Securities

6 Months Ended

Jun. 30, 2021

Investments, Debt and Equity Securities [Abstract]

Securities - Held to Maturity. A summary of the amortized cost, fair value and allowance for credit losses related to securities held to maturity as of June 30, 2021 and December 31, 2020 is presented below.


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Allowance for Credit Losses		Net Carrying Amount
June 30, 2021

Residential mortgage-backed securities	$	527,958	$	30,129	$	1	$	558,086	$	—	$	527,958
States and political subdivisions	1,284,105		52,544		—		1,336,649		(158)		1,283,947
Other	1,500		—		—		1,500		—		1,500
Total	$	1,813,563	$	82,673	$	1	$	1,896,235	$	(158)	$	1,813,405
December 31, 2020

Residential mortgage-backed securities	$	528,784	$	41,742	$	—	$	570,526	$	—	$	528,784
States and political subdivisions	1,415,549		65,321		—		1,480,870		(160)		1,415,389
Other	1,500		—		—		1,500		—		1,500
Total	$	1,945,833	$	107,063	$	—	$	2,052,896	$	(160)	$	1,945,673

All mortgage-backed securities included in the above table were issued by U.S. government agencies and corporations. The carrying value of held-to-maturity securities pledged to secure public funds, trust deposits, repurchase agreements and for other purposes, as required or permitted by law was $530.5 million and $659.2 million at June 30, 2021 and December 31, 2020, respectively. Accrued interest receivable on held-to-maturity securities totaled $19.5 million and $21.7 million at June 30, 2021 and December 31, 2020, respectively and is included in accrued interest receivable and other assets in the accompanying consolidated balance sheets.

From time to time, we have reclassified certain securities from available for sale to held to maturity. The net unamortized, unrealized gain remaining on transferred securities included in accumulated other comprehensive income in the accompanying balance sheet totaled $3.0 million ($2.4 million, net of tax) at June 30, 2021 and $3.5 million ($2.8 million, net of tax) at December 31, 2020. This amount will be amortized out of accumulated other comprehensive income over the remaining life of the underlying securities as an adjustment of the yield on those securities.

The following table summarizes Moody's and/or Standard & Poor's bond ratings for our portfolio of held-to-maturity securities issued by States and political subdivisions and other securities as of June 30, 2021 and December 31, 2020:


	States and Political Subdivisions
	Not Guaranteed or Pre-Refunded		Guaranteed by the Texas PSF		Pre-Refunded		Total		Other Securities
June 30, 2021
Aaa/AAA	$	101,978	$	478,728	$	534,514	$	1,115,220	$	—
Aa/AA	106,429		—		—		106,429		—
A	62,456		—		—		62,456		—
Not rated	—		—		—		—		1,500
Total	$	270,863	$	478,728	$	534,514	$	1,284,105	$	1,500
December 31, 2020
Aaa/AAA	$	115,016	$	659,999	$	470,745	$	1,245,760	$	—
Aa/AA	107,065		—		—		107,065		—
A	62,724		—		—		62,724		—
Not rated	—		—		—		—		1,500
Total	$	284,805	$	659,999	$	470,745	$	1,415,549	$	1,500

The following table details activity in the allowance for credit losses on held-to-maturity securities during the three and six months ended June 30, 2021 and 2020.


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Beginning balance	$	158	$	200	$	160	$	—
Impact of adopting ASC 326	—		—		—		215
Credit loss expense (benefit)	—		(28)		(2)		(43)
Ending balance	$	158	$	172	$	158	$	172

Securities - Available for Sale. A summary of the amortized cost, fair value and allowance for credit losses related to securities available for sale as of June 30, 2021 and December 31, 2020 is presented below.


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Estimated Fair Value
June 30, 2021
U.S. Treasury	$	1,473,800	$	26,664	$	2,742	$	—	$	1,497,722

Residential mortgage-backed securities	1,729,198		40,589		8,158		—		1,761,629
States and political subdivisions	7,014,119		526,628		1,928		—		7,538,819
Other	42,356		—		—		—		42,356
Total	$	10,259,473	$	593,881	$	12,828	$	—	$	10,840,526
December 31, 2020
U.S. Treasury	$	1,084,542	$	35,091	$	—	$	—	$	1,119,633

Residential mortgage-backed securities	1,916,581		71,102		4		—		1,987,679
States and political subdivisions	6,683,927		603,975		—		—		7,287,902
Other	42,351		—		—		—		42,351
Total	$	9,727,401	$	710,168	$	4	$	—	$	10,437,565

All mortgage-backed securities included in the above table were issued by U.S. government agencies and corporations. At June 30, 2021, all of the securities in our available for sale municipal bond portfolio were issued by the State of Texas or political subdivisions or agencies within the State of Texas, of which approximately 74.1% are either guaranteed by the PSF or have been pre-refunded. Securities with limited marketability, such as stock in the Federal Reserve Bank and the Federal Home Loan Bank, are carried at cost and are reported as other available for sale securities in the table above. The carrying value of available-for-sale securities pledged to secure public funds, trust deposits, repurchase agreements and for other purposes, as required or permitted by law was $4.6 billion and $4.4 billion at June 30, 2021 and December 31, 2020, respectively. Accrued interest receivable on available-for-sale securities totaled $111.3 million and $111.0 million at June 30, 2021 and December 31, 2020, respectively, and is included in accrued interest receivable and other assets in the accompanying consolidated balance sheets.

The table below summarizes, as of June 30, 2021, securities available for sale in an unrealized loss position for which an allowance for credit losses has not been recorded, aggregated by type of security and length of time in a continuous unrealized loss position.


	Less than 12 Months				More than 12 Months				Total
	Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses
U.S. Treasury	$	194,344	$	2,742	$	—	$	—	$	194,344	$	2,742
Residential mortgage-backed securities	673,043		8,158		—		—		673,043		8,158
States and political subdivisions	150,945		1,928		—		—		150,945		1,928
Total	$	1,018,332	$	12,828	$	—	$	—	$	1,018,332	$	12,828

As of June 30, 2021, no allowance for credit losses has been recognized on available for sale securities in an unrealized loss position as management does not believe any of the securities are impaired due to reasons of credit quality. This is based upon our analysis of the underlying risk characteristics, including credit ratings, and other qualitative factors related to our available for sale securities and in consideration of our historical credit loss experience and internal forecasts. The issuers of these securities continue to make timely principal and interest payments under the contractual terms of the securities. Furthermore, management does not have the intent to sell any of the securities classified as available for sale in the table above and believes

that it is more likely than not that we will not have to sell any such securities before a recovery of cost. The unrealized losses are due to increases in market interest rates over the yields available at the time the underlying securities were purchased. The fair value is expected to recover as the securities approach their maturity date or repricing date or if market yields for such investments decline.

Contractual Maturities. The following table summarizes the maturity distribution schedule of securities held to maturity and securities available for sale as of June 30, 2021. Mortgage-backed securities are included in maturity categories based on their stated maturity date. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations. Other securities classified as available for sale include stock in the Federal Reserve Bank and the Federal Home Loan Bank, which have no maturity date. These securities have been included in the total column only.


	Within 1 Year		1 - 5 Years		5 - 10 Years		After 10 Years		Total
Held To Maturity
Amortized Cost

Residential mortgage-backed securities	$	48	$	54	$	515,611	$	12,245	$	527,958
States and political subdivisions	260,563		337,281		116,087		570,174		1,284,105
Other	1,500		—		—		—		1,500
Total	$	262,111	$	337,335	$	631,698	$	582,419	$	1,813,563
Estimated Fair Value

Residential mortgage-backed securities	$	48	$	55	$	544,894	$	13,089	$	558,086
States and political subdivisions	264,142		348,160		118,396		605,951		1,336,649
Other	1,500		—		—		—		1,500
Total	$	265,690	$	348,215	$	663,290	$	619,040	$	1,896,235
Available For Sale
Amortized Cost
U. S. Treasury	$	799,521	$	285,676	$	197,086	$	191,517	$	1,473,800
Residential mortgage-backed securities	3,453		19,270		22,748		1,683,727		1,729,198
States and political subdivisions	129,046		1,367,342		817,906		4,699,825		7,014,119
Other	—		—		—		—		42,356
Total	$	932,020	$	1,672,288	$	1,037,740	$	6,575,069	$	10,259,473
Estimated Fair Value
U. S. Treasury	$	804,722	$	302,656	$	194,344	$	196,000	$	1,497,722
Residential mortgage-backed securities	3,592		20,327		23,379		1,714,331		1,761,629
States and political subdivisions	130,265		1,473,655		875,528		5,059,371		7,538,819
Other	—		—		—		—		42,356
Total	$	938,579	$	1,796,638	$	1,093,251	$	6,969,702	$	10,840,526

Sales of Securities. Sales of securities available for sale were as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Proceeds from sales	$	—	$	51,250	$	—	$	1,162,352
Gross realized gains	—		—		—		108,989
Gross realized losses	—		—		—		—
Tax (expense) benefit of securities gains/losses	—		—		—		(22,888)

Premiums and Discounts. Premium amortization and discount accretion included in interest income on securities was as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Premium amortization	$	(30,541)	$	(30,988)	$	(61,776)	$	(63,333)
Discount accretion	705		571		1,342		1,156
Net (premium amortization) discount accretion	$	(29,836)	$	(30,417)	$	(60,434)	$	(62,177)

Trading Account Securities. Trading account securities, at estimated fair value, were as follows:


	June 30, 2021		December 31, 2020
U.S. Treasury	$	24,137	$	23,996
States and political subdivisions	—		460
Total	$	24,137	$	24,456

Net gains and losses on trading account securities were as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Net gain on sales transactions	$	293	$	304	$	402	$	774
Net mark-to-market gains (losses)	—		(22)		(69)		93
Net gain (loss) on trading account securities	$	293	$	282	$	333	$	867