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Investment Securities | 9 Months Ended
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Sep. 30, 2017
Investment Securities |
Investment Securities | 2. Investment Securities As of September 30, 2017 and December 31, 2016, investment securities consisted predominantly of the following investment categories: U.S. Treasury and debt securities – includes U.S. Treasury notes and debt securities issued by government-sponsored enterprises. Mortgage- and asset-backed securities – includes securities backed by notes or receivables secured by either mortgage or prime auto assets with cash flows based on actual or scheduled payments. Collateralized mortgage obligations – includes securities backed by a pool of mortgages with cash flows distributed based on certain rules rather than pass through payments. As of September 30, 2017 and December 31, 2016, all of the Company’s investment securities were classified as debt securities and available-for-sale. Amortized cost and fair value of securities as of September 30, 2017 and December 31, 2016 were as follows:
|  | September 30, 2017 |  | December 31, 2016
|  | Amortized |  | Unrealized |  | Unrealized |  | Fair |  | Amortized |  | Unrealized |  | Unrealized |  | Fair
(dollars in thousands) |  | Cost |  | Gains |  | Losses |  | Value |  | Cost |  | Gains |  | Losses |  | Value
U.S. Treasury securities |  | $ | 404,693 |  | $ | — |  | $ | (7,927) |  | $ | 396,766 |  | $ | 405,637 |  | $ | — |  | $ | (13,164) |  | $ | 392,473
Government-sponsored enterprises debt securities |  |  | 249,711 |  |  | 26 |  |  | (4,599) |  |  | 245,138 |  |  | 249,707 |  |  | 16 |  |  | (7,056) |  |  | 242,667
Government agency mortgage-backed securities |  |  | 163,289 |  |  | — |  |  | (3,502) |  |  | 159,787 |  |  | 190,485 |  |  | — |  |  | (4,822) |  |  | 185,663
Government-sponsored enterprises mortgage-backed securities |  |  | 186,957 |  |  | 234 |  |  | (3,052) |  |  | 184,139 |  |  | 208,034 |  |  | 385 |  |  | (4,034) |  |  | 204,385
Non-government asset-backed securities |  |  | 101 |  |  | — |  |  | — |  |  | 101 |  |  | 12,592 |  |  | — |  |  | (9) |  |  | 12,583
Collateralized mortgage obligations: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Government agency |  |  | 3,551,654 |  |  | 1,129 |  |  | (38,879) |  |  | 3,513,904 |  |  | 3,409,822 |  |  | 794 |  |  | (58,794) |  |  | 3,351,822
Government-sponsored enterprises |  |  | 824,664 |  |  | 1,529 |  |  | (11,055) |  |  | 815,138 |  |  | 700,338 |  |  | 789 |  |  | (13,206) |  |  | 687,921
Total available-for-sale securities |  | $ | 5,381,069 |  | $ | 2,918 |  | $ | (69,014) |  | $ | 5,314,973 |  | $ | 5,176,615 |  | $ | 1,984 |  | $ | (101,085) |  | $ | 5,077,514
Proceeds from calls and sales of investment securities were nil for both the three and nine months ended September 30, 2017. Proceeds from calls and sales of investment securities totaled $46.2 million and nil, respectively, for the three months ended September 30, 2016, and $121.2 million and $505.0 million, respectively, for the nine months ended September 30, 2016. Gross realized gains were nil for both the three and nine months ended September 30, 2017. Including the 2016 sale of Visa Class B restricted shares described below, the Company recorded gross realized gains of nil and $25.8 million for the three and nine months ended September 30, 2016, respectively. Gross realized losses were nil for both the three and nine months ended September 30, 2017. There were no gross realized losses for the three and nine months ended September 30, 2016. The provision for income taxes related to the Company’s net realized gains on the sale of investment securities was nil for the three and nine months ended September 30, 2017 and nil and $10.2 million for the three and nine months ended September 30, 2016, respectively. Gains and losses realized on sales of securities are determined using the specific identification method. Interest income from taxable investment securities was $24.2 million and $21.1 million for the three months ended September 30, 2017 and 2016, respectively, and $75.7 million and $57.1 million for the nine months ended September 30, 2017 and 2016, respectively. The Company did not own any non-taxable investment securities during both the three and nine months ended September 30, 2017 and 2016. The amortized cost and fair value of U.S. Treasury and government-sponsored enterprises debt securities as of September 30, 2017, by contractual maturity, are shown below. Mortgage-backed securities, asset-backed securities and collateralized mortgage obligations are disclosed separately in the table below as remaining expected maturities will differ from contractual maturities as borrowers have the right to prepay obligations.
|  | September 30, 2017
|  | Amortized |  | Fair
(dollars in thousands) |  | Cost |  | Value
Due after one year through five years |  | $ | 330,821 |  | $ | 323,769
Due after five years through ten years |  |  | 323,583 |  |  | 318,135
|  |  | 654,404 |  |  | 641,904
Government agency mortgage-backed securities |  |  | 163,289 |  |  | 159,787
Government-sponsored enterprises mortgage-backed securities |  |  | 186,957 |  |  | 184,139
Non-government asset-backed securities |  |  | 101 |  |  | 101
Collateralized mortgage obligations: |  |  |  |  |  |
Government agency |  |  | 3,551,654 |  |  | 3,513,904
Government-sponsored enterprises |  |  | 824,664 |  |  | 815,138
Total mortgage- and asset-backed securities |  |  | 4,726,665 |  |  | 4,673,069
Total available-for-sale securities |  | $ | 5,381,069 |  | $ | 5,314,973
At September 30, 2017, pledged securities totaled $3.7 billion, of which $3.4 billion was pledged to secure public deposits and $230.6 million was pledged to secure other financial transactions. At December 31, 2016, pledged securities totaled $2.7 billion, of which $2.5 billion was pledged to secure public deposits and repurchase agreements, and $209.1 million was pledged to secure other financial transactions. The Company held no securities of any single issuer, other than the U.S. government, government agency and government-sponsored enterprises, which were in excess of 10% of stockholders’ equity as of September 30, 2017 and December 31, 2016. The following table presents the gross unrealized losses and fair values of securities in the available-for-sale portfolio by length of time that the 169 and 158 individual securities in each category have been in a continuous loss position as of September 30, 2017 and December 31, 2016, respectively. The gross unrealized losses were primarily attributable to changes in interest rates, relative to when the investment securities were purchased, and not due to the credit quality of the investment securities.
|  | Time in Continuous Loss as of September 30, 2017
|  | Less Than 12 Months |  | 12 Months or More |  | Total
|  | Unrealized |  |  |  |  | Unrealized |  |  |  |  | Unrealized |  |  |
(dollars in thousands) |  | Losses |  | Fair Value |  | Losses |  | Fair Value |  | Losses |  | Fair Value
U.S. Treasury securities |  | $ | (802) |  | $ | 97,031 |  | $ | (7,125) |  | $ | 299,735 |  | $ | (7,927) |  | $ | 396,766
Government-sponsored enterprises debt securities |  |  | (1,471) |  |  | 111,554 |  |  | (3,128) |  |  | 98,558 |  |  | (4,599) |  |  | 210,112
Government agency mortgage-backed securities |  |  | (2,080) |  |  | 111,991 |  |  | (1,422) |  |  | 47,796 |  |  | (3,502) |  |  | 159,787
Government-sponsored enterprises mortgage-backed securities |  |  | (441) |  |  | 36,211 |  |  | (2,611) |  |  | 141,003 |  |  | (3,052) |  |  | 177,214
Collateralized mortgage obligations: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Government agency |  |  | (12,237) |  |  | 1,589,897 |  |  | (26,642) |  |  | 1,336,841 |  |  | (38,879) |  |  | 2,926,738
Government-sponsored enterprises |  |  | (2,274) |  |  | 319,802 |  |  | (8,781) |  |  | 241,718 |  |  | (11,055) |  |  | 561,520
Total available-for-sale securities with unrealized losses |  | $ | (19,305) |  | $ | 2,266,486 |  | $ | (49,709) |  | $ | 2,165,651 |  | $ | (69,014) |  | $ | 4,432,137
|  | Time in Continuous Loss as of December 31, 2016
|  | Less Than 12 Months |  | 12 Months or More |  | Total
|  | Unrealized |  |  |  |  | Unrealized |  |  |  |  | Unrealized |  |  |
(dollars in thousands) |  | Losses |  | Fair Value |  | Losses |  | Fair Value |  | Losses |  | Fair Value
U.S. Treasury securities |  | $ | (13,164) |  | $ | 392,473 |  | $ | — |  | $ | — |  | $ | (13,164) |  | $ | 392,473
Government-sponsored enterprises debt securities |  |  | (7,056) |  |  | 207,651 |  |  | — |  |  | — |  |  | (7,056) |  |  | 207,651
Government agency mortgage-backed securities |  |  | (4,822) |  |  | 185,663 |  |  | — |  |  | — |  |  | (4,822) |  |  | 185,663
Government-sponsored enterprises mortgage-backed securities |  |  | (4,034) |  |  | 195,848 |  |  | — |  |  | — |  |  | (4,034) |  |  | 195,848
Non-government asset-backed securities |  |  | (3) |  |  | 5,202 |  |  | (6) |  |  | 7,381 |  |  | (9) |  |  | 12,583
Collateralized mortgage obligations: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Government agency |  |  | (51,484) |  |  | 2,847,103 |  |  | (7,310) |  |  | 233,706 |  |  | (58,794) |  |  | 3,080,809
Government-sponsored enterprises |  |  | (1,807) |  |  | 252,065 |  |  | (11,399) |  |  | 279,282 |  |  | (13,206) |  |  | 531,347
Total available-for-sale securities with unrealized losses |  | $ | (82,370) |  | $ | 4,086,005 |  | $ | (18,715) |  | $ | 520,369 |  | $ | (101,085) |  | $ | 4,606,374
Other-Than-Temporary Impairment (“OTTI”) Unrealized losses for all investment securities are reviewed to determine whether the losses are other than temporary. Investment securities are evaluated for OTTI on at least a quarterly basis, and more frequently when economic and market conditions warrant such an evaluation, to determine whether the decline in fair value below amortized cost is other than temporary. The term other-than-temporary is not intended to indicate that the decline is permanent, but indicates that the prospects for a near-term recovery of value are not necessarily favorable, or that there is a general lack of evidence to support a realizable value equal to or greater than the carrying value of the investment. The decline in value is not related to any issuer- or industry-specific credit event. At September 30, 2017 and December 31, 2016, the Company did not have the intent to sell and determined it was more likely than not that the Company would not be required to sell the securities prior to recovery of the amortized cost basis. As the Company has the intent and ability to hold securities in an unrealized loss position, each security with an unrealized loss position in the above tables has been further assessed to determine if a credit loss exists. If it is probable that the Company will not collect all amounts due according to the contractual terms of an investment security, an OTTI is considered to have occurred. In determining whether a credit loss exists, the Company estimates the present value of future cash flows expected to be collected from the investment security. If the present value of future cash flows is less than the amortized cost basis of the security, an OTTI exists. As of September 30, 2017 and December 31, 2016, the Company did not expect any credit losses in its debt securities and no OTTI was recognized on securities during the nine months ended September 30, 2017 and for the year ended December 31, 2016. Visa Class B Restricted Shares In 2008, the Company received 394,000 Visa Class B restricted shares as part of Visa’s initial public offering. Visa Class B restricted shares are not currently convertible to publicly traded Visa Class A common shares, and only transferable in limited circumstances, until the settlement of certain litigation which are indemnified by Visa members, including the Company. As there are existing transfer restrictions and the outcome of the aforementioned litigation is uncertain, these shares were included in the consolidated balance sheets at their historical cost of $0. During the nine months ended September 30, 2016, the Company recorded a $22.7 million net realized gain related to the sale of 274,000 Visa Class B restricted shares (recorded in the three months ended March 31, 2016). Concurrent with the sale of the Visa Class B restricted shares, the Company entered into an agreement with the buyer that requires payment to the buyer in the event Visa reduces each member bank’s Class B conversion ratio to unrestricted Class A common shares. See “Note 10. Derivative Financial Instruments” for more information. There were no such sales during the nine months ended September 30, 2017 or during the three months ended September 30, 2016. The Company held approximately 120,000 Visa Class B restricted shares as of both September 30, 2017 and December 31, 2016. These shares continued to be carried at $0 cost basis during each of the respective periods.

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- Definition The entire disclosure for investment holdings. This includes the long positions of investments for the entity. It contains investments in affiliated and unaffiliated issuers. The investments include securities and non securities (i.e. commodities and futures contracts). + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 946 -SubTopic 320 -Section S99 -Paragraph 4 -Subparagraph (SX 210.12-12C) -URI http://asc.fasb.org/extlink&oid=50485924&loc=d3e611225-123010 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 946 -SubTopic 320 -Section S99 -Paragraph 6 -Subparagraph (SX 210.12-14) -URI http://asc.fasb.org/extlink&oid=50485924&loc=d3e611322-123010 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 946 -SubTopic 320 -Section S99 -Paragraph 5 -Subparagraph (SX 210.12-13) -URI http://asc.fasb.org/extlink&oid=50485924&loc=d3e611282-123010 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 946 -SubTopic 320 -Section S99 -Paragraph 1 -Subparagraph (SX 210.12-12) -URI http://asc.fasb.org/extlink&oid=50485924&loc=d3e611133-123010 + Details
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