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Investment Securities | 9 Months Ended
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Sep. 30, 2021
Investments Debt And Equity Securities [Abstract] |
Investment Securities | Note 3. Investment Securities The amortized cost, gross unrealized gains and losses, and fair value of the Company’s investment securities as of September 30, 2021, and December 31, 2020, were as follows:
(dollars in thousands) |  | Amortized Cost |  |  | Gross Unrealized Gains |  |  | Gross Unrealized Losses |  |  | Fair Value |
September 30, 2021 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Available-for-Sale: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Debt Securities Issued by the U.S. Treasury and Government Agencies |  | $ | 143,409 |  |  | $ | 1,561 |  |  | $ | (106 | ) |  | $ | 144,864 |
Debt Securities Issued by States and Political Subdivisions |  |  | 20,231 |  |  |  | 839 |  |  |  | (2 | ) |  |  | 21,068 |
Debt Securities Issued by U.S. Government-Sponsored Enterprises |  |  | 1,509 |  |  |  | 47 |  |  |  | (1 | ) |  |  | 1,555 |
Debt Securities Issued by Corporations |  |  | 385,787 |  |  |  | 3,630 |  |  |  | (1,543 | ) |  |  | 387,874 |
Mortgage-Backed Securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential - Government Agencies |  |  | 1,410,231 |  |  |  | 15,435 |  |  |  | (8,483 | ) |  |  | 1,417,183 |
Residential - U.S. Government-Sponsored Enterprises |  |  | 2,223,697 |  |  |  | 8,395 |  |  |  | (32,040 | ) |  |  | 2,200,052 |
Commercial - Government Agencies |  |  | 177,721 |  |  |  | 3,877 |  |  |  | (674 | ) |  |  | 180,924 |
Total Mortgage-Backed Securities |  |  | 3,811,649 |  |  |  | 27,707 |  |  |  | (41,197 | ) |  |  | 3,798,159 |
Total |  | $ | 4,362,585 |  |  | $ | 33,784 |  |  | $ | (42,849 | ) |  | $ | 4,353,520 |
Held-to-Maturity: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Debt Securities Issued by the U.S. Treasury and Government Agencies |  | $ | 131,465 |  |  | $ | 277 |  |  | $ | (184 | ) |  | $ | 131,558 |
Debt Securities Issued by States and Political Subdivisions |  |  | 33,254 |  |  |  | 125 |  |  |  | — |  |  |  | 33,379 |
Debt Securities Issued by Corporations |  |  | 21,133 |  |  |  | 140 |  |  |  | (271 | ) |  |  | 21,002 |
Mortgage-Backed Securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential - Government Agencies |  |  | 1,877,804 |  |  |  | 18,683 |  |  |  | (14,525 | ) |  |  | 1,881,962 |
Residential - U.S. Government-Sponsored Enterprises |  |  | 2,371,155 |  |  |  | 22,683 |  |  |  | (24,397 | ) |  |  | 2,369,441 |
Commercial - Government Agencies |  |  | 465,069 |  |  |  | 900 |  |  |  | (7,548 | ) |  |  | 458,421 |
Total Mortgage-Backed Securities |  |  | 4,714,028 |  |  |  | 42,266 |  |  |  | (46,470 | ) |  |  | 4,709,824 |
Total |  | $ | 4,899,880 |  |  | $ | 42,808 |  |  | $ | (46,925 | ) |  | $ | 4,895,763 |
December 31, 2020 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Available-for-Sale: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Debt Securities Issued by the U.S. Treasury and Government Agencies |  | $ | 174,409 |  |  | $ | 427 |  |  | $ | (591 | ) |  | $ | 174,245 |
Debt Securities Issued by States and Political Subdivisions |  |  | 23,540 |  |  |  | 1,301 |  |  |  | (1 | ) |  |  | 24,840 |
Debt Securities Issued by U.S. Government-Sponsored Enterprises |  |  | 985 |  |  |  | 77 |  |  |  | — |  |  |  | 1,062 |
Debt Securities Issued by Corporations |  |  | 220,717 |  |  |  | 4,844 |  |  |  | (956 | ) |  |  | 224,605 |
Mortgage-Backed Securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential - Government Agencies |  |  | 1,561,603 |  |  |  | 33,657 |  |  |  | (445 | ) |  |  | 1,594,815 |
Residential - U.S. Government-Sponsored Enterprises |  |  | 1,497,353 |  |  |  | 21,254 |  |  |  | (324 | ) |  |  | 1,518,283 |
Commercial - Government Agencies |  |  | 243,029 |  |  |  | 10,868 |  |  |  | (58 | ) |  |  | 253,839 |
Total Mortgage-Backed Securities |  |  | 3,301,985 |  |  |  | 65,779 |  |  |  | (827 | ) |  |  | 3,366,937 |
Total |  | $ | 3,721,636 |  |  | $ | 72,428 |  |  | $ | (2,375 | ) |  | $ | 3,791,689 |
Held-to-Maturity: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Debt Securities Issued by the U.S. Treasury and Government Agencies |  | $ | 7,500 |  |  | $ | 8 |  |  | $ | (8 | ) |  | $ | 7,500 |
Debt Securities Issued by States and Political Subdivisions |  |  | 33,763 |  |  |  | 741 |  |  |  | — |  |  |  | 34,504 |
Debt Securities Issued by Corporations |  |  | 12,031 |  |  |  | 251 |  |  |  | — |  |  |  | 12,282 |
Mortgage-Backed Securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential - Government Agencies |  |  | 917,459 |  |  |  | 30,580 |  |  |  | (29 | ) |  |  | 948,010 |
Residential - U.S. Government-Sponsored Enterprises |  |  | 2,099,053 |  |  |  | 51,735 |  |  |  | (291 | ) |  |  | 2,150,497 |
Commercial - Government Agencies |  |  | 192,921 |  |  |  | 3,179 |  |  |  | (200 | ) |  |  | 195,900 |
Total Mortgage-Backed Securities |  |  | 3,209,433 |  |  |  | 85,494 |  |  |  | (520 | ) |  |  | 3,294,407 |
Total |  | $ | 3,262,727 |  |  | $ | 86,494 |  |  | $ | (528 | ) |  | $ | 3,348,693 |
The Company elected to exclude accrued interest receivable (“AIR”) from the amortized cost basis of debt securities disclosed throughout this footnote. For available-for-sale (“AFS”) debt securities, AIR totaled $7.9 million and $6.6 million as of September 30, 2021, and December 31, 2020, respectively. For held-to-maturity (“HTM”) debt securities, AIR totaled $9.0 million and $6.8 million as of September 30, 2021, and December 31, 2020, respectively. AIR is included in the “accrued interest receivable” line item on the Company’s consolidated statements of condition. The table below presents an analysis of the contractual maturities of the Company’s investment securities as of September 30, 2021. Debt securities issued by government agencies (Small Business Administration securities) and mortgage-backed securities are disclosed separately in the table below as these investment securities may prepay prior to their scheduled contractual maturity dates.
(dollars in thousands) |  | Amortized Cost |  |  | Fair Value |
Available-for-Sale: |  |  |  |  |  |  |  |
Due in One Year or Less |  | $ | 26,227 |  |  | $ | 26,290 |
Due After One Year Through Five Years |  |  | 111,281 |  |  |  | 113,889 |
Due After Five Years Through Ten Years |  |  | 270,764 |  |  |  | 271,069 |
|  |  | 408,272 |  |  |  | 411,248 |
Debt Securities Issued by Government Agencies |  |  | 142,664 |  |  |  | 144,113 |
Mortgage-Backed Securities: |  |  |  |  |  |  |  |
Residential - Government Agencies |  |  | 1,410,231 |  |  |  | 1,417,183 |
Residential - U.S. Government-Sponsored Enterprises |  |  | 2,223,697 |  |  |  | 2,200,052 |
Commercial - Government Agencies |  |  | 177,721 |  |  |  | 180,924 |
Total Mortgage-Backed Securities |  |  | 3,811,649 |  |  |  | 3,798,159 |
Total |  | $ | 4,362,585 |  |  | $ | 4,353,520 |
Held-to-Maturity: |  |  |  |  |  |  |  |
Due in One Year or Less |  |  | 33,254 |  |  |  | 33,379 |
Due After One Year Through Five Years |  |  | 17,290 |  |  |  | 17,285 |
Due After Five Year Through Ten Years |  |  | 123,966 |  |  |  | 124,204 |
Due After Ten Years |  |  | 11,342 |  |  |  | 11,071 |
|  |  | 185,852 |  |  |  | 185,939 |
Mortgage-Backed Securities: |  |  |  |  |  |  |  |
Residential - Government Agencies |  |  | 1,877,804 |  |  |  | 1,881,962 |
Residential - U.S. Government-Sponsored Enterprises |  |  | 2,371,155 |  |  |  | 2,369,441 |
Commercial - Government Agencies |  |  | 465,069 |  |  |  | 458,421 |
Total Mortgage-Backed Securities |  |  | 4,714,028 |  |  |  | 4,709,824 |
Total |  | $ | 4,899,880 |  |  | $ | 4,895,763 |
Investment securities with carrying values of $3.5 billion and $3.6 billion as of September 30, 2021, and December 31, 2020, respectively, were pledged to secure deposits of governmental entities, securities sold under agreements to repurchase, and FRB discount window borrowing. The table below presents the gains and losses from the sales of investment securities for the three and nine months ended September 30, 2021, and September 30, 2020:
|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
(dollars in thousands) |  | 2021 |  |  | 2020 |  |  | 2021 |  |  | 2020 |
Gross Gains on Sales of Investment Securities |  | $ | 110 |  |  | $ | — |  |  | $ | 3,785 |  |  | $ | 14,257 |
Gross Losses on Sales of Investment Securities |  |  | (1,369 | ) |  |  | (1,121 | ) |  |  | (3,824 | ) |  |  | (3,132 | )
Net Gains (Losses) on Sales of Investment Securities |  | $ | (1,259 | ) |  | $ | (1,121 | ) |  | $ | (39 | ) |  | $ | 11,125 |
Net investment securities losses totaled $1.3 million in the third quarter of 2021 compared to $1.1 million during the same period in 2020. The net loss in the third quarter of 2021 was primarily due to the fees paid to the counterparties of our prior Visa Class B share sale transactions. The net losses of $39 thousand in the first nine months of 2021 was primarily due to $3.8 million of the fees paid to the counterparties of our prior Visa Class B shares and was partially offset by the net gain from the sale of mortgage-backed securities, corporate and government debt securities. The net gain of $11.2 million in the first nine months of 2020 was primarily due to the sale of 80,214 Visa Class B shares. The following table summarizes the Company’s AFS debt securities in an unrealized loss position for which an allowance for credit losses was not deemed necessary, aggregated by major security type and length of time in a continuous unrealized loss position:
|  | Less Than 12 Months |  |  | 12 Months or Longer |  |  | Total |
(dollars in thousands) |  | Fair Value |  |  | Gross Unrealized Losses |  |  | Fair Value |  |  | Gross Unrealized Losses |  |  | Fair Value |  |  | Gross Unrealized Losses |
September 30, 2021 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Available-for-Sale: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Debt Securities Issued by the U.S. Treasury and Government Agencies |  | $ | 1,772 |  |  | $ | (4 | ) |  | $ | 10,458 |  |  | $ | (102 | ) |  | $ | 12,230 |  |  | $ | (106 | )
Debt Securities Issued by States and Political Subdivisions |  |  | 413 |  |  |  | (2 | ) |  |  | — |  |  |  | — |  |  |  | 413 |  |  |  | (2 | )
Debt Securities Issued by U.S. Government- Sponsored Enterprises |  |  | 99 |  |  |  | (1 | ) |  |  | — |  |  |  | — |  |  |  | 99 |  |  |  | (1 | )
Debt Securities Issued by Corporations |  |  | 123,230 |  |  |  | (734 | ) |  |  | 64,190 |  |  |  | (809 | ) |  |  | 187,420 |  |  |  | (1,543 | )
Mortgage-Backed Securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential - Government Agencies |  |  | 804,605 |  |  |  | (8,313 | ) |  |  | 7,954 |  |  |  | (170 | ) |  |  | 812,559 |  |  |  | (8,483 | )
Residential - U.S. Government-Sponsored Enterprises |  |  | 1,756,938 |  |  |  | (30,015 | ) |  |  | 43,773 |  |  |  | (2,025 | ) |  |  | 1,800,711 |  |  |  | (32,040 | )
Commercial-Government Agencies |  |  | — |  |  |  | — |  |  |  | 23,688 |  |  |  | (674 | ) |  |  | 23,688 |  |  |  | (674 | )
Total Mortgage-Backed Securities |  |  | 2,561,543 |  |  |  | (38,328 | ) |  |  | 75,415 |  |  |  | (2,869 | ) |  |  | 2,636,958 |  |  |  | (41,197 | )
Total |  | $ | 2,687,057 |  |  | $ | (39,069 | ) |  | $ | 150,063 |  |  | $ | (3,780 | ) |  | $ | 2,837,120 |  |  | $ | (42,849 | )
December 31, 2020 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Available-for-Sale: 1 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Debt Securities Issued by the U.S. Treasury and Government Agencies |  | $ | 21,338 |  |  | $ | (42 | ) |  | $ | 87,070 |  |  | $ | (549 | ) |  | $ | 108,408 |  |  | $ | (591 | )
Debt Securities Issued by States and Political Subdivisions |  |  | — |  |  |  | — |  |  |  | 26 |  |  |  | (1 | ) |  |  | 26 |  |  |  | (1 | )
Debt Securities Issued by Corporations |  |  | 65,000 |  |  |  | (853 | ) |  |  | 50,000 |  |  |  | (103 | ) |  |  | 115,000 |  |  |  | (956 | )
Mortgage-Backed Securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential - Government Agencies |  |  | 113,538 |  |  |  | (222 | ) |  |  | 28,063 |  |  |  | (223 | ) |  |  | 141,601 |  |  |  | (445 | )
Residential - U.S. Government-Sponsored Enterprises |  |  | 94,002 |  |  |  | (324 | ) |  |  | — |  |  |  | — |  |  |  | 94,002 |  |  |  | (324 | )
Commercial - Government Agencies |  |  | 25,075 |  |  |  | (58 | ) |  |  | — |  |  |  | — |  |  |  | 25,075 |  |  |  | (58 | )
Total Mortgage-Backed Securities |  |  | 232,615 |  |  |  | (604 | ) |  |  | 28,063 |  |  |  | (223 | ) |  |  | 260,678 |  |  |  | (827 | )
Total |  | $ | 318,953 |  |  | $ | (1,499 | ) |  | $ | 165,159 |  |  | $ | (876 | ) |  | $ | 484,112 |  |  | $ | (2,375 | )
1 The fair value and gross unrealized losses as of December 31, 2020, have been updated to properly reflect the length of time they were in a continuous unrealized loss position. The Company does not believe that the AFS debt securities that were in an unrealized loss position as of September 30, 2021, which were comprised of 213 individual securities, represent a credit loss impairment. The gross unrealized losses were primarily attributable to changes in interest rates, relative to when the investment securities were purchased. As of September 30, 2021, and December 31, 2020, the gross unrealized losses reported for mortgage-backed securities were mostly related to investment securities issued by Ginnie Mae, Fannie Mae, and Freddie Mac. The Company does not intend to sell the investment securities that were in an unrealized loss position and it is not more likely than not that the Company will be required to sell the investment securities before recovery of their amortized cost basis, which may be at maturity. Substantially all of the Company’s HTM debt securities are issued by U.S. government agencies or U.S. government-sponsored enterprises. These securities carry the explicit and/or implicit guarantee of the U.S. government, are widely recognized as “risk free,” and have a long history of zero credit loss. Therefore, an allowance for credit losses for these securities was not deemed necessary as of September 30, 2021. Interest income from taxable and non-taxable investment securities for the three and nine months ended September 30, 2021, and September 30, 2020, were as follows:
|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
(dollars in thousands) |  | 2021 |  |  | 2020 |  |  | 2021 |  |  | 2020 |
Taxable |  | $ | 32,889 |  |  | $ | 30,027 |  |  | $ | 91,510 |  |  | $ | 96,150 |
Non-Taxable |  |  | 261 |  |  |  | 498 |  |  |  | 820 |  |  |  | 1,637 |
Total Interest Income from Investment Securities |  | $ | 33,150 |  |  | $ | 30,525 |  |  | $ | 92,330 |  |  | $ | 97,787 |
As of September 30, 2021, and December 31, 2020, the carrying value of the Company’s Federal Home Loan Bank of Des Moines stock and Federal Reserve Bank stock was as follows:
(dollars in thousands) |  | September 30, 2021 |  |  | December 31, 2020 |
Federal Home Loan Bank of Des Moines Stock |  | $ | 10,000 |  |  | $ | 12,000 |
Federal Reserve Bank Stock |  |  | 21,574 |  |  |  | 21,340 |
Total |  | $ | 31,574 |  |  | $ | 33,340 |
These securities can only be redeemed or sold at their par value and only to the respective issuing institution or to another member institution. The Company records these non-marketable equity securities as a component of other assets and periodically evaluates these securities for impairment. Management considers these non-marketable equity securities to be long-term investments. Accordingly, when evaluating these securities for impairment, management considers the ultimate recoverability of the par value rather than recognizing temporary declines in value. Visa Class B Restricted Shares In 2008, the Company received Visa Class B restricted shares as part of Visa’s initial public offering. These shares are transferable only under limited circumstances until they can be converted into the publicly traded Class A common shares. This conversion will not occur until the settlement of certain litigation which will be indemnified by Visa members, including the Company. Visa funded an escrow account from its initial public offering to settle these litigation claims. Should this escrow account be insufficient to cover these litigation claims, Visa is entitled to fund additional amounts to the escrow account by reducing each member bank’s Class B conversion ratio to unrestricted Class A shares. As of September 30, 2021, the conversion ratio was 1.6228. See Note 11 Derivative Financial Instruments for more information. During the second quarter of 2020, the Company sold its remaining 80,214 Visa Class B Shares and recorded a $14.2 million gain on sale. As a result of this sale, the Company no longer owns any Visa Class B shares.

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- Definition The entire disclosure for investments in certain debt and equity securities. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 320 -URI http://asc.fasb.org/subtopic&trid=2209399 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 946 -SubTopic 320 -URI http://asc.fasb.org/subtopic&trid=2324412 Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 320 -URI http://asc.fasb.org/topic&trid=2196928 Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 940 -SubTopic 320 -URI http://asc.fasb.org/subtopic&trid=2176304 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher SEC -Name Regulation S-K (SK) -Number 229 -Section 1403 -Paragraph (b) + Details
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