Investment Securities

12 Months Ended

Dec. 31, 2021

Investments Debt And Equity Securities [Abstract]

Note 3. Investment Securities

The amortized cost, gross unrealized gains and losses, and fair value of the Company’s investment securities as of December 31, 2021, December 31, 2020, and December 31, 2019, were as follows:

(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
December 31, 2021
Available-for-Sale:
Debt Securities Issued by the U.S. Treasury and Government Agencies	$	248,858	$	1,513	$	(284	)	$	250,087
Debt Securities Issued by States and Political Subdivisions		74,743		1,080		(5	)		75,818
Debt Securities Issued by U.S. Government-Sponsored Enterprises		1,758		33		(11	)		1,780
Debt Securities Issued by Corporations		384,590		2,339		(3,816	)		383,113
Mortgage-Backed Securities:
Residential - Government Agencies		1,327,990		9,818		(18,766	)		1,319,042
Residential - U.S. Government-Sponsored Enterprises		2,127,781		4,792		(42,247	)		2,090,326
Commercial - Government Agencies		155,164		1,885		(1,159	)		155,890
Total Mortgage-Backed Securities		3,610,935		16,495		(62,172	)		3,565,258
Total	$	4,320,884	$	21,460	$	(66,288	)	$	4,276,056
Held-to-Maturity:
Debt Securities Issued by the U.S. Treasury and Government Agencies	$	131,495	$	287	$	(643	)	$	131,139
Debt Securities Issued by Corporations		20,316		76		(249	)		20,143
Mortgage-Backed Securities:
Residential - Government Agencies		1,774,394		12,139		(30,621	)		1,755,912
Residential - U.S. Government-Sponsored Enterprises		2,286,880		15,508		(32,627	)		2,269,761
Commercial - Government Agencies		481,695		324		(12,355	)		469,664
Total Mortgage-Backed Securities		4,542,969		27,971		(75,603	)		4,495,337
Total	$	4,694,780	$	28,334	$	(76,495	)	$	4,646,619
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
December 31, 2019
Available-for-Sale:
Debt Securities Issued by the U.S. Treasury and Government Agencies	$	222,365	$	213	$	(1,447	)	$	221,131
Debt Securities Issued by States and Political Subdivisions		54,480		631		(14	)		55,097
Debt Securities Issued by U.S. Government-Sponsored Enterprises		22,128		19		—			22,147
Debt Securities Issued by Corporations		335,553		1,401		(633	)		336,321
Mortgage-Backed Securities:
Residential - Government Agencies		1,164,466		11,627		(3,267	)		1,172,826
Residential - U.S. Government-Sponsored Enterprises		584,272		4,363		(1,874	)		586,761
Commercial - Government Agencies		224,372		2,889		(2,541	)		224,720
Total Mortgage-Backed Securities		1,973,110		18,879		(7,682	)		1,984,307
Total	$	2,607,636	$	21,143	$	(9,776	)	$	2,619,003
Held-to-Maturity:
Debt Securities Issued by the U.S. Treasury and Government Agencies	$	274,375	$	1,319	$	(31	)	$	275,663
Debt Securities Issued by States and Political Subdivisions		54,811		1,236		—			56,047
Debt Securities Issued by Corporations		14,975		—		(138	)		14,837
Mortgage-Backed Securities:
Residential - Government Agencies		1,067,416		13,247		(5,348	)		1,075,315
Residential - U.S. Government-Sponsored Enterprises		1,546,479		13,871		(2,478	)		1,557,872
Commercial - Government Agencies		84,238		317		(1,407	)		83,148
Total Mortgage-Backed Securities		2,698,133		27,435		(9,233	)		2,716,335
Total	$	3,042,294	$	29,990	$	(9,402	)	$	3,062,882

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 $8.4 million and $6.6 million as of December 31, 2021, and December 31, 2020, respectively. For held-to-maturity (“HTM”) debt securities, AIR totaled $8.2 million and $6.8 million as of December 31, 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 December 31, 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	$	972	$	978
Due After One Year Through Five Years		214,558		215,275
Due After Five Years Through Ten Years		347,391		345,996
Due After Ten Years		13,130		13,305
		576,051		575,554
Debt Securities Issued by Government Agencies		133,898		135,244
Mortgage-Backed Securities:
Residential - Government Agencies		1,327,990		1,319,042
Residential - U.S. Government-Sponsored Enterprises		2,127,781		2,090,326
Commercial - Government Agencies		155,164		155,890
Total Mortgage-Backed Securities		3,610,935		3,565,258
Total	$	4,320,884	$	4,276,056
Held-to-Maturity:
Due After One Year Through Five Years	$	16,537	$	16,391
Due After Five Years Through Ten Years		123,996		123,862
Due After Ten Years		11,278		11,029
		151,811		151,282
Mortgage-Backed Securities:
Residential - Government Agencies		1,774,394		1,755,912
Residential - U.S. Government-Sponsored Enterprises		2,286,880		2,269,761
Commercial - Government Agencies		481,695		469,664
Total Mortgage-Backed Securities		4,542,969		4,495,337
Total	$	4,694,780	$	4,646,619

Investment securities with carrying values of $2.9 billion and $3.6 billion as of December 31, 2021, and December 31, 2020, respectively, were pledged to secure deposits of governmental entities and securities sold under agreements to repurchase.

The table below presents the gains and losses from the sales of investment securities for the years ended December 31, 2021, December 31, 2020, and December 31, 2019.

(dollars in thousands)	2021			2020			2019
Gross Gains on Sales of Investment Securities	$	3,825		$	14,257		$	7,810
Gross Losses on Sales of Investment Securities		(5,122	)		(4,325	)		(11,796	)
Net Gains (Losses) on Sales of Investment Securities	$	(1,297	)	$	9,932		$	(3,986	)

The losses on sales of investment securities during the years ended December 31, 2021, December 31, 2020, and December 31, 2019, were due to fees paid to the counterparties of the Company’s prior Visa Class B share sale transactions, which are expensed as incurred.

The following table summarizes the Company’s AFS debt securities in an unrealized loss position for which an allowance for credit losses has not been recorded, 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
December 31, 2021
Available-for-Sale:
Debt Securities Issued by the U.S. Treasury and Government Agencies	$	51,455	$	(195	)	$	9,995	$	(89	)	$	61,450	$	(284	)
Debt Securities Issued by States and Political Subdivisions		643		(5	)		—		—			643		(5	)
Debt Securities Issued by U.S. Government- Sponsored Enterprises		814		(10	)		49		(1	)		863		(11	)
Debt Securities Issued by Corporations		249,629		(2,846	)		64,029		(970	)		313,658		(3,816	)
Mortgage-Backed Securities:
Residential - Government Agencies		810,157		(17,131	)		41,471		(1,635	)		851,628		(18,766	)
Residential - U.S. Government-Sponsored Enterprises		1,670,500		(35,711	)		180,205		(6,536	)		1,850,705		(42,247	)
Commercial - Government Agencies		25,664		(223	)		21,810		(936	)		47,474		(1,159	)
Total Mortgage-Backed Securities		2,506,321		(53,065	)		243,486		(9,107	)		2,749,807		(62,172	)
Total	$	2,808,862	$	(56,121	)	$	317,559	$	(10,167	)	$	3,126,421	$	(66,288	)
December 31, 2020 ¹
Available-for-Sale:
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 December 31, 2021, which were comprised of 231 individual securities, represent a credit loss impairment. The gross unrealized loss positions were primarily related to mortgage-backed securities 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. Total 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. The Company do 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, the Company did not record an allowance for credit losses for these securities as of December 31, 2021.

Interest income from taxable and non-taxable investment securities for the years ended December 31, 2021, December 31, 2020, and December 31, 2019, were as follows:

	Year Ended December 31,
(dollars in thousands)	2021		2020		2019
Taxable	$	125,529	$	125,291	$	137,204
Non-Taxable		976		2,058		6,586
Total Interest Income from Investment Securities	$	126,505	$	127,349	$	143,790

As of December 31, 2021, and December 31, 2020, the carrying value of the Company’s Federal Home Loan Bank of Des Moines (“FHLB Des Moines”) stock and Federal Reserve Bank stock was as follows:

	December 31,
(dollars in thousands)	2021		2020
Federal Home Loan Bank of Des Moines Stock	$	10,000	$	12,000
Federal Reserve Bank Stock		26,624		21,340
Total	$	36,624	$	33,340

These securities can only be redeemed or sold at their par value and only to the respective issuing government-supported 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 is 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 not be sufficient 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. In December 2021, Visa announced a reduction of the conversion rate from 1.6228 to 1.6181 effective December 29, 2021. See Note 17 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.