Investments

9 Months Ended

Sep. 30, 2019

Investments, Debt and Equity Securities [Abstract]

Investments

Investments

Available-for-Sale Investments

The amortized cost and fair value of securities available for sale are as follows:

	September 30, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Available for sale:
Mortgage-backed securities	$	219,531	$	1,807	$	(723	)	$	220,615
Utah Housing Corporation bonds	19,474		149		(261		)	19,362
U.S. government-sponsored enterprises	215,598		473		(80		)	215,991
Total	$	454,603	$	2,429	$	(1,064	)	$	455,968
	December 31, 2018
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Available for sale:
Mortgage-backed securities	$	159,937	$	155	$	(5,517	)	$	154,575
Utah Housing Corporation bonds	22,388		23		(741		)	21,670
Total	$	182,325	$	178	$	(6,258	)	$	176,245

The following table summarizes the amount of gross unrealized losses for our available for sale securities and the estimated fair value for securities having gross unrealized loss positions, categorized by length of time the securities have been in an unrealized loss position:

	Less than 12 months					12 months or more					Total
	Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value
As of September 30, 2019:
Mortgage-backed securities	$	(126	)	$	6,920	$	(597	)	$	73,337	$	(723	)	$	80,257
Utah Housing Corporation bonds	—			—		(261		)	10,919		(261		)	10,919
U.S. government-sponsored enterprises	(80		)	34,917		—			—		(80		)	34,917
Total	$	(206	)	$	41,837	$	(858	)	$	84,256	$	(1,064	)	$	126,093
As of December 31, 2018:
Mortgage-backed securities	$	(228	)	$	16,948	$	(5,289	)	$	125,537	$	(5,517	)	$	142,485
Utah Housing Corporation bonds	—			—		(741		)	16,647		(741		)	16,647
Total	$	(228	)	$	16,948	$	(6,030	)	$	142,184	$	(6,258	)	$	159,132

Our investment portfolio is comprised primarily of mortgage-backed securities issued by Ginnie Mae, Fannie Mae and Freddie Mac, with amortized costs of $56 million, $103 million, and $60 million, respectively, at September 30, 2019. We own these securities to meet our requirements under the Community Reinvestment Act. As of September 30, 2019, 35 of the 103 separate mortgage-backed securities in our investment portfolio had unrealized losses, and 16 of the 35 securities in a net loss position were issued under Ginnie Mae programs that carry a full faith and credit guarantee from the U.S. Government. The remaining securities in a net loss position carry a principal and interest guarantee by Fannie Mae or Freddie Mac, respectively. We have the ability and the intent to hold each of these securities for a period of time sufficient for the market price to recover to at least the adjusted amortized cost of the security. As of December 31, 2018, 74 of the 86 separate mortgage-backed securities in our investment portfolio had unrealized losses, and 34 of the 74 securities in a net loss position were issued under Ginnie Mae programs that carry a full faith and credit guarantee from the U.S. Government. The remainder carried a principal and interest guarantee by Fannie Mae or Freddie Mac, respectively.

We also invest in Utah Housing Corporation bonds for the purpose of complying with the Community Reinvestment Act. These bonds are rated Aa3 by Moody’s Investors Service. As of September 30, 2019, one of the three separate bonds was in a net loss position. We have the intent and ability to hold each of these bonds for a period of time sufficient for the market price to recover to at least the adjusted amortized cost of the security.

In the second quarter of 2018, we elected to sell nine securities totaling $41 million to better align the portfolio with the Community Reinvestment Act requirements, and we recognized a $2 million loss upon the sale of those securities.

Beginning in the second quarter of 2019, we began investing in U.S. government-sponsored enterprise securities issued by the Federal Home Loan Bank (“FHLB”), Freddie Mac and the Federal Farm Credit Bank (“FFCB”). These bonds are rated AA+ by Moody’s Investors Services. As of September 30, 2019, 2 of the 11 securities had unrealized losses.

As of September 30, 2019, the amortized cost and fair value of securities, by contractual maturities, are summarized below. Contractual maturities versus actual maturities may differ due to the effect of prepayments.

Year of Maturity	Amortized Cost		Estimated Fair Value
2020	$	77,265	$	77,377
2021	103,336		103,698
2022	34,997		34,917
2038	260		284
2039	2,880		3,071
2042	7,558		7,388
2043	12,274		12,420
2044	18,838		18,994
2045	20,227		20,259
2046	32,152		32,028
2047	48,145		47,816
2048	13,205		13,548
2049	83,466		84,168
Total	$	454,603	$	455,968

The mortgage-backed securities have been pledged to the Federal Reserve Bank (the “FRB”) as collateral against any advances and accrued interest under the Primary Credit lending program sponsored by the FRB. We had $214 million and $147 million par value of mortgage-backed securities pledged to this borrowing facility at September 30, 2019 and December 31, 2018, respectively, as discussed further in Note 6, “Borrowings.”

Other Investments

Investments in Non-Marketable Securities

We hold investments in non-marketable securities and account for these investments at cost, less impairment, plus or minus observable price changes of identical or similar securities of the same issuer. In the third quarter of 2019, we funded an additional investment in an issuer whose equity securities we purchased in the past. We used the valuation associated with the more recent securities investment to adjust the valuation of our previous investments and, as a result, recorded a gain of $8 million on our earlier equity securities investments. As of September 30, 2019 and December 31, 2018, our total investment in the securities of this issuer was $26 million and $8 million, respectively.

Low Income Housing Tax Credit Investments

We invest in affordable housing projects that qualify for the low income housing tax credit (“LIHTC”), which is designed to promote private development of low income housing. These investments generate a return mostly through realization of federal tax credits. Total carrying value of the LIHTC investments was $59 million at September 30, 2019 and $48 million at

December 31, 2018. We are periodically required to provide additional financial support during the investment period. Our liability for these unfunded commitments was $33 million at September 30, 2019 and $37 million at December 31, 2018.

Related to these investments, we recognized tax credits and other tax benefits through tax expense of $0.8 million at September 30, 2019 and $0.9 million at December 31, 2018. Tax credits and other tax benefits are recognized as part of our annual effective tax rate used to determine tax expense in a given quarter. Accordingly, the portion of a year’s expected tax benefits recognized in any given quarter may differ from 25 percent.