Securities

12 Months Ended

Dec. 31, 2019

Investments, Debt and Equity Securities [Abstract]

Securities. Year-end securities held to maturity and available for sale consisted of the following:



	2019								2018
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Held to Maturity:
Residential mortgage-backed securities	$	530,861	$	22	$	9,365	$	521,518	$	2,737	$	8	$	85	$	2,660
States and political subdivisions	1,497,644		28,909		896		1,525,657		1,101,820		11,525		552		1,112,793
Other	1,500		—		—		1,500		1,500		—		—		1,500
Total	$	2,030,005	$	28,931	$	10,261	$	2,048,675	$	1,106,057	$	11,533	$	637	$	1,116,953
Available for Sale:
U.S. Treasury	$	1,941,283	$	18,934	$	12,084	$	1,948,133	$	3,455,417	$	1,772	$	29,500	$	3,427,689
Residential mortgage-backed securities	2,176,275		32,608		1,289		2,207,594		823,208		13,079		6,547		829,740
States and political subdivisions	6,717,344		353,857		204		7,070,997		7,089,132		70,760		72,690		7,087,202
Other	42,867		—		—		42,867		42,690		—		—		42,690
Total	$	10,877,769	$	405,399	$	13,577	$	11,269,591	$	11,410,447	$	85,611	$	108,737	$	11,387,321

All mortgage-backed securities included in the above table were issued by U.S. government agencies and corporations. At December 31, 2019, approximately 99.7% of the securities in our municipal bond portfolio were issued by the State of Texas or political subdivisions or agencies within the State of Texas, of which approximately 69.1% are either guaranteed by the Texas Permanent School Fund, which has a “triple-A” insurer financial strength rating, or are secured by U.S. Treasury securities via defeasance of the debt by the issuers. 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 securities pledged to secure public funds, trust deposits, repurchase agreements and for other purposes, as required or permitted by law was $3.9 billion at December 31, 2019 and $3.8 billion December 31, 2018.

From time to time, we have reclassified certain securities from available for sale to held to maturity. During 2019, we reclassified securities with an aggregate fair value of $377.8 million and an aggregate net unrealized gain of $3.3 million ($2.6 million, net of tax) on the date of the transfer. The net unamortized, unrealized gain remaining on transferred securities, including those transferred in 2019 and in years prior, included in accumulated other comprehensive income in the accompanying balance sheet totaled $4.8 million ($3.8 million, net of tax) at December 31, 2019 and $2.7 million ($2.2 million, net of tax) at December 31, 2018. 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.

Unrealized Losses. Year-end securities with unrealized losses, segregated by length of impairment, were as follows:



	Less than 12 Months				More than 12 Months				Total
	Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses
2019
Held to Maturity:
Residential mortgage-backed securities	$	519,099	$	9,361	$	408	$	4	$	519,507	$	9,365
States and political subdivisions	371,434		896		—		—		371,434		896
Total	$	890,533	$	10,257	$	408	$	4	$	890,941	$	10,261
Available for Sale:
U.S. Treasury	$	636,999	$	12,070	$	199,980	$	14	$	836,979	$	12,084
Residential mortgage-backed securities	276,249		782		31,456		507		307,705		1,289
States and political subdivisions	59,678		204		—		—		59,678		204
Total	$	972,926	$	13,056	$	231,436	$	521	$	1,204,362	$	13,577



	Less than 12 Months				More than 12 Months				Total
	Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses
2018
Held to Maturity:
Residential mortgage-backed securities	$	—	$	—	$	2,034	$	85	$	2,034	$	85
States and political subdivisions	205,686		541		5,952		11		211,638		552
Total	$	205,686	$	541	$	7,986	$	96	$	213,672	$	637
Available for Sale:
U.S. Treasury	$	—	$	—	$	3,139,639	$	29,500	$	3,139,639	$	29,500
Residential mortgage-backed securities	152,682		205		213,982		6,342		366,664		6,547
States and political subdivisions	1,136,322		7,026		2,058,048		65,664		3,194,370		72,690
Total	$	1,289,004	$	7,231	$	5,411,669	$	101,506	$	6,700,673	$	108,737

Declines in the fair value of held-to-maturity and available-for-sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses to the extent the impairment is related to credit losses. The amount of the impairment related to other factors is recognized in other comprehensive income. In estimating other-than-temporary impairment losses, management considers, among other things, (i) the length of time and the extent to which the fair value has been less than cost, (ii) the financial condition and near-term prospects of the issuer, and (iii) the intent and our ability to retain our investment in the issuer for a period of time sufficient to allow for any anticipated recovery in cost.

Management has the ability and intent to hold the securities classified as held to maturity in the table above until they mature, at which time we expect to receive full value for the securities. Furthermore, as of December 31, 2019, 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. Any 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. Management does not believe any of the securities are impaired due to reasons of credit quality. Accordingly, as of December 31, 2019, management believes the impairments detailed in the table above are temporary and no impairment loss has been realized in our consolidated income statement.

Contractual Maturities. The amortized cost and estimated fair value of securities, excluding trading securities, at December 31, 2019 are presented below by contractual maturity. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations. Residential mortgage-backed securities and equity securities are shown separately since they are not due at a single maturity date.



	Held to Maturity				Available for Sale
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Due in one year or less	$	12,773	$	12,847	$	508,575	$	509,404
Due after one year through five years	165,519		169,970		1,317,774		1,344,035
Due after five years through ten years	527,907		541,249		451,885		478,800
Due after ten years	792,945		803,091		6,380,393		6,686,891
Residential mortgage-backed securities	530,861		521,518		2,176,275		2,207,594
Equity securities	—		—		42,867		42,867
Total	$	2,030,005	$	2,048,675	$	10,877,769	$	11,269,591

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



	2019			2018			2017
Proceeds from sales	$	18,660,147		$	16,806,062		$	11,963,359
Gross realized gains	930			3			1
Gross realized losses	(637		)	(159		)	(4,942		)
Tax benefit (expense) related to securities gains/losses	(62		)	33			1,729

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



	2019			2018			2017
Premium amortization	$	(120,785	)	$	(108,483	)	$	(97,841	)
Discount accretion	5,227			7,955			7,908
Net (premium amortization) discount accretion	$	(115,558	)	$	(100,528	)	$	(89,933	)

Trading Account Securities. Year-end trading account securities, at estimated fair value, were as follows:



	2019		2018
U.S. Treasury	$	24,298	$	21,928
States and political subdivisions	—		2,158
Total	$	24,298	$	24,086

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



	2019			2018		2017
Net gain on sales transactions	$	2,173		$	1,816	$	1,408
Net mark-to-market gains (losses)	(176		)	105		(43		)
Net gain on trading account securities	$	1,997		$	1,921	$	1,365