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Investment Securities
 6 Months Ended
Jun. 30, 2022
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 June 30, 2022, and December 31, 2021, were as follows:

 

(dollars in thousands)

 

Amortized

Cost

 

 

Gross

Unrealized

Gains

 

 

Gross

Unrealized

Losses

 

 

Fair Value

 

June 30, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Available-for-Sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt Securities Issued by the U.S. Treasury and Government Agencies

 

$

272,935

 

 

$

1,640

 

 

$

(10,689

)

 

$

263,886

 

Debt Securities Issued by States and Political Subdivisions

 

 

74,698

 

 

 

2

 

 

 

(8,859

)

 

 

65,841

 

Debt Securities Issued by U.S. Government-Sponsored Enterprises

 

 

1,758

 

 

 

—

 

 

 

(85

)

 

 

1,673

 

Debt Securities Issued by Corporations

 

 

432,016

 

 

 

—

 

 

 

(47,697

)

 

 

384,319

 

Mortgage-Backed Securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential - Government Agencies

 

 

1,348,519

 

 

 

566

 

 

 

(122,746

)

 

 

1,226,339

 

Residential - U.S. Government-Sponsored Enterprises

 

 

2,104,396

 

 

 

13

 

 

 

(254,542

)

 

 

1,849,867

 

Commercial - Government Agencies or Sponsored Agencies

 

 

178,008

 

 

 

—

 

 

 

(14,457

)

 

 

163,551

 

Total Mortgage-Backed Securities

 

 

3,630,923

 

 

 

579

 

 

 

(391,745

)

 

 

3,239,757

 

Total

 

$

4,412,330

 

 

$

2,221

 

 

$

(459,075

)

 

$

3,955,476

 

Held-to-Maturity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt Securities Issued by the U.S. Treasury and Government Agencies

 

$

131,556

 

 

$

—

 

 

$

(13,058

)

 

$

118,498

 

Debt Securities Issued by Corporations

 

 

18,672

 

 

 

—

 

 

 

(1,857

)

 

 

16,815

 

Mortgage-Backed Securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential - Government Agencies

 

 

1,605,791

 

 

 

721

 

 

 

(173,760

)

 

 

1,432,752

 

Residential - U.S. Government-Sponsored Enterprises

 

 

2,107,997

 

 

 

21

 

 

 

(247,438

)

 

 

1,860,580

 

Commercial - Government Agencies or Sponsored Agencies

 

 

457,677

 

 

 

—

 

 

 

(62,583

)

 

 

395,094

 

Total Mortgage-Backed Securities

 

 

4,171,465

 

 

 

742

 

 

 

(483,781

)

 

 

3,688,426

 

Total

 

$

4,321,693

 

 

$

742

 

 

$

(498,696

)

 

$

3,823,739

 

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 or Sponsored 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 or Sponsored 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

 

 

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 $9.0 million and $8.4 million as of June 30, 2022, and December 31, 2021, respectively.  For held-to-maturity (“HTM”) debt securities, AIR totaled $7.5 million and $8.2 million as of June 30, 2022, and December 31, 2021, 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 June 30, 2022.  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

 

$

902

 

 

$

902

 

Due After One Year Through Five Years

 

 

278,482

 

 

 

263,219

 

Due After Five Years Through Ten Years

 

 

372,109

 

 

 

322,093

 

Due After Ten Years

 

 

13,130

 

 

 

11,133

 

 

 

 

664,623

 

 

 

597,347

 

Debt Securities Issued by Government Agencies

 

 

116,784

 

 

 

118,372

 

Mortgage-Backed Securities:

 

 

 

 

 

 

 

 

Residential - Government Agencies

 

 

1,348,519

 

 

 

1,226,339

 

Residential - U.S. Government-Sponsored Enterprises

 

 

2,104,396

 

 

 

1,849,867

 

Commercial - Government Agencies or Sponsored Agencies

 

 

178,008

 

 

 

163,551

 

Total Mortgage-Backed Securities

 

 

3,630,923

 

 

 

3,239,757

 

Total

 

$

4,412,330

 

 

$

3,955,476

 

Held-to-Maturity:

 

 

 

 

 

 

 

 

Due After One Year Through Five Years

 

 

15,022

 

 

 

14,223

 

Due After Five Year Through Ten Years

 

 

124,057

 

 

 

111,628

 

Due After Ten Years

 

 

11,149

 

 

 

9,462

 

 

 

 

150,228

 

 

 

135,313

 

Mortgage-Backed Securities:

 

 

 

 

 

 

 

 

Residential - Government Agencies

 

 

1,605,791

 

 

 

1,432,752

 

Residential - U.S. Government-Sponsored Enterprises

 

 

2,107,997

 

 

 

1,860,580

 

Commercial - Government Agencies or Sponsored Agencies

 

 

457,677

 

 

 

395,094

 

Total Mortgage-Backed Securities

 

 

4,171,465

 

 

 

3,688,426

 

Total

 

$

4,321,693

 

 

$

3,823,739

 

 

Investment securities with carrying values of $3.7 billion and $2.9 billion as of June 30, 2022, and December 31, 2021, 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 losses from the sales of investment securities for the three and six months ended June 30, 2022, and June 30, 2021:

 

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

(dollars in thousands)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Gross Gains on Sales of Investment Securities

 

$

—

 

 

$

3,675

 

 

$

—

 

 

$

3,675

 

Gross Losses on Sales of Investment Securities

 

 

(1,295

)

 

 

(1,252

)

 

 

(2,840

)

 

 

(2,455

)

Total Losses on Sales of Investment Securities

 

$

(1,295

)

 

$

2,423

 

 

$

(2,840

)

 

$

1,220

 

 

The losses on sales of investment securities during the three and six months ended June 30, 2022, and June 30, 2021, 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 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

 

June 30, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Available-for-Sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt Securities Issued by the U.S. Treasury

   and Government Agencies

 

$

146,219

 

 

$

(10,637

)

 

$

6,682

 

 

$

(52

)

 

$

152,901

 

 

$

(10,689

)

Debt Securities Issued by States

   and Political Subdivisions

 

 

64,952

 

 

 

(8,859

)

 

 

—

 

 

 

—

 

 

 

64,952

 

 

 

(8,859

)

Debt Securities Issued by U.S. Government-

   Sponsored Enterprises

 

 

1,614

 

 

 

(79

)

 

 

60

 

 

 

(6

)

 

 

1,674

 

 

 

(85

)

Debt Securities Issued by Corporations

 

 

278,163

 

 

 

(38,854

)

 

 

106,156

 

 

 

(8,843

)

 

 

384,319

 

 

 

(47,697

)

Mortgage-Backed Securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential - Government Agencies

 

 

849,208

 

 

 

(61,865

)

 

 

342,358

 

 

 

(60,881

)

 

 

1,191,566

 

 

 

(122,746

)

Residential - U.S. Government-Sponsored

   Enterprises

 

 

946,822

 

 

 

(99,484

)

 

 

902,647

 

 

 

(155,058

)

 

 

1,849,469

 

 

 

(254,542

)

Commercial-Government Agencies or Sponsored Agencies

 

 

144,817

 

 

 

(11,126

)

 

 

18,734

 

 

 

(3,331

)

 

 

163,551

 

 

 

(14,457

)

Total Mortgage-Backed Securities

 

 

1,940,847

 

 

 

(172,475

)

 

 

1,263,739

 

 

 

(219,270

)

 

 

3,204,586

 

 

 

(391,745

)

Total

 

$

2,431,795

 

 

$

(230,904

)

 

$

1,376,637

 

 

$

(228,171

)

 

$

3,808,432

 

 

$

(459,075

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 or Sponsored 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

)

 

The Company does not believe that the AFS debt securities that were in an unrealized loss position as of June 30, 2022, which were comprised of 455 individual securities, represent a credit loss impairment.  As of June 30, 2022, and December 31, 2021, 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 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 June 30, 2022.  

 

 

Interest income from taxable and non-taxable investment securities for the three and six months ended June 30, 2022, and June 30, 2021, were as follows:

 

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

(dollars in thousands)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Taxable

 

$

36,809

 

 

$

29,765

 

 

$

72,599

 

 

$

58,621

 

Non-Taxable

 

 

12

 

 

 

278

 

 

 

23

 

 

 

559

 

Total Interest Income from Investment Securities

 

$

36,821

 

 

$

30,043

 

 

$

72,622

 

 

$

59,180

 

 

As of June 30, 2022, and December 31, 2021, 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)

 

June 30,

2022

 

 

December 31,

2021

 

Federal Home Loan Bank of Des Moines Stock

 

$

10,000

 

 

$

10,000

 

Federal Reserve Bank Stock

 

 

26,840

 

 

 

26,624

 

Total

 

$

36,840

 

 

$

36,624

 

 

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.