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Investment Securities
 6 Months Ended
Jun. 30, 2017
Investments, Debt and Equity Securities [Abstract]  
Investment Securities
Investment Securities

The amortized cost, gross unrealized gains and losses, and fair value of the Company’s investment securities as of June 30, 2017 and December 31, 2016 were as follows:

(dollars in thousands)
Amortized Cost

 
Gross
Unrealized Gains

 
Gross
Unrealized Losses

 
Fair Value

June 30, 2017
 

 
 

 
 

 
 

Available-for-Sale:
 

 
 

 
 

 
 

Debt Securities Issued by the U.S. Treasury and Government Agencies
$
430,208

 
$
3,732

 
$
(963
)
 
$
432,977

Debt Securities Issued by States and Political Subdivisions
650,075

 
17,905

 
(99
)
 
667,881

Debt Securities Issued by Corporations
268,022

 
138

 
(2,911
)
 
265,249

Mortgage-Backed Securities:
 

 
 

 
 

 
 

    Residential - Government Agencies
262,834

 
3,858

 
(1,150
)
 
265,542

    Residential - U.S. Government-Sponsored Enterprises
613,512

 
1,090

 
(4,701
)
 
609,901

    Commercial - Government Agencies
77,757

 
—

 
(2,579
)
 
75,178

Total Mortgage-Backed Securities
954,103

 
4,948

 
(8,430
)
 
950,621

Total
$
2,302,408

 
$
26,723

 
$
(12,403
)
 
$
2,316,728

Held-to-Maturity:
 

 
 

 
 

 
 

Debt Securities Issued by the U.S. Treasury and Government Agencies
$
500,111

 
$
613

 
$
(886
)
 
$
499,838

Debt Securities Issued by States and Political Subdivisions
240,413

 
14,472

 
—

 
254,885

Debt Securities Issued by Corporations
127,666

 
405

 
(1,326
)
 
126,745

Mortgage-Backed Securities:
 
 
 
 
 
 
 

    Residential - Government Agencies
1,928,530

 
15,726

 
(19,602
)
 
1,924,654

    Residential - U.S. Government-Sponsored Enterprises
772,212

 
1,284

 
(7,144
)
 
766,352

    Commercial - Government Agencies
213,770

 
2,213

 
(2,816
)
 
213,167

Total Mortgage-Backed Securities
2,914,512

 
19,223


(29,562
)

2,904,173

Total
$
3,782,702

 
$
34,713

 
$
(31,774
)
 
$
3,785,641

 
 
 
 
 
 
 
 
December 31, 2016
 

 
 

 
 

 
 

Available-for-Sale:
 

 
 

 
 

 
 

Debt Securities Issued by the U.S. Treasury and Government Agencies
$
407,478

 
$
2,531

 
$
(1,294
)
 
$
408,715

Debt Securities Issued by States and Political Subdivisions
662,231

 
11,455

 
(1,887
)
 
671,799

Debt Securities Issued by Corporations
273,044

 
5

 
(3,870
)
 
269,179

Mortgage-Backed Securities:
 
 
 
 
 
 
 

    Residential - Government Agencies
240,412

 
4,577

 
(1,145
)
 
243,844

    Residential - U.S. Government-Sponsored Enterprises
511,234

 
971

 
(5,218
)
 
506,987

    Commercial - Government Agencies
89,544

 
—

 
(4,027
)
 
85,517

Total Mortgage-Backed Securities
841,190

 
5,548

 
(10,390
)
 
836,348

Total
$
2,183,943

 
$
19,539

 
$
(17,441
)
 
$
2,186,041

Held-to-Maturity:
 

 
 

 
 

 
 

Debt Securities Issued by the U.S. Treasury and Government Agencies
$
530,149

 
$
1,562

 
$
(771
)
 
$
530,940

Debt Securities Issued by States and Political Subdivisions
242,295

 
9,991

 
—

 
252,286

Debt Securities Issued by Corporations
135,620

 
416

 
(1,528
)
 
134,508

Mortgage-Backed Securities:
 
 
 
 
 
 
 

    Residential - Government Agencies
1,940,076

 
20,567

 
(23,861
)
 
1,936,782

    Residential - U.S. Government-Sponsored Enterprises
752,768

 
798

 
(10,919
)
 
742,647

    Commercial - Government Agencies
232,089

 
940

 
(2,665
)
 
230,364

Total Mortgage-Backed Securities
2,924,933

 
22,305

 
(37,445
)
 
2,909,793

Total
$
3,832,997

 
$
34,274

 
$
(39,744
)
 
$
3,827,527



The table below presents an analysis of the contractual maturities of the Company’s investment securities as of June 30, 2017.  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
$
86,725

 
$
86,878

Due After One Year Through Five Years
585,928

 
589,580

Due After Five Years Through Ten Years
214,366

 
223,309

Due After Ten Years
31,629

 
33,904

 
918,648

 
933,671

 
 
 
 
Debt Securities Issued by Government Agencies
429,657

 
432,436

Mortgage-Backed Securities:
 

 
 

    Residential - Government Agencies
262,834

 
265,542

    Residential - U.S. Government-Sponsored Enterprises
613,512

 
609,901

    Commercial - Government Agencies
77,757

 
75,178

Total Mortgage-Backed Securities
954,103

 
950,621

Total
$
2,302,408

 
$
2,316,728

 
 
 
 
Held-to-Maturity:
 

 
 

Due in One Year or Less
$
235,104

 
$
234,882

Due After One Year Through Five Years
335,763

 
338,517

Due After Five Years Through Ten Years
258,942

 
266,850

Due After Ten Years
38,381

 
41,219

 
868,190

 
881,468

Mortgage-Backed Securities:
 

 
 

    Residential - Government Agencies
1,928,530

 
1,924,654

    Residential - U.S. Government-Sponsored Enterprises
772,212

 
766,352

    Commercial - Government Agencies
213,770

 
213,167

Total Mortgage-Backed Securities
2,914,512

 
2,904,173

Total
$
3,782,702

 
$
3,785,641



Investment securities with carrying values of $2.7 billion and $2.4 billion as of June 30, 2017 and December 31, 2016, 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 three and six months ended June 30, 2017 and 2016.
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
(dollars in thousands)
2017

 
2016

 
2017

 
2016

Gross Gains on Sales of Investment Securities
$
—

 
$
—

 
$
12,467

 
$
11,355

Gross Losses on Sales of Investment Securities
(520
)
 
(312
)
 
(854
)
 
(487
)
Net Gains (Losses) on Sales of Investment Securities
$
(520
)
 
$
(312
)
 
$
11,613

 
$
10,868



The losses during    the three and six months ended June 30, 2017 and 2016 were due to fees paid to the counterparties of our prior Visa Class B share sale transactions.
The Company’s investment securities in an unrealized loss position, segregated by continuous length of loss, were as follows:
 
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, 2017
 

 
 

 
 

 
 

 
 

 
 

Available-for-Sale:
 
 
 
 
 
 
 
 
 
 
 
Debt Securities Issued by the U.S. Treasury
   and Government Agencies
$
42,325

 
$
(285
)
 
$
143,773

 
$
(678
)
 
$
186,098

 
$
(963
)
Debt Securities Issued by States
   and Political Subdivisions
49,521

 
(99
)
 
—

 
—

 
49,521

 
(99
)
Debt Securities Issued by Corporations
62,472

 
(555
)
 
162,638

 
(2,356
)
 
225,110

 
(2,911
)
Mortgage-Backed Securities:
 
 
 
 
 
 
 
 


 


    Residential - Government Agencies
23,520

 
(56
)
 
13,814

 
(1,094
)
 
37,334

 
(1,150
)
    Residential - U.S. Government-Sponsored Enterprises
420,189

 
(4,398
)
 
10,611

 
(303
)
 
430,800

 
(4,701
)
    Commercial - Government Agencies
—

 
—

 
75,178

 
(2,579
)
 
75,178

 
(2,579
)
Total Mortgage-Backed Securities
443,709

 
(4,454
)
 
99,603

 
(3,976
)
 
543,312

 
(8,430
)
Total
$
598,027

 
$
(5,393
)
 
$
406,014

 
$
(7,010
)
 
$
1,004,041

 
$
(12,403
)
Held-to-Maturity:
 
 
 
 
 
 
 
 
 
 
 
Debt Securities Issued by the U.S. Treasury
   and Government Agencies
$
284,734

 
$
(886
)
 
$
—

 
$
—

 
$
284,734

 
$
(886
)
Debt Securities Issued by Corporations
65,356

 
(835
)
 
15,027

 
(491
)
 
80,383

 
(1,326
)
Mortgage-Backed Securities:
 
 
 
 
 
 
 
 
 
 
 
    Residential - Government Agencies
856,028

 
(11,817
)
 
222,166

 
(7,785
)
 
1,078,194

 
(19,602
)
    Residential - U.S. Government-Sponsored Enterprises
598,035

 
(7,144
)
 
—

 
—

 
598,035

 
(7,144
)
    Commercial - Government Agencies
79,883

 
(2,748
)
 
10,561

 
(68
)
 
90,444

 
(2,816
)
Total Mortgage-Backed Securities
1,533,946

 
(21,709
)
 
232,727

 
(7,853
)
 
1,766,673

 
(29,562
)
Total
$
1,884,036

 
$
(23,430
)
 
$
247,754

 
$
(8,344
)
 
$
2,131,790

 
$
(31,774
)
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2016
 

 
 

 
 

 
 

 
 

 
 

Available-for-Sale:
 
 
 
 
 
 
 
 
 
 
 
Debt Securities Issued by the U.S. Treasury
     and Government Agencies
$
143,715

 
$
(562
)
 
$
89,211

 
$
(732
)
 
$
232,926

 
$
(1,294
)
Debt Securities Issued by States
     and Political Subdivisions
211,188

 
(1,873
)
 
6,725

 
(14
)
 
217,913

 
(1,887
)
Debt Securities Issued by Corporations
67,332

 
(714
)
 
196,838

 
(3,156
)
 
264,170

 
(3,870
)
Mortgage-Backed Securities:
 
 
 
 
 
 
 
 
 
 
 
     Residential - Government Agencies
38,355

 
(89
)
 
11,185

 
(1,056
)
 
49,540

 
(1,145
)
     Residential - U.S. Government-Sponsored Enterprises
397,385

 
(5,218
)
 
—

 
—

 
397,385

 
(5,218
)
     Commercial - Government Agencies
5,097

 
(164
)
 
80,420

 
(3,863
)
 
85,517

 
(4,027
)
Total Mortgage-Backed Securities
440,837

 
(5,471
)
 
91,605

 
(4,919
)
 
532,442

 
(10,390
)
Total
$
863,072

 
$
(8,620
)
 
$
384,379

 
$
(8,821
)
 
$
1,247,451

 
$
(17,441
)
Held-to-Maturity:
 
 
 
 
 
 
 
 
 
 
 
Debt Securities Issued by the U.S. Treasury
and Government Agencies
$
169,926

 
$
(771
)
 
$
—

 
$
—

 
$
169,926

 
$
(771
)
Debt Securities Issued by Corporations
69,601

 
(971
)
 
15,933

 
(557
)
 
85,534

 
(1,528
)
Mortgage-Backed Securities:
 
 
 
 
 
 
 
 
 
 
 
     Residential - Government Agencies
835,227

 
(15,313
)
 
231,377

 
(8,548
)
 
1,066,604

 
(23,861
)
     Residential - U.S. Government-Sponsored Enterprises
693,047

 
(10,919
)
 
—

 
—

 
693,047

 
(10,919
)
     Commercial - Government Agencies
87,586

 
(2,597
)
 
18,653

 
(68
)
 
106,239

 
(2,665
)
Total Mortgage-Backed Securities
1,615,860

 
(28,829
)
 
250,030

 
(8,616
)
 
1,865,890

 
(37,445
)
Total
$
1,855,387

 
$
(30,571
)
 
$
265,963

 
$
(9,173
)
 
$
2,121,350

 
$
(39,744
)


The Company does not believe that the investment securities that were in an unrealized loss position as of June 30, 2017, which were comprised of 291 securities, represent an other-than-temporary impairment.  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.  As of June 30, 2017 and December 31, 2016, the gross unrealized losses reported for mortgage-backed securities were mostly related to investment securities issued by the Government National Mortgage Association. 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.

Interest income from taxable and non-taxable investment securities for the three and six months ended June 30, 2017 and 2016 were as follows:
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
(dollars in thousands)
2017

 
2016

 
2017

 
2016

Taxable
$
26,741

 
$
25,567

 
$
52,508

 
$
51,554

Non-Taxable
5,012

 
5,122

 
10,035

 
10,340

Total Interest Income from Investment Securities
$
31,753

 
$
30,689

 
$
62,543

 
$
61,894



As of June 30, 2017, included in the Company’s investment securities portfolio were debt securities issued by political subdivisions within the State of Hawaii of $528.3 million, representing 57% of the total fair value of the Company’s municipal debt securities. Of the entire Hawaii municipal bond portfolio, 94% were credit-rated Aa2 or better by Moody’s while the remaining Hawaii municipal bonds were credit-rated A2 or better by at least one nationally recognized statistical rating organization. Of the Company’s total Hawaii municipal bond holdings, 78% were general obligation issuances. As of June 30, 2017, there were no other holdings of municipal debt securities that were issued by a single state or political subdivision which comprised more than 10% of the total fair value of the Company’s municipal debt securities.

As of June 30, 2017 and December 31, 2016, 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,
2017

 
December 31,
2016

Federal Home Loan Bank Stock
$
20,000

 
$
20,000

Federal Reserve Bank Stock
20,167

 
20,063

Total
$
40,167

 
$
40,063



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. As of June 30, 2017, the conversion ratio was 1.6483.

During the first quarter of 2017, the Company recorded a $12.5 million gain on the sale of 90,000 Visa Class B shares. Concurrent with every sale of Visa Class B shares, the Company has entered into an agreement with the buyer that requires payment to the buyer in the event Visa further reduces the conversion ratio. Based on the existing transfer restriction and the uncertainty of the outcome of the Visa litigation mentioned above, the remaining 90,914 Class B shares (149,854 Class A equivalents) that the Company owns as of June 30, 2017 are carried at a zero cost basis.