| Securities |
Note 6 — Securities
The following tables present the amortized cost, gross unrealized gains and losses and fair value by major categories of available-for-sale investment securities, which are carried at fair value, and the held-to-maturity investment security, which is carried at amortized cost, as of September 30, 2017 and December 31, 2016: | | | | | | | | | | | | | | | | | | | | | As of September 30, 2017 | ($ in thousands) | | Amortized
Cost | | Gross
Unrealized
Gains | | Gross
Unrealized
Losses | | Fair
Value | Available-for-sale investment securities: | | |
| | |
| | |
| | |
| U.S. Treasury securities | | $ | 533,035 |
| | $ | — |
| | $ | (6,703 | ) | | $ | 526,332 |
| U.S. government agency and U.S. government sponsored enterprise debt securities | | 191,727 |
| | 81 |
| | (2,623 | ) | | 189,185 |
| U.S. government agency and U.S. government sponsored enterprise mortgage-backed securities: | | |
| | |
| | |
| | |
| Commercial mortgage-backed securities | | 321,943 |
| | 326 |
| | (7,097 | ) | | 315,172 |
| Residential mortgage-backed securities | | 1,154,026 |
| | 4,790 |
| | (7,882 | ) | | 1,150,934 |
| Municipal securities | | 116,798 |
| | 900 |
| | (456 | ) | | 117,242 |
| Non-agency residential mortgage-backed securities: | | | | | | | | |
| Investment grade (1) | | 9,680 |
| | 21 |
| | (7 | ) | | 9,694 |
| Corporate debt securities: | | | | | | | | |
| Investment grade (1) | | 2,464 |
| | — |
| | (137 | ) | | 2,327 |
| Non-investment grade (1) | | 10,191 |
| | — |
| | (576 | ) | | 9,615 |
| Foreign bonds: | | | | | | | |
|
| Investment grade (1) (2) | | 505,395 |
| | 229 |
| | (16,484 | ) | | 489,140 |
| Other securities (3) | | 147,504 |
| | 3 |
| | (372 | ) | | 147,135 |
| Total available-for-sale investment securities | | $ | 2,992,763 |
| | $ | 6,350 |
| | $ | (42,337 | ) | | $ | 2,956,776 |
| Held-to-maturity investment security: | | | | | | | | | Non-agency commercial mortgage-backed security | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| Total investment securities | | $ | 2,992,763 |
| | $ | 6,350 |
| | $ | (42,337 | ) | | $ | 2,956,776 |
| | | | | | | | | | | | | | | | | | | | | As of December 31, 2016 | ($ in thousands) | | Amortized
Cost | | Gross
Unrealized
Gains | | Gross
Unrealized
Losses | | Fair
Value | Available-for-sale investment securities: | | |
| | |
| | |
| | |
| U.S. Treasury securities | | $ | 730,287 |
| | $ | 21 |
| | $ | (9,829 | ) | | $ | 720,479 |
| U.S. government agency and U.S. government sponsored enterprise debt securities | | 277,891 |
| | 224 |
| | (3,249 | ) | | 274,866 |
| U.S. government agency and U.S. government sponsored enterprise mortgage-backed securities: | | |
| | |
| | |
| | |
| Commercial mortgage-backed securities | | 272,672 |
| | 345 |
| | (6,218 | ) | | 266,799 |
| Residential mortgage-backed securities | | 1,266,372 |
| | 3,924 |
| | (11,549 | ) | | 1,258,747 |
| Municipal securities | | 148,302 |
| | 1,252 |
| | (1,900 | ) | | 147,654 |
| Non-agency residential mortgage-backed securities: | | | | | | | | |
| Investment grade (1) | | 11,592 |
| | — |
| | (115 | ) | | 11,477 |
| Corporate debt securities: | | | | | | | | |
| Investment grade (1) | | 222,190 |
| | 562 |
| | (375 | ) | | 222,377 |
| Non-investment grade (1) | | 10,191 |
| | — |
| | (1,018 | ) | | 9,173 |
| Foreign bonds: | | | | | | | | | Investment grade (1) (2) | | 405,443 |
| | 30 |
| | (21,579 | ) | | 383,894 |
| Other securities | | 40,501 |
| | 337 |
| | (509 | ) | | 40,329 |
| Total available-for-sale investment securities | | $ | 3,385,441 |
| | $ | 6,695 |
| | $ | (56,341 | ) | | $ | 3,335,795 |
| Held-to-maturity investment security: | | | | | | | | | Non-agency commercial mortgage-backed security (3) | | $ | 143,971 |
| | $ | 622 |
| | $ | — |
| | $ | 144,593 |
| Total investment securities | | $ | 3,529,412 |
| | $ | 7,317 |
| | $ | (56,341 | ) | | $ | 3,480,388 |
| | | | | | | | | |
| | (1) | Available-for-sale investment securities rated BBB- or higher by Standard &Poor’s (“S&P”) or Baa3 or higher by Moody’s are considered investment grade. Conversely, available-for-sale investment securities rated lower than BBB- by S&P or lower than Baa3 by Moody’s are considered non-investment grade. Classifications are based on the lower of the credit ratings by S&P or Moody’s. |
| | (2) | Fair values of foreign bonds include $458.9 million and $353.6 million of multilateral development bank bonds as of September 30, 2017 and December 31, 2016, respectively. |
| | (3) | During the third quarter of 2017, the Company transferred a non-agency commercial mortgage-backed security with a net carrying amount of $115.6 million from held-to-maturity to available-for-sale. |
Unrealized Losses
The following tables present the gross unrealized losses and related fair values of the Company’s investment portfolio, aggregated by investment category and the length of time that individual securities have been in a continuous unrealized loss position, as of September 30, 2017 and December 31, 2016: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | As of September 30, 2017 | ($ in thousands) | | Less Than 12 Months | | 12 Months or More | | Total | | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses | Available-for-sale investment securities: | | |
| | |
| | |
| | |
| | |
| | |
| U.S. Treasury securities | | $ | 415,507 |
| | $ | (4,615 | ) | | $ | 110,825 |
| | $ | (2,088 | ) | | $ | 526,332 |
| | $ | (6,703 | ) | U.S. government agency and U.S. government sponsored enterprise debt securities | | 96,681 |
| | (367 | ) | | 54,512 |
| | (2,256 | ) | | 151,193 |
| | (2,623 | ) | U.S. government agency and U.S. government sponsored enterprise mortgage-backed securities: | | |
| | |
| | |
| | |
| | |
| | |
| Commercial mortgage-backed securities | | 120,070 |
| | (1,721 | ) | | 155,128 |
| | (5,376 | ) | | 275,198 |
| | (7,097 | ) | Residential mortgage-backed securities | | 365,038 |
| | (2,344 | ) | | 288,768 |
| | (5,538 | ) | | 653,806 |
| | (7,882 | ) | Municipal securities | | 22,010 |
| | (222 | ) | | 11,256 |
| | (234 | ) | | 33,266 |
| | (456 | ) | Non-agency residential mortgage-backed securities: | | |
| | |
| | |
| | |
| | |
| | |
| Investment grade | | 4,715 |
| | (7 | ) | | — |
| | — |
| | 4,715 |
| | (7 | ) | Corporate debt securities: | | |
| | |
| | |
| | |
| | |
| | |
| Investment grade | | — |
| | — |
| | 2,327 |
| | (137 | ) | | 2,327 |
| | (137 | ) | Non-investment grade | | — |
| | — |
| | 9,615 |
| | (576 | ) | | 9,615 |
| | (576 | ) | Foreign bonds: | | | | | | | | | | | | | Investment grade | | 73,619 |
| | (873 | ) | | 344,298 |
| | (15,611 | ) | | 417,917 |
| | (16,484 | ) | Other securities | | 31,223 |
| | (372 | ) | | — |
| | — |
| | 31,223 |
| | (372 | ) | Total available-for-sale investment securities | | $ | 1,128,863 |
| | $ | (10,521 | ) | | $ | 976,729 |
| | $ | (31,816 | ) | | $ | 2,105,592 |
| | $ | (42,337 | ) | Held-to-maturity investment security: | | | | | | | | | | | | | Non-agency commercial mortgage-backed security | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| Total investment securities | | $ | 1,128,863 |
| | $ | (10,521 | ) | | $ | 976,729 |
| | $ | (31,816 | ) | | $ | 2,105,592 |
| | $ | (42,337 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | As of December 31, 2016 | ($ in thousands) | | Less Than 12 Months | | 12 Months or More | | Total | | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses | Available-for-sale investment securities: | | |
| | |
| | |
| | |
| | |
| | |
| U.S. Treasury securities | | $ | 670,268 |
| | $ | (9,829 | ) | | $ | — |
| | $ | — |
| | $ | 670,268 |
| | $ | (9,829 | ) | U.S. government agency and U.S. government sponsored enterprise debt securities | | 203,901 |
| | (3,249 | ) | | — |
| | — |
| | 203,901 |
| | (3,249 | ) | U.S. government agency and U.S. government sponsored enterprise mortgage-backed securities: | | | | | | | | | | |
| | |
| Commercial mortgage-backed securities | | 202,106 |
| | (5,452 | ) | | 29,201 |
| | (766 | ) | | 231,307 |
| | (6,218 | ) | Residential mortgage-backed securities | | 629,324 |
| | (9,594 | ) | | 119,603 |
| | (1,955 | ) | | 748,927 |
| | (11,549 | ) | Municipal securities | | 57,655 |
| | (1,699 | ) | | 2,692 |
| | (201 | ) | | 60,347 |
| | (1,900 | ) | Non-agency residential mortgage-backed securities: | | | | | | | | | | |
| | |
| Investment grade | | 5,033 |
| | (101 | ) | | 6,444 |
| | (14 | ) | | 11,477 |
| | (115 | ) | Corporate debt securities: | | | | | | | | | | |
| | |
| Investment grade | | — |
| | — |
| | 71,667 |
| | (375 | ) | | 71,667 |
| | (375 | ) | Non-investment grade | | — |
| | — |
| | 9,173 |
| | (1,018 | ) | | 9,173 |
| | (1,018 | ) | Foreign bonds: | | | | | | | | | | | | | Investment grade | | 363,618 |
| | (21,327 | ) | | 14,258 |
| | (252 | ) | | 377,876 |
| | (21,579 | ) | Other securities | | 30,991 |
| | (509 | ) | | — |
| | — |
| | 30,991 |
| | (509 | ) | Total available-for-sale investment securities | | $ | 2,162,896 |
| | $ | (51,760 | ) | | $ | 253,038 |
| | $ | (4,581 | ) | | $ | 2,415,934 |
| | $ | (56,341 | ) | Held-to-maturity investment security: | | | | | | | | | | | | | Non-agency commercial mortgage-backed security | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| Total investment securities | | $ | 2,162,896 |
| | $ | (51,760 | ) | | $ | 253,038 |
| | $ | (4,581 | ) | | $ | 2,415,934 |
| | $ | (56,341 | ) | |
For each reporting period, the Company examines all individual securities that are in an unrealized loss position for OTTI. For discussion of the factors and criteria the Company uses in analyzing securities for OTTI, see Note 1 — Summary of Significant Accounting Policies — Available-for-Sale Investment Securities to the Consolidated Financial Statements of the Company’s 2016 Form 10-K.
The unrealized losses were primarily attributable to the yield curve movement, in addition to widened liquidity and credit spreads. The issuers of these securities have not, to the Company’s knowledge, established any cause for default on these securities. These securities have fluctuated in value since their purchase dates as market interest rates have fluctuated. The Company believes that the gross unrealized losses detailed in the previous tables are temporary and not due to reasons of credit quality. As a result, the Company expects to recover the entire amortized cost basis of these securities. Accordingly, no impairment loss was recorded on the Company’s Consolidated Statements of Income for the three and nine months ended September 30, 2017 and 2016. As of September 30, 2017, the Company had 146 available-for-sale investment securities in an unrealized loss position with no credit impairment, primarily comprised of 79 U.S. government agency and U.S. government sponsored enterprise mortgage-backed securities, 22 U.S. Treasury securities and 14 investment grade foreign bonds. In comparison, as of December 31, 2016, the Company had 170 available-for-sale investment securities in an unrealized loss position with no credit impairment, primarily comprised of 82 U.S. government agency and U.S. government sponsored enterprise mortgage-backed securities, 26 U.S. Treasury securities and 13 investment grade foreign bonds.
During the first quarter of 2016, the Company obtained a non-agency commercial mortgage-backed security, through the securitization of multifamily real estate loans, which was classified as held-to-maturity and recorded at amortized cost. During the third quarter of 2017, the Company transferred this non-agency commercial mortgage-backed security with a net carrying amount of $115.6 million from held-to-maturity to available-for-sale. The transfer reflects the Company’s intent to sell the security under active liquidity management.
Other-Than-Temporary Impairment
No OTTI credit losses were recognized for the three and nine months ended September 30, 2017 and 2016.
Realized Gains and Losses
The following table presents the proceeds, gross realized gains and losses, and tax expense related to the sales of available-for-sale investment securities for the three and nine months ended September 30, 2017 and 2016: | | | | | | | | | | | | | | | | | | | ($ in thousands) | | Three Months Ended September 30, | | Nine Months Ended September 30, | | 2017 | | 2016 | | 2017 | | 2016 | Proceeds from sales | | $ | 124,887 |
| | $ | 143,513 |
| | $ | 676,776 |
| | $ | 1,008,256 |
| Gross realized gains | | $ | 1,539 |
| | $ | 1,790 |
| | $ | 6,733 |
| | $ | 8,593 |
| Gross realized losses | | $ | — |
| | $ | — |
| | $ | — |
| | $ | (125 | ) | Related tax expense | | $ | 647 |
| | $ | 752 |
| | $ | 2,831 |
| | $ | 3,560 |
| |
Scheduled Maturities of Investment Securities The following table presents the scheduled maturities of available-for-sale investment securities as of September 30, 2017: | | | | | | | | | | | ($ in thousands) | | Amortized Cost | | Estimated Fair Value | Due within one year | | $ | 638,257 |
| | $ | 621,343 |
| Due after one year through five years | | 629,892 |
| | 623,058 |
| Due after five years through ten years | | 176,117 |
| | 172,902 |
| Due after ten years | | 1,548,497 |
| | 1,539,473 |
| Total available-for-sale investment securities | | $ | 2,992,763 |
| | $ | 2,956,776 |
| |
Actual maturities of mortgage-backed securities can differ from contractual maturities because borrowers have the right to prepay obligations. In addition, factors such as prepayments and interest rates may affect the yields on the carrying values of mortgage-backed securities.
Available-for-sale investment securities with fair values of $584.9 million and $767.4 million as of September 30, 2017 and December 31, 2016, respectively, were pledged to secure public deposits, repurchase agreements, the Federal Reserve Bank’s discount window and for other purposes required or permitted by law.
Restricted Equity Securities
Restricted equity securities include stock of the Federal Reserve Bank and of the FHLB. Restricted equity securities are carried at cost as these securities do not have a readily determinable fair value. The following table presents the restricted equity securities as of September 30, 2017 and December 31, 2016: | | | | | | | | | | | | | | | ($ in thousands) | | September 30, 2017 | | December 31, 2016 | Federal Reserve Bank stock | | $ | 56,072 |
| | $ | 55,525 |
| FHLB stock | | 17,250 |
| | 17,250 |
| Total | | $ | 73,322 |
| | $ | 72,775 |
| | | | | |
|