2. Investment Securities

As of June 30, 2017 and December 31, 2016, investment securities consisted predominantly of the following investment categories:

U.S. Treasury and debt securities – includes U.S. Treasury notes and debt securities issued by government-sponsored enterprises.

Mortgage- and asset-backed securities – includes securities backed by notes or receivables secured by either mortgage or prime auto assets with cash flows based on actual or scheduled payments.

Collateralized mortgage obligations – includes securities backed by a pool of mortgages with cash flows distributed based on certain rules rather than pass through payments.

As of June 30, 2017 and December 31, 2016, all of the Company’s investment securities were classified as debt securities and available-for-sale. Amortized cost and fair value of securities as of June 30, 2017 and December 31, 2016 were as follows:


	June 30, 2017								December 31, 2016
	Amortized		Unrealized		Unrealized		Fair		Amortized		Unrealized		Unrealized		Fair
(dollars in thousands)	Cost		Gains		Losses		Value		Cost		Gains		Losses		Value
U.S. Treasury securities	$	405,011	$	—	$	(8,169)	$	396,842	$	405,637	$	—	$	(13,164)	$	392,473
Government-sponsored enterprises debt securities		249,709		54		(4,445)		245,318		249,707		16		(7,056)		242,667
Government agency mortgage-backed securities		173,078		—		(4,280)		168,798		190,485		—		(4,822)		185,663
Government-sponsored enterprises mortgage-backed securities		194,340		267		(2,990)		191,617		208,034		385		(4,034)		204,385
Non-government asset-backed securities		3,802		—		(1)		3,801		12,592		—		(9)		12,583
Collateralized mortgage obligations:
Government agency		3,345,644		1,760		(38,085)		3,309,319		3,409,822		794		(58,794)		3,351,822
Government-sponsored enterprises		821,593		1,236		(11,655)		811,174		700,338		789		(13,206)		687,921
Total available-for-sale securities	$	5,193,177	$	3,317	$	(69,625)	$	5,126,869	$	5,176,615	$	1,984	$	(101,085)	$	5,077,514

Proceeds from calls and sales of investment securities were nil for both the three and six months ended June 30, 2017. Proceeds from calls and sales of investment securities totaled $50.0 million and nil, respectively, for the three months ended June 30, 2016, and $75.0 million and $505.0 million, respectively, for the six months ended June 30, 2016. Gross realized gains were nil for both the three and six months ended June 30, 2017. Including the 2016 sale of Visa Class B restricted shares described below, the Company recorded gross realized gains of nil and $25.8 million for the three and six months ended June 30, 2016, respectively. Gross realized losses were nil for both the three and six months ended June 30, 2017. The Company recorded gross realized losses of nil and $0.1 million for the three and six months ended June 30, 2016, respectively. The provision for income taxes related to the Company’s net realized gains on the sale of investment securities was nil for the three and six months ended June 30, 2017 and nil and $10.2 million for the three and six months ended June 30, 2016, respectively. Gains and losses realized on sales of securities are determined using the specific identification method.

Interest income from taxable investment securities was $25.1 million and $19.5 million for the three months ended June 30, 2017 and 2016, respectively, and $51.5 million and $36.0 million for the six months ended June 30, 2017 and 2016, respectively. The Company did not own any non-taxable investment securities during both the three and six months ended June 30, 2017 and 2016.

The amortized cost and fair value of U.S. Treasury and government-sponsored enterprises debt securities as of June 30, 2017, by contractual maturity, are shown below. Mortgage-backed securities, asset-backed securities and collateralized mortgage obligations are disclosed separately in the table below as remaining expected maturities will differ from contractual maturities as borrowers have the right to prepay obligations.


	June 30, 2017
	Amortized		Fair
(dollars in thousands)	Cost		Value
Due after one year through five years	$	305,580	$	299,129
Due after five years through ten years		349,140		343,031
		654,720		642,160

Government agency mortgage-backed securities		173,078		168,798
Government-sponsored enterprises mortgage-backed securities		194,340		191,617
Non-government asset-backed securities		3,802		3,801
Collateralized mortgage obligations:
Government agency		3,345,644		3,309,319
Government-sponsored enterprises		821,593		811,174
Total mortgage- and asset-backed securities		4,538,457		4,484,709
Total available-for-sale securities	$	5,193,177	$	5,126,869

At June 30, 2017, pledged securities totaled $2.9 billion, of which $2.7 billion was pledged to secure public deposits and $230.0 million was pledged to secure other financial transactions. At December 31, 2016, pledged securities totaled $2.7 billion, of which $2.5 billion was pledged to secure public deposits and repurchase agreements, and $209.1 million was pledged to secure other financial transactions.

The Company held no securities of any single issuer, other than the U.S. government, government agency and government-sponsored enterprises, which were in excess of 10% of stockholders’ equity as of June 30, 2017 and December 31, 2016.

The following table presents the gross unrealized losses and fair values of securities in the available-for-sale portfolio by length of time that the 165 and 158 individual securities in each category have been in a continuous loss position as of June 30, 2017 and December 31, 2016, respectively. The 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.


	Time in Continuous Loss as of June 30, 2017
	Less Than 12 Months				12 Months or More				Total
	Unrealized				Unrealized				Unrealized
(dollars in thousands)	Losses		Fair Value		Losses		Fair Value		Losses		Fair Value
U.S. Treasury securities	$	(8,169)	$	396,842	$	—	$	—	$	(8,169)	$	396,842
Government-sponsored enterprises debt securities		(4,445)		210,264		—		—		(4,445)		210,264
Government agency mortgage-backed securities		(4,280)		168,798		—		—		(4,280)		168,798
Government-sponsored enterprises mortgage-backed securities		(2,990)		184,143		—		—		(2,990)		184,143
Non-government asset-backed securities		(1)		1,640		—		2,161		(1)		3,801
Collateralized mortgage obligations:
Government agency		(29,692)		2,488,757		(8,393)		329,429		(38,085)		2,818,186
Government-sponsored enterprises		(2,213)		373,103		(9,442)		254,440		(11,655)		627,543
Total available-for-sale securities with unrealized losses	$	(51,790)	$	3,823,547	$	(17,835)	$	586,030	$	(69,625)	$	4,409,577


	Time in Continuous Loss as of December 31, 2016
	Less Than 12 Months				12 Months or More				Total
	Unrealized				Unrealized				Unrealized
(dollars in thousands)	Losses		Fair Value		Losses		Fair Value		Losses		Fair Value
U.S. Treasury securities	$	(13,164)	$	392,473	$	—	$	—	$	(13,164)	$	392,473
Government-sponsored enterprises debt securities		(7,056)		207,651		—		—		(7,056)		207,651
Government agency mortgage-backed securities		(4,822)		185,663		—		—		(4,822)		185,663
Government-sponsored enterprises mortgage-backed securities		(4,034)		195,848		—		—		(4,034)		195,848
Non-government asset-backed securities		(3)		5,202		(6)		7,381		(9)		12,583
Collateralized mortgage obligations:
Government agency		(51,484)		2,847,103		(7,310)		233,706		(58,794)		3,080,809
Government-sponsored enterprises		(1,807)		252,065		(11,399)		279,282		(13,206)		531,347
Total available-for-sale securities with unrealized losses	$	(82,370)	$	4,086,005	$	(18,715)	$	520,369	$	(101,085)	$	4,606,374

Other-Than-Temporary Impairment (“OTTI”)

Unrealized losses for all investment securities are reviewed to determine whether the losses are other than temporary. Investment securities are evaluated for OTTI on at least a quarterly basis, and more frequently when economic and market conditions warrant such an evaluation, to determine whether the decline in fair value below amortized cost is other than temporary.

The term other-than-temporary is not intended to indicate that the decline is permanent, but indicates that the prospects for a near-term recovery of value are not necessarily favorable, or that there is a general lack of evidence to support a realizable value equal to or greater than the carrying value of the investment. The decline in value is not related to any issuer- or industry-specific credit event. At June 30, 2017 and December 31, 2016, the Company did not have the intent to sell and determined it was more likely than not that the Company would not be required to sell the securities prior to recovery of the amortized cost basis. As the Company has the intent and ability to hold securities in an unrealized loss position, each security with an unrealized loss position in the above tables has been further assessed to determine if a credit loss exists. If it is probable that the Company will not collect all amounts due according to the contractual terms of an investment security, an OTTI is considered to have occurred. In determining whether a credit loss exists, the Company estimates the present value of future cash flows expected to be collected from the investment security. If the present value of future cash flows is less than the amortized cost basis of the security, an OTTI exists. As of June 30, 2017 and December 31, 2016, the Company did not expect any credit losses in its debt securities and no OTTI was recognized on securities during the six months ended June 30, 2017 and for the year ended December 31, 2016.

Visa Class B Restricted Shares

In 2008, the Company received 394,000 Visa Class B restricted shares as part of Visa’s initial public offering. Visa Class B restricted shares are not currently convertible to publicly traded Visa Class A common shares, and only transferable in limited circumstances, until the settlement of certain litigation which are indemnified by Visa members, including the Company. As there are existing transfer restrictions and the outcome of the aforementioned litigation is uncertain, these shares were included in the consolidated balance sheets at their historical cost of $0.

During the six months ended June 30, 2016, the Company recorded a $22.7 million net realized gain related to the sale of 274,000 Visa Class B restricted shares (recorded in the three months ended March 31, 2016). Concurrent with the sale of the Visa Class B restricted shares, the Company entered into an agreement with the buyer that requires payment to the buyer in the event Visa reduces each member bank’s Class B conversion ratio to unrestricted Class A common shares. See “Note 10. Derivative Financial Instruments” for more information. There were no such sales during the six months ended June 30, 2017 or during the three months ended June 30, 2016.

The Company held approximately 120,000 Visa Class B restricted shares as of both June 30, 2017 and December 31, 2016. These shares continued to be carried at $0 cost basis during each of the respective periods.