XML 24 R11.htm IDEA: XBRL DOCUMENT v3.8.0.1
Investment Securities
 12 Months Ended
Dec. 31, 2017
Investments, Debt and Equity Securities [Abstract]  
Investment Securities
The amortized cost, gross unrealized gains and losses, and fair value of the Company’s investment securities as of December 31, 2017, 2016, and 2015 were as follows:
(dollars in thousands)
Amortized
Cost

 
Gross
Unrealized
Gains

 
Gross
Unrealized
Losses

 
Fair
Value

December 31, 2017
 
 
 
 
 
 
 
Available-for-Sale:
 
 
 
 
 
 
 
Debt Securities Issued by the U.S. Treasury and Government Agencies
$
424,912

 
$
2,053

 
$
(1,035
)
 
$
425,930

Debt Securities Issued by States and Political Subdivisions
618,167

 
9,894

 
(1,042
)
 
627,019

Debt Securities Issued by Corporations
268,003

 
199

 
(2,091
)
 
266,111

Mortgage-Backed Securities:
 
 
 
 
 
 
 
    Residential - Government Agencies
233,268

 
3,129

 
(1,037
)
 
235,360

    Residential - U.S. Government-Sponsored Enterprises
619,795

 
420

 
(10,403
)
 
609,812

    Commercial - Government Agencies
71,999

 
—

 
(3,252
)
 
68,747

Total Mortgage-Backed Securities
925,062

 
3,549

 
(14,692
)
 
913,919

Total
$
2,236,144

 
$
15,695

 
$
(18,860
)
 
$
2,232,979

Held-to-Maturity:
 
 
 
 
 
 
 
Debt Securities Issued by the U.S. Treasury and Government Agencies
$
375,074

 
$
18

 
$
(1,451
)
 
$
373,641

Debt Securities Issued by States and Political Subdivisions
238,504

 
9,125

 
—

 
247,629

Debt Securities Issued by Corporations
119,635

 
123

 
(1,591
)
 
118,167

Mortgage-Backed Securities:
 
 
 
 
 
 
 
    Residential - Government Agencies
2,229,985

 
9,975

 
(37,047
)
 
2,202,913

    Residential - U.S. Government-Sponsored Enterprises
763,312

 
911

 
(11,255
)
 
752,968

    Commercial - Government Agencies
201,660

 
797

 
(3,654
)
 
198,803

Total Mortgage-Backed Securities
3,194,957

 
11,683

 
(51,956
)
 
3,154,684

Total
$
3,928,170

 
$
20,949

 
$
(54,998
)
 
$
3,894,121

 
 
 
 
 
 
 
 
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

 
 
 
 
 
 
 
 
December 31, 2015
 
 
 
 
 
 
 
Available-for-Sale:
 
 
 
 
 
 
 
Debt Securities Issued by the U.S. Treasury and Government Agencies
$
356,260

 
$
3,472

 
$
(838
)
 
$
358,894

Debt Securities Issued by States and Political Subdivisions
709,724

 
22,498

 
(304
)
 
731,918

Debt Securities Issued by Corporations
313,136

 
236

 
(4,502
)
 
308,870

Mortgage-Backed Securities:
 
 
 
 
 
 
 
    Residential - Government Agencies
310,966

 
6,546

 
(1,267
)
 
316,245

    Residential - U.S. Government-Sponsored Enterprises
442,760

 
1,368

 
(2,264
)
 
441,864

    Commercial - Government Agencies
103,227

 
—

 
(4,200
)
 
99,027

Total Mortgage-Backed Securities
856,953

 
7,914

 
(7,731
)
 
857,136

Total
$
2,236,073

 
$
34,120

 
$
(13,375
)
 
$
2,256,818

Held-to-Maturity:
 
 
 
 
 
 
 
Debt Securities Issued by the U.S. Treasury and Government Agencies
$
489,747

 
$
1,359

 
$
(1,139
)
 
$
489,967

Debt Securities Issued by States and Political Subdivisions
245,980

 
17,114

 
—

 
263,094

Debt Securities Issued by Corporations
151,301

 
368

 
(2,041
)
 
149,628

Mortgage-Backed Securities:
 
 
 
 
 
 
 
    Residential - Government Agencies
2,191,138

 
27,893

 
(19,067
)
 
2,199,964

    Residential - U.S. Government-Sponsored Enterprises
647,762

 
1,656

 
(2,616
)
 
646,802

    Commercial - Government Agencies
256,808

 
2,381

 
(2,232
)
 
256,957

Total Mortgage-Backed Securities
3,095,708

 
31,930

 
(23,915
)
 
3,103,723

Total
$
3,982,736

 
$
50,771

 
$
(27,095
)
 
$
4,006,412


The table below presents an analysis of the contractual maturities of the Company’s investment securities as of December 31, 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
$
88,977

 
$
89,096

Due After One Year Through Five Years
624,650

 
625,547

Due After Five Years Through Ten Years
149,994

 
154,890

Due After Ten Years
23,100

 
24,134

 
886,721

 
893,667

 
 
 
 
Debt Securities Issued by Government Agencies
424,361

 
425,393

Mortgage-Backed Securities:
 
 
 
    Residential - Government Agencies
233,268

 
235,360

    Residential - U.S. Government-Sponsored Enterprises
619,795

 
609,812

    Commercial - Government Agencies
71,999

 
68,747

Total Mortgage-Backed Securities
925,062

 
913,919

Total
$
2,236,144

 
$
2,232,979

 
 
 
 
Held-to-Maturity:
 
 
 
Due in One Year or Less
$
259,939

 
$
259,478

Due After One Year Through Five Years
206,180

 
207,551

Due After Five Years Through Ten Years
239,550

 
243,623

Due After Ten Years
27,544

 
28,785

 
733,213

 
739,437

Mortgage-Backed Securities:
 
 
 
    Residential - Government Agencies
2,229,985

 
2,202,913

    Residential - U.S. Government-Sponsored Enterprises
763,312

 
752,968

    Commercial - Government Agencies
201,660

 
198,803

Total Mortgage-Backed Securities
3,194,957

 
3,154,684

Total
$
3,928,170

 
$
3,894,121



Investment securities with carrying values of $2.4 billion, $2.4 billion, and $2.5 billion as of December 31, 2017, 2016, and 2015, 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 years ended December 31, 2017, 2016, and 2015.
(dollars in thousands)
2017

 
2016

 
2015

Gross Gains on Sales of Investment Securities
$
12,467

 
$
11,180

 
$
11,640

Gross Losses on Sales of Investment Securities
(2,037
)
 
(977
)
 
(1,480
)
Net Gains on Sales of Investment Securities
$
10,430

 
$
10,203

 
$
10,160



The losses during the year ended December 31, 2017 and December 31, 2016 were due to fees paid to the counterparties of our prior Visa Class B share sale transactions which are expensed as incurred. The securities sold for losses in 2015 were government agency commercial mortgage-backed securities categorized as available-for-sale. These securities were sold to reduce our allocation to the sector and did not represent an overall change in strategy.

The income tax expense related to the Company’s net realized gains on the sales of investment securities was $4.1 million in 2017 and $4.0 million in 2016 and 2015.


The Company’s investment securities in an unrealized loss position, segregated by continuous length of impairment, 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

December 31, 2017
 
 
 
 
 
 
 
 
 
 
 
Available-for-Sales:
 
 
 
 
 
 
 
 
 
 
 
Debt Securities Issued by the U.S. Treasury
 and Government Agencies
$
103,842

 
$
(599
)
 
$
132,071

 
$
(436
)
 
$
235,913

 
$
(1,035
)
Debt Securities Issued by States
 and Political Subdivisions
172,343

 
(1,032
)
 
734

 
(10
)
 
173,077

 
(1,042
)
Debt Securities Issued by Corporations
12,985

 
(15
)
 
192,927

 
(2,076
)
 
205,912

 
(2,091
)
Mortgage-Backed Securities:
 
 
 
 
 
 
 
 
 
 
 
    Residential - Government Agencies
11,035

 
(4
)
 
10,618

 
(1,033
)
 
21,653

 
(1,037
)
    Residential - U.S. Government-Sponsored Enterprises
429,342

 
(5,720
)
 
150,887

 
(4,683
)
 
580,229

 
(10,403
)
    Commercial - Government Agencies
—

 
—

 
68,747

 
(3,252
)
 
68,747

 
(3,252
)
Total Mortgage-Backed Securities
440,377

 
(5,724
)
 
230,252

 
(8,968
)
 
670,629

 
(14,692
)
Total
$
729,547

 
$
(7,370
)
 
$
555,984

 
$
(11,490
)
 
$
1,285,531

 
$
(18,860
)
 
 
 
 
 
 
 
 
 
 
 
 
Held-to-Maturity:
 
 
 
 
 
 
 
 
 
 
 
Debt Securities Issued by the U.S. Treasury
 and Government Agencies
$
254,283

 
$
(532
)
 
$
89,391

 
$
(919
)
 
$
343,674

 
$
(1,451
)
Debt Securities Issued by Corporations
25,490

 
(110
)
 
58,869

 
(1,481
)
 
84,359

 
(1,591
)
Mortgage-Backed Securities:
 
 
 
 
 
 
 
 
 
 
 
    Residential - Government Agencies
1,030,472

 
(12,262
)
 
704,545

 
(24,785
)
 
1,735,017

 
(37,047
)
    Residential - U.S. Government-Sponsored Enterprises
293,530

 
(3,106
)
 
339,232

 
(8,149
)
 
632,762

 
(11,255
)
    Commercial - Government Agencies
497

 
(5
)
 
82,288

 
(3,649
)
 
82,785

 
(3,654
)
Total Mortgage-Backed Securities
1,324,499

 
(15,373
)
 
1,126,065

 
(36,583
)
 
2,450,564

 
(51,956
)
Total
$
1,604,272

 
$
(16,015
)
 
$
1,274,325

 
$
(38,983
)
 
$
2,878,597

 
$
(54,998
)
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2016
 
 
 
 
 
 
 
 
 
 
 
Available-for-Sales:
 
 
 
 
 
 
 
 
 
 
 
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 December 31, 2017, which were comprised of 410 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 December 31, 2017, 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 bases, which may be at maturity.

Interest income from taxable and non-taxable investment securities for the years ended December 31, 2017, 2016, and 2015 were as follows:
 
Year Ended December 31,
(dollars in thousands)
2017

 
2016

 
2015

Taxable
$
108,787

 
$
100,541

 
$
109,912

Non-Taxable
19,725

 
20,438

 
21,230

Total Interest Income from Investment Securities
$
128,512

 
$
120,979

 
$
131,142



As of December 31, 2017, included in the Company’s investment securities portfolio were debt securities issued by political subdivisions within the State of Hawaii of $496.8 million, representing 57% of the total fair value of the Company’s municipal debt securities. Of the entire Hawaii municipal bond portfolio, 95% 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 December 31, 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 December 31, 2017 and 2016, the carrying value of the Company’s Federal Home Loan Bank of Des Moines (“FHLB Des Moines”) stock and Federal Reserve Bank stock was as follows:
 
December 31,
(dollars in thousands)
2017

 
2016

Federal Home Loan Bank Stock
$
20,000

 
$
20,000

Federal Reserve Bank Stock
20,645

 
20,063

Total
$
40,645

 
$
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 by 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 December 31, 2017, the conversion ratio was 1.6483.

During the first quarter of 2017, the Company recorded an $12.1 million net gain on the sale of 90,000 Visa Class B shares. Concurrent with this sale, the Company 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 86,614 Class B shares (142,766 Class A equivalents) that the Company owns as of December 31, 2017 are carried at a zero cost basis.