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Investment Securities
 3 Months Ended
Mar. 31, 2018
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 March 31, 2018 and December 31, 2017 were as follows:

(dollars in thousands)
Amortized Cost

 
Gross
Unrealized Gains

 
Gross
Unrealized Losses

 
Fair Value

March 31, 2018
 

 
 

 
 

 
 

Available-for-Sale:
 

 
 

 
 

 
 

Debt Securities Issued by the U.S. Treasury and Government Agencies
$
438,951

 
$
1,363

 
$
(1,904
)
 
$
438,410

Debt Securities Issued by States and Political Subdivisions
606,507

 
7,119

 
(1,622
)
 
612,004

Debt Securities Issued by Corporations
252,997

 
69

 
(2,000
)
 
251,066

Mortgage-Backed Securities:
 

 
 

 
 

 
 

    Residential - Government Agencies
220,935

 
2,710

 
(1,104
)
 
222,541

    Residential - U.S. Government-Sponsored Enterprises
610,668

 
485

 
(17,058
)
 
594,095

    Commercial - Government Agencies
70,351

 
—

 
(4,280
)
 
66,071

Total Mortgage-Backed Securities
901,954

 
3,195

 
(22,442
)
 
882,707

Total
$
2,200,409

 
$
11,746

 
$
(27,968
)
 
$
2,184,187

Held-to-Maturity:
 

 
 

 
 

 
 

Debt Securities Issued by the U.S. Treasury and Government Agencies
$
394,703

 
$
—

 
$
(1,906
)
 
$
392,797

Debt Securities Issued by States and Political Subdivisions
237,539

 
7,511

 
—

 
245,050

Debt Securities Issued by Corporations
115,590

 
—

 
(2,405
)
 
113,185

Mortgage-Backed Securities:
 
 
 
 
 
 
 

    Residential - Government Agencies
2,115,460

 
6,437

 
(60,248
)
 
2,061,649

    Residential - U.S. Government-Sponsored Enterprises
733,427

 
321

 
(22,295
)
 
711,453

    Commercial - Government Agencies
192,373

 
123

 
(5,481
)
 
187,015

Total Mortgage-Backed Securities
3,041,260

 
6,881


(88,024
)

2,960,117

Total
$
3,789,092

 
$
14,392

 
$
(92,335
)
 
$
3,711,149

 
 
 
 
 
 
 
 
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



The table below presents an analysis of the contractual maturities of the Company’s investment securities as of March 31, 2018.  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
$
82,510

 
$
82,492

Due After One Year Through Five Years
610,230

 
609,665

Due After Five Years Through Ten Years
144,294

 
147,503

Due After Ten Years
23,020

 
23,945

 
860,054

 
863,605

 
 
 
 
Debt Securities Issued by Government Agencies
438,401

 
437,875

Mortgage-Backed Securities:
 

 
 

    Residential - Government Agencies
220,935

 
222,541

    Residential - U.S. Government-Sponsored Enterprises
610,668

 
594,095

    Commercial - Government Agencies
70,351

 
66,071

Total Mortgage-Backed Securities
901,954

 
882,707

Total
$
2,200,409

 
$
2,184,187

 
 
 
 
Held-to-Maturity:
 

 
 

Due in One Year or Less
$
284,876

 
$
284,063

Due After One Year Through Five Years
200,331

 
200,997

Due After Five Years Through Ten Years
235,187

 
237,411

Due After Ten Years
27,438

 
28,561

 
747,832

 
751,032

Mortgage-Backed Securities:
 

 
 

    Residential - Government Agencies
2,115,460

 
2,061,649

    Residential - U.S. Government-Sponsored Enterprises
733,427

 
711,453

    Commercial - Government Agencies
192,373

 
187,015

Total Mortgage-Backed Securities
3,041,260

 
2,960,117

Total
$
3,789,092

 
$
3,711,149



Investment securities with carrying values of $2.5 billion and $2.4 billion as of March 31, 2018 and December 31, 2017, 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 months ended March 31, 2018 and 2017.
 
Three Months Ended
March 31,
(dollars in thousands)
2018

 
2017

Gross Gains on Sales of Investment Securities
$
—

 
$
12,467

Gross Losses on Sales of Investment Securities
(666
)
 
(334
)
Net Gains (Losses) on Sales of Investment Securities
$
(666
)
 
$
12,133



The losses during    the three months ended March 31, 2018 and 2017 were due to fees paid to the counterparties of our prior Visa Class B share sale transactions which are expensed as incurred.

The Company’s gross unrealized losses and the related fair value of investment securities, aggregated by investment category and length of time in a continuous unrealized loss position, 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

March 31, 2018
 

 
 

 
 

 
 

 
 

 
 

Available-for-Sale:
 
 
 
 
 
 
 
 
 
 
 
Debt Securities Issued by the U.S. Treasury
   and Government Agencies
$
198,606

 
$
(1,124
)
 
$
122,552

 
$
(780
)
 
$
321,158

 
$
(1,904
)
Debt Securities Issued by States
   and Political Subdivisions
211,831

 
(1,613
)
 
679

 
(9
)
 
212,510

 
(1,622
)
Debt Securities Issued by Corporations
39,958

 
(42
)
 
186,038

 
(1,958
)
 
225,996

 
(2,000
)
Mortgage-Backed Securities:
 
 
 
 
 
 
 
 


 


    Residential - Government Agencies
4,782

 
(38
)
 
19,530

 
(1,066
)
 
24,312

 
(1,104
)
    Residential - U.S. Government-Sponsored Enterprises
400,447

 
(10,337
)
 
150,143

 
(6,721
)
 
550,590

 
(17,058
)
    Commercial - Government Agencies
—

 
—

 
66,071

 
(4,280
)
 
66,071

 
(4,280
)
Total Mortgage-Backed Securities
405,229

 
(10,375
)
 
235,744

 
(12,067
)
 
640,973

 
(22,442
)
Total
$
855,624

 
$
(13,154
)
 
$
545,013

 
$
(14,814
)
 
$
1,400,637

 
$
(27,968
)
Held-to-Maturity:
 
 
 
 
 
 
 
 
 
 
 
Debt Securities Issued by the U.S. Treasury
   and Government Agencies
$
273,603

 
$
(807
)
 
$
119,195

 
$
(1,099
)
 
$
392,798

 
$
(1,906
)
Debt Securities Issued by Corporations
56,855

 
(517
)
 
56,330

 
(1,888
)
 
113,185

 
(2,405
)
Mortgage-Backed Securities:
 
 
 
 
 
 
 
 
 
 
 
    Residential - Government Agencies
1,101,266

 
(27,870
)
 
666,461

 
(32,378
)
 
1,767,727

 
(60,248
)
    Residential - U.S. Government-Sponsored Enterprises
383,734

 
(9,124
)
 
320,791

 
(13,171
)
 
704,525

 
(22,295
)
    Commercial - Government Agencies
75,948

 
(677
)
 
79,496

 
(4,804
)
 
155,444

 
(5,481
)
Total Mortgage-Backed Securities
1,560,948

 
(37,671
)
 
1,066,748

 
(50,353
)
 
2,627,696

 
(88,024
)
Total
$
1,891,406

 
$
(38,995
)
 
$
1,242,273

 
$
(53,340
)
 
$
3,133,679

 
$
(92,335
)
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2017
 

 
 

 
 

 
 

 
 

 
 

Available-for-Sale:
 
 
 
 
 
 
 
 
 
 
 
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
)


The Company does not believe that the investment securities that were in an unrealized loss position as of March 31, 2018, which were comprised of 469 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 March 31, 2018 and 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 basis, which may be at maturity.

Interest income from taxable and non-taxable investment securities for the three months ended March 31, 2018 and 2017 were as follows:
 
Three Months Ended
March 31,
(dollars in thousands)
2018

 
2017

Taxable
$
28,671

 
$
25,767

Non-Taxable
4,766

 
5,023

Total Interest Income from Investment Securities
$
33,437

 
$
30,790



As of March 31, 2018, included in the Company’s investment securities portfolio were debt securities issued by political subdivisions within the State of Hawaii of $488.4 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 A1 or better by at least one nationally recognized statistical rating organization. Of the Company’s total Hawaii municipal bond holdings, 79% were general obligation issuances. As of March 31, 2018, 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 March 31, 2018 and December 31, 2017, 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)
March 31,
2018

 
December 31,
2017

Federal Home Loan Bank Stock
$
19,000

 
$
20,000

Federal Reserve Bank Stock
20,745

 
20,645

Total
$
39,745

 
$
40,645



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 be insufficient 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 March 31, 2018, the conversion ratio was 1.6483.

The Company occasionally sells these Visa Class B shares to other financial institutions. Concurrent with every 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 March 31, 2018 are carried at a zero cost basis.