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Investment Securities
 9 Months Ended
Sep. 30, 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 September 30, 2018 and December 31, 2017 were as follows:

(dollars in thousands)
Amortized Cost

 
Gross
Unrealized Gains

 
Gross
Unrealized Losses

 
Fair Value

September 30, 2018
 

 
 

 
 

 
 

Available-for-Sale:
 

 
 

 
 

 
 

Debt Securities Issued by the U.S. Treasury and Government Agencies
$
420,400

 
$
474

 
$
(2,710
)
 
$
418,164

Debt Securities Issued by States and Political Subdivisions
574,755

 
4,275

 
(2,383
)
 
576,647

Debt Securities Issued by Government-Sponsored Enterprises
55


—


—

 
55

Debt Securities Issued by Corporations
224,997

 
65

 
(1,071
)
 
223,991

Mortgage-Backed Securities:
 

 
 

 
 

 
 

    Residential - Government Agencies
198,364

 
1,807

 
(1,138
)
 
199,033

    Residential - U.S. Government-Sponsored Enterprises
595,632

 
338

 
(23,778
)
 
572,192

    Commercial - Government Agencies
64,414

 
—

 
(4,809
)
 
59,605

Total Mortgage-Backed Securities
858,410

 
2,145

 
(29,725
)
 
830,830

Total
$
2,078,617

 
$
6,959

 
$
(35,889
)
 
$
2,049,687

Held-to-Maturity:
 

 
 

 
 

 
 

Debt Securities Issued by the U.S. Treasury and Government Agencies
$
422,762

 
$
—

 
$
(2,185
)
 
$
420,577

Debt Securities Issued by States and Political Subdivisions
235,588

 
5,271

 
—

 
240,859

Debt Securities Issued by Corporations
101,120

 
—

 
(3,248
)
 
97,872

Mortgage-Backed Securities:
 
 
 
 
 
 
 

    Residential - Government Agencies
1,956,198

 
3,140

 
(79,935
)
 
1,879,403

    Residential - U.S. Government-Sponsored Enterprises
768,121

 
226

 
(31,029
)
 
737,318

    Commercial - Government Agencies
180,698

 
—

 
(7,492
)
 
173,206

Total Mortgage-Backed Securities
2,905,017

 
3,366


(118,456
)

2,789,927

Total
$
3,664,487

 
$
8,637

 
$
(123,889
)
 
$
3,549,235

 
 
 
 
 
 
 
 
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 September 30, 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
$
51,919

 
$
51,866

Due After One Year Through Five Years
631,703

 
630,347

Due After Five Years Through Ten Years
94,253

 
95,875

Due After Ten Years
22,912

 
23,568

 
800,787

 
801,656

 
 
 
 
Debt Securities Issued by Government Agencies
419,420

 
417,201

Mortgage-Backed Securities:
 

 
 

    Residential - Government Agencies
198,364

 
199,033

    Residential - U.S. Government-Sponsored Enterprises
595,632

 
572,192

    Commercial - Government Agencies
64,414

 
59,605

Total Mortgage-Backed Securities
858,410

 
830,830

Total
$
2,078,617

 
$
2,049,687

 
 
 
 
Held-to-Maturity:
 

 
 

Due in One Year or Less
$
164,903

 
$
164,495

Due After One Year Through Five Years
347,271

 
346,571

Due After Five Years Through Ten Years
230,227

 
230,391

Due After Ten Years
17,069

 
17,851

 
759,470

 
759,308

Mortgage-Backed Securities:
 

 
 

    Residential - Government Agencies
1,956,198

 
1,879,403

    Residential - U.S. Government-Sponsored Enterprises
768,121

 
737,318

    Commercial - Government Agencies
180,698

 
173,206

Total Mortgage-Backed Securities
2,905,017

 
2,789,927

Total
$
3,664,487

 
$
3,549,235



Investment securities with carrying values of $2.5 billion and $2.4 billion as of September 30, 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 and nine months ended September 30, 2018 and 2017.
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
(dollars in thousands)
2018

 
2017

 
2018

 
2017

Gross Gains on Sales of Investment Securities
$
—

 
$
—

 
$
—

 
$
12,467

Gross Losses on Sales of Investment Securities
(729
)
 
(566
)
 
(3,097
)
 
(1,420
)
Net Gains (Losses) on Sales of Investment Securities
$
(729
)
 
$
(566
)
 
$
(3,097
)
 
$
11,047



The losses during    the three months ended September 30, 2018 were due to fees paid to the counterparties of the Company’s prior Visa Class B share sale transactions. The losses during the nine months ended September 30, 2018 were due to fees paid to the counterparties of the Company’s prior Visa Class B share sale transactions combined with a $1.0 million liability recorded in second quarter 2018 related to a change in the Visa Class B conversion ratio.

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

September 30, 2018
 

 
 

 
 

 
 

 
 

 
 

Available-for-Sale:
 
 
 
 
 
 
 
 
 
 
 
Debt Securities Issued by the U.S. Treasury
   and Government Agencies
$
188,906

 
$
(1,089
)
 
$
168,680

 
$
(1,621
)
 
$
357,586

 
$
(2,710
)
Debt Securities Issued by States
   and Political Subdivisions
256,816

 
(1,894
)
 
45,914

 
(489
)
 
302,730

 
(2,383
)
Debt Securities Issued by U.S.
   Government-Sponsored Enterprises
50

 
—

 
—

 
—

 
50

 
—

Debt Securities Issued by Corporations
24,940

 
(60
)
 
163,986

 
(1,011
)
 
188,926

 
(1,071
)
Mortgage-Backed Securities:
 
 
 
 
 
 
 
 


 


    Residential - Government Agencies
11,614

 
(128
)
 
16,470

 
(1,010
)
 
28,084

 
(1,138
)
    Residential - U.S. Government-Sponsored Enterprises
133,539

 
(3,236
)
 
417,167

 
(20,542
)
 
550,706

 
(23,778
)
    Commercial - Government Agencies
—

 
—

 
59,605

 
(4,809
)
 
59,605

 
(4,809
)
Total Mortgage-Backed Securities
145,153

 
(3,364
)
 
493,242

 
(26,361
)
 
638,395

 
(29,725
)
Total
$
615,865

 
$
(6,407
)
 
$
871,822

 
$
(29,482
)
 
$
1,487,687

 
$
(35,889
)
Held-to-Maturity:
 
 
 
 
 
 
 
 
 
 
 
Debt Securities Issued by the U.S. Treasury
   and Government Agencies
$
296,511

 
$
(1,116
)
 
$
124,066

 
$
(1,069
)
 
$
420,577

 
$
(2,185
)
Debt Securities Issued by Corporations
38,493

 
(839
)
 
59,378

 
(2,409
)
 
97,871

 
(3,248
)
Mortgage-Backed Securities:
 
 
 
 
 
 
 
 
 
 
 
    Residential - Government Agencies
444,465

 
(11,878
)
 
1,238,576

 
(68,057
)
 
1,683,041

 
(79,935
)
    Residential - U.S. Government-Sponsored Enterprises
241,918

 
(5,869
)
 
489,643

 
(25,160
)
 
731,561

 
(31,029
)
    Commercial - Government Agencies
98,194

 
(1,854
)
 
75,013

 
(5,638
)
 
173,207

 
(7,492
)
Total Mortgage-Backed Securities
784,577

 
(19,601
)
 
1,803,232

 
(98,855
)
 
2,587,809

 
(118,456
)
Total
$
1,119,581

 
$
(21,556
)
 
$
1,986,676

 
$
(102,333
)
 
$
3,106,257

 
$
(123,889
)
 
 
 
 
 
 
 
 
 
 
 
 
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 September 30, 2018, which were comprised of 520 individual 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 September 30, 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 and nine months ended September 30, 2018 and 2017 were as follows:
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
(dollars in thousands)
2018

 
2017

 
2018

 
2017

Taxable
$
28,855

 
$
27,441

 
$
85,931

 
$
79,949

Non-Taxable
4,554

 
4,880

 
14,006

 
14,915

Total Interest Income from Investment Securities
$
33,409

 
$
32,321

 
$
99,937

 
$
94,864



As of September 30, 2018, included in the Company’s investment securities portfolio were debt securities issued by political subdivisions within the State of Hawaii of $463.3 million, representing 57% of the total fair value of the Company’s municipal debt securities. Of the entire Hawaii municipal bond portfolio, 96% 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, 80% were general obligation issuances. As of September 30, 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 September 30, 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)
September 30,
2018

 
December 31,
2017

Federal Home Loan Bank Stock
$
17,000

 
$
20,000

Federal Reserve Bank Stock
20,858

 
20,645

Total
$
37,858

 
$
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 will be 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 September 30, 2018, the conversion ratio was 1.6298. See Note 12 Derivative Financial Instruments for more information.

The Company occasionally sells these Visa Class B shares to other financial institutions. Concurrent with every sale the Company enters 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 83,014 Class B shares (135,296 Class A equivalents) that the Company owns as of September 30, 2018 are carried at a zero cost basis.