Investments

12 Months Ended

Dec. 31, 2021

INVESTMENTS

The aggregate carrying and approximate fair values of investment securities follow (in thousands). Fair values are based on quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable financial instruments.


	December 31, 2021								December 31, 2020
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Securities available-for-sale:
Obligations of states and
political subdivisions	263,809		8,622		215		272,216		266,483		11,467		139		277,811
Mortgage-backed securities:
U.S. government agencies	1,085,092		16,146		6,927		1,094,311		815,682		34,807		105		850,384
Private label	8,555		553		—		9,108		9,976		916		—		10,892
Trust preferred securities	4,570		—		367		4,203		4,557		—		457		4,100
Corporate securities	27,292		1,047		12		28,327		31,465		2,146		1		33,610
Total Securities
Available-for-Sale	$	1,389,318	$	26,368	$	7,521	$	1,408,165	$	1,128,163	$	49,336	$	702	$	1,176,797

The Company's other investment securities include marketable and non-marketable equity securities. At December 31, 2021 and 2020, the Company held $9.2 million and $11.8 million, respectively, in marketable equity securities. Marketable equity securities mainly consist of investments made by the Company in equity positions of various community banks. Changes in the fair value of the marketable equity securities are recorded in "unrealized gains (losses) recognized on equity securities still held" in the consolidated statements of income. The Company's non-marketable securities consist of securities with limited marketability, such as stock in the Federal Reserve Bank ("FRB") or the Federal Home Loan Bank ("FHLB"). At December 31, 2021 and 2020, the Company held $15.3 million and $15.5 million, respectively, in non-marketable equity securities. These securities are carried at cost due to the restrictions placed on their transferability. At December 31, 2021 and 2020, the Company held $1.0 million and $2.0 million, respectively, in certificates of deposits held for investment.

The majority of the Company’s investment securities are mortgage-backed securities. These securities are collateralized by both residential and commercial properties. The mortgage-backed securities in which the Company has invested are predominantly issued by government-sponsored agencies such as Fannie Mae (“FNMA”), Freddie Mac (“FHLMC”) and Ginnie Mae (“GNMA”). At December 31, 2021 and 2020, there were no securities of any non-governmental issuer whose aggregate carrying value or estimated fair value exceeded 10% of shareholders' equity.

Certain investment securities owned by the Company were in an unrealized loss position (i.e., amortized cost basis exceeded the estimated fair value of the securities) as of December 31, 2021 and 2020. The following table shows the gross unrealized losses and fair value of the Company’s investments aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position (in thousands):


	December 31, 2021
	Less Than Twelve Months				Twelve Months or Greater				Total
	Estimated Fair Value		Unrealized Loss		Estimated Fair Value		Unrealized Loss		Estimated Fair Value		Unrealized Loss
Securities available-for-sale:
Obligations of states and political subdivisions	$	13,277	$	152	$	2,420	$	63	$	15,697	$	215
Mortgage-backed securities:
U.S. Government agencies	639,514		6,920		23,295		7		662,809		6,927
Trust preferred securities	—		—		4,203		367		4,203		367
Corporate securities	988		12		—		—		988		12
Total available-for-sale	$	653,779	$	7,084	$	29,918	$	437	$	683,697	$	7,521


	December 31, 2020
	Less Than Twelve Months				Twelve Months or Greater				Total
	Estimated Fair Value		Unrealized Loss		Estimated Fair Value		Unrealized Loss		Estimated Fair Value		Unrealized Loss
Securities available-for-sale:
Obligations of states and political subdivisions	$	10,578	$	139	$	—	$	—	$	10,578	$	139
Mortgage-backed securities:
U.S. Government agencies	62,412		105		35		—		62,447		105
Trust preferred securities	—		—		4,100		457		4,100		457
Corporate securities	488		1		—		—		488		1
Total available-for-sale	$	73,478	$	245	$	4,135	$	457	$	77,613	$	702

As of December 31, 2021, management does not intend to sell any securities that are in an unrealized loss position and it is not more than likely that it will be required to sell the securities before the recovery of the amortized cost basis. The unrealized losses on debt securities are primarily the result of interest rate changes, credit spread fluctuations on agency-issued mortgage related securities, general financial market uncertainty and unprecedented market volatility. These conditions should not prohibit the Company from receiving its contractual principal and interest payments on its debt securities. The fair value is expected to recover as the securities approach their maturity date or repricing date. As of December 31, 2021, management believes the unrealized losses detailed in the table above are temporary and no allowance for credit losses for available-for-sale securities has been recognized in the Company’s consolidated income statement. Should the impairment of any of these securities become other-than-temporary, the cost basis of the investment will be reduced and the resulting loss will be recognized in net income in the period the other-than-temporary impairment is identified, while any noncredit loss will be recognized in other comprehensive income. During the years ended December 31, 2021, 2020 and 2019, the Company had no credit-related net investment impairment losses.

The amortized cost and estimated fair value of debt securities at December 31, 2021, by contractual maturity, is shown in the following table (in thousands). Expected maturities will differ from contractual maturities because the issuers of the securities may have the right to prepay obligations without prepayment penalties. Mortgage-backed securities have been allocated to their respective maturity groupings based on their contractual maturity.


	Cost		Estimated Fair Value
Securities Available-for-Sale
Due in one year or less	$	3,024	$	3,089
Due after one year through five years	41,823		43,746
Due after five years through ten years	269,825		279,486
Due after ten years	1,074,646		1,081,844
	$	1,389,318	$	1,408,165

Gross gains and gross losses realized by the Company from investment security transactions are summarized in the table below (in thousands):


	For the year ended December 31,
	2021		2020		2019

Gross unrealized gains recognized on equity securities still held	$	547	$	223	$	888
Gross unrealized losses recognized on equity securities still held	(43)		(1,086)		—
Net unrealized gains (losses) recognized on equity securities still held	$	504	$	(863)	$	888

Gross realized gains	$	312	$	139	$	226
Gross realized losses	—		(77)		(157)
Net realized investment security gains	$	312	$	62	$	69

During January 2020, the Company sold the entirety of its Visa Inc. Class B common shares (86,605) in a cash transaction which resulted in a pre-tax gain of $17.8 million. The carrying value of the Visa Class B shares on the Company’s balance sheet was $0, as City National had no historical cost basis in the shares.

The carrying value of securities pledged to secure public deposits and for other purposes as required or permitted by law approximated $711 million and $644 million at December 31, 2021 and 2020, respectively.