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Table of contents

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
 
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
 
SECURITIES EXCHANGE ACT OF 1934
_________________________________________________________

For the quarterly period ended June 30, 2018

OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
 
SECURITIES EXCHANGE ACT OF 1934
____________________________________________________________

For the transition period from           to          
Commission File No. 0-2989
 
COMMERCE BANCSHARES, INC.
 
(Exact name of registrant as specified in its charter)
Missouri
 
43-0889454
(State of Incorporation)
 
(IRS Employer Identification No.)
 
 
 
1000 Walnut,
Kansas City, MO
 
64106
(Address of principal executive offices)
 
(Zip Code)
 
 
 
(816) 234-2000
 
 
(Registrant’s telephone number, including area code)
 
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes þ     No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes þ     No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer þ
Accelerated filer o
Non-accelerated filer o
Smaller reporting company £
Emerging growth company £
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o     No þ
As of August 1, 2018, the registrant had outstanding 106,616,850 shares of its $5 par value common stock, registrant’s only class of common stock.



Commerce Bancshares, Inc. and Subsidiaries

Form 10-Q
 

 
 
 
Page
INDEX
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

2

Table of contents

PART I: FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

Commerce Bancshares, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
 
 
June 30, 2018
 
December 31, 2017
 
(Unaudited)
 
 
 
(In thousands)
ASSETS
 
 
 
Loans
$
13,954,111

 
$
13,983,674

  Allowance for loan losses
(159,532
)
 
(159,532
)
Net loans
13,794,579

 
13,824,142

Loans held for sale (including $10,750,000 and $15,327,000 of residential mortgage loans carried at fair value at June 30, 2018 and December 31, 2017, respectively)
20,352

 
21,398

Investment securities:
 
 
 

Available for sale debt ($557,698,000 and $662,515,000 pledged at June 30, 2018 and
 
 
 
    December 31, 2017, respectively, to secure swap and repurchase agreements)
8,412,376

 
8,725,442

Trading debt
31,156

 
18,269

Equity
4,444

 
50,591

Other
112,309

 
99,005

Total investment securities
8,560,285

 
8,893,307

Federal funds sold and short-term securities purchased under agreements to resell
31,500

 
42,775

Long-term securities purchased under agreements to resell
700,000

 
700,000

Interest earning deposits with banks
114,947

 
30,631

Cash and due from banks
386,339

 
438,439

Land, buildings and equipment, net
331,782

 
335,110

Goodwill
138,921

 
138,921

Other intangible assets, net
8,083

 
7,618

Other assets
437,954

 
401,074

Total assets
$
24,524,742

 
$
24,833,415

LIABILITIES AND EQUITY
 
 
 
Deposits:
 
 
 

   Non-interest bearing
$
6,876,756

 
$
7,158,962

   Savings, interest checking and money market
11,761,832

 
11,499,620

   Time open and C.D.'s of less than $100,000
603,629

 
634,646

   Time open and C.D.'s of $100,000 and over
1,079,340

 
1,132,218

Total deposits
20,321,557

 
20,425,446

Federal funds purchased and securities sold under agreements to repurchase
1,166,759

 
1,507,138

Other borrowings
9,291

 
1,758

Other liabilities
255,752

 
180,889

Total liabilities
21,753,359

 
22,115,231

Commerce Bancshares, Inc. stockholders’ equity:
 
 
 

   Preferred stock, $1 par value
 
 
 
      Authorized 2,000,000 shares; issued 6,000 shares
144,784

 
144,784

   Common stock, $5 par value
 
 
 

 Authorized 120,000,000 shares;
 
 
 
   issued 107,081,397 shares
535,407

 
535,407

   Capital surplus
1,804,057

 
1,815,360

   Retained earnings
408,374

 
221,374

   Treasury stock of 275,577 shares at June 30, 2018
 
 
 
     and 276,968 shares at December 31, 2017, at cost
(15,854
)
 
(14,473
)
   Accumulated other comprehensive income (loss)
(108,781
)
 
14,108

Total Commerce Bancshares, Inc. stockholders' equity
2,767,987

 
2,716,560

Non-controlling interest
3,396

 
1,624

Total equity
2,771,383

 
2,718,184

Total liabilities and equity
$
24,524,742

 
$
24,833,415

See accompanying notes to consolidated financial statements.

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Table of contents

Commerce Bancshares, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
 
For the Three Months Ended June 30
 
For the Six Months Ended June 30
(In thousands, except per share data)
2018
2017
 
2018
2017
 
(Unaudited)
INTEREST INCOME
 
 
 
 
 
Interest and fees on loans
$
154,135

$
134,273

 
$
301,150

$
262,596

Interest and fees on loans held for sale
372

263

 
676

459

Interest on investment securities
65,564

54,975

 
118,806

110,240

Interest on federal funds sold and short-term securities purchased under
 
 
 
 
 
   agreements to resell
177

37

 
357

60

Interest on long-term securities purchased under agreements to resell
3,785

3,684

 
7,899

7,477

Interest on deposits with banks
1,590

362

 
2,730

759

Total interest income
225,623

193,594

 
431,618

381,591

INTEREST EXPENSE
 
 
 
 
 
Interest on deposits:
 
 
 
 
 
   Savings, interest checking and money market
6,519

4,342

 
12,108

8,232

   Time open and C.D.'s of less than $100,000
694

674

 
1,356

1,318

   Time open and C.D.'s of $100,000 and over
3,483

2,822

 
6,322

5,585

Interest on federal funds purchased and securities sold under
 
 
 
 
 
   agreements to repurchase
3,956

2,038

 
7,957

3,577

Interest on other borrowings
12

911

 
24

1,799

Total interest expense
14,664

10,787

 
27,767

20,511

Net interest income
210,959

182,807

 
403,851

361,080

Provision for loan losses
10,043

10,758

 
20,439

21,886

Net interest income after provision for loan losses
200,916

172,049

 
383,412

339,194

NON-INTEREST INCOME
 
 
 
 
 
Bank card transaction fees
43,215

37,295

 
84,668

73,046

Trust fees
37,036

33,120

 
73,098

65,134

Deposit account charges and other fees
23,893

22,861

 
46,875

44,803

Capital market fees
1,992

2,156

 
4,283

4,498

Consumer brokerage services
3,971

3,726

 
7,739

7,375

Loan fees and sales
3,229

4,091

 
6,091

7,259

Other
11,514

12,131

 
21,786

22,878

Total non-interest income
124,850

115,380

 
244,540

224,993

INVESTMENT SECURITIES GAINS (LOSSES), NET
(3,075
)
1,651

 
2,335

879

NON-INTEREST EXPENSE
 
 
 
 
 
Salaries and employee benefits
115,589

108,829

 
231,483

221,198

Net occupancy
11,118

11,430

 
22,702

22,873

Equipment
4,594

4,776

 
9,025

9,385

Supplies and communication
5,126

5,446

 
10,439

11,155

Data processing and software
21,016

20,035

 
41,706

39,940

Marketing
5,142

4,488

 
9,947

7,712

Deposit insurance
3,126

3,592

 
6,583

7,063

Community service
656

2,916

 
1,385

5,860

Other
15,493

15,378

 
30,867

31,081

Total non-interest expense
181,860

176,890

 
364,137

356,267

Income before income taxes
140,831

112,190

 
266,150

208,799

Less income taxes
29,507

33,201

 
52,765

58,108

Net income
111,324

78,989

 
213,385

150,691

Less non-controlling interest expense
994

29

 
2,071

227

Net income attributable to Commerce Bancshares, Inc.
110,330

78,960

 
211,314

150,464

Less preferred stock dividends
2,250

2,250

 
4,500

4,500

Net income available to common shareholders
$
108,080

$
76,710

 
$
206,814

$
145,964

Net income per common share — basic
$
1.02

$
.71

 
$
1.94

$
1.36

Net income per common share — diluted
$
1.01

$
.71

 
$
1.93

$
1.36

See accompanying notes to consolidated financial statements.

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Table of contents

Commerce Bancshares, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 
 
For the Three Months Ended June 30
 
For the Six Months Ended June 30
(In thousands)
 
2018
2017
 
2018
2017
 
 
(Unaudited)
Net income
 
$
111,324

$
78,989

 
$
213,385

$
150,691

Other comprehensive income (loss):
 
 
 
 
 
 
Net unrealized gains (losses) on securities for which a portion of an other-than-temporary impairment has been recorded in earnings
 
(123
)
76

 
(78
)
171

Net unrealized gains (losses) on other securities
 
(19,489
)
11,241

 
(93,210
)
30,243

Pension loss amortization
 
394

341

 
787

681

Other comprehensive income (loss)
 
(19,218
)
11,658

 
(92,501
)
31,095

Comprehensive income
 
92,106

90,647

 
120,884

181,786

Less non-controlling interest expense
 
994

29

 
2,071

227

Comprehensive income attributable to Commerce Bancshares, Inc.
$
91,112

$
90,618

 
$
118,813

$
181,559

See accompanying notes to consolidated financial statements.














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Table of contents

Commerce Bancshares, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
 
 
Commerce Bancshares, Inc. Shareholders
 
 
 
 

(In thousands, except per share data)
Preferred Stock
Common Stock
Capital Surplus
Retained Earnings
Treasury Stock
Accumulated Other Comprehensive Income (Loss)
Non-Controlling Interest
Total
 
(Unaudited)
Balance December 31, 2017
$
144,784

$
535,407

$
1,815,360

$
221,374

$
(14,473
)
$
14,108

$
1,624

$
2,718,184

Adoption of ASU 2018-02
 
 


(2,932
)
 
2,932

 

Adoption of ASU 2016-01
 




33,320



(33,320
)



Net income
 




211,314





2,071

213,385

Other comprehensive income (loss)
 








(92,501
)


(92,501
)
Distributions to non-controlling interest
 










(299
)
(299
)
Purchases of treasury stock
 






(19,069
)




(19,069
)
Issuance of stock under purchase and equity compensation plans
 


(17,697
)


17,688





(9
)
Stock-based compensation
 


6,394









6,394

Cash dividends on common stock ($.470 per share)
 




(50,202
)






(50,202
)
Cash dividends on preferred stock ($.750 per depositary share)
 




(4,500
)






(4,500
)
Balance June 30, 2018
$
144,784

$
535,407

$
1,804,057

$
408,374

$
(15,854
)
$
(108,781
)
$
3,396

$
2,771,383

Balance December 31, 2016
$
144,784

$
510,015

$
1,552,454

$
292,849

$
(15,294
)
$
10,975

$
5,349

$
2,501,132

Adoption of ASU 2016-09




3,441

(2,144
)






1,297

Net income
 




150,464





227

150,691

Other comprehensive income
 








31,095



31,095

Distributions to non-controlling interest
 










(1,252
)
(1,252
)
Purchases of treasury stock
 






(10,628
)




(10,628
)
Issuance of stock under purchase and equity compensation plans
 


(15,556
)


15,549





(7
)
Stock-based compensation
 


6,195









6,195

Cash dividends on common stock ($.429 per share)
 




(45,816
)






(45,816
)
Cash dividends on preferred stock ($.750 per depositary share)
 
 
 
(4,500
)
 
 
 
(4,500
)
Balance June 30, 2017
$
144,784

$
510,015

$
1,546,534

$
390,853

$
(10,373
)
$
42,070

$
4,324

$
2,628,207

See accompanying notes to consolidated financial statements.



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Table of contents

Commerce Bancshares, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
For the Six Months Ended June 30
(In thousands)
2018
 
2017
 
(Unaudited)
OPERATING ACTIVITIES:
 
 
 
Net income
$
213,385

 
$
150,691

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
  Provision for loan losses
20,439

 
21,886

  Provision for depreciation and amortization
19,180

 
19,890

  Amortization of investment security premiums, net
11,679

 
17,827

  Investment securities gains, net (A)
(2,335
)
 
(879
)
  Net gains on sales of loans held for sale
(2,671
)
 
(3,547
)
  Originations of loans held for sale
(89,183
)
 
(96,943
)
  Proceeds from sales of loans held for sale
91,671

 
92,423

  Net (increase) decrease in trading debt securities
(23,843
)
 
6,097

  Stock-based compensation
6,394

 
6,195

  Increase in interest receivable
(1,717
)
 
(428
)
  Decrease in interest payable
(601
)
 
(692
)
  Increase in income taxes payable
25,721

 
1,483

  Other changes, net
19,958

 
(6,939
)
Net cash provided by operating activities
288,077

 
207,064

INVESTING ACTIVITIES:
 
 
 
Proceeds from sales of investment securities (A)
192,522

 
6,552

Proceeds from maturities/pay downs of investment securities (A)
812,970

 
910,411

Purchases of investment securities (A)
(748,707
)
 
(625,931
)
Net (increase) decrease in loans
7,978

 
(234,405
)
Repayments of long-term securities purchased under agreements to resell

 
100,000

Purchases of land, buildings and equipment
(13,525
)
 
(14,117
)
Sales of land, buildings and equipment
1,667

 
2,527

Net cash provided by investing activities
252,905

 
145,037

FINANCING ACTIVITIES:
 
 
 
Net increase (decrease) in non-interest bearing, savings, interest checking and money market deposits
(27,222
)
 
77,562

Net decrease in time open and C.D.'s
(83,895
)
 
(157,367
)
Net decrease in federal funds purchased and securities sold under agreements to repurchase
(340,379
)
 
(467,461
)
Repayment of long-term borrowings
(149
)
 
(146
)
Net increase in short-term borrowings
7,682

 

Purchases of treasury stock
(19,069
)
 
(10,628
)
Issuance of stock under equity compensation plans
(9
)
 
(7
)
Cash dividends paid on common stock
(50,202
)
 
(45,816
)
Cash dividends paid on preferred stock
(4,500
)
 
(4,500
)
Net cash used in financing activities
(517,743
)
 
(608,363
)
Increase (decrease) in cash, cash equivalents and restricted cash
23,239

 
(256,262
)
Cash, cash equivalents and restricted cash at beginning of year
524,352

 
801,641

Cash, cash equivalents and restricted cash at June 30
$
547,591

 
$
545,379

(A) Available for sale debt securities, equity securities and other securities
 
 
 
Income tax payments, net
$
24,969

 
$
54,621

Interest paid on deposits and borrowings
$
28,368

 
$
21,203

Loans transferred to foreclosed real estate
$
1,044

 
$
461

See accompanying notes to consolidated financial statements.

Restricted cash is comprised of cash collateral posted by the Company to secure interest rate swap agreements. This balance is included in other assets in the consolidated balance sheets and totaled $14.8 million and $14.3 million at June 30, 2018 and 2017, respectively.


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Table of contents

Commerce Bancshares, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2018 (Unaudited)
 
1. Principles of Consolidation and Presentation
The accompanying consolidated financial statements include the accounts of Commerce Bancshares, Inc. and all majority-owned subsidiaries (the Company). Most of the Company's operations are conducted by its subsidiary bank, Commerce Bank (the Bank). The consolidated financial statements in this report have not been audited by an independent registered public accounting firm, but in the opinion of management, all adjustments necessary to present fairly the financial position and the results of operations for the interim periods have been made. All such adjustments are of a normal recurring nature. All significant intercompany accounts and transactions have been eliminated. Certain reclassifications were made to 2017 data to conform to current year presentation. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the period. Actual results could differ significantly from those estimates. Management has evaluated subsequent events for potential recognition or disclosure. The results of operations for the three and six month periods ended June 30, 2018 are not necessarily indicative of results to be attained for the full year or any other interim period.

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information and with the instructions to Form 10-Q adopted by the Securities and Exchange Commission. Accordingly, the financial statements do not include all of the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the Company's most recent Annual Report on Form 10-K, containing the latest audited consolidated financial statements and notes thereto.

These financial statements reflect the adoption of several FASB Accounting Standards Updates (ASUs) on January 1, 2018. In some cases, the adoption of these ASUs resulted in changes to former accounting policies as described in Note 1 to the financial statements in the 2017 Annual Report on Form 10-K. The ASUs which affected the Company's 2018 financial statements include:
ASU 2014-09, Revenue from Contracts with Customers, which is discussed further in Note 13.
ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, which is discussed further in Note 3 - Investment Securities, Note 8 - Accumulated Other Comprehensive Income, and Note 15 - Fair Value of Financial Instruments.
ASU 2016-18, Restricted Cash, which requires that the beginning and end of period amounts shown on the statement of cash flows include not only cash and cash equivalents, but also restricted cash and restricted cash equivalents, as considered such by the reporting entity.
ASU 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which is discussed further in Note 6 - Pension.
ASU 2018-02, Reclassification for Certain Tax Effects from Accumulated Other Comprehensive Income, which is discussed further in Note 8 - Accumulated Other Comprehensive Income.







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Table of contents

2. Loans and Allowance for Loan Losses
Major classifications within the Company’s held for investment loan portfolio at June 30, 2018 and December 31, 2017 are as follows:

(In thousands)
 
June 30, 2018
 
December 31, 2017
Commercial:
 
 
 
 
Business
 
$
4,990,298

 
$
4,958,554

Real estate – construction and land
 
967,151

 
968,820

Real estate – business
 
2,727,580

 
2,697,452

Personal Banking:
 
 
 
 
Real estate – personal
 
2,102,586

 
2,062,787

Consumer
 
2,012,644

 
2,104,487

Revolving home equity
 
374,557

 
400,587

Consumer credit card
 
775,214

 
783,864

Overdrafts
 
4,081

 
7,123

Total loans
 
$
13,954,111

 
$
13,983,674


At June 30, 2018, loans of $3.7 billion were pledged at the Federal Home Loan Bank as collateral for borrowings and letters of credit obtained to secure public deposits. Additional loans of $1.7 billion were pledged at the Federal Reserve Bank as collateral for discount window borrowings.

Allowance for loan losses    
A summary of the activity in the allowance for loan losses during the three and six months ended June 30, 2018 and 2017, respectively, follows:
 
 
For the Three Months Ended June 30
 
For the Six Months Ended June 30
(In thousands)
 
Commercial
Personal Banking

Total
 
Commercial
Personal Banking

Total
Balance at beginning of period
$
93,065

$
66,467

$
159,532

 
$
93,704

$
65,828

$
159,532

Provision
485

9,558

10,043

 
(409
)
20,848

20,439

Deductions:
 
 
 
 
 
 
 
   Loans charged off
362

13,323

13,685

 
728

26,688

27,416

   Less recoveries on loans
663

2,979

3,642

 
1,284

5,693

6,977

Net loan charge-offs (recoveries)
(301
)
10,344

10,043

 
(556
)
20,995

20,439

Balance June 30, 2018
$
93,851

$
65,681

$
159,532

 
$
93,851

$
65,681

$
159,532

Balance at beginning of period
$
92,951

$
64,881

$
157,832

 
$
91,361

$
64,571

$
155,932

Provision
(111
)
10,869

10,758

 
1,002

20,884

21,886

Deductions:
 
 
 
 
 
 
 
   Loans charged off
531

13,415

13,946

 
1,077

25,745

26,822

   Less recoveries on loans
430

2,758

3,188

 
1,453

5,383

6,836

Net loan charge-offs (recoveries)
101

10,657

10,758

 
(376
)
20,362

19,986

Balance June 30, 2017
$
92,739

$
65,093

$
157,832

 
$
92,739

$
65,093

$
157,832



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Table of contents

The following table shows the balance in the allowance for loan losses and the related loan balance at June 30, 2018 and December 31, 2017, disaggregated on the basis of impairment methodology. Impaired loans evaluated under Accounting Standards Codification (ASC) 310-10-35 include loans on non-accrual status, which are individually evaluated for impairment, and other impaired loans discussed below, which are deemed to have similar risk characteristics and are collectively evaluated. All other loans are collectively evaluated for impairment under ASC 450-20.
 
Impaired Loans
 
All Other Loans

(In thousands)
Allowance for Loan Losses
Loans Outstanding
 
Allowance for Loan Losses
Loans Outstanding
June 30, 2018
 
 
 
 
 
Commercial
$
2,631

$
90,724

 
$
91,220

$
8,594,305

Personal Banking
919

18,172

 
64,762

5,250,910

Total
$
3,550

$
108,896

 
$
155,982

$
13,845,215

December 31, 2017
 
 
 
 
 
Commercial
$
3,067

$
92,613

 
$
90,637

$
8,532,213

Personal Banking
1,176

22,182

 
64,652

5,336,666

Total
$
4,243

$
114,795

 
$
155,289

$
13,868,879


Impaired loans
The table below shows the Company’s investment in impaired loans at June 30, 2018 and December 31, 2017. These loans consist of all loans on non-accrual status and other restructured loans whose terms have been modified and classified as troubled debt restructurings. These restructured loans are performing in accordance with their modified terms, and because the Company believes it probable that all amounts due under the modified terms of the agreements will be collected, interest on these loans is being recognized on an accrual basis. They are discussed further in the "Troubled debt restructurings" section on page 15.
(In thousands)
 
June 30, 2018
 
Dec. 31, 2017
Non-accrual loans
 
$
9,472

 
$
11,983

Restructured loans (accruing)
 
99,424

 
102,812

Total impaired loans
 
$
108,896

 
$
114,795



10

Table of contents

The following table provides additional information about impaired loans held by the Company at June 30, 2018 and December 31, 2017, segregated between loans for which an allowance for credit losses has been provided and loans for which no allowance has been provided.


(In thousands)
Recorded Investment
Unpaid Principal
Balance
 Related
Allowance
June 30, 2018
 
 
 
With no related allowance recorded:
 
 
 
Business
$
4,946

$
8,936

$

Real estate – business
1,210

1,300


 
$
6,156

$
10,236

$

With an allowance recorded:
 
 
 
Business
$
70,871

$
71,157

$
2,090

Real estate – construction and land
1,342

1,346

39

Real estate – business
12,355

12,928

502

Real estate – personal
5,707

8,134

295

Consumer
5,464

5,464

52

Revolving home equity
114

114

11

Consumer credit card
6,887

6,887

561

 
$
102,740

$
106,030

$
3,550

Total
$
108,896

$
116,266

$
3,550

December 31, 2017
 
 
 
With no related allowance recorded:
 
 
 
Business
$
5,356

$
9,000

$

Real estate – business
1,299

1,303


Consumer
779

817


 
$
7,434

$
11,120

$

With an allowance recorded:
 
 
 
Business
$
72,589

$
73,168

$
2,455

Real estate – construction and land
837

841

27

Real estate – business
12,532

13,071

585

Real estate – personal
9,126

11,914

532

Consumer
5,388

5,426

67

Revolving home equity
204

204

11

Consumer credit card
6,685

6,685

566

 
$
107,361

$
111,309

$
4,243

Total
$
114,795

$
122,429

$
4,243




11

Table of contents

Total average impaired loans for the three and six month periods ended June 30, 2018 and 2017, respectively, are shown in the table below.

(In thousands)
Commercial
Personal Banking
Total
Average Impaired Loans:
 
 
 
For the three months ended June 30, 2018
 
 
 
Non-accrual loans
$
7,676

$
2,005

$
9,681

Restructured loans (accruing)
81,832

17,122

98,954

Total
$
89,508

$
19,127

$
108,635

For the six months ended June 30, 2018
 
 
 
Non-accrual loans
$
8,097

$
2,464

$
10,561

Restructured loans (accruing)
80,552

17,943

98,495

Total
$
88,649

$
20,407

$
109,056

For the three months ended June 30, 2017
 
 
 
Non-accrual loans
$
9,867

$
4,539

$
14,406

Restructured loans (accruing)
34,765

15,780

50,545

Total
$
44,632

$
20,319

$
64,951

For the six months ended June 30, 2017
 
 
 
Non-accrual loans
$
10,238

$
4,027

$
14,265

Restructured loans (accruing)
33,333

15,991

49,324

Total
$
43,571

$
20,018

$
63,589


The table below shows interest income recognized during the three and six month periods ended June 30, 2018 and 2017, respectively, for impaired loans held at the end of each period. This interest all relates to accruing restructured loans, as discussed in the "Troubled debt restructurings" section on page 15.
 
For the Three Months Ended June 30
 
For the Six Months Ended June 30
(In thousands)
2018
2017
 
2018
2017
Interest income recognized on impaired loans:
 
 
 
 
 
Business
$
821

$
319

 
$
1,641

$
637

Real estate – construction and land
22

1

 
44

2

Real estate – business
147

88

 
294

175

Real estate – personal
52

36

 
103

71

Consumer
82

80

 
164

159

Revolving home equity
1

6

 
2

12

Consumer credit card
159

145

 
317

289

Total
$
1,284

$
675

 
$
2,565

$
1,345



12

Table of contents

Delinquent and non-accrual loans
The following table provides aging information on the Company’s past due and accruing loans, in addition to the balances of loans on non-accrual status, at June 30, 2018 and December 31, 2017.




(In thousands)
Current or Less Than 30 Days Past Due

30 – 89
Days Past Due
90 Days Past Due and Still Accruing
Non-accrual



Total
June 30, 2018
 
 
 
 
 
Commercial:
 
 
 
 
 
Business
$
4,983,337

$
1,404

$
443

$
5,114

$
4,990,298

Real estate – construction and land
963,654

3,492


5

967,151

Real estate – business
2,718,888

6,227


2,465

2,727,580

Personal Banking:
 
 
 
 
 
Real estate – personal
2,092,350

7,155

1,193

1,888

2,102,586

Consumer
1,985,195

25,096

2,353


2,012,644

Revolving home equity
372,865

708

984


374,557

Consumer credit card
758,230

8,504

8,480


775,214

Overdrafts
3,731

350



4,081

Total
$
13,878,250

$
52,936

$
13,453

$
9,472

$
13,954,111

December 31, 2017
 
 
 
 
 
Commercial:
 
 
 
 
 
Business
$
4,949,148

$
3,085

$
374

$
5,947

$
4,958,554

Real estate – construction and land
967,321

1,473

21

5

968,820

Real estate – business
2,694,234

482


2,736

2,697,452

Personal Banking:
 
 
 
 
 
Real estate – personal
2,050,787

6,218

3,321

2,461

2,062,787

Consumer
2,067,025

32,674

3,954

834

2,104,487

Revolving home equity
397,349

1,962

1,276


400,587

Consumer credit card
764,568

10,115

9,181


783,864

Overdrafts
6,840

283



7,123

Total
$
13,897,272

$
56,292

$
18,127

$
11,983

$
13,983,674


Credit quality
The following table provides information about the credit quality of the Commercial loan portfolio, using the Company’s internal rating system as an indicator. The internal rating system is a series of grades reflecting management’s risk assessment, based on its analysis of the borrower’s financial condition. The “pass” category consists of a range of loan grades that reflect increasing, though still acceptable, risk. Movement of risk through the various grade levels in the “pass” category is monitored for early identification of credit deterioration. The “special mention” rating is applied to loans where the borrower exhibits negative financial trends due to borrower specific or systemic conditions that, if left uncorrected, threaten its capacity to meet its debt obligations. The borrower is believed to have sufficient financial flexibility to react to and resolve its negative financial situation. It is a transitional grade that is closely monitored for improvement or deterioration. The “substandard” rating is applied to loans where the borrower exhibits well-defined weaknesses that jeopardize its continued performance and are of a severity that the distinct possibility of default exists. Loans are placed on “non-accrual” when management does not expect to collect payments consistent with acceptable and agreed upon terms of repayment.

13

Table of contents

Commercial Loans


(In thousands)


Business
Real
 Estate-Construction
Real
Estate-
Business


Total
June 30, 2018
 
 
 
 
Pass
$
4,771,613

$
954,492

$
2,648,144

$
8,374,249

Special mention
58,771

10,501

33,791

103,063

Substandard
154,800

2,153

43,180

200,133

Non-accrual
5,114

5

2,465

7,584

Total
$
4,990,298

$
967,151

$
2,727,580

$
8,685,029

December 31, 2017
 
 
 
 
Pass
$
4,740,013

$
955,499

$
2,593,005

$
8,288,517

Special mention
59,177

10,614

50,577

120,368

Substandard
153,417

2,702

51,134

207,253

Non-accrual
5,947

5

2,736

8,688

Total
$
4,958,554

$
968,820

$
2,697,452

$
8,624,826


The credit quality of Personal Banking loans is monitored primarily on the basis of aging/delinquency, and this information is provided in the table in the above "Delinquent and non-accrual loans" section. In addition, FICO scores are obtained and updated on a quarterly basis for most of the loans in the Personal Banking portfolio. This is a published credit score designed to measure the risk of default by taking into account various factors from a borrower's financial history. The Bank normally obtains a FICO score at the loan's origination and renewal dates, and updates are obtained on a quarterly basis. Excluded from the table below are certain personal real estate loans for which FICO scores are not obtained because they generally pertain to commercial customer activities and are often underwritten with other collateral considerations. These loans totaled $211.1 million at June 30, 2018 and $219.2 million at December 31, 2017. The table also excludes consumer loans related to the Company's patient healthcare loan program, which totaled $161.8 million at June 30, 2018 and $145.0 million at December 31, 2017. As the healthcare loans are guaranteed by the hospital, FICO scores are not considered relevant for this program. The personal real estate loans and consumer loans excluded below totaled less than 8% of the Personal Banking portfolio. For the remainder of loans in the Personal Banking portfolio, the table below shows the percentage of balances outstanding at June 30, 2018 and December 31, 2017 by FICO score.
   Personal Banking Loans
 
% of Loan Category
 
Real Estate - Personal
Consumer
Revolving Home Equity
Consumer Credit Card
June 30, 2018
 
 
 
 
FICO score:
 
 
 
 
Under 600
1.1
%
3.2
%
.8
%
4.6
%
600 - 659
2.0

5.1

1.6

14.1

660 - 719
10.0

18.0

9.2

35.3

720 - 779
23.6

23.6

22.1

26.4

780 and over
63.3

50.1

66.3

19.6

Total
100.0
%
100.0
%
100.0
%
100.0
%
December 31, 2017
 
 
 
 
FICO score:
 
 
 
 
Under 600
1.3
%
3.3
%
1.1
%
4.7
%
600 - 659
2.1

5.5

1.7

14.4

660 - 719
10.5

17.3

9.5

34.4

720 - 779
25.6

26.8

21.4

26.0

780 and over
60.5

47.1

66.3

20.5

Total
100.0
%
100.0
%
100.0
%
100.0
%



14

Table of contents

Troubled debt restructurings
As mentioned previously, the Company's impaired loans include loans which have been classified as troubled debt restructurings, as shown in the table below. Restructured loans are those extended to borrowers who are experiencing financial difficulty and who have been granted a concession. Restructured loans are placed on non-accrual status if the Company does not believe it probable that amounts due under the contractual terms will be collected. Other performing restructured loans are comprised of certain business, construction and business real estate loans classified as substandard. Upon maturity, the loans renewed at interest rates judged not to be market rates for new debt with similar risk and as a result were classified as troubled debt restructurings. These loans are performing in accordance with their modified terms, and because the Company believes it probable that all amounts due under the modified terms of the agreements will be collected, interest on these loans is being recognized on an accrual basis. Troubled debt restructurings also include certain credit card loans under various debt management and assistance programs. Modifications to credit card loans generally involve removing the available line of credit, placing loans on amortizing status, and lowering the contractual interest rate. The Company also classified certain loans as troubled debt restructings because they were not reaffirmed by the borrower in bankruptcy proceedings. These loans are comprised of personal real estate, revolving home equity and consumer loans. Interest on these loans is being recognized on an accrual basis, as the borrowers are continuing to make payments.
(In thousands)
June 30, 2018
December 31, 2017
Accruing loans:
 
 
 
Non-market interest rates
$
86,906

$
88,588

 
Assistance programs
6,887

6,685

 
Bankruptcy non-affirmation
5,335

7,283

 
Other
296

256

Non-accrual loans
7,156

7,796

Total troubled debt restructurings
$
106,580

$
110,608


The table below shows the balance of troubled debt restructurings by loan classification at June 30, 2018, in addition to the outstanding balances of these restructured loans which the Company considers to have been in default at any time during the past twelve months. For purposes of this disclosure, the Company considers "default" to mean 90 days or more past due as to interest or principal.
(In thousands)
June 30, 2018
Balance 90 days past due at any time during previous 12 months
Commercial:
 
 
Business
$
75,680

$
32

Real estate - construction and land
1,337


Real estate - business
12,311


Personal Banking:
 
 
Real estate - personal
4,787

303

Consumer
5,464

115

Revolving home equity
114

42

Consumer credit card
6,887

577

Total troubled debt restructurings
$
106,580

$
1,069


For those loans on non-accrual status also classified as restructured, the modification did not create any further financial effect on the Company as those loans were already recorded at net realizable value. For those performing commercial loans classified as restructured, there were no concessions involving forgiveness of principal or interest and, therefore, there was no financial impact to the Company as a result of modification to these loans. No financial impact resulted from those performing loans where the debt was not reaffirmed in bankruptcy, as no changes to loan terms occurred in that process. The effects of modifications to consumer credit card loans were estimated to decrease interest income by approximately $925 thousand on an annual, pre-tax basis, compared to amounts contractually owed.

The allowance for loan losses related to troubled debt restructurings on non-accrual status is determined by individual evaluation, including collateral adequacy, using the same process as loans on non-accrual status which are not classified as troubled debt restructurings. Those performing loans classified as troubled debt restructurings are accruing loans which management expects to

15

Table of contents

collect under contractual terms. Performing commercial loans have had no other concessions granted other than being renewed at an interest rate judged not to be market. As such, they have similar risk characteristics as non-troubled debt commercial loans and are collectively evaluated based on internal risk rating, loan type, delinquency, historical experience and current economic factors. Performing personal banking loans classified as troubled debt restructurings resulted from the borrower not reaffirming the debt during bankruptcy and have had no other concession granted, other than the Bank's future limitations on collecting payment deficiencies or in pursuing foreclosure actions. As such, they have similar risk characteristics as non-troubled debt personal banking loans and are evaluated collectively based on loan type, delinquency, historical experience and current economic factors.

If a troubled debt restructuring defaults and is already on non-accrual status, the allowance for loan losses continues to be based on individual evaluation, using discounted expected cash flows or the fair value of collateral. If an accruing troubled debt restructuring defaults, the loan's risk rating is downgraded to non-accrual status and the loan's related allowance for loan losses is determined based on individual evaluation, or if necessary, the loan is charged off and collection efforts begun.

The Company had commitments of $6.1 million at June 30, 2018 to lend additional funds to borrowers with restructured loans.

Loans held for sale
The Company designates certain long-term fixed rate personal real estate loans as held for sale, and the Company has elected the fair value option for these loans. The election of the fair value option aligns the accounting for these loans with the related economic hedges discussed in Note 10. The loans are primarily sold to FNMA, FHLMC, and GNMA. At June 30, 2018, the fair value of these loans was $10.8 million, and the unpaid principal balance was $10.4 million.

The Company also designates student loan originations as held for sale. The borrowers are credit-worthy students who are attending colleges and universities. The loans are intended to be sold in the secondary market, and the Company maintains contracts with Sallie Mae to sell the loans within 210 days after the last disbursement to the student. These loans are carried at lower of cost or fair value, which at June 30, 2018 totaled $9.6 million.

At June 30, 2018, none of the loans held for sale were on non-accrual status or 90 days past due and still accruing.
 
Foreclosed real estate/repossessed assets
The Company’s holdings of foreclosed real estate totaled $1.0 million and $681 thousand at June 30, 2018 and December 31, 2017, respectively. Personal property acquired in repossession, generally autos and marine and recreational vehicles, totaled $2.3 million and $2.7 million at June 30, 2018 and December 31, 2017, respectively. Upon acquisition, these assets are recorded at fair value less estimated selling costs at the date of foreclosure, establishing a new cost basis. They are subsequently carried at the lower of this cost basis or fair value less estimated selling costs.

3. Investment Securities
Investment securities as shown in this report reflect revised categories as required by the Company’s adoption of ASU 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities”, on January 1, 2018. That new guidance refined the definition of equity securities and required their segregation from available for sale debt securities. For comparability purposes, prior period disclosures in this report have been revised to show the new categorization.
 
(In thousands)
June 30, 2018
December 31, 2017
Available for sale debt securities
$
8,412,376

$
8,725,442

Trading debt securities
31,156

18,269

Equity securities:
 
 
   Readily determinable fair value
2,741

48,838

   No readily determinable fair value
1,703

1,753

Other:


 
   Federal Reserve Bank stock
33,369

33,253

   Federal Home Loan Bank stock
10,000

10,000

   Private equity investments
68,940

55,752

Total investment securities
$
8,560,285

$
8,893,307


While changes in the fair value of available for sale debt securities continue to be recorded in the equity category of accumulated other comprehensive income, the new guidance requires changes in the fair value of equity securities to be recorded in current earnings. As required by the new guidance, the unrealized gain in fair value on equity securities (recorded in accumulated other

16

Table of contents

comprehensive income at December 31, 2017) was reclassified to retained earnings on January 1, 2018. The amount of the reclassification was $33.3 million, net of tax.
Equity securities include common and preferred stock with readily determinable fair values that totaled $2.5 million at cost and $2.7 million at fair value at June 30, 2018. The decline in these balances from prior periods was due to a third party merger transaction in June 2018, in which the majority of these securities were redeemed for cash of $39.9 million. During the first six months of 2018, unrealized net losses of $176 thousand were recognized in current earnings on equity securities still held at June 30, 2018.
Equity securities also include securities with a carrying value of $1.7 million that do not have readily determinable fair values. The Company has elected, under the ASU, to measure these at cost minus impairment, if any, plus or minus changes resulting from observable price changes for the identical or similar investment of the same issuer. The Company did not record any impairment or other adjustments to the carrying amount of these investments during the period.
Other investment securities whose accounting is not addressed in the ASU include Federal Reserve Bank (FRB) stock, Federal Home Loan Bank (FHLB) stock, and investments in portfolio concerns held by the Company's private equity subsidiaries. FRB stock and FHLB stock are held for debt and regulatory purposes. Investment in FRB stock is based on the capital structure of the investing bank, and investment in FHLB stock is tied to the level of borrowings from the FHLB. These holdings are carried at cost. The private equity investments, in the absence of readily ascertainable market values, are carried at estimated fair value.
The majority of the Company’s investment portfolio is comprised of available for sale debt securities, which are carried at fair value with changes in fair value reported in accumulated other comprehensive income (AOCI). A summary of the available for sale debt securities by maturity groupings as of June 30, 2018 is shown below. The investment portfolio includes agency mortgage-backed securities, which are guaranteed by agencies such as the FHLMC, FNMA, GNMA and FDIC, in addition to non-agency mortgage-backed securities, which have no guarantee but are collateralized by commercial and residential mortgages. Also included are certain other asset-backed securities, which are primarily collateralized by credit cards, automobiles, student loans, and commercial loans. These securities differ from traditional debt securities primarily in that they may have uncertain maturity dates and are priced based on estimated prepayment rates on the underlying collateral.

17

Table of contents

(In thousands)
Amortized Cost
Fair Value
U.S. government and federal agency obligations:
 
 
Within 1 year
$
52,660

$
52,603

After 1 but within 5 years
645,431

634,819

After 5 but within 10 years
157,967

155,108

After 10 years
69,202

68,562

Total U.S. government and federal agency obligations
925,260

911,092

Government-sponsored enterprise obligations:
 
 
Within 1 year
117,562

117,444

After 1 but within 5 years
121,584

119,743

After 5 but within 10 years
34,984

33,946

After 10 years
42,852

40,228

Total government-sponsored enterprise obligations
316,982

311,361

State and municipal obligations:
 
 
Within 1 year
147,325

147,668

After 1 but within 5 years
598,663

600,688

After 5 but within 10 years
591,819

590,950

After 10 years
40,963

39,858

Total state and municipal obligations
1,378,770

1,379,164

Mortgage and asset-backed securities:
 
 
  Agency mortgage-backed securities
3,194,764

3,131,025

  Non-agency mortgage-backed securities
1,019,545

1,010,331

  Asset-backed securities
1,351,461

1,338,542

Total mortgage and asset-backed securities
5,565,770

5,479,898

Other debt securities:
 
 
Within 1 year
9,003

8,971

After 1 but within 5 years
257,704

252,151

After 5 but within 10 years
73,283

69,739

Total other debt securities
339,990

330,861

Total available for sale debt securities
$
8,526,772

$
8,412,376


Investments in U.S. government and federal agency obligations include U.S. Treasury inflation-protected securities, which totaled $443.8 million, at fair value, at June 30, 2018. Interest paid on these securities increases with inflation and decreases with deflation, as measured by the Consumer Price Index. Included in state and municipal obligations are $15.1 million, at fair value, of auction rate securities, which were purchased from bank customers in 2008. Interest on these bonds is currently being paid at the maximum failed auction rates.


18

Table of contents

For debt securities classified as available for sale, the following table shows the unrealized gains and losses (pre-tax) in AOCI, by security type.
 
 
(In thousands)
Amortized Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Value
June 30, 2018
 
 
 
 
U.S. government and federal agency obligations
$
925,260

$
503

$
(14,671
)
$
911,092

Government-sponsored enterprise obligations
316,982


(5,621
)
311,361

State and municipal obligations
1,378,770

8,105

(7,711
)
1,379,164

Mortgage and asset-backed securities:
 
 
 
 
  Agency mortgage-backed securities
3,194,764

5,995

(69,734
)
3,131,025

  Non-agency mortgage-backed securities
1,019,545

6,232

(15,446
)
1,010,331

  Asset-backed securities
1,351,461

2,343

(15,262
)
1,338,542

Total mortgage and asset-backed securities
5,565,770

14,570

(100,442
)
5,479,898

Other debt securities
339,990


(9,129
)
330,861

Total
$
8,526,772

$
23,178

$
(137,574
)
$
8,412,376

December 31, 2017
 
 
 
 
U.S. government and federal agency obligations
$
917,494

$
4,096

$
(4,443
)
$
917,147

Government-sponsored enterprise obligations
408,266

26

(1,929
)
406,363

State and municipal obligations
1,592,707

21,413

(2,754
)
1,611,366

Mortgage and asset-backed securities:
 
 
 
 
  Agency mortgage-backed securities
3,046,701

17,956

(23,744
)
3,040,913

  Non-agency mortgage-backed securities
903,920

6,710

(4,837
)
905,793

  Asset-backed securities
1,495,380

2,657

(5,237
)
1,492,800

Total mortgage and asset-backed securities
5,446,001

27,323

(33,818
)
5,439,506

Other debt securities
350,988

1,250

(1,178
)
351,060

Total
$
8,715,456

$
54,108

$
(44,122
)
$
8,725,442


The Company’s impairment policy requires a review of all securities for which fair value is less than amortized cost. Special emphasis and analysis is placed on securities whose credit rating has fallen below A3 (Moody's) or A- (Standard & Poor's), whose fair values have fallen more than 20% below purchase price for an extended period of time, or who have been identified based on management’s judgment. These securities are placed on a watch list, and for all such securities, cash flow analyses are prepared. For more complex analyses, detailed cash flow models are prepared which use inputs specific to each security. Inputs to these models include factors such as cash flow received, contractual payments required, and various other information related to the underlying collateral (including current delinquencies), collateral loss severity rates (including loan to values), expected delinquency rates, credit support from other tranches, and prepayment speeds. Stress tests are performed at varying levels of delinquency rates, prepayment speeds and loss severities in order to gauge probable ranges of credit loss. At June 30, 2018, the fair value of securities on this watch list was $57.3 million compared to $68.0 million at December 31, 2017.

As of June 30, 2018, the Company had recorded other-than-temporary impairment (OTTI) on certain non-agency mortgage-backed securities, part of the watch list mentioned above, which had an aggregate fair value of $22.4 million. The cumulative credit-related portion of the impairment on these securities, which was recorded in earnings, totaled $14.2 million. The Company does not intend to sell these securities and believes it is not likely that it will be required to sell the securities before the recovery of their amortized cost.

The credit-related portion of the loss on these securities was based on the cash flows projected to be received over the estimated life of the securities, discounted to present value, and compared to the current amortized cost bases of the securities. Significant inputs to the cash flow models used to calculate the credit losses on these securities at June 30, 2018 included the following:

Significant Inputs
Range
Prepayment CPR
0%
-
25%
Projected cumulative default
13%
-
52%
Credit support
0%
-
20%
Loss severity
14%
-
63%


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The following table presents a rollforward of the cumulative OTTI credit losses recognized in earnings on all available for sale debt securities.
 
For the Six Months Ended June 30
(In thousands)
2018
2017
Cumulative OTTI credit losses at January 1
$
14,199

$
14,080

Credit losses on debt securities for which impairment was not previously recognized
58

46

Credit losses on debt securities for which impairment was previously recognized
10

274

Increase in expected cash flows that are recognized over remaining life of security
(104
)
(146
)
Cumulative OTTI credit losses at June 30
$
14,163

$
14,254


Debt securities with unrealized losses recorded in AOCI are shown in the table below, along with the length of the impairment period.
 
Less than 12 months
 
12 months or longer
 
Total
 
(In thousands)
   Fair Value
Unrealized
Losses
 
Fair Value
Unrealized
Losses
 
Fair Value
Unrealized
Losses
June 30, 2018
 
 
 
 
 
 
 
 
U.S. government and federal agency obligations
$
707,018

$
12,156

 
$
90,340

$
2,515

 
$
797,358

$
14,671

Government-sponsored enterprise obligations
261,378

5,605

 
49,983

16

 
311,361

5,621

State and municipal obligations
458,880

5,700

 
51,863

2,011

 
510,743

7,711

Mortgage and asset-backed securities:
 
 
 
 
 
 
 
 
   Agency mortgage-backed securities
2,029,957

45,267

 
566,986

24,467

 
2,596,943

69,734

   Non-agency mortgage-backed securities
773,890

12,076

 
134,679

3,370

 
908,569

15,446

   Asset-backed securities
862,416

13,296

 
173,895

1,966

 
1,036,311

15,262

Total mortgage and asset-backed securities
3,666,263

70,639

 
875,560

29,803

 
4,541,823

100,442

Other debt securities
311,714

8,033

 
19,147

1,096

 
330,861

9,129

Total
$
5,405,253

$
102,133

 
$
1,086,893

$
35,441

 
$
6,492,146

$
137,574

December 31, 2017
 
 
 
 
 
 
 
 
U.S. government and federal agency obligations
$
618,617

$
4,443

 
$

$

 
$
618,617

$
4,443

Government-sponsored enterprise obligations
286,393

1,712

 
49,766

217

 
336,159

1,929

State and municipal obligations
282,843

1,752

 
49,339

1,002

 
332,182

2,754

Mortgage and asset-backed securities:
 
 
 
 
 
 
 
 
   Agency mortgage-backed securities
1,320,689

9,433

 
619,300

14,311

 
1,939,989

23,744

   Non-agency mortgage-backed securities
577,017

2,966

 
153,813

1,871

 
730,830

4,837

   Asset-backed securities
786,048

3,168

 
264,295

2,069

 
1,050,343

5,237

Total mortgage and asset-backed securities
2,683,754

15,567

 
1,037,408

18,251

 
3,721,162

33,818

Other debt securities
144,090

727

 
20,202

451

 
164,292

1,178

Total
$
4,015,697

$
24,201

 
$
1,156,715

$
19,921

 
$
5,172,412

$
44,122


The available for sale debt portfolio included $6.5 billion of securities that were in a loss position at June 30, 2018, compared to $5.2 billion at December 31, 2017.  The total amount of unrealized loss on these securities was $137.6 million at June 30, 2018, an increase of $93.5 million compared to the loss at December 31, 2017.  This increase in losses was mainly due to a rising rate environment. 

    

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The following tables present proceeds from sales of securities and the components of investment securities gains and losses which have been recognized in earnings.