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Securities
 9 Months Ended
Sep. 30, 2023
Investments, Debt and Equity Securities [Abstract]  
Securities

5. Securities

Securities Available for Sale

This table provides detailed information about securities available for sale at September 30, 2023 and December 31, 2022 (in thousands):

September 30, 2023

 

Amortized
Cost

 

 

Gross
Unrealized
Gains

 

 

Gross
Unrealized
Losses

 

 

Fair
Value

 

U.S. Treasury

 

$

797,238

 

 

$

—

 

 

$

(17,863

)

 

$

779,375

 

U.S. Agencies

 

 

178,037

 

 

 

—

 

 

 

(4,687

)

 

 

173,350

 

Mortgage-backed

 

 

4,175,240

 

 

 

—

 

 

 

(695,289

)

 

 

3,479,951

 

State and political subdivisions

 

 

1,367,097

 

 

 

51

 

 

 

(160,492

)

 

 

1,206,656

 

Corporates

 

 

382,914

 

 

 

—

 

 

 

(38,013

)

 

 

344,901

 

Collateralized loan obligations

 

 

347,999

 

 

 

536

 

 

 

(2,069

)

 

 

346,466

 

Total

 

$

7,248,525

 

 

$

587

 

 

$

(918,413

)

 

$

6,330,699

 

December 31, 2022

 

Amortized
Cost

 

 

Gross
Unrealized
Gains

 

 

Gross
Unrealized
Losses

 

 

Fair
Value

 

U.S. Treasury

 

$

804,158

 

 

$

58

 

 

$

(27,146

)

 

$

777,070

 

U.S. Agencies

 

 

178,261

 

 

 

—

 

 

 

(6,965

)

 

 

171,296

 

Mortgage-backed

 

 

4,574,905

 

 

 

92

 

 

 

(592,875

)

 

 

3,982,122

 

State and political subdivisions

 

 

1,465,598

 

 

 

1,608

 

 

 

(104,799

)

 

 

1,362,407

 

Corporates

 

 

401,059

 

 

 

—

 

 

 

(33,559

)

 

 

367,500

 

Collateralized loan obligations

 

 

353,969

 

 

 

32

 

 

 

(8,049

)

 

 

345,952

 

Total

 

$

7,777,950

 

 

$

1,790

 

 

$

(773,393

)

 

$

7,006,347

 

 

 

The following table presents contractual maturity information for securities available for sale at September 30, 2023 (in thousands):

 

 

Amortized

 

 

Fair

 

 

 

Cost

 

 

Value

 

Due in 1 year or less

 

$

833,933

 

 

$

821,161

 

Due after 1 year through 5 years

 

 

1,017,582

 

 

 

966,945

 

Due after 5 years through 10 years

 

 

713,019

 

 

 

649,262

 

Due after 10 years

 

 

508,751

 

 

 

413,380

 

Total

 

 

3,073,285

 

 

 

2,850,748

 

Mortgage-backed securities

 

 

4,175,240

 

 

 

3,479,951

 

Total securities available for sale

 

$

7,248,525

 

 

$

6,330,699

 

 

Securities may be disposed of before contractual maturities due to sales by the Company or because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

For the nine months ended September 30, 2023, there were $22.2 million in proceeds from the sales of securities available for sale. For the nine months ended September 30, 2022, there were no sales of securities available for sale. Securities transactions resulted in gross realized gains of $154 thousand and gross realized losses of $2 thousand for the nine months ended September 30, 2023. There were no gross realized gains or losses for the nine months ended September 30, 2022.

There were $8.5 billion and $10.3 billion of securities pledged to secure U.S. Government deposits, other public deposits, certain trust deposits, derivative transactions, and repurchase agreements at September 30, 2023 and December 31, 2022, respectively.

Accrued interest on securities available for sale totaled $28.2 million and $32.1 million as of September 30, 2023 and December 31, 2022, respectively, and is included in the Accrued income line on the Company’s Consolidated Balance Sheets. The total amount of accrued interest is excluded from the amortized cost of available-for-sale securities presented above. Further, the Company has elected not to measure an ACL for accrued interest receivable.

The following table shows the Company’s available-for-sale investments’ gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at September 30, 2023 and December 31, 2022 (in thousands):

 

 

Less than 12 months

 

 

12 months or more

 

 

Total

 

September 30, 2023

 

Count

 

 

Fair Value

 

 

Unrealized
Losses

 

 

Count

 

 

Fair Value

 

 

Unrealized
Losses

 

 

Count

 

 

Fair Value

 

 

Unrealized
Losses

 

Description of Securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury

 

 

6

 

 

$

42,600

 

 

$

(322

)

 

 

63

 

 

$

736,775

 

 

$

(17,541

)

 

 

69

 

 

$

779,375

 

 

$

(17,863

)

U.S. Agencies

 

 

—

 

 

 

—

 

 

 

—

 

 

 

29

 

 

 

173,350

 

 

 

(4,687

)

 

 

29

 

 

 

173,350

 

 

 

(4,687

)

Mortgage-backed

 

 

18

 

 

 

27,783

 

 

 

(1,595

)

 

 

856

 

 

 

3,452,081

 

 

 

(693,694

)

 

 

874

 

 

 

3,479,864

 

 

 

(695,289

)

State and political subdivisions

 

 

617

 

 

 

332,747

 

 

 

(18,712

)

 

 

1,517

 

 

 

864,436

 

 

 

(141,780

)

 

 

2,134

 

 

 

1,197,183

 

 

 

(160,492

)

Corporates

 

 

—

 

 

 

—

 

 

 

—

 

 

 

267

 

 

 

344,901

 

 

 

(38,013

)

 

 

267

 

 

 

344,901

 

 

 

(38,013

)

Collateralized loan obligations

 

 

1

 

 

 

4,245

 

 

 

(5

)

 

 

34

 

 

 

231,032

 

 

 

(2,064

)

 

 

35

 

 

 

235,277

 

 

 

(2,069

)

Total

 

 

642

 

 

$

407,375

 

 

$

(20,634

)

 

 

2,766

 

 

$

5,802,575

 

 

$

(897,779

)

 

 

3,408

 

 

$

6,209,950

 

 

$

(918,413

)

 

 

 

 

Less than 12 months

 

 

12 months or more

 

 

Total

 

December 31, 2022

 

Count

 

 

Fair Value

 

 

Unrealized
Losses

 

 

Count

 

 

Fair Value

 

 

Unrealized
Losses

 

 

Count

 

 

Fair Value

 

 

Unrealized
Losses

 

Description of Securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury

 

 

61

 

 

$

688,208

 

 

$

(22,731

)

 

 

4

 

 

$

55,314

 

 

$

(4,415

)

 

 

65

 

 

$

743,522

 

 

$

(27,146

)

U.S. Agencies

 

 

27

 

 

 

140,877

 

 

 

(4,734

)

 

 

2

 

 

 

30,419

 

 

 

(2,231

)

 

 

29

 

 

 

171,296

 

 

 

(6,965

)

Mortgage-backed

 

 

687

 

 

 

1,415,169

 

 

 

(102,881

)

 

 

205

 

 

 

2,557,035

 

 

 

(489,994

)

 

 

892

 

 

 

3,972,204

 

 

 

(592,875

)

State and political subdivisions

 

 

1,744

 

 

 

936,865

 

 

 

(51,427

)

 

 

273

 

 

 

233,679

 

 

 

(53,372

)

 

 

2,017

 

 

 

1,170,544

 

 

 

(104,799

)

Corporates

 

 

86

 

 

 

146,615

 

 

 

(8,783

)

 

 

189

 

 

 

216,885

 

 

 

(24,776

)

 

 

275

 

 

 

363,500

 

 

 

(33,559

)

Collateralized loan obligations

 

 

41

 

 

 

326,659

 

 

 

(7,820

)

 

 

1

 

 

 

4,785

 

 

 

(229

)

 

 

42

 

 

 

331,444

 

 

 

(8,049

)

Total

 

 

2,646

 

 

$

3,654,393

 

 

$

(198,376

)

 

 

674

 

 

$

3,098,117

 

 

$

(575,017

)

 

 

3,320

 

 

$

6,752,510

 

 

$

(773,393

)

The unrealized losses in the Company’s investments were caused by changes in interest rates, and not from a decline in credit of the underlying issuers. The U.S. Treasury, U.S. Agency, and GSE mortgage-backed securities are all considered to be agency-backed securities with no risk of loss as they are either explicitly or implicitly guaranteed by the U.S. government. The changes in fair value in the agency-backed portfolios are solely driven by change in interest rates caused by changing economic conditions. The Company has no knowledge of any underlying credit issues and the cash flows underlying the debt securities have not changed and are not expected to be impacted by changes in interest rates.

For the State and political subdivision portfolio, the majority of the Company’s holdings are in general obligation bonds, which have a very low historical default rate due to issuers generally having unlimited taxing authority to service the debt. For the State and political, Corporate, and Collateralized loan obligations portfolios, the Company has a robust process for monitoring credit risk, including both pre-purchase and ongoing post-purchase credit reviews and analysis. The Company monitors credit ratings of all bond issuers in these segments and reviews available financial data, including market and sector trends.

During the nine months ended September 30, 2023, the Company recorded a $4.9 million impairment on one Corporate available-for-sale security.

As of September 30, 2023 and December 31, 2022, there was no ACL related to the Company’s available-for-sale securities as the decline in fair value did not result from credit issues.

Securities Held to Maturity

The following table provides detailed information about securities held to maturity at September 30, 2023 and December 31, 2022, respectively (in thousands):

September 30, 2023

 

Amortized Cost

 

 

Gross Unrealized Gains

 

 

Gross Unrealized Losses

 

 

Fair Value

 

 

Allowance for Credit Losses

 

 

Net Carrying Amount

 

U.S. Agencies

 

$

123,180

 

 

$

—

 

 

$

(4,228

)

 

$

118,952

 

 

$

—

 

 

$

123,180

 

Mortgage-backed

 

 

2,790,103

 

 

 

—

 

 

 

(512,431

)

 

 

2,277,672

 

 

 

—

 

 

 

2,790,103

 

State and political subdivisions

 

 

2,819,300

 

 

 

6,834

 

 

 

(366,292

)

 

 

2,459,842

 

 

 

(2,886

)

 

 

2,816,414

 

Total

 

$

5,732,583

 

 

$

6,834

 

 

$

(882,951

)

 

$

4,856,466

 

 

$

(2,886

)

 

$

5,729,697

 

December 31, 2022

 

Amortized Cost

 

 

Gross Unrealized Gains

 

 

Gross Unrealized Losses

 

 

Fair Value

 

 

Allowance for Credit Losses

 

 

Net Carrying Amount

 

U.S. Agencies

 

$

123,091

 

 

$

—

 

 

$

(4,567

)

 

$

118,524

 

 

$

—

 

 

$

123,091

 

Mortgage-backed

 

 

2,965,586

 

 

 

11

 

 

 

(392,530

)

 

 

2,573,067

 

 

 

—

 

 

 

2,965,586

 

State and political subdivisions

 

 

2,772,922

 

 

 

17,618

 

 

 

(201,472

)

 

 

2,589,068

 

 

 

(2,407

)

 

 

2,770,515

 

Total

 

$

5,861,599

 

 

$

17,629

 

 

$

(598,569

)

 

$

5,280,659

 

 

$

(2,407

)

 

$

5,859,192

 

 

The following table presents contractual maturity information for securities held to maturity at September 30, 2023 (in thousands):

 

 

 

Amortized

 

 

Fair

 

 

 

Cost

 

 

Value

 

Due in 1 year or less

 

$

84,409

 

 

$

83,964

 

Due after 1 year through 5 years

 

 

328,485

 

 

 

317,451

 

Due after 5 years through 10 years

 

 

824,540

 

 

 

757,544

 

Due after 10 years

 

 

1,705,046

 

 

 

1,419,835

 

Total

 

 

2,942,480

 

 

 

2,578,794

 

Mortgage-backed securities

 

 

2,790,103

 

 

 

2,277,672

 

Total securities held to maturity

 

$

5,732,583

 

 

$

4,856,466

 

 

Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

There were no sales of securities held to maturity during the nine months ended September 30, 2023 or 2022.

During the year ended December 31, 2022, securities with an amortized cost of $4.1 billion and a fair value of $3.8 billion were transferred from the available-for-sale classification to the held-to-maturity classification as the Company has the positive intent and ability to hold these securities to maturity. The transfers of securities were made at fair value at the time of transfer. The unrealized holding loss at the time of transfer is retained in AOCI and will be amortized over the remaining life of the securities, offsetting the related amortization of discount or premium on the transferred securities. No gains or losses were recognized at the time of the transfers. The amortized cost balance of securities held to maturity in the tables above includes a net unamortized unrealized loss of $216.5 million at September 30, 2023.

Accrued interest on securities held to maturity totaled $23.5 million and $27.0 million as of September 30, 2023 and December 31, 2022, respectively, and is included in the Accrued income line on the Company’s Consolidated Balance Sheets. The total amount of accrued interest is excluded from the amortized cost of held-to-maturity securities presented above. Further, the Company has elected not to measure an ACL for accrued interest receivable.

The following table shows the Company’s held-to-maturity investments’ gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at September 30, 2023 and December 31, 2022, respectively (in thousands):

 

 

 

Less than 12 months

 

 

12 months or more

 

 

Total

 

September 30, 2023

 

Count

 

 

Fair Value

 

 

Unrealized Losses

 

 

Count

 

 

Fair Value

 

 

Unrealized Losses

 

 

Count

 

 

Fair Value

 

 

Unrealized Losses

 

U.S. Agencies

 

 

—

 

 

$

—

 

 

$

—

 

 

 

11

 

 

$

118,952

 

 

$

(4,228

)

 

 

11

 

 

$

118,952

 

 

$

(4,228

)

Mortgage-backed

 

 

8

 

 

 

7,460

 

 

 

(435

)

 

 

261

 

 

 

2,270,212

 

 

 

(511,996

)

 

 

269

 

 

 

2,277,672

 

 

 

(512,431

)

State and political subdivisions

 

 

186

 

 

 

527,731

 

 

 

(53,443

)

 

 

1,382

 

 

 

1,688,475

 

 

 

(312,849

)

 

 

1,568

 

 

 

2,216,206

 

 

 

(366,292

)

Total

 

 

194

 

 

$

535,191

 

 

$

(53,878

)

 

 

1,654

 

 

$

4,077,639

 

 

$

(829,073

)

 

 

1,848

 

 

$

4,612,830

 

 

$

(882,951

)

 

 

 

Less than 12 months

 

 

12 months or more

 

 

Total

 

December 31, 2022

 

Count

 

 

Fair Value

 

 

Unrealized
Losses

 

 

Count

 

 

Fair Value

 

 

Unrealized
Losses

 

 

Count

 

 

Fair Value

 

 

Unrealized
Losses

 

U.S. Agency

 

 

11

 

 

$

118,524

 

 

$

(4,567

)

 

 

—

 

 

$

—

 

 

$

—

 

 

 

11

 

 

$

118,524

 

 

$

(4,567

)

Mortgage-backed

 

 

254

 

 

 

2,342,656

 

 

 

(346,611

)

 

 

11

 

 

 

228,079

 

 

 

(45,919

)

 

 

265

 

 

 

2,570,735

 

 

 

(392,530

)

State and political subdivisions

 

 

1,403

 

 

 

1,543,692

 

 

 

(177,957

)

 

 

61

 

 

 

617,805

 

 

 

(23,515

)

 

 

1,464

 

 

 

2,161,497

 

 

 

(201,472

)

Total

 

 

1,668

 

 

$

4,004,872

 

 

$

(529,135

)

 

 

72

 

 

$

845,884

 

 

$

(69,434

)

 

 

1,740

 

 

$

4,850,756

 

 

$

(598,569

)

 

 

The unrealized losses in the Company’s held-to-maturity portfolio were caused by changes in the interest rate environment. The U.S. Agency and GSE mortgage-backed securities are considered to be agency-backed securities with no risk of loss as they are either explicitly or implicitly guaranteed by the U.S. government. Therefore, the Company’s expected lifetime loss for these portfolios is zero and there is no ACL recorded for these portfolios. The Company has no knowledge of any underlying credit issues and the cash flows underlying the debt securities have not changed and are not expected to be impacted by changes in interest rates.

For the State and political subdivision portfolio, the Company’s holdings are in general obligation bonds as well as private placement bonds, which have very low historical default rates due to issuers generally having unlimited taxing authority to service the debt. The Company has a robust process for monitoring credit risk, including both pre-purchase and ongoing post-purchase credit reviews and analysis. The Company monitors credit ratings of all bond issuers in these segments and reviews available financial data, including market and sector trends. The underlying bonds are evaluated for credit losses in conjunction with management’s estimate of the ACL based on credit rating.

The following tables show the amortized cost basis by credit rating of the Company’s held-to-maturity investments at September 30, 2023 and December 31, 2022 (in thousands):

 

 

 

Amortized Cost Basis by Credit Rating - HTM Debt Securities

 

September 30, 2023

 

AAA

 

 

AA

 

 

A

 

 

BBB

 

 

BB

 

 

B

 

 

CCC-C

 

 

Total

 

State and political subdivisions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Competitive

 

$

—

 

 

$

6,588

 

 

$

460,569

 

 

$

645,173

 

 

$

14,490

 

 

$

16,170

 

 

$

2,721

 

 

$

1,145,711

 

Utilities

 

 

757,467

 

 

 

795,802

 

 

 

91,160

 

 

 

28,554

 

 

 

606

 

 

 

—

 

 

 

—

 

 

 

1,673,589

 

Total state and political subdivisions

 

$

757,467

 

 

$

802,390

 

 

$

551,729

 

 

$

673,727

 

 

$

15,096

 

 

$

16,170

 

 

$

2,721

 

 

$

2,819,300

 

 

 

 

Amortized Cost Basis by Credit Rating - HTM Debt Securities

 

December 31, 2022

 

AAA

 

 

AA

 

 

A

 

 

BBB

 

 

BB

 

 

CCC-C

 

 

Total

 

State and political subdivisions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Competitive

 

$

—

 

 

$

—

 

 

$

435,953

 

 

$

618,517

 

 

$

17,120

 

 

$

2,934

 

 

$

1,074,524

 

Utilities

 

 

759,539

 

 

 

824,386

 

 

 

84,293

 

 

 

29,599

 

 

 

581

 

 

 

—

 

 

 

1,698,398

 

Total state and political subdivisions

 

$

759,539

 

 

$

824,386

 

 

$

520,246

 

 

$

648,116

 

 

$

17,701

 

 

$

2,934

 

 

$

2,772,922

 

 

Competitive held-to-maturity securities include not-for-profit enterprises that provide public functions such as housing, higher education or healthcare, but do so in a competitive environment. It also includes project financings that can have relatively high enterprise risk, such as deals backed by revenues from sports or convention facilities or start-up transportation ventures.

Utilities and general obligation are public enterprises providing essential services with a monopoly or near-monopoly over the service area. This includes environmental utilities (water, sewer, solid waste), power utilities (electric distribution and generation, gas), and transportation utilities (airports, parking, toll roads, mass transit, ports).

All held-to-maturity securities were current and not past due at September 30, 2023 and at December 31, 2022.

Trading Securities

There were net unrealized losses on trading securities of $248 thousand and net unrealized gains of $33 thousand at September 30, 2023 and 2022, respectively. Net unrealized gains and losses are included in trading and

investment banking income on the Company’s Consolidated Statements of Income. Securities sold not yet purchased totaled $9.7 million and $3.5 million at September 30, 2023 and December 31, 2022, respectively, and are classified within the Other liabilities line of the Company’s Consolidated Balance Sheets.

Other Securities

The table below provides detailed information for Other securities at September 30, 2023 and December 31, 2022 (in thousands):

 

 

 

September 30, 2023

 

 

December 31, 2022

 

FRB and FHLB stock

 

$

102,672

 

 

$

41,472

 

Equity securities with readily determinable fair values

 

 

10,780

 

 

 

10,782

 

Equity securities without readily determinable fair values

 

 

359,803

 

 

 

297,504

 

Total

 

$

473,255

 

 

$

349,758

 

Investment in FRB stock is based on the capital structure of the investing bank, and investment in FHLB stock is mainly tied to the level of borrowings from the FHLB. These holdings are carried at cost. Equity securities with readily determinable fair values are generally traded on an exchange and market prices are readily available. Equity securities without readily determinable fair values include equity investments which are held by a subsidiary qualified as a Small Business Investment Company, as well as investments in low-income housing partnerships within the areas the Company serves. Unrealized gains or losses on equity securities with and without readily determinable fair values are recognized in the Investment securities gains, net line of the Company’s Consolidated Statements of Income.

Investment Securities Gains, Net

The table below presents the components of Investments securities gains (losses), net for the three and nine months ended September 30, 2023 and September 30, 2022 (in thousands):

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Investment securities gain (losses), net

 

 

 

 

 

 

 

 

 

 

 

 

Available-for-sale debt securities:

 

 

 

 

 

 

 

 

 

 

 

 

Gains realized on sales

 

$

154

 

 

$

—

 

 

$

154

 

 

$

—

 

Losses realized on sales

 

 

—

 

 

 

—

 

 

 

(2

)

 

 

—

 

Impairment of AFS security

 

 

—

 

 

 

—

 

 

 

(4,925

)

 

 

—

 

Equity securities with readily determinable fair values:

 

 

 

 

 

 

 

 

 

 

 

 

Fair value adjustments, net

 

 

(223

)

 

 

(1,441

)

 

 

(197

)

 

 

(8,570

)

Equity securities without readily determinable fair values:

 

 

 

 

 

 

 

 

 

 

 

 

Fair value adjustments, net

 

 

340

 

 

 

96

 

 

 

817

 

 

 

1,261

 

Sales

 

 

—

 

 

 

—

 

 

 

—

 

 

 

66,162

 

Total investment securities gains (losses), net

 

$

271

 

 

$

(1,345

)

 

$

(4,153

)

 

$

58,853

 

 

During June 2022, the Company sold the entirety of its Visa Inc. Class B common shares in a cash transaction which resulted in a pre-tax gain of $66.2 million. Prior to the sale, the Visa Inc. Class B shares had no carrying value on the Company’s Consolidated Balance Sheets as the Company had no historical cost basis in the shares.