Debt Securities Available for Sale and Debt Securities Held to Maturity

The following tables present the adjusted cost and approximate fair value of debt securities available for sale and debt securities held to maturity.



	June 30, 2020
			Gross Unrealized
	Amortized Cost		Gains		Losses		Fair Value
	(In Thousands)
Debt securities available for sale:
U.S. Treasury and other U.S. government agencies	$	2,176,754	$	56,764	$	15,780	$	2,217,738
Agency mortgage-backed securities	1,062,592		35,382		1,229		1,096,745
Agency collateralized mortgage obligations	2,391,399		59,210		614		2,449,995
States and political subdivisions	687		27		—		714
Total	$	5,631,432	$	151,383	$	17,623	$	5,765,192
Debt securities held to maturity:
U.S. Treasury and other U.S. government agencies	$	1,289,447	$	127,581	$	—	$	1,417,028
Collateralized mortgage obligations:
Agency	6,800,461		237,246		—		7,037,707
Non-agency	33,825		5,876		823		38,878
Asset-backed securities and other	48,903		1,321		5,465		44,759
States and political subdivisions (1)	535,818		15,574		11,466		539,926
Total	$	8,708,454	$	387,598	$	17,754	$	9,078,298


(1)	The Company recorded an allowance of $15 million, at June 30, 2020, related to state and political subdivisions, which is not included in the table above.



	December 31, 2019
			Gross Unrealized
	Amortized Cost		Gains		Losses		Fair Value
	(In Thousands)
Debt securities available for sale:
U.S. Treasury and other U.S. government agencies	$	3,145,331	$	16,888	$	34,694	$	3,127,525
Agency mortgage-backed securities	1,322,432		12,444		9,019		1,325,857
Agency collateralized mortgage obligations	2,783,003		7,744		9,622		2,781,125
States and political subdivisions	757		41		—		798
Total	$	7,251,523	$	37,117	$	53,335	$	7,235,305
Debt securities held to maturity:
U.S. Treasury and other U.S. government agencies	$	1,287,049	$	53,399	$	—	$	1,340,448
Collateralized mortgage obligations:
Agency	4,846,862		82,105		16,568		4,912,399
Non-agency	37,705		5,923		1,154		42,474
Asset-backed securities and other	52,355		1,266		2,017		51,604
States and political subdivisions	573,075		8,652		7,494		574,233
Total	$	6,797,046	$	151,345	$	27,233	$	6,921,158

The investments held within the states and political subdivision caption of debt securities held to maturity relate to private placement transactions underwritten as loans by the Company but that meet the definition of a security within ASC Topic 320, Investments – Debt Securities.

As noted in Note 1, Basis of Presentation, the Company adopted ASC 326 on January 1, 2020, which had an immaterial impact on the Company's available for sale debt securities and held to maturity debt securities.

The Company records its HTM debt securities at amortized cost when management has the positive intent and ability to hold them to maturity. Debt securities are classified as AFS when they might be sold before they mature. The Company records its AFS debt securities at fair value with unrealized holding gains and losses reported in other comprehensive income.

The Company measures expected credit losses on held to maturity debt securities on a collective basis by major security type. The estimate of expected credit losses considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. The majority of the Company's HTM debt securities portfolio consists of U.S. government entities and agencies which are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major credit rating agencies and inherently have minimal risk of nonpayment and therefore has applied a zero credit loss assumption for these securities.

Under the revised guidance of ASC 326, if the fair value of a security falls below the amortized cost basis, the security will be evaluated to determine if any of the decline in value is attributable to credit losses or other factors. In making this assessment, the Company considers the extent to which fair value is less than amortized cost, any changes to the rating of the security, and adverse conditions specially related to the security, among other factors. If it is determined that a credit loss exists then an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. If the credit subsequently improves, the allowance is reversed. When the Company intends to sell an impaired AFS debt security or it is more likely than not that the security will be required to be sold prior to recovering the amortized cost basis, the security's amortized cost basis is written down to fair value through income.

A debt security is placed on nonaccrual status at the time any principal or interest payments become 90 days delinquent. The Company has elected to not measure an allowance on its accrued interest receivable as a result of the timely reversal of interest receivable deemed uncollectible. Interest accrued but not received for a security placed on nonaccrual is reversed against interest income.

The following tables disclose the fair value and the gross unrealized losses of the Company’s available for sale debt securities that were in a loss position at June 30, 2020 and December 31, 2019, for which an allowance for credit losses has not been recorded at June 30, 2020. This information is aggregated by investment category and the length of time the individual securities have been in an unrealized loss position.



	June 30, 2020
	Securities in a loss position for less than 12 months				Securities in a loss position for 12 months or longer				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(In Thousands)
Debt securities available for sale:
U.S. Treasury and other U.S. government agencies	$	255,351	$	72	$	364,068	$	15,708	$	619,419	$	15,780
Agency mortgage-backed securities	14,155		74		75,365		1,155		89,520		1,229
Agency collateralized mortgage obligations	10,090		39		305,362		575		315,452		614
Total	$	279,596	$	185	$	744,795	$	17,438	$	1,024,391	$	17,623



	December 31, 2019
	Securities in a loss position for less than 12 months				Securities in a loss position for 12 months or longer				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(In Thousands)
Debt securities available for sale:
U.S. Treasury and other U.S. government agencies	$	59,496	$	208	$	819,360	$	34,486	$	878,856	$	34,694
Agency mortgage-backed securities	245,191		851		592,312		8,168		837,503		9,019
Agency collateralized mortgage obligations	880,485		4,768		579,679		4,854		1,460,164		9,622
Total	$	1,185,172	$	5,827	$	1,991,351	$	47,508	$	3,176,523	$	53,335

As indicated in the previous tables, at June 30, 2020, the Company held debt securities in unrealized loss positions. The Company has not recognized the unrealized losses into income for its securities because they are all backed by the U.S. government or government agencies and management does not intend to sell and it is likely that management will not be required to sell these securities before their anticipated recovery, and the decline in fair value is largely due to changes in interest rates and other market conditions. The fair value is expected to recover as the securities approach maturity.

The following table presents the activity in the allowance for debt securities held to maturity losses.



	Held to Maturity Debt Securities
	(In Thousands)
Three months ended June 30, 2020
Allowance for debt securities held to maturity losses:
Balance at beginning of period	$	1,892
Impact of adopting ASC 326	—
Provision for credit losses	13,125
Securities charged off	—
Recoveries	—
Balance at end of period	$	15,017

Six Months Ended June 30, 2020
Allowance for debt securities held to maturity losses:
Balance at beginning of period	$	—
Impact of adopting ASC 326	1,847
Provision for credit losses	13,170
Securities charged off	—
Recoveries	—
Balance at end of period	$	15,017

The Company regularly evaluates each held to maturity debt security for credit losses on a quarterly basis. The Company has not recorded a provision for credit loss related to its agency securities because they are all backed by the U.S. government or government agencies and have been deemed to have zero expected credit loss as of June 30, 2020. These securities are evaluated quarterly to determine if they still qualify as a zero credit loss security. The Company has non-agency securities that have unrealized losses at June 30, 2020. The Company considers such factors as the extent to which the fair value has been below cost and the financial condition of the issuer.

The Company monitors the credit quality of its HTM debt securities through credit ratings. The following table presents the amortized cost of HTM debt securities, as of June 30, 2020, aggregated by credit quality indicator.



	June 30, 2020
			Range of Ratings
	AAA		AA+ / A -		BBB+ / B-		CCC+ / C		D		NR		Total
	(In Thousands)
Debt securities held to maturity:
U.S. Treasury and other U.S. government agencies	$	1,289,447	$	—	$	—	$	—	$	—	$	—	$	1,289,447
Collateralized mortgage obligations:
Agency	6,800,461		—		—		—		—		—		6,800,461
Non-agency	66		9,201		11,576		5,932		2,968		4,082		33,825
Asset-backed securities and other	—		47,904		293		706		—		—		48,903
States and political subdivisions	—		332,314		203,504		—		—		—		535,818
	$	8,089,974	$	389,419	$	215,373	$	6,638	$	2,968	$	4,082	$	8,708,454

The contractual maturities of the securities portfolios are presented in the following table.



June 30, 2020	Amortized Cost		Fair Value
	(In Thousands)
Debt securities available for sale:
Maturing within one year	$	325,189	$	325,784
Maturing after one but within five years	1,393,467		1,446,864
Maturing after five but within ten years	20,904		21,824
Maturing after ten years	437,881		423,980
	2,177,441		2,218,452
Mortgage-backed securities and collateralized mortgage obligations	3,453,991		3,546,740
Total	$	5,631,432	$	5,765,192

Debt securities held to maturity:
Maturing within one year	$	25,500	$	25,497
Maturing after one but within five years	1,430,336		1,556,878
Maturing after five but within ten years	254,879		257,822
Maturing after ten years	163,453		161,516
	1,874,168		2,001,713
Collateralized mortgage obligations	6,834,286		7,076,585
Total	$	8,708,454	$	9,078,298

The gross realized gains and losses recognized on sales of debt securities available for sale are shown in the table below.



	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
	(In Thousands)
Gross gains	$	3,477	$	—	$	22,616	$	8,958
Gross losses	—		—		—		—
Net realized gains	$	3,477	$	—	$	22,616	$	8,958