Investment Securities

12 Months Ended

Dec. 31, 2019

Investments, Debt and Equity Securities [Abstract]

Investment securities, at fair value, consisted of the following at December 31, 2019 and 2018:



(In thousands)	2019		2018
Available for sale debt securities	$	8,571,626	$	8,538,041
Trading debt securities	28,161		27,059
Equity securities:
Readily determinable fair value	2,929		2,585
No readily determinable fair value	1,280		1,824
Other:
Federal Reserve Bank stock	33,770		33,498
Federal Home Loan Bank stock	10,000		10,000
Private equity investments	94,122		85,659
Total investment securities	$	8,741,888	$	8,698,666

The Company has elected to measure equity securities with no readily determinable fair value 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. This portfolio includes the Company's holdings of Visa Class B shares, which have a carrying value of zero, as there have not been observable price changes in orderly transactions for identical or similar investments of the same issuer. During the year-ended December 31, 2019, the Company did not record any impairment or other adjustments to the carrying amount of its portfolio of equity securities with no readily determinable fair value.

Other investment securities 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 December 31, 2019 is shown in the following table. The weighted average yield for each range of maturities was calculated using the yield on each security within that range weighted by the amortized cost of each security at December 31, 2019. Yields on tax exempt securities have not been adjusted for tax exempt status. The investment portfolio includes agency mortgage-backed securities, which are guaranteed by agencies such as FHLMC, FNMA, GNMA and FDIC, in addition to non-agency mortgage-backed securities, which have no guarantee but are collateralized by residential and commercial 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.



(Dollars in thousands)	Amortized Cost		Fair Value		Weighted Average Yield
U.S. government and federal agency obligations:
Within 1 year	$	57,234	$	57,192	(.01	)*%
After 1 but within 5 years	518,035		533,805		2.17	*
After 5 but within 10 years	252,592		260,779		.59	*
Total U.S. government and federal agency obligations	827,861		851,776		1.54	*
Government-sponsored enterprise obligations:
Within 1 year	81,616		81,830		1.99
After 10 years	57,118		57,447		2.65
Total government-sponsored enterprise obligations	138,734		139,277		2.26
State and municipal obligations:
Within 1 year	51,230		51,540		2.55
After 1 but within 5 years	740,283		763,396		2.42
After 5 but within 10 years	377,009		395,014		2.56
After 10 years	57,010		57,977		2.92
Total state and municipal obligations	1,225,532		1,267,927		2.49
Mortgage and asset-backed securities:
Agency mortgage-backed securities	3,893,247		3,937,964		2.87
Non-agency mortgage-backed securities	796,451		809,782		2.98
Asset-backed securities	1,228,151		1,233,489		2.61
Total mortgage and asset-backed securities	5,917,849		5,981,235		2.83
Other debt securities:
Within 1 year	51,998		52,180
After 1 but within 5 years	218,950		222,770
After 5 but within 10 years	54,607		56,461
Total other debt securities	325,555		331,411
Total available for sale debt securities	$	8,435,531	$	8,571,626

* Rate does not reflect inflation adjustment on inflation-protected securities

Investments in U.S. government and federal agency obligations include U.S. Treasury inflation-protected securities, which totaled $461.8 million, at fair value, at December 31, 2019. Interest paid on these securities increases with inflation and decreases with deflation, as measured by the Consumer Price Index. At maturity, the principal paid is the greater of an inflation-adjusted principal or the original principal. Included in state and municipal obligations are $9.9 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.

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
December 31, 2019
U.S. government and federal agency obligations	$	827,861	$	23,957	$	(42	)	$	851,776
Government-sponsored enterprise obligations	138,734		730		(187		)	139,277
State and municipal obligations	1,225,532		42,427		(32		)	1,267,927
Mortgage and asset-backed securities:
Agency mortgage-backed securities	3,893,247		50,890		(6,173		)	3,937,964
Non-agency mortgage-backed securities	796,451		14,036		(705		)	809,782
Asset-backed securities	1,228,151		11,056		(5,718		)	1,233,489
Total mortgage and asset-backed securities	5,917,849		75,982		(12,596		)	5,981,235
Other debt securities	325,555		5,863		(7		)	331,411
Total	$	8,435,531	$	148,959	$	(12,864	)	$	8,571,626
December 31, 2018
U.S. government and federal agency obligations	$	914,486	$	4,545	$	(11,379	)	$	907,652
Government-sponsored enterprise obligations	199,470		55		(3,747		)	195,778
State and municipal obligations	1,322,785		10,284		(5,030		)	1,328,039
Mortgage and asset-backed securities:
Agency mortgage-backed securities	3,253,433		9,820		(48,268		)	3,214,985
Non-agency mortgage-backed securities	1,053,854		6,641		(12,779		)	1,047,716
Asset-backed securities	1,518,976		3,849		(11,211		)	1,511,614
Total mortgage and asset-backed securities	5,826,263		20,310		(72,258		)	5,774,315
Other debt securities	339,595		72		(7,410		)	332,257
Total	$	8,602,599	$	35,266	$	(99,824	)	$	8,538,041

The Company’s impairment policy requires a review of all securities for which fair value is less than amortized cost. Special emphasis is placed on securities whose credit rating has fallen below Baa3 (Moody's) or BBB- (Standard & Poor's), whose fair values have fallen more than 20% below purchase price for an extended period of time, or those which have been identified based on management’s judgment. These securities are placed on a watch list and cash flow analyses are prepared on an individual security basis. Inputs to these models include factors such as cash flow projections, contractual payments required, expected delinquency rates, credit support from other tranches, prepayment speeds, collateral loss severity rates (including loan to values), and various other information related to the underlying collateral (including current delinquencies). 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 December 31, 2019, the fair value of securities on this watch list was $51.6 million compared to $57.7 million at December 31, 2018.

As of December 31, 2019, the Company had recorded other-than-temporary impairment (OTTI) on certain non-agency mortgage-backed securities with a current par value of $17.5 million. These securities, which are part of the watch list mentioned above, had an aggregate fair value of $13.1 million at December 31, 2019. The cumulative credit-related portion of the impairment on these securities, which was recorded in earnings, totaled $13.3 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 December 31, 2019 included the following:



Significant Inputs	Range
Prepayment CPR	0%	-	25%
Projected cumulative default	9%	-	52%
Credit support	0%	-	20%
Loss severity	8%	-	63%

The following table presents a rollforward of the cumulative OTTI credit losses recognized in earnings on all available for sale debt securities.



(In thousands)	2019			2018			2017
Cumulative OTTI credit losses at January 1	$	14,092		$	14,199		$	14,080
Credit losses on debt securities for which impairment was not previously recognized	48			58			111
Credit losses on debt securities for which impairment was previously recognized	85			10			274
Increase in expected cash flows that are recognized over remaining life of security	(950		)	(175		)	(266		)
Cumulative OTTI credit losses at December 31	$	13,275		$	14,092		$	14,199

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
December 31, 2019
U.S. government and federal agency obligations	$	31,787	$	21	$	25,405	$	21	$	57,192	$	42
Government-sponsored enterprise obligations	6,155		187		—		—		6,155		187
State and municipal obligations	6,700		31		1,554		1		8,254		32
Mortgage and asset-backed securities:
Agency mortgage-backed securities	652,352		5,306		147,653		867		800,005		6,173
Non-agency mortgage-backed securities	102,931		254		189,747		451		292,678		705
Asset-backed securities	330,876		3,610		152,461		2,108		483,337		5,718
Total mortgage and asset-backed securities	1,086,159		9,170		489,861		3,426		1,576,020		12,596
Other debt securities	5,496		4		997		3		6,493		7
Total	$	1,136,297	$	9,413	$	517,817	$	3,451	$	1,654,114	$	12,864
December 31, 2018
U.S. government and federal agency obligations	$	317,699	$	6,515	$	116,728	$	4,864	$	434,427	$	11,379
Government-sponsored enterprise obligations	—		—		188,846		3,747		188,846		3,747
State and municipal obligations	157,838		704		257,051		4,326		414,889		5,030
Mortgage and asset-backed securities:
Agency mortgage-backed securities	330,933		1,502		1,927,268		46,766		2,258,201		48,268
Non-agency mortgage-backed securities	207,506		1,085		657,685		11,694		865,191		12,779
Asset-backed securities	147,997		728		813,427		10,483		961,424		11,211
Total mortgage and asset-backed securities	686,436		3,315		3,398,380		68,943		4,084,816		72,258
Other debt securities	51,836		564		260,682		6,846		312,518		7,410
Total	$	1,213,809	$	11,098	$	4,221,687	$	88,726	$	5,435,496	$	99,824

The available for sale debt portfolio included $1.7 billion of securities that were in a loss position at December 31, 2019, compared to $5.4 billion at December 31, 2018. The total amount of unrealized loss on these securities was $12.9 million at December 31, 2019, a decrease of $87.0 million compared to the unrealized loss at December 31, 2018. This decrease in losses was mainly due to a declining interest rate environment.

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



	For the Year Ended December 31
(In thousands)	2019			2018			2017
Proceeds from sales of securities:
Available for sale debt securities	$	402,103		$	667,227		$	779,793
Equity securities	3,856			41,637			10,953
Other	7,244			—			1,634
Total proceeds	$	413,203		$	708,864		$	792,380

Investment securities gains (losses), net:
Available for sale debt securities:
Losses realized on called bonds	$	—		$	—		$	(254	)
Gains realized on sales	2,354			448			592
Losses realized on sales	(2,568		)	(10,101		)	(10,287		)
Other-than-temporary impairment recognized on debt securities	(133		)	(68		)	(385		)
Equity securities:
Gains realized on donations of securities	—			—			31,074
Gains realized on sales	3,262			1,759			10,653
Losses realized on sales	—			(8,917		)	(10		)
Fair value adjustments, net	344			2,542			—
Other:
Gains realized on sales	1,094			—			381
Losses realized on sales	—			—			(880		)
Fair value adjustments, net	(727		)	13,849			(5,833		)
Total investment securities gains (losses), net	$	3,626		$	(488	)	$	25,051

Investment securities with a fair value of $4.3 billion were pledged at both December 31, 2019 and 2018 to secure public deposits, securities sold under repurchase agreements, trust funds, and borrowings at the Federal Reserve Bank. Securities pledged under agreements pursuant to which the collateral may be sold or re-pledged by the secured parties approximated $204.9 million, while the remaining securities were pledged under agreements pursuant to which the secured parties may not sell or re-pledge the collateral. Except for obligations of various government-sponsored enterprises such as FNMA, FHLB and FHLMC, no investment in a single issuer exceeds 10% of stockholders’ equity.