Investment Securities

3 Months Ended

Mar. 31, 2023

Investment securities consisted of the following at March 31, 2023 and December 31, 2022.


(In thousands)	March 31, 2023		December 31, 2022
Available for sale debt securities	$	11,228,616	$	12,238,316
Trading debt securities	41,584		43,523
Equity securities:
Readily determinable fair value	6,083		6,210
No readily determinable fair value	6,445		6,094
Other:
Federal Reserve Bank stock	34,887		34,795
Federal Home Loan Bank stock	70,112		10,678
Equity method investments	—		1,434
Private equity investments	163,418		178,127
Total investment securities (1)	$	11,551,145	$	12,519,177

(1)Accrued interest receivable totaled $32.7 million and $38.8 million at March 31, 2023 and December 31, 2022, respectively, and was included within other assets on the consolidated balance sheets.

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 three months ended March 31, 2023, 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, equity method investments, and investments in portfolio concerns held by the Company's private equity subsidiary. 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 asset size of the borrowing bank and the level of borrowings from the FHLB. These holdings are carried at cost. Additionally, the Company's equity method investments are carried at cost, adjusted to reflect the Company's portion of income, loss, or dividends of the investee. These adjustments are included in non-interest income on the Company's consolidated statements of income. The Company's private equity investments 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 March 31, 2023 is shown below. The investment portfolio includes agency mortgage-backed securities, which are guaranteed by agencies such as FHLMC, FNMA, and Government National Mortgage Association (GNMA), 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.


(In thousands)	Amortized Cost		Fair Value
U.S. government and federal agency obligations:
Within 1 year	$	482,979	$	474,435
After 1 but within 5 years	391,902		378,408
After 5 but within 10 years	173,874		167,380

Total U.S. government and federal agency obligations	1,048,755		1,020,223
Government-sponsored enterprise obligations:


After 5 but within 10 years	4,955		4,631
After 10 years	50,734		39,783
Total government-sponsored enterprise obligations	55,689		44,414
State and municipal obligations:
Within 1 year	98,381		97,510
After 1 but within 5 years	465,196		442,933
After 5 but within 10 years	887,757		771,946
After 10 years	163,836		141,425
Total state and municipal obligations	1,615,170		1,453,814
Mortgage and asset-backed securities:
Agency mortgage-backed securities	4,975,242		4,271,563
Non-agency mortgage-backed securities	1,403,543		1,207,969
Asset-backed securities	2,918,160		2,763,578
Total mortgage and asset-backed securities	9,296,945		8,243,110
Other debt securities:
Within 1 year	14,040		13,572
After 1 but within 5 years	246,688		230,527
After 5 but within 10 years	245,003		209,285
After 10 years	16,260		13,671
Total other debt securities	521,991		467,055
Total available for sale debt securities	$	12,538,550	$	11,228,616

Investments in U.S. government and federal agency obligations include U.S. Treasury inflation-protected securities, which totaled $402.3 million, at fair value, at March 31, 2023. Interest earned on these securities increases with inflation and decreases with deflation, as measured by the non-seasonally adjusted Consumer Price Index (CPI-U). At maturity, the principal paid is the greater of an inflation-adjusted principal or the original principal.

Allowance for credit losses on available for sale debt securities

Securities for which fair value is less than amortized cost are reviewed for impairment. 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, or 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. Certain securities are analyzed using a projected cash flow model, discounted to present value, and compared to the current amortized cost bases of the securities. The model uses input 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. Securities not analyzed using the cash flow model are analyzed by reviewing risk ratings, credit support agreements, and industry knowledge to project future cash flows and any possible credit impairment.

At March 31, 2023, the fair value of securities on this watch list was $676.0 million compared to $1.3 billion at December 31, 2022. The majority of the securities included on the Company's watch list in the current quarter were experiencing unrealized loss positions due to the significant increase in interest rates and were analyzed outside of the cash flow model. At March 31, 2023, the securities on the Company's watch list that were not deemed to be solely related to increasing interest rates were securities backed by government-guaranteed student loans and are expected to perform as contractually required. As of March 31, 2023, the Company did not identify any securities for which a credit loss exists, and for the three months ended March 31, 2023 and 2022, the Company did not recognize a credit loss expense on any available for sale debt securities.

The table below summarizes debt securities available for sale in an unrealized loss position, aggregated by length of loss period, for which an allowance for credit losses has not been recorded at March 31, 2023 and December 31, 2022. Unrealized losses on these available for sale securities have not been recognized into income because after review, the securities were deemed not to be impaired. The unrealized losses on these securities are primarily attributable to changes in interest rates and current market conditions. At March 31, 2023, the Company does not intend to sell the securities, nor is it anticipated that it would be required to sell any of these securities at a loss.


	Less than 12 months				12 months or longer				Total
(In thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
March 31, 2023
U.S. government and federal agency obligations	$	532,588	$	9,565	$	386,394	$	20,444	$	918,982	$	30,009
Government-sponsored enterprise obligations	4,631		324		39,783		10,951		44,414		11,275
State and municipal obligations	188,055		2,025		1,200,901		159,549		1,388,956		161,574
Mortgage and asset-backed securities:
Agency mortgage-backed securities	159,424		4,610		4,091,658		699,252		4,251,082		703,862
Non-agency mortgage-backed securities	648		12		1,199,354		195,665		1,200,002		195,677
Asset-backed securities	131,679		2,523		2,631,899		152,059		2,763,578		154,582
Total mortgage and asset-backed securities	291,751		7,145		7,922,911		1,046,976		8,214,662		1,054,121
Other debt securities	7,843		201		459,212		54,735		467,055		54,936
Total	$	1,024,868	$	19,260	$	10,009,201	$	1,292,655	$	11,034,069	$	1,311,915
December 31, 2022
U.S. government and federal agency obligations	$	605,840	$	17,490	$	380,573	$	25,940	$	986,413	$	43,430
Government-sponsored enterprise obligations	25,068		4,650		18,040		7,971		43,108		12,621
State and municipal obligations	814,799		26,708		875,329		171,385		1,690,128		198,093
Mortgage and asset-backed securities:
Agency mortgage-backed securities	1,323,938		125,330		2,966,851		654,327		4,290,789		779,657
Non-agency mortgage-backed securities	135,984		16,736		1,069,222		195,218		1,205,206		211,954
Asset-backed securities	1,331,055		50,056		2,006,188		140,424		3,337,243		190,480
Total mortgage and asset-backed securities	2,790,977		192,122		6,042,261		989,969		8,833,238		1,182,091
Other debt securities	166,040		9,690		308,818		54,707		474,858		64,397
Total	$	4,402,724	$	250,660	$	7,625,021	$	1,249,972	$	12,027,745	$	1,500,632

The entire available for sale debt portfolio included $11.0 billion of securities that were in a loss position at March 31, 2023, compared to $12.0 billion at December 31, 2022. The total amount of unrealized loss on these securities was $1.3 billion at March 31, 2023, a decrease of $188.7 million compared to the unrealized loss at December 31, 2022. Securities with significant unrealized losses are discussed in the "Allowance for credit losses on available for sale debt securities" section above.

For debt securities classified as available for sale, the following table shows the amortized cost, fair value, and allowance for credit losses of securities available for sale at March 31, 2023 and December 31, 2022, and the corresponding amounts of gross unrealized gains and losses (pre-tax) in AOCI, by security type.


(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Fair Value
March 31, 2023
U.S. government and federal agency obligations	$	1,048,755	$	1,477	$	(30,009)	$	—	$	1,020,223
Government-sponsored enterprise obligations	55,689		—		(11,275)		—		44,414
State and municipal obligations	1,615,170		218		(161,574)		—		1,453,814
Mortgage and asset-backed securities:
Agency mortgage-backed securities	4,975,242		183		(703,862)		—		4,271,563
Non-agency mortgage-backed securities	1,403,543		103		(195,677)		—		1,207,969
Asset-backed securities	2,918,160		—		(154,582)		—		2,763,578
Total mortgage and asset-backed securities	9,296,945		286		(1,054,121)		—		8,243,110
Other debt securities	521,991		—		(54,936)		—		467,055
Total	$	12,538,550	$	1,981	$	(1,311,915)	$	—	$	11,228,616
December 31, 2022
U.S. government and federal agency obligations	$	1,078,807	$	29	$	(43,430)	$	—	$	1,035,406
Government-sponsored enterprise obligations	55,729		—		(12,621)		—		43,108
State and municipal obligations	1,965,028		174		(198,093)		—		1,767,109
Mortgage and asset-backed securities:
Agency mortgage-backed securities	5,087,893		191		(779,657)		—		4,308,427
Non-agency mortgage-backed securities	1,423,469		92		(211,954)		—		1,211,607
Asset-backed securities	3,588,025		256		(190,480)		—		3,397,801
Total mortgage and asset-backed securities	10,099,387		539		(1,182,091)		—		8,917,835
Other debt securities	539,255		—		(64,397)		—		474,858
Total	$	13,738,206	$	742	$	(1,500,632)	$	—	$	12,238,316

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 Three Months Ended March 31
(In thousands)	2023		2022
Proceeds from sales of securities:
Available for sale debt securities	$	812,176	$	—

Other investments	28,259		1,745
Total proceeds	$	840,435	$	1,745

Investment securities gains (losses), net:
Available for sale debt securities:


Losses realized on sales	$	(3,088)	$	—

Equity securities:



Fair value adjustments, net	(127)		(287)
Other:
Gains realized on sales	658		—

Fair value adjustments, net	2,251		7,450
Total investment securities gains (losses), net	$	(306)	$	7,163

Net losses on investment securities for the three months ended March 31, 2023 were mainly comprised of losses of $3.1 million on sales of available for sale securities, and net losses in fair value of $127 thousand on equity investments, offset by net gains in private equity securities due to sales and fair value adjustments of $658 thousand and $2.3 million, respectively.

At March 31, 2023, securities totaling $8.1 billion in fair value were pledged to secure public fund deposits, securities sold under agreements to repurchase, trust funds, and borrowings at the FRB and FHLB, compared to $4.7 billion at December 31, 2022. Securities pledged under agreements pursuant to which the collateral may be sold or re-pledged by the secured parties approximated $211.5 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 the U.S. Treasury and various government-sponsored enterprises such as FNMA, FHLB and FHLMC, no investment in a single issuer exceeded 10% of stockholders’ equity.