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SECURITIES
 9 Months Ended
Sep. 30, 2022
Investments, Debt and Equity Securities [Abstract]  
SECURITIES
NOTE 3 - SECURITIES
The following table presents the major components of securities at amortized cost and fair value:
September 30, 2022December 31, 2021
(in millions)Amortized CostGross Unrealized GainsGross Unrealized LossesFair ValueAmortized CostGross Unrealized GainsGross Unrealized LossesFair Value
U.S. Treasury and other$3,557 $— ($207)$3,350 $11 $— $— $11 
State and political subdivisions3 — — 3 2 — — 2 
Mortgage-backed securities:
Federal agencies and U.S. government sponsored entities21,019 — (2,335)18,684 24,607 210 (375)24,442 
Other/non-agency281 — (32)249 397 9 (1)405 
Total mortgage-backed securities21,300 — (2,367)18,933 25,004 219 (376)24,847 
Collateralized loan obligations1,248 — (56)1,192 1,208 — (1)1,207 
Total debt securities available for sale, at fair value$26,108 $— ($2,630)$23,478 $26,225 $219 ($377)$26,067 
Mortgage-backed securities:
Federal agencies and U.S. government sponsored entities$9,457 $4 ($657)$8,804 $1,505 $52 $— $1,557 
Total mortgage-backed securities9,457 4 (657)8,804 1,505 52 — 1,557 
Asset-backed securities614 — (45)569 737 2 (7)732 
Total debt securities held to maturity$10,071 $4 ($702)$9,373 $2,242 $54 ($7)$2,289 
Equity securities, at cost$1,113 $— $— $1,113 $624 $— $— $624 
Equity securities, at fair value151 — — 151 109 — — 109 
Accrued interest receivable on debt securities totaled $91 million and $56 million as of September 30, 2022 and December 31, 2021, respectively, and is included in other assets in the Consolidated Balance Sheets.
The following table presents the amortized cost and fair value of debt securities by contractual maturity as of September 30, 2022. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without incurring penalties.
Distribution of Maturities
(in millions)1 Year or LessAfter 1 Year through 5 YearsAfter 5 Years through 10 YearsAfter 10 YearsTotal
Amortized cost:
U.S. Treasury and other$10 $1,983 $1,564 $— $3,557 
State and political subdivisions1 — — 2 3 
Mortgage-backed securities:
Federal agencies and U.S. government sponsored entities3 939 2,954 17,123 21,019 
Other/non-agency— — — 281 281 
Collateralized loan obligations— — 24 1,224 1,248 
Total debt securities available for sale14 2,922 4,542 18,630 26,108 
Mortgage-backed securities:
Federal agencies and U.S. government sponsored entities— — — 9,457 9,457 
Asset-backed securities— 614 — — 614 
Total debt securities held to maturity— 614 — 9,457 10,071 
Total amortized cost of debt securities$14 $3,536 $4,542 $28,087 $36,179 
Fair value:
U.S. Treasury and other$10 $1,871 $1,469 $— $3,350 
State and political subdivisions1 — — 2 3 
Mortgage-backed securities:
Federal agencies and U.S. government sponsored entities2 890 2,713 15,079 18,684 
Other/non-agency— — — 249 249 
Collateralized loan obligations— — 23 1,169 1,192 
Total debt securities available for sale13 2,761 4,205 16,499 23,478 
Mortgage-backed securities:
Federal agencies and U.S. government sponsored entities— — — 8,804 8,804 
Asset-backed securities— 569 — — 569 
Total debt securities held to maturity— 569 — 8,804 9,373 
Total fair value of debt securities$13 $3,330 $4,205 $25,303 $32,851 
Taxable interest income from investment securities as presented in the Consolidated Statements of Operations was $243 million and $116 million for the three months ended September 30, 2022 and 2021, respectively, and $582 million and $368 million for the nine months ended September 30, 2022 and 2021, respectively.
The following table presents realized gains and losses on sale of securities:
Three Months Ended September 30,Nine Months Ended September 30,
(in millions)2022202120222021
Gains$— $3 $9 $9 
Losses— — (4)— 
Securities gains, net$— $3 $5 $9 
The following table presents the amortized cost and fair value of debt securities pledged:
September 30, 2022December 31, 2021
(in millions)Amortized CostFair ValueAmortized CostFair Value
Pledged against derivatives, to qualify for fiduciary powers, and to secure public and other deposits as required by law$3,910 $3,457 $4,816 $4,782 
Pledged as collateral for FHLB borrowing capacity244 214 325 333 
Pledged against repurchase agreements— — 1 1 
The Company regularly enters into security repurchase agreements with unrelated counterparties, which involve the transfer of a security from one party to another, and a subsequent transfer of substantially the same security back to the original party. These repurchase agreements are typically short-term in nature and are accounted for as secured borrowed funds in the Company’s Consolidated Balance Sheets. The Company recognized no offsetting of short-term receivables or payables as of September 30, 2022 or December 31, 2021. The Company offsets certain derivative assets and derivative liabilities in the Consolidated Balance Sheets. For further information see Note 10.
Securitizations of mortgage loans retained in the investment portfolio were $59 million and $99 million for the three and nine months ended September 30, 2022. Securitizations of mortgage loans retained in the investment portfolio were $60 million and $223 million for the three and nine months ended September 30, 2021, respectively. These securitizations include a substantive guarantee by a third party. The guarantors were FNMA and FHLMC in 2022 and 2021, and also included GNMA in 2021. The debt securities received from the guarantors are classified as AFS.
Impairment
The Company evaluated its existing HTM portfolio as of September 30, 2022 and concluded that in excess of 94% of HTM securities met the zero expected credit loss criteria and, therefore, no ACL was recognized. Lifetime expected credit losses on the remainder of the HTM portfolio were determined to be insignificant based on the modeling of the Company’s credit loss position in the securities. The Company monitors the credit exposure through the use of credit quality indicators. For these securities, the Company uses external credit ratings or an internally derived credit rating when an external rating is not available. All securities were determined to be investment grade at September 30, 2022.
The following tables present AFS debt securities with fair values below their respective carrying values, separated by the duration the securities have been in a continuous unrealized loss position:
September 30, 2022
Less than 12 Months12 Months or LongerTotal
(in millions)Fair ValueGross Unrealized LossesFair ValueGross Unrealized LossesFair ValueGross Unrealized Losses
U.S. Treasury and other$3,350 ($207)$— $— $3,350 ($207)
Mortgage-backed securities:
Federal agencies and U.S. government sponsored entities15,913 (1,687)2,756 (648)18,669 (2,335)
Other/non-agency248 (32)— — 248 (32)
Total mortgage-backed securities16,161 (1,719)2,756 (648)18,917 (2,367)
Collateralized loan obligations1,183 (55)9 (1)1,192 (56)
Total$20,694 ($1,981)$2,765 ($649)$23,459 ($2,630)
December 31, 2021
Less than 12 Months12 Months or LongerTotal
(in millions)Fair ValueGross Unrealized LossesFair ValueGross Unrealized LossesFair ValueGross Unrealized Losses
Mortgage-backed securities:
Federal agencies and U.S. government sponsored entities$14,131 ($320)$1,236 ($55)$15,367 ($375)
Other/non-agency123 (1)— — 123 (1)
Total mortgage-backed securities14,254 (321)1,236 (55)15,490 (376)
Collateralized loan obligations736 (1)— — 736 (1)
Total$14,990 ($322)$1,236 ($55)$16,226 ($377)
Citizens does not currently have the intent to sell these debt securities, and it is not more likely than not that the Company will be required to sell these debt securities prior to recovery of their amortized cost bases. Citizens has determined that credit losses are not expected to be incurred on the U.S. Treasury securities, agency MBS, non-agency MBS, and CLOs identified with unrealized losses as of September 30, 2022. The unrealized losses on these debt securities reflect non-credit-related factors driven by changes in interest rates. Therefore, the Company has determined that these debt securities are not impaired.