Investment in securities

12 Months Ended

Dec. 31, 2022

Investments, Debt and Equity Securities [Abstract]

Investment in securities

Note 5: Investment in securities

Amortized Cost, Carrying Amount and Fair Value

On the consolidated balance sheets, equity securities and AFS investments are carried at fair value and HTM investments are carried at amortized cost.

	December 31, 2022				December 31, 2021
	Amortized  cost	Gross  unrealized  gains	Gross  unrealized  losses	Fair value	Amortized  cost	Gross  unrealized  gains	Gross  unrealized  losses	Fair value
Equity securities
Mutual funds	724	—	(488)	236	724	—	(502)	222
Total equity securities	724	—	(488)	236	724	—	(502)	222
Available-for-sale
US government and federal agencies	1,919,285	14	(206,523)	1,712,776	3,163,964	30,945	(51,285)	3,143,624
Non-US governments debt securities	262,892	—	(11,429)	251,463	291,119	—	(1,526)	289,593
Asset-backed securities - Student loans	5,640	—	(14)	5,626	13,290	—	(116)	13,174
Residential mortgage-backed securities	21,261	—	(2,261)	19,000	27,191	218	(70)	27,339
Total available-for-sale	2,209,078	14	(220,227)	1,988,865	3,495,564	31,163	(52,997)	3,473,730
Held-to-maturity¹
US government and federal agencies	3,738,080	—	(540,572)	3,197,508	2,763,344	57,497	(34,729)	2,786,112
Total held-to-maturity	3,738,080	—	(540,572)	3,197,508	2,763,344	57,497	(34,729)	2,786,112

¹ For the years ended December 31, 2022, 2021 and 2020, impairments recognized in other comprehensive income for HTM investments were nil.

Investments with Unrealized Loss Positions

The Bank does not believe that the AFS debt securities that were in an unrealized loss position as of December 31, 2022, comprising 163 securities representing 99.8% of the AFS portfolios' carrying value (December 31, 2021: 67 and 73.6%), represent credit losses. Total gross unrealized AFS losses were 11.1% of the fair value of the affected securities (December 31, 2021: 2.1%).

The Bank’s HTM debt securities are comprised of US government and federal agencies securities and have a zero credit loss assumption under the CECL model. HTM debt securities that were in an unrealized loss position as of December 31, 2022, were comprised of 220 securities representing 100.0% of the HTM portfolios’ carrying value (December 31, 2021: 57 and 59.1%). Total gross unrealized HTM losses were 16.9% of the fair value of affected securities (December 31, 2021: 2.2%).

Management does not intend to sell and it is likely that management will not be required to sell the securities prior to the anticipated recovery of the cost of these securities. Unrealized losses were attributable primarily to changes in market interest rates, relative to when the investment securities were purchased, and not due to a decrease in the credit quality of the investment securities. The issuers continue to make timely principal and interest payments on the securities. The following describes the processes for identifying credit impairment in security types with the most significant unrealized losses as shown in the preceding tables.

Management believes that all the US government and federal agencies securities do not have any credit losses, given the explicit and implicit guarantees provided by the US federal government.

Management believes that all the Non-US governments debt securities do not have any credit losses, given the explicit guarantee provided by the issuing government.

Investments in Asset-backed securities - Student loans are composed primarily of securities collateralized by Federal Family Education Loan Program loans (“FFELP loans”). FFELP loans benefit from a US federal government guarantee of at least 97% of defaulted principal and accrued interest, with additional credit support provided in the form of over-collateralization, subordination and excess spread, which collectively total in excess of 100%. Accordingly, the vast majority of FFELP loan-backed securities are not exposed to traditional consumer credit risk.

Investments in Residential mortgage-backed securities relate to 13 securities (December 31, 2021: 4) which are rated AAA and possess similar significant credit enhancement as described above. No credit losses were recognized on these securities as the weighted average credit support and the weighted average loan-to-value ratios range from 16% - 49% and 47% - 56%, respectively. Current credit support is significantly greater than any delinquencies experienced on the underlying mortgages.

In the following tables, debt securities with unrealized losses that are not deemed to be credit impaired and for which an allowance for credit losses has not been recorded are categorized as being in a loss position for "less than 12 months" or "12 months or more" based on the point in time that the fair value most recently declined below the amortized cost basis.

	Less than 12 months		12 months or more
December 31, 2022	Fair value	Gross  unrealized  losses	Fair value	Gross unrealized losses	Total  fair value	Total gross unrealized losses
Available-for-sale securities with unrealized losses
US government and federal agencies	713,462	(68,016)	995,154	(138,507)	1,708,616	(206,523)
Non-US governments debt securities	—	—	251,463	(11,429)	251,463	(11,429)
Asset-backed securities - Student loans	—	—	5,626	(14)	5,626	(14)
Residential mortgage-backed securities	14,474	(1,618)	4,526	(643)	19,000	(2,261)
Total available-for-sale securities with unrealized losses	727,936	(69,634)	1,256,769	(150,593)	1,984,705	(220,227)
Held-to-maturity securities with unrealized losses
US government and federal agencies	1,462,005	(142,228)	1,735,504	(398,344)	3,197,509	(540,572)
	Less than 12 months		12 months or more
December 31, 2021	Fair value	Gross  unrealized  losses	Fair value	Gross unrealized losses	Total fair value	Total gross unrealized losses
Available-for-sale securities with unrealized losses
US government and federal agencies	2,144,105	(47,214)	102,428	(4,071)	2,246,533	(51,285)
Non-US governments debt securities	267,201	(1,125)	22,392	(401)	289,593	(1,526)
Asset-backed securities - Student loans	—	—	13,174	(116)	13,174	(116)
Residential mortgage-backed securities	8,051	(70)	—	—	8,051	(70)
Total available-for-sale securities with unrealized losses	2,419,357	(48,409)	137,994	(4,588)	2,557,351	(52,997)
Held-to-maturity securities with unrealized losses
US government and federal agencies	1,568,315	(33,554)	29,713	(1,175)	1,598,028	(34,729)

Investment Maturities

The following table presents the remaining term to contractual maturity of the Bank’s securities. The actual maturities may differ as certain securities offer prepayment options to the borrowers.

	Remaining term to maturity
December 31, 2022	Within  3 months	3 to 12  months	1 to 5  years	5 to 10  years	Over 10 years	No specific or single  maturity	Carrying  amount
Available-for-sale
US government and federal agencies	—	145,471	532,645	160,823	—	873,837	1,712,776
Non-US governments debt securities	—	22,392	229,071	—	—	—	251,463
Asset-backed securities - Student loans	—	—	—	—	—	5,626	5,626
Residential mortgage-backed securities	—	—	—	—	—	19,000	19,000
Total available-for-sale	—	167,863	761,716	160,823	—	898,463	1,988,865
Held-to-maturity
US government and federal agencies	—	—	—	—	—	3,738,080	3,738,080

Pledged Investments

The Bank pledges certain US government and federal agencies investment securities to further secure the Bank's issued customer deposit products. The secured party does not have the right to sell or repledge the collateral.

	December 31, 2022		December 31, 2021
Pledged Investments	Amortized  cost	Fair  value	Amortized  cost	Fair  value
Available-for-sale	—	—	807	842
Held-to-maturity	32,938	24,991	33,102	31,958

Sale Proceeds and Realized Gains and Losses of AFS Securities

	Year ended
	December 31, 2022				December 31, 2021				December 31, 2020
	Sale proceeds	Gross realized gains	Gross realized (losses)	Transfers of HTM1	Sale proceeds	Gross realized  gains	Gross realized (losses)	Transfers of HTM	Sale proceeds	Gross realized  gains	Gross realized (losses)	Transfers of HTM
US government and federal agencies	—	—	—	998,157	189,417	1,563	(1,802)	—	349,699	1,171	(55)	—
Non-US governments debt securities	—	—	—	—	—	—	—	—	3,266	104	—	—
Asset-backed securities - Student loans	7,631	—	(19)	—	—	—	—	—	—	—	—	—
Total	7,631	—	(19)	998,157	189,417	1,563	(1,802)	—	352,965	1,275	(55)	—

1During the year ended December 31, 2022, certain investments were transferred out of the AFS categorization and into HTM. The transfers were recorded at the fair value of the securities on the date of transfer. The related net unrealized losses of $99.1 million that were recorded in AOCIL will be accreted into net income over the remaining life of the transferred investments using the effective interest rate method.

Taxability of Interest Income

None of the investments' interest income have received a specific preferential income tax treatment in any of the jurisdictions in which the Bank owns investments.