SECURITIES

6 Months Ended

Jun. 30, 2021

Investments, Debt and Equity Securities [Abstract]

The amortized cost and fair value of AFS debt securities are presented in the table below. There was no ACL in the AFS portfolio at June 30, 2021 and December 31, 2020. Accrued interest receivable on AFS debt securities totaled $6.3 million and $6.2 million at June 30, 2021 and December 31, 2020, respectively, and is excluded from the estimate of credit losses and assessed separately in other assets in the Consolidated Balance Sheets. Accordingly, we have excluded accrued interest receivable from both the fair value and the amortized cost basis of AFS debt securities.

TABLE 3.1


(in millions)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Debt Securities AFS:
June 30, 2021

U.S. government agencies	$	165	$	2	$	—	$	167
U.S. government-sponsored entities	160		1		(1)		160
Residential mortgage-backed securities:
Agency mortgage-backed securities	1,187		29		—		1,216
Agency collateralized mortgage obligations	1,208		23		(5)		1,226

Commercial mortgage-backed securities	313		10		(1)		322
States of the U.S. and political subdivisions (municipals)	33		—		—		33
Other debt securities	2		—		—		2
Total debt securities AFS	$	3,068	$	65	$	(7)	$	3,126


(in millions)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Debt Securities AFS:
December 31, 2020
U.S. Treasury	$	600	$	—	$	—	$	600
U.S. government agencies	172		—		—		172
U.S. government-sponsored entities	160		1		—		161
Residential mortgage-backed securities:
Agency mortgage-backed securities	959		35		—		994
Agency collateralized mortgage obligations	1,094		31		(1)		1,124

Commercial mortgage-backed securities	361		17		—		378
States of the U.S. and political subdivisions (municipals)	32		—		—		32
Other debt securities	2		—		—		2
Total debt securities AFS	$	3,380	$	84	$	(1)	$	3,463

The amortized cost and fair value of HTM debt securities are presented in the table below. The ACL for the HTM municipal bond portfolio was $0.04 million at both June 30, 2021 and December 31, 2020. Accrued interest receivable on HTM debt securities totaled $12.2 million and $12.5 million at June 30, 2021 and December 31, 2020, respectively, and is excluded from the estimate of credit losses and assessed separately in other assets in the Consolidated Balance Sheets.

TABLE 3.2


(in millions)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Debt Securities HTM:
June 30, 2021
U.S. Treasury	$	1	$	—	$	—	$	1
U.S. government agencies	1		—		—		1
U.S. government-sponsored entities	40		—		—		40
Residential mortgage-backed securities:
Agency mortgage-backed securities	1,116		23		(1)		1,138
Agency collateralized mortgage obligations	626		12		(3)		635

Commercial mortgage-backed securities	299		6		(1)		304
States of the U.S. and political subdivisions (municipals)	1,052		46		—		1,098
Total debt securities HTM	$	3,135	$	87	$	(5)	$	3,217


(in millions)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Debt Securities HTM:
December 31, 2020
U.S. Treasury	$	1	$	—	$	—	$	1
U.S. government agencies	1		—		—		1
U.S. government-sponsored entities	120		1		—		121
Residential mortgage-backed securities:
Agency mortgage-backed securities	769		29		—		798
Agency collateralized mortgage obligations	562		17		—		579

Commercial mortgage-backed securities	307		10		—		317
States of the U.S. and political subdivisions (municipals)	1,108		48		—		1,156
Total debt securities HTM	$	2,868	$	105	$	—	$	2,973

There were no significant gross gains or gross losses realized on securities during the six months ended June 30, 2021 or 2020.

As of June 30, 2021, the amortized cost and fair value of debt securities, by contractual maturities, were as follows:

TABLE 3.3


	Available for Sale				Held to Maturity
(in millions)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	85	$	86	$	40	$	40
Due after one year but within five years	95		94		22		22
Due after five years but within ten years	110		111		128		131
Due after ten years	70		71		904		947
	360		362		1,094		1,140
Residential mortgage-backed securities:
Agency mortgage-backed securities	1,187		1,216		1,116		1,138
Agency collateralized mortgage obligations	1,208		1,226		626		635

Commercial mortgage-backed securities	313		322		299		304
Total debt securities	$	3,068	$	3,126	$	3,135	$	3,217

Actual maturities may differ from contractual terms because security issuers may have the right to call or prepay obligations with or without penalties. Periodic principal payments are received on residential mortgage-backed securities based on the payment patterns of the underlying collateral.

Following is information relating to securities pledged:

TABLE 3.4


(dollars in millions)	June 30, 2021			December 31, 2020
Securities pledged (carrying value):
To secure public deposits, trust deposits and for other purposes as required by law	$	5,338		$	5,384
As collateral for short-term borrowings	403			402
Securities pledged as a percent of total securities	91.7		%	91.4		%

At June 30, 2021, there were no holdings of securities of any one issuer, other than the U.S. government and its agencies, in any amount greater than 10% of stockholders’ equity.

Following are summaries of the fair values of AFS debt securities in an unrealized loss position for which an ACL has not been recorded, segregated by security type and length of continuous loss position:

TABLE 3.5


	Less than 12 Months					12 Months or More					Total
(dollars in millions)	#	Fair Value		Unrealized Losses		#	Fair Value		Unrealized Losses		#	Fair Value		Unrealized Losses
Debt Securities AFS
June 30, 2021

U.S. government agencies	1	$	—	$	—	11	$	22	$	—	12	$	22	$	—
U.S. government-sponsored entities	2	74		(1)		—	—		—		2	74		(1)
Residential mortgage-backed securities:
Agency mortgage-backed securities	3	152		—		—	—		—		3	152		—
Agency collateralized mortgage obligations	12	493		(5)		—	—		—		12	493		(5)

Commercial mortgage-backed securities	2	37		(1)		—	—		—		2	37		(1)
States of the U.S. and political subdivisions (municipals)	4	10		—		—	—		—		4	10		—
Other debt securities	—	—		—		1	2		—		1	2		—
Total	24	$	766	$	(7)	12	$	24	$	—	36	$	790	$	(7)
	Less than 12 Months					12 Months or More					Total
(dollars in millions)	#	Fair Value		Unrealized Losses		#	Fair Value		Unrealized Losses		#	Fair Value		Unrealized Losses
Debt Securities AFS
December 31, 2020
U.S. government agencies	1	$	13	$	—	16	$	69	$	—	17	$	82	$	—
U.S. government-sponsored entities	1	25		—		—	—		—		1	25		—
Residential mortgage-backed securities:

Agency collateralized mortgage obligations	5	130		(1)		—	—		—		5	130		(1)



Other debt securities	—	—		—		1	2		—		1	2		—
Total	7	$	168	$	(1)	17	$	71	$	—	24	$	239	$	(1)

We evaluated the AFS debt securities that were in an unrealized loss position at June 30, 2021. Based on the credit ratings and implied government guarantee for these securities, we concluded the loss position is temporary and caused by the movement of interest rates and does not reflect any expected credit losses. We do not intend to sell the AFS debt securities and it is not more likely than not that we will be required to sell the securities before the recovery of their amortized cost basis.

Credit Quality Indicators

We use credit ratings and the most recent financial information to help evaluate the credit quality of our credit-related AFS and HTM securities portfolios. Management reviews the credit profile of each issuer on a quarterly basis. Based on the nature of the issuers and current conditions, we have determined that securities backed by the UST, Fannie Mae, Freddie Mac, FHLB, Ginnie Mae, and the SBA have zero expected credit loss.

Our municipal bond portfolio, with a carrying amount of $1.1 billion as of June 30, 2021 is highly rated with an average rating of AA and 100% of the portfolio having an A or better rating. All the securities in the municipal portfolio are general obligation bonds. Geographically, municipal bonds support our primary footprint as 64% of the securities are from municipalities located in the primary states within which we conduct business. The average holding size of the securities in the municipal bond portfolio is $3.5 million. In addition to the strong stand-alone ratings, 61% of the municipal bonds have some formal credit enhancement (e.g., insurance) that strengthens the creditworthiness of the bond.

The ACL on the HTM municipal bond portfolio is calculated on each bond using:

•The bond’s underlying credit rating, time to maturity and exposure amount;

•Credit enhancements that improve the bond’s credit rating (e.g., insurance); and

•Moody’s U.S. Bond Defaults and Recoveries, 1970-2019 study.

By using these components, we derive the expected credit loss on the HTM general obligation bond portfolio. We further refine the expected credit loss by factoring in economic forecast data using our Commercial and Industrial Non-Manufacturing loan portfolio forecast adjustment as derived through our assessment of the loan portfolio as a proxy for our municipal bond portfolio.

For the year-to-date periods ending June 30, 2021 and 2020, we had no significant provision expense and no charge-offs or recoveries. The ACL on the HTM portfolio was $0.04 million as of both June 30, 2021 and December 31, 2020, respectively. No other securities portfolios had an ACL. At June 30, 2021 and December 31, 2020, there were no securities that were past due or on non-accrual.