Investment Securities |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investment Securities | Investment Securities Our investment securities portfolio consists of (i) an AFS securities portfolio and a HTM securities portfolio, both of which represent interest-earning investment securities and (ii) a non-marketable and other equity securities portfolio, which primarily represents investments managed as part of our funds management business, investments in qualified affordable housing projects, as well as public equity securities held as a result of equity warrant assets exercised. AFS Securities The major components of our AFS investment securities portfolio at December 31, 2022, and 2021 are as follows:
(1)Securities pledged as collateral for securities sold under agreements to repurchase totaled $530 million. For additional information, see Note 15—“Short-Term Borrowings and Long-Term Debt."
(1)Securities pledged as collateral for securities sold under agreements to repurchase totaled $61 million. For additional information, see Note 15—“Short-Term Borrowings and Long-Term Debt." The following table summarizes sale activity of AFS securities as recorded in the line item “Gains (losses) on investment securities, net," a component of noninterest income:
The following tables summarize our AFS securities in an unrealized loss position for which an ACL has not been recorded and summarized into categories of AFS securities that were in an unrealized loss position for less than 12 months, or 12 months or longer, as of December 31, 2022, and December 31, 2021:
(1)As of December 31, 2022, we identified a total of 810 investments that were in unrealized loss positions with 346 investments in an unrealized loss position for a period of time greater than 12 months. Based on our analysis of the securities in an unrealized loss position as of December 31, 2022, the decline in value is unrelated to credit loss and is related to changes in market interest rates since purchase, and therefore, changes in value for securities are included in other comprehensive income. Market valuations and credit loss analyses on assets in the AFS securities portfolio are reviewed and monitored on a quarterly basis. As of December 31, 2022, we do not intend to sell any of our securities in an unrealized loss position prior to recovery of our amortized cost basis, and it is more likely than not that we will not be required to sell any of our securities prior to recovery of our amortized cost basis. None of the investments in our AFS securities portfolio were past due as of December 31, 2022.
(1)As of December 31, 2021, we identified a total of 475 investments that were in unrealized loss positions, of which 4 investments are in an unrealized loss position for a period of time greater than 12 months. None of the investments in our AFS securities portfolio were past due as of December 31, 2021. The following table summarizes the fixed income securities, carried at fair value, classified as AFS as of December 31, 2022, by the remaining contractual principal maturities. For U.S. Treasury securities, U.S. agency debentures and foreign government debt securities, the expected maturity is the actual contractual maturity of the notes. Expected maturities for MBS may differ significantly from their contractual maturities because mortgage borrowers have the right to prepay outstanding loan obligations with or without penalties. MBS classified as AFS typically have original contractual maturities from 10 to 30 years, whereas expected average lives of these securities tend to be significantly shorter and vary based upon structure and prepayments in lower interest rate environments.
HTM Securities During the year ended December 31, 2021, we re-designated certain securities from the classification of AFS to HTM. The securities re-designated consisted of agency-issued CMO's, CMBS', MBS' and U.S. agency debentures with a total carrying value of $8.8 billion. At the time of re-designation the securities included $132 million of pretax net unrealized losses in other comprehensive income and are being amortized over the life of the securities in a manner consistent with the amortization of a premium or discount. Our decision to re-designate the securities was based on our ability and intent to hold these securities to maturity. Factors used in assessing the ability to hold these securities to maturity were future liquidity needs and sources of funding. HTM securities are carried on the balance sheet at amortized cost and the changes in the value of these securities, other than an ACL, are not reported on the financial statements. There were no re-designations during 2022. The components of our HTM investment securities portfolio at December 31, 2022, and December 31, 2021, are as follows:
(1) Consists of pools of Small Business Investment Company debentures issued and guaranteed by the SBA, an independent agency of the United States. (2) Refer to Note 2—“Summary of Significant Accounting Policies” for more information on our credit loss methodology.
(1) Consists of pools of Small Business Investment Company debentures issued and guaranteed by the SBA, an independent agency of the United States. (2) Refer to Note 2—“Summary of Significant Accounting Policies” for more information on our credit loss methodology. Allowance for Credit Losses for HTM Securities For the year ended December 31, 2022, HTM securities beginning ACL balance was $7 million, the reduction of credit losses was $1 million, and the ending ACL balance was $6 million. For the year ended December 31, 2021 HTM securities beginning ACL balance of less than $1 million, a provision for credit losses of $7 million and an ending ACL balance of $7 million. Credit Quality Indicators On a quarterly basis, management monitors the credit quality for HTM securities through the use of standard credit ratings. The following table summarizes our amortized cost of HTM securities aggregated by credit quality indicator at December 31, 2022, and December 31, 2021:
The following table summarizes the remaining contractual principal maturities on fixed income investment securities classified as HTM as of December 31, 2022. For U.S. agency debentures, the expected maturity is the actual contractual maturity of the notes. Expected remaining maturities for certain U.S. agency debentures may occur earlier than their contractual maturities because the note issuers have the right to call outstanding amounts ahead of their contractual maturity. Expected maturities for MBS may differ significantly from their contractual maturities because mortgage borrowers have the right to prepay outstanding loan obligations with or without penalties. MBS classified as HTM typically have original contractual maturities from 10 to 30, years whereas expected average lives of these securities tend to be significantly shorter and vary based upon structure and prepayments in lower interest rate environments; however, we expect to collect substantially all of the recorded investment on these securities.
Non-marketable and Other Equity Securities The major components of our non-marketable and other equity securities portfolio at December 31, 2022, and December 31, 2021, are as follows:
(1)The following table shows the amounts of venture capital and private equity fund investments held by the following consolidated funds and our ownership percentage of each fund at December 31, 2022, and December 31, 2021, (fair value accounting):
(2)The carrying value represents investments in 136 and 150 funds (primarily venture capital funds) at December 31, 2022, and December 31, 2021, respectively, where our ownership interest is typically less than 5% of the voting interests of each such fund and in which we do not have the ability to exercise significant influence over the partnerships operating activities and financial policies. We carry our unconsolidated venture capital and private equity fund investments at fair value based on the fund investments' net asset values per share as obtained from the general partners of the investments. For each fund investment, we adjust the net asset value per share for differences between our measurement date and the date of the fund investment’s net asset value by using the most recently available financial information from the investee general partner, for example September 30th for our December 31st consolidated financial statements, adjusted for any contributions paid, distributions received from the investment, and significant fund transactions or market events during the reporting period. (3)These investments include direct equity investments in private companies. The carrying value is based on the price at which the investment was acquired plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments. We consider a range of factors when adjusting the fair value of these investments, including, but not limited to, the term and nature of the investment, local market conditions, values for comparable securities, current and projected operating performance, exit strategies, financing transactions subsequent to the acquisition of the investment and a discount for certain investments that have lock-up restrictions or other features that indicate a discount to fair value is warranted. The following table shows the carrying amount of other investments without a readily determinable fair value at December 31, 2022, and the amounts recognized in earnings for the year ended December 31, 2022, and on a cumulative basis:
(4)Investments classified as other equity securities (fair value accounting) represent shares held in public companies as a result of exercising public equity warrant assets and direct equity investments in public companies held by our consolidated funds. Changes in equity securities measured at fair value are recognized through net income. (5)The following table shows the carrying value and our ownership percentage of each investment at December 31, 2022, and December 31, 2021 (equity method accounting):
(i)Our ownership includes direct ownership interest of 1.3 percent and indirect ownership interest of 3.8 percent through our investments in Strategic Investors Fund II, LP. (ii)Our ownership includes direct ownership interest of 11.5 percent in the fund and an indirect interest in the fund through our investment in Gold Hill Capital 2008, LLC of 4.0 percent. (6)The following table presents the balances of our investments in qualified affordable housing projects and related unfunded commitments included as a component of "other liabilities" on our consolidated balance sheets at December 31, 2022, and December 31, 2021:
The following table presents other information relating to our investments in qualified affordable housing projects for the years ended 2022, 2021 and 2020:
(i)All investments are amortized using the proportional amortization method, and amortization expense is included in the provision for income taxes. The following table presents the net gains and losses on non-marketable and other equity securities in 2022, 2021 and 2020 as recorded in the line item “Gains (losses) on investment securities, net," a component of noninterest income:
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