INVESTMENT SECURITIES

6 Months Ended

Jun. 30, 2023

INVESTMENT SECURITIES

INVESTMENT SECURITIES

NOTE D: INVESTMENT SECURITIES

The amortized cost and estimated fair value of investment securities as of June 30, 2023 and December 31, 2022 are as follows:

	June 30, 2023								December 31, 2022
			Gross		Gross						Gross		Gross
	Amortized		Unrealized		Unrealized		Fair		Amortized		Unrealized		Unrealized		Fair
(000’s omitted)	Cost		Gains		Losses		Value		Cost		Gains		Losses		Value
Available-for-Sale Portfolio:
U.S. Treasury and agency securities	$	2,529,014	$	0	$	339,169	$	2,189,845	$	3,660,546	$	0	$	417,009	$	3,243,537
Obligations of state and political subdivisions		529,922		577		38,536		491,963		549,118		506		45,327		504,297
Government agency mortgage-backed securities		422,521		29		57,044		365,506		444,689		58		60,114		384,633
Corporate debt securities		8,000		0		903		7,097		8,000		0		886		7,114
Government agency collateralized mortgage obligations		11,269		0		810		10,459		13,121		1		852		12,270
Total available-for-sale portfolio	$	3,500,726	$	606	$	436,462	$	3,064,870	$	4,675,474	$	565	$	524,188	$	4,151,851
Held-to-Maturity Portfolio:
U.S. Treasury and agency securities	$	1,094,267	$	0	$	40,454	$	1,053,813	$	1,079,695	$	0	$	44,900	$	1,034,795
Government agency mortgage-backed securities		9,753		0		122		9,631		0		0		0		0
Total held-to-maturity portfolio	$	1,104,020	$	0	$	40,576	$	1,063,444	$	1,079,695	$	0	$	44,900	$	1,034,795
Equity and Other Securities:
Equity securities, at fair value	$	251	$	118	$	0	$	369	$	251	$	168	$	0	$	419
Federal Home Loan Bank common stock		23,663		0		0		23,663		47,497		0		0		47,497
Federal Reserve Bank common stock		33,568		0		0		33,568		31,144		0		0		31,144
Other equity securities, at adjusted cost		4,659		750		0		5,409		3,532		750		0		4,282
Total equity and other securities	$	62,141	$	868	$	0	$	63,009	$	82,424	$	918	$	0	$	83,342

A summary of investment securities that have been in a continuous unrealized loss position is as follows:

As of June 30, 2023

	Less than 12 Months					12 Months or Longer					Total
				Gross					Gross					Gross
		Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
(000’s omitted)	#	Value		Losses		#	Value		Losses		#	Value		Losses
Available-for-Sale Portfolio:
U.S. Treasury and agency securities	0	$	0	$	0	71	$	2,189,845	$	339,169	71	$	2,189,845	$	339,169
Obligations of state and political subdivisions	296		159,626		4,042	326		234,244		34,494	622		393,870		38,536
Government agency mortgage-backed securities	206		37,877		1,762	575		325,263		55,282	781		363,140		57,044
Corporate debt securities	0		0		0	2		7,097		903	2		7,097		903
Government agency collateralized mortgage obligations	4		391		14	37		10,044		796	41		10,435		810
Total available-for-sale investment portfolio	506	$	197,894	$	5,818	1,011	$	2,766,493	$	430,644	1,517	$	2,964,387	$	436,462
Held-to-Maturity Portfolio:
U.S. Treasury and agency securities	23	$	1,053,813	$	40,454	0	$	0	$	0	23	$	1,053,813	$	40,454
Government agency mortgage-backed securities	6		9,631		122	0		0		0	6		9,631		122
Total held-to-maturity portfolio	29	$	1,063,444	$	40,576	0	$	0	$	0	29	$	1,063,444	$	40,576

As of December 31, 2022

	Less than 12 Months					12 Months or Longer					Total
				Gross					Gross					Gross
		Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
(000’s omitted)	#	Value		Losses		#	Value		Losses		#	Value		Losses
Available-for-Sale Portfolio:
U.S. Treasury and agency securities	41	$	1,384,075	$	132,511	61	$	1,859,462	$	284,498	102	$	3,243,537	$	417,009
Obligations of state and political subdivisions	582		370,524		35,488	76		47,923		9,839	658		418,447		45,327
Government agency mortgage-backed securities	497		190,727		19,508	274		189,919		40,606	771		380,646		60,114
Corporate debt securities	0		0		0	2		7,114		886	2		7,114		886
Government agency collateralized mortgage obligations	29		9,968		600	17		2,274		252	46		12,242		852
Total available-for-sale investment portfolio	1,149	$	1,955,294	$	188,107	430	$	2,106,692	$	336,081	1,579	$	4,061,986	$	524,188
Held-to-Maturity Portfolio:
U.S. Treasury and agency securities	23	$	1,034,795	$	44,900	0	$	0	$	0	23	$	1,034,795	$	44,900
Total held-to-maturity portfolio	23	$	1,034,795	$	44,900	0	$	0	$	0	23	$	1,034,795	$	44,900

The unrealized losses reported pertaining to available-for-sale securities issued by the U.S. government and its sponsored entities include treasuries, agencies, and mortgage-backed securities issued by Ginnie Mae, Fannie Mae, and Freddie Mac, which are currently rated AAA by Moody’s Investor Services, AA+ by Standard & Poor’s and are guaranteed by the U.S. government. The majority of the obligations of state and political subdivisions carry a credit rating of A or better. Additionally, a portion of the obligations of state and political subdivisions carry a secondary level of credit enhancement. The Company holds two corporate debt securities in an unrealized loss position and, based on an analysis done by the Company, the issuers of the securities show a low risk of default. Timely principal and interest payments continue to be made on the securities. The unrealized losses in the portfolios are primarily attributable to changes in interest rates. As such, management does not believe any individual unrealized loss as of June 30, 2023 represents credit losses and no unrealized losses have been recognized in the provision for credit losses. Accordingly, there is no allowance for credit losses on the Company’s available-for-sale investment portfolio as of June 30, 2023. Accrued interest receivable on available-for-sale debt securities, included in accrued interest and fees receivable on the consolidated statements of condition, totaled $12.7 million at June 30, 2023 and is excluded from the estimate of credit losses.

Securities classified as held-to-maturity are included under the CECL methodology. Calculation of expected credit loss under CECL is done on a collective (“pooled”) basis, with assets grouped when similar risk characteristics exist. The Company notes that at June 30, 2023 all securities in the held-to-maturity classification are U.S. Treasury securities and government agency mortgage-backed securities; therefore, they share the same risk characteristics and can be evaluated on a collective basis. The expected credit loss on these securities is evaluated based on historical credit losses of this security type and the expected possibility of default in the future, and these securities are guaranteed by the U.S. government. U.S. Treasury securities and government agency mortgage-backed securities often receive the highest credit rating by rating agencies and the Company has concluded that the possibility of default is considered remote. At June 30, 2023 the U.S. Treasury securities and government agency mortgage-backed securities held by the Company in the held-to-maturity category carry an AA+ rating from Standard & Poor’s, Aaa from Moody’s Investor Services, and AAA from Fitch. On August 1, 2023, Fitch downgraded the U.S. government’s long term rating from AAA to AA+. The credit rating downgrade does not impact the Company’s conclusion regarding the credit risk of U.S. government debt securities held in its investment portfolio. The Company concludes that the long history with no credit losses for these securities (adjusted for current conditions and reasonable and supportable forecasts) indicates an expectation that nonpayment of the amortized cost basis is zero. Management has concluded that the prepayment risk associated with these securities is insignificant and it is expected to recover the recorded investment. Accordingly, there is no allowance for credit losses on the Company’s held-to-maturity debt portfolio as of June 30, 2023. Accrued interest receivable on held-to-maturity debt securities, included in accrued interest and fees receivable on the consolidated statements of condition, totaled $4.7 million at June 30, 2023 and is excluded from the estimate of credit losses. The Company has the intent and ability to hold the securities to maturity.

The amortized cost and estimated fair value of debt securities at June 30, 2023, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date, including government agency mortgage-backed securities and government agency collateralized mortgage obligations, are shown separately.

	Held-to-Maturity				Available-for-Sale
	Amortized		Fair		Amortized		Fair
(000’s omitted)	Cost		Value		Cost		Value
Due in one year or less	$	0	$	0	$	170,995	$	170,364
Due after one through five years		0		0		1,013,648		909,908
Due after five years through ten years		546,275		529,303		1,100,527		972,563
Due after ten years		547,992		524,510		781,766		636,070
Subtotal		1,094,267		1,053,813		3,066,936		2,688,905
Government agency mortgage-backed securities		9,753		9,631		422,521		365,506
Government agency collateralized mortgage obligations		0		0		11,269		10,459
Total	$	1,104,020	$	1,063,444	$	3,500,726	$	3,064,870

Investment securities with a fair value of $3.45 billion and $2.18 billion at June 30, 2023 and December 31, 2022, respectively, were pledged to collateralize certain deposits, borrowings and potential future borrowings. Securities pledged to collateralize certain deposits and borrowings included $597.1 million and $466.9 million of U.S. Treasury securities that were pledged as collateral for securities sold under agreement to repurchase at June 30, 2023 and December 31, 2022, respectively. All securities sold under agreement to repurchase as of June 30, 2023 and December 31, 2022 have an overnight and continuous maturity.

During the first quarter of 2023, the Company sold $786.1 million in book value of available-for-sale U.S. Treasury and agency securities, recognizing $52.3 million of gross realized losses. The sales were completed in January and February 2023 as part of a strategic balance sheet repositioning and were unrelated to the negative developments in the banking industry that occurred in March 2023. The proceeds from these sales of $733.8 million were redeployed entirely towards paying off existing overnight borrowings.