Securities |
Securities Available for Sale Debt Securities. The following tables provide the amortized cost, fair values, and remaining maturities of AFS debt securities.
TABLE 57: RECONCILIATION OF AMORTIZED COST TO FAIR VALUE OF AVAILABLE FOR SALE DEBT SECURITIES | | | | | | | | | | | | | | | | DECEMBER 31, 2021 | (In Millions) | AMORTIZED COST | GROSS UNREALIZED GAINS | GROSS UNREALIZED LOSSES | FAIR VALUE | U.S. Government | $ | 2,406.2 | | $ | 29.3 | | $ | 9.4 | | $ | 2,426.1 | | Obligations of States and Political Subdivisions | 3,841.0 | | 73.7 | | 38.6 | | 3,876.1 | | Government Sponsored Agency | 18,092.1 | | 93.7 | | 110.2 | | 18,075.6 | | Non-U.S. Government | 383.4 | | 0.1 | | 9.5 | | 374.0 | | Corporate Debt | 2,319.8 | | 31.6 | | 9.7 | | 2,341.7 | | Covered Bonds | 502.6 | | 3.9 | | 0.9 | | 505.6 | | Sub-Sovereign, Supranational and Non-U.S. Agency Bonds | 3,052.4 | | 28.1 | | 35.4 | | 3,045.1 | | Other Asset-Backed | 5,962.0 | | 11.3 | | 31.7 | | 5,941.6 | | Commercial Mortgage-Backed | 1,389.0 | | 38.9 | | 3.2 | | 1,424.7 | | Total | $ | 37,948.5 | | $ | 310.6 | | $ | 248.6 | | $ | 38,010.5 | |
| | | | | | | | | | | | | | | | DECEMBER 31, 2020 | (In Millions) | AMORTIZED COST | GROSS UNREALIZED GAINS | GROSS UNREALIZED LOSSES | FAIR VALUE | U.S. Government | $ | 2,728.8 | | $ | 71.1 | | $ | — | | $ | 2,799.9 | | Obligations of States and Political Subdivisions | 2,927.8 | | 155.9 | | 0.1 | | 3,083.6 | | Government Sponsored Agency | 24,595.1 | | 388.5 | | 26.9 | | 24,956.7 | | Non-U.S. Government | 713.6 | | 1.1 | | 0.7 | | 714.0 | | Corporate Debt | 2,459.9 | | 79.8 | | 0.1 | | 2,539.6 | | Covered Bonds | 543.1 | | 10.0 | | — | | 553.1 | | Sub-Sovereign, Supranational and Non-U.S. Agency Bonds | 2,281.7 | | 64.7 | | 0.6 | | 2,345.8 | | Other Asset-Backed | 3,953.5 | | 46.8 | | 2.8 | | 3,997.5 | | Commercial Mortgage-Backed | 952.2 | | 79.7 | | 0.1 | | 1,031.8 | | Total | $ | 41,155.7 | | $ | 897.6 | | $ | 31.3 | | $ | 42,022.0 | |
TABLE 58: REMAINING MATURITY OF AVAILABLE FOR SALE DEBT SECURITIES | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | DECEMBER 31, 2021 | ONE YEAR OR LESS | ONE TO FIVE YEARS | FIVE TO TEN YEARS | OVER TEN YEARS | TOTAL | (In Millions) | Amortized Cost | Fair Value | Amortized Cost | Fair Value | Amortized Cost | Fair Value | Amortized Cost | Fair Value | Amortized Cost | Fair Value | U.S. Government | $ | — | | $ | — | | $ | 2,157.8 | | $ | 2,187.1 | | $ | 248.4 | | $ | 239.0 | | $ | — | | $ | — | | $ | 2,406.2 | | $ | 2,426.1 | | Obligations of States and Political Subdivisions | 22.8 | | 23.0 | | 448.3 | | 462.1 | | 3,239.7 | | 3,262.6 | | 130.2 | | 128.4 | | 3,841.0 | | 3,876.1 | | Government Sponsored Agency | 2,706.1 | | 2,713.2 | | 8,112.2 | | 8,121.1 | | 6,084.0 | | 6,053.4 | | 1,189.8 | | 1,187.9 | | 18,092.1 | | 18,075.6 | | Non-U.S. Government | 72.7 | | 72.7 | | 228.4 | | 223.1 | | 82.3 | | 78.2 | | — | | — | | 383.4 | | 374.0 | | Corporate Debt | 404.4 | | 408.0 | | 1,892.6 | | 1,911.6 | | 18.1 | | 17.5 | | 4.7 | | 4.6 | | 2,319.8 | | 2,341.7 | | Covered Bonds | 141.5 | | 142.1 | | 361.1 | | 363.5 | | — | | — | | — | | — | | 502.6 | | 505.6 | | Sub-Sovereign, Supranational and Non-U.S. Agency Bonds | 760.6 | | 765.7 | | 1,926.8 | | 1,926.1 | | 365.0 | | 353.3 | | — | | — | | 3,052.4 | | 3,045.1 | | Other Asset-Backed | 894.0 | | 896.8 | | 3,559.0 | | 3,541.4 | | 1,291.6 | | 1,286.3 | | 217.4 | | 217.1 | | 5,962.0 | | 5,941.6 | | Commercial Mortgage-Backed | 7.5 | | 7.4 | | 962.3 | | 982.1 | | 419.2 | | 435.2 | | — | | — | | 1,389.0 | | 1,424.7 | | Total | $ | 5,009.6 | | $ | 5,028.9 | | $ | 19,648.5 | | $ | 19,718.1 | | $ | 11,748.3 | | $ | 11,725.5 | | $ | 1,542.1 | | $ | 1,538.0 | | $ | 37,948.5 | | $ | 38,010.5 | |
Note: Mortgage-backed and asset-backed securities are included in the above table taking into account anticipated future prepayments. Available for Sale Debt Securities with Unrealized Losses. The following table provides information regarding AFS debt securities with no credit losses reported that had been in a continuous unrealized loss position for less than twelve months and for twelve months or longer as of December 31, 2021 and 2020.
TABLE 59: AVAILABLE FOR SALE DEBT SECURITIES IN UNREALIZED LOSS POSITION WITH NO CREDIT LOSSES REPORTED | | | | | | | | | | | | | | | | | | | | | AS OF DECEMBER 31, 2021 | LESS THAN 12 MONTHS | 12 MONTHS OR LONGER | TOTAL | (In Millions) | FAIR VALUE | UNREALIZED LOSSES | FAIR VALUE | UNREALIZED LOSSES | FAIR VALUE | UNREALIZED LOSSES | U.S. Government | $ | 239.0 | | $ | 9.4 | | $ | — | | $ | — | | $ | 239.0 | | $ | 9.4 | | Obligations of States and Political Subdivisions | 1,699.5 | | 37.4 | | 31.6 | | 1.2 | | 1,731.1 | | 38.6 | | Government Sponsored Agency | 8,207.3 | | 90.2 | | 1,821.4 | | 20.0 | | 10,028.7 | | 110.2 | | Non-U.S. Government | 230.0 | | 9.5 | | — | | — | | 230.0 | | 9.5 | | Corporate Debt | 693.7 | | 9.7 | | — | | — | | 693.7 | | 9.7 | | Covered Bonds | 92.1 | | 0.9 | | — | | — | | 92.1 | | 0.9 | | Sub-Sovereign, Supranational and Non-U.S. Agency Bonds | 1,116.8 | | 31.9 | | 172.3 | | 3.5 | | 1,289.1 | | 35.4 | | Other Asset-Backed | 3,815.5 | | 31.4 | | 11.7 | | 0.3 | | 3,827.2 | | 31.7 | | Commercial Mortgage-Backed | 566.8 | | 3.2 | | — | | — | | 566.8 | | 3.2 | | Total | $ | 16,660.7 | | $ | 223.6 | | $ | 2,037.0 | | $ | 25.0 | | $ | 18,697.7 | | $ | 248.6 | |
| | | | | | | | | | | | | | | | | | | | | AS OF DECEMBER 31, 2020 | LESS THAN 12 MONTHS | 12 MONTHS OR LONGER | TOTAL | (In Millions) | FAIR VALUE | UNREALIZED LOSSES | FAIR VALUE | UNREALIZED LOSSES | FAIR VALUE | UNREALIZED LOSSES | Obligations of States and Political Subdivisions | $ | 52.3 | | $ | 0.1 | | $ | — | | $ | — | | $ | 52.3 | | $ | 0.1 | | Government Sponsored Agency | 2,402.3 | | 13.6 | | 2,528.7 | | 13.3 | | 4,931.0 | | 26.9 | | Non-U.S. Government | 90.5 | | 0.7 | | — | | — | | 90.5 | | 0.7 | | Corporate Debt | 66.6 | | 0.1 | | — | | — | | 66.6 | | 0.1 | | Sub-Sovereign, Supranational and Non-U.S. Agency Bonds | 162.8 | | 0.5 | | 49.9 | | 0.1 | | 212.7 | | 0.6 | | Other Asset-Backed | 176.8 | | 0.2 | | 792.3 | | 2.6 | | 969.1 | | 2.8 | | Commercial Mortgage-Backed | 44.4 | | 0.1 | | — | | — | | 44.4 | | 0.1 | | Total | $ | 2,995.7 | | $ | 15.3 | | $ | 3,370.9 | | $ | 16.0 | | $ | 6,366.6 | | $ | 31.3 | |
As of December 31, 2021, 1,233 AFS debt securities with a combined fair value of $18.7 billion were in an unrealized loss position, with their unrealized losses totaling $248.6 million. As of December 31, 2021, unrealized losses in AFS debt securities of $110.2 million related to government sponsored agency, which are primarily attributable to changes in market interest rates and credit spreads since their purchase. As of December 31, 2020, 412 AFS debt securities with a combined fair value of $6.4 billion were in an unrealized loss position, with their unrealized losses totaling $31.3 million. As of December 31, 2020, unrealized losses in AFS debt securities of $26.9 million related to government-sponsored agency, which are primarily attributable to changes in market interest rates and credit spreads since their purchase. 14% and 16% of the AFS corporate debt securities portfolio were backed by guarantees provided by U.S. and non-U.S. governmental entities as of December 31, 2021 and 2020, respectively. The remaining unrealized losses on Northern Trust’s AFS debt securities portfolio as of December 31, 2021 and 2020 are attributable to changes in overall market interest rates or credit spreads. As of December 31, 2021, Northern Trust did not intend to sell any AFS debt securities in an unrealized loss position and it was more likely than not that Northern Trust would not be required to sell any such investment before the recovery of its amortized cost basis, which may be maturity. AFS debt securities impairment reviews are conducted quarterly to identify and evaluate securities that have indications of possible credit losses. A determination as to whether a security’s decline in market value is related to credit impairment takes into consideration numerous factors and the relative significance of any single factor can vary by security. Factors Northern Trust considers in determining whether impairment is credit-related include, but are not limited to, the severity of the impairment; the cause of the impairment and the financial condition and near-term prospects of the issuer; activity in the market of the issuer, which may indicate adverse credit conditions; Northern Trust’s intent regarding the sale of the security as of the balance sheet date; and the likelihood that Northern Trust will not be required to sell the security for a period of time sufficient to allow for the recovery of the security’s amortized cost basis. For each security meeting the requirements of Northern Trust’s internal screening process, an extensive review is conducted to determine if a credit loss has occurred. There was no provision for corporate debt AFS securities for the year ended December 31, 2021 and 2020, and no allowance for credit losses for corporate debt AFS securities as of December 31, 2021 and 2020.
Held to Maturity Debt Securities. The following tables provide the amortized cost, fair values and remaining maturities of held to maturity (HTM) debt securities.
TABLE 60: RECONCILIATION OF AMORTIZED COST TO FAIR VALUES OF HELD TO MATURITY DEBT SECURITIES | | | | | | | | | | | | | | | | DECEMBER 31, 2021 | (In Millions) | AMORTIZED COST | GROSS UNREALIZED GAINS | GROSS UNREALIZED LOSSES | FAIR VALUE | U.S. Government | $ | 47.0 | | $ | — | | $ | — | | $ | 47.0 | | Obligations of States and Political Subdivisions | 0.8 | | — | | — | | 0.8 | | Government Sponsored Agency | 5,927.6 | | 1.1 | | 106.1 | | 5,822.6 | | Non-U.S. Government | 5,773.3 | | 3.9 | | 9.8 | | 5,767.4 | | Corporate Debt | 901.8 | | 2.5 | | 6.5 | | 897.8 | | Covered Bonds | 2,942.4 | | 8.3 | | 9.6 | | 2,941.1 | | Certificates of Deposit | 674.7 | | — | | — | | 674.7 | | Sub-Sovereign, Supranational and Non-U.S. Agency Bonds | 6,098.0 | | 14.3 | | 80.0 | | 6,032.3 | | Other Asset-Backed | 682.6 | | 1.0 | | — | | 683.6 | | Other | 516.3 | | 3.4 | | 71.6 | | 448.1 | | Total | $ | 23,564.5 | | $ | 34.5 | | $ | 283.6 | | $ | 23,315.4 | |
| | | | | | | | | | | | | | | | DECEMBER 31, 2020 | (In Millions) | AMORTIZED COST | GROSS UNREALIZED GAINS | GROSS UNREALIZED LOSSES | FAIR VALUE | U.S. Government | $ | 90.0 | | $ | — | | $ | — | | $ | 90.0 | | Obligations of States and Political Subdivisions | 2.1 | | 0.1 | | — | | 2.2 | | Government Sponsored Agency | 3.0 | | 0.3 | | — | | 3.3 | | Non-U.S. Government | 8,336.6 | | 7.3 | | 0.2 | | 8,343.7 | | Corporate Debt | 588.0 | | 6.5 | | 0.1 | | 594.4 | | Covered Bonds | 3,184.6 | | 24.6 | | 0.3 | | 3,208.9 | | Certificates of Deposit | 807.2 | | — | | — | | 807.2 | | Sub-Sovereign, Supranational and Non-U.S. Agency Bonds | 3,648.0 | | 43.5 | | 0.9 | | 3,690.6 | | Other Asset-Backed | 677.0 | | 0.9 | | — | | 677.9 | | Other | 454.6 | | 1.1 | | 76.5 | | 379.2 | | Total | $ | 17,791.1 | | $ | 84.3 | | $ | 78.0 | | $ | 17,797.4 | |
As of December 31, 2021, the $23.6 billion HTM debt securities portfolio had an unrealized loss of $106.1 million, $80 million and $71.6 million related to government sponsored agency, sub-sovereign, supranational and non-U.S. agency bonds, and other residential mortgage-backed securities, respectively, which are primarily attributable to changes in overall market interest rates and credit spreads since their purchase. As of December 31, 2020, the $17.8 billion HTM debt securities portfolio had an unrealized loss of $76.5 million related to other residential mortgage-backed securities, which are primarily attributable to changes in overall market interest rates and credit spreads since their purchase. TABLE 61: REMAINING MATURITY OF HELD TO MATURITY DEBT SECURITIES | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | DECEMBER 31, 2021 | ONE YEAR OR LESS | ONE TO FIVE YEARS | FIVE TO TEN YEARS | OVER TEN YEARS | TOTAL | (In Millions) | Amortized Cost | Fair Value | Amortized Cost | Fair Value | Amortized Cost | Fair Value | Amortized Cost | Fair Value | Amortized Cost | Fair Value | U.S. Government | $ | 47.0 | | $ | 47.0 | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | 47.0 | | $ | 47.0 | | Obligations of States and Political Subdivisions | 0.8 | | 0.8 | | — | | — | | — | | — | | — | | — | | 0.8 | | 0.8 | | Government Sponsored Agency | 1,161.5 | | 1,143.6 | | 2,101.4 | | 2,064.6 | | 1,848.8 | | 1,815.0 | | 815.9 | | 799.4 | | 5,927.6 | | 5,822.6 | | Non-U.S. Government | 4,502.7 | | 4,502.6 | | 1,109.2 | | 1,103.9 | | 161.4 | | 160.9 | | — | | — | | 5,773.3 | | 5,767.4 | | Corporate Debt | 177.4 | | 178.8 | | 708.3 | | 703.4 | | 16.1 | | 15.6 | | — | | — | | 901.8 | | 897.8 | | Covered Bonds | 650.1 | | 651.3 | | 1,684.0 | | 1,688.0 | | 608.3 | | 601.8 | | — | | — | | 2,942.4 | | 2,941.1 | | Certificates of Deposit | 674.7 | | 674.7 | | — | | — | | — | | — | | — | | — | | 674.7 | | 674.7 | | Sub-Sovereign, Supranational and Non-U.S. Agency Bonds | 1,086.9 | | 1,091.5 | | 4,507.7 | | 4,451.4 | | 503.4 | | 489.4 | | — | | — | | 6,098.0 | | 6,032.3 | | Other Asset-Backed | 190.4 | | 190.6 | | 398.0 | | 398.7 | | 94.2 | | 94.3 | | — | | — | | 682.6 | | 683.6 | | Other | 106.0 | | 104.1 | | 232.0 | | 221.8 | | 60.1 | | 58.4 | | 118.2 | | 63.8 | | 516.3 | | 448.1 | | Total | $ | 8,597.5 | | $ | 8,585.0 | | $ | 10,740.6 | | $ | 10,631.8 | | $ | 3,292.3 | | $ | 3,235.4 | | $ | 934.1 | | $ | 863.2 | | $ | 23,564.5 | | $ | 23,315.4 | |
Note: Mortgage-backed and asset-backed securities are included in the above table taking into account anticipated future prepayments.
HTM debt securities consist of securities that management intends to, and Northern Trust has the ability to, hold until maturity. During the year ended December 31, 2021, $6.9 billion of government sponsored agency securities were transferred from AFS to HTM for capital management purposes, all of which were transferred in the second quarter of 2021. Upon transfer of a debt security from the AFS to HTM classification, the amortized cost is reset to fair value. Any net unrealized gain or loss at the date of transfer will remain in AOCI and be amortized into net interest income over the remaining life of the securities using the effective interest method. The amortization of amounts retained in AOCI will offset the effect on interest income of the amortization of the premium or discount resulting from transferring the securities at fair value. During the year ended December 31, 2020, $301.5 million of securities reflected in U.S. government were transferred from AFS to HTM, all of which were transferred in the second quarter of 2020.
Credit Quality Indicators. The following table provides the amortized cost of HTM debt securities by credit rating.
TABLE 62: AMORTIZED COST OF HELD TO MATURITY DEBT SECURITIES BY CREDIT RATING | | | | | | | | | | | | | | | | | | | | | | AS OF DECEMBER 31, 2021 | (In Millions) | AAA | AA | A | BBB | NOT RATED | TOTAL | U.S. Government | $ | 47.0 | | $ | — | | $ | — | | $ | — | | $ | — | | $ | 47.0 | | Obligations of States and Political Subdivisions | — | | 0.8 | | — | | — | | — | | 0.8 | | Government Sponsored Agency | 5,927.6 | | — | | — | | — | | — | | 5,927.6 | | Non-U.S. Government | 398.0 | | 942.6 | | 4,088.8 | | 343.9 | | — | | 5,773.3 | | Corporate Debt | 2.3 | | 386.7 | | 512.8 | | — | | — | | 901.8 | | Covered Bonds | 2,942.4 | | — | | — | | — | | — | | 2,942.4 | | Certificates of Deposit | — | | — | | — | | — | | 674.7 | | 674.7 | | Sub-Sovereign, Supranational and Non-U.S. Agency Bonds | 4,207.6 | | 1,858.0 | | 31.3 | | 1.1 | | — | | 6,098.0 | | Other Asset-Backed | 682.6 | | — | | — | | — | | — | | 682.6 | | Other | — | | — | | — | | — | | 516.3 | | 516.3 | | Total | $ | 14,207.5 | | $ | 3,188.1 | | $ | 4,632.9 | | $ | 345.0 | | $ | 1,191.0 | | $ | 23,564.5 | | Percent of Total | 60 | % | 14 | % | 20 | % | 1 | % | 5 | % | 100 | % |
| | | | | | | | | | | | | | | | | | | | | | AS OF DECEMBER 31, 2020 | (In Millions) | AAA | AA | A | BBB | NOT RATED | TOTAL | U.S. Government | $ | 90.0 | | $ | — | | $ | — | | $ | — | | $ | — | | $ | 90.0 | | Obligations of States and Political Subdivisions | — | | 1.0 | | — | | 1.1 | | — | | 2.1 | | Government Sponsored Agency | 3.0 | | — | | — | | — | | — | | 3.0 | | Non-U.S. Government | 319.8 | | 1,337.4 | | 6,630.6 | | 48.8 | | — | | 8,336.6 | | Corporate Debt | 3.8 | | 279.1 | | 305.1 | | — | | — | | 588.0 | | Covered Bonds | 3,184.6 | | — | | — | | — | | — | | 3,184.6 | | Certificates of Deposit | — | | — | | — | | — | | 807.2 | | 807.2 | | Sub-Sovereign, Supranational and Non-U.S. Agency Bonds | 2,590.9 | | 1,057.1 | | — | | — | | — | | 3,648.0 | | Other Asset-Backed | 677.0 | | — | | — | | — | | — | | 677.0 | | Other | — | | — | | — | | — | | 454.6 | | 454.6 | | Total | $ | 6,869.1 | | $ | 2,674.6 | | $ | 6,935.7 | | $ | 49.9 | | $ | 1,261.8 | | $ | 17,791.1 | | Percent of Total | 39 | % | 15 | % | 39 | % | — | % | 7 | % | 100 | % |
Credit quality indicators are metrics that provide information regarding the relative credit risk of debt securities. Northern Trust maintains a high quality debt securities portfolio, with 94% and 93% of the HTM portfolio comprised of securities rated A or higher as of December 31, 2021 and 2020, respectively. The remaining HTM debt securities portfolio was comprised of 1% rated BBB at December 31, 2021, and 5% and 7% not rated by Moody’s, S&P Global, or Fitch Ratings at December 31, 2021 and 2020, respectively. Securities not explicitly rated were grouped where possible under the credit rating of the issuer of the security.
Investment Security Gains and Losses. Proceeds of $116.7 million, $879.9 million, and $1.2 billion in 2021, 2020, and 2019, respectively, from the sale of debt securities resulted in the following gains and losses shown in the following table.
TABLE 63: INVESTMENT SECURITY GAINS AND LOSSES | | | | | | | | | | | | | DECEMBER 31, | (In Millions) | 2021 | 2020 | 2019 | Gross Realized Debt Securities Gains | $ | 1.4 | | $ | 3.4 | | $ | 2.4 | | Gross Realized Debt Securities Losses | (1.7) | | (3.8) | | (3.5) | | Changes in Other-Than-Temporary Impairment Losses(1) | — | | — | | (0.3) | | Net Investment Security Losses | $ | (0.3) | | $ | (0.4) | | $ | (1.4) | |
(1) Other-than-temporary impairment losses relate to certain Community Reinvestment Act (CRA) eligible HTM debt securities
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