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v3.22.2.2

SECURITIES | 9 Months Ended
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Sep. 30, 2022
Investments, Debt and Equity Securities [Abstract] |
SECURITIES | NOTE 3 - SECURITIES The following table presents the major components of securities at amortized cost and fair value:
| September 30, 2022 |  | December 31, 2021
(in millions) | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value |  | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value
U.S. Treasury and other | $3,557 |  | $— |  | ($207) |  | $3,350 |  |  | $11 |  | $— |  | $— |  | $11 |
State and political subdivisions | 3 |  | — |  | — |  | 3 |  |  | 2 |  | — |  | — |  | 2 |
Mortgage-backed securities: |  |  |  |  |  |  |  |  |
Federal agencies and U.S. government sponsored entities | 21,019 |  | — |  | (2,335) |  | 18,684 |  |  | 24,607 |  | 210 |  | (375) |  | 24,442 |
Other/non-agency | 281 |  | — |  | (32) |  | 249 |  |  | 397 |  | 9 |  | (1) |  | 405 |
Total mortgage-backed securities | 21,300 |  | — |  | (2,367) |  | 18,933 |  |  | 25,004 |  | 219 |  | (376) |  | 24,847 |
Collateralized loan obligations | 1,248 |  | — |  | (56) |  | 1,192 |  |  | 1,208 |  | — |  | (1) |  | 1,207 |
Total debt securities available for sale, at fair value | $26,108 |  | $— |  | ($2,630) |  | $23,478 |  |  | $26,225 |  | $219 |  | ($377) |  | $26,067 |
Mortgage-backed securities: |  |  |  |  |  |  |  |  |
Federal agencies and U.S. government sponsored entities | $9,457 |  | $4 |  | ($657) |  | $8,804 |  |  | $1,505 |  | $52 |  | $— |  | $1,557 |
Total mortgage-backed securities | 9,457 |  | 4 |  | (657) |  | 8,804 |  |  | 1,505 |  | 52 |  | — |  | 1,557 |
Asset-backed securities | 614 |  | — |  | (45) |  | 569 |  |  | 737 |  | 2 |  | (7) |  | 732 |
Total debt securities held to maturity | $10,071 |  | $4 |  | ($702) |  | $9,373 |  |  | $2,242 |  | $54 |  | ($7) |  | $2,289 |
Equity securities, at cost | $1,113 |  | $— |  | $— |  | $1,113 |  |  | $624 |  | $— |  | $— |  | $624 |
Equity securities, at fair value | 151 |  | — |  | — |  | 151 |  |  | 109 |  | — |  | — |  | 109 |
Accrued interest receivable on debt securities totaled $91 million and $56 million as of September 30, 2022 and December 31, 2021, respectively, and is included in other assets in the Consolidated Balance Sheets. The following table presents the amortized cost and fair value of debt securities by contractual maturity as of September 30, 2022. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without incurring penalties.
| Distribution of Maturities
(in millions) | 1 Year or Less | After 1 Year through 5 Years | After 5 Years through 10 Years | After 10 Years | Total
Amortized cost: |  |  |  |  |
U.S. Treasury and other | $10 |  | $1,983 |  | $1,564 |  | $— |  | $3,557 |
State and political subdivisions | 1 |  | — |  | — |  | 2 |  | 3 |
Mortgage-backed securities: |  |  |  |  |
Federal agencies and U.S. government sponsored entities | 3 |  | 939 |  | 2,954 |  | 17,123 |  | 21,019 |
Other/non-agency | — |  | — |  | — |  | 281 |  | 281 |
Collateralized loan obligations | — |  | — |  | 24 |  | 1,224 |  | 1,248 |
Total debt securities available for sale | 14 |  | 2,922 |  | 4,542 |  | 18,630 |  | 26,108 |
Mortgage-backed securities: |  |  |  |  |
Federal agencies and U.S. government sponsored entities | — |  | — |  | — |  | 9,457 |  | 9,457 |
Asset-backed securities | — |  | 614 |  | — |  | — |  | 614 |
Total debt securities held to maturity | — |  | 614 |  | — |  | 9,457 |  | 10,071 |
Total amortized cost of debt securities | $14 |  | $3,536 |  | $4,542 |  | $28,087 |  | $36,179 |
Fair value: |  |  |  |  |
U.S. Treasury and other | $10 |  | $1,871 |  | $1,469 |  | $— |  | $3,350 |
State and political subdivisions | 1 |  | — |  | — |  | 2 |  | 3 |
Mortgage-backed securities: |  |  |  |  |
Federal agencies and U.S. government sponsored entities | 2 |  | 890 |  | 2,713 |  | 15,079 |  | 18,684 |
Other/non-agency | — |  | — |  | — |  | 249 |  | 249 |
Collateralized loan obligations | — |  | — |  | 23 |  | 1,169 |  | 1,192 |
Total debt securities available for sale | 13 |  | 2,761 |  | 4,205 |  | 16,499 |  | 23,478 |
Mortgage-backed securities: |  |  |  |  |
Federal agencies and U.S. government sponsored entities | — |  | — |  | — |  | 8,804 |  | 8,804 |
Asset-backed securities | — |  | 569 |  | — |  | — |  | 569 |
Total debt securities held to maturity | — |  | 569 |  | — |  | 8,804 |  | 9,373 |
Total fair value of debt securities | $13 |  | $3,330 |  | $4,205 |  | $25,303 |  | $32,851 |
Taxable interest income from investment securities as presented in the Consolidated Statements of Operations was $243 million and $116 million for the three months ended September 30, 2022 and 2021, respectively, and $582 million and $368 million for the nine months ended September 30, 2022 and 2021, respectively. The following table presents realized gains and losses on sale of securities:
| Three Months Ended September 30, |  | Nine Months Ended September 30,
(in millions) | 2022 |  | 2021 |  | 2022 |  | 2021
Gains | $— |  |  | $3 |  |  | $9 |  |  | $9 |
Losses | — |  |  | — |  |  | (4) |  |  | — |
Securities gains, net | $— |  |  | $3 |  |  | $5 |  |  | $9 |
The following table presents the amortized cost and fair value of debt securities pledged:
| September 30, 2022 |  | December 31, 2021
(in millions) | Amortized Cost | Fair Value |  | Amortized Cost | Fair Value
Pledged against derivatives, to qualify for fiduciary powers, and to secure public and other deposits as required by law | $3,910 |  | $3,457 |  |  | $4,816 |  | $4,782 |
Pledged as collateral for FHLB borrowing capacity | 244 |  | 214 |  |  | 325 |  | 333 |
Pledged against repurchase agreements | — |  | — |  |  | 1 |  | 1 |
The Company regularly enters into security repurchase agreements with unrelated counterparties, which involve the transfer of a security from one party to another, and a subsequent transfer of substantially the same security back to the original party. These repurchase agreements are typically short-term in nature and are accounted for as secured borrowed funds in the Company’s Consolidated Balance Sheets. The Company recognized no offsetting of short-term receivables or payables as of September 30, 2022 or December 31, 2021. The Company offsets certain derivative assets and derivative liabilities in the Consolidated Balance Sheets. For further information see Note 10. Securitizations of mortgage loans retained in the investment portfolio were $59 million and $99 million for the three and nine months ended September 30, 2022. Securitizations of mortgage loans retained in the investment portfolio were $60 million and $223 million for the three and nine months ended September 30, 2021, respectively. These securitizations include a substantive guarantee by a third party. The guarantors were FNMA and FHLMC in 2022 and 2021, and also included GNMA in 2021. The debt securities received from the guarantors are classified as AFS. Impairment The Company evaluated its existing HTM portfolio as of September 30, 2022 and concluded that in excess of 94% of HTM securities met the zero expected credit loss criteria and, therefore, no ACL was recognized. Lifetime expected credit losses on the remainder of the HTM portfolio were determined to be insignificant based on the modeling of the Company’s credit loss position in the securities. The Company monitors the credit exposure through the use of credit quality indicators. For these securities, the Company uses external credit ratings or an internally derived credit rating when an external rating is not available. All securities were determined to be investment grade at September 30, 2022. The following tables present AFS debt securities with fair values below their respective carrying values, separated by the duration the securities have been in a continuous unrealized loss position:
| September 30, 2022
| Less than 12 Months |  | 12 Months or Longer |  | Total
(in millions) | Fair Value | Gross Unrealized Losses |  | Fair Value | Gross Unrealized Losses |  | Fair Value | Gross Unrealized Losses
U.S. Treasury and other | $3,350 |  | ($207) |  |  | $— |  | $— |  |  | $3,350 |  | ($207) |
Mortgage-backed securities: |  |  |  |  |  |  |  |
Federal agencies and U.S. government sponsored entities | 15,913 |  | (1,687) |  |  | 2,756 |  | (648) |  |  | 18,669 |  | (2,335) |
Other/non-agency | 248 |  | (32) |  |  | — |  | — |  |  | 248 |  | (32) |
Total mortgage-backed securities | 16,161 |  | (1,719) |  |  | 2,756 |  | (648) |  |  | 18,917 |  | (2,367) |
Collateralized loan obligations | 1,183 |  | (55) |  |  | 9 |  | (1) |  |  | 1,192 |  | (56) |
Total | $20,694 |  | ($1,981) |  |  | $2,765 |  | ($649) |  |  | $23,459 |  | ($2,630) |
| December 31, 2021
| Less than 12 Months |  | 12 Months or Longer |  | Total
(in millions) | Fair Value | Gross Unrealized Losses |  | Fair Value | Gross Unrealized Losses |  | Fair Value | Gross Unrealized Losses
Mortgage-backed securities: |  |  |  |  |  |  |  |
Federal agencies and U.S. government sponsored entities | $14,131 |  | ($320) |  |  | $1,236 |  | ($55) |  |  | $15,367 |  | ($375) |
Other/non-agency | 123 |  | (1) |  |  | — |  | — |  |  | 123 |  | (1) |
Total mortgage-backed securities | 14,254 |  | (321) |  |  | 1,236 |  | (55) |  |  | 15,490 |  | (376) |
Collateralized loan obligations | 736 |  | (1) |  |  | — |  | — |  |  | 736 |  | (1) |
Total | $14,990 |  | ($322) |  |  | $1,236 |  | ($55) |  |  | $16,226 |  | ($377) |
Citizens does not currently have the intent to sell these debt securities, and it is not more likely than not that the Company will be required to sell these debt securities prior to recovery of their amortized cost bases. Citizens has determined that credit losses are not expected to be incurred on the U.S. Treasury securities, agency MBS, non-agency MBS, and CLOs identified with unrealized losses as of September 30, 2022. The unrealized losses on these debt securities reflect non-credit-related factors driven by changes in interest rates. Therefore, the Company has determined that these debt securities are not impaired.

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- Definition The entire disclosure for investments in certain debt and equity securities. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 320 -URI https://asc.fasb.org/subtopic&trid=2209399 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 946 -SubTopic 320 -URI https://asc.fasb.org/subtopic&trid=2324412 Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 320 -URI https://asc.fasb.org/topic&trid=2196928 Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 940 -SubTopic 320 -URI https://asc.fasb.org/subtopic&trid=2176304 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher SEC -Name Regulation S-K (SK) -Number 229 -Section 1403 -Paragraph (b) + Details
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