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INVESTMENT SECURITIES

6 Months Ended

Jun. 30, 2024

INVESTMENT SECURITIES

INVESTMENT SECURITIES

NOTE D: INVESTMENT SECURITIES

The amortized cost and estimated fair value of investment securities as of June 30, 2024 and December 31, 2023 are as follows:


		June 30, 2024												December 31, 2023
					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		$	2,385,193		$	0		$	329,145		$	2,056,048		$	2,381,168		$	0		$	300,385		$	2,080,783
Obligations of state and political subdivisions			459,849			330			42,736			417,443			502,879			1,469			29,985			474,363
Government agency mortgage-backed securities			380,373			23			60,101			320,295			400,062			76			51,612			348,526
Corporate debt securities			8,000			0			503			7,497			8,000			0			606			7,394
Government agency collateralized mortgage obligations			8,195			0			525			7,670			9,498			0			572			8,926
Total available-for-sale portfolio		$	3,241,610		$	353		$	433,010		$	2,808,953		$	3,301,607		$	1,545		$	383,160		$	2,919,992

Held-to-Maturity Portfolio:
U.S. Treasury and agency securities		$	1,123,825		$	0		$	102,042		$	1,021,783		$	1,109,101		$	0		$	50,866		$	1,058,235
Government agency mortgage-backed securities			147,284			343			1,655			145,972			63,073			688			180			63,581
Total held-to-maturity portfolio		$	1,271,109		$	343		$	103,697		$	1,167,755		$	1,172,174		$	688		$	51,046		$	1,121,816

As of June 30, 2024, equity and other securities on the consolidated statements of condition consists of equity securities with readily determinable fair values carried at $2.0 million and equity securities without readily determinable fair values carried at $84.5 million, including FHLB common stock of $44.8 million, Federal Reserve Bank (“FRB”) common stock of $33.6 million and other equity securities of $6.1 million.

As of December 31, 2023, equity and other securities on the consolidated statements of condition consists of equity securities with readily determinable fair values carried at $0.4 million and equity securities without readily determinable fair values carried at $72.8 million, including FHLB common stock of $32.5 million, FRB common stock of $33.6 million and other equity securities of $6.7 million.

The investment in FRB stock represents approximately half of the total required subscription, and the remaining half is unpaid and remains subject to call by the FRB.

The amount of upward and downward adjustments to equity securities without readily determinable fair values was not material for the three and six months ended June 30, 2024 and 2023.

The gains and losses on equity and other securities for the three and six months ended June 30, 2024 and 2023 are as follows:


		Three Months Ended						Six Months Ended
		June 30,						June 30,
(000’s omitted)		2024			2023			2024			2023
Net gain (loss) recognized on equity securities		$	867		$	(50)		$	883		$	(50)
Less: Net gain (loss) recognized on equity securities sold during the period			0			0			0			0
Unrealized gain (loss) recognized on equity securities still held		$	867		$	(50)		$	883		$	(50)

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

As of June 30, 2024


		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		$	2,056,048		$	329,145		$	2,056,048		$	329,145
Obligations of state and political subdivisions			65,434			1,524			317,221			41,212			382,655			42,736
Government agency mortgage-backed securities			1,562			17			316,377			60,084			317,939			60,101
Corporate debt securities			0			0			7,497			503			7,497			503
Government agency collateralized mortgage obligations			0			0			7,656			525			7,656			525
Total available-for-sale investment portfolio		$	66,996		$	1,541		$	2,704,799		$	431,469		$	2,771,795		$	433,010

Held-to-Maturity Portfolio:
U.S Treasury and agency securities		$	0		$	0		$	1,021,783		$	102,042		$	1,021,783		$	102,042
Government agency mortgage-backed securities			114,305			1,518			6,507			137			120,812			1,655
Total held-to-maturity portfolio		$	114,305		$	1,518		$	1,028,290		$	102,179		$	1,142,595		$	103,697

As of December 31, 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		$	2,080,783		$	300,385		$	2,080,783		$	300,385
Obligations of state and political subdivisions			63,541			878			287,191			29,107			350,732			29,985
Government agency mortgage-backed securities			8,586			55			336,266			51,557			344,852			51,612
Corporate debt securities			0			0			7,394			606			7,394			606
Government agency collateralized mortgage obligations			0			0			8,907			572			8,907			572
Total available-for-sale investment portfolio		$	72,127		$	933		$	2,720,541		$	382,227		$	2,792,668		$	383,160

Held-to-Maturity Portfolio:
U.S Treasury and agency securities		$	536,885		$	15,953		$	521,350		$	34,913		$	1,058,235		$	50,866
Government agency mortgage-backed securities			18,951			158			1,393			22			20,344			180
Total held-to-maturity portfolio		$	555,836		$	16,111		$	522,743		$	34,935		$	1,078,579		$	51,046

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 of the financial position of the issuers including financial performance, liquidity and regulatory capital ratios, the issuers of the securities show a remote risk of default. Timely 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, 2024 represents credit losses and no related allowance for credit losses has been recognized. Accordingly, there is no allowance for credit losses on the Company’s available-for-sale investment portfolio as of June 30, 2024. Accrued interest receivable on available-for-sale debt securities, included in accrued interest and fees receivable on the consolidated statements of condition, totaled $14.0 million at June 30, 2024 and is excluded from the estimate of credit losses.

Securities classified as held-to-maturity are included under the Current Expected Credit Loss (“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, 2024 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. 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 AA+ from Fitch. 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, 2024. Accrued interest receivable on held-to-maturity debt securities, included in accrued interest and fees receivable on the consolidated statements of condition, totaled $5.4 million at June 30, 2024 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, 2024, 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		$	13,680		$	13,537
Due after one through five years			0			0			1,681,466			1,519,060
Due after five years through ten years			559,346			525,818			485,462			427,416
Due after ten years			564,479			495,965			672,434			520,975
Subtotal			1,123,825			1,021,783			2,853,042			2,480,988
Government agency mortgage-backed securities			147,284			145,972			380,373			320,295
Government agency collateralized mortgage obligations			0			0			8,195			7,670
Total		$	1,271,109		$	1,167,755		$	3,241,610		$	2,808,953

Investment securities with a carrying value of $2.05 billion and $2.14 billion at June 30, 2024 and December 31, 2023, respectively, were pledged to collateralize certain deposits and borrowings. Securities pledged to collateralize certain borrowings included $344.8 million and $598.9 million of U.S. Treasury securities that were pledged as collateral for securities sold under agreement to repurchase at June 30, 2024 and December 31, 2023, respectively. All securities sold under agreement to repurchase as of June 30, 2024 and December 31, 2023 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.

During the second quarter of 2024, the Company sold $31.2 million in book value of available-for-sale obligations of state and political subdivisions securities, recognizing $0.2 million of gross realized gains and $0.4 million of gross realized losses. The proceeds from these sales of $31.0 million were redeployed entirely towards paying off existing overnight borrowings.