Securities

12 Months Ended

Dec. 31, 2022

Securities

Securities

Note 4: Securities

The following table summarizes the amortized cost and fair value of the securities portfolio at December 31, 2022 and 2021, and the corresponding amounts of gross unrealized gains and losses were as follows:

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
December 31, 2022	Cost1		Gains		Losses		Value
Securities available-for-sale
U.S. Treasury	$	224,054	$	-	$	(11,925)	$	212,129
U.S. government agencies		61,178		-		(5,130)		56,048
U.S. government agencies mortgage-backed		140,588		-		(15,598)		124,990
States and political subdivisions		239,999		363		(14,234)		226,128
Corporate bonds		10,000		-		(378)		9,622
Collateralized mortgage obligations		596,336		1		(62,569)		533,768
Asset-backed securities		210,388		6		(8,466)		201,928
Collateralized loan obligations		180,276		-		(5,530)		174,746
Total securities available-for-sale	$	1,662,819	$	370	$	(123,830)	$	1,539,359

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
December 31, 2021	Cost1		Gains		Losses		Value
Securities available-for-sale
U.S. Treasury	$	202,251	$	125	$	(37)	$	202,339
U.S. government agencies		62,587		-		(699)		61,888
U.S. government agencies mortgage-backed		172,016		856		(570)		172,302
States and political subdivisions		241,937		16,344		(672)		257,609
Corporate bonds		10,000		-		(113)		9,887
Collateralized mortgage obligations		673,238		2,014		(2,285)		672,967
Asset-backed securities		236,293		1,245		(661)		236,877
Collateralized loan obligations		79,838		3		(78)		79,763
Total securities available-for-sale	$	1,678,160	$	20,587	$	(5,115)	$	1,693,632

¹ Excludes interest receivable of $6.8 million and $4.3 million at December 31, 2022 and December 31, 2021, respectively, that is recorded in other assets on the consolidated balance sheet.

FHLBC stock was $5.6 million and $7.1 million at December 31, 2022 and December 31, 2021, respectively.  FRBC stock was $14.9 million at December 31, 2022 and $6.2 million at December 31, 2021.  Our FHLBC stock is necessary to maintain access to FHLBC advances.  

Securities valued at $547.8 million as of December 31, 2022, were pledged to secure deposits and borrowings, and for other purposes, an increase from $501.3 million at year-end 2021.

The fair value, amortized cost and weighted average yield of debt securities at December 31, 2022 by contractual maturity, were as follows in the table below.  Securities not due at a single maturity date are shown separately.

			Weighted
	Amortized		Average		Fair
Securities available-for-sale	Cost		Yield		Value
Due in one year or less	$	62,369	0.69	%	$	60,279
Due after one year through five years		247,711	1.14			231,925
Due after five years through ten years		43,941	2.75			39,785
Due after ten years		181,210	3.04			171,938
		535,231	1.86			503,927
Mortgage-backed and collateralized mortgage obligations		736,924	2.53			658,758
Asset-backed securities		210,388	4.77			201,928
Collateralized loan obligations		180,276	6.21			174,746
Total securities available-for-sale	$	1,662,819	3.00	%	$	1,539,359

At December 31, 2022, the Company’s investments include asset-backed securities totaling $160.8 million that are backed by student loans originated under the Federal Family Education Loan program (“FFEL”).  Under the FFEL, private lenders made federally guaranteed student loans to parents and students.  While the program was modified several times before elimination in 2010, FFEL securities are generally guaranteed by the U.S. Department of Education (“DOE”) at not less than 97% of the principal amount of the loans.  The guarantee will reduce to 85% if the DOE receives reimbursement requests in excess of 5% of insured loans; reimbursement will drop to 75% if reimbursement requests exceed 9% of insured loans.  As of December 31, 2022, the likelihood of the decrease in the government guarantee was minimal as the average rate of reimbursement for 2022 was less than 1.0%.  

As of December 31, 2022, the Company has no securities issued from one originator, other than the U.S. Government and its agencies, that individually amounted to over 10% of the Company’s stockholders equity.  

Securities with unrealized losses with no corresponding allowance for credit losses at December 31, 2022 and 2021, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, were as follows (in thousands except for number of securities):

	Less than 12 months					12 months or more
December 31, 2022	in an unrealized loss position					in an unrealized loss position					Total
	Number of	Unrealized		Fair		Number of	Unrealized		Fair		Number of	Unrealized		Fair
Securities available-for-sale	Securities	Losses		Value		Securities	Losses		Value		Securities	Losses		Value
U.S. Treasuries	1	$	1,025	$	24,121	4	$	10,900	$	188,008	5	$	11,925	$	212,129
U.S. government agencies	-		-		-	9		5,130		56,048	9		5,130		56,048
U.S. government agencies mortgage-backed	15		975		11,369	117		14,623		113,621	132		15,598		124,990
States and political subdivisions	45		5,800		128,770	15		8,434		48,877	60		14,234		177,647
Corporate bonds	-		-		-	2		378		9,622	2		378		9,622
Collateralized mortgage obligations	80		12,895		180,624	120		49,674		348,880	200		62,569		529,504
Asset-backed securities	30		3,030		121,915	21		5,436		79,659	51		8,466		201,574
Collateralized loan obligations	23		3,579		112,772	11		1,951		61,974	34		5,530		174,746
Total securities available-for-sale	194	$	27,304	$	579,571	299	$	96,526	$	906,689	493	$	123,830	$	1,486,260

	Less than 12 months					12 months or more
December 31, 2021	in an unrealized loss position					in an unrealized loss position					Total
	Number of	Unrealized			Fair	Number of	Unrealized			Fair	Number of	Unrealized			Fair
Securities available-for-sale	Securities	Losses			Value	Securities	Losses			Value	Securities	Losses			Value
U.S. Treasuries	1	$	37	$	49,719	-	$	-	$	-	1	$	37	$	49,719
U.S. government agencies	5		592		56,879	4		107		5,008	9		699		61,887
U.S. government agencies mortgage-backed	63		505		78,711	1		65		1,663	64		570		80,374
States and political subdivisions	7		55		8,430	1		617		4,051	8		672		12,481
Corporate bonds	2		113		9,887	-		-		-	2		113		9,887
Collateralized mortgage obligations	133		2,285		381,658	-		-		-	133		2,285		381,658
Asset-backed securities	20		608		103,819	3		53		3,276	23		661		107,095
Collateralized loan obligations	10		35		45,132	2		43		10,628	12		78		55,760
Total securities available-for-sale	241	$	4,230	$	734,235	11	$	885	$	24,626	252	$	5,115	$	758,861

Available-for-sale debt securities in unrealized loss positions are evaluated for allowance related to credit losses at least quarterly. The analysis consists of screening all securities to determine if the bonds have market value loss exceeding 5% of book value and if that loss exceeds $200,000. Two other aspects of each security are assessed. The first is whether a security carries a government guarantee. If the security is backed by a 100% U.S. Government or U.S. Agency guarantee, then no allowance for credit loss would be considered necessary, since ultimately principal and interest of the investment would be paid. For securities that carried a U.S. Government guarantee of less than 100%, an allowance for credit loss analysis is performed. In the case of a partial government guarantee, the loss amount is assumed to be the percentage not guaranteed multiplied by the gain or loss on the position. In addition, a calculation is performed to estimate the amount of value change attributable to movements in interest rates. If the devaluation of a security is largely due to rate changes, then no allowance would be considered necessary. However, if a payment collected on a particular bond is less than the expected amount, individual credit analysis is conducted on that position. Furthermore, for positions whose market valuations are not directly attributable to movements in interest rates, even if all scheduled payments have been received, credit analysis is performed on each position.

The following table presents net realized gains (losses) on securities available-for-sale for the years ended:  

	Year Ended
	December 31,
Securities available-for-sale	2022			2021			2020
Proceeds from sales of securities	$	30,981		$	605,846		$	18,006
Gross realized gains on securities		-			270			17
Gross realized losses on securities		(944)			(38)			(42)
Net realized (losses) gains	$	(944)		$	232		$	(25)
Income tax benefit (expense) on net realized (losses) gains	$	265		$	(65)		$	7
Effective tax rate applied		28.1	%		28.0	%		28.0	%