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Securities | 9 Months Ended
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Sep. 30, 2015
Securities |
Securities | Note 2 – Securities Investment Portfolio Management Our investment portfolio serves the liquidity needs and income objectives o f the Company. While the portfolio serves as an important component of the overall liquidity management at the Bank, portions of the portfolio will also serve as income producing assets. The size and composition of the portfolio reflects liquidity needs, loan demand and interest income objectives. Portfolio size and composition will be adjusted from time to time. While a significant portion of the portfolio consists of readily marketable securities to address liquidity, other parts of the portfolio may reflect funds invested pending future loan demand or to maximize interest income without undue interest rate risk. Investments are comprised of debt securities and non-marketable equity investments. Securities available-for-sale are carried at fair value. Unrealized gains and losses, net of tax, on securities available-for-sale are reported as a separate component of equity. This balance sheet component changes as interest rates and market conditions change. Unrealized gains and losses are not included in the calculation of regulatory capital. Securities held-to-maturity are carried at amortized cost and the discount or premium created in the 2013 transfer from available-for-sale securities or at the time of purchase thereafter is accreted or amortized to the maturity or expected payoff date but not an earlier call. In accordance with GAAP, the Company has the positive intent and ability to hold the securities to maturity. Nonmarketable equity investments include Federal Home Loan Bank of Chicago (“FHLBC”) stock and Federal Reserve Bank of Chicago (“Reserve Bank”) stock. FHLBC stock was recorded at $3.5 million at September 30, 2015, and $4.3 million at December 31, 2014. Reserve Bank stock was recorded at $4.8 million at September 30, 2015, and December 31, 2014. Our FHLBC stock is necessary to maintain access to FHLBC advances. The following table summarizes the amortized cost and fair value of the securities portfolio at September 30, 2015, a nd December 31, 2014, and the corresponding amounts of gross unrealized gains and losses (in thousands):
|  |  |  |  | Gross |  | Gross |  |  |
|  | Amortized |  | Unrealized |  | Unrealized |  | Fair
September 30, 2015: |  | Cost |  | Gains |  | Losses |  | Value
Securities Available-for-Sale |  |  |  |  |  |  |  |
U.S. Treasury |  | $ | 1,514 |  | $ | 1 |  | $ | - |  | $ | 1,515
U.S. government agencies |  |  | 1,690 |  |  | - |  |  | (113) |  |  | 1,577
U.S. government agencies mortgage-backed |  |  | 2,049 |  |  | - |  |  | (15) |  |  | 2,034
States and political subdivisions |  |  | 22,918 |  |  | 401 |  |  | (149) |  |  | 23,170
Corporate bonds |  |  | 30,160 |  |  | - |  |  | (580) |  |  | 29,580
Collateralized mortgage obligations |  |  | 72,015 |  |  | 53 |  |  | (1,191) |  |  | 70,877
Asset-backed securities |  |  | 195,100 |  |  | 49 |  |  | (8,053) |  |  | 187,096
Collateralized loan obligations |  |  | 94,265 |  |  | - |  |  | (1,278) |  |  | 92,987
Total Securities Available-for-Sale |  | $ | 419,711 |  | $ | 504 |  | $ | (11,379) |  | $ | 408,836
Securities Held-to-Maturity |  |  |  |  |  |  |  |  |  |  |  |
U.S. government agency mortgage-backed |  | $ | 36,746 |  | $ | 2,442 |  | $ | - |  | $ | 39,188
Collateralized mortgage obligations |  |  | 213,298 |  |  | 5,746 |  |  | (24) |  |  | 219,020
Total Securities Held-to-Maturity |  | $ | 250,044 |  | $ | 8,188 |  | $ | (24) |  | $ | 258,208
|  |  |  |  | Gross |  | Gross |  |  |
|  | Amortized |  | Unrealized |  | Unrealized |  | Fair
December 31, 2014: |  | Cost |  | Gains |  | Losses |  | Value
Securities Available-for-Sale |  |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury |  | $ | 1,529 |  | $ | - |  | $ | (2) |  | $ | 1,527
U.S. government agencies |  |  | 1,711 |  |  | - |  |  | (87) |  |  | 1,624
States and political subdivisions |  |  | 21,682 |  |  | 432 |  |  | (96) |  |  | 22,018
Corporate bonds |  |  | 31,243 |  |  | 309 |  |  | (567) |  |  | 30,985
Collateralized mortgage obligations |  |  | 65,728 |  |  | 31 |  |  | (2,132) |  |  | 63,627
Asset-backed securities |  |  | 175,565 |  |  | 199 |  |  | (2,268) |  |  | 173,496
Collateralized loan obligations |  |  | 94,236 |  |  | 176 |  |  | (2,203) |  |  | 92,209
Total Securities Available-for-Sale |  | $ | 391,694 |  | $ | 1,147 |  | $ | (7,355) |  | $ | 385,486
Securities Held-to-Maturity |  |  |  |  |  |  |  |  |  |  |  |
U.S. government agency mortgage-backed |  | $ | 37,125 |  | $ | 2,030 |  | $ | - |  | $ | 39,155
Collateralized mortgage obligations |  |  | 222,545 |  |  | 3,005 |  |  | (1,439) |  |  | 224,111
Total Securities Held-to-Maturity |  | $ | 259,670 |  | $ | 5,035 |  | $ | (1,439) |  | $ | 263,266
The fair value, amortized cost and weighted average yield of debt securities at September 30, 2015, 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 |  | $ | 12,136 |  | 1.52 | % |  | $ | 12,159 |
Due after one year through five years |  |  | 6,898 |  | 2.90 | % |  |  | 7,092 |
Due after five years through ten years |  |  | 33,586 |  | 2.39 | % |  |  | 33,077 |
Due after ten years |  |  | 3,662 |  | 2.82 | % |  |  | 3,514 |
|  |  | 56,282 |  | 2.29 | % |  |  | 55,842 |
Mortgage-backed and collateralized mortgage obligations |  |  | 74,064 |  | 1.30 | % |  |  | 72,911 |
Asset-backed securities |  |  | 195,100 |  | 1.26 | % |  |  | 187,096 |
Collateralized loan obligations |  |  | 94,265 |  | 2.87 | % |  |  | 92,987 |
|  | $ | 419,711 |  | 1.77 | % |  | $ | 408,836 |
Securities Held-to-Maturity |  |  |  |  |  |  |  |  |  |
Mortgage-backed and collateralized mortgage obligations |  | $ | 250,044 |  | 2.98 | % |  | $ | 258,208 |
Securities with unrealized losses at September 30, 2015, and December 31, 2014, 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 |  | Greater than 12 months |  |  |  |  |  |  |  |
September 30, 2015 |  | 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. government agencies |  | - |  | $ | - |  | $ | - |  | 1 |  | $ | 113 |  | $ | 1,577 |  | 1 |  | $ | 113 |  | $ | 1,577
U.S. government agencies mortgage-backed |  | 1 |  |  | 15 |  |  | 2,034 |  | - |  |  | - |  |  | - |  | 1 |  |  | 15 |  |  | 2,034
States and political subdivisions |  | 1 |  |  | 28 |  |  | 1,490 |  | 1 |  |  | 121 |  |  | 1,703 |  | 2 |  |  | 149 |  |  | 3,193
Corporate bonds |  | 5 |  |  | 160 |  |  | 15,000 |  | 3 |  |  | 420 |  |  | 14,580 |  | 8 |  |  | 580 |  |  | 29,580
Collateralized mortgage obligations |  | 7 |  |  | 386 |  |  | 43,651 |  | 4 |  |  | 805 |  |  | 19,211 |  | 11 |  |  | 1,191 |  |  | 62,862
Asset-backed securities |  | 9 |  |  | 2,499 |  |  | 74,269 |  | 6 |  |  | 5,554 |  |  | 93,838 |  | 15 |  |  | 8,053 |  |  | 168,107
Collateralized loan obligations |  | 5 |  |  | 212 |  |  | 29,684 |  | 9 |  |  | 1,066 |  |  | 63,303 |  | 14 |  |  | 1,278 |  |  | 92,987
|  | 28 |  | $ | 3,300 |  | $ | 166,128 |  | 24 |  | $ | 8,079 |  | $ | 194,212 |  | 52 |  | $ | 11,379 |  | $ | 360,340
Securities Held-to-Maturity |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Collateralized mortgage obligations |  | - |  | $ | - |  | $ | - |  | 2 |  | $ | 24 |  | $ | 34,550 |  | 2 |  | $ | 24 |  | $ | 34,550
|  | - |  | $ | - |  | $ | - |  | 2 |  | $ | 24 |  | $ | 34,550 |  | 2 |  | $ | 24 |  | $ | 34,550
|  | Less than 12 months |  | Greater than 12 months |  |  |  |  |  |  |  |
December 31, 2014 |  | 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. Treasury |  | 1 |  | $ | 2 |  | $ | 1,527 |  | - |  | $ | - |  | $ | - |  | 1 |  | $ | 2 |  | $ | 1,527
U.S. government agencies |  | - |  |  | - |  |  | - |  | 1 |  |  | 87 |  |  | 1,624 |  | 1 |  |  | 87 |  |  | 1,624
States and political subdivisions |  | 4 |  |  | 96 |  |  | 4,896 |  | - |  |  | - |  |  | - |  | 4 |  |  | 96 |  |  | 4,896
Corporate bonds |  | 4 |  |  | 486 |  |  | 15,246 |  | 1 |  |  | 81 |  |  | 1,921 |  | 5 |  |  | 567 |  |  | 17,167
Collateralized mortgage obligations |  | 5 |  |  | 900 |  |  | 38,284 |  | 3 |  |  | 1,232 |  |  | 21,604 |  | 8 |  |  | 2,132 |  |  | 59,888
Asset-backed securities |  | 9 |  |  | 1,077 |  |  | 99,286 |  | 3 |  |  | 1,191 |  |  | 43,662 |  | 12 |  |  | 2,268 |  |  | 142,948
Collateralized loan obligations |  | 12 |  |  | 2,203 |  |  | 82,387 |  | - |  |  | - |  |  | - |  | 12 |  |  | 2,203 |  |  | 82,387
|  | 35 |  | $ | 4,764 |  | $ | 241,626 |  | 8 |  | $ | 2,591 |  | $ | 68,811 |  | 43 |  | $ | 7,355 |  | $ | 310,437
Securities Held-to-Maturity |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Collateralized mortgage obligations |  | 7 |  | $ | 457 |  | $ | 49,302 |  | 4 |  | $ | 982 |  | $ | 46,283 |  | 11 |  | $ | 1,439 |  | $ | 95,585
|  | 7 |  | $ | 457 |  | $ | 49,302 |  | 4 |  | $ | 982 |  | $ | 46,283 |  | 11 |  | $ | 1,439 |  | $ | 95,585
Recognition of other-than-temporary impairment was not necessary in the three and nine months ending September 30, 2015, or the year ended December 31, 2014. The changes in fair value related primarily to interest rate fluctuations. Our review of other-than-temporary impairment determined that there was no credit quality deterioration.

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