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Securities

12 Months Ended

Dec. 31, 2020

Securities

Securities

Note 3: Securities

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


					Gross			Gross
		Amortized			Unrealized			Unrealized			Fair
December 31, 2020		Cost¹			Gains			Losses			Value
Securities available-for-sale
U.S. Treasury		$	4,014		$	103		$	-		$	4,117
U.S. government agencies			6,811			-			(154)			6,657
U.S. government agencies mortgage-backed			16,098			1,112			(1)			17,209
States and political subdivisions			229,352			21,269			(1,362)			249,259
Collateralized mortgage obligations			53,999			2,866			(280)			56,585
Asset-backed securities			130,959			1,370			(511)			131,818
Collateralized loan obligations			30,728			15			(210)			30,533
Total securities available-for-sale		$	471,961		$	26,735		$	(2,518)		$	496,178


					Gross			Gross
		Amortized			Unrealized			Unrealized			Fair
December 31, 2019		Cost¹			Gains			Losses			Value
Securities available-for-sale
U.S. Treasury		$	4,010		$	26		$	-		$	4,036
U.S. government agencies			8,502			-			(165)			8,337
U.S. government agencies mortgage-backed			16,164			443			(19)			16,588
States and political subdivisions			240,399			11,207			(2,431)			249,175
Collateralized mortgage obligations			57,059			963			(38)			57,984
Asset-backed securities			82,114			617			(887)			81,844
Collateralized loan obligations			66,898			29			(243)			66,684
Total securities available-for-sale		$	475,146		$	13,285		$	(3,783)		$	484,648

¹ Excludes interest receivable of $2.7 million and $3.2 million at December 31, 2020 and December 31, 2019, respectively, that is recorded in other assets on the consolidated balance sheet.

FHLBC stock was $3.7 million at December 31, 2020 and December 31, 2019. FRBC stock was $6.2 million at December 31, 2020 and December 31, 2019. Our FHLBC stock is necessary to maintain access to FHLBC advances.

Securities valued at $335.8 million as of December 31, 2020, were pledged to secure deposits and borrowings, and for other purposes, an increase from $320.8 million at year-end 2019.

The fair value, amortized cost and weighted average yield of debt securities at December 31, 2020, 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		$	423		2.09	%		$	427
Due after one year through five years			5,833		2.11				6,062
Due after five years through ten years			27,802		2.33				29,027
Due after ten years			206,119		3.02				224,517
			240,177		2.92				260,033
Mortgage-backed and collateralized mortgage obligations			70,097		2.95				73,794
Asset-backed securities			130,959		1.37				131,818
Collateralized loan obligations			30,728		2.04				30,533
Total securities available-for-sale		$	471,961		2.44	%		$	496,178

At December 31, 2020, the Company’s investments include asset-backed securities totaling $105.0 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, 2020, the likelihood of the decrease in the government guarantee was minimal as the average rate of reimbursement for 2020 was less than 1.0%.

The Company has accumulated the securities issued from one originator that individually amounted to over 10% of the Company’s stockholders equity. The amortized cost and fair value of securities related to this issuer are as follows:


		December 31, 2020
		Amortized			Fair
Issuer		Cost			Value
Towd Point Mortgage Trust			33,198			35,479

Securities with unrealized losses with no corresponding allowance for credit losses at December 31, 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, 2020		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		-		$	-		$	-		4		$	154		$	6,657		4		$	154		$	6,657
U.S. government agencies mortgage-backed		1			1			141		-			-			-		1			1			141
States and political subdivisions		-			-			-		1			1,362			3,433		1			1,362			3,433
Collateralized mortgage obligations		4			279			8,142		1			1			146		5			280			8,288
Asset-backed securities		1			2			251		3			509			49,572		4			511			49,823
Collateralized loan obligations		1			31			7,468		4			179			21,477		5			210			28,945
Total securities available-for-sale		7		$	313		$	16,002		13		$	2,205		$	81,285		20		$	2,518		$	97,287


		Less than 12 months								12 months or more
December 31, 2019		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		-		$	-		$	-		4		$	165		$	8,337		4		$	165		$	8,337
U.S. government agencies mortgage-backed		3			10			3,018		2			9			843		5			19			3,861
States and political subdivisions		6			1,665			41,043		2			766			6,593		8			2,431			47,636
Collateralized mortgage obligations		2			26			9,054		2			12			1,209		4			38			10,263
Asset-backed securities		4			839			54,540		1			48			3,238		5			887			57,778
Collateralized loan obligations		4			62			21,927		4			181			25,020		8			243			46,947
Total securities available-for-sale		19		$	2,602		$	129,582		15		$	1,181		$	45,240		34		$	3,783		$	174,822

The unrealized loss attributable to our collateral loan obligations are the result of spread widening in that sector due to the current economic environment. The unrealized loss attributable to our U.S. government agencies is associated with our SBA positions. Shortly after purchase a structural change in the SBA program occurred that led to higher prepayments which negatively affected these positions. The unrealized loss attributable to states and political subdivisions, collateralized mortgage obligations, and asset-backed securities are

due to limited illiquidity as a result of a few securities with uncommon structures and lesser known issuers. The asset-backed securities are primarily backed by student loans under the FFEL program, these securities are 97% guaranteed by U.S. DOE and have a long history of no credit losses. At December 31, 2020, we have no intent to sell any securities that were in an unrealized loss position nor is it expected that we would be required to sell the securities prior to their anticipated recovery.

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			2020			2019			2018
Proceeds from sales of securities			$	18,006		$	191,298		$	94,663
Gross realized gains on securities				17			5,521			369
Gross realized losses on securities				(42)			(1,010)			(9)
Net realized (losses) gains			$	(25)		$	4,511		$	360
Income tax (expense) benefit on net realized gains (losses)			$	7		$	(1,267)		$	(100)
Effective tax rate applied				28.0	%		28.1	%		27.8	%