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Securities | 9 Months Ended
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Sep. 30, 2021
Securities |
Securities | ​ Note 3 – Securities ​ Investment Portfolio Management ​ Our investment portfolio serves the liquidity needs and income objectives of the Company. While the portfolio serves as an important component of the overall liquidity management at the Bank, portions of the portfolio 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. ​ Federal Home Loan Bank of Chicago (“FHLBC”) and Federal Reserve Bank of Chicago (“FRBC”) stock are considered nonmarketable equity investments. FHLBC stock was recorded at $3.7 million at September 30, 2021, and December 31, 2020. FRBC stock was recorded at $6.2 million at September 30, 2021, and December 31, 2020. ​ The following tables summarize the amortized cost and fair value of the securities portfolio at September 30, 2021, and December 31, 2020, and the corresponding amounts of gross unrealized gains and losses: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | Gross | ​ | Gross | ​ | ​ | ​
​ | ​ | Amortized | ​ | Unrealized | ​ | Unrealized | ​ | Fair
September 30, 2021 |  | Cost1 |  | Gains |  | Losses | ​ | Value
Securities available-for-sale | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
U.S. Treasury | ​ | $ | 4,017 | ​ | $ | 53 | ​ | $ | - | ​ | $ | 4,070
U.S. government agencies | ​ | ​ | 33,915 | ​ | ​ | - | ​ | ​ | (340) | ​ | ​ | 33,575
U.S. government agencies mortgage-backed | ​ | ​ | 17,269 | ​ | ​ | 764 | ​ | ​ | (215) | ​ | ​ | 17,818
States and political subdivisions | ​ | ​ | 222,833 | ​ | ​ | 16,758 | ​ | ​ | (639) | ​ | ​ | 238,952
Corporate bonds | ​ | ​ | 5,000 | ​ | ​ | - | ​ | ​ | (8) | ​ | ​ | 4,992
Collateralized mortgage obligations | ​ | ​ | 163,756 | ​ | ​ | 1,966 | ​ | ​ | (308) | ​ | ​ | 165,414
Asset-backed securities | ​ | ​ | 187,825 | ​ | ​ | 1,646 | ​ | ​ | (133) | ​ | ​ | 189,338
Collateralized loan obligations | ​ | ​ | 61,085 | ​ | ​ | 18 | ​ | ​ | (74) | ​ | ​ | 61,029
Total securities available-for-sale | ​ | $ | 695,700 | ​ | $ | 21,205 | ​ | $ | (1,717) | ​ | $ | 715,188
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ ​ ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | 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
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ 1 Excludes accrued interest receivable of $2.8 million and $2.7 million at September 30, 2021 and December 31, 2020, respectively, that is recorded in other assets on the consolidated balance sheet. ​ The fair value, amortized cost and weighted average yield of debt securities at September 30, 2021, by contractual maturity, are listed 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 | ​ | $ | 4,227 | ​ | 1.87 | % | ​ | $ | 4,281 | ​
Due after one year through five years | ​ | ​ | 36,288 | ​ | 0.79 | ​ | ​ | ​ | 36,240 | ​
Due after five years through ten years | ​ | ​ | 28,159 | ​ | 2.35 | ​ | ​ | ​ | 29,387 | ​
Due after ten years | ​ | ​ | 197,091 | ​ | 3.01 | ​ | ​ | ​ | 211,681 | ​
​ | ​ | ​ | 265,765 | ​ | 2.62 | ​ | ​ | ​ | 281,589 | ​
Mortgage-backed and collateralized mortgage obligations | ​ | ​ | 181,025 | ​ | 1.73 | ​ | ​ | ​ | 183,232 | ​
Asset-backed securities | ​ | ​ | 187,825 | ​ | 1.14 | ​ | ​ | ​ | 189,338 | ​
Collateralized loan obligations | ​ | ​ | 61,085 | ​ | 1.40 | ​ | ​ | ​ | 61,029 | ​
Total securities available-for-sale | ​ | $ | 695,700 | ​ | 1.88 | % | ​ | $ | 715,188 | ​
​ At September 30, 2021, the Company’s investments included $154.5 million of asset-backed securities 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 outstanding 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. In addition to the DOE guarantee, total added credit enhancement in the form of overcollateralization and/or subordination amounted to $15.6 million, or 10.03% of outstanding principal. ​ At September 30, 2021, the Company had invested in securities issued from one originator that individually amounted to over 10% of the Company’s stockholders’ equity. Information regarding this issuer and the value of the securities issued follows: ​ ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | September 30, 2021
​ |  | Amortized |  | Fair
Issuer | ​ | Cost | ​ | Value
Towd Point Mortgage Trust | ​ | $ | 32,836 | ​ | $ | 34,339
​ Securities with unrealized losses with no corresponding allowance for credit losses at September 30, 2021 and December 31, 2020, 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 | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
September 30, 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. government agencies | ​ | 2 | ​ | $ | 229 | ​ | $ | 28,066 | ​ | 4 | ​ | $ | 111 | ​ | $ | 5,509 | ​ | 6 | ​ | $ | 340 | ​ | $ | 33,575
U.S. government agencies mortgage-backed | ​ | 6 | ​ | ​ | 215 | ​ | ​ | 6,084 | ​ | - | ​ | ​ | - | ​ | ​ | - | ​ | 6 | ​ | ​ | 215 | ​ | ​ | 6,084
States and political subdivisions | ​ | 2 | ​ | ​ | 23 | ​ | ​ | 1,490 | ​ | 1 | ​ | ​ | 616 | ​ | ​ | 4,085 | ​ | 3 | ​ | ​ | 639 | ​ | ​ | 5,575
Corporate bonds | ​ | 1 | ​ | ​ | 8 | ​ | ​ | 4,992 | ​ | - | ​ | ​ | - | ​ | ​ | - | ​ | 1 | ​ | ​ | 8 | ​ | ​ | 4,992
Collateralized mortgage obligations | ​ | 7 | ​ | ​ | 244 | ​ | ​ | 63,495 | ​ | 1 | ​ | ​ | 64 | ​ | ​ | 7,531 | ​ | 8 | ​ | ​ | 308 | ​ | ​ | 71,026
Asset-backed securities | ​ | 5 | ​ | ​ | 79 | ​ | ​ | 35,048 | ​ | 1 | ​ | ​ | 54 | ​ | ​ | 3,270 | ​ | 6 | ​ | ​ | 133 | ​ | ​ | 38,318
Collateralized loan obligations | ​ | 6 | ​ | ​ | 27 | ​ | ​ | 20,386 | ​ | 2 | ​ | ​ | 47 | ​ | ​ | 10,625 | ​ | 8 | ​ | ​ | 74 | ​ | ​ | 31,011
Total securities available-for-sale | ​ | 29 | ​ | $ | 825 | ​ | $ | 159,561 | ​ | 9 | ​ | $ | 892 | ​ | $ | 31,020 | ​ | 38 | ​ | $ | 1,717 | ​ | $ | 190,581
​ ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | 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
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ Each quarter we perform an analysis to determine if any of the unrealized losses on securities available-for-sale are comprised of credit losses as compared to unrealized losses due to market interest rate adjustments. Our assessment includes a review of the unrealized loss for each security issuance held; the financial condition and near-term prospects of the issuer, including external credit ratings and recent downgrades; and our ability and intent to hold the security for a period of time sufficient for a recovery in value. We also consider the extent to which the securities are issued by the federal government or its agencies, and any guarantee of issued amounts by those agencies. No credit losses were determined to be present as of September 30, 2021, as there was no credit quality deterioration noted. Therefore, no provision for credit losses on securities was recognized for the third quarter of 2021. ​ The following table presents proceeds from sale and net realized gains (losses) on securities available-for-sale for the three and nine months ended September 30, 2021 and 2020: ​ ​ ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | Three Months Ended | ​ | ​ | Nine Months Ended | ​ | ​
​ | ​ | ​ | September 30, | ​ | ​ | September 30, | ​ | ​
Securities available-for-sale |  | 2021 |  | 2020 |  | 2021 |  | 2020 |  | ​
Proceeds from sales of securities | ​ | $ | 26,873 | ​ | $ | - | ​ | $ | 35,075 | ​ | $ | 18,006 | ​ | ​
Gross realized gains on securities | ​ | $ | 262 | ​ | $ | - | ​ | $ | 267 | ​ | $ | 17 | ​ | ​
Gross realized losses on securities | ​ |  | (18) | ​ |  | (1) | ​ |  | (21) | ​ |  | (42) | ​ | ​
Net realized gains (losses) | ​ | $ | 244 | ​ | $ | (1) | ​ | $ | 246 | ​ | $ | (25) | ​ | ​
Income tax (expense) benefit on net realized gains (losses) | ​ | $ | (69) | ​ | $ | - | ​ | $ | (70) | ​ | $ | 7 | ​ | ​
Effective tax rate applied | ​ | ​ | 28.3 | % | ​ | 0.0 | % | ​ | 28.5 | % | ​ | 28.0 | % | ​
​ ​ As of September 30, 2021, securities valued at $353.2 million were pledged to secure deposits and borrowings, and for other purposes, an increase from $335.8 million of securities pledged at year-end 2020.

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