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Securities

12 Months Ended

Dec. 31, 2021

Securities

Securities

Note 4: 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, 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			240,793			16,344			(672)			256,465
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		$	1,677,016		$	20,587		$	(5,115)		$	1,692,488


					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 interest receivable of $4.3 million and $2.7 million at December 31, 2021 and December 31, 2020, respectively, that is recorded in other assets on the consolidated balance sheet.

FHLBC stock was $7.1 million and $3.7 million at December 31, 2021 and December 31, 2020 respectively. FRBC stock was $6.2 million at December 31, 2021 and December 31, 2020. Our FHLBC stock is necessary to maintain access to FHLBC advances.

Securities valued at $501.3 million as of December 31, 2021, were pledged to secure deposits and borrowings, and for other purposes, an increase from $335.8 million at year-end 2020, primarily due to the West Suburban acquisition in 2021.

The fair value, amortized cost and weighted average yield of debt securities at December 31, 2021, 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		$	8,671		1.24	%		$	8,707
Due after one year through five years			274,984		0.89				274,537
Due after five years through ten years			43,770		2.43				45,470
Due after ten years			188,206		2.98				201,865
			515,631		1.79				530,579
Mortgage-backed and collateralized mortgage obligations			845,254		1.19				845,269
Asset-backed securities			236,293		1.12				236,877
Collateralized loan obligations			79,838		1.60				79,763
Total securities available-for-sale		$	1,677,016		1.38	%		$	1,692,488

At December 31, 2021, the Company’s investments include asset-backed securities totaling $194.4 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, 2021, the likelihood of the decrease in the government guarantee was minimal as the average rate of reimbursement for 2021 was less than 1.0%.

As of December 31, 2021, 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, 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, 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


		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

The unrealized loss attributable to our collateralized loan obligations are the result of spread widening in that sector due to the current economic environment, specifically rising interest rates. 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 liquidity 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, 2021, 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		2021			2020			2019
Proceeds from sales of securities		$	605,846		$	18,006		$	191,298
Gross realized gains on securities			270			17			5,521
Gross realized losses on securities			(38)			(42)			(1,010)
Net realized gains (losses)		$	232		$	(25)		$	4,511
Income tax (expense) benefit on net realized gains (losses)		$	(65)		$	7		$	(1,267)
Effective tax rate applied			28.0	%		28.0	%		28.1	%