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Securities

9 Months Ended

Sep. 30, 2025

Note 3 – Securities

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 non-marketable equity investments. FHLBC stock was recorded at $8.2 million as of September 30, 2025, and $4.5 million as of December 31, 2024. FRBC stock was recorded at $20.1 million at September 30, 2025, and $14.9 million at December 31, 2024. Our FHLBC stock is necessary to maintain access to FHLBC advances.

The following tables summarize the amortized cost and fair value of the securities portfolio at September 30, 2025, and December 31, 2024, and the corresponding amounts of gross unrealized gains and losses:


					Gross			Gross
		Amortized			Unrealized			Unrealized			Fair
September 30, 2025		Cost¹			Gains			Losses			Value
Securities available-for-sale
U.S. Treasury		$	189,140		$	1,530		$	-		$	190,670
U.S. government agencies			38,716			-			(452)			38,264
U.S. government agencies mortgage-backed			100,957			-			(7,906)			93,051
States and political subdivisions			218,851			334			(8,510)			210,675
Collateralized mortgage obligations			410,239			1,211			(33,214)			378,236
Asset-backed securities			48,767			389			(1,354)			47,802
Collateralized loan obligations			197,860			304			(66)			198,098
Equity securities			684			-			-			684
Total securities available-for-sale		$	1,205,214		$	3,768		$	(51,502)		$	1,157,480


					Gross			Gross
		Amortized			Unrealized			Unrealized			Fair
December 31, 2024		Cost¹			Gains			Losses			Value
Securities available-for-sale
U.S. Treasury		$	193,902		$	700		$	(459)		$	194,143
U.S. government agencies			39,202			-			(1,388)			37,814
U.S. government agencies mortgage-backed			112,241			-			(11,964)			100,277
States and political subdivisions			226,969			264			(11,777)			215,456
Collateralized mortgage obligations			411,170			647			(43,201)			368,616
Asset-backed securities			64,215			69			(1,981)			62,303
Collateralized loan obligations			182,629			472			(9)			183,092
Total securities available-for-sale		$	1,230,328		$	2,152		$	(70,779)		$	1,161,701

¹ Excludes accrued interest receivable of $7.3 million at September 30, 2025, and $7.1 million at December 31, 2024, that is recorded in other assets on the Consolidated Balance Sheets.

The fair value, amortized cost and weighted average yield of debt securities at September 30, 2025, by contractual maturity, are listed in the table below. Securities not due at a single maturity date are shown separately.

At September 30, 2025, the Company had no securities issued from any one originator, other than the U.S. Government and its agencies, which individually amounted to over 10% of the Company’s stockholders’ equity.


					Weighted
		Amortized			Average			Fair
Securities available-for-sale		Cost			Yield			Value
Due in one year or less		$	104,295		3.93	%		$	104,189
Due after one year through five years			157,181		3.94				157,690
Due after five years through ten years			93,379		2.94				89,505
Due after ten years			91,852		3.21				88,225
			446,707		3.58				439,609
Mortgage-backed and collateralized mortgage obligations			511,196		2.81				471,287
Asset-backed securities			48,767		4.05				47,802
Collateralized loan obligations			197,860		5.74				198,098
Equity securities			684		-				684
Total securities available-for-sale		$	1,205,214		3.63	%		$	1,157,480

Securities with unrealized losses with no corresponding allowance for credit losses at September 30, 2025, and December 31, 2024, 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, 2025		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		-			-			-		8			452			38,264		8			452			38,264
U.S. government agencies mortgage-backed		1			40			10,603		128			7,866			82,448		129			7,906			93,051
States and political subdivisions		11			407			28,365		29			8,103			112,046		40			8,510			140,411
Collateralized mortgage obligations		2			7			3,720		135			33,207			301,071		137			33,214			304,791
Asset-backed securities		6			158			15,163		7			1,196			21,300		13			1,354			36,463
Collateralized loan obligations		7			66			50,925		-			-			-		7			66			50,925
Total securities available-for-sale		27		$	678		$	108,776		307		$	50,824		$	555,129		334		$	51,502		$	663,905


		Less than 12 months								12 months or more
December 31, 2024		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		4		$	72		$	49,788		1		$	387		$	49,547		5		$	459		$	99,335
U.S. government agencies		-			-			-		8			1,388			37,814		8			1,388			37,814
U.S. government agencies mortgage-backed		1			447			10,296		128			11,517			89,981		129			11,964			100,277
States and political subdivisions		31			455			85,457		27			11,322			111,308		58			11,777			196,765
Collateralized mortgage obligations		3			24			5,107		139			43,177			328,708		142			43,201			333,815
Asset-backed securities		2			4			1,068		13			1,977			50,198		15			1,981			51,266
Collateralized loan obligations		4			8			31,440		1			1			227		5			9			31,667
Total securities available-for-sale		45		$	1,010		$	183,156		317		$	69,769		$	667,783		362		$	70,779		$	850,939

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. The portfolio continues to consist of a mix of fixed and floating-rate, high quality securities, largely rated AA (or better), displaying an overall effective duration of approximately 3.0 years.

The following table presents net realized gains (losses) on securities available-for-sale for the three and nine months ended:


			Three Months Ended						Nine Months Ended
			September 30,						September 30,
Securities available-for-sale		2025			2024			2025			2024
Proceeds from sales of securities ¹		$	125,892		$	-		$	125,892		$	5,331
Gross realized gains on securities			-			-			-			1
Gross realized losses on securities			(1)			(1)			(1)			(1)
Net realized losses		$	(1)		$	(1)		$	(1)		$	-
Income tax benefit on net realized losses		$	-		$	-		$	-		$	-
Effective tax rate applied			0.0			0.0			0.0			N/M

¹ Includes $118.4 million of proceeds on the sale of securities acquired from Bancorp Financial, which is a reflection of the fair value on the acquisition date.

N/M – Not meaningful.

As of September 30, 2025, securities valued at $677.7 million were pledged for borrowings and for other purposes, a decrease from $717.5 million of securities pledged at year end 2024.