NOTE 3 – SECURITIES

The carrying balances of the securities were as follows:


	December 31,		December 31,
	2019		2018
	(dollars in thousands)
Securities available-for-sale	$	592,404	$	679,526
Securities held-to-maturity		88,477		121,715
Equity securities:
Readily determinable fair value		3,241		3,081
No readily determinable fair value		1,148		180
Total securities	$	685,270	$	804,502

The Company has elected to measure the equity securities with no readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes for identical or similar securities of the same issuer. During the year ended December 31, 2019, the Company recognized losses of $165,000 on equity securities with no readily determinable fair value based on observable price changes of an identical investment.

The amortized cost and fair values of securities available-for-sale, with gross unrealized gains and losses, are as follows:


December 31, 2019	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available-for-sale:	(dollars in thousands)
U.S. government agency	$	49,113	$	529	$	(27)	$	49,615
Municipal		131,241		2,503		(6)		133,738
Mortgage-backed:
Agency residential		198,184		2,780		(286)		200,678
Agency commercial		133,730		1,516		(292)		134,954
Corporate		72,239		1,180		—		73,419
Total	$	584,507	$	8,508	$	(611)	$	592,404


December 31, 2018	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available-for-sale:	(dollars in thousands)
U.S. government agency	$	46,977	$	250	$	(361)	$	46,866
Municipal		161,957		761		(1,268)		161,450
Mortgage-backed:
Agency residential		235,903		788		(2,388)		234,303
Agency commercial		151,878		285		(2,082)		150,081
Private-label		254		2		—		256
Corporate		87,118		207		(755)		86,570
Total	$	684,087	$	2,293	$	(6,854)	$	679,526

The amortized cost and fair value of securities held-to-maturity, with gross unrealized gains and losses, are as follows:


December 31, 2019	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Held-to-maturity:	(dollars in thousands)
Municipal	$	45,239	$	1,340	$	—	$	46,579
Mortgage-backed:
Agency residential		19,072		161		(170)		19,063
Agency commercial		24,166		775		(54)		24,887
Total	$	88,477	$	2,276	$	(224)	$	90,529


December 31, 2018	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Held-to-maturity:	(dollars in thousands)
Municipal	$	73,176	$	1,149	$	(42)	$	74,283
Mortgage-backed:
Agency residential		23,192		—		(998)		22,194
Agency commercial		25,347		177		(495)		25,029
Total	$	121,715	$	1,326	$	(1,535)	$	121,506

As of December 31, 2019 and 2018, the Banks had securities with a carrying value of $284,895,000 and $291,404,000, respectively, which were pledged to secure public and trust deposits, securities sold under agreements to repurchase, and for other purposes required or permitted by law.

The Company has no direct exposure to the State of Illinois, but approximately 51% of the obligations of local municipalities portfolio consists of securities issued by municipalities located in Illinois as of December 31, 2019. Approximately 88% of such securities were general obligation issues as of December 31, 2019.

The amortized cost and fair value of securities available-for-sale and securities held-to-maturity, as of December 31, 2019, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.


	Available-for-Sale				Held-to-Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(dollars in thousands)
Due in 1 year or less	$	49,357	$	49,527	$	752	$	758
Due after 1 year through 5 years		115,487		117,484		31,309		32,238
Due after 5 years through 10 years		81,515		83,392		11,504		11,799
Due after 10 years		6,234		6,369		1,674		1,784

Mortgage-backed:
Agency residential		198,184		200,678		19,072		19,063
Agency commercial		133,730		134,954		24,166		24,887
Total	$	584,507	$	592,404	$	88,477	$	90,529

Sales of securities available-for-sale were as follows during the years ended December 31:


	Year Ended December 31,
	2019		2018		2017
	(dollars in thousands)
Proceeds from sales	$	—		104,303	$	51,500
Gross realized gains		—		281		—
Gross realized losses		—		(2,822)		(1,275)

Gains (losses) on securities were as follows during the years ended December 31:


	Year Ended December 31,
	2019		2018		2017
	(dollars in thousands)
Net realized losses on sales	$	—		(2,541)	$	(1,275)
Net unrealized gains (losses) on equities:
Readily determinable fair value		160		(122)		—
No readily determinable fair value		(165)		—		—
Gains (losses) on securities	$	(5)		(2,663)	$	(1,275)

The following tables present gross unrealized losses and fair value of investments, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, as of December 31:


	Investments in a Continuous Unrealized Loss Position
	Less than 12 Months				12 Months or More				Total
December 31, 2019	Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value
Available-for-sale:	(dollars in thousands)
U.S. government agency	$	(26)	$	18,865	$	(1)	$	1,998	$	(27)	$	20,863
Municipal		(6)		894		—		—		(6)		894
Mortgage-backed:
Agency residential		(108)		25,563		(178)		27,296		(286)		52,859
Agency commercial		(100)		20,056		(192)		15,704		(292)		35,760
Total	$	(240)	$	65,378	$	(371)	$	44,998	$	(611)	$	110,376

Held-to-maturity:
Mortgage-backed:
Agency residential	$	(30)	$	2,516	$	(140)	$	9,002	$	(170)	$	11,518
Agency commercial		(47)		7,016		(7)		599		(54)		7,615
Total	$	(77)	$	9,532	$	(147)	$	9,601	$	(224)	$	19,133


	Investments in a Continuous Unrealized Loss Position
	Less than 12 Months				12 Months or More				Total
December 31, 2018	Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value
Available-for-sale:	(dollars in thousands)
U.S. government agency	$	(302)	$	19,079	$	(59)	$	7,938	$	(361)	$	27,017
Municipal		(230)		31,034		(1,038)		59,702		(1,268)		90,736
Mortgage-backed:
Agency residential		(299)		40,864		(2,089)		99,967		(2,388)		140,831
Agency commercial		(262)		35,462		(1,820)		81,899		(2,082)		117,361
Corporate		(263)		20,734		(492)		39,054		(755)		59,788
Total	$	(1,356)	$	147,173	$	(5,498)	$	288,560	$	(6,854)	$	435,733

Held-to-maturity:
Municipal	$	(32)	$	4,166	$	(10)	$	1,856	$	(42)	$	6,022
Mortgage-backed:
Agency residential		(59)		4,046		(939)		17,564		(998)		21,610
Agency commercial		(67)		8,910		(428)		10,413		(495)		19,323
Total	$	(158)	$	17,122	$	(1,377)	$	29,833	$	(1,535)	$	46,955

As of December 31, 2019, there were 59 securities in an unrealized loss position for a period of twelve months or more, and 35 securities in an unrealized loss position for a period of less than twelve months. These unrealized losses are primarily a result of fluctuations in interest rates in the bond market. In analyzing an issuer’s financial condition, management considers whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, and industry analysts’ reports. Management believes that all declines in value of these securities are deemed to be temporary.