NOTE 2 – SECURITIES

The carrying balances of the securities were as follows:


	September 30,		December 31,
	2020		2019
	(dollars in thousands)
Debt securities available-for-sale	$	814,798	$	592,404
Debt securities held-to-maturity		74,510		88,477
Equity securities:
Readily determinable fair value		3,262		3,241
No readily determinable fair value		1,552		1,148
Total securities	$	894,122	$	685,270

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 three and nine months ended September 30, 2020, there were no adjustments to the carrying balance of equity securities with no readily determinable fair value based on an observable price change of an identical investment. During the three and nine months ended September 30, 2019, there were downward adjustments of $128,000 to the carrying balance of equity securities with no readily determinable fair value based on an observable price change of an identical investment. As of September 30, 2020 and December 31, 2019, the carrying balance of equity securities with no readily determinable fair value reflect cumulative downward adjustments based on observable price changes of $165,000. There have been no impairments or upward adjustments based on observable price changes to the equity securities with no readily determinable fair value held at September 30, 2020 and December 31, 2019.

The amortized cost and fair values of debt securities, with gross unrealized gains and losses, are as follows:


September 30, 2020	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available-for-sale:	(dollars in thousands)
U.S. government agency	$	100,462	$	3,866	$	(2)	$	104,326
Municipal		232,795		7,962		(347)		240,410
Mortgage-backed:
Agency residential		220,970		5,462		(115)		226,317
Agency commercial		166,444		4,831		(203)		171,072
Corporate		70,862		1,907		(96)		72,673
Total available-for-sale		791,533		24,028		(763)		814,798
Held-to-maturity:
Municipal		26,830		1,480		—		28,310
Mortgage-backed:
Agency residential		14,556		523		—		15,079
Agency commercial		33,124		2,378		—		35,502
Total held-to-maturity		74,510		4,381		—		78,891
Total debt securities	$	866,043	$	28,409	$	(763)	$	893,689


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 available-for-sale		584,507		8,508		(611)		592,404
Held-to-maturity:
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 held-to-maturity		88,477		2,276		(224)		90,529
Total debt securities	$	672,984	$	10,784	$	(835)	$	682,933

As of September 30, 2020 and December 31, 2019, the Banks had debt securities with a carrying value of $349,412,000 and $284,895,000, 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 41% of the obligations of local municipalities portfolio consists of debt securities issued by municipalities located in Illinois as of September 30, 2020. Approximately 87% of such debt securities were general obligation issues as of September 30, 2020.

The amortized cost and fair value of debt securities by contractual maturity, as of September 30, 2020, 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	$	36,762	$	37,033	$	747	$	749
Due after 1 year through 5 years		85,100		87,897		14,702		15,452
Due after 5 years through 10 years		183,944		191,538		10,490		11,186
Due after 10 years		98,313		100,941		891		923

Mortgage-backed:
Agency residential		220,970		226,317		14,556		15,079
Agency commercial		166,444		171,072		33,124		35,502
Total	$	791,533	$	814,798	$	74,510	$	78,891

There were no sales of securities during the three and nine months ended September 30, 2020 and 2019. Gains (losses) on securities were as follows during the three and nine months ended September 30:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
	(dollars in thousands)
Net realized gains (losses) on sales	$	—	$	—	$	—	$	—
Net unrealized gains (losses) on equities:
Readily determinable fair value		(2)		55		3		170
No readily determinable fair value		—		(128)		—		(128)
Gains (losses) on securities	$	(2)	$	(73)	$	3	$	42

The following tables present gross unrealized losses and fair value of debt securities, aggregated by category and length of time that individual debt securities have been in a continuous unrealized loss position, as of September 30, 2020 and December 31, 2019:


	Investments in a Continuous Unrealized Loss Position
	Less than 12 Months				12 Months or More				Total
September 30, 2020	Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value
Available-for-sale:	(dollars in thousands)
U.S. government agency	$	(2)	$	3,493	$	—	$	—	$	(2)	$	3,493
Municipal		(347)		28,955		—		—		(347)		28,955
Mortgage-backed:
Agency residential		(101)		20,386		(14)		4,378		(115)		24,764
Agency commercial		(177)		22,668		(26)		3,471		(203)		26,139
Corporate		(96)		9,858		—		—		(96)		9,858
Total available-for-sale		(723)		85,360		(40)		7,849		(763)		93,209
Total debt securities	$	(723)	$	85,360	$	(40)	$	7,849	$	(763)	$	93,209


	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 available-for-sale		(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 held-to-maturity		(77)		9,532		(147)		9,601		(224)		19,133
Total debt securities	$	(317)	$	74,910	$	(518)	$	54,599	$	(835)	$	129,509

As of September 30, 2020, there were 7 debt securities in an unrealized loss position for a period of twelve months or more, and 58 debt securities in an unrealized loss position for a period of less than twelve months. These unrealized losses are primarily a result of fluctuations in market interest rates. In analyzing an issuer’s financial condition, management considers whether the debt 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 debt securities are deemed to be temporary.