NOTE 3 – SECURITIES

The carrying balances of the securities were as follows:


	December 31,		December 31,
	2020		2019
	(dollars in thousands)
Debt securities available-for-sale	$	922,869	$	592,404
Debt securities held-to-maturity		68,395		88,477
Equity securities:
Readily determinable fair value		3,292		3,241
No readily determinable fair value		1,552		1,148
Total securities	$	996,108	$	685,270

Sales of securities were as follows during the years ended December 31:


	Year Ended December 31,
	2020		2019		2018
	(dollars in thousands)
Proceeds from sales	$	—		—	$	104,303
Gross realized gains		—		—		281
Gross realized losses		—		—		(2,822)

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


	Year Ended December 31,
	2020		2019		2018
	(dollars in thousands)
Net realized losses on sales	$	—		—	$	(2,541)
Net unrealized gains (losses) on equity securities:
Readily determinable fair value		33		160		(122)
No readily determinable fair value		—		(165)		—
Gains (losses) on securities	$	33		(5)	$	(2,663)

The $165,000 unrealized loss on equity securities with no readily determinable fair value during the year ended December 31, 2019 reflects a downward adjustment based on observable price changes of an identical investment.

Debt Securities

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


December 31, 2020	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Available-for-sale:	(dollars in thousands)
U.S. government agency	$	118,282	$	3,720	$	(9)	$	121,993
Municipal		265,309		9,232		(280)		274,261
Mortgage-backed:
Agency residential		198,543		4,871		(162)		203,252
Agency commercial		246,649		4,651		(534)		250,766
Corporate		70,917		1,786		(106)		72,597
Total available-for-sale		899,700		24,260		(1,091)		922,869
Held-to-maturity:
Municipal		22,484		1,390		—		23,874
Mortgage-backed:
Agency residential		13,031		452		—		13,483
Agency commercial		32,880		2,222		(18)		35,084
Total held-to-maturity		68,395		4,064		(18)		72,441
Total debt securities	$	968,095	$	28,324	$	(1,109)	$	995,310


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 December 31, 2020 and 2019, the Bank had securities with a carrying value of $308,064,000 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 securities issued by municipalities located in Illinois as of December 31, 2020. Approximately 75% of such securities were general obligation issues as of December 31, 2020.

The amortized cost and fair value of debt securities by contractual maturity, as of December 31, 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	$	28,332	$	28,626	$	1,396	$	1,424
Due after 1 year through 5 years		82,778		85,859		13,895		14,806
Due after 5 years through 10 years		210,971		218,710		6,302		6,723
Due after 10 years		132,427		135,656		891		921

Mortgage-backed:
Agency residential		198,543		203,252		13,031		13,483
Agency commercial		246,649		250,766		32,880		35,084
Total	$	899,700	$	922,869	$	68,395	$	72,441

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, 2020	Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value
Available-for-sale:	(dollars in thousands)
U.S. government agency	$	(9)	$	5,919	$	—	$	—	$	(9)	$	5,919
Municipal		(280)		19,652		—		—		(280)		19,652
Mortgage-backed:
Agency residential		(142)		20,387		(20)		4,490		(162)		24,877
Agency commercial		(524)		57,126		(10)		3,449		(534)		60,575
Corporate		(106)		4,849		—		—		(106)		4,849
Total available-for-sale		(1,061)		107,933		(30)		7,939		(1,091)		115,872
Held-to-maturity:
Mortgage-backed:
Agency commercial		(18)		2,983		—		—		(18)		2,983
Total held-to-maturity		(18)		2,983		—		—		(18)		2,983
Total debt securities	$	(1,079)	$	110,916	$	(30)	$	7,939	$	(1,109)	$	118,855


	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 December 31, 2020, there were 8 securities in an unrealized loss position for a period of twelve months or more, and 60 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.

Equity Securities

The Company has elected to measure equity securities with no readily determinable fair value at cost minus impairment, if any, plus or minus changes resulting from observable price changes for identical or similar securities of the same issuer.

The initial cost and carrying values of equity securities, with cumulative net unrealized gains and losses, are as follows:


			Cumulative
			Net Unrealized
December 31, 2020	Initial Cost		Gains (Losses)		Carrying Value
	(dollars in thousands)
Readily determinable fair value	$	3,098	$	194	$	3,292
No readily determinable fair value		1,717		(165)		1,552
Total equity securities	$	4,815	$	29	$	4,844


			Cumulative
			Net Unrealized
December 31, 2019	Initial Cost		Gains (Losses)		Carrying Value
	(dollars in thousands)
Readily determinable fair value	$	3,080	$	161	$	3,241
No readily determinable fair value		1,313		(165)		1,148
Total equity securities	$	4,393	$	(4)	$	4,389

As of December 31, 2020 and 2019, the cumulative net unrealized losses on equity securities with no readily determinable fair value reflects downward adjustments based on observable price changes of an identical investment. There have been no impairments or upward adjustments based on observable price changes to equity securities with no readily determinable fair value.