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SECURITIES

12 Months Ended

Dec. 31, 2022

SECURITIES

SECURITIES

NOTE 3 – SECURITIES

Debt Securities

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


December 31, 2022		Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses			Fair Value

Available-for-sale:		(dollars in thousands)
U.S. Treasury		$	169,860		$	—		$	(15,345)		$	154,515
U.S. government agency			59,291			—			(4,134)			55,157
Municipal			275,972			46			(32,189)			243,829
Mortgage-backed:
Agency residential			213,676			5			(18,240)			195,441
Agency commercial			150,060			—			(17,172)			132,888
Corporate			65,597			55			(3,958)			61,694
Total available-for-sale			934,456			106			(91,038)			843,524
Held-to-maturity:
U.S. government agency			88,424			—			(9,728)			78,696
Municipal			42,167			195			(314)			42,048
Mortgage-backed:
Agency residential			102,728			—			(6,470)			96,258
Agency commercial			308,281			—			(46,482)			261,799
Total held-to-maturity			541,600			195			(62,994)			478,801
Total debt securities		$	1,476,056		$	301		$	(154,032)		$	1,322,325


December 31, 2021		Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses			Fair Value

Available-for-sale:		(dollars in thousands)
U.S. Treasury		$	109,002		$	328		$	(354)		$	108,976
U.S. government agency			129,269			1,303			(2,467)			128,105
Municipal			293,837			6,144			(2,904)			297,077
Mortgage-backed:
Agency residential			178,236			2,149			(919)			179,466
Agency commercial			164,875			1,234			(2,048)			164,061
Corporate			63,141			1,638			(296)			64,483
Total available-for-sale			938,360			12,796			(8,988)			942,168
Held-to-maturity:
U.S. government agency			12,349			42			(51)			12,340
Municipal			15,666			809			—			16,475
Mortgage-backed:
Agency residential			20,555			196			(102)			20,649
Agency commercial			287,615			1,749			(2,801)			286,563
Total held-to-maturity			336,185			2,796			(2,954)			336,027
Total debt securities		$	1,274,545		$	15,592		$	(11,942)		$	1,278,195

On March 31, 2022, June 30, 2021 and March 31, 2021, the Company transferred certain debt securities from the available-for-sale category to the held-to-maturity category in order to better reflect the revised intentions of the Company due to possible market volatility, resulting from a potential rise in interest rates. The following is a summary of the amortized cost and fair value of securities transferred to the held-to-maturity category:


		March 31, 2022						June 30, 2021						March 31, 2021
		Amortized						Amortized						Amortized
		Cost			Fair Value			Cost			Fair Value			Cost			Fair Value

		(dollars in thousands)
U.S. government agency		$	78,841		$	71,048		$	—		$	—		$	7,593		$	7,323
Mortgage-backed:
Agency residential			8,175			7,651			—			—			8,776			8,536
Agency commercial			27,834			25,432			99,271			99,275			118,792			113,861
Total		$	114,850		$	104,131		$	99,271		$	99,275		$	135,161		$	129,720

The debt securities were transferred between categories at fair value, with the transfer date fair value becoming the new amortized cost for each security transferred. The unrealized gain (loss), net of tax, at the date of transfer remains a component of accumulated other comprehensive income (loss), but will be amortized over the remaining life of the debt securities as an adjustment of yield in a manner consistent with amortization of any premium or discount. As a result, the amortization of an unrealized gain (loss) reported in accumulated other comprehensive income (loss) will offset or mitigate the effect on interest income of the amortization of the premium or discount for that held-to-maturity debt security.

As of December 31, 2022 and 2021, the Company had securities with a carrying value of $332.6 million and $353.3 million, 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 49% of the municipal portfolio consists of securities issued by municipalities located in Illinois as of December 31, 2022. Approximately 81% of such securities were general obligation issues as of December 31, 2022.

The amortized cost and fair value of debt securities by contractual maturity, as of December 31, 2022, 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		$	19,501		$	19,127		$	2,288		$	2,290
Due after 1 year through 5 years			230,286			216,799			27,813			26,908
Due after 5 years through 10 years			251,203			217,722			83,181			76,214
Due after 10 years			69,730			61,547			17,309			15,332

Mortgage-backed:
Agency residential			213,676			195,441			102,728			96,258
Agency commercial			150,060			132,888			308,281			261,799
Total		$	934,456		$	843,524		$	541,600		$	478,801

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, 2022		Unrealized Loss			Fair Value			Unrealized Loss			Fair Value			Unrealized Loss			Fair Value

Available-for-sale:		(dollars in thousands)
U.S. Treasury		$	(8,401)		$	92,445		$	(6,944)		$	62,070		$	(15,345)		$	154,515
U.S. government agency			(2,980)			47,370			(1,154)			7,787			(4,134)			55,157
Municipal			(10,906)			149,261			(21,283)			87,794			(32,189)			237,055
Mortgage-backed:
Agency residential			(8,332)			127,288			(9,908)			65,692			(18,240)			192,980
Agency commercial			(4,764)			62,672			(12,408)			70,216			(17,172)			132,888
Corporate			(2,594)			52,190			(1,364)			5,600			(3,958)			57,790
Total available-for-sale			(37,977)			531,226			(53,061)			299,159			(91,038)			830,385
Held-to-maturity:
U.S. government agency			(1,754)			15,751			(7,974)			62,945			(9,728)			78,696
Municipal			(314)			23,433			—			—			(314)			23,433
Mortgage-backed:
Agency residential			(4,039)			78,452			(2,431)			17,806			(6,470)			96,258
Agency commercial			(16,716)			103,298			(29,766)			158,501			(46,482)			261,799
Total held-to-maturity			(22,823)			220,934			(40,171)			239,252			(62,994)			460,186
Total debt securities		$	(60,800)		$	752,160		$	(93,232)		$	538,411		$	(154,032)		$	1,290,571


		Investments in a Continuous Unrealized Loss Position
		Less than 12 Months						12 Months or More						Total
December 31, 2021		Unrealized Loss			Fair Value			Unrealized Loss			Fair Value			Unrealized Loss			Fair Value

Available-for-sale:		(dollars in thousands)
U.S. Treasury		$	(354)		$	68,410		$	—		$	—		$	(354)		$	68,410
U.S. government agency			(2,183)			80,219			(284)			5,578			(2,467)			85,797
Municipal			(2,018)			89,424			(886)			17,327			(2,904)			106,751
Mortgage-backed:
Agency residential			(851)			91,703			(68)			4,305			(919)			96,008
Agency commercial			(1,921)			113,111			(127)			6,443			(2,048)			119,554
Corporate			(7)			2,737			(289)			4,671			(296)			7,408
Total available-for-sale			(7,334)			445,604			(1,654)			38,324			(8,988)			483,928
Held-to-maturity:
U.S. government agency			(51)			4,949			—			—			(51)			4,949
Mortgage-backed:
Agency residential			(102)			14,932			—			—			(102)			14,932
Agency commercial			(2,673)			174,428			(128)			2,776			(2,801)			177,204
Total held-to-maturity			(2,826)			194,309			(128)			2,776			(2,954)			197,085
Total debt securities		$	(10,160)		$	639,913		$	(1,782)		$	41,100		$	(11,942)		$	681,013

As of December 31, 2022, there were 261 securities in an unrealized loss position for a period of twelve months or more, and 519 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.

There were no sales of debt securities during the years ended December 31, 2022, 2021, and 2020.

Equity Securities

Equity securities with readily determinable fair values are measured at fair value with changes in fair value recognized in unrealized gains (losses) on equity securities on the consolidated statements of income.

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:


		Readily			No Readily
		Determinable			Determinable
December 31, 2022		Fair Value			Fair Value

		(dollars in thousands)
Initial cost		$	3,142		$	2,142
Cumulative net unrealized losses			(113)			(165)
Carrying value		$	3,029		$	1,977


		Readily			No Readily
		Determinable			Determinable
December 31, 2021		Fair Value			Fair Value

		(dollars in thousands)
Initial cost		$	3,142		$	2,092
Cumulative net unrealized gains (losses)			301			(165)
Carrying value		$	3,443		$	1,927

As of December 31, 2022 and 2021, the cumulative net unrealized losses on equity securities with no readily determinable fair value reflect 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.

There were no sales of equity securities during the years ended December 31, 2022, 2021, and 2020. Unrealized gains (losses) on equity securities were as follows during the years ended December 31:


		Year Ended December 31,
		2022			2021			2020

		(dollars in thousands)
Readily determinable fair value			(414)			107			33
No readily determinable fair value			—			—			—
Unrealized gains (losses) on equity securities		$	(414)			107		$	33