Securities

6 Months Ended

Jun. 30, 2026

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 primarily of debt securities, which are classified as securities available-for-sale and 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.

In addition, non-marketable equity investments include Federal Home Loan Bank of Chicago (“FHLBC”) and Federal Reserve Bank of Chicago (“FRBC”) stock and are reported separately on the Consolidated Balance Sheets. FHLBC stock was recorded at $19.4 million as of June 30, 2026, and $11.3 million as of December 31, 2025. FRBC stock was recorded at $20.7 million at June 30, 2026 and December 31, 2025. 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 June 30, 2026, and December 31, 2025, and the corresponding amounts of gross unrealized gains and losses:


					Gross			Gross
		Amortized			Unrealized			Unrealized			Fair
June 30, 2026		Cost¹			Gains			Losses			Value
Securities available-for-sale
U.S. Treasury		$	144,392		$	183		$	(188)		$	144,387
U.S. government agencies			68,861			-			(457)			68,404
U.S. government agencies mortgage-backed			88,663			-			(7,427)			81,236
States and political subdivisions			205,386			230			(7,671)			197,945
Collateralized mortgage obligations			374,483			509			(31,931)			343,061
Asset-backed securities			40,128			327			(1,330)			39,125
Collateralized loan obligations			165,752			183			(79)			165,856
Equity securities			714			32			-			746
Total securities available-for-sale		$	1,088,379		$	1,464		$	(49,083)		$	1,040,760


					Gross			Gross
		Amortized			Unrealized			Unrealized			Fair
December 31, 2025		Cost¹			Gains			Losses			Value
Securities available-for-sale
U.S. Treasury		$	164,296		$	1,564		$	-		$	165,860
U.S. government agencies			29,421			-			(245)			29,176
U.S. government agencies mortgage-backed			95,899			-			(7,119)			88,780
States and political subdivisions			213,366			450			(7,441)			206,375
Collateralized mortgage obligations			388,774			1,102			(30,571)			359,305
Asset-backed securities			46,600			423			(1,207)			45,816
Collateralized loan obligations			194,552			151			(239)			194,464
Equity securities			684			63			-			747
Total securities available-for-sale		$	1,133,592		$	3,753		$	(46,822)		$	1,090,523

¹ Excludes accrued interest receivable of $6.8 million at June 30, 2026, and $6.9 million at December 31, 2025, that is recorded in other assets on the Consolidated Balance Sheets.

The fair value, amortized cost and weighted average yield of debt securities at June 30, 2026, by contractual maturity, are listed in the table below. Securities not due at a single maturity date are shown separately.


					Weighted
		Amortized			Average			Fair
Securities available-for-sale		Cost			Yield			Value
Due in one year or less		$	97,792		3.89	%		$	97,905
Due after one year through five years			110,048		3.82				108,959
Due after five years through ten years			149,558		3.48				145,058
Due after ten years			61,241		3.25				58,814
			418,639		3.63				410,736
Mortgage-backed and collateralized mortgage obligations			463,146		2.81				424,297
Asset-backed securities			40,128		3.69				39,125
Collateralized loan obligations			165,752		5.21				165,856
Equity securities			714		-				746
Total securities available-for-sale		$	1,088,379		3.52	%		$	1,040,760

At June 30, 2026, 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.

Securities with unrealized losses with no corresponding allowance for credit losses at June 30, 2026, and December 31, 2025, 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
June 30, 2026		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		5		$	188		$	64,452		-		$	-		$	-		5		$	188		$	64,452
U.S. government agencies		1			385			39,303		7			72			29,101		8			457			68,404
U.S. government agencies mortgage-backed		1			75			10,462		126			7,352			70,774		127			7,427			81,236
States and political subdivisions		13			67			40,342		19			7,604			74,472		32			7,671			114,814
Collateralized mortgage obligations		10			230			35,177		126			31,701			262,851		136			31,931			298,028
Asset-backed securities		6			204			11,504		9			1,126			21,905		15			1,330			33,409
Collateralized loan obligations		9			60			54,949		2			19			9,983		11			79			64,932
Total securities available-for-sale		45		$	1,209		$	256,189		289		$	47,874		$	469,086		334		$	49,083		$	725,275


		Less than 12 months								12 months or more
December 31, 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		-		$	-		$	-		7		$	245		$	29,176		7		$	245		$	29,176
U.S. government agencies mortgage-backed		1			36			10,572		126			7,083			78,208		127			7,119			88,780
States and political subdivisions		1			4			5,046		29			7,437			104,483		30			7,441			109,529
Collateralized mortgage obligations		5			19			6,287		130			30,552			288,228		135			30,571			294,515
Asset-backed securities		7			139			14,927		7			1,068			20,164		14			1,207			35,091
Collateralized loan obligations		12			239			87,299		-			-			-		12			239			87,299
Total securities available-for-sale		26		$	437		$	124,131		299		$	46,385		$	520,259		325		$	46,822		$	644,390

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 2.5 years.

There were no securities sold for the three and six months ended June 30, 2026 or June 30, 2025, respectively.

As of June 30, 2026, securities valued at $663.7 million were pledged for borrowings and for other purposes, a decrease from $679.5 million of securities pledged at year end 2025.