INVESTMENT SECURITIES

12 Months Ended

Dec. 31, 2025

INVESTMENT SECURITIES

INVESTMENT SECURITIES

5. INVESTMENT SECURITIES

The cost basis and fair values of investment securities are summarized as follows:

Investment securities available for sale:

	DECEMBER 31, 2025
			GROSS		GROSS		ALLOWANCE
			UNREALIZED		UNREALIZED		FOR CREDIT		FAIR
	COST BASIS		GAINS		LOSSES		LOSSES		VALUE
	(IN THOUSANDS)
U.S. Agency	$	5,162	$	—	$	(372)	$	—	$	4,790
U.S. Agency mortgage-backed securities		119,381		639		(9,164)		—		110,856
Municipal		10,155		140		(361)		—		9,934
Corporate bonds		51,473		387		(1,212)		—		50,648
Total	$	186,171	$	1,166	$	(11,109)	$	—	$	176,228

Investment securities held to maturity:

	DECEMBER 31, 2025
			ALLOWANCE				GROSS		GROSS
			FOR CREDIT		CARRYING		UNREALIZED		UNREALIZED		FAIR
	COST BASIS		LOSSES		VALUE		GAINS		LOSSES		VALUE
	(IN THOUSANDS)
U.S. Agency	$	2,500	$	—	$	2,500	$	—	$	(216)	$	2,284
U.S. Agency mortgage-backed securities		36,592		—		36,592		210		(1,820)		34,982
Municipal		30,754		(1)		30,753		6		(1,415)		29,344
Corporate bonds and other securities		2,500		(89)		2,411		—		(105)		2,306
Total	$	72,346	$	(90)	$	72,256	$	216	$	(3,556)	$	68,916

Investment securities available for sale:

	DECEMBER 31, 2024
			GROSS		GROSS		ALLOWANCE
			UNREALIZED		UNREALIZED		FOR CREDIT		FAIR
	COST BASIS		GAINS		LOSSES		LOSSES		VALUE
	(IN THOUSANDS)
U.S. Agency	$	5,345	$	—	$	(679)	$	—	$	4,666
U.S. Agency mortgage-backed securities		104,227		90		(12,783)		—		91,534
Municipal		9,031		2		(670)		—		8,363
Corporate bonds		54,254		94		(2,931)		(360)		51,057
Total	$	172,857	$	186	$	(17,063)	$	(360)	$	155,620

Investment securities held to maturity:

	DECEMBER 31, 2024
			ALLOWANCE				GROSS		GROSS
			FOR CREDIT		CARRYING		UNREALIZED		UNREALIZED		FAIR
	COST BASIS		LOSSES		VALUE		GAINS		LOSSES		VALUE
	(IN THOUSANDS)
U.S. Agency	$	2,500	$	—	$	2,500	$	—	$	(365)	$	2,135
U.S. Agency mortgage-backed securities		26,966		—		26,966		28		(2,403)		24,591
Municipal		30,961		(2)		30,959		—		(2,553)		28,406
Corporate bonds and other securities		3,499		(87)		3,412		—		(73)		3,339
Total	$	63,926	$	(89)	$	63,837	$	28	$	(5,394)	$	58,471

The Company and its subsidiary, collectively, did not hold securities of any single issuer, excluding U.S. agencies, that exceeded 10% of shareholders’ equity at December 31, 2025. Management conducted a review of the investment

securities portfolio in order to identify exposures to issuers within foreign countries experiencing significant economic, fiscal, and/or political strains. Given the instability and continuing conflict between Israel and other Middle East nations, the nation of Israel has been identified by management as significantly strained. At December 31, 2025, the Company had a State of Israel Jubilee bond within the held to maturity portfolio with an amortized cost of $1.0 million and a fair value of $980,000. The 3-year bond was purchased prior to the start of the conflicts and is set to mature in August 2026.

The Company recognized no gross investment security gains or losses in 2025 and 2024. The Company sold no available for sale (AFS) securities during 2025 while the proceeds from the sale of AFS securities totaled $935,000 for 2024. The Company had established an allowance for credit losses on one of the AFS securities sold during 2024. In accordance with ASC 326, Financial Instruments – Credit Losses, once the Company decided to sell the security (i.e. intent to sell), the security was charged down, against the allowance, to fair value therefore resulting in the recognition of no gain or loss.

The carrying value of securities, both available for sale and held to maturity, pledged to secure public and trust deposits was $142.7 million at December 31, 2025 and $125.8 million at December 31, 2024. In addition, the Company has pledged $3.8 million of available for sale securities as collateral for a revolving line of credit from an unrelated financial institution.

The interest rate environment and market yields can have a significant impact on the yield earned on mortgage-backed securities (MBS). Prepayment speed assumptions are an important factor to consider when evaluating the returns on an MBS. Generally, as interest rates decline, borrowers have more incentive to refinance into a lower rate, so prepayments will rise. Conversely, as interest rates increase, prepayments will decline. When an MBS is purchased at a premium, the yield will decrease as prepayments increase and the yield will increase as prepayments decrease. As of December 31, 2025, the Company had low premium risk as the book value of our mortgage-backed securities purchased at a premium was only 100.6% of the par value.

The Company’s consolidated investment securities portfolio had an effective duration of approximately 3.76 years. The weighted average expected maturity for available for sale securities at December 31, 2025 for U.S. agency, U.S. agency mortgage-backed, corporate bond, and municipal securities was 5.06, 7.60, 4.14, and 5.19 years, respectively. The weighted average expected maturity for held to maturity securities at December 31, 2025 for U.S. agency, U.S. agency mortgage-backed, corporate bond/other securities, and municipal securities was 4.97, 6.65, 3.93, and 3.68 years, respectively. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without prepayment penalties. The following tables set forth the contractual maturity distribution of investment securities, cost basis for available for sale and carrying value for held to maturity as well as fair market values, as of December 31, 2025.

Investment securities available for sale:

	AT DECEMBER 31, 2025
									TOTAL
							U.S. AGENCY		INVESTMENT
							MORTGAGE-		SECURITIES
					CORPORATE		BACKED		AVAILABLE
	U. S. AGENCY		MUNICIPAL		BONDS		SECURITIES		FOR SALE
	(IN THOUSANDS)
COST BASIS
Within 1 year	$	—	$	700	$	7,793	$	—	$	8,493
After 1 year but within 5 years		3,112		4,372		15,841		1,100		24,425
After 5 years but within 10 years		1,000		4,103		26,089		3,976		35,168
Over 10 years		1,050		980		1,750		114,305		118,085
Total	$	5,162	$	10,155	$	51,473	$	119,381	$	186,171
FAIR VALUE
Within 1 year	$	—	$	700	$	7,739	$	—	$	8,439
After 1 year but within 5 years		2,904		4,124		15,772		1,097		23,897
After 5 years but within 10 years		899		4,126		25,356		3,871		34,252
Over 10 years		987		984		1,781		105,888		109,640
Total	$	4,790	$	9,934	$	50,648	$	110,856	$	176,228

Investment securities held to maturity:

	AT DECEMBER 31, 2025
									TOTAL
							U.S. AGENCY		INVESTMENT
					CORPORATE		MORTGAGE-		SECURITIES
					BONDS AND		BACKED		HELD TO
	U.S. AGENCY		MUNICIPAL		OTHER		SECURITIES		MATURITY
	(IN THOUSANDS)
CARRYING VALUE
Within 1 year	$	—	$	1,406	$	1,000	$	—	$	2,406
After 1 year but within 5 years		—		15,844		—		—		15,844
After 5 years but within 10 years		2,500		13,188		1,411		1,031		18,130
Over 10 years		—		315		—		35,561		35,876
Total	$	2,500	$	30,753	$	2,411	$	36,592	$	72,256
FAIR VALUE
Within 1 year	$	—	$	1,404	$	980	$	—	$	2,384
After 1 year but within 5 years		—		15,569		—		—		15,569
After 5 years but within 10 years		2,284		12,085		1,326		1,014		16,709
Over 10 years		—		286		—		33,968		34,254
Total	$	2,284	$	29,344	$	2,306	$	34,982	$	68,916

The following tables summarize the available for sale debt securities in an unrealized loss position for which an allowance for credit losses has not been recorded as of December 31, 2025 and 2024, aggregated by security type and length of time in a continuous loss position (in thousands):

	DECEMBER 31, 2025
	LESS THAN 12 MONTHS				12 MONTHS OR LONGER				TOTAL
	FAIR		UNREALIZED		FAIR		UNREALIZED		FAIR		UNREALIZED
	VALUE		LOSSES		VALUE		LOSSES		VALUE		LOSSES
U.S. Agency	$	—	$	—	$	4,790	$	(372)	$	4,790	$	(372)
U.S. Agency mortgage-backed securities		9,198		(28)		60,272		(9,136)		69,470		(9,164)
Municipal		—		—		5,670		(361)		5,670		(361)
Corporate bonds		5,086		(64)		20,416		(1,148)		25,502		(1,212)
Total	$	14,284	$	(92)	$	91,148	$	(11,017)	$	105,432	$	(11,109)

	DECEMBER 31, 2024
	LESS THAN 12 MONTHS				12 MONTHS OR LONGER				TOTAL
	FAIR		UNREALIZED		FAIR		UNREALIZED		FAIR		UNREALIZED
	VALUE		LOSSES		VALUE		LOSSES		VALUE		LOSSES
U.S. Agency	$	—	$	—	$	4,666	$	(679)	$	4,666	$	(679)
U.S. Agency mortgage-backed securities		16,104		(275)		63,323		(12,508)		79,427		(12,783)
Municipal		—		—		8,121		(670)		8,121		(670)
Corporate bonds		9,500		(675)		34,612		(2,256)		44,112		(2,931)
Total	$	25,604	$	(950)	$	110,722	$	(16,113)	$	136,326	$	(17,063)

At December 31, 2025, within the available for sale debt securities portfolio, the Company had six U.S. Agency mortgage-backed securities and ten corporate bonds that have been in a gross unrealized loss position for less than 12 months with depreciation of 0.6% from its amortized cost basis. Additionally, at December 31, 2025, within the available for sale debt securities portfolio, the Company had six U.S. Agency, 127 U.S. Agency mortgage-backed securities, 16 municipal, and 39 corporate bonds that have been in a gross unrealized loss position for greater than 12 months with depreciation of 10.8% from its amortized cost basis.

These unrealized losses are primarily a result of increases in market yields from the time of purchase. In general, as market yields rise, the value of securities will decrease; as market yields decrease, the fair value of securities will increase. Management generally views changes in fair value caused by changes in interest rates as temporary; therefore, no allowance for credit losses has been recorded for these securities. Management has also concluded that based on current information we expect to continue to receive scheduled interest payments as well as the entire principal balance. Furthermore, management does not intend to sell these securities and does not believe it will be required to sell these securities before they recover in value or mature.

The following tables present the activity in the allowance for credit losses on available for sale debt securities by major security type for the years ended December 31, 2025 and 2024 (in thousands).

	BALANCE AT DECEMBER 31, 2024		CHARGE-OFFS		RECOVERIES		PROVISION (RECOVERY)		BALANCE AT DECEMBER 31, 2025
Corporate bonds	$	360	$	(1,000)	$	—	$	640	$	—
Total	$	360	$	(1,000)	$	—	$	640	$	—

	BALANCE AT DECEMBER 31, 2023		CHARGE-OFFS		RECOVERIES		PROVISION (RECOVERY)		BALANCE AT DECEMBER 31, 2024
Corporate bonds	$	926	$	(491)	$	—	$	(75)	$	360
Total	$	926	$	(491)	$	—	$	(75)	$	360

During 2025, the Company recognized the charge-off of a $1.0 million corporate bond within the available for sale debt securities portfolio. The security was charged off against an established allowance for credit losses due to further credit deterioration and heightened doubts surrounding the issuer’s ability to meet its payment obligations as well as substantial legal issues. The Company recognized a $640,000 provision for credit losses on available for sale debt securities in 2025 as a result of the establishment of a full reserve on the corporate bond discussed above after a partial reserve was established for the security last year. This compares to the recognition of a $75,000 provision for credit losses recovery in 2024. During 2024, the recognition of the provision recovery was due to the sale of the impaired subordinated debt investment issued by Signature Bank which was partially offset by the establishment of an allowance for credit losses on a corporate AFS security deemed to be credit impaired.

The following tables present the activity in the allowance for credit losses on held to maturity debt securities by major security type for the years ended December 31, 2025 and 2024 (in thousands).

	BALANCE AT DECEMBER 31, 2024		CHARGE-OFFS		RECOVERIES		PROVISION (RECOVERY)		BALANCE AT DECEMBER 31, 2025
Municipal	$	2	$	—	$	—	$	(1)	$	1
Corporate bonds and other securities		87		—		—		2		89
Total	$	89	$	—	$	—	$	1	$	90

	BALANCE AT DECEMBER 31, 2023		CHARGE-OFFS		RECOVERIES		PROVISION (RECOVERY)		BALANCE AT DECEMBER 31, 2024
Municipal	$	2	$	—	$	—	$	—	$	2
Corporate bonds and other securities		35		—		—		52		87
Total	$	37	$	—	$	—	$	52	$	89

The Company’s agency and mortgage-backed securities are issued by U.S. government entities and agencies and are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major rating agencies, and have a long history of no credit losses. As such, no allowance for credit losses has been established for these securities. The allowance for credit losses on the municipal, corporate, and other bonds within the held to maturity securities portfolio is calculated using the PD/LGD method. The calculation is completed on a quarterly basis using the default studies provided by an industry leading source.

Maintaining investment quality is a primary objective of the Company’s Investment Policy which, subject to certain limited exceptions, prohibits the purchase of any investment security below a Moody’s or Standard & Poor’s rating of A. The Company monitors the credit ratings of its debt securities on a quarterly basis. At December 31, 2025, 1.7% of the portfolio was rated AAA as compared to 59.2% at December 31, 2024. The steep decline in securities rated AAA resulted from the Moody’s downgrade of the United States rating to Aa1 during 2025 which impacted the Company’s U.S. Agency and U.S. Agency mortgage-backed securities. At December 31, 2025, 76.5% of the total investment securities portfolio was rated AA or higher compared to 72.8% at December 31, 2024. Approximately 13.5% of the portfolio was rated below A or unrated at December 31, 2025 compared to 14.7% at December 31, 2024.

Specifically, the following table summarizes the carrying value of held to maturity debt securities at December 31, 2025, aggregated by credit quality indicator (in thousands).

	DECEMBER 31, 2025
	CREDIT RATING
	AAA/AA/A		BBB/BB/B		UNRATED		TOTAL
U.S. Agency	$	2,500	$	—	$	—	$	2,500
U.S. Agency mortgage-backed securities		36,592		—		—		36,592
Municipal		30,753		—		—		30,753
Corporate bonds and other securities		1,000		—		1,411		2,411
Total	$	70,845	$	—	$	1,411	$	72,256

The Company had no held to maturity debt securities in non-accrual status or past due 90 days still accruing interest at December 31, 2025 and 2024. The underlying issuers continue to make timely principal and interest payments on the securities.

Trading Securities

The following table presents the Company’s trading securities, at estimated fair value.

	AT DECEMBER 31,
	2025		2024
	(IN THOUSANDS)
U.S. Treasury	$	3,401	$	—
Municipal		3,852		—
Total	$	7,253	$	—

The following table presents the net gain on trading securities included in trading securities revenue for the years ended December 31, 2025 and 2024.

	YEAR ENDED DECEMBER 31,
	2025		2024
	(IN THOUSANDS)
Net realized gain on sales	$	213	$	—
Net unrealized gain		29		—
Net gain on trading securities		242		—
Less: Portfolio expenses and management fees		124		—
Trading securities revenue	$	118	$	—

Equity Securities

As of December 31, 2025 and 2024, the Company reported $183,000 and $350,000, respectively, of equity securities within other assets on the Consolidated Balance Sheets. These equity securities are held within a non-qualified deferred compensation plan in which a select group of executives of the Company can participate. An eligible executive can defer a certain percentage of their current salary to be placed into the plan and held within a rabbi trust. The assets of the rabbi trust are invested in various publicly listed mutual funds. The gain or loss on the equity securities (both realized and unrealized) is reported within other income on the Consolidated Statements of Operations. No gain or loss on the equity securities (both realized and unrealized) was recorded during 2025 and 2024. Additionally, the Company has recognized a deferred compensation liability, which is equal to the balance of the equity securities and is reported within other liabilities on the Consolidated Balance Sheets.

Additionally, the Company previously entered into a Registration Rights Agreement with a borrower who, upon emergence from bankruptcy, issued ordinary shares in satisfaction of debt previously contracted. The shares are not listed on any stock exchange. At December 31, 2025 and 2024, the carrying value of these equity securities without readily determinable fair values was $600,000, which is included in other assets on the Consolidated Balance Sheets. During 2025, the Company received additional shares of restricted common stock due to the spin-off of a portion of the issuer’s business. The shares cannot be sold or transferred and are not listed on any stock exchange. The restricted shares have no carrying value on the Company’s Consolidated Balance Sheets as of December 31, 2025.