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SECURITIES
3 Months Ended
Mar. 31, 2026
SECURITIES  
SECURITIES

NOTE 3 — SECURITIES

Debt Securities

The Company classifies its securities as either “Held-to-Maturity” or “Available-for-Sale” at the time of purchase. Securities are accounted for on a trade date basis. Debt securities are classified as Held-to-Maturity when the Company has the ability and positive intent to hold the securities to maturity. Securities classified as Held-to-Maturity are carried at cost adjusted for amortization of premium and accretion of discount to maturity. At March 31, 2026 and December 31, 2025, all debt securities held were classified as available-for-sale.

Debt securities not classified as Held-to-Maturity are included in the Available-for-Sale category and are carried at fair value. The amount of any unrealized gain or loss, net of the effect of deferred income taxes, is reported as accumulated other comprehensive loss in the consolidated balance sheets and consolidated statements of changes in stockholders’ equity. Management’s decision to sell Available-for-Sale securities is based on changes in economic conditions, controlling the sources and applications of funds, terms, availability of and yield of alternative investments, interest rate risk and the need for liquidity.

The cost of debt securities classified as Held-to-Maturity or Available-for-Sale is adjusted for amortization of premiums to the earliest call date and accretion of discounts to expected maturity. Such amortization and accretion, as well as interest and dividends, are included in interest and dividend income from securities. Realized gains and losses are included in net securities gains and losses. The cost of securities sold, redeemed or matured is based on the specific identification method.

The Company invests in various forms of agency debt including residential and commercial mortgage-backed securities and callable debt. The mortgage-backed agency securities are issued by Federal Home Loan Mortgage
Corporation (“FHLMC”), Federal National Mortgage Association (“FNMA”), Government National Mortgage
Association (“GNMA”) or Small Business Administration (“SBA”). The other mortgage-backed securities consist of private (non-agency) residential and commercial mortgage-backed securities. The municipal securities consist of general obligations and revenue bonds. Asset-backed securities consist of private (non-agency) student loan pools backed by the Federal Family Education Loan Program (“FFELP”) which carry a 97% federal government guarantee. Corporate debt securities consist of senior debt and subordinated debt holdings.

There was no allowance for credit losses for Available-For-Sale debt securities recorded as of March 31, 2026 and December 31, 2025; therefore, it is not present in the table below. The amortized cost, related estimated fair value, and unrealized gains and losses for debt securities classified as Available-For-Sale, along with the cumulative basis adjustments for fair value hedges, were as follows at March 31, 2026 and December 31, 2025:

Debt Securities Available-for-Sale

(Dollars in thousands)

  ​ ​ ​

  ​ ​ ​

Gross

  ​ ​ ​

Gross

  ​ ​ ​

Amortized

Unrealized

Unrealized

Basis

Fair

March 31, 2026:

Cost

Gains

Losses

Adjustment

Value

U.S. Treasury securities

$

7,948

$

$

(412)

$

$

7,536

Obligations of U.S. Government Agencies and Sponsored Agencies:

 

 

 

 

 

Mortgage-backed

181,649

667

(10,570)

594

172,340

Other

 

2,794

 

30

 

(14)

 

 

2,810

Other mortgage backed securities

 

35,497

 

51

 

(1,229)

 

 

34,319

Obligations of state and political subdivisions

 

82,570

 

30

 

(9,060)

 

675

 

74,215

Asset-backed securities

 

60,771

 

151

 

(442)

 

 

60,480

Corporate debt securities

 

37,181

 

467

 

(2,484)

 

 

35,164

Total

$

408,410

$

1,396

$

(24,211)

$

1,269

$

386,864

Debt Securities Available-for-Sale

(Dollars in thousands)

  ​ ​ ​

  ​ ​ ​

Gross

  ​ ​ ​

Gross

  ​ ​ ​

Amortized

Unrealized

Unrealized

Basis

Fair

December 31, 2025:

Cost

Gains

Losses

Adjustment

Value

U.S. Treasury securities

$

7,941

$

$

(405)

$

$

7,536

Obligations of U.S. Government Agencies and Sponsored Agencies:

 

 

 

 

 

Mortgage-backed

185,140

919

(10,748)

940

176,251

Other

 

3,271

 

40

 

(17)

 

 

3,294

Other mortgage backed securities

 

37,572

 

45

 

(1,186)

 

 

36,431

Obligations of state and political subdivisions

 

82,919

 

30

 

(9,017)

 

993

 

74,925

Asset-backed securities

 

63,644

 

211

 

(362)

 

 

63,493

Corporate debt securities

 

34,418

 

383

 

(2,505)

 

 

32,296

Total

$

414,905

$

1,628

$

(24,240)

$

1,933

$

394,226

Debt securities Available-for-Sale with an aggregate fair value of $223,351,000 at March 31, 2026 and $214,422,000 at December 31, 2025, were pledged to secure public funds, trust funds, securities sold under agreements to repurchase and the Federal Discount Window aggregating $163,333,000 at March 31, 2026 and $170,661,000 at December 31, 2025.

The amortized cost and estimated fair value of debt securities, by contractual maturity, are shown below at March 31, 2026. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

March 31, 2026

Debt Securities Available-For-Sale

(Dollars in thousands)

U.S. Government

Other

Obligations

Agency &

Mortgage

of State

Asset

Corporate

 

U.S. Treasury

 

Sponsored Agency

 

Backed Debt

 

& Political

 

Backed

 

Debt

  ​ ​ ​

Securities

  ​ ​ ​

Obligations1

  ​ ​ ​

Securities1

  ​ ​ ​

Subdivisions

  ​ ​ ​

Securities

  ​ ​ ​

Securities

Within 1 Year:

 

  ​

 

  ​

 

  ​

 

  ​

 

  ​

 

  ​

Amortized cost

$

$

$

4,014

$

4,395

$

$

Fair value

 

 

 

4,002

 

4,388

 

 

1 - 5 Years:

 

Amortized cost

 

7,948

 

7,766

 

104

 

7,168

 

591

 

7,706

Fair value

 

7,536

 

7,770

 

104

 

6,955

 

592

 

7,684

5 - 10 Years:

 

Amortized cost

 

 

748

 

698

 

32,834

 

703

 

24,251

Fair value

 

 

747

 

705

 

29,320

 

700

 

23,823

After 10 Years:

 

Amortized cost

 

 

175,929

 

30,681

 

38,173

 

59,477

 

5,224

Fair value

 

 

166,633

 

29,508

 

33,552

 

59,188

 

3,657

Total:

 

  ​

 

  ​

 

  ​

 

  ​

 

  ​

 

  ​

Amortized cost

$

7,948

$

184,443

$

35,497

$

82,570

$

60,771

$

37,181

Fair value

 

7,536

 

175,150

 

34,319

 

74,215

 

60,480

 

35,164

1

Mortgage-backed securities are allocated for maturity reporting at their original maturity date.

At March 31, 2026 and December 31, 2025, the Company had holdings of securities from the following issuers in excess of ten percent of consolidated stockholders’ equity (excluding holdings of the U.S. Government and U.S. Government Agencies and Corporations).

(Dollars in thousands)

  ​ ​ ​

 

Fair

 

March 31, 2026:

Value

 

Issuer

Sallie Mae Bank

$

22,595

Velocity Commercial Capital

18,355

Nelnet Student Loan Trust

 

12,663

(Dollars in thousands)

  ​ ​ ​

Fair

December 31, 2025:

Value

Issuer

Sallie Mae Bank

$

23,354

Velocity Commercial Capital

19,551

Nelnet Student Loan Trust

 

13,169

There were no proceeds from sales of Debt Securities Available-For-Sale for the quarter ended March 31, 2026 and 2025. Therefore, there were no gains or losses realized during these periods.

The summary below shows the gross unrealized losses and fair value of the Company’s debt securities. Totals are aggregated by investment category where individual securities have been in a continuous loss position for less than 12 months or 12 months or more as of March 31, 2026 and December 31, 2025:

March 31, 2026

(Dollars in thousands)

Less Than 12 Months

12 Months or More

Total

Fair

Unrealized

Fair

Unrealized

Fair

Unrealized

Available-for-Sale:

  ​ ​ ​

Value

  ​ ​ ​

Loss

  ​ ​ ​

Value

  ​ ​ ​

Loss

  ​ ​ ​

Value

  ​ ​ ​

Loss

U.S. Treasury securities

$

$

$

7,536

$

(412)

$

7,536

$

(412)

Obligations of U.S. Government Agencies and Sponsored Agencies:

 

  ​

 

  ​

 

  ​

 

  ​

 

  ​

 

  ​

Mortgage-backed

13,192

(17)

70,916

(10,553)

84,108

(10,570)

Other

 

1,067

(14)

 

1,067

 

(14)

Other mortgage-backed debt securities

 

25,731

(1,229)

 

25,731

 

(1,229)

Obligations of state and political subdivisions

 

70,857

(9,060)

 

70,857

 

(9,060)

Asset-backed securities

 

15,156

(65)

22,854

(377)

 

38,010

 

(442)

Corporate debt securities

 

22,470

(2,484)

 

22,470

 

(2,484)

Total

$

28,348

$

(82)

$

221,431

$

(24,129)

$

249,779

$

(24,211)

December 31, 2025

(Dollars in thousands)

Less Than 12 Months

12 Months or More

Total

  ​ ​ ​

Fair

  ​ ​ ​

Unrealized

  ​ ​ ​

Fair

  ​ ​ ​

Unrealized

  ​ ​ ​

Fair

  ​ ​ ​

Unrealized

Available-for-Sale:

Value

Loss

Value

Loss

Value

Loss

U.S. Treasury securities

$

$

$

7,536

$

(405)

$

7,536

$

(405)

Obligations of U.S. Government Agencies and Sponsored Agencies:

 

  ​

 

  ​

 

  ​

 

  ​

 

  ​

 

  ​

Mortgage-backed

80,318

(10,748)

80,318

(10,748)

Other

 

1,223

(17)

 

1,223

 

(17)

Other mortgage-backed debt securities

 

2,428

(42)

27,130

(1,144)

 

29,558

 

(1,186)

Obligations of state and political subdivisions

 

71,413

(9,017)

 

71,413

 

(9,017)

Asset-backed securities

 

14,527

(36)

18,971

(326)

 

33,498

 

(362)

Corporate debt securities

 

500

(1)

24,197

(2,504)

 

24,697

 

(2,505)

Total

$

17,455

$

(79)

$

230,788

$

(24,161)

$

248,243

$

(24,240)

There were 144 individual debt securities in an unrealized loss position as of March 31, 2026, with a combined decline in value representing 5.28% of the debt securities portfolio. There were 144 individual debt securities in an unrealized loss position as of December 31, 2025, with their combined decline in value representing 4.98% of the debt securities portfolio.

Available-for-sale debt securities are required to be individually evaluated for impairment in accordance with ASC 326, Financial Instruments – Credit Losses. Management evaluates debt securities for impairment where there has been a decline in fair value below the amortized cost basis of a debt security to determine whether there is a credit loss associated with the decline in fair value on at least a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to (1) the financial condition and near-term prospects of the issuer, (2) the outlook for receiving the contractual cash flows of the investments, (3) the extent to which the fair value has been less than cost, (4) the Company’s intent and ability to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value or whether it is more-likely-than-not that the Company will be required to sell the debt security prior to recovering its fair value, (5) credit ratings, (6) third party guarantees, and (7) collateral values. 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, the results of reviews of the issuer’s financial condition, and the issuer’s anticipated ability to pay the contractual cash flows of the debt securities. All issues of U.S. Treasury and Agency-Backed debt securities have the full faith and credit backing of the United States Government or one of its agencies. All other debt securities that do not have a zero expected credit loss are evaluated quarterly to determine whether there is a credit loss associated with a decline in fair value. As of March 31, 2026 and December 31, 2025, there were no credit losses recorded in relation to available-for-sale debt securities.

Credit losses are calculated individually, rather than collectively, using a discounted cash flow method, whereby management compares the present value of expected cash flows with the amortized cost basis of the debt security. The credit loss component would be recognized as a credit loss expense (or reversal) through the provision for credit losses and the creation of an allowance for credit losses. Losses would be charged against the allowance if management believes the available-for-sale debt security to be uncollectible or when either criteria regarding the intent or requirement to sell are met (e.g. the Company intends to sell or determines it is more-likely-than-not that it will be required to sell the security prior to recovering the security’s fair value).

The Company made a policy election to exclude accrued interest receivable from the amortized cost basis of debt securities available for sale. Accrued interest receivable on debt securities available for sale is reported as a component of accrued interest receivable on the Company’s consolidated balance sheet and totaled $2,086,000 as of March 31, 2026 as compared to $2,068,000 as of December 31, 2025. Accrued interest receivable on debt securities available for sale is excluded from the estimate of credit losses.

All debt securities available for sale in an unrealized loss position, as of March 31, 2026, continue to perform as scheduled and the Company does not believe that there is a credit loss or that a provision for credit losses is necessary. Also, as part of the Company’s evaluation of its intent and ability to hold debt securities for a period of time sufficient to allow for any anticipated recovery in the market, the Company considers its investment strategies, cash flow needs, liquidity position, capital adequacy and interest rate risk position. The Company does not currently intend to sell the debt securities within the portfolio and it is not more-likely-than-not that the Company will be required to sell the debt securities.

Management continues to monitor all of the Company’s debt securities with a high degree of scrutiny. There can be no assurance that the Company will not conclude in future periods that conditions existing at that time indicate some or all of its debt securities may be sold or would require a charge to earnings as a provision for credit losses in such periods.

Equity Securities

In accordance with ASC 321-10, equity securities with readily determinable fair values are stated at fair value with realized and unrealized gains and losses reported on the consolidated statements of income. Equity securities without readily determinable fair values are recorded at cost, adjusted for observable price changes and impairments, if any.

At March 31, 2026 and December 31, 2025, the Company had $1,984,000 and $1,810,000, respectively, in equity securities recorded at fair value. The following is a summary of realized gains and losses recognized in net income on equity securities during the three months ended March 31, 2026 and 2025:

(Dollars in thousands)

Three months ended

Three months ended

  ​ ​ ​

March 31, 2026

  ​ ​ ​

March 31, 2025

  ​ ​ ​

Net gains (losses) from market value fluctuations recognized during the period on equity securities

$

174

$

(86)

Less: Net gains recognized during the period on equity securities sold during the period

 

 

Net gains (losses) recognized during the reporting period on equity securities still held at the reporting date

$

174

$

(86)

Management evaluates equity securities for impairment at least on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. Equity securities without readily determinable fair values are measured at fair value with changes in fair value recognized as earnings. Equity securities without readily determinable fair values are measured at cost less any determined impairment, plus or minus any observable price changes in orderly transactions for the same or similar securities in accordance with ASC 321, Equity Securities. Management evaluates equity securities without readily determinable fair values for impairment whenever events or changes in circumstances indicate the carrying value may not be recoverable. In determining impairment under the ASC 321 model, management considers many factors, including (1) an offer to purchase the security at a fair value that is less than the cost/carrying value, (2) the financial condition and near-term prospects of the issuer, (3) any adverse changes in the issuer’s industry, operating environment, or macroeconomic conditions, and (4) whether the entity has the intent to sell the equity security or more likely than not will be required to sell the equity security before its anticipated recovery. The assessment of whether an impairment exists involves a high degree of subjectivity and judgment and is based on the information available to management at a point in time. If an impairment loss on an equity security is considered to exist, an impairment loss equal to the amount by which the carrying value exceeds the estimated fair value is recorded. Once the impairment is recorded, the new carrying value becomes the new cost basis of the equity security and cannot be adjusted upward if there is a subsequent recovery in the fair value of the security.

The Company monitors the equity securities portfolio monthly with particular attention given to securities in a continuous loss position of at least ten percent for over twelve months. Based on the factors described above, management did not consider any equity securities to be impaired at March 31, 2026 or December 31, 2025.