Investments

9 Months Ended

Sep. 30, 2025

Investments

Investments

Note 4 – Investments

The following tables show a comparison of amortized cost and fair values of investment securities at September 30, 2025 and December 31, 2024:

(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Estimated Fair Value
September 30, 2025
Available for Sale:
U.S. government agencies	$	2,000	$	—	$	624	$	—	$	1,376
Residential mortgage-backed agencies		24,273		30		3,384		—		20,919
Commercial mortgage-backed agencies		37,988		—		7,943		—		30,045
Collateralized mortgage obligations		30,615		28		2,528		—		28,115
Obligations of states and political subdivisions		8,556		25		110		—		8,471
Corporate bonds		1,000		—		85		—		915
Collateralized debt obligations		18,759		—		3,540		—		15,219
Total available for sale	$	123,191	$	83	$	18,214	$	—	$	105,060

(in thousands)	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Estimated Fair Value		Allowance for Credit Losses
September 30, 2025
Held to Maturity:
U.S. government agencies	$	68,521	$	—	$	8,337	$	60,184	$	—
Residential mortgage-backed agencies		32,834		83		2,626		30,291		—
Commercial mortgage-backed agencies		20,995		—		5,238		15,757		—
Collateralized mortgage obligations		46,171		—		7,300		38,871		—
Obligations of states and political subdivisions		4,399		219		591		4,027		102
Total held to maturity	$	172,920	$	302	$	24,092	$	149,130	$	102

(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Estimated Fair Value
December 31, 2024
Available for Sale:
U.S. government agencies	$	7,000	$	—	$	885	$	—	$	6,115
Residential mortgage-backed agencies		24,621		—		4,425		—		20,196
Commercial mortgage-backed agencies		37,205		—		8,571		—		28,634
Collateralized mortgage obligations		21,069		—		3,343		—		17,726
Obligations of states and political subdivisions		6,533		—		324		—		6,209
Corporate bonds		1,000		—		104		—		896
Collateralized debt obligations		18,686		—		3,968		—		14,718
Total available for sale	$	116,114	$	—	$	21,620	$	—	$	94,494
(in thousands)	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Estimated Fair Value		Allowance for Credit Losses
December 31, 2024
Held to Maturity:
U.S. government agencies	$	68,301	$	—	$	11,192	$	57,109	$	—
Residential mortgage-backed agencies		32,171		1		3,561		28,611		—
Commercial mortgage-backed agencies		21,134		—		5,794		15,340		—
Collateralized mortgage obligations		49,439		—		9,724		39,715		—
Obligations of states and political subdivisions		4,511		177		703		3,985		59
Total held to maturity	$	175,556	$	178	$	30,974	$	144,760	$	59

Proceeds from sales and calls of available-for-sale (“AFS”) securities and the realized gains and losses for the nine- and three-month periods ended September 30, 2025 and 2024 are as follows:

	Nine Months Ended				Three Months Ended
	September 30,				September 30,
(in thousands)	2025		2024		2025		2024
Proceeds	$	8,965	$	—	$	8,965	$	—
Realized gains		203		—		203		—
Realized losses		106		—		106		—

The Corporation utilizes FASB Accounting Standards Codification (“ASC”) Topic 326 to evaluate its AFS and held-to-maturity (“HTM”) debt security portfolio for expected credit losses.  

For any AFS debt security in an unrealized loss position, the Corporation first assesses whether it intends to sell, or it is more likely than not that the Corporation will be required to sell, the security before recovery to its amortized cost basis.  If either criterion regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income.  For AFS debt securities that do not meet the aforementioned criteria, the Corporation evaluates whether any decline in fair value has resulted from credit losses or other factors.  In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors.  If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security.  If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses (“ACL”) is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis.  Any impairment that has not been recorded through the ACL is recorded in other comprehensive income (“OCI”).

The Corporation adopted ASC Topic 326 using the prospective transition approach for debt securities for which other than temporary impairment (“OTTI”) had been recognized prior to January 1, 2023, such as AFS collateralized debt obligations.  As a result, the amortized cost basis for such debt securities remained the same before and after the effective date of ASC Topic 326.  The effective interest rate on these debt securities was not changed.  Amounts of OTTI that were recorded prior to January 1, 2023 are being accreted into income over the remaining life of the assets.  

The ACL on HTM securities is a contra-asset valuation account, calculated in accordance with ASC Topic 326.  Management measures expected credit losses on HTM debt securities on a collective basis by major security type.  Management has elected to not measure an ACL for accrued interest on securities. The estimate of expected credit losses considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts.  

Management classifies the HTM portfolio into the following major security types: (i) securities issued or guaranteed by U.S. government agencies (including U.S. treasuries, agency bonds, and U.S. guaranteed residential mortgage-backed securities, commercial mortgage-backed securities, and collateralized mortgage obligations); (ii) rated municipal securities; and (iii) unrated municipal securities.  With regard to securities issued by U.S. government agencies and corporations, it is expected that the securities will not settle at prices that are less than the amortized cost bases of the securities, as such securities are backed by the full faith and credit of and/or guaranteed by the U.S. government.  Accordingly, no ACL has been recorded on these securities.  With regard to securities issued by states and political subdivisions, management considers (x) issuer bond ratings, (y) historical loss rates for given bond ratings, and (z) whether issuers continue to make timely principal and interest payments under the contractual terms of the securities. Non-rated securities are evaluated internally based on financial performance and expected future cash flows.

As of September 30, 2025 and December 31, 2024, the Corporation recorded ACL of approximately $102,000 and $59,000, respectively, related to one municipal bond in its HTM security portfolio.

The following tables show the Corporation’s investment securities with gross unrealized and unrecognized losses and fair values at September 30, 2025 and December 31, 2024, aggregated by investment category and the length of time that individual securities have been in a continuous unrealized and unrecognized loss position:

	Less than 12 months					12 months or more
(in thousands)	Fair Value		Unrealized Losses		Number of Investments	Fair Value		Unrealized Losses		Number of Investments
September 30, 2025
Available for Sale:
U.S. government agencies	$	—	$	—	—	$	1,376	$	624	1
Residential mortgage-backed agencies		—		—	—		17,610		3,384	3
Commercial mortgage-backed agencies		3,092		126	2		26,953		7,817	8
Collateralized mortgage obligations		8,955		45	1		14,479		2,483	9
Obligations of states and political subdivisions		—		—	—		4,183		110	4
Corporate bonds		—		—	—		915		85	1
Collateralized debt obligations		—		—	—		15,219		3,540	9
Total available for sale	$	12,047	$	171	3	$	80,735	$	18,043	35
	Less than 12 months					12 months or more
(in thousands)	Fair Value		Unrecognized Losses		Number of Investments	Fair Value		Unrecognized Losses		Number of Investments
September 30, 2025
Held to Maturity:
U.S. government agencies	$	—	$	—	—	$	60,184		8,337	9
Residential mortgage-backed agencies		2,247		8	2		19,718		2,618	35
Commercial mortgage-backed agencies		—		—	—		15,757		5,238	2
Collateralized mortgage obligations		—		—	—		38,871		7,300	8
Obligations of states and political subdivisions		—		—	—		2,269		591	1
Total held to maturity	$	2,247	$	8	2	$	136,799	$	24,084	55

	Less than 12 months					12 months or more
(in thousands)	Fair Value		Unrealized Losses		Number of Investments	Fair Value		Unrealized Losses		Number of Investments
December 31, 2024
Available for Sale:
U.S. government agencies	$	—	$	—	—	$	6,115	$	885	2
Residential mortgage-backed agencies		1,974		18	1		18,222		4,407	3
Commercial mortgage-backed agencies		1,688		59	1		26,946		8,512	8
Collateralized mortgage obligations		2,892		50	1		14,834		3,293	9
Obligations of states and political subdivisions		1,224		18	2		3,742		306	3
Corporate Bonds		—		—	—		896		104	1
Collateralized debt obligations		—		—	—		14,718		3,968	9
Total available for sale	$	7,778	$	145	5	$	85,473	$	21,475	35
	Less than 12 months					12 months or more
(in thousands)	Fair Value		Unrecognized Losses		Number of Investments	Fair Value		Unrecognized Losses		Number of Investments
December 31, 2024
Held to Maturity:
U.S. government agencies	$	—	$	—	—	$	57,109	$	11,192	9
Residential mortgage-backed agencies		8,291		132	5		20,243		3,429	35
Commercial mortgage-backed agencies		—		—	—		15,340		5,794	2
Collateralized mortgage obligations		—		—	—		39,715		9,724	8
Obligations of states and political subdivisions		—		—	—		2,179		703	1
Total held to maturity	$	8,291	$	132	5	$	134,586	$	30,842	55

The amortized cost and estimated fair value of securities by contractual maturities at September 30, 2025 are shown in the following table.  Expected maturities for mortgage-backed securities and collateralized mortgage obligations will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	September 30, 2025
(in thousands)	Amortized Cost		Fair Value
Contractual Maturity
Available for Sale:
Due in one year or less	$	2,241	$	2,251
Due after five years through ten years		4,418		4,329
Due after ten years		23,656		19,401
		30,315		25,981
Residential mortgage-backed agencies		24,273		20,919
Commercial mortgage-backed agencies		37,988		30,045
Collateralized mortgage obligations		30,615		28,115
Total available for sale	$	123,191	$	105,060
Held to Maturity:
Due after one year through five years	$	17,050	$	16,542
Due after five years through ten years		36,052		32,102
Due after ten years		19,818		15,567
		72,920		64,211
Residential mortgage-backed agencies		32,834		30,291
Commercial mortgage-backed agencies		20,995		15,757
Collateralized mortgage obligations		46,171		38,871
Total held to maturity	$	172,920	$	149,130

At September 30, 2025 and December 31, 2024, AFS investment securities with an aggregate fair value of $88.0 million and $71.6 million, respectively, and HTM investment securities with an aggregate book value of $171.0 million and $161.2 million, respectively, were pledged as permitted or required to secure public deposits, for securities sold under agreements to repurchase as required or permitted by law and as collateral for borrowing capacity.