NOTE 2 - INVESTMENT SECURITIES

3 Months Ended

Mar. 31, 2026

INVESTMENT SECURITIES

INVESTMENT SECURITIES

NOTE 2– INVESTMENT SECURITIES

The amortized cost and fair value of investment securities as of March 31, 2026 and December 31, 2025 are summarized as follows:

			Allowance		Gross		Gross
	Amortized		for Credit		Unrealized		Unrealized		Fair
	Cost		(Losses)		Gains		(Losses)		Value
	(dollars in thousands)
March 31, 2026:
Securities HTM:
Municipal securities	$	920,855	$	(272)	$	16,342	$	(129,073)	$	807,852
Corporate securities		30,293		(9)		1,556		—		31,840
Other securities		1,050		(1)		—		(1)		1,048
	$	952,198	$	(282)	$	17,898	$	(129,074)	$	840,740
Securities AFS:
U.S. treasuries and govt. sponsored agency securities	$	16,847	$	—	$	3	$	(1,791)	$	15,059
Residential mortgage-backed and related securities		90,911		—		110		(4,799)		86,222
Municipal securities		203,399		—		—		(43,152)		160,247
Asset-backed securities		3,985		—		91		—		4,076
Corporate securities		25,073		—		112		(683)		24,502
	$	340,215	$	—	$	316	$	(50,425)	$	290,106

			Allowance		Gross		Gross
	Amortized		for Credit		Unrealized		Unrealized		Fair
	Cost		(Losses)		Gains		(Losses)		Value
	(dollars in thousands)
December 31, 2025:
Securities HTM:
Municipal securities	$	918,189	$	(272)	$	23,402	$	(117,074)	$	824,245
Corporate securities		29,719		(9)		2,660		—		32,370
Other securities		1,050		(1)		—		(1)		1,048
	$	948,958	$	(282)	$	26,062	$	(117,075)	$	857,663
Securities AFS:
U.S. treasuries and govt. sponsored agency securities	$	17,775	$	—	$	4	$	(1,755)	$	16,024
Residential mortgage-backed and related securities		72,951		—		151		(4,247)		68,855
Municipal securities		203,613		—		27		(40,555)		163,085
Asset-backed securities		4,345		—		94		—		4,439
Corporate securities		28,068		—		148		(842)		27,374
	$	326,752	$	—	$	424	$	(47,399)	$	279,777

The Company's HTM municipal securities consist largely of private issues of municipal debt. The large majority of the municipalities are located within the Midwest. The municipal debt investments are underwritten using specific guidelines with ongoing monitoring.

The Company's residential mortgage-backed and related securities portfolio consists entirely of government sponsored or government guaranteed securities. The Company has not invested in private mortgage-backed securities or pooled trust preferred securities.

Gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of March 31, 2026, and December 31, 2025, are summarized in the tables below. Securities AFS, for which an allowance for credit losses has been provided, are not included in these disclosures as there are no unrealized losses remaining after consideration of the ACL.

	Less than 12 Months				12 Months or More				Total
			Gross				Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
	(dollars in thousands)
March 31, 2026:
Securities HTM:
Municipal securities	$	142,185	$	(33,906)	$	371,871	$	(95,167)	$	514,056	$	(129,073)
Other securities		549		(1)		—		—		549		(1)
	$	142,734	$	(33,907)	$	371,871	$	(95,167)	$	514,605	$	(129,074)
Securities AFS:
U.S. treasuries and govt. sponsored agency securities	$	1,045	$	—	$	13,501	$	(1,791)	$	14,546	$	(1,791)
Residential mortgage-backed and related securities		36,410		(1,075)		31,264		(3,724)		67,674		(4,799)
Municipal securities		3,883		(32)		156,364		(43,120)		160,247		(43,152)
Corporate securities		1,656		(23)		16,282		(660)		17,938		(683)
	$	42,994	$	(1,130)	$	217,411	$	(49,295)	$	260,405	$	(50,425)

	Less than 12 Months				12 Months or More				Total
			Gross				Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
	(dollars in thousands)
December 31, 2025:
Securities HTM:
Municipal securities	$	88,718	$	(52,445)	$	316,672	$	(64,629)	$	405,390	$	(117,074)
Other securities		549		(1)		—		—		549		(1)
	$	89,267	$	(52,446)	$	316,672	$	(64,629)	$	405,939	$	(117,075)
Securities AFS:
U.S. govt. sponsored agency securities	$	48	$	(1)	$	13,663	$	(1,754)	$	13,711	$	(1,755)
Residential mortgage-backed and related securities		16,167		(592)		32,137		(3,655)		48,304		(4,247)
Municipal securities		636		(9)		159,146		(40,546)		159,782		(40,555)
Corporate securities		1,491		(25)		18,802		(817)		20,293		(842)
	$	18,342	$	(627)	$	223,748	$	(46,772)	$	242,090	$	(47,399)

As of March 31, 2026, the investment portfolio included 669 securities. Of this number, 539 securities were in an unrealized loss position. The aggregate losses of these securities totaled approximately 13.9% of the total amortized cost of the portfolio. Of these 539 securities, there were 463 securities that were in an unrealized loss position for twelve months or more. Management has concluded unrealized losses as of March 31, 2026 were temporary due to the changing interest rate environment.  

There was no allowance for credit losses for available for sale securities for each of the three months ended March 31, 2026 and 2025. The following table presents the activity in the allowance for credit losses for held to maturity securities by major security type for the three months ended March 31, 2026 and 2025:

	Three Months Ended
	March 31, 2026								March 31, 2025
	Securities HTM								Securities HTM
	Municipal		Corporate		Other				Municipal		Corporate		Other
	securities		securities		securities		Total		securities		securities		securities		Total
	(dollars in thousands)
Allowance for credit losses:
Beginning balance	$	272	$	9	$	1	$	282	$	254	$	8	$	1	$	263
Reduction due to sales		—		—		—		—		—		—		—		—
Provision		—		—		—		—		—		—		—		—
Balance, ending	$	272	$	9	$	1	$	282	$	254	$	8	$	1	$	263

Trading securities had a fair value of $82.7 million as of March 31, 2026 and $83.9 million as of December 31, 2025 and consisted of retained beneficial interests acquired in conjunction with Freddie Mac securitizations completed by the Company in prior years. The change in fair value on trading securities for the three months ended March 31, 2026 and 2025 was a net loss of $852 thousand and $809 thousand, respectively. See also Note 4 to the Consolidated Financial Statements for details of these securitizations.

There were no transfers of securities between classifications during either the three months ended March 31, 2026 and 2025.

There were no sales of securities during either the three months ended March 31, 2026 or 2025.

The amortized cost and fair value of securities as of March 31, 2026 by contractual maturity are shown below. Expected maturities of residential mortgage-backed and related securities and asset-backed securities may differ from contractual maturities because the residential mortgages underlying the securities may be prepaid without any penalties. Therefore, these securities are not included in the maturity categories in the following table:

	Amortized Cost		Fair Value
	(dollars in thousands)
Securities HTM:
Due in one year or less	$	389	$	390
Due after one year through five years		42,078		41,754
Due after five years		909,731		798,596
	$	952,198	$	840,740
Securities AFS:
Due in one year or less	$	1,425	$	1,423
Due after one year through five years		14,926		14,515
Due after five years		228,968		183,870
		245,319		199,808
Residential mortgage-backed and related securities		90,911		86,222
Asset-backed securities		3,985		4,076
	$	340,215	$	290,106

Portions of the U.S. government sponsored agency securities and municipal securities contain call options, which, at the discretion of the issuer, terminate the security at par and at predetermined dates prior to the stated maturity, summarized as follows as of March 31, 2026:

	Amortized Cost		Fair Value
	(dollars in thousands)
Securities HTM:
Municipal securities	$	199,530	$	193,023
Corporate securities		30,293		31,840
	$	229,823	$	224,863
Securities AFS:
Municipal securities	$	202,876	$	159,734
Corporate securities		24,103		23,517
	$	226,979	$	183,251

As of March 31, 2026, the Company's municipal securities portfolios were comprised of general obligation bonds issued by 80 issuers with fair values totaling $104.1 million and revenue bonds, issued by 161 issuers, primarily consisting of states, counties, towns, villages and school districts with fair values totaling $863.2 million. The Company also held investments in general obligation bonds in 18 states, including 9 states in which the aggregate fair value exceeded $5.0 million, and in revenue bonds in 31 states, including 14 states in which the aggregate fair value exceeded $5.0 million.

As of December 31, 2025, the Company's municipal securities portfolios were comprised of general obligation bonds issued by 80 issuers with fair values totaling $106.8 million and revenue bonds, issued by 164 issuers, primarily consisting of states, counties, towns, villages and school districts with fair values totaling $879.6 million. The Company held investments in general obligation bonds in 18 states, including nine states in which the aggregate fair value exceeded $5.0 million, and in revenue bonds in 31 states, including 14 states in which the aggregate fair value exceeded $5.0 million.

The Company monitors the investments and concentration closely. Both general obligation and revenue bonds are diversified across many issuers. As of March 31, 2026 and December 31, 2025, the Company did not hold general obligation bonds of any single issuer, that in aggregate exceed 10% of the Company’s stockholders’ equity. Of the general obligation and revenue bonds in the Company's portfolio, the majority are unrated bonds that represent private issuances. All unrated bonds were underwritten according to the Company’s loan underwriting standards and have an average loan

risk rating of 2, indicating very high quality. Additionally, many of these bonds are funding essential municipal services such as water, sewer, education, and medical facilities.

The Company's municipal securities are owned by its four subsidiary banks, whose investment policies set forth limits for various subcategories within the municipal securities portfolio. The investments of each charter are monitored individually, and as of March 31, 2026, all were within policy limitations approved by the Company’s board of directors. Policy limits are calculated as a percentage of each charter's total risk-based capital.

As of March 31, 2026, the Company's standard monitoring of its municipal securities portfolio had not uncovered any facts or circumstances resulting in significantly different credit ratings than those assigned by a nationally recognized statistical rating organization, or in the case of unrated bonds, the rating assigned using the credit underwriting standards.

The following table summarizes the fair value of investment securities pledged and held under derivatives, public deposits, short-term borrowings and other borrowings as of March 31, 2026 and December 31, 2025:

	March 31, 2026		December 31, 2025
	(dollars in thousands)
Derivatives:
U.S. govt. sponsored agency securities	$	11,210	$	11,268
Residential mortgage-backed and related securities		36,316		36,565
Municipal securities		138,695		142,065
		186,221		189,898
Public deposits:
U.S. govt. sponsored agency securities		1,274		1,338
Residential mortgage-backed and related securities		1,905		1,985
		3,179		3,323
Other borrowings:
Municipal securities*		157,363		161,329
		157,363		161,329
Total investments pledged:
U.S. govt. sponsored agency securities		12,484		12,606
Residential mortgage-backed and related securities		38,221		38,550
Municipal securities		296,058		303,394
	$	346,763	$	354,550

* Municipal securities with an amortized cost of $175.8 million and $176.6 million were pledged on secured borrowings as of March 31, 2026 and December 31, 2025, respectively.