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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.