NOTE 2 - INVESTMENT SECURITIES

9 Months Ended

Sep. 30, 2026

INVESTMENT SECURITIES

INVESTMENT SECURITIES

NOTE 2 – INVESTMENT SECURITIES

The amortized cost and fair value of investment securities as of September 30, 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)
September 30, 2026:
Securities HTM:
Municipal securities	$	998,172	$	(272)	$	6,776	$	(116,564)	$	888,112
Corporate securities		30,657		(9)		94		(195)		30,547
Other securities		1,050		(1)		—		(7)		1,042
	$	1,029,879	$	(282)	$	6,870	$	(116,766)	$	919,701
Securities AFS:
U.S. treasuries and govt. sponsored agency securities	$	15,543	$	—	$	3	$	(2,190)	$	13,356
Residential mortgage-backed and related securities		117,477		—		4		(11,348)		106,133
Municipal securities		204,365		—		—		(58,163)		146,202
Asset-backed securities		3,590		—		61		—		3,651
Corporate securities		16,961		—		44		(405)		16,600
	$	357,936	$	—	$	112	$	(72,106)	$	285,942

			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)	$	26,059	$	(56,752)	$	887,224
Corporate securities		29,719		(9)		2,660		—		32,370
Other securities		1,050		(1)		—		(1)		1,048
	$	948,958	$	(282)	$	28,719	$	(56,753)	$	920,642
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 greater 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 September 30, 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)
September 30, 2026:
Securities HTM:
Municipal securities	$	529,564	$	(66,788)	$	172,388	$	(49,776)	$	701,952	$	(116,564)
Corporate securities		22,910		(195)		—		—		22,910		(195)
Other securities		1,043		(7)		—		—		1,043		(7)
	$	553,517	$	(66,990)	$	172,388	$	(49,776)	$	725,905	$	(116,766)
Securities AFS:
U.S. treasuries and govt. sponsored agency securities	$	—	$	—	$	12,876	$	(2,190)	$	12,876	$	(2,190)
Residential mortgage-backed and related securities		77,390		(6,509)		28,516		(4,839)		105,906		(11,348)
Municipal securities		5,470		(426)		140,732		(57,737)		146,202		(58,163)
Corporate securities		1,473		(21)		10,866		(384)		12,339		(405)
	$	84,333	$	(6,956)	$	192,990	$	(65,150)	$	277,323	$	(72,106)

	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	$	41,724	$	(1,329)	$	307,914	$	(55,423)	$	349,638	$	(56,752)
Other securities		549		(1)		—		—		549		(1)
	$	42,273	$	(1,330)	$	307,914	$	(55,423)	$	350,187	$	(56,753)
Securities AFS:
U.S. treasuries and 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 September 30, 2026, the investment portfolio included 688 securities. Of this number, 627 securities were in an unrealized loss position. The aggregate losses of these securities totaled approximately 13.6% of the total amortized cost of the portfolio. Of these 627 securities, there were 368 securities that were in an unrealized loss position for twelve months or more. Management has concluded unrealized losses as of September 30, 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 and nine months ended September 30, 2026 and 2025. The following tables present the activity in the allowance for credit losses for held to maturity securities by major security type for the three and nine months ended September 30, 2026 and 2025:

	Three Months Ended
	September 30, 2026								September 30, 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
Provision		—		—		—		—		—		—		—		—
Balance, ending	$	272	$	9	$	1	$	282	$	254	$	8	$	1	$	263
	Nine Months Ended
	September 30, 2026								September 30, 2025
	Securities HTM								Securities HTM
	Municipal			Corporate	Other				Municipal		Other		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
Provision for credit loss expense		—		—		—		—		—		—		—		—
Balance, ending	$	272		9	$	1	$	282	$	254	$	8	$	1	$	263

Trading securities had a fair value of $116.1 million as of September 30, 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. The change in fair value on trading securities for the nine months ended September 30, 2026 and 2025 was a net gain of $397 thousand and a net gain of $530 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 or nine months ended September 30, 2026 or 2025.

There were no sales of securities during either the three and nine months ended September 30, 2026 or 2025.

The amortized cost and fair value of securities as of September 30, 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	$	976	$	969
Due after one year through five years		41,183		40,679
Due after five years		987,720		878,053
	$	1,029,879	$	919,701
Securities AFS:
Due in one year or less	$	17	$	17
Due after one year through five years		22,113		20,696
Due after five years		214,739		155,445
		236,869		176,158
Residential mortgage-backed and related securities		117,477		106,133
Asset-backed securities		3,590		3,651
	$	357,936	$	285,942

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 September 30, 2026:

	Amortized Cost		Fair Value
	(dollars in thousands)
Securities HTM:
Municipal securities	$	175,789	$	160,951
Corporate securities		30,657		30,546
	$	206,446	$	191,497
Securities AFS:
Municipal securities	$	204,223	$	146,073
Corporate securities		15,493		15,129
	$	219,716	$	161,202

As of September 30, 2026, the Company's municipal securities portfolios were comprised of general obligation bonds issued by 81 issuers with fair values totaling $94.6 million and revenue bonds, issued by 159 issuers, primarily consisting of states, counties, towns, villages and school districts with fair values totaling $939.7 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 $942.3 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 September 30, 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 September 30, 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 September 30, 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 September 30, 2026 and December 31, 2025:

	September 30, 2026		December 31, 2025
	(dollars in thousands)
Derivatives:
U.S. govt. sponsored agency securities	$	10,861	$	11,268
Residential mortgage-backed and related securities		19,056		36,565
Municipal securities		123,777		142,065
		153,694		189,898
Public deposits:
U.S. govt. sponsored agency securities		1,123		1,338
Residential mortgage-backed and related securities		1,656		1,985
		2,779		3,323
Other borrowings:
Municipal securities*		139,372		161,329
		139,372		161,329
Total investments pledged:
U.S. govt. sponsored agency securities		11,984		12,606
Residential mortgage-backed and related securities		20,712		38,550
Municipal securities		263,149		303,394
	$	295,845	$	354,550

* Municipal securities with an amortized cost of $167.9 million and $176.6 million were pledged on secured borrowings as of September 30, 2026 and December 31, 2025, respectively.