Investments in debt securities are summarized as follows:

The allowance for credit losses on held-to-maturity securities is a contra-asset valuation allowance that is deducted from the amortized cost basis of held-to-maturity securities to present the net amount expected to be collected. Management measures expected credit losses on held-to-maturity securities on a collective basis by major security type with each type sharing similar risk characteristics, and considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. With regard to securities issued by states and political subdivisions, management considers (i) issuer bond ratings, (ii) historical loss rates for given bond ratings, (iii) whether issuers continue to make timely principal and interest payments under the contractual terms of the securities, and (iv) internal forecasts. Unrated bonds were underwritten similar to commercial loans and the financial condition of the issuer is monitored periodically. Expected credit losses on commercial loans are applied to unrated bonds. The duration of each bond is used as the remaining life in the calculation of expected credit losses.

The following table summarizes Moody's and/or Standard & Poor's bond ratings (the Company’s primary credit quality indicators) for our portfolio of held-to-maturity securities issued by states and political subdivisions as of June 30, 2025 and December 31, 2024 at amortized cost:

Generally, the historical loss rates associated with securities having similar grades as those in our portfolio have not been significant. Furthermore, as of June 30, 2025, there were no past due principal or interest payments associated with these securities and none were on nonaccrual status.

The following table details activity in the allowance for credit losses on held-to-maturity securities for the three- and six-month periods ended June 30, 2025 and 2024:

Accrued interest receivable on available for sale securities totaled $278.2 thousand and $302.5 thousand as of June 30, 2025 and December 31, 2024, respectively, and accrued interest receivable on held to maturity securities totaled $123.2 thousand and $122.0 thousand as of June 30, 2025 and December 31, 2024, respectively.  Both are grouped in accrued interest receivable on the consolidated balance sheets.

Contractual maturities, shown below, will differ from actual maturities because borrowers and issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

Securities with a carrying value of $24.2 million and $26.3 million as of June 30, 2025 and December 31, 2024, respectively, were pledged as collateral for borrowings, securities sold under repurchase agreements and other collateralized deposits.

During the three- and six-month periods ended June 30, 2025, there were no sales of available for sale securities. The Bank settled a fair value hedge during the first quarter of 2025 which resulted in a gain of $94 thousand. There was one sale of an available for sale security with a principal balance of $521 thousand witch resulted in a loss of $32 thousand during the three and six- month periods ended June 30, 2024.

The following table sets forth the Company’s gross unrealized losses on a continuous basis for available for sale debt securities, by category and length of time.

As of June 30, 2025, management did not have the intent to sell any of the securities before a recovery of cost and it is more likely than not that the Company will not be required to sell before the recovery of the amortized cost basis. The unrealized losses as of June 30, 2025 were due to increases in market interest rates over the yields available at the time the underlying securities were purchased as well as other market conditions for each particular security based upon the structure and remaining principal balance. The fair values of the investment securities are expected to recover as the securities approach their maturity dates or repricing dates or if market yields for such investments decline. Based on these factors, as of June 30, 2025, management believes that the unrealized losses detailed in the table above are temporary and, accordingly, none of these unrealized losses have been recognized in the Company’s consolidated statement of income.