NOTE 3 Investment Securities

Trading securities are reported on the Company’s consolidated balance sheet at fair value. The fair value of the Company’s trading securities was $0.5 million and $1.8 million as of  June 30, 2026 and  December 31, 2025, respectively. Changes in the fair value of trading securities are recorded in other noninterest income on the Company’s consolidated statements of income. 

The following tables present amortized cost, gross unrealized gains and losses, allowance for credit losses (“ACL”) and fair value of available-for-sale (“AFS”) investment securities and the amortized cost, gross unrealized gains and losses and fair value of held-to-maturity (“HTM”) securities as of June 30, 2026 and December 31, 2025:

The adequacy of the ACL on investment securities is assessed at the end of each quarter. The Company does not believe that the AFS debt securities that were in an unrealized loss position as of June 30, 2026 represented a credit loss impairment. As of both June 30, 2026 and December 31, 2025, the gross unrealized loss positions were primarily related to mortgage-backed securities issued by U.S. government agencies or U.S. government-sponsored enterprises. These securities carry the explicit and/or implicit guarantee of the U.S. government, are widely recognized as “risk free,” and have a long history of zero credit loss. Additionally, there were corporate bonds in gross unrealized loss positions as of both June 30, 2026 and December 31, 2025; however, all such bonds had an investment grade rating as of both dates. Total gross unrealized losses were attributable to changes in interest rates, relative to when the investment securities were purchased, and not due to the credit quality of the investment securities. It is not likely that the Company will be required to sell the investment securities before recovery of their amortized cost basis, which may be at maturity. 

The ACL on HTM debt securities is estimated using relevant information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Using a probability of default and loss given default analysis, the ACL on HTM debt securities was $115 thousand and $123 thousand as of June 30, 2026 and December 31, 2025, respectively. The change in the ACL on HTM debt securities was due to a change in the provision for credit losses, with no charge-offs or recoveries for the three and six months ended June 30, 2026. 

Accrued interest receivable on AFS investment securities and HTM investment securities is recorded in accrued interest receivable and is excluded from the estimate of credit losses. As of June 30, 2026, the accrued interest receivable on AFS investment securities and HTM investment securities totaled $2.1 million and $1.1 million, respectively. As of December 31, 2025, the accrued interest receivable on AFS investment securities and HTM investment securities totaled $1.9 million and $1.2 million, respectively. 

The Company had no sales of AFS investment securities for the three and six months ended June 30, 2026 and 2025. The Company had calls of AFS investment securities with proceeds of $3.0 million for both the three and six months ended June 30, 2026, and had calls of AFS investment securities with proceeds of $9.0 million and $19.0 million for the three and six months ended June 30, 2025, respectively. 

The Company had no sales of HTM investment securities for the three and six months ended June 30, 2026 and 2025. 

The following tables present investment securities with gross unrealized losses, for which an ACL was not recorded at June 30, 2026 and December 31, 2025, aggregated by investment category and length of time that individual investment securities have been in a continuous loss position: 

As of June 30, 2026 and December 31, 2025, none of the Company’s HTM debt securities were past due or on nonaccrual status. The Company did not recognize any interest income on nonaccrual HTM debt securities during the three months ended June 30, 2026 and 2025.

The following table presents the carrying value and fair value of HTM investment securities and the amortized cost and fair value of AFS investment securities as of June 30, 2026, by contractual maturity:

Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

Investment securities with a total carrying value of $330.0 million and $115.1 million were pledged as of June 30, 2026 and December 31, 2025, respectively, to secure public deposits and for other purposes required or permitted by law.

As of June 30, 2026 and December 31, 2025, the carrying value of the Company’s Federal Reserve stock and Federal Home Loan Bank of Des Moines (“FHLB”) stock was as follows:

These securities can only be redeemed or sold at their par value and only to the respective issuing institution or to another member institution. The Company records these non-marketable equity securities as a component of other assets and periodically evaluates these securities for impairment. Management considers these non-marketable equity securities to be long-term investments. Accordingly, when evaluating these securities for impairment, management considers the ultimate recoverability of the par value rather than recognizing temporary declines in value.

Visa Class B Restricted Shares

In 2008, the Company received Visa Class B restricted shares as part of Visa’s initial public offering. These shares are transferable only under limited circumstances until they can be converted into the publicly traded Class A common shares. This conversion will not occur until the settlement of certain litigation which will be indemnified by Visa members, including the Company. Visa funded an escrow account from its initial public offering to settle these litigation claims. Should this escrow account be insufficient to cover these litigation claims, Visa is entitled to fund additional amounts to the escrow account by reducing each member bank’s Class B conversion ratio to unrestricted Class A shares. As of June 30, 2026, the conversion ratio was 1.5445. Based on the existing transfer restriction and the uncertainty of the outcome of the Visa litigation mentioned above, the 6,924 Class B shares (10,694 Class A equivalents) that the Company owned as of June 30, 2026 and December 31, 2025, were carried at a zero cost basis.