NOTE D: INVESTMENT SECURITIES

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The amortized cost and estimated fair value of investment securities as of June 30, 2026 and December 31, 2025 are as follows:

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As of June 30, 2026, equity and other securities on the consolidated statements of condition consists of equity securities with readily determinable fair values carried at $3.7 million and investment securities without readily determinable fair values carried at $84.2 million, including Federal Home Loan Banks of New York, Boston, and Indianapolis (collectively, “FHLB”) common stock of $40.4 million, Federal Reserve Bank (“FRB”) common stock of $33.3 million, equity securities of $5.3 million and other investment securities of $5.2 million.

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As of December 31, 2025, equity and other securities on the consolidated statements of condition consists of equity securities with readily determinable fair values carried at $4.4 million and equity securities without readily determinable fair values carried at $72.8 million; including FHLB common stock of $33.2 million, FRB common stock of $33.3 million and other equity securities of $6.3 million.

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The investment in FRB stock represents approximately half of the total required subscription, and the remaining half is unpaid and remains subject to call by the FRB.

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The amount of upward and downward adjustments to equity securities without readily determinable fair values was not material for the three and six months ended June 30, 2026 and 2025.

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The gains and losses on equity and other securities for the three and six months ended June 30, 2026 and 2025 are as follows:

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A summary of investment securities that have been in a continuous unrealized loss position is as follows:

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As of June 30, 2026

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As of December 31, 2025

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The unrealized losses reported pertaining to available-for-sale securities issued by the U.S. government and its sponsored entities include treasuries, agencies, and mortgage-backed securities issued by Ginnie Mae, Fannie Mae, and Freddie Mac, which are currently rated Aa1 by Moody’s Investor Services, AA+ by Standard & Poor’s, AA+ by Fitch and carry either an explicit or implicit guarantee by the U.S. government. The majority of the obligations of state and political subdivisions carry a credit rating of A or better. Additionally, a portion of the obligations of state and political subdivisions carry a secondary level of credit enhancement. The Company holds corporate debt securities in an unrealized loss position and, based on an analysis of the financial position of the issuers including financial performance, liquidity and regulatory capital ratios, the issuers of the securities show a remote risk of default. Timely interest payments continue to be made on the securities. The unrealized losses in the portfolios are primarily attributable to changes in interest rates. As such, management does not believe any individual unrealized loss as of June 30, 2026 represents credit losses and no unrealized losses have been recognized in the provision for credit losses. Accordingly, there is no allowance for credit losses on the Company’s available-for-sale portfolio as of June 30, 2026. Accrued interest receivable on available-for-sale debt securities, included in accrued interest and fees receivable on the consolidated statements of condition, totaled $11.3 million at June 30, 2026 and is excluded from the estimate of credit losses.

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Securities classified as held-to-maturity are included under the Current Expected Credit Loss (“CECL”) methodology. Calculation of expected credit loss under CECL is done on a collective (“pooled”) basis, with assets grouped when similar risk characteristics exist. The Company notes that at June 30, 2026, all securities in the held-to-maturity classification are U.S. Treasury securities and government agency mortgage-backed securities, therefore they share the same risk characteristics and can be evaluated on a collective basis. The expected credit loss on these securities is evaluated based on historical credit losses of this security type and the expected possibility of default in the future as these securities are guaranteed by the U.S. government. U.S. Treasury securities and government agency mortgage-backed securities often receive the highest credit rating by rating agencies and the Company has concluded that the possibility of default is considered remote. The U.S. Treasury securities and government agency mortgage-backed securities held by the Company in the held-to-maturity category carry an Aa1 rating from Moody’s Investor Services, AA+ rating from Standard & Poor’s, and AA+ from Fitch. The Company concludes that the long history with no credit losses for these securities (adjusted for current conditions and reasonable and supportable forecasts) indicates an expectation that nonpayment of the amortized cost basis is zero. Management has concluded that the prepayment risk associated with these securities is insignificant and it is expected to recover the recorded investment. Accordingly, there is no allowance for credit losses on the Company’s held-to-maturity debt portfolio as of June 30, 2026. Accrued interest receivable on held-to-maturity debt securities, included in accrued interest and fees receivable on the consolidated statements of condition, totaled $6.1 million at June 30, 2026 and is excluded from the estimate of credit losses. The Company has the intent and ability to hold the securities to maturity.

The amortized cost and estimated fair value of debt securities at June 30, 2026, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date, including government agency mortgage-backed securities and government agency collateralized mortgage obligations, are shown separately.

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Investment securities with a carrying value of $2.15 billion and $2.06 billion at June 30, 2026 and December 31, 2025, respectively, were pledged to collateralize certain deposits, borrowings, and swaps. Securities pledged to collateralize certain deposits and borrowings included $318.3 million and $319.5 million of U.S. Treasury securities that were pledged as collateral for securities sold under agreement to repurchase at June 30, 2026 and December 31, 2025, respectively.

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On August 3, 2026, the Company sold $296.8 million of lower-yielding available-for-sale U.S. Treasury securities and the proceeds from the sale were used to repay higher cost overnight borrowings. The sale resulted in a pre-tax realized loss of $3.0 million.