3.Investment Securities

Investment securities have been classified in the consolidated balance sheets according to management’s intent. Investment securities at June 30, 2026 and December 31, 2025 are summarized as follows:

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Agency notes and bonds, agency mortgage-backed securities and agency collateralized mortgage obligations (“CMO”) include securities issued by the Government National Mortgage Association (“GNMA”), a U.S. government agency, and the Federal National Mortgage Association (“FNMA”), the Federal Home Loan Mortgage Corporation (“FHLMC”), the Federal Farm Credit Bank (“FFCB”) and the Federal Home Loan Bank (“FHLB”), which are government-sponsored enterprises. Corporate notes classified as held to maturity include subordinated debt obligations issued by other bank holding companies (“BHC”).

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The amortized cost and fair value of debt securities as of June 30, 2026, by contractual maturity, are shown below. Expected maturities of mortgage-backed securities and CMO may differ from contractual maturities because the mortgages underlying the obligations may be prepaid without penalty.

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Information pertaining to investment securities with gross unrealized losses at June 30, 2026, aggregated by investment category and the length of time that individual investment securities have been in a continuous loss position, follows.

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Information pertaining to investment securities with gross unrealized losses at December 31, 2025, aggregated by investment category and the length of time that individual investment securities have been in a continuous position, follows.

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The Company has not identified any specific available for sale securities in a loss position that it intends to sell in the near term and does not believe that it will be required to sell any such securities. The Company reviews its securities on a quarterly basis to assess declines in fair value for credit losses. Consideration is given to such factors as the credit rating of the borrower, market conditions such as current interest rates, any adverse conditions specific to the security, and delinquency status on contractual payments. At June 30, 2026, management concluded that in all instances, securities with fair values less than carrying value were due to fluctuations in interest rates and other factors; thus, no credit loss provision was required.

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In addition, management assesses held to maturity securities for credit losses on a quarterly basis. The assessment includes review of performance metrics, identification of delinquency and evaluation of market factors.  Based on all analysis, management concludes the decline in fair value of all securities classified as held to maturity was due to changes in interest rates and other market factors.

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At June 30, 2026, the municipal obligations and U.S. government agency debt securities, including Treasury notes and bonds, agency notes and bonds, mortgage-backed securities and CMOs classified as available for sale and in a loss position had depreciated approximately 5.8% from the amortized cost basis. All of the U.S. government agency securities and municipal obligations are issued by U.S. government agencies, government-sponsored enterprises and municipal governments, or are secured by first mortgage loans and municipal project revenues. At June 30, 2026, the corporate notes classified as held to maturity in a loss position had depreciated approximately 20.8% from the amortized cost basis. These unrealized losses related principally to current interest rates for similar types of securities. In analyzing an issuer’s financial condition, management considers whether the securities are issued by the federal government, its agencies or other governments, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer’s financial condition. As the Company has the intent and ability to hold the debt securities until maturity, or the foreseeable future if classified as available for sale, no credit loss is deemed to exist.

As of June 30, 2026 and December 31, 2025, the Company estimated expected credit losses to be immaterial based on the composition of the held to maturity securities portfolio.

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While management does not anticipate any credit losses at June 30, 2026, additional deterioration in market and economic conditions may have an adverse impact on credit quality in the future.

There were no sales of available for sale securities during the three months ended June 30, 2026 or 2025.  During the six months ended June 30, 2026, the Company recognized gross gains of $169,000 and gross losses of $261,000 on sales of available for sale securities.  During the six months ended June 30, 2025, the Company recognized gross gains of $31,000 and gross losses of $86,000 on sales of available for sale securities.

At June 30, 2026 and December 31, 2025, there were no holdings of securities of any one issuer, other than the U.S. Government and its agencies, with an aggregate book value greater than 10% of stockholders’ equity.

The securities balances presented above exclude an agency CMO with a carrying value of $2.0 million that was purchased prior to June 30, 2026 but remained unsettled at quarter-end.  As a result, the security was included in other assets on the consolidated balance sheets at June 30, 2026 and was transferred to the available for sale securities portfolio upon settlement in July 2026.

Accrued interest receivable on available for sale debt securities totaled $2.6 million at both June 30, 2026 and December 31, 2025 and was reported in accrued interest receivable on the consolidated balance sheets and is excluded from the estimate of credit losses.

Accrued interest receivable on held to maturity debt securities totaled $18,000 at both June 30, 2026 and December 31, 2025, and was reported in accrued interest receivable on the consolidated balance sheets and is excluded from the estimate of credit losses.

Equity Securities

In September 2018, the Company acquired 90,000 shares of common stock in another BHC, representing approximately 5% of the outstanding common stock of the entity, for a total investment of $1.9 million.  During the three months ended June 30, 2026, the Company recognized a gain of $92,000.  During the three months ended June 30, 2025, the Company recognized a loss of $41,000.  During the six months ended June 30, 2026, the Company recognized a gain of $270,000.  During the six months ended June 30, 2025, the Company recognized a loss of $23,000.  At June 30, 2026 and December 31, 2025, the equity investment had a fair value of $1.3 million and $1.0 million, respectively, and is included in other assets on the consolidated balance sheets.

In October 2021, the Company entered into an agreement to invest in a bank technology fund through a limited partnership and the Company entered into an agreement to participate in a second, related fund in June 2025. At both June 30, 2026 and December 31, 2025, the Company’s investment in the limited partnerships was $910,000 and is reflected in other assets on the consolidated balance sheets. The unfunded commitment related to the limited partnership investments at June 30, 2026 and December 31, 2025 was $103,000 and $237,000, respectively, and is reflected in other liabilities on the consolidated balance sheets. The Company expects to fulfill the commitment as capital calls are made through 2026. The investments are accounted for as equity securities without a readily determinable fair value, and have been recorded at cost, less any impairment, and adjustments resulting from observable price changes. There were no impairments or adjustments on equity securities without readily determinable fair values during the three and six months ended June 30, 2026 or 2025.