NOTE 4. INVESTMENT SECURITIES

Management determined there was no allowance for credit losses ("ACL") required for securities available for sale and securities held to maturity as of June 30, 2026 or December 31, 2025.

Investment securities with a carrying value of $92.1 million and $78.5 million were pledged as collateral at June 30, 2026 and December 31, 2025, respectively, for borrowings available through the Federal Reserve Bank of Boston discount window (see Note 8). Investment securities with a carrying value of $229.9 million and $188.7 million were pledged as collateral at June 30, 2026 and December 31, 2025, respectively, for borrowings available with the Federal Home Loan Bank (see Note 8).

During the three and six months ended June 30, 2026, there were no sales of securities available for sale. During the three and six months ended June 30, 2025, proceeds from sales of securities available for sale amounted to $400 thousand and $8.3 million, respectively. During the three and six months ended June 30, 2026, there were no gross gains or losses. During the three months ended June 30, 2025, there were gross losses of $78 thousand and no gross gains. During the six months ended June 30, 2025 there were gross losses of $619 thousand and no gross gains.

The unrealized losses on the Company’s available for sale mortgage-backed securities (MBS) and debt securities have not been recognized into income because management does not intend to sell, nor does it anticipate that it will be required to sell, any of the available for sale securities before recovery of its amortized cost basis. Furthermore, the unrealized losses were due to changes in market interest rates and other market conditions, were not reflective of credit events, and the issuers continue to make timely principal and interest payments on the MBS and debt security instruments. Agency-backed and government-sponsored enterprise securities have a long history with no credit losses, including during times of severe stress. The principal and interest payments on agency guaranteed debt and MBS are backed by the U.S. government. Government-sponsored enterprises similarly guarantee principal and interest payments and carry an implicit guarantee from the U.S. Department of the Treasury. Additionally, government-sponsored enterprise securities are exceptionally liquid, readily marketable, and provide a substantial amount of price transparency and price parity, indicating a perception of zero credit risk. The Company’s unrealized losses from municipal bonds were due to changes in the market interest rate environment and not reflective of credit events. The issuers of these bonds are all Massachusetts based and have no history of credit losses. The contractual terms of these investments do not permit the issuers to settle the security at a price less than the par value of the investments. The Company does not believe it is probable that it will be unable to collect all amounts due according to the contractual terms of the municipal bonds.

Held to maturity corporate bond and subordinated debt holdings are comprised of high credit quality financial institutions. High credit quality corporate bonds and subordinated debt obligations have a history of zero to near-zero credit loss. Corporate bonds are primarily comprised of well capitalized and strong performing financial institutions. Accordingly, the Company determined that the expected credit loss on its held to maturity portfolio was immaterial, and therefore, an allowance was not carried on its held to maturity debt securities at June 30, 2026 and December 31, 2025.