The Company invests in a variety of debt securities, principally obligations of the U.S. government and federal agencies, mortgage-backed securities, state and municipal agencies, and corporations. As of December 31, 2024 and December 31, 2023, all debt securities were classified as held to maturity (“HTM”) or available for sale (“AFS”).

Management considers the appropriateness of the accounting treatment applied to the Company’s debt securities portfolio on an ongoing basis. During a prior year, certain AFS bonds were transferred to the HTM portfolio. Bonds selected for transfer included U.S. government and federal agencies, corporate bonds, and state and municipal bonds. The unrealized loss at the time of transfer is being amortized monthly over the remaining lives of the debt securities with an increase to the carrying value of the debt securities and a decrease to the related accumulated other comprehensive loss, which is included in the stockholders’ equity section of the consolidated balance sheets.

The following tables summarize the amortized cost, gross unrealized gains and losses, fair value and allowance for credit losses of AFS and HTM debt securities at December 31, 2024 and December 31, 2023 (dollars in thousands):


	December 31, 2024
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Allowance for Credit Losses
Securities available for sale:
U.S. government and federal agencies	$	207,935	$	29	$	(1,561)	$	206,403	$	—
Mortgage-backed securities	7,976		1		(582)		7,395		—
Corporate bonds	44,707		20		(753)		43,974		—
State and municipal securities	104,705		37		(4,185)		100,557		—
Total securities available for sale	$	365,323	$	87	$	(7,081)	$	358,329	$	—
Securities held to maturity:
U.S. government and federal agencies	$	122,452	$	—	$	(9,181)	$	113,271	$	—
Mortgage-backed securities	1,168		—		(51)		1,117		—
Corporate bonds	57,470		43		(1,698)		55,815		(171)
State and municipal securities	119,563		5		(10,820)		108,748		(31)
Total securities held to maturity	$	300,653	$	48	$	(21,750)	$	278,951	$	(202)
Total securities	$	665,976	$	135	$	(28,831)	$	637,280	$	(202)


	December 31, 2023
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Allowance for Credit Losses
Securities available for sale:
U.S. government and federal agencies	$	95,129	$	32	$	(2,864)	$	92,297	$	—
Mortgage-backed securities	9,247		11		(609)		8,649		—
Corporate bonds	57,304		5		(1,837)		55,472		—
State and municipal securities	106,472		34		(4,810)		101,696		—
Total securities available for sale	$	268,152	$	82	$	(10,120)	$	258,114	$	—
Securities held to maturity:
U.S. government and federal agencies	$	123,938	$	—	$	(10,069)	$	113,869	$	—
Mortgage-backed securities	1,190		—		(17)		1,173		—
Corporate bonds	59,629		59		(3,027)		56,661		(322)
State and municipal securities	123,649		6		(11,442)		112,213		(26)
Total securities held to maturity	$	308,406	$	65	$	(24,555)	$	283,916	$	(348)
Total securities	$	576,558	$	147	$	(34,675)	$	542,030	$	(348)

Proceeds from calls, maturities, paydowns and sales of debt securities available for sale totaled $187.6 million for the twelve months ended December 31, 2024 and $50.8 million for the twelve months ended December 31, 2023. Proceeds from sales, calls, maturities, and paydowns of debt securities held to maturity totaled $7.4 million and $3.2 million for the twelve month periods ended December 31, 2024 and 2023, respectively.

During the twelve months ended December 31, 2024, the Bank sold an AFS bond that was charged off during a prior year for $210 thousand. The proceeds were recorded as a recapture of credit loss. Because this sale did not result in a realized gain or loss on sale of securities, it is excluded from the related tables below.


	Twelve Months Ended December 31, 2024
	Available for Sale		Held to Maturity
Proceeds from sales and calls of securities	$	458	$	953
Gross gains	—		—
Gross losses	(16)		(65)
Net losses on sale of a securities	$	(16)	$	(65)
Income tax benefit attributable to realized net losses on sale of securities	$	3	$	14


	Twelve Months Ended December 31, 2023
	Available for Sale		Held to Maturity
Proceeds from sales of securities	$	3,041	$	512
Gross gains	—		—
Gross losses	(340)		(49)
Net losses on sale of a securities	$	(340)	$	(49)
Income tax benefit attributable to realized net losses on sale of securities	$	71	$	10

Management classifies bonds as HTM only when the Company has the ability and intent to hold the bond to maturity, and certain sales or transfers of HTM could call into question management’s ability or intent to hold the remaining HTM bond portfolio to maturity, thereby “tainting” the entire portfolio and triggering a reclassification of the entire portfolio to available for sale. However, there are limited situations, including evidence of deterioration in the issuer’s creditworthiness, in which the Company could sell an HTM bond without tainting the remaining HTM portfolio. During 2024, the Company sold two HTM bonds from a single issuer due to significant documented deterioration of the issuer’s creditworthiness evidenced by the downgrading of the issuer’s public credit rating, compared to 2023, when one HTM bond was sold under similar circumstances. The sales are included in the tables above. Under these circumstances, the sales did not taint the HTM portfolio.


	Available for Sale				Held to Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Within one year	$	238,354	$	237,924	$	42,676	$	42,036
After one year through five years	96,599		93,024		170,060		160,143
After five years through ten years	25,536		23,072		83,615		73,202
Over ten years	4,834		4,309		4,302		3,570
Total	$	365,323	$	358,329	$	300,653	$	278,951

The following table shows the gross unrealized losses and fair value of the Company’s AFS debt securities with unrealized losses aggregated by investment category and length of time that individual debt securities have been in a continuous unrealized loss position at December 31, 2024 and December 31, 2023 (dollars in thousands):


	December 31, 2024
	Less Than Twelve Months				Over Twelve Months				Total
	Gross Unrealized Loss		Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss		Fair Value
Securities available for sale:
U.S. government and federal agencies	$	(29)	$	141,169	$	(1,532)	$	22,348	$	(1,561)	$	163,517
Mortgage-backed securities	—		26		(582)		7,338		(582)		7,364
Corporate bonds	(90)		6,365		(663)		30,677		(753)		37,042
State and municipal securities	(77)		9,121		(4,108)		79,790		(4,185)		88,911
Total securities available for sale	$	(196)	$	156,681	$	(6,885)	$	140,153	$	(7,081)	$	296,834


	December 31, 2023
	Less Than Twelve Months				Over Twelve Months				Total
	Gross Unrealized Loss		Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss		Fair Value
Securities available for sale:
U.S. government and federal agencies	$	(16)	$	5,860	$	(2,848)	$	70,906	$	(2,864)	$	76,766
Mortgage-backed securities	—		—		(609)		8,604		(609)		8,604
Corporate bonds	(3)		2,482		(1,834)		51,987		(1,837)		54,469
State and municipal securities	(31)		3,675		(4,779)		89,828		(4,810)		93,503
Total securities available for sale	$	(50)	$	12,017	$	(10,070)	$	221,325	$	(10,120)	$	233,342

In the AFS portfolio at December 31, 2024, 37 out of 49 debt securities of the U.S. government and federal agencies, 14 out of 19 mortgage-backed securities, 76 out of 90 corporate bonds, and 269 out of 298 state and municipal securities were in an unrealized loss position. All of the Company’s investment portfolio was evaluated under the monitoring process described in Note 1, and all investments were deemed investment grade. All of the unrealized losses are attributed to changes in market interest rates, and are not a result of deterioration of creditworthiness among any of the issuers.

Of the total AFS and HTM portfolio at December 31, 2024 and December 31, 2023, 776 and 880 debt securities had unrealized losses with aggregate impairment of 4.3% and 6.0%, respectively, of the Company’s amortized cost basis. These unrealized losses related principally to interest rate movements and not the creditworthiness of the issuer. In analyzing an issuer’s financial condition, management considers whether the debt securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, and industry analysts’ reports. Credit loss allowances for the AFS and HTM portfolios are described in the following sections.

Management evaluates debt securities to determine whether the unrealized loss is due to credit-related factors or non-credit-related factors. This analysis occurs on a quarterly basis. Consideration is given to the extent to which fair value is less than cost, the financial condition and near-term prospects of the issuer, and the intent and ability of the Company to retain its investment in the security for a period of time sufficient to allow for full recovery of its amortized cost. If the assessment reveals that a credit loss exists, the present value of the expected cash flows of the security is compared to the amortized cost basis of the security. If the present value of future cash flows expected to be collected is less than the amortized cost, an allowance for the credit loss is recorded. The loss is limited by the amount that the amortized cost exceeds fair value.

As of the reporting date, the Company did not intend to sell any of the AFS debt securities, did not expect to be required to sell these debt securities, and expected to recover the entire amortized cost basis of all of the debt securities.

The Company did not record an ACL on the AFS debt securities at December 31, 2024 and December 31, 2023. The Company has evaluated these debt securities for credit-related impairment at the reporting date and concluded that no impairment existed. In analyzing an issuer’s financial condition, management considers whether the debt securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, industry analysts’ reports, and correlations between fair value changes and interest rate changes among instruments that are not credit sensitive. All AFS debt securities were current with no debt securities past due or on non-accrual as of December 31, 2024 and December 31, 2023. The Company considers the unrealized losses on the debt securities as of December 31, 2024 and December 31, 2023 to be related to fluctuations in market conditions, primarily interest rates, and is not reflective of deterioration in credit.

The table below presents a rollforward by major security type of the allowance for credit losses on AFS debt securities for the twelve months ended December 31, 2024 and 2023 (dollars in thousands):


	December 31, 2024
	U.S. Government and Federal Agencies		Mortgage Backed Securities		Corporate Bonds		State and Municipal Securities		Total AFS Securities
Allowance for credit losses:
Beginning balance, December 31, 2023	$	—	$	—	$	—	$	—	$	—
Provision for (recapture of) credit losses	—		—		(210)		—		(210)
Write offs charged against the allowance	—		—		—		—		—
Recoveries of amounts previously written off	—		—		210		—		210
Ending balance, December 31, 2024	$	—	$	—	$	—	$	—	$	—

At December 31, 2024, there was no allowance for credit losses on AFS debt securities recorded. During the twelve months ended December 31, 2024, the Bank received proceeds totaling $210 thousand for a bond that was fully charged off during 2023, and recorded a recovery of credit loss. The entire ACL recovery during 2024 was recorded in the first quarter.


	December 31, 2023
	U.S. Government and Federal Agencies		Mortgage Backed Securities		Corporate Bonds		State and Municipal Securities		Total AFS Securities
Allowance for credit losses:
Beginning balance, December 31, 2022	$	—	$	—	$	—	$	—	$	—
Impact of adopting ASC 326	—		—		—		—		—
Provision for credit losses	—		—		785		—		785
Write offs charged against the allowance	—		—		(785)		—		(785)
Recoveries of amounts previously written off	—		—		—		—		—
Ending balance, December 31, 2023	$	—	$	—	$	—	$	—	$	—

At December 31, 2023, there was no allowance for credit losses on AFS debt securities recorded. The entire ACL provision recorded for the AFS portfolio during 2023 was recorded in the first quarter and pertained to a holding from a single corporate issuer whose business was ultimately closed by a regulatory authority. The bond, initially classified as HTM, was transferred to the AFS portfolio based on the unlikely collectability of the unsecured bond and significant documented credit deterioration. A portion of the bond was subsequently sold at a loss, and the remaining unsold portion was written off entirely. The write-off was subsequently partially recovered during 2024.

The Company evaluates the credit risk of its HTM debt securities on a quarterly basis. The Company estimates expected credit losses on HTM debt securities using an instrument-level process described in Note 1. The primary indicators of credit quality for the Company’s HTM portfolio are security type, time remaining to maturity, and credit rating. Credit ratings may be influenced by a number of factors including obligor cash flows, geography, seniority and others. The HTM portfolio includes debt securities issued by the U.S. Treasury and agencies of the federal government, and mortgage-backed securities issued by government agencies. These types of investments carry implicit or explicit backing of the U.S. Treasury, and therefore are deemed to carry no credit risk for purposes of the ACL evaluation.


	December 31, 2024
	U.S. Government and Federal Agencies		Mortgage Backed Securities		Corporate Bonds		State and Municipal Securities		Total HTM Securities
AAA / AA / A	$	122,452	$	1,168	$	18,046	$	119,563	$	261,229
BBB / BB / B	—		—		39,424		—		39,424
Total	$	122,452	$	1,168	$	57,470	$	119,563	$	300,653


	December 31, 2023
	U.S. Government and Federal Agencies		Mortgage Backed Securities		Corporate Bonds		State and Municipal Securities		Total HTM Securities
AAA / AA / A	$	123,938	$	1,190	$	20,091	$	123,168	$	268,387
BBB / BB / B	—		—		39,538		481		40,019
Total	$	123,938	$	1,190	$	59,629	$	123,649	$	308,406


	December 31, 2024
	U.S. Government and Federal Agencies		Mortgage Backed Securities		Corporate Bonds		State and Municipal Securities		Total HTM Securities
Allowance for credit losses:
Beginning balance, December 31, 2023	$	—	$	—	$	322	$	26	$	348
Provision for (recapture of) credit losses					(151)		5		(146)
Write offs charged against the allowance	—		—		—		—		—
Recoveries of amounts previously written off	—		—		—		—		—
Ending balance, December 31, 2024	$	—	$	—	$	171	$	31	$	202


	December 31, 2023
	U.S. Government and Federal Agencies		Mortgage Backed Securities		Corporate Bonds		State and Municipal Securities		Total HTM Securities
Allowance for credit losses:
Beginning balance, December 31, 2022	$	—	$	—	$	—	$	—	$	—
Impact of adopting ASC 326	—		—		303		26		329
Provision for credit losses	—		—		19		—		19
Write offs charged against the allowance	—		—		—		—		—
Recoveries of amounts previously written off	—		—		—		—		—
Ending balance, December 31, 2023	$	—	$	—	$	322	$	26	$	348

At December 31, 2024, the Company had no HTM debt securities that were 30 days or more past due as to principal and interest payments. The Company had no debt securities held to maturity classified as non-accrual as of December 31, 2024.