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 June 30, 2025 and December 31, 2024, 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 June 30, 2025 and December 31, 2024 (dollars in thousands):


	June 30, 2025
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)		Fair Value		Allowance for Credit Losses
Securities available for sale:
U.S. government and federal agencies	$	317,522	$	291	$	(1,160)	$	316,653	$	—
Mortgage backed securities	6,814		1		(447)		6,368		—
Corporate bonds	49,467		147		(344)		49,270		—
State and municipal securities	99,869		63		(2,931)		97,001		—
Total securities available for sale	$	473,672	$	502	$	(4,882)	$	469,292	$	—
Securities held to maturity:
U.S. government and federal agencies	$	117,457	$	—	$	(6,368)	$	111,089	$	—
Mortgage backed securities	1,159		—		(26)		1,133		—
Corporate bonds	52,856		58		(946)		51,968		(114)
State and municipal securities	117,877		5		(8,006)		109,876		(30)
Total securities held to maturity	$	289,349	$	63	$	(15,346)	$	274,066	$	(144)
Total securities	$	763,021	$	565	$	(20,228)	$	743,358	$	(144)


	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)

Proceeds from calls, maturities, and paydowns of debt securities available for sale totaled $248.6 million for the six months ended June 30, 2025 and $27.6 million for the six months ended June 30, 2024. Proceeds from calls, maturities, and paydowns of debt securities held to maturity totaled $11.2 million and $13 thousand for the six month periods ended June 30, 2025 and 2024, respectively.

During the three and six months ended June 30, 2025, the Bank had no sales of AFS securities. One AFS security was disposed of through a tender offered by the security’s issuer. The proceeds received approximated the security’s amortized cost, and the transaction did not result in a material gain or loss. During the six months ended June 30, 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 previously recorded credit losses. This sale did not result in a realized gain or loss on sale of securities.

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 the first six months of 2025 and 2024, the Company did not sell any HTM bonds.


	Available for Sale				Held to Maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Within one year	$	243,487	$	243,147	$	62,862	$	62,097
After one year through five years	208,049		205,720		159,412		151,868
After five years through ten years	17,584		16,300		62,804		56,452
Over ten years	4,552		4,125		4,271		3,649
Total	$	473,672	$	469,292	$	289,349	$	274,066

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 June 30, 2025 and December 31, 2024 (dollars in thousands):


	June 30, 2025
	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	$	(87)	$	176,314	$	(1,073)	$	18,837	$	(1,160)	$	195,151
Mortgage backed securities	—		—		(447)		6,313		(447)		6,313
Corporate bonds	(22)		6,445		(322)		17,960		(344)		24,405
State and municipal securities	(26)		7,039		(2,905)		67,218		(2,931)		74,257
Total securities available for sale	$	(135)	$	189,798	$	(4,747)	$	110,328	$	(4,882)	$	300,126


	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

In the AFS portfolio at June 30, 2025, 40 out of 60 debt securities of the U.S. government and federal agencies, 10 out of 16 mortgage backed securities, 52 out of 102 corporate bonds, and 229 out of 290 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 of the audited consolidated financial statements for the year ended December 31, 2024, contained within the Form 10-K, 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 June 30, 2025 and December 31, 2024, 696 and 776 debt securities had unrealized losses with aggregate impairment of 2.7% and 4.3%, 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 June 30, 2025 and December 31, 2024. 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 June 30, 2025 and December 31, 2024. The Company considers the unrealized losses on the debt securities as of June 30, 2025 and December 31, 2024 to be related to fluctuations in market conditions, primarily interest rates, and is not reflective of deterioration in credit.


	June 30, 2024
For the six months ended	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, June 30, 2024	$	—	$	—	$	—	$	—	$	—

At June 30, 2024, there was no allowance for credit losses on AFS debt securities recorded. During the six months ended June 30, 2024, the Bank received proceeds totaling $210 thousand for a bond that was fully charged off during 2023, and recorded a recovery of the credit loss.

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 of the audited consolidated financial statements for the year ended December 31, 2024. 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.


	June 30, 2025
	U.S. Government and Federal Agencies		Mortgage Backed Securities		Corporate Bonds		State and Municipal Securities		Total HTM Securities
AAA / AA / A	$	117,457	$	1,159	$	18,981	$	117,877	$	255,474
BBB / BB / B	—		—		33,875		—		33,875
Total	$	117,457	$	1,159	$	52,856	$	117,877	$	289,349


	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


	June 30, 2025
For the three months ended	U.S. Government and Federal Agencies		Mortgage Backed Securities		Corporate Bonds		State and Municipal Securities		Total HTM Securities
Allowance for credit losses:
Beginning balance, March 31, 2025	$	—	$	—	$	145	$	30	$	175
Provision for (recapture of) credit losses	—		—		(31)		—		(31)
Write offs charged against the allowance	—		—		—		—		—
Recoveries of amounts previously written off	—		—		—		—		—
Ending balance, June 30, 2025	$	—	$	—	$	114	$	30	$	144


	June 30, 2024
For the three months ended	U.S. Government and Federal Agencies		Mortgage Backed Securities		Corporate Bonds		State and Municipal Securities		Total HTM Securities
Allowance for credit losses:
Beginning balance, March 31, 2024	$	—	$	—	$	325	$	34	$	359
Provision for (recapture of) credit losses	—		—		(110)		(1)		(111)
Write offs charged against the allowance	—		—		—		—		—
Recoveries of amounts previously written off	—		—		—		—		—
Ending balance, June 30, 2024	$	—	$	—	$	215	$	33	$	248


	June 30, 2025
For the six months ended	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, 2024	$	—	$	—	$	171	$	31	$	202
Provision for (recapture of) credit losses	—		—		(57)		(1)		(58)
Write offs charged against the allowance	—		—		—		—		—
Recoveries of amounts previously written off	—		—		—		—		—
Ending balance, June 30, 2025	$	—	$	—	$	114	$	30	$	144


	June 30, 2024
For the six months ended	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 credit losses	—		—		(107)		7		(100)
Write offs charged against the allowance	—		—		—		—		—
Recoveries of amounts previously written off	—		—		—		—		—
Ending balance, June 30, 2024	$	—	$	—	$	215	$	33	$	248

At June 30, 2025 and 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 June 30, 2025 and December 31, 2024.