Investment Securities

3 Months Ended

Mar. 31, 2025

Investments, Debt and Equity Securities [Abstract]

Note 4: Investment Securities

The amortized cost and estimated fair value of investment securities are summarized as follows:


	March 31, 2025
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
(In thousands)	Cost		Gains		Losses			Value
Available-for-Sale Portfolio
Debt investment securities:
US Treasury, agencies and GSEs	$	72,073	$	279	$	(3,172	)	$	69,180
State and political subdivisions		35,279		15		(2,861	)		32,433
Corporate		10,946		156		(217	)		10,885
Asset backed securities		18,687		7		(219	)		18,475
Residential mortgage-backed - US agency		50,090		258		(1,128	)		49,220
Collateralized mortgage obligations - US agency		15,809		166		(778	)		15,197
Collateralized mortgage obligations - Private label		90,170		218		(1,933	)		88,455
Total		293,054		1,099		(10,308	)		283,845
Equity investment securities:
Common stock - financial services industry		206		-		-			206
Total		206		-		-			206
Total available-for-sale	$	293,260	$	1,099	$	(10,308	)	$	284,051

Held-to-Maturity Portfolio
Debt investment securities:
US Treasury, agencies and GSEs	$	3,593	$	-	$	(235	)	$	3,358
State and political subdivisions		16,580		8		(1,648	)		14,940
Corporate		41,168		17		(1,501	)		39,684
Asset backed securities		12,566		12		(494	)		12,084
Residential mortgage-backed - US agency		9,484		34		(590	)		8,928
Collateralized mortgage obligations - US agency		11,556		2		(1,077	)		10,481
Collateralized mortgage obligations - Private label		61,014		54		(1,495	)		59,573
Total		155,961		127		(7,040	)		149,048
Less: Allowance for credit losses		257
Total held-to-maturity, net of allowance for credit losses	$	155,704


	December 31, 2024
			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
(In thousands)	Cost		Gains		Losses			Value
Available-for-Sale Portfolio
Debt investment securities:
US Treasury, agencies and GSEs	$	73,888	$	371	$	(3,834	)	$	70,425
State and political subdivisions		35,128		122		(1,928	)		33,322
Corporate		10,956		209		(284	)		10,881
Asset backed securities		18,934		26		(473	)		18,487
Residential mortgage-backed - US agency		40,636		35		(1,500	)		39,171
Collateralized mortgage obligations - US agency		14,376		45		(891	)		13,530
Collateralized mortgage obligations - Private label		85,426		158		(2,275	)		83,309
Total		279,344		966		(11,185	)		269,125
Equity investment securities:
Common stock - financial services industry		206		-		-			206
Total		206		-		-			206
Total available-for-sale	$	279,550	$	966	$	(11,185	)	$	269,331

Held-to-Maturity Portfolio
Debt investment securities:
US Treasury, agencies and GSEs	$	3,648	$	-	$	(282	)	$	3,366
State and political subdivisions		17,153		10		(1,833	)		15,330
Corporate		43,628		23		(1,740	)		41,911
Asset backed securities		13,050		8		(557	)		12,501
Residential mortgage-backed - US agency		9,575		32		(728	)		8,879
Collateralized mortgage obligations - US agency		11,940		3		(1,223	)		10,720
Collateralized mortgage obligations - Private label		59,946		40		(1,670	)		58,316
Total		158,940		116		(8,033	)		151,023
Less: Allowance for credit losses		257
Total held-to-maturity, net of allowance for credit losses	$	158,683

The amortized cost and estimated fair value of debt investments at March 31, 2025 by contractual maturity are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalties.


	Available-for-Sale				Held-to-Maturity
	Amortized		Estimated		Amortized		Estimated
(In thousands)	Cost		Fair Value		Cost		Fair Value
Due in one year or less	$	6,558	$	6,665	$	5,929	$	5,913
Due after one year through five years		35,380		32,126		36,509		35,261
Due after five years through ten years		14,904		14,103		18,179		16,378
Due after ten years		80,143		78,079		13,290		12,514
Sub-total		136,985		130,973		73,907		70,066
Residential mortgage-backed - US agency		50,090		49,220		9,484		8,928
Collateralized mortgage obligations - US agency		15,809		15,197		11,556		10,481
Collateralized mortgage obligations - Private label		90,170		88,455		61,014		59,573
Totals	$	293,054	$	283,845	$	155,961	$	149,048

The Company’s investment securities’ gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, are as follows:


	March 31, 2025
	Less than Twelve Months							Twelve Months or More							Total
	Number of							Number of							Number of
	Individual		Unrealized			Fair		Individual		Unrealized			Fair		Individual		Unrealized			Fair
(In thousands)	Securities		Losses			Value		Securities		Losses			Value		Securities		Losses			Value
Available-for-Sale Portfolio
US Treasury, agencies and GSEs		1	$	(1	)	$	209		8	$	(3,171	)	$	26,938		9	$	(3,172	)	$	27,147
State and political subdivisions		7		(157	)		4,261		21		(2,704	)		26,292		28		(2,861	)		30,553
Corporate		-		-			-		4		(217	)		3,472		4		(217	)		3,472
Asset backed securities		5		(91	)		8,833		6		(128	)		5,936		11		(219	)		14,769
Residential mortgage-backed - US agency		7		(283	)		13,920		10		(845	)		9,634		17		(1,128	)		23,554
Collateralized mortgage obligations - US agency		-		-			-		11		(778	)		6,754		11		(778	)		6,754
Collateralized mortgage obligations - Private label		20		(115	)		36,598		18		(1,818	)		20,515		38		(1,933	)		57,113
Totals		40	$	(647	)	$	63,821		78	$	(9,661	)	$	99,541		118	$	(10,308	)	$	163,362
Held-to-Maturity Portfolio
US Treasury, agencies and GSEs		-	$	-		$	-		2	$	(235	)	$	3,358		2	$	(235	)	$	3,358
State and political subdivisions		3		(4	)		358		16		(1,644	)		12,675		19		(1,648	)		13,033
Corporate		-		-			-		35		(1,501	)		28,829		35		(1,501	)		28,829
Asset backed securities		1		(3	)		491		5		(491	)		6,840		6		(494	)		7,331
Residential mortgage-backed - US agency		1		(50	)		2,863		6		(540	)		4,801		7		(590	)		7,664
Collateralized mortgage obligations - US agency		-		-			-		9		(1,077	)		9,957		9		(1,077	)		9,957
Collateralized mortgage obligations - Private label		6		(54	)		12,300		23		(1,441	)		30,844		29		(1,495	)		43,144
Totals		11	$	(111	)	$	16,012		96	$	(6,929	)	$	97,304		107	$	(7,040	)	$	113,316


	December 31, 2024
	Less than Twelve Months							Twelve Months or More							Total
	Number of							Number of							Number of
	Individual		Unrealized			Fair		Individual		Unrealized			Fair		Individual		Unrealized			Fair
(In thousands)	Securities		Losses			Value		Securities		Losses			Value		Securities		Losses			Value
Available-for-Sale Portfolio
US Treasury, agencies and GSEs		2	$	(132	)	$	18,790		8	$	(3,702	)	$	26,748		10	$	(3,834	)	$	45,538
State and political subdivisions		6		(3	)		900		21		(1,925	)		25,211		27		(1,928	)		26,111
Corporate		-		-			-		4		(284	)		3,410		4		(284	)		3,410
Asset backed securities		3		(328	)		3,608		7		(145	)		8,343		10		(473	)		11,951
Residential mortgage-backed - US agency		13		(794	)		29,628		9		(706	)		6,107		22		(1,500	)		35,735
Collateralized mortgage obligations - US agency		1		(15	)		1,937		11		(876	)		6,972		12		(891	)		8,909
Collateralized mortgage obligations - Private label		9		(43	)		15,561		20		(2,232	)		23,309		29		(2,275	)		38,870
Totals		34	$	(1,315	)	$	70,424		80	$	(9,870	)	$	100,100		114	$	(11,185	)	$	170,524
Held-to-Maturity Portfolio
US Treasury, agencies and GSE's		-	$	-		$	-		2	$	(282	)	$	3,366		2	$	(282	)	$	3,366
State and political subdivisions		6		(5	)		1,438		16		(1,828	)		12,561		22		(1,833	)		13,999
Corporate		1		(7	)		993		35		(1,733	)		28,603		36		(1,740	)		29,596
Asset backed securities		2		(5	)		2,241		5		(552	)		6,862		7		(557	)		9,103
Residential mortgage-backed - US agency		1		(115	)		2,808		7		(613	)		4,866		8		(728	)		7,674
Collateralized mortgage obligations - US agency		-		-			-		9		(1,223	)		10,121		9		(1,223	)		10,121
Collateralized mortgage obligations - Private label		3		(55	)		8,644		26		(1,615	)		34,539		29		(1,670	)		43,183
Totals		13	$	(187	)	$	16,124		100	$	(7,846	)	$	100,918		113	$	(8,033	)	$	117,042

Excluding the effects of changes in the characteristics of individual debt securities that potentially give rise to credit losses, as described below, the fair market value of a debt security as of a particular measurement date is highly dependent upon prevailing market and economic environmental factors at the measurement date relative to the prevailing market and economic environmental factors present at the time the debt security was acquired. The most significant market and environmental factors include, but are not limited to (1) the general level of interest rates, (2) the relationship between shorter-term interest rates and longer-term interest rates (referred to as the “slope” or "shape" of the interest rate yield curve),

(3) general bond market liquidity, (4) the recent and expected near-term volume of new issuances of similar debt securities, and (5) changes in the market values of individual loan collateral underlying mortgage-backed an asset-backed debt securities. Changes in interest rates affect the fair market values of debt securities by influencing the discount rate applied to the securities’ future expected cash flows. The higher the discount rate, the lower the resultant security fair value at the measurement date. Conversely, the lower the discount rate, the higher the resultant security fair value at the measurement date. In addition, the cumulative amount and timing of undiscounted cash flows of debt securities may also be affected by changes in interest rates. For any given level of movement in the general market and economic environmental factors described above, the magnitude of any particular debt security’s price changes will also depend heavily upon security-specific factors such as (1) the duration of the security, (2) imbedded optionality contractually granted to the issuer of the security with respect to principal prepayments, and (3) changes in the level of market premiums demanded by investors for securities with imbedded credit risk (where applicable).

When the fair value of any individual security categorized as available-for-sale ("AFS") or held-to-maturity ("HTM") is less than its amortized cost basis, an assessment is made as to whether or not an adjustment to current earnings for credit loss is required. In assessing potential credit losses, management also makes a quantitative determination of potential credit loss for all HTM securities even if the risk of credit loss is considered remote and uses a best estimate threshold for securities categorized as AFS. The Company considers numerous factors when determining whether a potential credit loss exists. The principal factors considered are (1) the financial condition of the issue and (guarantor, if any) any adverse conditions specifically related to the security, industry or geographic area, (2) failure of the issuer of the security to make scheduled interest or principal payments, (3) any changes to the rating of the security by a nationally recognized statistical rating organization (“NRSRO”), and (4) the presence of contractual credit enhancements, if any, including the guarantee of the federal government or any of its agencies.

The Company carries all of its AFS investments at fair value with any unrealized gains or losses reported, net of income tax effects, as an adjustment to shareholders' equity and included in accumulated other comprehensive income (loss), except for the credit-related portion of debt securities’ credit losses, if any, which are charged to earnings. The Company's ability to fully realize the value of its investments in various securities, including corporate debt securities, is dependent on the underlying creditworthiness of the issuing organization. In evaluating the debt securities portfolio (both AFS and HTM) for credit losses, management considers (1) the intent to sell the security; (2) if it is “more likely than not” the security is required to be sold before recovery of its amortized cost basis; or (3) if the present value of expected cash flows is insufficient to recover the entire amortized cost basis.

The portion of the investment securities portfolio, categorized as AFS, with an aggregate amortized historical cost of $293.3 million, had an aggregate fair value that was less than its aggregate amortized historical cost by $9.2 million, or -3.1%, at March 31, 2025. The AFS securities portfolio, with an aggregate amortized historical cost of $279.6 million, had an aggregate fair value that was less than its aggregate amortized historical cost by $10.2 million, or -3.7%, at December 31, 2024. The resultant $1.0 million total improvement in the fair value of the AFS investment portfolio's aggregate fair value relative to its aggregate amortized historical cost, in the three months ended March 31, 2025, was primarily due to changes in the interest rate environment (the general interest rate level and the relationships between shorter-term and longer-term interest rates, known as the 'yield curve') that occurred in that period. These changes in aggregate fair value relative to aggregate amortized historical cost that occurred in the three months ended March 31, 2025 did not represent any changes in credit loss estimations within the portfolio.

The portion of the investment securities portfolio, categorized as HTM, with an aggregate amortized historical cost of $156.0 million, had an aggregate fair value that was less than its aggregate amortized historical cost by $6.9 million, or -4.4%, at March 31, 2025. The portion of the investment securities portfolio, categorized as HTM, with an aggregate amortized historical cost of $158.9 million, had an aggregate fair value that was less than its aggregate amortized historical cost by $7.9 million, or -5.0%, at December 31, 2024. The resultant $1.0 million improvement in the aggregate fair value of the HTM investment portfolio, relative to its aggregate amortized historical cost, during the three months ended March 31, 2025, was primarily due to changes in the interest rate environment (the general interest rate level and the relationships between shorter-term and longer-term interest rates, known as the 'yield curve') that occurred in that period. These changes in aggregate fair value relative to aggregate amortized historical cost that occurred in the three months ended March 31, 2025 did not represent any changes in credit loss estimations within the portfolio. The Company does not intend to sell these

securities, nor is it more likely than not that the Company will be required to sell these securities prior to the recovery of the amortized cost.

The following tables provide a rollforward of the allowance for credit losses on investment securities classified as held-to-maturity for the three months ended March 31, 2025 and 2024:


(In thousands)	Government Issued and Government Sponsored Enterprise Securities		Mortgage and Asset-backed Securities		Securities Issued By State and Political Subdivisions		Corporate Securities		Total
Balance, December 31, 2024	$	-	$	-	$	1	$	256	$	257
Provision for credit losses		-		-		-		-		-
Allowance on purchased financial assets with credit deterioration		-		-		-		-		-
Charge-offs of securities		-		-		-		-		-
Recoveries		-		-		-		-		-
Balance, March 31, 2025	$	-	$	-	$	1	$	256	$	257


	Government Issued and Government Sponsored Enterprise Securities		Mortgage and Asset-backed Securities		Securities Issued By State and Political Subdivisions		Corporate Securities		Total
Balance, December 31, 2023	$	-	$	-	$	2	$	350	$	352
Provision for credit losses		-		-		-		15		15
Allowance on purchased financial assets with credit deterioration		-		-		-		-		-
Charge-offs of securities		-		-		-		-		-
Recoveries		-		-		-		-		-
Balance, March 31, 2024	$	-	$	-	$	2	$	365	$	367

The Company monitors the credit quality of the debt securities categorized as HTM primarily through the use of NRSRO credit ratings. These assessments are made on a quarterly basis. The following tables summarize the amortized cost of debt securities categorized as HTM at March 31, 2025 and December 31, 2024, aggregated by credit quality indicators:


(In thousands)	March 31, 2025		December 31, 2024
AAA or equivalent	$	33,877	$	38,304
AA or equivalent, including securities issued by the United States Government or Government Sponsored Enterprises		44,874		40,429
A or equivalent		8,717		12,602
BBB or equivalent		12,031		15,265
BB or equivalent		1,487		1,487
Unrated		54,975		50,853
Total	$	155,961	$	158,940

Gross realized (losses) gains on sales and redemptions of available-for-sale and held-to-maturity securities for the indicated periods are detailed below:


	For the three months
	ended March 31,
(In thousands)	2025			2024
Realized gains on investments	$	-		$	734
Realized losses on investments		(8	)		(882	)
Total	$	(8	)	$	(148	)

As of March 31, 2025 and December 31, 2024, securities with a fair value of $153.3 million and $119.8 million, respectively, were pledged to collateralize certain municipal deposit relationships. As of the same dates, securities with a fair value of $105.8 million and $123.2 million, respectively, were pledged against certain borrowing arrangements.

Management has reviewed its loan and mortgage-backed securities portfolios and determined that, to the best of its knowledge, only minimal exposure exists to sub-prime or other high-risk residential mortgages. With limited exceptions in the Company’s investment portfolio involving the most senior tranches of securitized bonds, the Company is not in the practice of investing in, or originating, these types of investment securities.