Securities

9 Months Ended

Sep. 30, 2025

Investments, Debt and Equity Securities [Abstract]

The carrying values of investment securities at September 30, 2025 and December 31, 2024 are summarized in the following table (dollars in thousands):


	September 30, 2025				December 31, 2024
	Amount		Percent		Amount		Percent
Securities available for sale
U.S. Treasury	$	271,843	28.24	%	$	288,462	30.55	%
Other securities (FHLB, FHLMC, FNMA and SBA)	4,824		0.50		14,848		1.57
State and political subdivisions	407,046		42.28		362,736		38.42
Mortgage-backed securities and collateralized mortgage obligations (MBS and CMO)	279,050		28.98		278,090		29.46
Total securities available for sale	$	962,763	100.00	%	$	944,136	100.00	%

Investment securities have been classified in the consolidated balance sheets according to management’s intent. Available-for-sale securities consist of debt securities not classified as trading or held to maturity. Available-for-sale securities are stated at fair value, and unrealized holding gains and losses, net of the related deferred tax effect, are reported as a separate component of stockholders' equity. Municipal bonds are comprised of general obligation bonds and revenue bonds issued by various municipal corporations. As of September 30, 2025 and December 31, 2024, all securities held were rated investment grade based upon external ratings where available and, where not available, based upon management knowledge of the local issuers and their financial situations. There were no trading or held to maturity securities as of September 30, 2025 or December 31, 2024.

The carrying amount of available-for-sale securities, fair values and allowance for credit losses were as follows as of September 30, 2025 and December 31, 2024 (in thousands):


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)		Allowance for Credit Losses		Estimated Fair Value
September 30, 2025
U.S. Treasury	$	271,489	$	2,088	$	(1,734)	$	—	$	271,843
Other securities (FHLB, FHLMC, FNMA and SBA)	4,842		—		(18)		—		4,824
State and political subdivisions	421,975		1,790		(16,719)		—		407,046
MBS and CMO	276,518		3,185		(653)		—		279,050
Total	$	974,824	$	7,063	$	(19,124)	$	—	$	962,763
December 31, 2024:
U.S. Treasury	$	294,210	$	215	$	(5,963)	$	—	$	288,462
Other securities (FHLB, FHLMC and FNMA)	15,010		—		(162)		—		14,848
State and political subdivisions	383,244		832		(21,340)		—		362,736
MBS and CMO	287,391		54		(9,355)		—		278,090
Total	$	979,855	$	1,101	$	(36,820)	$	—	$	944,136

The amortized cost and estimated fair value of available-for-sale securities classified according to their contractual maturities at September 30, 2025, were as follows (in thousands) below. Expected maturities of MBS may differ from contractual maturities because the mortgages underlying the securities may be called or prepaid without any penalties. Therefore, these securities are not included in the maturity categories in the following summary.


	Amortized Cost		Fair Value
Due in one year or less	$	61,079	$	60,432
Due after one year through five years	308,843		307,701
Due after five years through ten years	116,410		106,752
Due over ten years	211,974		208,828
	$	698,306	$	683,713
MBS and CMO	276,518		279,050
	$	974,824	$	962,763

As of September 30, 2025 and December 31, 2024, investment securities with a carrying value of $137.13 million and $250.65 million, respectively, were pledged to collateralize other borrowings. As of September 30, 2025, there were no holdings of securities of any one issuer, other than the U.S. government and its agencies, in an amount greater than 10% of stockholders' equity.

Sales proceeds and gross realized gains and losses on available-for-sale securities were as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2025		2024		2025		2024
Sale proceeds	$	39,726	$	—	$	39,726	$	—
Gross realized gains	—		—		—		—
Gross realized losses	(4,294)		—		(4,294)		—

The following table shows the fair value, gross unrealized losses and the percentage of fair value represented by gross unrealized losses of applicable investment securities owned by the Company, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at September 30, 2025 and December 31, 2024 (in thousands):


	Less than 12 months							12 months or more							Total
September 30, 2025 Description of Securities	#	Fair Value		Unrealized Loss		%		#	Fair Value		Unrealized Loss		%		#	Fair Value		Unrealized Loss		%
U.S. Treasury	5	$	20,354	$	(53)	0.26	%	34	$	100,324	$	(1,681)	1.68	%	39	$	120,678	$	(1,734)	1.44	%

Other securities (FHLB, FHLMC, FNMA and SBA)	1	4,824		(18)		0.37		—	—		—		—		1	4,824		(18)		0.37

State and political subdivisions	273	112,064		(2,593)		2.31		654	179,249		(14,126)		7.88		927	291,313		(16,719)		5.74

MBS and CMO	4	41,083		(468)		1.14		4	21,411		(185)		0.86		8	62,494		(653)		1.04

Total	283	$	178,325	$	(3,132)	1.76	%	692	$	300,984	$	(15,992)	5.31	%	975	$	479,309	$	(19,124)	3.99	%


	Less than 12 months							12 months or more							Total
December 31, 2024 Description of Securities	#	Fair Value		Unrealized Loss		%		#	Fair Value		Unrealized Loss		%		#	Fair Value		Unrealized Loss		%
U.S. Treasury	32	$	115,094	$	(2,555)	2.22	%	44	$	125,590	$	(3,408)	2.71	%	76	$	240,684	$	(5,963)	2.48	%

Other securities (FHLB, FHLMC and FNMA)	—	—		—		—		6	14,848		(162)		1.09		6	14,848		(162)		1.09

State and political subdivisions	369	140,021		(2,844)		2.03		663	163,330		(18,496)		11.32		1,032	303,351		(21,340)		7.03

MBS and CMO	35	225,680		(2,904)		—		18	41,222		(6,451)		15.65		53	266,902		(9,355)		3.51

Total	436	$	480,795	$	(8,303)	1.73	%	731	$	344,990	$	(28,517)	8.27	%	1,167	$	825,785	$	(36,820)	4.46	%

The Company considered the following information in reaching the conclusion that the unrealized losses disclosed in the table above are not attributable to credit losses. None of the unrealized losses in the above table was due to the deterioration in the credit quality of any of the issues that might result in the non-collection of contractual principal and interest. The unrealized losses are due to changes in interest rates. The Company has not recognized any unrealized loss in income because management does not have the intent to sell the securities included in the previous table. Management has concluded that it is more likely than not that the Company will not be required to sell these securities prior to recovery of the amortized cost basis. The securities are of high credit quality (investment grade credit ratings) and principal and interest payments are made timely with no payments past due as of September 30, 2025. The fair value is expected to recover as the securities approach maturity. The U.S. Treasury and other securities are issued and guaranteed by U.S. government-sponsored entities and agencies. The MBS and CMOs have implied U.S. government guarantees of the agency securities. The Company evaluates if a credit loss exists by monitoring to ensure it has adequate credit support considering the nature of the investment, number and significance of investments in an unrealized loss position, collectability or delinquency issues, the underlying financial statements of the issuers, credit ratings and subsequent changes thereto, and other available relevant information. Considering the above factors, management has determined that no allowance for credit losses is necessary for the securities portfolio as of September 30, 2025.

HILLS BANCORPORATION 10-Q