Investment Securities

9 Months Ended

Sep. 30, 2021

Securities Financing Transactions Disclosures [Abstract]

(3)Investment Securities

The majority of the investment portfolio is comprised of securities issued by state and political subdivision obligations and U.S. Treasury and government agencies. The amortized cost, fair value, and unrealized gains and losses on investment securities at September 30, 2021 and December 31, 2020 are as follows:

(Dollars in thousands)	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
September 30, 2021
Available-for-sale debt securities:
Mortgage-backed U.S. government agencies	$	2	$	—	$	—	$	2
Corporate debt securities		5,031		—		18		5,013
Total available-for-sale debt securities		5,033		—		18		5,015
Held-to-maturity debt securities:
U.S. Treasury and U.S. government agencies	$	43,732	$	24	$	334	$	43,422
Mortgage-backed U.S. government agencies		27,799		690		3		28,486
State and political subdivision obligations		67,251		2,475		39		69,687
Corporate debt securities		14,009		151		75		14,085
Total held-to-maturity debt securities		152,791		3,340		451		155,680
Total	$	157,824	$	3,340	$	469	$	160,695

(Dollars in thousands)	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
December 31, 2020
Available-for-sale debt securities:
Mortgage-backed U.S. government agencies	$	2	$	—	$	—	$	2
Corporate debt securities		5,750		—		4		5,746
Total available-for-sale debt securities		5,752		—		4		5,748
Held-to-maturity debt securities:
U.S. Treasury and U.S. government agencies	$	11,511	$	66	$	—	$	11,577
Mortgage-backed U.S. government agencies		40,810		948		15		41,743
State and political subdivision obligations		65,449		3,295		6		68,738
Corporate debt securities		10,522		215		1		10,736
Total held-to-maturity debt securities		128,292		4,524		22		132,794
Total	$	134,044	$	4,524	$	26	$	138,542

Estimated fair values of debt securities are based on quoted market prices, where applicable. If quoted market prices are not available, fair values are based on quoted market prices of instruments of a similar type, credit quality and structure, adjusted for differences between the quoted instruments and the instruments being valued. Please refer to Note 7, Fair Value Measurement, for more information on the fair value of investment securities.

Investment securities having a fair value of $137,452,000 at September 30, 2021 and $102,959,000 at December 31, 2020 were pledged to secure public deposits, some Trust department deposit accounts, and certain other borrowings. In accordance with legal provisions for alternatives other than pledging of investments, Mid Penn also obtains letters of credit from the Federal Home Loan Bank of Pittsburgh (“FHLB”) to secure certain public deposits. These FHLB letter of credit commitments totaled $362,520,000 as of September 30, 2021 and $288,950,000 as of December 31, 2020.

The following tables present gross unrealized losses and fair value of debt security investments aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at September 30, 2021 and December 31, 2020.

(Dollars in thousands)	Less Than 12 Months					12 Months or More					Total
	Number					Number					Number
	of	Fair		Unrealized		of	Fair		Unrealized		of	Fair		Unrealized
September 30, 2021	Securities	Value		Losses		Securities	Value		Losses		Securities	Value		Losses
Available-for-sale debt securities:
Corporate debt securities	3	$	2,982	$	18	0	$	—	$	—	3	$	2,982	$	18
Total temporarily impaired available-for-sale debt securities	3	$	2,982	$	18	0	$	—	$	—	3	$	2,982	$	18

Held-to-maturity debt securities:
U.S. Treasury and U.S. government agencies	25	$	37,598	$	334	0	$	—	$	—	25	$	37,598	$	334
Mortgage-backed U.S. government agencies	2		566		3	0		—		—	2		566		3
State and political subdivision obligations	14		3,849		32	1		250		7	15		4,099		39
Corporate debt securities	5		5,924		75	0		—		—	5		5,924		75
Total temporarily impaired held-to-maturity debt securities	46		47,937		444	1		250		7	47		48,187		451
Total	49	$	50,919	$	462	1	$	250	$	7	50	$	51,169	$	469

(Dollars in thousands)	Less Than 12 Months					12 Months or More						Total
	Number					Number						Number
	of	Fair		Unrealized		of	Fair		Unrealized			of	Fair		Unrealized
December 31, 2020	Securities	Value		Losses		Securities	Value		Losses			Securities	Value		Losses
Available-for-sale securities:
Corporate debt securities	2	$	3,497	$	4	0	$	—		$	—	2	$	3,497	$	4
Total temporarily impaired available-for-sale securities	2	$	3,497	$	4	0	$	—		$	—	2	$	3,497	$	4

Held-to-maturity securities:
Mortgage-backed U.S. government agencies	8	$	5,336	$	15	0	$	—		$	—	8	$	5,336	$	15
State and political subdivision obligations	2		801		6	0		—			—	2		801		6
Corporate debt securities	1		449		1	0		—			—	1		449		1
Total temporarily impaired held to maturity securities	11		6,586		22	0		—			—	11		6,586		22
Total	13	$	10,083	$	26	0	$	—		$	—	13	$	10,083	$	26

Management evaluates securities for other-than-temporary impairment on at least a quarterly basis, and more frequently when economic or market concerns warrant such additional evaluation. Consideration is given to the length of time and the extent to which the fair value of the security has been less than amortized cost, as well as the overall financial condition of the issuer. In addition, for debt securities, Mid Penn considers (i) whether management has the intent to sell the security, (ii) whether it is more likely than not that management will be required to sell the security prior to its anticipated recovery, and (iii) whether management expects to recover the entire amortized cost basis. At September 30, 2021, the majority of securities in an unrealized loss position were U.S. government agency securities and state and political subdivision obligations. At December 31, 2020, the majority of securities in an unrealized loss position were U.S. government agency and mortgage-back U.S. government agency securities.

Mid Penn had no securities considered by management to be other-than-temporarily impaired as of September 30, 2021, December 31, 2020, or September 30, 2020, and did not record any securities impairment charges in the respective periods ended on these dates. This determination reflects management’s assessment that no securities in its portfolio were impaired as a result of any COVID-19 pandemic impacts, to date, to the repayment ability of the underlying issuers of securities. Mid Penn does not consider the securities with unrealized losses on the respective dates to be other-than-temporarily impaired as the unrealized losses were deemed to be temporary changes in value related to market movements in interest yields at various periods similar to the maturity dates of holdings in the investment portfolio, and not reflective of an erosion of credit quality.

Gross realized gains and losses on sales of available-for-sale debt securities for the three and nine months ended September 30, 2021 and 2020 are shown in the table below.

(Dollars in thousands)	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Realized gains		$	79		$	150		$	79		$	405
Realized losses			—			—			—			(12	)
Net gains		$	79		$	150		$	79		$	393

The table below illustrates the maturity distribution of investment securities at amortized cost and fair value as of September 30, 2021.

(Dollars in thousands)	Available-for-sale				Held-to-maturity
	Amortized		Fair		Amortized		Fair
September 30, 2021	Cost		Value		Cost		Value
Due in 1 year or less	$	—	$	—	$	3,891	$	3,920
Due after 1 year but within 5 years		1,250		1,247		35,364		36,900
Due after 5 years but within 10 years		3,781		3,766		85,737		86,374
Due after 10 years		—		—		—		—
		5,031		5,013		124,992		127,194

Mortgage-backed securities		2		2		27,799		28,486
	$	5,033	$	5,015	$	152,791	$	155,680