Investment Securities

6 Months Ended

Jun. 30, 2022

Securities Financing Transactions Disclosures [Abstract]

Note 4 - Investment Securities

The majority of the investment portfolio is comprised of securities issued by U.S. Treasury and government agencies, mortgage-backed U.S. government agencies, and state and political subdivision obligations. The amortized cost, fair value, and unrealized gains and losses on investment securities at June 30, 2022 and December 31, 2021 are as follows:

(Dollars in thousands)	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
June 30, 2022
Available-for-sale debt securities:
U.S. Treasury and U.S. government agencies	$	34,475	$	76	$	525	$	34,026
Mortgage-backed U.S. government agencies		166,321		40		10,928		155,433
State and political subdivision obligations		4,366		—		697		3,669
Corporate debt securities		26,570		—		1,000		25,570
Total available-for-sale debt securities		231,732		116		13,150		218,698
Held-to-maturity debt securities:
U.S. Treasury and U.S. government agencies	$	239,605	$	28	$	21,516	$	218,117
Mortgage-backed U.S. government agencies		55,180		1		4,857		50,324
State and political subdivision obligations		88,250		68		6,673		81,645
Corporate debt securities		15,997		1		796		15,202
Total held-to-maturity debt securities		399,032		98		33,842		365,288
Total	$	630,764	$	214	$	46,992	$	583,986

(Dollars in thousands)	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
December 31, 2021
Available-for-sale debt securities:
Mortgage-backed U.S. government agencies	$	49,760	$	3	$	283	$	49,480
State and political subdivision obligations		3,899		26		11		3,914
Corporate debt securities		9,525		—		57		9,468
Total available-for-sale debt securities		63,184		29		351		62,862
Held-to-maturity debt securities:
U.S. Treasury and U.S. government agencies	$	178,136	$	26	$	1,165	$	176,997
Mortgage-backed U.S. government agencies		61,157		440		272		61,325
State and political subdivision obligations		75,958		2,305		27		78,236
Corporate debt securities		14,006		133		71		14,068
Total held-to-maturity debt securities		329,257		2,904		1,535		330,626
Total	$	392,441	$	2,933	$	1,886	$	393,488

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 $380,649,000 at June 30, 2022 and $244,763,000 at December 31, 2021 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 $205,100,000 as of June 30, 2022 and $450,850,000 as of December 31, 2021.

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 June 30, 2022 and December 31, 2021.

(Dollars in thousands)	Less Than 12 Months					12 Months or More					Total
	Number					Number					Number
	of	Fair		Unrealized		of	Fair		Unrealized		of	Fair		Unrealized
June 30, 2022	Securities	Value		Losses		Securities	Value		Losses		Securities	Value		Losses
Available-for-sale debt securities:
U.S. Treasury and U.S. government agencies	11	$	18,476	$	525	0	$	—	$	—	11	$	18,476	$	525
Mortgage-backed U.S. government agencies	83		146,413		10,928	0		—		—	83		146,413		10,928
State and political subdivision obligations	8		3,669		697	0		—		—	8		3,669		697
Corporate debt securities	13		21,319		1,000	0		—		—	13		21,319		1,000
Total temporarily impaired available-for-sale debt securities	115	$	189,877	$	13,150	0	$	—	$	—	115	$	189,877	$	13,150

Held-to-maturity debt securities:
U.S. Treasury and U.S. government agencies	134	$	205,184	$	20,366	5	$	7,345	$	1,150	139	$	212,529	$	21,516
Mortgage-backed U.S. government agencies	64		50,323		4,857	0		—		—	64		50,323		4,857
State and political subdivision obligations	168		68,551		6,548	4		815		125	172		69,366		6,673
Corporate debt securities	3		4,784		272	4		4,475		524	7		9,259		796
Total temporarily impaired held-to-maturity debt securities	369		328,842		32,043	13		12,635		1,799	382		341,477		33,842
Total	484	$	518,719	$	45,193	13	$	12,635	$	1,799	497	$	531,354	$	46,992

(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, 2021	Securities	Value		Losses		Securities	Value		Losses			Securities	Value		Losses
Available-for-sale securities:
U.S. government agencies	24	$	45,476	$	283	0	$	—		$	—	24	$	45,476	$	283
State and political subdivision obligations	2		1,168		11	0		—			—	2		1,168		11
Corporate debt securities	4		4,943		57	0		—			—	4		4,943		57
Total temporarily impaired available-for-sale securities	30		51,587		351	0		—			—	30		51,587		351

Held-to-maturity securities:
U.S. Treasury and U.S. government agencies	91	$	149,425	$	1,165	0	$	—		$	—	91	$	149,425	$	1,165
Mortgage-backed U.S. government agencies	24		39,995		272	0		—			—	24		39,995		272
State and political subdivision obligations	17		5,302		25	1		255			2	18		5,557		27
Corporate debt securities	6		6,928		71	0		—			—	6		6,928		71
Total temporarily impaired held to maturity securities	138		201,650		1,533	1		255			2	139		201,905		1,535
Total	168	$	253,237	$	1,884	1	$	255		$	2	169	$	253,492	$	1,886

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 June 30, 2022, the majority of securities in an unrealized loss position were U.S. government agency securities and mortgage-backed U.S. government agency securities. At December 31, 2021, the majority of securities in an unrealized loss position were attributable to mortgage-backed U.S. government agency securities.

Mid Penn had no securities considered by management to be other-than-temporarily impaired as of June 30, 2022, December 31, 2021, or June 30, 2021, 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.

There were no gross realized gains and losses on sales of available-for-sale debt securities for the three and six months ended June 30, 2022 and 2021.

The table below illustrates the maturity distribution of investment securities at amortized cost and fair value as of June 30, 2022.

(Dollars in thousands)	Available-for-sale				Held-to-maturity
	Amortized		Fair		Amortized		Fair
June 30, 2022	Cost		Value		Cost		Value
Due in 1 year or less	$	250	$	250	$	450	$	451
Due after 1 year but within 5 years		32,976		32,649		69,605		67,815
Due after 5 years but within 10 years		28,121		26,955		230,019		209,494
Due after 10 years		4,064		3,411		43,778		37,204
		65,411		63,265		343,852		314,964

Mortgage-backed securities		166,321		155,433		55,180		50,324
	$	231,732	$	218,698	$	399,032	$	365,288