Securities

3 Months Ended

Mar. 31, 2022

Investments, Debt and Equity Securities [Abstract]

Debt securities that management has the positive intent and ability to hold to maturity are classified as “held to maturity” and recorded at amortized cost. Debt securities not classified as held to maturity or trading are classified as “available for sale” and recorded at fair value, with unrealized gains and losses excluded from earnings and reported, net of tax, in other comprehensive income (loss). Equity securities with readily determinable fair values are recorded at fair value with changes in fair value recognized in net income.

Purchase premiums and discounts are recognized in interest income using the interest method over the terms of the securities. Declines in the fair value of held to maturity and available for sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses. In estimating other-than-temporary impairment losses on debt securities, management considers (1) whether management intends to sell the security, or (2) if it is more likely than not that management will be required to sell the security before recovery, or (3) if

management does not expect to recover the entire amortized cost basis. In assessing potential other-than-temporary impairment for equity securities, consideration is given to management’s intention and ability to hold the securities until recovery of unrealized losses. Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method.

Amortized cost and fair value of securities at March 31, 2022, and December 31, 2021, were as follows:


In thousands	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value

SECURITIES AVAILABLE FOR SALE

MARCH 31, 2022
U.S. Government and agencies	$	258,526	$	126	$	17,118	$	241,534
Mortgage-backed securities	288,512		111		9,898		278,725
State and municipal	44,505		2		4,825		39,682
Corporate bonds	16,850		23		454		16,419
	$	608,393	$	262	$	32,295	$	576,360

DECEMBER 31, 2021
U.S. Government and agencies	$	249,463	$	503	$	4,925	$	245,041
Mortgage-backed securities, residential	133,697		1,562		1,763		133,496
State and municipal	44,547		315		251		44,611
Corporate bonds	13,858		164		72		13,950
	$	441,565	$	2,544	$	7,011	$	437,098

SECURITIES HELD TO MATURITY

MARCH 31, 2022
State and municipal	$	22,202	$	7	$	252	$	21,957
Mortgage-backed securities	$	5,817	$	17	$	112	$	5,722
	$	28,019	$	24	$	364	$	27,679
DECEMBER 31, 2021
U.S. Government and agencies	$	—	$	—	$	—	$	—
Mortgage-backed securities, residential	$	6,454	$	198	$	—	$	6,652
	$	6,454	$	198	$	—	$	6,652

Fair value of equity securities with readily determinable fair values at March 31, 2022, March 31, 2021, and December 31, 2021, are as follows:


In thousands	Fair Value at January 1, 2022		Unrealized Gains		Unrealized Losses		Fair Value at March 31, 2022
MARCH 31, 2022
CRA Mutual Fund	$	1,036	$	—	$	49	$	987
Stock in other banks	1,573		—		60		1,513
	$	2,609	$	—	$	109	$	2,500


In thousands	Fair Value at January 1, 2021		Unrealized Gains		Unrealized Losses		Fair Value at March 31, 2021
MARCH 31, 2021
CRA Mutual Fund	$	1,065	$	—	$	17	$	1,048
Stock in other banks	1,105		382		—		1,487
	$	2,170	$	382	$	17	$	2,535


In thousands	Fair Value at January 1, 2021		Unrealized Gains		Unrealized Losses		Fair Value at December 31, 2021
DECEMBER 31, 2021
CRA Mutual Fund	$	1,065	$	—	$	29	$	1,036
Stock in other banks	1,105		468		—		1,573
	$	2,170	$	468	$	29	$	2,609

The following table shows the Corporation’s investments’ 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, at March 31, 2022, and December 31, 2021:


	Less than 12 Months				12 Months or More				Total
In thousands	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses

SECURITIES AVAILABLE FOR SALE

MARCH 31, 2022
U.S. Government and agencies	$	126,133	$	7,552	$	90,763	$	9,566	$	216,896	$	17,118
Mortgage-backed securities	238,855		6,526		33,005		3,372		271,860		9,898
State and municipal	33,037		4,086		5,522		739		38,559		4,825
Corporate bond	13,646		454		—		—		13,646		454
	$	411,671	$	18,618	$	129,290	$	13,677	$	540,961	$	32,295

DECEMBER 31, 2021
U.S. Government and agencies	$	177,107	$	3,537	$	34,297	$	1,388	$	211,404	$	4,925
Mortgage-backed securities, residential	77,969		1,495		7,727		268		85,696		1,763
State and municipal	20,289		224		2,123		27		22,412		251
Corporate bond	5,790		72		—		—		5,790		72
	$	281,155	$	5,328	$	44,147	$	1,683	$	325,302	$	7,011

SECURITIES HELD TO MATURITY

MARCH 31, 2022
State and municipal	$	18,609	$	252					$	18,609	$	252
Mortgage-backed securities	$	5,273	$	112	$	—	$	—	$	5,273	$	112
	$	23,882	$	364	$	—	$	—	$	23,882	$	364

DECEMBER 31, 2021
U.S. Government and agencies									$	—	$	—
Mortgage-backed securities, residential	$	6,454	$	—	$	198	$	—	$	6,652	$	—
	$	6,454	$	—	$	198	$	—	$	6,652	$	—

All mortgage-backed security investments are government sponsored enterprise (GSE) pass-through instruments issued by the Federal National Mortgage Association (FNMA), Government National Mortgage Association (GNMA) or Federal Home Loan Mortgage Corporation (FHLMC), which guarantee the timely payment of principal on these investments.

At March 31, 2022, ninety-eight available for sale U.S. Government and agency securities had unrealized losses that individually did not exceed 14% of amortized cost. Thirty-eight of these securities have been in a continuous loss position for 12 months or more. These unrealized losses relate principally to changes in interest rates subsequent to the acquisition of the specific securities.

At March 31, 2022, one hundred thirty-two available for sale residential mortgage-backed securities had unrealized losses that individually did not exceed 12% of amortized cost. Eighteen of these securities have been in a continuous loss position for 12 months or more. These unrealized losses relate principally to changes in interest rates subsequent to the acquisition of the specific securities.

At March 31, 2022, twenty eight held to maturity residential mortgage-backed securities had unrealized losses that individually did not exceed 5% of amortized cost. None of these securities have been in a continuous loss position for 12 months or more. These unrealized losses relate principally to changes in interest rates subsequent to the acquisition of the specific securities.

At March 31, 2022, sixty-five available for sale state and municipal securities had unrealized losses that individually did not exceed 23% of amortized cost. Eleven of these securities have been in a continuous loss position for 12 months or more. These unrealized losses relate principally to changes in interest rates subsequent to the acquisition of the specific securities.

At March 31, 2022, ten held to maturity state and municipal securities had unrealized losses that individually did not exceed 3 of amortized cost. None of these securities have been in a continuous loss position for 12 months or more. These unrealized losses relate principally to changes in interest rates subsequent to the acquisition of the specific securities.

At March 31, 2022, fourteen corporate bonds had unrealized losses that individually did not exceed 16% of amortized cost. None of these securities have been in a continuous loss position for 12 months or more. These unrealized losses relate principally to changes in interest rates subsequent to the acquisition of the specific securities.

In analyzing the issuer’s financial condition, management considers industry analysts’ reports, financial performance, and projected target prices of investment analysts within a one-year time frame. Based on the above information, management has determined that none of these investments are other-than-temporarily impaired.

The fair values of securities available for sale (carried at fair value) and held to maturity (carried at amortized cost) are determined by obtaining quoted market prices on nationally recognized securities exchanges (Level 1), or matrix pricing (Level 2) which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted market prices for the specific securities but rather by relying on the security’s relationship to other benchmark quoted prices. The Corporation uses independent service providers to provide matrix pricing.

Management routinely sells securities from its available for sale portfolio in an effort to manage and allocate the portfolio. At March 31, 2022, management had not identified any securities with an unrealized loss that it intends to sell or will be required to sell. In estimating other-than-temporary impairment losses on debt securities, management considers (1) whether management intends to sell the security, or (2) if it is more likely than not that management will be required to sell the security before recovery, or (3) if management does not expect to recover the entire amortized cost basis. In assessing potential other-than-temporary impairment for equity securities, consideration is given to management’s intention and ability to hold the securities until recovery of unrealized losses.

Amortized cost and fair value at March 31, 2022, by contractual maturity, where applicable, are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay with or without penalties.


	Available for Sale				Held to Maturity
In thousands	Amortized Cost		Fair Value		Amortized Cost		Fair Value

1 year or less	$	20,346	$	20,436	$	—	$	—
Over 1 year through 5 years	120,382		114,052		—		—
Over 5 years through 10 years	133,082		122,161		5,612		5,606
Over 10 years	46,071		40,986		16,590		16,361
Mortgage-backed securities	288,512		278,725		5,817		5,712
	$	608,393	$	576,360	$	28,019	$	27,679

The Corporation did not sell any securities available for sale during 2022 or 2021.

At March 31, 2022, and December 31, 2021, securities with a carrying value of $328,619,000 and $353,989,000, respectively, were pledged as collateral as required by law on public and trust deposits, repurchase agreements, and for other purposes.