Securities

9 Months Ended

Sep. 30, 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.

The Corporation reassessed classification of certain investments and effective April 1, 2022, the Corporation transferred $39.7 million of state and municipal securities from available for sale to held to maturity securities. The transfer occurred at fair value. The related unrealized loss of $4.8 million included in other comprehensive loss remained in other comprehensive loss, to be amortized out of other comprehensive loss with an offsetting entry to interest income as a yield adjustment over the remaining term of the securities. No gain or loss was recorded at the time of transfer.

Amortized cost and fair value of securities at September 30, 2022, and December 31, 2021, were as follows:


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

SECURITIES AVAILABLE FOR SALE

September 30, 2022
U.S. Government and agencies	$	247,995	$	—	$	32,319	$	215,676
Mortgage-backed securities	300,294		6		34,463		265,837
State and municipal	7,521		—		515		7,006
Corporate bonds	16,134		—		1,460		14,674
	$	571,944	$	6	$	68,757	$	503,193

December 31, 2021
U.S. Government and agencies	$	249,463	$	503	$	4,925	$	245,041
Mortgage-backed securities	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

September 30, 2022
State and municipal	$	61,520	$	—	$	9,261	$	52,259
Mortgage-backed securities	4,784		3		245		4,542
	$	66,304	$	3	$	9,506	$	56,801
December 31, 2021

Mortgage-backed securities	$	6,454	$	198	$	—	$	6,652
	$	6,454	$	198	$	—	$	6,652

Fair value of equity securities with readily determinable fair values at September 30, 2022 and December 31, 2021, are as follows:


In thousands	Fair Value at January 1, 2022		Purchases		Gains		Losses		Fair Value at September 30, 2022
September 30, 2022
CRA Mutual Fund	$	1,036	$	—	$	—	$	123	$	913
Canapi Ventures SBIC Fund	—		35		—		—		35
Stock in other banks	1,573		—		—		222		1,351
	$	2,609	$	35	$	—	$	345	$	2,299


In thousands	Fair Value at January 1, 2021		Gains		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 September 30, 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

September 30, 2022
U.S. Government and agencies	$	78,296	$	7,127	$	137,380	$	25,192	$	215,676	$	32,319
Mortgage-backed securities	210,111		22,574		55,179		11,889		265,290		34,463
State and municipal	7,006		515		—		—		7,006		515
Corporate bond	10,675		1,106		3,999		354		14,674		1,460
	$	306,088	$	31,322	$	196,558	$	37,435	$	502,646	$	68,757

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

September 30, 2022
State and municipal	$	37,551	$	6,136	$	14,708	$	3,125	$	52,259	$	9,261
Mortgage-backed securities	4,239		245		—		—		4,239		245
	$	41,790	$	6,381	$	14,708	$	3,125	$	56,498	$	9,506

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.

In analyzing the issuer’s financial condition, management considers industry analysts’ reports and financial performance. 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 sells securities from its available for sale portfolio in an effort to manage and allocate the portfolio. At September 30, 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 September 30, 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	$	14,015	$	13,903	$	285	$	281
Over 1 year through 5 years	136,417		121,985		375		354
Over 5 years through 10 years	108,564		90,163		14,933		13,328
Over 10 years	12,654		11,305		45,927		38,296
Mortgage-backed securities	300,294		265,837		4,784		4,542
	$	571,944	$	503,193	$	66,304	$	56,801

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

At September 30, 2022, and December 31, 2021, securities with a carrying value of $354,965,000 and $353,989,000, respectively, were pledged as collateral as required by law on public and trust deposits, repurchase agreements, and for other purposes.