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Note 7 - Securities
 12 Months Ended
Dec. 31, 2019
Notes to Financial Statements  
Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]
7.
SECURITIES
 
Amortized cost and fair value of available-for-sale debt securities at
December 31, 2019
and
2018
are summarized as follows:
 
   
 
 
 
  
December 31, 201
9
    
 
 
 
   
 
 
 
  
Gross
    
Gross
    
 
 
 
   
 
 
 
  
Unrealized
    
Unrealized
    
 
 
 
   
Amortized
    
Holding
    
Holding
    
Fair
  
(In Thousands)
  
Cost
    
Gains
    
Losses
    
Value
  
                                 
Obligations of U.S. Government agencies
   $
16,380
     $
620
     $
0
     $
17,000
  
Obligations of states and political subdivisions:
                                
Tax-exempt
    
68,787
      
2,011
      
(38
 )    
70,760
  
Taxable
    
35,446
      
927
      
(70
 )    
36,303
  
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
                                
Residential pass-through securities
    
58,875
      
472
      
(137
 )    
59,210
  
Residential collateralized mortgage obligations
    
115,025
      
308
      
(610
 )    
114,723
  
Commercial mortgage-backed securities
    
47,765
      
1,069
      
(107
 )    
48,727
  
Total
   $
342,278
     $
5,407
     $
(962
 )   $
346,723
  
 
 
   
 
 
 
  
 
December 31, 201
8
    
 
 
 
   
 
 
 
  
Gross
    
Gross
    
 
 
 
   
 
 
 
  
Unrealized
    
Unrealized
    
 
 
 
   
Amortized
    
Holding
    
Holding
    
Fair
  
(In Thousands)
  
Cost
    
Gains
    
Losses
    
Value
  
                                 
Obligations of U.S. Government agencies
   $
12,331
     $
169
     $
0
     $
12,500
  
Obligations of states and political subdivisions:
                                
Tax-exempt
    
84,204
      
949
      
(1,201
 )    
83,952
  
Taxable
    
27,618
      
208
      
(127
 )    
27,699
  
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
                                
Residential pass-through securities
    
54,827
      
48
      
(1,430
 )    
53,445
  
Residential collateralized mortgage obligations
    
148,964
      
238
      
(3,290
 )    
145,912
  
Commercial mortgage-backed securities
    
40,781
      
166
      
(1,182
 )    
39,765
  
Total
   $
368,725
     $
1,778
     $
(7,230
 )   $
363,273
  
 
The following table presents gross unrealized losses and fair value of available-for-sale debt securities with unrealized loss positions that are
not
deemed to be other-than-temporarily impaired, aggregated by length of time that individual securities have been in a continuous unrealized loss position at
December 31, 2019
and
2018:
 
December 31, 201
9
  
Less Than 12 Months
    
12 Months or More
    
Total
  
(In Thousands)
  
Fair
    
Unrealized
    
Fair
    
Unrealized
    
Fair
    
Unrealized
  
   
Value
    
Losses
    
Value
    
Losses
    
Value
    
Losses
  
                                                 
Obligations of states and political subdivisions:
                                                
Tax-exempt
   $
6,429
     $
(38
 )   $
0
     $
0
     $
6,429
     $
(38
 )
Taxable
    
5,624
      
(68
 )    
161
      
(2
 )    
5,785
      
(70
 )
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
                                                
Residential pass-through securities
    
9,771
      
(35
 )    
14,787
      
(102
 )    
24,558
      
(137
 )
Residential collateralized mortgage obligations
    
31,409
      
(195
 )    
30,535
      
(415
 )    
61,944
      
(610
 )
Commercial mortgage-backed securities
    
0
      
0
      
8,507
      
(107
 )    
8,507
      
(107
 )
Total
   $
53,233
     $
(336
 )   $
53,990
     $
(626
 )   $
107,223
     $
(962
 )
 
December 31, 201
8
  
Less Than 12 Months
    
12 Months or More
    
Total
  
(In Thousands)
 		  
Fair
    
Unrealized
    
Fair
    
Unrealized
    
Fair
    
Unrealized
  
   
Value
    
Losses
    
Value
    
Losses
    
Value
    
Losses
  
                                                 
Obligations of states and political subdivisions:
                                                
Tax-exempt
   $
5,084
     $
(11
 )   $
32,684
     $
(1,190
 )   $
37,768
     $
(1,201
 )
Taxable
    
980
      
(2
 )    
11,418
      
(125
 )    
12,398
      
(127
 )
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
                                                
Residential pass-through securities
    
5,592
      
(4
 )    
42,309
      
(1,426
 )    
47,901
      
(1,430
 )
Residential collateralized mortgage obligations
    
1,892
      
(8
 )    
101,662
      
(3,282
 )    
103,554
      
(3,290
 )
Commercial mortgage-backed securities
    
0
      
0
      
32,552
      
(1,182
 )    
32,552
      
(1,182
 )
Total
   $
13,548
     $
(25
 )   $
220,625
     $
(7,205
 )   $
234,173
     $
(7,230
 )
 
Gross realized gains and losses from available-for-sale securities and the related income tax provision were as follows:
 
(In Thousands)
 
 
 
 
  
 
 
 
   
201
9
    
2018
  
Gross realized gains from sales
   $
24
     $
259
  
Gross realized losses from sales
    
(1
 )    
(547
 )
Net realized gains (losses)
   $
23
     $
(288
 )
Income tax (credit) provision related to net realized gains (losses)
   $
5
     $
(60
 )
 
The amortized cost and fair value of available-for-sale debt securities by contractual maturity are shown in the following table as of
December 31, 2019.
Actual maturities
may
differ from contractual maturities because counterparties
may
have the right to call or prepay obligations with or without call or prepayment penalties.
 
   
December 31, 201
9
  
   
Amortized
    
Fair
  
(In Thousands)
  
Cost
    
Value
  
                 
Due in one year or less
   $
7,216
     $
7,247
  
Due from one year through five years
    
31,627
      
32,408
  
Due from five years through ten years
    
42,709
      
43,845
  
Due after ten years
    
39,061
      
40,563
  
Sub-total
    
120,613
      
124,063
  
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
                
Residential pass-through securities
    
58,875
      
59,210
  
Residential collateralized mortgage obligations
    
115,025
      
114,723
  
Commercial mortgage-backed securities
    
47,765
      
48,727
  
Total
   $
342,278
     $
346,723
  
 
The Corporation’s mortgage-backed securities and collateralized mortgage obligations have stated maturities that
may
differ from actual maturities due to borrowers’ ability to prepay obligations. Cash flows from such investments are dependent upon the performance of the underlying mortgage loans and are generally influenced by the level of interest rates. In the table above, mortgage-backed securities and collateralized mortgage obligations are shown in
one
period.
 
Investment securities carried at
$215,270,000
at
December 31, 2019
and
$229,418,000
at
December 31, 2018
were pledged as collateral for public deposits, trusts and certain other deposits as provided by law. See Note
12
for information concerning securities pledged to secure borrowing arrangements.
 
Management evaluates securities for OTTI at least on a quarterly basis, and more frequently when economic or market conditions warrant such evaluation. Consideration is given to (
1
) the length of time and the extent to which the fair value has been less than cost, (
2
) the financial condition and near-term prospects of the issuer, and (
3
) whether the Corporation intends to sell the security or more likely than
not
will be required to sell the security before its anticipated recovery.
 
A summary of information management considered in evaluating debt and equity securities for OTTI at
December 31, 2019
and
2018
is provided below.
 
Debt Securities
 
At
December 31, 2019
and
2018,
management performed an assessment for possible OTTI of the Corporation’s debt securities on an issue-by-issue basis, relying on information obtained from various sources, including publicly available financial data, ratings by external agencies, brokers and other sources. The extent of individual analysis applied to each security depended on the size of the Corporation’s investment, as well as management’s perception of the credit risk associated with each security. Based on the results of the assessment, management believes impairment of these debt securities at
December 31, 2019
and
2018
to be temporary.
 
Equity Securities
 
C&N Bank is a member of the Federal Home Loan Bank of Pittsburgh (FHLB-Pittsburgh), which is
one
of
11
regional Federal Home Loan Banks. As a member, C&N Bank is required to purchase and maintain stock in FHLB-Pittsburgh. There is
no
active market for FHLB-Pittsburgh stock, and it must ordinarily be redeemed by FHLB-Pittsburgh in order to be liquidated. C&N Bank’s investment in FHLB-Pittsburgh stock, included in Other Assets in the consolidated balance sheets, was
$10,131,000
at
December 31, 2019
and
$5,582,000
at
December 31, 2018.
The Corporation evaluated its holding of FHLB-Pittsburgh stock for impairment and deemed the stock to
not
be impaired at
December 31, 2019
and
December 31, 2018.
In making this determination, management concluded that recovery of total outstanding par value, which equals the carrying value, is expected. The decision was based on review of financial information that FHLB-Pittsburgh has made publicly available.
 
The Corporation’s marketable equity security, with carrying values of
$979,000
at
December 31, 2019
and
$950,000
at
December 31, 2018,
consisted exclusively of
one
mutual fund. There was an unrealized loss on the mutual fund of
$21,000
at
December 31, 2019
and
$50,000
at
December 31, 2018.
The decrease in the unrealized loss of
$29,000
in
2019
and the increase in the unrealized loss of
$21,000
in
2018
are included in other noninterest income in the consolidated statements of income.
 
In the year ended
December 31, 2018,
the Corporation recorded pre-tax gains from sales of a restricted equity security (Visa Class B stock) totaling
$2,321,000.
The Corporation had received
19,789
shares of Visa Class B stock pursuant to Visa’s
2007
initial public offering. Until the
second
quarter
2018,
the carrying value of the shares was
$0,
which represented the Corporation’s cost basis. Class B shares are subject to restrictions on transfer, essentially limiting their transferability to other owners of Class B shares. In the
second
and
third
quarters of
2018,
the Corporation sold all of its Visa Class B stock.
 
A summary of realized and unrealized gains and losses recognized on equity securities is as follows:
 
(In Thousands)
            
             
   
201
9
    
201
8
  
Net gains recognized during the period on equity securities
   $
29
     $
2,300
  
Less: net gains recognized during the period on equity securities sold during the period
    
0
      
(2,321
 )
                 
Unrealized gains (losses) recognized during the period on equity securities still held at the reporting date
   $
29
     $
(21
 )