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SECURITIES

6 Months Ended

Jun. 30, 2020

6. SECURITIES

Amortized cost and fair value of available-for-sale debt securities at June 30, 2020 and December 31, 2019 are summarized as follows:


(In Thousands)		June 30, 2020
					Gross			Gross
					Unrealized			Unrealized
		Amortized			Holding			Holding			Fair
		Cost			Gains			Losses			Value

Obligations of U.S. Government agencies		$	10,706		$	967		$	0		$	11,673
Obligations of states and political subdivisions:
Tax-exempt			86,897			4,786			(40)			91,643
Taxable			38,022			1,810			(48)			39,784
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities			49,852			1,668			0			51,520
Residential collateralized mortgage obligations			87,527			1,951			(43)			89,435
Commercial mortgage-backed securities			44,664			3,469			0			48,133
Total available-for-sale debt securities		$	317,668		$	14,651		$	(131)		$	332,188


(In Thousands)		December 31, 2019
					Gross			Gross
					Unrealized			Unrealized
		Amortized			Holding			Holding			Fair
		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 available-for-sale debt securities		$	342,278		$	5,407		$	(962)		$	346,723

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 June 30, 2020 and December 31, 2019:


June 30, 2020		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		$	3,743		$	(40)		$	0		$	0		$	3,743		$	(40)
Taxable			1,476			(48)			0			0			1,476			(48)
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential collateralized mortgage obligations			8,809			(43)			0			0			8,809			(43)
Total temporary impaired available for sale debt securities		$	14,028		$	(131)		$	0		$	0		$	14,028		$	(131)


December 31, 2019		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 temporarily impaired available-for-sale debt securities		$	53,233		$	(336)		$	53,990		$	(626)		$	107,223		$	(962)

Gross realized gains and losses from available-for-sale debt securities were as follows:


(In Thousands)		3 Months Ended						6 Months Ended
		June 30,			June 30,			June 30,			June 30,
		2020			2019			2020			2019
Gross realized gains from sales		$	0		$	7		$	52		$	7
Gross realized losses from sales			0			0			(52)			0
Net realized gains		$	0		$	7		$	0		$	7

The amortized cost and fair value of available-for-sale debt securities by contractual maturity are shown in the following table as of June 30, 2020. 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.


(In Thousands)		June 30, 2020
		Amortized			Fair
		Cost			Value
Due in one year or less		$	7,369		$	7,414
Due from one year through five years			33,740			35,119
Due from five years through ten years			38,294			40,729
Due after ten years			56,222			59,838
Sub-total			135,625			143,100
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities			49,852			51,520
Residential collateralized mortgage obligations			87,527			89,435
Commercial mortgage-backed securities			44,664			48,133
Total		$	317,668		$	332,188

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 $196,620,000 at June 30, 2020 and $215,270,000 at December 31, 2019 were pledged as collateral for public deposits, trusts and certain other deposits as provided by law. See Note 9 for information concerning securities pledged to secure borrowing arrangements.

Management evaluates securities for other-than-temporary impairment (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 other-than-temporary impairment (“OTTI”) at June 30, 2020 is provided below.

Debt Securities

At June 30, 2020 and December 31, 2019, 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 debt securities at June 30, 2020 and December 31, 2019 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 $8,671,000 at June 30, 2020 and $10,131,000 at December 31, 2019. The Corporation evaluated its holding of FHLB-Pittsburgh stock for impairment and deemed the stock to not be impaired at June 30, 2020 and December 31, 2019. 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 a carrying value of $1,003,000 at June 30, 2020 and $979,000 at December 31, 2019, consisted exclusively of one mutual fund. There was an unrealized gain on the mutual fund of $3,000 at June 30, 2020 and an unrealized loss of $21,000 at December 31, 2019. Changes in the unrealized gains or losses on this security are included in other noninterest income in the consolidated statements of income.