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SECURITIES

9 Months Ended

Sep. 30, 2021

6. SECURITIES

Amortized cost and fair value of available-for-sale debt securities at September 30, 2021 and December 31, 2020 are summarized as follows:


(In Thousands)		September 30, 2021
					Gross			Gross
					Unrealized			Unrealized
		Amortized			Holding			Holding			Fair
		Cost			Gains			Losses			Value

Obligations of the U.S. Treasury		$	25,088		$	60		$	(80)		$	25,068
Obligations of U.S. Government agencies			23,935			666			(289)			24,312
Obligations of states and political subdivisions:
Tax-exempt			135,362			4,390			(508)			139,244
Taxable			69,426			1,516			(449)			70,493
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities			59,920			978			(269)			60,629
Residential collateralized mortgage obligations			43,811			820			(38)			44,593
Commercial mortgage-backed securities			72,341			1,963			(786)			73,518
Total available-for-sale debt securities		$	429,883		$	10,393		$	(2,419)		$	437,857


(In Thousands)		December 31, 2020
					Gross			Gross
					Unrealized			Unrealized
		Amortized			Holding			Holding			Fair
		Cost			Gains			Losses			Value

Obligations of the U.S. Treasury		$	12,184		$	0		$	(2)		$	12,182
Obligations of U.S. Government agencies			25,349			1,003			(8)			26,344
Obligations of states and political subdivisions:
Tax-exempt			116,427			6,000			(26)			122,401
Taxable			45,230			2,246			(24)			47,452
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities			36,853			1,323			0			38,176
Residential collateralized mortgage obligations			56,048			1,428			(9)			57,467
Commercial mortgage-backed securities			42,461			2,849			0			45,310
Total available-for-sale debt securities		$	334,552		$	14,849		$	(69)		$	349,332

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 September 30, 2021 and December 31, 2020:


September 30, 2021		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 the U.S. Treasury		$	11,001		$	(80)		$	0		$	0		$	11,001		$	(80)
Obligations of U.S. Government agencies			12,210			(289)			0			0			12,210			(289)
Obligations of states and political subdivisions:
Tax-exempt			41,145			(508)			0			0			41,145			(508)
Taxable			25,561			(365)			2,200			(84)			27,761			(449)
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities			36,651			(269)			0			0			36,651			(269)
Residential collateralized mortgage obligations			4,745			(38)			0			0			4,745			(38)
Commercial mortgage-backed securities			34,931			(786)			0			0			34,931			(786)
Total temporarily impaired available-for-sale debt securities		$	166,244		$	(2,335)		$	2,200		$	(84)		$	168,444		$	(2,419)


December 31, 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 the U.S. Treasury		$	9,159		$	(2)		$	0		$	0		$	9,159		$	(2)
Obligations of U.S. Government agencies			4,992			(8)			0			0			4,992			(8)
Obligations of states and political subdivisions:
Tax-exempt			3,811			(26)			0			0			3,811			(26)
Taxable			5,235			(24)			0			0			5,235			(24)
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies,
Residential collateralized mortgage obligations			2,861			(9)			0			0			2,861			(9)
Total temporarily impaired available-for-sale debt securities		$	26,058		$	(69)		$	0		$	0		$	26,058		$	(69)

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


(In Thousands)		Three Months Ended						Nine Months Ended
		September 30,			September 30,			September 30,			September 30,
		2021			2020			2021			2020
Gross realized gains from sales		$	23		$	26		$	27		$	78
Gross realized losses from sales			0			(1)			(2)			(53)
Net realized gains		$	23		$	25		$	25		$	25

The amortized cost and fair value of available-for-sale debt securities by contractual maturity are shown in the following table as of September 30, 2021. 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)		September 30, 2021
		Amortized			Fair
		Cost			Value
Due in one year or less		$	15,531		$	15,641
Due from one year through five years			51,151			52,150
Due from five years through ten years			65,651			67,498
Due after ten years			121,478			123,828
Sub-total			253,811			259,117
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities			59,920			60,629
Residential collateralized mortgage obligations			43,811			44,593
Commercial mortgage-backed securities			72,341			73,518
Total		$	429,883		$	437,857

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 $254,062,000 at September 30, 2021 and $247,373,000 at December 31, 2020 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 and Note 12 for information related to securities pledged against interest rate swap obligations.

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 OTTI at September 30, 2021 is provided below.

Debt Securities

At September 30, 2021 and December 31, 2020, 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 September 30, 2021 and December 31, 2020 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 $9,400,000 at September 30, 2021 and $9,720,000 at December 31, 2020. The Corporation evaluated its holding of FHLB-Pittsburgh stock for impairment and deemed the stock to not be impaired at September 30, 2021 and December 31, 2020. 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 has a marketable equity security included in other assets in the consolidated balance sheets with a carrying value of $981,000 at September 30, 2021 and $1,000,000 at December 31, 2020, consisting exclusively of one mutual fund. There was an unrealized loss on the mutual fund of $19,000 at September 30, 2021 and no unrealized gain or loss on the mutual fund at December 31, 2020. Changes in the unrealized gains or losses on this security are included in other noninterest income in the consolidated statements of income.