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SECURITIES

3 Months Ended

Mar. 31, 2024

5. SECURITIES

Amortized cost and fair value of available-for-sale debt securities at March 31, 2024 and December 31, 2023 are summarized as follows:


(In Thousands)		March 31, 2024
					Gross			Gross
					Unrealized			Unrealized
		Amortized			Holding			Holding			Fair
		Cost			Gains			Losses			Value

Obligations of the U.S. Treasury		$	11,324		$	0		$	(1,093)		$	10,231
Obligations of U.S. Government agencies			10,637			0			(1,261)			9,376
Bank holding company debt securities			28,953			0			(5,484)			23,469
Obligations of states and political subdivisions:
Tax-exempt			113,181			281			(10,636)			102,826
Taxable			57,960			0			(8,705)			49,255
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities			102,048			4			(10,936)			91,116
Residential collateralized mortgage obligations			48,477			0			(3,976)			44,501
Commercial mortgage-backed securities			76,249			0			(10,128)			66,121
Private label commercial mortgage-backed securities			8,252			0			(53)			8,199
Total available-for-sale debt securities		$	457,081		$	285		$	(52,272)		$	405,094


(In Thousands)		December 31, 2023
					Gross			Gross
					Unrealized			Unrealized
		Amortized			Holding			Holding			Fair
		Cost			Gains			Losses			Value

Obligations of the U.S. Treasury		$	12,325		$	0		$	(1,035)		$	11,290
Obligations of U.S. Government agencies			11,119			0			(1,173)			9,946
Bank holding company debt securities			28,952			0			(5,452)			23,500
Obligations of states and political subdivisions:
Tax-exempt			113,464			311			(9,576)			104,199
Taxable			58,720			0			(8,609)			50,111
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities			105,549			40			(10,184)			95,405
Residential collateralized mortgage obligations			50,212			0			(3,750)			46,462
Commercial mortgage-backed securities			76,412			0			(9,730)			66,682
Private label commercial mortgage-backed securities			8,215			0			(55)			8,160
Total available-for-sale debt securities		$	464,968		$	351		$	(49,564)		$	415,755

The following table presents gross unrealized losses and fair value of available-for-sale debt securities with unrealized loss positions aggregated by length of time that individual securities have been in a continuous unrealized loss position at March 31, 2024 and December 31, 2023:


March 31, 2024		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		$	0		$	0		$	10,231		$	(1,093)		$	10,231		$	(1,093)
Obligations of U.S. Government agencies			0			0			9,376			(1,261)			9,376			(1,261)
Bank holding company debt securities			0			0			23,469			(5,484)			23,469			(5,484)
Obligations of states and political subdivisions:
Tax-exempt			2,475			(32)			96,244			(10,604)			98,719			(10,636)
Taxable			0			0			48,750			(8,705)			48,750			(8,705)
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities			6,684			(31)			83,585			(10,905)			90,269			(10,936)
Residential collateralized mortgage obligations			13,255			(141)			31,246			(3,835)			44,501			(3,976)
Commercial mortgage-backed securities			2,304			(41)			63,817			(10,087)			66,121			(10,128)
Private label commercial mortgage-backed securities			3,336			(17)			4,863			(36)			8,199			(53)
Total		$	28,054		$	(262)		$	371,581		$	(52,010)		$	399,635		$	(52,272)


December 31, 2023		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		$	0		$	0		$	11,290		$	(1,035)		$	11,290		$	(1,035)
Obligations of U.S. Government agencies			1,595			(9)			8,351			(1,164)			9,946			(1,173)
Bank holding company debt securities			0			0			23,500			(5,452)			23,500			(5,452)
Obligations of states and political subdivisions:
Tax-exempt			3,257			(24)			96,758			(9,552)			100,015			(9,576)
Taxable			0			0			49,961			(8,609)			49,961			(8,609)
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities			3,334			(27)			84,297			(10,157)			87,631			(10,184)
Residential collateralized mortgage obligations			3,588			(2)			32,808			(3,748)			36,396			(3,750)
Commercial mortgage-backed securities			2,327			(16)			64,355			(9,714)			66,682			(9,730)
Private label commercial mortgage-backed securities			8,160			(55)			0			0			8,160			(55)
Total		$	22,261		$	(133)		$	371,320		$	(49,431)		$	393,581		$	(49,564)

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


(In Thousands)		Three Months Ended
		March 31,			March 31,
		2024			2023
Gross realized gains from sales		$	0		$	80
Gross realized losses from sales			0			(73)
Net realized gains		$	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 March 31, 2024. 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)		March 31, 2024
		Amortized			Fair
		Cost			Value
Due in one year or less		$	12,117		$	11,936
Due from one year through five years			30,083			28,020
Due from five years through ten years			75,135			65,458
Due after ten years			104,720			89,743
Sub-total			222,055			195,157
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities			102,048			91,116
Residential collateralized mortgage obligations			48,477			44,501
Commercial mortgage-backed securities			76,249			66,121
Private label commercial mortgage-backed securities			8,252			8,199
Total		$	457,081		$	405,094

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 $183,661,000 at March 31, 2024 and $232,437,000 at December 31, 2023 were pledged as collateral for public deposits, trusts and certain other deposits as provided by law. See Note 8 for information concerning securities pledged to secure borrowing arrangements and Note 11 for information related to securities pledged against interest rate swap obligations.

A summary of information management considered in evaluating debt and equity securities for credit losses at March 31, 2024 and December 31, 2023 is provided below.

Debt Securities

As reflected in the table above, gross unrealized holding losses on available-for-sale debt securities totaled $52,272,000 at March 31, 2024 and $49,564,000 at December 31, 2023. At March 31, 2024, the Corporation does not have the intent to sell, nor is it more likely than not it will be required to sell, these securities before it is able to recover the amortized cost basis. The unrealized holding losses were consistent with significant increases in market interest rates that have occurred subsequent to the purchase of most of the securities.

At March 31, 2024 and December 31, 2023, management performed an assessment for possible credit losses 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. At March 31, 2024 and December 31, 2023, all of the Corporation’s holdings of bank holding company debt securities, obligations of states and political subdivisions and private label commercial mortgage-backed securities were investment grade and there have been no payment defaults.

Based on the results of the assessment, there was no allowance for credit losses (“ACL”) required on available-for-sale debt securities in an unrealized loss position at March 31, 2024 and December 31, 2023.

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 $16,266,000 at March 31, 2024 and $15,214,000 at December 31, 2023. The Corporation evaluated its holding of FHLB-Pittsburgh stock for impairment and deemed the stock to not be impaired at March 31, 2024 and December 31, 2023. 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.

In July 2023, C&N Bank became a member of the Federal Reserve System. As a member, C&N Bank is required to purchase and maintain stock in the Federal Reserve Bank of Philadelphia. There is no active market for Federal Reserve Bank stock, and it must ordinarily be redeemed by the Federal Reserve Bank of Philadelphia in order to be liquidated. C&N Bank’s investment in Federal Reserve Bank stock, included in other assets in the consolidated balance sheets, was $6,266,000 at March 31, 2024 and $6,252,000 at December 31, 2023.

The Corporation has a marketable equity security included in other assets in the consolidated balance sheets with a carrying value of $862,000 at March 31, 2024 and $871,000 December 31, 2023, consisting exclusively of one mutual fund. There was an unrealized loss on the mutual fund of $138,000 at March 31, 2024 and $129,000 at December 31, 2023. Changes in the unrealized gains or losses on this security, which are included in other noninterest income in the consolidated statements of income, were a loss of $9,000 in the first quarter 2024 compared to a gain of $14,000 in the first quarter 2023.