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Investments

9 Months Ended

Sep. 30, 2022

Investments [Abstract]

Investments

Note 3 – Investments

The following tables show a comparison of amortized cost and fair values of investment securities at September 30, 2022 and December 31, 2021:



(in thousands)		Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses			Fair Value			OTTI in AOCL
September 30, 2022
Available for Sale:
U.S. government agencies		$	11,052		$	—		$	1,605		$	9,447		$	—
Residential mortgage-backed agencies			45,899			—			8,165			37,734			—
Commercial mortgage-backed agencies			37,766			—			6,155			31,611			—
Collateralized mortgage obligations			26,336			—			4,635			21,701			—
Obligations of states and political subdivisions			11,208			1			465			10,744			—
Corporate bonds			1,000			—			80			920			—
Collateralized debt obligations			18,648			—			2,766			15,882			(1,664)
Total available for sale		$	151,909		$	1		$	23,871		$	128,039		$	(1,664)

(in thousands)		Amortized Cost			Gross Unrecognized Gains			Gross Unrecognized Losses			Fair Value			OTTI in AOCL
September 30, 2022
Held to Maturity:
U.S. treasuries		$	37,140		$	—		$	1,727		$	35,413		$	—
U.S. government agencies			67,665			—			12,853			54,812			—
Residential mortgage-backed agencies			29,536			1			3,920			25,617			—
Commercial mortgage-backed agencies			23,018			—			4,378			18,640			—
Collateralized mortgage obligations			58,462			—			9,622			48,840			—
Obligations of states and political subdivisions			22,624			504			705			22,423			—
Total held to maturity		$	238,445		$	505		$	33,205		$	205,745		$	—


(in thousands)		Amortized Cost			Gross Unrealized Gains			Gross Unrealized Losses			Fair Value			OTTI in AOCL
December 31, 2021
Available for Sale:
U.S. government agencies		$	69,602		$	66		$	2,499		$	67,169		$	—
Residential mortgage-backed agencies			49,630			—			969			48,661			—
Commercial mortgage-backed agencies			51,694			175			1,001			50,868			—
Collateralized mortgage obligations			93,018			84			3,025			90,077			—
Obligations of states and political subdivisions			12,439			371			6			12,804			—
Collateralized debt obligations			18,609			112			1,529			17,192			(660)
Total available for sale		$	294,992		$	808		$	9,029		$	286,771		$	(660)

(in thousands)		Amortized Cost			Gross Unrecognized Gains			Gross Unrecognized Losses			Fair Value			OTTI in AOCL
December 31, 2021
Held to Maturity:
Residential mortgage-backed agencies		$	30,634		$	649		$	436		$	30,847		$	—
Commercial mortgage-backed agencies			5,456			145			—			5,601			—
Obligations of states and political subdivisions			20,169			8,752			—			28,921			—
Total held to maturity		$	56,259		$	9,546		$	436		$	65,369		$	—

The Corporation reassessed the classification of certain investments and, effective February 1, 2022, transferred $139.0 million of callable agencies, obligations of state and political subdivisions, and collateralized mortgage obligations from available for sale to held to maturity securities. The transfer occurred at fair value. The related unrealized loss of $8.4 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.

The following table shows the Corporation’s investment securities with gross unrealized and unrecognized losses and fair values at September 30, 2022 and December 31, 2021, aggregated by investment category and the length of time that individual securities have been in a continuous unrealized loss position:


		Less than 12 months								12 months or more
(in thousands)		Fair Value			Unrealized Losses			Number of Investments		Fair Value			Unrealized Losses			Number of Investments
September 30, 2022
Available for Sale:
U.S. government agencies		$	8,145			907		2			1,302			698		1
Residential mortgage-backed agencies			15,945			3,065		2			21,788			5,100		3
Commercial mortgage-backed agencies			13,915			2,182		6			17,697			3,973		4
Collateralized mortgage obligations			13,352			2,860		8			8,349			1,775		2
Obligations of states and political subdivisions			10,048			465		9			—			—		—
Corporate Bonds			920			80		1			—			—		—
Collateralized debt obligations			6,464			152		4			9,418			2,614		5
Total available for sale		$	68,789		$	9,711		32		$	58,554		$	14,160		15

		Less than 12 months								12 months or more
(in thousands)		Fair Value			Unrecognized Losses			Number of Investments		Fair Value			Unrecognized Losses			Number of Investments
September 30, 2022
Held to Maturity:
U.S. treasuries		$	35,413			1,727		4		$	—		$	—		—
U.S. government agencies			54,811		$	12,853		9			—			—		—
Residential mortgage-backed agencies			18,794			1,992		33			6,730			1,928		3
Commercial mortgage-backed agencies			18,640			4,378		3			—			—		—
Collateralized mortgage obligations			48,840			9,622		8			—			—		—
Obligations of states and political subdivisions			2,162			705		1			—			—		—
Total held to maturity		$	178,660		$	31,277		58		$	6,730		$	1,928		3


		Less than 12 months								12 months or more
(in thousands)		Fair Value			Unrealized Losses			Number of Investments		Fair Value			Unrealized Losses			Number of Investments
December 31, 2021
Available for Sale:
U.S. government agencies		$	23,577		$	122		3		$	33,972		$	2,377		6
Residential mortgage-backed agencies			29,507			257		3			19,154			712		2
Commercial mortgage-backed agencies			32,177			787		4			5,211			214		1
Collateralized mortgage obligations			24,322			649		5			43,076			2,376		5
Obligations of states and political subdivisions			3,046			6		1			—			—		—
Collateralized debt obligations			—			—		—			10,468			1,529		5
Total available for sale		$	112,629		$	1,821		16		$	111,881		$	7,208		19


		Less than 12 months								12 months or more
(in thousands)		Fair Value			Unrecognized Losses			Number of Investments		Fair Value			Unrecognized Losses			Number of Investments
December 31, 2021
Held to Maturity:
Residential mortgage-backed agencies		$	7,395		$	291		6		$	2,782		$	145		1
Total held to maturity		$	7,395		$	291		6		$	2,782		$	145		1

Management systematically evaluates securities for impairment on a quarterly basis. Based upon application of Accounting Standards Codification (“ASC”) Topic 320 (Section 320-10-35) issued by the Financial Accounting Standards Board (the “FASB”), management must assess whether (a) the Corporation has the intent to sell the security and (b) it is more likely than not that the Corporation will be required to sell the security prior to its anticipated recovery. If neither applies, then declines in the fair value of securities below their cost that are considered other-than-temporary declines are split into two components. The first is the loss attributable to declining credit quality. Credit losses are recognized in earnings as realized losses in the period in which the impairment determination is made. The second component consists of all other losses. The other losses are recognized in other comprehensive income. In estimating other than temporary impairment (“OTTI”) charges, management considers (1) the length of time and the extent to which the fair value has been less than cost, (2) adverse conditions specifically related to the security, an industry, or a geographic area, (3) the historic and implied volatility of the security, (4) changes in the rating of a security by a rating agency, (5) recoveries or additional declines in fair value subsequent to the balance sheet date, (6) failure of the issuer of the security to make scheduled interest payments, and (7) the payment structure of the debt security and the likelihood of the issuer being able to make payments that increase in the future. Due to the duration and the significant market value decline in the pooled trust preferred securities held in our portfolio, we performed more extensive testing on these securities for purposes of evaluating whether or not an OTTI has occurred.

The following table presents a cumulative roll-forward of the amount of non-cash OTTI charges related to credit losses that have been recognized in earnings for the trust preferred securities held in the CDO portfolio during the nine and three month periods ended September 30, 2022 and 2021 that the Corporation does not intend to sell:


		Nine Months Ended
		September 30,
(in thousands)		2022			2021
Balance of credit-related OTTI at January 1		$	2,043		$	2,244
Reduction for increases in cash flows expected to be collected			(152)			(151)
Balance of credit-related OTTI at September 30		$	1,891		$	2,093


		Three Months Ended
		September 30,
(in thousands)		2022			2021
Balance of credit-related OTTI at July 1		$	1,942		$	2,143
Reduction for increases in cash flows expected to be collected			(51)			(50)
Balance of credit-related OTTI at September 30		$	1,891		$	2,093

The amortized cost and estimated fair value of securities by contractual maturity at September 30, 2022 are shown in the following table. Actual maturities may differ from contractual maturities because the issuers of the securities may have the right to call or prepay obligations with or without call or prepayment penalties.



		September 30, 2022
(in thousands)		Amortized Cost			Fair Value
Available for Sale:
Due after one year through five years		$	8,364		$	7,865
Due after five years through ten years			6,197			5,572
Due after ten years			27,347			23,556
			41,908			36,993
Residential mortgage-backed agencies			45,899			37,734
Commercial mortgage-backed agencies			37,766			31,611
Collateralized mortgage obligations			26,336			21,701
Total available for sale		$	151,909		$	128,039
Held to Maturity:
Due after one year through five years		$	49,640		$	46,582
Due after five years through ten years			32,986			26,924
Due after ten years			44,803			39,142
			127,429			112,648
Residential mortgage-backed agencies			29,536			25,617
Commercial mortgage-backed agencies			23,018			18,640
Collateralized mortgage obligations			58,462			48,840
Total held to maturity		$	238,445		$	205,745