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