SECURITIES

12 Months Ended

Dec. 31, 2022

SECURITIES

SECURITIES

7. SECURITIES

Amortized cost and fair value of available-for-sale debt securities at December 31, 2022 and 2021 are summarized as follows:

(In Thousands)	December 31, 2022
			Gross		Gross
			Unrealized		Unrealized
	Amortized		Holding		Holding		Fair
	Cost		Gains		Losses		Value
Obligations of the U.S. Treasury	$	35,166	$	0	$	(3,330)	$	31,836
Obligations of U.S. Government agencies		25,938		0		(2,508)		23,430
Bank holding company debt securities		28,945		0		(3,559)		25,386
Obligations of states and political subdivisions:
Tax-exempt		146,149		319		(13,845)		132,623
Taxable		68,488		0		(11,676)		56,812
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		112,782		0		(12,841)		99,941
Residential collateralized mortgage obligations		44,868		0		(4,572)		40,296
Commercial mortgage-backed securities		91,388		0		(11,702)		79,686
Private label commercial mortgage-backed securities		8,070		2		(49)		8,023
Total available-for-sale debt securities	$	561,794	$	321	$	(64,082)	$	498,033

(In Thousands)	December 31, 2021
			Gross		Gross
			Unrealized		Unrealized
	Amortized		Holding		Holding		Fair
	Cost		Gains		Losses		Value
Obligations of the U.S. Treasury	$	25,058	$	52	$	(198)	$	24,912
Obligations of U.S. Government agencies		23,936		563		(408)		24,091
Bank holding company debt securities		18,000		18		(31)		17,987
Obligations of states and political subdivisions:
Tax-exempt		143,427		4,749		(148)		148,028
Taxable		72,182		1,232		(649)		72,765
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		98,048		705		(572)		98,181
Residential collateralized mortgage obligations		44,015		437		(205)		44,247
Commercial mortgage-backed securities		86,926		1,548		(1,006)		87,468
Total available-for-sale debt securities	$	511,592	$	9,304	$	(3,217)	$	517,679

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 December 31, 2022 and 2021:

December 31, 2022	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	$	20,192	$	(1,939)	$	11,644	$	(1,391)	$	31,836	$	(3,330)
Obligations of U.S. Government agencies		8,509		(430)		12,921		(2,078)		21,430		(2,508)
Bank holding company debt securities		14,248		(1,697)		11,138		(1,862)		25,386		(3,559)
Obligations of states and political subdivisions:
Tax-exempt		106,204		(11,023)		15,153		(2,822)		121,357		(13,845)
Taxable		28,901		(4,739)		27,761		(6,937)		56,662		(11,676)
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		45,410		(4,226)		54,531		(8,615)		99,941		(12,841)
Residential collateralized mortgage obligations		28,670		(2,042)		11,626		(2,530)		40,296		(4,572)
Commercial mortgage-backed securities		40,408		(2,585)		39,278		(9,117)		79,686		(11,702)
Private label commercial mortgage-backed securities		4,762		(49)		0		0		4,762		(49)
Total temporarily impaired available-for-sale debt securities	$	297,304	$	(28,730)	$	184,052	$	(35,352)	$	481,356	$	(64,082)

December 31, 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	$	18,886	$	(198)	$	0	$	0	$	18,886	$	(198)
Obligations of U.S. Government agencies		9,735		(264)		4,856		(144)		14,591		(408)
Bank holding company debt securities		12,969		(31)		0		0		12,969		(31)
Obligations of states and political subdivisions:
Tax-exempt		17,852		(141)		549		(7)		18,401		(148)
Taxable		31,261		(517)		3,277		(132)		34,538		(649)
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		71,451		(572)		0		0		71,451		(572)
Residential collateralized mortgage obligations		15,117		(205)		0		0		15,117		(205)
Commercial mortgage-backed securities		52,867		(1,006)		0		0		52,867		(1,006)
Total temporarily impaired available-for-sale debt securities	$	230,138	$	(2,934)	$	8,682	$	(283)	$	238,820	$	(3,217)

Gross realized gains and losses from available-for-sale securities and the related income tax provision were as follows:

(In Thousands)	2022		2021		2020
Gross realized gains from sales	$	48	$	27	$	222
Gross realized losses from sales		(28)		(3)		(53)
Net realized gains	$	20	$	24	$	169
Income tax provision related to net realized gains	$	4	$	5	$	35

The amortized cost and fair value of available-for-sale debt securities by contractual maturity are shown in the following table as of December 31, 2022. 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)	December 31, 2022
	Amortized		Fair
	Cost		Value
Due in one year or less	$	13,568	$	13,431
Due from one year through five years		74,983		70,160
Due from five years through ten years		89,023		79,404
Due after ten years		127,112		107,092
Sub-total		304,686		270,087
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		112,782		99,941
Residential collateralized mortgage obligations		44,868		40,296
Commercial mortgage-backed securities		91,388		79,686
Private label commercial mortgage-backed securities		8,070		8,023
Total	$	561,794	$	498,033

The Corporation’s mortgage-backed securities 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 $277,302,000 at December 31, 2022 and $241,428,000 at December 31, 2021 were pledged as collateral for public deposits, trusts and certain other deposits, as provided by law, totaling $196,760,000 at December 31, 2022 and $189,383,000 at December 31, 2021. See Note 12 for information concerning securities pledged to secure borrowing arrangements and Note 20 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 December 31, 2022 and 2021 is provided below.

Debt Securities

At December 31, 2022 and 2021, 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. As reflected in the table above, gross unrealized holding losses on available-for-sale debt securities totaled $64,082,000 at December 31, 2022 and $3,217,000 at December 31, 2021. The increase in gross unrealized holding losses in 2022 was consistent with the significant increase in market interest rates that occurred during the period. Based on the results of the assessment, management believes there were no credit-related declines in fair value and that impairment of debt securities in an unrealized loss position at December 31, 2022 and 2021 is 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 $14,168,000 at December 31, 2022 and $9,313,000 at December 31, 2021. The Corporation evaluated its holding of FHLB-Pittsburgh stock for impairment and deemed the stock to not be impaired at December 31, 2022 and December 31, 2021. 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 $859,000 at December 31, 2022 and $971,000 at December 31, 2021 consisted exclusively of one mutual fund. There was an unrealized loss of $141,000 on the mutual fund at December 31, 2022 and $29,000 at December 31, 2021 and no unrealized gain/loss at December 31, 2020. The increase in the unrealized loss of $112,000 in 2022 and $29,000 in 2021 and the decrease in the unrealized loss of $21,000 in 2020 are included in other noninterest income in the consolidated statements of income.  There were no sales of equity securities in 2022, 2021 and 2020.