SECURITIES

12 Months Ended

Dec. 31, 2023

SECURITIES

SECURITIES

6. SECURITIES

Amortized cost and fair value of available-for-sale debt securities at December 31, 2023 and 2022 are summarized as follows:

(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

(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

The following table presents gross unrealized losses and fair value of available-for-sale debt securities aggregated by length of time that individual securities have been in a continuous unrealized loss position at December 31, 2023 and 2022:

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)

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	$	297,304	$	(28,730)	$	184,052	$	(35,352)	$	481,356	$	(64,082)

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

(In Thousands)	2023		2022		2021
Gross realized gains from sales	$	89	$	48	$	27
Gross realized losses from sales		(3,125)		(28)		(3)
Net realized (losses) gains	$	(3,036)	$	20	$	24
Income tax provision related to net realized (losses) gains	$	(638)	$	4	$	5

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, 2023. 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, 2023
	Amortized		Fair
	Cost		Value
Due in one year or less	$	13,200	$	12,937
Due from one year through five years		27,951		26,299
Due from five years through ten years		77,246		67,709
Due after ten years		106,183		92,101
Sub-total		224,580		199,046
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		105,549		95,405
Residential collateralized mortgage obligations		50,212		46,462
Commercial mortgage-backed securities		76,412		66,682
Private label commercial mortgage-backed securities		8,215		8,160
Total	$	464,968	$	415,755

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 $232,437,000 at December 31, 2023 and $277,302,000 at December 31, 2022 were pledged as collateral for public deposits, trusts and certain other deposits, as provided by law, totaling $136,494,000 at December 31, 2023 and $196,760,000 at December 31, 2022. See Note 11 for information concerning securities pledged to secure borrowing arrangements.

A summary of information management considered in evaluating debt and equity securities for credit losses at December 31, 2023 and 2022 is provided below.

Debt Securities

As reflected in the table above, gross unrealized holding losses on available-for-sale debt securities totaled $49,564,000 at December 31, 2023 and $64,082,000 at December 31, 2022. At December 31, 2023, 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 occurred in 2022 and 2023.

At December 31, 2023 and December 31, 2022, 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 December 31, 2023 and 2022, 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 ACL required on available-for-sale debt securities in an unrealized loss position at December 31, 2023 and 2022.

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 $15,214,000 at December 31, 2023 and

$14,168,000 at December 31, 2022. The Corporation evaluated its holding of FHLB-Pittsburgh stock for impairment and deemed the stock to not be impaired at December 31, 2023 and 2022. 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 $6,252,000 at December 31, 2023.

The Corporation’s marketable equity security, with a carrying value of $871,000 at December 31, 2023 and $859,000 at December 31, 2022 consisted exclusively of one mutual fund. There was an unrealized loss of $129,000 on the mutual fund at December 31, 2023 and $141,000 at December 31, 2022. 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 gain of $12,000 in 2023, a loss of $112,000 in 2022 and a loss of $29,000 in 2021.  There were no sales of equity securities in 2023, 2022 and 2021.