SECURITIES

6 Months Ended

Jun. 30, 2024

SECURITIES

SECURITIES

5. SECURITIES

Amortized cost and fair value of available-for-sale debt securities at June 30, 2024 and December 31, 2023 are summarized as follows:

(In Thousands)	June 30, 2024
			Gross		Gross
			Unrealized		Unrealized
	Amortized		Holding		Holding		Fair
	Cost		Gains		Losses		Value
Obligations of the U.S. Treasury	$	10,323	$	0	$	(1,066)	$	9,257
Obligations of U.S. Government agencies		10,582		0		(1,232)		9,350
Bank holding company debt securities		28,955		0		(5,298)		23,657
Obligations of states and political subdivisions:
Tax-exempt		113,659		247		(11,886)		102,020
Taxable		56,294		0		(8,813)		47,481
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		104,708		0		(10,834)		93,874
Residential collateralized mortgage obligations		46,623		0		(4,058)		42,565
Commercial mortgage-backed securities		74,510		0		(9,792)		64,718
Private label commercial mortgage-backed securities		8,290		0		(67)		8,223
Total available-for-sale debt securities	$	453,944	$	247	$	(53,046)	$	401,145

(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 June 30, 2024 and December 31, 2023 for which an allowance for credit losses has not been recorded:

June 30, 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	$	9,257		(1,066)	$	9,257	$	(1,066)
Obligations of U.S. Government agencies		0		0		9,350		(1,232)		9,350		(1,232)
Bank holding company debt securities		0		0		23,657		(5,298)		23,657		(5,298)
Obligations of states and political subdivisions:
Tax-exempt		1,921		(23)		95,837		(11,863)		97,758		(11,886)
Taxable		0		0		47,481		(8,813)		47,481		(8,813)
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		13,586		(111)		80,288		(10,723)		93,874		(10,834)
Residential collateralized mortgage obligations		12,945		(160)		29,620		(3,898)		42,565		(4,058)
Commercial mortgage-backed securities		0		0		64,718		(9,792)		64,718		(9,792)
Private label commercial mortgage-backed securities		0		0		8,223		(67)		8,223		(67)
Total	$	28,452	$	(294)	$	368,431	$	(52,752)	$	396,883	$	(53,046)

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				Six Months Ended
	June 30,		June 30,		June 30,		June 30,
	2024		2023		2024		2023
Gross realized gains from sales	$	0	$	9	$	0	$	89
Gross realized losses from sales		0		(10)		0		(83)
Net realized (losses) gains	$	0	$	(1)	$	0	$	6

The amortized cost and fair value of available-for-sale debt securities by contractual maturity are shown in the following table as of June 30, 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)	June 30, 2024
	Amortized		Fair
	Cost		Value
Due in one year or less	$	10,983	$	10,847
Due from one year through five years		29,973		27,736
Due from five years through ten years		77,475		67,081
Due after ten years		101,382		86,101
Sub-total		219,813		191,765
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		104,708		93,874
Residential collateralized mortgage obligations		46,623		42,565
Commercial mortgage-backed securities		74,510		64,718
Private label commercial mortgage-backed securities		8,290		8,223
Total	$	453,944	$	401,145

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 $178,513,000 at June 30, 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.

A summary of information management considered in evaluating debt and equity securities for credit losses at June 30, 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 $53,046,000 at June 30, 2024 and $49,564,000 at December 31, 2023. At June 30, 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 June 30, 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 June 30, 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 June 30, 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 $16,464,000 at June 30, 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 June 30, 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 $6,276,000 at June 30, 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 $858,000 at June 30, 2024 and $871,000 December 31, 2023, consisting exclusively of one mutual fund. There was an unrealized loss on the mutual fund of $142,000 at June 30, 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 second quarter 2024, a loss of $14,000 in the second quarter 2023, a loss of $13,000 in the six-month period ended June 30, 2024 and no net gain or loss in the six-month period ended June 30, 2023.