Investment Securities

3 Months Ended

Mar. 31, 2019

Securities Financing Transactions Disclosures [Abstract]

(5)	Investment Securities

The majority of the investment portfolio is comprised of securities issued by U.S. government agencies and state and political subdivision obligations. The amortized cost, fair value, and unrealized gains and losses on investment securities at March 31, 2019 and December 31, 2018 are as follows:

(Dollars in thousands)	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
March 31, 2019
Available-for-sale debt securities:
U.S. Treasury and U.S. government agencies	$	40,086	$	—	$	906	$	39,180
Mortgage-backed U.S. government agencies		34,323		22		500		33,845
State and political subdivision obligations		25,198		12		454		24,756
Corporate debt securities		3,734		29		12		3,751
Total available-for-sale debt securities		103,341		63		1,872		101,532
Held-to-maturity debt securities:
U.S. Treasury and U.S. government agencies		14,495		18		83		14,430
Mortgage-backed U.S. government agencies		62,872		206		663		62,415
State and political subdivision obligations		83,889		1,545		73		85,361
Corporate debt securities		1,535		—		18		1,517
Total held-to-maturity debt securities		162,791		1,769		837		163,723
Total	$	266,132	$	1,832	$	2,709	$	265,255

(Dollars in thousands)	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
December 31, 2018
Available-for-sale debt securities:
U.S. Treasury and U.S. government agencies	$	43,270	$	10	$	1,708	$	41,572
Mortgage-backed U.S. government agencies		39,865		—		1,016		38,849
State and political subdivision obligations		30,642		11		1,397		29,256
Corporate debt securities		2,250		—		4		2,246
Total available-for-sale debt securities		116,027		21		4,125		111,923
Held-to-maturity debt securities:
U.S. Treasury and U.S. government agencies		16,985		14		143		16,856
Mortgage-backed U.S. government agencies		65,812		46		1,310		64,548
State and political subdivision obligations		84,034		457		842		83,649
Corporate debt securities		1,539		—		10		1,529
Total held-to-maturity debt securities		168,370		517		2,305		166,582
Total	$	284,397	$	538	$	6,430	$	278,505

Estimated fair values of debt securities are based on quoted market prices, where applicable. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments, adjusted for differences between the quoted instruments and the instruments being valued. Please refer to Note 9, Fair Value Measurement, for more information on the fair value of investment securities.

Investment securities having a fair value of $222,079,000 at March 31, 2019 and $214,239,000 at December 31, 2018 were pledged to secure public deposits, some trust account holdings, and certain other borrowings.

The following tables present gross unrealized losses and fair value of debt security investments aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at March 31, 2019 and December 31, 2018.

(Dollars in thousands)	Less Than 12 Months					12 Months or More					Total
	Number					Number					Number
	of	Fair		Unrealized		of	Fair		Unrealized		of	Fair		Unrealized
March 31, 2019	Securities	Value		Losses		Securities	Value		Losses		Securities	Value		Losses
Available-for-sale debt securities:
U.S. Treasury and U.S. government agencies	0	$	—	$	—	21	$	39,180	$	906	21	$	39,180	$	906
Mortgage-backed U.S. government agencies	1		1,846		2	21		24,885		498	22		26,731		500
State and political subdivision obligations	0		—		—	44		21,637		454	44		21,637		454
Corporate debt securities	2		2,470		12	0		—		—	2		2,470		12
Total temporarily impaired available-for-sale debt securities	3		4,316		14	86		85,702		1,858	89		90,018		1,872

Held-to-maturity debt securities:
U.S. Treasury and U.S. government agencies	0	$	—	$	—	3	$	8,903	$	83	3	$	8,903	$	83
Mortgage-backed U.S. government agencies	0		—		—	35		41,088		663	35		41,088		663
State and political subdivision obligations	1		555		5	36		14,175		68	37		14,730		73
Corporate debt securities	1		1,517		18	0		—		—	1		1,517		18
Total temporarily impaired held-to-maturity debt securities	2	$	2,072	$	23	74	$	64,166	$	814	76	$	66,238	$	837
Total	5	$	6,388	$	37	160	$	149,868	$	2,672	165	$	156,256	$	2,709

(Dollars in thousands)	Less Than 12 Months					12 Months or More						Total
	Number					Number						Number
	of	Fair		Unrealized		of	Fair		Unrealized			of	Fair		Unrealized
December 31, 2018	Securities	Value		Losses		Securities	Value		Losses			Securities	Value		Losses
Available-for-sale securities:
U.S. Treasury and U.S. government agencies	0	$	—	$	—	21	$	38,386		$	1,708	21	$	38,386	$	1,708
Mortgage-backed U.S. government agencies	11		16,740		163	19		22,093			853	30		38,833		1,016
State and political subdivision obligations	3		1,751		23	51		24,520			1,374	54		26,271		1,397
Corporate debt securities	2		1,996		4	0		—			—	2		1,996		4
Total temporarily impaired available-for-sale securities	16	$	20,487	$	190	91	$	84,999		$	3,935	107	$	105,486	$	4,125

Held-to-maturity securities:
U.S. Treasury and U.S. government agencies	1	$	1,985	$	10	3	$	8,852		$	133	4	$	10,837	$	143
Mortgage-backed U.S. government agencies	10		16,165		79	35		42,431			1,231	45		58,596		1,310
State and political subdivision obligations	26		11,321		111	77		29,460			731	103		40,781		842
Corporate debt securities	1		1,529		10	0		—			—	1		1,529		10
Total temporarily impaired held to maturity securities	38	$	31,000	$	210	115	$	80,743		$	2,095	153	$	111,743	$	2,305
Total	54	$	51,487	$	400	206	$	165,742		$	6,030	260	$	217,229	$	6,430

Management evaluates securities for other-than-temporary impairment on at least a quarterly basis, and more frequently when economic or market concerns warrant such additional evaluation. Consideration is given to the length of time and the extent to which the fair value of the security has been less than amortized cost as well as the overall financial condition of the issuer. In addition, for debt securities, Mid Penn considers (a) whether management has the intent to sell the security, (b) it is more likely than not that management will be required to sell the security prior to its anticipated recovery, and (c) whether management expects to recover the entire amortized cost basis. At both March 31, 2019 and December 31, 2018, the majority of available-for-sale securities and held-to-maturity securities in an unrealized loss position were obligations of state and political subdivisions, U.S. Treasury and agency securities, and mortgage-backed U.S. government agencies.

Mid Penn had no securities considered by management to be other-than-temporarily impaired as of March 31, 2019, December 31, 2018, or March 31, 2018, and did not record any securities impairment charges in the respective periods ended on these dates. Mid Penn does not consider the securities with unrealized losses on the respective dates to be other-than-temporarily impaired as the unrealized losses were deemed to relate to changes in interest rates, and not erosion of credit quality.

Gross realized gains and losses on sales of available-for-sale debt securities for the three months ended March 31, 2019 and 2018 are shown in the table below.

(Dollars in thousands)	Three Months Ended March 31,

	2019				2018
Realized gains		$	26			$	100
Realized losses			(19	)			(2	)
Net gains		$	7			$	98

The table below illustrates the maturity distribution of investment securities at amortized cost and fair value as of March 31, 2019.

(Dollars in thousands)	Available-for-sale				Held-to-maturity
	Amortized		Fair		Amortized		Fair
March 31, 2019	Cost		Value		Cost		Value
Due in 1 year or less	$	—	$	—	$	3,992	$	3,970
Due after 1 year but within 5 years		19,983		19,680		14,475		14,486
Due after 5 years but within 10 years		43,742		42,912		81,452		82,852
Due after 10 years		5,293		5,095		-		-
		69,018		67,687		99,919		101,308

Mortgage-backed securities		34,323		33,845		62,872		62,415
	$	103,341	$	101,532	$	162,791	$	163,723