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Investment Securities
 3 Months Ended
Mar. 31, 2020
Securities Financing Transactions Disclosures [Abstract]  
Investment Securities

(3)

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, 2020 and December 31, 2019 are as follows:

 

(Dollars in thousands)

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

Fair

 

 

 

Cost

 

 

Gains

 

 

Losses

 

 

Value

 

March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Available-for-sale debt securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed U.S. government agencies

 

$

3,671

 

 

$

6

 

 

$

15

 

 

$

3,662

 

State and political subdivision obligations

 

 

16,092

 

 

 

27

 

 

 

1

 

 

 

16,118

 

Corporate debt securities

 

 

7,633

 

 

 

13

 

 

 

6

 

 

 

7,640

 

Total available-for-sale debt securities

 

 

27,396

 

 

 

46

 

 

 

22

 

 

 

27,420

 

Held-to-maturity debt securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury and U.S. government agencies

 

$

68,321

 

 

$

288

 

 

$

18

 

 

$

68,591

 

Mortgage-backed U.S. government agencies

 

 

44,940

 

 

 

916

 

 

 

24

 

 

 

45,832

 

State and political subdivision obligations

 

 

50,603

 

 

 

1,295

 

 

 

78

 

 

 

51,820

 

Corporate debt securities

 

 

4,099

 

 

 

57

 

 

 

—

 

 

 

4,156

 

Total held-to-maturity debt securities

 

 

167,963

 

 

 

2,556

 

 

 

120

 

 

 

170,399

 

Total

 

$

195,359

 

 

$

2,602

 

 

$

142

 

 

$

197,819

 

 

 

(Dollars in thousands)

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

Fair

 

 

 

Cost

 

 

Gains

 

 

Losses

 

 

Value

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Available-for-sale debt securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government agencies

 

$

22,894

 

 

$

6

 

 

$

70

 

 

$

22,830

 

Mortgage-backed U.S. government agencies

 

 

12,996

 

 

 

7

 

 

 

113

 

 

 

12,890

 

State and political subdivision obligations

 

 

30

 

 

 

—

 

 

 

—

 

 

 

30

 

Corporate debt securities

 

 

1,250

 

 

 

9

 

 

 

—

 

 

 

1,259

 

Total available-for-sale debt securities

 

 

37,170

 

 

 

22

 

 

 

183

 

 

 

37,009

 

Held-to-maturity debt securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury and U.S. government agencies

 

$

50,210

 

 

$

46

 

 

$

220

 

 

$

50,036

 

Mortgage-backed U.S. government agencies

 

 

42,098

 

 

 

95

 

 

 

102

 

 

 

42,091

 

State and political subdivision obligations

 

 

44,169

 

 

 

1,193

 

 

 

13

 

 

 

45,349

 

Total held-to-maturity debt securities

 

 

136,477

 

 

 

1,334

 

 

 

335

 

 

 

137,476

 

Total

 

$

173,647

 

 

$

1,356

 

 

$

518

 

 

$

174,485

 

 

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 6, Fair Value Measurement, for more information on the fair value of investment securities.

Investment securities having a fair value of $142,407,000 at March 31, 2020 and $147,283,000 at December 31, 2019 were pledged to secure public deposits, some trust account holdings, and certain other borrowings.  Mid Penn also obtains letters of credit from the Federal Home Loan Bank of Pittsburgh (“FHLB”) to secure certain public deposits.  These FHLB letter of credit commitments totaled $169,636,000 as of March 31, 2020 and $169,051,000 as of December 31, 2019.

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, 2020 and December 31, 2019.

 

(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, 2020

 

Securities

 

Value

 

 

Losses

 

 

Securities

 

Value

 

 

Losses

 

 

Securities

 

Value

 

 

Losses

 

Available-for-sale debt securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed U.S. government agencies

 

1

 

$

2,573

 

 

$

13

 

 

1

 

$

200

 

 

$

2

 

 

2

 

$

2,773

 

 

$

15

 

State and political subdivision obligations

 

1

 

 

2,962

 

 

 

1

 

 

0

 

 

—

 

 

 

—

 

 

1

 

 

2,962

 

 

 

1

 

Corporate debt securities

 

2

 

 

3,893

 

 

 

6

 

 

0

 

 

—

 

 

 

—

 

 

2

 

 

3,893

 

 

 

6

 

Total temporarily impaired available-for-sale debt securities

 

4

 

$

9,428

 

 

$

20

 

 

1

 

$

200

 

 

$

2

 

 

5

 

$

9,628

 

 

$

22

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Held-to-maturity debt securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury and U.S. government agencies

 

4

 

$

5,507

 

 

$

18

 

 

0

 

$

—

 

 

$

—

 

 

4

 

$

5,507

 

 

$

18

 

Mortgage-backed U.S. government agencies

 

2

 

 

1,960

 

 

 

18

 

 

2

 

 

1,358

 

 

 

6

 

 

4

 

 

3,318

 

 

 

24

 

State and political subdivision obligations

 

8

 

 

5,332

 

 

 

78

 

 

0

 

 

—

 

 

 

—

 

 

8

 

 

5,332

 

 

 

78

 

Total temporarily impaired held-to-maturity debt securities

 

14

 

$

12,799

 

 

$

114

 

 

2

 

$

1,358

 

 

$

6

 

 

16

 

$

14,157

 

 

$

120

 

Total

 

18

 

$

22,227

 

 

$

134

 

 

3

 

$

1,558

 

 

$

8

 

 

21

 

$

23,785

 

 

$

142

 

 

 

 

 

(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, 2019

 

Securities

 

Value

 

 

Losses

 

 

Securities

 

Value

 

Losses

 

 

Securities

 

Value

 

 

Losses

 

Available-for-sale securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government agencies

 

4

 

$

4,652

 

 

$

24

 

 

7

 

$

11,982

 

 

$

46

 

 

11

 

$

16,634

 

 

$

70

 

Mortgage-backed U.S. government agencies

 

1

 

 

1,643

 

 

 

4

 

 

14

 

 

10,603

 

 

 

109

 

 

15

 

 

12,246

 

 

 

113

 

Total temporarily impaired available-for-sale securities

 

5

 

$

6,295

 

 

$

28

 

 

21

 

$

22,585

 

 

$

155

 

 

26

 

$

28,880

 

 

$

183

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Held-to-maturity securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury and U.S. government agencies

 

18

 

$

29,024

 

 

$

219

 

 

1

 

$

2,999

 

 

$

1

 

 

19

 

$

32,023

 

 

$

220

 

Mortgage-backed U.S. government agencies

 

6

 

 

8,445

 

 

 

35

 

 

13

 

 

11,050

 

 

 

67

 

 

19

 

 

19,495

 

 

 

102

 

State and political subdivision obligations

 

3

 

 

1,383

 

 

 

13

 

 

0

 

 

—

 

 

 

—

 

 

3

 

 

1,383

 

 

 

13

 

Total temporarily impaired held to maturity securities

 

27

 

$

38,852

 

 

$

267

 

 

14

 

$

14,049

 

 

$

68

 

 

41

 

$

52,901

 

 

$

335

 

Total

 

32

 

$

45,147

 

 

$

295

 

 

35

 

$

36,634

 

 

$

223

 

 

67

 

$

81,781

 

 

$

518

 

 

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 (i) whether management has the intent to sell the security, (ii) it is more likely than not that management will be required to sell the security prior to its anticipated recovery, and (iii) whether management expects to recover the entire amortized cost basis.  At both March 31, 2020 and December 31, 2019, the majority of available-for-sale securities and held-to-maturity securities in an unrealized loss position were obligations of state and political subdivisions, mortgage-backed U.S. government agencies, and U.S. Treasury and agency securities.

Mid Penn had no securities considered by management to be other-than-temporarily impaired as of March 31, 2020, December 31, 2019, or March 31, 2019, 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 be temporary changes in value related to market movements in interest yields at various periods similar to the maturity dates of holdings in the investment portfolio, and not reflective of an erosion of credit quality.

As a result of the COVID-19 global pandemic which impacted the United States including the State of Pennsylvania and other states and municipalities in which Mid Penn holds debt security investments, Mid Penn management performed an updated assessment of all of its debt security holdings of obligations of state and political subdivisions to determine whether this COVID-19 event resulted in any significant credit deterioration of the financial condition of the underlying issuers which would result in any related securities having what appears to be other-than-temporary impairment.  Based upon this comprehensive review, management’s determination was that, as of March 31, 2020, there was no other-than-temporary impairment to its debt security holdings of obligations of state and political subdivisions.  As the COVID-19 event continues and its implications to the country, the economy, and specifically Mid Penn evolve, management will continue to update this other-than-temporary impairment assessment as necessary.

Gross realized gains and losses on sales of available-for-sale debt securities for the three months ended March 31, 2020 and 2019 are shown in the table below.

 

(Dollars in thousands)

Three Months Ended March 31,

 

 

 

 

 

 

 

 

 

 

 

 

2020

 

 

2019

 

Realized gains

 

$

137

 

 

 

$

26

 

Realized losses

 

 

(5

)

 

 

 

(19

)

Net gains

 

$

132

 

 

 

$

7

 

 

 

The table below illustrates the maturity distribution of investment securities at amortized cost and fair value as of March 31, 2020.

 

(Dollars in thousands)

 

Available-for-sale

 

 

Held-to-maturity

 

 

 

Amortized

 

 

Fair

 

 

Amortized

 

 

Fair

 

March 31, 2020

 

Cost

 

 

Value

 

 

Cost

 

 

Value

 

Due in 1 year or less

 

$

—

 

 

$

—

 

 

$

5,907

 

 

$

5,953

 

Due after 1 year but within 5 years

 

 

7,982

 

 

 

8,012

 

 

 

15,378

 

 

 

15,751

 

Due after 5 years but within 10 years

 

 

7,599

 

 

 

7,598

 

 

 

96,184

 

 

 

97,347

 

Due after 10 years

 

 

8,144

 

 

 

8,148

 

 

 

5,554

 

 

 

5,516

 

 

 

 

23,725

 

 

 

23,758

 

 

 

123,023

 

 

 

124,567

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities

 

 

3,671

 

 

 

3,662

 

 

 

44,940

 

 

 

45,832

 

 

 

$

27,396

 

 

$

27,420

 

 

$

167,963

 

 

$

170,399