SECURITIES

9 Months Ended

Sep. 30, 2020

SECURITIES

SECURITIES

6. SECURITIES

Amortized cost and fair value of available-for-sale debt securities at September 30, 2020 and December 31, 2019 are summarized as follows:

(In Thousands)	September 30, 2020
			Gross		Gross
			Unrealized		Unrealized
	Amortized		Holding		Holding		Fair
	Cost		Gains		Losses		Value
Obligations of the U.S. Treasury	$	12,228	$	0	$	(2)	$	12,226
Obligations of U.S. Government agencies		15,348		1,007		0		16,355
Obligations of states and political subdivisions:
Tax-exempt		104,821		5,057		(210)		109,668
Taxable		42,079		2,161		(45)		44,195
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		44,697		1,514		0		46,211
Residential collateralized mortgage obligations		67,635		1,726		(24)		69,337
Commercial mortgage-backed securities		39,337		3,216		0		42,553
Total available-for-sale debt securities	$	326,145	$	14,681	$	(281)	$	340,545

(In Thousands)	December 31, 2019
			Gross		Gross
			Unrealized		Unrealized
	Amortized		Holding		Holding		Fair
	Cost		Gains		Losses		Value
Obligations of U.S. Government agencies	$	16,380	$	620	$	0	$	17,000
Obligations of states and political subdivisions:
Tax-exempt		68,787		2,011		(38)		70,760
Taxable		35,446		927		(70)		36,303
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		58,875		472		(137)		59,210
Residential collateralized mortgage obligations		115,025		308		(610)		114,723
Commercial mortgage-backed securities		47,765		1,069		(107)		48,727
Total available-for-sale debt securities	$	342,278	$	5,407	$	(962)	$	346,723

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 September 30, 2020 and December 31, 2019:

September 30, 2020	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	$	12,226	$	(2)	$	0	$	0	$	12,226	$	(2)
Obligations of states and political subdivisions:
Tax-exempt		17,061		(210)		0		0		17,061		(210)
Taxable		4,856		(45)		0		0		4,856		(45)
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies,
Residential collateralized mortgage obligations		4,165		(24)		0		0		4,165		(24)
Total temporary impaired available for sale debt securities	$	38,308	$	(281)	$	0	$	0	$	38,308	$	(281)

December 31, 2019	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 states and political subdivisions:
Tax-exempt	$	6,429	$	(38)	$	0	$	0	$	6,429	$	(38)
Taxable		5,624		(68)		161		(2)		5,785		(70)
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		9,771		(35)		14,787		(102)		24,558		(137)
Residential collateralized mortgage obligations		31,409		(195)		30,535		(415)		61,944		(610)
Commercial mortgage-backed securities		0		0		8,507		(107)		8,507		(107)
Total temporarily impaired available-for-sale debt securities	$	53,233	$	(336)	$	53,990	$	(626)	$	107,223	$	(962)

Gross realized gains and losses from available-for-sale debt securities were as follows:

(In Thousands)	Three Months Ended				Nine Months Ended
	September 30,		September 30,		September 30,		September 30,
	2020		2019		2020		2019
Gross realized gains from sales	$	26	$	14	$	78	$	21
Gross realized losses from sales		(1)		(1)		(53)		(1)
Net realized gains	$	25	$	13	$	25	$	20

The amortized cost and fair value of available-for-sale debt securities by contractual maturity are shown in the following table as of September 30, 2020. 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)	September 30, 2020
	Amortized		Fair
	Cost		Value
Due in one year or less	$	14,411	$	14,469
Due from one year through five years		45,804		47,460
Due from five years through ten years		37,479		40,088
Due after ten years		76,782		80,427
Sub-total		174,476		182,444
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		44,697		46,211
Residential collateralized mortgage obligations		67,635		69,337
Commercial mortgage-backed securities		39,337		42,553
Total	$	326,145	$	340,545

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 $255,312,000 at September 30, 2020 and $215,270,000 at December 31, 2019 were pledged as collateral for public deposits, trusts and certain other deposits as provided by law. See Note 9 for information concerning securities pledged to secure borrowing arrangements.

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 other-than-temporary impairment (“OTTI”) at September 30, 2020 is provided below.

Debt Securities

At September 30, 2020 and December 31, 2019, 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. Based on the results of the assessment, management believes impairment of debt securities at September 30, 2020 and December 31, 2019 to be 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 $11,929,000 at September 30, 2020 and $10,131,000 at December 31, 2019. The Corporation evaluated its holding of FHLB-Pittsburgh stock for impairment and deemed the stock to not be impaired at September 30, 2020 and December 31, 2019. 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 $1,003,000 at September 30, 2020 and $979,000 at December 31, 2019, consisted exclusively of one mutual fund. There was an unrealized gain on the mutual fund of $3,000 at September 30, 2020 and an unrealized loss of $21,000 at December 31, 2019. Changes in the unrealized gains or losses on this security are included in other noninterest income in the consolidated statements of income.