Investment Securities

9 Months Ended

Sep. 30, 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 September 30, 2019 and December 31, 2018 are as follows:

(Dollars in thousands)	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
September 30, 2019
Available-for-sale debt securities:
U.S. Treasury and U.S. government agencies	$	32,611	$	33	$	111	$	32,533
Mortgage-backed U.S. government agencies		16,638		8		135		16,511
State and political subdivision obligations		1,059		—		4		1,055
Corporate debt securities		2,250		70		—		2,320
Total available-for-sale debt securities		52,558		111		250		52,419
Held-to-maturity debt securities:
U.S. Treasury and U.S. government agencies		19,421		39		20		19,440
Mortgage-backed U.S. government agencies		67,472		521		119		67,874
State and political subdivision obligations		82,051		2,820		—		84,871
Corporate debt securities		1,528		9		—		1,537
Total held-to-maturity debt securities		170,472		3,389		139		173,722
Total	$	223,030	$	3,500	$	389	$	226,141

(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 $172,084,000 at September 30, 2019 and $214,239,000 at December 31, 2018 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 $155,700,000 as of September 30, 2019 and $36,850,000 as of December 31, 2018.

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 September 30, 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
September 30, 2019	Securities	Value		Losses		Securities	Value		Losses		Securities	Value		Losses
Available-for-sale debt securities:
U.S. Treasury and U.S. government agencies	3	$	6,988	$	12	7	$	11,940	$	99	10	$	18,928	$	111
Mortgage-backed U.S. government agencies	1		627		2	14		11,277		133	15		11,904		135
State and political subdivision obligations	2		1,025		4	0		—		—	2		1,025		4
Total temporarily impaired available-for-sale debt securities	6	$	8,640	$	18	21	$	23,217	$	232	27	$	31,857	$	250

Held-to-maturity debt securities:
U.S. Treasury and U.S. government agencies	3	$	7,447	$	15	1	$	2,994	$	5	4	$	10,441	$	20
Mortgage-backed U.S. government agencies	7		11,239		15	15		13,403		104	22		24,642		119
Total temporarily impaired held-to-maturity debt securities	10	$	18,686	$	30	16	$	16,397	$	109	26	$	35,083	$	139
Total	16	$	27,326	$	48	37	$	39,614	$	341	53	$	66,940	$	389

(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 September 30, 2019 and December 31, 2018, the majority of available-for-sale securities and held-to-maturity securities in an unrealized loss position were mortgage-backed U.S. government agencies, obligations of state and political subdivisions, and U.S. Treasury and agency securities.

Mid Penn had no securities considered by management to be other-than-temporarily impaired as of September 30, 2019, December 31, 2018, or September 30, 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 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.

Gross realized gains and losses on sales of available-for-sale debt securities for the three and nine months ended September 30, 2019 and 2018 are shown in the table below.

(Dollars in thousands)	Three Months Ended September 30,							Nine Months Ended September 30,
	2019				2018			2019				2018
Realized gains		$	64			$	30		$	133			$	141
Realized losses			(18	)			—			(63	)			(9	)
Net gains		$	46			$	30		$	70			$	132

The table below illustrates the maturity distribution of investment securities at amortized cost and fair value as of September 30, 2019.

(Dollars in thousands)	Available-for-sale				Held-to-maturity
	Amortized		Fair		Amortized		Fair
September 30, 2019	Cost		Value		Cost		Value
Due in 1 year or less	$	—	$	—	$	3,990	$	3,992
Due after 1 year but within 5 years		19,457		19,403		19,663		19,926
Due after 5 years but within 10 years		16,463		16,505		79,347		81,930
Due after 10 years		—		—		—		—
		35,920		35,908		103,000		105,848

Mortgage-backed securities		16,638		16,511		67,472		67,874
	$	52,558	$	52,419	$	170,472	$	173,722