Investment Securities

6 Months Ended

Jun. 30, 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 June 30, 2020 and December 31, 2019 are as follows:

(Dollars in thousands)	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
June 30, 2020
Available-for-sale debt securities:
Mortgage-backed U.S. government agencies	$	2	$	—	$	—	$	2
State and political subdivision obligations		7,014		36		—		7,050
Corporate debt securities		16,464		42		66		16,440
Total available-for-sale debt securities		23,480		78		66		23,492
Held-to-maturity debt securities:
U.S. Treasury and U.S. government agencies	$	24,004	$	228	$	—	$	24,232
Mortgage-backed U.S. government agencies		41,312		1,072		4		42,380
State and political subdivision obligations		60,525		2,642		23		63,144
Corporate debt securities		9,546		205		16		9,735
Total held-to-maturity debt securities		135,387		4,147		43		139,491
Total	$	158,867	$	4,225	$	109	$	162,983

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

Investment securities having a fair value of $128,301,000 at June 30, 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 $212,401,000 as of June 30, 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 June 30, 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
June 30, 2020	Securities	Value		Losses		Securities	Value		Losses		Securities	Value		Losses
Available-for-sale debt securities:
Corporate debt securities	5	$	9,895	$	66	0	$	—	$	—	5	$	9,895	$	66
Total temporarily impaired available-for-sale debt securities	5	$	9,895	$	66	0	$	—	$	—	5	$	9,895	$	66
Held-to-maturity debt securities:
Mortgage-backed U.S. government agencies	1	$	1,135	$	4	0	$	—	$	—	1	$	1,135	$	4
State and political subdivision obligations	2		2,668		23	0		—		—	2		2,668		23
Corporate debt securities	2		1,983		16	0		—		—	2		1,983		16
Total temporarily impaired held-to-maturity debt securities	5	$	5,786	$	43	0	$	—	$	—	5	$	5,786	$	43
Total	10	$	15,681	$	109	0	$	—	$	—	10	$	15,681	$	109

(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) whether 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 June 30, 2020 and December 31, 2019, the majority of available-for-sale securities and held-to-maturity securities in an unrealized loss position were corporate debt securities.

Mid Penn had no securities considered by management to be other-than-temporarily impaired as of June 30, 2020, December 31, 2019, or June 30, 2019, and did not record any securities impairment charges in the respective periods ended on these dates.  This determination reflects management’s assessment that no securities in its portfolio were impaired as a result of any COVID-19 pandemic impacts, to date, to the underlying issuers of securities.  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 six months ended June 30, 2020 and 2019 are shown in the table below.

(Dollars in thousands)	Three Months Ended June 30,								Six Months Ended June 30,
	2020				2019				2020				2019
Realized gains		$	118			$	43			$	255			$	69
Realized losses			(7	)			(26	)			(12	)			(45	)
Net gains		$	111			$	17			$	243			$	24

The table below illustrates the maturity distribution of investment securities at amortized cost and fair value as of June 30, 2020.

(Dollars in thousands)	Available-for-sale				Held-to-maturity
	Amortized		Fair		Amortized		Fair
June 30, 2020	Cost		Value		Cost		Value
Due in 1 year or less	$	—	$	—	$	3,162	$	3,191
Due after 1 year but within 5 years		2,975		2,994		19,478		20,195
Due after 5 years but within 10 years		17,679		17,667		67,984		70,266
Due after 10 years		2,824		2,829		3,451		3,459
		23,478		23,490		94,075		97,111
Mortgage-backed securities		2		2		41,312		42,380
	$	23,480	$	23,492	$	135,387	$	139,491