Investment Securities

12 Months Ended

Dec. 31, 2020

Securities Financing Transactions Disclosures [Abstract]

(6) 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 December 31, 2020 and December 31, 2019 are as follows:

(Dollars in thousands)
	Amortized		Unrealized		Unrealized		Fair
December 31, 2020	Cost		Gains		Losses		Value
Available for sale securities:
Mortgage-backed U.S. government agencies	$	2	$	—	$	—	$	2
Corporate debt securities		5,750		—		4		5,746
Total available for sale securities		5,752		—		4		5,748
Held to maturity securities:
U.S. Treasury and U.S. government agencies		11,511		66		—		11,577
Mortgage-backed U.S. government agencies		40,810		948		15		41,743
State and political subdivision obligations		65,449		3,295		6		68,738
Corporate debt securities		10,522		215		1		10,736
Total held to maturity securities		128,292		4,524		22		132,794
Total	$	134,044	$	4,524	$	26	$	138,542

(Dollars in thousands)
	Amortized		Unrealized		Unrealized		Fair
December 31, 2019	Cost		Gains		Losses		Value
Available for sale 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 15, Fair Value Measurement, for more information on the fair value of investment securities.

During the fourth quarter of 2019, Mid Penn early adopted Accounting Standards Update (“ASU”) 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments), and as part of the adoption, reclassified 113 held-to-maturity debt securities with an aggregate amortized cost of $67,096,000 to the available for sale category. All 113 securities were subsequently sold during the fourth quarter and Mid Penn recognized a pre-tax gain on the sales of $1,779,000. Please refer to Note 25, Recent Accounting Pronouncements, for more information regarding the adoption of ASU 2019-04.

Investment securities having a fair value of $102,959,000 at December 31, 2020, and $147,283,000 at December 31, 2019, were pledged primarily to secure public fund deposits. Mid Penn also obtains letters of credit from the Federal Home Loan Bank of Pittsburgh (“FHLB”) to secure certain public fund deposits of municipality and school district customers who agree to use of the FHLB letters of credit. These FHLB letter of credit commitments totaled $288,950,000 as of December 31, 2020 and $169,051,000 as of December 31, 2019.

The following table presents gross unrealized losses and fair value of investments aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 31, 2020 and 2019.

(Dollars in thousands)	Less Than 12 Months					12 Months or More					Total
December 31, 2020	Number of Securities	Fair Value		Unrealized Losses		Number of Securities	Fair Value		Unrealized Losses		Number of Securities	Fair Value		Unrealized Losses
Available for sale securities:
Corporate debt securities	2	$	3,497	$	4	0	$	—	$	—	2	$	3,497	$	4
Total temporarily impaired available for sale securities	2		3,497		4	0		—		—	2		3,497		4

Held to maturity securities:
Mortgage-backed U.S. government agencies	8	$	5,336	$	15	0	$	—	$	—	8	$	5,336	$	15
State and political subdivision obligations	2		801		6	0		—		—	2		801		6
Corporate debt securities	1		449		1	0		—		—	1		449		1
Total temporarily impaired held to maturity securities	11		6,586		22	0		—		—	11		6,586		22
Total	13	$	10,083	$	26	0	$	—	$	—	13	$	10,083	$	26


(Dollars in thousands)	Less Than 12 Months					12 Months or More					Total
December 31, 2019	Number of Securities	Fair Value		Unrealized Losses		Number of Securities	Fair Value		Unrealized Losses		Number of Securities	Fair Value		Unrealized 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 at least on quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to the length of time and the extent to which the fair value has been less than cost, and the financial condition and near-term prospects 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. For equity securities, management considers the intent and ability to hold securities until recovery of unrealized losses.

At December 31, 2020, the majority of the unrealized losses on securities in an unrealized loss position were attributable to mortgage-backed U.S. government agencies. At December 31, 2019, the majority of the unrealized losses on securities in an unrealized loss position were attributed to U.S. government agencies and mortgage-backed U.S. government agencies.

Mid Penn had no securities considered by management to be other-than-temporarily impaired as of December 31, 2020 and December 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.

Gross realized gains and losses on sales of available-for-sale securities for the years ended December 31, 2020, 2019, and 2018 are shown in the table below.

(Dollars in thousands)	For the year ended December 31,
	2020			2019				2018
Realized gains	$	479		$	1,951		$	150
Realized losses		(12	)		(73	)		(13	)
Net gains	$	467		$	1,878		$	137

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

(Dollars in thousands)	Available for Sale				Held to Maturity
	Amortized		Fair		Amortized		Fair
December 31, 2020	Cost		Value		Cost		Value
Due in 1 year or less	$	—	$	—	$	—	$	—
Due after 1 year but within 5 years		4,750		4,747		33,983		35,196
Due after 5 years but within 10 years		1,000		999		51,364		53,659
Due after 10 years		—		—	$	2,135	$	2,196
		5,750		5,746		87,482		91,051
Mortgage-backed securities		2		2		40,810		41,743
	$	5,752	$	5,748	$	128,292	$	132,794