Investment Securities

12 Months Ended

Dec. 31, 2021

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 December 31, 2021 and December 31, 2020 are as follows:

(Dollars in thousands)
	Amortized		Unrealized		Unrealized		Fair
December 31, 2021	Cost		Gains		Losses		Value
Available for sale securities:
Mortgage-backed U.S. government agencies	$	49,760	$	3	$	283	$	49,480
State and political subdivision obligations		3,899		26		11		3,914
Corporate debt securities		9,525		—		57		9,468
Total available for sale securities		63,184		29		351		62,862
Held to maturity securities:
U.S. Treasury and U.S. government agencies		178,136		26		1,165		176,997
Mortgage-backed U.S. government agencies		61,157		440		272		61,325
State and political subdivision obligations		75,958		2,305		27		78,236
Corporate debt securities		14,006		133		71		14,068
Total held to maturity securities		329,257		2,904		1,535		330,626
Total	$	392,441	$	2,933	$	1,886	$	393,488

(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 debt securities		5,752		—		4		5,748
Held-to-maturity debt 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 debt securities		128,292		4,524		22		132,794
Total	$	134,044	$	4,524	$	26	$	138,542

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 14, 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 23, Recent Accounting Pronouncements, for more information regarding the adoption of ASU 2019-04.

Investment securities having a fair value of $244,763,000 at December 31, 2021, and $102,959,000 at December 31, 2020, 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 $450,850,000 as of December 31, 2021 and $288,950,000 as of December 31, 2020.

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, 2021 and 2020.

(Dollars in thousands)	Less Than 12 Months					12 Months or More					Total
December 31, 2021	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:
Mortgage-backed U.S. government agencies	24	$	45,476	$	283	0	$	—	$	—	24	$	45,476	$	283
State and political subdivision obligations	2		1,168		11	0		—		—	2		1,168		11
Corporate debt securities	4		4,943		57	0		—		—	4		4,943		57
Total temporarily impaired available for sale securities	30		51,587		351	0		—		—	30		51,587		351

Held to maturity securities:
U.S. Treasury and U.S. government agencies	91	$	149,425	$	1,165	0	$	—	$	—	91	$	149,425	$	1,165
Mortgage-backed U.S. government agencies	24		39,995		272	0		—		—	24		39,995		272
State and political subdivision obligations	17		5,302		25	1		255		2	18		5,557		27
Corporate debt securities	6		6,928		71	0		—		—	6		6,928		71
Total temporarily impaired held to maturity securities	138		201,650		1,533	1		255		2	139		201,905		1,535
Total	168	$	253,237	$	1,884	1	$	255	$	2	169	$	253,492	$	1,886


(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

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, 2021, the majority of the unrealized losses on securities in an unrealized loss position were attributable to U.S. Treasury and U.S. government agencies, and mortgage-backed U.S. government agencies. 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.

Mid Penn had no securities considered by management to be other-than-temporarily impaired as of December 31, 2021 and December 31, 2020, 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, 2021, 2020, and 2019 are shown in the table below.

(Dollars in thousands)	For the year ended December 31,
	2021		2020				2019
Realized gains	$	79	$	479		$	1,951
Realized losses		—		(12	)		(73	)
Net gains	$	79	$	467		$	1,878

The table below illustrates the maturity distribution of investment securities at amortized cost and fair value at December 31, 2021.

(Dollars in thousands)	Available for Sale				Held to Maturity
	Amortized		Fair		Amortized		Fair
December 31, 2021	Cost		Value		Cost		Value
Due in 1 year or less	$	250	$	250	$	3,949	$	3,965
Due after 1 year but within 5 years		3,000		2,967		53,357		54,691
Due after 5 years but within 10 years		6,576		6,554		188,839		188,687
Due after 10 years		3,598		3,611		21,955		21,958
		13,424		13,382		268,100		269,301
Mortgage-backed securities		49,760		49,480		61,157		61,325
	$	63,184	$	62,862	$	329,257	$	330,626