2.	Investment Securities

The amortized cost, fair values, and unrealized gains and losses of the securities available-for-sale are as follows

(in thousands):

September 30, 2018	Amortized Cost		Gross Unrealized				Fair/Book Value
September 30, 2018	Amortized Cost		Gains		Losses		Fair/Book Value
Government Agency & Government-Sponsored Entities	$	3,045	$	7	$	-	$	3,052
US Treasury Notes		164,671		-		463		164,208
US Govt SBA		17,144		6		177		16,973
Mortgage Backed Securities⁽¹⁾		279,757		265		8,955		271,067
Other		3,011		-		-		3,011
Total	$	467,628	$	278	$	9,595	$	458,311

December 31, 2017	Amortized Cost		Gross Unrealized				Fair/Book Value
December 31, 2017	Amortized Cost		Gains		Losses		Fair/Book Value
Government Agency & Government-Sponsored Entities	$	3,080	$	48	$	-	$	3,128
US Treasury Notes		144,606		-		442		144,164
US Govt SBA		29,559		29		208		29,380
Mortgage Backed Securities⁽¹⁾		302,502		939		1,527		301,914
Other		3,010		-		-		3,010
Total	$	482,757	$	1,016	$	2,177	$	481,596

September 30, 2017	Amortized Cost		Gross Unrealized				Fair/Book Value
September 30, 2017	Amortized Cost		Gains		Losses		Fair/Book Value
Government Agency & Government-Sponsored Entities	$	3,091	$	78	$	-	$	3,169
US Treasury Notes		144,657		2		249		144,410
US Govt SBA		31,732		45		86		31,691
Mortgage Backed Securities (1)		274,877		1,985		819		276,043
Other		1,010		-		-		1,010
Total	$	455,367	$	2,110	$	1,154	$	456,323

⁽¹⁾All Mortgage Backed Securities consist of securities collateralized by residential real estate and were issued by an agency or government sponsored entity of the U.S. government.

The book values, estimated fair values and unrealized gains and losses of investments classified as held-to-maturity are as follows (in thousands):

September 30, 2018	Book Value		Gross Unrealized				Fair Value
September 30, 2018	Book Value		Gains		Losses		Fair Value
Obligations of States and Political Subdivisions	$	51,459	$	97	$	174	$	51,382
Total	$	51,459	$	97	$	174	$	51,382

December 31, 2017	Book Value		Gross Unrealized				Fair Value
December 31, 2017	Book Value		Gains		Losses		Fair Value
Obligations of States and Political Subdivisions	$	54,460	$	776	$	-	$	55,236
Total	$	54,460	$	776	$	-	$	55,236

September 30, 2017	Book Value		Gross Unrealized				Fair Value
September 30, 2017	Book Value		Gains		Losses		Fair Value
Obligations of States and Political Subdivisions	$	55,542	$	749	$	-	$	56,291
Total	$	55,542	$	749	$	-	$	56,291

Fair values are based on quoted market prices or dealer quotes. If a quoted market price or dealer quote is not available, fair value is estimated using quoted market prices for similar securities.

The amortized cost and estimated fair values of investment securities at September 30, 2018 by contractual maturity are shown in the following table (in thousands):

	Available-for-Sale				Held-to-Maturity
September 30, 2018	Amortized Cost		Fair/Book Value		Book Value		Fair Value

Within one year	$	156,111	$	155,934	$	2,085	$	2,086
After one year through five years		15,601		15,319		6,730		6,733
After five years through ten years		1,566		1,563		20,230		20,210
After ten years		14,593		14,428		22,414		22,353
		187,871		187,244		51,459		51,382
Investment securities not due at a single maturity date:
Mortgage-backed securities		279,757		271,067		-		-

Total	$	467,628	$	458,311	$	51,459	$	51,382

Expected maturities of mortgage-backed securities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

The following tables show those investments with gross unrealized losses and their market value aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at the dates indicated (in thousands):

	Less Than 12 Months				12 Months or More				Total
September 30, 2018	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss

Securities Available-for-Sale
US Treasury Notes	$	84,315	$	290	$	24,902	$	173	$	109,217	$	463
US Govt SBA		4,965		62		8,467		115		13,432		177
Mortgage Backed Securities		182,243		5,772		78,272		3,183		260,515		8,955
Total	$	271,523	$	6,124	$	111,641	$	3,471	$	383,164	$	9,595

Securities Held-to-Maturity
Obligations of States and Political Subdivisions	$	15,309	$	174	$	-	$	-	$	15,309	$	174
Total	$	15,309	$	174	$	-	$	-	$	15,309	$	174

	Less Than 12 Months				12 Months or More				Total
December 31, 2017	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss

Securities Available-for-Sale
US Treasury Notes	$	94,281	$	144	$	49,883	$	298	$	144,164	$	442
US Govt SBA		8,379		51		12,900		157		21,279		208
Mortgage Backed Securities		126,863		932		43,208		595		170,071		1,527
Total	$	229,523	$	1,127	$	105,991	$	1,050	$	335,514	$	2,177

There were no HTM investments with gross unrealized losses at December 31, 2017

	Less Than 12 Months				12 Months or More				Total
September 30, 2017	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss

Securities Available-for-Sale
US Treasury Notes	$	74,414	$	249	$	-	$	-	$	74,414	$	249
US Govt SBA		18,669		86		-		-		18,669		86
Mortgage Backed Securities		122,887		819		-		-		122,887		819
Total	$	215,970	$	1,154	$	-	$	-	$	215,970	$	1,154

There were no HTM investments with gross unrealized losses at September 30, 2017

As of September 30, 2018, the Company held 431 investment securities of which 132 were in an unrealized loss position for less than twelve months. 88 securities were in a loss position for twelve months or more. Management periodically evaluates each investment security for other-than-temporary impairment relying primarily on industry analyst reports and observations of market conditions and interest rate fluctuations. Management believes it will be able to collect all amounts due according to the contractual terms of the underlying investment securities.

Securities of Government Agency and Government Sponsored Entities – At September 30, 2018, December 31, 2017 and September 30, 2017, no securities of government agency and government sponsored entities were in an unrealized loss position for less than 12 months or for 12 months or more.

U.S. Treasury Notes – At September 30, 2018, ten U.S. Treasury Note security investments were in an unrealized loss position for less than 12 months and one was in a loss position for 12 months or more. The unrealized losses on the Company's investment in U.S. Treasury Notes were $463,000, $442,000, and $249,000 at September 30, 2018, December 31, 2017, and September 30, 2017, respectively. The unrealized losses were caused by interest rate fluctuations. Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the securities and it is more likely than not that the Company will not have to sell the securities before recovery of their cost basis, the Company did not consider these investments to be other-than-temporarily impaired at September 30, 2018, December 31, 2017, and September 30, 2017.

U.S. Government SBA – At September 30, 2018, 27 U.S. Government SBA security investments were in an unrealized loss position for less than 12 months and 45 were in a loss position for 12 months or more. The unrealized losses on the Company's investment in U.S. Government SBA securities were $177,000, $208,000, and $86,000 at September 30, 2018, December 31, 2017, and September 30, 2017, respectively. The unrealized losses were caused by interest rate fluctuations. Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the securities and it is more likely than not that the Company will not have to sell the securities before recovery of their cost basis, the Company did not consider these investments to be other-than-temporarily impaired at September 30, 2018, December 31, 2017, and September 30, 2017.

Mortgage Backed Securities – At September 30, 2018, 56 mortgage backed security investments were in an unrealized loss position for less than 12 months and 42 were in a loss position for 12 months or more. The unrealized losses on the Company's investment in mortgage backed securities were $8.9 million, $1.5 million, and $819,000 at September 30, 2018, December 31, 2017, and September 30, 2017, respectively. The unrealized losses on the Company’s investment in mortgage-backed securities were caused by interest rate fluctuations. The contractual cash flows of these investments are guaranteed by an agency or government sponsored entity of the U.S. government. Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost of the Company's investment. Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the securities and it is more likely than not that the Company will not have to sell the securities before recovery of their cost basis, the Company does not consider these investments to be other-than-temporarily impaired at September 30, 2018, December 31, 2017 and September 30, 2017.

Obligations of States and Political Subdivisions - At September 30, 2018, 39 obligations of states and political subdivisions were in an unrealized loss position for less than 12 months. None were in a loss position for 12 months or more. As of September 30, 2018, over ninety-nine percent of the Company’s bank-qualified municipal bond portfolio is rated at either the issue or issuer level, and all of these ratings are “investment grade.” The Company monitors the status of the one percent of the portfolio that is not rated and at the current time does not believe any of them to be exhibiting financial problems that could result in a loss in any individual security.

The unrealized losses on the Company’s investment in obligations of states and political subdivisions were $174,000, $0 and $0 at September 30, 2018, December 31, 2017 and September 30, 2017, respectively. Management believes that any unrealized losses on the Company's investments in obligations of states and political subdivisions were primarily caused by interest rate fluctuations. The contractual terms of these investments do not permit the issuer to settle the securities at a price less than the amortized cost of the investment. Because the Company does not intend to sell the securities and it is more likely than not that the Company will not have to sell the securities before recovery of their cost basis, the Company does not consider these investments to be other-than-temporarily impaired at September 30, 2018.

Proceeds from sales and calls of securities were as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2018		2017		2018		2017
Proceeds	$	-	$	-	$	31,370	$	7,831
Gains		-		-		8		143
Losses		-		-		1,338		12

Pledged Securities

As of September 30, 2018, securities carried at $241.8 million were pledged to secure public deposits, Federal Home Loan Bank (“FHLB”) borrowings, and other government agency deposits as required by law. This amount was $214.5 million at December 31, 2017, and $201.8 million at September 30, 2017.