2. Investment Securities

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

(in thousands)

	Amortized		Gross Unrealized				Fair/Book
June 30, 2019	Cost		Gains		Losses		Value
Government Agency & Government-Sponsored Entities	$	3,009	$	5	$	-	$	3,014
US Treasury Notes		174,688		245		25		174,908
US Government Agency SBA		13,289		23		114		13,198
Mortgage Backed Securities⁽¹⁾		288,550		3,727		116		292,161
Other		4,812		-		-		4,812
Total	$	484,348	$	4,000	$	255	$	488,093

	Amortized		Gross Unrealized				Fair/Book
December 31, 2018	Cost		Gains		Losses		Value
Government Agency & Government-Sponsored Entities	$	3,033	$	6	$	-	$	3,039
US Treasury Notes		164,672		-		158		164,514
US Government Agency SBA		15,601		6		160		15,447
Mortgage Backed Securities⁽¹⁾		310,982		1,196		5,133		307,045
Other		5,351		-		-		5,351
Total	$	499,639	$	1,208	$	5,451	$	495,396

	Amortized		Gross Unrealized				Fair/Book
June 30, 2018	Cost		Gains		Losses		Value
Government Agency & Government-Sponsored Entities	$	3,056	$	15	$	-	$	3,071
US Treasury Notes		139,689		2		416		139,275
US Government Agency SBA		18,583		8		188		18,403
Mortgage Backed Securities⁽¹⁾		293,473		337		7,396		286,414
Other		3,011		-		-		3,011
Total	$	457,812	$	362	$	8,000	$	450,174

⁽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 debt securities classified as held-to-maturity are as follows (in thousands):

	Book		Gross Unrealized				Fair
June 30, 2019	Value		Gains		Losses		Value
Obligations of States and Political Subdivisions	$	60,310	$	845	$	-	$	61,155
Total	$	60,310	$	845	$	-	$	61,155

	Book		Gross Unrealized				Fair
December 31, 2018	Value		Gains		Losses		Value
Obligations of States and Political Subdivisions	$	53,566	$	211	$	39	$	53,738
Total	$	53,566	$	211	$	39	$	53,738

	Book		Gross Unrealized				Fair
June 30, 2018	Value		Gains		Losses		Value
Obligations of States and Political Subdivisions	$	52,210	$	227	$	79	$	52,358
Total	$	52,210	$	227	$	79	$	52,358

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 June 30, 2019 by contractual maturity are shown in the following table (in thousands):

	Available-for-Sale				Held-to-Maturity
June 30, 2019	Amortized Cost		Fair/Book Value		Book Value		Fair Value
Within one year	$	166,665	$	166,644	$	562	$	563
After one year through five years		16,515		16,760		3,513		3,520
After five years through ten years		1,239		1,241		24,440		25,048
After ten years		11,380		11,287		31,795		32,024
		195,799		195,932		60,310		61,155
Investment securities not due at a single maturity date:
Mortgage-backed securities		288,549		292,161		-		-
Total	$	484,348	$	488,093	$	60,310	$	61,155

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
June 30, 2019	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss

Securities Available-for-Sale
US Treasury Notes	$	159,966	$	25	$	-	$	-	$	159,966	$	25
US Government Agency SBA		60		-		6,750		114		6,810		114
Mortgage Backed Securities		1,331		1		35,247		115		36,578		116
Total	$	161,357	$	26	$	41,997	$	229	$	203,354	$	255

There were no HTM investments with gross unrealized losses at June 30, 2019.

	Less Than 12 Months				12 Months or More				Total
December 31, 2018	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss

Securities Available-for-Sale
US Treasury Notes	$	124,985	$	7	$	39,529	$	151	$	164,514	$	158
US Government Agency SBA		3,250		28		8,618		132		11,868		160
Mortgage Backed Securities		52,289		528		207,271		4,605		259,560		5,133
Total	$	180,524	$	563	$	255,418	$	4,888	$	435,942	$	5,451

Securities Held-to-Maturity
Obligations of States and Political Subdivisions	$	6,052	$	23	$	849	$	16	$	6,901	$	39
Total	$	6,052	$	23	$	849	$	16	$	6,901	$	39

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

Securities Available-for-Sale
US Treasury Notes	$	14,412	$	178	$	29,876	$	238	$	44,288	$	416
US Government Agency SBA		5,589		68		9,023		120		14,612		188
Mortgage Backed Securities		214,949		5,464		58,148		1,932		273,097		7,396
Total	$	234,950	$	5,710	$	97,047	$	2,290	$	331,997	$	8,000

Securities Held-to-Maturity
Obligations of States and Political Subdivisions	$	8,543	$	79	$	-	$	-	$	8,543	$	79
Total	$	8,543	$	79	$	-	$	-	$	8,543	$	79

As of June 30, 2019, the Company held 572 investment securities of which 20 were in an unrealized loss position for less than twelve months and 84 securities were in an unrealized 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 June 30, 2019, no securities of government agency and government sponsored entities were in an unrealized loss position for less than 12 months, and none were in an unrealized loss position for 12 months or more. The unrealized losses on the Company’s investments in securities of government agency and government sponsored entities were $0 at June 30, 2019, December 31, 2018 and at June 30, 2018.

U.S. Treasury Notes – At June 30, 2019, 16 U.S. Treasury Note security investments were in an unrealized loss position for less than 12 months and none were in an unrealized loss position for 12 months or more. The unrealized losses on the Company’s investment in U.S. Treasury Notes were $25,000, $158,000, and $416,000 at June 30, 2019, December 31, 2018, and June 30, 2018, 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 June 30, 2019, December 31, 2018, and June 30, 2018.

U.S. Government SBA – At June 30, 2019, 2 U.S. Government SBA security investments were in an unrealized loss position for less than 12 months and 55 were in an unrealized loss position for 12 months or more. The unrealized losses on the Company’s investment in U.S. Government SBA securities were $114,000, $160,000, and $188,000 at June 30, 2019, December 31, 2018, and June 30, 2018, 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 June 30, 2019, December 31, 2018, and June 30, 2018.

Mortgage Backed Securities – At June 30, 2019, 2 mortgage backed security investments were in an unrealized loss position for less than 12 months and 29 were in an unrealized loss position for 12 months or more. The unrealized losses on the Company’s investment in mortgage backed securities were $116,000, $5.1 million, and $7.4 million at June 30, 2019, December 31, 2018, and June 30, 2018, 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 June 30, 2019, December 31, 2018, and June 30, 2018.

Obligations of States and Political Subdivisions – At June 30, 2019, no obligations of states and political subdivisions were in an unrealized loss position for less than 12 months, and none were in an unrealized loss position for 12 months or more. As of June 30, 2019, 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 $0, $39,000 and $79,000 at June 30, 2019, December 31, 2018 and June 30, 2018, 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 June 30, 2019, December 31, 2018 and June 30, 2018.

Proceeds from sales and calls of securities were as follows:

	Three Months Ended June 30,				Six Months Ended June 30,

(in thousands)	2019		2018		2019		2018
Proceeds	$	1,310	$	31,370	$	1,310	$	31,370
Gains		-		8		-		8
Losses		-		1,338		-		1,338

Pledged Securities

As of June 30, 2019, securities carried at $250.9 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 $268.8 million at December 31, 2018, and $210.0 million at June 30, 2018.