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5. INVESTMENT SECURITIES

9 Months Ended

Sep. 30, 2018

The amortized cost and estimated fair values of Available-for-Sale and Held-to-Maturity investment securities at September 30, 2018 and December 31, 2017 consisted of the following (dollars in thousands):

Available-for-Sale

	September 30, 2018
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Debt securities:
U.S. Government Agencies and Sponsored Entities	$	256,018	$	360	$	(6,088	)	$	250,290
Obligations of states and political subdivisions		15,791		120		(370	)		15,541
Corporate bonds		6,492		51		(68	)		6,475
U.S. Treasury securities		4,969		—		(6	)		4,963
	$	283,270	$	531	$	(6,532	)	$	277,269

	December 31, 2017
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Debt securities:
U.S. Government Agencies and Sponsored Entities	$	233,956	$	1,184	$	(2,271	)	$	232,869
Obligations of states and political subdivisions		22,281		528		(94	)		22,715
Corporate bonds		6,490		160		(24	)		6,626
Equity securities:
Corporate stock		51		61		—			112
	$	262,778	$	1,933	$	(2,389	)	$	262,322

Net unrealized losses on available-for-sale investment securities totaling $6,001,000 were recorded, net of $1,911,000 in tax benefits, as accumulated other comprehensive losses within shareholders’ equity at September 30, 2018. Proceeds and gross realized gains from the sale and call of available-for-sale investment securities totaled $10,310,000 and $8,000, respectively, for the three-month period ended September 30, 2018 and for the nine-month period ended September 30, 2018, proceeds and gross realized gains from the sale and call of available-for-sale investment securities totaled $26,252,000 and $19,000, respectively. There were no transfers of available-for-sale investment securities for the three-month and nine-month periods ended September 30, 2018.

Net unrealized losses on available-for-sale investment securities totaling $456,000 were recorded, net of $135,000 in tax benefits, as accumulated other comprehensive income within shareholders’ equity at December 31, 2017. Proceeds and gross realized gains from the sale and call of available-for-sale investment securities totaled $22,730,000 and $19,000, respectively, for the three-month period ended September 30, 2017 and for the nine-month period ended September 30, 2017, proceeds and gross realized gains from the sale and call of available-for-sale investment securities totaled $31,433,000 and $161,000, respectively. There were no transfers of available-for-sale investment securities for the three-month and nine-month periods ended September 30, 2017.

Held-to-Maturity

September 30, 2018

Gross

Estimated

Amortized

Unrealized

Fair

Cost

Gains

Losses

Value

Debt securities:

U.S. Government Agencies and Sponsored Entities

311

—

328

December 31, 2017

Gross

Estimated

Amortized

Unrealized

Fair

Cost

Gains

Losses

Value

Debt securities:

U.S. Government Agencies and Sponsored Entities

378

—

404

There were no sales or transfers of held-to-maturity investment securities for the periods ended September 30, 2018 and September 30, 2017. Investment securities with unrealized losses at September 30, 2018 and December 31, 2017 are summarized and classified according to the duration of the loss period as follows (dollars in thousands):

September 30, 2018	Less than 12 Months					12 Months or More					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Available-for-Sale

Debt securities:
U.S. Government Agencies and Sponsored Entities	$	127,137	$	(2,321	)	$	100,217	$	(3,767	)	$	227,354	$	(6,088	)
Obligations of states and political subdivisions		5,554		(98	)		5,518		(272	)		11,072		(370	)
Corporate bonds		498		(2	)		1,926		(66	)		2,424		(68	)
U.S. Treasury securities		4,963		(6	)		—		—			4,963		(6	)
	$	138,152	$	(2,427	)	$	107,661	$	(4,105	)	$	245,813	$	(6,532	)

December 31, 2017	Less than 12 Months					12 Months or More					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Available-for-Sale

Debt securities:
US Government Agencies and Sponsored Entities	$	119,455	$	(1,148	)	$	49,258	$	(1,123	)	$	168,713	$	(2,271	)
Obligations of states and political subdivisions		1,130		(9	)		4,654		(85	)		5,784		(94	)
Corporate bonds		1,967		(24	)		—		—			1,967		(24	)
	$	122,552	$	(1,181	)	$	53,912	$	(1,208	)	$	176,464	$	(2,389	)

There were no held-to-maturity investment securities with unrealized losses as of September 30, 2018 or December 31, 2017. At September 30, 2018, the Company held 218 securities of which 79 were in a loss position for less than twelve months and 71 were in a loss position for twelve months or more. Of the 79 securities in a loss position for less than twelve months, 70 were U.S. Government Agencies and Sponsored Entities securities, six were obligations of states or political subdivisions, two were US treasuries, and one was a corporate bond and of the 71 securities that were in a loss position for greater than twelve months, 65 were U.S. Government Agencies and Sponsored Entities securities, five were obligations of states or political subdivisions, and one was a corporate bond.

At December 31, 2017, the Company held 217 securities of which 64 were in a loss position for less than twelve months and 35 were in a loss position for twelve months or more. Of the 35 securities in a loss position for greater than twelve months at December 31, 2017, four were municipal securities and 31 were US Government Agencies and Sponsored Agencies securities.

The unrealized loss on the Company’s investment securities is primarily driven by interest rates. Because the decline in market value is attributable to a change in interest rates and not credit quality, and because the Company has the ability and intent to hold these investments until recovery of fair value, which may be until maturity, management does not consider these investments to be other-than-temporarily impaired.

The amortized cost and estimated fair values of investment securities at September 30, 2018 by contractual maturity are shown below (dollars in thousands).

	Available-for-Sale				Held-to-Maturity
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value

Within one year	$	4,969	$	4,963
After one year through five years		5,145		5,109
After five years through ten years		12,980		12,818
After ten years		4,158		4,089
		27,252		26,979
Investment securities not due at a single maturity date:
US Government Agencies and Sponsored Entities		256,018		250,290	$	311	$	328
	$	283,270	$	277,269	$	311	$	328

Expected maturities will differ from contractual maturities because the issuers of the securities may have the right to call or prepay obligations with or without call or prepayment penalties.