Investments

The cost or amortized cost, gross unrealized gain or loss, and estimated fair value of the investments in securities classified as available for sale at September 30, 2018 and December 31, 2017, were as follows (dollars in thousands):



	September 30, 2018
	Cost or Amortized Cost		Gross Unrealized					Estimated Fair Value
			Gains		Losses
Debt Securities:
U.S. Government	$	15,809	$	1	$	(307	)	$	15,503
State and local government	16,004		57		(305		)	15,756
Corporate debt	31,742		86		(706		)	31,122
Asset-backed securities	24,006		22		(187		)	23,841
Mortgage-backed securities	31,320		9		(1,524		)	29,805
Commercial mortgage-backed securities	3,890		—		(100		)	3,790
Collateralized mortgage obligations	2,247		7		(75		)	2,179
Total debt securities available for sale	$	125,018	$	182	$	(3,204	)	$	121,996



	December 31, 2017
	Cost or Amortized Cost		Gross Unrealized					Estimated Fair Value
			Gains		Losses
Debt Securities:
U.S. Government	$	17,179	$	10	$	(99	)	$	17,090
State and local government	17,302		255		(54		)	17,503
Corporate debt	38,947		170		(209		)	38,908
Asset-backed securities	23,539		36		(35		)	23,540
Mortgage-backed securities	33,942		38		(522		)	33,458
Commercial mortgage-backed securities	3,532		3		(44		)	3,491
Collateralized mortgage obligations	2,563		19		(36		)	2,546
Total debt securities available for sale	137,004		531		(999		)	136,536
Equity Securities (1)	8,629		1,240		(182		)	9,687
Total securities available for sale	$	145,633	$	1,771	$	(1,181	)	$	146,223

(1) Effective January 1, 2018, the Company adopted ASU No. 2016-01. As a result, equity securities are no longer classified as available-for-sale. Prior periods have not been recast to conform to the current presentation. Refer to Note 1 ~ Summary of Significant Accounting Policies for further details.

The following table summarizes the aggregate fair value and gross unrealized losses, by security type, of the available-for-sale securities in unrealized loss positions. The table segregates the holdings based on the length of time that individual securities have been in a continuous unrealized loss position, as follows (dollars in thousands):



	September 30, 2018
	Less than 12 months						Greater than 12 months						Total
	No. of Issues	Fair Value of Investments with Unrealized Losses		Gross Unrealized Losses			No. of Issues	Fair Value of Investments with Unrealized Losses		Gross Unrealized Losses			No. of Issues	Fair Value of Investments with Unrealized Losses		Gross Unrealized Losses
Debt Securities:
U.S. Government	9	$	9,877	$	(165	)	10	$	5,300	$	(142	)	19	$	15,177	$	(307	)
State and local government	40	9,239		(185		)	9	2,827		(120		)	49	12,066		(305		)
Corporate debt	47	14,716		(247		)	11	7,118		(459		)	58	21,834		(706		)
Asset-backed securities	29	18,228		(173		)	5	972		(14		)	34	19,200		(187		)
Mortgage-backed securities	19	6,664		(242		)	28	20,999		(1,282		)	47	27,663		(1,524		)
Commercial mortgage-backed securities	4	2,310		(26		)	2	1,400		(74		)	6	3,710		(100		)
Collateralized mortgage obligations	9	275		(4		)	3	1,553		(71		)	12	1,828		(75		)
Total debt securities available for sale	157	$	61,309	$	(1,042	)	68	$	40,169	$	(2,162	)	225	$	101,478	$	(3,204	)



	December 31, 2017
	Less than 12 months						Greater than 12 months						Total
	No. of Issues	Fair Value of Investments with Unrealized Losses		Gross Unrealized Losses			No. of Issues	Fair Value of Investments with Unrealized Losses		Gross Unrealized Losses			No. of Issues	Fair Value of Investments with Unrealized Losses		Gross Unrealized Losses
Debt Securities:
U.S. Government	12	$	11,555	$	(64	)	7	$	2,207	$	(35	)	19	$	13,762	$	(99	)
State and local government	10	3,511		(20		)	7	1,424		(34		)	17	4,935		(54		)
Corporate debt	38	15,236		(46		)	10	6,555		(163		)	48	21,791		(209		)
Asset-backed securities	20	13,948		(29		)	3	915		(6		)	23	14,863		(35		)
Mortgage-backed securities	6	4,935		(19		)	26	24,939		(503		)	32	29,874		(522		)
Commercial mortgage-backed securities	3	2,026		(12		)	2	722		(32		)	5	2,748		(44		)
Collateralized mortgage obligations	8	1,870		(36		)	—	—		—			8	1,870		(36		)
Total debt securities available for sale	97	53,081		(226		)	55	36,762		(773		)	152	89,843		(999		)
Equity Securities (1)	13	436		(75		)	4	266		(107		)	17	702		(182		)
Total securities available for sale	110	$	53,517	$	(301	)	59	$	37,028	$	(880	)	169	$	90,545	$	(1,181	)

The Company analyzed its investment portfolio in accordance with its other-than-temporary impairment ("OTTI") review procedures and determined the Company did not need to record a credit-related OTTI loss in net income, nor recognize a non-credit related OTTI loss in other comprehensive income for the nine months ended September 30, 2018 and 2017.

The Company’s sources of net investment income are as follows (dollars in thousands):



	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Debt securities	$	801		$	733		$	2,495		$	2,030
Equity securities	33			44			98			94
Cash and short-term investments	19			64			55			91
Total investment income	853			841			2,648			2,215
Investment expenses	(67		)	(73		)	(223		)	(207		)
Net investment income	$	786		$	768		$	2,425		$	2,008

The following table summarizes the gross realized gains and losses from sales or maturities of available-for-sale debt and equity securities (dollars in thousands):



	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Debt securities:
Gross realized gains	$	52		$	29		$	54		$	29
Gross realized losses	(131		)	(1		)	(146		)	(8		)
Total debt securities	(79		)	28			(92		)	21
Equity securities:
Gross realized gains	84			11			290			40
Gross realized losses	(26		)	—			(46		)	(30		)
Total equity securities	58			11			244			10
Total net realized investment gains (losses)	$	(21	)	$	39		$	152		$	31

Proceeds from the sales of debt securities, maturities and other redemptions (primarily the return of capital) were $23.5 million and $19.5 million for the nine months ended September 30, 2018 and 2017, respectively.

Effective January 1, 2018, the Company adopted ASU No. 2016-01. As a result, equity securities are no longer classified as available for sale with unrealized gains and losses recognized in other comprehensive income; rather, all changes in fair value of equity securities are now recognized in net income. The change in fair value of equity securities included in net income for the three and nine months ended September 30, 2018, was a $151,000 gain and a $116,000 loss, respectively. Prior periods have not been recast for the adoption of this guidance.

The table below summarizes the amortized cost and fair value of available-for-sale debt securities by contractual maturity at September 30, 2018. Actual maturities may differ from contractual maturities because certain borrowers have the right to call or prepay obligations with or without call or prepayment penalties (dollars in thousands):



	Amortized Cost		Estimated Fair Value
Due in one year or less	$	7,009	$	6,986
Due after one year through five years	35,377		34,818
Due after five years through ten years	12,972		12,578
Due after ten years	8,197		7,999
Securities with contractual maturities	63,555		62,381
Asset-backed securities	24,006		23,841
Mortgage-backed securities	31,320		29,805
Commercial mortgage-backed securities	3,890		3,790
Collateralized mortgage obligations	2,247		2,179
Total debt securities	$	125,018	$	121,996

At September 30, 2018 and December 31, 2017, the Insurance Company Subsidiaries had an aggregate of $8.2 million on deposit in trust accounts to meet the deposit requirements of various state insurance departments. At September 30, 2018 and December 31, 2017, the Company had $41.0 million and $18.4 million, respectively, held in trust accounts to meet collateral requirements with other third-party insurers, relating to various fronting arrangements. There are withdrawal and other restrictions on these deposits, including the type of investments that may be held, however, the Company may generally invest in high-grade bonds and short-term investments and earn interest on the funds.