3. INVESTMENT SECURITIES

The amortized cost, gross unrealized gains and losses, and fair value of investment securities at December 31, 2016 and 2015 were as follows (in thousands):

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
2016	Cost		Gains		Losses			Value
Available-for-sale securities:
U.S. Agency securities	$	170,276	$	407	$	(269	)	$	170,414
U.S. Treasuries		2,999		1		-			3,000
Obligations of state and
political subdivisions		95,956		1,463		(493	)		96,926
Corporate obligations		3,000		50		-			3,050
Mortgage-backed securities in
government sponsored entities		37,987		88		(347	)		37,728
Equity securities in financial institutions		1,821		1,078		-			2,899
Total available-for-sale securities	$	312,039	$	3,087	$	(1,109	)	$	314,017

2015
Available-for-sale securities:
U.S. Agency securities	$	199,749	$	369	$	(527	)	$	199,591
U.S. Treasuries		10,103		-		(21	)		10,082
Obligations of state and
political subdivisions		99,856		3,080		(73	)		102,863
Corporate obligations		14,583		68		(86	)		14,565
Mortgage-backed securities in
government sponsored entities		30,107		186		(89	)		30,204
Equity securities in financial institutions		2,001		436		(5	)		2,432
Total available-for-sale securities	$	356,399	$	4,139	$	(801	)	$	359,737

The following table shows the Company's gross unrealized losses and fair value, aggregated by investment category and length of time, that the individual securities have been in a continuous unrealized loss position, at December 31, 2016 and 2015 (in thousands). As of December 31, 2016, the Company owned 88 securities whose fair value was less than their cost basis.

	Less than Twelve Months					Twelve Months or Greater					Total
			Gross					Gross					Gross
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
2016	Value		Losses			Value		Losses			Value		Losses
U.S. Agency securities	$	50,947	$	(269	)	$	-	$	-		$	50,947	$	(269	)
Obligations of states and
political subdivisions		28,398		(472	)		767		(21	)		29,165		(493	)
Mortgage-backed securities in
government sponsored entities		26,717		(330	)		753		(17	)		27,470		(347	)
Total securities	$	106,062	$	(1,071	)	$	1,520	$	(38	)	$	107,582	$	(1,109	)

2015
U.S. Agency securities	$	123,591	$	(527	)	$	-	$	-		$	123,591	$	(527	)
U.S. Treasuries		10,082		(21	)		-		-			10,082		(21	)
Obligations of states and
political subdivisions		7,023		(57	)		2,914		(16	)		9,937		(73	)
Corporate obligations		5,822		(61	)		2,138		(25	)		7,960		(86	)
Mortgage-backed securities in
government sponsored entities		9,830		(77	)		227		(12	)		10,057		(89	)
Equity securities in financial institutions		106		(5	)		-		-			106		(5	)
Total securities	$	156,454	$	(748	)	$	5,279	$	(53	)	$	161,733	$	(801	)

As of December 31, 2016, the Company's investment securities portfolio contained unrealized losses on agency securities issued or backed by the full faith and credit of the United States government or are generally viewed as having the implied guarantee of the U.S. government, obligations of states and political subdivisions and mortgage backed securities in government sponsored entities. For fixed maturity investments management considers whether the present value of cash flows expected to be collected are less than the security's amortized cost basis (the difference defined as the credit loss), the magnitude and duration of the decline, the reasons underlying the decline and the Company's intent to sell the security or whether it is more likely than not that the Company would be required to sell the security before its anticipated recovery in market value, to determine whether the loss in value is other than temporary. Once a decline in value is determined to be other than temporary, if the Company does not intend to sell the security, and it is more-likely-than-not that it will not be required to sell the security, before recovery of the security's amortized cost basis, the charge to earnings is limited to the amount of credit loss. Any remaining difference between fair value and amortized cost (the difference defined as the non-credit portion) is recognized in other comprehensive income, net of applicable taxes. Otherwise, the entire difference between fair value and amortized cost is charged to earnings. For equity securities where the fair value has been significantly below cost for one year, the Company's policy is to recognize an impairment loss unless sufficient evidence is available that the decline is not other than temporary and a recovery period can be predicted. As of December 31, 2016 and 2015, the Company had concluded that any impairment of its investment securities portfolio outlined in the above table is not other than temporary and is the result of interest rate changes, sector credit rating changes, or company-specific rating changes that are not expected to result in the non-collection of principal and interest during the period.

Proceeds from sales of securities available-for-sale during 2016, 2015 and, 2014 were $22,372,000, $30,464,000 and $28,989,000, respectively. The gross gains realized during 2016 consisted of $72,000, $27,000, $80,000 and $133,000 from the sales of four agency securities, two US treasury notes, four municipal securities and portions of three equity security positions, respectively. The gross losses realized during 2016 consisted of $22,000 and $35,000 from the sales of four agency securities and six corporate securities. The gross gains realized during 2015 consisted of $196,000, $69,000, $99,000 and $76,000 from the sales of five agency securities, five mortgage backed securities, seven municipal securities and an entire equity security position, respectively. The gross loss of $11,000 was realized from the sale of one US treasury security. The gross gains realized during 2014 consisted of $177,000, $197,000, $172,000 and $101,000 from the sales eight agency securities, seven mortgage backed securities, one municipal security and a portion of one equity security, respectively. The gross loss of $31,000 was realized from the sale of two US treasury securities. Gross gains and gross losses were realized as follows (in thousands):

	2016			2015			2014
Gross gains	$	312		$	440		$	647
Gross losses		(57	)		(11	)		(31	)
Net gains	$	255		$	429		$	616

Investment securities with an approximate carrying value of $206,322,000 and $203,769,000 at December 31, 2016 and 2015, respectively, were pledged to secure public funds and certain other deposits as provided by law and certain borrowing arrangements of the Company.

Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. The amortized cost and fair value of debt securities at December 31, 2016, by contractual maturity are shown below (in thousands). Municipal securities that have been refunded and will therefore pay-off on the call date are reflected in the table below utilizing the call date as the date of repayment as payment is guaranteed on that day:

	Amortized
	Cost		Fair Value
Available-for-sale securities:
Due in one year or less	$	44,331	$	44,484
Due after one year through five years		155,199		156,177
Due after five years through ten years		38,363		38,305
Due after ten years		72,325		72,152
Total	$	310,218	$	311,118