INVESTMENT SECURITIES

The amortized cost, gross unrealized gains and losses, and the fair value of the Company’s available for sale and held to maturity investment securities are as follows:



	December 31, 2017									December 31, 2016
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)
AVAILABLE FOR SALE
U.S. Treasury and U.S. government agencies	$	148,968	$	78	$	(1,791	)	$	147,255	$	118,537	$	102	$	(1,280	)	$	117,359
Mortgage-backed securities, residential	419,538		479		(5,763		)	414,254		406,851		1,174		(4,487		)	403,538
Mortgage-backed securities, multifamily	10,133		7		(63		)	10,077		10,192		30		(35		)	10,187
Obligations of states and political subdivisions	51,289		448		(417		)	51,320		48,868		391		(933		)	48,326
Debt securities	5,000		140		—			5,140		5,350		63		(1		)	5,412
Equity securities	15,545		3,000		(456		)	18,089		17,314		5,000		(432		)	21,882
	$	650,473	$	4,152	$	(8,490	)	$	646,135	$	607,112	$	6,760	$	(7,168	)	$	606,704



	December 31, 2017									December 31, 2016
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)
HELD TO MATURITY
U.S. government agencies	$	33,415	$	24	$	(402	)	$	33,037	$	33,553	$	144	$	(430	)	$	33,267
Mortgage-backed securities, residential	54,991		249		(978		)	54,262		38,706		369		(598		)	38,477
Mortgage-backed securities, multifamily	1,957		—		(22		)	1,935		2,059		—		(44		)	2,015
Obligations of states and political subdivisions	43,318		306		(188		)	43,436		71,284		269		(385		)	71,168
Debt securities	6,004		14		—			6,018		2,012		51		—			2,063
	$	139,685	$	593	$	(1,590	)	$	138,688	$	147,614	$	833	$	(1,457	)	$	146,990

The following table lists contractual maturities of investment securities classified as available for sale and held to maturity. 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.



	Available for Sale				Held to Maturity
	Amortized		Fair		Amortized		Fair
December 31, 2017	Cost		Value		Cost		Value
	(in thousands)
Due in one year or less	$	9,387	$	9,387	$	16,385	$	16,401
Due after one year through five years	109,655		108,999		38,986		38,903
Due after five years through ten years	56,380		55,577		23,568		23,392
Due after ten years	29,835		29,752		3,798		3,795
	205,257		203,715		82,737		82,491
Mortgage-backed securities	429,671		424,331		56,948		56,197
Equity securities	15,545		18,089		—		—
Total securities	$	650,473	$	646,135	$	139,685	$	138,688

The following table shows proceeds from sales of securities, gross gains and gross losses on sales and calls of securities for the periods indicated:



	Years Ended December 31,
	2017			2016		2015
	(in thousands)
Sale proceeds	$	4,500		$	15,654	$	33,613
Gross gains	2,539			370		304
Gross losses	(15		)	—		(63		)

Gains or losses on sales of securities are based on the net proceeds and the adjusted carrying amount of the securities sold using the specific identification method.

Securities with a carrying value of approximately $400.4 million and $443.4 million at December 31, 2017 and 2016, respectively, were pledged to secure public deposits and for other purposes required by applicable laws and regulations.

The following table indicates the length of time individual securities have been in a continuous unrealized loss position at December 31, 2017 and 2016:



December 31, 2017	Less than 12 Months				12 Months or Longer				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Number of Securities	Fair Value		Unrealized Losses
	(dollars in thousands)
AVAILABLE FOR SALE
U.S. Treasury and U.S. government agencies	$	80,391	$	646	$	54,769	$	1,145	27	$	135,160	$	1,791
Mortgage-backed securities, residential	199,387		1,723		157,739		4,040		118	357,126		5,763
Mortgage-backed securities, multifamily	—		—		5,088		63		1	5,088		63
Obligations of states and political subdivisions	9,612		77		12,970		340		39	22,582		417
Equity securities	—		—		9,657		456		2	9,657		456
	$	289,390	$	2,446	$	240,223	$	6,044	187	$	529,613	$	8,490
HELD TO MATURITY
U.S. government agencies	$	15,371	$	95	$	6,720	$	307	4	$	22,091	$	402
Mortgage-backed securities, residential	26,090		426		19,203		552		25	45,293		978
Mortgage-backed securities, multifamily	1,935		22		—		—		2	1,935		22
Obligations of states and political subdivisions	15,353		56		6,028		132		23	21,381		188
	$	58,749	$	599	$	31,951	$	991	54	$	90,700	$	1,590



December 31, 2016	Less than 12 Months				12 Months or Longer				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Number of securities	Fair Value		Unrealized Losses
	(dollars in thousands)
AVAILABLE FOR SALE
U.S. Treasury and U.S. government agencies	$	94,153	$	1,280	$	—	$	—	18	$	94,153	$	1,280
Mortgage-backed securities, residential	292,873		4,078		15,453		409		91	308,326		4,487
Mortgage-backed securities, multifamily	5,178		35		—		—		1	5,178		35
Obligations of states and political subdivisions	29,904		933		—		—		54	29,904		933
Debt securities	350		1		—		—		1	350		1
Equity securities	6,030		94		4,720		338		2	10,750		432
	$	428,488	$	6,421	$	20,173	$	747	167	$	448,661	$	7,168
HELD TO MATURITY
U.S. government agencies	$	17,147	$	430	$	—	$	—	3	$	17,147	$	430
Mortgage-backed securities, residential	27,909		535		1,061		63		15	28,970		598
Mortgage-backed securities, multifamily	2,015		44		—		—		2	2,015		44
Obligations of states and political subdivisions	50,302		384		401		1		43	50,703		385
	$	97,373	$	1,393	$	1,462	$	64	63	$	98,835	$	1,457

Management has evaluated the securities in the above table and has concluded that none of the securities with unrealized losses has impairments that are other-than-temporary. Fair value below cost is solely due to interest rate movements and is deemed temporary.

Investment securities, including the mortgage-backed securities and corporate securities, are evaluated on a periodic basis to determine if factors are identified that would require further analysis. In evaluating the Company’s securities, management considers the following items:


•	The Company’s ability and intent to hold the securities, including an evaluation of the need to sell the security to meet certain liquidity measures, or whether the Company has sufficient levels of cash to hold the identified security in order to recover the entire amortized cost of the security;


•	The financial condition of the underlying issuer;


•	The credit ratings of the underlying issuer and if any changes in the credit rating have occurred;


•	The length of time the security’s fair value has been less than amortized cost; and


•	Adverse conditions related to the security or its issuer if the issuer has failed to make scheduled payments or other factors.

If the above factors indicate an additional analysis is required, management will perform a discounted cash flow analysis evaluating the security.

As of December 31, 2017, the equity securities included investments in other financial institutions for market appreciation purposes. These equities had a purchase price of $2.2 million and market value of $5.2 million as of December 31, 2017.

As of December 31, 2017, equity securities also included $12.9 million in investment funds that do not have a quoted market price, but use net asset value per share or its equivalent to measure fair value. The investment funds include $3.3 million in funds that are primarily invested in community development loans that are guaranteed by the Small Business Administration (SBA). Because the funds are primarily guaranteed by the federal government there are minimal changes in market value between accounting periods. These funds can be redeemed within 60 day’s notice at the net asset value less unpaid management fees with the approval of the fund manager. As of December 31, 2017, the net amortized cost equaled the market value of the investment. There are no unfunded commitments related to this investment. The investment funds also include $9.6 million in funds that are invested in government guaranteed loans, mortgage-backed securities, small business loans and other instruments supporting affordable housing and economic development. The Company may redeem these funds at the net asset value calculated at the end of the current business day less any unpaid management fees. As of December 31, 2017, the amortized cost of these securities was $10.1 million and the fair value was $9.6 million. There are no restrictions on redemptions for the holdings in these investments other than the notice required by the fund manager. There are no unfunded commitments related to this investment.