INVESTMENT SECURITIES



	September 30, 2018									December 31, 2017
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)									(in thousands)
AVAILABLE FOR SALE
U.S. Treasury and U.S. government agencies	$	148,402	$	—	$	(3,928	)	$	144,474	$	148,968	$	78	$	(1,791	)	$	147,255
Mortgage-backed securities, residential	412,979		77		(14,345		)	398,711		419,538		479		(5,763		)	414,254
Mortgage-backed securities, multifamily	19,166		18		(348		)	18,836		10,133		7		(63		)	10,077
Obligations of states and political subdivisions	47,099		98		(1,016		)	46,181		51,289		448		(417		)	51,320
Debt securities	5,000		41		—			5,041		5,000		140		—			5,140
	$	632,646	$	234	$	(19,637	)	$	613,243	$	634,928	$	1,152	$	(8,034	)	$	628,046



	September 30, 2018									December 31, 2017
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)									(in thousands)
HELD TO MATURITY
U.S. government agencies	$	38,278	$	—	$	(1,081	)	$	37,197	$	33,415	$	24	$	(402	)	$	33,037
Mortgage-backed securities, residential	75,825		105		(2,890		)	73,040		54,991		249		(978		)	54,262
Mortgage-backed securities, multifamily	1,879		—		(59		)	1,820		1,957		—		(22		)	1,935
Obligations of states and political subdivisions	37,594		77		(570		)	37,101		43,318		306		(188		)	43,436
Debt securities	5,000		—		(183		)	4,817		6,004		14		—			6,018
	$	158,576	$	182	$	(4,783	)	$	153,975	$	139,685	$	593	$	(1,590	)	$	138,688

The following table shows investment securities by stated maturity. Securities backed by mortgages have expected maturities that differ from contractual maturities because borrowers have the right to call or prepay, and are, therefore, classified separately with no specific maturity date (in thousands):



	Available for Sale				Held to Maturity
September 30, 2018	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	27,831	$	27,694	$	11,369	$	11,376
Due after one year through five years	106,416		103,528		42,149		41,398
Due after five years through ten years	37,758		36,465		24,093		23,204
Due after ten years	28,496		28,009		3,261		3,137
	200,501		195,696		80,872		79,115
Mortgage-backed securities	432,145		417,547		77,704		74,860
Total securities	$	632,646	$	613,243	$	158,576	$	153,975

The following table shows proceeds from sales of securities and gross gains and losses on sales of securities for the periods indicated (in thousands):



	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2018		2017		2018		2017
Sale proceeds	$	—	$	—	$	—	$	4,500
Gross gains	—		—		—		2,539
Gross losses	—		—		—		(15		)

There were no other-than-temporary impairments during the three and nine months ended September 30, 2018 or 2017.

Gains or losses on sales of investment 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 $458.8 million and $400.4 million at September 30, 2018 and December 31, 2017, 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 for the periods presented:



	Less Than 12 Months				12 Months or Longer				Total
September 30, 2018	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	$	58,128	$	1,279	$	86,347	$	2,649	28	$	144,475	$	3,928
Mortgage-backed securities, residential	135,669		2,952		249,216		11,393		153	384,885		14,345
Mortgage-backed securities, multifamily	10,871		242		4,992		106		4	15,863		348
Obligations of states and political subdivisions	19,175		279		15,265		737		65	34,440		1,016
	$	223,843	$	4,752	$	355,820	$	14,885	250	$	579,663	$	19,637
HELD TO MATURITY
U.S. government agencies	$	25,521	$	445	$	11,678	$	636	7	$	37,199	$	1,081
Mortgage-backed securities, residential	30,173		774		37,234		2,116		37	67,407		2,890
Mortgage-backed securities, multifamily	—		—		1,820		59		2	1,820		59
Obligations of states and political subdivisions	15,398		257		7,234		313		39	22,632		570
Debt securities	3,817		183		—		—		1	3,817		183
	$	74,909	$	1,659	$	57,966	$	3,124	86	$	132,875	$	4,783



	Less Than 12 Months				12 Months or Longer				Total
December 31, 2017	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
	$	289,390	$	2,446	$	230,566	$	5,588	185	$	519,956	$	8,034
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

Management has evaluated the securities in the above table and has concluded that none of the securities are other-than-temporarily impaired. The fair values being below cost is due to interest rate movements and is deemed temporary. All investment securities are evaluated on a periodic basis to identify any factors that would require a 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 that an additional analysis is required, management will perform and consider the results of a discounted cash flow analysis.

Equity securities at fair value

The Company has an equity securities portfolio which consists of investments in other financial institutions for market appreciation purposes, and investments in Community Reinvestment funds. The market value of these investments was $16.0 million and $18.1 million as of September 30, 2018 and December 31, 2017, respectively. Upon implementation of Accounting Standards Update 2016-01 - Financial Instruments ("ASU 2016-01"), the Company made a cumulative adjustment of $2.0 million from other comprehensive income to retained earnings as of January 1, 2018. In the first nine months of 2018, the Company recorded $384,000 in market value loss on equity securities in noninterest income.

As of September 30, 2018, the equity investments in other financial institutions and Community Reinvestment funds had a market value of $3.0 million and $13.0 million, respectively.

The Community Reinvestment funds include $9.5 million 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. 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 these investments.

The investment funds also include $3.5 million 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 with 60 days notice at the net asset value less unpaid management fees with the approval of the fund manager. As of September 30, 2018, the net amortized cost equaled the market value of the investment. There are no unfunded commitments related to these investments.