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, 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)
AVAILABLE FOR SALE
U.S. Treasury and U.S. government agencies	$	143,495	$	—	$	(2,568	)	$	140,927	$	148,968	$	78	$	(1,791	)	$	147,255
Mortgage-backed securities, residential	434,208		779		(8,843		)	426,144		419,538		479		(5,763		)	414,254
Mortgage-backed securities, multifamily	21,087		67		(204		)	20,950		10,133		7		(63		)	10,077
Obligations of states and political subdivisions	45,951		140		(586		)	45,505		51,289		448		(417		)	51,320
Debt securities	5,000		92		—			5,092		5,000		140		—			5,140
	$	649,741	$	1,078	$	(12,201	)	$	638,618	$	634,928	$	1,152	$	(8,034	)	$	628,046



	December 31, 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)
HELD TO MATURITY
U.S. government agencies	$	33,025	$	—	$	(677	)	$	32,348	$	33,415	$	24	$	(402	)	$	33,037
Mortgage-backed securities, residential	75,859		169		(1,838		)	74,190		54,991		249		(978		)	54,262
Mortgage-backed securities, multifamily	1,853		—		(35		)	1,818		1,957		—		(22		)	1,935
Obligations of states and political subdivisions	37,909		113		(328		)	37,694		43,318		306		(188		)	43,436
Debt securities	5,000		—		(118		)	4,882		6,004		14		—			6,018
	$	153,646	$	282	$	(2,996	)	$	150,932	$	139,685	$	593	$	(1,590	)	$	138,688

The following table lists contractual maturities of investment securities classified as available for sale and held to maturity at December 31, 2018. 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
	Cost		Value		Cost		Value
	(in thousands)
Due in one year or less	$	30,766	$	30,614	$	7,061	$	7,066
Due after one year through five years	104,519		102,754		42,103		41,720
Due after five years through ten years	40,768		40,108		23,752		23,185
Due after ten years	18,393		18,048		3,018		2,953
	194,446		191,524		75,934		74,924
Mortgage-backed securities	455,295		447,094		77,712		76,008
Total securities	$	649,741	$	638,618	$	153,646	$	150,932

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,
	2018		2017			2016
	(in thousands)
Sale proceeds	$	—	$	4,500		$	15,654
Gross gains	—		2,539			370
Gross losses	—		(15		)	—

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 $476.3 million and $400.4 million at December 31, 2018 and 2017, respectively, were pledged to secure public deposits and for other purposes required by applicable laws and regulations.

The following tables indicates the length of time individual securities have been in a continuous unrealized loss position at December 31, 2018 and 2017:



December 31, 2018	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	$	20,588	$	216	$	120,338	$	2,352	27	$	140,926	$	2,568
Mortgage-backed securities, residential	10,119		58		316,851		8,785		139	326,970		8,843
Mortgage-backed securities, multifamily	1,977		2		12,911		202		4	14,888		204
Obligations of states and political subdivisions	1,289		2		26,522		584		50	27,811		586
	$	33,973	$	278	$	476,622	$	11,923	220	$	510,595	$	12,201
HELD TO MATURITY
U.S. government agencies	$	—	$	—	$	32,348	$	677	6	$	32,348	$	677
Mortgage-backed securities, residential	8,325		59		53,761		1,779		36	62,086		1,838
Mortgage-backed securities, multifamily	—		—		1,818		35		2	1,818		35
Obligations of states and political subdivisions	1,764		8		15,580		320		27	17,344		328
Debt securities	3,882		118		—		—		1	3,882		118
	$	13,971	$	185	$	103,507	$	2,811	72	$	117,478	$	2,996



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
	$	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 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.

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 $15.9 million and $18.1 million as of December 31, 2018 and 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 twelve months ended December 31, 2018, the Company recorded $583,000 in market value loss on equity securities in noninterest income.

As of December 31, 2018, the equity investments in other financial institutions and Community Reinvestment funds had a market value of $2.7 million and $13.2 million, respectively. The Community Reinvestment funds 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 within 60 days' notice at the net asset value less unpaid management fees with the approval of the fund manager. As of December 31, 2018, the net amortized cost equaled the market value of the investment. There are no unfunded commitments related to these investments.

The Community Reinvestment funds also include 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, 2018, the amortized cost of these securities was $10.4 million and the fair value was $9.7 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.