4. INVESTMENTS

Unrealized Gains and Losses

The following table details the difference between amortized cost or cost and estimated fair value, by major investment catergory, at June 30, 2016 and at December 31, 2015:

	Amortized Cost or Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(in thousands)
June 30, 2016
Debt Securities - available-for-sale:
United States government obligations and authorities	$	63,692	$	1,551	$	1	$	65,242
Obligations of states and political subdivisions		136,439		3,248		2		139,685
Corporate		144,429		4,289		122		148,596
International		11,639		243		41		11,841
		356,199		9,331		166		365,364

Debt Securities - held-to-maturity:
United States government obligations and authorities		4,178		85		67		4,196
Corporate		1,662		45		1		1,706
International		65		3		-		68
		5,905		133		68		5,970
Equity securities		34,565		7,204		1,168		40,601
Total investments	$	396,669	$	16,668	$	1,402	$	411,935

	Amortized Cost or Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(in thousands)
December 31, 2015
Debt Securities - available-for-sale:
United States government obligations and authorities	$	61,384	$	489	$	320	$	61,553
Obligations of states and political subdivisions		109,152		1,590		40		110,702
Corporate		154,957		1,153		1,490		154,620
International		12,528		18		243		12,303
		338,021		3,250		2,093		339,178

Debt Securities - held-to-maturity:
United States government obligations and authorities		4,275		30		204		4,101
Corporate		2,253		14		20		2,247
International		91		-		-		91
		6,619		44		224		6,439
Equity securities		33,581		6,809		1,856		38,534
Total investments	$	378,221	$	10,103	$	4,173	$	384,151

Net Realized Gains and Losses

The Company calculates the gain or loss realized on the sale of investments by comparing the sales price (fair value) to the cost or amortized cost of the security sold. Net realized gains and losses on investments are determined in accordance with the specific identification method. The following tables detail the Company’s net realized gains (losses) by major investment category for the three and six months ended June 30, 2016 and 2015:

	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
	(in thousands)						(in thousands)
Gross realized gains:
Debt securities	$	624		$	265		$	1,927		$	747
Equity securities		417			915			1,155			2,342
Total gross realized gains		1,041			1,180			3,082			3,089

Gross realized losses:
Debt securities		(55	)		(224	)		(595	)		(326	)
Equity securities		(979	)		(43	)		(1,553	)		(146	)
Total gross realized losses		(1,034	)		(267	)		(2,148	)		(472	)
Net realized gains on investments	$	7		$	913		$	934		$	2,617

During the three months ended June 30, 2016 and 2015, the proceeds from sales of available-for-sale investment securities were $36.9 million and $30.3 million, respectively. During the six months ended June 30, 2016 and 2015, the proceeds from sales of available-for-sale investment securities were $99.4 million and $80.2 million, respectively.

Contractual Maturity

The amortized cost and estimated fair value of debt securities as of June 30, 2016 and December 31, 2015 by contractual maturity are shown below. Expected maturities may differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	June 30, 2016				December 31, 2015
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Securities with maturity dates:	(in thousands)
Debt securities, available-for-sale:
One year or less	$	32,222	$	32,266	$	24,470	$	24,488
Over one through five years		177,983		181,141		170,797		171,113
Over five through ten years		145,773		151,728		142,728		143,545
Over ten years		220		229		26		32
		356,198		365,364		338,021		339,178
Debt securities, held-to-maturity:
One year or less		431		432		486		487
Over one through five years		1,724		1,786		1,899		1,915
Over five through ten years		3,750		3,751		4,234		4,037
		5,905		5,969		6,619		6,439
Total	$	362,103	$	371,333	$	344,640	$	345,617

Net Investment Income

The following table summarizes the Company’s net investment income for the three and six months ended June 30, 2016 and 2015:

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
	(in thousands)
Interest income	$	1,984	$	1,573	$	3,837	$	3,014
Dividends income		210		128		397		234
Net investment income	$	2,194	$	1,701	$	4,234	$	3,248

Aging of Gross Unrealized Losses

As of June 30, 2016 and December 31, 2015, gross unrealized losses and related fair values for available-for-sale debt securities and equity securities, grouped by duration of time in a continuous unrealized loss position, were as follows:

	Less than 12 months				12 months or longer				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
June 30, 2016					(in thousands)
Debt securities - available-for-sale:
United States government obligations and authorities	$	-	$	-	$	128	$	1	$	128	$	1
Obligations of states and political subdivisions		2,372		1		1,025		1		3,397		2
Corporate		6,733		50		3,587		72		10,320		122
International		-		-		2,005		41		2,005		41
		9,105		51		6,745		115		15,850		166

Equity securities		9,361		1,035		1,245		133		10,606		1,168

Total investments	$	18,466	$	1,086	$	7,990	$	248	$	26,456	$	1,334

	Less than 12 months				12 months or longer				Total
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
December 31, 2015					(in thousands)
Debt securities - available-for-sale:
United States government obligations and authorities	$	30,464	$	303	$	659	$	17	$	31,123	$	320
Obligations of states and political subdivisions		16,652		40		-		-		16,652		40
Corporate		87,176		1,420		3,590		70		90,766		1,490
International		8,660		191		281		52		8,941		243
		142,952		1,954		4,530		139		147,482		2,093

Equity securities		11,790		1,850		84		6		11,874		1,856

Total investments	$	154,742	$	3,804	$	4,614	$	145	$	159,356	$	3,949

The Company holds its equity securities and some of its debt securities as available-for-sale and as such, these securities are recorded at fair value. The Company continually monitors the difference between cost and the estimated fair value of its investments, which involves uncertainty as to whether declines in value are temporary in nature. If the decline of a particular investment is deemed temporary, the Company records the decline as an unrealized loss in shareholders’ equity. If the decline is deemed to be other than temporary, the Company will write the security’s cost-basis or amortized cost-basis down to the fair value of the investment and recognizes an other than temporarily impairment (“OTTI”) loss in our consolidated statements of operations. Additionally, any portion of such decline related to debt securities that is believed to arise from factors other than credit will be recorded as a component of other comprehensive income rather than charged against income.

The Company’s assessment of equity securities initially involves an evaluation of all securities that are in an unrealized loss position, regardless of the duration or severity of the loss, as of the applicable balance sheet date. Such initial review consists primarily of assessing whether: (i) there has been a negative credit or news event with respect to the issuer that could indicate the existence of an OTTI; and (ii) the Company has the ability and intent to hold an equity security for a period of time sufficient to allow for an anticipated recovery (generally considered to be one year from the balance sheet date).

To the extent that an equity security in an unrealized loss position is not impaired based on the initial review described above, the Company then evaluates such equity security by considering qualitative and quantitative factors. These factors include but are not limited to facts and circumstances specific to individual securities, asset classes, the financial condition of the issuer, changes in dividend payment, the length of time fair value had been less than cost, the severity of the decline in fair value below cost, industry outlook and our ability and intent to hold each position until its forecasted recovery.

If the Company intends to sell, or it is more likely than not that, the Company will sell, a debt security before recovery of its amortized cost basis, the total amount of the unrealized loss position is recognized as an OTTI loss in our consolidated statement of operations. To the extent a debt security in an unrealized loss position is not impaired based on the preceding, the Company will consider that security to be impaired when it believes collection of the amortized cost is not probable.

During the Company’s quarterly evaluation of its securities for impairment, we had $0.3 million OTTI losses in our investments in debt and equity securities during the three and six months ended June 30, 2016. We did not have any material OTTI losses in our investments in debt and equity securities that reflected an unrealized loss position during the three and six months ended June 30, 2015.

Collateral Deposits

As of June 30, 2016, investments with fair values of approximately $10.8 million, the majority of which were debt securities, were deposited with governmental authorities and into custodial bank accounts as required by law or contractually obligated.