4. INVESTMENTS

Unrealized Gains and Losses

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



	Amortized		Gross		Gross
	Cost		Unrealized		Unrealized
	or Cost		Gains		Losses		Fair Value
	(in thousands)
September 30, 2016
Debt securities - available-for-sale:
United States government obligations and authorities	$	64,810	$	1,039	$	39	$	65,810
Obligations of states and political subdivisions		148,366		2,556		49		150,873
Corporate		144,990		4,305		85		149,210
International		12,715		273		2		12,986
		370,881		8,173		175		378,879

Debt securities - held-to-maturity:
United States government obligations and authorities		4,173		70		59		4,184
Corporate		1,636		47		—		1,683
International		71		2		—		73
		5,880		119		59		5,940
Equity securities		34,905		7,278		849		41,334
Total investments	$	411,666	$	15,570	$	1,083	$	426,153



	Amortized		Gross		Gross
	Cost		Unrealized		Unrealized
	or Cost		Gains		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 nine months ended September 30, 2016 and 2015:



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2016		2015		2016		2015
	(in thousands)				(in thousands)
Gross realized gains:
Debt securities	$	897	$	226	$	2,822	$	973
Equity securities		597		1,847		1,752		4,188
Total gross realized gains		1,494		2,073		4,574		5,161

Gross realized losses:
Debt securities		(20)		(178)		(614)		(504)
Equity securities		(348)		(769)		(1,900)		(914)
Total gross realized losses		(368)		(947)		(2,514)		(1,418)
Net realized gains on investments	$	1,126	$	1,126	$	2,060	$	3,743

During the three months ended September 30, 2016 and 2015, the proceeds from sales of available-for-sale investment securities were $30.1 million and $42.5 million, respectively. During the nine months ended September 30, 2016 and 2015, the proceeds from sales of available-for-sale investment securities were $129.5 million and $134.9 million, respectively.

Contractual Maturity

The amortized cost and estimated fair value of debt securities as of September 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.



	September 30, 2016				December 31, 2015
	Amortized				Amortized
	Cost		Fair Value		Cost		Fair Value
Securities with maturity dates:	(in thousands)
Debt securities, available-for-sale:
One year or less	$	41,507	$	41,565	$	24,470	$	24,488
Over one through five years		182,129		185,001		170,797		171,113
Over five through ten years		145,639		150,694		142,728		143,545
Over ten years		1,606		1,619		26		32
		370,881		378,879		338,021		339,178
Debt securities, held-to-maturity:
One year or less		413		413		486		487
Over one through five years		1,887		1,949		1,899		1,915
Over five through ten years		3,580		3,578		4,234		4,037
		5,880		5,940		6,619		6,439
Total	$	376,761	$	384,819	$	344,640	$	345,617

Net Investment Income

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



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2016		2015		2016		2015
	(in thousands)
Interest income	$	1,963	$	1,760	$	5,801	$	4,773
Dividends income		201		147		597		381
Net investment income	$	2,164	$	1,907	$	6,398	$	5,154

Aging of Gross Unrealized Losses

As of September 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
			Gross				Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
September 30, 2016					(in thousands)
Debt securities - available-for-sale:
United States government obligations
and authorities	$	8,995	$	38	$	121	$	1	$	9,116	$	39
Obligations of states and political subdivisions		28,481		47		1,015		2		29,496		49
Corporate		11,405		33		3,345		52		14,750		85
International		1,170		1		302		1		1,472		2
		50,051		119		4,783		56		54,834		175

Equity securities		5,590		679		2,179		170		7,769		849

Total investments	$	55,641	$	798	$	6,962	$	226	$	62,603	$	1,024



	Less than 12 months				12 months or longer				Total
			Gross				Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		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 temporary impairment (“OTTI”) loss in our consolidated statement 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, there were no identified OTTI losses in our investments in debt and equity securities during the three months ended September 30, 2016 and $0.3 million OTTI losses in our investments in debt and equity securities during the nine months ended September 30, 2016. We did not have any OTTI losses in our investments in debt and equity securities that were in an unrealized loss position during the three and nine months ended September 30, 2015.

Collateral Deposits

As of September 30, 2016, investments with fair values of approximately $10.7 million, the majority of which were debt securities, were deposited with governmental authorities and into custodial bank accounts as required by law or contractual obligations.