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 March 31, 2017 and at December 31, 2016:



	Amortized		Gross		Gross
	Cost		Unrealized		Unrealized
	or Cost		Gains		Losses		Fair Value
	(in thousands)
March 31, 2017
Debt securities - available-for-sale:
United States government obligations and authorities	$	75,618	$	315	$	538	$	75,395
Obligations of states and political subdivisions		86,997		488		511		86,974
Corporate		197,041		1,723		717		198,047
International		15,533		115		94		15,554
		375,189		2,641		1,860		375,970

Debt securities - held-to-maturity:
United States government obligations and authorities		4,162		21		100		4,083
Corporate		1,261		22		1		1,282
International		65		1		—		66
		5,488		44		101		5,431
Equity securities		37,750		6,839		586		44,003
Total investments	$	418,427	$	9,524	$	2,547	$	425,404



	Amortized		Gross		Gross
	Cost		Unrealized		Unrealized
	or Cost		Gains		Losses			Fair Value
	(in thousands)
December 31, 2016
Debt securities - available-for-sale:
United States government obligations and authorities	$	62,881	$	177	$	853	$	62,205
Obligations of states and political subdivisions		152,823		427		2,067		151,183
Corporate		149,053		1,347		895		149,505
International		11,887		95		119		11,863
		376,644		2,046		3,934		374,756

Debt securities - held-to-maturity:
United States government obligations and authorities		4,163		22		118		4,067
Corporate		1,317		20		2		1,335
International		71		—		—		71
		5,551		42		120		5,473
Equity securities		24,163		5,500		288		29,375
Total investments	$	406,358	$	7,588	$	4,342	$	409,604

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 months ended March 31, 2017 and 2016:



	Three Months Ended
	March 31,
	2017		2016
	(in thousands)
Gross realized gains:
Debt securities	$	570	$	1,304
Equity securities		560		738
Total gross realized gains		1,130		2,042

Gross realized losses:
Debt securities		(1,092)		(540)
Equity securities		(143)		(575)
Total gross realized losses		(1,235)		(1,115)
Net realized (losses) gains on investments	$	(105)	$	927

During the three months ended March 31, 2017 and 2016, the proceeds from sales of available-for-sale investment securities were $111.5 million and $66.7 million, respectively.

Contractual Maturity

The amortized cost and estimated fair value of debt securities as of March 31, 2017 and December 31, 2016 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.



	March 31, 2017				December 31, 2016
	Amortized				Amortized
	Cost		Fair Value		Cost		Fair Value
Securities with maturity dates:	(in thousands)
Debt securities, available-for-sale:
One year or less	$	34,393	$	34,469	$	46,189	$	46,231
Over one through five years		177,620		178,374		177,982		177,899
Over five through ten years		161,961		161,955		150,557		148,783
Over ten years		1,215		1,172		1,916		1,843
		375,189		375,970		376,644		374,756
Debt securities, held-to-maturity:
One year or less		184		185		170		170
Over one through five years		1,763		1,795		1,719		1,750
Over five through ten years		3,541		3,451		3,662		3,553
		5,488		5,431		5,551		5,473
Total	$	380,677	$	381,401	$	382,195	$	380,229

Net Investment Income

The following table summarizes the Company’s net investment income for the three months ended March 31, 2017 and 2016:



	Three Months Ended
	March 31,
	2017		2016
		(in thousands)
Interest income	$	2,169	$	1,853
Dividends income		149		187
Net investment income	$	2,318	$	2,040

Aging of Gross Unrealized Losses

As of March 31, 2017 and December 31, 2016, 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
March 31, 2017					(in thousands)
Debt securities - available-for-sale:
United States government obligations
and authorities	$	33,711	$	535	$	106	$	3	$	33,817	$	538
Obligations of states and political subdivisions		37,406		511		-		-		37,406		511
Corporate		65,054		702		1,779		15		66,833		717
International		6,214		94		5		-		6,219		94
		142,385		1,842		1,890		18		144,275		1,860

Equity securities		6,727		416		832		170		7,559		586

Total investments	$	149,112	$	2,258	$	2,722	$	188	$	151,834	$	2,446



	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, 2016					(in thousands)
Debt securities - available-for-sale:
United States government obligations
and authorities	$	45,255	$	850	$	111	$	3	$	45,366	$	853
Obligations of states and political subdivisions		103,724		2,066		1,007		1		104,731		2,067
Corporate		59,970		864		2,427		31		62,397		895
International		5,925		119		5		-		5,930		119
		214,874		3,899		3,550		35		218,424		3,934

Equity securities		4,701		253		434		35		5,135		288

Total investments	$	219,575	$	4,152	$	3,984	$	70	$	223,559	$	4,222

As of March 31, 2017, the Company held a total of 573 debt and equity securities that were in an unrealized loss position, of which 23 securities were in an unrealized loss position continuously for 12 months or more. As of December 31, 2016, the Company held a total of 1,132 debt and equity securities that were in an unrealized loss position, of which 36 securities were in an unrealized loss position continuously for 12 months or more. The unrealized losses associated with these securities consisted primarily of losses related to corporate securities.

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 material OTTI losses identified in our investments in debt and equity securities during the three months ended March 31, 2017 and 2016, respectively.

Collateral Deposits

As of March 31, 2017, investments with fair values of approximately $10.6 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.