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, 2017 and at December 31, 2016:



	Amortized		Gross		Gross
	Cost		Unrealized		Unrealized
	or Cost		Gains		Losses		Fair Value
	(in thousands)
September 30, 2017
Debt securities - available-for-sale:
United States government obligations and authorities	$	116,390	$	421	$	601	$	116,210
Obligations of states and political subdivisions		72,372		792		165		72,999
Corporate		216,923		2,897		419		219,401
International		13,558		193		2		13,749
		419,243		4,303		1,187		422,359

Debt securities - held-to-maturity:
United States government obligations and authorities		4,156		18		91		4,083
Corporate		1,189		28		—		1,217
International		65		1		—		66
		5,410		47		91		5,366
Equity securities		14,531		1,312		268		15,575
Total investments	$	439,184	$	5,662	$	1,546	$	443,300



	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 and nine months ended September 30, 2017 and 2016:



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2017		2016		2017		2016
	(in thousands)				(in thousands)
Gross realized gains:
Debt securities	$	618	$	897	$	1,471	$	2,822
Equity securities		6,527		597		9,776		1,752
Total gross realized gains		7,145		1,494		11,247		4,574

Gross realized losses:
Debt securities		(103)		(20)		(1,293)		(614)
Equity securities		(941)		(348)		(1,310)		(1,900)
Total gross realized losses		(1,044)		(368)		(2,603)		(2,514)
Net realized gains on investments	$	6,101	$	1,126	$	8,644	$	2,060

Contractual Maturity

The amortized cost and estimated fair value of debt securities as of September 30, 2017 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, 2017
	Amortized
	Cost		Fair Value
Securities with maturity dates:	(in thousands)
Debt securities, available-for-sale:
One year or less	$	37,940	$	37,968
Over one through five years		196,630		198,180
Over five through ten years		182,560		184,199
Over ten years		2,113		2,012
		419,243		422,359
Debt securities, held-to-maturity:
One year or less		170		170
Over one through five years		4,114		4,065
Over five through ten years		1,126		1,131
		5,410		5,366
Total	$	424,653	$	427,725

Net Investment Income

The following table provides a detail of the Company’s net investment income for the three and nine months ended September 30, 2017 and 2016:



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2017		2016		2017		2016
	(in thousands)
Interest income	$	2,492	$	1,963	$	7,073	$	5,801
Dividends income		111		201		408		597
Net investment income	$	2,603	$	2,164	$	7,481	$	6,398

Aging of Gross Unrealized Losses

As of September 30, 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
September 30, 2017					(in thousands)
Debt securities - available-for-sale:
United States government obligations
and authorities	$	67,924	$	527	$	5,820	$	74	$	73,744	$	601
Obligations of states and political subdivisions		15,454		135		2,966		30		18,420		165
Corporate		58,838		340		3,971		79		62,809		419
International		1,383		2		—		—		1,383		2
		143,599		1,004		12,757		183		156,356		1,187

Equity securities		3,478		267		242		1		3,720		268

Total investments	$	147,077	$	1,271	$	12,999	$	184	$	160,076	$	1,455



	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 September 30, 2017, the Company held a total of 614 debt and equity securities that were in an unrealized loss position, of which 25 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 OTTI losses identified in our investments in debt and equity securities during the three and nine months ended September 30, 2017 and 2016.

Collateral Deposits

As of September 30, 2017, investments with fair values of approximately $12.9 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.