2. Investment Securities

The amortized cost, fair values, and unrealized gains and losses of the securities available-for-sale are as follows

(in thousands):

	Amortized		Gross Unrealized				Fair/Book
June 30, 2017	Cost		Gains		Losses		Value
Government Agency & Government-Sponsored Entities	$	3,103	$	92	$	-	$	3,195
US Treasury Notes		134,689		3		272		134,420
US Govt SBA		32,889		30		119		32,800
Mortgage Backed Securities⁽¹⁾		288,121		1,821		919		289,023
Other		2,429		-		-		2,429
Total	$	461,231	$	1,946	$	1,310	$	461,867

	Amortized		Gross Unrealized				Fair/Book
December 31, 2016	Cost		Gains		Losses		Value
Government Agency & Government-Sponsored Entities	$	3,127	$	114	$	-	$	3,241
US Treasury Notes		134,755		5		332		134,428
US Govt SBA		36,532		42		260		36,314
Mortgage Backed Securities⁽¹⁾		272,858		1,725		1,313		273,270
Other		1,010		-		-		1,010
Total	$	448,282	$	1,886	$	1,905	$	448,263

	Amortized		Gross Unrealized				Fair/Book
June 30, 2016	Cost		Gains		Losses		Value
Government Agency & Government-Sponsored Entities	$	93,139	$	192	$	-	$	93,331
US Treasury Notes		65,522		457		-		65,979
Mortgage Backed Securities⁽¹⁾		195,860		6,043		-		201,903
Other		1,010		-		-		1,010
Total	$	355,531	$	6,692	$	-	$	362,223

⁽¹⁾All Mortgage Backed Securities consist of securities collateralized by residential real estate and were issued by an agency or government sponsored entity of the U.S. government.

The book values, estimated fair values and unrealized gains and losses of investments classified as held-to-maturity are as follows (in thousands):

	Book		Gross Unrealized				Fair
June 30, 2017	Value		Gains		Losses		Value
Obligations of States and Political Subdivisions	$	56,381	$	746	$	-	$	57,127
Total	$	56,381	$	746	$	-	$	57,127

	Book		Gross Unrealized				Fair
December 31, 2016	Value		Gains		Losses		Value
Obligations of States and Political Subdivisions	$	58,109	$	339	$	40	$	58,408
Total	$	58,109	$	339	$	40	$	58,408

	Book		Gross Unrealized				Fair
June 30, 2016	Value		Gains		Losses		Value
Obligations of States and Political Subdivisions	$	60,949	$	1,894	$	-	$	62,843
Total	$	60,949	$	1,894	$	-	$	62,843

Fair values are based on quoted market prices or dealer quotes. If a quoted market price or dealer quote is not available, fair value is estimated using quoted market prices for similar securities.

The amortized cost and estimated fair values of investment securities at June 30, 2017 by contractual maturity are shown in the following table (in thousands):

	Available-for-Sale				Held-to-Maturity
June 30, 2017	Amortized Cost		Fair/Book Value		Book Value		Fair Value
Within one year	$	97,484	$	97,396	$	1,250	$	1,252
After one year through five years		35,556		35,475		9,718		9,739
After five years through ten years		13,500		13,475		14,247		14,452
After ten years		26,570		26,498		31,166		31,684
		173,110		172,844		56,381		57,127

Investment securities not due at a single maturity date:
Mortgage-backed securities		288,121		289,023		-		-

Total	$	461,231	$	461,867	$	56,381	$	57,127

Expected maturities of mortgage-backed securities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

The following tables show those investments with gross unrealized losses and their market value aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at the dates indicated (in thousands):

	Less Than 12 Months				12 Months or More				Total
June 30, 2017	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss

Securities Available-for-Sale
US Treasury Notes	$	74,423	$	272	$	-	$	-	$	74,423	$	272
US Govt SBA		22,775		119		-		-		22,775		119
Mortgage Backed Securities		141,268		919		-		-		141,268		919
Total	$	238,466	$	1,310	$	-	$	-	$	238,466	$	1,310

	Less Than 12 Months				12 Months or More				Total
December 31, 2016	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss

Securities Available-for-Sale
US Treasury Notes	$	99,429	$	332	$	-	$	-	$	99,429	$	332
US Govt SBA		27,483		260		-		-		27,483		260
Mortgage Backed Securities		123,157		1,313		-		-		123,157		1,313
Total	$	250,069	$	1,905	$	-	$	-	$	250,069	$	1,905

Securities Held-to-Maturity
Obligations of States and Political Subdivisions	$	7,251	$	40	$	-	$	-	$	7,251	$	40
Total	$	7,251	$	40	$	-	$	-	$	7,251	$	40

There were no available-for-sale or held-to-maturity investments with gross unrealized losses at June 30, 2016.

As of June 30, 2017, the Company held 462 investment securities of which 179 were in a loss position for less than twelve months. No securities were in a loss position for twelve months or more. Management periodically evaluates each investment security for other-than-temporary impairment relying primarily on industry analyst reports and observations of market conditions and interest rate fluctuations. Management believes it will be able to collect all amounts due according to the contractual terms of the underlying investment securities.

Securities of Government Agency and Government Sponsored Entities – At June 30, 2017, December 31, 2016 and June 30, 2016, no securities of government agency and government sponsored entities were in a loss position for less than 12 months or for 12 months or more.

U.S. Treasury Notes – At June 30, 2017, six U.S. Treasury Note security investments were in a loss position for less than 12 months and none were in a loss position for 12 months or more. The unrealized losses on the Company's investment in U.S. Treasury Notes were $272,000 at June 30, 2017 and $332,000 at December 31, 2016. There were no U.S. Treasury Notes in a loss position at June 30, 2016. The unrealized losses were caused by interest rate fluctuations. Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the securities and it is more likely than not that the Company will not have to sell the securities before recovery of their cost basis, the Company did not consider these investments to be other-than-temporarily impaired at June 30, 2017 and December 31, 2016.

U.S. Government SBA – At June 30, 2017, 116 U.S. Government SBA security investments were in a loss position for less than 12 months and none were in a loss position for 12 months or more. The unrealized losses on the Company's investment in U.S. Government SBA securities were $119,000 at June 30, 2017 and $260,000 at December 31, 2016. The unrealized losses were caused by interest rate fluctuations. Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the securities and it is more likely than not that the Company will not have to sell the securities before recovery of their cost basis, the Company did not consider these investments to be other-than-temporarily impaired at June 30, 2017 and December 31, 2016. The Company did not own any U.S. Government SBA securities prior to December 2016.

Mortgage Backed Securities – At June 30, 2017, 56 mortgage backed security investments were in a loss position for less than 12 months and none were in a loss position for 12 months or more. The unrealized losses on the Company's investment in mortgage backed securities were $919,000, $1.3 million, and $0 at June 30, 2017, December 31, 2016, and June 30, 2016, respectively. The unrealized losses on the Company’s investment in mortgage backed securities were caused by interest rate fluctuations. The contractual cash flows of these investments are guaranteed by an agency or government sponsored entity of the U.S. government. Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost of the Company's investment. Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell the securities and it is more likely than not that the Company will not have to sell the securities before recovery of their cost basis, the Company does not consider these investments to be other-than-temporarily impaired at June 30, 2017 and December 31, 2016.

Obligations of States and Political Subdivisions - At June 30, 2017, no obligations of states and political subdivisions were in a loss position for less than 12 months. None were in a loss position for 12 months or more. As of June 30, 2017, over ninety-eight percent of the Company’s bank-qualified municipal bond portfolio is rated at either the issue or issuer level, and all of these ratings are “investment grade.” The Company monitors the status of the two percent of the portfolio that is not rated and at the current time does not believe any of them to be exhibiting financial problems that could result in a loss in any individual security.

The unrealized losses on the Company’s investment in obligations of states and political subdivisions were $0, $40,000 and $0 at June 30, 2017, December 31, 2016 and June 30, 2016, respectively. Management believes that any unrealized losses on the Company's investments in obligations of states and political subdivisions were primarily caused by interest rate fluctuations. The contractual terms of these investments do not permit the issuer to settle the securities at a price less than the amortized cost of the investment. Because the Company does not intend to sell the securities and it is more likely than not that the Company will not have to sell the securities before recovery of their cost basis, the Company does not consider these investments to be other-than-temporarily impaired at June 30, 2017 and December 31, 2016.

Proceeds from sales and calls of securities were as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2017		2016		2017		2016
Proceeds	$	7,831	$	-	$	7,831	$	102,895
Gains		143		-		143		245
Losses		12		-		12		534

Pledged Securities

As of June 30, 2017, securities carried at $211.6 million were pledged to secure public deposits, Federal Home Loan Bank (“FHLB”) borrowings, and other government agency deposits as required by law. This amount was $171.9 million at December 31, 2016, and $197.0 million at June 30, 2016.