3.	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
December 31, 2017	Cost		Gains		Losses		Value
Government Agency & Government-Sponsored Entities	$	3,080	$	48	$	-	$	3,128
US Treasury Notes		144,606		-		442		144,164
US Govt SBA		29,559		29		208		29,380
Mortgage Backed Securities⁽¹⁾		302,502		939		1,527		301,914
Other		3,010		-		-		3,010
Total	$	482,757	$	1,016	$	2,177	$	481,596

	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

⁽¹⁾	All Mortgage Backed Securities 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
December 31, 2017	Value		Gains		Losses		Value
Obligations of States and Political Subdivisions	$	54,460	$	776	$	-	$	55,236
Total	$	54,460	$	776	$	-	$	55,236

	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

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 December 31, 2017 by contractual maturity are shown in the following tables. (in thousands)

	Available-for-Sale				Held-to-Maturity
December 31, 2017	Amortized Cost		Fair/Book Value		Book Value		Fair Value
Within One Year	$	113,065	$	112,989	$	1,760	$	1,769
After One Year Through Five Years		30,207		29,979		8,659		8,664
After Five Years Through Ten Years		13,044		12,922		14,155		14,347
After Ten Years		23,939		23,792		29,886		30,456
		180,255		179,682		54,460		55,236

Investment Securities Not Due at a Single Maturity Date:
Mortgage Backed Securities		302,502		301,914		-		-
Total	$	482,757	$	481,596	$	54,460	$	55,236

Expected maturities of mortgage-backed securities may differ from contractual maturities because borrowers 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
December 31, 2017	Fair Value			Unrealized Loss			Fair Value			Unrealized Loss			Fair Value			Unrealized Loss

Securities Available-for-Sale
US Treasury Notes		$	94,281		$	144		$	49,883		$	298		$	144,164		$	442
US Govt SBA			8,379			51			12,900			157			21,279			208
Mortgage Backed Securities			126,863			932			43,208			595			170,071			1,527
Total		$	229,523		$	1,127		$	105,991		$	1,050		$	335,514		$	2,177

	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

As of December 31, 2017, the Company held 476 investment securities of which 97 were in an unrealized loss position for less than twelve months and 98 securities were in an unrealized 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 December 31, 2017, no securities of government agency and government sponsored entities were in a loss position for less than 12 months and none were in a loss position for 12 months or more. There were no unrealized losses on the Company's investments in securities of government agency and government sponsored entities at December 31, 2017 or December 31, 2016. Repayment of these investments is 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 did not consider these investments to be other-than-temporarily impaired at December 31, 2017.

U.S. Treasury Notes – At December 31, 2017, 7 U.S. Treasury Note security investments were in a loss position for less than 12 months and 2 were in a loss position for 12 months or more. The unrealized losses on the Company's investment in US treasury notes were $442,000 at December 31, 2017 and $332,000 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 December 31, 2017 and December 31, 2016.

U.S. Government SBA – At December 31, 2017, 54 U.S. Government SBA security investments were in a loss position for less than 12 months and 70 were in a loss position for 12 months or more. The unrealized losses on the Company's investment in U.S. Government SBA were $208,000 at December 31, 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 December 31, 2017 and December 31, 2016.

Mortgage Backed Securities - At December 31, 2017, 26 mortgage backed security investments were in a loss position for less than 12 months and 36 was in a loss position for 12 months or more. The unrealized losses on the Company's investment in mortgage-backed securities were $1.5 million at December 31, 2017 and $1.3 million at December 31, 2016. The unrealized losses 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 did not consider these investments to be other-than-temporarily impaired at December 31, 2017 or 2016.

Obligations of States and Political Subdivisions - At December 31, 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 December 31, 2017, over ninety-nine percent of the Company’s bank-qualified municipal bond portfolio is rated at either the issue or the issuer level, and all of these ratings are “investment grade.” The Company monitors the status of the one 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 obligation of states and political subdivisions were $0 at December 31, 2017 and $40,000 at December 31, 2016. Management believes that any unrealized losses on the Company's investments in obligations of states and political subdivisions were 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 would 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 December 31, 2017 and December 31, 2016.

Proceeds from sales and calls of these securities were as follows:

(in thousands)	Gross Proceeds		Gross Gains		Gross Losses
2017	$	7,831	$	143	$	12
2016	$	105,941	$	250	$	534
2015	$	61,335	$	275	$	-

Pledged Securities

As of December 31, 2017, securities carried at $214.5 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.

Investment in Unconsolidated Subsidiary

On April 5, 2017, the Company purchased 4.9% of the voting shares of Bank of Rio Vista, Rio Vista, California for $1.4 million. On July 3, 2017, the Federal Reserve Bank of San Francisco approved the Company’s application to acquire an additional 34.55% of the voting shares for $10.5 million. The purchase of the additional shares closed on July 20, 2017. The Company, as per requirements outlined in ASC 323-10-15-6, does not have the ability to exercise significant influence over BORV’s operating and financial policies. Accordingly, the investment in BORV is accounted for under the cost method of accounting as Other Assets.