Investment Securities

Equity Securities

Equity securities consist of money market mutual funds classified as cash and cash equivalents on the balance sheet and mutual funds and equity securities in the investment portfolio of the Company’s captive insurance subsidiary. Money market mutual funds were

$35.0

million and

$36.7

million at

March 31, 2018

and

December 31, 2017,

respectively. The Company held

$1.6

million and

$935

thousand in mutual funds and equity securities recorded at fair value at

March 31, 2018

and

December 31, 2017,

respectively.

Effective

January 1, 2018,

the Company adopted ASU

2016

01,

which requires the Company to recognize changes in the fair value of its equity securities through net income. Prior to

2018,

changes in the fair value of equity securities were recognized through AOCI. At

December 31, 2017,

unrealized gains, net of tax, of

$56

thousand had been recognized in AOCI. At the beginning of

2018,

the Company made a cumulative-effect adjustment to reclassify those gains out of AOCI and into retained earnings. During the

three

months ended

March 31, 2018,

the Company recognized an unrealized loss of

$55

thousand on the equity securities held at

March 31, 2018,

which was recorded in other noninterest income. There were

sales of equity securities during the

three

months ended

March 31, 2018.

Debt Securities

The Company’s debt securities are classified as available for sale or held to maturity. The following tables summarize the amortized costs and estimated fair value of the Company’s debt securities at

March 31, 2018

and

December 31, 2017.

March 31, 2018 (In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Available For Sale
Obligations of U.S. government-sponsored entities	$	42,633	$	14	$	691	$	41,956
Obligations of states and political subdivisions		109,652		281		2,365		107,568
Mortgage-backed securities – residential		186,441		318		5,158		181,601
Mortgage-backed securities – commercial		49,990		-		2,116		47,874
Asset-backed securities		15,538		8		29		15,517
Corporate debt securities		7,741		49		18		7,772
Total securities – available for sale	$	411,995	$	670	$	10,377	$	402,288
Held To Maturity
Obligations of states and political subdivisions	$	3,350	$	74	$	-	$	3,424

December 31, 2017 (In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Available For Sale
Obligations of U.S. government-sponsored entities	$	43,601	$	44	$	437	$	43,208
Obligations of states and political subdivisions		114,960		562		1,273		114,249
Mortgage-backed securities – residential		195,605		523		2,735		193,393
Mortgage-backed securities – commercial		50,518		42		1,208		49,352
Asset-backed securities		15,569		9		4		15,574
Corporate debt securities		7,578		1		37		7,542
Total securities – available for sale	$	427,831	$	1,181	$	5,694	$	423,318
Held To Maturity
Obligations of states and political subdivisions	$	3,364	$	114	$	-	$	3,478

Debt securities with a carrying value of

$208

million and

$214

million at

March 31, 2018

and

December 31, 2017,

respectively, were pledged to secure public and trust deposits, repurchase agreements, and for other purposes.

The amortized cost and estimated fair value of the debt securities portfolio at

March 31, 2018,

by contractual maturity, are detailed below. Expected maturities

may

differ from contractual maturities because borrowers

may

have the right to call or prepay obligations with or without call or prepayment penalties. Mortgage-backed securities are stated separately due to the nature of payment and prepayment characteristics of these securities, as principal is

not

due at a single date.

	Available For Sale				Held To Maturity
	Amortized		Estimated		Amortized		Estimated
March 31, 2018 (In thousands)	Cost		Fair Value		Cost		Fair Value
Due in one year or less	$	28,921	$	28,872	$	-	$	-
Due after one year through five years		52,222		51,572		-		-
Due after five years through ten years		55,496		53,726		1,232		1,289
Due after ten years		38,925		38,643		2,118		2,135
Mortgage-backed securities		236,431		229,475		-		-
Total	$	411,995	$	402,288	$	3,350	$	3,424

Gross realized gains and losses on the sale of available for sale debt securities are presented in the table below for the periods indicated.

	Three Months Ended
	March 31,
(In thousands)	2018		2017

Gross realized gains	$	-	$	-
Gross realized losses		-		9
Net realized loss	$	-	$	(9	)

Debt securities with unrealized losses at

March 31, 2018

and

December 31, 2017

not

recognized in income are presented in the tables below. The tables segregate debt securities that have been in a continuous unrealized loss position for less than

twelve

months from those that have been in a continuous unrealized loss position for

twelve

months or more. The tables also include the fair value of the related securities.

	Less than 12 Months				12 Months or More				Total
March 31, 2018 (In thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Obligations of U.S. government-sponsored entities	$	13,336	$	182	$	27,010	$	509	$	40,346	$	691
Obligations of states and political subdivisions		52,756		956		33,058		1,409		85,814		2,365
Mortgage-backed securities – residential		74,591		1,642		93,924		3,516		168,515		5,158
Mortgage-backed securities – commercial		14,798		378		33,076		1,738		47,874		2,116
Asset-backed securities		11,721		29		-		-		11,721		29
Corporate debt securities		2,721		15		498		3		3,219		18
Total	$	169,923	$	3,202	$	187,566	$	7,175	$	357,489	$	10,377

	Less than 12 Months				12 Months or More				Total
December 31, 2017 (In thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Obligations of U.S. government-sponsored entities	$	11,544	$	43	$	25,298	$	394	$	36,842	$	437
Obligations of states and political subdivisions		40,402		413		33,965		860		74,367		1,273
Mortgage-backed securities – residential		77,312		481		99,986		2,254		177,298		2,735
Mortgage-backed securities – commercial		7,758		62		34,139		1,146		41,897		1,208
Asset-backed securities		1,166		4		-		-		1,166		4
Corporate debt securities		7,251		36		200		1		7,451		37
Total	$	145,433	$	1,039	$	193,588	$	4,655	$	339,021	$	5,694

Unrealized losses included in the tables above have

not

been recognized in income since they have been identified as temporary. The Company evaluates debt securities for other-than-temporary impairment (“OTTI”) at least quarterly, and more frequently when economic or market conditions warrant. Many factors are considered, including: (

) the length of time and the extent to which the fair value has been less than cost, (

) the financial condition and near-term prospects of the issuer, (

) whether the market decline was effected by macroeconomic conditions, and (

) whether the Company has the intent to sell the security or more likely than

not

will be required to sell the security before its anticipated recovery. The assessment of whether an OTTI charge exists involves a high degree of subjectivity and judgment and is based on the information available to the Company at a point in time.

The Company attributes the unrealized losses in its debt securities portfolio to changes in market interest rates and volatility. Debt securities with unrealized losses at

March 31, 2018 and December 31, 2017

are performing according to their contractual terms, and the Company does

not

expect to incur a loss on these securities unless they are sold prior to maturity. The Company does

not

have the intent to sell these securities nor does it believe it is likely that it will be required to sell these securities prior to their anticipated recovery. The Company does

not

consider any of the securities to be impaired due to reasons of credit quality or other factors.