Investments

The aggregate carrying and approximate market values of investment securities follow (in thousands). Fair values are based on quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable financial instruments.



	March 31, 2019								December 31, 2018
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Securities available-for-sale:
U.S. Treasuries and U.S.
government agencies	$	2,277	$	23	$	—	$	2,300	$	5,713	$	20	$	—	$	5,733
Obligations of states and
political subdivisions	123,293		2,632		285		125,640		128,089		1,033		1,052		128,070
Mortgage-backed securities:
U.S. government agencies	590,773		4,871		6,946		588,698		561,799		1,950		12,991		550,758
Private label	11,787		328		—		12,115		11,948		95		—		12,043
Trust preferred securities	4,776		31		569		4,238		4,774		25		—		4,799
Corporate securities	16,787		93		1		16,879		16,795		30		167		16,658
Total Debt Securities	749,693		7,978		7,801		749,870		729,118		3,153		14,210		718,061
Certificates of deposit held for investment	3,735		—		—		3,735		3,735		—		—		3,735
Investment funds	1,526		—		50		1,476		1,525		—		67		1,458
Total Securities
Available-for-Sale	$	754,954	$	7,978	$	7,851	$	755,081	$	734,378	$	3,153	$	14,277	$	723,254



Securities held-to-maturity:
Mortgage-backed securities:
U.S. government agencies	$	55,326	$	858	$	99	$	56,085	$	56,827	$	173	$	294	$	56,706
Trust preferred securities	—		—		—		—		4,000		—		—		4,000
Total Securities
Held-to-Maturity	$	55,326	$	858	$	99	$	56,085	$	60,827	$	173	$	294	$	60,706

The Company's other investment securities include marketable and non-marketable equity securities. At March 31, 2019 and December 31, 2018, the Company held $10.4 million and $10.3 million, respectively, in marketable equity securities. Marketable equity securities consist of investments made by the Company in equity positions of various community banks. Included within this portfolio are ownership positions in the following community bank holding companies: First National Corporation (FXNC) (4%) and Eagle Financial Services, Inc. (EFSI) (1.5%). The Company's non-marketable securities consist of securities with limited marketability, such as stock in the Federal Reserve Bank ("FRB") or the Federal Home Loan Bank ("FHLB"). At March 31, 2019 and December 31, 2018, the Company held $15.8 million and $18.5 million, respectively, in non-marketable equity securities. These securities are carried at cost due to the restrictions placed on their transferability.

The Company's mortgage-backed U.S. government agency securities consist of both residential and commercial securities, all of which are guaranteed by Fannie Mae ("FNMA"), Freddie Mac ("FHLMC"), or Ginnie Mae (GNMA"). At March 31, 2019 and December 31, 2018 there were no securities of any non-governmental issuer whose aggregate carrying value or estimated fair value exceeded 10% of shareholders' equity. The Company's certificates of deposit consist of domestically issued certificates of deposits in denominations of less than the FDIC insurance limit of $250,000.

Certain investment securities owned by the Company were in an unrealized loss position (i.e., amortized cost basis exceeded the estimated fair value of the securities) as of March 31, 2019 and December 31, 2018. The following table shows the gross unrealized losses and fair value of the Company’s investments aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position (in thousands):



	March 31, 2019
	Less Than Twelve Months				Twelve Months or Greater				Total
	Estimated Fair Value		Unrealized Loss		Estimated Fair Value		Unrealized Loss		Estimated Fair Value		Unrealized Loss
Securities available-for-sale:
Obligations of states and political subdivisions	$	832	$	3	$	20,922	$	282	$	21,754	$	285
Mortgage-backed securities:
U.S. Government agencies	5,654		2		343,082		6,944		348,736		6,946
Trust preferred securities	3,972		569		—		—		3,972		569
Corporate securities	1,020		1		—		—		1,020		1
Investment funds	1,500		50		—		—		1,500		50
Total available-for-sale	$	12,978	$	625	$	364,004	$	7,226	$	376,982	$	7,851

Securities held-to-maturity:
Mortgage-backed securities:
U.S. Government agencies	$	—	$	—	$	5,896	$	99	$	5,896	$	99
Total held-to-maturity	$	—	$	—	$	5,896	$	99	$	5,896	$	99



	December 31, 2018
	Less Than Twelve Months				Twelve Months or Greater				Total
	Estimated Fair Value		Unrealized Loss		Estimated Fair Value		Unrealized Loss		Estimated Fair Value		Unrealized Loss
Securities available-for-sale:
Obligations of states and political subdivisions	$	11,837	$	272	$	22,068	$	780	$	33,905	$	1,052
Mortgage-backed securities:
U.S. Government agencies	84,975		1,593		282,560		11,398		367,535		12,991
Corporate securities	12,995		167		—		—		12,995		167
Investment funds	1,500		67		—		—		1,500		67
Total available-for-sale	$	111,307	$	2,099	$	304,628	$	12,178	$	415,935	$	14,277

Securities held-to-maturity:
Mortgage-backed securities
U.S. Government agencies	$	28,274	$	126	$	5,960	$	168	$	34,234	$	294
Total held-to-maturity	$	28,274	$	126	$	5,960	$	168	$	34,234	$	294

During the three months ended March 31, 2019 and 2018, the Company had no credit-related net investment impairment losses. At March 31, 2019, the cumulative amount of credit-related investment impairment losses that have been recognized by the Company on its equity securities that remain in the Company's investment portfolio as of that date was $1.8 million.

Declines in the fair value of held-to-maturity and available-for-sale securities below their cost that are deemed to be other-than-temporary would be reflected in earnings as realized losses. In estimating other-than-temporary impairment losses, management considers, among other things (i) the length of time and the extent to which the fair value has been less than cost; (ii) the financial condition, capital strength, and near-term (within 12 months) prospects of the issuer, including any specific events which may influence the operations of the issuer such as changes in technology that may impair the earnings potential of the investment or the discontinuance of a segment of the business that may affect the future earnings potential; (iii) the historical volatility in the market value of the investment and/or the liquidity or illiquidity of the investment; (iv) adverse conditions specifically related to the security, an industry, or a geographic area; and (v) the intent to sell the investment security and if it’s more likely than not that the Company will not have to sell the security before recovery of its cost basis. In addition, management also employs a continuous monitoring process in regards to its marketable equity securities, specifically its portfolio of regional community bank holdings. Although the regional community bank stocks that are owned by the Company are publicly traded, the trading activity for these stocks is minimal, with trading volumes of less than 0.2% of each respective company being traded on a daily basis. As part of management’s review process for these securities, management reviews the financial condition of each respective regional community bank for any indications of financial weakness.

Management has the ability and intent to hold the securities classified as held-to-maturity until they mature, at which time the Company expects to receive full value for the securities. Furthermore, as of March 31, 2019, management does not intend to sell any impaired security and it is not more than likely that it will be required to sell any impaired security before the recovery of its amortized cost basis. The unrealized losses on debt securities are primarily the result of interest rate changes, credit spread fluctuations on agency-issued mortgage-related securities, general financial market uncertainty and unprecedented market volatility. These conditions should not prohibit the Company from receiving its contractual principal and interest payments on its debt securities. The fair value is expected to recover as the securities approach their maturity date or repricing date. As of March 31, 2019, management believes the unrealized losses detailed in the table above are temporary and no additional impairment loss has been recognized in the Company’s consolidated income statement. Should the impairment of any of these securities become other-than-temporary, the cost basis of the investment will be reduced and the resulting loss will be recognized in net income in the period the other-than-temporary impairment is identified, while any noncredit loss will be recognized in other comprehensive income.

The amortized cost and estimated fair value of debt securities at March 31, 2019, by contractual maturity, are shown in the following table (in thousands). Expected maturities will differ from contractual maturities because the issuers of the securities may have the right to prepay obligations without prepayment penalties. Mortgage-backed securities have been allocated to their respective maturity groupings based on their contractual maturity.



	Amortized Cost		Estimated Fair Value
Available-for-Sale Debt Securities
Due in one year or less	$	3,238	$	3,241
Due after one year through five years	18,566		18,776
Due after five years through ten years	156,128		156,585
Due after ten years	571,761		571,268
Total	$	749,693	$	749,870

Held-to-Maturity Debt Securities
Due in one year or less	$	—	$	—
Due after one year through five years	—		—
Due after five years through ten years	4,929		5,230
Due after ten years	50,397		50,855
Total	$	55,326	$	56,085

Gross gains and gross losses recognized by the Company from investment security transactions are summarized in the table below (in thousands):



	Three months ended March 31,
	2019			2018
Gross unrealized gains recognized on securities still held	$	143		$	283
Gross unrealized losses recognized on securities still held	(68		)	(3		)
Net unrealized gains (losses) recognized on securities still held	$	75		$	280

Gross realized gains on securities sold	$	89		$	—
Gross realized losses on securities sold	(1		)	—
Net investment security gains	$	88		$	—

The carrying value of securities pledged to secure public deposits and for other purposes as required or permitted by law approximated $462 million and $510 million at March 31, 2019 and December 31, 2018, respectively.