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Investments | 9 Months Ended
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Sep. 30, 2018
Investments [Abstract] |
Investments | Investments The amortized cost and estimated fair values of the Company's securities are shown in the following table (in thousands):
| September 30, 2018 | December 31, 2017
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 | $ | 1 |  | $ | — |  | $ | — |  | $ | 1 |  | $ | 2 |  | $ | — |  | $ | — |  | $ | 2 |
Obligations of states and |  |  |  |  |  |  |  |  |  |  |  |  |
political subdivisions | 92,972 |  | 265 |  | 1,673 |  | 91,564 |  | 94,552 |  | 2,051 |  | 407 |  | 96,196 |
Mortgage-backed securities: |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. government agencies | 469,810 |  | 222 |  | 22,286 |  | 447,746 |  | 425,559 |  | 1,093 |  | 7,305 |  | 419,347 |
Private label | 523 |  | 6 |  | — |  | 529 |  | 649 |  | 3 |  | — |  | 652 |
Trust preferred securities | 4,772 |  | 26 |  | — |  | 4,798 |  | 4,764 |  | 26 |  | 54 |  | 4,736 |
Corporate securities(1) | 17,086 |  | 7 |  | 172 |  | 16,921 |  | 21,916 |  | 475 |  | 123 |  | 22,268 |
Total Debt Securities | 585,164 |  | 526 |  | 24,131 |  | 561,559 |  | 547,442 |  | 3,648 |  | 7,889 |  | 543,201 |
Marketable equity securities | — |  | — |  | — |  | — |  | 2,136 |  | 3,563 |  | — |  | 5,699 |
Investment funds | 1,526 |  | — |  | 82 |  | 1,444 |  | 1,525 |  | — |  | 36 |  | 1,489 |
Total Securities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Available-for-Sale | $ | 586,690 |  | $ | 526 |  | $ | 24,213 |  | $ | 563,003 |  | $ | 551,103 |  | $ | 7,211 |  | $ | 7,925 |  | $ | 550,389 |
Securities held-to-maturity: |  |  |  |  |  |  |  |
Mortgage-backed securities: |  |  |  |  |  |  |  |
U.S. government agencies | $ | 53,812 |  | $ | — |  | $ | 971 |  | $ | 52,841 |  | $ | 60,449 |  | $ | 1,222 |  | $ | 25 |  | $ | 61,646 |
Trust preferred securities | 4,000 |  | — |  | — |  | 4,000 |  | 4,000 |  | — |  | — |  | 4,000 |
Total Securities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Held-to-Maturity | $ | 57,812 |  | $ | — |  | $ | 971 |  | $ | 56,841 |  | $ | 64,449 |  | $ | 1,222 |  | $ | 25 |  | $ | 65,646 |
Other investment securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Non-marketable equity securities | $ | 17,316 |  | $ | — |  | $ | — |  | $ | 17,316 |  | $ | 14,147 |  | $ | — |  | $ | — |  | $ | 14,147 |
Marketable equity securities(1) | 11,559 |  | — |  | — |  | 11,559 |  | — |  | — |  | — |  | — |
Total Other Investment |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Securities | $ | 28,875 |  | $ | — |  | $ | — |  | $ | 28,875 |  | $ | 14,147 |  | $ | — |  | $ | — |  | $ | 14,147 |
(1) Effective January 1, 2018, the Company's equity and perpetual preferred securities are measured at fair value through net income.
Marketable equity securities consist of investments made by the Company in equity positions of various regional 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%). Securities with limited marketability, such as stock in the Federal Reserve Bank ("Federal Reserve") and the Federal Home Loan Bank ("FHLB"), are carried at cost and are reported as non-marketable equity securities in the table above. Certain investment securities owned by the Company are in an unrealized loss position (i.e., amortized cost basis exceeded the estimated fair value of the securities). 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):
| September 30, 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 | $ | 45,560 |  | $ | 653 |  | $ | 19,197 |  | $ | 1,020 |  | $ | 64,757 |  | $ | 1,673 |
Mortgage-backed securities: |  |  |  |  |  |  |  |
U.S. Government agencies | 239,964 |  | 8,325 |  | 191,172 |  | 13,961 |  | 431,136 |  | 22,286 |
Corporate securities | 14,922 |  | 172 |  | — |  | — |  | 14,922 |  | 172 |
Investment funds | 1,500 |  | 82 |  | — |  | — |  | 1,500 |  | 82 |
Total available-for-sale | $ | 301,946 |  | $ | 9,232 |  | $ | 210,369 |  | $ | 14,981 |  | $ | 512,315 |  | $ | 24,213 |
Securities held-to-maturity: |  |  |  |  |  |
Mortgage-backed securities |  |  |  |  |  |
U.S. Government agencies | $ | 52,841 |  | $ | 971 |  | $ | — |  | $ | — |  | $ | 52,841 |  | $ | 971 |
Total held-to-maturity | $ | 52,841 |  | $ | 971 |  | $ | — |  | $ | — |  | $ | 52,841 |  | $ | 971 |
| December 31, 2017
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 | $ | 4,913 |  | $ | 28 |  | $ | 19,440 |  | $ | 379 |  | $ | 24,353 |  | $ | 407 |
Mortgage-backed securities: |  |  |  |  |  |  |  |
U.S. Government agencies | 172,807 |  | 1,887 |  | 140,226 |  | 5,418 |  | 313,033 |  | 7,305 |
Trust preferred securities | 4,475 |  | 54 |  | — |  | — |  | 4,475 |  | 54 |
Corporate securities | 3,357 |  | 49 |  | 2,350 |  | 74 |  | 5,707 |  | 123 |
Investment funds | 1,500 |  | 36 |  | — |  | — |  | 1,500 |  | 36 |
Total available-for-sale | $ | 187,052 |  | $ | 2,054 |  | $ | 162,016 |  | $ | 5,871 |  | $ | 349,068 |  | $ | 7,925 |
Securities held-to-maturity: |  |  |  |  |  |
Mortgage-backed securities |  |  |  |  |  |
U.S. Government agencies | $ | 7,182 |  | $ | 25 |  | $ | — |  | $ | — |  | $ | 7,182 |  | $ | 25 |
Total held-to-maturity | $ | 7,182 |  | $ | 25 |  | $ | — |  | $ | — |  | $ | 7,182 |  | $ | 25 |
During the nine months ended September 30, 2018 and 2017, the Company had no investment impairment losses. At September 30, 2018, 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 $1.6 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 0.5% 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 September 30, 2018, 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 September 30, 2018, 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 September 30, 2018, 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 | $ | 2,685 |  | $ | 2,684 |
Due after one year through five years | 10,504 |  | 10,493 |
Due after five years through ten years | 81,069 |  | 76,996 |
Due after ten years | 490,906 |  | 471,386 |
Total | $ | 585,164 |  | $ | 561,559 |
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 | — |  | — |
Due after ten years | 57,812 |  | 56,841 |
Total | $ | 57,812 |  | $ | 56,841 |
The table below presents the unrealized gains (losses) that were recognized in "Other Income" in the consolidated statements of income during the three and nine months ended September 30, 2018 as a result of the change in the fair value of the Company's equity and perpetual preferred securities due to the adoption of ASU 2016-01 (in thousands). Additionally, on January 1, 2018, the Company reclassified $2.7 million, net of deferred taxes, from other comprehensive income to retained earnings on the consolidated balance sheets to recognize the prior period fair value impact of these securities. During the nine months ended September 30, 2017, the Company realized $4.3 million of investment gains. These gains represented partial recoveries of impairment charges previously recognized on pooled trust preferred securities. As a result of these sales, the Company no longer holds any pooled trust preferred securities in its investment portfolio.
| Three months ended September 30, | Nine months ended September 30,
| 2018 | 2017 | 2018 | 2017
Equity and perpetual preferred securities: |  |  |  |
Unrealized gains recognized on securities still held | $ | 383 |  | $ | — |  | $ | 1,155 |  | $ | — |
Gross realized gains on securities sold | $ | — |  | $ | — |  | — |  | 4,276 |
Gross realized losses on securities sold | — |  | — |  | — |  | — |
Net investment security gains | $ | — |  | $ | — |  | $ | — |  | $ | 4,276 |
The carrying value of securities pledged to secure public deposits and for other purposes as required or permitted by law approximated $490 million and $429 million at September 30, 2018 and December 31, 2017, respectively.

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