Securities to be held for indefinite periods, but not intended to be held to maturity, are classified as available for sale and carried at fair value. Securities held for indefinite periods include securities that management intends to use as part of its asset and liability management strategy and that may be sold in response to liquidity needs, changes in interest rates, resultant prepayment risk, and other factors related to interest rate and resultant prepayment risk changes. Securities to be held to maturity are carried at amortized cost.

Realized gains and losses on dispositions are based on the net proceeds and the adjusted book value of the securities sold, using the specific identification method. Unrealized gains and losses on investment securities available for sale are based on the difference between book value and fair value of each security. These gains and losses are credited or charged to other comprehensive income (loss), whereas realized gains and losses flow through Mid Penn’s consolidated statements of income.

ASC Topic 320, Investments – Debt Securities, clarifies the interaction of the factors that should be considered when determining whether a debt security is other-than-temporarily impaired. For debt securities, management must assess whether (a) it has the intent to sell the security and (b) it is more likely than not that it will be required to sell the security prior to its anticipated recovery. These steps are done before assessing whether the entity will recover the cost basis of the investment.

In instances when a determination is made that other-than-temporary impairment exists but the investor does not intend to sell the debt security and it is not more likely than not that it will be required to sell the debt security prior to its anticipated recovery, this guidance changes the presentation and amount of the other-than-temporary impairment recognized in the income statement. The other-than-temporary impairment is separated into (a) the amount of the total other-than-temporary impairment related to a decrease in cash flows expected to be collected from the debt security (the credit loss) and (b) the amount of the total other-than-temporary impairment related to all other factors. The amount of the total other-than-temporary impairment related to the credit loss is recognized in earnings. The amount of the total other-than-temporary impairment related to all other factors is recognized in other comprehensive income (loss).

In assessing potential other-than-temporary impairment for equity securities, consideration is given to management’s intent and ability to hold the securities until recovery of unrealized losses. Mid Penn had no other-than-temporary impaired debt or equity securities in 2018, 2017, and 2016.

Beginning January 1, 2018, upon adoption of ASU 2016-01, equity securities with readily determinable fair values are stated at fair value within other assets on the balance sheet, with realized and unrealized gains and losses reported in other expense on the income statement. For periods prior to January 1, 2018, equity securities were classified as available-for-sale and stated at fair value within investment securities available-for-sale on the balance sheet, with unrealized gains and losses reported as a separate component of accumulated other comprehensive loss, net of tax. Equity securities without readily determinable fair values are recorded at cost less any impairment.

At December 31, 2018 and 2017, amortized cost, fair value, and unrealized gains and losses on investment securities are as follows:

(Dollars in thousands)
	Amortized		Unrealized		Unrealized		Fair
December 31, 2018	Cost		Gains		Losses		Value
Available for sale securities:
U.S. Treasury and U.S. government agencies	$	43,270	$	10	$	1,708	$	41,572
Mortgage-backed U.S. government agencies		39,865		—		1,016		38,849
State and political subdivision obligations		30,642		11		1,397		29,256
Corporate debt securities		2,250		—		4		2,246
Total available for sale securities		116,027		21		4,125		111,923
Held to maturity securities:
U.S. Treasury and U.S. government agencies	$	16,985	$	14	$	143	$	16,856
Mortgage-backed U.S. government agencies		65,812		46		1,310		64,548
State and political subdivision obligations		84,034		457		842		83,649
Corporate debt securities		1,539		—		10		1,529
Total held to maturity securities		168,370		517		2,305		166,582
Total	$	284,397	$	538	$	6,430	$	278,505

(Dollars in thousands)
	Amortized		Unrealized		Unrealized		Fair
December 31, 2017	Cost		Gains		Losses		Value
Available for sale securities:
U.S. Treasury and U.S. government agencies	$	40,125	$	—	$	1,395	$	38,730
Mortgage-backed U.S. government agencies		26,398		2		569		25,831
State and political subdivision obligations		27,775		7		739		27,043
Corporate debt securities		1,350		5		—		1,355
Total available-for-sale debt securities	$	95,648	$	14	$	2,703	$	92,959
Available-for-sale equity securities:
Equity securities		550		—		44		506
Total available-for-sale equity securities	$	550	$	—	$	44	$	506
Held-to-maturity debt securities:
U.S. Treasury and U.S. government agencies	$	10,984	$	—	$	90	$	10,894
Mortgage-backed U.S. government agencies		53,472		—		523		52,949
State and political subdivision obligations		36,900		41		301		36,640
Total held-to-maturity debt securities		101,356		41		914		100,483
Total	$	197,554	$	55	$	3,661	$	193,948

Estimated fair values of debt securities are based on quoted market prices, where applicable. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments, adjusted for differences between the quoted instruments and the instruments being valued.

Equity securities consist of Community Reinvestment Act funds and, as of December 31, 2018 and December 31, 2017, Mid Penn had $492,000 and $506,000, respectively, in equity securities recorded at fair value. Prior to January 1, 2018, equity securities were stated at fair value with unrealized gains and losses reported as a separate component of accumulated other comprehensive loss, net of tax. At December 31, 2017, net unrealized gains of $44,000 had been recognized in accumulated other comprehensive loss. On January 1, 2018, with the adoption of ASU 2016-01, these unrealized gains and losses were reclassified out of accumulated other comprehensive loss and into retained earnings and subsequent changes in fair value are now recognized in net income and the fair value of securities is presented in other assets. During the year ended December 31, 2018, no equity securities were sold and $15,000 of loss related to the change in fair value of the equity securities was recorded in other expense.

Investment securities having a fair value of $214,239,000 at December 31, 2018, and $141,465,000 at December 31, 2017, were pledged primarily to secure public deposits.

The following table presents gross unrealized losses and fair value of investments aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 31, 2018 and 2017.

(Dollars in thousands)	Less Than 12 Months					12 Months or More					Total
December 31, 2018	Number of Securities	Fair Value		Unrealized Losses		Number of Securities	Fair Value		Unrealized Losses		Number of Securities	Fair Value		Unrealized Losses
Available for sale securities:
U.S. Treasury and U.S. government agencies	0	$	—	$	—	21	$	38,386	$	1,708	21	$	38,386	$	1,708
Mortgage-backed U.S. government agencies	11		16,740		163	19		22,093		853	30		38,833		1,016
State and political subdivision obligations	3		1,751		23	51		24,520		1,374	54		26,271		1,397
Corporate debt securities	2		1,996		4	0		—		—	2		1,996		4
Total temporarily impaired available for sale securities	16		20,487		190	91		84,999		3,935	107		105,486		4,125

Held to maturity securities:
U.S. Treasury and U.S. government agencies	1	$	1,985	$	10	3	$	8,852	$	133	4	$	10,837	$	143
Mortgage-backed U.S. government agencies	10		16,165		79	35		42,431		1,231	45		58,596		1,310
State and political subdivision obligations	26		11,321		111	77		29,460		731	103		40,781		842
Corporate debt securities	1		1,529		10	0		—		—	1		1,529		10
Total temporarily impaired held to maturity securities	38		31,000		210	115		80,743		2,095	153		111,743		2,305
Total	54	$	51,487	$	400	206	$	165,742	$	6,030	260	$	217,229	$	6,430


(Dollars in thousands)	Less Than 12 Months					12 Months or More					Total
December 31, 2017	Number of Securities	Fair Value		Unrealized Losses		Number of Securities	Fair Value		Unrealized Losses		Number of Securities	Fair Value		Unrealized Losses
Available for sale securities:
U.S. Treasury and U.S. government agencies	3	$	5,008	$	184	18	$	33,722	$	1,211	21	$	38,730	$	1,395
Mortgage-backed U.S. government agencies	4		5,267		75	15		20,497		494	19		25,764		569
State and political subdivision obligations	11		6,144		102	40		19,091		637	51		25,235		739
Corporate debt securities	0		—		—	0		—		—	0		—		—
Equity securities	0		—		—	1		506		44	1		506		44
Total temporarily impaired available for sale securities	18		16,419		361	74		73,816		2,386	92		90,235		2,747

Held to maturity securities:
U.S. Treasury and U.S. government agencies	0	$	—	$	—	4	$	10,894	$	90	4	$	10,894	$	90
Mortgage-backed U.S. government agencies	0		—		—	35		52,949		523	35		52,949		523
State and political subdivision obligations	0		—		—	77		29,976		301	77		29,976		301
Total temporarily impaired held to maturity securities	0		—		—	116		93,819		914	116		93,819		914
Total	18	$	16,419	$	361	190	$	167,635	$	3,300	208	$	184,054	$	3,661

Management evaluates securities for other-than-temporary impairment on a quarterly basis and more frequently when economic or market concerns warrant such evaluation. Consideration is given to the length of time and the extent to which the fair value has been less than cost, and the financial condition and near term prospects of the issuer. In addition, for debt securities, Mid Penn considers (a) whether management has the intent to sell the security, (b) it is more likely than not that management will be required to sell the security prior to its anticipated recovery, and (c) whether management expects to recover the entire amortized cost basis. For equity securities, management considers the intent and ability to hold securities until recovery of unrealized losses.

The majority of the investment portfolio is comprised of mortgage-backed U.S. government agencies and state and political subdivision obligations. For the investment securities with an unrealized loss, Mid Penn has concluded, based on its analysis, that the unrealized losses in the investments are primarily caused by the movement of interest rates, and the contractual terms of these investments do not permit the issuer to settle the securities at a price less than the par value of the investment.

At December 31, 2018, the majority of the unrealized losses on securities in an unrealized loss position were attributed to state and political subdivision obligations, mortgage-back U.S. government agencies and U.S. Treasury and government agencies. At December 31, 2017, the majority of the unrealized losses on securities in an unrealized loss position were attributed to state and political subdivision obligations and mortgage-back U.S. government agencies. Because Mid Penn does not intend to sell these investments and it is not likely it will be required to sell these investments before a recovery of fair value, which may be maturity, Mid Penn does not consider the securities with unrealized losses to be other-than-temporarily impaired as losses relate primarily to changes in interest rates (based upon the respective securities maturity date relative to the yield curve) and not due to any notable erosion of credit quality.

Gross realized gains and losses on sales of available-for-sale securities for the years ended December 31, 2018, 2017, and 2016 are shown in the table below.

The table below is the maturity distribution of investment securities at amortized cost and fair value at December 31, 2018.