4. Investment securities:

The amortized cost and fair value of investment securities aggregated by investment category at September 30, 2018 and December 31, 2017 are summarized as follows:


			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
September 30, 2018	Cost		Gains		Losses		Value
Available-for-sale:
U.S. Treasury securities	$	25,941			$	711	$	25,230
U.S. Government-sponsored enterprises		95,089				3,317		91,772
State and municipals:
Taxable		13,576	$	237				13,813
Tax-exempt		90,535		495		1,061		89,969
Residential Mortgage-backed securities:
U.S. Government agencies		13,719				134		13,585
U.S. Government-sponsored enterprises		35,284		1		811		34,474
Commercial Mortgage-backed securities:
U.S. Government-sponsored enterprises		6,281				330		5,951
Total	$	280,425	$	733	$	6,364	$	274,794
Held-to-maturity:
Tax-exempt state and municipals	$	6,856	$	2	$	185	$	6,673
Residential Mortgage-backed securities:
U.S. Government agencies		45						45
U.S. Government-sponsored enterprises		1,650		72		5		1,717
Total	$	8,551	$	74	$	190	$	8,435


			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
December 31, 2017	Cost		Gains		Losses		Value
Available-for-sale:
U.S. Treasury securities	$	20,042			$	228	$	19,814
U.S. Government-sponsored enterprises		95,358	$	30		1,740		93,648
State and municipals:
Taxable		14,559		488				15,047
Tax-exempt		103,199		1,136		502		103,833
Residential Mortgage-backed securities:
U.S. Government agencies		14,517		2		85		14,434
U.S. Government-sponsored enterprises		19,752		10		231		19,531
Commercial Mortgage-backed securities:
U.S. Government-sponsored enterprises		6,315				120		6,195
Total	$	273,742	$	1,666	$	2,906	$	272,502
Held-to-maturity:
Tax-exempt state and municipals	$	6,859	$	152	$	13	$	6,998
Residential Mortgage-backed securities:
U.S. Government agencies		54						54
U.S. Government-sponsored enterprises		2,361		138		4		2,495
Total	$	9,274	$	290	$	17	$	9,547

Equity Securities

Our equity securities portfolio consists of stock of two other financial institutions. At September 30, 2018 and December 31, 2017, we had $291 thousand and $46 thousand, 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 Income (“AOCI”), net of tax. At December 31, 2017, net unrealized gains of $3 thousand had been recognized in AOCI. On January 1, 2018, these unrealized gains, net of income tax were reclassified out of AOCI and into retained earnings with subsequent changes in fair value being recognized in net income. At September 30, 2018, the fair value of our equity portfolio exceeded the cost basis by $14. The following is a summary of unrealized and realized gains and losses recognized in net income on equity securities during the three and nine months ended September 30, 2018 (in thousands):

Restricted Investment In Stock

Restricted investment in stock includes Federal Home Loan Bank of Pittsburgh (“FHLB”) with a carrying cost of $7,785 and $8,520 at September 30, 2018 and December 31, 2017, respectively and Atlantic Community Bankers Bank (“ACBB”) stock with a carrying cost of $42 and VISA Class B stock with a carry cost of $0 at September 30, 2018 and December 31, 2017, are included in other assets in the consolidated balance sheets. FHLB and ACBB stock was issued as a requirement to facilitate participation in borrowing and other banking services. The investment in FHLB stock may fluctuate, as it is based on the member banks’ use of FHLB’s services.

Peoples Bank owns 44,982 shares of Visa Class B stock, which was necessary to participate in Visa services in support of the Bank’s credit card, debit card, and related payment programs (permissible activities under banking regulations) as a member institution. Following the resolution of Visa’s covered litigation, shares of Visa’s Class B stock will be converted to Visa Class A shares using a conversion factor (1.6298 as of September 30, 2018), which is periodically adjusted to reflect VISA’s ongoing litigation costs. There is a very limited market for this stock, as only current owners of Class B shares are permitted to transact in Class B. Due to the lack of orderly trades and public information of such trades, Visa Class B stock has no readily determinable fair value.

These restricted investments are carried at cost and evaluated for other-than-temporary impairment (“OTTI”) periodically. As of September 30, 2018, there was no OTTI associated with these investments.

The maturity distribution of the fair value, which is the net carrying amount, of the debt securities classified as available-for-sale at September 30, 2018, is summarized as follows:


	Fair
September 30, 2018	Value
Within one year	$	34,805
After one but within five years		156,767
After five but within ten years		16,149
After ten years		13,063
		220,784
Mortgage-backed securities		54,010
Total	$	274,794

The maturity distribution of the amortized cost and fair value, of debt securities classified as held-to-maturity at September 30, 2018, is summarized as follows:


	Amortized		Fair
September 30, 2018	Cost		Value
Within one year
After one but within five years
After five but within ten years
After ten years	$	6,856	$	6,673
		6,856		6,673
Mortgage-backed securities		1,695		1,762
Total	$	8,551	$	8,435

Securities with a carrying value of $164,516 and $163,936 at September 30, 2018 and December 31, 2017, respectively, were pledged to secure public deposits and certain other deposits as required or permitted by law.

Securities and short-term investment activities are conducted with a diverse group of government entities, corporations and state and local municipalities. The counterparty’s creditworthiness and type of collateral is evaluated on a case-by-case basis. At September 30, 2018 and December 31, 2017, there were no significant concentrations of credit risk from any one issuer, with the exception of U.S. Government agencies and sponsored enterprises, that exceeded 10.0 percent of stockholders’ equity.

The fair value and gross unrealized losses of investment securities with unrealized losses for which an OTTI has not been recognized at September 30, 2018 and December 31, 2017, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position, are summarized as follows:


	Less Than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
September 30, 2018	Value		Losses		Value		Losses		Value		Losses
U.S. Treasury securities	$	8,711	$	169	$	16,519	$	542	$	25,230	$	711
U.S. Government-sponsored enterprises		16,813		337		74,959		2,980		91,772		3,317
State and municipals:
Tax-exempt		52,220		893		14,529		353		66,749		1,246
Residential Mortgage-backed securities:
U.S. Government agencies		6,423		33		7,162		101		13,585		134
U.S. Government-sponsored enterprises		21,705		322		13,261		494		34,966		816
Commercial Mortgage-backed securities:
U.S. Government-sponsored enterprises						5,951		330		5,951		330
Total	$	105,872	$	1,754	$	132,381	$	4,800	$	238,253	$	6,554


	Less Than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
December 31, 2017	Value		Losses		Value		Losses		Value		Losses
U.S. Treasury securities	$	17,350	$	170	$	2,464	$	58	$	19,814	$	228
U.S. Government-sponsored enterprises		39,096		445		51,365		1,295		90,461		1,740
State and municipals:
Tax-exempt		54,788		454		3,808		61		58,596		515
Residential Mortgage-backed securities:
U.S. Government agencies		9,484		39		3,968		46		13,452		85
U.S. Government-sponsored enterprises		12,537		103		6,504		132		19,041		235
Commercial Mortgage-backed securities:
U.S. Government-sponsored enterprises		6,195		120						6,195		120
Total	$	139,450	$	1,331	$	68,109	$	1,592	$	207,559	$	2,923

The Company had 209 investment securities, consisting of 118 tax-exempt state and municipal obligations, nine U.S. Treasury securities, 38 U.S. Government-sponsored enterprise securities, and 44 mortgage-backed securities that were in unrealized loss positions at September 30, 2018. Of these securities, six U.S. Treasury securities, 30 U.S. Government-sponsored enterprise securities, 23 tax-exempt state and municipal obligations, and 28 mortgage-backed securities were in a continuous unrealized loss position for twelve months or more. Management does not consider the unrealized losses on the debt securities, as a result of changes in interest rates, to be OTTI based on historical evidence that indicates the cost of these securities is recoverable within a reasonable period of time in relation to normal cyclical changes in the market rates of interest. Moreover, because there has been no material change in the credit quality of the issuers or other events or circumstances that may cause a significant adverse impact on the fair value of these securities, and management does not intend to sell these securities and it is unlikely that the Company will be required to sell these securities before recovery of their amortized cost basis, which may be maturity, the Company does not consider the unrealized losses to be OTTI at September 30, 2018. There was no OTTI recognized for the three or nine months ended September 30, 2018 and 2017.

Three months ended

Nine months ended

September 30, 2018

September 30, 2018

September 30, 2018

Net gains recognized during the period on equity securities

Less: Net gains and (losses) recognized during the period on equity securities sold during the period

Unrealized gains recognized during the reporting period on equity securities still held at the reporting date