8. Investment Securities

The cost basis and fair values of investment securities are summarized as follows (in thousands):

Investment securities available for sale (AFS):


	September 30, 2019
			Gross		Gross
	Cost		Unrealized		Unrealized		Fair
	Basis		Gains		Losses		Value
US Agency	$	6,209	$	71	$	—	$	6,280
US Agency mortgage- backed securities		83,830		1,760		(100)		85,490
Municipal		13,781		642		(8)		14,415
Corporate bonds		37,290		317		(392)		37,215
Total	$	141,110	$	2,790	$	(500)	$	143,400

Investment securities held to maturity (HTM):


	September 30, 2019
			Gross		Gross
	Cost		Unrealized		Unrealized		Fair
	Basis		Gains		Losses		Value
US Agency mortgage- backed securities	$	9,061	$	277	$	(6)	$	9,332
Municipal		24,205		1,259		(42)		25,422
Corporate bonds and other securities		6,033		62		(36)		6,059
Total	$	39,299	$	1,598	$	(84)	$	40,813

Investment securities available for sale (AFS):


	December 31, 2018
			Gross		Gross
	Cost		Unrealized		Unrealized		Fair
	Basis		Gains		Losses		Value
US Agency	$	7,685	$	4	$	(160)	$	7,529
US Agency mortgage- backed securities		90,169		516		(1,158)		89,527
Municipal		13,301		114		(234)		13,181
Corporate bonds		37,359		131		(996)		36,494
Total	$	148,514	$	765	$	(2,548)	$	146,731

Investment securities held to maturity (HTM):


	December 31, 2018
			Gross		Gross
	Cost		Unrealized		Unrealized		Fair
	Basis		Gains		Losses		Value
US Agency mortgage- backed securities	$	9,983	$	78	$	(132)	$	9,929
Municipal		24,740		131		(404)		24,467
Corporate bonds and other securities		6,037		13		(122)		5,928
Total	$	40,760	$	222	$	(658)	$	40,324

Maintaining investment quality is a primary objective of the Company’s investment policy which, subject to certain limited exceptions, prohibits the purchase of any investment security below a Moody’s Investor’s Service or Standard & Poor’s rating of “A.” At September 30, 2019, 55.6% of the portfolio was rated “AAA” as compared to 57.5% at December 31, 2018. Approximately 9.1% of the portfolio was either rated below “A” or unrated at September 30, 2019 as compared to 10.0% at December 31, 2018.

The Company sold $2.8 million AFS securities in the third quarter of 2019 resulting in $88,000 of gross investment security gains and sold $3.4 million AFS securities in the first nine months of 2019 resulting in $118,000 of gross investment security gains. The Company sold no AFS securities during the third quarter of 2018. Total proceeds from the sale of AFS securities for the first nine months of 2018 were $4.5 million resulting in $15,000 of gross investment security gains and $163,000 of gross investment security losses.

The carrying value of securities, both available for sale and held to maturity, pledged to secure public and trust deposits was $126,815,000 at September 30, 2019 and $115,536,000 at December 31, 2018.

The following tables present information concerning investments with unrealized losses as of September 30, 2019 and December 31, 2018 (in thousands):

Total investment securities:


	September 30, 2019
	Less than 12 months				12 months or longer				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
US Agency	$	—	$	—	$	—	$	—	$	—	$	—
US Agency mortgage-backed securities		4,602		(20)		10,804		(86)		15,406		(106)
Municipal		943		(3)		1,130		(47)		2,073		(50)
Corporate bonds and other securities		3,051		(31)		16,145		(397)		19,196		(428)
Total	$	8,596	$	(54)	$	28,079	$	(530)	$	36,675	$	(584)

Total investment securities:


	December 31, 2018
	Less than 12 months				12 months or longer				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
US Agency	$	244	$	(6)	$	5,631	$	(154)	$	5,875	$	(160)
US Agency mortgage-backed securities		17,718		(177)		39,983		(1,113)		57,701		(1,290)
Municipal		6,601		(71)		15,880		(567)		22,481		(638)
Corporate bonds and other securities		15,221		(440)		17,038		(678)		32,259		(1,118)
Total	$	39,784	$	(694)	$	78,532	$	(2,512)	$	118,316	$	(3,206)

The unrealized losses are primarily a result of increases in market yields from the time of purchase. In general, as market yields rise, the value of securities will decrease; as market yields fall, the fair value of securities will increase. There are 51 positions that are considered temporarily impaired at September 30, 2019. Management generally views changes in fair value caused by changes in interest rates as temporary; therefore, these securities have not been classified as other-than-temporarily impaired. Management has also concluded that based on current information we expect to continue to receive scheduled interest payments as well as the entire principal balance. Furthermore, management does not intend to sell these securities and does not believe it will be required to sell these securities before they recover in value or mature.

Contractual maturities of securities at September 30, 2019 are shown below (in thousands). Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without prepayment penalties. The weighted average duration of the total investment securities portfolio at September 30, 2019 is 35.1 months and is lower than the duration at December 31, 2018 which was 44.1 months. The duration remains within our internal established guideline range of 24 to 60 months which we believe is appropriate to maintain proper levels of liquidity, interest rate risk, market valuation sensitivity and profitability.

Total investment securities:


	September 30, 2019
	Available for sale				Held to maturity
	Cost		Fair		Cost		Fair
	Basis		Value		Basis		Value
Within 1 year	$	2,500	$	2,506	$	—	$	—
After 1 year but within 5 years		21,374		21,485		6,516		6,565
After 5 years but within 10 years		40,360		41,005		19,662		20,618
After 10 years but within15 years		24,722		25,248		8,085		8,481
Over 15 years		52,154		53,156		5,036		5,149
Total	$	141,110	$	143,400	$	39,299	$	40,813

As of September 30, 2019, the Company reported $354,000 of equity securities within Other assets on the Consolidated Balance Sheets. These equity securities are held within a nonqualified deferred compensation plan in which a select group of executives of the Company can participate. An eligible executive can defer a certain percentage of their current salary to be placed into the plan and held within a rabbi trust. The assets of the rabbi trust are invested in various publicly listed mutual funds. The gain or loss on the equity securities (both realized and unrealized) is reported within Other income on the Consolidated Statements of Operations. For the third quarter and first nine months of 2019, the Company recorded a realized gain of $9,000 and an unrealized gain of $3,000 on these equity securities. Additionally, the Company has recognized a deferred compensation liability, which is equal to the balance of the equity securities and is reported within Other liabilities on the Consolidated Balance Sheets.