3.	Securities

Securities available for sale consist of the following:

	Amortized		Unrealized
	Cost		Gains		Losses		Fair Value
	(In thousands)
September 30, 2017
U.S. agency	$	26,455	$	210	$	39	$	26,626
U.S. agency residential mortgage-backed		135,293		1,331		515		136,109
U.S. agency commercial mortgage-backed		10,767		84		115		10,736
Private label mortgage-backed		26,703		518		231		26,990
Other asset backed		108,128		319		108		108,339
Obligations of states and political subdivisions		176,087		1,708		619		177,176
Corporate		57,213		853		66		58,000
Trust preferred		2,928		-		128		2,800
Foreign government		2,098		-		9		2,089
Total	$	545,672	$	5,023	$	1,830	$	548,865

December 31, 2016
U.S. agency	$	28,909	$	159	$	80	$	28,988
U.S. agency residential mortgage-backed		156,053		1,173		937		156,289
U.S. agency commercial mortgage-backed		12,799		28		195		12,632
Private label mortgage-backed		35,035		216		524		34,727
Other asset backed		146,829		271		391		146,709
Obligations of states and political subdivisions		175,180		478		4,759		170,899
Corporate		56,356		223		399		56,180
Trust preferred		2,922		-		343		2,579
Foreign government		1,626		-		13		1,613
Total	$	615,709	$	2,548	$	7,641	$	610,616

We adopted ASU 2017-08 during the first quarter of 2017 using a modified retrospective approach. As a result, the amortized cost of securities as of January 1, 2017 was adjusted lower by $0.46 million (see note #2).

Our investments’ gross unrealized losses and fair values aggregated by investment type and length of time that individual securities have been at a continuous unrealized loss position follows:

	Less Than Twelve Months				Twelve Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(In thousands)

September 30, 2017
U.S. agency	$	4,819	$	21	$	4,947	$	18	$	9,766	$	39
U.S. agency residential mortgage-backed		24,116		215		27,817		300		51,933		515
U.S. agency commercial mortgage-backed		1,815		22		3,933		93		5,748		115
Private label mortgage- backed		3,423		26		3,163		205		6,586		231
Other asset backed		12,756		18		16,298		90		29,054		108
Obligations of states and political subdivisions		42,186		447		13,787		172		55,973		619
Corporate		8,654		22		2,458		44		11,112		66
Trust preferred		-		-		2,800		128		2,800		128
Foreign government		2,089		9		-		-		2,089		9
Total	$	99,858	$	780	$	75,203	$	1,050	$	175,061	$	1,830

December 31, 2016
U.S. agency	$	4,179	$	41	$	8,217	$	39	$	12,396	$	80
U.S. agency residential mortgage-backed		62,524		732		20,857		205		83,381		937
U.S. agency commercial mortgage-backed		6,079		194		143		1		6,222		195
Private label mortgage-backed		20,545		281		1,413		243		21,958		524
Other asset backed		52,958		172		17,763		219		70,721		391
Obligations of states and political subdivisions		113,078		4,014		14,623		745		127,701		4,759
Corporate		25,546		292		2,810		107		28,356		399
Trust preferred		-		-		2,579		343		2,579		343
Foreign government		1,613		13		-		-		1,613		13
Total	$	286,522	$	5,739	$	68,405	$	1,902	$	354,927	$	7,641

Our portfolio of securities available for sale is reviewed quarterly for impairment in value. In performing this review management considers (1) the length of time and extent that fair value has been less than cost, (2) the financial condition and near term prospects of the issuer, (3) the impact of changes in market interest rates on the market value of the security and (4) an assessment of whether we intend to sell, or it is more likely than not that we will be required to sell, a security in an unrealized loss position before recovery of its amortized cost basis. For securities that do not meet the aforementioned recovery criteria, the amount of impairment recognized in earnings is limited to the amount related to credit losses, while impairment related to other factors is recognized in other comprehensive income.

U.S. agency, U.S. agency residential mortgage-backed securities and U.S. agency commercial mortgage backed securities — at September 30, 2017, we had 33 U.S. agency, 109 U.S. agency residential mortgage-backed and 10 U.S. agency commercial mortgage-backed securities whose fair market value is less than amortized cost. The unrealized losses are largely attributed to increases in interest rates since acquisition and widening spreads to Treasury bonds. As management does not intend to liquidate these securities and it is more likely than not that we will not be required to sell these securities prior to recovery of these unrealized losses, no declines are deemed to be other than temporary.

Private label mortgage backed securities — at September 30, 2017, we had 11 of this type of security whose fair value is less than amortized cost. The majority of unrealized losses are attributed to three securities purchased prior to 2016. Two of these three securities has an impairment in excess of 10% and all three of these holdings have been impaired for more than 12 months. The unrealized losses are largely attributable to credit spread widening on these three securities since their acquisition.

These three securities are receiving principal and interest payments. These transactions are pass-through structures, receiving pro rata principal and interest payments from a dedicated collateral pool. The nonreceipt of interest cash flows is not expected and thus not presently considered in our discounted cash flow methodology discussed below.

These three private label mortgage-backed securities are periodically reviewed for other than temporary impairment (“OTTI”) utilizing a cash flow projection. The cash flow analysis forecasts cash flow from the underlying loans in each transaction and then applies these cash flows to the bonds in the securitization. Our cash flow analysis forecasts complete recovery of our cost basis for all three of these securities whose fair value is less than amortized cost.

As management does not intend to liquidate these securities and it is more likely than not that we will not be required to sell these securities prior to recovery of these unrealized losses, no other declines discussed above are deemed to be other than temporary.

Other asset backed — at September 30, 2017, we had 51 other asset backed securities whose fair value is less than amortized cost. The unrealized losses are primarily due to credit spread widening and increases in interest rates since acquisition. As management does not intend to liquidate these securities and it is more likely than not that we will not be required to sell these securities prior to recovery of these unrealized losses, no declines are deemed to be other than temporary.

Obligations of states and political subdivisions — at September 30, 2017, we had 182 municipal securities whose fair value is less than amortized cost. The unrealized losses are primarily due to wider benchmark pricing spreads and increases in interest rates since acquisition. As management does not intend to liquidate these securities and it is more likely than not that we will not be required to sell these securities prior to recovery of these unrealized losses, no declines are deemed to be other than temporary.

Corporate — at September 30, 2017, we had 11 corporate securities whose fair value is less than amortized cost. The unrealized losses are primarily due to credit spread widening and increases in interest rates since acquisition. As management does not intend to liquidate these securities and it is more likely than not that we will not be required to sell these securities prior to recovery of these unrealized losses, no declines are deemed to be other than temporary.

Trust preferred securities — at September 30, 2017, we had three trust preferred securities whose fair value is less than amortized cost. All of our trust preferred securities are single issue securities issued by a trust subsidiary of a bank holding company. The pricing of trust preferred securities has suffered from credit spread widening.

One of the three securities is rated by two major rating agencies as investment grade, while one (a Bank of America issuance) is rated below investment grade by two major rating agencies and the other one is non-rated. The non-rated issue is a relatively small bank and was never rated. The issuer of this non-rated trust preferred security, which had a total amortized cost of $1.0 million and total fair value of $0.9 million as of September 30, 2017, continues to have satisfactory credit metrics and make interest payments.

The following table breaks out our trust preferred securities in further detail as of September 30, 2017 and December 31, 2016:

	September 30, 2017					December 31, 2016
	Fair Value		Net Unrealized Loss			Fair Value		Net Unrealized Loss
	(In thousands)

Trust preferred securities
Rated issues	$	1,880	$	(48	)	$	1,800	$	(123	)
Unrated issues		920		(80	)		779		(220	)

Foreign government — at September 30, 2017, we had two foreign government securities whose fair value is less than amortized cost. The unrealized loss is primarily due to increases in interest rates since acquisition. As management does not intend to liquidate these securities and it is more likely than not that we will not be required to sell these securities prior to recovery of these unrealized losses, no declines are deemed to be other than temporary.

We recorded no credit related OTTI charges in our Condensed Consolidated Statements of Operations related to securities available for sale during the three and nine month periods ended September 30, 2017 and 2016, respectively.

At September 30, 2017, three private label mortgage-backed securities had credit related OTTI and are summarized as follows:

	Senior Security		Super Senior Security		Senior Support Security		Total
	(In thousands)

As of September 30, 2017
Fair value	$	1,076	$	1,032	$	65	$	2,173
Amortized cost		937		842		-		1,779
Non-credit unrealized loss		-		-		-		-
Unrealized gain		139		190		65		394
Cumulative credit related OTTI		757		457		380		1,594

Each of these securities is receiving principal and interest payments similar to principal reductions in the underlying collateral. All three of these securities have unrealized gains at September 30, 2017. The original amortized cost for each of these securities has been permanently adjusted downward for previously recorded credit related OTTI. The unrealized loss (based on original amortized cost) for these securities is now less than previously recorded credit related OTTI amounts.

A roll forward of credit losses recognized in earnings on securities available for sale follows:

	Three months ended September 30,				Nine months ended September 30,
	2017		2016		2017		2016
	(In thousands)
Balance at beginning of period	$	1,844	$	1,844	$	1,844	$	1,844
Additions to credit losses on securities for which no previous OTTI was recognized		-		-		-		-
Increases to credit losses on securities for which OTTI was previously recognized		-		-		-		-
Balance at end of period	$	1,844	$	1,844	$	1,844	$	1,844

The amortized cost and fair value of securities available for sale at September 30, 2017, by contractual maturity, follow:

	Amortized Cost		Fair Value
	(In thousands)
Maturing within one year	$	27,811	$	27,865
Maturing after one year but within five years		98,784		99,533
Maturing after five years but within ten years		82,590		83,671
Maturing after ten years		55,596		55,622
		264,781		266,691
U.S. agency residential mortgage-backed		135,293		136,109
U.S. agency commercial mortgage-backed		10,767		10,736
Private label mortgage-backed		26,703		26,990
Other asset backed		108,128		108,339
Total	$	545,672	$	548,865

The actual maturity may differ from the contractual maturity because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

Gains and losses realized on the sale of securities available for sale are determined using the specific identification method and are recognized on a trade-date basis. A summary of proceeds from the sale of securities available for sale and gains and losses for the nine month periods ending September 30, follows:

			Realized
	Proceeds (1)		Gains		Losses
	(In thousands)
2017	$	9,594	$	125	$	-
2016		56,451		350		52

(1)	2017 includes $0.760 million for trades that did not settle until after September 30, 2017.

During 2017 and 2016, our trading securities consisted of various preferred stocks. During the nine months ended September 30, 2017 and 2016, we recognized gains (losses) on trading securities of $(0.063) million and $0.004 million, respectively, that are included in net gains (losses) on securities in the Condensed Consolidated Statements of Operations. These amounts relate to trading securities still held at each respective period end.