(3)	INVESTMENT SECURITIES

Investment securities have been classified according to management’s intent.

Trading Account Securities

The Company invests in small and medium lot, investment grade municipal bonds through a managed brokerage account. The brokerage account is managed by an investment advisory firm registered with the U.S. Securities and Exchange Commission. Trading account securities recorded at fair value totaled $9.3 million and $9.0 million as of September 30, 2016 and 2015, respectively. During the year ended September 30, 2016, the Company reported net gains on trading account securities of $748,000, including net realized gains on the sale of securities of $795,000 partially offset by net unrealized losses on securities still held as of the balance sheet date of $47,000. During the year ended September 30, 2015, the Company reported net gains on trading account securities of $440,000, including net realized gains on the sale of securities of $394,000 and net unrealized gains on securities still held as of the balance sheet date of $46,000.

Securities Available for Sale and Held to Maturity

The amortized cost of securities available for sale and held to maturity and their approximate fair values are as follows:

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
(In thousands)	Cost		Gains		Losses		Value
September 30, 2016:
Securities available for sale:
Agency bonds and notes	$	1,024	$	8	$	-	$	1,032
Agency mortgage-backed		46,376		1,029		-		47,405
Agency CMO		16,053		108		66		16,095
Privately-issued CMO		2,359		293		-		2,652
Privately-issued ABS		3,675		864		7		4,532
SBA certificates		1,220		7		-		1,227
Municipal bonds		94,567		7,002		19		101,550
Total securities available for sale	$	165,274	$	9,311	$	92	$	174,493

Securities held to maturity:
Agency mortgage-backed	$	260	$	23	$	-	$	283
Municipal bonds		2,906		465		-		3,371
Total securities held to maturity	$	3,166	$	488	$	-	$	3,654

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
(In thousands)	Cost		Gains		Losses		Value
September 30, 2015:
Securities available for sale:
Agency bonds and notes	$	5,564	$	18	$	-	$	5,582
Agency mortgage-backed		47,418		901		41		48,278
Agency CMO		18,943		118		47		19,014
Privately-issued CMO		3,005		465		-		3,470
Privately-issued ABS		4,820		1,289		-		6,109
SBA certificates		1,472		8		-		1,480
Municipal bonds		90,380		4,185		170		94,395
Total securities available for sale	$	171,602	$	6,984	$	258	$	178,328

Securities held to maturity:
Agency mortgage-backed	$	345	$	31	$	-	$	376
Municipal bonds		4,275		540		-		4,815
Total securities held to maturity	$	4,620	$	571	$	-	$	5,191

The amortized cost and fair value of available for sale and held to maturity debt securities as of September 30, 2016 by contractual maturity are shown below. Expected maturities of mortgage and other asset-backed securities may differ from contractual maturities because the mortgages and other assets underlying the obligations may be prepaid without penalty.

	Available for Sale				Held to Maturity
	Amortized		Fair		Amortized		Fair
(In thousands)	Cost		Value		Cost		Value

Due within one year	$	2,229	$	2,252	$	208	$	241
Due after one year through five years		8,427		8,919		962		1,112
Due after five years through ten years		19,365		21,267		1,171		1,367
Due after ten years		65,570		70,144		565		651
		95,591		102,582		2,906		3,371

CMO		18,412		18,747		-		-
ABS		3,675		4,532		-		-
SBA certificates		1,220		1,227		-		-
Mortgage-backed securities		46,376		47,405		260		283

	$	165,274	$	174,493	$	3,166	$	3,654

Information pertaining to securities with gross unrealized losses at September 30, 2016, aggregated by investment category and the length of time that individual securities have been in a continuous loss position, follows:

	Number				Gross
	of Investment		Fair		Unrealized
(Dollars in thousands)	Positions		Value		Losses

Securities available for sale:
Continuous loss position less than twelve months: Agency CMO		3	$	3,946	$	12
Privately-issued ABS		2		66		7
Municipal bonds		4		2,147		19

Total less than twelve months		9		6,159		38

Continuous loss position more than twelve months: Agency CMO		2		4,683		54

Total more than twelve months		2		4,683		54

Total securities available for sale		11	$	10,842	$	92

At September 30, 2016, the Company did not have any securities held to maturity with an unrealized loss.

Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

The total available for sale debt securities in loss positions at September 30, 2016, which consisted of U.S. government agency CMOs, privately-issued ABS and municipal bonds, had depreciated approximately 0.78% from the Company’s amortized cost basis and are fixed and variable rate securities with a weighted-average yield of 1.87% and a weighted-average coupon rate of 2.96% at September 30, 2016. All of the agency and municipal securities are issued by U.S. government-sponsored enterprises and municipal governments, and are generally secured by first mortgage loans and municipal project revenues.

The Company evaluates the existence of a potential credit loss component related to the decline in fair value of the privately-issued CMO and ABS portfolios each quarter using an independent third party analysis. At September 30, 2016, the Company held seventeen privately-issued CMO and ABS securities acquired in a 2009 bank acquisition with an aggregate carrying value of $2.0 million and fair value of $2.8 million that have been downgraded to a substandard regulatory classification due to a downgrade of the security’s credit quality rating by various rating agencies.

At September 30, 2016, the two privately-issued ABSs in loss positions had depreciated approximately 9.59% from the Company’s carrying value and include securities collateralized by residential mortgage loans and residential home equity lines of credit. These two securities had an aggregate fair value of $66,000 and an aggregate unrealized loss of $7,000 at September 30, 2016 and were rated below investment grade by a nationally recognized statistical rating organization (“NRSRO”). Based on the independent third party analysis of the expected cash flows, management has determined that the declines in value for these securities are temporary and, as a result, no other-than-temporary impairment has been recognized on the privately-issued CMO and ABS portfolios. While the Company did not recognize a credit-related impairment loss at September 30, 2016, additional deterioration in market and economic conditions may have an adverse impact on the credit quality in the future and therefore, require a credit-related impairment charge.

The unrealized losses on U.S. government agency CMOs and municipal bonds relate principally to current interest rates for similar types of securities. In analyzing an issuer’s financial condition, management considers whether the securities are issued by the federal government, its agencies, or other governments, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer’s financial condition. As management has the ability to hold debt securities to maturity, or for the foreseeable future if classified as available for sale, no declines are deemed to be other-than-temporary.

During the years ended September 30, 2016 and 2015, the Company did not realize any gross gains or losses on sales of available for sale securities.

Certain available for sale debt securities were pledged under repurchase agreements and to secure FHLB borrowings during the years ended September 30, 2016 and 2015, and may be pledged to secure federal funds borrowings (see Notes 11, 12 and 13).