3.	Securities

Securities available for sale consist of the following:

	Amortized Cost		Unrealized				Fair Value
	Amortized Cost		Gains		Losses		Fair Value
	(In thousands)
March 31, 2017
U.S. agency	$	28,636	$	211	$	63	$	28,784
U.S. agency residential mortgage-backed		147,432		1,165		723		147,874
U.S. agency commercial mortgage-backed		12,298		52		155		12,195
Private label mortgage-backed		29,018		218		396		28,840
Other asset backed		145,659		346		210		145,795
Obligations of states and political subdivisions		181,727		716		2,193		180,250
Corporate		60,790		380		203		60,967
Trust preferred		2,924		-		271		2,653
Foreign government		1,616		-		10		1,606
Total	$	610,100	$	3,088	$	4,224	$	608,964

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)

March 31, 2017
U.S. agency	$	3,721	$	24	$	7,707	$	39	$	11,428	$	63
U.S. agency residential mortgage-backed		46,206		537		20,682		186		66,888		723
U.S. agency commercial mortgage-backed		6,672		154		140		1		6,812		155
Private label mortgage-backed		17,038		173		1,321		223		18,359		396
Other asset backed		39,168		95		11,949		115		51,117		210
Obligations of states and political subdivisions		103,301		2,030		10,090		163		113,391		2,193
Corporate		15,461		155		1,955		48		17,416		203
Trust preferred		-		-		2,653		271		2,653		271
Foreign government		1,606		10		-		-		1,606		10
Total	$	233,173	$	3,178	$	56,497	$	1,046	$	289,670	$	4,224

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 March 31, 2017, we had 23 U.S. agency, 118 U.S. agency residential mortgage-backed and 13 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 March 31, 2017, we had 30 of this type of security whose fair value is less than amortized cost. The unrealized losses are primarily attributed to four securities purchased prior to 2016. Two of these four securities have an impairment in excess of 10% and all four of these holdings have been impaired for more than 12 months. The unrealized losses are largely attributable to credit spread widening on these four securities since their acquisition.

These four securities are receiving principal and interest payments. Most of 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 four 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 four 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 March 31, 2017, we had 97 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 March 31, 2017, we had 308 municipal securities whose fair value is less than amortized cost. The unrealized losses are primarily due to increases in interest rates since acquisition. Twenty-eight of these securities have an impairment in excess of 10%. 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 March 31, 2017, we had 19 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 March 31, 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 $0.8 million as of March 31, 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 March 31, 2017 and December 31, 2016:

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

Trust preferred securities
Rated issues	$	1,812	$	(112	)	$	1,800	$	(123	)
Unrated issues		841		(159	)		779		(220	)

Foreign government — at March 31, 2017, we had one foreign government security 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 this security and it is more likely than not that we will not be required to sell this security prior to recovery of this unrealized loss, this decline is not 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 month periods ended March 31, 2017 and 2016, respectively.

At March 31, 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 March 31, 2017
Fair value	$	1,127	$	1,013	$	72	$	2,212
Amortized cost		1,092		958		-		2,050
Non-credit unrealized loss		-		-		-		-
Unrealized gain		35		55		72		162
Cumulative credit related OTTI		757		457		380		1,594

Credit related OTTI recognized in our Condensed
Consolidated Statements of Operations
For the three months ended March 31,
2017	$	-	$	-	$	-	$	-
2016		-		-		-		-

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 March 31, 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 for the three month periods ending March 31, follows:

	Three months ended March 31,
	2017		2016
	(In thousands)
Balance at beginning of period	$	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

The amortized cost and fair value of securities available for sale at March 31, 2017, by contractual maturity, follow:

	Amortized Cost		Fair Value
	(In thousands)
Maturing within one year	$	20,583	$	20,596
Maturing after one year but within five years		107,748		107,791
Maturing after five years but within ten years		85,047		84,667
Maturing after ten years		62,315		61,206
		275,693		274,260
U.S. agency residential mortgage-backed		147,432		147,874
U.S. agency commercial mortgage-backed		12,298		12,195
Private label residential mortgage-backed		29,018		28,840
Other asset backed		145,659		145,795
Total	$	610,100	$	608,964

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 three month periods ending March 31, follows:

	Proceeds		Realized
	Proceeds		Gains		Losses
	(In thousands)
2017	$	6,152	$	106	$	-
2016		42,391		226		52

During 2017 and 2016, our trading securities consisted of various preferred stocks. During the first three months of 2017 and 2016, we recognized losses on trading securities of $0.079 million and $0.012 million, respectively, that are included in net gains on securities in the Condensed Consolidated Statements of Operations. Both of these amounts relate to losses recognized on trading securities still held at each respective period end.