3.	Securities

Securities available for sale consist of the following:

	Amortized Cost		Unrealized				Fair Value
	Amortized Cost		Gains		Losses		Fair Value
	(In thousands)
June 30, 2018
U.S. agency	$	23,094	$	3	$	285	$	22,812
U.S. agency residential mortgage-backed		131,317		874		2,190		130,001
U.S. agency commercial mortgage-backed		9,659		1		276		9,384
Private label mortgage-backed		30,593		392		702		30,283
Other asset backed		77,292		170		182		77,280
Obligations of states and political subdivisions		146,941		343		3,205		144,079
Corporate		33,285		64		514		32,835
Trust preferred		1,959		-		61		1,898
Foreign government		2,069		-		48		2,021
Total	$	456,209	$	1,847	$	7,463	$	450,593

December 31, 2017
U.S. Treasury	$	898	$	-	$	-	$	898
U.S. agency		25,667		82		67		25,682
U.S. agency residential mortgage-backed		137,785		1,116		983		137,918
U.S. agency commercial mortgage-backed		9,894		36		170		9,760
Private label mortgage-backed		29,011		428		330		29,109
Other asset backed		93,811		202		115		93,898
Obligations of states and political subdivisions		174,073		755		1,883		172,945
Corporate		47,365		578		90		47,853
Trust preferred		2,929		-		127		2,802
Foreign government		2,087		-		27		2,060
Total	$	523,520	$	3,197	$	3,792	$	522,925

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)

June 30, 2018
U.S. agency	$	13,530	$	211	$	7,843	$	74	$	21,373	$	285
U.S. agency residential mortgage-backed		39,328		988		31,119		1,202		70,447		2,190
U.S. agency commercial mortgage-backed		4,294		57		4,996		219		9,290		276
Private label mortgage- backed		16,797		423		4,107		279		20,904		702
Other asset backed		27,318		109		11,003		73		38,321		182
Obligations of states and political subdivisions		75,486		1,534		38,012		1,671		113,498		3,205
Corporate		20,679		395		3,862		119		24,541		514
Trust preferred		-		-		1,898		61		1,898		61
Foreign government		-		-		2,021		48		2,021		48
Total	$	197,432	$	3,717	$	104,861	$	3,746	$	302,293	$	7,463

December 31, 2017
U.S. agency	$	5,466	$	26	$	5,735	$	41	$	11,201	$	67
U.S. agency residential mortgage-backed		22,198		229		40,698		754		62,896		983
U.S. agency commercial mortgage-backed		2,181		34		3,994		136		6,175		170
Private label mortgage-backed		11,390		92		4,396		238		15,786		330
Other asset backed		20,352		40		16,648		75		37,000		115
Obligations of states and political subdivisions		76,574		936		28,246		947		104,820		1,883
Corporate		14,440		33		3,943		57		18,383		90
Trust preferred		-		-		2,802		127		2,802		127
Foreign government		489		10		1,571		17		2,060		27
Total	$	153,090	$	1,400	$	108,033	$	2,392	$	261,123	$	3,792

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 (loss).

U.S. agency, U.S. agency residential mortgage-backed securities and U.S. agency commercial mortgage backed securities — at June 30, 2018, we had 46 U.S. agency, 135 U.S. agency residential mortgage-backed and 18 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 June 30, 2018, we had 29 of this type of security whose fair value is less than amortized cost. Unrealized losses are primarily due to credit spread widening and increases in interest rates since their acquisition.

Two private label mortgage-backed securities (included in the securities discussed further below) were 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. See further discussion below.

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 June 30, 2018, we had 75 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 June 30, 2018, we had 342 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. Tax exempt securities have been negatively impacted by lower federal tax rates signed into law in December, 2017. 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 June 30, 2018, we had 30 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 June 30, 2018, we had two trust preferred securities whose fair value is less than amortized cost. Both 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 securities is rated by a major rating agency as investment grade while 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 $0.97 million as of June 30, 2018, continues to have satisfactory credit metrics and make interest payments.

The following table breaks out our trust preferred securities in further detail as of June 30, 2018 and December 31, 2017:

	June 30, 2018					December 31, 2017
	Fair Value		Net Unrealized Loss			Fair Value		Net Unrealized Loss
	(In thousands)

Trust preferred securities
Rated issues	$	935	$	(27	)	$	1,860	$	(69	)
Unrated issues		963		(34	)		942		(58	)

Foreign government — at June 30, 2018, we had two foreign government securities whose fair value is less than amortized cost. The unrealized losses are 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 six month periods ended June 30, 2018 and 2017, respectively.

At June 30, 2018, 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)

Fair value	$	887	$	873	$	46	$	1,806
Amortized cost		737		704		-		1,441
Non-credit unrealized loss		-		-		-		-
Unrealized gain		150		169		46		365
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 June 30, 2018. The original amortized cost (current amortized cost excluding cumulative credit related OTTI) 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 June 30,				Six months ended June 30,
	2018		2017		2018		2017
	(In thousands)				(In thousands)
Balance at beginning of period	$	1,594	$	1,594	$	1,594	$	1,594
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	$	1,594	$	1,594	$	1,594	$	1,594

The amortized cost and fair value of securities available for sale at June 30, 2018, by contractual maturity, follow:

	Amortized Cost		Fair Value
	(In thousands)
Maturing within one year	$	16,943	$	16,925
Maturing after one year but within five years		79,682		78,851
Maturing after five years but within ten years		61,039		59,771
Maturing after ten years		49,684		48,098
		207,348		203,645
U.S. agency residential mortgage-backed		131,317		130,001
U.S. agency commercial mortgage-backed		9,659		9,384
Private label mortgage-backed		30,593		30,283
Other asset backed		77,292		77,280
Total	$	456,209	$	450,593

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 six month periods ending June 30, follows:

			Realized
	Proceeds		Gains		Losses
	(In thousands)
2018	$	31,445	$	81	$	126
2017		7,830		117		-

Certain preferred stocks have been classified as equity securities at fair value in our Condensed Consolidated Statement of Financial Condition beginning on January 1, 2018. Previously these preferred stocks were classified as trading securities. See note #2. During the six months ended June 30, 2018 and 2017 we recognized losses on these preferred stocks of $0.119 million and $0.124 million, respectively, that are included in net gains (losses) on securities in the Condensed Consolidated Statements of Operations. These amounts relate to preferred stock still held at each respective period end.