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Securities

9 Months Ended

Sep. 30, 2020

3.	Securities

Securities available for sale consist of the following:

	Amortized		Unrealized
	Cost		Gains		Losses		Fair Value
	(In thousands)
September 30, 2020
U.S. agency	$	10,820	$	332	$	22	$	11,130
U.S. agency residential mortgage-backed		330,914		5,167		521		335,560
U.S. agency commercial mortgage-backed		8,039		382		-		8,421
Private label mortgage-backed		43,190		1,415		320		44,285
Other asset backed		262,435		1,392		456		263,371
Obligations of states and political subdivisions		238,479		6,635		136		244,978
Corporate		71,691		3,558		232		75,017
Trust preferred		1,970		-		200		1,770
Foreign government		500		18		-		518
Total	$	968,038	$	18,899	$	1,887	$	985,050

December 31, 2019
U.S. agency	$	14,591	$	89	$	19	$	14,661
U.S. agency residential mortgage-backed		226,130		1,910		278		227,762
U.S. agency commercial mortgage-backed		10,671		113		28		10,756
Private label mortgage-backed		39,248		544		99		39,693
Other asset backed		94,158		103		375		93,886
Obligations of states and political subdivisions		94,499		1,724		121		96,102
Corporate		31,904		1,296		5		33,195
Trust preferred		1,968		-		125		1,843
Foreign government		499		3		-		502
Total	$	513,668	$	5,782	$	1,050	$	518,400

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, 2020
U.S. agency	$	1,788	$	5	$	2,262	$	17	$	4,050	$	22
U.S. agency residential mortgage-backed		81,400		519		1,298		2		82,698		521
Private label mortgage-backed		14,269		268		749		52		15,018		320
Other asset backed		28,630		129		22,210		327		50,840		456
Obligations of states and political subdivisions		19,075		110		2,003		26		21,078		136
Corporate		10,628		232		-		-		10,628		232
Trust preferred		-		-		1,770		200		1,770		200
Total	$	155,790	$	1,263	$	30,292	$	624	$	186,082	$	1,887

December 31, 2019
U.S. agency	$	2,782	$	8	$	2,712	$	11	$	5,494	$	19
U.S. agency residential mortgage-backed		56,377		126		13,551		152		69,928		278
U.S. agency commercial mortgage-backed		3,284		24		659		4		3,943		28
Private label mortgage-backed		16,387		55		343		44		16,730		99
Other asset backed		34,027		233		13,839		142		47,866		375
Obligations of states and political subdivisions		15,666		84		5,396		37		21,062		121
Corporate		2,125		5		-		-		2,125		5
Trust preferred		-		-		1,843		125		1,843		125
Total	$	130,648	$	535	$	38,343	$	515	$	168,991	$	1,050

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 and U.S. agency residential mortgage-backed securities — at September 30, 2020, we had 27 U.S. agency and 39 U.S. agency residential mortgage-backed securities whose fair value is less than amortized cost. The unrealized losses are largely attributed to widening spreads to Treasury bonds since acquisition.

Private label mortgage backed, other asset backed and corporate securities — at September 30, 2020, we had 20 private label mortgage backed, 55 other asset backed and 12 corporate securities whose fair value is less than amortized cost. The unrealized losses are primarily due to credit spread widening since acquisition.

Two private label mortgage-backed 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.

Obligations of states and political subdivisions — at September 30, 2020, we had 26 municipal securities whose fair value is less than amortized cost. The unrealized losses are primarily due to wider benchmark pricing spreads since acquisition.

Trust preferred securities — at September 30, 2020, 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 $0.85 million as of September 30, 2020, continues to have satisfactory credit metrics and make interest payments.

As management does not intend to liquidate any of the securities discussed above 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 discussed above (other than certain declines related to the two private label mortgage-backed securities currently being reviewed for OTTI) 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, 2020 and 2019, respectively.

At September 30, 2020, two private label mortgage-backed securities had credit related OTTI and are summarized as follows:

	Senior Security		Super Senior Security		Total
	(In thousands)

Fair value	$	403	$	536	$	939
Amortized cost		386		368		754
Non-credit unrealized loss		-		-		-
Unrealized gain		17		168		185
Cumulative credit related OTTI		757		457		1,214

Both of these securities are receiving principal and interest payments similar to principal reductions in the underlying collateral and have unrealized gains at September 30, 2020. 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 both of 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,
	2020		2019			2020		2019
	(In thousands)					(In thousands)
Balance at beginning of period	$	1,214	$	1,594		$	1,214	$	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		-		-			-		-
Reduction (1)		-		(380	)		-		(380	)
Balance at end of period	$	1,214	$	1,214		$	1,214	$	1,214

⁽¹⁾During the third quarter of 2019 one security with previously recorded OTTI was settled and balance is now zero.

The amortized cost and fair value of securities available for sale at September 30, 2020, by contractual maturity, follow:

	Amortized Cost		Fair Value
	(In thousands)
Maturing within one year	$	18,967	$	19,048
Maturing after one year but within five years		80,229		83,042
Maturing after five years but within ten years		63,308		66,592
Maturing after ten years		160,956		164,731
		323,460		333,413
U.S. agency residential mortgage-backed		330,914		335,560
U.S. agency commercial mortgage-backed		8,039		8,421
Private label mortgage-backed		43,190		44,285
Other asset backed		262,435		263,371
Total	$	968,038	$	985,050

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		Gains		Losses
	(In thousands)
2020	$	36,593	$	253	$	-
2019		44,305		169		32

Certain preferred stocks which were all sold during the first quarter of 2019 had been classified as equity securities at fair value in our Condensed Consolidated Statement of Financial Condition. During the nine months ended September 30, 2019 we recognized gains on these preferred stocks of $0.167 million that are included in net gains on securities available for sale in the Condensed Consolidated Statements of Operations.