SECURITIES AVAILABLE FOR SALE

The following is a summary of securities available for sale:



(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
September 30, 2017
Securities available for sale
Debt securities:
Obligations of US Government sponsored enterprises	$	6,952	$	27	$	—	$	6,979
Mortgage-backed securities:
US Government-sponsored enterprises	438,332		3,413		3,788		437,957
US Government agency	102,044		695		601		102,138
Private label	562		162		5		719
Obligations of states and political subdivisions thereof	140,475		2,818		1,311		141,982
Corporate bonds	28,245		441		2		28,684
Total securities available for sale	$	716,610	$	7,556	$	5,707	$	718,459

December 31, 2016
Securities available for sale
Debt securities:
Obligations of US Government sponsored enterprises	$	—	$	—	$	—	$	—
Mortgage-backed securities:
US Government-sponsored enterprises	330,635		2,682		4,865		328,452
US Government agency	76,722		797		613		76,906
Private label	936		207		11		1,132
Obligations of states and political subdivisions thereof	123,832		1,941		3,407		122,366
Corporate bonds	—		—		—		—
Total securities available for sale	$	532,125	$	5,627	$	8,896	$	528,856

The amortized cost and estimated fair value of available for sale (“AFS”) securities segregated by contractual maturity at September 30, 2017 are presented below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations. Mortgage-backed securities are shown in total, as their maturities are highly variable.



	Available for sale
	Amortized		Fair
(In thousands)	Cost		Value
Within 1 year	$	3,613	$	3,627
Over 1 year to 5 years	18,499		18,735
Over 5 years to 10 years	73,997		75,366
Over 10 years	620,501		620,731
Total securities available for sale	$	716,610	$	718,459

Securities with unrealized losses, segregated by the duration of their continuous unrealized loss positions, are summarized as follows:



	Less Than Twelve Months				Over Twelve Months				Total
(In thousands)	Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value
September 30, 2017

Securities available for sale
Debt securities:
Obligations of US Government sponsored enterprises	$	—	$	—	$	—	$	—	$	—	$	—
Mortgage-backed securities:
US Government-sponsored enterprises	1,559		150,524		2,229		64,882		3,788		215,406
US Government agency	345		48,529		256		11,880		601		60,409
Private label	—		7		5		134		5		141
Obligations of states and political subdivisions thereof	89		8,838		1,222		31,570		1,311		40,408
Corporate bonds	2		3,038		—		—		2		3,038
Total securities available for sale	$	1,995	$	210,936	$	3,712	$	108,466	$	5,707	$	319,402


December 31, 2016

Securities available for sale
Debt securities:
Obligations of US Government sponsored enterprises	$	—	$	—	$	—	$	—	$	—	$	—
Mortgage-backed securities:
US Government-sponsored enterprises	4,369		197,914		496		10,120		4,865		208,034
US Government agency	472		36,941		141		4,263		613		41,204
Private label	—		107		11		312		11		419
Obligations of states and political subdivisions thereof	3,252		76,803		155		3,916		3,407		80,719
Corporate bonds	—		—		—		—		—		—
Total securities available for sale	$	8,093	$	311,765	$	803	$	18,611	$	8,896	$	330,376

Securities Impairment: As a part of the Company’s ongoing security monitoring process, the Company identifies securities in an unrealized loss position that could potentially be other-than-temporarily impaired. For the three and nine months ended September 30, 2017 and 2016 the Company did not record any other-than-temporary impairment (“OTTI”) losses.



	Three Months Ended September 30,
	2017		2016
Estimated credit losses as of June 30,	$	1,697	$	1,697
Reductions for securities paid off during the period	—		—
Estimated credit losses at end of the period	$	1,697	$	1,697



	Nine Months Ended September 30,
	2017		2016
Estimated credit losses as of prior year-end,	$	1,697	$	3,180
Reductions for securities paid off during the period	—		1,483
Estimated credit losses at end of the period	$	1,697	$	1,697

Visa Class B Common Shares

The Company was a member of the Visa USA payment network and was issued Class B shares in connection with the Visa Reorganization and the Visa Inc. initial public offering in March 2008. The Visa Class B shares are transferable only under limited circumstances until they can be converted into shares of the publicly traded class of Visa stock. This conversion cannot happen until the settlement of certain litigation, which is indemnified by Visa members. Since its initial public offering, Visa has funded a litigation reserve based upon a change in the conversion ratio of Visa Class B shares into Visa Class A shares. At its discretion, Visa may continue to increase the conversion rate in connection with any settlements in excess of amounts then in escrow for that purpose and reduce the conversion rate to the extent that it adds any funds to the escrow in the future. Based on the existing transfer restriction and the uncertainty of the litigation, the Company has recorded its Visa Class B shares on its statements of condition at zero value for all reporting periods since 2008. At September 30, 2017, the Company owned 11,623 of Visa Class B shares with a then current conversion ratio to Visa Class A shares of 1.648 (or 19,158 Visa Class A shares). Upon termination of the existing transfer restriction and settlement of the litigation, and to the extent that the Company continues to own such Visa Class B shares in the future, the Company expects to record its Visa Class B shares at fair value.

For securities with unrealized losses, the following information was considered in determining that the impairments were not other-than-temporary:

Debt Securities

The Company expects to recover its amortized cost basis on all debt securities in its AFS portfolio. Furthermore, the Company does not intend to sell nor does it anticipate that it will be required to sell any of its securities in an unrealized loss position as of September 30, 2017, prior to this recovery. The Company’s ability and intent to hold these securities until recovery is supported by the Company’s strong capital and liquidity positions as well as its historically low portfolio turnover.

The following summarizes, by investment security type, the basis for the conclusion that the debt securities in an unrealized loss position within the Company’s AFS were not other-than-temporarily impaired at September 30, 2017:

US Government-sponsored enterprises

At September 30, 2017, 275 out of the total 789 securities in the Company’s portfolios of AFS US Government sponsored enterprises were in unrealized loss positions. Aggregate unrealized losses represented 1.7% of the amortized cost of securities in unrealized loss positions.The Federal National Mortgage Association (“FNMA”) and Federal Home Loan Mortgage Corporation (“FHLMC”) guarantee the contractual cash flows of all of the Company’s US government-sponsored enterprises. The securities are investment grade rated and there were no material underlying credit downgrades during the quarter. All securities are performing.

US Government agencies

At September 30, 2017, 62 out of the total 208 securities in the Company’s portfolios of AFS US Government agency securities were in unrealized loss positions. Aggregate unrealized losses represented 1.0% of the amortized cost of securities in unrealized loss positions. The Government National Mortgage Association (“GNMA”) guarantees the contractual cash flows of all of the Company’s US government agency securities. The securities are investment grade rated and there were no material underlying credit downgrades during the quarter. All securities are performing.

Private-label

At September 30, 2017, 8 of the total 26 securities in the Company’s portfolio of AFS private-label mortgage-backed securities were in unrealized loss positions. Aggregate unrealized losses represented 3.3% of the amortized cost of securities in unrealized loss positions. Based upon the foregoing considerations, and the expectation that the Company will receive all of the future contractual cash flows related to the amortized cost on these securities, the Company does not consider there to be any additional other-than-temporary impairment with respect to these securities.

Obligations of states and political subdivisions thereof

At September 30, 2017, 79 of the total 262 securities in the Company’s portfolio of AFS municipal bonds and obligations were in unrealized loss positions. Aggregate unrealized losses represented 3.1% of the amortized cost of securities in unrealized loss positions. The Company continually monitors the municipal bond sector of the market carefully and periodically evaluates the appropriate level of exposure to the market. At this time, the Company feels the bonds in this portfolio carry minimal risk of default and the Company is appropriately compensated for that risk. There were no material underlying credit downgrades during the quarter. All securities are performing.

Corporate bonds

At September 30, 2017, one out of 12 securities in the Company’s portfolio of AFS corporate bonds were in an unrealized loss position. The aggregate unrealized loss represents 0.1% of the amortized cost of bonds in unrealized loss positions. The Company reviews the financial strength of all of these bonds and has concluded that the amortized cost remains supported by the expected future cash flows of these securities.