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
December 31, 2017
Securities available for sale
Debt securities:
Obligations of US Government sponsored enterprises	$	6,967	$	5	$	—	$	6,972
Mortgage-backed securities:
US Government-sponsored enterprises	447,081		1,738		5,816		443,003
US Government agency	96,357		413		1,174		95,596
Private label	529		150		5		674
Obligations of states and political subdivisions thereof	138,522		2,407		729		140,200
Corporate bonds	30,527		323		53		30,797
Total securities available for sale	$	719,983	$	5,036	$	7,777	$	717,242

December 31, 2016
Securities available for sale
Debt securities:
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 December 31, 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	$	6,997	$	7,002
Over 1 year to 5 years	11,627		11,621
Over 5 years to 10 years	46,942		47,776
Over 10 years	110,450		111,569
Total bonds and obligations	176,016		177,968
Mortgage-backed securities	543,967		539,274
Total securities available for sale	$	719,983	$	717,242

The following table summarizes proceeds from the sale of AFS securities and realized gains and losses:



(in thousands)	Proceeds from Sale of Securities Available for Sale		Realized Gains		Realized Losses		Net
2017	$	1,599	$	19	$	—	$	19
2016	66,583		4,498		—		4,498
2015	22,753		1,334		—		1,334

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
December 31, 2017
Securities available for sale
Debt securities:
Mortgage-backed securities:
US Government-sponsored enterprises	$	1,895	$	189,486	$	3,921	$	117,156	$	5,816	$	306,642
US Government agency	559		45,221		615		30,155		1,174		75,376
Private label	—		8		5		130		5		138
Obligations of states and political subdivisions thereof	58		8,298		671		27,727		729		36,025
Corporate bonds	53		8,943		—		—		53		8,943
Total securities available for sale	$	2,565	$	251,956	$	5,212	$	175,168	$	7,777	$	427,124


December 31, 2016
Securities available for sale
Debt securities:
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

A summary of securities pledged as collateral for certain deposits and borrowing arrangements as of the years ended December 31, 2017 and December 31, 2016 is as follows:



	December 31, 2017				December 31, 2016
(in thousands)	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Securities pledged for deposits	$	195,921	$	194,681	$	92,380	$	92,149
Securities pledged for repurchase agreements	98,407		98,050		28,206		28,130
Securities pledged for other borrowings (1)	213,379		212,089		278,067		277,261
Total securities pledged	$	507,707	$	504,820	$	398,653	$	397,540

______________________________

(1) The Bank pledged securities as collateral for certain borrowing arrangements with the Federal Home Loan Bank of Boston and Federal Reserve Bank of Boston

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 twelve months ended December 31, 2017, 2016 and 2015 the Company did not record any other-than-temporary impairment (“OTTI”) losses.

The following table presents the remaining amount of historical credit losses on debt securities and changes reflected in the statement of income:



	Twelve Months Ended December 31,
(in thousands)	2017		2016		2015
Estimated credit losses as of prior year-end,	$	1,697	$	3,180	$	3,413
Reductions for securities paid off during the period	—		1,483		233
Estimated credit losses at end of the period	$	1,697	$	1,697	$	3,180

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

The Company expects to recover its amortized cost basis on all debt securities in its AFS portfolio, as unrealized losses are the result of changes in the interest rate environment and other market factors. 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 December 31, 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 December 31, 2017:

US Government-sponsored enterprises

At December 31, 2017, 369 out of the total 787 securities in the Company’s portfolios of AFS US Government sponsored enterprises were in unrealized loss positions. Aggregate unrealized losses represented 1.9% 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 rated investment grade and there were no material underlying credit downgrades during the quarter. All securities are performing.

US Government agencies

At December 31, 2017, 91 out of the total 207 securities in the Company’s portfolios of AFS US Government agency securities were in unrealized loss positions. Aggregate unrealized losses represented 1.5% 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 rated investment grade and there were no material underlying credit downgrades during the quarter. All securities are performing.

Private-label

At December 31, 2017, 10 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 3.4% 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 December 31, 2017, 71 of the total 264 securities in the Company’s portfolio of AFS municipal bonds and obligations were in unrealized loss positions. Aggregate unrealized losses represented 2.0% 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 December 31, 2017, 4 out of 14 securities in the Company’s portfolio of AFS corporate bonds were in an unrealized loss position. The aggregate unrealized loss represents 0.6% 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.

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 December 31, 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.