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
March 31, 2018
Securities available for sale
Debt securities:
Obligations of US Government sponsored enterprises	$	6,982	$	1	$	6	$	6,977
Mortgage-backed securities:
US Government-sponsored enterprises	459,601		838		11,264		449,175
US Government agency	92,286		275		2,165		90,396
Private label	484		137		5		616
Obligations of states and political subdivisions thereof	136,244		1,079		2,046		135,277
Corporate bonds	36,405		161		448		36,118
Total securities available for sale	$	732,002	$	2,491	$	15,934	$	718,559

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

The amortized cost and estimated fair value of available for sale (“AFS”) securities segregated by contractual maturity at March 31, 2018 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
(in thousands)	Amortized Cost		Fair Value
Within 1 year	$	7,012	$	7,007
Over 1 year to 5 years	15,718		15,521
Over 5 years to 10 years	46,614		46,574
Over 10 years	110,287		109,270
Total bonds and obligations	179,631		178,372
Mortgage-backed securities	552,371		540,187
Total securities available for sale	$	732,002	$	718,559

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
March 31, 2018
Securities available for sale
Debt securities:
Obligations of US Government sponsored enterprises	$	6	$	3,978	$	—	$	—	$	6	$	3,978
Mortgage-backed securities:
US Government-sponsored enterprises	5,388		267,678		5,876		117,825		11,264		385,503
US Government agency	1,168		49,816		997		28,727		2,165		78,543
Private label	—		1		5		56		5		57
Obligations of states and political subdivisions thereof	475		39,618		1,571		26,759		2,046		66,377
Corporate bonds	448		25,549		—		—		448		25,549
Total securities available for sale	$	7,485	$	386,640	$	8,449	$	173,367	$	15,934	$	560,007


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

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 months ended March 31, 2018 and 2017 the Company did not record any other-than-temporary impairment (“OTTI”) losses.



	Three Months Ended March 31,
	2018		2017
Estimated credit losses as of prior year end	$	1,697	$	1,697
Reductions for securities paid off during the period	—		—
Estimated credit losses at end of the period	$	1,697	$	1,697

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. 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 March 31, 2018, 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 for the debt securities in an unrealized loss position within the Company’s AFS were not other-than-temporarily impaired at March 31, 2018:

Obligations of US Government-sponsored enterprises

At March 31, 2018, 1 out of the total 2 securities in the Company’s portfolios of AFS US Government sponsored enterprises were in unrealized loss positions. Aggregate unrealized losses represented 0.1% 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-sponsored enterprises

At March 31, 2018, 455 out of the total 781 securities in the Company’s portfolios of AFS US Government sponsored enterprises were in unrealized loss positions. Aggregate unrealized losses represented 2.8% of the amortized cost of securities in unrealized loss positions.The FNMA and 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 agency

At March 31, 2018, 117 out of the total 203 securities in the Company’s portfolios of AFS US Government agency securities were in unrealized loss positions. Aggregate unrealized losses represented 2.7% 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 March 31, 2018, 6 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 7.9% 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 March 31, 2018, 122 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 3.0% 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 the risk. There were no material underlying credit downgrades during the quarter. All securities are performing.

Corporate bonds

At March 31, 2018, 9 out of the total 16 securities in the Company’s portfolio of AFS corporate bonds were in an unrealized loss position. The aggregate unrealized loss represents 1.7% 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 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 March 31, 2018, 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 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.