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, 2018
Securities available for sale
Debt securities:
Mortgage-backed securities:
US Government-sponsored enterprises	$	413,492	$	904	$	9,444	$	404,952
US Government agency	111,938		509		1,935		110,512
Private label	20,353		113		84		20,382
Obligations of states and political subdivisions thereof	133,260		1,081		2,076		132,265
Corporate bonds	58,098		264		636		57,726
Total securities available for sale	$	737,141	$	2,871	$	14,175	$	725,837

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 December 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	$	425	$	427
Over 1 year to 5 years	23,312		23,311
Over 5 years to 10 years	62,111		62,055
Over 10 years	105,510		104,198
Total bonds and obligations	191,358		189,991
Mortgage-backed securities	545,783		535,846
Total securities available for sale	$	737,141	$	725,837

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
2018	$	29,107	$	—	$	924	$	(924	)
2017	1,599		19		—		19
2016	66,583		4,498		—		4,498

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, 2018
Securities available for sale
Debt securities:
Mortgage-backed securities:
US Government-sponsored enterprises	$	155	$	19,367	$	9,289	$	297,569	$	9,444	$	316,936
US Government agency	16		2,570		1,919		68,266		1,935		70,836
Private label	79		10,393		5		47		84		10,440
Obligations of states and political subdivisions thereof	43		6,784		2,033		47,930		2,076		54,714
Corporate bonds	224		11,759		412		14,460		636		26,219
Total securities available for sale	$	517	$	50,873	$	13,658	$	428,272	$	14,175	$	479,145

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

A summary of securities pledged as collateral for certain deposits and borrowing arrangements as of the years ended December 31, 2018 and December 31, 2017 is as follows:



	December 31, 2018				December 31, 2017
(in thousands)	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Securities pledged for deposits	$	128,949	$	126,649	$	195,921	$	194,681
Securities pledged for repurchase agreements	55,656		54,189		98,407		98,050
Securities pledged for other borrowings ⁽¹⁾	270,252		265,334		213,379		212,089
Total securities pledged	$	454,857	$	446,172	$	507,707	$	504,820

______________________________

(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.

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 ("IPO") 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 uncertainty of the litigation, the Company has recorded its Visa Class B shares on its consolidated balance sheets at a zero value for all reporting periods since 2008.

In 2018, the Company sold all of its shares for a pre-tax gain of $2.1 million reflected in other income. As of December 31, 2017 the Company held 15,542 Visa Class B shares, which 11,623 were obtained through the original IPO and 3,919 were acquired through a business combination in early 2017.

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, 2018, 2017 and 2016. 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)	2018		2017		2016
Estimated credit losses as of prior year-end,	$	1,697	$	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	$	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, 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, 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 that the debt securities in an unrealized loss position within the Company’s AFS were not other-than-temporarily impaired at December 31, 2018:

US Government-sponsored enterprises

451 out of the total 759 securities in the Company’s portfolios of AFS US Government-sponsored enterprises were in unrealized loss positions. Aggregate unrealized losses represented 2.9% 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 year. All securities are performing.

US Government agencies

117 out of the total 194 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 rated investment grade and there were no material underlying credit downgrades during the year. All securities are performing.

Private-label

15 of the total 23 securities in the Company’s portfolio of AFS private-label mortgage-backed securities were in unrealized loss positions. Aggregate unrealized losses represented 0.8% 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

118 of the total 257 securities in the Company’s portfolio of AFS municipal bonds and obligations were in unrealized loss positions. Aggregate unrealized losses represented 3.7% 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 believes 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 year. All securities are performing.

Corporate bonds

10 of the total 21 securities in the Company’s portfolio of AFS corporate bonds were in an unrealized loss position. The aggregate unrealized loss represents 2.4% 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.