Securities

The gross amortized cost, gross unrealized gains and losses and gross fair value of securities available for sale and held to maturity at June 30, 2018 and December 31, 2017⁽¹⁾ are summarized as follows:



	June 30, 2018
	Gross Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(In thousands)
Debt securities available for sale
U.S. Treasury securities and obligations of U.S. Government Entities	$	8,372	$	137	$	(44	)	$	8,465
Mortgage-backed securities and collateralized mortgage obligations of U.S. Government Sponsored Entities	616,152		239		(21,510		)	594,881
Private mortgage-backed securities and collateralized mortgage obligations	80,618		918		(404		)	81,132
Collateralized loan obligations	226,549		98		(504		)	226,143
Obligations of state and political subdivisions	44,491		339		(545		)	44,285
Totals	$	976,182	$	1,731	$	(23,007	)	$	954,906

Debt securities held to maturity
Mortgage-backed securities and collateralized mortgage obligations of U.S. Government Sponsored Entities	$	324,410	$	0	$	(11,551	)	$	312,859
Private mortgage-backed securities and collateralized mortgage obligations	22,127		241		(96		)	22,272
Collateralized loan obligations	35,600		57		(1		)	35,656
Totals	$	382,137	$	298	$	(11,648	)	$	370,787



	December 31, 2017
	Gross Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(In thousands)
Debt securities available for sale
U.S. Treasury securities and obligations of U.S. Government Entities	$	9,475	$	274	$	(5	)	$	9,744
Mortgage-backed securities and collateralized mortgage obligations of U.S. Government Sponsored Entities	560,396		1,163		(8,034		)	553,525
Private mortgage-backed securities and collateralized mortgage obligations	75,152		1,154		(285		)	76,021
Collateralized loan obligations	263,579		798		(68		)	264,309
Obligations of state and political subdivisions	45,118		813		(70		)	45,861
Totals	$	953,720	$	4,202	$	(8,462	)	$	949,460

Debt securities held to maturity
Mortgage-backed securities and collateralized mortgage obligations of U.S. Government Sponsored Entities	$	353,541	$	802	$	(4,159	)	$	350,184
Private mortgage-backed securities and collateralized mortgage obligations	22,799		714		(53		)	23,460
Collateralized loan obligations	40,523		303		0			40,826
Totals	$	416,863	$	1,819	$	(4,212	)	$	414,470

(1) December 31, 2017 balances in the tables above reflect certain reclassifications between categories.

There were no sales of securities during the three and six month periods ended June 30, 2018. Proceeds from sales of securities during the three and six month periods ended June 30, 2017 were $3.8 million with gross gains of $21,000 and no gross losses. Included in “Securities (losses)/gains, net” for the three and six month periods ended June 30, 2018, is $0.1 million and $0.2 million, respectively, decline in the value of an investment in shares of a mutual fund that invests primarily in CRA-qualified debt securities.

At June 30, 2018, debt securities with a fair value of $172.7 million were pledged as collateral for United States Treasury deposits, other public deposits and trust deposits, and debt securities with a fair value of $200.1 million were pledged as collateral for repurchase agreements.

The amortized cost and fair value of debt securities available for sale and held to maturity at June 30, 2018, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because prepayments of the underlying collateral for these securities may occur, due to the right to call or repay obligations with or without call or prepayment penalties. Securities not due at a single maturity date are shown separately.



	Held to Maturity				Available for Sale
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(In thousands)
Due in less than one year	$	0	$	0	$	15,119	$	15,110
Due after one year through five years	3,600		3,599		64,674		64,761
Due after five years through ten years	29,000		29,053		183,806		183,290
Due after ten years	3,000		3,004		15,813		15,732
	35,600		35,656		279,412		278,893
Mortgage-backed securities and collateralized mortgage obligations of U.S. Government Sponsored Entities	324,410		312,859		616,152		594,881
Private mortgage-backed securities and collateralized mortgage obligations	22,127		22,272		80,618		81,132
Totals	$	382,137	$	370,787	$	976,182	$	954,906

The estimated fair value of a security is determined based on market quotations when available or, if not available, by using quoted market prices for similar securities, pricing models or discounted cash flows analyses, using observable market data where available. The tables below indicate the amount of debt securities with unrealized losses and the period of time for which these losses were outstanding at June 30, 2018 and December 31, 2017, respectively.



	June 30, 2018
	Less than 12 months					12 months or longer					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(In thousands)
U.S. Treasury securities and obligations of U.S. Government Entities	$	3,417	$	(44	)	$	0	$	0		$	3,417	$	(44	)
Mortgage-backed securities and collateralized mortgage obligations of U.S. Government Sponsored Entities	420,280		(12,087		)	468,753		(20,976		)	889,033		(33,063		)
Private mortgage-backed securities and collateralized mortgage obligations	25,971		(210		)	18,468		(291		)	44,439		(501		)
Collateralized loan obligations	138,769		(502		)	0		0			138,769		(502		)
Obligations of state and political subdivisions	9,896		(94		)	20,330		(451		)	30,226		(545		)
Totals	$	598,333	$	(12,937	)	$	507,551	$	(21,718	)	$	1,105,884	$	(34,655	)



	December 31, 2017
	Less than 12 months					12 months or longer					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(In thousands)
U.S. Treasury securities and obligations of U.S. Government Entities	$	1,107	$	(5	)	$	0	$	0		$	1,107	$	(5	)
Mortgage-backed securities and collateralized mortgage obligations of U.S. Government Sponsored Entities	304,723		(2,047		)	413,725		(10,146		)	718,448		(12,193		)
Private mortgage-backed securities and collateralized mortgage obligations	0		0			20,744		(338		)	20,744		(338		)
Collateralized loan obligations	14,933		(68		)	0		0			14,933		(68		)
Obligations of state and political subdivisions	5,414		(14		)	5,864		(56		)	11,278		(70		)
Totals	$	326,177	$	(2,134	)	$	440,333	$	(10,540	)	$	766,510	$	(12,674	)

The two tables above include debt securities held to maturity that were transferred from available for sale into held to maturity during 2014. Those securities had unrealized losses of $3.1 million at the date of transfer, and at June 30, 2018, the unamortized balance was $0.9 million. The fair value of those securities in an unrealized loss position for less than twelve months at June 30, 2018 and December 31, 2017 was $57.7 million and $22.9 million, respectively, with unrealized losses of $1.2 million and $0.2 million, respectively. The fair value of those securities in an unrealized loss position for 12 months or more at June 30, 2018 and December 31, 2017 is $13.1 million and $15.3 million, respectively, with unrealized losses of $0.7 million and $0.4 million, respectively.

At June 30, 2018, the Company had $33.1 million of unrealized losses on mortgage-backed securities and collateralized mortgage obligations of government sponsored entities having a fair value of $889 million that were attributable to a combination of factors, including relative changes in interest rates since the time of purchase. The contractual cash flows for these debt securities are guaranteed by U.S. government-sponsored entities. Based on our assessment of these mitigating factors, management believes that the unrealized losses on these holdings are a function of changes in investment spreads and interest movements and not changes in credit quality. Management expects to recover the entire amortized cost basis of these securities.

At June 30, 2018, $0.5 million of the unrealized losses pertained to private label debt securities secured by seasoned collateral with a fair value of $44.4 million. Management attributes the loss to a combination of factors, including relative changes in interest rates since the time of purchase. The collateral underlying these mortgage investments are 30- and 15-year fixed and 10/1 adjustable rate mortgage loans with low loan to values, improving subordination, and historically have had minimal foreclosures and losses. Based on its assessment of these factors, management believes that the unrealized losses on these holdings are a function of changes in investment spreads and interest rate movements and not changes in credit quality. Management expects to recover the entire amortized cost basis of these securities.

At June 30, 2018, collateralized loan obligations with a fair value of $138.7 million had unrealized losses of $0.5 million. Management expects to recover the entire amortized cost basis of these securities.

At June 30, 2018, obligations of state and political subdivisions with a fair value of $30.2 million had unrealized losses of $0.5 million. Management expects to recover the entire amortized cost basis of these securities.

As of June 30, 2018, the Company does not intend to sell debt securities that are in an unrealized loss position and it is not more likely than not that the Company will be required to sell these securities before recovery of the amortized cost basis. Therefore, management does not consider any investment to be other-than-temporarily impaired at June 30, 2018.

Included in other assets is Federal Home Loan Bank and Federal Reserve Bank stock which has a par value of $35 million and $32.5 million as of June 30, 2018 and December 31, 2017, respectively. At June 30, 2018, the Company had not identified events or changes in circumstances which may have a significant adverse effect on the fair value of these investments. Also included in other assets is a $6.2 million investment in a mutual fund carried at fair value.

The Company holds 11,330 shares of Visa Class B stock which, following resolution of pending litigation, will be converted to Visa Class A shares. Under the current conversion ratio that became effective June 28, 2018, the Company expects to receive 1.6298 shares of Class A stock for each share of Class B stock, for a total of 18,465 shares of Visa Class A stock. Our ownership of these shares is related to prior ownership in Visa’s network while Visa operated as a cooperative. The shares are recorded on our financial records at zero basis.