Securities

The following tables present the amortized cost, gross unrealized holding gains, gross unrealized holding losses, and fair value of securities by major security type and class of security:



(Dollars in thousands)
December 31, 2014	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Securities Available for Sale:
Obligations of U.S. government-sponsored enterprises		$31,205		$21		($54	)		$31,172
Mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored enterprises	235,343		10,023		—			245,366
Obligations of states and political subdivisions	47,647		1,529		—			49,176
Individual name issuer trust preferred debt securities	30,753		—		(4,979		)	25,774
Corporate bonds	6,120		57		(3		)	6,174
Total securities available for sale		$351,068		$11,630		($5,036	)		$357,662
Held to Maturity:
Mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored enterprises		$25,222		$786		$—			$26,008
Total securities held to maturity	25,222		786		—			26,008
Total securities		$376,290		$12,416		($5,036	)		$383,670



(Dollars in thousands)
December 31, 2013	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Securities Available for Sale:
Obligations of U.S. government-sponsored enterprises		$54,474		$720		($79	)		$55,115
Mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored enterprises	230,387		8,369		(401		)	238,355
Obligations of states and political subdivisions	60,659		2,200		—			62,859
Individual name issuer trust preferred debt securities	30,715		—		(6,031		)	24,684
Pooled trust preferred debt securities	547		—		—			547
Corporate bonds	11,128		231		(16		)	11,343
Total securities available for sale		$387,910		$11,520		($6,527	)		$392,903
Held to Maturity:
Mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored enterprises		$29,905		$14		($54	)		$29,865
Total securities held to maturity	29,905		14		(54		)	29,865
Total securities		$417,815		$11,534		($6,581	)		$422,768

At December 31, 2014 and 2013, securities available for sale and held to maturity with a fair value of $350.5 million and $397.5 million, respectively, were pledged as collateral for FHLBB borrowings and letters of credit, potential borrowings with the FRB, certain public deposits and for other purposes. See Note 11 for additional discussion of FHLBB borrowings.

The schedule of maturities of debt securities available for sale and held to maturity is presented below. Mortgage-backed securities are included based on weighted average maturities, adjusted for anticipated prepayments. All other debt securities are included based on contractual maturities. Actual maturities may differ from amounts presented because certain issuers have the right to call or prepay obligations with or without call or prepayment penalties. Yields on tax exempt obligations are not computed on a tax equivalent basis.



(Dollars in thousands)	December 31, 2014
	Within 1 Year			1-5 Years			5-10 Years			After 10 Years			Totals
Securities Available for Sale:
Obligations of U.S. government-sponsored enterprises:
Amortized cost		$—			$31,005			$200			$—			$31,205
Weighted average yield	—		%	1.72		%	2.34		%	—		%	1.72		%
Mortgage-backed securities issued by U.S. government-sponsored enterprises:
Amortized cost	41,645			107,553			58,867			27,278			235,343
Weighted average yield	3.76			3.35			2.75			1.71			3.08
Obligations of states and political subdivisions:
Amortized cost	3,096			23,778			20,773			—			47,647
Weighted average yield	3.65			3.94			3.98			—			3.94
Individual name issuer trust preferred debt securities:
Amortized cost	—			—			—			30,753			30,753
Weighted average yield	—			—			—			1.10			1.10
Corporate bonds:
Amortized cost	5,712			204			204			—			6,120
Weighted average yield	2.83			1.62			3.21			—			2.80
Total debt securities available for sale:
Amortized cost		$50,453			$162,540			$80,044			$58,031			$351,068
Weighted average yield	3.64		%	3.12		%	3.07		%	1.39		%	2.90		%
Fair value		$52,375			$167,853			$83,219			$54,215			$357,662
Securities Held to Maturity:
Mortgage-backed securities issued by U.S. government-sponsored enterprises:
Amortized cost		$3,540			$10,433			$7,443			$3,806			$25,222
Weighted average yield	3.05		%	2.96		%	2.72		%	0.93		%	2.60		%
Fair value		$3,649			$10,759			$7,675			$3,925			$26,008

Included in the above table were debt securities with an amortized cost balance of $102.3 million and a fair value of $98.6 million at December 31, 2014 that are callable at the discretion of the issuers. Final maturities of the callable securities range from nine months to twenty-two years, with call features ranging from one month to two years.

Other-Than-Temporary Impairment Assessment

The Corporation assesses whether the decline in fair value of investment securities is other-than-temporary on a regular basis. Unrealized losses on debt securities may occur from current market conditions, increases in interest rates since the time of purchase, a structural change in an investment, volatility of earnings of a specific issuer, or deterioration in credit quality of the issuer. Management evaluates impairments in value both qualitatively and quantitatively to assess whether they are other-than-temporary.

The following tables summarizes temporarily impaired investment securities, segregated by length of time the securities have been in a continuous unrealized loss position:



(Dollars in thousands)	Less than 12 Months						12 Months or Longer						Total
December 31, 2014	#	Fair Value		Unrealized Losses			#	Fair Value		Unrealized Losses			#	Fair Value		Unrealized Losses
Obligations of U.S. government-sponsored enterprises	3		$20,952		($54	)	—		$—		$—		3		$20,952		($54	)
Individual name issuer trust preferred debt securities	—	—		—			11	25,774		(4,979		)	11	25,774		(4,979		)
Corporate bonds	—	—		—			1	199		(3		)	1	199		(3		)
Total temporarily impaired securities	3		$20,952		($54	)	12		$25,973		($4,982	)	15		$46,925		($5,036	)



(Dollars in thousands)	Less than 12 Months						12 Months or Longer						Total
December 31, 2013	#	Fair Value		Unrealized Losses			#	Fair Value		Unrealized Losses			#	Fair Value		Unrealized Losses
Obligations of U.S. government-sponsored enterprises	1		$9,909		($79	)	—		$—		$—		1		$9,909		($79	)
Mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored enterprises	7	76,748		(455		)	—	—		—			7	76,748		(455		)
Individual name issuer trust preferred debt securities	—	—		—			11	24,684		(6,031		)	11	24,684		(6,031		)
Corporate bonds	2	407		(16		)	—	—		—			2	407		(16		)
Total temporarily impaired securities	10		$87,064		($550	)	11		$24,684		($6,031	)	21		$111,748		($6,581	)

Further deterioration in credit quality of the underlying issuers of the securities, further deterioration in the condition of the financial services industry, a continuation or worsening of the current economic environment, or additional declines in real estate values, among other things, may further affect the fair value of these securities and increase the potential that certain unrealized losses be designated as other-than-temporary in future periods, and the Corporation may incur additional write-downs.

Trust Preferred Debt Securities of Individual Name Issuers

Included in debt securities in an unrealized loss position at December 31, 2014 were eleven trust preferred security holdings issued by seven individual companies in the the banking sector. Management believes the unrealized loss position in these holdings is attributable to the general widening of spreads for this category of debt securities issued by financial services companies since the time these securities were purchased. Based on the information available through the filing date of this report, all individual name trust preferred debt securities held in our portfolio continue to accrue and make payments as expected with no payment deferrals or defaults on the part of the issuers. As of December 31, 2014, individual name issuers trust preferred debt securities with an amortized cost of $11.9 million and unrealized losses of $2.1 million were rated below investment grade by Standard & Poors, Inc. (“S&P”). Management reviewed the collectibility of these securities taking into consideration such factors as the financial condition of the issuers, reported regulatory capital ratios of the issuers, credit ratings, including ratings in effect as of the reporting period date as well as credit rating changes between the reporting period date and the filing date of this report, and other information. We noted no additional downgrades to below investment grade between the reporting period date and the filing date of this report. Based on these analyses, management concluded that it expects to recover the entire amortized cost basis of these securities. Furthermore, Washington Trust does not intend to sell these securities and it is not more-likely-than-not that Washington Trust will be required to sell these securities before recovery of their cost basis, which may be maturity. Therefore, management does not consider these investments to be other-than-temporarily impaired at December 31, 2014.

Credit-Related Impairment Losses Recognized on Debt Securities

Washington Trust had invested in two pooled trust preferred holdings in the form of collateralized debt obligations (“CDO”). The pooled trust preferred holdings consisted of trust preferred obligations of banking industry companies and, to a lesser extent, insurance industry companies.

On March 22, 2013, the trustee for one of the pooled trust preferred securities issued a notice that liquidation of the CDO entity would take place at the direction of holders of the CDO tranches senior to the subordinate tranche interest held by Washington Trust. Accordingly, we recognized an other-than-temporary impairment charge in the first quarter of 2013 on the entire $2.8 million carrying value of the security, based on the expectation that proceeds from liquidation would be insufficient to satisfy the amount owed to the subordinate tranche. The liquidation was conducted in August 2013 and was insufficient to satisfy any amount owed to the subordinate tranche.

In December 2013, Washington Trust changed its intent to hold its other CDO investment until recovery of its cost basis and subsequently sold this security in January 2014. As a result, Washington Trust recognized an other-than-temporary impairment loss of $717 thousand on this CDO in December 2013. The amortized cost and fair value of this CDO amounted to $547 thousand at December 31, 2013, which equaled the January 2014 sales price.

The following table presents a rollforward of the cumulative credit-related impairment losses on debt securities:



(Dollars in thousands)
Years ended December 31,	2014		2013			2012
Balance at beginning of period		$—		$3,325			$3,104
Credit-related impairment loss on debt securities for which an other-than-temporary impairment was not previously recognized	—		—			—
Additional increases to the amount of credit-related impairment loss on debt securities for which an other-than-temporary impairment was previously recognized	—		3,489			221
Reductions for securities for which a liquidation notice was received during the period	—		(4,868		)	—
Reductions for securities for which the amount previously recognized in other comprehensive income was recognized in earnings because the entity intends to sell the security or more likely than not will be required to sell the security before recovery of its amortized cost	—		(1,946		)	—
Balance at end of period		$—		$—			$3,325

The January 1, 2014 beginning balance of the cumulative credit-related impairment losses was corrected from the $6.8 million reported in our Form 10-K for the fiscal year ended December 31, 2013 to reflect the impact of the notice of liquidation of a pooled trust preferred security that occurred during the first quarter of 2013 and management’s change in intent to no longer hold its other pooled trust preferred security, which was made in December 2013.

Sales of Securities

The following is a summary of amounts relating to sales of securities:



(Dollars in thousands)
Years ended December 31,	2014		2013		2012
Proceeds from sales		$547		$—		$42,158

Gross realized gains		$—		$—		$1,224
Gross realized losses	—		—		(1		)
Net realized gains on securities		$—		$—		$1,223