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)
September 30, 2018	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Securities Available for Sale:
Obligations of U.S. government-sponsored enterprises		$201,398		$9		($7,934	)		$193,473
Mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored enterprises	616,552		1,143		(24,833		)	592,862
Obligations of states and political subdivisions	935		2		—			937
Individual name issuer trust preferred debt securities	13,303		—		(839		)	12,464
Corporate bonds	13,911		—		(1,000		)	12,911
Total securities available for sale		$846,099		$1,154		($34,606	)		$812,647
Held to Maturity:
Mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored enterprises		$10,863		$—		($206	)		$10,657
Total securities held to maturity		$10,863		$—		($206	)		$10,657
Total securities		$856,962		$1,154		($34,812	)		$823,304



(Dollars in thousands)
December 31, 2017	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Securities Available for Sale:
Obligations of U.S. government-sponsored enterprises		$161,479		$—		($3,875	)		$157,604
Mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored enterprises	594,944		3,671		(7,733		)	590,882
Obligations of states and political subdivisions	2,355		4		—			2,359
Individual name issuer trust preferred debt securities	18,106		—		(1,122		)	16,984
Corporate bonds	13,917		13		(805		)	13,125
Total securities available for sale		$790,801		$3,688		($13,535	)		$780,954
Held to Maturity:
Mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored enterprises		$12,541		$180		$—			$12,721
Total securities held to maturity		$12,541		$180		$—			$12,721
Total securities		$803,342		$3,868		($13,535	)		$793,675

As of September 30, 2018 and December 31, 2017, securities with a fair value of $356.5 million and $357.8 million, respectively, were pledged as collateral for Federal Home Loan Bank of Boston (“FHLB”) borrowings, potential borrowings with the FRB, certain public deposits and for other purposes. See Note 7 for additional disclosure on FHLB 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.



(Dollars in thousands)	Available for Sale				Held to Maturity
September 30, 2018	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less		$64,023		$61,577		$1,370		$1,344
Due after one year to five years	314,353		302,124		4,529		4,443
Due after five years to ten years	278,106		266,878		3,709		3,639
Due after ten years	189,617		182,068		1,255		1,231
Total securities		$846,099		$812,647		$10,863		$10,657

Included in the above table are debt securities with an amortized cost balance of $228.6 million and a fair value of $218.9 million at September 30, 2018 that are callable at the discretion of the issuers. Final maturities of the callable securities range from 8 months to 18 years, with call features ranging from 1 month to 3 years.

Other-Than-Temporary Impairment Assessment

Washington Trust 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 summarize temporarily impaired 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
September 30, 2018	#	Fair Value		Unrealized Losses			#	Fair Value		Unrealized Losses			#	Fair Value		Unrealized Losses
Obligations of U.S. government-sponsored enterprises	8		$77,958		($2,040	)	11		$105,606		($5,894	)	19		$183,564		($7,934	)
Mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored enterprises	37	235,900		(6,567		)	34	304,937		(18,472		)	71	540,837		(25,039		)
Individual name issuer trust preferred debt securities	—	—		—			5	12,464		(839		)	5	12,464		(839		)
Corporate bonds	4	1,706		(13		)	5	11,205		(987		)	9	12,911		(1,000		)
Total temporarily impaired securities	49		$315,564		($8,620	)	55		$434,212		($26,192	)	104		$749,776		($34,812	)



(Dollars in thousands)	Less than 12 Months						12 Months or Longer						Total
December 31, 2017	#	Fair Value		Unrealized Losses			#	Fair Value		Unrealized Losses			#	Fair Value		Unrealized Losses
Obligations of U.S. government-sponsored enterprises	8		$69,681		($798	)	8		$87,923		($3,077	)	16		$157,604		($3,875	)
Mortgage-backed securities issued by U.S. government agencies and U.S. government-sponsored enterprises	20	128,965		(613		)	22	279,693		(7,120		)	42	408,658		(7,733		)
Individual name issuer trust preferred debt securities	—	—		—			7	16,984		(1,122		)	7	16,984		(1,122		)
Corporate bonds	3	921		(5		)	3	10,980		(800		)	6	11,901		(805		)
Total temporarily impaired securities	31		$199,567		($1,416	)	40		$395,580		($12,119	)	71		$595,147		($13,535	)

Further deterioration in credit quality of the underlying issuers of the securities, deterioration in the condition of the financial services industry, 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 write-downs.

U.S. Government Agency and U.S. Government-Sponsored Enterprise Securities, including Mortgage-Backed Securities

The gross unrealized losses on U.S. government agency and U.S government-sponsored debt securities, including mortgage-backed securities, were primarily attributable to relative changes in interest rates since the time of purchase. The contractual cash flows for these securities are guaranteed by U.S. government agencies and U.S. government-sponsored enterprises. Management believes that the unrealized losses on these debt security 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. 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 September 30, 2018.

Trust Preferred Debt Securities of Individual Name Issuers

Included in debt securities in an unrealized loss position at September 30, 2018 were five trust preferred securities issued by four individual companies in the banking sector. Management believes the unrealized losses on these holdings were 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 issuer trust preferred debt securities held in our portfolio continue to accrue interest and make payments as expected with no payment deferrals or defaults on the part of the issuers. As of September 30, 2018, individual name issuer trust preferred debt securities with an amortized cost of $6.1 million and unrealized losses of $411 thousand 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 September 30, 2018 and the filing date of this report. Based on this review, 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 September 30, 2018.

Corporate Bonds

At September 30, 2018, Washington Trust had nine corporate bond holdings with unrealized losses totaling $1.0 million. These investment grade corporate bonds were issued by large corporations, primarily in the financial services industry. Management believes the unrealized losses on these bonds are a function of the changes in the investment spreads and interest rate movements and not changes in the credit quality of the issuers of the debt securities. Management 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 September 30, 2018.