INVESTMENTS

AFS and HTM Investments

The following table summarizes the amortized cost and estimated fair values of AFS and HTM securities, as of the dates indicated:



	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
September 30, 2018
AFS Investments (carried at fair value):
Obligations of states and political subdivisions	$	4,778	$	44	$	(4	)	$	4,818
Mortgage-backed securities issued or guaranteed by U.S. government-sponsored enterprises	479,836		350		(19,888		)	460,298
Collateralized mortgage obligations issued or guaranteed by U.S. government-sponsored enterprises	320,543		—		(13,932		)	306,611
Subordinated corporate bonds	8,589		65		(38		)	8,616
Total AFS investments	$	813,746	$	459	$	(33,862	)	$	780,343
HTM Investments (carried at amortized cost):
Obligations of states and political subdivisions	$	92,933	$	58	$	(2,441	)	$	90,550
Total HTM investments	$	92,933	$	58	$	(2,441	)	$	90,550
December 31, 2017
AFS Investments (carried at fair value):
Obligations of states and political subdivisions	$	7,232	$	103	$	—		$	7,335
Mortgage-backed securities issued or guaranteed by U.S. government-sponsored enterprises	510,176		597		(7,471		)	503,302
Collateralized mortgage obligations issued or guaranteed by U.S. government-sponsored enterprises	279,575		14		(6,790		)	272,799
Subordinated corporate bonds	5,484		173		—			5,657
Equity investments⁽¹⁾	554		252		—			806
Total AFS investments	$	803,021	$	1,139	$	(14,261	)	$	789,899
HTM Investments (carried at amortized cost):
Obligations of states and political subdivisions	$	94,073	$	1,077	$	(237	)	$	94,913
Total HTM investments	$	94,073	$	1,077	$	(237	)	$	94,913


(1)	As of December 31, 2017, equity investments were classified as AFS investments. Effective January 1, 2018, these investments were reclassified to other investments on the consolidated statements of condition as they are no longer eligible to be classified as AFS upon adoption of ASU 2016-01. Refer to Note 2 for further details.

Net unrealized losses on AFS investments at September 30, 2018 included in AOCI amounted to $26.2 million, net of a deferred tax benefit of $7.2 million. Net unrealized losses on AFS investments at December 31, 2017 included in AOCI amounted to $10.3 million, net of a deferred tax benefit of $2.8 million.

For the nine months ended September 30, 2018 and 2017, the Company purchased debt investments of $148.8 million and $141.6 million, respectively, all of which were designated as AFS investments.

Impaired AFS and HTM Investments:

Management periodically reviews the Company’s AFS and HTM investments to determine the cause, magnitude and duration of declines in the fair value of each security. Thorough evaluations of the causes of the unrealized losses are performed to determine whether the impairment is temporary or other-than-temporary in nature. Considerations such as the ability of the securities to meet cash flow requirements, levels of credit enhancements, risk of curtailment, and recoverability of invested amount over a reasonable period of time, and the length of time the security is in a loss position, for example, are applied in determining OTTI. Once a decline in value is determined to be other-than-temporary, the cost basis of the security is permanently reduced and a corresponding charge to earnings is recognized.

The following table presents the estimated fair values and gross unrealized losses on AFS and HTM investments that were in a continuous loss position at September 30, 2018 and December 31, 2017, by length of time that an individual security in each category has been in a continuous loss position:



	Less Than 12 Months					12 Months or More					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
September 30, 2018
AFS Investments:
Obligations of states and political subdivisions	$	1,516	$	(4	)	$	—	$	—		$	1,516	$	(4	)
Mortgage-backed securities issued or guaranteed by U.S. government-sponsored enterprises	120,098		(2,544		)	328,180		(17,344		)	448,278		(19,888		)
Collateralized mortgage obligations issued or guaranteed by U.S. government-sponsored enterprises	123,951		(2,220		)	181,524		(11,712		)	305,475		(13,932		)
Subordinated corporate bonds	5,051		(38		)	—		—			5,051		(38		)
Total AFS investments	$	250,616	$	(4,806	)	$	509,704	$	(29,056	)	$	760,320	$	(33,862	)
HTM Investments:
Obligations of states and political subdivisions	$	67,328	$	(1,755	)	$	12,546	$	(686	)	$	79,874	$	(2,441	)
Total HTM investments	$	67,328	$	(1,755	)	$	12,546	$	(686	)	$	79,874	$	(2,441	)
December 31, 2017
AFS Investments:
Mortgage-backed securities issued or guaranteed by U.S. government-sponsored enterprises	$	221,466	$	(2,393	)	$	233,971	$	(5,078	)	$	455,437	$	(7,471	)
Collateralized mortgage obligations issued or guaranteed by U.S. government-sponsored enterprises	102,612		(696		)	164,389		(6,094		)	267,001		(6,790		)
Total AFS investments	$	324,078	$	(3,089	)	$	398,360	$	(11,172	)	$	722,438	$	(14,261	)
HTM Investments:
Obligations of states and political subdivisions	$	9,317	$	(57	)	$	9,436	$	(180	)	$	18,753	$	(237	)
Total HTM investments	$	9,317	$	(57	)	$	9,436	$	(180	)	$	18,753	$	(237	)

At September 30, 2018 and December 31, 2017, the Company held 354 and 209 debt investments classified as AFS and HTM with a fair value of $840.2 million and $741.2 million that were in an unrealized loss position totaling $36.3 million and $14.5 million, respectively, that were considered temporary. Of these, MBS and CMOs with a fair value of $509.7 million and $398.4 million were in an unrealized loss position, and have been in an unrealized loss position for 12 months or more, totaling $29.1 million and $11.2 million at September 30, 2018 and December 31, 2017, respectively. The unrealized loss was reflective of current interest rates in excess of the yield received on debt investments and is not indicative of an overall change in credit quality or other factors with the Company's AFS and HTM investment portfolio. At September 30, 2018 and December 31, 2017, gross unrealized losses on the Company's AFS and HTM investments were 4.3% and 2.0%, respectively, of its respective fair value.

The Company has the intent and ability to retain its debt investments in an unrealized loss position at September 30, 2018 until the decline in value has recovered.

Sale of AFS Investments:

The following table details the Company's sales of AFS investments for the period indicated below:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Proceeds from sales of investments	$	22,830		$	20,269		$	32,728		$	20,269
Gross realized gains	—			841			31			841
Gross realized losses	(275		)	(14		)	(275		)	(14		)

For the three and nine months ended September 30, 2018, the Company sold certain AFS investments with a total carrying value of $23.1 million and $33.0 million and recorded net losses on the sale of these AFS securities of $275,000 and $244,000, respectively, within non-interest income in the consolidated statements of income. The Company had not previously recorded any OTTI on these securities sold.

For the three and nine months ended September 30, 2017 the Company sold certain AFS investments with a total carrying value of $19.4 million and recorded net gains on the sale of AFS securities of $827,000 within non-interest income in the consolidated statements of income. The Company had not previously recorded an OTTI on these securities sold.

AFS and HTM Investments Pledged:

At September 30, 2018 and December 31, 2017, AFS and HTM investments with an amortized cost of $696.6 million and $702.5 million and estimated fair values of $666.2 million and $691.2 million, respectively, were pledged to secure FHLBB advances, public deposits, and securities sold under agreements to repurchase and for other purposes required or permitted by law.

Contractual Maturities:

The amortized cost and estimated fair values of the Company's AFS and HTM investments by contractual maturity at September 30, 2018, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.



	Amortized Cost		Fair Value
AFS Investments
Due in one year or less	$	7,933	$	7,907
Due after one year through five years	94,474		91,482
Due after five years through ten years	193,165		184,931
Due after ten years	518,174		496,023
	$	813,746	$	780,343
HTM Investments
Due in one year or less	$	4,610	$	4,609
Due after one year through five years	1,529		1,538
Due after five years through ten years	19,960		19,670
Due after ten years	66,834		64,733
	$	92,933	$	90,550

Other Investments

The following table summarizes the cost and estimated fair values of the Company's investment in equity securities, FHLBB stock and FRBB stock as presented within other investments on the consolidated statements of condition, as of the dates indicated:



	Cost		Unrealized Gains		Unrealized Losses		Fair Value / Carrying Value
September 30, 2018
Equity securities - bank stock (carried at fair value)⁽¹⁾	$	544	$	239	$	—	$	783
FHLBB (carried at cost)	10,744		—		—		10,744
FRB (carried at cost)	5,374		—		—		5,374
Total other investments	$	16,662	$	239	$	—	$	16,901
December 31, 2017
FHLBB (carried at cost)	$	18,296	$	—	$	—	$	18,296
FRB (carried at cost)	5,374		—		—		5,374
Total other investments	$	23,670	$	—	$	—	$	23,670


(1)	Effective January 1, 2018, these investments were reclassified to other investments on the consolidated statements of condition as they are no longer eligible for AFS classification upon adoption of ASU 2016-01. Refer to Note 2 for further details.

For the three and nine months ended September 30, 2018, the Company recognized an unrealized gain (loss) of $11,000 and $(13,000), respectively, due to the change in fair value of its bank stock equity securities, which were presented within other income on the consolidated statements of income. In addition, the Company's investment in a reinsurance program liquidated during the three months ended March 31, 2018, and a gain of $195,000 was recognized within other income on the Company's consolidated statements of income for the nine months ended September 30, 2018.

For the three and nine months ended September 30, 2018, the Company sold its shares of Visa Inc. Class B common stock, with a carrying value of $441,000 that was presented within other assets on the consolidated statements of condition. The sale resulted in a gain of $939,000 that has been presented within net gain on sale of securities on the consolidated statements of income.

The Bank is a member of the FHLBB and FRBB, and as a member, the Bank is required to hold a certain amount of FHLBB and FRB common stock. This stock is a non-marketable equity security and is reported at cost. The Company evaluates its FHLBB and FRB common stock for impairment based on the ultimate recoverability of the par value rather than by recognizing temporary declines in value. For the three or nine months ended September 30, 2018 and 2017, the Company did not record any OTTI on its FHLBB and FRB stock.