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Investment Securities
 12 Months Ended
Dec. 31, 2012
Investments Securities [Abstract]  
Investment Securities
Note 3. Investment Securities

The following tables summarize the amortized cost and estimated fair value of investment securities at December 31, 2012 and 2011:

 
 
Amortized
  
Unrealized
  
Unrealized
  
Fair Value
 
 As of December 31, 2012
 
Cost
  
Gains
  
Losses
  
(Estimated)
 
Securities available for sale
 
  
  
  
 
Mortgage-backed securities
 
$
164,752,000
  
$
4,636,000
  
$
(295,000
)
 
$
169,093,000
 
State and political subdivisions
  
113,069,000
   
8,074,000
   
(199,000
)
  
120,944,000
 
Corporate securities
  
-
   
-
   
-
   
-
 
Other equity securities
  
1,578,000
   
43,000
   
(44,000
)
  
1,577,000
 
 
 
$
279,399,000
  
$
12,753,000
  
$
(538,000
)
 
$
291,614,000
 
Securities to be held to maturity
                
U.S. Government-sponsored agencies
 
$
60,919,000
  
$
242,000
  
$
(182,000
)
 
$
60,979,000
 
Mortgage-backed securities
  
39,193,000
   
2,850,000
   
(19,000
)
  
42,024,000
 
State and political subdivisions
  
42,908,000
   
4,036,000
   
-
   
46,944,000
 
Corporate securities
  
300,000
   
-
   
-
   
300,000
 
 
 
$
143,320,000
  
$
7,128,000
  
$
(201,000
)
 
$
150,247,000
 
Restricted equity securities
                
Federal Home Loan Bank Stock
 
$
13,412,000
  
$
-
  
$
-
  
$
13,412,000
 
Federal Reserve Bank Stock
  
1,036,000
   
-
   
-
   
1,036,000
 
 
 
$
14,448,000
  
$
-
  
$
-
  
$
14,448,000
 


 
 
Amortized
  
Unrealized
  
Unrealized
  
Fair Value
 
 As of December 31, 2011
 
Cost
  
Gains
  
Losses
  
(Estimated)
 
Securities available for sale
 
  
  
  
 
Mortgage-backed securities
 
$
191,924,000
  
$
6,486,000
  
$
(178,000
)
 
$
198,232,000
 
State and political subdivisions
  
80,259,000
   
5,484,000
   
(17,000
)
  
85,726,000
 
Corporate securities
  
1,098,000
   
-
   
(287,000
)
  
811,000
 
Other equity securities
  
1,535,000
   
37,000
   
(139,000
)
  
1,433,000
 
 
 
$
274,816,000
  
$
12,007,000
  
$
(621,000
)
 
$
286,202,000
 
Securities to be held to maturity
                
U.S. Government-sponsored agencies
 
$
19,390,000
  
$
132,000
  
$
-
  
$
19,522,000
 
Mortgage-backed securities
  
56,800,000
   
3,900,000
   
(3,000
)
  
60,697,000
 
State and political subdivisions
  
46,171,000
   
4,159,000
   
(172,000
)
  
50,158,000
 
Corporate securities
  
300,000
   
-
   
-
   
300,000
 
 
 
$
122,661,000
  
$
8,191,000
  
$
(175,000
)
 
$
130,677,000
 
Restricted equity securities
                
Federal Home Loan Bank Stock
 
$
14,031,000
  
$
-
  
$
-
  
$
14,031,000
 
Federal Reserve Bank Stock
  
1,412,000
   
-
   
-
   
1,412,000
 
 
 
$
15,443,000
  
$
-
  
$
-
  
$
15,443,000
 



The following table summarizes the contractual maturities of investment securities at December 31, 2012:

 
 
Securities available for sale
  
Securities to be held to maturity
 
 
 
Amortized Cost
  
Fair Value (Estimated)
  
Amortized Cost
  
Fair Value (Estimated)
 
Due in 1 year or less
 
$
18,761,000
  
$
18,926,000
  
$
3,754,000
  
$
3,785,000
 
Due in 1 to 5 years
  
27,243,000
   
27,816,000
   
11,950,000
   
12,701,000
 
Due in 5 to 10 years
  
16,686,000
   
17,666,000
   
27,461,000
   
29,986,000
 
Due after 10 years
  
215,131,000
   
225,629,000
   
100,155,000
   
103,775,000
 
Equity securities
  
1,578,000
   
1,577,000
   
-
   
-
 
 
 
$
279,399,000
  
$
291,614,000
  
$
143,320,000
  
$
150,247,000
 

The following table summarizes the contractual maturities of investment securities at December 31, 2011:

 
 
Securities available for sale
  
Securities to be held to maturity
 
In thousands of dollars
 
Amortized
Cost
  
Fair Value (Estimated)
  
Amortized
Cost
  
Fair Value (Estimated)
 
Due in 1 year or less
 
$
6,617,000
  
$
6,773,000
  
$
5,179,000
  
$
5,227,000
 
Due in 1 to 5 years
  
18,792,000
   
19,473,000
   
10,085,000
   
10,654,000
 
Due in 5 to 10 years
  
23,219,000
   
24,065,000
   
23,027,000
   
24,694,000
 
Due after 10 years
  
224,653,000
   
234,458,000
   
84,370,000
   
90,102,000
 
Equity securities
  
1,535,000
   
1,433,000
   
-
   
-
 
 
 
$
274,816,000
  
$
286,202,000
  
$
122,661,000
  
$
130,677,000
 

At December 31, 2012, securities with a fair value of $154,817,000 were pledged to secure borrowings from the Federal Home Loan Bank of Boston, public deposits, repurchase agreements, and for other purposes as required by law. This compares to securities with a fair value of $141,506,000, as of December 31, 2011 pledged for the same purpose.
Gains and losses on the sale of securities available for sale are computed by subtracting the amortized cost at the time of sale from the security's selling price, net of accrued interest to be received.
The following table shows securities gains and losses for 2012, 2011 and 2010:

 
 
2012
  
2011
  
2010
 
Proceeds from sales of securities
 
$
26,437,000
  
$
140,417,000
  
$
202,000
 
Gross realized gains
  
2,257,000
   
4,020,000
   
2,000
 
Gross realized losses
  
(289,000
)
  
(727,000
)
  
-
 
Net gain
 
$
1,968,000
  
$
3,293,000
  
$
2,000
 
Related income taxes
 
$
689,000
  
$
1,153,000
  
$
1,000
 

The following table summarizes activity in the unrealized gain or loss on available for sale securities included in other comprehensive income for the years ended December 31, 2012, 2011 and 2010.

Years ended December 31,
 
2012
  
2011
  
2010
 
Balance at beginning of year
 
$
7,401,000
  
$
(2,057,000
)
 
$
(125,000
)
Unrealized gains (losses) arising during the period
  
2,797,000
   
17,844,000
   
(2,971,000
)
Realized gains during the period
  
(1,968,000
)
  
(3,293,000
)
  
(2,000
)
Related deferred taxes
  
(290,000
)
  
(5,093,000
)
  
1,041,000
 
Net change
  
539,000
   
9,458,000
   
(1,932,000
)
Balance at end of year
 
$
7,940,000
  
$
7,401,000
  
$
(2,057,000
)

Management reviews securities with unrealized losses for other than temporary impairment. As of December 31, 2012, there were 42 securities with unrealized losses held in the Company's portfolio. These securities were temporarily impaired as a result of changes in interest rates reducing their fair value, of which 7 had been temporarily impaired for

12 months or more. At the present time, there have been no material changes in the credit quality of these securities resulting in other than temporary impairment, and in Management's opinion, no additional write-down for other-than-temporary impairment is warranted.
      Information regarding securities temporarily impaired as of December 31, 2012 is summarized below:

 
 
Less than 12 months
  
12 months or more
  
Total
 
 
 
Fair
  
Unrealized
  
Fair
  
Unrealized
  
Fair
  
Unrealized
 
 As of December 31, 2012
 
Value
  
Losses
  
Value
  
Losses
  
Value
  
Losses
 
U.S. Government-sponsored agencies
 
$
15,817,000
  
$
(182,000
)
 
$
-
  
$
-
  
$
15,817,000
  
$
(182,000
)
Mortgage-backed securities
  
9,982,000
   
(231,000
)
  
2,534,000
   
(83,000
)
  
12,516,000
   
(314,000
)
State and political subdivisions
  
8,621,000
   
(199,000
)
  
-
   
-
   
8,621,000
   
(199,000
)
Corporate securities
  
-
   
-
   
-
   
-
   
-
   
-
 
Other equity securities
  
-
   
-
   
222,000
   
(44,000
)
  
222,000
   
(44,000
)
 
 
$
34,420,000
  
$
(612,000
)
 
$
2,756,000
  
$
(127,000
)
 
$
37,176,000
  
$
(739,000
)

Information regarding securities temporarily impaired as of December 31, 2011 is summarized below:

 
 
Less than 12 months
  
12 months or more
  
Total
 
 
 
Fair
  
Unrealized
  
Fair
  
Unrealized
  
Fair
  
Unrealized
 
 As of December 31, 2011
 
Value
  
Losses
  
Value
  
Losses
  
Value
  
Losses
 
U.S. Government-sponsored agencies
 
$
-
  
$
-
  
$
-
  
$
-
  
$
-
  
$
-
 
Mortgage-backed securities
  
12,489,000
   
(25,000
)
  
6,780,000
   
(156,000
)
  
19,269,000
   
(181,000
)
State and political subdivisions
  
1,984,000
   
(17,000
)
  
1,667,000
   
(172,000
)
  
3,651,000
   
(189,000
)
Corporate securities
  
-
   
-
   
811,000
   
(287,000
)
  
811,000
   
(287,000
)
Other equity securities
  
154,000
   
(120,000
)
  
34,000
   
(19,000
)
  
188,000
   
(139,000
)
 
 
$
14,627,000
  
$
(162,000
)
 
$
9,292,000
  
$
(634,000
)
 
$
23,919,000
  
$
(796,000
)

The Bank is a member of the Federal Home Loan Bank ("FHLB") of Boston, a cooperatively owned wholesale bank for housing and finance in the six New England States. As a requirement of membership in the FHLB, the Bank must own a minimum required amount of FHLB stock, calculated periodically based primarily on its level of borrowings from the FHLB. The Bank uses the FHLB for much of its wholesale funding needs. As of December 31, 2012 and December 31, 2011, the Bank's investment in FHLB stock totaled $13,412,000 and $14,031,000, respectively. FHLB stock is a restricted equity security and therefore is reported at cost, which equals par value.
The Company periodically evaluates its investment in FHLB stock for impairment based on, among other factors, the capital adequacy of the FHLB and its overall financial condition. No impairment losses have been recorded through December 31, 2012. The Bank will continue to monitor its investment in FHLB stock.