Investment Securities

The following table summarizes the amortized cost and estimated fair value of investment securities at September 30, 2014:



	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value (Estimated)
Securities available for sale
Mortgage-backed securities	$	157,420,000	$	2,109,000	$	(1,779,000	)	$	157,750,000
State and political subdivisions	29,099,000		1,785,000		(265,000		)	30,619,000
Other equity securities	2,514,000		53,000		(16,000		)	2,551,000
	$	189,033,000	$	3,947,000	$	(2,060,000	)	$	190,920,000
Securities to be held to maturity
U.S. Government-sponsored agencies	$	92,332,000	$	2,000	$	(5,271,000	)	$	87,063,000
Mortgage-backed securities	61,138,000		1,695,000		(587,000		)	62,246,000
State and political subdivisions	127,970,000		3,238,000		(38,000		)	131,170,000
Corporate securities	300,000		—		—			300,000
	$	281,740,000	$	4,935,000	$	(5,896,000	)	$	280,779,000
Restricted equity securities
Federal Home Loan Bank Stock	$	12,875,000	$	—	$	—		$	12,875,000
Federal Reserve Bank Stock	1,037,000		—		—			1,037,000
	$	13,912,000	$	—	$	—		$	13,912,000

The following table summarizes the amortized cost and estimated fair value of investment securities at December 31, 2013:



	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value (Estimated)
Securities available for sale
Mortgage-backed securities	$	180,109,000	$	1,392,000	$	(3,772,000	)	$	177,729,000
State and political subdivisions	134,188,000		1,458,000		(9,331,000		)	126,315,000
Other equity securities	1,666,000		116,000		(2,000		)	1,780,000
	$	315,963,000	$	2,966,000	$	(13,105,000	)	$	305,824,000
Securities to be held to maturity
U.S. Government-sponsored agencies	$	92,280,000	$	1,000	$	(12,757,000	)	$	79,524,000
Mortgage-backed securities	35,712,000		1,440,000		(1,336,000		)	35,816,000
State and political subdivisions	40,985,000		1,823,000		(112,000		)	42,696,000
Corporate securities	300,000		—		—			300,000
	$	169,277,000	$	3,264,000	$	(14,205,000	)	$	158,336,000
Restricted equity securities
Federal Home Loan Bank Stock	$	12,875,000	$	—	$	—		$	12,875,000
Federal Reserve Bank Stock	1,037,000		—		—			1,037,000
	$	13,912,000	$	—	$	—		$	13,912,000

The following table summarizes the amortized cost and estimated fair value of investment securities at September 30, 2013:



	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value (Estimated)
Securities available for sale
Mortgage-backed securities	$	187,789,000	$	2,117,000	$	(1,650,000	)	$	188,256,000
State and political subdivisions	134,978,000		1,703,000		(8,710,000		)	127,971,000
Other equity securities	1,614,000		62,000		(3,000		)	1,673,000
	$	324,381,000	$	3,882,000	$	(10,363,000	)	$	317,900,000
Securities to be held to maturity
U.S. Government-sponsored agencies	$	92,226,000	$	11,000	$	(8,684,000	)	$	83,553,000
Mortgage-backed securities	37,915,000		1,701,000		(997,000		)	38,619,000
State and political subdivisions	41,810,000		2,067,000		(80,000		)	43,797,000
Corporate securities	300,000		—		—			300,000
	$	172,251,000	$	3,779,000	$	(9,761,000	)	$	166,269,000
Restricted equity securities
Federal Home Loan Bank Stock	$	12,875,000	$	—	$	—		$	12,875,000
Federal Reserve Bank Stock	1,037,000		—		—			1,037,000
	$	13,912,000	$	—	$	—		$	13,912,000

The following table summarizes the contractual maturities of investment securities at September 30, 2014:



	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	$	2,502,000	$	2,533,000	$	1,778,000	$	1,792,000
Due in 1 to 5 years	16,076,000		16,399,000		9,380,000		9,669,000
Due in 5 to 10 years	17,710,000		17,991,000		51,620,000		53,271,000
Due after 10 years	150,231,000		151,446,000		218,962,000		216,047,000
Equity securities	2,514,000		2,551,000		—		—
	$	189,033,000	$	190,920,000	$	281,740,000	$	280,779,000

The following table summarizes the contractual maturities of investment securities at December 31, 2013:



	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	$	717,000	$	721,000	$	268,000	$	273,000
Due in 1 to 5 years	20,547,000		20,636,000		6,420,000		6,790,000
Due in 5 to 10 years	16,114,000		16,267,000		33,442,000		33,828,000
Due after 10 years	276,919,000		266,420,000		129,147,000		117,445,000
Equity securities	1,666,000		1,780,000		—		—
	$	315,963,000	$	305,824,000	$	169,277,000	$	158,336,000

The following table summarizes the contractual maturities of investment securities at September 30, 2013:



	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	$	1,755,000	$	1,775,000	$	717,000	$	726,000
Due in 1 to 5 years	14,249,000		14,473,000		6,559,000		6,955,000
Due in 5 to 10 years	18,808,000		19,199,000		33,863,000		34,692,000
Due after 10 years	287,955,000		280,780,000		131,112,000		123,896,000
Equity securities	1,614,000		1,673,000		—		—
	$	324,381,000	$	317,900,000	$	172,251,000	$	166,269,000

At September 30, 2014, securities with a fair value of $181,441,000 were pledged to secure public deposits, repurchase agreements, and for other purposes as required by law. This compares to securities with a fair value of $147,074,000 as of December 31, 2013 and $156,727,000 at September 30, 2013, pledged for the same purposes.

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 the nine months and quarters ended September 30, 2014 and 2013:



	For the nine months ended September 30,				For the quarters ended September 30,
	2014		2013		2014		2013
Proceeds from sales of securities	$	15,557,000	$	10,563,000	$	15,557,000	$	—
Gross realized gains	1,145,000		1,087,000		1,105,000		—
Gross realized losses	—		—		—		—
Net gain	$	1,145,000	$	1,087,000	$	1,105,000	$	—
Related income taxes	$	401,000	$	380,000	$	387,000	$	—

Management reviews securities with unrealized losses for other than temporary impairment. As of September 30, 2014, there were 76 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 47 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 September 30, 2014 is summarized below:



	Less than 12 months					12 months or more					Total
	Fair Value (Estimated)		Unrealized Losses			Fair Value (Estimated)		Unrealized Losses			Fair Value (Estimated)		Unrealized Losses
U.S. Government-sponsored agencies	$	4,985,000	$	(15,000	)	$	81,253,000	$	(5,256,000	)	$	86,238,000	$	(5,271,000	)
Mortgage-backed securities	52,644,000		(736,000		)	32,009,000		(1,630,000		)	84,653,000		(2,366,000		)
State and political subdivisions	3,880,000		(27,000		)	5,878,000		(276,000		)	9,758,000		(303,000		)
Other equity securities	142,000		(15,000		)	52,000		(1,000		)	194,000		(16,000		)
	$	61,651,000	$	(793,000	)	$	119,192,000	$	(7,163,000	)	$	180,843,000	$	(7,956,000	)

As of December 31, 2013, there were 304 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 32 had been temporarily impaired for 12 months or more. Information regarding securities temporarily impaired as of December 31, 2013 is summarized below:



	Less than 12 months					12 months or more					Total
	Fair Value (Estimated)		Unrealized Losses			Fair Value (Estimated)		Unrealized Losses			Fair Value (Estimated)		Unrealized Losses
U.S. Government-sponsored agencies	$	78,724,000	$	(12,757,000	)	$	—	$	—		$	78,724,000	$	(12,757,000	)
Mortgage-backed securities	96,263,000		(4,977,000		)	5,451,000		(131,000		)	101,714,000		(5,108,000		)
State and political subdivisions	69,406,000		(7,895,000		)	7,150,000		(1,548,000		)	76,556,000		(9,443,000		)
Other equity securities	—		—			50,000		(2,000		)	50,000		(2,000		)
	$	244,393,000	$	(25,629,000	)	$	12,651,000	$	(1,681,000	)	$	257,044,000	$	(27,310,000	)

As of September 30, 2013, there were 297 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 seven had been temporarily impaired for 12 months or more. Information regarding securities temporarily impaired as of September 30, 2013 is summarized below:



	Less than 12 months					12 months or more					Total
	Fair Value (Estimated)		Unrealized Losses			Fair Value (Estimated)		Unrealized Losses			Fair Value (Estimated)		Unrealized Losses
U.S. Government-sponsored agencies	$	82,752,000	$	(8,684,000	)	$	—	$	—		$	82,752,000	$	(8,684,000	)
Mortgage-backed securities	84,609,000		(2,514,000		)	3,086,000		(133,000		)	87,695,000		(2,647,000		)
State and political subdivisions	73,244,000		(8,760,000		)	334,000		(30,000		)	73,578,000		(8,790,000		)
Other equity securities	—		—			50,000		(3,000		)	50,000		(3,000		)
	$	240,605,000	$	(19,958,000	)	$	3,470,000	$	(166,000	)	$	244,075,000	$	(20,124,000	)

During the third quarter of 2014, the Company transferred securities with a total amortized cost of $89,780,000 with a corresponding fair value of $89,757,000 from available for sale to held to maturity. The net unrealized loss, net of taxes, on these securities at the date of the transfer was $15,000. The net unrealized holding loss at the time of transfer continues to be reported in accumulated other comprehensive income (loss), net of tax and is amortized over the remaining lives of the securities as an adjustment of the yield. The amortization of the net unrealized loss reported in accumulated other comprehensive income (loss) will offset the effect on interest income of the discount for the transferred securities. The remaining unamortized balance of the net unrealized losses for the securities transferred from available for sale to held to maturity was $28,000 at September 30, 2014. These securities were transferred as a part of the Company's overall investment and balance sheet strategies.

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 September 30, 2014, and 2013, and December 31, 2013, the Bank's investment in FHLB stock totaled $12,875,000. FHLB stock is a non-marketable equity security and therefore is reported at cost, which equals par value.