Investment Securities

12 Months Ended

Dec. 31, 2018

Investments, Debt and Equity Securities [Abstract]

The following tables summarize the amortized cost and estimated fair value of investment securities at December 31, 2018 and 2017:



	Amortized		Unrealized		Unrealized			Fair Value
As of December 31, 2018	Cost		Gains		Losses			(Estimated)
Securities available for sale
U.S. government-sponsored agencies	$	5,000,000	$	7,000	$	—		$	5,007,000
Mortgage-backed securities	313,854,000		571,000		(6,732,000)			307,693,000
State and political subdivisions	4,955,000		—		(239,000		)	4,716,000
	$	323,809,000	$	578,000	$	(6,971,000	)	$	317,416,000
Securities to be held to maturity
U.S. Government-sponsored agencies	$	11,155,000	$	—	$	(472,000	)	$	10,683,000
Mortgage-backed securities	18,250,000		336,000		(255,000		)	18,331,000
State and political subdivisions	221,958,000		1,046,000		(5,418,000		)	217,586,000
Corporate securities	4,300,000		—		—			4,300,000
	$	255,663,000	$	1,382,000	$	(6,145,000	)	$	250,900,000
Restricted equity securities
Federal Home Loan Bank Stock	$	10,549,000	$	—	$	—		$	10,549,000
Federal Reserve Bank Stock	1,037,000		—		—			1,037,000
	$	11,586,000	$	—	$	—		$	11,586,000



	Amortized		Unrealized		Unrealized			Fair Value
As of December 31, 2017	Cost		Gains		Losses			(Estimated)
Securities available for sale
Mortgage-backed securities	$	293,689,000	$	722,000	$	(4,422,000	)	$	289,989,000
State and political subdivisions	6,860,000		16,000		(107,000		)	6,769,000
Other equity securities	323,000		121,000		(3,000		)	441,000
	$	300,872,000	$	859,000	$	(4,532,000	)	$	297,199,000
Securities to be held to maturity
U.S. Government-sponsored agencies	$	11,155,000	$	—	$	(180,000	)	$	10,975,000
Mortgage-backed securities	23,284,000		568,000		(128,000		)	23,724,000
State and political subdivisions	217,828,000		3,931,000		(1,103,000		)	220,656,000
Corporate securities	4,300,000		—		—			4,300,000
	$	256,567,000	$	4,499,000	$	(1,411,000	)	$	259,655,000
Restricted equity securities
Federal Home Loan Bank Stock	$	9,321,000	$	—	$	—		$	9,321,000
Federal Reserve Bank Stock	1,037,000		—		—			1,037,000
	$	10,358,000	$	—	$	—		$	10,358,000

The following table summarizes the contractual maturities of investment securities at December 31, 2018:



	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	$	—	$	—	$	1,432,000	$	1,433,000
Due in 1 to 5 years	13,501,000		13,518,000		20,717,000		20,778,000
Due in 5 to 10 years	83,954,000		83,326,000		157,544,000		155,313,000
Due after 10 years	226,354,000		220,572,000		75,970,000		73,376,000
	$	323,809,000	$	317,416,000	$	255,663,000	$	250,900,000

The following table summarizes the contractual maturities of investment securities at December 31, 2017:



	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	$	111,000	$	112,000	$	635,000	$	637,000
Due in 1 to 5 years	841,000		842,000		18,059,000		18,164,000
Due in 5 to 10 years	29,003,000		29,177,000		37,182,000		37,719,000
Due after 10 years	270,594,000		266,627,000		200,691,000		203,135,000
Equity securities	323,000		441,000		—		—
	$	300,872,000	$	297,199,000	$	256,567,000	$	259,655,000

At December 31, 2018, securities with a fair value of $222,829,000 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 $231,516,000 as of December 31, 2017 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 2018, 2017 and 2016:



	2018		2017		2016
Proceeds from sales of securities	$	459,000	$	15,587,000	$	10,309,000
Gross realized gains	137,000		471,000		673,000
Gross realized losses	—		—		—
Net gain	$	137,000	$	471,000	$	673,000
Related income taxes	$	29,000	$	165,000	$	236,000

All equity securities were sold during 2018.

Management reviews securities with unrealized losses for other than temporary impairment. As of December 31, 2018, there were 511 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 232 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, 2018 is summarized below:



	Less than 12 months					12 months or more					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
As of December 31, 2018	Value		Losses			Value		Losses			Value		Losses
U.S. Government-sponsored agencies	$	—	$	—		$	10,683,000	$	(472,000	)	$	10,683,000	$	(472,000	)
Mortgage-backed securities	76,050,000		(1,061,000		)	185,136,000		(5,926,000		)	261,186,000		(6,987,000		)
State and political subdivisions	76,809,000		(1,784,000		)	45,052,000		(3,873,000		)	121,861,000		(5,657,000		)
	$	152,859,000	$	(2,845,000	)	$	240,871,000	$	(10,271,000	)	$	393,730,000	$	(13,116,000	)

As of December 31, 2017, there were 241 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 157 had been temporarily impaired for 12 months or more. Information regarding securities temporarily impaired as of December 31, 2017 is summarized below:



	Less than 12 months					12 months or more					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
As of December 31, 2017	Value		Losses			Value		Losses			Value		Losses
U.S. Government-sponsored agencies	$	7,161,000	$	(94,000	)	$	3,814,000	$	(86,000	)	$	10,975,000	$	(180,000	)
Mortgage-backed securities	132,025,000		(1,857,000		)	101,707,000		(2,693,000		)	233,732,000		(4,550,000		)
State and political subdivisions	9,425,000		(149,000		)	38,864,000		(1,061,000		)	48,289,000		(1,210,000		)
Other equity securities	—		—			9,000		(3,000		)	9,000		(3,000		)
	$	148,611,000	$	(2,100,000	)	$	144,394,000	$	(3,843,000	)	$	293,005,000	$	(5,943,000	)

During the third quarter of 2014, the Company transferred securities with a total amortized cost of $89,780,000 and 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 $197,000 at December 31, 2018. 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 December 31, 2018 and 2017, the Bank's investment in FHLB stock totaled $10,549,000 and $9,321,000, 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, 2018. The Bank will continue to monitor its investment in FHLB stock.