Note 4. Securities Available-for-Sale


	September 30, 2013								December 31, 2012
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(In thousands)
U.S. Treasury	$	1,997	$	—	$	1	$	1,996	$	2,000	$	4	$	—	$	2,004
U.S. Government Sponsored Enterprises		9,995		3		—		9,998		130,048		360		68		130,340
Small Business Administration		7,414		17		—		7,431		8,043		113		—		8,156
U.S. Government Agency and Sponsored Enterprises Mortgage Backed Securities		429,665		1,032		1,388		429,309		1,212,953		20,816		412		1,233,357
Privately Issued Residential Mortgage Backed Securities		2,434		6		22		2,418		2,938		31		22		2,947
Obligations Issued by States and Political Subdivisions		41,720		18		725		41,013		55,855		41		722		55,174

Other Debt Securities		2,300		—		111		2,189		2,300		—		47		2,253
Equity Securities		406		141		—		547		458		112		—		570


Total	$	495,931	$	1,217	$	2,247	$	494,901	$	1,414,595	$	21,477	$	1,271	$	1,434,801

During the third quarter of 2013, securities available-for-sale with an amortized cost of $1,012,370,000 were transferred to securities held-to-maturity at their fair value of $987,037,000 in response to rising interest rates. Rising interest rates have the potential to increase unrealized losses on the available-for-sale portfolio. The transfer was implemented to lessen the effects of rising interest rates.

Included in U.S. Government Sponsored Enterprise Securities and U.S. Government Agency and Sponsored Enterprise Mortgage-Backed Securities are securities at fair value pledged to secure public deposits and repurchase agreements amounting to $285,264,000 and $665,028,000 at September 30, 2013 and December 31, 2012, respectively. Also included in securities available-for-sale are securities pledged for borrowing at the Federal Home Loan Bank of Boston amounting to $13,450,000 and $220,313,000 at September 30, 2013 and December 31, 2012, respectively. The Company realized gross gains of $2,665,000 from the proceeds of $216,078,000 from the sales of available-for-sale securities for the nine months ended September 30, 2013. The Company realized gross gains of $1,119,000 from the proceeds of $271,500,000 from the sales of available-for-sale securities for the nine months ended September 30, 2012.

Debt securities of Government Sponsored Enterprises primarily refer to debt securities of Fannie Mae and Freddie Mac.

The following table shows the maturity distribution of the Company’s securities available-for-sale at September 30, 2013.


	Amortized Cost		Fair Value
	(In thousands)
Within one year	$	36,030	$	36,072
After one but within five years		228,332		228,266
After five but within ten years		217,786		217,202
More than 10 years		11,876		11,426
Non-maturing		1,907		1,935

Total	$	495,931	$	494,901

The weighted average remaining life of investment securities available-for-sale at September 30, 2013 was 4.9 years. The contractual maturities, which were used in the table above, of mortgage-backed securities, will differ from the actual maturities, due to the ability of the issuers to prepay underlying obligations.

As of September 30, 2013 and December 31, 2012, management concluded that the unrealized losses of its investment securities are temporary in nature since they are not related to the underlying credit quality of the issuers, and the Company does not intend to sell these debt securities and it is not more likely than not that it will be required to sell these debt securities before the anticipated recovery of its remaining amortized cost. In making its other-than-temporary impairment evaluation, the Company considered the fact that the principal and interest on these securities are from issuers that are investment grade. The change in the unrealized losses on the state and municipal securities and the nonagency mortgage-backed securities was primarily caused by changes in credit spreads and liquidity issues in the marketplace.

The unrealized loss on U.S. Government Sponsored Enterprises and U.S. Government Sponsored Enterprises Mortgage Backed Securities related primarily to interest rates and not credit quality and because the Company has the ability and intent to hold these investments until recovery of fair value, which may be maturity. The Company does not consider these investments to be other-than-temporarily impaired.

In evaluating the underlying credit quality of a security, management considers several factors such as the credit rating of the obligor and the issuer, if applicable. Internal reviews of issuer financial statements are performed as deemed necessary. In the case of privately issued mortgage-backed securities, the performance of the underlying loans is analyzed as deemed necessary to determine the estimated future cash flows of the securities. Factors considered include the level of subordination, current and estimated future default rates, current and estimated prepayment rates, estimated loss severity rates, geographic concentrations and origination dates of underlying loans. In the case of marketable equity securities, the severity of the unrealized loss, the length of time the unrealized loss has existed, and the issuer’s financial performance are considered.

The following table shows the temporarily impaired securities of the Company’s available-for-sale portfolio at September 30, 2013. This table shows the unrealized market loss of securities that have been in a continuous unrealized loss position for 12 months or less and a continuous loss position for 12 months and longer. There are 51 and 4 securities that are temporarily impaired for less than 12 months and for 12 months or longer, respectively, out of a total of 245 holdings at September 30, 2013.

September 30, 2013

Less than 12 months

12 months or longer

Total

Temporarily Impaired Investments

Fair Value

Unrealized
Losses

Fair Value

Unrealized
Losses

Fair Value

Unrealized
Losses

(In thousands)

U.S. Government Sponsored Enterprises

1,996

—

1,996

U.S. Government Agency and Sponsored Enterprises Mortgage Backed Securities

328,829

1,368

1,945

330,774

1,388

Privately Issued Residential Mortgage Backed Securities

1, 575

—

1,575

Obligations Issued by States and Political Subdivisions

—

3,963

725

3,963

725

Other Debt Securities

—

1,389

111

1,389

111

Total temporarily impaired securities

332,400

1,391

7,297

856

339,697

2,247

The following table shows the temporarily impaired securities of the Company’s available-for-sale portfolio at December 31, 2012. This table shows the unrealized market loss of securities that have been in a continuous unrealized loss position for 12 months or less and a continuous loss position for 12 months and longer. There are 20 and 7 securities that are temporarily impaired for less than 12 months and for 12 months or longer, respectively, out of a total of 458 holdings at December 31, 2012.


	December 31, 2012
	Less than 12 months				12 months or longer				Total
Temporarily Impaired Investments	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(In thousands)
U.S. Government Sponsored Enterprises	$	34,967	$	68	$	—	$	—	$	34,967	$	68
U.S. Government Agency and Sponsored Enterprises Mortgage Backed Securities		93,006		383		10,169		29		103,175		412
Privately Issued Residential Mortgage Backed Securities		—		—		1,863		22		1,863		22
Obligations Issued by States and Political Subdivisions		—		—		3,963		722		3,963		722
Other Debt Securities		—		—		1,453		47		1,453		47
Equity Securities		—		—		—		—		—		—

Total temporarily impaired securities	$	127,973	$	451	$	17,448	$	820	$	145,421	$	1,271