Note 2. Securities Available-for-Sale


	September 30, 2016								December 31, 2015
	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	$	2,000	$	—	$	—	$	2,000	$	1,999	$	—	$	10	$	1,989
U.S. Government Sponsored Enterprises		15,000		9		—		15,009		—		—		—		—
SBA Backed Securities		58,496		11		162		58,345		5,983		8		2		5,989
U.S. Government Agency and Sponsored Enterprise Mortgage-Backed Securities		264,545		346		437		264,454		232,967		859		300		233,526
Privately Issued Residential Mortgage-Backed Securities		1,190		2		15		1,177		1,437		10		13		1,434
Obligations Issued by States and Political Subdivisions		180,315		—		404		179,911		157,838		—		878		1 56,960
Other Debt Securities		5,100		15		154		4,961		4,600		3		130		4,473
Equity Securities		116		159		—		275		153		99		—		252

Total	$	526,762	$	542	$	1,172	$	526,132	$	404,977	$	979	$	1,333	$	404,623

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 $223,246,000 and $220,482,000 at September 30, 2016 and December 31, 2015, respectively. Also included in securities available-for-sale are securities at fair value pledged for borrowing at the Federal Home Loan Bank of Boston amounting to $63,351,000 and $20,056,000 at September 30, 2016 and December 31, 2015, respectively. The Company realized gross gains of $52,000 from the proceeds of $2,376,000 from the sales of available-for-sale securities for the nine months ended September 30, 2016. The Company realized gross gains of $170,000 from the proceeds of $42,716,000 from the sales of available-for-sale securities for the nine months ended September 30, 2015.

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, 2016.


	Amortized Cost		Fair Value
	(in thousands)
Within one year	$	186,348	$	186,336
After one but within five years		203,010		202,873
After five but within ten years		130,087		129,948
More than 10 years		5,701		5,313
Non-maturing		1,616		1,662

Total	$	526,762	$	526,132

The weighted average remaining life of investment securities available-for-sale at September 30, 2016 was 3.6 years. Included in the weighted average remaining life calculation at September 30, 2016 were $15,000,000 of U.S. Government Sponsored Enterprises obligations that are callable at the discretion of the issuer. 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, 2016 and December 31, 2015, 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 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 non-agency mortgage-backed securities was primarily caused by changes in credit spreads and liquidity issues in the marketplace.

The unrealized loss on SBA Backed Securities, U.S. Government Agency and Sponsored Enterprise Mortgage Backed Securities, and Obligations Issued by States and Political Subdivisions, 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, 2016. This table shows the unrealized market loss of securities that have been in a continuous unrealized loss position for less than 12 months and a continuous loss position for 12 months or longer. There are 41 and 15 securities that are temporarily impaired for less than 12 months and for 12 months or longer, respectively, out of a total of 282 holdings at September 30, 2016.

September 30, 2016

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. Treasury

—

SBA Backed Securities

52,809

160

971

53,780

162

U.S. Government Agency and Sponsored Enterprise Mortgage-Backed Securities

128,839

298

33,439

139

162,278

437

Privately Issued Residential Mortgage-Backed Securities

373

430

803

Obligations Issued by States and Political Subdivisions

—

4,298

404

4,298

404

Other Debt Securities

460

1,886

114

2,346

154

Total temporarily impaired securities

182,481

499

41,024

673

223,505

1,172

The following table shows the temporarily impaired securities of the Company’s available-for-sale portfolio at December 31, 2015. This table shows the unrealized market loss of securities that have been in a continuous unrealized loss position for less than 12 months and a continuous loss position for 12 months or longer. There are 14 and 11 securities that are temporarily impaired for less than 12 months and for 12 months or longer, respectively, out of a total of 290 holdings at December 31, 2015.


	December 31, 2015
	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. Treasury	$	1,989	$	10	$	—	$	—	$	1,989	$	10
SBA Backed Securities		1,031		2		—		—		1,031		2
U.S. Government Agency and Sponsored Enterprise Mortgage-Backed Securities		26,519		52		49,341		248		75,860		300
Privately Issued Residential Mortgage-Backed Securities		—		—		490		13		490		13
Obligations Issued by States and Political Subdivisions		—		—		3,820		878		3,820		878
Other Debt Securities		497		3		1,373		127		1,870		130

Total temporarily impaired securities	$	30,036	$	67	$	55,024	$	1,266	$	85,060	$	1,333