Securities Available-for-Sale

3 Months Ended

Mar. 31, 2019

Note 3. Securities Available-for-Sale

	March 31, 2019								December 31, 2018
	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	$	1,998	$	2,000	$	—	$	8	$	1,992
U.S. Government Sponsored Enterprises		3,950		—		8		3,942		3,946		—		31		3,915
SBA Backed Securities		72,906		—		318		72,588		70,477		1		284		70,194
U.S. Government Agency and Sponsored Enterprise Mortgage-Backed Securities		194,549		228		572		194,205		162,604		536		250		162,890
Privately Issued Residential Mortgage-Backed Securities		653		4		8		649		679		3		10		672
Obligations Issued by States and Political Subdivisions		68,051		56		—		68,107		93,445		58		—		93,503
Other Debt Securities		3,600		41		41		3,600		3,600		37		44		3,593
Total	$	345,709	$	329	$	949	$	345,089	$	336,751	$	635	$	627	$	336,759

Included in SBA Backed Securities, 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 $188,887,000 and $197,304,000 at March 31, 2109 and December 31, 2018, 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 $35,852,000 and $34,787,000 at March 31, 2019 and December 31, 2018, respectively. There were no sales of available-for-sale securities for the three months ended March 31, 2019. The Company realized gross gains of $197,000 from the proceeds of $17,871,000 from the sales of available-for-sale securities for the three months ended March 31, 2018.

Debt securities of U.S. Government Sponsored Enterprises and U.S. Government Agency and Sponsored Enterprise Mortgage-Backed Securities 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 March 31, 2019.

	Amortized Cost		Fair Value
	(in thousands)
Within one year	$	66,419	$	66,413
After one but within five years		101,922		101,815
After five but within ten years		133,284		132,854
More than 10 years		44,084		44,007
Total	$	345,709	$	345,089

The weighted average remaining life of investment securities available-for-sale at March 31, 2019 was 5.2 years. Included in the weighted average remaining life calculation at March 31, 2019 were $

3,950

,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. Also $273,776,000 of the securities are floating rate or adjustable rate and reprice prior to maturity.

As of March 31, 2019 and December 31, 2018, 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 Obligations Issued by States and Political Subdivisions, Privately Issued Residential Mortgage-Backed Securities and Other Debt 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 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 at March 31, 2019 or December 31, 2018.

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.

The following table shows the temporarily impaired securities of the Company’s available-for-sale portfolio at March 31, 2019. 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 21 and 31 securities that are temporarily impaired for less than 12 months and for 12 months or longer, respectively, out of a total of 183 holdings at March 31, 2019.

	March 31, 2019
	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	$	—	$	—	$	1,998	$	2	$	1,998	$	2
U.S. Government Sponsored Enterprises		—		—		3,942		8		3,942		8
SBA Backed Securities		19,409		40		53,180		278		72,589		318
U.S. Government Agency and Sponsored Enterprise Mortgage-Backed Securities		70,530		278		43,656		294		114,186		572
Privately Issued Residential Mortgage-Backed Securities		—		—		479		8		479		8
Obligations Issued by States and Political Subdivisions		—		—		—		—		—		—
Other Debt Securities		—		—		459		41		459		41
Total temporarily impaired securities	$	89,939	$	318	$	103,714	$	631	$	193,653	$	949

The following table shows the temporarily impaired securities of the Company’s available-for-sale portfolio at December 31, 2018. 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 10 and 30 securities that are temporarily impaired for less than 12 months and for 12 months or longer, respectively, out of a total of 190 holdings at December 31, 2018.

	December 31, 2018
	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	$	—	$	—	$	1,992	$	8	$	1,992	$	8
U.S. Government Sponsored Enterprises		3,914		31		—		—		3,914		31
SBA Backed Securities		17,950		28		44,323		256		62,273		284
U.S. Government Agency and Sponsored Enterprise Mortgage-Backed Securities		19,244		21		45,782		229		65,026		250
Privately Issued Residential Mortgage-Backed Securities		—		—		495		10		495		10
Obligations Issued by States and Political Subdivisions		—		—		—		—		—		—
Other Debt Securities		—		—		455		44		455		44
Total temporarily impaired securities	$	41,108	$	80	$	93,047	$	547	$	134,155	$	627