Investment and Mortgage-Backed Securities, Available For Sale

The amortized cost, gross unrealized gains, gross unrealized losses, and fair values of investment and mortgage-backed securities available for sale are as follows:



	June 30, 2014
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair value
FHLB Securities	$	14,325,249	$	100,255	$	421,073	$	14,004,431
Federal Farm Credit Bank ("FFCB") Securities	5,750,000		—		137,495		5,612,505
Fannie Mae ("FNMA") And Freddie Mac ("FHLMC") Bonds	996,457		791		—		997,248
Small Business Administration (“SBA”) Bonds	95,497,940		1,822,916		271,402		97,049,454
Tax Exempt Municipal Bonds	58,330,018		1,776,888		352,949		59,753,957
Mortgage-Backed Securities	253,775,042		6,812,674		1,499,478		259,088,238
Equity Securities	257,938		47,062		—		305,000
	$	428,932,644	$	10,560,586	$	2,682,397	$	436,810,833

	December 31, 2013
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair value
FHLB Securities	$	13,538,723	$	25,695	$	893,968	$	12,670,450
FFCB Securities	5,750,000		—		383,820		5,366,180
FNMA And FHLMC Bonds	1,993,473		—		18,543		1,974,930
SBA Bonds	99,228,708		1,914,720		319,443		100,823,985
Tax Exempt Municipal Bonds	63,590,959		410,151		2,685,988		61,315,122
Mortgage-Backed Securities	245,882,053		5,843,365		3,128,883		248,596,535
Equity Securities	257,938		—		1,688		256,250
	$	430,241,854	$	8,193,931	$	7,432,333	$	431,003,452

FHLB securities, FFCB securities and FNMA and FHLMC mortgage-backed securities are issued by government-sponsored enterprises (“GSEs”). GSEs are not backed by the full faith and credit of the United States government. SBA bonds are backed by the full faith and credit of the United States government. Included in the tables above and below in mortgage-backed securities are GNMA mortgage-backed securities, which are also backed by the full faith and credit of the United States government. At June 30, 2014 the Bank held an amortized cost and fair value of $172.6 million and $177.2 million, respectively, in GNMA mortgage-backed securities included in mortgage-backed securities listed above compared to an amortized cost and fair value of $170.4 million and $173.5 million, respectively, at December 31, 2013. All mortgage-backed securities above are either GSEs or GNMA mortgage-backed securities. The Company has not invested in any private label mortgage-backed securities.

7. Investment and Mortgage-Backed Securities, Available For Sale, Continued

The amortized cost and fair value of investment and mortgage-backed securities available for sale at June 30, 2014 are shown below by contractual maturity. Expected maturities will differ from contractual maturities because borrowers have the right to prepay obligations with or without call or prepayment penalties.



Investment Securities	Amortized Cost		Fair Value
Less Than One Year	$	321,151	$	328,913
One – Five Years	12,647,153		12,876,501
Over Five – Ten Years	72,912,189		73,784,671
More Than Ten Years	89,277,109		90,732,510
Mortgage-Backed Securities	253,775,042		259,088,238
	$	428,932,644	$	436,810,833

At June 30, 2014 the amortized cost and fair value of investment and mortgage-backed securities available for sale pledged as collateral for certain deposit accounts, FHLB advances and other borrowings were $129.0 million and $132.8 million, respectively, compared to an amortized cost and fair value of $118.3 million and $121.1 million, respectively at December 31, 2013.

The Bank received $13.4 million and $10.9 million in gross proceeds from sales of available for sale securities during the three months ended June 30, 2014 and 2013, respectively. As a result, the Bank recognized gross gains of $168,000 and $370,000 respectively, and gross losses of $207,000 and zero respectively, for the three months ended June 30. 2014 and 2013.

The Bank received $27.3 million and $31.8 million in gross proceeds from sales of available for sale securities during the six months ended June 30, 2014 and 2013, respectively. As a result, the Bank recognized gross gains of $477,000 and $754,000, respectively, and gross losses of $432,000 and zero, respectively, for the six months ended June 30, 2014 and 2013.

The following tables show gross unrealized losses and fair value, aggregated by investment category, and length of time that the individual available for sale securities have been in a continuous unrealized loss position at the dates indicated.



	June 30, 2014
	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
FHLB Securities	$	—	$	—	$	7,577,335	$	421,073	$	7,577,335	$	421,073
FFCB Securities	4,634,994		115,006		977,511		22,489		5,612,505		137,495
SBA Bonds	15,275,676		132,635		7,622,202		138,767		22,897,878		271,402
Tax Exempt Municipal Bond	4,442,890		44,641		19,923,138		308,308		24,366,028		352,949
Mortgage-Backed Securities	39,386,204		1,187,371		22,734,106		312,107		62,120,310		1,499,478
	$	63,739,764	$	1,479,653	$	58,834,292	$	1,202,744	$	122,574,056	$	2,682,397

7. Investment and Mortgage-Backed Securities, Available For Sale, Continued



	December 31, 2013
	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
FHLB Securities	$	10,288,110	$	651,608	$	1,757,640	$	242,360	$	12,045,750	$	893,968
FFCB Securities	4,435,070		314,930		931,110		68,890		5,366,180		383,820
FNMA Bonds	1,974,930		18,543		—		—		1,974,930		18,543
SBA Bonds	12,183,961		288,678		3,541,453		30,765		15,725,414		319,443
Tax Exempt Municipal Bond	39,848,206		2,556,014		2,008,272		129,974		41,856,478		2,685,988
Mortgage-Backed Securities	88,516,030		2,756,216		6,436,369		372,667		94,952,399		3,128,883
Equity Securities	—		—		101,250		1,688		101,250		1,688
	$	157,246,307	$	6,585,989	$	14,776,094	$	846,344	$	172,022,401	$	7,432,333

Securities classified as available for sale are recorded at fair market value. At both June 30, 2014 and December 31, 2013, 11.4% of the unrealized losses, representing 38 and 11 individual securities, respectively, consisted of securities in a continuous loss position for 12 months or more. The Company has the ability and intent to hold these securities until such time as the value recovers or the securities mature. The Company believes, based on industry analyst reports and credit ratings, that the deterioration in value is attributable to changes in market interest rates and is not in the credit quality of the issuer and therefore, these losses are not considered other-than-temporary. The Company reviews its investment securities portfolio at least quarterly and more frequently when economic conditions warrant, assessing whether there is any indication of other-than-temporary impairment (“OTTI”).

Factors considered in the review include estimated future cash flows, length of time and extent to which market value has been less than cost, the financial condition and near term prospects of the issuer, and our intent and ability to retain the security to allow for an anticipated recovery in market value.

If the review determines that there is OTTI, then an impairment loss is recognized in earnings equal to the entire difference between the investment’s cost and its fair value at the balance sheet date of the reporting period for which the assessment is made, or we may recognize a portion in other comprehensive income. The fair value of investments on which OTTI is recognized then becomes the new cost basis of the investment.