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 at the dates indicated are as follows:



	September 30, 2015
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
FHLB Securities	$	5,113,509	$	4,254	$	56,284	$	5,061,479
Federal Farm Credit Bank ("FFCB") Securities	2,000,000		—		10,138		1,989,862
Federal National Mortgage Association ("FNMA") Bonds	997,380		17,281		—		1,014,661
Small Business Administration (“SBA”) Bonds	111,586,926		1,674,338		135,029		113,126,235
Tax Exempt Municipal Bonds	79,370,686		1,897,885		737,204		80,531,367
Mortgage-Backed Securities	181,909,642		4,563,834		135,449		186,338,027
Equity Securities	250,438		40,162		—		290,600
Total Available For Sale	$	381,228,581	$	8,197,754	$	1,074,104	$	388,352,231

	December 31, 2014
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
FHLB Securities	$	13,317,462	$	83,691	$	154,492	$	13,246,661
FFCB Securities	5,750,000		—		82,006		5,667,994
FNMA Bonds	996,822		7,559		—		1,004,381
SBA Bonds	106,637,400		1,796,943		307,649		108,126,694
Tax Exempt Municipal Bonds	59,960,960		2,579,543		45,080		62,495,423
Mortgage-Backed Securities	233,963,842		5,704,855		815,984		238,852,713
Equity Securities	250,438		56,236		—		306,674
Total Available For Sale	$	420,876,924	$	10,228,827	$	1,405,211	$	429,700,540

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 Government National Mortgage Association ("GNMA") mortgage-backed securities, which are also backed by the full faith and credit of the United States government. At September 30, 2015 the Bank held an amortized cost and fair value of $121.1 million and $124.0 million, respectively, in GNMA mortgage-backed securities included in mortgage-backed securities listed above compared to an amortized cost and fair value of $156.8 million and $160.6 million, respectively, at December 31, 2014. Also included in mortgage-backed securities in the tables above and below are three private label collateralized mortgage obligation ("CMO") securities purchased by the Bank during the three months ended September 30, 2015. These securities are issued by non-governmental real estate mortgage investment conduits, which are not backed by the full faith and credit of the United States government. At September 30, 2015 the Bank held both an amortized cost and fair value of $3.0 million in private label CMO mortgage-backed securities included in mortgage-backed securities listed above. There were no private label mortgage-backed securities held at December 31, 2014.

6. 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 September 30, 2015 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. Since mortgage-backed securities are not due at a single maturity date, they are disclosed separately, rather than allocated over the the maturity groupings below.



Investment Securities	Amortized Cost		Fair Value
Less Than One Year	$	693,127	$	692,225
One – Five Years	13,170,421		13,414,588
Over Five – Ten Years	63,800,934		64,895,557
More Than Ten Years	121,654,457		123,011,834
Mortgage-Backed Securities	181,909,642		186,338,027
	$	381,228,581	$	388,352,231

At September 30, 2015 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 $83.9 million and $86.8 million, respectively, compared to an amortized cost and fair value of $120.7 million and $124.4 million, respectively, at December 31, 2014.

The Bank received $4.0 million and $27.3 million in gross proceeds from sales of available for sale securities during the three months ended September 30, 2015 and 2014, respectively. As a result, the Bank recognized gross gains of $8,000 and $319,000 respectively, and gross losses of $0 and $176,000 respectively, for the three months ended September 30, 2015 and 2014.

Similarly, during the nine months ended September 30, 2015 and 2014, the Bank received $58.2 million and $54.6 million, respectively, in gross proceeds from sales of available for sale securities. As a result, the Bank recognized gross gains of $1.7 million and $795,000, respectively, and gross losses of $47,000 and $607,000, respectively, for the nine months ended September 30, 2015 and 2014.

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.



	September 30, 2015
	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
FHLB Securities	$	—	$	—	$	1,943,716	$	56,284	$	1,943,716	$	56,284
FFCB Securities	1,989,862		10,138		—		—		1,989,862		10,138
SBA Bonds	18,263,615		53,112		10,312,370		81,917		28,575,985		135,029
Tax Exempt Municipal Bond	37,133,463		734,874		800,502		2,330		37,933,965		737,204
Mortgage-Backed Securities	21,794,606		126,202		1,741,983		9,247		23,536,589		135,449
	$	79,181,546	$	924,326	$	14,798,571	$	149,778	$	93,980,117	$	1,074,104

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



	December 31, 2014
	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
FHLB Securities	$	994,818	$	5,182	$	3,850,690	$	149,310	$	4,845,508	$	154,492
FFCB Securities	—		—		5,667,994		82,006		5,667,994		82,006
SBA Bonds	27,859,461		223,070		4,920,631		84,579		32,780,092		307,649
Tax Exempt Municipal Bond	3,605,319		16,039		1,710,586		29,041		5,315,905		45,080
Mortgage-Backed Securities	34,840,832		208,242		30,899,075		607,742		65,739,907		815,984
	$	67,300,430	$	452,533	$	47,048,976	$	952,678	$	114,349,406	$	1,405,211

Securities classified as available for sale are recorded at fair market value. At September 30, 2015 and December 31, 2014, 13.9% and 67.8% of the unrealized losses, representing 10 and 24 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. There was no OTTI recognized during the nine months ended September 30, 2015.