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 were as follows:



	September 30, 2017
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Federal Home Loan Mortgage Corporation (“FHLMC”) Bond	$	968,436	$	—	$	2,790	$	965,646
Small Business Administration (“SBA”) Bonds	123,756,916		1,186,563		139,930		124,803,549
Tax Exempt Municipal Bonds	78,068,936		3,175,211		429,120		80,815,027
Taxable Municipal Bonds	2,017,913		—		5,323		2,012,590
Mortgage-Backed Securities	177,751,622		2,548,619		465,620		179,834,621
State Tax Credit	56,800		—		—		56,800
Equity Securities	155,000		—		—		155,000
Total Available For Sale	$	382,775,623	$	6,910,393	$	1,042,783	$	388,643,233

	December 31, 2016
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
FHLB Bonds	$	998,001	$	—	$	1	$	998,000
SBA Bonds	101,280,921		909,361		284,223		101,906,059
Tax Exempt Municipal Bonds	72,248,915		1,185,753		1,899,519		71,535,149
Taxable Municipal Bonds	2,021,192		—		30,062		1,991,130
Mortgage-Backed Securities	183,657,697		2,575,616		972,222		185,261,091
Equity Securities	250,438		117,562		—		368,000
Total Available For Sale	$	360,457,164	$	4,788,292	$	3,186,027	$	362,059,429

The FHLMC and FHLB are government sponsored enterprises ("GSEs") and the securities and bonds issued by 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, 2017 the Bank held AFS GNMA mortgage-backed securities with an amortized cost and fair value of $93.0 million and $94.2 million, respectively, compared to an amortized cost and fair value of $107.9 million and $109.2 million, respectively, at December 31, 2016.

Also included in mortgage-backed securities in the tables above and below are private label collateralized mortgage obligation ("CMO") securities, which are issued by non-governmental real estate mortgage investment conduits and are not backed by the full faith and credit of the United States government. At September 30, 2017 the Bank held AFS private label CMO mortgage-backed securities with both an amortized cost and fair value of $31.2 million compared to an amortized cost and fair value of $20.0 million and $19.7 million, respectively, at December 31, 2016.

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, 2017 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 maturity groupings set forth in the table below.



	September 30, 2017
Investment Securities:	Amortized Cost		Fair Value
One Year or Less	$	190,589	$	190,501
After One – Five Years	14,816,156		14,930,955
After Five – Ten Years	47,080,250		47,638,450
More Than Ten Years	142,937,006		146,048,706
Mortgage-Backed Securities	177,751,622		179,834,621
Total Available For Sale	$	382,775,623	$	388,643,233

At September 30, 2017 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 $97.6 million and $99.5 million, respectively, compared to an amortized cost and fair value of $75.3 million and $76.9 million, respectively, at December 31, 2016.

The Bank received $29.3 million and $6.9 million in gross proceeds from sales of available for sale securities during the three months ended September 30, 2017 and 2016, respectively. As a result, the Bank recognized gross gains of $241,000 and $360,000, respectively, and gross losses of $162,000 and $0, respectively, for the same periods.

During the nine months ended September 30, 2017 and 2016, the Bank received $46.8 million and $21.5 million, respectively, in gross proceeds from sales of available for sale securities. As a result, the Bank recognized gross gains of $870,000 and $772,000, respectively, with $162,000 and $0 gross losses recognized for the same periods.

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, 2017
	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
FHLMC Bond	$	965,646	$	2,790	$	—	$	—	$	965,646	$	2,790
SBA Bonds	22,776,378		102,708		6,857,393		37,222		29,633,771		139,930
Tax Exempt Municipal Bonds	6,094,283		73,787		10,341,319		355,333		16,435,602		429,120
Taxable Municipal Bonds	2,012,590		5,323		—		—		2,012,590		5,323
Mortgage-Backed Securities	46,108,221		323,710		13,021,339		141,910		59,129,560		465,620
	$	77,957,118	$	508,318	$	30,220,051	$	534,465	$	108,177,169	$	1,042,783

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



	December 31, 2016
	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
FHLB Securities	$	998,000	$	1	$	—	$	—	$	998,000	$	1
SBA Bonds	28,490,243		228,432		8,212,824		55,791		36,703,067		284,223
Tax Exempt Municipal Bonds	47,405,066		1,899,519		—		—		47,405,066		1,899,519
Taxable Municipal Bond	1,991,130		30,062		—		—		1,991,130		30,062
Mortgage-Backed Securities	62,738,366		916,699		5,600,262		55,523		68,338,628		972,222
	$	141,622,805	$	3,074,713	$	13,813,086	$	111,314	$	155,435,891	$	3,186,027

Securities classified as available for sale are recorded at fair market value. At September 30, 2017 and December 31, 2016, 51.3% and 3.5% of the unrealized losses, representing 28 and 15 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 the Company 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, 2017.