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, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Student Loan Pools	$	41,569,303	$	4,007	$	329,972	$	41,243,338
Small Business Administration (“SBA”) Bonds	120,910,755		717,658		651,988		120,976,425
Tax Exempt Municipal Bonds	43,187,057		4,329,929		—		47,516,986
Taxable Municipal Bonds	2,013,786		40,892		37,623		2,017,055
Mortgage-Backed Securities	221,931,218		4,836,297		494,126		226,273,389
State Tax Credit	61,242		—		—		61,242
Equity Securities	155,000		—		—		155,000
Total Available For Sale	$	429,828,361	$	9,928,783	$	1,513,709	$	438,243,435

	December 31, 2018
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Student Loan Pools	$	12,934,037	$	20,713	$	69,249	$	12,885,501
SBA Bonds	125,777,016		560,352		890,837		125,446,531
Tax Exempt Municipal Bonds	60,141,164		1,518,974		329,769		61,330,369
Taxable Municipal Bonds	1,998,258		3,546		23,919		1,977,885
Mortgage-Backed Securities	185,291,038		1,073,432		1,903,919		184,460,551
Equity Securities	155,000		—		—		155,000
Total Available For Sale	$	386,296,513	$	3,177,017	$	3,217,693	$	386,255,837

Student Loan Pools are typically 97% guaranteed by the United States government while SBA bonds are 100% 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, 2019, AFS GNMA mortgage-backed securities had an amortized cost and fair value of $84.2 million and $85.1 million, respectively, compared to an amortized cost and fair value of $80.4 million and $80.2 million, respectively, at December 31, 2018.

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, 2019 the Bank held AFS private label CMO mortgage-backed securities with an amortized cost and fair value of $25.1 million and $25.4 million, respectively, compared to an amortized cost and fair value of $29.7 million and $29.5 million, respectively, at December 31, 2018.

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, 2019 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, 2019
Investment Securities:	Amortized Cost		Fair Value
One Year or Less	$	99,189	$	98,978
After One – Five Years	7,796,197		7,840,171
After Five – Ten Years	59,181,477		59,258,866
More Than Ten Years	140,820,280		144,772,031
Mortgage-Backed Securities	221,931,218		226,273,389
Total Available For Sale	$	429,828,361	$	438,243,435

At September 30, 2019 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 $145.1 million and $147.5 million, respectively, compared to an amortized cost and fair value of $111.8 million and $111.7 million, respectively, at December 31, 2018.

The Company received $70.8 million and $28.6 million in gross proceeds from sales of available for sale securities during the nine months ended September 30, 2019 and 2018, respectively. As a result, the Company recognized gross gains of $1.3 million and $503,000 during the nine months ended September 30, 2019 and 2018, respectively, with $288,000 and $67,000 gross losses recognized for the same periods, respectively.

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 were in a continuous unrealized loss position at the dates indicated.



	September 30, 2019
	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Student Loan Pools	$	31,327,315	$	283,132	$	3,030,566	$	46,840	$	34,357,881	$	329,972
SBA Bonds	20,192,185		101,704		49,743,150		550,284		69,935,335		651,988
Taxable Municipal Bonds	981,630		37,623		—		—		981,630		37,623
Mortgage-Backed Securities	44,595,549		256,776		20,595,466		237,350		65,191,015		494,126
	$	97,096,679	$	679,235	$	73,369,182	$	834,474	$	170,465,861	$	1,513,709



	December 31, 2018
	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Student Loan Pools	$	8,384,145	$	69,249	$	—	$	—	$	8,384,145	$	69,249
SBA Bonds	59,496,936		479,955		25,054,861		410,882		84,551,797		890,837
Tax Exempt Municipal Bonds	4,585,849		91,281		9,626,613		238,488		14,212,462		329,769
Taxable Municipal Bond	—		—		980,520		23,919		980,520		23,919
Mortgage-Backed Securities	38,168,598		249,050		81,947,249		1,654,869		120,115,847		1,903,919
	$	110,635,528	$	889,535	$	117,609,243	$	2,328,158	$	228,244,771	$	3,217,693

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

Securities classified as available for sale are recorded at fair market value. At September 30, 2019 and December 31, 2018, 55.1% and 72.4% of the unrealized losses, representing 71 and 92 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, 2019.