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:



	March 31, 2020
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Student Loan Pools	$	51,954,147	$	—	$	4,154,233	$	47,799,914
Small Business Administration (“SBA”) Bonds	116,275,454		677,769		598,900		116,354,323
Tax Exempt Municipal Bonds	36,159,875		4,115,386		—		40,275,261
Taxable Municipal Bonds	27,911,455		106,427		503,698		27,514,184
Mortgage-Backed Securities	233,945,687		5,622,860		2,188,024		237,380,523
Total Available For Sale	$	466,246,618	$	10,522,442	$	7,444,855	$	469,324,205

	December 31, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Student Loan Pools	$	41,088,231	$	—	$	856,401	$	40,231,830
SBA Bonds	111,927,938		622,105		656,944		111,893,099
Tax Exempt Municipal Bonds	43,153,086		4,088,408		—		47,241,494
Taxable Municipal Bonds	15,169,737		35,359		364,686		14,840,410
Mortgage-Backed Securities	197,356,288		3,664,621		582,902		200,438,007
Total Available For Sale	$	408,695,280	$	8,410,493	$	2,460,933	$	414,644,840

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 March 31, 2020, AFS GNMA mortgage-backed securities had an amortized cost and fair value of $69.9 million and $70.2 million, respectively, compared to an amortized cost and fair value of $63.2 million and $63.9 million, respectively, at December 31, 2019.

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 March 31, 2020 the Bank held AFS private label CMO mortgage-backed securities with an amortized cost and fair value of $28.0 million and $27.1 million, respectively, compared to an amortized cost and fair value of $15.8 million and $16.1 million, respectively, at December 31, 2019.

The amortized cost and fair value of investment and mortgage-backed securities available for sale at March 31, 2020 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.

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



	March 31, 2020
Investment Securities:	Amortized Cost		Fair Value
One Year or Less	$	22,564	$	22,471
After One – Five Years	5,723,428		5,774,746
After Five – Ten Years	66,054,005		66,119,094
More Than Ten Years	160,500,934		160,027,371
Mortgage-Backed Securities	233,945,687		237,380,523
Total Available For Sale	$	466,246,618	$	469,324,205

At March 31, 2020 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 $204.5 million and $210.5 million, respectively, compared to an amortized cost and fair value of $171.4 million and $173.1 million, respectively, at December 31, 2019.

The Company received $11.1 million and $6.6 million in gross proceeds from sales of available for sale securities during the three months ended March 31, 2020 and 2019, respectively. As a result, the Company recognized gross gains of $707,000 and $299,000 and gross losses of $0 and $8,000 during the three months ended March 31, 2020 and 2019, 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.



	March 31, 2020
	Less than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Student Loan Pools	$	28,402,671	$	2,305,196	$	19,397,243	$	1,849,037	$	47,799,914	$	4,154,233
SBA Bonds	28,353,399		174,615		42,900,499		424,285		71,253,898		598,900
Taxable Municipal Bonds	16,813,764		503,698		—		—		16,813,764		503,698
Mortgage-Backed Securities	79,832,042		1,954,994		8,080,882		233,030		87,912,924		2,188,024
	$	153,401,876	$	4,938,503	$	70,378,624	$	2,506,352	$	223,780,500	$	7,444,855



	December 31, 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	$	30,079,497	$	534,048	$	10,152,333	$	322,353	$	40,231,830	$	856,401
SBA Bonds	13,844,666		106,110		47,395,036		550,834		61,239,702		656,944
Taxable Municipal Bond	13,810,279		364,686		—		—		13,810,279		364,686
Mortgage-Backed Securities	55,326,064		480,958		7,975,863		101,944		63,301,927		582,902
	$	113,060,506	$	1,485,802	$	65,523,232	$	975,131	$	178,583,738	$	2,460,933

Securities classified as available for sale are recorded at fair market value. At March 31, 2020 and December 31, 2019, 33.7% and 39.6% of the unrealized losses, representing 72 and 69 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”).

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

Additional deterioration in market and economic conditions related to COVID-19 pandemic may, however, have an adverse impact on credit quality in the future and result in OTTI charges. 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 three months ended March 31, 2020.