INVESTMENTS

9 Months Ended

Sep. 30, 2016

Investments, Debt and Equity Securities [Abstract]

INVESTMENTS

6. INVESTMENTS

The amortized cost and approximate fair value of securities, all of which are classified as available-for-sale, are as follows:

			Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses			Fair Value
September 30, 2016:
U.S. government and agencies	$	18,660,712	$	324,562	$	(23,217	)	$	18,962,057
Mortgage-backed securities (government-sponsored enterprises - residential)		31,255,205		483,154		(8,467	)		31,729,892
Municipal bonds		41,035,533		1,500,932		(27,244	)		42,509,221
	$	90,951,450	$	2,308,648	$	(58,928	)	$	93,201,170
December 31, 2015:
U.S. government and agencies	$	15,979,475	$	44,972	$	(85,750	)	$	15,938,697
Mortgage-backed securities (government-sponsored enterprises - residential)		23,067,200		211,987		(100,792	)		23,178,395
Municipal bonds		47,229,171		1,306,328		(179,259	)		48,356,240
	$	86,275,846	$	1,563,287	$	(365,801	)	$	87,473,332

The amortized cost and fair value of available-for-sale securities at September 30, 2016, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Amortized		Fair
	Cost		Value
Within one year	$	200,816	$	200,860
More than one year to five years		8,314,459		8,584,364
More than five years to ten years		30,092,455		31,036,499
After ten years		21,088,515		21,649,555
		59,696,245		61,471,278
Mortgage-backed securities (government-sponsored enterprises - residential)		31,255,205		31,729,892
	$	90,951,450	$	93,201,170

The carrying value of securities pledged as collateral, to secure public deposits and for other purposes, was $55,492,000 at September 30, 2016 and $25,681,000 at December 31, 2015.

The carrying value of securities sold under agreement to repurchase amounted to $6,760,000 at September 30, 2016 and $7,591,000 at December 31, 2015. At September 30, 2016, we had repurchase agreements secured by mortgage backed securities of $6,588,000, repurchase agreements secured by U.S. government agency bonds of $1,054,000, and repurchase agreements secured by time deposits in other banks of $741,000. All of our repurchase agreements mature overnight. The right of offset for a repurchase agreement resembles a secured borrowing, whereby the collateral pledged by the Company would be used to settle the fair value of the repurchase agreement should the Company be in default. The collateral is held by the Company in a segregated custodial account. In the event the collateral fair value falls below stipulated levels, the Company will pledge additional securities. The Company closely monitors collateral levels to ensure adequate levels are maintained.

Gross gains of $84,000 and $55,000 and gross losses of $0 resulting from sales of available-for-sale securities were realized during the three months ended September 30, 2016 and 2015, respectively. Gross gains of $295,000 and $299,000 and gross losses of $3,000 and $32,000 resulting from sales of available-for-sale securities were realized during the nine months ended September 30, 2016 and 2015, respectively. Gains and losses on the sale of securities are recorded on the settlement date and are determined using the specific identification method.

Certain investments in debt securities are reported in the financial statements at an amount less than their historical cost. Total fair value of these investments at September 30, 2016 and December 31, 2015 were $13,912,000, and $30,677,000, respectively, which were approximately 15% and 35% of the Company’s available-for-sale investment portfolio.

Management believes the declines in fair value for these securities are temporary. Should the impairment of any of these securities become other than temporary, the cost basis of the investment will be reduced and the resulting loss recognized in net income in the period the other-than-temporary impairment is identified.

The following table shows the gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous loss position, at September 30, 2016 and December 31, 2015.

	Less Than Twelve Months					Twelve Months or More					Total
	Gross					Gross					Gross
	Unrealized			Fair		Unrealized			Fair		Unrealized			Fair
	Losses			Value		Losses			Value		Losses			Value
September 30, 2016:
U.S. government agencies	$	(23,217	)	$	3,003,360	$	-		$	-	$	(23,217	)	$	3,003,360
Mortgage-backed securities (government sponsored enterprises - residential)		(27,244	)		2,764,369		-			-		(27,244	)		2,764,369
Municipal bonds		(8,467	)		8,144,524		-			-	$	(8,467	)	$	8,144,524
Total	$	(58,928	)	$	13,912,253	$	-		$	-	$	(58,928	)	$	13,912,253
December 31, 2015:
U.S. government agencies	$	(49,205	)	$	8,591,014	$	(36,545	)	$	1,809,745	$	(85,750	)	$	10,400,759
Mortgage-backed securities (government sponsored enterprises - residential)		(45,886	)		5,843,754		(54,906	)		2,257,674		(100,792	)		8,101,428
Municipal bonds		(48,383	)		5,440,291		(130,876	)		6,734,290		(179,259	)		12,174,581
Total	$	(143,474	)	$	19,875,059	$	(222,327	)	$	10,801,709	$	(365,801	)	$	30,676,768

The unrealized losses on the Company’s investments in municipal bonds, U.S. government agencies, and mortgage-backed securities were caused by interest rate increases. The contractual terms of these investments do not permit the issuer to settle the securities at a price less than the amortized cost bases of the investments. Because the Company does not intend to sell the investments and it is not more likely than not the Company will be required to sell the investments before recovery of their amortized cost bases, which may be maturity, the Company does not consider these investments to be other-than-temporarily impaired at September 30, 2016 and December 31, 2015.