Note 7 - Investment Securities

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

NOTE 7 – INVESTMENT SECURITIES

The amortized cost and fair values of securities, with gross unrealized gains and losses, follows:

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
September 30, 2016:
Available for Sale
State and municipal securities	$	18,299,408	$	714,188	$	-	$	19,013,596
Residential mortgage-backed securities		24,763,845		459,902		87,804		25,135,943
	$	43,063,253	$	1,174,090	$	87,804	$	44,149,539
December 31, 2015:
Available for Sale
State and municipal securities	$	18,733,573	$	525,089	$	21,454	$	19,237,208
Residential mortgage-backed securities		27,532,067		365,558		149,926		27,747,699
	$	46,265,640	$	890,647	$	171,380	$	46,984,907

 

The amortized cost and fair value at September 30, 2016, by contractual maturity, are shown below. Maturities may differ from contractual maturities in residential mortgage-backed securities because the mortgages underlying the securities may be called or prepaid without penalties. Therefore, stated maturities of residential mortgage-backed securities are not disclosed.

	Securities Available for Sale
	Amortized		Fair
	Cost		Value
Due in three months or less	$	-	$	-
Due after three months through one year		336,717		341,164
Due after one year through five years		3,537,316		3,652,423
Due after five years through ten years		5,514,468		5,740,590
Due after ten years		8,910,907		9,279,419
Residential mortgage-backed securities		24,763,845		25,135,943
	$	43,063,253	$	44,149,539

The following table reflects securities with gross unrealized losses for less than 12 months and for 12 months or more at September 30, 2016 and December 31, 2015:

	Less than 12 Months				12 Months or More				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	Value		Losses		Value		Losses		Value		Losses
September 30, 2016
Securities Available for Sale
State and municipal securities	$	-	$	-	$	-	$	-	$	-	$	-
Residential mortgage-backed securities		1,837,258		7,778		5,758,660		80,026		7,595,918		87,804
	$	1,837,258	$	7,778	$	5,758,660	$	80,026	$	7,595,918	$	87,804
December 31, 2015
Securities Available for Sale
State and municipal securities	$	169,601	$	101	$	436,067	$	21,353	$	605,668	$	21,454
Residential mortgage-backed securities		10,468,746		120,218		1,247,527		29,708		11,716,273		149,926
	$	10,638,347	$	120,319	$	1,683,594	$	51,061	$	12,321,941	$	171,380

Management evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability to retain and whether it is not more likely than not the Company will be required to sell its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. In analyzing an issuer’s financial condition, management considers whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, and industry analysts’ reports.

At September 30, 2016, 12 securities had unrealized losses with an aggregate depreciation of 1.14% from the Company’s amortized cost basis. The Company does not consider these investments to be other than temporarily impaired at September 30, 2016 due to the following:

● Decline in value is attributable to interest rates.

● The value did not decline due to credit quality.

● The Company does not intend to sell these securities.

● The Company has adequate liquidity such that it will not more likely than not have to sell these securities before recovery of the amortized cost basis, which may be at maturity.

 

There were no sales of securities during the three months ended September 30, 2016 and 2015. There were proceeds of $1.7 million from the sales of securities for the nine months ended September 30, 2016 and proceeds of $5.6 million for the nine months ended September 30, 2015. The sales during the nine months ended September 30, 2016 resulted in gross realized gains of $8,418 and gross realized losses of $3,261, for net realized gains of $5,157. The sales during the nine months ended September 30, 2015 resulted in gross realized gains of $21,630 and gross realized losses of $2,039, for net realized gains of $19,591. The tax provision applicable to the realized gains amounted to $2,002 and $7,605, respectively, for the nine months ended September 30, 2016 and 2015.