4. Investment Securities

9 Months Ended

Sep. 30, 2019

Debt Securities, Available-for-sale [Abstract]

Note 4. Investment Securities

Change in Accounting Principle

Prior to 2019, the entire balance of the Company’s HTM investment portfolio consisted of Municipal notes. Effective January 1, 2019, and in accordance with ASC 250 (Accounting Changes and Error Corrections), the Company chose to reclassify these debt instruments from the investment portfolio into the loan portfolio. This change represents a voluntary reclassification of municipal debt instruments from classification as investment securities under ASC 320 (Investments – Debt and Equity Securities) to classification as loans under ASC 310 (Receivables). All periods presented have been restated to conform to this change. Accordingly, for all periods presented below, the Company’s investment portfolio consists entirely of AFS investments and municipal debt obligations are reported as a component of the Company’s loan portfolio (See Note 5). The reclassification of the municipal debt instruments in this portfolio did not have a material impact on the Company’s consolidated financial statements or results of operations.

Debt securities as of the balance sheet dates consisted of the following:

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value
September 30, 2019
U.S. GSE debt securities	$	16,715,156	$	103,252	$	10,433	$	16,807,975
Agency MBS		15,003,111		89,940		54,556		15,038,495
ABS and OAS		1,797,128		88,221		0		1,885,349
Other investments		8,665,000		182,623		147		8,847,476
Total	$	42,180,395	$	464,036	$	65,136	$	42,579,295
December 31, 2018
U.S. GSE debt securities	$	14,010,100	$	394	$	259,391	$	13,751,103
Agency MBS		16,020,892		2,701		449,068		15,574,525
ABS and OAS		1,988,565		3,806		6,242		1,986,129
Other investments		8,167,000		8,472		120,398		8,055,074
Total	$	40,186,557	$	15,373	$	835,099	$	39,366,831

Investments pledged as collateral for repurchase agreements consisted of U.S. GSE debt securities, Agency MBS, ABS and OAS, and CDs. These repurchase agreements mature daily. These investments as of the balance sheet dates were as follows:

	Amortized		Fair
	Cost		Value
September 30, 2019	$	42,180,395	$	42,579,295
December 31, 2018		40,186,557		39,366,831

The scheduled maturities of debt securities as of the balance sheet dates were as follows:

	Amortized		Fair
	Cost		Value
September 30, 2019
Due in one year or less	$	1,521,908	$	1,522,901
Due from one to five years		12,633,885		12,807,696
Due from five to ten years		12,041,660		12,217,358
Due after ten years		979,831		992,845
Agency MBS		15,003,111		15,038,495
Total	$	42,180,395	$	42,579,295
December 31, 2018
Due from one to five years	$	12,714,642	$	12,519,008
Due from five to ten years		11,451,023		11,273,298
Agency MBS		16,020,892		15,574,525
Total	$	40,186,557	$	39,366,831

Agency MBS are not due at a single maturity date and have not been allocated to maturity groupings for purposes of the maturity table.

Debt securities with unrealized losses as of the balance sheet dates are presented in the table below.

	Less than 12 months				12 months or more				Total
	Fair		Unrealized		Fair		Unrealized		Number of		Fair		Unrealized
	Value		Loss		Value		Loss		Securities		Value		Loss
September 30, 2019
U.S. GSE debt securities	$	1,999,231	$	769	$	1,990,336	$	9,664		2	$	3,989,567	$	10,433
Agency MBS		1,845,095		3,306		5,662,969		51,250		18		7,508,064		54,556
Other investments		0		0		247,853		147		3		247,853		147
Total	$	3,844,326	$	4,075	$	7,901,158	$	61,061		23	$	11,745,484	$	65,136
December 31, 2018
U.S. GSE debt securities	$	1,465,947	$	6,752	$	11,284,761	$	252,639		11	$	12,750,708	$	259,391
Agency MBS		2,317,838		22,029		12,223,386		427,039		24		14,541,224		449,068
ABS and OAS		976,226		6,242		0		0		1		976,226		6,242
Other investments		1,956,914		20,086		4,113,688		100,312		25		6,070,602		120,398
Total	$	6,716,925	$	55,109	$	27,621,835	$	779,990		61	$	34,338,760	$	835,099

The unrealized losses for all periods presented were principally attributable to changes in prevailing interest rates for similar types of securities and not deterioration in the creditworthiness of the issuer.

Management evaluates its investment securities for OTTI at least on a quarterly basis, and more frequently when economic or market conditions, or adverse developments relating to the issuer, warrant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than the carrying value, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment 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 or other adverse developments in the status of the securities have occurred, and the results of reviews of the issuer's financial condition. As of September 30, 2019 and December 31, 2018, there were no declines in the fair value of any of the securities reflected in the table above that were deemed by management to be OTTI.