
	10.	SECURITIES



	September 30, 2013
	Amortized	Gross Unrealized	Gross Unrealized	Estimated
	Cost	Gains	Losses	Fair Value
Securities available for sale (AFS)
Asset-backed securities issued by GSEs
Residential MBS	$ 181,968	$ 16,745	$ -	$ 198,713
Residential CMOs	47,721,616	75,448	1,326,064	46,471,000
Corporate equity securities	37,310	1,572	184	38,698
Bond mutual funds	4,078,129	82,950	-	4,161,079
Total securities available for sale	$ 52,019,023	$ 176,715	$ 1,326,248	$ 50,869,490

Securities held to maturity (HTM)
Asset-backed securities issued by GSEs:
Residential MBS	$ 23,722,148	$ 684,723	$ 186,163	$ 24,220,708
Residential CMOs	63,583,106	385,242	864,471	63,103,877
Asset-backed securities issued by Others:
Residential CMOs	3,294,474	100,907	418,975	2,976,406
Total debt securities held to maturity	90,599,728	1,170,872	1,469,609	90,300,991

U.S. government obligations	749,887	75	-	749,962
Total securities held to maturity	$ 91,349,615	$ 1,170,947	$ 1,469,609	$ 91,050,953



	December 31, 2012
	Amortized	Gross Unrealized	Gross Unrealized	Estimated
	Cost	Gains	Losses	Fair Value
Securities available for sale (AFS)
Asset-backed securities issued by GSEs
Residential MBS	$ 198,400	$ 32,986	$ -	$ 231,386
Residential CMOs	42,507,542	266,775	118,518	42,655,799
Corporate equity securities	37,310	306	284	37,332
Bond mutual funds	4,012,609	268,537	-	4,281,146
Total securities available for sale	$ 46,755,861	$ 568,604	$ 118,802	$ 47,205,663

Securities held to maturity (HTM)
Asset-backed securities issued by GSEs:
Residential MBS	$ 31,239,176	$ 1,237,277	$ -	$ 32,476,453
Residential CMOs	76,191,199	715,620	97,998	76,808,821
Asset-backed securities issued by Others:				-
Residential CMOs	4,439,118	197,028	484,343	4,151,803
Total debt securities held to maturity	111,869,493	2,149,925	582,341	113,437,077

U.S. government obligations	749,941	-	-	749,941
Total securities held to maturity	$ 112,619,434	$ 2,149,925	$ 582,341	$ 114,187,018

At September 30, 2013, certain asset-backed securities with an aggregate carrying value of $36.7 million were pledged to secure certain deposits. At September 30, 2013, asset-backed securities with an aggregate carrying value of $2.9 million were pledged as collateral for advances from the Federal Home Loan Bank of Atlanta.

At September 30, 2013, 98% of the asset-backed securities portfolio was rated AAA by Standard & Poor’s or the equivalent credit rating from another major rating agency. AFS asset-backed securities issued by GSEs had an average life of 5.12 years and an average duration of 4.68 years and are guaranteed by their issuer as to credit risk. HTM asset-backed securities issued by GSEs had an average life of 5.54 years and an average duration of 5.14 years and are guaranteed by their issuer as to credit risk.

At December 31, 2012, 97% of the asset-backed securities portfolio was rated AAA by Standard & Poor’s or the equivalent credit rating from another major rating agency. AFS asset-backed securities issued by GSEs had an average life of 3.43 years and average duration of 3.26 years and are guaranteed by their issuer as to credit risk. HTM asset-backed securities issued by GSEs had an average life of 3.43 years and average duration of 3.24 years and are guaranteed by their issuer as to credit risk.

We believe that AFS securities with unrealized losses will either recover in market value or be paid off as agreed. The Company intends to, and has the ability to, hold these securities to maturity. We believe that the losses are the result of general perceptions of safety and creditworthiness of the entire sector and a general disruption of orderly markets in the asset class.

Management has the ability and intent to hold the HTM securities with unrealized losses until they mature, at which time the Company will receive full value for the securities. Because our intention is not to sell the investments and it is not more likely than not that we will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, management considers the unrealized losses in the held-to-maturity portfolio to be temporary.

No charges related to other-than-temporary impairment were made during the three and nine months ended September 30, 2013 and for the year ended December 31, 2012. During the year ended December 31, 2009, the Company recorded a charge of $148,000 related to other-than-temporary impairment on a single HTM CMO issue. At September 30, 2013, the CMO issue had a par value of $889,000, a market fair value of $611,000 and a carrying value of $511,000.

During the fourth quarter of the year ended December 31, 2012, the Company recognized net losses on the sale of securities of $3,736. The Company sold one AFS security with a carrying value of $1,469,911 and three HTM securities with aggregate carrying values of $3,796,011, recognizing a gain of $153,417 and losses of $157,153, respectively. The sale of HTM securities was permitted under ASC 320 “Investments - Debt and Equity Securities.” ASC 320-10-25-6 permits the sale of HTM securities for certain changes in circumstances. The Company sold the HTM positions due to a significant deterioration in the issues’ creditworthiness and the increase in regulatory risk weights mandated for risk-based capital purposes. There were no sales of AFS and HTM securities during the three and nine months ended September 30, 2013 and 2012, respectively.

AFS Securities

Gross unrealized losses and estimated fair value by length of time that the individual AFS securities have been in a continuous unrealized loss position at September 30, 2013 are as follows:



September 30, 2013	Less Than 12		More Than 12
	Months		Months		Total
	Fair Value	Unrealized Loss	Fair Value	Unrealized Loss	Fair Value	Unrealized Losses
Asset-backed securities issued by GSEs	$ 33,460,034	$ 1,098,769	$ 5,623,802	$ 227,295	$ 39,083,836	$ 1,326,064
Corporate equity securities	126	184	-	-	126	184
	$ 33,460,160	$ 1,098,953	$ 5,623,802	$ 227,295	$ 39,083,962	$ 1,326,248

At September 30, 2013, the AFS investment portfolio had an estimated fair value of $50,869,490, of which $39,083,962 or 77% of the securities had some unrealized losses from their amortized cost. The securities with unrealized losses are predominantly mortgage-backed securities issued by GSEs.

AFS securities issued by GSEs are guaranteed by the issuer. Total unrealized losses on the asset-backed securities issued by GSEs were $1,326,064 or 2.77% of the portfolio amortized cost of $47,903,584. AFS asset-backed securities issued by GSEs with unrealized losses have an average life of 5.22 years and an average duration of 4.74 years. We believe that the securities will either recover in market value or be paid off as agreed.

At December 31, 2012, the AFS investment portfolio had a fair value of $47,205,663 with unrealized losses from their amortized cost of $118,802. Asset-backed securities and corporate securities with unrealized losses had a fair value of $11,956,182 and all unrealized losses were for less than twelve months.

HTM Securities

Gross unrealized losses and estimated fair value by length of time that the individual HTM securities have been in a continuous unrealized loss position at September 30, 2013 are as follows:



September 30, 2013	Less Than 12		More Than 12
	Months		Months		Total
	Fair Value	Unrealized Loss	Fair Value	Unrealized Loss	Fair Value	Unrealized Losses
Asset-backed securities issued by GSEs	$ 41,773,548	$ 1,029,248	$ 3,300,948	$ 21,386	$ 45,074,496	$ 1,050,634
Asset-backed securities issued by other	-	-	2,258,562	418,975	2,258,562	418,975
	$ 41,773,548	$ 1,029,248	$ 5,559,510	$ 440,362	$ 47,333,058	$ 1,469,609

At September 30, 2013, the HTM investment portfolio had an estimated fair value of $91,050,953, of which $47,333,058 or 52%, of the securities had some unrealized losses from their amortized cost. Of these securities, $45,074,496 or 95%, are mortgage-backed securities issued by GSEs and the remaining $2,258,562 or 5%, were asset-backed securities issued by others.

HTM securities issued by GSEs are guaranteed by the issuer. Total unrealized losses on the asset-backed securities issued by GSEs were $1,050,634 or 1.20% of the portfolio amortized cost of $87,305,254. HTM asset-backed securities issued by GSEs with unrealized losses have an average life of 6.02 years and an average duration of 5.56 years. We believe that the securities will either recover in market value or be paid off as agreed. The Company intends to, and has the ability to, hold these securities to maturity.

HTM asset-backed securities issued by others are collateralized mortgage obligation securities. All of the securities have credit support tranches that absorb losses prior to the tranches that the Company owns. The Company reviews credit support positions on its securities regularly. Total unrealized losses on the asset-backed securities issued by others were $418,975, or 12.72% of the portfolio amortized cost of $3,294,474. HTM asset-backed securities issued by others with unrealized losses have an average life of 4.24 years and an average duration of 3.27 years.

Gross unrealized losses and estimated fair value by length of time that the individual HTM securities have been in a continuous unrealized loss position at December 31, 2012 are as follows:



December 31, 2012	Less Than 12		More Than 12
	Months		Months		Total
	Fair Value	Unrealized Loss	Fair Value	Unrealized Loss	Fair Value	Unrealized Losses
Asset-backed securities issued by GSEs	$ 14,253,558	$ 89,638	$ 6,132,036	$ 8,360	$ 20,385,594	$ 97,998
Asset-backed securities issued by other	-	-	3,057,666	484,343	3,057,666	484,343
	$ 14,253,558	$ 89,638	$ 9,189,702	$ 492,703	$ 23,443,260	$ 582,341

At December 31, 2012, the HTM investment portfolio had an estimated fair value of $114,187,018, of which $23,443,260, or 21% of the securities, had some unrealized losses from their amortized cost. Of these securities, $20,385,594, or 87%, are mortgage-backed securities issued by GSEs and the remaining $3,057,666, or 13%, were asset-backed securities issued by others.

HTM securities issued by GSEs are guaranteed by the issuer. Total unrealized losses on the asset-backed securities issued by GSEs were $97,998 or 0.09% of the portfolio amortized cost of $107,430,375. HTM asset-backed securities issued by GSEs with unrealized losses have an average life of 1.85 years and an average duration of 1.72 years. We believe that the securities will either recover in market value or be paid off as agreed. The Company intends to, and has the ability to, hold these securities to maturity.

HTM asset-backed securities issued by others are collateralized mortgage obligation securities. All of the securities have credit support tranches that absorb losses prior to the tranches that the Company owns. The Company reviews credit support positions on its securities regularly. Total unrealized losses on the asset-backed securities issued by others were $484,343, or 10.91% of the portfolio amortized cost of $4,439,118. HTM asset-backed securities issued by others with unrealized losses have an average life of 3.17 years and an average duration of 2.40 years.

Credit Quality of Asset-Backed Securities

The tables below present the Standard & Poor’s or equivalent credit rating from other major rating agencies for AFS and HTM asset-backed securities issued by GSEs and others at September 30, 2013 and December 31, 2012 by carrying value. The Company considers noninvestment grade securities rated BB+ or lower as classified assets for regulatory and financial reporting. GSE asset-backed security downgrades by Standard and Poor’s were treated as AAA based on regulatory guidance.



September 30, 2013		December 31. 2012
Credit Rating	Amount	Credit Rating	Amount
AAA	$ 133,974,968	AAA	$ 150,317,560
A+	-	A+	-
A	-	A	110,780
BBB	635,920	BBB	978,043
BBB-	106,045	BBB-	322,329
BB+	-	BB+	-
BB	836,679	BB	1,069,517
BB-	-	BB-	68,604
B+	66,873	B+	1,008,126
CCC+	874,410	CCC+	-
CCC	774,547	CCC	881,719
Total	$ 137,269,442	Total	$ 154,756,678