NOTE 10 – SECURITIES


	June 30, 2015
	Amortized	Gross Unrealized	Gross Unrealized	Estimated
(dollars in thousands)	Cost	Gains	Losses	Fair Value
Securities available for sale (AFS)
Asset-backed securities issued by GSEs
Residential Mortgage Backed Securities ("MBS")	$ 25	$ 5	$ -	$ 30
Residential Collateralized Mortgage Obligations ("CMOs")	34,568	64	673	33,959
Corporate equity securities	37	3	-	40
Bond mutual funds	4,243	106	-	4,349
Total securities available for sale	$ 38,873	$ 178	$ 673	$ 38,378

Securities held to maturity (HTM)
Asset-backed securities issued by GSEs
Residential MBS	$ 17,877	$ 601	$ 58	$ 18,420
Residential CMOs	66,087	392	591	65,888
Asset-backed securities issued by Others:
Residential CMOs	1,271	-	114	1,157
Total debt securities held to maturity	85,235	993	763	85,465

U.S. government obligations	750	-	-	750
Total securities held to maturity	$ 85,985	$ 993	$ 763	$ 86,215


	December 31, 2014
	Amortized	Gross Unrealized	Gross Unrealized	Estimated
(dollars in thousands)	Cost	Gains	Losses	Fair Value
Securities available for sale (AFS)
Asset-backed securities issued by GSEs
Residential MBS	$ 33	$ 4	$ -	$ 37
Residential CMOs	38,294	77	830	37,541
Corporate equity securities	37	3	-	40
Bond mutual funds	4,199	122	-	4,321
Total securities available for sale	$ 42,563	$ 206	$ 830	$ 41,939

Securities held to maturity (HTM)
Asset-backed securities issued by GSEs
Residential MBS	$ 19,501	$ 767	$ 45	$ 20,223
Residential CMOs	62,683	379	580	62,482
Asset-backed securities issued by Others:
Residential CMOs	1,472	-	112	1,360
Total debt securities held to maturity	83,656	1,146	737	84,065

U.S. government obligations	850	-	-	850
Total securities held to maturity	$ 84,506	$ 1,146	$ 737	$ 84,915

At June 30, 2015, certain asset-backed securities with an amortized cost of $21.6 million were pledged to secure certain deposits. At June 30, 2015, asset-backed securities with an amortized cost of $2.1 million were pledged as collateral for advances from the Federal Home Loan Bank (“FHLB”) of Atlanta.

At June 30, 2015, 99% 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 government sponsored entities (“GSEs”) had an average life of 4.55 years and an average duration of 4.19 years and are guaranteed by their issuer as to credit risk. HTM asset-backed securities issued by GSEs had an average life of 4.65 years and an average duration of 4.32 years and are guaranteed by their issuer as to credit risk.

At December 31, 2014, 99% 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 3.66 years and average duration of 3.41 years and are guaranteed by their issuer as to credit risk. HTM asset-backed securities issued by GSEs had an average life of 3.40 years and average duration of 3.21 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 until recovery of the market value which may be at 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 six months ended June 30, 2015 and 2014.

During the six months ended June 30, 2015, the Company sold one HTM security with a carrying value of $68,000 and recognized a loss of $1,000. During the six months ended June 30, 2014, the Company recognized net gains on the sale of securities of $24,000. The Company sold five AFS securities with a carrying value of $2.1 million and ten HTM securities with aggregate carrying values of $3.2 million, recognizing gains of $8,000 and $16,000, respectively. The sale of HTM securities were permitted under ASC 320 “Investments - Debt and Equity Securities.” ASC 320 permits the sale of HTM securities for certain changes in circumstances. Securities were disposed of using the safe harbor rule that allows for the sale of HTM securities that have principal payments paid down to less than 15% of original purchased par. ASC 320 10-25-15 indicates that a sale of a debt security after a substantial portion of the principal has been collected is equivalent to holding the security to maturity. In addition, HTM securities were disposed of under ASC 320-10-25-6 due to a significant deterioration in the issues’ creditworthiness and the increase in regulatory risk weights mandated for risk-based capital purposes.

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 June 30, 2015 were as follows:

June 30, 2015

Less Than 12

More Than 12

Months

Total

(dollars in thousands)

Fair Value

Unrealized Loss

Fair Value

Unrealized Loss

Fair Value

Unrealized Losses

Asset-backed securities
issued by GSEs

$ 2,261

$ 14

$ 22,193

$ 659

$ 24,454

$ 673

At June 30, 2015, the AFS investment portfolio had an estimated fair value of $38.4 million, of which $24.5 million of the securities had some unrealized losses from their amortized cost. The securities with unrealized losses were CMOs 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 $673,000 of the portfolio amortized cost of $34.6 million. AFS asset-backed securities issued by GSEs with unrealized losses had an average life of 4.56 years and an average duration of 4.14 years. We believe that the securities will either recover in market value or be paid off as agreed.

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 December 31, 2014 were as follows:

December 31, 2014

Less Than 12

More Than 12

Months

Total

(dollars in thousands)

Fair Value

Unrealized Loss

Fair Value

Unrealized Loss

Fair Value

Unrealized Losses

Asset-backed securities
issued by GSEs

$ 294

$ -

$ 26,856

$ 830

$ 27,150

$ 830

At December 31, 2014, the AFS investment portfolio had an estimated fair value of $41.9 million, of which $27.2 million of the securities had some unrealized losses from their amortized cost. The securities with unrealized losses were CMOs 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 $830,000 of the portfolio amortized cost of $38.3 million. AFS asset-backed securities issued by GSEs with unrealized losses had an average life of 3.77 years and an average duration of 3.46 years. We believe that the securities will either recover in market value or be paid off as agreed.

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 June 30, 2015 were as follows:


June 30, 2015	Less Than 12		More Than 12
	Months		Months		Total
(dollars in thousands)	Fair Value	Unrealized Loss	Fair Value	Unrealized Loss	Fair Value	Unrealized Losses
Asset-backed securities issued by GSEs	8,207	89	18,880	560	27,087	649
Asset-backed securities issued by other	-	-	1,155	114	1,155	114
	$ 8,207	$ 89	$ 20,035	$ 674	$ 28,242	$ 763

At June 30, 2015, the HTM investment portfolio had an estimated fair value of $86.2 million, of which $28.2 million of the securities had some unrealized losses from their amortized cost. Of these securities, $27.0 million were asset-backed securities issued by GSEs and the remaining $1.2 million 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 $649,000 of the portfolio amortized cost of $84.0 million. HTM asset-backed securities issued by GSEs with unrealized losses had an average life of 4.30 years and an average duration of 3.95 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 $114,000 of the portfolio amortized cost of $1.3 million. HTM asset-backed securities issued by others with unrealized losses have an average life of 4.74 years and an average duration of 3.90 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, 2014 were as follows:


December 31, 2014	Less Than 12		More Than 12
	Months		Months		Total
(dollars in thousands)	Fair Value	Unrealized Loss	Fair Value	Unrealized Loss	Fair Value	Unrealized Losses
Asset-backed securities issued by GSEs	$ 14,508	$ 85	$ 21,091	$ 540	$ 35,599	$ 625
Asset-backed securities issued by other	-	-	1,291	112	1,291	112
	$ 14,508	$ 85	$ 22,382	$ 652	$ 36,890	$ 737

At December 31, 2014, the HTM investment portfolio had an estimated fair value of $84.9 million, of which $36.9 million of the securities had some unrealized losses from their amortized cost. Of these securities, $35.6 million were asset-backed securities issued by GSEs and the remaining $1.3 million 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 $625,000 of the portfolio amortized cost of $82.2 million. HTM asset-backed securities issued by GSEs with unrealized losses had an average life of 3.23 years and an average duration of 3.01 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 $112,000 of the portfolio amortized cost of $1.5 million. HTM asset-backed securities issued by others with unrealized losses have an average life of 4.27 years and an average duration of 3.62 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 June 30, 2015 and December 31, 2014 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.



June 30, 2015		December 31, 2014
Credit Rating	Amount	Credit Rating	Amount
(dollars in thousands)
AAA	$ 117,953	AAA	$ 119,762
BBB	-	BBB	68
BB	632	BB	695
CCC+	639	CCC+	709
Total	$ 119,224	Total	$ 121,234