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Investment Securities
 12 Months Ended
Dec. 31, 2014
Investments, Debt and Equity Securities [Abstract]  
Investment Securities
Note 3.   Investment Securities
 
Investment securities are summarized as follows:
                         
         
Gross
    
Gross
        
   
Amortized
    
Unrealized
    
Unrealized
    
Fair
  
December 31, 2014
  
Cost
    
Gains
    
Losses
    
Value
  
                         
Available for sale:
                        
U.S. Treasury
  
$
7,946,530
    
$
5,843
    
$
23,883
    
$
7,928,490
  
U.S. Government agencies
    
28,360
      
295,584
      
-
      
323,944
  
State and municipal
    
32,771,006
      
813,974
      
75,534
      
33,509,446
  
Corporate trust preferred
    
247,150
      
-
      
83,695
      
163,455
  
Mortgage-backed
    
46,831,094
      
95,832
      
859,116
      
46,067,810
  
                                 
   
$
87,824,140
    
$
1,211,233
    
$
1,042,228
    
$
87,993,145
  
 
         
Gross
    
Gross
        
   
Amortized
  
Unrealized
  
Unrealized
    
Fair
  
December 31, 2013
  
Cost
    
Gains
    
Losses
    
Value
  
                         
Available for sale:
                        
U.S. Government agencies
   $ 28,360     $ 575,000     $ -     $ 603,360  
State and municipal
     32,395,630       360,384       1,746,943       31,009,071  
Corporate trust preferred
     333,395       -       109,403       223,992  
Mortgage-backed
     43,512,419       688,095       1,723,255       42,477,259  
                                 
    $ 76,269,804     $ 1,623,479     $ 3,579,601     $ 74,313,682  
 
Gross
Gross
Amortized
Unrealized
Unrealized
Fair
December 31, 2012
Cost
Gains
Losses
Value
Available for sale:
U.S. Government agencies
 $ 28,360 $ - $ 320 $ 28,040
State and municipal
 38,528,451 2,623,768 14,797 41,137,422
Corporate trust preferred
 349,646 - 65,116 284,530
Mortgage-backed
 57,494,784 1,597,567 52,076 59,040,275
$ 96,401,241 $ 4,221,335 $ 132,309 $ 100,490,267
 
The gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2014 are as follows:
 
Less than 12 months
12 months or more
Total
Fair
Unrealized
Fair
Unrealized
Fair
Unrealized
Value
Loss
Value
Loss
Value
Loss
U.S. Treasury
 $ 5,946,025 $ 23,883 $ - $ - $ 5,946,025 $ 23,883
State and Municipal
 2,613,263 30,438 1,261,322 45,096 3,874,585 75,534
Corporate trust preferred
 - - 163,455 83,695 163,455 83,695
Mortgaged-backed
 21,210,373 144,533 18,303,420 714,583 39,513,793 859,116
$ 29,769,661 $ 198,854 $ 19,728,197 $ 843,374 $ 49,497,858 $ 1,042,228
 
At December 31, 2014, the Company owned one pooled trust preferred security issued by Regional Diversified Funding, Senior notes with a Fitch credit rating of C, which is included in the securities described above. The market for these securities at December 31, 2014 was not active and markets for similar securities were also not active. As a result, the Company had cash flow testing performed as of December 31, 2014 by an unrelated third party in order to measure the possible extent of other-than-temporary-impairment (“OTTI”). This testing assumed future defaults on the currently performing financial institutions of 150 basis points applied annually with a 0% recovery on both current and future defaulting financial institutions. As a result of this testing, no write-downs were required in 2014 and 2012. A write-down of $15,581 was taken on this security during 2013.
 
 
The market values for these securities (and any securities other than those issued or guaranteed by the U.S. Treasury) are very depressed relative to historical levels. Therefore, a low market price for a particular security may only provide evidence of stress in the credit markets overall rather than being an indicator of credit problems with a particular issuer.
 
Declines in the fair value of held to maturity and available for sale securities below their cost that are deemed to be other than temporary are reflected in earnings as realized losses. In estimating other-than-temporary impairment losses, management considers, among other things, (i) the length of time and the extent to which the fair value has been less than cost, (ii) the financial condition and near-term prospects of the issuer, and (iii) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.
 
As of December 31, 2014, management had the ability and intent to hold the securities classified as available for sale for a period of time sufficient for a recovery of cost. On December 31, 2014, the Bank held 27 investment securities having continuous unrealized loss positions for more than 12 months. Except as noted above, management has determined that all unrealized losses are either due to increases in market interest rates over the yields available at the time the underlying securities were purchased, current call features that are nearing, and the effect the sub-prime market has had on all mortgaged-backed securities. The Bank has no mortgaged-backed securities collateralized by sub-prime mortgages. The fair value is expected to recover as the bonds approach their maturity date or repricing date or if market yields for such investments decline. Management does not believe any of the remaining securities are impaired due to reasons of credit quality. Accordingly, as of December 31, 2014, management believes the impairments detailed in the table above are temporary and no additional impairment loss is required to be realized in the Company’s consolidated income statement.
 
 
A rollforward of the cumulative other-than-temporary credit losses recognized in earnings for all debt and equity securities for which a portion of an other-then-temporary loss is recognized in accumulated other comprehensive loss is as follows:
 
2014
2013
2012
Estimated credit losses, beginning of year
 $ 3,262,496 $ 3,246,915 $ 3,246,915
Credit losses - no previous OTTI recognized
 - - -
Credit losses - previous OTTI recognized
 - 15,581 -
Estimated credit losses, end of year
 $ 3,262,496 $ 3,262,496 $ 3,246,915
 
Contractual maturities of investment securities at December 31, 2014, 2013, and 2012 are shown below. Actual maturities may differ from contractual maturities because debtors may have the right to call or prepay obligations with or without call or prepayment penalties. Mortgage-backed securities have no stated maturity and primarily reflect investments in various Pass-through and Participation Certificates issued by the Federal National Mortgage Association and the Government National Mortgage Association. Repayment of mortgage-backed securities is affected by the contractual repayment terms of the underlying mortgages collateralizing these obligations and the current level of interest rates.
 
Available for Sale
Amortized
Fair
December 31, 2014
Cost
Value
Due within one year
 $ 61,064 $ 61,780
Due over one to five years
 5,938,706 5,923,560
Due over five to ten years
 2,007,824 2,004,890
Due over ten years
 32,957,092 33,611,161
Mortgage-backed, due in monthly installments
 46,859,454 46,391,754
$ 87,824,140 $ 87,993,145
 
Available for Sale
Amortized
Fair
December 31, 2013
Cost
Value
Due within one year
 $ - $ -
Due over one to five years
 - -
Due over five to ten years
 - -
Due over ten years
 32,729,025 31,233,063
Mortgage-backed, due in monthly installments
 43,540,779 43,080,619
$ 76,269,804 $ 74,313,682
 
 
Available for Sale
Amortized
Fair
December 31, 2012
Cost
Value
Due within one year
 $ 125,021 $ 125,745
Due over one to five years
 - -
Due over five to ten years
 400,000 415,028
Due over ten years
 38,353,076 40,881,179
Mortgage-backed, due in monthly installments
 57,523,144 59,068,315
$ 96,401,241 $ 100,490,267
 
Proceeds from sales of available for sale securities prior to maturity totaled $30,269,965, $25,626,845, and $18,656,622 for the years ended December 31, 2014, 2013, and 2012, respectively. The Bank realized gains of $1,210,332 and losses of $54,354 on those sales for 2014. The Bank realized gains of $664,269 and losses of $318,938 on those sales for 2013. The Bank realized gains of $282,069 and losses of $119,475 on those sales for 2012. Realized gains and losses were calculated based on the amortized cost of the securities at the date of trade. Income tax expense relating to net gains on sales of investment securities totaled $455,976, $136,216, and $64,135 for the years ended December 31, 2014, 2013, and 2012, respectively.
 
The Bank has no derivative financial instruments required to be disclosed under ASC Topic 815, Disclosure about Derivative Financial Instruments and Fair Value of Financial Instruments.