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Note 2 - Investment Securities

3 Months Ended

Mar. 31, 2014

NOTE 2 – INVESTMENT SECURITIES

The amortized cost and fair value of investment securities as of March 31, 2014 and December 31, 2013 are summarized as follows:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Fair Value
March 31, 2014
Securities held to maturity:
Municipal securities	$	160,579,152	$	756,828	$	(4,768,120	)	$	156,567,860
Other securities		1,050,000		-		-			1,050,000
	$	161,629,152	$	756,828	$	(4,768,120	)	$	157,617,860

Securities available for sale:
U.S. govt. sponsored agency securities	$	363,901,863	$	31,503	$	(13,595,807	)	$	350,337,559
Residential mortgage-backed and related securities		159,343,903		1,377,020		(2,601,522	)		158,119,401
Municipal securities		34,495,776		997,316		(417,026	)		35,076,066
Other securities		1,378,550		565,961		-			1,944,511
	$	559,120,092	$	2,971,800	$	(16,614,355	)	$	545,477,537

December 31, 2013:
Securities held to maturity:
Municipal securities	$	144,401,895	$	299,789	$	(7,111,579	)	$	137,590,105
Other securities		1,050,000		-		-			1,050,000
	$	145,451,895	$	299,789	$	(7,111,579	)	$	138,640,105

Securities available for sale:
U.S. govt. sponsored agency securities	$	376,574,132	$	41,696	$	(20,142,841	)	$	356,472,987
Residential mortgage-backed and related securities		160,110,199		1,153,409		(3,834,157	)		157,429,451
Municipal securities		35,813,866		923,315		(778,324	)		35,958,857
Other securities		1,372,365		524,798		-			1,897,163
	$	573,870,562	$	2,643,218	$	(24,755,322	)	$	551,758,458

The Company’s held to maturity municipal securities consist largely of private issues of municipal debt. The municipalities are located within the Midwest with a portion in or adjacent to the communities of QCBT and CRBT. The municipal debt investments are underwritten using specific guidelines with ongoing monitoring.

The Company’s residential mortgage-backed and related securities portfolio consists entirely of government sponsored or government guaranteed securities. The Company has not invested in commercial mortgage-backed securities or pooled trust preferred securities.

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 as of March 31, 2014 and December 31, 2013, are summarized as follows:

	Less than 12 Months					12 Months or More					Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
March 31, 2014:
Securities held to maturity:
Municipal securities	$	90,268,363	$	(3,972,217	)	$	11,141,166	$	(795,903	)	$	101,409,529	$	(4,768,120	)

Securities available for sale:
U.S. govt. sponsored agency securities	$	330,406,007	$	(12,809,546	)	$	11,194,076	$	(786,261	)	$	341,600,083	$	(13,595,807	)
Residential mortgage-backed and related securities		74,273,019		(1,586,915	)		21,330,340		(1,014,607	)		95,603,359		(2,601,522	)
Municipal securities		12,715,294		(372,659	)		1,699,797		(44,367	)		14,415,091		(417,026	)
	$	417,394,320	$	(14,769,120	)	$	34,224,213	$	(1,845,235	)	$	451,618,533	$	(16,614,355	)

December 31, 2013:
Securities held to maturity:
Municipal securities	$	101,983,602	$	(6,711,240	)	$	2,697,375	$	(400,339	)	$	104,680,977	$	(7,111,579	)

Securities available for sale:
U.S. govt. sponsored agency securities	$	333,194,820	$	(19,141,077	)	$	10,978,390	$	(1,001,764	)	$	344,173,210	$	(20,142,841	)
Residential mortgage-backed and related securities		94,723,092		(2,947,770	)		14,117,719		(886,387	)		108,840,811		(3,834,157	)
Municipal securities		13,890,692		(724,939	)		985,687		(53,385	)		14,876,379		(778,324	)
	$	441,808,604	$	(22,813,786	)	$	26,081,796	$	(1,941,536	)	$	467,890,400	$	(24,755,322	)

At March 31, 2014, the investment portfolio included 539 securities. Of this number, 323 securities had current unrealized losses with aggregate depreciation of less than 4% from the total amortized cost basis. Of these, 38 securities had an unrealized loss for twelve months or more. All of the debt securities in unrealized loss positions are considered acceptable credit risks. Based upon an evaluation of the available evidence, including the recent changes in market rates, credit rating information and information obtained from regulatory filings, management believes the declines in fair value for these debt securities are temporary. In addition, the Company does not intend to sell these securities and it is not more-likely-than-not that the Company will be required to sell these debt securities before their anticipated recovery. At March 31, 2014 and December 31, 2013, equity securities represented less than 1% of the total portfolio.

The Company did not recognize other-than-temporary impairment on any debt or equity securities for the three months ended March 31, 2014 and 2013.

All sales of securities for the three months ended March 31, 2014 and 2013, respectively, were from securities identified as available-for-sale. Information on proceeds received, as well as pre-tax gross gains from sales on those securities is as follows:

	Three Months Ended
	March 31, 2014		March 31, 2013

Proceeds from sales of securities	$	7,020,625	$	-
Pre-tax gross gains from sales of securities		20,625		-

The amortized cost and fair value of securities as of March 31, 2014 by contractual maturity are shown below. Expected maturities of residential mortgage-backed and related securities may differ from contractual maturities because the residential mortgages underlying the residential mortgage-backed and related securities may be called or prepaid without any penalties. Therefore, these securities are not included in the maturity categories in the following table. “Other securities” available for sale are excluded from the maturity categories as there is no fixed maturity date for those securities.

	Amortized Cost		Fair Value
Securities held to maturity:
Due in one year or less	$	2,298,028	$	2,299,876
Due after one year through five years		10,898,311		10,876,493
Due after one year through five years		148,432,813		144,441,491
	$	161,629,152	$	157,617,860

Securities available for sale:
Due in one year or less	$	5,399,927	$	5,412,462
Due after one year through five years		51,172,655		50,810,680
Due after five years		341,825,057		329,190,483
	$	398,397,639	$	385,413,625
Residential mortgage-backed and related securities		159,343,903		158,119,401
Other securities		1,378,550		1,944,511
	$	559,120,092	$	545,477,537

Portions of the U.S. government sponsored agency securities and municipal securities contain call options, at the discretion of the issuer, to terminate the security at par and at predetermined dates prior to the stated maturity, summarized as follows:

	Amortized Cost		Fair Value
Securities held to maturity:
Municipal securities	$	107,791,951	$	104,916,513

Securities available for sale:
U.S. govt. sponsored agency securities		307,435,005		295,518,088
Municipal securities		22,063,064		22,190,224
	$	329,498,069	$	317,708,312

- Definition

The entire disclosure for investment holdings. This includes the long positions of investments for the entity. It contains investments in affiliated and unaffiliated issuers. The investments include securities and non securities (i.e. commodities and futures contracts).

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