Note 2 - Investment Securities

9 Months Ended

Sep. 30, 2014

Investment Holdings [Abstract]

Investment Holdings [Text Block]

NOTE 2 – INVESTMENT SECURITIES

The amortized cost and fair value of investment securities as of September 30, 2014 and December 31, 2013 are summarized as follows:

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		(Losses)			Value
September 30, 2014
Securities held to maturity:
Municipal securities	$	184,790,139	$	1,861,338	$	(1,765,426	)	$	184,886,051
Other securities		1,050,000		-		-			1,050,000
	$	185,840,139	$	1,861,338	$	(1,765,426	)	$	185,936,051
Securities available for sale:
U.S. govt. sponsored agency securities	$	315,019,934	$	30,913	$	(9,046,242	)	$	306,004,605
Residential mortgage-backed and related securities		127,822,284		1,372,274		(1,414,809	)		127,779,749
Municipal securities		30,209,955		1,149,656		(99,465	)		31,260,146
Other securities		1,354,116		545,951		-			1,900,067
	$	474,406,289	$	3,098,794	$	(10,560,516	)	$	466,944,567
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 September 30, 2014 and December 31, 2013, are summarized as follows:

	Less than 12 Months					12 Months or More					Total
			Gross					Gross					Gross
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
September 30, 2014:
Securities held to maturity:
Municipal securities	$	29,794,026	$	(633,024	)	$	43,172,941	$	(1,132,402	)	$	72,966,967	$	(1,765,426	)
Securities available for sale:
U.S. govt. sponsored agency securities	$	32,208,945	$	(156,930	)	$	262,773,625	$	(8,889,312	)	$	294,982,570	$	(9,046,242	)
Residential mortgage-backed and related securities		10,125,288		(74,264	)		58,008,272		(1,340,545	)		68,133,560		(1,414,809	)
Municipal securities		1,446,532		(3,113	)		5,616,381		(96,352	)		7,062,913		(99,465	)
	$	43,780,765	$	(234,307	)	$	326,398,278	$	(10,326,209	)	$	370,179,043	$	(10,560,516	)
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 September 30, 2014, the investment portfolio included 505 securities. Of this number, 241 securities had current unrealized losses with aggregate depreciation of less than 3% from the total amortized cost basis. Of these, 190 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 September 30, 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 and nine months ended September 30, 2014 and 2013. 

All sales of securities for the three and nine months ended September 30, 2014 and 2013, respectively, were from securities identified as available for sale. Information on proceeds received, as well as pre-tax gross gains and losses from sales on those securities are as follows:

	Three Months Ended						Nine Months Ended
	September 30, 2014			September 30, 2013			September 30, 2014			September 30, 2013
Proceeds from sales of securities	$	39,876,889		$	31,225,516		$	65,754,467		$	37,393,047
Pre-tax gross gains from sales of securities		357,934			506,611			379,130			523,071
Pre-tax gross losses from sales of securities		(338,505	)		(89,675	)		(338,505	)		(89,675	)

The amortized cost and fair value of securities as of September 30, 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	$	12,682,406	$	12,683,453
Due after one year through five years		16,825,667		16,856,667
Due after five years		156,332,066		156,395,931
	$	185,840,139	$	185,936,051
Securities available for sale:
Due in one year or less	$	3,649,998	$	3,664,418
Due after one year through five years		60,972,541		60,242,076
Due after five years		280,607,350		273,358,257
	$	345,229,889	$	337,264,751
Residential mortgage-backed and related securities		127,822,284		127,779,749
Other securities		1,354,116		1,900,067
	$	474,406,289	$	466,944,567

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	$	99,883,698	$	100,074,857
Securities available for sale:
U.S. govt. sponsored agency securities		250,617,040		243,092,527
Municipal securities		18,473,306		18,985,950
	$	269,090,346	$	262,078,477

The Company had available for sale municipal securities with a fair value of $31.3 million and $36.0 million as of September 30, 2014 and December 31, 2013, respectively. In addition, the Company had held to maturity municipal securities which were reported at amortized cost totaling $184.8 million and $144.4 million as of September 30, 2014 and December 31, 2013, respectively.

As of September 30, 2014, the Company’s municipal securities portfolios were comprised of general obligation bonds with fair values totaling $63.2 million and revenue bonds issued by 272 issuers, primarily consisting of states, counties, towns, villages and school districts with fair values totaling $153.0 million. The Company held investments in general obligation bonds in 19 states, including three states in which the aggregate fair value exceeded $5.0 million. The Company held investments in revenue bonds in eight states, including four states in which the aggregate fair value exceeded $5.0 million.

As of December 31, 2013, the Company’s municipal securities portfolios were comprised of general obligation bonds with fair values totaling $54.2 million and revenue bonds issued by 269 issuers, primarily consisting of states, counties, towns, villages and school districts with fair values totaling $119.3 million. The Company held investments in general obligation bonds in 20 states, including two states in which the aggregate fair value exceeded $5.0 million. The Company held investments in revenue bonds in eight states, including four states in which the aggregate fair value exceeded $5.0 million.

The amortized cost and fair values of the Company’s portfolio of general obligation bonds are summarized in the following tables by the issuer’s state:

September 30, 2014:
U.S. State:	Number of Issuers		Amortized Cost		Fair Value		Average Exposure Per Issuer (Fair Value)
Illinois		32	$	23,058,258	$	23,431,499	$	732,234
Iowa		25		16,557,625		16,746,965		669,879
Missouri		12		6,136,797		6,097,169		508,097
Other		52		16,674,720		16,908,510		325,164
Total general obligation bonds		121	$	62,427,400	$	63,184,143	$	522,183

December 31, 2013:
U.S. State:	Number of Issuers		Amortized Cost		Fair Value		Average Exposure Per Issuer (Fair Value)
Iowa		30	$	17,946,059	$	17,444,045	$	581,468
Illinois		36		15,063,325		15,264,718		424,020
Other		67		22,166,026		21,512,582		321,083
Total general obligation bonds		133	$	55,175,410	$	54,221,345	$	407,679

The general obligations bonds are diversified across many issuers. As of September 30, 2014 and December 31, 2013, the Company did not hold general obligation bonds of any single issuer, the aggregate book or market value of which exceeded 10% of the Company’s stockholders’ equity. Of the general obligation bonds in the Company’s portfolio, the majority are unrated bonds that represent small, private issuances. All unrated general obligation bonds were underwritten according to loan underwriting standards and have an average risk rating of 2, indicating very high quality. Additionally, many of these bonds are funding essential services (water, sewer, education, medical facilities).

The amortized cost and fair values of the Company’s portfolio of revenue bonds are summarized in the following tables by the issuer’s state:

September 30, 2014:
U.S. State:	Number of Issuers		Amortized Cost		Fair Value		Average Exposure Per Issuer (Fair Value)
Iowa		37	$	59,955,899	$	60,603,053	$	1,637,920
Missouri		65		54,016,464		53,997,386		830,729
Indiana		12		17,991,200		17,835,277		1,486,273
Kansas		6		12,310,134		12,139,318		2,023,220
Other		31		8,298,997		8,387,020		270,549
Total revenue bonds		151	$	152,572,694	$	152,962,054	$	1,012,994

December 31, 2013:
U.S. State:	Number of Issuers		Amortized Cost		Fair Value		Average Exposure Per Issuer (Fair Value)
Iowa		31	$	47,903,572	$	46,257,997	$	1,492,193
Missouri		57		42,085,249		40,054,613		702,713
Indiana		8		15,020,000		14,324,717		1,790,590
Kansas		5		11,022,382		9,997,068		1,999,414
Other		35		9,009,148		8,693,222		248,378
Total revenue bonds		136	$	125,040,351	$	119,327,617	$	877,409

The revenue bonds are diversified across many issuers. As of September 30, 2014 and December 31, 2013, the Company did not hold revenue bonds of any single issuer, the aggregate book or market value of which exceeded 10% of the Company’s stockholders’ equity. Of the revenue bonds in the Company’s portfolio, the majority are unrated bonds that represent small, private issuances. All unrated revenue bonds were underwritten according to loan underwriting standards and have an average risk rating of 2, indicating very high quality. Additionally, many of these bonds are funding essential services (water, sewer, education, medical facilities).

The Company’s municipal securities are owned by each of the three charters, whose investment policies set forth limits for various subcategories within the municipal securities portfolio. Each charter is monitored individually and as of September 30, 2014, all were well-within policy limitations approved by the board of directors. Policy limits are calculated as a percentage of total risk-based capital.

As of September 30, 2014, the Company’s regular monitoring of its municipal securities portfolio had not uncovered any facts or circumstances resulting in significantly different credits ratings than those assigned by a nationally recognized statistical rating organization, or in the case of unrated bonds, the rating assigned using the credit underwriting standards.