NOTE 2 – INVESTMENT SECURITIES

The amortized cost and fair value of investment securities as of June 30, 2016 and December 31, 2015 are summarized as follows:

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		(Losses)			Value
June 30, 2016:
Securities HTM:
Municipal securities	$	279,295,532	$	6,194,753	$	(731,170	)	$	284,759,115
Other securities		1,050,000		-		-			1,050,000
	$	280,345,532	$	6,194,753	$	(731,170	)	$	285,809,115

Securities AFS:
U.S. govt. sponsored agency securities	$	87,068,743	$	1,332,981	$	(80,276	)	$	88,321,448
Residential mortgage-backed and related securities		114,990,076		1,855,710		(80,276	)		116,765,510
Municipal securities		22,463,188		945,994		(16,365	)		23,392,817
Other securities		1,684,787		449,222		-			2,134,009
	$	226,206,794	$	4,583,907	$	(176,917	)	$	230,613,784

December 31, 2015:
Securities HTM:
Municipal securities	$	252,624,159	$	3,190,558	$	(1,173,432	)	$	254,641,285
Other securities		1,050,000		-		-			1,050,000
	$	253,674,159	$	3,190,558	$	(1,173,432	)	$	255,691,285

Securities AFS:
U.S. govt. sponsored agency securities	$	216,281,416	$	104,524	$	(2,848,561	)	$	213,537,379
Residential mortgage-backed and related securities		81,442,479		511,095		(1,283,439	)		80,670,135
Municipal securities		26,764,981		872,985		(59,378	)		27,578,588
Other securities		1,108,124		540,919		(163	)		1,648,880
	$	325,597,000	$	2,029,523	$	(4,191,541	)	$	323,434,982

Part I

Item 1

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)-continued

The Company’s HTM municipal securities consist largely of private issues of municipal debt. The large majority of the municipalities are located within the Midwest. 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 June 30, 2016 and December 31, 2015, 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
June 30, 2016:
Securities HTM:
Municipal securities	$	5,805,354	$	(384,457	)	$	14,508,402	$	(346,713	)	$	20,313,756	$	(731,170	)

Securities AFS:
U.S. govt. sponsored agency securities	$	5,825,476	$	(80,276	)	$	-	$	-		$	5,825,476	$	(80,276	)
Residential mortgage-backed and related securities		4,337,187		(7,492	)		8,829,330		(72,784	)		13,166,517		(80,276	)
Municipal securities		380,749		(206	)		850,050		(16,159	)		1,230,799		(16,365	)
Other securities		-		-			-		-			-		-
	$	10,543,412	$	(87,974	)	$	9,679,380	$	(88,943	)	$	20,222,792	$	(176,917	)

December 31, 2015:
Securities HTM:
Municipal securities	$	14,803,408	$	(294,438	)	$	19,927,581	$	(878,994	)	$	34,730,989	$	(1,173,432	)

Securities AFS:
U.S. govt. sponsored agency securities	$	112,900,327	$	(1,397,591	)	$	64,476,661	$	(1,450,970	)	$	177,376,988	$	(2,848,561	)
Residential mortgage-backed and related securities		40,356,921		(730,466	)		19,836,637		(552,973	)		60,193,558		(1,283,439	)
Municipal securities		2,220,800		(31,807	)		848,329		(27,571	)		3,069,129		(59,378	)
Other securities		411		(163	)		-		-			411		(163	)
	$	155,478,459	$	(2,160,027	)	$	85,161,627	$	(2,031,514	)	$	240,640,086	$	(4,191,541	)

At June 30, 2016, the investment portfolio included 447 securities. Of this number, 30 securities were in an unrealized loss position. The aggregate losses of these securities totaled less than 1% of the total amortized cost of the portfolio. Of these 30 securities, 17 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 June 30, 2016 and December 31, 2015, equity securities represented less than 1% of the total portfolio.

The Company did not recognize OTTI on any debt or equity securities for the three or six months ended June 30, 2016 and 2015.

Part I

Item 1

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)-continued

All sales of securities for the three and six months ended June 30, 2016 and 2015, respectively, were from securities identified as AFS. Information on proceeds received, as well as pre-tax gross gains and losses from sales on those securities are as follows:

	Three Months Ended				Six Months Ended
	June 30, 2016		June 30, 2015		June 30, 2016			June 30, 2015

Proceeds from sales of securities	$	5,548,294	$	-	$	61,075,145		$	54,966,923
Pre-tax gross gains from sales of securities		18,030		-		533,545			569,551
Pre-tax gross losses from sales of securities		-		-		(157,035	)		(152,618	)

The amortized cost and fair value of securities as of June 30, 2016 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 prepaid without any penalties. Therefore, these securities are not included in the maturity categories in the following table. “Other securities” AFS are excluded from the maturity categories as there is no fixed maturity date for those securities.

	Amortized Cost		Fair Value
Securities HTM:
Due in one year or less	$	4,972,563	$	4,993,619
Due after one year through five years		20,232,407		20,415,409
Due after five years		255,140,562		260,400,087
	$	280,345,532	$	285,809,115

Securities AFS:
Due in one year or less	$	2,133,829	$	2,141,186
Due after one year through five years		54,381,038		55,669,426
Due after five years		53,017,064		53,903,653
	$	109,531,931	$	111,714,265
Residential mortgage-backed and related securities		114,990,076		116,765,510
Other securities		1,684,787		2,134,009
	$	226,206,794	$	230,613,784

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. These callable securities are summarized as follows:

	Amortized Cost		Fair Value
Securities HTM:
Municipal securities	$	153,065,142	$	156,170,970

Securities AFS:
U.S. govt. sponsored agency securities		23,616,009		23,718,901
Municipal securities		13,844,290		14,296,378
	$	37,460,299	$	38,015,279

Part I

Item 1

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)-continued

As of June 30, 2016, the Company’s municipal securities portfolios were comprised of general obligation bonds issued by 77 issuers with fair values totaling $69.0 million and revenue bonds issued by 99 issuers, primarily consisting of states, counties, towns, villages and school districts with fair values totaling $239.1 million. The Company held investments in general obligation bonds in 19 states, including four states in which the aggregate fair value exceeded $5.0 million. The Company held investments in revenue bonds in nine states, including four states in which the aggregate fair value exceeded $5.0 million.

As of December 31, 2015, the Company’s municipal securities portfolios were comprised of general obligation bonds issued by 82 issuers with fair values totaling $67.8 million and revenue bonds issued by 92 issuers, primarily consisting of states, counties, towns, villages and school districts with fair values totaling $214.4 million. The Company held investments in general obligation bonds in 19 states, including four states in which the aggregate fair value exceeded $5.0 million. The Company held investments in revenue bonds in nine 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:

June 30, 2016:
U.S. State:	Number of Issuers		Amortized Cost		Fair Value		Average Exposure Per Issuer (Fair Value)

Iowa		13	$	19,441,057	$	19,965,926	$	1,535,840
Illinois		9		10,127,747		10,527,337		1,169,704
Missouri		12		7,349,505		7,519,474		626,623
North Dakota		6		16,208,320		16,872,189		2,812,032
Other		37		13,738,908		14,133,036		381,974
Total general obligation bonds		77	$	66,865,537	$	69,017,962	$	896,337

December 31, 2015:
U.S. State:	Number of Issuers		Amortized Cost		Fair Value		Average Exposure Per Issuer (Fair Value)

Iowa		15	$	19,974,939	$	20,247,108	$	1,349,807
Illinois		9		10,928,700		11,264,348		1,251,594
North Dakota		5		10,890,000		11,050,235		2,210,047
Missouri		12		7,924,800		7,986,856		665,571
Other		41		16,965,393		17,229,485		420,231
Total general obligation bonds		82	$	66,683,832	$	67,778,032	$	826,561

Part I

Item 1

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)-continued

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:

June 30, 2016:
U.S. State:	Number of Issuers		Amortized Cost		Fair Value		Average Exposure Per Issuer (Fair Value)

Missouri		41	$	89,033,470	$	90,174,695	$	2,199,383
Iowa		26		73,076,794		74,933,480		2,882,057
Indiana		18		40,009,789		40,615,477		2,256,415
Kansas		5		13,172,824		13,315,662		2,663,132
North Dakota		4		8,161,630		8,359,661		2,089,915
Other		5		11,438,676		11,734,995		2,346,999
Total revenue bonds		99	$	234,893,183	$	239,133,970	$	2,415,495

December 31, 2015:
U.S. State:	Number of Issuers		Amortized Cost		Fair Value		Average Exposure Per Issuer (Fair Value)

Missouri		41	$	78,593,590	$	79,015,378	$	1,927,204
Iowa		26		70,773,660		71,659,410		2,756,131
Indiana		17		40,018,381		40,210,320		2,365,313
Kansas		3		11,748,679		11,821,055		3,940,352
Other		5		11,570,998		11,735,678		2,347,136
Total revenue bonds		92	$	212,705,308	$	214,441,841	$	2,330,890

Both general obligation and revenue bonds are diversified across many issuers. As of June 30, 2016 and December 31, 2015, the Company did not hold general obligation or revenue bonds of any single issuer, the aggregate book or market value of which exceeded 4% of the Company’s stockholders’ equity. Of the general obligation and revenue bonds in the Company’s portfolio, the majority are unrated bonds that represent small, private issuances. All unrated bonds were underwritten according to loan underwriting standards and have an average loan risk rating of 2, indicating very high quality. Additionally, many of these bonds are funding essential municipal services such as water, sewer, education, and 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 June 30, 2016, 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 June 30, 2016, the Company’s standard monitoring of its municipal securities portfolio had not uncovered any facts or circumstances resulting in significantly different credit 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.