NOTE 2 – INVESTMENT SECURITIES

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

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		(Losses)			Value
September 30, 2016:
Securities HTM:
Municipal securities	$	305,690,174	$	5,533,151	$	(778,982	)	$	310,444,343
Other securities		1,050,000		-		-			1,050,000
	$	306,740,174	$	5,533,151	$	(778,982	)	$	311,494,343

Securities AFS:
U.S. govt. sponsored agency securities	$	66,966,328	$	992,084	$	(73,463	)	$	67,884,949
Residential mortgage-backed and related securities		131,496,011		1,824,345		(147,552	)		133,172,804
Municipal securities		53,887,898		816,063		(63,499	)		54,640,462
Other securities		2,002,113		492,980		(3,227	)		2,491,866
	$	254,352,350	$	4,125,472	$	(287,741	)	$	258,190,081

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

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 September 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
September 30, 2016:
Securities HTM:
Municipal securities	$	23,632,888	$	(251,558	)	$	14,150,396	$	(527,424	)	$	37,783,284	$	(778,982	)

Securities AFS:
U.S. govt. sponsored agency securities	$	9,547,746	$	(73,463	)	$	-	$	-		$	9,547,746	$	(73,463	)
Residential mortgage-backed and related securities		9,326,000		(78,305	)		8,464,738		(69,247	)		17,790,738		(147,552	)
Municipal securities		25,921,780		(49,087	)		846,894		(14,412	)		26,768,674		(63,499	)
Other securities		641,430		(3,227	)		-		-			641,430		(3,227	)
	$	45,436,956	$	(204,082	)	$	9,311,632	$	(83,659	)	$	54,748,588	$	(287,741	)

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 September 30, 2016, the investment portfolio included 526 securities. Of this number, 92 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 92 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 September 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 nine months ended September 30, 2016 and 2015.

All sales of securities for the three and nine months ended September 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						Nine Months Ended
	September 30, 2016			September 30, 2015			September 30, 2016			September 30, 2015

Proceeds from sales of securities*	$	58,775,764		$	11,922,915		$	119,850,909		$	65,889,838
Pre-tax gross gains from sales of securities		4,281,828			102,766			4,815,373			672,317
Pre-tax gross losses from sales of securities		(30,055	)		(46,186	)		(187,090	)		(198,804	)

* Proceeds from sales of securities for the nine months ended September 30, 2016 includes $32.1 million receivable from broker for the sale of securities

In September 2016, the Company sold an equity security and recognized a pre-tax gross gain on the sale of $4,010,877. The equity security was acquired by the Company at no cost as part of a membership in the invested company in 2002.

The amortized cost and fair value of securities as of September 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	$	9,333,827	$	9,382,178
Due after one year through five years		30,899,427		31,047,261
Due after five years		266,506,920		271,064,904
	$	306,740,174	$	311,494,343

Securities AFS:
Due in one year or less	$	2,345,063	$	2,347,195
Due after one year through five years		55,691,033		56,456,647
Due after five years		62,818,130		63,721,569
	$	120,854,226	$	122,525,411
Residential mortgage-backed and related securities		131,496,011		133,172,804
Other securities		2,002,113		2,491,866
	$	254,352,350	$	258,190,081

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	$	178,052,716	$	180,307,064

Securities AFS:
U.S. govt. sponsored agency securities		11,042,867		11,073,088
Municipal securities		41,062,791		37,443,219
	$	52,105,658	$	48,516,307

As of September 30, 2016, the Company’s municipal securities portfolios were comprised of general obligation bonds issued by 114 issuers with fair values totaling $115.8 million and revenue bonds issued by 112 issuers, primarily consisting of states, counties, towns, villages and school districts with fair values totaling $249.3 million. The Company held investments in general obligation bonds in 24 states, including four states in which the aggregate fair value exceeded $5.0 million. The Company held investments in revenue bonds in 13 states, including five 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:

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

Iowa		27	$	32,289,974	$	32,746,465	$	1,212,832
Illinois		19		30,063,690		30,437,115		1,601,953
North Dakota		6		19,403,728		19,906,421		3,317,737
Missouri		13		8,304,022		8,448,994		649,923
Other		49		23,934,196		24,247,257		494,842
Total general obligation bonds		114	$	113,995,610	$	115,786,252	$	1,015,669

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

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

Missouri		44	$	90,171,820	$	91,084,628	$	2,070,105
Iowa		30		75,440,709		77,216,784		2,573,893
Indiana		20		43,994,737		44,605,536		2,230,277
Kansas		6		13,480,269		13,587,744		2,264,624
North Dakota		4		8,114,931		8,175,230		2,043,808
Other		8		14,379,998		14,628,631		1,828,579
Total revenue bonds		112	$	245,582,464	$	249,298,553	$	2,225,880

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 September 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 four 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, 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 September 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.