Note 3 - Investment Securities

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Investment Holdings [Text Block]

Note

3.

Investment Securities

The amortized cost and fair value of investment securities as of

December

31,

2016

and

2015

are summarized as follows:

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		(Losses)			Value
December 31, 2016:
Securities held to maturity:
Municipal securities	$	321,859,056	$	2,200,577	$	(4,694,734	)	$	319,364,899
Other securities		1,050,000		-		-			1,050,000
	$	322,909,056	$	2,200,577	$	(4,694,734	)	$	320,414,899
Securities available for sale:
U.S. govt. sponsored agency securities	$	46,281,306	$	132,886	$	(330,585	)	$	46,083,607
Residential mortgage-backed and related securities		150,465,222		174,993		(2,938,088	)		147,702,127
Municipal securities		52,816,541		425,801		(637,916	)		52,604,426
Other securities		4,046,332		703,978		(27,331	)		4,722,979
	$	253,609,401	$	1,437,658	$	(3,933,920	)	$	251,113,139
December 31, 2015:
Securities held to maturity:
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 available for sale:
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 municipalities are located primarily 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

December

 

31,

2016

and

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
December 31, 2016:
Securities held to maturity:
Municipal securities	$	122,271,533	$	(4,076,647	)	$	13,010,803	$	(618,087	)	$	135,282,336	$	(4,694,734	)
Securities available for sale:
U.S. govt. sponsored agency securities	$	21,788,139	$	(257,640	)	$	5,499,012	$	(72,945	)	$	27,287,151	$	(330,585	)
Residential mortgage-backed and related securities		121,506,582		(2,641,664	)		7,437,615		(296,424	)		128,944,197		(2,938,088	)
Municipal securities		34,152,822		(618,462	)		338,099		(19,454	)		34,490,921		(637,916	)
Other securities		3,177,414		(27,331	)		-		-			3,177,414		(27,331	)
	$	180,624,957	$	(3,545,097	)	$	13,274,726	$	(388,823	)	$	193,899,683	$	(3,933,920	)
December 31, 2015:
Securities held to maturity:
Municipal securities	$	14,803,408	$	(294,438	)	$	19,927,581	$	(878,994	)	$	34,730,989	$	(1,173,432	)
Securities available for sale:
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

December

31,

2016,

the investment portfolio included

556

securities. Of this number,

267

securities were in an unrealized loss position. The aggregate losses of these securities totaled approximately

1.5%

of the total aggregate amortized cost. Of these

267

securities,

18

securities had an unrealized loss for

12

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 lacks the intent to sell these securities and/or it is not more-likely-than-not that the Company will be required to sell these debt securities before their anticipated recovery. At

December

31,

2016

and

2015,

the Company’s equity securities represent less than

1%

of the total portfolio.

The Company did

not

recognize OTTI on any debt or equity securities for the years ended

December

31,

2016,

2015

or

2014.

 

All sales of securities, as applicable, for the years ended

December

31,

2016,

2015

and

2014,

respectively, were from securities identified as AFS. Information on proceeds received, as well as the gains and losses from the sale of those securities are as follows:

	2016			2015			2014
Proceeds from sales of securities	$	134,188,737		$	81,410,368		$	78,476,422
Gross gains from sales of securities		4,845,009			1,045,444			517,116
Gross losses from sales of securities		(252,611	)		(246,461	)		(424,753	)

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

December

31,

2016,

by contractual maturity are shown below. Expected maturities of mortgage-backed and related securities

may

differ from contractual maturities because the mortgages underlying the securities

may

be called or prepaid without any penalties. Therefore, these securities are not included in the maturity categories in the following summary. “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	$	23,795,317	$	23,816,249
Due after one year through five years		16,362,018		16,406,132
Due after five years		282,751,721		280,192,518
	$	322,909,056	$	320,414,899
Securities available for sale:
Due in one year or less	$	3,103,329	$	3,102,013
Due after one year through five years		44,550,460		44,614,611
Due after five years		51,444,058		50,971,409
	$	99,097,847	$	98,688,033
Residential mortgage-backed and related securities		150,465,222		147,702,127
Other securities		4,046,332		4,722,979
	$	253,609,401	$	251,113,139

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

	Amortized Cost		Fair Value
Securities held to maturity:
Municipal securities	$	179,399,031	$	176,447,494
Securities available for sale:
U.S. govt. sponsored agency securities		5,058,440		5,083,493
Municipal securities		40,032,698		39,633,259
	$	45,091,138	$	44,716,752

As of

December

31,

2016

and

2015,

investment securities with a carrying value of

$118,811,905

and

$248,277,471,

respectively, were pledged on FHLB advances, customer and wholesale repurchase agreements, and for other purposes as required or permitted by law.

As of

December

31,

2016,

the Company’s municipal securities portfolios were comprised of general obligation bonds issued by

116

issuers with fair values totaling

$116.5

million and revenue bonds issued by

120

issuers, primarily consisting of states, counties, towns, villages and school districts with fair values totaling

$255.5

million. The Company held investments in general obligation bonds in

21

states, including

5

states in which the aggregate fair value exceeded

$5.0

million. The Company held investments in revenue bonds in

12

states, including

6

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:

December 31, 2016:
U.S. State:	Number of Issuers		Amortized Cost		Fair Value		Average Exposure Per Issuer (Fair Value)
Iowa		27	$	32,258,612	$	32,231,936	$	1,193,775
Illinois		19		29,214,559		29,308,438		1,542,549
North Dakota		7		22,169,050		21,499,075		3,071,296
Missouri		14		8,291,192		8,323,245		594,518
Ohio		8		6,790,398		6,651,897		831,487
Other		41		18,481,496		18,458,044		450,196
Total general obligation bonds		116	$	117,205,307	$	116,472,635	$	1,004,074

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:

December 31, 2016:
U.S. State:	Number of Issuers		Amortized Cost		Fair Value		Average Exposure Per Issuer (Fair Value)
Missouri		47	$	90,784,441	$	89,664,013	$	1,907,745
Iowa		31		70,788,393		71,142,393		2,294,916
Indiana		22		47,994,737		47,582,138		2,162,824
Kansas		6		13,476,366		13,427,491		2,237,915
North Dakota		4		8,089,067		7,796,381		1,949,095
Ohio		3		13,650,000		13,405,222		4,468,407
Other		7		12,687,286		12,479,052		1,782,722
Total revenue bonds		120	$	257,470,290	$	255,496,690	$	2,129,139

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

December

31,

2016

and

2015,

the Company did

not

hold general obligation or revenue bonds of any single issuer, the aggregate book or market value of which exceeded

6%

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 risk rating of

2,

indicating very high quality. Additionally, many of these bonds are funding essential municipal services (water, sewer, education, 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

December

31,

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

December

31,

2016,

the Company’s standard 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.