NOTE

– INVESTMENT SECURITIES

The amortized cost and fair value of

investment securities as of

March

31,

2017

and

December

31,

2016

are summarized as follows:

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		(Losses)			Value
March 31, 2017:
Securities HTM:
Municipal securities	$	305,644,063	$	2,193,278	$	(4,690,335	)	$	303,147,006
Other securities		1,050,000		-		-			1,050,000
	$	306,694,063	$	2,193,278	$	(4,690,335	)	$	304,197,006

Securities AFS:
U.S. govt. sponsored agency securities	$	47,720,622	$	130,306	$	(294,847	)	$	47,556,081
Residential mortgage-backed and related securities		149,968,905		160,174		(2,625,092	)		147,503,987
Municipal securities		51,104,318		454,505		(426,949	)		51,131,874
Other securities		4,056,248		760,936		(57,105	)		4,760,079
	$	252,850,093	$	1,505,921	$	(3,403,993	)	$	250,952,021

December 31, 2016:
Securities HTM:
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 AFS:
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

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 private 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 unre

alized loss position as of

March

31,

2017

and

December

31,

2016,

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
March 31, 2017:
Securities HTM:
Municipal securities	$	110,858,743	$	(3,751,123	)	$	15,350,772	$	(939,212	)	$	126,209,515	$	(4,690,335	)

Securities AFS:
U.S. govt. sponsored agency securities	$	18,742,054	$	(230,974	)	$	5,115,200	$	(63,873	)	$	23,857,254	$	(294,847	)
Residential mortgage-backed and related securities		124,401,508		(2,266,050	)		9,181,284		(359,042	)		133,582,792		(2,625,092	)
Municipal securities		29,386,855		(408,233	)		337,522		(18,716	)		29,724,377		(426,949	)
Other securities		2,901,563		(57,105	)		-		-			2,901,563		(57,105	)
	$	175,431,980	$	(2,962,362	)	$	14,634,006	$	(441,631	)	$	190,065,986	$	(3,403,993	)

December 31, 2016:
Securities HTM:
Municipal securities	$	122,271,533	$	(4,076,647	)	$	13,010,803	$	(618,087	)	$	135,282,336	$	(4,694,734	)

Securities AFS:
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	)

March

31,

2017,

the investment portfolio included

554

securities. Of this number,

255

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

1.5%

of the total amortized cost of the portfolio. Of these

255

securities,

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 lacks the intent 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,

2017

and

December

31,

2016,

equity securities represented less than

of the total portfolio.

The Company did

not

recognize

OTTI on any debt or equity securities for the

three

months ended

March

31,

2017

and

2016.

There were

sales of securities for the

three

months ended

March

31,

2017.

All sales of securities for the

three

months ended

March

31,

2016

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
	March 31, 2016

Proceeds from sales of securities	$	55,526,851
Pre-tax gross gains from sales of securities		515,515
Pre-tax gross losses from sales of securities		(157,035	)

The amortized cost and fai

r value of securities as of

March

31,

2017

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	$	8,580,563	$	8,580,930
Due after one year through five years		16,946,533		17,027,273
Due after five years		281,166,967		278,588,803
	$	306,694,063	$	304,197,006

Securities AFS:
Due in one year or less	$	3,228,439	$	3,240,004
Due after one year through five years		43,980,525		44,165,961
Due after five years		51,615,976		51,281,990
	$	98,824,940	$	98,687,955
Residential mortgage-backed and related securities		149,968,905		147,503,987
Other securities		4,056,248		4,760,079
	$	252,850,093	$	250,952,021

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	$	163,299,673	$	161,458,045

Securities AFS:
U.S. govt. sponsored agency securities		5,048,496		5,059,493
Municipal securities		39,611,651		39,404,492
	$	44,660,147	$	44,463,985

As of

March

31,

2017,

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

112

issuers with fair values totaling

$99.3

million and revenue bonds issued by

123

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

$255.0

million. The Company held investments in general obligation bonds in

states, including

five

states in which the aggregate fair value exceeded

$5.0

million. The Company held investments in revenue bonds in

states, including

six

states in which the aggregate fair value exceeded

$5.0

million.

As of

December

31,

201

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

states, including

five

states in which the aggregate fair value exceeded

$5.0

million. The Company held investments in revenue bonds in

twelve

states, including

six

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:

March 31, 2017:
U.S. State:	Number of Issuers		Amortized Cost		Fair Value		Average Exposure Per Issuer (Fair Value)

Iowa		27	$	32,227,250	$	32,252,723	$	1,194,545
North Dakota		7		22,169,480		21,572,627		3,081,804
Illinois		17		12,915,605		13,060,349		768,256
Missouri		15		8,060,239		8,097,352		539,823
Ohio		8		6,785,433		6,635,402		829,425
Other		38		17,657,322		17,700,070		465,791
Total general obligation bonds		112	$	99,815,329	$	99,318,523	$	886,773

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

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:

March 31, 2017:
U.S. State:	Number of Issuers		Amortized Cost		Fair Value		Average Exposure Per Issuer (Fair Value)

Missouri		50	$	92,894,184	$	91,892,614	$	1,837,852
Iowa		31		70,400,232		70,771,347		2,282,947
Indiana		22		46,469,290		45,838,852		2,083,584
Ohio		3		13,650,000		13,380,921		4,460,307
Kansas		6		13,260,612		13,243,053		2,207,176
North Dakota		4		7,992,074		7,722,774		1,930,694
Other		7		12,266,660		12,110,796		1,730,114
Total revenue bonds		123	$	256,933,052	$	254,960,357	$	2,072,848

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

Both general obligation and revenue bonds are diversified across many issuers. As of

March

31,

2017

and

December

31,

2016,

the Company did

not

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

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

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

March

31,

2017,

all were well within policy limitations approved by the board of directors. Policy limits are calculated as a percentage of each charter’s total risk-based capital.

As of

March

31,

2017,

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.