NOTE

– INVESTMENT SECURITIES

The amortized cost and fair value of

investment securities as of

June 30, 2017

and

December 31, 2016

are summarized as follows:

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		(Losses)			Value
June 30, 2017:
Securities HTM:
Municipal securities	$	323,153,634	$	2,027,969	$	(3,242,226	)	$	321,939,377
Other securities		1,050,000		-		-			1,050,000
	$	324,203,634	$	2,027,969	$	(3,242,226	)	$	322,989,377

Securities AFS:
U.S. govt. sponsored agency securities	$	42,037,160	$	96,651	$	(189,347	)	$	41,944,464
Residential mortgage-backed and related securities		166,063,973		245,551		(1,894,691	)		164,414,833
Municipal securities		57,881,338		471,713		(252,541	)		58,100,510
Other securities		4,065,468		778,988		(22,550	)		4,821,906
	$	270,047,939	$	1,592,903	$	(2,359,129	)	$	269,281,713

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

June 30, 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
June 30, 2017:
Securities HTM:
Municipal securities	$	64,001,034	$	(1,792,524	)	$	30,641,106	$	(1,449,702	)	$	94,642,140	$	(3,242,226	)

Securities AFS:
U.S. govt. sponsored agency securities	$	27,793,290	$	(184,702	)	$	4,775,235	$	(4,645	)	$	32,568,525	$	(189,347	)
Residential mortgage-backed and related securities		129,347,074		(1,614,041	)		8,839,471		(280,650	)		138,186,545		(1,894,691	)
Municipal securities		25,578,044		(234,044	)		336,441		(18,497	)		25,914,485		(252,541	)
Other securities		926,800		(22,550	)		-		-			926,800		(22,550	)
	$	183,645,208	$	(2,055,337	)	$	13,951,147	$	(303,792	)	$	197,596,355	$	(2,359,129	)

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	)

June 30, 2017,

the investment portfolio included

568

securities. Of this number,

212

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

0.9%

of the total amortized cost of the portfolio. Of these

212

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

June 30, 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

six

months ended

June 30, 2017

and

2016.

All sales of securities for the

three

and

six

months

ended

June 30, 2017

and

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					Six Months Ended
	June 30, 2017			June 30, 2016		June 30, 2017			June 30, 2016

Proceeds from sales of securities	$	13,554,075		$	5,548,294	$	13,554,075		$	61,075,145
Pre-tax gross gains from sales of securities		59,568			18,030		59,568			533,545
Pre-tax gross losses from sales of securities		(21,104	)		-		(21,104	)		(157,035	)

The amortized cost and fai

r value of securities as of

June 30, 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

fixed maturity date for those securities.

	Amortized Cost		Fair Value
Securities HTM:
Due in one year or less	$	7,479,990	$	7,478,528
Due after one year through five years		18,040,753		18,137,483
Due after five years		298,682,891		297,373,366
	$	324,203,634	$	322,989,377

Securities AFS:
Due in one year or less	$	3,498,188	$	3,504,089
Due after one year through five years		31,550,278		31,700,139
Due after five years		64,870,032		64,840,746
	$	99,918,498	$	100,044,974
Residential mortgage-backed and related securities		166,063,973		164,414,833
Other securities		4,065,468		4,821,906
	$	270,047,939	$	269,281,713

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	$	170,556,294	$	170,715,228

Securities AFS:
U.S. govt. sponsored agency securities		5,048,597		5,040,134
Municipal securities		41,135,349		41,095,251
	$	46,183,946	$	46,135,385

As of

June 30, 2017,

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

124

issuers with fair values totaling

$107.9

million and revenue bonds issued by

126

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

$272.2

million. The Company held investments in general obligation bonds in

states, including

six

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:

June 30, 2017:
U.S. State:	Number of Issuers		Amortized Cost		Fair Value		Average Exposure Per Issuer (Fair Value)

Iowa		26	$	31,131,484	$	31,242,925	$	1,201,651
North Dakota		7		21,619,812		21,514,855		3,073,551
Illinois		19		14,872,773		15,051,806		792,200
Missouri		16		9,078,540		9,123,733		570,233
Ohio		10		8,716,542		8,588,019		858,802
Texas		8		5,347,075		5,336,188		667,024
Other		38		16,886,554		16,997,159		447,294
Total general obligation bonds		124	$	107,652,780	$	107,854,685	$	869,796

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:

June 30, 2017:
U.S. State:	Number of Issuers		Amortized Cost		Fair Value		Average Exposure Per Issuer (Fair Value)

Missouri		54	$	107,360,504	$	106,983,845	$	1,981,182
Iowa		27		57,862,675		57,834,419		2,142,016
Indiana		21		50,114,290		49,578,767		2,360,894
Ohio		5		19,691,358		19,493,348		3,898,670
Kansas		6		13,178,963		13,179,104		2,196,517
North Dakota		5		11,729,782		11,676,766		2,335,353
Other		8		13,444,620		13,438,953		1,679,869
Total revenue bonds		126	$	273,382,192	$	272,185,202	$	2,160,200

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

June 30, 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

June 30, 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

June 30, 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.