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Note 3 - Investment Securities
 12 Months Ended
Dec. 31, 2017
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,
2017
and
2016
are summarized as follows:
 
           
Gross
    
Gross
          
   
Amortized
    
Unrealized
    
Unrealized
    
Fair
  
   
Cost
    
Gains
    
(Losses)
    
Value
  
December 31, 2017:
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Securities held to maturity:
                                
Municipal securities
   $
378,424,205
     $
2,763,718
     $
(2,488,119
 )   $
378,699,804
  
Other securities
    
1,050,000
      
-
      
-
      
1,050,000
  
    $
379,474,205
     $
2,763,718
     $
(2,488,119
 )   $
379,749,804
  
                                 
Securities available for sale:
                                
U.S. govt. sponsored agency securities
   $
38,409,157
     $
37,344
     $
(349,967
 )   $
38,096,534
  
Residential mortgage-backed and related securities
    
165,459,470
      
155,363
      
(2,313,529
 )    
163,301,304
  
Municipal securities
    
66,176,364
      
660,232
      
(211,100
 )    
66,625,496
  
Other securities
    
4,014,004
      
896,384
      
(25,815
 )    
4,884,573
  
    $
274,058,995
     $
1,749,323
     $
(2,900,411
 )   $
272,907,907
  
                                 
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
  
 
 
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,
2017
and
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
  
December 31, 2017:
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Securities held to maturity:
                                                
Municipal securities
   $
23,750,826
     $
(354,460
 )   $
72,611,780
     $
(2,133,659
 )   $
96,362,606
     $
(2,488,119
 )
                                                 
Securities available for sale:
                                                
U.S. govt. sponsored agency securities
   $
28,576,258
     $
(200,022
 )   $
3,640,477
     $
(149,945
 )   $
32,216,735
     $
(349,967
 )
Residential mortgage-backed and related securities
    
88,927,779
      
(871,855
 )    
57,931,731
      
(1,441,674
 )    
146,859,510
      
(2,313,529
 )
Municipal securities
    
10,229,337
      
(41,151
 )    
9,997,433
      
(169,949
 )    
20,226,770
      
(211,100
 )
Other securities
    
923,535
      
(25,815
 )    
-
      
-
      
923,535
      
(25,815
 )
    $
128,656,909
     $
(1,138,843
 )   $
71,569,641
     $
(1,761,568
 )   $
200,226,550
     $
(2,900,411
 )
                                                 
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
 )
 
 
At
December 31,
2017,
the investment portfolio included
613
securities. Of this number,
223
securities were in an unrealized loss position. The aggregate losses of these securities totaled approximately
0.8%
of the total aggregate amortized cost. Of these
223
securities,
110
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, 2017
and
2016,
the Company’s equity securities represent less than
1%
of the total portfolio.
 
T
he Company did
not
recognize OTTI on any debt or equity securities for the years ended
December 31, 2017,
2016
or
2015.
 
All sales of securities
for the years ended
December 31, 2017,
2016
and
2015,
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:
 
   
2017
    
2016
    
2015
  
                         
Proceeds from sales of securities
   $
71,091,580
     $
134,188,737
     $
81,410,368
  
Gross gains from sales of securities
    
67,351
      
4,845,009
      
1,045,444
  
Gross losses from sales of securities
    
(155,236
 )    
(252,611
 )    
(246,461
 )
 
 
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,
2017,
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
   $
2,912,158
     $
2,909,816
  
Due after one year through five years
    
20,838,734
      
20,896,388
  
Due after five years
    
355,723,313
      
355,943,600
  
    $
379,474,205
     $
379,749,804
  
Securities available for sale:
                
Due in one year or less
   $
1,991,755
     $
1,996,584
  
Due after one year through five years
    
26,984,843
      
26,986,584
  
Due after five years
    
75,608,923
      
75,738,862
  
    $
104,585,521
     $
104,722,030
  
Residential mortgage-backed and related securities
    
165,459,470
      
163,301,304
  
Other securities
    
4,014,004
      
4,884,573
  
    $
274,058,995
     $
272,907,907
  
 
P
ortions 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
   $
208,103,672
     $
208,961,233
  
                 
Securities available for sale:
                
U.S. govt. sponsored agency securities
    
5,048,756
      
4,988,073
  
Municipal securities
    
57,554,280
      
57,817,498
  
    $
62,603,036
     $
62,805,571
  
 
 
As of
December 31,
2017
and
2016,
investment securities with a carrying value of
$78,642,843
and
$118,811,905,
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, 2017,
the Company’s municipal securities portfolios were comprised of general obligation bonds issued by
131
issuers with fair values totaling
$108.0
million and revenue bonds issued by
145
issuers, primarily consisting of states, counties, towns, villages and school districts with fair values totaling
$337.3
million. The Company held investments in general obligation bonds in
26
states, including
6
states in which the aggregate fair value exceeded
$5.0
million. The Company held investments in revenue bonds in
16
states, including
7
states in which the aggregate fair value exceeded
$5.0
million.
 
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.
 
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, 2017:
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
U.S. State:
  
Number of
Issuers
    
Amortized Cost
    
Fair Value
    
Average
Exposure Per
Issuer (Fair Value)
  
                                 
Illinois
    
20
     $
19,328,700
     $
19,514,024
     $
975,701
  
Iowa
    
16
      
13,881,689
      
13,969,512
      
873,095
  
Missouri
    
17
      
9,243,355
      
9,308,287
      
547,546
  
North Dakota
    
7
      
21,626,574
      
21,724,197
      
3,103,457
  
Ohio
    
9
      
8,002,705
      
7,938,028
      
882,003
  
Texas
    
17
      
11,253,775
      
11,308,848
      
665,226
  
Other
    
45
      
24,000,278
      
24,215,119
      
538,114
  
Total general obligation bonds
    
131
     $
107,337,076
     $
107,978,015
     $
824,260
  
 
 
December 31, 2016:
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
U.S. State:
  
Number of
Issuers
    
Amortized Cost
    
Fair Value
    
Average
Exposure Per
Issuer (Fair Value)
  
                                 
Illinois
    
19
     $
29,214,559
     $
29,308,438
     $
1,542,549
  
Iowa
    
27
      
32,258,612
      
32,231,936
      
1,193,775
  
Missouri
    
14
      
8,291,192
      
8,323,245
      
594,518
  
North Dakota
    
7
      
22,169,050
      
21,499,075
      
3,071,296
  
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:
 
December 31, 2017:
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
U.S. State:
  
Number of
Issuers
    
Amortized Cost
    
Fair Value
    
Average
Exposure Per
Issuer (Fair Value)
  
                                 
Illinois
    
2
     $
17,211,441
     $
17,408,544
     $
8,704,272
  
Indiana
    
26
      
51,171,818
      
50,861,336
      
1,956,205
  
Iowa
    
29
      
68,724,899
      
69,079,470
      
2,382,051
  
Kansas
    
6
      
12,873,329
      
12,877,087
      
2,146,181
  
Missouri
    
56
      
106,259,015
      
106,232,837
      
1,897,015
  
North Dakota
    
5
      
11,451,560
      
11,351,676
      
2,270,335
  
Ohio
    
10
      
55,766,091
      
55,820,203
      
5,582,020
  
Other
    
11
      
13,805,340
      
13,716,132
      
1,246,921
  
Total revenue bonds
    
145
     $
337,263,493
     $
337,347,285
     $
2,326,533
  
 
 
December 31, 2016:
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
U.S. State:
  
Number of
Issuers
    
Amortized Cost
    
Fair Value
    
Average
Exposure Per
Issuer (Fair Value)
  
                                 
Indiana
    
22
     $
47,994,737
     $
47,582,138
     $
2,162,824
  
Iowa
    
31
      
70,788,393
      
71,142,393
      
2,294,916
  
Kansas
    
6
      
13,476,366
      
13,427,491
      
2,237,915
  
Missouri
    
47
      
90,784,441
      
89,664,013
      
1,907,745
  
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
  
 
 
As of
December 31,
2017
and
2016,
the Company did
not
hold general obligation or revenue bonds of any single issuer, the aggregate book or market value of which exceeded
5%
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, 2017,
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, 2017,
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.