NOTE

– INVESTMENT SECURITIES

The amortized cost and fair value of investment securities as of

March 31, 2018

and

December 31, 2017

are summarized as follows:

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		(Losses)			Value
March 31, 2018:
Securities HTM:
Municipal securities	$	377,534,337	$	2,244,218	$	(5,024,697	)	$	374,753,858
Other securities		1,050,000		-		(11,175	)		1,038,825
	$	378,584,337	$	2,244,218	$	(5,035,872	)	$	375,792,683

Securities AFS:
U.S. govt. sponsored agency securities	$	37,591,155	$	21,236	$	(744,881	)	$	36,867,510
Residential mortgage-backed and related securities		162,453,605		60,222		(5,224,784	)		157,289,043
Municipal securities		61,862,665		238,583		(899,444	)		61,201,804
Other securities		4,254,716		31,867		-			4,286,583
	$	266,162,141	$	351,908	$	(6,869,109	)	$	259,644,940

December 31, 2017:
Securities HTM:
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 AFS:
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

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 unrealized loss position as of

March 31, 2018

and

December 31, 2017,

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, 2018:
Securities HTM:
Municipal securities	$	69,404,232	$	(2,881,032	)	$	59,545,239	$	(2,143,665	)	$	128,949,471	$	(5,024,697	)
Other securities		1,038,825		(11,175	)		-		-			1,038,825		(11,175	)
	$	70,443,057	$	(2,892,207	)	$	59,545,239	$	(2,143,665	)	$	129,988,296	$	(5,035,872	)

Securities AFS:
U.S. govt. sponsored agency securities	$	29,643,497	$	(589,515	)	$	3,634,609	$	(155,365	)	$	33,278,106	$	(744,880	)
Residential mortgage-backed and related securities		94,102,512		(2,858,578	)		55,394,159		(2,366,206	)		149,496,671		(5,224,784	)
Municipal securities		36,845,821		(659,492	)		8,217,318		(239,952	)		45,063,139		(899,444	)
	$	160,591,830	$	(4,107,585	)	$	67,246,086	$	(2,761,523	)	$	227,837,916	$	(6,869,108	)

December 31, 2017:
Securities HTM:
Municipal securities	$	23,750,826	$	(354,460	)	$	72,611,780	$	(2,133,659	)	$	96,362,606	$	(2,488,119	)


Securities AFS:
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	)

March 31, 2018,

the investment portfolio included

604

securities. Of this number,

290

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

1.8%

of the total amortized cost of the portfolio. Of these

290

securities,

105

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.

The Company did

not

recognize OTTI on any investment securities for the

three

months ended

March 31, 2018

and

2017.

There were

sales of securities for the

three

months ended

March 31, 2018

and

2017.

The amortized cost and fair value of securities as of

March 31, 2018

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.

	Amortized Cost		Fair Value
Securities HTM:
Due in one year or less	$	3,344,356	$	3,345,990
Due after one year through five years		25,163,524		25,191,668
Due after five years		350,076,457		347,255,025
	$	378,584,337	$	375,792,683

Securities AFS:
Due in one year or less	$	3,368,633	$	3,381,748
Due after one year through five years		23,949,100		23,738,028
Due after five years		76,390,803		75,236,121
		103,708,536		102,355,897
Residential mortgage-backed and related securities		162,453,605		157,289,043
	$	266,162,141	$	259,644,940

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	$	209,306,946	$	207,262,788


Securities AFS:
U.S. govt. sponsored agency securities		5,048,812		4,947,644
Municipal securities		54,016,828		53,258,850
	$	59,065,640	$	58,206,494

As of

March 31, 2018,

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

128

issuers with fair values totaling

$101.3

million and revenue bonds issued by

148

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

$334.6

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

seven

states in which the aggregate fair value exceeded

$5.0

million.

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

states, including

six

states in which the aggregate fair value exceeded

$5.0

million. The Company held investments in revenue bonds in

states, including

seven

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, 2018:
U.S. State:	Number of Issuers		Amortized Cost		Fair Value		Average Exposure Per Issuer (Fair Value)

North Dakota		7	$	21,627,097	$	20,756,566	$	2,965,224
Illinois		20		18,532,776		18,513,766		925,688
Iowa		16		13,878,991		13,830,003		864,375
Texas		17		10,763,333		10,554,430		620,849
Missouri		17		8,314,872		8,323,476		489,616
Ohio		8		7,378,887		7,296,859		912,107
Other		43		22,261,263		22,068,390		513,218
Total general obligation bonds		128	$	102,757,219	$	101,343,490	$	791,746

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

North Dakota		7	$	21,626,574	$	21,724,197	$	3,103,457
Illinois		20		19,328,700		19,514,024		975,701
Iowa		16		13,881,689		13,969,512		873,095
Texas		17		11,253,775		11,308,848		665,226
Missouri		17		9,243,355		9,308,287		547,546
Ohio		9		8,002,705		7,938,028		882,003
Other		45		24,000,278		24,215,119		538,114
Total general obligation bonds		131	$	107,337,076	$	107,978,015	$	824,260

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, 2018:
U.S. State:	Number of Issuers		Amortized Cost		Fair Value		Average Exposure Per Issuer (Fair Value)

Missouri		58	$	108,311,804	$	108,445,780	$	1,869,755
Iowa		29		68,370,374		68,236,038		2,352,967
Ohio		10		55,757,914		55,699,375		5,569,938
Indiana		26		49,258,364		48,833,113		1,878,197
Illinois		2		17,205,951		17,373,994		8,686,997
Kansas		6		12,651,338		12,172,961		2,028,827
North Dakota		5		11,220,278		10,644,441		2,128,888
Other		12		13,863,760		13,206,470		1,100,539
Total revenue bonds		148	$	336,639,783	$	334,612,172	$	2,260,893

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

Missouri		56	$	106,259,015	$	106,232,837	$	1,897,015
Iowa		29		68,724,899		69,079,470		2,382,051
Ohio		10		55,766,091		55,820,203		5,582,020
Indiana		26		51,171,818		50,861,336		1,956,205
Illinois		2		17,211,441		17,408,544		8,704,272
Kansas		6		12,873,329		12,877,087		2,146,181
North Dakota		5		11,451,560		11,351,676		2,270,335
Other		11		13,805,340		13,716,132		1,246,921
Total revenue bonds		145	$	337,263,493	$	337,347,285	$	2,326,533

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

March 31, 2018

and

December 31, 2017,

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, 2018,

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, 2018,

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.