NOTE 3 – INVESTMENT SECURITIES

The amortized cost and fair value of investment securities as of September 30, 2018 and December 31, 2017 are summarized as follows:


			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		(Losses)		Value
September 30, 2018:
Securities HTM:
Municipal securities	$	394,371,195	$	3,887,422	$	(10,753,857)	$	387,504,760
Other securities		1,050,000		—		(13,480)		1,036,520
	$	395,421,195	$	3,887,422	$	(10,767,337)	$	388,541,280

Securities AFS:
U.S. govt. sponsored agency securities	$	37,715,802	$	9,963	$	(1,234,016)	$	36,491,749
Residential mortgage-backed and related securities		162,933,727		35,691		(7,236,822)		155,732,596
Municipal securities		60,101,620		150,615		(1,348,028)		58,904,207
Other securities		4,254,364		—		(59,474)		4,194,890
	$	265,005,513	$	196,269	$	(9,878,340)	$	255,323,442


			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		(Losses)		Value
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 September 30, 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
September 30, 2018:
Securities HTM:
Municipal securities	$	170,633,644	$	(5,439,521)	$	64,984,249	$	(5,314,336)	$	235,617,893	$	(10,753,857)
Other securities		536,520		(13,480)		—		—		536,520		(13,480)
	$	171,170,164	$	(5,453,001)	$	64,984,249	$	(5,314,336)	$	236,154,413	$	(10,767,337)

Securities AFS:
U.S. govt. sponsored agency securities	$	18,437,573	$	(521,633)	$	15,829,173	$	(712,383)	$	34,266,746	$	(1,234,016)
Residential mortgage-backed and related securities		44,903,593		(1,712,003)		105,007,537		(5,524,819)		149,911,130		(7,236,822)
Municipal securities		79,442,346		(976,811)		10,952,533		(371,217)		90,394,879		(1,348,028)
Other securities		4,194,890		(59,474)		—				4,194,890		(59,474)
	$	146,978,402	$	(3,269,921)	$	131,789,243	$	(6,608,419)	$	278,767,645	$	(9,878,340)


	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 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)

At September 30, 2018, the investment portfolio included 613 securities. Of this number, 434 securities were in an unrealized loss position. The aggregate losses of these securities totaled approximately 3.2% of the total amortized cost of the portfolio. Of these 434 securities, 171 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 or nine months ended September 30, 2018 and 2017.

All sales of securities for the three and nine months ended September 30, 2018 and 2017 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				Nine Months Ended
	September 30, 2018		September 30, 2017		September 30, 2018		September 30, 2017
Proceeds from sales of securities	$	1,938,043	$	8,415,795	$	1,938,043	$	21,969,870
Gross gains from sales of securities		—		6,312		—		65,880
Gross losses from sales of securities		—		(69,900)		—		(91,004)

The amortized cost and fair value of securities as of September 30, 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	$	1,710,335	$	1,711,153
Due after one year through five years		27,876,391		27,826,476
Due after five years		365,834,469		359,003,651
	$	395,421,195	$	388,541,280
Securities AFS:
Due in one year or less	$	3,153,996	$	3,156,871
Due after one year through five years		25,663,131		25,220,152
Due after five years		73,254,659		71,213,823
		102,071,786		99,590,846
Residential mortgage-backed and related securities		162,933,727		155,732,596
	$	265,005,513	$	255,323,442

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	$	229,992,901	$	226,439,711

Securities AFS:
U.S. govt. sponsored agency securities		4,998,969		4,847,750
Municipal securities		50,248,182		49,027,162
Corporate securities		4,006,462		3,948,640
	$	59,253,613	$	57,823,552

As of September 30, 2018, the Company's municipal securities portfolios were comprised of general obligation bonds issued by 113 issuers with fair values totaling $86.2 million and revenue bonds issued by 163 issuers, primarily consisting of states, counties, towns, villages and school districts with fair values totaling $360.2 million. The Company held investments in general obligation bonds in 27 states, including six states in which the aggregate fair value exceeded $5.0 million. The Company held investments in revenue bonds in 19 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 26 states, including nine states in which the aggregate fair value exceeded $5.0 million. The Company held investments in revenue bonds in 16 states, including seven states in which the aggregate fair value exceeded $5.0 million.

Both general obligation and revenue bonds are diversified across many issuers. As of September 30, 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 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 loan risk rating of 2, 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 five charters, whose investment policies set forth limits for various subcategories within the municipal securities portfolio. Each charter is monitored individually, and as of September 30, 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 September 30, 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.