Note 3. Investment Securities

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


			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		(Losses)		Value
December 31, 2018:
Securities HTM:
Municipal securities	$	400,862,885	$	5,661,095	$	(6,802,765)	$	399,721,215
Other securities		1,050,000		—		(632)		1,049,368
	$	401,912,885	$	5,661,095	$	(6,803,397)	$	400,770,583

Securities AFS:
U.S. govt. sponsored agency securities	$	37,150,434	$	38,620	$	(777,663)	$	36,411,391
Residential mortgage-backed and related securities		163,697,973		181,868		(4,630,581)		159,249,260
Municipal securities		59,069,259		179,748		(702,985)		58,546,022
Other securities		6,754,164		100,700		(5,089)		6,849,775
	$	266,671,830	$	500,936	$	(6,116,318)	$	261,056,448


			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

Note 3. Investment Securities (continued)

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.

As discussed in Note 1, effective January 1, 2018, equity securities (previously included in other securities) are no longer included in available for sale securities and, instead, are carried in other assets at fair value with changes in fair value recognized in net income.

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, 2018 and 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
December 31, 2018:
Securities HTM:
Municipal securities	$	114,200,687	$	(2,186,574)	$	69,412,341	$	(4,616,191)	$	183,613,028	$	(6,802,765)
Other securities		549,368		(632)		—		—		549,368		(632)
	$	114,750,055	$	(2,187,206)	$	69,412,341	$	(4,616,191)	$	184,162,396	$	(6,803,397)

Securities AFS:
U.S. govt. sponsored agency securities	$	1,565,136	$	(33,278)	$	29,605,388	$	(744,385)	$	31,170,524	$	(777,663)
Residential mortgage-backed and related securities		12,809,544		(147,592)		133,533,963		(4,482,989)		146,343,507		(4,630,581)
Municipal securities		28,356,204		(394,235)		15,932,376		(308,750)		44,288,580		(702,985)
Other securities		4,249,075		(5,089)		—				4,249,075		(5,089)
	$	46,979,959	$	(580,194)	$	179,071,727	$	(5,536,124)	$	226,051,686	$	(6,116,318)


	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 December 31, 2018, the investment portfolio included 611 securities. Of this number, 350 securities were in an unrealized loss position. The aggregate losses of these securities totaled approximately 1.9% of the total aggregate amortized cost. Of these 350 securities, 188 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 it is not more-likely-than-not that the Company will be required to sell these debt securities before their anticipated recovery.

Note 3. Investment Securities (continued)

The Company did not recognize OTTI on any investment securities for the years ended December 31, 2018, 2017 or 2016.

All sales of securities for the years ended December 31, 2018, 2017 and 2016, 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:


	2018		2017		2016

Proceeds from sales of securities	$	1,938,043	$	71,091,580	$	134,188,737
Gross gains from sales of securities		—		67,351		4,845,009
Gross losses from sales of securities		—		(155,236)		(252,611)

In September 2016, the Company sold an equity security and recognized a pre-tax gross gain on the sale of $4.0 million. 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, 2018, 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.


	Amortized Cost		Fair Value
Securities HTM:
Due in one year or less	$	2,232,726	$	2,237,767
Due after one year through five years		27,569,566		27,716,775
Due after five years		372,110,593		370,816,041
	$	401,912,885	$	400,770,583
Securities AFS:
Due in one year or less	$	2,665,560	$	2,665,829
Due after one year through five years		29,140,442		28,856,751
Due after five years		71,167,855		70,284,608
		102,973,857		101,807,188
Residential mortgage-backed and related securities		163,697,973		159,249,260
	$	266,671,830	$	261,056,448

Portions 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 HTM:
Municipal securities	$	209,953,250	$	208,366,466

Securities AFS:
U.S. govt. sponsored agency securities		4,999,072		4,918,050
Municipal securities		49,715,648		49,110,178
Other securities		6,505,918		6,602,900
	$	61,220,638	$	60,631,128

Note 3. Investment Securities (continued)

As of December 31, 2018 and 2017, investment securities with a carrying value of $100.9 million and $78.6 million, 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, 2018, the Company’s municipal securities portfolios were comprised of general obligation bonds issued by 110 issuers with fair values totaling $86.4 million and revenue bonds issued by 160 issuers, primarily consisting of states, counties, towns, villages and school districts with fair values totaling $371.9 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 19 states, including 7 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 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, 2018, the Company held revenue bonds of one single issuer, located in Ohio, the aggregate book or market value of which exceeded 5% of the Company’s stockholders’ equity. The issuer’s financial condition is strong and the source of repayment is diversified. The Compan monitors the investment and concentration closely. As of 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 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 five 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, 2018, 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, 2018, 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.