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Note 3 - Investment Securities | 12 Months Ended
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Dec. 31, 2018
Notes to Financial Statements |
INVESTMENT SECURITIES | 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.

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- Definition The entire disclosure for investment holdings. This includes the long positions of investments for the entity. It contains investments in affiliated and unaffiliated issuers. The investments include securities and non securities (i.e. commodities and futures contracts). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 946 -SubTopic 320 -Section S99 -Paragraph 6 -Subparagraph (SX 210.12-14) -URI http://asc.fasb.org/extlink&oid=50485924&loc=d3e611322-123010 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 946 -SubTopic 320 -Section S99 -Paragraph 1 -Subparagraph (SX 210.12-12) -URI http://asc.fasb.org/extlink&oid=50485924&loc=d3e611133-123010 Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 946 -SubTopic 320 -Section S99 -Paragraph 5 -Subparagraph (SX 210.12-13) -URI http://asc.fasb.org/extlink&oid=50485924&loc=d3e611282-123010 Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 946 -SubTopic 320 -Section S99 -Paragraph 4 -Subparagraph (SX 210.12-12C) -URI http://asc.fasb.org/extlink&oid=50485924&loc=d3e611225-123010 + Details
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