CZWI filing — read by section

Item 1. Financial Statements

ITEM 1. 
 FINANCIAL STATEMENTS 
 
 4 
 
 CITIZENS COMMUNITY BANCORP, INC. 
 Consolidated Balance Sheets 
 June 30, 2020 (unaudited) and December 31, 2019 
 (derived from audited financial statements) 
 (in thousands, except share and per share data) 
 
 June 30, 2020 
 
 December 31, 2019 
 
 Assets 
 
 Cash and cash equivalents 
 $ 
 39,581 
 
 $ 
 55,840 
 
 Other interest-bearing deposits 
 3,752 
 
 4,744 
 
 Securities available for sale "AFS" 
 162,716 
 
 180,119 
 
 Securities held to maturity "HTM" 
 10,541 
 
 2,851 
 
 Equity securities with readily determinable fair value 
 188 
 
 246 
 
 Other investments 
 15,193 
 
 15,005 
 
 Loans receivable 
 1,281,175 
 
 1,177,380 
 
 Allowance for loan losses 
 ( 13,373 
 ) 
 
 ( 10,320 
 ) 
 
 Loans receivable, net 
 1,267,802 
 
 1,167,060 
 
 Loans held for sale 
 8,876 
 
 5,893 
 
 Mortgage servicing rights 
 3,509 
 
 4,282 
 
 Office properties and equipment, net 
 21,318 
 
 21,106 
 
 Accrued interest receivable 
 5,855 
 
 4,738 
 
 Intangible assets 
 6,293 
 
 7,587 
 
 Goodwill 
 31,498 
 
 31,498 
 
 Foreclosed and repossessed assets, net 
 734 
 
 1,460 
 
 Bank owned life insurance ("BOLI") 
 23,357 
 
 23,063 
 
 Other assets 
 6,301 
 
 5,757 
 
 TOTAL ASSETS 
 $ 
 1,607,514 
 
 $ 
 1,531,249 
 
 Liabilities and Stockholders’ Equity 
 
 Liabilities: 
 
 Deposits 
 $ 
 1,272,197 
 
 $ 
 1,195,702 
 
 Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank (“FRB”) advances 
 124,484 
 
 130,971 
 
 Other borrowings 
 43,595 
 
 43,560 
 
 Other liabilities 
 14,448 
 
 10,463 
 
 Total liabilities 
 1,454,724 
 
 1,380,696 
 
 Stockholders’ Equity: 
 
 Common stock— $0.01 par value, authorized 30,000,000; 11,150,695 and 11,266,954 shares issued and outstanding, respectively 
 112 
 
 113 
 
 Additional paid-in capital 
 127,734 
 
 128,856 
 
 Retained earnings 
 25,759 
 
 22,517 
 
 Unearned deferred compensation 
 ( 834 
 ) 
 
 ( 462 
 ) 
 
 Accumulated other comprehensive income (loss) 
 19 
 
 ( 471 
 ) 
 
 Total stockholders’ equity 
 152,790 
 
 150,553 
 
 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY 
 $ 
 1,607,514 
 
 $ 
 1,531,249 
 
 See accompanying condensed notes to unaudited consolidated financial statements. 
 
 5 
 
 CITIZENS COMMUNITY BANCORP, INC. 
 Consolidated Statements of Operations (unaudited) 
 Three and Six Months Ended June 30, 2020 and 2019 
 (in thousands, except per share data) 
 
 Three Months Ended 
 
 Six Months Ended 
 
 June 30, 2020 
 
 June 30, 2019 
 
 June 30, 2020 
 
 June 30, 2019 
 
 Interest and dividend income: 
 
 Interest and fees on loans 
 $ 
 14,687 
 
 $ 
 12,976 
 
 $ 
 30,146 
 
 $ 
 25,390 
 
 Interest on investments 
 1,199 
 
 1,360 
 
 2,648 
 
 2,664 
 
 Total interest and dividend income 
 15,886 
 
 14,336 
 
 32,794 
 
 28,054 
 
 Interest expense: 
 
 Interest on deposits 
 2,607 
 
 2,926 
 
 5,787 
 
 5,519 
 
 Interest on FHLB and FRB borrowed funds 
 448 
 
 913 
 
 956 
 
 1,574 
 
 Interest on other borrowed funds 
 528 
 
 414 
 
 1,077 
 
 816 
 
 Total interest expense 
 3,583 
 
 4,253 
 
 7,820 
 
 7,909 
 
 Net interest income before provision for loan losses 
 12,303 
 
 10,083 
 
 24,974 
 
 20,145 
 
 Provision for loan losses 
 1,750 
 
 325 
 
 3,750 
 
 1,550 
 
 Net interest income after provision for loan losses 
 10,553 
 
 9,758 
 
 21,224 
 
 18,595 
 
 Non-interest income: 
 
 Service charges on deposit accounts 
 345 
 
 581 
 
 905 
 
 1,131 
 
 Interchange income 
 489 
 
 453 
 
 953 
 
 791 
 
 Loan servicing income 
 1,315 
 
 634 
 
 2,000 
 
 1,188 
 
 Gain on sale of loans 
 1,818 
 
 573 
 
 2,598 
 
 881 
 
 Loan fees and service charges 
 244 
 
 261 
 
 721 
 
 389 
 
 Insurance commission income 
 195 
 
 192 
 
 474 
 
 376 
 
 Net gains on investment securities 
 25 
 
 21 
 
 98 
 
 55 
 
 Gain on sale of branch 
 — 
 
 2,295 
 
 — 
 
 2,295 
 
 Gain on sale of insurance agency 
 252 
 
 — 
 
 252 
 
 — 
 
 Settlement proceeds 
 131 
 
 — 
 
 131 
 
 — 
 
 Other 
 199 
 
 228 
 
 484 
 
 464 
 
 Total non-interest income 
 5,013 
 
 5,238 
 
 8,616 
 
 7,570 
 
 Non-interest expense: 
 
 Compensation and related benefits 
 5,908 
 
 4,604 
 
 11,343 
 
 9,310 
 
 Occupancy 
 899 
 
 866 
 
 1,905 
 
 1,820 
 
 Office 
 575 
 
 528 
 
 1,118 
 
 1,050 
 
 Data processing 
 1,024 
 
 868 
 
 2,020 
 
 1,855 
 
 Amortization of intangible assets 
 412 
 
 346 
 
 824 
 
 673 
 
 Mortgage servicing rights expense 
 991 
 
 306 
 
 1,727 
 
 497 
 
 Advertising, marketing and public relations 
 303 
 
 456 
 
 542 
 
 659 
 
 FDIC premium assessment 
 180 
 
 146 
 
 248 
 
 240 
 
 Professional services 
 353 
 
 575 
 
 957 
 
 1,400 
 
 Gain on repossessed assets, net 
 ( 22 
 ) 
 
 ( 90 
 ) 
 
 ( 90 
 ) 
 
 ( 127 
 ) 
 
 Other 
 769 
 
 784 
 
 1,529 
 
 1,906 
 
 Total non-interest expense 
 11,392 
 
 9,389 
 
 22,123 
 
 19,283 
 
 Income before provision for income tax 
 4,174 
 
 5,607 
 
 7,717 
 
 6,882 
 
 Provision for income taxes 
 1,105 
 
 1,500 
 
 2,042 
 
 1,822 
 
 Net income attributable to common stockholders 
 $ 
 3,069 
 
 $ 
 4,107 
 
 $ 
 5,675 
 
 $ 
 5,060 
 
 Per share information: 
 
 Basic earnings 
 $ 
 0.28 
 
 $ 
 0.37 
 
 $ 
 0.51 
 
 $ 
 0.46 
 
 Diluted earnings 
 $ 
 0.28 
 
 $ 
 0.37 
 
 $ 
 0.51 
 
 $ 
 0.46 
 
 Cash dividends paid 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 0.21 
 
 $ 
 0.20 
 
 See accompanying condensed notes to unaudited consolidated financial statements. 
 
 6 
 
 CITIZENS COMMUNITY BANCORP, INC. 
 Consolidated Statements of Comprehensive Income (unaudited) 
 Three and Six months ended June 30, 2020 and 2019 
 (in thousands) 
 
 Three Months Ended 
 
 Six Months Ended 
 
 June 30, 2020 
 
 June 30, 2019 
 
 June 30, 2020 
 
 June 30, 2019 
 
 Net income attributable to common stockholders 
 
 $ 
 3,069 
 
 $ 
 4,107 
 
 $ 
 5,675 
 
 $ 
 5,060 
 
 Other comprehensive income, net of tax: 
 
 Securities available for sale 
 
 Net unrealized gains arising during period 
 
 1,628 
 
 694 
 
 603 
 
 1,858 
 
 Reclassification adjustment for net gains included in net income 
 
 — 
 
 ( 19 
 ) 
 
 ( 113 
 ) 
 
 ( 19 
 ) 
 
 Other comprehensive income 
 
 1,628 
 
 675 
 
 490 
 
 1,839 
 
 Comprehensive income 
 
 $ 
 4,697 
 
 $ 
 4,782 
 
 $ 
 6,165 
 
 $ 
 6,899 
 
 See accompanying condensed notes to unaudited consolidated financial statements. 
 
 7 
 
 CITIZENS COMMUNITY BANCORP, INC. 
 Consolidated Statement of Changes in Stockholders’ Equity (unaudited) 
 Six Months Ended June 30, 2020 
 (in thousands, except shares and per share data) 
 
 Additional Paid-In Capital 
 
 Retained Earnings 
 
 Unearned Deferred Compensation 
 
 Accumulated Other Comprehensive Income (Loss) 
 
 Total Stockholders’ Equity 
 
 Common Stock 
 
 Shares 
 
 Amount 
 
 Balance, January 1, 2020 
 11,266,954 
 
 $ 
 113 
 
 $ 
 128,856 
 
 $ 
 22,517 
 
 $ 
 ( 462 
 ) 
 
 $ 
 ( 471 
 ) 
 
 $ 
 150,553 
 
 Net income 
 — 
 
 — 
 
 — 
 
 2,606 
 
 — 
 
 — 
 
 2,606 
 
 Other comprehensive income, net of tax 
 — 
 
 — 
 
 — 
 
 — 
 
 — 
 
 ( 1,138 
 ) 
 
 ( 1,138 
 ) 
 
 Surrender of restricted shares of common stock 
 ( 1,746 
 ) 
 
 — 
 
 ( 21 
 ) 
 
 — 
 
 — 
 
 — 
 
 ( 21 
 ) 
 
 Common stock awarded under the equity incentive plan 
 41,507 
 
 — 
 
 669 
 
 — 
 
 ( 669 
 ) 
 
 — 
 
 — 
 
 Common stock fractional share audit adjustment 
 ( 40 
 ) 
 
 — 
 
 — 
 
 — 
 
 — 
 
 — 
 
 — 
 
 Common stock repurchased 
 ( 155,666 
 ) 
 
 ( 1 
 ) 
 
 ( 1,776 
 ) 
 
 ( 61 
 ) 
 
 — 
 
 — 
 
 ( 1,838 
 ) 
 
 Stock option expense 
 — 
 
 — 
 
 4 
 
 — 
 
 — 
 
 — 
 
 4 
 
 Amortization of restricted stock 
 — 
 
 — 
 
 — 
 
 — 
 
 139 
 
 — 
 
 139 
 
 Cash dividends ($0.21 per share) 
 — 
 
 — 
 
 — 
 
 ( 2,372 
 ) 
 
 — 
 
 — 
 
 ( 2,372 
 ) 
 
 Balance at March 31, 2020 
 11,151,009 
 
 112 
 
 127,732 
 
 22,690 
 
 ( 992 
 ) 
 
 ( 1,609 
 ) 
 
 147,933 
 
 Net income 
 — 
 
 — 
 
 — 
 
 3,069 
 
 — 
 
 — 
 
 3,069 
 
 Other comprehensive income, net of tax 
 — 
 
 — 
 
 — 
 
 — 
 
 — 
 
 1,628 
 
 1,628 
 
 Surrender of restricted shares of common stock 
 ( 314 
 ) 
 
 — 
 
 ( 2 
 ) 
 
 — 
 
 — 
 
 — 
 
 ( 2 
 ) 
 
 Stock option expense 
 — 
 
 — 
 
 4 
 
 — 
 
 — 
 
 — 
 
 4 
 
 Amortization of restricted stock 
 — 
 
 — 
 
 — 
 
 — 
 
 158 
 
 — 
 
 158 
 
 Balance at June 30, 2020 
 11,150,695 
 
 $ 
 112 
 
 $ 
 127,734 
 
 $ 
 25,759 
 
 $ 
 ( 834 
 ) 
 
 $ 
 19 
 
 $ 
 152,790 
 
 See accompanying condensed notes to unaudited consolidated financial statements. 
 
 8 
 
 CITIZENS COMMUNITY BANCORP, INC. 
 Consolidated Statement of Changes in Stockholders’ Equity (unaudited) 
 Twelve Months Ended December 31, 2019 
 (in thousands, except shares and per share data) 
 
 Additional Paid-In Capital 
 
 Retained Earnings 
 
 Unearned Deferred Compensation 
 
 Accumulated Other Comprehensive Income (Loss) 
 
 Total Stockholders’ Equity 
 
 Common Stock 
 
 Shares 
 
 Amount 
 
 Balance, January 1, 2019 
 10,953,512 
 
 $ 
 109 
 
 $ 
 125,512 
 
 $ 
 15,264 
 
 $ 
 ( 857 
 ) 
 
 $ 
 ( 1,841 
 ) 
 
 $ 
 138,187 
 
 Net income 
 — 
 
 — 
 
 — 
 
 953 
 
 — 
 
 — 
 
 953 
 
 Other comprehensive income, net of tax 
 — 
 
 — 
 
 — 
 
 — 
 
 — 
 
 1,164 
 
 1,164 
 
 Forfeiture of unvested shares 
 ( 958 
 ) 
 
 — 
 
 ( 13 
 ) 
 
 — 
 
 13 
 
 — 
 
 — 
 
 Surrender of restricted shares of common stock 
 ( 798 
 ) 
 
 — 
 
 ( 9 
 ) 
 
 — 
 
 — 
 
 — 
 
 ( 9 
 ) 
 
 Common stock awarded under the equity incentive plan 
 10,847 
 
 — 
 
 252 
 
 — 
 
 ( 252 
 ) 
 
 — 
 
 — 
 
 Common stock options exercised 
 27,430 
 
 1 
 
 194 
 
 — 
 
 — 
 
 — 
 
 195 
 
 Stock option expense 
 — 
 
 — 
 
 4 
 
 — 
 
 — 
 
 — 
 
 4 
 
 Amortization of restricted stock 
 — 
 
 — 
 
 — 
 
 — 
 
 140 
 
 — 
 
 140 
 
 Adoption of ASU 2016-01; Equity securities 
 — 
 
 — 
 
 — 
 
 45 
 
 — 
 
 ( 45 
 ) 
 
 — 
 
 Adoption of ASU 2016-02; Leases 
 — 
 
 — 
 
 — 
 
 ( 56 
 ) 
 
 — 
 
 — 
 
 ( 56 
 ) 
 
 Cash dividends ($0.20 per share) 
 — 
 
 — 
 
 — 
 
 ( 2,198 
 ) 
 
 — 
 
 — 
 
 ( 2,198 
 ) 
 
 Balance at March 31, 2019 
 10,990,033 
 
 110 
 
 125,940 
 
 14,008 
 
 ( 956 
 ) 
 
 ( 722 
 ) 
 
 138,380 
 
 Net income 
 — 
 
 — 
 
 — 
 
 4,107 
 
 — 
 
 — 
 
 4,107 
 
 Other comprehensive income, net of tax 
 — 
 
 — 
 
 — 
 
 — 
 
 — 
 
 675 
 
 675 
 
 Forfeiture of unvested shares 
 ( 7,958 
 ) 
 
 — 
 
 ( 118 
 ) 
 
 — 
 
 118 
 
 — 
 
 — 
 
 Surrender of restricted shares of common stock 
 ( 3,067 
 ) 
 
 — 
 
 ( 35 
 ) 
 
 — 
 
 — 
 
 — 
 
 ( 35 
 ) 
 
 Common stock awarded under the equity incentive plan 
 2,000 
 
 — 
 
 22 
 
 — 
 
 ( 22 
 ) 
 
 — 
 
 — 
 
 Common stock options exercised 
 1,000 
 
 — 
 
 8 
 
 — 
 
 — 
 
 — 
 
 8 
 
 Stock option expense 
 — 
 
 — 
 
 5 
 
 — 
 
 — 
 
 — 
 
 5 
 
 Amortization of restricted stock 
 — 
 
 — 
 
 — 
 
 — 
 
 103 
 
 — 
 
 103 
 
 Adoption of ASU 2016-02; Leases 
 — 
 
 — 
 
 — 
 
 ( 1 
 ) 
 
 — 
 
 — 
 
 ( 1 
 ) 
 
 Balance at June 30, 2019 
 10,982,008 
 
 110 
 
 125,822 
 
 18,114 
 
 ( 757 
 ) 
 
 ( 47 
 ) 
 
 143,242 
 
 Net income 
 — 
 
 — 
 
 — 
 
 1,234 
 
 — 
 
 — 
 
 1,234 
 
 Other comprehensive income, net of tax 
 — 
 
 — 
 
 — 
 
 — 
 
 — 
 
 319 
 
 319 
 
 Surrender of restricted shares of common stock 
 ( 297 
 ) 
 
 — 
 
 ( 3 
 ) 
 
 — 
 
 — 
 
 — 
 
 ( 3 
 ) 
 
 Common stock issued to F&M shareholders 
 288,999 
 
 3 
 
 3,102 
 
 — 
 
 — 
 
 — 
 
 3,105 
 
 Stock option expense 
 — 
 
 — 
 
 5 
 
 — 
 
 — 
 
 — 
 
 5 
 
 Amortization of restricted stock 
 — 
 
 — 
 
 — 
 
 — 
 
 127 
 
 — 
 
 127 
 
 Balance, September 30, 2019 
 11,270,710 
 
 113 
 
 128,926 
 
 19,348 
 
 ( 630 
 ) 
 
 272 
 
 148,029 
 
 Net income 
 — 
 
 — 
 
 — 
 
 3,169 
 
 — 
 
 — 
 
 3,169 
 
 Other comprehensive income, net of tax 
 — 
 
 — 
 
 — 
 
 — 
 
 — 
 
 ( 743 
 ) 
 
 ( 743 
 ) 
 
 Forfeiture of unvested shares 
 ( 3,251 
 ) 
 
 — 
 
 ( 68 
 ) 
 
 — 
 
 68 
 
 — 
 
 — 
 
 Surrender of restricted shares of common stock 
 ( 505 
 ) 
 
 — 
 
 ( 6 
 ) 
 
 — 
 
 — 
 
 — 
 
 ( 6 
 ) 
 
 Stock option expense 
 — 
 
 — 
 
 4 
 
 — 
 
 — 
 
 — 
 
 4 
 
 Amortization of restricted stock 
 — 
 
 — 
 
 — 
 
 — 
 
 100 
 
 — 
 
 100 
 
 Balance, December 31, 2019 
 11,266,954 
 
 $ 
 113 
 
 $ 
 128,856 
 
 $ 
 22,517 
 
 $ 
 ( 462 
 ) 
 
 $ 
 ( 471 
 ) 
 
 $ 
 150,553 
 
 See accompanying condensed notes to unaudited consolidated financial statements. 
 
 9 
 
 CITIZENS COMMUNITY BANCORP, INC. 
 Consolidated Statements of Cash Flows (unaudited) 
 Six Months Ended June 30, 2020 and 2019 
 (in thousands) 
 
 Six Months Ended 
 
 June 30, 2020 
 
 June 30, 2019 
 
 Cash flows from operating activities: 
 
 Net income attributable to common stockholders 
 $ 
 5,675 
 
 $ 
 5,060 
 
 Adjustments to reconcile net income to net cash provided by operating activities: 
 
 Premium amortization, net of discount accretion on investment securities 
 148 
 
 533 
 
 Depreciation expense 
 943 
 
 705 
 
 Provision for loan losses 
 3,750 
 
 1,550 
 
 Net realized loss (gain) on equity securities 
 58 
 
 ( 29 
 ) 
 
 Net realized gain on debt securities 
 ( 156 
 ) 
 
 ( 26 
 ) 
 
 Increase in MSR assets resulting from transfers of financial assets 
 ( 954 
 ) 
 
 ( 330 
 ) 
 
 Mortgage servicing rights expense 
 1,727 
 
 497 
 
 Amortization of intangible assets 
 824 
 
 673 
 
 Amortization of restricted stock 
 297 
 
 243 
 
 Net stock based compensation expense 
 8 
 
 9 
 
 Loss (gain) on sale of office properties and equipment 
 21 
 
 ( 32 
 ) 
 
 Deferred income taxes 
 ( 799 
 ) 
 
 — 
 
 Increase in cash surrender value of life insurance 
 ( 294 
 ) 
 
 ( 230 
 ) 
 
 Net (gain) loss from disposals of foreclosed and repossessed assets 
 ( 90 
 ) 
 
 ( 127 
 ) 
 
 Gain on sale of loans held for sale, net 
 ( 2,598 
 ) 
 
 ( 881 
 ) 
 
 Net change in loans held for sale 
 ( 385 
 ) 
 
 333 
 
 Decrease in accrued interest receivable and other assets 
 ( 1,048 
 ) 
 
 ( 346 
 ) 
 
 Increase (decrease) in other liabilities 
 3,580 
 
 ( 3,776 
 ) 
 
 Net gain on sale of insurance agency 
 ( 252 
 ) 
 
 — 
 
 Total adjustments 
 4,780 
 
 ( 1,234 
 ) 
 
 Net cash provided by operating activities 
 10,455 
 
 3,826 
 
 Cash flows from investing activities: 
 
 Net decrease in other interest-bearing deposits 
 992 
 
 1,480 
 
 Purchase of available for sale securities 
 ( 13,855 
 ) 
 
 ( 24,006 
 ) 
 
 Purchase of held to maturity securities 
 ( 8,062 
 ) 
 
 — 
 
 Proceeds from principal payments and sale of available for sale securities 
 31,952 
 
 17,835 
 
 Proceeds from principal payments and maturities of held to maturity securities 
 362 
 
 1,022 
 
 Net sales of other investments 
 ( 188 
 ) 
 
 ( 1,282 
 ) 
 
 Proceeds from sale of foreclosed and repossessed assets 
 1,767 
 
 1,984 
 
 Net increase in loans 
 ( 105,443 
 ) 
 
 ( 28,470 
 ) 
 
 Net capital expenditures 
 ( 1,184 
 ) 
 
 ( 2,747 
 ) 
 
 Proceeds from disposal of office properties and equipment 
 8 
 
 300 
 
 Net proceeds from sale of insurance agency 
 1,127 
 
 — 
 
 Net cash used in investing activities 
 ( 92,524 
 ) 
 
 ( 33,884 
 ) 
 
 Cash flows from financing activities: 
 
 Escrow merger settlement proceeds 
 — 
 
 ( 20,555 
 ) 
 
 Net (decrease) increase in short-term Federal Home Loan Bank advances 
 ( 40,987 
 ) 
 
 26,031 
 
 Long-term Federal Home Loan Bank advances 
 66,500 
 
 — 
 
 Long-term Federal Home Loan Bank maturities 
 ( 32,000 
 ) 
 
 — 
 
 Amortization of debt issuance costs 
 35 
 
 55 
 
 Proceeds from other borrowings to fund business combination, net of origination costs 
 — 
 
 29,849 
 
 Principal payment reduction to other borrowings 
 — 
 
 ( 10,000 
 ) 
 
 Net increase in deposits 
 76,495 
 
 7,947 
 
 Repurchase shares of common stock 
 ( 1,838 
 ) 
 
 — 
 
 Surrender of restricted shares of common stock 
 ( 23 
 ) 
 
 ( 44 
 ) 
 
 Common stock options exercised 
 — 
 
 203 
 
 Cash dividends paid 
 ( 2,372 
 ) 
 
 ( 2,198 
 ) 
 
 Net cash provided by financing activities 
 65,810 
 
 31,288 
 
 Net (decrease) increase in cash and cash equivalents 
 ( 16,259 
 ) 
 
 1,230 
 
 Cash and cash equivalents at beginning of period 
 55,840 
 
 45,778 
 
 Cash and cash equivalents at end of period 
 $ 
 39,581 
 
 $ 
 47,008 
 
 10 
 
 Supplemental cash flow information: 
 
 Cash paid during the period for: 
 
 Interest on deposits 
 $ 
 5,854 
 
 $ 
 5,474 
 
 Interest on borrowings 
 $ 
 2,032 
 
 $ 
 2,394 
 
 Income taxes 
 $ 
 115 
 
 $ 
 3,747 
 
 Supplemental noncash disclosure: 
 
 Transfers from loans receivable to foreclosed and repossessed assets 
 $ 
 879 
 
 $ 
 674 
 
 See accompanying condensed notes to unaudited consolidated financial statements. 
 
 11 
 
 CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
 (Dollars in thousands, except share and per share data) 
 (UNAUDITED) 
 
 NOTE 1 – NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 
 The accompanying consolidated financial statements include the accounts of Citizens Community Bancorp, Inc. (the “Company”) and its wholly owned subsidiary, Citizens Community Federal N.A. (the “Bank”), and have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements. As used in this quarterly report, the terms “we”, “us”, “our”, and “Citizens Community Bancorp, Inc.” mean the Company and its wholly owned subsidiary, the Bank, unless the context indicates other meaning. 
 The Bank is a national banking association (a “National Bank”) and operates under the title of Citizens Community Federal National Association (“Citizens Community Federal N.A.” or “Bank” or “CCFBank”). The Company is a bank holding company, supervised by the Federal Reserve Bank of Minneapolis (the “FRB”), and operates under the title of Citizens Community Bancorp, Inc. Wells Insurance Agency (“WIA”) was a wholly owned subsidiary of the Bank, providing insurance products to the Bank’s customers and was sold on June 30, 2020. F&M Investment Corp. of Tomah was a wholly owned subsidiary of the Bank that was formerly utilized by F. & M. Bancorp. of Tomah, Inc. (“F & M”) to manage its municipal bond portfolio, and has been dissolved. The U.S. Office of the Comptroller of the Currency (the “OCC”), is the primary federal regulator for the Bank. 
 The consolidated income of the Company is principally derived from the income of the Bank, the Company’s wholly owned subsidiary, serving customers in Wisconsin and Minnesota through 28 branch locations. Its primary markets include the Chippewa Valley Region in Wisconsin, the Twin Cities and Mankato markets in Minnesota, and various rural communities around these areas. The Bank offers traditional community banking services to businesses, agricultural operators and consumers, including one-to-four family residential mortgages. 
 The Bank is subject to competition from other financial institutions and non-financial institutions providing financial products. Additionally, the Bank is subject to the regulations of certain regulatory agencies and undergoes periodic examination by those regulatory agencies. 
 In preparing these consolidated financial statements, we evaluated the events and transactions that occurred subsequent to the balance sheet date as of June 30, 2020 and through the date the financial statements were available to be issued for items that should potentially be recognized or disclosed in these consolidated financial statements. 
 The accompanying consolidated interim financial statements are unaudited. However, in the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Unless otherwise stated herein, and except for shares and per share amounts, all amounts are in thousands. 
 Principles of Consolidation – The accompanying consolidated financial statements include the accounts of the Company and the Bank. All significant intercompany accounts and transactions have been eliminated. 
 Preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying disclosures. These estimates are based on management’s best knowledge of current events and actions the Company may undertake in the future. Estimates are used in accounting for, among other items, fair value of financial instruments, the allowance for loan losses, mortgage servicing rights, foreclosed and repossessed assets, valuation of intangible assets arising from acquisitions, useful lives for depreciation and amortization, valuation of goodwill and long-lived assets, stock based compensation, deferred tax assets, uncertain income tax positions and contingencies. Management does not anticipate any material changes to estimates made herein in the near term. Factors that may cause sensitivity to the aforementioned estimates include but are not limited to: those items described under the caption “Risk Factors” in Item 1A of the annual report on Form 10-K for the year ended December 31, 2019, filed with the SEC on March 10, 2020, the matters described in “Risk Factors” in Item 1A of our Form 10-Q for the quarter ended March 31, 2020 and in Item 1A of this Form 10-Q, external market factors such as market interest rates and unemployment rates, changes to operating policies and procedures, and changes in applicable banking regulations. Actual results may ultimately differ from estimates, although management does not generally believe such differences would materially affect the consolidated financial statements in any individual reporting period. 
 Investment Securities; Held to Maturity and Available for Sale – Management determines the appropriate classification of investment securities at the time of purchase and reevaluates such designation as of the date of each balance sheet. 
 
 12 
 
 Securities are classified as held to maturity when the Company has the positive intent and ability to hold the securities to maturity. Held to maturity securities are stated at amortized cost. Investment securities not classified as held to maturity are classified as available for sale. Available for sale securities are stated at fair value, with unrealized holding gains and losses being reported in other comprehensive income (loss), net of tax. Unrealized losses deemed other-than-temporary due to credit issues are reported in the Company’s net income in the period in which the losses arise. Interest income includes amortization of purchase premium or accretion of purchase discount. Amortization of premiums and accretion of discounts are recognized in interest income using the interest method over the estimated lives of the securities. 
 The Company evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. As part of such monitoring, the credit quality of individual securities and their issuer is assessed. Significant inputs used to measure the amount of other-than-temporary impairment related to credit loss include, but are not limited to; the Company’s intent and ability to sell the debt security prior to recovery, that it is more likely than not that the Company will not sell the security prior to recovery, default and delinquency rates of the underlying collateral, remaining credit support, and historical loss severities. Adjustments to market value of available for sale securities that are considered temporary are recorded in other comprehensive income or loss as separate components of stockholders’ equity, net of tax. If the unrealized loss of a security is identified as other-than-temporary based on information available, such as the decline in the creditworthiness of the issuer, external market ratings, or the anticipated or realized elimination of associated dividends, such impairments are further analyzed to determine if credit loss exists. If there is a credit loss, it will be recorded in the Company’s consolidated statement of operations. Non-credit components of the unrealized losses on available for sale securities will continue to be recognized in other comprehensive income (loss), net of tax. 
 Equity securities with readily determinable fair value - The Company is required to maintain an investment in Federal Agricultural Mortgage Corporation (“Farmer Mac”) equity securities. Farmer Mac equity securities are carried at their fair market value, which is readily determinable. Changes in fair value are recognized as gains (losses) on investment securities in the consolidated Statement of Operations. 
 Other Investments - As a member of the Federal Reserve Bank (“FRB”) System and the Federal Home Loan Bank (“FHLB”) System, the Bank is required to maintain an investment in the capital stock of these entities. These securities are “restricted” in that they can only be sold back to the respective institutions or another member institution at par. Therefore, they are less liquid than other exchange traded equity securities. As no ready market exists for these stocks, and they have no quoted market value, these investments are carried at cost and periodically evaluated for impairment based on the ultimate recovery of par value. Cash dividends are reported as other income in the consolidated statement of operations. 
 Also included in non-marketable equity securities is stock of our correspondent bank, Bankers’ Bank, without readily determinable fair value. This stock is carried at cost plus or minus changes resulting from observable price changes in orderly transactions for this stock, less other-than-temporary impairment charges, if any. 
 Management’s evaluation for impairment of these other investments, includes consideration of the financial condition and other available relevant information of the issuer. Based on management’s quarterly evaluation, no impairment has been recorded on these securities. Other investments totaling $ 15,193 at June 30, 2020 consisted of $ 8,349 of FHLB stock, $ 5,169 of Federal Reserve Bank stock and $ 1,675 of Bankers’ Bank stock. Other investments totaling $ 15,005 at December 31, 2019 consisted of $ 8,196 of FHLB stock and $ 5,162 of Federal Reserve Bank stock and $ 1,647 of Bankers’ Bank stock. 
 Loans – Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at the principal balance outstanding, net of unearned interest, and net of deferred loan fees and costs, and non-accretable discount on purchased credit impaired loans. Interest income is accrued on the unpaid principal balance of these loans. Loan origination fees, net of certain direct origination costs, are deferred and recognized in interest income using the interest method without anticipating prepayments. Late charge fees are recognized into income when collected. 
 Interest income on commercial, mortgage and consumer loans is discontinued according to the following schedules: 
 • Commercial/agricultural real estate loans past due 90 days or more; 
 • Commercial and industrial/agricultural operating loans past due 90 days or more; 
 • Closed end consumer installment loans past due 120 days or more; and 
 • Residential mortgage loans and open ended consumer installment loans past due 180 days or more. 
 Past due status is based on the contractual terms of the loan. In all cases, loans are placed on nonaccrual status or charged off at an earlier date if collection of principal or interest is considered doubtful. All interest accrued but not received for a loan placed on nonaccrual status is reversed against interest income. Interest received on such loans is accounted for on the cash 
 
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 basis or cost recovery method until qualifying for return to accrual status. Loans are returned to accrual status when payments are made that bring the loan account current with the contractual term of the loan and a six month payment history has been established. Interest on impaired loans considered troubled debt restructurings (“TDRs”) or substandard, less than 90 days delinquent, is recognized as income as it accrues based on the revised terms of the loan over an established period of continued payment. Substandard loans, as defined by the OCC, our primary banking regulator, are loans that are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. 
 Residential mortgage loans and open ended consumer installment loans are charged off to estimated net realizable value less estimated selling costs at the earlier of when (a) the loan is deemed by management to be uncollectible, or (b) the loan becomes past due 180 days or more. Closed ended consumer installment loans are charged off to net realizable value at the earlier of when (a) the loan is deemed by management to be uncollectible, or (b) the loan becomes past due 120 days or more. Commercial/agricultural real estate, commercial and industrial and agricultural operating loans are charged off to net realizable value at the earlier of when (a) the loan is deemed by management to be uncollectible, or (b) the loan becomes past due 90 days or more. 
 Allowance for Loan Losses – The allowance for loan losses (“ALL”) is a valuation allowance for probable and inherent credit losses in our loan portfolio. Loan losses are charged against the ALL when management believes that the collectability of a loan balance is unlikely. Subsequent recoveries, if any, are credited to the ALL. Management estimates the required ALL balance taking into account the following factors: past loan loss experience; the nature, volume and composition of our loan portfolio; known and inherent risks in our portfolio; information about specific borrowers’ ability to repay; estimated collateral values; current economic conditions; and other relevant factors determined by management. The ALL consists of specific and general components. The specific component relates to loans that are individually classified as impaired. The general component covers non-impaired loans and is based on historical loss experience adjusted for certain qualitative factors. The entire ALL balance is available for any loan that, in management’s judgment, should be charged off. 
 A loan is impaired when full payment under the loan terms is not expected. Impaired loans consist of all TDRs, as well as individual loans not considered a TDR, that are either (1) rated substandard or worse, (2) on nonaccrual status or (3) PCI loans which are impaired at the time of acquisition. All TDRs are individually evaluated for impairment. See Note 3, “Loans, Allowance for Loan Losses and Impaired Loans” for more information on what we consider to be a TDR. For TDR’s or substandard loans deemed to be impaired, a specific ALL allocation may be established so that the loan is reported, net, at the lower of (a) its outstanding principal balance; (b) the present value of the loan’s estimated future cash flows using the loan’s existing rate; or (c) at the fair value of any loan collateral, less estimated disposal costs, if repayment is expected solely from the underlying collateral of the loan. For TDRs less than 90+ days past due, and certain substandard loans that are less than 90+ days delinquent, the likelihood of the loan migrating to over 90 days past due is also taken into account when determining the specific ALL allocation for these particular loans. Large groups of smaller balance homogeneous loans, such as non-TDR commercial, consumer and residential real estate loans, are collectively evaluated for ALL purposes, and accordingly, are not separately identified for ALL disclosures. 
 Acquired Loans— Loans acquired in connection with acquisitions are recorded at their acquisition-date fair value with no carryover of related allowance for credit losses. Any allowance for loan loss on these pools reflect only losses incurred after the acquisition (meaning the present value of all cash flows expected at acquisition that ultimately are not to be received). Determining the fair value of the acquired loans involves estimating the principal and interest cash flows expected to be collected on the loans and discounting those cash flows at a market rate of interest. Management considers a number of factors in evaluating the acquisition-date fair value including the remaining life of the acquired loans, delinquency status, estimated prepayments, payment options and other loan features, internal risk grade, estimated value of the underlying collateral and interest rate environment. 
 Acquired loans that met the criteria for nonaccrual of interest prior to the acquisition may be considered performing upon acquisition, regardless of whether the customer is contractually delinquent, if we can reasonably estimate the timing and amount of the expected cash flows on such loans and if we expect to fully collect the new carrying value of the loans. As such, we may no longer consider the loan to be nonaccrual or nonperforming and may accrue interest on these loans, including the impact of any accretable yield. 
 Loans acquired with deteriorated credit quality are accounted for in accordance with Accounting Standards Codification (“ASC”) 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality (ASC 310-30) if, at acquisition, the loans have evidence of credit quality deterioration since origination and it is probable that all contractually required payments will not be collected. At acquisition, the Company considers several factors as indicators that an acquired loan has evidence of deterioration in credit quality. These factors include, but are not limited to; loans 90 days or more past due, loans with an internal risk grade of substandard or below, loans classified as non-accrual by the acquired institution, and loans that have been previously modified in a troubled debt restructuring. 
 
 14 
 
 Under the ASC 310-30 model, the excess of cash flows expected to be collected at acquisition over recorded fair value is referred to as the accretable yield and is the interest component of expected cash flow. The accretable yield is recognized into income over the remaining life of the loan if the timing and/or amount of cash flows expected to be collected can be reasonably estimated (the accretion method). If the timing or amount of cash flows expected to be collected cannot be reasonably estimated, the cost recovery method of income recognition is used. The difference between the loan’s total scheduled principal and interest payments over all cash flows expected to be collected at acquisition, considering the impact of prepayments, is referred to as the non-accretable difference. The non-accretable difference represents contractually required principal and interest payments which the Company does not expect to collect. 
 Over the life of the loan, management continues to estimate cash flows expected to be collected. Decreases in expected cash flows are recognized as impairments through a charge to the provision for loan losses resulting in an increase in the allowance for loan losses. Subsequent improvements in cash flows result in first, reversal of existing valuation allowances recognized subsequent to acquisition, if any, and next, an increase in the amount of accretable yield to be subsequently recognized in interest income on a prospective basis over the loan’s remaining life. 
 Acquired loans that were not individually determined to be purchased with deteriorated credit quality are accounted for in accordance with ASC 310-20, Nonrefundable Fees and Other Costs (ASC 310-20), whereby the premium or discount derived from the fair market value adjustment, on a loan-by-loan or pooled basis, is recognized into interest income on a level yield basis over the remaining expected life of the loan or pool. 
 For all acquired loans, the outstanding loan balances less any related accretable yield and/or non-accretable difference is referred to as the loans’ carrying amount. 
 Loans Held for Sale — Loans held for sale are those loans the Company has the intent to sell in the foreseeable future. They are carried at the lower of aggregate cost or fair value. Gains and losses on sales of loans are recognized at settlement dates, and are determined by the difference between the sales proceeds and the carrying value of the loans after allocating costs to servicing rights retained. All sales are made without recourse. Interest rate lock commitments on mortgage loans to be funded and sold are valued at fair value, and are included in other assets or liabilities, if material. 
 Mortgage Servicing Rights— Mortgage servicing rights (“MSR”) assets result as the Company sells loans to investors in the secondary market and retains the rights to service mortgage loans sold to others. MSR assets are initially measured at fair value; assessed at least annually for impairment; carried at the lower of the initial capitalized amount, net of accumulated amortization, or estimated fair value. MSR assets are amortized in proportion to and over the period of estimated net servicing income, with the amortization recorded in non-interest expense in the consolidated statement of operations. 
 The valuation of MSRs and related amortization, included in amortization of mortgage servicing rights in the Consolidated Statements of Operations, thereon are based on numerous factors, assumptions and judgments, such as those for: changes in the mix of loans, interest rates, prepayment speeds, and default rates. Changes in these factors, assumptions and judgments may have a material effect on the valuation and amortization of MSRs. Although management believes that the assumptions used to evaluate the MSRs for impairment are reasonable, future adjustment may be necessary if future economic conditions differ substantially from the economic assumptions used to determine the value of MSRs. 
 Foreclosed and Repossessed Assets, net – Assets acquired through foreclosure or repossession are initially recorded at fair value, less estimated costs to sell, which establishes a new cost basis. If the fair value declines subsequent to foreclosure or repossession, a write-down is recorded through expense. Costs incurred after acquisition are expensed and are included in non-interest expense, other in the Consolidated Statements of Operations. 
 Transfers of financial assets— Transfers of financial assets are accounted for as sales when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the entity, (2) the transferee obtains the right, free of conditions that constrain it from taking advantage of that right, to pledge or exchange the transferred assets, and (3) the entity does not maintain effective control over the transferred assets through an agreement to repurchase them before maturity. 
 Goodwill and other intangible assets- The Company accounts for goodwill and other intangible assets in accordance with ASC Topic 350, “Intangibles - Goodwill and Other.” The Company records the excess of the cost of acquired entities over the fair value of identifiable tangible and intangible assets acquired, less liabilities assumed, as goodwill. The Company amortizes acquired intangible assets with definite useful economic lives over their useful economic lives utilizing the straight-line method. On a periodic basis, management assesses whether events or changes in circumstances indicate that the carrying amounts of the intangible assets may be impaired. The Company does not amortize goodwill and any acquired intangible asset with an indefinite useful economic life, but reviews them for impairment at a reporting unit level on an annual basis, or when events or changes in circumstances indicate that the carrying amounts may be impaired. A reporting unit is defined as any 
 
 15 
 
 distinct, separately identifiable component of the Company’s one operating segment for which complete, discrete financial information is available and reviewed regularly by the segment’s management. The Company has one reporting unit as of December 31, 2019 which is related to its banking activities. The Company has performed the required goodwill impairment test and has determined that goodwill was not impaired as of December 31, 2019. The Company performed a goodwill impairment analysis as of June 30, 2020 , due to triggering events being identified, and determined that goodwill was not impaired. 
 Leases - We determine if an arrangement is a lease at inception. All of our existing leases have been determined to be operating leases under ASC 842. Right-of-use (“ROU”) assets are included in other assets in our consolidated balance sheets. Operating lease liabilities are included in other liabilities in our consolidated balance sheets. 
 
 ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date, based on the present value of lease payments over the lease term. As none of our existing leases provide an implicit rate, we use our incremental borrowing rate, based on information available at commencement date, in determining the present value of lease payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Our lease terms may include options to extend or terminate the lease, when it is reasonably certain that we will exercise that option. Lease expense is recognized based on the total contractually required lease payments, over the term of the lease, on a straight-line basis. 
 Debt and equity issuance costs— Debt issuance costs, which consist primarily of fees paid to note lenders, are deferred and included in other borrowings in the consolidated balance sheet. Debt issuance costs are amortized over the contractual term of the corresponding debt, as a component of interest expense on other borrowed funds in the consolidated statement of operations. Specific costs associated with the issuance of shares of the Company’s common or preferred stock are netted against proceeds and recorded in stockholders’ equity, as additional paid in capital, on the consolidated balance sheet, in the period of the share issuance. 
 Advertising, Marketing and Public Relations Expense— The Company expenses all advertising, marketing and public relations costs as they are incurred. 
 Income Taxes – The Company accounts for income taxes in accordance with the Financial Accounting Standards Board (FASB) Accounting Standards Codification (“ASC”) Topic 740, “Income Taxes.” Under this guidance, deferred taxes are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates that will apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized as income or expense in the period that includes the enactment date. 
 The Company regularly reviews the carrying amount of its net deferred tax assets to determine if the establishment of a valuation allowance is necessary. If based on the available evidence, it is more likely than not that all or a portion of the Company’s net deferred tax assets will not be realized in future periods, a deferred tax valuation allowance would be established. Consideration is given to various positive and negative factors that could affect the realization of the deferred tax assets. In evaluating this available evidence, management considers, among other things, historical performance, expectations of future earnings, the ability to carry back losses to recoup taxes previously paid, the length of statutory carry forward periods, any experience with utilization of operating loss and tax credit carry forwards not expiring, tax planning strategies and timing of reversals of temporary differences. Significant judgment is required in assessing future earnings trends and the timing of reversals of temporary differences. Accordingly, the Company’s evaluation is based on current tax laws as well as management’s expectations of future performance. 
 Revenue Recognition - The Company recognizes revenue in the consolidated statements of operations as it is earned and when collectability is reasonably assured. The primary source of revenue is interest income from interest earning assets, which is recognized on the accrual basis of accounting using the effective interest method. The recognition of revenues from interest earning assets is based upon formulas from underlying loan agreements, securities contracts or other similar contracts. Non-interest income is recognized on the accrual basis of accounting as services are provided or as transactions occur. Non-interest income includes fees from brokerage and advisory service, deposit accounts, merchant services, ATM and debit card fees, mortgage banking activities, and other miscellaneous services and transactions. Commission revenue is recognized as of the effective date of the insurance policy or the date the customer is billed, whichever is later. The Company also receives contingent commissions from insurance companies which are based on the overall profitability of their relationship based primarily on the loss experience of the insurance placed by the Company. Contingent commissions from insurance companies 
 
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 are recognized when determinable. Commission revenue is included in other non-interest income in the consolidated statement of operations. 
 Earnings Per Share – Basic earnings per common share is net income or loss divided by the weighted average number of common shares outstanding during the period. Diluted earnings per common share includes the dilutive effect of additional potential common shares issuable during the period, consisting of stock options outstanding under the Company’s stock incentive plans that have an exercise price that is less than the Company’s stock price on the reporting date. 
 Operating Segments— While our executive officers monitor the revenue streams of the various banking products and services, operations are managed and financial performance is evaluated on a Company-wide basis. Accordingly, all of the Company’s banking operations are considered by management to be aggregated in one reportable operating segment. 
 Reclassifications – Certain items previously reported were reclassified for consistency with the current presentation. 
 Recent Accounting Pronouncements— The Financial Accounting Standards Board (FASB) issues Accounting Standards Updates (ASUs) to the FASB Accounting Standards Codification (ASC). This section provides a summary description of recent ASUs that have significant implications (elected or required) within the consolidated financial statements, or that management expects may have a significant impact on financial statements issued in the near future. 
 Recent Accounting Pronouncements—Adopted 
 ASU 2018-02; Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income - ASU 2018-02 permits, but does not require, entities to reclassify tax effects stranded in accumulated other comprehensive income resulting from the Tax Cuts and Jobs Act of 2017 to retained earnings. Companies that elect to reclassify these amounts must reclassify stranded tax effects for all items accounted for in accumulated other comprehensive income. The Company adopted this standard update, effective January 1, 2019. The Company’s stranded tax effects were related to valuation of the net deferred tax asset attributable to accumulated other comprehensive income (loss), which are unrealized gains (losses) on available-for-sale debt securities. Adoption resulted in a reclassification between two categories of stockholders’ equity at January 1, 2018, with an increase of $ 137 in retained earnings and a decrease in accumulated other comprehensive loss for the same amount ( no net change in stockholders’ equity). 
 
 ASU 2014-09; Revenue from Contracts with Customers (Topic 606)— Under the ASU, as modified by subsequent ASUs, revenue is recognized when a customer obtains control of promised services in an amount that reflects the consideration the entity expects to receive in exchange for those services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The Company applied the five-step method outlined in the ASU to all revenue streams scoped-in by the ASU and elected the modified retrospective implementation method. Substantially all of the Company’s interest income and certain non-interest income were not impacted by the adoption of this ASU because the revenue from those contracts with customers is covered by other guidance in U.S. GAAP. The Company’s largest sources of non-interest revenue which are subject to the guidance include fees and service charges on loan and deposit accounts and interchange revenue from debit card transactions. ASU 2014-09, as amended, became effective for the Company’s annual and interim periods beginning in the first quarter 2019. Adoption of ASU 2014-09 did not have a material impact on the Company’s consolidated financial statements as the change in the timing and pattern of the Company’s revenue recognition related to scoped-in non-interest income recognized under the newly issued ASU is consistent with the current applicable accounting guidance. The Company has made all required additional disclosures related to non-interest income in the consolidated financial statements, primarily in Revenue Recognition policy included herein in Note 1. 
 
 ASU 2016-01; Recognition and Measurement of Financial Assets and Liabilities— The guidance requires certain equity investments to be measured at fair value, with changes in fair value recognized in net income. The Company’s adoption of ASU 2016-01 as of January 1, 2019, constitutes a change in accounting principle. The Company recorded a cumulative effect adjustment to retained earnings of $ 45 as of January 1, 2019, as a result of implementing this new accounting standard. 
 
 ASU 2016-02; Leases (Topic 842)— The ASU changed current GAAP by requiring that lease assets and liabilities arising from operating leases be recognized on the balance sheet. In July 2018, the FASB issued ASU 2018-10 and ASU 2018-11, Codification Improvements to Topic 842, Leases, amending various aspects of Topic 842. Topic 842 does not significantly change the recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessee from current U.S. GAAP. For leases with a term of 12 months or less, a lessee would be permitted to make an accounting policy election, by class of underlying asset, not to recognize lease assets and liabilities. Topic 842 became effective for the Company for annual and interim periods beginning in the first quarter 2019. 
 
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 The Company leased (1) 9 branch locations, (2) its corporate offices ( 3 ) 1 production office and ( 4 ) office equipment under operating leases that resulted in the recognition of right-of-use assets and corresponding lease liabilities of approximately $ 5,000 on the consolidated balance sheet under Topic 842. Adoption of Topic 842 did not have a material impact on the Company’s consolidated statement of operations. Management adopted the guidance on January 1, 2019, and elected certain practical expedients offered by the FASB, including foregoing the restatement of comparative periods upon adoption. Management also excluded short-term leases from the recognition of right-of-use asset and lease liabilities. Additionally, the Company elected the transition relief allowed by FASB in foregoing reassessment of the following: whether any existing contracts were or contained leases, the classification of existing leases, and the determination of initial direct costs for existing leases. As of June 30, 2020 , the Company leases (1) 6 branch locations, ( 2 ) its corporate offices (3) 1 production office and ( 4 ) office equipment under operating leases. See Note 5 for additional detail. 
 ASU 2017-04; Intangibles - Goodwill and Other (Topic 350)— The ASU simplifies the accounting for goodwill impairment. This guidance, among other things, removes step two of the goodwill impairment test thus eliminating the need to determine the fair value of individual assets and liabilities of the reporting unit. Upon adoption of this ASU, goodwill impairment will be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. This may result in either greater or less impairment being recognized than under current guidance. The Company adopted this Update for the Company’s annual goodwill impairment tests beginning in the year ended December 31, 2019. Adoption of this ASU had no material impact on its consolidated financial statements. 
 ASU 2018-13, Fair Value Measurement (Topic 820)— The ASU modifies disclosure requirements on fair value measurements. This ASU removes requirements to disclose, (1) the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, and (2) the policy for timing of transfers between levels and the valuation processes for Level 3 fair value measurements. ASU 2018-13 clarifies that, disclosure regarding measurement uncertainty, is intended to communicate information about the uncertainty in measurement, as of the reporting date. ASU 2018-13 adds certain disclosure requirements, including (1) disclosure of changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements, and (2) the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The Company adopted this ASU, in first quarter 2020. The amendments on (1) changes in unrealized gains and losses, (2) the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and (3) the narrative description of measurement uncertainty, are being applied prospectively. All other amendments have been applied retrospectively for all periods presented. Adoption of this ASU had no material impact on its consolidated financial position or results of operations. 
 ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40)— The ASU was issued to help entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement (hosting arrangement), by providing guidance for determining when the arrangement includes a software license. The amendments align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract, with similar costs to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by the amendments. This guidance became effective for the Company beginning in the first quarter 2020. Adoption of this ASU had no material impact on its consolidated financial statements. 
 
 ASU 2020-04, Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting-- The ASU provides optional and temporary relief, in the form of optional expedients and exceptions, for applying GAAP to modifications of contacts, hedging relationships and other transactions affected by reference rate (e.g. LIBOR) reforms. ASU 2020-04 is effective for the Company immediately and through December 31, 2022. The Company utilizes LIBOR, among other indexes, as a reference rate for underwriting variable rate loans. Reference rate reform has not had, nor does the Company expect it to have, a material effect on the Company’s consolidated balance sheet, operations or cash flows. 
 Recently Issued, But Not Yet Effective Accounting Pronouncements 
 ASU 2016-13; Financial Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments-- The ASU changes accounting for credit losses on loans receivable and debt securities from an incurred loss methodology to an expected credit loss methodology. Among other things, ASU 2016-13 requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Accordingly, ASU 2016-13 requires the use of forward-looking information to form credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, though the inputs to those techniques will change to reflect the full amount of expected credit losses. In addition, ASU 2016-13 amends the accounting for credit losses on debt securities and purchased financial assets with credit deterioration. On July 17, 2019, the FASB proposed delaying the effective date for ASU 2016-13 for smaller reporting companies. In November 2019, the FASB issued ASU 2019-10 to extend the effective date one year. Earlier adoption is permitted; however, the Company does not currently plan to 
 
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 adopt the ASU early. Management is assessing alternative loss estimation methodologies and the Company’s data and system needs in order to evaluate the impact that adoption of this standard will have on the Company’s financial condition and results of operations. The Company anticipates recording the effect of implementing this ASU through a cumulative-effect adjustment through retained earnings as of the beginning of the reporting period in which the ASU is effective, which will be January 1, 2023. 
 
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 NOTE 2 – INVESTMENT SECURITIES 
 The amortized cost, estimated fair value and related unrealized gains and losses on securities available for sale and held to maturity as of June 30, 2020 and December 31, 2019 , respectively, were as follows: 
 
 Available for sale securities 
 Amortized 
 Cost 
 
 Gross 
 Unrealized 
 Gains 
 
 Gross 
 Unrealized 
 Losses 
 
 Estimated 
 Fair Value 
 
 June 30, 2020 
 
 U.S. government agency obligations 
 $ 
 35,109 
 
 $ 
 355 
 
 $ 
 110 
 
 $ 
 35,354 
 
 Obligations of states and political subdivisions 
 140 
 
 — 
 
 — 
 
 140 
 
 Mortgage-backed securities 
 57,057 
 
 2,315 
 
 — 
 
 59,372 
 
 Corporate debt securities 
 19,942 
 
 259 
 
 122 
 
 20,079 
 
 Corporate asset based securities 
 36,542 
 
 — 
 
 1,720 
 
 34,822 
 
 Trust preferred securities 
 13,899 
 
 — 
 
 950 
 
 12,949 
 
 Total available for sale securities 
 $ 
 162,689 
 
 $ 
 2,929 
 
 $ 
 2,902 
 
 $ 
 162,716 
 
 December 31, 2019 
 
 U.S. government agency obligations 
 $ 
 52,020 
 
 $ 
 132 
 
 $ 
 347 
 
 $ 
 51,805 
 
 Obligations of states and political subdivisions 
 281 
 
 — 
 
 — 
 
 281 
 
 Mortgage-backed securities 
 70,806 
 
 635 
 
 110 
 
 71,331 
 
 Corporate debt securities 
 18,776 
 
 66 
 
 117 
 
 18,725 
 
 Corporate asset based securities 
 27,718 
 
 — 
 
 864 
 
 26,854 
 
 Trust preferred securities 
 11,167 
 
 35 
 
 79 
 
 11,123 
 
 Total available for sale securities 
 $ 
 180,768 
 
 $ 
 868 
 
 $ 
 1,517 
 
 $ 
 180,119 
 
 Held to maturity securities 
 Amortized 
 Cost 
 
 Gross 
 Unrealized 
 Gains 
 
 Gross 
 Unrealized 
 Losses 
 
 Estimated 
 Fair Value 
 
 June 30, 2020 
 
 Obligations of states and political subdivisions 
 $ 
 300 
 
 $ 
 1 
 
 $ 
 — 
 
 $ 
 301 
 
 Mortgage-backed securities 
 10,241 
 
 380 
 
 — 
 
 10,621 
 
 Total held to maturity securities 
 $ 
 10,541 
 
 $ 
 381 
 
 $ 
 — 
 
 $ 
 10,922 
 
 December 31, 2019 
 
 Obligations of states and political subdivisions 
 $ 
 300 
 
 $ 
 2 
 
 $ 
 — 
 
 $ 
 302 
 
 Mortgage-backed securities 
 2,551 
 
 104 
 
 — 
 
 2,655 
 
 Total held to maturity securities 
 $ 
 2,851 
 
 $ 
 106 
 
 $ 
 — 
 
 $ 
 2,957 
 
 As of June 30, 2020 , the Bank has pledged U.S. Government Agency securities with a market value of $ 613 and mortgage-backed securities with a market value of $ 3,950 as collateral against specific municipal deposits. At June 30, 2020 , the Bank has pledged mortgage-backed securities with a market value of $ 1,403 as collateral against a borrowing line of credit with the Federal Reserve Bank. However, as of June 30, 2020 , there were no borrowings outstanding on this Federal Reserve Bank line of credit. As of June 30, 2020 , the Bank also has mortgage-backed securities with a carrying value of $ 594 pledged as collateral to the Federal Home Loan Bank of Des Moines. 
 
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 The estimated fair value of securities at June 30, 2020 and December 31, 2019 , by contractual maturity, is shown below. Expected maturities will differ from contractual maturities on mortgage-backed securities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Expected maturities may differ from contractual maturities on certain agency and municipal securities due to the call feature. 
 
 June 30, 2020 
 
 December 31, 2019 
 
 Available for sale securities 
 Amortized 
 Cost 
 
 Estimated 
 Fair Value 
 
 Amortized 
 Cost 
 
 Estimated 
 Fair Value 
 
 Due in one year or less 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 141 
 
 $ 
 141 
 
 Due after one year through five years 
 5,866 
 
 6,086 
 
 5,900 
 
 5,959 
 
 Due after five years through ten years 
 40,544 
 
 39,811 
 
 43,269 
 
 43,180 
 
 Due after ten years 
 59,222 
 
 57,447 
 
 60,652 
 
 59,508 
 
 Total securities with contractual maturities 
 $ 
 105,632 
 
 $ 
 103,344 
 
 $ 
 109,962 
 
 $ 
 108,788 
 
 Mortgage backed securities 
 57,057 
 
 59,372 
 
 70,806 
 
 71,331 
 
 Securities without contractual maturities 
 — 
 
 — 
 
 — 
 
 — 
 
 Total available for sale securities 
 $ 
 162,689 
 
 $ 
 162,716 
 
 $ 
 180,768 
 
 $ 
 180,119 
 
 June 30, 2020 
 
 December 31, 2019 
 
 Held to maturity securities 
 Amortized 
 Cost 
 
 Estimated 
 Fair Value 
 
 Amortized 
 Cost 
 
 Estimated 
 Fair Value 
 
 Due in one year or less 
 $ 
 300 
 
 $ 
 301 
 
 $ 
 300 
 
 $ 
 302 
 
 Total securities with contractual maturities 
 300 
 
 301 
 
 300 
 
 302 
 
 Mortgage backed securities 
 10,241 
 
 10,621 
 
 2,551 
 
 2,655 
 
 Total held to maturity securities 
 $ 
 10,541 
 
 $ 
 10,922 
 
 $ 
 2,851 
 
 $ 
 2,957 
 
 Securities with unrealized losses at June 30, 2020 and December 31, 2019 , aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, were as follows: 
 
 Less than 12 Months 
 
 12 Months or More 
 
 Total 
 
 Available for sale securities 
 
 Fair 
 Value 
 
 Unrealized 
 Loss 
 
 Fair 
 Value 
 
 Unrealized 
 Loss 
 
 Fair 
 Value 
 
 Unrealized 
 Loss 
 
 June 30, 2020 
 
 U.S. government agency obligations 
 
 $ 
 12,277 
 
 $ 
 41 
 
 $ 
 7,558 
 
 $ 
 69 
 
 $ 
 19,835 
 
 $ 
 110 
 
 Mortgage backed securities 
 
 — 
 
 — 
 
 — 
 
 — 
 
 — 
 
 — 
 
 Corporate debt securities 
 
 3,686 
 
 14 
 
 1,392 
 
 108 
 
 5,078 
 
 122 
 
 Corporate asset based securities 
 
 9,466 
 
 279 
 
 25,356 
 
 1,441 
 
 34,822 
 
 1,720 
 
 Trust preferred securities 
 
 12,949 
 
 950 
 
 — 
 
 — 
 
 12,949 
 
 950 
 
 Total 
 
 $ 
 38,378 
 
 $ 
 1,284 
 
 $ 
 34,306 
 
 $ 
 1,618 
 
 $ 
 72,684 
 
 $ 
 2,902 
 
 December 31, 2019 
 
 U.S. government agency obligations 
 
 $ 
 14,593 
 
 $ 
 156 
 
 $ 
 10,540 
 
 $ 
 191 
 
 $ 
 25,133 
 
 $ 
 347 
 
 Mortgage backed securities 
 
 22,537 
 
 62 
 
 5,883 
 
 48 
 
 28,420 
 
 110 
 
 Corporate debt securities 
 
 7,001 
 
 15 
 
 1,398 
 
 102 
 
 8,399 
 
 117 
 
 Corporate asset based securities 
 
 8,683 
 
 285 
 
 18,171 
 
 579 
 
 26,854 
 
 864 
 
 Trust preferred securities 
 
 7,420 
 
 79 
 
 — 
 
 — 
 
 7,420 
 
 79 
 
 Total 
 
 $ 
 60,234 
 
 $ 
 597 
 
 $ 
 35,992 
 
 $ 
 920 
 
 $ 
 96,226 
 
 $ 
 1,517 
 
 There were no held to maturity securities in a net loss position at either June 30, 2020 or December 31, 2019. 
 
 21 
 
 The Company evaluates AFS securities in unrealized loss positions to determine whether the impairment is due to credit-related factors or noncredit-related factors. In making this evaluation, management considers the extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer, and the intent and ability of the Company to hold the security for a period of time sufficient to allow for any anticipated recovery in fair value. 
 
 As of June 30, 2020 , the Company does not consider its AFS securities with unrealized losses to be attributable to credit-related factors, as the unrealized losses in each category have occurred as a result of changes in noncredit-related factors such as changes in interest rates, market spreads and market conditions subsequent to purchase, not credit deterioration; thus, no other-than-temporary impairment on AFS securities was recorded. There were no other-than-temporary impairments charged to earnings during the three or six months ended June 30, 2020 or the three or six months ended June 30, 2019 . 
 
 During the three and six months ended June 30, 2020, the Bank sold approximately $ 0 and $ 10,700 of fixed-rate mortgage-backed certificates with a realized gain of $ 0 and $ 156 , respectively, which is included in net gains on investment securities in the Consolidated Statements of Operations. During the three and six months ended June 30, 2019 , the Bank sold approximately $ 7,950 of fixed rate securities with a realized gain of $ 26 , which is included in net gains on investment securities in the Consolidated Statements of Operations. 
 
 NOTE 3 – LOANS, ALLOWANCE FOR LOAN LOSSES AND IMPAIRED LOANS 
 Portfolio Segments: 
 Commercial and agricultural real estate loans are underwritten after evaluating and understanding the borrower's ability to operate profitably and prudently expand its business. Management examines current and projected cash flows to determine the ability of the borrower to repay its obligations as agreed. These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Commercial real estate lending typically involves higher loan principal amounts and the repayment of these loans is generally largely dependent on the successful operation of the property or the business conducted on the property securing the loan. Commercial real estate loans may be more adversely affected by conditions in the real estate markets or in the general economy. The level of owner-occupied property versus non-owner-occupied property are tracked and monitored on a regular basis. Agricultural real estate loans are primarily comprised of loans for the purchase of farmland. Loan-to-value ratios on loans secured by farmland generally do not exceed 75 % . 
 Commercial and industrial loans are primarily made based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. These cash flows, however, may not be as expected and the value of collateral securing the loans may fluctuate. Most commercial loans are secured by the assets being financed or other business assets such as accounts receivable or inventory and may incorporate a personal guarantee. Agricultural operating loans are generally comprised of term loans to fund the purchase of equipment, livestock and seasonal operating lines. Operating lines are typically written for one year and secured by the crop and other farm assets as considered necessary. Agricultural loans carry significant credit risks as they may involve larger balances concentrated with single borrowers or groups of related borrowers. In addition, repayment of such loans depends on the successful operation or management of the farm property securing the loan or for which an operating loan is utilized. Farming operations may be affected by adverse weather conditions such as drought, hail or floods that can severely limit crop yields. 
 Residential mortgage loans are collateralized by primary and secondary positions on real estate and are underwritten primarily based on borrower’s documented income, credit scores, and collateral values. Under consumer home equity loan guidelines, the borrower will be approved for a loan based on a percentage of their home’s appraised value less the balance owed on the existing first mortgage. Credit risk is minimized within the residential mortgage portfolio as relatively small loan amounts are spread across many individual borrowers. Management evaluates trends in past due loans and current economic factors such as the housing price index on a regular basis. 
 Consumer installment loans are comprised of originated indirect paper loans secured primarily by boats and recreational vehicles and other consumer loans secured primarily by automobiles and other personal assets. The Bank ceased new originations of originated indirect paper loans in early fiscal 2017. Consumer loans underwriting terms often depend on the collateral type, debt to income ratio and the borrower’s creditworthiness as evidenced by their credit score. Collateral value alone may not provide an adequate source of repayment of the outstanding loan balance in the event of a consumer installment loan default. This shortage is a result of the greater likelihood of damage, loss and depreciation for consumer based collateral. 
 
 22 
 
 Credit Quality/Risk Ratings: 
 Management utilizes a numeric risk rating system to identify and quantify the Bank’s risk of loss within its loan portfolio. Ratings are initially assigned prior to funding the loan, and may be changed at any time as circumstances warrant. 
 Ratings range from the highest to lowest quality based on factors that include measurements of ability to pay, collateral type and value, borrower stability and management experience. The Bank’s loan portfolio is presented below in accordance with the risk rating framework that has been commonly adopted by the federal banking agencies. The definitions of the various risk rating categories are as follows: 
 1 through 4 - Pass. A “Pass” loan means that the condition of the borrower and the performance of the loan is satisfactory or better. 
 5 - Watch. A “Watch” loan has clearly identifiable developing weaknesses that deserve additional attention from management. Weaknesses that are not corrected or mitigated, may jeopardize the ability of the borrower to repay the loan in the future. 
 6 - Special Mention. A “Special Mention” loan has one or more potential weakness that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or in the institution’s credit position in the future. 
 7 - Substandard. A “Substandard” loan is inadequately protected by the current net worth and paying capacity of the obligor or the collateral pledged, if any. Assets classified as substandard must have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. 
 8 - Doubtful. A “Doubtful” loan has all the weaknesses inherent in a Substandard loan with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. 
 9 - Loss. Loans classified as “Loss” are considered uncollectible, and their continuance as bankable assets is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value, and a partial recovery may occur in the future. 
 
 23 
 
 Below is a summary of originated and acquired loans by type and risk rating as of June 30, 2020 : 
 
 1 to 5 
 
 6 
 
 7 
 
 8 
 
 9 
 
 TOTAL 
 
 Originated Loans: 
 
 Commercial/Agricultural real estate: 
 
 Commercial real estate 
 
 $ 
 308,633 
 
 $ 
 4,952 
 
 $ 
 805 
 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 314,390 
 
 Agricultural real estate 
 
 32,592 
 
 469 
 
 2,077 
 
 — 
 
 — 
 
 35,138 
 
 Multi-family real estate 
 
 90,617 
 
 — 
 
 — 
 
 — 
 
 — 
 
 90,617 
 
 Construction and land development 
 
 85,511 
 
 5,867 
 
 3,478 
 
 — 
 
 — 
 
 94,856 
 
 C&I/Agricultural operating: 
 
 Commercial and industrial 
 
 76,447 
 
 661 
 
 3,261 
 
 — 
 
 — 
 
 80,369 
 
 C&I SBA PPP loans 
 
 137,330 
 
 — 
 
 — 
 
 — 
 
 — 
 
 137,330 
 
 Agricultural operating 
 
 24,488 
 
 768 
 
 557 
 
 — 
 
 — 
 
 25,813 
 
 Residential mortgage: 
 
 Residential mortgage 
 
 91,649 
 
 — 
 
 4,015 
 
 — 
 
 — 
 
 95,664 
 
 Purchased HELOC loans 
 
 6,534 
 
 — 
 
 327 
 
 — 
 
 — 
 
 6,861 
 
 Consumer installment: 
 
 Originated indirect paper 
 
 31,815 
 
 — 
 
 216 
 
 — 
 
 — 
 
 32,031 
 
 Other consumer 
 
 14,082 
 
 — 
 
 93 
 
 — 
 
 — 
 
 14,175 
 
 Total originated loans 
 
 $ 
 899,698 
 
 $ 
 12,717 
 
 $ 
 14,829 
 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 927,244 
 
 Acquired Loans: 
 
 Commercial/Agricultural real estate: 
 
 Commercial real estate 
 
 $ 
 180,003 
 
 $ 
 6,699 
 
 $ 
 8,633 
 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 195,335 
 
 Agricultural real estate 
 
 35,712 
 
 — 
 
 7,342 
 
 — 
 
 — 
 
 43,054 
 
 Multi-family real estate 
 
 12,874 
 
 — 
 
 148 
 
 — 
 
 — 
 
 13,022 
 
 Construction and land development 
 
 15,086 
 
 — 
 
 190 
 
 — 
 
 — 
 
 15,276 
 
 C&I/Agricultural operating: 
 
 Commercial and industrial 
 
 28,274 
 
 59 
 
 1,144 
 
 — 
 
 — 
 
 29,477 
 
 Agricultural operating 
 
 10,723 
 
 80 
 
 1,321 
 
 — 
 
 — 
 
 12,124 
 
 Residential mortgage: 
 
 Residential mortgage 
 
 54,058 
 
 403 
 
 2,299 
 
 — 
 
 — 
 
 56,760 
 
 Consumer installment: 
 
 Other consumer 
 
 1,634 
 
 — 
 
 5 
 
 — 
 
 — 
 
 1,639 
 
 Total acquired loans 
 
 $ 
 338,364 
 
 $ 
 7,241 
 
 $ 
 21,082 
 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 366,687 
 
 Total Loans: 
 
 Commercial/Agricultural real estate: 
 
 Commercial real estate 
 
 $ 
 488,636 
 
 $ 
 11,651 
 
 $ 
 9,438 
 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 509,725 
 
 Agricultural real estate 
 
 68,304 
 
 469 
 
 9,419 
 
 — 
 
 — 
 
 78,192 
 
 Multi-family real estate 
 
 103,491 
 
 — 
 
 148 
 
 — 
 
 — 
 
 103,639 
 
 Construction and land development 
 
 100,597 
 
 5,867 
 
 3,668 
 
 — 
 
 — 
 
 110,132 
 
 Commercial/Agricultural non-real estate: 
 
 Commercial and industrial 
 
 104,721 
 
 720 
 
 4,405 
 
 — 
 
 — 
 
 109,846 
 
 C&I SBA PPP loans 
 
 137,330 
 
 — 
 
 — 
 
 — 
 
 — 
 
 137,330 
 
 Agricultural operating 
 
 35,211 
 
 848 
 
 1,878 
 
 — 
 
 — 
 
 37,937 
 
 Residential mortgage: 
 
 Residential mortgage 
 
 145,707 
 
 403 
 
 6,314 
 
 — 
 
 — 
 
 152,424 
 
 Purchased HELOC loans 
 
 6,534 
 
 — 
 
 327 
 
 — 
 
 — 
 
 6,861 
 
 Consumer installment: 
 
 Originated indirect paper 
 
 31,815 
 
 — 
 
 216 
 
 — 
 
 — 
 
 32,031 
 
 Other Consumer 
 
 15,716 
 
 — 
 
 98 
 
 — 
 
 — 
 
 15,814 
 
 Gross loans 
 
 $ 
 1,238,062 
 
 $ 
 19,958 
 
 $ 
 35,911 
 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 1,293,931 
 
 Less: 
 
 Unearned net deferred fees and costs and loans in process 
 
 ( 5,369 
 ) 
 
 Unamortized discount on acquired loans 
 
 ( 7,387 
 ) 
 
 Allowance for loan losses 
 
 ( 13,373 
 ) 
 
 Loans receivable, net 
 
 $ 
 1,267,802 
 
 24 
 
 Below is a summary of originated loans by type and risk rating as of December 31, 2019 : 
 
 1 to 5 
 
 6 
 
 7 
 
 8 
 
 9 
 
 TOTAL 
 
 Originated Loans: 
 
 Commercial/Agricultural real estate: 
 
 Commercial real estate 
 
 $ 
 301,381 
 
 $ 
 266 
 
 $ 
 899 
 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 302,546 
 
 Agricultural real estate 
 
 31,129 
 
 829 
 
 2,068 
 
 — 
 
 — 
 
 34,026 
 
 Multi-family real estate 
 
 71,877 
 
 — 
 
 — 
 
 — 
 
 — 
 
 71,877 
 
 Construction and land development 
 
 67,989 
 
 — 
 
 3,478 
 
 — 
 
 — 
 
 71,467 
 
 C&I/Agricultural operating: 
 
 Commercial and industrial 
 
 85,248 
 
 1,023 
 
 3,459 
 
 — 
 
 — 
 
 89,730 
 
 Agricultural operating 
 
 19,545 
 
 402 
 
 770 
 
 — 
 
 — 
 
 20,717 
 
 Residential mortgage: 
 
 Residential mortgage 
 
 104,428 
 
 — 
 
 4,191 
 
 — 
 
 — 
 
 108,619 
 
 Purchased HELOC loans 
 
 8,407 
 
 — 
 
 — 
 
 — 
 
 — 
 
 8,407 
 
 Consumer installment: 
 
 — 
 
 Originated indirect paper 
 
 39,339 
 
 — 
 
 246 
 
 — 
 
 — 
 
 39,585 
 
 Other Consumer 
 
 15,425 
 
 — 
 
 121 
 
 — 
 
 — 
 
 15,546 
 
 Total originated loans 
 
 $ 
 744,768 
 
 $ 
 2,520 
 
 $ 
 15,232 
 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 762,520 
 
 Acquired Loans: 
 
 Commercial/Agricultural real estate: 
 
 Commercial real estate 
 
 $ 
 196,692 
 
 $ 
 6,084 
 
 $ 
 9,137 
 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 211,913 
 
 Agricultural real estate 
 
 42,381 
 
 534 
 
 8,422 
 
 — 
 
 — 
 
 51,337 
 
 Multi-family real estate 
 
 13,533 
 
 — 
 
 1,598 
 
 — 
 
 — 
 
 15,131 
 
 Construction and land development 
 
 14,181 
 
 — 
 
 762 
 
 — 
 
 — 
 
 14,943 
 
 C&I/Agricultural operating: 
 
 Commercial and industrial 
 
 41,587 
 
 932 
 
 1,485 
 
 — 
 
 — 
 
 44,004 
 
 Agricultural operating 
 
 15,621 
 
 350 
 
 1,092 
 
 — 
 
 — 
 
 17,063 
 
 Residential mortgage: 
 
 Residential mortgage 
 
 65,125 
 
 436 
 
 2,152 
 
 — 
 
 — 
 
 67,713 
 
 Consumer installment: 
 
 Other Consumer 
 
 2,628 
 
 — 
 
 12 
 
 — 
 
 — 
 
 2,640 
 
 Total acquired loans 
 
 $ 
 391,748 
 
 $ 
 8,336 
 
 $ 
 24,660 
 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 424,744 
 
 Total Loans: 
 
 Commercial/Agricultural real estate: 
 
 Commercial real estate 
 
 $ 
 498,073 
 
 $ 
 6,350 
 
 $ 
 10,036 
 
 $ 
 — 
 
 $ 
 — 
 
 514,459 
 
 Agricultural real estate 
 
 73,510 
 
 1,363 
 
 10,490 
 
 — 
 
 — 
 
 85,363 
 
 Multi-family real estate 
 
 85,410 
 
 — 
 
 1,598 
 
 — 
 
 — 
 
 87,008 
 
 Construction and land development 
 
 82,170 
 
 — 
 
 4,240 
 
 — 
 
 — 
 
 86,410 
 
 C&I/Agricultural operating: 
 
 Commercial and industrial 
 
 126,835 
 
 1,955 
 
 4,944 
 
 — 
 
 — 
 
 133,734 
 
 Agricultural operating 
 
 35,166 
 
 752 
 
 1,862 
 
 — 
 
 — 
 
 37,780 
 
 Residential mortgage: 
 
 Residential mortgage 
 
 169,553 
 
 436 
 
 6,343 
 
 — 
 
 — 
 
 176,332 
 
 Purchased HELOC loans 
 
 8,407 
 
 — 
 
 — 
 
 — 
 
 — 
 
 8,407 
 
 Consumer installment: 
 
 Originated indirect paper 
 
 39,339 
 
 — 
 
 246 
 
 — 
 
 — 
 
 39,585 
 
 Other Consumer 
 
 18,053 
 
 — 
 
 133 
 
 — 
 
 — 
 
 18,186 
 
 Gross loans 
 
 $ 
 1,136,516 
 
 $ 
 10,856 
 
 $ 
 39,892 
 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 1,187,264 
 
 Less: 
 
 Unearned net deferred fees and costs and loans in process 
 
 ( 393 
 ) 
 
 Unamortized discount on acquired loans 
 
 ( 9,491 
 ) 
 
 Allowance for loan losses 
 
 ( 10,320 
 ) 
 
 Loans receivable, net 
 
 $ 
 1,167,060 
 
 25 
 
 Allowance for Loan Losses - The ALL represents management’s estimate of probable and inherent credit losses in the Bank’s loan portfolio. Estimating the amount of the ALL requires the exercise of significant judgment and the use of estimates related to the amount and timing of expected future cash flows on impaired loans, estimated losses on pools of homogeneous loans based on historical loss experience, and consideration of other qualitative factors such as current economic trends and conditions, all of which may be susceptible to significant change. 
 There are many factors affecting the ALL; some are quantitative, while others require qualitative judgment. The process for determining the ALL (which management believes adequately considers potential factors which result in probable credit losses), includes subjective elements and, therefore, may be susceptible to significant change. To the extent actual outcomes differ from management estimates, additional provision for loan losses could be required that could adversely affect the Company’s earnings or financial position in future periods. Allocations of the ALL may be made for specific loans but the entire ALL is available for any loan that, in management’s judgment, should be charged-off or for which an actual loss is realized. 
 As an integral part of their examination process, various regulatory agencies also review the Bank’s ALL. Such agencies may require that changes in the ALL be recognized when such regulators’ credit evaluations differ from those of our management based on information available to the regulators at the time of their examinations. 
 
 26 
 
 Changes in the ALL by loan type for the periods presented below were as follows: 
 
 Commercial/Agriculture Real Estate 
 
 C&I/Agricultural operating 
 
 Residential Mortgage 
 
 Consumer Installment 
 
 Unallocated 
 
 Total 
 
 Six months ended June 30, 2020 
 
 Allowance for Loan Losses: 
 
 Beginning balance, January 1, 2020 
 $ 
 6,205 
 
 $ 
 1,643 
 
 $ 
 879 
 
 $ 
 467 
 
 $ 
 357 
 
 $ 
 9,551 
 
 Charge-offs 
 — 
 
 ( 529 
 ) 
 
 — 
 
 ( 114 
 ) 
 
 — 
 
 ( 643 
 ) 
 
 Recoveries 
 — 
 
 — 
 
 5 
 
 37 
 
 — 
 
 42 
 
 Provision 
 2,092 
 
 664 
 
 96 
 
 90 
 
 217 
 
 3,159 
 
 Total Allowance on originated loans 
 8,297 
 
 1,778 
 
 980 
 
 480 
 
 574 
 
 12,109 
 
 Purchased credit impaired loans 
 — 
 
 — 
 
 — 
 
 — 
 
 — 
 
 — 
 
 Other acquired loans: 
 
 Beginning balance, January 1, 2020 
 526 
 
 27 
 
 163 
 
 53 
 
 — 
 
 769 
 
 Charge-offs 
 — 
 
 ( 159 
 ) 
 
 ( 27 
 ) 
 
 ( 2 
 ) 
 
 — 
 
 ( 188 
 ) 
 
 Recoveries 
 76 
 
 — 
 
 14 
 
 2 
 
 — 
 
 92 
 
 Provision 
 144 
 
 466 
 
 ( 38 
 ) 
 
 19 
 
 — 
 
 591 
 
 Total Allowance on other acquired loans 
 746 
 
 334 
 
 112 
 
 72 
 
 — 
 
 1,264 
 
 Total Allowance on acquired loans 
 746 
 
 334 
 
 112 
 
 72 
 
 — 
 
 1,264 
 
 Ending balance, June 30, 2020 
 $ 
 9,043 
 
 $ 
 2,112 
 
 $ 
 1,092 
 
 $ 
 552 
 
 $ 
 574 
 
 $ 
 13,373 
 
 Allowance for Loan Losses at June 30, 2020: 
 
 Amount of allowance for loan losses arising from loans individually evaluated for impairment 
 $ 
 815 
 
 $ 
 181 
 
 $ 
 101 
 
 $ 
 1 
 
 $ 
 — 
 
 $ 
 1,098 
 
 Amount of allowance for loan losses arising from loans collectively evaluated for impairment 
 $ 
 8,228 
 
 $ 
 1,931 
 
 $ 
 991 
 
 $ 
 551 
 
 $ 
 574 
 
 $ 
 12,275 
 
 Loans Receivable as of June 30, 2020: 
 
 — 
 
 Ending balance of originated loans 
 $ 
 535,001 
 
 $ 
 243,512 
 
 $ 
 102,525 
 
 $ 
 46,206 
 
 $ 
 — 
 
 $ 
 927,244 
 
 Ending balance of purchased credit-impaired loans 
 22,452 
 
 2,559 
 
 1,788 
 
 — 
 
 — 
 
 26,799 
 
 Ending balance of other acquired loans 
 244,235 
 
 39,042 
 
 54,972 
 
 1,639 
 
 — 
 
 339,888 
 
 Ending balance of loans 
 $ 
 801,688 
 
 $ 
 285,113 
 
 $ 
 159,285 
 
 $ 
 47,845 
 
 $ 
 — 
 
 $ 
 1,293,931 
 
 Ending balance: individually evaluated for impairment 
 $ 
 14,456 
 
 $ 
 5,587 
 
 $ 
 7,823 
 
 $ 
 377 
 
 $ 
 — 
 
 $ 
 28,243 
 
 Ending balance: collectively evaluated for impairment 
 $ 
 787,232 
 
 $ 
 279,526 
 
 $ 
 151,462 
 
 $ 
 47,468 
 
 $ 
 — 
 
 $ 
 1,265,688 
 
 27 
 
 Commercial/Agriculture Real Estate 
 
 C&I/Agricultural operating 
 
 Residential Mortgage 
 
 Consumer Installment 
 
 Unallocated 
 
 Total 
 
 Six months ended June 30, 2019 
 
 Allowance for Loan Losses: 
 
 Beginning balance, January 1, 2019 
 $ 
 4,019 
 
 $ 
 1,258 
 
 $ 
 1,048 
 
 $ 
 641 
 
 $ 
 214 
 
 $ 
 7,180 
 
 Charge-offs 
 ( 225 
 ) 
 
 — 
 
 ( 30 
 ) 
 
 ( 106 
 ) 
 
 — 
 
 ( 361 
 ) 
 
 Recoveries 
 — 
 
 — 
 
 — 
 
 36 
 
 — 
 
 36 
 
 Provision 
 1,216 
 
 212 
 
 ( 41 
 ) 
 
 ( 43 
 ) 
 
 85 
 
 1,429 
 
 Total Allowance on originated loans 
 $ 
 5,010 
 
 $ 
 1,470 
 
 $ 
 977 
 
 $ 
 528 
 
 $ 
 299 
 
 $ 
 8,284 
 
 Purchased credit impaired loans 
 — 
 
 — 
 
 — 
 
 — 
 
 — 
 
 — 
 
 Other acquired loans 
 
 Beginning balance, January 1, 2019 
 183 
 
 32 
 
 205 
 
 65 
 
 ( 61 
 ) 
 
 424 
 
 Charge-offs 
 — 
 
 — 
 
 ( 60 
 ) 
 
 ( 20 
 ) 
 
 — 
 
 ( 80 
 ) 
 
 Recoveries 
 3 
 
 — 
 
 1 
 
 6 
 
 — 
 
 10 
 
 Provision 
 ( 5 
 ) 
 
 53 
 
 7 
 
 5 
 
 61 
 
 121 
 
 Total Allowance on other acquired loans 
 181 
 
 85 
 
 153 
 
 56 
 
 — 
 
 475 
 
 Total Allowance on acquired loans 
 181 
 
 85 
 
 153 
 
 56 
 
 — 
 
 475 
 
 Ending balance, June 30, 2019 
 5,191 
 
 1,555 
 
 1,130 
 
 584 
 
 299 
 
 8,759 
 
 Allowance for Loan Losses at June 30, 2019: 
 
 Amount of allowance for loan losses arising from loans individually evaluated for impairment 
 $ 
 140 
 
 $ 
 195 
 
 $ 
 154 
 
 $ 
 34 
 
 $ 
 — 
 
 $ 
 523 
 
 Amount of allowance for loan losses arising from loans collectively evaluated for impairment 
 $ 
 5,051 
 
 $ 
 1,360 
 
 $ 
 976 
 
 $ 
 550 
 
 $ 
 299 
 
 $ 
 8,236 
 
 Loans Receivable as of June 30, 2019: 
 
 Ending balance of originated loans 
 $ 
 384,672 
 
 $ 
 96,962 
 
 $ 
 128,710 
 
 $ 
 73,775 
 
 $ 
 — 
 
 $ 
 684,119 
 
 Ending balance of purchased credit-impaired loans 
 19,917 
 
 3,509 
 
 1,841 
 
 — 
 
 — 
 
 25,267 
 
 Ending balance of other acquired loans 
 197,483 
 
 44,110 
 
 72,464 
 
 3,160 
 
 — 
 
 317,217 
 
 Ending balance of loans 
 $ 
 602,072 
 
 $ 
 144,581 
 
 $ 
 203,015 
 
 $ 
 76,935 
 
 $ 
 — 
 
 $ 
 1,026,603 
 
 Ending balance: individually evaluated for impairment 
 $ 
 12,984 
 
 $ 
 7,040 
 
 $ 
 7,669 
 
 $ 
 348 
 
 $ 
 — 
 
 $ 
 28,041 
 
 Ending balance: collectively evaluated for impairment 
 $ 
 589,088 
 
 $ 
 137,541 
 
 $ 
 195,346 
 
 $ 
 76,587 
 
 $ 
 — 
 
 $ 
 998,562 
 
 28 
 
 Loans receivable by loan type as of the end of the periods shown below were as follows: 
 
 Commercial/Agriculture Real Estate Loans 
 
 C&I/Agricultural Operating 
 
 Residential Mortgage 
 
 Consumer Installment 
 
 Totals 
 
 June 30, 2020 
 
 December 31, 2019 
 
 June 30, 2020 
 
 December 31, 2019 
 
 June 30, 2020 
 
 December 31, 2019 
 
 June 30, 2020 
 
 December 31, 2019 
 
 June 30, 2020 
 
 December 31, 2019 
 
 Performing loans 
 
 Performing TDR loans 
 $ 
 1,885 
 
 $ 
 1,730 
 
 $ 
 1,199 
 
 $ 
 366 
 
 $ 
 2,576 
 
 $ 
 3,206 
 
 $ 
 63 
 
 $ 
 68 
 
 $ 
 5,723 
 
 $ 
 5,370 
 
 Performing loans other 
 790,603 
 
 758,237 
 
 281,112 
 
 167,596 
 
 152,163 
 
 178,415 
 
 47,663 
 
 57,486 
 
 1,271,541 
 
 1,161,734 
 
 Total performing loans 
 792,488 
 
 759,967 
 
 282,311 
 
 167,962 
 
 154,739 
 
 181,621 
 
 47,726 
 
 57,554 
 
 1,277,264 
 
 1,167,104 
 
 Nonperforming loans (1) 
 
 Nonperforming TDR loans 
 5,255 
 
 4,868 
 
 1,381 
 
 1,973 
 
 760 
 
 383 
 
 — 
 
 — 
 
 7,396 
 
 7,224 
 
 Nonperforming loans other 
 3,945 
 
 8,405 
 
 1,421 
 
 1,579 
 
 3,786 
 
 2,735 
 
 119 
 
 217 
 
 9,271 
 
 12,936 
 
 Total nonperforming loans 
 9,200 
 
 13,273 
 
 2,802 
 
 3,552 
 
 4,546 
 
 3,118 
 
 119 
 
 217 
 
 16,667 
 
 20,160 
 
 Total loans 
 $ 
 801,688 
 
 $ 
 773,240 
 
 $ 
 285,113 
 
 $ 
 171,514 
 
 $ 
 159,285 
 
 $ 
 184,739 
 
 $ 
 47,845 
 
 $ 
 57,771 
 
 $ 
 1,293,931 
 
 $ 
 1,187,264 
 
 (1) 
 Nonperforming loans are either 90+ days past due or nonaccrual. 
 
 29 
 
 An aging analysis of the Company’s commercial/agricultural real estate, C&I, agricultural operating, residential mortgage, consumer installment and purchased third party loans as of June 30, 2020 and December 31, 2019 , respectively, was as follows: 
 
 30-59 Days Past Due and Accruing 
 
 60-89 Days Past Due and Accruing 
 
 Greater Than 89 Days Past Due and Accruing 
 
 Total 
 Past Due and Accruing 
 
 Nonaccrual Loans 
 
 Total Past Due Accruing and Nonaccrual Loans 
 
 Current 
 
 Total 
 Loans 
 
 June 30, 2020 
 
 Commercial/Agricultural real estate: 
 
 Commercial real estate 
 $ 
 5,574 
 
 $ 
 329 
 
 $ 
 — 
 
 $ 
 5,903 
 
 $ 
 3,073 
 
 $ 
 8,976 
 
 $ 
 500,749 
 
 $ 
 509,725 
 
 Agricultural real estate 
 449 
 
 63 
 
 — 
 
 512 
 
 5,979 
 
 6,491 
 
 71,701 
 
 78,192 
 
 Multi-family real estate 
 — 
 
 — 
 
 — 
 
 — 
 
 148 
 
 148 
 
 103,491 
 
 103,639 
 
 Construction and land development 
 — 
 
 — 
 
 — 
 
 — 
 
 — 
 
 — 
 
 110,132 
 
 110,132 
 
 C&I/Agricultural operating: 
 
 Commercial and industrial 
 466 
 
 16 
 
 — 
 
 482 
 
 1,306 
 
 1,788 
 
 108,058 
 
 109,846 
 
 C&I SBA PPP loans 
 — 
 
 — 
 
 — 
 
 — 
 
 — 
 
 — 
 
 137,330 
 
 137,330 
 
 Agricultural operating 
 296 
 
 40 
 
 — 
 
 336 
 
 1,496 
 
 1,832 
 
 36,105 
 
 37,937 
 
 Residential mortgage: 
 
 Residential mortgage 
 3,044 
 
 1,004 
 
 1,786 
 
 5,834 
 
 2,433 
 
 8,267 
 
 144,157 
 
 152,424 
 
 Purchased HELOC loans 
 — 
 
 520 
 
 94 
 
 614 
 
 234 
 
 848 
 
 6,013 
 
 6,861 
 
 Consumer installment: 
 
 Originated indirect paper 
 109 
 
 — 
 
 — 
 
 109 
 
 94 
 
 203 
 
 31,828 
 
 32,031 
 
 Other Consumer 
 22 
 
 3 
 
 — 
 
 25 
 
 24 
 
 49 
 
 15,765 
 
 15,814 
 
 Total 
 $ 
 9,960 
 
 $ 
 1,975 
 
 $ 
 1,880 
 
 $ 
 13,815 
 
 $ 
 14,787 
 
 $ 
 28,602 
 
 $ 
 1,265,329 
 
 $ 
 1,293,931 
 
 December 31, 2019 
 
 Commercial/Agricultural real estate: 
 
 Commercial real estate 
 $ 
 2,804 
 
 $ 
 847 
 
 $ 
 — 
 
 $ 
 3,651 
 
 $ 
 4,214 
 
 $ 
 7,865 
 
 $ 
 506,594 
 
 $ 
 514,459 
 
 Agricultural real estate 
 509 
 
 — 
 
 — 
 
 509 
 
 7,568 
 
 8,077 
 
 77,286 
 
 85,363 
 
 Multi-family real estate 
 — 
 
 — 
 
 — 
 
 — 
 
 1,449 
 
 1,449 
 
 85,559 
 
 87,008 
 
 Construction and land development 
 436 
 
 — 
 
 — 
 
 436 
 
 42 
 
 478 
 
 85,932 
 
 86,410 
 
 C&I/Agricultural operating: 
 
 Commercial and industrial 
 1,024 
 
 — 
 
 — 
 
 1,024 
 
 1,850 
 
 2,874 
 
 130,860 
 
 133,734 
 
 Agricultural operating 
 73 
 
 49 
 
 — 
 
 122 
 
 1,702 
 
 1,824 
 
 35,956 
 
 37,780 
 
 Residential mortgage: 
 
 One to four family 
 4,929 
 
 1,597 
 
 649 
 
 7,175 
 
 2,063 
 
 9,238 
 
 167,094 
 
 176,332 
 
 Residential mortgage 
 293 
 
 378 
 
 407 
 
 1,078 
 
 — 
 
 1,078 
 
 7,329 
 
 8,407 
 
 Consumer installment: 
 
 Originated indirect paper 
 168 
 
 52 
 
 20 
 
 240 
 
 137 
 
 377 
 
 39,208 
 
 39,585 
 
 Other Consumer 
 204 
 
 43 
 
 28 
 
 275 
 
 31 
 
 306 
 
 17,880 
 
 18,186 
 
 Total 
 $ 
 10,440 
 
 $ 
 2,966 
 
 $ 
 1,104 
 
 $ 
 14,510 
 
 $ 
 19,056 
 
 $ 
 33,566 
 
 $ 
 1,153,698 
 
 $ 
 1,187,264 
 
 30 
 
 At June 30, 2020 , the Company has identified impaired loans of $ 51,688 , consisting of $ 13,119 TDR loans, the carrying amount of purchased credit impaired loans of $ 23,444 and $ 15,125 of substandard non-TDR loans. The $ 51,688 total of impaired loans includes $ 5,723 of performing TDR loans. At December 31, 2019 , the Company has identified impaired loans of $ 63,196 , consisting of $ 12,594 TDR loans, the carrying amount of purchased credit impaired loans of $ 31,978 and $ 18,624 of substandard non-TDR loans. The $ 63,196 total of impaired loans includes $ 5,370 of performing TDR loans. A loan is identified as impaired when, based on current information and events, it is probable that the Bank will be unable to collect all amounts due according to the contractual terms of the loan agreement. Performing TDRs consist of loans that have been modified and are performing in accordance with the modified terms for a sufficient length of time, generally six months, or loans that were modified on a proactive basis. 
 A summary of the Company’s impaired loans as of June 30, 2020 , December 31, 2019 and June 30, 2019 was as follows: 
 
 Recorded Investment 
 
 Unpaid Principal Balance 
 
 Related Allowance 
 
 Average Recorded Investment 
 
 Interest Income Recognized 
 
 June 30, 2020 
 
 With No Related Allowance Recorded: 
 
 Commercial/agriculture real estate 
 $ 
 30,268 
 
 $ 
 30,268 
 
 $ 
 — 
 
 $ 
 35,391 
 
 $ 
 369 
 
 C&I/Agricultural operating 
 7,280 
 
 7,280 
 
 — 
 
 8,379 
 
 44 
 
 Residential mortgage 
 8,621 
 
 8,621 
 
 — 
 
 8,658 
 
 125 
 
 Consumer installment 
 363 
 
 363 
 
 — 
 
 371 
 
 8 
 
 Total 
 $ 
 46,532 
 
 $ 
 46,532 
 
 $ 
 — 
 
 $ 
 52,799 
 
 $ 
 546 
 
 With An Allowance Recorded: 
 
 Commercial/agriculture real estate 
 $ 
 4,017 
 
 $ 
 4,017 
 
 $ 
 815 
 
 $ 
 3,080 
 
 $ 
 12 
 
 C&I/Agricultural operating 
 303 
 
 303 
 
 181 
 
 397 
 
 1 
 
 Residential mortgage 
 822 
 
 822 
 
 101 
 
 1,127 
 
 4 
 
 Consumer installment 
 14 
 
 14 
 
 1 
 
 41 
 
 — 
 
 Total 
 $ 
 5,156 
 
 $ 
 5,156 
 
 $ 
 1,098 
 
 $ 
 4,645 
 
 $ 
 17 
 
 June 30, 2020 Totals: 
 
 Commercial/agriculture real estate 
 $ 
 34,285 
 
 $ 
 34,285 
 
 $ 
 815 
 
 $ 
 38,471 
 
 $ 
 381 
 
 C&I/Agricultural operating 
 7,583 
 
 7,583 
 
 181 
 
 8,776 
 
 45 
 
 Residential mortgage 
 9,443 
 
 9,443 
 
 101 
 
 9,785 
 
 129 
 
 Consumer installment 
 377 
 
 377 
 
 1 
 
 412 
 
 8 
 
 Total 
 $ 
 51,688 
 
 $ 
 51,688 
 
 $ 
 1,098 
 
 $ 
 57,444 
 
 $ 
 563 
 
 31 
 
 Recorded Investment 
 
 Unpaid Principal Balance 
 
 Related Allowance 
 
 Average Recorded Investment 
 
 Interest Income Recognized 
 
 December 31, 2019 
 
 With No Related Allowance Recorded: 
 
 Commercial/agriculture real estate 
 $ 
 40,514 
 
 $ 
 40,514 
 
 $ 
 — 
 
 $ 
 24,693 
 
 $ 
 699 
 
 C&I/Agricultural operating 
 9,477 
 
 9,477 
 
 — 
 
 19,163 
 
 119 
 
 Residential mortgage 
 8,695 
 
 8,695 
 
 — 
 
 4,461 
 
 128 
 
 Consumer installment 
 379 
 
 379 
 
 — 
 
 3,640 
 
 6 
 
 Total 
 $ 
 59,065 
 
 $ 
 59,065 
 
 $ 
 — 
 
 $ 
 51,957 
 
 $ 
 952 
 
 With An Allowance Recorded: 
 
 Commercial/agriculture real estate 
 $ 
 2,143 
 
 $ 
 2,143 
 
 $ 
 495 
 
 $ 
 1,738 
 
 $ 
 4 
 
 C&I/Agricultural operating 
 490 
 
 490 
 
 312 
 
 734 
 
 3 
 
 Residential mortgage 
 1,431 
 
 1,431 
 
 136 
 
 789 
 
 15 
 
 Consumer installment 
 67 
 
 67 
 
 13 
 
 47 
 
 — 
 
 Total 
 $ 
 4,131 
 
 $ 
 4,131 
 
 $ 
 956 
 
 $ 
 3,308 
 
 $ 
 22 
 
 December 31, 2019 Totals 
 
 Commercial/agriculture real estate 
 $ 
 42,657 
 
 $ 
 42,657 
 
 $ 
 495 
 
 $ 
 26,431 
 
 $ 
 703 
 
 C&I/Agricultural operating 
 9,967 
 
 9,967 
 
 312 
 
 19,897 
 
 122 
 
 Residential mortgage 
 10,126 
 
 10,126 
 
 136 
 
 5,250 
 
 143 
 
 Consumer installment 
 446 
 
 446 
 
 13 
 
 3,687 
 
 6 
 
 Total 
 $ 
 63,196 
 
 $ 
 63,196 
 
 $ 
 956 
 
 $ 
 55,265 
 
 $ 
 974 
 
 Recorded Investment 
 
 Unpaid Principal Balance 
 
 Related Allowance 
 
 Average Recorded Investment 
 
 Interest Income Recognized 
 
 June 30, 2019 
 
 With No Related Allowance Recorded: 
 
 Commercial/agriculture real estate 
 $ 
 29,540 
 
 $ 
 29,540 
 
 $ 
 — 
 
 $ 
 29,195 
 
 $ 
 492 
 
 C&I/Agricultural operating 
 8,536 
 
 8,536 
 
 — 
 
 7,718 
 
 165 
 
 Residential mortgage 
 8,169 
 
 8,169 
 
 — 
 
 8,521 
 
 106 
 
 Consumer installment 
 241 
 
 241 
 
 — 
 
 234 
 
 6 
 
 Total 
 $ 
 46,486 
 
 $ 
 46,486 
 
 $ 
 — 
 
 $ 
 45,668 
 
 $ 
 769 
 
 With An Allowance Recorded: 
 
 Commercial/agriculture real estate 
 $ 
 1,134 
 
 $ 
 1,134 
 
 $ 
 140 
 
 $ 
 1,056 
 
 $ 
 — 
 
 C&I/Agricultural operating 
 611 
 
 611 
 
 195 
 
 319 
 
 8 
 
 Residential mortgage 
 1,081 
 
 1,081 
 
 154 
 
 1,207 
 
 8 
 
 Consumer installment 
 107 
 
 107 
 
 34 
 
 127 
 
 1 
 
 Total 
 $ 
 2,933 
 
 $ 
 2,933 
 
 $ 
 523 
 
 $ 
 2,709 
 
 $ 
 17 
 
 June 30, 2019 Totals: 
 
 Commercial/agriculture real estate 
 $ 
 30,674 
 
 $ 
 30,674 
 
 $ 
 140 
 
 $ 
 30,251 
 
 $ 
 492 
 
 C&I/Agricultural operating 
 9,147 
 
 9,147 
 
 195 
 
 8,037 
 
 173 
 
 Residential mortgage 
 9,250 
 
 9,250 
 
 154 
 
 9,728 
 
 114 
 
 Consumer installment 
 348 
 
 348 
 
 34 
 
 361 
 
 7 
 
 Total 
 $ 
 49,419 
 
 $ 
 49,419 
 
 $ 
 523 
 
 $ 
 48,377 
 
 $ 
 786 
 
 32 
 
 Troubled Debt Restructuring – A TDR includes a loan modification where a borrower is experiencing financial difficulty and the Bank grants a concession to that borrower that the Bank would not otherwise consider except for the borrower’s financial difficulties. Concessions include an extension of loan terms, renewals of existing balloon loans, reductions in interest rates and consolidating existing Bank loans at modified terms. A TDR may be either on accrual or nonaccrual status based upon the performance of the borrower and management’s assessment of collectability. If a TDR is placed on nonaccrual status, it remains there until a sufficient period of performance under the restructured terms has occurred at which time it is returned to accrual status. There were 5 delinquent accruing TDRs greater than 60 days past due with a recorded investment of $ 563 at June 30, 2020 , compared to 2 such loans with a recorded investment of $ 101 at December 31, 2019 . 
 Following is a summary of TDR loans by accrual status as of June 30, 2020 and December 31, 2019 . 
 
 June 30, 2020 
 
 December 31, 2019 
 
 Troubled debt restructure loans: 
 
 Accrual status 
 
 $ 
 6,127 
 
 $ 
 5,396 
 
 Non-accrual status 
 
 6,992 
 
 7,198 
 
 Total 
 
 $ 
 13,119 
 
 $ 
 12,594 
 
 There was one TDR commitment meeting our TDR criteria as of June 30, 2020 totaling $ 50 and no TDR commitments meeting our TDR criteria as of December 31, 2019. There were unused lines of credit totaling $ 34 and $ 12 meeting our TDR criteria as of June 30, 2020 and December 31, 2019, respectively. 
 
 33 
 
 The following provides detail, including specific reserve and reasons for modification, related to loans identified as TDRs during the six months ended June 30, 2020 and June 30, 2019: 
 
 Number of Contracts 
 
 Modified Rate 
 
 Modified Payment 
 
 Modified Under- writing 
 
 Other 
 
 Pre-Modification Outstanding Recorded Investment 
 
 Post-Modification Outstanding Recorded Investment 
 
 Specific Reserve 
 
 Six months ended June 30, 2020 
 
 TDRs: 
 
 Commercial/agriculture real estate 
 
 9 
 
 $ 
 892 
 
 $ 
 198 
 
 $ 
 17 
 
 $ 
 — 
 
 $ 
 1,107 
 
 $ 
 1,107 
 
 $ 
 — 
 
 C&I/Agricultural operating 
 
 3 
 
 295 
 
 78 
 
 — 
 
 — 
 
 373 
 
 373 
 
 — 
 
 Residential mortgage 
 
 5 
 
 89 
 
 358 
 
 85 
 
 — 
 
 532 
 
 532 
 
 — 
 
 Consumer installment 
 
 2 
 
 3 
 
 — 
 
 4 
 
 — 
 
 7 
 
 7 
 
 — 
 
 Totals 
 
 19 
 
 $ 
 1,279 
 
 $ 
 634 
 
 $ 
 106 
 
 $ 
 — 
 
 $ 
 2,019 
 
 $ 
 2,019 
 
 $ 
 — 
 
 Number of Contracts 
 
 Modified Rate 
 
 Modified Payment 
 
 Modified Under- writing 
 
 Other 
 
 Pre-Modification Outstanding Recorded Investment 
 
 Post-Modification Outstanding Recorded Investment 
 
 Specific Reserve 
 
 Six months ended June 30, 2019 
 
 TDRs: 
 
 Commercial/agriculture real estate 
 
 7 
 
 $ 
 18 
 
 $ 
 78 
 
 $ 
 1,190 
 
 $ 
 — 
 
 $ 
 1,286 
 
 $ 
 1,286 
 
 $ 
 — 
 
 C&I/Agricultural operating 
 
 6 
 
 165 
 
 364 
 
 409 
 
 — 
 
 938 
 
 938 
 
 — 
 
 Residential mortgage 
 
 7 
 
 325 
 
 — 
 
 171 
 
 — 
 
 496 
 
 496 
 
 — 
 
 Consumer installment 
 
 1 
 
 2 
 
 — 
 
 — 
 
 — 
 
 2 
 
 2 
 
 — 
 
 Totals 
 
 21 
 
 $ 
 510 
 
 $ 
 442 
 
 $ 
 1,770 
 
 $ 
 — 
 
 $ 
 2,722 
 
 $ 
 2,722 
 
 $ 
 — 
 
 A summary of loans by loan segment modified in a troubled debt restructuring as of June 30, 2020 and June 30, 2019, was as follows: 
 
 June 30, 2020 
 
 June 30, 2019 
 
 Number of 
 Modifications 
 
 Recorded 
 Investment 
 
 Number of 
 Modifications 
 
 Recorded 
 Investment 
 
 Troubled debt restructurings: 
 
 Commercial/agriculture real estate 
 
 34 
 
 $ 
 7,140 
 
 20 
 
 $ 
 3,938 
 
 C&I/Agricultural operating 
 
 17 
 
 2,580 
 
 16 
 
 2,469 
 
 Residential mortgage 
 
 43 
 
 3,336 
 
 43 
 
 3,511 
 
 Consumer installment 
 
 8 
 
 63 
 
 11 
 
 82 
 
 Total troubled debt restructurings 
 
 102 
 
 $ 
 13,119 
 
 90 
 
 $ 
 10,000 
 
 34 
 
 The following table provides information related to restructured loans that were considered in default as of June 30, 2020 and June 30, 2019: 
 
 June 30, 2020 
 
 June 30, 2019 
 
 Number of 
 Modifications 
 
 Recorded 
 Investment 
 
 Number of 
 Modifications 
 
 Recorded 
 Investment 
 
 Troubled debt restructurings: 
 
 Commercial/agriculture real estate 
 
 15 
 
 $ 
 5,255 
 
 6 
 
 $ 
 1,736 
 
 Commercial/agricultural non-real estate 
 
 12 
 
 1,382 
 
 12 
 
 1,990 
 
 Residential real estate 
 
 4 
 
 355 
 
 4 
 
 374 
 
 Total troubled debt restructurings 
 
 31 
 
 $ 
 6,992 
 
 22 
 
 $ 
 4,100 
 
 All acquired loans were initially recorded at fair value at the acquisition date. The outstanding balance and the carrying amount of acquired loans included in the consolidated balance sheet are as follows: 
 
 June 30, 2020 
 
 December 31, 2019 
 
 Accountable for under ASC 310-30 (Purchased Credit Impaired “PCI” loans) 
 
 Outstanding balance 
 
 $ 
 26,799 
 
 $ 
 38,268 
 
 Carrying amount 
 
 $ 
 23,444 
 
 $ 
 31,978 
 
 Accountable for under ASC 310-20 (non-PCI loans) 
 
 Outstanding balance 
 
 $ 
 339,888 
 
 $ 
 386,476 
 
 Carrying amount 
 
 $ 
 335,856 
 
 $ 
 383,275 
 
 Total acquired loans 
 
 Outstanding balance 
 
 $ 
 366,687 
 
 $ 
 424,744 
 
 Carrying amount 
 
 $ 
 359,300 
 
 $ 
 415,253 
 
 The following table provides changes in accretable discounts for all acquired loans from prior acquisitions with deteriorated credit quality: 
 
 June 30, 2020 
 
 June 30, 2019 
 
 Accretable discounts, beginning of period 
 
 $ 
 3,201 
 
 $ 
 3,163 
 
 Additions to accretable discount for acquired performing loans 
 
 — 
 
 — 
 
 Accelerated accretion from payoff of certain PCI loans with transferred non-accretable differences 
 
 ( 99 
 ) 
 
 — 
 
 Transfers from non-accretable difference to accretable discount 
 
 1,410 
 
 80 
 
 Scheduled accretion 
 
 ( 480 
 ) 
 
 ( 388 
 ) 
 
 Accretable discounts, end of period 
 
 $ 
 4,032 
 
 $ 
 2,855 
 
 Non-accretable difference on purchase credit impaired loans was $ 3,355 and $ 6,290 at June 30, 2020 and December 31, 2019, respectively. 
 
 NOTE 4 – MORTGAGE SERVICING RIGHTS 
 Mortgage servicing rights-- Mortgage loans serviced for others are not included in the accompanying consolidated balance sheets. The unpaid balances of these loans as of June 30, 2020 and December 31, 2019 were $ 538,347 and $ 524,715 , respectively, and consisted of one to four family residential real estate loans. These loans are serviced primarily for the Federal Home Loan Mortgage Corporation, Federal Home Loan Bank and the Federal National Mortgage Association. The current period valuation allowance is included as amortization of mortgage servicing rights in non-interest expense on the consolidated statement of operations. 
 Custodial escrow balances maintained in connection with the foregoing loan servicing, and included in deposits were $ 4,889 and $ 2,868 , at June 30, 2020 and December 31, 2019 , respectively. Mortgage servicing rights activity for the six month period ended June 30, 2020 and twelve months ended December 31, 2019 were as follows: 
 
 As of and for the Six Months Ended 
 
 As of and for the Twelve Months Ended 
 
 Mortgage servicing rights: 
 
 June 30, 2020 
 
 December 31, 2019 
 
 Mortgage servicing assets, net; beginning of period 
 
 $ 
 4,541 
 
 $ 
 4,486 
 
 MSR asset acquired 
 
 — 
 
 — 
 
 Increase in MSR assets resulting from transfers of financial assets 
 
 955 
 
 904 
 
 Amortization during the period 
 
 ( 556 
 ) 
 
 ( 849 
 ) 
 
 4,940 
 
 4,541 
 
 Valuation Allowances: 
 
 Balance at beginning of period 
 
 ( 259 
 ) 
 
 — 
 
 Additions 
 
 ( 1,172 
 ) 
 
 ( 259 
 ) 
 
 Recoveries 
 
 — 
 
 — 
 
 Write-downs 
 
 — 
 
 — 
 
 Balance at end of period 
 
 ( 1,431 
 ) 
 
 ( 259 
 ) 
 
 Mortgage servicing assets, net; end of period 
 
 $ 
 3,509 
 
 $ 
 4,282 
 
 Fair value of MSR asset; end of period 
 
 $ 
 3,509 
 
 $ 
 4,309 
 
 Residential mortgage loans serviced for others 
 
 $ 
 538,347 
 
 $ 
 524,715 
 
 Net book value of MSR asset to loans serviced for others 
 
 0.65 
 % 
 
 0.82 
 % 
 
 35 
 
 NOTE 5 – LEASES 
 We have operating leases for our corporate offices ( 1 ), bank branch offices ( 6 ), other production offices ( 1 ) and certain office equipment. Our leases have remaining lease terms of 3 months to 8 years, some of which include options to extend the leases for up to 5 years. As of June 30, 2020 , we have no additional lease commitments that have not yet commenced. 
 
 Six Months Ended 
 
 June 30, 2020 
 
 June 30, 2019 
 
 Supplemental cash flow information related to leases was as follows: 
 
 Cash paid for amounts included in the measurement of lease liabilities: 
 
 Operating cash flows from operating leases 
 
 $ 
 318 
 
 $ 
 470 
 
 Right-of-use assets obtained in exchange for lease obligations: 
 
 Operating leases 
 
 $ 
 — 
 
 $ 
 158 
 
 June 30, 2020 
 
 December 31, 2019 
 
 Supplemental balance sheet information related to leases was as follows: 
 
 Operating lease right-of-use assets 
 
 $ 
 2,435 
 
 $ 
 2,787 
 
 Operating lease liabilities 
 
 $ 
 2,549 
 
 $ 
 2,845 
 
 Weighted average remaining lease term in years; operating leases 
 
 6.14 
 
 6.63 
 
 Weighted average discount rate; operating leases 
 
 3.07 
 % 
 
 3.07 
 % 
 
 Cash obligations under lease contracts are as follows: 
 
 Fiscal years ending December 31, 
 
 2020 
 $ 
 294 
 
 2021 
 473 
 
 2022 
 437 
 
 2023 
 391 
 
 2024 
 338 
 
 Thereafter 
 1,168 
 
 Total 
 3,101 
 
 Less: effects of discounting 
 ( 552 
 ) 
 
 Lease liability recognized 
 $ 
 2,549 
 
 36 
 
 NOTE 6 – DEPOSITS 
 The following is a summary of deposits by type at June 30, 2020 and December 31, 2019, respectively: 
 
 June 30, 2020 
 
 December 31, 2019 
 
 Non-interest bearing demand deposits 
 
 $ 
 223,536 
 
 $ 
 168,157 
 
 Interest bearing demand deposits 
 
 270,116 
 
 223,102 
 
 Savings accounts 
 
 185,816 
 
 156,599 
 
 Money market accounts 
 
 242,536 
 
 246,430 
 
 Certificate accounts 
 
 350,193 
 
 401,414 
 
 Total deposits 
 
 $ 
 1,272,197 
 
 $ 
 1,195,702 
 
 Brokered deposits included above: 
 
 $ 
 19,564 
 
 $ 
 50,377 
 
 At June 30, 2020 , the scheduled maturities of time deposits were as follows: 
 
 June 30, 2021 
 
 $ 
 227,486 
 
 June 30, 2022 
 
 102,326 
 
 June 30, 2023 
 
 16,673 
 
 June 30, 2024 
 
 2,533 
 
 June 30, 2025 
 
 1,175 
 
 After June 30, 2025 
 
 — 
 
 Total 
 
 $ 
 350,193 
 
 37 
 
 NOTE 7 – FEDERAL HOME LOAN BANK AND FEDERAL RESERVE BANK ADVANCES AND OTHER BORROWINGS 
 A summary of Federal Home Loan Bank advances and other borrowings at June 30, 2020 and December 31, 2019 is as follows: 
 
 June 30, 2020 
 
 December 31, 2019 
 
 Stated Maturity 
 
 Amount 
 
 Range of Stated Rates 
 
 Amount 
 
 Range of Stated Rates 
 
 Federal Home Loan Bank advances (1), (2), (3), (4), (5) 
 
 2020 
 
 $ 
 1,000 
 
 1.76 
 % 
 
 1.76 
 % 
 
 $ 
 69,000 
 
 1.67 
 % 
 
 2.05 
 % 
 
 2021 
 
 8,000 
 
 — 
 % 
 
 2.16 
 % 
 
 4,000 
 
 1.85 
 % 
 
 2.16 
 % 
 
 2022 
 
 15,000 
 
 2.34 
 % 
 
 2.45 
 % 
 
 15,000 
 
 2.34 
 % 
 
 2.45 
 % 
 
 2023 
 
 20,000 
 
 1.43 
 % 
 
 1.44 
 % 
 
 — 
 
 — 
 % 
 
 — 
 % 
 
 2024 
 
 20,530 
 
 — 
 % 
 
 1.45 
 % 
 
 530 
 
 — 
 % 
 
 — 
 % 
 
 2025 
 
 5,000 
 
 1.45 
 % 
 
 1.45 
 % 
 
 — 
 
 — 
 % 
 
 — 
 % 
 
 2029 
 
 42,500 
 
 1.00 
 % 
 
 1.13 
 % 
 
 42,500 
 
 1.00 
 % 
 
 1.13 
 % 
 
 2030 
 
 12,500 
 
 0.52 
 % 
 
 0.86 
 % 
 
 — 
 
 — 
 % 
 
 — 
 % 
 
 Subtotal 
 
 124,530 
 
 131,030 
 
 Unamortized discount on acquired notes 
 
 ( 46 
 ) 
 
 ( 59 
 ) 
 
 Federal Home Loan Bank advances, net 
 
 $ 
 124,484 
 
 $ 
 130,971 
 
 Senior Notes (6) 
 
 2031 
 
 $ 
 28,856 
 
 3.50 
 % 
 
 3.50 
 % 
 
 $ 
 28,856 
 
 4.00 
 % 
 
 4.75 
 % 
 
 Subordinated Notes (7) 
 
 2027 
 
 $ 
 15,000 
 
 6.75 
 % 
 
 6.75 
 % 
 
 $ 
 15,000 
 
 6.75 
 % 
 
 6.75 
 % 
 
 Unamortized debt issuance costs 
 
 $ 
 ( 261 
 ) 
 
 $ 
 ( 296 
 ) 
 
 Total other borrowings 
 
 $ 
 43,595 
 
 $ 
 43,560 
 
 Totals 
 
 $ 
 168,079 
 
 $ 
 174,531 
 
 (1) The FHLB advances bear fixed rates, require interest-only monthly payments, and are collateralized by a blanket lien on pre-qualifying first mortgages, home equity lines, multi-family loans and certain other loans which had a pledged balance of $ 816,721 and $ 792,909 at June 30, 2020 and December 31, 2019, respectively. At June 30, 2020 , the Bank’s available and unused portion under the FHLB borrowing arrangement was approximately $ 189,242 compared to $ 203,935 as of December 31, 2019. 
 (2) Maximum month-end borrowed amounts outstanding under this borrowing agreement were $ 162,480 and $ 151,130 , during the six months ended June 30, 2020 and the twelve months ended December 31, 2019, respectively. 
 (3) The weighted-average interest rates on FHLB borrowings maturing within twelve months as of June 30, 2020 and December 31, 2019 were 0.82 % and 1.74 % , respectively. 
 (4) Six of the FHLB notes with remaining balances totaling $ 9,530 were acquired as a result of the F&M acquisition. These notes mature on various dates through 2024 with a weighted average rate of 2.02 % and weighted average maturity of 17 months. The Bank acquired one $ 11,000 FHLB note as a result of the United Bank acquisition, with a 2.45 % rate and February 1, 2022 maturity date. 
 (5) FHLB term notes totaling $ 55,000 , with various maturity dates in 2029 and 2030, can be called or replaced by the FHLB on a quarterly basis, beginning approximately three months after the initial advance. 
 (6) Senior notes, entered into by the Company in June 2019 consist of the following: 
 (a) A term note, requiring quarterly interest-only payments through June 2022, and quarterly principal and interest payments thereafter. Interest is variable, based on US Prime rate with a floor rate of 3.50 % . 
 (b) A $ 5,000 line of credit, maturing in August 2020, that remains undrawn upon. 
 
 38 
 
 (7) Subordinated notes resulted from the Company’s private sale in August 2017, and bear a fixed interest rate of 6.75 % for five years . In August 2022, they convert to a three-month LIBOR plus 4.90 % rate, and the interest rate will reset quarterly thereafter. Interest-only payments are due quarterly. 
 Federal Home Loan Bank Letters of Credit 
 The Bank has an irrevocable Standby Letter of Credit Master Reimbursement Agreement with the Federal Home Loan Bank. This irrevocable standby letter of credit (“LOC”) is supported by loan collateral as an alternative to directly pledging investment securities on behalf of a municipal customer as collateral for their interest bearing deposit balances. These balances were $ 182,324 and $ 147,991 at June 30, 2020 and December 31, 2019, respectively. 
 Federal Reserve Bank Paycheck Protection Program Liquidity Facility (“FRB PPPLF”) Program 
 The Bank has originated Small Business Association’s Payment Protection Program (“SBA PPP”) loans and has complied with the requirements to pledge these loans to the FRB PPPLF program which provides 100% funding for SBA PPP loans upon request. The Bank has no outstanding loan balances under this facility at June 30, 2020 and December 31, 2019. Maximum month-end borrowed amounts outstanding under this agreement were $ 25,136 and $ 0 , during the six months ended June 30, 2020 and the twelve months ended December 31, 2019, respectively. 
 
 NOTE 8 - CAPITAL MATTERS 
 Banks and bank holding companies are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations involve quantitative measures of assets, liabilities and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action. 
 Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized. Although these terms are not used to represent overall financial condition, if adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required. At June 30, 2020 , the Bank and Company were categorized as “Well Capitalized”, under Prompt Corrective Action Provisions. 
 The Bank’s Tier 1 (leverage) and risk-based capital ratios at June 30, 2020 and December 31, 2019 , respectively, are presented below: 
 
 Actual 
 
 For Capital Adequacy
Purposes 
 
 To Be Well Capitalized
Under Prompt Corrective
Action Provisions 
 
 Amount 
 
 Ratio 
 
 Amount 
 
 Ratio 
 
 Amount 
 
 Ratio 
 
 As of June 30, 2020 
 
 Total capital (to risk weighted assets) 
 
 $ 
 166,781 
 
 14.0 
 % 
 
 $ 
 95,059 
 
 > = 
 
 8.0 
 % 
 
 $ 
 118,824 
 
 > = 
 
 10.0 
 % 
 
 Tier 1 capital (to risk weighted assets) 
 
 153,408 
 
 12.9 
 % 
 
 71,295 
 
 > = 
 
 6.0 
 % 
 
 95,059 
 
 > = 
 
 8.0 
 % 
 
 Common equity tier 1 capital (to risk weighted assets) 
 
 153,408 
 
 12.9 
 % 
 
 53,471 
 
 > = 
 
 4.5 
 % 
 
 77,236 
 
 > = 
 
 6.5 
 % 
 
 Tier 1 leverage ratio (to adjusted total assets) 
 
 153,408 
 
 9.9 
 % 
 
 61,942 
 
 > = 
 
 4.0 
 % 
 
 77,427 
 
 > = 
 
 5.0 
 % 
 
 As of December 31, 2019 
 
 Total capital (to risk weighted assets) 
 
 $ 
 160,302 
 
 13.1 
 % 
 
 $ 
 98,174 
 
 > = 
 
 8.0 
 % 
 
 $ 
 122,718 
 
 > = 
 
 10.0 
 % 
 
 Tier 1 capital (to risk weighted assets) 
 
 149,982 
 
 12.2 
 % 
 
 73,631 
 
 > = 
 
 6.0 
 % 
 
 98,174 
 
 > = 
 
 8.0 
 % 
 
 Common equity tier 1 capital (to risk weighted assets) 
 
 149,982 
 
 12.2 
 % 
 
 55,223 
 
 > = 
 
 4.5 
 % 
 
 79,767 
 
 > = 
 
 6.5 
 % 
 
 Tier 1 leverage ratio (to adjusted total assets) 
 
 149,982 
 
 10.4 
 % 
 
 57,834 
 
 > = 
 
 4.0 
 % 
 
 72,293 
 
 > = 
 
 5.0 
 % 
 
 39 
 
 The Company’s Tier 1 (leverage) and risk-based capital ratios at June 30, 2020 and December 31, 2019 , respectively, are presented below: 
 
 Actual 
 
 For Capital Adequacy
Purposes 
 
 To Be Well Capitalized
Under Prompt Corrective
Action Provisions 
 
 Amount 
 
 Ratio 
 
 Amount 
 
 Ratio 
 
 Amount 
 
 Ratio 
 
 As of June 30, 2020 
 
 Total capital (to risk weighted assets) 
 
 $ 
 143,353 
 
 12.1 
 % 
 
 $ 
 95,059 
 
 > = 
 
 8.0 
 % 
 
 $ 
 118,824 
 
 > = 
 
 10.0 
 % 
 
 Tier 1 capital (to risk weighted assets) 
 
 114,980 
 
 9.7 
 % 
 
 71,295 
 
 > = 
 
 6.0 
 % 
 
 95,059 
 
 > = 
 
 8.0 
 % 
 
 Common equity tier 1 capital (to risk weighted assets) 
 
 114,980 
 
 9.7 
 % 
 
 53,471 
 
 > = 
 
 4.5 
 % 
 
 77,236 
 
 > = 
 
 6.5 
 % 
 
 Tier 1 leverage ratio (to adjusted total assets) 
 
 114,980 
 
 7.4 
 % 
 
 61,942 
 
 > = 
 
 4.0 
 % 
 
 77,427 
 
 > = 
 
 5.0 
 % 
 
 As of December 31, 2019 
 
 Total capital (to risk weighted assets) 
 
 $ 
 137,259 
 
 11.2 
 % 
 
 $ 
 98,174 
 
 > = 
 
 8.0 
 % 
 
 $ 
 122,718 
 
 > = 
 
 10.0 
 % 
 
 Tier 1 capital (to risk weighted assets) 
 
 111,939 
 
 9.1 
 % 
 
 73,631 
 
 > = 
 
 6.0 
 % 
 
 998,174 
 
 > = 
 
 8.0 
 % 
 
 Common equity tier 1 capital (to risk weighted assets) 
 
 111,939 
 
 9.1 
 % 
 
 55,223 
 
 > = 
 
 4.5 
 % 
 
 79,767 
 
 > = 
 
 6.5 
 % 
 
 Tier 1 leverage ratio (to adjusted total assets) 
 
 111,939 
 
 7.7 
 % 
 
 57,834 
 
 > = 
 
 4.0 
 % 
 
 72,293 
 
 > = 
 
 5.0 
 % 
 
 - 
 NOTE 9 – STOCK-BASED COMPENSATION 
 In February 2005, the Company’s stockholders approved the Company’s 2004 Recognition and Retention Plan and 2004 Stock Option and Incentive Plan. These plans were terminated on January 18, 2018. 
 In February 2008, the Company’s stockholders approved the Company’s 2008 Equity Incentive Plan for a term of 10 years. As of June 30, 2020 , 89,183 restricted shares and 181,000 options had been granted to eligible participants. Due to the plan’s expiration, no new awards can be granted under this plan. Restricted shares granted under the 2008 Equity Incentive Plan were awarded at no cost to the employee and vest pro rata over a two to five -year period from the grant date. Options granted to date under this plan vest pro rata over a five -year period from the grant date. Unexercised, nonqualified stock options expire within 15 years of the grant date and unexercised incentive stock options expire within 10 years of the grant date. 
 On March 27, 2018, the stockholders of Citizens Community Bancorp, Inc. approved the 2018 Equity Incentive Plan. The aggregate number of shares of common stock reserved and available for issuance under the 2018 Equity Incentive Plan is 350,000 shares. As of June 30, 2020 , 95,575 restricted shares had been granted under this plan. As of June 30, 2020 , no stock options had been granted under this plan. 
 Net compensation expense related to restricted stock awards from these plans was $ 158 and $ 297 for the three and six months ended June 30, 2020 , compared to $ 103 and $ 243 for the three and six months ended June 30, 2019 . 
 
 40 
 
 Restricted Common Stock Award 
 
 June 30, 2020 
 
 December 31, 2019 
 
 Number of Shares 
 
 Weighted
Average
Grant Price 
 
 Number of Shares 
 
 Weighted
Average
Grant Price 
 
 Restricted Shares 
 
 Unvested and outstanding at beginning of year 
 
 43,457 
 
 $ 
 12.76 
 
 75,407 
 
 $ 
 13.24 
 
 Granted 
 
 41,507 
 
 11.93 
 
 12,847 
 
 11.50 
 
 Vested 
 
 ( 13,645 
 ) 
 
 12.83 
 
 ( 32,630 
 ) 
 
 12.89 
 
 Forfeited 
 
 — 
 
 — 
 
 ( 12,167 
 ) 
 
 13.28 
 
 Unvested and outstanding at end of year 
 
 71,319 
 
 $ 
 12.27 
 
 43,457 
 
 $ 
 12.76 
 
 The Company accounts for stock-based employee compensation related to the Company’s 2008 Equity Incentive Plan and 2018 Equity Incentive Plan using the fair-value-based method. Accordingly, management records compensation expense based on the value of the award as measured on the grant date and then the Company recognizes that cost over the vesting period for the award. The compensation cost recognized for stock-based employee compensation related to these plans for the three and six month periods ended June 30, 2020 was $ 4 and $ 8 , respectively. The compensation cost recognized for stock-based employee compensation related to these plans for the three and six month periods ended June 30, 2019 was $ 5 and $ 9 , respectively. 
 Common Stock Option Awards 
 
 Option Shares 
 
 Weighted 
 Average 
 Exercise 
 Price 
 
 Weighted 
 Average 
 Remaining 
 Contractual 
 Term 
 
 Aggregate 
 Intrinsic 
 Value 
 
 June 30, 2020 
 
 Outstanding at beginning of year 
 
 78,100 
 
 $ 
 11.18 
 
 Forfeited or expired 
 
 ( 3,200 
 ) 
 
 12.21 
 
 Outstanding at end of year 
 
 74,900 
 
 $ 
 11.14 
 
 6.03 
 
 Exercisable at end of year 
 
 51,300 
 
 $ 
 10.66 
 
 5.80 
 
 $ 
 ( 195 
 ) 
 
 Fully vested and expected to vest 
 
 74,900 
 
 $ 
 11.14 
 
 6.03 
 
 $ 
 ( 321 
 ) 
 
 December 31, 2019 
 
 Outstanding at beginning of year 
 
 108,930 
 
 $ 
 10.15 
 
 Exercised 
 
 ( 28,430 
 ) 
 
 7.12 
 
 Forfeited or expired 
 
 ( 2,400 
 ) 
 
 12.38 
 
 Outstanding at end of year 
 
 78,100 
 
 $ 
 11.18 
 
 6.55 
 
 Exercisable at end of year 
 
 44,700 
 
 $ 
 10.73 
 
 6.30 
 
 $ 
 67 
 
 Fully vested and expected to vest 
 
 78,100 
 
 $ 
 11.18 
 
 6.55 
 
 $ 
 81 
 
 Information related to the 2004 Stock Option and Incentive Plan and 2008 Equity Incentive Plan for the respective periods follows: 
 
 Six months ended June 30, 2020 
 
 Twelve months ended December 31, 2019 
 
 Intrinsic value of options exercised 
 
 $ 
 — 
 
 $ 
 130 
 
 Cash received from options exercised 
 
 $ 
 — 
 
 $ 
 203 
 
 Tax benefit realized from options exercised 
 
 $ 
 — 
 
 $ 
 — 
 
 41 
 
 NOTE 10 – FAIR VALUE ACCOUNTING 
 ASC Topic 820-10, “ Fair Value Measurements and Disclosures ” establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The topic describes three levels of inputs that may be used to measure fair value: 
 Level 1- Quoted prices (unadjusted) for identical assets or liabilities in active markets that the Company has the ability to access as of the measurement date. 
 Level 2- Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. 
 Level 3- Significant unobservable inputs that reflect the Company’s assumptions about the factors that market participants would use in pricing an asset or liability. 
 A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input within the valuation hierarchy that is significant to the fair value measurement. 
 The fair value of securities available for sale is determined by obtaining market price quotes from independent third parties wherever such quotes are available (Level 1 inputs); or matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs). Where such quotes are not available, we utilize independent third party valuation analysis to support our own estimates and judgments in determining fair value (Level 3 inputs). 
 Assets Measured on a Recurring Basis 
 The following tables present the financial instruments measured at fair value on a recurring basis as of June 30, 2020 and December 31, 2019 : 
 
 Fair 
 Value 
 
 Quoted Prices in 
 Active Markets 
 for Identical 
 Instruments 
 (Level 1) 
 
 Significant 
 Other 
 Observable 
 Inputs 
 (Level 2) 
 
 Significant 
 Unobservable 
 Inputs 
 (Level 3) 
 
 June 30, 2020 
 
 Investment securities: 
 
 U.S. government agency obligations 
 $ 
 35,353 
 
 $ 
 — 
 
 $ 
 35,353 
 
 $ 
 — 
 
 Obligations of states and political subdivisions 
 140 
 
 — 
 
 140 
 
 — 
 
 Mortgage-backed securities 
 59,372 
 
 — 
 
 59,372 
 
 — 
 
 Corporate debt securities 
 20,079 
 
 — 
 
 20,079 
 
 — 
 
 Corporate asset based securities 
 34,822 
 
 — 
 
 34,822 
 
 — 
 
 Trust preferred securities 
 12,950 
 
 — 
 
 12,950 
 
 — 
 
 Total 
 $ 
 162,716 
 
 $ 
 — 
 
 $ 
 162,716 
 
 $ 
 — 
 
 December 31, 2019 
 
 Investment securities: 
 
 U.S. government agency obligations 
 $ 
 51,805 
 
 $ 
 — 
 
 $ 
 51,805 
 
 $ 
 — 
 
 Obligations of states and political subdivisions 
 281 
 
 — 
 
 281 
 
 — 
 
 Mortgage-backed securities 
 71,331 
 
 — 
 
 71,331 
 
 — 
 
 Corporate debt securities 
 18,725 
 
 — 
 
 18,725 
 
 — 
 
 Corporate asset backed securities 
 26,854 
 
 — 
 
 26,854 
 
 — 
 
 Trust preferred securities 
 11,123 
 
 — 
 
 11,123 
 
 — 
 
 Total 
 $ 
 180,119 
 
 $ 
 — 
 
 $ 
 180,119 
 
 $ 
 — 
 
 42 
 
 Assets Measured on Nonrecurring Basis 
 The following tables present the financial instruments measured at fair value on a nonrecurring basis as of June 30, 2020 and December 31, 2019 : 
 
 Carrying Value 
 
 Quoted Prices in 
 Active Markets 
 for Identical 
 Instruments 
 (Level 1) 
 
 Significant 
 Other 
 Observable 
 Inputs 
 (Level 2) 
 
 Significant 
 Unobservable 
 Inputs 
 (Level 3) 
 
 June 30, 2020 
 
 Foreclosed and repossessed assets, net 
 $ 
 734 
 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 734 
 
 Impaired loans with allocated allowances 
 4,058 
 
 — 
 
 — 
 
 4,058 
 
 Mortgage servicing rights 
 3,509 
 
 — 
 
 — 
 
 3,509 
 
 Total 
 $ 
 8,301 
 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 8,301 
 
 December 31, 2019 
 
 Foreclosed and repossessed assets, net 
 $ 
 1,460 
 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 1,460 
 
 Impaired loans with allocated allowances 
 3,175 
 
 — 
 
 — 
 
 3,175 
 
 Mortgage servicing rights 
 4,282 
 
 — 
 
 — 
 
 4,309 
 
 Total 
 $ 
 8,917 
 
 $ 
 — 
 
 $ 
 — 
 
 $ 
 8,944 
 
 The fair value of impaired loans referenced above was determined by obtaining independent third party appraisals and/or internally developed collateral valuations to support the Company’s estimates and judgments in determining the fair value of the underlying collateral supporting impaired loans. 
 The fair value of foreclosed and repossessed assets was determined by obtaining market price valuations from independent third parties wherever such quotes were available for other collateral owned. The Company utilized independent third party appraisals to support the Company’s estimates and judgments in determining fair value for other real estate owned. 
 The fair value of mortgage servicing rights was estimated using discounted cash flows based on current market rates and other factors. 
 The following table represents additional quantitative information about assets measured at fair value on a 
 recurring and nonrecurring basis and for which we have utilized Level 3 inputs to determine their fair value at 
 June 30, 2020 . 
 
 Fair 
 Value 
 
 Valuation Techniques (1) 
 
 Significant Unobservable Inputs (2) 
 
 Range 
 
 June 30, 2020 
 
 Foreclosed and repossessed assets, net 
 $ 
 734 
 
 Appraisal value 
 
 Estimated costs to sell 
 
 10 - 15% 
 
 Impaired loans with allocated allowances 
 $ 
 4,058 
 
 Appraisal value 
 
 Estimated costs to sell 
 
 10 - 15% 
 
 Mortgage servicing rights 
 $ 
 3,509 
 
 Discounted cash flows 
 
 Discounted rates 
 
 9.5% - 12.5% 
 
 December 31, 2019 
 
 Foreclosed and repossessed assets, net 
 $ 
 1,460 
 
 Appraisal value 
 
 Estimated costs to sell 
 
 10 - 15% 
 
 Impaired loans with allocated allowances 
 $ 
 3,175 
 
 Appraisal value 
 
 Estimated costs to sell 
 
 10 - 15% 
 
 Mortgage servicing rights 
 $ 
 4,309 
 
 Discounted cash flows 
 
 Discounted rates 
 
 9.5% - 12.5% 
 
 (1) Fair value is generally determined through independent third-party appraisals of the underlying 
 collateral, which generally includes various level 3 inputs which are not observable. 
 
 43 
 
 (2) The fair value basis of impaired loans and real estate owned may be adjusted to reflect management 
 estimates of disposal costs including, but not limited to, real estate brokerage commissions, legal fees, 
 and delinquent property taxes. 
 The table below represents what we would receive to sell an asset or what we would have to pay to transfer a liability in an orderly transaction between market participants at the measurement date. The carrying amount and estimated fair value of the Company’s financial instruments as of the dates indicated below were as follows: 
 
 June 30, 2020 
 
 December 31, 2019 
 
 Valuation Method Used 
 
 Carrying 
 Amount 
 
 Estimated 
 Fair 
 Value 
 
 Carrying 
 Amount 
 
 Estimated 
 Fair 
 Value 
 
 Financial assets: 
 
 Cash and cash equivalents 
 (Level I) 
 
 $ 
 39,581 
 
 $ 
 39,581 
 
 $ 
 55,840 
 
 $ 
 55,840 
 
 Other interest-bearing deposits 
 (Level II) 
 
 3,752 
 
 3,855 
 
 4,744 
 
 4,792 
 
 Securities available for sale “AFS” 
 (Level II) 
 
 162,716 
 
 162,716 
 
 180,119 
 
 180,119 
 
 Securities held to maturity “HTM” 
 (Level II) 
 
 10,541 
 
 10,922 
 
 2,851 
 
 2,957 
 
 Equity securities with readily determinable fair value 
 (Level I) 
 
 188 
 
 188 
 
 246 
 
 246 
 
 Other investments 
 (Level II) 
 
 15,193 
 
 15,193 
 
 15,005 
 
 15,005 
 
 Loans receivable, net 
 (Level III) 
 
 1,267,802 
 
 1,292,278 
 
 1,167,060 
 
 1,161,660 
 
 Loans held for sale 
 (Level II) 
 
 8,876 
 
 8,876 
 
 5,893 
 
 5,893 
 
 Mortgage servicing rights 
 (Level III) 
 
 3,509 
 
 3,509 
 
 4,282 
 
 4,309 
 
 Accrued interest receivable 
 (Level 1) 
 
 5,855 
 
 5,855 
 
 4,738 
 
 4,738 
 
 Financial liabilities: 
 
 Deposits 
 (Level III) 
 
 $ 
 1,272,197 
 
 $ 
 1,273,191 
 
 $ 
 1,195,702 
 
 $ 
 1,192,777 
 
 FHLB advances 
 (Level II) 
 
 124,484 
 
 129,689 
 
 130,971 
 
 131,593 
 
 Other borrowings 
 (Level I) 
 
 43,595 
 
 43,595 
 
 43,560 
 
 43,560 
 
 Accrued interest payable 
 (Level I) 
 
 373 
 
 373 
 
 453 
 
 453 
 
 44 
 
 NOTE 11 – OTHER COMPREHENSIVE INCOME (LOSS) 
 The following tables show the tax effects allocated to each component of other comprehensive income for the three and 
 six months ended June 30, 2020 and 2019: 
 
 Three months ended 
 
 June 30, 2020 
 
 June 30, 2019 
 
 Before-Tax 
 Amount 
 
 Tax 
 Expense 
 
 Net-of-Tax 
 Amount 
 
 Before-Tax 
 Amount 
 
 Tax 
 Expense 
 
 Net-of-Tax 
 Amount 
 
 Unrealized gains on securities: 
 
 Net unrealized gains arising during the period 
 $ 
 2,245 
 
 $ 
 ( 617 
 ) 
 
 $ 
 1,628 
 
 $ 
 956 
 
 $ 
 ( 262 
 ) 
 
 $ 
 694 
 
 Reclassification adjustment for gains included in net income 
 — 
 
 — 
 
 — 
 
 ( 26 
 ) 
 
 7 
 
 ( 19 
 ) 
 
 Other comprehensive income 
 $ 
 2,245 
 
 $ 
 ( 617 
 ) 
 
 $ 
 1,628 
 
 $ 
 930 
 
 $ 
 ( 255 
 ) 
 
 $ 
 675 
 
 Six months ended 
 
 June 30, 2020 
 
 June 30, 2019 
 
 Before-Tax 
 Amount 
 
 Tax 
 Expense 
 
 Net-of-Tax 
 Amount 
 
 Before-Tax 
 Amount 
 
 Tax 
 Expense 
 
 Net-of-Tax 
 Amount 
 
 Unrealized gains on securities: 
 
 Net unrealized gains arising during the period 
 $ 
 832 
 
 $ 
 ( 229 
 ) 
 
 $ 
 603 
 
 $ 
 2,563 
 
 $ 
 ( 705 
 ) 
 
 $ 
 1,858 
 
 Reclassification adjustment for gains included in net income 
 ( 156 
 ) 
 
 43 
 
 ( 113 
 ) 
 
 ( 26 
 ) 
 
 7 
 
 ( 19 
 ) 
 
 Other comprehensive income 
 $ 
 676 
 
 $ 
 ( 186 
 ) 
 
 $ 
 490 
 
 $ 
 2,537 
 
 $ 
 ( 698 
 ) 
 
 $ 
 1,839 
 
 The changes in the accumulated balances for each component of other comprehensive income (loss), net of tax for the twelve months ended December 31, 2019 and the six months ended June 30, 2020 were as follows: 
 
 Unrealized 
 Gains (Losses) 
 on 
 Securities 
 
 Other Accumulated 
 Comprehensive 
 Income (Loss), net of tax 
 
 Beginning Balance, January 1, 2019 
 $ 
 ( 2,540 
 ) 
 
 $ 
 ( 1,841 
 ) 
 
 Current year-to-date other comprehensive income 
 1,953 
 
 1,415 
 
 Adoption of ASU 2016-01; Equity securities (1) 
 ( 62 
 ) 
 
 ( 45 
 ) 
 
 Ending balance, December 31, 2019 
 $ 
 ( 649 
 ) 
 
 $ 
 ( 471 
 ) 
 
 Current year-to-date other comprehensive loss 
 676 
 
 490 
 
 Ending balance, June 30, 2020 
 $ 
 27 
 
 $ 
 19 
 
 (1) Amounts reclassified to retained earnings due to January 1, 2019 adoption of ASU 2016-02. For further information, refer to Note 1, “Nature of Business and Summary of Significant Policies; Recent Pronouncements-Adopted”. 
 
 45 
 
 Reclassifications out of accumulated other comprehensive income (loss) for the three and six months ended June 30, 2020 were as follows: 
 
 Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) 
 
 Details about Accumulated Other Comprehensive Income (Loss) Components 
 
 Three months ended June 30, 2020 
 
 Six months ended June 30, 2020 
 (1) 
 Affected Line Item on the Statement of Operations 
 
 Unrealized gains and losses 
 
 Sale of securities 
 
 $ 
 — 
 
 $ 
 156 
 
 Net gains on investment securities 
 
 Tax Effect 
 
 — 
 
 ( 43 
 ) 
 
 Provision for income taxes 
 
 Total reclassifications for the period 
 
 $ 
 — 
 
 $ 
 113 
 
 Net gain attributable to common shareholders 
 
 (1) Amounts in parentheses indicate decreases to income/loss. 
 Reclassifications out of accumulated other comprehensive income (loss) for the three and six months ended June 30, 2019 were as follows: 
 
 Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) 
 
 Details about Accumulated Other Comprehensive Income (Loss) Components 
 
 Three months ended June 30, 2019 
 
 Six months ended June 30, 2019 
 (1) 
 Affected Line Item on the Statement of Operations 
 
 Unrealized gains and losses 
 
 Sale of securities 
 
 $ 
 26 
 
 $ 
 26 
 
 Net gains on investment securities 
 
 Tax Effect 
 
 ( 7 
 ) 
 
 ( 7 
 ) 
 
 Provision for income taxes 
 
 Total reclassifications for the period 
 
 $ 
 19 
 
 $ 
 19 
 
 Net gain attributable to common shareholders 
 
 (1) Amounts in parentheses indicate decreases to profit/loss. 
 
 46
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.
Citizens Community Bancorp Inc. 10-Q

Item 1. Financial Statements
