What changed in this filing

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Item 1. Financial Statements

2020-11-06 compared with 2020-08-06 · 445 added, 361 removed, 1003 unchanged (45% of the section changed)

2 unchanged sentences

Consolidated Balance Sheets

June 30, 2020 (unaudited) and December 31, 2019

September 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

September 30, 2020 December 31, 2019

Cash and cash equivalents $ 115,474 $ 55,840

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Intangible assets 5,893 7,587

Goodwill 31,498 31,498

Foreclosed and repossessed assets, net 812 1,460

Bank owned life insurance ("BOLI") 23,514 23,063

Other assets 7,378 5,757

TOTAL ASSETS $ 1,622,593 $ 1,531,249

Liabilities and Stockholders’ Equity

Deposits $ 1,270,778 $ 1,195,702

Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank (“FRB”) advances 124,491 130,971

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Consolidated Statements of Operations (unaudited)

Three and Six Months Ended June 30, 2020 and 2019

Three and Nine Months Ended September 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

Three Months Ended Nine Months Ended

September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019

Interest and dividend income:

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Insurance commission income — 197 474 573

Net gains on investment securities

Gain on sale of branch

Gain on sale of insurance agency

Net gains (losses) on investment securities ( 1 ) 96 97 151

Net gain (loss) on sale of branch — — — 2,295

Net gain (loss) on sale of acquired business lines 180 — 432 —

Settlement proceeds — — 131 —

Other 445 363 929 827

Total non-interest income 5,062 3,621 13,678 11,191

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Compensation and related benefits 5,538 5,295 16,881 14,605

Occupancy 993 905 2,898 2,725

Office 532 599 1,650 1,649

Data processing 1,145 1,092 3,165 2,953

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Gain on repossessed assets, net ( 105 ) ( 16 ) ( 195 ) ( 143 )

Other 737 3,409 2,266 5,309

Total non-interest expense 10,724 12,975 32,847 32,258

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Consolidated Statements of Comprehensive Income (unaudited)

Three and Six months ended June 30, 2020 and 2019

Three and Nine months ended September 30, 2020 and 2019

(in thousands)

Three Months Ended

Six Months Ended

June 30, 2020

June 30, 2019

June 30, 2020

June 30, 2019

Three Months Ended Nine Months Ended

September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019

Net income attributable to common stockholders $ 3,480 $ 1,234 $ 9,155 $ 6,294

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Consolidated Statement of Changes in Stockholders’ Equity (unaudited)

Six Months Ended June 30, 2020

Nine Months Ended September 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

Additional Paid-In Capital Retained Earnings Unearned Deferred Compensation Accumulated Other Comprehensive Income (Loss) Total Stockholders’ Equity

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 )

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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

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Balance at June 30, 2020 11,150,695 112 127,734 25,759 ( 834 ) 19 152,790

Net income — — — 3,480 — — 3,480

Other comprehensive income, net of tax — — — — — 885 885

Surrender of restricted shares of common stock ( 50 ) — — — — —

Common stock awarded under the equity incentive plan 4,000 — 41 — ( 41 ) — —

Stock option expense — — 3 — — — 3

Amortization of restricted stock — — — — 165 — 165

Balance, September 30, 2020 11,154,645 $ 112 $ 127,778 $ 29,239 $ ( 710 ) $ 904 $ 157,323

See accompanying condensed notes to unaudited consolidated financial statements.

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(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

Additional Paid-In Capital Retained Earnings Unearned Deferred Compensation Accumulated Other Comprehensive Income (Loss) Total Stockholders’ Equity

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

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Equity securities

— — — 45 — ( 45 ) —

Adoption of ASU 2016-02;

— — — ( 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

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Adoption of ASU 2016-02;

— — — ( 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

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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 )

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Consolidated Statements of Cash Flows (unaudited)

Six Months Ended June 30, 2020 and 2019

Nine Months Ended September 30, 2020 and 2019

(in thousands)

Six Months Ended

June 30, 2020

June 30, 2019

Nine Months Ended

September 30, 2020 September 30, 2019

Cash flows from operating activities:

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Net capital expenditures ( 1,975 ) ( 6,149 )

Net cash (disbursed) acquired in business combinations — ( 8,137 )

Proceeds from disposal of office properties and equipment 8 300

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Cash flows from financing activities:

Escrow merger settlement proceeds

Net (decrease) increase in short-term Federal Home Loan Bank advances ( 40,980 ) ( 16,469 )

2 unchanged sentences

Amortization of debt issuance costs 60 —

Proceeds from other borrowings, net of origination costs 14,677 —

Proceeds from other borrowings to fund business combination, net of origination costs — 29,889

1 unchanged sentence

Net increase in deposits 75,076 5,601

Common stock issued in F&M acquisition less capitalized equity costs — 3,105

Repurchase shares of common stock ( 1,838 ) —

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Interest on borrowings $ 2,999 $ 3,966

Income taxes $ 4,820 $ 3,847

Supplemental noncash disclosure:

Transfers from loans receivable to foreclosed and repossessed assets $ 1,057 $ 898

Fair value of assets acquired, net of cash and cash equivalents $ — $ 177,494

Fair value of liabilities assumed, net of cash and cash equivalents $ — $ 169,724

See accompanying condensed notes to unaudited consolidated financial statements.

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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.

In preparing these consolidated financial statements, we evaluated the events and transactions that occurred subsequent to the September 30, 2020 balance sheet date 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.

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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.

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 quarters ended March 31, 2020, June 30, 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.

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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.

Securities are classified as held to maturity when the Company has the positive intent and ability to hold the securities to maturity.

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.

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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.

Changes in fair value are recognized as net 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.

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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.

Also included in other investments 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.

1 unchanged sentence

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 $ 15,075 at September 30, 2020 consisted of $ 8,231 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.

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:

deferred loan fees and costs, accretable yield on acquired loans and non-accretable discount on purchased credit impaired loans.

Interest income is accrued on the unpaid principal balance of these loans.

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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.

Interest on accruing troubled debt restructured (“TDR”) loans is recognized as income as it accrues, based on the revised terms of the loan over an established period of continued payment.

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.

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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.

A loan is impaired when full payment under the loan’s contractual terms is not expected.

All TDRs are individually evaluated for impairment.

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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).

Acquired Loans— Loans acquired in connection with acquisitions are recorded at their acquisition-date fair value with no carryover of related allowance for loan 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 no longer are expected 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.

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.

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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).

The accretable discount 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.

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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.

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 discount 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.

For all acquired loans, the outstanding loan balances less any related accretable discount 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.

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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.

Such gains and losses are included in non-interest income in the consolidated statements of operations.

All sales are made without recourse.

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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

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 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 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.

The Company performed a goodwill impairment analysis as of September 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.

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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.

Non-interest income includes fees from deposit accounts, 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

are recognized when determinable.

Contingent commissions from insurance companies are recognized when determinable.

Commission revenue is included in other non-interest income in the consolidated statement of operations.

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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.

This section provides a summary description of recent ASUs that have potentially 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

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).

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.

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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.

Substantially all of the Company’s interest income and certain non-interest income items 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.

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.

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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.

As of September 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.

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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 Company adopted this ASU, in the first quarter of 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.

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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.

This guidance became effective for the Company beginning in the first quarter of 2020.

Adoption of this ASU had no material impact on its consolidated financial statements.

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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.

In November 2019, the FASB issued ASU 2019-10, extending the effective date to fiscal years beginning after December 15, 2022, which is the Company’s fiscal year ending December 31, 2023.

Earlier adoption is permitted;

however, the Company does not currently plan to

adopt the ASU early.

however, the Company does not currently plan to 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.

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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

June 30, 2020

The amortized cost, estimated fair value and related unrealized gains and losses on securities available for sale and held to maturity as of September 30, 2020 and December 31, 2019, respectively, were as follows:

Available for sale securities Amortized

Losses Estimated

September 30, 2020

government agency obligations $ 34,059 $ 391 $ 71 $ 34,379

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Total available for sale securities $ 180,768 $ 868 $ 1,517 $ 180,119

Held to maturity securities

June 30, 2020

Held to maturity securities Amortized

Losses Estimated

September 30, 2020

Obligations of states and political subdivisions $ 300 $ — $ — $ 300

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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.

The estimated fair value of securities at June 30, 2020 and December 31, 2019 , by contractual maturity, is shown below.

As of September 30, 2020, the Bank has pledged U.S.

Government Agency securities with a carrying value of $ 595 and mortgage-backed securities with a carrying value of $ 3,855 as collateral against specific municipal deposits.

At September 30, 2020, the Bank has pledged mortgage-backed securities with a carrying value of $ 1,299 as collateral against a borrowing line of credit with the Federal Reserve Bank.

However, as of September 30, 2020, there were no borrowings outstanding on this Federal Reserve Bank line of credit.

As of September 30, 2020, the Bank also has mortgage-backed securities with a carrying value of $ 530 pledged as collateral to the Federal Home Loan Bank of Des Moines.

The estimated fair value of securities at September 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

September 30, 2020 December 31, 2019

Available for sale securities Amortized

Cost Estimated

Fair Value Amortized

Cost Estimated

Due in one year or less $ — $ — $ 141 $ 141

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Total available for sale securities $ 149,661 $ 150,908 $ 180,768 $ 180,119

June 30, 2020

December 31, 2019

Held to maturity securities

September 30, 2020 December 31, 2019

Held to maturity securities Amortized

Cost Estimated

Fair Value Amortized

Cost Estimated

Due in one year or less $ 300 $ 300 $ 300 $ 302

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Total held to maturity securities $ 16,927 $ 17,233 $ 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

Available for sale securities

June 30, 2020

Securities with unrealized losses at September 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

September 30, 2020

government agency obligations $ 9,596 $ 24 $ 5,364 $ 47 $ 14,960 $ 71

Mortgage backed securities

Corporate debt securities 2,009 17 1,393 107 3,402 124

1 unchanged sentence

Trust preferred securities 10,963 283 — — 10,963 283

Total $ 22,568 $ 324 $ 40,360 $ 1,092 $ 62,928 $ 1,416

December 31, 2019

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Trust preferred securities 7,420 79 — — 7,420 79

There were no held to maturity securities in a net loss position at either June 30, 2020 or December 31, 2019.

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 September 30, 2020 or December 31, 2019.

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;

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 September 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.

There were no other-than-temporary impairments charged to earnings during the three or nine months ended September 30, 2020 or the three or nine months ended September 30, 2019.

During the three and nine months ended September 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 nine months ended September 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

8 unchanged sentences

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.

Commercial and industrial (“C&I”) 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.

1 unchanged sentence

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.

Operating lines are typically written for one year and secured by the crop and other farm assets or other business 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.

3 unchanged sentences

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.

Credit risk is minimized within the residential mortgage portfolio due to relatively small loan account balances 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.

The Bank ceased new originations of indirect paper loans in early fiscal 2017.

Consumer loan underwriting terms often depend on the collateral type, debt to income ratio and the borrower’s creditworthiness as evidenced by their credit score.

In the event of a consumer installment loan default, collateral value alone may not provide an adequate source of repayment of the outstanding loan balance.

This shortage is a result of the greater likelihood of damage, loss and depreciation for consumer based collateral.

3 unchanged sentences

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 Bank’s loan portfolio ratings are 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:

14 unchanged sentences

This classification does not mean that the loan has absolutely no recovery or salvage value, and a partial recovery may occur in the future.

Below is a summary of originated and acquired loans by type and risk rating as of June 30, 2020 :

Below is a summary of originated and acquired loans by type and risk rating as of September 30, 2020:

1 to 5 6 7 8 9 TOTAL

Originated Loans:

44 unchanged sentences

Other Consumer 14,539 — 91 — — 14,630

Gross loans $ 1,201,185 $ 7,777 $ 32,922 $ — $ — $ 1,241,884

Unearned net deferred fees and costs and loans in process ( 5,033 )

3 unchanged sentences

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:

42 unchanged sentences

Other Consumer 18,053 — 133 — — 18,186

Gross loans $ 1,136,516 $ 10,856 $ 39,892 $ — $ — $ 1,187,264

Unearned net deferred fees and costs and loans in process ( 393 )

12 unchanged sentences

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

Six months ended June 30, 2020

Commercial/Agriculture Real Estate C&I/Agricultural operating Residential Mortgage Consumer Installment Unallocated Total

Three months ended September 30, 2020

Allowance for Loan Losses:

Beginning balance, July 1, 2020 $ 8,297 $ 1,778 $ 980 $ 480 $ 574 $ 12,109

Charge-offs — ( 103 ) ( 4 ) ( 10 ) — ( 117 )

Recoveries 74 — 2 18 — 94

Provision 430 188 ( 15 ) 64 56 723

Total Allowance on originated loans 8,801 1,863 963 552 630 12,809

Purchased credit impaired loans — — — — — —

Other acquired loans:

Beginning balance, July 1, 2020 746 334 112 72 — 1,264

Charge-offs — — ( 47 ) — — ( 47 )

Recoveries 1 30 — 2 — 33

Provision 623 ( 58 ) 199 13 — 777

Total Allowance on other acquired loans 1,370 306 264 87 — 2,027

Total Allowance on acquired loans 1,370 306 264 87 — 2,027

Ending balance, September 30, 2020 $ 10,171 $ 2,169 $ 1,227 $ 639 $ 630 $ 14,836

Commercial/Agriculture Real Estate C&I/Agricultural operating Residential Mortgage Consumer Installment Unallocated Total

Nine months ended September 30, 2020

Allowance for Loan Losses:

Beginning balance, January 1, 2020 $ 6,205 $ 1,643 $ 879 $ 467 $ 357 $ 9,551

Charge-offs — ( 632 ) ( 4 ) ( 124 ) — ( 760 )

Recoveries 74 — 7 55 — 136

Provision 2,522 852 81 154 273 3,882

Total Allowance on originated loans 8,801 1,863 963 552 630 12,809

2 unchanged sentences

Beginning balance, January 1, 2020 526 27 163 53 — 769

Charge-offs — ( 159 ) ( 74 ) ( 2 ) — ( 235 )

Recoveries 77 30 14 4 — 125

Provision 767 408 161 32 — 1,368

Total Allowance on other acquired loans 1,370 306 264 87 — 2,027

Total Allowance on acquired loans 1,370 306 264 87 — 2,027

Ending balance, June 30, 2020

Allowance for Loan Losses at June 30, 2020:

Ending balance, September 30, 2020 $ 10,171 $ 2,169 $ 1,227 $ 639 $ 630 $ 14,836

Allowance for Loan Losses at September 30, 2020:

Amount of allowance for loan losses arising from loans individually evaluated for impairment $ 772 $ 159 $ 249 $ 1 $ — $ 1,181

Amount of allowance for loan losses arising from loans collectively evaluated for impairment $ 9,399 $ 2,010 $ 978 $ 638 $ 630 $ 13,655

Loans Receivable as of June 30, 2020:

Loans Receivable as of September 30, 2020:

Ending balance of originated loans $ 535,698 $ 243,449 $ 96,647 $ 41,756 $ — $ 917,550

6 unchanged sentences

collectively evaluated for impairment $ 759,632 $ 271,221 $ 139,965 $ 42,798 $ — $ 1,213,616

Commercial/Agriculture Real Estate

C&I/Agricultural operating

Residential Mortgage

Consumer Installment

Six months ended June 30, 2019

Commercial/Agriculture Real Estate C&I/Agricultural operating Residential Mortgage Consumer Installment Unallocated Total

Three months ended September 30, 2019

Allowance for Loan Losses:

Beginning balance, July 1, 2019 $ 5,010 $ 1,470 $ 977 $ 528 $ 299 $ 8,284

Charge-offs — — ( 89 ) ( 36 ) — ( 125 )

Recoveries — — — 17 — 17

Provision 281 130 117 ( 12 ) 2 518

Total Allowance on originated loans 5,291 1,600 1,005 497 301 8,694

Purchased credit impaired loans — — — — — —

Other acquired loans:

Beginning balance, July 1, 2019 181 85 153 56 — 475

Charge-offs — — ( 45 ) ( 9 ) — ( 54 )

Recoveries — — 1 4 — 5

Provision ( 10 ) 2 61 4 — 57

Total Allowance on other acquired loans 171 87 170 55 — 483

Total Allowance on acquired loans 171 87 170 55 — 483

Ending balance, September 30, 2019 $ 5,462 $ 1,687 $ 1,175 $ 552 $ 301 $ 9,177

Commercial/Agriculture Real Estate C&I/Agricultural operating Residential Mortgage Consumer Installment Unallocated Total

Nine months ended September 30, 2019

Allowance for Loan Losses:

Beginning balance, January 1, 2019 $ 4,019 $ 1,258 $ 1,048 $ 641 $ 214 $ 7,180

Charge-offs ( 225 ) — ( 119 ) ( 142 ) — ( 486 )

Recoveries — — — 53 — 53

Provision 1,497 342 76 ( 55 ) 87 1,947

Total Allowance on originated loans $ 5,291 $ 1,600 $ 1,005 $ 497 $ 301 $ 8,694

2 unchanged sentences

Beginning balance, January 1, 2019 183 32 205 65 ( 61 ) 424

Charge-offs — — ( 105 ) ( 29 ) — ( 134 )

Recoveries 3 — 2 10 — 15

Provision ( 15 ) 55 68 9 61 178

Total Allowance on other acquired loans 171 87 170 55 — 483

Total Allowance on acquired loans 171 87 170 55 — 483

Ending balance, June 30, 2019

Allowance for Loan Losses at June 30, 2019:

Ending balance, September 30, 2019 $ 5,462 $ 1,687 $ 1,175 $ 552 $ 301 $ 9,177

Allowance for Loan Losses at September 30, 2019:

Amount of allowance for loan losses arising from loans individually evaluated for impairment $ 205 $ 252 $ 191 $ 15 $ — $ 663

Amount of allowance for loan losses arising from loans collectively evaluated for impairment $ 5,257 $ 1,435 $ 984 $ 537 $ 301 $ 8,514

Loans Receivable as of June 30, 2019:

Loans Receivable as of September 30, 2019:

Ending balance of originated loans $ 401,211 $ 102,998 $ 124,627 $ 58,612 $ — $ 687,448

7 unchanged sentences

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

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

Commercial/Agriculture Real Estate Loans C&I/Agricultural Operating Residential Mortgage Consumer Installment Totals

September 30, 2020 December 31, 2019 September 30, 2020 December 31, 2019 September 30, 2020 December 31, 2019 September 30, 2020 December 31, 2019 September 30, 2020 December 31, 2019

Performing loans

6 unchanged sentences

Total nonperforming loans 8,014 13,273 2,504 3,552 3,468 3,118 118 217 14,104 20,160

Total loans $ 772,822 $ 773,240 $ 277,496 $ 171,514 $ 148,401 $ 184,739 $ 43,165 $ 57,771 $ 1,241,884 $ 1,187,264

(1) Nonperforming loans are either 90+ days past due or nonaccrual.

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

Past Due and Accruing

Nonaccrual Loans

Total Past Due Accruing and Nonaccrual Loans

June 30, 2020

As of September 30, 2020, the Company had $ 260.8 million in unused commitments, compared to $ 246.7 million in unused commitments as of December 31, 2019.

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 September 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

September 30, 2020

Commercial/Agricultural real estate:

13 unchanged sentences

Other Consumer 63 15 1 79 26 105 14,525 14,630

Total $ 3,694 $ 2,161 $ 950 $ 6,805 $ 13,154 $ 19,959 $ 1,221,925 $ 1,241,884

December 31, 2019

8 unchanged sentences

Residential mortgage:

One to four family

Residential mortgage 4,929 1,597 649 7,175 2,063 9,238 167,094 176,332

Purchased HELOC loans 293 378 407 1,078 — 1,078 7,329 8,407

Consumer installment:

1 unchanged sentence

Other Consumer 204 43 28 275 31 306 17,880 18,186

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.

Total $ 10,440 $ 2,966 $ 1,104 $ 14,510 $ 19,056 $ 33,566 $ 1,153,698 $ 1,187,264

At September 30, 2020, the Company has identified impaired loans of $ 51,689 , consisting of $ 19,778 TDR loans, the carrying amount of purchased credit impaired loans of $ 23,422 and $ 8,489 of substandard non-TDR loans.

The $ 51,689 total of impaired loans includes $ 12,579 of performing TDR loans.

3 unchanged sentences

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

A summary of the Company’s impaired loans as of September 30, 2020, December 31, 2019 and September 30, 2019 was as follows:

Three Months Ended Nine Months Ended

Recorded Investment Unpaid Principal Balance Related Allowance Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized

September 30, 2020

With No Related Allowance Recorded:

3 unchanged sentences

Consumer installment 363 363 — 363 6 371 23

Total $ 46,357 $ 46,357 $ — $ 46,445 $ 602 $ 52,712 $ 1,941

With An Allowance Recorded:

3 unchanged sentences

Consumer installment 3 3 1 9 — 35 —

June 30, 2020 Totals:

Total $ 5,332 $ 5,332 $ 1,181 $ 5,245 $ 55 $ 4,732 $ 121

September 30, 2020 Totals:

Commercial/agriculture real estate $ 33,596 $ 33,596 $ 772 $ 33,941 $ 502 $ 38,127 $ 1,447

2 unchanged sentences

Consumer installment 366 366 1 372 6 406 23

Recorded Investment

Unpaid Principal Balance

Related Allowance

Average Recorded Investment

Interest Income Recognized

Total $ 51,689 $ 51,689 $ 1,181 $ 51,690 $ 657 $ 57,444 $ 2,062

Recorded Investment Unpaid Principal Balance Related Allowance

December 31, 2019

4 unchanged sentences

Consumer installment 379 379 —

Total $ 59,065 $ 59,065 $ —

With An Allowance Recorded:

3 unchanged sentences

Consumer installment 67 67 13

Total $ 4,131 $ 4,131 $ 956

December 31, 2019 Totals

3 unchanged sentences

Consumer installment 446 446 13

Recorded Investment

Unpaid Principal Balance

Related Allowance

Average Recorded Investment

Interest Income Recognized

June 30, 2019

Total $ 63,196 $ 63,196 $ 956

Three Months Ended Nine Months Ended

Recorded Investment Unpaid Principal Balance Related Allowance Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized

September 30, 2019

With No Related Allowance Recorded:

3 unchanged sentences

Consumer installment 358 358 — 300 7 292 24

Total $ 63,579 $ 63,579 $ — $ 55,034 $ 1,035 $ 54,215 $ 3,149

With An Allowance Recorded:

3 unchanged sentences

Consumer installment 62 62 15 85 — 104 2

June 30, 2019 Totals:

Total $ 3,835 $ 3,835 $ 663 $ 3,385 $ 24 $ 3,160 $ 75

September 30, 2019 Totals:

Commercial/agriculture real estate $ 45,541 $ 45,541 $ 205 $ 38,108 $ 721 $ 37,686 $ 2,212

2 unchanged sentences

Consumer installment 420 420 15 385 7 396 26

Total $ 67,414 $ 67,414 $ 663 $ 58,419 $ 1,059 $ 57,375 $ 3,224

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.

Concessions may include:

extension of the loan’s term, 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

There were three delinquent accruing TDRs greater than 60 days past due with a recorded investment of $ 310 at September 30, 2020, compared to two such loans with a recorded investment of $ 101 at December 31, 2019.

Following is a summary of TDR loans by accrual status as of September 30, 2020 and December 31, 2019.

September 30, 2020 December 31, 2019

Troubled debt restructure loans:

1 unchanged sentence

Non-accrual status 7,199 7,198

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.

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

Pre-Modification Outstanding Recorded Investment

Post-Modification Outstanding Recorded Investment

Specific Reserve

Six months ended June 30, 2020

Total $ 19,778 $ 12,594

There was one loan commitment meeting our TDR criteria as of September 30, 2020 totaling $ 17 and no loan commitments meeting our TDR criteria as of December 31, 2019.

There were unused lines of credit totaling $ 85 and $ 12 meeting our TDR criteria as of September 30, 2020 and December 31, 2019, respectively.

The following provides detail, including specific reserve and reasons for modification, related to loans identified as TDRs during the three and nine months ended September 30, 2020 and September 30, 2019:

Number of Contracts Maturity Extension Modified Payment Modified Under- writing Other Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment Specific Reserve

Three months ended September 30, 2020

Commercial/agriculture real estate 3 $ 3,550 $ — $ 276 $ — $ 3,826 $ 3,826 $ —

2 unchanged sentences

Consumer installment — — — — — — — —

Number of Contracts

Modified Rate

Modified Payment

Modified Under- writing

Pre-Modification Outstanding Recorded Investment

Post-Modification Outstanding Recorded Investment

Specific Reserve

Six months ended June 30, 2019

Totals 13 $ 6,609 $ 500 $ 308 $ — $ 7,417 $ 7,417 $ —

Nine months ended September 30, 2020

Commercial/agriculture real estate 12 $ 4,442 $ 198 $ 293 $ — $ 4,933 $ 4,933 $ —

2 unchanged sentences

Consumer installment 2 3 — 4 — 7 7 —

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

Modifications

Totals 32 $ 7,888 $ 1,134 $ 414 $ — $ 9,436 $ 9,436 $ —

Three months ended September 30, 2019

Commercial/agriculture real estate 7 $ 1,987 $ — $ 25 $ — $ 2,012 $ 2,012 $ —

C&I/Agricultural operating 1 — — 60 — 60 60 —

Residential mortgage 2 106 — — — 106 106 —

Consumer installment — — — — — — — —

Totals 10 $ 2,093 $ — $ 85 $ — $ 2,178 $ 2,178 $ —

Nine months ended September 30, 2019

Commercial/agriculture real estate 14 $ 2,005 $ 78 $ 1,215 $ — $ 3,298 $ 3,298 $ —

C&I/Agricultural operating 7 165 364 469 — 998 998 —

Residential mortgage 9 431 — 171 — 602 602 —

Consumer installment 1 2 — — — 2 2 —

Totals 31 $ 2,603 $ 442 $ 1,855 $ — $ 4,900 $ 4,900 $ —

A summary of loans by loan segment modified in a troubled debt restructuring as of September 30, 2020 and September 30, 2019, was as follows:

September 30, 2020 September 30, 2019

Modifications Recorded

Investment Number of

Modifications Recorded

Troubled debt restructurings:

4 unchanged sentences

Total troubled debt restructurings 108 $ 19,778 93 $ 11,795

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

Modifications

The following table provides information related to restructured loans that were considered in default as of September 30, 2020 and September 30, 2019:

September 30, 2020 September 30, 2019

Modifications Recorded

Investment Number of

Modifications Recorded

Troubled debt restructurings:

Commercial/agriculture real estate 15 $ 5,037 9 $ 2,343

Commercial/agricultural non-real estate

Residential real estate

C&I/Agricultural operating 12 1,490 12 1,914

Residential mortgage 8 672 3 344

Total troubled debt restructurings 35 $ 7,199 24 $ 4,601

The following table provides information related to restructured loans that became in default during the three months ended September 30, 2020 and September 30, 2019:

September 30, 2020 September 30, 2019

Modifications Recorded

Investment Number of

Modifications Recorded

Troubled debt restructurings:

Commercial/agriculture real estate — $ — 2 $ 120

Residential mortgage 2 234 — —

Total troubled debt restructurings 2 $ 234 2 $ 120

The following table provides information related to restructured loans that became in default during the nine months ended September 30, 2020 and September 30, 2019:

September 30, 2020 September 30, 2019

Modifications Recorded

Investment Number of

Modifications Recorded

Troubled debt restructurings:

Commercial/agriculture real estate 2 $ 140 7 $ 227

C&I/Agricultural operating 1 78 4 857

Residential mortgage 3 279 — —

Total troubled debt restructurings 6 $ 497 11 $ 1,084

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

September 30, 2020 December 31, 2019

Accountable for under ASC 310-30 (Purchased Credit Impaired “PCI” loans)

8 unchanged sentences

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

September 30, 2020 September 30, 2019

Accretable discount, beginning of period $ 3,201 $ 3,163

Additions to accretable discount for acquired performing loans — 814

Accelerated accretion from payoff of certain PCI loans with transferred non-accretable differences

Accelerated accretion from payoff of certain PCI loans with transferred non-accretable difference ( 99 ) —

Transfers from non-accretable difference to accretable discount 2,704 80

1 unchanged sentence

Accretable discounts, end of period $ 5,050 $ 3,435

Non-accretable difference on purchase credit impaired loans was $ 3,355 and $ 6,290 at June 30, 2020 and December 31, 2019, respectively.

Non-accretable difference on purchase credit impaired loans was $ 1,661 and $ 6,290 at September 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.

The unpaid balances of these loans as of September 30, 2020 and December 31, 2019 were $ 555,700 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

Custodial escrow balances maintained in connection with the foregoing loan servicing, and included in deposits were $ 6,753 and $ 2,868 , at September 30, 2020 and December 31, 2019, respectively.

Mortgage servicing rights activity for the nine month period ended September 30, 2020 and twelve months ended December 31, 2019 were as follows:

As of and for the Nine Months Ended As of and for the Twelve Months Ended

Mortgage servicing rights:

June 30, 2020

December 31, 2019

September 30, 2020 December 31, 2019

Mortgage servicing assets, net;

5 unchanged sentences

Balance at beginning of period ( 259 ) —

Additions ( 1,422 ) ( 259 )

Recoveries — —

Write-downs — —

Balance at end of period ( 1,681 ) ( 259 )

7 unchanged sentences

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

Our leases have remaining lease terms ranging from approximately 3 months to 8 years, some of which include options to extend the leases for up to 5 additional years.

As of September 30, 2020, we have no additional lease commitments that have not yet commenced.

Nine Months Ended

September 30, 2020 September 30, 2019

Supplemental cash flow information related to leases was as follows:

3 unchanged sentences

Operating leases $ — $ 158

June 30, 2020

December 31, 2019

September 30, 2020 December 31, 2019

Supplemental balance sheet information related to leases was as follows:

7 unchanged sentences

Fiscal years ending December 31,

Thereafter 1,229

effects of discounting ( 554 )

1 unchanged sentence

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

The following is a summary of deposits by type at September 30, 2020 and December 31, 2019, respectively:

September 30, 2020 December 31, 2019

Non-interest bearing demand deposits $ 229,217 $ 168,157

5 unchanged sentences

Brokered deposits included above:

At June 30, 2020 , the scheduled maturities of time deposits were as follows:

June 30, 2021

June 30, 2022

June 30, 2023

June 30, 2024

June 30, 2025

After June 30, 2025

$ 3,250 $ 50,377

At September 30, 2020, the scheduled maturities of time deposits were as follows:

September 30, 2021 $ 216,854

September 30, 2022 96,391

September 30, 2023 6,669

September 30, 2024 2,976

September 30, 2025 861

After September 30, 2025 —

Total $ 323,751

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

Range of Stated Rates

A summary of Federal Home Loan Bank advances and other borrowings at September 30, 2020 and December 31, 2019 is as follows:

September 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 ( 39 ) ( 59 )

2 unchanged sentences

Subordinated Notes (7) 2027 $ 15,000 6.75 % 6.75 % $ 15,000 6.75 % 6.75 %

2030 15,000 6.00 % 6.00 %

Unamortized debt issuance costs $ ( 559 ) $ ( 296 )

Total other borrowings $ 58,297 $ 43,560

(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.

Totals $ 182,788 $ 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 $ 681,951 and $ 792,909 at September 30, 2020 and December 31, 2019, respectively.

At September 30, 2020, the Bank’s available and unused portion under the FHLB borrowing arrangement was approximately $ 105,858 compared to $ 203,935 as of December 31, 2019.

(2) Maximum month-end borrowed amounts outstanding under this borrowing agreement were $ 162,530 and $ 151,530 , during the nine months ended September 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 September 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 14 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.

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(b) A $ 5,000 line of credit, maturing in August 2021, that remains undrawn upon.

(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 .

(7) Subordinated notes resulted from the following:

(a) The Company’s private sale in August 2017, which bears 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.

(b) The Company’s Subordinated Note Purchase Agreement entered into with certain purchasers in August 2020, which bears a fixed interest rate of 6.00 % for five years .

In September 2025, the fixed interest rate will be reset quarterly to equal the three-month term Secured Overnight Financing Rate plus 591 basis points.

Interest-only payments are due semi-annually each year during the fixed interest period and quarterly during the floating interest period.

Federal Home Loan Bank Letters of Credit

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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.

These balances were $ 180,325 and $ 147,991 at September 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.

The Bank has originated Small Business Association’s Paycheck 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 September 30, 2020 and December 31, 2019.

Maximum month-end borrowed amounts outstanding under this agreement were $ 25,136 and $ 0 , during the nine months ended September 30, 2020 and the twelve months ended December 31, 2019, respectively.

NOTE 8 - CAPITAL MATTERS

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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:

For Capital Adequacy

To Be Well Capitalized

At September 30, 2020, the Bank was categorized as “Well Capitalized”, under Prompt Corrective Action Provisions.

The Bank’s Tier 1 (leverage) and risk-based capital ratios at September 30, 2020 and December 31, 2019, respectively, are presented below:

Actual For Capital Adequacy

Purposes To Be Well Capitalized

Under Prompt Corrective

Action Provisions

As of June 30, 2020

Amount Ratio Amount Ratio Amount Ratio

As of September 30, 2020

Total capital (to risk weighted assets) $ 170,610 15.0 % $ 91,021 > = 8.0 % $ 113,776 > = 10.0 %

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Tier 1 leverage ratio (to adjusted total assets) 149,982 10.4 % 57,834 > = 4.0 % 72,293 > = 5.0 %

The Company’s Tier 1 (leverage) and risk-based capital ratios at June 30, 2020 and December 31, 2019 , respectively, are presented below:

For Capital Adequacy

To Be Well Capitalized

The Company’s Tier 1 (leverage) and risk-based capital ratios at September 30, 2020 and December 31, 2019, respectively, are presented below:

Actual For Capital Adequacy

Purposes To Be Well Capitalized

Under Prompt Corrective

Action Provisions

As of June 30, 2020

Total capital (to risk weighted assets)

Tier 1 capital (to risk weighted assets)

Common equity tier 1 capital (to risk weighted assets)

Tier 1 leverage ratio (to adjusted total assets)

Amount Ratio Amount Ratio Amount Ratio

As of September 30, 2020

Total capital (to risk weighted assets) $ 163,250 14.3 % $ 91,021 > = 8.0 % N/A N/A

Tier 1 capital (to risk weighted assets) 119,028 10.5 % 68,266 > = 6.0 % N/A N/A

Common equity tier 1 capital (to risk weighted assets) 119,028 10.5 % 51,199 > = 4.5 % N/A N/A

Tier 1 leverage ratio (to adjusted total assets) 119,028 7.5 % 63,465 > = 4.0 % N/A N/A

As of December 31, 2019

Total capital (to risk weighted assets)

Tier 1 capital (to risk weighted assets)

Common equity tier 1 capital (to risk weighted assets)

Tier 1 leverage ratio (to adjusted total assets)

Total capital (to risk weighted assets) $ 137,259 11.2 % $ 98,174 > = 8.0 % N/A N/A

Tier 1 capital (to risk weighted assets) 111,939 9.1 % 73,631 > = 6.0 % N/A N/A

Common equity tier 1 capital (to risk weighted assets) 111,939 9.1 % 55,223 > = 4.5 % N/A N/A

Tier 1 leverage ratio (to adjusted total assets) 111,939 7.7 % 57,834 > = 4.0 % N/A N/A

NOTE 9 – STOCK-BASED COMPENSATION

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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.

As of September 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.

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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 .

As of September 30, 2020, 99,575 restricted shares had been granted under this plan.

As of September 30, 2020, no stock options had been granted under this plan.

Net compensation expense related to restricted stock awards from these plans was $ 165 and $ 462 for the three and nine months ended September 30, 2020, compared to $ 127 and $ 370 for the three and nine months ended September 30, 2019.

Restricted Common Stock Award

June 30, 2020

December 31, 2019

Number of Shares

September 30, 2020 December 31, 2019

Number of Shares Weighted

Grant Price Number of Shares Weighted

Restricted Shares

Unvested and outstanding at beginning of year 43,457 $ 12.76 75,407 $ 13.24

Granted 45,507 11.79 12,847 11.50

Vested ( 14,545 ) 12.78 ( 32,630 ) 12.89

Forfeited — — ( 12,167 ) 13.28

Unvested and outstanding at end of year 74,419 $ 12.16 43,457 $ 12.76

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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.

The compensation cost recognized for stock-based employee compensation related to these plans for the three and nine month periods ended September 30, 2020 was $ 3 and $ 11 , respectively.

The compensation cost recognized for stock-based employee compensation related to these plans for the three and nine month periods ended September 30, 2019 was $ 5 and $ 14 , respectively.

Common Stock Option Awards

Option Shares

June 30, 2020

Option Shares Weighted

Price Weighted

Term Aggregate

September 30, 2020

Outstanding at beginning of year 78,100 $ 11.18

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Outstanding at beginning of year 108,930 $ 10.15

Exercised ( 28,430 ) 7.12

Forfeited or expired ( 2,400 ) 12.38

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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

Nine months ended September 30, 2020 Twelve months ended December 31, 2019

Intrinsic value of options exercised $ — $ 130

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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 :

Quoted Prices in

The following tables present the financial instruments measured at fair value on a recurring basis as of September 30, 2020 and December 31, 2019:

Value Quoted Prices in

Active Markets

for Identical

June 30, 2020

(Level 1) Significant

(Level 2) Significant

September 30, 2020

Investment securities:

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Trust preferred securities 13,724 — 13,724 —

Total $ 150,908 150908000 $ — $ 150,908 $ —

December 31, 2019

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Trust preferred securities 11,123 — 11,123 —

Total $ 180,119 $ — $ 180,119 $ —

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

The following tables present the financial instruments measured at fair value on a nonrecurring basis as of September 30, 2020 and December 31, 2019:

Carrying Value Quoted Prices in

Active Markets

for Identical

June 30, 2020

(Level 1) Significant

(Level 2) Significant

September 30, 2020

Foreclosed and repossessed assets, net $ 812 $ — $ — $ 812

1 unchanged sentence

Mortgage servicing rights 3,498 — — 3,509

Total $ 8,461 $ — $ — $ 8,472

December 31, 2019

2 unchanged sentences

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.

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recurring and nonrecurring basis and for which we have utilized Level 3 inputs to determine their fair value at

June 30, 2020 .

Valuation Techniques (1)

Significant Unobservable Inputs (2)

June 30, 2020

Foreclosed and repossessed assets, net

Appraisal value

Estimated costs to sell

Impaired loans with allocated allowances

Appraisal value

Estimated costs to sell

Mortgage servicing rights

Discounted cash flows

Discounted rates

September 30, 2020.

Value Valuation Techniques (1) Significant Unobservable Inputs (2) Range

September 30, 2020

Foreclosed and repossessed assets, net $ 812 Appraisal value Estimated costs to sell 10 - 15%

Impaired loans with allocated allowances $ 4,151 Appraisal value Estimated costs to sell 10 - 15%

Mortgage servicing rights $ 3,509 Discounted cash flows Discounted rates 9 - 12%

December 31, 2019

Foreclosed and repossessed assets, net

Appraisal value

Estimated costs to sell

Impaired loans with allocated allowances

Appraisal value

Estimated costs to sell

Mortgage servicing rights

Discounted cash flows

Discounted rates

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

5 unchanged sentences

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

September 30, 2020 December 31, 2019

Valuation Method Used Carrying

Amount Estimated

Value Carrying

Amount Estimated

Financial assets:

Cash and cash equivalents

Other interest-bearing deposits

Securities available for sale “AFS”

Securities held to maturity “HTM”

Equity securities with readily determinable fair value

Other investments

Loans receivable, net

Loans held for sale

Mortgage servicing rights

Accrued interest receivable

Cash and cash equivalents (Level I) $ 115,474 $ 115,474 $ 55,840 $ 55,840

Other interest-bearing deposits (Level II) 3,752 3,838 4,744 4,792

Securities available for sale “AFS” (Level II) 150,908 150,908 180,119 180,119

Securities held to maturity “HTM” (Level II) 16,927 17,233 2,851 2,957

Equity securities with readily determinable fair value (Level I) 187 187 246 246

Other investments (Level II) 15,075 15,075 15,005 15,005

Loans receivable, net (Level III) 1,215,303 1,204,923 1,167,060 1,161,660

Loans held for sale (Level II) 4,938 4,938 5,893 5,893

Mortgage servicing rights (Level III) 3,498 3,509 4,282 4,309

Accrued interest receivable (Level 1) 5,829 5,829 4,738 4,738

Financial liabilities:

FHLB advances

Other borrowings

Accrued interest payable

Deposits (Level III) $ 1,270,778 $ 1,275,000 $ 1,195,702 $ 1,192,777

FHLB advances (Level II) 124,491 129,798 130,971 131,593

Other borrowings (Level I) 58,297 58,297 43,560 43,560

Accrued interest payable (Level I) 517 517 453 453

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:

nine months ended September 30, 2020 and 2019:

Three months ended

June 30, 2020

June 30, 2019

September 30, 2020 September 30, 2019

Expense Net-of-Tax

Amount Before-Tax

Expense Net-of-Tax

Unrealized gains on securities:

2 unchanged sentences

Other comprehensive income $ 1,220 $ ( 335 ) $ 885 $ 440 $ ( 121 ) $ 319

Six months ended

June 30, 2020

June 30, 2019

Nine months ended

September 30, 2020 September 30, 2019

Expense Net-of-Tax

Amount Before-Tax

Expense Net-of-Tax

Unrealized gains on securities:

2 unchanged sentences

Other comprehensive income $ 1,896 $ ( 521 ) $ 1,375 $ 2,977 $ ( 819 ) $ 2,158

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:

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 nine months ended September 30, 2020 were as follows:

Gains (Losses)

Other Accumulated

Securities Other Accumulated

Comprehensive

5 unchanged sentences

Ending balance, December 31, 2019 $ ( 649 ) $ ( 471 )

Current year-to-date other comprehensive loss

Ending balance, June 30, 2020

Current year-to-date other comprehensive income 1,896 1,375

Ending balance, September 30, 2020 $ 1,247 $ 904

(1) Amounts reclassified to retained earnings due to January 1, 2019 adoption of ASU 2016-02.

1 unchanged sentence

Recent Pronouncements-Adopted”.

Reclassifications out of accumulated other comprehensive income (loss) for the three and six months ended June 30, 2020 were as follows:

Reclassifications out of accumulated other comprehensive income (loss) for the three and nine months ended September 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

Affected Line Item on the Statement of Operations

Details about Accumulated Other Comprehensive Income (Loss) Components Three months ended September 30, 2020 Nine months ended September 30, 2020 (1) Affected Line Item on the Statement of Operations

Unrealized gains and losses

Sale of securities

Net gains on investment securities

Provision for income taxes

Total reclassifications for the period

Net gain attributable to common shareholders

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:

Reclassifications out of accumulated other comprehensive income (loss) for the three and nine months ended September 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

Affected Line Item on the Statement of Operations

Details about Accumulated Other Comprehensive Income (Loss) Components Three months ended September 30, 2019 Nine months ended September 30, 2019 (1) Affected Line Item on the Statement of Operations

Unrealized gains and losses

Sale of securities

Net gains on investment securities

Provision for income taxes

Total reclassifications for the period

Net gain attributable to common shareholders

Sale of securities $ — $ 26 Net gains on investment securities

Tax Effect — ( 7 ) Provision for income taxes

Total reclassifications for the period $ — $ 19 Net gain attributable to common shareholders

(1) Amounts in parentheses indicate decreases to profit/loss.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements