What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-05-06 compared with 2020-11-06 · 344 added, 402 removed, 1046 unchanged (42% of the section changed)

2 unchanged sentences

Consolidated Balance Sheets

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

March 31, 2021 (unaudited) and December 31, 2020

(derived from audited financial statements)

(in thousands, except share and per share data)

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

Cash and cash equivalents $ 196,039 $ 119,440

8 unchanged sentences

Loans held for sale 2,267 3,075

Mortgage servicing rights 3,498 4,282

Mortgage servicing rights, net 3,999 3,252

Office properties and equipment, net 21,081 21,165

18 unchanged sentences

Unearned deferred compensation ( 1,239 ) ( 550 )

Accumulated other comprehensive income (loss) 904 ( 471 )

Accumulated other comprehensive income 1,004 1,490

Total stockholders’ equity 160,662 160,564

3 unchanged sentences

Consolidated Statements of Operations (unaudited)

Three and Nine Months Ended September 30, 2020 and 2019

Three Months Ended March 31, 2021 and 2020

(in thousands, except per share data)

Three Months Ended Nine Months Ended

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

Three Months Ended

March 31, 2021 March 31, 2020

Interest and dividend income:

17 unchanged sentences

Insurance commission income — 279

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 —

Net gains on investment securities 235 73

Other 247 285

3 unchanged sentences

Occupancy 1,316 1,374

Office 532 599 1,650 1,649

Data processing 1,342 1,192

Amortization of intangible assets 399 412

Mortgage servicing rights expense 603 325 2,330 822

Mortgage servicing rights expense, net ( 450 ) 736

Advertising, marketing and public relations 163 239

14 unchanged sentences

Consolidated Statements of Comprehensive Income (unaudited)

Three and Nine months ended September 30, 2020 and 2019

Three months ended March 31, 2021 and 2020

(in thousands)

Three Months Ended Nine Months Ended

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

Three Months Ended

March 31, 2021 March 31, 2020

Net income attributable to common stockholders $ 5,506 $ 2,606

Other comprehensive income, net of tax:

Other comprehensive loss, net of tax:

Securities available for sale

Net unrealized gains arising during period 885 319 1,488 2,177

Reclassification adjustment for net gains included in net income — — ( 113 ) ( 19 )

Other comprehensive income 885 319 1,375 2,158

Net unrealized losses arising during period ( 486 ) ( 1,191 )

Reclassification adjustment for net gains included in net income, net of tax — 53

Other comprehensive loss ( 486 ) ( 1,138 )

Comprehensive income $ 5,020 $ 1,468

2 unchanged sentences

Consolidated Statement of Changes in Stockholders’ Equity (unaudited)

Nine Months Ended September 30, 2020

Three Months Ended March 31, 2021

(in thousands, except shares and per share data)

3 unchanged sentences

Net income — — — 5,506 — — 5,506

Other comprehensive income, net of tax — — — — — ( 1,138 ) ( 1,138 )

Other comprehensive loss, net of tax — — — — — ( 486 ) ( 486 )

Forfeiture of unvested shares ( 1,500 ) — ( 16 ) — 16 — —

Surrender of restricted shares of common stock ( 895 ) — ( 10 ) — — — ( 10 )

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 )

Restricted common stock awarded under the equity incentive plan 64,399 — 876 — ( 876 ) — —

Common stock repurchased - canceled/retired ( 224,481 ) ( 2 ) ( 2,552 ) ( 21 ) — — ( 2,575 )

Stock option expense — — 3 — — — 3

3 unchanged sentences

Balance at March 31, 2021 10,893,872 $ 109 $ 125,005 $ 35,783 $ ( 1,239 ) $ 1,004 $ 160,662

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

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.

8 unchanged sentences

Other comprehensive income, net of tax — — — — — ( 1,138 ) ( 1,138 )

Forfeiture of unvested shares ( 958 ) — ( 13 ) — 13 — —

Surrender of restricted shares of common stock ( 1,746 ) — ( 21 ) — — ( 21 )

Common stock awarded under the equity incentive plan 10,847 — 252 — ( 252 ) — —

Common stock options exercised 27,430 1 194 — — — 195

Restricted 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

Adoption of ASU 2016-01 ;

Equity securities

— — — 45 — ( 45 ) —

Adoption of ASU 2016-02;

— — — ( 56 ) — — ( 56 )

Cash dividends ($ 0.21 per share)

3 unchanged sentences

Other comprehensive income, net of tax — — — — — 1,628 1,628

Forfeiture of unvested shares ( 7,958 ) — ( 118 ) — 118 — —

Surrender of restricted shares of common stock ( 314 ) — ( 2 ) — — — ( 2 )

Common stock awarded under the equity incentive plan 2,000 — 22 — ( 22 ) — —

Common stock options exercised 1,000 — 8 — — — 8

Stock option expense — — 4 — — — 4

Amortization of restricted stock — — — — 158 — 158

Adoption of ASU 2016-02;

— — — ( 1 ) — — ( 1 )

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

2 unchanged sentences

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

Common stock issued to F&M shareholders 288,999 3 3,102 — — — 3,105

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

Stock option expense — — 3 — — — 3

3 unchanged sentences

Other comprehensive income, net of tax — — — — — 586 586

Forfeiture of unvested shares ( 3,251 ) — ( 68 ) — 68 — —

Unrealized performance-based restricted common stock awards — — ( 92 ) — 92 — —

Surrender of restricted shares of common stock ( 531 ) — ( 4 ) — — — ( 4 )

Common stock repurchased ( 97,765 ) ( 1 ) ( 981 ) — — — ( 982 )

Stock option expense — — 3 — — — 3

4 unchanged sentences

Consolidated Statements of Cash Flows (unaudited)

Nine Months Ended September 30, 2020 and 2019

Three Months Ended March 31, 2021 and 2020

(in thousands)

Nine Months Ended

September 30, 2020 September 30, 2019

Three Months Ended

March 31, 2021 March 31, 2020

Cash flows from operating activities:

4 unchanged sentences

Provision for loan losses — 2,000

Net realized loss (gain) on equity securities 59 ( 125 )

Net realized (gain) loss on equity securities ( 235 ) 83

Net realized gain on debt securities — ( 156 )

Increase in MSR assets resulting from transfers of financial assets ( 297 ) ( 182 )

Mortgage servicing rights expense 2,330 822

Mortgage servicing rights expense, net ( 450 ) 736

Amortization of intangible assets 399 412

1 unchanged sentence

Net stock based compensation expense 3 4

Loss (gain) on sale of office properties and equipment 30 ( 32 )

Loss on sale of office properties and equipment 6 —

Deferred income taxes 765 ( 150 )

Increase in cash surrender value of life insurance ( 153 ) ( 142 )

Net (gain) loss from disposals of foreclosed and repossessed assets ( 195 ) ( 143 )

Net gain from disposals of foreclosed and repossessed assets ( 117 ) ( 68 )

Gain on sale of loans held for sale, net ( 1,595 ) ( 780 )

2 unchanged sentences

Increase (decrease) in other liabilities 6,248 ( 340 )

Net gain on sale of insurance agency ( 252 ) —

Total adjustments 8,023 6,653

6 unchanged sentences

Proceeds from principal payments and maturities of held to maturity securities 2,629 142

Net sales of other investments ( 70 ) 1,084

Proceeds from sale of foreclosed and repossessed assets 2,098 2,238

Net increase in loans ( 54,748 ) ( 6,710 )

Net purchases (sales) of other investments 17 6

Proceeds from sales of foreclosed and repossessed assets 312 997

Net decrease (increase) in loans 45,189 ( 4,957 )

Net capital expenditures ( 462 ) ( 423 )

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

Proceeds from disposal of office properties and equipment 10 —

Net proceeds from sale of insurance agency 1,128 —

Net cash used in investing activities ( 35,536 ) ( 10,069 )

Net cash (used in) provided by investing activities ( 8,687 ) 3,604

Cash flows from financing activities:

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

Net decrease in short-term Federal Home Loan Bank advances — ( 64,994 )

Long-term Federal Home Loan Bank advances — 57,500

Long-term Federal Home Loan Bank maturities ( 32,000 ) —

Federal Home Loan Bank advance termination payments ( 8,119 ) —

Amortization of debt issuance costs 26 16

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

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

Principal payment reduction to other borrowings — ( 10,000 )

Net increase in deposits 75,076 5,601

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

Net increase (decrease) in deposits 84,946 ( 15,647 )

Repurchase shares of common stock ( 2,575 ) ( 1,838 )

Surrender of restricted shares of common stock ( 10 ) ( 21 )

Common stock options exercised — 203

Cash dividends paid ( 2,511 ) ( 2,372 )

Net cash provided by financing activities 79,100 10,084

Net (decrease) increase in cash and cash equivalents 59,634 6,498

Net cash provided by (used in) financing activities 71,757 ( 27,356 )

Net increase (decrease) in cash and cash equivalents 76,599 ( 14,493 )

Cash and cash equivalents at beginning of period 119,440 55,840

6 unchanged sentences

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

Transfers from loans receivable to other real estate owned ("OREO") $ 45 $ 879

See accompanying condensed notes to unaudited consolidated financial statements.

2 unchanged sentences

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.

The consolidated financial statements of Citizens Community Federal N.A.

(the “Bank”) included herein have been included by its parent company, Citizens Community Bancorp, Inc.

(the “Company”) 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.

5 unchanged sentences

of Tomah, Inc.

(“F & M”) to manage its municipal bond portfolio, and has been dissolved.

(“F & M”) to manage its municipal bond portfolio, and was dissolved in February 2020.

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 25 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.

Its primary markets include the Chippewa Valley Region in Wisconsin, the Mankato and Twin Cities 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.

1 unchanged sentence

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 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.

In preparing these consolidated financial statements, we evaluated the events and transactions that occurred subsequent to the March 31, 2021 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.

3 unchanged sentences

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.

Use of Estimates –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.

4 unchanged sentences

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, 2020, filed with the SEC on March 8, 2021;

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;

the matters described in “Risk Factors” in Item 1A of this Form 10-Q;

external market factors such as market interest rates and unemployment rates;

3 unchanged sentences

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.

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

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.

24 unchanged sentences

Based on management’s quarterly evaluation, no impairment has been recorded on these securities.

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 $ 15,069 at March 31, 2021 consisted of $ 8,041 of FHLB stock, $ 5,181 of Federal Reserve Bank stock and $ 1,847 of Bankers’ Bank stock.

Other investments totaling $ 14,948 at December 31, 2020 consisted of $ 8,103 of FHLB stock and $ 5,170 of Federal Reserve Bank stock and $ 1,675 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:

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

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

Loan origination fees, net of certain direct origination costs, are deferred and recognized in interest income using the interest method with no prepayment assumptions.

Late charge fees are recognized into income when collected.

7 unchanged sentences

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

basis or cost recovery method until qualifying for return to accrual status.

Interest received on such loans is accounted for on the cash 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 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.

Interest on accruing troubled debt restructured (“TDR”), 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.

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.

16 unchanged sentences

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’s contractual 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 were deemed impaired at the time of acquisition.

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

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.

16 unchanged sentences

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.

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.

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.

14 unchanged sentences

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.

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.

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;

assessed for impairment at least annually;

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:

The valuation of MSRs and related amortization, included in mortgage servicing rights expense 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.

1 unchanged sentence

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.

Servicing fee income, which is reported on the consolidated statements of operations in non-interest income as Loan servicing fee income, is recorded for fees earned for servicing loans.

The fee are based on a contractual percentage of outstanding principal;

or a fixed amount per loan and are recorded as income when earned.

The amortization of mortgage servicing rights is netted against loan servicing fee income.

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.

On a periodic basis, management assesses whether events or changes in circumstances indicate that the carrying amounts of the intangible assets

may be impaired.

Goodwill is not amortized but, instead, is subject to impairment tests on at least an annual basis, and more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount.

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 one reporting unit as of March 31, 2021 which is related to its banking activities.

The impairment testing process is conducted by assigning net assets and goodwill to the Company’s reporting unit.

An initial qualitative evaluation is made to assess the likelihood of impairment and determine whether further quantitative testing to calculate the fair value is necessary.

When the qualitative evaluation indicates that impairment is more likely than not, quantitative testing is required whereby the fair value of the Company’s reporting unit is calculated and compared to the recorded book value, “step one.” If the calculated fair value of the Company’s reporting unit exceeds its carrying value, goodwill is not considered impaired and “step two” is not considered necessary.

If the carrying value of the company’s reporting unit exceeds its calculated fair value, the impairment test continues (“step two”) by comparing the carrying value of the Company’s reporting unit’s goodwill to the implied fair value of goodwill.

An impairment charge is recognized if the carrying value of goodwill exceeds the implied fair value of goodwill.

The Company has performed the required goodwill impairment test and has determined that goodwill was not impaired as of December 31, 2020.

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.

The Company performed a goodwill impairment analysis as of March 31, 2021 and determined that goodwill was not impaired.

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.

Leases - We determine if an arrangement is a lease at inception.

2 unchanged sentences

Operating lease liabilities are included in other liabilities in our consolidated balance sheets.

Lease expense is included in non-interest expense, occupancy in the consolidated statements of operations.

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.

14 unchanged sentences

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.

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.

6 unchanged sentences

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

Contingent commissions from insurance companies are recognized when determinable.

2 unchanged sentences

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.

Loss Contingencies— Loss contingencies, including claims and legal actions arising in the normal course of business, are recorded as liabilities when the likelihood of loss is probable and an amount of loss can be reasonably estimated.

Other Comprehensive Income — Accumulated and other comprehensive income or loss is comprised of the unrealized and realized gains and losses on securities available for sale and pension liability adjustments, net of tax, and is shown on the accompanying consolidated statements of other comprehensive income.

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.

4 unchanged sentences

Recent Accounting Pronouncements—Adopted

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 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.

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.

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.

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.

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.

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 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.

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.

9 unchanged sentences

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 of 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.

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.

ASU 2020-04 and ASU 2021-01, Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting-- These ASUs provide 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.

ASU 2020-04 and ASU 2021-01 are 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.

6 unchanged sentences

In addition, ASU 2016-13 amends the accounting for credit losses on debt securities and purchased financial assets with credit deterioration.

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.

In November, 2019, the FASB issued ASU-2019-10, which delayed the effective date for ASU 2016-13 for smaller reporting companies, resulting in ASU 2016-13 becoming effective in the first quarter of 2023 for the Company.

Earlier adoption is permitted;

3 unchanged sentences

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 September 30, 2020 and December 31, 2019, respectively, were as follows:

The amortized cost, estimated fair value and related unrealized gains and losses on securities available for sale and held to maturity as of March 31, 2021 and December 31, 2020, respectively, were as follows:

Available for sale securities Amortized

Losses Estimated

September 30, 2020

March 31, 2021

government agency obligations $ 31,474 $ 303 $ 65 $ 31,712

15 unchanged sentences

Losses Estimated

September 30, 2020

March 31, 2021

government agency obligations $ 3,500 $ — $ 17 $ 3,483

Obligations of states and political subdivisions 4,600 2 9 4,593

5 unchanged sentences

Total held to maturity securities $ 43,551 $ 267 $ 34 $ 43,784

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

As of March 31, 2021, the Bank has pledged U.S.

Government Agency securities with a carrying value of $ 548 and mortgage-backed securities with a carrying value of $ 2,655 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.

2021, the Bank has pledged mortgage-backed securities with a carrying value of $ 1,121 as collateral against a borrowing line of credit with the Federal Reserve Bank.

However, as of March 31, 2021, there were no borrowings outstanding on this Federal Reserve Bank line of credit.

As of March 31, 2021, the Bank also has mortgage-backed securities with a carrying value of $ 402 pledged as collateral to the Federal Home Loan Bank of Des Moines.

At December 31, 2020, the Bank has pledged certain of its mortgage-backed securities with a carrying value of $ 1,209 as collateral to secure a line of credit with the Federal Reserve Bank.

As of December 31, 2020, there were no borrowings outstanding on this Federal Reserve Bank line of credit.

As of December 31, 2020, the Bank has pledged certain of its U.S.

Government Agency securities with a carrying value of $ 576 and mortgage-backed securities with a carrying value of $ 3,028 as collateral against specific municipal deposits.

As of December 31, 2020, the Bank also has mortgage-backed securities with a carrying value of $ 468 pledged as collateral to the Federal Home Loan Bank of Des Moines.

For the three month period ended March 31, 2020 gross sales of available for sale securities were $ 10,841 .

There were no sales of available for sale securities for the three month period ended March 31, 2021.

Gross gains on sale of available for sale securities for the three months ended March 31, 2020 were $ 157 .

Gross losses on sale of available for sale securities for the three months ended March 31, 2020 were $ 1 .

The estimated fair value of securities at March 31, 2021 and December 31, 2020, 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.

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

Available for sale securities Amortized

8 unchanged sentences

Mortgage backed securities 71,448 72,056 39,454 40,991

Securities without contractual maturities — — — —

Total available for sale securities $ 183,776 $ 185,160 $ 142,177 $ 144,233

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

Held to maturity securities Amortized

3 unchanged sentences

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

Due after one year through five years 4,300 4,300 200 200

Due after five years through ten years 3,800 3,776 400 402

Total securities with contractual maturities 8,100 8,076 600 602

1 unchanged sentence

Total held to maturity securities $ 57,419 $ 55,786 $ 43,551 $ 43,784

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:

Securities with unrealized losses at March 31, 2021 and December 31, 2020, 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

3 unchanged sentences

Value Unrealized

September 30, 2020

March 31, 2021

government agency obligations $ — $ — $ 13,088 $ 65 $ 13,088 $ 65

Mortgage backed securities 39,035 401 — — 39,035 401

Corporate debt securities 9,335 203 1,418 82 10,753 285

4 unchanged sentences

government agency obligations $ 7,654 $ 17 $ 6,834 $ 53 $ 14,488 $ 70

Mortgage backed securities 22,537 62 5,883 48 28,420 110

Corporate debt securities 3,447 27 1,418 82 4,865 109

2 unchanged sentences

Total $ 16,713 $ 82 $ 32,562 $ 451 $ 49,275 $ 533

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 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 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.

Less than 12 Months 12 Months or More Total

Held to maturity securities Fair

Value Unrealized

March 31, 2021

government agency obligations $ 3,483 $ 17 $ — $ — $ 3,483 $ 17

Obligations of states and political subdivisions 500 9 — — 500 9

Mortgage-backed securities 42,342 1,809 — — 42,342 1,809

Total $ 46,325 $ 1,835 $ — $ — $ 46,325 $ 1,835

December 31, 2020

Mortgage-backed securities $ 16,538 $ 34 $ — $ — $ 16,538 $ 34

Total $ 16,538 $ 34 $ — $ — $ 16,538 $ 34

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 as separate components of shareholders’ 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.

Unrealized losses reflected in the preceding tables have not been included in results of operations because the unrealized loss was not deemed other-than-temporary.

Management has determined that more likely than not, the Company neither intends to sell, nor will it be required to sell each debt security before its anticipated recovery, and therefore recovery of cost will occur.

NOTE 3 – LOANS, ALLOWANCE FOR LOAN LOSSES AND IMPAIRED LOANS

15 unchanged sentences

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.

Farming operations may be

affected by adverse weather conditions such as drought, hail or floods that can severely limit crop yields.

SBA PPP loan balances are 100% guaranteed under the Small Business Association’s Paycheck Protection Program and may be forgiven in full, depending on use of funds and eligibility.

These SBA-backed loans helped businesses keep their workforce employed during the COVID-19 crisis.

Eligible borrowers, who qualify for full loan forgiveness during the eight to twenty four week period following loan disbursement, can apply for forgiveness, once all proceeds for which the borrower requested forgiveness has been used.

Borrowers can apply for forgiveness any time up to the maturity date of the loan.

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.

28 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 September 30, 2020:

Below is a summary of originated and acquired loans by type and risk rating as of March 31, 2021:

1 to 5 6 7 8 9 TOTAL

7 unchanged sentences

Commercial and industrial 72,355 317 4,021 — — 76,693

C&I SBA PPP loans 139,166 — — — — 139,166

Agricultural operating 20,003 1,045 101 — — 21,149

5 unchanged sentences

Other consumer 10,906 — 45 — — 10,951

Originated loans before SBA PPP loans 801,963 2,952 13,822 — — 818,737

SBA PPP loans 118,931 — — — — 118,931

Total originated loans $ 920,894 $ 2,952 $ 13,822 $ — $ — $ 937,668

20 unchanged sentences

Commercial and industrial 91,220 326 4,387 — — 95,933

C&I SBA PPP loans 139,166 — — — — 139,166

Agricultural operating 26,757 1,045 448 — — 28,250

5 unchanged sentences

Other Consumer 11,812 — 52 — — 11,864

Gross loans before SBA PPP Loans 1,042,608 13,659 26,064 — — 1,082,331

SBA PPP loans 118,931 — — — — $ 118,931

Gross loans $ 1,161,539 $ 13,659 $ 26,064 $ — $ — $ 1,201,262

3 unchanged sentences

Loans receivable, net $ 1,175,266

Below is a summary of originated loans by type and risk rating as of December 31, 2019:

Below is a summary of originated and acquired loans by type and risk rating as of December 31, 2020:

1 to 5 6 7 8 9 TOTAL

14 unchanged sentences

Other Consumer 11,986 — 70 — — 12,056

Originated loans before SBA PPP loans 819,303 2,258 15,462 — — 837,023

SBA PPP loans 123,702 — — — — 123,702

Total originated loans $ 943,005 $ 2,258 $ 15,462 $ — $ — $ 960,725

27 unchanged sentences

Other Consumer 13,136 — 77 — — 13,213

Gross loans before SBA PPP loans 1,087,974 6,672 28,541 — — 1,123,187

SBA PPP loans 123,702 — — — — 123,702

Gross loans $ 1,211,676 $ 6,672 $ 28,541 $ — $ — $ 1,246,889

3 unchanged sentences

Loans receivable, net $ 1,220,538

The following table summarizes SBA PPP loans by round at March 31, 2021 and December 31, 2020 and includes additional round 2 activity in April 2021:

(Dollars in Millions)

Balance Net Deferred Fee Income

SBA PPP Loans - Round 1 $ 124 $ 3.0

SBA PPP Loans - Round 2 — —

Total SBA PPP Loans, December 31, 2020 124 3.0

SBA PPP Loans - Round 1 $ 72 $ 1.3

SBA PPP Loans - Round 2 47 1.7

Total SBA PPP Loans, March 31, 2021 119 3.0

Net deferred fees collected after March 31, 2021 from Q1 SBA PPP loan originations — 0.9

SBA PPP Pipeline Round 2, April 2021 8 0.8

March 31, 2021 plus SBA PPP Pipeline - Round 2, April 2021 $ 127 $ 4.7

Allowance for Loan Losses - The ALL represents management’s estimate of probable and inherent credit losses in the Bank’s loan portfolio.

9 unchanged sentences

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

Three months ended March 31, 2021

Allowance for Loan Losses:

12 unchanged sentences

Total Allowance on acquired loans 1,301 94 388 49 — 1,832

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

Allowance for Loan Losses at September 30, 2020:

Ending balance, March 31, 2021 $ 12,410 $ 1,727 $ 1,329 $ 499 $ 895 $ 16,860

Allowance for Loan Losses at March 31, 2021:

Amount of allowance for loan losses arising from loans individually evaluated for impairment $ 1,094 $ 10 $ 157 $ — $ — $ 1,261

Amount of allowance for loan losses arising from loans collectively evaluated for impairment $ 11,316 $ 1,717 $ 1,172 $ 499 $ 895 $ 15,599

Loans Receivable as of September 30, 2020:

Loans Receivable as of March 31, 2021 —

Ending balance of originated loans $ 599,182 $ 216,773 $ 87,576 $ 34,137 $ — $ 937,668

7 unchanged sentences

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

Three months ended March 31, 2020

Allowance for Loan Losses:

12 unchanged sentences

Total Allowance on acquired loans 665 160 115 45 — 985

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

Allowance for Loan Losses at September 30, 2019:

Ending balance, March 31, 2020 $ 7,942 $ 1,819 $ 1,039 $ 575 $ 460 $ 11,835

Allowance for Loan Losses at March 31, 2020:

Amount of allowance for loan losses arising from loans individually evaluated for impairment $ 733 $ 92 $ 181 $ 27 $ — $ 1,033

Amount of allowance for loan losses arising from loans collectively evaluated for impairment $ 7,209 $ 1,727 $ 858 $ 548 $ 460 $ 10,802

Loans Receivable as of September 30, 2019:

Loans Receivable as of March 31, 2020:

Ending balance of originated loans $ 519,958 $ 107,949 $ 110,455 $ 51,494 $ — $ 789,856

6 unchanged sentences

collectively evaluated for impairment $ 765,999 $ 151,187 $ 163,186 $ 53,102 $ — $ 1,133,474

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

Allowance for Loan Losses at December 31, 2020:

Amount of allowance for loan losses arising from loans individually evaluated for impairment $ 698 $ 190 $ 226 $ 1 $ — $ 1,115

Amount of allowance for loan losses arising from loans collectively evaluated for impairment $ 11,257 $ 2,063 $ 1,150 $ 552 $ 906 $ 15,928

Loans Receivable as of December 31, 2020:

Ending balance of originated loans $ 586,826 $ 243,449 $ 92,543 $ 37,907 $ — $ 960,725

Ending balance of purchased credit-impaired loans 15,100 1,534 1,312 — — 17,946

Ending balance of other acquired loans 195,213 28,057 43,791 1,157 — 268,218

Ending balance of loans $ 797,139 797139000 $ 273,040 $ 137,646 $ 39,064 $ — $ 1,246,889

Ending balance:

individually evaluated for impairment $ 26,303 $ 7,115 $ 9,621 $ 358 $ — $ 43,397

Ending balance:

collectively evaluated for impairment $ 770,836 $ 265,925 $ 128,025 $ 38,706 $ — $ 1,203,492

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

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

March 31, 2021 December 31, 2020 March 31, 2021 December 31, 2020 March 31, 2021 December 31, 2020 March 31, 2021 December 31, 2020 March 31, 2021 December 31, 2020

Performing loans

8 unchanged sentences

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

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:

As of March 31, 2021, the Company had $ 209,511 in unused commitments, compared to $ 247,324 in unused commitments as of December 31, 2020.

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 March 31, 2021 and December 31, 2020, 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

March 31, 2021

Commercial/Agricultural real estate:

22 unchanged sentences

Commercial and industrial 436 491 — 927 357 1,284 115,269 116,553

SBA PPP loans — — — — — — 123,702 123,702

Agricultural operating 1,499 200 — 1,699 1,872 3,571 29,214 32,785

6 unchanged sentences

Total $ 18,886 $ 1,723 $ 586 $ 21,195 $ 10,747 $ 31,942 $ 1,214,947 $ 1,246,889

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.

At March 31, 2021, the Company has identified impaired loans of $ 40,243 , consisting of $ 17,442 TDR loans, the carrying amount of purchased credit impaired loans of $ 16,475 and $ 6,326 of substandard non-TDR loans.

The $ 40,243 total of impaired loans includes $ 11,752 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 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

A summary of the Company’s impaired loans as of March 31, 2021, December 31, 2020 and March 31, 2020 was as follows:

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

March 31, 2021

With No Related Allowance Recorded:

10 unchanged sentences

Total $ 5,965 $ 5,965 $ 1,261 $ 5,059 $ 70

September 30, 2020 Totals:

March 31, 2021 Totals:

Commercial/agriculture real estate $ 24,948 $ 24,948 $ 1,094 $ 25,626 $ 301

3 unchanged sentences

Total $ 40,243 $ 40,243 $ 1,261 $ 41,822 $ 462

Recorded Investment Unpaid Principal Balance Related Allowance

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

December 31, 2020

17 unchanged sentences

Total $ 43,397 $ 43,397 $ 1,115 $ 53,300 $ 2,835

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

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

March 31, 2020

With No Related Allowance Recorded:

10 unchanged sentences

Total $ 5,286 $ 5,286 $ 1,033 $ 4,709 $ 42

September 30, 2019 Totals:

March 31, 2020 Totals:

Commercial/agriculture real estate $ 36,470 $ 36,470 $ 733 $ 39,564 $ 569

8 unchanged sentences

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 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

There was one delinquent accruing TDR greater than 60 days past due with a recorded investment of $ 17 at March 31, 2021, compared to one such loans with a recorded investment of $ 20 at December 31, 2020.

Following is a summary of TDR loans by accrual status as of March 31, 2021 and December 31, 2020.

March 31, 2021 December 31, 2020

Troubled debt restructure loans:

2 unchanged sentences

Total $ 17,442 $ 18,477

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 $ —

C&I/Agricultural operating 2 3,000 — — — 3,000 3,000 —

Residential mortgage 8 59 500 32 — 591 591 —

Consumer installment — — — — — — — —

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 $ —

C&I/Agricultural operating 5 3,295 78 — — 3,373 3,373 —

Residential mortgage 13 148 858 117 — 1,123 1,123 —

Consumer installment 2 3 — 4 — 7 7 —

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

There were no loan commitments meeting our TDR criteria as of March 31, 2021 and December 31, 2020.

There were unused lines of credit totaling $ 42 and $ 15 meeting our TDR criteria as of March 31, 2021 and December 31, 2020, respectively.

The following provides detail, including specific reserve and reasons for modification, related to loans identified as TDRs during the three months ended March 31, 2021 and March 31, 2020:

Three months ended September 30, 2019

Three months ended March 31, 2021

Commercial/agriculture real estate 2 $ 38 $ 81 $ — $ — $ 119 $ 119 $ —

4 unchanged sentences

Nine months ended September 30, 2019

Three months ended March 31, 2020

Commercial/agriculture real estate 3 $ 248 $ — $ 17 $ — $ 265 $ 265 $ —

3 unchanged sentences

Totals 6 $ 251 $ — $ 106 $ — $ 357 $ 357 $ —

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

A summary of loans by loan segment modified in a troubled debt restructuring as of March 31, 2021 and March 31, 2020, was as follows:

March 31, 2021 March 31, 2020

Modifications Recorded

7 unchanged sentences

Total troubled debt restructurings 105 $ 17,442 92 $ 12,088

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

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

The following table provides the number of loans modified in a TDR during the previous twelve months which subsequently defaulted during the three months ended March 31, 2021 and March 31, 2020, as well as the recorded investment in these restructured loans as of March 31, 2021 and March 31, 2020:

March 31, 2021 March 31, 2020

Modifications Recorded

5 unchanged sentences

Residential mortgage 1 19 — —

Consumer installment — — — —

Total troubled debt restructurings 1 $ 19 5 $ 1,892

1 unchanged sentence

The outstanding balance and the carrying amount of acquired loans included in the consolidated balance sheet are as follows:

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

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

7 unchanged sentences

Carrying amount $ 258,945 $ 281,101

The following table provides changes in accretable discounts for all acquired loans from prior acquisitions with deteriorated credit quality:

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 difference ( 99 ) —

The following table provides changes in accretable yield for all acquired loans from prior acquisitions with deteriorated credit quality:

March 31, 2021 March 31, 2020

Balance at beginning of period $ 3,976 $ 3,201

Acquisitions — —

Reduction due to unexpected early payoffs ( 90 ) —

Reclass from non-accretable difference 63 669

Accretion ( 266 ) ( 233 )

Balance at end of period $ 3,683 $ 3,637

The following table provides changes in non-accretable yield for all acquired loans from prior acquisitions with deteriorated credit quality:

March 31, 2021 December 31, 2020

Balance at beginning of period $ 1,087 $ 6,290

Additions to non-accretable difference for acquired purchased credit impaired loans — —

Non-accretable difference realized as interest from payoffs of purchased credit impaired loans ( 58 ) ( 1,693 )

Transfers from non-accretable difference to accretable discount ( 63 ) ( 2,754 )

Scheduled accretion ( 756 ) ( 622 )

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

Non-accretable difference on purchase credit impaired loans was $ 1,661 and $ 6,290 at September 30, 2020 and December 31, 2019, respectively.

Non-accretable difference used to reduce loan principal balance — ( 505 )

Non-accretable difference transferred to OREO due to loan foreclosure — ( 251 )

Balance at end of period $ 966 $ 1,087

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 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.

The unpaid balances of these loans as of March 31, 2021 and December 31, 2020 were $ 551,622 and $ 553,655 , 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 $ 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

Custodial escrow balances maintained in connection with the foregoing loan servicing, and included in deposits were $ 4,979 and $ 2,890 , at March 31, 2021 and December 31, 2020, respectively.

Mortgage servicing rights activity for the three month period ended March 31, 2021 and twelve months ended December 31, 2020 were as follows:

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

Mortgage servicing rights:

September 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 1,546 904

March 31, 2021 December 31, 2020

Mortgage servicing rights, beginning of period $ 5,266 $ 4,541

Increase in mortgage servicing rights resulting from transfers of financial assets 297 2,020

Amortization during the period ( 439 ) ( 1,295 )

Valuation Allowances:

Balance at beginning of period ( 259 ) —

Valuation allowance:

Valuation allowance, beginning of period ( 2,014 ) ( 259 )

Additions — ( 1,755 )

Recoveries 889 —

Write-downs — —

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

Mortgage servicing assets, net;

end of period $ 3,498 $ 4,282

Fair value of MSR asset;

Valuation allowance, end of period ( 1,125 ) ( 2,014 )

Mortgage servicing rights, net $ 3,999 $ 3,252

Fair value of mortgage servicing rights;

end of period $ 4,005 $ 3,285

Residential mortgage loans serviced for others $ 551,622 $ 553,655

Net book value of MSR asset to loans serviced for others 0.63 % 0.82 %

Net book value of mortgage servicing rights to loans serviced for others 0.73 % 0.59 %

Servicing fees totaled $ 352 and $ 339 for the three months ended March, 31 2021 and March 31, 2020, respectively.

Late fees and ancillary fees related to loan servicing are not material.

To estimate the fair value of the MSR asset, a valuation model is applied at the loan level to calculate the present value of the expected future cash flows.

The valuation model incorporates various assumptions that would impact market participants’ estimations of future servicing income.

Central to the valuation model is the discount rate.

Fair value at March 31, 2021 was determined using discount rates ranging from 9 % to 12 %.

Fair value at December 31, 2020 was determined using discount rates ranging from 9 % to 12 %.

Other assumptions utilized in the valuation model include, but are not limited to, prepayment speed, servicing costs, delinquencies, costs of advances, foreclosure costs, ancillary income, and income earned on float and escrow.

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 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

We have operating leases for our corporate offices ( 1 ) and bank branch offices ( 5 ).

Our leases have remaining lease terms ranging from approximately 2 to 7.08 years, some of which include options to extend the leases for up to 5 additional years.

As of March 31, 2021, we have no additional lease commitments that have not yet commenced.

The Company also leases a portion of some of its facilities and receives rental income from such lease agreements, all of which are considered operating leases.

Three Months Ended

March 31, 2021 March 31, 2020

The components of total lease cost were as follows:

Operating lease cost $ 139 $ 161

Variable lease cost 7 2

Total lease cost $ 146 $ 163

The components of total lease income were as follows:

Operating lease income $ 7 $ 3

Supplemental cash flow information related to leases was as follows:

1 unchanged sentence

Operating cash flows from operating leases $ 138 $ 159

Right-of-use assets obtained in exchange for lease obligations:

Operating leases $ — $ 158

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

Supplemental balance sheet information related to leases was as follows:

5 unchanged sentences

operating leases 2.7 % 2.7 %

Cash obligations under lease contracts are as follows:

Fiscal years ending December 31,

Cash obligations and receipts under lease contracts are as follows:

Fiscal years ending December 31, Payments Receipts

2021 $ 415 $ 25

Thereafter 826

Total 3,126 $ 86

effects of discounting ( 520 )

1 unchanged sentence

NOTE 6 – DEPOSITS

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

September 30, 2020 December 31, 2019

The following is a summary of deposits by type at March 31, 2021 and December 31, 2020, respectively:

March 31, 2021 December 31, 2020

Non-interest bearing demand deposits $ 257,042 $ 238,348

6 unchanged sentences

$ 2,516 $ 2,516

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 —

At March 31, 2021, the scheduled maturities of time deposits were as follows:

March 31, 2022 $ 217,364

March 31, 2023 61,638

March 31, 2024 6,975

March 31, 2025 2,814

March 31, 2026 677

After March 31, 2026 —

Total $ 289,468

Time deposits of $250 or more were $ 42,992 and $ 46,660 at March 31, 2021 and December 31, 2020, respectively.

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 September 30, 2020 and December 31, 2019 is as follows:

September 30, 2020 December 31, 2019

A summary of Federal Home Loan Bank advances and other borrowings at March 31, 2021 and December 31, 2020 is as follows:

March 31, 2021 December 31, 2020

Stated Maturity Amount Range of Stated Rates Amount Range of Stated Rates

6 unchanged sentences

2030 12,500 0.52 % 0.86 % 12,500 0.52 % 0.86 %

2030 12,500 0.52 % 0.86 % — — % — %

Subtotal 115,530 123,530

4 unchanged sentences

2030 15,000 6.00 % 6.00 % 15,000 6.00 % 6.00 %

$ 30,000 $ 30,000

Unamortized debt issuance costs $ ( 502 ) $ ( 528 )

1 unchanged sentence

Totals $ 173,835 $ 181,826

(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.

(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 $ 720,008 and $ 723,862 at March 31, 2021 and December 31, 2020, respectively.

At March 31, 2021, the Bank’s available and unused portion under the FHLB borrowing arrangement was approximately $ 122,791 compared to $ 118,391 as of December 31, 2020.

(2) Maximum month-end borrowed amounts outstanding under this borrowing agreement were $ 123,530 and $ 162,530 , during the three months ended March 31, 2021 and the twelve months ended December 31, 2020, respectively.

(3) The weighted-average interest rates on FHLB borrowings maturing within twelve months as of March 31, 2021 and December 31, 2020 were 1.80 % and 0.50 %, respectively.

(4) 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.

(5) 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.

(a) A term note, which was subsequently refinanced in October 2020, 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 3.25 %.

10 unchanged sentences

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 $ 180,325 and $ 147,991 at September 30, 2020 and December 31, 2019, respectively.

These balances were $ 179,725 and $ 179,400 at March 31, 2021 and December 31, 2020, respectively.

Federal Reserve Bank Paycheck Protection Program Liquidity Facility (“FRB PPPLF”) Program

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.

At March 31, 2021 the Bank had $ 118,931 of borrowing capacity under the Federal Reserve SBA PPP facility, which the Federal Reserve established in 2020.

The Bank has no outstanding loan balances under this facility at March 31, 2021 and December 31, 2020.

Maximum month-end borrowed amounts outstanding under this agreement were $ 0 and $ 25,136 , during the three months ended March 31, 2021 and the twelve months ended December 31, 2020, respectively.

NOTE 8 - CAPITAL MATTERS

7 unchanged sentences

If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required.

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:

At March 31, 2021, the Bank was categorized as “Well Capitalized”, under Prompt Corrective Action Provisions.

The Bank’s Tier 1 (leverage) and risk-based capital ratios at March 31, 2021 and December 31, 2020, respectively, are presented below:

Actual For Capital Adequacy

3 unchanged sentences

Amount Ratio Amount Ratio Amount Ratio

As of September 30, 2020

As of March 31, 2021

Total capital (to risk weighted assets) $ 174,424 15.5 % $ 89,877 > = 8.0 % $ 112,347 > = 10.0 %

7 unchanged sentences

Tier 1 leverage ratio (to adjusted total assets) 157,081 9.9 % 63,718 > = 4.0 % 79,647 > = 5.0 %

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

The Company’s Tier 1 (leverage) and risk-based capital ratios at March 31, 2021 and December 31, 2020, 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 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

Amount Ratio Amount Ratio

As of March 31, 2021

Total capital (to risk weighted assets) $ 167,145 14.9 % 89,877 > = 8.0 %

Tier 1 capital (to risk weighted assets) 123,065 11.0 % 67,408 > = 6.0 %

Common equity tier 1 capital (to risk weighted assets) 123,065 11.0 % 50,556 > = 4.5 %

Tier 1 leverage ratio (to adjusted total assets) 123,065 7.5 % 65,595 > = 4.0 %

As of December 31, 2020

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

Total capital (to risk weighted assets) $ 166,703 14.3 % $ 93,381 > = 8.0 %

Tier 1 capital (to risk weighted assets) 122,082 10.5 % 70,035 > = 6.0 %

Common equity tier 1 capital (to risk weighted assets) 122,082 10.5 % 52,527 > = 4.5 %

Tier 1 leverage ratio (to adjusted total assets) 122,082 7.7 % 63,718 > = 4.0 %

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.

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 March 31, 2021, 163,974 restricted shares had been granted under this plan.

As of March 31, 2021, no stock options had been granted under this plan.

In February 2008, the Company’s stockholders approved the Company’s 2008 Equity Incentive Plan for a term of 10 years.

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.

As of March 31, 2021,there are 3,619 remaining unvested restricted shares and 71,700 unexercised options.

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 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.

Unexercised incentive stock options expire within 10 years of the grant date.

Net compensation expense related to restricted stock awards from these plans was $ 171 for the three months ended March 31, 2021, compared to $ 139 for the three months ended March 31, 2020.

Restricted Common Stock Award

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

Number of Shares Weighted

8 unchanged sentences

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 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.

The compensation cost recognized for stock-based employee compensation related to these plans for the three month period ended March 31, 2021 was $ 3 .

The compensation cost recognized for stock-based employee compensation related to these plans for the three month period ended March 31, 2020 was $ 4 .

Common Stock Option Awards

2 unchanged sentences

Term Aggregate

September 30, 2020

March, 31, 2021

Outstanding at beginning of year 72,300 $ 11.05

Exercised — —

Forfeited or expired ( 600 ) 13.76

9 unchanged sentences

Fully vested and expected to vest 72,300 $ 11.05 5.49 $ —

Information related to the 2004 Stock Option and Incentive Plan and 2008 Equity Incentive Plan for the respective periods follows:

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

Information related to the 2008 Equity Incentive Plan for the respective periods follows:

Three months ended March 31, 2021 Twelve months ended December 31, 2020

Intrinsic value of options exercised $ — $ —

14 unchanged sentences

Assets Measured on a Recurring Basis

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

The following tables present the financial instruments measured at fair value on a recurring basis as of March 31, 2021 and December 31, 2020:

Value Quoted Prices in

3 unchanged sentences

(Level 2) Significant

September 30, 2020

March 31, 2021

Investment securities:

3 unchanged sentences

Corporate debt securities 27,913 — 27,913 —

Corporate asset-based securities 35,543 — 35,543 —

Corporate asset-backed securities 35,709 — 35,709 —

Trust preferred securities 17,630 — 17,630 —

10 unchanged sentences

Assets Measured on Nonrecurring Basis

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

The following tables present the financial instruments measured at fair value on a nonrecurring basis as of March 31, 2021 and December 31, 2020:

Carrying Value Quoted Prices in

3 unchanged sentences

(Level 2) Significant

September 30, 2020

March 31, 2021

Foreclosed and repossessed assets, net $ 85 $ — $ — $ 85

13 unchanged sentences

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

September 30, 2020.

March 31, 2021.

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

September 30, 2020

March 31, 2021

Foreclosed and repossessed assets, net $ 85 Appraisal value Estimated costs to sell 10 % - 15 %

12 unchanged sentences

The carrying amount and estimated fair value of the Company’s financial instruments as of the dates indicated below were as follows:

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

Valuation Method Used Carrying

19 unchanged sentences

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

nine months ended September 30, 2020 and 2019:

The following tables show the tax effects allocated to each component of other comprehensive loss for the

three months ended March 31, 2021 and 2020:

Three months ended

September 30, 2020 September 30, 2019

Expense Net-of-Tax

Amount Before-Tax

Expense Net-of-Tax

Unrealized gains on securities:

Net unrealized gains arising during the period $ 1,220 $ ( 335 ) $ 885 $ 440 $ ( 121 ) $ 319

Reclassification adjustment for gains included in net income — — — — — —

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

Nine months ended

September 30, 2020 September 30, 2019

March 31, 2021 March 31, 2020

Expense Net-of-Tax

2 unchanged sentences

Unrealized gains on securities:

Net unrealized gains arising during the period $ 2,052 $ ( 564 ) $ 1,488 $ 3,003 $ ( 826 ) $ 2,177

Net unrealized losses arising during the period $ ( 672 ) $ 186 $ ( 486 ) $ ( 1,643 ) $ 452 $ ( 1,191 )

Reclassification adjustment for gains included in net income — — — 73 ( 20 ) 53

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 nine months ended September 30, 2020 were as follows:

Other comprehensive loss $ ( 672 ) $ 186 $ ( 486 ) $ ( 1,570 ) $ 432 $ ( 1,138 )

The changes in the accumulated balances for each component of other comprehensive income (loss), net of tax for the twelve months ended December 31, 2020 and the three months ended March 31, 2021 were as follows:

Gains (Losses)

4 unchanged sentences

Current year-to-date other comprehensive income 2,705 1,961

Adoption of ASU 2016-01;

Equity securities (1) ( 62 ) ( 45 )

Ending balance, December 31, 2020 $ 2,056 $ 1,490

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.

For further information, refer to Note 1, “Nature of Business and Summary of Significant Policies;

Recent Pronouncements-Adopted”.

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

Current year-to-date other comprehensive loss ( 672 ) ( 486 )

Ending balance, March 31, 2021 $ 1,384 $ 1,004

Reclassifications out of accumulated other comprehensive income (loss) for the three months ended March 31, 2021 were as follows:

Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)

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

Details about Accumulated Other Comprehensive Income (Loss) Components Three months ended March 31, 2021 (1) Affected Line Item on the Statement of Operations

Unrealized gains and losses

3 unchanged sentences

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

Reclassifications out of accumulated other comprehensive income (loss) for the three and nine months ended September 30, 2019 were as follows:

Reclassifications out of accumulated other comprehensive income (loss) for the three months ended March 31, 2020 were as follows:

Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)

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

Details about Accumulated Other Comprehensive Income (Loss) Components Three months ended March 31, 2020 (1) Affected Line Item on the Statement of Operations

Unrealized gains and losses

4 unchanged sentences

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