What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-08-03 compared with 2023-05-04 · 293 added, 182 removed, 1296 unchanged (27% of the section changed)

2 unchanged sentences

Consolidated Balance Sheets

March 31, 2023 (unaudited) and December 31, 2022

June 30, 2023 (unaudited) and December 31, 2022

(derived from audited financial statements)

(in thousands, except share and per share data)

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Cash and cash equivalents $ 42,969 $ 35,363

Other interest bearing deposits — 249

Securities available for sale "AFS" 173,423 165,991

Securities held to maturity "HTM" 95,301 96,379

Available for sale ("AFS") securities, at fair value (amortized cost of $ 187,172 , net of allowance for credit losses of $ 0 at June 30, 2023)

161,135 165,991

Held to maturity ("HTM") securities, at amortized cost, net of allowance for credit losses of $ 0 at June 30, 2023

93,800 96,379

Equity investments 2,299 1,794

15 unchanged sentences

Deposits $ 1,464,682 $ 1,424,720

Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank (“FRB”) advances 182,530 142,530

Federal Home Loan Bank (“FHLB”) 122,530 142,530

Other borrowings 67,357 72,409

12 unchanged sentences

Consolidated Statements of Operations (unaudited)

Three Months Ended March 31, 2023 and 2022

Three and Six Months Ended June 30, 2023 and 2022

(in thousands, except per share data)

Three Months Ended

March 31, 2023 March 31, 2022

Three Months Ended Six Months Ended

June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022

Interest and dividend income:

16 unchanged sentences

Loan fees and service charges 88 141 168 233

Net gains on investment securities 56 ( 37 )

Net gains (losses) on investment securities 10 ( 75 ) 66 ( 112 )

Other 333 196 586 394

23 unchanged sentences

Consolidated Statements of Comprehensive Income (Loss) (unaudited)

Three months ended March 31, 2023 and 2022

Three and Six months ended June 30, 2023 and 2022

(in thousands)

Three Months Ended

March 31, 2023 March 31, 2022

Three Months Ended Six Months Ended

June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022

Net income attributable to common stockholders $ 3,206 $ 4,366 $ 6,868 $ 9,072

1 unchanged sentence

Securities available for sale

Net unrealized gains (losses) arising during period, net of tax 1,065 ( 7,123 )

Other comprehensive gain (loss), net of tax 1,065 ( 7,123 )

Net unrealized losses arising during period, net of tax ( 2,277 ) ( 5,315 ) ( 1,212 ) ( 12,438 )

Reclassification adjustment for net gains included in net income, net of tax ( 9 ) — ( 9 ) —

Other comprehensive loss, net of tax ( 2,286 ) ( 5,315 ) ( 1,221 ) ( 12,438 )

Comprehensive income (loss) $ 920 $ ( 949 ) $ 5,647 $ ( 3,366 )

2 unchanged sentences

Consolidated Statement of Changes in Stockholders’ Equity (unaudited)

Three Months Ended March 31, 2023

Six Months Ended June 30, 2023

(in thousands, except shares and per share data)

14 unchanged sentences

Balance at March 31, 2023 10,482,821 105 119,327 61,720 ( 16,591 ) 164,561

Net income — — — 3,206 — 3,206

Other comprehensive loss, net of tax — — — — ( 2,286 ) ( 2,286 )

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

Common stock options exercised 3,000 — 28 — — 28

Common stock repurchased ( 14,146 ) — ( 117 ) — — ( 117 )

Amortization of restricted stock — — 166 — — 166

Balance at June 30, 2023 10,470,175 $ 105 $ 119,404 $ 64,926 $ ( 18,877 ) $ 165,558

See accompanying condensed notes to unaudited consolidated financial statements.

45 unchanged sentences

Consolidated Statements of Cash Flows (unaudited)

Three Months Ended March 31, 2023 and 2022

Six Months Ended June 30, 2023 and 2022

(in thousands)

Three Months Ended

March 31, 2023 March 31, 2022

Six Months Ended

June 30, 2023 June 30, 2022

Cash flows from operating activities:

5 unchanged sentences

Net realized (gain) loss on equity securities ( 54 ) 113

Net realized gain on debt securities ( 12 ) —

Increase in mortgage servicing rights resulting from transfers of financial assets ( 52 ) ( 227 )

15 unchanged sentences

Cash flows from investing activities:

Net decrease in other interest bearing deposits 249 6

Purchase of available for sale securities ( 11,007 ) ( 5,760 )

Proceeds from principal payments of available for sale securities 9,128 14,577

Proceeds from sales of available for sale securities 5,105 —

Purchase of held to maturity securities — ( 35,342 )

3 unchanged sentences

Proceeds from sales of foreclosed and repossessed assets 254 38

Net (increase) decrease in loans ( 9,082 ) 20,704

Net increase in loans ( 13,199 ) ( 36,445 )

Net capital expenditures ( 547 ) ( 1,583 )

5 unchanged sentences

Amortization of fair value adjustments for acquired Federal Home Loan Bank advances — 3

Federal Home Loan Bank advance call payments — ( 27,500 )

Federal Home Loan Bank advance termination payments — ( 15,015 )

10 unchanged sentences

Net cash provided by financing activities 11,653 28,710

Net increase in cash and cash equivalents 29,687 36,673

Net increase (decrease) in cash and cash equivalents 7,606 ( 15,948 )

Cash and cash equivalents at beginning of period 35,363 47,691

23 unchanged sentences

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 March 31, 2023, 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 June 30, 2023, 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.

10 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, 2022, filed with the SEC on March 7, 2023;

the matters described in “Risk Factors” in Item 1A of the quarterly reports on Form 10-Q for the quarter ended March 31, 2023, filed with the SEC on May 4, 2023;

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

6 unchanged sentences

Held to maturity securities are stated at amortized cost.

Investment securities not classified as held to maturity are classified as available for sale.

Investment securities not classified as held to maturity are classified as available

Available for sale securities are stated at fair value, with unrealized holding gains and losses being reported in other comprehensive income (loss), net of tax.

Unrealized losses deemed other-than-temporary due to credit issues are reported in the

Company’s net income in the period in which the losses arise.

Realized gains or losses on sales of available for sale securities are calculated with the specific identification method and are included in the consolidated statements of operations under net gains on investment securities.

1 unchanged sentence

Amortization of premiums and accretion of discounts are recognized in interest income using the interest method over the estimated lives of the securities.

The Company evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation.

As part of such monitoring, the credit quality of individual securities and their issuer is assessed.

Significant inputs used to measure the amount of other-than-temporary impairment related to credit loss include, but are not limited to:

the Company’s intent and ability to sell the debt security prior to recovery, that it is more likely than not that the Company will not sell the security prior to recovery, default and delinquency rates of the underlying collateral, remaining credit support, and historical loss severities.

Adjustments to market value of available for sale securities that are considered temporary are recorded in other comprehensive income or loss as separate components of stockholders’ equity, net of tax.

If the unrealized loss of a security is identified as other-than-temporary based on information available, such as the decline in the creditworthiness of the issuer, external market ratings, or the anticipated or realized elimination of associated dividends, such impairments are further analyzed to determine if credit loss exists.

If there is a credit loss, it will be recorded in the Company’s consolidated statement of operations.

Non-credit components of the unrealized losses on available for sale securities will continue to be recognized in other comprehensive income (loss), net of tax.

Allowance for Credit Losses – Held to Maturity Securities - The Company measures expected credit losses on held to maturity debt securities on a collective basis by major security type.

For agency mortgage-backed securities there are no expected credit losses as they are guaranteed by the U.S.

government, are highly rated by major rating agencies, and have a long history of no credit losses.

For other securities, the estimate of expected credit losses considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts.

Allowance for Credit Losses – Available for Sale Securities - The Company measures the allowance for credit losses on available for sale debt securities by evaluating securities in an unrealized loss position using a two-step process.

First, the Company assesses whether it intends to sell, or it is more likely than not that it will be required to sell the security before recovery of its amortized cost.

If it is determined that the Company intends or will be required to sell the security, it is written down to its fair value through income.

For agency mortgage-backed and asset-backed securities that do not meet the criteria in step one, there are no expected credit losses as they are guaranteed by the U.S.

government, are highly rated by major rating agencies, and have a long history of no credit losses.

For other debt securities that do not meet the criteria in step one, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors.

In making this assessment management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors.

If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost of the security.

If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and the allowance for credit losses on available for sale investments is recorded for the credit loss, limited by the amount that the fair value is less that the amortized cost basis.

Any impairment that has not been recorded though an allowance for credit losses is recognized in other comprehensive income.

Equity investments - The Company is required to maintain an investment in Federal Agricultural Mortgage Corporation (“Farmer Mac”) equity securities.

18 unchanged sentences

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

Other investments totaling $ 17,428 at March 31, 2023 consisted of $ 9,240 of FHLB stock, $ 5,680 of Federal Reserve Bank stock and $ 2,508 of Bankers’ Bank stock.

Other investments totaling $ 16,347 at June 30, 2023 consisted of $ 8,153 of FHLB stock, $ 5,686 of

Federal Reserve Bank stock and $ 2,508 of Bankers’ Bank stock.

Other investments totaling $ 15,834 at December 31, 2022 consisted of $ 7,652 of FHLB stock and $ 5,674 of Federal Reserve Bank stock and $ 2,508 of Bankers’ Bank stock.

82 unchanged sentences

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.

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 March 31, 2023, which is related to its banking activities.

The Company has one reporting unit as of June 30, 2023, 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.

4 unchanged sentences

The Company has performed the required goodwill impairment test and has determined that goodwill was not impaired as of December 31, 2022.

The Company has monitored

events and conditions since December 31, 2022, and has determined that no triggering event has occurred that would require goodwill to be tested for impairment.

The Company has monitored events and conditions since December 31, 2022, and has determined that no triggering event has occurred that would require goodwill to be tested for impairment.

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.

9 unchanged sentences

Prior to the adoption of ASU 2023-02 the investment was accounted for using the equity method of accounting and was amortized through non-interest expense

As of March 31, 2022, the carrying amount of this investment, which is included in other assets in the consolidated balance sheets, was $ 3,334 .

As of June 30, 2023, the carrying amount of this investment, which is included in other assets in the consolidated balance sheets, was $ 3,189 .

Prior to the adoption of ASU 2023-02, the carrying value of the investment as of December 31, 2022 was $ 3,350 .

The risk of loss with this investment is limited to its carrying value and is tied to its ability to operate in compliance with the rules and regulations necessary for the qualification of the tax credit generated by the investment.

As of March 31, 2023, there were no known instances of noncompliance associated with the investment.

As of June 30, 2023, there were no known instances of noncompliance associated with the investment.

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

11 unchanged sentences

Debt issuance costs with a Company call option that originated prior to 2020 and senior note debt issuance costs, are amortized over the contractual term of the corresponding debt, as a component of interest expense on other borrowed funds in the consolidated statements of operations.

Debt issuance costs that originated in 2020 and thereafter, are amortized through the first Company call option date of the corresponding debt, as a component of interest expense on other borrowed funds in the consolidated statements of operations.

Debt issuance costs that originated in 2020 and thereafter, are amortized through the first Company call option date of the corresponding debt, as a

component of interest expense on other borrowed funds in the consolidated statements of operations.

Specific costs associated with the issuance of shares of the Company’s common or preferred stock are netted against proceeds and recorded in stockholders’ equity, as additional paid in capital, on the consolidated balance sheets, in the period of the share issuance.

43 unchanged sentences

LIBOR) reforms.

ASU 2020-04 and ASU 2021-01 are effective for the Company immediately and through December 31, 2024.

ASU 2020-04 and ASU 2021-01 was effective immediately upon issuance and will remain in effect through December 31, 2024.

The Company utilizes LIBOR, among other indexes, as a reference rate for underwriting variable rate loans.

13 unchanged sentences

Results for the periods beginning on and after January 1, 2023 are presented under ASU 2016-13 while prior period amounts are reported in accordance with previously applicable accounting standards.

The company recorded a reduction to retained earnings of $ 4,432 upon the adoption of ASU 2016-13, primarily due to the requirement to estimated credit losses over the life of the loan and the duration of the Company’s portfolio.

The company recorded a reduction to retained earnings of $ 4,432 upon the adoption of ASU 2016-13, primarily due to the requirement to estimate credit losses over the life of the loan and the duration of the Company’s portfolio.

The Company also recorded an increase to the ACL of $ 4,706 .

This increase was made up of two components, $ 4,576 for non-purchased credit deteriorated (“PCD”) loans and $ 130 for PCD loans.

This increase was made up

of two components, $ 4,576 for non-purchased credit deteriorated (“PCD”) loans and $ 130 for PCD loans.

An ACL on unfunded commitments of $ 1,537 was also established.

33 unchanged sentences

Proportional amortization better matches the cost of the investment with the benefits received, and including the amortization of the investment in provision for income taxes better reflects the benefit the Company receives from the transaction.

For the three months ended March 31, 2023, adopting ASU 2023-02 increased net income $ 32 .

For the three and six months ended June 30, 2023, adopting ASU 2023-02 increased net income $ 33 and $ 65 , respectively.

Recently Issued, But Not Yet Effective Accounting Pronouncements

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 March 31, 2023 and December 31, 2022, 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 June 30, 2023 and December 31, 2022, respectively, were as follows:

Available for sale securities Amortized

Losses Estimated

March 31, 2023

June 30, 2023

government agency obligations $ 18,820 $ 107 $ 224 $ 18,703

1 unchanged sentence

Corporate debt securities 47,147 — 6,894 40,253

Corporate asset-based securities 27,933 11 877 27,067

Asset-backed securities 26,823 10 630 26,203

Total available for sale securities $ 187,172 $ 117 $ 26,154 $ 161,135

3 unchanged sentences

Corporate debt securities 44,636 — 4,385 40,251

Corporate asset-based securities 29,877 — 1,060 28,817

Asset-backed securities 29,877 — 1,060 28,817

Total available for sale securities $ 190,344 $ 173 $ 24,526 $ 165,991

1 unchanged sentence

Losses Estimated

March 31, 2023

June 30, 2023

Obligations of states and political subdivisions $ 600 $ — $ 49 $ 551

5 unchanged sentences

Total held to maturity securities $ 96,379 $ 7 $ 19,607 $ 76,779

At March 31, 2023, the Bank has pledged mortgage-backed securities with a carrying value of $ 30,396 as collateral against a borrowing line of credit with the Federal Reserve Bank.

However, as of March 31, 2023, there were no borrowings outstanding on this Federal Reserve Bank line of credit.

As of March 31, 2023, the Bank has pledged U.S.

At June 30, 2023, the Bank has pledged mortgage-backed securities with a carrying value of $ 29,984 as collateral against a borrowing line of credit with the Federal Reserve Bank.

As of June 30, 2023, there were no borrowings outstanding on this Federal Reserve Bank line of credit.

As of June 30, 2023, the Bank has pledged U.S.

Government Agency securities with a carrying value of $ 1,979 and mortgage-backed securities with a carrying value of $ 2,161 as collateral against specific municipal deposits.

As of March 31, 2023, the Bank also has mortgage-backed securities with a carrying value of $ 122 pledged as collateral to the Federal Home Loan Bank of Des Moines.

At December 31, 2022, the Bank has pledged certain of its mortgage-backed securities with a carrying value of $ 5,421 as collateral to secure a line of credit with the Federal Reserve Bank.

As of June 30, 2023, the Bank also has mortgage-backed securities with a carrying value of $ 223 pledged as collateral to the Federal Home Loan Bank of Des Moines.

At December 31, 2022, the Bank had pledged certain of its mortgage-backed securities with a carrying value of $ 5,421 as collateral to secure a line of credit with the Federal Reserve Bank.

As of December 31, 2022, there were no borrowings outstanding on this Federal Reserve Bank line of credit.

As of December 31, 2022, the Bank has pledged certain of its U.S.

As of December 31, 2022, the Bank had pledged certain of its U.S.

Government Agency securities with a carrying value of $ 2,602 and mortgage-backed securities with a carrying value of $ 2,219 as collateral against specific municipal deposits.

As of December 31, 2022, the Bank also has mortgage-backed securities with a carrying value of $ 142 pledged as collateral to the Federal Home Loan Bank of Des Moines.

For the three month periods ended March 31, 2023 and March 31, 2022, there were no sales of available for sale securities.

The estimated fair value of securities at March 31, 2023 and December 31, 2022, by contractual maturity, is shown below.

As of December 31, 2022, the Bank also had mortgage-backed securities with a carrying value of $ 142 pledged as collateral to the Federal Home Loan Bank of Des Moines.

For the three and six month periods ended June 30, 2023 gross sales of available securities were $ 5,105 , gross gains on the sale of available for sale securities were $ 12 , and gross losses on the sale of available for sale securities were $ 0 .

For the three and six month periods ended June 30, 2022, there were no sales of available for sale securities.

The estimated fair value of securities at June 30, 2023 and December 31, 2022, 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.

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Available for sale securities Amortized

9 unchanged sentences

Total available for sale securities $ 187,172 $ 161,135 $ 190,344 $ 165,991

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Held to maturity securities Amortized

8 unchanged sentences

Total held to maturity securities $ 93,800 $ 74,681 $ 96,379 $ 76,779

Securities with unrealized losses at March 31, 2023 and December 31, 2022, 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 June 30, 2023 and December 31, 2022, 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

March 31, 2023

June 30, 2023

government agency obligations $ 940 $ 6 $ 2,840 $ 218 $ 3,780 $ 224

1 unchanged sentence

Corporate debt securities 11,099 928 29,154 5,966 40,253 6,894

Corporate asset-based securities — — 25,801 877 25,801 877

Asset-backed securities — — 24,977 630 24,977 630

Total $ 12,051 $ 934 $ 132,935 $ 25,220 $ 144,986 $ 26,154

3 unchanged sentences

Corporate debt securities 21,547 1,688 18,704 2,697 40,251 4,385

Corporate asset-based securities 7,955 221 20,862 839 28,817 1,060

Asset-backed securities 7,955 221 20,862 839 28,817 1,060

Total $ 42,325 $ 2,943 $ 109,611 $ 21,583 $ 151,936 $ 24,526

4 unchanged sentences

Value Unrealized

March 31, 2023

June 30, 2023

Obligations of states and political subdivisions $ — $ — $ 551 $ 49 $ 551 $ 49

5 unchanged sentences

Total $ 16,627 $ 2,416 $ 59,913 $ 17,191 $ 76,540 $ 19,607

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;

Adjustments to market value of available for sale securities that are considered temporary are recorded as separate components of stockholders’ equity, net of tax.

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.

At June 30, 2023 no ACL was established for available for sale or held to maturity securities.

Substantially all the held to maturity portfolio is made up of agency backed mortgage securities.

These securities are guaranteed by the U.S.

government, are highly rated by major rating agencies, and have a long history of no credit losses.

Accordingly, the Company does not expect to incur credit losses on these securities.

Unrealized losses on available-for-sale investment securities have not been recognized into income because the issuers’ bonds are agency backed securities or other securities that all principal and interest is expected to be received on a timely basis.

Furthermore, the Company does not intend to sell, and it is likely that management will not be required to sell, the securities prior to their anticipated recovery, and the decline in fair value is largely due to changes in interest rates.

The issuers continue to make timely principal and interest payments on their bonds.

NOTE 3 – LOANS AND ALLOWANCE FOR CREDIT LOSSES

8 unchanged sentences

Loan-to-value ratios on loans secured by farmland generally do not exceed 75 %.

Commercial and industrial (“C&I”) loans are primarily made based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower.

Commercial and industrial (“C&I”) loans are primarily underwritten based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower.

These cash flows, however, may not be as expected and the value of collateral securing the loans may fluctuate.

16 unchanged sentences

Interest on substantially all loans is credited to income based on the principal amount outstanding.

A summary of loans at March 31, 2023 follows:

March 31, 2023

A summary of loans at June 30, 2023 follows:

June 30, 2023

Amortized Cost % of Total

60 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 the amortized cost of loans summarized by class, credit quality risk rating and year of origination as of March 31, 2023 and gross charge-offs for the three months ended March 31, 2023:

Below is a summary of the amortized cost of loans summarized by class, credit quality risk rating and year of origination as of June 30, 2023 and gross charge-offs for the six months ended June 30, 2023:

Amortized Cost Basis by Origination Year

109 unchanged sentences

Loans receivable, net $ 1,393,845

Allowance for Credit Losses - On January 1, 2023, the Company adopted Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial instruments and transitioned to the Current Expected Credit Loss (“CECL”) model to estimate losses based on the lifetime of the loan.

Allowance for Credit Losses - Loans- On January 1, 2023, the Company adopted Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial instruments and transitioned to the Current Expected Credit Loss (“CECL”) model to estimate losses based on the lifetime of the loan.

Under the new methodology, the ACL is comprised of collectively evaluated and individually evaluated components.

5 unchanged sentences

The Company estimates the appropriate level of allowance for credit losses by evaluating loans collectively on a pooled basis when similar risk characteristics exist, and on an individual basis when management determines that a loan does not share similar risk characteristics with other loans.

The following table presents the balance and activity in the allowance for credit losses (“ACL”) - loans by portfolio segment as of March 31, 2023:

The following tables present the balance and activity in the allowance for credit losses (“ACL”) - loans by portfolio segment for the three and six months ended June 30, 2023:

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

Three months ended March 31, 2023

Three months ended June 30, 2023

Allowance for Credit Losses - Loans:

ACL - Loans, at beginning of period $ 18,496 $ 1,848 $ 2,000 $ 335 $ — $ 22,679

Charge-offs ( 14 ) — ( 10 ) ( 16 ) — ( 40 )

Recoveries 27 16 36 10 — 89

Additions to ACL - Loans via provision for credit losses charged to operations 424 ( 406 ) 426 ( 8 ) — 436

ACL - Loans, at end of period $ 18,933 $ 1,458 $ 2,452 $ 321 $ — $ 23,164

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

Six months ended June 30, 2023

Allowance for Credit Losses - Loans:

ACL - Loans, at beginning of period $ 14,085 $ 2,318 $ 599 $ 129 $ 808 $ 17,939

Cumulative effect of ASU 2016-13 adoption 4,510 ( 331 ) 1,119 216 ( 808 ) 4,706

3 unchanged sentences

ACL - Loans, at end of period $ 18,933 $ 1,458 $ 2,452 $ 321 $ — $ 23,164

Allowance for Credit Losses - Unfunded Commitments:

In addition to the ACL - Loans, the Company has established an ACL - Unfunded Commitments of $ 1,530 at March 31, 2023 and $ 0 at December 31, 2022, classified in other liabilities on the consolidated balance sheets.

March 31, 2023 and Three Months Ended December 31, 2022 and Three Months Ended

Allowance for Credit Losses - Unfunded Commitments - In addition to the ACL - Loans, the Company has established an ACL - Unfunded Commitments of $ 1,544 at June 30, 2023 and $ 0 at December 31, 2022, classified in other liabilities on the consolidated balance sheets.

The following table presents the balance and activity in the ACL - Unfunded Commitments for the three and six months ended June 30, 2023.

June 30, 2023 and Three Months Ended June 30, 2023 and Six Months Ended

ACL - Unfunded commitments - beginning of period $ 1,530 $ —

Cumulative effect of ASU 2016-13 adoption — 1,537

Reductions to ACL - Unfunded commitments via provision for credit losses charged to operations ( 7 ) —

Additions to ACL - Unfunded commitments via provision for credit losses charged to operations 14 7

ACL - Unfunded commitments - End of period $ 1,544 $ 1,544

1 unchanged sentence

The following table presents the components of the provision for credit losses.

March 31, 2023 and Three Months Ended

June 30, 2023 and Three Months Ended June 30, 2023 and Six Months Ended

Provision for credit losses on:

Loans $ 436 $ 493

Unfunded commitments 14 7

4 unchanged sentences

some were quantitative, while others required qualitative judgment.

The process for determining the ALL (which management believed adequately considered potential factors which resulted in

probable credit losses), included subjective elements and, therefore, may have been susceptible to significant change.

The process for determining the ALL (which management believed adequately considered potential factors which resulted in probable credit losses), included subjective elements and, therefore, may have been susceptible to significant change.

To the extent actual outcomes differed from management estimates, additional provision for loan losses could have been required that could have adversely affected the Company’s earnings or financial position in future periods.

3 unchanged sentences

Changes in the ALL by loan type for the periods presented below were as follows:

Three months ended June 30, 2022 Commercial/Agricultural Real Estate C&I/Agricultural operating Residential Mortgage Consumer Installment Unallocated Total

Allowance for Loan Losses:

Beginning balance, April 1, 2022 $ 12,394 $ 2,104 $ 460 $ 160 $ 782 $ 15,900

Charge-offs ( 122 ) ( 247 ) ( 35 ) ( 14 ) — ( 418 )

Recoveries 3 9 — 11 — 23

Provision 427 44 47 ( 14 ) 44 548

Total allowance on originated loans 12,702 1,910 472 143 826 16,053

Purchased credit impaired loans — — — — — —

Other acquired loans:

Beginning balance, April 1, 2022 789 58 62 9 — 918

Charge-offs — — ( 21 ) ( 2 ) — ( 23 )

Recoveries — — 25 — — 25

Provision ( 125 ) ( 7 ) ( 18 ) 2 — ( 148 )

Total allowance on other acquired loans 664 51 48 9 — 772

Total allowance on acquired loans 664 51 48 9 — 772

Ending balance, June 30, 2022 $ 13,366 $ 1,961 $ 520 $ 152 $ 826 $ 16,825

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

Three months ended March 31, 2022

Six months ended June 30, 2022

Allowance for Loan Losses:

12 unchanged sentences

Total allowance on acquired loans 664 51 48 9 — 772

Ending balance, March 31, 2022 $ 13,183 $ 2,162 $ 522 $ 169 $ 782 $ 16,818

Allowance for Loan Losses at March 31, 2022:

Ending balance, June 30, 2022 $ 13,366 $ 1,961 $ 520 $ 152 $ 826 $ 16,825

Allowance for Loan Losses at June 30, 2022:

Amount of allowance for loan losses arising from loans individually evaluated for impairment $ 809 $ — $ 34 $ — $ — $ 843

Amount of allowance for loan losses arising from loans collectively evaluated for impairment $ 12,557 $ 1,961 $ 486 $ 152 $ 826 $ 15,982

Loans Receivable as of March 31, 2022

Loans Receivable as of June 30, 2022

Ending balance of originated loans $ 943,305 $ 144,400 $ 69,126 $ 20,208 $ — $ 1,177,039

19 unchanged sentences

collectively evaluated for impairment $ 1,108,405 $ 161,527 $ 102,653 $ 16,631 $ — $ 1,389,216

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, 2023 and December 31, 2022, respectively, was as follows:

An aging analysis of the Company’s commercial/agricultural real estate, C&I, agricultural operating, residential mortgage, consumer installment and purchased third party loans as of June 30, 2023 and December 31, 2022, respectively, was as follows:

(Loan balances at amortized cost) 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

March 31, 2023

June 30, 2023

Commercial/Agricultural real estate:

31 unchanged sentences

Total $ 10,816 $ 595 $ 246 $ 11,657 $ 11,204 $ 22,861 $ 1,393,274 $ 1,416,135

Nonaccrual Loans - The following table presents the Company’s nonaccrual loans at March 31, 2023 with no allowance for credit losses and interest income that would have been recorded under the original terms of such nonaccrual loans:

March 31, 2023 Total Nonaccrual Loans Nonaccrual with no Allowance for Credit Losses Interest Income Not Recorded for Nonaccrual loans

Nonaccrual Loans - The following table presents the amortized cost basis of loans on nonaccrual status and of nonaccrual loans individually evaluated at June 30, 2023 with no allowance for credit losses and interest income that would have been recorded under the original terms of such nonaccrual loans:

June 30, 2023 Total Nonaccrual Loans Nonaccrual with no Allowance for Credit Losses Interest Income Not Recorded for Nonaccrual loans

Commercial/Agricultural real estate:

13 unchanged sentences

Total $ 15,663 $ 15,404 $ 673

Collateral Dependent Loans - A loan is considered to be collateral dependent when, based upon management’assessment, the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral.

The Company’s policy is to discontinue the accrual of interest income on all loans for which principal or interest is past due according to the following schedules:

• Commercial/agricultural real estate loans, past due 90 days or more;

• Commercial and industrial/agricultural operating loans past due 90 days or more;

• Closed ended consumer installment loans past due 120 days or more;

• Residential mortgage and open ended consumer installment loans past due 180 days or more.

The accrual of interest is discontinued earlier when, in the opinion of management, there is reasonable doubt as to the timely collection of interest or principal.

Once interest accruals are discontinued, accrued but uncollected interest is charged against current year income.

Subsequent receipts on non-accrual loans are recorded as a reduction of principal, and interest income is recorded only after principal recovery is reasonably assured.

Interest on loans determined to be modified is recognized on an accrual basis in accordance with the restructured terms if the loan is in compliance with the modified terms.

Nonaccrual loans are returned to accrual status when, in the opinion of management, the financial position of the borrower indicates there is no longer any reasonable doubt as to the timely collection of interest or principal.

The Company requires a period of satisfactory performance of not less than six months before returning a nonaccrual loan to accrual status.

The amount of interest income recognized by the Company for the three and six months ended June 30, 2023, due to nonaccrual loan payoffs was $ 75 and $ 85 , respectively.

Collateral Dependent Loans - A loan is considered to be collateral dependent when, based upon management’s assessment, the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral.

For collateral dependent loans, expected credit losses are based on the fair value of the collateral at the balance sheet date, with consideration for estimated selling costs if satisfaction of the loan depends on the sale of the collateral.

The following table presents collateral dependent loans by portfolio segment and collateral type, including those loans with and without a related allowance allocation.

The following table presents the amortized cost basis of collateral dependent loans by portfolio segment and collateral type that were individually evaluated to determine expected credit losses and the related allowance for credit losses as of June 30, 2023.

Collateral Type

March 31, 2023 Real Estate Other Assets Total Without an Allowance With an Allowance Allowance Allocation

June 30, 2023 Real Estate Other Assets Total Without an Allowance With an Allowance Allowance Allocation

Commercial/Agricultural real estate:

13 unchanged sentences

Total $ 24,660 $ 4,648 $ 29,308 $ 28,916 $ 392 $ 93

There were no outstanding commitments to borrowers experiencing financial difficulty as of March 31, 2023.

There were unused lines of credit totaling $ 71 on loans with borrowers experiencing financial difficulties as of March 31, 2023.

There were no outstanding commitments to borrowers experiencing financial difficulty as of June 30, 2023.

There were unused lines of credit totaling $ 64 on loans with borrowers experiencing financial difficulties as of June 30, 2023.

At December 31, 2022, the Company individually evaluated loans for impairment with a recorded investment of $ 26,823 , consisting of (1) $ 7,000 PCI loans, with a carrying amount of $ 6,904 ;

4 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 loans individually evaluated for impairment as of December 31, 2022 and March 31, 2022 was as follows:

A summary of the Company’s loans individually evaluated for impairment as of December 31, 2022 and June 30, 2022 was as follows:

Twelve Months Ended

19 unchanged sentences

Total $ 26,823 $ 26,919 $ 826 $ 31,336 $ 1,418

Three Months Ended

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

March 31, 2022

Three Months Ended Six Months Ended

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

June 30, 2022

With No Related Allowance Recorded:

10 unchanged sentences

Total $ 6,004 $ 6,004 $ 843 $ 6,617 $ 4 $ 6,202 $ 26

March 31, 2022

June 30, 2022

Commercial/Agricultural real estate $ 19,093 $ 19,305 $ 809 $ 19,707 $ 172 $ 20,972 $ 319

3 unchanged sentences

Total $ 29,386 $ 29,796 $ 843 $ 31,565 $ 269 $ 33,385 $ 550

Loan Modifications Made to Borrowers Experiencing Financial Difficulty:

The tables below detail Loan Modifications Made to Borrowers Experiencing Financial Difficulty during the three months ended June 30, 2023:

Term Extension

Loan Class Amortized Cost Basis at

March 31, 2023 % of Total Class of Financing Receivables

June 30, 2023 % of Total Class of Financing Receivables

Commercial and industrial $ 8 0.01 %

Agricultural operating $ 179 0.73 %

Other-Than-Insignificant Payment Delay

Loan Class Amortized Cost Basis at

June 30, 2023 % of Total Class of Financing Receivables

Residential mortgage $ 69 0.06 %

The following tables describe the financial effect of the modifications made to borrowers experiencing financial difficulty during the three months ended June 30, 2023:

Term Extension

Loan Class Financial Effect

Commercial and industrial A weighted average of 3 months was added to the term of the loans

Agricultural operating A weighted average of 3 months was added to the term of the loans

Other-Than-Insignificant Payment Delay

Loan Class Financial Effect

Residential mortgage Payments were deferred a weighted average of 6 months

The tables below detail Loan Modifications Made to Borrowers Experiencing Financial Difficulty during the six months ended June 30, 2023:

Term Extension

Loan Class Amortized Cost Basis at

June 30, 2023 % of Total Class of Financing Receivables

Commercial real estate $ 5,337 0.73 %

Commercial and industrial $ 8 0.01 %

Agricultural operating $ 179 0.73 %

Residential mortgage $ 37 0.03 %

1 unchanged sentence

Loan Class Amortized Cost Basis at

March 31, 2023 % of Total Class of Financing Receivables

June 30, 2023 % of Total Class of Financing Receivables

Residential mortgage $ 69 0.06 %

Other consumer $ 22 0.34 %

The following tables describe the financial effect of the modifications made to borrowers experiencing financial difficulty:

The following tables describe the financial effect of the modifications made to borrowers experiencing financial difficulty during the six months ended June 30, 2023:

Term Extension

2 unchanged sentences

Commercial and industrial A weighted average of 3 months was added to the term of the loans

Agricultural operating A weighted average of 3 months was added to the term of the loans

Residential mortgage A weighted average of 17 months was added to the term of the loans

1 unchanged sentence

Loan Class Financial Effect

Residential mortgage Payments were deferred a weighted average of 6 months

Other consumer Payments were deferred a weighted average of 3 months

The Company closely monitors the performance of loans that have been modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts.

The following table shows the performance of such loans that have been modified during the three months ended March 31, 2023.

No loan modified within the last three months has subsequently defaulted.

No loan modified during the three and six months ended June 30, 2023 has subsequently defaulted.

The following table shows the performance of such loans that have been modified during the six months ended June 30, 2023.

Current 30-59 Days Past Due 60-89 Days Past Due Greater Than 89 Days Past Due

1 unchanged sentence

Commercial and industrial 8 — — —

Agricultural operating 179

Residential mortgage 106 — — —

15 unchanged sentences

There were unused lines of credit totaling $ 484 meeting our TDR criteria as of December 31, 2022.

The following provides detail, including specific reserve and reasons for modification, related to loans identified as TDRs during the three months ended March 31, 2022:

The following provides detail, including specific reserve and reasons for modification, related to loans identified as TDRs during the three and six months ended June 30, 2022:

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 March 31, 2022

Three months ended June 30, 2022

Commercial/Agricultural real estate 1 $ — $ — $ 425 $ — $ 425 $ 425 $ —

3 unchanged sentences

Totals 5 $ 32 $ — $ 871 $ — $ 903 $ 903 $ —

There were no loans modified in a TDR during the previous twelve months which subsequently defaulted during the three months ended March 31, 2022.

Six months ended June 30, 2022

Commercial/Agricultural real estate 5 $ 1,241 $ — $ 425 $ — $ 1,666 $ 1,666 $ —

C&I/Agricultural operating 3 — — 596 — 596 596 —

Residential mortgage 6 63 — 507 — 570 570 —

Consumer installment — — — — — — — —

Totals 14 $ 1,304 $ — $ 1,528 $ — $ 2,832 $ 2,832 $ —

There were no loans modified in a TDR during the previous twelve months which subsequently defaulted during the three and six months ended June 30, 2022.

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 March 31, 2023 and December 31, 2022 were $ 513,781 and $ 523,736 , respectively, and consisted of one to four family residential real estate loans.

The unpaid balances of these loans as of June 30, 2023 and December 31, 2022 were $ 503,022 and $ 523,736 , 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.

Custodial escrow balances maintained in connection with the foregoing loan servicing, and included in deposits were $ 4,552 and $ 2,649 at March 31, 2023 and December 31, 2022, respectively.

Mortgage servicing rights activity for the three month periods ended March 31, 2023 and March 31, 2022 were as follows:

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

March 31, 2023 March 31, 2022

Custodial escrow balances maintained in connection with the foregoing loan servicing, and included in deposits were $ 4,753 and $ 2,649 at June 30, 2023 and December 31, 2022, respectively.

Mortgage servicing rights activity for the six month periods ended June 30, 2023 and June 30, 2022 were as follows:

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

June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022

Mortgage servicing rights:

12 unchanged sentences

The current period change in valuation allowance, if applicable, is included in non-interest expense as mortgage servicing rights expense, net on the consolidated statement of operations.

Servicing fees totaled $ 317 and $ 351 for the three months ended March 31, 2023 and March 31, 2022, respectively.

Servicing fees totaled $ 325 and $ 352 for the three months ended June 30, 2023 and June 30, 2022, respectively.

Servicing fees totaled $ 655 and $ 703 for the six months ended June 30, 2023 and June 30, 2022, respectively.

Servicing fees are included in loan servicing income on the consolidated statement of operations.

3 unchanged sentences

Central to the valuation model is the discount rate.

Fair value at both March 31, 2023 and March 31, 2022, was determined using discount rates ranging from 9 % to 12 %.

Fair value at June 30, 2023, was determined using discount rates ranging from 9.5 % to 12.5 %.

Fair value at June 30, 2022, 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.

2 unchanged sentences

Our leases have remaining lease terms ranging from approximately 1.17 to 5.00 years.

Some of the leases include an option to extend, the longest of with is for two 5 year terms.

As of March 31, 2023, we have no lease commitments that have not yet commenced.

Some of the leases include an option to extend, the longest of which is for two 5 year terms.

As of June 30, 2023, we have no 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, 2023 March 31, 2022

Six Months Ended

June 30, 2023 June 30, 2022

The components of total lease cost were as follows:

7 unchanged sentences

Operating cash flows from operating leases $ 273 $ 278

March 31, 2023 December 31, 2022

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

Operating leases $ 225 $ —

June 30, 2023 December 31, 2022

Supplemental balance sheet information related to leases was as follows:

13 unchanged sentences

NOTE 6 – DEPOSITS

The following is a summary of deposits by type at March 31, 2023 and December 31, 2022, respectively:

March 31, 2023 December 31, 2022

The following is a summary of deposits by type at June 30, 2023 and December 31, 2022, respectively:

June 30, 2023 December 31, 2022

Non-interest bearing demand deposits $ 261,876 $ 284,722

4 unchanged sentences

Total deposits $ 1,464,682 $ 1,424,720

At March 31, 2023, the scheduled maturities of time deposits were as follows for the year ended, except December 31, 2023, which is the nine months ended:

At June 30, 2023, the scheduled maturities of certificate accounts were as follows for the year ended, except December 31, 2023, which is the six months ended:

December 31, 2023 $ 101,540

5 unchanged sentences

Total $ 349,266

Time deposits of $250 or more were $ 87,549 and $ 66,827 at March 31, 2023 and December 31, 2022, respectively.

Brokered deposits were $ 63,962 at March 31, 2023 and consisted of $ 53,962 of brokered certificates of deposit and $ 10,000 of brokered money market accounts.

Brokered Deposits were $ 39,841 at December 31, 2022 and consisted of $ 39,839 of brokered certificates of deposit and $ 2 of brokered money market accounts.

At March 31, 2023, the scheduled maturities of brokered certificates of deposit were as follows for the year ended, except December 31, 2023, which is the nine months ended:

Certificate accounts of $250 or more were $ 132,647 and $ 66,827 at June 30, 2023 and December 31, 2022, respectively.

Brokered deposits were $ 97,330 at June 30, 2023 and consisted of $ 94,096 of brokered certificate accounts and $ 3,234 of brokered money market accounts.

Brokered Deposits were $ 39,841 at December 31, 2022 and consisted of $ 39,839 of brokered certificate accounts and $ 2 of brokered money market accounts.

At June 30, 2023, the scheduled maturities of brokered certificate accounts were as follows for the year ended, except December 31, 2023, which is the six months ended:

December 31, 2023 $ 35,639

1 unchanged sentence

December 31, 2025 (1) 8,634

December 31, 2028 (1) 5,489

Total $ 94,096

(1) The Company can call the brokered certificates of deposits maturing in the years ended December 31, 2025 and 2028, monthly beginning in March 2024.

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 March 31, 2023 and December 31, 2022 is as follows:

March 31, 2023

(1) The Company can call the brokered certificate accounts maturing in the years ended December 31, 2025 and 2028, monthly beginning in March 2024.

NOTE 7 – FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWINGS

A summary of Federal Home Loan Bank advances and other borrowings at June 30, 2023 and December 31, 2022 is as follows:

June 30, 2023

December 31, 2022

3 unchanged sentences

2025 5,000 1.45 % 1.45 % 2025 5,000 1.45 % 1.45 %

2028 15,000 3.57 % 3.59 %

Federal Home Loan Bank advances $ 122,530 $ 142,530

6 unchanged sentences

Totals $ 189,887 $ 214,939

(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 $ 1,017,535 and $ 984,878 at March 31, 2023 and December 31, 2022, respectively.

At March 31, 2023, the Bank’s available and unused portion under the FHLB borrowing arrangement was approximately $ 213,372 compared to $ 256,773 as of December 31, 2022.

(2) Maximum month-end borrowed amounts outstanding under this borrowing agreement were $ 182,530 and $ 157,530 , during the three months ended March 31, 2023 and the twelve months ended December 31, 2022, respectively.

(3) The weighted-average interest rate on FHLB borrowings maturing within twelve months as of March 31, 2023 and December 31, 2022 were 4.55 % and 4.09 %, respectively.

(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 $ 1,040,484 and $ 984,878 at June 30, 2023 and December 31, 2022, respectively.

At June 30, 2023, the Bank’s available and unused portion under the FHLB borrowing arrangement was approximately $ 294,400 compared to $ 256,773 as of December 31, 2022.

(2) Maximum month-end borrowed amounts outstanding under this borrowing agreement were $ 217,530 and $ 157,530 , during the six months ended June 30, 2023 and the twelve months ended December 31, 2022, respectively.

(3) The weighted-average interest rate on FHLB borrowings maturing within twelve months as of June 30, 2023 and December 31, 2022 were 4.58 % and 4.09 %, respectively.

(4) FHLB term notes totaling $ 15,000 , with 2028 maturity dates, are callable once by the FHLB in December of 2023.

(5) Senior notes, entered into by the Company in June 2019 consist of the following:

2 unchanged sentences

(b) A $ 5,000 line of credit, maturing August 1, 2023, that remains undrawn upon.

This line was renewed effective August 1, 2023 and will mature August 1, 2024.

(6) Subordinated notes resulted from the following:

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 $ 206,150 and $ 191,650 at March 31, 2023 and December 31, 2022, respectively.

The letters of credit balances were $ 197,500 and $ 191,650 at June 30, 2023 and December 31, 2022, respectively.

Federal Reserve Borrowings

At March 31, 2023 and December 31, 2022, the Bank had the ability to borrow $ 19,869 and $ 4,118 from the Federal Reserve Bank of Minneapolis.

The ability to borrow is based on mortgage-backed securities pledged with a carrying value of $ 30,396 and $ 5,421 as of March 31, 2023 and December 31, 2022, respectively.

There were no Federal Reserve borrowings outstanding as of March 31, 2023 and December 31, 2022.

At June 30, 223 and December 31, 2022, the Bank had the ability to borrow $ 23,859 and $ 4,118 from the Federal Reserve Bank of Minneapolis.

The ability to borrow is based on mortgage-backed securities pledged with a carrying value of $ 29,984 and $ 5,421 as of June 30, 2023 and December 31, 2022, respectively.

There were no Federal Reserve borrowings outstanding as of June 30, 2023 and December 31, 2022.

In March of 2023, the Bank was approved to obtain funding from the Federal Reserve’s new Bank Term Funding Program (“BTFP”).

As of March 31, 2023, the Bank has not borrowed from this facility and has not pledged any collateral to this facility.

As of June 30, 2023, the Bank has not borrowed from this facility and has not pledged any collateral to this facility.

Federal Funds Purchased Lines of Credit

As of March 31, 2023, the Bank maintains two unsecured federal funds purchased lines of credit with its banking partners which total $ 30,000 .

As of June 30, 2023, the Bank maintains two unsecured federal funds purchased lines of credit with its banking partners which total $ 70,000 .

As of December 31, 2022, the Bank maintained three unsecured federal funds purchased lines of credit with its banking partners which totaled $ 75,000 .

These lines bear interest at the lender bank’s announced daily federal funds rate, mature daily and are revocable at the discretion of the lending institution.

There were no borrowings outstanding on these lines of credit as of March 31, 2023 or December 31, 2022.

There were no borrowings outstanding on these lines of credit as of June 30, 2023 or December 31, 2022.

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 March 31, 2023, 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, 2023, and December 31, 2022, respectively, are presented below:

At June 30, 2023, the Bank was categorized as “Well Capitalized”, under Prompt Corrective Action Provisions.

The Bank’s Tier 1 (leverage) and risk-based capital ratios at June 30, 2023, and December 31, 2022, respectively, are presented below:

Actual For Capital Adequacy

3 unchanged sentences

Amount Ratio Amount Ratio Amount Ratio

As of March 31, 2023

As of June 30, 2023

Total capital (to risk weighted assets) $ 230,053 14.7 % $ 125,304 > = 8.0 % $ 156,630 > = 10.0 %

7 unchanged sentences

Tier 1 leverage ratio (to adjusted total assets) 203,422 11.5 % 70,610 > = 4.0 % 88,262 > = 5.0 %

The Company’s Tier 1 (leverage) and risk-based capital ratios at March 31, 2023 and December 31, 2022, respectively, are presented below:

The Company’s Tier 1 (leverage) and risk-based capital ratios at June 30, 2023 and December 31, 2022, respectively, are presented below:

Actual For Capital Adequacy

Amount Ratio Amount Ratio

As of March 31, 2023

As of June 30, 2023

Total capital (to risk weighted assets) $ 223,802 14.3 % $ 125,304 > = 8.0 %

11 unchanged sentences

The aggregate number of shares of common stock initially reserved and available for issuance under the 2018 Equity Incentive Plan was 350,000 shares.

As of March 31, 2023, 290,187 restricted shares had been granted under this plan.

As of June 30, 2023, 290,187 restricted shares had been granted under this plan.

This amount includes 11,834 shares of performance based restricted stock granted in 2019 and issued in January 2022 upon achievement of the performance criteria and completion of the three year performance period beginning in January 2019 and ending December 31, 2021.

2 unchanged sentences

Both of these issuances were approved by the Compensation Committee in accordance with plan documents and were to a former employee.

As of March 31, 2023, no stock options had been granted under this plan.

As of June 30, 2023, 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.

Due to the plan’s expiration, no new awards can be granted under this plan.

As of March 31, 2023, there are no awarded unvested restricted shares and 57,000 awarded unexercised options remaining from the plan.

As of June 30, 2023, there are no awarded unvested restricted shares and 54,000 awarded unexercised options remaining from the plan.

Options granted to date under this plan vest pro rata over a five-year period from the grant date.

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

Net compensation expense related to restricted stock awards from these plans was $ 216 for the three months ended March 31, 2023, compared to $ 195 for the three months ended March 31, 2022.

Net compensation expense related to restricted stock awards from these plans was $ 166 and $ 382 for the three and six months ended June 30, 2023, compared to $ 197 and $ 392 for the three and six months ended June 30, 2022.

Restricted Common Stock Award

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

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 option-based employee compensation related to the 2008 plan for the three month period ended March 31, 2023 was $ 0 as all options have vested.

The compensation cost recognized for stock option-based employee compensation related to these plans for the three month period ended March 31, 2022 was $ 1 .

The compensation cost recognized for stock option-based employee compensation related to the 2008 plan for the three and six month periods ended June 30, 2023 was $ 0 as all options have vested.

The compensation cost recognized for stock option-based employee compensation related to these plans for the three and six month period ended June 30, 2022 was $ 1 and $ 2 , respectively.

Common Stock Option Awards

2 unchanged sentences

Term in Years Aggregate

March 31, 2023

June 30, 2023

Outstanding at beginning of year 58,000 $ 11.51

10 unchanged sentences

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

Three months ended March 31, 2023 Twelve months ended December 31, 2022

Six months ended June 30, 2023 Twelve months ended December 31, 2022

Intrinsic value of options exercised $ 2 $ 38

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 March 31, 2023 and December 31, 2022:

The following tables present the financial instruments measured at fair value on a recurring basis as of June 30, 2023 and December 31, 2022:

Value Quoted Prices in

3 unchanged sentences

(Level 2) Significant

March 31, 2023

June 30, 2023

Investment securities:

23 unchanged sentences

Assets Measured on Nonrecurring Basis

The following tables present the financial instruments measured at fair value on a nonrecurring basis as of March 31, 2023 and December 31, 2022:

The following tables present the financial instruments measured at fair value on a nonrecurring basis as of June 30, 2023 and December 31, 2022:

Carrying Value Quoted Prices in

3 unchanged sentences

(Level 2) Significant

March 31, 2023

June 30, 2023

Foreclosed and repossessed assets, net $ 1,199 $ — $ — $ 1,199

13 unchanged sentences

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

March 31, 2023.

June 30, 2023.

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

March 31, 2023

June 30, 2023

Foreclosed and repossessed assets, net $ 1,199 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:

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Valuation Method Used Carrying

24 unchanged sentences

A reconciliation of the basic and diluted earnings per share is as follows:

Three Months Ended

(Share count in thousands) March 31, 2023 March 31, 2022

Three Months Ended Six Months Ended

(Share count in thousands) June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022

Net income attributable to common stockholders $ 3,206 $ 4,366 $ 6,868 $ 9,072

8 unchanged sentences

NOTE 12 – OTHER COMPREHENSIVE INCOME (LOSS)

The following tables show the tax effects allocated to each component of other comprehensive income (loss) for the three months ended March 31, 2023 and 2022:

The following tables show the tax effects allocated to each component of other comprehensive income (loss) for the three and six months ended June 30, 2023 and 2022:

Three Months Ended

March 31, 2023 March 31, 2022

June 30, 2023 June 30, 2022

Amount Tax Benefit

4 unchanged sentences

Unrealized gain (losses) on securities:

Net unrealized gains (losses) arising during the period $ 1,469 $ ( 404 ) $ 1,065 $ ( 9,824 ) $ 2,701 $ ( 7,123 )

Other comprehensive income (loss) $ 1,469 $ ( 404 ) $ 1,065 $ ( 9,824 ) $ 2,701 $ ( 7,123 )

The changes in the accumulated balances for each component of other comprehensive income (loss), net of tax for the twelve months ended December 31, 2022 and the three months ended March 31, 2023 were as follows:

Net unrealized losses arising during the period $ ( 3,140 ) $ 863 $ ( 2,277 ) $ ( 7,331 ) $ 2,016 $ ( 5,315 )

Reclassification adjustment for gains included in net income ( 12 ) 3 ( 9 ) — — —

Other comprehensive loss $ ( 3,152 ) $ 866 $ ( 2,286 ) $ ( 7,331 ) $ 2,016 $ ( 5,315 )

Six Months Ended

June 30, 2023 June 30, 2022

Expense Net-of-Tax

Amount Before-Tax

Expense Net-of-Tax

Unrealized (losses) gains on securities:

Net unrealized losses arising during the period $ ( 1,672 ) $ 460 $ ( 1,212 ) $ ( 17,156 ) $ 4,718 $ ( 12,438 )

Reclassification adjustment for gains included in net income ( 12 ) 3 ( 9 ) — — —

Other comprehensive loss $ ( 1,684 ) $ 463 $ ( 1,221 ) $ ( 17,156 ) $ 4,718 $ ( 12,438 )

The changes in the accumulated balances for each component of other comprehensive income (loss), net of tax for the twelve months ended December 31, 2022 and the six months ended June 30, 2023 were as follows:

Gains (Losses)

5 unchanged sentences

Ending balance, December 31, 2022 $ ( 24,353 ) $ ( 17,656 )

Current year-to-date other comprehensive income 1,469 1,065

Ending balance, March 31, 2023 $ ( 22,884 ) $ ( 16,591 )

Reclassifications out of accumulated other comprehensive income (loss) for the three month periods ended March 31, 2023 and March 31, 2022 were as follows:

Current year-to-date other comprehensive loss ( 1,684 ) ( 1,221 )

Ending balance, June 30, 2023 $ ( 26,037 ) $ ( 18,877 )

Reclassifications out of accumulated other comprehensive income (loss) for the three and six month periods ended June 30, 2023 and June 30, 2022 were as follows:

Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)

Details about Accumulated Other Comprehensive Income (Loss) Components Three months ended March 31, 2023 Three months ended March 31, 2022 (1) Affected Line Item on the Statement of Operations

Details about Accumulated Other Comprehensive Income (Loss) Components Three months ended June 30, 2023 Six months ended June 30, 2023 (1) Affected Line Item on the Statement of Operations

Unrealized gains and losses

2 unchanged sentences

Total reclassifications for the period $ 9 $ 9 Net income attributable to common stockholders

Amounts Reclassified from Accumulated Other Comprehensive Income (Loss)

Details about Accumulated Other Comprehensive Income (Loss) Components Three months ended June 30, 2022 Six months ended June 30, 2022 (1) Affected Line Item on the Statement of Operations

Unrealized gains and losses

Sale of securities $ — $ — Net gains (losses) on investment securities

Tax effect — — Provision for income taxes

Total reclassifications for the period $ — $ — Net income attributable to common stockholders

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