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OFFON

BANK FIRST CORPORATION

(BFC)
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BANK FIRST : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

08/09/2021 | 12:38pm EST
The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our audited consolidated financial
statements for the year ended December 31, 2020, included in our Annual Report
and with our unaudited condensed accompanying notes set forth in this Quarterly
Report on Form 10-Q for the quarterly period June 30, 2021.

FORWARD-LOOKING STATEMENTS

Certain statements contained in this report are forward-looking statements
within the meaning of and subject to the safe harbor protections of the Private
Securities Litigation Reform Act of 1995. These forward-looking statements
include, without limitation, statements relating to the Company's assets,
business, cash flows, condition (financial or otherwise), credit quality,
financial performance, liquidity, short and long-term performance goals,
prospects, results of operations, strategic initiatives, potential future
acquisitions, disposition and other growth opportunities. These statements,
which are based upon certain assumptions and estimates and describe the
Company's future plans, results, strategies and expectations, can generally be
identified by the use of the words and phrases "may," "will," "should," "could,"
"would," "goal," "plan," "potential," "estimate," "project," "believe,"
"intend," "anticipate," "expect," "target," "aim," "predict," "continue,"
"seek," "projection" and other variations of such words and phrases and similar
expressions. These forward-looking statements are not historical facts, and are
based upon current expectations, estimates and projections about the Company's
industry, management's beliefs and certain assumptions made by management, many
of which, by their nature, are inherently uncertain and beyond the Company's
control. The inclusion of these forward-looking statements should not be
regarded as a representation by the Company or any other person that such
expectations, estimates and projections will be achieved. Accordingly, the
Company cautions investors that any such forward-looking statements are not
guarantees of future performance and are subject to risks, assumptions and
uncertainties that are difficult to predict and that are beyond the Company's
control. Although the Company believes that the expectations reflected in these
forward-looking statements are reasonable as of the date of this report, actual
results may prove to be materially different from the results expressed or
implied by the forward-looking statements. A number of factors could cause
actual results to differ materially from those contemplated by the
forward-looking statement in this report including, without limitation, the
risks and other factors set forth in the Company's Registration Statements under
the captions "Cautionary Note Regarding Forward-Looking Statements" and "Risk
factors." Many of these factors are beyond the Company's ability to control or
predict. If one or more events related to these or other risks or uncertainties
materialize, or if the Company's underlying assumptions prove to be incorrect,
actual results may differ materially from the forward-looking statements.
Accordingly, investors should not place undue reliance on any such
forward-looking statements. Any forward-looking statements speaks only as of the
date of this report, and the Company does not undertake any obligation to
publicly update or review any forward-looking statement, whether as a result of
new information, future developments or otherwise, except as required by law.
New risks and uncertainties may emerge from time to time, and it is not possible
for the Company to predict their occurrence or how they will affect the Company.

We qualify all of our forward-looking statements by these cautionary statements.

OVERVIEW


Bank First Corporation is a Wisconsin corporation that was organized primarily
to serve as the holding company for Bank First, N.A. Bank First, N.A., which was
incorporated in 1894, is a nationally-chartered bank headquartered in Manitowoc,
Wisconsin. It is a member of the Board of Governors of the Federal Reserve
System ("Federal Reserve"), and is regulated by the Office of the Comptroller of
the Currency ("OCC"). Including its headquarters in Manitowoc, Wisconsin, the
Bank has 21 banking locations in Manitowoc, Outagamie, Brown, Winnebago,
Sheboygan, Waupaca, Ozaukee, Monroe, and Jefferson counties in Wisconsin. The
Bank offers loan, deposit and treasury management products at each of its
banking locations.

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As with most community banks, the Bank derives a significant portion of its
income from interest received on loans and investments. The Bank's primary
source of funding is deposits, both interest-bearing and noninterest-bearing. In
order to maximize the Bank's net interest income, or the difference between the
income on interest-earning assets and the expense of interest-bearing
liabilities, the Bank must not only manage the volume of these balance sheet
items, but also the yields earned on interest-earning assets and the rates paid
on interest-bearing liabilities. To account for credit risk inherent in all
loans, the Bank maintains an ALL to absorb possible losses on existing loans
that may become uncollectible. The Bank establishes and maintains this allowance
by charging a provision for loan losses against operating earnings. Beyond its
net interest income, the Bank further receives income through the net gain on
sale of loans held for sale as well as servicing income which is retained on
those sold loans. In order to maintain its operations and bank locations, the
Bank incurs various operating expenses which are further described within the
"Results of Operations" later in this section.

The Bank is a 49.8% member of a data processing subsidiary, UFS, which provides
core data processing, endpoint management cloud services, cyber security and
digital banking solutions for over 50 Midwest banks. The Bank, through its 100%
owned subsidiary TVG Holdings, Inc., also holds a 40% ownership interest in
Ansay, an insurance agency providing clients throughout Wisconsin with insurance
and risk management solutions. These unconsolidated subsidiary interests
contribute noninterest income to the Bank through their underlying annual
earnings.

On October 27, 2017, the Company consummated its merger with Waupaca pursuant to
the Agreement and Plan of Bank Merger, dated as of May 11, 2017 and as amended
on July 20, 2017, by and among the Company, BFNC Merger Sub, LLC, a wholly-owned
subsidiary of the Company, and Waupaca, whereby Waupaca was merged with and into
the Company, and First National Bank, Waupaca's wholly owned banking subsidiary,
was merged with and into the Bank. The system integration was completed, and six
branches of First National Bank opened on October 30, 2017 as branches of the
Bank, expanding the Bank's presence into Waupaca county.

On July 12, 2019, the Company consummated its merger with Partnership pursuant
to the Agreement and Plan of Bank Merger, dated as of January 22, 2019 and as
amended on April 30, 2019, by and among the Company and Partnership, whereby
Partnership was merged with and into the Company, and Partnership Bank,
Partnership's wholly owned banking subsidiary, was merged with and into the
Bank. The system integration was completed, and four branches of Partnership
Bank opened on July 15, 2019 as branches of the bank, expanding the Bank's
presence into Ozaukee, Monroe and Jefferson counties.

On May 15, 2020, the Company consummated its merger with Timberwood pursuant to
the Agreement and Plan of Bank Merger, dated as of November 20, 2019, by and
among the Company and Timberwood, whereby Timberwood was merged with and into
the Company, and Timberwood Bank, Timberwood's wholly owned banking subsidiary,
was merged with and into the Bank. The system integration was completed, and the
sole branch of Timberwood Bank opened on May 18, 2020 as a branch of the bank,
expanding the Bank's presence in Monroe County.

During the first quarter of 2020, COVID-19 was declared a global pandemic by the
World Health Organization and a National Public Health Emergency was declared in
the United States. Shortly before the end of March 2020, in response to the
COVID-19 pandemic, the government of Wisconsin and of most other states took
preventative or protective actions, such as imposing restrictions on travel and
business operations, advising or requiring individuals to limit or forego their
time outside of their homes, and ordering temporary closures of businesses that
have been deemed to be non-essential. These preventative and protective actions
within Wisconsin were lifted during May 2020.

The impact of the COVID-19 pandemic on the economy continues to evolve. The
COVID-19 pandemic and its associated impacts on trade, travel, unemployment,
consumer spending, and other economic activities has resulted in less economic
activity and could have an adverse effect on our business, financial condition
and results of operations. The ultimate extent of the impact of the COVID-19
pandemic on our business, financial condition and results of operations is
currently uncertain and will depend on various developments and other factors,
including, among others, the duration and scope of the pandemic, as well as
governmental, regulatory and private sector responses to the pandemic, and the
associated impacts on the economy, financial markets and our customers.

Our business, financial condition and results of operations generally rely upon
the ability of our borrowers to repay their loans, the value of collateral
underlying our secured loans, and demand for loans and other products and
services we offer, which are highly dependent on the business environment in our
primary markets. We have actively reached out to our customers to provide
guidance, direction and assistance in these uncertain times. We also
participated extensively in the Payroll Protection Program ("PPP"), under which
we secured funding of approximately 1,875 loans totaling approximately $279.6
million during 2020 as well as approximately 1,132 loans totaling approximately
$98.2 million under the new round of funding during the first six months of
2021.

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

The following tables present certain selected historical consolidated financial data as of the dates or for the period indicated:




                                                         At or for the Three Months Ended                           At or for the Six Months Ended
(In thousands, except per share
data)                                  6/30/2021      3/31/2021     12/31/2020      9/30/2020      6/30/2020        6/30/2021            6/30/2020

Results of Operations:

Interest income                       $    24,003    $    24,442    $    27,094    $    25,928    $    24,382    $         48,445     $         47,678
Interest expense                            2,189          2,339          2,623          3,003          3,586               4,528                8,239

Net interest income                        21,814         22,103         24,471         22,925         20,796              43,917               39,439
Provision for loan losses                     950            900          1,650          1,350          3,150               1,850                4,125

Net interest income after
provision for loan losses                  20,864         21,203         22,821         21,575         17,646              42,067               35,314

Noninterest income                          6,574          6,210          6,744          5,115          7,764              12,784               11,661
Noninterest expense                        12,221         12,225         13,972         12,202         14,438              24,446               27,179

Income before income tax expense           15,217         15,188         15,593         14,488         10,972              30,405               19,796
Income tax expense                          3,669          3,674          4,063          3,534          2,676               7,343                4,234

Net income                            $    11,548    $    11,514    $    11,530    $    10,954    $     8,296    $         23,062     $         15,562

Earnings per common share - basic     $      1.50    $      1.49    $      1.49    $      1.42    $      1.11    $           2.99     $           2.14
Earnings per common share -
diluted                                      1.50           1.49           1.49           1.42           1.11                2.99                 2.14

Common Shares:

Basic weighted average                  7,653,317      7,657,301      7,659,904      7,673,572      7,395,199           7,655,738            7,212,634
Diluted weighted average                7,668,740      7,677,976      7,682,101      7,691,326      7,405,995           7,674,993            7,271,192
Outstanding                             7,688,795      7,729,216      7,709,497      7,729,762      7,733,457           7,688,795            7,733,457

Noninterest income / noninterest
expense:

Service charges                       $     1,596    $     1,467    $     1,586    $     1,343    $     1,158    $          3,063     $          2,074
Income from Ansay                             723            725            169            970            710               1,448                1,601
Income from UFS                               663            366            599            720            850               1,029                1,747
Loan servicing income                       1,178            505            194            538            226               1,683                  688
Net gain on sales of mortgage
loans                                       2,187          2,811          2,214          1,304          1,332               4,998                

1,792

Net gain on sales of securities                 -              -              -              -          3,233                   -                3,233
Noninterest income from strategic
alliances                                      28             17             26             16             16                  45                   33
Other noninterest income                      199            319          1,956            224            239                 518                  493

Total noninterest income              $     6,574    $     6,210    $     6,744    $     5,115    $     7,764    $         12,784     $         11,661

Personnel expense                     $     7,121    $     7,091    $    

7,604 $ 6,609 $ 6,608 $ 14,212 $ 13,060 Occupancy, equipment and office

               968          1,210          1,352          1,171            921               2,178                2,196
Data processing                             1,358          1,393          1,519          1,463          1,334               2,751                2,533
Postage, stationery and supplies              131            197            204            219            277                 328                  449
Net (gain) loss on sales and
valuations of other real estate
owned                                        (73)          (133)           (16)           (32)            467               (206)                1,443
Advertising                                    53             49             61             41             69                 102                  124
Charitable contributions                      152            126            214            110            127                 278                  250
Outside service fees                          804            755          1,029            888          1,394               1,559                2,195
Amortization of intangibles                   351            351            522            418            362                 702                  696
Penalty for early extinguishment
of debt                                         -              -              -              -          1,323                   -                1,323
Other noninterest expense                   1,356          1,186          1,483          1,315          1,556               2,542                

2,910


Total noninterest expense             $    12,221    $    12,225    $    13,972    $    12,202    $    14,438    $         24,446     $         27,179

Period-end balances:

Loans                                 $ 2,225,217    $ 2,228,892    $

2,191,460 $ 2,193,228 $ 2,115,023 $ 2,225,217 $ 2,115,023 Allowance for loan losses

                  19,547         18,531         17,658         16,318         16,071              19,547               

16,071

Investment securities
available-for-sale, at fair value         153,818        167,940        165,039        173,334        174,067             153,818              174,067
Investment securities
held-to-maturity, at cost                   5,912          5,934          6,669          6,670          9,579               5,912                9,579
Goodwill and other intangibles,
net                                        64,440         64,288         64,639         65,110         65,559              64,440               65,559
Total assets                            2,818,950      2,846,199      2,718,016      2,639,247      2,657,911           2,818,950            2,657,911
Deposits                                2,446,654      2,448,035      2,320,963      2,271,040      2,263,145           2,446,654            2,263,145
Stockholders' equity                      311,430        303,442        294,857        286,104        276,100             311,430              276,100
Book value per common share                 40.50          39.26          38.25          37.01          35.70               40.50                35.70
Tangible book value per common
share (1)                                   32.69          31.42          30.35          29.12          27.76               32.69                27.76

Average balances:

Loans                                 $ 2,247,026    $ 2,196,142    $ 2,206,207    $ 2,140,008    $ 2,034,738    $      2,221,715     $      1,889,657
Interest-earning assets                 2,633,850      2,547,783      2,465,713      2,423,168      2,329,097           2,591,044            2,170,238
Total assets                            2,835,580      2,750,471      2,671,967      2,626,136      2,520,882           2,793,261            2,358,772
Deposits                                2,453,156      2,355,888      2,316,793      2,260,065      2,130,100           2,404,790            1,986,569
Interest-bearing liabilities            1,723,395      1,694,711      1,663,642      1,636,606      1,589,127           1,709,132            

1,532,970

Goodwill and other intangibles,
net                                        60,363         60,782         60,836         61,276         53,836              60,571               51,275
Stockholders' equity                      308,201        300,331        289,916        281,656        256,529             304,288              244,999

Financial ratios (2):

Return on average assets                     1.63 %         1.67 %         1.71 %         1.67 %         1.32 %              1.65 %               1.32 %
Return on average common equity             14.99 %        15.34 %        15.78 %        15.56 %        12.94 %             15.16 %              12.70 %
Average equity to average assets            10.87 %        10.92 %        10.85 %        10.73 %        10.18 %             10.89 %              10.39 %
Stockholders' equity to assets              11.05 %        10.66 %        10.85 %        10.84 %        10.39 %             11.05 %              10.39 %
Tangible equity to tangible assets
(1)                                          9.11 %         8.72 %         8.80 %         8.73 %         8.27 %              9.11 %               8.27 %
Loan yield                                   4.13 %         4.34 %         4.62 %         4.65 %         4.66 %              4.19 %               4.78 %
Earning asset yield                          3.71 %         3.95 %         4.44 %         4.33 %         4.29 %              3.82 %               4.50 %
Cost of funds                                0.51 %         0.56 %         0.63 %         0.73 %         0.91 %              0.53 %               1.08 %
Net interest margin, taxable
equivalent                                   3.37 %         3.57 %         4.01 %         3.84 %         3.67 %              3.47 %               3.74 %
Net loan charge-offs to average
loans                                      (0.01) %         0.00 %         0.01 %         0.20 %         0.01 %              0.00 %             (0.03) %
Nonperforming loans to total loans           0.55 %         0.63 %         0.57 %         0.84 %         1.09 %              0.55 %               1.09 %
Nonperforming assets to total
assets                                       0.45 %         0.52 %         0.52 %         0.79 %         0.94 %              0.45 %               0.94 %
Allowance for loan losses to loans           0.88 %         0.83 %        
0.81 %         0.74 %         0.76 %              0.88 %               0.76 %


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  Table of Contents

These measures are not measures prepared in accordance with GAAP, and are (1) therefore considered to be non-GAAP financial measures. See "GAAP

reconciliation and management explanation of non-GAAP finanical measures" for

a reconciliation of these measures to their most comparable GAAP measures.

(2) Income statement-related ratios for partial year periods are annualized.

GAAP RECONCILIATION AND MANAGEMENT EXPLANATION OF NON-GAAP FINANCIAL MEASURES


We identify certain financial measures discussed in the Report as being
"non-GAAP financial measures." The non-GAAP financial measures presented in this
Report are tangible book value per common share and tangible equity to tangible
assets.

In accordance with the SEC's rules, we classify a financial measure as being a
non-GAAP financial measure if that financial measure excludes or includes
amounts, or is subject to adjustments that have the effect of excluding or
including amounts, that are included or excluded, as the case may be, in the
most directly comparable measure calculated and presented in accordance with
GAAP as in effect from time to time in the United States in our statements of
income, balance sheets or statements of cash flows.

The non-GAAP financial measures that we discuss in this Report should not be
considered in isolation or as a substitute for the most directly comparable or
other financial measures calculated in accordance with GAAP. Moreover, the
manner in which we calculate the non-GAAP financial measures that we discuss in
our selected historical consolidated financial data may differ from that of
other companies reporting measures with similar names. You should understand how
such other banking organizations calculate their financial measures similar or
with names similar to the non-GAAP financial measures we have presented in our
selected historical consolidated financial data when comparing such non-GAAP
financial measures. The following discussion and reconciliations provide a more
detailed analysis of these non-GAAP financial measures.

Tangible book value per common share and tangible equity to tangible assets are
non-GAAP measures that exclude the impact of goodwill and other intangibles used
by the Company's management to evaluate capital adequacy. Because intangible
assets such as goodwill and other intangibles vary extensively from company to
company, we believe that the presentation of this information allows investors
to more easily compare the Company's capital position to other companies. The
most directly comparable financial measures calculated in accordance with GAAP
are book value per common share, return on average common equity and
stockholders' equity to total assets.




                                                       At or for the Three Months Ended                           At or for the Six Months Ended
(In thousands, except per share
data)                                6/30/2021      3/31/2021     12/31/2020      9/30/2020      6/30/2020        6/30/2021            6/30/2020
Tangible Assets
Total assets                        $ 2,818,950    $ 2,846,199    $ 2,718,016    $ 2,639,247    $ 2,657,911    $      2,818,950     $      2,657,911
Adjustments:
Goodwill                               (55,357)       (55,472)       (55,472)       (55,022)       (55,052)            (55,357)             (55,052)
Core deposit intangible, net of
amortization                            (4,738)        (5,089)        (5,440)        (5,962)        (6,381)             (4,738)              

(6,381)

Tangible assets                     $ 2,758,855    $ 2,785,638    $ 

2,657,104 $ 2,578,263 $ 2,596,478 $ 2,758,855 $ 2,596,478


Tangible Common Equity
Total stockholders' equity          $   311,430    $   303,442    $   294,857    $   286,104    $   276,100    $        311,430     $        276,100
Adjustments:
Goodwill                               (55,357)       (55,472)       (55,472)       (55,022)       (55,052)            (55,357)             (55,052)
Core deposit intangible, net of
amortization                            (4,738)        (5,089)        (5,440)        (5,962)        (6,381)             (4,738)              (6,381)
Tangible common equity              $   251,335    $   242,881    $   233,945    $   225,120    $   214,667    $        251,335     $        214,667

Book value per common share         $     40.50    $     39.26    $     38.25    $     37.01    $     35.70    $          40.50     $          35.70
Tangible book value per common
share                                     32.69          31.42          30.35          29.12          27.76               32.69                

27.76


Total stockholders' equity to
total assets                              11.05 %        10.66 %        10.85 %        10.84 %        10.39 %             11.05 %              10.39 %
Tangible common equity to
tangible assets                            9.11 %         8.72 %         8.80 %         8.73 %         8.27 %              9.11 %               8.27 %




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RESULTS OF OPERATIONS

Results of Operations for the Three Months Ended June 30, 2021 and June 30, 2020


General. Net income increased $3.2 million to $11.5 million for three months
ended June 30, 2021, compared to $8.3 million for the same period in 2020. This
increase was primarily due to the reduction of funding costs based on lower rate
deposits in 2021, a $2.2 million reduction in provisions for loan losses
quarter-over-quarter, and strong residential mortgage production during the
second quarter of 2021.

Net Interest Income. The management of interest income and expense is
fundamental to our financial performance. Net interest income, the difference
between interest income and interest expense, is the largest component of the
Company's total revenue. Management closely monitors both total net interest
income and the net interest margin (net interest income divided by average
earning assets). We seek to maximize net interest income without exposing the
Company to an excessive level of interest rate risk through our asset and
liability policies. Interest rate risk is managed by monitoring the pricing,
maturity and repricing options of all classes of interest-bearing assets and
liabilities. Our net interest margin can also be adversely impacted by the
reversal of interest on nonaccrual loans and the reinvestment of loan payoffs
into lower yielding investment securities and other short-term investments.

Net interest and dividend income increased by $1.0 million to $21.8 million for
the three months ended June 30, 2021 compared to $20.8 million for three months
ended June 30, 2020. The increase in net interest income was primarily due to
the reduction in funding costs on interest bearing liabilities, which declined
0.40% quarter-over-quarter. Tax equivalent net interest margin decreased 0.30%
to 3.37% for the three-months ended June 30, 2021, down from 3.67% for the same
period in 2020. Net interest margin decreased by 0.08% due to a decrease in
purchase accounting accretion quarter-over-quarter which added to a decrease of
0.22% in core net interest margin. Net interest margin and net interest income
are influenced by internal and external factors. Internal factors include
balance sheet changes on both volume and mix and pricing decisions, and external
factors include changes in market interest rates, competition and the shape of
the interest rate yield curve.

Interest Income. Total interest income decreased $0.4 million, or 1.6%, to $24.0
million for the three months ended June 30, 2021 compared to $24.4 million for
the same period in 2020. The decrease in total interest income was primarily due
a reduction of 0.58% in yield on interest earnings assets, offset by interest
income produced by approximately $377.8 million in PPP loans originated during
2020 and 2021. The average balance of loans increased by $212.3 million during
the three months ended June 30, 2021 compared to the same period in 2020.

Interest Expense. Interest expense decreased $1.4 million, or 39.0%, to $2.2
million for the three months ended June 30, 2021 compared to $3.6 million for
the same period in 2020. The decrease in interest expense was primarily due to
the lower overall interest rate environment.

Interest expense on interest-bearing deposits decreased by $1.2 million to $2.0
million for the three months ended June 30, 2021 from $3.2 million for the same
period in 2020. The average cost of interest-bearing deposits was 0.48% for the
three months ended June 30, 2021, compared to 0.88% for the same period in 2020.

Provision for Loan Losses. Credit risk is inherent in the business of making
loans. We establish an ALL through charges to earnings, which are shown in the
statements of operations as the provision for loan losses. Specifically
identifiable and quantifiable known losses are promptly charged off against the
allowance. The provision for loan losses is determined by conducting a quarterly
evaluation of the adequacy of our ALL and charging the shortfall or excess, if
any, to the current quarter's expense. This has the effect of creating
variability in the amount and frequency of charges to earnings. The provision
for loan losses and level of allowance for each period are dependent upon many
factors, including loan growth, net charge-offs, changes in the composition of
the loan portfolio, delinquencies, management's assessment of the quality of the
loan portfolio, the valuation of problem loans and the general economic
conditions in our market area. The determination of the amount is complex and
involves a high degree of judgment and subjectivity.

We recorded a provision for loan losses of $1.0 million for the three months
ended June 30, 2021 compared to $3.2 million for the same period in 2020. We
recorded net recoveries of $0.1 million for the three months ended June 30, 2021
compared to net charge-offs of $0.1 million for the same period in 2020. The ALL
was $19.5 million, or 0.88% of total loans, at June 30, 2021 compared to $16.1
million, or 0.76% of total loans at June 30, 2020.

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Table of Contents


Noninterest Income. Noninterest income is an important component of our total
revenues. A significant portion of our noninterest income is associated with
service charges and income from the Bank's subsidiaries, Ansay and UFS. Other
sources of noninterest income include loan servicing fees, gains on sales of
mortgage loans, and other income from strategic alliances.

Noninterest income decreased $1.2 million to $6.6 million for the three months
ended June 30, 2021 compared to $7.8 million for the same period in 2020. Income
from service charges increased by 37.8% due to an expanded base of customer
relationships, many of which were the result of the Timberwood acquisition
Income from our investment in UFS decreased by 22.0% as a result of an absence
of one-time deconversion fees that existed during 2020. Loan servicing income
increased by 421.2% resulting from significant additions to the Company's
serviced portfolios as well as a positive adjustment to the Company's mortgage
servicing rights of $0.6 million during the second quarter of 2021 which
compared favorably to a negative $0.5 million adjustment to these same rights
during the second quarter of 2020. Net gains on sales of mortgage loans saw a
very significant increase quarter-over-quarter as the Company continues to
experience very robust activity in secondary market loan originations. Finally,
the Company experienced a gain on sale of investment securities totaling $3.2
million during the second quarter of 2020, compared to no gain or loss on sales
of investment securities during the second quarter of 2021.

The major components of our noninterest income are listed below:




                                                          Three Months Ended June 30,
                                                   2021       2020      $ Change      % Change

                                                    (In thousands)
Noninterest Income
Service Charges                                   $ 1,596    $ 1,158    $     438            38 %
Income from Ansay                                     723        710           13             2 %
Income from UFS                                       663        850        (187)          (22) %
Loan Servicing income                               1,178        226          952           421 %
Net gain on sales of mortgage loans                 2,187      1,332          855            64 %
Net gain on sale of securities                          -      3,233      (3,233)            NM
Noninterest income from strategic alliances            28         16       
   12            75 %
Other                                                 199        239         (40)          (17) %
Total noninterest income                          $ 6,574    $ 7,764    $ (1,190)          (15) %




Noninterest Expense. Noninterest expense decreased $2.2 million to $12.2 million
for the three months ended June 30, 2021 compared to $14.4 million for the same
period in 2020. Personnel expense increased 7.8%, or $0.5 million, as a result
of the added scale from the Timberwood acquisition in addition to customary
annual pay increases. Postage, stationary and supplies expense decreased $0.2
million, or 52.7%, due to investments made in supplies during the second quarter
of 2020 while dealing with the COVID 19 pandemic which were not required during
2021. During the second quarter of 2021 we recognized gains on sales and
valuations of other real estate owned totaling $0.1 million, compared to a loss
of $0.5 million during the second quarter of 2020, creating a significant
positive variance between the quarters. The Timberwood acquisition occurred
during the second quarter of 2020, causing significant third-party professional
expenses which were not repeated during the second quarter of 2021, leading to a
significant reduction in outside service fees. Finally, during the second
quarter of 2020, the Company repaid $30.0 million in borrowings from the Federal
Home Loan Bank of Chicago prior to the contractual maturity dates of these
borrowings, leading to prepayment penalties of $1.3 million. There were no
similar prepayment penalties during the second quarter of 2021.

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The major components of our noninterest expense are listed below:




                                                         Three Months Ended June 30,
                                                  2021        2020      $ Change      % Change

                                                   (In thousands)
Noninterest Expense
Salaries, commissions, and employee benefits    $  7,121    $  6,608    $  
  513             8 %
Occupancy                                            968         921           47             5 %
Data Processing                                    1,358       1,334           24             2 %
Postage, stationary, and supplies                    131         277        (146)          (53) %
Net gain on sales and valuation of ORE              (73)         467       
(540)            NM
Advertising                                           53          69         (16)          (23) %
Charitable contributions                             152         127           25            20 %
Outside service fees                                 804       1,394        (590)          (42) %
Amortization of intangibles                          351         362         (11)           (3) %
Penalty for early extinguishment of debt               -       1,323      (1,323)            NM
Other                                              1,356       1,556        (200)          (13) %
Total noninterest expenses                      $ 12,221    $ 14,438    $ (2,217)          (15) %




Income Tax Expense. We recorded a provision for income taxes of $3.7 million for
the three months ended June 30, 2021 compared to a provision of $2.7 million for
the same period during 2020, reflecting effective tax rates of 24.1% and 24.4%,
respectively. The effective tax rates were reduced from the statutory federal
and state income tax rates during both periods as a result of tax-exempt
interest income produced by certain qualifying loans and investments in the
Bank's portfolios. The effective tax rate for the first quarter of 2020 was
further lowered by favorable tax treatment related to the payout of a deferred
compensation plan during that quarter.

Results of Operations for the Six Months Ended June 30, 2021 and June 30, 2020


General. Net income increased $7.5 million to $23.1 million for the six months
ended June 30, 2021, compared to $15.6 million for the same period in 2020. This
increase was primarily due to the added scale of one office acquired in the
Timberwood acquisition during the second quarter of 2020, strong residential
mortgage production during the first six months of 2021, a reduction of funding
costs based on lower rate deposits in 2021, and a $2.3 million reduction in
provisions for loan losses period-over-period.

Net Interest Income. Net interest and dividend income increased by $4.5 million
to $43.9 million for the six months ended June 30, 2021, compared to $39.4
million for six months ended June 30, 2020. The increase in net interest income
was primarily due to the added scale of the Timberwood acquisition along with a
reduction in funding costs on interest bearing liabilities, which declined 0.55%
period-over-period. Total average interest-earning assets increased to $2.59
billion for the six months ended June 30, 2021, compared to $2.17 billion for
the same period in 2020. Tax equivalent net interest margin decreased 0.27% to
3.47% for the six months ended June 30, 2021, down from 3.74% for the same
period in 2020. Net interest margin decreased by 0.11% due to a decrease in
purchase accounting accretion period-over-period which added to a decrease of
0.16% in core net interest margin. Net interest margin and net interest income
are influenced by internal and external factors. Internal factors include
balance sheet changes on both volume and mix and pricing decisions, and external
factors include changes in market interest rates, competition and the shape of
the interest rate yield curve.

Interest Income. Total interest income increased $0.7 million, or 1.61%, to
$48.4 million for the six months ended June 30, 2021 compared to $47.7 million
for the same period in 2020. The increase in total interest income was primarily
due the added scale of one office acquired in the Timberwood acquisition during
the second quarter of 2020 along with interest income produced by approximately
$377.8 million in PPP loans originated during 2020 and 2021, offset by lower
overall yields on earning assets. The average balance of interest-earnings
assets increased by $420.8 million during the six months ended June 30, 2021
compared to the same period in 2020, offsetting a reduction in yield on
interest-earning assets of 0.68% between these two periods.

Interest Expense. Interest expense decreased $3.7 million, or 45.0%, to $4.5
million for the six months ended June 30, 2021 compared to $8.2 million for the
same period in 2020. The decrease in interest expense was primarily due to the
lower overall interest rate environment, which was counteracted to a certain
extent by an increase of $176.2 million in interest-bearing liabilities.

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Interest expense on interest-bearing deposits decreased by $3.2 million to $4.1
million for the six months ended June 30, 2021, from $7.3 million for the same
period in 2020. The average cost of interest-bearing deposits was 0.51% for the
six months ended June 30, 2021, compared to 1.04% for the same period in 2020.

Provision for Loan Losses. We recorded a provision for loan losses of $1.9
million for the six months ended June 30, 2021, compared to $4.1 million for the
same period in 2020. We recorded net recoveries of $39,000 for the six months
ended June 30, 2021 compared to net recoveries of 0.6 million for the same
period in 2020. The ALL was $19.5 million, or 0.88% of total loans, at June 30,
2021 compared to $16.1 million, or 0.76% of total loans at June 30, 2020. The
elevated provision during the first half of 2020 compared to the provision
during the first half of 2021 was primarily the result of heightened economic
risks resulting from the COVID-19 pandemic.

Noninterest Income. Noninterest income increased $1.1 million to $12.8 million
for the six months ended June 30, 2021 compared to $11.7 million for the same
period in 2020. Income from service charges increased by 47.7% due to an
expanded base of customer relationships, many of which were the result of the
Timberwood acquisition. Income from our investment in UFS decreased by 41.1% as
a result of the absence of one-time deconversion fees that existed during 2020.
Loan servicing income increased by 45.8% resulting from a positive adjustment to
the Company's mortgage servicing rights of $0.6 million during the first half of
2021 which compared favorably to a negative $0.5 million adjustment to these
same rights during the first half of 2020. Net gains on sales of mortgage loans
saw a very significant increase period-over-period as the Company continues to
experience very robust activity in secondary market loan originations. During
the second quarter of 2020 the Company sold $36.6 million of U.S. Treasury
notes, resulting in a gain of $3.1 million. There were no similar sales of
investments during the first half of 2021, causing a negative comparison between
those periods.

The major components of our noninterest income are listed below:


                                                         Six Months Ended June 30,
                                                  2021       2020      $ Change     % Change

                                                  (In thousands)
Noninterest Income
Service Charges                                 $  3,063   $  2,074    $     989          48  %
Income from Ansay                                  1,448      1,601        (153)        (10)  %
Income from UFS                                    1,029      1,747        (718)        (41)  %
Loan Servicing income                              1,683        688          995         145  %
Net gain on sales of mortgage loans                4,998      1,792        3,206         179  %
Net gain on sales of securities                        -      3,233      (3,233)          NM
Noninterest income from strategic alliances           45         33        
  12          36  %
Other                                                518        493           25           5  %
Total noninterest income                        $ 12,784   $ 11,661    $   1,123          10  %




Noninterest Expense. Noninterest expense decreased $2.7 million to $24.5 million
for the six months ended June 30, 2021 compared to $27.2 million for the same
period in 2020. Personnel expense increased 8.8%, or $1.2 million, as a result
of the added scale from the Timberwood acquisition in addition to customary
annual pay increases. During the first half of 2021 we recognized gains on sales
and valuations of other real estate owned totaling $0.2 million, compared to a
loss of $1.4 million during the first half of 2020, creating a significant
positive variance between the periods. The Timberwood acquisition occurred
during the second quarter of 2020, causing significant third-party professional
expenses which were not repeated during the first half of 2021, leading to a
significant reduction in outside service fees. Finally, during the second
quarter of 2020, the Company repaid $30.0 million in borrowings from the Federal
Home Loan Bank of Chicago prior to the contractual maturity dates of these
borrowings, leading to prepayment penalties of $1.3 million. There were no
similar prepayment penalties during the first half of 2021.



Net gains and losses from sales of ORE and securities are specific to the
properties and securities which are sold and will vary greatly period to period,
as they did in the first six months of 2021 compared to the first six months of
2020.



                                       35

  Table of Contents

The major components of our noninterest expense are listed below:




                                                           Six Months Ended June 30,
                                                   2021        2020      $ Change     % Change

                                                    (In thousands)
Noninterest Expense
Salaries, commissions, and employee benefits     $ 14,212    $ 13,060    $ 
 1,152           9 %
Occupancy                                           2,178       2,196         (18)    (1)      %
Data Processing                                     2,751       2,533          218           9 %
Postage, stationary, and supplies                     328         449        (121)        (27) %
Net loss (gain) on sales and valuation of ORE       (206)       1,443     
(1,649)          NM
Advertising                                           102         124         (22)        (18) %
Charitable Contributions                              278         250           28          11 %
Outside service fees                                1,559       2,195        (636)        (29) %
Amortization of intangibles                           702         696            6           1 %
Penalty for early extinguishment of debt                -       1,323     
(1,323)          NM
Other                                               2,542       2,910        (368)        (13) %
Total noninterest expenses                       $ 24,446    $ 27,179    $ (2,733)        (10) %




Income Tax Expense. We recorded a provision for income taxes of $7.3 million for
the six months ended June 30, 2021 compared to a provision of $4.2 million for
the same period during 2020, reflecting effective tax rates of 24.2% and 21.4%,
respectively. The effective tax rates were reduced from the statutory federal
and state income tax rates largely as a result of tax-exempt interest income
produced by certain qualifying loans and investments in the Bank's portfolios.



NET INTEREST MARGIN

Net interest income represents the difference between interest earned, primarily
on loans and investments, and interest paid on funding sources, primarily
deposits and borrowings. Interest rate spread is the difference between the
average rate earned on total interest-earning assets and the average rate paid
on total interest-bearing liabilities. Net interest margin is the amount of net
interest income, on a fully taxable-equivalent basis, expressed as a percentage
of average interest-earning assets. The average rate earned on earning assets is
the amount of annualized taxable equivalent interest income expressed as
a percentage of average earning assets. The average rate paid on
interest-bearing liabilities is equal to annualized interest expense as
a percentage of average interest-bearing liabilities.

                                       36

Table of Contents

The following tables set forth the distribution of our average assets, liabilities and stockholders' equity, and average rates earned or paid on a fully taxable equivalent basis for each of the periods indicated:




                                                                              Three Months Ended
                                                     June 30, 2021                                          June 30, 2020
                                                    Interest                                               Interest
                                   Average           Income/        Rate Earned/ Paid      Average          Income/        Rate Earned/ Paid
                                    Balance        Expenses (1)             (1)             Balance       Expenses (1)            (1)

                                                                            (dollars in thousands)
ASSETS
Interest-earning assets
Loans (2)
Taxable                           $ 2,160,774    $        88,771                  4.11 %  $ 1,917,156    $       88,760                 4.63 %
Tax-exempt                             86,252              4,065                  4.71 %      117,582             6,048                 5.14 %
Securities
Taxable (available for sale)          103,774              2,242           
      2.16 %      109,530             2,426                 2.21 %
Tax-exempt (available for
sale)                                  70,112              2,206                  3.15 %       68,401             2,205                 3.22 %
Taxable (held to maturity)                  -                  -                     -          2,948                62                 2.10 %
Tax-exempt (held to maturity)           5,917                152                  2.57 %        9,764               268                 2.74 %
Cash and due from banks               207,021                190                  0.09 %      103,716                85                 0.08 %
Total interest-earning assets       2,633,850             97,626           
      3.71 %    2,329,097            99,854                 4.29 %
Non interest-earning assets           220,551                                                 205,962
Allowance for loan losses            (18,821)                                                (14,177)
Total assets                      $ 2,835,580                                             $ 2,520,882
LIABILITIES AND SHAREHOLDERS'
EQUITY
Interest-bearing deposits
Checking accounts                 $   211,562    $           251                  0.12 %  $   197,067    $          493                 0.25 %
Savings accounts                      483,567              1,754                  0.36 %      346,279             1,815                 0.52 %
Money market accounts                 660,011              2,303                  0.35 %      536,139             3,092                 0.58 %
Certificates of deposit               289,778              3,206                  1.11 %      372,003             6,988                 1.88 %
Brokered Deposits                      16,174                457                  2.83 %       18,532               531                 2.87 %
Total interest bearing
deposits                            1,661,092              7,971                  0.48 %    1,470,020            12,919                 0.88 %
Other borrowed funds                   62,303                811                  1.30 %      119,107             1,504                 1.26 %
Total interest-bearing
liabilities                         1,723,395              8,782                  0.51 %    1,589,127            14,423                 0.91 %
Non-interest bearing
liabilities
Demand Deposits                       792,064                                                 660,080
Other liabilities                      11,920                                                  15,146
Total Liabilities                   2,527,379                                               2,264,353
Shareholders' equity                  308,201                                                 256,529
Total liabilities &
shareholders' equity              $ 2,835,580                                             $ 2,520,882
Net interest income on a fully
taxable equivalent basis                                  88,844                                                 85,431
Less taxable equivalent
adjustment                                               (1,349)                                                (1,789)
Net interest income                              $        87,495                                         $       83,642
Net interest spread (3)                                                           3.20 %                                                3.38 %
Net interest margin (4)                                                           3.37 %                                                3.67 %

(1) Annualized on a fully taxable equivalent basis calculated using a federal tax

rate of 21% for the three months ended June 30, 2021 and 2020.

(2) Nonaccrual loans are included in average amounts outstanding.

Interest rate spread represents the difference between the weighted average

(3) yield on interest-earning assets and the weighted average cost of

interest-bearing liabilities.

(4) Net interest margin represents net interest income on a fully tax equivalent

     basis as a percentage of average interest-earning assets.


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  Table of Contents




                                                                Six Months Ended
                                           June 30,2021                                 June 30,2020
                                               Interest         Rate                        Interest         Rate
                               Average         Income/        Earned/       Average         Income/        Earned/
                               Balance       Expenses (1)     Paid (1)      Balance       Expenses (1)     Paid (1)

                                                             (dollars in thousands)
ASSETS
Interest-earning assets
Loans (2)
Taxable                      $ 2,131,670     $      89,867        4.22 %  $ 1,771,514     $      85,566        4.83  %
Tax-exempt                        90,045             4,197        4.66 %      118,143             6,057        5.13  %
Securities
Taxable (available for
sale)                            102,179             2,448        2.40 %      121,653             2,994        2.46  %
Tax-exempt (available for
sale)                             70,694             2,232        3.16 %       61,958             2,044        3.30  %
Taxable (held to
maturity)                              -                 -           -         18,236               435        2.39  %
Tax-exempt (held to
maturity)                          6,287               159        2.53 %        9,986               274        2.74  %
Cash and due from banks          190,169               174        0.09 %       68,748               269        0.39  %
Total interest-earning
assets                         2,591,044            99,077        3.82 %    2,170,238            97,639        4.50  %
Non interest-earning
assets                           220,647                                      201,565
Allowance for loan losses       (18,430)                                     (13,031)
Total assets                 $ 2,793,261                                  $ 2,358,772
LIABILITIES AND
SHAREHOLDERS' EQUITY
Interest-bearing deposits
Checking accounts            $   216,498     $         253        0.12 %  $   193,946     $       1,063        0.55  %
Savings accounts                 459,267             1,663        0.36 %      324,795             2,130        0.66  %
Money market accounts            643,526             2,220        0.34 %      517,476             3,817        0.74  %
Certificates of deposit          303,153             3,720        1.23 %      368,417             7,214        1.96  %
Brokered Deposits                 17,205               487        2.83 %       17,056               500        2.93  %
Total interest bearing
deposits                       1,639,649             8,343        0.51 %    1,421,690            14,724        1.04  %
Other borrowed funds              69,483               789        1.14 %      111,280             1,844        1.66  %
Total interest-bearing
liabilities                    1,709,132             9,132        0.53 %    1,532,970            16,568        1.08  %
Non-interest bearing
liabilities
Demand Deposits                  765,141                                      564,879
Other liabilities                318,988                                       15,924
Total Liabilities              2,793,261                                    2,113,773
Shareholders' equity             304,288                                      244,999
Total liabilities &
shareholders' equity         $ 3,097,549                                  $ 2,358,772
Net interest income on a
fully taxable equivalent
basis                                               89,945                                       81,071
Less taxable equivalent
adjustment                                         (1,383)                                      (1,759)
Net interest income                         $       88,562                                $      79,312
Net interest spread (3)                                           3.29 %                                       3.42 %
Net interest margin (4)                                           3.47 %                                       3.74 %

(1) Annualized on a fully taxable equivalent basis calculated using a federal tax

rate of 21% for the six months ended June 30, 2021 and 2020.

(2) Nonaccrual loans are included in average amounts outstanding.

Interest rate spread represents the difference between the weighted average

(3) yield on interest-earning assets and the weighted average cost of

interest-bearing liabilities.

(4) Net interest margin represents net interest income on a fully tax equivalent

     basis as a percentage of average interest-earning assets.




                                       38

  Table of Contents

Rate/Volume Analysis

The following tables describe the extent to which changes in interest rates and
changes in the volume of interest-earning assets and interest-bearing
liabilities have affected our interest income and interest expense during the
periods indicated. Information is provided in each category with respect to:
(i) changes attributable to changes in volumes (changes in average balance
multiplied by prior year average rate) and (ii) changes attributable to changes
in rate (change in average interest rate multiplied by prior year average
balance), while (iii) changes attributable to the combined impact of volumes and
rates have been allocated proportionately to separate volume and rate
categories.




                                                   Three Months Ended June 30, 2021                 Six Months Ended June 30, 2021
                                                             Compared with                                  Compared with
                                                   Three Months Ended June 30, 2020                 Six Months Ended June 30, 2020
                                                 Increase/(Decrease) Due to Change in            Increase/(Decrease) Due to Change in
                                                 Volume             Rate          Total         Volume             Rate           Total

                                                        (dollars in thousands)                          (dollars in thousands)
Interest income
Loans
Taxable                                       $      10,606      $  (10,595)    $      11    $      16,035     $    (11,734)    $   4,301
Tax-exempt                                          (1,509)            (474)      (1,983)          (1,346)             (514)      (1,860)
Securities
Taxable (AFS)                                         (125)             (59)        (184)            (468)              (78)        (546)
Tax-exempt (AFS)                                         54             (53)            1              279              (91)          188
Taxable (HTM)                                          (31)             (31)         (62)            (218)             (217)        (435)
Tax-exempt (HTM)                                      (100)             (16)        (116)             (95)              (20)        (115)
Cash and due from banks                                  94               11          105              221             (316)         (95)
Total interest income                                 8,989         (11,217)      (2,228)           14,408          (12,970)        1,438
Interest expense
Deposits
Checking accounts                             $          34      $     (276)    $   (242)    $         111     $       (921)    $   (810)
Savings accounts                                        594            (655)         (61)              692           (1,159)        (467)
Money market accounts                                   610          (1,399)        (789)              774           (2,371)      (1,597)
Certificates of deposit                             (1,323)          (2,459)      (3,782)          (1,124)           (2,370)      (3,494)
Brokered Deposits                                      (67)              (7)         (74)                4              (17)         (13)
Total interest bearing deposits                       (151)          (4,797)      (4,948)              457           (6,838)      (6,381)
Other borrowed funds                                  (738)               45        (693)            (574)             (481)      (1,055)
Total interest expense                                (889)          (4,752)      (5,641)            (117)           (7,319)      (7,436)
Change in net interest income                 $       9,878      $   (6,465)    $   3,413    $      14,525     $     (5,651)    $   8,874



CHANGES IN FINANCIAL CONDITION

Total Assets. Total assets increased $100.9 million, or 3.7%, to $2.82 billion at June 30, 2021, from $2.72 billion at December 31, 2020.

Cash and Cash Equivalents. Cash and cash equivalents increased by $80.9 million to $251.1 million at June 30, 2021 from $170.2 million at December 31, 2020.

Investment Securities. The carrying value of total investment securities decreased by $12.0 million to $159.7 million at June 30 2021, from $171.7 million at December 31, 2020.

Loans. Net loans increased by $31.9 million, totaling $2.21 billion at June 30, 2021 compared to $2.17 billion at December 31, 2020.


Bank-Owned Life Insurance. At June 30, 2021, our investment in bank-owned life
insurance was $31.8 million, an increase of $0.4 million from $31.4 million at
December 31, 2020.

Deposits. Deposits increased $125.7 million, or 5.4%, to $2.45 billion at June 30, 2021 from $2.32 billion at December 31, 2020.


                                       39

Table of Contents


Borrowings. At June 30, 2021, borrowings consisted of advances from the FHLB of
Chicago, as well as subordinated debt to other banks. FHLB borrowings decreased
to $9.2 million at June 30, 2021, from $23.5 million at December 31, 2020.
Subordinated debt owed to other banks totaled $17.5 million at June 30, 2021 and
December 31, 2020.

Stockholders' Equity. Total stockholders' equity increased $16.5 million, or
5.6%, to $311.4 million at June 30, 2021, from $294.9 million at December 31,
2020.

LOANS

Our lending activities are conducted principally in Wisconsin. The Bank makes
commercial and industrial loans, commercial real estate loans, construction and
development loans, residential real estate loans, and a variety of consumer
loans and other loans. Much of the loans made by the Bank are secured by real
estate collateral. The Bank's commercial business loans are primarily made based
on the cash flow of the borrower and secondarily on the underlying collateral
provided by the borrower, with liquidation of the underlying real estate
collateral typically being viewed as the primary source of repayment in the
event of borrower default. Although commercial business loans are also often
collateralized by equipment, inventory, accounts receivable, or other business
assets, the liquidation of collateral in the event of default is often an
insufficient source of repayment. Repayment of the Bank's residential loans are
generally dependent on the health of the employment market in the borrowers'
geographic areas and that of the general economy with liquidation of the
underlying real estate collateral being typically viewed as the primary source
of repayment in the event of borrower default.

Our loan portfolio is our most significant earning asset, comprising 78.9% and
80.6% of our total assets as of June 30, 2021 and December 31, 2020,
respectively. Our strategy is to grow our loan portfolio by originating quality
commercial and consumer loans that comply with our credit policies and that
produce revenues consistent with our financial objectives. We believe our loan
portfolio is well-balanced, which provides us with the opportunity to grow while
monitoring our loan concentrations.

Loans increased $33.8 million, or 1.5%, to $2.23 billion as of June 30, 2021 as
compared to $2.19 billion as of December 31, 2020. This increase during the
first six months of 2021 has been comprised of a decrease of $40.6 million or
9.1% in commercial and industrial loans, an increase of $49.9 million or 5.0% in
commercial real estate loans, an increase of $0.6 million or 0.4% in
construction and development loans, an increase of $26.4 million or 4.8% in
residential 1-4 family loans and a decrease of $2.7 million or 3.9% in consumer
and other loans.



                                       40

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The following table presents the balance and associated percentage of each major
category in our loan portfolio at June 30, 2021, December 31, 2020, and June 30,
2020:




                                               June 30,                   December 31,                   June 30,
                                          2021        % of Total       2020        % of Total       2020        % of Total

                                                                     (dollars in thousands)
Commercial & industrial
Commercial & industrial                $   408,341            18 %  $   447,344            20 %  $   574,052            27 %
Deferred costs net of unearned fees        (3,897)             0 %      (2,352)             0 %      (7,258)             0 %
Total commercial & industrial              404,444            18 %      444,992            20 %      566,794            27 %
Commercial real estate
Owner Occupied                             559,886            25 %      549,619            25 %      525,908            25 %
Non-owner occupied                         482,850            22 %      443,144            20 %      410,931            19 %
Deferred costs net of unearned fees          (575)             0 %        (514)             0 %        (329)             0 %
Total commercial real estate             1,042,161            47 %      992,249            45 %      936,510            44 %
Construction & Development
Construction & Development                 140,694             6 %      140,042             7 %      126,653             6 %
Deferred costs net of unearned fees           (10)             0 %           32             0 %         (81)             0 %
Total construction & development           140,684             6 %      140,074             7 %      126,572             6 %
Residential 1-4 family
Residential 1-4 family                     572,233            26 %      545,818            25 %      451,070            21 %
Deferred costs net of unearned fees              8             0 %         (12)             0 %           49             0 %
Total residential 1-4 family               572,241            26 %      545,806            25 %      451,119            21 %

Consumer

Consumer                                    33,399             2 %       30,359             1 %       28,532             1 %
Deferred costs net of unearned fees            134             0 %         
129             0 %          128             0 %
Total consumer                              33,533             2 %       30,488             1 %       28,660             1 %
Other Loans
Other                                       32,402             1 %       38,054             2 %        5,365             0 %
Deferred costs net of unearned fees          (248)             0 %        (203)             0 %            3             0 %
Total other loans                           32,154             1 %       37,851             2 %        5,368             0 %
Total loans                            $ 2,225,217           100 %  $ 2,191,460           100 %  $ 2,115,023           100 %



Our directors and officers and their associates are customers of, and have other
transactions with, the Bank in the normal course of business. All loans and
commitments included in such transactions were made on substantially the same
terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions with other persons and do not involve more than
normal risk of collection or present other unfavorable features. At June 30,
2021 and December 31, 2020, total loans outstanding to such directors and
officers and their associates were $67.7 million and $67.1 million,
respectively. During the six months ended June 30, 2021, $9.7 million of
additions and $9.2 million of repayments were made to these loans. At June 30,
2021 and December 31, 2020, all of the loans to directors and officers were
performing according to their original terms, other than standard and customary
payment deferrals allowed under the CARES act, which were provided under the
same terms as all other customers of the Bank.

Loan categories

The principal categories of our loan portfolio are discussed below:

Commercial and Industrial (C&I). Our C&I portfolio totaled $404.4 million and $445.0 million at June 30, 2021 and December 31, 2020, respectively, and represented 18% and 20% of our total loans at those dates.


Our C&I loan customers represent various small and middle-market established
businesses involved in professional services, accommodation and food services,
health care, financial services, wholesale trade, manufacturing, distribution,
retailing and non-profits. Most clients are privately owned with markets that
range from local to national in scope. Many of the loans to this segment are
secured by liens on corporate assets and the personal guarantees of the
principals. The regional economic strength or weakness impacts the relative
risks in this loan category. There is little concentration in any one business
sector, and loan risks are generally diversified among many borrowers.

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Commercial Real Estate (CRE). Our CRE loan portfolio totaled $1.04 billion and $992.2 million at June 30, 2021 and December 31, 2020, respectively, and represented 47% and 45% of our total loans at those dates.


Our CRE loans are secured by a variety of property types including multifamily
dwellings, retail facilities, office buildings, commercial mixed use, lodging
and industrial and warehouse properties. We do not have any specific industry or
customer concentrations in our CRE portfolio. Our commercial real estate loans
are generally for terms up to ten years, with loan-to-values that generally do
not exceed 80%. Amortization schedules are long term and thus a balloon payment
is generally due at maturity. Under most circumstances, the Bank will offer to
rewrite or otherwise extend the loan at prevailing interest rates.

Construction and Development (C&D). Our C&D loan portfolio totaled $140.7 million and $140.1 million at June 30, 2021 and December 31, 2020, respectively, and represented 6% and 7% of our total loans at those dates.


Our C&D loans are generally for the purpose of creating value out of real estate
through construction and development work, and also include loans used to
purchase recreational use land. Borrowers typically provide a copy of a
construction or development contract which is subject to bank acceptance prior
to loan approval. Disbursements are handled by a title company. Borrowers are
required to inject their own equity into the project prior to any note proceeds
being disbursed. These loans are, by their nature, intended to be short term and
are refinanced into other loan types at the end of the construction and
development period.

Residential 1 - 4 Family. Residential 1 - 4 family loans held in portfolio amounted to $572.2 million and $545.8 million at June 30, 2021 and December 31, 2020, respectively, and represented26% and 25% of our total loans at those dates.


We offer fixed and adjustable-rate residential mortgage loans with maturities up
to 30 years. One-to-four family residential mortgage loans are generally
underwritten according to Fannie Mae guidelines, and we refer to loans that
conform to such guidelines as "conforming loans." We generally originate both
fixed and adjustable-rate mortgage loans in amounts up to the maximum conforming
loan limits as established by the Federal Housing Finance Agency, which is
generally $424,100 for one-unit properties. In addition, we also offer loans
above conforming lending limits typically referred to as "jumbo" loans. These
loans are typically underwritten to the same guidelines as conforming loans;
however, we may choose to hold a jumbo loan within its portfolio with
underwriting criteria that does not exactly match conforming guidelines.

We do not offer reverse mortgages nor do we offer loans that provide for
negative amortization of principal, such as "Option ARM" loans, where the
borrower can pay less than the interest owed on his loan, resulting in an
increased principal balance during the life of the loan. We also do not offer
"subprime loans" (loans that are made with low down payments to borrowers with
weakened credit histories typically characterized by payment delinquencies,
previous charge-offs, judgments, bankruptcies, or borrowers with questionable
repayment capacity as evidenced by low credit scores or high debt-burden ratios)
or Alt-A loans (defined as loans having less than full documentation).

Residential real estate loans are originated both for sale to the secondary
market as well as for retention in the Bank's loan portfolio. The decision to
sell a loan to the secondary market or retain within the portfolio is determined
based on a variety of factors including but not limited to our asset/liability
position, the current interest rate environment, and customer preference.
Servicing rights are retained on all loans sold to the secondary market.

We were servicing mortgage loans sold to others without recourse of approximately $662.7 million at June 30, 2021 and $612.7 million at December 31, 2020.


Loans sold with the retention of servicing assets result in the capitalization
of servicing rights. Loan servicing rights are included in other assets and are
carried at fair value. The net balance of capitalized servicing rights amounted
to $4.3 million and $3.7 million at June 30, 2021 and December 31, 2020.

Consumer Loans. Our consumer loan portfolio totaled $33.5 million and $30.5
million at June 30, 2021 and December 31, 2020, respectively, and represented 2%
and 1% of our total loans at those dates. Consumer loans include secured and
unsecured loans, lines of credit and personal installment loans.

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Consumer loans generally have greater risk compared to longer-term loans secured
by improved, owner-occupied real estate, particularly consumer loans that are
secured by rapidly depreciable assets. In these cases, any repossessed
collateral for a defaulted loan may not provide an adequate source of repayment
of the outstanding loan balance. As a result, consumer loan repayments are
dependent on the borrower's continuing financial stability and thus are more
likely to be adversely affected by job loss, divorce, illness or personal
bankruptcy.

Other Loans. Our other loans totaled $32.2 million and $37.9 million at June 30,
2021 and December 31, 2020, respectively, and are immaterial to the overall loan
portfolio. The other loans category consists primarily of over-drafted
depository accounts, loans utilized to purchase or carry securities and loans to
nonprofit organizations.

Loan Portfolio Maturities. The following tables summarize the dollar amount of
loans maturing in our portfolio based on their loan type and contractual terms
to maturity at June 30, 2021 and December 31, 2020, respectively. The tables do
not include any estimate of prepayments, which can significantly shorten the
average life of all loans and may cause our actual repayment experience to
differ from that shown below. Demand loans, loans having no stated repayment
schedule or maturity, and overdraft loans are reported as being due in one
year
or less.




                               One Year or      One to Five      Over Five
As of June 30, 2021               Less             Years           Years          Total

                                                 (dollars in thousands)
Commercial & industrial       $     103,278    $     217,148    $    84,018    $   404,444
Commercial real estate               86,962          419,745        535,454      1,042,161
Construction & Development           23,771           19,560         97,353        140,684
Residential 1-4 family               12,099           58,820        501,322        572,241
Consumer and other                   11,007           33,203         21,477         65,687
Total                         $     237,117    $     748,476    $ 1,239,624    $ 2,225,217





                               One Year or      One to Five      Over Five
As of December 31, 2020           Less             Years           Years          Total

                                                 (dollars in thousands)
Commercial & industrial       $      52,315    $     306,198    $    86,479    $   444,992
Commercial real estate              112,260          410,469        469,520        992,249
Construction & Development           29,789           15,164         95,121        140,074
Residential 1-4 family               19,641           59,375        466,790        545,806
Consumer and other                    5,990           44,324         18,025         68,339
Total                         $     219,995    $     835,530    $ 1,135,935    $ 2,191,460




The following tables summarize the dollar amount of loans maturing in our
portfolio based on whether the loan has a fixed or variable rate of interest and
their contractual terms to maturity at June 30, 2021 and December 31, 2020,
respectively. The tables do not include any estimate of prepayments, which can
significantly shorten the average life of all loans and may cause our actual
repayment experience to differ from that shown below. Demand loans, loans having
no stated repayment schedule or maturity, and overdraft loans are reported as
being due in one year or less.




                                  One Year       One to Five      Over Five
As of June 30, 2021                or Less          Years           Years          Total

                                                   (dollars in thousands)
Predetermined interest rates     $   136,753    $     667,669    $   783,099    $ 1,587,521
Floating or adjustable
interest rates                       100,364           80,807        456,525        637,696
Total                            $   237,117    $     748,476    $ 1,239,624    $ 2,225,217





                                  One Year       One to Five      Over Five
As of December 31, 2020            or Less          Years           Years           Total

                                                   (dollars in thousands)
Predetermined interest rates     $   141,578    $     574,071    $    389,942    $ 1,105,591
Floating or adjustable
interest rates                       136,700           97,641         396,411        630,752
Total                            $   278,278    $     671,712    $    786,353    $ 1,736,343




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NONPERFORMING LOANS AND TROUBLED DEBT RESTRUCTURINGS


In order to operate with a sound risk profile, we focus on originating loans
that we believe to be of high quality. We have established loan approval
policies and procedures to assist us in maintaining the overall quality of our
loan portfolio. When delinquencies in our loans exist, we rigorously monitor the
levels of such delinquencies for any negative or adverse trends. From time to
time, we may modify loans to extend the term or make other concessions to help a
borrower with a deteriorating financial condition stay current on their loan and
to avoid foreclosure. We generally do not forgive principal or interest on loans
or modify the interest rates on loans to rates that are below market rates.
Furthermore, we are committed to collecting on all of our loans and, as a
result, at times have lower net charge-offs compared to many of our peer banks.
We believe that our commitment to collecting on all of our loans results in
higher loan recoveries.

Our nonperforming assets consist of nonperforming loans and foreclosed real
estate. Nonperforming loans are those on which the accrual of interest has
stopped, as well as loans that are contractually 90 days past due on which
interest continues to accrue. The composition of our nonperforming assets is as
follows:




                                           June 30,        December 31,        June 30,
                                             2021              2020              2020

                                                      (dollars in thousands)
Nonaccruals                              $      12,008    $        10,796    $      23,037
Loans past due > 90 days, but still
accruing                                           351              1,738               81
Total nonperforming loans                $      12,359    $        12,534    $      23,118
Accruing troubled debt restructured
loans                                    $       1,240    $         1,132    $       1,206
Nonperforming loans as a percent of
gross loans                                       0.55 %             0.57 %           1.09 %
Nonperforming loans as a percent of
total assets                                      0.44 %             0.46 %           0.87 %



At June 30, 2021 and December 31, 2020, impaired loans had specific reserves of $0.5 million and $0.9 million, respectively.

Nonaccrual Loans


Loans are typically placed on nonaccrual status when any payment of principal
and/or interest is 90 days or more past due, unless the collateral is sufficient
to cover both principal and interest and the loan is in the process of
collection. Loans are also placed on nonaccrual status when management believes,
after considering economic and business conditions, that the principal or
interest will not be collectible in the normal course of business. We monitor
closely the performance of our loan portfolio. In addition to the monitoring and
review of loan performance internally, we have also contracted with an
independent organization to review our commercial and retail loan portfolios.
The status of delinquent loans, as well as situations identified as potential
problems, is reviewed on a regular basis by senior management.

Troubled Debt Restructurings

A troubled debt restructuring includes a loan modification where a borrower is
experiencing financial difficulty and we grant a concession to that borrower
that we would not otherwise consider except for the borrower's financial
difficulties. These concessions may include modifications of the terms of the
debt such as deferral of payments, extension of maturity, reduction of principal
balance, reduction of the stated interest rate other than normal market rate
adjustments, or a combination of these concessions. Debt may be bifurcated with
separate terms for each tranche of the restructured debt. Restructuring a loan
in lieu of aggressively enforcing the collection of the loan may benefit the
Company by increasing the ultimate probability of collection.

A TDR may be either on accrual or nonaccrual status based upon the performance
of the borrower and management's assessment of collectability. If a TDR is
placed on nonaccrual status, which would occur based on the same criteria as
non-TDR loans, it remains there until a sufficient period of performance under
the restructured terms has occurred at which it returned to accrual status,
generally 6 months.

As of June 30, 2021 and December 31, 2020 the Company had no specific reserves for TDRs.


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During 2020 the Bank experienced an increase in customer requests for loan
modifications and payment deferrals as a result of impacts of the COVID-19
pandemic. The CARES act, signed into law on March 27, 2020, allowed financial
institutions the option to exempt loan modifications related to the COVID-19
pandemic that would otherwise be categorized as a TDR from consideration for TDR
treatment. Modifications in the scope of the exemption include forbearance
agreements, interest-rate modifications, repayment plan changes and any other
similar arrangements that would delay payments of principal or interest. This
relief was allowable on modifications on loans which were not more than 30 days
past due as of December 31, 2019, and that occur after March 1, 2020, and before
the earlier of 60 days after the date on which the national emergency related to
the COVID-19 outbreak is terminated. The Company granted payment deferrals to
over 625 customers on loans totaling over $271.5 million. These deferrals were
primarily for lengths in the range of 60 to 180 days, and were a combination of
deferrals of principal payments only (89.7% by dollar value) or both principal
and interest payments (10.3% by dollar value). As of June 30, 2021, these totals
had decreased to negligible levels.

Classified loans


Accounting standards require the Company to identify loans, where full repayment
of principal and interest is doubtful, as impaired loans. These standards
require that impaired loans be valued at the present value of expected future
cash flows, discounted at the loan's effective interest rate, or using one of
the following methods: the observable market price of the loan or the fair value
of the underlying collateral if the loan is collateral dependent. We have
implemented these standards in our quarterly review of the adequacy of the ALL,
and identify and value impaired loans in accordance with guidance on these
standards. As part of the review process, we also identify loans classified as
watch, which, while still considered pass credits, have characteristics which
deserve heightened attention by management.

Loans totaling $72.0 million and $50.1 million were classified substandard under
the Bank's policy at June 30, 2021 and December 31, 2020, respectively. The
following table sets forth information related to the credit quality of our loan
portfolio at June 30, 2021 and December 31, 2020.




Loan type (in thousands)              Pass         Watch       Classified        Total
As of June 30, 2021 (unaudited)
Commercial & industrial            $   373,828    $ 12,098    $     18,518    $   404,444
Commercial real estate                 910,759      80,484          50,918      1,042,161
Construction & Development             138,598       1,634             452        140,684
Residential 1-4 family                 566,127       4,001           2,113        572,241
Consumer                                33,522           4               7         33,533
Other loans                             32,154           -               -         32,154
Total loans                        $ 2,054,988    $ 98,221    $     72,008    $ 2,225,217





Loan type (in thousands)         Pass          Watch       Classified        Total
As of December 31, 2020
Commercial & industrial       $   413,467    $  24,642    $      6,883    $   444,992
Commercial real estate            848,909      103,096          40,244        992,249
Construction & Development        134,313        5,412             349        140,074
Residential 1-4 family            535,463        7,688           2,655        545,806
Consumer                           30,479            9               -         30,488
Other loans                        37,428          423               -         37,851
Total loans                   $ 2,000,059    $ 141,270    $     50,131    $ 2,191,460




ALLOWANCE FOR LOAN LOSSES
ALL represents management's estimate of probable and inherent credit losses in
the loan portfolio. Estimating the amount of the ALL require the exercise of
significant judgment and the use of estimates related to the amount and timing
of expected future cash flows or impaired loans, estimated losses on pools of
homogenous loans based on historical loss experience, and consideration of other
qualitative factors such as current economic trends and conditions, all of which
may be susceptible to significant change. The loan portfolio also represents the
largest asset on the consolidated balance sheets. Loan losses are charged off
against the ALL, while recoveries of amounts previously charged off are credited
to the ALL. A provision for loan losses is charged to operations based on
management's periodic evaluation of the factors previously mentioned, as well as
other pertinent factors.

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  Table of Contents

The ALL consists of specific reserves for certain individually evaluated
impaired loans and general reserves for collectively evaluated non-impaired
loans. Specific reserves reflect estimated losses on impaired loans from
management's analyses developed through specific credit allocations. The
specific reserves are based on regular analyses of impaired, non-homogenous
loans greater than $250,000. These analyses involve a high degree of judgment in
estimating the amount of loss associated with specific loans, including
estimating the amount and timing of future cash flows and collateral values. The
general reserve is based in part on the Bank's historical loss experience which
is updated quarterly. The general reserve portion of the ALL also includes
consideration of certain qualitative factors such as (1) changes in lending
policies and/or underwriting practices, (2) national and local economic
conditions, (3) changes in portfolio volume and nature, (4) experience, ability
and depth of lending management and other relevant staff, (5) levels of and
trends in past-due and nonaccrual loans and quality, (6) changes in loan review
and oversight, (7) impact and effects of concentrations and (8) other issues
deemed relevant.

There are many factors affecting ALL; some are quantitative while others require
qualitative judgment. The process for determining the ALL (which management
believes adequately considers potential factors which might possibly result in
credit losses) includes subjective elements and, therefore, may be susceptible
to significant change. To the extent actual outcomes differ from management
estimates, additional provision for loan losses could be required that could
adversely affect our earnings or financial position in future periods.
Allocations of the ALL may be made for specific loans but the entire ALL is
available for any loan that, in management's judgment, should be charged off or
for which an actual loss is realized. As an integral part of their examination
process, various regulatory agencies review the ALL as well. Such agencies may
require that changes in the ALL be recognized when such regulators' credit
evaluations differ from those of management based on information available to
the regulators at the time of their examinations.

The following table summarizes the changes in our ALL for the periods indicated:




                                                    Six months ended       Year ended        Six months ended
                                                       June 30,           December 31,          June 30,
                                                          2021                2020                 2020

                                                                     (dollars in thousands)
Period-end loans outstanding (net of unearned
discount and deferred loan fees)                   $        2,225,217    $     2,191,460    $        2,115,023
Average loans outstanding (net of unearned
discount and deferred loan fees)                   $        2,247,026    $     2,032,157    $        1,889,657
Balance of allowance for loan losses at the
beginning of period                                $           17,658    $        11,396    $           11,396
Loans charged-off:
Commercial & industrial                                             0              1,087                     8
Commercial real estate - owner occupied                            24                783                   101
Commercial real estate - non-owner occupied                         0      
           0                     0
Construction & Development                                          0                 33                     0
Residential 1-4 family                                              0                 63                    59
Consumer                                                            0                 90                     0
Other Loans                                                        13                 35                     9
Total loans charged-off                            $               37    $         2,091    $              177

Recoveries of loans previously charged off:
Commercial & industrial                                            27                  4                     1
Commercial real estate - owner occupied                             0              1,129                   640
Commercial real estate - non-owner occupied                         5      
          40                    40
Construction & Development                                         33                  0                     0
Residential 1-4 family                                              8                 42                    37
Consumer                                                            1                  0                     0
Other Loans                                                         2                 13                     9
Total recoveries of loans previously charged
off:                                                               76              1,228                   727
Net Loan charge-offs                               $             (39)    $           863    $            (550)
Provision charged to operating expense                          1,850              7,125                 4,125
Balance at end of period                           $           19,547    $        17,658    $           16,071
Ratio of net charge offs during the year to
average loans outstanding                                      (0.00) %             0.04 %              (0.03) %
Ratio of allowance for loan losses to loans
outstanding                                                      0.88 %             0.81 %                0.76 %




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  Table of Contents

The level of charge-offs depends on many factors, including the national and
regional economy. Cyclical lagging factors may result in charge-offs being
higher than historical levels. Although the allowance is allocated between
categories, the entire allowance is available to absorb losses attributable to
all loan categories. Management believes that the current ALL is adequate.

The following table summarizes an allocation of the ALL and the
related percentage of loans outstanding in each category for the periods below.




                                       June 30,                December 31,                June 30,
                                          2021                      2020                      2020
(in thousands, except %)          Amount     % of Loans     Amount     % of Loans     Amount     % of Loans
Loan Type:
Commercial & industrial          $  2,810            18 %  $  2,049            20 %  $  2,548            27 %
Commercial real estate -
owner occupied                      6,693            25 %     6,108            25 %     6,031            25 %
Commercial real estate -
non-owner occupied                  4,122            22 %     3,904            20 %     3,798            19 %
Construction & Development          1,064             6 %     1,027             7 %       772             6 %
Residential 1-4 family              4,338            26 %     3,960            25 %     2,705            21 %
Consumer                              235             2 %       201             1 %       160             1 %
Other Loans                           285             1 %       409             2 %        57             0 %
Total allowance                  $ 19,547           100 %  $ 17,658           100 %  $ 16,071           100 %




SOURCES OF FUNDS

General. Deposits traditionally have been our primary source of funds for our
investment and lending activities. We also borrow from the FHLB of Chicago to
supplement cash needs, to lengthen the maturities of liabilities for interest
rate risk management purposes and to manage our cost of funds. Our additional
sources of funds are scheduled payments and prepayments of principal and
interest on loans and investment securities and fee income and proceeds from the
sales of loans and securities.

Deposits. Our current deposit products include non-interest bearing and
interest-bearing checking accounts, savings accounts, money market accounts, and
certificate of deposits. As of June 30, 2021, deposit liabilities accounted for
approximately 86.8% of our total liabilities and equity. We accept deposits
primarily from customers in the communities in which our branches and offices
are located, as well as from small businesses and other customers throughout our
lending area. We rely on our competitive pricing and products, quality customer
service, and convenient locations and hours to attract and retain deposits.
Deposit rates and terms are based primarily on current business strategies,
market interest rates, liquidity requirements and our deposit growth goals.



Total deposits were $2.45 billion and $2.32 billion as of June 30, 2021 and
December 31, 2020, respectively. Noninterest-bearing deposits at June 30, 2021
and December 31, 2020, were $782.9 million and $715.6 million, respectively,
while interest-bearing deposits were $1.66 billion and $1.61 billion at June 30,
2021 and December 31, 2020, respectively.



At June 30, 2021, we had a total of $285.3 million in certificates of deposit,
including $12.5 million of brokered deposits. Based on historical experience and
our current pricing strategy, we believe we will retain a majority of these
accounts upon maturity, although our long-term strategy is to minimize reliance
on certificates of deposits by increasing relationship deposits in lower earning
savings and demand deposit accounts.



                                       47

  Table of Contents

The following tables set forth the average balances of our deposits for the
periods indicated:




                                     Six months ended                                Year ended                               Six months ended
                                    June 30, 2021                              December 31, 2020                              June 30, 2020
                                                     Weighted                                     Weighted                                     Weighted
                          Amount       Percent     average rate        Amount       Percent     average rate        Amount       Percent     average rate

                                                                              (dollars in thousands)

Noninterest-bearing
demand deposits        $    765,141       31.8 %            N/A     $    634,939       29.7 %            N/A     $    564,879       28.4 %            N/A
Interest-bearing
checking deposits           216,498        9.0 %           0.12 %        194,718        9.1 %           0.34 %        193,946        9.8 %           0.55 %
Savings deposits            459,267       19.1 %           0.36 %        356,091       16.7 %           0.50 %        324,795       16.3 %           0.66 %
Money market
accounts                    643,526       26.8 %           0.34 %        563,847       26.4 %           0.55 %        517,476       26.0 %           0.74 %
Certificates of
deposit                     303,153       12.6 %           1.23 %        367,054       17.2 %           1.74 %        368,417       18.5 %           1.96 %
Brokered deposits            17,205        0.7 %           2.83 %         18,428        0.9 %           2.88 %         17,056        0.9 %           2.93 %
Total                  $  2,404,790        100 %                    $  2,135,077        100 %                    $  1,986,569        100 %



Certificates of deposit of $100,000 or greater by maturity are as follows:



                                June 30,       December 31,      June 30,
                                   2021            2020             2020

                                          (dollars in thousands)
Less than 3 months remaining    $   29,274    $        33,672    $   28,327
3 to 6 months remaining             13,650             43,163        27,435
6 to 12 months remaining            37,595             31,614        71,600
12 months or more remaining         44,584             45,611        53,877
Total                           $  125,103    $       154,060    $  181,239




Retail certificates of deposit of $100,000 or greater totaled $125.1 million and
$154.1 million at June 30, 2021 and December 31, 2020, respectively. Interest
expense on retail certificates of deposit of $100,000 or greater was $1.0
million for the six months ended June 30, 2021, and $3.1 million for the year
ended December 31, 2020.


The following table sets forth certificates of deposit classified by interest rate as of the dates indicated:





                   June 30,       December 31,      June 30,
                      2021            2020             2020

                             (dollars in thousands)
Interest Rate:
Less than 1.00%    $  164,869    $       115,478    $   53,821
1.00% to 1.99%         43,687            105,376       172,736
2.00% to 2.99%         54,161             98,275       147,204
3.00% to 3.99%         22,587             29,182        31,381
Total              $  285,304    $       348,311    $  405,142




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Borrowings

Securities sold under repurchase agreements


The Company has securities sold under repurchase agreements which have
contractual maturities up to one year from the transaction date with variable
and fixed rate terms. The agreements to repurchase require that the Company
(seller) repurchase identical securities as those that are sold. The securities
underlying the agreements are under the Company's control.

The following table summarizes securities sold under repurchase agreements, and the weighted average interest rates paid:




                                                                                                Six months ended         Year ended          Six months ended
(dollars in thousands)                                                                           June 30, 2021        December 31, 2020       June 30, 

2020

Average daily amount of securities sold under repurchase agreements during the period $

           38,242    $            34,984    $          

45,633

Weighted average interest rate on average daily securities sold under repurchase agreements

                  0.03 %                 0.32 %        

0.47 % Maximum outstanding securities sold under repurchase agreements at any month-end

               $           53,857    $            79,718    $      

79,718

Securities sold under repurchase agreements at period end                                      $           21,679    $            36,377    $           

57,442

Weighted average interest rate on securities sold under repurchase agreements at period end                  0.05 %                 0.04 %                0.03 %




Borrowings

The Company's borrowings have historically consisted primarily of FHLB of
Chicago advances collateralized by a blanket pledge agreement on the Company's
FHLB capital stock and retail and commercial loans held in the Company's
portfolio. There were $9.1 million of advances outstanding from the FHLB at June
30, 2021, and $23.3 million as of December 31, 2020.



The total loans pledged as collateral were $831.6 million at June 30, 2021 and
$825.3 million at December 31, 2020. The company had no outstanding letters of
credit from the FHLB at June 30, 2021 and $0.8 million outstanding at December
31, 2020.


The following table summarizes borrowings, which consist of borrowings from the FHLB, and the weighted average interest rates paid:




                                                                      Six months         Year ended         Six months
                                                                        ended           December 31,           ended
(dollars in thousands)                                               June 30, 2021          2020           June 30, 2020
Average daily amount of borrowings outstanding during the period    $        13,741    $        35,622    $        46,573
Weighted average interest rate on average daily borrowing                      0.38 %             1.37 %             1.64 %
Maximum outstanding borrowings at any month-end                     $        15,338    $        58,800    $        58,800
Borrowing outstanding at period end                                 $         9,108    $        23,338    $        24,988
Weighted average interest rate on borrowing at period end                  
   1.07 %             1.22 %             1.29 %



Lines of credit and other borrowings.


We maintain a $7.5 million line of credit with another commercial bank, which
was entered into on May 15, 2021. There were no outstanding balances on this
note at June 30, 2021. Any future borrowings will required monthly payments of
interest at a variable rate, and will be due in full on May 15, 2022.

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During September 2017, the Company entered into subordinated note agreements
with three separate commercial banks. As of June 30, 2021 and December 31, 2020,
outstanding balances under these agreements totaled $11.5 million. These notes
were all issued with 10-year maturities, carry interest at a variable rate
payable quarterly, are callable on or after the sixth anniversary of their
issuance dates, and qualify for Tier 2 capital for regulatory purposes.

During July 2020, the Company entered into subordinated note agreements with two
separate commercial banks. As of June 30, 2021 and December 31, 2020,
outstanding balances under these agreements totaled $6.0 million. These notes
were issued with 10-year maturities, will carry interest at a fixed rate of 5.0%
through June 30, 2025, and at a variable rate thereafter, payable quarterly.
These notes are callable on or after January 1, 2026 and qualify for Tier 2
capital for regulatory purposes.

INVESTMENT SECURITIES


Our securities portfolio consists of securities available for sale and
securities held to maturity. Securities are classified as held to maturity or
available for sale at the time of purchase. Obligations of states and political
subdivisions and mortgage-backed securities, all of which are issued by U.S.
government agencies or U.S. government-sponsored enterprises, make up the
largest components of the securities portfolio. We manage our investment
portfolio to provide an adequate level of liquidity as well as to maintain
neutral interest rate-sensitive positions, while earning an adequate level of
investment income without taking undue or excessive risk.

Securities available for sale consist of obligations of states and political
subdivision, mortgage-backed securities, and corporate notes. Securities
classified as available for sale, which management has the intent and ability to
hold for an indefinite period of time, but not necessarily to maturity, are
carried at fair value, with unrealized gains and losses, net of related deferred
income taxes, included in stockholders' equity as a separate component of other
comprehensive income. The fair value of securities available for sale totaled
$153.8 million and included gross unrealized gains of $7.1 million and gross
unrealized losses of $0.1 at June 30, 2021. At December 31, 2020, the fair value
of securities available for sale totaled $165.0 million and included gross
unrealized gains of $8.0 million and gross unrealized losses of $0.1 million.



Securities classified as held to maturity consist of obligations of states and
political subdivisions. These securities, which management has the intent and
ability to hold to maturity, are reported at amortized cost. Securities held to
maturity totaled $5.9 million and $6.7 million at June 30, 2021 and December 31,
2020, respectively.


The Company had no recognized gains or losses on sales of securities during the
six-months ended June 30, 2021. The Company recognized a net gain on sale of
available for sale securities of $0.1 million during the six-months ended June
30, 2020. The Company recognized a net gain of $3.1 million on sale of held to
maturity securities during the six-months ended June 30, 2020.



The following table sets forth the fair value of available for sale investment securities, the amortized costs of held to maturity and the percentage distribution at the dates indicated:




                                                                June 30,             December 31,
                                                                  2021                    2020
                                                           Amount      Percent     Amount      Percent

                                                                     

(dollars in thousands) Available for sale securities, at estimated fair value U.S. Treasury securities

                                  $   9,717          6 %  $       -          0 %
Obligations of U.S. Government sponsored agencies            17,342         11 %     18,779         11 %
Obligations of states and political subdivisions             70,283        
46 %     72,217         44 %
Mortgage-backed securities                                   38,584         25 %     44,199         27 %
Corporate notes                                              16,069         10 %     27,743         17 %
Certificates of deposit                                       1,823          1 %      2,101          1 %
Total securities available for sale                         153,818        100 %    165,039        100 %
Held to maturity securities, at amortized cost
Obligations of states and political subdivisions              5,912       
100 %      6,669        100 %
Total                                                     $ 159,730               $ 171,708




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The following tables set forth the composition and maturities of investment securities as of June 30, 2021 and December 31, 2020. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.




                                                                             After One, But               After Five, But
                                                Within One Year            Within Five Years            Within Ten Years            After Ten Years                  Total
                                                           Weighted                    Weighted                    Weighted                    Weighted                   Weighted
                                             Amortized      Average      Amortized      Average      Amortized      Average      Amortized      Average     Amortized      Average
                                               Cost        Yield (1)       Cost        Yield (1)       Cost        Yield (1)       Cost        Yield (1)       Cost       Yield (1)

                                                                                                    (dollars in thousands)
At June 30, 2021
Available for sale securities
U.S. Treasury securities                    $         -          0.0 %  $         -          0.0 %  $     9,586          1.6 %  $         -          0.0 %  $    9,586          1.6 %
Obligations of U.S. Government sponsored
agencies                                              -          0.0 %          306          0.1 %        2,079          2.1 %       14,615          1.8 %      17,000          1.8 %
Obligations of states and political
subdivisions                                        589          3.2 %     

4,833 3.7 % 14,054 3.4 % 46,661 3.4 % 66,137 3.4 % Mortgage-backed securities

                            1          4.8 %      

15,311 2.5 % 13,915 2.9 % 7,424 2.5 % 36,651 2.6 % Corporate notes

                                       -          0.0 %      

4,967 3.3 % 9,272 3.9 % 1,462 5.1 % 15,701 3.8 % Certificates of deposit

                             248          0.7 %        1,546          1.1 %            -          0.0 %            -          0.0 %       1,794          1.0 %
Total available for sale securities         $       838          2.5 %  $    26,963          2.7 %  $    48,906          2.9 %  $    70,162          3.0 %  $  146,869          2.9 %
Held to maturity securities
Obligations of states and political
subdivisions                                $       714          2.3 %  $     3,494          2.6 %  $     1,704          3.0 %  $         -            -    $    5,912          2.7 %
Total                                       $     1,552          2.4 %  $    30,457          2.7 %  $    50,610          2.9 %  $    70,162          3.0 %  $  152,781          2.9 %





                                                                             After One, But             After Five, But
                                                Within One Year            Within Five Years            Within Ten Years            After Ten Years                  Total
                                                           Weighted                    Weighted                    Weighted                    Weighted                   Weighted
                                             Amortized      Average      Amortized      Average      Amortized      Average      Amortized      Average     Amortized      Average
                                               Cost        Yield (1)       Cost        Yield (1)       Cost        Yield (1)       Cost        Yield (1)       Cost       Yield (1)

                                                                                                    (dollars in thousands)
At December 31, 2020
Available for sale securities
Obligations of U.S.
Government sponsored agencies               $       302        (0.4) %  $       310          0.1 %  $     2,184          2.1 %  $    15,480          1.8 %  $   18,276          1.8 %
Obligations of states and political
subdivisions                                        593          3.2 %     

4,724 3.7 % 13,412 3.3 % 48,924 3.4 % 67,653 3.4 % Mortgage-backed securities

                        1,585          2.2 %      

15,554 2.5 % 14,864 2.9 % 9,801 2.6 % 41,804 2.6 % Corporate notes

                                  11,960          2.9 %        4,961          3.3 %            -          0.0 %       10,437          0.9 %      27,358          2.2 %
Certificates of deposit                             501          1.3 %        1,562          1.0 %            -          0.0 %            -          0.0 %       2,063          1.1 %
Total available for sale securities         $    14,941          2.7 %  $    27,111          2.7 %  $    30,460          3.0 %  $    84,642          2.7 %  $  157,154          2.8 %
Held to maturity securities
Obligations of states and political
subdivisions                                $       751          1.8 %  $     3,523          2.6 %  $     2,395          2.9 %  $         -            -    $    6,669          2.6 %
Total                                       $    15,692          2.6 %  $    30,634          2.7 %  $    32,855          3.0 %  $    84,642          2.7 %  $  163,823          2.8 %

(1) Weighted Average Yield is shown on a fully taxable equivalent basis using a

federal tax rate of 21% at June 30, 2021 and December 31, 2020, respectively.

The Company evaluates securities for other-than-temporary impairment on at least
a quarterly basis, and more frequently when economic or market conditions
warrant such evaluation. Consideration is given to (1) credit quality of
individual securities and their issuers are assessed; (2) the length of time and
the extent to which the fair value has been less than cost; (3) the financial
condition and near-term prospects of the issuer; and (4) that the Company does
not have the intent to sell the security and it is more likely than not that it
will not have to sell the security before recovery of its cost basis.

As of June 30, 2021, 2 debt securities had gross unrealized losses, with an aggregate depreciation of 0.1% from our amortized cost basis. The largest unrealized loss percentage of any single security was 1.8% (or $105,000 of its amortized cost. This was also the largest unrealized dollar loss of any security.


As of December 31, 2020, 6 debt securities had gross unrealized losses, with an
aggregate depreciation of 0.1% from our amortized cost basis. The largest
unrealized loss percentage of any single security was 1.9% (or $74,000) of its
amortized cost. This was also the largest unrealized dollar loss of any single
security.

The unrealized losses on these debt securities arose primarily due to changing interest rates and are considered to be temporary.


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LIQUIDITY AND CAPITAL RESOURCES


Impact of Inflation and Changing Prices. Our consolidated financial statements
and related notes have been prepared in accordance with GAAP. GAAP generally
requires the measurement of financial position and operating results in terms of
historical dollars without consideration of changes in the relative purchasing
power of money over time due to inflation. The impact of inflation is reflected
in the increased cost of our operations. Unlike industrial companies, our assets
and liabilities are primarily monetary in nature. As a result, changes in market
interest rates have a greater impact on our performance than they would on
industrial companies.

Liquidity. Liquidity is defined as the Company's ability to generate adequate
cash to meet its needs for day-to-day operations and material long and
short-term commitments. Liquidity is the risk of potential loss if we were
unable to meet our funding requirements at a reasonable cost. We are expected to
maintain adequate liquidity at the Bank to meet the cash flow requirements of
customers who may be either depositors wishing to withdraw funds or borrowers
needing assurance that sufficient funds will be available to meet their credit
needs. Our asset and liability management policy is intended to cause the Bank
to maintain adequate liquidity and, therefore, enhance our ability to raise
funds to support asset growth, meet deposit withdrawals and lending needs,
maintain reserve requirements and otherwise sustain our operations.

We continuously monitor our liquidity position to ensure that assets and
liabilities are managed in a manner that will meet all of our short-term and
long-term cash requirements. We manage our liquidity based on demand and
specific events and uncertainties to meet current and future financial
obligations of a short-term nature. We also monitor our liquidity requirements
in light of interest rate trends, changes in the economy and the scheduled
maturity and interest rate sensitivity of the investment and loan portfolios and
deposits. Our objective in managing liquidity is to respond to the needs of
depositors and borrowers as well as to increase earnings enhancement
opportunities in a changing marketplace.

Our liquidity is maintained through investment portfolio, deposits, borrowings
from the FHLB, and lines available from correspondent banks. Our highest
priority is placed on growing noninterest bearing deposits through strong
community involvement in the markets that we serve. Borrowings and brokered
deposits are considered short-term supplements to our overall liquidity but are
not intended to be relied upon for long-term needs. We believe that our present
position is adequate to meet our current and future liquidity needs, and
management knows of no trend or event that will have a material impact on the
Company's ability to maintain liquidity at satisfactory levels.

Capital Adequacy. Total stockholders' equity was $311.4 million at June 30, 2021 compared to $294.9 million at December 31, 2020.

Our capital management consists of providing adequate equity to support our
current and future operations. The Bank is subject to various regulatory capital
requirements administered by state and federal banking agencies, including the
Federal Reserve and the OCC. Failure to meet minimum capital requirements may
prompt certain actions by regulators that, if undertaken, could have a direct
material adverse effect on our financial condition and results of operations.
Under capital adequacy guidelines and the regulatory framework for prompt
corrective action, the Bank must meet specific capital guidelines that involve
quantitative measure of their assets, liabilities, and certain off-balance sheet
items as calculated under regulatory accounting practices. The capital amounts
and the classifications are also subject to qualitative judgment by the
regulator in regard to components, risk weighting and other factors.

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Table of Contents


The Bank is subject to the following risk-based capital ratios: a common equity
Tier 1 ("CET1") risk-based capital ratio, a Tier 1 risk-based capital ratio,
which includes CET1 and additional Tier 1 capital, and a total capital ratio,
which includes Tier 1 and Tier 2 capital. CET1 is primarily comprised of the sum
of common stock instruments and related surplus net of treasury stock, retained
earnings, and certain qualifying minority interests, less certain adjustments
and deductions, including with respect to goodwill, intangible assets, mortgage
servicing assets and deferred tax assets subject to temporary timing
differences. Additional Tier 1 capital is primarily comprised of noncumulative
perpetual preferred stock, tier 1 minority interests and grandfathered trust
preferred securities. Tier 2 capital consists of instruments disqualified from
Tier 1 capital, including qualifying subordinated debt, other preferred stock
and certain hybrid capital instruments, and a limited amount of loan loss
reserves up to a maximum of 1.25% of risk-weighted assets, subject to certain
eligibility criteria. The capital rules also define the risk-weights assigned to
assets and off-balance sheet items to determine the risk-weighted asset
components of the risk-based capital rules, including, for example, certain
"high volatility" commercial real estate, past due assets, structured securities
and equity holdings.

The leverage capital ratio, which serves as a minimum capital standard, is the
ratio of Tier 1 capital to quarterly average assets net of goodwill, certain
other intangible assets, and certain required deduction items. The required
minimum leverage ratio for all banks is 4%.

Failure to be well-capitalized or to meet minimum capital requirements could
result in certain mandatory and possible additional discretionary actions by
regulators that, if undertaken, could have an adverse material effect on our
operations or financial condition. For example, only a well-capitalized
depository institution may accept brokered deposits without prior regulatory
approval. Failure to be well-capitalized or to meet minimum capital requirements
could also result in restrictions on the Bank's ability to pay dividends or
otherwise distribute capital or to receive regulatory approval of applications
or other restrictions on its growth.

The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"),
among other things, requires the federal bank regulatory agencies to take
"prompt corrective action" regarding depository institutions that do not meet
minimum capital requirements. FDICIA establishes five regulatory capital tiers:
"well capitalized", "adequately capitalized", "undercapitalized", "significantly
undercapitalized", and "critically undercapitalized". A depository institution's
capital tier will depend upon how its capital levels compare to various relevant
capital measures and certain other factors, as established by regulation. FDICIA
generally prohibits a depository institution from making any capital
distribution (including payment of a dividend) or paying any management fee to
its holding company if the depository institution would thereafter be
undercapitalized. The FDICIA imposes progressively more restrictive restraints
on operations, management and capital distributions, depending on the category
in which an institution is classified. Undercapitalized depository institutions
are subject to restrictions on borrowing from the Federal Reserve System. In
addition, undercapitalized depository institutions may not accept brokered
deposits absent a waiver from the FDIC, are subject to growth limitations and
are required to submit capital restoration plans for regulatory approval. A
depository institution's holding company must guarantee any required capital
restoration plan, up to an amount equal to the lesser of 5 percent of the
depository institution's assets at the time it becomes undercapitalized or the
amount of the capital deficiency when the institution fails to comply with the
plan. Federal banking agencies may not accept a capital plan without
determining, among other things, that the plan is based on realistic assumptions
and is likely to succeed in restoring the depository institution's capital. If a
depository institution fails to submit an acceptable plan, it is treated as if
it is significantly undercapitalized. All of the federal bank regulatory
agencies have adopted regulations establishing relevant capital measures and
relevant capital levels for federally insured depository institutions. The Bank
was well capitalized at June 30, 2021, and brokered deposits are not restricted.

To be well-capitalized, the Bank must maintain at least the following capital ratios:

? 6.5% CET1 to risk-weighted assets;

? 8.0% Tier 1 capital to risk-weighted assets;

? 10.0% Total capital to risk-weighted assets; and

? 5.0% leverage ratio.

The Bank's regulatory capital ratios were above the applicable well-capitalized standards and met the then-applicable capital conservation buffer. Based on current estimates, we believe that the Bank will continue to exceed all applicable well-capitalized regulatory capital requirements and the capital conservation buffer in 2021.


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The Economic Growth, Regulatory Relief, and Consumer Protection Act (the
"Economic Growth Act") signed into law in May 2018 scaled back certain
requirements of the Dodd-Frank Act and provided other regulatory relief. Among
the provisions of the Economic Growth Act was a requirement that the Federal
Reserve raise the asset threshold for those bank holding companies subject to
the Federal Reserve's Small Bank Holding Company Policy Statement ("Policy
Statement") to $3 billion. As a result, as of the effective date of that change
in 2018, the Company was no longer required to comply with the risk-based
capital rules applicable to the Bank as described above. The Federal Reserve may
however, require smaller bank holding companies subject to the Policy Statement
to maintain certain minimum capital levels, depending upon general economic
conditions and a bank holding company's particular condition, risk profile and
growth plans.

As a result of the Economic Growth Act, the federal banking agencies were also
required to develop a "Community Bank Leverage Ratio" (the ratio of a bank's
Tier 1 capital to average total consolidated assets) for financial institutions
with assets of less than $10 billion. A "qualifying community bank" that exceeds
this ratio will be deemed to be in compliance with all other capital and
leverage requirements, including the capital requirements to be considered "well
capitalized" under prompt corrective action statutes. The federal banking
agencies may consider a financial institutions risk profile when evaluation
whether it qualifies as a community bank for purposes of the capital ratio
requirement. The federal banking agencies set the minimum capital for the new
Community Bank Leverage Ratio at 9%. The Bank does not intend to opt into the
Community Bank Leverage Ratio Framework.

On December 21, 2018, federal banking agencies issued a joint final rule to
revise their regulatory capital rules to (i) address the upcoming implementation
of the "current expected credit losses" ("CECL") accounting standard under GAAP;
(ii) provide an optional three-year phase-in period for the day-one adverse
regulatory capital effects that banking organizations are expected to experience
upon adopting CECL; and (iii) require the use of CECL in stress tests beginning
with the 2020 capital planning and stress testing cycle for certain banking
organizations. for more information regarding Accounting Standards Update
No. 2016-13, which introduced CECL as the methodology to replace the current
"incurred loss" methodology for financial assets measured at amortized cost, and
changed the approaches for recognizing and recording credit losses on
available-for-sale debt securities and purchased credit impaired financial
assets, including the required implementation date for the Company, see the
Company's Annual Report.

Federal banking regulators have issued risk-based capital guidelines, which assign risk factors to asset categories and off-balance-sheet items. The following table reflects capital ratios computed utilizing the implemented Basel III regulatory capital framework discussed above:




                                                                                       Minimum Capital
                                                                                        Required for
                                                                                      Capital Adequacy            Minimum To Be
                                                                                        Plus Capital            Well-Capitalized
                                                               Minimum

Capital Conservation Buffer Under Prompt

                                                                 Required for          Basel III Fully          Corrective Action
                                            Actual             Capital Adequacy           Phased In                Provisions
                                       Amount      Ratio       Amount      Ratio      Amount        Ratio       Amount       Ratio

                                                                         (dollars in thousands)
At June 30, 2021
Bank First Corporation:
Total capital (to risk-weighted
assets)                               $ 283,332     12.2 %          N/A      N/A            N/A       N/A            N/A       N/A
Tier I capital (to risk-weighted
assets)                                 246,285     10.6 %          N/A      N/A            N/A       N/A            N/A       N/A
Common equity tier I capital (to
risk-weighted assets)                   246,285     10.6 %          N/A      N/A            N/A       N/A            N/A       N/A
Tier I capital (to average assets)      246,285      8.9 %          N/A      N/A            N/A       N/A            N/A       N/A
Bank First, N.A:
Total capital (to risk-weighted
assets)                               $ 281,985     12.1 %      185,743    

8.0 % 243,787 10.5 % 232,178 10.0 % Tier I capital (to risk-weighted assets)

                                 262,438     11.3 %      139,307     

6.0 % 197,352 8.5 % 185,743 8.0 % Common equity tier I capital (to risk-weighted assets)

                   262,438     11.3 %      104,480     

4.5 % 162,525 7.0 % 150,916 6.5 % Tier I capital (to average assets) 262,438 9.5 % 110,534

      4.0 %      110,534       4.0 %      138,167       5.0 %
At December 31, 2020
Bank First Corporation:
Total capital (to risk-weighted
assets)                               $ 263,344     11.7 %          N/A      N/A            N/A       N/A            N/A       N/A
Tier I capital (to risk-weighted
assets)                                 228,186     10.2 %          N/A      N/A            N/A       N/A            N/A       N/A
Common equity tier I capital (to
risk-weighted assets)                   228,186     10.2 %          N/A      N/A            N/A       N/A            N/A       N/A
Tier I capital (to average assets)      228,186      8.7 %          N/A      N/A            N/A       N/A            N/A       N/A
Bank First, N.A:
Total capital (to risk-weighted
assets)                               $ 263,129     11.7 %      179,420    

8.0 % 235,489 10.50 % 224,275 10.0 % Tier I capital (to risk-weighted assets)

                                 245,471     10.9 %      134,565     

6.0 % 190,634 8.50 % 179,420 8.0 % Common equity tier I capital (to risk-weighted assets)

                   245,471     10.9 %      100,924     

4.5 % 156,993 7.00 % 145,779 6.5 % Tier I capital (to average assets) 245,471 9.5 % 103,814

 4.0 %      103,814      4.00 %      129,768       5.0 %



As previously mentioned, the Company carried $17.5 million of subordinated debt
as of June 30, 2021 and December 31, 2020, respectively, which is included in
total capital for the Company in the tables above.

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FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK


We are party to financial instruments with off-balance-sheet risk in the normal
course of business to meet the financing needs of our customers. These financial
instruments primarily include commitments to originate and sell loans, standby
and direct pay letters of credit, unused lines of credit and unadvanced portions
of construction and development loans. The instruments involve, to varying
degrees, elements of credit and interest rate risk in excess of the amount
recognized in the consolidated balance sheet. The contract or notional amounts
of those instruments reflect the extent of involvement the Company has in these
particular classes of financial instruments.

Our exposure to credit loss in the event of nonperformance by the other party to
the financial instrument for loan commitments, standby and direct pay letters of
credit and unadvanced portions of construction and development loans is
represented by the contractual amount of those instruments. The Company uses the
same credit policies in making commitments and conditional obligations as it
does for on-balance-sheet instruments.

Off-Balance Sheet Arrangements. Our significant off-balance-sheet arrangements consist of the following:


? Unused lines of credit


? Standby and direct pay letters of credit

? Credit card arrangements



Off-balance sheet arrangement means any transaction, agreement or other
contractual arrangement to which an entity unconsolidated with the registrant is
a party, under which the registrant has (1) any obligation under a guarantee
contract, (2) retained or contingent interest in assets transferred to an
unconsolidated entity or similar arrangement, (3) any obligation, including a
contingent obligation, under a contract that would be accounted for as a
derivative instrument, or (4) any obligation, including a contingent obligation,
arising out of a variable interest.

Loan commitments are made to accommodate the financial needs of our customers.
Standby and direct pay letters of credit commit us to make payments on behalf of
customers when certain specified future events occur. Both arrangements have
credit risk essentially the same as that involved in extending loans to clients
and are subject to our normal credit policies. Collateral (e.g., securities,
receivables, inventory, equipment, etc.) is obtained based on management's
credit assessment of the customer.

Loan commitments and standby and direct pay letters of credit do not necessarily
represent our future cash requirements because while the borrower has the
ability to draw upon these commitments at any time, these commitments often
expire without being drawn upon. Our off-balance sheet arrangements at the
dates
indicated were as follows:




                                                       Amounts of

Commitments Expiring - By Period as of June 30, 2021

                                                                Less Than       One to Three       Three to Five      After Five
Other Commitments                               Total           One Year            Years              Years             Years

                                                                            (dollars in thousands)
Unused lines of credit                      $     470,833     $     234,684 

$ 80,870 $ 42,590 $ 112,689 Standby and direct pay letters of credit

            9,021             5,343             3,253                 423                2
Credit card arrangements                           11,210                 -                 -                   -           11,210
Total commitments                           $     491,064     $     240,027     $      84,123     $        43,013    $     123,901





                                                    Amounts of Commitments

Expiring - By Period as of December 31, 2020

                                                                  Less Than          One to          Three to       After Five
Other Commitments                                Total            One Year         Three Years      Five Years        Years

                                                                          (dollars in thousands)
Unused lines of credit                      $       461,036    $       

249,691 $ 83,557 $ 26,295 $ 101,493 Standby and direct pay letters of credit

              7,567              5,800            1,400              364              3
Credit card arrangements                             10,867                  -                -                -         10,867
Total commitments                           $       479,470    $       255,491    $      84,957    $      26,659   $    112,363








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11/22BANK FIRST : announces promotion of Longmeyer and Hanke
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11/22Hovde Group Upgrades Bank First Corp to Outperform From Market Perform, Raises Price Ta..
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11/12BANK FIRST : announces plans for new Green Bay branch
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11/09BANK FIRST CORP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT..
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11/09BANK FIRST : November 2021 Shareholder Newsletter
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11/02Bank First participates in Make a Difference Day
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10/19BANK FIRST CORPORATION : Q3 Earnings Snapshot
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10/19BANK FIRST : Announces Net Income for the Third Quarter of 2021 - Form 8-K
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10/19BANK FIRST : Announces Net Income for the Third Quarter of 2021
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10/19Bank First Corporation Approves Quarterly Cash Dividend, Payable on January 5, 2022
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Financials (USD)
Sales 2021 114 M - -
Net income 2021 45,4 M - -
Net Debt 2021 - - -
P/E ratio 2021 12,2x
Yield 2021 1,37%
Capitalization 550 M 550 M -
Capi. / Sales 2021 4,84x
Capi. / Sales 2022 4,99x
Nbr of Employees 314
Free-Float 77,0%
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Income Statement Evolution
Consensus
Sell
Buy
Mean consensus OUTPERFORM
Number of Analysts 2
Last Close Price 72,04 $
Average target price 79,50 $
Spread / Average Target 10,4%
EPS Revisions
Managers and Directors
Michael B. Molepske President, Chief Executive Officer & Director
Kevin M. LeMahieu Chief Financial Officer
Michael G. Ansay Chairman
Donald R. Brisch Independent Director
David R. Sachse Independent Director