Bank Acquisition

October 25, 2019,

the Company completed the purchase of Iowa State Savings Bank (“ISSB”), including its’

four

branches in Creston, Diagonal, Lennox and Corning, Iowa (the “Acquisition”). The Acquisition was consistent with the Bank’s strategy to strengthen and expand its Iowa market share. ISSB’s acquired assets and liabilities were recorded at fair value at the date of acquisition. This bank was purchased for cash consideration of

$22.6

million. As a result of the acquisition, the Company recorded a core deposit intangible asset of

$1,891,000

and goodwill of approximately

$2,680,000.

The results of operations for this acquisition have been included since the transaction date of

October 25, 2019.

Since the acquisition date, there has been

significant credit deterioration of the acquired loans.

The following table summarizes the fair value of the total consideration transferred as a part of the ISSB Acquisition as well as the fair value of identifiable assets acquired and liabilities assumed as of the effective date of the transactions. (

in thousands

)

Cash consideration transferred	$	22,643

Recognized amounts of identifiable assets acquired and liabilities assumed:

Cash and due from banks	$	3,188
Federal funds sold		2,792
Interest bearing deposits in financial institutions		21,035
Securities available-for-sale		33,615
Federal Home Loan Bank stock at cost		365
Loans receivable		137,776
Accrued interest receivable		2,888
Bank premises and equipment		2,452
Other real estate owned		3,582
Bank owned life insurance		2,499
Core deposit intangible asset		1,891
Other assets		204
Deposits		(188,631	)
Securities sold under repurchase agreements		(1,747	)
Accrued interest payable and other liabilities		(1,946	)

Total identifiable net assets		19,963

Goodwill	$	2,680

October 25, 2019,

associated with the ISSB Acquisition, the contractual balance of loans receivable acquired was

$139,703,000

and the contractual balance of the deposits assumed was

$188,068,000.

Loans receivable acquired include commercial real estate,

family real estate, agricultural real estate, commercial operating, agricultural operating and consumer loans. During the

first

quarter of

2020,

an additional

$310,000

of goodwill was recorded due to an adjustment to the initial purchase price.

The acquired loans associated with the ISSB Acquisition at contractual values as of

October 25, 2019

were determined to be risk rated as follows (

in thousands

Pass	$	121,346
Watch		12,333
Special Mention		-
Substandard		6,024

Total loans acquired at book value	$	139,703

The core deposit intangible asset is amortized to expense on a declining basis over a period of

ten

years. The loan market valuation is accreted to income on the effective yield method over a

ten

year period. The time deposits market valuation is amortized to expense on a declining basis over a

two

year period.