Basis of Presentation: BankFinancial Corporation, a Maryland corporation headquartered in Burr Ridge, Illinois, is the owner of all of the issued and outstanding capital stock of BankFinancial, NA (the “Bank”). The interim unaudited consolidated financial statements include the accounts and transactions of BankFinancial Corporation, the Bank, and the Bank’s wholly-owned subsidiaries, Financial Assurance Services, Inc. and BFIN Asset Recovery Company, LLC (collectively, “the Company”), and reflect all normal and recurring adjustments that are, in the opinion of management, considered necessary for a fair presentation of the financial condition and results of operations for the periods presented. Such adjustments are the only adjustments reflected in the accompanying financial statements. All significant intercompany accounts and transactions have been eliminated. The results of operations for the ~~three~~ ~~and~~ nine month ~~periods~~period ended September 30, ~~2020~~2021 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, ~~2020~~2021 or for any other period.

Certain information and note disclosures normally included in financial statements prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).

Use of Estimates: The preparation of the consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Although these estimates and assumptions are based on the best available information, actual information, actual results could differ from those estimates.

COVID-19: ~~The Company has evaluated subsequent events for potential recognition and/or disclosure through the date the unaudited consolidated financial statements included in this Quarterly Report on Form~~ 10~~-Q were issued.~~ On March 11, 2020, the World Health Organization declared the outbreak of a novel coronavirus (“COVID-19”) as a global ~~pandemic, which continues to spread throughout the United States and around the world.~~pandemic. The declaration of a global pandemic indicates that almost all public commerce and related business activities must be, to varying degrees, curtailed with the goal of decreasing the rate of new infections. The outbreak of COVID-19 has adversely impacted, and could further adversely impact, a broad range of industries in which the Company’s customers operate and impair their ability to fulfill their financial obligations to the Company. On March 3, 2020, the Federal Open Market Committee reduced the target federal funds rate range by 50 basis points to 1.00% to 1.25%. This rate was further reduced to a target range of 0% to 0.25% on March 16, 2020. These reductions in interest rates and other effects of the COVID-19 outbreak may adversely affect the Company’s financial condition and results of operations. As a result of the spread of the COVID-19 coronavirus, economic uncertainties have arisen which are likely to negatively impact net interest income and noninterest income. Other financial impacts could occur though such potential impact is unknown at this time.

Reclassifications: Certain reclassifications have been made in the prior period’s financial statements to conform them to the current period’s presentation.

These unaudited consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020, as filed with the Securities and Exchange Commission.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). These amendments require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. For SEC filers who are smaller reporting companies, such as the Company, ASU 2016-13 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022.

Amounts reported in earnings per share reflect earnings available to common stockholders for the period divided by the weighted average number of shares of common stock outstanding during the period.

The fair value of securities and the related gross unrealized gains and losses recognized in accumulated other comprehensive income is as follows:

~~The mortgage-backed~~Mortgage-backed securities and collateralized mortgage obligations reflected in the preceding table were issued by U.S. government-sponsored entities orand agencies, Freddie Mac, Fannie Mae and Ginnie Mae, and are obligations which the government has affirmed its commitment to support.

The amortized cost and fair values of securities available-for-sale by contractual maturity are shown below. Securities not due at a single maturity date are shown separately. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

Investment securities available-for-sale with carrying ~~values~~value of ~~$1.2~~$1.1 million and ~~$2.0~~$1.2 million at September 30, ~~2020~~2021 and December 31, ~~2019~~2020, respectively, were pledged as collateral on customer repurchase agreements and for other purposes as required or permitted by law.

~~Table of Contents~~

Securities available-for-sale with unrealized losses not recognized in income are as follows:

The Company evaluates marketable investment securities with significant declines in fair value on a quarterly basis to determine whether they should be considered other-than-temporarily impaired under current accounting guidance, which generally provides that if a marketable security is in an unrealized loss position, whether due to general market conditions or industry or issuer-specific factors, the holder of the securities must assess whether the impairment is other-than-temporary.

There were no unrealized loss positions at September 30, 2021. Certain collateralized mortgage obligations that the Company holds in its investment portfolio were in an unrealized loss position at ~~September 30,~~December 31, 2020,, but the unrealized ~~losses were~~loss was not considered significant under the Company’s impairment testing methodology. In addition, the Company does not intend to sell these securities, and it is likely that the Company will not be required to sell these securities before their anticipated recovery occurs.

~~The Bank, as a member of Visa USA, received 51,404 unrestricted shares of Visa, Inc. Class B common stock in connection with Visa, Inc.’s initial public offering in~~ ~~2007~~ and a related retroactive responsibility plan. The retroactive responsibility plan obligates all former Visa USA members to indemnify Visa USA, in proportion to their equity interests in Visa USA, for certain litigation losses and expenses, including settlement expenses, for the lawsuits covered by the retrospective responsibility plan. Due to the restrictions that the retrospective responsibility plan imposes on the Company’s Visa, Inc. Class B shares, the Company did ~~not~~ ~~record the Class B shares as an asset.~~

~~The Bank sold 25,702 shares of Visa Class B common stock in the~~ ~~fourth~~ ~~quarter of~~ ~~2018~~ ~~and the remaining 25,702 shares of Visa Class B common stock in the~~ ~~first~~ ~~quarter of~~ ~~2019~~ ~~and recorded an aggregate gain of $295,000.~~

The following tables present the balance in the allowance for loan losses and loans receivable by portfolio segment and based on impairment method:

The following table represents the activity in the allowance for loan losses by portfolio segment:

The following tables present loans individually evaluated for impairment by class of loans:

The following tables present the recorded investment in nonaccrual and loans 90 days or more past due still on accrual by class of loans:

Nonaccrual loans and impaired loans are defined differently. Some loans may be included in both categories, and some loans may only be included in one category. Nonaccrual loans include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans.

The Company’s reserve for uncollected loan interest was ~~$135,000~~$132,000 and ~~$81,000~~$133,000 at September 30, ~~2020~~2021 and December 31, ~~2019~~2020, respectively. When a loan is on nonaccrual status and the ultimate collectability of the total principal of an impaired loan is in doubt, all payments are applied to principal under the cost recovery method. Alternatively, when a loan is on nonaccrual status but there is doubt concerning only the ultimate collectability of interest, contractual interest is credited to interest income only when received, under the cash basis method pursuant to the provisions of FASB ASC 310–10, as applicable. In all cases, the average balances are calculated based on the month–end balances of the financing receivables within the period reported pursuant to the provisions of FASB ASC 310–10, as applicable.

The following tables present the aging of the recorded investment of loans by class of loans:

In response to the COVID-19 pandemic, the Coronavirus Aid, Relief and Economic Security Act ("CARES Act") was passed by Congress and signed into law on March 27,2020.The CARES Act established the Paycheck Protection Program loan, designed to provide a direct incentive for small businesses to keep their workers on the payroll. Under the most recently published guidance, the U.S. Small Business Administration ("SBA") will forgive PPP loans if all employee retention criteria are met, and the funds are used for eligible expenses. ~~For the~~ ~~nine~~ ~~months ended~~ ~~September 30, 2020~~~~, we allocated approximately $11 million to the PPP based on the expected~~ ~~100%~~ ~~guaranty of the SBA.~~

Section 4013 of the CARES Act provides that a qualified loan modification is exempt by law from classification as a Troubled Debt Restructuring ("TDR") pursuant to US GAAP. In addition, the Revised Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working With Customers Affected by the Coronavirus (“OCC Bulletin 2020-50”) provides more limited circumstances in which a loan modification is not subject to classification as a TDR and also ~~defined~~defines the circumstances where the borrower’s loan is reported as current on loan payments. Pursuant to these new capabilities, we developed several loan forbearance programs to assist borrowers with managing cash flows disrupted due to COVID-19.

Our Apartment and Commercial Real Estate COVID-19 Qualified Limited Forbearance Agreement permitted borrowers who qualified under Section 4013 of the CARES Act to make an election to pay only scheduled interest and escrow payments (if applicable) for a four-month period beginning in April 2020, and to pay all deferred principal payments by December 2020.

Our Small Investment Property COVID-19 Qualified Limited Forbearance Agreement permitted borrowers with loan balances under $750,000 who qualified under Section 4013 of the CARES Act to make an election to pay only scheduled interest and escrow payments (if applicable) for a four-month period beginning in April 2020, and to pay all deferred principal payments by December 2020. In addition, the borrower could elect to defer the May 2020 loan payment entirely, with all deferred interest amounts due by December 2020 and all deferred principal amounts due by June 30, 2021.

CARES Act Section 4013 and OCC Bulletin 2020-35 forbearance agreements are available to qualified commercial loan and commercial finance borrowers, and to commercial equipment lessees.

For residential mortgage and consumer loans, relief under CARES Act Section 4013 or OCC Bulletin 2020-35 forbearance agreements are available to qualified borrowers with terms consistent with secondary residential mortgage market standards established by Fannie Mae.

Per the terms of the COVID-19 loan forbearance modifications program, all loan deferrals were paid in full as of June 30, 2021.

The following table summarizes the remaining loan forbearance modifications atas of ~~September 30, 2020~~December 31, 2020::

The Company evaluates loan extensions or modifications not qualified under Section 4013 of the CARES Act or under OCC Bulletin 2020-35 in accordance with FASB ASC 340-10 with respect to the classification of the loan as a TDR.

Under ASC 340-10, if the Company grants a loan extension or modification to a borrower experiencing financial difficulties for other than an insignificant period of time that includes a below–market interest rate, principal forgiveness, payment forbearance or other concession intended to minimize the economic loss to the Company, the loan extension or loan modification is classified as a TDR. In cases where borrowers are granted new terms that provide for a reduction of either interest or principal then due and payable, management measures any impairment on the restructured loan in the same manner as for impaired loans as noted above.

The Company had 0 TDRs at September 30, ~~2020~~2021 and December 31, ~~2019~~2020. During thethree and nine months ended September 30, ~~2020~~2021 and ~~2019~~2020, there were 0 loans modified and classified as TDRs. During the three and nine months ended September 30, ~~2020~~2021 and ~~2019~~2020, there were 0 TDR loans that subsequently defaulted within twelve months of their modification.

A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms.

To determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under the Company’s internal underwriting policy.

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt, including current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans based on credit risk. This analysis includes non-homogeneous loans, such as commercial and commercial real estate loans. This analysis is performed on a monthly basis. The Company uses the following definitions for risk ratings:

Special Mention. A Special Mention asset has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the institution’s credit position at some future date. Special Mention assets are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification.

Substandard. Loans categorized as Substandard continue to accrue interest, but exhibit a well-defined weakness or weaknesses that may jeopardize the liquidation of the debt. The loans continue to accrue interest because they are well secured and collection of principal and interest is expected within a reasonable time. The risk rating guidance published by the Office of the Comptroller of the Currency clarifies that a loan with a well-defined weakness does not have to present a probability of default for the loan to be rated Substandard, and that an individual loan’s loss potential does not have to be distinct for the loan to be rated Substandard.

Nonaccrual. An asset classified Nonaccrual has all the weaknesses inherent in one classified Substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered “Pass” rated loans.

Based on the most recent analysis performed, the risk categories of loans by class of loans are as follows:

Real estate that is acquired through foreclosure or a deed in lieu of foreclosure is classified as other real estate owned ("OREO") until it is sold. When real estate is acquired through foreclosure or by deed in lieu of foreclosure, it is recorded at its fair value, less the estimated costs of disposal. If the fair value of the property is less than the loan balance, the difference is charged against the allowance for loan losses.

Assets are classified as foreclosed when physical possession of the collateral is taken regardless of whether foreclosure proceedings have taken place. Other foreclosed assets received in satisfaction of borrowers debt are initially recorded at fair value of the asset less estimated costs to sell.

The following represents the roll forward of ~~OREO and the composition of OREO properties:~~foreclosed assets:

At ~~September 30, 2020~~ ~~and~~ ~~December 31, 2019~~~~, the balance of OREO included 0 foreclosed residential real estate properties recorded as a result of obtaining physical possession of the property without title. At~~ ~~September 30, 2020~~ ~~and~~ ~~December 31, 2019~~~~, the recorded investment of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in process was $180,000 and $237,000, respectively.~~

At September 30, 2021 and December 31, 2020, the balance of OREO includes 0 foreclosed residential real estate properties recorded as a result of obtaining physical possession of the property without title. At September 30, 2021 and December 31, 2020, the recorded investment of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in process was $73,000 and $187,000, respectively. The other foreclosed assets consist of non real estate collateral repossessed related to a previously classified Chicago area commercial loan.

~~The Company enters into operating leases in the normal course of business primarily for several of its branch and corporate locations. Leases (Topic~~ ~~842~~~~) establishes a right of use model that requires a lessee to record a right of use (“ROU”) asset and a lease liability for all leases with terms longer than~~ 12 ~~months. Currently the Company is obligated under~~ ~~four~~ ~~non-cancellable operating lease agreements for~~ ~~three~~ ~~branch properties and its corporate office. The leases have varying terms, the longest of which will end in~~ ~~2032.~~ ~~The Company's lease agreements include options to renew at the Company's discretion. The extensions are~~ ~~not~~ ~~reasonably certain to be exercised; therefore, they were~~ ~~not~~ ~~considered in the calculation of the ROU asset and lease liability. The Company has also elected~~ ~~not~~ ~~to recognize leases with original lease terms of~~ 12 ~~months or less (short-term leases) on the Company's Statement of Financial Condition.~~

The following table represents the classification of the Company's right of use and lease liabilities:

~~Amortization~~Lease amortization expense was ~~$221,000~~$292,000 and ~~$212,000~~$221,000 for the three months ended September 30, ~~2020~~2021 and ~~2019~~2020, respectively, and ~~$660,000~~$773,000 and ~~$636,000~~$660,000 for the nine months ended September 30, ~~2020~~2021 and ~~2019~~2020., respectively. At September 30, ~~2020~~2021, the weighted-average remaining lease term for the Company's operating leases was ~~8.4~~7.1 years and the weighted-average discount rate used in the measurement of the Company's operating lease liabilities was ~~3.13%~~2.83%. ~~The Company utilized~~For each operating lease, the discount rate is the FHLB fixed rate advance rate for the term most closely aligning with the remaining lease term at inception.

Future minimum payments under non-cancellable operating leases with terms longer than 12 months, are as ~~follows at~~ ~~September 30, 2020~~:follows. Future minimum payments on shorter term leases are excluded as the amounts are insignificant.

~~Securities sold under agreements to repurchase, which are included with borrowings on the consolidated balance sheet, are shown below.~~

~~There were~~ no ~~repurchase agreements and repurchase-to-maturity transactions at~~ ~~September 30, 2020~~.

~~Securities sold under agreements to repurchase were secured by a mortgage-backed security with a carrying amount of $2.0 million at~~ ~~December 31, 2019~~~~, As the security's value fluctuates due to market conditions, the Company has~~ no ~~control over the market value. The Company is obligated to promptly transfer additional securities if the market value of the securities falls below the repurchase price, per the agreement.~~

On April 1, 14, 2021, the Company entered into Subordinated Note Purchase Agreements with certain qualified institutional buyers and accredited investors pursuant to which the Company sold and issued $20.0 million in aggregate principal amount of its 3.75% Fixed-to-Floating Rate Subordinated Notes due May 15, 2031 (the “Notes”).

The Company incurred $441,000 of issuance costs associated with the Notes. These issuance costs are being amortized over the 10-year life of the Notes. At September 30, 2021, there were $422,000 in remaining unamortized issuance costs and they are presented in the Company's financial statements as a reduction of the principal amount of the Notes.

The Notes bear interest at a fixed annual rate of 3.75%, from and including the date of issuance to May 14, 2026, payable semi-annually in arrears. From and including May 15, 2026 but excluding the maturity date or early redemption date, as applicable, the interest rate will reset quarterly to an interest rate per annum equal to Three-Month Term SOFR (as defined in the Notes) plus 299 basis points, payable quarterly in arrears. Under the conditions specified in the Notes, the interest rate accruing during the applicable floating rate period may be determined based on a rate other than Three-Month Term SOFR. The Notes have a stated maturity date of May 15, 2031 and are redeemable, in whole or in part, on May 15, 2026, on any interest payment date thereafter, and at any time upon the occurrence of certain events.

Principal and interest payments due on the Notes are subject to acceleration only in limited circumstances in the case of certain bankruptcy and insolvency-related events with respect to the Company. The Notes are unsecured, subordinated obligations of the Company and generally rank junior in right of payment to the Company’s current and future senior indebtedness. The Notes qualify as Tier 2 capital for regulatory capital purposes.

In 2020,the Company established a $5.0 million unsecured line of credit with a correspondent bank. Interest is payable at a rate of Prime Rate as published in the Wall Street Journal rate minus 0.75%, with a minimum rate of 2.40%. The line of credit ~~will mature on~~has been extended since its original maturity date and the current maturity date is ~~April 1, 2021.~~March 31, 2022. The line of credit had 0 outstanding balance at September 30, ~~2020~~2021. and December 31, 2020.

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values:

The Company used the following methods and significant assumptions to estimate the fair value of each type of financial instrument:

Securities: The fair values of debt securities are generally determined by matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities, but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2).

Impaired loans: The fair value of impaired loans with specific allocations of the allowance for loan losses is generally based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available for similar loans and collateral underlying such loans. Non-real estate collateral may be valued using an appraisal, net book value per the borrower’s financial statements, or aging reports, adjusted or discounted based on management’s historical knowledge, changes in market conditions from the time of the valuation, and management’s expertise and knowledge of the client and client’s business, resulting in a Level 3 fair value classification. Impaired loans are evaluated on a quarterly basis for additional impairment and adjusted in accordance with the allowance policy.

~~Other real estate owned:~~Foreclosed assets: Assets acquired through or instead of loan foreclosure are initially recorded at fair value less costs to sell when acquired, establishing a new cost basis. These assets are subsequently accounted for at lower of cost or fair value less estimated costs to sell. Fair value is commonly based on recent real estate appraisals which are updated no less frequently than annually. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach with data from comparable properties. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between the comparable sales and income data available. ~~Real estate owned properties~~Foreclosed assets are evaluated on a quarterly basis for additional impairment and adjusted accordingly.

The following table sets forth the Company’s financial assets that were accounted for at fair value and are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

The following table sets forth the Company’s assets that were measured at fair value on a non-recurring basis:

~~Impaired loans, which are measured for impairment using the fair value of the collateral for collateral–dependent loans, had a carrying amount of $288,000, with a valuation allowance of $20,000 at~~ ~~September 30, 2020~~~~. At~~ ~~December 31, 2019~~ there were 0 impaired loans that were measured for impairment using the fair value of the collateral for collateral–dependent loans and which had specific valuation allowances. There is an increase in the provision for loan losses of $20,000 for the ~~three~~ ~~and~~ ~~nine~~ ~~months ended~~ ~~September 30, 2020,~~ ~~compared to 0 specific provision for loan losses for the~~ ~~three~~ ~~and~~ ~~nine~~ ~~months ended~~ ~~September 30, 2019.~~

At ~~September 30, 2020~~ ~~and~~ ~~December 31, 2019~~ ~~there were 0 OREO properties with valuation allowances.~~

~~The following table presents quantitative information, based on certain empirical data with respect to Level~~ 3 ~~fair value measurements for financial instruments measured at fair value on a non-recurring basis at~~ ~~September 30, 2020~~:

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BANKFINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Table amounts in thousands, except share and per share data)

NOTE 8 - FAIR VALUE (continued)

Impaired loans, which are measured for impairment using the fair value of the collateral for collateral–dependent loans, had a carrying amount of $296,000, with a valuation allowance of $28,000 at September 30, 2021 and December 31, 2020. There was no change in the provision for loan losses of $28,000 for the three and nine months ended September 30, 2021, compared to the provision for loan losses of $20,000 for the three and nine months ended September 30, 2020.

Foreclosed assets are carried at the lower of cost or fair value less costs to sell. At September 30, 2021 foreclosed assets had a carrying value of $1.4 million less a valuation allowance of $336,000, or $1.0 million. At December 31, 2020, there were 0 foreclosed assets with valuation allowances. There were $124,000 of valuation adjustments of foreclosed assets recorded in the three months ended September 30, 2021 and $405,000 of valuation adjustments of foreclosed assets for the nine months ended September 30, 2021, compared to 0 valuation adjustment recorded for the three or nine months ended September 30, 2020.

The following table presents quantitative information, based on certain empirical data with respect to Level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis:

	*Fair Value*		*Valuation Technique(s)*	*Significant Unobservable Input(s)*	*Range (Weighted Average)*
September 30, 2021
Impaired loans - nonresidential real estate	$	268	Sales comparison	Discount applied to valuation		22.0	%

Foreclosed assets:
One–to–four family residential	$	73	Sales comparison	Discount applied to valuation		65.0	%
Nonresidential real estate		140	Sales comparison	Discount applied to valuation		11.8	%
Other foreclosed assets		792	Redemption value	Discount applied to valuation		22.0	%
	$	1,005

December 31, 2020
Impaired loans - nonresidential real estate	$	268	Sales comparison	Discount applied to valuation		22.0	%

The carrying amount and estimated fair value of financial instruments are as follows:

			*Fair Value Measurements at September 30, 2020 Using:*										*Fair Value Measurements at September 30, 2021 Using:*
	*Carrying Amount*		*Level 1*		*Level 2*		*Level 3*		*Total*		*Carrying Amount*		*Level 1*		*Level 2*		*Level 3*		*Total*
Financial assets
Cash and cash equivalents	$	429,665	$	13,740	$	415,925	$	0	$	429,665	$	528,615	$	11,432	$	517,183	$	0	$	528,615
Securities		42,048		0		42,048		0		42,048		14,693		0		14,693		0		14,693
Loans receivable, net of allowance for loan losses		1,065,892		0		0		1,073,308		1,073,308		1,047,056		0		0		1,045,500		1,045,500
FHLB and FRB stock		7,490		0		0		0		N /A		7,490		0		0		0		N /A
Accrued interest receivable		4,354		0		158		4,196		4,354		5,118		0		103		5,015		5,118
Financial liabilities
Certificates of deposit		301,351		0		302,791		0		302,791		217,267		0		217,452		0		217,452
Borrowings		4,000		0		3,997		0		3,997		5,000		0		4,998		0		4,998
Subordinated Notes												19,578		0		20,525		0		20,525

			*Fair Value Measurements at December 31, 2019 Using:*										*Fair Value Measurements at December 31, 2020 Using:*
	*Carrying Amount*		*Level 1*		*Level 2*		*Level 3*		*Total*		*Carrying Amount*		*Level 1*		*Level 2*		*Level 3*		*Total*
Financial assets
Cash and cash equivalents	$	190,325	$	9,785	$	180,540	$	0	$	190,325	$	503,496	$	14,115	$	489,381	$	0	$	503,496
Securities		60,193		0		60,193		0		60,193		23,829		0		23,829		0		23,829
Loans receivable, net of allowance for loan losses		1,168,008		0		0		1,177,459		1,177,459		1,002,578		0		0		1,004,854		1,004,854
FHLB and FRB stock		7,490		0		0		0		N /A		7,490		0		0		0		N /A
Accrued interest receivable		4,563		0		252		4,311		4,563		3,941		0		52		3,889		3,941
Financial liabilities
Certificates of deposit		402,034		0		402,914		0		402,914		253,000		0		253,906		0		253,906
Borrowings		61		0		61		0		61		4,000		0		3,998		0		3,998

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BANKFINANCIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Table amounts in thousands, except share and per share data)

NOTE 8 - FAIR VALUE (continued)

Loans: The exit price observations are obtained from an independent third-party using its proprietary valuation model and methodology and may not reflect actual or prospective market valuations. The valuation is based on the probability of default, loss given default, recovery delay, prepayment, and discount rate assumptions.

While the above estimates are based on management’s judgment of the most appropriate factors, as of the balance sheet date, there is no assurance that the estimated fair values would have been realized if the assets were disposed of or the liabilities settled at that date, since market values may differ depending on the various circumstances. The estimated fair values would also not apply to subsequent dates.

In addition, other assets and liabilities that are not financial instruments, such as premises and equipment, are not included in the above disclosures.

~~Table of Contents~~

~~BANKFINANCIAL CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Table amounts in thousands, except share and per share data)~~

NOTE 9 – REVENUE FROM CONTRACTS WITH CUSTOMERS

All of the Company's revenue from contracts with customers within the scope of ASC 606 is recognized within noninterest income. The following table presents the Company's sources of noninterest income. Items outside of the scope of the ASC 606 are noted as such.

	*Three Months Ended*				*Nine Months Ended*						*Three Months Ended*				*Nine Months Ended*
	*September 30,*				*September 30,*						*September 30,*				*September 30,*
	*2020*		*2019*		*2020*			*2019*			*2021*		*2020*		*2021*		*2020*
Deposit service charges and fees	$	833	$	983	$	2,456		$	2,887		$	814	$	833	$	2,352	$	2,456
Loan servicing fees ⁽¹⁾		44		99		189			178			140		44		336		189
Mortgage brokerage and banking fees ⁽¹⁾		44		28		84			77			16		44		33		84
Gain on sale of equity securities ⁽¹⁾		0		0		0			295
Loss on disposal of other assets		0		0		(2	)		(19	)
Trust and insurance commissions and annuities income		222		198		728			627			263		222		880		728
Earnings on bank-owned life insurance ⁽¹⁾		10		37		51			105			31		10		82		51
Other ⁽¹⁾		111		129		319			374			110		111		375		317
Total noninterest income	$	1,264	$	1,474	$	3,825		$	4,524		$	1,374	$	1,264	$	4,058	$	3,825

⁽¹⁾ Not within the scope of ASC 606

A description of the Company's revenue streams accounted for under ASC 606 follows:

Deposit service charges and fees: The Company earns fees from its deposit customers based on specific types of transactions, account maintenance and overdraft services. Transaction-based fees, which include services such as ATM use fees, stop payment charges, statement rendering, and ACH fees, are recognized at the time the transaction is executed as that is the point in time the Company fulfills the customer's request. Account maintenance fees, which relate primarily to monthly maintenance, are earned over the course of a month, representing the period over which the Company satisfies the performance obligation. Overdraft fees are recognized at the point in time that the overdraft occurs. Service charges on deposits are withdrawn from the customer's account balance.

Interchange income: The Company earns interchange fees from debit cardholder transactions conducted through the Visa payment network. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provided to the cardholder. Interchange income is included in deposit service charges and fees. Interchange income was ~~$ 394,000~~$409,000 and ~~$ 395,000~~$394,000 for the three months ended September 30, ~~2020~~2021 and ~~2019~~2020., respectively. Interchange income was ~~$ 1.1~~$1.2 million and ~~$ 1.2~~$1.1 million for the nine months ended September 30, ~~2020~~2021 and ~~2019~~2020., respectively.

Trust and insurance commissions and annuities income: The Company earns trust, insurance commissions and annuities income from its contracts with trust customers to manage assets for investment, and/or to transact on their accounts. These fees are primarily earned over time as the Company provides the contracted monthly or quarterly services and are generally assessed based on a tiered scale of the market value of assets under management (AUM) at month-end. Fees that are transaction based, including trade execution services, are recognized at the point in time that the transaction is executed, i.e., the trade date. Other related services provided include fees the Company earns, which are based on a fixed fee schedule, are recognized when the services are rendered.

Gains/losses on sales of ~~OREO~~foreclosed assets and other assets: The Company records a gain or loss from the sale of ~~OREO~~foreclosed assets and other assets when control of the property transfers to the buyer, which generally occurs at the time of an executed deed. When the Company finances the sale of ~~OREO~~foreclosed assets to the buyer, the Company assesses whether the buyer is committed to perform their obligations under the contract and whether collectability of the transaction price is probable. Once these criteria are met, the ~~OREO~~foreclosed assets asset is derecognized and the gain or loss on sale is recorded upon the transfer of control of the property to the buyer. In determining the gain or loss on the sale, the Company adjusts the transaction price and related gain (loss) on sale if a significant financing component is present. ~~OREO~~Foreclosed assets sales for the three and nine months ended September 30, ~~2020~~2021 and ~~2019~~2020 were not financed by the ~~Bank.~~Company.

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ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Statement Regarding Forward-Looking Information

Forward Looking Statements

This Quarterly Report on Form 10-Q contains, and other periodic and current reports, press releases and other public stockholder communications of BankFinancial Corporation may contain, forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, that involve significant risks and uncertainties. Forward-looking statements may include statements relating to our future plans, strategies and expectations, as well as our future revenues, earnings, losses, financial performance, financial condition, asset quality metrics and future prospects. Forward looking statements are generally identifiable by use of the words “believe,” “may,” “will,” “should,” “could,” “expect,” “estimate,” “intend,” “anticipate,” “preliminary,” “project,” “plan,” or similar expressions. Forward looking statements speak only as of the date made. They are frequently based on assumptions that may or may not materialize, and are subject to numerous uncertainties that could cause actual results to differ materially from those anticipated in the forward looking statements. We intend all forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for the purpose of invoking these safe harbor provisions.

Factors that could cause actual results to differ materially from the results anticipated or projected and which could materially and adversely affect our operating results, financial condition or future prospects include, but are not limited to: (i) less than anticipated loan growth due to intense competition for loans and leases, particularly in terms of pricing and credit underwriting, or a dearth of borrowers who meet our underwriting standards, or the COVID-19 pandemic and the related adverse local and national economic consequences; (ii) the impact of re-pricing and competitors’ pricing initiatives on loan and deposit products; (iii) interest rate movements, inflation and their impact on the economy, customer behavior and our net interest margin; (iv) adverse economic conditions in general, or specific events such as the COVID-19 pandemic or terrorism, and in the markets in which we lend that could result in increased delinquencies in our loan portfolio or a decline in the value of our investment securities and the collateral for our loans; (v) declines in ~~real estate~~asset values that adversely impact the value of our loan collateral, OREO, asset dispositions and the level of borrower equity in their investments; (vi) borrowers that experience legal or financial difficulties that we do not currently foresee; (vii) results of supervisory monitoring or examinations by regulatory authorities, including the possibility that a regulatory authority could, among other things, require us to increase our allowance for loan losses or adversely change our loan classifications, write-down assets, reduce credit concentrations or maintain specific capital levels; (viii) changes, disruptions or illiquidity in national or global financial markets; (ix) the credit risks of lending, leasing and other financing activities, including risks that could cause changes in the level and direction of loan delinquencies and charge-offs or changes in estimates relating to the computation of our allowance for loan losses; (x) monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board; (xi) factors affecting our ability to access deposits or cost-effective funding, and the impact of competitors' pricing initiatives on our deposit products; (xii) legislative or regulatory changes, that have an adverse impact on our products, services, operations, operating expenses and ~~operating expenses;~~tax rates; (xiii) higher federal deposit insurance premiums; (xiv) higher than expected overhead, infrastructure and compliance costs; (xv) changes in accounting or tax principles, policies or guidelines; (xvi) the effects of any federal government shutdown; and (xvii) privacy and cybersecurity risks, including the risks of business interruption and the compromise of confidential customer information resulting from intrusions.

These risks and uncertainties, together with the Risk Factors and other information set forth in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019,~~2020, as well as Part II, Items 1A of our subsequent Quarterly Reports on Form 10-Q, and other filings we make with the SEC, should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Forward looking statements speak only as of the date they are made. We do not undertake any obligation to update any forward-looking statement in the future, or to reflect circumstances and events that occur after the date on which the forward-looking statement was made.

Critical Accounting Policies

Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, and could potentially result in materially different results under different assumptions and conditions. We believe that the most critical accounting policies upon which our financial condition and results of operation depend, and which involve the most complex subjective decisions or assessments, are included in the discussion entitled “Critical Accounting Policies” in Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations,” in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, ~~2019,~~2020, as filed with the SEC.

Overview

We reported net income of $1.6 million, or $0.12, per common share for the quarter ended September 30, 2021. At September ~~2020,~~30, 2021, the Company had total assets of $1.660 billion, total loans of $1.047 billion, total deposits of $1.454 billion and stockholders' equity of $158 million.

Total net loans increased by $14.9 million during the quarter ended September 30, 2021. Total commercial loans increased by $13.6 million (16.8%), net of $4.8 million in SBA Paycheck Protection Program payments, due to originations of commercial finance and lessor finance lines of credit and higher utilization of healthcare finance lines of credit. Total commercial equipment leases increased by $2.6 million (0.7%) as stronger originations of middle market, small ticket and government equipment finance transactions slightly offset higher levels of scheduled government equipment finance payments. For the third quarter of 2021, middle market and small ticket equipment finance transactions represented 30% of total equipment finance originations. Multi-family and nonresidential real estate loans increased slightly as stronger originations offset continued elevated multi-family real estate loan prepayments.

Total deposits increased by $15.8 million during the three months ended September 30, 2021, primarily due to bea $23.5 million increase in core retail and business deposits, partially offset by a ~~strong financial~~$7.2 million decrease in retail certificates of deposit.

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Net interest income increased by $255,000 for the quarter ended September 30, 2021 due to higher yields on loans and ~~operational condition.~~ leases increased commercial line utilization, and revenues related to PPP loan forgiveness. Interest expense decreased by $4,000 for the quarter ended September 30, 2021 primarily due to a reduction in the cost of deposits.

Noninterest income decreased by $52,000 primarily due to reduced trust and insurance revenues, and other revenues notwithstanding increases in deposit services charges and commercial mortgage banking fees. Noninterest expenses decreased $75,000 due to decreased occupancy and supplies expense, offset by increased compensation for commercial finance, equipment finance and multi-family real estate loan personnel and higher information technology expenses.

The ~~Company had a Tier 1 leverage ratio of 10.66% and a Tier 1 risk-based capital ratio of 17.84%. Our~~Company’s ratio of nonperforming loans to total loans was ~~0.22% and the~~0.06% at September 30, 2021. Nonperforming commercial-related loans represented 0.03% of total commercial-related loans at September 30, 2021. The ratio of nonperforming assets to total assets was ~~0.15%. The Company’s subsidiary, BankFinancial NA, had 28.3% of total assets in cash deposited~~0.10% at ~~the Federal Reserve Bank and other insured depository institutions. We believe the Company continues to be prepared for the economic and social consequences of the COVID-19 global pandemic.~~

~~Pandemic Operational Status~~

Beginning in the third quarter of 2020, we restored walk-in branch service hours for limited periods and modestly expanded drive-in hours for certain branch offices to accommodate customer service needs at peak periods. We implemented enhanced health safety protocols in all branch facilities for which we restored walk-in branch services. As of September 30, ~~2020, two branch offices remain closed as we consolidated the customer service capabilities of these facilities with another nearby branch location.~~

~~Loan Composition & Activity~~

Our loan portfolio continues to benefit from its inherent diversity of credit exposures and geographic distribution. Consistent with our long-standing asset allocation principles, we have no material exposure to the hospitality (hotels or restaurants/franchises), oil and gas production, or travel/leisure industries. We have no exposure to direct construction lending or leveraged loans. We have limited exposure to residential mortgages and consumer loans. Our principle of lending based on “essential-use” assets and industries, such as affordable multi-family housing, health care and within a broadly-diversified range of large corporations and governments, has so far resulted in a loan portfolio that could prove to be resilient in terms of asset quality performance.

In the third quarter of 2020, total loans declined by $15.9 million (1.5%) compared to June 30, 2020. Commercial loan and lease finance balances increased by $5.0 million (1.3%) as growth in Equipment Finance originations offset reductions in commercial line of credit balances and scheduled principal amortizations in the Equipment Finance portfolio. Total equipment finance originations were $58.9 million in the third quarter of 2020, compared to $18.0 million in the second quarter of 2020, primarily due to substantial growth in government and middle market commercial equipment and software finance transactions. Line of credit usage by healthcare providers remains at historically low levels, as providers continued to receive substantial additional liquidity from Medicare reimbursement advances and other sources, and most line of credit borrowers chose to pay down credit exposures to the maximum extent possible. Multi-family residential mortgage loans decreased by $13.8 million (2.6%) primarily due to prepayment activity related to project sales and external refinance activity. Nonresidential real estate mortgage loans declined by $3.1 million (2.4%) primarily due to scheduled principal amortization.

~~U.S. Small Business Administration Paycheck Protection Program (PPP)~~

We originated ten loans for $135,000 pursuant to the U.S. Small Business Administration Paycheck Protection Program ("PPP") in the third quarter of 2020. Due to the uncertainties concerning the PPP, borrower demand for PPP loans declined each month during the second and third quarters of 2020. At September 30, 2020, we had 310 PPP loans with $11.0 million in outstanding principal balance. We focused our PPP loan origination capabilities on new and existing small business deposit customers, resulting in an average loan origination amount of approximately $35,000. On October 8, 2020, the SBA announced that PPP loans of $50,000 or less would be eligible for a streamlined loan forgiveness process. As of September 30, 2020, we had 168 PPP loans for a total of $3.2 million with balances of $50,000 or less eligible for streamlined forgiveness, of which 41 loans totaling $678,000 had completed PPP Loan Forgiveness Applications submitted to the SBA.

In anticipation of further extensions and enhancements to the PPP, we implemented a technology solution to automate the processing of PPP loans. We also implemented a technology solution to automate the processing of requests for forgiveness of PPP loans not forgiven by operation of law. As of September 30, 2020, we submitted 57 completed Loan Forgiveness Applications for a total of $2.4 million to the SBA PPP Loan Forgiveness Portal. As of October 23, 2020, the SBA had processed and paid 16 PPP Loan Forgiveness Applications, totaling approximately $388,000 in principal.

~~COVID-19 Loan Forbearance Program~~

Section 4013 of the CARES Act provides that a qualified loan modification is exempt by law from classification as a Troubled Debt Restructuring pursuant to GAAP. In addition, OCC Bulletin 2020-35 provides more limited circumstances in which a loan modification is not subject to classification as a Troubled Debt Restructuring. Pursuant to these new capabilities, we developed several loan forbearance programs in the first half of 2020 to assist borrowers with managing cash flows disrupted due to COVID-19.

Our Apartment and Commercial Real Estate Qualified Limited Forbearance Program permits borrowers who qualify under Section 4013 of the CARES Act to make an election to pay scheduled interest and escrow payments (if applicable) for a four-month period beginning in April, 2020, and pay all deferred principal payments by December 2020. As of September 30, 2020, 104 borrowers with $90.0 million in total outstanding balances executed a Qualified Limited Forbearance Program Agreement. At September 30, 2020, 23 borrowers had paid all deferred amounts owed. The remaining 81 borrowers owe approximately $458,000 in deferred principal payments which are scheduled for payment in full by December 31, 2020.

For small investment property owners with loan balances under $750,000, the borrower could elect to defer the May 2020 loan payment entirely, with all deferred interest amounts due by December, 2020 and all deferred principal amounts due by June 30, 2021. As of September 30, 2020, 40 borrowers with $12.3 million in outstanding principal balances executed to a Small Investment Property Limited Forbearance Program Agreement. At September 30, 2020, ten borrowers had paid all deferred amounts owed. The remaining 30 borrowers owe approximately $139,000 of deferred payments, of which $97,000 is scheduled for payment by December 31, 2020 and $42,000 is scheduled for payment by June 30, 2021.

CARES Act Section 4013 and OCC Bulletin 2020-35 forbearance agreements are available to qualified commercial loan and commercial finance borrowers, and to commercial equipment lessees. As of September 30, 2020, we had no commercial loan borrowers subject to any form of forbearance agreement. As of September 30, 2020, there were 25 commercial equipment lease obligations with $9.2 million in outstanding principal balances subject to a forbearance agreement which extended the maturity and re-amortized the principal over the remaining term with a weighted average maturity of 33 months. As of September 30, 2020, all lessees subject to re-amortization were current on all required payments.

~~Owner-Occupied Residential Mortgage & Consumer Loans~~

For residential mortgage and consumer loans, CARES Act Section 4013 or OCC Bulletin 2020-35 forbearance agreements are available to qualified borrowers. As of September 30, 2020, we had ten borrowers with $1.4 million in outstanding principal balances subject to a forbearance agreement with terms consistent with secondary residential mortgage market standards established by Fannie Mae. As of September 30, 2020, there were approximately $11,000 of deferred payments of which $4,000 is scheduled for payment by December 31, 2020 and $7,000 is scheduled for payment by June 30, 2021.

~~Asset Quality~~

Our nonperforming loans to total loans ratio was 0.22% as of September 30, 2020. We placed one Chicago nonresidential real estate loan in the amount of $1.6 million on nonaccrual status during the third quarter of 2020, due to our decision to commence receivership proceedings based on the borrower’s unauthorized material alteration of the collateral; however, the borrower expects to repay the loan in full prior to the November, 2020 effective date of the receivership. Past due loan balances, including payments due on any loan or leases subject to a forbearance agreement, continued to remain nominal; however, these trends could change based on the pace of economic recovery from the COVID-19 pandemic and based on any further fiscal stimulus, if any, from the U.S. Government in the future.

~~Allowance for Loan Losses~~

Our allowance for loan losses ~~("ALLL") decreased~~was 0.65% of total loans as of September 30, 2021. The allowance for losses on loans and leases increased by ~~$145,000 (1.8%), compared to an increase of $44,000 for the quarter ended June 30, 2020,~~$38,000, primarily due to the ~~decline~~increase in ~~lessor line of credit balances, partially offset by continued precautionary increases~~required reserves due to growth in ~~the loan loss reserve ratios for multi-family residential and nonesidential real estate loans. As of September 30, 2020, the required reserve ratios for multi-family residential real estate~~commercial loans and ~~nonresidential real estate loans increased by 21.5%, and 58.2%, respectively, compared to December 31, 2019.~~

If our loan balances increase as business and liquidity conditions normalize for our health care borrowers, and as equipment finance and commercial loan and finance originations return to their previously expected levels, we expect that we will experience additional increases to the ALLL. Additionally, should economic conditions worsen due to the broad impacts of the COVID-19 pandemic, further increases in required reserve ratios for certain loan types may also require an increase in the ALLL.

~~Table of Contents~~

~~Deposit Portfolio Composition & Activity~~

Our deposit portfolio composition consists almost entirely of core transaction accounts, including local retail and business money market deposit accounts, and local retail certificates of deposit accounts. In the third quarter of 2020, total deposits increased by $14.1 million (1.0%), net of a $11.3 million reduction in wholesale deposit balances. Core transaction account balances increased by $53.5 million during the third quarter of 2020 and $218.2 million since December 31, 2019, primarily due to the continuing impacts of multiple COVID-19 U.S. Government fiscal stimulus programs and reductions in personal and business spending by depositors. We also note that the delays enacted for federal and state tax reporting and remittances also deferred seasonal deposit withdrawal activities which typically occur earlier in the calendar year. For the remainder of 2020, we expect greater volatility in deposit balances, as various forms of government stimulus provide additional liquidity to depositors, but in most cases this liquidity may also be consumed to pay current or past due obligations. Given our substantial liquidity, we expect to maintain a moderate competitive posture for interest-bearing deposits, particularly certificates of deposit, with pricing flexibility reserved for our most valuable overall deposit relationships.

~~Net Interest Income and Noninterest Income~~leases.

The ~~abrupt decline in interest rates~~Company’s capital position remained strong, with a Tier 1 leverage ratio of 9.45% at September 30, 2021. The Company repurchased 744,587 of its common shares during the first quarter of 2020 not only reduced interest income on floating-rate commercial loans and liquidity assets, but it also reduced competitive pressures and depositor expectations concerning deposit interest rates. Because of the need to maintain higher levels of liquidity and delays in business investment activity due to COVID-19 disruptions, some further compression of our net interest margin is foreseeable through year-end, but a sustained recovery in business conditions should enable us to continue to deploy our expanded asset generation resources and thus reallocate some of our excess liquidity.

~~The average yield on our loan and lease portfolio for~~ the quarter ended September 30, ~~2020 was 4.43%, compared to an average loan and lease portfolio yield of 4.57% for the quarter ended June 30, 2020.~~2021. The average cost of retail and commercial deposits decreased to 0.48% for the quarter ended September 30, 2020, compared to an average cost of 0.63% for the quarter ended June 30, 2020. The average cost of wholesale deposits and borrowings declined to 2.22% for the quarter ended September 30, 2020. Our net interest margin decreased to 2.85% for the quarter ended September 30, 2020, compared to 3.09% for the quarter ended June 30, 2020.

For the third quarter of 2020, noninterest income was $1.3 million, compared to $1.2 million in the second quarter of 2020. Noninterest income improved slightly in the third quarter of 2020 as the impact of “Stay-At-Home” orders on use of card-based payments for retail sales and on commercial mortgage brokerage activity began to recover. Changes in the market return of trust assets caused a slight reduction in wealth management and trust income. Due to the abrupt change in market interest rates in the first quarter, income on our bank-owned life insurance portfolio remained at significantly reduced levels. We expect to see some continued gradual improvement in consumer spending, trust and wealth management income, and commercial real estate brokerage fees as these market-based opportunities commensurate with the reduction of uncertainties in consumer incomes, commercial real estate rental collections and debt/equity market investments return potential.

~~Noninterest Expense~~

Current market conditions favor a focus on expense reductions where feasible; however, our Business Plan requires investment in personnel and marketing resources to achieve our growth objectives in our loan and lease portfolios, and noninterest income for Commercial Mortgage Banking and Trust Services. Accordingly, we will seek to leverage cost savings from improved efficiencies in customer service delivery and reduction of legacy card-based transaction assets such as ATM/debit cards and machines to help offset declines in interest income, and preserve our ability to realize our business generation priorities.

Noninterest expense increased to $9.8 million for the quarter ended September 30, 2020 compared to the quarter ended June 30, 2020. Compensation and benefits increased by $230,000, compared to the quarter ended June 30, 2020, including $100,000 of employee severance accruals, $100,000 for branch employee pandemic service recognition payments and $13,000 for additional security related to civil unrest in the Chicago metropolitan area. Occupancy expenses increased by $137,000 due to extensive cleaning activities for branch and corporate facilities. Information technology expenses decreased slightly due to the renegotiation of technology contracts and completion of improvements in our information security and network capacities. Despite increased expenses for health safety and other COVID-19 protections and responses, other expenses remained well-contained, as we curtailed marketing expenses and other discretionary expenses to improve efficiencies.

~~Capital Management~~

~~The decline in the~~ Company’s ~~share price to below~~ tangible book value ~~should create an opportunity to enhance shareholder value through highly accretive~~per common share repurchases, absent the imposition of regulatory limitations or the existence of higher priority capital needs. We also intend to continue to pursue acquisition opportunities that meet our established parameters, if executable under current market conditions.

~~We repurchased 66,000 shares at an average cost of $7.82 during the third quarter of 2020. Our tangible book value~~ increased to ~~$11.63~~$11.83 per share at September 30, 2020 from $11.58 at June 30, 2020. At September 30, 2020, we had 89,127 shares available for repurchase in our share repurchase program. The current share repurchase authorization will expire on October 31, 2020, unless extended.2021.

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SELECTED FINANCIAL DATA

The following summary information is derived from the consolidated financial statements of the Company. For additional information, reference is made to the Consolidated Financial Statements of the Company and related notes included elsewhere in this Quarterly Report.

	September 30, 2020		December 31, 2019		Change			September 30, 2021		December 31, 2020		Change
	(In thousands)							(In thousands)
Selected Financial Condition Data:
Total assets	$	1,604,943	$	1,488,015	$	116,928		$	1,660,142	$	1,596,842	$	63,300
Loans, net		1,065,892		1,168,008		(102,116	)		1,047,056		1,002,578		44,478
Securities, at fair value		42,048		60,193		(18,145	)		14,693		23,829		(9,136	)
Other real estate owned, net		110		186		(76	)
Foreclosed assets, net									1,049		157		892
Deposits		1,402,244		1,284,757		117,487			1,454,389		1,393,544		60,845
Borrowings		4,000		61		3,939			5,000		4,000		1,000
Subordinated Notes, net of unamortized issuance costs									19,578		—		19,578
Equity		172,397		174,372		(1,975	)		158,173		172,930		(14,757	)

	Three Months Ended									Nine Months Ended							Three Months Ended									Nine Months Ended
	September 30,									September 30,							September 30,									September 30,
	2020			2019			Change			2020		2019		Change			2021			2020			Change			2021			2020		Change
	(In thousands)																(In thousands)
Selected Operating Data:
Interest income	$	12,485		$	16,628		$	(4,143	)	$	40,332	$	49,676	$	(9,344	)	$	11,748		$	12,485		$	(737	)	$	34,493		$	40,332	$	(5,839	)
Interest expense		1,488			3,386			(1,898	)		6,041		10,112		(4,071	)		718			1,488			(770	)		2,108			6,041		(3,933	)
Net interest income		10,997			13,242			(2,245	)		34,291		39,564		(5,273	)		11,030			10,997			33			32,385			34,291		(1,906	)
Provision for (recovery of) loan losses		(187	)		(134	)		(53	)		326		3,736		(3,410	)
Net interest income after provision for (recovery of) loan losses		11,184			13,376			(2,192	)		33,965		35,828		(1,863	)
(Recovery of) provision for loan losses																		(6	)		(187	)		181			(1,019	)		326		(1,345	)
Net interest income after (recovery of) provision for loan losses																		11,036			11,184			(148	)		33,404			33,965		(561	)
Noninterest income		1,264			1,474			(210	)		3,825		4,524		(699	)		1,374			1,264			110			4,058			3,825		233
Noninterest expense		9,787			9,509			278			28,664		29,079		(415	)		10,166			9,787			379			30,594			28,664		1,930
Income before income tax expense		2,661			5,341			(2,680	)		9,126		11,273		(2,147	)
Income before income taxes																		2,244			2,661			(417	)		6,868			9,126		(2,258	)
Income tax expense		713			1,417			(704	)		2,408		2,991		(583	)		600			713			(113	)		1,829			2,408		(579	)
Net income	$	1,948		$	3,924		$	(1,976	)	$	6,718	$	8,282	$	(1,564	)	$	1,644		$	1,948		$	(304	)	$	5,039		$	6,718	$	(1,679	)

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	Three Months Ended						Nine Months Ended						Three Months Ended						Nine Months Ended
	September 30,						September 30,						September 30,						September 30,
	2020			2019			2020			2019			2021			2020			2021			2020
Selected Financial Ratios and Other Data:
Performance Ratios:
Return on assets (ratio of net income to average total assets) ⁽¹⁾		0.49	%		1.05	%		0.58	%		0.72	%		0.40	%		0.49	%		0.41	%		0.58	%
Return on equity (ratio of net income to average equity) ⁽¹⁾		4.50			9.04			5.15			6.20			4.05			4.50			3.99			5.15
Average equity to average assets		10.83			11.59			11.34			11.68			9.79			10.83			10.34			11.34
Net interest rate spread ^{(1) (2)}		2.69			3.38			2.91			3.34			2.68			2.69			2.70			2.91
Net interest margin ^{(1) (3)}		2.85			3.67			3.12			3.63			2.75			2.85			2.77			3.12
Efficiency ratio ⁽⁴⁾		79.82			64.62			75.20			65.96			81.96			79.82			83.95			75.20
Noninterest expense to average total assets ⁽¹⁾		2.45			2.54			2.49			2.54			2.45			2.45			2.50			2.49
Average interest-earning assets to average interest-bearing liabilities		141.40			131.18			137.45			131.57			138.97			141.40			140.45			137.45
Dividends declared per share	$	0.10		$	0.10		$	0.30		$	0.30		$	0.10		$	0.10		$	0.30		$	0.30
Dividend payout ratio		76.13	%		39.18	%		67.04	%		57.12	%		83.58	%		76.13	%		85.21	%		67.04	%

	At September 30, 2020			At December 31, 2019			At September 30, 2021			At December 31, 2020
Asset Quality Ratios:
Nonperforming assets to total assets ⁽⁵⁾		0.15	%		0.07	%		0.10	%		0.09	%
Nonperforming loans to total loans		0.22			0.07			0.06			0.12
Allowance for loan losses to nonperforming loans		343.08			901.06			1,067.34			634.81
Allowance for loan losses to total loans		0.75			0.65			0.65			0.77
Capital Ratios:
Equity to total assets at end of period		10.74	%		11.72	%		9.53	%		10.83	%
Tier 1 leverage ratio (Bank only)		10.13	%		10.89	%		10.00	%		10.10	%
Other Data:
Number of full-service offices		19			19			19			19
Employees (full-time equivalents)		210			222			224			210

⁽¹⁾	Ratios annualized.

⁽²⁾	The net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities for the period.

⁽³⁾	The net interest margin represents net interest income divided by average total interest-earning assets for the period.

⁽⁴⁾	The efficiency ratio represents noninterest expense, divided by the sum of net interest income and noninterest income.

⁽⁵⁾	Nonperforming assets include nonperforming loans and ~~other real estate owned.~~foreclosed assets.

Comparison of Financial Condition at September 30, ~~2020~~2021 and December 31, ~~2019~~2020

Total assets increased ~~$ 116.9~~$63.3 million, or ~~7.9%~~4.0%, to ~~$1.605~~$1.660 billion at September 30, ~~2020,~~2021, from ~~$1.488~~$1.597 billion at December 31, ~~2019.~~2020. The increase in total assets was primarily due to ~~an increase~~increases in cash and cash equivalents ~~which was partially offset by a decrease in~~and loans receivable. Cash and cash equivalents increased ~~$ 239.3~~$25.1 million ~~or 125.8%,~~ to ~~$429.7~~$528.6 million at September 30, ~~2020,~~2021, from ~~$190.3~~$503.5 million at December 31, ~~2019.~~2020. Loans ~~decreased $102.1~~receivable increased $44.5 million, or ~~8.7%~~4.4%, to ~~$1.066~~$1.047 billion at September 30, ~~2020,~~2021, from ~~$1.168~~$1.003 billion at December 31, ~~2019.~~2020.

Our loan portfolio consists primarily of investment and business loans (multi-family, nonresidential real estate, and commercial loans and leases), which together totaled ~~95.7%~~96.8% of gross loans at September 30, ~~2020.~~2021. During the nine months ended September 30, ~~2020, multi-family loans decreased by $ 40.9 million, or 7.3%;~~2021, commercial loans and leases ~~decreased~~increased by ~~$ 38.7~~$78.6 million, or ~~9.3%; and nonresidential real estate loans decreased $ 10.2 million, or 7.6%~~19.4%. The ~~decrease~~increase in ~~multi-family~~commercial loans and leases was primarily due to a ~~significant amount~~$56.4 million increase in government equipment finance balances, $33.2 million increase in middle market and small ticket equipment finance balances, and $17.8 million increase in lessor finance lines of ~~loan prepayments.~~credit balances, partially offset by a decrease of $26.1 million in corporate equipment finance balances. Nonresidential real estate loans decreased $8.2 million, or 7.5%, and multi-family real estate loans decreased by $16.6 million, or 3.7%.

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Our primary lending area for regulatory purposes consists of the counties in the State of Illinois where our branch offices are located, and contiguous counties. We currently derive the most significant portion of our revenues from these geographic areas. We also engage in multi-family mortgage lending activities in carefully selected metropolitan areas outside our primary lending area, and we engage in certain types of commercial lending and ~~leasing~~commercial equipment finance activities on a nationwide basis. At September 30, ~~2020, $222.8~~2021, $229.2 million, or ~~42.6%~~52.6%, of our multi-family mortgage loans were in the Metropolitan Statistical Area for Chicago, Illinois; ~~$63.9~~$88.4 million, or ~~12.2%~~20.3%, were in ~~the Metropolitan Statistical Area for Dallas,~~ Texas; ~~$46.9~~$35.6 million, or ~~9.0%~~8.2%, were in ~~the Metropolitan Statistical Area for Denver,~~ Colorado; ~~$29.1~~and $43.0 million, or ~~5.6%~~9.9%, were in the Metropolitan Statistical Area for Tampa, Florida; $28.3 million, or 5.4%, were in the Metropolitan Statistical Area for Greenville-Spartanburg, South Carolina; $21.4 million, or 4.1%, were in the Metropolitan Statistical Area for San Antonio, Texas; and $16.4 million, or 3.1%, were in the Metropolitan Statistical Area for Minneapolis, Minnesota.Florida. This information reflects the location of the collateral for the loan and does not necessarily reflect the location of the ~~borrower.~~borrowers.

Total liabilities increased ~~$ 118.9~~$78.1 million, or ~~9.1%~~5.5%, to ~~$1.433~~$1.502 billion at September 30, ~~2020,~~2021, from ~~$1.314~~$1.424 billion at December 31, ~~2019, primarily~~2020, due to an increase in total ~~deposits.~~deposits and our issuance of $20.0 million of Subordinated Notes in April of 2021. Total deposits increased ~~$ 117.5~~$60.8 million, or ~~9.1%~~4.4%, to ~~$1.402~~$1.454 billion at September 30, ~~2020,~~2021, from ~~$1.285~~$1.394 billion at December 31, ~~2019.~~2020. Interest-bearing NOW accounts increased $55.3 million, or 16.4%, to $392.3 million at September 30, 2021, from $337.0 million at December 31, 2020. Money market accounts increased $22.1 million, or 7.4%, to $319.9 million at September 30, 2021, from $297.8 million at December 31, 2020. Savings accounts increased $17.2 million, or 9.6%, to $196.8 million at September 30, 2021, from $179.6 million at December 31, 2020. Noninterest-bearing demand deposits increased ~~$118.2~~$2.0 million, or ~~56.1%~~0.6%, to ~~$ 328.9~~$328.2 million at September 30, ~~2020,~~2021, from ~~$ 210.8~~$326.2 million at December 31, 2019 and interest-bearing NOW accounts increased $43.8 million, or 16.0%, to $ 317.0 million at September 30, 2020, from $ 273.2 million at December 31, 2019. Money market accounts increased $37.6 million, or 15.3%, to $ 283.2 million at September 30, 2020, from $ 245.6 million at December 31, 2019. Savings accounts increased $18.6 million, or 12.1%, to $ 171.8 million at September 30, 2020, from $ 153.2 million at December 31, 2019.2020. Retail certificates of deposit decreased ~~$61.1~~$32.5 million, or ~~18.1%~~13.2%, to ~~$ 275.9~~$213.3 million at September 30, ~~2020,~~2021, from ~~$ 336.9~~$245.8 million at December 31, ~~2019. Wholesale~~2020 and wholesale certificates of deposit decreased ~~$39.6~~$3.2 million, or ~~60.8%~~45.0%, to ~~$ 25.5~~$3.9 million at September 30, ~~2020,~~2021, from ~~$ 65.1~~$7.2 million at December 31, ~~2019.~~2020. Core deposits (which consists of savings, money market, noninterest-bearing demand and NOW accounts) represented ~~78.5%~~85.1% of total deposits at September 30, ~~2020,~~2021, compared to ~~68.7%~~81.8% at December 31, ~~2019.~~2020. Borrowings increased ~~$3.9 million in May 2020, as the Bank borrowed $4.0~~by $1.0 million from the FHLB, by obtaining a FHLB advance of $5.0 million at zero percent interest rate for a ~~one year term.~~one-year term in May 2021.

Total stockholders’ equity was ~~$172.4~~$158.2 million at September 30, ~~2020,~~2021, compared to ~~$174.4~~$172.9 million at December 31, ~~2019.~~2020. The decrease in total stockholders’ equity was primarily due to our repurchase of ~~453,836~~1,395,632 shares of our common stock during the nine months ended September 30, ~~2020~~2021 at a total cost of ~~$ 4.2~~$15.4 million, and our declaration and payment of cash dividends totaling ~~$ 4.5~~$4.3 million during the same period. These reductions in total stockholders’ equity were partially offset by the net income of ~~$ 6.7~~$5.0 million that the Company recorded for the nine months ended September 30, ~~2020.~~2021.

Operating Results for the Three Months Ended September 30, ~~2020~~2021 and ~~2019~~2020

Net Income. Net income was $1.6 million for the three months ended September 30, 2021, compared to $1.9 million for the three months ended September 30, ~~2020, compared to $3.9 million for the three months ended September 30, 2019.~~2020. Earnings per basic and fully diluted share of common stock were $0.12 for the three months ended September 30, 2021, compared to $0.13 for the three months ended September 30, ~~2020, compared to $0.26 for the three months ended September 30, 2019.~~2020.

Net Interest Income. Net interest income was ~~$ 11.0~~$11.0 million for the three months ended September 30, ~~2020, compared to $ 13.2 million for the three months ended~~2021 and September 30, ~~2019. The decrease in net interest~~2020. Interest income ~~reflected a $4.1 million, or 24.9%, decrease in interest income, partially~~decreased $737,000, which was offset by a ~~$1.9 million~~$770,000 decrease in interest expense.

The ~~decrease in interest income was due in substantial part to a decrease in the~~ average yield on interest-earning assets ~~which~~decrease was ~~partially~~ offset by a decrease in the cost of interest-bearing liabilities and ~~a decrease~~an increase in total average ~~interest-bearing liabilities.~~interest-earning assets. Loan interest income for the three months ended September 30, 2021 includes amortized fees of $329,000 from SBA Paycheck Protection Program loans. We recorded prepayment income of $208,000 for the three months ended September 30, 2021, compared to $88,000 for the same period in 2020. The yield on interest-earning assets decreased ~~137~~31 basis points to 2.93% for the three months ended September 30, 2021, from 3.24% for the three months ended September 30, ~~2020, from 4.61%~~2020. The cost of interest-bearing liabilities decreased 30 basis points to 0.25% for the three months ended September 30, ~~2019. The cost of interest-bearing liabilities decreased 68 basis points to~~2021, from 0.55% ~~for the three months ended September 30, 2020, from 1.23%~~ for the same period in ~~2019.~~2020. Total average interest-earning assets increased ~~$103.5~~$58.2 million, or ~~7.2%~~3.8%, to ~~$1.534~~$1.592 billion for the three months ended September 30, ~~2020,~~2021, from ~~$1.431~~$1.534 billion for the same period in ~~2019.~~2020. Total average interest-bearing liabilities ~~decreased $5.6~~increased $60.8 million, or ~~0.5%~~5.6%, to ~~$1.085~~$1.146 billion for the three months ended September 30, ~~2020,~~2021, from ~~$1.091~~$1.085 billion for the same period in ~~2019.~~2020. The increase in interest-bearing liabilities is partly attributable to the Company's issuance of $20.0 million of Subordinated Notes in April of 2021. Our net interest rate spread decreased by 69one basis ~~points~~point to ~~2.69%~~2.68% for the three months ended September 30, ~~2020,~~2021, from ~~3.38%~~2.69% for the same period in ~~2019.~~2020. Our net interest margin decreased by 82ten basis points to ~~2.85%~~2.75% for the three months ended September 30, ~~2020,~~2021, from ~~3.67%~~2.85% for the same period in ~~2019.~~2020.

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Average Balance Sheets

The following table sets forth average balance sheets, average yields and costs, and certain other information. No tax-equivalent yield adjustments were made, as the effect of these adjustments would not be material. Average balances are daily average balances. Nonaccrual loans are included in the computation of average balances, but have been reflected in the table as loans carrying a zero yield. The yields set forth below include the effect of deferred fees and expenses and discounts and premiums that are amortized or accreted to interest income or expense.

	For the Three Months Ended September 30,																For the Three Months Ended September 30,
	2020								2019								2021								2020
	Average Outstanding Balance			Interest		Yield/Rate (1)			Average Outstanding Balance			Interest		Yield/Rate (1)			Average Outstanding Balance			Interest		Yield/Rate ⁽¹⁾			Average Outstanding Balance			Interest		Yield/Rate ⁽¹⁾
	(Dollars in thousands)																(Dollars in thousands)
Interest-earning assets:
Loans	$	1,080,521		$	12,027		4.43	%	$	1,239,774		$	15,371		4.92	%	$	1,045,586		$	11,389		4.32	%	$	1,080,521		$	12,027		4.43	%
Securities		52,265			183		1.39			78,221			508		2.58			16,915			46		1.08			52,265			183		1.39
Stock in FHLB and FRB		7,490			87		4.62			7,490			86		4.56			7,490			85		4.50			7,490			87		4.62
Other		394,048			188		0.19			105,345			663		2.50			522,491			228		0.17			394,048			188		0.19
Total interest-earning assets		1,534,324			12,485		3.24			1,430,830			16,628		4.61			1,592,482			11,748		2.93			1,534,324			12,485		3.24
Noninterest-earning assets		64,824								67,550								65,380								64,824
Total assets	$	1,599,148							$	1,498,380							$	1,657,862							$	1,599,148
Interest-bearing liabilities:
Savings deposits	$	169,989			27		0.06		$	151,523			115		0.30		$	196,551			30		0.06		$	169,989			27		0.06
Money market accounts		274,160			163		0.24			241,180			562		0.92			327,029			117		0.14			274,160			163		0.24
NOW accounts		310,024			121		0.16			268,742			301		0.44			377,169			132		0.14			310,024			121		0.16
Certificates of deposit		326,956			1,177		1.43			428,151			2,407		2.23			220,565			241		0.43			326,956			1,177		1.43
Total deposits		1,081,129			1,488		0.55			1,089,596			3,385		1.23			1,121,314			520		0.18			1,081,129			1,488		0.55
Borrowings		4,000			—		—			1,170			1		0.34
Borrowings and Subordinated Notes																		24,573			198		3.20			4,000			—		—
Total interest-bearing liabilities		1,085,129			1,488		0.55			1,090,766			3,386		1.23			1,145,887			718		0.25			1,085,129			1,488		0.55
Noninterest-bearing deposits		314,965								208,279								321,417								314,965
Noninterest-bearing liabilities		25,788								25,637								28,197								25,788
Total liabilities		1,425,882								1,324,682								1,495,501								1,425,882
Equity		173,266								173,698								162,361								173,266
Total liabilities and equity	$	1,599,148							$	1,498,380							$	1,657,862							$	1,599,148
Net interest income				$	10,997							$	13,242							$	11,030							$	10,997
Net interest rate spread ⁽²⁾							2.69	%							3.38	%							2.68	%							2.69	%
Net interest-earning assets ⁽³⁾	$	449,195							$	340,064							$	446,595							$	449,195
Net interest margin ⁽⁴⁾							2.85	%							3.67	%							2.75	%							2.85	%
Ratio of interest-earning assets to interest-bearing liabilities		141.40	%							131.18	%							138.97	%							141.40	%

⁽¹⁾	Annualized.

⁽²⁾	Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.

⁽³⁾	Net interest-earning assets represents total interest-earning assets less total interest-bearing liabilities.

⁽⁴⁾	Net interest margin represents net interest income divided by average total interest-earning assets.

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Provision for Loan Losses

We establish provisions for loan losses, which are charged to operations in order to maintain the allowance for loan losses at a level we consider necessary to absorb probable incurred credit losses in the loan portfolio. In determining the level of the allowance for loan losses, we consider past and current loss experience, evaluations of real estate collateral, current economic conditions, volume and type of lending, adverse situations that may affect a borrower’s ability to repay a loan and the levels of nonperforming and other classified loans. The amount of the allowance is based on estimates and the ultimate losses may vary from such estimates as more information becomes available or events change. We assess the allowance for loan losses on a quarterly basis and make provisions for loan losses in order to maintain the allowance.

A loan balance is classified as a loss and charged-off when it is confirmed that there is no readily apparent source of repayment for the portion of the loan that is classified as loss. Confirmation can occur upon the receipt of updated third-party appraisal valuation information indicating that there is a low probability of repayment upon sale of the collateral, the final disposition of collateral where the net proceeds are insufficient to pay the loan balance in full, our failure to obtain possession of certain consumer-loan collateral within certain time limits specified by applicable federal regulations, the conclusion of legal proceedings where the borrower’s obligation to repay is legally discharged (such as a Chapter 7 bankruptcy proceeding), or when it appears that further formal collection procedures are not likely to result in net proceeds in excess of the costs to collect.

We recorded a recovery of loan losses of ~~$187,000~~$6,000 for the three months ended September 30, ~~2020,~~2021, compared to a recovery of ~~$134,000~~loan losses of $187,000 for the same period in ~~2019.~~2020. The provision for, or recovery of, loan losses is a function of the allowance for loan loss methodology that we use to determine the appropriate level of the allowance for inherent loan losses after net charge-offs have been deducted. The portion of the allowance for loan losses that is attributable to loans collectively evaluated for impairment ~~decreased $165,000,~~increased $38,000, or ~~2.0%~~0.6%, to ~~$8.0~~$6.9 million at September 30, ~~2020~~2021, from ~~$8.2~~$6.8 million at June 30, ~~2020.~~2021. There were ~~$20,000~~$28,000 of reserves established for loans individually evaluated for impairment at September 30, 2021 and June 30, 2021. Net recoveries were $44,000 for the three months ended September 30, ~~2020,~~2021, compared to ~~no reserves established for loans individually evaluated for impairment for the three months ended September 30, 2019. Net~~net recoveries ~~were~~of $42,000 for the three months ended September 30, ~~2020, compared to net charge-offs of $87,000 for the three months ended September 30, 2019.~~2020.

The allowance for loan losses as a percentage of nonperforming loans was ~~343.08%~~1,067.34% at September 30, ~~2020,~~2021, compared to ~~457.43%~~775.68% at June 30, ~~2020 and 901.06 % at December 31, 2019.~~2021.

Noninterest Income

	Three Months Ended							Three Months Ended
	September 30,							September 30,
	2020		2019		Change			2021		2020		Change
	(Dollars in thousands)							(Dollars in thousands)
Deposit service charges and fees	$	833	$	983	$	(150	)	$	814	$	833	$	(19	)
Loan servicing fees		44		99		(55	)		140		44		96
Mortgage brokerage and banking fees		44		28		16			16		44		(28	)
Trust and insurance commissions and annuities income		222		198		24			263		222		41
Earnings on bank-owned life insurance		10		37		(27	)		31		10		21
Other		111		129		(18	)		110		111		(1	)
Total noninterest income	$	1,264	$	1,474	$	(210	)	$	1,374	$	1,264	$	110

Noninterest income ~~decreased $ 210,000,~~increased $110,000 to $1.4 million, or ~~14.2%~~8.7%, for the three months ended September 30, ~~2020 to $ 1.3 million,~~2021, compared to ~~$ 1.5~~$1.3 million for the same period in ~~2019.~~2020. Deposit service charges decreased ~~$150,000,~~$19,000, or ~~15.3%~~2.3%, primarily due to reduced non-sufficient funds ~~(“ NSF”)~~ returns charges, service charges and ~~negative balance fees.~~ATM service charges. Loan servicing fees increased $96,000 due to the collection of $125,000 loan commitment and letter of credit service fees. Mortgage brokerage and banking fees decreased ~~$55,000~~$28,000 due to payoffs and paydowns on serviced mortgage loans. Trust and insurance commissions and annuities income increased $41,000, or 18.5%, to $263,000 for the three months ended September 30, ~~2020, compared to the three months ended September 30, 2019. Earnings on bank-owned life insurance decreased by $27,000 to $10,000~~2021, from $222,000 for the three months ended September 30, 2020 due to ~~lower interest rates. Other income decreased $18,000, or 14.0%,~~increased assets under management. Earnings on bank-owned life insurance increased by $21,000 to ~~$111,000~~$31,000 for the three months ended September 30, ~~2020, compared to $129,000~~2021. Other noninterest income remained constant for the three months ended September 30, ~~2019.~~2021 and September 30, 2020.

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Noninterest Expense

	Three Months Ended								Three Months Ended
	September 30,								September 30,
	2020		2019			Change			2021		2020		Change
	(Dollars in thousands)								(Dollars in thousands)
Compensation and benefits	$	5,398	$	5,218		$	180		$	5,782	$	5,398	$	384
Office occupancy and equipment		1,860		1,879			(19	)		1,882		1,860		22
Advertising and public relations		135		182			(47	)		150		135		15
Information technology		781		892			(111	)		710		781		(71	)
Professional fees		307		213			94			311		341		(30	)
Supplies, telephone and postage		288		312			(24	)		382		288		94
Amortization of intangibles		6		13			(7	)		—		6		(6	)
Nonperforming asset management		57		17			40			6		57		(51	)
Operations of other real estate owned, net		23		19			4
Operations of foreclosed assets, net										81		23		58
FDIC insurance premiums		105		(127	)		232			125		105		20
Other		827		891			(64	)		737		793		(56	)
Total noninterest expense	$	9,787	$	9,509		$	278		$	10,166	$	9,787	$	379

Noninterest expense increased by ~~$278,000,~~$379,000, or ~~2.9%~~3.9%, to ~~$ 9.8~~$10.2 million for the three months ended September 30, ~~2020, from $ 9.5~~2021, compared to $9.8 million for the same period in ~~2019.~~2020. The increase in noninterest expense was due in substantial part to increases in compensation and ~~FDIC insurance~~benefits expense, office occupancy and equipment expense, advertising and public relations expense, supplies, telephone and postage expense, and expense for operations of foreclosed assets. These increases were partially offset by a decrease in information technology ~~expense.~~expense and professional fees. Compensation and benefits expense increased ~~$180,000,~~$384,000, or ~~3.4%~~7.1%; primarily due to an increase in full time equivalent employees (FTE's), from 224 at September 30, 2021, compared to 210 at September 30, 2020. Office occupancy and equipment increased $22,000, or 1.2%, primarily due to increased ~~payroll stemming~~rent expense and expense from ~~special performance compensation related to COVID-19 risk management and customer service activities in addition to severance accruals.~~depreciation of fixed assets. Information technology expense decreased ~~$111,000,~~$71,000, or ~~12.4%~~9.1%, to ~~$781,000~~$710,000 for the three months ended September 30, ~~2020,~~2021, from ~~$892,000~~$781,000 for the same period in ~~2019,~~2020, primarily due to the renegotiation of technology contracts as we continue to upgrade our ~~system~~systems and implement cybersecurity ~~prevention.~~measures. Professional fees decreased $30,000, or 8.8%, for the three months ended September 30, 2021, primarily due to less consulting projects at the Bank during the third quarter of 2021. Telephone expense increased $94,000 due to the upgrade and conversion of our telephone and data systems and the temporary need to operate concurrent systems. Expense from operations of foreclosed assets was $81,000 for the three months ended September 30, 2021, an increase from $23,000 over the same period in 2020, primarily due to the combined impact of the recording of a $55,000 valuation allowance of foreclosed assets, and a $22,000 loss on sales of foreclosed assets that we recorded for the three months ended September 30, 2021. Other noninterest expense decreased $56,000, or ~~44.1%~~7.1%, to ~~$307,000~~$737,000 for the three months ended September 30, 2021, from $793,000 for the three months ended September 30, 2020, from $213,000 for the same period in 2019, due in substantial part to several consulting projects at the Bank. FDIC insurance premiums increased $232,000, to $105,000 for the three months ended September 30, 2020, compared to a credit of $127,000 for the same period in 2019,primarily due to ~~the receipt of the FDIC's small bank assessment credit~~decreases in ~~third quarter 2019. Supplies~~losses due to fraud and ~~office occupancy expense included $219,000 in expenses related to civil unrest and COVID-19 for additional cleaning and sanitation costs that were incurred for infection control and prevention.~~ATM expenses.

Income Taxes

We recorded income tax expense of $600,000 for the three months ended September 30, 2021, compared to $713,000 for the three months ended September 30, ~~2020, compared to $1.4 million for the three months ended September 30, 2019.~~2020. Our combined state and federal effective tax rate for the three months ended September 30, ~~2020~~2021 was 26.7%, compared to 26.8% ~~versus an effective tax rate of 26.5%~~ for the three months ended September 30, ~~2019.~~2020. During the second quarter 2021, Illinois Senate Bill 2017 was passed which created a temporary limitation on Illinois net operating loss carryforward utilization. For tax years 2021, 2022, and 2023, corporations are limited to applying a maximum of $100,000 of Illinois net operating loss carryforwards to taxable income. Illinois net operating loss carryforwards that are limited during these years have an extended expiration date for the years in which they are limited. The extended expiration of the Company’s Illinois net operating loss carryforwards are from 2026 to 2028.

Operating Results for the Nine Months Ended September 30, ~~2020~~2021 and ~~2019~~2020

Net Income. ~~We had net~~Net income ofwas $5.0 million for the nine months ended September 30, 2021, compared to $6.7 million for the nine months ended September 30, ~~2020, compared to $8.3 million for the nine months ended September 30, 2019.~~2020. Earnings per basic and fully diluted share of common stock were $0.35 for the nine months ended September 30, 2021, compared to $0.45 for the nine months ended September 30, ~~2020, compared to $0.53 per basic and fully diluted share for the same period in 2019.~~2020.

Net Interest Income. Net interest income was ~~$ 34.3~~$32.4 million for the nine months ended September 30, ~~2020,~~2021, compared to ~~$ 39.6~~$34.3 million for the ~~same period in 2019.~~nine months ended September 30, 2020. The ~~$5.3 million~~ decrease in net interest income reflected a ~~$9.3~~$5.8 million, or ~~18.8%~~14.5%, decrease in interest income, partially offset by a ~~$4.1~~$3.9 million, or 65.1%, decrease in interest expense.

The decrease in net interest income was ~~primarily attributable~~due in substantial part to a decrease in the average yield on interest-earning assets, which was partially offset by an increase in total average interest-earning assets and a decrease in the cost of interest-bearing ~~liabilities and a decrease in total interest-bearing~~ liabilities. ~~The yield on interest-earning assets decreased 90 basis points, or 19.7%, to 3.66%~~Loan interest income for the nine months ended September 30, ~~2020,~~2021 included amortized fees of $682,000 from ~~4.56%~~SBA Paycheck Protection Program loans and $164,000 of interest that we recovered from a previously charged-off commercial loan. We recorded prepayment income of $485,000 for the nine months ended September 30, ~~2019.~~2021, compared to $396,000 for the same period in 2020. The ~~cost of interest-bearing liabilities~~yield on interest-earning assets decreased 4771 basis points to ~~0.75%~~2.95% for the nine months ended September 30, ~~2020,~~2021, from ~~1.22%~~3.66% for the same period in ~~2019.~~2020. The cost of interest-bearing liabilities decreased 50 basis points to 0.25% for the nine months ended September 30, 2021, from 0.75% for the same period in 2020. Total average interest-earning assets increased ~~$14.6~~$94.8 million, or ~~1.0%~~6.4%, to ~~$1.470~~$1.565 billion for the nine months ended September 30, ~~2020,~~2021, from ~~$1.456~~$1.470 billion for the same period in ~~2019. Our net interest rate spread decreased 43 basis points~~2020. Total average interest-bearing liabilities increased $44.7 million, or 4.2%, to ~~2.91%~~$1.114 billion for the nine months ended September 30, ~~2020,~~2021, from ~~3.34%~~$1.070 billion for the same period in ~~2019.~~2020. The increase in interest-bearing liabilities is attributable to the Company's issuance of $20.0 million of Subordinated Notes in April of 2021. Our net interest ~~margin~~rate spread decreased by 5121 basis points to ~~3.12%~~2.70% for the nine months ended September 30, ~~2020,~~2021, from ~~3.63%~~2.91% for the same period in ~~2019.~~2020. Our net interest margin decreased by 35 basis points to 2.77% for the nine months ended September 30, 2021, from 3.12% for the same period in 2020.

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Average Balance Sheets

	For the Nine Months Ended September 30,																For the Nine Months Ended September 30,
	2020								2019								2021								2020
	Average Outstanding Balance			Interest		Yield/Rate (1)			Average Outstanding Balance			Interest		Yield/Rate (1)			Average Outstanding Balance			Interest		Yield/Rate⁽¹⁾			Average Outstanding Balance			Interest		Yield/Rate ⁽¹⁾
	(Dollars in thousands)																(Dollars in thousands)
Interest-earning assets:
Loans	$	1,118,637		$	38,307		4.57	%	$	1,280,333		$	46,112		4.82	%	$	1,032,782		$	33,510		4.34	%	$	1,118,637		$	38,307		4.57	%
Securities		60,606			758		1.67			85,148			1,712		2.69			19,604			152		1.04			60,606			758		1.67
Stock in FHLB and FRB		7,490			259		4.62			7,713			278		4.82			7,490			255		4.55			7,490			259		4.62
Other		283,493			1,008		0.47			82,425			1,574		2.55			505,153			576		0.15			283,493			1,008		0.47
Total interest-earning assets		1,470,226			40,332		3.66			1,455,619			49,676		4.56			1,565,029			34,493		2.95			1,470,226			40,332		3.66
Noninterest-earning assets		64,689								68,565								65,358								64,689
Total assets	$	1,534,915							$	1,524,184							$	1,630,387							$	1,534,915
Interest-bearing liabilities:
Savings deposits	$	162,501			118		0.10		$	153,261			346		0.30		$	191,822			88		0.06		$	162,501			118		0.10
Money market accounts		260,314			829		0.43			246,879			1,703		0.92			319,302			338		0.14			260,314			829		0.43
NOW accounts		287,478			472		0.22			268,708			903		0.45			354,810			366		0.14			287,478			472		0.22
Certificates of deposit		357,182			4,622		1.73			431,965			7,071		2.19			231,622			948		0.55			357,182			4,622		1.73
Total deposits		1,067,475			6,041		0.76			1,100,813			10,023		1.22			1,097,556			1,740		0.21			1,067,475			6,041		0.76
Borrowings		2,144			—		—			5,501			89		2.16
Borrowings and Subordinated Notes																		16,771			368		2.93			2,144			—		—
Total interest-bearing liabilities		1,069,619			6,041		0.75			1,106,314			10,112		1.22			1,114,327			2,108		0.25			1,069,619			6,041		0.75
Noninterest-bearing deposits		265,928								214,512								321,641								265,928
Noninterest-bearing liabilities		25,372								25,364								25,886								25,372
Total liabilities		1,360,919								1,346,190								1,461,854								1,360,919
Equity		173,996								177,994								168,533								173,996
Total liabilities and equity	$	1,534,915							$	1,524,184							$	1,630,387							$	1,534,915
Net interest income				$	34,291							$	39,564							$	32,385							$	34,291
Net interest rate spread ⁽²⁾							2.91	%							3.34	%							2.70	%							2.91	%
Net interest-earning assets ⁽³⁾	$	400,607							$	349,305							$	450,702							$	400,607
Net interest margin ⁽⁴⁾							3.12	%							3.63	%							2.77	%							3.12	%
Ratio of interest-earning assets to interest-bearing liabilities		137.45	%							131.57	%							140.45	%							137.45	%

⁽¹⁾	~~Annualized~~Annualized.

⁽²⁾	Net interest rate spread represents the difference between the yield on average interest-earning assets and the cost of average interest-bearing liabilities.

⁽³⁾	Net interest-earning assets represents total interest-earning assets less total interest-bearing liabilities.

⁽⁴⁾	Net interest margin represents net interest income divided by average total interest-earning assets.

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Provision for Loan Losses

We recorded a recovery of loan losses of $1.0 million for the nine months ended September 30, 2021, compared to a provision for loan losses of $326,000 for the ~~nine months ended September 30, 2020, compared to a provision for loan losses of $3.7 million for the~~ same period in ~~2019.~~2020. The provision for, or recovery of, loan losses is a function of the allowance for loan loss methodology that we use to determine the appropriate level of the allowance for inherent loan losses after net charge-offs have been deducted. The portion of the allowance for loan losses that is attributable to loans collectively evaluated for impairment ~~increased $359,000,~~decreased $856,000, or ~~4.7%~~11.1%, to ~~$8.0~~$6.9 million at September 30, ~~2020,~~2021, from ~~$7.6~~$7.7 million at December 31, ~~2019.~~2020. There were ~~$20,000~~$28,000 of reserves established for loans individually evaluated for impairment at September 30, 2021 and at September 30, 2020. Net recoveries were $163,000 for the nine months ended September 30, ~~2020 and no reserves established for loans individually evaluated for impairment for the nine months ended September 30, 2019. Net~~2021, compared to net recoveries ~~were~~of $53,000 for the nine months ended September 30, 2020, compared to net charge-offs of $4.6 million for the same period in 2019. The decreases in net charge-offs and provision for loan losses were primarily due to the fact that our operating results for the nine months ended September 30, 2019 included a $4.4 million loss on the sale of a Chicago commercial credit exposure that experienced an unexpected deterioration in the second quarter of 2019. 2020.

The allowance for loan losses as a percentage of nonperforming loans was ~~343.08%~~1,067.34% at September 30, ~~2020,~~2021, compared to ~~901.06%~~634.81% at December 31, ~~2019.~~2020.

Noninterest Income

	Nine Months Ended									Nine Months Ended
	September 30,									September 30,
	2020			2019			Change			2021		2020		Change
	(Dollars in thousands)									(Dollars in thousands)
Deposit service charges and fees	$	2,456		$	2,887		$	(431	)	$	2,352	$	2,456	$	(104	)
Loan servicing fees		189			178			11			336		189		147
Mortgage brokerage and banking fees		84			77			7			33		84		(51	)
Gain on sale of equity securities		—			295			(295	)
Loss on disposal of other assets		(2	)		(19	)		17
Trust and insurance commissions and annuities income		728			627			101			880		728		152
Earnings on bank-owned life insurance		51			105			(54	)		82		51		31
Other		319			374			(55	)		375		317		58
Total noninterest income	$	3,825		$	4,524		$	(699	)	$	4,058	$	3,825	$	233

Noninterest income ~~decreased by $699,000,~~increased $233,000, or ~~15.5%~~6.1%, ~~to $3.8 million~~ for the nine months ended September 30, ~~2020,~~2021 to $4.1 million, compared to $3.8 million for the same period in 2020. Deposit service charges decreased $104,000, or 4.2%, due to lower non-sufficient funds returns charges and negative balance fees. Loan servicing fees increased $147,000, or 77.8%, due to the collection of commitment fees, letter of credit fees and a $61,000 release fee from ~~$4.5 million~~a corporate lessor. Mortgage brokerage and banking fees decreased $51,000 for the nine months ended September 30, 2019. Deposit service charges and fees decreased $431,000, or 14.9%, to $2.5 million for the nine months ended September 30, 2020, compared to $2.9 million for the nine months ended September 30, 2019, primarily2021, due to ~~reduced NSF return charges, Visa fees~~payoffs and ~~negative balance fees. We recorded a gain~~paydowns on ~~sale of equity securities for the nine months ended September 30, 2019 of $295,000.~~serviced mortgages loans. Trust and insurance commissions and annuities income increased ~~$101,000,~~$152,000, or ~~16.1%~~20.9%, to ~~$728,000~~$880,000 for the nine months ended September 30, ~~2020, compared to $627,000 for the nine months ended September 30, 2019. Earnings on bank-owned life insurance decreased $54,000 to $51,000~~2021, from $728,000 for the nine months ended September 30, 2020 due to ~~lower interest rates.~~increased assets under management. Earnings on bank-owned life insurance increased by $31,000 to $82,000 for the nine months ended September 30, 2021. Other income ~~decreased $55,000,~~increased $56,000, or ~~14.7%~~17.6%, to $375,000 for the nine months ended September 30, 2021, compared to $319,000 for the nine months ended September 30, 2020, ~~compared~~primarily due to ~~$374,000~~the receipt of $67,000 for the ~~nine months ended September 30, 2019.~~final dissolution of a low-income housing investment.

Table of Contents

Noninterest Expense

	Nine Months Ended							Nine Months Ended
	September 30,							September 30,
	2020		2019		Change			2021		2020		Change
	(Dollars in thousands)							(Dollars in thousands)
Compensation and benefits	$	16,084	$	16,128	$	(44	)	$	16,811	$	16,084	$	727
Office occupancy and equipment		5,383		5,348		35			5,971		5,383		588
Advertising and public relations		405		488		(83	)		525		405		120
Information technology		2,453		2,351		102			2,021		2,453		(432	)
Professional fees		831		757		74			1,024		943		81
Supplies, telephone and postage		875		1,037		(162	)		1,224		875		349
Amortization of intangibles		27		47		(20	)		7		27		(20	)
Nonperforming asset management		154		129		25			55		154		(99	)
Operations of other real estate owned, net		13		22		(9	)
Operations of foreclosed assets, net									366		13		353
FDIC insurance premiums		241		127		114			345		241		104
Other		2,198		2,645		(447	)		2,245		2,086		159
Total noninterest expense	$	28,664	$	29,079	$	(415	)	$	30,594	$	28,664	$	1,930

Noninterest expense ~~decreased~~increased by ~~$415,000,~~$1.9 million, or ~~1.4%~~6.7%, to ~~$28.7~~$30.6 million for the nine months ended September 30, ~~2020,~~2021, from ~~$29.1~~$28.7 million for the same period in ~~2019.~~2020. The ~~decrease~~increase in noninterest expense iswas due in substantial part to ~~decreases~~increases in compensation and benefits expense, office occupancy and equipment expense, advertising and public relations expense, professional fees, supplies, telephone and postage expense, expense for operations of foreclosed assets and other ~~noninterest expense,~~expense. These increases were partially offset ~~in part~~ by ~~an increase~~a decrease in information technology expense. Compensation and benefits expense ~~decreased $44,000,~~increased $727,000, or ~~0.3%, partially~~4.5% primarily due to ~~a decrease~~an increase in ~~full-time~~full time equivalent employees (FTE's). The increase in FTE's was primarily due to ~~210 at September 30, 2020 from 223 at September 31, 2019.~~staffing increases for commercial finance, multi-family lending and equipment finance originations and the restoration of services in certain branch offices that were reduced or suspended due to COVID-19. Office occupancy and equipment increased $588,000, or 10.9%, primarily due to increased rent expense, snow removal expense and expense related to COVID-19 cleaning and sanitation. Information technology expense ~~increased $102,000,~~decreased $432,000, or ~~4.3%~~17.6%, to ~~$2.5~~$2.0 million for the nine months ended September 30, ~~2020, compared to $2.4~~2021, from $2.5 million for the same period in ~~2019,~~2020, primarily due to ~~system upgrades~~the renegotiation of technology contracts as we continued to upgrade our systems and implement cybersecurity ~~prevention expenses.~~measures. Professional fees increased $81,000, or 8.6%, for the nine months ended September 30, 2021, primarily due to increases in audit and accounting fees and placement fees for staffing additions. Telephone expense increased $413,000 due to the upgrade and conversion of our telephone and data systems and the temporary need to operate concurrent systems. Operations of foreclosed assets increased to $366,000 for the nine months ended September 30, 2021, compared to $13,000 for the same period in 2020, primarily due to the recording of a $336,000 valuation allowance on foreclosed assets, which was partially offset by $29,000 of gains on sales of foreclosed assets that we recorded for the nine months ended September 30, 2021. FDIC insurance premiums increased ~~$114,000,~~$104,000, to $345,000 for the nine months ended September 30, 2021, compared to $241,000 for the same period in 2020, because the insurance premiums for the nine months ended September 30, 2020 ~~compared to $127,000 for the same period in 2019, due to the receipt of~~was partially offset by the FDIC's small bank assessment ~~credit in third quarter 2019.~~credit. Other ~~expenses decreased $447,000,~~noninterest expense increased $159,000, or ~~16.9%~~7.6%, to $2.2 million for the nine months ended September 30, ~~2020,~~2021, from ~~$2.6~~$2.1 million for the same period in 2019, due in substantial part to the reversal of a $116,000 reserve established for the open letters of credit related to a loan charge-off that was recorded in the second quarter 2019. Supplies and office occupancy expense for the nine months ended September 30, 2020, ~~included $341,000~~primarily due to increased loan expenses and the reversal of a $116,000 reserve on open commitments for two undrawn letters of credit in ~~expenses related to civil unrest and COVID-19 for additional cleaning and sanitation costs that were incurred for infection control and prevention.~~2020.

Income Taxes

~~For the nine months ended September 30, 2020, we~~We recorded ~~$2.4 million of~~ income tax expense ~~compared to $3.0~~of $1.8 million for the nine months ended September 30, ~~2019.~~2021, compared to $2.4 million for the nine months ended September 30, 2020. Our combined state and federal effective tax rate for the nine months ended September 30, ~~2020~~2021 was ~~26.4%~~26.6%, compared to ~~26.5%~~26.4% for the ~~same period~~nine months ended September 30, 2020. During the second quarter 2021, Illinois Senate Bill 2017 was passed which created a temporary limitation on Illinois net operating loss carryforward utilization. For tax years 2021, 2022, and 2023, corporations are limited to applying a maximum of $100,000 of Illinois net operating loss carryforwards to taxable income. Illinois net operating loss carryforwards that are limited during these years have an extended expiration date for the years in ~~2019.~~which they are limited. The extended expiration of the Company’s Illinois net operating loss carryforwards are from 2026 to 2028.

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Nonperforming Loans and Assets

We review loans on a regular basis, and generally place loans on nonaccrual status when either principal or interest is 90 days or more past due. In addition, we place loans on nonaccrual status when we do not expect to receive full payment of interest or principal. Interest accrued and unpaid at the time a loan is placed on nonaccrual status is reversed from interest income. Interest payments received on nonaccrual loans are recognized in accordance with our significant accounting policies. Once a loan is placed on nonaccrual status, the borrower must generally demonstrate at least six consecutive months of contractual payment performance before the loan is eligible to return to accrual status. We may have loans classified as 90 days or more delinquent and still accruing. Generally, we do not utilize this category of loan classification unless: (1) the loan is repaid in full shortly after the period end date; (2) the loan is well secured and there are no asserted or pending legal barriers to its collection; or (3) the borrower has remitted all scheduled payments and is otherwise in substantial compliance with the terms of the loan, but the processing of loan payments actually received or the renewal of the loan has not occurred for administrative reasons. At September 30, ~~2020,~~2021, we had no loans in this category.

We typically obtain new third–party appraisals or collateral valuations when we place a loan on nonaccrual status, conduct impairment testing or conduct a TDR analysis unless the existing valuation information for the collateral is sufficiently current to comply with the requirements of our Appraisal and Collateral Valuation Policy (“ACV Policy”). We also obtain new third–party appraisals or collateral valuations when the judicial foreclosure process concludes with respect to real estate collateral, and when we otherwise acquire actual or constructive title to real estate collateral. In addition to third–party appraisals, we use updated valuation information based on Multiple Listing Service data, broker opinions of value, actual sales prices of similar assets sold by us and approved sales prices in response to offers to purchase similar assets owned by us to provide interim valuation information for consolidated financial statement and management purposes. Our ACV Policy establishes the maximum useful life of a real estate appraisal at 18 months. Because appraisals and updated valuations utilize historical or “ask–side” data in reaching valuation conclusions, the appraised or updated valuation may or may not reflect the actual sales price that we will receive at the time of sale.

Real estate appraisals may include up to three approaches to value: the sales comparison approach, the income approach (for income-producing property) and the cost approach. Not all appraisals utilize all three approaches. Depending on the nature of the collateral and market conditions, we may emphasize one approach over another in determining the fair value of real estate collateral. Appraisals may also contain different estimates of value based on the level of occupancy or planned future improvements. “As-is” valuations represent an estimate of value based on current market conditions with no changes to the use or condition of the real estate collateral. “As-stabilized” or “as-completed” valuations assume the real estate collateral will be improved to a stated standard or achieve its highest and best use in terms of occupancy. “As-stabilized” or “as-completed” valuations may be subject to a present value adjustment for market conditions or the schedule of improvements.

As part of the asset classification process, we develop an exit strategy for real estate collateral ~~or OREO~~and foreclosed assets by assessing overall market conditions, the current use and condition of the asset, and its highest and best use. For most income–producing real estate, we believe that investors value most highly a stable income stream from the asset; consequently, we perform a comparative evaluation to determine whether conducting a sale on an “as–is,” “as–stabilized” or “as–completed” basis is most likely to produce the highest net realizable value. If we determine that the “as–stabilized” or “as–completed” basis is appropriate, we then complete the necessary improvements or tenant stabilization tasks, with the applicable time value discount and improvement expenses incorporated into our estimates of the expected costs to sell. As of September 30, ~~2020,~~2021, substantially all impaired real estate loan collateral and OREO were valued on an “as–is basis.”

Estimates of the net realizable value of real estate collateral also include a deduction for the expected costs to sell the collateral or such other deductions from the cash flows resulting from the operation and liquidation of the asset as are appropriate. For most real estate collateral subject to the judicial foreclosure process, we generally apply a 10.0% deduction to the value of the asset to determine the expected costs to sell the asset. This estimate includes one year of real estate taxes, sales commissions and miscellaneous repair and closing costs. If we receive a purchase offer that requires unbudgeted repairs, or if the expected resolution period for the asset exceeds one year, we then include, on a case-by-case basis, the costs of the additional real estate taxes and repairs and any other material holding costs in the expected costs to sell the collateral. For OREO, we generally apply a 7.0% deduction to determine the expected costs to sell, as expenses for real estate taxes and repairs are expensed when incurred.

Nonperforming Assets Summary

The following table ~~below~~ sets forth the amounts and categories of our nonperforming loans and nonperforming assets.

	September 30, 2020			June 30, 2020			December 31, 2019			Quarter Change			Nine-Month Change			September 30, 2021			June 30, 2021			December 31, 2020			Quarter Change			Nine-Month Change
	(Dollars in thousands)															(Dollars in thousands)
Nonaccrual loans:
One-to-four family residential real estate	$	465		$	662		$	512		$	(197	)	$	(47	)	$	341		$	588		$	925		$	(247	)	$	(584	)
Nonresidential real estate		1,870			288			288			1,582			1,582			296			296			296			—			—
Other commercial leases		—			833			—			(833	)		—
		2,335			1,783			800			552			1,535
Loans past due over 90 days, still accruing - commercial leases		—			—			47			—			(47	)

Equipment finance - investment-rated																	9			—			—			9			9
Nonperforming loans		2,335			1,783			847			552			1,488			646			884			1,221			(238	)		(575	)

Other real estate owned - One-to-four family residential		110			143			186			(33	)		(76	)
Other real estate owned:
One-to-four family residential real estate																	112			335			157			(223	)		(45	)
Nonresidential real estate																	140			140			—			—			140
Other real estate owned																	252			475			157			(223	)		95

Other foreclosed assets																	797			1,227			—			(430	)		797

Total nonperforming assets	$	2,445		$	1,926		$	1,033		$	519		$	1,412		$	1,695		$	2,586		$	1,378		$	(891	)	$	317

Ratios:
Nonperforming loans to total loans		0.22	%		0.16	%		0.07	%								0.06	%		0.09	%		0.12	%
Nonperforming assets to total assets		0.15			0.12			0.07									0.10			0.16			0.09

Table of Contents

Nonperforming Assets

Nonperforming assets increased ~~$1.4 million~~$317,000 to ~~$2.4~~$1.7 million at September 30, ~~2020, from $1.0~~2021, net of additions and sales of foreclosed collateral. In the second and third quarters of 2021, we redeemed and sold $3.2 million ~~at December 31, 2019, due in substantial part~~of repossessed collateral related to ~~our placing one~~a $4.3 million previously classified Chicago nonresidential real estate loan in the amount of $1.6 million on nonaccrual status due to our decision to commence receivership proceedings based on the borrower’s unauthorized material alteration of the collateral; however, the borrower expects to repay the loan in full prior to the November 2020 effective date of the receivership. Onecommercial loan. Two residential ~~loan~~loans with a total book balance of ~~$33,000 was~~$128,000 were transferred from nonaccrual loans to OREO during the nine months ended September 30, ~~2020.~~2021. We continue to experience modest quantities of defaults on residential real estate loans principally due either to the borrower’s personal financial condition or deteriorated collateral value.

~~Table of Contents~~

Liquidity and Capital Resources

Liquidity. The overall objective of our liquidity management is to ensure the availability of sufficient cash funds to meet all financial commitments and to take advantage of investment opportunities. We manage liquidity in order to meet deposit withdrawals on demand or at contractual maturity, to repay borrowings as they mature, and to fund new loans and investments as opportunities arise.

Our primary sources of funds are deposits, principal and interest payments on loans and securities, and, to a lesser extent, wholesale borrowings, the proceeds from maturing securities and short-term investments, the sales of loans and securities and lease payments. The scheduled amortization of loans and securities, as well as proceeds from borrowings, are predictable sources of funds. Other funding sources, however, such as deposit inflows, mortgage prepayments and mortgage loan sales are greatly influenced by market interest rates, economic conditions and competition. We anticipate that we will have sufficient funds available to meet current loan commitments and lines of credit and maturing certificates of deposit that are not renewed or extended. We generally remain fully invested and utilize FHLB advances as an additional source of funds. We had ~~$4.0~~$5.0 million of FHLB advances outstanding at September 30, ~~2020~~2021 and ~~none~~$4.0 million at December 31, ~~2019.~~2020.

The Company is a separate legal entity from BankFinancial, NA. The Company must provide for its own liquidity to pay any dividends to its ~~shareholders~~stockholders and to repurchase shares of its common stock, and for other corporate purposes. The Company's primary source of liquidity is dividend payments it receives from the Bank. The Bank's ability to pay dividends to the Company is subject to regulatory limitations. The Company completed the issuance of $20.0 million of Subordinated Notes in April 2021, at a rate of 3.75%. maturing on May 15, 2031. At September 30, ~~2020,~~2021, the Company (on an unconsolidated, stand-alone basis) had liquid assets of ~~$8.0~~$9.7 million. ~~On April 1,~~In 2020, the Company obtained a $5.0 million unsecured line of credit with a correspondent ~~bank.~~bank to provide a secondary source of liquidity. Interest is payable at a rate of Prime rate minus 0.75%. The line of credit will mature on ~~April 1, 2021.~~March 31, 2022. The line of credit had no outstanding balance at September 30, ~~2020.~~2021.

As of September 30, ~~2020,~~2021, we were not aware of any known trends, events or uncertainties that had or were reasonably likely to have a material adverse impact on our liquidity. As of September 30, ~~2020,~~2021, we had no other material commitments for capital expenditures.

Capital Management - Bank. The overall objectives of our capital management are to ensure the availability of sufficient capital to support loan, deposit and other asset and liability growth opportunities and to maintain sufficient capital to absorb unforeseen losses or write-downs that are inherent in the business risks associated with the banking industry. We seek to balance the need for higher capital levels to address such unforeseen risks and the goal to achieve an adequate return on the capital invested by our stockholders.

The Bank is subject to regulatory capital requirements administered by the federal banking agencies. The capital adequacy guidelines and prompt corrective action regulations, involve the quantitative measurement of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators. The failure to meet minimum capital requirements can result in regulatory actions. The final rules implementing Basel Committee on Banking Supervision's capital guidelines for U.S. banks (Basel III rules) became effective in 2015. The net unrealized gain or loss on available-for-sale securities is not included in computing regulatory capital.

In addition, as a result of the legislation, the federal banking agencies developed a “Community Bank Leverage Ratio” (the ratio of a bank’s tangible equity 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 institution’s risk profile when evaluating whether it qualifies as a community bank for purposes of the capital ratio requirement. The federal banking agencies must set the minimum capital for the new Community Bank Leverage Ratio at not less than 8% and not more than 10%. Beginning in the second quarter 2020 and until the end of ~~the year,~~2020, a banking organization that ~~has~~had a leverage ratio of 8% or greater and ~~meets~~met certain other criteria ~~may~~could elect to use the Community Bank Leverage Ratio framework; and ~~qualified~~qualifying community banks will have until January 1, 2022, before the Community Bank Leverage Ratio requirement is re-established at greater than 9%. Pursuant to Section 4012 of the CARES Act and related interim final rules, the Community Bank Leverage Ratio ~~will be 8% beginning in the second quarter and for the remainder of calendar year 2020,~~is 8.5% for calendar year 2021, and 9% thereafter. A financial institution can elect to be subject to this new definition, and opt-out of this new definition, at any time. As a ~~qualified~~qualifying community bank, we elected to be subject to this definition beginning in the second quarter of 2020. As of September 30, ~~2020,~~2021, the Bank's Community Bank Leverage Ratio was ~~10.13%~~10.00%.

Prompt corrective action regulations provide five classifications: well-capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If only adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and capital restoration plans are required.

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The Company and the Bank have each adopted Regulatory Capital Plans that require the Bank to maintain a Tier 1 leverage ratio of at least 7.5% and a total risk-based capital ratio of at least 10.5%. The minimum capital ratios set forth in the Regulatory Capital Plans will be increased and other minimum capital requirements will be established if and as necessary. In accordance with the Regulatory Capital Plans, the Bank will not pursue any acquisition or growth opportunity, declare any dividend or conduct any stock repurchase that would cause the Bank's total risk-based capital ratio and/or its Tier 1 leverage ratio to fall below the established minimum capital levels or the capital levels required for capital adequacy plus the capital conservation buffer (“CCB”). The minimum CCB is 2.5%.

As of September 30, ~~2020,~~2021, the Bank was well-capitalized, with all capital ratios exceeding the well-capitalized requirement. There are no conditions or events that management believes have changed the Bank’s prompt corrective action capitalization category.

The Bank is subject to regulatory restrictions on the amount of dividends it may declare and pay to the Company without prior regulatory approval, and to regulatory notification requirements for dividends that do not require prior regulatory approval.

Actual and required capital amounts and ratios for the Bank were:

Actual

Required for Capital Adequacy Purposes

To be Well-Capitalized under Prompt Corrective Action Provisions

Amount

Ratio

Amount

Ratio

Amount

Ratio

(Dollars in thousands)

December 31, 2019

Total capital (to risk-weighted assets)
$ 170,203 16.38 % $ 83,130 8.00 % $ 103,913 10.00 %
Tier 1 (core) capital (to risk-weighted assets)
162,455 15.63 62,348 6.00 83,130 8.00
Common Tier 1 (CET1)
162,455 15.63 46,761 4.50 67,543 6.50
Tier 1 (core) capital (to adjusted average total assets):
162,455 10.89 59,666 4.00 74,583 5.00

	Actual					Required for Capital Adequacy Purposes
	Amount		Ratio			Amount		Ratio
	(Dollars in thousands)
September 30, 2021
Community Bank Leverage Ratio	$	165,537		10.00	%	$	140,761		8.50	%

December 31, 2020
Community Bank Leverage Ratio	$	160,236		10.10	%	$	126,964		8.00	%

Quarterly Cash Dividends. The Company declared cash dividends of $0.30 per share for both of the nine months ended September 30, ~~2020~~2021 and September 30, ~~2019.~~2020.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Qualitative Analysis. A significant form of market risk is interest rate risk. Interest rate risk results from timing differences in the maturity or repricing of our assets, liabilities and off balance sheet contracts (i.e., forward loan commitments), the effect of loan prepayments and deposit withdrawals, the difference in the behavior of lending and funding rates arising from the use of different indices and “yield curve risk” arising from changing rate relationships across the spectrum of maturities for constant or variable credit risk investments. In addition to directly affecting net interest income, changes in market interest rates can also affect the amount of new loan originations, the ability of borrowers to repay variable rate loans, the volume of loan prepayments and refinancings, the carrying value of investment securities classified as available-for-sale and the flow and mix of deposits.

The general objective of our interest rate risk management is to determine the appropriate level of risk given our business strategy and then manage that risk in a manner that is consistent with our policy to reduce, to the extent possible, the exposure of our net interest income to changes in market interest rates. Our Asset/Liability Management Committee (“ALCO”), which consists of certain members of senior management, evaluates the interest rate risk inherent in certain assets and liabilities, our operating environment and capital and liquidity requirements, and modifies our lending, investing and deposit gathering strategies accordingly. The Board of Directors then reviews the ALCO’s activities and strategies, the effect of those strategies on our net interest margin, and the effect that changes in market interest rates would have on the economic value of our loan and securities portfolios as well as the intrinsic value of our deposits and borrowings, and reports to the full Board of Directors.

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We actively evaluate interest rate risk in connection with our lending, investing and deposit activities. In an effort to better manage interest rate risk, we have de-emphasized the origination of residential mortgage loans, and have increased our emphasis on the origination of nonresidential real estate loans, multi-family mortgage loans, and commercial loans and commercial leases. In addition, depending on market interest rates and our capital and liquidity position, we generally sell all or a portion of our longer-term, fixed-rate residential loans, and usually on a servicing-retained basis. Further, we primarily invest in shorter-duration securities, which generally have lower yields compared to longer-term investments. Shortening the average maturity of our interest-earning assets by increasing our investments in shorter-term loans and securities, as well as loans with variable rates of interest, helps to better match the maturities and interest rates of our assets and liabilities, thereby reducing the exposure of our net interest income to changes in market interest rates. Finally, we have classified all of our investment portfolio as available-for-sale so as to provide flexibility in liquidity management.

We utilize a combination of analyses to monitor the Bank’s exposure to changes in interest rates. The economic value of equity analysis is a model that estimates the change in net portfolio value (“NPV”) over a range of interest rate scenarios. NPV is the discounted present value of expected cash flows from assets, liabilities and off-balance-sheet contracts. In calculating changes in NPV, we assume estimated loan prepayment rates, reinvestment rates and deposit decay rates that seem most likely based on historical experience during prior interest rate changes.

Our net interest income analysis utilizes the data derived from the dynamic GAP analysis, described below, and applies several additional elements, including actual interest rate indices and margins, contractual limitations such as interest rate floors and caps and the U.S. Treasury yield curve as of the balance sheet date. In addition, we apply consistent parallel yield curve shifts (in both directions) to determine possible changes in net interest income if the theoretical yield curve shifts occurred instantaneously. Net interest income analysis also adjusts the dynamic GAP repricing analysis based on changes in prepayment rates resulting from the parallel yield curve shifts.

Our dynamic GAP analysis determines the relative balance between the repricing of assets and liabilities over multiple periods of time (ranging from overnight to five years). Dynamic GAP analysis includes expected cash flows from loans and mortgage-backed securities, applying prepayment rates based on the differential between the current interest rate and the market interest rate for each loan and security type. This analysis identifies mismatches in the timing of asset and liability repricing but does not necessarily provide an accurate indicator of interest rate risk because it omits the factors incorporated into the net interest income analysis.

Quantitative Analysis. The following table sets forth, as of September 30, ~~2020,~~2021, the estimated changes in the Bank’s NPV and net interest income that would result from the designated instantaneous parallel shift in the U.S. Treasury yield curve. Computations of prospective effects of hypothetical interest rate changes are based on numerous assumptions including relative levels of market interest rates, loan prepayments and deposit decay, and should not be relied upon as indicative of actual results.

	Estimated Increase (Decrease) in NPV						Increase (Decrease) in Estimated Net Interest Income						Estimated Increase (Decrease) in NPV						Increase (Decrease) in Estimated Net Interest Income
Change in Interest Rates (basis points)	Amount			Percent			Amount			Percent			Amount			Percent			Amount			Percent
	(Dollars in thousands)												(Dollars in thousands)
+400	$	8,190			4.56	%	$	8,832			20.34	%	$	17,185			8.60	%	$	13,270			31.33	%
+300		8,264			4.60			6,816			15.70			17,522			8.76			10,183			24.04
+200		4,282			2.39			4,536			10.45			13,662			6.83			6,765			15.97
+100		99			0.06			2,184			5.03			6,980			3.49			3,253			7.68
0
-25		(4,448	)		(2.48	)		(328	)		(0.76	)		(6,736	)		(3.37	)		(744	)		(1.76	)

The table set forth above indicates that at September 30, ~~2020,~~2021, in the event of an immediate 25 basis point decrease in interest rates, the Bank would be expected to experience a ~~2.48%~~3.37% decrease in NPV and a ~~$328,000~~$744,000 decrease in net interest income. In the event of an immediate 200 basis point increase in interest rates, the Bank would be expected to experience a ~~2.39%~~6.83% increase in NPV and a ~~$4.5~~$6.8 million increase in net interest income. This data does not reflect any actions that we may undertake in response to changes in interest rates, such as changes in rates paid on certain deposit accounts based on local competitive factors, which could reduce the actual impact on NPV and net interest income, if any.

Certain shortcomings are inherent in the methodology used in the above interest rate risk measurements. Modeling changes in NPV and net interest income requires that we make certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. The NPV and net interest income table presented above assumes that the composition of our interest-rate-sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and, accordingly, the data does not reflect any actions that we may undertake in response to changes in interest rates, such as changes in rates paid on certain deposit accounts based on local competitive factors. The table also assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration to maturity or the repricing characteristics of specific assets and liabilities. Because of the shortcomings mentioned above, management considers many additional factors such as projected changes in loan and deposit balances and various projected forward interest rate scenarios when evaluating strategies for managing interest rate risk. Accordingly, although the NPV and net interest income table provides an indication of our sensitivity to interest rate changes at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on our net interest income and will differ from actual results.

ITEM 4.

CONTROLS AND PROCEDURES

An evaluation was performed under the supervision and with the participation of the Company’s management, including the Chairman, Chief Executive Officer and President and the Executive Vice President and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities and Exchange Act of 1934, as amended) as of September 30, ~~2020.~~2021. Based on that evaluation, the Company’s management, including the Chairman, Chief Executive Officer, and President and the Executive Vice President and Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were effective.

During the quarter ended September 30, ~~2020,~~2021, there have been no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

3534

Table of Contents

PART II

ITEM 1.

LEGAL PROCEEDINGS

The Company and its subsidiaries are subject to various legal actions arising in the normal course of business. In the opinion of management, based on currently available information, the resolution of these legal actions is not expected to have a material adverse effect on the Company’s financial condition or results of operations

ITEM 1A.

RISK FACTORS

There have been no material changes to the risk factors previously disclosed in the Company's filings with the Securities and Exchange Commission.

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a)

Unregistered Sale of Equity ~~Securities~~Securities.. Not applicable.


	(b)	Use of Proceeds. Not applicable.


	(c)	Repurchases of Equity Securities.

The following table sets forth information in connection with purchases of our common stock made by, or, on behalf of us, during the third quarter of ~~2020.~~ 2021.

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares that May Yet be Purchased under the Plans or Programs
July 1, 2021 through July 31, 2021		307,498	$	11.42		307,498		625,721
August 1, 2021 through August 31, 2021		221,792		11.37		221,792		403,929
September 1, 2021 through September 30, 2021		215,297		11.38		215,297		188,632
		744,587				744,587

As of September 30, ~~2020,~~2021, the Company had repurchased ~~5,721,628~~7,172,123 shares of its common stock out of the ~~5,810,755~~7,360,755 shares of common stock authorized under the current share repurchase authorization approved on March 30, 2015. Pursuant to the share repurchase authorization, as of September 30, ~~2020,~~2021, there ~~are 89,127~~were 188,632 shares of common stock authorized for repurchase. On April 19, 2021, the Board extended the expiration of the Company's share repurchase ~~through October 31, 2020.~~authorization from April 30, 2021 to November 15, 2021, and increased the total number of shares currently authorized for repurchase by 250,000 shares. On June 24, 2021, the Board increased the number of shares currently authorized for repurchase by 900,000 shares.

Period
Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares that May Yet be Purchased under the Plans or Programs
July 1, 2020 through July 31, 2020
53,500 $ 7.91 53,500 101,627
August 1, 2020 through August 31, 2020
7,500 7.51 7,500 94,127
September 1, 2020 through September 30, 2020
5,000 7.39 5,000 89,127
66,000 66,000

ITEM 3.

DEFAULT UPON SENIOR SECURITIES

None.

ITEM 4.

MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.

OTHER INFORMATION

None.

3635

Table of Contents

ITEM 6.

EXHIBITS

	Exhibit Number		Description
	31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	32		Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
	101		The following financial statements from the BankFinancial Corporation Quarterly Report on Form 10-Q for the quarter ended September 30, ~~2020,~~2021, formatted in Inline Extensive Business Reporting Language (iXBRL): (i) consolidated statements of financial condition, (ii) consolidated statements of operations, (iii) consolidated statements of comprehensive income, (iv) consolidated statements of changes in stockholders' equity, (v) consolidated statements of cash flows and (vi) the notes to consolidated financial statements.
	104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

*	A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

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Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		BANKFINANCIAL CORPORATION

Dated:	October ~~28, 2020~~29, 2021	By:	/s/ F. Morgan Gasior
			F. Morgan Gasior
			Chairman of the Board, Chief Executive Officer and President

			/s/ Paul A. Cloutier
			Paul A. Cloutier
			Executive Vice President and Chief Financial Officer

3837


Maryland	75-3199276
(State or Other Jurisdiction of Incorporation)	(I.R.S. Employer Identification No.)

60 North Frontage Road, Burr Ridge, Illinois 60527
(Address of Principal Executive Offices)

Large accelerated filer	☐	Accelerated filer	☒☐
Non-accelerated filer	☐☒	Smaller reporting company	☒
		Emerging growth company	☐

		Page Number
PART I

Item 1.	Financial Statements	1

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	21

Item 3.	Quantitative and Qualitative Disclosure about Market Risk	3433

Item 4.	Controls and Procedures	3534

PART II

Item 1.	Legal Proceedings	3635

Item 1A.	Risk Factors	3635

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3635

Item 3.	Defaults Upon Senior Securities	3635

Item 4.	Mine Safety Disclosures	3635

Item 5.	Other Information	3635

Item 6.	Exhibits	3736

Signatures		3837

										*Accumulated*															*Accumulated*
				*Additional*						*Other*									*Additional*						*Other*
	*Common*			*Paid-in*			*Retained*			*Comprehensive*						*Common*			*Paid-in*			*Retained*			*Comprehensive*
	*Stock*			*Capital*			*Earnings*			*Income*			*Total*			*Stock*			*Capital*			*Earnings*			*Income*			*Total*
For the three months ended

Balance at July, 1 2019	$	154		$	113,717		$	57,331		$	289		$	171,491
Net income		0			0			3,924			0			3,924
Other comprehensive loss, net of tax		0			0			0			(11	)		(11	)
Cash dividends declared on common stock ($0.10 per share)		0			0			(1,537	)		0			(1,537	)
Balance at September 30, 2019	$	154		$	113,717		$	59,718		$	278		$	173,867

Balance at July, 1 2020	$	149		$	108,748		$	63,322		$	235		$	172,454		$	149		$	108,748		$	63,322		$	235		$	172,454
Net income		0			0			1,948			0			1,948			0			0			1,948			0			1,948
Other comprehensive loss, net of tax		0			0			0			(4	)		(4	)		0			0			0			(4	)		(4	)
Repurchase and retirement of common stock (66,000 shares)		(1	)		(517	)		0			0			(518	)		(1	)		(517	)		0			0			(518	)
Cash dividends declared on common stock ($0.10 per share)		0			0			(1,483	)		0			(1,483	)		0			0			(1,483	)		0			(1,483	)
Balance at September 30, 2020	$	148		$	108,231		$	63,787		$	231		$	172,397		$	148		$	108,231		$	63,787		$	231		$	172,397

Balance at July, 1 2021																$	141		$	100,877		$	65,230		$	188		$	166,436
Net income																	0			0			1,644			0			1,644
Other comprehensive loss, net of tax																	0			0			0			(28	)		(28	)
Repurchase and retirement of common stock (744,587 shares)																	(7	)		(8,496	)		0			0			(8,503	)
Cash dividends declared on common stock ($0.10 per share)																	0			0			(1,376	)		0			(1,376	)
Balance at September 30, 2021																$	134		$	92,381		$	65,498		$	160		$	158,173

For the nine months ended

Balance at January 1, 2019	$	165		$	130,547		$	56,167		$	271		$	187,150
Net income		0			0			8,282			0			8,282
Other comprehensive income, net of tax		0			0			0			7			7
Repurchase and retirement of common stock (1,107,550 shares)		(11	)		(16,830	)		0			0			(16,841	)
Cash dividends declared on common stock ($0.30 per share)		0			0			(4,731	)		0			(4,731	)
Balance at September 30, 2019	$	154		$	113,717		$	59,718		$	278		$	173,867

Balance at January 1, 2020	$	153		$	112,420		$	61,573		$	226		$	174,372		$	153		$	112,420		$	61,573		$	226		$	174,372
Net income		0			0			6,718			0			6,718			0			0			6,718			0			6,718
Other comprehensive income, net of tax		0			0			0			5			5			0			0			0			5			5
Repurchase and retirement of common stock (453,836 shares)		(5	)		(4,189	)		0			0			(4,194	)		(5	)		(4,189	)		0			0			(4,194	)
Cash dividends declared on common stock ($0.30 per share)		0			0			(4,504	)		0			(4,504	)		0			0			(4,504	)		0			(4,504	)
Balance at September 30, 2020	$	148		$	108,231		$	63,787		$	231		$	172,397		$	148		$	108,231		$	63,787		$	231		$	172,397

Balance at January 1, 2021																$	148		$	107,815		$	64,754		$	213		$	172,930
Net income																	0			0			5,039			0			5,039
Other comprehensive loss, net of tax																	0			0			0			(53	)		(53	)
Repurchase and retirement of common stock (1,395,632 shares)																	(14	)		(15,434	)		0			0			(15,448	)
Cash dividends declared on common stock ($0.30 per share)																	0			0			(4,295	)		0			(4,295	)
Balance at September 30, 2021																$	134		$	92,381		$	65,498		$	160		$	158,173

	*Nine Months Ended*						*Nine Months Ended*
	*September 30,*						*September 30,*
	*2020*			*2019*			*2021*			*2020*
Cash flows from operating activities
Net income	$	6,718		$	8,282		$	5,039		$	6,718
Adjustments to reconcile to net income to net cash from operating activities
Provision for loan losses		326			3,736
Depreciation		1,236			1,211
Amortization of premiums and discounts on securities		4			4
Amortization of intangibles		27			47
Amortization of servicing assets		56			63
Adjustments to reconcile net income to net cash from operating activities
(Recovery of) provision for loan losses								(1,019	)		326
Depreciation and amortization								1,530			1,323
Net change in net deferred loan origination costs		545			127			316			545
Gain on sale of other real estate owned		(22	)		(112	)
Gain on sale of equity securities		0			(295	)
Gain on sale of foreclosed assets								(29	)		(22	)
Loss on disposal of other assets		2			19			0			2
Other real estate owned valuation adjustments		0			38
Foreclosed assets valuation adjustments								405			0
Earnings on bank-owned life insurance		(51	)		(105	)		(82	)		(51	)
Net change in:
Accrued interest receivable		209			189			(1,177	)		209
Other assets		1,942			4,379			411			1,942
Accrued interest payable and other liabilities		(2,399	)		(3,570	)		(3,472	)		(2,399	)
Net cash from operating activities		8,593			14,013			1,922			8,593
Cash flows from investing activities
Securities
Proceeds from maturities		55,599			79,210			14,869			55,599
Proceeds from principal repayments		2,206			2,234			1,386			2,206
Proceeds from sale of equity securities		0			3,722
Purchases of securities		(39,657	)		(58,700	)		(7,193	)		(39,657	)
Net decrease in loans receivable		101,108			105,846
Purchase of FHLB and FRB stock		0			(4	)
Redemption of FHLB and FRB stock		0			540
Proceeds from sale of other real estate owned		120			1,107
Net (increase) decrease in loans receivable								(43,419	)		101,108
Loan participation purchased								(5,000	)		0
Proceeds from sale of foreclosed assets								3,205			120
Purchase of premises and equipment, net		(1,133	)		(623	)		(1,552	)		(1,133	)
Net cash from investing activities		118,243			133,332
Net cash (used in) from investing activities								(37,704	)		118,243
Cash flows from financing activities
Net change in:
Deposits		117,487			(63,659	)		60,845			117,487
Borrowings		3,939			(19,796	)		1,000			3,939
Advance payments by borrowers for taxes and insurance		(224	)		271			(760	)		(224	)
Proceeds from issuance of Subordinated Notes								20,000			0
Costs paid for issuance of Subordinated Notes								(441	)		0
Repurchase and retirement of common stock		(4,194	)		(16,841	)		(15,448	)		(4,194	)
Cash dividends paid on common stock		(4,504	)		(4,731	)		(4,295	)		(4,504	)
Net cash from (used in) financing activities		112,504			(104,756	)
Net cash from financing activities								60,901			112,504
Net change in cash and cash equivalents		239,340			42,589			25,119			239,340
Beginning cash and cash equivalents		190,325			98,204			503,496			190,325
Ending cash and cash equivalents	$	429,665		$	140,793		$	528,615		$	429,665

Supplemental disclosures of cash flow information:
Interest paid	$	6,047		$	10,295		$	1,763		$	6,047
Income taxes paid		155			349			2,641			155
Income taxes refunded		8			10			0			8
Loans transferred to other real estate owned		33			76
Loans transferred to foreclosed assets								4,473			33
Recording of right of use asset in exchange for lease obligations in other assets and other liabilities		111			6,694			866			111

	*September 30, 2020*		*December 31, 2019*		*September 30, 2021*		*December 31, 2020*
Assets
Cash and due from other financial institutions	$	13,740	$	9,785	$	11,432	$	14,115
Interest-bearing deposits in other financial institutions		415,925		180,540		517,183		489,381
Cash and cash equivalents		429,665		190,325		528,615		503,496
Securities, at fair value		42,048		60,193		14,693		23,829
Loans receivable, net of allowance for loan losses: September 30, 2020, $8,011 and December 31, 2019, $7,632		1,065,892		1,168,008
Other real estate owned, net		110		186
Loans receivable, net of allowance for loan losses: September 30, 2021, $6,895 and December 31, 2020, $7,751						1,047,056		1,002,578
Foreclosed assets, net						1,049		157
Stock in Federal Home Loan Bank ("FHLB") and Federal Reserve Bank ("FRB"), at cost		7,490		7,490		7,490		7,490
Premises and equipment, net		24,241		24,346		24,772		24,675
Accrued interest receivable		4,354		4,563		5,118		3,941
Bank-owned life insurance		18,996		18,945		19,097		19,015
Deferred taxes		3,520		3,873		2,348		2,741
Other assets		8,627		10,086		9,904		8,920
Total assets	$	1,604,943	$	1,488,015	$	1,660,142	$	1,596,842

Liabilities
Deposits
Noninterest-bearing	$	328,915	$	210,762	$	328,182	$	326,188
Interest-bearing		1,073,329		1,073,995		1,126,207		1,067,356
Total deposits		1,402,244		1,284,757		1,454,389		1,393,544
Borrowings		4,000		61		5,000		4,000
Subordinated Notes, net of unamortized issuance costs						19,578		0
Advance payments by borrowers for taxes and insurance		9,998		10,222		7,910		8,670
Accrued interest payable and other liabilities		16,304		18,603		15,092		17,698
Total liabilities		1,432,546		1,313,643		1,501,969		1,423,912

Stockholders’ equity
Preferred Stock, $0.01 par value, 25,000,000 shares authorized, none issued or outstanding		0		0		0		0
Common Stock, $0.01 par value, 100,000,000 shares authorized; 14,824,628 shares issued at September 30, 2020 and 15,278,464 issued at December 31, 2019		148		153
Common Stock, $0.01 par value, 100,000,000 shares authorized; 13,374,133 shares issued at September 30, 2021 and 14,769,765 shares issued at December 31, 2020						134		148
Additional paid-in capital		108,231		112,420		92,381		107,815
Retained earnings		63,787		61,573		65,498		64,754
Accumulated other comprehensive income		231		226		160		213
Total stockholders’ equity		172,397		174,372		158,173		172,930
Total liabilities and stockholders’ equity	$	1,604,943	$	1,488,015	$	1,660,142	$	1,596,842

	*Amortized Cost*		*Gross Unrealized Gains*		*Gross Unrealized Losses*			*Fair Value*		*Amortized Cost*		*Gross Unrealized Gains*		*Gross Unrealized Losses*			*Fair Value*
Available-for-Sale Securities
September 30, 2020
September 30, 2021
Certificates of deposit	$	32,724	$	0	$	0		$	32,724	$	7,441	$	0	$	0		$	7,441
Municipal securities		503		9		0			512		401		1		0			402
Mortgage-backed securities - residential		6,124		305		0			6,429		4,909		212		0			5,121
Collateralized mortgage obligations - residential		2,381		4		(2	)		2,383		1,724		5		0			1,729
	$	41,732	$	318	$	(2	)	$	42,048	$	14,475	$	218	$	0		$	14,693
December 31, 2019
December 31, 2020
Certificates of deposit	$	48,666	$	0	$	0		$	48,666	$	15,117	$	0	$	0		$	15,117
Municipal securities		505		8		0			513		402		7		0			409
Mortgage-backed securities - residential		7,727		310		0			8,037		5,826		282		0			6,108
Collateralized mortgage obligations - residential		2,986		4		(13	)		2,977		2,193		3		(1	)		2,195
	$	59,884	$	322	$	(13	)	$	60,193	$	23,538	$	292	$	(1	)	$	23,829

			*Less than 12 Months*							*12 Months or More*							*Total*						*Less than 12 Months*						*12 Months or More*							*Total*
	*Count*		*Fair Value*		*Unrealized Loss*			*Count*		*Fair Value*		*Unrealized Loss*			*Count*		*Fair Value*		*Unrealized Loss*			*Count*		*Fair Value*		*Unrealized Loss*		*Count*		*Fair Value*		*Unrealized Loss*			*Count*		*Fair Value*		*Unrealized Loss*
September 30, 2020

December 31, 2020
Collateralized mortgage obligations - residential		0	$	0	$	0			3	$	1,695	$	(2	)		3	$	1,695	$	(2	)		0	$	0	$	0		3	$	1,588	$	(1	)		3	$	1,588	$	(1	)

December 31, 2019
Collateralized mortgage obligations - residential		3	$	1,566	$	(10	)		1	$	937	$	(3	)		4	$	2,503	$	(13	)

	*Allowance for loan losses*						*Loan Balances*							*Allowance for loan losses*						*Loan Balances*
	*Individually evaluated for impairment*		*Collectively evaluated for impairment*		*Total*		*Individually evaluated for impairment*		*Collectively evaluated for impairment*		*Total*			*Individually evaluated for impairment*		*Collectively evaluated for impairment*		*Total*		*Individually evaluated for impairment*		*Collectively evaluated for impairment*		*Total*
September 30, 2020
September 30, 2021
One-to-four family residential real estate	$	0	$	623	$	623	$	1,746	$	43,066	$	44,812		$	0	$	401	$	401	$	1,354	$	30,475	$	31,829
Multi-family mortgage		0		4,143		4,143		596		522,229		522,825			0		3,579		3,579		503		435,131		435,634
Nonresidential real estate		20		1,697		1,717		1,870		122,607		124,477			28		1,278		1,306		296		100,173		100,469
Construction and land															0		12		12		0		499		499
Commercial loans and leases		0		1,480		1,480		155		379,483		379,638			0		1,554		1,554		9		483,696		483,705
Consumer		0		48		48		0		1,784		1,784			0		43		43		0		1,760		1,760
	$	20	$	7,991	$	8,011	$	4,367	$	1,069,169		1,073,536		$	28	$	6,867	$	6,895	$	2,162	$	1,051,734		1,053,896
Net deferred loan origination costs												367													55
Allowance for loan losses												(8,011	)												(6,895	)
Loans, net											$	1,065,892												$	1,047,056

	*Beginning balance*		*Provision for (recovery of) loan losses*			*Loans charged off*			*Recoveries*		*Ending balance*		*Beginning balance*		*Provision for (recovery of) loan losses*			*Loans charged off*			*Recoveries*		*Ending balance*
For the three months ended

September 30, 2021
One-to-four family residential real estate													$	396	$	(33	)	$	0		$	38	$	401
Multi-family mortgage														3,690		(118	)		0			7		3,579
Nonresidential real estate														1,336		(30	)		0			0		1,306
Construction and land														11		1			0			0		12
Commercial loans and leases														1,377		176			0			1		1,554
Consumer														47		(2	)		(2	)		0		43
													$	6,857	$	(6	)	$	(2	)	$	46	$	6,895

September 30, 2020
One-to-four family residential real estate	$	665	$	(42	)	$	(2	)	$	2	$	623	$	665	$	(42	)	$	(2	)	$	2	$	623
Multi-family mortgage		4,185		(98	)		0			56		4,143		4,185		(98	)		0			56		4,143
Nonresidential real estate		1,602		115			0			0		1,717		1,602		115			0			0		1,717
Commercial loans and leases		1,658		(178	)		0			0		1,480		1,658		(178	)		0			0		1,480
Consumer		46		16			(14	)		0		48		46		16			(14	)		0		48
	$	8,156	$	(187	)	$	(16	)	$	58	$	8,011	$	8,156	$	(187	)	$	(16	)	$	58	$	8,011

September 30, 2019
One-to-four family residential real estate	$	563	$	56		$	(44	)	$	5	$	580
Multi-family mortgage		3,988		(268	)		0			8		3,728
Nonresidential real estate		1,195		77			(55	)		0		1,217
Construction and land		3		(1	)		0			0		2
Commercial loans and leases		2,044		(8	)		0			4		2,040
Consumer		31		10			(5	)		0		36
	$	7,824	$	(134	)	$	(104	)	$	17	$	7,603

									*Year ended*												*Three Months Ended*				*Nine Months Ended*
									*December 31, 2019*												*September 30, 2021*				*September 30, 2021*
	*Loan Balance*		*Recorded Investment*		*Partial Charge-off*		*Allowance for Loan Losses Allocated*		*Average Investment in Impaired Loans*		*Interest Income Recognized*		*Loan Balance*		*Recorded Investment*		*Partial Charge-off*		*Allowance for Loan Losses Allocated*		*Average Investment in Impaired Loans*		*Interest Income Recognized*		*Average Investment in Impaired Loans*		*Interest Income Recognized*
December 31, 2019
September 30, 2021
With no related allowance recorded:
One-to-four family residential real estate	$	2,168	$	1,835	$	339	$	0	$	2,208	$	51	$	1,465	$	1,354	$	111	$	—	$	1,428	$	7	$	1,524	$	23
Multi-family mortgage - Illinois		620		620		0		0		637		37		503		503		0		—		506		7		512		22
Nonresidential real estate		280		288		0		0		589		2
Equipment finance - investment - rated														9		9		0		—		2		0		1		0
	$	3,068	$	2,743	$	339	$	0	$	3,434	$	90		1,977		1,866		111		—		1,936		14		2,037		45

With an allowance recorded - nonresidential real estate														280		296		0		28		296		0		296		0
													$	2,257	$	2,162	$	111	$	28	$	2,232	$	14	$	2,333	$	45

	*Loan Balance*		*Recorded Investment*		*Loans Past Due Over 90 Days, Still Accruing*		*Loan Balance*		*Recorded Investment*		*Loans Past Due Over 90 Days, Still Accruing*
September 30, 2020
September 30, 2021
One-to-four family residential real estate							$	373	$	341	$	0
Nonresidential real estate								280		296		0
Equipment finance - investment - rated								9		9		0
							$	662	$	646	$	0
December 31, 2020
One-to-four family residential real estate	$	485	$	465	$	0	$	946	$	925	$	0
Nonresidential real estate		1,863		1,870		0		280		296		0
	$	2,348	$	2,335	$	0	$	1,226	$	1,221	$	0
December 31, 2019
One-to-four family residential real estate	$	598	$	512	$	0
Nonresidential real estate		280		288		0
Investment-rated commercial leases		47		0		47
	$	925	$	800	$	47

	*30-59 Days Past Due*		*60-89 Days Past Due*		*90 Days or Greater Past Due*		*Total Past Due*		*Loans Not Past Due*		*Total*
September 30, 2020
One-to-four family residential real estate loans:
Owner occupied	$	48	$	0	$	462	$	510	$	35,604	$	36,114
Non-owner occupied		3		95		0	$	98		8,600		8,698
Multi-family mortgage:
Illinois		0		0		0		0		224,919		224,919
Other		0		0		0		0		297,906		297,906
Nonresidential real estate		0		0		1,870		1,870		122,607		124,477
Commercial loans and leases:
Commercial		0		0		0		0		90,767		90,767
Asset-based		0		0		0		0		1,471		1,471
Equipment finance:
Government		0		0		0		0		71,504		71,504
Investment-rated		439		124		0		563		81,449		82,012
Other		633		0		0		633		133,251		133,884
Consumer		6		4		0		10		1,774		1,784
	$	1,129	$	223	$	2,332	$	3,684	$	1,069,852	$	1,073,536

	*Number of loans*		*Originated*		*Balance*
For the Nine Months Ended September 30, 2020
Paycheck protection program loan originations		315	$	11,160

September 30, 2020
Paycheck protection program loans		310			$	11,042

	*For the Three Months Ended September 30,*				*For the Nine Months Ended September 30,*
	*2021*		*2020*		*2021*		*2020*
Paycheck protection program:
Number of loans originated		0		10		238		315
Loan balance originations	$	0	$	136	$	10,135	$	11,160
Loan balance forgiven	$	4,801	$	0	$	14,538	$	117

	*Pass*		*Special Mention*		*Substandard*		*Nonaccrual*		*Total*		*Pass*		*Special Mention*		*Substandard*		*Nonaccrual*		*Total*
December 31, 2019
December 31, 2020
One-to-four family residential real estate loans:
Owner occupied	$	43,908	$	36	$	533	$	512	$	44,989	$	32,089	$	0	$	452	$	834	$	33,375
Non-owner occupied		10,696		30		35		0		10,761		8,164		27		34		91		8,316
Multi-family mortgage:
Illinois		247,757		0		206		0		247,963		222,029		0		0		0		222,029
Other		315,787		0		0		0		315,787		230,212		0		0		0		230,212
Nonresidential real estate		134,134		162		90		288		134,674		106,280		1,998		84		296		108,658
Construction and land												499		0		0		0		499
Commercial loans and leases:
Commercial		125,630		8,346		0		0		133,976		72,809		0		4,886		0		77,695
Asset-based		11,738		0		0		0		11,738		1,740		0		0		0		1,740
Equipment finance:
Government		33,555		0		0		0		33,555		102,740		0		0		0		102,740
Investment-rated		101,381		507		0		0		101,888		88,594		0		0		0		88,594
Other		136,289		761		136		0		137,186		125,012		0		1,005		0		126,017
Middle market												6,988		0		0		0		6,988
Small ticket												1,283		0		0		0		1,283
Consumer		2,153		5		53		0		2,211		1,802		5		5		0		1,812
	$	1,163,028	$	9,847	$	1,053	$	800	$	1,174,728	$	1,000,241	$	2,030	$	6,466	$	1,221	$	1,009,958

	*Number of loans*		*Principal Balance*		*Remaining Amounts Deferred*

Small Investment Property COVID-19 Qualified Limited Forbearance Agreement
Multi-family mortgage		15	$	4,511	$	46
Nonresidential real estate		15		5,871		93
Apartment and Commercial Real Estate COVID-19 Qualified Limited Forbearance Agreement
Multi-family mortgage		53		42,663		185
Nonresidential real estate		28		31,861		273
Commercial leases ⁽¹⁾		25		9,211		0
One-to-four family residential real estate		10		1,422		11

		146	$	95,539	$	608

	*For the Three Months Ended*						*For the Nine Months Ended*						*For the Three Months Ended*						*For the Nine Months Ended*
	*September 30,*						*September 30,*						*September 30,*						*September 30,*
	*2020*			*2019*			*2020*			*2019*			*2021*			*2020*			*2021*			*2020*
Beginning balance	$	143		$	497		$	186		$	1,226		$	1,702		$	143		$	157		$	186
New foreclosed properties		0			30			33			76
New foreclosed assets														0			0			4,473			33
Valuation adjustments		0			(17	)		0			(38	)		(124	)		0			(405	)		0
Sales and other reductions		(33	)		(241	)		(109	)		(995	)
Valuation reductions from sales														69			0			69			0
Sales														(598	)		(33	)		(3,245	)		(109	)
Ending balance	$	110		$	269		$	110		$	269		$	1,049		$	110		$	1,049		$	110

	*Statement of Financial Condition Location*	*September 30, 2020*			*December 31, 2019*			*Statement of Financial Condition Location*	*September 30, 2021*			*December 31, 2020*
Operating Lease Right of Use Asset:
Gross carrying amount		$	6,694		$	0			$	6,805		$	6,694
New lease obligation			111			6,694				866			111
Accumulated amortization			(1,508	)		(848	)			(2,502	)		(1,730	)
Net carrying value	Other assets	$	5,297		$	5,846
Net recorded value								Other assets	$	5,169		$	5,075

Operating Lease Liabilities:
Right of use lease obligations	Other liabilities	$	5,297		$	5,846		Other liabilities	$	5,169		$	5,075

Twelve months ended September 30,
2021	$	957
2022		991
2023		1,002
2024		582
2025		505
Thereafter		2,344
Total future minimum operating lease payments		6,381
Amounts representing interest		(1,084	)
Present value of net future minimum operating lease payments	$	5,297

Twelve months ended September 30,
2022	$	1,280
2023		1,290
2024		808
2025		505
2026		511
Thereafter		1,833
Total future minimum operating lease payments		6,227
Amounts representing interest		(1,058	)
Present value of net future minimum operating lease payments	$	5,169

	*September 30, 2020*					*December 31, 2019*
	*Contractual*					*Contractual*
	*Rate*			*Amount*		*Rate*			*Amount*
Fixed-rate advance from FHLB, due within 1 year		0	%	$	4,000		0	%	$	0

	*Overnight and Continuous*		*Up to 30 days*		*30 - 90 days*		*Greater Than 90 days*		*Total*
December 31, 2019
Repurchase agreements and repurchase-to-maturity transactions	$	61	$	0	$	0	$	0	$	61
Gross amount of recognized liabilities for repurchase agreements in Consolidated Statements of Financial Condition									$	61


	•	Level 2 – Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.


	•	Level 3 – Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

	*Fair Value Measurements Using*								*Fair Value Measurements Using*
	*Quoted Prices in Active Markets for Identical Assets (Level 1)*		*Significant Observable Inputs (Level 2)*		*Significant Unobservable Inputs (Level 3)*		*Fair Value*		*Quoted Prices in Active Markets for Identical Assets (Level 1)*		*Significant Observable Inputs (Level 2)*		*Significant Unobservable Inputs (Level 3)*		*Fair Value*
September 30, 2020
September 30, 2021
Securities:
Certificates of deposit	$	0	$	32,724	$	0	$	32,724	$	0	$	7,441	$	0	$	7,441
Municipal securities		0		512		0		512		0		402		0		402
Mortgage-backed securities – residential		0		6,429		0		6,429		0		5,121		0		5,121
Collateralized mortgage obligations – residential		0		2,383		0		2,383		0		1,729		0		1,729
	$	0	$	42,048	$	0	$	42,048	$	0	$	14,693	$	0	$	14,693
December 31, 2019
December 31, 2020
Securities:
Certificates of deposit	$	0	$	48,666	$	0	$	48,666	$	0	$	15,117	$	0	$	15,117
Municipal securities		0		513		0		513		0		409		0		409
Mortgage-backed securities - residential		0		8,037		0		8,037		0		6,108		0		6,108
Collateralized mortgage obligations – residential		0		2,977		0		2,977		0		2,195		0		2,195
	$	0	$	60,193	$	0	$	60,193	$	0	$	23,829	$	0	$	23,829

	*Fair Value Measurement Using*								*Fair Value Measurement Using*
	*Quoted Prices in Active Markets for Identical Assets (Level 1)*		*Significant Observable Inputs (Level 2)*		*Significant Unobservable Inputs (Level 3)*		*Fair Value*		*Quoted Prices in Active Markets for Identical Assets (Level 1)*		*Significant Observable Inputs (Level 2)*		*Significant Unobservable Inputs (Level 3)*		*Fair Value*
September 30, 2020
September 30, 2021
Impaired loans - nonresidential real estate	$	0	$	0	$	268	$	268	$	0	$	0	$	268	$	268

Foreclosed assets:
One–to–four family residential									$	0	$	0	$	73	$	73
Nonresidential real estate										0		0		140		140
Other foreclosed assets										0		0		792		792
									$	0	$	0	$	1,005	$	1,005


December 31, 2020
Impaired loans - nonresidential real estate									$	0	$	0	$	268	$	268

	Actual					Required for Capital Adequacy Purposes					To be Well-Capitalized under Prompt Corrective Action Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio
	(Dollars in thousands)
December 31, 2019
Total capital (to risk-weighted assets)	$	170,203		16.38	%	$	83,130		8.00	%	$	103,913		10.00	%
Tier 1 (core) capital (to risk-weighted assets)		162,455		15.63			62,348		6.00			83,130		8.00
Common Tier 1 (CET1)		162,455		15.63			46,761		4.50			67,543		6.50
Tier 1 (core) capital (to adjusted average total assets):		162,455		10.89			59,666		4.00			74,583		5.00