SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ Quarterly Report Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended ~~September~~December 3031, 2021 OR ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from _______________ to _______________

Commission File No. 000-56049

TEB Bancorp, Inc.

(Exact name of registrant as specified in its charter)


Maryland	83-2040340
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

2290 N Mayfair Road, Wauwatosa, WI	53226
(Address of Principal Executive Offices)	(Zip Code)

414-476-6434

(Registrant’s telephone number)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class TradingSymbol(s) Name of each exchange on which registered None NONE

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such requirements for the past 90 days.

~~Yes~~YES ⌧ NoNO ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

~~Yes~~YES ⌧ NoNO ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

~~Yes~~YES ◻☐ NoNO ⌧

As of ~~November~~February 129, ~~2021~~2022, 2,624,343 shares of the Registrant’s common stock, par value $0.01 per share, were issued and outstanding.

Table of Contents

		Page
Part I. Financial Information

Item 1.	Condensed Consolidated Financial Statements

	Condensed Consolidated Balance Sheets as of ~~September~~December 3031, 2021 (Unaudited) and June 30, 2021	1

	Condensed Consolidated Statements of Operations for the Three and Six Months Ended ~~September~~December 3031, 2021 and 2020 (Unaudited)	2

	Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended ~~September~~December 3031, 2021 and 2020 (Unaudited)	3

	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three and Six Months Ended ~~September~~December 3031, 2021 and 2020 (Unaudited)	4

	Condensed Consolidated Statements of Cash Flows for the ~~Three~~Six Months Ended ~~September~~December 3031, 2021 and 2020 (Unaudited)	5

	Notes to Condensed Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3132

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	3842

Item 4.	Controls and Procedures	3842

Part II. Other Information
Item 1.	Legal Proceedings	3842

Item 1A.	Risk Factors	3842

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3942

Item 3.	Defaults upon Senior Securities	3942

Item 4.	Mine Safety Disclosures	3942

Item 5.	Other Information	3943

Item 6.	Exhibits	3943

	Signature Page	4044

Table of Contents

Part I Financial Information

Item 1 Financial Statements

TEB BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

As of ~~September~~December 3031, 2021 (Unaudited) and June 30, 2021


	~~September~~December 3031, 2021		June 30, 2021
ASSETS
Cash and due from banks	$	2223,~~422~~035,~~322~~628	$	5,577,965
Federal funds sold		151,~~823~~670,~~766~~652		43,799,524
Cash and cash equivalents		3824,~~246~~706,~~088~~280		49,377,489

Interest bearing deposits in banks		~~342~~512,~~294~~968		326,245
Available for sale securities - stated at fair value		3439,~~258~~033,~~691~~226		32,868,700
Loans, less allowance for loan losses of $1,462,889 and $1,412,489 at September 30, 2021 and June 30, 2021, respectively		225,611,409		215,419,951
Loans, less allowance for loan losses of $1,487,823 and $1,412,489 at December 31, 2021 and June 30, 2021, respectively		234,014,634		215,419,951
Loans held for sale		73,~~829~~344,~~305~~857		6,866,900
Other real estate owned, net		167,590		167,590
Premises and equipment, net		7,~~948~~887,~~259~~195		7,912,493
Federal Home Loan Bank stock		1,031,200		1,031,200
Accrued interest receivable and other assets		1,~~770~~555,~~077~~477		1,731,234
TOTAL ASSETS	$	~~317~~312,~~204~~253,~~913~~427	$	315,701,802

LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Deposits
Demand	$	~~104~~107,~~173~~046,~~609~~085	$	108,991,043
Savings and NOW		9190,~~787~~042,~~078~~054		88,156,887
Certificates of deposit		7169,~~862~~961,~~849~~025		72,738,385
Total Deposits		267,~~823~~049,~~536~~164		269,886,315
Federal Home Loan Bank borrowings		5,000,000		5,000,000
Advance payments by borrowers for property taxes and insurance		4513,~~722,562~~182		3,434,519
Accrued interest payable and other liabilities		65,~~081~~753,~~602~~426		4,257,101
Total Liabilities		~~283~~278,~~627~~315,~~700~~772		282,577,935

STOCKHOLDERS’ EQUITY
Preferred stock ($0.01 par value, 5,000,000 authorized, no shares issued or outstanding as of September 30, 2021 and June 30, 2021, respectively)		—		—
Preferred stock ($0.01 par value, 5,000,000 authorized, no shares issued or outstanding as of December 31, 2021 and June 30, 2021, respectively)		—		—
Common stock ($0.01 par value, 20,000,000 authorized, 2,624,343 issued and outstanding as of September 30, 2021 and June 30, 2021)		26,243		26,243
Common stock ($0.01 par value, 20,000,000 authorized, 2,624,343 issued and outstanding as of December 31, 2021 and June 30, 2021)		26,243		26,243
Additional paid in capital		11,319,328		11,319,328
Retained earnings		24,~~012~~548,~~506~~109		23,388,455
Accumulated other comprehensive loss		(1,~~780~~956,~~864~~025)		(1,610,159)
Total Stockholders’ Equity		33,~~577~~937,~~213~~655		33,123,867
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	~~317~~312,~~204~~253,~~913~~427	$	315,701,802

See accompanying notes to condensed consolidated financial statements

Table of Contents

TEB BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three and Six Months Ended ~~September~~December 3031, 2021 and 2020 (Unaudited)


	Three months ended				Six months ended
	~~September~~December 3031,				December 31,
	2021		2020		2021		2020
INTEREST AND DIVIDEND INCOME
Interest and fees on loans	$	2,~~256~~303,~~146~~453	$	2,599,~~597~~766	$	4,559,599	$	5,199,363
Interest and dividends on investment securities		~~181~~194,~~283~~662		~~151~~149,~~990~~355		375,945		301,345
Interest on federal funds sold		78,~~181~~518		~~217~~190		15,699		407
Interest on deposits in banks		760		~~342~~222		67		564
Total Interest and Dividend Income		2,~~444~~506,~~617~~693		2,~~752~~749,~~146~~533		4,951,310		5,501,679

INTEREST EXPENSE
Interest on deposits		~~275~~259,~~174~~487		~~362~~318,~~499~~653		534,661		681,152
Interest on Federal Home Loan Bank borrowings		—		~~6,142~~664		—		6,806
Total Interest Expense		~~275~~259,~~174~~487		~~368~~319,~~641~~317		534,661		687,958

Net interest income before provision for loan losses		2,~~169~~247,~~443~~206		2,~~383~~430,~~505~~216		4,416,649		4,813,721
Provision for loan losses		5025,000		—50,000		75,000		50,000
Net interest income after provision for loan losses		2,~~119~~222,~~443~~206		2,~~383~~380,~~505~~216		4,341,649		4,763,721

NON-INTEREST INCOME
Service fees on deposits		~~102~~93,~~118~~207		105,~~306~~779		195,325		211,085
Service fees on loans		5040,~~692~~252		4246,~~305~~232		90,944		88,537
Gain on sales of mortgage loans		1,~~639~~338,~~961~~788		3,~~003~~619,~~100~~405		2,978,749		6,622,505
Income on sale of uninsured products		~~142~~124,~~565~~844		~~113~~102,~~785~~849		267,409		216,634
Other income		6,150		8,588
Net gain on sale of other real estate owned		—		(11,573)		—		(11,573)
Total Non-Interest Income		1,941,486		3,273,084
Other income		6,699		5,253		12,849		13,841

Total Non-Interest Income		1,603,790		3,867,945		3,545,276		7,141,029
NON-INTEREST EXPENSES

Compensation and benefits		2,134,654		2,437,776
NON-INTEREST EXPENSES
Occupancy		515,594		523,588
Compensation and benefits		2,049,868		2,649,604		4,184,522		5,087,380
Advertising		27,995		40,045
Occupancy		526,426		537,707		1,042,020		1,061,295
Data processing services		284,164		268,818
Advertising		49,995		37,545		77,990		77,590
FDIC assessment		19,991		40,240
Data processing services		250,842		291,498		535,006		560,316
Cost of operations for other real estate owned		1,910		17,111
FDIC assessment		20,990		26,570		40,981		66,810
Insurance expense		29,421		30,044
Cost of operations for other real estate owned		4,620		159,564		6,530		176,675
Professional fees		120,153		123,977
Insurance expense		28,084		29,141		57,505		59,185
Other expenses		302,996		396,142
Professional fees		82,627		135,506		202,780		259,483
Total Non-Interest Expenses		3,436,878		3,877,741
Other expenses		276,941		423,489		579,937		819,631

Total Non-Interest Expenses		3,290,393		4,290,624		6,727,271		8,168,365
Income before income taxes		624,051		1,778,848

Income tax expense		—		—
Income before income taxes		535,603		1,957,537		1,159,654		3,736,385
NET INCOME	$	624,051	$	1,778,848
Income tax expense		—		—		—		—

NET INCOME	$	535,603	$	1,957,537	$	1,159,654	$	3,736,385
Basic income per share	$	0.24	$	0.68

Diluted income per share	$	0.24	$	0.68
Basic income per share	$	0.20	$	0.75	$	0.44		1.42
Diluted income per share	$	0.20	$	0.75	$	0.44		1.42

See accompanying notes to condensed consolidated financial statements.

Table of Contents

TEB BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the Three and Six Months Ended ~~September~~December 3031, 2021 and 2020 (Unaudited)


	For the three months ended				For the six months ended
	~~September~~December 3031,		~~September~~December 3031,		December 31,		December 31,
	2021		2020		2021		2020
Net income	$	~~624~~535,~~051~~603	$	1,~~778~~957,~~848~~537	$	1,159,654	$	3,736,385
Other comprehensive income (loss), net of tax
Unrealized gains/losses on securities
Net unrealized holding (losses) gains arising during period		(~~130~~135,~~805~~261)		~~136~~17,~~142~~690		(266,066)		153,832
Tax effect		—		—		—		—
Change in pension obligation		(39,900)		(102,135)		(79,800)		(204,270)
Tax effect		—		—		—		—
Other comprehensive (loss) income, net of tax		(170,705)		34,007
Other comprehensive loss, net of tax		(175,161)		(84,445)		(345,866)		(50,438)
COMPREHENSIVE INCOME	$	~~453~~360,~~346~~442	$	1,~~812~~873,~~855~~092	$	813,788	$	3,685,947

See accompanying notes to condensed consolidated financial statements.

Table of Contents

TEB BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

For the Three and Six Months Ended ~~September~~December 3031, 2021 and 2020 (Unaudited)


								Accumulated
				Additional				Other
	Number of	Common		Paid- In		Retained		Comprehensive
	Shares	Stock		Capital		Earnings		Income (Loss)		Total

June 30, 2020 (audited)	2,624,343	$	26,243	$	11,319,328	$	17,002,468	$	(4,835,836)	$	23,512,203
June 30, 2020	2,624,343	$	26,243	$	11,319,328	$	17,002,468	$	(4,835,836)	$	23,512,203
Net income	—		—		—		1,778,848		—		1,778,848
Other comprehensive income, net of tax	—		—		—		—		34,007		34,007
September 30, 2020	2,624,343	$	26,243	$	11,319,328	$	18,781,316	$	(4,801,829)	$	25,325,058
Net income	—		—		—		1,957,537		—		1,957,537
Other comprehensive loss, net of tax	—		—		—		—		(84,445)		(84,445)
December 31, 2020	2,624,343	$	26,243	$	11,319,328	$	20,738,853	$	(4,886,274)	$	27,198,150

June 30, 2021 (audited)	2,624,343	$	26,243	$	11,319,328	$	23,388,455	$	(1,610,159)	$	33,123,867
June 30, 2021	2,624,343	$	26,243	$	11,319,328	$	23,388,455	$	(1,610,159)	$	33,123,867
Net income	—		—		—		624,051		—		624,051
Other comprehensive loss, net of tax	—		—		—		—		(170,705)		(170,705)
September 30, 2021	2,624,343	$	26,243	$	11,319,328	$	24,012,506	$	(1,780,864)	$	33,577,213
Net income	—		—		—		535,603		—		535,603
Other comprehensive loss, net of tax	—		—		—		—		(175,161)		(175,161)
December 31, 2021	2,624,343	$	26,243	$	11,319,328	$	24,548,109	$	(1,956,025)	$	33,937,655

See accompanying notes to condensed consolidated financial statements.

Table of Contents

TEB BANCORP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the ~~Three~~Six Months Ended ~~September~~December 3031, 2021 and 2020 (Unaudited)



	For the ~~three~~six months ended ~~September~~December 3031,
	2021		2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	~~624~~1,~~051~~159,654	$	13,~~778~~736,~~848~~385
Adjustments to reconcile net income to net cash flows provided by (used in) operating activities
Adjustments to reconcile net income to net cash flows provided by operating activities
Provision for loan losses		5075,000		—50,000
Depreciation		~~134~~270,~~584~~285		~~136~~275,~~683~~684
Net amortization and accretion		(~~6,882~~910)		1019,~~056~~585
Origination of mortgage loans held for sale		(72130,~~636~~846,~~795~~862)		(~~142~~289,~~460~~881,~~755~~006)
Proceeds from sales of mortgage loans held for sale		73137,~~314~~347,~~351~~654		~~140~~299,~~615~~644,~~027~~824
Gain on sale of mortgage loans held for sale		(12,~~639~~978,~~961~~749)		(36,~~003~~622,~~100~~505)
Gain on sale or disposal of assets, net		—		(7,509)
Loss on sale of other real estate owned, net		—		11,573
Income tax valuation allowance		246,244		852,343
Gain on sale or disposal of assets, net		—		(7,510)
Changes in assets and liabilities:
Accrued interest receivable and other assets		~~(38~~175,~~843)~~757		(~~314~~21,~~910~~263)
Accrued interest payable and other liabilities		1,~~784~~170,~~597~~278		(31,~~148~~637,~~235~~177)
Net cash flows provided by (used in) operating activities		1,585,102		(6,393,895)
Net cash flows provided by operating activities		6,618,351		6,420,933
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities or calls of securities available for sale		~~391~~745,~~089~~321		~~562~~1,~~823~~470,923
Purchase of securities available for sale		(17,~~905~~175,000)		(~~500~~3,815,000)
Change in loans		(1018,~~241~~669,~~458~~683)		4,~~387~~600,~~871~~637
Change in interest bearing deposits in banks		(16,049)		(154,918)
Change from redemption of FHLB stock		—		314,300
Change in interest bearing deposits in banks		(186,723)		2,030,788
Proceeds from sale of other real estate owned		—		1,737,762
Charge-offs on other real estate owned		—		152,765
Proceeds from sale of premises and equipment		—		26,400
Purchase of premises and equipment, net		(~~170~~244,~~349~~987)		(~~120~~476,~~842~~627)
Net cash flows (used in) provided by investing activities		(1125,~~941~~531,~~767~~072)		46,~~201~~041,~~334~~948
CASH FLOWS FROM FINANCING ACTIVITIES
Net (decrease) increase in deposits		(2,062,779)		1,795,458
Net decrease in deposits		(2,837,151)		(244,638)
FHLB advance proceeds		—		245,~~000~~500,000
FHLB advance repayments		—		(750,~~000~~500,000)
Change in advance payments by borrowers for property taxes and insurance		1(2,~~288~~921,~~043~~337)		(1,~~755~~969,~~385~~638)
Net cash flows used in financing activities		(~~774~~5,~~736~~758,488)		(17,~~449~~214,~~157~~276)
Net Change in Cash and Cash Equivalents		(1124,~~131~~671,~~401~~209)		(35,~~641~~248,~~718)~~605

CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR		49,377,489		13,106,041
CASH AND CASH EQUIVALENTS - END OF PERIOD	$	3824,~~246~~706,~~088~~280	$	918,~~464~~354,~~323~~646

SUPPLEMENTAL CASH FLOW DISCLOSURES
Cash paid for interest	$	~~248~~517,~~215~~298	$	~~279~~615,~~707~~616

See accompanying notes to condensed consolidated financial statements.

Table of Contents

TEB BANCORP, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

As of ~~September~~December 3031, 2021 (Unaudited) and June 30, 2021 and for The Three and Six Months Ended

~~September~~December 3031, 2021 and 2020 (Unaudited)

NOTE 1 – Summary of Significant Accounting Policies

Organization

On April 30, 2019, The Equitable Bank, S.S.B. (the “Bank”) converted to a stock savings bank in the mutual holding company structure. The Bank issued all of its outstanding stock to a new holding company, TEB Bancorp, Inc. (the “Company”), which sold 1,309,547 shares of common stock to the public at 10.00 per share, representing 49.9% of its outstanding shares of common stock for gross proceeds of approximately $13.1 million. The net proceeds received were approximately $11.4 million after offering costs. TEB Bancorp, Inc. is organized as a corporation under the laws of the State of Maryland. The Bank utilized $100,000 of proceeds received from the offering as initial capitalization of TEB MHC. TEB MHC has been organized as a mutual holding company under the laws of the State of Wisconsin and owns 1,314,796 shares, or 50.1% of the outstanding common stock of TEB Bancorp, Inc.

The Bank is a state-chartered savings bank providing a full range of financial services. The Bank grants commercial, residential and consumer loans, and accepts deposits from customers primarily in the Metropolitan Milwaukee area, which is in southeastern Wisconsin. The Bank is subject to competition from other financial institutions and nonfinancial institutions providing financial products. Additionally, the Bank is subject to the regulations of certain regulatory agencies and undergoes periodic examination by those regulatory agencies.

All depositors who had liquidation rights with respect to the Bank as of the effective date of the reorganization continue to have such rights solely with respect to TEB MHC so long as they continue to hold their deposit accounts with the Bank. In addition, all persons who become depositors of the Bank subsequent to the reorganization will have such liquidation rights with respect to TEB MHC.

At ~~September~~December 3031, 2021, the significant assets of TEB Bancorp, Inc. were the capital stock of the Bank and a deposit account held at the Bank. The liabilities of TEB Bancorp, Inc. were insignificant. The Company is subject to the financial reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Company is subject to regulation and examination by the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”).

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of TEB Bancorp, Inc. and its wholly-owned subsidiaries were prepared in accordance with the instructions for Form 10-Q and Article 10 of Regulation S-X and, therefore, do not include information or footnotes necessary for a complete presentation of financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the condensed consolidated financial statements and notes thereto of the Company as of and for the year ended June 30, 2021.

The interim condensed consolidated financial statements of the Company as of ~~September~~December 3031, 2021, and for the three and six months ended ~~September~~December 3031, 2021 and 2020 are unaudited and reflect all normal recurring adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. Such adjustments are the only adjustments contained in the interim financial statements. The results of operations for the three and six months ended ~~September~~December 3031, 2021, are not necessarily indicative of the results to be achieved for the year ending June 30, 2022 or any other period.

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TEB BANCORP, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

As of ~~September~~December 3031, 2021 (Unaudited) and June 30, 2021 and for The Three and Six Months Ended

~~September~~December 3031, 2021 and 2020 (Unaudited)

Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements as of and for the periods ending ~~September~~December 3031, 2021 and 2020 and June 30, 2021 and 2020 include the accounts and operations of TEB Bancorp, Inc. and its wholly-owned subsidiaries, the Bank, Equitable Investment Corp., and Equity Credit Corp. All significant intercompany accounts and transactions have been eliminated in consolidation.

Emerging Growth Company Status

Under the Jumpstart Our Business Startups Act (the "JOBS Act"), a company with total annual gross revenues of less than $1.07 billion during its most recently completed fiscal year qualifies as an "emerging growth company". The Company qualifies as an emerging growth company and believes that it will continue to qualify as an emerging growth company.

An emerging growth company may elect to comply with new or amended accounting pronouncements in the same manner as a private company, but must make such election when the company is first required to file a registration statement. Such an election is irrevocable during the period a company is an emerging growth company. The Company has elected to comply with new or amended accounting pronouncements in the same manner as a private company. Accordingly, the financial statements may not be comparable to the financial statements of companies that comply with such new or revised accounting standards.

Use of Estimates

In preparing the unaudited condensed consolidated financial statements in conformity with U.S. GAAP, management of the Company is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated balance sheet and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, the pension actuarial assumptions, and the valuation of deferred tax assets.

Revenue Recognition

Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (“ASC 606”), establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts to provide goods or services recognized as performance obligations are satisfied.

The majority of the Company’s revenue-generating transactions are not subject to ASC 606, including all interest and dividend income generated from financial instruments. Certain noninterest income items, including gain on sales of loans, gain on sales of securities, and other noninterest income have been evaluated and determined to not fall within the scope of ASC 606. Elements of noninterest income that fall within the scope of ASC 606 are as follows:

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TEB BANCORP, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

As of ~~September~~December 3031, 2021 (Unaudited) and June 30, 2021 and for The Three and Six Months Ended

~~September~~December 3031, 2021 and 2020 (Unaudited)

Service charges and other fees -. The Company earns fees from its deposit customers for transaction-based, account maintenance, and overdraft services. Management reviewed the deposit account agreements and determined that the agreements can be terminated at any time by either the Company or the account holder. Transaction fees, such as wires and overdraft charges, are settled the day the performance obligation is satisfied. The Company’s monthly service charges and maintenance fees are for services provided to the customer on a monthly basis and are considered a series of services that have the same pattern of transfer each month. The review of service charges assessed on deposit accounts included the amount of variable consideration that is a part of the monthly charges. It was found that the waiver of service charges due to insufficient funds and dormant account fees is immaterial and would not require a change in the accounting treatment for these fees under the new revenue standards. Recognition of revenue under ASC 606 did not materially change the timing or magnitude of revenue recognition for service charges and other fees.

Interchange fees. - Customers use a Bank-issued debit card to purchase goods and services, and the Company earns interchange fees on those transactions, typically a percentage of the sale amount of the transaction. The Company records the amount due when it receives the settlement from the payment network. Payments from the payment network are received and recorded into income on a daily basis. These funds are included in “Service fees on deposits” on the Condensed Consolidated Statements of Operations. There are no contingent debit card interchange fees recorded by the Company that could be subject to a clawback in future periods. Recognition of revenue under ASC 606 did not materially change the timing or magnitude of revenue recognition for interchange fees.

Cash and Cash Equivalents

For purposes of reporting cash flows, cash and cash equivalents include cash and balances due from banks and federal funds sold, all of which mature within 90 days. The Company maintains amounts due from banks, which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts.

Interest Bearing Deposits in Banks

Interest bearing deposits in banks mature within one year and are carried at cost, which approximates fair value.

Securities

Available for sale securities are stated at fair value and unrealized holding gains and losses on available for sale securities are reported as accumulated other comprehensive income (loss), net of applicable deferred income tax and adjusted for any applicable valuation allowance, a separate component of equity. Available for sale securities are written down to market value through operations if an impairment of value is deemed other than temporary due to credit issues. Gains or losses on the sale of securities, if any, are determined on the specific identification method. Securities transactions are recorded on the trade date.

Loans

Loans are carried at the unpaid principal balance adjusted for deferred loan fees and costs and charge-offs. Loan origination and commitment fees and certain direct loan origination costs are deferred and the net amounts amortized as an adjustment of the related loan’s yield over the contractual life of the related loan.

Interest on loans is accrued on the unpaid principal balances as earned. Loans are normally placed on nonaccrual status when contractually past due 90 days or more as to interest or principal payments. Additionally, whenever management becomes aware of facts or circumstances that may adversely impact the collectability of principal or interest on a loan, it is management’s practice to place such loan on nonaccrual status immediately, rather than delaying such action until the loan becomes 90 days past due. When a loan is placed on nonaccrual, previously accrued and uncollected interest on

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TEB BANCORP, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

As of ~~September~~December 3031, 2021 (Unaudited) and June 30, 2021 and for The Three and Six Months Ended

~~September~~December 3031, 2021 and 2020 (Unaudited)

such loan is reversed, amortization of related loan fees is suspended, and income is recorded only to the extent that loan payments are subsequently received in cash and a determination has been made that the principal balance of the loan is collectible. If collectability of the principal is in doubt, payments received are applied to loan principal.

A troubled debt restructuring (“TDR”) includes a loan modification where a borrower is experiencing financial difficulty and a concession is granted to that borrower that would not otherwise have been considered except for the borrower’s financial difficulties. All TDRs are classified as impaired loans. TDRs may be on accrual or nonaccrual status based upon the performance of the borrower and management’s assessment of collectability. Loans deemed nonaccrual may return to accrued status based on performance in accordance with terms of the restructuring, generally six months.

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status and the probability of collecting scheduled principal and interest payment when due.

Loans Held for Sale

Loans originated and intended for sale in the secondary market are carried at the lower of cost or estimated market value in the aggregate. Net unrealized losses are recognized through a valuation allowance by charges to operations. All sales are made without recourse.

Allowance for Loan Losses

The allowance for loan losses (“ALL”) is established as losses are estimated to have occurred through a provision for loan losses charged to expense. Loan losses are charged against the allowance when management believes the uncollectability of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the ALL. The ALL consists of specific reserves on certain impaired loans from analyses developed through specific credit allocations for individual loans. The specific reserve relates to all loans for which the ALL is estimated on a loan by loan basis using either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price, or the fair value of the collateral if the loan is collateral dependent. The general reserve is based on the Company’s historical loss experience along with consideration of certain qualitative factors such as (i) changes in the nature, volume, and terms of loans, (ii) changes in lending personnel, (iii) changes in the quality of the loan review function, (iv) changes in nature and volume of past-due, nonaccrual, and/or classified loans, (v) changes in concentration of credit risk, (vi) changes in economic and industry conditions, (vii) changes in legal and regulatory requirements, (viii) unemployment and inflation statistics, and (ix) changes in underlying collateral values.

There are many factors affecting the ALL; some are quantitative while others require qualitative judgment. The ALL reflects management’s best estimate of the probable and inherent losses on loans. The adequacy of the ALL is reviewed and approved by the Company’s Board of Directors. Allocations of the ALL may be made for specific loans, but the entire ALL is available for any loan that, in management’s judgment, should be charged-off.

As an integral part of their examination process, various regulatory agencies review the ALL as well. Such agencies may require that changes in the ALL be recognized when such regulatory credit evaluations differ from those of management based on information available to the regulators at the time of their examinations.

Premises and Equipment, Net

Premises and equipment are recorded at cost less accumulated depreciation and amortization. Depreciation and amortization expense is provided on the straight-line method over the estimated useful life of the asset for financial

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TEB BANCORP, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

As of ~~September~~December 3031, 2021 (Unaudited) and June 30, 2021 and for The Three and Six Months Ended

~~September~~December 3031, 2021 and 2020 (Unaudited)

reporting purposes, and the straight-line and accelerated methods for income tax purposes. Amortization of leasehold improvements is provided on the straight-line method over the lesser of the term of the respective lease or the estimated economic life of the improvements.

Other Real Estate Owned, Net

Other real estate owned is initially recorded at the fair market value of the real estate acquired less the estimated costs to sell the real estate at the date title is received, establishing a new cost basis, with any write-down charged to the allowance for loan losses. Costs relating to development or improvement of property are capitalized up to the fair value of the property. Valuations are periodically performed by management and independent third parties and a charge to expense is taken if the carrying value of a property exceeds its fair value less estimated costs to sell. Income and expense related to the operations of other real estate owned is recorded net in “Cost of operations of other real estate owned” as a component of non-interest expenses on the condensed consolidated statements of operations. Gains and losses on the sale of other real estate owned are recorded in “Gain (loss) on sale of other real estate owned” as a component of non-interest income in the condensed consolidated statements of operations.

Federal Home Loan Bank Stock

The Bank is a member of the Federal Home Loan Bank (“FHLB”) system. Members are required to own a certain amount of FHLB stock based on the Bank’s level of borrowings from the FHLB and other factors, and may invest in additional amounts of FHLB stock. The Bank’s investment in FHLB of Chicago stock meets the minimum amount required by current regulations and is carried at cost, which approximates fair value. FHLB stock is evaluated quarterly for impairment. Based on management’s evaluation, no impairment has been recorded on these securities. Both cash and stock dividends are reported as income.

Defined Benefit Pension Plan

The Bank has a defined benefit pension plan (the “Plan”) covering substantially all of its employees hired prior to December 31, 2012. The benefits are based on years of service and the employee’s average monthly pay received during the five highest consecutive calendar years in the last 10 years of employment under the Plan. Management contributes annually the amounts necessary to provide for defined benefit payments upon retirement or death as determined by the Plan’s actuary. The Plan was frozen effective December 31, 2012 for all employees. No additional benefits are being accrued for active participants after that date and no new participants will be entered into the Plan.

The Bank records annual amounts relating to the Plan based on calculations that incorporate various actuarial and other assumptions including discount rates, mortality, assumed rates of return, compensation increases, and turnover rates. The Bank reviews its assumptions on an annual basis and makes modifications to the assumptions based on current rates and trends where appropriate to do so. The effect of modifications to those assumptions is recorded in accumulated other comprehensive income (loss) and amortized to net periodic pension cost over future periods. The Bank believes that the assumptions utilized in recording its obligations under its plan are reasonable based on its experience and market conditions.

Comprehensive Income

U.S. GAAP generally requires that recognized revenue, expenses, gains, and losses be included in earnings. Although certain changes in assets and liabilities, such as unrealized gains and losses on available for sale securities, are reported as a separate component of the equity section and changes in the funded status of the pension plan, such items, along with net income are components of comprehensive income.

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TEB BANCORP, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

As of ~~September~~December 3031, 2021 (Unaudited) and June 30, 2021 and for The Three and Six Months Ended

~~September~~December 3031, 2021 and 2020 (Unaudited)

Income Taxes

Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

The Company recognizes the tax effects from an uncertain tax position in the condensed consolidated financial statements only if the position is more likely than not to be sustained on audit, based on the technical merits of the position. The Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the condensed consolidated financial statements is the largest benefit that has a greater than 50% likelihood of being realized, upon ultimate settlement with the relevant tax authority. The Company recognizes interest and penalties accrued or released related to uncertain tax positions in current income tax expense or benefit.

Transfers of Financial Assets

Transfers of financial assets are accounted for as sales when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

Advertising

Advertising costs are accrued and expensed in the period incurred.

Off-Balance Sheet Financial Instruments

In the ordinary course of business, the Bank has entered into off-balance-sheet financial instruments consisting of commitments to extend credit, commitments under credit card arrangements, commercial letters of credit and standby letters of credit. Such financial instruments are recorded in the condensed consolidated financial statements when they are funded or related fees are incurred or received.

COVID-19

In December 2019, a coronavirus (COVID-19) was reported in China and in March 2020 was declared a national emergency in the United States. The COVID-19 pandemic caused significant economic dislocation as many state and local governments ordered non-essential businesses to close and residents to shelter in place at home. Given the ongoing and dynamic nature of the circumstances, it is difficult to predict the full impact of the COVID-19 outbreak on our business. The extent of such impact will depend on future developments, which are highly uncertain, including when the coronavirus can be fully controlled and abated and how the economy continues to reopen. In order to protect the health of employees and customers, the Company had temporarily limited lobby hours and transitioned as many employees to remote work as possible. As COVID-19 vaccines have become more available, the Company has begun to transition to a

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TEB BANCORP, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

As of ~~September~~December 3031, 2021 (Unaudited) and June 30, 2021 and for The Three and Six Months Ended

~~September~~December 3031, 2021 and 2020 (Unaudited)

return to in-person work for employees. Nonetheless, the Company has not incurred any significant disruptions to its business activities.

The Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, was signed into law on March 27, 2020 and provided over $2.0 trillion in emergency economic relief to individuals and businesses impacted by the COVID-19 pandemic. The CARES Act authorized the Small Business Administration (“SBA”) to temporarily guarantee loans under a new 7(a) loan program called the Paycheck Protection Program (“PPP”). Although we were not already a qualified SBA lender, we became eligible to originate PPP loans by completing the required SBA documentation.

In October 2020, the SBA approved an extension of the deferment period without modifications on the PPP loans originated. The Company agreed to extend the deferment period for six months from the first payment date.

In ~~late~~ December 2020, as part of the Taxpayer Certainty and Disaster Recovery Act, the PPP loan portal was reopened for first draw PPP loan applications. A second draw was made available to qualified businesses starting January 13, 2021. Eligible borrowers ~~will~~ qualify for full forgiveness if employee and compensations levels are maintained with at least 60% attributed to payroll costs. The remaining can be used for interest on mortgages, rents, and utilities.

Eligibility for first draws required that, together with their affiliates, employers have 500 or fewer employees. Second draw eligibility required borrowers to have received a first draw PPP Loan and will or had used the full amount only for authorized use, had no more than 300 employees and demonstrated at least a 25% reduction in gross receipts between comparable quarters of 2019 and 2020.

Since the reopening in January 2021, the Company has originated nine first and second draw PPP loans totaling $729,000, netting fees of $32,000. As of December 31, 2021, all of those loans received full forgiveness from the SBA.

~~Since~~Prior the reopening ~~in January 2021~~, the Company ~~has~~had ~~originated~~recorded ~~nine~~17 ~~first and second draw~~ PPP loans totaling $~~729,000~~1.1 ~~and~~million. ~~netting~~These 17 loans generated fees net to the Company of $3244,000. As of ~~September~~March 3024, 2021, ~~six~~all of ~~those~~the 17 loans had received full forgiveness infrom the ~~amount of $651,000~~SBA.

~~Prior~~To ~~the~~work ~~reopening~~with customers impacted by COVID-19, the Company ~~had~~is ~~recorded~~offering 17short-term ~~PPP~~loan ~~loans~~modifications ~~totaling $1~~(i.~~1 million~~e., ~~These~~three 17months ~~loans~~or ~~generated~~less ~~fees~~with ~~net~~the potential to extend up to six months, if necessary) on a case by case basis to borrowers who were current in their payments at the inception of the loan modification program. The Company additionally offers, to borrowers that qualify, loan deferrals under Section 4013 of ~~$44~~the CARES Act. Loans less than 30 days past due as of September 30,~~000~~ 2020 are considered current for COVID-19 modifications and therefore qualify for a loan deferral. AsA financial institution can then suspend the requirements under U.S. GAAP for loan modifications related to COVID-19 that would otherwise be categorized as a TDR, and suspend any determination of a loan modified as a result of COVID-19 as being a TDR, including the requirement to determine impairment for accounting purposes. Financial institutions wishing to utilize this authority must make a policy election, which applies to any COVID-19 modification made between March 241, 2020 and the earlier of either January 1, 2021 or the 60th day after the end of the COVID-19 national emergency. Similarly, ~~all~~the Financial Accounting Standards Board (“FASB”) has confirmed that short-term modifications made on a good faith basis in response to COVID-19 to loan customers who were current prior to any relief are not TDRs. Lastly, prior to the enactment of the 17CARES Act, the banking regulatory agencies provided guidance as to how certain short-term modifications would not be considered TDRs, and have subsequently confirmed that such guidance could be applicable for loans ~~had~~that ~~received~~do ~~full~~not ~~forgiveness~~qualify for favorable accounting treatment under Section 4013 of the CARES Act. On December 27, 2020, the Consolidated Appropriations Act, 2020 (the “CAA Act”) became law, which both funded the federal government until September 30, 2021 and broadly addressed additional COVID-19 responses and relief. Among the additional relief measures included were certain extensions to elements of the CARES Act, including an extension of temporary relief from TDRs established under Section 4013 of the ~~SBA~~CARES Act to the earlier of a) January 1, 2022, or b) the date that is 60 days after the date on which the national COVID-19 emergency terminates.

To work with customers impacted by COVID-19, the Company is offering short-term loan modifications (i.e., three months or less with the potential to extend up to six months, if necessary) on a case by case basis to borrowers who were current in their payments at the inception of the loan modification program. The Company additionally offers, to borrowers that qualify, loan deferrals under Section 4013 of the CARES Act. Loans less than 30 days past due as of September 30, 2020 are considered current for COVID-19 modifications and therefore qualify for a loan deferral. A financial institution can then suspend the requirements under U.S. GAAP for loan modifications related to COVID-19 that would otherwise be categorized as a TDR, and suspend any determination of a loan modified as a result of COVID-19 as being a TDR, including the requirement to determine impairment for accounting purposes. Financial institutions wishing to utilize this authority must make a policy election, which applies to any COVID-19 modification made between March 1, 2020 and the earlier of either January 1, 2021 or the 60th day after the end of the COVID-19 national emergency. Similarly, the Financial Accounting Standards Board (“FASB”) has confirmed that short-term modifications made on a good faith basis in response to COVID-19 to loan customers who were current prior to any relief are not TDRs. Lastly, prior to the enactment of the CARES Act, the banking regulatory agencies provided guidance as to how certain short-term modifications would not be considered TDRs, and have subsequently confirmed that such guidance could be applicable for loans that do not qualify for favorable accounting treatment under Section 4013 of the CARES Act. On December 27, 2020, the Consolidated Appropriations Act, 2020 (the “CAA Act”) became law, which both funded the federal government until September 30, 2021 and broadly addressed additional COVID-19 responses and relief. Amoung the additional relief measures included were certain extensions to elements of the CARES Act, including an extension of temporary relief from TDRs established under Section 4013 of the CARES Act to the earlier of a) January 1, 2022, or b) the date that is 60 days after the date on which the national COVID-19 emergency terminates.

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TEB BANCORP, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

As of ~~September~~December 3031, 2021 (Unaudited) and June 30, 2021 and for The Three and Six Months Ended

~~September~~December 3031, 2021 and 2020 (Unaudited)

As of ~~September~~December 3031, 2021, the Company had received requests to modify 8685 loans aggregating $22.47 million, which excluded any loans that had been paid off subsequent to modification. Of these modifications, $22.14 million, or 98.7%, were performing in accordance with the accounting treatment under Section 4013 of the CARES Act and therefore did not qualify as TDRs. Three loans totaling $~~287~~284,000 were modified and did not qualify for the favorable accounting treatment under Section 4013 of the CARES Act and therefore each loan was reported as a TDR; however, ~~two~~all of the loans were transferred out of TDR status after receiving six ~~consequtive~~consecutive monthly payments after the end of the deferral period. Management has evaluated the loans and determined that based on the liquidation value of the collateral, no specific reserve is necessary. Details with respect to loan modification requests are as follows:


	As of ~~September~~December 3031, 2021
	Payments Resumed				Payments Deferred
Loan Classification	Number of Loans		Balance		Number of Loans		Balance
Construction, land, development		2	$	~~112~~111,~~319~~301		—	$	—
1-4 family owner occupied		5051		67,~~875~~002,~~038~~392		—1		—834,688
1-4 family non-owner occupied		1413		1,~~901~~632,~~595~~191		—		—
Multifamily		1311		10,~~670~~250,~~307~~837		—		—
Commercial owner occupied		2		1,~~418~~415,~~037~~517		—		—
Commercial non-owner occupied		2		1,~~394~~383,~~555~~102		—		—
Consumer and installment loans		3		4240,~~310~~970		—		—
Total loan modification requests		8684	$	2221,~~414~~836,~~161~~310		—1	$	—834,688

Subsequent Events

Management has reviewed the Company's operations for potential disclosure or financial statement impacts related to events occurring after ~~September~~December 3031, 2021, but prior to the release of these financial statements. Based on the results of this review, no subsequent event disclosure or financial statement impacts to these financial statements are required as of ~~November~~February 12X, ~~2021~~2022.

NOTE 2 – Recent Accounting Pronouncements

The FASB issues Accounting Standards Updates (“ASU”s) to the FASB Accounting Standards Codification (“ASC”). This section provides a summary description of recent ASUs that had or that management expects may have an impact on the condensed consolidated financial statements issued upon adoption. The Company is classified as an emerging growth company and has elected to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Effective dates reflect this election.

Recently Adopted Accounting Pronouncements

In March 2017, the FASB issued ASU 2017-08, “Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities.” ASU 2017-08 amends guidance on the amortization period of premiums on certain purchased callable debt securities. The amendments shorten the amortization period of premiums on certain purchased callable debt securities to the earliest call date. ASU 2017-08 is effective for annual periods beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted. The Company adopted ASU 2017-08 effective July 1, 2020 and the adoption did not have a material impact on the Company’s condensed consolidated financial statements.

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TEB BANCORP, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

As of ~~September~~December 3031, 2021 (Unaudited) and June 30, 2021 and for The Three and Six Months Ended

~~September~~December 3031, 2021 and 2020 (Unaudited)

In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement.” ASU 2018-13 modifies the disclosure requirements on fair value measurements in Topic 820, including the removal, modification to, and addition of certain disclosure requirements. This ASU ~~will~~was be effective for fiscal years beginning after December 15, 2019 with early adoption permitted. Although this ASU impacts the Company’s fair value disclosures, there is no additional impact to the Company’s condensed consolidated financial statements. ~~All footnote disclosures were properly updated.~~

In August 2021, the FASB issued ASU No. 2021-06, “Presentation of Financial Statements (Topic 205), Financial Services – Depository and Lending (Topic 942), and Financial Services – Investment Companies (Topic 946).” ASU 2021-06 provides guidance for financial services companies, among other industries, regarding the types of disclosures that must be included in filings with the Securities and Exchange Commission. The purpose of the rule is to indicate the various items, if applicable, that should appear on the face of the balance sheets or in the notes thereto, predominately involving the loans that are originated by the financial institution to executive officers, principal holders of equity securities of the registrant or any associate of such persons. These disclosures should follow the regulations of Rule 9-03 of Regulation S-X. If any loans granted to the above mentioned parties exceed 5 percent of stockholders equity in any year, ASU 2021-06 sets out disclosure requirements for these events. This ASU was effective upon issuance. The adoption of this guidance did not have a material impact on the consolidated results of operations, financial position, or cash flow of the Company.

Recently Issued, But Not Yet Effective Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” Topic 842 was subsequently amended by ASU 2018-10, “Codification Improvements to Topic 842, Leases” and ASU 2018-11, “Leases (Topic 842)”. The amendments in this update increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. For leases with a term of 12 months or less, the amendments permit lessees to make an accounting policy election by class of underlying assets not to recognize lease assets and lease liabilities. For finance leases, the amendments in this update require a lessee to (1) recognize a right-of-use asset and lease liability, initially measured at the present value of the lease payments, on the balance sheet; (2) recognize interest on the lease liability separately from amortization of the right-of-use asset in the statement of operations; (3) classify repayments of the principal portion of the lease liability within financing activities and payments of interest on the least liability and variable lease payments within operating activities in the statement of cash flows. For operating leases, the amendments in this update require a lessee to (1) recognized a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, on the balance sheet; (2) recognized a single lease cost, calculated so that the cost of the lease is allocated over the lease term on a generally straight-line basis; (3) classify all cash payments within operating activities in the statement of cash flows. On October 16, 2019, the FASB approved the proposal to delay the effective date for this standard for private and all other entities. Due to the Company’s extended transition period election, the amendments are effective for fiscal years beginning after December 15, ~~2020~~2021. Early adoption is permitted. The Company’s leases are operating leases and ASU 2016-02 will require the Company to add them to its consolidated balance sheet. The Company’s operating leases are predominately related to real estate. Management is currently evaluating other impacts this guidance will have on the consolidated results of operations, financial presentation, and cash flows of the Company.

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326) – Measurement of Credit Losses on Financial Instruments.” Topic 326 was subsequently amended by ASU 2018-19, “Codification Improvements to Topic 326, Financial Instruments – Credit Losses; ASU 2019-04, “Codification Improvements to Topic 326, Financial Instruments – Credit Losses”; and ASU 2019-05, “Financial Instruments – Credit Losses (Topic 326): Targeted Transition Relief.” This ASU replaces the current incurred loss impairment methodology with a methodology that reflected expected credit losses measured at amortized cost and certain other instruments, including loans, held-to-maturity debt securities, net investments in leases, and off-balance-sheet credit exposures. On October 16, 2019, the

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TEB BANCORP, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

As of ~~September~~December 3031, 2021 (Unaudited) and June 30, 2021 and for The Three and Six Months Ended

~~September~~December 3031, 2021 and 2020 (Unaudited)

FASB approved the proposal to delay the effective date for this standard for private and all other entities. Due to the Company’s extended transition period election, the update is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Management is currently evaluating the potential impact on its consolidated results of operations, financial position, and cash flows; however, due to the significant differences in the revised guidance from existing U.S. GAAP, the implementation of this guidance may result in material changes in the Company’s accounting for credit losses on financial instruments.

In August 2018, the FASB issued ASU No. 2018-14, “Compensation – Retirement Benefits – Defined Benefit Plans – General (Subtopic 715-20): Disclosure Framework – Changes to the Disclosure Requirements for Defined Benefit Plans.” ASU 2018-14 applies to all employers that sponsor defined benefit pension or other postretirement plans. The amendments require that an employer disclose an explanation of the reasons for significant gains and losses related to changes in the net benefit obligation for the period. Multiple disclosure requirements are also removed with this amendment, including: (1) the amounts in accumulated other comprehensive income expected to be recognized as components of net periodic benefit cost over the next fiscal year; (2) the amount and timing of plan assets expected to be returned to the employer; (3) related party disclosures about significant transactions between the employer or related parties and the plan; and (4) the effects of a one-percentage-point change in assumed health care cost trend rates on the aggregate of the service and interest cost components of net periodic benefit costs. Additional disclosure requirements contained within Subtopic 715-20 are also clarified. The amendments are effective for fiscal years ending after December 15, 2021. Early adoption is permitted. The adoption of this guidance is not expected to have a material impact on the consolidated results of operations, financial position, or cash flows of the Company.

In January 2021, the FASB issued ASU No. 2021-01, “Reference Rate Reform (Topic 848).” ASU 2021-01 responds to concerns about structural risks of interbank offered rates (IBORs) and particularly the risk of cessation of the London Interbank Offered Rate (LIBOR). The amendments clarify the scope of Topic 848 as to the accounting for derivatives within a company’s portfolio. While the Company has no hedging instruments, it does have loans that adjust to LIBOR at varying periods within the term on the loan. This ASU was effective upon its issuance on January 7, 2021, however the amendments related to the discounting transition are optional. The Company has ~~yet~~evaluated tothe ~~adopt~~impact of this ASU, ~~but~~and ~~management~~ does not expect it to have a material impact on the Company’s financial statements.

NOTE 3 – Earnings Per Share

Earnings per share is based on net income divided by the weighted average number of shares outstanding during the period. Earnings per share is presented for the three and six month periods ended ~~September~~December 3031, 2021 and 2020.


	Three Months Ended		Three Months Ended	Six Months Ended		Six Months Ended
	~~September~~December 3031, 2021		~~September~~December 3031, 2020	December 31, 2021		December 31, 2020
Net income	$	~~624~~535,~~051~~603	1,~~778~~957,~~848~~537	$	1,159,654	3,736,385
Basic potential common shares
Weighted average shares outstanding		2,624,343	2,624,343		2,624,343	2,624,343
Basic weighted average shares outstanding		2,624,343	2,624,343		2,624,343	2,624,343
Diluted potential common shares		—	—		—	—
Diluted weighted average shares outstanding		2,624,343	2,624,343		2,624,343	2,624,343
Basic earnings per share	$	0.2420	0.6875	$	0.44	1.42
Diluted earnings per share	$	0.2420	0.6875	$	0.44	1.42

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TEB BANCORP, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

As of ~~September~~December 3031, 2021 (Unaudited) and June 30, 2021 and for The Three and Six Months Ended

~~September~~December 3031, 2021 and 2020 (Unaudited)

NOTE 4 – Fair Value of Financial Instruments

Fair value is the price that would be received to sell an asset or paid to transfer liabilities in an orderly transaction between market participants at the measurement date (exit price) and establishes a framework for measuring fair value.

To determine fair value the Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. The Company is able to classify fair value balances based on the observability of those inputs. The guidance establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The three levels of the fair value hierarchy are as follows:

> Level 1 - Fair value is based upon quoted prices (unadjusted) for identical assets or liabilities in active markets. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of financial instruments such as listed equities and U.S. Treasury securities.

> Level 2 - Fair value is based upon quoted prices for similar, but not identical, assets and liabilities in active markets, and other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. This also includes quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability, or inputs that are derived principally from or corroborated by observable market data.

> Level 3 - Fair value is based upon financial models using primarily unobservable inputs. Unobservable inputs reflect the Company's own assumptions about the assumptions that market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

Assets

Available for sale securities. Where quoted prices for securities are available in an active market, those securities are classified within Level 1 of the valuation hierarchy. If such quoted market prices are not available, then fair values are estimated using pricing models, quoted prices of securities with similar characteristics, or discounted cash flows. Examples of securities with similar characteristics, which would generally be classified within Level 2 of the valuation hierarchy, include certain AAA-rated U.S. government sponsored agency securities, municipal obligations, and mortgage-backed securities. A security using financial models based upon primarily unobservable inputs, such as commercial paper, would generally be classified within Level 3 of the valuation hierarchy.

Loans. The Company does not record loans at fair value on a recurring basis. However, from time to time, a loan is considered impaired and an allowance for loan losses may be established. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. Once a loan is identified as individually impaired, management measures impairment. The fair value of impaired loans is estimated using one of several methods, including collateral value, market value of similar debt, enterprise value, liquidation value and discounted cash flows. Those impaired loans not requiring an allowance represent loans for which the fair value of the collateral exceeds the recorded investments in such loans and for which carrying amount will remain at amortized cost. Impaired loans where an allowance is established based on the fair value of

Table of Contents

TEB BANCORP, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

As of ~~September~~December 3031, 2021 (Unaudited) and June 30, 2021 and for The Three and Six Months Ended

~~September~~December 3031, 2021 and 2020 (Unaudited)

collateral or expected cash flows require classification in the fair value hierarchy. When the fair value of the collateral is based on an observable market price or a current appraised value, less selling costs, the Company records the impaired loan as a non-recurring Level 3 valuation.

Other real estate owned, net. Assets on which the underlying collateral has been repossessed are initially recorded at the fair market value of the real estate acquired less estimated costs to sell, establishing a new cost basis.

Subsequently, other real estate owned is carried at the lower of carrying value or fair value. Fair value is based upon independent market prices, appraised values of the collateral or management’s estimation of the value of the collateral. When the fair value of the collateral is based on an observable market price or a current appraised value, less selling costs, the Company records the repossessed asset as a non-recurring Level 3 valuation.

The following tables set forth, by level within the fair value hierarchy, the Company's financial assets that were accounted for at fair value on a recurring and non-recurring basis as of ~~September~~December 3031, 2021 and June 30, 2021, respectively. According to fair value guidance, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to their fair value measurement. The Company's assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels.

The following table presents assets measured at fair value on a recurring basis:

Fair Value as of ~~September~~December 3031, 2021

Level 1

Level 2

Level 3

Total

Securities classified as available for sale:

Obligations of states and political subdivisions

—

2530,~~578~~457,~~235~~298

—

2530,~~578~~457,~~235~~298

US government agency obligations

—

5,~~624~~575,~~782~~899

—

5,~~624~~575,~~782~~899

Mortgage-backed securities

—

1,~~228~~180,~~915~~781

—

1,~~228~~180,~~915~~781

Municipal leases

—

~~999~~998,~~976~~590

—

~~999~~998,~~976~~590

Certificates of deposit

—

~~826~~820,~~783~~658

—

~~826~~820,~~783~~658

Total

—

3439,~~258~~033,~~691~~226

—

3439,~~258~~033,~~691~~226


	Fair Value as of June 30, 2021
	Level 1		Level 2		Level 3		Total
Securities classified as available for sale:
Obligations of states and political subdivisions	$	—	$	23,775,999	$	—	$	23,775,999
US government agency obligations		—		5,981,978		—		5,981,978
Mortgage-backed securities		—		1,274,916		—		1,274,916
Municipal leases		—		1,002,989		—		1,002,989
Certificates of deposit		—		832,818		—		832,818
Total	$	—	$	32,868,700	$	—	$	32,868,700

Assets measured at fair value on non-recurring basis:


	Fair Value as of ~~September~~December 3031, 2021
	Level 1		Level 2		Level 3		Total
Impaired loans with a valuation allowance, net	$	—	$	—	$	~~113~~108,~~899~~652	$	~~113~~108,~~899~~652
Other real estate owned, net		—		—		167,590		167,590
Total	$	—	$	—	$	~~281~~276,~~489~~242	$	~~281~~276,~~489~~242

Table of Contents

TEB BANCORP, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

As of ~~September~~December 3031, 2021 (Unaudited) and June 30, 2021 and for The Three and Six Months Ended

~~September~~December 3031, 2021 and 2020 (Unaudited)


	Fair Value as of June 30, 2021
	Level 1		Level 2		Level 3		Total
Impaired loans with a valuation allowance, net	$	—	$	—	$	116,906	$	116,906
Other real estate owned, net		—		—		167,590		167,590
Total	$	—	$	—	$	284,496	$	284,496

Loans with a carrying amount of $~~202~~193,000 and $206,000 were considered impaired as of ~~September~~December 3031, 2021 and June 30, 2021 and a specific allowance for loan losses of $8984,000 and $89,000, respectively, was established against these loans.

Other real estate owned with carrying ~~amount~~amounts of approximately $168,000 was determined to be at their fair value as of ~~September~~December 3031, 2021 and June 2030, ~~2020~~2021.

The following presents quantitative information about nonrecurring Level 3 fair value measurements:


	As of ~~September~~December 3031, 2021
	Fair Value		Valuation Technique	Unobservable Input(s)	Range/Weighted Average
Impaired loans with a valuation allowance, net	$	~~113~~108,~~899~~652	Market price or appraised value	Discount on appraised values for selling costs	5% - 15%
Other real estate owned, net	$	167,590	Market price or appraised value	Discount on appraised values for selling costs	5% - 15%


	As of June 30, 2021
	Fair Value		Valuation Technique	Unobservable Input(s)	Range/Weighted Average
Impaired loans with a valuation allowance, net	$	116,906	Market price or appraised value	Discount on appraised values for selling costs	5% - 15%
Other real estate owned, net	$	167,590	Market price or appraised value	Discount on appraised values for selling costs	5% - 15%

NOTE 5 – Cash and Due From Banks

In March 2020, the Federal Reserve Board reduced reserve requirements for U.S. banks to 0%. Accordingly, the Bank had no required reserves with the Federal Reserve Bank of Chicago at ~~September~~December 3031, 2021 and June 30, 2021.

Table of Contents

TEB BANCORP, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

As of ~~September~~December 3031, 2021 (Unaudited) and June 30, 2021 and for The Three and Six Months Ended

~~September~~December 3031, 2021 and 2020 (Unaudited)

NOTE 6 – Available for Sale Securities

Amortized costs and fair values of available for sale securities are summarized as follows:

~~September~~December 3031, 2021

Gross

Amortized

Unrealized

Cost

Gains

Losses

Fair Value

Obligations of states and political subdivisions

2530,~~264~~211,~~967~~914

~~446~~397,~~448~~812

~~133~~152,~~180~~428

2530,~~578~~457,~~235~~298

U.S. government agency obligations

5,642,~~505~~521

—

1766,~~723~~622

5,~~624~~575,~~782~~899

Mortgage-backed securities

1,~~193~~157,~~917~~784

3422,~~998~~997

—

1,~~228~~180,~~915~~781

Municipal leases

1,~~001~~000,~~206~~172

~~974~~3,714

25,~~204~~296

~~999~~998,~~976~~590

Certificates of deposit

800,000

2620,~~783~~658

—

~~826~~820,~~783~~658

3338,~~902~~812,~~595~~391

~~509~~445,~~203~~181

~~153~~224,~~107~~346

3439,~~258~~033,~~691~~226


	June 30, 2021
			Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses		Fair Value
Obligations of states and political subdivisions	$	23,350,108	$	508,588	$	82,697	$	23,775,999
U.S. government agency obligations		5,999,632		15		17,669		5,981,978
Mortgage-backed securities		1,229,820		45,096		—		1,274,916
Municipal leases		1,002,239		2,185		1,435		1,002,989
Certificates of deposit		800,000		32,818		—		832,818
	$	32,381,799	$	588,702	$	101,801	$	32,868,700

The following tables present the portion of the Company's available for sale securities portfolio which has gross unrealized losses, reflecting the length of time that individual securities have been in a continuous unrealized loss position:

~~September~~December 3031, 2021

Continuous Unrealized

Losses Existing for Less

Losses Existing for 12 Months

Than 12 Months

or Greater

Total

Unrealized

Fair Value

Losses

Fair Value

Losses

Fair Value

Losses

Obligations of states and political subdivisions

78,~~022~~747,~~805~~258

~~107~~126,~~260~~282

~~654~~653,~~080~~854

2526,~~920~~146

79,~~676~~401,~~885~~112

~~133~~152,~~180~~428

U.S. government agency obligations

5,~~624~~575,~~782~~899

1766,~~723~~622

—

5,~~624~~575,~~782~~899

1766,~~723~~622

Municipal leases

~~586~~353,~~158~~359

25,~~204~~296

—

~~586~~353,~~158~~359

25,~~204~~296

1314,~~233~~676,~~745~~516

~~127~~198,~~187~~200

~~654~~653,~~080~~854

2526,~~920~~146

1315,~~887~~330,~~825~~370

~~153~~224,~~107~~346

Management does not believe any individual unrealized loss as of ~~September~~December 3031, 2021 represents other than temporary impairment. AtThe ~~September 30, 2021 the~~ Bank ~~held~~holds $~~654~~653,~~080~~854, comprised of two securities, in obligations of states and political subdivisions, at December 31, 2021 that ~~have~~has an unrealized loss existing for 12 months or greater of $2526,~~920~~146. Management believes the temporary impairment in fair value was caused by market fluctuations in interest rates. Although these securities are

Table of Contents

TEB BANCORP, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

As of ~~September~~December 3031, 2021 (Unaudited) and June 30, 2021 and for The Three and Six Months Ended

~~September~~December 3031, 2021 and 2020 (Unaudited)

classified as available for sale, management does not have the intent to sell the securities and it is more likely than not it will be able to hold the securities through a recovery period or until maturity.


	June 30, 2021
	Continuous Unrealized				Continuous Unrealized
	Losses Existing for Less				Losses Existing for 12 Months
	Than 12 Months				or Greater				Total
			Unrealized				Unrealized				Unrealized
	Fair Value		Losses		Fair Value		Losses		Fair Value		Losses
Obligations of states and political subdivisions	$	4,487,481	$	82,697	$	—	$	—	$	4,487,481	$	82,697
U.S. government agency obligations		5,481,963		17,669		—		—		5,481,963		17,669
Municipal leases		588,000		1,435		—		—		588,000		1,435
	$	10,557,444	$	101,801	$	—	$	—	$	10,557,444	$	101,801

Management does not believe any individual unrealized loss as of June 30, 2021 represents other than temporary impairment. At June 30, 2021, the Bank ~~does~~did not hold any securities in obligations of states and political subdivisions at that ~~have~~had an unrealized loss existing for 12 months or greater.

The amortized cost and fair value of available for sale securities as of ~~September~~December 3031, 2021 are shown below by contractual maturity. Expected maturities of mortgage-backed securities will differ from contractual maturities since the anticipated maturities are not readily determinable.


	Amortized
	Cost		Fair Value
Due in one year or less	$	1,~~230~~875,~~555~~278	$	1,~~239~~888,~~941~~794
Due after one year through 5 years		12,~~670~~123,~~932~~723		12,~~854~~237,~~734~~278
Due after 5 years through 10 years		7,~~678~~873,~~950~~353		7,~~812~~925,~~016~~832
Due after 10 years		1115,~~128~~782,~~241~~253		1115,~~123~~800,~~085~~541
Subtotal		3237,~~708~~654,~~678~~607		3337,~~029~~852,~~776~~445
Mortgage backed securities
Due after one year through 5 years		1,~~193~~157,~~917~~784		1,~~228~~180,~~915~~781
Due after 5 years through 10 years		—		—
Total	$	3338,~~902~~812,~~595~~391	$	3439,~~258~~033,~~691~~226

During the three months ended ~~September~~December 3031, 2021 and 2020, the ~~Company~~Bank did not sell any available for sale securities. The ~~Company~~Bank did not have any available for sale securities pledged at ~~September~~December 3031, 2021 and June 30, 2021.

Table of Contents

TEB BANCORP, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

As of ~~September~~December 3031, 2021 (Unaudited) and June 30, 2021 and for The Three and Six Months Ended

~~September~~December 3031, 2021 and 2020 (Unaudited)

NOTE 7 – Loans and Allowance for Loan Losses

Major classifications of loans are as follows:


	~~September~~December 3031, 2021		June 30, 2021
Construction, land, development	$	89,~~070~~760,~~394~~179	$	2,458,461
1-4 family owner occupied		7472,~~012~~853,~~356~~855		72,011,570
1-4 family non-owner occupied		2125,~~211~~508,~~782~~136		22,368,557
Multifamily		96100,~~821~~199,~~185~~616		91,876,323
Commercial owner occupied		6,~~296~~135,~~756~~242		6,405,226
Commercial non-owner occupied		1314,~~458~~046,~~274~~851		14,182,106
Consumer and installment loans		76,~~203~~998,~~551~~578		7,530,197

Total loans		~~227~~235,~~074~~502,~~298~~457		216,832,440
Less:
Allowance for loan losses		(1,~~462~~487,~~889~~823)		(1,412,489)

Loans, net	$	~~225~~234,~~611~~014,~~409~~634	$	215,419,951

In the table above, outstanding loan balances are presented net of deferred loan origination fees of $~~133~~131,000 at ~~September~~December 3031, 2021 and $99,000 at June 30, 2021.

~~Non-performing~~Impaired loans are as follows:


	~~September~~December 3031, 2021		June 30, 2021
Nonaccrual Loans	$	640,030	$	793,141
Nonaccrual loans	$	756,272	$	793,141
Total non-performing loans	$	~~640~~756,~~030~~272	$	793,141

Restructured loans, accruing	$	—	$	—
Total impaired loans	$	~~640~~756,~~030~~272	$	793,141

Table of Contents

TEB BANCORP, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

As of ~~September~~December 3031, 2021 (Unaudited) and June 30, 2021 and for The Three and Six Months Ended

~~September~~December 3031, 2021 and 2020 (Unaudited)

Impaired loans are as follows as of and for the following periods ended:


	~~September~~December 3031, 2021
	Construction,		1-4 Family		1-4 Family				Commercial		Commercial
	Land,		Owner		Non-Owner				Owner		Non-Owner		Consumer and
	Development		Occupied		Occupied		Multifamily		Occupied		Occupied		Installment		Total
With related allowance recorded
Recorded investment	$	—	$	—	$	—	$	—	$	~~181~~180,~~914~~579	$	—	$	2012,~~569~~520	$	~~202~~193,~~483~~099
Unpaid principal balance		—		—		—		—		~~181~~180,~~914~~579		—		2012,~~569~~520		~~202~~193,~~483~~099
Related allowance		—		—		—		—		6871,~~016~~927		—		2012,~~569~~520		8884,~~585~~447

With no related allowance recorded		—
Recorded investment	$	—	$	~~437~~557,~~547~~688	$	—	$	—	$	—	$	—	$	—5,485	$	~~437~~563,~~547~~173
Unpaid principal balance		—		~~437~~557,~~547~~688		—		—		—		—		—5,485		~~437~~563,~~547~~173
Related allowance		—		—		—		—		—		—		—		—

Total
Recorded investment	$	—	$	~~437~~557,~~547~~688	$	—	$	—	$	~~181~~180,~~914~~579	$	—	$	2018,~~569~~005	$	~~640~~756,~~030~~272
Unpaid principal balance		—		~~437~~557,~~547~~688		—		—		~~181~~180,~~914~~579		—		2018,~~569~~005		~~640~~756,~~030~~272
Related allowance		—		—		—		—		6871,~~016~~927		—		2012,~~569~~520		8884,~~585~~447

	Three Months Ended ~~September~~December 3031, 2021
Average recorded balance	$	—	$	~~476~~501,~~294~~535	$	—	$	—	$	~~182~~181,~~223~~092	$	—	$	2219,~~065~~287	$	~~680~~701,~~582~~914
																—
Interest income recognized while impaired	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Interest income recognized on a cash basis while impaired		—		15,~~723~~678		—		—		—		—		—		15,~~723~~678
Total interest on impaired loans	$	—	$	15,~~723~~678	$	—	$	—	$	—	$	—	$	—	$	15,~~723~~678

	Six Months Ended December 31, 2021
Average recorded balance	$	—	$	496,253	$	—	$	—	$	181,621	$	—	$	20,691	$	698,565

Interest income recognized while impaired	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Interest income recognized on a cash basis while impaired		—		7,401		—		—		—		—		—		7,401
Total interest on impaired loans	$	—	$	7,401	$	—	$	—	$	—	$	—	$	—	$	7,401


	June 30, 2021
	Construction,		1-4 Family		1-4 Family				Commercial		Commercial
	Land,		Owner		Non-Owner				Owner		Non-Owner		Consumer and
	Development		Occupied		Occupied		Multifamily		Occupied		Occupied		Installment		Total
With related allowance recorded
Recorded investment	$	—	$	—	$	—	$	—	$	182,532	$	—	$	23,133	$	205,665
Unpaid principal balance		—		—		—		—		182,532		—		23,133		205,665
Related allowance		—		—		—		—		65,626		—		23,133		88,759

With no related allowance recorded
Recorded investment	$	—	$	587,476	$	—	$	—	$	—	$	—	$	—	$	587,476
Unpaid principal balance		—		587,476		—		—		—		—		—		587,476
Related allowance		—		—		—		—		—		—		—		—

Total
Recorded investment	$	—	$	587,476	$	—	$	—	$	182,532	$	—	$	23,133	$	793,141
Unpaid principal balance		—		587,476		—		—		182,532		—		23,133		793,141
Related allowance		—		—		—		—		65,626		—		23,133		88,759

Average recorded balance	$	—	$	780,405	$	41,013	$	—	$	181,950	$	—	$	109,214	$	1,112,582

Interest income recognized while impaired	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Interest income recognized on a cash basis while impaired		—		20,084		—		—		—		—		—		20,084
Total interest on impaired loans	$	—	$	20,084	$	—	$	—	$	—	$	—	$	—	$	20,084

Table of Contents

TEB BANCORP, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

As of ~~September~~December 3031, 2021 (Unaudited) and June 30, 2021 and for The Three and Six Months Ended

~~September~~December 3031, 2021 and 2020 (Unaudited)


	~~September~~December 3031, 2020
	Construction,		1-4 Family		1-4 Family				Commercial		Commercial
	Land,		Owner		Non-Owner				Owner		Non-Owner		Consumer and
	Development		Occupied		Occupied		Multifamily		Occupied		Occupied		Installment		Total
With related allowance recorded
Recorded investment	$	—	$	~~162~~93,~~455~~110	$	—	$	—	$	~~173~~182,~~316~~853	$	—	$	~~102~~95,~~036~~763	$	~~437~~371,~~807~~726
Unpaid principal balance		—		~~162~~93,~~455~~110		—		—		~~173~~182,~~316~~853		—		~~102~~95,~~036~~763		~~437~~371,~~807~~726
Related allowance		—		6661,~~048~~491		—		—		5464,~~334~~430		—		6053,~~155~~882		~~180~~179,~~537~~803

With no related allowance recorded
Recorded investment	$	—	$	~~802~~799,~~514~~428	$	79,265	$	—	$	—	$	—	$	30,374	$	~~832~~909,~~888~~067
Unpaid principal balance		—		~~802~~799,~~514~~428		79,265		—		—		—		30,374		~~832~~909,~~888~~067
Related allowance		—		—		—		—		—		—		—		—

Total
Recorded investment	$	—	$	~~964~~892,~~969~~538	$	—79,265	$	—	$	~~173~~182,~~316~~853	$	—	$	~~132~~126,~~410~~137	$	1,~~270~~280,~~695~~793
Unpaid principal balance		—		~~964~~892,~~969~~538		—79,265		—		~~173~~182,~~316~~853		—		~~132~~126,~~410~~137		1,~~270~~280,~~695~~793
Related allowance		—		6661,~~048~~491		—		—		5464,~~334~~430		—		6053,~~155~~882		~~180~~179,~~537~~803

	Three Months Ended ~~September~~December 3031, 2020
Average recorded balance	$	—	$	~~965~~911,~~118~~182	$	1419,~~393~~816	$	—	$	180,~~082~~387	$	—	$	130,~~309~~024	$	1,~~289~~241,~~902~~409

Interest income recognized while impaired	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Interest income recognized on a cash basis while impaired		—		35,~~388~~021		—		—		—		—		—		35,~~388~~021
Total interest in impaired loans	$	—	$	3,388	$	—	$	—	$	—	$	—	$	—	$	3,388
Total interest on impaired loans	$	—	$	5,021	$	—	$	—	$	—	$	—	$	—	$	5,021

	Six Months Ended December 31, 2020
Average recorded balance	$	—	$	934,319	$	19,548	$	—	$	181,222	$	—	$	129,846	$	1,264,935

Interest income recognized while impaired	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Interest income recognized on a cash basis while impaired		—		8,409		—		—		—		—		—		8,409
Total interest in impaired loans	$	—	$	8,409	$	—	$	—	$	—	$	—	$	—	$	8,409

Loans are individually evaluated for impairment once a weakness or adverse trend is identified that may jeopardize the repayment of the loan in accordance with the terms of the loan.

The following are the Company's risk rating definitions:

Pass: Loans in this category are to persons or entities that span from having financial characteristics of unquestioned strength to entities that have potential risks that if left uncorrected could at some point result in deterioration of the Bank’s credit position. Loans in this category are rated “1” through “4” with the lower risk being identified with a lower numerical rating. General characteristics that are monitored include borrower net worth, liquidity and entity profitability.

Special Mention: Loans in this category contain some weakness or potential weakness that if left uncorrected may result in the deterioration of the repayment capacity. Loans in this category are rated as a “5”.

Substandard: Loans in this category exhibit the same characteristics as “5” rated credits and are inadequately protected by the current net worth and paying capacity of the obligor and/or of the collateral pledged as security for the asset. Loans in this category are rated as a “6”.

Real Estate in Judgement: Loans in this category have been placed in non-accrual and the Bank has taken legal action to preserve its position. Loans in this category are rated as a “7”.

Table of Contents

TEB BANCORP, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

As of ~~September~~December 3031, 2021 (Unaudited) and June 30, 2021 and for The Three and Six Months Ended

~~September~~December 3031, 2021 and 2020 (Unaudited)

The following is a summary of loans by risk rating:


	~~September~~December 3031, 2021
	Construction,		1-4 Family		1-4 Family				Commercial		Commercial
	Land,		Owner		Non-Owner				Owner		Non-Owner		Consumer and
			Occupied		Occupied		Multifamily		Occupied		Occupied		Installment		Total
1-4	$	89,~~070~~760,~~394~~179	$	7372,~~519~~296,~~200~~167	$	2125,~~211~~508,~~782~~136	$	96100,~~821~~199,~~185~~616	$	4,~~956~~796,~~966~~787	$	10,~~219~~825,~~550~~775	$	76,~~182~~980,~~982~~573	$	~~221~~230,~~982~~367,~~059~~233
5		—		~~55,609~~—		—		—		1,157,876		3,~~238~~221,~~724~~076		—		4,~~452~~378,~~209~~952
6		—		~~437~~557,~~547~~688		—		—		~~181,914~~—		—		2018,~~569~~005		~~640~~575,~~030~~693
7		—		—		—		—		—180,579		—		—		—180,579
Total	$	89,~~070~~760,~~394~~179	$	7472,~~012~~853,~~356~~855	$	2125,~~211~~508,~~782~~136	$	96100,~~821~~199,~~185~~616	$	6,~~296~~135,~~756~~242	$	1314,~~458~~046,~~274~~851	$	76,~~203~~998,~~551~~578	$	~~227~~235,~~074~~502,~~298~~457


	June 30, 2021
	Construction,		1-4 Family		1-4 Family				Commercial		Commercial
	Land,		Owner		Non-Owner				Owner		Non-Owner		Consumer and
	Development		Occupied		Occupied		Multifamily		Occupied		Occupied		Installment		Total
1-4	$	2,458,461	$	71,319,957	$	22,368,557	$	91,876,323	$	5,064,818	$	10,917,142	$	7,507,064	$	211,512,322
5		—		104,137		—		—		1,157,876		3,264,964		—		4,526,977
6		—		587,476		—		—		182,532		—		23,133		793,141
7		—		—		—		—		—		—		—		—
Total	$	2,458,461	$	72,011,570	$	22,368,557	$	91,876,323	$	6,405,226	$	14,182,106	$	7,530,197	$	216,832,440

The following is a summary of past due loans:

~~September~~December 3031, 2021

Construction,

1-4 Family

Commercial

Land,

Owner

Non-Owner

Owner

Non-Owner

Consumer and

Development

Occupied

Multifamily

Occupied

Installment

Total

30‑59 days, accruing

—

~~371~~250,~~488~~352

~~18,376~~—

—

~~389~~250,~~864~~352

60‑89 days, accruing

—

70226,~~658~~894

—

70226,~~658~~894

90 days & over or nonaccrual

—

~~437~~557,~~547~~688

—

~~181~~180,~~914~~579

—

2018,~~569~~005

~~640~~756,~~030~~272

Total

—

~~879~~1,~~693~~034,934

~~18,376~~—

—

~~181~~180,~~914~~579

—

2018,~~569~~005

1,~~100~~233,~~552~~518


	June 30, 2021
	Construction,		1-4 Family		1-4 Family				Commercial		Commercial
	Land,		Owner		Non-Owner				Owner		Non-Owner		Consumer and
	Development		Occupied		Occupied		Multifamily		Occupied		Occupied		Installment		Total
30‑59 days, accruing	$	—	$	535,696	$	—	$	—	$	—	$	—	$	—	$	535,696
60‑89 days, accruing		—		—		—		—		—		—		—		—
90 days & over or nonaccrual		—		587,476		—		—		182,532		—		23,133		793,141
Total	$	—	$	1,123,172	$	—	$	—	$	182,532	$	—	$	23,133	$	1,328,837

TDRs involve the granting of some concession to a distressed borrower resulting in a loan modification such as; payment schedule changes, interest rate reductions, or principal charge-offs. There were no new TDRs during the ~~three~~six months ending ~~September~~December 3031, 2021. There were also no TDRs that defaulted during the period that were modified within the previous ~~three~~six months as of ~~September~~December 3031, 2021. ~~One~~Two ~~TDR~~TDRs ~~was~~were transferred out of TDR status during the ~~three~~six months ended ~~September~~December 3031, 2021. There ~~was~~were ~~one~~no ~~TDR~~TDRs as of ~~September~~December 3031, 2021 and two TDRs as of June 30, 2021. As discussed within Note 1, under Section 4013 of the CARES Act, a financial institution can suspend the requirements under U.S. GAAP for loan modifications related to COVID-19 that would otherwise be categorized as a TDR and suspend any determination of a loan modified as a result of COVID-19 as being a TDR, including the requirement to determine impairment for accounting purposes. Management has evaluated the loans and determined that based on the liquidation value of the collateral, no specific reserve is necessary.

Table of Contents

TEB BANCORP, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

As of ~~September~~December 3031, 2021 (Unaudited) and June 30, 2021 and for The Three and Six Months Ended

~~September~~December 3031, 2021 and 2020 (Unaudited)

Loans that have previously been restructured in a troubled debt restructuring and are no longer impaired based on the terms specified in their restructuring agreement and are now at a rate equal to or greater than a rate the Bank is willing to accept for a loan with comparable risk are transferred out of TDR status. ~~One~~Two ~~loan~~loans ~~was~~were transferred out of TDR status during the ~~three~~six months ended ~~September~~December 3031, 2021.

The following is a summary of TDRs as of ~~September~~December 3031, 2021:


	Construction,		1-4 Family		1-4 Family				Commercial		Commercial
	Land,		Owner		Non-Owner				Owner		Non-Owner		Consumer &
	Development		Occupied		Occupied		Multifamily		Occupied		Occupied		Installment		Total
Accruing
Beginning balance June 30, 2021	$	—	$	104,137	$	—	$	—	$	—	$	—	$	—	$	104,137
Transfer to other loan category		—		—		—		—		—		—		—		—
Principal payments		—		(~~311~~610)		—		—		—		—		—		(~~311~~610)
Charge-offs		—		—		—		—		—		—		—		—
Sales		—		—		—		—		—		—		—		—
New restructureds		—		—		—		—		—		—		—		—
Transfers out of TDR status		—		(48,217)		—		—		—		—		—		(48,217)
Transfers to foreclosed properties		—		—		—		—		—		—		—		—
Transfers to nonaccrual		—		—(55,310)		—		—		—		—		—		—(55,310)
Transfers out of nonaccrual		—		—		—		—		—		—		—		—
Ending balance	$	—	$	~~55,609~~—	$	—	$	—	$	—	$	—	$	—	$	~~55,609~~—

Nonaccrual
Beginning balance	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Principal payments		—		—		—		—		—		—		—		—
Charge-offs		—		—		—		—		—		—		—		—
Sales		—		—		—		—		—		—		—		—
Transfers to foreclosed properties		—		—		—		—		—		—		—		—
Transfers from accrual		—		—		—		—		—		—		—		—
Transfers to accrual		—		—		—		—		—		—		—		—
Ending balance	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Totals
Beginning balance	$	—	$	104,137	$	—	$	—	$	—	$	—	$	—	$	104,137
Transfer to other loan category		—		—		—		—		—		—		—		—
Principal payments		—		(~~311~~610)		—		—		—		—		—		(~~311~~610)
Charge-offs		—		—		—		—		—		—		—		—
Sales		—		—		—		—		—		—		—		—
New restructureds		—		—		—		—		—		—		—		—
Transfers out of TDR status		—		(48,217)		—		—		—		—		—		(48,217)
Transfers to foreclosed properties		—		—		—		—		—		—		—		—
Transfers to nonaccrual		—		—(55,310)		—		—		—		—		—		—(55,310)
Transfers from accrual		—		—		—		—		—		—		—		—
Transfers out of nonaccrual		—		—		—		—		—		—		—		—
Ending balance	$	—	$	~~55,609~~—	$	—	$	—	$	—	$	—	$	—	$	~~55,609~~—

Table of Contents

TEB BANCORP, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

As of ~~September~~December 3031, 2021 (Unaudited) and June 30, 2021 and for The Three and Six Months Ended

~~September~~December 3031, 2021 and 2020 (Unaudited)

The allowance for loan losses reflected in the accompanying condensed consolidated financial statements represents the allowance available to absorb probable and inherent loan losses in the loan portfolio. An analysis of changes in the allowance is presented in the following tabulation for the three and six months ended ~~September~~December 3031, 2021 and 2020 and the year ended June 30, 2021:


	Three Months Ended ~~September~~December 3031, 2021
	Construction,		1-4 Family		1-4 Family				Commercial		Commercial				Not
	Land,		Owner		Non-Owner				Owner		Non-Owner				Specifically
	Development		Occupied		Occupied		Multifamily		Occupied		Occupied		Consumer		Allocated		Total
Allowance
Balance at 9/30/21	$	36,317	$	339,916	$	100,119	$	484,106	$	101,647	$	218,697	$	61,871	$	120,216	$	1,462,889
Charge-offs		—		—		—		—		—		—		(207)		—		(207)
Recoveries		—		—		—		—		—		—		141		—		141
Provision		10,044		14,335		27,422		41,942		4,519		(39,599)		(7,192)		(26,471)		25,000
Balance at 12/31/21	$	46,361	$	354,251	$	127,541	$	526,048	$	106,166	$	179,098	$	54,613	$	93,745	$	1,487,823

	Six Months Ended December 31, 2021
	Construction,		1-4 Family		1-4 Family				Commercial		Commercial				Not
	Land,		Owner		Non-Owner				Owner-		Non-Owner				Specifically
	Development		Occupied		Occupied		Multifamily		Occupied		Occupied		Consumer		Allocated		Total
Allowance
Balance at 6/30/21	$	11,063	$	326,408	$	115,645	$	459,382	$	99,851	$	230,459	$	66,523	$	103,158	$	1,412,489
Charge-offs		—		—		—		—		—		—		—(207)		—		—(207)
Recoveries		—		—		—		—		—		—		~~400~~541		—		~~400~~541
Provision		2535,~~254~~298		1327,~~508~~843		~~(15~~11,~~526)~~896		2466,~~724~~666		16,~~796~~315		(1151,~~762~~361)		(512,~~052~~244)		17(9,~~058~~413)		5075,000
Balance at 9/30/21	$	36,317	$	339,916	$	100,119	$	484,106	$	101,647	$	218,697	$	61,871	$	120,216	$	1,462,889
Balance at 12/31/21	$	46,361	$	354,251	$	127,541	$	526,048	$	106,166	$	179,098	$	54,613	$	93,745	$	1,487,823

Allowance
Ending balance individually evaluated for impairment	$	—	$	—	$	—	$	—	$	6871,~~016~~927	$	—	$	2012,~~569~~520	$	—	$	8884,~~585~~447
Ending balance collectively evaluated for impairment		3646,~~317~~361		~~339~~354,~~916~~251		~~100~~127,~~119~~541		~~484~~526,~~106~~048		3334,~~631~~239		~~218~~179,~~697~~098		4142,~~302~~093		~~120~~93,~~216~~745		1,~~374~~403,~~304~~376
Ending balance	$	3646,~~317~~361	$	~~339~~354,~~916~~251	$	~~100~~127,~~119~~541	$	~~484~~526,~~106~~048	$	~~101~~106,~~647~~166	$	~~218~~179,~~697~~098	$	6154,~~871~~613	$	~~120~~93,~~216~~745	$	1,~~462~~487,~~889~~823
Loans
Ending balance individually evaluated for impairment	$	—	$	~~437~~557,~~547~~688	$	—	$	—	$	~~181~~180,~~914~~579	$	—	$	2018,~~569~~005	$	—	$	~~640~~756,~~030~~272
Ending balance collectively evaluated for impairment		89,~~070~~760,~~394~~179		7372,~~574~~296,~~809~~167		2125,~~211~~508,~~782~~136		96100,~~821~~199,~~185~~616		65,~~114~~954,~~842~~663		1314,~~458~~046,~~274~~851		76,~~182~~980,~~982~~573		—		~~226~~234,~~434~~746,~~268~~185
Total loans	$	89,~~070~~760,~~394~~179	$	7472,~~012~~853,~~356~~855	$	2125,~~211~~508,~~782~~136	$	96100,~~821~~199,~~185~~616	$	6,~~296~~135,~~756~~242	$	1314,~~458~~046,~~274~~851	$	76,~~203~~998,~~551~~578	$	—	$	~~227~~235,~~074~~502,~~298~~457
Less allowance	$	3646,~~317~~361	$	~~339~~354,~~916~~251	$	~~100~~127,~~119~~541	$	~~484~~526,~~106~~048	$	~~101~~106,~~647~~166	$	~~218~~179,~~697~~098	$	6154,~~871~~613	$	~~120~~93,~~216~~745	$	1,~~462~~487,~~889~~823
Total loans, net	$	89,~~034~~713,~~077~~818	$	7372,~~672~~499,~~440~~604	$	2125,~~111~~380,~~663~~595	$	9699,~~337~~673,~~079~~568	$	6,~~195~~029,~~109~~076	$	13,~~239~~867,~~577~~753	$	76,~~141~~943,~~680~~965	$	(~~120~~93,~~216~~745)	$	~~225~~234,~~611~~014,~~409~~634

Table of Contents

TEB BANCORP, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

As of ~~September~~December 3031, 2021 (Unaudited) and June 30, 2021 and for The Three and Six Months Ended

~~September~~December 3031, 2021 and 2020 (Unaudited)


	June 30, 2021
	Construction,		1-4 Family		1-4 Family				Commercial		Commercial				Not
	Land,		Owner		Non-Owner				Owner-		Non-Owner				Specifically
	Development		Occupied		Occupied		Multifamily		Occupied		Occupied		Consumer		Allocated		Total
Allowance
Balance at 6/30/20	$	13,795	$	356,434	$	77,220	$	286,665	$	95,711	$	312,670	$	97,312	$	113,620	$	1,353,427
Charge-offs		—		(61,491)		—		—		—		—		(29,994)		—		(91,485)
Recoveries		—		—		—		—		—		—		547		—		547
Provision		(2,732)		31,465		38,425		172,717		4,140		(82,211)		(1,342)		(10,462)		150,000
Balance at 6/30/21	$	11,063	$	326,408	$	115,645	$	459,382	$	99,851	$	230,459	$	66,523	$	103,158	$	1,412,489

Allowance
Ending balance individually evaluated for impairment	$	—	$	—	$	—	$	—	$	65,626	$	—	$	23,133	$	—	$	88,759
Ending balance collectively evaluated for impairment		11,063		326,408		115,645		459,382		34,225		230,459		43,390		103,158		1,323,730
Ending balance	$	11,063	$	326,408	$	115,645	$	459,382	$	99,851	$	230,459	$	66,523	$	103,158	$	1,412,489
Loans

Ending balance individually evaluated for impairment	$	—	$	587,476	$	—	$	—	$	182,532	$	—	$	23,133	$	—	$	793,141
Ending balance collectively evaluated for impairment		2,458,461		71,424,094		22,368,557		91,876,323		6,222,694		14,182,106		7,507,064		—		216,039,299
Total loans	$	2,458,461	$	72,011,570	$	22,368,557	$	91,876,323	$	6,405,226	$	14,182,106	$	7,530,197	$	—	$	216,832,440
Less allowance	$	11,063	$	326,408	$	115,645	$	459,382	$	99,851	$	230,459	$	66,523	$	103,158	$	1,412,489
Total loans, net	$	2,447,398	$	71,685,162	$	22,252,912	$	91,416,941	$	6,305,375	$	13,951,647	$	7,463,674	$	(103,158)	$	215,419,951


	Three Months Ended September 30, 2020
	Construction,		1-4 Family		1-4 Family				Commercial		Commercial				Not
	Land,		Owner		Non-Owner				Owner-		Non-Owner				Specifically
	Development		Occupied		Occupied		Multifamily		Occupied		Occupied		Consumer		Allocated		Total
Allowance
Balance at 6/30/20	$	13,795	$	356,434	$	77,220	$	286,665	$	95,711	$	312,670	$	97,312	$	113,620	$	1,353,427
Charge-offs		—		—		—		—		—		—		(325)		—		(325)
Recoveries		—		—		—		—		—		—		382		—		382
Provision		(2,936)		(21,043)		(1,393)		63,976		(20,527)		16,232		(7,428)		(26,881)		—
Balance at 3/31/20	$	10,859	$	335,391	$	75,827	$	350,641	$	75,184	$	328,902	$	89,941	$	86,739	$	1,353,484

Allowance
Ending balance individually evaluated for impairment	$	—	$	66,048	$	—	$	—	$	54,334	$	—	$	60,155	$	—	$	180,537
Ending balance collectively evaluated for impairment		10,859		269,343		75,827		350,641		20,850		328,902		29,786		86,739		1,172,947
Ending balance	$	10,859	$	335,391	$	75,827	$	350,641	$	75,184	$	328,902	$	89,941	$	86,739	$	1,353,484
Loans

Ending balance individually evaluated for impairment	$	—	$	964,969	$	—	$	—	$	173,316	$	—	$	132,410	$	—	$	1,270,695
Ending balance collectively evaluated for impairment		3,619,835		91,613,190		20,831,506		82,503,675		6,415,474		20,620,785		7,390,931		—		232,995,396
Total loans	$	3,619,835	$	92,578,159	$	20,831,506	$	82,503,675	$	6,588,790	$	20,620,785	$	7,523,341	$	—	$	234,266,091
Less allowance	$	10,859	$	335,391	$	75,827	$	350,641	$	75,184	$	328,902	$	89,941	$	86,739	$	1,353,484
Total loans, net	$	3,608,976	$	92,242,768	$	20,755,679	$	82,153,034	$	6,513,606	$	20,291,883	$	7,433,400	$	(86,739)	$	232,912,607

Table of Contents

TEB BANCORP, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

As of ~~September~~December 3031, 2021 (Unaudited) and June 30, 2021 and for The Three and Six Months Ended

~~September~~December 3031, 2021 and 2020 (Unaudited)


	Three Months Ended December 31, 2020
	Construction,		1-4 Family		1-4 Family				Commercial		Commercial				Not
	Land,		Owner		Non-Owner				Owner		Non-Owner				Specifically
	Development		Occupied		Occupied		Multifamily		Occupied		Occupied		Consumer		Allocated		Total
Allowance
Balance at 9/30/20	$	10,859	$	335,391	$	75,827	$	350,641	$	75,184	$	328,902	$	89,941	$	86,739	$	1,353,484
Charge-offs		—		—		—		—		—		—		—		—		—
Recoveries		—		—		—		—		—		—		7		—		7
Provision		389		(16,619)		11,525		48,824		11,266		11,745		(3,096)		(14,034)		50,000
Balance at 12/31/20	$	11,248	$	318,772	$	87,352	$	399,465	$	86,450	$	340,647	$	86,852	$	72,705	$	1,403,491

	Six Months Ended December 31, 2020
	Construction,		1-4 Family		1-4 Family				Commercial		Commercial				Not
	Land,		Owner		Non-Owner				Owner-		Non-Owner				Specifically
	Development		Occupied		Occupied		Multifamily		Occupied		Occupied		Consumer		Allocated		Total
Allowance
Balance at 6/30/20	$	13,795	$	356,434	$	77,220	$	286,665	$	95,711	$	312,670	$	97,312	$	113,620	$	1,353,427
Charge-offs		—		—		—		—		—		—		(325)		—		(325)
Recoveries		—		—		—		—		—		—		389		—		389
Provision		(2,547)		(37,662)		10,132		112,800		(9,261)		27,977		(10,524)		(40,915)		50,000
Balance at 12/31/20	$	11,248	$	318,772	$	87,352	$	399,465	$	86,450	$	340,647	$	86,852	$	72,705	$	1,403,491

Allowance
Ending balance individually evaluated for impairment	$	—	$	61,491	$	—	$	—	$	64,430	$	—	$	53,882	$	—	$	179,803
Ending balance collectively evaluated for impairment		11,248		257,281		87,352		399,465		22,020		340,647		32,970		72,705		1,223,688
Ending balance	$	11,248	$	318,772	$	87,352	$	399,465	$	86,450	$	340,647	$	86,852	$	72,705	$	1,403,491
Loans

Ending balance individually evaluated for impairment	$	—	$	892,538	$	79,265	$	—	$	182,853	$	—	$	126,137	$	—	$	1,280,793
Ending balance collectively evaluated for impairment		3,460,986		84,354,539		22,513,372		88,769,856		6,291,455		19,679,205		7,703,126		—		232,772,539
Total loans	$	3,460,986	$	85,247,077	$	22,592,637	$	88,769,856	$	6,474,308	$	19,679,205	$	7,829,263	$	—	$	234,053,332
Less allowance	$	11,248	$	318,772	$	87,352	$	399,465	$	86,450	$	340,647	$	86,852	$	72,705	$	1,403,491
Total loans, net	$	3,449,738	$	84,928,305	$	22,505,285	$	88,370,391	$	6,387,858	$	19,338,558	$	7,742,411	$	(72,705)	$	232,649,841

NOTE 8 – Loan Servicing

The unpaid principal balance of loans serviced for others, which is not included in the condensed consolidated financial statements, was $11,~~808~~873,~~767~~450 and $12,471,488 at ~~September~~December 3031, 2021 and June 30, 2021, respectively. The Bank did not maintain any custodial balances at ~~September~~December 3031, 2021 and June 30, 2021, respectively, in connection with the foregoing loan servicing.

NOTE 9 – Borrowings

Borrowings consist of the following:


	~~September~~December 3031, 2021		June 30, 2021
FHLB fixed rate advance (0.00%, matures 5/23/22)	$	5,000,000	$	5,000,000

	$	5,000,000	$	5,000,000

The Bank has a master contract agreement with the FHLB, which provides for borrowing up to a maximum ~~110~~$111,~~106~~317,~~324~~440 at ~~September~~December 3031, 2021. The FHLB provides both fixed and floating rate advances. Within the master contract agreement, the Bank also has an open line of credit with the FHLB with a variable interest rate. There were no outstanding advances on the open line of credit as of September 30, 2021 and June 30, 2021.

Additionally, the Bank had $5,000,000 outstanding in term advances as of September 30, 2021 and June 30, 2021. The advances are collateralized by a security agreement pledging a majority of the Bank’s one- to four-family and multifamily mortgages.28

~~The~~Table ~~Bank has an agreement with U.S. Bank, which provides for borrowing up to the maximum~~ of ~~$5,000,000. There were no amounts outstanding as of September 30, 2021 or June 30, 2021.~~Contents

TEB BANCORP, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

As of December 31, 2021 (Unaudited) and June 30, 2021 and for The Three and Six Months Ended

December 31, 2021 and 2020 (Unaudited)

contract agreement, the Bank also has an open line of credit with the FHLB with a variable interest rate. There were no outstanding advances on the open line of credit as of December 31, 2021 and June 30, 2021.

Additionally, the Bank had $5,000,000 outstanding in term advances at December 31, 2021 and June 30, 2021. The advances are collateralized by a security agreement pledging a majority of the Bank’s one- to four-family and multifamily mortgages.

The Bank has an agreement with U.S. Bank, which provides for borrowing up to the maximum of $5,000,000. There were no amounts outstanding as of December 31, 2021 or June 30, 2021.

NOTE 10 – Income Taxes

The Company recognized no income tax expense for each of the three and six months ended ~~September~~December 3031, 2021 and 2020. At the end of each interim period, management estimates the effective tax rate expected to be applicable for the full fiscal year and this rate is applied to the results for the year to date period, and adjusted for any items that are considered discrete in accordance with ASC 740-270. The primary difference between the statutory tax rate and the effective rate for the period ending ~~September~~December 3031, 2021 would be the anticipated change in valuation allowance. Management records a valuation allowance for deferred tax assets that are more likely than not to not be realized.

NOTE 11 – Defined Benefit Pension Plan

The Plan covers substantially all employees hired prior to March 31, 2012. The benefits are based on years of service and the employee’s average monthly pay received during the five highest consecutive calendar years in the last 10 years of employment under the Plan. Management contributes annually the amounts necessary to provide for defined benefit payments upon retirement or death as determined by the Plan’s actuary. The defined benefit pension plan was frozen effective March 31, 2012 for all employees. No additional benefits are being accrued for active participants after this date, and no new participants will be entered into the Plan.

In accordance with accounting guidance for defined benefit plans, the Bank recognizes the funded status of defined benefit pension and other post-retirement plans as a net asset or liability on its consolidated balance sheet.

28The Bank recognized pension income of $82,155 and $164,310 for the three and six months ended December 31, 2021, respectively, and pension expense of $26,250 and $52,500 for the three and six months ended December 31, 2020, respectively.

~~Table~~The Bank had a valuation of ~~Contents~~the Plan completed at fiscal year ending June 30, 2021, which included estimated amortizations from accumulated other comprehensive loss into net periodic pension cost during the next fiscal year of $159,594. The change in pension obligation reported in the condensed consolidated balance sheets, condensed consolidated statements of comprehensive income, and in the condensed consolidated statements of changes in stockholders’ equity as of December 31, 2021 reflect this estimation.

TEB BANCORP, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

As of September 30, 2021 (Unaudited) and June 30, 2021 and for The Three Months Ended

September 30, 2021 and 2020 (Unaudited)

The Bank recognized pension income of $82,155 for the three months ended September 30, 2021, and pension expense of $26,250 for the three months ended September 30, 2020.

The Bank had a valuation of the Plan completed as of the fiscal year ended June 30, 2021, which included estimated amortizations from accumulated other comprehensive loss into net periodic pension cost during the next fiscal year of

$159,594. The change in pension obligation reported in the condensed consolidated balance sheets, condensed consolidated statements of comprehensive income, and in the condensed consolidated statements of changes in stockholders’ equity as of September 30, 2021 reflect this estimation.

NOTE 12 – Commitments and Contingencies

In the normal course of business, the Company is involved in various legal proceedings. In the opinion of management, any liability resulting from such proceedings would not have a material adverse effect on the condensed consolidated financial statements.

The Company is party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, financial ~~guarantees, and standby letters of credit. They involve, to varying degrees, elements of credit risk in excess of amounts recognized on the consolidated balance sheets.~~

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TEB BANCORP, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

As of December 31, 2021 (Unaudited) and June 30, 2021 and for The Three and Six Months Ended

December 31, 2021 and 2020 (Unaudited)

guarantees, and standby letters of credit. They involve, to varying degrees, elements of credit risk in excess of amounts recognized on the consolidated balance sheets.

The Company's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual notional amount of those instruments. The Company uses the same credit policies in making commitments and issuing letters of credit as they do for on-balance-sheet instruments.

A summary of the contract or notional amount of the Company's exposure to off-balance-sheet risk is as follows:


	~~September~~December 3031, 2021		June 30, 2021
Financial instruments whose contract amounts represent credit risk:
Commitments to extend credit to borrowers	$	2423,~~377~~723,~~449~~228	$	20,938,071
Sold loan commitments	$	3513,~~868~~763,~~067~~340	$	41,039,038
Credit card commitments	$	488,~~187~~454	$	500,204

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer’s credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the counterparty. Collateral held varies but may include accounts receivable, inventory, property and equipment, and income-producing commercial properties. Sold loan commitments are agreements to sell loans to loan correspondents on a best efforts basis. Credit card commitments are unsecured.

As of ~~September~~December 3031, 2021 and June 30, 2021, the Company did not engage in the use of interest rate swaps, futures or option contracts.

29NOTE 13 – Regulatory Capital Requirements

The Bank is subject to various regulatory capital requirements administered by the federal and state banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possibly additional discretionary, actions by regulators that, if undertaken, could have a direct material effect on the Bank’s condensed consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of its assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk-weightings, and other factors.

On November 13, 2019, the federal regulators finalized and adopted a regulatory capital rule establishing a new community bank leverage ratio (“CBLR”), which became effective on January 1, 2020. The intent of the CBLR is to provide a simple alternative measure of capital adequacy for electing qualifying depository institutions as directed under the Economic Growth, Regulatory Relief, and Consumer Protection Act. Under the CBLR, if a qualifying depository institution elects to use such measure, such institutions will be considered well capitalized if its ratio of Tier 1 capital to average total consolidated assets (i.e. leverage ratio) exceeds a 9% threshold, subject to a limited two quarter grace period, during which the leverage ratio cannot go 100 basis points below the then applicable threshold, and will not be required to calculate and report risk-based capital ratios.

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TEB BANCORP, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

As of ~~September~~December 3031, 2021 (Unaudited) and June 30, 2021 and for The Three and Six Months Ended

~~September~~December 3031, 2021 and 2020 (Unaudited)

NOTE 13 – Regulatory Capital Requirements

On November 13, 2019, the federal regulators finalized and adopted a regulatory capital rule establishing a new community bank leverage ratio (“CBLR”), which became effective on January 1, 2020. The intent of the CBLR is to provide a simple alternative measure of capital adequacy for electing qualifying depository institutions as directed under the Economic Growth, Regulatory Relief, and Consumer Protection Act. Under the CBLR, if a qualifying depository institution (like the bank) elects to use such measure, such institutions will be considered well capitalized if its ratio of Tier 1 capital to average total consolidated assets (i.e. leverage ratio) exceeds a 9% threshold, subject to a limited two quarter grace period, during which the leverage ratio cannot go 100 basis points below the then applicable threshold, and will not be required to calculate and report risk-based capital ratios.

In April 2020, under the CARES Act, the 9% leverage ratio threshold was temporarily reduced to 8% in response to the COVID-19 pandemic. The threshold increased to 8.5% in 2021 and will return to 9% in 2022. The Bank elected to begin using the CBLR for the first quarter of 2020 and intends to utilize this measure for the foreseeable future.

As of ~~September~~December 3031, 2021 and June 30, 2021, the Bank was categorized as well capitalized. Listed in the table below is a comparison of the Bank’s actual capital amounts with the minimum requirements for well capitalized banks, as defined above. ~~Under the CBLR Framework, capital adequacy amounts and ratios are not applicable as qualifying depositary institutions are evaluated solely on whether or not they are well capitalized.~~


					To be Considered
	Actual				Well Capitalized
	Amount		Ratio		Amount		Ratio
As of September 30, 2021 (unaudited)
CBLR Framework
Tier 1 capital (to average assets)(i.e., leverage ratio)	$	34,762,410	11.26	%	$	26,237,034	8.50	%

As of June 30, 2021
CBLR Framework
Tier 1 capital (to average assets)(i.e., leverage ratio)	$	34,108,270	11.26	%	$	25,744,847	8.50	%


					To be Considered
	Actual				Well Capitalized
	Amount		Ratio		Amount		Ratio
As of December 31, 2021 (unaudited)
CBLR Framework
Tier 1 capital (to average assets) (i.e., leverage ratio)	$	35,336,304	11.21	%	$	26,792,843	8.50	%

As of June 30, 2021
CBLR Framework
Tier 1 capital (to average assets) (i.e., leverage ratio)	$	34,108,270	11.26	%	$	25,744,847	8.50	%

A Wisconsin state-chartered savings bank is required by state law to maintain minimum net worth in an amount equal to at least 6.0% of its total assets. At September 30, 2021 and June 30, 2021, the Bank’s net worth was $32,988,228 with general loan loss reserve of $1,374,304 and $32,504,792 with general loan loss reserve of $1,323,730, totaling 10.8% and 10.7% of total assets, respectively, which meets the state of Wisconsin’s minimum net worth requirements.

A Wisconsin state-chartered savings bank is required by state law to maintain minimum net worth in an amount equal to at least 6.0% of its total assets. At December 31, 2021 and June 30, 2021, the Bank’s net worth was $33,386,960 with general loan loss reserve of $1,403,376 and $32,504,792 with general loan loss reserve of $1,323,730, totaling 11.1% and 10.7% of total assets, respectively, which meets the state of Wisconsin’s minimum net worth requirements.

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Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations

The summary information presented below at ~~September~~December 3031, 2021 and June 30, 2021 and for the three and six months ended ~~September~~December 3031, 2021 and 2020 is derived in part from the financial statements of The Equitable Bank. The financial condition data at June 30, 2021 is derived from the audited financial statements of TEB Bancorp, Inc. The information as of ~~September~~December 3031, 2021 and for the three and six months ended ~~September~~December 3031, 2021 and 2020 is derived from unaudited financial statements of TEB Bancorp, Inc. for ~~September~~December 3031, 2021 and 2020 and reflects only normal recurring adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the interim period presented. The following information is only a summary, and should be read in conjunction with our audited financial statements and notes as of and for the year ended June 30, 2021 and for the three and six months ended ~~September~~December 3031, 2021 and 2020. The results of operations for the three and six months ended ~~September~~December 3031, 2021 are not necessarily indicative of the results to be achieved for all of the year ending June 30, ~~2021~~2022.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This quarterly report contains forward-looking statements, which can be identified by the use of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “assume,” “plan,” “seek,” “expect,” “will,” “may,” “should,” “indicate,” “would,” “contemplate,” “continue,” “potential,” “target” and words of similar meaning. These forward-looking statements include, but are not limited to:

●

statements of our goals, intentions and expectations;

●

statements regarding our business plans, prospects, growth and operating strategies;

●

statements regarding the quality of our loan and investment portfolios; and

●

estimates of our risks and future costs and benefits.

These forward-looking statements are based on our current beliefs and expectations and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. We are under no duty to and do not take any obligation to update any forward-looking statements after the date of this quarterly report. The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:

● adverse changes in the economy or business conditions, either nationally or in our markets, including, without limitation, the adverse effects of the COVID-19 ~~or any other~~ pandemic on the global, national, and local economy;

● the effect of the COVID-19 or any other pandemic on the Company’s credit quality, revenue, and business operations;

●

general economic conditions, either nationally or in our market areas, that are worse than expected;

●

changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for loan losses;

●

our ability to access cost-effective funding;

●

fluctuations in real estate values and both residential and commercial real estate market conditions;

●

demand for loans and deposits in our market area;

~~● our ability to implement and change our business strategies;~~32

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●

our ability to implement and change our business strategies;

●

competition among depository and other financial institutions;

●

inflation and changes in the interest rate environment that reduce our margins and yields, our mortgage banking revenues, the fair value of financial instruments or our level of loan originations, or increase the level of defaults, losses and prepayments on loans we have made and make;

●

adverse changes in the securities or secondary mortgage markets;

●

changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees and capital requirements;

●

changes in the quality or composition of our loan or investment portfolios;

●

technological changes that may be more difficult or expensive than expected, or the failure or breaches of information technology security systems;

●

the inability of third-party providers to perform as expected;

●

our ability to manage market risk, credit risk and operational risk in the current economic environment;

●

our ability to enter new markets successfully and capitalize on growth opportunities;

●

our ability to successfully integrate into our operations any assets, liabilities, customers, systems and management personnel we may acquire and our ability to realize related revenue synergies and cost savings within expected time frames, and any goodwill charges related thereto;

●

changes in consumer spending, borrowing and savings habits;

●

changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission or the Public Company Accounting Oversight Board;

●

our ability to retain key employees; and

●

changes in the financial condition, results of operations or future prospects of issuers of securities that we own.

COVID-19 Outbreak

In December 2019, a coronavirus (COVID-19) was reported in China, and, in March 2020 was declared a national emergency in the United States. The COVID-19 pandemic has caused significant economic dislocation in the United States as many state and local governments ordered non-essential businesses to close and residents to shelter in place at home. Certain industries have been particularly hard-hit, including the travel and hospitality industry, the restaurant industry, and the retail industry. The following table shows the Company’s exposure within these hard-hit industries.


Commercial Loan Type	~~September~~December 3031, 2021		Percentage of Portfolio Loans
Restaurant, food service, bar	$	1,~~568~~563,~~178~~124	0.6966	%
Retail		2,~~230~~211,~~898~~097	0.9894	%
Hospitality and tourism		—	—	%
	$	3,~~799~~774,~~076~~221	1.6760	%

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The Company’s allowance for loan losses ~~was~~ increased $75,000 to $1.5 million ~~for~~at ~~September~~December 3031, 2021 ~~and~~compared to $1.4 million at ~~September~~December 3031, 2020. At ~~September~~December 3031, 2021 and ~~September~~December 3031, 2020, the allowance for loan losses represented 0.6463% and 0.5860% of total loans, respectively. During 2020, the Company adjusted the economic risk factor methodology to incorporate the current economic implications and higher unemployment rate from the COVID-19 pandemic, leading to the increase in the allowance for loan losses as a percentage of total loans. In determining its allowance for loan loss level at ~~September~~December 3031, 2021, the Company considered, ~~among other things,~~ the health and composition of its loan portfolio in relation to the COVID-19 pandemic. At ~~September~~December 3031, 2021, approximately 99.24% of the Company’s loan portfolio is collateralized by real estate. Approximately 1.76% of the Company’s loan portfolio is to borrowers in the more particularly hard-hit industries (including the restaurant and food service industries, retail industry, and hospitality and tourism industries) and the Company has no international exposure.

Given the ongoing and dynamic nature of the circumstances, it is difficult to predict the full impact of the COVID-19 outbreak on our business. The extent of such impact will depend on future developments, which are highly uncertain, including when the coronavirus can be controlled and abated and how the economy continues to reopen. As the result of the COVID-19 pandemic and the related adverse local and national economic consequences, we could be subject to any of the following risks, any of which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations:

●

demand for our products and services may decline, making it difficult to grow assets and income;

● if the economy is unable to ~~stay~~continue ~~open,~~to ~~and~~fully ~~high levels of unemployment occur for an extended period of time~~reopen, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income;

●

collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase;

●

our allowance for loan losses may have to be increased if borrowers experience financial difficulties beyond forbearance periods, which will adversely affect our net income;

●

the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us;

● asour ~~the~~uninsured ~~result~~investment ofrevenues ~~the decline in the Federal Reserve Board’s target federal funds rate to near 0%, the yield on our assets~~ may ~~continue to~~ decline towith acontinuing ~~greater~~market ~~extent than the decline in our cost of interest-bearing liabilities, reducing our net interest margin and spread and reducing net income~~turmoil;

● our ~~uninsured~~cyber ~~investment~~security ~~revenues~~risks ~~may~~are ~~decline~~increased ifas ~~there~~the isresult ~~market~~of ~~turmoil~~an increase in the number of employees working remotely;

● our cyber security risks will increase if there is an increase in the number of employees working remotely;

●

we rely on third party vendors for certain services and the unavailability of a critical service due to the COVID-19 outbreak could have an adverse effect on us; and

●

Federal Deposit Insurance Corporation premiums may increase if the agency experiences additional resolution costs.

Moreover, our future success and profitability substantially depends on the management skills of our executive officers and directors, many of whom have held officer and director positions with us for many years. The unanticipated loss or unavailability of key employees due to anthe ~~increased~~ outbreak could harm our ability to operate our business or execute our business strategy. We may not be successful in finding and integrating suitable successors in the event of key employee loss or unavailability.

Any one or a combination of the factors identified above could negatively impact our business, financial condition, and results of operations and prospects.

33As of December 31, 2021, the Company originated 26 PPP loans totaling $1.8 million and generated approximately $76,000 from the processing fees. All PPP loan originations occurred before the end of the December 31, 2021 reporting period. As of December 31, 2021, all of those loans received full forgiveness from the SBA.

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As of ~~September~~December 3031, 2021, the Company ~~originated~~had 26received ~~PPP~~requests to modify 85 loans ~~totaling~~aggregating $122.87 million, which excluded any loans that had been paid off subsequent to modification. Of these modifications, $21.6 million, or 98.7%, were performing in accordance with the accounting treatment under Section 4013 of the CARES Act and ~~generated~~therefore ~~approximately~~did not qualify as TDRs. Three loans totaling $76284,000 ~~from~~were modified and did not qualify for the ~~processing~~favorable ~~fees.~~accounting ~~All~~treatment ~~PPP~~under Section 4013 of the CARES Act and therefore each loan ~~originations~~was ~~occurred~~reported ~~before~~as a TDR; however, all of the ~~end~~loans were transferred out of TDR status after receiving six consequtive monthly payments after the ~~September~~end ~~30,~~of ~~2021~~the ~~reporting~~deferral period. AsManagement ofhas ~~September~~evaluated ~~30,~~the ~~2021,~~loans 23and ~~PPP~~determined ~~loans~~that ~~totaling~~based ~~$1.8~~on ~~million~~the ~~have~~liquidation ~~been~~value ~~forgiven~~of the collateral, no specific reserve is necessary.

As of September 30, 2021, the Company had received requests to modify 86 loans aggregating $22.4 million, which excludes any loans that had been paid off subsequent to modification. Of these modifications, $22.1 million, or 98.7%, were performing in accordance with the accounting treatment under Section 4013 of the CARES Act and therefore did not qualify as TDRs. As of September 30, 2021, all of these modifications have resumed monthly loan payments. Three loans totaling $287,000 were modified and did not qualify for the favorable accounting treatment under Section 4013 of the CARES Act and therefore each loan was reported as a TDR, however two of the loans were transferred out of TDR status after receiving six consequtive monthly payments after the end of the deferral period. Management has evaluated the loans and determined that based on the liquidation value of the collateral, no specific reserve is necessary.

Critical Accounting Policies

There are no material changes to the critical accounting policies disclosed in the Company’s Annual Report on Form 10-K for the year ended June 30, 2021.

Comparison of Financial Condition at ~~September~~December 3031, 2021 and June 30, 2021

Total Assets. Total assets ~~increased~~decreased $13.54 million, or 01.51%, to $~~317~~312.23 million at ~~September~~December 3031, 2021 from $315.7 million at June 30, 2021. The ~~increase~~decrease in assets was primarily due to ana ~~increase~~decrease of $1024.27 million in ~~net~~cash ~~loans~~and ~~held~~cash ~~for~~equivalents ~~investment~~offset ~~and~~by aan ~~$962,000~~ increase in net loans held for ~~sale,~~investment ~~offset by a decrease in cash and cash equivalents~~ of $1118.16 million.

Cash and Cash Equivalents. Cash and cash equivalents decreased $1124.17 million, or 2250.50%, to $3824.27 million at ~~September~~December 3031, 2021 from $49.4 million at June 30, 2021. This decrease in cash and cash equivalents was a result of loan fundings as discussed below.

Interest Bearing Deposits. Interest bearing deposits ~~remained~~increased ~~relatively consistent, increasing by~~ $16187,000, or 457.92%, to $~~342~~513,000 at ~~September~~December 3031, 2021 from $326,000 at June 30, 2021.

Available-for-Sale Securities. Available-for-sale securities increased $16.42 million, or 418.28%, to $3439.30 million at ~~September~~December 3031, 2021 from $32.9 million at June 30, 2021, due to the purchase of securities totaling $17.92 million, offset by maturities and calls of $~~391~~745,000.

Net Loans Held for Investment. Net loans held for investment increased $1018.26 million, or 48.76%, to $~~225~~234.60 million at ~~September~~December 3031, 2021 from $215.4 million at June 30, 2021, primarily reflecting an increase in ~~construction and~~ multifamily loans. ~~Construction~~of ~~loans increased~~ $58.63 million, or ~~228~~9.31%, ~~from~~to $2100.52 million at ~~June~~December 3031, 2021 tofrom $891.19 million at ~~September~~June 30, 2021, and ~~multifamily~~an increase in construction loans ~~increased~~of $47.93 million, or 5297.40%, to $969.8 million at ~~September~~December 3031, 2021 from $912.95 million at June 30, 2021. ~~Additionally, one~~One- to four-family non-owner occupied residential real estate loans also increased $23.01 million, or 214.80%, from $7222.04 million at June 30, 2021 to $7425.05 million at ~~September~~December 3031, 2021. We currently sell the majority of the single family loans we originate.

Loans Held for Sale. Loans held for sale ~~increased~~decreased $~~962~~3.5 million,~~000,~~ or 1451.03%, to $73.83 million at ~~September~~December 3031, 2021 from $6.9 million at June 30, 2021, due to ~~slower~~a ~~payment~~decrease ~~speeds~~in by loan ~~correspondents~~sales ~~during~~and ~~the~~thus ~~quarter,~~less ~~reflecting~~loans ~~slower~~outstanding ~~secondary~~at ~~market~~quarter ~~sales of loans originated~~end.

Other Real Estate Owned. Other real estate owned remained the same at $168,000 at ~~September~~December 3031, 2021 and June 30, 2021.

Federal Home Loan Bank Stock. Federal Home Loan Bank stock remained unchanged at $1.0 million at ~~September~~December 3031, 2021, and June 30, 2021, respectively, as a result of the same balance in borrowed funds as discussed below.

34Deposits. Total deposits decreased $2.8 million, or 1.1%, to $267.0 million at December 31, 2021 from $269.9 million at June 30, 2021. The decrease was due to decreases in demand accounts of $1.9 million, or 1.8%, from $109.0 million at June 30, 2021 to $107.0 million at December 31, 2021 and certificates of deposits of $2.8 million, or 3.8%, to $70.0 million at December 31, 2021 from $72.7 million at June 30, 2021. The decreases were offset partially by an increase in savings and NOW accounts of $1.9 million, or 2.1%, from $88.2 million at June 30, 2021 to $90.0 million at December 31, 2021.

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Deposits. Total deposits decreased $2.1 million, or 0.8%, to $267.8 million at September 30, 2021 from $269.9 million at June 30, 2021. The decrease was due to decreases in demand accounts of $4.8 million, or 4.4%, from $109.0 million at June 30, 2021 to $104.2 million at September 30, 2021 and in certificates of deposit of $876,000, or 1.2%, to $71.9 million at September 30, 2021 from $72.7 million at June 30, 2021. The decreases were offset partially by the increase in savings and NOW accounts of $3.6 million, or 4.1%, from $88.2 million at June 30, 2021 to $91.8 million at September 30, 2021.

Borrowed Funds. Borrowed funds, consisting solely of Federal Home Loan Bank advances, remained unchanged at $5.0 million at September 30, 2021 and June 30, 2021. Loan payments and payoffs have reduced our need for borrowings to fund our operations.

Stockholders’ Equity. Total stockholders’ equity increased $453,000 or 1.4%, to $33.6 million at September 30, 2021 from $33.1 million at June 30, 2021. The increase was due primarily to net income of $624,000 during the three months ended September 30, 2021.

Comparison of Operating Results for the Three Months Ended September 30, 2021 and 2020

General. Net income was $624,000 for the three months ended September 30, 2021, compared to $1.8 million for the three months ended September 30, 2020, a decrease of $1.2 million. The change was primarily due to a $1.4 million decrease in gain on sales of mortgage loans, partially offset by a $303,000 decrease in compensation and benefits expense, described in more detail below.

Interest Income. Interest income decreased $308,000, or 11.2%, to $2.4 million for the three months ended September 30, 2021 compared to $2.8 million for the three months ended September 30, 2020. Interest income on loans, which is our primary source of interest income, decreased $343,000, or 13.2%, to $2.3 million for the three months ended September 30, 2021 compared to $2.6 million for the three months ended September 30, 2020. Our annualized average yield on loans decreased 34 basis points to 4.13% for the three months ended September 30, 2021 from 4.47% for the three months ended September 30, 2020, primarily due to the decrease in interest rates. The average balance of loans decreased $14.3 million, or 6.1%, to $218.4 million for the three months ended September 30, 2021 from $232.6 million for the three months ended September 30, 2020.

Interest Expense. Interest expense decreased $93,000, or 25.4%, to $275,000 for the three months ended September 30, 2021 compared to $369,000 for the three months ended September 30, 2020, due primarily to decreases in market interest rates and a shift in deposits from certificates of deposit to lower cost demand and savings and NOW accounts.

Interest expense on deposits decreased $87,000, or 24.1%, to $275,000 for the three months ended September 30, 2021 from $362,000 for the three months ended September 30, 2020. Specifically, interest expense on certificates of deposit decreased $83,000, or 24.6%, to $255,000 for the three months ended September 30, 2021 from $338,000 for the three months ended September 30, 2020. The decrease resulted from a 17 basis point decrease in the annualized average rate we paid on certificates of deposit to 1.42% for the three months ended September 30, 2021 from 1.59% for the three months ended September 30, 2020, reflecting a decrease in market rates. Additionally, there was a $13.3 million decrease in the average balance of certificates of deposits to $72.0 million at September 30, 2021 from $85.3 million for the three months ended September 30, 2020.

There was no interest expense on FHLB borrowings for the three months ended September 30, 2021 compared to $6,000 for the three months ended September 30, 2020. This decrease resulted from decreases in both the average balance of FHLB borrowings and the average rate we paid on FHLB borrowings. The average balance of borrowings decreased $3.0 million, or 37.2%, to $5.0 million for the three months ended September 30, 2021 from $8.0 million for the three months ended September 30, 2020, and the annualized average rate we paid on borrowings decreased 31 basis points to 0% for the three months ended September 30, 2021 from 0.31% for the three months ended September 30, 2020. As described above, loan payments and payoffs and increases in demand and savings and NOW deposits have reduced our need for borrowings to fund our operations.

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~~Net~~Borrowed ~~Interest Income~~Funds. ~~Net~~Borrowed ~~interest income decreased $214~~funds,~~000,~~ orconsisting ~~9.0%,~~solely toof ~~$2.2~~Federal ~~million~~Home ~~for~~Loan ~~the~~Bank ~~three months ended September 30~~advances, ~~2021~~was ~~from~~ $25.40 million ~~the~~at ~~three~~December ~~months ended September 30~~31, ~~2020,~~2021 ~~primarily~~and asJune ~~a result of the decreased interest income from loans. In addition, our net interest rate spread decreased by 65 basis points to 2.87% for the three months ended September~~ 30, 2021 ~~from 3~~.~~52%~~ ~~for~~Loan ~~the~~payments ~~three~~and ~~months~~payoffs ~~ended September 30, 2020,~~ and ~~our~~increases ~~net~~in ~~interest~~deposits ~~margin~~have ~~decreased~~reduced byour 65need ~~basis points to 2.97%~~ for ~~the~~borrowings ~~three months ended September 30, 2021 from 3.61% for the three months ended September 30, 2020, due~~ to ~~the~~fund ~~decreases~~our ~~in market interest rates~~operations.

~~Provision~~Stockholders’ ~~for Loan Losses~~Equity. ~~Provisions~~ ~~for~~Total ~~loan~~stockholders’ ~~losses~~equity ~~are~~increased ~~charged~~$814,000 toor operations to establish an allowance for loan losses at a level necessary to absorb known and inherent losses in our loan portfolio that are both probable and reasonably estimated at the date of the financial statements2. ~~In evaluating the level of the allowance for loan losses~~5%, ~~management analyzes several qualitative loan portfolio risk factors including, but not limited~~ to, ~~management’s~~$33.9 ~~ongoing~~million ~~review~~at ~~and~~December ~~grading of loans~~31, ~~facts~~2021 ~~and~~from ~~issues~~$33.1 ~~related~~million toat ~~specific~~June ~~loans~~30, ~~historical~~2021. ~~loan~~The ~~loss~~increase ~~and~~was ~~delinquency experience, trends in past~~ due ~~and~~primarily ~~non-accrual~~to ~~loans,~~net ~~existing~~income ~~risk characteristics~~ of ~~specific~~$1.2 ~~loans~~million orduring ~~loan pools, changes in~~ the ~~nature,~~six ~~volume~~months ~~and~~ended ~~terms~~December ~~of loans~~31, ~~the fair value of underlying collateral, changes in lending personnel, current economic conditions and other qualitative and quantitative factors which could affect potential credit losses~~2021. ~~See “Summary of Significant Accounting Policies” for additional information.~~

~~After~~Comparison ~~an evaluation~~ of ~~these~~Operating ~~factors,~~Results ~~and based on management’s current assessment of the increased inherent risk in the loan portfolio due to COVID-19, we recorded a $50,000 provision~~ for ~~loan losses for~~ the ~~three~~Three Months ~~months~~Ended ~~ended~~December ~~September 30~~31, 2021, ~~compared to no provision for the three months ended September 30, 2020. Our allowance for loan losses was $1.5 million at September 30, 2021~~ and $1.4 million at June 30, 2021. The allowance for loan losses to total loans was 0.64% at September 30, 2021 and 0.65% at June 30, 2021, while the allowance for loan losses to non-performing loans was 228.57% at September 30, 2021 and 178.09% at June 30, 2021. 2020

ToGeneral. ~~the~~Net ~~best~~income ofwas ~~our knowledge~~$536,000 wefor ~~have~~the ~~recorded~~three ~~all~~months ~~loan~~ended ~~losses~~December ~~that~~31, ~~are~~2021, ~~both~~compared ~~probable and reasonable~~ to ~~estimate at September 30, 2021~~$2. ~~However,~~0 ~~future~~million ~~changes~~for in the ~~factors~~three ~~described~~months ~~above,~~ended ~~including,~~December ~~but not limited to~~31, ~~actual~~2020. The ~~loss~~change ~~experience~~was ~~with~~primarily ~~respect~~due to ~~our~~a ~~loan~~$2.3 ~~portfolio,~~million ~~could~~decrease ~~result~~ in ~~material~~gain ~~increases~~on insales ~~our~~of ~~provision~~mortgage ~~for loan losses. In addition~~loans, ~~the~~offset ~~WDFI~~by ~~and~~a ~~the Federal Deposit Insurance Corporation~~$600,000 asdecrease anin ~~integral~~compensation ~~part of their examination process, will periodically review our allowance for loan losses,~~ and asbenefits ~~a result of such reviews~~expense, wedescribed ~~may~~in ~~have~~more todetail ~~adjust our allowance for loan losses~~below.

~~Non-interest~~Interest Income. ~~Non-interest~~Interest income decreased $~~1.3 million~~243,000, or 408.78%, to $12.95 million for the three months ended ~~September~~December 3031, 2021 compared to $32.37 million for the three months ended ~~September~~December 3031, 2020. ~~The~~Interest ~~gain~~income on ~~sale~~loans, ofwhich ~~mortgage~~is ~~loans~~our ~~(consisting~~primary ~~solely~~source of ~~one-~~interest toincome, ~~four-family residential real estate loans)~~ decreased $~~1.4 million~~296,000, or 4511.4%, to $12.63 million for the three months ended ~~September~~December 3031, 2021 compared to $32.06 million for the three months ended ~~September~~December 3031, 2020. ~~The~~Our ~~decrease~~annualized inaverage yield on loans decreased 43 basis points to 4.01% for the ~~gain~~three onmonths ~~sale~~ended ofDecember ~~motgage~~31, ~~loans~~2021 ~~was~~from ~~due~~4.44% for the three months ended December 31, 2020, primarily due to ~~the~~a decrease in ~~the~~market ~~originations~~interest ~~for~~rates. ~~sale~~The average balance of loans decreased $724.65 million, ofor ~~mortgage~~1.9%, ~~loans~~to ~~during~~$229.6 million for the ~~2021~~three ~~period~~months ~~compared~~ended toDecember 31, 2021 from $~~142~~234.51 million offor ~~such~~the ~~originations~~three ~~during~~months ~~the~~ended ~~2020~~December ~~period~~31, 2020.

~~Non-interest~~Interest ~~Expenses~~Expense. ~~Non-interest~~Interest ~~expenses~~expense decreased $~~441~~60,000, or 1118.47%, to $~~3.4~~259,000 ~~million~~ for the three months ended ~~September~~December 3031, 2021 ~~from~~compared ~~$3.9~~to ~~million for the three months ended September 30, 2020. Compensation and benefits expense decreased~~ $~~303~~319,000, ~~or 12.4%, to $2.1 million~~ for the three months ended ~~September~~December 3031, ~~2021 from $2.4 million for the three months ended September 30,~~ 2020, asdue weprimarily ~~experienced~~to adecreases ~~decrease~~ in ~~payroll~~market ~~expense~~interest ~~due~~rates toand ~~lower~~a ~~loan~~shift ~~officer~~in ~~compensation~~deposits asfrom acertificates ~~result~~ of ~~decreased~~deposit ~~loan origination volume. Other expenses decreased $93,000 or 23.5%~~ to ~~$303,000~~lower ~~for~~cost ~~the three months ended September 30~~demand, ~~2021 compared to $396~~savings,~~000~~ ~~as of September 30, 2020 due to decreased loan sold volume~~ and ~~the~~NOW ~~associated loan origination costs that are written off at time of sale~~accounts.

~~Income~~Interest ~~Tax~~expense ~~Expense~~on deposits decreased $59,000, or 18.6%, Weto ~~recognized~~$259,000 nofor ~~income~~the ~~tax~~three months ended December 31, 2021 from $319,000 for the three months ended December 31, 2020. Specifically, interest expense on certificates of deposit decreased $45,000, or ~~benefits~~15.5%, to $248,000 for the three months ended ~~September~~December 3031, 2021 ~~and~~from $293,000 for the three months ended ~~September~~December 3031, 2020. The ~~due~~decrease resulted from a seven basis point decrease in the annualized average rate we paid on certificates of deposit to 1.40% for the three months ended December 31, 2021 from 1.47% for the three months ended December 31, 2020, reflecting a ~~full~~decrease ~~valuation~~in ~~allowance~~market ~~being~~rates. ~~recorded~~Additionally, ~~against~~there was an $8.5 million decrease in the ~~Company’s~~average ~~deferred~~balance ~~tax~~of ~~assets~~certificates of deposits to $71.0 million at December 31, 2021 from $79.5 million for the three months ended December 31, 2020.

There was no interest expense on FHLB borrowings for the three months ended December 31, 2021 compared to $1,000 for the three months ended December 31, 2020. This decrease resulted from decreases in both the average balance of FHLB borrowings and the average rate we paid on FHLB borrowings. The average balance of borrowings decreased $178,000, or 3.4%, to $5.0 million for the three months ended December 31, 2021 from $5.2 million for the three months ended December 31, 2020, and the annualized average rate we paid on borrowings decreased 5 basis points to 0% for the three months ended December 31, 2021 from 0.05% for the three months ended December 31, 2020. As described above, increases in demand, savings, and NOW deposits have reduced our need for borrowings to fund our operations.

Net Interest Income. Net interest income decreased $183,000, or 7.5%, to $2.2 million for the three months ended December 31, 2021 from $2.4 million the three months ended December 31, 2020, primarily as a result of the decreased interest income from loans. In addition, our net interest rate spread decreased by 65 basis points to 2.93% for the three months ended December 31, 2021 from 3.58% for the three months ended December 31, 2020, and our net interest margin decreased by 66 basis points to 3.01% for the three months ended December 31, 2021 from 3.67% for the three months ended December 31, 2020, due to the decreases in market interest rates.

Provision for Loan Losses. Provisions for loan losses are charged to operations to establish an allowance for loan losses at a level necessary to absorb known and inherent losses in our loan portfolio that are both probable and reasonably

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estimated at the date of the financial statements. In evaluating the level of the allowance for loan losses, management analyzes several qualitative loan portfolio risk factors including, but not limited to, management’s ongoing review and grading of loans, facts and issues related to specific loans, historical loan loss and delinquency experience, trends in past due and non-accrual loans, existing risk characteristics of specific loans or loan pools, changes in the nature, volume and terms of loans, the fair value of underlying collateral, changes in lending personnel, current economic conditions and other qualitative and quantitative factors which could affect potential credit losses. See “Summary of Significant Accounting Policies” for additional information.

After an evaluation of these factors, and based on management’s current assessment of the increased inherent risk in the loan portfolio due to COVID-19, we recorded a $25,000 provision for loan losses for the three months ended December 31, 2021, compared to a $50,000 provision for the three months ended December 31, 2020. Our allowance for loan losses was $1.5 million at December 31, 2021, compared to $1.4 million at June 30, 2021. The allowance for loan losses to total loans was 0.63% at December 31, 2021 and 0.65% at June 30, 2021, while the allowance for loan losses to non-performing loans was 196.73% at December 31, 2021 and 178.09% at June 30, 2021.

To the best of our knowledge, we have recorded all loan losses that are both probable and reasonable to estimate at December 31, 2021. However, future changes in the factors described above, including, but not limited to, actual loss experience with respect to our loan portfolio, could result in material increases in our provision for loan losses. In addition, the WDFI and the Federal Deposit Insurance Corporation, as an integral part of their examination process, will periodically review our allowance for loan losses, and as a result of such reviews, we may have to adjust our allowance for loan losses.

Non-interest Income. Non-interest income decreased $2.3 million, or 58.5%, to $1.6 million for the three months ended December 31, 2021 compared to $3.9 million for the three months ended December 31, 2020. The gain on sale of mortgage loans (consisting solely of one- to four-family residential real estate loans) decreased $2.3 million, or 63.0%, to $1.3 million for the three months ended December 31, 2021 compared to $3.6 million for the three months ended December 31, 2020. The decrease in the gain on sale of motgage loans was due primarily to the decrease in the originations for sale of $58.2 million of mortgage loans during the 2021 period compared to $147.4 million of such originations during the 2020 period.

Non-interest Expenses. Non-interest expenses decreased $1.0 million, or 23.3%, to $3.3 million for the three months ended December 31, 2021 from $4.3 million for the three months ended December 31, 2020. Compensation and benefits expense decreased $600,000, or 22.6%, to $2.0 million for the three months ended December 31, 2021 from $2.6 million for the three months ended December 31, 2020, as we experienced a decrease in payroll expense due to lower loan officer compensation as a result of decreased loan origination volume. Other expenses decreased $147,000 or 34.6% to $277,000 for the three months ended December 31, 2021 compared to $423,000 for the three months ended December 31, 2020 due to decreased sold loan volume and the associated loan origination costs that are written off at time of sale.

Income Tax Expense. We recognized no income tax expense or benefits for the three months ended December 31, 2021 and for the three months ended December 31, 2020 due to a full valuation allowance being recorded against the Company’s deferred tax assets.

Average Balance Sheets

The following table sets forth average balance sheets, average yields and costs, and certain other information at and for the periods indicated. No tax-equivalent yield adjustments have been made, as the effects would be immaterial. All average balances are daily average balances. Non-accrual loans were included in the computation of average balances.

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The yields set forth below include the effect of deferred fees, discounts, and premiums that are amortized or accreted to interest income or interest expense. Loan balances exclude loans held for sale.

Filing Compare · TEB Bancorp, Inc.