2021 Annual Report

treasury securities represented 0.2% of the portfolio, asset-backed securities represented 9.3% of the portfolio, and other mortgage-backed securities represented 2.3% of the portfolio. The following table presents the amortized cost and fair value of securities available for sale, by type, at December 31, 2021, 2020 and 2019.

December 31, 2021

December 31, 2020

December 31, 2019

Amortized

Fair Value

Amortized

Fair Value

Amortized

Fair

Cost

Cost

Cost

Value

U.S. Treasury Securities . . . . . . . . . . . . . . $ 756 $ — $ — $ 4,990 $ 4,998 SBA Securities . . . . . . . . . . . . . . . . . . . . . . 30,474 30,370 40,455 40,107 50,126 49,559 754 $

Mortgage-Backed Securities Issued or Guaranteed by U.S. Agencies (MBS): Residential Pass-Through: Guaranteed by GNMA . . . . . . . . . . .

671 957 1,195 1,215 Issued by FNMA and FHLMC. . . . . 20,649 20,363 16,067 16,117 3,571 3,543 Other Residential Mortgage-Backed Securities . . . . . . . . . . . . . . . . . . . . . . . 83,394 82,271 94,440 94,409 46,464 46,695 Commercial Mortgage-Backed Securities . . . . . . . . . . . . . . . . . . . . . . . 10,646 11,138 11,254 12,032 12,019 12,213 All Other Commercial MBS . . . . . . . . . . 10,203 10,063 742 745 1,063 1,062 Total MBS . . . . . . . . . . . . . . . . . . . . . 125,563 124,537 123,395 124,260 64,312 64,728 Municipal Securities . . . . . . . . . . . . . . . . . 151,665 158,369 105,975 115,012 99,441 105,743 Corporate Securities . . . . . . . . . . . . . . . . . 81,925 84,480 71,116 72,155 49,674 50,176 Asset-Backed Securities . . . . . . . . . . . . . . 39,867 40,852 38,135 39,095 14,673 14,673 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 430,250 $ 439,362 $ 379,076 $ 390,629 $ 283,216 $ 289,877 Loan Portfolio The Company focuses on lending to borrowers located or investing in the Minneapolis-St. Paul-Bloomington, MN-WI Metropolitan Statistical Area across a diverse range of industries and property types. The Company lends primarily to commercial customers, consisting of loans secured by nonfarm, nonresidential properties, multifamily residential properties, land, and non-real estate business assets. Responsive service, local decision making, and an efficient turnaround time from application to closing have been significant factors in growing the loan portfolio. The Company manages concentrations of credit exposure through a risk management program which implements formalized processes and procedures specifically for managing and mitigating risk within the loan portfolio. The processes and procedures include board and management oversight, commercial real estate exposure limits, portfolio monitoring tools, management information systems, market reports, underwriting standards, internal and external loan review, and stress testing. Total gross loans increased $493.0 million, or 21.2%, to $2.82 billion at December 31, 2021, compared to $2.33 billion at December 31, 2020. Excluding the forgiveness of $112.3 million of PPP loans, gross loans increased 27.7% at December 31, 2021 compared to December 31, 2020. The construction and land development, multifamily and commercial real estate, or CRE, nonowner occupied categories contributed most significantly to the $605.3 million of net loan growth, excluding PPP loans. As of December 31, 2021, construction and land development loans increased $111.3 million, or 65.4%, multifamily loans increased $283.8 million, or 45.3%, and nonowner occupied CRE loans increased $109.3 million, or 15.4%, when compared to December 31, 2020. The Company’s continued strong loan growth has been driven by the expansion of the talented lending teams, the strong, growing brand of the Bank in the Twin Cities market, the M&A-related market disruption in the Twin Cities resulting in client and banker acquisition opportunities and the PPP-related new client acquisitions. 702 892

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