Redwood Financial : Annual Report

Consolidated Financial Statements

December 31, 2020 and 2019

Redwood Financial, Inc. and

Subsidiaries

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	Redwood Financial, Inc. and Subsidiaries
	Table of Contents
	December 31, 2020 and 2019
Independent Auditor's Report ...................................................................................................................................	1
Financial Statements
Consolidated Balance Sheets .................................................................................................................................	2
Consolidated Statements of Income......................................................................................................................	3
Consolidated Statements of Comprehensive Income ...........................................................................................	4
Consolidated Statements of Stockholders' Equity.................................................................................................	5
Consolidated Statements of Cash Flows................................................................................................................	6
Notes to Consolidated Financial Statements.........................................................................................................	7

Independent Auditor's Report

The Stockholders and Board of Directors

Redwood Financial, Inc. and Subsidiaries

Redwood Falls, Minnesota

Report on the Financial Statements

We have audited the accompanying consolidated financial statements of Redwood Financial, Inc. and Subsidiaries, which comprise the consolidated balance sheets, as of December 31, 2020 and 2019 , and the related consolidated statements of income, comprehensive income, stockholders' equity, and cash flows for the years then ended, and the related notes to the consolidated financial statements.

Management's Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Redwood Financial, Inc. and Subsidiaries, as of December 31, 2020 and 2019, and the results of their operations and their cash flows for the years then ended, in accordance with accounting principles generally accepted in the United States of America.

Mankato, Minnesota

March 22, 2021

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111 S. 2nd St., Ste. 300 | Mankato, MN 56001-5803| T 507.387.6031 | F 507.387.6436 | EOE

Redwood Financial, Inc. and Subsidiaries

Consolidated Balance Sheets

December 31, 2020 and 2019

Assets		2020			2019
Cash and cash equivalents	$	9,872,215	$	10,511,615
Interest‐bearing deposits in banks		6,125,000			6,615,000
Debt securities available‐for‐sale		177,272,248			70,115,187
Loans, net		243,252,819			231,790,937
Investments in restricted stock		7,850,900			10,191,000
Accrued interest receivable		2,165,790			2,111,041
Premises and equipment, net		15,099,904			15,634,117
Mortgage servicing rights		2,990,304			2,097,312
Goodwill		4,478,398			4,478,398
Other assets		664,839			637,041
Total Assets	$	469,772,417	$	354,181,648
Liabilities and Stockholders' Equity
Deposits	$	404,422,414	$	288,175,116
Borrowings		11,134,368			21,483,461
Subordinated debentures		6,186,000			6,186,000
Accrued interest payable		241,968			238,899
Advance payments by borrowers for taxes and insurance		3,054,963			2,072,201
Accrued expenses and other liabilities		2,585,406			2,023,941
Deferred tax liability		2,210,788			1,668,662
Total liabilities		429,835,907			321,848,280
Common stock ($.10 par value), 1,125,000 shares
authorized and issued; 405,047 and 399,047
shares outstanding, respectively		112,500			112,500
Additional paid‐in capital		10,577,486			10,192,893
Retained earnings		40,442,012			34,387,716
Accumulated other comprehensive income		1,299,723			206,878
Treasury stock, at cost, 719,953 and 725,953
shares, respectively		(12,495,211)			(12,566,619)
Total stockholders' equity		39,936,510			32,333,368
Total Liabilities and Stockholders' Equity	$	469,772,417	$	354,181,648

See Notes to Consolidated Financial Statements

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Redwood Financial, Inc. and Subsidiaries

Consolidated Statements of Income

Years Ended December 31, 2020 and 2019

Interest Income		2020			2019
Loans, including fees	$	18,939,769	$	14,252,254
Debt securities available‐for‐sale		1,589,000			1,118,851
Federal funds sold		21,094			152,255
Interest‐bearing deposits in banks		170,064			204,805
Total interest income		20,719,927			15,728,165
Interest Expense
Demand deposits		528,122			599,781
Savings deposits		248,967			238,663
Certificates of deposits		532,906			468,531
Borrowings		490,420			625,595
Subordinated debentures		153,898			269,220
Total interest expense		1,954,313			2,201,790
Net interest income		18,765,614			13,526,375
Provision for Loan Losses		55,000			142,000
Net interest income after provision for loan losses		18,710,614			13,384,375
Non‐Interest Income
Fees and service charges		1,287,930			1,433,707
Mortgage servicing income		1,708,055			1,111,909
Insurance commissions		594,630			652,612
Other		772,527			604,661
Total non‐interest income		4,363,142			3,802,889
Non‐Interest Expense
Compensation and employee benefits		8,969,625			7,179,711
Occupancy expenses		1,353,309			1,467,804
Data processing expenses		1,331,566			1,129,400
Federal deposit insurance premiums		94,451			43,432
Advertising expenses		128,589			188,820
Legal and accounting expenses		395,002			194,506
Other operating expenses		1,242,240			986,812
Total non‐interest expense		13,514,782			11,190,485
Income before income taxes		9,558,974			5,996,779
Income Tax Expense		2,694,584			1,617,375
Net income	$	6,864,390	$	4,379,404
Earnings per Share
Basic	$	16.97	$	11.05
Diluted	$	16.97	$	11.05

See Notes to Consolidated Financial Statements

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