Note 6. Guaranteed Investment Contract
The Principal Fixed Income Guaranteed Option is a fully benefit-responsive guaranteed general-account backed group annuity contract, issued by
Principal Life Insurance Company (Principal Life) to Principal Trust Company as custodian. Principal Life guaranteed interest accounts are reported at contract value which is the aggregation of contributions, plus interest, less withdrawals and
administrative expenses. A rate of interest contractually guaranteed by Principal Life is credited to participant account balances and the rate may not be less than 1%.
Certain events limit the Plans ability to transact at contract value with Principal Life. Such events include the following: amendments
to the Plan documents (including complete or partial plan termination or merger with another plan), termination of any record-keeping arrangement, service agreement or other agreement between Principal and the Plan, or termination of the investment
contract. No redemption fees, early withdrawal charges, or market value adjustments are charged on participant transfers of assets into or out of the contract. A surrender of the Plans interest or initiated transfer in this contract is subject
to either a 12-month advance notice or a 5% surrender charge. Notification of the Plans intent to terminate its interest may be revoked within 90 days of Principals receipt of such notice, after
which time, the notice becomes irrevocable. The Plan Administrator does not believe that any events that would limit the Plans ability to transact at contract value with Plan participants or the issuer are probable of occurring. The balance in
the Principal Fixed Income Guaranteed Option contract was $7,254,087 and $8,222,907 at December 31, 2020 and 2019, respectively.
Note 7.
Loans Payable
In 2005, the ESOP entered into a term loan agreement with the Company (Plan Sponsor) to borrow enough to purchase up to
699,660 shares of the Companys common stock. Through 2006, the plan borrowed $7,884,254 and the proceeds of the loan were used to purchase 699,659 shares of the Companys common stock. Unallocated shares were collateral for the loan. The
agreement provided for the loan to be repaid over ten years. The loan bore interest at the prime rate plus one percentage point as published in the Wall Street Journal. At December 31, 2014, prime plus one was 4.25%. This loan matured and was
paid in full on December 31, 2014.
On March 3, 2011, the Company completed the second step conversion from a mutual
holding company structure to a stock holding company structure. The Plan borrowed $7,071,039 from the Company to purchase 684,395 shares of common stock in the open market. Unallocated shares were collateral for the loan. The loan bore interest at
the prime rate plus one percentage point as published in the Wall Street Journal. This loan was scheduled to mature on December 31, 2040. The loan was fully repaid during 2019 in connection with the merger and termination of the Plan.
Note 8. Plan Termination
The Bank
has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions set forth in ERISA. The Plan was terminated effective October 27, 2019.
Note 9. Federal Income Tax Status
The Internal Revenue Service has determined and informed the Bank by a letter dated May 26, 2017, that the Plan and related trust were
designed in accordance with the applicable regulations of the IRC. Although the Plan has been amended since receiving the determination letter, the Plan administrator and the Plans tax counsel believe that the Plan is designed, and is
currently being operated, in compliance with the applicable requirements of the IRC and, therefore, believe that the Plan is qualified, and the related trust is tax-exempt. Therefore, no provision for income
taxes has been included in the Plans financial statements. In accordance with U.S. GAAP, the Plan Administrator has evaluated the Plans tax positions and concluded that the Plan has taken no uncertain tax positions that require
adjustments to or disclosures in these financial statements. The Plan is subject to routine audits by tax authorities; however, there are currently no audits for any tax periods in progress.
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