1.	Nature of Operations and Basis of Presentation

Emclaire Financial Corp (the Corporation) is a Pennsylvania corporation and the holding company of The Farmers National Bank of Emlenton (the Bank). The Corporation provides a variety of financial services to individuals and businesses through its offices in western Pennsylvania and northern West Virginia. Its primary deposit products are checking, savings and term certificate accounts and its primary lending products are residential and commercial mortgages, commercial business loans and consumer loans.

The consolidated financial statements include the accounts of the Corporation and its wholly owned subsidiaries, the Bank and the Title Company. All significant intercompany transactions and balances have been eliminated in preparing the consolidated financial statements.

The accompanying unaudited consolidated financial statements for the interim periods include all adjustments, consisting of normal recurring accruals, which are necessary, in the opinion of management, to fairly reflect the Corporation’s consolidated financial position and results of operations. Additionally, these consolidated financial statements for the interim periods have been prepared in accordance with instructions for the Securities and Exchange Commission’s (SEC’s) Form

-Q and Article

of Regulation S-

and therefore do

not

include all information or footnotes necessary for a complete presentation of financial condition, results of operations and cash flows in conformity with accounting principles generally accepted in the United States of America (GAAP). For further information, refer to the audited consolidated financial statements and footnotes thereto for the year ended

December 31, 2019

, as contained in the Corporation’s Annual Report on Form

-K for the year ended

December 31, 2019

filed with the SEC.

The balance sheet at

December 31, 2019

has been derived from the audited financial statements at that date but does

not

include all the information and footnotes required by GAAP for complete financial statements.

The preparation of financial statements, in conformity with GAAP, requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. The results of operations for interim quarterly or year-to-date periods are

not

necessarily indicative of the results that

may

be expected for the entire year or any other period. Certain amounts previously reported

may

have been reclassified to conform to the current year’s financial statement presentation.

The coronavirus (COVID-

) pandemic has negatively impacted the global economy, disrupted global supply chains and increased unemployment levels. The resulting temporary closure of many businesses and the implementation of social distancing and sheltering-in-place policies has and

may

continue to impact many of the Corporation’s customers. While the full effects of the pandemic remain unknown, the Corporation is committed to supporting its customers, employees and communities during this difficult time. The Corporation has given hardship relief assistance to customers, including the consideration of various loan payment deferral and fee waiver options, and encourages customers to reach out for assistance to support their individual circumstances. The pandemic could result in the recognition of credit losses in our loan portfolios and increases in our allowance for credit losses, particularly if businesses remain closed, the impact on the global economy worsens, or more customers draw on their lines of credit or seek additional loans to help finance their businesses. Similarly, because of changing economic and market conditions, we

may

be required to recognize impairments on securities, goodwill or other significant estimates. The extent to which the COVID-

pandemic impacts our business, results of operations, and financial condition, as well as our regulatory capital and liquidity ratios, will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the pandemic and actions taken by governmental authorities and other

third

parties in response to the pandemic.

March 27, 2020,

the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was signed by the President of the United States. Certain provisions within the CARES Act encourage financial institutions to practice prudent efforts to work with borrowers impacted by COVID-

19.

Under these provisions, loan modifications deemed to be COVID-

-related would

not

be considered a troubled debt restructuring (TDR) if the loan was

not

more than

days past due as of

December 31, 2019

and the deferral was executed between

March 1, 2020

and the earlier of

days after the date of termination of the COVID-

national emergency or

December 31, 2020.

The banking regulators issued similar guidance, which also clarified that a COVID-

-related modification should

not

be considered a TDR if the borrower was current on payments at the time the underlying loan modification program was implemented and if the modification is considered to be short-term. Under these terms, as of

March

31,

2020,

the Corporation had processed payment deferrals for

loans with an aggregate balance of

$15.1

million. Through

May 6, 2020,

the number of deferrals increased to

391

with an aggregate balance of

$78.7

million. The majority of these deferrals were generally

days in duration.

Additionally, the Bank is a lender for the Small Business Administration's (SBA) Paycheck Protection Program (PPP), a program under the CARES Act, and other SBA, Federal Reserve or United States Treasury programs that have been created in response to the pandemic, and

may

be a lender for programs created in the future. These programs are new and their effects on the Corporation’s business are uncertain. Through

May 6, 2020,

the Bank had closed

470

PPP loans amounting to

$45.3

million under the allocation approved by Congress.