Citizens Community Bancorp Inc 8-K, filed Apr 25, 2022
Citizens Community Bancorp Inc. (CZWI)
8-K
2022-04-25
For: 2022-04-25
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Added on
July 04, 2026
About this 8-K
Citizens Community Bancorp Inc filed this 8-K on April 25, 2022.
Items reported
- Item 2.02: Financial results
- Item 9.01: Financial statements and exhibits
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): April 25, 2022
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation)
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(Address and Zip Code of principal executive offices)
(Registrant's telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
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Securities registered or to be registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933. (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter.)
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. ☐
Item 2.02. Results of Operations and Financial Condition.
On April 25, 2022, Citizens Community Bancorp, Inc. (the “Company”) issued a press release announcing our financial results for the three months ended March 31, 2022 and posted its Earnings Release Supplement to its website. A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K, and a copy of the Earnings Release Supplement is attached hereto as Exhibit 99.2. The attached Exhibits 99.1 and 99.2 are furnished pursuant to Item 2.02 of Form 8-K.
The information in this Item 2.02, Item 9.01 and Exhibits 99.1 and 99.2 attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of such section, nor shall it be deemed incorporated by reference in any filing of the Company under the Securities Act of 1933 or the Securities Exchange Act of 1934, regardless of any general incorporation language in such filing, unless expressly incorporated by specific reference in such filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits. The following exhibit is being furnished herewith:
| 104 | The cover page from this Current Report on Form 8-K in Inline XBRL (Extensible Business Reporting Language) | ||||
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| CITIZENS COMMUNITY BANCORP, INC. | ||||||||||||||
| Date: April 25, 2022 | By: | /s/ James S. Broucek | ||||||||||||
| James S. Broucek | ||||||||||||||
| Chief Financial Officer | ||||||||||||||
EXHIBIT 99.1
Citizens Community Bancorp, Inc. Reports Earnings Per Share $0.45 Per Share in 1Q22;
Bank Capital Base Strengthened
EAU CLAIRE, WI, April 25, 2022 - Citizens Community Bancorp, Inc. (the “Company”) (Nasdaq: CZWI), the parent company of Citizens Community Federal N.A. (the “Bank” or “CCFBank”), today reported earnings of $4.7 million and earnings per diluted share of $0.45 for the quarter ended March 31, 2022, compared to $6.1 million and $0.58 per diluted share for the quarter ended December 31, 2021, and $5.5 million and $0.50 per diluted share for the quarter ended March 31, 2021, respectively.
The Company’s first quarter 2022 operating results reflected the following expected changes from the fourth quarter of 2021: (1) loan interest income decreased largely due to lower net accretion of SBA PPP fees of $1 million as most of these loans repaid in 2021 and (2) a decrease in net gains on sale of investment securities of $0.9 million. Other changes in the quarter included an increase in interest income due to higher volume of loans, lower liability costs, a decrease in incentive compensation and the impact of higher mortgage servicing rights impairment reversals. These positive items were offset by the impact of two fewer days of interest income, the impact of lower yields on fourth quarter loan originations and lower gain on sale of loans.
Book value per share was $15.72 at March 31, 2022, compared to $16.27 at December 31, 2021, and $14.75 at March 31, 2021. Tangible book value per share (non-GAAP)1 was $12.40 at March 31, 2022, compared to $12.90 at December 31, 2021, and $11.39 at March 31, 2021. Book value per share increased $0.97 over the past 12 months, a 6.6% increase from March 31, 2021. Tangible book value per share increased $1.01 over the past 12 months, an 8.9% increase from March 31, 2021. The quarterly decrease in tangible book value per share was largely due to the shift to an unrealized loss in the available for sale securities portfolio of approximately $0.68 per share in the first quarter and the Company’s payment of the annual shareholder dividend in the first quarter of 2022 of $0.26 per share. These decreases were partially offset by net income.
“Loan balances decreased 1.5% in the quarter because of expected payoffs, contractual amortization and the seasonal decline in pipeline activity noted last quarter. Loan pipelines accelerated in the last half of the quarter and economic activity in our markets remained strong, which points to a resumption in loan growth. We are closely monitoring the effect of higher interest rates, inflation and supply chain delays on new construction projects, and have adjusted credit standards to prudently manage risk. Our expense base decreased from the linked quarter due to lower sales production incentives, which partially offset lower mortgage gain on sale income”, said Stephen Bianchi, Chairman, President and Chief Executive Officer.
1
March 31, 2022 Highlights: (as of or for the 3-month period ended March 31, 2022 compared to December 31, 2021 and March 31, 2021.)
•Quarterly earnings of $4.7 million, or $0.45 per diluted share for the quarter ended March 31, 2022, decreased from the quarter ended December 31, 2021, earnings of $6.1 million or $0.58 per diluted share, and decreased from the quarter ended March 31, 2021 earnings of $5.5 million or $0.50 per diluted share. Lower gain on sale of loans, service fees and loan related fees are largely the reason for the decrease from a year ago. Lower SBA PPP accretion compared to a year ago was offset by higher loan volumes and lower liability costs.
•In the first quarter ended March 31, 2022, the Company issued $35 million in subordinated debt with a 10-year maturity. The debt is non-callable for 5 years and reprices quarterly after 5 years at the 3 month Secured Overnight Financing Rate (“SOFR”) plus 3.29%. The Company intends to use a portion of the proceeds to call and repay the current outstanding $15 million, 6.75% subordinated debt in August 2022. In addition, the Company injected $15 million of capital into the bank subsidiary, Citizens Community Federal N.A., which bolstered the bank’s capital ratios and will support future loan growth. The Company also refinanced its $28.856 million senior debt, decreasing the principal to $23.25 million with quarterly interest-only payments due for the first three years and amortized with principal and interest payments over the next nine years.
•Interest expense on subordinated debt will increase approximately $300 thousand in the second quarter from first quarter levels as a full quarter of interest expense is realized, approximately $175 thousand in the third quarter from first quarter levels and approximately $50 thousand in the fourth quarter from first quarter levels as the existing subordinated debt is repaid. These impacts will be partially offset by lower interest expense of approximately $50 thousand in each of the second, third and fourth quarters due to the principal paydown of senior debt.
•Loan growth was negatively impacted by loan payoffs. Approximately $27 million of current quarter payoffs occurred in the originated loan portfolio resulting in a net decline of $1.1 million, excluding SBA PPP loans. Total loans, exclusive of SBA PPP loans, decreased $14.7 million for the quarter ended March 31, 2022. The acquired loan portfolio shrank $13.6 million. In addition, our SBA PPP portfolio decreased $6.7 million during the quarter and totaled $2.1 million at March 31, 2022.
•The net interest margin without SBA PPP net loan fee accretion and loan purchase accretion has increased each quarter over the past five quarters. For the quarter ended March 31, 2022, the net interest margin without SBA PPP net loan fee accretion and loan purchase accretion was 3.11% compared to 2.75% for the year earlier quarter and 3.09% versus the linked quarter.
•Stockholders’ equity as a percent of total assets was 9.32% at March 31, 2022, compared to 9.82% at December 31, 2021. Tangible common equity (“TCE”) as a percent of tangible assets (non-GAAP)1 was 7.50% at March 31, 2022, compared to 7.95% at December 31, 2021. This decrease is due to the payment of the annual shareholder dividend, the impact of modest asset growth, and an increase in unrealized losses in the available for sale portfolio, partially offset by net income.
•No loan loss provision was realized during the quarters ended March 31, 2022, December 31, 2021, and March 31, 2021, due to lower CARES Act Section 4013 deferrals, low net charge-off or low net recoveries, decreases in criticized assets and improving economic conditions in our markets. The MSA unemployment rates in the two markets in which the Company operates were under the national average of 3.6% as of February 2022 and remain low compared to historical levels. This has led to improving trends for businesses most impacted by the pandemic and allowed the Company to reduce its general economic Q-Factor allocation in its allowance calculation. At March 31, 2022, the general economic Q-Factor has returned to pre-pandemic levels, and we expect to provide for loan growth, adjusted for changes in specific reserves levels and net charge offs going forward.
2
•The Bank’s COVID-19 related modifications under Section 4013 of the CARES Act decreased to $0.4 million, or 0.03% of gross loans at March 31, 2022, versus $6.6 million, or 0.5% of gross loans at December 31, 2021. At March 31, 2022, all COVID-19 related modifications were residential.
•The allowance for loan losses on originated loans, excluding SBA PPP loans, increased to 1.45% at March 31, 2022, from 1.43% at December 31, 2021. Since SBA PPP loans are guaranteed by the SBA, they are excluded from this reserve calculation. The allowance for loan losses to total loans increased to 1.30% at March 31, 2022, from 1.29% at December 31, 2021, and decreased from 1.41% at March 31, 2021. Additionally, loans resulting from Bank acquisitions were effectively marked to market value at the time of their acquisition and were also excluded from this reserve calculation.
•Nonperforming assets increased $0.4 million to $13.6 million at March 31, 2022, compared to $13.2 million one quarter earlier.
•Substandard loans increased modestly by $2 million to $24.8 million at March 31, 2022, compared to $22.8 million at December 31, 2021. The increase was largely due to loans totaling $5.2 million, which are primarily agricultural, that have started the workout process and were partially offset by the payoff of a $3.3 million accruing substandard TDR loan. Special mention loans decreased $2.7 million, partially due to the movement of $1.6 million of agricultural loans to substandard.
Balance Sheet and Asset Quality
Total assets increased $35.8 million during the quarter to $1.78 billion at March 31, 2022, compared to $1.74 billion at December 31, 2021. This growth was largely due to an increase in cash and cash equivalents which grew $36.7 million and was supported by new deposits totaling $40.8 million.
Securities available for sale decreased $15.2 million during the quarter ended March 31, 2022, to $187.9 million from $203.1 million at December 31, 2021. This decrease was primarily due to a reduced market value of the portfolio of $9.6 million associated with higher interest rates. The remaining decrease was due to the net reduction of the portfolio due to principal repayments.
Securities held to maturity increased $33.8 million to $104.9 million during the quarter ended March 31, 2022, from $71.1 million at December 31, 2021, primarily due to a net increase in agency mortgage-backed securities as purchases exceeded principal reductions.
Total loans receivable decreased by $20.8 million to $1.290 billion at March 31, 2022, from $1.311 billion as of December 31, 2021. The originated loan portfolio, before SBA PPP loans, decreased $1.1 million in the quarter as newly originated loans nearly offset prepayments and loan paydowns. Acquired loans decreased by $13.6 million and total SBA PPP loans decreased $6.7 million during the current quarter.
The allowance for loan losses was $16.8 million at March 31, 2022, representing 1.30% of total loans receivable compared to $16.9 million at December 31, 2021, or 1.29% of total loans receivable. Approximately 14.3% of the loan portfolio, excluding SBA loans at March 31, 2022, consists of loans purchased through whole bank acquisitions, resulting in these loans being recorded at fair market value at acquisition. The allowance for loan losses allocated to originated loans as a percent of originated loans excluding SBA PPP loans was 1.45% at March 31, 2022, compared to 1.43% at December 31, 2021. For the quarter ended March 31, 2022, the Bank had modest net charge offs of $95 thousand.
3
Allowance for Loan Losses Percentages
(in thousands, except ratios)
| March 31, 2022 | December 31, 2021 | September 30, 2021 | March 31, 2021 | |||||||||||||||||||||||
| Originated loans, net of deferred fees and costs | $ | 1,106,409 | $ | 1,107,555 | $ | 1,006,159 | $ | 817,261 | ||||||||||||||||||
| SBA PPP loans, net of deferred fees | 2,032 | 8,457 | 29,753 | 115,920 | ||||||||||||||||||||||
| Acquired loans, net of unamortized discount | 181,734 | 194,951 | 212,742 | 258,945 | ||||||||||||||||||||||
| Loans, end of period | $ | 1,290,175 | $ | 1,310,963 | $ | 1,248,654 | $ | 1,192,126 | ||||||||||||||||||
| SBA PPP loans, net of deferred fees | (2,032) | (8,457) | (29,753) | (115,920) | ||||||||||||||||||||||
| Loans, net of SBA PPP loans and deferred fees | $ | 1,288,143 | $ | 1,302,506 | $ | 1,218,901 | $ | 1,076,206 | ||||||||||||||||||
| Allowance for loan losses allocated to originated loans | $ | 16,001 | $ | 15,830 | $ | 15,505 | $ | 15,028 | ||||||||||||||||||
| Allowance for loan losses allocated to other loans | 817 | 1,083 | 1,327 | 1,832 | ||||||||||||||||||||||
| Allowance for loan losses | $ | 16,818 | $ | 16,913 | $ | 16,832 | $ | 16,860 | ||||||||||||||||||
| ALL as a percentage of loans, end of period | 1.30 | % | 1.29 | % | 1.35 | % | 1.41 | % | ||||||||||||||||||
| ALL as a percentage of loans, net of SBA PPP loans and deferred fees | 1.31 | % | 1.30 | % | 1.38 | % | 1.57 | % | ||||||||||||||||||
| ALL allocated to originated loans as a percentage of originated loans, net of deferred fees and costs | 1.45 | % | 1.43 | % | 1.54 | % | 1.84 | % | ||||||||||||||||||
Nonperforming assets increased slightly to $13.6 million or 0.77% of total assets at March 31, 2022, compared to $13.2 million or 0.76% of total assets at December 31, 2021. This increase was due to the modest increase in accruing one to four family residential loans past due 90 days or more, which increased $0.2 million. Included in nonperforming assets at March 31, 2022, are $5.3 million of nonperforming loans acquired during recent whole-bank acquisitions and $1.4 million of OREO, currently under a purchase agreement to be sold, related to a branch facility from a whole-bank acquisition. Originated nonperforming assets were $7.0 million, or 0.39% of total assets for the most recent quarter. Over the past year, total criticized loans decreased 33% from $39.7 million at March 31, 2021, to $26.7 million at March 31, 2022. In the first quarter of 2022, a $3.0 million accruing substandard TDR loan was paid in full.
| (in thousands) | ||||||||||||||||||||||||||||||||
| March 31, 2022 | December 31, 2021 | September 30, 2021 | June 30, 2021 | March 31, 2021 | ||||||||||||||||||||||||||||
| Special mention loan balances | $ | 1,849 | $ | 4,536 | $ | 2,548 | $ | 12,308 | $ | 13,659 | ||||||||||||||||||||||
| Substandard loan balances | 24,822 | 22,817 | 27,137 | 25,890 | 26,064 | |||||||||||||||||||||||||||
| Criticized loans, end of period | $ | 26,671 | $ | 27,353 | $ | 29,685 | $ | 38,198 | $ | 39,723 | ||||||||||||||||||||||
Deposits increased $40.7 million to $1.428 billion at March 31, 2022, from $1.388 billion at December 31, 2021. The increase was due in part to seasonal factors related to taxes and two large retail and one large commercial deposit. These large deposits totaling $19 million are approximately evenly split between retail and commercial deposits and are expected to decrease substantially over the next three quarters. Certificates of deposit balances decreased $30 million in the first quarter with some of those maturing deposits moving to money market accounts. The decrease in certificates of deposit account balances was due to the Company choosing not to match higher rate local retail certificate competition.
As of March 31, 2022, approximately 354 thousand shares remain available for repurchase under the share repurchase authorization and the bank repurchased 18 thousand shares in the quarter.
4
Review of Operations
Net interest income was $13.2 million for the first quarter ended March 31, 2022, compared to $14.4 million for the fourth quarter ended December 31, 2021, and $12.8 million for the quarter ended March 31, 2021. Compared to the fourth and first quarters of 2021, net interest income decreased due to lower SBA PPP accretion and lower accelerated accretion from payoff of certain PCI loans. In addition, compared to the fourth quarter of 2021, there were two fewer days of interest income.
The net interest margin (“NIM”) decreased to 3.25% in the first quarter ended March 31, 2022, compared to 3.50% for the fourth quarter ended December 31, 2021, and decreased from 3.31% for the quarter ended March 31, 2021. The decrease in NIM from the fourth quarter is largely due to lower net accretion of SBA PPP loans and purchase accretion, partially offset by the lower cost of deposits.
In comparison to the quarter ended March 31, 2021, the current quarter NIM of 3.25% decreased due to: (1) 39 basis points from lower SBA PPP net loan fee accretion, and (2) 4 basis points of lower acceleration of loan purchase accretion. The decrease was partially offset by lower deposit costs of 26 basis points, and a 13 basis point improvement from investing lower yielding cash into securities.
The table below shows the impact of accretion related to purchased credit impaired loans and SBA PPP loans on interest income and NIM.
Net interest income and net interest margin analysis:
(in thousands, except yields and rates)
| Three months ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| March 31, 2022 | December 31, 2021 | September 30, 2021 | June 30, 2021 | March 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net Interest Income | Net Interest Margin | Net Interest Income | Net Interest Margin | Net Interest Income | Net Interest Margin | Net Interest Income | Net Interest Margin | Net Interest Income | Net Interest Margin | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| As reported | $ | 13,167 | 3.25 | % | $ | 14,384 | 3.50 | % | $ | 13,688 | 3.34 | % | $ | 12,831 | 3.22 | % | $ | 12,764 | 3.31 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Less non-accretable difference realized as interest from payoff of purchased credit impaired (“PCI”) loans | $ | (26) | (0.01) | % | $ | (2) | — | % | $ | (8) | — | % | $ | (37) | (0.01) | % | $ | (58) | (0.02) | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Less accelerated accretion from payoff of certain PCI loans with transferred non-accretable differences | $ | (11) | — | % | $ | (200) | (0.05) | % | $ | (12) | — | % | $ | — | — | % | $ | (90) | (0.02) | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Less scheduled accretion interest | $ | (264) | (0.07) | % | $ | (264) | (0.06) | % | $ | (261) | (0.06) | % | $ | (265) | (0.07) | % | $ | (266) | (0.07) | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Without loan purchase accretion | $ | 12,866 | 3.17 | % | $ | 13,918 | 3.39 | % | $ | 13,407 | 3.28 | % | $ | 12,529 | 3.14 | % | $ | 12,350 | 3.20 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Less SBA PPP net loan fee accretion | $ | (259) | (0.06) | % | $ | (1,251) | (0.30) | % | $ | (1,878) | (0.46) | % | $ | (1,309) | (0.33) | % | $ | (1,750) | (0.45) | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Without SBA PPP net loan fee accretion and loan purchase accretion | $ | 12,607 | 3.11 | % | $ | 12,667 | 3.09 | % | $ | 11,529 | 2.82 | % | $ | 11,220 | 2.81 | % | $ | 10,600 | 2.75 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
5
The table below lists the SBA PPP loans and net deferred loan fee accretion balances related to 2020 and 2021 SBA PPP loan originations:
| 2020 Originations | 2021 Originations | Total | ||||||||||||||||||||||||||||||||||||
| Balance | Net Deferred Fee Income | Balance | Net Deferred Fee Income | Balance | Net Deferred Fee Income | |||||||||||||||||||||||||||||||||
| SBA PPP loans, January 1, 2021 | $ | 123,702 | $ | 2,991 | $ | — | $ | — | $ | 123,702 | $ | 2,991 | ||||||||||||||||||||||||||
| 2021 SBA PPP loan originations | — | — | 47,467 | 1,770 | 47,467 | 1,770 | ||||||||||||||||||||||||||||||||
| Less: 2021 SBA PPP loan forgiveness and fee accretion | (52,238) | (1,706) | — | (44) | (52,238) | (1,750) | ||||||||||||||||||||||||||||||||
| SBA PPP loans, March 31, 2021 | 71,464 | 1,285 | 47,467 | 1,726 | 118,931 | 3,011 | ||||||||||||||||||||||||||||||||
| 2021 SBA PPP loan originations | — | — | 8,323 | 1,715 | 8,323 | 1,715 | ||||||||||||||||||||||||||||||||
| Less: 2021 SBA PPP loan forgiveness and fee accretion | (50,057) | (977) | (2,272) | (332) | (52,329) | (1,309) | ||||||||||||||||||||||||||||||||
| SBA PPP loans, June 30, 2021 | 21,407 | 308 | 53,518 | $ | 3,109 | 74,925 | 3,417 | |||||||||||||||||||||||||||||||
| 2021 SBA PPP loan originations | — | — | 64 | 9 | 64 | 9 | ||||||||||||||||||||||||||||||||
| Less: 2021 SBA PPP loan forgiveness and fee accretion | (18,286) | (279) | (25,402) | (1,599) | (43,688) | (1,878) | ||||||||||||||||||||||||||||||||
| SBA PPP Loans, September 30, 2021 | 3,121 | 29 | 28,180 | 1,519 | 31,301 | 1,548 | ||||||||||||||||||||||||||||||||
| 2021 SBA PPP loan originations | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
| Less: 2021 SBA PPP loan forgiveness and fee accretion | (993) | (25) | (21,553) | (1,226) | (22,546) | (1,251) | ||||||||||||||||||||||||||||||||
| SBA PPP Loans, December 31, 2021 | 2,128 | 4 | 6,627 | 293 | 8,755 | 297 | ||||||||||||||||||||||||||||||||
| Less: 2022 SBA PPP loan forgiveness and fee accretion | (886) | (3) | (5,798) | (255) | (6,684) | (258) | ||||||||||||||||||||||||||||||||
| SBA PPP loans, March 31, 2022 | $ | 1,242 | $ | 1 | $ | 829 | $ | 38 | $ | 2,071 | $ | 39 | ||||||||||||||||||||||||||
The Bank continued to manage deposit interest rates, primarily as interest rates on new and renewed certificates of deposit were lower than the previous quarter. In the first quarter, the Company’s overall CD portfolio cost of funds decreased 14 basis points from the fourth quarter of 2021 and 42 basis points from the first quarter of 2021. At March 31, 2022, the Bank had approximately $72.5 million of certificate of deposit accounts (“CD’s”) maturing in the second quarter of 2022 with a weighted average cost of approximately 1.50%.
There were no loan loss provisions for the quarter ended March 31, 2022, and the quarters ended December 31, 2021, and March 31, 2021. This is due to lower CARES Act Section 4013 deferrals, low net charge-off or net recovery activity, decreases in criticized assets and improving economic conditions in our markets to pre-pandemic levels. Continued improving economic conditions in our markets, as evidenced by unemployment rates below the national average in our two largest population centers, have resulted in improving overall economic trends for businesses.
Non-interest income decreased to $2.7 million in the quarter ended March 31, 2022 compared to $4.4 million in the quarter ended December 31, 2021 and decreased from $4.2 million in the quarter ended March 31, 2021. The decrease in the first quarter of 2022 compared to the fourth quarter of 2021 was largely due to a decrease in gain on sale of investment securities of $0.9 million due to no sales in the first quarter and a $0.5 million decrease in gain on sale of loans, largely due to lower mortgage originations. Loan servicing income and loan fees and service charges were also lower. Relative to the comparable quarter one year earlier, non-interest income was lower as a result of the following factors: (1) lower gain on sale of loans; (2) lower loan servicing income; and (3) lower loan fees and service charges.
6
Total non-interest expense decreased $0.8 million in the first quarter of 2022 to $9.7 million, compared to $10.5 million for the quarter ended December 31, 2021, and increased from $9.5 million for the quarter ended March 31, 2021. The decrease from the fourth quarter was largely due to: (1) a decrease in compensation, as incentives decreased based on performance, including lower loan originations; (2) lower mortgage servicing rights expensed due to higher reversals of previously recorded MSR impairment in the first quarter of 2022 of $0.57 million compared to fourth quarter of $0.15 million; and (3) a decrease in advertising, marketing and public relations as the Bank provided contributions to support community projects in the fourth quarter of 2021. The fair value of MSR is now greater than book value and there is no MSR impairment remaining. These decreases were partially offset by higher data processing expenses due to one-time credits recognized in the fourth quarter of 2021. In the first quarter of 2022, the Company purchased new market tax credits for $4.1 million. These tax credits, which are included in other assets, are being expensed in lock step with the related tax credit realization and will result in a lower tax rate.
Provisions for income taxes decreased to $1.5 million in the first quarter of 2022 from $2.2 million in the fourth quarter of 2021, due to lower pre-tax income and a lower tax rate due to the impact of the tax credits noted above. The tax credits are expected to be realized over the next seven years. The effective tax rate was 24.2% in the first quarter of 2022, compared to 26.7% the previous quarter and 26.1% for the comparable prior year quarter.
These financial results are preliminary until the Form 10-Q is filed in May 2022.
About the Company
Citizens Community Bancorp, Inc. (NASDAQ: “CZWI”) is the holding company of the Bank, a national bank based in Altoona, Wisconsin, currently serving customers primarily in Wisconsin and Minnesota through 25 branch locations. Its primary markets include the Chippewa Valley Region in Wisconsin, the Twin Cities and Mankato markets in Minnesota, and various rural communities around these areas. The Bank offers traditional community banking services to businesses, ag operators and consumers, including residential mortgage loans.
Cautionary Statement Regarding Forward-Looking Statements
Certain statements contained in this release are considered “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may be identified using forward-looking words or phrases such as “anticipate,” “believe,” “could,” “expect,” “estimates,” “intend,” “may,” “on pace,” “preliminary,” “planned,” “potential,” “should,” “will,” “would” or the negative of those terms or other words of similar meaning. Such forward-looking statements in this release are inherently subject to many uncertainties arising in the operations and business environment of the Company and the Bank. These uncertainties include conditions in the financial markets and economic conditions generally; adverse impacts to the Company or Bank arising from the COVID-19 pandemic; acts of terrorism and political or military actions by the United States or other governments; the possibility of a deterioration in the residential real estate markets; interest rate risk; lending risk; higher lending risks associated with our commercial and agricultural banking activities; the sufficiency of loan allowances; changes in the fair value or ratings downgrades of our securities; competitive pressures among depository and other financial institutions; disintermediation risk; our ability to maintain our reputation; our ability to maintain or increase our market share; our ability to realize the benefits of net deferred tax assets; our inability to obtain needed liquidity; our ability to raise capital needed to fund growth or meet regulatory requirements; our ability to attract and retain key personnel; our ability to keep pace with technological change; prevalence of fraud and other financial crimes; cybersecurity risks; the possibility that our internal controls and procedures could fail or be circumvented; our ability to successfully execute our acquisition growth strategy; risks posed by acquisitions and other expansion opportunities, including difficulties and delays in integrating the acquired business operations or fully realizing the cost savings and other benefits; restrictions on our ability to pay dividends; the potential volatility of our stock price; accounting standards for loan losses; legislative or regulatory changes or actions, or significant litigation, adversely affecting the Company or Bank; public company reporting obligations; changes in federal or state tax laws; and changes in accounting principles, policies or guidelines and their impact on financial performance. Stockholders, potential investors, and other readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. Such uncertainties and other risks that may affect the Company’s performance are discussed further in Part I, Item 1A, “Risk Factors,” in the Company’s Form 10-K, for the year ended December 31, 2021, filed with the Securities and Exchange Commission (“SEC”) on March 2, 2022 and the Company’s subsequent filings with the SEC. The Company undertakes no obligation to make any revisions to the
7
forward-looking statements contained in this news release or to update them to reflect events or circumstances occurring after the date of this release.
Non-GAAP Financial Measures
This press release contains non-GAAP financial measures, such as tangible book value, tangible book value per share, tangible common equity as a percent of tangible assets and return on average tangible common equity which management believes may be helpful in understanding the Company’s results of operations or financial position and comparing results over different periods.
Tangible book value, tangible book value per share, tangible common equity as a percent of tangible assets and return on average tangible common equity are non-GAAP measures that eliminate the impact of goodwill, and intangible assets on our financial position. Management believes these measures are useful in assessing the strength of our financial position.
Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, can be found in this press release. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other banks and financial institutions.
Contact: Steve Bianchi, CEO
(715)-836-9994
(CZWI-ER)
8
CITIZENS COMMUNITY BANCORP, INC.
Consolidated Balance Sheets
(in thousands, except shares and per share data)
| March 31, 2022 (unaudited) | December 31, 2021 (audited) | March 31, 2021 (unaudited) | ||||||||||||||||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 84,364 | $ | 47,691 | $ | 196,039 | ||||||||||||||||||||||||||||||||
| Other interest-bearing deposits | 1,511 | 1,511 | 2,016 | |||||||||||||||||||||||||||||||||||
| Securities available for sale “AFS” | 187,905 | 203,068 | 185,160 | |||||||||||||||||||||||||||||||||||
| Securities held to maturity “HTM” | 104,894 | 71,141 | 57,419 | |||||||||||||||||||||||||||||||||||
| Equity investments | 1,291 | 1,328 | 297 | |||||||||||||||||||||||||||||||||||
| Other investments | 15,084 | 15,305 | 15,069 | |||||||||||||||||||||||||||||||||||
| Loans receivable | 1,290,176 | 1,310,963 | 1,192,126 | |||||||||||||||||||||||||||||||||||
| Allowance for loan losses | (16,818) | (16,913) | (16,860) | |||||||||||||||||||||||||||||||||||
| Loans receivable, net | 1,273,358 | 1,294,050 | 1,175,266 | |||||||||||||||||||||||||||||||||||
| Loans held for sale | 2,528 | 6,670 | 2,267 | |||||||||||||||||||||||||||||||||||
| Mortgage servicing rights, net | 4,614 | 4,161 | 3,999 | |||||||||||||||||||||||||||||||||||
| Office properties and equipment, net | 21,393 | 21,169 | 21,081 | |||||||||||||||||||||||||||||||||||
| Accrued interest receivable | 4,179 | 3,916 | 5,464 | |||||||||||||||||||||||||||||||||||
| Intangible assets | 3,499 | 3,898 | 5,095 | |||||||||||||||||||||||||||||||||||
| Goodwill | 31,498 | 31,498 | 31,498 | |||||||||||||||||||||||||||||||||||
| Foreclosed and repossessed assets, net | 1,368 | 1,408 | 85 | |||||||||||||||||||||||||||||||||||
| Bank owned life insurance (“BOLI”) | 24,464 | 24,312 | 23,837 | |||||||||||||||||||||||||||||||||||
| Other assets | 13,519 | 8,502 | 7,702 | |||||||||||||||||||||||||||||||||||
| TOTAL ASSETS | $ | 1,775,469 | $ | 1,739,628 | $ | 1,732,294 | ||||||||||||||||||||||||||||||||
| Liabilities and Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||||
| Liabilities: | ||||||||||||||||||||||||||||||||||||||
| Deposits | $ | 1,428,223 | $ | 1,387,535 | $ | 1,380,202 | ||||||||||||||||||||||||||||||||
| Federal Home Loan Bank (“FHLB”) advances | 85,530 | 111,527 | 115,481 | |||||||||||||||||||||||||||||||||||
| Other borrowings | 87,062 | 58,426 | 58,354 | |||||||||||||||||||||||||||||||||||
| Other liabilities | 9,160 | 11,274 | 17,595 | |||||||||||||||||||||||||||||||||||
| Total liabilities | 1,609,975 | 1,568,762 | 1,571,632 | |||||||||||||||||||||||||||||||||||
| Stockholders’ equity: | ||||||||||||||||||||||||||||||||||||||
| Common stock— $0.01 par value, authorized 30,000,000; 10,526,781; 10,502,442 and 10,893,872 shares issued and outstanding, respectively | 105 | 105 | 109 | |||||||||||||||||||||||||||||||||||
| Additional paid-in capital | 119,789 | 119,925 | 123,766 | |||||||||||||||||||||||||||||||||||
| Retained earnings | 52,562 | 50,675 | 35,783 | |||||||||||||||||||||||||||||||||||
| Accumulated other comprehensive (loss) income | (6,962) | 161 | 1,004 | |||||||||||||||||||||||||||||||||||
| Total stockholders’ equity | 165,494 | 170,866 | 160,662 | |||||||||||||||||||||||||||||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 1,775,469 | $ | 1,739,628 | $ | 1,732,294 | ||||||||||||||||||||||||||||||||
Note: Certain items previously reported were reclassified for consistency with the current presentation.
9
CITIZENS COMMUNITY BANCORP, INC.
Consolidated Statements of Operations
(in thousands, except per share data)
| Three Months Ended | ||||||||||||||||||||||||||||||||||||||
| March 31, 2022 (unaudited) | December 31, 2021 (unaudited) | March 31, 2021 (unaudited) | ||||||||||||||||||||||||||||||||||||
| Interest and dividend income: | ||||||||||||||||||||||||||||||||||||||
| Interest and fees on loans | $ | 13,767 | $ | 15,158 | $ | 14,517 | ||||||||||||||||||||||||||||||||
| Interest on investments | 1,609 | 1,604 | 1,103 | |||||||||||||||||||||||||||||||||||
| Total interest and dividend income | 15,376 | 16,762 | 15,620 | |||||||||||||||||||||||||||||||||||
| Interest expense: | ||||||||||||||||||||||||||||||||||||||
| Interest on deposits | 1,068 | 1,261 | 1,714 | |||||||||||||||||||||||||||||||||||
| Interest on FHLB borrowed funds | 311 | 388 | 411 | |||||||||||||||||||||||||||||||||||
| Interest on other borrowed funds | 830 | 729 | 731 | |||||||||||||||||||||||||||||||||||
| Total interest expense | 2,209 | 2,378 | 2,856 | |||||||||||||||||||||||||||||||||||
| Net interest income before provision for loan losses | 13,167 | 14,384 | 12,764 | |||||||||||||||||||||||||||||||||||
| Provision for loan losses | — | — | — | |||||||||||||||||||||||||||||||||||
| Net interest income after provision for loan losses | 13,167 | 14,384 | 12,764 | |||||||||||||||||||||||||||||||||||
| Non-interest income: | ||||||||||||||||||||||||||||||||||||||
| Service charges on deposit accounts | 488 | 470 | 398 | |||||||||||||||||||||||||||||||||||
| Interchange income | 549 | 577 | 530 | |||||||||||||||||||||||||||||||||||
| Loan servicing income | 701 | 762 | 893 | |||||||||||||||||||||||||||||||||||
| Gain on sale of loans | 722 | 1,268 | 1,595 | |||||||||||||||||||||||||||||||||||
| Loan fees and service charges | 92 | 158 | 278 | |||||||||||||||||||||||||||||||||||
| Net gains (losses) on investment securities | (37) | 879 | 235 | |||||||||||||||||||||||||||||||||||
| Other | 198 | 293 | 247 | |||||||||||||||||||||||||||||||||||
| Total non-interest income | 2,713 | 4,407 | 4,176 | |||||||||||||||||||||||||||||||||||
| Non-interest expense: | ||||||||||||||||||||||||||||||||||||||
| Compensation and related benefits | 5,398 | 5,987 | 5,569 | |||||||||||||||||||||||||||||||||||
| Occupancy | 1,365 | 1,384 | 1,316 | |||||||||||||||||||||||||||||||||||
| Data processing | 1,301 | 1,186 | 1,370 | |||||||||||||||||||||||||||||||||||
| Amortization of intangible assets | 399 | 399 | 399 | |||||||||||||||||||||||||||||||||||
| Mortgage servicing rights expense, net | (327) | 163 | (450) | |||||||||||||||||||||||||||||||||||
| Advertising, marketing and public relations | 212 | 409 | 163 | |||||||||||||||||||||||||||||||||||
| FDIC premium assessment | 115 | 156 | 165 | |||||||||||||||||||||||||||||||||||
| Professional services | 402 | 350 | 502 | |||||||||||||||||||||||||||||||||||
| Gains on repossessed assets, net | (7) | (50) | (117) | |||||||||||||||||||||||||||||||||||
| New market tax credit depletion | 163 | — | — | |||||||||||||||||||||||||||||||||||
| Other | 647 | 541 | 572 | |||||||||||||||||||||||||||||||||||
| Total non-interest expense | 9,668 | 10,525 | 9,489 | |||||||||||||||||||||||||||||||||||
| Income before provision for income taxes | 6,212 | 8,266 | 7,451 | |||||||||||||||||||||||||||||||||||
| Provision for income taxes | 1,506 | 2,209 | 1,945 | |||||||||||||||||||||||||||||||||||
| Net income attributable to common stockholders | $ | 4,706 | $ | 6,057 | $ | 5,506 | ||||||||||||||||||||||||||||||||
| Per share information: | ||||||||||||||||||||||||||||||||||||||
| Basic earnings | $ | 0.45 | $ | 0.58 | $ | 0.50 | ||||||||||||||||||||||||||||||||
| Diluted earnings | $ | 0.45 | $ | 0.58 | $ | 0.50 | ||||||||||||||||||||||||||||||||
| Cash dividends paid | $ | 0.26 | $ | — | $ | 0.23 | ||||||||||||||||||||||||||||||||
| Book value per share at end of period | $ | 15.72 | $ | 16.27 | $ | 14.75 | ||||||||||||||||||||||||||||||||
| Tangible book value per share at end of period (non-GAAP) | $ | 12.40 | $ | 12.90 | $ | 11.39 | ||||||||||||||||||||||||||||||||
Note: Certain items previously reported were reclassified for consistency with the current presentation.
10
| Loan Composition (in thousands) | March 31, 2022 | December 31, 2021 | March 31, 2021 | |||||||||||||||||||||||
| Originated Loans: | ||||||||||||||||||||||||||
| Commercial/Agricultural real estate: | ||||||||||||||||||||||||||
| Commercial real estate | $ | 575,289 | $ | 578,395 | $ | 365,603 | ||||||||||||||||||||
| Agricultural real estate | 52,683 | 52,372 | 38,140 | |||||||||||||||||||||||
| Multi-family real estate | 175,471 | 174,050 | 111,503 | |||||||||||||||||||||||
| Construction and land development | 86,997 | 78,613 | 83,936 | |||||||||||||||||||||||
| C&I/Agricultural operating: | ||||||||||||||||||||||||||
| Commercial and industrial | 108,422 | 107,937 | 76,693 | |||||||||||||||||||||||
| Agricultural operating | 24,020 | 26,202 | 21,149 | |||||||||||||||||||||||
| Residential mortgage: | ||||||||||||||||||||||||||
| Residential mortgage | 59,875 | 63,855 | 82,285 | |||||||||||||||||||||||
| Purchased HELOC loans | 3,487 | 3,871 | 5,291 | |||||||||||||||||||||||
| Consumer installment: | ||||||||||||||||||||||||||
| Originated indirect paper | 14,508 | 15,971 | 23,186 | |||||||||||||||||||||||
| Other consumer | 7,842 | 8,473 | 10,951 | |||||||||||||||||||||||
| Originated loans before SBA PPP loans | 1,108,594 | 1,109,739 | 818,737 | |||||||||||||||||||||||
| SBA PPP loans | 2,071 | 8,755 | 118,931 | |||||||||||||||||||||||
| Total originated loans | $ | 1,110,665 | $ | 1,118,494 | $ | 937,668 | ||||||||||||||||||||
| Acquired Loans: | ||||||||||||||||||||||||||
| Commercial/Agricultural real estate: | ||||||||||||||||||||||||||
| Commercial real estate | $ | 114,485 | $ | 120,070 | $ | 149,586 | ||||||||||||||||||||
| Agricultural real estate | 23,033 | 26,123 | 32,427 | |||||||||||||||||||||||
| Multi-family real estate | 4,016 | 4,299 | 7,485 | |||||||||||||||||||||||
| Construction and land development | 883 | 907 | 6,796 | |||||||||||||||||||||||
| C&I/Agricultural operating: | ||||||||||||||||||||||||||
| Commercial and industrial | 12,600 | 14,230 | 19,240 | |||||||||||||||||||||||
| Agricultural operating | 4,737 | 5,386 | 7,101 | |||||||||||||||||||||||
| Residential mortgage: | ||||||||||||||||||||||||||
| Residential mortgage | 24,898 | 27,135 | 40,046 | |||||||||||||||||||||||
| Consumer installment: | ||||||||||||||||||||||||||
| Other consumer | 349 | 401 | 913 | |||||||||||||||||||||||
| Total acquired loans | $ | 185,001 | $ | 198,551 | $ | 263,594 | ||||||||||||||||||||
| Total Loans: | ||||||||||||||||||||||||||
| Commercial/Agricultural real estate: | ||||||||||||||||||||||||||
| Commercial real estate | $ | 689,774 | $ | 698,465 | $ | 515,189 | ||||||||||||||||||||
| Agricultural real estate | 75,716 | 78,495 | 70,567 | |||||||||||||||||||||||
| Multi-family real estate | 179,487 | 178,349 | 118,988 | |||||||||||||||||||||||
| Construction and land development | 87,880 | 79,520 | 90,732 | |||||||||||||||||||||||
| C&I/Agricultural operating: | ||||||||||||||||||||||||||
| Commercial and industrial | 121,022 | 122,167 | 95,933 | |||||||||||||||||||||||
| Agricultural operating | 28,757 | 31,588 | 28,250 | |||||||||||||||||||||||
| Residential mortgage: | ||||||||||||||||||||||||||
| Residential mortgage | 84,773 | 90,990 | 122,331 | |||||||||||||||||||||||
| Purchased HELOC loans | 3,487 | 3,871 | 5,291 | |||||||||||||||||||||||
| Consumer installment: | ||||||||||||||||||||||||||
| Originated indirect paper | 14,508 | 15,971 | 23,186 | |||||||||||||||||||||||
| Other consumer | 8,191 | 8,874 | 11,864 | |||||||||||||||||||||||
| Gross loans before SBA PPP loans | 1,293,595 | 1,308,290 | 1,082,331 | |||||||||||||||||||||||
| SBA PPP loans | 2,071 | 8,755 | 118,931 | |||||||||||||||||||||||
| Gross loans | $ | 1,295,666 | $ | 1,317,045 | $ | 1,201,262 | ||||||||||||||||||||
| Unearned net deferred fees and costs and loans in process | (2,223) | (2,482) | (4,487) | |||||||||||||||||||||||
| Unamortized discount on acquired loans | (3,267) | (3,600) | (4,649) | |||||||||||||||||||||||
| Total loans receivable | $ | 1,290,176 | $ | 1,310,963 | $ | 1,192,126 | ||||||||||||||||||||
11
Nonperforming Originated and Acquired Assets
(in thousands, except ratios)
| March 31, 2022 and Three Months Ended | December 31, 2021 and Three Months Ended | March 31, 2021 and Three Months Ended | ||||||||||||||||||||||||
| Nonperforming assets: | ||||||||||||||||||||||||||
| Originated nonperforming assets: | ||||||||||||||||||||||||||
| Nonaccrual loans | $ | 6,602 | $ | 6,448 | $ | 2,344 | ||||||||||||||||||||
| Accruing loans past due 90 days or more | 398 | 63 | 391 | |||||||||||||||||||||||
| Total originated nonperforming loans (“NPL”) | 7,000 | 6,511 | 2,735 | |||||||||||||||||||||||
| Other real estate owned (“OREO”) | — | — | — | |||||||||||||||||||||||
| Other collateral owned | 8 | 2 | 28 | |||||||||||||||||||||||
| Total originated nonperforming assets (“NPAs”) | $ | 7,008 | $ | 6,513 | $ | 2,763 | ||||||||||||||||||||
| Acquired nonperforming assets: | ||||||||||||||||||||||||||
| Nonaccrual loans | $ | 5,256 | $ | 5,217 | $ | 6,335 | ||||||||||||||||||||
| Accruing loans past due 90 days or more | — | 97 | 145 | |||||||||||||||||||||||
| Total acquired nonperforming loans (“NPL”) | 5,256 | 5,314 | 6,480 | |||||||||||||||||||||||
| Other real estate owned (“OREO”) | 1,360 | 1,406 | 57 | |||||||||||||||||||||||
| Other collateral owned | — | — | — | |||||||||||||||||||||||
| Total acquired nonperforming assets (“NPAs”) | $ | 6,616 | $ | 6,720 | $ | 6,537 | ||||||||||||||||||||
| Total nonperforming assets (“NPAs”) | $ | 13,624 | $ | 13,233 | $ | 9,300 | ||||||||||||||||||||
| Loans, end of period | $ | 1,290,176 | $ | 1,310,963 | $ | 1,192,126 | ||||||||||||||||||||
| Total assets, end of period | $ | 1,775,469 | $ | 1,739,628 | $ | 1,732,294 | ||||||||||||||||||||
| Ratios: | ||||||||||||||||||||||||||
| Originated NPLs to total loans | 0.54 | % | 0.50 | % | 0.23 | % | ||||||||||||||||||||
| Acquired NPLs to total loans | 0.41 | % | 0.41 | % | 0.54 | % | ||||||||||||||||||||
| Originated NPAs to total assets | 0.40 | % | 0.37 | % | 0.16 | % | ||||||||||||||||||||
| Acquired NPAs to total assets | 0.37 | % | 0.39 | % | 0.38 | % | ||||||||||||||||||||
12
Nonperforming Total Assets
(in thousand, except ratios)
| March 31, 2022 and Three Months Ended | December 31, 2021 and Three Months Ended | March 31, 2021 and Three Months Ended | ||||||||||||||||||||||||||||||||||||
| Nonperforming assets: | ||||||||||||||||||||||||||||||||||||||
| Nonaccrual loans | ||||||||||||||||||||||||||||||||||||||
| Commercial real estate | $ | 5,503 | $ | 5,374 | $ | 760 | ||||||||||||||||||||||||||||||||
| Agricultural real estate | 3,454 | 3,490 | 4,511 | |||||||||||||||||||||||||||||||||||
| Construction and land development | 129 | — | — | |||||||||||||||||||||||||||||||||||
| Commercial and industrial (“C&I”) | 284 | 298 | 391 | |||||||||||||||||||||||||||||||||||
| Agricultural operating | 1,064 | 993 | 764 | |||||||||||||||||||||||||||||||||||
| Residential mortgage | 1,334 | 1,433 | 2,167 | |||||||||||||||||||||||||||||||||||
| Consumer installment | 90 | 77 | 86 | |||||||||||||||||||||||||||||||||||
| Total nonaccrual loans | $ | 11,858 | $ | 11,665 | $ | 8,679 | ||||||||||||||||||||||||||||||||
| Accruing loans past due 90 days or more | 398 | 160 | 536 | |||||||||||||||||||||||||||||||||||
| Total nonperforming loans (“NPLs”) | 12,256 | 11,825 | 9,215 | |||||||||||||||||||||||||||||||||||
| Foreclosed and repossessed assets, net | 1,368 | 1,408 | 85 | |||||||||||||||||||||||||||||||||||
| Total nonperforming assets (“NPAs”) | $ | 13,624 | $ | 13,233 | $ | 9,300 | ||||||||||||||||||||||||||||||||
| Troubled Debt Restructurings (“TDRs”) | $ | 10,231 | $ | 12,523 | $ | 17,442 | ||||||||||||||||||||||||||||||||
| Nonaccrual TDRs | $ | 4,586 | $ | 4,539 | $ | 5,690 | ||||||||||||||||||||||||||||||||
| Loans, end of period | $ | 1,290,176 | $ | 1,310,963 | $ | 1,192,126 | ||||||||||||||||||||||||||||||||
| Total assets, end of period | $ | 1,775,469 | $ | 1,739,628 | $ | 1,732,294 | ||||||||||||||||||||||||||||||||
| Ratios: | ||||||||||||||||||||||||||||||||||||||
| NPLs to total loans | 0.95 | % | 0.90 | % | 0.77 | % | ||||||||||||||||||||||||||||||||
| NPAs to total assets | 0.77 | % | 0.76 | % | 0.54 | % | ||||||||||||||||||||||||||||||||
Deposit Composition
(in thousands)
| March 31, 2022 | December 31, 2021 | March 31, 2021 | ||||||||||||||||||||||||
| Non-interest bearing demand deposits | $ | 269,481 | $ | 276,631 | $ | 257,042 | ||||||||||||||||||||
| Interest bearing demand deposits | 423,251 | 396,231 | 352,302 | |||||||||||||||||||||||
| Savings accounts | 241,072 | 222,674 | 222,448 | |||||||||||||||||||||||
| Money market accounts | 321,409 | 288,985 | 258,942 | |||||||||||||||||||||||
| Certificate accounts | 173,010 | 203,014 | 289,468 | |||||||||||||||||||||||
| Total deposits | $ | 1,428,223 | $ | 1,387,535 | $ | 1,380,202 | ||||||||||||||||||||
13
Average balances, Interest Yields and Rates
(in thousands, except yields and rates)
| Three months ended March 31, 2022 | Three months ended December 31, 2021 | Three months ended March 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Average Balance | Interest Income/ Expense | Average Yield/ Rate (1) | Average Balance | Interest Income/ Expense | Average Yield/ Rate (1) | Average Balance | Interest Income/ Expense | Average Yield/ Rate (1) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Average interest earning assets: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 35,208 | $ | 13 | 0.15 | % | $ | 45,758 | $ | 15 | 0.13 | % | $ | 129,642 | $ | 29 | 0.09 | % | ||||||||||||||||||||||||||||||||||||||
| Loans receivable | 1,304,141 | 13,767 | 4.28 | % | 1,271,956 | 15,158 | 4.73 | % | 1,213,562 | 14,517 | 4.85 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Interest bearing deposits | 1,511 | 8 | 2.15 | % | 1,512 | 8 | 2.10 | % | 3,437 | 20 | 2.36 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Investment securities (1) | 288,261 | 1,416 | 1.99 | % | 296,444 | 1,404 | 1.88 | % | 202,981 | 885 | 1.77 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Other investments | 15,258 | 172 | 4.57 | % | 15,081 | 177 | 4.66 | % | 15,038 | 169 | 4.56 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Total interest earning assets (1) | $ | 1,644,379 | $ | 15,376 | 3.79 | % | $ | 1,630,751 | $ | 16,762 | 4.08 | % | $ | 1,564,660 | $ | 15,620 | 4.05 | % | ||||||||||||||||||||||||||||||||||||||
| Average interest bearing liabilities: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Savings accounts | $ | 224,557 | $ | 94 | 0.17 | % | $ | 217,460 | $ | 92 | 0.17 | % | $ | 197,647 | $ | 83 | 0.17 | % | ||||||||||||||||||||||||||||||||||||||
| Demand deposits | 410,890 | 217 | 0.21 | % | 384,477 | 259 | 0.27 | % | 330,674 | 251 | 0.31 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Money market accounts | 299,004 | 216 | 0.29 | % | 288,683 | 207 | 0.28 | % | 254,120 | 202 | 0.32 | % | ||||||||||||||||||||||||||||||||||||||||||||
| CD’s | 161,203 | 464 | 1.17 | % | 183,137 | 607 | 1.31 | % | 266,044 | 1,043 | 1.59 | % | ||||||||||||||||||||||||||||||||||||||||||||
| IRA’s | 37,067 | 77 | 0.84 | % | 38,453 | 96 | 0.99 | % | 40,877 | 135 | 1.34 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Total deposits | $ | 1,132,721 | $ | 1,068 | 0.38 | % | $ | 1,112,210 | $ | 1,261 | 0.45 | % | $ | 1,089,362 | $ | 1,714 | 0.64 | % | ||||||||||||||||||||||||||||||||||||||
| FHLB advances and other borrowings | 166,118 | 1,141 | 2.79 | % | 170,475 | 1,117 | 2.60 | % | 180,635 | 1,142 | 2.56 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Total interest bearing liabilities | $ | 1,298,839 | $ | 2,209 | 0.69 | % | $ | 1,282,685 | $ | 2,378 | 0.74 | % | $ | 1,269,997 | $ | 2,856 | 0.91 | % | ||||||||||||||||||||||||||||||||||||||
| Net interest income | $ | 13,167 | $ | 14,384 | $ | 12,764 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest rate spread | 3.10 | % | 3.34 | % | 3.14 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Net interest margin (1) | 3.25 | % | 3.50 | % | 3.31 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Average interest earning assets to average interest bearing liabilities | 1.27 | 1.27 | 1.23 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
(1) Fully taxable equivalent (FTE). The average yield on tax exempt securities is computed on a tax equivalent basis using a tax rate of 21% for the quarters ended March 31, 2022, December 31, 2021 and March 31, 2021. The FTE adjustment to net interest income included in the rate calculations totaled $1, $0 and $1 thousand for the three months ended March 31, 2022, December 31, 2021 and March 31, 2021, respectively.
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The following table reports key financial metric ratios based on a net income basis:
| Three Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||
| March 31, 2022 | December 31, 2021 | March 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||
| Ratios based on net income: | |||||||||||||||||||||||||||||||||||||||||||||||
| Return on average assets (annualized) | 1.09 | % | 1.37 | % | 1.33 | % | |||||||||||||||||||||||||||||||||||||||||
| Return on average equity (annualized) | 11.38 | % | 14.29 | % | 13.97 | % | |||||||||||||||||||||||||||||||||||||||||
Return on average tangible common equity1 (annualized) | 15.32 | % | 19.00 | % | 19.11 | % | |||||||||||||||||||||||||||||||||||||||||
| Efficiency ratio | 58 | % | 57 | % | 54 | % | |||||||||||||||||||||||||||||||||||||||||
| Net interest margin with loan purchase accretion | 3.25 | % | 3.50 | % | 3.31 | % | |||||||||||||||||||||||||||||||||||||||||
| Net interest margin without loan purchase accretion | 3.17 | % | 3.39 | % | 3.20 | % | |||||||||||||||||||||||||||||||||||||||||
Reconciliation of tangible book value per share (non-GAAP)
(in thousands, except per share data)
| Tangible book value per share at end of period | March 31, 2022 | December 31, 2021 | March 31, 2021 | |||||||||||||||||||||||||||||||||||
| Total stockholders’ equity | $ | 165,494 | $ | 170,866 | $ | 160,662 | ||||||||||||||||||||||||||||||||
| Less: Goodwill | (31,498) | (31,498) | (31,498) | |||||||||||||||||||||||||||||||||||
| Less: Intangible assets | (3,499) | (3,898) | (5,095) | |||||||||||||||||||||||||||||||||||
| Tangible common equity (non-GAAP) | $ | 130,497 | $ | 135,470 | $ | 124,069 | ||||||||||||||||||||||||||||||||
| Ending common shares outstanding | 10,526,781 | 10,502,442 | 10,893,872 | |||||||||||||||||||||||||||||||||||
| Book value per share | $ | 15.72 | $ | 16.27 | $ | 14.75 | ||||||||||||||||||||||||||||||||
| Tangible book value per share (non-GAAP) | $ | 12.40 | $ | 12.90 | $ | 11.39 | ||||||||||||||||||||||||||||||||
Reconciliation of tangible common equity as a percent of tangible assets (non-GAAP)
(in thousands, except ratios)
| Tangible common equity as a percent of tangible assets at end of period | March 31, 2022 | December 31, 2021 | March 31, 2021 | |||||||||||||||||||||||||||||||||||
| Total stockholders’ equity | $ | 165,494 | $ | 170,866 | $ | 160,662 | ||||||||||||||||||||||||||||||||
| Less: Goodwill | (31,498) | (31,498) | (31,498) | |||||||||||||||||||||||||||||||||||
| Less: Intangible assets | (3,499) | (3,898) | (5,095) | |||||||||||||||||||||||||||||||||||
| Tangible common equity (non-GAAP) | $ | 130,497 | $ | 135,470 | $ | 124,069 | ||||||||||||||||||||||||||||||||
| Total Assets | $ | 1,775,469 | $ | 1,739,628 | $ | 1,732,294 | ||||||||||||||||||||||||||||||||
| Less: Goodwill | (31,498) | (31,498) | (31,498) | |||||||||||||||||||||||||||||||||||
| Less: Intangible assets | (3,499) | (3,898) | (5,095) | |||||||||||||||||||||||||||||||||||
| Tangible Assets (non-GAAP) | $ | 1,740,472 | $ | 1,704,232 | $ | 1,695,701 | ||||||||||||||||||||||||||||||||
| Total stockholders’ equity to total assets ratio | 9.32 | % | 9.82 | % | 9.27 | % | ||||||||||||||||||||||||||||||||
| Tangible common equity as a percent of tangible assets (non-GAAP) | 7.50 | % | 7.95 | % | 7.32 | % | ||||||||||||||||||||||||||||||||
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Reconciliation of Return on Average Tangible Common Equity (non-GAAP)
(in thousands, except ratios)
| Three Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||
| March 31, 2022 | December 31, 2021 | March 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Total stockholders’ equity | $ | 165,494 | $ | 170,866 | $ | 160,662 | ||||||||||||||||||||||||||||||||||||||||||||
| Less: Goodwill | (31,498) | (31,498) | (31,498) | |||||||||||||||||||||||||||||||||||||||||||||||
| Less: Intangible assets | (3,499) | (3,898) | (5,095) | |||||||||||||||||||||||||||||||||||||||||||||||
| Tangible common equity (non-GAAP) | $ | 130,497 | $ | 135,470 | $ | 124,069 | ||||||||||||||||||||||||||||||||||||||||||||
| Average tangible common equity (non-GAAP) | $ | 132,550 | $ | 132,569 | $ | 123,088 | ||||||||||||||||||||||||||||||||||||||||||||
| GAAP earnings after income taxes | $ | 4,706 | $ | 6,057 | $ | 5,506 | ||||||||||||||||||||||||||||||||||||||||||||
| Amortization of intangible assets, net of tax | 302 | $ | 292 | 295 | ||||||||||||||||||||||||||||||||||||||||||||||
| Tangible net income | $ | 5,008 | $ | 6,349 | $ | 5,801 | ||||||||||||||||||||||||||||||||||||||||||||
| Return on average tangible common equity (annualized) | 15.32 | % | 19.00 | % | 19.11 | % | ||||||||||||||||||||||||||||||||||||||||||||
Reconciliation of Efficiency Ratio
(in thousands, except ratios)
| Three Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||
| March 31, 2022 | December 31, 2021 | March 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Non-interest expense (GAAP) | $ | 9,668 | $ | 10,525 | $ | 9,489 | ||||||||||||||||||||||||||||||||||||||||||||
| Less amortization of intangibles | (399) | (399) | (399) | |||||||||||||||||||||||||||||||||||||||||||||||
| Efficiency ratio numerator (GAAP) | $ | 9,269 | $ | 10,126 | $ | 9,090 | ||||||||||||||||||||||||||||||||||||||||||||
| Non-interest income | 2,713 | 4,407 | 4,176 | |||||||||||||||||||||||||||||||||||||||||||||||
| Loss (Gain) on investment securities | 37 | (879) | (235) | |||||||||||||||||||||||||||||||||||||||||||||||
| Net interest margin | 13,167 | 14,384 | 12,764 | |||||||||||||||||||||||||||||||||||||||||||||||
| Efficiency ratio denominator (GAAP) | $ | 15,917 | $ | 17,912 | $ | 16,705 | ||||||||||||||||||||||||||||||||||||||||||||
| Efficiency ratio (GAAP) | 58 | % | 57 | % | 54 | % | ||||||||||||||||||||||||||||||||||||||||||||
1Tangible book value, tangible book value per share, tangible common equity as a percent of tangible assets and return on tangible common equity are non-GAAP measures that management believes enhances investors’ ability to better understand the Company’s financial position. For a detailed reconciliation of GAAP to non-GAAP results, see the accompanying financial table “Reconciliation of tangible book value per share (non-GAAP)”, “Reconciliation of tangible common equity as a percent of tangible assets (non-GAAP)”, and “Reconciliation of return on average tangible common equity)”.
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EXHIBIT 99.2 Earnings Release Supplement First Quarter 2022
Citizens Community Bancorp, Inc. Table of Contents Cautionary Notes and Additional Disclosures COVID-19 Related Loan Deferrals Non-Owner Occupied CRE Owner Occupied CRE Multi-family Commercial & Industrial Loans Construction & Development Loans Agricultural Real Estate & Operating Loans Hotel Loans Restaurant Loans Campground Loans Credit Quality/Risk Rating Descriptions Loans by Risk Rating as of March 31, 2022 Loans by Risk Rating as of December 31, 2021 Loans by Risk Rating as of March 31, 2021 Allowance for Loan Losses Nonaccrual Loans Roll forward Other Real Estate Owned Roll forward Troubled Debt Restructurings in Accrual Status Acquired Loans – Non-Accretable Difference and Accretable Discount Tables Earnings Per Share Selected Capital Composition Highlights – Bank and Company Non-GAAP Financial Measures Reconciliation of GAAP Net Income and Net Income as Adjusted (non-GAAP) Key Financial Metrics Based on Net Income as Adjusted Reconciliation of Return on Average Assets as Adjusted (non-GAAP) Reconciliation of Return on Average Equity as Adjusted (non-GAAP) Page(s) 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 18 18 19 20 21 22 22 23 23 23 1
Cautionary Notes and Additional Disclosures DATES AND PERIODS PRESENTED In this earnings release financial supplement, unless otherwise noted, “20YY” refers to either the corresponding fiscal year-end date or the corresponding 12-months (i.e. fiscal year) then ended. “MMM-YY” refers to either the corresponding quarter-end date, or the corresponding three-month period then ended. CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS This earnings release financial supplement may contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. These statements include, but are not limited to, descriptions of the financial condition, results of operations, asset and credit quality trends, profitability, projected earnings, future plans, strategies and expectations of Citizens Community Bancorp, Inc. (“CZWI” or the “Company”) and its subsidiary, Citizens Community Federal, National Association (“CCFBank”). The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and is including this statement for purposes of complying with those safe harbor provisions. Forward-looking statements, which are based on certain assumptions of the Company, are generally identifiable by use of the words “believe,” “expect,” “estimates,” “intend,” “anticipate,” “estimate,” “project,” “on pace,” “seek,” “target,” “potential,” “focus,” “may,” “preliminary,” “could,” “should” or similar expressions. These forward-looking statements express management’s current expectations or forecasts of future events, and by their nature, are subject to risks and uncertainties. Therefore, there are a number of factors that might cause actual results to differ materially from those in such statements. These uncertainties include conditions in the financial markets and economic conditions generally; adverse impacts to the Company or CCFBank arising from the COVID-19 pandemic; acts of terrorism and political or military actions by the United States or other governments; the possibility of a deterioration in the residential real estate markets; interest rate risk; lending risk; higher lending risks associated with our commercial and agricultural banking activities; the sufficiency of loan allowances; changes in the fair value or ratings downgrades of our securities; competitive pressures among depository and other financial institutions; disintermediation risk; our ability to maintain our reputation; our ability to maintain or increase our market share; our ability to realize the benefits of net deferred tax assets; our inability to obtain needed liquidity; our ability to raise capital needed to fund growth or meet regulatory requirements; our ability to attract and retain key personnel; our ability to keep pace with technological change; prevalence of fraud and other financial crimes; cybersecurity risks; the possibility that our internal controls and procedures could fail or be circumvented; our ability to successfully execute our acquisition growth strategy; risks posed by acquisitions and other expansion opportunities, including difficulties and delays in integrating the acquired business operations or fully realizing the cost savings and other benefits; restrictions on our ability to pay dividends; the potential volatility of our stock price; accounting standards for loan losses; legislative or regulatory changes or actions, or significant litigation, adversely affecting the Company or CCFBank; public company reporting obligations; changes in federal or state tax laws; and changes in accounting principles, policies or guidelines and their impact on financial performance. Stockholders, potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. Such uncertainties and other risks that may affect the Company's performance are discussed further in Part I, Item 1A, “Risk Factors,” in the Company’s Form 10-K, for the year ended December 31, 2021 filed with the Securities and Exchange Commission (“SEC”) on March 2, 2022, and the Company's subsequent filings with the SEC. The Company undertakes no obligation to make any revisions to the forward-looking statements contained herein or to update them to reflect events or circumstances occurring after the date hereof. NON-GAAP FINANCIAL MEASURES This earnings release financial supplement contains non-GAAP financial measures. For purposes of Regulation G, a non-GAAP financial measure is a numerical measure of the registrant's historical or future financial performance, financial position or cash flows that excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with GAAP in the statement of income, balance sheet or statement of cash flows (or equivalent statements) of the issuer; or includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented. In this regard, GAAP refers to generally accepted accounting principles in the United States. Non-GAAP financial measures referred to herein include net income as adjusted, return on average equity as adjusted, and return on average assets as adjusted. Reconciliations of all non-GAAP financial measures used herein to the comparable GAAP financial measures in the appendix at the end of this presentation. 2
COVID-19 Related Loan Deferrals Dollars in Thousands COVID‐19 Deferrals Balance Number of Loans Commercial Deferrals Hotel Loans ‐$ ‐ Other Commercial Loans ‐ ‐ Total Commercial Deferrals ‐ ‐ Residential Deferrals 389 5 Consumer Deferrals ‐ ‐ Total Deferrals 389$ 5 March 31, 2022 3
Portfolio Fundamentals 62% 33% 4% Wisconsin Minnesota Other By Geography As of 3/31/22 • Typically well seasoned investors with multiple projects, track record of success and personal financial strength (net worth/Liquidity) • Maximum LTV =<80% with recourse to owners with >20% interest • Term of 5‐10 years with 20 to 25‐year amortizations depending on property type, markets and strength and liquidity of sponsors • Minimum DSC and/or Global DSC covenant required to monitor performance ranging from 1.15x‐1.25x • Conservative underwriting approach emphasizing actual results or market data • Appropriate use of SBA 504/7a for lower cash injection or special use projects Non – Owner Occupied CRE As of 3/31/22 As of 12/31/21 $466 $480 758 762 $615 $629 Approximate Weighted Average LTV 62% 62% 2.2x 2.2x Weighted Average Seasoning In Months 24 22 0.01% 0.00% Approximate Weighted Average DSCR Trailing 12 Month Net Charge‐Offs Loan Balance Outstanding In Millions Number of Loans Average Loan Size In Thousands Portfolio Characteristics ‐ Non‐Owner Occupied CRE 23% 22% 11% 11% 11% 7% 5% 4% 2% 4% Hotel Investor Residential CRE ‐ Senior Living CRE ‐ Retail CRE ‐ Office CRE ‐ Warehouse/Mini Storage CRE ‐ Industrial/Manufacturing CRE ‐ Campground CRE ‐ Mixed Use Other Non – Owner Occupied CRE As of 3/31/22 4
26% 18% 11% 10% 9% 8% 5% 13% CRE Campground CRE Restaurant CRE Retail CRE Industrial/Manufacturing CRE Warehouse/Mini Storage CRE Mixed Use CRE Office Other Owner Occupied CRE As of 3/31/22 Portfolio Fundamentals 67%10% 23% Wisconsin Minnesota Other By Geography As of 3/31/22 • Underwritten to <80% LTV based on appraised value (<75% for Restaurant) • Term of 5‐10 years with 20‐year amortization • Recourse to owners with greater than 20% interest • DSC covenant of 1.25x on project and/or Global DSC of 1.15x • Appropriate use of SBA 504/7a for lower cash injection or special use projects • By Geography “Other” segment includes borrowers with warm climates, no income tax states Owner Occupied CRE As of 3/31/22 As of 12/31/21 $223 $219 426 426 $524 $514 Approximate Weighted Average LTV 50% 48% 2.2x 2.2x Weighted Average Seasoning In Months 30 29 0.00% 0.00% Approximate Weighted Average DSCR Trailing 12 Month Net Charge‐Offs Portfolio Characteristics ‐ Owner Occupied CRE Loan Balance Outstanding In Millions Number of Loans Average Loan Size In Thousands 5
Portfolio Fundamentals 61% 38% 1% Wisconsin Minnesota Other By Geography As of 3/31/22 1% 40% 36% 9% 9% 5% 2022 2021 2020 2019 2018 Prior By Vintage As of 3/31/22 • Robust housing markets in Eau Claire and Mankato markets supported by student populations at state universities, technical colleges, and growing population and job markets • Multi‐family sponsors experienced owners with multi‐project portfolios • Typically underwritten to 75% LTV based on appraised value with recourse; metro markets and/or strong sponsors may warrant up to 80% LTV • Generally, term of 5‐10 years with 20 to 25‐year amortization (varies by new versus existing, size of market and sponsor strength) • Covenant for minimum DSC/Global DSC Multi-family As of 3/31/22 As of 12/31/21 $179 $178 113 111 $1.59 $1.61 68% 68% Approximate Weighted Average DSCR 1.7x 1.9x 20 17 0.00% 0.00% Approximate Weighted Average LTV Weighted Average Seasoning In Months Trailing 12 Month Net Charge‐Offs Portfolio Characteristics ‐ Multi‐family Loan Balance Outstanding In Millions Number of Loans Average Loan Size In Millions 6
86% 13% 1% Wisconsin Minnesota Other By Geography As of 3/31/22 23% 11% 10% 9%6% 6% 6% 6% 5% 4% 3% 3% 3% 5% Manufacturing Transportation and Warehousing Finance and Insurance Wholesale Trade Real Estate, Rental and Leasing Public Admin Construction Retail Trade Agriculture Education Services Administrative Support Health Care Other Services Other Commercial & Industrial As of 3/31/22 • Highly diversified, secured loan portfolio underwritten with recourse • Lines of credit reviewed annually and may have borrowing base certificates governing line usage • Fixed asset LTV’s based on age and type of equipment; <5‐year amortization • Use of SBA Guaranty Program (Preferred Lender or General Processing) as appropriate • “Retail Trade” segment consists of Farm Supply, Franchised Hardware, Franchised Auto Parts, Franchised and Non‐franchised Auto Dealers and Repair Shops, Convenience Stores/Gas Stations Commercial & Industrial Loans As of 3/31/22 As of 12/31/21 $121 $122 710 714 $170 $171 2.3x 5.3x 30 31 0.01% ‐0.05% Committed Line, if collateral 57 63 Approximate Weighted Average DSCR Weighted Average Seasoning In Months Trailing 12 Month Net Charge‐Offs Portfolio Characteristics ‐ Commercial & Industrial Loan Balance In Millions Number of Loans Average Loan Size In Thousands Portfolio Fundamentals 7
Portfolio Fundamentals 24% 23% 8% 8% 7% 6% 4% 4% 16% Commercial 1‐4 Family Construction CRE Multi‐family CRE Campground CRE Warehouse/Mini Storage CRE Retail CRE Senior Living Land Hospitality Other Commercial & Development As of 3/31/22 38% 26% 13% 10% 6% 5% 2% Wisconsin Minnesota South Dakota Iowa Florida Michigan Other By Geography As of 3/31/22 • Underwritten to 75‐80% LTV based on lesser of cost or appraised value with full recourse • Interest only typically up to 18 months (depending on project complexity and seasonal timing) followed by amortization of 15‐25 years (terms vary by property type) • Borrower equity contribution of cash/land value =>15% injected at the beginning of project (cash/land contribution) • Construction loans require 3rd party inspections and title company draws after balancing to sworn construction statement • 1‐4 residential construction centered in eastern Twin Cities and Northwest Wisconsin. Generally, 80% LTC /60%‐80% of AV. Spec building capped. Progress reporting monthly by individual home Construction & Development Loans As of 3/31/22 As of 12/31/21 Loan Balance Outstanding In Millions $88 $80 Number of Loans 128 130 Average Loan Size In Thousands $687 $612 Approximate Weighted Average LTV 60% 80% Trailing 12 Month Net Charge‐Offs 0.00% 0.00% Percent Utilized of Commitments 43% 44% Portfolio Characteristics ‐ Construction & Development 8
38% 23% 23% 16% Crop Dairy Other Farming Other Agricultural As of 3/31/22 Portfolio Fundamentals 69% 28% 3% Wisconsin Minnesota Other By Geography As of 3/31/22 • Producers required to have marketing plans to mitigate volatility of commodities • Appropriate crop/revenue insurance and/or dairy margin protection required • Maximum ag RE LTV of less than 65%; equipment LTV of less than 75% • Appropriate structuring to separate crop production cycles and to match length of loan with asset financed • Use of Farmer Mac, FSA, SBA or USDA programs to address DSC, collateral margins or working capital Agricultural Real Estate & Operating Loans As of 3/31/22 As of 12/31/21 $104 $110 546 564 $191 $195 1.9x 1.8x 32 31 ‐0.03% 0.16% Approximate Weighted Average DSCR Weighted Average Seasoning In Months Trailing 12 Month Net Charge‐Offs Portfolio Characteristics ‐ Agricultural Loan Balance Outstanding In Millions Number of Loans Average Loan Size In Thousands 9
70% 25% 5% Limited Service Full Service Other Hotels As of 3/31/22 Portfolio Fundamentals 46% 40% 14% Minnesota Wisconsin Illinois By Geography As of 3/31/22 • Mainly experienced multi project hoteliers and guarantors with strong personal financial statements (net worth and liquidity) • Mainly flagged properties • Underwriting consistent with management's conservative approach to Investor CRE, emphasizing actual results in underwriting Hotel Loans As of 3/31/22 As of 12/31/21 $96 $119 32 33 $3.0 $3.6 58% 57% 2.5x 2.3x 0.00% 0.00%Trailing 12 Month Net Charge Offs Number of Loans Approximate DSCR ‐ Non‐Construction Portfolio Characteristics ‐ Hotels Loan Balance Outstanding In Millions Average Loan Size In Millions Approximate Weighted Average LTV 10
65% 13% 7% 4% 3% 8% Culver's ‐ Limited Service Restaurants Other National Limited Services Drinking Establishments Bowling Centers Other Restaurants As of 3/31/22 Portfolio Fundamentals 68% 16% 17% Wisconsin Minnesota Other By Geography As of 3/31/22 • Experienced developers/operators of national Limited /Quick Service brands (Culver’s, Subway, Dairy Queen, McDonalds, Jimmy John’s, A&W) • Underwritten to =<80% LTV with full recourse (depending on sponsor history); 20‐year amortization with 5 to 10‐year terms • Use of SBA Guaranty Program (Preferred Lender or General Processing) as appropriate • Drinking establishments may have other collateral pledged and tend to be in smaller communities in our footprint • Lessors of RE include investor and owner‐occupied structure Restaurant Loans As of 3/31/22 As of 12/31/21 $47 $47 80 76 $592 $622 56% 54% 3.6x 3.6x 0.00% 0.00% Portfolio Characteristics ‐ Restaurants Approximate Weighted Average DSCR Trailing 12 Month Net Charge‐Offs Loan Balance Outstanding In Millions Number of Loans Average Loan Size In Thousands Approximate Weighted Average LTV 11
1% 35% 35% 12% 5% 4% 8% 2022 2021 2020 2019 2017 2016 Prior By Vintage As of 3/31/22 Portfolio Fundamentals 31% 13% 13% 10% 7% 7% 5% 5% 9% Wisconsin Maryland Ohio Pennsylvania Kentucky Utah Iowa New Jersey Other By Geography As of 3/31/22 • Experienced multi‐unit operators and owner‐occupied franchised campgrounds (typically Jellystone Park) • Grounds offer a mix of camping, RV and cabin options with recreational amenities • Park locations within reasonable proximity of metropolitan areas and/or near national and state parks • Underwritten with recourse generally with 5‐10 year terms and 20 year amortization • Use of SBA 7a and 504, or other government guaranteed loan programs as appropriate • 20+ years of history through CCF acquisition with no charge‐off history Campground Loans As of 3/31/22 As of 12/31/21 $76 $74 47 48 $1.6 $1.5 40% 44% 1.7x 1.8x 0.00% 0.00% Portfolio Characteristics ‐ Campgrounds Approximate Weighted Average DSCR Trailing 12 Month Net Charge‐Offs Loan Balance Outstanding In Millions Number of Loans Average Loan Size In Millions Approximate Weighted Average LTV 12
Credit Quality/Risk Ratings: Management utilizes a numeric risk rating system to identify and quantify the Bank’s risk of loss within its loan portfolio. Ratings are initially assigned prior to funding the loan, and may be changed at any time as circumstances warrant. Ratings range from the highest to lowest quality based on factors that include measurements of ability to pay, collateral type and value, borrower stability and management experience. The Bank’s loan portfolio is presented below in accordance with the risk rating framework that has been commonly adopted by the federal banking agencies. The definitions of the various risk rating categories are as follows: 1 through 4 - Pass. A “Pass” loan means that the condition of the borrower and the performance of the loan is satisfactory or better. 5 - Watch. A “Watch” loan has clearly identifiable developing weaknesses that deserve additional attention from management. Weaknesses that are not corrected or mitigated, may jeopardize the ability of the borrower to repay the loan in the future. 6 - Special Mention. A “Special Mention” loan has one or more potential weakness that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or in the institution’s credit position in the future. 7 - Substandard. A “Substandard” loan is inadequately protected by the current net worth and paying capacity of the obligor or the collateral pledged, if any. Assets classified as substandard must have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. 8 - Doubtful. A “Doubtful” loan has all the weaknesses inherent in a Substandard loan with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. 9 - Loss. Loans classified as “Loss” are considered uncollectible, and their continuance as bankable assets is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value, and a partial recovery may occur in the future. 13
Below is a breakdown of loans by risk rating as of March 31, 2022: 1 to 5 6 7 8 9 TOTAL Originated Loans: Commercial/Agricultural real estate: Commercial real estate $ 569,560 $ 659 $ 5,070 $ — $ — $ 575,289 Agricultural real estate 50,111 784 1,788 — — 52,683 Multi-family real estate 175,186 285 — — — 175,471 Construction and land development 86,869 — 128 — — 86,997 C&I/Agricultural operating: Commercial and industrial 108,370 48 4 — — 108,422 Agricultural operating 18,792 68 5,160 — — 24,020 Residential mortgage: Residential mortgage 57,145 — 2,730 — — 59,875 Purchased HELOC loans 3,487 — — — — 3,487 Consumer installment: Originated indirect paper 14,396 — 112 — — 14,508 Other consumer 7,772 — 70 — — 7,842 Originated loans before SBA PPP loans $ 1,091,688 $ 1,844 $ 15,062 $ — $ — $ 1,108,594 SBA PPP loans 2,071 — — — — 2,071 Total originated loans $ 1,093,759 $ 1,844 $ 15,062 $ — $ — $ 1,110,665 Acquired Loans: Commercial/Agricultural real estate: Commercial real estate $ 111,371 $ — $ 3,114 $ — $ — $ 114,485 Agricultural real estate 18,424 — 4,609 — — 23,033 Multi-family real estate 4,016 — — — — 4,016 Construction and land development 729 — 154 — — 883 C&I/Agricultural operating: Commercial and industrial 12,342 5 253 — — 12,600 Agricultural operating 4,501 — 236 — — 4,737 Residential mortgage: Residential mortgage 23,507 — 1,391 — — 24,898 Consumer installment: Other consumer 346 — 3 — — 349 Total acquired loans $ 175,236 $ 5 $ 9,760 $ — $ — $ 185,001 Total Loans: Commercial/Agricultural real estate: Commercial real estate $ 680,931 $ 659 $ 8,184 $ — $ — $ 689,774 Agricultural real estate 68,535 784 6,397 — — 75,716 Multi-family real estate 179,202 285 — — — 179,487 Construction and land development 87,598 — 282 — — 87,880 C&I/Agricultural operating: Commercial and industrial 120,712 53 257 — — 121,022 Agricultural operating 23,293 68 5,396 — — 28,757 Residential mortgage: Residential mortgage 80,652 — 4,121 — — 84,773 Purchased HELOC loans 3,487 — — — — 3,487 Consumer installment: Originated indirect paper 14,396 — 112 — — 14,508 Other consumer 8,118 — 73 — — 8,191 Gross Loans Before SBA PPP Loans $ 1,266,924 $ 1,849 $ 24,822 $ — $ — $ 1,293,595 SBA PPP loans 2,071 — — — — 2,071 Gross loans $ 1,268,995 $ 1,849 $ 24,822 $ — $ — $ 1,295,666 Less: Unearned net deferred fees and costs and loans in process (2,223) Unamortized discount on acquired loans (3,267) Allowance for loan losses (16,818) Loans receivable, net $ 1,273,358 14
Below is a breakdown of loans by risk rating as of December 31, 2021: 1 to 5 6 7 8 9 TOTAL Originated Loans: Commercial/Agricultural real estate: Commercial real estate $ 572,724 $ 667 $ 5,004 $ — $ — $ 578,395 Agricultural real estate 50,834 1,267 271 — — 52,372 Multi-family real estate 173,760 290 — — — 174,050 Construction and land development 75,146 — 3,467 — — 78,613 C&I/Agricultural operating: Commercial and industrial 107,798 57 82 — — 107,937 Agricultural operating 23,935 764 1,503 — — 26,202 Residential mortgage: Residential mortgage 60,754 — 3,101 — — 63,855 Purchased HELOC loans 3,706 — 165 — — 3,871 Consumer installment: Originated indirect paper 15,818 — 153 — — 15,971 Other consumer 8,404 — 69 — — 8,473 Originated loans before SBA PPP loans $ 1,092,879 $ 3,045 $ 13,815 $ — $ — $ 1,109,739 SBA PPP loans 8,755 — — — — 8,755 Total originated loans $ 1,101,634 $ 3,045 $ 13,815 $ — $ — $ 1,118,494 Acquired Loans: Commercial/Agricultural real estate: Commercial real estate $ 116,839 $ 1,314 $ 1,917 $ — $ — $ 120,070 Agricultural real estate 21,051 — 5,072 — — 26,123 Multi-family real estate 4,299 — — — — 4,299 Construction and land development 735 172 — — — 907 C&I/Agricultural operating: Commercial and industrial 13,931 5 294 — — 14,230 Agricultural operating 4,936 — 450 — — 5,386 Residential mortgage: Residential mortgage 25,869 — 1,266 — — 27,135 Consumer installment: Other consumer 398 — 3 — — 401 Total acquired loans $ 188,058 $ 1,491 $ 9,002 $ — $ — $ 198,551 Total Loans: Commercial/Agricultural real estate: Commercial real estate $ 689,563 $ 1,981 $ 6,921 $ — $ — $ 698,465 Agricultural real estate 71,885 1,267 5,343 — — 78,495 Multi-family real estate 178,059 290 — — — 178,349 Construction and land development 75,881 172 3,467 — — 79,520 C&I/Agricultural operating: Commercial and industrial 121,729 62 376 — — 122,167 Agricultural operating 28,871 764 1,953 — — 31,588 Residential mortgage: Residential mortgage 86,623 — 4,367 — — 90,990 Purchased HELOC loans 3,706 — 165 — — 3,871 Consumer installment: Originated indirect paper 15,818 — 153 — — 15,971 Other consumer 8,802 — 72 — — 8,874 Gross Loans Before SBA PPP Loans $ 1,280,937 $ 4,536 $ 22,817 $ — $ — $ 1,308,290 SBA PPP loans 8,755 — — — — 8,755 Gross loans $ 1,289,692 $ 4,536 $ 22,817 $ — $ — $ 1,317,045 Less: Unearned net deferred fees and costs and loans in process (2,482) Unamortized discount on acquired loans (3,600) Allowance for loan losses (16,913) Loans receivable, net $ 1,294,050 15
Below is a breakdown of loans by risk rating as of March 31, 2021: 1 to 5 6 7 8 9 TOTAL Originated Loans: Commercial/Agricultural real estate: Commercial real estate $ 363,758 $ 764 $ 1,081 $ — $ — $ 365,603 Agricultural real estate 36,439 522 1,179 — — 38,140 Multi-family real estate 111,199 304 — — — 111,503 Construction and land development 80,458 — 3,478 — — 83,936 C&I/Agricultural operating: Commercial and industrial 72,355 317 4,021 — — 76,693 Agricultural operating 20,003 1,045 101 — — 21,149 Residential mortgage: Residential mortgage 78,764 — 3,521 — — 82,285 Purchased HELOC loans 5,057 — 234 — — 5,291 Consumer installment: Originated indirect paper 23,024 — 162 — — 23,186 Other consumer 10,906 — 45 — — 10,951 Originated loans before SBA PPP loans $ 801,963 $ 2,952 $ 13,822 $ — $ — $ 818,737 SBA PPP loans 118,931 — — — — 118,931 Total originated loans $ 920,894 $ 2,952 $ 13,822 $ — $ — $ 937,668 Acquired Loans: Commercial/Agricultural real estate: Commercial real estate $ 135,059 $ 10,494 $ 4,033 $ — $ — $ 149,586 Agricultural real estate 27,041 — 5,386 — — 32,427 Multi-family real estate 7,485 — — — — 7,485 Construction and land development 6,553 204 39 — — 6,796 C&I/Agricultural operating: Commercial and industrial 18,865 9 366 — — 19,240 Agricultural operating 6,754 — 347 — — 7,101 Residential mortgage: Residential mortgage 37,982 — 2,064 — — 40,046 Consumer installment: Other consumer 906 — 7 — — 913 Total acquired loans $ 240,645 $ 10,707 $ 12,242 $ — $ — $ 263,594 Total Loans: Commercial/Agricultural real estate: Commercial real estate $ 498,817 $ 11,258 $ 5,114 $ — $ — $ 515,189 Agricultural real estate 63,480 522 6,565 — — 70,567 Multi-family real estate 118,684 304 — — — 118,988 Construction and land development 87,011 204 3,517 — — 90,732 C&I/Agricultural operating: Commercial and industrial 91,220 326 4,387 — — 95,933 Agricultural operating 26,757 1,045 448 — — 28,250 Residential mortgage: Residential mortgage 116,746 — 5,585 — — 122,331 Purchased HELOC loans 5,057 — 234 — — 5,291 Consumer installment: Originated indirect paper 23,024 — 162 — — 23,186 Other consumer 11,812 — 52 — — 11,864 Gross Loans Before SBA PPP Loans $ 1,042,608 $ 13,659 $ 26,064 $ — $ — $ 1,082,331 SBA PPP loans 118,931 — — — — 118,931 Gross loans $ 1,161,539 $ 13,659 $ 26,064 $ — $ — $ 1,201,262 Less: Unearned net deferred fees and costs and loans in process (4,487) Unamortized discount on acquired loans (4,649) Allowance for loan losses (16,860) Loans receivable, net $ 1,175,266 16
Allowance for Loan Losses (in thousand, except ratios) March 31, 2022 and Three Months Ended December 31, 2021 and Three Months Ended March 31, 2021 and Three Months Ended Allowance for loan losses (“ALL”), at beginning of period $ 16,913 $ 16,832 $ 17,043 Loans charged off: Commercial/Agricultural real estate (35) — (200) C&I/Agricultural operating (63) — — Residential mortgage (12) — — Consumer installment (9) (5) (25) Total loans charged off (119) (5) (225) Recoveries of loans previously charged off: Commercial/Agricultural real estate 3 18 5 C&I/Agricultural operating 10 62 15 Residential mortgage 1 1 8 Consumer installment 10 5 14 Total recoveries of loans previously charged off: 24 86 42 Net loans charged off (“NCOs”) (95) 81 (183) Additions to ALL via provision for loan losses charged to operations — — — ALL, at end of period $ 16,818 $ 16,913 $ 16,860 Average outstanding loan balance $ 1,304,141 $ 1,271,956 $ 1,213,562 Ratios: NCOs (annualized) to average loans 0.03 % (0.03) % 0.06 % 17
Nonaccrual Loans Roll forward (in thousands) Quarter Ended March 31, 2022 December 31, 2021 September 30, 2021 June 30, 2021 March 31, 2021 Balance, beginning of period $ 11,665 $ 11,706 $ 8,075 $ 8,678 $ 10,747 Additions 720 428 4,859 863 430 Acquired nonaccrual loans — — — — — Charge offs (15) (1) (24) (58) (205) Transfers to OREO — (19) — — (45) Return to accrual status (51) (30) — (696) (291) Payments received (461) (422) (1,202) (712) (1,935) Other, net — 3 (2) — (23) Balance, end of period $ 11,858 $ 11,665 $ 11,706 $ 8,075 $ 8,678 Other Real Estate Owned Roll forward (in thousands) Quarter Ended March 31, 2022 December 31, 2021 September 30, 2021 June 30, 2021 March 31, 2021 Balance, beginning of period $ 1,406 $ 2 $ 129 $ 57 $ 156 Loans transferred in — 46 — — 45 Branch properties transferred in — 1,360 — 79 — Sales (45) — (124) (5) (142) Write-downs — — — — — Other, net (1) (2) (3) (2) (2) Balance, end of period $ 1,360 $ 1,406 $ 2 $ 129 $ 57 Troubled Debt Restructurings in Accrual Status (in thousands, except number of modifications) March 31, 2022 December 31, 2021 September 30, 2021 March 31, 2021 Number of Modifications Recorded Investment Number of Modifications Recorded Investment Number of Modifications Recorded Investment Number of Modifications Recorded Investment Troubled debt restructurings: Accrual Status Commercial/Agricultural real estate 10 $ 2,085 11 $ 4,618 12 $ 4,711 14 $ 4,472 C&I/Agricultural Operating 2 608 3 649 4 3,685 5 4,042 Residential mortgage 35 2,924 36 2,681 39 2,925 44 3,195 Consumer installment 5 28 6 36 6 44 8 43 Total loans 52 $ 5,645 56 $ 7,984 61 $ 11,365 71 $ 11,752 18
Acquired loans represent much of the reduction in non-performing loans and classified loans. The table below shows the changes in the Bank’s non-accretable difference on purchased credit impaired loans. The second table below shows the changes in the Bank’s accretable loan discount which was established at each acquisition. The Bank has transferred the non-accretable difference on purchased credit impaired loans to accretable discount as collateral coverage improved sufficiently, due to a combination of principal paydowns and/or improving collateral positions. This transferred non-accretable difference to accretable discount is accreted over the remaining maturity of the loan or until payoff, whichever is shorter. Non-accretable difference: (in thousands) March 31, 2022 December 31, 2021 September 30, 2021 June 30, 2021 March 31, 2021 Non-accretable difference, beginning of period $ 653 $ 686 $ 823 $ 966 $ 1,087 Additions to non-accretable difference for acquired purchased credit impaired loans — — — — — Non-accretable difference realized as interest from payoffs of purchased credit impaired loans (26) (2) (8) (37) (58) Transfers from non-accretable difference to accretable discount (86) (31) (129) (106) (63) Non-accretable difference used to reduce loan principal balance (32) — — — — Non-accretable difference, end of period $ 509 $ 653 $ 686 $ 823 $ 966 The table below provides the changes in accretable discount for acquired loans. Accretable discount: (in thousands) March 31, 2022 December 31, 2021 September 30, 2021 June 30, 2021 March 31, 2021 Accretable discount, beginning of period $ 2,947 $ 3,380 $ 3,524 $ 3,683 $ 3,976 Additions to accretable discount for acquired performing loans — — — — — Accelerated accretion from payoff of certain purchased credit impaired loans with transferred non-accretable difference (11) (200) (12) — (90) Transfers from non-accretable difference to accretable discount 86 31 129 106 63 Scheduled accretion (264) (264) (261) (265) (266) Accretable discount, end of period $ 2,758 $ 2,947 $ 3,380 $ 3,524 $ 3,683 19
On November 30, 2020, the Board of Directors adopted a share repurchase program, pursuant to which Citizens Community Bancorp, Inc. was authorized to repurchase 557 thousand shares of its common stock, or approximately 5% of the outstanding shares on that date. Repurchases made during the quarter ended September 30, 2021, used all remaining shares authorized under this share repurchase program. On July 23, 2021, the Board of Directors adopted a new share repurchase program, pursuant to which Citizens Community Bancorp, Inc. is authorized to repurchase 532,962 shares of its common stock, or approximately 5% of the outstanding shares on that date. Under this new share repurchase program, approximately 18 thousand shares, were repurchased during the quarter ended March 31, 2022. As of March 31, 2022, there were 10.5 million shares outstanding and an additional 354 thousand shares could be repurchased under the program. Earnings Per Share (Amounts in thousands, except per share data) Three Months Ended March 31, 2022 December 31, 2021 March 31, 2021 Basic Net income attributable to common shareholders $ 4,706 $ 6,057 $ 5,506 Weighted average common shares outstanding 10,527 10,503 10,980 Basic earnings per share $ 0.45 $ 0.58 $ 0.50 Diluted Net income attributable to common shareholders $ 4,706 $ 6,057 $ 5,506 Weighted average common shares outstanding 10,527 10,503 10,980 Add: Dilutive stock options outstanding 14 13 6 Average shares and dilutive potential common shares 10,541 10,516 10,986 Diluted earnings per share $ 0.45 $ 0.58 $ 0.50 Common stock issued and outstanding 10,527 10,502 10,894 20
CITIZENS COMMUNITY FEDERAL N.A. Selected Capital Composition Highlights March 31, 2022 (unaudited) December 31, 2021 (audited) September 30, 2021 (unaudited) March 31, 2021 (unaudited) To Be Well Capitalized Under Prompt Corrective Action Provisions Tier 1 leverage ratio (to adjusted total assets) 11.1% 10.0% 9.6% 9.8% 5.0% Tier 1 capital (to risk weighted assets) 13.7% 12.2% 12.4% 14.3% 8.0% Common equity tier 1 capital (to risk weighted assets) 13.7% 12.2% 12.4% 14.3% 6.5% Total capital (to risk weighted assets) 14.9% 13.4% 13.6% 15.5% 10.0% CITIZENS COMMUNITY BANCORP, INC. Selected Capital Composition Highlights March 31, 2022 (unaudited) December 31, 2021 (audited) September 30, 2021 (unaudited) March 31, 2021 (unaudited) For Capital Adequacy Purposes Tier 1 leverage ratio (to adjusted total assets) 8.0% 7.9% 7.6% 7.5% 4.0% Tier 1 capital (to risk weighted assets) 9.9% 9.7% 9.7% 11.0% 6.0% Common equity tier 1 capital (to risk weighted assets) 9.9% 9.7% 9.7% 11.0% 4.5% Total capital (to risk weighted assets) 15.8% 13.1% 13.2% 14.9% 8.0% 21
Non-GAAP Financial Measures This earnings supplement contains non-GAAP financial measures, such as net income as adjusted and net income as adjusted per share, which management believes may be helpful in understanding the Company’s results of operations or financial position and comparing results over different periods. Net income as adjusted and net income as adjusted per share are non-GAAP measures that eliminate the impact of certain expenses such as acquisition and branch closure costs and related data processing termination fees, legal costs, severance pay, accelerated depreciation expense and lease termination fees, the gain on sale of branch deposits and fixed assets and the net impact of the Tax Cuts and Jobs Act of 2017, which management believes enhances investors’ ability to better understand the underlying business performance and trends related to core business activities. Merger related charges represent expenses to either satisfy contractual obligations of acquired entities without any useful benefit to the Company or to convert and consolidate customer records onto the Company platforms. These costs are unique to each transaction based on the contracts in existence at the merger date. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, can be found in this earnings supplement. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other banks and financial institutions. Reconciliation of GAAP Net Income and Net Income as Adjusted (non-GAAP) (in thousands, except per share data) Three Months Ended Twelve Months Ended March 31, 2022 December 31, 2021 March 31, 2021 December 31, 2021 GAAP pretax income $ 6,212 $ 8,266 $ 7,451 $ 28,959 FHLB borrowings prepayment fee (1) — — 102 102 Pretax income as adjusted (2) 6,212 8,266 7,553 29,061 Provision for income tax on net income as adjusted (3) 1,506 2,209 1,971 7,722 Net income as adjusted (non-GAAP) (2) $ 4,706 $ 6,057 $ 5,582 $ 21,339 GAAP diluted earnings per share, net of tax $ 0.45 $ 0.58 $ 0.50 $ 1.98 FHLB borrowings prepayment fee — — 0.01 0.01 Diluted earnings per share, as adjusted, net of tax (non-GAAP) $ 0.45 $ 0.58 $ 0.51 $ 1.99 Average diluted shares outstanding 10,541,306 10,516,130 10,985,994 10,726,539 (1) FHLB borrowings prepayment fee resulted from the early termination of $8 million in FHLB borrowings at a weighted average rate of 2.19% and weighted average maturity of 8.75 months included in other non-interest expense in the consolidated statement of operations. (2) Net income as adjusted is a non-GAAP measure that management believes enhances the market’s ability to assess the underlying business performance and trends related to core business activities. (3) Provision for income tax on net income as adjusted is calculated at our effective tax rate for each respective period presented. 22
The following table reports key financial metric ratios based on a net income as adjusted basis: Three Months Ended March 31, 2022 December 31, 2021 March 31, 2021 Ratios based on net income as adjusted (non- GAAP): Return on average assets as adjusted2 (annualized) 1.09 % 1.37 % 1.35 % Return on average equity as adjusted3 (annualized) 11.38 % 14.29 % 14.16 % Reconciliation of Return on Average Assets as Adjusted (non-GAAP) (in thousands, except ratios) Three Months Ended March 31, 2022 December 31, 2021 March 31, 2021 GAAP earnings after income taxes $ 4,706 $ 6,057 $ 5,506 Net income as adjusted after income taxes (non- GAAP) (1) $ 4,706 $ 6,057 $ 5,582 Average assets $ 1,750,114 $ 1,751,609 $ 1,682,064 Return on average assets (annualized) 1.09 % 1.37 % 1.33 % Return on average assets as adjusted (non-GAAP) (annualized) 1.09 % 1.37 % 1.35 % (1) See Reconciliation of GAAP Net Income and Net Income as Adjusted (non-GAAP) Reconciliation of Return on Average Equity as Adjusted (non-GAAP) (in thousands, except ratios) Three Months Ended March 31, 2022 December 31, 2021 March 31, 2021 GAAP earnings after income taxes $ 4,706 $ 6,057 $ 5,506 Net income as adjusted after income taxes (non- GAAP) (1) $ 4,706 $ 6,057 $ 5,582 Average equity $ 167,746 $ 168,165 $ 159,881 Return on average equity (annualized) 11.38 % 14.29 % 13.97 % Return on average equity as adjusted (non-GAAP) (annualized) 11.38 % 14.29 % 14.16 % (1) See Reconciliation of GAAP Net Income and Net Income as Adjusted (non-GAAP) 1Net income as adjusted and net income as adjusted per share are non-GAAP financial measures that management believes enhances investors’ ability to better understand the underlying business performance and trends related to core business activities. For a detailed reconciliation of GAAP to non-GAAP results, see the accompanying financial table “Reconciliation of GAAP Net Income and Net Income as Adjusted (non-GAAP)”. 2Return on average assets as adjusted is a non-GAAP measure that management believes enhances investors’ ability to better understand the underlying business performance and trends relative to average assets. For a detailed reconciliation of GAAP to non-GAAP results, see the accompanying financial table “Reconciliation of Return on Average Assets as Adjusted (non-GAAP)”. 3Return on average equity as adjusted is a non-GAAP measure that management believes enhances investors’ ability to better understand the underlying business performance and trends relative to average equity. For a detailed reconciliation of GAAP to non-GAAP results, see the accompanying financial table “Reconciliation of Return on Average Equity as Adjusted (non-GAAP)”. 23