8-K
Citizens Community Bancorp Inc. (CZWI)
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): July 26, 2021
CITIZENS COMMUNITY BANCORP, INC.
(Exact name of registrant as specified in its charter)
Maryland
(State or other jurisdiction of incorporation)
| 001-33003 | 20-5120010 |
|---|---|
| (Commission File Number) | (I.R.S. Employer Identification No.) |
2174 EastRidge Center
Eau Claire, WI 54701
(Address and Zip Code of principal executive offices)
715-836-9994
(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):
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered or to be registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, $.01 par value per share | CZWI | NASDAQ Global Market |
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 July 26, 2021, Citizens Community Bancorp, Inc. (the “Company”) issued a press release announcing our financial results for the three and six months ended June 30, 2021 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 8.01. Other Events.
On July 23, 2021, the Board of Directors of Citizens Community Bancorp, Inc. (the “Company”), approved a stock repurchase program. Under this program the Company may repurchase up to 532 thousand shares of its common stock, or approximately 5% of the current outstanding shares, after the existing repurchase program is completed. The repurchase program permits shares to be repurchased in open market or private transactions, from time to time, through block trades, and pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 of the Securities and Exchange Commission.
Repurchases may be made at management’s discretion at prices management considers to be attractive and in the best interests of both the Company and its stockholders, subject to the availability of stock, general market conditions, the applicable trading price, future alternative advantageous uses for capital, and the Company’s financial performance. Open market purchases will be conducted in accordance with the limitations set forth in Rule 10b -18 of the Securities and Exchange Commission and other applicable legal requirements.
The repurchase program may be suspended, terminated or modified at any time for any reason, including market conditions, the cost of repurchasing shares, the availability of alternative investment opportunities, liquidity, and other factors deemed appropriate. These factors may also affect the timing and amount of share repurchases. The repurchase program does not obligate the Company to purchase any particular number of shares.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits. The following exhibit is being furnished herewith:
| 99.1 | Press Release dated July 26, 2021 |
|---|---|
| 99.2 | Earnings Release Supplement dated July 26, 2021 |
| 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: July 26, 2021 | By: | /s/ James S. Broucek |
| James S. Broucek | ||
| Chief Financial Officer |
Document
EXHIBIT 99.1
Citizens Community Bancorp, Inc. Earnings Increase 53% to $4.7 Million, or $0.44 Per Share in 2Q21 from 2Q20;
2021 Record Six Month Earnings of $10.2 million, Increase of 80% from 2020;
Annualized Gross Loan Growth of 12% and Asset Quality Continues to Improve;
Board Approves 5% Stock Repurchase Program
EAU CLAIRE, WI, July 26, 2021 - 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 or $0.44 per diluted share for the quarter ended June 30, 2021 compared to $5.5 million, or $0.50 per diluted share for the quarter ended March 31, 2021, and $3.1 million, or $0.28 per diluted share for the quarter ended June 30, 2020. Net income as adjusted (non-GAAP)1 was also $4.7 million or $0.44 per diluted share for the second quarter of 2021 as there were no adjustments to any income or expense items during the quarter, compared to net income as adjusted of $5.6 million, or $0.51 per diluted share for the preceding quarter and $2.8 million or $0.25 per diluted share for the second quarter a year ago. For the first six months of 2021, earnings increased 80% to a record $10.2 million, or $0.94 per diluted share compared to earnings of $5.7 million or $0.51 per share, for the first six months of 2020. On July 23, 2021, the Board of Directors approved a new 5% stock repurchase plan as described below.
The Company’s second quarter 2021 operating results reflected the following changes from the first quarter of 2021: (1) modest increase in net interest income resulting from an increase in the investment portfolio size and lower deposit cost; which was largely offset by a decrease in the accretion of deferred fees on the Small Business Administration’s Paycheck Protection Program (“SBA PPP”) and a decrease in accretion due to reductions of purchased credit impaired loans; (2) lower gains on securities sales; and (3) an increase in net mortgage servicing expenses of $0.9 million largely due to the reversal of $0.9 million of previously recorded MSR impairment in the first quarter of 2021.
Book value per share was $15.33 at June 30, 2021, compared to $14.75 at March 31, 2021, and $13.70 at June 30, 2020. Tangible book value per share (non-GAAP)5 was $11.95 at June 30, 2021 compared to $11.39 at March 31, 2021 and $10.31 at June 30, 2020. Book value per share increased $1.63 over the past 12 months, an 11.9% increase from June 30, 2020. Tangible book value per share increased $1.64 over the past 12 months, a 15.9% increase from June 30, 2020. Additionally, the Company increased and paid an annual dividend, which increased 10% to $0.23 per share on February 25, 2021.
“Our effort over the last year and a half to strengthen our culture of caring for customers and colleagues and accountability for our strategic and tactical execution is evidenced in our results. The 16% increase in tangible book value year over year, further asset quality improvements to peer group levels and disciplined expense management are examples of a focused team. We saw a nice rebound this quarter in loan growth (12% annualized) following the seasonally slow first quarter which was supported by low unemployment rates in our markets that are below the
national averages. Our loan pipeline remains strong entering the summer months and we are optimistic about our loan growth prospects in the third quarter, ” said Stephen Bianchi, Chairman, President and Chief Executive Officer.
June 30, 2021 Highlights: (as of or for the 3-month period ended June 30, 2021 compared to March 31, 2021 and June 30, 2020.)
•Quarterly earnings of $4.7 million, or $0.44 per diluted share for the second quarter ended June 30, 2021, were the second highest in the Company’s history, down modestly from the record quarter ended March 31, 2021 earnings of $5.5 million or $0.50 per diluted share. Fiscal 2021 earnings are on pace to exceed fiscal 2020’s record earnings. Year-over-year earnings for the six-month ended June 30, 2021 were $10.2 million, or $0.94 per share compared to $5.7 million, or $0.51 per share for the six months ended June 30, 2020.
•Stockholders’ equity as a percent of total assets was 9.57% at June 30, 2021, compared to 9.27% at March 31, 2021. Tangible common equity (“TCE”) as a percent of tangible assets (non-GAAP)5 was 7.62% at June 30, 2021, compared to 7.32% at March 31, 2021. “We were pleased with growth in equity ratios during the quarter as we approach 8.00%. We utilized a portion of our strong earnings to repurchase 198 thousand shares of stock during the quarter at an average price of $13.21. We balance the positive effect on earnings per share with the impact on TCE ratio and regulatory capital ratios. The shares repurchased have reduced outstanding shares by almost 5% which impacts earnings per share positively, while reducing TCE ratio growth by approximately 35 basis points.” said James Broucek, Executive Vice President and CFO.
•No loan loss provision was realized during the quarter ended June 30, 2021 due to improved asset quality, lower CARES Act Section 4013 deferrals, and low charge-off activity. Economic conditions in our markets continued to improve from those seen in the last quarter of 2020. This has led to improving trends for businesses most impacted by the pandemic, which allowed the Company to reduce its general economic Q-Factor allocation in its allowance calculation. Further reductions in loans deferred under Section 4013 of the CARES Act and improvements in our markets’ business activities due to the timing and efficacy of vaccinations, and related impact on consumer behavior and business activities would allow further reductions in this economic Q-Factor.
•The Bank’s COVID-19 related modifications under Section 4013 of the CARES Act totaled $35.7 million, or 3% of gross loans at June 30, 2021, versus $57.3 million, or 5% of gross loans at March 31, 2021. At June 30, 2021, hotel industry sector loans represent $31.1 million of the approved deferrals. The Company granted a third deferral on two urban hotels for interest only payments with similar ownership totaling $19.2 million, with the borrower depositing two years’ worth of principal and interest at the Bank. The occupancy rate on the Bank’s hotel portfolio has increased each month for the past five months ending May 31, 2021. Approximately $14 million of commercial loan modifications are scheduled to return to making their original principal and interest payments in the third quarter.
•The allowance for loan losses on originated loans, excluding SBA PPP loans, decreased to 1.72% at June 30,
2021, from 1.84% at March 31, 2021 due to loan growth and no provision for loan losses. Since SBA PPP loans are guaranteed by the SBA, they are excluded from this reserve calculation. 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. The allowance for loan losses of $16.8 million, is allocated $15.0 million to the originated loan portfolio and $1.8 million to the acquired loan portfolio.
•Nonperforming assets continued to decline and at June 30, 2021, were $8.8 million compared to $9.3 million one quarter earlier, or a reduction of 6%.
•On July 23, 2021, the Board of Directors of the Company approved a stock repurchase program. Under this program the Company may repurchase up to 532 thousand shares of its common stock, or 5% of the current outstanding shares, after the existing repurchase program is completed. The repurchase program permits shares to be repurchased in open market or private transactions, from time to time, through block trades, and pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 of the Securities and Exchange Commission. Repurchases may be made at management’s discretion at prices management considers to be attractive and in the best interests of both the Company and its stockholders, subject to the availability of stock, general market conditions, the applicable trading price, future alternative advantageous uses for capital, and the Company’s financial performance. Open market purchases will be conducted in accordance with the limitations set forth in Rule 10b-18 of the Securities and Exchange Commission and other applicable legal requirements. The repurchase program may be suspended, terminated or modified at any time for any reason, including market conditions, the cost of repurchasing shares, the availability of alternative investment opportunities, liquidity, and other factors deemed appropriate. These factors may also affect the timing and amount of share repurchases. The repurchase program does not obligate the Company to purchase any particular number of shares.
Balance Sheet and Asset Quality
Total assets decreased $17.8 million during the quarter to $1.71 billion at June 30, 2021, compared to $1.73 billion at March 31, 2021, largely due to modest shrinkage in liabilities in the quarter which allowed the Bank to reduce interest-bearing cash and shrink assets.
Securities available for sale increased $58.6 million during the quarter ended June 30, 2021 to $243.7 million from $185.2 million at March 31, 2021. This growth was largely through the purchase of 30-year agency mortgage-backed securities and subordinated debt issued by banks.
Loans receivable decreased by $10 million to $1.182 billion at June 30, 2021. The originated loan portfolio before SBA PPP loans increased $60.5 million in the quarter. Acquired loans decreased by $26.7 million. Total SBA PPP loans decreased $44.0 million.
The allowance for loan losses was $16.8 million and remained flat at June 30, 2021, representing 1.43% of loans receivable compared to $16.9 million at March 31, 2021, representing 1.41% of loans receivable. Excluding the SBA PPP loans, which are guaranteed by the SBA, the allowance for loan losses was 1.52% at June 30, 2021, compared to 1.57% at March 31, 2021. Approximately 21% of the loan portfolio, excluding SBA loans at June 30, 2021, 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 as a percent of originated loans excluding SBA PPP loans was 1.72% at June 30, 2021, compared to 1.84% at March 31, 2021 due to growth in the originated loan portfolio. For the quarter ended June 30, 2021, the Bank had net charge-offs of $0.015 million.
Allowance for Loan Losses Percentages
(in thousands, except ratios)
| June 30, 2021 | March 31, 2021 | December 31, 2020 | June 30, 2020 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Originated loans, net of deferred fees and costs | $ | 877,534 | $ | 817,261 | $ | 835,769 | $ | 789,075 | ||||
| SBA PPP loans, net of deferred fees | 71,508 | 115,920 | 120,711 | 132,800 | ||||||||
| Acquired loans, net of unamortized discount | 232,516 | 258,945 | 281,101 | 359,300 | ||||||||
| Loans, end of period | $ | 1,181,558 | $ | 1,192,126 | $ | 1,237,581 | $ | 1,281,175 | ||||
| SBA PPP loans, net of deferred fees | (71,508) | (115,920) | (120,711) | (132,800) | ||||||||
| Loans, net of SBA PPP loans and deferred fees | $ | 1,110,050 | $ | 1,076,206 | $ | 1,116,870 | $ | 1,148,375 | ||||
| Allowance for loan losses allocated to originated loans | $ | 15,059 | $ | 15,028 | $ | 14,819 | $ | 12,109 | ||||
| Allowance for loan losses allocated to other loans | 1,786 | 1,832 | 2,224 | 1,264 | ||||||||
| Allowance for loan losses | $ | 16,845 | $ | 16,860 | $ | 17,043 | $ | 13,373 | ||||
| ALL as a percentage of loans, end of period | 1.43 | % | 1.41 | % | 1.38 | % | 1.04 | % | ||||
| ALL as a percentage of loans, net of SBA PPP loans and deferred fees | 1.52 | % | 1.57 | % | 1.53 | % | 1.16 | % | ||||
| ALL allocated to originated loans as a percentage of originated loans, net of deferred fees and costs | 1.72 | % | 1.84 | % | 1.77 | % | 1.53 | % |
Nonperforming assets decreased 5.8% to $8.8 million or 0.51% of total assets at June 30, 2021 compared to $9.3 million or 0.54% of total assets at March 31, 2021. Included in nonperforming assets at June 30, 2021 are $6.3 million of nonperforming assets acquired during recent whole-bank acquisitions. Originated nonperforming assets were $2.5 million, or 0.21% of total assets for the most recent quarter. Over the past year, nonperforming assets declined 50% from $17.4 million at June 30, 2020 to $8.8 million at June 30, 2021. Over the past year, total criticized loans decreased 46.3% from $55.9 million at June 30, 2020, to $38.2 million at June 30, 2021.
| (in thousands) | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| June 30, 2021 | March 31, 2021 | December 31, 2020 | September 30, 2020 | June 30, 2020 | ||||||
| Special mention loan balances | $ | 12,308 | $ | 13,659 | $ | 6,672 | $ | 7,777 | $ | 19,958 |
| Substandard loan balances | 25,890 | 26,064 | 28,541 | 32,922 | 35,911 | |||||
| Criticized loans, end of period | $ | 38,198 | $ | 39,723 | $ | 35,213 | $ | 40,699 | $ | 55,869 |
Deposits decreased $9 million to $1.37 billion at June 30, 2021, from $1.38 billion at March 31,2021. The decrease in certificates of deposit more than offset the $23 million increase in non-maturity deposits. The decrease in certificates of deposit was due to the Company choosing not to match higher rate local retail certificate competition.
Review of Operations
Net interest income was $12.8 million for the second quarter ended June 30, 2021 compared to $12.8 million for the first quarter ended March 31, 2021 and $12.3 million for the quarter ended June 30, 2020. Net interest income benefited from growth in the investment portfolio and lower deposit costs offset by lower SBA PPP net loan fee accretion, largely due to the impact of changes in accretion on debt forgiveness and decreased accretion due to reductions of purchased credit impaired loans compared to the prior quarter. The net interest margin (“NIM”) decreased to 3.22% in the second quarter ended June 30, 2021, compared to 3.31% for the first quarter ended March 31, 2021. This decrease is largely due to a (1) 12 basis point reduction in SBA PPP net loan fee accretion and a (2) 3 basis point decrease in accretion due to reductions of purchased credit impaired loans, partially offset by the impact of lower liability costs.
The NIM decreased to 3.22% for the quarter ended June 30, 2021 from 3.34% for the quarter ended June 30, 2020. The NIM decreased approximately 12 basis points due to the higher interest-bearing cash balances during 2021 compared to 2020. Lower accretion on the reduction of purchased credit impaired loans decreased the NIM by 7 basis points in 2021 compared to 2020. Other reductions to NIM included lower yielding loans and investment securities as a result of
the dramatic reduction in interest rates in March 2020. The NIM benefited 27 basis points from lower liability costs and 19 basis points from increased SBA PPP net loan fee accretion quarter over quarter.
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 | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| June 30, 2021 | March 31, 2021 | December 31, 2020 | September 30, 2020 | June 30, 2020 | ||||||||||||||||
| 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 | $ | 12,831 | 3.22 | % | $ | 12,764 | 3.31 | % | $ | 13,372 | 3.51 | % | $ | 11,909 | 3.11 | % | $ | 12,303 | 3.34 | % |
| Less non-accretable difference realized as interest from payoff of purchased credit impaired (“PCI”) loans | $ | (37) | (0.01) | % | $ | (58) | (0.02) | % | $ | (324) | (0.08) | % | $ | (130) | (0.03) | % | $ | (196) | (0.05) | % |
| Less accelerated accretion from payoff of certain PCI loans with transferred non-accretable differences | $ | — | — | % | $ | (90) | (0.02) | % | $ | (872) | (0.23) | % | $ | — | — | % | $ | (99) | (0.03) | % |
| Less scheduled accretion interest | $ | (265) | (0.07) | % | $ | (266) | (0.07) | % | $ | (252) | (0.07) | % | $ | (276) | (0.07) | % | $ | (247) | (0.07) | % |
| Without loan purchase accretion | $ | 12,529 | 3.14 | % | $ | 12,350 | 3.20 | % | $ | 11,924 | 3.13 | % | $ | 11,503 | 3.01 | % | $ | 11,761 | 3.19 | % |
| Less SBA PPP net loan fee accretion | $ | (1,309) | (0.33) | % | $ | (1,750) | (0.45) | % | $ | (985) | (0.26) | % | $ | (643) | (0.17) | % | $ | (500) | (0.14) | % |
| Without SBA PPP purchase and net loan fee accretion | $ | 11,220 | 2.81 | % | $ | 10,600 | 2.75 | % | $ | 10,939 | 2.87 | % | $ | 10,860 | 2.84 | % | $ | 11,261 | 3.05 | % |
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, December 31, 2020 | $ | 123,702 | $ | 2,991 | $ | — | $ | — | $ | 123,702 | $ | 2,991 |
| 2021 SBA PPP Loan Originations | — | — | 55,790 | 3,485 | 55,790 | 3,485 | ||||||
| Less: 2021 SBA PPP Loan Forgiveness and Fee Accretion | (102,295) | (2,683) | (2,272) | (376) | (104,567) | (3,059) | ||||||
| Balance, June 30, 2021 | $ | 21,407 | $ | 308 | $ | 53,518 | $ | 3,109 | $ | 74,925 | $ | 3,417 |
The Bank continued to manage deposit interest rates, as various non-maturity deposit product rates were reduced, and interest rates on new and renewed certificates of deposit were lower than the previous quarter. These actions reduced the cost of deposits by 9 basis points in the quarter ended June 30, 2021. At June 30, 2021, the Bank had approximately $110 million of certificate of deposit accounts maturing in 2021 with a weighted average cost of approximately 1.0% and approximately $127 million of certificate of deposit accounts maturing in 2022 with a weighted average cost of approximately 1.8%. The 2021 maturities are generally evenly spread throughout the remainder of the year, with approximately 85% of the 2022 maturities occurring in the first half of 2022. The approximate weighted average cost of new certificates in the second quarter of 2021 was below 0.5%.
Loan loss provisions were zero for the quarters ended June 30, 2021, March 31, 2021 and $1.8 million one year earlier. During the quarter ended June 30, 2021, asset quality improved as indicated by a lower level of non-performing assets, substandard assets and lower loan deferrals under Section 4013 of the Cares Act. Improved general business activity also allowed the Company to reduce its general economic Q-factor, which reduced the allowance allocated for this factor. In addition, a reduction in loan deferrals reduced the allowance allocated to such deferrals. These reductions were largely offset by allowance allocation increases due to loan growth and a modest increase in specific reserves. For the six-month ended June 30, 2021, provision for loan losses was zero compared to $3.75 million for the six months ended June 30, 2020. The year-to-date June 30, 2020 provision for loan losses expense due to the impact of the pandemic was approximately $2 million, with the remaining provision split evenly due to loan growth and changes in credit quality.
Non-interest income decreased to $3.8 million in the quarter ended June 30, 2021, compared to $4.2 million in the quarter ended March 31, 2021 and decreased $1.2 million from the quarter ended June 30, 2020. The decrease in the second quarter compared to the first quarter was largely due to a reduction in gain on sale of securities of $0.2 million. Gains on sale of loans decreased during the quarter due to lower mortgage origination activity partially offset by increased gains on sale of SBA loans. The decrease in non-interest income during the current quarter compared to the comparable prior year quarter year was a result of the following factors: (1) lower gain on sale of loans, (2) lower loan servicing income, (3) no gain on sale of acquired business lines, (4) no settlement income and (5) no insurance commission income in the second quarter of 2021.
Total non-interest expense increased $0.7 million in the second quarter of 2021 to $10.2 million compared to $9.5 million for the quarter ended March 31, 2021 and decreased from $11.4 million for the quarter ended June 30, 2020. The increase from the first quarter was largely due to the reversal of $0.9 million of previously recorded MSR impairment in the first quarter of 2021, partially offset by the first quarter debt termination cost of $0.1 million and second quarter lower compensation and FDIC premium assessment. The decrease from the second quarter of 2020 was largely due to higher interest rates which decreased variable incentive compensation and resulted in lower MSR impairment and amortization of $0.5 million. In addition, compensation was impacted by fewer FTE’s in the second quarter of 2021.
Provisions for income taxes, decreased to $1.7 million in the second quarter of 2021 from the first quarter of 2021 at $1.9 million. The effective tax rate for the most recent quarter was 26.8% compared to 26.1% for the prior quarter. The effective tax rate was 26.5% for the comparable prior year quarter.
These financial results are preliminary until the Form 10-Q is filed in August 2021.
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 the conditions in the financial markets and economic conditions generally; adverse impacts to the Company or Bank arising from the COVID-19
pandemic; the possibility of a deterioration in the residential real estate markets; interest rate risk; lending risk; the sufficiency of loan allowances; changes in the fair value or ratings downgrades of our securities; competitive pressures among depository and other financial institutions; our ability to maintain our reputation; our ability to realize the benefits of net deferred tax assets; our ability to maintain or increase our market share; acts of terrorism and political or military actions by the United States or other governments; legislative or regulatory changes or actions, or significant litigation, adversely affecting the Company or Bank; increases in FDIC insurance premiums or special assessments by the FDIC; disintermediation risk; our inability to obtain needed liquidity; 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; our ability to raise capital needed to fund growth or meet regulatory requirements; the possibility that our internal controls and procedures could fail or be circumvented; our ability to attract and retain key personnel; our ability to keep pace with technological change; cybersecurity risks; changes in federal or state tax laws; changes in accounting principles, policies or guidelines and their impact on financial performance; restrictions on our ability to pay dividends; and the potential volatility of our stock price. 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, 2020, filed with the Securities and Exchange Commission (“SEC”) on March 8, 2021 and the Company’s subsequent filings with the SEC. The Company undertakes no obligation to make any revisions to the 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 net income as adjusted, net income as adjusted per share, tangible book value, tangible book value per share, tangible common equity as a percent of tangible assets, return on average tangible common equity and return on average tangible common equity as adjusted, 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. 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 preferred stock equity, 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)
CITIZENS COMMUNITY BANCORP, INC.
Consolidated Balance Sheets
(in thousands, except shares and per share data)
| June 30, 2021 (unaudited) | March 31, 2021 (unaudited) | December 31, 2020 (audited) | June 30, 2020 (unaudited) | |||||
|---|---|---|---|---|---|---|---|---|
| Assets | ||||||||
| Cash and cash equivalents | $ | 128,440 | $ | 196,039 | $ | 119,440 | $ | 39,581 |
| Other interest-bearing deposits | 1,512 | 2,016 | 3,752 | 3,752 | ||||
| Securities available for sale “AFS” | 243,746 | 185,160 | 144,233 | 162,716 | ||||
| Securities held to maturity “HTM” | 59,582 | 57,419 | 43,551 | 10,541 | ||||
| Equity securities with readily determinable fair value | 297 | 297 | 200 | 188 | ||||
| Other investments | 14,966 | 15,069 | 14,948 | 15,193 | ||||
| Loans receivable | 1,181,558 | 1,192,126 | 1,237,581 | 1,281,175 | ||||
| Allowance for loan losses | (16,845) | (16,860) | (17,043) | (13,373) | ||||
| Loans receivable, net | 1,164,713 | 1,175,266 | 1,220,538 | 1,267,802 | ||||
| Loans held for sale | 3,109 | 2,267 | 3,075 | 8,876 | ||||
| Mortgage servicing rights, net | 3,862 | 3,999 | 3,252 | 3,509 | ||||
| Office properties and equipment, net | 21,121 | 21,081 | 21,165 | 21,318 | ||||
| Accrued interest receivable | 4,898 | 5,464 | 5,652 | 5,855 | ||||
| Intangible assets | 4,696 | 5,095 | 5,494 | 6,293 | ||||
| Goodwill | 31,498 | 31,498 | 31,498 | 31,498 | ||||
| Foreclosed and repossessed assets, net | 145 | 85 | 197 | 734 | ||||
| Bank owned life insurance (“BOLI”) | 23,991 | 23,837 | 23,684 | 23,357 | ||||
| Other assets | 7,896 | 7,702 | 8,416 | 6,301 | ||||
| TOTAL ASSETS | $ | 1,714,472 | $ | 1,732,294 | $ | 1,649,095 | $ | 1,607,514 |
| Liabilities and Stockholders’ Equity | ||||||||
| Liabilities: | ||||||||
| Deposits | $ | 1,371,226 | $ | 1,380,202 | $ | 1,295,256 | $ | 1,272,197 |
| Federal Home Loan Bank (“FHLB”) advances | 111,496 | 115,481 | 123,498 | 124,484 | ||||
| Other borrowings | 58,380 | 58,354 | 58,328 | 43,595 | ||||
| Other liabilities | 9,354 | 17,595 | 11,449 | 14,448 | ||||
| Total liabilities | 1,550,456 | 1,571,632 | 1,488,531 | 1,454,724 | ||||
| Stockholders’ equity: | ||||||||
| Common stock— $0.01 par value, authorized 30,000,000; 10,696,075 , 10,893,872; 11,056,349 and 11,150,695 shares issued and outstanding, respectively | 107 | 109 | 111 | 112 | ||||
| Additional paid-in capital | 121,732 | 123,766 | 126,154 | 126,900 | ||||
| Retained earnings | 40,117 | 35,783 | 32,809 | 25,759 | ||||
| Accumulated other comprehensive income | 2,060 | 1,004 | 1,490 | 19 | ||||
| Total stockholders’ equity | 164,016 | 160,662 | 160,564 | 152,790 | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 1,714,472 | $ | 1,732,294 | $ | 1,649,095 | $ | 1,607,514 |
Note: Certain items previously reported were reclassified for consistency with the current presentation.
CITIZENS COMMUNITY BANCORP, INC.
Consolidated Statements of Operations
(in thousands, except per share data)
| Three Months Ended | Six Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| June 30, 2021 (unaudited) | March 31, 2021 (unaudited) | June 30, 2020 (unaudited) | June 30, 2021 (unaudited) | June 30, 2020 (unaudited) | ||||||
| Interest and dividend income: | ||||||||||
| Interest and fees on loans | $ | 13,960 | $ | 14,517 | $ | 14,687 | $ | 28,477 | $ | 30,146 |
| Interest on investments | 1,518 | 1,103 | 1,199 | 2,621 | 2,648 | |||||
| Total interest and dividend income | 15,478 | 15,620 | 15,886 | 31,098 | 32,794 | |||||
| Interest expense: | ||||||||||
| Interest on deposits | 1,521 | 1,714 | 2,607 | 3,235 | 5,787 | |||||
| Interest on FHLB and FRB borrowed funds | 384 | 411 | 448 | 795 | 956 | |||||
| Interest on other borrowed funds | 742 | 731 | 528 | 1,473 | 1,077 | |||||
| Total interest expense | 2,647 | 2,856 | 3,583 | 5,503 | 7,820 | |||||
| Net interest income before provision for loan losses | 12,831 | 12,764 | 12,303 | 25,595 | 24,974 | |||||
| Provision for loan losses | — | — | 1,750 | — | 3,750 | |||||
| Net interest income after provision for loan losses | 12,831 | 12,764 | 10,553 | 25,595 | 21,224 | |||||
| Non-interest income: | ||||||||||
| Service charges on deposit accounts | 395 | 398 | 345 | 793 | 905 | |||||
| Interchange income | 647 | 530 | 489 | 1,177 | 953 | |||||
| Loan servicing income | 825 | 893 | 1,315 | 1,718 | 2,000 | |||||
| Gain on sale of loans | 1,522 | 1,595 | 1,818 | 3,117 | 2,598 | |||||
| Loan fees and service charges | 151 | 278 | 244 | 429 | 721 | |||||
| Insurance commission income | — | — | 195 | — | 474 | |||||
| Net gains on investment securities | 37 | 235 | 25 | 272 | 98 | |||||
| Net gain on sale of acquired business lines | — | — | 252 | — | 252 | |||||
| Settlement proceeds | — | — | 131 | — | 131 | |||||
| Other | 216 | 247 | 199 | 463 | 484 | |||||
| Total non-interest income | 3,793 | 4,176 | 5,013 | 7,969 | 8,616 | |||||
| Non-interest expense: | ||||||||||
| Compensation and related benefits | 5,473 | 5,596 | 5,908 | 11,069 | 11,343 | |||||
| Occupancy | 1,314 | 1,316 | 1,336 | 2,630 | 2,710 | |||||
| Data processing | 1,396 | 1,342 | 1,212 | 2,738 | 2,404 | |||||
| Amortization of intangible assets | 399 | 399 | 412 | 798 | 824 | |||||
| Mortgage servicing rights expense, net | 441 | (450) | 991 | (9) | 1,727 | |||||
| Advertising, marketing and public relations | 194 | 163 | 303 | 357 | 542 | |||||
| FDIC premium assessment | 82 | 165 | 180 | 247 | 248 | |||||
| Professional services | 381 | 521 | 353 | 902 | 957 | |||||
| Gains on repossessed assets, net | (29) | (117) | (22) | (146) | (90) | |||||
| Other | 547 | 554 | 719 | 1,101 | 1,458 | |||||
| Total non-interest expense | 10,198 | 9,489 | 11,392 | 19,687 | 22,123 | |||||
| Income before provision for income taxes | 6,426 | 7,451 | 4,174 | 13,877 | 7,717 | |||||
| Provision for income taxes | 1,720 | 1,945 | 1,105 | 3,665 | 2,042 | |||||
| Net income attributable to common stockholders | $ | 4,706 | $ | 5,506 | $ | 3,069 | $ | 10,212 | $ | 5,675 |
| Per share information: | ||||||||||
| Basic earnings | $ | 0.44 | $ | 0.50 | $ | 0.28 | $ | 0.94 | $ | 0.51 |
| Diluted earnings | $ | 0.44 | $ | 0.50 | $ | 0.28 | $ | 0.94 | $ | 0.51 |
| Cash dividends paid | $ | — | $ | 0.23 | $ | — | $ | 0.23 | $ | 0.21 |
| Book value per share at end of period | $ | 15.33 | $ | 14.75 | $ | 13.70 | $ | 15.33 | $ | 13.70 |
| Tangible book value per share at end of period (non-GAAP) | $ | 11.95 | $ | 11.39 | $ | 10.31 | $ | 11.95 | $ | 10.31 |
Note: Certain items previously reported were reclassified for consistency with the current presentation.
Reconciliation of GAAP Net Income and Net Income as Adjusted (non-GAAP)
(in thousands, except per share data)
| Three Months Ended | Six Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| June 30, 2021 | March 31, 2021 | June 30, 2020 | June 30, 2021 | June 30, 2020 | ||||||
| GAAP pretax income | $ | 6,426 | $ | 7,451 | $ | 4,174 | $ | 13,877 | $ | 7,717 |
| Net gain on sale of acquired business lines (1) | — | — | (252) | — | (252) | |||||
| Settlement proceeds (2) | — | — | (131) | — | (131) | |||||
| FHLB borrowings prepayment fee (3) | — | 102 | — | 102 | ||||||
| Pretax income as adjusted (4) | 6,426 | 7,553 | 3,791 | 13,979 | 7,334 | |||||
| Provision for income tax on net income as adjusted (5) | 1,720 | 1,971 | 1,005 | 3,692 | 1,944 | |||||
| Net income as adjusted after income taxes (non-GAAP) (4) | $ | 4,706 | $ | 5,582 | $ | 2,786 | $ | 10,287 | $ | 5,390 |
| GAAP diluted earnings per share, net of tax | $ | 0.44 | $ | 0.50 | $ | 0.28 | $ | 0.94 | $ | 0.51 |
| Net gain on sale of acquired business lines | — | — | (0.02) | — | (0.02) | |||||
| Settlement proceeds | — | — | (0.01) | — | (0.01) | |||||
| FHLB borrowings prepayment fee | $ | — | $ | 0.01 | — | $ | 0.01 | — | ||
| Diluted earnings per share, as adjusted, net of tax (non-GAAP) | $ | 0.44 | $ | 0.51 | $ | 0.25 | $ | 0.95 | $ | 0.48 |
| Average diluted shares outstanding | 10,789,843 | 10,985,994 | 11,150,785 | 10,887,409 | 11,183,216 |
(1) Net gain on sale of acquired business lines resulted from the sale of Wells Insurance Agency
(2) Settlement proceeds includes litigation income from a JP Morgan Residential Mortgage-Backed Security (RMBS) claim. This distribution represents a supplement to the proceeds received in March 2017 from a JP Morgan RMBS previously owned by the Bank and sold in 2011.
(3) 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.
(4) 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.
(5) Provision for income tax on net income as adjusted is calculated at our effective tax rate for each respective period presented.
| Loan Composition (in thousands) | June 30, 2021 | March 31, 2021 | December 31, 2020 | June 30, 2020 | ||||
|---|---|---|---|---|---|---|---|---|
| Originated Loans: | ||||||||
| Commercial/Agricultural real estate: | ||||||||
| Commercial real estate | $ | 420,565 | $ | 365,603 | $ | 351,113 | $ | 314,390 |
| Agricultural real estate | 42,925 | 38,140 | 31,741 | 35,138 | ||||
| Multi-family real estate | 113,790 | 111,503 | 112,731 | 90,617 | ||||
| Construction and land development | 89,586 | 83,936 | 91,241 | 94,856 | ||||
| C&I/Agricultural operating: | ||||||||
| Commercial and industrial | 80,783 | 76,693 | 95,290 | 80,369 | ||||
| Agricultural operating | 23,014 | 21,149 | 24,457 | 25,813 | ||||
| Residential mortgage: | ||||||||
| Residential mortgage | 72,965 | 82,285 | 86,283 | 95,664 | ||||
| Purchased HELOC loans | 4,949 | 5,291 | 6,260 | 6,861 | ||||
| Consumer installment: | ||||||||
| Originated indirect paper | 20,377 | 23,186 | 25,851 | 32,031 | ||||
| Other consumer | 10,296 | 10,951 | 12,056 | 14,175 | ||||
| Originated loans before SBA PPP loans | 879,250 | 818,737 | 837,023 | 789,914 | ||||
| SBA PPP loans | 74,925 | 118,931 | 123,702 | 137,330 | ||||
| Total originated loans | $ | 954,175 | $ | 937,668 | $ | 960,725 | $ | 927,244 |
| Acquired Loans: | ||||||||
| Commercial/Agricultural real estate: | ||||||||
| Commercial real estate | $ | 139,497 | $ | 149,586 | $ | 156,562 | $ | 195,335 |
| Agricultural real estate | 29,740 | 32,427 | 37,054 | 43,054 | ||||
| Multi-family real estate | 7,401 | 7,485 | 9,421 | 13,022 | ||||
| Construction and land development | 1,202 | 6,796 | 7,276 | 15,276 | ||||
| C&I/Agricultural operating: | ||||||||
| Commercial and industrial | 19,701 | 19,240 | 21,263 | 29,477 | ||||
| Agricultural operating | 4,893 | 7,101 | 8,328 | 12,124 | ||||
| Residential mortgage: | ||||||||
| Residential mortgage | 33,781 | 40,046 | 45,103 | 56,760 | ||||
| Consumer installment: | ||||||||
| Other consumer | 648 | 913 | 1,157 | 1,639 | ||||
| Total acquired loans | $ | 236,863 | $ | 263,594 | $ | 286,164 | $ | 366,687 |
| Total Loans: | ||||||||
| Commercial/Agricultural real estate: | ||||||||
| Commercial real estate | $ | 560,062 | $ | 515,189 | $ | 507,675 | $ | 509,725 |
| Agricultural real estate | 72,665 | 70,567 | 68,795 | 78,192 | ||||
| Multi-family real estate | 121,191 | 118,988 | 122,152 | 103,639 | ||||
| Construction and land development | 90,788 | 90,732 | 98,517 | 110,132 | ||||
| C&I/Agricultural operating: | ||||||||
| Commercial and industrial | 100,484 | 95,933 | 116,553 | 109,846 | ||||
| Agricultural operating | 27,907 | 28,250 | 32,785 | 37,937 | ||||
| Residential mortgage: | ||||||||
| Residential mortgage | 106,746 | 122,331 | 131,386 | 152,424 | ||||
| Purchased HELOC loans | 4,949 | 5,291 | 6,260 | 6,861 | ||||
| Consumer installment: | ||||||||
| Originated indirect paper | 20,377 | 23,186 | 25,851 | 32,031 | ||||
| Other consumer | 10,944 | 11,864 | 13,213 | 15,814 | ||||
| Gross loans before SBA PPP loans | 1,116,113 | 1,082,331 | 1,123,187 | 1,156,601 | ||||
| SBA PPP loans | 74,925 | 118,931 | 123,702 | 137,330 | ||||
| Gross loans | $ | 1,191,038 | $ | 1,201,262 | $ | 1,246,889 | $ | 1,293,931 |
| Unearned net deferred fees and costs and loans in process | (5,133) | (4,487) | (4,245) | (5,369) | ||||
| Unamortized discount on acquired loans | (4,347) | (4,649) | (5,063) | (7,387) | ||||
| Total loans receivable | $ | 1,181,558 | $ | 1,192,126 | $ | 1,237,581 | $ | 1,281,175 |
Nonperforming Originated and Acquired Assets
(in thousands, except ratios)
| June 30, 2021 and Three Months Ended | March 31, 2021 and Three Months Ended | December 31, 2020 and Three Months Ended | June 30, 2020 and Three Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Nonperforming assets: | ||||||||||||
| Originated nonperforming assets: | ||||||||||||
| Nonaccrual loans | $ | 2,420 | $ | 2,344 | $ | 3,649 | $ | 3,951 | ||||
| Accruing loans past due 90 days or more | 88 | 391 | 415 | 1,455 | ||||||||
| Total originated nonperforming loans (“NPL”) | 2,508 | 2,735 | 4,064 | 5,406 | ||||||||
| Other real estate owned (“OREO”) | — | — | 63 | 270 | ||||||||
| Other collateral owned | 16 | 28 | 41 | 42 | ||||||||
| Total originated nonperforming assets (“NPAs”) | $ | 2,524 | $ | 2,763 | $ | 4,168 | $ | 5,718 | ||||
| Acquired nonperforming assets: | ||||||||||||
| Nonaccrual loans | $ | 5,655 | $ | 6,335 | $ | 7,098 | $ | 10,836 | ||||
| Accruing loans past due 90 days or more | 454 | 145 | 171 | 425 | ||||||||
| Total acquired nonperforming loans (“NPL”) | 6,109 | 6,480 | 7,269 | 11,261 | ||||||||
| Other real estate owned (“OREO”) | 129 | 57 | 93 | 422 | ||||||||
| Other collateral owned | — | — | — | — | ||||||||
| Total acquired nonperforming assets (“NPAs”) | $ | 6,238 | $ | 6,537 | $ | 7,362 | $ | 11,683 | ||||
| Total nonperforming assets (“NPAs”) | $ | 8,762 | $ | 9,300 | $ | 11,530 | $ | 17,401 | ||||
| Loans, end of period | $ | 1,181,558 | $ | 1,192,126 | $ | 1,237,581 | $ | 1,281,175 | ||||
| Total assets, end of period | $ | 1,714,472 | $ | 1,732,294 | $ | 1,649,095 | $ | 1,607,514 | ||||
| Ratios: | ||||||||||||
| Originated NPLs to total loans | 0.21 | % | 0.23 | % | 0.33 | % | 0.42 | % | ||||
| Acquired NPLs to total loans | 0.52 | % | 0.54 | % | 0.59 | % | 0.88 | % | ||||
| Originated NPAs to total assets | 0.15 | % | 0.16 | % | 0.25 | % | 0.36 | % | ||||
| Acquired NPAs to total assets | 0.36 | % | 0.38 | % | 0.45 | % | 0.73 | % |
Nonperforming Total Assets
(in thousand, except ratios)
| June 30, 2021 and Three Months Ended | March 31, 2021 and Three Months Ended | December 31, 2020 and Three Months Ended | June 30, 2020 and Three Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Nonperforming assets: | ||||||||||||
| Nonaccrual loans | ||||||||||||
| Commercial real estate | $ | 1,027 | $ | 760 | $ | 827 | $ | 3,221 | ||||
| Agricultural real estate | 3,716 | 4,511 | 5,084 | 5,979 | ||||||||
| Commercial and industrial (“C&I”) | 313 | 391 | 357 | 1,306 | ||||||||
| Agricultural operating | 1,163 | 764 | 1,872 | 1,496 | ||||||||
| Residential mortgage | 1,768 | 2,167 | 2,451 | 2,666 | ||||||||
| Consumer installment | 88 | 86 | 156 | 119 | ||||||||
| Total nonaccrual loans | $ | 8,075 | $ | 8,679 | $ | 10,747 | $ | 14,787 | ||||
| Accruing loans past due 90 days or more | 542 | 536 | 586 | 1,880 | ||||||||
| Total nonperforming loans (“NPLs”) | 8,617 | 9,215 | 11,333 | 16,667 | ||||||||
| Foreclosed and repossessed assets, net | 145 | 85 | 197 | 734 | ||||||||
| Total nonperforming assets (“NPAs”) | $ | 8,762 | $ | 9,300 | $ | 11,530 | $ | 17,401 | ||||
| Troubled Debt Restructurings (“TDRs”) | $ | 16,597 | $ | 17,442 | $ | 18,477 | $ | 13,119 | ||||
| Nonaccrual TDRs | $ | 4,861 | $ | 5,690 | $ | 6,735 | $ | 6,992 | ||||
| Loans, end of period | $ | 1,181,558 | $ | 1,192,126 | $ | 1,237,581 | $ | 1,281,175 | ||||
| Total assets, end of period | $ | 1,714,472 | $ | 1,732,294 | $ | 1,649,095 | $ | 1,607,514 | ||||
| Ratios: | ||||||||||||
| NPLs to total loans | 0.73 | % | 0.77 | % | 0.92 | % | 1.30 | % | ||||
| NPAs to total assets | 0.51 | % | 0.54 | % | 0.70 | % | 1.08 | % |
Deposit Composition
(in thousands)
| June 30,<br>2021 | March 31,<br>2021 | December 31,<br>2020 | June 30,<br>2020 | |||||
|---|---|---|---|---|---|---|---|---|
| Non-interest bearing demand deposits | $ | 253,097 | $ | 257,042 | $ | 238,348 | $ | 223,536 |
| Interest bearing demand deposits | 375,005 | 352,302 | 301,764 | 270,116 | ||||
| Savings accounts | 220,698 | 222,448 | 196,348 | 185,816 | ||||
| Money market accounts | 263,390 | 258,942 | 245,549 | 242,536 | ||||
| Certificate accounts | 259,036 | 289,468 | 313,247 | 350,193 | ||||
| Total deposits | $ | 1,371,226 | $ | 1,380,202 | $ | 1,295,256 | $ | 1,272,197 |
Average balances, Interest Yields and Rates
(in thousands, except yields and rates)
| Three months ended June 30, 2021 | Three months ended March, 31 2021 | Three months ended June 30, 2020 | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Average<br>Balance | Interest<br>Income/<br>Expense | Average<br>Yield/<br>Rate (1) | Average<br>Balance | Interest<br>Income/<br>Expense | Average<br>Yield/<br>Rate (1) | Average<br>Balance | Interest<br>Income/<br>Expense | Average<br>Yield/<br>Rate (1) | ||||||||||
| Average interest earning assets: | ||||||||||||||||||
| Cash and cash equivalents | $ | 113,561 | $ | 28 | 0.10 | % | $ | 129,642 | $ | 29 | 0.09 | % | $ | 19,995 | $ | 5 | 0.10 | % |
| Loans receivable | 1,186,439 | 13,960 | 4.72 | % | 1,213,562 | 14,517 | 4.85 | % | 1,266,273 | 14,687 | 4.66 | % | ||||||
| Interest bearing deposits | 1,754 | 9 | 2.06 | % | 3,437 | 20 | 2.36 | % | 3,788 | 23 | 2.44 | % | ||||||
| Investment securities (1) | 283,557 | 1,308 | 1.85 | % | 202,981 | 885 | 1.77 | % | 174,875 | 988 | 2.27 | % | ||||||
| Other investments | 15,020 | 173 | 4.62 | % | 15,038 | 169 | 4.56 | % | 15,160 | 183 | 4.86 | % | ||||||
| Total interest earning assets (1) | $ | 1,600,331 | $ | 15,478 | 3.88 | % | $ | 1,564,660 | $ | 15,620 | 4.05 | % | $ | 1,480,091 | $ | 15,886 | 4.32 | % |
| Average interest bearing liabilities: | ||||||||||||||||||
| Savings accounts | $ | 219,804 | $ | 99 | 0.18 | % | $ | 197,647 | $ | 83 | 0.17 | % | $ | 171,285 | $ | 99 | 0.23 | % |
| Demand deposits | 360,314 | 257 | 0.29 | % | 330,674 | 251 | 0.31 | % | 267,429 | 260 | 0.39 | % | ||||||
| Money market accounts | 258,638 | 182 | 0.28 | % | 254,120 | 202 | 0.32 | % | 243,264 | 350 | 0.58 | % | ||||||
| CD’s | 240,224 | 868 | 1.45 | % | 266,044 | 1,043 | 1.59 | % | 328,543 | 1,706 | 2.09 | % | ||||||
| IRA’s | 39,970 | 115 | 1.15 | % | 40,877 | 135 | 1.34 | % | 42,117 | 192 | 1.83 | % | ||||||
| Total deposits | $ | 1,118,950 | $ | 1,521 | 0.55 | % | $ | 1,089,362 | $ | 1,714 | 0.64 | % | $ | 1,052,638 | $ | 2,607 | 1.00 | % |
| FHLB advances and other borrowings | 171,261 | 1,126 | 2.64 | % | 180,635 | 1,142 | 2.56 | % | 186,191 | 976 | 2.11 | % | ||||||
| Total interest bearing liabilities | $ | 1,290,211 | $ | 2,647 | 0.82 | % | $ | 1,269,997 | $ | 2,856 | 0.91 | % | $ | 1,238,829 | $ | 3,583 | 1.16 | % |
| Net interest income | $ | 12,831 | $ | 12,764 | $ | 12,303 | ||||||||||||
| Interest rate spread | 3.06 | % | 3.14 | % | 3.16 | % | ||||||||||||
| Net interest margin (1) | 3.22 | % | 3.31 | % | 3.34 | % | ||||||||||||
| Average interest earning assets to average interest bearing liabilities | 1.24 | 1.23 | 1.19 |
(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 June 30, 2021, March 31, 2021 and June 30, 2020. The FTE adjustment to net interest income included in the rate calculations totaled $1, $1 and $0 thousand for the three months ended June 30, 2021, March 31, 2021 and June 30, 2020, respectively.
| Six months ended June 30, 2021 | Six months ended June 30, 2020 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Average<br>Balance | Interest<br>Income/<br>Expense | Average<br>Yield/<br>Rate (1) | Average<br>Balance | Interest<br>Income/<br>Expense | Average<br>Yield/<br>Rate (1) | |||||||
| Average interest earning assets: | ||||||||||||
| Cash and cash equivalents | $ | 121,557 | $ | 57 | 0.09 | % | $ | 25,532 | $ | 123 | 0.97 | % |
| Loans receivable | 1,199,925 | 28,477 | 4.79 | % | 1,219,905 | 30,146 | 4.97 | % | ||||
| Interest bearing deposits | 2,591 | 29 | 2.26 | % | 4,075 | 50 | 2.47 | % | ||||
| Investment securities (1) | 243,492 | 2,193 | 1.82 | % | 177,081 | 2,119 | 2.41 | % | ||||
| Other investments | 15,029 | 342 | 4.59 | % | 15,083 | 356 | 4.75 | % | ||||
| Total interest earning assets (1) | $ | 1,582,594 | $ | 31,098 | 3.96 | % | $ | 1,441,676 | $ | 32,794 | 4.57 | % |
| Average interest bearing liabilities: | ||||||||||||
| Savings accounts | $ | 208,787 | $ | 182 | 0.18 | % | $ | 162,941 | $ | 250 | 0.31 | % |
| Demand deposits | 345,576 | 507 | 0.30 | % | 251,125 | 635 | 0.51 | % | ||||
| Money market accounts | 256,391 | 384 | 0.30 | % | 239,867 | 959 | 0.80 | % | ||||
| CD’s | 253,063 | 1,911 | 1.52 | % | 341,319 | 3,552 | 2.09 | % | ||||
| IRA’s | 40,421 | 251 | 1.25 | % | 42,406 | 391 | 1.85 | % | ||||
| Total deposits | $ | 1,104,238 | $ | 3,235 | 0.59 | % | $ | 1,037,658 | $ | 5,787 | 1.12 | % |
| FHLB advances and other borrowings | 175,922 | 2,268 | 2.60 | % | 180,927 | 2,033 | 2.26 | % | ||||
| Total interest bearing liabilities | $ | 1,280,160 | $ | 5,503 | 0.87 | % | $ | 1,218,585 | $ | 7,820 | 1.29 | % |
| Net interest income | $ | 25,595 | $ | 24,974 | ||||||||
| Interest rate spread | 3.09 | % | 3.28 | % | ||||||||
| Net interest margin (1) | 3.26 | % | 3.48 | % | ||||||||
| Average interest earning assets to average interest bearing liabilities | 1.24 | 1.18 |
(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 six months ended June 30, 2021 and June 30, 2020, respectively. The FTE adjustment to net interest income included in the rate calculations totaled $2 and $1 thousand for the six months ended June 30, 2021 and June 30, 2020, respectively.
The following table reports key financial metric ratios based on a net income and net income as adjusted basis:
| Three Months Ended | Six Months Ended | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| June 30, 2021 | March 31, 2021 | June 30, 2020 | June 30, 2021 | June 30, 2020 | |||||||
| Ratios based on net income: | |||||||||||
| Return on average assets (annualized) | 1.10 | % | 1.33 | % | 0.78 | % | 1.22 | % | 0.73 | % | |
| Return on average equity (annualized) | 11.63 | % | 13.97 | % | 8.23 | % | 12.78 | % | 7.61 | % | |
| Return on average tangible common equity5 (annualized) | 14.98 | % | 18.14 | % | 11.06 | % | 16.53 | % | 10.25 | % | |
| Efficiency ratio | 61 | % | 56 | % | 66 | % | 59 | % | 66 | % | |
| Net interest margin with loan purchase accretion | 3.22 | % | 3.31 | % | 3.34 | % | 3.26 | % | 3.48 | % | |
| Net interest margin without loan purchase accretion | 3.14 | % | 3.20 | % | 3.19 | % | 3.17 | % | 3.23 | % | |
| Ratios based on net income as adjusted (non-GAAP): | |||||||||||
| Return on average assets as adjusted2 (annualized) | 1.10 | % | 1.35 | % | 0.71 | % | 1.22 | % | 0.70 | % | |
| Return on average equity as adjusted3 (annualized) | 11.63 | % | 14.16 | % | 7.47 | % | 12.87 | % | 7.23 | % | |
| Return on average tangible common equity as adjusted5 (annualized) | 14.98 | % | 18.39 | % | 10.04 | % | 16.65 | % | 9.73 | % | |
| Efficiency ratio4 as adjusted (non-GAAP) | 61 | % | 55 | % | 67 | % | 58 | % | 67 | % |
Reconciliation of Return on Average Assets as Adjusted (non-GAAP)
(in thousands, except ratios)
| Three Months Ended | Six Months Ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| June 30, 2021 | March 31, 2021 | June 30, 2020 | June 30, 2021 | June 30, 2020 | ||||||||||||
| GAAP earnings after income taxes | $ | 4,706 | $ | 5,506 | $ | 3,069 | $ | 10,212 | $ | 5,675 | ||||||
| Net income as adjusted after income taxes (non-GAAP) (1) | $ | 4,706 | $ | 5,582 | $ | 2,786 | $ | 10,288 | $ | 5,390 | ||||||
| Average assets | $ | 1,716,394 | $ | 1,682,064 | 1,585,421 | $ | 1,694,505 | $ | 1,557,837 | |||||||
| Return on average assets (annualized) | 1.10 | % | 1.33 | % | 0.78 | % | 1.22 | % | 0.73 | % | ||||||
| Return on average assets as adjusted (non-GAAP) (annualized) | 1.10 | % | 1.35 | % | 0.71 | % | 1.22 | % | 0.70 | % |
(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 | Six Months Ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| June 30, 2021 | March 31, 2021 | June 30, 2020 | June 30, 2021 | June 30, 2020 | ||||||||||||
| GAAP earnings after income taxes | $ | 4,706 | $ | 5,506 | $ | 3,069 | $ | 10,212 | $ | 5,675 | ||||||
| Net income as adjusted after income taxes (non-GAAP) (1) | $ | 4,706 | $ | 5,582 | $ | 2,786 | $ | 10,288 | $ | 5,390 | ||||||
| Average equity | $ | 162,361 | $ | 159,881 | 149,973 | $ | 161,186 | $ | 149,960 | |||||||
| Return on average equity (annualized) | 11.63 | % | 13.97 | % | 8.23 | % | 12.78 | % | 7.61 | % | ||||||
| Return on average equity as adjusted (non-GAAP) (annualized) | 11.63 | % | 14.16 | % | 7.47 | % | 12.87 | % | 7.23 | % |
(1) See Reconciliation of GAAP Net Income and Net Income as Adjusted (non-GAAP)
Reconciliation of Return on Average Tangible Common Equity and Reconciliation of Return on Average Tangible Common Equity, as Adjusted (non-GAAP)
(in thousands, except ratios)
| Three Months Ended | Six Months Ended | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| June 30, 2021 | March 31, 2021 | June 30, 2020 | June 30, 2021 | June 30, 2020 | |||||||||||
| Total stockholders’ equity | $ | 164,016 | $ | 160,662 | $ | 152,790 | $ | 164,016 | $ | 152,790 | |||||
| Less: Goodwill | (31,498) | (31,498) | (31,498) | (31,498) | (31,498) | ||||||||||
| Less: Intangible assets | (4,696) | (5,095) | (6,293) | (4,696) | (6,293) | ||||||||||
| Tangible common equity (non-GAAP) | $ | 127,822 | $ | 124,069 | $ | 114,999 | $ | 127,822 | $ | 114,999 | |||||
| Average tangible common equity (non-GAAP) | $ | 125,967 | $ | 123,088 | $ | 111,624 | $ | 124,593 | $ | 111,355 | |||||
| GAAP earnings after income taxes | $ | 4,706 | $ | 5,506 | $ | 3,069 | $ | 10,212 | $ | 5,675 | |||||
| Net income as adjusted after income taxes (non-GAAP) (1) | $ | 4,706 | $ | 5,582 | $ | 2,786 | $ | 10,288 | $ | 5,390 | |||||
| Return on average tangible common equity (annualized) | 14.98 | % | 18.14 | % | 11.06 | % | 16.53 | % | 10.25 | % | |||||
| Return on average tangible common equity as adjusted (non-GAAP) (annualized) | 14.98 | % | 18.39 | % | 10.04 | % | 16.65 | % | 9.73 | % |
(1) See Reconciliation of GAAP Net Income and Net Income as Adjusted (non-GAAP)
Reconciliation of Efficiency Ratio as Adjusted (non-GAAP)
(in thousands, except ratios)
| Three Months Ended | Six Months Ended | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| June 30, 2021 | March 31, 2021 | June 30, 2020 | June 30, 2021 | June 30, 2020 | |||||||||||
| Non-interest expense (GAAP) | $ | 10,198 | $ | 9,489 | $ | 11,392 | $ | 19,687 | $ | 22,123 | |||||
| FHLB borrowings prepayment fee (1) | — | (102) | — | (102) | — | ||||||||||
| Non-interest expense as adjusted (non-GAAP) | 10,198 | 9,387 | 11,392 | 19,585 | 22,123 | ||||||||||
| Non-interest income | 3,793 | 4,176 | 5,013 | 7,969 | 8,616 | ||||||||||
| Net interest margin | 12,831 | 12,764 | 12,303 | 25,595 | 24,974 | ||||||||||
| Efficiency ratio denominator (GAAP) | $ | 16,624 | $ | 16,940 | $ | 17,316 | $ | 33,564 | $ | 33,590 | |||||
| Net gain on acquired business lines (1) | — | — | (252) | — | (252) | ||||||||||
| Settlement proceeds (1) | — | — | (131) | — | (131) | ||||||||||
| Efficiency ratio denominator (non-GAAP) | $ | 16,624 | $ | 16,940 | $ | 16,933 | $ | 33,564 | $ | 33,207 | |||||
| Efficiency ratio (GAAP) | 61 | % | 56 | % | 66 | % | 59 | % | 66 | % | |||||
| Efficiency ratio as adjusted (non-GAAP) | 61 | % | 55 | % | 67 | % | 58 | % | 67 | % |
(1) See Reconciliation of GAAP Net Income and Net Income as Adjusted (non-GAAP)
Reconciliation of tangible book value per share (non-GAAP)
(in thousands, except per share data)
| Tangible book value per share at end of period | June 30, 2021 | March 31, 2021 | June 30, 2020 | |||
|---|---|---|---|---|---|---|
| Total stockholders’ equity | $ | 164,016 | $ | 160,662 | $ | 152,790 |
| Less: Goodwill | (31,498) | (31,498) | (31,498) | |||
| Less: Intangible assets | (4,696) | (5,095) | (6,293) | |||
| Tangible common equity (non-GAAP) | $ | 127,822 | $ | 124,069 | $ | 114,999 |
| Ending common shares outstanding | 10,696,075 | 10,893,872 | 11,150,695 | |||
| Book value per share | $ | 15.33 | $ | 14.75 | $ | 13.70 |
| Tangible book value per share (non-GAAP) | $ | 11.95 | $ | 11.39 | $ | 10.31 |
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 | June 30, 2021 | March 31, 2021 | June 30, 2020 | ||||||
|---|---|---|---|---|---|---|---|---|---|
| Total stockholders’ equity | $ | 164,016 | $ | 160,662 | $ | 152,790 | |||
| Less: Goodwill | (31,498) | (31,498) | (31,498) | ||||||
| Less: Intangible assets | (4,696) | (5,095) | (6,293) | ||||||
| Tangible common equity (non-GAAP) | $ | 127,822 | $ | 124,069 | $ | 114,999 | |||
| Total Assets | $ | 1,714,472 | $ | 1,732,294 | $ | 1,607,514 | |||
| Less: Goodwill | (31,498) | (31,498) | (31,498) | ||||||
| Less: Intangible assets | (4,696) | (5,095) | (6,293) | ||||||
| Tangible Assets (non-GAAP) | $ | 1,678,278 | $ | 1,695,701 | $ | 1,569,723 | |||
| Less SBA PPP Loans | (74,925) | (118,931) | (137,330) | ||||||
| Tangible Assets, excluding SBA PPP Loans (non-GAAP) | $ | 1,603,353 | $ | 1,576,770 | $ | 1,432,393 | |||
| Total stockholders’ equity to total assets ratio | 9.57 | % | 9.27 | % | 9.50 | % | |||
| Tangible common equity as a percent of tangible assets (non-GAAP) | 7.62 | % | 7.32 | % | 7.33 | % | |||
| Tangible common equity as a percent of tangible assets, excluding SBA PPP Loans (non-GAAP) | 7.97 | % | 7.87 | % | 8.03 | % |
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)”.
4The efficiency ratio as adjusted (non-GAAP) is a non-GAAP measure that management believes enhances investors’ ability to better understand the underlying business performance and the Company’s ability to use what it has to generate the most profit possible for shareholders relative to core business activities. For a detailed reconciliation of GAAP to non-GAAP results, see the accompanying financial table “Reconciliation of Efficiency Ratio as Adjusted (non-GAAP)”.
5Tangible book value, tangible book value per share, tangible common equity as a percent of tangible assets, return on tangible common equity and return on tangible common equity as adjusted 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 and Reconciliation of Return on Average Tangible Common Equity as Adjusted (non-GAAP)”.
17
ex992
EXHIBIT 99.2 Earnings Release Supplement Second Quarter 2021
Citizens Community Bancorp, Inc. Table of Contents Segment Profiles 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 Credit Quality/Risk Rating Descriptions Loans by Risk Rating as of June 30, 2021 Loans by Rish Rating as of March 31, 2021 Loans by Risk Rating as of December 31, 2020 Loans by Risk Rating as of June 30, 2020 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 Page(s) 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 17 17 18 19 20 1
COVID-19 Related Loan Deferrals Dollars in Thousands COVID-19 Deferrals Balance Number of Loans Commercial Deferrals Hotel Loans 31,117$ 5 Other Commercial Loans 2,469 9 Total Commercial Deferrals 33,586 14 Residential Deferrals 2,148 17 Consumer Deferrals - - Total Deferrals 35,734$ 31 June 30, 2021 Commercial Loan Deferral Expiration by Quarter as of June 30, 2021 Balance Number of Loans Hotel Loans Quarter Ending September 30, 2021 11,926$ 3 Quarter Ending December 31, 2021 - - Quarter Ending March 31, 2022 19,191* 2 Total Hotel Loans 31,117 5 Other Commercial Loans Quarter Ending September 30, 2021 2,392 8 Quarter Ending December 31, 2021 77 1 Total Other Commercial Loans 2,469$ 9 Total Commercial Deferral Expirations 33,586$ 14 *Interest only deferral – borrower provided 2 years principal and interest payments 2
Portfolio Fundamentals 54%35% 11% Wisconsin Minnesota Other By Geography As of 06/30/21 • 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 06/30/21 As of 03/31/21 $353 $311 752 765 $469 $406 Approximate Weighted Average LTV 59% 55% 2.3x 2.4x Weighted Average Seasoning In Months 26 28 0.00% 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 27% 23% 11% 9% 6% 5% 4% 2% 2% 11% Hotel Investor Residential CRE - Retail CRE - Office CRE - Warehouse/Mini Storage CRE - Senior Living CRE - Industrial/Manufacturing CRE - Mixed Use CRE - Bar/Restaurant Other Non – Owner Occupied CRE As of 06/30/21 3
19% 16% 11% 10% 10% 9% 7% 7% 2% 9% CRE Campground CRE Restaurant CRE Industrial/Manufacturing CRE Retail CRE Senior Living CRE Warehouse/Mini Storage CRE Mixed Use CRE Office Hotels Other Owner Occupied CRE As of 06/30/21 Portfolio Fundamentals 75% 14% 11% Wisconsin Minnesota Other By Geography As of 06/30/21 • 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 06/30/21 As of 03/31/21 $207 $205 425 420 $488 $487 Approximate Weighted Average LTV 48% 50% 2.1x 2.1x Weighted Average Seasoning In Months 32 31 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 4
Portfolio Fundamentals 61% 37% 2% Wisconsin Minnesota Other By Geography As of 06/30/21 100% Multi-family Multi-family As of 06/30/21 • 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 • 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 06/30/21 As of 03/31/21 $121 $119 104 102 $1.17 $1.17 67% 67% Approximate Weighted Average DSCR 1.8x 1.9x 21 18 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 5
83% 16% 1% Wisconsin Minnesota Other (1%) By Geography As of 06/30/21 18% 12% 11% 8%8% 6% 6% 5% 5% 4% 4% 4% 3% 6% Manufacturing Public Admin Transportation and Warehousing Wholesale Trade Construction Real Estate, Rental and Leasing Agriculture Retail Trade Administrative Support Education Services Health Care Other Services Finance and Insurance Other Commercial & Industrial As of 06/30/21 Portfolio Fundamentals • 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 06/30/21 As of 03/31/21 $100 $96 736 756 $137 $127 2.7x 2.7x 27 25 0.35% 0.42% Committed Line, if collateral 57 58 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 6
Portfolio Fundamentals 20% 16% 12%12% 8% 8% 8% 6% 10% Commercial 1-4 Family Construction CRE Multi-family CRE Senior Living CRE Warehouse/Mini Storage CRE Retail CRE Hospitality Other Land CRE Campground Other Commercial & Development As of 06/30/21 48% 37% 15% Wisconsin Minnesota Other By Geography As of 06/30/21 • 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 06/30/21 As of 03/31/2021 Loan Balance Outstanding In Millions $91 $90 Number of Loans 118 109 Average Loan Size In Thousands $769 $832 Approximate Weighted Average LTV 61% 56% Trailing 12 Month Net Charge-Offs 0.00% 0.00% Percent Utilized of Commitments 58% 63% Portfolio Characteristics - Construction & Development 7
39% 24% 22% 15% Crop Dairy Other Farming Other Agricultural As of 06/30/21 Portfolio Fundamentals 70% 27% 3% Wisconsin Minnesota Other By Geography As of 06/30/21 • 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 06/30/21 As of 03/31/21 $101 $98 568 611 $177 $162 1.8x 1.8x 33 34 0.12% 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 8
68% 20% 12% Flagged Historic Boutique Other Hotels As of 06/30/21 Portfolio Fundamentals 51% 32% 17% Minnesota Wisconsin Illinois By Geography As of 06/30/21 • Mainly experienced multi project hoteliers and guarantors with strong personal financial statements (net worth and liquidity) • Mainly flagged properties • Historic hotels are two hotels in Twin Cities area • Underwriting consistent with management's conservative approach to Investor CRE, emphasizing actual results in underwriting Hotel Loans As of 06/30/21 As of 03/31/21 $93 $93 32 32 $2.9 $2.9 53% 56% 2.3x 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 9
53% 16% 10% 8% 7% 6% Culver's - Limited Service Restaurants Micro Breweries Other National Limited Services Drinking Establishments Other Restaurants As of 06/30/21 Portfolio Fundamentals 79% 20% 1% Wisconsin Minnesota Other By Geography As of 06/30/21 • 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 • Micro Breweries concentrated in Eau Claire area • Lessors of RE include investor and owner-occupied structure Restaurant Loans As of 06/30/21 As of 03/31/2021 $39 $39 83 87 $464 $444 59% 57% 3.5x 3.5x 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 10
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. 11
Below is a breakdown of loans by risk rating as of June 30, 2021: 1 to 5 6 7 8 9 TOTAL Originated Loans: Commercial/Agricultural real estate: Commercial real estate $ 419,278 $ 506 $ 781 $ — $ — $ 420,565 Agricultural real estate 41,425 378 1,122 — — 42,925 Multi-family real estate 113,491 299 — — — 113,790 Construction and land development 86,108 — 3,478 — — 89,586 C&I/Agricultural operating: Commercial and industrial 77,758 16 3,009 — — 80,783 Agricultural operating 21,261 22 1,731 — — 23,014 Residential mortgage: Residential mortgage 69,549 — 3,416 — — 72,965 Purchased HELOC loans 4,715 — 234 — — 4,949 Consumer installment: Originated indirect paper 20,196 — 181 — — 20,377 Other consumer 10,250 — 46 — — 10,296 Originated loans before SBA PPP loans 864,031 1,221 13,998 — — 879,250 SBA PPP loans 74,925 — — — — 74,925 Total originated loans $ 938,956 $ 1,221 $ 13,998 $ — $ — $ 954,175 Acquired Loans: Commercial/Agricultural real estate: Commercial real estate $ 124,647 $ 10,876 $ 3,974 $ — $ — $ 139,497 Agricultural real estate 24,576 — 5,164 — — 29,740 Multi-family real estate 7,401 — — — — 7,401 Construction and land development 961 202 39 — — 1,202 C&I/Agricultural operating: Commercial and industrial 19,391 9 301 — — 19,701 Agricultural operating 4,482 — 411 — — 4,893 Residential mortgage: Residential mortgage 31,782 — 1,999 — — 33,781 Consumer installment: Other consumer 644 — 4 — — 648 Total acquired loans $ 213,884 $ 11,087 $ 11,892 $ — $ — $ 236,863 Total Loans: Commercial/Agricultural real estate: Commercial real estate $ 543,925 $ 11,382 $ 4,755 $ — $ — $ 560,062 Agricultural real estate 66,001 378 6,286 — — 72,665 Multi-family real estate 120,892 299 — — — 121,191 Construction and land development 87,069 202 3,517 — — 90,788 C&I/Agricultural operating: Commercial and industrial 97,149 25 3,310 — — 100,484 Agricultural operating 25,743 22 2,142 — — 27,907 Residential mortgage: Residential mortgage 101,331 — 5,415 — — 106,746 Purchased HELOC loans 4,715 — 234 — — 4,949 Consumer installment: Originated indirect paper 20,196 — 181 — — 20,377 Other consumer 10,894 — 50 — — 10,944 Gross Loans Before SBA PPP Loans $ 1,077,915 $ 12,308 $ 25,890 $ — $ — $ 1,116,113 SBA PPP loans 74,925 — — — — 74,925 Gross loans $ 1,152,840 $ 12,308 $ 25,890 $ — $ — $ 1,191,038 Less: Unearned net deferred fees and costs and loans in process (5,133) Unamortized discount on acquired loans (4,347) Allowance for loan losses (16,845) Loans receivable, net $ 1,164,713 12
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 13
Below is a breakdown of loans by risk rating as of December 31, 2020: 1 to 5 6 7 8 9 TOTAL Originated Loans: Commercial/Agricultural real estate: Commercial real estate $ 349,482 $ 543 $ 1,088 $ — $ — $ 351,113 Agricultural real estate 30,041 446 1,254 — — 31,741 Multi-family real estate 112,423 308 — — — 112,731 Construction and land development 87,763 — 3,478 — — 91,241 C&I/Agricultural operating: Commercial and industrial 91,474 20 3,796 — — 95,290 Agricultural operating 22,462 934 1,061 — — 24,457 Residential mortgage: Residential mortgage 82,097 7 4,179 — — 86,283 Purchased HELOC loans 5,959 — 301 — — 6,260 Consumer installment: Originated indirect paper 25,616 — 235 — — 25,851 Other consumer 11,986 — 70 — — 12,056 Originated loans before SBA PPP loans $ 819,303 $ 2,258 $ 15,462 $ — $ — $ 837,023 SBA PPP loans 123,702 — — — — 123,702 Total originated loans $ 943,005 $ 2,258 $ 15,462 $ — $ — $ 960,725 Acquired Loans: Commercial/Agricultural real estate: Commercial real estate $ 148,303 $ 4,274 $ 3,985 $ — $ — $ 156,562 Agricultural real estate 31,147 — 5,907 — — 37,054 Multi-family real estate 9,273 — 148 — — 9,421 Construction and land development 7,237 — 39 — — 7,276 C&I/Agricultural operating: Commercial and industrial 20,918 9 336 — — 21,263 Agricultural operating 7,838 — 490 — — 8,328 Residential mortgage: Residential mortgage 42,805 131 2,167 — — 45,103 Consumer installment: Other consumer 1,150 — 7 — — 1,157 Total acquired loans $ 268,671 $ 4,414 $ 13,079 $ — $ — $ 286,164 Total Loans: Commercial/Agricultural real estate: Commercial real estate $ 497,785 $ 4,817 $ 5,073 $ — $ — $ 507,675 Agricultural real estate 61,188 446 7,161 — — 68,795 Multi-family real estate 121,696 308 148 — — 122,152 Construction and land development 95,000 — 3,517 — — 98,517 C&I/Agricultural operating: Commercial and industrial 112,392 29 4,132 — — 116,553 Agricultural operating 30,300 934 1,551 — — 32,785 Residential mortgage: Residential mortgage 124,902 138 6,346 — — 131,386 Purchased HELOC loans 5,959 — 301 — — 6,260 Consumer installment: Originated indirect paper 25,616 — 235 — — 25,851 Other consumer 13,136 — 77 — — 13,213 Gross Loans Before SBA PPP Loans $ 1,087,974 $ 6,672 $ 28,541 $ — $ — $ 1,123,187 SBA PPP loans 123,702 — — — — 123,702 Gross loans $ 1,211,676 $ 6,672 $ 28,541 $ — $ — $ 1,246,889 Less: Unearned net deferred fees and costs and loans in process (4,245) Unamortized discount on acquired loans (5,063) Allowance for loan losses (17,043) Loans receivable, net $ 1,220,538 14
Below is a breakdown of loans by risk rating as of June 30, 2020: 1 to 5 6 7 8 9 TOTAL Originated Loans: Commercial/Agricultural real estate: Commercial real estate $ 308,633 $ 4,952 $ 805 $ — $ — $ 314,390 Agricultural real estate 32,592 469 2,077 — — 35,138 Multi-family real estate 90,617 — — — — 90,617 Construction and land development 85,511 5,867 3,478 — — 94,856 C&I/Agricultural operating: Commercial and industrial 76,447 661 3,261 — — 80,369 Agricultural operating 24,488 768 557 — — 25,813 Residential mortgage: Residential mortgage 91,649 — 4,015 — — 95,664 Purchased HELOC loans 6,534 — 327 — — 6,861 Consumer installment: Originated indirect paper 31,815 — 216 — — 32,031 Other consumer 14,082 — 93 — — 14,175 Originated loans before SBA PPP loans $ 762,368 $ 12,717 $ 14,829 $ — $ — $ 789,914 SBA PPP loans 137,330 — — — — 137,330 Total originated loans $ 899,698 $ 12,717 $ 14,829 $ — $ — $ 927,244 Acquired Loans: Commercial/Agricultural real estate: Commercial real estate $ 180,003 $ 6,699 $ 8,633 $ — $ — $ 195,335 Agricultural real estate 35,712 — 7,342 — — 43,054 Multi-family real estate 12,874 — 148 — — 13,022 Construction and land development 15,086 — 190 — — 15,276 C&I/Agricultural operating: Commercial and industrial 28,274 59 1,144 — — 29,477 Agricultural operating 10,723 80 1,321 — — 12,124 Residential mortgage: Residential mortgage 54,058 403 2,299 — — 56,760 Consumer installment: Other consumer 1,634 — 5 — — 1,639 Total acquired loans $ 338,364 $ 7,241 $ 21,082 $ — $ — $ 366,687 Total Loans: Commercial/Agricultural real estate: Commercial real estate $ 488,636 $ 11,651 $ 9,438 $ — $ — $ 509,725 Agricultural real estate 68,304 469 9,419 — — 78,192 Multi-family real estate 103,491 — 148 — — 103,639 Construction and land development 100,597 5,867 3,668 — — 110,132 C&I/Agricultural operating: Commercial and industrial 104,721 720 4,405 — — 109,846 Agricultural operating 35,211 848 1,878 — — 37,937 Residential mortgage: Residential mortgage 145,707 403 6,314 — — 152,424 Purchased HELOC loans 6,534 — 327 — — 6,861 Consumer installment: Originated indirect paper 31,815 — 216 — — 32,031 Other consumer 15,716 — 98 — — 15,814 Gross Loans Before SBA PPP Loans $ 1,100,732 $ 19,958 $ 35,911 $ — $ — $ 1,156,601 SBA PPP loans 137,330 — — — — 137,330 Gross loans $ 1,238,062 $ 19,958 $ 35,911 $ — $ — $ 1,293,931 Less: Unearned net deferred fees and costs and loans in process (5,369) Unamortized discount on acquired loans (7,387) Allowance for loan losses (13,373) Loans receivable, net $ 1,267,802 15
Allowance for Loan Losses (in thousand, except ratios) June 30, 2021 and Three Months Ended March 31, 2021 and Three Months Ended December 31, 2020 and Three Months Ended June 30, 2020 and Three Months Ended Allowance for loan losses (“ALL”), at beginning of period $ 16,860 $ 17,043 $ 14,836 $ 11,835 Loans charged off: Commercial/Agricultural real estate (51) (200) — — C&I/Agricultural operating (7) — (300) (246) Residential mortgage — — — — Consumer installment (15) (25) (23) (65) Total loans charged off (73) (225) (323) (311) Recoveries of loans previously charged off: Commercial/Agricultural real estate 1 5 1 76 C&I/Agricultural operating 33 15 11 — Residential mortgage 3 8 — 6 Consumer installment 21 14 18 17 Total recoveries of loans previously charged off: 58 42 30 99 Net loans charged off (“NCOs”) (15) (183) (293) (212) Additions to ALL via provision for loan losses charged to operations — — 2,500 1,750 ALL, at end of period $ 16,845 $ 16,860 $ 17,043 $ 13,373 Average outstanding loan balance $ 1,186,439 $ 1,213,562 $ 1,240,895 $ 1,266,273 Ratios: NCOs (annualized) to average loans 0.01 % 0.06 % 0.09 % 0.07 % 16
Nonaccrual Loans Roll forward (in thousands) Quarter Ended June 30, 2021 March 31, 2021 December 31, 2020 September 30, 2020 June 30, 2020 Balance, beginning of period $ 8,678 $ 10,747 $ 13,154 $ 14,787 $ 16,090 Additions 863 430 912 716 1,907 Acquired nonaccrual loans — — — — — Charge offs (58) (205) (2) (141) (175) Transfers to OREO — (45) — (172) — Return to accrual status (696) (291) — (165) (1,702) Payments received (712) (1,935) (3,317) (1,744) (1,292) Other, net — (23) — (127) (41) Balance, end of period $ 8,075 $ 8,678 $ 10,747 $ 13,154 $ 14,787 Other Real Estate Owned Roll forward (in thousands) Quarter Ended June 30, 2021 March 31, 2021 December 31, 2020 September 30, 2020 June 30, 2020 Balance, beginning of period $ 57 $ 156 $ 756 $ 692 $ 1,412 Loans transferred in — 45 — 172 — Branch properties transferred in 79 — — — — Sales (5) (142) (529) (86) (681) Write-downs — — (68) (26) (151) Other, net (2) (2) (3) 4 112 Balance, end of period $ 129 $ 57 $ 156 $ 756 $ 692 Troubled Debt Restructurings in Accrual Status (in thousands, except number of modifications) June 30, 2021 March 31, 2021 December 31, 2020 June 30, 2020 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 14 $ 4,841 14 $ 4,472 16 $ 4,695 19 $ 1,885 C&I/Agricultural Operating 6 3,804 5 4,042 4 3,836 5 1,199 Residential mortgage 40 3,040 44 3,195 43 3,162 39 2,981 Consumer installment 7 51 8 43 8 49 8 62 Total loans 67 $ 11,736 71 $ 11,752 71 $ 11,742 71 $ 6,127 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 17
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) June 30, 2021 March 31, 2021 December 31, 2020 September 30, 2020 June 30, 2020 Non-accretable difference, beginning of period $ 966 $ 1,087 $ 1,661 $ 3,355 $ 4,327 Additions to non-accretable difference for acquired purchased credit impaired loans — — — — — Non-accretable difference realized as interest from payoffs of purchased credit impaired loans (37) (58) (324) (130) (196) Transfers from non-accretable difference to accretable discount (106) (63) (50) (1,294) (741) Non-accretable difference used to reduce loan principal balance — — (200) (270) (35) Non-accretable difference transferred to OREO due to loan foreclosure — — — — — Non-accretable difference, end of period $ 823 $ 966 $ 1,087 $ 1,661 $ 3,355 The table below provides the changes in accretable discount for acquired loans. Accretable discount: (in thousands) June 30, 2021 March 31, 2021 December 31, 2020 September 30, 2020 June 30, 2020 Accretable discount, beginning of period $ 3,683 $ 3,976 $ 5,050 $ 4,032 $ 3,637 Additions to accretable discount for acquired performing loans — — — — — Accelerated accretion from payoff of certain purchased credit impaired loans with transferred non-accretable difference — (90) (872) — (99) Transfers from non-accretable difference to accretable discount 106 63 50 1,294 741 Scheduled accretion (265) (266) (252) (276) (247) Accretable discount, end of period $ 3,524 $ 3,683 $ 3,976 $ 5,050 $ 4,032 18
On November 30, 2020, a 5% stock repurchase program was authorized by the Board of Directors. Under this authorization, 198 thousand shares, or 1.8% of the shares outstanding, were repurchased during the quarter ended June 30, 2021. As of June 30, 2021, there were $10.7 million shares outstanding and an additional 36 thousand shares could be repurchased under the the program. Earnings Per Share (Amounts in thousands, except per share data, share count in thousands) Three Months Ended Six Months Ended June 30, 2021 March 31, 2021 June 30, 2020 June 30, 2021 June 30, 2020 Basic Net income attributable to common shareholders $ 4,706 $ 5,506 $ 3,069 $ 10,212 $ 5,675 Weighted average common shares outstanding 10,778 10,980 11,151 10,879 11,182 Basic earnings per share $ 0.44 $ 0.50 $ 0.28 $ 0.94 $ 0.51 Diluted Net income attributable to common shareholders $ 4,706 $ 5,506 $ 3,069 $ 10,212 $ 5,675 Weighted average common shares outstanding 10,778 10,980 11,151 10,879 11,182 Add: Dilutive stock options outstanding 12 6 — 8 1 Average shares and dilutive potential common shares 10,790 10,986 11,151 10,887 11,183 Diluted earnings per share $ 0.44 $ 0.50 $ 0.28 $ 0.94 $ 0.51 Common stock issued and outstanding 10,696 10,894 11,151 10,696 11,151 19
CITIZENS COMMUNITY FEDERAL N.A. Selected Capital Composition Highlights June 30, 2021 (unaudited) March 31, 2021 (unaudited) December 31, 2020 (audited) June 30, 2020 (unaudited) To Be Well Capitalized Under Prompt Corrective Action Provisions Tier 1 leverage ratio (to adjusted total assets) 9.7% 9.8% 9.9% 9.9% 5.0% Tier 1 capital (to risk weighted assets) 13.5% 14.3% 13.5% 12.9% 8.0% Common equity tier 1 capital (to risk weighted assets) 13.5% 14.3% 13.5% 12.9% 6.5% Total capital (to risk weighted assets) 14.7% 15.5% 14.7% 14.0% 10.0% CITIZENS COMMUNITY BANCORP, INC. Selected Capital Composition Highlights June 30, 2021 (unaudited) March 31, 2021 (unaudited) December 31, 2020 (audited) June 30, 2020 (unaudited) For Capital Adequacy Purposes Tier 1 leverage ratio (to adjusted total assets) 7.5% 7.5% 7.7% 7.4% 4.0% Tier 1 capital (to risk weighted assets) 10.4% 11.0% 10.5% 9.7% 6.0% Common equity tier 1 capital (to risk weighted assets) 10.4% 11.0% 10.5% 9.7% 4.5% Total capital (to risk weighted assets) 14.2% 14.9% 14.3% 12.1% 8.0% 20