Citizens Community Bancorp Inc 8-K, filed Jan 31, 2022
Citizens Community Bancorp Inc. (CZWI)
8-K
2022-01-31
For: 2022-01-31
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Added on
July 04, 2026
About this 8-K
Citizens Community Bancorp Inc filed this 8-K on January 31, 2022.
Items reported
- Item 2.02: Financial results
- Item 8.01: Other events
- Item 9.01: Financial statements and exhibits
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): January 31, 2022
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation)
| (Commission File Number) | (I.R.S. Employer Identification No.) | |||||||
(Address and Zip Code of principal executive offices)
(Registrant's telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| 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:
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933. (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter.)
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition.
On January 31, 2022, Citizens Community Bancorp, Inc. (the “Company”) issued a press release announcing our financial results for the three and twelve months ended December 31, 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 January 27, 2022, the Board of Directors declared an annual cash dividend of $0.26 per share to holders of record as of February 14, 2022, payable on February 28, 2022.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits. The following exhibit is being furnished herewith:
| 104 | The cover page from this Current Report on Form 8-K in Inline XBRL (Extensible Business Reporting Language) | ||||
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| CITIZENS COMMUNITY BANCORP, INC. | ||||||||||||||
| Date: January 31, 2022 | By: | /s/ James S. Broucek | ||||||||||||
| James S. Broucek | ||||||||||||||
| Chief Financial Officer | ||||||||||||||
EXHIBIT 99.1
Citizens Community Bancorp, Inc. Earnings Per Share Increase 81%
to $0.58 Per Share in 4Q21 from 4Q20;
2021 Record Annual Earnings of $21.3 Million;
Quarterly Loan Growth of $83 Million Excluding PPP Loan Paydowns;
2022 Annual Dividend Increase of 13% to $0.26 Per Share
EAU CLAIRE, WI, January 31, 2022 - Citizens Community Bancorp, Inc. (the “Company”) (Nasdaq: CZWI), the parent company of Citizens Community Federal N.A. (the “Bank” or “CCFBank”), today reported earnings of $6.1 million and earnings per diluted share of $0.58 for the quarter ended December 31, 2021, compared to $5.0 million and $0.47 per diluted share for the quarter ended September 30, 2021, and $3.6 million and $0.32 per diluted share for the quarter ended December 31, 2020, respectively. Net income as adjusted (non-GAAP)1 was $6.1 million and $0.58 per diluted share for the fourth quarter of 2021, compared to net income as adjusted of $5.0 million and $0.47 per diluted share for the preceding quarter, and $3.7 million and $0.33 per diluted share for the fourth quarter one year ago. For the fiscal year ended December 31, 2021, earnings increased 67% to a record $21.3 million, or $1.98 per diluted share compared to earnings of $12.7 million or $1.14 per diluted share, for the fiscal year ended December 31, 2020.
The Company’s fourth quarter 2021 operating results reflected the following changes from the third quarter of 2021: (1) increase in loan interest income due to loan growth and the resulting increase in the loan portfolio, partially offset by lower net accretion of SBA PPP fees and purchase accretion; (2) lower deposit costs; (3) an increase in net gains on the sale of investment securities; and (4) a slight increase in compensation expense of $0.3 million largely due to higher incentive compensation based on performance, including loan growth.
Book value per share was $16.27 at December 31, 2021, compared to $15.77 at September 30, 2021, and $14.52 at December 31, 2020. Tangible book value per share (non-GAAP)5 was $12.90 at December 31, 2021, compared to $12.37 at September 30, 2021, and $11.18 at December 31, 2020. Book value per share increased $1.75 over the past 12 months, a 12.1% increase from December 31, 2020. Tangible book value per share increased $1.72 over the past 12 months, a 15.4% increase from December 31, 2020. These increases were net of the Company’s payment of the annual shareholder dividend in the first quarter of 2021 of $0.23 per share.
“We experienced a second consecutive quarter of exceptional loan growth in a period that typically shows decelerating business demand. However, our key markets are very strong with unemployment below 2%, which drove commercial real estate, multi-family and commercial development lending opportunities and growth. Our Ag based rural communities are also very healthy. SBA PPP loan forgiveness exceeded 95% of originations at year end. The reduction in cash balances at the Fed boosted our net interest margin and continued stability in asset quality was achieved. Expenses were well managed with compensation increasing due to higher loan production and net income incentives. As the year ended, loan pipelines had softened and some payoff activity expected in Q4 slipped into 2022,” said Stephen Bianchi, Chairman, President and Chief Executive Officer.
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December 31, 2021 Highlights: (as of or for the 3-month period ended December 31, 2021 compared to September 30, 2021 and December 31, 2020.)
•Quarterly earnings of $6.1 million, or $0.58 per diluted share for the fourth quarter ended December 31, 2021, were the highest quarterly earnings in the Company’s history and up modestly from the quarter ended September 30, 2021 earnings of $5.0 million or $0.47 per diluted share, and increased from the quarter ended December 31, 2020 earnings of $3.6 million or $0.32 per diluted share. Fiscal 2021 earnings were up 67% and exceeded fiscal 2020’s previous record earnings. Year-over-year earnings for the fiscal year ended December 31, 2021, were $21.3 million, or $1.98 per share compared to $12.7 million, or $1.14 per share for the fiscal year ended December 31, 2020.
•Total loans, exclusive of SBA PPP loans, increased $83.4 million, or 6.8% for the quarter ended December 31, 2021. Meanwhile, cash and investments declined $81.3 million during the quarter ended December 31, 2021. The Company sold $28.6 million of investments, most of which were 100% risk weighted for regulatory capital purposes, to help fund higher yielding loan growth and improve risk-based capital ratios. The reduction of $20.8 million in deposits this quarter was largely due to the withdrawal of temporary deposits by certain commercial depositors, who placed the net proceeds from sales of assets/businesses on deposit with the Bank the prior quarter, along with maturing certificates of deposit that were neither renewed nor converted to non-maturity deposits. Total assets decreased slightly in the quarter to $1.74 billion from $1.75 billion.
•Stockholders’ equity as a percent of total assets was 9.82% at December 31, 2021, compared to 9.46% at September 30, 2021. Tangible common equity (“TCE”) as a percent of tangible assets (non-GAAP)5 was 7.95% at December 31, 2021, compared to 7.58% at September 30, 2021. Record quarterly income and a modest decrease in assets drove the growth in the TCE ratio. Risk-based capital ratios remained flat, as risk-based capital generated from our net income and investment sales offset the impact of loan growth.
•As of December 31, 2021, approximately 373 thousand shares remain available for repurchase under the share repurchase authorization. “We continue to balance the positive effect on earnings per share accretion with the need for capital to support loan growth and the impact on the TCE ratio and regulatory capital ratios. Maintaining our risk-based capital ratio led to very modest stock buybacks in the quarter. The Company had a net reduction in shares outstanding of 554 thousand due to the buyback in 2021,” said James Broucek, Executive Vice President and CFO.
•No loan loss provision was realized during the quarters ended December 31, 2021 and September 30, 2021, due to lower CARES Act Section 4013 deferrals, low net charge-off or low net recoveries, decreases in criticized assets and improving economic conditions in our markets. Our two MSA unemployment rates were under 2% for November 2021, which ranks in the lowest 10% of all United States MSA and down from the 4% range seen in November 2020. This has led to improving trends for businesses most impacted by the pandemic and allowed the Company to reduce its general economic Q-Factor allocation in its allowance calculation. 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 may allow further reductions in this economic Q-Factor.
•The Bank’s COVID-19 related modifications under Section 4013 of the CARES Act decreased to $6.6 million, or 0.5% of gross loans at December 31, 2021, versus $20.6 million, or 1.6% of gross loans at September 30, 2021. At December 31, 2021, hotel industry sector loans represent $6.0 million of the approved deferrals.
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•The allowance for loan losses on originated loans, excluding SBA PPP loans, decreased to 1.43% at December 31, 2021, from 1.54% at September 30, 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. The allowance for loan losses to total loans decreased to 1.29% at December 31, 2021, down from 1.35% at September 30, 2021, and 1.38% at December 31, 2020. Additionally, loans resulting from Bank acquisitions were effectively marked to market value at the time of their acquisition and were also excluded from this reserve calculation.
•Nonperforming assets increased $1.1 million to $13.2 million at December 31, 2021, compared to $12.1 million one quarter earlier. This increase was due to a transfer of a closed acquired bank branch to OREO, on which we have a purchase agreement from a non-financial institution supporting the carrying value of $1.4 million. The Bank was able to construct a new, smaller facility that supports the Bank’s needs on this site.
•Substandard loans decreased $4.3 million to $22.8 million at December 31, 2021, compared to $27.1 million at September 30, 2021. The decrease was largely due to the payoff of a $3.0 million accruing substandard TDR loan.
•On January 27, 2022, the Board of Directors approved a 13% increase in the annual cash dividend to $0.26 per share. The dividend will be payable on February 28, 2022 to the shareholders of record on February 14, 2022.
Balance Sheet and Asset Quality
Total assets decreased $13.8 million during the quarter to $1.74 billion at December 31, 2021, compared to $1.75 billion at September 30, 2021. The modest decline was due to lower deposit levels, which reduced excess liquidity.
Securities available for sale decreased $31.3 million during the quarter ended December 31, 2021 to $203.1 million, from $234.4 million at September 30, 2021. This decrease was primarily due to the sale of $28.6 million of securities, primarily consisting of lower yielding trust preferred securities issued by large bank holding companies, and senior debt of large bank holding companies along with the amortization on agency securities. The decrease was partially offset by $6.7 million in purchases of subordinated debt issued by banks.
Securities held to maturity increased $3.4 million to $71.1 million during the quarter ended December 31, 2021, from $67.7 million at September 30, 2021, primarily due to a net increase in agency mortgage-backed securities as purchases exceeded principal reductions.
Loans receivable increased by $62.3 million to $1.311 billion at December 31, 2021, from $1.249 billion as of September 30, 2021. The originated loan portfolio, before SBA PPP loans, increased $101.6 million in the quarter. The growth was largely in commercial real estate and multifamily loans, with agricultural and C&I loans also showing modest growth. Acquired loans decreased by $18.3 million and total SBA PPP loans decreased $22.5 million during the current quarter.
The allowance for loan losses was $16.9 million at December 31, 2021, representing 1.29% of total loans receivable compared to $16.8 million at September 30, 2021, representing 1.35% of total loans receivable. Approximately 15% of the loan portfolio, excluding SBA loans at December 31, 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 allocated to originated loans as a percent of originated loans excluding SBA PPP loans was 1.43% at December 31, 2021, compared to 1.54% at September 30, 2021, with the decrease due to growth in the originated loan portfolio. For the quarter ended December 31, 2021, the Bank had modest net recoveries of $81 thousand.
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Allowance for Loan Losses Percentages
(in thousands, except ratios)
| December 31, 2021 | September 30, 2021 | June 30, 2021 | December 31, 2020 | |||||||||||||||||||||||
| Originated loans, net of deferred fees and costs | $ | 1,107,555 | $ | 1,006,159 | $ | 877,534 | $ | 835,769 | ||||||||||||||||||
| SBA PPP loans, net of deferred fees | 8,457 | 29,753 | 71,508 | 120,711 | ||||||||||||||||||||||
| Acquired loans, net of unamortized discount | 194,951 | 212,742 | 232,516 | 281,101 | ||||||||||||||||||||||
| Loans, end of period | $ | 1,310,963 | $ | 1,248,654 | $ | 1,181,558 | $ | 1,237,581 | ||||||||||||||||||
| SBA PPP loans, net of deferred fees | (8,457) | (29,753) | (71,508) | (120,711) | ||||||||||||||||||||||
| Loans, net of SBA PPP loans and deferred fees | $ | 1,302,506 | $ | 1,218,901 | $ | 1,110,050 | $ | 1,116,870 | ||||||||||||||||||
| Allowance for loan losses allocated to originated loans | $ | 15,830 | $ | 15,505 | $ | 15,059 | $ | 14,819 | ||||||||||||||||||
| Allowance for loan losses allocated to other loans | 1,083 | 1,327 | 1,786 | 2,224 | ||||||||||||||||||||||
| Allowance for loan losses | $ | 16,913 | $ | 16,832 | $ | 16,845 | $ | 17,043 | ||||||||||||||||||
| ALL as a percentage of loans, end of period | 1.29 | % | 1.35 | % | 1.43 | % | 1.38 | % | ||||||||||||||||||
| ALL as a percentage of loans, net of SBA PPP loans and deferred fees | 1.30 | % | 1.38 | % | 1.52 | % | 1.53 | % | ||||||||||||||||||
| ALL allocated to originated loans as a percentage of originated loans, net of deferred fees and costs | 1.43 | % | 1.54 | % | 1.72 | % | 1.77 | % | ||||||||||||||||||
Nonperforming assets increased to $13.2 million or 0.76% of total assets at December 31, 2021, compared to $12.1 million or 0.69% of total assets at September 30, 2021. This increase was due to the addition of $1.4 million in OREO related to the transfer of a closed acquired branch facility at its carrying value, which is supported by a current purchase agreement. The Bank was able to build and open a more appropriately sized branch on this site in the fourth quarter. Included in nonperforming assets at December 31, 2021, are $5.3 million of nonperforming loans acquired during recent whole-bank acquisitions and $1.4 million of OREO related to recent whole-bank acquisitions. Originated nonperforming assets were $6.5 million, or 0.37% of total assets for the most recent quarter. Over the past year, total criticized loans decreased 22% from $35.2 million at December 31, 2020, to $27.4 million at December 31, 2021. In the fourth quarter, a $3.0 million accruing substandard TDR loan was paid in full.
| (in thousands) | ||||||||||||||||||||||||||||||||
| December 31, 2021 | September 30, 2021 | June 30, 2021 | March 31, 2021 | December 31, 2020 | ||||||||||||||||||||||||||||
| Special mention loan balances | $ | 4,536 | $ | 2,548 | $ | 12,308 | $ | 13,659 | $ | 6,672 | ||||||||||||||||||||||
| Substandard loan balances | 22,817 | 27,137 | 25,890 | 26,064 | 28,541 | |||||||||||||||||||||||||||
| Criticized loans, end of period | $ | 27,353 | $ | 29,685 | $ | 38,198 | $ | 39,723 | $ | 35,213 | ||||||||||||||||||||||
Deposits decreased $20.8 million to $1.388 billion at December 31, 2021, from $1.408 billion at September 30, 2021. As previously mentioned, the reduction in deposits was largely due to commercial depositors, who temporarily placed the net proceeds from sales of assets/businesses on deposit with the Bank the previous quarter and withdrew the sale proceeds during the current quarter. Certificates of deposit decreased $22.5 million in the fourth quarter with some of those maturing deposits moving to interest-bearing non-maturity deposits. The decrease in certificates of deposit was due to the Company choosing not to match higher rate local retail certificate competition, with some of these matured certificates being transferred to interest-bearing non-maturity deposits.
Review of Operations
Net interest income was $14.4 million for the fourth quarter ended December 31, 2021, compared to $13.7 million for the third quarter ended September 30, 2021, and $13.4 million for the quarter ended December 31, 2020. Compared to the third quarter, net interest income benefited from increases in: (1) average loan balances, due to strong loan growth;
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(2) $0.3 million of non-recurring loan interest income; and (3) lower deposit costs, partially offset by lower accretion on SBA PPP debt forgiveness of $0.6 million.
The net interest margin (“NIM”) increased to 3.50% in the fourth quarter ended December 31, 2021, compared to 3.34% for the third quarter ended September 30, 2021, and decreased from 3.51% for the quarter ended December 31, 2020. The increase in NIM from the third quarter is largely due to the growth in the higher yielding loan portfolio replacing lower yielding investment securities and lower yielding cash, approximately 8 basis points of one time loan interest income and lower deposit and borrowing costs. These positive influences on NIM were offset by lower net accretion of SBA PPP loans and purchase accretion.
In comparison to the quarter ended December 31, 2020, the current quarter NIM of 3.50% benefited from: (1) 30 basis points due to lower deposit costs; (2) 10 basis point improvement from replacing lower yielding cash; and (3) 4 basis points from increased SBA PPP net loan fee accretion. This increase was partially offset by decreases in NIM largely due to lower loan and investment yields due to reductions in market rates, and the increases in the balances of lower yielding investments.
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 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| December 31, 2021 | September 30, 2021 | June 30, 2021 | March 31, 2021 | December 31, 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 | $ | 14,384 | 3.50 | % | $ | 13,688 | 3.34 | % | $ | 12,831 | 3.22 | % | $ | 12,764 | 3.31 | % | $ | 13,372 | 3.51 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Less non-accretable difference realized as interest from payoff of purchased credit impaired (“PCI”) loans | $ | (2) | — | % | $ | (8) | — | % | $ | (37) | (0.01) | % | $ | (58) | (0.02) | % | $ | (324) | (0.08) | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Less accelerated accretion from payoff of certain PCI loans with transferred non-accretable differences | $ | (200) | (0.05) | % | $ | (12) | — | % | $ | — | — | % | $ | (90) | (0.02) | % | $ | (872) | (0.23) | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Less scheduled accretion interest | $ | (264) | (0.06) | % | $ | (261) | (0.06) | % | $ | (265) | (0.07) | % | $ | (266) | (0.07) | % | $ | (252) | (0.07) | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Without loan purchase accretion | $ | 13,918 | 3.39 | % | $ | 13,407 | 3.28 | % | $ | 12,529 | 3.14 | % | $ | 12,350 | 3.20 | % | $ | 11,924 | 3.13 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Less SBA PPP net loan fee accretion | $ | (1,251) | (0.30) | % | $ | (1,878) | (0.46) | % | $ | (1,309) | (0.33) | % | $ | (1,750) | (0.45) | % | $ | (985) | (0.26) | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Without SBA PPP purchase and net loan fee accretion | $ | 12,667 | 3.09 | % | $ | 11,529 | 2.82 | % | $ | 11,220 | 2.81 | % | $ | 10,600 | 2.75 | % | $ | 10,939 | 2.87 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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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 | — | — | 47,467 | 1,770 | 47,467 | 1,770 | ||||||||||||||||||||||||||||||||
| Less: 2021 SBA PPP loan forgiveness and fee accretion | (52,238) | (1,706) | — | (44) | (52,238) | (1,750) | ||||||||||||||||||||||||||||||||
| SBA PPP loans, March 31, 2021 | 71,464 | 1,285 | 47,467 | 1,726 | 118,931 | 3,011 | ||||||||||||||||||||||||||||||||
| 2021 SBA PPP loan originations | — | — | 8,323 | 1,715 | 8,323 | 1,715 | ||||||||||||||||||||||||||||||||
| Less: 2021 SBA PPP loan forgiveness and fee accretion | (50,057) | (977) | (2,272) | (332) | (52,329) | (1,309) | ||||||||||||||||||||||||||||||||
| SBA PPP loans, June 30, 2021 | 21,407 | 308 | 53,518 | $ | 3,109 | 74,925 | 3,417 | |||||||||||||||||||||||||||||||
| 2021 SBA PPP loan originations | — | — | 64 | 9 | 64 | 9 | ||||||||||||||||||||||||||||||||
| Less: 2021 SBA PPP loan forgiveness and fee accretion | (18,286) | (279) | (25,402) | (1,599) | (43,688) | (1,878) | ||||||||||||||||||||||||||||||||
| SBA PPP Loans, September 30, 2021 | 3,121 | 29 | 28,180 | 1,519 | 31,301 | 1,548 | ||||||||||||||||||||||||||||||||
| 2021 SBA PPP loan originations | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
| Less: 2021 SBA PPP loan forgiveness and fee accretion | (993) | (25) | (21,553) | (1,226) | (22,546) | (1,251) | ||||||||||||||||||||||||||||||||
| SBA PPP Loans, December 31, 2021 | $ | 2,128 | $ | 4 | $ | 6,627 | $ | 293 | $ | 8,755 | $ | 297 | ||||||||||||||||||||||||||
The Bank continued to manage deposit interest rates, primarily as interest rates on new and renewed certificates of deposit were lower than the previous quarter. At December 31, 2021, the Bank had approximately $64 million of certificate of deposit accounts (“CD’s”) maturing in the first quarter of 2022 with a weighted average cost of approximately 1.50% and $73 million of CD’s maturing in the second quarter of 2022 with a weighted average cost of approximately 1.50%. For all of 2022, there is approximately $179 million of maturing certificate of deposit accounts with a weighted average cost of approximately 1.35%. The approximate weighted average cost of new certificates in the fourth quarter of 2021 was below 0.3%.
Loan loss provisions were zero for the quarters ended December 31, 2021 and September 30, 2021, and $2.5 million for the quarter ended December 31, 2020. No loan loss provision was realized during the quarters ended December 31, 2021, and September 30, 2021, due to lower CARES Act Section 4013 deferrals, low net charge-off or recovery activity, decreases in criticized assets and improving economic conditions in our markets from the last quarter of 2020. Continued improving economic conditions in our markets, as evidenced by unemployment rates below 2% in our two largest population centers, have resulted in improving overall economic trends for businesses. For the twelve-months ended December 31, 2021, provision for loan losses was zero compared to $7.75 million for the twelve months ended December 31, 2020. For the twelve months ended December 31, 2020, the qualitative factor impact on the provision for loan losses expense due to the impact of the pandemic was an increase of approximately $4.8 million, with the remaining provision split due to loan growth and changes in credit quality.
Non-interest income increased to $4.4 million in the quarter ended December 31, 2021, compared to $3.4 million in the quarter ended September 30, 2021, and decreased from $4.8 million in the quarter ended December 31, 2020. The increase in the fourth quarter compared to the third quarter was largely due to an increase in gain on sale of investment securities of $0.9 million and a $0.3 million increase in gain on sale of loans. The sale of securities helped fund loan growth and decreased 100% risk-weighted AFS investment securities. Relative to the comparable quarter one year earlier, non-interest income was lower as a result of the following factors: (1) lower gain on sale of loans; (2) lower
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loan servicing income; and (3) lower loan fees and service charges. These decreases were partially offset by higher gains on the sale of investment securities.
Total non-interest expense increased $0.2 million in the fourth quarter of 2021 to $10.5 million, compared to $10.3 million for the quarter ended September 30, 2021, and decreased from $10.8 million for the quarter ended December 31, 2020. The increase from the third quarter was largely due to: (1) an increase in compensation, as incentives increased based on performance, including strong loan origination; (2) an increase in advertising, marketing and public relations as the Bank provided contributions to support community projects; and (3) higher mortgage servicing rights expensed due to lower reversals of previously recorded MSR impairment in the fourth quarter of $0.15 million compared to $0.38 million in the third quarter. The increases were partially offset by lower data processing expenses due to one-time credits recognized in the fourth quarter. The decrease in non-interest expense from the fourth quarter of 2020 was due to the reversal of MSR impairment in the fourth quarter of 2021 and a modest MSR impairment recorded in the fourth quarter of 2020. This was partially offset by $0.6 million of higher compensation in the current quarter due to higher incentives discussed above which more than offset the reduction in full time equivalent employees from a year ago.
Provisions for income taxes increased to $2.2 million in the fourth quarter of 2021 from the third quarter of 2021 at $1.8 million, due to higher pre-tax income as the effective tax rate for both current year quarters was 26.7%. The effective tax rate was 25.9% for the comparable prior year quarter.
These financial results are preliminary until the Form 10-K is filed in March 2022.
About the Company
Citizens Community Bancorp, Inc. (NASDAQ: “CZWI”) is the holding company of the Bank, a national bank based in Altoona, Wisconsin, currently serving customers primarily in Wisconsin and Minnesota through 25 branch locations. Its primary markets include the Chippewa Valley Region in Wisconsin, the Twin Cities and Mankato markets in Minnesota, and various rural communities around these areas. The Bank offers traditional community banking services to businesses, ag operators and consumers, including residential mortgage loans.
Cautionary Statement Regarding Forward-Looking Statements
Certain statements contained in this release are considered “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may be identified using forward-looking words or phrases such as “anticipate,” “believe,” “could,” “expect,” “estimates,” “intend,” “may,” “on pace,” “preliminary,” “planned,” “potential,” “should,” “will,” “would” or the negative of those terms or other words of similar meaning. Such forward-looking statements in this release are inherently subject to many uncertainties arising in the operations and business environment of the Company and the Bank. These uncertainties include 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
7
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)
8
CITIZENS COMMUNITY BANCORP, INC.
Consolidated Balance Sheets
(in thousands, except shares and per share data)
| December 31, 2021 (unaudited) | September 30, 2021 (unaudited) | December 31, 2020 (audited) | ||||||||||||||||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 47,691 | $ | 102,341 | $ | 119,440 | ||||||||||||||||||||||||||||||||
| Other interest-bearing deposits | 1,511 | 1,512 | 3,752 | |||||||||||||||||||||||||||||||||||
| Securities available for sale “AFS” | 203,068 | 234,425 | 144,233 | |||||||||||||||||||||||||||||||||||
| Securities held to maturity “HTM” | 71,141 | 67,739 | 43,551 | |||||||||||||||||||||||||||||||||||
| Equity investments | 1,328 | 327 | 200 | |||||||||||||||||||||||||||||||||||
| Other investments | 15,305 | 14,965 | 14,948 | |||||||||||||||||||||||||||||||||||
| Loans receivable | 1,310,963 | 1,248,654 | 1,237,581 | |||||||||||||||||||||||||||||||||||
| Allowance for loan losses | (16,913) | (16,832) | (17,043) | |||||||||||||||||||||||||||||||||||
| Loans receivable, net | 1,294,050 | 1,231,822 | 1,220,538 | |||||||||||||||||||||||||||||||||||
| Loans held for sale | 6,670 | 1,675 | 3,075 | |||||||||||||||||||||||||||||||||||
| Mortgage servicing rights, net | 4,161 | 4,082 | 3,252 | |||||||||||||||||||||||||||||||||||
| Office properties and equipment, net | 21,169 | 21,730 | 21,165 | |||||||||||||||||||||||||||||||||||
| Accrued interest receivable | 3,916 | 4,882 | 5,652 | |||||||||||||||||||||||||||||||||||
| Intangible assets | 3,898 | 4,297 | 5,494 | |||||||||||||||||||||||||||||||||||
| Goodwill | 31,498 | 31,498 | 31,498 | |||||||||||||||||||||||||||||||||||
| Foreclosed and repossessed assets, net | 1,408 | 4 | 197 | |||||||||||||||||||||||||||||||||||
| Bank owned life insurance (“BOLI”) | 24,312 | 24,149 | 23,684 | |||||||||||||||||||||||||||||||||||
| Other assets | 8,502 | 8,029 | 8,416 | |||||||||||||||||||||||||||||||||||
| TOTAL ASSETS | $ | 1,739,628 | $ | 1,753,477 | $ | 1,649,095 | ||||||||||||||||||||||||||||||||
| Liabilities and Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||||
| Liabilities: | ||||||||||||||||||||||||||||||||||||||
| Deposits | $ | 1,387,535 | $ | 1,408,315 | $ | 1,295,256 | ||||||||||||||||||||||||||||||||
| Federal Home Loan Bank (“FHLB”) advances | 111,527 | 111,512 | 123,498 | |||||||||||||||||||||||||||||||||||
| Other borrowings | 58,426 | 58,400 | 58,328 | |||||||||||||||||||||||||||||||||||
| Other liabilities | 11,274 | 9,324 | 11,449 | |||||||||||||||||||||||||||||||||||
| Total liabilities | 1,568,762 | 1,587,551 | 1,488,531 | |||||||||||||||||||||||||||||||||||
| Stockholders’ equity: | ||||||||||||||||||||||||||||||||||||||
| Common stock— $0.01 par value, authorized 30,000,000; 10,502,442; 10,518,885 and 11,056,349 shares issued and outstanding, respectively | 105 | 105 | 111 | |||||||||||||||||||||||||||||||||||
| Additional paid-in capital | 119,925 | 119,929 | 126,154 | |||||||||||||||||||||||||||||||||||
| Retained earnings | 50,675 | 44,660 | 32,809 | |||||||||||||||||||||||||||||||||||
| Accumulated other comprehensive income | 161 | 1,232 | 1,490 | |||||||||||||||||||||||||||||||||||
| Total stockholders’ equity | 170,866 | 165,926 | 160,564 | |||||||||||||||||||||||||||||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 1,739,628 | $ | 1,753,477 | $ | 1,649,095 | ||||||||||||||||||||||||||||||||
Note: Certain items previously reported were reclassified for consistency with the current presentation.
9
CITIZENS COMMUNITY BANCORP, INC.
Consolidated Statements of Operations
(in thousands, except per share data)
| Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||||||||||||||||
| December 31, 2021 (unaudited) | September 30, 2021 (unaudited) | December 31, 2020 (unaudited) | December 31, 2021 (unaudited) | December 31, 2020 (audited) | ||||||||||||||||||||||||||||||||||
| Interest and dividend income: | ||||||||||||||||||||||||||||||||||||||
| Interest and fees on loans | $ | 15,158 | $ | 14,537 | $ | 15,463 | $ | 58,172 | $ | 59,763 | ||||||||||||||||||||||||||||
| Interest on investments | 1,604 | 1,638 | 1,052 | 5,863 | 4,764 | |||||||||||||||||||||||||||||||||
| Total interest and dividend income | 16,762 | 16,175 | 16,515 | 64,035 | 64,527 | |||||||||||||||||||||||||||||||||
| Interest expense: | ||||||||||||||||||||||||||||||||||||||
| Interest on deposits | 1,261 | 1,354 | 1,958 | 5,850 | 10,000 | |||||||||||||||||||||||||||||||||
| Interest on FHLB and FRB borrowed funds | 388 | 389 | 428 | 1,572 | 1,814 | |||||||||||||||||||||||||||||||||
| Interest on other borrowed funds | 729 | 744 | 757 | 2,946 | 2,458 | |||||||||||||||||||||||||||||||||
| Total interest expense | 2,378 | 2,487 | 3,143 | 10,368 | 14,272 | |||||||||||||||||||||||||||||||||
| Net interest income before provision for loan losses | 14,384 | 13,688 | 13,372 | 53,667 | 50,255 | |||||||||||||||||||||||||||||||||
| Provision for loan losses | — | — | 2,500 | — | 7,750 | |||||||||||||||||||||||||||||||||
| Net interest income after provision for loan losses | 14,384 | 13,688 | 10,872 | 53,667 | 42,505 | |||||||||||||||||||||||||||||||||
| Non-interest income: | ||||||||||||||||||||||||||||||||||||||
| Service charges on deposit accounts | 470 | 463 | 496 | 1,726 | 1,832 | |||||||||||||||||||||||||||||||||
| Interchange income | 577 | 600 | 520 | 2,354 | 2,029 | |||||||||||||||||||||||||||||||||
| Loan servicing income | 762 | 842 | 1,014 | 3,322 | 4,158 | |||||||||||||||||||||||||||||||||
| Gain on sale of loans | 1,268 | 1,014 | 2,108 | 5,399 | 6,693 | |||||||||||||||||||||||||||||||||
| Loan fees and service charges | 158 | 118 | 342 | 705 | 1,383 | |||||||||||||||||||||||||||||||||
| Insurance commission income | — | — | — | — | 475 | |||||||||||||||||||||||||||||||||
| Net gains (losses) on investment securities | 879 | 73 | 13 | 1,224 | 110 | |||||||||||||||||||||||||||||||||
| Net gain on sale of acquired business lines | — | — | — | — | 432 | |||||||||||||||||||||||||||||||||
| Settlement proceeds | — | — | — | — | 131 | |||||||||||||||||||||||||||||||||
| Other | 293 | 338 | 277 | 1,094 | 1,205 | |||||||||||||||||||||||||||||||||
| Total non-interest income | 4,407 | 3,448 | 4,770 | 15,824 | 18,448 | |||||||||||||||||||||||||||||||||
| Non-interest expense: | ||||||||||||||||||||||||||||||||||||||
| Compensation and related benefits | 5,987 | 5,718 | 5,409 | 22,723 | 22,256 | |||||||||||||||||||||||||||||||||
| Occupancy | 1,384 | 1,313 | 1,417 | 5,327 | 5,523 | |||||||||||||||||||||||||||||||||
| Data processing | 1,186 | 1,582 | 1,384 | 5,560 | 5,193 | |||||||||||||||||||||||||||||||||
| Amortization of intangible assets | 399 | 399 | 399 | 1,596 | 1,622 | |||||||||||||||||||||||||||||||||
| Mortgage servicing rights expense, net | 163 | 37 | 720 | 191 | 3,050 | |||||||||||||||||||||||||||||||||
| Advertising, marketing and public relations | 409 | 220 | 165 | 986 | 967 | |||||||||||||||||||||||||||||||||
| FDIC premium assessment | 156 | 148 | 148 | 551 | 584 | |||||||||||||||||||||||||||||||||
| Professional services | 350 | 328 | 420 | 1,542 | 1,757 | |||||||||||||||||||||||||||||||||
| Gains on repossessed assets, net | (50) | (3) | (64) | (199) | (259) | |||||||||||||||||||||||||||||||||
| Other | 541 | 578 | 828 | 2,255 | 2,980 | |||||||||||||||||||||||||||||||||
| Total non-interest expense | 10,525 | 10,320 | 10,826 | 40,532 | 43,673 | |||||||||||||||||||||||||||||||||
| Income before provision for income taxes | 8,266 | 6,816 | 4,816 | 28,959 | 17,280 | |||||||||||||||||||||||||||||||||
| Provision for income taxes | 2,209 | 1,819 | 1,246 | 7,693 | 4,555 | |||||||||||||||||||||||||||||||||
| Net income attributable to common stockholders | $ | 6,057 | $ | 4,997 | $ | 3,570 | $ | 21,266 | $ | 12,725 | ||||||||||||||||||||||||||||
| Per share information: | ||||||||||||||||||||||||||||||||||||||
| Basic earnings | $ | 0.58 | $ | 0.47 | $ | 0.32 | $ | 1.98 | $ | 1.14 | ||||||||||||||||||||||||||||
| Diluted earnings | $ | 0.58 | $ | 0.47 | $ | 0.32 | $ | 1.98 | $ | 1.14 | ||||||||||||||||||||||||||||
| Cash dividends paid | $ | — | $ | — | $ | — | $ | 0.23 | $ | 0.21 | ||||||||||||||||||||||||||||
| Book value per share at end of period | $ | 16.27 | $ | 15.77 | $ | 14.52 | $ | 16.27 | $ | 14.52 | ||||||||||||||||||||||||||||
| Tangible book value per share at end of period (non-GAAP) | $ | 12.90 | $ | 12.37 | $ | 11.18 | $ | 12.90 | $ | 11.18 | ||||||||||||||||||||||||||||
Note: Certain items previously reported were reclassified for consistency with the current presentation.
10
Reconciliation of GAAP Net Income and Net Income as Adjusted (non-GAAP)
(in thousands, except per share data)
| Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||||||||||||||||
| December 31, 2021 | September 30, 2021 | December 31, 2020 | December 31, 2021 | December 31, 2020 | ||||||||||||||||||||||||||||||||||
| GAAP pretax income | $ | 8,266 | $ | 6,816 | $ | 4,816 | $ | 28,959 | $ | 17,280 | ||||||||||||||||||||||||||||
| Branch closure costs (1) | — | — | 165 | — | 165 | |||||||||||||||||||||||||||||||||
| Net gain on sale of acquired business lines (2) | — | — | — | — | (432) | |||||||||||||||||||||||||||||||||
| Settlement proceeds (3) | — | — | — | — | (131) | |||||||||||||||||||||||||||||||||
| FHLB borrowings prepayment fee (4) | — | — | — | 102 | — | |||||||||||||||||||||||||||||||||
| Pretax income as adjusted (5) | 8,266 | 6,816 | 4,981 | 29,061 | 16,882 | |||||||||||||||||||||||||||||||||
| Provision for income tax on net income as adjusted (6) | 2,209 | 1,819 | 1,290 | 7,722 | 4,457 | |||||||||||||||||||||||||||||||||
| Net income as adjusted (non-GAAP) (5) | $ | 6,057 | $ | 4,997 | $ | 3,691 | $ | 21,339 | $ | 12,425 | ||||||||||||||||||||||||||||
| GAAP diluted earnings per share, net of tax | $ | 0.58 | $ | 0.47 | $ | 0.32 | $ | 1.98 | $ | 1.14 | ||||||||||||||||||||||||||||
| Branch closure costs, net of tax | — | — | 0.01 | — | 0.01 | |||||||||||||||||||||||||||||||||
| Net gain on sale of acquired business lines | — | — | — | — | (0.03) | |||||||||||||||||||||||||||||||||
| Settlement proceeds | — | — | — | — | (0.01) | |||||||||||||||||||||||||||||||||
| FHLB borrowings prepayment fee | — | — | — | 0.01 | — | |||||||||||||||||||||||||||||||||
| Diluted earnings per share, as adjusted, net of tax (non-GAAP) | $ | 0.58 | $ | 0.47 | $ | 0.33 | $ | 1.99 | $ | 1.11 | ||||||||||||||||||||||||||||
| Average diluted shares outstanding | 10,516,130 | 10,622,595 | 11,128,628 | 10,726,539 | 11,161,811 | |||||||||||||||||||||||||||||||||
(1) Branch closure costs include severance pay recorded in compensation and benefits, accelerated depreciation expense and lease termination fees included in occupancy and other costs included in other non-interest expense in the consolidated statement of operations.
(2) Net gain on sale of acquired business lines resulted from (1) the sale of Wells Insurance Agency and (2) the termination and sale of the wealth management business line sales contract acquired in a former acquisition.
(3) 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.
(4) 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.
(5) 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.
(6) Provision for income tax on net income as adjusted is calculated at our effective tax rate for each respective period presented.
11
| Loan Composition (in thousands) | December 31, 2021 | September 30, 2021 | June 30, 2021 | December 31, 2020 | ||||||||||||||||||||||
| Originated Loans: | ||||||||||||||||||||||||||
| Commercial/Agricultural real estate: | ||||||||||||||||||||||||||
| Commercial real estate | $ | 578,395 | $ | 508,540 | $ | 420,565 | $ | 351,113 | ||||||||||||||||||
| Agricultural real estate | 52,372 | 49,082 | 42,925 | 31,741 | ||||||||||||||||||||||
| Multi-family real estate | 174,050 | 150,094 | 113,790 | 112,731 | ||||||||||||||||||||||
| Construction and land development | 78,613 | 84,399 | 89,586 | 91,241 | ||||||||||||||||||||||
| C&I/Agricultural operating: | ||||||||||||||||||||||||||
| Commercial and industrial | 107,937 | 90,581 | 80,783 | 95,290 | ||||||||||||||||||||||
| Agricultural operating | 26,202 | 25,390 | 23,014 | 24,457 | ||||||||||||||||||||||
| Residential mortgage: | ||||||||||||||||||||||||||
| Residential mortgage | 63,855 | 68,986 | 72,965 | 86,283 | ||||||||||||||||||||||
| Purchased HELOC loans | 3,871 | 3,921 | 4,949 | 6,260 | ||||||||||||||||||||||
| Consumer installment: | ||||||||||||||||||||||||||
| Originated indirect paper | 15,971 | 17,689 | 20,377 | 25,851 | ||||||||||||||||||||||
| Other consumer | 8,473 | 9,414 | 10,296 | 12,056 | ||||||||||||||||||||||
| Originated loans before SBA PPP loans | 1,109,739 | 1,008,096 | 879,250 | 837,023 | ||||||||||||||||||||||
| SBA PPP loans | 8,755 | 31,301 | 74,925 | 123,702 | ||||||||||||||||||||||
| Total originated loans | $ | 1,118,494 | $ | 1,039,397 | $ | 954,175 | $ | 960,725 | ||||||||||||||||||
| Acquired Loans: | ||||||||||||||||||||||||||
| Commercial/Agricultural real estate: | ||||||||||||||||||||||||||
| Commercial real estate | $ | 120,070 | $ | 129,784 | $ | 139,497 | $ | 156,562 | ||||||||||||||||||
| Agricultural real estate | 26,123 | 27,552 | 29,740 | 37,054 | ||||||||||||||||||||||
| Multi-family real estate | 4,299 | 5,928 | 7,401 | 9,421 | ||||||||||||||||||||||
| Construction and land development | 907 | 1,139 | 1,202 | 7,276 | ||||||||||||||||||||||
| C&I/Agricultural operating: | ||||||||||||||||||||||||||
| Commercial and industrial | 14,230 | 16,554 | 19,701 | 21,263 | ||||||||||||||||||||||
| Agricultural operating | 5,386 | 4,541 | 4,893 | 8,328 | ||||||||||||||||||||||
| Residential mortgage: | ||||||||||||||||||||||||||
| Residential mortgage | 27,135 | 30,795 | 33,781 | 45,103 | ||||||||||||||||||||||
| Consumer installment: | ||||||||||||||||||||||||||
| Other consumer | 401 | 516 | 648 | 1,157 | ||||||||||||||||||||||
| Total acquired loans | $ | 198,551 | $ | 216,809 | $ | 236,863 | $ | 286,164 | ||||||||||||||||||
| Total Loans: | ||||||||||||||||||||||||||
| Commercial/Agricultural real estate: | ||||||||||||||||||||||||||
| Commercial real estate | $ | 698,465 | $ | 638,324 | $ | 560,062 | $ | 507,675 | ||||||||||||||||||
| Agricultural real estate | 78,495 | 76,634 | 72,665 | 68,795 | ||||||||||||||||||||||
| Multi-family real estate | 178,349 | 156,022 | 121,191 | 122,152 | ||||||||||||||||||||||
| Construction and land development | 79,520 | 85,538 | 90,788 | 98,517 | ||||||||||||||||||||||
| C&I/Agricultural operating: | ||||||||||||||||||||||||||
| Commercial and industrial | 122,167 | 107,135 | 100,484 | 116,553 | ||||||||||||||||||||||
| Agricultural operating | 31,588 | 29,931 | 27,907 | 32,785 | ||||||||||||||||||||||
| Residential mortgage: | ||||||||||||||||||||||||||
| Residential mortgage | 90,990 | 99,781 | 106,746 | 131,386 | ||||||||||||||||||||||
| Purchased HELOC loans | 3,871 | 3,921 | 4,949 | 6,260 | ||||||||||||||||||||||
| Consumer installment: | ||||||||||||||||||||||||||
| Originated indirect paper | 15,971 | 17,689 | 20,377 | 25,851 | ||||||||||||||||||||||
| Other consumer | 8,874 | 9,930 | 10,944 | 13,213 | ||||||||||||||||||||||
| Gross loans before SBA PPP loans | 1,308,290 | 1,224,905 | 1,116,113 | 1,123,187 | ||||||||||||||||||||||
| SBA PPP loans | 8,755 | 31,301 | 74,925 | 123,702 | ||||||||||||||||||||||
| Gross loans | $ | 1,317,045 | $ | 1,256,206 | $ | 1,191,038 | $ | 1,246,889 | ||||||||||||||||||
| Unearned net deferred fees and costs and loans in process | (2,482) | (3,486) | (5,133) | (4,245) | ||||||||||||||||||||||
| Unamortized discount on acquired loans | (3,600) | (4,066) | (4,347) | (5,063) | ||||||||||||||||||||||
| Total loans receivable | $ | 1,310,963 | $ | 1,248,654 | $ | 1,181,558 | $ | 1,237,581 | ||||||||||||||||||
12
Nonperforming Originated and Acquired Assets
(in thousands, except ratios)
| December 31, 2021 and Three Months Ended | September 30, 2021 and Three Months Ended | June 30, 2021 and Three Months Ended | December 31, 2020 and Three Months Ended | |||||||||||||||||||||||
| Nonperforming assets: | ||||||||||||||||||||||||||
| Originated nonperforming assets: | ||||||||||||||||||||||||||
| Nonaccrual loans | $ | 6,448 | $ | 6,408 | $ | 2,420 | $ | 3,649 | ||||||||||||||||||
| Accruing loans past due 90 days or more | 63 | 295 | 88 | 415 | ||||||||||||||||||||||
| Total originated nonperforming loans (“NPL”) | 6,511 | 6,703 | 2,508 | 4,064 | ||||||||||||||||||||||
| Other real estate owned (“OREO”) | — | — | — | 63 | ||||||||||||||||||||||
| Other collateral owned | 2 | 2 | 16 | 41 | ||||||||||||||||||||||
| Total originated nonperforming assets (“NPAs”) | $ | 6,513 | $ | 6,705 | $ | 2,524 | $ | 4,168 | ||||||||||||||||||
| Acquired nonperforming assets: | ||||||||||||||||||||||||||
| Nonaccrual loans | $ | 5,217 | $ | 5,298 | $ | 5,655 | $ | 7,098 | ||||||||||||||||||
| Accruing loans past due 90 days or more | 97 | 130 | 454 | 171 | ||||||||||||||||||||||
| Total acquired nonperforming loans (“NPL”) | 5,314 | 5,428 | 6,109 | 7,269 | ||||||||||||||||||||||
| Other real estate owned (“OREO”) | 1,406 | 2 | 129 | 93 | ||||||||||||||||||||||
| Other collateral owned | — | — | — | — | ||||||||||||||||||||||
| Total acquired nonperforming assets (“NPAs”) | $ | 6,720 | $ | 5,430 | $ | 6,238 | $ | 7,362 | ||||||||||||||||||
| Total nonperforming assets (“NPAs”) | $ | 13,233 | $ | 12,135 | $ | 8,762 | $ | 11,530 | ||||||||||||||||||
| Loans, end of period | $ | 1,310,963 | $ | 1,248,654 | $ | 1,181,558 | $ | 1,237,581 | ||||||||||||||||||
| Total assets, end of period | $ | 1,739,628 | $ | 1,753,477 | $ | 1,714,472 | $ | 1,649,095 | ||||||||||||||||||
| Ratios: | ||||||||||||||||||||||||||
| Originated NPLs to total loans | 0.50 | % | 0.54 | % | 0.21 | % | 0.33 | % | ||||||||||||||||||
| Acquired NPLs to total loans | 0.41 | % | 0.43 | % | 0.52 | % | 0.59 | % | ||||||||||||||||||
| Originated NPAs to total assets | 0.37 | % | 0.38 | % | 0.15 | % | 0.25 | % | ||||||||||||||||||
| Acquired NPAs to total assets | 0.39 | % | 0.31 | % | 0.36 | % | 0.45 | % | ||||||||||||||||||
Nonperforming Total Assets
(in thousand, except ratios)
| December 31, 2021 and Three Months Ended | September 30, 2021 and Three Months Ended | June 30, 2021 and Three Months Ended | December 31, 2020 and Three Months Ended | |||||||||||||||||||||||||||||||||||
| Nonperforming assets: | ||||||||||||||||||||||||||||||||||||||
| Nonaccrual loans | ||||||||||||||||||||||||||||||||||||||
| Commercial real estate | $ | 5,374 | $ | 5,427 | $ | 1,027 | $ | 827 | ||||||||||||||||||||||||||||||
| Agricultural real estate | 3,490 | 3,567 | 3,716 | 5,084 | ||||||||||||||||||||||||||||||||||
| Commercial and industrial (“C&I”) | 298 | 311 | 313 | 357 | ||||||||||||||||||||||||||||||||||
| Agricultural operating | 993 | 1,063 | 1,163 | 1,872 | ||||||||||||||||||||||||||||||||||
| Residential mortgage | 1,433 | 1,263 | 1,768 | 2,451 | ||||||||||||||||||||||||||||||||||
| Consumer installment | 77 | 75 | 88 | 156 | ||||||||||||||||||||||||||||||||||
| Total nonaccrual loans | $ | 11,665 | $ | 11,706 | $ | 8,075 | $ | 10,747 | ||||||||||||||||||||||||||||||
| Accruing loans past due 90 days or more | 160 | 425 | 542 | 586 | ||||||||||||||||||||||||||||||||||
| Total nonperforming loans (“NPLs”) | 11,825 | 12,131 | 8,617 | 11,333 | ||||||||||||||||||||||||||||||||||
| Foreclosed and repossessed assets, net | 1,408 | 4 | 145 | 197 | ||||||||||||||||||||||||||||||||||
| Total nonperforming assets (“NPAs”) | $ | 13,233 | $ | 12,135 | $ | 8,762 | $ | 11,530 | ||||||||||||||||||||||||||||||
| Troubled Debt Restructurings (“TDRs”) | $ | 12,523 | $ | 15,689 | $ | 16,597 | $ | 18,477 | ||||||||||||||||||||||||||||||
| Nonaccrual TDRs | $ | 4,539 | $ | 4,324 | $ | 4,861 | $ | 6,735 | ||||||||||||||||||||||||||||||
| Loans, end of period | $ | 1,310,963 | $ | 1,248,654 | $ | 1,181,558 | $ | 1,237,581 | ||||||||||||||||||||||||||||||
| Total assets, end of period | $ | 1,739,628 | $ | 1,753,477 | $ | 1,714,472 | $ | 1,649,095 | ||||||||||||||||||||||||||||||
| Ratios: | ||||||||||||||||||||||||||||||||||||||
| NPLs to total loans | 0.90 | % | 0.97 | % | 0.73 | % | 0.92 | % | ||||||||||||||||||||||||||||||
| NPAs to total assets | 0.76 | % | 0.69 | % | 0.51 | % | 0.70 | % | ||||||||||||||||||||||||||||||
13
Deposit Composition
(in thousands)
| December 31, 2021 | September 30, 2021 | June 30, 2021 | December 31, 2020 | |||||||||||||||||||||||
| Non-interest bearing demand deposits | $ | 276,631 | $ | 280,611 | $ | 253,097 | $ | 238,348 | ||||||||||||||||||
| Interest bearing demand deposits | 396,231 | 381,315 | 375,005 | 301,764 | ||||||||||||||||||||||
| Savings accounts | 222,674 | 229,623 | 220,698 | 196,348 | ||||||||||||||||||||||
| Money market accounts | 288,985 | 291,242 | 263,390 | 245,549 | ||||||||||||||||||||||
| Certificate accounts | 203,014 | 225,524 | 259,036 | 313,247 | ||||||||||||||||||||||
| Total deposits | $ | 1,387,535 | $ | 1,408,315 | $ | 1,371,226 | $ | 1,295,256 | ||||||||||||||||||
Average balances, Interest Yields and Rates
(in thousands, except yields and rates)
| Three months ended December 31, 2021 | Three months ended September 30, 2021 | Three months ended December 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Average Balance | Interest Income/ Expense | Average Yield/ Rate (1) | Average Balance | Interest Income/ Expense | Average Yield/ Rate (1) | Average Balance | Interest Income/ Expense | Average Yield/ Rate (1) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Average interest earning assets: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 45,758 | $ | 15 | 0.13 | % | $ | 111,192 | $ | 50 | 0.18 | % | $ | 79,225 | $ | 21 | 0.11 | % | ||||||||||||||||||||||||||||||||||||||
| Loans receivable | 1,271,956 | 15,158 | 4.73 | % | 1,192,636 | 14,537 | 4.84 | % | 1,240,895 | 15,463 | 4.96 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Interest bearing deposits | 1,512 | 8 | 2.10 | % | 1,512 | 8 | 2.10 | % | 3,752 | 23 | 2.44 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Investment securities (1) | 296,444 | 1,404 | 1.88 | % | 303,325 | 1,412 | 1.85 | % | 176,802 | 824 | 1.85 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Other investments | 15,081 | 177 | 4.66 | % | 14,961 | 168 | 4.46 | % | 15,015 | 184 | 4.88 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Total interest earning assets (1) | $ | 1,630,751 | $ | 16,762 | 4.08 | % | $ | 1,623,626 | $ | 16,175 | 3.95 | % | $ | 1,515,689 | $ | 16,515 | 4.33 | % | ||||||||||||||||||||||||||||||||||||||
| Average interest bearing liabilities: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Savings accounts | $ | 217,460 | $ | 92 | 0.17 | % | $ | 216,304 | $ | 95 | 0.17 | % | $ | 187,474 | $ | 87 | 0.18 | % | ||||||||||||||||||||||||||||||||||||||
| Demand deposits | 384,477 | 259 | 0.27 | % | 392,080 | 280 | 0.28 | % | 285,001 | 200 | 0.28 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Money market accounts | 288,683 | 207 | 0.28 | % | 276,582 | 193 | 0.28 | % | 243,631 | 206 | 0.34 | % | ||||||||||||||||||||||||||||||||||||||||||||
| CD’s | 183,137 | 607 | 1.31 | % | 207,494 | 682 | 1.30 | % | 284,728 | 1,304 | 1.82 | % | ||||||||||||||||||||||||||||||||||||||||||||
| IRA’s | 38,453 | 96 | 0.99 | % | 39,525 | 104 | 1.04 | % | 41,493 | 161 | 1.54 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Total deposits | $ | 1,112,210 | $ | 1,261 | 0.45 | % | $ | 1,131,985 | $ | 1,354 | 0.47 | % | $ | 1,042,327 | $ | 1,958 | 0.75 | % | ||||||||||||||||||||||||||||||||||||||
| FHLB advances and other borrowings | 170,475 | 1,117 | 2.60 | % | 169,891 | 1,133 | 2.65 | % | 182,463 | 1,185 | 2.58 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Total interest bearing liabilities | $ | 1,282,685 | $ | 2,378 | 0.74 | % | $ | 1,301,876 | $ | 2,487 | 0.76 | % | $ | 1,224,790 | $ | 3,143 | 1.02 | % | ||||||||||||||||||||||||||||||||||||||
| Net interest income | $ | 14,384 | $ | 13,688 | $ | 13,372 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest rate spread | 3.34 | % | 3.19 | % | 3.31 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Net interest margin (1) | 3.50 | % | 3.34 | % | 3.51 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Average interest earning assets to average interest bearing liabilities | 1.27 | 1.25 | 1.24 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
(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 December 31, 2021, September 30, 2021 and December 31, 2020. The FTE adjustment to net interest income included in the rate calculations totaled $0, $1 and $0 thousand for the three months ended December 31, 2021, September 30, 2021 and December 31, 2020, respectively.
14
| Twelve months ended December 31, 2021 | Twelve months ended December 31, 2020 | |||||||||||||||||||||||||||||||||||||
| Average Balance | Interest Income/ Expense | Average Yield/ Rate (1) | Average Balance | Interest Income/ Expense | Average Yield/ Rate (1) | |||||||||||||||||||||||||||||||||
| Average interest earning assets: | ||||||||||||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 99,839 | $ | 122 | 0.12 | % | $ | 52,016 | $ | 162 | 0.31 | % | ||||||||||||||||||||||||||
| Loans receivable | 1,216,244 | 58,172 | 4.78 | % | 1,234,732 | 59,763 | 4.84 | % | ||||||||||||||||||||||||||||||
| Interest bearing deposits | 2,047 | 45 | 2.20 | % | 3,914 | 96 | 2.45 | % | ||||||||||||||||||||||||||||||
| Investment securities (1) | 271,715 | 5,009 | 1.84 | % | 174,396 | 3,789 | 2.17 | % | ||||||||||||||||||||||||||||||
| Other investments | 15,025 | 687 | 4.57 | % | 15,081 | 717 | 4.75 | % | ||||||||||||||||||||||||||||||
| Total interest earning assets (1) | $ | 1,604,870 | $ | 64,035 | 3.99 | % | $ | 1,480,139 | $ | 64,527 | 4.36 | % | ||||||||||||||||||||||||||
| Average interest bearing liabilities: | ||||||||||||||||||||||||||||||||||||||
| Savings accounts | $ | 212,867 | $ | 369 | 0.17 | % | $ | 174,184 | $ | 435 | 0.25 | % | ||||||||||||||||||||||||||
| Demand deposits | 367,103 | 1,047 | 0.29 | % | 268,311 | 1,065 | 0.40 | % | ||||||||||||||||||||||||||||||
| Money market accounts | 269,620 | 783 | 0.29 | % | 244,632 | 1,446 | 0.59 | % | ||||||||||||||||||||||||||||||
| CD’s | 224,708 | 3,200 | 1.42 | % | 316,264 | 6,325 | 2.00 | % | ||||||||||||||||||||||||||||||
| IRA’s | 39,699 | 451 | 1.14 | % | 42,039 | 729 | 1.73 | % | ||||||||||||||||||||||||||||||
| Total deposits | $ | 1,113,997 | $ | 5,850 | 0.53 | % | $ | 1,045,430 | $ | 10,000 | 0.96 | % | ||||||||||||||||||||||||||
| FHLB advances and other borrowings | 173,029 | 4,518 | 2.61 | % | 186,724 | 4,272 | 2.29 | % | ||||||||||||||||||||||||||||||
| Total interest bearing liabilities | $ | 1,287,026 | $ | 10,368 | 0.81 | % | $ | 1,232,154 | $ | 14,272 | 1.16 | % | ||||||||||||||||||||||||||
| Net interest income | $ | 53,667 | $ | 50,255 | ||||||||||||||||||||||||||||||||||
| Interest rate spread | 3.18 | % | 3.20 | % | ||||||||||||||||||||||||||||||||||
| Net interest margin (1) | 3.34 | % | 3.40 | % | ||||||||||||||||||||||||||||||||||
| Average interest earning assets to average interest bearing liabilities | 1.25 | 1.20 | ||||||||||||||||||||||||||||||||||||
(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 twelve months ended December 31, 2021 and December 31, 2020, respectively. The FTE adjustment to net interest income included in the rate calculations totaled $3 and $1 thousand for the twelve months ended December 31, 2021 and December 31, 2020, respectively.
15
The following table reports key financial metric ratios based on a net income and net income as adjusted basis:
| Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||
| December 31, 2021 | September 30, 2021 | December 31, 2020 | December 31, 2021 | December 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||
| Ratios based on net income: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Return on average assets (annualized) | 1.37 | % | 1.13 | % | 0.87 | % | 1.23 | % | 0.80 | % | ||||||||||||||||||||||||||||||||||||||||
| Return on average equity (annualized) | 14.29 | % | 12.00 | % | 8.93 | % | 12.97 | % | 8.29 | % | ||||||||||||||||||||||||||||||||||||||||
Return on average tangible common equity5 (annualized) | 18.13 | % | 15.34 | % | 11.67 | % | 16.64 | % | 11.04 | % | ||||||||||||||||||||||||||||||||||||||||
| Efficiency ratio | 56 | % | 60 | % | 60 | % | 58 | % | 64 | % | ||||||||||||||||||||||||||||||||||||||||
| Net interest margin with loan purchase accretion | 3.50 | % | 3.34 | % | 3.51 | % | 3.34 | % | 3.40 | % | ||||||||||||||||||||||||||||||||||||||||
| Net interest margin without loan purchase accretion | 3.39 | % | 3.28 | % | 3.13 | % | 3.25 | % | 3.15 | % | ||||||||||||||||||||||||||||||||||||||||
| Ratios based on net income as adjusted (non-GAAP): | ||||||||||||||||||||||||||||||||||||||||||||||||||
Return on average assets as adjusted2 (annualized) | 1.37 | % | 1.13 | % | 0.90 | % | 1.24 | % | 0.78 | % | ||||||||||||||||||||||||||||||||||||||||
Return on average equity as adjusted3 (annualized) | 14.29 | % | 12.00 | % | 9.24 | % | 13.01 | % | 8.09 | % | ||||||||||||||||||||||||||||||||||||||||
Return on average tangible common equity as adjusted5 (annualized) | 18.13 | % | 15.34 | % | 12.06 | % | 16.70 | % | 10.78 | % | ||||||||||||||||||||||||||||||||||||||||
Efficiency ratio4 as adjusted (non-GAAP) | 56 | % | 60 | % | 59 | % | 58 | % | 64 | % | ||||||||||||||||||||||||||||||||||||||||
Reconciliation of Return on Average Assets as Adjusted (non-GAAP)
(in thousands, except ratios)
| Three Months Ended | Twelve Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||
| December 31, 2021 | September 30, 2021 | December 31, 2020 | December 31, 2021 | December 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||
| GAAP earnings after income taxes | $ | 6,057 | $ | 4,997 | $ | 3,570 | $ | 21,266 | $ | 12,725 | |||||||||||||||||||||||||||||||||||||
| Net income as adjusted after income taxes (non-GAAP) (1) | $ | 6,057 | $ | 4,997 | $ | 3,691 | $ | 21,339 | $ | 12,425 | |||||||||||||||||||||||||||||||||||||
| Average assets | $ | 1,751,609 | $ | 1,748,065 | $ | 1,634,459 | $ | 1,722,483 | $ | 1,594,053 | |||||||||||||||||||||||||||||||||||||
| Return on average assets (annualized) | 1.37 | % | 1.13 | % | 0.87 | % | 1.23 | % | 0.80 | % | |||||||||||||||||||||||||||||||||||||
| Return on average assets as adjusted (non-GAAP) (annualized) | 1.37 | % | 1.13 | % | 0.90 | % | 1.24 | % | 0.78 | % | |||||||||||||||||||||||||||||||||||||
(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 | Twelve Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||
| December 31, 2021 | September 30, 2021 | December 31, 2020 | December 31, 2021 | December 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||
| GAAP earnings after income taxes | $ | 6,057 | $ | 4,997 | $ | 3,570 | $ | 21,266 | $ | 12,725 | ||||||||||||||||||||||||||||||||||||||||
| Net income as adjusted after income taxes (non-GAAP) (1) | $ | 6,057 | $ | 4,997 | $ | 3,691 | $ | 21,339 | $ | 12,425 | ||||||||||||||||||||||||||||||||||||||||
| Average equity | $ | 168,165 | $ | 165,203 | $ | 158,968 | $ | 163,987 | $ | 153,497 | ||||||||||||||||||||||||||||||||||||||||
| Return on average equity (annualized) | 14.29 | % | 12.00 | % | 8.93 | % | 12.97 | % | 8.29 | % | ||||||||||||||||||||||||||||||||||||||||
| Return on average equity as adjusted (non-GAAP) (annualized) | 14.29 | % | 12.00 | % | 9.24 | % | 13.01 | % | 8.09 | % | ||||||||||||||||||||||||||||||||||||||||
(1) See Reconciliation of GAAP Net Income and Net Income as Adjusted (non-GAAP)
16
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 | Twelve Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||
| December 31, 2021 | September 30, 2021 | December 31, 2020 | December 31, 2021 | December 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||
| Total stockholders’ equity | $ | 170,866 | $ | 165,926 | $ | 160,564 | $ | 170,866 | $ | 160,564 | ||||||||||||||||||||||||||||||||||||||||
| Less: Goodwill | (31,498) | (31,498) | (31,498) | (31,498) | (31,498) | |||||||||||||||||||||||||||||||||||||||||||||
| Less: Intangible assets | (3,898) | (4,297) | (5,494) | (3,898) | (5,494) | |||||||||||||||||||||||||||||||||||||||||||||
| Tangible common equity (non-GAAP) | $ | 135,470 | $ | 130,131 | $ | 123,572 | $ | 135,470 | $ | 123,572 | ||||||||||||||||||||||||||||||||||||||||
| Average tangible common equity (non-GAAP) | $ | 132,569 | $ | 129,208 | $ | 121,752 | $ | 127,793 | $ | 115,313 | ||||||||||||||||||||||||||||||||||||||||
| GAAP earnings after income taxes | $ | 6,057 | $ | 4,997 | $ | 3,570 | $ | 21,266 | $ | 12,725 | ||||||||||||||||||||||||||||||||||||||||
| Net income as adjusted after income taxes (non-GAAP) (1) | $ | 6,057 | $ | 4,997 | $ | 3,691 | $ | 21,339 | $ | 12,425 | ||||||||||||||||||||||||||||||||||||||||
| Return on average tangible common equity (annualized) | 18.13 | % | 15.34 | % | 11.67 | % | 16.64 | % | 11.04 | % | ||||||||||||||||||||||||||||||||||||||||
| Return on average tangible common equity as adjusted (non-GAAP) (annualized) | 18.13 | % | 15.34 | % | 12.06 | % | 16.70 | % | 10.78 | % | ||||||||||||||||||||||||||||||||||||||||
(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 | Twelve Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||
| December 31, 2021 | September 30, 2021 | December 31, 2020 | December 31, 2021 | December 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||
| Non-interest expense (GAAP) | $ | 10,525 | $ | 10,320 | $ | 10,826 | $ | 40,532 | $ | 43,673 | ||||||||||||||||||||||||||||||||||||||||
| Branch Closure Costs (1) | — | — | (165) | — | (165) | |||||||||||||||||||||||||||||||||||||||||||||
| FHLB borrowings prepayment fee (1) | — | — | — | (102) | — | |||||||||||||||||||||||||||||||||||||||||||||
| Non-interest expense as adjusted (non-GAAP) | 10,525 | 10,320 | 10,661 | 40,430 | 43,508 | |||||||||||||||||||||||||||||||||||||||||||||
| Non-interest income | 4,407 | 3,448 | 4,770 | 15,824 | 18,448 | |||||||||||||||||||||||||||||||||||||||||||||
| Net interest margin | 14,384 | 13,688 | 13,372 | 53,667 | 50,255 | |||||||||||||||||||||||||||||||||||||||||||||
| Efficiency ratio denominator (GAAP) | $ | 18,791 | $ | 17,136 | $ | 18,142 | $ | 69,491 | $ | 68,703 | ||||||||||||||||||||||||||||||||||||||||
| Net gain on acquired business lines (1) | — | — | — | — | (432) | |||||||||||||||||||||||||||||||||||||||||||||
| Settlement proceeds (1) | — | — | — | — | (131) | |||||||||||||||||||||||||||||||||||||||||||||
| Efficiency ratio denominator (non-GAAP) | $ | 18,791 | $ | 17,136 | $ | 18,142 | $ | 69,491 | $ | 68,140 | ||||||||||||||||||||||||||||||||||||||||
| Efficiency ratio (GAAP) | 56 | % | 60 | % | 60 | % | 58 | % | 64 | % | ||||||||||||||||||||||||||||||||||||||||
| Efficiency ratio as adjusted (non-GAAP) | 56 | % | 60 | % | 59 | % | 58 | % | 64 | % | ||||||||||||||||||||||||||||||||||||||||
(1) See Reconciliation of GAAP Net Income and Net Income as Adjusted (non-GAAP)
17
Reconciliation of tangible book value per share (non-GAAP)
(in thousands, except per share data)
| Tangible book value per share at end of period | December 31, 2021 | September 30, 2021 | December 31, 2020 | |||||||||||||||||||||||||||||||||||
| Total stockholders’ equity | $ | 170,866 | $ | 165,926 | $ | 160,564 | ||||||||||||||||||||||||||||||||
| Less: Goodwill | (31,498) | (31,498) | (31,498) | |||||||||||||||||||||||||||||||||||
| Less: Intangible assets | (3,898) | (4,297) | (5,494) | |||||||||||||||||||||||||||||||||||
| Tangible common equity (non-GAAP) | $ | 135,470 | $ | 130,131 | $ | 123,572 | ||||||||||||||||||||||||||||||||
| Ending common shares outstanding | 10,502,442 | 10,518,885 | 11,056,349 | |||||||||||||||||||||||||||||||||||
| Book value per share | $ | 16.27 | $ | 15.77 | $ | 14.52 | ||||||||||||||||||||||||||||||||
| Tangible book value per share (non-GAAP) | $ | 12.90 | $ | 12.37 | $ | 11.18 | ||||||||||||||||||||||||||||||||
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 | December 31, 2021 | September 30, 2021 | December 31, 2020 | |||||||||||||||||||||||||||||||||||
| Total stockholders’ equity | $ | 170,866 | $ | 165,926 | $ | 160,564 | ||||||||||||||||||||||||||||||||
| Less: Goodwill | (31,498) | (31,498) | (31,498) | |||||||||||||||||||||||||||||||||||
| Less: Intangible assets | (3,898) | (4,297) | (5,494) | |||||||||||||||||||||||||||||||||||
| Tangible common equity (non-GAAP) | $ | 135,470 | $ | 130,131 | $ | 123,572 | ||||||||||||||||||||||||||||||||
| Total Assets | $ | 1,739,628 | $ | 1,753,477 | $ | 1,649,095 | ||||||||||||||||||||||||||||||||
| Less: Goodwill | (31,498) | (31,498) | (31,498) | |||||||||||||||||||||||||||||||||||
| Less: Intangible assets | (3,898) | (4,297) | (5,494) | |||||||||||||||||||||||||||||||||||
| Tangible Assets (non-GAAP) | $ | 1,704,232 | $ | 1,717,682 | $ | 1,612,103 | ||||||||||||||||||||||||||||||||
| Total stockholders’ equity to total assets ratio | 9.82 | % | 9.46 | % | 9.74 | % | ||||||||||||||||||||||||||||||||
| Tangible common equity as a percent of tangible assets (non-GAAP) | 7.95 | % | 7.58 | % | 7.67 | % | ||||||||||||||||||||||||||||||||
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)”.
18
EXHIBIT 99.2 Earnings Release Supplement Fourth Quarter 2021
Citizens Community Bancorp, Inc. Table of Contents Cautionary Notes and Additional Disclosures COVID‐19 Related Loan Deferrals Non‐Owner Occupied CRE Owner Occupied CRE Multi‐family Commercial & Industrial Loans Construction & Development Loans Agricultural Real Estate & Operating Loans Hotel Loans Restaurant Loans Campground Loans Credit Quality/Risk Rating Descriptions Loans by Risk Rating as of December 31, 2021 Loans by Risk Rating as of September 30, 2021 Loans by Risk Rating as of December 31, 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 18 18 18 19 20 21 1
Cautionary Notes and Additional Disclosures DATES AND PERIODS PRESENTED In this earnings release financial supplement, unless otherwise noted, “20YY” refers to either the corresponding fiscal year-end date or the corresponding 12-months (i.e. fiscal year) then ended. “MMM-YY” refers to either the corresponding quarter-end date, or the corresponding three-month period then ended. CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS This earnings release financial supplement may contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. These statements include, but are not limited to, descriptions of the financial condition, results of operations, asset and credit quality trends, profitability, projected earnings, future plans, strategies and expectations of Citizens Community Bancorp, Inc. (“CZWI” or the “Company”) and its subsidiary, Citizens Community Federal, National Association (“CCFBank”). The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and is including this statement for purposes of complying with those safe harbor provisions. Forward-looking statements, which are based on certain assumptions of the Company, are generally identifiable by use of the words “believe,” “expect,” “estimates,” “intend,” “anticipate,” “estimate,” “project,” “on pace,” “seek,” “target,” “potential,” “focus,” “may,” “preliminary,” “could,” “should” or similar expressions. These forward-looking statements express management’s current expectations or forecasts of future events, and by their nature, are subject to risks and uncertainties. Therefore, there are a number of factors that might cause actual results to differ materially from those in such statements. These uncertainties include conditions in the financial markets and economic conditions generally; adverse impacts to the Company or CCFBank arising from the COVID-19 pandemic; 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 CCFBank; 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 herein or to update them to reflect events or circumstances occurring after the date hereof. 30 2
COVID-19 Related Loan Deferrals Dollars in Thousands COVID‐19 Deferrals Balance Number of Loans Commercial Deferrals Hotel Loans 5,953$ 1 Other Commercial Loans ‐ ‐ Total Commercial Deferrals 5,953 1 Residential Deferrals 671 5 Consumer Deferrals ‐ ‐ Total Deferrals 6,624$ 6 December 31, 2021 *Interest only deferral – borrower provided two years of principal and interest payments at time of deferral Commercial Loan Deferral Expiration by Quarter Balance Number of Loans Hotel Loans Quarter Ending March 31, 2022 $ 5,953* 1 Total Hotel Loans 5,953 1 Other Commercial Loans Quarter Ending March 31, 2022 ‐$ ‐ Total Other Commercial Loans ‐ ‐ Total Commercial Deferral Expirations 5,953$ 1 December 31, 2021 3
Portfolio Fundamentals 61% 35% 4% Wisconsin Minnesota Other By Geography As of 12/31/21 • 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 12/31/21 As of 09/30/21 $480 $426 762 753 $629 $566 Approximate Weighted Average LTV 62% 58% 2.2x 2.2x Weighted Average Seasoning In Months 22 23 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 25% 22% 11% 11% 10% 8% 5% 3% 2% 3% Hotel Investor Residential CRE ‐ Senior Living CRE ‐ Retail CRE ‐ Office CRE ‐ Warehouse/Mini Storage CRE ‐ Industrial/Manufacturing CRE ‐ Campground CRE ‐ Mixed Use Other Non – Owner Occupied CRE As of 12/31/21 4
25% 17% 11% 11% 10% 8% 6% 12% CRE Campground CRE Restaurant CRE Industrial/Manufacturing CRE Retail CRE Warehouse/Mini Storage CRE Mixed Use CRE Office Other Owner Occupied CRE As of 12/31/21 Portfolio Fundamentals 69% 12% 19% Wisconsin Minnesota Other By Geography As of 12/31/21 • 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 12/31/21 As of 09/30/21 $219 $212 426 421 $514 $504 Approximate Weighted Average LTV 48% 47% 2.2x 2.2x Weighted Average Seasoning In Months 29 29 0.00% 0.00% Approximate Weighted Average DSCR Trailing 12 Month Net Charge‐Offs Portfolio Characteristics ‐ Owner Occupied CRE Loan Balance Outstanding In Millions Number of Loans Average Loan Size In Thousands 5
Portfolio Fundamentals 62% 37% 1% Wisconsin Minnesota Other By Geography As of 12/31/21 100% Multi‐family Multi‐family As of 12/31/21 • 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 • Generally, term of 5‐10 years with 20 to 25‐year amortization (varies by new versus existing, size of market and sponsor strength) • Covenant for minimum DSC/Global DSC Multi-family As of 12/31/21 As of 09/30/21 $178 $156 111 111 $1.61 $1.41 68% 69% Approximate Weighted Average DSCR 1.9x 1.8x 17 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 6
85% 14% 1% Wisconsin Minnesota Other By Geography As of 12/31/21 20% 10% 10% 9%7% 7% 6% 6% 6% 5% 4% 3% 3% 4% Manufacturing Transportation and Warehousing Finance and Insurance Real Estate, Rental and Leasing Public Admin Wholesale Trade Construction Retail Trade Education Services Agriculture Administrative Support Health Care Other Services Other Commercial & Industrial As of 12/31/21 • 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 12/31/21 As of 09/30/21 $122 $107 714 730 $171 $147 5.3x 2.3x 31 30 ‐0.05% 0.28% Committed Line, if collateral 63 66 Approximate Weighted Average DSCR Weighted Average Seasoning In Months Trailing 12 Month Net Charge‐Offs Portfolio Characteristics ‐ Commercial & Industrial Loan Balance In Millions Number of Loans Average Loan Size In Thousands Portfolio Fundamentals 7
Portfolio Fundamentals 28% 21% 10% 9% 6% 6% 5% 15% Commercial 1‐4 Family Construction CRE Multi‐family CRE Campground Land CRE Warehouse/Mini Storage CRE Retail CRE Senior Living Other Commercial & Development As of 12/31/21 43% 30% 11% 16% Wisconsin Minnesota Iowa Other By Geography As of 12/31/21 • 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 12/31/21 As of 09/30/21 Loan Balance Outstanding In Millions $80 $86 Number of Loans 130 132 Average Loan Size In Thousands $612 $648 Approximate Weighted Average LTV 80% 78% Trailing 12 Month Net Charge‐Offs 0.00% 0.00% Percent Utilized of Commitments 44% 50% Portfolio Characteristics ‐ Construction & Development 8
40% 22% 22% 16% Crop Dairy Other Farming Other Agricultural As of 12/31/21 Portfolio Fundamentals 68% 29% 3% Wisconsin Minnesota Other By Geography As of 12/31/21 • 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 12/31/21 As of 09/30/21 $110 $107 564 568 $195 $188 1.8x 1.8x 31 31 0.16% 0.18% Approximate Weighted Average DSCR Weighted Average Seasoning In Months Trailing 12 Month Net Charge‐Offs Portfolio Characteristics ‐ Agricultural Loan Balance Outstanding In Millions Number of Loans Average Loan Size In Thousands 9
64% 33% 3% Limited Service Full Service Other Hotels As of 12/31/21 Portfolio Fundamentals 52% 36% 12% Minnesota Wisconsin Illinois By Geography As of 12/31/21 • Mainly experienced multi project hoteliers and guarantors with strong personal financial statements (net worth and liquidity) • Mainly flagged properties • Underwriting consistent with management's conservative approach to Investor CRE, emphasizing actual results in underwriting Hotel Loans As of 12/31/21 As of 09/30/21 $119 $109 33 31 $3.6 $3.5 57% 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 10
56% 12% 12% 8% 4% 3% 4% Culver's ‐ Limited Service Restaurants Micro Breweries Other National Limited Services Drinking Establishments Bowling Centers Other Restaurants As of 12/31/21 Portfolio Fundamentals 75% 20% 5% Wisconsin Minnesota Other By Geography As of 12/31/21 • 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 12/31/21 As of 09/30/21 $47 $41 76 80 $622 $518 54% 56% 3.6x 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 11
33% 36% 13% 5% 4% 9% 2021 2020 2019 2017 2016 Prior By Vintage As of 12/31/21 Portfolio Fundamentals 32% 13% 11%9% 7% 6% 5% 5% 12% Wisconsin Maryland Ohio Pennsylvania Kentucky Utah Iowa New Jersey Other By Geography As of 12/31/21 • Experienced multi‐unit operators and owner‐occupied franchised campgrounds (typically Jellystone Park) • Grounds offer a mix of camping, RV and cabin options with recreational amenities • Park locations within reasonable proximity of metropolitan areas and/or near national and state parks • Underwritten with recourse generally with 5‐10 year terms and 20 year amortization • Use of SBA 7a and 504, or other government guaranteed loan programs as appropriate • 20+ years of history through CCF acquisition with no charge‐off history Campground Loans As of 12/31/21 As of 09/30/21 $74 $83 48 49 $1.5 $1.7 44% 43% 1.8x 1.8x 0.00% 0.00% Portfolio Characteristics ‐ Campgrounds Approximate Weighted Average DSCR Trailing 12 Month Net Charge‐Offs Loan Balance Outstanding In Millions Number of Loans Average Loan Size In Millions Approximate Weighted Average LTV 12
Credit Quality/Risk Ratings: Management utilizes a numeric risk rating system to identify and quantify the Bank’s risk of loss within its loan portfolio. Ratings are initially assigned prior to funding the loan, and may be changed at any time as circumstances warrant. Ratings range from the highest to lowest quality based on factors that include measurements of ability to pay, collateral type and value, borrower stability and management experience. The Bank’s loan portfolio is presented below in accordance with the risk rating framework that has been commonly adopted by the federal banking agencies. The definitions of the various risk rating categories are as follows: 1 through 4 - Pass. A “Pass” loan means that the condition of the borrower and the performance of the loan is satisfactory or better. 5 - Watch. A “Watch” loan has clearly identifiable developing weaknesses that deserve additional attention from management. Weaknesses that are not corrected or mitigated, may jeopardize the ability of the borrower to repay the loan in the future. 6 - Special Mention. A “Special Mention” loan has one or more potential weakness that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or in the institution’s credit position in the future. 7 - Substandard. A “Substandard” loan is inadequately protected by the current net worth and paying capacity of the obligor or the collateral pledged, if any. Assets classified as substandard must have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. 8 - Doubtful. A “Doubtful” loan has all the weaknesses inherent in a Substandard loan with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. 9 - Loss. Loans classified as “Loss” are considered uncollectible, and their continuance as bankable assets is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value, and a partial recovery may occur in the future. 13
Below is a breakdown of loans by risk rating as of December 31, 2021: 1 to 5 6 7 8 9 TOTAL Originated Loans: Commercial/Agricultural real estate: Commercial real estate $ 572,724 $ 667 $ 5,004 $ — $ — $ 578,395 Agricultural real estate 50,834 1,267 271 — — 52,372 Multi-family real estate 173,760 290 — — — 174,050 Construction and land development 75,146 — 3,467 — — 78,613 C&I/Agricultural operating: Commercial and industrial 107,798 57 82 — — 107,937 Agricultural operating 23,935 764 1,503 — — 26,202 Residential mortgage: Residential mortgage 60,754 — 3,101 — — 63,855 Purchased HELOC loans 3,706 — 165 — — 3,871 Consumer installment: Originated indirect paper 15,818 — 153 — — 15,971 Other consumer 8,404 — 69 — — 8,473 Originated loans before SBA PPP loans $ 1,092,879 $ 3,045 $ 13,815 $ — $ — $ 1,109,739 SBA PPP loans 8,755 — — — — 8,755 Total originated loans $ 1,101,634 $ 3,045 $ 13,815 $ — $ — $ 1,118,494 Acquired Loans: Commercial/Agricultural real estate: Commercial real estate $ 116,839 $ 1,314 $ 1,917 $ — $ — $ 120,070 Agricultural real estate 21,051 — 5,072 — — 26,123 Multi-family real estate 4,299 — — — — 4,299 Construction and land development 735 172 — — — 907 C&I/Agricultural operating: Commercial and industrial 13,931 5 294 — — 14,230 Agricultural operating 4,936 — 450 — — 5,386 Residential mortgage: Residential mortgage 25,869 — 1,266 — — 27,135 Consumer installment: Other consumer 398 — 3 — — 401 Total acquired loans $ 188,058 $ 1,491 $ 9,002 $ — $ — $ 198,551 Total Loans: Commercial/Agricultural real estate: Commercial real estate $ 689,563 $ 1,981 $ 6,921 $ — $ — $ 698,465 Agricultural real estate 71,885 1,267 5,343 — — 78,495 Multi-family real estate 178,059 290 — — — 178,349 Construction and land development 75,881 172 3,467 — — 79,520 C&I/Agricultural operating: Commercial and industrial 121,729 62 376 — — 122,167 Agricultural operating 28,871 764 1,953 — — 31,588 Residential mortgage: Residential mortgage 86,623 — 4,367 — — 90,990 Purchased HELOC loans 3,706 — 165 — — 3,871 Consumer installment: Originated indirect paper 15,818 — 153 — — 15,971 Other consumer 8,802 — 72 — — 8,874 Gross Loans Before SBA PPP Loans $ 1,280,937 $ 4,536 $ 22,817 $ — $ — $ 1,308,290 SBA PPP loans 8,755 — — — — 8,755 Gross loans $ 1,289,692 $ 4,536 $ 22,817 $ — $ — $ 1,317,045 Less: Unearned net deferred fees and costs and loans in process (2,482) Unamortized discount on acquired loans (3,600) Allowance for loan losses (16,913) Loans receivable, net $ 1,294,050 14
Below is a breakdown of loans by risk rating as of September 30, 2021: 1 to 5 6 7 8 9 TOTAL Originated Loans: Commercial/Agricultural real estate: Commercial real estate $ 507,305 $ 300 $ 935 $ — $ — $ 508,540 Agricultural real estate 48,053 378 651 — — 49,082 Multi-family real estate 149,802 292 — — — 150,094 Construction and land development 76,366 — 8,033 — — 84,399 C&I/Agricultural operating: Commercial and industrial 87,481 16 3,084 — — 90,581 Agricultural operating 23,744 22 1,624 — — 25,390 Residential mortgage: Residential mortgage 65,733 — 3,253 — — 68,986 Purchased HELOC loans 3,756 — 165 — — 3,921 Consumer installment: Originated indirect paper 17,511 — 178 — — 17,689 Other consumer 9,344 — 70 — — 9,414 Originated loans before SBA PPP loans $ 989,095 $ 1,008 $ 17,993 $ — $ — $ 1,008,096 SBA PPP loans 31,301 — — — — 31,301 Total originated loans $ 1,020,396 $ 1,008 $ 17,993 $ — $ — $ 1,039,397 Acquired Loans: Commercial/Agricultural real estate: Commercial real estate $ 126,472 $ 1,342 $ 1,970 $ — $ — $ 129,784 Agricultural real estate 22,517 — 5,035 — — 27,552 Multi-family real estate 5,928 — — — — 5,928 Construction and land development 949 190 — — — 1,139 C&I/Agricultural operating: Commercial and industrial 16,243 8 303 — — 16,554 Agricultural operating 4,251 — 290 — — 4,541 Residential mortgage: Residential mortgage 29,253 — 1,542 — — 30,795 Consumer installment: Other consumer 512 — 4 — — 516 Total acquired loans $ 206,125 $ 1,540 $ 9,144 $ — $ — $ 216,809 Total Loans: Commercial/Agricultural real estate: Commercial real estate $ 633,777 $ 1,642 $ 2,905 $ — $ — $ 638,324 Agricultural real estate 70,570 378 5,686 — — 76,634 Multi-family real estate 155,730 292 — — — 156,022 Construction and land development 77,315 190 8,033 — — 85,538 C&I/Agricultural operating: Commercial and industrial 103,724 24 3,387 — — 107,135 Agricultural operating 27,995 22 1,914 — — 29,931 Residential mortgage: Residential mortgage 94,986 — 4,795 — — 99,781 Purchased HELOC loans 3,756 — 165 — — 3,921 Consumer installment: Originated indirect paper 17,511 — 178 — — 17,689 Other consumer 9,856 — 74 — — 9,930 Gross Loans Before SBA PPP Loans $ 1,195,220 $ 2,548 $ 27,137 $ — $ — $ 1,224,905 SBA PPP loans 31,301 — — — — 31,301 Gross loans $ 1,226,521 $ 2,548 $ 27,137 $ — $ — $ 1,256,206 Less: Unearned net deferred fees and costs and loans in process (3,486) Unamortized discount on acquired loans (4,066) Allowance for loan losses (16,832) Loans receivable, net $ 1,231,822 15
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 16
Allowance for Loan Losses (in thousand, except ratios) December 31, 2021 and Three Months Ended September 30, 2021 and Three Months Ended June 30, 2021 and Three Months Ended December 31, 2020 and Three Months Ended Allowance for loan losses (“ALL”), at beginning of period $ 16,832 $ 16,845 $ 16,860 $ 14,836 Loans charged off: Commercial/Agricultural real estate — — (51) — C&I/Agricultural operating — — (7) (300) Residential mortgage — — — — Consumer installment (5) (36) (15) (23) Total loans charged off (5) (36) (73) (323) Recoveries of loans previously charged off: Commercial/Agricultural real estate 18 4 1 1 C&I/Agricultural operating 62 13 33 11 Residential mortgage 1 1 3 — Consumer installment 5 5 21 18 Total recoveries of loans previously charged off: 86 23 58 30 Net loans charged off (“NCOs”) 81 (13) (15) (293) Additions to ALL via provision for loan losses charged to operations — — — 2,500 ALL, at end of period $ 16,913 $ 16,832 $ 16,845 $ 17,043 Average outstanding loan balance $ 1,271,956 $ 1,192,636 $ 1,186,439 $ 1,240,895 Ratios: NCOs (annualized) to average loans (0.03) % — % 0.01 % 0.09 % 17
Nonaccrual Loans Roll forward (in thousands) Quarter Ended December 31, 2021 September 30, 2021 June 30, 2021 March 31, 2021 December 31, 2020 Balance, beginning of period $ 11,706 $ 8,075 $ 8,678 $ 10,747 $ 13,154 Additions 428 4,859 863 430 912 Acquired nonaccrual loans — — — — — Charge offs (1) (24) (58) (205) (2) Transfers to OREO (19) — — (45) — Return to accrual status (30) — (696) (291) — Payments received (422) (1,202) (712) (1,935) (3,317) Other, net 3 (2) — (23) — Balance, end of period $ 11,665 $ 11,706 $ 8,075 $ 8,678 $ 10,747 Other Real Estate Owned Roll forward (in thousands) Quarter Ended December 31, 2021 September 30, 2021 June 30, 2021 March 31, 2021 December 31, 2020 Balance, beginning of period $ 2 $ 129 $ 57 $ 156 $ 756 Loans transferred in 46 — — 45 — Branch properties transferred in 1,360 — 79 — — Sales — (124) (5) (142) (529) Write-downs — — — — (68) Other, net (2) (3) (2) (2) (3) Balance, end of period $ 1,406 $ 2 $ 129 $ 57 $ 156 Troubled Debt Restructurings in Accrual Status (in thousands, except number of modifications) December 31, 2021 September 30, 2021 June 30, 2021 December 31, 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 11 $ 4,618 12 $ 4,711 14 $ 4,841 16 $ 4,695 C&I/Agricultural Operating 3 649 4 3,685 6 3,804 4 3,836 Residential mortgage 36 2,681 39 2,925 40 3,040 43 3,162 Consumer installment 6 36 6 44 7 51 8 49 Total loans 56 $ 7,984 61 $ 11,365 67 $ 11,736 71 $ 11,742 18
Acquired loans represent much of the reduction in non-performing loans and classified loans. The table below shows the changes in the Bank’s non-accretable difference on purchased credit impaired loans. The second table below shows the changes in the Bank’s accretable loan discount which was established at each acquisition. The Bank has transferred the non-accretable difference on purchased credit impaired loans to accretable discount as collateral coverage improved sufficiently, due to a combination of principal paydowns and/or improving collateral positions. This transferred non-accretable difference to accretable discount is accreted over the remaining maturity of the loan or until payoff, whichever is shorter. Non-accretable difference: (in thousands) December 31, 2021 September 30, 2021 June 30, 2021 March 31, 2021 December 31, 2020 Non-accretable difference, beginning of period $ 686 $ 823 $ 966 $ 1,087 $ 1,661 Additions to non-accretable difference for acquired purchased credit impaired loans — — — — — Non-accretable difference realized as interest from payoffs of purchased credit impaired loans (2) (8) (37) (58) (324) Transfers from non-accretable difference to accretable discount (31) (129) (106) (63) (50) Non-accretable difference used to reduce loan principal balance — — — — (200) Non-accretable difference, end of period $ 653 $ 686 $ 823 $ 966 $ 1,087 The table below provides the changes in accretable discount for acquired loans. Accretable discount: (in thousands) December 31, 2021 September 30, 2021 June 30, 2021 March 31, 2021 December 31, 2020 Accretable discount, beginning of period $ 3,380 $ 3,524 $ 3,683 $ 3,976 $ 5,050 Additions to accretable discount for acquired performing loans — — — — — Accelerated accretion from payoff of certain purchased credit impaired loans with transferred non-accretable difference (200) (12) — (90) (872) Transfers from non-accretable difference to accretable discount 31 129 106 63 50 Scheduled accretion (264) (261) (265) (266) (252) Accretable discount, end of period $ 2,947 $ 3,380 $ 3,524 $ 3,683 $ 3,976 19
On November 30, 2020, the Board of Directors adopted a share repurchase program, pursuant to which Citizens Community Bancorp, Inc. was authorized to repurchase 557 thousand shares of its common stock, or approximately 5% of the outstanding shares on that date. Repurchases made during the quarter ended September 30, 2021, used all remaining shares authorized under this share repurchase program. On July 23, 2021, the Board of Directors adopted a new share repurchase program, pursuant to which Citizens Community Bancorp, Inc. is authorized to repurchase 532,962 shares of its common stock, or approximately 5% of the outstanding shares on that date. Under this new share repurchase program, approximately 16 thousand shares, were repurchased during the quarter ended December, 2021. As of December 31, 2021, there were 10.5 million shares outstanding and an additional 373 thousand shares could be repurchased under the program. Earnings Per Share (Amounts in thousands, except per share data) Three Months Ended Twelve Months Ended December 31, 2021 September 30, 2021 December 31, 2020 December 31, 2021 December 31, 2020 Basic Net income attributable to common shareholders $ 6,057 $ 4,997 $ 3,570 $ 21,266 $ 12,725 Weighted average common shares outstanding 10,503 10,610 11,129 10,717 11,162 Basic earnings per share $ 0.58 $ 0.47 $ 0.32 $ 1.98 $ 1.14 Diluted Net income attributable to common shareholders $ 6,057 $ 4,997 $ 3,570 $ 21,266 $ 12,725 Weighted average common shares outstanding 10,503 10,610 11,129 10,717 11,162 Add: Dilutive stock options outstanding 13 13 — 10 — Average shares and dilutive potential common shares 10,516 10,623 11,129 10,727 11,162 Diluted earnings per share $ 0.58 $ 0.47 $ 0.32 $ 1.98 $ 1.14 Common stock issued and outstanding 10,502 10,519 11,056 10,502 11,056 20
CITIZENS COMMUNITY FEDERAL N.A. Selected Capital Composition Highlights December 31, 2021 (unaudited) September 30, 2021 (unaudited) June 30, 2021 (unaudited) December 31, 2020 (audited) To Be Well Capitalized Under Prompt Corrective Action Provisions Tier 1 leverage ratio (to adjusted total assets) 10.0% 9.6% 9.7% 9.9% 5.0% Tier 1 capital (to risk weighted assets) 12.2% 12.4% 13.5% 13.5% 8.0% Common equity tier 1 capital (to risk weighted assets) 12.2% 12.4% 13.5% 13.5% 6.5% Total capital (to risk weighted assets) 13.4% 13.6% 14.7% 14.7% 10.0% CITIZENS COMMUNITY BANCORP, INC. Selected Capital Composition Highlights December 31, 2021 (unaudited) September 30, 2021 (unaudited) June 30, 2021 (unaudited) December 31, 2020 (audited) For Capital Adequacy Purposes Tier 1 leverage ratio (to adjusted total assets) 7.9% 7.6% 7.5% 7.7% 4.0% Tier 1 capital (to risk weighted assets) 9.7% 9.7% 10.4% 10.5% 6.0% Common equity tier 1 capital (to risk weighted assets) 9.7% 9.7% 10.4% 10.5% 4.5% Total capital (to risk weighted assets) 13.1% 13.2% 14.2% 14.3% 8.0% 21