8-K
Citizens Community Bancorp Inc. (CZWI)
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): April 25, 2023
CITIZENS COMMUNITY BANCORP, INC.
(Exact name of registrant as specified in its charter)
Maryland
(State or other jurisdiction of incorporation)
| 001-33003 | 20-5120010 |
|---|---|
| (Commission File Number) | (I.R.S. Employer Identification No.) |
2174 EastRidge Center
Eau Claire, WI 54701
(Address and Zip Code of principal executive offices)
715-836-9994
(Registrant's telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered or to be registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, $.01 par value per share | CZWI | NASDAQ Global Market |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933. (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter.)
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition.
On April 25, 2023, Citizens Community Bancorp, Inc. (the “Company”) issued a press release announcing our financial results for the three months ended March 31, 2023 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, a copy of the Earnings Release Supplement is attached hereto as Exhibit 99.2. The attached Exhibits 99.1 and 99.2 are furnished pursuant to Item 2.02 of Form 8-K.
The information in this Item 2.02, Item 9.01 and Exhibits 99.1 and 99.2 attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of such section, nor shall it be deemed incorporated by reference in any filing of the Company under the Securities Act of 1933 or the Securities Exchange Act of 1934, regardless of any general incorporation language in such filing, unless expressly incorporated by specific reference in such filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits. The following exhibit is being furnished herewith:
| 99.1 | Press Release dated April 25, 2023 |
|---|---|
| 99.2 | Earnings Release Supplement dated April 25, 2023 |
| 104 | The cover page from this Current Report on Form 8-K in Inline XBRL (Extensible Business Reporting Language) |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| CITIZENS COMMUNITY BANCORP, INC. | ||
|---|---|---|
| Date: April 25, 2023 | By: | /s/ James S. Broucek |
| James S. Broucek | ||
| Chief Financial Officer |
Document
EXHIBIT 99.1
Citizens Community Bancorp, Inc. Reports Earnings of $0.35 Per Share in 1Q23;
Deposit and Loan Balances Increase From Prior Quarter
EAU CLAIRE, WI, April 25, 2023 - 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 $3.7 million and earnings per diluted share of $0.35 for the quarter ended March 31, 2023, compared to $4.7 million and $0.45 per diluted share for the quarter ended December 31, 2022, and $4.7 million and $0.45 per diluted share for the quarter ended March 31, 2022, respectively.
The Company’s first quarter of 2023 operating results reflected the following changes from the fourth quarter of 2022: (1) lower net interest income due to the impact of higher deposit costs; and (2) lower non-interest income of $0.6 million due to decreases in net gains on investment securities, partially offset by lower credit loss provision due to lower loan growth and improved asset quality.
“Despite unusual challenges presented to us by rapidly rising interest rates, highly publicized bank failures and continued discussion of a pending economic recession, our underlying resilience and teamwork produced a return on tangible shareholders’ equity of 12% for our first quarter of 2023. Much effort has been put into the Bank’s operations designed to ensure efficiency, diversification of deposits and loans and continued growth in franchise value. Our largely small and rural markets have provided stability in employment and deposits with customer outlooks generally positive about 2023. The stability of our deposit base also benefits from the fact that 82% are either insured or collateralized,” stated Stephen Bianchi, Chairman, President and Chief Executive Officer. “We expect to see annual loan growth moderating to low single digit percentage growth in 2023 as higher interest rates appear to be affecting new project feasibility. Asset quality improved further with a 25% reduction in criticized loans to $22.1 million, non-performing assets to total assets of .63%, and minimal loan net charge offs of $23 thousand.”
Book value per share was $15.70 at March 31, 2023, compared to $16.03 at December 31, 2022, and $15.72 at March 31, 2022. Tangible book value per share (non-GAAP)1 was $12.48 at March 31, 2023, compared to $12.77 at December 31, 2022, and $12.40 at March 31, 2022. For the quarter, tangible book value was positively influenced by net income, intangible amortization and lower accumulated other comprehensive loss on investment securities, offset by dividend payments to shareholders and the adoption of the Accounting Standards Update (“ASU”) 2016-13, Financial Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments (“CECL”).
March 31, 2023 Highlights: (as of or for the 3-month period ended March 31, 2023 compared to December 31, 2022 and March 31, 2022.)
•Quarterly earnings of $3.7 million, or $0.35 per diluted share for the quarter ended March 31, 2023, decreased from the quarter ended December 31, 2022, earnings of $4.7 million or $0.45 per diluted share, and decreased from the quarter ended March 31, 2022, earnings of $4.7 million or $0.45 per diluted share.
•Quarterly earnings, as adjusted (non-GAAP)1, were $3.7 million, or $0.35 per diluted share for the quarter ended March 31, 2023, compared to $5.2 million or $0.49 per diluted share for the quarter ended December 31, 2022, and $4.7 million or $0.45 per diluted share for the quarter ended March 31, 2022.
•Net interest income decreased $1.7 million to $12.8 million for the quarter ended March 31, 2023 from $14.5 million the previous quarter and decreased $0.4 million from the first quarter of 2022. First quarter 2023 net interest income without SBA PPP net loan fee accretion and loan purchase accretion decreased $1.5 million from the fourth quarter of 2022 and increased $0.1 million from the first quarter of 2022. The decrease in net interest income and net interest margin from year end is due to a reduction in commercial non-interest-bearing balances in January, replaced with higher cost borrowings, higher CD costs, an increase in indexed municipal deposits rates and other customer rate increases more than offsetting the 9 basis points increase in asset yields.
•The net interest margin without SBA PPP net loan fee accretion and loan purchase accretion was 2.99% for the quarter ended March 31, 2023 compared to 3.33% for the previous quarter and 3.11% for the comparable quarter one year earlier.
•The first quarter provision for credit losses was $0.05 million due to modest loan growth and strong credit results, compared to $0.70 million for the preceding quarter. No credit loss provision was realized during the first quarter a year ago due to low net charge-offs, decreases in criticized assets and stable economic conditions in our markets.
•The Company adopted CECL using the modified retrospective approach effective January 1, 2023 and, as a result, increased the allowance for credit losses (“ACL”) on loans by $4.7 million and established an off-balance sheet reserve of $1.5 million. The increase in ACL is primarily CRE and is primarily due to the impact of the remaining maturity of the portfolio.
•The efficiency ratio increased to 66% for the quarter ended March 31, 2023 from 61% for the quarter December 31, 2022, as lower non-interest expense was more than offset by lower net interest income.
•Gross loans increased by $9.0 million during the first quarter of 2023. Draws on construction loans increased $12.5 million. As a result of current market conditions, residential 10/1 ARM loan originations were added to the portfolio which resulted in residential mortgage loan growth of $5.0 million. The commercial and industrial loan decrease of $5.1 million was largely due to the reduction and payoff of a special mention credit. Agricultural operating loans decreased $4.7 million due to normal seasonality.
•Nonperforming assets were $11.7 million at March 31, 2023, compared to $12.7 million at December 31, 2022.
•Substandard loans decreased by $1.9 million to $15.4 million at March 31, 2022, compared to $17.3 million at December 31, 2022.
•Our office loan portfolio is $45 million and consists of 72 loans. There are no criticized loans in the portfolio and there have been no charge-offs in the trailing twelve months.
•Special mention loans decreased $5.5 million from the December 31, 2022 balance of $12.2 million to $6.6 million at March 31, 2023, as a large C&I loan paid off in the first quarter of 2023.
•Stockholders’ equity as a percent of total assets was 8.84% at March 31, 2023, compared to 9.20% at December 31, 2022. Tangible common equity (“TCE”) as a percent of tangible assets (non-GAAP)1 was 7.16% at March 31, 2023, compared to 7.47% at December 31, 2022. The impact of the adoption of CECL of $4.4 million, the annual dividend payment of $3.0 million and modest asset growth outweighed the impact of net income, a decrease in unrealized losses in the available for sale portfolio and amortization of intangibles.
•Consumer, commercial and government deposits have been stable since January 31, 2023 and since the two large coastal bank failures in early March. There are no material customer or industry concentrations. A decrease in deposits during January occurred as a couple of commercial accounts invested funds in their businesses.
•At March 31, 2023 our deposit portfolio composition was 55% consumer, 27% commercial, 14% public and 4% brokered deposits. At December 31, 2022 our deposit portfolio composition was 57% consumer, 28% commercial, 12% public and 3% brokered deposits.
•Uninsured and uncollateralized deposits were $252.7 million, or 18% of total deposits, at March 31, 2023 and $298.8 million, or 21% of total deposits, at December 31, 2022. Uninsured deposits alone at March 31, 2023 were $413.5 million, or 29% of total deposits, and $441.2 million, or 31% of total deposits at December 31, 2022, with the difference being fully secured government deposits.
•On-balance sheet liquidity, collateralized borrowing and uncomitted federal funds availability was 205% of uninsured and uncollateralized deposits at March 31, 2023 and 191% at December 31, 2022.
•On-balance sheet liquidity, collateralized borrowing and uncommitted federal funds availability was $517.4 million at March 31, 2023 and $570.0 million at December 31, 2022.
Balance Sheet and Asset Quality
Total assets increased modestly by $44.3 million during the quarter to $1.86 billion at March 31, 2023, compared to $1.82 billion at December 31, 2022.
Cash and cash equivalents increased $29.7 million during the quarter to $65.1 million at March 31, 2023, largely due to an increase in interest-bearing deposits of $20 million.
Securities available for sale increased $7.4 million during the quarter ended March 31, 2023 to $173.4 million from $166.0 million at December 31, 2022. This increase was primarily due to the purchase of floating-rate SBA backed pass-through securities, with a modest increase in the market value of the portfolio more than offsetting principal repayments.
Securities held to maturity decreased $1.1 million to $95.3 million during the quarter ended March 31, 2023 from $96.4 million at December 31, 2022 due to principal repayments.
Total loans receivable increased to $1.421 billion at March 31, 2023 from $1.412 billion at December 31, 2022. Draws on construction loans increased $12.5 million during the first quarter. As a result of current market conditions, residential 10/1 ARM loan originations were added to the portfolio which resulted in residential mortgage loan growth
of $5.0 million. The commercial and industrial loan portfolio decrease of $5.1 million was largely due to the reduction and payoff of a special mention credit. Agricultural operating loans decreased $4.7 million due to normal seasonality.
The allowance for credit losses on loans increased to $22.7 million at March 31, 2023, largely as a result of the $4.7 million CECL transition adjustment, representing 1.60% of total loans receivable. At December 31, 2022, the allowance for loan losses was 1.27% of total loans receivable. For the quarter ended March 31, 2023, the Bank had net charge offs of $23 thousand.
Allowance for Credit Losses (“ACL”) - Loans Percentage
(in thousands, except ratios)
| March 31, 2023 | December 31, 2022 | September 30, 2022 | June 30, 2022 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Loans, end of period | $ | 1,420,955 | $ | 1,411,784 | $ | 1,375,876 | $ | 1,346,855 | ||||
| Allowance for credit losses - Loans | $ | 22,679 | ||||||||||
| Allowance for loan losses “ALL” | $ | 17,939 | $ | 17,217 | $ | 16,825 | ||||||
| ACL - Loans as a percentage of loans, end of period | 1.60 | % | ||||||||||
| ALL as a percentage of loans, end of period | 1.27 | % | 1.25 | % | 1.25 | % |
Allowance for Credit Losses - Unfunded Commitments:
(in thousands)
In addition to the ACL - Loans, the Company has established an ACL - Unfunded Commitments of $1,530 at March 31, 2023 and $0 at December 31, 2022, classified in other liabilities on the consolidated balance sheets.
| March 31, 2023 and Three Months Ended | December 31, 2022 and Three Months Ended | |||
|---|---|---|---|---|
| ACL - Unfunded commitments - beginning of period | $ | — | $ | — |
| Cumulative effect of ASU 2016-13 adoption | 1,537 | — | ||
| Reductions to ACL - Unfunded commitments via provision for credit losses charged to operations | (7) | — | ||
| ACL - Unfunded commitments - end of period | $ | 1,530 | $ | — |
Nonperforming assets declined to $11.7 million or 0.63% of total assets at March 31, 2023, compared to $12.7 million or 0.70% at December 31, 2022.
| (in thousands) | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| March 31, 2023 | December 31, 2022 | September 30, 2022 | June 30, 2022 | March 31, 2022 | ||||||
| Special mention loan balances | $ | 6,636 | $ | 12,170 | $ | 20,178 | $ | 17,274 | $ | 1,849 |
| Substandard loan balances | 15,439 | 17,319 | 20,227 | 20,680 | 24,822 | |||||
| Criticized loans, end of period | $ | 22,075 | $ | 29,489 | $ | 40,405 | $ | 37,954 | $ | 26,671 |
Special mention loans decreased $5.5 million, largely due to a payoff of a commercial loan. Substandard loans decreased modestly by $1.9 million to $15.4 million at March 31, 2023, compared to $17.3 million at December 31, 2022.
From a month-end perspective, deposits remained stable. From March 7, 2023 to March 31, 2023, a period closely monitored for unusual withdrawal activity, balances remained stable. Deposit composition changed during the quarter ended March 31, 2023, as both business and retail depositors sought higher yields on deposit accounts. For the quarter, retail deposits remained stable, with customers returning to higher yielding certificates with money moving from money market and savings accounts. In January 2023, commercial non-interest bearing deposits fell as commercial customers decreased their cash balances to support the needs of their businesses. Modest brokered deposit growth
supplemented deposit growth, with $10 million of brokered money market growth and $15 million of brokered certificate growth.
Deposit Portfolio Composition
(in thousands)
| March 31, 2023 | February 28, 2023 | January 31, 2023 | December 31, 2022 | |||||
|---|---|---|---|---|---|---|---|---|
| Consumer deposits | $ | 786,614 | $ | 784,162 | $ | 779,476 | $ | 805,598 |
| Commercial deposits | 391,534 | 388,770 | 385,071 | 405,733 | ||||
| Public deposits | 194,683 | 193,213 | 195,115 | 173,548 | ||||
| Brokered deposits | 63,962 | 53,963 | 39,841 | 39,841 | ||||
| Total deposits | $ | 1,436,793 | $ | 1,420,108 | $ | 1,399,503 | $ | 1,424,720 |
Deposit Composition
(in thousands)
| March 31, 2023 | December 31, 2022 | March 31, 2022 | ||||
|---|---|---|---|---|---|---|
| Non-interest bearing demand deposits | $ | 247,735 | $ | 284,722 | $ | 269,481 |
| Interest bearing demand deposits | 390,730 | 371,210 | 423,251 | |||
| Savings accounts | 214,537 | 220,019 | 241,072 | |||
| Money market accounts | 309,005 | 323,435 | 321,409 | |||
| Certificate accounts | 274,786 | 225,334 | 173,010 | |||
| Total deposits | $ | 1,436,793 | $ | 1,424,720 | $ | 1,428,223 |
Federal Home Loan Bank advances increased $40 million to $182.5 million at March 31, 2023 from $142.5 million one quarter earlier. Relative to brokered deposits and maturity sensitivity, FHLB advances provided a less expensive funding option.
The Company did not repurchase any of the Company’s common stock in the first quarter of 2023. As of March 31, 2023, approximately 243 thousand shares remain available for repurchase under the current share repurchase authorization.
Review of Operations
Net interest income was $12.8 million for the first quarter ended March 31, 2023, compared to $14.5 million for the quarter ended December 31, 2022, and decreased slightly from $13.2 million for the quarter ended March 31, 2022. Net interest income for the first quarter of 2022, included $0.3 million of SBA PPP net loan fee accretion. “The decrease in net interest income in the first quarter was due to funding costs exceeding increases in assets yields. Though our one-year interest rate risk profile remains nearly neutral with repricing borrowings and deposits modestly exceeding repricing assets, we expect to see a reduction in the net interest margin in the second quarter of 2023, due to increasing CD costs as ending certificate rates exceeded the first quarter average by 50 basis points and the full quarter impact of late first quarter deposit repricing,” said Jim Broucek, Executive Vice President and Chief Financial Officer.
Net interest income and net interest margin analysis:
(in thousands, except yields and rates)
| Three months ended | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| March 31, 2023 | December 31, 2022 | September 30, 2022 | June 30, 2022 | March 31, 2022 | ||||||||||||||||
| Net Interest Income | Net Interest Margin | Net Interest Income | Net Interest Margin | Net Interest Income | Net Interest Margin | Net Interest Income | Net Interest Margin | Net Interest Income | Net Interest Margin | |||||||||||
| As reported | $ | 12,795 | 3.02 | % | $ | 14,478 | 3.40 | % | $ | 14,457 | 3.43 | % | $ | 14,267 | 3.46 | % | $ | 13,167 | 3.25 | % |
| Less non-accretable difference realized as interest from payoff of purchased credit impaired (“PCI”) loans | — | — | % | (109) | (0.02) | % | (34) | (0.01) | % | (70) | (0.02) | % | (26) | (0.01) | % | |||||
| Less accelerated accretion from payoff of certain PCI loans with transferred non-accretable differences | — | — | % | (32) | (0.01) | % | (117) | (0.06) | % | (308) | (0.08) | % | (11) | — | % | |||||
| Less accretion for PCD loans | (37) | (0.01) | % | — | — | % | — | — | % | — | — | % | — | — | % | |||||
| Less scheduled accretion interest | (84) | (0.02) | % | (169) | (0.04) | % | (247) | (0.03) | % | (255) | (0.06) | % | (264) | (0.07) | % | |||||
| Without loan purchase accretion | $ | 12,674 | 2.99 | % | $ | 14,168 | 3.33 | % | $ | 14,059 | 3.33 | % | $ | 13,634 | 3.30 | % | $ | 12,866 | 3.17 | % |
| Less SBA PPP net loan fee accretion | — | — | % | — | — | % | — | — | % | (39) | (0.01) | % | (259) | (0.06) | % | |||||
| Without SBA PPP net loan fee accretion and loan purchase accretion | $ | 12,674 | 2.99 | % | $ | 14,168 | 3.33 | % | $ | 14,059 | 3.33 | % | $ | 13,595 | 3.29 | % | $ | 12,607 | 3.11 | % |
Credit loss provisions for the quarter ended March 31, 2023 were $50 thousand reflecting the expanding loan portfolio. Loan loss provisions for the quarters ended December 31, 2022, and March 31, 2022, were $0.7 million and $0, respectively.
Non-interest income decreased to $2.3 million in the quarter ended March 31, 2023, compared to $2.9 million in the quarter ended December 31, 2022 and $2.7 million in the quarter ended March 31, 2022. The decrease in the first quarter of 2023, compared to the fourth quarter of 2022, was largely due to lower gains on investment securities. Relative to the comparable quarter one year earlier, non-interest income was lower as a result of lower gain on sale of loans and lower loan servicing income.
Total non-interest expense decreased $215 thousand in the first quarter of 2023 to $10.1 million, compared to $10.3 million for the quarter ended December 31, 2022, and $9.7 million for the quarter ended March 31, 2022. The decrease from the fourth quarter of 2022 was due to: (1) lower other non-interest expense of $0.5 million, largely due to fourth quarter branch closure costs primarily associated with reductions in value of the two closed branches totaling $0.7 million; (2) new market tax credit depletion being reclassified to tax expense (see provision for taxes below); (3) lower marketing expenses due to seasonality; and (4) a reduction in the amortization of core deposit intangibles. These decreases were partially offset by the impact of a one-time seasonal $0.3 million reduction in compensation expense recognized in the fourth quarter of 2022 and increases in other related benefits, occupancy and data processing.
Provision for income taxes decreased to $1.3 million in the first quarter of 2023 from $1.6 million in the fourth quarter of 2022 due primarily to lower pre-tax income. However, income tax provisions were impacted by the adoption of new accounting practices related to tax credit investments. “Effective January 1, 2023, the Company early adopted ASU 2023-02. This guidance results in new market tax credit depletion being reclassified from non-interest expense to tax expense and changes the amortization method to be proportional to the tax credit realized. As a result, retained earnings increased $130 thousand, effective January 1, 2023, non-interest expense decreased by $162 thousand from the previous quarter results, and the effective tax rate increased to 25.5% in the first quarter,” said Broucek. The effective tax rate was 25.6% in the previous quarter due to higher net income and 24.2% for the comparable prior year quarter.
These financial results are preliminary until the Form 10-Q is filed in May 2023.
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 23 branch locations. Its primary markets include the Chippewa Valley Region in Wisconsin, the Twin Cities and Mankato markets in Minnesota, and various rural communities around these areas. The Bank offers traditional community banking services to businesses, ag operators and consumers, including residential mortgage loans.
Cautionary Statement Regarding Forward-Looking Statements
Certain statements contained in this release are considered “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may be identified using forward-looking words or phrases such as “anticipate,” “believe,” “could,” “expect,” “estimates,” “intend,” “may,” “on pace,” “preliminary,” “planned,” “potential,” “should,” “will,” “would” or the negative of those terms or other words of similar meaning. Such forward-looking statements in this release are inherently subject to many uncertainties arising in the operations and business environment of the Company and the Bank. These uncertainties include conditions in the financial markets and economic conditions generally; adverse impacts to the Company or Bank arising from the COVID-19 pandemic; acts of terrorism and political or military actions by the United States or other governments; the possibility of a deterioration in the residential real estate markets; interest rate risk; lending risk; higher lending risks associated with our commercial and agricultural banking activities; the sufficiency of loan allowances; changes in the fair value or ratings downgrades of our securities; competitive pressures among depository and other financial institutions; disintermediation risk; our ability to maintain our reputation; our ability to maintain or increase our market share; our ability to realize the benefits of net deferred tax assets; our inability to obtain needed liquidity; our ability to raise capital needed to fund growth or meet regulatory requirements; our ability to attract and retain key personnel; our ability to keep pace with technological change; prevalence of fraud and other financial crimes; cybersecurity risks; the possibility that our internal controls and procedures could fail or be circumvented; our ability to successfully execute our acquisition growth strategy; risks posed by acquisitions and other expansion opportunities, including difficulties and delays in integrating the acquired business operations or fully realizing the cost savings and other benefits; restrictions on our ability to pay dividends; the potential volatility of our stock price; accounting standards for credit losses; legislative or regulatory changes or actions, or significant litigation, adversely affecting the Company or Bank; public company reporting obligations; changes in federal or state tax laws; and changes in accounting principles, policies or guidelines and their impact on financial performance. Stockholders, potential investors, and other readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. Such uncertainties and other risks that may affect the Company’s performance are discussed further in Part I, Item 1A, “Risk Factors,” in the Company’s Form 10-K, for the year ended December 31, 2022, filed with the Securities and Exchange Commission (“SEC”) on March 7, 2023 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.
1 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 and return on average tangible common equity, which management believes may be helpful in understanding the Company’s results of operations or financial position and comparing results over different periods.
Net income as adjusted and net income as adjusted per share are non-GAAP measures that eliminate the impact of certain expenses such as branch closure costs and related severance pay, accelerated depreciation expense and lease termination fees, and the gain on sale of branch deposits and fixed assets. Tangible book value, tangible book value per share, tangible common equity as a percent of tangible assets and return on average tangible common equity are non-GAAP measures that eliminate the impact of goodwill and intangible assets on our financial position. Management believes these measures are useful in assessing the strength of our financial position.
Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, can be found in this press release. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other banks and financial institutions.
Contact: Steve Bianchi, CEO
(715)-836-9994
(CZWI-ER)
CITIZENS COMMUNITY BANCORP, INC.
Consolidated Balance Sheets
(in thousands, except shares and per share data)
| March 31, 2023 (unaudited) | December 31, 2022 (audited) | March 31, 2022 (unaudited) | ||||
|---|---|---|---|---|---|---|
| Assets | ||||||
| Cash and cash equivalents | $ | 65,050 | $ | 35,363 | $ | 84,364 |
| Other interest bearing deposits | 249 | 249 | 1,511 | |||
| Securities available for sale “AFS” | 173,423 | 165,991 | 187,905 | |||
| Securities held to maturity “HTM” | 95,301 | 96,379 | 104,894 | |||
| Equity investments | 2,151 | 1,794 | 1,291 | |||
| Other investments | 17,428 | 15,834 | 15,084 | |||
| Loans receivable | 1,420,955 | 1,411,784 | 1,290,176 | |||
| Allowance for credit losses | (22,679) | (17,939) | (16,818) | |||
| Loans receivable, net | 1,398,276 | 1,393,845 | 1,273,358 | |||
| Loans held for sale | 761 | — | 2,528 | |||
| Mortgage servicing rights, net | 4,120 | 4,262 | 4,614 | |||
| Office properties and equipment, net | 20,197 | 20,493 | 21,393 | |||
| Accrued interest receivable | 5,550 | 5,285 | 4,179 | |||
| Intangible assets | 2,245 | 2,449 | 3,499 | |||
| Goodwill | 31,498 | 31,498 | 31,498 | |||
| Foreclosed and repossessed assets, net | 1,113 | 1,271 | 1,368 | |||
| Bank owned life insurance (“BOLI”) | 25,118 | 24,954 | 24,464 | |||
| Other assets | 18,240 | 16,719 | 13,519 | |||
| TOTAL ASSETS | $ | 1,860,720 | $ | 1,816,386 | $ | 1,775,469 |
| Liabilities and Stockholders’ Equity | ||||||
| Liabilities: | ||||||
| Deposits | $ | 1,436,793 | $ | 1,424,720 | $ | 1,428,223 |
| Federal Home Loan Bank (“FHLB”) advances | 182,530 | 142,530 | 85,530 | |||
| Other borrowings | 67,300 | 72,409 | 87,062 | |||
| Other liabilities | 9,536 | 9,639 | 9,160 | |||
| Total liabilities | 1,696,159 | 1,649,298 | 1,609,975 | |||
| Stockholders’ equity: | ||||||
| Common stock— $0.01 par value, authorized 30,000,000; 10,482,821, 10,425,119 and 10,526,781 shares issued and outstanding, respectively | 105 | 104 | 105 | |||
| Additional paid-in capital | 119,327 | 119,240 | 119,789 | |||
| Retained earnings | 61,720 | 65,400 | 52,562 | |||
| Accumulated other comprehensive loss | (16,591) | (17,656) | (6,962) | |||
| Total stockholders’ equity | 164,561 | 167,088 | 165,494 | |||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 1,860,720 | $ | 1,816,386 | $ | 1,775,469 |
Note: Certain items previously reported were reclassified for consistency with the current presentation.
CITIZENS COMMUNITY BANCORP, INC.
Consolidated Statements of Operations
(in thousands, except per share data)
| Three Months Ended | ||||||
|---|---|---|---|---|---|---|
| March 31, 2023 (unaudited) | December 31, 2022 (unaudited) | March 31, 2022 (unaudited) | ||||
| Interest and dividend income: | ||||||
| Interest and fees on loans | $ | 17,126 | $ | 17,042 | $ | 13,767 |
| Interest on investments | 2,547 | 2,317 | 1,609 | |||
| Total interest and dividend income | 19,673 | 19,359 | 15,376 | |||
| Interest expense: | ||||||
| Interest on deposits | 4,348 | 2,695 | 1,068 | |||
| Interest on FHLB borrowed funds | 1,493 | 1,127 | 311 | |||
| Interest on other borrowed funds | 1,037 | 1,059 | 830 | |||
| Total interest expense | 6,878 | 4,881 | 2,209 | |||
| Net interest income before provision for credit losses | 12,795 | 14,478 | 13,167 | |||
| Provision for credit losses | 50 | 700 | — | |||
| Net interest income after provision for credit losses | 12,745 | 13,778 | 13,167 | |||
| Non-interest income: | ||||||
| Service charges on deposit accounts | 485 | 513 | 488 | |||
| Interchange income | 551 | 583 | 549 | |||
| Loan servicing income | 569 | 527 | 701 | |||
| Gain on sale of loans | 298 | 144 | 722 | |||
| Loan fees and service charges | 80 | 179 | 92 | |||
| Net gains (losses) on investment securities | 56 | 708 | (37) | |||
| Other | 253 | 219 | 198 | |||
| Total non-interest income | 2,292 | 2,873 | 2,713 | |||
| Non-interest expense: | ||||||
| Compensation and related benefits | 5,338 | 5,241 | 5,398 | |||
| Occupancy | 1,423 | 1,353 | 1,365 | |||
| Data processing | 1,460 | 1,355 | 1,301 | |||
| Amortization of intangible assets | 204 | 252 | 399 | |||
| Mortgage servicing rights expense, net | 158 | 157 | (327) | |||
| Advertising, marketing and public relations | 136 | 255 | 212 | |||
| FDIC premium assessment | 201 | 118 | 115 | |||
| Professional services | 505 | 555 | 402 | |||
| Gains on repossessed assets, net | (29) | (378) | (7) | |||
| New market tax credit depletion | — | 162 | 163 | |||
| Other | 725 | 1,266 | 647 | |||
| Total non-interest expense | 10,121 | 10,336 | 9,668 | |||
| Income before provision for income taxes | 4,916 | 6,315 | 6,212 | |||
| Provision for income taxes | 1,254 | 1,619 | 1,506 | |||
| Net income attributable to common stockholders | $ | 3,662 | $ | 4,696 | $ | 4,706 |
| Per share information: | ||||||
| Basic earnings | $ | 0.35 | $ | 0.45 | $ | 0.45 |
| Diluted earnings | $ | 0.35 | $ | 0.45 | $ | 0.45 |
| Cash dividends paid | $ | 0.29 | $ | — | $ | 0.26 |
| Book value per share at end of period | $ | 15.70 | $ | 16.03 | $ | 15.72 |
| Tangible book value per share at end of period (non-GAAP) | $ | 12.48 | $ | 12.77 | $ | 12.40 |
Note: Certain items previously reported were reclassified for consistency with the current presentation.
Reconciliation of GAAP Net Income and Net Income as Adjusted (non-GAAP)
(in thousands, except per share data)
| Three Months Ended | ||||||
|---|---|---|---|---|---|---|
| March 31, 2023 | December 31, 2022 | March 31, 2022 | ||||
| GAAP pretax income | $ | 4,916 | $ | 6,315 | $ | 6,212 |
| Branch closure costs (1) | — | 646 | — | |||
| Pretax income as adjusted (2) | 4,916 | 6,961 | 6,212 | |||
| Provision for income tax on net income as adjusted (3) | 1,254 | 1,785 | 1,506 | |||
| Net income as adjusted (non-GAAP) (2) | $ | 3,662 | $ | 5,176 | $ | 4,706 |
| GAAP diluted earnings per share, net of tax | $ | 0.35 | $ | 0.45 | $ | 0.45 |
| Branch closure costs, net of tax (4) | — | 0.04 | — | |||
| Diluted earnings per share, as adjusted, net of tax (non-GAAP) | $ | 0.35 | $ | 0.49 | $ | 0.45 |
| Average diluted shares outstanding | 10,477,610 | 10,460,025 | 10,541,306 |
(1) Branch closure costs include severance pay recorded in compensation and benefits and accelerated depreciation expense included in other non-interest expense in the consolidated statement of operations.
(2) Pretax income as adjusted and net income as adjusted is a non-GAAP measure that management believes enhances the market’s ability to assess the underlying business performance and trends related to core business activities.
(3) Provision for income tax on net income as adjusted is calculated at our effective tax rate for each respective period presented.
(4) Branch closure costs, net of tax is rounded to $0.04 to balance to diluted earnings per share, as adjusted, net of tax (non-GAAP).
Loan Composition
(in thousands)
| March 31, 2023 | December 31, 2022 | March 31, 2022 | ||||
|---|---|---|---|---|---|---|
| Total Loans: | ||||||
| Commercial/Agricultural real estate: | ||||||
| Commercial real estate | $ | 726,748 | $ | 725,971 | $ | 689,774 |
| Agricultural real estate | 90,958 | 87,908 | 75,716 | |||
| Multi-family real estate | 207,786 | 208,908 | 179,487 | |||
| Construction and land development | 114,951 | 102,492 | 87,880 | |||
| C&I/Agricultural operating: | ||||||
| Commercial and industrial | 130,943 | 136,013 | 121,022 | |||
| Agricultural operating | 24,146 | 28,806 | 28,757 | |||
| Residential mortgage: | ||||||
| Residential mortgage | 110,379 | 105,389 | 84,773 | |||
| Purchased HELOC loans | 3,206 | 3,262 | 3,487 | |||
| Consumer installment: | ||||||
| Originated indirect paper | 9,314 | 10,236 | 14,508 | |||
| Other consumer | 6,728 | 7,150 | 8,191 | |||
| Gross loans before SBA PPP loans | $ | 1,425,159 | $ | 1,416,135 | $ | 1,293,595 |
| SBA PPP loans | — | — | 2,071 | |||
| Gross loans | $ | 1,425,159 | $ | 1,416,135 | $ | 1,295,666 |
| Unearned net deferred fees and costs and loans in process | (2,689) | (2,585) | (2,223) | |||
| Unamortized discount on acquired loans | (1,515) | (1,766) | (3,267) | |||
| Total loans receivable | $ | 1,420,955 | $ | 1,411,784 | $ | 1,290,176 |
Nonperforming Assets
(in thousands, except ratios)
| March 31, 2023 (1) | December 31, 2022 | March 31, 2022 | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Nonperforming assets: | |||||||||
| Nonaccrual loans | |||||||||
| Commercial real estate | $ | 5,514 | $ | 5,736 | $ | 5,503 | |||
| Agricultural real estate | 2,496 | 2,742 | 3,454 | ||||||
| Construction and land development | — | — | 129 | ||||||
| Commercial and industrial (“C&I”) | 452 | 552 | 284 | ||||||
| Agricultural operating | 794 | 890 | 1,064 | ||||||
| Residential mortgage | 1,131 | 1,253 | 1,334 | ||||||
| Consumer installment | 23 | 31 | 90 | ||||||
| Total nonaccrual loans | $ | 10,410 | $ | 11,204 | $ | 11,858 | |||
| Accruing loans past due 90 days or more | 224 | 246 | 398 | ||||||
| Total nonperforming loans (“NPLs”) | 10,634 | 11,450 | 12,256 | ||||||
| Foreclosed and repossessed assets, net | 1,113 | 1,271 | 1,368 | ||||||
| Total nonperforming assets (“NPAs”) | $ | 11,747 | $ | 12,721 | $ | 13,624 | |||
| Loans, end of period | $ | 1,420,955 | $ | 1,411,784 | $ | 1,290,176 | |||
| Total assets, end of period | $ | 1,860,720 | $ | 1,816,386 | $ | 1,775,469 | |||
| Ratios: | |||||||||
| NPLs to total loans | 0.75 | % | 0.81 | % | 0.95 | % | |||
| NPAs to total assets | 0.63 | % | 0.70 | % | 0.77 | % |
(1) Loan balances are at amortized cost.
Average Balances, Interest Yields and Rates
(in thousands, except yields and rates)
| Three Months Ended <br>March 31, 2023 | Three Months Ended <br>December 31, 2022 | Three Months Ended<br>March 31, 2022 | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Average<br>Balance | Interest<br>Income/<br>Expense | Average<br>Yield/<br>Rate (1) | Average<br>Balance | Interest<br>Income/<br>Expense | Average<br>Yield/<br>Rate (1) | Average<br>Balance | Interest<br>Income/<br>Expense | Average<br>Yield/<br>Rate (1) | ||||||||||
| Average interest earning assets: | ||||||||||||||||||
| Cash and cash equivalents | $ | 18,270 | $ | 140 | 3.11 | % | $ | 8,134 | $ | 88 | 4.29 | % | $ | 35,208 | $ | 13 | 0.15 | % |
| Loans receivable | 1,412,409 | 17,126 | 4.92 | % | 1,399,244 | 17,041 | 4.83 | % | 1,304,141 | 13,767 | 4.28 | % | ||||||
| Interest bearing deposits | 249 | 1 | 1.63 | % | 337 | 2 | 2.35 | % | 1,511 | 8 | 2.15 | % | ||||||
| Investment securities (1) | 270,174 | 2,175 | 3.22 | % | 264,064 | 1,990 | 3.01 | % | 288,261 | 1,416 | 1.99 | % | ||||||
| Other investments | 16,663 | 231 | 5.62 | % | 15,783 | 238 | 5.98 | % | 15,258 | 172 | 4.57 | % | ||||||
| Total interest earning assets (1) | $ | 1,717,765 | $ | 19,673 | 4.64 | % | $ | 1,687,562 | $ | 19,359 | 4.55 | % | $ | 1,644,379 | $ | 15,376 | 3.79 | % |
| Average interest bearing liabilities: | ||||||||||||||||||
| Savings accounts | $ | 216,169 | $ | 382 | 0.72 | % | $ | 226,082 | $ | 312 | 0.55 | % | $ | 233,642 | $ | 99 | 0.17 | % |
| Demand deposits | 391,635 | 1,432 | 1.48 | % | 379,011 | 836 | 0.88 | % | 410,890 | 213 | 0.21 | % | ||||||
| Money market accounts | 301,710 | 1,096 | 1.47 | % | 316,791 | 710 | 0.89 | % | 299,004 | 216 | 0.29 | % | ||||||
| CD’s | 255,567 | 1,438 | 2.28 | % | 205,201 | 837 | 1.62 | % | 189,185 | 540 | 1.16 | % | ||||||
| Total deposits | $ | 1,165,081 | $ | 4,348 | 1.51 | % | $ | 1,127,085 | $ | 2,695 | 0.95 | % | $ | 1,132,721 | $ | 1,068 | 0.38 | % |
| FHLB advances and other borrowings | 232,166 | 2,530 | 4.42 | % | 212,051 | 2,186 | 4.09 | % | 166,118 | 1,141 | 2.79 | % | ||||||
| Total interest bearing liabilities | $ | 1,397,247 | $ | 6,878 | 2.00 | % | $ | 1,339,136 | $ | 4,881 | 1.45 | % | $ | 1,298,839 | $ | 2,209 | 0.69 | % |
| Net interest income | $ | 12,795 | $ | 14,478 | $ | 13,167 | ||||||||||||
| Interest rate spread | 2.64 | % | 3.10 | % | 3.10 | % | ||||||||||||
| Net interest margin (1) | 3.02 | % | 3.40 | % | 3.25 | % | ||||||||||||
| Average interest earning assets to average interest bearing liabilities | 1.23 | 1.26 | 1.27 |
(1) Fully taxable equivalent (FTE). The average yield on tax exempt securities is computed on a tax equivalent basis using a tax rate of 21% for the quarters ended March 31, 2023, December 31, 2022 and March 31, 2022. The FTE adjustment to net interest income included in the rate calculations totaled $0, $0 and $1 thousand for the three months ended March 31, 2023, December 31, 2022 and March 31, 2022, respectively.
Key Financial Metric Ratios Based on a Net Income as Adjusted Basis:
| Three Months Ended | ||||||
|---|---|---|---|---|---|---|
| March 31, 2023 | December 31, 2022 | March 31, 2022 | ||||
| Ratios based on net income: | ||||||
| Return on average assets (annualized) | 0.81 | % | 1.03 | % | 1.09 | % |
| Return on average equity (annualized) | 9.03 | % | 11.32 | % | 11.38 | % |
| Return on average tangible common equity4 (annualized) | 11.85 | % | 14.85 | % | 15.32 | % |
| Efficiency ratio | 66 | % | 61 | % | 58 | % |
| Net interest margin with loan purchase accretion | 3.02 | % | 3.40 | % | 3.25 | % |
| Net interest margin without loan purchase accretion | 2.99 | % | 3.33 | % | 3.17 | % |
| Ratios based on net income as adjusted (non-GAAP) | ||||||
| Return on average assets as adjusted2 (annualized) | 0.81 | % | 1.14 | % | 1.09 | % |
| Return on average equity as adjusted3 (annualized) | 9.03 | % | 12.47 | % | 11.38 | % |
Reconciliation of Return on Average Assets as Adjusted (non-GAAP)
(in thousands, except ratios)
| Three Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| March 31, 2023 | December 31, 2022 | March 31, 2022 | |||||||
| GAAP earnings after income taxes | $ | 3,662 | $ | 4,696 | $ | 4,706 | |||
| Net income as adjusted after income taxes (non-GAAP) (1) | $ | 3,662 | $ | 5,176 | $ | 4,706 | |||
| Average assets | $ | 1,823,748 | $ | 1,803,155 | $ | 1,750,114 | |||
| Return on average assets (annualized) | 0.81 | % | 1.03 | % | 1.09 | % | |||
| Return on average assets as adjusted (non-GAAP) (annualized) | 0.81 | % | 1.14 | % | 1.09 | % |
(1) See Reconciliation of GAAP Net Income and Net Income as Adjusted (non-GAAP)
Reconciliation of Return on Average Equity as Adjusted (non-GAAP)
(in thousands, except ratios)
| Three Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| March 31, 2023 | December 31, 2022 | March 31, 2022 | |||||||
| GAAP earnings after income taxes | $ | 3,662 | $ | 4,696 | $ | 4,706 | |||
| Net income as adjusted after income taxes (non-GAAP) (1) | $ | 3,662 | $ | 5,176 | $ | 4,706 | |||
| Average equity | $ | 164,426 | $ | 164,621 | $ | 167,746 | |||
| Return on average equity (annualized) | 9.03 | % | 11.32 | % | 11.38 | % | |||
| Return on average equity as adjusted (non-GAAP) (annualized) | 9.03 | % | 12.47 | % | 11.38 | % |
(1) See Reconciliation of GAAP Net Income and Net Income as Adjusted (non-GAAP)
Reconciliation of tangible book value per share (non-GAAP)
(in thousands, except per share data)
| Tangible book value per share at end of period | March 31, 2023 | December 31, 2022 | March 31, 2022 | |||
|---|---|---|---|---|---|---|
| Total stockholders’ equity | $ | 164,561 | $ | 167,088 | $ | 165,494 |
| Less: Goodwill | (31,498) | (31,498) | (31,498) | |||
| Less: Intangible assets | (2,245) | (2,449) | (3,499) | |||
| Tangible common equity (non-GAAP) | $ | 130,818 | $ | 133,141 | $ | 130,497 |
| Ending common shares outstanding | 10,482,821 | 10,425,119 | 10,526,781 | |||
| Book value per share | $ | 15.70 | $ | 16.03 | $ | 15.72 |
| Tangible book value per share (non-GAAP) | $ | 12.48 | $ | 12.77 | $ | 12.40 |
Reconciliation of tangible common equity as a percent of tangible assets (non-GAAP)
(in thousands, except ratios)
| Tangible common equity as a percent of tangible assets at end of period | March 31, 2023 | December 31, 2022 | March 31, 2022 | ||||||
|---|---|---|---|---|---|---|---|---|---|
| Total stockholders’ equity | $ | 164,561 | $ | 167,088 | $ | 165,494 | |||
| Less: Goodwill | (31,498) | (31,498) | (31,498) | ||||||
| Less: Intangible assets | (2,245) | (2,449) | (3,499) | ||||||
| Tangible common equity (non-GAAP) | $ | 130,818 | $ | 133,141 | $ | 130,497 | |||
| Total Assets | $ | 1,860,720 | $ | 1,816,386 | $ | 1,775,469 | |||
| Less: Goodwill | (31,498) | (31,498) | (31,498) | ||||||
| Less: Intangible assets | (2,245) | (2,449) | (3,499) | ||||||
| Tangible Assets (non-GAAP) | $ | 1,826,977 | $ | 1,782,439 | $ | 1,740,472 | |||
| Total stockholders’ equity to total assets ratio | 8.84 | % | 9.20 | % | 9.32 | % | |||
| Tangible common equity as a percent of tangible assets (non-GAAP) | 7.16 | % | 7.47 | % | 7.50 | % |
Reconciliation of Return on Average Tangible Common Equity (non-GAAP)
(in thousands, except ratios)
| Three Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| March 31, 2023 | December 31, 2022 | March 31, 2022 | |||||||
| Total stockholders’ equity | $ | 164,561 | $ | 167,088 | $ | 165,494 | |||
| Less: Goodwill | (31,498) | (31,498) | (31,498) | ||||||
| Less: Intangible assets | (2,245) | (2,449) | (3,499) | ||||||
| Tangible common equity (non-GAAP) | $ | 130,818 | $ | 133,141 | $ | 130,497 | |||
| Average tangible common equity (non-GAAP) | $ | 130,582 | $ | 130,577 | $ | 132,550 | |||
| GAAP earnings after income taxes | 3,662 | 4,696 | 4,706 | ||||||
| Amortization of intangible assets, net of tax | 152 | 190 | 302 | ||||||
| Tangible net income | $ | 3,814 | $ | 4,886 | $ | 5,008 | |||
| Return on average tangible common equity (annualized) | 11.85 | % | 14.85 | % | 15.32 | % |
Reconciliation of Efficiency Ratio
(in thousands, except ratios)
| Three Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| March 31, 2023 | December 31, 2022 | March 31, 2022 | |||||||
| Non-interest expense (GAAP) | $ | 10,121 | $ | 10,336 | $ | 9,668 | |||
| Less amortization of intangibles | (204) | (252) | (399) | ||||||
| Efficiency ratio numerator (GAAP) | $ | 9,917 | $ | 10,084 | $ | 9,269 | |||
| Non-interest income | $ | 2,292 | $ | 2,873 | $ | 2,713 | |||
| Loss (Gain) on investment securities | (56) | (708) | 37 | ||||||
| Net interest margin | 12,795 | 14,478 | 13,167 | ||||||
| Efficiency ratio denominator (GAAP) | $ | 15,031 | $ | 16,643 | $ | 15,917 | |||
| Efficiency ratio (GAAP) | 66 | % | 61 | % | 58 | % |
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)”.
4Tangible book value, tangible book value per share, tangible common equity as a percent of tangible assets and return on tangible common equity are non-GAAP measures that management believes enhances investors’ ability to better understand the Company’s financial position. For a detailed reconciliation of GAAP to non-GAAP results, see the accompanying financial table “Reconciliation of tangible book value per share (non-GAAP)”, “Reconciliation of tangible common equity as a percent of tangible assets (non-GAAP)”, and “Reconciliation of return on average tangible common equity)”.
16
ex992
EXHIBIT 99.2 Earnings Release Supplement First Quarter 2023
Citizens Community Bancorp, Inc. Table of Contents Cautionary Notes and Additional Disclosures Deposit Composition Commercial Deposit Concentrations Top 100 Depositors Liquidity 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 Office Loans Credit Quality/Risk Rating Descriptions Loans by Risk Rating as of March 31, 2023 Loans by Risk Rating as of December 31, 2022 Loans by Risk Rating as of March 31, 2022 Allowance for Credit Losses – Loans Allowance for Credit Losses – Unfunded Commitments Delinquency as of March 31, 2023, and December 31, 2022 Delinquency as of March 31, 2022 Nonaccrual Loans Roll forward Other Real Estate Owned Roll forward Page(s) 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 18 19 20 20 21 22 22 23 Investments – Amortized Cost and Fair Value Investments – Credit Ratings Earnings Per Share Economic Value of Equity Net Interest Income Over One Year Horizon Selected Capital Composition Highlights – Bank and Company Page(s) 23 24 25 26 26 27 1
Cautionary Notes and Additional Disclosures DATES AND PERIODS PRESENTED In this earnings release financial supplement, unless otherwise noted, “20YY” refers to either the corresponding fiscal year-end date or the corresponding 12-months (i.e. fiscal year) then ended. “MMM-YY” refers to either the corresponding quarter-end date, or the corresponding three-month period then ended. CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS This earnings release financial supplement may contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. These statements include, but are not limited to, descriptions of the financial condition, results of operations, asset and credit quality trends, profitability, projected earnings, future plans, strategies and expectations of Citizens Community Bancorp, Inc. (“CZWI” or the “Company”) and its subsidiary, Citizens Community Federal, National Association (“CCFBank”). The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and is including this statement for purposes of complying with those safe harbor provisions. Forward-looking statements, which are based on certain assumptions of the Company, are generally identifiable by use of the words “believe,” “expect,” “estimates,” “intend,” “anticipate,” “estimate,” “project,” “on pace,” “seek,” “target,” “potential,” “focus,” “may,” “preliminary,” “could,” “should” or similar expressions. These forward-looking statements express management’s current expectations or forecasts of future events, and by their nature, are subject to risks and uncertainties. Therefore, there are a number of factors that might cause actual results to differ materially from those in such statements. These uncertainties include conditions in the financial markets and economic conditions generally; adverse impacts to the Company or CCFBank arising from the COVID-19 pandemic; acts of terrorism and political or military actions by the United States or other governments; the possibility of a deterioration in the residential real estate markets; interest rate risk; lending risk; higher lending risks associated with our commercial and agricultural banking activities; the sufficiency of credit allowances; changes in the fair value or ratings downgrades of our securities; competitive pressures among depository and other financial institutions; disintermediation risk; our ability to maintain our reputation; our ability to maintain or increase our market share; our ability to realize the benefits of net deferred tax assets; our inability to obtain needed liquidity; our ability to raise capital needed to fund growth or meet regulatory requirements; our ability to attract and retain key personnel; our ability to keep pace with technological change; prevalence of fraud and other financial crimes; cybersecurity risks; the possibility that our internal controls and procedures could fail or be circumvented; our ability to successfully execute our acquisition growth strategy; risks posed by acquisitions and other expansion opportunities, including difficulties and delays in integrating the acquired business operations or fully realizing the cost savings and other benefits; restrictions on our ability to pay dividends; the potential volatility of our stock price; accounting standards for credit losses; legislative or regulatory changes or actions, or significant litigation, adversely affecting the Company or CCFBank; public company reporting obligations; changes in federal or state tax laws; and changes in accounting principles, policies or guidelines and their impact on financial performance. Stockholders, potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. Such uncertainties and other risks that may affect the Company's performance are discussed further in Part I, Item 1A, “Risk Factors,” in the Company’s Form 10-K, for the year ended December 31, 2022, filed with the Securities and Exchange Commission (“SEC”) on March 7, 2023, and the Company's subsequent filings with the SEC. The Company undertakes no obligation to make any revisions to the forward-looking statements contained herein or to update them to reflect events or circumstances occurring after the date hereof. NON-GAAP FINANCIAL MEASURES This earnings release financial supplement contains non-GAAP financial measures. For purposes of Regulation G, a non-GAAP financial measure is a numerical measure of the registrant's historical or future financial performance, financial position or cash flows that excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with GAAP in the statement of income, balance sheet or statement of cash flows (or equivalent statements) of the issuer; or includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented. In this regard, GAAP refers to generally accepted accounting principles in the United States. Non-GAAP financial measures referred to herein include net income as adjusted, return on average equity as adjusted, and return on average assets as adjusted. Reconciliations of all non-GAAP financial measures used herein to the comparable GAAP financial measures in the appendix at the end of this presentation. 2
Deposit Composition March 31, 2023 Average Account Size (In Thousands) AmountType $16Retail $68Commercial $451Public$1.44 Billion 82% of deposits insured or collateralized Top 10 Depositors Coverage Beyond FDIC(1)Industry% of DepositsRank ICSPublic Administration2.1%1 ICSHealth Care1.8%2 CollateralizedGovernmental Entity1.7%3 ICSEducational Services1.5%4 CollateralizedGovernmental Entity1.4%5 CollateralizedGovernmental Entity1.2%6 ICS and CollateralizedGovernmental Entity1.0%7 Private InsuranceReal Estate0.9%8 ICSPublic Administration0.8%9 ICS and CollateralizedGovernmental Entity0.6%10 (1) Coverage by ICS and private insurance my not cover entire balance 3
Commercial Deposit Concentrations March 31, 2023 Source: Internal Company Documents Diverse commercial deposit base with no industry concentration over 15% 4
Top 100 Depositors March 31, 2023 $395 Million 5
Liquidity March 31, 2023 $517.4 Million 6
Portfolio Fundamentals 63% 30% 7% Wisconsin Minnesota Other By Geography As of 3/31/2023 • 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 3/31/2023 12/31/2022 $452 $449 747 766 $606 $587 Approximate Weighted Average LTV 60% 62% 31 26 Trailing 12 Month Net Charge‐Offs 0.02% 0.02% $11.3 $11.6 2.5% 2.6% Weighted Average Seasoning In Months Loan Balance Outstanding In Millions Number of Loans Average Loan Size In Thousands Portfolio Characteristics ‐ Non‐Owner Occupied CRE As of Criticized Loans Millions Criticized Loans as a Percent of Total 22% 20% 12% 11% 8% 7% 7% 6% 3% 4% Investor Residential Hotel CRE ‐ Retail CRE ‐ Senior Living CRE ‐ Office Non – Owner Occupied CRE As of 3/31/2023 7
18% 14% 12% 11% 10% 9% 8% 5% 13% CRE Campground CRE Restaurant CRE Industrial/Manufacturing CRE Warehouse/Mini Storage CRE Senior Living CRE Retail CRE Mixed Use CRE Office Other Owner Occupied CRE As of 3/31/23 Portfolio Fundamentals 74% 10% 16% Wisconsin Minnesota Other By Geography As of 3/31/23 • 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 3/31/2023 12/31/2022 $274 $277 422 425 $650 $651 Approximate Weighted Average LTV 51% 52% 31 29 Trailing 12 Month Net Charge‐Offs 0.00% 0.00% $1.7 $1.7 0.6% 0.6%Criticized Loans as a Precent of Total Weighted Average Seasoning In Months Criticized Loans In Millions Portfolio Characteristics ‐ Owner Occupied CRE Loan Balance Outstanding In Millions Number of Loans Average Loan Size In Thousands As of 8
Portfolio Fundamentals 64% 35% 1% Wisconsin Minnesota Other By Geography As of 3/31/23 1% 20% 43% 23% 4% 7% 3% 2023 2022 2021 2020 2019 2018 Prior By Vintage As of 3/31/23 • 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 3/31/2023 12/31/2022 $208 $209 119 120 $1.75 $1.74 62% 64% Weighted Average Seasoning In Months 25 22 0% 0% $0.0 $0.0 0.0% 0.0%Criticized Loans as a Percent of Total Approximate Weighted Average LTV Trailing 12 Month Net Charge‐Offs Criticized Loans in Millions Portfolio Characteristics ‐ Multi‐family Loan Balance Outstanding In Millions Number of Loans Average Loan Size In Millions As of 9
92% 7% 1% Wisconsin Minnesota Other By Geography As of 3/31/23 18% 14% 14% 12% 6% 5% 5% 5% 5% 3% 3% 3% 7% Finance and Insurance Wholesale Trade Manufacturing Transportation and Warehousing Public Admin Real Estate, Rental and Leasing Administrative Support Construction Agriculture Education Services Retail Trade Health Care Other Commercial & Industrial As of 3/31/23 • 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 3/31/2023 12/31/2022 $131 $136 663 673 $198 $202 26 26 0.02% 0.08% $61 $67 $0.5 $6.3 Criticized Loans as a Precent of Total 0.4% 4.6% Criticized Loans In Millions Weighted Average Seasoning In Months Trailing 12 Month Net Charge‐Offs Committed Line, if collateral In Millions Portfolio Characteristics ‐ Commercial & Industrial Loan Balance In Millions Number of Loans Average Loan Size In Thousands As of Portfolio Fundamentals 10
Portfolio Fundamentals 25% 18% 19% 16% 5% 5% 3% 3% 6% Campgrounds Multi‐Family Warehouse/Mini 1‐4 Family Hospitality Land Mixed Use Retail Other Commercial & Development As of 3/31/23 25% 23% 13% 10% 10% 5% 5% 4% 5% Wisconsin Minnesota South Dakota Iowa Utah Illinois Florida Ohio Other By Geography As of 3/31/23 • 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 3/31/2023 12/31/2022 Loan Balance Outstanding In Millions $115 $102 Number of Loans 114 122 Average Loan Size In Millions $1.0 $0.8 Approximate Weighted Average LTV 61% 54% Trailing 12 Month Net Charge‐Offs 0.00% 0.00% Percent Utilized of Commitments 56% 54% $0.1 $0.1 Criticized Loans as a Percent of Total 0.1% 0.1% Portfolio Characteristics ‐ Construction & Development As of Criticized Loans in Millions 11
32% 24% 19% 25% Crop Other Farming Dairy Other Agricultural As of 3/31/23 Portfolio Fundamentals 72% 25% 3% Wisconsin Minnesota Other By Geography As of 3/31/23 • 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 • Operating and ag loan relationships are typically cross collateralized Agricultural Real Estate & Operating Loans 3/31/2023 12/31/2022 $115 $117 511 523 $225 $223 32 32 0.18% 0.15% Criticized Loans in Millions $5.5 $6.1 4.8% 5.2%Criticized Loans as a Percent of Total 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 As of 12
64% 28% 8% Limited Service Full Service Other Hotels As of 3/31/23 Portfolio Fundamentals 38% 46% 16% Minnesota Wisconsin Illinois By Geography As of 3/31/23 • Mainly experienced multi project hoteliers and guarantors with strong personal financial statements (net worth and liquidity) • Mainly flagged/franchised limited stay properties • Underwriting consistent with management's conservative approach to Investor CRE, emphasizing actual results in underwriting Hotel Loans 3/31/2023 12/31/2022 $92 $92 26 26 $3.4 $3.5 56% 57% 0.00% 0.00% Criticized Loans in Millions $5.9 $6.0 6.4% 6.5%Criticized Loans as a Precent of Total As of Number of Loans Trailing 12 Month Net Charge Offs Portfolio Characteristics ‐ Hotels Loan Balance Outstanding In Millions Average Loan Size In Millions Approximate Weighted Average LTV 13
66% 16% 7% 4% 3% 4% Culver's ‐ Limited Service Restaurants Other National Limited Services Drinking Establishments Bowling Centers Restaurants As of 3/31/23 Portfolio Fundamentals 46% 33% 21% Wisconsin Minnesota Other By Geography As of 3/31/23 • Experienced developers/operators of national Limited /Quick Service brands (Culver’s, Subway, Dairy Queen, McDonalds, Jimmy John’s, A&W) • Underwritten to =<80% LTV with full recourse (depending on sponsor history); 20‐year amortization with 5 to 10‐year terms • Use of SBA Guaranty Program (Preferred Lender or General Processing) as appropriate • Drinking establishments may have other collateral pledged and tend to be in smaller communities in our footprint • Lessors of RE include investor and owner‐occupied structure Restaurant Loans 3/31/2023 12/31/2022 $48 $48 69 74 $689 $655 54% 55% 0.00% 0.00% Criticized Loans In Millions $0.8 $0.8 1.7% 1.7%Criticized Loans as a Percent of Total Portfolio Characteristics ‐ Restaurants As of Trailing 12 Month Net Charge‐Offs Loan Balance Outstanding In Millions Number of Loans Average Loan Size In Thousands Approximate Weighted Average LTV 14
8% 20% 29% 31% 3% 3% 6% 2023 2022 2021 2020 2017 2016 Prior By Vintage As of 3/31/23 Portfolio Fundamentals 19% 13% 10% 9%7% 7% 6% 5% 4% 4% 4% 4% 4% 4% Wisconsin Ohio Utah Maryland Illinois Pennsylvania Kentucky New York North Carolina Tennessee Iowa South Carolina New Jersey Other By Geography As of 3/31/23 • 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 3/31/2023 12/31/2022 $97 $87 49 48 $2.0 $1.8 47% 46% 26 27 0.00% 0.00% $0.0 $0.0 Criticized Loans as a Percent of Total 0.0% 0.0% Portfolio Characteristics ‐ Campgrounds As of Weighted Average Seasoning in Months Criticized Loans in Millions Loan Balance Outstanding In Millions Number of Loans Average Loan Size In Millions Approximate Weighted Average LTV Trailing 12 Month Net Charge‐Offs 15
5% 29% 4%41% 21% 2023 2024 2025 2026 2027 & Beyond Maturity or Next Repricing Date As of 3/31/23 Portfolio Fundamentals 60% 34% 6% Wisconsin Minnesota Other By Geography As of 3/31/23 Properties financed are generally in Wisconsin and Minnesota and are not in urban or immediate suburbs of large metro areas Projects underwritten with 5‐10 year term, up to 20 year amortization, and less than 80% LTV Loans are with recourse to the sponsor/owner(s) Buildings are mostly single level buildings and no more than three floors high Tenants centered in medical, insurance, professional services and government Office Loans 3/31/2023 12/31/2022 $45 $45 72 72 $626 $631 65% 66% 31 28 0.00% 0.00% $0.0 $0.0 0.0% 0.0%Criticized Loans as a Percent of Total Portfolio Characteristics ‐ Office As of Weighted Average Seasoning in Months Criticized Loans in Millions Loan Balance Outstanding In Millions Number of Loans Average Loan Size In Thousands Approximate Weighted Average LTV Trailing 12 Month Net Charge‐Offs 16
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