8-K - CZWI - Equibles

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

________________

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): July 27, 2020

CITIZENS COMMUNITY BANCORP, INC.

(Exact name of registrant as specified in its charter)

Maryland

(State or other jurisdiction of incorporation)

001-33003	20-5120010
(Commission File Number)	(I.R.S. Employer Identification No.)

2174 EastRidge Center

Eau Claire, WI

54701

(Address and Zip Code of principal executive offices)

715-836-9994

(Registrant's telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $.01 par value per share	CZWI	NASDAQ Global Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933. (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter.)

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 2.02. Results of Operations and Financial Condition.

On July 30, 2020, Citizens Community Bancorp, Inc. (the “Company”) issued a press release announcing our financial results for its second quarter ended June 30, 2020 and posted its Earnings Release Supplement to its website. A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K, and a copy of the Earnings Release Supplement is attached hereto as Exhibit 99.2. The attached Exhibits 99.1 and 99.2 are furnished pursuant to Item 2.02 of Form 8-K.

The information in this Item 2.02, Item 9.01 and Exhibits 99.1 and 99.2 attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of such section, nor shall it be deemed incorporated by reference in any filing of the Company under the Securities Act of 1933 or the Securities Exchange Act of 1934, regardless of any general incorporation language in such filing, unless expressly incorporated by specific reference in such filing.

Item 8.01. Other Events.

On July 27, 2020, the Company terminated its existing stock repurchase program, which as previously reported, had been suspended on March 23, 2020. The stock repurchase program was adopted on October 25, 2019 with authority through September 30, 2020 and could be suspended, terminated or modified at any time for any reason.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits. The following exhibit is being furnished herewith:

99.1	Press Release dated July 30, 2020
99.2	Earnings Release Supplement dated July 30, 2020
104	The cover page from this Current Report on Form 8-K in Inline XBRL (Extensible Business Reporting Language)

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	CITIZENS COMMUNITY BANCORP, INC.
Date: July 30, 2020	By:	/s/ James S. Broucek
		James S. Broucek
		Chief Financial Officer

		Exhibit

EXHIBIT 99.1

Citizens Community Bancorp, Inc. Earns $3.1 Million, or $0.28 Per Share in 2Q20.

SBA Paycheck Protection Program Loan Production of $137 Million,

Record Mortgage Originations of $82 Million

EAU CLAIRE, WI, July 30, 2020 - 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 $3.1 million, or $0.28 per diluted share for the quarter ended June 30, 2020, compared to $2.6 million, or $0.23 per diluted share for the previous quarter ended March 31, 2020. Tangible book value per share (non-GAAP)^5^ was $10.31 at June 30, 2020 compared to $9.80 at March 31, 2020. This increase in tangible book value reflects the second quarter net income of $3.1 million, quarterly increase in accumulated other comprehensive income of $1.6 million and a reduction of intangibles of $0.9 million, including a reduction of $0.5 million from the sale of the Wells Insurance Agency. For the six months ended June 30, 2020, earnings totaled $5.7 million, or $0.51 per share compared to earnings of $5.1 million, or $0.46 per share for the six months ended June 30, 2019.

The Company’s second quarter operating results reflected: (1) improved asset quality, (2) interest income benefiting from fee accretion on SBA Payment Protection Program (“PPP”) originations and accretion from purchase credit impaired (“PCI”) loans, (3) a continued robust refinancing market which lead to all-time high gains on sale of mortgage loans, (4) higher loan loss provisions, primarily due to increasing our COVID-19-related qualitative allowance factor, (5) lower net interest margin related to the addition of low yielding SBA PPP loans and further reductions in short term interest rates, and (6) higher non-interest expenses due to increased impairment of mortgage servicing right assets and variable compensation on all-time high mortgage loan production.

“We were pleased with asset quality improvements evidenced by reductions in special mention and substandard loans and the accretion of interest on PCI loans. Deferments tapered off as the quarter progressed and ended the quarter at 15% of total loans. We found through our client outreach, focused on high risk segments and larger borrowers covering approximately $700 million in loans, that businesses remained optimistic but that more visibility on the reopening of the economy in their markets is needed for them to better assess future prospects.” said Stephen Bianchi, Chairman, President and Chief Executive Officer. “The development of our mortgage banking platform over the last three years and the team’s commitment to long hours allowed us to take advantage of heavy refinance activity and accelerating purchase market to recognize all-time high gains on sale and loan servicing income. During the COVID-19 shutdown, we evaluated our business and began the implementation of a restructuring plan which began with the sale of Wells Insurance Agency,” continued Bianchi.

June 30, 2020 Highlights: (as of or for the 3-month period ended June 30, 2020, compared to March 31, 2020)

•	Non-performing assets declined to $17.4 million or 1.08% of total assets at June 30, 2020 from $19.2 million or 1.28% of total assets at March 31, 2020. With the payoff of certain purchased credit impaired loans in the second quarter of 2020, the Company realized loan accretion of approximately $0.3 million, which is reflected in interest income, and positively impacts net interest margin.

•	SBA PPP loan production of $137 million increased loans receivable to $1.28 billion at June 30, 2020 compared to $1.18 billion at March 31, 2020. The strong SBA PPP loan growth was partially offset by reductions in the acquired loan portfolio of $33 million. Loan growth was also offset by principal reductions in the community banking portfolio of $7.2 million in residential mortgage loans and $4.4 million of principal repayments on indirect paper.
•	The net interest margin, excluding purchase accounting related accretion, was 3.19% for the quarter ended June 30, 2020 compared to 3.27% for the previous quarter. This decrease was largely due to two components. First, the impact of modestly lower yielding SBA PPP loans during the second quarter reduced the net interest margin by 4 bp. Secondly, the reduction in interest income recognized on nonaccrual loan payoffs during the current quarter compared to the previous quarter reduced the net interest margin by 4 bp. Although asset yields decreased due to the swift first quarter reduction in interest rates, this impact was offset by lower liability yields, partially due to the increase in non-interest bearing checking deposit growth. While reducing the overall margin percentage, net interest income grew as the Company recognized $0.8 million interest income on the SBA PPP loans, which included $0.5 million of deferred origination fees on the SBA PPP loans.
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•	The reported net interest margin (“NIM”) decreased to 3.34% for the quarter ended June 30, 2020, from 3.64% for the quarter ended March 31, 2020. The decrease primarily related to lower realized non-accretable differences included in loan interest income, as payoffs of certain purchased credit impaired loans were higher in the prior quarter and to a lesser extent, the changes discussed above.
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•	The Bank recorded provision for loan losses of $1.75 million for the quarter ended June 30, 2020. In continued anticipation of a COVID-19 related adverse economic impact, management reserved $1.25 million increasing the allowance for loan losses allocated to COVID-19 to $2.00 million. Various “Stay-at-Home Orders” continued to result in temporary business closures, reduced operating capacity and uncertainty regarding potential future revenue and cash flows for certain businesses, including bank borrowers. Approximately $100 thousand of the provision was related to loan portfolio growth in the quarter. The remaining provision was related to the impact of net loan charge-offs of $212 thousand and necessary increases in specific and unallocated allowance for loan losses. In the first quarter of 2020, approximately $750 thousand of provision for loan losses was due to COVID-19, $600 thousand was due to loan growth with the remaining $650 thousand due to increases in specific and unallocated allowances, and net charge-offs of $485 thousand.
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•	Hotels and restaurants represent our portfolios’ two industry sectors most directly and adversely affected by the COVID-19 pandemic. These sectors loans totaled approximately $109 million and $42 million, respectively, at June 30, 2020.
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•	As of June 30, 2020, the Bank had approved $197 million of COVID-19 related modifications under Section 4013 of the CARES Act, primarily consisting of payment deferrals. Hotel industry sectors represent approximately $78 million of the approved deferrals and restaurant industry sectors represent $25 million. Approximately, $39 million of approved deferrals are in the non-owner occupied CRE sector, where many of these are to facilitate landlords providing payment deferrals for their tenants.
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•	Non-interest income increased to $5.0 million for the quarter ended June 30, 2020 from $3.6 million for the quarter ended March 31, 2020. The increase is largely due to higher gains on sale of mortgage loans, modestly offset by lower levels of deposit charges and loan fees and service charges. Higher customer deposit balances led to lower service charges on deposit accounts and muted loan demand resulted in lower loan fees and service charges. Nonrecurring gains of $252 thousand from the sale of Wells Insurance Agency and $131 thousand related to a private-mortgage backed security claim were recorded during the current quarter. The latter represents a supplement to the proceeds received in March 2017 from this private-mortgage backed security previously owned by the Bank and sold in 2011.
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•

Total non-interest expense was higher due in part to increased impairment on mortgage servicing rights (“MSR”) due to higher actual and forecasted prepayment rates, higher variable compensation related to higher mortgage loan originations and higher FDIC insurance expense as the final FDIC insurance credit was recognized in the first quarter. These expenses were partially offset by lower professional fees.

Bank and Company capital ratios exceeded regulatory guidelines for a well-capitalized financial institution under the Basel III regulatory requirements at June 30, 2020:

	Citizens Community Federal N.A.	Citizens Community Bancorp, Inc.	To Be Well Capitalized Under Prompt Corrective Action Provisions
Tier 1 leverage ratio (to adjusted total assets)	9.9%	7.4%	5.0%
Tier 1 capital (to risk weighted assets)	12.9%	9.7%	8.0%
Common equity tier 1 capital (to risk weighted assets)	12.9%	9.7%	6.5%
Total capital (to risk weighted assets)	14.0%	12.1%	10.0%

Balance Sheet and Asset Quality

Total assets increased $101.8 million during the quarter to $1.61 billion at June 30, 2020 from $1.51 billion at March 31, 2020. The increase is due to the loan portfolio growth due to the origination of SBA PPP loans, partially offset by reductions in the acquired loan portfolio.

Total stockholders’ equity increased to $153 million at June 30, 2020 from $148 million one quarter earlier. This increase reflects second quarter net income of $3.1 million and the positive impact of unrealized gains on the available-for-sale securities portfolio reflected in other comprehensive income. Book value per share was $13.70 at June 30, 2020 compared to $13.27 at March 31, 2020. Tangible book value per share (non-GAAP)^5^was $10.31 at June 30, 2020 compared to $9.80 at March 31, 2020. Tangible common equity (non-GAAP)^5^as a percent of tangible assets (non-GAAP) was 7.33% at June 30, 2020 compared to 7.45% at March 31, 2020. Tangible common equity (non-GAAP)^5^as a percent of tangible assets (non-GAAP) excluding SBA PPP loans was 8.03% at June 30, 2020.

The temporary deterioration in the valuation of the Bank’s investment in Trust Preferred Securities and Student Loan Paper realized in March due to market turmoil, moderated in June. At June 30, 2020, accumulated other comprehensive income increased to a $19 thousand unrealized gain compared to an unrealized loss of $1.6 million at March 31, 2020. “As we discussed last quarter, the unrealized loss at March 31, 2020 was considered to be a temporary event and was not related to long-term credit deterioration in the portfolios. Volatility in interest rates and pricing spreads will impact the market values of our available for sale investment portfolio securities,” said Jim Broucek, Executive Vice President and CFO.

Gross loans increased to $1.29 billion at June 30, 2020 from $1.19 billion primarily due to the origination of $137.3 million of SBA PPP loans. Both multi-family real estate and construction and land development loans grew during the quarter while all other loan categories reflected net loan reductions during the quarter.

The originated loan portfolio remained flat with the prior quarter at $790 million before the impact of the $137 million growth in SBA PPP loan originations. Acquired loans declined to $366.7 million in the current quarter from $399.6 million in the previous quarter. All acquired loans were marked to fair value as of the acquisition date.

The allowance for loan and lease losses increased to $13.4 million at June 30, 2020 representing 1.04% of loans receivable or 1.16% of loans receivable, excluding the 100% SBA guaranteed PPP loans. A significant portion of the current loan portfolio includes loans purchased through whole bank acquisitions resulting in purchased credit

impairments which are not included in the allowance for loan losses. The allowance for loan and lease losses was $11.8 million at March 31, 2020, representing 1.00% of total loans. The increase in the allowance was primarily due to loan loss provisions largely associated with anticipated COVID-19 adverse economic impacts. In addition, the June 2020 provision included modest growth in unallocated and specific reserves and approximately $100 thousand related to loan growth. Net charge-offs decreased in this quarter to $212 thousand compared to $485 thousand for the previous quarter.

One of the Company’s strategic objectives for 2020 was to reduce nonperforming assets and classified assets.

Nonperforming assets decreased to $17.4 million or 1.08% of total assets at June 30, 2020 compared to $19.2 million or 1.28% of total assets at March 31, 2020. Classified assets decreased approximately $3 million during the quarter to $36.7 million. Included in classified assets are agricultural real estate loans of approximately $9.4 million at June 30, 2020 compared to $10.2 million at March 31, 2020. Agricultural operating loans decreased to $1.9 million at June 30, 2020 compared to $2.2 million at March 31, 2020.

The table below shows the decreases in substandard loans by quarter since the first impact of the F&M acquisition on September 30, 2019 levels. While special mention loans increased in the first quarter of 2020, the growth moderated in the second quarter of 2020.

	(in thousands)
	June 30, 2020		March 31, 2020		December 31, 2019		September 30, 2019
Special mention loan balances	$	19,958	$	19,387	$	10,856	$	12,959
Substandard loan balances	35,911		38,393		39,892		38,527
Balances, end of period	$	55,869	$	57,780	$	50,748	$	51,486

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 discounts which were established at acquisition. The Bank has transferred non-accretable differences on purchased credit impaired loans to accretable discounts as collateral coverage improved sufficiently, due to a combination of principal paydowns and/or improving collateral positions. This transferred non-accretable difference to accretable discounts is accreted over the remaining maturity of the loan or until payoff, whichever is shorter.

Non-accretable differences:

	(in thousands)
	June 30, 2020			March 31, 2020			December 31, 2019			September 30, 2019
Non-accretable difference, beginning of period	$	4,327		$	6,290		$	6,737		$	3,889
Additions to non-accretable difference for acquired purchased credit impaired loans	—			—			(170		)	2,898
Non-accretable difference realized as interest from payoffs of purchased credit impaired loans	(196		)	(1,043		)	(271		)	(50		)
Transfers from non-accretable difference to accretable discount.	(741		)	(669		)	—			—
Non-accretable difference used to reduce loan principal balance	(35		)	—			—			—
Non-accretable difference transferred to OREO due to loan foreclosure	—			(251		)	(6		)	—
Non-accretable difference, end of period	$	3,355		$	4,327		$	6,290		$	6,737

The table below provides the changes in accretable discount for acquired loans.

Accretable discounts:

	(in thousands)
	June 30, 2020			March 31, 2020			December 31, 2019			September 30, 2019
Accretable discounts, beginning of period	$	3,637		$	3,201		$	3,435		$	2,855
Additions to accretable discount for acquired performing loans	—			—			—			814
Accelerated accretion from payoff of certain PCI loans with transferred non-accretable differences	(99		)	—			—			—
Transfers from non-accretable difference to accretable discount	741			669			—			—
Scheduled accretion	(247		)	(233		)	(234		)	(234		)
Accretable discounts, end of period	$	4,032		$	3,637		$	3,201		$	3,435

Deposits increased $92 million to $1.27 billion at June 30, 2020 compared to $1.18 billion at March 31, 2020. Retail non-maturity deposits increased $35 million in the quarter and commercial non-maturity deposits increased $91 million in the quarter. Approximately $16 million of the commercial non-maturity deposits related to growth from customers who borrowed under the SBA PPP program and were depositors at the Bank. Approximately $3 million of the commercial non-maturity deposit growth was growth in deposit accounts for SBA PPP loan customers who did not have a lending or deposit relationship with the Bank prior to the pandemic. The strong non-maturity deposit growth allowed the Company to reduce the use of higher-cost brokered and institutional deposits by $23 million to $20 million at June 30, 2020. Additionally, retail certificates of deposit decreased by $11 million as the Company chose not to match higher rate local retail certificate competition.

Effective March 20, 2020, the Company suspended its stock repurchase plan. On July 23, 2020, the Board of Directors of the Company accelerated the time period the buyback authorization ended from September 30, 2020 to July 23, 2020.

Review of Operations

Net interest income was $12.3 million for the second quarter of 2020, compared to $12.7 million for the first quarter of 2020, and $10.1 million for the quarter ended June 30, 2019. The net interest margin decreased to 3.34% for the second quarter of 2020 compared to 3.64% in the preceding quarter and increased from 3.30% for the quarter ended June 30, 2019. For the quarter ended June 30, 2020, the decrease in net interest margin primarily related to lower realized non-accretable differences included in loan interest income, as payoffs of certain purchased credit impaired loans were higher in the prior quarter. Additionally, interest income recognized on nonaccrual loan payoffs from the

previous quarter, decreased the interest margin in the current quarter by 0.04% and the impact of modestly lower yielding SBA PPP loans during the second quarter, lowered the net interest margin by an additional 0.04%. While asset yields decreased due to the swift first quarter reduction in interest rates, this impact was partially offset by lower liability yields, influenced by the increase in non-interest bearing checking deposit growth. While reducing the overall margin percentage, net interest income grew as the Company recognized $0.8 million interest income on the SBA PPP loans. This was largely due to the recognition of $0.5 million of deferred origination fees on the SBA PPP loans.

Net interest income and net interest margin with and without loan purchase accounting:

(in thousands, except yields and rates)

	Three months ended
	June 30, 2020					March 31, 2020					December 31, 2019					June 30, 2019
	Net Interest Income			Net Interest Margin		Net Interest Income			Net Interest Margin		Net Interest Income			Net Interest Margin		Net Interest Income			Net Interest Margin
With loan purchase accretion	$	12,303		3.34	%	$	12,671		3.64	%	$	11,775		3.41	%	$	10,083		3.30	%
Less non-accretable difference realized as interest from payoff of purchased credit impaired loans	(196		)	(0.05	)%	(1,043		)	(0.30	)%	(271		)	(0.08	)%	(56		)	(0.02	)%
Less accelerated accretion from payoff of certain PCI loans with transferred non-accretable differences	(99		)	(0.03	)%	—			—	%	—			—	%	—			—	%
Less scheduled accretion interest	(247		)	(0.07	)%	(233		)	(0.07	)%	(233		)	(0.07	)%	(194		)	(0.07	)%
Without loan purchase accretion	$	11,761		3.19	%	$	11,395		3.27	%	$	11,271		3.26	%	$	9,833		3.21	%

The yield on interest earning assets was 4.32% for the second quarter of 2020, compared to 4.85% the prior quarter, and 4.68% for the second quarter one year earlier. The decrease in the most recent quarter was largely due to a reduction in loan accretion from the payoff of purchased credit impaired loans. Furthermore, the addition of low yielding SBA PPP loans along with loans and investments repricing to lower rates, decreased the yields on interest earning assets. In the first quarter, the yield was elevated by the accretion of discounts associated with the payoff of purchased credit impaired loans. The cost of interest-bearing liabilities decreased to 1.16 % for the second quarter from 1.46% one quarter earlier and 1.63% one year earlier. The primary decrease in the second quarter funding costs was due to lower deposit costs as the Bank repriced various deposit products. For the six months ended June 30, 2020, the net interest margin was 3.48% compared to 3.36% for the same time period one year earlier largely due to the increase in loan accretion from the payoff of purchased credit impaired loans.

Loan loss provisions were $1.75 million for the quarter ended June 30, 2020 compared to $2.0 million for the quarter ended March 31, 2020 and $325 thousand one year earlier. Various businesses, as determined through our outreach, remained optimistic, but these businesses acknowledged more visibility on the reopening of the economy in their markets is needed for them to better assess their future prospects. This uncertainty, and until the full effect of the COVID-19 pandemic becomes clearer, will continue to impact future loan loss provisions. For the six months ended June 30, 2020, provisions for loan losses were $3.75 million compared to $1.55 million for the six months ended June 30, 2019.

Non-interest income was $5.0 million for the second quarter compared to $3.6 million the preceding quarter and $5.2 million the second quarter one year ago when a gain on branch sale of $2.3 million was recognized. The current quarter reflects $1.8 million in gains on the sale of loans versus $780 thousand the prior quarter and $573 thousand for the second quarter ended June 30, 2019. Loan servicing income also increased in the current quarter to $1.3 million from $685 thousand the prior quarter and $634 thousand one year earlier. Service charges on deposit accounts declined to $345 thousand during the current quarter from $560 thousand as more customers had larger

deposit balances, due in part to SBA PPP funds deposited into their accounts. Loan fee and service charge income declined to $244 thousand for the quarter ended June 30, 2020 from $477 thousand the prior quarter due primarily to lower commercial customer activity. The Company sold the Wells Insurance Agency at the end of the quarter ended June 30, 2020, realizing a net gain of $252 thousand. With the sale of the Agency, the Company reduced intangible assets assigned to the customer list by $470 thousand. During the quarter ended June 30, 2020, the Company recognized $131 thousand of non-interest income related to a private-mortgage backed security claim. This distribution represents a supplement to the proceeds received in March 2017 from this private-mortgage backed security previously owned by the Bank and sold in 2011. For the six months ended June 30, 2020, total non-interest income was $8.6 million compared to $7.6 million for the same period one year earlier.

Total non-interest expense increased to $11.4 million for the second quarter of 2020, compared to $10.7 million in the prior quarter and $9.4 million for the quarter ended June 30, 2019. The increase in total non-interest expense for the current quarter relative to the previous quarter is primarily due to higher variable mortgage production compensation related to all-time high mortgage loan origination activity during the quarter. Additionally, data processing expenses increased modestly due to loan origination activity and larger deposit balances. Mortgage servicing expenses increased to $991 thousand for the quarter ended June 30, 2020 from $736 thousand the prior quarter due to MSR impairment of $650 thousand recognized in the second quarter compared to $480 thousand recognized in the first quarter, largely due to the impact of higher actual and forecasted prepayment rates. The increase in non-interest expenses also reflected increased FDIC insurance costs, offset by lower professional fees. For the six months ended June 30, 2020, total non-interest expenses were $22.1 million compared to $19.3 million for the six months ended June 30, 2019. The impact of the F&M acquisition on July 1, 2019 increased non-interest expense in 2020 in addition to the items discussed above.

Provisions for income taxes were $1.1 million for the second quarter ended June 30, 2020 compared to $937 thousand during the preceding quarter. For the six months ended June 30, 2020, provisions for income taxes were $2.0 million compared to $1.8 million for the six months ended June 30, 2019. The effective tax rate for all periods discussed was 26.5%.

These financial results are preliminary until the Form 10-Q is filed in August 2020.

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 28 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,” “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; risks related to the ongoing integration of F. & M. Bancorp. of Tomah, Inc. into the Company’s operations; 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, 2019 filed with the Securities and Exchange Commission (“SEC”) on March 10, 2020 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, tangible book value per share and tangible common equity as a percent of tangible assets, 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 is a non-GAAP measure that eliminates 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 per share and tangible common equity as a percent of tangible assets 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

CITIZENS COMMUNITY BANCORP, INC.

Consolidated Balance Sheets

(in thousands, except shares and per share data)

	June 30, 2020 (unaudited)			March 31, 2020 (unaudited)			December 31, 2019 (audited)			June 30, 2019 (unaudited)
Assets
Cash and cash equivalents	$	39,581		$	41,347		$	55,840		$	47,008
Other interest-bearing deposits	3,752			4,006			4,744			5,980
Securities available for sale “AFS”	162,716			163,435			180,119			154,760
Securities held to maturity “HTM”	10,541			10,767			2,851			3,828
Equity securities with readily determinable fair value	188			163			246			177
Other investments	15,193			14,999			15,005			12,543
Loans receivable	1,281,175			1,180,951			1,177,380			1,019,957
Allowance for loan losses	(13,373		)	(11,835		)	(10,320		)	(8,759		)
Loans receivable, net	1,267,802			1,169,116			1,167,060			1,011,198
Loans held for sale	8,876			3,281			5,893			2,475
Mortgage servicing rights	3,509			3,728			4,282			4,319
Office properties and equipment, net	21,318			21,066			21,106			15,287
Accrued interest receivable	5,855			4,822			4,738			4,452
Intangible assets	6,293			7,175			7,587			6,828
Goodwill	31,498			31,498			31,498			31,474
Foreclosed and repossessed assets, net	734			1,432			1,460			1,387
Bank owned life insurance (“BOLI”)	23,357			23,205			23,063			18,022
Escrow merger settlement proceeds	—			—			—			20,555
Other assets	5,787			5,124			5,757			8,127
TOTAL ASSETS	$	1,607,000		$	1,505,164		$	1,531,249		$	1,348,420
Liabilities and Stockholders’ Equity
Liabilities:
Deposits	$	1,272,197		$	1,180,055		$	1,195,702		$	1,015,459
Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank (“FRB”) advances	124,484			123,477			130,971			135,844
Other borrowings	43,595			43,576			43,560			44,551
Other liabilities	13,934			10,123			10,463			9,324
Total liabilities	1,454,210			1,357,231			1,380,696			1,205,178
Stockholders’ equity:
Common stock— $0.01 par value, authorized 30,000,000; 11,150,695; 11,151,009; 11,266,954 and 10,982,008 shares issued and outstanding, respectively	112			112			113			110
Additional paid-in capital	127,734			127,732			128,856			125,822
Retained earnings	25,759			22,690			22,517			18,114
Unearned deferred compensation	(834		)	(992		)	(462		)	(757		)
Accumulated other comprehensive income (loss)	19			(1,609		)	(471		)	(47		)
Total stockholders’ equity	152,790			147,933			150,553			143,242
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,607,000		$	1,505,164		$	1,531,249		$	1,348,420

Note: Certain items previously reported were reclassified for consistency with the current presentation.

CITIZENS COMMUNITY BANCORP, INC.

Consolidated Statements of Operations

(in thousands, except per share data)

	Three Months Ended									Six Months Ended
	June 30, 2020 (unaudited)			March 31, 2020 (unaudited)			June 30, 2019 (unaudited)			June 30, 2020 (unaudited)			June 30, 2019 (unaudited)
Interest and dividend income:
Interest and fees on loans	$	14,687		$	15,459		$	12,976		$	30,146		$	25,390
Interest on investments	1,199			1,449			1,360			2,648			2,664
Total interest and dividend income	15,886			16,908			14,336			32,794			28,054
Interest expense:
Interest on deposits	2,607			3,180			2,926			5,787			5,519
Interest on FHLB and FRB borrowed funds	448			508			913			956			1,574
Interest on other borrowed funds	528			549			414			1,077			816
Total interest expense	3,583			4,237			4,253			7,820			7,909
Net interest income before provision for loan losses	12,303			12,671			10,083			24,974			20,145
Provision for loan losses	1,750			2,000			325			3,750			1,550
Net interest income after provision for loan losses	10,553			10,671			9,758			21,224			18,595
Non-interest income:
Service charges on deposit accounts	345			560			581			905			1,131
Interchange income	489			464			453			953			791
Loan servicing income	1,315			685			634			2,000			1,188
Gain on sale of loans	1,818			780			573			2,598			881
Loan fees and service charges	244			477			261			721			389
Insurance commission income	195			279			192			474			376
Net gains on investment securities	25			73			21			98			55
Net gain on sale of branch	—			—			2,295			—			2,295
Net gain on sale of insurance agency	252			—			—			252			—
Settlement proceeds	131			—			—			131			—
Other	199			285			228			484			464
Total non-interest income	5,013			3,603			5,238			8,616			7,570
Non-interest expense:
Compensation and related benefits	5,908			5,435			4,604			11,343			9,310
Occupancy	899			1,006			866			1,905			1,820
Office	575			543			528			1,118			1,050
Data processing	1,024			996			868			2,020			1,855
Amortization of intangible assets	412			412			346			824			673
Mortgage servicing rights expense	991			736			306			1,727			497
Advertising, marketing and public relations	303			239			456			542			659
FDIC premium assessment	180			68			146			248			240
Professional services	353			604			575			957			1,400
Gains on repossessed assets, net	(22		)	(68		)	(90		)	(90		)	(127		)
Other	769			760			784			1,529			1,906
Total non-interest expense	11,392			10,731			9,389			22,123			19,283
Income before provision for income taxes	4,174			3,543			5,607			7,717			6,882
Provision for income taxes	1,105			937			1,500			2,042			1,822
Net income attributable to common stockholders	$	3,069		$	2,606		$	4,107		$	5,675		$	5,060
Per share information:
Basic earnings	$	0.28		$	0.23		$	0.37		$	0.51		$	0.46
Diluted earnings	$	0.28		$	0.23		$	0.37		$	0.51		$	0.46
Cash dividends paid	$	—		$	0.21		$	—		$	0.21		$	0.20
Book value per share at end of period	$	13.70		$	13.27		$	13.04		$	13.70		$	13.04
Tangible book value per share at end of period (non-GAAP)	$	10.31		$	9.80		$	9.56		$	10.31		$	9.56

Note: Certain items previously reported were reclassified for consistency with the current presentation.

Reconciliation of GAAP Net Income and Net Income as Adjusted (non-GAAP)

(in thousands, except per share data)

	Three Months Ended								Six Months Ended
	June 30, 2020			March 31, 2020		June 30, 2019			June 30, 2020			June 30, 2019
GAAP earnings before income taxes	$	4,174		$	3,543	$	5,607		$	7,717		$	6,882
Merger related costs	—			—		206			—			865
Branch closure costs (1)	—			—		—			—			15
Audit and Financial Reporting (2)	—			—		—			—			358
Net gain on sale of branch (3)	—			—		(2,295		)	—			(2,295		)
Net gain on sale of insurance agency (4)	(252		)	—		—			(252		)	—
Settlement proceeds (5)	(131		)	—		—			(131		)	—
Net income as adjusted before income taxes (6)	3,791			3,543		3,518			7,334			5,825
Provision for income tax on net income as adjusted (7)	1,005			937		943			1,944			1,544
Net income as adjusted after income taxes (non-GAAP) (6)	$	2,786		$	2,606	$	2,575		$	5,390		$	4,281
GAAP diluted earnings per share, net of tax	$	0.28		$	0.23	$	0.37		$	0.51		$	0.46
Merger related costs, net of tax	—			—		0.01			—			0.06
Branch closure costs, net of tax	—			—		—			—			—
Audit and Financial Reporting	—			—		—			—			0.02
Net gain on sale of branch	—			—		(0.15		)	—			(0.15		)
Net gain on sale of insurance agency	(0.02		)	—		—			(0.02		)	—
Settlement proceeds	(0.01		)	—		—			(0.01		)	—
Diluted earnings per share, as adjusted, net of tax (non-GAAP)	$	0.25		$	0.23	$	0.23		$	0.48		$	0.39
Average diluted shares outstanding	11,150,785			11,219,660		10,994,470			11,183,216			10,988,990

(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) Audit and financial reporting costs include additional audit and professional fees related to the change in our year end from September 30 to December 31, effective December 31, 2018.

(3) Gain on sale of branch resulted from the sale of our sole Michigan office in Rochester Hills.

(4) Gain on sale of insurance agency resulted from the sale of Wells Insurance Agency.

(5) 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.

(6) 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.

(7) Provision for income tax on net income as adjusted is calculated at our effective tax rate for each respective period presented.

Nonperforming Assets

(in thousands, except ratios)

	June 30, 2020 and Three Months Ended			March 31, 2020 and Three Months Ended			December 31, 2019 and Three Months Ended			June 30, 2019 and Three Months Ended
Nonperforming assets:
Nonaccrual loans
Commercial real estate	$	3,221		$	3,505		$	5,705		$	1,732
Agricultural real estate	5,979			7,162			7,568			5,717
Commercial and industrial (“C&I”)	1,306			1,360			1,850			1,785
Agricultural operating	1,496			1,739			1,702			1,915
Residential mortgage	2,666			2,139			2,063			2,298
Consumer installment	119			185			168			165
Total nonaccrual loans	$	14,787		$	16,090		$	19,056		$	13,612
Accruing loans past due 90 days or more	1,880			1,670			1,104			880
Total nonperforming loans (“NPLs”)	16,667			17,760			20,160			14,492
Other real estate owned (“OREO”)	692			1,412			1,429			1,354
Other collateral owned	42			20			31			33
Total nonperforming assets (“NPAs”)	$	17,401		$	19,192		$	21,620		$	15,879
Troubled Debt Restructurings (“TDRs”)	$	13,119		$	12,088		$	12,594		$	10,000
Nonaccrual TDRs	$	6,992		$	7,711		$	7,198		$	4,101
Average outstanding loan balance	$	1,266,273		$	1,172,246		$	1,136,330		$	1,023,447
Loans, end of period	$	1,281,175		$	1,180,951		$	1,177,380		$	1,019,957
Total assets, end of period	$	1,607,000		$	1,505,164		$	1,531,249		$	1,348,420
Allowance for loan losses (“ALL”), at beginning of period	$	11,835		$	10,320		$	9,177		$	8,707
Loans charged off:
Commercial/Agricultural real estate	—			—			(156		)	(225		)
C&I/Agricultural operating	(246		)	(442		)	—			—
Residential mortgage	—			(27		)	(16		)	(23		)
Consumer installment	(65		)	(51		)	(119		)	(48		)
Total loans charged off	(311		)	(520		)	(291		)	(296		)
Recoveries of loans previously charged off:
Commercial/Agricultural real estate	76			—			—			3
C&I/Agricultural operating	—			—			—			—
Residential mortgage	6			13			3			—
Consumer installment	17			22			31			20
Total recoveries of loans previously charged off:	99			35			34			23
Net loans charged off (“NCOs”)	(212		)	(485		)	(257		)	(273		)
Additions to ALL via provision for loan losses charged to operations	1,750			2,000			1,400			325
ALL, at end of period	$	13,373		$	11,835		$	10,320		$	8,759
Ratios:
ALL to NCOs (annualized)	1,577.00		%	610.05		%	1,003.89		%	802.11		%
NCOs (annualized) to average loans	0.07		%	0.17		%	0.09		%	0.11		%
ALL to total loans	1.04		%	1.00		%	0.88		%	0.86		%
NPLs to total loans	1.30		%	1.50		%	1.71		%	1.42		%
NPAs to total assets	1.08		%	1.28		%	1.41		%	1.18		%

Nonperforming Originated / Acquired Assets

(in thousands, except ratios)

	June 30, 2020 and Three Months Ended			March 31, 2020 and Three Months Ended			December 31, 2019 and Three Months Ended			June 30, 2019 and Three Months Ended
Nonperforming assets:
Originated nonperforming assets:
Nonaccrual loans	$	3,951		$	4,017		$	4,285		$	4,220
Accruing loans past due 90 days or more	1,455			1,174			946			617
Total originated nonperforming loans (“NPL”)	5,406			5,191			5,231			4,837
Other real estate owned (“OREO”)	270			337			441			70
Other collateral owned	42			20			28			33
Total originated nonperforming assets (“NPAs”)	$	5,718		$	5,548		$	5,700		$	4,940
Acquired nonperforming assets:
Nonaccrual loans	$	10,836		$	12,073		$	14,771		$	9,392
Accruing loans past due 90 days or more	425			496			158			263
Total acquired nonperforming loans (“NPL”)	11,261			12,569			14,929			9,655
Other real estate owned (“OREO”)	422			1,075			988			1,284
Other collateral owned	—			—			3			—
Total acquired nonperforming assets (“NPAs”)	$	11,683		$	13,644		$	15,920		$	10,939
Total nonperforming assets (“NPAs”)	$	17,401		$	19,192		$	21,620		$	15,879
Loans, end of period	$	1,281,175		$	1,180,951		$	1,177,380		$	1,019,957
Total assets, end of period	$	1,607,000		$	1,505,164		$	1,531,249		$	1,348,420
Ratios:
Originated NPLs to total loans	0.42		%	0.44		%	0.44		%	0.47		%
Acquired NPLs to total loans	0.88		%	1.06		%	1.27		%	0.95		%
Originated NPAs to total assets	0.36		%	0.37		%	0.37		%	0.37		%
Acquired NPAs to total assets	0.73		%	0.91		%	1.04		%	0.81		%

Allowance for Loan Losses Percentages

(in thousands, except ratios)

	June 30, 2020			March 31, 2020			December 31, 2019			June 30, 2019
Originated loans, net of deferred fees and costs	$	789,075		$	789,346		$	762,127		$	684,217
C&I SBA PPP loans, net of deferred fees	132,800			—			—			—
Acquired loans, net of unamortized discount	359,300			391,605			415,253			335,740
Loans, end of period	$	1,281,175		$	1,180,951		$	1,177,380		$	1,019,957
C&I SBA PPP loans, net of deferred fees	(132,800		)	—			—			—
Loans, net of C&I SBA PPP loans and deferred fees	$	1,148,375		$	1,180,951		$	1,177,380		$	1,019,957
Allowance for loans losses allocated to originated loans	$	12,109		$	10,850		$	9,551		$	8,284
Allowance for loan losses allocated to other loans	1,264			985			769			475
Allowance for loan losses	$	13,373		$	11,835		$	10,320		$	8,759
ALL as a percentage of loans, end of period	1.04		%	1.00		%	0.88		%	0.86		%
ALL as a percentage of loans, net of C&I SBA PPP loans and deferred fees	1.16		%	1.00		%	0.88		%	0.86		%
ALL allocated to originated loans as a percentage of originated loans, net of deferred fees and costs	1.53		%	1.37		%	1.25		%	1.21		%

Nonaccrual Loans Rollforward

(in thousands)

	Quarter Ended
	June 30, 2020			March 31, 2020			December 31, 2019			June 30, 2019
Balance, beginning of period	$	16,090		$	19,056		$	19,022		$	9,871
Additions	1,907			1,811			2,641			7,405
Acquired nonaccrual loans	—			—			—			—
Charge offs	(175		)	(452		)	(198		)	(262		)
Transfers to OREO	—			(1,100		)	(425		)	(236		)
Return to accrual status	(1,702		)	(120		)	(14		)	(149		)
Payments received	(760		)	(2,824		)	(1,957		)	(2,612		)
Other, net	(573		)	(281		)	(13		)	(405		)
Balance, end of period	$	14,787		$	16,090		$	19,056		$	13,612

Other Real Estate Owned Rollforward

(in thousands)

	Quarter Ended
	June 30, 2020			March 31, 2020			December 31, 2019			June 30, 2019
Balance, beginning of period	$	1,412		$	1,429		$	1,348		$	2,071
Loans transferred in	—			988			495			236
Sales	(681		)	(965		)	(378		)	(958		)
Write-downs	(151		)	(49		)	(64		)	(23		)
Other, net	112			9			28			28
Balance, end of period	$	692		$	1,412		$	1,429		$	1,354

Troubled Debt Restructurings in Accrual Status

(in thousands, except number of modifications)

	June 30, 2020			March 31, 2020			December 31, 2019			June 30, 2019
	Number of<br><br>Modifications	Recorded<br><br>Investment		Number of<br><br>Modifications	Recorded<br><br>Investment		Number of<br><br>Modifications	Recorded<br><br>Investment		Number of<br>Modifications	Recorded<br>Investment
Troubled debt restructurings: Accrual Status
Commercial/Agricultural real estate	19	$	1,885	13	$	1,125	14	$	1,730	14	$	2,202
C&I/Agricultural Operating	5	1,199		1	9		2	366		4	478
Residential mortgage	39	2,981		38	3,174		40	3,233		39	3,137
Consumer installment	8	62		8	69		7	67		11	82
Total loans	71	$	6,127	60	$	4,377	63	$	5,396	68	$	5,899

Loan Composition (in thousands)	June 30, 2020			March 31, 2020			December 31, 2019			June 30, 2019
Originated Loans:
Commercial/Agricultural real estate:
Commercial real estate	$	314,390		$	313,147		$	302,546		$	239,051
Agricultural real estate	35,138			35,652			34,026			34,927
Multi-family real estate	90,617			89,474			71,877			75,664
Construction and land development	94,856			81,685			71,467			35,030
C&I/Agricultural operating:
Commercial and industrial	80,369			85,249			89,730			75,186
Agricultural operating	25,813			22,700			20,717			21,776
Residential mortgage:
Residential mortgage	95,664			102,854			108,619			117,585
Purchased HELOC loans	6,861			7,601			8,407			11,125
Consumer installment:
Originated indirect paper	32,031			36,414			39,585			47,391
Purchased indirect paper	—			—			—			11,155
Other consumer	14,175			15,080			15,546			15,229
Originated loans before C&I SBA PPP loans	789,914			789,856			762,520			684,119
C&I SBA PPP loans	137,330			—			$	—		—
Total originated loans	$	927,244		$	789,856		$	762,520		$	684,119
Acquired Loans:
Commercial/Agricultural real estate:
Commercial real estate	$	195,335		$	207,003		$	211,913		$	135,390
Agricultural real estate	43,054			47,766			51,337			57,210
Multi-family real estate	13,022			13,509			15,131			7,759
Construction and land development	15,276			14,233			14,943			17,041
C&I/Agricultural operating:
Commercial and industrial	29,477			36,757			44,004			32,568
Agricultural operating	12,124			15,240			17,063			15,051
Residential mortgage:
Residential mortgage	56,760			62,957			67,713			74,305
Consumer installment:
Other consumer	1,639			2,104			2,640			3,160
Total acquired loans	$	366,687		$	399,569		$	424,744		$	342,484
Total Loans:
Commercial/Agricultural real estate:
Commercial real estate	$	509,725		$	520,150		$	514,459		$	374,441
Agricultural real estate	78,192			83,418			85,363			92,137
Multi-family real estate	103,639			102,983			87,008			83,423
Construction and land development	110,132			95,918			86,410			52,071
C&I/Agricultural operating:
Commercial and industrial	109,846			122,006			133,734			107,754
Agricultural operating	37,937			37,940			37,780			36,827
Residential mortgage:
Residential mortgage	152,424			165,811			176,332			191,890
Purchased HELOC loans	6,861			7,601			8,407			11,125
Consumer installment:
Originated indirect paper	32,031			36,414			39,585			47,391
Purchased indirect paper	—			—			—			11,155
Other consumer	15,814			17,184			18,186			18,389
Gross loans before C&I SBA PPP loans	1,156,601			1,189,425			1,187,264			1,026,603
C&I SBA PPP loans	137,330			—			—			—
Gross loans	$	1,293,931		$	1,189,425		$	1,187,264		$	1,026,603
Unearned net deferred fees and costs and loans in process	(5,369		)	(510		)	(393		)	98
Unamortized discount on acquired loans	(7,387		)	(7,964		)	(9,491		)	(6,744		)
Total loans receivable	$	1,281,175		$	1,180,951		$	1,177,380		$	1,019,957

Deposit Composition

(in thousands)

	June 30, <br>2020		March 31, <br>2020		December 31, <br>2019		June 30, 2019
Non-interest bearing demand deposits	$	223,536	$	150,139	$	168,157	$	140,130
Interest bearing demand deposits	270,116		242,824		223,102		180,001
Savings accounts	185,816		161,038		156,599		148,005
Money market accounts	242,536		243,715		246,430		155,964
Certificate accounts	350,193		382,339		401,414		391,359
Total deposits	$	1,272,197	$	1,180,055	$	1,195,702	$	1,015,459

Average balances, Interest Yields and Rates

(in thousands, except yields and rates)

	Three months June 30, 2020						Three months ended March 31, 2020						Three months June 30, 2019
	Average<br><br>Balance		Interest<br><br>Income/<br><br>Expense		Average<br><br>Yield/<br><br>Rate (1)		Average<br><br>Balance		Interest<br><br>Income/<br><br>Expense		Average<br><br>Yield/<br><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	$	19,995	$	5	0.10	%	$	31,069	$	118	1.53	%	$	30,076	$	171	2.28	%
Loans receivable	1,266,273		14,687		4.66	%	1,172,246		15,459		5.30	%	1,023,447		12,976		5.09	%
Interest bearing deposits	3,788		23		2.44	%	4,362		27		2.49	%	5,967		35		2.35	%
Investment securities (1)	174,875		988		2.27	%	179,287		1,131		2.54	%	158,991		996		2.60	%
Other investments	15,160		183		4.86	%	15,006		173		4.64	%	12,114		158		5.23	%
Total interest earning assets (1)	$	1,480,091	$	15,886	4.32	%	$	1,401,970	$	16,908	4.85	%	$	1,230,595	$	14,336	4.68	%
Average interest bearing liabilities:
Savings accounts	$	171,285	$	99	0.23	%	$	154,596	$	151	0.39	%	$	147,456	$	149	0.41	%
Demand deposits	267,429		260		0.39	%	234,822		375		0.64	%	191,858		383		0.80	%
Money market accounts	243,264		350		0.58	%	236,470		609		1.04	%	164,402		448		1.09	%
CD’s	328,543		1,706		2.09	%	354,095		1,846		2.10	%	336,253		1,765		2.11	%
IRA’s	42,117		192		1.83	%	42,695		199		1.87	%	40,688		181		1.78	%
Total deposits	$	1,052,638	$	2,607	1.00	%	$	1,022,678	$	3,180	1.25	%	$	880,657	$	2,926	1.33	%
FHLB advances and other borrowings	186,191		976		2.11	%	146,810		1,057		2.90	%	165,733		1,327		3.21	%
Total interest bearing liabilities	$	1,238,829	$	3,583	1.16	%	$	1,169,488	$	4,237	1.46	%	$	1,046,390	$	4,253	1.63	%
Net interest income			$	12,303					$	12,671					$	10,083
Interest rate spread					3.15	%					3.39	%					3.05	%
Net interest margin (1)					3.34	%					3.64	%					3.30	%
Average interest earning assets to average interest bearing liabilities					1.19						1.20						1.18

(1) Fully taxable equivalent (FTE). The average yield on tax exempt securities is computed on a tax equivalent basis using a tax rate of 21% for the quarters ended June 30, 2020, March 31, 2020 and June 30, 2019. The FTE adjustment to net interest income included in the rate calculations totaled $0, $0 and $35 thousand for the three months ended June 30, 2020, March 31, 2020, and June 30, 2019, respectively.

	Six months ended June 30, 2020						Six months ended June 30, 2019
	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	$	25,532	$	123	0.97	%	$	28,045	$	339	2.44	%
Loans receivable	1,219,905		30,146		4.97	%	1,010,113		25,390		5.07	%
Interest bearing deposits	4,075		50		2.47	%	6,440		74		2.32	%
Investment securities (1)	177,081		2,119		2.41	%	157,574		1,943		2.59	%
Other investments	15,083		356		4.75	%	11,244		308		5.52	%
Total interest earning assets (1)	$	1,441,676	$	32,794	4.57	%	$	1,213,416	$	28,054	4.68	%
Average interest bearing liabilities:
Savings accounts	$	162,941	$	250	0.31	%	$	155,792	$	324	0.42	%
Demand deposits	251,125		635		0.51	%	190,603		737		0.78	%
Money market accounts	239,867		959		0.80	%	158,683		831		1.06	%
CD’s	341,319		3,552		2.09	%	331,543		3,293		2.00	%
IRA’s	42,406		391		1.85	%	40,272		334		1.67	%
Total deposits	$	1,037,658	$	5,787	1.12	%	$	876,893	$	5,519	1.27	%
FHLB advances and other borrowings	180,927		2,033		2.26	%	145,986		2,390		3.30	%
Total interest bearing liabilities	$	1,218,585	$	7,820	1.29	%	$	1,022,879	$	7,909	1.56	%
Net interest income			$	24,974					$	20,145
Interest rate spread					3.28	%					3.12	%
Net interest margin (1)					3.48	%					3.36	%
Average interest earning assets to average interest bearing liabilities					1.18						1.19

(1) Fully taxable equivalent (FTE). The average yield on tax exempt securities is computed on a tax equivalent basis using a tax rate of 21% for the six months ended June 30, 2020 and June 30, 2019. The FTE adjustment to net interest income included in the rate calculations totaled $1 thousand and $77 thousand for the six months ended June 30, 2020 and June 30, 2019, respectively.

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
	June 30, 2020		March 31, 2020		June 30, 2019		December 31, 2019
Ratios based on net income:
Return on average assets (annualized)	0.78	%	0.69	%	1.23	%	0.68	%
Return on average equity (annualized)	8.23	%	7.01	%	11.72	%	6.59	%
Efficiency ratio (non-GAAP)	66	%	66	%	61	%	73	%
Net interest margin with loan purchase accretion	3.36	%	3.64	%	3.30	%	3.37	%
Net interest margin without loan purchase accretion	3.21	%	3.27	%	3.21	%	3.26	%
Ratios based on net income as adjusted (non-GAAP):
Return on average assets as adjusted^2^(annualized)	0.71	%	0.69	%	0.77	%	0.76	%
Return on average equity as adjusted^3^ (annualized)	7.47	%	7.01	%	7.35	%	7.44	%
Efficiency ratio^4^(non-GAAP)	67	%	66	%	70	%	68	%

CITIZENS COMMUNITY FEDERAL N.A.

Selected Capital Composition Highlights

	June 30, 2020 (unaudited)	March 31, 2020 (unaudited)	December 31, 2019 (audited)	June 30, 2019 (unaudited)	To Be Well Capitalized Under Prompt Corrective Action Provisions
Tier 1 leverage ratio (to adjusted total assets)	9.9%	10.3%	10.4%	9.7%	5.0%
Tier 1 capital (to risk weighted assets)	12.9%	12.6%	12.2%	12.2%	8.0%
Common equity tier 1 capital (to risk weighted assets)	12.9%	12.6%	12.2%	12.2%	6.5%
Total capital (to risk weighted assets)	14.0%	13.6%	13.1%	13.1%	10.0%

Reconciliation of Return on Average Assets as Adjusted (non-GAAP)

(in thousands, except ratios)

	Three Months Ended
	June 30, 2020			March 31, 2020			June 30, 2019
GAAP earnings after income taxes	$	3,069		$	2,606		$	4,107
Net income as adjusted after income taxes (non-GAAP) (1)	$	2,786		$	2,606		$	2,575
Average assets	$	1,585,421		$	1,516,957		$	1,334,860
Return on average assets (annualized)	0.78		%	0.69		%	1.23		%
Return on average assets as adjusted (non-GAAP) (annualized)	0.71		%	0.69		%	0.77		%

(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
	June 30, 2020			March 31, 2020			June 30, 2019
GAAP earnings after income taxes	$	3,069		$	2,606		$	4,107
Net income as adjusted after income taxes (non-GAAP) (1)	$	2,786		$	2,606		$	2,575
Average equity	$	149,973		$	149,441		$	140,561
Return on average equity (annualized)	8.23		%	7.01		%	11.72		%
Return on average equity as adjusted (non-GAAP) (annualized)	7.47		%	7.01		%	7.35		%

(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
	June 30, 2020			March 31, 2020			June 30, 2019
Non-interest expense (GAAP)	$	11,392		$	10,731		$	9,389
Merger related Costs (1)	—			—			(206		)
Branch Closure Costs (1)	—			—			—
Audit and financial reporting (1)	—			—			—
Non-interest expense as adjusted (non-GAAP)	11,392			10,731			9,183
Non-interest income	5,013			3,603			5,238
Net interest margin	12,303			12,671			10,083
Efficiency ratio denominator (GAAP)	17,316			16,274			15,321
Net gain on sale of branch (1)	—			—			(2,295		)
Net gain on sale of insurance agency (1)	(252		)	—			—
Settlement proceeds (1)	(131		)	—			—
Efficiency ratio denominator (non-GAAP)	16,933			16,274			13,026
Efficiency ratio (GAAP)	66		%	66		%	61		%
Efficiency ratio (non-GAAP)	67		%	66		%	70		%

(1) See Reconciliation of GAAP Net Income and Net Income as Adjusted (non-GAAP)

Reconciliation of tangible book value per share (non-GAAP)

(in thousands, except per share data)

Tangible book value per share at end of period	June 30, 2020			March 31, 2020			June 30, 2019
Total stockholders’ equity	$	152,790		$	147,933		$	143,242
Less: Goodwill	(31,498		)	(31,498		)	(31,474		)
Less: Intangible assets	(6,293		)	(7,175		)	(6,828		)
Tangible common equity (non-GAAP)	$	114,999		$	109,260		$	104,940
Ending common shares outstanding	11,150,695			11,151,009			10,982,008
Book value per share	$	13.70		$	13.27		$	13.04
Tangible book value per share (non-GAAP)	$	10.31		$	9.80		$	9.56

Reconciliation of tangible common equity as a percent of tangible assets (non-GAAP)

(in thousands, except ratios)

Tangible common equity as a percent of tangible assets at end of period	June 30, 2020			March 31, 2020			June 30, 2019
Total stockholders’ equity	$	152,790		$	147,933		$	143,242
Less: Goodwill	(31,498		)	(31,498		)	(31,474		)
Less: Intangible assets	(6,293		)	(7,175		)	(6,828		)
Tangible common equity (non-GAAP)	$	114,999		$	109,260		$	104,940
Total Assets	$	1,607,000		$	1,505,164		$	1,348,420
Less: Goodwill	(31,498		)	(31,498		)	(31,474		)
Less: Intangible assets	(6,293		)	(7,175		)	(6,828		)
Tangible Assets (non-GAAP)	$	1,569,209		$	1,466,491		$	1,310,118
Less C&I SBA PPP Loans	(137,330		)	—			—
Tangible Assets, excluding C&I SBA PPP Loans (non-GAAP)	$	1,431,879		$	1,466,491		$	1,310,118
Total stockholders’ equity to total assets ratio	9.51		%	9.83		%	10.62		%
Tangible common equity as a percent of tangible assets (non-GAAP)	7.33		%	7.45		%	8.01		%
Tangible common equity as a percent of tangible assets, excluding C&I SBA PPP Loans (non-GAAP)	8.03		%	7.45		%	8.01		%

^1^Net income as adjusted is a non-GAAP measure 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)”.

^2^Return 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)”.

^3^Return 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)”.

^4^The 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)”.

^5^Tangible book value per share and tangible common equity as a percent of tangible assets are non-GAAP measure 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)” and “Reconciliation of tangible common equity as a percent of tangible assets (non-GAAP)”.

ex992

Exhibit 99.2 Earnings Release Supplement Second Quarter 2020

Citizens Community Bancorp, Inc. Table of Contents Segment Profiles Page(s) CZWI Focus Items 2 COVID-19 Related Loan Deferrals 3 Non-Owner Occupied CRE 4 Owner Occupied CRE 5 Multi-family 6 Construction and Development Loans 7 Commercial and Industrial Loans 8 Agricultural Real Estate and Operating Loans 9 Commercial Real Estate by Vintage and Risk Rating 10 Residential Loans 11 Hotel Loans 12 Restaurant Loans 13 Credit Quality Risk Rating Descriptions 14 Loans by Risk Rating as of June 30, 2020 15 Loans by Risk Rating as of March 31, 2020 16 Loans by Risk Rating as of December 31, 2019 17 Loans by Risk Rating as of June 30, 2019 18 1

CZWI Focus Items INCREASE TANGIBLE BOOK AND SHAREHOLDER VALUE Grow TBV >10% annually, increase TCE to Total Assets >8% and achieve ROA and ROE in the upper half of its peer group. REDUCE NPA’S & CLASSIFIED LOANS TO PEER GROUP MEDIAN Aggressively reduce problem assets from acquired banks, manage the originated book prudently, and build the allowance to absorb potential COVID related losses. INCREASE OPERATING LEVERAGE Achieve an efficiency ratio in the mid 60% range by reducing branch and support expenses, optimize commercial portfolios, and increase non-interest income sources. CONSISTENCY IN CULTURE Apply software and API’s to increase productivity and support future growth, while proactively managing operating and credit risk. 2

Dollars In Thousands Modification Types Balances of Loans Interest Only P&I Payments % of Total Category Loan Category Modified Payment Deferred Loans Commercial Real Estate $ 147,235 34.1% 40.5% 11.4% Agricultural Real Estate $ 2,289 0.0% 1.2% 0.2% Multi-family $ 14,835 3.5% 4.0% 1.2% Construction & Development $ 16,795 3.0% 5.5% 1.3% Commercial & Industrial $ 12,493 4.4% 1.9% 1.0% Agricultural Operating $ 66 0.0% 0.0% 0.0% Residential Mortgage $ 3,054 0.0% 1.5% 0.2% Consumer Installment & Originated Indirect $ 544 0.0% 0.3% 0.0% Total $ 197,311 45.0% 55.0% 15.3% Balances of Loans High Exposure Commercial Segments Interest Only Principal Only Modified Hotel $ 78,151 17.8% 21.8% Restaurant $ 24,657 8.6% 3.9% Other Non-Owner Occupied Commercial Real Estate $ 39,069 9.9% 9.9% Total $ 141,877 36.3% 35.6% Notes All loan deferments qualified for temporary suspension of troubled • No completed COVID–19 related modifications/deferrals processed as debt restructuring requirements of March 31, 2020 pursuant to section 4013 of the CARES • Over 97% COVID-19 modifications occurred in April and May Act. Source: Internal Company Documents 3

Non – Owner Occupied CRE Non – Owner Portfolio Characteristics 9% Occupied 4% 27% Non - Owner Occupied CRE CRE 4% 5% 5% Loan Balance Outstanding - In Millions $303 5% Number of Loans 850 6% 7% 28% Average Loan Size - In Thousands $356 Approximate Weighted Average LTV 55% Investor Residential Hotel Retail Senior Living Office Industrial/Manufacturing Approximate Weighted Average DSCR 2.1x Restaurant Warehouse/Mini Storage Mixed Use Seasoning In Months 43 Other 2019 Net Charge-Offs 0.00% By Geography 12% Portfolio Fundamentals 49% 39% Wisconsin Minnesota Other Source: Internal Company Documents 4

Owner Occupied CRE Owner Occupied Portfolio Characteristics 15% 20% CRE Owner Occupied 6% 7% 13% Loan Balance Outstanding In Millions $207 8% Number of Loans 427 9% 11% 11% Average Loan Size In Thousands $356 CRE Campground Restaurant Approximate Weighted Average LTV 47% Mixed Use industrial/Manufacturing Approximate Weighted Average DSCR 1.9x Retail Warehouse/Mini Storage Seasoning In Months 47 Senior Living Office Other 2019 Net Charge-Offs 0.00% By Geography Portfolio Fundamentals 8% 36% 56% Wisconsin Minnesota Other Source: Internal Company Documents 5

Multi-family Multi-family Portfolio Characteristics - Multi-family Loan Balance Outstanding In Millions $104 100% Number of Loans 93 Average Loan Size In Millions $1.1 Approximate Weighted Average LTV 59% Approximate Weighted Average DSCR 1.77x Seasoning In Months 27 Multi-family Net Charge-Offs 0.00% 2% By Geography Portfolio Fundamentals 29% • 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 69% • Typically underwritten to 75% LTV based on appraised value with recourse; metro markets and/or strong sponsors may warrant up to 80% LTV • Term of 5-10 years with 20 to 25-year amortization (varies by new versus existing, size of market and sponsor strength) Wisconsin Minnesota Other • Covenant for minimum DSC/Global DSC 6

Construction & Development Loans Commercial & 3% 3% 7% Development 3% Portfolio Characteristics - Construction & Development 4% 37% 6% Loan Balance Outstanding In Millions $110 9% Number of Loans 278 11% 17% Average Loan Size In Millions $396 Multi-family CRE Hospitality Approximate Weighted Average LTV 62% Commercial 1-4 Family Construction CRE Industrial/Manufacturing 2019 Net Charge-Offs CRE Senior Living CRE Warehouse/Mini Storage 0.00% Residential Lot Other Land Percent Utilized of Commitments 74% Retail Other Portfolio Fundamentals By Geography 11% • Underwritten to 75-80% LTV based on lesser of cost or appraised value 29% with full recourse 60% • 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 Wisconsin Minnesota Other draws after balancing to sworn construction statement • 1-4 Residential construction centered in eastern Twin Cities and 7 Northwest Wisconsin. Generally 80% LTC /60%-80% of AV. Spec building capped. Progress reporting monthly by individual home.

Commercial & Industrial Loans 2% 2% 3% Commercial & 3% Industrial Portfolio Characteristics - Commercial & Industrial 4% 14% 4% 5% 12% 6% Loan Balance In Millions $110 7% 11% Number of Loans 864 8% 10% Average Loan Size In Thousands $127 8% Approximate Weighted Average DSCR 2.6 Manufacturing Public Administration Construction Real Estate, Rental and Leasing Seasoning in months 34 Transportation and Warehousing Other Services Wholesale Trade Retail Trade Administrative Services Professional Services Net Charge-Offs 0.00% Other Services Finance and Insurance Educational Services Agriculture Committed Line, if collateral 65 Accomodation Services 3% By Geography Portfolio Fundamentals 13% • 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 84% • Use of SBA Guaranty Program (Preferred Lender or General Processing) as appropriate • “Retail Trade” segment consists of Farm Supply, Franchised Hardware, Wisconsin Minnesota Other Franchised Auto Parts, Franchised and Non-franchised Auto Dealers and Repair Shops, Convenience Stores/Gas Stations 8

Agricultural RE & Operating Loans Agricultural Portfolio Characteristics - Agricultural 22% 36% Loan Balance Outstanding - In Millions $110 13% Number of Loans 664 Average Loan Size - In Thousands $165 29% Approximate Weighted Average DSCR 1.9x Seasoning In Months 52 Crop Dairy Other Farming Owned Land 2019 Net Charge-Offs 0.30% 4% By Geography Portfolio Fundamentals • Producers required to have marketing plans to mitigate volatility of 36% commodities 60% • 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, Wisconsin Minnesota Other collateral margins or working capital 9

Dollars In Thousands 2015 & 2016 2017 2018 2019 2020 Total Pass Rated Prior Commercial Real Estate $33,663 $75,501 $117,981 $134,109 $56,550 $70,832 $488,636 Agricultural Real Estate $4,438 $8,980 $16,383 $9,842 $9,857 $18,804 $68,304 Multi-family $6,034 $6,032 $26,761 $22,493 $38,655 $3,516 $103,491 Construction and Development $1,380 $756 $12,077 $73,365 $11,888 $1,131 $100,597 $45,515 $91,269 $173,202 $239,809 $116,950 $94,283 $761,028 Special Mention Rated Commercial Real Estate $10 $5,267 $250 $514 $1,679 $3,931 $11,651 Agricultural Real Estate $63 $0 $386 $0 $0 $20 $469 Construction and Development $0 $0 $5,867 $0 $0 $0 $5,867 $73 $5,267 $6,503 $514 $1,679 $3,951 $17,987 Substandard Rated Commercial Real Estate $2,091 $265 $0 $109 $0 $6,973 $9,438 Agricultural Real Estate $1,165 $1,808 $1,751 $3,295 $248 $1,152 $9,419 Multi-family $0 $0 $0 $0 $0 $148 $148 Construction and Development $3,478 $0 $0 $0 $0 $190 $3,668 $6,734 $2,073 $1,751 $3,404 $248 $8,463 $22,673 Source: Internal Company Documents 10

Residential Loans Dollars In Thousands Year Of Origination By FICO Score Band 2016 2017 2018 2019 2020 2015 & Prior Grand Total Greater than 740 $5,926 $5,442 $8,708 $9,701 $1,558 $52,015 $83,350 >680-740 $2,325 $1,189 $3,834 $3,198 $1,006 $21,651 $33,203 580-680 $1,192 $745 $1,897 $1,829 $372 $18,499 $24,534 Less than 580 $1,190 $304 $472 $167 $131 $7,128 $9,392 Not Available $369 $258 $0 $0 $0 $1,318 $1,945 Total $11,002 $7,938 $14,911 $14,895 $3,067 $100,611 $152,424 Year Of Origination By LTV Range 2016 2017 2018 2019 2020 2015 & Prior Grand Total > 75% $1,706 $1,509 $3,032 $6,406 $1,222 $5,826 $19,701 >65-75% $2,088 $892 $2,431 $1,725 $439 $18,128 $25,703 >55-65% $2,111 $1,192 $1,928 $1,791 $265 $20,263 $27,550 <= 55% $5,097 $4,345 $7,520 $4,973 $1,141 $56,394 $79,470 Total $11,002 $7,938 $14,911 $14,895 $3,067 $100,611 $152,424 11

Hotel Loans Hotels Portfolio Characteristics - Hotels 8% 12% Loan Balance Outstanding In Millions $109 Number of Loans 43 Average Loan Size In Millions $2.3 21% 59% Approximate Weighted Average LTV 64% Approximate DSCR - Non-Construction 1.6x Net Charge Offs 0.00% Construction Loan Balance 19 Flagged Historic Boutique Wisconsin Dells Area Other Percent Utilized of Commitments 84% By Geography Portfolio Fundamentals 15% 41% • Mainly experienced multi project hoteliers and guarantors with strong personal financial statements (net worth and liquidity) • Mainly flagged properties, Historic hotels, including two hotels in Minneapolis 44% • Wisconsin Dells Area projects were acquired from F&M • One Historic project is approved for SBA 504 structure and there is a flagged project approved with the SBA 504 structure; both nearing completion of construction Wisconsin Minnesota Illinois • Underwriting consistent with management's conservative approach to Investor Secured CRE, emphasizing actual results in underwriting 12

Restaurant Loans 6% Restaurants 8% Portfolio Characteristics - Restaurants 9% 44% 12% Loan Balance Outstanding In Millions $42 Number of Loans 99 21% Average Loan Size In Thousands $426 Culver's - Limited Service Restaurants Approximate Weighted Average LTV 54% Lessors of RE for Restaurant use Micro Breweries Approximate Weighted Average DSCR 2.2x Other National Limited Services Drinking Establishments Net Charge-Offs in 2019 0.00% By Geography 1% Portfolio Fundamentals 19% • 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) 80% 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 Wisconsin Minnesota Other • Lessors of RE include investor and owner-occupied structure 13

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. 14

Below is a breakdown of loans by risk rating as of June 30, 2020: 1 to 5 6 7 8 9 TOTAL Originated Loans: Commercial/Agricultural real estate: Commercial real estate $ 308,633 $ 4,952 $ 805 $ — $ — $ 314,390 Agricultural real estate 32,592 469 2,077 — — 35,138 Multi-family real estate 90,617 — — — — 90,617 Construction and land development 85,511 5,867 3,478 — — 94,856 C&I/Agricultural operating: Commercial and industrial 76,447 661 3,261 — — 80,369 C&I SBA PPP loans 137,330 — — — — 137,330 Agricultural operating 24,488 768 557 — — 25,813 Residential mortgage: Residential mortgage 91,649 — 4,015 — — 95,664 Purchased HELOC loans 6,534 — 327 — — 6,861 Consumer installment: Originated indirect paper 31,815 — 216 — — 32,031 Other consumer 14,082 — 93 — — 14,175 Total originated loans $ 899,698 $ 12,717 $ 14,829 $ — $ — $ 927,244 Acquired Loans: Commercial/Agricultural real estate: Commercial real estate $ 180,003 $ 6,699 $ 8,633 $ — $ — $ 195,335 Agricultural real estate 35,712 — 7,342 — — 43,054 Multi-family real estate 12,874 — 148 — — 13,022 Construction and land development 15,086 — 190 — — 15,276 C&I/Agricultural operating: Commercial and industrial 28,274 59 1,144 — — 29,477 Agricultural operating 10,723 80 1,321 — — 12,124 Residential mortgage: Residential mortgage 54,058 403 2,299 — — 56,760 Consumer installment: Other consumer 1,634 — 5 — — 1,639 Total acquired loans $ 338,364 $ 7,241 $ 21,082 $ — $ — $ 366,687 Total Loans: Commercial/Agricultural real estate: Commercial real estate $ 488,636 $ 11,651 $ 9,438 $ — $ — $ 509,725 Agricultural real estate 68,304 469 9,419 — — 78,192 Multi-family real estate 103,491 — 148 — — 103,639 Construction and land development 100,597 5,867 3,668 — — 110,132 C&I/Agricultural operating: Commercial and industrial 104,721 720 4,405 — — 109,846 C&I SBA PPP loans 137,330 — — — — 137,330 Agricultural operating 35,211 848 1,878 — — 37,937 Residential mortgage: Residential mortgage 145,707 403 6,314 — — 152,424 Purchased HELOC loans 6,534 — 327 — — 6,861 Consumer installment: Originated indirect paper 31,815 — 216 — — 32,031 Other consumer 15,716 — 98 — — 15,814 Gross loans $ 1,238,062 $ 19,958 $ 35,911 $ — $ — $ 1,293,931 Less: Unearned net deferred fees and costs and loans in process (5,369) Unamortized discount on acquired loans (7,387) Allowance for loan losses (13,373) Loans receivable, net $ 1,267,802 15

Below is a breakdown of loans by risk rating as of March 31, 2020: 1 to 5 6 7 8 9 TOTAL Originated Loans: Commercial/Agricultural real estate: Commercial real estate $ 307,313 $ 4,978 $ 856 $ — $ — $ 313,147 Agricultural real estate 33,069 469 2,114 — — 35,652 Multi-family real estate 89,474 — — — — 89,474 Construction and land development 72,427 5,780 3,478 — — 81,685 C&I/Agricultural operating: Commercial and industrial 80,746 1,115 3,388 — — 85,249 Agricultural operating 21,552 428 720 — — 22,700 Residential mortgage: Residential mortgage 98,138 35 4,681 — — 102,854 Purchased HELOC loans 7,367 — 234 — — 7,601 Consumer installment: Originated indirect paper 36,153 — 261 — — 36,414 Purchased indirect paper ————— — Other consumer 14,923 — 157 — — 15,080 Total originated loans $ 761,162 $ 12,805 $ 15,889 $ — $ — $ 789,856 Acquired Loans: Commercial/Agricultural real estate: Commercial real estate $ 192,367 $ 5,513 $ 9,123 $ — $ — $ 207,003 Agricultural real estate 39,729 — 8,037 — — 47,766 Multi-family real estate 13,361 — 148 — — 13,509 Construction and land development 13,982 — 251 — — 14,233 C&I/Agricultural operating: Commercial and industrial 34,914 563 1,280 — — 36,757 Agricultural operating 13,700 82 1,458 — — 15,240 Residential mortgage: Residential mortgage 60,335 424 2,198 — — 62,957 Consumer installment: Other consumer 2,095 — 9 — — 2,104 Total acquired loans $ 370,483 $ 6,582 $ 22,504 $ — $ — $ 399,569 Total Loans: Commercial/Agricultural real estate: Commercial real estate $ 499,680 $ 10,491 $ 9,979 $ — $ — $ 520,150 Agricultural real estate 72,798 469 10,151 — — 83,418 Multi-family real estate 102,835 — 148 — — 102,983 Construction and land development 86,409 5,780 3,729 — — 95,918 C&I/Agricultural operating: Commercial and industrial 115,660 1,678 4,668 — — 122,006 Agricultural operating 35,252 510 2,178 — — 37,940 Residential mortgage: Residential mortgage 158,473 459 6,879 — — 165,811 Purchased HELOC loans 7,367 — 234 — — 7,601 Consumer installment: Originated indirect paper 36,153 — 261 — — 36,414 Purchased indirect paper ————— — Other consumer 17,018 — 166 — — 17,184 Gross loans $ 1,131,645 $ 19,387 $ 38,393 $ — $ — $ 1,189,425 Less: Unearned net deferred fees and costs and loans in process (510) Unamortized discount on acquired loans (7,964) Allowance for loan losses (11,835) Loans receivable, net $ 1,169,116 16

Below is a breakdown of loans by risk rating as of December 31, 2019: 1 to 5 6 7 8 9 TOTAL Originated Loans: Commercial/Agricultural real estate: Commercial real estate $ 301,381 $ 266 $ 899 $ — $ — $ 302,546 Agricultural real estate 31,129 829 2,068 — — 34,026 Multi-family real estate 71,877 — — — — 71,877 Construction and land development 67,989 — 3,478 — — 71,467 C&I/Agricultural operating: Commercial and industrial 85,248 1,023 3,459 — — 89,730 Agricultural operating 19,545 402 770 — — 20,717 Residential mortgage: Residential mortgage 104,428 — 4,191 — — 108,619 Purchased HELOC loans 8,407 — — — — 8,407 Consumer installment: — Originated indirect paper 39,339 — 246 — — 39,585 Purchased indirect paper ————— — Other consumer 15,425 — 121 — — 15,546 Total originated loans $ 744,768 $ 2,520 $ 15,232 $ — $ — $ 762,520 Acquired Loans: Commercial/Agricultural real estate: Commercial real estate $ 196,692 $ 6,084 $ 9,137 $ — $ — $ 211,913 Agricultural real estate 42,381 534 8,422 — — 51,337 Multi-family real estate 13,533 — 1,598 — — 15,131 Construction and land development 14,181 — 762 — — 14,943 C&I/Agricultural operating: Commercial and industrial 41,587 932 1,485 — — 44,004 Agricultural operating 15,621 350 1,092 — — 17,063 Residential mortgage: Residential mortgage 65,125 436 2,152 — — 67,713 Consumer installment: Other consumer 2,628 — 12 — — 2,640 Total acquired loans $ 391,748 $ 8,336 $ 24,660 $ — $ — $ 424,744 Total Loans: Commercial/Agricultural real estate: Commercial real estate $ 498,073 $ 6,350 $ 10,036 $ — $ — $ 514,459 Agricultural real estate 73,510 1,363 10,490 — — 85,363 Multi-family real estate 85,410 — 1,598 — — 87,008 Construction and land development 82,170 — 4,240 — — 86,410 C&I/Agricultural operating: Commercial and industrial 126,835 1,955 4,944 — — 133,734 Agricultural operating 35,166 752 1,862 — — 37,780 Residential mortgage: Residential mortgage 169,553 436 6,343 — — 176,332 Purchased HELOC loans 8,407 — — — — 8,407 Consumer installment: Originated indirect paper 39,339 — 246 — — 39,585 Purchased indirect paper ————— — Other consumer 18,053 — 133 — — 18,186 Gross loans $ 1,136,516 $ 10,856 $ 39,892 $ — $ — $ 1,187,264 Less: Unearned net deferred fees and costs and loans in process (393) Unamortized discount on acquired loans (9,491) Allowance for loan losses (10,320) Loans receivable, net $ 1,167,060 17

Below is a breakdown of loans by risk rating as of June 30, 2019: 1 to 5 6 7 8 9 TOTAL Originated Loans: Commercial/Agricultural real estate: Commercial real estate $ 237,548 $ 349 $ 1,154 $ — $ — $ 239,051 Agricultural real estate 32,681 111 2,135 — — 34,927 Multi-family real estate 75,663 — 1 — — 75,664 Construction and land development 31,530 — 3,500 — — 35,030 C&I/Agricultural operating: Commercial and industrial 70,605 1,141 3,440 — — 75,186 Agricultural operating 19,778 1,157 841 — — 21,776 Residential mortgage: Residential mortgage 114,787 54 2,744 — — 117,585 Purchased HELOC loans 11,125 — — — — 11,125 Consumer installment: Originated indirect paper 47,188 — 203 — — 47,391 Purchased indirect paper 11,155 — — — — 11,155 Other consumer 15,187 — 42 — — 15,229 Total originated loans $ 667,247 $ 2,812 $ 14,060 $ — $ — $ 684,119 Acquired Loans: Commercial/Agricultural real estate: Commercial real estate $ 123,977 $ 5,648 $ 5,765 $ — $ — $ 135,390 Agricultural real estate 50,217 1,297 5,696 — — 57,210 Multi-family real estate 7,600 — 159 — — 7,759 Construction and land development 16,630 38 373 — — 17,041 C&I/Agricultural operating: Commercial and industrial 29,127 1,526 1,915 — — 32,568 Agricultural operating 13,699 195 1,157 — — 15,051 Residential mortgage: Residential mortgage 71,810 462 2,033 — — 74,305 Consumer installment: Other consumer 3,139 — 21 — — 3,160 Total acquired loans $ 316,199 $ 9,166 $ 17,119 $ — $ — $ 342,484 Total Loans: Commercial/Agricultural real estate: Commercial real estate $ 361,525 $ 5,997 $ 6,919 $ — $ — $ 374,441 Agricultural real estate 82,898 1,408 7,831 — — 92,137 Multi-family real estate 83,263 — 160 — — 83,423 Construction and land development 48,160 38 3,873 — — 52,071 C&I/Agricultural operating: Commercial and industrial 99,732 2,667 5,355 — — 107,754 Agricultural operating 33,477 1,352 1,998 — — 36,827 Residential mortgage: Residential mortgage 186,597 516 4,777 — — 191,890 Purchased HELOC loans 11,125 — — — — 11,125 Consumer installment: Originated indirect paper 47,188 — 203 — — 47,391 Purchased indirect paper 11,155 — — — — 11,155 Other consumer 18,326 — 63 — — 18,389 Gross loans $ 983,446 $ 11,978 $ 31,179 $ — $ — $ 1,026,603 Less: Unearned net deferred fees and costs and loans in process 98 Unamortized discount on acquired loans (6,744) Allowance for loan losses (8,759) Loans receivable, net $ 1,011,198 18