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): October 24, 2022
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 October 24, 2022, Citizens Community Bancorp, Inc. (the “Company”) issued a press release announcing our financial results for the three and nine months ended September 30, 2022 and posted its Earnings Release Supplement and Earnings Release Presentation 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 and a copy of the Earnings Release Presentation is attached hereto as Exhibit 99.3. The attached Exhibits 99.1, 99.2 and 99.3 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, 99.2 and 99.3 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 October 24, 2022 |
|---|---|
| 99.2 | Earnings Release Supplement dated October 24, 2022 |
| 99.3 | Earnings Release Presentation dated October 24, 2022 |
| 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: October 24, 2022 | By: | /s/ James S. Broucek |
| James S. Broucek | ||
| Chief Financial Officer |
Document
EXHIBIT 99.1
Citizens Community Bancorp, Inc. Reports Earnings Of $0.38 Per Share in 3Q22;
Net Interest Income Increases;
Net Loan Growth Up 2.2% From Prior Quarter
EAU CLAIRE, WI, October 24, 2022 - Citizens Community Bancorp, Inc. (the “Company”) (Nasdaq: CZWI), the parent company of Citizens Community Federal N.A. (the “Bank” or “CCFBank”), today reported earnings of $4.0 million and earnings per diluted share of $0.38 for the quarter ended September 30, 2022, compared to $4.4 million and $0.41 per diluted share for the quarter ended June 30, 2022, and $5.0 million and $0.47 per diluted share for the quarter ended September 30, 2021, respectively. For the first nine months of 2022, earnings were $13.1 million, or $1.24 per diluted share, compared to earnings of $15.2 million, or $1.41 per diluted share for the first nine months of 2021.
The Company’s third quarter 2022 operating results reflected the following changes from the second quarter of 2022: (1) net interest income increased $0.2 million, more than offsetting: (a) $0.4 million of interest income on nonaccrual loans in the second quarter; (b) a reduction of $0.2 million in accretion of purchased discounts; and (c) higher subordinated debt expense due to write-off of unamortized issuance costs of $0.1 million; (2) higher compensation expense due to incentives of $0.2 million; and (3) higher other expense of $0.3 million due to the write down of a closed branch facility after receipt of a purchase agreement.
“We generated net loan growth of 2.2% compared to the linked quarter. Our pipeline plus advances on unfunded commitments suggests growth during the fourth quarter as our markets remain strong. Steady core net interest margin expansion was also integral to earnings performance in the quarter. While visibility into 2023 is limited, we do expect aggressive action by the Federal Reserve to slow loan demand across all loan segments in the coming year. To offset expected inflation in existing vendor contracts and colleague compensation expense, our team has taken steps to improve efficiency by closing one branch during the quarter with two more announced branch closures occurring in the fourth quarter, among other steps,” said Stephen Bianchi, Chairman, President and Chief Executive Officer.
Book value per share was $15.59 at September 30, 2022, compared to $15.64 at June 30, 2022, and $15.77 at September 30, 2021. Tangible book value per share (non-GAAP)1 was $12.32 at September 30, 2022, compared to $12.36 at June 30, 2022, and $12.37 at September 30, 2021. The increase in unrealized losses in the securities available for sale portfolio lowered both book and tangible book value in the second and third quarters, with the amount of the unrealized loss moderating in the third quarter of 2022. Net income and intangible amortization partially offset this unrealized loss impact on book value.
September 30, 2022 Highlights: (as of or for the 3-month period ended September 30, 2022 compared to June 30, 2022 and September 30, 2021.)
•Quarterly earnings of $4.0 million, or $0.38 per diluted share for the quarter ended September 30, 2022, decreased from the quarter ended June 30, 2022, earnings of $4.4 million or $0.41 per diluted share, and decreased from the quarter ended September 30, 2021, earnings of $5.0 million or $0.47 per diluted share.
•Quarterly earnings, as adjusted (non-GAAP)1, were $4.2 million, or $0.40 per diluted share for the quarter ended September 30, 2022, compared to $4.4 million or $0.41 per diluted share for the quarter ended June 30, 2022, and $5.0 million or $0.47 per diluted share for the third quarter ended September 30, 2021.
•Earnings for the nine months ended September 30, 2022, were $13.1 million, or $1.24 per share, which is a decrease from $15.2 million, or $1.41 per share, for the same period in the prior year. The Company grew net interest income, despite lower SBA PPP net loan fee accretion in 2022 compared to 2021. The positive benefit of higher net interest income was more than offset year to date fiscal 2022 by higher provision for loan losses, lower gain on sale of loans, a modest increase in expense, partially due to 2022 new market tax depletion, 2022 branch closure expense and lower gains on foreclosed asset sales.
•Net interest income increased $0.2 million from the second quarter of 2022, $0.8 million from the third quarter of 2021 and $2.6 million for the nine months ended September 30, 2022, to $41.9 million. Net interest income was positively impacted by loan growth and the contractual increase in loan and investment yields, which more than offset the reduction in interest income realized on nonaccrual loan payoffs of $0.4 million (9 basis points in net interest margin) and higher liability interest expense.
•The net interest margin without SBA PPP net loan fee accretion and loan purchase accretion has increased each quarter over the past six quarters. For the quarter ended September 30, 2022, the net interest margin without SBA PPP net loan fee accretion and loan purchase accretion was 3.33% compared to 2.82% for the year earlier quarter and 3.29% versus the linked quarter. The linked second quarter net interest margin included the positive benefit of approximately 0.09% due to interest income received on nonaccrual loan payoffs.
•On August 10, 2022, the Company redeemed its $15.0 million subordinated debt with a coupon of 6.75%. For the third quarter, total interest expense on this debt was $0.29 million, including remaining issuance costs.
•The provision for loan losses for the quarter ended September 30, 2022, was $0.38 million due to loan growth, compared to $0.40 million for the quarter ended June 30, 2022. No loan loss provision was realized during the quarters ended March 31, 2022 and September 30, 2021, due to lower CARES Act Section 4013 deferrals, low net charge-off or low net recoveries, decreases in criticized assets and improving economic conditions in our markets.
•Originated loans increased by $49.6 million during the third quarter of 2022, with strong originations in commercial real estate, multi-family real estate and residential mortgages held in the loan portfolio. As a result of current market conditions, residential 10/1 ARM loan originations were added to the portfolio. The acquired loan portfolio declined $21.1 million.
•The allowance for loan losses on originated loans decreased to 1.34% at September 30, 2022, from 1.37% at June 30, 2022. Loans resulting from Bank acquisitions were effectively marked to market value at the time of their acquisition and were excluded from this reserve calculation.
•Nonperforming assets remained at $12.6 million at September 30, 2022.
•Substandard loans decreased modestly by $0.5 million to $20.2 million at September 30, 2022, compared to $20.7 million at June 30, 2022. The decrease was largely due to the payoff of substandard loans that were purchased credit impaired loans classified as substandard when acquired.
•The Company repurchased 53 thousand shares of the Company’s common stock in the third quarter. As of September 30, 2022, approximately 301 thousand shares remain available for repurchase under the current share repurchase authorization.
•Stockholders’ equity as a percent of total assets was 9.17% at September 30, 2022, compared to 9.34% at June 30, 2022. Tangible common equity (“TCE”) as a percent of tangible assets (non-GAAP)1 was 7.40% at September 30, 2022, compared to 7.53% at June 30, 2022. Reductions in stockholders’ equity due to increased unrealized losses in the available for sale portfolio, modest stock buyback activity and modest asset growth, were partially offset by net income and amortization of intangibles.
•In June 2022, the Company notified customers of the St. James, MN branch, with approximately $18.7 million in deposits, that the branch would close in September 2022. In August of 2022, the Company notified customers of the south branch in Rice Lake, WI, that the branch would close and be consolidated with the north branch in Rice Lake, WI. In addition, in August 2022 the Company notified the customers of the Red Wing, MN branch that the branch would close. These August branch closure announcements will occur in the fourth quarter of 2022. The deposit accounts will be consolidated into various nearby branches.
Balance Sheet and Asset Quality
Total assets increased modestly by $16.6 million during the quarter to $1.78 billion at September 30, 2022, compared to $1.76 billion at June 30, 2022.
Securities available for sale decreased $9.3 million during the quarter ended September 30, 2022, to $167.8 million from $177.1 million at June 30, 2022. This decrease was primarily due to a reduced market value of the portfolio associated with higher interest rates and principal repayments, partially offset by purchases of bank issued subordinated debt of $4.8 million.
Securities held to maturity decreased $1.6 million to $97.6 million during the quarter ended September 30, 2022, from $99.2 million at June 30, 2022, due to principal repayments.
Total loans receivable increased to $1.376 billion at September 30, 2022, from $1.347 billion at June 30, 2022. The originated loan portfolio increased $49.6 million in the quarter. The growth was due to strong net new loan fundings and growth in the commercial, multi-family and residential real estate portfolios totaling $43.7 million. Acquired loans decreased by $21.1 million including a loan prepayment of approximately $10 million with an associated loan prepayment of $0.16 million recorded in loan fees and service charges.
The allowance for loan losses increased to $17.2 million at September 30, 2022, representing 1.25% of total loans receivable. At June 30, 2022, the allowance for loan losses was also 1.25% of total loans receivable. The allowance for loan losses allocated to originated loans as a percentage of originated loans, net of deferred fees and costs, was 1.34% at September 30, 2022, compared to 1.37% at June 30, 2022. For the quarter ended September 30, 2022, the Bank had net charge offs of $17 thousand. Approximately 11.1% of the loan portfolio, at September 30, 2022, consists of loans purchased through whole bank acquisitions, resulting in these loans being recorded at fair market value at acquisition.
Allowance for Loan Losses Percentages
(in thousands, except ratios)
| September 30, 2022 | June 30, 2022 | December 31, 2021 | September 30, 2021 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Originated loans, net of deferred fees and costs | $ | 1,224,219 | $ | 1,174,701 | $ | 1,107,555 | $ | 1,006,159 | ||||
| SBA PPP loans, net of deferred fees | — | — | 8,457 | 29,753 | ||||||||
| Acquired loans, net of unamortized discount | 151,657 | 172,154 | 194,951 | 212,742 | ||||||||
| Loans, end of period | $ | 1,375,876 | $ | 1,346,855 | $ | 1,310,963 | $ | 1,248,654 | ||||
| SBA PPP loans, net of deferred fees | — | — | (8,457) | (29,753) | ||||||||
| Loans, net of SBA PPP loans and deferred fees | $ | 1,375,876 | $ | 1,346,855 | $ | 1,302,506 | $ | 1,218,901 | ||||
| Allowance for loan losses allocated to originated loans | $ | 16,465 | $ | 16,053 | $ | 15,830 | $ | 15,505 | ||||
| Allowance for loan losses allocated to other loans | 752 | 772 | 1,083 | 1,327 | ||||||||
| Allowance for loan losses | $ | 17,217 | $ | 16,825 | $ | 16,913 | $ | 16,832 | ||||
| ALL as a percentage of loans, end of period | 1.25 | % | 1.25 | % | 1.29 | % | 1.35 | % | ||||
| ALL as a percentage of loans, net of SBA PPP loans and deferred fees | 1.25 | % | 1.25 | % | 1.30 | % | 1.38 | % | ||||
| ALL allocated to originated loans as a percentage of originated loans, net of deferred fees and costs | 1.34 | % | 1.37 | % | 1.43 | % | 1.54 | % |
Nonperforming assets remained flat at $12.6 million or 0.71% of total assets at September 30, 2022, compared to June 30, 2022. During the quarter ended September 30, 2022, the Bank repurchased a $0.5 million nonaccrual SBA loan. Acquired nonaccrual loans decreased to $2.6 million at September 30, 2022, from $2.7 million at June 30, 2022. Originated nonperforming assets remained flat at $8.5 million or 0.61% of total assets for the most recent quarter.
| (in thousands) | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| September 30, 2022 | June 30, 2022 | March 31, 2022 | December 31, 2021 | September 30, 2021 | ||||||
| Special mention loan balances | $ | 20,178 | $ | 17,274 | $ | 1,849 | $ | 4,536 | $ | 2,548 |
| Substandard loan balances | 20,227 | 20,680 | 24,822 | 22,817 | 27,137 | |||||
| Criticized loans, end of period | $ | 40,405 | $ | 37,954 | $ | 26,671 | $ | 27,353 | $ | 29,685 |
Special mention loans increased $2.9 million, primarily due to the utilization of a secured line of credit. This loan was categorized as special mention at June 30, 2022, and the loan balance is projected to decrease to June levels by mid-first quarter 2023.
Substandard loans decreased modestly by $0.5 million to $20.2 million at September 30, 2022, compared to $20.7 million at June 30, 2022. The decrease in the third quarter was largely due to the payoff of substandard loans that were purchased credit impaired loans classified as substandard when acquired.
Deposits increased $34.2 million to $1.43 billion at September 30, 2022, from $1.40 billion at June 30, 2022. The increase was largely due to an increase in certificate of deposit (“CD”) accounts of $35.6 million. The increase reflects the addition of $20 million of brokered CD and retail CD accounts. The retail CD increase is partially due to customers moving money market balances to CD accounts. The outflow of money market deposits to CD accounts was replaced with commercial money market accounts.
The Company repurchased 53 thousand shares of the Company’s common stock in the third quarter. As of September 30, 2022, approximately 301 thousand shares remain available for repurchase under the current share repurchase authorization.
Review of Operations
Net interest income was $14.5 million for the third quarter ended September 30, 2022, compared to $14.3 million for the second quarter ended June 30, 2022, and $13.7 million for the quarter ended September 30, 2021. Compared to the second quarter of 2022 and third quarter of 2021, net interest income increased due to the growth in the loan and
investment portfolios. “Net interest income was positively impacted by loan growth and contractual increase in loan and investment yields, which more than offset the reduction in interest income realized on nonaccrual loan payoffs of $0.4 million (9 basis points in net interest margin) and higher liability costs. Our net interest margin excluding SBA fee accretion and purchase accretion increased to 3.33% from 3.29% in the second quarter or 3.20% in the second quarter excluding nonaccrual loan income from payoffs. The impact of lower scheduled accretion to $0.15 million, adding brokered certificates late in the quarter, and the retail CD portfolio end of period rates being 22 basis points above the third quarter average will more than offset the positive impact of lower subordinated debt interest expense of $0.30 million in the fourth quarter,” said Jim Broucek, Executive Vice President and Chief Financial Officer.
The table below shows the impact of accretion related to purchased credit impaired loans and SBA PPP net loan fees on interest income and NIM.
Net interest income and net interest margin analysis:
(in thousands, except yields and rates)
| Three months ended | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, 2022 | June 30, 2022 | March 31, 2022 | December 31, 2021 | September 30, 2021 | ||||||||||||||||
| Net Interest Income | Net Interest Margin | Net Interest Income | Net Interest Margin | Net Interest Income | Net Interest Margin | Net Interest Income | Net Interest Margin | Net Interest Income | Net Interest Margin | |||||||||||
| As reported | $ | 14,457 | 3.43 | % | $ | 14,267 | 3.46 | % | $ | 13,167 | 3.25 | % | $ | 14,384 | 3.50 | % | $ | 13,688 | 3.34 | % |
| Less non-accretable difference realized as interest from payoff of purchased credit impaired (“PCI”) loans | $ | (34) | (0.01) | % | $ | (70) | (0.02) | % | $ | (26) | (0.01) | % | $ | (2) | — | % | $ | (8) | — | % |
| Less accelerated accretion from payoff of certain PCI loans with transferred non-accretable differences | $ | (117) | (0.06) | % | $ | (308) | (0.08) | % | $ | (11) | — | % | $ | (200) | (0.05) | % | $ | (12) | — | % |
| Less scheduled accretion interest | $ | (247) | (0.03) | % | $ | (255) | (0.06) | % | $ | (264) | (0.07) | % | $ | (264) | (0.06) | % | $ | (261) | (0.06) | % |
| Without loan purchase accretion | $ | 14,059 | 3.33 | % | $ | 13,634 | 3.30 | % | $ | 12,866 | 3.17 | % | $ | 13,918 | 3.39 | % | $ | 13,407 | 3.28 | % |
| Less SBA PPP net loan fee accretion | $ | — | — | % | $ | (39) | (0.01) | % | $ | (259) | (0.06) | % | $ | (1,251) | (0.30) | % | $ | (1,878) | (0.46) | % |
| Without SBA PPP net loan fee accretion and loan purchase accretion | $ | 14,059 | 3.33 | % | $ | 13,595 | 3.29 | % | $ | 12,607 | 3.11 | % | $ | 12,667 | 3.09 | % | $ | 11,529 | 2.82 | % |
Loan loss provisions for the quarter ended September 30, 2022, were $0.4 million. Based on loan growth alone, the provision would have been about $100 thousand higher. However, payments on substandard loans reduced specific reserves. Loan loss provisions for the quarter ended June 30, 2022 were $0.4 million. There were no loan loss provisions for the quarters ended March 31, 2022 or September 30, 2021. Continued improving economic conditions in our markets, as evidenced by unemployment rates below the national average in our two largest population centers, have resulted in improving overall economic trends for businesses.
Non-interest income increased to $2.5 million in the quarter ended September 30, 2022, compared to $2.4 million in the quarter ended June 30, 2022, and decreased from $3.4 million in the quarter ended September 30, 2021. The increase in the third quarter of 2022 compared to the second quarter of 2022 was largely due to: (1) increases in loan fees and service charges due to an increase in prepayment penalties; and (2) increases in other income largely due to the receipt of an annual incentive based on debit card usage. These increases were partially offset by a decrease in gain on sale of loans of $0.2 million largely due to lower mortgage originations. 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 increased $0.8 million in the third quarter of 2022 to $11.3 million, compared to $10.5 million for the quarter ended June 30, 2022, and $10.3 million for the quarter ended September 30, 2021. The increase from the second quarter of 2022 was due to an increase in: (1) branch closure expenses of $0.3 million primarily
recorded in other expense; (2) compensation due to higher incentive accruals of $0.2 million based on year-to-date performance; (3) seasonal expenses in occupancy and marketing of $0.15 million; and (4) compensation and other expenses of $0.2 million reflecting higher salary and benefit expenses. In the fourth quarter, core deposit intangible amortization will decrease to $0.247 million.
Provision for income taxes decreased to $1.3 million in the third quarter of 2022 from $1.4 million in the second quarter of 2022. The provision for income taxes also decreased to $4.2 million for the first nine months of 2022 from $5.5 million for the first nine months of 2021. Both decreases are due to lower pre-tax income and a lower tax rate due to the impact of the tax credits purchased in the first quarter of 2022. The tax credits are expected to be realized over the next seven years. The effective tax rate was 24.3% in the third quarter of 2022, compared to 24.4% the previous quarter and 26.7% for the comparable prior year quarter. The effective tax rate for the first nine months of 2022 was 24.3% compared to 26.5% for the same period in the prior year.
These financial results are preliminary until the Form 10-Q is filed in November 2022.
About the Company
Citizens Community Bancorp, Inc. (NASDAQ: “CZWI”) is the holding company of the Bank, a national bank based in Altoona, Wisconsin, currently serving customers primarily in Wisconsin and Minnesota through 24 branch locations. Its primary markets include the Chippewa Valley Region in Wisconsin, the Twin Cities and Mankato markets in Minnesota, and various rural communities around these areas. The Bank offers traditional community banking services to businesses, ag operators and consumers, including residential mortgage loans.
Cautionary Statement Regarding Forward-Looking Statements
Certain statements contained in this release are considered “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may be identified using forward-looking words or phrases such as “anticipate,” “believe,” “could,” “expect,” “estimates,” “intend,” “may,” “on pace,” “preliminary,” “planned,” “potential,” “should,” “will,” “would” or the negative of those terms or other words of similar meaning. Such forward-looking statements in this release are inherently subject to many uncertainties arising in the operations and business environment of the Company and the Bank. These uncertainties include conditions in the financial markets and economic conditions generally; adverse impacts to the Company or Bank arising from the COVID-19 pandemic; acts of terrorism and political or military actions by the United States or other governments; the possibility of a deterioration in the residential real estate markets; interest rate risk; lending risk; higher lending risks associated with our commercial and agricultural banking activities; the sufficiency of loan allowances; changes in the fair value or ratings downgrades of our securities; competitive pressures among depository and other financial institutions; disintermediation risk; our ability to maintain our reputation; our ability to maintain or increase our market share; our ability to realize the benefits of net deferred tax assets; our inability to obtain needed liquidity; our ability to raise capital needed to fund growth or meet regulatory requirements; our ability to attract and retain key personnel; our ability to keep pace with technological change; prevalence of fraud and other financial crimes; cybersecurity risks; the possibility that our internal controls and procedures could fail or be circumvented; our ability to successfully execute our acquisition growth strategy; risks posed by acquisitions and other expansion opportunities, including difficulties and delays in integrating the acquired business operations or fully realizing the cost savings and other benefits; restrictions on our ability to pay dividends; the potential volatility of our stock price; accounting standards for loan losses; legislative or regulatory changes or actions, or significant litigation, adversely affecting the Company or Bank; public company reporting obligations; changes in federal or state tax laws; and changes in accounting principles, policies or guidelines and their impact on financial performance. Stockholders, potential investors, and other readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. Such uncertainties and other risks that may affect the Company’s performance are discussed further in Part I, Item 1A, “Risk Factors,” in the Company’s Form 10-K, for the year ended December 31, 2021, filed with the Securities and Exchange Commission (“SEC”) on March 2, 2022 and the Company’s subsequent filings with the SEC. The Company undertakes no obligation to make any revisions to the 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)
| September 30, 2022 (unaudited) | June 30, 2022 (unaudited) | December 31, 2021 (audited) | September 30, 2021 (unaudited) | |||||
|---|---|---|---|---|---|---|---|---|
| Assets | ||||||||
| Cash and cash equivalents | $ | 29,411 | $ | 31,743 | $ | 47,691 | $ | 102,341 |
| Other interest bearing deposits | 368 | 1,505 | 1,511 | 1,512 | ||||
| Securities available for sale “AFS” | 167,764 | 177,068 | 203,068 | 234,425 | ||||
| Securities held to maturity “HTM” | 97,610 | 99,249 | 71,141 | 67,739 | ||||
| Equity investments | 1,461 | 1,365 | 1,328 | 327 | ||||
| Other investments | 15,907 | 14,899 | 15,305 | 14,965 | ||||
| Loans receivable | 1,375,876 | 1,346,855 | 1,310,963 | 1,248,654 | ||||
| Allowance for loan losses | (17,217) | (16,825) | (16,913) | (16,832) | ||||
| Loans receivable, net | 1,358,659 | 1,330,030 | 1,294,050 | 1,231,822 | ||||
| Loans held for sale | 666 | 1,172 | 6,670 | 1,675 | ||||
| Mortgage servicing rights, net | 4,371 | 4,520 | 4,161 | 4,082 | ||||
| Office properties and equipment, net | 21,427 | 21,589 | 21,169 | 21,730 | ||||
| Accrued interest receivable | 4,716 | 4,243 | 3,916 | 4,882 | ||||
| Intangible assets | 2,701 | 3,100 | 3,898 | 4,297 | ||||
| Goodwill | 31,498 | 31,498 | 31,498 | 31,498 | ||||
| Foreclosed and repossessed assets, net | 1,584 | 1,437 | 1,408 | 4 | ||||
| Bank owned life insurance (“BOLI”) | 24,784 | 24,622 | 24,312 | 24,149 | ||||
| Other assets | 17,275 | 15,567 | 8,502 | 8,029 | ||||
| TOTAL ASSETS | $ | 1,780,202 | $ | 1,763,607 | $ | 1,739,628 | $ | 1,753,477 |
| Liabilities and Stockholders’ Equity | ||||||||
| Liabilities: | ||||||||
| Deposits | $ | 1,434,368 | $ | 1,400,210 | $ | 1,387,535 | $ | 1,408,315 |
| Federal Home Loan Bank (“FHLB”) advances | 102,530 | 102,030 | 111,527 | 111,512 | ||||
| Other borrowings | 72,351 | 87,124 | 58,426 | 58,400 | ||||
| Other liabilities | 7,634 | 9,500 | 11,274 | 9,324 | ||||
| Total liabilities | 1,616,883 | 1,598,864 | 1,568,762 | 1,587,551 | ||||
| Stockholders’ equity: | ||||||||
| Common stock— $0.01 par value, authorized 30,000,000; 10,478,210, 10,530,415 10,502,442, and 10,518,885 shares issued and outstanding, respectively | 105 | 105 | 105 | 105 | ||||
| Additional paid-in capital | 119,638 | 119,987 | 119,925 | 119,929 | ||||
| Retained earnings | 60,833 | 56,928 | 50,675 | 44,660 | ||||
| Accumulated other comprehensive (loss) income | (17,257) | (12,277) | 161 | 1,232 | ||||
| Total stockholders’ equity | 163,319 | 164,743 | 170,866 | 165,926 | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 1,780,202 | $ | 1,763,607 | $ | 1,739,628 | $ | 1,753,477 |
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 | Nine Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| September 30, 2022 (unaudited) | June 30, 2022 (unaudited) | September 30, 2021 (unaudited) | September 30, 2022 (unaudited) | September 30, 2021 (unaudited) | ||||||
| Interest and dividend income: | ||||||||||
| Interest and fees on loans | $ | 15,937 | $ | 14,893 | $ | 14,537 | $ | 44,597 | $ | 43,014 |
| Interest on investments | 2,022 | 1,810 | 1,638 | 5,441 | 4,260 | |||||
| Total interest and dividend income | 17,959 | 16,703 | 16,175 | 50,038 | 47,274 | |||||
| Interest expense: | ||||||||||
| Interest on deposits | 1,681 | 985 | 1,354 | 3,734 | 4,589 | |||||
| Interest on FHLB borrowed funds | 568 | 297 | 389 | 1,176 | 1,183 | |||||
| Interest on other borrowed funds | 1,253 | 1,154 | 744 | 3,237 | 2,217 | |||||
| Total interest expense | 3,502 | 2,436 | 2,487 | 8,147 | 7,989 | |||||
| Net interest income before provision for loan losses | 14,457 | 14,267 | 13,688 | 41,891 | 39,285 | |||||
| Provision for loan losses | 375 | 400 | — | 775 | — | |||||
| Net interest income after provision for loan losses | 14,082 | 13,867 | 13,688 | 41,116 | 39,285 | |||||
| Non-interest income: | ||||||||||
| Service charges on deposit accounts | 535 | 482 | 463 | 1,505 | 1,256 | |||||
| Interchange income | 597 | 614 | 600 | 1,760 | 1,776 | |||||
| Loan servicing income | 611 | 600 | 842 | 1,912 | 2,560 | |||||
| Gain on sale of loans | 194 | 414 | 1,014 | 1,330 | 4,131 | |||||
| Loan fees and service charges | 267 | 141 | 118 | 500 | 547 | |||||
| Net (losses) gains on investment securities | (55) | (75) | 73 | (167) | 344 | |||||
| Other | 323 | 196 | 338 | 717 | 801 | |||||
| Total non-interest income | 2,472 | 2,372 | 3,448 | 7,557 | 11,415 | |||||
| Non-interest expense: | ||||||||||
| Compensation and related benefits | 5,900 | 5,589 | 5,718 | 16,887 | 16,736 | |||||
| Occupancy | 1,429 | 1,343 | 1,313 | 4,137 | 3,943 | |||||
| Data processing | 1,382 | 1,415 | 1,582 | 4,098 | 4,374 | |||||
| Amortization of intangible assets | 399 | 399 | 399 | 1,197 | 1,197 | |||||
| Mortgage servicing rights expense, net | 197 | 195 | 37 | 65 | 28 | |||||
| Advertising, marketing and public relations | 300 | 250 | 220 | 762 | 577 | |||||
| FDIC premium assessment | 119 | 118 | 148 | 352 | 395 | |||||
| Professional services | 382 | 368 | 328 | 1,152 | 1,192 | |||||
| Gains on repossessed assets, net | (8) | (2) | (3) | (17) | (149) | |||||
| New market tax credit depletion | 163 | 162 | — | 488 | — | |||||
| Other | 1,014 | 625 | 578 | 2,286 | 1,714 | |||||
| Total non-interest expense | 11,277 | 10,462 | 10,320 | 31,407 | 30,007 | |||||
| Income before provision for income taxes | 5,277 | 5,777 | 6,816 | 17,266 | 20,693 | |||||
| Provision for income taxes | 1,284 | 1,411 | 1,819 | 4,201 | 5,484 | |||||
| Net income attributable to common stockholders | $ | 3,993 | $ | 4,366 | $ | 4,997 | $ | 13,065 | $ | 15,209 |
| Per share information: | ||||||||||
| Basic earnings | $ | 0.38 | $ | 0.41 | $ | 0.47 | $ | 1.24 | $ | 1.41 |
| Diluted earnings | $ | 0.38 | $ | 0.41 | $ | 0.47 | $ | 1.24 | $ | 1.41 |
| Cash dividends paid | $ | — | $ | — | $ | — | $ | 0.26 | $ | 0.23 |
| Book value per share at end of period | $ | 15.59 | $ | 15.64 | $ | 15.77 | $ | 15.59 | $ | 15.77 |
| Tangible book value per share at end of period (non-GAAP) | $ | 12.32 | $ | 12.36 | $ | 12.37 | $ | 12.32 | $ | 12.37 |
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 | Nine Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| September 30, 2022 | June 30, 2022 | September 30, 2021 | September 30, 2022 | September 30, 2021 | ||||||
| GAAP pretax income | $ | 5,277 | $ | 5,777 | $ | 6,816 | $ | 17,266 | $ | 20,693 |
| Branch closure costs (1) | 302 | 33 | — | 335 | — | |||||
| FHLB borrowings prepayment fee (2) | — | — | — | — | 102 | |||||
| Pretax income as adjusted (3) | 5,579 | 5,810 | 6,816 | 17,601 | 20,795 | |||||
| Provision for income tax on net income as adjusted (4) | 1,357 | 1,419 | 1,819 | 4,282 | 5,511 | |||||
| Net income as adjusted (non-GAAP) (3) | $ | 4,222 | $ | 4,391 | $ | 4,997 | $ | 13,319 | $ | 15,284 |
| GAAP diluted earnings per share, net of tax | $ | 0.38 | $ | 0.41 | $ | 0.47 | $ | 1.24 | $ | 1.41 |
| Branch closure costs, net of tax | 0.02 | — | — | 0.02 | — | |||||
| FHLB borrowings prepayment fee | — | — | — | — | 0.01 | |||||
| Diluted earnings per share, as adjusted, net of tax (non-GAAP) | $ | 0.40 | $ | 0.41 | $ | 0.47 | $ | 1.26 | $ | 1.42 |
| Average diluted shares outstanding | 10,519,079 | 10,541,905 | 10,622,595 | 10,533,414 | 10,797,502 |
(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) FHLB borrowings prepayment fee resulted from the early termination of $8 million in FHLB borrowings at a weighted average rate of 2.19% and weighted average maturity of 8.75 months included in other non-interest expense in the consolidated statement of operations.
(3) 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.
(4) Provision for income tax on net income as adjusted is calculated at our effective tax rate for each respective period presented.
| Loan Composition (in thousands) | September 30, 2022 | June 30, 2022 | December 31, 2021 | September 30, 2021 | ||||
|---|---|---|---|---|---|---|---|---|
| Originated Loans: | ||||||||
| Commercial/Agricultural real estate: | ||||||||
| Commercial real estate | $ | 610,348 | $ | 596,001 | $ | 578,395 | $ | 508,540 |
| Agricultural real estate | 62,302 | 57,323 | 52,372 | 49,082 | ||||
| Multi-family real estate | 193,758 | 175,964 | 174,050 | 150,094 | ||||
| Construction and land development | 116,147 | 114,017 | 78,613 | 84,399 | ||||
| C&I/Agricultural operating: | ||||||||
| Commercial and industrial | 124,350 | 124,113 | 107,937 | 90,581 | ||||
| Agricultural operating | 20,847 | 20,287 | 26,202 | 25,390 | ||||
| Residential mortgage: | ||||||||
| Residential mortgage | 77,307 | 65,707 | 63,855 | 68,986 | ||||
| Purchased HELOC loans | 3,357 | 3,419 | 3,871 | 3,921 | ||||
| Consumer installment: | ||||||||
| Originated indirect paper | 11,234 | 12,736 | 15,971 | 17,689 | ||||
| Other consumer | 7,016 | 7,472 | 8,473 | 9,414 | ||||
| Originated loans before SBA PPP loans | 1,226,666 | 1,177,039 | 1,109,739 | 1,008,096 | ||||
| SBA PPP loans | — | — | 8,755 | 31,301 | ||||
| Total originated loans | $ | 1,226,666 | $ | 1,177,039 | $ | 1,118,494 | $ | 1,039,397 |
| Acquired Loans: | ||||||||
| Commercial/Agricultural real estate: | ||||||||
| Commercial real estate | $ | 91,340 | $ | 106,916 | $ | 120,070 | $ | 129,784 |
| Agricultural real estate | 19,405 | 20,484 | 26,123 | 27,552 | ||||
| Multi-family real estate | 3,914 | 3,965 | 4,299 | 5,928 | ||||
| Construction and land development | 1,703 | 1,171 | 907 | 1,139 | ||||
| C&I/Agricultural operating: | ||||||||
| Commercial and industrial | 10,465 | 14,889 | 14,230 | 16,554 | ||||
| Agricultural operating | 5,186 | 4,182 | 5,386 | 4,541 | ||||
| Residential mortgage: | ||||||||
| Residential mortgage | 21,426 | 22,868 | 27,135 | 30,795 | ||||
| Consumer installment: | ||||||||
| Other consumer | 294 | 313 | 401 | 516 | ||||
| Total acquired loans | $ | 153,733 | $ | 174,788 | $ | 198,551 | $ | 216,809 |
| Total Loans: | ||||||||
| Commercial/Agricultural real estate: | ||||||||
| Commercial real estate | $ | 701,688 | $ | 702,917 | $ | 698,465 | $ | 638,324 |
| Agricultural real estate | 81,707 | 77,807 | 78,495 | 76,634 | ||||
| Multi-family real estate | 197,672 | 179,929 | 178,349 | 156,022 | ||||
| Construction and land development | 117,850 | 115,188 | 79,520 | 85,538 | ||||
| C&I/Agricultural operating: | ||||||||
| Commercial and industrial | 134,815 | 139,002 | 122,167 | 107,135 | ||||
| Agricultural operating | 26,033 | 24,469 | 31,588 | 29,931 | ||||
| Residential mortgage: | ||||||||
| Residential mortgage | 98,733 | 88,575 | 90,990 | 99,781 | ||||
| Purchased HELOC loans | 3,357 | 3,419 | 3,871 | 3,921 | ||||
| Consumer installment: | ||||||||
| Originated indirect paper | 11,234 | 12,736 | 15,971 | 17,689 | ||||
| Other consumer | 7,310 | 7,785 | 8,874 | 9,930 | ||||
| Gross loans before SBA PPP loans | 1,380,399 | 1,351,827 | 1,308,290 | 1,224,905 | ||||
| SBA PPP loans | — | — | 8,755 | 31,301 | ||||
| Gross loans | $ | 1,380,399 | $ | 1,351,827 | $ | 1,317,045 | $ | 1,256,206 |
| Unearned net deferred fees and costs and loans in process | (2,447) | (2,338) | (2,482) | (3,486) | ||||
| Unamortized discount on acquired loans | (2,076) | (2,634) | (3,600) | (4,066) | ||||
| Total loans receivable | $ | 1,375,876 | $ | 1,346,855 | $ | 1,310,963 | $ | 1,248,654 |
Nonperforming Originated and Acquired Assets
(in thousands, except ratios)
| September 30, 2022 | June 30, 2022 | December 31, 2021 | September 30, 2021 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Nonperforming assets: | ||||||||||||
| Originated nonperforming assets: | ||||||||||||
| Nonaccrual loans | $ | 8,294 | $ | 7,770 | $ | 6,448 | $ | 6,408 | ||||
| Accruing loans past due 90 days or more | 169 | 700 | 63 | 295 | ||||||||
| Total originated nonperforming loans (“NPL”) | 8,463 | 8,470 | 6,511 | 6,703 | ||||||||
| Other real estate owned (“OREO”) | — | — | — | — | ||||||||
| Other collateral owned | — | 10 | 2 | 2 | ||||||||
| Total originated nonperforming assets (“NPAs”) | $ | 8,463 | $ | 8,480 | $ | 6,513 | $ | 6,705 | ||||
| Acquired nonperforming assets: | ||||||||||||
| Nonaccrual loans | $ | 2,478 | $ | 2,664 | $ | 5,217 | $ | 5,298 | ||||
| Accruing loans past due 90 days or more | 79 | 14 | 97 | 130 | ||||||||
| Total acquired nonperforming loans (“NPL”) | 2,557 | 2,678 | 5,314 | 5,428 | ||||||||
| Other real estate owned (“OREO”) | 1,584 | 1,427 | 1,406 | 2 | ||||||||
| Other collateral owned | — | — | — | — | ||||||||
| Total acquired nonperforming assets (“NPAs”) | $ | 4,141 | $ | 4,105 | $ | 6,720 | $ | 5,430 | ||||
| Total nonperforming assets (“NPAs”) | $ | 12,604 | $ | 12,585 | $ | 13,233 | $ | 12,135 | ||||
| Loans, end of period | $ | 1,375,876 | $ | 1,346,855 | $ | 1,310,963 | $ | 1,248,654 | ||||
| Total assets, end of period | $ | 1,780,202 | $ | 1,763,607 | $ | 1,739,628 | $ | 1,753,477 | ||||
| Ratios: | ||||||||||||
| Originated NPLs to total loans | 0.61 | % | 0.63 | % | 0.50 | % | 0.54 | % | ||||
| Acquired NPLs to total loans | 0.19 | % | 0.20 | % | 0.41 | % | 0.43 | % | ||||
| Originated NPAs to total assets | 0.48 | % | 0.48 | % | 0.37 | % | 0.38 | % | ||||
| Acquired NPAs to total assets | 0.23 | % | 0.23 | % | 0.39 | % | 0.31 | % |
Nonperforming Assets
(in thousand, except ratios)
| September 30, 2022 | June 30, 2022 | December 31, 2021 | September 30, 2021 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Nonperforming assets: | ||||||||||||
| Nonaccrual loans | ||||||||||||
| Commercial real estate | $ | 5,848 | $ | 5,275 | $ | 5,374 | $ | 5,427 | ||||
| Agricultural real estate | 2,729 | 3,169 | 3,490 | 3,567 | ||||||||
| Construction and land development | 43 | 43 | — | — | ||||||||
| Commercial and industrial (“C&I”) | 188 | 211 | 298 | 311 | ||||||||
| Agricultural operating | 668 | 555 | 993 | 1,063 | ||||||||
| Residential mortgage | 1,246 | 1,122 | 1,433 | 1,263 | ||||||||
| Consumer installment | 50 | 59 | 77 | 75 | ||||||||
| Total nonaccrual loans | $ | 10,772 | $ | 10,434 | $ | 11,665 | $ | 11,706 | ||||
| Accruing loans past due 90 days or more | 248 | 714 | 160 | 425 | ||||||||
| Total nonperforming loans (“NPLs”) | 11,020 | 11,148 | 11,825 | 12,131 | ||||||||
| Foreclosed and repossessed assets, net | 1,584 | 1,437 | 1,408 | 4 | ||||||||
| Total nonperforming assets (“NPAs”) | $ | 12,604 | $ | 12,585 | $ | 13,233 | $ | 12,135 | ||||
| Troubled Debt Restructurings (“TDRs”) | $ | 9,336 | $ | 8,712 | $ | 12,523 | $ | 15,689 | ||||
| Nonaccrual TDRs | $ | 2,426 | $ | 2,549 | $ | 4,539 | $ | 4,324 | ||||
| Loans, end of period | $ | 1,375,876 | $ | 1,346,855 | $ | 1,310,963 | $ | 1,248,654 | ||||
| Total assets, end of period | $ | 1,780,202 | $ | 1,763,607 | $ | 1,739,628 | $ | 1,753,477 | ||||
| Ratios: | ||||||||||||
| NPLs to total loans | 0.80 | % | 0.83 | % | 0.90 | % | 0.97 | % | ||||
| NPAs to total assets | 0.71 | % | 0.71 | % | 0.76 | % | 0.69 | % |
Deposit Composition
(in thousands)
| September 30, 2022 | June 30, 2022 | December 31, 2021 | September 30, 2021 | |||||
|---|---|---|---|---|---|---|---|---|
| Non-interest bearing demand deposits | $ | 285,670 | $ | 276,815 | $ | 276,631 | $ | 280,611 |
| Interest bearing demand deposits | 394,924 | 401,857 | 396,231 | 381,315 | ||||
| Savings accounts | 236,107 | 239,322 | 222,674 | 229,623 | ||||
| Money market accounts | 328,544 | 328,718 | 288,985 | 291,242 | ||||
| Certificate accounts | 189,123 | 153,498 | 203,014 | 225,524 | ||||
| Total deposits | $ | 1,434,368 | $ | 1,400,210 | $ | 1,387,535 | $ | 1,408,315 |
Average Balances, Interest Yields and Rates
(in thousands, except yields and rates)
| Three months ended <br>September 30, 2022 | Three months ended <br>June 30, 2022 | Three months ended<br> September 30, 2021 | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 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 | $ | 11,043 | $ | 60 | 2.16 | % | $ | 25,195 | $ | 43 | 0.68 | % | $ | 111,192 | $ | 50 | 0.18 | % |
| Loans receivable | 1,370,897 | 15,937 | 4.61 | % | 1,328,661 | 14,893 | 4.50 | % | 1,192,636 | 14,537 | 4.84 | % | ||||||
| Interest bearing deposits | 1,079 | 7 | 2.57 | % | 1,509 | 8 | 2.13 | % | 1,512 | 8 | 2.10 | % | ||||||
| Investment securities (1) | 274,868 | 1,768 | 2.57 | % | 285,332 | 1,593 | 2.23 | % | 303,325 | 1,412 | 1.85 | % | ||||||
| Other investments | 14,910 | 187 | 4.98 | % | 14,969 | 166 | 4.45 | % | 14,961 | 168 | 4.46 | % | ||||||
| Total interest earning assets (1) | $ | 1,672,797 | $ | 17,959 | 4.26 | % | $ | 1,655,666 | $ | 16,703 | 4.05 | % | $ | 1,623,626 | $ | 16,175 | 3.95 | % |
| Average interest bearing liabilities: | ||||||||||||||||||
| Savings accounts | $ | 227,985 | $ | 204 | 0.36 | % | $ | 230,784 | $ | 125 | 0.22 | % | $ | 216,304 | $ | 95 | 0.17 | % |
| Demand deposits | 413,033 | 575 | 0.55 | % | 410,468 | 300 | 0.29 | % | 392,080 | 280 | 0.28 | % | ||||||
| Money market accounts | 331,469 | 519 | 0.62 | % | 323,907 | 287 | 0.36 | % | 276,582 | 193 | 0.28 | % | ||||||
| CD’s | 136,624 | 335 | 0.97 | % | 134,338 | 223 | 0.67 | % | 207,494 | 682 | 1.30 | % | ||||||
| IRA’s | 34,446 | 48 | 0.55 | % | 35,701 | 50 | 0.56 | % | 39,525 | 104 | 1.04 | % | ||||||
| Total deposits | $ | 1,143,557 | $ | 1,681 | 0.58 | % | $ | 1,135,198 | $ | 985 | 0.35 | % | $ | 1,131,985 | $ | 1,354 | 0.47 | % |
| FHLB advances and other borrowings | 192,338 | 1,821 | 3.76 | % | 186,050 | 1,451 | 3.13 | % | 169,891 | 1,133 | 2.65 | % | ||||||
| Total interest bearing liabilities | $ | 1,335,895 | $ | 3,502 | 1.04 | % | $ | 1,321,248 | $ | 2,436 | 0.74 | % | $ | 1,301,876 | $ | 2,487 | 0.76 | % |
| Net interest income | $ | 14,457 | $ | 14,267 | $ | 13,688 | ||||||||||||
| Interest rate spread | 3.22 | % | 3.31 | % | 3.19 | % | ||||||||||||
| Net interest margin (1) | 3.43 | % | 3.46 | % | 3.34 | % | ||||||||||||
| Average interest earning assets to average interest bearing liabilities | 1.25 | 1.25 | 1.25 |
(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 September 30, 2022, June 30, 2022 and September 30, 2021. The FTE adjustment to net interest income included in the rate calculations totaled $0, $0 and $1 thousand for the three months ended September 30, 2022, June 30, 2022 and September 30, 2021, respectively.
| Nine months ended September 30, 2022 | Nine months ended September 30, 2021 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 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 | $ | 23,727 | $ | 116 | 0.65 | % | $ | 118,064 | $ | 107 | 0.12 | % |
| Loans receivable | 1,334,811 | 44,598 | 4.47 | % | 1,197,469 | 43,014 | 4.80 | % | ||||
| Interest bearing deposits | 1,365 | 22 | 2.15 | % | 2,227 | 37 | 2.22 | % | ||||
| Investment securities (1) | 282,771 | 4,777 | 3.38 | % | 263,655 | 3,606 | 1.83 | % | ||||
| Other investments | 15,044 | 525 | 4.67 | % | 15,006 | 510 | 4.54 | % | ||||
| Total interest earning assets (1) | $ | 1,657,718 | $ | 50,038 | 4.04 | % | $ | 1,596,421 | $ | 47,274 | 3.96 | % |
| Average interest bearing liabilities: | ||||||||||||
| Savings accounts | $ | 227,787 | $ | 424 | 0.25 | % | $ | 211,320 | $ | 277 | 0.18 | % |
| Demand deposits | 411,471 | 1,045 | 0.34 | % | 361,248 | 788 | 0.29 | % | ||||
| Money market accounts | 318,246 | 1,011 | 0.42 | % | 263,195 | 577 | 0.29 | % | ||||
| CD’s | 143,965 | 1,079 | 1.00 | % | 237,706 | 2,592 | 1.46 | % | ||||
| IRA’s | 35,729 | 175 | 0.65 | % | 40,119 | 355 | 1.18 | % | ||||
| Total deposits | $ | 1,137,198 | $ | 3,734 | 0.44 | % | $ | 1,113,588 | $ | 4,589 | 0.55 | % |
| FHLB advances and other borrowings | 181,598 | 4,413 | 3.25 | % | 173,889 | 3,400 | 2.61 | % | ||||
| Total interest bearing liabilities | $ | 1,318,796 | $ | 8,147 | 0.83 | % | $ | 1,287,477 | $ | 7,989 | 0.83 | % |
| Net interest income | $ | 41,891 | $ | 39,285 | ||||||||
| Interest rate spread | 3.21 | % | 3.13 | % | ||||||||
| Net interest margin (1) | 3.38 | % | 3.29 | % | ||||||||
| Average interest earning assets to average interest bearing liabilities | 1.26 | 1.24 |
(1) Fully taxable equivalent (FTE). The average yield on tax exempt securities is computed on a tax equivalent basis using a tax rate of 21% for the nine months ended September 30, 2022 and September 30, 2021. The FTE adjustment to net interest income included in the rate calculations totaled $1 and $3 thousand for the nine months ended September 30, 2022 and September 30, 2021, respectively.
The following table reports key financial metric ratios based on a net income as adjusted basis:
| Three Months Ended | Nine Months Ended | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, 2022 | June 30, 2022 | September 30, 2021 | September 30, 2022 | September 30, 2021 | |||||||
| Ratios based on net income: | |||||||||||
| Return on average assets (annualized) | 0.89 | % | 0.99 | % | 1.13 | % | 0.99 | % | 1.19 | % | |
| Return on average equity (annualized) | 9.57 | % | 10.63 | % | 12.00 | % | 10.51 | % | 12.51 | % | |
| Return on average tangible common equity4 (annualized) | 12.99 | % | 14.41 | % | 16.24 | % | 14.22 | % | 17.06 | % | |
| Efficiency ratio | 64 | % | 60 | % | 58 | % | 61 | % | 57 | % | |
| Net interest margin with loan purchase accretion | 3.43 | % | 3.46 | % | 3.34 | % | 3.38 | % | 3.29 | % | |
| Net interest margin without loan purchase accretion | 3.33 | % | 3.30 | % | 3.28 | % | 3.27 | % | 3.21 | % | |
| Ratios based on net income as adjusted (non-GAAP) | |||||||||||
| Return on average assets as adjusted2 (annualized) | 0.94 | % | 0.99 | % | 1.13 | % | 1.01 | % | 1.19 | % | |
| Return on average equity as adjusted3 (annualized) | 10.12 | % | 10.63 | % | 12.00 | % | 10.71 | % | 12.57 | % |
Reconciliation of Return on Average Assets as Adjusted (non-GAAP)
(in thousands, except ratios)
| Three Months Ended | Nine Months Ended | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, 2022 | June 30, 2022 | September 30, 2021 | September 30, 2022 | September 30, 2021 | ||||||||||||
| GAAP earnings after income taxes | $ | 3,993 | $ | 4,366 | $ | 4,997 | $ | 13,065 | $ | 15,209 | ||||||
| Net income as adjusted after income taxes (non-GAAP) (1) | $ | 4,221 | $ | 4,391 | $ | 4,997 | $ | 13,318 | $ | 15,284 | ||||||
| Average assets | $ | 1,780,942 | $ | 1,764,517 | $ | 1,748,065 | $ | 1,764,321 | $ | 1,713,932 | ||||||
| Return on average assets (annualized) | 0.89 | % | 0.99 | % | 1.13 | % | 0.99 | % | 1.19 | % | ||||||
| Return on average assets as adjusted (non-GAAP) (annualized) | 0.94 | % | 1.00 | % | 1.13 | % | 1.01 | % | 1.19 | % |
(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 | Nine Months Ended | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, 2022 | June 30, 2022 | September 30, 2021 | September 30, 2022 | September 30, 2021 | |||||||||||
| GAAP earnings after income taxes | $ | 3,993 | $ | 4,366 | $ | 4,997 | $ | 13,065 | $ | 15,209 | |||||
| Net income as adjusted after income taxes (non-GAAP) (1) | $ | 4,221 | $ | 4,391 | $ | 4,997 | $ | 13,318 | $ | 15,284 | |||||
| Average equity | $ | 165,528 | $ | 164,737 | $ | 165,203 | $ | 166,181 | $ | 162,510 | |||||
| Return on average equity (annualized) | 9.57 | % | 10.63 | % | 12.00 | % | 10.51 | % | 12.51 | % | |||||
| Return on average equity as adjusted (non-GAAP) (annualized) | 10.12 | % | 10.69 | % | 12.00 | % | 10.71 | % | 12.57 | % |
(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 | September 30, 2022 | June 30, 2022 | September 30, 2021 | |||
|---|---|---|---|---|---|---|
| Total stockholders’ equity | $ | 163,319 | $ | 164,743 | $ | 165,926 |
| Less: Goodwill | (31,498) | (31,498) | (31,498) | |||
| Less: Intangible assets | (2,701) | (3,100) | (4,297) | |||
| Tangible common equity (non-GAAP) | $ | 129,120 | $ | 130,145 | $ | 130,131 |
| Ending common shares outstanding | 10,478,210 | 10,530,415 | 10,518,885 | |||
| Book value per share | $ | 15.59 | $ | 15.64 | $ | 15.77 |
| Tangible book value per share (non-GAAP) | $ | 12.32 | $ | 12.36 | $ | 12.37 |
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 | September 30, 2022 | June 30, 2022 | September 30, 2021 | ||||||
|---|---|---|---|---|---|---|---|---|---|
| Total stockholders’ equity | $ | 163,319 | $ | 164,743 | $ | 165,926 | |||
| Less: Goodwill | (31,498) | (31,498) | (31,498) | ||||||
| Less: Intangible assets | (2,701) | (3,100) | (4,297) | ||||||
| Tangible common equity (non-GAAP) | $ | 129,120 | $ | 130,145 | $ | 130,131 | |||
| Total Assets | $ | 1,780,202 | $ | 1,763,607 | $ | 1,753,477 | |||
| Less: Goodwill | (31,498) | (31,498) | (31,498) | ||||||
| Less: Intangible assets | (2,701) | (3,100) | (4,297) | ||||||
| Tangible Assets (non-GAAP) | $ | 1,746,003 | $ | 1,729,009 | $ | 1,717,682 | |||
| Total stockholders’ equity to total assets ratio | 9.17 | % | 9.34 | % | 9.46 | % | |||
| Tangible common equity as a percent of tangible assets (non-GAAP) | 7.40 | % | 7.53 | % | 7.58 | % |
Reconciliation of Return on Average Tangible Common Equity (non-GAAP)
(in thousands, except ratios)
| Three Months Ended | Nine Months Ended | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, 2022 | June 30, 2022 | September 30, 2021 | September 30, 2022 | September 30, 2021 | |||||||||||
| Total stockholders’ equity | $ | 163,319 | $ | 164,743 | $ | 165,926 | $ | 163,319 | $ | 165,926 | |||||
| Less: Goodwill | (31,498) | (31,498) | (31,498) | (31,498) | (31,498) | ||||||||||
| Less: Intangible assets | (2,701) | (3,100) | (4,297) | (2,701) | (4,297) | ||||||||||
| Tangible common equity (non-GAAP) | $ | 129,120 | $ | 130,145 | $ | 130,131 | $ | 129,120 | $ | 130,131 | |||||
| Average tangible common equity (non-GAAP) | $ | 131,130 | $ | 129,939 | $ | 129,208 | $ | 131,383 | $ | 126,116 | |||||
| GAAP earnings after income taxes | $ | 3,993 | $ | 4,366 | $ | 4,997 | $ | 13,065 | $ | 15,209 | |||||
| Amortization of intangible assets, net of tax | 302 | 302 | 292 | 906 | 879 | ||||||||||
| Tangible net income | $ | 4,295 | $ | 4,668 | $ | 5,289 | $ | 13,971 | $ | 16,088 | |||||
| Return on average tangible common equity (annualized) | 12.99 | % | 14.41 | % | 16.24 | % | 14.22 | % | 17.06 | % |
Reconciliation of Efficiency Ratio
(in thousands, except ratios)
| Three Months Ended | Nine Months Ended | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, 2022 | June 30, 2022 | September 30, 2021 | September 30, 2022 | September 30, 2021 | |||||||||||
| Non-interest expense (GAAP) | $ | 11,277 | $ | 10,462 | $ | 10,320 | $ | 31,407 | $ | 30,007 | |||||
| Less amortization of intangibles | (399) | (399) | (399) | (1,197) | (1,197) | ||||||||||
| Efficiency ratio numerator (GAAP) | $ | 10,878 | $ | 10,063 | $ | 9,921 | $ | 30,210 | $ | 28,810 | |||||
| Non-interest income | $ | 2,472 | $ | 2,372 | $ | 3,448 | $ | 7,557 | $ | 11,415 | |||||
| Loss (Gain) on investment securities | 55 | 75 | (73) | 167 | (344) | ||||||||||
| Net interest margin | 14,457 | 14,267 | 13,688 | 41,891 | 39,285 | ||||||||||
| Efficiency ratio denominator (GAAP) | $ | 16,984 | $ | 16,714 | $ | 17,063 | $ | 49,615 | $ | 50,356 | |||||
| Efficiency ratio (GAAP) | 64 | % | 60 | % | 58 | % | 61 | % | 57 | % |
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)”.
18
ex992
EXHIBIT 99.2 Earnings Release Supplement Third Quarter 2022
Citizens Community Bancorp, Inc. Table of Contents Cautionary Notes and Additional Disclosures Non‐Owner Occupied CRE Owner Occupied CRE Multi‐family Commercial & Industrial Loans Construction & Development Loans Agricultural Real Estate & Operating Loans Hotel Loans Restaurant Loans Campground Loans Credit Quality/Risk Rating Descriptions Loans by Risk Rating as of September 30, 2022 Loans by Risk Rating as of June 30, 2022 Loans by Risk Rating as of December 31, 2021 Loans by Risk Rating as of September 30, 2021 Allowance for Loan Losses Delinquency as of September 30, 2022, and June 30, 2022 Delinquency as of December 31, 2021, and September 30, 2021 Nonaccrual Loans Roll forward Other Real Estate Owned Roll forward Troubled Debt Restructurings in Accrual Status Acquired Loans – Non‐Accretable Difference and Accretable Discount Tables COVID‐19 Related Deferrals SBA PPP loans and SBA PPP net deferred loan fee accretion by year of origination Earnings Per Share Selected Capital Composition Highlights – Bank and Company Page(s) 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 20 20 21 22 22 23 24 1
Cautionary Notes and Additional Disclosures DATES AND PERIODS PRESENTED In this earnings release financial supplement, unless otherwise noted, “20YY” refers to either the corresponding fiscal year-end date or the corresponding 12-months (i.e. fiscal year) then ended. “MMM-YY” refers to either the corresponding quarter-end date, or the corresponding three-month period then ended. CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS This earnings release financial supplement may contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. These statements include, but are not limited to, descriptions of the financial condition, results of operations, asset and credit quality trends, profitability, projected earnings, future plans, strategies and expectations of Citizens Community Bancorp, Inc. (“CZWI” or the “Company”) and its subsidiary, Citizens Community Federal, National Association (“CCFBank”). The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and is including this statement for purposes of complying with those safe harbor provisions. Forward-looking statements, which are based on certain assumptions of the Company, are generally identifiable by use of the words “believe,” “expect,” “estimates,” “intend,” “anticipate,” “estimate,” “project,” “on pace,” “seek,” “target,” “potential,” “focus,” “may,” “preliminary,” “could,” “should” or similar expressions. These forward-looking statements express management’s current expectations or forecasts of future events, and by their nature, are subject to risks and uncertainties. Therefore, there are a number of factors that might cause actual results to differ materially from those in such statements. These uncertainties include conditions in the financial markets and economic conditions generally; adverse impacts to the Company or CCFBank arising from the COVID-19 pandemic; acts of terrorism and political or military actions by the United States or other governments; the possibility of a deterioration in the residential real estate markets; interest rate risk; lending risk; higher lending risks associated with our commercial and agricultural banking activities; the sufficiency of loan allowances; changes in the fair value or ratings downgrades of our securities; competitive pressures among depository and other financial institutions; disintermediation risk; our ability to maintain our reputation; our ability to maintain or increase our market share; our ability to realize the benefits of net deferred tax assets; our inability to obtain needed liquidity; our ability to raise capital needed to fund growth or meet regulatory requirements; our ability to attract and retain key personnel; our ability to keep pace with technological change; prevalence of fraud and other financial crimes; cybersecurity risks; the possibility that our internal controls and procedures could fail or be circumvented; our ability to successfully execute our acquisition growth strategy; risks posed by acquisitions and other expansion opportunities, including difficulties and delays in integrating the acquired business operations or fully realizing the cost savings and other benefits; restrictions on our ability to pay dividends; the potential volatility of our stock price; accounting standards for loan losses; legislative or regulatory changes or actions, or significant litigation, adversely affecting the Company or CCFBank; public company reporting obligations; changes in federal or state tax laws; and changes in accounting principles, policies or guidelines and their impact on financial performance. Stockholders, potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. Such uncertainties and other risks that may affect the Company's performance are discussed further in Part I, Item 1A, “Risk Factors,” in the Company’s Form 10-K, for the year ended December 31, 2021, filed with the Securities and Exchange Commission (“SEC”) on March 2, 2022, the Company’s Forms 10-Q for the quarter ended March 31, 2022, and June 30, 2022, filed with the SEC on May 4, 2022, and August 4, 2022, respectively, 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
Portfolio Fundamentals 63% 32% 5% Wisconsin Minnesota Other By Geography As of 9/30/22 • Typically well seasoned investors with multiple projects, track record of success and personal financial strength (net worth/Liquidity) • Maximum LTV =<80% with recourse to owners with >20% interest • Term of 5‐10 years with 20 to 25‐year amortizations depending on property type, markets and strength and liquidity of sponsors • Minimum DSC and/or Global DSC covenant required to monitor performance ranging from 1.15x‐1.25x • Conservative underwriting approach emphasizing actual results or market data • Appropriate use of SBA 504/7a for lower cash injection or special use projects Non – Owner Occupied CRE 9/30/2022 6/30/2022 $456 $455 769 759 $593 $599 Approximate Weighted Average LTV 62% 63% 26 25 Trailing 12 Month Net Charge‐Offs 0.03% 0.01% $12.0 $12.6 2.6% 2.8% 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 21% 20% 12%11% 11% 8% 5% 5% 3% 4% Investor Residential Hotel CRE ‐ Retail CRE ‐ Senior Living CRE ‐ Office CRE ‐ Warehouse/Mini Storage CRE ‐ Industrial/Manufacturing CRE ‐ Campground CRE ‐ Mixed Use Other Non – Owner Occupied CRE As of 9/30/22 3
19% 16% 14%11% 9% 8% 6% 4% 13% CRE Campground CRE Restaurant CRE Industrial/Manufacturing CRE Retail CRE Mixed Use CRE Warehouse/Mini Storage CRE Senior Living CRE Office Other Owner Occupied CRE As of 9/30/22 Portfolio Fundamentals 71% 12% 4% 3% 3% 7% Wisconsin Minnesota Maryland Ohio Pennsylvania Other By Geography As of 9/30/22 • Underwritten to <80% LTV based on appraised value (<75% for Restaurant) • Term of 5‐10 years with 20‐year amortization • Recourse to owners with greater than 20% interest • DSC covenant of 1.25x on project and/or Global DSC of 1.15x • Appropriate use of SBA 504/7a for lower cash injection or special use projects • By Geography “Other” segment includes borrowers with warm climates, no income tax states Owner Occupied CRE 9/30/2022 6/30/2022 $245 $248 418 423 $587 $587 Approximate Weighted Average LTV 50% 49% 29 28 Trailing 12 Month Net Charge‐Offs 0.00% 0.00% $2.6 $2.1 1.1% 0.8%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 4
Portfolio Fundamentals 65% 34% 1% Wisconsin Minnesota Other By Geography As of 9/30/22 17% 41% 26% 5% 8% 3% 2022 2021 2020 2019 2018 Prior By Vintage As of 9/30/22 • Robust housing markets in Eau Claire and Mankato markets supported by student populations at state universities, technical colleges, and growing population and job markets • Multi‐family sponsors experienced owners with multi‐project portfolios • Typically underwritten to 75% LTV based on appraised value with recourse; metro markets and/or strong sponsors may warrant up to 80% LTV • Generally, term of 5‐10 years with 20 to 25‐year amortization (varies by new versus existing, size of market and sponsor strength) • Covenant for minimum DSC/Global DSC Multi-family 9/30/2022 6/30/2022 $198 $180 117 114 $1.69 $1.58 64% 67% Weighted Average Seasoning In Months 20 21 0% 0% $0.3 $0.3 0.2% 0.2%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 5
89% 10% 1% Wisconsin Minnesota Other By Geography As of 9/30/22 23% 14% 11% 7% 7% 5% 5% 5% 5% 5% 3% 3% 2% 5% Manufacturing Finance and Insurance Transportation and Warehousing Wholesale Trade Retail Trade Real Estate, Rental and Leasing Public Admin Construction Agriculture Administrative Support Education Services Health Care Other Services Other Commercial & Industrial As of 9/30/22 • Highly diversified, secured loan portfolio underwritten with recourse • Lines of credit reviewed annually and may have borrowing base certificates governing line usage • Fixed asset LTV’s based on age and type of equipment; <5‐year amortization • Use of SBA Guaranty Program (Preferred Lender or General Processing) as appropriate • “Retail Trade” segment consists of Farm Supply, Franchised Hardware, Franchised Auto Parts, Franchised and Non‐franchised Auto Dealers and Repair Shops, Convenience Stores/Gas Stations Commercial & Industrial Loans 9/30/2022 6/30/2022 $135 $139 680 707 $198 $197 31 29 0.01% 0.01% $64 $58 $15.1 $12.2 Criticized Loans as a Precent of Total 11.2% 8.8% 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 6
Portfolio Fundamentals 39% 18% 12% 6% 4% 5% 3% 3% 3% 7% 1‐4 Family & Multi‐Family Warehouse/Mini Campgrounds Senior Living Mixed Use Hospitality Retail Land Industrial/Manufacturing Other Commercial & Development As of 9/30/22 42% 23% 13% 10% 5% 4% 3% Wisconsin Minnesota South Dakota Iowa Ohio Florida Other By Geography As of 9/30/22 • Underwritten to 75‐80% LTV based on lesser of cost or appraised value with full recourse • Interest only typically up to 18 months (depending on project complexity and seasonal timing) followed by amortization of 15‐25 years (terms vary by property type) • Borrower equity contribution of cash/land value =>15% injected at the beginning of project (cash/land contribution) • Construction loans require 3rd party inspections and title company draws after balancing to sworn construction statement • 1‐4 residential construction centered in eastern Twin Cities and Northwest Wisconsin. Generally, 80% LTC /60%‐80% of AV. Spec building capped. Progress reporting monthly by individual home Construction & Development Loans 9/30/2022 6/30/2022 Loan Balance Outstanding In Millions $118 $115 Number of Loans 128 138 Average Loan Size In Thousands $921 $835 Approximate Weighted Average LTV 58% 60% Trailing 12 Month Net Charge‐Offs 0.00% 0.00% Percent Utilized of Commitments 55% 51% $0.2 $0.2 Criticized Loans as a Percent of Total 0.1% 0.2% Portfolio Characteristics ‐ Construction & Development As of Criticized Loans in Millions 7
35% 22% 20% 23% Crop Other Farming Dairy Other Agricultural As of 9/30/22 Portfolio Fundamentals 71% 26% 3% Wisconsin Minnesota Other By Geography As of 9/30/22 • Producers required to have marketing plans to mitigate volatility of commodities • Appropriate crop/revenue insurance and/or dairy margin protection required • Maximum ag RE LTV of less than 65%; equipment LTV of less than 75% • Appropriate structuring to separate crop production cycles and to match length of loan with asset financed • Use of Farmer Mac, FSA, SBA or USDA programs to address DSC, collateral margins or working capital • Operating and ag loan relationships are typically cross collateralized Agricultural Real Estate & Operating Loans 9/30/2022 6/30/2022 $108 $102 535 539 $201 $190 32 32 0.14% 0.17% Criticized Loans in Millions $6.2 $7.0 5.7% 6.9%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 8
64% 28% 8% Limited Service Full Service Other Hotels As of 9/30/22 Portfolio Fundamentals 38% 45% 17% Minnesota Wisconsin Illinois By Geography As of 9/30/22 • 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 9/30/2022 6/30/2022 $93 $97 26 27 $3.6 $3.6 57% 61% 0.00% 0.00% Criticized Loans in Millions $6.2 $6.3 6.7% 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 9
67% 15% 7% 4%3% 4% Culver's ‐ Limited Service Restaurants Other National Limited Services Drinking Establishments Bowling Centers Other Restaurants As of 9/30/22 Portfolio Fundamentals 42% 35% 23% Wisconsin Minnesota Other By Geography As of 9/30/22 • Experienced developers/operators of national Limited /Quick Service brands (Culver’s, Subway, Dairy Queen, McDonalds, Jimmy John’s, A&W) • Underwritten to =<80% LTV with full recourse (depending on sponsor history); 20‐year amortization with 5 to 10‐year terms • Use of SBA Guaranty Program (Preferred Lender or General Processing) as appropriate • Drinking establishments may have other collateral pledged and tend to be in smaller communities in our footprint • Lessors of RE include investor and owner‐occupied structure Restaurant Loans 9/30/2022 6/30/2022 $48 $48 76 77 $631 $619 55% 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 10
15% 34%35% 4% 4% 8% 2022 2021 2020 2017 2016 Prior By Vintage As of 9/30/22 Portfolio Fundamentals 21% 14% 12% 10% 8% 7% 6% 5% 5% 12% Wisconsin Ohio Maryland Pennsylvania Utah Kentucky New York New Jersey Iowa Other By Geography As of 9/30/22 • Experienced multi‐unit operators and owner‐occupied franchised campgrounds (typically Jellystone Park) • Grounds offer a mix of camping, RV and cabin options with recreational amenities • Park locations within reasonable proximity of metropolitan areas and/or near national and state parks • Underwritten with recourse generally with 5‐10 year terms and 20 year amortization • Use of SBA 7a and 504, or other government guaranteed loan programs as appropriate • 20+ years of history through CCF acquisition with no charge‐off history Campground Loans 9/30/2022 6/30/2022 $80 $82 49 51 $1.6 $1.6 45% 43% 28 28 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 11
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. 12
Below is a breakdown of loans by risk rating as of September 30, 2022: 1 to 5 6 7 8 9 TOTAL Originated Loans: Commercial/Agricultural real estate: Commercial real estate $ 597,339 $ 6,038 $ 6,971 $ — $ — $ 610,348 Agricultural real estate 60,117 648 1,537 — — 62,302 Multi-family real estate 193,484 274 — — — 193,758 Construction and land development 116,103 — 44 — — 116,147 C&I/Agricultural operating: Commercial and industrial 109,485 12,873 1,992 — — 124,350 Agricultural operating 18,589 341 1,917 — — 20,847 Residential mortgage: Residential mortgage 74,473 — 2,834 — — 77,307 Purchased HELOC loans 3,357 — — — — 3,357 Consumer installment: Originated indirect paper 11,177 — 57 — — 11,234 Other consumer 6,972 — 44 — — 7,016 Originated loans before SBA PPP loans $ 1,191,096 $ 20,174 $ 15,396 $ — $ — $ 1,226,666 SBA PPP loans — — — — — — Total originated loans $ 1,191,096 $ 20,174 $ 15,396 $ — $ — $ 1,226,666 Acquired Loans: Commercial/Agricultural real estate: Commercial real estate $ 89,779 $ — $ 1,561 $ — $ — $ 91,340 Agricultural real estate 17,769 — 1,636 — — 19,405 Multi-family real estate 3,914 — — — — 3,914 Construction and land development 1,579 — 124 — — 1,703 C&I/Agricultural operating: Commercial and industrial 10,247 4 214 — — 10,465 Agricultural operating 5,017 — 169 — — 5,186 Residential mortgage: Residential mortgage 20,302 — 1,124 — — 21,426 Consumer installment: Other consumer 291 — 3 — — 294 Total acquired loans $ 148,898 $ 4 $ 4,831 $ — $ — $ 153,733 Total Loans: Commercial/Agricultural real estate: Commercial real estate $ 687,118 $ 6,038 $ 8,532 $ — $ — $ 701,688 Agricultural real estate 77,886 648 3,173 — — 81,707 Multi-family real estate 197,398 274 — — — 197,672 Construction and land development 117,682 — 168 — — 117,850 C&I/Agricultural operating: Commercial and industrial 119,732 12,877 2,206 — — 134,815 Agricultural operating 23,606 341 2,086 — — 26,033 Residential mortgage: Residential mortgage 94,775 — 3,958 — — 98,733 Purchased HELOC loans 3,357 — — — — 3,357 Consumer installment: Originated indirect paper 11,177 — 57 — — 11,234 Other consumer 7,263 — 47 — — 7,310 Gross Loans Before SBA PPP Loans $ 1,339,994 $ 20,178 $ 20,227 $ — $ — $ 1,380,399 SBA PPP loans — — — — — — Gross loans $ 1,339,994 $ 20,178 $ 20,227 $ — $ — $ 1,380,399 Less: Unearned net deferred fees and costs and loans in process (2,447) Unamortized discount on acquired loans (2,076) Allowance for loan losses (17,217) Loans receivable, net $ 1,358,659 13
Below is a breakdown of loans by risk rating as of June 30, 2022: 1 to 5 6 7 8 9 TOTAL Originated Loans: Commercial/Agricultural real estate: Commercial real estate $ 583,783 $ 6,084 $ 6,134 $ — $ — $ 596,001 Agricultural real estate 55,382 406 1,535 — — 57,323 Multi-family real estate 175,684 280 — — — 175,964 Construction and land development 113,974 — 43 — — 114,017 C&I/Agricultural operating: Commercial and industrial 112,171 10,448 1,494 — — 124,113 Agricultural operating 18,230 52 2,005 — — 20,287 Residential mortgage: Residential mortgage 63,266 — 2,441 — — 65,707 Purchased HELOC loans 3,419 — — — — 3,419 Consumer installment: Originated indirect paper 12,651 — 85 — — 12,736 Other consumer 7,416 — 56 — — 7,472 Originated loans before SBA PPP loans $ 1,145,976 $ 17,270 $ 13,793 $ — $ — $ 1,177,039 SBA PPP loans — — — — — — Total originated loans $ 1,145,976 $ 17,270 $ 13,793 $ — $ — $ 1,177,039 Acquired Loans: Commercial/Agricultural real estate: Commercial real estate $ 104,436 $ — $ 2,480 $ — $ — $ 106,916 Agricultural real estate 17,581 — 2,903 — — 20,484 Multi-family real estate 3,965 — — — — 3,965 Construction and land development 1,035 — 136 — — 1,171 C&I/Agricultural operating: Commercial and industrial 14,647 4 238 — — 14,889 Agricultural operating 4,125 — 57 — — 4,182 Residential mortgage: Residential mortgage 21,798 — 1,070 — — 22,868 Consumer installment: Other consumer 310 — 3 — — 313 Total acquired loans $ 167,897 $ 4 $ 6,887 $ — $ — $ 174,788 Total Loans: Commercial/Agricultural real estate: Commercial real estate $ 688,219 $ 6,084 $ 8,614 $ — $ — $ 702,917 Agricultural real estate 72,963 406 4,438 — — 77,807 Multi-family real estate 179,649 280 — — — 179,929 Construction and land development 115,009 — 179 — — 115,188 C&I/Agricultural operating: Commercial and industrial 126,818 10,452 1,732 — — 139,002 Agricultural operating 22,355 52 2,062 — — 24,469 Residential mortgage: Residential mortgage 85,064 — 3,511 — — 88,575 Purchased HELOC loans 3,419 — — — — 3,419 Consumer installment: Originated indirect paper 12,651 — 85 — — 12,736 Other consumer 7,726 — 59 — — 7,785 Gross Loans Before SBA PPP Loans $ 1,313,873 $ 17,274 $ 20,680 $ — $ — $ 1,351,827 SBA PPP loans — — — — — — Gross loans $ 1,313,873 $ 17,274 $ 20,680 $ — $ — $ 1,351,827 Less: Unearned net deferred fees and costs and loans in process (2,338) Unamortized discount on acquired loans (2,634) Allowance for loan losses (16,825) Loans receivable, net $ 1,330,030 14
Below is a breakdown of loans by risk rating as of December 31, 2021: 1 to 5 6 7 8 9 TOTAL Originated Loans: Commercial/Agricultural real estate: Commercial real estate $ 572,724 $ 667 $ 5,004 $ — $ — $ 578,395 Agricultural real estate 50,834 1,267 271 — — 52,372 Multi-family real estate 173,760 290 — — — 174,050 Construction and land development 75,146 — 3,467 — — 78,613 C&I/Agricultural operating: Commercial and industrial 107,798 57 82 — — 107,937 Agricultural operating 23,935 764 1,503 — — 26,202 Residential mortgage: Residential mortgage 60,754 — 3,101 — — 63,855 Purchased HELOC loans 3,706 — 165 — — 3,871 Consumer installment: Originated indirect paper 15,818 — 153 — — 15,971 Other consumer 8,404 — 69 — — 8,473 Originated loans before SBA PPP loans $ 1,092,879 $ 3,045 $ 13,815 $ — $ — $ 1,109,739 SBA PPP loans 8,755 — — — — 8,755 Total originated loans $ 1,101,634 $ 3,045 $ 13,815 $ — $ — $ 1,118,494 Acquired Loans: Commercial/Agricultural real estate: Commercial real estate $ 116,839 $ 1,314 $ 1,917 $ — $ — $ 120,070 Agricultural real estate 21,051 — 5,072 — — 26,123 Multi-family real estate 4,299 — — — — 4,299 Construction and land development 735 172 — — — 907 C&I/Agricultural operating: Commercial and industrial 13,931 5 294 — — 14,230 Agricultural operating 4,936 — 450 — — 5,386 Residential mortgage: Residential mortgage 25,869 — 1,266 — — 27,135 Consumer installment: Other consumer 398 — 3 — — 401 Total acquired loans $ 188,058 $ 1,491 $ 9,002 $ — $ — $ 198,551 Total Loans: Commercial/Agricultural real estate: Commercial real estate $ 689,563 $ 1,981 $ 6,921 $ — $ — $ 698,465 Agricultural real estate 71,885 1,267 5,343 — — 78,495 Multi-family real estate 178,059 290 — — — 178,349 Construction and land development 75,881 172 3,467 — — 79,520 C&I/Agricultural operating: Commercial and industrial 121,729 62 376 — — 122,167 Agricultural operating 28,871 764 1,953 — — 31,588 Residential mortgage: Residential mortgage 86,623 — 4,367 — — 90,990 Purchased HELOC loans 3,706 — 165 — — 3,871 Consumer installment: Originated indirect paper 15,818 — 153 — — 15,971 Other consumer 8,802 — 72 — — 8,874 Gross Loans Before SBA PPP Loans $ 1,280,937 $ 4,536 $ 22,817 $ — $ — $ 1,308,290 SBA PPP loans 8,755 — — — — 8,755 Gross loans $ 1,289,692 $ 4,536 $ 22,817 $ — $ — $ 1,317,045 Less: Unearned net deferred fees and costs and loans in process (2,482) Unamortized discount on acquired loans (3,600) Allowance for loan losses (16,913) Loans receivable, net $ 1,294,050 15
Below is a breakdown of loans by risk rating as of September 30, 2021: 1 to 5 6 7 8 9 TOTAL Originated Loans: Commercial/Agricultural real estate: Commercial real estate $ 507,305 $ 300 $ 935 $ — $ — $ 508,540 Agricultural real estate 48,053 378 651 — — 49,082 Multi-family real estate 149,802 292 — — — 150,094 Construction and land development 76,366 — 8,033 — — 84,399 C&I/Agricultural operating: Commercial and industrial 87,481 16 3,084 — — 90,581 Agricultural operating 23,744 22 1,624 — — 25,390 Residential mortgage: Residential mortgage 65,733 — 3,253 — — 68,986 Purchased HELOC loans 3,756 — 165 — — 3,921 Consumer installment: Originated indirect paper 17,511 — 178 — — 17,689 Other consumer 9,344 — 70 — — 9,414 Originated loans before SBA PPP loans $ 989,095 $ 1,008 $ 17,993 $ — $ — $ 1,008,096 SBA PPP loans 31,301 — — — — 31,301 Total originated loans $ 1,020,396 $ 1,008 $ 17,993 $ — $ — $ 1,039,397 Acquired Loans: Commercial/Agricultural real estate: Commercial real estate $ 126,472 $ 1,342 $ 1,970 $ — $ — $ 129,784 Agricultural real estate 22,517 — 5,035 — — 27,552 Multi-family real estate 5,928 — — — — 5,928 Construction and land development 949 190 — — — 1,139 C&I/Agricultural operating: Commercial and industrial 16,243 8 303 — — 16,554 Agricultural operating 4,251 — 290 — — 4,541 Residential mortgage: Residential mortgage 29,253 — 1,542 — — 30,795 Consumer installment: Other consumer 512 — 4 — — 516 Total acquired loans $ 206,125 $ 1,540 $ 9,144 $ — $ — $ 216,809 Total Loans: Commercial/Agricultural real estate: Commercial real estate $ 633,777 $ 1,642 $ 2,905 $ — $ — $ 638,324 Agricultural real estate 70,570 378 5,686 — — 76,634 Multi-family real estate 155,730 292 — — — 156,022 Construction and land development 77,315 190 8,033 — — 85,538 C&I/Agricultural operating: Commercial and industrial 103,724 24 3,387 — — 107,135 Agricultural operating 27,995 22 1,914 — — 29,931 Residential mortgage: Residential mortgage 94,986 — 4,795 — — 99,781 Purchased HELOC loans 3,756 — 165 — — 3,921 Consumer installment: Originated indirect paper 17,511 — 178 — — 17,689 Other consumer 9,856 — 74 — — 9,930 Gross Loans Before SBA PPP Loans $ 1,195,220 $ 2,548 $ 27,137 $ — $ — $ 1,224,905 SBA PPP loans 31,301 — — — — 31,301 Gross loans $ 1,226,521 $ 2,548 $ 27,137 $ — $ — $ 1,256,206 Less: Unearned net deferred fees and costs and loans in process (3,486) Unamortized discount on acquired loans (4,066) Allowance for loan losses (16,832) Loans receivable, net $ 1,231,822 16
Allowance for Loan Losses (in thousand, except ratios) September 30, 2022 and Three Months Ended June 30, 2022 and Three Months Ended December 31, 2021 and Three Months Ended September 30, 2021 and Three Months Ended Allowance for loan losses (“ALL”), at beginning of period $ 16,825 $ 16,818 $ 16,832 $ 16,845 Loans charged off: Commercial/Agricultural real estate (48) (122) — — C&I/Agricultural operating — (247) — — Residential mortgage — (56) — — Consumer installment (9) (16) (5) (36) Total loans charged off (57) (441) (5) (36) Recoveries of loans previously charged off: Commercial/Agricultural real estate 35 3 18 4 C&I/Agricultural operating 8 9 62 13 Residential mortgage 3 25 1 1 Consumer installment 28 11 5 5 Total recoveries of loans previously charged off: 74 48 86 23 Net loans charged off (“NCOs”) 17 (393) 81 (13) Additions to ALL via provision for loan losses charged to operations 375 400 — — ALL, at end of period $ 17,217 $ 16,825 $ 16,913 $ 16,832 Average outstanding loan balance $ 1,370,897 $ 1,328,661 $ 1,271,956 $ 1,192,636 Ratios: NCOs (annualized) to average loans — % 0.12 % (0.03) % — % 17
Delinquency Detail (in thousands) 30-59 Days Past Due and Accruing 60-89 Days Past Due and Accruing Greater Than 89 Days Past Due and Accruing Total Past Due and Accruing Nonaccrual Loans Total Past Due Accruing and Nonaccrual Loans Current Total Loans September 30, 2022 Commercial/Agricultural real estate: Commercial real estate $ — $ — $ — $ — $ 5,848 $ 5,848 $ 695,840 $ 701,688 Agricultural real estate — 70 — 70 2,729 2,799 78,908 81,707 Multi-family real estate — — — — — — 197,672 197,672 Construction and land development — — — — 43 43 117,807 117,850 C&I/Agricultural operating: Commercial and industrial — — — — 188 188 134,627 134,815 Agricultural operating 74 231 — 305 668 973 25,060 26,033 Residential mortgage: Residential mortgage 1,443 250 244 1,937 1,246 3,183 95,550 98,733 Purchased HELOC loans 117 — — 117 — 117 3,240 3,357 Consumer installment: Originated indirect paper — — 3 3 30 33 11,201 11,234 Other consumer 20 17 1 38 20 58 7,252 7,310 Total $ 1,654 $ 568 $ 248 $ 2,470 $ 10,772 $ 13,242 $ 1,367,157 $ 1,380,399 June 30, 2022 Commercial/Agricultural real estate: Commercial real estate $ — $ — $ — $ — $ 5,275 $ 5,275 $ 697,642 $ 702,917 Agricultural real estate 78 — — 78 3,169 3,247 74,560 77,807 Multi-family real estate — — — — — — 179,929 179,929 Construction and land development — — — — 43 43 115,145 115,188 C&I/Agricultural operating: Commercial and industrial 7 8 — 15 211 226 138,776 139,002 Agricultural operating 146 — — 146 555 701 23,768 24,469 Residential mortgage: Residential mortgage 1,032 668 712 2,412 1,122 3,534 85,041 88,575 Purchased HELOC loans — — — — — — 3,419 3,419 Consumer installment: Originated indirect paper 13 — — 13 41 54 12,682 12,736 Other consumer 54 3 2 59 18 77 7,708 7,785 Total $ 1,330 $ 679 $ 714 $ 2,723 $ 10,434 $ 13,157 $ 1,338,670 $ 1,351,827 18
Delinquency Detail (Continued) (in thousands) 30-59 Days Past Due and Accruing 60-89 Days Past Due and Accruing Greater Than 89 Days Past Due and Accruing Total Past Due and Accruing Nonaccrual Loans Total Past Due Accruing and Nonaccrual Loans Current Total Loans December 31, 2021 Commercial/Agricultural real estate: Commercial real estate $ 36 $ — $ — $ 36 $ 5,374 $ 5,410 $ 693,055 $ 698,465 Agricultural real estate 498 4 — 502 3,490 3,992 74,503 78,495 Multi-family real estate — — — — — — 178,349 178,349 Construction and land development — — — — — — 79,520 79,520 C&I/Agricultural operating: Commercial and industrial — 32 — 32 298 330 121,837 122,167 SBA PPP loans — — — — — — 8,755 8,755 Agricultural operating 1,123 — — 1,123 993 2,116 29,472 31,588 Residential mortgage: Residential mortgage 1,471 487 156 2,114 1,268 3,382 87,608 90,990 Purchased HELOC loans 117 — — 117 165 282 3,589 3,871 Consumer installment: Originated indirect paper 38 27 — 65 55 120 15,851 15,971 Other consumer 58 10 4 72 22 94 8,780 8,874 Total $ 3,341 $ 560 $ 160 $ 4,061 $ 11,665 $ 15,726 $ 1,301,319 $ 1,317,045 September 30, 2021 Commercial/Agricultural real estate: Commercial real estate $ 5,613 $ — $ — $ 5,613 $ 872 $ 6,485 $ 631,839 $ 638,324 Agricultural real estate 345 — — 345 3,567 3,912 72,722 76,634 Multi-family real estate — — — — — — 156,022 156,022 Construction and land development 48 — — 48 4,555 4,603 80,935 85,538 C&I/Agricultural operating: Commercial and industrial 21 — — 21 311 332 106,803 107,135 SBA PPP loans — — — — — — 31,301 31,301 Agricultural operating 199 — — 199 1,063 1,262 28,669 29,931 Residential mortgage: Residential mortgage 2,085 782 409 3,276 1,098 4,374 95,407 99,781 Purchased HELOC loans 232 — — 232 165 397 3,524 3,921 Consumer installment: Originated indirect paper 105 1 14 120 51 171 17,518 17,689 Other consumer 37 4 2 43 24 67 9,863 9,930 Total $ 8,685 $ 787 $ 425 $ 9,897 $ 11,706 $ 21,603 $ 1,234,603 $ 1,256,206 19
Nonaccrual Loans Roll forward (in thousands) Quarter Ended September 30, 2022 June 30, 2022 March 31, 2022 December 31, 2021 September 30, 2021 Balance, beginning of period $ 10,434 $ 11,858 $ 11,665 $ 11,706 $ 8,075 Additions 257 1,918 720 428 4,859 Acquired nonaccrual loans — — — — — Charge offs (4) (437) (15) (1) (24) Transfers to OREO (27) (65) — (19) — Return to accrual status (117) — (51) (30) — Repurchase of government guaranteed loans 517 Payments received (288) (2,830) (461) (422) (1,202) Other, net — (10) — 3 (2) Balance, end of period $ 10,772 $ 10,434 $ 11,858 $ 11,665 $ 11,706 Other Real Estate Owned Roll forward (in thousands) Quarter Ended September 30, 2022 June 30, 2022 March 31, 2022 December 31, 2021 September 30, 2021 Balance, beginning of period $ 1,427 $ 1,360 $ 1,406 $ 2 $ 129 Loans transferred in 27 65 — 46 — Branch properties transferred in 130 — — 1,360 — Sales — — (45) — (124) Write-downs — — — — — Other, net — 2 (1) (2) (3) Balance, end of period $ 1,584 $ 1,427 $ 1,360 $ 1,406 $ 2 Troubled Debt Restructurings in Accrual Status (in thousands, except number of modifications) September 30, 2022 June 30, 2022 December 31, 2021 September 30, 2021 Number of Modifications Recorded Investment Number of Modifications Recorded Investment Number of Modifications Recorded Investment Number of Modifications Recorded Investment Troubled debt restructurings: Accrual Status Commercial/Agricultural real estate 10 $ 1,363 10 $ 2,049 11 $ 4,618 12 $ 4,711 C&I/Agricultural Operating 6 2,505 4 1,182 3 649 4 3,685 Residential mortgage 37 3,033 36 2,915 36 2,681 39 2,925 Consumer installment 2 9 3 17 6 36 6 44 Total loans 55 $ 6,910 53 $ 6,163 56 $ 7,984 61 $ 11,365 20
Acquired loans represent much of the reduction in non-performing loans and classified loans. The table below shows the changes in the Bank’s non-accretable difference on purchased credit impaired loans. The second table below shows the changes in the Bank’s accretable loan discount which was established at each acquisition. The Bank has transferred the non-accretable difference on purchased credit impaired loans to accretable discount as collateral coverage improved sufficiently, due to a combination of principal paydowns and/or improving collateral positions. This transferred non-accretable difference to accretable discount is accreted over the remaining maturity of the loan or until payoff, whichever is shorter. Non-accretable Difference (in thousands) September 30, 2022 June 30, 2022 March 31, 2022 December 31, 2021 September 30, 2021 Non-accretable difference, beginning of period $ 410 $ 509 $ 653 $ 686 $ 823 Additions to non-accretable difference for acquired purchased credit impaired loans — — — — — Non-accretable difference realized as interest from payoffs of purchased credit impaired loans (34) (70) (26) (2) (8) Transfers from non-accretable difference to accretable discount — (29) (86) (31) (129) Non-accretable difference used to reduce loan principal balance (160) — (32) — — Non-accretable difference, end of period $ 216 $ 410 $ 509 $ 653 $ 686 The table below provides the changes in accretable discount for acquired loans. Accretable Discount (in thousands) September 30, 2022 June 30, 2022 March 31, 2022 December 31, 2021 September 30, 2021 Accretable discount, beginning of period $ 2,224 $ 2,758 $ 2,947 $ 3,380 $ 3,524 Additions to accretable discount for acquired performing loans — — — — — Accelerated accretion from payoff of certain purchased credit impaired loans with transferred non-accretable difference (117) (308) (11) (200) (12) Transfers from non-accretable difference to accretable discount — 29 86 31 129 Scheduled accretion (247) (255) (264) (264) (261) Accretable discount, end of period $ 1,860 $ 2,224 $ 2,758 $ 2,947 $ 3,380 21
The following table details COVID-19 related loan deferrals: COVID-19 Related Deferrals (in thousands, except number of loans) September 30, 2022 Balance Number of Loans Commercial deferrals $ — — Residential deferrals 197 3 Consumer deferrals — — Total Deferrals $ 197 3 The table below lists the SBA PPP loans and net deferred loan fee accretion balances related to 2020 and 2021 SBA PPP loan originations: SBA PPP Loans and SBA PPP Net Deferred Loan Fee Accretion by Year of Origination (in thousands) 2020 Originations 2021 Originations Total Balance Net Deferred Fee Income Balance Net Deferred Fee Income Balance Net Deferred Fee Income SBA PPP loans, January 1, 2021 $ 123,702 $ 2,991 $ — $ — $ 123,702 $ 2,991 2021 SBA PPP loan originations — — 47,467 1,770 47,467 1,770 Less: 2021 SBA PPP loan forgiveness and fee accretion (52,238) (1,706) — (44) (52,238) (1,750) SBA PPP loans, March 31, 2021 71,464 1,285 47,467 1,726 118,931 3,011 2021 SBA PPP loan originations — — 8,323 1,715 8,323 1,715 Less: 2021 SBA PPP loan forgiveness and fee accretion (50,057) (977) (2,272) (332) (52,329) (1,309) SBA PPP loans, June 30, 2021 21,407 308 53,518 $ 3,109 74,925 3,417 2021 SBA PPP loan originations — — 64 9 64 9 Less: 2021 SBA PPP loan forgiveness and fee accretion (18,286) (279) (25,402) (1,599) (43,688) (1,878) SBA PPP Loans, September 30, 2021 3,121 29 28,180 1,519 31,301 1,548 2021 SBA PPP loan originations — — — — — — Less: 2021 SBA PPP loan forgiveness and fee accretion (993) (25) (21,553) (1,226) (22,546) (1,251) SBA PPP Loans, December 31, 2021 2,128 4 6,627 293 8,755 297 Less: 2022 SBA PPP loan forgiveness and fee accretion (886) (3) (5,798) (255) (6,684) (258) SBA PPP loans, March 31, 2022 1,242 1 829 38 2,071 39 Less: 2022 SBA PPP loan forgiveness and fee accretion (1,242) (1) (829) (38) (2,071) (39) SBA PPP loans, June 30, 2022 $ — $ — $ — $ — $ — $ — 22
On November 30, 2020, the Board of Directors adopted a share repurchase program, pursuant to which Citizens Community Bancorp, Inc. was authorized to repurchase 557 thousand shares of its common stock, or approximately 5% of the outstanding shares on that date. Repurchases made during the quarter ended September 30, 2021, used all remaining shares authorized under this share repurchase program. On July 23, 2021, the Board of Directors adopted a new share repurchase program, pursuant to which Citizens Community Bancorp, Inc. is authorized to repurchase 532,962 shares of its common stock, or approximately 5% of the outstanding shares on that date. Under this new share repurchase program, approximately 53 thousand shares were repurchased during the quarter ended September 30, 2022 and approximately 71 thousand shares were repurchased during the nine months ended September 30, 2022. As of September 30, 2022, there were 10.5 million shares outstanding and an additional 301 thousand shares could be repurchased under the program. Earnings Per Share (Amounts in thousands, except per share data) Three Months Ended Nine Months Ended September 30, 2022 June 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021 Basic Net income attributable to common shareholders $ 3,993 $ 4,366 $ 4,997 $ 13,065 $ 15,209 Weighted average common shares outstanding 10,510 10,530 10,610 10,522 10,788 Basic earnings per share $ 0.38 $ 0.41 $ 0.47 $ 1.24 $ 1.41 Diluted Net income attributable to common shareholders $ 3,993 $ 4,366 $ 4,997 $ 13,065 $ 15,209 Weighted average common shares outstanding 10,510 10,530 10,610 10,522 10,788 Add: Dilutive stock options outstanding 9 12 13 11 10 Average shares and dilutive potential common shares 10,519 10,542 10,623 10,533 10,798 Diluted earnings per share $ 0.38 $ 0.41 $ 0.47 $ 1.24 $ 1.41 Common stock issued and outstanding 10,478 10,530 10,519 10,478 10,519 23
CITIZENS COMMUNITY FEDERAL N.A. Selected Capital Composition Highlights September 30, 2022 (unaudited) June 30, 2022 (unaudited) December 31, 2021 (audited) September 30, 2021 (unaudited) To Be Well Capitalized Under Prompt Corrective Action Provisions Tier 1 leverage ratio (to adjusted total assets) 11.6% 11.4% 10.0% 9.6% 5.0% Tier 1 capital (to risk weighted assets) 13.3% 13.2% 12.2% 12.4% 8.0% Common equity tier 1 capital (to risk weighted assets) 13.3% 13.2% 12.2% 12.4% 6.5% Total capital (to risk weighted assets) 14.4% 14.3% 13.4% 13.6% 10.0% CITIZENS COMMUNITY BANCORP, INC. Selected Capital Composition Highlights September 30, 2022 (unaudited) June 30, 2022 (unaudited) December 31, 2021 (audited) September 30, 2021 (unaudited) For Capital Adequacy Purposes Tier 1 leverage ratio (to adjusted total assets) 8.4% 8.2% 7.9% 7.6% 4.0% Tier 1 capital (to risk weighted assets) 9.6% 9.6% 9.7% 9.7% 6.0% Common equity tier 1 capital (to risk weighted assets) 9.6% 9.6% 9.7% 9.7% 4.5% Total capital (to risk weighted assets) 14.0% 15.1% 13.1% 13.2% 8.0% 24
ex993
2022 Third Quarter Results Earnings Release Presentation EXHIBIT 99.3
Cautionary Notes and Additional Disclosures 2 DATES AND PERIODS PRESENTED 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 presentation may contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. These statements include, but are not limited to, descriptions of the financial condition, results of operations, asset and credit quality trends, profitability, projected earnings, future plans, strategies and expectations of Citizens Community Bancorp, Inc. (“CZWI” or the “Company”) and its subsidiary, Citizens Community Federal, National Association (“CCFBank”) . The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and is including this statement for purposes of complying with those safe harbor provisions. Forward-looking statements, which are based on certain assumptions of the Company, are generally identifiable by use of the words “believe,” “expect,” “estimates,” “intend,” “anticipate,” “estimate,” “project,” “on pace,” “seek,” “target,” “potential,” “focus,” “may,” “preliminary,” “could,” “should” or similar expressions. These forward-looking statements express management’s current expectations or forecasts of future events, and by their nature, are subject to risks and uncertainties. Therefore, there are a number of factors that might cause actual results to differ materially from those in such statements. These uncertainties include conditions in the financial markets and economic conditions generally; adverse impacts to the Company or CCFBank arising from the COVID-19 pandemic; acts of terrorism and political or military actions by the United States or other governments; the possibility of a deterioration in the residential real estate markets; interest rate risk; lending risk; higher lending risks associated with our commercial and agricultural banking activities; the sufficiency of loan allowances; changes in the fair value or ratings downgrades of our securities; competitive pressures among depository and other financial institutions; disintermediation risk; our ability to maintain our reputation; our ability to maintain or increase our market share; our ability to realize the benefits of net deferred tax assets; our inability to obtain needed liquidity; our ability to raise capital needed to fund growth or meet regulatory requirements; our ability to attract and retain key personnel; our ability to keep pace with technological change; prevalence of fraud and other financial crimes; cybersecurity risks; the possibility that our internal controls and procedures could fail or be circumvented; our ability to successfully execute our acquisition growth strategy; risks posed by acquisitions and other expansion opportunities, including difficulties and delays in integrating the acquired business operations or fully realizing the cost savings and other benefits; restrictions on our ability to pay dividends; the potential volatility of our stock price; accounting standards for loan losses; legislative or regulatory changes or actions, or significant litigation, adversely affecting the Company or CCFBank; public company reporting obligations; changes in federal or state tax laws; and changes in accounting principles, policies or guidelines and their impact on financial performance. Stockholders, potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward- looking statements. Such uncertainties and other risks that may affect the Company's performance are discussed further in Part I, Item 1A, "Risk Factors," in the Company's Form 10-K, for the year ended December 31, 2021, filed with the Securities and Exchange Commission ("SEC") on March 2, 2022, the Company’s Form 10-Qs for the quarters ended March 31, 2022 and June 30, 2022, filed with the SEC on May 4, 2022, and August 4, 2022, respectively, 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 These slides contain 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, EPS as adjusted, ROAA as adjusted, return on average tangible common equity (ROATCE), ROATCE as adjusted, tangible book value, tangible book value per share, efficiency ratio as adjusted and tangible common equity / tangible assets. Reconciliations of all Non·GAAP financial measures used herein to the comparable GAAP financial measures in the appendix at the end of this presentation. SOURCE Unless otherwise noted, internal Company documents
Investment Summary Strong Markets Strong earnings and ROATCE profile with capacity and infrastructure to grow organically 3 Returns Asset Quality Strong markets with diverse industries and lower unemployment than national averages mitigate volatility and support steady growth. Sound underwriting practices and portfolio administration have produced strong credit performance Capital Ratios Strong bank capital ratios and improving holding company regulatory capital ratios Shareholder Friendly Board and Executive Management commitment to the company’s stock evidenced by approved share repurchase authorizations in November 2020 and July 2021 and open market purchases
89.2% 82.3% 76.1% 87.1% 73.7% 86.5% 87.1% 84.0% 80.8% 89.6% 74.1% 87.4% 0.0% 25.0% 50.0% 75.0% 100.0% Overall Role Team Supervisor Compensation Organization Colleague Engagement 2021 Favorable 2022 Favorable Excellent Target 75% Values Our six main values are: integrity, commitment, innovation, collaboration, focus, and sustainability. Vision Make more possible for our customers, colleagues, communities, and shareholders! Mission Provide the best products, service, and ideas to our customers every interaction every day. Culture & Engagement 4 91.4% of colleagues participated in annual engagement survey, up from 71.8% in 2021.
Performance Objectives Increase Tangible Book and Shareholder Value Maintain Strong Asset Quality Metrics Increase Operating Leverage Sustainable Business Practices Targeted growth in TBV of 8-10% and achieve ROAA and ROATCE in the upper half of its peer group Maintain NPAs, classifieds and NCOs at or better than peer group median Maintain efficiency ratio in the low to mid 60% range by growing revenue and controlling expenses Execute sustainable business practices that strengthen our culture and communities, foster equity, diversity and inclusion and maintain sound corporate and board governance 5
Operating Market Overview CZWI Operates in diverse markets within the northwestern region of Wisconsin, metro Twin Cities and the Mankato, Minnesota MSA Source: S&P Global Market Intelligence 0 0 0 0 0 6
$574 $733 $759 $1,177 $1,238 $1,311 $1,290 $1,347 $1,376 $558 $743 $747 $1,196 $1,295 $1,388 $1,428 $1,400 $1,434 $696 $941 $975 $1,531 $1,649 $1,740 $1,775 $1,764 $1,780 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY Mar-22 Jun-22 Sep-22 Franchise Expansion CZWI has transformed the Company from a consumer bank to a commercial bank to strengthen the earnings profile and franchise. Total Assets Loans Receivable Total Deposits Source: S&P Global Market Intelligence, company filings 7 July 2019 Assets: $192mm Tomah, WI May 2016 Assets: $154mm Rice Lake, WI 2 Central Bank branches February 2016 Deposits: $27mm Northwestern WI August 2017 Assets: $269mm Wells, MN October 2018 Assets: $269mm Osseo, WI
Net Income and Diluted EPS Source: S&P Global Market Intelligence, company filings Net Income as Adjusted and Diluted EPS Income as Adjusted are non-GAAP financial measures, which management believes may be helpful in understanding the Company's results of operations or financial position and comparing results over different periods. Reconciliation of Net Income and Diluted EPS Income as Adjusted to the comparable GAAP financial measure can be found in the appendix of this presentation. These measures should not be viewed as a substitute for operating results determined in accordance with GAAP. 8 $2,499 $4,283 $9,463 $12,725 $21,266 $4,706 $4,366 $3,993 $4,221 $4,962 $10,675 $12,425 $21,339 $4,706 $4,391 $4,222 -$1,000 $4,000 $9,000 $14,000 $19,000 $24,000 2017 2018 2019 2020 2021 Mar‐22 Jun‐22 Sep‐22 Net Income Net Income Net Income as Adjusted $0.46 $0.58 $0.85 $1.14 $1.98 $0.45 $0.41 $0.38 $0.78 $0.68 $0.96 $1.11 $1.99 $0.45 $0.41 $0.40 $0.00 $0.20 $0.40 $0.60 $0.80 $1.00 $1.20 $1.40 $1.60 $1.80 $2.00 2017 2018 2019 2020 2021 Mar‐22 Jun‐22 Sep‐22 Diluted EPS Diluted EPS Diluted EPS Income as Adjusted
Book Value, Tangible Book Value and Core Net Revenue Detail Source: S&P Global Market Intelligence, company filings Tangible book value per share is a non-GAAP measure which management believes may be helpful in better assessing capital adequacy. The reconciliation of Tangible book value per share can be found in the appendix of this presentation. These measures should not be viewed as substitutes for operating results determined in accordance with GAAP. 9 $9.78 $11.05 $9.89 $11.18 $12.90 $12.40 $12.36 $12.32$12.48 $12.46 $13.36 $14.52 $16.27 $15.72 $15.64 $15.59 $0.00 $2.00 $4.00 $6.00 $8.00 $10.00 $12.00 $14.00 $16.00 $18.00 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY Mar‐22 Jun‐22 Sep‐22 BOOK VALUE AND TANGIBLE BOOK VALUE PER SHARE TANGIBLE BOOK VALUE PER SHARE BOOK VALUE PER SHARE $22,878 $29,764 $42,686 $43,673 $40,532 $31,407 $- $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000 2017 2018 2019 2020 2021 2022 YTD CORE NET REVENUE DETAIL NET INTEREST INCOME NON-INTEREST INCOME NON-INTEREST EXPENSE $58,488 $68,703 $69,491 $27,019 $37,673 $49,448
Return on average assets as adjusted, return on average tangible common equity (ROATCE) and ROATCE as adjusted are non-GAAP measures, which management believes may be helpful in better understanding the underlying business performance trends related to average assets and average tangible equity. Reconciliations of ROAA as adjusted, ROTCE, and ROTCE as adjusted can be found in the appendix of this presentation. These measures should not be viewed as substitutes for operating results determined in accordance with GAAP. Return on Average Assets and Return on Average Tangible Common Equity Source: SEC filings and Company documents 10 0.34% 0.45% 0.68% 0.80% 1.23% 1.09% 0.99% 0.89% 0.58% 0.52% 0.76% 0.78% 1.24% 1.09% 1.00% 0.94% 0.00% 0.20% 0.40% 0.60% 0.80% 1.00% 1.20% 1.40% 2017 2018 2019 2020 2021 Mar-22 Jun-22 Sep-22 ROAA ROAA ROAA INCOME AS ADJUSTED 4.5% 5.3% 10.1% 12.1% 17.6% 15.3% 14.4% 13.0% 7.5% 6.0% 11.2% 11.8% 17.6% 15.3% 14.5% 13.7% 0.0% 5.0% 10.0% 15.0% 20.0% 2017 2018 2019 2020 2021 Mar-22 Jun-22 Sep-22 ROATCE ROATCE ROATCE INCOME AS ADJUSTED
Efficiency Ratio, Net Interest Income (NII) and Net Interest Margin (NIM) The efficiency ratio as adjusted is a non-GAAP measure, which management believes may be helpful in better understanding the underlying business performance trends related to non-interest expense. A reconciliation of the efficiency ratio as adjusted to its comparable GAAP financial measure can be found in the appendix of this presentation. This measure should not be viewed as a substitute for operating results determined in accordance with GAAP. 11 84% 77% 71% 61% 57% 58% 60% 64% 74% 76% 66% 62% 57% 58% 60% 62% 40% 45% 50% 55% 60% 65% 70% 75% 80% 85% 90% 2017 2018 2019 2020 2021 Mar‐22 Jun‐22 Sep‐21 EFFICIENCY RATIO EFFICIENCY RATIO EFFICIENCY RATIO AS ADJUSTED $20,077 $22,268 $30,303 $43,513 $50,255 $53,667 $41,891 3.27% 3.31% 3.42% 3.37% 3.40% 3.34% 3.38% 2.50% 3.00% 3.50% 4.00% 4.50% 5.00% 5.50% 6.00% $- $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 YTD NII AND NIM NET INTEREST INCOME NET INTEREST MARGIN
Capital Ratios Note: 2018 FY represents the completion of the 2018 offering of $65 million, but does not include the acquisition of United Bank Source: S&P Global Market Intelligence, company filings 12 6.6% 12.7% 7.7% 7.7% 7.9% 8.0% 8.2% 8.4% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% 20.0% 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY Mar-22 Jun-22 Sep-22 LEVERAGE RATIO 8.8% 16.8% 9.1% 10.5% 9.7% 9.9% 9.6% 9.6% 0.0% 5.0% 10.0% 15.0% 20.0% 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY Mar-22 Jun-22 Sep-22 COMMON EQUITY TIER 1 RATIO 12.0% 19.8% 11.2% 14.3% 13.1% 15.8% 15.1% 14.0% 0.0% 5.0% 10.0% 15.0% 20.0% 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY Mar-22 Jun-22 Sep-22 TOTAL CAPITAL RATIO Tangible common equity/tangible assets is a non-GAAP measure, which management believes may be helpful in better understanding the underlying business performance trends related to tangible assets and tangible common equity. A reconciliation of tangible common equity and tangible assets to its comparable financial measure can be found in the appendix of the presentation. This measure should not be viewed as a substitute for operating results determined in accordance with GAAP. 6.2% 12.6% 9.9% 7.7% 7.9% 7.5% 7.5% 7.4% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% 20.0% 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY Mar-22 Jun-22 Sep-22 TANGIBLE COMMON EQUITY / TANGIBLE ASSETS
Asset Quality 0.82% 0.89% 0.88% 1.38% 1.29% 1.30% 1.25% 1.25% 1.25% 1.11% 1.25% 1.55% 1.40% 1.44% 1.37% 1.34% 1.77% 1.43% 1.45% 1.37% 1.34% 0.00% 0.30% 0.60% 0.90% 1.20% 1.50% 1.80% 2.10% 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY Mar‐22 Jun‐22 Sep‐21 ALLOWANCE FOR LOAN LOSSES (ALLL) ALL AS A % OF TOTAL LOANS ALL ALLOCATED TO ORIGINATED LOANS AS A % OF ORIGINATED LOANS ALL ALLOCATED TO ORIGINATED LOANS AS A % OF ORIGINATED LOANS, NET OF SBA PPP LOANS 1.49% 1.14% 1.41% 0.70% 0.76% 0.77% 0.71% 0.71% 0.00% 0.30% 0.60% 0.90% 1.20% 1.50% 1.80% 2.10% 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY Mar-22 Jun-22 Sep-22 NON-PERFORMING ASSETS (NPA) / ASSETS CCF ORIGINATED NPA/ASSETS CCF ACQUIRED NPA/ASSETS 13 81.04% 51.19% 150.38% 143.03% 137.22% 150.92% 156.23% 0.00% 20.00% 40.00% 60.00% 80.00% 100.00% 120.00% 140.00% 160.00% 180.00% 2018 FY 2019 FY 2020 FY 2021 FY Mar-22 Jun-22 Sep-22 ALLL / NON-PERFORMING LOANS (NPL) ALLL/NPL 0.07% 0.07% 0.08% 0.08% 0.01% 0.03% 0.12% 0.00% 0.00% 0.20% 0.40% 0.60% 0.80% 1.00% 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY Mar-22 Jun-22 Sep-21 NET CHARGE OFFS (NCOS)/ AVERAGE LOANS NCOS / AVERAGE LOANS
CRE, C&I, Ag. Related, C&D 91% Residential & HELOC 8% Consumer 1% Loan Portfolio 9/30/2016 9/30/22 CRE, C&I, Ag. Related, C&D 34% Residential & HELOC 33% Consumer 33% ($000s) Sep‐16 Sep‐17 Sep‐18 Dec‐19 Dec‐20 Dec‐21 Mar‐22 Jun‐22 Sep‐22 Commercial Real Estate $54,600 $109,024 $156,735 $420,383 $425,283 $610,214 $599,825 $612,627 $609,323 Housing related CRE $53,475 $77,166 $108,029 $181,084 $204,544 $266,600 $269,436 $270,219 $290,037 Commercial & Industrial $31,001 $55,251 $76,254 $133,734 $116,553 $122,167 $121,022 $139,002 $134,815 Ag. Real Estate / Ag. Operating $42,845 $91,875 $97,066 $123,143 $101,580 $110,083 $104,473 $102,276 $107,740 Q3 2022 Construction & Development $16,580 $19,708 $17,739 $86,410 $98,517 $79,520 $87,880 $115,188 $117,850 4.54% Residential mortgage and Purchased HELOC loans $187,738 $247,634 $209,781 $184,739 $137,646 $94,861 $88,261 $91,994 $102,090 Yield (1) Indirect Consumer Installment $168,294 $115,287 $78,245 $39,585 $25,851 $15,971 $14,509 $12,736 $11,234 Consumer Installment $19,715 $20,668 $18,844 $18,186 $13,213 $8,874 $8,191 $7,785 $7,310 Gross Loans Ex SBA PPP Loans $574,248 $736,613 $762,693 $1,187,264 $1,123,187 $1,308,290 $1,293,597 $1,351,827 $1,380,399 SBA PPP Loans $0 $0 $0 $0 $123,702 $8,755 $2,071 $0 $0 Total Gross Loans $574,248 $736,613 $762,693 $1,187,264 $1,246,889 $1,317,045 $1,295,668 $1,351,827 $1,380,399 14 (1) Yield excludes SBA PPP accretion, PCI loan accretion, loan purchase accretion, and interest income recognized on nonaccrual loan payoffs
Commercial & Ag Loan Portfolio CZWI has transformed its loan portfolio through organic growth and acquisitions Change has occurred from a primarily consumer focused portfolio to a diversified mix consisting of commercial real estate, agricultural and commercial business loans Credit quality remains a focus in conjunction with loan growth Transformation of the loan portfolio has occurred through both acquisitions and organic growth 15 ($000s) S e p-16 S e p-17 S e p-18 De c-19 De c-20 De c-21 Ma r-22 J un-22 S e p-22 Origina te d C omme rcia l L oa ns: C ommercial real es tate $58,768 $97,155 $168,319 $302,546 $351,113 $578,395 $575,289 $596,001 $610,348 Agricultural real es tate $3,418 $10,628 $27,017 $34,026 $31,741 $52,372 $52,683 $57,323 $62,302 Multi-family real es tate $18,935 $24,486 $44,767 $71,877 $112,731 $174,050 $175,471 $175,964 $193,758 C ons truction and development $12,977 $12,399 $14,648 $71,467 $91,241 $78,613 $86,997 $114,017 $116,147 C ommercial and indus trial $17,969 $35,198 $62,196 $89,730 $95,290 $107,937 $108,422 $124,113 $124,350 Agricultural operating $9,994 $12,493 $17,514 $20,717 $24,457 $26,202 $24,020 $20,287 $20,847 T ota l G ross Origina te d C omme rcia l & Ag L oa ns $122,061 $192,359 $334,461 $590,363 $706,573 $1,017,569 $1,022,882 $1,087,705 $1,127,752 Acquire d C omme rcia l L oa ns: C ommercial real es tate $30,172 $62,807 $48,384 $211,913 $156,562 $120,070 $114,485 $106,916 $91,340 Agricultural real es tate $24,780 $57,374 $43,500 $51,337 $37,054 $26,123 $23,033 $20,484 $19,405 Multi-family real es tate $200 $1,742 $3,294 $15,131 $9,421 $4,299 $4,016 $3,965 $3,914 C ons truction and development $3,603 $7,309 $3,091 $14,943 $7,276 $907 $883 $1,171 $1,703 C ommercial and indus trial $13,032 $20,053 $14,058 $44,004 $21,263 $14,230 $12,600 $14,889 $10,465 Agricultural operating $4,653 $11,380 $9,035 $17,063 $8,328 $5,386 $4,737 $4,182 $5,186 T ota l G ross Acquire d C omme rcia l & Ag L oa ns $76,440 $160,665 $121,362 $354,391 $239,904 $171,015 $159,754 $151,607 $132,013 T ota l G ross C omme rcia l & Ag L oa ns $198,501 $353,024 $455,823 $944,754 $946,477 $1,188,584 $1,182,636 $1,239,312 $1,259,765
Deposit Composition Focus has been on transforming the deposit composition to core deposits Deposit transformation and growth has been achieved through both acquisitions and organic initiatives 9/30/2016 9/30/2022 Source: S&P Global Market Intelligence, company filings Non Interest Bearing Demand 8% Interest Bearing Demand 9% MMDA & Savings 34% CDs 49% 16 Non Interest Bearing Demand 20% Interest Bearing Demand 28% MMDA & Savings 39% CDs 13% ($000) S e p-16 S e p-17 S e p-18 De c-19 De c-20 De c-21 Ma r-22 J un-22 S e p-22 Non-interes t-bearing demand depos its $45,408 $75,318 $87,495 $168,157 $238,348 $276,631 $269,481 $276,815 $285,670 Interes t bearing demand depos its $48,934 $147,912 $139,276 $223,102 $301,764 $396,231 $423,251 $401,857 $394,924 Q3 2022 S avings accounts $52,153 $102,756 $97,329 $156,599 $196,348 $222,674 $241,072 $239,322 $236,107 C ost of De posits Money market accounts $137,234 $125,749 $109,314 $246,430 $245,549 $288,985 $321,409 $328,718 $328,544 0.47% C ertificate accounts $273,948 $290,769 $313,115 $401,414 $313,247 $203,014 $173,010 $153,498 $189,123 T ota l De posits $557,677 $742,504 $746,529 $1, 195,702 $1,295, 256 $1,387,535 $1,428,223 $1,400,210 $1,434,368 Depos it C ompos ition - Q uarter L ookback
Appendix 17
Net Interest Margin Analysis Source: S&P Global Market Intelligence, company filings 18 (1) Fully taxable equivalent. The average yield on tax exempt securities is computed on a tax equivalent basis using a tax rate of 21% for the quarters ended September 30, 2022, June 30, 2022, March 31, 2022, and December 31, 2021. Quarter ended September 30, 2022 Quarter ended June 30, 2022 Quarter ended March 31, 2022 Quarter ended December 31, 2021 Th Interest Average Interest Average Interest Average Interest Average Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/ ($ Dollars in Thousands) Balance Expense Rate Balance Expense Rate Balance Expense Rate Balance Expense Rate Average interest earning assets: Cash and cash equivalents 11,043$ 60$ 2.16% 25,195$ 43$ 0.68% 35,208$ 13$ 0.15% 45,758$ 15$ 0.13% Loans receivable 1,370,897 15,937 4.61% 1,328,661 14,893 4.50% 1,304,141 13,767 4.28% 1,271,956 15,158 4.73% Interest‐bearing deposits 1,079 7 2.57% 1,509 8 2.13% 1,511 8 2.15% 1,512 8 2.10% Investment securities (1) 274,868 1,768 2.57% 285,332 1,593 2.23% 288,261 1,416 1.99% 296,444 1,404 1.88% Non‐marketable equity securities, at cost 14,910 187 4.98% 14,969 166 4.45% 15,258 172 4.57% 15,081 177 4.66% Total interest earning assets 1,672,797$ 17,959$ 4.26% 1,655,666$ 16,703$ 4.05% 1,644,379$ 15,376$ 3.79% 1,630,751$ 16,762$ 4.08% Average interest‐bearing liabilities: Total deposits 1,143,557$ 1,681$ 0.58% 1,135,198$ 985$ 0.35% 1,132,721$ 1,068$ 0.38% 1,112,210$ 1,261$ 0.45% FHLB Advances & Other Borrowings 192,338 1,821 3.76% 186,050 1,451 3.13% 166,118 1,141 2.79% 170,475 1,117 2.60% Total interest bearing liabilities 1,335,895$ 3,502$ 1.04% 1,321,248$ 2,436$ 0.74% 1,298,839$ 2,209$ 0.69% 1,282,685$ 2,378$ 0.74% Net interest income 14,457$ 14,267$ 13,167$ 14,384$ Interest Rate Spread 3.22% 3.31% 3.10% 3.34% Net interest margin 3.43% 3.46% 3.25% 3.50%
Interest Rate Risk 19 (1) Assumes an immediate and parallel shift in the yield curve at all maturities. Note: The tables above may not be indicative of future results. September 30, 2022 December 31, 2021 +300 bp 0% ‐5% +200 bp 0% ‐3% +100 bp 0% ‐1% ‐100 bp 0% ‐1% September 30, 2022 December 31, 2021 +300 bp 0% ‐11% +200 bp 0% ‐7% +100 bp 0% ‐4% ‐100 bp 0% 0% Percent Change in Economic Value of Equity (EVE)Change in Interest Rates In Basis Points ("bp") Rate Shock in Rates (1) Change in Interest Rates In Basis Points ("bp") Rate Shock in Rates (1) Percent Change in Net Interest Income Over One Year Horizon
20 Reconciliation of Non-GAAP Financial Measures Reconciliation of GAAP Earnings and Core Earnings (non‐GAAP): GAAP pre‐tax earnings 3,822$ 6,609$ 12,277$ 17,280$ 28,959$ 6,212$ 5,777$ 5,277$ Merger related costs (1) 1,860$ 463$ 3,880$ ‐$ ‐$ ‐$ ‐$ ‐$ Branch closure costs (2) 951$ 26$ 15$ 165$ ‐$ ‐$ 33$ 302$ Settlement proceeds (3) (283)$ ‐$ ‐$ (131)$ ‐$ ‐$ ‐$ ‐$ FHLB borrowings prepayment fee (4) 104$ ‐$ ‐$ ‐$ 102$ ‐$ ‐$ ‐$ Audit and Financial Reporting (5) ‐$ ‐$ 358$ ‐$ ‐$ ‐$ ‐$ ‐$ Net gain on sale of branch ‐$ ‐$ (2,295)$ ‐$ ‐$ ‐$ ‐$ ‐$ Net gain on sale of acquired business lines (6) ‐$ ‐$ ‐$ (432)$ ‐$ ‐$ ‐$ ‐$ Income before provision for income taxes as adjusted (7) 6,454$ 7,098$ 14,235$ 16,882$ 29,061$ 6,212$ 5,810$ 5,579$ Provision for income tax on pre‐tax earnings as adjusted (8) 2,233$ 1,798$ 3,260$ 4,457$ 7,722$ 1,506$ 1,419$ 1,357$ Tax impact of certain acquired BOLI policies (9) ‐$ ‐$ 300$ ‐$ ‐$ ‐$ ‐$ ‐$ Tax cuts and Jobs Act of 2017 (10) ‐$ 338$ ‐$ ‐$ ‐$ ‐$ ‐$ ‐$ Total provision for income tax as adjusted 2,233$ 2,136$ 3,560$ 4,457$ 7,722$ 1,506$ 1,419$ 1,357$ Net income as adjusted (non‐GAAP) (7) 4,221$ 4,962$ 10,675$ 12,425$ 21,339$ 4,706$ 4,391$ 4,222$ GAAP diluted earnings per share, net of tax 0.46$ 0.58$ 0.85$ 1.14$ 1.98$ 0.45$ 0.41$ 0.38$ Merger related costs, net of tax 0.22$ 0.06$ 0.27$ ‐$ ‐$ ‐$ ‐$ ‐$ Branch related costs, net of tax 0.12$ ‐$ ‐$ 0.01$ ‐$ ‐$ ‐$ 0.02$ Settlement proceeds (0.03)$ ‐$ ‐$ (0.01)$ ‐$ ‐$ ‐$ ‐$ FHLB borrowings prepayment fee 0.01$ ‐$ ‐$ ‐$ 0.01$ ‐$ ‐$ ‐$ Tax impact of certain acquired BOLI policies (9) ‐$ ‐$ (0.03)$ ‐$ ‐$ ‐$ ‐$ ‐$ Tax Cuts and Jobs Act of 2017 tax provision (10) ‐$ 0.04$ ‐$ ‐$ ‐$ ‐$ ‐$ ‐$ Audit and Financial Reporting, net of tax ‐$ ‐$ 0.02$ ‐$ ‐$ ‐$ ‐$ ‐$ Net gain on sale of branch ‐$ ‐$ (0.15)$ ‐$ ‐$ ‐$ ‐$ ‐$ Net gain on sale of acquired business lines ‐$ ‐$ ‐$ (0.03)$ ‐$ ‐$ ‐$ ‐$ Diluted earnings per share, as adjusted, net of tax (non‐GAAP) 0.78$ 0.68$ 0.96$ 1.11$ 1.99$ 0.45$ 0.41$ 0.40$ Average diluted shares outstanding 5,378,548 7,335,247 11,121,435 11,161,811 10,726,539 10,541,306 10,541,905 10,519,079 Mar‐22FY 2017 FY 2018 FY 2019 Sep‐22FY 2020 FY 2021 Jun‐22
(1) All costs incurred are presented as professional fees and other non-interest expense in the consolidated statement of operations and include costs $0, $0, $0 $0, $0, $341,000, $350,000, and $565,000 for the three months ended September 30, 2022, June 30, 2022 and March 31, 2022 and years ended December 31, 2021, December 31, 2020, December 31, 2019, September 30, 2018, and September 30, 2017, respectively, which are nondeductible expenses for federal income tax purposes. (2) 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. In addition, other non- interest expense includes costs related to the reduction in valuation of a closed branch office in the fourth quarter of fiscal 2017 and costs associated with three branch closures during the quarter ended December 31, 2020, and one branch closure in the quarter ended September 30, 2022. Professional services includes legal costs related to the sale of the Michigan branch included in these Branch closure costs during the quarter ended March 31, 2019. (3) Settlement proceeds includes litigation income from a JP Morgan Residential Mortgage-Backed Security (RMBS) claim. This JP Morgan RMBS was previously owned by the Bank and sold in 2011. (4) The prepayment fee to restructure our FHLB borrowings is included in other non-interest expense in the consolidated statement of operations. (5) 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. (6) Net gain on sale of acquired business lines resulted from (1) the sale of Wells Insurance Agency and (2) the termination and sale of the wealth management business line sales contract acquired in a former acquisition. (7) Income before provision for income tax as adjusted and net income as adjusted are non-GAAP measures that management believes enhances the markets ability to assess the underlying business performance and trends related to core business activities. (8) Provision for income tax on pre-tax income as adjusted is calculated at our effective tax rate for each respective period presented. (9) Tax impact of certain acquired BOLI policies from United Bank. (10) As a result of the Tax Cuts and Jobs Act of 2017, we recorded a one-time net tax provision of $338,000 in 2018, which is included in provision for income taxes expense in the consolidated statement of operations. 21 Reconciliation of Non-GAAP Financial Measures
Note: All quarterly periods are annualized for net income / net income as adjusted. 22 Reconciliation of Non-GAAP Financial Measures 2017 2018 2019 2020 2021 Mar‐22 Jun‐22 Sep‐22 Net Income 2,499$ 4,283$ 9,463$ 12,725$ 21,266$ 4,706$ 4,366$ 3,993$ Net Income as adjusted 4,221$ 4,962$ 10,675$ 12,425$ 21,339$ 4,706$ 4,391$ 4,222$ Average assets 731,407$ 954,912$ 1,398,482$ 1,594,053$ 1,722,483$ 1,750,114$ 1,764,517$ 1,780,942$ Return on average assets 0.34% 0.45% 0.68% 0.80% 1.23% 1.09% 0.99% 0.89% Return on average assets as adjusted 0.58% 0.52% 0.76% 0.78% 1.24% 1.09% 1.00% 0.94% 2017 2018 2019 2020 2021 Mar‐22 Jun‐22 Sep‐22 Common Equity 73,483$ 135,847$ 150,553$ 160,564$ 170,866$ 165,494$ 164,743$ 163,319$ Less: Goodwill (10,444) (10,444) (31,498) (31,498) (31,498) (31,498) (31,498) (31,498) Less: Core Deposit and other intangibles (5,449) (4,805) (7,587) (5,494) (3,898) (3,499) (3,100) (2,701) Tangible Common Equity (TCE) 57,590$ 120,598$ 111,468$ 123,572$ 135,470$ 130,497$ 130,145$ 129,120$ Average Tangible Common Equity 58,300$ 89,094$ 105,340$ 115,313$ 127,793$ 132,550$ 129,939$ 131,130$ Net Income 2,499$ 4,283$ 9,463$ 12,725$ 21,266$ 4,706$ 4,366$ 3,993$ Intangible amortization, net of tax 143 417 1,153 1,194 1,171 302 302 302 Tangible Net Income 2,642$ 4,700$ 10,616$ 13,919$ 22,437$ 5,008$ 4,668$ 4,295$ Net Income as adjusted 4,221$ 4,962$ 10,675$ 12,425$ 21,339$ 4,706$ 4,391$ 4,222$ Intangible amortization, net of tax 143 417 1,153 1,194 1,171 302 302 302 Tangible Net Income as adjusted 4,364$ 5,379$ 11,828$ 13,619$ 22,510$ 5,008$ 4,693$ 4,524$ ROATCE 4.5% 5.3% 10.1% 12.1% 17.6% 15.3% 14.4% 13.0% ROATCE as adjusted 7.5% 6.0% 11.2% 11.8% 17.6% 15.3% 14.5% 13.7% Return on Average Assets (ROAA) as Adjusted Return on Average Tangible Common Equity (ROATCE) as Adjusted (In thousands except ROATCE and ROATCE as adjusted) (In thousands except ROAA and ROAA as adjusted)
Reconciliation of Non-GAAP Financial Measures Note: All quarterly periods are annualized for net income / net income as adjusted 23 2017 2018 2019 2020 2021 Mar‐22 Jun‐22 Sep‐22 Non‐interest Expense (GAAP) 22,878$ 29,764$ 42,686$ 43,673$ 40,532$ 9,668$ 10,462$ 11,277$ Less amortization of intangibles (219) (644) (1,496) (1,622) (1,596) (399) (399) (399) Efficiency ratio numerator 22,659 29,120 41,190 42,051 38,936 9,269 10,063 10,878 Merger related costs (1,860) (463) (3,880) ‐ ‐ ‐ ‐ ‐ Branch Closure costs (951) (26) (15) (165) ‐ ‐ (33) (302) Audit and financial reporting ‐ ‐ (358) ‐ ‐ ‐ ‐ ‐ Prepayment fee (104) ‐ ‐ ‐ (102) ‐ ‐ ‐ Efficiency ratio numerator as adjusted 19,744$ 28,631$ 36,937$ 41,886$ 38,834$ 9,269$ 10,030$ 10,576$ Non‐interest income 4,751$ 7,370$ 14,975$ 18,448$ 15,824$ 2,713$ 2,372$ 2,472$ Net interest margin 22,268 30,303 43,513 50,255 53,667 13,167 14,267 14,457 Loss (Gain) on investment securities (111) 17 (271) (110) (1,224) 37 75 55 Efficiency ratio denominator (GAAP) 26,908 37,690 58,217 68,593 68,267 15,917 16,714 16,984 Net gain on sale of branch ‐ ‐ (2,295) ‐ ‐ ‐ ‐ ‐ Net gain on sale of acquired business l ines ‐ ‐ ‐ (432) ‐ ‐ ‐ ‐ Settlement proceeds (283) ‐ ‐ (131) ‐ ‐ ‐ ‐ Efficiency ratio denominator as adjusted 26,625$ 37,690$ 55,922$ 68,030$ 68,267$ 15,917$ 16,714$ 16,984$ Efficiency ratio 84% 77% 71% 61% 57% 58% 60% 64% Efficiency ratio as adjusted 74% 76% 66% 62% 57% 58% 60% 62% 2017 2018 2019 2020 2021 Mar‐22 Jun‐22 Sep‐22 Total Stockholders' equity 73,483$ 135,847$ 150,553$ 160,564$ 170,866$ 165,494$ 164,743$ 163,319$ Less: Goodwill (10,444) (10,444) (31,498) (31,498) (31,498) (31,498) (31,498) (31,498) Less: Core deposit and intangibles (5,449) (4,805) (7,587) (5,494) (3,898) (3,499) (3,100) (2,701) Tangible book value (non‐GAAP) 57,590$ 120,598$ 111,468$ 123,572$ 135,470$ 130,497$ 130,145$ 129,120$ Shares outstanding 5,888,816 10,913,853 11,266,954 11,056,349 10,502,442 10,526,781 10,530,415 10,478,210 Book Value 12.48$ 12.45$ 13.36$ 14.52$ 16.27$ 15.72$ 15.64$ 15.59$ TBVPS 9.78$ 11.05$ 9.89$ 11.18$ 12.90$ 12.40$ 12.36$ 12.32$ 2017 2018 2019 2020 2021 Mar‐22 Jun‐22 Sep‐22 Total Assets 940,664$ 975,409$ 1,167,060$ 1,649,095$ 1,739,628$ 1,775,469$ 1,763,607$ 1,780,202$ Less: Goodwill (10,444) (10,444) (31,498) (31,498) (31,498) (31,498) (31,498) (31,498) Less: Core deposit and intangibles (5,449) (4,805) (7,587) (5,494) (3,898) (3,499) (3,100) (2,701) Tangible Assets (non‐GAAP) 924,771$ 960,160$ 1,127,975$ 1,612,103$ 1,704,232$ 1,740,472$ 1,729,009$ 1,746,003$ Tangible Common Equity / Tangible Assets 6.2% 12.6% 9.9% 7.7% 7.9% 7.5% 7.5% 7.4% Efficiency Ratio as Adjusted Tangible Book Value Per Share (TBVPS) as Adjusted Tangible Common Equity / Tangible Assets (In thousands except Tangible Common Equity / Tangible Asets) (In thousands except Shares Outstanding, Book Value and TBVPS) (In thousands except Efficiency Ratio and Efficiency Ratio as adjusted)
Source: S&P Global Market Intelligence, eauclairedevelopment.com, greatermankato.com, Google Images, US Bureau of Labor Statistics Eau Claire MSA: Features a broad-based, diverse economy, which is driven by commercial, housing, retail and medical industries. Mankato MSA: The Mankato market also possesses a broad-based, diverse economy, which is driven by manufacturing, agribusiness, health care and education. Mankato Area EmployersEau Claire Area Employers Market Demographics 24 2.6% 3.2% 5.5% 3.2% 3.0% 2.5% 3.1% 5.5% 2.9% 1.7% 0.0% 2.5% 5.0% 7.5% Aug‐18 Aug‐19 Aug‐20 Aug‐21 Aug‐22 MSA Unemployment Rates Eau Claire MSA Mankato MSA
Leadership Team Stephen M. Bianchi Chairman of the Board President & CEO Mr. Stephen M. Bianchi, also known as Steve, has been the Chief Executive Officer and President of Citizens Community Bancorp, Inc. and Citizens Community Federal since June 24, 2016. He has been Chairman of Citizens Community Bancorp, Inc. since October 2018 and Citizens Community Federal National Association. As a banking veteran with 36 years of experience, Mr. Bianchi served in several senior management positions at Wells Fargo Bank and with Associated Bank. He served as the Chief Executive Officer at HF Financial Corp. from October 2011 and its President from April 2010 to May 2015. Mr. Bianchi served as the Chief Executive Officer and President of Home Federal Bank, a subsidiary of HF Financial Corp. from August 2012 to May 2015. He served as the Interim Chief Executive Officer and Interim President of HF Financial Corp. from October 2011 until July 2012. Mr. Bianchi served as Senior Vice President at Associated Bank, where he served as Minnesota Regional President and Minnesota Regional Commercial Banking Manager from July 2006 to April 2010. Before that, he served as Twin Cities Business Banking Manager for Wells Fargo Bank, where he held several other management positions over 14 years. He has been a Director of Citizens Community Bancorp, Inc. since May 25, 2017. He has been a Director of Citizens Community Federal since June 24, 2016. Mr. Bianchi received his B.S. degree in Finance and M.B.A. from Providence College. James S. Broucek Executive VP, CFO Principal Accounting Officer, Treasurer & Secretary Mr. James S. Broucek, also known as Jim, has been Chief Financial Officer and Principal Accounting Officer at Citizens Community Bancorp, Inc and Citizens Community Federal since October 31, 2017. He serves as Executive Vice President, CFO, Treasurer, and Secretary of Citizens Community Bancorp, Inc. and of Citizens Community Federal National Association. He served as a Senior Manager of Wipfli LLP (“Wipfli”) from December 2013 to October 2017. Before joining Wipfli, Mr. Broucek held several positions with TCF Financial Corporation (“TCF Financial”) and its subsidiaries from 1995 to 2013, with his last position being Treasurer of TCF Financial. Prior to joining TCF Financial, Mr. Broucek served as the Controller of Great Lakes Bancorp. Mr. Broucek is a banking veteran with 36 years of experience. Mr. Broucek holds a B.A. in mathematics and business administration with a concentration in accounting from Hope College. 25