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CST: 13/11/2019 16:09:50   

CORRECTING and REPLACING – Citizens Community Bancorp, Inc. Earns $1.2 Million, or $0.11 Per Share, in 3Q19; Third Quarter Highlighted by Completed Acquisition of F. & M. Bancorp of Tomah, Inc. 

15 Days ago

Announces 5% Stock Buyback Plan

EAU CLAIRE, Wis., Oct. 28, 2019 (GLOBE NEWSWIRE) -- In a release issued under the same headline earlier today by Citizens Community Bancorp, Inc. (Nasdaq: CZWI), please note that in the table titled "Loan Composition," under "Acquired Loans," "Residential real estate," all figures in the "One to four family" row have been corrected. The corrected release follows:

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 $1.2 million, or $0.11 per diluted share, for the quarter ended September 30, 2019, compared to $4.1 million, or $0.37 per diluted share, for the previous quarter ended June 30, 2019. In the September 2019 quarter, the Company benefited from (1) the full quarter impact of the F. & M. Bancorp. of Tomah, Inc. ("F&M") acquisition, net of merger charge considerations, (2) strong loan fee income from commercial activity, (3) an annual debit card incentive and (4) reduced FDIC insurance assessments due to the FDIC application of Small Bank Assessment Credits to our current quarter invoice. These items were partially offset by (1) increased loan servicing amortization resulting from higher prepayments and (2) higher than normal marketing expenses as CCFBank continues to execute on its plan of brand awareness with recent acquisitions.

Net income as adjusted (non-GAAP)1 was $3.4 million or $0.30 per diluted share for the quarter ended September 30, 2019 compared to $2.6 million of $0.23 per diluted share for the quarter ended June 30, 2019. The current quarter results were impacted by $2.9 million of acquisition-related expenses which reduced net income by $0.19 per diluted share. Included in GAAP net income and net income as adjusted for the quarter ended September 30, 2019, was the earnings impact from F&M of approximately $0.03 per diluted share, before merger charges. The June 2019 quarter operations reflected a $2.3 million gain on the sale of a branch, or $0.15 per diluted share. This gain was excluded from net income as adjusted and modestly offset by the addition of $206,000 of pre-tax acquisition-related expenses which added $0.01 per diluted share.

The following table reports key financial metric ratios based on a net income and net income as adjusted basis:

  Three Months Ended   Nine Months Ended
  September 30,
2019
  June 30,
2019
  September 30,
2018
    September 30,
2019
  September 30,
2018
 
Ratios based on net income:                      
Return on average assets (annualized) 0.34 % 1.23 % 0.44 %   0.61 % 0.46 %
Return on average equity (annualized) 3.35 % 11.72 % 3.21 %   5.94 % 4.00 %
Efficiency ratio (non-GAAP) 85 % 61 % 77 %   75 % 80 %
Net interest margin 3.34 % 3.30 % 3.45 %   3.35 % 3.42 %
Ratios based on net income as adjusted (non- GAAP):          
Return on average assets as adjusted2 (annualized) 0.93 % 0.77 % 0.48 %   0.75 % 0.5 %
Return on average equity as adjusted3 (annualized) 9.22 % 7.27 % 3.45 %   7.23 % 4.35 %
Efficiency ratio4 66 % 74 % 78 %   69 % 82 %
                       

"During the third quarter, we focused on successfully integrating our last two bank acquisitions. We believe the financial impact of these successful business combinations is showing in our non-interest income and non-interest expense lines," said Stephen Bianchi, Chairman, President and Chief Executive Officer. Mr. Bianchi added, "Mortgage activity has been strong in our markets dominated by purchase activity and growing refinancing business more recently. We also eliminated our unsecured purchased indirect portfolio of approximately $11 million by selling loans back to the originator at par. No meaningful margin impact is expected and there was no allowance for loan losses associated with the remaining loan portfolio, which reached its peak at $50 million three years ago. Our Community Banking loan growth slowed somewhat, as we balance pricing and growth in this challenging rate environment.  We do, however, still see strong economic activity in our markets and solid pipelines through the early part of 2020, and will remain prudent in our pricing and risk taking."

The Company closed on the acquisition of F&M on July 1, 2019 and completed the F&M data systems conversion on July 14, 2019. The F&M transaction was valued at approximately $24 million and resulted in the creation of $367,000 of goodwill and $1.6 million of a core deposit intangible asset at September 30, 2019, based on preliminary estimates. We expect our analysis to be final at December 31, 2019. At June 30, 2019, F&M had total assets of $192.3 million, gross loans of $130.3 million, and deposits of $148.5 million.

On October 24, 2019, the Board of Directors approved a stock repurchase program. Under this program the Company may repurchase up to approximately 5% of the current outstanding shares of its common stock, from time to time through October 1, 2020. The repurchase program permits shares to be repurchased in open market or private transactions, through block trades, and pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 of the Securities and Exchange commission.

Repurchases may be made at management's discretion at prices management considers to be attractive and in the best interests of both the Company and its stockholders, subject to the availability of stock, general market conditions, the applicable trading price, future alternative advantageous uses for capital, and the Company's financial performance. Open market purchases will be conducted in accordance with the limitations set forth in Rule 10b-18 of the Securities and Exchange Commission and other applicable legal requirements.

The repurchase program may be suspended, terminated or modified at any time for any reason, including market conditions, the cost of repurchasing shares, the availability of alternative investment opportunities, liquidity, and other factors deemed appropriate. These factors may also affect the timing and amount of share repurchases. The repurchase program does not obligate the Company to repurchase any particular number of shares.

September 30, 2019 Highlights: (as of or for the periods ended September 30, 2019, compared to June 30, 2019)

  • Total assets increased to $1.48 billion at September 30, 2019 from $1.35 billion at June 30, 2019. The increased asset base reflected the acquisition of assets from F&M.
     
  • Loans receivable increased to $1.12 billion at September 30, 2019 from $1.02 billion at June 30, 2019. The loan growth of $108.1 million was due to the F&M acquisition of $130.3 million and originated commercial loan growth, partially offset by the paydown and sale of the Bank's unsecured purchased indirect loan portfolio and reductions in the Legacy loan portfolio consisting of originated indirect paper and one-to-four family loans.
     
  • Book value per share increased to $13.13 at September 30, 2019 from $13.04 at June 30, 209. Tangible book value per share (non-GAAP)5 increased to $9.60 at September 30, 2019 from $9.56 at June 30, 2019, reflecting earnings, increased market value in the available for sale portfolio and intangible amortization, net of the intangibles created in the F&M acquisition.
     
  • The net interest margin increased to 3.34% for the quarter ended September 30, 2019 from 3.30% the prior quarter. The increase was largely due to lower borrowing costs as management entered into lower cost FHLB callable debt in the quarter. The changes in the Company's net interest margin, along with the impact of the F&M acquisition was neutral to the margin and purchase accounting accretion from F&M was more than offset by an increase in holding company interest expense to pay for the cash portion of the acquisition.
  • Loan loss provisions increased to $575,000 for the quarter ended September 30, 2019 from $325,000 for the quarter ended June 30, 2019. The provisions for each period were primarily due to continued new originated loan growth, charge-offs without specific reserves associated with the underlying loans ($157,000 in the third quarter compared to $48,000 in the second quarter) and in the third quarter, an approximately $150,000 increase in specific reserves primarily related to certain specific residential loans.
     
  • Non-interest income increased to $3.6 million for the third quarter ended September 30, 2019 from $2.9 million for the second quarter of 2019, excluding the gain on the sale of a branch office in the second quarter of 2019. The relative increase in non-interest income in the third quarter reflects higher loan fees driven by commercial activity and gains on sale of mortgage loans driven by refinancing activities and an $94,000 incentive payment from a card provider due to increased debit card activity. Additionally, service charges on deposit accounts, interchange income and BOLI income (recorded in other non-interest income) all increased primarily due to the F&M acquisition.
     
  • Total non-interest expense was $13.0 million for the third quarter of 2019, compared to $9.4 million in the prior quarter and $7.6 million for the quarter ended September 30, 2018. Total non-interest expense for the current quarter reflects $2.9 million in merger related expenses versus $206,000 in the second quarter of 2019 and $131,000 in the third quarter of 2018. Third quarter 2019 also includes a full quarter impact of operating expenses from the F&M acquisition of approximately $900,000.
     
  • The third quarter ended September 30, 2019 was favorably impacted by the FDIC application of the Small Bank Assessment Credits to our current quarter deposit insurance invoice totaling $150,000.
     
  • Nonperforming assets increased to $21.5 million at September 30, 2019 or 1.46% of total assets compared to $15.9 million at June 30, 2019 or 1.18% of total assets. Nonperforming assets related to F&M were $5.9 million. Classified assets increased to $39.9 million at September 30, 2019, from $32.6 million at June 30, 2019. Classified assets from the F&M acquisition were $7.5 million.

Estimated Bank and Company capital ratios exceeded regulatory guidelines for a well-capitalized financial institution under the Basel III regulatory requirements at September 30, 2019:

  Citizens
Community
Federal N.A.
Citizens
Community
Bancorp, Inc.
To Be Well Capitalized Under Prompt Corrective Action
Provisions
Tier 1 leverage ratio (to adjusted total assets) 10.2 % 7.2 % 5.0 %
Tier 1 capital (to risk weighted assets) 12.7 % 9.1 % 8.0 %
Common equity tier 1 capital (to risk weighted assets) 12.7 % 9.1 % 6.5 %
Total capital (to risk weighted assets) 13.5 % 11.1 % 10.0 %
             

Balance Sheet and Asset Quality Review

Asset growth continued in the quarter ended September 30, 2019, fueled primarily by the acquisition of F&M along with new loan originations. Asset growth, however, was tempered by a loan sale and acquired loan portfolio repayments and payoffs. Total assets were $1.48 billion at September 30, 2019, compared to $1.35 billion at June 30, 2019 and $975.4 million one year earlier.

In the quarter, securities available for sale ("AFS") increased $28.2 million. The Bank purchased $19.6 million of floating-rate securities with an estimated yield of 3.00% and purchased $15.5 million of fixed-rate securities with an estimated yield of 2.88%. The estimated repricing duration of the AFS portfolio changed from 2.09 years at June 30, 2019 to 2.05 years at September 30, 2019. The Bank liquidated the F&M securities portfolio in early July and there were no gains or losses on the sale of these securities.

Net loans were $1.12 billion at September 30, 2019 compared to $1.02 billion at June 30, 2019. The Community Banking loan portfolio consisting of commercial, agricultural and consumer loans grew to $903.7 million or 79.6%, of gross loans, largely due to the F&M acquisition.  The Bank's agricultural real estate loans totaled $89.4 million or 7.9% of gross loans and agricultural non-real estate loans totaled $39.8 million or 3.5% of gross loans at September 30, 2019. The total agricultural portfolio is split by approximately 48% of secured real estate, 28% term debt and 24% of operating lines. The total agricultural portfolio is approximately 35% row crop, 27% owned and rented land, 25% dairy and 13% other.

The Legacy loan portfolio consisting of indirect paper and one-to-four family loans decreased $19.4 million to $231 million at September 30, 2019 or 20.4% of total loans, from $250.4 million at June 30, 2019. The decline in Legacy loans reflect the sale of all purchased indirect paper loans and the planned runoff of originated indirect paper and one-to-four family residential real estate loans.

The allowance for loan and lease losses increased to $9.2 million, at September 30, 2019, representing 0.82% of total loans, compared to $8.8 million and 0.86% of total loans at June 30, 2019. Approximately 36.1% of the Bank's loan portfolio represents acquired performing loans and marked to fair value as of the acquisition date. Associated with the acquired loan portfolio, is $6.7 million of purchase-discount related to credit impaired acquired loans. Net charge offs were $157,000 for the quarter ended September 30, 2019, compared to $273,000 for the quarter ended June 30, 2019. The second quarter charge offs include $225,000 of charge-offs with specific reserves.

Nonperforming assets increased to $21.5 million, or 1.46% of total assets at September 30, 2019, compared to $15.9 million or 1.18% at June 30, 2019.  The increase in the most recent quarter primarily related to the F&M acquisition, which added $5.9 million to nonperforming assets. Classified assets increased $7.3 million during the current quarter to $39.9 million. The increase is largely due to the $7.5 million of classified assets related to the F&M acquisition at September 30, 2019. Included in classified assets, are agricultural real estate loans of approximately $7.7 million at September 30, 2019 compared to $7.8 million at June 30, 2019 and agricultural non- real estate loans of approximately $2.0 million at September 30, 2019 or flat compared with June 30, 2019.

Fixed assets grew in the current quarter due to the purchase of two previously leased branches and the addition of F&M's two branch offices. The Bank purchased a third previously leased branch in the second quarter. The purchase of these three branches resulted in decreases in other assets and other liabilities due to the impact of eliminating these branches from the right of use asset and lease liability recorded in the first quarter of 2019.

Deposits increased $146.3 million to $1.16 billion at September 30, 2019 from $1.02 billion at June 30, 2019. The increase in deposits was largely due to the F&M acquisition. The F&M acquisition increased non-maturity deposits as a percent of total deposits.

Federal Home Loan Bank advances decreased to $113.5 million at September 30, 2019 from $135.8 million at June 30, 2019. In addition to reducing outstanding advances related to the runoff of the acquired loan portfolio, the Bank repaid short-term existing FHLB advances and entered into $32.5 million of lower costing FHLB callable debt. At September 30, 2019, the Bank had $42.5 million of a 10-year maturity at a weighted average cost of 1.03% and the FHLB can call the debt quarterly until maturity.

Total stockholders’ equity increased to $148.0 million at September 30, 2019, from $143.2 million one quarter earlier, as the Company benefitted from the addition of earnings and a reduction in accumulated other comprehensive loss, mainly due to lower long-term interest rates. Tangible book value per share (non-GAAP)5 was $9.60 at September 30, 2019, compared to $9.56 at June 30, 2019. Stockholders' equity as a percent of total assets was 10.03% at September 30, 2019, compared to 10.62% at June 30, 2019. Tangible common equity (non-GAAP)5 as a percent of tangible assets (non-GAAP) was 7.54% at September 30, 2019, compared to 8.01% at June 30, 2019.

Review of Operations

Net interest income was $11.6 million for the third quarter of 2019, compared to $10.1 million for the second quarter of 2019, and $7.9 million for the quarter ended September 30, 2018. The net interest margin (“NIM”) increased to 3.34% for the third quarter of 2019 compared to 3.30% in the preceding quarter and 3.45% for the like quarter one year earlier.

The yield on interest earnings assets decreased one basis point to 4.67% for the third quarter of 2019 from 4.68% the previous quarter and increased 18 basis points from the third quarter one year earlier. Meanwhile, the cost of interest-bearing liabilities decreased 7 basis points to 1.56% for the third quarter from 1.63% one quarter earlier and increased 30 basis points from one year earlier. The primary decrease in funding costs was due to lower FHLB advances and other borrowing costs.

For the quarter ended September 30, 2019, the Company’s net interest margin benefited from $50,000 of purchased loan accretion, or two basis points compared to $54,000, or two basis points in the prior quarter. Scheduled accretion for acquired loans, was $234,000, $194,000, and $142,000 for the quarters ended September 30, 2019, June 30, 2019 and September 30, 2018, respectively.

“The growth in our margin was largely due to the refinancing of the FHLB debt discussed above, The modest increase in loan accretion was more than offset by the interest expense on the $19.9 million of holding company debt to fund the F&M acquisition," said Jim Broucek, Chief Financial Officer.

Loan loss provisions increased to $575,000 for the quarter ended September 30, 2019 from $325,000 for the quarter ended June 30, 2019. The provisions for each period were primarily due to continued new originated loan growth, charge-offs without specific reserves associated with the underlying loans ($157,000 in third quarter compared to $48,000 in the second quarter) and in the third quarter, an approximately $150,000 increase in specific reserves primarily related to certain residential loans.

Total non-interest income was $3.6 million for the third quarter compared to $5.2 million for the preceding quarter and $2.0 million for the quarter ended September 30, 2018. The second quarter reflected a $2.3 million gain on the sale of the Rochester Hills branch. Excluding the branch sale gain, total non-interest income would have been $2.9 million in the second quarter. The relative increase in non-interest income in the third quarter reflects higher loan fees driven by commercial activity and gains on sale of mortgage loans driven by refinancing activities and an $94,000 incentive payment from a card provider due to increased debit card activity. Additionally, service charges on deposit accounts, interchange income and loan servicing income all increased primarily due to the F&M acquisition.

Total non-interest expense was $13.0 million for the third quarter of 2019, compared to $9.4 million in the prior quarter and $7.6 million for the quarter ended September 30, 2018. Total non-interest expense for the current quarter reflects $2.9 million in merger related expenses versus $206,000 in the second quarter of 2019 and $131,000 in the third quarter of 2018 and a full quarter impact of expenses due to the F&M acquisition of approximately $900,000.

Compensation and benefits expense increased to $5.3 million for the third quarter of 2019 from $4.6 million the previous quarter largely due to the F&M acquisition. Due to the two weeks between the F&M acquisition close and computer conversion, cost savings were realized early in the quarter. In the fourth quarter, no material changes in compensation due to cost savings are expected.

Data processing expenses increased to $1.1 million for the third quarter of 2019 from $874,000 during the prior quarter due in part to a larger number of deposit and loan accounts serviced through our core processor, largely due to the F&M acquisition.

Amortization of mortgage servicing rights increased during the quarter ended September 30, 2019 from $306,000 in the prior quarter to $325,000 during the current quarter due to increased prepayments in the Company’s servicing portfolio related to the lower interest rate environment.

Advertising, marketing and public relations expenses decreased to $315,000 during the third quarter from $456,000 in the prior quarter. Although these costs declined from the prior period, the expenses remain elevated over historical run rates. We would expect fourth quarter marketing expenses to remain consistent with third quarter as there was some spill-over of marketing costs from the third quarter to the fourth quarter. We anticipate a decrease to the $225,000 to $250,000 range in 2020, which approximates the historic run rates for CCFBank as adjusted for the marketing costs in the acquired bank markets.

Merger related expenses incurred in the current quarter and included in the consolidated statement of operations consisted of the following: (1) $200,000 recorded in professional services and (2) $2.7 million recorded in other non-interest expense.

Merger related expenses incurred in the quarter ended June 30, 2019 and included in the consolidated statement of operations consisted of the following: (1) $126,000 recorded in professional services and (2) $80,000 recorded in other non-interest expense.

Provisions for income taxes declined to $430,000 for the third quarter ended September 30, 2019 from $1.5 million during the preceding quarter. The effective tax rate for the third quarter was 25.8% compared to 26.8% during the prior quarter. The third quarter tax rate reflects the Company's estimated tax position at September 30, 2019. We anticipate that the fourth quarter tax rate should be similar to the third quarter based on current tax positions, which will be reviewed in the fourth quarter after our 2018 tax return is filed in October. The impact of lower non- deductible merger expenses contributed to the lower tax rate.

These financial results are preliminary until the Form 10-Q is filed in November 2019.

About the Company

Citizens Community Bancorp, Inc. (NASDAQ: “CZWI”) is the holding company of the Bank, a national bank based in Altoona, Wisconsin, currently serving customers primarily in Wisconsin and Minnesota through 28 branch locations. Its primary markets include the Chippewa Valley Region in Wisconsin, the Twin Cities and Mankato markets in Minnesota, and various rural communities around these areas. The Bank offers traditional community banking services to businesses, Ag operators and consumers, including one-to-four family mortgages.

Cautionary Statement Regarding Forward-Looking Statements

Certain statements contained in this release are considered "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may be identified using forward-looking words or phrases such as "anticipate," "believe," "could," "expect," "estimates," "intend," "may," "preliminary," "planned," "potential," "should," "will," "would" or the negative of those terms or other words of similar meaning. Such forward-looking statements in this release are inherently subject to many uncertainties arising in the operations and business environment of the Company and the Bank. These uncertainties include the conditions in the financial markets and economic conditions generally; the possibility of a deterioration in the residential real estate markets; interest rate risk; lending risk; the sufficiency of loan allowances; changes in the fair value or ratings downgrades of our securities; competitive pressures among depository and other financial institutions; our ability to realize the benefits of net deferred tax assets; our ability to maintain or increase our market share; acts of terrorism and political or military actions by the United States or other governments; legislative or regulatory changes or actions, or significant litigation, adversely affecting the Company or Bank; increases in FDIC insurance premiums or special assessments by the FDIC; disintermediation risk; our inability to obtain needed liquidity; risks related to the success of the acquisition of F. & M. Bancorp. of Tomah, Inc. ("F&M") through merger (the “F&M Merger”) and integration of F&M into the Company’s operations; the risk that the combined company may be unable to retain the Company and/or F&M personnel successfully after the F&M Merger is completed; our ability to successfully execute our acquisition growth strategy; risks posed by acquisitions and other expansion opportunities, including difficulties and delays in integrating the acquired business operations or fully realizing the cost savings and other benefits; our ability to raise capital needed to fund growth or meet regulatory requirements; the possibility that our internal controls and procedures could fail or be circumvented; our ability to attract and retain key personnel; our ability to keep pace with technological change; cybersecurity risks; changes in federal or state tax laws; changes in accounting principles, policies or guidelines and their impact on financial performance; restrictions on our ability to pay dividends; and the potential volatility of our stock price. Stockholders, potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. Such uncertainties and other risks that may affect the Company’s performance are discussed further in Part I, Item 1A, “Risk Factors,” in the Company’s Form 10-K, for the transition period ended December 31, 2018 filed with the Securities and Exchange Commission ("SEC") on March 8, 2019 and the Company's subsequent filings with the SEC. The Company undertakes no obligation to make any revisions to the forward-looking statements contained in this news release or to update them to reflect events or circumstances occurring after the date of this release.

Non-GAAP Financial Measures

This press release contains non-GAAP financial measures, such as net income as adjusted, tangible book value per share and tangible common equity as a percent of tangible assets, which management believes may be helpful in understanding the Company's results of operations or financial position and comparing results over different periods.

Net income as adjusted is a non-GAAP measure that eliminates the impact of certain expenses such as acquisition and branch closure costs and related data processing termination fees, legal costs, severance pay, accelerated depreciation expense and lease termination fees, the gain on sale of branch deposits and fixed assets and the net impact of the Tax Cuts and Jobs Act of 2017, which management believes enhances investors' ability to better understand the underlying business performance and trends related to core business activities. Merger related charges represent expenses to either satisfy contractual obligations of acquired entities without any useful benefit to the Company or to convert and consolidate customer records onto the Company platforms. These costs are unique to each transaction based on the contracts in existence at the merger date. Tangible book value per share and tangible common equity as a percent of tangible assets are non-GAAP measures that eliminate the impact of preferred stock equity, goodwill and intangible assets on our financial position. Management believes these measures are useful in assessing the strength of our financial position.

Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, can be found in this press release. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other banks and financial institutions.

Contact: Steve Bianchi, CEO
(715)-836-9994


CITIZENS COMMUNITY BANCORP, INC.
Consolidated Balance Sheets
(in thousands)

    September 30,
2019
(unaudited)
    June 30,
2019
(unaudited)
    December 31,
2018
(audited)
    September 30,
2018
(audited)
 
Assets                        
Cash and cash equivalents $   52,276   $   47,008   $   45,778   $   34,494  
Other interest bearing deposits   5,245     5,980     7,460     7,180  
Securities available for sale "AFS"   182,956     154,760     146,725     118,482  
Securities held to maturity "HTM"   3,665     3,828     4,850     4,619  
Equity securities with readily determinable fair value   241     177          
Non-marketable equity securities, at cost   12,622     12,543     11,261     7,218  
Loans receivable   1,124,378     1,019,957     992,556     759,247  
Allowance for loan losses   (9,177 )   (8,759 )   (7,604 )   (6,748 )
Loans receivable, net   1,115,201     1,011,198     984,952     752,499  
Loans held for sale   3,262     2,475     1,927     1,917  
Mortgage servicing rights   4,245     4,319     4,486     1,840  
Office properties and equipment, net   20,938     15,287     13,513     10,034  
Accrued interest receivable   4,993     4,452     4,307     3,600  
Intangible assets   7,999     6,828     7,501     4,805  
Goodwill   31,841     31,474     31,474     10,444  
Foreclosed and repossessed assets, net   1,373     1,387     2,570     2,768  
Bank owned life insurance   22,895     18,022     17,792     11,661  
Escrow merger settlement proceeds       20,555          
Other assets   5,612     8,127     3,328     3,848  
TOTAL ASSETS $ 1,475,364   $ 1,348,420   $ 1,287,924   $ 975,409  
Liabilities and Stockholders’ Equity
Liabilities:        
Deposits $   1,161,750   $   1,015,459   $   1,007,512   $   746,529  
Federal Home Loan Bank advances   113,466     135,844     109,813     63,000  
Other borrowings   44,545     44,551     24,647     24,619  
Other liabilities   7,574     9,324     7,765     5,414  
Total liabilities   1,327,335     1,205,178     1,149,737     839,562  
Stockholders’ equity:        
Common stock— $0.01 par value, authorized 30,000,000; 11,270,710; 10,982,008; 10,953,512 and 10,913,853 shares issued and outstanding, respectively   113     110     109     109  
Additional paid-in capital   128,926     125,822     125,512     125,063  
Retained earnings   19,348     18,114     15,264     14,003  
Unearned deferred compensation   (630 )   (757 )   (857 )   (622 )
Accumulated other comprehensive income (loss)   272      (47 )    (1,841 )    (2,706 )
Total stockholders’ equity   148,029     143,242     138,187     135,847  
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 1,475,364   $ 1,348,420   $ 1,287,924   $ 975,409  

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


CITIZENS COMMUNITY BANCORP, INC.
Consolidated Statements of Operations (unaudited)
(in thousands, except per share data)

  Three Months Ended   Nine Months Ended
  September 30,
2019
June 30,
2019
September 30,
2018
  September 30,
2019
September 30,
2018
Interest and dividend income:                              
Interest and fees on loans $ 14,646   $ 12,976   $ 9,414   $ 40,036   $ 26,818  
Interest on investments   1,577     1,360     948     4,241     2,666  
Total interest and dividend income   16,223     14,336     10,362     44,277     29,484  
Interest expense:          
Interest on deposits   3,371     2,926     1,659     8,890     4,341  
Interest on FHLB borrowed funds   639     913     323     2,213     1,049  
Interest on other borrowed funds   620     414     440     1,436     1,318  
Total interest expense   4,630     4,253     2,422     12,539     6,708  
Net interest income before provision for loan losses   11,593     10,083     7,940     31,738     22,776  
Provision for loan losses   575     325     450     2,125     1,200  
Net interest income after provision for loan losses   11,018     9,758     7,490     29,613     21,576  
Non-interest income:          
Service charges on deposit accounts   625     581     489     1,756     1,332  
Interchange income   476     453     338     1,267     978  
Loan servicing income   714     634     368     1,902     1,051  
Gain on sale of loans   679     573     234     1,560     649  
Loan fees and service charges   471     261     164     860     367  
Insurance commission income   197     192     180     573     554  
Gains (losses) on investment securities   96     21         151     (17 )
Gain on sale of branch       2,295         2,295      
Other   363     228     216     827     517  
Total non-interest income   3,621     5,238     1,989     11,191     5,431  
Non-interest expense:          
Compensation and benefits   5,295     4,604     3,778     14,605     11,424  
Occupancy   905     866     776     2,725     2,270  
Office   599     528     468     1,649     1,311  
Data processing   1,092     874     771     2,953     2,224  
Amortization of intangible assets   412     346     161     1,085     483  
Amortization of mortgage servicing rights   325     306     85     822     245  
Advertising, marketing and public relations   315     456     265     974     596  
FDIC premium assessment   78     146     121     318     330  
Professional services   561     575     577     1,961     1,635  
(Gains) losses on repossessed assets, net   (16 )   (90 )   71     (143 )   521  
Other   3,409     776     571     5,309     1,582  
Total non-interest expense   12,975     9,389     7,644     32,258     22,621  
Income before provision for income taxes   1,664     5,607     1,835     8,546     4,386  
Provision for income taxes   430     1,500     736     2,252     1,443  
Net income attributable to common stockholders $ 1,234   $ 4,107   $ 1,099   $ 6,294   $ 2,943  
Per share information:          
Basic earnings $ 0.11   $ 0.37   $ 0.18   $ 0.57   $ 0.49  
Diluted earnings $ 0.11   $ 0.37   $ 0.10   $ 0.57   $ 0.38  
Cash dividends paid $   $   $   $ 0.20   $ 0.20  
Book value per share at end of period $ 13.13   $ 13.04   $ 12.45   $ 13.13   $ 12.45  
Tangible book value per share at end of period (non-GAAP) $ 9.60   $ 9.56   $ 11.05   $ 9.60   $ 11.05  

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, June 30, September 30, September 30, September 30,
  2019 2019 2018 2019 2018
         
GAAP earnings before income taxes $ 1,664 $ 5,607   $ 1,835 $ 8,546   $ 4,386
Merger related costs (1)   2,911   206     131   3,776     369
Branch closure costs (2)         2   15     19
Audit and Financial Reporting (3)           358    
Gain on sale of branch     (2,295 )     (2,295 )  
Net income as adjusted before income taxes (4)   4,575   3,518     1,968   10,400     4,774
Provision for income tax on net income as adjusted (5)   1,180   943     789   2,746     1,571
Net income as adjusted after income taxes (non-GAAP) (4) $ 3,395 $ 2,575   $ 1,179 $ 7,654   $ 3,203
GAAP diluted earnings per share, net of tax $ 0.11 $ 0.37   $ 0.10 $ 0.57   $ 0.38
Merger related costs, net of tax (1)   0.19   0.01     0.01   0.25     0.03
Branch closure costs, net of tax              
Audit and Financial Reporting           0.02    
Gain on sale of branch     (0.15 )     (0.15 )  
Diluted earnings per share, as adjusted, net of tax (non-GAAP) $ 0.30 $ 0.23   $ 0.11 $ 0.69   $ 0.41
                         
Average diluted shares outstanding   11,276,005   10,994,470     10,950,980   11,068,227     7,811,655

(1) Costs incurred are included as professional fees and other non-interest expense in the consolidated statement of operations and include costs of $61,000, $160,000 and $118,000 for the quarters ended September 30, 2019, June 30, 2019 and September 30, 2018, respectively, and $341,000 and $350,000 for the nine months ended September 30, 2019 and 2018, 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.
(3) 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.
(4) Net income as adjusted is a non-GAAP measure that management believes enhances the market's ability to assess the underlying business performance and trends related to core business activities.
(5) Provision for income tax on net income as adjusted is calculated at our effective tax rate for each respective period presented.

Nonperforming Assets:
(in thousands, except ratios)

    September 30, 2019 and Three Months Ended       June 30, 2019 and Three Months Ended       December 31, 2018 and Three Months Ended       September 30, 2018
and Three Months Ended
 
Nonperforming assets:                              
Nonaccrual loans        
One to four family $ 2,255     $ 2,298     $ 2,331     $ 1,939  
Commercial real estate   6,324       1,732       808       499  
Agricultural real estate   6,191       5,717       2,019       2,637  
Consumer non-real estate   191       165       120       86  
Commercial non-real estate   2,072       1,785       1,314       1,196  
Agricultural non-real estate   1,989       1,915       762       853  
Total nonaccrual loans $ 19,022     $ 13,612     $ 7,354     $ 7,210  
Accruing loans past due 90 days or more   1,099       880       736       1,117  
Total nonperforming loans ("NPLs")   20,121       14,492       8,090       8,327  
Other real estate owned ("OREO")   1,348       1,354       2,522       2,749  
Other collateral owned   25       33       48       19  
Total nonperforming assets ("NPAs") $ 21,494     $ 15,879     $ 10,660     $ 11,095  
Troubled Debt Restructurings ("TDRs") $ 11,795     $ 10,000     $ 8,722     $ 8,418  
Nonaccrual TDRs $ 4,601     $ 4,101     $ 2,667     $ 2,687  
Average outstanding loan balance $ 1,143,252     $ 1,023,447     $ 921,951     $ 754,442  
Loans, end of period $ 1,124,378     $ 1,019,957     $ 992,556     $ 759,247  
Total assets, end of period $ 1,475,364     $ 1,348,420     $ 1,287,924     $ 975,409  
Allowance for loan losses ("ALL"), at beginning of period $ 8,759     $ 8,707     $ 6,748     $ 6,458  
Loans charged off:                              
Residential real estate   (133 )     (23 )     (43 )     (82 )
Commercial/Agricultural real estate         (225 )            
Consumer non-real estate   (46 )     (48 )     (79 )     (85 )
Commercial/Agricultural non-real estate                     (47 )
Total loans charged off   (179 )     (296 )     (122 )     (214 )
Recoveries of loans previously charged off:                              
Residential real estate   1             4       28  
Commercial/Agricultural real estate         3              
Consumer non-real estate   21       20       24       25  
Commercial/Agricultural non-real estate                     1  
Total recoveries of loans previously charged off:   22       23       28       54  
Net loans charged off ("NCOs")   (157 )     (273 )     (94 )     (160 )
Additions to ALL via provision for loan losses charged to operations   575       325       950       450  
ALL, at end of period $ 9,177     $ 8,759     $ 7,604     $ 6,748  
Ratios:                              
ALL to NCOs (annualized)   1,461.31 %     802.11 %     2,022.34 %     1,054.38 %
NCOs (annualized) to average loans   0.05 %     0.11 %     0.04 %     0.08 %
ALL to total loans   0.82 %     0.86 %     0.77 %     0.89 %
NPLs to total loans   1.79 %     1.42 %     0.82 %     1.10 %
NPAs to total assets   1.46 %     1.18 %     0.83 %     1.14 %
                               

Nonaccrual Loans Rollforward:
(in thousands)

  Quarter Ended
  September 30,
 2019
  June 30, 2019   December 31,
2018
  September 30,
 2018
Balance, beginning of period $ 13,612     $ 9,871     $ 7,210     $ 6,627  
Additions   1,493       7,405       906       2,030  
Acquired nonaccrual loans   5,898             941        
Charge offs   (134 )     (262 )     (40 )     (68 )
Transfers to OREO   (209 )     (236 )     (201 )     (400 )
Return to accrual status   (53 )     (149 )           (93 )
Payments received   (1,539 )     (2,612 )     (1,429 )     (676 )
Other, net   (46 )     (405 )     (33 )     (210 )
Balance, end of period $ 19,022     $ 13,612     $ 7,354     $ 7,210  
                               

Other Real Estate Owned Rollforward:
(in thousands)

  Quarter Ended
  September 30,       December 31,   September 30,
    2019     June 30, 2019     2018       2018  
Balance, beginning of period $ 1,354     $ 2,071     $ 2,749     $ 5,328  
Loans transferred in   209       236       201       400  
Branch properties sales                     (1,245 )
Sales   (220 )     (958 )     (210 )     (1762 )
Write-downs         (23 )           (127 )
Other, net   5       28       (218 )     155  
Balance, end of period $ 1,348     $ 1,354     $ 2,522     $ 2,749  
               


Troubled Debt Restructurings in Accrual Status
(in thousands, except number of modifications)

  September 30, 2019   June 30, 2019   December 31, 2018   September 30, 2018
  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                              
Residential real estate 39 $ 3,094   39 $ 3,137   34 $ 3,319   34 $ 3,495
Commercial/Agricultural real estate 18   3,574   14   2,202   15   2,209   14   1,646
Consumer non-real estate
8   74   11   82   13   99   14   109
Commercial/Agricultural non-real estate
4   452   4   478   2   428   3   481
Total loans 69 $ 7,194   68 $ 5,899   64 $ 6,055   65 $ 5,731
                               

Loan Composition - Detail
(in thousands)

To help better understand the Bank's loan trends, we have added the table below. The loan categories and amounts shown are the same as on the following page and are presented in a different format. The Community Banking loan portfolios reflect the Bank's strategy to grow its commercial banking business and consumer lending. The Legacy loan portfolios reflect the Bank's strategy to sell substantially all newly originated one to four family loans in the secondary market and the discontinuation of originated and purchased indirect paper loans, effective in the first quarter of fiscal 2017. 

  September 30, 2019 June 30, 2019 December 31, 2018 September 30, 2018
Community Banking Loan Portfolios:        
Commercial/Agricultural real estate:        
Commercial real estate $ 465,046 $ 374,441 $ 357,959 $ 216,703
Agricultural real estate   89,441   92,137   86,015   70,517
Multi-family real estate   87,758   83,423   69,400   48,061
Construction and land development   65,550   52,071   22,691   17,739
Commercial/Agricultural non-real estate:        
Commercial non-real estate   127,232   107,754   112,427   76,254
Agricultural non-real estate   39,827   36,827   36,327   26,549
Residential real estate:        
Purchased HELOC loans   10,120   11,125   12,883   13,729
Consumer non-real estate:        
Other consumer   18,770   18,389   20,214   18,844
Total Community Banking Loan Portfolios   903,744   776,167   717,916   488,396
         
Legacy Loan Portfolios:        
Residential real estate:        
One to four family   188,070   191,890   209,926   196,052
Consumer non-real estate:        
Originated indirect paper   42,894   47,391   56,585   60,991
Purchased indirect paper     11,155   15,006   17,254
Total Legacy Loan Portfolios   230,964   250,436   281,517   274,297
Gross loans $ 1,134,708 $ 1,026,603 $ 999,433 $ 762,693


Loan Composition September 30, 2019 June 30, 2019 December 31, 2018 September 30, 2018
Originated Loans:                        
Residential real estate:                        
One to four family $ 114,507   $ 117,585   $ 121,053   $ 122,797  
Purchased HELOC loans   10,120     11,125     12,883     13,729  
Commercial/Agricultural real estate:                        
Commercial real estate   244,809     239,051     200,875     168,319  
Agricultural real estate   34,527     34,927     29,589     27,017  
Multi-family real estate   69,556     75,664     61,574     44,767  
Construction and land development   52,319     35,030     15,812     14,648  
Consumer non-real estate:                        
Originated indirect paper   42,894     47,391     56,585     60,991  
Purchased indirect paper       11,155     15,006     17,254  
Other Consumer   15,718     15,229     15,553     15,991  
Commercial/Agricultural non-real estate:                        
Commercial non-real estate   80,941     75,186     73,518     62,196  
Agricultural non-real estate   22,057     21,776     17,341     17,514  
Total originated loans $ 687,448 $ 687,448   $ 684,119   $ 619,789   $ 565,223  
Acquired Loans:                        
Residential real estate:                        
One to four family $ 73,563   $ 74,305   $ 88,873   $ 73,255  
Commercial/Agricultural real estate:                        
Commercial real estate   220,237     135,390     157,084     48,384  
Agricultural real estate   54,914     57,210     56,426     43,500  
Multi-family real estate   18,202     7,759     7,826     3,294  
Construction and land development   13,231     17,041     6,879     3,091  
Consumer non-real estate:                        
Other Consumer   3,052     3,160     4,661     2,853  
Commercial/Agricultural non-real estate:                        
Commercial non-real estate   46,291     32,568     38,909     14,058  
Agricultural non-real estate   17,770     15,051     18,986     9,035  
Total acquired loans $ 447,260   $ 342,484   $ 379,644   $ 197,470  
Total Loans:                        
Residential real estate:                        
One to four family $ 188,070   $ 191,890   $ 209,926   $ 196,052  
Purchased HELOC loans   10,120     11,125     12,883     13,729  
Commercial/Agricultural real estate:                        
Commercial real estate   465,046     374,441     357,959     216,703  
Agricultural real estate   89,441     92,137     86,015     70,517  
Multi-family real estate   87,758     83,423     69,400     48,061  
Construction and land development   65,550     52,071     22,691     17,739  
Consumer non-real estate:                        
Originated indirect paper   42,894     47,391     56,585     60,991  
Purchased indirect paper       11,155     15,006     17,254  
Other Consumer   18,770     18,389     20,214     18,844  
Commercial/Agricultural non-real estate:                        
Commercial non-real estate   127,232     107,754     112,427     76,254  
Agricultural non-real estate   39,827     36,827     36,327     26,549  
Gross loans $ 1,134,708   $ 1,026,603   $ 999,433   $ 762,693  
Unearned net deferred fees and costs and loans in process   (158 )   98     409     557  
Unamortized discount on acquired loans   (10,172 )   (6,744 )   (7,286 )   (4,003 )
Total loans receivable $ 1,124,378   $ 1,019,957   $ 992,556   $ 759,247  
                         

 

Deposit Composition:
(in thousands)

    September 30,   June 30,   December 31,   September 30,
    2019   2019   2018   2018
Non-interest bearing demand deposits $ 174,202 $ 140,130 $ 155,405 $ 87,495
Interest bearing demand deposits   209,644   180,001   169,310   139,276
Savings accounts   165,419   148,005   192,310   97,329
Money market accounts   193,654   155,964   126,021   109,314
Certificate accounts   418,831   391,359   364,466   313,115
Total deposits $ 1,161,750 $ 1,015,459 $ 1,007,512 $ 746,529

 

Average balances, Interest Yields and Rates:
(in thousands, except yields and rates)

                           
  Three months ended September 30,     Three months ended June 30,   Three months ended September 30,  
  2019      2019    2018  
  Average Balance Interest Income/ Expense Average
Yield/
Rate (1)
    Average Balance Interest Income/ Expense Average
Yield/
Rate (1)
  Average Balance Interest Income/ Expense Average
Yield/
Rate (1)
 
Average interest earning assets:                          
Cash and cash equivalents $ 32,376 $  203 2.49 %   $   30,076 $  171 2.28 % $   24,468 $   117 1.90 %
Loans receivable 1,143,252 14,646 5.08 %   1,023,447 12,976 5.09 % 754,442 9,414 4.95 %
Interest bearing deposits 5,577 34 2.42 %   5,967 35 2.35 % 7,971 42 2.09 %
Investment securities (1) 185,921 1,174 2.56 %   158,991 996 2.60 % 124,991 674 2.30 %
Non-marketable equity securities, at                          
cost 13,072 166 5.04 %   12,114 158 5.23 % 7,581 115 6.02 %
Total interest earning assets (1) $ 1,380,198 $ 16,223 4.67 %   $  1,230,595 $ 14,336 4.68 % $  919,453 $ 10,362 4.49 %
                           
Average interest bearing liabilities:                          
Savings accounts $158,967  $ 155 0.39 %     $  147,456 $ 149 0.41 % $93,551 $59 0.25 %
Demand deposits 219,955 550 0.99 %   191,858 383 0.80 % 146,372 142 0.38 %
Money market accounts 200,647 593 1.17 %   164,402 448 1.09 % 116,597 213 0.72 %
CD’s 381,331 1,870 1.95 %   336,253 1,765 2.11 % 277,125 1,145 1.64 %
IRA’s 44,184 203 1.82 %   40,688 181 1.78 % 33,029 100 1.20 %
Total deposits $ 1,005,084 $   3,371 1.33 %   $880,657 $ 2,926 1.33  % $666,674 $1,659 0.99 %
FHLB advances and other
borrowings
169,908 1,259 2.94 %   165,733 1,327 3.21 % 96,448 763 3.14 %
                           
Total interest bearing liabilities $1,174,992 $4,630 1.56 %   $ 1,046,390 $ 4,253 1.63 % $ 763,122
$ 2,422 1.26 %
Net interest income   $11,593         $ 10,083       $ 7,940    
Interest rate spread     3.11 %       3.05 %     3.23 %
Net interest margin (1)     3.34 %       3.30 %     3.45 %
Average interest earning assets to average interest bearing liabilities     1.18         1.18       1.20
 
                           

(1) Fully taxable equivalent (FTE). The average yield on tax exempt securities is computed on a tax equivalent basis using a tax rate of 21% for the quarters ended September 30, 2019 and June 30, 2019 and 24.5% for the quarter ended September 30, 2018. The FTE adjustment to net interest income included in the rate calculations totaled $27,000, $35,000 and $51,000 for the three months ended September 30, 2019, June 30, 2019 and September 30, 2018, respectively


  Nine months ended September 30, 2019   Nine months ended September 30, 2018
  Average
Balance
  Interest
Income/
Expense
  Average
Yield
Rate (1)
  Average
Balance
  Interest
Income/
Expense
  Average
Yield
Rate (1)
Average interest earning assets:                                  
Cash and cash equivalents $ 29,489   $ 542   2.46 %   $ 23,814   $ 240   1.35 %
Loans receivable   1,054,492     40,036   5.08 %     736,478     26,818   4.87 %
Interest bearing deposits   6,153     107   2.33 %     7,890     117   1.98 %
Investment securities (1)   167,023     3,119   2.58 %     121,216     1,996   2.38 %
Non-marketable equity securities, at cost   11,853     473   5.34 %     7,915     313   5.29 %
Total interest earning assets (1) $ 1,269,010   $ 44,277   4.68 %   $ 897,313   $ 29,484   4.42 %
Average interest bearing liabilities:                                  
Savings accounts $ 156,851   $ 479   0.41 %   $ 94,263   $ 140   0.20 %
Demand deposits   200,387     1,288   0.86 %     150,023     385   0.34 %
Money market accounts   172,671     1,423   1.10 %     116,948     570   0.65 %
CD’s   348,139     5,163   1.98 %     271,352     2,968   1.46 %
IRA’s   41,576     537   1.73 %     33,202     278   1.12 %
Total deposits $ 919,624   $ 8,890   1.29 %   $ 665,788   $ 4,341   0.87 %
FHLB advances and other borrowings   153,960     3,649   3.17 %     109,628     2,367   2.89 %
Total interest bearing liabilities $ 1,073,584   $ 12,539   1.56 %   $ 775,416   $ 6,708   1.16 %
Net interest income       $ 31,738               $ 22,776      
Interest rate spread             3.12 %               3.26 %
Net interest margin (1)             3.35 %               3.42 %
Average interest earning assets to average interest bearing liabilities             1.18                 1.16  
 
(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, 2019 and 24.5% for the nine months ended September 30, 2018. The FTE adjustment to net interest income included in the rate calculations totaled $103,000 and $158,000 for the nine months ended September 30, 2019 and September 30, 2018, respectively.
 

CITIZENS COMMUNITY FEDERAL N.A.
Selected Capital Composition Highlights (unaudited)

  September 30, 2019 June 30, 2019 December 31, 2018 September 30, 2018 To Be Well Capitalized Under Prompt Corrective Action Provisions
Tier 1 leverage ratio (to adjusted total assets) 10.2% 9.7% 9.7% 9.2% 5.0%
Tier 1 capital (to risk weighted assets) 12.7% 12.2% 11.9% 12.2% 8.0%
Common equity tier 1 capital (to risk weighted assets) 12.7% 12.2% 11.9% 12.2% 6.5%
Total capital (to risk weighted assets) 13.5% 13.1% 12.7% 13.1% 10.0%
           

 

Reconciliation of Return on Average Assets as Adjusted (non-GAAP):
(in thousands, except ratios)

  Three months ended Nine months ended
     
               
               
               
               
               
               
    September 30,   June 30, September 30, September 30, September 30,
    2019     2019     2018     2019     2018  
GAAP earnings after income taxes $ 1,234   $ 4,107   $ 1,099   $ 6,294   $ 2,943  
Net income as adjusted after income taxes (non-GAAP) (1)  $ 3,395   $ 2,575   $ 1,179   $ 7,654   $ 3,203  
Average assets   1,454,455     1,334,860     981,181     1,368,430     862,475  
Return on average assets (annualized)   0.34 %   1.23 %   0.44 %   0.61 %   0.46 %
Return on average assets as adjusted (non-GAAP) (annualized)    0.93 %   0.77 %   0.48 %   0.75 %   0.50 %
 
(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,     June 30     September 30,     September 30,     September 30,  
    2019     2019     2018     2019     2018  
GAAP earnings after income taxes $ 1,234   $ 4,107   $ 1,099   $ 6,294   $ 2,943  
Net income as adjusted after income taxes (non-GAAP) (1) $ 3,395   $ 2,575   $ 1,179   $ 7,654   $ 3,203  
Average equity   146,116     140,561     135,670     141,608     98,452  
Return on average equity (annualized)   3.35 %   11.72 %   3.21 %   5.94 %   4.00 %
Return on average equity as adjusted (non-GAAP) (annualized)   9.22 %   7.27 %   3.45 %   7.23 %   4.35 %
 
(1) See Reconciliation of GAAP Net Income and Net Income as Adjusted (non-GAAP)
 

 

Reconciliation of Efficiency Ratio as Adjusted (non-GAAP):
(in thousands, except ratios)

  Three months ended Nine months ended
    September      June     September      September      September   
    30, 2019      30, 2019     30, 2018     30, 2019     30, 2018  
           
Non-interest expense (GAAP) $ 12,975   $ 9,389   $ 7,644   $ 32,258   $ 22,621  
Merger related Costs (1)   (2,911 )   206     131     (3,776 )   369  
Branch Closure Costs (1)           2     (15 )   19  
Audit and financial reporting (1)               (358 )    
Non-interest expense as adjusted (non- GAAP)   10,064     9,595     7,777     28,109     23,009  
           
Non-interest income   3,621     5,238     1,989     11,191     5,431  
Net interest margin   11,593     10,083     7,940     31,738     22,776  
           
Efficiency ratio denominator (GAAP)   15,214     15,321     9,929     42,929     28,207  
Gain on sale of branch (1)       (2,295 )       (2,295 )    
Efficiency ratio denominator (non- GAAP)   15,214     13,026     9,929     40,634     28,207  
Efficiency ratio (GAAP)   85 %   61 %   77 %   75 %   80 %
Efficiency ratio (non-GAAP)   66 %   74 %   78 %   69 %   82 %
 
(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)

  September 30, June 30, December 31, September 30,
Tangible book value per share at end of period 2019 2018 2018 2018
Total stockholders' equity $ 148,029 $143,242 $ 138,187 $ 135,847
Less: Goodwill (1,841) (31,474) (31,474) (10,444)
Less: Intangible assets (7,999) (6,828) (7,501) (4,805)
Tangible common equity (non-GAAP) $ 108,189 $ 104,940 $ 99,212 $ 120,598
Ending common shares outstanding 11,270,710 10,982,008 10,953,512 10,913,853
Book value per share $ 13.13 $ 13.04 $ 12.62 $ 12.45
Tangible book value per share (non-GAAP) $ 9.60 $ 9.56 $ 9.06 $ 11.05


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,
2019
  June 30, 2019   December 31,
2018
  September 30,
2018
Total stockholders' equity $   148,029   $   143,242   $   138,187   $   135,847
Less: Goodwill (31,841)   (31,474)   (31,474)   (10,444)
Less: Intangible assets (7,999)   (6,828)   (7,501)   (4,805)
Tangible common equity (non-GAAP) $   108,189   $   104,940   $   99,212   $   120,598
Total Assets $   1,475,364   $ 1,348,420   $   1,287,924   $   975,409
Less: Goodwill (31,841)   (31,474)   (31,474)   (10,444)
Less: Intangible assets (7,999)   (6,828)   (7,501)   (4,805)
Tangible Assets (non-GAAP) $   1,435,524   $ 1,310,118   $   1,248,949   $   960,160
Total stockholders' equity to total assets ratio 10.03%   10.62%   10.73%   13.93%
Tangible common equity as a percent of tangible assets (non-GAAP) 7.54%   8.01%   7.94%   12.56%

1 Net income as adjusted is a non-GAAP measure that management believes enhances investors' ability to better understand the underlying business performance and trends related to core business activities. For a detailed reconciliation of GAAP to non-GAAP results, see the accompanying financial table "Reconciliation of GAAP Net Income and Net Income as Adjusted (non-GAAP)".

2 Return on average assets as adjusted is a non-GAAP measure that management believes enhances investors' ability to better understand the underlying business performance and trends relative to average assets. For a detailed reconciliation of GAAP to non-GAAP results, see the accompanying financial table "Reconciliation of Return on Average Assets as Adjusted (non-GAAP)".

3 Return on average equity as adjusted is a non-GAAP measure that management believes enhances investors' ability to better understand the underlying business performance and trends relative to average equity. For a detailed reconciliation of GAAP to non-GAAP results, see the accompanying financial table "Reconciliation of Return on Average Equity as Adjusted (non-GAAP)".

4 The efficiency ratio as adjusted (non-GAAP) is a non-GAAP measure that management believes enhances investors' ability to better understand the underlying business performance and the Company's ability to use what it has to generate the most profit possible for shareholders relative to core business activities. For a detailed reconciliation of GAAP to non-GAAP results, see the accompanying financial table "Reconciliation of Efficiency Ratio as Adjusted (non-GAAP)".

5 Tangible book value per share and tangible common equity as a percent of tangible assets are non-GAAP measure that management believes enhances investors' ability to better understand the Company's financial position. For a detailed reconciliation of GAAP to non-GAAP results, see the accompanying financial table "Reconciliation of tangible book value per share (non-GAAP)" and "Reconciliation of tangible common equity as a percent of tangible assets (non-GAAP)".

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