Citizens Community Bancorp, Inc. Earns $3.6 Million, or $0.32 Per Share in 4Q20; Record 2020 Annual Earnings Increase 34% from Prior Year Annual Earnings; Asset Quality Continues to Improve; 2021 Annual Cash Dividend Increases to $0.23 Per Share
EAU CLAIRE, Wis., Jan. 28, 2021 (GLOBE NEWSWIRE) -- Citizens Community Bancorp, Inc. (the “Company”) (Nasdaq: CZWI), the parent company of Citizens Community Federal N.A. (the “Bank” or “CCFBank”), today reported earnings of $3.6 million, or $0.32 per diluted share for the quarter ended December 31, 2020, compared to $3.5 million, or $0.31 per diluted share for the quarter ended September 30, 2020 and $3.2 million, or $0.28 per diluted share for the quarter ended December 31, 2019. Net income as adjusted (non-GAAP)1 of $3.7 million, or $0.33 per diluted share was reported for the quarter ended December 31, 2020, compared to $3.3 million, or $0.30 per diluted share for the quarter ended September 30, 2020. For the fiscal year ended December 31, 2020, the Company earned a record $12.7 million, or $1.14 per diluted share compared to earnings of $9.5 million, or $0.85 per diluted share for the fiscal year ended December 31, 2019.
The Company’s fourth quarter operating results reflected: (1) increased net interest income largely due to increased accretion related to both reductions of purchased credit impaired loans and the Small Business Administration’s Paycheck Protection Program (SBA PPP) debt forgiveness; (2) higher loan loss provisions, primarily due to the impact of loan growth and economic uncertainty; (3) a continued robust refinancing market which led to an all-time high on gains on sale of mortgage loans; and (4) a modest increase in non-interest expenses due to branch closure costs and modestly higher impairment of mortgage servicing right assets, offset by lower compensation and a seasonal reduction in advertising.
Book value per share was $14.52 at December 31, 2020 compared to $14.10 at September 30, 2020 and $13.36 at December 31, 2019. Tangible book value per share (non-GAAP)5 was $11.18 at December 31, 2020 compared to $10.75 at September 30, 2020 and $9.89 at December 31, 2019. Book value per share increased $1.16 in fiscal 2020, a 9% increase from December 31, 2019. Tangible book value per share increased $1.29 in fiscal 2020, a 13.0% increase from December 31, 2019. In addition to building tangible book value per share 13.0% over the past year, the Company paid an annual dividend of $0.21 per share in fiscal 2020. On January 28, 2021, the Board of Directors approved a 10% increase in the annual cash dividend to $0.23 per share. The dividend will be payable on February 25, 2021 to the shareholders of record on February 11, 2021.
Stephen Bianchi, Chairman, President and Chief Executive Officer, in expressing his appreciation of the Citizens team, said, “I am very proud of the focus and commitment by our colleagues to clients, to each other and to the communities we serve. Their dedication in the face of adversity helped the Bank deliver strong returns to stakeholders and positions us well for the future.”
“The continued execution of our strategic priorities resulted in the following highlights; (1) a 13% increase in tangible book value, or $1.29 per share, to $11.18; (2) continued asset quality improvement in the quarter with a $3.4 million, or 23%, decrease in nonperforming assets and a decrease for the year of $10.1 million, or 47%; (3) Criticized assets declined 39% from March 31, 2020 levels; (4) originated loans, net of SBA PPP loans, grew by $59 million or 8% on a linked quarter basis; and (5) efforts to build more efficient workflows using technology and lower staffing levels through attrition and three branch closures were partially reflected in the fourth quarter as non-interest expense declined. The full cost savings will be more fully reflected in the first quarter of 2021,” continued Stephen Bianchi.
“Fourth quarter commercial activity accelerated across our markets where unemployment through November was below 5% in all markets and under 4% in select markets. As expected, COVID-19 deferrals remain concentrated in the hospitality segment where occupancy rates generally have been tracking with, or slightly better than, national averages depending on the property. We have been working with our clients as the pandemic persists by requiring additional support from the borrower in exchange for further deferral periods and expect the second PPP draws will be beneficial to this segment,” continued Bianchi.
December 31, 2020 Highlights: (as of or for the 3-month period ended December 31, 2020 and year ended December 31, 2020, compared to September 30, 2020 and December 31, 2019.)
- Stockholders’ equity as a percent of total assets increased to 9.74% from 9.70% during the quarter ended December 31, 2020. Tangible common equity as a percent of tangible assets (non-GAAP)5, increased to 7.67% from 7.57% during the quarter ended December 31, 2020.
- Return on average assets increased to 0.80% from 0.68% during the year ended December 31, 2020. Return on average equity increased to 8.29% from 6.59% during the year ended December 31, 2020. Return on average tangible common equity5 (non-GAAP) increased to 11.04% from 8.98% during the year ended December 31, 2020.
- The Bank recorded provision for loan losses of $2.5 million for the quarter ended December 31, 2020, compared to $1.5 million for the quarter ended September 30, 2020. The increase was largely due to organic loan growth along with qualitative factor increases related to the potential adverse economic impact of COVID-19. The COVID-19 pandemic continued to result in reduced operating capacity and uncertainty regarding potential future revenue and cash flows for certain businesses, including bank borrowers. Economic conditions in our markets continued to improve during the last quarter of 2020. This has supported improving trends for businesses most impacted by the pandemic, but further improvements in their prospects will be dependent on the timing and efficacy of vaccinations, and related impact on consumer behavior and business activities.
- As of December 31, 2020, the Bank’s COVID-19 related modifications under Section 4013 of the CARES Act, totaled $61 million, or 5% of gross loans versus $126.7 million, or 10% of gross loans at September 30, 2020. At December 31, 2020, hotel industry sector loans represent $51.6 million of the approved deferrals. The Bank has approximately $2.4 million of total payment deferrals expiring in the first quarter of 2021.
- The sum of special mention and substandard loans decreased $5.5 million to $35.2 million at December 31, 2020 from $40.7 million at September 30, 2020, a decrease of 13%.
- The allowance for loan losses on originated loans, excluding PPP loans, increased to 1.77% at December 31, 2020 from 1.65% at September 30, 2020. Since PPP loans are guaranteed by the SBA, they are excluded from this reserve calculation. Additionally, loans resulting from Bank acquisitions were effectively marked to market value at the time of their acquisition and were also excluded from this reserve calculation. The allowance for loan losses of $17.0 million, is allocated $14.8 million to the originated loan portfolio and $2.2 million to the acquired loan portfolio.
- During the fourth quarter, the Bank closed three branch operations located at Minnesota Lake, Minnesota, Eau Claire, Wisconsin, and Eleva, Wisconsin. These branch operations were consolidated into nearby branch locations. These closures resulted in pretax net branch closure costs of $165 thousand as presented in the “Reconciliation of GAAP Net Income and Net Income as Adjusted (non-GAAP)” table.
- Nonperforming assets continued to decline during the quarter ended December 31, 2020 to $11.5 million from $14.9 million one quarter earlier.
- On November 30, 2020, the Board of Directors approved a stock repurchase program. Under this program the Company may repurchase up to 557,728 shares of its common stock, or approximately 5% of the current outstanding shares. Through December 31, 2020, the Company has repurchased approximately 98,000 shares under this new stock repurchase program.
Balance Sheet and Asset Quality
Total assets increased $26.5 million during the quarter to $1.65 billion at December 31, 2020, compared to $1.62 billion at September 30, 2020. This increase was approximately the same as the increase in deposits of $24.5 million.
Securities available for sale decreased $6.7 million during the quarter ended December 31, 2020 to $144.2 million from $150.9 million at September 30, 2020. Meanwhile, the Bank’s securities held to maturity increased $26.0 million in the quarter. With strong deposit levels and SBA PPP loan debt forgiveness expected to increase in 2021, the Bank purchased $29 million of agency mortgage-backed certificates during the fourth quarter, in the held to maturity category.
Loans receivable increased by $7.4 million to $1.24 billion at December 31, 2020. The originated loan portfolio before SBA PPP loans increased $59 million in the quarter. Approximately $5.5 million of the loan growth was represented by draws on lines of credit taken on December 31, 2020 with the proceeds deposited into the customer’s money market accounts at the Bank, and repaid on January 4, 2021. SBA’s PPP loans decreased $15 million in the quarter due to debt forgiveness. Acquired loans decreased by $38 million. The acquired loan portfolio asset quality improved with a reduction of $4 million in substandard loans, which included the prepayment of $3 million of nonaccrual loans and the payoff of hotel loans on deferral of $8 million.
The allowance for loan losses increased to $17.0 million at December 31, 2020 representing 1.38% of loans receivable at December 31, 2020, compared to $14.8 million at September 30, 2020 representing 1.21% of loans receivable at September 30, 2020. Excluding the PPP loans, which are guaranteed by the SBA, the allowance for loan losses was 1.53% at December 31, 2020 compared to 1.35% at September 30, 2020. Approximately 23% of the loan portfolio at December 31, 2020 consists of loans purchased through whole bank acquisitions resulting in these loans being recorded at fair market value at acquisition. The allowance for loan losses as a percent of originated loans excluding PPP loans was 1.77% at December 31, 2020 compared to 1.65% at September 30, 2020. For the quarter ended December 31, 2020, the Bank had net charge-offs of $293,000.
Allowance for Loan Losses Percentages | ||||||||||||||||
(in thousands, except ratios) | ||||||||||||||||
December 31, 2020 | September 30, 2020 | June 30, 2020 | December 31, 2019 | |||||||||||||
Originated loans, net of deferred fees and costs | $ | 835,769 | $ | 777,340 | $ | 789,075 | $ | 762,127 | ||||||||
SBA PPP loans, net of deferred fees | 120,711 | 135,177 | 132,800 | — | ||||||||||||
Acquired loans, net of unamortized discount | 281,101 | 317,622 | 359,300 | 415,253 | ||||||||||||
Loans, end of period | $ | 1,237,581 | $ | 1,230,139 | $ | 1,281,175 | $ | 1,177,380 | ||||||||
SBA PPP loans, net of deferred fees | (120,711 | ) | (135,177 | ) | (132,800 | ) | — | |||||||||
Loans, net of SBA PPP loans and deferred fees | $ | 1,116,870 | $ | 1,094,962 | $ | 1,148,375 | $ | 1,177,380 | ||||||||
Allowance for loan losses allocated to originated loans | $ | 14,819 | $ | 12,809 | $ | 12,109 | $ | 9,551 | ||||||||
Allowance for loan losses allocated to other loans | 2,224 | 2,027 | 1,264 | 769 | ||||||||||||
Allowance for loan losses | $ | 17,043 | $ | 14,836 | $ | 13,373 | $ | 10,320 | ||||||||
Non-accretable difference on purchased credit impaired loans | $ | 1,087 | $ | 1,661 | $ | 3,355 | $ | 6,290 | ||||||||
ALL as a percentage of loans, end of period | 1.38 | % | 1.21 | % | 1.04 | % | 0.88 | % | ||||||||
ALL as a percentage of loans, net of SBA PPP loans and deferred fees | 1.53 | % | 1.35 | % | 1.16 | % | 0.88 | % | ||||||||
ALL allocated to originated loans as a percentage of originated loans, net of deferred fees and costs | 1.77 | % | 1.65 | % | 1.53 | % | 1.25 | % |
Nonperforming assets decreased 22.7% to $11.5 million or 0.70% of total assets at December 31, 2020 compared to $14.9 million or 0.92% of total assets at September 30, 2020. Included in nonperforming assets at December 31, 2020 are $7.4 million of nonperforming assets acquired during recent whole-bank acquisitions. Originated nonperforming assets were only $4.2 million, or 0.25% of total assets for the most recent quarter. Over the past year, nonperforming assets declined 47% from $21.6 million at December 31, 2019 to $11.5 million at December 31, 2020.
Substandard and special mention loans declined $5.5 million, or 13%, during the quarter ended December 31, 2020. The table below shows the decreases in substandard loans by quarter during 2020. Over the past year, total criticized loans decreased 30.6% from $50.7 million at December 31, 2019 to $35.2 million at December 31, 2020.
(in thousands) | ||||||||||||||||||||
December 31, 2020 | September 30, 2020 | June 30, 2020 | March 31, 2020 | December 31, 2019 | ||||||||||||||||
Special mention loan balances | $ | 6,672 | $ | 7,777 | $ | 19,958 | $ | 19,387 | $ | 10,856 | ||||||||||
Substandard loan balances | 28,541 | 32,922 | 35,911 | 38,393 | 39,892 | |||||||||||||||
Criticized loans, end of period | $ | 35,213 | $ | 40,699 | $ | 55,869 | $ | 57,780 | $ | 50,748 |
Deposits increased $24.5 million to $1.295 billion at December 31, 2020 compared to $1.271 billion at September 30, 2020. The increase was in non-maturity deposits which more than offset the modest decrease of $10 million in certificates of deposit. Deposit growth of $5.5 million represents line of credit draw proceeds deposited into customers’ money market accounts, which were subsequently withdrawn to repay the line of credits on January 4, 2021. The decrease in certificates of deposit was due to the Company choosing not to match higher rate local retail certificate competition.
Review of Operations
Net interest income was $13.4 million for the fourth quarter of 2020 compared to $11.9 million for the third quarter of
2020, and $11.8 million for the quarter ended December 31, 2019. The net interest margin increased to 3.51% for the fourth quarter of 2020 compared to 3.11% for the third quarter of 2020 and 3.41% for the fourth quarter ended December 31, 2019.
Net interest income and net interest margin with and without loan purchase accounting: (in thousands, except yields and rates) | ||||||||||||||||||||||||||||||||||||
Three months ended | ||||||||||||||||||||||||||||||||||||
December 31, 2020 | September 30, 2020 | June 30, 2020 | March 31, 2020 | December 31, 2019 | ||||||||||||||||||||||||||||||||
Net Interest Income |
Net Interest Margin |
Net Interest Income |
Net Interest Margin |
Net Interest Income |
Net Interest Margin |
Net Interest Income |
Net Interest Margin |
Net Interest Income |
Net Interest Margin |
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With loan purchase accretion | $ | 13,372 | 3.51 | % | $ | 11,909 | 3.11 | % | $ | 12,303 | 3.34 | % | $ | 12,671 | 3.64 | % | $ | 11,775 | 3.41 | % | ||||||||||||||||
Less non-accretable difference realized as interest from payoff of purchased credit impaired loans | (324 | ) | (0.08 | )% | (130 | ) | (0.03 | )% | (196 | ) | (0.05 | )% | (1,043 | ) | (0.30 | )% | (271 | ) | (0.08 | )% | ||||||||||||||||
Less accelerated accretion from payoff of certain PCI loans with transferred non-accretable differences | (872 | ) | (0.23 | )% | — | — | % | (99 | ) | (0.03 | )% | — | — | % | — | — | % | |||||||||||||||||||
Less scheduled accretion interest | (252 | ) | (0.07 | )% | (276 | ) | (0.07 | )% | (247 | ) | (0.07 | )% | (233 | ) | (0.07 | )% | (233 | ) | (0.07 | )% | ||||||||||||||||
Without loan purchase accretion | $ | 11,924 | 3.13 | % | $ | 11,503 | 3.01 | % | $ | 11,761 | 3.19 | % | $ | 11,395 | 3.27 | % | $ | 11,271 | 3.26 | % | ||||||||||||||||
As noted above, the current quarter net interest margin was favorably impacted by reductions in purchased credit impaired loans and associated income realization. The Company realized $1.2 million, or 31 basis points, of such accelerated accretion in the quarter ended December 31, 2020. In addition, current quarter SBA PPP fee accretion of $0.98 million represented a $0.34 million, or 10 basis point, net interest margin increase over the prior quarter’s accretion of $0.64 million. The increase in SBA PPP fee accretion results from such loans qualifying for and receiving debt forgiveness. Deferred SBA PPP fees were approximately $3 million at December 31, 2020.
The Company continued to manage deposit interest rates. Various non-maturity deposit product yields were reduced and the Bank was able to lower the cost of certificate of deposit accounts as the interest rates on new and renewed certificates of deposit were lower than the previous quarter. Additionally, the Bank relied less on higher-costing certificates of deposit. These actions reduced the cost of deposits by 9 basis points in the quarter which more than offset the full quarter impact of the third quarter’s subordinated debt issuance. The Bank has $61 million of certificates of deposits maturing in the first quarter of 2021 with a blended interest cost of approximately 1.90% and an additional $124 million maturing in the remaining three quarters of 2021 at a blended interest cost of approximately 1.05%. The weighted average cost of new certificates in the fourth quarter of 2020 was approximately 0.50%.
Loan loss provisions were $2.5 million for the quarter ended December 31, 2020 compared to $1.50 million for the quarter ended September 30, 2020 and $1.4 million one year earlier. There was no provision on the $5.5 million lines of credit drawn in late December and repaid on January 4, 2021. The increase was largely due to organic growth, along with qualitative factor increases related to the potential adverse impact of COVID-19. We estimate the COVID-19/qualitative factor increase impact on the provisions for loan losses to be approximately $1.3 million and $4.8 million for the three and twelve months ended December 31, 2020. For the year ended December 31, 2020, provisions for loan losses were $7.750 million compared to $3.525 million for the year ended December 31, 2019.
Non-interest income decreased modestly in the quarter ended December 31, 2020 to $4.8 million from the previous quarter ended September 30, 2020 level of $5.1 million. The decrease in the fourth quarter was largely due to a recognized gain in the third quarter on the disposition of an acquired business line and the third quarter recognition of a higher annual incentive paid on debit card activity. For the year ended December 31, 2020, non-interest income increased by $3.5 million to $18.4 million with stronger gain on sale of loans and loan servicing income being partially offset by the sale of the Company’s only Michigan branch in the second quarter of 2019.
Total non-interest expense increased by $0.1 million to $10.8 million for the quarter ended December 31, 2020. This was due to modestly higher impairment on mortgage servicing rights (“MSR”) of $0.33 million and $0.17 million of costs related to the closure of 3 branches in mid-November. MSR impairment for the quarter ended December 31, 2020 totaled $0.33 million compared to $0.25 million for the quarter ended September 30, 2020. These increases were partially offset by lower compensation due to a smaller level of FTE and lower seasonal marketing costs. For the year ended December 31, 2020, total non-interest expense was $43.7 million compared to $42.7 million for the year ended December 21, 2019. The impact of the F&M acquisition on July 1, 2019 increased non-interest expense in 2020 in addition to the items discussed above.
Provisions for income taxes remained unchanged in the fourth quarter at $1.3 million compared to the preceding quarter. For the year ended December 31, 2020, provisions for income taxes were $4.6 million compared to $2.8 million for the year ended December 31, 2019, which included a $0.3 million reduction due to a favorable tax treatment of certain acquired bank-owned life insurance. The effective tax rate for the most recent quarter was 25.9% compared to 26.7% the prior quarter.
These financial results are preliminary until the Form 10-K is filed in March 2021.
About the Company
Citizens Community Bancorp, Inc. (NASDAQ: “CZWI”) is the holding company of the Bank, a national bank based in Altoona, Wisconsin, currently serving customers primarily in Wisconsin and Minnesota through 25
branch locations. Its primary markets include the Chippewa Valley Region in Wisconsin, the Twin Cities and Mankato markets in Minnesota, and various rural communities around these areas. The Bank offers traditional community banking services to businesses, Ag operators and consumers, including residential mortgage loans.
Cautionary Statement Regarding Forward-Looking Statements
Certain statements contained in this release are considered “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may be identified using forward-looking words or phrases such as “anticipate,” “believe,” “could,” “expect,” “estimates,” “intend,” “may,” “preliminary,” “planned,” “potential,” “should,” “will,” “would” or the negative of those terms or other words of similar meaning. Such forward-looking statements in this release are inherently subject to many uncertainties arising in the operations and business environment of the Company and the Bank. These uncertainties include the conditions in the financial markets and economic conditions generally; adverse impacts to the Company or Bank arising from the COVID-19 pandemic; the possibility of a deterioration in the residential real estate markets; interest rate risk; lending risk; the sufficiency of loan allowances; changes in the fair value or ratings downgrades of our securities; competitive pressures among depository and other financial institutions; our ability to maintain our reputation; our ability to realize the benefits of net deferred tax assets; our ability to maintain or increase our market share; acts of terrorism and political or military actions by the United States or other governments; legislative or regulatory changes or actions, or significant litigation, adversely affecting the Company or Bank; increases in FDIC insurance premiums or special assessments by the FDIC; disintermediation risk; our inability to obtain needed liquidity; risks related to the ongoing integration of F. & M. Bancorp. of Tomah, Inc. into the Company’s operations; our ability to successfully execute our acquisition growth strategy; risks posed by acquisitions and other expansion opportunities, including difficulties and delays in integrating the acquired business operations or fully realizing the cost savings and other benefits; our ability to raise capital needed to fund growth or meet regulatory requirements; the possibility that our internal controls and procedures could fail or be circumvented; our ability to attract and retain key personnel; our ability to keep pace with technological change; cybersecurity risks; changes in federal or state tax laws; changes in accounting principles, policies or guidelines and their impact on financial performance; restrictions on our ability to pay dividends; and the potential volatility of our stock price. Stockholders, potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. Such uncertainties and other risks that may affect the Company’s performance are discussed further in Part I, Item 1A, “Risk Factors,” in the Company’s Form 10-K, for the year ended December 31, 2019 filed with the Securities and Exchange Commission (“SEC”) on March 10, 2020 and the Company’s subsequent filings with the SEC. The Company undertakes no obligation to make any revisions to the forward-looking statements contained in this news release or to update them to reflect events or circumstances occurring after the date of this release.
Non-GAAP Financial Measures
This press release contains non-GAAP financial measures, such as net income as adjusted, net income as adjusted per share, tangible book value, tangible book value per share, tangible common equity as a percent of tangible assets, return on average tangible common equity and return on average tangible common equity as adjusted which management believes may be helpful in understanding the Company’s results of operations or financial position and comparing results over different periods.
Net income as adjusted and net income as adjusted per share are non-GAAP measures that 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, tangible book value per share, tangible common equity as a percent of tangible assets and return on average tangible common equity are non-GAAP measures that eliminate the impact of preferred stock equity, goodwill and intangible assets on our financial position. Management believes these measures are useful in assessing the strength of our financial position.
Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, can be found in this press release. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other banks and financial institutions.
Contact: Steve Bianchi, CEO
(715)-836-9994
CITIZENS COMMUNITY BANCORP, INC. Consolidated Balance Sheets (in thousands, except shares and per share data) | ||||||||||||
December 31, 2020 (unaudited) |
September 30, 2020 (unaudited) |
December 31, 2019 (audited) |
||||||||||
Assets | ||||||||||||
Cash and cash equivalents | $ | 119,440 | $ | 115,474 | $ | 55,840 | ||||||
Other interest-bearing deposits | 3,752 | 3,752 | 4,744 | |||||||||
Securities available for sale “AFS” | 144,233 | 150,908 | 180,119 | |||||||||
Securities held to maturity “HTM” | 43,551 | 16,927 | 2,851 | |||||||||
Equity securities with readily determinable fair value | 200 | 187 | 246 | |||||||||
Other investments | 14,948 | 15,075 | 15,005 | |||||||||
Loans receivable | 1,237,581 | 1,230,139 | 1,177,380 | |||||||||
Allowance for loan losses | (17,043 | ) | (14,836 | ) | (10,320 | ) | ||||||
Loans receivable, net | 1,220,538 | 1,215,303 | 1,167,060 | |||||||||
Loans held for sale | 3,075 | 4,938 | 5,893 | |||||||||
Mortgage servicing rights | 3,252 | 3,498 | 4,282 | |||||||||
Office properties and equipment, net | 21,165 | 21,607 | 21,106 | |||||||||
Accrued interest receivable | 5,652 | 5,829 | 4,738 | |||||||||
Intangible assets | 5,494 | 5,893 | 7,587 | |||||||||
Goodwill | 31,498 | 31,498 | 31,498 | |||||||||
Foreclosed and repossessed assets, net | 197 | 812 | 1,460 | |||||||||
Bank owned life insurance (“BOLI”) | 23,684 | 23,514 | 23,063 | |||||||||
Other assets | 8,416 | 7,378 | 5,757 | |||||||||
TOTAL ASSETS | $ | 1,649,095 | $ | 1,622,593 | $ | 1,531,249 | ||||||
Liabilities and Stockholders’ Equity | ||||||||||||
Liabilities: | ||||||||||||
Deposits | $ | 1,295,256 | $ | 1,270,778 | $ | 1,195,702 | ||||||
Federal Home Loan Bank (“FHLB”) and Federal Reserve Bank (“FRB”) advances | 123,498 | 124,491 | 130,971 | |||||||||
Other borrowings | 58,328 | 58,297 | 43,560 | |||||||||
Other liabilities | 11,449 | 11,704 | 10,463 | |||||||||
Total liabilities | 1,488,531 | 1,465,270 | 1,380,696 | |||||||||
Stockholders’ equity: | ||||||||||||
Common stock— $0.01 par value, authorized 30,000,000; 11,056,349; 11,154,645 and 11,266,954 shares issued and outstanding, respectively |
111 | 112 | 113 | |||||||||
Additional paid-in capital | 126,704 | 127,778 | 128,856 | |||||||||
Retained earnings | 32,809 | 29,239 | 22,517 | |||||||||
Unearned deferred compensation | (550 | ) | (710 | ) | (462 | ) | ||||||
Accumulated other comprehensive income (loss) | 1,490 | 904 | (471 | ) | ||||||||
Total stockholders’ equity | 160,564 | 157,323 | 150,553 | |||||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 1,649,095 | $ | 1,622,593 | $ | 1,531,249 | ||||||
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 | Twelve Months Ended | |||||||||||||||||||
December 31, 2020 (unaudited) |
September 30, 2020 (unaudited) |
December 31, 2019 (unaudited) |
December 31, 2020 (unaudited) |
December 31, 2019 (audited) |
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Interest and dividend income: | ||||||||||||||||||||
Interest and fees on loans | $ | 15,463 | $ | 14,154 | $ | 14,611 | $ | 59,763 | $ | 54,647 | ||||||||||
Interest on investments | 1,052 | 1,064 | 1,535 | 4,764 | 5,776 | |||||||||||||||
Total interest and dividend income | 16,515 | 15,218 | 16,146 | 64,527 | 60,423 | |||||||||||||||
Interest expense: | ||||||||||||||||||||
Interest on deposits | 1,958 | 2,255 | 3,284 | 10,000 | 12,174 | |||||||||||||||
Interest on FHLB and FRB borrowed funds | 428 | 430 | 508 | 1,814 | 2,721 | |||||||||||||||
Interest on other borrowed funds | 757 | 624 | 579 | 2,458 | 2,015 | |||||||||||||||
Total interest expense | 3,143 | 3,309 | 4,371 | 14,272 | 16,910 | |||||||||||||||
Net interest income before provision for loan losses | 13,372 | 11,909 | 11,775 | 50,255 | 43,513 | |||||||||||||||
Provision for loan losses | 2,500 | 1,500 | 1,400 | 7,750 | 3,525 | |||||||||||||||
Net interest income after provision for loan losses | 10,872 | 10,409 | 10,375 | 42,505 | 39,988 | |||||||||||||||
Non-interest income: | ||||||||||||||||||||
Service charges on deposit accounts | 496 | 431 | 612 | 1,832 | 2,368 | |||||||||||||||
Interchange income | 520 | 556 | 468 | 2,029 | 1,735 | |||||||||||||||
Loan servicing income | 1,014 | 1,144 | 772 | 4,158 | 2,674 | |||||||||||||||
Gain on sale of loans | 2,108 | 1,987 | 902 | 6,693 | 2,462 | |||||||||||||||
Loan fees and service charges | 342 | 320 | 285 | 1,383 | 1,145 | |||||||||||||||
Insurance commission income | — | — | 161 | 475 | 734 | |||||||||||||||
Net gains (losses) on investment securities | 13 | (1 | ) | 120 | 110 | 271 | ||||||||||||||
Net gain (loss) on sale of branch | — | — | — | 432 | 2,295 | |||||||||||||||
Net gain (loss) on sale of acquired business lines | — | 180 | — | — | — | |||||||||||||||
Settlement proceeds | — | — | — | 131 | — | |||||||||||||||
Other | 277 | 445 | 464 | 1,205 | 1,291 | |||||||||||||||
Total non-interest income | 4,770 | 5,062 | 3,784 | 18,448 | 14,975 | |||||||||||||||
Non-interest expense: | ||||||||||||||||||||
Compensation and related benefits | 5,440 | 5,538 | 5,720 | 22,321 | 20,325 | |||||||||||||||
Occupancy | 1,017 | 993 | 972 | 3,915 | 3,697 | |||||||||||||||
Office | 502 | 532 | 539 | 2,152 | 2,188 | |||||||||||||||
Data processing | 1,210 | 1,145 | 985 | 4,375 | 3,938 | |||||||||||||||
Amortization of intangible assets | 399 | 399 | 412 | 1,622 | 1,496 | |||||||||||||||
Mortgage servicing rights expense | 720 | 603 | 286 | 3,050 | 1,108 | |||||||||||||||
Advertising, marketing and public relations | 165 | 260 | 240 | 967 | 1,214 | |||||||||||||||
FDIC premium assessment | 148 | 188 | (60 | ) | 584 | 258 | ||||||||||||||
Professional services | 438 | 434 | 496 | 1,829 | 2,457 | |||||||||||||||
Gains (losses) on repossessed assets, net | (64 | ) | (105 | ) | 18 | (259 | ) | (125 | ) | |||||||||||
Other | 851 | 737 | 820 | 3,117 | 6,130 | |||||||||||||||
Total non-interest expense | 10,826 | 10,724 | 10,428 | 43,673 | 42,686 | |||||||||||||||
Income before provision for income taxes | 4,816 | 4,747 | 3,731 | 17,280 | 12,277 | |||||||||||||||
Provision for income taxes | 1,246 | 1,267 | 562 | 4,555 | 2,814 | |||||||||||||||
Net income attributable to common stockholders | $ | 3,570 | $ | 3,480 | $ | 3,169 | $ | 12,725 | $ | 9,463 | ||||||||||
Per share information: | ||||||||||||||||||||
Basic earnings | $ | 0.32 | $ | 0.31 | $ | 0.28 | $ | 1.14 | $ | 0.85 | ||||||||||
Diluted earnings | $ | 0.32 | $ | 0.31 | $ | 0.28 | $ | 1.14 | $ | 0.85 | ||||||||||
Cash dividends paid | $ | — | $ | — | $ | — | $ | 0.21 | $ | 0.20 | ||||||||||
Book value per share at end of period | $ | 14.52 | $ | 14.10 | $ | 13.36 | $ | 14.52 | $ | 13.36 | ||||||||||
Tangible book value per share at end of period (non-GAAP) | $ | 11.18 | $ | 10.75 | $ | 9.89 | $ | 11.18 | $ | 9.89 | ||||||||||
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 | Twelve Months Ended | |||||||||||||||||||
December 31, 2020 |
September 30, 2020 |
December 31, 2019 |
December 31, 2020 |
December 31, 2019 |
||||||||||||||||
GAAP pretax income | $ | 4,816 | $ | 4,747 | $ | 3,731 | $ | 17,280 | $ | 12,277 | ||||||||||
Merger related costs | — | — | 104 | — | 3,880 | |||||||||||||||
Branch closure costs (1) | 165 | — | — | 165 | 15 | |||||||||||||||
Audit and Financial Reporting (2) | — | — | — | — | 358 | |||||||||||||||
Net gain on sale of branch (3) | — | — | — | — | (2,295 | ) | ||||||||||||||
Net gain on sale of acquired business lines (4) | — | (180 | ) | — | (432 | ) | — | |||||||||||||
Settlement proceeds (5) | — | — | — | (131 | ) | — | ||||||||||||||
Pretax income as adjusted (6) | 4,981 | 4,567 | 3,835 | 16,882 | 14,235 | |||||||||||||||
Provision for income tax on net income as adjusted (7) | 1,290 | 1,219 | 579 | 4,457 | 3,260 | |||||||||||||||
Tax impact of certain acquired BOLI policies (8) | — | — | 300 | — | 300 | |||||||||||||||
Total Provision for income tax | 1,290 | 1,219 | 879 | 4,457 | 3,560 | |||||||||||||||
Net income as adjusted after income taxes (non-GAAP) (6) | $ | 3,691 | $ | 3,348 | $ | 2,956 | $ | 12,425 | $ | 10,675 | ||||||||||
GAAP diluted earnings per share, net of tax | $ | 0.32 | $ | 0.31 | $ | 0.28 | $ | 1.14 | $ | 0.85 | ||||||||||
Merger related costs, net of tax | — | — | 0.01 | — | 0.27 | |||||||||||||||
Branch closure costs, net of tax | 0.01 | — | — | 0.01 | — | |||||||||||||||
Audit and Financial Reporting | — | — | — | — | 0.02 | |||||||||||||||
Net gain on sale of branch | — | — | — | — | (0.15 | ) | ||||||||||||||
Tax impact of certain acquired BOLI policies | — | — | (0.03 | ) | (0.03 | ) | ||||||||||||||
Net gain on sale of acquired business lines | — | (0.01 | ) | — | (0.03 | ) | — | |||||||||||||
Settlement proceeds | — | — | — | (0.01 | ) | — | ||||||||||||||
Diluted earnings per share, as adjusted, net of tax (non-GAAP) | $ | 0.33 | $ | 0.30 | $ | 0.26 | $ | 1.11 | $ | 0.96 | ||||||||||
Average diluted shares outstanding | 11,128,628 | 11,155,337 | 11,275,961 | 11,161,811 | 11,121,435 |
(1) Branch closure costs include severance pay recorded in compensation and benefits, accelerated depreciation expense and lease termination fees included in occupancy and other costs included in other non-interest expense in the consolidated statement of operations.
(2) Audit and financial reporting costs include additional audit and professional fees related to the change in our year end from September 30 to December 31, effective December 31, 2018.
(3) Gain on sale of branch resulted from the sale of our sole Michigan office in Rochester Hills.
(4) Gain on sale of 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.
(5) Settlement proceeds includes litigation income from a JP Morgan Residential Mortgage Backed Security (RMBS) claim. This distribution represents a supplement to the proceeds received in March 2017 from a JP Morgan RMBS previously owned by the Bank and sold in 2011.
(6) Net income as adjusted is a non-GAAP measure that management believes enhances the market’s ability to assess the underlying business performance and trends related to core business activities.
(7) Provision for income tax on net income as adjusted is calculated at our effective tax rate for each respective period presented.
(8) Tax impact of certain BOLI policies acquired from United Bank equal to $300 thousand.
Loan Composition (in thousands) | December 31, 2020 |
September 30, 2020 |
June 30, 2020 |
December 31, 2019 |
||||||||||||
Originated Loans: | ||||||||||||||||
Commercial/Agricultural real estate: | ||||||||||||||||
Commercial real estate | $ | 351,113 | $ | 322,028 | $ | 314,390 | $ | 302,546 | ||||||||
Agricultural real estate | 31,741 | 32,530 | 35,138 | 34,026 | ||||||||||||
Multi-family real estate | 112,731 | 100,148 | 90,617 | 71,877 | ||||||||||||
Construction and land development | 91,241 | 80,992 | 94,856 | 71,467 | ||||||||||||
C&I/Agricultural operating: | ||||||||||||||||
Commercial and industrial | 95,290 | 79,959 | 80,369 | 89,730 | ||||||||||||
Agricultural operating | 24,457 | 24,324 | 25,813 | 20,717 | ||||||||||||
Residential mortgage: | ||||||||||||||||
Residential mortgage | 86,283 | 90,100 | 95,664 | 108,619 | ||||||||||||
Purchased HELOC loans | 6,260 | 6,547 | 6,861 | 8,407 | ||||||||||||
Consumer installment: | ||||||||||||||||
Originated indirect paper | 25,851 | 28,535 | 32,031 | 39,585 | ||||||||||||
Other consumer | 12,056 | 13,221 | 14,175 | 15,546 | ||||||||||||
Originated loans before SBA PPP loans | 837,023 | 778,384 | 789,914 | 762,520 | ||||||||||||
SBA PPP loans | 123,702 | 139,166 | 137,330 | — | ||||||||||||
Total originated loans | $ | 960,725 | $ | 917,550 | $ | 927,244 | $ | 762,520 | ||||||||
Acquired Loans: | ||||||||||||||||
Commercial/Agricultural real estate: | ||||||||||||||||
Commercial real estate | $ | 156,562 | $ | 178,645 | $ | 195,335 | $ | 211,913 | ||||||||
Agricultural real estate | 37,054 | 40,613 | 43,054 | 51,337 | ||||||||||||
Multi-family real estate | 9,421 | 9,520 | 13,022 | 15,131 | ||||||||||||
Construction and land development | 7,276 | 8,346 | 15,276 | 14,943 | ||||||||||||
C&I/Agricultural operating: | ||||||||||||||||
Commercial and industrial | 21,263 | 24,413 | 29,477 | 44,004 | ||||||||||||
Agricultural operating | 8,328 | 9,634 | 12,124 | 17,063 | ||||||||||||
Residential mortgage: | ||||||||||||||||
Residential mortgage | 45,103 | 51,754 | 56,760 | 67,713 | ||||||||||||
Consumer installment: | ||||||||||||||||
Other consumer | 1,157 | 1,409 | 1,639 | 2,640 | ||||||||||||
Total acquired loans | $ | 286,164 | $ | 324,334 | $ | 366,687 | $ | 424,744 | ||||||||
Total Loans: | ||||||||||||||||
Commercial/Agricultural real estate: | ||||||||||||||||
Commercial real estate | $ | 507,675 | $ | 500,673 | $ | 509,725 | $ | 514,459 | ||||||||
Agricultural real estate | 68,795 | 73,143 | 78,192 | 85,363 | ||||||||||||
Multi-family real estate | 122,152 | 109,668 | 103,639 | 87,008 | ||||||||||||
Construction and land development | 98,517 | 89,338 | 110,132 | 86,410 | ||||||||||||
C&I/Agricultural operating: | ||||||||||||||||
Commercial and industrial | 116,553 | 104,372 | 109,846 | 133,734 | ||||||||||||
Agricultural operating | 32,785 | 33,958 | 37,937 | 37,780 | ||||||||||||
Residential mortgage: | ||||||||||||||||
Residential mortgage | 131,386 | 141,854 | 152,424 | 176,332 | ||||||||||||
Purchased HELOC loans | 6,260 | 6,547 | 6,861 | 8,407 | ||||||||||||
Consumer installment: | ||||||||||||||||
Originated indirect paper | 25,851 | 28,535 | 32,031 | 39,585 | ||||||||||||
Other consumer | 13,213 | 14,630 | 15,814 | 18,186 | ||||||||||||
Gross loans before SBA PPP loans | 1,123,187 | 1,102,718 | 1,156,601 | 1,187,264 | ||||||||||||
SBA PPP loans | 123,702 | 139,166 | 137,330 | — | ||||||||||||
Gross loans | $ | 1,246,889 | $ | 1,241,884 | $ | 1,293,931 | $ | 1,187,264 | ||||||||
Unearned net deferred fees and costs and loans in process | (4,245 | ) | (5,033 | ) | (5,369 | ) | (393 | ) | ||||||||
Unamortized discount on acquired loans | (5,063 | ) | (6,712 | ) | (7,387 | ) | (9,491 | ) | ||||||||
Total loans receivable | $ | 1,237,581 | $ | 1,230,139 | $ | 1,281,175 | $ | 1,177,380 |
Nonperforming Originated and Acquired Assets (in thousands, except ratios) | ||||||||||||||||
December 31, 2020 and Three Months Ended |
September 30, 2020 and Three Months Ended |
June 30, 2020 and Three Months Ended |
December 31, 2019 and Three Months Ended |
|||||||||||||
Nonperforming assets: | ||||||||||||||||
Originated nonperforming assets: | ||||||||||||||||
Nonaccrual loans | $ | 3,649 | $ | 3,255 | $ | 3,951 | $ | 4,285 | ||||||||
Accruing loans past due 90 days or more | 415 | 698 | 1,455 | 946 | ||||||||||||
Total originated nonperforming loans (“NPL”) | 4,064 | 3,953 | 5,406 | 5,231 | ||||||||||||
Other real estate owned (“OREO”) | 63 | 352 | 270 | 441 | ||||||||||||
Other collateral owned | 41 | 56 | 42 | 28 | ||||||||||||
Total originated nonperforming assets (“NPAs”) | $ | 4,168 | $ | 4,361 | $ | 5,718 | $ | 5,700 | ||||||||
Acquired nonperforming assets: | ||||||||||||||||
Nonaccrual loans | $ | 7,098 | $ | 9,899 | $ | 10,836 | $ | 14,771 | ||||||||
Accruing loans past due 90 days or more | 171 | 252 | 425 | 158 | ||||||||||||
Total acquired nonperforming loans (“NPL”) | 7,269 | 10,151 | 11,261 | 14,929 | ||||||||||||
Other real estate owned (“OREO”) | 93 | 404 | 422 | 988 | ||||||||||||
Other collateral owned | — | — | — | 3 | ||||||||||||
Total acquired nonperforming assets (“NPAs”) | $ | 7,362 | $ | 10,555 | $ | 11,683 | $ | 15,920 | ||||||||
Total nonperforming assets (“NPAs”) | $ | 11,530 | $ | 14,916 | $ | 17,401 | $ | 21,620 | ||||||||
Loans, end of period | $ | 1,237,581 | $ | 1,230,139 | $ | 1,281,175 | $ | 1,177,380 | ||||||||
Total assets, end of period | $ | 1,649,095 | $ | 1,622,593 | $ | 1,607,514 | $ | 1,531,249 | ||||||||
Ratios: | ||||||||||||||||
Originated NPLs to total loans | 0.33 | % | 0.32 | % | 0.42 | % | 0.44 | % | ||||||||
Acquired NPLs to total loans | 0.59 | % | 0.83 | % | 0.88 | % | 1.27 | % | ||||||||
Originated NPAs to total assets | 0.25 | % | 0.27 | % | 0.36 | % | 0.37 | % | ||||||||
Acquired NPAs to total assets | 0.45 | % | 0.65 | % | 0.73 | % | 1.04 | % | ||||||||
Nonperforming Total Assets | ||||||||||||||||
(in thousand, except ratios) | ||||||||||||||||
December 31, 2020 and Three Months Ended |
September 30, 2020 and Three Months Ended |
June 30, 2020 and Three Months Ended |
December 31, 2019 and Three Months Ended |
|||||||||||||
Nonperforming assets: | ||||||||||||||||
Nonaccrual loans | ||||||||||||||||
Commercial real estate | $ | 827 | $ | 2,762 | $ | 3,221 | $ | 5,705 | ||||||||
Agricultural real estate | 5,084 | 5,252 | 5,979 | 7,568 | ||||||||||||
Commercial and industrial (“C&I”) | 357 | 853 | 1,306 | 1,850 | ||||||||||||
Agricultural operating | 1,872 | 1,651 | 1,496 | 1,702 | ||||||||||||
Residential mortgage | 2,451 | 2,536 | 2,666 | 2,063 | ||||||||||||
Consumer installment | 156 | 100 | 119 | 168 | ||||||||||||
Total nonaccrual loans | $ | 10,747 | $ | 13,154 | $ | 14,787 | $ | 19,056 | ||||||||
Accruing loans past due 90 days or more | 586 | 950 | 1,880 | 1,104 | ||||||||||||
Total nonperforming loans (“NPLs”) | 11,333 | 14,104 | 16,667 | 20,160 | ||||||||||||
Foreclosed and repossessed assets, net | 197 | 812 | 734 | 1,460 | ||||||||||||
Total nonperforming assets (“NPAs”) | $ | 11,530 | $ | 14,916 | $ | 17,401 | $ | 21,620 | ||||||||
Troubled Debt Restructurings (“TDRs”) | $ | 18,477 | $ | 19,778 | $ | 13,119 | $ | 12,594 | ||||||||
Nonaccrual TDRs | $ | 6,735 | $ | 7,199 | $ | 6,992 | $ | 7,198 | ||||||||
Loans, end of period | $ | 1,237,581 | $ | 1,230,139 | $ | 1,281,175 | $ | 1,177,380 | ||||||||
Total assets, end of period | $ | 1,649,095 | $ | 1,622,593 | $ | 1,607,514 | $ | 1,531,249 | ||||||||
Ratios: | ||||||||||||||||
NPLs to total loans | 0.92 | % | 1.15 | % | 1.30 | % | 1.71 | % | ||||||||
NPAs to total assets | 0.70 | % | 0.92 | % | 1.08 | % | 1.41 | % |
Deposit Composition (in thousands) | |||||||||||||||||
December 31, 2020 |
September 30, 2020 |
June 30, 2020 |
December 31, 2019 |
||||||||||||||
Non-interest bearing demand deposits | $ | 238,348 | $ | 229,217 | $ | 223,536 | $ | 168,157 | |||||||||
Interest bearing demand deposits | 301,764 | 279,648 | 270,116 | 223,102 | |||||||||||||
Savings accounts | 196,348 | 191,511 | 185,816 | 156,599 | |||||||||||||
Money market accounts | 245,549 | 246,651 | 242,536 | 246,430 | |||||||||||||
Certificate accounts | 313,247 | 323,751 | 350,193 | 401,414 | |||||||||||||
Total deposits | $ | 1,295,256 | $ | 1,270,778 | $ | 1,272,197 | $ | 1,195,702 |
Average balances, Interest Yields and Rates (in thousands, except yields and rates) | |||||||||||||||||||||||||||||||||
Three months ended December 31, 2020 |
Three months ended September 30, 2020 |
Three months ended December 31, 2019 |
|||||||||||||||||||||||||||||||
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 | $ | 79,225 | $ | 21 | 0.11 | % | $ | 77,774 | $ | 18 | 0.09 | % | $ | 31,327 | $ | 122 | 1.55 | % | |||||||||||||||
Loans receivable | 1,240,895 | 15,463 | 4.96 | % | 1,258,224 | 14,154 | 4.48 | % | 1,136,330 | 14,611 | 5.10 | % | |||||||||||||||||||||
Interest bearing deposits | 3,752 | 23 | 2.44 | % | 3,752 | 23 | 2.44 | % | 4,904 | 30 | 2.43 | % | |||||||||||||||||||||
Investment securities (1) | 176,802 | 824 | 1.85 | % | 166,622 | 846 | 2.02 | % | 185,920 | 1,222 | 2.62 | % | |||||||||||||||||||||
Other investments | 15,015 | 184 | 4.88 | % | 15,145 | 177 | 4.65 | % | 14,209 | 161 | 4.50 | % | |||||||||||||||||||||
Total interest earning assets (1) | $ | 1,515,689 | $ | 16,515 | 4.33 | % | $ | 1,521,517 | $ | 15,218 | 3.98 | % | $ | 1,372,690 | $ | 16,146 | 4.67 | % | |||||||||||||||
Average interest bearing liabilities: | |||||||||||||||||||||||||||||||||
Savings accounts | $ | 187,474 | $ | 87 | 0.18 | % | $ | 183,381 | $ | 98 | 0.21 | % | $ | 152,841 | $ | 172 | 0.45 | % | |||||||||||||||
Demand deposits | 285,001 | 200 | 0.28 | % | 285,993 | 231 | 0.32 | % | 216,021 | 389 | 0.71 | % | |||||||||||||||||||||
Money market accounts | 243,631 | 206 | 0.34 | % | 255,160 | 280 | 0.44 | % | 210,398 | 565 | 1.07 | % | |||||||||||||||||||||
CD’s | 284,728 | 1,304 | 1.82 | % | 297,691 | 1,469 | 1.96 | % | 367,278 | 1,951 | 2.11 | % | |||||||||||||||||||||
IRA’s | 41,493 | 161 | 1.54 | % | 41,852 | 177 | 1.68 | % | 43,809 | 207 | 1.87 | % | |||||||||||||||||||||
Total deposits | $ | 1,042,327 | $ | 1,958 | 0.75 | % | $ | 1,064,077 | $ | 2,255 | 0.84 | % | $ | 990,347 | $ | 3,284 | 1.32 | % | |||||||||||||||
FHLB advances and other borrowings | 182,463 | 1,185 | 2.58 | % | 173,758 | 1,054 | 2.41 | % | 165,660 | 1,087 | 2.60 | % | |||||||||||||||||||||
Total interest bearing liabilities | $ | 1,224,790 | $ | 3,143 | 1.02 | % | $ | 1,237,835 | $ | 3,309 | 1.06 | % | $ | 1,156,007 | $ | 4,371 | 1.50 | % | |||||||||||||||
Net interest income | $ | 13,372 | $ | 11,909 | $ | 11,775 | |||||||||||||||||||||||||||
Interest rate spread | 3.31 | % | 2.92 | % | 3.17 | % | |||||||||||||||||||||||||||
Net interest margin (1) | 3.51 | % | 3.11 | % | 3.41 | % | |||||||||||||||||||||||||||
Average interest earning assets to average interest bearing liabilities | 1.24 | 1.23 | 1.19 | ||||||||||||||||||||||||||||||
(1) Fully taxable equivalent (FTE). The average yield on tax exempt securities is computed on a tax equivalent basis using a tax rate of 21% for the quarters ended December 31, 2020, September 30, 2020 and December 31, 2019. The FTE adjustment to net interest income included in the rate calculations totaled $0, $0 and $8 thousand for the three months ended December 31, 2020, September 30, 2020 and December 31, 2019, respectively. | |||||||||||||||||||||||||||||||||
Twelve months ended December 31, 2020 | Twelve months ended December 31, 2019 | |||||||||||||||||||||
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 | $ | 52,016 | $ | 162 | 0.31 | % | $ | 29,948 | $ | 672 | 2.24 | % | ||||||||||
Loans receivable | 1,234,732 | 59,763 | 4.84 | % | 1,074,952 | 54,647 | 5.08 | % | ||||||||||||||
Interest bearing deposits | 3,914 | 96 | 2.45 | % | 5,841 | 137 | 2.35 | % | ||||||||||||||
Investment securities (1) | 174,396 | 3,789 | 2.17 | % | 171,747 | 4,332 | 2.60 | % | ||||||||||||||
Other investments | 15,081 | 717 | 4.75 | % | 12,442 | 635 | 5.10 | % | ||||||||||||||
Total interest earning assets (1) | $ | 1,480,139 | $ | 64,527 | 4.36 | % | $ | 1,294,930 | $ | 60,423 | 4.68 | % | ||||||||||
Average interest bearing liabilities: | ||||||||||||||||||||||
Savings accounts | $ | 174,184 | $ | 435 | 0.25 | % | $ | 155,848 | $ | 651 | 0.42 | % | ||||||||||
Demand deposits | 268,311 | 1,065 | 0.40 | % | 204,296 | 1,677 | 0.82 | % | ||||||||||||||
Money market accounts | 244,632 | 1,446 | 0.59 | % | 182,103 | 1,988 | 1.09 | % | ||||||||||||||
CD’s | 316,264 | 6,325 | 2.00 | % | 352,924 | 7,114 | 2.02 | % | ||||||||||||||
IRA’s | 42,039 | 729 | 1.73 | % | 42,134 | 744 | 1.77 | % | ||||||||||||||
Total deposits | $ | 1,045,430 | $ | 10,000 | 0.96 | % | $ | 937,305 | $ | 12,174 | 1.30 | % | ||||||||||
FHLB advances and other borrowings | 186,724 | 4,272 | 2.29 | % | 156,885 | 4,736 | 3.02 | % | ||||||||||||||
Total interest bearing liabilities | $ | 1,232,154 | $ | 14,272 | 1.16 | % | $ | 1,094,190 | $ | 16,910 | 1.55 | % | ||||||||||
Net interest income | $ | 50,255 | $ | 43,513 | ||||||||||||||||||
Interest rate spread | 3.20 | % | 3.13 | % | ||||||||||||||||||
Net interest margin (1) | 3.40 | % | 3.37 | % | ||||||||||||||||||
Average interest earning assets to average interest bearing liabilities | 1.20 | 1.18 | ||||||||||||||||||||
(1) Fully taxable equivalent (FTE). The average yield on tax exempt securities is computed on a tax equivalent basis using a tax rate of 21% for the twelve months ended December 31, 2020 and December 31, 2019. The FTE adjustment to net interest income included in the rate calculations totaled $1 thousand and $120 thousand for the twelve months ended December 31, 2020 and December 31, 2019, respectively. | ||||||||||||||||||||||
The following table reports key financial metric ratios based on a net income and net income as adjusted basis:
Three Months Ended | Twelve Months Ended | ||||||||||||||
December 31, 2020 | September 30, 2020 |
December 31, 2019 |
December 31, 2020 | December 31, 2019 | |||||||||||
Ratios based on net income: | |||||||||||||||
Return on average assets (annualized) | 0.87 | % | 0.85 | % | 0.84 | % | 0.80 | % | 0.68 | % | |||||
Return on average equity (annualized) | 8.93 | % | 8.93 | % | 8.41 | % | 8.29 | % | 6.59 | % | |||||
Return on average tangible common equity5 (annualized) | 11.67 | % | 11.79 | % | 11.45 | % | 11.04 | % | 8.98 | % | |||||
Efficiency ratio | 60 | % | 63 | % | 67 | % | 64 | % | 73 | % | |||||
Net interest margin with loan purchase accretion | 3.51 | % | 3.11 | % | 3.41 | % | 3.40 | % | 3.37 | % | |||||
Net interest margin without loan purchase accretion | 3.13 | % | 3.01 | % | 3.26 | % | 3.15 | % | 3.26 | % | |||||
Ratios based on net income as adjusted (non-GAAP): | |||||||||||||||
Return on average assets as adjusted2 (annualized) | 0.90 | % | 0.82 | % | 0.79 | % | 0.78 | % | 0.76 | % | |||||
Return on average equity as adjusted3 (annualized) | 9.24 | % | 8.59 | % | 7.85 | % | 8.09 | % | 7.44 | % | |||||
Return on average tangible common equity as adjusted5 (annualized) | 12.06 | % | 11.34 | % | 10.68 | % | 10.78 | % | 10.13 | % | |||||
Efficiency ratio4 as adjusted (non-GAAP) | 59 | % | 64 | % | 66 | % | 64 | % | 68 | % |
Reconciliation of Return on Average Assets as Adjusted (non-GAAP) (in thousands, except ratios) | ||||||||||||||||||||
Three Months Ended | Twelve Months Ended | |||||||||||||||||||
December 31, 2020 | September 30, 2020 | December 31, 2019 | December 31, 2020 | December 31, 2019 | ||||||||||||||||
GAAP earnings after income taxes | $ | 3,570 | $ | 3,480 | $ | 3,169 | $ | 12,725 | $ | 9,463 | ||||||||||
Net income as adjusted after income taxes (non-GAAP) (1) | $ | 3,691 | $ | 3,348 | $ | 2,956 | $ | 12,425 | $ | 10,675 | ||||||||||
Average assets | $ | 1,634,459 | $ | 1,627,497 | $ | 1,492,834 | $ | 1,594,053 | $ | 1,398,482 | ||||||||||
Return on average assets (annualized) | 0.87 | % | 0.85 | % | 0.84 | % | 0.80 | % | 0.68 | % | ||||||||||
Return on average assets as adjusted (non-GAAP) (annualized) | 0.90 | % | 0.82 | % | 0.79 | % | 0.78 | % | 0.76 | % | ||||||||||
(1) See Reconciliation of GAAP Net Income and Net Income as Adjusted (non-GAAP) | ||||||||||||||||||||
Reconciliation of Return on Average Equity as Adjusted (non-GAAP) (in thousands, except ratios) | ||||||||||||||||||||
Three Months Ended | Twelve Months Ended | |||||||||||||||||||
December 31, 2020 | September 30, 2020 | December 31, 2019 | December 31, 2020 | December 31, 2019 | ||||||||||||||||
GAAP earnings after income taxes | $ | 3,570 | $ | 3,480 | $ | 3,169 | $ | 12,725 | $ | 9,463 | ||||||||||
Net income as adjusted after income taxes (non-GAAP) (1) | $ | 3,691 | $ | 3,348 | $ | 2,956 | $ | 12,425 | $ | 10,675 | ||||||||||
Average equity | $ | 158,968 | $ | 154,996 | $ | 149,437 | $ | 153,497 | $ | 143,523 | ||||||||||
Return on average equity (annualized) | 8.93 | % | 8.93 | % | 8.41 | % | 8.29 | % | 6.59 | % | ||||||||||
Return on average equity as adjusted (non-GAAP) (annualized) | 9.24 | % | 8.59 | % | 7.85 | % | 8.09 | % | 7.44 | % | ||||||||||
(1) See Reconciliation of GAAP Net Income and Net Income as Adjusted (non-GAAP) | ||||||||||||||||||||
Reconciliation of Return on Average Tangible Common Equity and Reconciliation of Return on Average Tangible Common Equity, as Adjusted (non-GAAP) (in thousands, except ratios) | ||||||||||||||||||||
Three Months Ended | Twelve Months Ended | |||||||||||||||||||
December 31, 2020 | September 30, 2020 | December 31, 2019 | December 31, 2020 | December 31, 2019 | ||||||||||||||||
Total stockholders’ equity | $ | 160,564 | $ | 157,323 | $ | 150,553 | $ | 160,564 | $ | 150,553 | ||||||||||
Less: Goodwill | (31,498 | ) | (31,498 | ) | (31,498 | ) | (31,498 | ) | (31,498 | ) | ||||||||||
Less: Intangible assets | (5,494 | ) | (5,893 | ) | (7,587 | ) | (5,494 | ) | (7,587 | ) | ||||||||||
Tangible common equity (non-GAAP) | $ | 123,572 | $ | 119,932 | $ | 111,468 | $ | 123,572 | $ | 111,468 | ||||||||||
Average tangible common equity (non-GAAP) | $ | 121,752 | $ | 117,466 | $ | 109,829 | $ | 115,313 | $ | 105,340 | ||||||||||
GAAP earnings after income taxes | $ | 3,570 | $ | 3,480 | $ | 3,169 | $ | 12,725 | $ | 9,463 | ||||||||||
Net income as adjusted after income taxes (non-GAAP) (1) | $ | 3,691 | $ | 3,348 | $ | 2,956 | $ | 12,425 | $ | 10,675 | ||||||||||
Return on average tangible common equity (annualized) | 11.67 | % | 11.79 | % | 11.45 | % | 11.04 | % | 8.98 | % | ||||||||||
Return on average tangible common equity as adjusted (non-GAAP) (annualized) | 12.06 | % | 11.34 | % | 10.68 | % | 10.78 | % | 10.13 | % | ||||||||||
(1) See Reconciliation of GAAP Net Income and Net Income as Adjusted (non-GAAP) | ||||||||||||||||||||
Reconciliation of Efficiency Ratio as Adjusted (non-GAAP) (in thousands, except ratios) | ||||||||||||||||||||
Three Months Ended | Twelve Months Ended | |||||||||||||||||||
December 31, 2020 | September 30, 2020 | December 31, 2019 | December 31, 2020 | December 31, 2019 | ||||||||||||||||
Non-interest expense (GAAP) | $ | 10,826 | $ | 10,724 | $ | 10,428 | $ | 43,673 | $ | 42,686 | ||||||||||
Merger related Costs (1) | — | — | (104 | ) | — | (3,880 | ) | |||||||||||||
Branch Closure Costs (1) | (165 | ) | — | — | (165 | ) | (15 | ) | ||||||||||||
Audit and financial reporting (1) | — | — | — | — | (358 | ) | ||||||||||||||
Non-interest expense as adjusted (non-GAAP) | 10,661 | 10,724 | 10,324 | 43,508 | 38,433 | |||||||||||||||
Non-interest income | 4,770 | 5,062 | 3,784 | 18,448 | 14,975 | |||||||||||||||
Net interest margin | 13,372 | 11,909 | 11,775 | 50,255 | 43,513 | |||||||||||||||
Efficiency ratio denominator (GAAP) | $ | 18,142 | $ | 16,971 | $ | 15,559 | $ | 68,703 | $ | 58,488 | ||||||||||
Net gain on sale of branch (1) | — | — | — | — | (2,295 | ) | ||||||||||||||
Net gain on acquired business lines (1) | — | (180 | ) | — | (432 | ) | — | |||||||||||||
Settlement proceeds (1) | — | — | — | (131 | ) | — | ||||||||||||||
Efficiency ratio denominator (non-GAAP) | $ | 18,142 | $ | 16,791 | $ | 15,559 | $ | 68,140 | $ | 56,193 | ||||||||||
Efficiency ratio (GAAP) | 60 | % | 63 | % | 67 | % | 64 | % | 73 | % | ||||||||||
Efficiency ratio as adjusted (non-GAAP) | 59 | % | 64 | % | 66 | % | 64 | % | 68 | % | ||||||||||
(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 | December 31, 2020 | September 30, 2020 | December 31, 2019 | |||||||||
Total stockholders’ equity | $ | 160,564 | $ | 157,323 | $ | 150,553 | ||||||
Less: Goodwill | (31,498 | ) | (31,498 | ) | (31,498 | ) | ||||||
Less: Intangible assets | (5,494 | ) | (5,893 | ) | (7,587 | ) | ||||||
Tangible common equity (non-GAAP) | $ | 123,572 | $ | 119,932 | $ | 111,468 | ||||||
Ending common shares outstanding | 11,056,349 | 11,154,645 | 11,266,954 | |||||||||
Book value per share | $ | 14.52 | $ | 14.10 | $ | 13.36 | ||||||
Tangible book value per share (non-GAAP) | $ | 11.18 | $ | 10.75 | $ | 9.89 | ||||||
Reconciliation of tangible common equity as a percent of tangible assets (non-GAAP) (in thousands, except ratios) | ||||||||||||
Tangible common equity as a percent of tangible assets at end of period | December 31, 2020 | September 30, 2020 | December 31, 2019 | |||||||||
Total stockholders’ equity | $ | 160,564 | $ | 157,323 | $ | 150,553 | ||||||
Less: Goodwill | (31,498 | ) | (31,498 | ) | (31,498 | ) | ||||||
Less: Intangible assets | (5,494 | ) | (5,893 | ) | (7,587 | ) | ||||||
Tangible common equity (non-GAAP) | $ | 123,572 | $ | 119,932 | $ | 111,468 | ||||||
Total Assets | $ | 1,649,095 | $ | 1,622,593 | $ | 1,531,249 | ||||||
Less: Goodwill | (31,498 | ) | (31,498 | ) | (31,498 | ) | ||||||
Less: Intangible assets | (5,494 | ) | (5,893 | ) | (7,587 | ) | ||||||
Tangible Assets (non-GAAP) | $ | 1,612,103 | $ | 1,585,202 | $ | 1,492,164 | ||||||
Less SBA PPP Loans | (123,702 | ) | (139,166 | ) | — | |||||||
Tangible Assets, excluding SBA PPP Loans (non-GAAP) | $ | 1,488,401 | $ | 1,446,036 | $ | 1,492,164 | ||||||
Total stockholders’ equity to total assets ratio | 9.74 | % | 9.70 | % | 9.83 | % | ||||||
Tangible common equity as a percent of tangible assets (non-GAAP) | 7.67 | % | 7.57 | % | 7.47 | % | ||||||
Tangible common equity as a percent of tangible assets, excluding SBA PPP Loans (non-GAAP) | 8.30 | % | 8.29 | % | 7.47 | % |
1Net income as adjusted and net income as adjusted per share are non-GAAP financial measures that management believes enhances investors’ ability to better understand the underlying business performance and trends related to core business activities. For a detailed reconciliation of GAAP to non-GAAP results, see the accompanying financial table “Reconciliation of GAAP Net Income and Net Income as Adjusted (non-GAAP)”.
2Return on average assets as adjusted is a non-GAAP measure that management believes enhances investors’ ability to better understand the underlying business performance and trends relative to average assets. For a detailed reconciliation of GAAP to non-GAAP results, see the accompanying financial table “Reconciliation of Return on Average Assets as Adjusted (non-GAAP)”.
3Return on average equity as adjusted is a non-GAAP measure that management believes enhances investors’ ability to better understand the underlying business performance and trends relative to average equity. For a detailed reconciliation of GAAP to non-GAAP results, see the accompanying financial table “Reconciliation of Return on Average Equity as Adjusted (non-GAAP)”.
4The efficiency ratio as adjusted (non-GAAP) is a non-GAAP measure that management believes enhances investors’ ability to better understand the underlying business performance and the Company’s ability to use what it has to generate the most profit possible for shareholders relative to core business activities. For a detailed reconciliation of GAAP to non-GAAP results, see the accompanying financial table “Reconciliation of Efficiency Ratio as Adjusted (non-GAAP)”.
5Tangible book value, tangible book value per share, tangible common equity as a percent of tangible assets, return on tangible common equity and return on tangible common equity as adjusted are non-GAAP measures that management believes enhances investors’ ability to better understand the Company’s financial position. For a detailed reconciliation of GAAP to non-GAAP results, see the accompanying financial table “Reconciliation of tangible book value per share (non-GAAP)”, “Reconciliation of tangible common equity as a percent of tangible assets (non-GAAP)”, and “Reconciliation of return on average tangible common equity and Reconciliation of Return on Average Tangible Common Equity as Adjusted (non-GAAP)”.
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