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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
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)
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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