Market Overview

Citizens Community Bancorp, Inc. Earns $2.5 Million For Fiscal 2017

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EAU CLAIRE, Wis., Nov. 06, 2017 (GLOBE NEWSWIRE) -- Citizens Community Bancorp, Inc. (the "Company") (NASDAQ:CZWI), the parent company of Citizens Community Federal N.A. (the "Bank"), today reported GAAP earnings decreased to $2.50 million, or $0.46 per diluted share in fiscal 2017, compared to $2.57 million, or $0.49 per diluted share for the prior fiscal year.  For the fourth quarter ended September 30, 2017, GAAP earnings showed a loss of $458,000, or $0.08 per diluted share compared to earnings of $1.08 million, or $0.20 per diluted share in the linked quarter and earnings of $176,000, or $0.04 per diluted share for the fourth quarter one year earlier.  The 2017 fiscal fourth quarter and year to date operations were negatively impacted by merger expenses including data system conversion expenses, severance costs, higher professional fees, interest expense from acquisition debt, increased loan loss provision associated with organic loan growth and higher compensation costs due to production incentive increases, partially offset by settlement proceeds and the positive impact of the Wells merger.

Core earnings (non-GAAP) increased 20.0% year-over-year to $4.3 million, or $0.79 per diluted share for fiscal 2017, compared to $3.6 million, or $0.67 per diluted share for fiscal 2016.  For the fourth quarter of fiscal 2017, core earnings (non-GAAP) were $731,000, or $0.13 per diluted share, compared to $785,000, or $0.15 per diluted share (non-GAAP) for the fourth quarter of fiscal 2016.  Fiscal 2017 core earnings exclude merger expenditures and the cost of closing six branches during the year, as well as other costs and proceeds itemized on the accompanying financial table "Reconciliation of GAAP Earnings and Core Earnings (non-GAAP)".  Fiscal 2016 core earnings exclude merger expenditures related to the merger with Community Bank of Northern Wisconsin ("CBN") and the cost of closing four branch offices.

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

"We have made considerable progress during the year improving our balance sheet, core operations and transforming our profile from our credit union heritage during the past year.  We will continue to focus on streamlining operations and demonstrating we can grow organically as well as through acquisitions." said Stephen Bianchi, President and Chief Executive Officer.  "Our commercial lending platform continues to expand through the addition of new lending teams and improved performance of our existing lending teams.  With solid fourth quarter growth in the commercial loan portfolio, we recorded a loan loss provision for the first time since the quarter ended December 31, 2015."

Acquisition of Wells Financial Corp.

"We closed the acquisition of Wells Financial Corp. on August 18, 2017, and issued 592,218 Citizens Community Bancorp, Inc. shares to Wells Financial shareholders. The acquisition substantially diversified our loan and deposit portfolios, and expanded our southern Minnesota markets coverage.  Within days of closing the acquisition, we were able to convert their core data system to our platform," said Bianchi.

Fourth Quarter Fiscal 2017 Financial Highlights: (at or for the periods ended September 30, 2017, compared to June 30, 2017 and /or September 30, 2016)

  • GAAP net income reflected a loss of $458,000 in Q4 fiscal 2017, compared to earnings of $176,000 from a year ago, and $1.08 million in Q3 fiscal 2017.  Fiscal 2017 net income decreased 2.9% to $2.50 million, or $0.46 per diluted share, from $2.57 million, or $0.49 per diluted share for fiscal 2016.

  • Expenses for acquisitions and other non-core items totaled $1.8 million pretax, or $0.22 per diluted share, after-tax, in the 4Q fiscal 2017 compared to $1.1 million pretax, or $0.11 per diluted share after-tax in the 4Q 2016.  For fiscal 2017, non-core expenses were $2.9 million pretax, or $0.36 per diluted share after-tax, compared to $1.5 million pretax, or $0.18 per diluted share after tax for fiscal 2016.

  • Net interest income increased 7.9% to $6.17 million in Q4 fiscal 2017, from $5.72 million in Q4 fiscal 2016.  For fiscal 2017, net interest income grew 10.9% to $22.27 million from $20.08 million for fiscal 2016.

  • Net interest margin (NIM) was 3.29% for the current quarter, compared to 3.32% for Q4 fiscal 2016.  For fiscal 2017, the NIM expanded 4 basis points to 3.31% from 3.27% in fiscal 2016.  Incremental interest expense on acquisition debt of approximately $180,000, or 11 basis points, was recorded in the current quarter.

  • Loan loss provision increased to $319,000 in Q4 fiscal 2017 compared to no provisions one year earlier and the previous quarter.  Provisions were increased primarily related to the organic growth of portfolio loans by approximately $36 million in the quarter.

  • Total non-interest income increased 22% to $1.4 million in Q4 fiscal 2017, compared to $1.1 million in Q4 fiscal 2016.  For fiscal 2017, total non-interest income grew 21% to $4.8 million from $3.9 million for the like period in 2016.  Growth in non-interest income is being driven primarily by settlement proceeds and fee income generated due to the Wells acquisition.

  • Net loans were $727.1 million at September 30, 2017, compared to $568.4 million at September 30, 2016 and $513.6 million at June 30, 2017.  The larger balance of loans, in the quarter, reflects organic loan growth plus loans acquired in the Wells Financial acquisition.

  • Total deposits were $742.5 million at September 30, 2017, compared to $557.7 million at September 30, 2016 and $519.1 million at June 30, 2017.  The deposit growth is due to the Wells Financial acquisition, partially offset by deposit runoff in closed branches.

  • The allowance for loan and lease losses was 0.81% of total loans at September 30, 2017, compared to 1.06% one year earlier and 1.11% the previous quarter.  The lower ratio for Q4 2017 was a result of the larger balance of loans related to the acquisition of Wells Financial that were recorded at fair values and therefore without provisions for losses.

  • Nonperforming assets were $14.7 million, or 1.56% of total assets at September 30, 2017, compared to $4.3 million, or 0.62% of total assets at September 30, 2016, and $7.3 million, or 1.10% of total assets at June 30, 2017.  Included in nonperforming assets are approximately, $6.2 million of foreclosed properties acquired in the Wells Financial acquisition, including $3.1 million that have loan contracts on which the borrowers are paying according to their contractual terms, but the deed remains in the name of the Bank. The weighted average FICO score for these 24 contracts is 652 and the average loan-to-value is 64%.  Additionally, other real estate owned increased $3.4 million due to contract for deed loans classified as other real estate loans, acquired in the Wells merger.

  • Bank capital ratios exceeded regulatory guidelines for a well-capitalized financial institution under the Basel III regulatory requirements at September 30, 2017:
         
    Citizens
Community
Federal N.A.
  To Be Well Capitalized Under
Prompt Corrective Action
Provisions
Total capital (to risk weighted assets)   13.3 %   10.0 %
Tier 1 capital (to risk weighted assets)   12.4 %   8.0 %
Common equity tier 1 capital (to risk weighted assets)   12.4 %   6.5 %
Tier 1 leverage ratio (to adjusted total assets)   9.3 %   5.0 %
             

Balance Sheet and Asset Quality Review

Total assets were $940.7 million at September 30, 2017, compared to $695.9 million at September 30, 2016, and $665.6 million at June 30, 2017.  The increase in total assets from a year ago, and on a linked quarter basis, was primarily due to the acquisition of Wells Financial.

Loan balances increased from the immediate prior quarter and the previous fiscal year period due to loans acquired through the Wells Financial acquisition plus organic growth through the existing commercial lenders.  The organic growth outpaced the roll-off of indirect loans and lower levels of 1-4 family loans.  At September 30, 2017, commercial and agricultural loans for both operating purpose and real estate secured totaled 47.9% of the total loan portfolio versus 42.4% the prior quarter.  One to four family residential and home equity real estate loans represented 33.6% of the total loan portfolio versus 30.1% the prior quarter, while consumer related non-real estate loans totaled 18.5% of the total loan portfolio versus 27.5% the prior quarter.

Deposits totaled $742.5 million at September 30, 2017, compared to $557.7 million at September 30, 2016, and $519.1 million at June 30, 2017.  Noninterest-bearing deposits increased to $75.3 million at September 30, 2017, compared to $49.6 million at June 30 and $45.4 million at September 30, 2016.  Core deposits, excluding time deposits, increased to $451.7 million, or 60.8% of total deposits compared to $280.5 million at June 30, 2017, or 54.0% of total deposits.

"The acquisition of Wells Financial, combined with the closing of several branches over the past year has substantially changed the composition of our loan and deposit portfolios, which we believe will result in a stronger core earnings stream and better net interest margins," added Bianchi.

Federal Home Loan Bank ("FHLB") advances totaled $90.0 million at September 30, 2017, compared to $67.9 million at June 30, 2017.  Other borrowings increased to $30.3 million at September 30, 2017 compared to $11.0 million at June 30, 2017.  The Bank has used borrowings and equity capital to fund branch closings, as well as acquisition of other financial institutions, and FHLB advances to support organic loan growth.

The allowance for loan and lease losses at September 30, 2017, totaled $5.9 million and represented 0.81% of total loans, compared to $6.1 million and 1.06% of total loans at September 30, 2016.  Net charged off loans totaled $445,000 and represented 0.07% of average loans for fiscal 2017.   One year earlier, net charge offs totaled $503,000 and represented 0.10% of average loans in fiscal 2016.

Tangible book value per share (non-GAAP) was $9.85 at September 30, 2017, compared to $11.22 at September 30, 2016, and $11.50 at June 30, 2017.  The acquisition of Wells Financial resulted in the addition of $5.4 million in goodwill and $4.8 million in other intangible assets.

Capital ratios for the Bank continued to remain well above regulatory requirements with Tier 1 capital to risk weighted assets of 12.4% at September 30, 2017, compared to 12.9% at September 30, 2016.  Tier 1 leverage capital to adjusted total assets was 9.3% at September 30, 2017 compared to 9.3% at September 30, 2016.  These regulatory ratios were higher than the required minimum levels to be considered "Well Capitalized" of 8.00% for Tier 1 capital to risk weighted assets and 5.00% for Tier 1 leverage capital to adjusted total assets.

Review of Operations

Net interest income increased to $6.2 million for the fourth quarter of fiscal 2017, compared to $5.7 million for the fourth quarter of fiscal 2016 and $5.3 million on a linked quarter basis.  For fiscal 2017, net interest income grew to $22.3 million, compared to $20.1 million for fiscal 2016.  The NIM declined slightly to 3.29% for the fiscal fourth quarter of 2017, compared to 3.32% for the same quarter one year earlier, primarily due to acquisition debt, which reduced NIM 72 bp in the current quarter.  The borrowings costs for the quarter were partially offset by the lower costing deposit base.  For the fiscal fourth quarter 2017, deposit costs declined to 0.77% compared to 0.90% one year earlier and 0.88% for the preceding quarter.  For fiscal 2017, the NIM increased to 3.31%, compared to 3.27% for fiscal 2016. The cost on the FHLB and other borrowings increased to 1.58% in fiscal 2017 compared to 1.23% in fiscal 2016.

For the quarter ended September 30, 2017, provision for loan losses totaling $319,000 was recorded, responsive to organic loan growth.  This provision was the first recorded in the past seven quarters.  Net charge offs were $133,000 for the fourth quarter of fiscal 2017, compared to $79,000 for the third quarter of fiscal 2017.  Allowance for loan and lease losses totaled 0.81%, at September 30, 2017, compared to 1.06% at September 30, 2016 and 1.11%, at June 30, 2017.

Total noninterest expense was $7.9 million for the fourth quarter of fiscal 2017 compared to $6.7 million for the quarter ended September 30, 2016 and $4.7 million for the quarter ended June 30, 2017.  Total non-interest expense for the fourth quarter includes merger related costs of $1.5 million and branch closure costs of $255,000.  For fiscal 2017, noninterest expense increased to $22.9 million compared to $20.1 million for fiscal 2016, primarily due to professional fees associated with the merger, higher compensation and benefits expense due to severance payments associated with the Wells Financial acquisition and data conversion cost associated with terminating their service provider.

These financial results are preliminary until the Form 10-K is filed in December 2017.

About the Company

Citizens Community Bancorp, Inc. (NASDAQ: "CZWI") is the holding company of Citizens Community Federal N.A., a national bank based in Altoona, Wisconsin, serving customers in Wisconsin, Minnesota and Michigan through 23 branch locations.  Its primary markets include the Chippewa Valley Region in Wisconsin, the Twin Cities and Mankato, MN, and various rural communities around these areas. The company offers traditional community banking services to businesses, Ag operators and consumers, including one-to-four family mortgages. The company's recently completed merger with Wells Federal Bank of Wells, MN expands its market share in Mankato and southern Minnesota, and adds nine branch locations (seven branch locations after mid-December) along with expanded services through Wells Insurance Agency, Investment Advisory Services and Mortgage Loan Servicing.

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 by the use of forward-looking words or phrases such as "anticipate," "believe," "could," "expect," "intend," "may," "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 Citizens Community Federal N.A. ("CCFBank"). These uncertainties include the combined company's ability to achieve the synergies and value creation contemplated by the transaction with Wells Financial; management's ability to promptly and effectively integrate the businesses of the two companies; the diversion of management time on transaction-related issues; the effects of governmental regulation of the financial services industry; industry consolidation; technological developments and major world news events; general economic conditions, in particular, relating to consumer demand for CCFBank's products and services; CCFBank's ability to maintain current deposit and loan levels at current interest rates; competitive and technological developments; deteriorating credit quality, including changes in the interest rate environment reducing interest margins; prepayment speeds, loan origination and sale volumes, charge-offs and loan loss provisions; CCFBank's ability to maintain required capital levels and adequate sources of funding and liquidity; maintaining capital requirements may limit CCFBank's operations and potential growth; changes and trends in capital markets; competitive pressures among depository institutions; effects of critical accounting estimates and judgments; changes in accounting policies or procedures as may be required by the Financial Accounting Standards Board (FASB) or other regulatory agencies overseeing CCFBank; CCFBank's ability to implement its cost-savings and revenue enhancement initiatives, including costs associated with its branch consolidation and new market branch growth initiatives; legislative or regulatory changes or actions or significant litigation adversely affecting CCFBank; fluctuation of the Company's stock price; CCFBank's ability to attract and retain key personnel; CCFBank's ability to secure confidential information through the use of computer systems and telecommunications networks; and the impact of reputational risk created by these developments on such matters as business generation and retention, funding and liquidity. Shareholders, 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 September 30, 2016 filed with the Securities and Exchange Commission ("SEC") on December 29, 2016 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, which management believes may be helpful in understanding the Company's results of operations or financial position and comparing results over different periods.  Non-GAAP measures eliminate the impact of certain one-time 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.  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.  In addition, non-GAAP financial measures exclude settlement proceeds and the FHLB prepayment fee. 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 (unaudited)
(in thousands)
               
    September 30,
2017
  June 30, 2017   September 30,
2016
 
Assets              
Cash and cash equivalents   $ 41,677     $ 33,749     $ 10,046    
Other interest bearing deposits   8,148     995     745    
Securities available for sale "AFS"   95,883     78,475     80,123    
Securities held to maturity "HTM"   5,453     5,653     6,669    
Non-marketable equity securities, at cost   7,292     4,498     5,034    
Loans receivable   732,995     519,403     574,439    
Allowance for loan losses   (5,942 )   (5,756 )   (6,068 )  
Loans receivable, net   727,053     513,647     568,371    
Loans held for sale   2,334            
Mortgage servicing rights   1,886            
Office properties and equipment, net   9,645     5,023     5,338    
Accrued interest receivable   3,291     1,950     2,032    
Intangible assets   5,449     753     872    
Goodwill   10,052     4,663     4,663    
Foreclosed and repossessed assets, net   6,664     622     776    
Other assets   15,837     15,613     11,196    
TOTAL ASSETS   $ 940,664     $ 665,641     $ 695,865    
Liabilities and Stockholders' Equity              
Liabilities:              
Deposits   $ 742,504     $ 519,133     $ 557,677    
Federal Home Loan Bank advances   90,000     67,900     59,291    
Other borrowings   30,319     11,000     11,000    
Other liabilities   4,358     1,598     3,353    
Total liabilities   867,181     599,631     631,321    
Stockholders' equity:              
Common stock— $0.01 par value, authorized 30,000,000; 5,888,816; 5,270,895 and 5,260,098 shares issued and outstanding, respectively   59     53     53    
Additional paid-in capital   63,383     55,089     54,963    
Retained earnings   10,764     11,221     9,107    
Unearned deferred compensation   (456 )   (214 )   (193 )  
Accumulated other comprehensive (loss) gain   (267 )   (139 )   614    
Total stockholders' equity   73,483     66,010     64,544    
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY   $ 940,664     $ 665,641     $ 695,865    
                           


         
CITIZENS COMMUNITY BANCORP, INC.
Consolidated Statements of Operations (unaudited)
(in thousands, except per share data)
         
         
    Three Months Ended
  Twelve Months Ended
    September 30,
2017
  June 30, 2017   September 30,
2016
  September 30,
2017
  September 30,
2016 
Interest and dividend income:                                        
Interest and fees on loans   $ 7,194     $ 6,030     $ 6,784     $ 25,826     $ 23,407  
Interest on investments   576     591     410     2,052     1,677  
Total interest and dividend income   7,770     6,621     7,194     27,878     25,084  
Interest expense:                    
Interest on deposits   1,095     1,035     1,212     4,299     4,200  
Interest on FHLB borrowed funds   217     164     168     717     664  
Interest on other borrowed funds   286     107     96     594     143  
Total interest expense   1,598     1,306     1,476     5,610     5,007  
Net interest income before provision for loan losses   6,172     5,315     5,718     22,268     20,077  
Provision for loan losses   319             319     75  
Net interest income after provision for loan losses   5,853     5,315     5,718     21,949     20,002  
Non-interest income:                    
Net gains on available for sale securities   82         16     111     63  
Service charges on deposit accounts   368     325     463     1,433     1,627  
Loan fees and service charges   453     313     410     1,540     1,296  
Settlement proceeds               283      
Other   488     353     253     1,384     929  
Total non-interest income   1,391     991     1,142     4,751     3,915  
Non-interest expense:                    
Compensation and benefits   3,233     2,395     3,082     10,862     9,866  
Occupancy   584     565     991     2,780     2,826  
Office   443     304     361     1,340     1,225  
Data processing   650     476     528     2,052     1,802  
Amortization of intangible assets   100     38     45     219     111  
Amortization of mortgage servicing rights   39             39      
Advertising, marketing and public relations   302     75     245     545     701  
FDIC premium assessment   69     79     139     300     394  
Professional services   860     382     579     2,078     1,368  
Other   1,629     305     759     2,663     1,765  
Total non-interest expense   7,909     4,619     6,729     22,878     20,058  
(Loss) income before (benefit) provision for income taxes   (665 )   1,687     131     3,822     3,859  
(Benefit) provision for income taxes   (207 )   604     (45 )   1,323     1,286  
Net (loss) income attributable to common stockholders   $ (458 )   $ 1,083     $ 176     $ 2,499     $ 2,573  
Per share information:                    
Basic earnings (loss)   $ (0.08 )   $ 0.21     $ 0.04     $ 0.47     $ 0.49  
Diluted earnings (loss)   $ (0.08 )   $ 0.20     $ 0.04     $ 0.46     $ 0.49  
Cash dividends paid   $     $     $     $ 0.16     $ 0.12  
Book value per share at end of period   $ 12.48     $ 12.52     $ 12.27     $ 12.48     $ 12.27  
Tangible book value per share at end of period (non-GAAP)   $ 9.85     $ 11.50     $ 11.22     $ 9.83     $ 11.22  
                                         

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

Reconciliation of GAAP Earnings (loss) and Core Earnings (non-GAAP):

         
    Three Months Ended   Twelve Months Ended
    September 30,
2017
  June 30, 2017   September 30,
2016
  September 30,
2017
  September 30,
2016
                                       
  (Dollars in Thousands, except share data)
GAAP earnings (loss) before income taxes   $ (665 )   $ 1,687     $ 131     $ 3,822     $ 3,859  
Merger related costs (1)   1,517     147     444     1,860     701  
Branch closure costs (2)   255     59     614     951     839  
Settlement proceeds (3)               (283 )    
Prepayment fee (4)               104      
Core earnings before income taxes (5)   1,107     1,893     1,189     6,454     5,399  
Provision for income tax on core earnings at 34%   376     644     404     2,194     1,836  
Core earnings after income taxes (5)   $ 731     $ 1,249     $ 785     $ 4,260     $ 3,563  
GAAP diluted earnings (loss) per share, net of tax   $ (0.08 )   $ 0.20     $ 0.04     $ 0.46     $ 0.49  
Merger related costs, net of tax   0.19     0.02     0.05     0.23     0.09  
Branch closure costs, net of tax   0.03     0.01     0.06     0.12     0.09  
Settlement proceeds   $     $     $     $ (0.03 )   $  
Prepayment fee   $     $     $     $ 0.01     $  
Core diluted earnings per share, net of tax   $ 0.14     $ 0.23     $ 0.15     $ 0.79     $ 0.67  
                     
Average diluted shares outstanding   5,629,363     5,316,726     5,274,505     5,378,548     5,257,304  
                               

(1)  Costs incurred are included as data processing, advertising, marketing and public relations, professional fees and other non-interest expense in the consolidated statement of operations.

(2)  Branch closure costs include severance pay recorded in salaries and other benefits, accelerated depreciation expense and lease termination fees included in occupancy and other costs included in other non-interest expense in the consolidated statement of operations.  In addition, other non-interest expense includes costs related to the valuation reduction of the Ridgeland branch office in the fourth quarter of fiscal 2017.

(3) Settlement proceeds includes litigation income from a JP Morgan Residential Mortgage Backed Security (RMBS) claim.  This JP Morgan RMBS was previously owned by the Bank and sold in 2011.

(4) The prepayment fee, includes the cost to restructure our FHLB borrowings and is included in other non-interest expense in the consolidated statement of operations.

(5)  Core earnings is a non-GAAP measure that management believes enhances investors' ability to better understand the underlying business performance and trends related to core business activities.

(6)  Reconciliation of tangible book value:

             
Tangible book value per share at end of period   September 30,
2017
  June 30, 2017   September 30,
 2016
Total stockholders' equity   $ 73,483     $ 66,010     $ 64,544  
Less:  Goodwill   (10,052 )   (4,663 )   (4,663 )
Less:  Intangible assets   (5,449 )   (753 )   (872 )
Tangible common equity (non-GAAP)   $ 57,982     $ 60,594     $ 59,009  
Ending common shares outstanding   5,888,816     5,270,895     5,260,098  
Tangible book value per share (non-GAAP)   $ 9.85     $ 11.50     $ 11.22  
                         

Nonperforming Assets:

    September 30,
2017
and Three
Months
Ended
  June 30,
2017
and Three
Months
Ended
  September 30,
2017
and Twelve
Months
Ended
  September 30,
2016
and Twelve
Months
Ended
Nonperforming assets:                              
Nonaccrual loans   $ 7,452     $ 6,035     $ 7,452     $ 3,191  
Accruing loans past due 90 days or more   589     681     589     380  
Total nonperforming loans ("NPLs") (1)   8,041     6,716     8,041     3,571  
Other real estate owned (1)   6,609     580     6,609     725  
Other collateral owned   55     42     55     52  
Total nonperforming assets ("NPAs") (1)   $ 14,705     $ 7,338     $ 14,705     $ 4,348  
Troubled Debt Restructurings ("TDRs")   $ 3,423     $ 3,389     $ 3,423     $ 3,733  
Nonaccrual TDRs   $ 621     $ 393     $ 621     $ 515  
Average outstanding loan balance   $ 626,199     $ 527,106     $ 653,717     $ 512,475  
Loans, end of period   732,995     519,403     732,995     574,439  
Total assets, end of period   940,664     665,641     940,664     695,865  
ALL, at beginning of period   5,756     5,835     6,068     6,496  
Loans charged off:                
Residential real estate   (74 )   (50 )   (233 )   (140 )
Commercial/agriculture real estate                
Consumer non-real estate   (95 )   (54 )   (389 )   (460 )
Commercial agriculture non-real estate       (7 )   (9 )   (118 )
Total loans charged off   (169 )   (111 )   (631 )   (718 )
Recoveries of loans previously charged off:                
Residential real estate   6     4     14     11  
Commercial/agriculture real estate                
Consumer non-real estate   30     28     171     204  
Commercial agriculture non-real estate           1      
Total recoveries of loans previously charged off:   36     32     186     215  
Net loans charged off ("NCOs")   (133 )   (79 )   (445 )   (503 )
Additions to ALL via provision for loan losses charged to operations   319         319     75  
ALL, at end of period   $ 5,942     $ 5,756     $ 5,942     $ 6,068  
Ratios:                
ALL to NCOs (annualized)   1,116.92 %   1,821.52 %   1,335.28 %   1,206.36 %
NCOs (annualized) to average loans   0.08 %   0.06 %   0.07 %   0.10 %
ALL to total loans   0.81 %   1.11 %   0.81 %   1.06 %
NPLs to total loans   1.10 %   1.29 %   1.10 %   0.62 %
NPAs to total assets   1.56 %   1.10 %   1.56 %   0.62 %
                         

(1)  Total Nonperforming assets increased primarily due to REO loan balances acquired with the Wells acquisition in August 2017.  Acquired nonperforming loans were $5,794, $4,289 and $1,778 at September 30, 2017, June 30, 2017 and September 30, 2016, respectively.  Acquired real estate owned property balances were $6,221, $138 and $212 at September 30, 2017, June 30, 2017 and September 30, 2016, respectively. At  September 30, 2017, acquired real estate owned property includes $3,094 contract for deed loans paying according to contract terms.

Troubled Debt Restructurings:

  September 30, 2017   June 30, 2017   September 30, 2016
  Number of
Modifications
  Recorded
Investment
  Number of
Modifications
  Recorded
Investment
  Number of
Modifications
  Recorded
Investment
Troubled debt restructurings:                                        
Residential real estate 29     $ 3,072     28     $ 3,125     32     $ 3,414  
Commercial/Agricultural real estate 1     68                  
Consumer non-real estate 20     195     20     223     25     384  
Commercial/Agricultural non-real estate 2     88     1     41          
Total loans 52     $ 3,423     49     $ 3,389     57     $ 3,798  
                                         

Loan Composition:

    September 30, 2017   June 30, 2017   September 30, 2016
Originated Loans:            
Residential real estate:            
One to four family   $ 132,380     $ 136,527     $ 160,961  
Purchased HELOC loans   18,071          
Commercial/Agricultural real estate:            
Commercial real estate   97,155     79,450     58,768  
Agricultural real estate   10,628     8,428     3,418  
Multi-family real estate   24,486     23,354     18,935  
Construction and land development   12,399     11,951     12,977  
Consumer non-real estate:            
Originated indirect paper   85,732     93,887     119,073  
Purchased indirect paper   29,555     33,660     49,221  
Other Consumer   14,496     14,771     18,926  
Commercial/Agricultural non-real estate:            
Commercial non-real estate   35,198     22,308     17,969  
Agricultural non-real estate   12,493     12,213     9,994  
Total originated loans   $ 472,593     $ 436,549     $ 470,242  
Acquired Loans:            
Residential real estate:            
One to four family   $ 97,183     $ 20,208     $ 26,777  
Commercial/Agricultural real estate:            
Commercial real estate   62,807     24,827     30,172  
Agricultural real estate   57,374     21,260     24,780  
Multi-family real estate   1,742         200  
Construction and land development   7,309     2,036     3,603  
Consumer non-real estate:            
Other Consumer   6,172     415     789  
Commercial/Agricultural non-real estate:            
Commercial non-real estate   20,053     10,249     13,032  
Agricultural non-real estate   11,380     4,193     4,653  
Total acquired loans   $ 264,020     $ 83,188     $ 104,006  
Total Loans:            
Residential real estate:            
One to four family   $ 229,563     $ 156,735     $ 187,738  
Purchased HELOC loans   18,071          
Commercial/Agricultural real estate:            
Commercial real estate   159,962     104,277     88,940  
Agricultural real estate   68,002     29,688     28,198  
Multi-family real estate   26,228     23,354     19,135  
Construction and land development   19,708     13,987     16,580  
Consumer non-real estate:            
Originated indirect paper   85,732     93,887     119,073  
Purchased indirect paper   29,555     33,660     49,221  
Other Consumer   20,668     15,186     19,715  
Commercial/Agricultural non-real estate:            
Commercial non-real estate   55,251     32,557     31,001  
Agricultural non-real estate   23,873     16,406     14,647  
Gross loans   $ 736,613     $ 519,737     $ 574,248  
Net deferred loan costs (fees)   (3,618 )   (334 )   191  
Total loans receivable   $ 732,995     $ 519,403     $ 574,439  
                         

Deposit Composition:

    September 30,
2017
  June 30, 2017   September 30,
 2016
Non-interest bearing demand deposits   $ 75,318     $ 49,582     $ 45,408  
Interest bearing demand deposits   147,912     49,366     48,934  
Savings accounts   102,756     53,124     52,153  
Money market accounts   125,749     128,435     137,234  
Certificate accounts   290,769     238,626     273,948  
Total deposits   $ 742,504     $ 519,133     $ 557,677  
                         

Average balances, Interest Yields and Rates:

    Three months ended September
30, 2017
  Three months ended June 30,
2017
  Three months ended September
30, 2016
    Average
Balance
  Interest
Income/
Expense
  Average
Yield/
Rate
  Average
Balance
  Interest
Income/
Expense
  Average
Yield/
Rate
  Average
Balance
  Interest
Income/
Expense
  Average
Yield/
Rate
Average interest earning assets:                                    
Cash and cash equivalents   $ 32,692     $ 71     0.86 %   $ 17,246     $ 27     0.63 %   $ 19,088     $ 19     0.40 %
Loans receivable   621,530     7,194     4.59 %   526,661     6,030     4.59 %   580,151     6,784     4.65 %
Interest bearing deposits   4,571     18     1.56 %   808     4     1.99 %   745     4     2.14 %
Investment securities (1)   90,467     511     2.24 %   84,845     582     2.75 %   88,705     405     1.82 %
Non-marketable equity securities, at cost   5,701     57     3.97 %   4,488     48     4.29 %   5,034     54     4.27 %
Total interest earning assets   $ 754,961     $ 7,851     4.13 %   $ 634,048     $ 6,691     4.23 %   $ 693,723     $ 7,266     4.17 %
Average interest bearing liabilities:                                    
Savings accounts   $ 72,476     $ 21     0.11 %   $ 47,184     $ 13     0.11 %   $ 42,368     $ 17     0.16 %
Demand deposits   98,416     79     0.32 %   50,617     59     0.47 %   52,868     85     0.64 %
Money market accounts   128,039     168     0.52 %   122,709     126     0.41 %   143,493     149     0.41 %
CD's   235,076     752     1.27 %   226,189     767     1.36 %   265,357     878     1.32 %
IRA's   31,302     75     0.95 %   26,852     70     1.05 %   30,237     83     1.09 %
Total deposits   $ 565,309     $ 1,095     0.77 %   $ 473,551     $ 1,035     0.88 %   $ 534,323     $ 1,212     0.90 %
FHLB advances and other borrowings   93,978     503     2.12 %   74,548     271     1.46 %   73,426     264     1.43 %
Total interest bearing liabilities   $ 659,287     $ 1,598     0.96 %   $ 548,099     $ 1,306     0.96 %   $ 607,749     $ 1,476     0.97 %
Net interest income       $ 6,253             $ 5,385             $ 5,790      
Interest rate spread           3.17 %           3.27 %           3.20 %
Net interest margin           3.29 %           3.41 %           3.32 %
Average interest earning assets to average interest bearing liabilities           1.15             1.16             1.14  
                                           

(1)  For the 3 months ended September 30, 2017, June 30, 2017 and September 30, 2016, the average balance of the tax exempt investment securities, included in investment securities, were $32,540, $31,204 and $31,819 respectively.  The interest income on tax exempt securities is computed on a tax-equivalent basis using a tax rate of 34% for all periods presented.

    Year ended September 30, 2017   Year ended September 30, 2016
    Average
Balance
  Interest
Income/
Expense
  Average
Yield/
Rate
  Average
Balance
  Interest
Income/
Expense
  Average
Yield/
Rate
Average interest earning assets:                        
Cash and cash equivalents   $ 19,368     $ 139     0.72 %   $ 18,873     $ 70     0.37 %
Loans receivable   568,670     25,826     4.54 %   504,972     23,407     4.64 %
Interest bearing deposits   1,922     29     1.51 %   2,378     47     1.98 %
Investment securities (1)   87,449     1,974     2.26 %   90,565     1,655     1.83 %
Non-marketable equity securities, at cost   5,136     205     3.99 %   4,783     172     3.60 %
Total interest earning assets   $ 682,545     $ 28,173     4.13 %   $ 621,571     $ 25,351     4.08 %
Average interest bearing liabilities:                        
Savings accounts   $ 53,530     $ 67     0.13 %   $ 33,538     $ 43     0.13 %
Demand deposits   65,283     273     0.42 %   36,878     240     0.65 %
Money market accounts   126,487     555     0.44 %   141,938     585     0.41 %
CD's   236,590     3,104     1.31 %   239,363     3,037     1.27 %
IRA's   29,042     300     1.03 %   25,854     295     1.14 %
Total deposits   $ 510,932     $ 4,299     0.84 %   $ 477,571     $ 4,200     0.88 %
FHLB advances and other borrowings   82,781     1,311     1.58 %   65,857     807     1.23 %
Total interest bearing liabilities   $ 593,713     $ 5,610     0.94 %   $ 543,428     $ 5,007     0.92 %
Net interest income       $ 22,563             $ 20,344      
Interest rate spread           3.19 %           3.16 %
Net interest margin           3.31 %           3.27 %
Average interest earning assets to average interest bearing liabilities           1.15             1.14  
                             

(1)  For the 12 months ended September 30, 2017 and September 30, 2016, the average balance of the tax exempt investment securities, included in investment securities, were $31,883 and $29,232 respectively.  The interest income on tax exempt securities is computed on a tax-equivalent basis using a tax rate of 34% for all periods presented.

                 
CITIZENS COMMUNITY FEDERAL N.A.
Selected Capital Composition Highlights (unaudited)
                 
    September 30,
2017
  June 30, 2017   September 30,
2016
  To Be Well Capitalized Under
Prompt Corrective Action
Provisions
Total capital (to risk weighted assets)   13.3 %   15.4 %   14.1 %   10.0 %
Tier 1 capital (to risk weighted assets)   12.4 %   14.2 %   12.9 %   8.0 %
Common equity tier 1 capital (to risk weighted assets)   12.4 %   14.2 %   12.9 %   6.5 %
Tier 1 leverage ratio (to adjusted total assets)   9.3 %   10.3 %   9.3 %   5.0 %

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