Market Overview

Citizens Community Bancorp, Inc. Earns $1.3 Million For First Fiscal Quarter 2018; Raises Annual Dividend 25% to $0.20 Per Share; Commercial/Ag Real Estate Loans Expand 5.5% Over Previous Quarter

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EAU CLAIRE, Wis., Jan. 26, 2018 (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 increased to $1.34 million, or $0.23 per diluted share in Q1 fiscal 2018, compared to $940,000, or $0.18 per share one year earlier and a loss of $458,000, or ($0.08) one quarter earlier.  The Q1 fiscal 2018 operations reflect a full quarter earnings impact from the Wells Financial acquisition, the decrease in tax rate due to Tax Cuts and Jobs Act ("the Tax Act") of 2017, offset by higher professional costs,  severance costs, and a $275,000, or $0.05 per share additional one-time tax expense associated with the recently passed Tax Act discussed above.  The quarter reflected continued growth in commercial/ag loans while indirect lending balances have declined.

The Board of Directors increased the annual cash dividend 25% to $0.20 per share over the annual dividend paid to holders of common stock in 2017.  The dividend will be payable on March 8, 2018 to shareholders of record on February 9, 2018.

Core earnings (non-GAAP) increased 140% to $1.8 million, or $0.30 per diluted share for Q1 fiscal 2018, compared to $0.7 million, or $0.14 per diluted share from the prior quarter.  Q1 fiscal 2018 core earnings (non-GAAP) exclude modest merger and branch closure expenditures and the net impact of the Tax Act which are itemized on the accompanying financial table "Reconciliation of GAAP Earnings (loss) and Core Earnings (non-GAAP)".

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 (loss) and Core Earnings (non-GAAP)".

"We continue to make progress in transforming our balance sheet composition, which is translating into stronger core earnings.  Our commercial loan growth reflects our commercial bankers' successful calling efforts and the addition of new commercial and ag bankers to our team.  The efforts to improve our funding sources and costs by increasing transaction oriented, core deposits continues," said Stephen Bianchi, President and Chief Executive Officer.  "Our commitment to expense management is ongoing as we use technology to automate and manage workflows, specifically in commercial banking."

Q1 Fiscal 2018 Financial Highlights: (at or for the periods ended December 31, 2017, compared to September 30, 2017 and /or December 31, 2016)

  • GAAP net income reflected earnings of $1.34 million in Q1 fiscal 2018, compared to $940,000 from a year ago, and a loss of $458,000 in Q4 fiscal 2017.

  • Net interest income increased 35.5% to $7.53 million in Q1 fiscal 2018, from $5.56 million in Q1 fiscal 2017 and 22.0% from $6.17 million one quarter earlier, largely due to the full quarter impact of the Wells acquisition.

  • Net interest margin (NIM) expanded to 3.42% for the current quarter, compared to 3.36% for Q1 fiscal 2017 and 3.29% for Q4 fiscal 2017, largely due to the full quarter impact of the Wells acquisition.

  • Loan loss provision increased to $100,000 in Q1 fiscal 2018 compared to no provisions one year earlier and decreased from $319,000 the previous quarter.

  • Total non-interest income increased 56% to $1.94 million in Q1 fiscal 2018, compared to $1.24 million in Q1 fiscal 2017 and 39% from $1.39 million one quarter earlier.  Growth in non-interest income is being driven by the impact of the Wells acquisition which has resulted in higher deposit charges and increased loan fees and service charges due to gain on sale of residential loan income.

  • Total non-interest expense increased to $7.14 million for Q1 fiscal 2018 from $5.39 million for Q1 fiscal 2017 and declined from $7.91 million in Q4 fiscal 2017, largely due to lower merger and branch closure expenses, partially offset by a full quarter's expenses related to the Wells acquisition.

  • Net loans were $725.1 million at December 31, 2017, compared to $543.0 million at December 31, 2016, reflecting the Wells acquisition and $727.1 million at September 30, 2017.

  • Total deposits were $741.1 million at December 31, 2017, compared to $535.1 million at December 31, 2016 and $742.5 million at September 30, 2017.

  • The allowance for loan and lease losses was 0.80% of total loans at December 31, 2017, compared to 1.08% one year earlier and 0.81% the preceding quarter.  The lower ratio for Q1 fiscal 2018 relative to one year earlier 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 loan losses.

  • Nonperforming assets were $14.2 million, or 1.50% of total assets at December 31, 2017, compared to $7.4 million, or 1.08% of total assets at December 31, 2016, and $14.1 million, or 1.49% of total assets at September 30, 2017.   In the current quarter, the impact of paydowns on non-performing loans was offset by the transfer of an owned, closed branch acquired in the Wells acquisition.

  • Bank capital ratios exceeded regulatory guidelines for a well-capitalized financial institution under the Basel III regulatory requirements at December 31, 2017:
         
    Citizens
Community
Federal N.A.
  To Be Well Capitalized Under
Prompt Corrective Action
Provisions
Total capital (to risk weighted assets)   13.4 %   10.0 %
Tier 1 capital (to risk weighted assets)   12.5 %   8.0 %
Common equity tier 1 capital (to risk weighted assets)   12.5 %   6.5 %
Tier 1 leverage ratio (to adjusted total assets)   9.3 %   5.0 %
             

Balance Sheet and Asset Quality Review

Total assets were $943.0 million at December 31, 2017, compared to $686.4 million at December 31, 2016, and $940.7 million at September 30, 2017.  The increase in total assets from a year ago was primarily due to the acquisition of Wells Financial.

Loan balances decreased slightly from the immediate prior quarter due to the pay down of indirect loans and one to four family real estate loans. Meanwhile, commercial real estate loans increased through originations outpacing loan pay downs. At December 31, 2017, commercial and agricultural real estate loans totaled 39.4% of the total loan portfolio versus 37.2% the prior quarter and 27.6% one year earlier.  One to four family residential and home equity real estate loans represented 32.4% of the total loan portfolio versus 33.6% the prior quarter, while consumer related non-real estate loans totaled 17.0% of the total loan portfolio versus 18.5% the prior quarter.

The allowance for loan and lease losses was largely unchanged at December 31, 2017 and totaled $5.9 million, representing 0.80% of total loans, compared to $5.9 million and 0.81% of total loans at September 30, 2017.  Net charged off loans totaled $183,000 for the first quarter ended December 31, 2017 compared to $151,000 for the quarter ended December 31, 2016.

Nonperforming assets were $14.2 million, or 1.50% of total assets at December 31, 2017 compared to $7.4 million, or 1.08% of total assets at December 31, 2016, and $14.1 million, or 1.49% of total assets at September 30, 2017.  Included in nonperforming assets are approximately $5.1 million of REO properties acquired in the Wells Financial acquisition.   Additionally, the level of other real estate owned increased to $7.0 million at December 31, 2017 from $6.0 million one quarter earlier due to the transfer of an owned, closed branch acquired in the Wells acquisition.

Deposits totaled $741.1 million at December 31, 2017, compared to $535.1 million at December 31, 2016, and $742.5 million at September 30, 2017.  Noninterest-bearing deposits increased to $78.7 million at December 31, 2017, compared to $75.3 million at September 30, 2017, and $47.5 million at December 31, 2016.  Core deposits, excluding time deposits, increased to $452.5 million, or 61.1% of total deposits compared to $451.7 million at September 30, 2017, or 60.8% of total deposits.

Federal Home Loan Bank ("FHLB") advances totaled $94.0 million at December 31, 2017, compared to $90.0 million at September 30, 2017.  Other borrowings decreased slightly to $29.9 million at December 31, 2017, compared to $30.3 million at September 30, 2017.  The Bank has used borrowings and equity capital to fund acquisitions of other financial institutions, branch closings and FHLB advances to support organic loan growth.

Tangible book value per share (non-GAAP) was $9.98 at December 31, 2017, compared to $11.09 at December 31, 2016, and $9.78 at September 30, 2017.

Capital ratios for the Bank continued to remain well above regulatory requirements.

Review of Operations

Net interest income increased to $7.5 million for Q1 fiscal 2018, compared to $5.6 million for Q1 fiscal 2017 and $6.2 million on a linked quarter basis.  The NIM increased to 3.42% for Q1 fiscal 2018, compared to 3.36% for the same quarter one year earlier and 3.29% for Q4 fiscal 2017.   The increase in the net interest margin was supported by higher yields on loans and lower cost of funds.

Loan yields increased to 4.72% for Q1 fiscal 2018 compared to 4.61% one year earlier and 4.59% for the immediately prior quarter.   Meanwhile, deposit costs declined to 0.72% for Q1 fiscal 2018 from 0.89% one year earlier and 0.77% for Q4 fiscal 2017.   Costs on the FHLB and other borrowings increased to 2.33% for Q1 fiscal 2018 from 1.37% one year earlier and 2.12% for the preceding quarter.  "The improved net interest margin is largely due to the full quarter impact of the Wells merger along with the result of our changing balance sheet composition which reflects more direct lending of commercial related loans and funding the loans with lower cost deposits," said Jim Broucek, Chief Financial Officer.

For Q1 fiscal 2018, provision for loan losses totaling $100,000 was recorded, responsive to organic loan growth.  Net charge offs were $183,000 for Q1 fiscal 2018, compared to $151,000 for Q1 fiscal 2017.  Allowance for loan and lease losses to total loans was  0.80%, at December 31, 2017, compared to 1.08% at December 31, 2016 and 0.81%, at September 30, 2017.

Total non-interest expense was $7.1 million for Q1 fiscal 2018 compared to $5.4 million for Q1 fiscal 2017 and $7.9 million for Q4 fiscal 2017.  Total non-interest expense for the first quarter includes severance expense related to an executive departure and slightly higher professional fees.

The Tax Cuts and Jobs Act was enacted December 22, 2017, reducing the corporate Federal income tax rate for the Company from 34% to 24.5% in fiscal 2018 and 21% in fiscal 2019.  Additionally, the Tax Act made other changes to U.S. corporate income tax laws.  GAAP requires that the impact of the provisions of the Tax Act be accounted for in the period of enactment.  The Company revalued its net deferred tax assets to account for the future impact of lower corporate tax rates.  For the first quarter ended December 31, 2017, the Company recorded a one-time net tax charge of $275,000 related to the revaluation of the deferred assets related to both the revaluation of timing differences and the unrealized loss on securities.  This increase in income tax expense was partially offset by an approximately $135,000 reduction in income tax expense due to a lower corporate tax rate.

These financial results are preliminary until the Form 10-Q is filed in February 2018.

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 21 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 added seven branch locations along with expanded services through Wells Insurance Agency.

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 post acquisition integration 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, 2017 filed with the Securities and Exchange Commission ("SEC") on December 13, 2017 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 and the net impact of the Tax Cuts and Jobs Act of 2017.  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.  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)  
               
    December 31,
2017
  September 30,
2017
  December 31,
2016
 
Assets              
Cash and cash equivalents   $ 47,215     $ 41,677     $ 20,444    
Other interest bearing deposits   7,155     8,148     745    
Securities available for sale "AFS"   96,548     95,883     81,136    
Securities held to maturity "HTM"   5,227     5,453     6,235    
Non-marketable equity securities, at cost   8,151     7,292     5,365    
Loans receivable   730,918     732,995     548,904    
Allowance for loan losses   (5,859 )   (5,942 )   (5,917 )  
Loans receivable, net   725,059     727,053     542,987    
Loans held for sale   2,179     2,334        
Mortgage servicing rights   1,866     1,886        
Office properties and equipment, net   8,517     9,645     5,166    
Accrued interest receivable   3,189     3,291     2,073    
Intangible assets   5,287     5,449     829    
Goodwill   10,444     10,444     4,663    
Foreclosed and repossessed assets, net   7,031     6,017     784    
Other assets   15,164     16,092     15,987    
TOTAL ASSETS   $ 943,032     $ 940,664     $ 686,414    
Liabilities and Stockholders' Equity              
Liabilities:              
Deposits   $ 741,069     $ 742,504     $ 535,112    
Federal Home Loan Bank advances   94,000     90,000     73,491    
Other borrowings   29,899     30,319     11,000    
Other liabilities   3,610     4,358     2,985    
Total liabilities   868,578     867,181     622,588    
Stockholders' equity:              
Common stock— $0.01 par value, authorized 30,000,000; 5,883,603; 5,888,816 and
5,261,170 shares issued and outstanding, respectively
  59     59     53    
Additional paid-in capital   63,348     63,383     54,983    
Retained earnings   12,241     10,764     10,047    
Unearned deferred compensation   (391 )   (456 )   (205 )  
Accumulated other comprehensive (loss) gain   (803 )   (267 )   (1,052 )  
Total stockholders' equity   74,454     73,483     63,826    
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY   $ 943,032     $ 940,664     $ 686,414    


     
CITIZENS COMMUNITY BANCORP, INC.
Consolidated Statements of Operations (unaudited)
(in thousands, except per share data)
     
    Three Months Ended
    December 31,
2017
  September 30,
2017
  December 31,
2016
Interest and dividend income:            
Interest and fees on loans   $ 8,721     $ 7,194     $ 6,530  
Interest on investments   691     576     418  
Total interest and dividend income   9,412     7,770     6,948  
Interest expense:            
Interest on deposits   1,202     1,095     1,119  
Interest on FHLB borrowed funds   261     217     173  
Interest on other borrowed funds   422     286     99  
Total interest expense   1,885     1,598     1,391  
Net interest income before provision for loan losses   7,527     6,172     5,557  
Provision for loan losses   100     319      
Net interest income after provision for loan losses   7,427     5,853     5,557  
Non-interest income:            
Net gains on available for sale securities       82     29  
Service charges on deposit accounts   460     368     398  
Loan fees and service charges   776     453     533  
Other   703     488     283  
Total non-interest income   1,939     1,391     1,243  
Non-interest expense:            
Compensation and benefits   3,555     3,233     2,604  
Occupancy   705     584     1,068  
Office   438     443     281  
Data processing   704     650     472  
Amortization of intangible assets   162     100     43  
Amortization of mortgage servicing rights   90     39      
Advertising, marketing and public relations   149     302     63  
FDIC premium assessment   142     69     83  
Professional services   688     860     401  
Other   510     1,629     378  
Total non-interest expense   7,143     7,909     5,393  
Income (loss) before provision (benefit) for income taxes   2,223     (665 )   1,407  
Provision (benefit) for income taxes   883     (207 )   467  
Net income (loss) attributable to common stockholders   $ 1,340     $ (458 )   $ 940  
Per share information:            
Basic earnings (loss)   $ 0.23     $ (0.08 )   $ 0.18  
Diluted earnings (loss)   $ 0.23     $ (0.08 )   $ 0.18  
Cash dividends paid   $     $     $  
Book value per share at end of period   $ 12.65     $ 12.48     $ 12.13  
Tangible book value per share at end of period (non-GAAP)   $ 9.98     $ 9.78     $ 11.09  
                         

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
    December 31,
2017
  September 30,
2017
  December 31,
2016
  (Dollars in Thousands, except share data)
GAAP earnings (loss) before income taxes   $ 2,223     $ (665 )   $ 1,407  
Merger related costs (1)   94     1,517      
Branch closure costs (2)   7     255     633  
Core earnings before income taxes (3)   2,324     1,107     2,040  
Provision for income tax on core earnings (4)   569     376     694  
Core earnings after income taxes (3)   $ 1,755     $ 731     $ 1,346  
GAAP diluted earnings (loss) per share, net of tax   $ 0.23     $ (0.08 )   $ 0.18  
Merger related costs, net of tax   0.02     0.19      
Branch closure costs, net of tax       0.03     0.07  
Tax Cuts and Jobs Act of 2017 tax provision (5)   0.05          
Core diluted earnings per share, net of tax   $ 0.30     $ 0.14     $ 0.25  
             
Average diluted shares outstanding   5,920,899     5,629,363     5,262,718  
                   

(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 compensation and benefits, accelerated depreciation expense and lease termination fees included in occupancy and other costs included in other non-interest expense in the consolidated statement of operations.  In addition, other non-interest expense includes costs related to the valuation reduction of the Ridgeland branch office in the fourth quarter of fiscal 2017.
(3) 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.
(4)  Provision for income tax on core earnings is calculated at 24.5% for the three months ended December 31, 2017 and at 34% for all quarters in the prior fiscal year, which represents our federal statutory tax rate for each respective period presented.
(5) As a result of the Tax Cuts and Jobs Act of 2017, we recorded a one-time net tax provision of $275 in December 2017, which is included in provision for income taxes expense in the consolidated statement of operations.
(6)  Reconciliation of tangible book value:

             
Tangible book value per share at end of period   December 31,
2017
  September 30,
2017
  December 31,
2016
Total stockholders' equity   $ 74,454     $ 73,483     $ 63,826  
Less:  Goodwill   (10,444 )   (10,444 )   (4,663 )
Less:  Intangible assets   (5,287 )   (5,449 )   (829 )
Tangible common equity (non-GAAP)   $ 58,723     $ 57,590     $ 58,334  
Ending common shares outstanding   5,883,603     5,888,816     5,260,098  
Tangible book value per share (non-GAAP)   $ 9.98     $ 9.78     $ 11.09  
                         

Nonperforming Assets:

             
    December 31, 2017 
and Three Months Ended
  September 30, 2017
and Twelve Months Ended
  December 31, 2016
and Three Months Ended
Nonperforming assets:            
Nonaccrual loans   6,388     $ 7,452     $ 5,750  
Accruing loans past due 90 days or more   739     589     894  
Total nonperforming loans ("NPLs")   7,127     8,041     6,644  
Other real estate owned   6,996     5,962     655  
Other collateral owned   35     55     129  
Total nonperforming assets ("NPAs")   $ 14,158     $ 14,058     $ 7,428  
Troubled Debt Restructurings ("TDRs")   $ 7,263     $ 5,851     $ 3,529  
Nonaccrual TDRs   $ 1,327     $ 621     $ 410  
Average outstanding loan balance   $ 731,957     $ 653,717     $ 561,672  
Loans, end of period   730,918     732,995     548,904  
Total assets, end of period   943,032     940,664     686,414  
ALL, at beginning of period   5,942     6,068     6,068  
Loans charged off:            
Residential real estate   (24 )   (233 )   (43 )
Commercial/agriculture real estate   (1 )        
Consumer non-real estate   (194 )   (389 )   (172 )
Commercial agriculture non-real estate       (9 )    
Total loans charged off   (219 )   (631 )   (215 )
Recoveries of loans previously charged off:            
Residential real estate   13     14     3  
Commercial/agriculture real estate            
Consumer non-real estate   22     171     61  
Commercial agriculture non-real estate   1     1      
Total recoveries of loans previously charged off:   36     186     64  
Net loans charged off ("NCOs")   (183 )   (445 )   (151 )
Additions to ALL via provision for loan losses charged to operations   100     319      
ALL, at end of period   $ 5,859     $ 5,942     $ 5,917  
Ratios:            
ALL to NCOs (annualized)   800.41 %   1,335.28 %   979.64 %
NCOs (annualized) to average loans   0.10 %   0.07 %   0.11 %
ALL to total loans   0.80 %   0.81 %   1.08 %
NPLs to total loans   0.98 %   1.10 %   1.21 %
NPAs to total assets   1.50 %   1.49 %   1.08 %
                   

Nonaccrual Loans Rollforward:

   
  Quarter Ended
                   
  December 31,
2017
  September 30,
2017
  June 30,
2017
  March 31,
2017
  December 31,
2016
Balance, beginning of period $ 7,452     $ 6,035     $ 5,767     $ 5,750     $ 3,191  
Additions 263     $ 488     557     308     3,433  
Acquired nonaccrual loans     1,449              
Charge-offs (74 )   (22 )   (12 )   (68 )   (150 )
Transfers to foreclosed and repossessed assets (46 )   (153 )   (109 )   (14 )   (220 )
Return to accrual status                  
Payments received (1,207 )   (345 )   (168 )   (209 )   (504 )
Other, net                  
Balance, end of period $ 6,388     $ 7,452     $ 6,035     $ 5,767     $ 5,750  
                                       

Other Real Estate Owned Rollforward:

   
  Quarter Ended
                   
  December 31,
2017
  September 30,
2017
  June 30,
2017
  March 31,
2017
  December 31,
2016
Balance, beginning of period $ 5,962     $ 580     $ 648     $ 655     $ 725  
Loans transferred in 57     $ 175     82         179  
Acquired OREO     5,343              
Branch properties transferred in 1,444     250              
Sales (394 )   (353 )   (150 )       (249 )
Writedowns (16 )   (33 )       (7 )    
Other, net (57 )                
Balance, end of period $ 6,996     $ 5,962     $ 580     $ 648     $ 655  
                                       

Troubled Debt Restructurings:

           
  December 31, 2017   September 30, 2017   December 31, 2016
  Number of
Modifications
  Recorded
Investment
  Number of
Modifications
  Recorded
Investment
  Number of
Modifications
  Recorded
Investment
Troubled debt restructurings:                      
Residential real estate 33     $ 3,667     32     $ 3,678     30     $ 3,214  
Commercial/Agricultural real estate 12     2,699     8     1,890          
Consumer non-real estate 19     166     20     195     22     315  
Commercial/Agricultural non-real estate 6     731     2     88          
Total loans 70     $ 7,263     62     $ 5,851     52     $ 3,529  
                                         

Loan Composition:

             
    December 31, 2017   September 30, 2017   December 31, 2016
Originated Loans:            
Residential real estate:            
One to four family   $ 128,396     $ 132,380     $ 151,180  
Purchased HELOC loans   16,968     18,071      
Commercial/Agricultural real estate:            
Commercial real estate   110,815     97,155     62,724  
Agricultural real estate   11,580     10,628     4,803  
Multi-family real estate   30,868     24,486     15,550  
Construction and land development   12,682     12,399     12,812  
Consumer non-real estate:            
Originated indirect paper   79,492     85,732     111,507  
Purchased indirect paper   26,210     29,555     44,006  
Other Consumer   14,465     14,496     17,851  
Commercial/Agricultural non-real estate:            
Commercial non-real estate   39,594     35,198     20,803  
Agricultural non-real estate   12,649     12,493     9,621  
Total originated loans   $ 483,719     $ 472,593     $ 450,857  
Acquired Loans:            
Residential real estate:            
One to four family   $ 92,681     $ 97,183     $ 24,884  
Commercial/Agricultural real estate:            
Commercial real estate   60,828     62,807     28,444  
Agricultural real estate   53,447     57,374     24,133  
Multi-family real estate   1,708     1,742      
Construction and land development   7,156     7,309     2,710  
Consumer non-real estate:            
Other Consumer   4,777     6,172     604  
Commercial/Agricultural non-real estate:            
Commercial non-real estate   19,229     20,053     12,650  
Agricultural non-real estate   11,061     11,380     4,466  
Total acquired loans   $ 250,887     $ 264,020     $ 97,891  
Total Loans:            
Residential real estate:            
One to four family   $ 221,077     $ 229,563     $ 176,064  
Purchased HELOC loans   16,968     18,071      
Commercial/Agricultural real estate:            
Commercial real estate   171,643     159,962     91,168  
Agricultural real estate   65,027     68,002     28,936  
Multi-family real estate   32,576     26,228     15,550  
Construction and land development   19,838     19,708     15,522  
Consumer non-real estate:            
Originated indirect paper   79,492     85,732     111,507  
Purchased indirect paper   26,210     29,555     44,006  
Other Consumer   19,242     20,668     18,455  
Commercial/Agricultural non-real estate:            
Commercial non-real estate   58,823     55,251     33,453  
Agricultural non-real estate   23,710     23,873     14,087  
Gross loans   $ 734,606     $ 736,613     $ 548,748  
Unearned net deferred fees and costs and loans in process   1,252     1,471     1,605  
Unamortized discount on acquired loans   (4,940 )   (5,089 )   (1,449 )
Total loans receivable   $ 730,918     $ 732,995     $ 548,904  
                         

Deposit Composition:

             
    December 31,
2017
  September 30,
2017
  December 31,
 2016
Non-interest bearing demand deposits   $ 78,685     $ 75,318     $ 47,463  
Interest bearing demand deposits   149,058     147,912     50,779  
Savings accounts   98,941     102,756     51,826  
Money market accounts   125,831     125,749     125,923  
Certificate accounts   288,554     290,769     259,121  
Total deposits   $ 741,069     $ 742,504     $ 535,112  
                         

Average balances, Interest Yields and Rates:

             
    Three months ended
December 31, 2017
  Three months ended
September 30, 2017
  Three months ended
December 31, 2016
    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   $ 30,848     $ 67     0.86 %   $ 32,692     $ 71     0.86 %   $ 10,238     $ 12     0.47 %
Loans receivable   733,203     8,721     4.72 %   621,530     7,194     4.59 %   561,519     6,530     4.61 %
Interest bearing deposits   7,714     32     1.65 %   4,571     18     1.56 %   745     3     1.60 %
Investment securities (1)   100,737     513     2.23 %   90,467     430     2.24 %   86,617     358     1.97 %
Non-marketable equity securities, at cost   7,336     79     4.27 %   5,701     57     3.97 %   5,200     45     3.43 %
Total interest earning assets   $ 879,838     $ 9,412     4.27 %   $ 754,961     $ 7,770     4.13 %   $ 664,319     $ 6,948     4.19 %
Average interest bearing liabilities:                                    
Savings accounts   $ 96,230     $ 22     0.09 %   $ 72,476     $ 21     0.11 %   $ 43,743     $ 17     0.15 %
Demand deposits   146,838     90     0.24 %   98,416     79     0.32 %   48,989     74     0.60 %
Money market accounts   123,459     167     0.54 %   128,039     168     0.52 %   130,057     134     0.41 %
CD's   263,429     839     1.26 %   235,076     752     1.27 %   245,646     814     1.31 %
IRA's   34,992     84     0.95 %   31,302     75     0.95 %   29,000     80     1.09 %
Total deposits   $ 664,948     $ 1,202     0.72 %   $ 565,309     $ 1,095     0.77 %   $ 497,435     $ 1,119     0.89 %
FHLB advances and other borrowings   116,359     683     2.33 %   93,978     503     2.12 %   78,841     272     1.37 %
Total interest bearing liabilities   $ 781,307     $ 1,885     0.96 %   $ 659,287     $ 1,598     0.96 %   $ 576,276     $ 1,391     0.96 %
Net interest income       $ 7,527             $ 6,172             $ 5,557      
Interest rate spread           3.31 %           3.17 %           3.23 %
Net interest margin           3.42 %           3.29 %           3.36 %
Average interest earning assets to average interest bearing liabilities           1.13             1.15             1.15  
                                           

(1) Fully taxable equivalent.

 
CITIZENS COMMUNITY FEDERAL N.A.
Selected Capital Composition Highlights (unaudited)
 
    December 31,
2017
  September 30,
2017
  December 31,
2016
  To Be Well Capitalized Under
Prompt Corrective Action
Provisions
Total capital (to risk weighted assets)   13.4 %   13.2 %   14.7 %   10.0 %
Tier 1 capital (to risk weighted assets)   12.5 %   12.4 %   13.5 %   8.0 %
Common equity tier 1 capital (to risk weighted assets)   12.5 %   12.4 %   13.5 %   6.5 %
Tier 1 leverage ratio (to adjusted total assets)   9.3 %   9.2 %   9.8 %   5.0 %

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