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| 8-K - 8-K - Citizens Community Bancorp Inc. | a8kearningsrelczwi20170331.htm |
EXHIBIT 99.1
Citizens Community Bancorp, Inc. Earnings Increase 38% YOY for Second Quarter Fiscal 2017 Earnings Increase 23% YOY for First Six Months of Fiscal 2017
EAU CLAIRE, WI, May 1, 2017 - Citizens Community Bancorp, Inc. (the "Company") (Nasdaq: CZWI), the parent company of Citizens Community Federal N.A. (the “Bank”), today reported GAAP earnings increased 38% to $934,000, or $0.17 per diluted share, in its fiscal second quarter of 2017, ended March 31, 2017, compared to GAAP earnings of $675,000, or $0.13 per diluted share, for the second fiscal quarter one year ago. GAAP earnings remained relatively flat from $940,000, or $0.18 per diluted share, for the preceding quarter. For the first six months of fiscal 2017, the Company reported earnings increased 23% to $1.9 million, or $0.35 per diluted share, from $1.5 million, or $0.29 per diluted share, in the first six months of fiscal 2016.
Excluding merger expenses related to the recently announced Agreement and Plan of Merger (the "Merger Agreement") with Wells Financial Corp. ("Wells") (OTCQB:"WEFP"), and costs for closing four branches last November, core earnings (non-GAAP) increased 13% to $933,000, or $0.17 per core diluted share (non-GAAP)for Q2 fiscal 2017, compared to $825,000, or $0.15 per core diluted share (non-GAAP), a year ago and declined 31% from $1.3 million, or $0.26 per core diluted share in the preceding quarter. For the first six months of fiscal 2017, core earnings (non-GAAP) were $2.3 million, or $0.43 per core diluted share, up from $1.7 million, or $0.32 per core diluted share, in the first six months one year ago.
Core earnings is a non-GAAP measure that we believe provides additional understanding of 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 achieved record earnings for the first six months of fiscal 2017, fueled by 15% year-over-year growth in loans and a 12% increase in deposits, primarily as a result of the Community Bank of Northern Wisconsin ("CBN") acquisition,” said Stephen Bianchi, President and Chief Executive Officer. “As we continue to focus on strategically expanding our franchise through acquisitions, we are simultaneously building our commercial lending business and service capabilities to replace the transactional indirect paper and on balance sheet one to four family loan portfolios which have been declining. Gain on sale from mortgages decreased as home purchases slowed seasonally and refinancing activity decreased after rates rose following the election. We were also internally focused on upgrading our mortgage lending system to support future originations. Agricultural lending grew through acquired loans from our recent acquisition by 133%, but organic demand was muted due to weak commodity prices and tight margins for operators."
Second Quarter Fiscal 2017 Financial Highlights: (at or for the periods ended March 31, 2017, compared to March 31, 2016 and /or December 31, 2016.)
• | GAAP earnings were $934,000, or $0.17 per diluted share, for Q2 fiscal 2017 compared to $940,000, or $0.18 per diluted share, for Q1 fiscal 2017, and $675,000, or $0.13 per diluted share, for Q2 fiscal 2016. For |
the first fiscal half of 2017, GAAP earnings increased 23% to $1.9 million, or $0.35 per diluted share, from $1.5 million, or $0.29 per diluted share, for the first six months of fiscal 2016.
• | Core earnings (non-GAAP) grew 13% to $933,000 for Q2 fiscal 2017, compared to $825,000 for the quarter ended March 31, 2016, and increased 33% from $1.7 million for the first six months of fiscal 2016 to $2.3 million for the first six months of fiscal 2017. Core earnings (non-GAAP) primarily reflect adjustments related to merger-related costs of the CBN acquisition on May 16, 2016 and branch closure costs of three branch closures in fiscal 2016. Core earnings (non-GAAP) adjustments in fiscal 2017 relate primarily to preliminary merger-related costs of the Wells acquisition as well as the costs associated with the closing of four branches as part of the planned exit from the Eastern Wisconsin market. |
• | On March 17, 2017, the Company and Wells entered into the Merger Agreement valued at approximately $39.8 million. Under the Merger Agreement, Wells will merge with and into the Company with the Company surviving the merger. The transaction is expected to strengthen the presence and capacity of the Company in Southern Minnesota, provide stable, low cost funding to support loan growth, and create operating efficiencies in the combined franchise. |
• | In addition to the four supermarket branches closed in November, 2016, the Company plans to close two branch offices in Lake Orion, Michigan and Ridgeland, WI, as previously announced, at the end of June 2017 to streamline operating efficiencies. |
• | In the second quarter of fiscal 2017, the net interest margin (NIM) was 3.31% up from 3.28% a year ago. For the first six months of fiscal 2017, the NIM was 3.34%, compared to 3.25% for the first six months of fiscal 2016. |
• | Total assets increased 11% to $668.5 million at March 31, 2017, from $601.8 million at March 31, 2016, primarily due to contributions of $111.7 million in loans from the acquisition of CBN in May 2016. Total assets declined 3% from $686.4 million at December 31, 2016 and 3.9% from $695.9 million at September 30, 2016. |
• | Net loans grew 15% to $529.0 million at March 31, 2017, compared to $460.2 million at March 31, 2016, and declined by 3% from $543.0 million, on a linked quarter basis, reflecting seasonality of our loan portfolio and the new strategic lending focus. Net loans declined 6.9% at March 31, 2017 from $568.4 million at September 30, 2016. |
• | Total deposits increased 12% to $530.9 million at March 31, 2017, from $473.8 million at March 31, 2016. Deposits declined 1% at March 31, 2017, from $535.1 million at December 31, 2016 and declined 4.8% from $557.7 million at September 30, 2016. |
• | The allowance for loan and lease losses as a percentage of total loans was 1.09% at March 31, 2017, compared to 1.35% one year earlier, and 1.06% at September 30, 2016. The decrease, year over year, is primarily due to additional loan balances from the CBN acquisition without a corresponding allowance for loan losses in accordance with accounting for business combinations. |
• | Asset quality improved during the quarter with nonperforming assets to total assets at 1.05% at March 31, 2017, compared to 1.08% in the preceding quarter. Asset quality declined from one year ago with nonperforming assets to total assets at 0.38%. This increase was mainly due to the deterioration of two larger, acquired agricultural real estate loans. |
• | Bank capital ratios exceeded regulatory guidelines for a well-capitalized financial institution under the Basel III regulatory requirements at March 31, 2017: |
Citizens Community Federal N.A. | To Be Well Capitalized Under Prompt Corrective Action Provisions | |||
Total capital (to risk weighted assets) | 14.8% | 10.0% | ||
Tier 1 capital (to risk weighted assets) | 13.6% | 8.0% | ||
Common equity tier 1 capital (to risk weighted assets) | 13.6% | 6.5% | ||
Tier 1 leverage ratio (to adjusted total assets) | 9.8% | 5.0% | ||
• | Tangible book value was $11.19 per share at March 31, 2017, compared to $11.85 per share a year ago. |
Balance Sheet and Asset Quality Review
Total assets grew 11% to $668.5 million at March 31, 2017, compared to $601.8 million at March 31, 2016, and declined 3% from $686.4 million at December 31, 2016. The increase in total assets from a year ago, primarily reflects higher loans outstanding primarily due to the CBN acquisition, while the decline in total assets on a linked quarter basis, is mainly due to the decision made to discontinue indirect lending and reduced emphasis on one to four family residential portfolio loans.
Total net loans grew 15% to $529.0 million at March 31, 2017, from $460.2 million at March 31, 2016, and decreased 3% from $543.0 million at December 31, 2016. The increase in loans year-over-year was primarily due to the CBN acquisition, which included $111.7 million of net loans. The decline in the loan balances from the immediate prior quarter was primarily due to decreased levels of one to four family loans and a decreased investment in indirect consumer loans. At the same time, commercial and agricultural loan balances increased over the past quarter reflecting increased emphasis on internally underwritten loans. Since September 30, 2016, commercial and agricultural loan balances have increased $12.5 million from $198.5 million at September 30, 2016 to $211.0 million at March 31, 2017.
At March 31, 2017, commercial and agricultural real estate and non-real estate loans totaled 39.4% of the total loan portfolio. One to four family residential real estate loans represented 31.1% of the total loan portfolio, while consumer related non-real estate loans totaled 29.5% of the total loan portfolio - down from 31.7% in the preceding quarter.
Total deposits grew 12% to $530.9 million at March 31, 2017, compared to $473.8 million at March 31, 2016, and declined slightly from $535.1 million at December 31, 2016. Non-interest bearing demand deposits represented 9% of total deposits; interest bearing demand deposits and savings, each accounted for 10% of the deposit mix, and money market accounts represented 23% of total deposits at March 31, 2017. At March 31, 2016, non-interest bearing and interest bearing demand deposits each represented 6% of total deposits; savings deposits accounted for 7% of the deposit mix, and money market accounts represented 28% of total deposits The change in composition of deposits from one year ago, reflects a combination of deposit run-off related to the announced closure of the four Eastern Wisconsin branches, as well as previous branch closures, and an increase in commercial deposit accounts from the CBN acquisition.
Federal Home Loan Bank ("FHLB") advances and other borrowings totaled $61.5 million at March 31, 2016, compared to $71.5 million at March 31, 2017. To facilitate the purchase of CBN in May 2016, the Company obtained an adjustable-rate, $11.0 million loan with a maturity date of May 15, 2021. In March 2017, the Bank prepaid $9.8 million in FHLB borrowings with an average rate of 2.10% and average remaining maturity of 13.17 months. The prepayment fee totaled $104,000 and is included in other non-interest expense for the current three and six months ended, March 31, 2017. The Bank replaced these FHLB borrowings with shorter term borrowings
maturing in one month at 0.75%. The weighted average remaining term of the borrowings at March 31, 2017 was 2.59 months compared to 8.32 months at September 30, 2016.
Nonperforming assets (“NPAs”) totaled $7.0 million, or 1.05% of total assets, at March 31, 2017, compared to $7.4 million, or 1.08% of total assets, three months earlier, and $2.3 million, or 0.38% of total assets, at March 31, 2016. The increase in NPAs at March 31, 2017, was primarily due to the deterioration of two larger, acquired agricultural loans as reported three months earlier.
The allowance for loan and lease losses at March 31, 2017, totaled $5.8 million and represented 1.09% of total loans, compared to $6.3 million and 1.35% of total loans at March 31, 2016. Net charge off loans totaled $82,000 and represented 0.06% of average loans on an annualized basis, at March 31, 2017. One year earlier, net charge offs totaled $138,000 and represented 0.12% of average loans on an annualized basis.
Tangible common stockholders' equity was 8.89% of tangible assets at March 31, 2017, compared to 8.55% at September 30, 2016. Tangible book value per common share was $11.19 at March 31, 2017 compared to $11.22 at September 30, 2016.
Capital ratios for the Bank continued to remain well above regulatory requirements with Tier 1 capital to risk weighted assets of 13.6% at March 31, 2017, up from 12.9% at September 30, 2016. Tier 1 leverage capital to adjusted total assets improved to 9.8% at March 31, 2017 compared to 9.3% at September 30, 2016. These regulatory ratios were higher than the required minimum levels of 6.00% for Tier 1 capital to risk weighted assets and 4.00% for Tier 1 leverage capital to adjusted total assets.
Review of Operations
Primarily due to growth in the loan portfolio, net interest income increased 13% to $5.2 million for the second quarter of fiscal 2017, compared to $4.6 million for the second quarter of fiscal 2016. Net interest income declined 6% from $5.6 million on a linked quarter basis mainly due to a reduction in the loan portfolio. For the first six months of fiscal 2017, net interest income grew 17% to $10.8 million, compared to $9.2 million for the first six months of fiscal 2016.
The net interest margin (“NIM”) was 3.31% for the fiscal second quarter of 2017, compared to 3.28% for the same quarter one year earlier, and 3.36% for the preceding quarter ended December 31, 2016. For the first six months of fiscal 2017, the NIM expanded 9 basis points to 3.34% compared to 3.25% for the first six months of fiscal 2016. The year-over-year higher quarterly margin was primarily due to higher earning asset yields.
No provision for loan losses was recorded during the first six months of fiscal 2017. “We haven’t taken any provision for loan losses since the first quarter of fiscal 2016,” said Mark Oldenberg, EVP and Chief Financial Officer. “The balance of the allowance for loan and lease losses was $5.8 million, or 1.09% of our loan portfolio at March 31, 2017.”
Net charge offs were $82,000 for the second quarter of fiscal 2017, compared to $138,000 a year ago and $151,000 for the first quarter of fiscal 2017. Allowance for loan and lease losses totaled 1.09%, at March 31, 2017, compared to 1.35% at March 31, 2016 and 1.08%, at December 31, 2016.
Noninterest income increased $394,000 to $1.2 million for the second quarter of fiscal 2017, compared to $810,000 one year ago, and declined from $1.3 million for the immediate prior quarter. For the first six months of fiscal 2017, noninterest income increased 43% to $2.5 million, compared to $1.8 million for the first six months of fiscal 2016, mainly due to gains on payoffs from purchased credit impaired loans in the amount of $206,000 during the first fiscal quarter of 2017, an increase in secondary market fee income generated from customer mortgage activity due to advantages over the ARM loan portfolio mortgage offerings and an increase in commercial loan origination and servicing fee income. Settlement proceeds increased $283,000 in the current three month period ended March 31, 2017. "In March 2017, the Bank received litigation settlement proceeds from a JP Morgan Residential Mortgage Backed Security (RMBS) claim in the amount of $283,000. This JP Morgan RMBS was previously owned by the Bank and sold in 2011," said Oldenberg.
Total noninterest expense was $5.0 million in the second quarter of fiscal 2017 compared to $4.4 million for the quarter ended March 31, 2016. The increase in expenses for the current quarter was primarily related to salaries and related benefits cost increases due to the addition of new employees related to the CBN acquisition and professional services related to the Wells acquisition. The FHLB borrowings prepayment fee totaled $104,000 and is included in other non-interest expense for the current three and six months ended, March 31, 2017. For the first six months of fiscal 2017, noninterest expense increased to $10.5 million compared to $8.5 million for the first six months of fiscal 2016. In addition to the increased costs mentioned above, occupancy expense increased during the first fiscal quarter of 2017, primarily due to rent termination costs related to the four branch closures in Eastern Wisconsin.
These financial results are preliminary until the Form 10-Q is filed in May 2017.
About the Company
Citizens Community Federal N.A., a wholly owned subsidiary of Citizens Community Bancorp, Inc., is a full-service national bank based in Altoona, Wisconsin, serving more than 50,000 customers in Wisconsin, Minnesota and Michigan through 16 branch locations. Subsequent to the branch closures in June 2017, the Company will operate through 14 branch locations.The Company’s stock trades on the NASDAQ Global Market under the symbol “CZWI.”
No Offer or Solicitation
This communication is for informational purposes only and is neither an offer to purchase, nor a solicitation of an offer to sell, any securities in any jurisdiction pursuant to the proposed transaction or otherwise, nor shall there be any sale, issuance or transfer of securities in any jurisdiction in contravention of any applicable law. No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.
Additional Information About The Proposed Transaction and Where To Find It
Investors are urged to read the Merger Agreement for a more complete understanding of the terms of the transactions discussed herein.
This release does not constitute a solicitation of any vote or approval. In connection with the merger, the Company will be filing with the Securities and Exchange Commission (“SEC”) a Registration Statement on Form S-4 and other relevant documents. STOCKHOLDERS ARE URGED TO READ THE REGISTRATION STATEMENT ON FORM S-4 TO BE FILED BY THE COMPANY WHEN IT BECOMES AVAILABLE AND ANY OTHER RELEVANT DOCUMENTS FILED BY THE COMPANY WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION.
The Registration Statement, including the proxy statement/prospectus, and other relevant materials (when they become available), and any other documents filed by the Company with the SEC, may be obtained free of charge at the SEC’s website at www.sec.gov. Documents filed by the Company with the SEC, including the registration statement, may also be obtained free of charge from the Company’s website http://www.snl.com/IRWebLinkX/corporateprofile.aspx?iid=4091023 by clicking the “SEC Filings” heading, or by directing a request to the Company’s CEO, Stephen Bianchi at sbianchi@ccf.us.
The directors, executive officers and certain other members of management and employees of Wells may be deemed to be “participants” in the solicitation of proxies for stockholder approval. Information regarding the persons who may, under the rules of the SEC, be considered participants in the solicitation of stockholder approval will be set forth in the proxy statement/prospectus and the other relevant documents to be filed with the SEC.
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 timing to consummate the proposed transaction; the risk that a condition to closing of the proposed transaction may not be satisfied and the transaction may not close; the risk that a regulatory approval that may be required for the proposed transaction is delayed, is not obtained or is obtained subject to conditions that are not anticipated; the combined company’s ability to achieve the synergies and value creation contemplated by the proposed transaction; 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 on December 29, 2016. 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 eliminates 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. 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)
March 31, 2017 | December 31, 2016 | September 30, 2016 | March 31, 2016 (As Restated) | |||||||||||||
Assets | ||||||||||||||||
Cash and cash equivalents | $ | 19,850 | $ | 20,444 | $ | 10,046 | $ | 22,012 | ||||||||
Other interest bearing deposits | 745 | 745 | 745 | 2,992 | ||||||||||||
Securities available for sale "AFS" | 79,369 | 81,136 | 80,123 | 86,114 | ||||||||||||
Securities held to maturity "HTM" | 5,984 | 6,235 | 6,669 | 7,427 | ||||||||||||
Non-marketable equity securities, at cost | 4,412 | 5,365 | 5,034 | 4,626 | ||||||||||||
Loans receivable | 534,808 | 548,904 | 574,439 | 466,492 | ||||||||||||
Allowance for loan losses | (5,835 | ) | (5,917 | ) | (6,068 | ) | (6,303 | ) | ||||||||
Loans receivable, net | 528,973 | 542,987 | 568,371 | 460,189 | ||||||||||||
Office properties and equipment, net | 5,163 | 5,166 | 5,338 | 2,834 | ||||||||||||
Accrued interest receivable | 1,982 | 2,073 | 2,032 | 1,725 | ||||||||||||
Intangible assets | 791 | 829 | 872 | 341 | ||||||||||||
Goodwill | 4,663 | 4,663 | 4,663 | 435 | ||||||||||||
Foreclosed and repossessed assets, net | 692 | 784 | 776 | 832 | ||||||||||||
Other assets | 15,829 | 15,987 | 11,196 | 12,273 | ||||||||||||
TOTAL ASSETS | $ | 668,453 | $ | 686,414 | $ | 695,865 | $ | 601,800 | ||||||||
Liabilities and Stockholders’ Equity | ||||||||||||||||
Liabilities: | ||||||||||||||||
Deposits | $ | 530,929 | $ | 535,112 | $ | 557,677 | $ | 473,833 | ||||||||
Federal Home Loan Bank advances | 60,491 | 73,491 | 59,291 | 61,474 | ||||||||||||
Other borrowings | 11,000 | 11,000 | 11,000 | — | ||||||||||||
Other liabilities | 1,653 | 2,985 | 3,353 | 3,542 | ||||||||||||
Total liabilities | 604,073 | 622,588 | 631,321 | 538,849 | ||||||||||||
Stockholders’ equity: | ||||||||||||||||
Common stock—$0.01 par value authorized 30,000,000; 5,266,895, 5,261,170 and 5,260,098 shares issued and outstanding, respectively | 53 | 53 | 53 | 52 | ||||||||||||
Additional paid-in capital | 55,032 | 54,983 | 54,963 | 54,825 | ||||||||||||
Retained earnings | 10,138 | 10,047 | 9,107 | 8,057 | ||||||||||||
Unearned deferred compensation | (190 | ) | (205 | ) | (193 | ) | (235 | ) | ||||||||
Accumulated other comprehensive (loss) gain | (653 | ) | (1,052 | ) | 614 | 252 | ||||||||||
Total stockholders’ equity | 64,380 | 63,826 | 64,544 | 62,951 | ||||||||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 668,453 | $ | 686,414 | $ | 695,865 | $ | 601,800 | ||||||||
CITIZENS COMMUNITY BANCORP, INC.
Consolidated Statements of Operations (unaudited)
(in thousands, except per share data)
Three Months Ended | Six Months Ended | |||||||||||||||||||
March 31, 2017 | December 31, 2016 | March 31, 2016 (As Restated) | March 31, 2017 | March 31, 2016 (As Restated) | ||||||||||||||||
Interest and dividend income: | ||||||||||||||||||||
Interest and fees on loans | $ | 6,072 | $ | 6,530 | $ | 5,301 | $ | 12,602 | $ | 10,551 | ||||||||||
Interest on investments | 467 | 418 | 441 | 885 | 865 | |||||||||||||||
Total interest and dividend income | 6,539 | 6,948 | 5,742 | 13,487 | 11,416 | |||||||||||||||
Interest expense: | ||||||||||||||||||||
Interest on deposits | 1,050 | 1,119 | 951 | 2,169 | 1,907 | |||||||||||||||
Interest on FHLB borrowed funds | 163 | 173 | 164 | 336 | 329 | |||||||||||||||
Interest on other borrowed funds | 102 | 99 | — | 201 | — | |||||||||||||||
Total interest expense | 1,315 | 1,391 | 1,115 | 2,706 | 2,236 | |||||||||||||||
Net interest income | 5,224 | 5,557 | 4,627 | 10,781 | 9,180 | |||||||||||||||
Provision for loan losses | — | — | — | — | 75 | |||||||||||||||
Net interest income after provision for loan losses | 5,224 | 5,557 | 4,627 | 10,781 | 9,105 | |||||||||||||||
Non-interest income: | ||||||||||||||||||||
Net gains on available for sale securities | — | 29 | 4 | 29 | 4 | |||||||||||||||
Service charges on deposit accounts | 342 | 398 | 331 | 740 | 754 | |||||||||||||||
Loan fees and service charges | 294 | 603 | 263 | 897 | 584 | |||||||||||||||
Settlement proceeds | 283 | — | — | 283 | — | |||||||||||||||
Other | 285 | 283 | 212 | 568 | 418 | |||||||||||||||
Total non-interest income | 1,204 | 1,313 | 810 | 2,517 | 1,760 | |||||||||||||||
Non-interest expense: | ||||||||||||||||||||
Salaries and related benefits | 2,708 | 2,674 | 2,188 | 5,382 | 4,406 | |||||||||||||||
Occupancy | 563 | 1,068 | 712 | 1,631 | 1,281 | |||||||||||||||
Office | 312 | 281 | 262 | 593 | 514 | |||||||||||||||
Data processing | 454 | 472 | 420 | 926 | 829 | |||||||||||||||
Amortization of core deposit intangible | 38 | 43 | 21 | 81 | 35 | |||||||||||||||
Advertising, marketing and public relations | 105 | 63 | 145 | 168 | 282 | |||||||||||||||
FDIC premium assessment | 69 | 83 | 84 | 152 | 169 | |||||||||||||||
Professional services | 435 | 401 | 284 | 836 | 456 | |||||||||||||||
Other | 351 | 378 | 294 | 729 | 553 | |||||||||||||||
Total non-interest expense | 5,035 | 5,463 | 4,410 | 10,498 | 8,525 | |||||||||||||||
Income before provision for income taxes | 1,393 | 1,407 | 1,027 | 2,800 | 2,340 | |||||||||||||||
(Provision) benefit for income taxes | (459 | ) | (467 | ) | (352 | ) | 926 | 818 | ||||||||||||
Net income attributable to common stockholders | $ | 934 | $ | 940 | $ | 675 | $ | 1,874 | $ | 1,522 | ||||||||||
Per share information: | ||||||||||||||||||||
Basic earnings | $ | 0.18 | $ | 0.18 | $ | 0.13 | $ | 0.36 | $ | 0.29 | ||||||||||
Diluted earnings | $ | 0.17 | $ | 0.18 | $ | 0.13 | $ | 0.35 | $ | 0.29 | ||||||||||
Cash dividends paid | $ | 0.16 | $ | — | $ | 0.12 | $ | 0.16 | $ | 0.12 | ||||||||||
Book value per share at end of period | $ | 12.22 | $ | 12.13 | $ | 12.00 | $ | 12.22 | $ | 12.00 | ||||||||||
Tangible book value per share at end of period | $ | 11.19 | $ | 11.09 | $ | 11.85 | $ | 11.19 | $ | 11.85 | ||||||||||
Reconciliation of GAAP Earnings and Core Earnings (non-GAAP):
Six Months Ended | ||||||||||||||||||||
March 31, 2017 | December 31, 2016 | March 31, 2016 (As Restated) | March 31, 2017 | March 31, 2016 (As Restated) | ||||||||||||||||
(Dollars in Thousands, except share data) | ||||||||||||||||||||
GAAP earnings before income taxes | $ | 1,393 | $ | 1,407 | $ | 1,027 | $ | 2,800 | $ | 2,340 | ||||||||||
Merger related costs (1) | 196 | — | 35 | 196 | 35 | |||||||||||||||
Branch closure costs (2) | 4 | 633 | 187 | 637 | 225 | |||||||||||||||
Settlement proceeds (3) | (283 | ) | — | — | (283 | ) | — | |||||||||||||
Prepayment fee (4) | 104 | — | — | 104 | — | |||||||||||||||
Core earnings before income taxes (5) | 1,414 | 2,040 | 1,249 | 3,454 | 2,600 | |||||||||||||||
Provision for income tax on core earnings at 34% | 481 | 694 | 424 | 1,175 | 884 | |||||||||||||||
Core earnings after income taxes (5) | $ | 933 | $ | 1,346 | $ | 825 | $ | 2,279 | $ | 1,716 | ||||||||||
GAAP diluted earnings per share, net of tax | $ | 0.17 | $ | 0.18 | $ | 0.13 | $ | 0.35 | $ | 0.29 | ||||||||||
Merger related costs, net of tax | 0.02 | — | — | 0.02 | — | |||||||||||||||
Branch closure costs, net of tax | — | 0.08 | 0.02 | 0.08 | 0.03 | |||||||||||||||
Settlement proceeds | $ | (0.03 | ) | $ | — | $ | — | $ | (0.03 | ) | $ | — | ||||||||
Prepayment fee | $ | 0.01 | $ | — | $ | — | $ | 0.01 | $ | — | ||||||||||
Core diluted earnings per share, net of tax | $ | 0.17 | $ | 0.26 | $ | 0.15 | $ | 0.43 | $ | 0.32 | ||||||||||
Average diluted shares outstanding | 5,306,463 | 5,293,700 | 5,263,246 | 5,299,595 | 5,259,806 | |||||||||||||||
(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 non-interest expense in the consolidated statement of operations.
(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.
Non-performing Assets:
March 31, 2017 and Three Months Ended | December 31, 2016 and Three Months Ended | September 30, 2016 and Twelve Months Ended | March 31, 2016 and Three Months Ended | |||||||||||||
Nonperforming assets: | ||||||||||||||||
Nonaccrual loans | 5,767 | $ | 5,750 | $ | 3,191 | $ | 1,192 | |||||||||
Accruing loans past due 90 days or more | 576 | 894 | 380 | 287 | ||||||||||||
Total nonperforming loans (“NPLs”) (1) | 6,343 | 6,644 | 3,571 | 1,479 | ||||||||||||
Other real estate owned (1) | 647 | 655 | 725 | 739 | ||||||||||||
Other collateral owned | 45 | 129 | 52 | 93 | ||||||||||||
Total nonperforming assets (“NPAs”) (1) | $ | 7,035 | $ | 7,428 | $ | 4,348 | $ | 2,311 | ||||||||
Troubled Debt Restructurings (“TDRs”) - Originated Loans | $ | 3,471 | $ | 3,529 | $ | 3,733 | $ | 3,889 | ||||||||
Nonaccrual TDRs - Originated Loans | $ | 404 | $ | 410 | $ | 515 | $ | 420 | ||||||||
Average outstanding loan balance | $ | 554,624 | $ | 561,672 | $ | 512,475 | $ | 445,687 | ||||||||
Loans, end of period | 534,808 | 548,904 | 574,439 | 466,492 | ||||||||||||
Total assets, end of period | 668,453 | 686,414 | 695,865 | 601,800 | ||||||||||||
ALL, at beginning of period | 5,917 | 6,068 | 6,496 | 6,441 | ||||||||||||
Loans charged off: | ||||||||||||||||
Residential real estate | (67 | ) | (43 | ) | (140 | ) | (14 | ) | ||||||||
Commercial/agriculture real estate | — | — | — | — | ||||||||||||
Consumer non-real estate | (67 | ) | (172 | ) | (460 | ) | (170 | ) | ||||||||
Commercial agriculture non-real estate | (2 | ) | — | (118 | ) | |||||||||||
Total loans charged off | (136 | ) | (215 | ) | (718 | ) | (184 | ) | ||||||||
Recoveries of loans previously charged off: | ||||||||||||||||
Residential real estate | 1 | 3 | 11 | 2 | ||||||||||||
Commercial/agriculture real estate | — | — | — | — | ||||||||||||
Consumer non-real estate | 52 | 61 | 204 | 44 | ||||||||||||
Commercial agriculture non-real estate | 1 | — | — | — | ||||||||||||
Total recoveries of loans previously charged off: | 54 | 64 | 215 | 46 | ||||||||||||
Net loans charged off (“NCOs”) | (82 | ) | (151 | ) | (503 | ) | (138 | ) | ||||||||
Additions to ALL via provision for loan losses charged to operations | — | — | 75 | — | ||||||||||||
ALL, at end of period | $ | 5,835 | $ | 5,917 | $ | 6,068 | $ | 6,303 | ||||||||
Ratios: | ||||||||||||||||
ALL to NCOs (annualized) | 1,778.96 | % | 979.64 | % | 1,206.36 | % | 1,141.85 | % | ||||||||
NCOs (annualized) to average loans | 0.06 | % | 0.11 | % | 0.10 | % | 0.12 | % | ||||||||
ALL to total loans | 1.09 | % | 1.08 | % | 1.06 | % | 1.35 | % | ||||||||
NPLs to total loans | 1.19 | % | 1.21 | % | 0.62 | % | 0.32 | % | ||||||||
NPAs to total assets | 1.05 | % | 1.08 | % | 0.62 | % | 0.38 | % | ||||||||
(1) Total Nonperforming assets increased due to the CBN acquisition in Fiscal 2016. Acquired nonperforming loans were $4,322, $5,090 and $1,778 at March 31, 2017, December 31, 2016 and September 30, 2016, respectively. Acquired real estate owned property balances were $160, $143 and $212 at March 31, 2017, December 31, 2016 and September 30, 2016, respectively.
Troubled Debt Restructurings:
March 31, 2017 | December 31, 2016 | September 30, 2016 | March 31, 2016 | ||||||||||||||||||||||||
Number of Modifications | Recorded Investment | Number of Modifications | Recorded Investment | Number of Modifications | Recorded Investment | Number of Modifications | Recorded Investment | ||||||||||||||||||||
Troubled debt restructurings: | |||||||||||||||||||||||||||
Residential real estate | 29 | $ | 3,110 | 30 | $ | 3,214 | 32 | $ | 3,413 | 33 | $ | 3,477 | |||||||||||||||
Commercial/Agricultural real estate | — | — | — | — | — | — | — | — | |||||||||||||||||||
Consumer non-real estate | 23 | 318 | 22 | 315 | 21 | 320 | 28 | 412 | |||||||||||||||||||
Commercial/Agricultural non-real estate | 1 | 43 | — | — | — | — | — | — | |||||||||||||||||||
Total loans | 53 | $ | 3,471 | 52 | $ | 3,529 | 53 | $ | 3,733 | 61 | $ | 3,889 | |||||||||||||||
Loan Composition:
March 31, 2017 | December 31, 2016 | September 30, 2016 | ||||||||||
Originated Loans: | ||||||||||||
Residential real estate: | ||||||||||||
One to four family | $ | 143,859 | $ | 151,180 | $ | 160,961 | ||||||
Commercial/Agricultural real estate: | ||||||||||||
Commercial real estate | 75,510 | 62,724 | 58,768 | |||||||||
Agricultural real estate | 6,817 | 4,803 | 3,418 | |||||||||
Multi-family real estate | 17,538 | 15,550 | 18,935 | |||||||||
Construction and land development | 13,166 | 12,812 | 12,977 | |||||||||
Consumer non-real estate: | ||||||||||||
Originated indirect paper | 103,021 | 111,507 | 119,073 | |||||||||
Purchased indirect paper | 38,201 | 44,006 | 49,221 | |||||||||
Other Consumer | 16,035 | 17,851 | 18,926 | |||||||||
Commercial/Agricultural non-real estate: | ||||||||||||
Commercial non-real estate | 20,236 | 20,803 | 17,969 | |||||||||
Agricultural non-real estate | 10,727 | 9,621 | 9,994 | |||||||||
Total originated loans | $ | 445,110 | $ | 450,857 | $ | 470,242 | ||||||
Acquired Loans: | ||||||||||||
Residential real estate: | ||||||||||||
One to four family | $ | 22,299 | $ | 24,884 | $ | 26,777 | ||||||
Commercial/Agricultural real estate: | ||||||||||||
Commercial real estate | 27,243 | 28,444 | 30,172 | |||||||||
Agricultural real estate | 21,325 | 24,133 | 24,780 | |||||||||
Multi-family real estate | — | — | 200 | |||||||||
Construction and land development | 2,248 | 2,710 | 3,603 | |||||||||
Consumer non-real estate: | ||||||||||||
Other Consumer | 501 | 604 | 789 | |||||||||
Commercial/Agricultural non-real estate: | ||||||||||||
Commercial non-real estate | 11,930 | 12,650 | 13,032 | |||||||||
Agricultural non-real estate | 4,221 | 4,466 | 4,653 | |||||||||
Total acquired loans | $ | 89,767 | $ | 97,891 | $ | 104,006 | ||||||
Total Loans: | ||||||||||||
Residential real estate: | ||||||||||||
One to four family | $ | 166,158 | $ | 176,064 | $ | 187,738 | ||||||
Commercial/Agricultural real estate: | ||||||||||||
Commercial real estate | 102,753 | 91,168 | 88,940 | |||||||||
Agricultural real estate | 28,142 | 28,936 | 28,198 | |||||||||
Multi-family real estate | 17,538 | 15,550 | 19,135 | |||||||||
Construction and land development | 15,414 | 15,522 | 16,580 | |||||||||
Consumer non-real estate: | ||||||||||||
Originated indirect paper | 103,021 | 111,507 | 119,073 | |||||||||
Purchased indirect paper | 38,201 | 44,006 | 49,221 | |||||||||
Other Consumer | 16,536 | 18,455 | 19,715 | |||||||||
Commercial/Agricultural non-real estate: | ||||||||||||
Commercial non-real estate | 32,166 | 33,453 | 31,001 | |||||||||
Agricultural non-real estate | 14,948 | 14,087 | 14,647 | |||||||||
Gross loans | $ | 534,877 | $ | 548,748 | $ | 574,248 | ||||||
Net deferred loan costs (fees) | (69 | ) | 156 | $ | 191 | |||||||
Total loans receivable | $ | 534,808 | $ | 548,904 | $ | 574,439 | ||||||
Deposit Composition:
March 31, 2017 | December 31, 2016 | September 30, 2016 | ||||||||
Non-interest bearing demand deposits | 45,661 | $ | 47,463 | 45,408 | ||||||
Interest bearing demand deposits | 53,848 | 50,779 | 48,934 | |||||||
Savings accounts | 53,865 | 51,826 | 52,153 | |||||||
Money market accounts | 122,080 | 125,923 | 137,234 | |||||||
Certificate accounts | 255,475 | 259,121 | 273,948 | |||||||
Total deposits | 530,929 | $ | 535,112 | 557,677 | ||||||
Average balances, Interest Yields and Rates:
Three months ended March 31, 2017 | Three months ended December 31, 2016 | Three months ended March 31, 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 | $ | 17,695 | $ | 29 | 0.66 | % | $ | 10,238 | $ | 12 | 0.47 | % | $ | 13,212 | $ | 18 | 0.55 | % | |||||||||||||||
Loans receivable | 539,276 | 6,072 | 4.57 | % | 561,519 | 6,530 | 4.61 | % | 459,465 | 5,301 | 4.64 | % | |||||||||||||||||||||
Interest bearing deposits | 745 | 4 | 2.18 | % | 745 | 3 | 1.60 | % | 3,117 | 16 | 2.06 | % | |||||||||||||||||||||
Investment securities (1) | 86,494 | 451 | 2.11 | % | 86,617 | 430 | 1.97 | % | 94,617 | 429 | 1.82 | % | |||||||||||||||||||||
Non-marketable equity securities, at cost | 4,874 | 55 | 4.58 | % | 5,200 | 45 | 3.43 | % | 4,626 | 44 | 3.83 | % | |||||||||||||||||||||
Total interest earning assets | $ | 649,084 | $ | 6,611 | 4.13 | % | $ | 664,319 | $ | 7,020 | 4.19 | % | $ | 575,037 | $ | 5,808 | 4.06 | % | |||||||||||||||
Average interest bearing liabilities: | |||||||||||||||||||||||||||||||||
Savings accounts | $ | 45,199 | $ | 16 | 0.14 | % | $ | 43,743 | $ | 17 | 0.15 | % | $ | 28,308 | $ | 7 | 0.10 | % | |||||||||||||||
Demand deposits | 52,647 | 61 | 0.47 | % | 48,989 | 74 | 0.60 | % | 26,625 | 46 | 0.69 | % | |||||||||||||||||||||
Money market accounts | 124,389 | 127 | 0.41 | % | 130,057 | 134 | 0.41 | % | 138,248 | 141 | 0.41 | % | |||||||||||||||||||||
CD’s | 234,842 | 771 | 1.33 | % | 245,646 | 814 | 1.31 | % | 222,176 | 689 | 1.25 | % | |||||||||||||||||||||
IRA’s | 27,777 | 75 | 1.10 | % | 29,000 | 80 | 1.09 | % | 23,221 | 68 | 1.18 | % | |||||||||||||||||||||
Total deposits | $ | 484,854 | $ | 1,050 | 0.88 | % | $ | 497,435 | $ | 1,119 | 0.89 | % | $ | 438,578 | $ | 951 | 0.87 | % | |||||||||||||||
FHLB advances and other borrowings | 80,391 | 264 | 1.33 | % | 78,841 | 273 | 1.37 | % | 61,453 | 164 | 1.07 | % | |||||||||||||||||||||
Total interest bearing liabilities | $ | 565,245 | $ | 1,314 | 0.94 | % | $ | 576,276 | $ | 1,392 | 0.96 | % | $ | 500,031 | $ | 1,115 | 0.90 | % | |||||||||||||||
Net interest income | $ | 5,297 | $ | 5,628 | $ | 4,693 | |||||||||||||||||||||||||||
Interest rate spread | 3.19 | % | 3.23 | % | 3.16 | % | |||||||||||||||||||||||||||
Net interest margin | 3.31 | % | 3.36 | % | 3.28 | % | |||||||||||||||||||||||||||
Average interest earning assets to average interest bearing liabilities | 1.15 | 1.15 | 1.15 | ||||||||||||||||||||||||||||||
(1) For the 3 months ended March 31, 2017, December 31, 2016 and March 31, 2016, the average balance of the tax exempt investment securities, included in investment securities, were $31,445, $31,986 and $28,565 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.
Six months ended March 31, 2017 | Six months ended March 31, 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 | $ | 13,724 | $ | 41 | 0.60 | % | $ | 17,188 | $ | 33 | 0.38 | % | |||||||||||
Loans receivable | 550,611 | 12,602 | 4.59 | % | 455,921 | 10,551 | 4.63 | % | |||||||||||||||
Interest bearing deposits | 745 | 7 | 1.88 | % | 3,063 | 33 | 2.15 | % | |||||||||||||||
Investment securities (1) | 86,439 | 881 | 2.04 | % | 91,334 | 853 | 1.87 | % | |||||||||||||||
Non-marketable equity securities, at cost | 4,990 | 100 | 4.02 | % | 4,626 | 72 | 3.11 | % | |||||||||||||||
Total interest earning assets | $ | 656,509 | $ | 13,631 | 4.16 | % | $ | 572,132 | $ | 11,542 | 4.03 | % | |||||||||||
Average interest bearing liabilities: | |||||||||||||||||||||||
Savings accounts | $ | 44,559 | $ | 33 | 0.15 | % | $ | 27,787 | $ | 15 | 0.11 | % | |||||||||||
Demand deposits | 50,824 | 135 | 0.53 | % | 25,324 | 90 | 0.71 | % | |||||||||||||||
Money market accounts | 127,408 | 261 | 0.41 | % | 141,263 | 295 | 0.42 | % | |||||||||||||||
CD’s | 240,433 | 1,585 | 1.32 | % | 221,064 | 1,372 | 1.24 | % | |||||||||||||||
IRA’s | 28,419 | 155 | 1.09 | % | 22,925 | 135 | 1.18 | % | |||||||||||||||
Total deposits | $ | 491,643 | $ | 2,169 | 0.88 | % | $ | 438,363 | $ | 1,907 | 0.87 | % | |||||||||||
FHLB advances and other borrowings | 78,920 | 537 | 1.36 | % | 60,355 | 329 | 1.09 | % | |||||||||||||||
Total interest bearing liabilities | $ | 570,563 | $ | 2,706 | 0.95 | % | $ | 498,718 | $ | 2,236 | 0.90 | % | |||||||||||
Net interest income | $ | 10,925 | $ | 9,306 | |||||||||||||||||||
Interest rate spread | 3.21 | % | 3.13 | % | |||||||||||||||||||
Net interest margin | 3.34 | % | 3.25 | % | |||||||||||||||||||
Average interest earning assets to average interest bearing liabilities | 1.15 | 1.15 | |||||||||||||||||||||
(1) For the 6 months ended March 31, 2017 and March 31, 2016, the average balance of the tax exempt investment securities, included in investment securities, were $31,738 and $27,455 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)
March 31, 2017 | December 31, 2016 | September 30, 2016 | To Be Well Capitalized Under Prompt Corrective Action Provisions | |||||
Total capital (to risk weighted assets) | 14.8% | 14.7% | 14.1% | 10.0% | ||||
Tier 1 capital (to risk weighted assets) | 13.6% | 13.5% | 12.9% | 8.0% | ||||
Common equity tier 1 capital (to risk weighted assets) | 13.6% | 13.5% | 12.9% | 6.5% | ||||
Tier 1 leverage ratio (to adjusted total assets) | 9.8% | 9.8% | 9.3% | 5.0% | ||||