• Citizens Community Bancorp, Inc. Earns $5.5 Million, or $0.50 Per Share in 1Q21; Record Quarterly Earnings Increase 54% from 4Q20 Earnings; Asset Quality Continues to Improve

    Source: Nasdaq GlobeNewswire / 26 Apr 2021 15:15:01   America/Chicago

    EAU CLAIRE, Wis., April 26, 2021 (GLOBE NEWSWIRE) -- Citizens Community Bancorp, Inc. (the “Company”) (Nasdaq: CZWI), the parent company of Citizens Community Federal N.A. (the “Bank” or “CCFBank”), today reported earnings of $5.5 million or $0.50 per diluted share for the quarter ended March 31, 2021 compared to $3.6 million, or $0.32 per diluted share for the quarter ended December 31, 2020, and $2.6 million, or $0.23 per diluted share for the quarter ended March 31, 2020. Net income as adjusted (non-GAAP)1 was $5.6 million or $0.51 per diluted share for the first quarter of 2021, compared to $3.7 million, or $0.33 per diluted share for the preceding quarter and $2.6 million or $0.23 per diluted share for the first quarter a year ago.

    The Company’s first quarter 2021 operating results reflected: (1) lower net interest income largely resulting from decreased accretion due to reductions of purchased credit impaired loan payoffs, partially offset by higher accretion of deferred fees on the Small Business Administration’s Paycheck Protection Program (SBA PPP) debt forgiveness; (2) no loan loss provisions, primarily due to loan shrinkage, lower net charge-offs and no provision related to economic uncertainty recorded in 2020; (3) a slow-down in the refinancing market which led to decreased, yet strong gain on sale of loans; and (4) a decrease in non-interest expenses largely due to a reversal of $0.9 million of previously recorded MSR impairment as forecasted future prepayments slowed, and no branch closure costs, offset by modestly higher compensation expense and $0.1 million of debt termination costs.

    Book value per share was $14.75 at March 31, 2021 compared to $14.52 at December 31, 2020 and $13.27 at March 31, 2020. Tangible book value per share (non-GAAP)5 was $11.39 at March 31, 2021 compared to $11.18 at December 31, 2020 and $9.80 at March 31, 2020. Book value per share increased $1.48 over the past 12 months, an 11% increase from March 31, 2020. Tangible book value per share increased $1.59 over the past 12 months, a 16% increase from March 31, 2020.

    “I am pleased with our Team’s effort in building a strong culture focused on deepening our customer relationships has translated into strong financial results. Our continued focus on building tangible book value, improving asset quality and expense management was demonstrated in the quarter and year over year. Tangible book value increased 16% year over year and the cash dividend was increased 10% to $0.23 per share paid in the first quarter, despite operating in an uncertain environment. Nonperforming assets declined 19% in the quarter and have declined over 50% in the past 12 months. I am optimistic that with COVID-19 vaccinations increasing, our branch lobbies reopening in June, and our cold winter coming to a close, that loan demand should increase, especially since unemployment rates in our markets are below the national averages,” said Stephen Bianchi, Chairman, President and Chief Executive Officer. “We also assisted our business and farming customers seeking a second draw of SBA PPP loans, with the expected $3.3 million of deferred fees to be accreted over the life of the loans,” continued Bianchi.

    March 31, 2021 Highlights: (as of or for the 3-month period ended March 31, 2021 compared to December 31, 2020 and March 31, 2020.)

    • Record quarterly earnings of $5.5 million, or $0.50 per diluted share for the first quarter ended March 31, 2021 were led by a continued strong mortgage origination climate, no loan loss provision and lower non-interest expenses supported by a reversal in mortgage servicing rights impairment charges. For the quarter ended December 31, 2020, earnings were $3.6 million or $0.32 per diluted share.
    • Stockholders’ equity as a percent of total assets was to 9.27% at March 31, 2021 compared to 9.74% at December 31, 2020. Tangible common equity as a percent of tangible assets (non-GAAP)5 was 7.32% at March 31, 2021 compared to 7.67% at December 31, 2020. These decreases were due to strong deposit growth which increased liquidity and resulted in asset growth.
    • No loan loss provisions were realized during the quarter ended March 31, 2021 due to improved asset quality, a smaller balance of loans receivable and lower charge-off activity. Economic conditions in our markets continued to improve from those seen in the last quarter of 2020. This has led to improving trends for businesses most impacted by the pandemic, but further improvements in their prospects will depend on the timing and efficacy of vaccinations, and related impact on consumer behavior and business activities.
    • The Bank’s COVID-19 related modifications under Section 4013 of the CARES Act totaled $57.3 million, or 5% of gross loans at March 31, 2021 versus $61 million, or 5% of gross loans at December 31, 2020. At March 31, 2021, hotel industry sector loans represent $48.9 million of the approved deferrals. Approximately $39 million of commercial loan modifications are scheduled to make their principal and interest payment in the second quarter. Approximately 45% of these dollars had a contractual payment due in April and all borrowers made this payment.
    • The allowance for loan losses on originated loans, excluding SBA PPP loans, increased to 1.84% at March 31, 2021 from 1.77% at December 31, 2020. Since SBA PPP loans are guaranteed by the SBA, they are excluded from this reserve calculation. Additionally, loans resulting from Bank acquisitions were effectively marked to market value at the time of their acquisition and were also excluded from this reserve calculation. The allowance for loan losses of $16.9 million, is allocated $15.0 million to the originated loan portfolio and $1.9 million to the acquired loan portfolio.
    • Nonperforming assets continued to decline and at March 31, 2021 were $9.3 million compared to $11.5 million one quarter earlier or a reduction of 19.3%.

    Balance Sheet and Asset Quality

    Total assets increased $83.2 million during the quarter to $1.73 billion at March 31, 2021 compared to $1.65 billion at December 31, 2020. This increase was approximately the same as the increase in deposits of $84.9 million.

    Securities available for sale increased $41.0 million during the quarter ended March 31, 2021 to $185.2 million from $144.2 million at December 31, 2020. The Bank’s securities held to maturity increased $13.9 million in the quarter. This growth was largely through the purchase of 30-year agency mortgage-backed securities. These purchases allowed the Bank to modestly reduce the asset sensitive interest rate profile from December 31, 2020.

    Loans receivable decreased by $45.5 million to $1.19 billion at March 31, 2021. The originated loan portfolio before SBA PPP loans decreased $18.3 million in the quarter. This decrease included the repayment of $5.5 million of draws on a line of credit originated the last business day of December and repaid on the first business day of January. Total SBA PPP loans decreased $4.8 million due to debt forgiveness of $52 million, offset by strong new SBA PPP second round loan originations of $47 million. Acquired loans decreased by $22.6 million. This decrease was partially due to reductions in agricultural real estate due to the borrower requesting a long-term fixed-rate loan which the Bank facilitated using Farmer Mac financing.

    The allowance for loan losses modestly decreased to $16.9 million at March 31, 2021, representing 1.41% of loans receivable compared to $17.0 million at December 31, 2020, representing 1.38% of loans receivable. Excluding the SBA PPP loans, which are guaranteed by the SBA, the allowance for loan losses was 1.57% at March 31, 2021 compared to 1.53% at December 31, 2020. Approximately 22% of the loan portfolio at March 31, 2021 consists of loans purchased through whole bank acquisitions resulting in these loans being recorded at fair market value at acquisition. The allowance for loan losses as a percent of originated loans excluding PPP loans was 1.84% at March 31, 2021 compared to 1.77% at December 31, 2020. For the quarter ended March 31, 2021, the Bank had net charge-offs of $183,000.

    Allowance for Loan Losses Percentages
    (in thousands, except ratios)

      March 31, 2021 December 31, 2020 September 30, 2020 March 31, 2020
    Originated loans, net of deferred fees and costs $817,261   $835,769   $777,340   $789,346 
    SBA PPP loans, net of deferred fees 115,920   120,711   135,177   — 
    Acquired loans, net of unamortized discount 258,945   281,101   317,622   391,605 
    Loans, end of period $1,192,126   $1,237,581   $1,230,139   $1,180,951 
    SBA PPP loans, net of deferred fees (115,920)  (120,711)  (135,177)  — 
    Loans, net of SBA PPP loans and deferred fees $1,076,206   $1,116,870   $1,094,962   $1,180,951 
    Allowance for loan losses allocated to originated loans $15,028   $14,819   $12,809   $10,850 
    Allowance for loan losses allocated to other loans 1,832   2,224   2,027   985 
    Allowance for loan losses $16,860   $17,043   $14,836   $11,835 
    Non-accretable difference on purchased credit impaired
    loans    		 $966   $1,087   $1,661   $4,327 
    ALL as a percentage of loans, end of period 1.41 % 1.38 % 1.21 % 1.00%
    ALL as a percentage of loans, net of SBA PPP loans
    and deferred fees    		 1.57 % 1.53 % 1.35 % 1.00%
    ALL allocated to originated loans as a percentage of
    originated loans, net of deferred fees and costs    		 1.84 % 1.77 % 1.65 % 1.37%


    Nonperforming assets decreased 19.3% to $9.3 million or 0.54% of total assets at March 31, 2021 compared to $11.5 million or 0.70% of total assets at December 31, 2020. Included in nonperforming assets at March 31, 2021 are $6.5 million of nonperforming assets acquired during recent whole-bank acquisitions. Originated nonperforming assets were $2.8 million, or 0.16% of total assets for the most recent quarter. Over the past year, nonperforming assets declined 52% from $19.2 million at March 31, 2020 to $9.3 million at March 31, 2021.

    Substandard and special mention loans increased $4.5 million during the quarter ended March 31, 2021 largely due to one hotel loan that moved to special mention. This loan is currently in payment deferral status. Over the past year, total criticized loans decreased 31.3% from $57.8 million at March 31, 2020 to $39.7 million at March 31, 2021.

      (in thousands)
      March 31, 2021 December 31, 2020 September 30, 2020 June 30, 2020 March 31, 2020
    Special mention loan balances $13,659  $6,672  $7,777  $19,958  $19,387 
    Substandard loan balances 26,064  28,541  32,922  35,911  38,393 
    Criticized loans, end of period $39,723  $35,213  $40,699  $55,869  $57,780 


    Deposits increased $84.9 million to $1.38 billion at March 31, 2021 from $1.30 billion at December 31, 2020. The increase was in non-maturity deposits which more than offset the decrease of $23.8 million in certificates of deposit.
    The decrease in certificates of deposit was due to the Company choosing not to match higher rate local retail certificate competition.

    Review of Operations

    Net interest income was $12.8 million for the first quarter ended March 31, 2021 compared to $13.4 million for the fourth quarter ended December 31, 2020 and $12.7 million for the quarter ended March 31, 2020. The net interest margin (“NIM”) decreased to 3.31% in the first quarter ended March 31, 2021 compared to 3.51% for the fourth quarter ended December 31, 2020. The decrease in NIM was primarily due to a larger percentage of lower yielding interest-bearing cash which lowered NIM by 11 basis points, lower yields on loans and securities, the impact of higher yielding loans being replaced by lower yielding investment securities, partially offset by the decrease in liability costs. The net interest margin for the current quarter also reflected a decrease in accretion on purchased credit impaired loans and an increased accretion on SBA PPP loans. Net interest income was negatively impacted by two fewer days in the quarter, which decreased net interest income approximately $0.3 million.

    The net interest margin decreased to 3.31% for the quarter ended March 31, 2021 from 3.64% for the quarter ended March 31, 2020. This decrease is largely due to the Federal Reserve decreasing interest rates 125 basis points in six days in March 2020, which resulted in lower loan and security yields, partially offset by lower deposit costs. Approximately half of the decrease is due to uninvested liquidity.

    The table below shows the impact of accretion related to purchased credit impaired loans and SBA PPP loans on interest income and NIM.

    Net interest income and net interest margin analysis:
    (in thousands, except yields and rates)

      Three months ended
      March 31, 2021 December 31, 2020 September 30, 2020 June 30, 2020 March 31, 2020
      Net
    Interest
    Income    		 Net
    Interest
    Margin    		 Net
    Interest
    Income    		 Net
    Interest
    Margin    		 Net
    Interest
    Income    		 Net
    Interest
    Margin    		 Net
    Interest
    Income    		 Net
    Interest
    Margin    		 Net
    Interest
    Income    		 Net
    Interest
    Margin
    As reported $12,764   3.31 % $13,372   3.51 % $11,909   3.11 % $12,303   3.34 % $12,671   3.64 %
    Less non-accretable difference realized as interest from payoff of purchased credit impaired loans $(58)  (0.02)% $(324)  (0.08)% $(130)  (0.03)% $(196)  (0.05)% $(1,043)  (0.30)%
    Less accelerated accretion from payoff of certain PCI loans with transferred non-accretable differences $(90)  (0.02)% $(872)  (0.23)% $—   — % $(99)  (0.03)% $—   — %
    Less scheduled accretion interest $(266)  (0.07)% $(252)  (0.07)% $(276)  (0.07)% $(247)  (0.07)% $(233)  (0.07)%
    Without loan purchase accretion $12,350   3.20 % $11,924   3.13 % $11,503   3.01 % $11,761   3.19 % $11,395   3.27 %
    Less SBA PPP net loan fee accretion $(1,750)  (0.45)% $(985)  (0.26)% $(643)  (0.17)% $(500)  (0.14)% $—   — %
    Without SBA PPP purchase and net loan fee accretion $10,600   2.75 % $10,939   2.87 % $10,860   2.84 % $11,261   3.05 % $11,395   3.27 %


    The table below lists the SBA PPP loans and net deferred loan fee accretion balances related to 2020 and 2021 SBA PPP loan originations:


      March 31, 2021 December 31, 2020
      Balance Net Deferred Fee Income Balance Net Deferred Fee Income
    SBA PPP loans - Round 1 $71,464  $1,290  $123,702  $2,991 
    SBA PPP loans - Round 2 47,467  1,721  —  — 
    Total SBA PPP loans $118,931  $3,011  $123,702  $2,991 


    The Bank’s current pipeline would add an additional $7 million of new SBA PPP loans and the Bank should collect an additional $1.6 million in fee income as not all fees associated with loans closed in the first quarter of 2021 were received at March 31, 2021.

    The Bank continued to manage deposit interest rates, as various non-maturity deposit product rates were reduced, and interest rates on new and renewed certificates of deposit were lower than the previous quarter. These actions reduced the cost of deposits by 11 basis points in the quarter. At March 31, 2021, the Bank had approximately $160 million of certificate of deposit accounts maturing in 2021 with a weighted average cost of approximately 1.1% and approximately $110 million of certificate of deposit accounts maturing in 2022 with a weighted average cost of approximately 2.0%. The 2021 maturities are approximately evenly spread throughout the year, with approximately 85% of the 2022 maturities occurring in the first half of 2022. The approximate weighted average cost of new certificates in the first quarter of 2021 was below 0.5%.

    Loan loss provisions were zero for the quarter ended March 31, 2021 compared to $2.5 million for the quarter ended December 31, 2020 and $2.0 million one year earlier. During the quarter ended March 31, 2021, asset quality improved as indicated by a lower level of non-performing assets, substandard assets and lower loan deferrals under Section 4013 of the Cares Act. This, along with reduced overall loan balances, resulted in an adequate ALLL without recording any loan loss provision in the quarter. Additionally, both the December 31, 2020 and March 31, 2020 quarters had provisions related to increases in Q-Factors related to COVID-19. With decreases in loan deferrals and improvements in general economic conditions, no such Q-factor increase was applied in the quarter ended March 31, 2021. To a lesser extent, the quarters ended December 31, 2020 and March 31, 2020 also had provisions related to loan growth.

    Non-interest income decreased $0.6 million in the quarter ended March 31, 2021 to $4.2 million compared to $4.8 million in the quarter ended December 31, 2020 and increased $0.6 million from the quarter ended March 31, 2020. The decrease in the first quarter compared to the fourth quarter was largely due to a modest reduction in gain on sale of loans. This modest reduction was due to the impact of higher interest rates, which slowed refinancing activity and, to a lesser extent, colder weather, which slowed customer purchase activity. The increase during the quarter compared to the year ago quarter was largely due to higher gain on sale of loans, partially offset by the sale of Wells Insurance Agency in the second quarter of 2020 resulting in no insurance commission income in the first quarter of 2021.

    Total non-interest expense decreased $1.3 million in the first quarter of 2021 to $9.5 million compared to $10.8 million for the quarter ended December 31, 2020 and $10.7 million for the quarter ended March 31, 2020. The decrease from the fourth quarter was largely due to the reversal of $0.9 million of previously recorded MSR impairment, compared to MSR impairment recorded in the fourth quarter of $0.3 million. This decrease in the first quarter of 2021 was offset by $0.1 million in debt termination charges and a $0.16 million increase in compensation expense, largely due to higher payroll taxes and benefit costs. In addition, the fourth quarter of 2020 had $0.2 million of costs related to the closure of 3 branches in mid-November.

    Provisions for income taxes, with record earnings, increased to $1.9 million in the first quarter of 2021 from the fourth quarter of 2020 at $1.2 million. The effective tax rate for the most recent quarter was 26.1% compared to 25.9% for the prior quarter, and 26.4% for the comparable prior year quarter.

    These financial results are preliminary until the Form 10-Q is filed in May 2021.

    About the Company
    Citizens Community Bancorp, Inc. (NASDAQ: “CZWI”) is the holding company of the Bank, a national bank based in Altoona, Wisconsin, currently serving customers primarily in Wisconsin and Minnesota through 25 branch locations. Its primary markets include the Chippewa Valley Region in Wisconsin, the Twin Cities and Mankato markets in Minnesota, and various rural communities around these areas. The Bank offers traditional community banking services to businesses, Ag operators and consumers, including residential mortgage loans.

    Cautionary Statement Regarding Forward-Looking Statements
    Certain statements contained in this release are considered “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may be identified using forward-looking words or phrases such as “anticipate,” “believe,” “could,” “expect,” “estimates,” “intend,” “may,” “preliminary,” “planned,” “potential,” “should,” “will,” “would” or the negative of those terms or other words of similar meaning. Such forward-looking statements in this release are inherently subject to many uncertainties arising in the operations and business environment of the Company and the Bank. These uncertainties include the conditions in the financial markets and economic conditions generally; adverse impacts to the Company or Bank arising from the COVID-19 pandemic; the possibility of a deterioration in the residential real estate markets; interest rate risk; lending risk; the sufficiency of loan allowances; changes in the fair value or ratings downgrades of our securities; competitive pressures among depository and other financial institutions; our ability to maintain our reputation; our ability to realize the benefits of net deferred tax assets; our ability to maintain or increase our market share; acts of terrorism and political or military actions by the United States or other governments; legislative or regulatory changes or actions, or significant litigation, adversely affecting the Company or Bank; increases in FDIC insurance premiums or special assessments by the FDIC; disintermediation risk; our inability to obtain needed liquidity; our ability to successfully execute our acquisition growth strategy; risks posed by acquisitions and other expansion opportunities, including difficulties and delays in integrating the acquired business operations or fully realizing the cost savings and other benefits; our ability to raise capital needed to fund growth or meet regulatory requirements; the possibility that our internal controls and procedures could fail or be circumvented; our ability to attract and retain key personnel; our ability to keep pace with technological change; cybersecurity risks; changes in federal or state tax laws; changes in accounting principles, policies or guidelines and their impact on financial performance; restrictions on our ability to pay dividends; and the potential volatility of our stock price. Stockholders, potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. Such uncertainties and other risks that may affect the Company’s performance are discussed further in Part I, Item 1A, “Risk Factors,” in the Company’s Form 10-K, for the year ended December 31, 2020 filed with the Securities and Exchange Commission (“SEC”) on March 8, 2021 and the Company’s subsequent filings with the SEC. The Company undertakes no obligation to make any revisions to the forward-looking statements contained in this news release or to update them to reflect events or circumstances occurring after the date of this release.

    Non-GAAP Financial Measures
    This press release contains non-GAAP financial measures, such as net income as adjusted, net income as adjusted per share, tangible book value, tangible book value per share, tangible common equity as a percent of tangible assets, return on average tangible common equity and return on average tangible common equity as adjusted, which management believes may be helpful in understanding the Company’s results of operations or financial position and comparing results over different periods.

    Net income as adjusted and net income as adjusted per share are non-GAAP measures that eliminate the impact of certain expenses such as acquisition and branch closure costs and related data processing termination fees, legal costs, severance pay, accelerated depreciation expense and lease termination fees, the gain on sale of branch deposits and fixed assets and the net impact of the Tax Cuts and Jobs Act of 2017, which management believes enhances investors’ ability to better understand the underlying business performance and trends related to core business activities. Merger related charges represent expenses to either satisfy contractual obligations of acquired entities without any useful benefit to the Company or to convert and consolidate customer records onto the Company platforms. These costs are unique to each transaction based on the contracts in existence at the merger date. Tangible book value, tangible book value per share, tangible common equity as a percent of tangible assets and return on average tangible common equity are non-GAAP measures that eliminate the impact of preferred stock equity, goodwill and intangible assets on our financial position. Management believes these measures are useful in assessing the strength of our financial position.

    Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, can be found in this press release. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other banks and financial institutions.
    Contact: Steve Bianchi, CEO
    (715)-836-9994

    (CZWI-ER)


    CITIZENS COMMUNITY BANCORP, INC.
    Consolidated Balance Sheets
    (in thousands, except shares and per share data)

      March 31, 2021 (unaudited) December 31, 2020 (audited) March 31, 2020 (unaudited)
    Assets      
    Cash and cash equivalents $196,039   $119,440   $41,347  
    Other interest-bearing deposits 2,016   3,752   4,006  
    Securities available for sale “AFS” 185,160   144,233   163,435  
    Securities held to maturity “HTM” 57,419   43,551   10,767  
    Equity securities with readily determinable fair value 297   200   163  
    Other investments 15,069   14,948   14,999  
    Loans receivable 1,192,126   1,237,581   1,180,951  
    Allowance for loan losses (16,860)  (17,043)  (11,835) 
    Loans receivable, net 1,175,266   1,220,538   1,169,116  
    Loans held for sale 2,267   3,075   3,281  
    Mortgage servicing rights, net 3,999   3,252   3,728  
    Office properties and equipment, net 21,081   21,165   21,066  
    Accrued interest receivable 5,464   5,652   4,822  
    Intangible assets 5,095   5,494   7,175  
    Goodwill 31,498   31,498   31,498  
    Foreclosed and repossessed assets, net 85   197   1,432  
    Bank owned life insurance (“BOLI”) 23,837   23,684   23,205  
    Other assets 7,702   8,416   5,124  
    TOTAL ASSETS $1,732,294   $1,649,095   $1,505,164  
    Liabilities and Stockholders’ Equity      
    Liabilities:      
    Deposits $1,380,202   $1,295,256   $1,180,055  
    Federal Home Loan Bank (“FHLB”) advances 115,481   123,498   123,477  
    Other borrowings 58,354   58,328   43,576  
    Other liabilities 17,595   11,449   10,123  
    Total liabilities 1,571,632   1,488,531   1,357,231  
    Stockholders’ equity:      
    Common stock— $0.01 par value,
    authorized 30,000,000; 10,893,872;
    11,056,349 and 11,151,009 shares issued
    and outstanding, respectively    		 109   111   112  
    Additional paid-in capital 125,005   126,704   127,732  
    Retained earnings 35,783   32,809   22,690  
    Unearned deferred compensation (1,239)  (550)  (992) 
    Accumulated other comprehensive income (loss) 1,004   1,490   (1,609) 
    Total stockholders’ equity 160,662   160,564   147,933  
    TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $1,732,294   $1,649,095   $1,505,164  

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


    CITIZENS COMMUNITY BANCORP, INC.
    Consolidated Statements of Operations
    (in thousands, except per share data)

      Three Months Ended
      March 31, 2021 (unaudited) December 31, 2020 (unaudited) March 31, 2020 (unaudited)
    Interest and dividend income:      
    Interest and fees on loans $14,517   $15,463   $15,459  
    Interest on investments 1,103   1,052   1,449  
    Total interest and dividend income 15,620   16,515   16,908  
    Interest expense:      
    Interest on deposits 1,714   1,958   3,180  
    Interest on FHLB and FRB borrowed funds 411   428   508  
    Interest on other borrowed funds 731   757   549  
    Total interest expense 2,856   3,143   4,237  
    Net interest income before provision for loan losses 12,764   13,372   12,671  
    Provision for loan losses —   2,500   2,000  
    Net interest income after provision for loan losses 12,764   10,872   10,671  
    Non-interest income:      
    Service charges on deposit accounts 398   496   560  
    Interchange income 530   520   464  
    Loan servicing income 893   1,014   685  
    Gain on sale of loans 1,595   2,108   780  
    Loan fees and service charges 278   342   477  
    Insurance commission income —   —   279  
    Net gains on investment securities 235   13   73  
    Other 247   277   285  
    Total non-interest income 4,176   4,770   3,603  
    Non-interest expense:      
    Compensation and related benefits 5,596   5,440   5,435  
    Occupancy 992   1,017   1,006  
    Office 390   502   543  
    Data processing 1,276   1,255   1,017  
    Amortization of intangible assets 399   399   412  
    Mortgage servicing rights expense (450)  720   736  
    Advertising, marketing and public relations 163   165   239  
    FDIC premium assessment 165   148   68  
    Professional services 521   438   604  
    Gains on repossessed assets, net (117)  (64)  (68) 
    Other 554   806   739  
    Total non-interest expense 9,489   10,826   10,731  
    Income before provision for income taxes 7,451   4,816   3,543  
    Provision for income taxes 1,945   1,246   937  
    Net income attributable to common stockholders $5,506   $3,570   $2,606  
    Per share information:      
    Basic earnings $0.50   $0.32   $0.23  
    Diluted earnings $0.50   $0.32   $0.23  
    Cash dividends paid $0.23   $—   $0.21  
    Book value per share at end of period $14.75   $14.52   $13.27  
    Tangible book value per share at end of period (non-GAAP) $11.39   $11.18   $9.80  

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

    Reconciliation of GAAP Net Income and Net Income as Adjusted (non-GAAP)
    (in thousands, except per share data)

      Three Months Ended Twelve Months Ended
      March 31, 2021 December 31, 2020 March 31, 2020 December 31, 2020
            
    GAAP pretax income $7,451  $4,816  $3,543  $17,280  
    Branch closure costs (1) —  165  —  165  
    Net gain on sale of acquired business lines (2) —  —  —  (432) 
    Settlement proceeds (3) —  —  —  (131) 
    FHLB borrowings prepayment fee (4) 102  —  —  —  
    Pretax income as adjusted (5) 7,553  4,981  3,543  16,882  
    Provision for income tax on net income as adjusted (6) 1,971  1,290  937  4,457  
    Net income as adjusted after income taxes (non-GAAP) (5) $5,582  $3,691  $2,606  $12,425  
    GAAP diluted earnings per share, net of tax $0.50  $0.32  $0.23  $1.14  
    Branch closure costs, net of tax —  0.01  —  0.01  
    Net gain on sale of acquired business lines —  —  —  (0.03) 
    Settlement proceeds —  —  —  (0.01) 
    FHLB borrowings prepayment fee $0.01  —  —  —  
    Diluted earnings per share, as adjusted, net of tax (non-GAAP) $0.51  $0.33  $0.23  $1.11  
             
    Average diluted shares outstanding 10,985,994  11,128,628  11,219,660  11,161,811  


    (1) Branch closure costs include severance pay recorded in compensation and benefits, accelerated depreciation expense and lease termination fees included in occupancy and other costs included in other non-interest expense in the consolidated statement of operations.
    (2) Net gain on sale of acquired business lines resulted from (1) the sale of Wells Insurance Agency and (2) the termination and sale of the wealth management business line sales contract acquired in a former acquisition.
    (3) Settlement proceeds includes litigation income from a JP Morgan Residential Mortgage-Backed Security (RMBS) claim. This distribution represents a supplement to the proceeds received in March 2017 from a JP Morgan RMBS previously owned by the Bank and sold in 2011.
    (4) FHLB borrowings prepayment fee resulted from the early termination of $8 million in FHLB borrowings at a weighted average rate of 2.19% and weighted average maturity of 8.75 months included in other non-interest expense in the consolidated statement of operations.
    (5) Net income as adjusted is a non-GAAP measure that management believes enhances the market’s ability to assess the underlying business performance and trends related to core business activities.
    (6) Provision for income tax on net income as adjusted is calculated at our effective tax rate for each respective period presented.


    Loan Composition (in thousands) March 31, 2021 December 31, 2020 March 31, 2020
    Originated Loans:      
    Commercial/Agricultural real estate:      
    Commercial real estate $365,603   $351,113   $313,147  
    Agricultural real estate 38,140   31,741   35,652  
    Multi-family real estate 111,503   112,731   89,474  
    Construction and land development 83,936   91,241   81,685  
    C&I/Agricultural operating:      
    Commercial and industrial 76,693   95,290   85,249  
    Agricultural operating 21,149   24,457   22,700  
    Residential mortgage:      
    Residential mortgage 82,285   86,283   102,854  
    Purchased HELOC loans 5,291   6,260   7,601  
    Consumer installment:      
    Originated indirect paper 23,186   25,851   36,414  
    Other consumer 10,951   12,056   15,080  
    Originated loans before SBA PPP loans 818,737   837,023   789,856  
    SBA PPP loans 118,931   123,702   —  
    Total originated loans $937,668   $960,725   $789,856  
    Acquired Loans:      
    Commercial/Agricultural real estate:      
    Commercial real estate $149,586   $156,562   $207,003  
    Agricultural real estate 32,427   37,054   47,766  
    Multi-family real estate 7,485   9,421   13,509  
    Construction and land development 6,796   7,276   14,233  
    C&I/Agricultural operating:      
    Commercial and industrial 19,240   21,263   36,757  
    Agricultural operating 7,101   8,328   15,240  
    Residential mortgage:      
    Residential mortgage 40,046   45,103   62,957  
    Consumer installment:      
    Other consumer 913   1,157   2,104  
    Total acquired loans $263,594   $286,164   $399,569  
    Total Loans:      
    Commercial/Agricultural real estate:      
    Commercial real estate $515,189   $507,675   $520,150  
    Agricultural real estate 70,567   68,795   83,418  
    Multi-family real estate 118,988   122,152   102,983  
    Construction and land development 90,732   98,517   95,918  
    C&I/Agricultural operating:      
    Commercial and industrial 95,933   116,553   122,006  
    Agricultural operating 28,250   32,785   37,940  
    Residential mortgage:      
    Residential mortgage 122,331   131,386   165,811  
    Purchased HELOC loans 5,291   6,260   7,601  
    Consumer installment:      
    Originated indirect paper 23,186   25,851   36,414  
    Other consumer 11,864   13,213   17,184  
    Gross loans before SBA PPP loans 1,082,331   1,123,187   1,189,425  
    SBA PPP loans 118,931   123,702   —  
    Gross loans $1,201,262   $1,246,889   $1,189,425  
    Unearned net deferred fees and costs and loans in process (4,487)  (4,245)  (510) 
    Unamortized discount on acquired loans (4,649)  (5,063)  (7,964) 
    Total loans receivable $1,192,126   $1,237,581   $1,180,951  


    Nonperforming Originated and Acquired Assets
    (in thousands, except ratios)

      March 31, 2021 and
    Three Months Ended    		 December 31, 2020
    and Three Months Ended    		 March 31, 2020 and
    Three Months Ended
    Nonperforming assets:      
    Originated nonperforming assets:      
    Nonaccrual loans $2,344  $3,649  $4,017 
    Accruing loans past due 90 days or more 391  415  1,174 
    Total originated nonperforming loans (“NPL”) 2,735  4,064  5,191 
    Other real estate owned (“OREO”) —  63  337 
    Other collateral owned 28  41  20 
    Total originated nonperforming assets (“NPAs”) $2,763  $4,168  $5,548 
    Acquired nonperforming assets:      
    Nonaccrual loans $6,335  $7,098  $12,073 
    Accruing loans past due 90 days or more 145  171  496 
    Total acquired nonperforming loans (“NPL”) 6,480  7,269  12,569 
    Other real estate owned (“OREO”) 57  93  1,075 
    Other collateral owned —  —  — 
    Total acquired nonperforming assets (“NPAs”) $6,537  $7,362  $13,644 
    Total nonperforming assets (“NPAs”) $9,300  $11,530  $19,192 
    Loans, end of period $1,192,126  $1,237,581  $1,180,951 
    Total assets, end of period $1,732,294  $1,649,095  $1,505,164 
    Ratios:      
    Originated NPLs to total loans 0.23% 0.33% 0.44%
    Acquired NPLs to total loans 0.54% 0.59% 1.06%
    Originated NPAs to total assets 0.16% 0.25% 0.37%
    Acquired NPAs to total assets 0.38% 0.45% 0.91%


    Nonperforming Total Assets
    (in thousands, except ratios)

      March 31, 2021 and
    Three Months Ended    		 December 31, 2020
    and Three Months Ended    		 March 31, 2020 and
    Three Months Ended
    Nonperforming assets:      
    Nonaccrual loans      
    Commercial real estate $760  $827  $3,505 
    Agricultural real estate 4,511  5,084  7,162 
    Commercial and industrial (“C&I”) 391  357  1,360 
    Agricultural operating 764  1,872  1,739 
    Residential mortgage 2,167  2,451  2,139 
    Consumer installment 86  156  185 
    Total nonaccrual loans $8,679  $10,747  $16,090 
    Accruing loans past due 90 days or more 536  586  1,670 
    Total nonperforming loans (“NPLs”) 9,215  11,333  17,760 
    Foreclosed and repossessed assets, net 85  197  1,432 
    Total nonperforming assets (“NPAs”) $9,300  $11,530  $19,192 
    Troubled Debt Restructurings (“TDRs”) $17,442  $18,477  $12,088 
    Nonaccrual TDRs $5,690  $6,735  $7,711 
    Loans, end of period $1,192,126  $1,237,581  $1,180,951 
    Total assets, end of period $1,732,294  $1,649,095  $1,505,164 
    Ratios:      
    NPLs to total loans 0.77% 0.92% 1.50%
    NPAs to total assets 0.54% 0.70% 1.28%


    Deposit Composition
    (in thousands)

      March 31,
    2021    		 December 31,
    2020    		 March 31,
    2020
    Non-interest bearing demand deposits $257,042   $238,348   $150,139  
    Interest bearing demand deposits 352,302   301,764   242,824  
    Savings accounts 222,448   196,348   161,038  
    Money market accounts 258,942   245,549   243,715  
    Certificate accounts 289,468   313,247   382,339  
    Total deposits $1,380,202   $1,295,256   $1,180,055  


    Average balances, Interest Yields and Rates
    (in thousands, except yields and rates)

      Three months ended March 31, 2021 Three months ended December, 31 2020 Three months ended March, 31 2020
      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 $129,642  $29  0.09% $79,225  $21  0.11% $31,069  $118  1.53%
    Loans receivable 1,213,562  14,517  4.85% 1,240,895  15,463  4.96% 1,172,246  15,459  5.30%
    Interest bearing deposits 3,437  20  2.36% 3,752  23  2.44% 4,362  27  2.49%
    Investment securities (1) 202,981  885  1.77% 176,802  824  1.85% 179,287  1,131  2.54%
    Other investments 15,038  169  4.56% 15,015  184  4.88% 15,006  173  4.64%
    Total interest earning assets (1) $1,564,660  $15,620  4.05% $1,515,689  $16,515  4.33% $1,401,970  $16,908  4.85%
    Average interest bearing liabilities:                  
    Savings accounts $197,647  $83  0.17% $187,474  $87  0.18% $154,596  $151  0.39%
    Demand deposits 330,674  251  0.31% 285,001  200  0.28% 234,822  375  0.64%
    Money market accounts 254,120  202  0.32% 243,631  206  0.34% 236,470  609  1.04%
    CD’s 266,044  1,043  1.59% 284,728  1,304  1.82% 354,095  1,846  2.10%
    IRA’s 40,877  135  1.34% 41,493  161  1.54% 42,695  199  1.87%
    Total deposits $1,089,362  $1,714  0.64% $1,042,327  $1,958  0.75% $1,022,678  $3,180  1.25%
    FHLB advances and other borrowings 180,635  1,142  2.56% 182,463  1,185  2.58% 146,810  1,057  2.90%
    Total interest bearing liabilities $1,269,997  $2,856  0.91% $1,224,790  $3,143  1.02% $1,169,488  $4,237  1.46%
    Net interest income   $12,764      $13,372      $12,671   
    Interest rate spread     3.14%     3.31%     3.39%
    Net interest margin (1)     3.31%     3.51%     3.64%
    Average interest earning assets to
    average interest bearing liabilities    		     1.23      1.24      1.20 



    (1) Fully taxable equivalent (FTE). The average yield on tax exempt securities is computed on a tax equivalent basis using a tax rate of 21% for the quarters ended March 31, 2021, December 31, 2020 and March 31, 2020. The FTE adjustment to net interest income included in the rate calculations totaled $1, $1 and $0 thousand for the three months ended March 31, 2021, December 31, 2020 and March 31, 2020, respectively.


    The following table reports key financial metric ratios based on a net income and net income as adjusted basis:

      Three Months Ended
      March 31, 2021 December 31, 2020 March 31, 2020
    Ratios based on net income:      
    Return on average assets (annualized) 1.33% 0.87% 0.69%
    Return on average equity (annualized) 13.97% 8.93% 7.01%
    Return on average tangible common equity5 (annualized) 18.14% 11.67% 11.45%
    Efficiency ratio 56% 60% 66%
    Net interest margin with loan purchase accretion 3.31% 3.51% 3.64%
    Net interest margin without loan purchase accretion 3.20% 3.13% 3.27%
    Ratios based on net income as adjusted (non-GAAP):      
    Return on average assets as adjusted2 (annualized) 1.35% 0.90% 0.69%
    Return on average equity as adjusted3 (annualized) 14.16% 9.24% 7.01%
    Return on average tangible common equity as adjusted5 (annualized) 18.39% 12.06% 9.50%
    Efficiency ratio4 as adjusted (non-GAAP) 55% 59% 66%


    Reconciliation of Return on Average Assets as Adjusted (non-GAAP)
    (in thousands, except ratios)

      Three Months Ended
      March 31, 2021 December 31, 2020 March 31 2020
        
    GAAP earnings after income taxes $5,506  $3,570  $2,606 
    Net income as adjusted after income taxes (non-GAAP) (1) $5,582  $3,691  $2,606 
    Average assets $1,682,064  $1,634,459  $1,516,957 
    Return on average assets (annualized) 1.33% 0.87% 0.69%
    Return on average assets as adjusted (non-GAAP) (annualized) 1.35% 0.90% 0.69%

    (1) See Reconciliation of GAAP Net Income and Net Income as Adjusted (non-GAAP)


    Reconciliation of Return on Average Equity as Adjusted (non-GAAP)
    (in thousands, except ratios)

      Three Months Ended
      March 31, 2021 December 31, 2020 March 31 2020
        
    GAAP earnings after income taxes $5,506  $3,570  $2,606 
    Net income as adjusted after income taxes (non-GAAP) (1) $5,582  $3,691  $2,606 
    Average equity $159,881  $158,968  $149,441 
    Return on average equity (annualized) 13.97% 8.93% 7.01%
    Return on average equity as adjusted (non-GAAP) (annualized) 14.16% 9.24% 7.01%

    (1) See Reconciliation of GAAP Net Income and Net Income as Adjusted (non-GAAP)


    Reconciliation of Return on Average Tangible Common Equity and Reconciliation of Return on Average Tangible Common Equity, as Adjusted (non-GAAP)
    (in thousands, except ratios)

      Three Months Ended
      March 31, 2021 December 31, 2020 March 31, 2020
    Total stockholders’ equity $160,662   $160,564   $147,790  
    Less: Goodwill (31,498)  (31,498)  (31,498) 
    Less: Intangible assets (5,095)  (5,494)  (6,293) 
    Tangible common equity (non-GAAP) $124,069   $123,572   $109,999  
    Average tangible common equity (non-GAAP) $123,088   $121,752   $110,364  
    GAAP earnings after income taxes $5,506   $3,570   $2,606  
    Net income as adjusted after income taxes (non-GAAP) (1) $5,582   $3,691   $2,606  
    Return on average tangible common equity (annualized) 18.14 % 11.67 % 9.50 %
    Return on average tangible common equity as adjusted (non-GAAP) (annualized) 18.39 % 12.06 % 9.50 %

    (1) See Reconciliation of GAAP Net Income and Net Income as Adjusted (non-GAAP)


    Reconciliation of Efficiency Ratio as Adjusted (non-GAAP)
    (in thousands, except ratios)

      Three Months Ended
      March 31, 2021 December 31, 2020 March 31 2020
          
    Non-interest expense (GAAP) $9,489   $10,826   $10,731 
    Branch Closure Costs (1) —   (165)  — 
    FHLB borrowings prepayment fee (1) (102)  —   — 
    Non-interest expense as adjusted (non-GAAP) 9,387   10,661   10,731 
    Non-interest income 4,176   4,770   3,603 
    Net interest margin 12,764   13,372   12,671 
    Efficiency ratio denominator (GAAP) $16,940   $18,142   $16,274 
    Net gain on acquired business lines (1) —   —   — 
    Settlement proceeds (1) —   —   — 
    Efficiency ratio denominator (non-GAAP) $16,940   $18,142   $16,274 
    Efficiency ratio (GAAP) 56 % 60 % 66%
    Efficiency ratio as adjusted (non-GAAP) 55 % 59 % 66%

    (1) See Reconciliation of GAAP Net Income and Net Income as Adjusted (non-GAAP)


    Reconciliation of tangible book value per share (non-GAAP)
    (in thousands, except per share data)

    Tangible book value per share at end of period March 31, 2021 December 31, 2020 March 31, 2020
    Total stockholders’ equity $160,662   $160,564   $147,933  
    Less: Goodwill (31,498)  (31,498)  (31,498) 
    Less: Intangible assets (5,095)  (5,494)  (7,175) 
    Tangible common equity (non-GAAP) $124,069   $123,572   $109,260  
    Ending common shares outstanding 10,893,872   11,056,349   11,151,009  
    Book value per share $14.75   $14.52   $13.27  
    Tangible book value per share (non-GAAP) $11.39   $11.18   $9.80  

            
    Reconciliation of tangible common equity as a percent of tangible assets (non-GAAP)
    (in thousands, except ratios)

    Tangible common equity as a percent of tangible assets at end of period  March 31, 2021 December 31, 2020 March 31, 2020
    Total stockholders’ equity $160,662   $160,564   $147,933  
    Less: Goodwill (31,498)  (31,498)  (31,498) 
    Less: Intangible assets (5,095)  (5,494)  (7,175) 
    Tangible common equity (non-GAAP) $124,069   $123,572   $109,260  
    Total Assets $1,732,294   $1,649,095   $1,505,164  
    Less: Goodwill (31,498)  (31,498)  (31,498) 
    Less: Intangible assets (5,095)  (5,494)  (7,175) 
    Tangible Assets (non-GAAP) $1,695,701   $1,612,103   $1,466,491  
    Less SBA PPP Loans (118,931)  (123,702)  —  
    Tangible Assets, excluding SBA PPP Loans (non-GAAP) $1,576,770   $1,488,401   $1,466,491  
    Total stockholders’ equity to total assets ratio 9.27 % 9.74 % 9.83 %
    Tangible common equity as a percent of tangible assets (non-GAAP) 7.32 % 7.67 % 7.45 %
    Tangible common equity as a percent of tangible assets, excluding SBA PPP Loans (non-GAAP) 7.87 % 8.30 % 7.45 %

    1Net income as adjusted and net income as adjusted per share are non-GAAP financial measures that management believes enhances investors’ ability to better understand the underlying business performance and trends related to core business activities. For a detailed reconciliation of GAAP to non-GAAP results, see the accompanying financial table “Reconciliation of GAAP Net Income and Net Income as Adjusted (non-GAAP)”.

    2Return on average assets as adjusted is a non-GAAP measure that management believes enhances investors’ ability to better understand the underlying business performance and trends relative to average assets. For a detailed reconciliation of GAAP to non-GAAP results, see the accompanying financial table “Reconciliation of Return on Average Assets as Adjusted (non-GAAP)”.

    3Return on average equity as adjusted is a non-GAAP measure that management believes enhances investors’ ability to better understand the underlying business performance and trends relative to average equity. For a detailed reconciliation of GAAP to non-GAAP results, see the accompanying financial table “Reconciliation of Return on Average Equity as Adjusted (non-GAAP)”.

    4The efficiency ratio as adjusted (non-GAAP) is a non-GAAP measure that management believes enhances investors’ ability to better understand the underlying business performance and the Company’s ability to use what it has to generate the most profit possible for shareholders relative to core business activities. For a detailed reconciliation of GAAP to non-GAAP results, see the accompanying financial table “Reconciliation of Efficiency Ratio as Adjusted (non-GAAP)”.

    5Tangible book value, tangible book value per share, tangible common equity as a percent of tangible assets, return on tangible common equity and return on tangible common equity as adjusted are non-GAAP measures that management believes enhances investors’ ability to better understand the Company’s financial position. For a detailed reconciliation of GAAP to non-GAAP results, see the accompanying financial table “Reconciliation of tangible book value per share (non-GAAP)”, “Reconciliation of tangible common equity as a percent of tangible assets (non-GAAP)”, and “Reconciliation of return on average tangible common equity and Reconciliation of Return on Average Tangible Common Equity as Adjusted (non-GAAP)”. 


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