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Citizens Community Bancorp, Inc. Earns $1.2 Million, or $0.11 Per Share, in 3Q19; Third Quarter Highlighted by Completed Acquisition of F. & M. Bancorp of Tomah, Inc. Announces 5% Stock Buyback Plan

EAU CLAIRE, Wis., Oct. 28, 2019 (GLOBE NEWSWIRE) -- Citizens Community Bancorp, Inc. (the "Company") (CZWI), the parent company of Citizens Community Federal N.A. (the “Bank” or "CCFBank"), today reported earnings of $1.2 million, or $0.11 per diluted share, for the quarter ended September 30, 2019, compared to $4.1 million, or $0.37 per diluted share, for the previous quarter ended June 30, 2019. In the September 2019 quarter, the Company benefited from (1) the full quarter impact of the F. & M. Bancorp. of Tomah, Inc. ("F&M") acquisition, net of merger charge considerations, (2) strong loan fee income from commercial activity, (3) an annual debit card incentive and (4) reduced FDIC insurance assessments due to the FDIC application of Small Bank Assessment Credits to our current quarter invoice. These items were partially offset by (1) increased loan servicing amortization resulting from higher prepayments and (2) higher than normal marketing expenses as CCFBank continues to execute on its plan of brand awareness with recent acquisitions.

Net income as adjusted (non-GAAP)1 was $3.4 million or $0.30 per diluted share for the quarter ended September 30, 2019 compared to $2.6 million of $0.23 per diluted share for the quarter ended June 30, 2019. The current quarter results were impacted by $2.9 million of acquisition-related expenses which reduced net income by $0.19 per diluted share. Included in GAAP net income and net income as adjusted for the quarter ended September 30, 2019, was the earnings impact from F&M of approximately $0.03 per diluted share, before merger charges. The June 2019 quarter operations reflected a $2.3 million gain on the sale of a branch, or $0.15 per diluted share. This gain was excluded from net income as adjusted and modestly offset by the addition of $206,000 of pre-tax acquisition-related expenses which added $0.01 per diluted share.

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

Three Months Ended

Nine Months Ended

September 30,
2019

June 30,
2019

September 30,
2018

September 30,
2019

September 30,
2018

Ratios based on net income:

Return on average assets (annualized)

0.34

%

1.23

%

0.44

%

0.61

%

0.46

%

Return on average equity (annualized)

3.35

%

11.72

%

3.21

%

5.94

%

4.00

%

Efficiency ratio (non-GAAP)

85

%

61

%

77

%

75

%

80

%

Net interest margin

3.34

%

3.30

%

3.45

%

3.35

%

3.42

%

Ratios based on net income as adjusted (non- GAAP):

Return on average assets as adjusted2 (annualized)

0.93

%

0.77

%

0.48

%

0.75

%

0.5

%

Return on average equity as adjusted3 (annualized)

9.22

%

7.27

%

3.45

%

7.23

%

4.35

%

Efficiency ratio4

66

%

74

%

78

%

69

%

82

%

"During the third quarter, we focused on successfully integrating our last two bank acquisitions. We believe the financial impact of these successful business combinations is showing in our non-interest income and non-interest expense lines," said Stephen Bianchi, Chairman, President and Chief Executive Officer. Mr. Bianchi added, "Mortgage activity has been strong in our markets dominated by purchase activity and growing refinancing business more recently. We also eliminated our unsecured purchased indirect portfolio of approximately $11 million by selling loans back to the originator at par. No meaningful margin impact is expected and there was no allowance for loan losses associated with the remaining loan portfolio, which reached its peak at $50 million three years ago. Our Community Banking loan growth slowed somewhat, as we balance pricing and growth in this challenging rate environment. We do, however, still see strong economic activity in our markets and solid pipelines through the early part of 2020, and will remain prudent in our pricing and risk taking."

The Company closed on the acquisition of F&M on July 1, 2019 and completed the F&M data systems conversion on July 14, 2019. The F&M transaction was valued at approximately $24 million and resulted in the creation of $367,000 of goodwill and $1.6 million of a core deposit intangible asset at September 30, 2019, based on preliminary estimates. We expect our analysis to be final at December 31, 2019. At June 30, 2019, F&M had total assets of $192.3 million, gross loans of $130.3 million, and deposits of $148.5 million.

On October 24, 2019, the Board of Directors approved a stock repurchase program. Under this program the Company may repurchase up to approximately 5% of the current outstanding shares of its common stock, from time to time through October 1, 2020. The repurchase program permits shares to be repurchased in open market or private transactions, through block trades, and pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 of the Securities and Exchange commission.

Repurchases may be made at management's discretion at prices management considers to be attractive and in the best interests of both the Company and its stockholders, subject to the availability of stock, general market conditions, the applicable trading price, future alternative advantageous uses for capital, and the Company's financial performance. Open market purchases will be conducted in accordance with the limitations set forth in Rule 10b-18 of the Securities and Exchange Commission and other applicable legal requirements.

The repurchase program may be suspended, terminated or modified at any time for any reason, including market conditions, the cost of repurchasing shares, the availability of alternative investment opportunities, liquidity, and other factors deemed appropriate. These factors may also affect the timing and amount of share repurchases. The repurchase program does not obligate the Company to repurchase any particular number of shares.

September 30, 2019 Highlights: (as of or for the periods ended September 30, 2019, compared to June 30, 2019)

  • Total assets increased to $1.48 billion at September 30, 2019 from $1.35 billion at June 30, 2019. The increased asset base reflected the acquisition of assets from F&M.

  • Loans receivable increased to $1.12 billion at September 30, 2019 from $1.02 billion at June 30, 2019. The loan growth of $108.1 million was due to the F&M acquisition of $130.3 million and originated commercial loan growth, partially offset by the paydown and sale of the Bank's unsecured purchased indirect loan portfolio and reductions in the Legacy loan portfolio consisting of originated indirect paper and one-to-four family loans.

  • Book value per share increased to $13.13 at September 30, 2019 from $13.04 at June 30, 209. Tangible book value per share (non-GAAP)5 increased to $9.60 at September 30, 2019 from $9.56 at June 30, 2019, reflecting earnings, increased market value in the available for sale portfolio and intangible amortization, net of the intangibles created in the F&M acquisition.

  • The net interest margin increased to 3.34% for the quarter ended September 30, 2019 from 3.30% the prior quarter. The increase was largely due to lower borrowing costs as management entered into lower cost FHLB callable debt in the quarter. The changes in the Company's net interest margin, along with the impact of the F&M acquisition was neutral to the margin and purchase accounting accretion from F&M was more than offset by an increase in holding company interest expense to pay for the cash portion of the acquisition.

  • Loan loss provisions increased to $575,000 for the quarter ended September 30, 2019 from $325,000 for the quarter ended June 30, 2019. The provisions for each period were primarily due to continued new originated loan growth, charge-offs without specific reserves associated with the underlying loans ($157,000 in the third quarter compared to $48,000 in the second quarter) and in the third quarter, an approximately $150,000 increase in specific reserves primarily related to certain specific residential loans.

  • Non-interest income increased to $3.6 million for the third quarter ended September 30, 2019 from $2.9 million for the second quarter of 2019, excluding the gain on the sale of a branch office in the second quarter of 2019. The relative increase in non-interest income in the third quarter reflects higher loan fees driven by commercial activity and gains on sale of mortgage loans driven by refinancing activities and an $94,000 incentive payment from a card provider due to increased debit card activity. Additionally, service charges on deposit accounts, interchange income and BOLI income (recorded in other non-interest income) all increased primarily due to the F&M acquisition.

  • Total non-interest expense was $13.0 million for the third quarter of 2019, compared to $9.4 million in the prior quarter and $7.6 million for the quarter ended September 30, 2018. Total non-interest expense for the current quarter reflects $2.9 million in merger related expenses versus $206,000 in the second quarter of 2019 and $131,000 in the third quarter of 2018. Third quarter 2019 also includes a full quarter impact of operating expenses from the F&M acquisition of approximately $900,000.

  • The third quarter ended September 30, 2019 was favorably impacted by the FDIC application of the Small Bank Assessment Credits to our current quarter deposit insurance invoice totaling $150,000.

  • Nonperforming assets increased to $21.5 million at September 30, 2019 or 1.46% of total assets compared to $15.9 million at June 30, 2019 or 1.18% of total assets. Nonperforming assets related to F&M were $5.9 million. Classified assets increased to $39.9 million at September 30, 2019, from $32.6 million at June 30, 2019. Classified assets from the F&M acquisition were $7.5 million.

Estimated Bank and Company capital ratios exceeded regulatory guidelines for a well-capitalized financial institution under the Basel III regulatory requirements at September 30, 2019:

Citizens
Community
Federal N.A.

Citizens
Community
Bancorp, Inc.

To Be Well Capitalized Under Prompt Corrective Action
Provisions

Tier 1 leverage ratio (to adjusted total assets)

10.20

%

7.20

%

5.00

%

Tier 1 capital (to risk weighted assets)

12.70

%

9.10

%

8.00

%

Common equity tier 1 capital (to risk weighted assets)

12.70

%

9.10

%

6.50

%

Total capital (to risk weighted assets)

13.50

%

11.10

%

10.00

%

Balance Sheet and Asset Quality Review

Asset growth continued in the quarter ended September 30, 2019, fueled primarily by the acquisition of F&M along with new loan originations. Asset growth, however, was tempered by a loan sale and acquired loan portfolio repayments and payoffs. Total assets were $1.48 billion at September 30, 2019, compared to $1.35 billion at June 30, 2019 and $975.4 million one year earlier.

In the quarter, securities available for sale ("AFS") increased $28.2 million. The Bank purchased $19.6 million of floating-rate securities with an estimated yield of 3.00% and purchased $15.5 million of fixed-rate securities with an estimated yield of 2.88%. The estimated repricing duration of the AFS portfolio changed from 2.09 years at June 30, 2019 to 2.05 years at September 30, 2019. The Bank liquidated the F&M securities portfolio in early July and there were no gains or losses on the sale of these securities.

Net loans were $1.12 billion at September 30, 2019 compared to $1.02 billion at June 30, 2019. The Community Banking loan portfolio consisting of commercial, agricultural and consumer loans grew to $903.7 million or 79.6%, of gross loans, largely due to the F&M acquisition. The Bank's agricultural real estate loans totaled $89.4 million or 7.9% of gross loans and agricultural non-real estate loans totaled $39.8 million or 3.5% of gross loans at September 30, 2019. The total agricultural portfolio is split by approximately 48% of secured real estate, 28% term debt and 24% of operating lines. The total agricultural portfolio is approximately 35% row crop, 27% owned and rented land, 25% dairy and 13% other.

The Legacy loan portfolio consisting of indirect paper and one-to-four family loans decreased $19.4 million to $231 million at September 30, 2019 or 20.4% of total loans, from $250.4 million at June 30, 2019. The decline in Legacy loans reflect the sale of all purchased indirect paper loans and the planned runoff of originated indirect paper and one-to-four family residential real estate loans.

The allowance for loan and lease losses increased to $9.2 million, at September 30, 2019, representing 0.82% of total loans, compared to $8.8 million and 0.86% of total loans at June 30, 2019. Approximately 36.1% of the Bank's loan portfolio represents acquired performing loans and marked to fair value as of the acquisition date. Associated with the acquired loan portfolio, is $6.7 million of purchase-discount related to credit impaired acquired loans. Net charge offs were $157,000 for the quarter ended September 30, 2019, compared to $273,000 for the quarter ended June 30, 2019. The second quarter charge offs include $225,000 of charge-offs with specific reserves.

Nonperforming assets increased to $21.5 million, or 1.46% of total assets at September 30, 2019, compared to $15.9 million or 1.18% at June 30, 2019. The increase in the most recent quarter primarily related to the F&M acquisition, which added $5.9 million to nonperforming assets. Classified assets increased $7.3 million during the current quarter to $39.9 million. The increase is largely due to the $7.5 million of classified assets related to the F&M acquisition at September 30, 2019. Included in classified assets, are agricultural real estate loans of approximately $7.7 million at September 30, 2019 compared to $7.8 million at June 30, 2019 and agricultural non- real estate loans of approximately $2.0 million at September 30, 2019 or flat compared with June 30, 2019.

Fixed assets grew in the current quarter due to the purchase of two previously leased branches and the addition of F&M's two branch offices. The Bank purchased a third previously leased branch in the second quarter. The purchase of these three branches resulted in decreases in other assets and other liabilities due to the impact of eliminating these branches from the right of use asset and lease liability recorded in the first quarter of 2019.

Deposits increased $146.3 million to $1.16 billion at September 30, 2019 from $1.02 billion at June 30, 2019. The increase in deposits was largely due to the F&M acquisition. The F&M acquisition increased non-maturity deposits as a percent of total deposits.

Federal Home Loan Bank advances decreased to $113.5 million at September 30, 2019 from $135.8 million at June 30, 2019. In addition to reducing outstanding advances related to the runoff of the acquired loan portfolio, the Bank repaid short-term existing FHLB advances and entered into $32.5 million of lower costing FHLB callable debt. At September 30, 2019, the Bank had $42.5 million of a 10-year maturity at a weighted average cost of 1.03% and the FHLB can call the debt quarterly until maturity.

Total stockholders’ equity increased to $148.0 million at September 30, 2019, from $143.2 million one quarter earlier, as the Company benefitted from the addition of earnings and a reduction in accumulated other comprehensive loss, mainly due to lower long-term interest rates. Tangible book value per share (non-GAAP)5 was $9.60 at September 30, 2019, compared to $9.56 at June 30, 2019. Stockholders' equity as a percent of total assets was 10.03% at September 30, 2019, compared to 10.62% at June 30, 2019. Tangible common equity (non-GAAP)5 as a percent of tangible assets (non-GAAP) was 7.54% at September 30, 2019, compared to 8.01% at June 30, 2019.

Review of Operations

Net interest income was $11.6 million for the third quarter of 2019, compared to $10.1 million for the second quarter of 2019, and $7.9 million for the quarter ended September 30, 2018. The net interest margin (“NIM”) increased to 3.34% for the third quarter of 2019 compared to 3.30% in the preceding quarter and 3.45% for the like quarter one year earlier.

The yield on interest earnings assets decreased one basis point to 4.67% for the third quarter of 2019 from 4.68% the previous quarter and increased 18 basis points from the third quarter one year earlier. Meanwhile, the cost of interest-bearing liabilities decreased 7 basis points to 1.56% for the third quarter from 1.63% one quarter earlier and increased 30 basis points from one year earlier. The primary decrease in funding costs was due to lower FHLB advances and other borrowing costs.

For the quarter ended September 30, 2019, the Company’s net interest margin benefited from $50,000 of purchased loan accretion, or two basis points compared to $54,000, or two basis points in the prior quarter. Scheduled accretion for acquired loans, was $234,000, $194,000, and $142,000 for the quarters ended September 30, 2019, June 30, 2019 and September 30, 2018, respectively.

“The growth in our margin was largely due to the refinancing of the FHLB debt discussed above, The modest increase in loan accretion was more than offset by the interest expense on the $19.9 million of holding company debt to fund the F&M acquisition," said Jim Broucek, Chief Financial Officer.

Loan loss provisions increased to $575,000 for the quarter ended September 30, 2019 from $325,000 for the quarter ended June 30, 2019. The provisions for each period were primarily due to continued new originated loan growth, charge-offs without specific reserves associated with the underlying loans ($157,000 in third quarter compared to $48,000 in the second quarter) and in the third quarter, an approximately $150,000 increase in specific reserves primarily related to certain residential loans.

Total non-interest income was $3.6 million for the third quarter compared to $5.2 million for the preceding quarter and $2.0 million for the quarter ended September 30, 2018. The second quarter reflected a $2.3 million gain on the sale of the Rochester Hills branch. Excluding the branch sale gain, total non-interest income would have been $2.9 million in the second quarter. The relative increase in non-interest income in the third quarter reflects higher loan fees driven by commercial activity and gains on sale of mortgage loans driven by refinancing activities and an $94,000 incentive payment from a card provider due to increased debit card activity. Additionally, service charges on deposit accounts, interchange income and loan servicing income all increased primarily due to the F&M acquisition.

Total non-interest expense was $13.0 million for the third quarter of 2019, compared to $9.4 million in the prior quarter and $7.6 million for the quarter ended September 30, 2018. Total non-interest expense for the current quarter reflects $2.9 million in merger related expenses versus $206,000 in the second quarter of 2019 and $131,000 in the third quarter of 2018 and a full quarter impact of expenses due to the F&M acquisition of approximately $900,000.

Compensation and benefits expense increased to $5.3 million for the third quarter of 2019 from $4.6 million the previous quarter largely due to the F&M acquisition. Due to the two weeks between the F&M acquisition close and computer conversion, cost savings were realized early in the quarter. In the fourth quarter, no material changes in compensation due to cost savings are expected.

Data processing expenses increased to $1.1 million for the third quarter of 2019 from $874,000 during the prior quarter due in part to a larger number of deposit and loan accounts serviced through our core processor, largely due to the F&M acquisition.

Amortization of mortgage servicing rights increased during the quarter ended September 30, 2019 from $306,000 in the prior quarter to $325,000 during the current quarter due to increased prepayments in the Company’s servicing portfolio related to the lower interest rate environment.

Advertising, marketing and public relations expenses decreased to $315,000 during the third quarter from $456,000 in the prior quarter. Although these costs declined from the prior period, the expenses remain elevated over historical run rates. We would expect fourth quarter marketing expenses to remain consistent with third quarter as there was some spill-over of marketing costs from the third quarter to the fourth quarter. We anticipate a decrease to the $225,000 to $250,000 range in 2020, which approximates the historic run rates for CCFBank as adjusted for the marketing costs in the acquired bank markets.

Merger related expenses incurred in the current quarter and included in the consolidated statement of operations consisted of the following: (1) $200,000 recorded in professional services and (2) $2.7 million recorded in other non-interest expense.

Merger related expenses incurred in the quarter ended June 30, 2019 and included in the consolidated statement of operations consisted of the following: (1) $126,000 recorded in professional services and (2) $80,000 recorded in other non-interest expense.

Provisions for income taxes declined to $430,000 for the third quarter ended September 30, 2019 from $1.5 million during the preceding quarter. The effective tax rate for the third quarter was 25.8% compared to 26.8% during the prior quarter. The third quarter tax rate reflects the Company's estimated tax position at September 30, 2019. We anticipate that the fourth quarter tax rate should be similar to the third quarter based on current tax positions, which will be reviewed in the fourth quarter after our 2018 tax return is filed in October. The impact of lower non- deductible merger expenses contributed to the lower tax rate.

These financial results are preliminary until the Form 10-Q is filed in November 2019.

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 28 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 one-to-four family mortgages.

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; 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 realize the benefits of net deferred tax assets; our ability to maintain or increase our market share; acts of terrorism and political or military actions by the United States or other governments; legislative or regulatory changes or actions, or significant litigation, adversely affecting the Company or Bank; increases in FDIC insurance premiums or special assessments by the FDIC; disintermediation risk; our inability to obtain needed liquidity; risks related to the success of the acquisition of F. & M. Bancorp. of Tomah, Inc. ("F&M") through merger (the “F&M Merger”) and integration of F&M into the Company’s operations; the risk that the combined company may be unable to retain the Company and/or F&M personnel successfully after the F&M Merger is completed; 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 transition period ended December 31, 2018 filed with the Securities and Exchange Commission ("SEC") on March 8, 2019 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, tangible book value per share and tangible common equity as a percent of tangible assets, 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 is a non-GAAP measure that eliminates the impact of certain expenses such as acquisition and branch closure costs and related data processing termination fees, legal costs, severance pay, accelerated depreciation expense and lease termination fees, the gain on sale of branch deposits and fixed assets and the net impact of the Tax Cuts and Jobs Act of 2017, which management believes enhances investors' ability to better understand the underlying business performance and trends related to core business activities. Merger related charges represent expenses to either satisfy contractual obligations of acquired entities without any useful benefit to the Company or to convert and consolidate customer records onto the Company platforms. These costs are unique to each transaction based on the contracts in existence at the merger date. Tangible book value per share and tangible common equity as a percent of tangible assets are non-GAAP measures that eliminate the impact of preferred stock equity, goodwill and intangible assets on our financial position. Management believes these measures are useful in assessing the strength of our financial position.

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

Contact: Steve Bianchi, CEO
(715)-836-9994


CITIZENS COMMUNITY BANCORP, INC.
Consolidated Balance Sheets
(in thousands)

September 30,
2019
(unaudited)

June 30,
2019
(unaudited)

December 31,
2018
(audited)

September 30,
2018
(audited)

Assets

Cash and cash equivalents

$

52,276

$

47,008

$

45,778

$

34,494

Other interest bearing deposits

5,245

5,980

7,460

7,180

Securities available for sale "AFS"

182,956

154,760

146,725

118,482

Securities held to maturity "HTM"

3,665

3,828

4,850

4,619

Equity securities with readily determinable fair value

241

177

Non-marketable equity securities, at cost

12,622

12,543

11,261

7,218

Loans receivable

1,124,378

1,019,957

992,556

759,247

Allowance for loan losses

(9,177

)

(8,759

)

(7,604

)

(6,748

)

Loans receivable, net

1,115,201

1,011,198

984,952

752,499

Loans held for sale

3,262

2,475

1,927

1,917

Mortgage servicing rights

4,245

4,319

4,486

1,840

Office properties and equipment, net

20,938

15,287

13,513

10,034

Accrued interest receivable

4,993

4,452

4,307

3,600

Intangible assets

7,999

6,828

7,501

4,805

Goodwill

31,841

31,474

31,474

10,444

Foreclosed and repossessed assets, net

1,373

1,387

2,570

2,768

Bank owned life insurance

22,895

18,022

17,792

11,661

Escrow merger settlement proceeds

20,555

Other assets

5,612

8,127

3,328

3,848

TOTAL ASSETS

$

1,475,364

$

1,348,420

$

1,287,924

$

975,409

Liabilities and Stockholders’ Equity

Liabilities:

Deposits

$

1,161,750

$

1,015,459

$

1,007,512

$

746,529

Federal Home Loan Bank advances

113,466

135,844

109,813

63,000

Other borrowings

44,545

44,551

24,647

24,619

Other liabilities

7,574

9,324

7,765

5,414

Total liabilities

1,327,335

1,205,178

1,149,737

839,562

Stockholders’ equity:

Common stock— $0.01 par value, authorized 30,000,000; 11,270,710; 10,982,008; 10,953,512 and 10,913,853 shares issued and outstanding, respectively

113

110

109

109

Additional paid-in capital

128,926

125,822

125,512

125,063

Retained earnings

19,348

18,114

15,264

14,003

Unearned deferred compensation

(630

)

(757

)

(857

)

(622

)

Accumulated other comprehensive income (loss)

272

(47

)

(1,841

)

(2,706

)

Total stockholders’ equity

148,029

143,242

138,187

135,847

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$

1,475,364

$

1,348,420

$

1,287,924

$

975,409

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


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

Three Months Ended

Nine Months Ended

September 30,
2019

June 30,
2019

September 30,
2018

September 30,
2019

September 30,
2018

Interest and dividend income:

Interest and fees on loans

$

14,646

$

12,976

$

9,414

$

40,036

$

26,818

Interest on investments

1,577

1,360

948

4,241

2,666

Total interest and dividend income

16,223

14,336

10,362

44,277

29,484

Interest expense:

Interest on deposits

3,371

2,926

1,659

8,890

4,341

Interest on FHLB borrowed funds

639

913

323

2,213

1,049

Interest on other borrowed funds

620

414

440

1,436

1,318

Total interest expense

4,630

4,253

2,422

12,539

6,708

Net interest income before provision for loan losses

11,593

10,083

7,940

31,738

22,776

Provision for loan losses

575

325

450

2,125

1,200

Net interest income after provision for loan losses

11,018

9,758

7,490

29,613

21,576

Non-interest income:

Service charges on deposit accounts

625

581

489

1,756

1,332

Interchange income

476

453

338

1,267

978

Loan servicing income

714

634

368

1,902

1,051

Gain on sale of loans

679

573

234

1,560

649

Loan fees and service charges

471

261

164

860

367

Insurance commission income

197

192

180

573

554

Gains (losses) on investment securities

96

21

151

(17

)

Gain on sale of branch

2,295

2,295

Other

363

228

216

827

517

Total non-interest income

3,621

5,238

1,989

11,191

5,431

Non-interest expense:

Compensation and benefits

5,295

4,604

3,778

14,605

11,424

Occupancy

905

866

776

2,725

2,270

Office

599

528

468

1,649

1,311

Data processing

1,092

874

771

2,953

2,224

Amortization of intangible assets

412

346

161

1,085

483

Amortization of mortgage servicing rights

325

306

85

822

245

Advertising, marketing and public relations

315

456

265

974

596

FDIC premium assessment

78

146

121

318

330

Professional services

561

575

577

1,961

1,635

(Gains) losses on repossessed assets, net

(16

)

(90

)

71

(143

)

521

Other

3,409

776

571

5,309

1,582

Total non-interest expense

12,975

9,389

7,644

32,258

22,621

Income before provision for income taxes

1,664

5,607

1,835

8,546

4,386

Provision for income taxes

430

1,500

736

2,252

1,443

Net income attributable to common stockholders

$

1,234

$

4,107

$

1,099

$

6,294

$

2,943

Per share information:

Basic earnings

$

0.11

$

0.37

$

0.18

$

0.57

$

0.49

Diluted earnings

$

0.11

$

0.37

$

0.10

$

0.57

$

0.38

Cash dividends paid

$

$

$

$

0.20

$

0.20

Book value per share at end of period

$

13.13

$

13.04

$

12.45

$

13.13

$

12.45

Tangible book value per share at end of period (non-GAAP)

$

9.60

$

9.56

$

11.05

$

9.60

$

11.05

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

Nine Months Ended

September 30,

June 30,

September 30,

September 30,

September 30,

2019

2019

2018

2019

2018

GAAP earnings before income taxes

$

1,664

$

5,607

$

1,835

$

8,546

$

4,386

Merger related costs (1)

2,911

206

131

3,776

369

Branch closure costs (2)

2

15

19

Audit and Financial Reporting (3)

358

Gain on sale of branch

(2,295

)

(2,295

)

Net income as adjusted before income taxes (4)

4,575

3,518

1,968

10,400

4,774

Provision for income tax on net income as adjusted (5)

1,180

943

789

2,746

1,571

Net income as adjusted after income taxes (non-GAAP) (4)

$

3,395

$

2,575

$

1,179

$

7,654

$

3,203

GAAP diluted earnings per share, net of tax

$

0.11

$

0.37

$

0.10

$

0.57

$

0.38

Merger related costs, net of tax (1)

0.19

0.01

0.01

0.25

0.03

Branch closure costs, net of tax

Audit and Financial Reporting

0.02

Gain on sale of branch

(0.15

)

(0.15

)

Diluted earnings per share, as adjusted, net of tax (non-GAAP)

$

0.30

$

0.23

$

0.11

$

0.69

$

0.41

Average diluted shares outstanding

11,276,005

10,994,470

10,950,980

11,068,227

7,811,655

(1) Costs incurred are included as professional fees and other non-interest expense in the consolidated statement of operations and include costs of $61,000, $160,000 and $118,000 for the quarters ended September 30, 2019, June 30, 2019 and September 30, 2018, respectively, and $341,000 and $350,000 for the nine months ended September 30, 2019 and 2018, respectively, which are nondeductible expenses for federal income tax purposes.
(2) Branch closure costs include severance pay recorded in compensation and benefits, accelerated depreciation expense and lease termination fees included in occupancy and other costs included in other non-interest expense in the consolidated statement of operations.
(3) Audit and financial reporting costs include additional audit and professional fees related to the change in our year end from September 30 to December 31.
(4) 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.
(5) Provision for income tax on net income as adjusted is calculated at our effective tax rate for each respective period presented.

Nonperforming Assets:
(in thousands, except ratios)

September 30, 2019 and Three Months Ended

June 30, 2019 and Three Months Ended

December 31, 2018 and Three Months Ended

September 30, 2018
and Three Months Ended

Nonperforming assets:

Nonaccrual loans

One to four family

$

2,255

$

2,298

$

2,331

$

1,939

Commercial real estate

6,324

1,732

808

499

Agricultural real estate

6,191

5,717

2,019

2,637

Consumer non-real estate

191

165

120

86

Commercial non-real estate

2,072

1,785

1,314

1,196

Agricultural non-real estate

1,989

1,915

762

853

Total nonaccrual loans

$

19,022

$

13,612

$

7,354

$

7,210

Accruing loans past due 90 days or more

1,099

880

736

1,117

Total nonperforming loans ("NPLs")

20,121

14,492

8,090

8,327

Other real estate owned ("OREO")

1,348

1,354

2,522

2,749

Other collateral owned

25

33

48

19

Total nonperforming assets ("NPAs")

$

21,494

$

15,879

$

10,660

$

11,095

Troubled Debt Restructurings ("TDRs")

$

11,795

$

10,000

$

8,722

$

8,418

Nonaccrual TDRs

$

4,601

$

4,101

$

2,667

$

2,687

Average outstanding loan balance

$

1,143,252

$

1,023,447

$

921,951

$

754,442

Loans, end of period

$

1,124,378

$

1,019,957

$

992,556

$

759,247

Total assets, end of period

$

1,475,364

$

1,348,420

$

1,287,924

$

975,409

Allowance for loan losses ("ALL"), at beginning of period

$

8,759

$

8,707

$

6,748

$

6,458

Loans charged off:

Residential real estate

(133

)

(23

)

(43

)

(82

)

Commercial/Agricultural real estate

(225

)

Consumer non-real estate

(46

)

(48

)

(79

)

(85

)

Commercial/Agricultural non-real estate

(47

)

Total loans charged off

(179

)

(296

)

(122

)

(214

)

Recoveries of loans previously charged off:

Residential real estate

1

4

28

Commercial/Agricultural real estate

3

Consumer non-real estate

21

20

24

25

Commercial/Agricultural non-real estate

1

Total recoveries of loans previously charged off:

22

23

28

54

Net loans charged off ("NCOs")

(157

)

(273

)

(94

)

(160

)

Additions to ALL via provision for loan losses charged to operations

575

325

950

450

ALL, at end of period

$

9,177

$

8,759

$

7,604

$

6,748

Ratios:

ALL to NCOs (annualized)

1,461.31

%

802.11

%

2,022.34

%

1,054.38

%

NCOs (annualized) to average loans

0.05

%

0.11

%

0.04

%

0.08

%

ALL to total loans

0.82

%

0.86

%

0.77

%

0.89

%

NPLs to total loans

1.79

%

1.42

%

0.82

%

1.10

%

NPAs to total assets

1.46

%

1.18

%

0.83

%

1.14

%

Nonaccrual Loans Rollforward:
(in thousands)

Quarter Ended

September 30,
2019

June 30, 2019

December 31,
2018

September 30,
2018

Balance, beginning of period

$

13,612

$

9,871

$

7,210

$

6,627

Additions

1,493

7,405

906

2,030

Acquired nonaccrual loans

5,898

941

Charge offs

(134

)

(262

)

(40

)

(68

)

Transfers to OREO

(209

)

(236

)

(201

)

(400

)

Return to accrual status

(53

)

(149

)

(93

)

Payments received

(1,539

)

(2,612

)

(1,429

)

(676

)

Other, net

(46

)

(405

)

(33

)

(210

)

Balance, end of period

$

19,022

$

13,612

$

7,354

$

7,210

Other Real Estate Owned Rollforward:
(in thousands)

Quarter Ended

September 30,

December 31,

September 30,

2019

June 30, 2019

2018

2018

Balance, beginning of period

$

1,354

$

2,071

$

2,749

$

5,328

Loans transferred in

209

236

201

400

Branch properties sales

(1,245

)

Sales

(220

)

(958

)

(210

)

(1762

)

Write-downs

(23

)

(127

)

Other, net

5

28

(218

)

155

Balance, end of period

$

1,348

$

1,354

$

2,522

$

2,749


Troubled Debt Restructurings in Accrual Status
(in thousands, except number of modifications)

September 30, 2019

June 30, 2019

December 31, 2018

September 30, 2018

Number of Modifications

Recorded Investment

Number of Modifications

Recorded Investment

Number of Modifications

Recorded Investment

Number of Modifications

Recorded Investment

Troubled debt restructurings: Accrual Status

Residential real estate

39

$

3,094

39

$

3,137

34

$

3,319

34

$

3,495

Commercial/Agricultural real estate

18

3,574

14

2,202

15

2,209

14

1,646

Consumer non-real estate

8

74

11

82

13

99

14

109

Commercial/Agricultural non-real estate

4

452

4

478

2

428

3

481

Total loans

69

$

7,194

68

$

5,899

64

$

6,055

65

$

5,731

Loan Composition - Detail
(in thousands)

To help better understand the Bank's loan trends, we have added the table below. The loan categories and amounts shown are the same as on the following page and are presented in a different format. The Community Banking loan portfolios reflect the Bank's strategy to grow its commercial banking business and consumer lending. The Legacy loan portfolios reflect the Bank's strategy to sell substantially all newly originated one to four family loans in the secondary market and the discontinuation of originated and purchased indirect paper loans, effective in the first quarter of fiscal 2017.

September 30, 2019

June 30, 2019

December 31, 2018

September 30, 2018

Community Banking Loan Portfolios:

Commercial/Agricultural real estate:

Commercial real estate

$

465,046

$

374,441

$

357,959

$

216,703

Agricultural real estate

89,441

92,137

86,015

70,517

Multi-family real estate

87,758

83,423

69,400

48,061

Construction and land development

65,550

52,071

22,691

17,739

Commercial/Agricultural non-real estate:

Commercial non-real estate

127,232

107,754

112,427

76,254

Agricultural non-real estate

39,827

36,827

36,327

26,549

Residential real estate:

Purchased HELOC loans

10,120

11,125

12,883

13,729

Consumer non-real estate:

Other consumer

18,770

18,389

20,214

18,844

Total Community Banking Loan Portfolios

903,744

776,167

717,916

488,396

Legacy Loan Portfolios:

Residential real estate:

One to four family

188,070

191,890

209,926

196,052

Consumer non-real estate:

Originated indirect paper

42,894

47,391

56,585

60,991

Purchased indirect paper

11,155

15,006

17,254

Total Legacy Loan Portfolios

230,964

250,436

281,517

274,297

Gross loans

$

1,134,708

$

1,026,603

$

999,433

$

762,693


Loan Composition

September 30, 2019

June 30, 2019

December 31, 2018

September 30, 2018

Originated Loans:

Residential real estate:

One to four family

$

114,507

$

117,585

$

121,053

$

122,797

Purchased HELOC loans

10,120

11,125

12,883

13,729

Commercial/Agricultural real estate:

Commercial real estate

244,809

239,051

200,875

168,319

Agricultural real estate

34,527

34,927

29,589

27,017

Multi-family real estate

69,556

75,664

61,574

44,767

Construction and land development

52,319

35,030

15,812

14,648

Consumer non-real estate:

Originated indirect paper

42,894

47,391

56,585

60,991

Purchased indirect paper

11,155

15,006

17,254

Other Consumer

15,718

15,229

15,553

15,991

Commercial/Agricultural non-real estate:

Commercial non-real estate

80,941

75,186

73,518

62,196

Agricultural non-real estate

22,057

21,776

17,341

17,514

Total originated loans $ 687,448

$

687,448

$

684,119

$

619,789

$

565,223

Acquired Loans:

Residential real estate:

One to four family

$

114,507

$

73,563

$

74,305

$

88,873

Commercial/Agricultural real estate:

Commercial real estate

220,237

135,390

157,084

48,384

Agricultural real estate

54,914

57,210

56,426

43,500

Multi-family real estate

18,202

7,759

7,826

3,294

Construction and land development

13,231

17,041

6,879

3,091

Consumer non-real estate:

Other Consumer

3,052

3,160

4,661

2,853

Commercial/Agricultural non-real estate:

Commercial non-real estate

46,291

32,568

38,909

14,058

Agricultural non-real estate

17,770

15,051

18,986

9,035

Total acquired loans

$

447,260

$

342,484

$

379,644

$

197,470

Total Loans:

Residential real estate:

One to four family

$

188,070

$

191,890

$

209,926

$

196,052

Purchased HELOC loans

10,120

11,125

12,883

13,729

Commercial/Agricultural real estate:

Commercial real estate

465,046

374,441

357,959

216,703

Agricultural real estate

89,441

92,137

86,015

70,517

Multi-family real estate

87,758

83,423

69,400

48,061

Construction and land development

65,550

52,071

22,691

17,739

Consumer non-real estate:

Originated indirect paper

42,894

47,391

56,585

60,991

Purchased indirect paper

11,155

15,006

17,254

Other Consumer

18,770

18,389

20,214

18,844

Commercial/Agricultural non-real estate:

Commercial non-real estate

127,232

107,754

112,427

76,254

Agricultural non-real estate

39,827

36,827

36,327

26,549

Gross loans

$

1,134,708

$

1,026,603

$

999,433

$

762,693

Unearned net deferred fees and costs and loans in process

(158

)

98

409

557

Unamortized discount on acquired loans

(10,172

)

(6,744

)

(7,286

)

(4,003

)

Total loans receivable

$

1,124,378

$

1,019,957

$

992,556

$

759,247


Deposit Composition:
(in thousands)

September 30,

June 30,

December 31,

September 30,

2019

2019

2018

2018

Non-interest bearing demand deposits

$

174,202

$

140,130

$

155,405

$

87,495

Interest bearing demand deposits

209,644

180,001

169,310

139,276

Savings accounts

165,419

148,005

192,310

97,329

Money market accounts

193,654

155,964

126,021

109,314

Certificate accounts

418,831

391,359

364,466

313,115

Total deposits

$

1,161,750

$

1,015,459

$

1,007,512

$

746,529


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

Three months ended September 30,

Three months ended June 30,

Three months ended September 30,

2019

2019

2018

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

$

32,376

$

203

2.49

%

$

30,076

$

171

2.28

%

$

24,468

$

117

1.90

%

Loans receivable

1,143,252

14,646

5.08

%

1,023,447

12,976

5.09

%

754,442

9,414

4.95

%

Interest bearing deposits

5,577

34

2.42

%

5,967

35

2.35

%

7,971

42

2.09

%

Investment securities (1)

185,921

1,174

2.56

%

158,991

996

2.60

%

124,991

674

2.30

%

Non-marketable equity securities, at

cost

13,072

166

5.04

%

12,114

158

5.23

%

7,581

115

6.02

%

Total interest earning assets (1)

$

1,380,198

$

16,223

4.67

%

$

1,230,595

$

14,336

4.68

%

$

919,453

$

10,362

4.49

%

Average interest bearing liabilities:

Savings accounts

$158,967

$ 155

0.39

%

$ 147,456

$

149

0.41

%

$93,551

$59

0.25

%

Demand deposits

219,955

550

0.99

%

191,858

383

0.80

%

146,372

142

0.38

%

Money market accounts

200,647

593

1.17

%

164,402

448

1.09

%

116,597

213

0.72

%

CD’s

381,331

1,870

1.95

%

336,253

1,765

2.11

%

277,125

1,145

1.64

%

IRA’s

44,184

203

1.82

%

40,688

181

1.78

%

33,029

100

1.20

%

Total deposits

$ 1,005,084

$ 3,371

1.33

%

$880,657

$

2,926

1.33

%

$666,674

$1,659

0.99

%

FHLB advances and other
borrowings

169,908

1,259

2.94

%

165,733

1,327

3.21

%

96,448

763

3.14

%

Total interest bearing liabilities

$1,174,992

$4,630

1.56

%

$

1,046,390

$

4,253

1.63

%

$

763,122

$

2,422

1.26

%

Net interest income

$11,593

$

10,083

$

7,940

Interest rate spread

3.11

%

3.05

%

3.23

%

Net interest margin (1)

3.34

%

3.30

%

3.45

%

Average interest earning assets to average interest bearing liabilities

1.18

1.18

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 September 30, 2019 and June 30, 2019 and 24.5% for the quarter ended September 30, 2018. The FTE adjustment to net interest income included in the rate calculations totaled $27,000, $35,000 and $51,000 for the three months ended September 30, 2019, June 30, 2019 and September 30, 2018, respectively


Nine months ended September 30, 2019

Nine months ended September 30, 2018

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

$

29,489

$

542

2.46

%

$

23,814

$

240

1.35

%

Loans receivable

1,054,492

40,036

5.08

%

736,478

26,818

4.87

%

Interest bearing deposits

6,153

107

2.33

%

7,890

117

1.98

%

Investment securities (1)

167,023

3,119

2.58

%

121,216

1,996

2.38

%

Non-marketable equity securities, at cost

11,853

473

5.34

%

7,915

313

5.29

%

Total interest earning assets (1)

$

1,269,010

$

44,277

4.68

%

$

897,313

$

29,484

4.42

%

Average interest bearing liabilities:

Savings accounts

$

156,851

$

479

0.41

%

$

94,263

$

140

0.20

%

Demand deposits

200,387

1,288

0.86

%

150,023

385

0.34

%

Money market accounts

172,671

1,423

1.10

%

116,948

570

0.65

%

CD’s

348,139

5,163

1.98

%

271,352

2,968

1.46

%

IRA’s

41,576

537

1.73

%

33,202

278

1.12

%

Total deposits

$

919,624

$

8,890

1.29

%

$

665,788

$

4,341

0.87

%

FHLB advances and other borrowings

153,960

3,649

3.17

%

109,628

2,367

2.89

%

Total interest bearing liabilities

$

1,073,584

$

12,539

1.56

%

$

775,416

$

6,708

1.16

%

Net interest income

$

31,738

$

22,776

Interest rate spread

3.12

%

3.26

%

Net interest margin (1)

3.35

%

3.42

%

Average interest earning assets to average interest bearing liabilities

1.18

1.16

(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 nine months ended September 30, 2019 and 24.5% for the nine months ended September 30, 2018. The FTE adjustment to net interest income included in the rate calculations totaled $103,000 and $158,000 for the nine months ended September 30, 2019 and September 30, 2018, respectively.

CITIZENS COMMUNITY FEDERAL N.A.
Selected Capital Composition Highlights (unaudited)

September 30, 2019

June 30, 2019

December 31, 2018

September 30, 2018

To Be Well Capitalized Under Prompt Corrective Action Provisions

Tier 1 leverage ratio (to adjusted total assets)

10.2%

9.7%

9.70%

9.20%

5.00%

Tier 1 capital (to risk weighted assets)

12.7%

12.2%

11.90%

12.20%

8.00%

Common equity tier 1 capital (to risk weighted assets)

12.7%

12.2%

11.90%

12.20%

6.50%

Total capital (to risk weighted assets)

13.5%

13.1%

12.70%

13.10%

10.00%


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

Three months ended

Nine months ended

September 30,

June 30,

September 30,

September 30,

September 30,

2019

2019

2018

2019

2018

GAAP earnings after income taxes

$

1,234

$

4,107

$

1,099

$

6,294

$

2,943

Net income as adjusted after income taxes (non-GAAP) (1)

$

3,395

$

2,575

$

1,179

$

7,654

$

3,203

Average assets

1,454,455

1,334,860

981,181

1,368,430

862,475

Return on average assets (annualized)

0.34

%

1.23

%

0.44

%

0.61

%

0.46

%

Return on average assets as adjusted (non-GAAP) (annualized)

0.93

%

0.77

%

0.48

%

0.75

%

0.50

%

(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

Nine months ended

September 30,

June 30

September 30,

September 30,

September 30,

2019

2019

2018

2019

2018

GAAP earnings after income taxes

$

1,234

$

4,107

$

1,099

$

6,294

$

2,943

Net income as adjusted after income taxes (non-GAAP) (1)

$

3,395

$

2,575

$

1,179

$

7,654

$

3,203

Average equity

146,116

140,561

135,670

141,608

98,452

Return on average equity (annualized)

3.35

%

11.72

%

3.21

%

5.94

%

4.00

%

Return on average equity as adjusted (non-GAAP) (annualized)

9.22

%

7.27

%

3.45

%

7.23

%

4.35

%

(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

Nine months ended

September

June

September

September

September

30, 2019

30, 2019

30, 2018

30, 2019

30, 2018

Non-interest expense (GAAP)

$

12,975

$

9,389

$

7,644

$

32,258

$

22,621

Merger related Costs (1)

(2,911

)

206

131

(3,776

)

369

Branch Closure Costs (1)

2

(15

)

19

Audit and financial reporting (1)

(358

)

Non-interest expense as adjusted (non- GAAP)

10,064

9,595

7,777

28,109

23,009

Non-interest income

3,621

5,238

1,989

11,191

5,431

Net interest margin

11,593

10,083

7,940

31,738

22,776

Efficiency ratio denominator (GAAP)

15,214

15,321

9,929

42,929

28,207

Gain on sale of branch (1)

(2,295

)

(2,295

)

Efficiency ratio denominator (non- GAAP)

15,214

13,026

9,929

40,634

28,207

Efficiency ratio (GAAP)

85

%

61

%

77

%

75

%

80

%

Efficiency ratio (non-GAAP)

66

%

74

%

78

%

69

%

82

%

(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)

September 30,

June 30,

December 31,

September 30,

Tangible book value per share at end of period

2019

2018

2018

2018

Total stockholders' equity

$

148,029

$143,242

$

138,187

$

135,847

Less: Goodwill

(1,841)

(31,474)

(31,474)

(10,444)

Less: Intangible assets

(7,999)

(6,828)

(7,501)

(4,805)

Tangible common equity (non-GAAP)

$

108,189

$

104,940

$

99,212

$

120,598

Ending common shares outstanding

11,270,710

10,982,008

10,953,512

10,913,853

Book value per share

$

13.13

$

13.04

$

12.62

$

12.45

Tangible book value per share (non-GAAP)

$

9.60

$

9.56

$

9.06

$

11.05


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

September 30,
2019

June 30, 2019

December 31,
2018

September 30,
2018

Total stockholders' equity

$ 148,029

$ 143,242

$ 138,187

$ 135,847

Less: Goodwill

(31,841)

(31,474)

(31,474)

(10,444)

Less: Intangible assets

(7,999)

(6,828)

(7,501)

(4,805)

Tangible common equity (non-GAAP)

$ 108,189

$ 104,940

$ 99,212

$ 120,598

Total Assets

$ 1,475,364

$ 1,348,420

$ 1,287,924

$ 975,409

Less: Goodwill

(31,841)

(31,474)

(31,474)

(10,444)

Less: Intangible assets

(7,999)

(6,828)

(7,501)

(4,805)

Tangible Assets (non-GAAP)

$ 1,435,524

$ 1,310,118

$ 1,248,949

$ 960,160

Total stockholders' equity to total assets ratio

10.03%

10.62%

10.73%

13.93%

Tangible common equity as a percent of tangible assets (non-GAAP)

7.54%

8.01%

7.94%

12.56%

1Net income as adjusted is a non-GAAP measure that management believes enhances investors' ability to better understand the underlying business performance and trends related to core business activities. For a detailed reconciliation of GAAP to non-GAAP results, see the accompanying financial table "Reconciliation of GAAP 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 per share and tangible common equity as a percent of tangible assets are non-GAAP measure 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)" and "Reconciliation of tangible common equity as a percent of tangible assets (non-GAAP)".