Group 1: Earnings Performance - Citizens Community Bancorp reported quarterly earnings of $0.37 per share, matching the Zacks Consensus Estimate, and an increase from $0.32 per share a year ago [1] - The company posted revenues of $16.24 million for the quarter ended September 2025, exceeding the Zacks Consensus Estimate by 5.43% and up from $14.21 million year-over-year [2] - Over the last four quarters, the company has surpassed consensus EPS estimates two times [1][2] Group 2: Stock Performance and Outlook - Citizens Community Bancorp shares have declined approximately 2.3% since the beginning of the year, while the S&P 500 has gained 15.5% [3] - The current consensus EPS estimate for the upcoming quarter is $0.37 on revenues of $15.7 million, and for the current fiscal year, it is $1.38 on revenues of $61.3 million [7] - The estimate revisions trend for Citizens Community Bancorp was mixed ahead of the earnings release, resulting in a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market [6] Group 3: Industry Context - The Financial - Savings and Loan industry, to which Citizens Community Bancorp belongs, is currently in the bottom 35% of over 250 Zacks industries, suggesting potential challenges for stock performance [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

Financial Performance - The Company reported third quarter 2025 earnings of $3.7 million, or $0.37 per diluted share, an increase from $3.3 million, or $0.33 per diluted share in the second quarter of 2025[3]. - For the nine months ended September 30, 2025, earnings were $10.1 million, or $1.02 per diluted share, compared to $11.0 million, or $1.07 per diluted share for the same period in 2024[6]. - Net interest income decreased by $0.1 million to $13.2 million for the third quarter of 2025, compared to $13.3 million in the previous quarter, but increased from $11.3 million in the same quarter of 2024[6]. - Non-interest income increased by $0.2 million to $3.0 million in the third quarter of 2025, driven by higher gains on loan sales[6]. - Net income attributable to common stockholders for the three months ended September 30, 2025, was $3,682 million, an increase of 12.6% from $3,270 million in the previous quarter[39]. - Basic earnings per share for the three months ended September 30, 2025, were $0.37, up from $0.33 in the previous quarter, reflecting a growth of 12.1%[39]. - Net interest income for the nine months ended September 30, 2025, was $38,119,000, compared to $34,766,000 for the same period last year, reflecting a year-over-year increase of 9.5%[47]. Asset and Liability Management - Total assets decreased by $8.2 million to $1.727 billion at September 30, 2025[7]. - The Company reported a decrease in total liabilities to $1,540.172 million as of September 30, 2025, from $1,551.702 million in the previous quarter[37]. - Total loans receivable decreased to $1,323,010 million as of September 30, 2025, from $1,345,620 million in the previous quarter, a decline of 1.7%[40]. - Loans receivable net amounted to $1,300.828 million as of September 30, 2025, compared to $1,324.273 million in the previous quarter[37]. - Total deposits increased slightly to $1,480,554,000 at September 30, 2025, from $1,478,416,000 at June 30, 2025, with consumer deposits comprising 58% of the total[19]. Credit Quality - The provision for credit losses was $0.65 million for the third quarter of 2025, down from $1.35 million in the previous quarter and a negative provision of $0.4 million in the same quarter of 2024[6]. - The allowance for credit losses on loans increased to $22.2 million, representing 1.68% of total loans receivable, compared to 1.59% at June 30, 2025[13]. - Nonperforming assets increased by $3.7 million to $16.7 million at September 30, 2025, compared to $13.0 million at June 30, 2025, due to a $9 million multi-family loan placed on nonaccrual[17]. - Nonperforming loans (NPLs) at amortized cost increased to $15,751 million as of September 30, 2025, compared to $12,130 million in the previous quarter, representing a rise of 29.0%[40]. - The ratio of NPLs to total loans was 1.19% as of September 30, 2025, up from 0.90% in the previous quarter, indicating a deterioration in loan quality[40]. Operational Efficiency - The efficiency ratio was 67% for the quarter ended September 30, 2025, compared to 66% in the previous quarter[12]. - Non-interest expense rose by $0.3 million to $11.1 million from the previous quarter, attributed to higher compensation and medical costs[28]. - Total non-interest expense increased to $11,051 million for the three months ended September 30, 2025, compared to $10,750 million in the previous quarter, an increase of 2.8%[39]. - The efficiency ratio improved to 67% for the three months ended September 30, 2025, down from 72% in the same period last year[43]. Capital Management - The company repurchased approximately 136,000 shares at an average price of $14.93 per share, with 363,000 shares remaining under the current buyback authorization[22]. - Retained earnings rose to $86.913 million as of September 30, 2025, compared to $83.709 million in the previous quarter[37]. - Total stockholders' equity rose to $186,815,000 as of September 30, 2025, from $183,462,000 in the previous quarter, marking an increase of 1.8%[49]. - Tangible book value per share increased to $15.71 as of September 30, 2025, up from $15.15 in the previous quarter, representing a growth of 3.7%[49]. Market and Economic Conditions - The company is focused on maintaining its market share and adapting to technological changes in the banking sector[32]. - Forward-looking statements indicate potential risks including economic conditions, interest rate risk, and competitive pressures[31].

Deposit & Liquidity - 81% of deposits are insured or collateralized, totaling $1.48 billion[11, 17] - The average account sizes are $16 thousand for retail, $66 thousand for commercial, and $406 thousand for public deposits[13] - The company has a diverse commercial deposit base with no industry concentration exceeding 10%[15] Loan Portfolio - Non-Owner Occupied CRE loan balance outstanding is $447 million as of September 30, 2025, with an approximate weighted average LTV of 52%[24] - Owner Occupied CRE loan balance outstanding is $237 million as of September 30, 2025, with an approximate weighted average LTV of 50%[30] - Multi-family loan balance outstanding is $237 million as of September 30, 2025, with an approximate weighted average LTV of 61%[36] - Commercial & Industrial loan balance is $102 million as of September 30, 2025[42] - Construction & Development loan balance outstanding is $75 million as of September 30, 2025, with an approximate weighted average LTV of 73%[49] Capital & Stock Repurchase - As of September 30, 2025, approximately 136 thousand shares were repurchased under the stock repurchase program, with 363 thousand shares remaining available for repurchase[102] Financial Performance - Basic earnings per share for the three months ended September 30, 2025, was $0.37[103]

Core Viewpoint - Citizens Community Bancorp, Inc. reported improved earnings for the third quarter of 2025, with net income of $3.7 million and earnings per diluted share of $0.37, reflecting growth compared to previous quarters and the same period last year [1][5]. Financial Performance - Earnings for the nine months ended September 30, 2025, were $10.1 million or $1.02 per diluted share, down from $11.0 million or $1.07 per diluted share in the prior year [5]. - The third quarter's net interest income decreased by $0.1 million to $13.2 million compared to the second quarter of 2025, but increased from $11.3 million in the same quarter of 2024 [5][25]. - Non-interest income rose by $0.2 million to $3.0 million in the third quarter of 2025, driven by higher gains on loan sales [8][29]. Balance Sheet and Asset Quality - Book value per share increased to $18.95 at September 30, 2025, from $18.36 at June 30, 2025, and $17.88 at September 30, 2024 [3]. - Total assets decreased by $8.2 million to $1.727 billion at September 30, 2025 [6]. - The allowance for credit losses on loans increased to $22.2 million, representing 1.68% of total loans receivable [12][13]. Capital and Liquidity - The tangible capital ratio exceeded 9.1%, with tangible book value increasing by 3.7% from the previous quarter [4]. - On-balance sheet liquidity ratio improved to 13.4% of total assets at September 30, 2025, compared to 12.2% at June 30, 2025 [7]. Loan and Deposit Trends - Loans receivable decreased by $22.6 million to $1.323 billion during the third quarter [10]. - Total deposits increased by $2.1 million to $1.48 billion, primarily due to growth in commercial deposits [19]. - Nonperforming assets rose by $3.7 million to $16.7 million, largely due to a multi-family loan moving to substandard status [17][18]. Shareholder Actions - The Company repurchased approximately 136 thousand shares at an average price of $14.93 per share during the quarter, with 363 thousand shares remaining under the buyback authorization [22].

Core Viewpoint - Citizens Community Bancorp, Inc. (CZWI) has reached a significant support level and is considered a potential investment opportunity due to a recent technical indicator known as a "golden cross" [1][3]. Technical Analysis - CZWI's 50-day simple moving average has recently crossed above its 200-day moving average, indicating a bullish breakout may be on the horizon [1]. - A successful golden cross event consists of three stages: the stock price bottoms out, the shorter moving average crosses above the longer moving average, and the stock maintains upward momentum [2]. Performance Metrics - Over the past four weeks, CZWI has rallied by 10.4%, suggesting positive momentum [3]. - The company currently holds a 2 (Buy) rating on the Zacks Rank, indicating strong potential for further gains [3]. Earnings Outlook - There have been no cuts to earnings estimates for the current quarter, with one revision higher in the past 60 days, which supports a positive earnings outlook [3]. - The Zacks Consensus Estimate for CZWI has also increased, further solidifying the bullish case for the stock [3][5].

[Filing Information](index=1&type=section&id=Filing%20Information) Details the Form 10-Q filing for Citizens Community Bancorp, Inc., including registrant information, filer status, and common shares outstanding [General Filing Details](index=1&type=section&id=General%20Filing%20Details) Provides essential filing details for the Form 10-Q, including registrant, trading symbol, filer status, and common shares outstanding - The filing is a Quarterly Report on Form 10-Q for the period ended **June 30, 2025**[2](index=2&type=chunk) - The registrant is **Citizens Community Bancorp, Inc.**, trading under the symbol **CZWI** on the NASDAQ Global Market[2](index=2&type=chunk)[4](index=4&type=chunk) - The company is classified as a **non-accelerated filer** and a **smaller reporting company**[5](index=5&type=chunk) Common Stock Outstanding | Date | Shares Outstanding | | :------------- | :----------------- | | August 7, 2025 | 9,870,287 | [Part I – FINANCIAL INFORMATION](index=3&type=section&id=Part%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) Presents the unaudited consolidated financial statements and management's discussion and analysis for the company [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) Presents the unaudited consolidated financial statements, including balance sheets, statements of operations, comprehensive income, equity changes, and cash flows, with condensed notes [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) Details the company's financial position, showing slight decreases in assets and liabilities, and an increase in stockholders' equity Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--------------------------- | :------------ | :---------------- | | Total Assets | $1,735,164 | $1,748,519 | | Total Liabilities | $1,551,702 | $1,569,435 | | Total Stockholders' Equity | $183,462 | $179,084 | | Cash and cash equivalents | $67,454 | $50,172 | | Loans receivable, net | $1,324,273 | $1,348,432 | | Deposits | $1,478,416 | $1,488,148 | [Consolidated Statements of Operations](index=6&type=section&id=Consolidated%20Statements%20of%20Operations) Presents financial performance, showing increased net interest income due to lower interest expense, but decreased net income from higher credit loss provisions Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Total interest and dividend income | $22,502 | $22,463 | $43,605 | $45,142 | | Total interest expense | $9,191 | $10,887 | $18,700 | $21,661 | | Net interest income before provision for credit losses | $13,311 | $11,576 | $24,905 | $23,481 | | Provision for credit losses | $1,350 | $(1,525) | $1,100 | $(2,325) | | Net income attributable to common stockholders | $3,270 | $3,675 | $6,467 | $7,763 | | Basic earnings per share | $0.33 | $0.35 | $0.65 | $0.75 | | Diluted earnings per share | $0.33 | $0.35 | $0.65 | $0.75 | [Consolidated Statements of Comprehensive Income (Loss)](index=7&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) Details comprehensive income, which increased for both periods in 2025, driven by net income and positive other comprehensive income Consolidated Statements of Comprehensive Income (Loss) Highlights (in thousands) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net income attributable to common stockholders | $3,270 | $3,675 | $6,467 | $7,763 | | Other comprehensive income (loss), net of tax | $81 | $633 | $1,536 | $(69) | | Comprehensive income | $3,351 | $4,308 | $8,003 | $7,694 | [Consolidated Statement of Changes in Stockholders' Equity](index=8&type=section&id=Consolidated%20Statement%20of%20Changes%20in%20Stockholders'%20Equity) Outlines changes in stockholders' equity, primarily increasing due to net income and other comprehensive income, offset by dividends Stockholders' Equity Changes (Six Months Ended June 30, 2025, in thousands) | Item | Amount | | :--------------------------------------- | :---------- | | Balance, December 31, 2024 | $179,084 | | Net income | $6,467 | | Other comprehensive income, net of tax | $1,536 | | Surrender of restricted shares for taxes | $(190) | | Common stock options exercised | $61 | | Stock based compensation expense | $102 | | Cash dividends paid | $(3,598) | | **Balance at June 30, 2025** | **$183,462**| [Consolidated Statements of Cash Flows](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Summarizes cash flows, showing less cash from operations, more from investing, and less used in financing, leading to a net cash increase Consolidated Statements of Cash Flows Highlights (Six Months Ended June 30, in thousands) | Cash Flow Activity | 2025 | 2024 | | :--------------------------------------- | :---------- | :---------- | | Net cash from operating activities | $1,207 | $14,270 | | Net cash from investing activities | $34,534 | $44,442 | | Net cash from financing activities | $(18,459) | $(58,964) | | Net increase (decrease) in cash and cash equivalents | $17,282 | $(252) | | Cash and cash equivalents at end of period | $67,454 | $36,886 | [Condensed Notes to Consolidated Financial Statements](index=12&type=section&id=Condensed%20Notes%20to%20Consolidated%20Financial%20Statements) Provides essential details and explanations for the financial statements, covering business, accounting policies, and financial instrument disclosures [NOTE 1 – NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=12&type=section&id=NOTE%201%20%E2%80%93%20NATURE%20OF%20BUSINESS%20AND%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) Outlines the company's banking business, significant accounting policies for consolidation, estimates, securities, ACL, revenue, and recent accounting pronouncements - Citizens Community Bancorp, Inc. (Company) and its wholly-owned subsidiary, Citizens Community Federal N.A. (Bank), provide **traditional community banking services** primarily in Wisconsin and Minnesota through **21 branch locations**[27](index=27&type=chunk)[29](index=29&type=chunk) - Investment securities are classified as **Available for Sale (AFS)** at fair value (unrealized gains/losses in OCI) or **Held to Maturity (HTM)** at amortized cost, based on management's intent and ability to hold[36](index=36&type=chunk) - The Allowance for Credit Losses (ACL) is measured for AFS, HTM, and Loans, based on **expected credit losses** over the contractual term, adjusted for prepayments and considering historical loss experience, current conditions, and reasonable and supportable forecasts[37](index=37&type=chunk)[38](index=38&type=chunk)[49](index=49&type=chunk) - Revenue recognition primarily stems from **interest income** on an accrual basis using the effective interest method, with non-interest income recognized when performance obligations are satisfied or transactions occur[78](index=78&type=chunk)[79](index=79&type=chunk)[80](index=80&type=chunk)[82](index=82&type=chunk) - Recent accounting pronouncements adopted include ASU 2020-04/2021-01 (Reference Rate Reform), ASU 2023-06 (Disclosure Improvements), and ASU 2023-07 (Segment Reporting), none of which had a **material impact** on the company's financial condition or results of operations[94](index=94&type=chunk)[95](index=95&type=chunk)[96](index=96&type=chunk) - ASU 2023-09 (Income Taxes – Improvements to Income Tax Disclosures) and ASU 2024-03 (Expense Disaggregation Disclosures) are recently issued but not yet effective, with the company currently evaluating their impact[97](index=97&type=chunk)[98](index=98&type=chunk) [NOTE 2 – INVESTMENT SECURITIES](index=21&type=section&id=NOTE%202%20%E2%80%93%20INVESTMENT%20SECURITIES) Details the investment securities portfolio, showing decreases in AFS and HTM values, pledged securities, and no credit loss allowance due to high quality Available-for-sale securities (AFS) (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :------------------------ | :------------ | :---------------- | | Amortized Cost | $155,503 | $165,604 | | Estimated Fair Value | $134,773 | $142,851 | | Gross Unrealized Losses | $20,834 | $22,935 | Held-to-maturity securities (HTM) (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :------------------------ | :------------ | :---------------- | | Amortized Cost | $83,029 | $85,504 | | Estimated Fair Value | $65,012 | $65,622 | | Gross Unrecognized Losses | $18,023 | $19,886 | - At June 30, 2025, the Bank pledged **$33,158 thousand** of mortgage-backed securities as collateral to the Federal Reserve Bank (no outstanding borrowings), **$284 thousand** of U.S. Government Agency securities and **$1,719 thousand** of mortgage-backed securities against specific municipal deposits, and **$444 thousand** of mortgage-backed securities to the Federal Home Loan Bank of Des Moines[99](index=99&type=chunk) - No Allowance for Credit Losses (ACL) was established for available-for-sale or held-to-maturity securities, as they are **guaranteed by the U.S. government or highly rated**, with no expected credit losses[103](index=103&type=chunk) [NOTE 3 – LOANS AND ALLOWANCE FOR CREDIT LOSSES](index=24&type=section&id=NOTE%203%20%E2%80%93%20LOANS%20AND%20ALLOWANCE%20FOR%20CREDIT%20LOSSES) Provides a comprehensive overview of the loan portfolio and ACL activity, noting an increased provision for credit losses due to delinquencies and macroeconomic factors Loan Portfolio Composition (Amortized Cost, in thousands) | Loan Type | June 30, 2025 | % of Total | December 31, 2024 | % of Total | | :------------------------------ | :------------ | :--------- | :---------------- | :--------- | | Commercial/Agricultural real estate | $1,069,639 | 79.5% | $1,078,600 | 78.8% | | C&I/Agricultural operating | $140,943 | 10.5% | $146,552 | 10.7% | | Residential mortgage | $127,804 | 9.5% | $134,848 | 9.9% | | Consumer installment | $7,234 | 0.5% | $8,982 | 0.6% | | **Total loans receivable** | **$1,345,620**| **100%** | **$1,368,981** | **100%** | Allowance for Credit Losses (ACL) - Loans Activity (in thousands) | Metric | 3 Months Ended June 30, 2025 | 6 Months Ended June 30, 2025 | | :------------------------------------ | :--------------------------- | :--------------------------- | | ACL - Loans, at beginning of period | $20,205 | $20,549 | | Charge-offs | $(74) | $(156) | | Recoveries | $58 | $147 | | Additions to ACL via provision | $1,158 | $807 | | **ACL - Loans, at end of period** | **$21,347** | **$21,347** | Provision for Credit Losses (in thousands) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :---------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Loans | $1,158 | $(1,262) | $807 | $(1,787) | | Unfunded Commitments | $192 | $(263) | $293 | $(538) | | **Total provision for credit losses** | **$1,350** | **$(1,525)** | **$1,100** | **$(2,325)** | - The increase in Q2 2025 provision for credit losses was largely due to: (1) **$0.7 million** from three 30-89 days delinquent commercial relationships; (2) **$0.3 million** from modestly worsening macro-economic assumptions; (3) **$0.15 million** from provisions on new loans with longer contractual life; and (4) **$0.2 million** from an increase in off-balance sheet commitments for new construction loan originations[210](index=210&type=chunk)[248](index=248&type=chunk) - Loan modifications for borrowers experiencing financial difficulty during the three months ended June 30, 2025, included term extensions for **$164 thousand** in commercial real estate loans (weighted average **2 months** added) and payment delays for **$4,263 thousand** in commercial real estate loans (weighted average **3 months** deferred) and **$200 thousand** in agricultural real estate loans (weighted average **9 months** deferred)[134](index=134&type=chunk)[135](index=135&type=chunk) [NOTE 4 – MORTGAGE SERVICING RIGHTS](index=42&type=section&id=NOTE%204%20%E2%80%93%20MORTGAGE%20SERVICING%20RIGHTS) Details MSR activity and valuation, showing a slight decrease in net value due to amortization exceeding new transfers, with fair value estimated by a model Mortgage Servicing Rights (MSRs) Activity (in thousands) | Metric | 3 Months Ended June 30, 2025 | 6 Months Ended June 30, 2025 | | :------------------------------------ | :--------------------------- | :--------------------------- | | Mortgage servicing rights, beginning of period | $3,583 | $3,663 | | Increase from transfers of financial assets | $113 | $173 | | Amortization during the period | $(148) | $(288) | | **Mortgage servicing rights, end of period** | **$3,548** | **$3,548** | - The fair value of mortgage servicing rights was **$5,099 thousand** at June 30, 2025, compared to **$5,425 thousand** at June 30, 2024[142](index=142&type=chunk) - MSR fair value is determined using discount rates ranging from **9.5% to 12.5%** at June 30, 2025, along with other assumptions like prepayment speeds, servicing costs, and default rates[143](index=143&type=chunk) [NOTE 5 – LEASES](index=43&type=section&id=NOTE%205%20%E2%80%93%20LEASES) Details operating lease arrangements, showing decreased lease costs, increased lease income, and supplemental balance sheet information for lease assets and liabilities - The company has operating leases for **1 corporate office, 2 bank branch offices, 2 former bank branch offices, and 1 ATM location**, with remaining lease terms from approximately **0.25 to 3.00 years**[145](index=145&type=chunk) Lease Costs and Income (Three Months Ended June 30, in thousands) | Metric | 2025 | 2024 | | :----------------- | :--- | :--- | | Total lease cost | $246 | $295 | | Operating lease income | $43 | $21 | Supplemental Balance Sheet Information Related to Leases (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Operating lease right-of-use assets | $629 | $815 | | Operating lease liabilities | $864 | $1,076 | [NOTE 6 – DEPOSITS](index=44&type=section&id=NOTE%206%20%E2%80%93%20DEPOSITS) Summarizes deposits by type and maturity, noting a slight decrease due to reduced brokered deposits and significant upcoming certificate account maturities Deposits by Type (in thousands) | Deposit Type | June 30, 2025 | December 31, 2024 | | :---------------------------- | :------------ | :---------------- | | Non-interest bearing demand | $260,248 | $252,656 | | Interest bearing demand | $366,481 | $355,750 | | Savings accounts | $159,340 | $159,821 | | Money market accounts | $357,518 | $369,534 | | Certificate accounts | $334,829 | $350,387 | | **Total deposits** | **$1,478,416**| **$1,488,148** | - Brokered deposits decreased from **$19,125 thousand** at December 31, 2024, to **$5,092 thousand** at June 30, 2025[150](index=150&type=chunk) - Approximately **99% ($331,797 thousand)** of the total certificate accounts (**$334,829 thousand**) are scheduled to mature within the next **12 months** (by December 31, 2026)[149](index=149&type=chunk) [NOTE 7 – FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWINGS](index=45&type=section&id=NOTE%207%20%E2%80%93%20FEDERAL%20HOME%20LOAN%20BANK%20ADVANCES%20AND%20OTHER%20BORROWINGS) Details FHLB advances and other borrowings, noting FHLB repayment, stable other borrowings, significant unused capacity, and a scheduled subordinated note redemption Borrowings Summary (in thousands) | Borrowing Type | June 30, 2025 | December 31, 2024 | | :---------------------------- | :------------ | :---------------- | | Federal Home Loan Bank advances | $0 | $5,000 | | Senior Notes | $12,000 | $12,000 | | Subordinated Notes | $50,000 | $50,000 | | Unamortized debt issuance costs | $(278) | $(394) | | **Total other borrowings** | **$61,722** | **$61,606** | - There were **no FHLB borrowings outstanding** as of June 30, 2025[153](index=153&type=chunk) - The Board of Directors approved the redemption of the entire **$15,000 thousand** balance of the **6% subordinated debentures** due September 1, 2030, with redemption scheduled for **September 1, 2025**[155](index=155&type=chunk) - As of June 30, 2025, the Bank had available and unused borrowing capacity of approximately **$424,392 thousand** under the FHLB arrangement, **$24,665 thousand** from the Federal Reserve Bank, and **$70,000 thousand** from unsecured federal funds purchased lines of credit[152](index=152&type=chunk)[159](index=159&type=chunk)[160](index=160&type=chunk) [NOTE 8 - CAPITAL MATTERS](index=47&type=section&id=NOTE%208%20-%20CAPITAL%20MATTERS) Presents regulatory capital requirements and ratios, confirming both the Bank and Company are "Well Capitalized" and exceed minimum thresholds Bank Capital Ratios (June 30, 2025) | Capital Ratio (Bank) | Actual Ratio | Minimum for Capital Adequacy | Minimum for Well Capitalized | | :------------------- | :----------- | :--------------------------- | :--------------------------- | | Total Capital | 15.7% | >= 8.0% | >= 10.0% | | Tier 1 Capital | 14.4% | >= 6.0% | >= 8.0% | | Common Equity Tier 1 | 14.4% | >= 4.5% | >= 6.5% | | Tier 1 Leverage | 12.2% | >= 4.0% | >= 5.0% | Company Capital Ratios (June 30, 2025) | Capital Ratio (Company) | Actual Ratio | Minimum for Capital Adequacy | | :---------------------- | :----------- | :--------------------------- | | Total Capital | 16.3% | >= 8.0% | | Tier 1 Capital | 11.6% | >= 6.0% | | Common Equity Tier 1 | 11.6% | >= 4.5% | | Tier 1 Leverage | 9.8% | >= 4.0% | - The Bank was categorized as **'Well Capitalized'** under Prompt Corrective Action Provisions at both June 30, 2025, and December 31, 2024[162](index=162&type=chunk) [NOTE 9 – STOCK-BASED AND OTHER COMPENSATION](index=49&type=section&id=NOTE%209%20%E2%80%93%20STOCK-BASED%20AND%20OTHER%20COMPENSATION) Details stock-based compensation plans, showing decreased expense and new phantom stock plans linking cash awards to share price and performance Stock-Based Compensation Expense (in thousands) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Stock based compensation expense | $34 | $158 | $102 | $316 | - A phantom stock plan was approved on **January 23, 2025**, allowing certain employees to earn future cash awards linked to the company's common share price for time and performance-based awards, vesting over a **three-year period** (January 2025 through December 2027)[173](index=173&type=chunk) - A similar phantom stock plan was approved on **January 25, 2024**, with awards vesting over a **three-year period** (January 2024 through December 2026)[174](index=174&type=chunk) - The related liability for the phantom stock plan was **$222 thousand** at June 30, 2025, compared to **$190 thousand** at December 31, 2024[175](index=175&type=chunk) [NOTE 10 – FAIR VALUE ACCOUNTING](index=51&type=section&id=NOTE%2010%20%E2%80%93%20FAIR%20VALUE%20ACCOUNTING) Explains the fair value hierarchy and presents assets measured at fair value, with most investment securities using Level 2 and certain assets using Level 3 inputs - The fair value hierarchy categorizes inputs into **Level 1** (quoted prices in active markets), **Level 2** (significant other observable inputs), and **Level 3** (significant unobservable inputs)[176](index=176&type=chunk)[177](index=177&type=chunk)[178](index=178&type=chunk) Assets Measured on a Recurring Basis at Fair Value (June 30, 2025, in thousands) | Asset Type | Fair Value | Level 1 | Level 2 | Level 3 | | :-------------------------- | :--------- | :------ | :------- | :------ | | Investment securities | $134,773 | $0 | $134,773 | $0 | | Farmer Mac equity securities| $557 | $557 | $0 | $0 | | Preferred equity | $1,362 | $0 | $0 | $1,362 | Assets Measured on a Nonrecurring Basis at Fair Value (June 30, 2025, in thousands) | Asset Type | Carrying Value | Level 1 | Level 2 | Level 3 | | :-------------------------------- | :------------- | :------ | :------ | :------ | | Foreclosed and repossessed assets, net | $895 | $0 | $0 | $895 | | Collateral dependent loans | $5,915 | $0 | $0 | $5,915 | - Level 3 inputs for foreclosed and repossessed assets and collateral-dependent loans primarily include estimated costs to sell, ranging from **10% to 15%**[189](index=189&type=chunk) [NOTE 11—EARNINGS PER SHARE](index=56&type=section&id=NOTE%2011%E2%80%94EARNINGS%20PER%20SHARE) Provides basic and diluted EPS calculations, showing a year-over-year decrease for both periods, reflecting lower net income Earnings Per Share (in thousands, except per share data) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net income attributable to common stockholders | $3,270 | $3,675 | $6,467 | $7,763 | | Weighted average common shares outstanding | 9,989 | 10,370 | 9,989 | 10,405 | | Basic earnings per share | $0.33 | $0.35 | $0.65 | $0.75 | | Diluted earnings per share | $0.33 | $0.35 | $0.65 | $0.75 | [NOTE 12 – OTHER COMPREHENSIVE INCOME (LOSS)](index=57&type=section&id=NOTE%2012%20%E2%80%93%20OTHER%20COMPREHENSIVE%20INCOME%20(LOSS)) Details tax effects and changes in other comprehensive income (loss), showing net unrealized gains on securities in 2025, a reversal from 2024 losses Other Comprehensive Income (Loss), Net of Tax (in thousands) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net unrealized gains (losses) arising during the period | $81 | $503 | $1,536 | $(199) | | Reclassification for net loss on exchanged security | $0 | $130 | $0 | $130 | | **Total Other Comprehensive Income (Loss)** | **$81** | **$633** | **$1,536** | **$(69)** | Accumulated Other Comprehensive Income (Loss) (in thousands) | Metric | December 31, 2023 | December 31, 2024 | June 30, 2025 | | :------------------------------------------- | :---------------- | :---------------- | :------------ | | Ending Balance, Accumulated Other Comprehensive Income (Loss), net of tax | $(17,328) | $(16,420) | $(14,884) | [NOTE 13 – SEGMENT INFORMATION](index=59&type=section&id=NOTE%2013%20%E2%80%93%20SEGMENT%20INFORMATION) Clarifies the company operates as a single "Banking Operations" segment, with performance evaluated on consolidated net income and key revenue/expense streams - The company has a **single reportable operating segment**: Banking Operations, which includes lending, deposit, and investment activities[202](index=202&type=chunk) - The Chief Operating Decision Maker evaluates financial performance and allocates resources on a company-wide basis, using **consolidated net income** as a benchmark[202](index=202&type=chunk) Total Consolidated Revenues (in thousands) | Period | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Total consolidated revenues | $25,338 | $24,376 | $49,034 | $50,319 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=60&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Provides management's analysis of financial condition and operations, covering forward-looking statements, performance, critical estimates, and detailed balance sheet and income statement analysis [FORWARD-LOOKING STATEMENTS](index=60&type=section&id=FORWARD-LOOKING%20STATEMENTS) Highlights the presence of forward-looking statements, subject to uncertainties and risks, advising caution and noting no obligation for public updates - Forward-looking statements are identified by words such as **'anticipate,' 'believe,' 'expect,' 'estimates,' 'intend,' 'may,' 'will,'** or similar phrases[204](index=204&type=chunk) - Key risk factors include conditions in financial markets, inflation, geopolitical tensions, lending risks, cybersecurity, interest rate risk, competitive pressures, liquidity, capital, and regulatory changes[205](index=205&type=chunk) - The company undertakes **no obligation** to publicly update forward-looking statements to reflect subsequent events or circumstances[206](index=206&type=chunk) [GENERAL](index=61&type=section&id=GENERAL) Introduces management's discussion and analysis of financial condition and operations, specifying that monetary amounts are in thousands - The discussion covers the consolidated financial condition as of **June 30, 2025**, and results of operations for the **six months ended June 30, 2025**, compared to the same period in 2024[207](index=207&type=chunk) - All monetary amounts, except share, per share, and capital ratio amounts, are stated in **thousands**[207](index=207&type=chunk) [PERFORMANCE SUMMARY](index=61&type=section&id=PERFORMANCE%20SUMMARY) Summarizes operating results, noting increased net interest income, higher credit loss provisions, increased non-interest income, and higher non-interest expense, leading to decreased net income - Net interest income for Q2 2025 increased by **$1.7 million** compared to Q2 2024, primarily due to **$0.7 million** from nonaccrual loan payoffs, **$0.4 million** accretion, and improved net interest margin[209](index=209&type=chunk) - The total provision for credit losses for Q2 2025 was **$1.350 million**, a significant change from a negative provision of **$1.525 million** in Q2 2024, driven by delinquent commercial relationships, worsening macro-economic assumptions, and provisions on new loans and off-balance sheet commitments[210](index=210&type=chunk) - Non-interest income increased by **$0.9 million** in Q2 2025, mainly due to **$0.8 million** higher gain on equity securities and **$0.5 million** higher gain on sales of loans[211](index=211&type=chunk) - Non-interest expense increased by **$0.5 million** in Q2 2025, primarily due to higher compensation expenses (annual pay raises, incentive accruals, medical costs)[212](index=212&type=chunk) Net Income Attributable to Common Stockholders (in millions) | Period | 2025 | 2024 | | :------- | :--- | :--- | | Q2 | $3.3 | $3.7 | | 6 Months | $6.5 | $7.8 | [CRITICAL ACCOUNTING ESTIMATES](index=62&type=section&id=CRITICAL%20ACCOUNTING%20ESTIMATES) Highlights critical accounting estimates, focusing on the Allowance for Credit Losses (ACL) and its subjective estimation process for expected credit losses [Allowance for Credit Losses](index=62&type=section&id=Allowance%20for%20Credit%20Losses) Details the Allowance for Credit Losses (ACL) as a critical estimate, involving subjective judgment, models, individual evaluations, and qualitative adjustments for loan losses - The company adopted **ASU 2016-13, Financial Instruments-Credit Losses (Topic 326)**, on January 1, 2023[223](index=223&type=chunk) - The ACL is maintained to absorb probable and inherent losses in the loan portfolio, based on ongoing quarterly assessments of **estimated lifetime losses**[224](index=224&type=chunk) - The ACL determination uses a **third-party model** for collective evaluation and **individual evaluation** for loans with unique risk characteristics[225](index=225&type=chunk)[226](index=226&type=chunk) - Qualitative adjustments are made to the collectively evaluated ACL to incorporate factors not included in the model, such as lending policies, staff experience, and problem credit volume[226](index=226&type=chunk) - Assessing the ACL is inherently subjective, requiring material estimates that are susceptible to **significant change**[227](index=227&type=chunk) [STATEMENT OF OPERATIONS ANALYSIS](index=63&type=section&id=STATEMENT%20OF%20OPERATIONS%20ANALYSIS) Analyzes the Statement of Operations, detailing changes in net interest income, credit loss provision, non-interest income/expense, and income taxes, driven by rates and operations [Net Interest Income](index=63&type=section&id=Net%20Interest%20Income) Net interest income increased due to nonaccrual loan payoffs, accretion, and improved net interest margin from lower liability costs Net Interest Income (in millions) | Period | June 30, 2025 | June 30, 2024 | | :------- | :------------ | :------------ | | 3 Months | $13.3 | $11.6 | | 6 Months | $24.9 | $23.5 | - The increase in net interest income for the three months ended June 30, 2025, was due to **$0.7 million** from nonaccrual loan payoffs, **$0.4 million** in accretion, and improved net interest margin from **33 basis points** lower liability costs[229](index=229&type=chunk) Net Interest Margin | Period | June 30, 2025 | June 30, 2024 | | :------- | :------------ | :------------ | | 3 Months | 3.27% | 2.72% | | 6 Months | 3.06% | 2.75% | [Average Balances, Net Interest Income, Yields Earned and Rates Paid](index=63&type=section&id=Average%20Balances,%20Net%20Interest%20Income,%20Yields%20Earned%20and%20Rates%20Paid) Analyzes average balances, yields, and rates, showing decreased interest-earning assets but higher yields, and decreased interest-bearing liabilities with lower rates, improving margins Net Interest Income Analysis (3 Months Ended June 30, in thousands, except rates) | Metric | 2025 Average Balance | 2025 Yield/Rate | 2024 Average Balance | 2024 Yield/Rate | | :------------------------------------ | :------------------- | :-------------- | :------------------- | :-------------- | | Total interest earning assets | $1,633,427 | 5.53% | $1,709,627 | 5.28% | | Total interest-bearing liabilities | $1,299,732 | 2.84% | $1,380,745 | 3.17% | | Net interest income | | $13,311 | | $11,576 | | Interest rate spread | | 2.69% | | 2.11% | | Net interest margin | | 3.27% | | 2.72% | Net Interest Income Analysis (6 Months Ended June 30, in thousands, except rates) | Metric | 2025 Average Balance | 2025 Yield/Rate | 2024 Average Balance | 2024 Yield/Rate | | :------------------------------------ | :------------------- | :-------------- | :------------------- | :-------------- | | Total interest earning assets | $1,642,761 | 5.35% | $1,718,312 | 5.28% | | Total interest-bearing liabilities | $1,311,436 | 2.88% | $1,386,965 | 3.14% | | Net interest income | | $24,905 | | $23,481 | | Interest rate spread | | 2.47% | | 2.14% | | Net interest margin | | 3.06% | | 2.75% | [Rate/Volume Analysis](index=66&type=section&id=Rate%2FVolume%20Analysis) Breaks down net interest income changes into rate and volume impacts, showing positive rate effects largely offset negative volume impacts for both periods Net Interest Income Change (3 Months Ended June 30, 2025 vs. 2024, in thousands) | Component | Volume Change | Rate Change | Net Change | | :------------------ | :------------ | :---------- | :--------- | | Interest income | $(1,062) | $1,101 | $39 | | Interest expense | $(849) | $(847) | $(1,696) | | **Net interest income** | **$(213)** | **$1,948** | **$1,735** | Net Interest Income Change (6 Months Ended June 30, 2025 vs. 2024, in thousands) | Component | Volume Change | Rate Change | Net Change | | :------------------ | :------------ | :---------- | :--------- | | Interest income | $(2,087) | $550 | $(1,537) | | Interest expense | $(861) | $(2,100) | $(2,961) | | **Net interest income** | **$(1,226)** | **$2,650** | **$1,424** | [Provision for Credit Losses](index=68&type=section&id=Provision%20for%20Credit%20Losses) Provision for credit losses significantly increased due to delinquent commercial relationships, worsening macroeconomic assumptions, new loans, and off-balance sheet commitments Total Provision for Credit Losses (in millions) | Period | June 30, 2025 | June 30, 2024 | | :------- | :------------ | :------------ | | 3 Months | $1.350 | $(1.525) | | 6 Months | $1.100 | $(2.325) | - The Q2 2025 provision expense was largely due to: (1) **$0.7 million** from three 30-89 day delinquent commercial relationships; (2) **$0.3 million** from modestly worsening macro-economic assumptions; (3) **$0.15 million** from provisions on new loans with longer contractual life; and (4) **$0.2 million** from an increase in off-balance sheet commitments for new construction loan originations[248](index=248&type=chunk) - Management believes the provision recorded is **adequate** given the current loan portfolio condition and the sufficiency of collateral supporting non-performing loans[252](index=252&type=chunk) [Non-interest Income](index=69&type=section&id=Non-interest%20Income) Non-interest income increased due to higher gains on equity securities and loan sales, partially offset by lower service charges and loan fees Non-interest Income (in thousands) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | % Change | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | % Change | | :-------------------------------- | :--------------------------- | :--------------------------- | :------- | :--------------------------- | :--------------------------- | :------- | | Service charges on deposit accounts | $432 | $490 | (11.84)% | $855 | $961 | (11.03)% | | Loan servicing income | $565 | $526 | 7.41% | $1,124 | $1,108 | 1.44% | | Gain on sale of loans | $699 | $226 | 209.29% | $1,419 | $1,246 | 13.88% | | Net gains (losses) on equity securities | $99 | $(658) | N/M | $109 | $(491) | N/M | | **Total non-interest income** | **$2,836** | **$1,913** | **48.25%** | **$5,429** | **$5,177** | **4.87%**| - The increase in gain on sale of loans was primarily due to **higher gains on SBA loan sales** for the three-month period and higher residential gains on sale for the six-month period[257](index=257&type=chunk) - The increase in net gains on equity securities was due to **positive mark-to-market impacts**, contrasting with unrealized losses in the prior year[258](index=258&type=chunk) [Non-interest Expense](index=70&type=section&id=Non-interest%20Expense) Non-interest expense increased due to higher compensation and data processing costs, partially offset by decreases in other expenses from prior year one-off items Non-interest Expense (in thousands) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | % Change | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | % Change | | :-------------------------------- | :--------------------------- | :--------------------------- | :------- | :--------------------------- | :--------------------------- | :------- | | Compensation and related benefits | $6,008 | $5,675 | 5.87% | $11,605 | $11,158 | 4.0% | | Data processing | $1,753 | $1,525 | 14.95% | $3,472 | $3,122 | 11.2% | | Professional services | $432 | $347 | 24.50% | $940 | $913 | 2.9% | | Other | $649 | $756 | (14.15)% | $1,313 | $1,824 | (28.0)% | | **Total non-interest expense** | **$10,750** | **$10,299** | **4.38%**| **$21,213** | **$21,076** | **0.6%** | - Compensation expense increased due to **annual employee pay raises, higher incentive accruals, and increased medical costs**[260](index=260&type=chunk) - Data processing expense increased due to **inflationary pressures and new software implementation costs**[261](index=261&type=chunk) - The decrease in 'Other' non-interest expense was primarily due to **branch closure costs in Q2 2024** and the establishment of an **SBA valuation reserve in Q1 2024**[262](index=262&type=chunk) [Income Taxes](index=70&type=section&id=Income%20Taxes) Income tax provision decreased due to lower pre-tax income and a more favorable effective tax rate from higher permanent tax deductions Provision for Income Taxes (in millions) | Period | June 30, 2025 | June 30, 2024 | | :------- | :------------ | :------------ | | 3 Months | $0.8 | $1.0 | | 6 Months | $1.6 | $2.1 | - The decrease in income tax provision was primarily due to **lower pre-tax income** and a **lower effective tax rate**, driven by higher permanent tax deductions in 2025[263](index=263&type=chunk) [BALANCE SHEET ANALYSIS](index=71&type=section&id=BALANCE%20SHEET%20ANALYSIS) Analyzes balance sheet components, highlighting changes and trends in cash, investments, loans, ACL, NPAs, MSRs, deposits, borrowings, equity, liquidity, and off-balance sheet items [Cash and Cash Equivalents](index=71&type=section&id=Cash%20and%20Cash%20Equivalents) Cash and cash equivalents significantly increased, primarily due to net proceeds from loan shrinkage, enhancing on-balance sheet liquidity Cash and Cash Equivalents (in millions) | Date | Amount | | :------------ | :----- | | June 30, 2025 | $67.5 | | Dec 31, 2024 | $50.2 | - The increase was primarily due to **net proceeds from loan shrinkage**, which increased on-balance sheet liquidity and growing interest-bearing cash[265](index=265&type=chunk) [Investment Securities](index=71&type=section&id=Investment%20Securities) Investment securities decreased in both AFS and HTM categories due to repayments and maturities, with certain securities remaining pledged as collateral Available-for-sale securities (AFS) (in millions) | Metric | June 30, 2025 | December 31, 2024 | | :------------------- | :------------ | :---------------- | | Fair Value | $134.8 | $142.9 | | Amortized Cost | $155.5 | $165.6 | | Unrealized Loss (net)| $(20.7) | $(22.8) | Held-to-maturity securities (HTM) (in millions) | Metric | June 30, 2025 | December 31, 2024 | | :------------------- | :------------ | :---------------- | | Amortized Cost | $83.0 | $85.5 | | Fair Value | $65.0 | $65.6 | - At June 30, 2025, the Bank pledged **$33.2 million** of mortgage-backed securities as collateral to the Federal Reserve Bank, **$0.3 million** of U.S. Government Agency securities and **$1.7 million** of mortgage-backed securities against specific municipal deposits, and **$0.4 million** of mortgage-backed securities to the Federal Home Loan Bank of Des Moines[268](index=268&type=chunk) [Loans](index=73&type=section&id=Loans) Total loans decreased to $1.35 billion, with commercial/agricultural real estate as the largest segment, and detailed CRE portfolio characteristics provided Total Loans Outstanding (in billions) | Date | Amount | | :------------ | :----- | | June 30, 2025 | $1.35 | | Dec 31, 2024 | $1.37 | Loan Portfolio Composition (June 30, 2025, in millions) | Loan Type | Amount | Percent | | :------------------------------ | :------- | :------ | | Commercial/Agricultural real estate | $1,071.6 | 79.6% | | C&I/Agricultural operating | $141.1 | 10.5% | | Residential mortgage | $128.2 | 9.5% | | Consumer installment | $7.2 | 0.5% | Commercial Real Estate (CRE) Portfolio Characteristics (June 30, 2025, in millions) | CRE Type | Loan Balance | Avg Loan Size | Avg LTV | Criticized Loans | % of Total Criticized | | :------------------------ | :----------- | :------------ | :------ | :--------------- | :-------------------- | | Non-Owner Occupied CRE | $453 | $0.6 | 52% | $7.2 | 1.6% | | Owner-Occupied CRE | $241 | $0.6 | 50% | $8.2 | 3.4% | | Multi-family CRE | $239 | $1.9 | 62% | $9.0 | 3.8% | | Construction & Land Dev. | $70 | $0.8 | 70% | $0.0 | 0.0% | - The geographical distribution of the CRE portfolio at June 30, 2025, shows **Wisconsin as the dominant market** across most CRE types, followed by Minnesota[271](index=271&type=chunk) [Allowance for Credit Losses - Loans](index=76&type=section&id=Allowance%20for%20Credit%20Losses%20-%20Loans) ACL for loans increased to $21.3 million (1.59% of total loans) due to provisions, partially offset by net charge-offs, with ACL for unfunded commitments also rising Allowance for Credit Losses (ACL) - Loans (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | ACL - Loans, end of period | $21,347 | $20,549 | | ACL - Loans to loans, end of period | 1.59% | 1.50% | ACL - Loans Roll Forward (Six Months Ended June 30, 2025, in thousands) | Item | Amount | | :---------------------------------- | :----- | | ACL - Loans, at beginning of period | $20,549| | Net loan recoveries/(charge-offs) | $(9) | | Additions to ACL via provision | $807 | | **ACL - Loans, at end of period** | **$21,347**| Allowance for Credit Losses (ACL) - Unfunded Commitments (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | ACL - Unfunded Commitments, end of period | $627 | $334 | [Nonperforming Loans, Potential Problem Loans and Foreclosed Properties](index=78&type=section&id=Nonperforming%20Loans,%20Potential%20Problem%20Loans%20and%20Foreclosed%20Properties) NPAs decreased to $13.0 million due to payoffs, but criticized loans significantly increased from weaker commercial and multi-family relationships Nonperforming Assets (NPAs) (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | Total nonaccrual loans | $11,609 | $13,168 | | Accruing loans past due 90 days or more | $521 | $186 | | Total nonperforming loans (NPLs) | $12,130 | $13,354 | | Other real estate owned | $876 | $891 | | Other collateral owned | $19 | $24 | | **Total nonperforming assets (NPAs)** | **$13,025** | **$14,269** | - Nonaccrual loans to total loans decreased to **0.86%** at June 30, 2025, from **0.96%** at December 31, 2024[285](index=285&type=chunk) Criticized Loans (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Special mention loan balances | $23,201 | $8,480 | | Substandard loan balances | $17,922 | $18,891 | | **Criticized loans, end of period** | **$41,123** | **$27,371** | - The increase in criticized loans was primarily due to **one forestry services credit moving to substandard in Q3 2024**, and new special mention commercial loans (C&I and multi-family) in Q1 2025 due to **weaker cash flow and slower leasing activity**[289](index=289&type=chunk) [Mortgage Servicing Rights](index=81&type=section&id=Mortgage%20Servicing%20Rights) MSR fair value slightly decreased to $5.1 million, representing 1.07% of the $475.2 million servicing portfolio Fair Market Value of MSR Asset (in millions) | Date | Amount | | :------------ | :----- | | June 30, 2025 | $5.1 | | June 30, 2024 | $5.4 | - The MSR asset as a percentage of its servicing portfolio was **1.07%** at June 30, 2025, compared to **1.09%** at December 31, 2024[291](index=291&type=chunk) - The unpaid balances of one-to-four family residential real estate loans serviced for others were **$475.2 million** at June 30, 2025, down from **$479.6 million** at December 31, 2024[291](index=291&type=chunk) [Deposits](index=81&type=section&id=Deposits) Total deposits decreased to $1.48 billion due to reduced brokered deposits and commercial cash, with stable composition and ample liquidity coverage for uninsured deposits Total Deposits (in millions) | Date | Amount | | :------------ | :----- | | June 30, 2025 | $1,478.4 | | Dec 31, 2024 | $1,488.1 | - The decrease in deposits was largely due to a **reduction in brokered deposits** and commercial customers decreasing their cash balances[292](index=292&type=chunk) - At June 30, 2025, the deposit portfolio composition was **58% consumer, 27% commercial, 13% public, and 2% brokered deposits**[292](index=292&type=chunk) - Uninsured and uncollateralized deposits were **$263.2 million (18% of total deposits)** at June 30, 2025[293](index=293&type=chunk) - On-balance sheet liquidity, collateralized borrowing, and uncommitted federal funds borrowing availability totaled **$730 million**, covering **277%** of uninsured and uncollateralized deposits at June 30, 2025[294](index=294&type=chunk) [Federal Home Loan Bank (FHLB) advances and Other Borrowings](index=83&type=section&id=Federal%20Home%20Loan%20Bank%20(FHLB)%20advances%20and%20Other%20Borrowings) FHLB advances were repaid, other borrowings remained stable, and the company maintains substantial unused borrowing capacity, with a $15 million subordinated note redemption scheduled Borrowings Summary (in millions) | Borrowing Type | June 30, 2025 | December 31, 2024 | | :---------------------------- | :------------ | :---------------- | | Federal Home Loan Bank advances | $0.0 | $5.0 | | Senior Notes | $12.0 | $12.0 | | Subordinated Notes | $50.0 | $50.0 | | **Total other borrowings** | **$61.7** | **$61.6** | - The Board of Directors approved the redemption of the entire **$15.0 million** balance of the **6% subordinated debentures** due September 1, 2030, with redemption scheduled for **September 1, 2025**[298](index=298&type=chunk) - As of June 30, 2025, the Bank had available and unused borrowing capacity of approximately **$424.4 million** under the FHLB arrangement, **$24.7 million** from the Federal Reserve Bank, and **$70.0 million** from unsecured federal funds purchased lines of credit[300](index=300&type=chunk)[301](index=301&type=chunk)[302](index=302&type=chunk) [Stockholders' Equity](index=84&type=section&id=Stockholders'%20Equity) Stockholders' equity increased to $183.5 million, driven by net income and reduced unrealized losses, partially offset by dividends, with a new share repurchase program authorized Stockholders' Equity (in millions) | Date | Amount | | :------------ | :----- | | June 30, 2025 | $183.5 | | Dec 31, 2024 | $179.1 | - The increase was attributable to **net income of $6.5 million** and a **$1.5 million decrease in net unrealized losses** from AFS securities, partially offset by **$3.6 million in cash dividends paid**[304](index=304&type=chunk) - On **July 24, 2025**, the Board of Directors authorized a new stock repurchase program for **5% of outstanding shares, or 499,000 shares**[305](index=305&type=chunk) [Liquidity and Asset / Liability Management](index=84&type=section&id=Liquidity%20and%20Asset%20%2F%20Liability%20Management) The company actively manages liquidity, with an increased ratio, diverse funding sources, and significant access to external credit lines, ensuring robust coverage for uninsured deposits - The liquidity ratio increased by **0.42% to 12.17%** at June 30, 2025, from December 31, 2024[306](index=306&type=chunk) - Primary sources of funds include deposits, amortization, prepayments and maturities on investment and loan portfolios, and funds provided from operations[310](index=310&type=chunk) - On-balance sheet liquidity, collateralized new borrowing capacity, and uncommitted federal funds borrowing availability totaled **$730 million**, covering **277%** of uninsured and uncollateralized deposits at June 30, 2025[309](index=309&type=chunk) - The company maintains access to additional funds through FHLB borrowings (**$424.4 million available**), Federal Reserve Bank lines of credit (**$24.7 million available**), and **$70 million** in uncommitted federal funds purchased lines with correspondent banks[312](index=312&type=chunk) [Off-Balance Sheet Liabilities](index=85&type=section&id=Off-Balance%20Sheet%20Liabilities) Off-balance sheet liabilities primarily include increased unused loan commitments ($166.5 million) and $2.0 million in capital contribution commitments Off-Balance Sheet Liabilities (in millions) | Item | June 30, 2025 | December 31, 2024 | | :------------------------ | :------------ | :---------------- | | Unused loan commitments | $166.5 | $137.0 | | Capital contribution commitments | $2.0 | $2.9 | [Capital Resources](index=86&type=section&id=Capital%20Resources) Reaffirms that both the Bank and Company are "Well Capitalized," with all regulatory capital ratios exceeding minimum requirements Bank Capital Ratios (June 30, 2025) | Capital Ratio (Bank) | Actual Ratio | Minimum for Well Capitalized | | :------------------- | :----------- | :--------------------------- | | Total Capital | 15.7% | >= 10.0% | | Tier 1 Capital | 14.4% | >= 8.0% | | Common Equity Tier 1 | 14.4% | >= 6.5% | | Tier 1 Leverage | 12.2% | >= 5.0% | Company Capital Ratios (June 30, 2025) | Capital Ratio (Company) | Actual Ratio | Minimum for Capital Adequacy | | :---------------------- | :----------- | :--------------------------- | | Total Capital | 16.3% | >= 8.0% | | Tier 1 Capital | 11.6% | >= 6.0% | | Common Equity Tier 1 | 11.6% | >= 4.5% | | Tier 1 Leverage | 9.8% | >= 4.0% | - Both the Bank and the Company were categorized as **'Well Capitalized'** under Prompt Corrective Action Provisions at June 30, 2025, and December 31, 2024[316](index=316&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=87&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) Discusses the company's primary market risk, interest rate risk, and its management through ALCO policies and quantification via EVE and NII shock analyses [Our Risk When Interest Rates Change](index=87&type=section&id=Our%20Risk%20When%20Interest%20Rates%20Change) Changes in market interest rates significantly affect financial results, representing the company's most substantial market risk due to fixed-period contractual rates - Interest rate risk is the company's **most significant market risk**, impacting results of operations due to changes in market interest rates[318](index=318&type=chunk) - The company's interest income and expense are affected by general economic conditions and regulatory policies, including those of the Federal Reserve[318](index=318&type=chunk) [How We Measure Our Risk of Interest Rate Changes](index=87&type=section&id=How%20We%20Measure%20Our%20Risk%20of%20Interest%20Rate%20Changes) Measures interest rate risk through ALCO-managed asset and liability policies, quantifying potential impacts using EVE and NII shock analyses for hypothetical rate shifts - The company monitors interest rate risk through third-party reporting software and manages it via **asset and liability management policies** implemented by the ALCO[319](index=319&type=chunk)[320](index=320&type=chunk) - Strategies include originating shorter-term/variable rate loans, selling longer-term fixed-rate residential loans, managing core deposits, and utilizing various borrowings and investment securities[321](index=321&type=chunk) Percent Change in Economic Value of Equity (EVE) (June 30, 2025) | Change in Interest Rates (bp) | % Change in EVE | | :---------------------------- | :-------------- | | +300 bp | 6% | | +200 bp | 4% | | +100 bp | 2% | | -100 bp | (2)% | | -200 bp | (5)% | Percent Change in Net Interest Income Over One Year Horizon (June 30, 2025) | Change in Interest Rates (bp) | % Change in NII | | :---------------------------- | :-------------- | | +300 bp | (5)% | | +200 bp | (3)% | | +100 bp | (2)% | | -100 bp | 1% | | -200 bp | 2% | - The projected changes in net interest income are largely due to the impact of growth in **short-term certificates of deposits**, which reprice faster and at a higher rate than other deposit products[327](index=327&type=chunk) [Item 4. Controls and Procedures](index=88&type=section&id=Item%204.%20Controls%20and%20Procedures) Addresses disclosure controls and internal control over financial reporting, confirming effectiveness and no material changes during the quarter [Evaluation of Disclosure Controls and Procedures](index=88&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2025, ensuring timely and accurate SEC reporting - Disclosure controls and procedures are designed to ensure that information required for Exchange Act reports is recorded, processed, summarized, and reported within specified time periods[328](index=328&type=chunk) - As of June 30, 2025, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were **effective** at reaching a level of reasonable assurance[330](index=330&type=chunk) [Changes in Internal Control over Financial Reporting](index=89&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) No material changes occurred in the company's internal control over financial reporting during the most recently completed fiscal quarter - No material changes in the company's internal control over financial reporting occurred during the most recently completed fiscal quarter[331](index=331&type=chunk) [Part II – OTHER INFORMATION](index=89&type=section&id=Part%20II%20%E2%80%93%20OTHER%20INFORMATION) Presents other information, including legal proceedings, risk factors, equity sales, defaults, mine safety, other disclosures, and exhibits [Item 1. Legal Proceedings](index=89&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in normal course legal proceedings, with management believing no material adverse effect on business or financial condition - The company and/or the Bank occasionally become involved in various legal proceedings in the normal course of business[332](index=332&type=chunk) - Management believes any liability from such proceedings would **not have a material adverse effect** on the business or financial condition of the Company[332](index=332&type=chunk) [Item 1A. Risk Factors](index=89&type=section&id=Item%201A.%20Risk%20Factors) Directs readers to the 2024 10-K and this 10-Q's "Forward-Looking Statements" for a comprehensive understanding of risk factors - Readers should refer to the **'Risk Factors' in Item 1A of the 2024 10-K** and the **'Forward-Looking Statements' in this Form 10-Q** for a comprehensive understanding of risks[333](index=333&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=89&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No shares were repurchased under the 2024 program, but a new program for 499,000 shares was authorized in July 2025 - No shares were repurchased under the 2024 share repurchase program during the quarter ended June 30, 2025[334](index=334&type=chunk) - As of June 30, 2025, **238,769 shares** remained available for repurchase under the 2024 program, which expires in July 2025[334](index=334&type=chunk) - On **July 24, 2025**, a new stock repurchase program was authorized for **5% of the outstanding shares (499,000 shares)**[334](index=334&type=chunk) [Item 3. Defaults Upon Senior Securities](index=89&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable to the company - This item is **not applicable**[335](index=335&type=chunk) [Item 4. Mine Safety Disclosures](index=89&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - This item is **not applicable**[336](index=336&type=chunk) [Item 5. Other Information](index=89&type=section&id=Item%205.%20Other%20Information) No Section 16 officers or directors adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter - No Section 16 officers or directors adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arran

Core Insights - Citizens Community Bancorp, Inc. (CZWI) reported quarterly earnings of $0.33 per share, exceeding the Zacks Consensus Estimate of $0.29 per share, but down from $0.36 per share a year ago, representing an earnings surprise of +13.79% [1] - The company posted revenues of $16.15 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 9.84% and up from $13.49 million year-over-year [2] - The stock has underperformed the market, losing about 9.3% since the beginning of the year compared to the S&P 500's gain of 8.6% [3] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.35 on revenues of $15.5 million, and for the current fiscal year, it is $1.32 on revenues of $60 million [7] - The estimate revisions trend for Citizens Community Bancorp was mixed ahead of the earnings release, resulting in a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market [6] Industry Context - The Financial - Savings and Loan industry, to which Citizens Community Bancorp belongs, is currently in the bottom 30% of the Zacks industry rankings, which may impact stock performance [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, suggesting that investors should monitor these revisions closely [5]

[Q2 2025 Earnings Overview](index=1&type=section&id=1.%20Q2%202025%20Earnings%20Overview) [Financial Performance Summary](index=1&type=section&id=1.1%20Financial%20Performance%20Summary) Citizens Community Bancorp reported Q2 2025 net income of $3.3 million and diluted EPS of $0.33, showing sequential growth but a slight year-over-year decrease, driven by increased net interest income and credit loss provisions Key Financial Data for Q2 2025 | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Net Income | $3.3 million | $3.2 million | $3.7 million | | Diluted EPS | $0.33 | $0.32 | $0.35 | | Net Interest Income QoQ Growth | $1.7 million | - | - | | Provision for Credit Losses | $1.35 million | ($0.25 million) | - | | Book Value Per Share | $18.36 | $18.02 | $17.10 | | Tangible Book Value Per Share (non-GAAP) | $15.15 | $14.79 | $13.91 | | Shareholders' Equity as % of Total Assets | 10.57% | 10.12% | - | | Tangible Common Equity as % of Tangible Assets (non-GAAP) | 8.89% | 8.45% | - | [Key Operational and Financial Highlights](index=2&type=section&id=1.2%20Key%20Operational%20and%20Financial%20Highlights) Q2 2025 saw significant improvements in net interest income and net interest margin, driven by loan repayments and lower deposit costs, though credit loss provisions increased due to loan delinquencies and macroeconomic assumption changes Key Highlights for Q2 2025 | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Quarterly Earnings | $3.3 million | $3.2 million | $3.7 million | | Diluted EPS | $0.33 | $0.32 | $0.35 | | Net Interest Income | $13.3 million | $11.6 million | $11.6 million | | Net Interest Margin | 3.27% | 2.85% | 2.72% | | Provision for Credit Losses | $1.4 million | ($0.25 million) | $1.53 million | | Non-Interest Income | $2.8 million | $2.6 million | $1.9 million | | Non-Interest Expense | $10.8 million | $10.5 million | $10.3 million | | Effective Tax Rate | 19.2% | 19.6% | 22.1% | - Net interest income quarter-over-quarter growth is primarily attributed to **$0.7 million** from non-accrual loan repayments, **$0.4 million** from purchase accounting accretion on loan repayments, **$0.2 million** from loan repricing and new originations, **$0.4 million** from reduced interest expense due to lower deposit rates, and a **$0.1 million** net impact from one additional day of interest income[5](index=5&type=chunk) - The increase in provision for credit losses is primarily due to **$0.7 million** from three 30-89 day past due commercial real estate loan relationships, **$0.3 million** from changes in macroeconomic assumptions by a third-party provider, **$0.15 million** from new loan provisions exceeding prepaid and matured loans, and **$0.2 million** from off-balance sheet construction commitments[5](index=5&type=chunk) [Balance Sheet and Asset Quality](index=3&type=section&id=2.%20Balance%20Sheet%20and%20Asset%20Quality) [Balance Sheet Changes](index=3&type=section&id=2.1%20Balance%20Sheet%20Changes) Total assets decreased by $44.8 million to $1.735 billion this quarter, primarily due to reductions in cash and loans receivable, as new originations were offset by repayments of larger non-strategic loans Key Balance Sheet Changes (as of June 30, 2025) | Metric | Amount (million USD) | QoQ Change (million USD) | | :--- | :--- | :--- | | Total Assets | 1,735 | (44.8) | | Cash | (32.7) | - | | Loans Receivable | 1,345 | (7.1) | [Liquidity Position](index=3&type=section&id=2.2%20Liquidity%20Position) On-balance sheet liquidity decreased to 12.17% of total assets as of June 30, 2025, yet total liquidity, including borrowing capacity, remained strong at 277% of uninsured and uncollateralized deposits Liquidity Metrics (as of June 30, 2025) | Metric | June 30, 2025 | March 31, 2025 | | :--- | :--- | :--- | | On-balance sheet liquidity ratio (% of total assets) | 12.17% | 14.38% | | Total liquidity (% of uninsured and uncollateralized deposits) | 277% ($730 million) | 314% ($852 million) | [Loan Portfolio and Asset Quality](index=3&type=section&id=2.3%20Loan%20Portfolio%20and%20Asset%20Quality) Total loans receivable declined quarter-over-quarter despite new originations, while asset quality saw reduced nonperforming assets but a significant increase in special mention loans due to slower multi-family residential leasing activity, leading to increased credit loss provisions [Loan Portfolio Composition](index=3&type=section&id=2.3.1%20Loan%20Portfolio%20Composition) Loans Receivable (as of June 30, 2025) | Loan Type | Amount (thousand USD) | | :--- | :--- | | Commercial Real Estate | 693,382 | | Agricultural Real Estate | 69,237 | | Multi-Family Residential Real Estate | 238,953 | | Construction and Land Development | 70,477 | | Commercial and Industrial | 109,202 | | Agricultural Operating | 31,876 | | Residential Mortgage | 125,818 | | Purchased HELOC Loans | 2,368 | | Original Indirect Notes | 2,959 | | Other Consumer Loans | 4,275 | | **Total Loans Receivable** | **1,345,620** | - Loans receivable decreased by **$7.1 million** to **$1.345 billion** in Q2, as increased new origination activity was offset by repayments of larger non-strategic loans[9](index=9&type=chunk)[10](index=10&type=chunk) - The office loan portfolio totaled **$26 million** (70 loans), down from **$28 million** (72 loans) in the prior quarter[10](index=10&type=chunk) [Allowance for Credit Losses (ACL)](index=4&type=section&id=2.3.2%20Allowance%20for%20Credit%20Losses%20(ACL)) Allowance for Credit Losses (ACL) - Percentage of Loans | Date | Loans EOP Balance (thousand USD) | ACL - Loans (thousand USD) | ACL - Loans as % of Loans EOP Balance | | :--- | :--- | :--- | :--- | | June 30, 2025 | 1,345,620 | 21,347 | 1.59 % | | March 31, 2025 | 1,352,728 | 20,205 | 1.49 % | | December 31, 2024 | 1,368,981 | 20,549 | 1.50 % | | September 30, 2024 | 1,424,828 | 21,000 | 1.47 % | - The allowance for credit losses on loans increased by **$1.1 million** to **$21.3 million**, representing **1.59%** of total loans, up from **1.49%** in the prior quarter[12](index=12&type=chunk) - A **$1.35 million** provision for credit losses was recorded this quarter, primarily due to three 30-89 day past due commercial real estate loan relationships (**$0.7 million**) and changes in macroeconomic assumptions (**$0.3 million**)[12](index=12&type=chunk) [Nonperforming and Criticized Assets](index=3&type=section&id=2.3.3%20Nonperforming%20and%20Criticized%20Assets) Nonperforming Assets (NPAs) and Criticized Loans | Metric | June 30, 2025 (thousand USD) | March 31, 2025 (thousand USD) | June 30, 2024 (thousand USD) | | :--- | :--- | :--- | :--- | | Nonperforming Assets (NPAs) | 13,025 | 14,535 | 10,270 | | Special Mention Loans | 23,201 | 14,990 | 8,848 | | Substandard Loans | 17,922 | 19,591 | 14,420 | | Nonperforming Loans (NPLs) as % of Total Loans | 0.90 % | 1.01 % | 0.60 % | | Nonperforming Assets (NPAs) as % of Total Assets | 0.75 % | 0.82 % | 0.57 % | - Nonperforming assets decreased by **$1.5 million** to **$13 million**, primarily due to the repayment of an agricultural relationship[10](index=10&type=chunk)[15](index=15&type=chunk) - Special mention loans increased by **$8.2 million** to **$23.2 million**, mainly due to slower-than-expected leasing activity for a multi-family residential loan[10](index=10&type=chunk)[14](index=14&type=chunk) [Deposit Portfolio](index=3&type=section&id=2.4%20Deposit%20Portfolio) Total deposits decreased by $45.2 million to $1.48 billion this quarter, primarily due to seasonal public deposit reductions and a decline in commercial deposits, while the deposit mix remained stable with consumer deposits as the largest share Deposit Portfolio (as of June 30, 2025) | Deposit Type | Amount (thousand USD) | Percentage | | :--- | :--- | :--- | | Consumer Deposits | 856,467 | 58% | | Commercial Deposits | 406,608 | 27% | | Public Deposits | 190,933 | 13% | | Wholesale Deposits | 24,408 | 2% | | **Total Deposits** | **1,478,416** | **100%** | - Total deposits decreased by **$45.2 million**, primarily reflecting a seasonal reduction of **$20.3 million** in public deposits and a **$17 million** decrease in commercial deposits[10](index=10&type=chunk) - Uninsured and uncollateralized deposits totaled **$263.2 million**, representing **18%** of total deposits[18](index=18&type=chunk) [Review of Operations](index=5&type=section&id=3.%20Review%20of%20Operations) [Net Interest Income and Net Interest Margin](index=5&type=section&id=3.1%20Net%20Interest%20Income%20and%20Net%20Interest%20Margin) Net interest income increased by $1.7 million quarter-over-quarter to $13.3 million, with net interest margin rising 42 basis points to 3.27%, driven by loan repayments, higher purchase accounting accretion, lower deposit costs, and improved asset yields Net Interest Income and Net Interest Margin Analysis | Period | Net Interest Income (thousand USD) | Net Interest Margin (%) | | :--- | :--- | :--- | | June 30, 2025 | 13,311 | 3.27 | | March 31, 2025 | 11,594 | 2.85 | | December 31, 2024 | 11,708 | 2.79 | | September 30, 2024 | 11,285 | 2.63 | | June 30, 2024 | 11,576 | 2.72 | - Net interest income increased by **$1.7 million** quarter-over-quarter, primarily due to **$0.7 million** from non-accrual loan repayments, **$0.4 million** from purchase accounting accretion on loan repayments, **$0.2 million** from increased loan interest income from repricing and new originations, **$0.4 million** from reduced interest expense due to lower deposit rates, and a **$0.1 million** net impact from one additional day of interest income[21](index=21&type=chunk)[22](index=22&type=chunk) - Net interest margin increased by **42 basis points** quarter-over-quarter, primarily due to **17 basis points** from loan repayment income, **10 basis points** from increased purchase accounting accretion on loan repayments, **8 basis points** from lower deposit costs, and **7 basis points** from improved asset yields[25](index=25&type=chunk) [Pre-Provision Net Revenue (PPNR)](index=7&type=section&id=3.2%20Pre-Provision%20Net%20Revenue%20(PPNR)) Pre-Provision Net Revenue (PPNR) grew by $1.7 million quarter-over-quarter to $5.4 million, primarily driven by increased net interest income from loan repricing, new high-yield originations, and declining deposit rates Pre-Provision Net Revenue (PPNR) (thousand USD) | Period | Pre-Tax Income | Add Back Provision for Credit Losses | Subtract Negative Provision for Credit Losses | Pre-Provision Net Revenue | | :--- | :--- | :--- | :--- | :--- | | June 30, 2025 | 4,047 | 1,350 | — | 5,397 | | March 31, 2025 | 3,974 | — | (250) | 3,724 | | December 31, 2024 | 3,358 | — | (450) | 2,908 | | September 30, 2024 | 4,185 | — | (400) | 3,785 | | June 30, 2024 | 4,715 | — | (1,525) | 3,190 | - Excluding the impact of unexpected interest income related to non-accrual loan repayments and loan repayment interest accretion, PPNR increased by **$0.6 million** quarter-over-quarter, primarily from loan repricing, new high-yield originations, and declining deposit rates[24](index=24&type=chunk) [Non-Interest Income](index=8&type=section&id=3.3%20Non-Interest%20Income) Non-interest income increased by $0.2 million quarter-over-quarter to $2.8 million and by $0.9 million year-over-year, primarily due to loan fees collected on non-accrual loan repayments and increased equity securities gains - Non-interest income increased by **$0.2 million** to **$2.8 million** in Q2 2025, up from **$2.6 million** in the prior quarter, mainly due to loan fees collected on non-accrual loan repayments and increased equity securities gains[29](index=29&type=chunk) - Total non-interest income increased by **$0.9 million** compared to Q2 2024, primarily due to increased gains on loan sales and net realized gains on equity securities[29](index=29&type=chunk) [Non-Interest Expense](index=8&type=section&id=3.4%20Non-Interest%20Expense) Non-interest expense increased by $0.3 million quarter-over-quarter to $10.8 million and by $0.5 million year-over-year, mainly due to compensation items such as annual merit increases and moderately increased incentive costs, as well as inflationary factors - Non-interest expense increased by **$0.3 million** to **$10.8 million** in Q2 2025, up from **$10.5 million** in the prior quarter, primarily due to compensation items, including annual merit increases at the end of March 2025 and moderately increased incentive costs[30](index=30&type=chunk) - Non-interest expense increased by **$0.5 million** compared to Q2 2024, primarily due to higher compensation expenses, including the impact of annual merit increases and inflationary factors affecting non-interest expenses[30](index=30&type=chunk) [Income Taxes](index=8&type=section&id=3.5%20Income%20Taxes) The provision for income taxes in Q2 2025 was $0.8 million, consistent with the prior quarter, with the effective tax rate slightly decreasing to 19.2% Income Tax Data | Period | Provision for Income Taxes (thousand USD) | Effective Tax Rate (%) | | :--- | :--- | :--- | | June 30, 2025 | 777 | 19.2 | | March 31, 2025 | 777 | 19.6 | | June 30, 2024 | 1,040 | 22.1 | [Corporate Actions and Information](index=3&type=section&id=4.%20Corporate%20Actions%20and%20Information) [Stock Buyback Authorization](index=3&type=section&id=4.1%20Stock%20Buyback%20Authorization) The Board of Directors authorized a new 5% common stock repurchase plan on July 24, 2025, allowing for the repurchase of up to 499,000 shares, with no common stock repurchases made in Q2 2025 - The Board of Directors authorized a new **5%** common stock repurchase plan for **499,000 shares** on July 24, 2025[10](index=10&type=chunk)[20](index=20&type=chunk) - No common stock was repurchased in Q2 2025[20](index=20&type=chunk) [Subordinated Debenture Redemption](index=3&type=section&id=4.2%20Subordinated%20Debenture%20Redemption) The Board of Directors approved the redemption of all $15 million of 6% subordinated debentures on July 7, 2025, which were originally set to mature and reprice on September 1, 2030, with the redemption scheduled for September 1, 2025 - The Board of Directors approved the redemption of all **$15 million** of **6%** subordinated debentures on July 7, 2025, originally set to mature and reprice on September 1, 2030[10](index=10&type=chunk) - The redemption will occur on September 1, 2025[10](index=10&type=chunk) [About the Company](index=8&type=section&id=4.3%20About%20the%20Company) Citizens Community Bancorp, Inc. is the holding company for Citizens Community Federal N.A., a national bank headquartered in Altoona, Wisconsin, serving customers through 21 branches in Wisconsin and Minnesota with traditional community banking services - Citizens Community Bancorp, Inc. (NASDAQ: CZWI) is the holding company for Citizens Community Federal N.A. (CCFBank)[32](index=32&type=chunk) - The bank primarily serves customers through **21 branches** in Wisconsin and Minnesota[32](index=32&type=chunk) - It offers traditional community banking services, including residential mortgages, to businesses, agricultural operators, and consumers[32](index=32&type=chunk) [Cautionary Statement Regarding Forward-Looking Statements](index=8&type=section&id=4.4%20Cautionary%20Statement%20Regarding%20Forward-Looking%20Statements) This press release contains forward-looking statements subject to inherent uncertainties and risks in the company's operations and business environment, advising readers to consider relevant factors and noting no obligation to update these statements - Forward-looking statements are identified by words such as "anticipate," "believe," "could," "expect," "estimate," "intend," "may," "plan," "preliminary," "project," "potential," "should," "will," "would," or similar meanings[33](index=33&type=chunk) - Uncertainties include financial market and economic conditions, inflation impact, geopolitical tensions, cybersecurity risks, interest rate risks, adequacy of allowance for credit losses, competitive pressures, ability to maintain reputation, liquidity, ability to attract and retain key personnel, technological changes, fraud, internal controls, acquisition growth strategies, dividend restrictions, stock price volatility, accounting standards, legislative or regulatory changes, and tax law changes[33](index=33&type=chunk)[34](index=34&type=chunk) - The company undertakes no obligation to revise or update any forward-looking statements contained in this press release[34](index=34&type=chunk) [Non-GAAP Financial Measures](index=9&type=section&id=4.5%20Non-GAAP%20Financial%20Measures) This press release utilizes non-GAAP financial measures, such as adjusted net income and tangible book value ratios, which management deems useful for understanding the company's operating results and financial condition, with reconciliations to GAAP provided - This press release contains non-GAAP financial measures such as adjusted net income, adjusted net income per share, tangible book value, tangible book value per share, tangible common equity as a percentage of tangible assets, and return on average tangible common equity[35](index=35&type=chunk) - Management believes these metrics are useful for understanding the company's operating results or financial condition and for comparing results across periods[35](index=35&type=chunk) - These disclosures should not be considered a substitute for GAAP-determined operating results and may not be comparable to non-GAAP performance measures presented by other banks and financial institutions[37](index=37&type=chunk) [Financial Statements and Reconciliations](index=10&type=section&id=5.%20Financial%20Statements%20and%20Reconciliations) [Consolidated Balance Sheets](index=10&type=section&id=5.1%20Consolidated%20Balance%20Sheets) The consolidated balance sheets show total assets of $1.735 billion as of June 30, 2025, a decrease from $1.780 billion on March 31, 2025, with corresponding reductions in total liabilities and a slight increase in shareholders' equity Consolidated Balance Sheets (thousand USD) | Item | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | 67,454 | 100,199 | 36,886 | | Loans receivable, net | 1,324,273 | 1,332,523 | 1,407,410 | | Total assets | 1,735,164 | 1,779,963 | 1,802,307 | | Deposits | 1,478,416 | 1,523,654 | 1,519,544 | | Total liabilities | 1,551,702 | 1,599,912 | 1,626,262 | | Total shareholders' equity | 183,462 | 180,051 | 176,045 | [Consolidated Statements of Operations](index=11&type=section&id=5.2%20Consolidated%20Statements%20of%20Operations) The consolidated statements of operations report net income attributable to common shareholders of $3.27 million and diluted EPS of $0.33 for Q2 2025, marked by significant quarter-over-quarter growth in net interest income and a shift from negative to positive credit loss provisions Consolidated Statements of Operations (thousand USD, except per share data) | Item | June 30, 2025 (three months) | March 31, 2025 (three months) | June 30, 2024 (three months) | June 30, 2025 (six months) | June 30, 2024 (six months) | | :--- | :--- | :--- | :--- | :--- | :--- | | Total interest and dividend income | 22,502 | 21,103 | 22,463 | 43,605 | 45,142 | | Total interest expense | 9,191 | 9,509 | 10,887 | 18,700 | 21,661 | | Net interest income before provision for credit losses | 13,311 | 11,594 | 11,576 | 24,905 | 23,481 | | Provision for credit losses | 1,350 | (250) | (1,525) | 1,100 | (2,325) | | Total non-interest income | 2,836 | 2,593 | 1,913 | 5,429 | 5,177 | | Total non-interest expense | 10,750 | 10,463 | 10,299 | 21,213 | 21,076 | | Net income attributable to common shareholders | 3,270 | 3,197 | 3,675 | 6,467 | 7,763 | | Diluted earnings per share | 0.33 | 0.32 | 0.35 | 0.65 | 0.75 | [Reconciliation of GAAP Net Income and Net Income as Adjusted (non-GAAP)](index=12&type=section&id=5.3%20Reconciliation%20of%20GAAP%20Net%20Income%20and%20Net%20Income%20as%20Adjusted%20(non-GAAP)) The reconciliation shows GAAP net income aligned with adjusted net income (non-GAAP) for Q2 2025 and the first half of 2025 due to no adjustments, while Q2 2024 adjusted net income was slightly higher due to branch closing costs Reconciliation of GAAP Net Income and Net Income as Adjusted (non-GAAP) (thousand USD, except per share data) | Item | June 30, 2025 (three months) | March 31, 2025 (three months) | June 30, 2024 (three months) | June 30, 2025 (six months) | June 30, 2024 (six months) | | :--- | :--- | :--- | :--- | :--- | :--- | | GAAP pre-tax income | 4,047 | 3,974 | 4,715 | 8,021 | 9,907 | | Branch closing costs | — | — | 168 | — | 168 | | Adjusted pre-tax income | 4,047 | 3,974 | 4,883 | 8,021 | 10,075 | | Provision for income taxes on adjusted net income | 777 | 777 | 1,077 | 1,554 | 2,180 | | Adjusted net income (non-GAAP) | 3,270 | 3,197 | 3,806 | 6,467 | 7,895 | | GAAP diluted EPS, after tax | 0.33 | 0.32 | 0.35 | 0.65 | 0.75 | | Adjusted diluted EPS, after tax (non-GAAP) | 0.33 | 0.32 | 0.36 | 0.65 | 0.76 | [Loan Composition](index=13&type=section&id=5.4%20Loan%20Composition) The detailed loan composition table indicates a slight decrease in total loans receivable as of June 30, 2025, with commercial real estate remaining the largest loan category Loan Composition (thousand USD) | Loan Type | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :--- | :--- | :--- | :--- | | Commercial Real Estate | 693,382 | 709,975 | 729,236 | | Agricultural Real Estate | 69,237 | 71,071 | 78,248 | | Multi-Family Residential Real Estate | 238,953 | 237,872 | 234,758 | | Construction and Land Development | 70,477 | 58,461 | 87,898 | | Commercial and Industrial | 109,202 | 109,620 | 127,386 | | Agricultural Operating | 31,876 | 29,310 | 27,409 | | Residential Mortgage | 125,818 | 129,070 | 133,503 | | Purchased HELOC Loans | 2,368 | 2,560 | 2,915 | | Original Indirect Notes | 2,959 | 3,434 | 5,110 | | Other Consumer Loans | 4,275 | 4,679 | 5,860 | | **Total Loans Receivable** | **1,345,620** | **1,352,728** | **1,428,588** | [Nonperforming Assets Loan Balances](index=13&type=section&id=5.5%20Nonperforming%20Assets%20Loan%20Balances) Nonperforming assets decreased to $13 million as of June 30, 2025, with non-accrual loans as the primary component, and the ratio of nonperforming loans to total loans improved to 0.90% Nonperforming Assets Loan Balances (thousand USD, except ratios) | Item | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :--- | :--- | :--- | :--- | | Total non-accrual loans | 11,609 | 13,091 | 8,352 | | Accruing loans 90 days or more past due | 521 | 568 | 256 | | Total nonperforming loans (NPLs) | 12,130 | 13,659 | 8,608 | | Repossessed and foreclosed assets, net | 895 | 876 | 1,662 | | Total nonperforming assets (NPAs) | 13,025 | 14,535 | 10,270 | | NPLs as % of total loans | 0.90 % | 1.01 % | 0.60 % | | NPAs as % of total assets | 0.75 % | 0.82 % | 0.57 % | [Average Balances, Interest Yields and Rates](index=14&type=section&id=5.6%20Average%20Balances%2C%20Interest%20Yields%20and%20Rates) The average balances, interest yields, and rates table details the composition of interest-earning assets and interest-bearing liabilities, showing an increase in total yield on interest-earning assets and a decrease in total rate on interest-bearing liabilities, contributing to an improved net interest margin Average Balances, Interest Yields and Rates (thousand USD, except yields and rates) | Item | June 30, 2025 (three months) Average Balance | June 30, 2025 (three months) Yield/Rate | March 31, 2025 (three months) Average Balance | March 31, 2025 (three months) Yield/Rate | | :--- | :--- | :--- | :--- | :--- | | Total interest-earning assets | 1,633,427 | 5.53 % | 1,652,199 | 5.18 % | | Loans receivable yield | - | 5.96 % | - | 5.53 % | | Total interest-bearing liabilities | 1,299,732 | 2.84 % | 1,323,270 | 2.91 % | | Total deposits rate | - | 2.69 % | - | 2.77 % | | Net interest income | 13,311 | - | 11,594 | - | | Spread | - | 2.69 % | - | 2.27 % | | Net interest margin | - | 3.27 % | - | 2.85 % | [Wholesale Deposits](index=15&type=section&id=5.7%20Wholesale%20Deposits) Wholesale deposits continued their decline over the past year, with decreases in brokered certificates of deposit and brokered money market accounts, while third-party originated reciprocal deposits saw a slight quarter-over-quarter increase Wholesale Deposits (thousand USD) | Item | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :--- | :--- | :--- | :--- | | Brokered certificates of deposit | — | 5,489 | 54,123 | | Brokered money market accounts | 5,092 | 5,053 | 42,673 | | Third-party originated reciprocal deposits | 19,316 | 16,451 | 17,237 | | **Total** | **24,408** | **26,993** | **114,033** | [Key Financial Metric Ratios](index=15&type=section&id=5.8%20Key%20Financial%20Metric%20Ratios) Key financial ratios show improvements in return on average assets and efficiency ratio this quarter, while return on average equity and return on average tangible common equity remained relatively stable, with a significant improvement in net interest margin Key Financial Metric Ratios | Ratio | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :--- | :--- | :--- | :--- | | Return on average assets (annualized) | 0.75 % | 0.74 % | 0.81 % | | Return on average equity (annualized) | 7.23 % | 7.26 % | 8.52 % | | Return on average tangible common equity (annualized) | 9.18 % | 9.28 % | 10.92 % | | Efficiency ratio | 66 % | 73 % | 72 % | | Net interest margin including loan purchase accretion | 3.27 % | 2.85 % | 2.72 % | | Net interest margin excluding loan purchase accretion | 3.15 % | 2.83 % | 2.70 % | [Reconciliation of Return on Average Assets](index=15&type=section&id=5.9%20Reconciliation%20of%20Return%20on%20Average%20Assets) The reconciliation confirms that GAAP and non-GAAP return on average assets were consistent at 0.75% and 0.74% for Q2 2025 and the first half of 2025, respectively, as no adjustments were made during these periods Reconciliation of Return on Average Assets (annualized) | Period | GAAP | Non-GAAP (Adjusted) | | :--- | :--- | :--- | | June 30, 2025 | 0.75 % | 0.75 % | | March 31, 2025 | 0.74 % | 0.74 % | | June 30, 2024 | 0.81 % | 0.84 % | [Reconciliation of Return on Average Equity](index=17&type=section&id=5.10%20Reconciliation%20of%20Return%20on%20Average%20Equity) The reconciliation shows GAAP and non-GAAP return on average equity were consistent at 7.23% and 7.25% for Q2 2025 and the first half of 2025, respectively, as no adjustments were made Reconciliation of Return on Average Equity (annualized) | Period | GAAP | Non-GAAP (Adjusted) | | :--- | :--- | :--- | | June 30, 2025 | 7.23 % | 7.23 % | | March 31, 2025 | 7.26 % | 7.26 % | | June 30, 2024 | 8.52 % | 8.82 % | [Reconciliation of Return on Average Tangible Common Equity (non-GAAP)](index=17&type=section&id=5.11%20Reconciliation%20of%20Return%20on%20Average%20Tangible%20Common%20Equity%20(non-GAAP)) Return on average tangible common equity (non-GAAP) for Q2 2025 was 9.18%, slightly lower than the prior quarter and prior year, reflecting the impact of intangible asset amortization Return on Average Tangible Common Equity (annualized) | Period | Percentage | | :--- | :--- | | June 30, 2025 | 9.18 % | | March 31, 2025 | 9.28 % | | June 30, 2024 | 10.92 % | [Reconciliation of Efficiency Ratio](index=17&type=section&id=5.12%20Reconciliation%20of%20Efficiency%20Ratio) The efficiency ratio significantly improved from 73% in Q1 2025 to 66% in Q2 2025, primarily driven by an increase in net interest income Efficiency Ratio (GAAP) | Period | Percentage | | :--- | :--- | | June 30, 2025 | 66 % | | March 31, 2025 | 73 % | | June 30, 2024 | 72 % | [Reconciliation of Tangible Book Value Per Share (non-GAAP)](index=18&type=section&id=5.13%20Reconciliation%20of%20Tangible%20Book%20Value%20Per%20Share%20(non-GAAP)) Tangible book value per share (non-GAAP) increased from $14.79 on March 31, 2025, to $15.15 on June 30, 2025, reflecting growth in tangible common equity Tangible Book Value Per Share (non-GAAP) | Date | Amount ($) | | :--- | :--- | | June 30, 2025 | 15.15 | | March 31, 2025 | 14.79 | | December 31, 2024 | 14.69 | | September 30, 2024 | 14.64 | | June 30, 2024 | 13.91 | [Reconciliation of Tangible Common Equity as a Percent of Tangible Assets (non-GAAP)](index=18&type=section&id=5.14%20Reconciliation%20of%20Tangible%20Common%20Equity%20as%20a%20Percent%20of%20Tangible%20Assets%20(non-GAAP)) Tangible common equity as a percentage of tangible assets (non-GAAP) improved from 8.45% in the prior quarter to 8.89% on June 30, 2025, indicating an improved capital position relative to tangible assets Tangible Common Equity as a Percent of Tangible Assets (non-GAAP) | Date | Percentage | | :--- | :--- | | June 30, 2025 | 8.89 % | | March 31, 2025 | 8.45 % | | December 31, 2024 | 8.54 % | | September 30, 2024 | 8.35 % | | June 30, 2024 | 8.09 % |

Deposit & Liquidity - 82% of deposits are insured or collateralized, totaling $1.48 billion[11, 13] - The company has a diverse commercial deposit base with no industry concentration exceeding 10%[15] Loan Portfolio - Non-Owner Occupied CRE portfolio has a loan balance of $453 million as of June 30, 2025, with an approximate weighted average LTV of 52%[25] - Owner Occupied CRE portfolio has a loan balance of $241 million as of June 30, 2025, with an approximate weighted average LTV of 50%[31] - Multi-family loan balance outstanding is $239 million as of June 30, 2025, with an approximate weighted average LTV of 62%[37] - Commercial & Industrial Loans have a balance of $109 million as of June 30, 2025[43] - Construction & Development Loans have a balance of $70 million as of June 30, 2025, with 59% utilized of commitments[49] - Agricultural Real Estate & Operating Loans have a balance of $101 million as of June 30, 2025[56] Credit Quality - Total loans graded 1 to 5 (Pass) amounted to $1,307,424 thousand as of June 30, 2025[91] - Total loans graded 6 (Watch) amounted to $23,201 thousand as of June 30, 2025[91] - Total loans graded 7 (Substandard) amounted to $17,922 thousand as of June 30, 2025[91]

Core Viewpoint - Citizens Community Bancorp, Inc. reported a solid performance in Q2 2025 with earnings of $3.3 million, reflecting a slight increase from the previous quarter but a decrease compared to the same quarter last year. The company experienced improvements in net interest income and tangible book value, although provisions for credit losses increased significantly due to rising delinquencies and changes in macroeconomic assumptions. Financial Performance - Earnings for Q2 2025 were $3.3 million, or $0.33 per diluted share, compared to $3.2 million and $0.32 per diluted share in Q1 2025, and $3.7 million and $0.35 per diluted share in Q2 2024 [1][5] - For the first half of 2025, earnings totaled $6.5 million, down from $7.8 million in the same period last year [5] - Net interest income increased by $1.7 million to $13.3 million in Q2 2025, driven by interest income from loan payoffs and lower deposit costs [2][24] Balance Sheet and Asset Quality - Book value per share improved to $18.36 at June 30, 2025, from $18.02 at March 31, 2025, and $17.10 at June 30, 2024 [3] - The provision for credit losses was $1.35 million in Q2 2025, compared to a negative provision of $0.25 million in Q1 2025, largely due to a $9.3 million increase in delinquencies [2][8] - Nonperforming assets decreased by $1.5 million to $13.0 million at June 30, 2025, while special mention loans increased by $8.2 million to $23.2 million [17][19] Deposits and Liquidity - Total deposits decreased by $45.2 million to $1.48 billion during Q2 2025, reflecting seasonal shrinkage in public deposits and a decline in commercial deposits [9][19] - The on-balance sheet liquidity ratio was 12.17% of total assets at June 30, 2025, down from 14.38% at March 31, 2025 [10] Non-Interest Income and Expenses - Non-interest income increased by $0.2 million to $2.8 million in Q2 2025, primarily due to loan fees and gains on equity securities [6][31] - Non-interest expense rose by $0.3 million to $10.8 million, attributed to higher compensation costs [31] Efficiency and Capital Management - The efficiency ratio improved to 66% in Q2 2025 from 73% in Q1 2025, aided by recognized interest income from loan payoffs [9] - The Board of Directors authorized a new 5% common stock buyback program for 499,000 shares [23]