PART I – FINANCIAL INFORMATION [ITEM 1. FINANCIAL STATEMENTS](index=4&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) Presents the unaudited consolidated financial statements for the period ended September 30, 2021 [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) Consolidated Balance Sheet Highlights (in thousands) | Metric | Sep 30, 2021 | Dec 31, 2020 | Change | % Change | |:---|:---|:---|:---|:---| | Total Assets | $1,753,477 | $1,649,095 | $104,382 | 6.33% | | Loans Receivable, net | $1,231,822 | $1,220,538 | $11,284 | 0.92% | | Securities AFS | $234,425 | $144,233 | $90,192 | 62.53% | | Deposits | $1,408,315 | $1,295,256 | $113,059 | 8.73% | | Total Liabilities | $1,587,551 | $1,488,531 | $99,020 | 6.65% | | Total Stockholders' Equity | $165,926 | $160,564 | $5,362 | 3.34% | [Consolidated Statements of Operations](index=6&type=section&id=Consolidated%20Statements%20of%20Operations) Consolidated Statements of Operations Highlights (in thousands) | Metric | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | Change (YoY) | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | Change (YoY) | |:---|:---|:---|:---|:---|:---|:---| | Total Interest & Dividend Income | $15,218 | $15,218 | $0 | $47,274 | $48,012 | -$738 | | Total Interest Expense | $3,309 | $3,309 | $0 | $7,989 | $11,129 | -$3,140 | | Net Interest Income before PLL | $11,909 | $11,909 | $0 | $39,285 | $36,883 | $2,402 | | Provision for Loan Losses | $0 | $1,500 | -$1,500 | $0 | $5,250 | -$5,250 | | Total Non-Interest Income | $5,062 | $5,062 | $0 | $11,415 | $13,678 | -$2,263 | | Total Non-Interest Expense | $10,724 | $10,724 | $0 | $30,007 | $32,847 | -$2,840 | | Net Income attributable to common stockholders | $4,997 | $3,480 | $1,517 | $15,209 | $9,155 | $6,054 | | Basic EPS | $0.47 | $0.31 | $0.16 | $1.41 | $0.82 | $0.59 | | Diluted EPS | $0.47 | $0.31 | $0.16 | $1.41 | $0.82 | $0.59 | [Consolidated Statements of Comprehensive Income](index=7&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Consolidated Statements of Comprehensive Income Highlights (in thousands) | Metric | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | Change (YoY) | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | Change (YoY) | |:---|:---|:---|:---|:---|:---|:---| | Net Income attributable to common stockholders | $4,997 | $3,480 | $1,517 | $15,209 | $9,155 | $6,054 | | Other comprehensive (loss) income, net of tax | -$828 | $885 | -$1,713 | -$258 | $1,375 | -$1,633 | | Comprehensive Income | $4,169 | $4,365 | -$196 | $14,951 | $10,530 | $4,421 | [Consolidated Statement of Changes in Stockholders' Equity](index=8&type=section&id=Consolidated%20Statement%20of%20Changes%20in%20Stockholders'%20Equity) Changes in Stockholders' Equity (in thousands) | Metric | Jan 1, 2021 Balance | Sep 30, 2021 Balance | Change | |:---|:---|:---|:---| | Common Stock | $111 | $105 | -$6 | | Additional Paid-In Capital | $126,154 | $119,929 | -$6,225 | | Retained Earnings | $32,809 | $44,660 | $11,851 | | Accumulated Other Comprehensive Income | $1,490 | $1,232 | -$258 | | Total Stockholders' Equity | $160,564 | $165,926 | $5,362 | - The increase in total stockholders' equity was primarily driven by **net income of $15,209 thousand** for the nine months ended September 30, 2021, partially offset by common stock repurchases totaling $7,723 thousand and cash dividends paid of $2,511 thousand[19](index=19&type=chunk)[310](index=310&type=chunk) [Consolidated Statements of Cash Flows](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | Change (YoY) | |:---|:---|:---|:---| | Net cash provided by operating activities | $17,620 | $16,070 | $1,550 | | Net cash used in investing activities | -$125,552 | -$35,536 | -$90,016 | | Net cash provided by financing activities | $90,833 | $79,100 | $11,733 | | Net (decrease) increase in cash and cash equivalents | -$17,099 | $59,634 | -$76,733 | | Cash and cash equivalents at end of period | $102,341 | $115,474 | -$13,133 | - Net cash used in investing activities significantly increased due to **higher purchases of available-for-sale securities** ($123,756 thousand in 2021 vs $20,956 thousand in 2020) and held-to-maturity securities ($34,114 thousand in 2021 vs $15,147 thousand in 2020)[25](index=25&type=chunk) [Condensed Notes to Consolidated Financial Statements (Unaudited)](index=12&type=section&id=Condensed%20Notes%20to%20Consolidated%20Financial%20Statements%20(Unaudited)) [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 operations, services, and significant accounting policies - The Company operates as a bank holding company, with its wholly-owned subsidiary, Citizens Community Federal N.A. (the 'Bank'), providing traditional community banking services to businesses, agricultural operators, and consumers in Wisconsin and Minnesota through **25 branch locations**[29](index=29&type=chunk)[30](index=30&type=chunk)[31](index=31&type=chunk) - The Bank sold its wholly-owned subsidiary, Wells Insurance Agency, on **June 30, 2020**[30](index=30&type=chunk) - The Company adopted ASU 2018-13 (Fair Value Measurement) and ASU 2018-15 (Intangibles - Goodwill and Other - Internal-Use Software) in the first quarter of 2020, with **no material impact** on financial statements[80](index=80&type=chunk)[82](index=82&type=chunk) - ASU 2016-13 (Financial Instruments-Credit Losses), which changes credit loss accounting from an incurred loss to an expected credit loss methodology, is effective for the Company in the **first quarter of 2023**, with earlier adoption not currently planned[84](index=84&type=chunk) [NOTE 2 – INVESTMENT SECURITIES](index=19&type=section&id=NOTE%202%20%E2%80%93%20INVESTMENT%20SECURITIES) Details the composition, fair value, and maturities of the Company's investment securities portfolio Investment Securities Composition (in thousands) | Security Type | Sep 30, 2021 (Fair Value) | Dec 31, 2020 (Fair Value) | Change | |:---|:---|:---|:---| | **Available for Sale (AFS):** | | | | | U.S. government agency obligations | $28,410 | $33,365 | -$4,955 | | Mortgage-backed securities | $120,802 | $40,991 | $79,811 | | Corporate debt securities | $41,218 | $17,462 | $23,756 | | Corporate asset-based securities | $34,615 | $35,827 | -$1,212 | | Trust preferred securities | $9,240 | $16,448 | -$7,208 | | Total AFS Securities | $234,425 | $144,233 | $90,192 | | **Held to Maturity (HTM):** | | | | | Mortgage-backed securities | $61,268 | $43,182 | $18,086 | | Total HTM Securities | $65,867 | $43,784 | $22,083 | - Gross sales of available-for-sale securities for the nine months ended September 30, 2021, were **$9,118 thousand**, resulting in gross gains of $92 thousand and gross losses of $14 thousand[89](index=89&type=chunk) - At September 30, 2021, the Company had **$112,782 thousand in AFS securities with unrealized losses** and **$58,201 thousand in HTM securities with unrealized losses**, which management does not consider to be other-than-temporary[94](index=94&type=chunk)[96](index=96&type=chunk) [NOTE 3 – LOANS, ALLOWANCE FOR LOAN LOSSES AND IMPAIRED LOANS](index=23&type=section&id=NOTE%203%20%E2%80%93%20LOANS,%20ALLOWANCE%20FOR%20LOAN%20LOSSES%20AND%20IMPAIRED%20LOANS) Details the loan portfolio segmentation, credit quality, allowance for loan losses, and impaired loan information Gross Loans by Type and Risk Rating (in thousands) as of Sep 30, 2021 | Loan Type | Pass (1 to 5) | Special Mention (6) | Substandard (7) | Doubtful (8) | Loss (9) | Total | |:---|:---|:---|:---|:---|:---|:---| | Commercial/Agricultural real estate | $867,342 | $2,302 | $16,624 | $0 | $0 | $886,518 | | C&I/Agricultural operating | $131,719 | $46 | $5,291 | $0 | $0 | $137,060 | | Residential mortgage | $98,742 | $0 | $4,960 | $0 | $0 | $103,702 | | Consumer installment | $27,367 | $0 | $252 | $0 | $0 | $27,619 | | SBA PPP loans | $31,301 | $0 | $0 | $0 | $0 | $31,301 | | **Total Gross Loans** | **$1,156,471** | **$2,348** | **$27,127** | **$0** | **$0** | **$1,286,200** | SBA PPP Loan Activity (in thousands) | Metric | 2020 Originations (Balance) | 2021 Originations (Balance) | Total Balance | |:---|:---|:---|:---| | Balance, Dec 31, 2020 | $123,702 | $0 | $123,702 | | 2021 Originations | $0 | $47,467 | $47,467 | | 2021 Forgiveness & Fee Accretion | -$120,581 | -$27,674 | -$148,255 | | Balance, Sep 30, 2021 | $3,121 | $28,180 | $31,301 | Allowance for Loan Losses (ALL) by Loan Type (in thousands) as of Sep 30, 2021 | Loan Type | Originated Loans | Other Acquired Loans | Total ALL | |:---|:---|:---|:---| | Commercial/Agricultural Real Estate | $11,898 | $1,097 | $12,995 | | C&I/Agricultural operating | $1,974 | $74 | $2,048 | | Residential Mortgage | $586 | $126 | $712 | | Consumer Installment | $275 | $30 | $305 | | Unallocated | $772 | $0 | $772 | | **Total ALL** | **$15,505** | **$1,327** | **$16,832** | - Total loans individually evaluated for impairment were **$37,191 thousand** at September 30, 2021, including $11,499 thousand in purchased credit impaired (PCI) loans and $13,198 thousand in Troubled Debt Restructuring (TDR) loans[132](index=132&type=chunk)[133](index=133&type=chunk) - TDR loans **decreased to $15,689 thousand** at September 30, 2021, from $18,477 thousand at December 31, 2020[139](index=139&type=chunk)[140](index=140&type=chunk)[142](index=142&type=chunk) [NOTE 4 – MORTGAGE SERVICING RIGHTS](index=40&type=section&id=NOTE%204%20%E2%80%93%20MORTGAGE%20SERVICING%20RIGHTS) Details mortgage servicing rights (MSR) activity, fair value, and key valuation assumptions Mortgage Servicing Rights Activity (in thousands) | Metric | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2021 | |:---|:---|:---| | MSR, beginning of period | $4,964 | $5,266 | | Increase from transfers | $256 | $858 | | Amortization | -$418 | -$1,322 | | Valuation allowance, beginning of period | -$1,102 | -$2,014 | | Valuation allowance recoveries | $382 | $1,294 | | MSR, net (end of period) | $4,082 | $4,082 | | Fair value of MSR, end of period | $4,161 | $4,161 | - The fair value of MSRs at September 30, 2021, was estimated using **discount rates ranging from 9% to 12%**[150](index=150&type=chunk) - Servicing fees totaled **$354 thousand** for the three months and **$1,058 thousand** for the nine months ended September 30, 2021[149](index=149&type=chunk) [NOTE 5 – LEASES](index=41&type=section&id=NOTE%205%20%E2%80%93%20LEASES) Provides information on the Company's operating leases, including costs, assets, liabilities, and terms Lease Information (in thousands) | Metric | 9 Months Ended Sep 30, 2021 | Dec 31, 2020 | |:---|:---|:---| | Total Lease Cost | $454 | N/A | | Operating Lease ROU Assets | $2,286 | $2,657 | | Operating Lease Liabilities | $2,354 | $2,762 | | Weighted Average Remaining Lease Term | 5.76 years | 6.32 years | | Weighted Average Discount Rate | 2.72% | 2.70% | - The Company's operating leases have remaining terms ranging from **1.50 to 6.75 years**, with options to extend for up to 5 additional years[152](index=152&type=chunk) [NOTE 6 – DEPOSITS](index=43&type=section&id=NOTE%206%20%E2%80%93%20DEPOSITS) Summarizes the Company's deposits by type and scheduled maturities, highlighting changes in composition Deposits by Type (in thousands) | Deposit Type | Sep 30, 2021 | Dec 31, 2020 | Change | % Change | |:---|:---|:---|:---|:---| | Non-interest bearing demand deposits | $280,611 | $238,348 | $42,263 | 17.73% | | Interest bearing demand deposits | $381,315 | $301,764 | $79,551 | 26.36% | | Savings accounts | $229,623 | $196,348 | $33,275 | 16.95% | | Money market accounts | $291,242 | $245,549 | $45,693 | 18.61% | | Certificate accounts | $225,524 | $313,247 | -$87,723 | -28.01% | | **Total Deposits** | **$1,408,315** | **$1,295,256** | **$113,059** | **8.73%** | - Total deposits **increased by $113,059 thousand**, driven by growth in demand, savings, and money market accounts, partially offset by a significant decrease in certificate accounts[157](index=157&type=chunk)[294](index=294&type=chunk) - At September 30, 2021, **$155,717 thousand of certificate accounts** are scheduled to mature in 2022[157](index=157&type=chunk) [NOTE 7 – FEDERAL HOME LOAN BANK AND FEDERAL RESERVE BANK ADVANCES AND OTHER BORROWINGS](index=45&type=section&id=NOTE%207%20%E2%80%93%20FEDERAL%20HOME%20LOAN%20BANK%20AND%20FEDERAL%20RESERVE%20BANK%20ADVANCES%20AND%20OTHER%20BORROWINGS) Details FHLB advances and other borrowings, including maturities, interest rates, and collateralization FHLB Advances and Other Borrowings (in thousands) | Borrowing Type | Sep 30, 2021 | Dec 31, 2020 | Change | |:---|:---|:---|:---| | FHLB Advances, net | $111,512 | $123,498 | -$11,986 | | Senior Notes | $28,856 | $28,856 | $0 | | Subordinated Notes | $30,000 | $30,000 | $0 | | Unamortized debt issuance costs | -$456 | -$528 | $72 | | **Total Other Borrowings** | **$58,400** | **$58,328** | **$72** | | **Total Borrowings** | **$169,912** | **$181,826** | **-$11,914** | - FHLB advances **decreased by $12,000 thousand**, primarily due to the termination of $8,000 thousand in advances and a $4,000 thousand advance maturity in 2021[306](index=306&type=chunk) - At September 30, 2021, the Bank had an available and unused borrowing capacity of approximately **$162,875 thousand** under its FHLB arrangement[159](index=159&type=chunk) - The FRB PPPLF program expired on July 30, 2021, and the Bank had **no outstanding borrowings** under this facility at September 30, 2021[168](index=168&type=chunk)[307](index=307&type=chunk) [NOTE 8 - CAPITAL MATTERS](index=46&type=section&id=NOTE%208%20-%20CAPITAL%20MATTERS) Provides regulatory capital requirements and ratios, demonstrating compliance with 'Well Capitalized' status Bank Capital Ratios as of Sep 30, 2021 | Capital Ratio | Actual Ratio | Minimum for Capital Adequacy | Minimum for Well Capitalized | |:---|:---|:---|:---| | Total Capital (to RWA) | 13.6% | 8.0% | 10.0% | | Tier 1 Capital (to RWA) | 12.4% | 6.0% | 8.0% | | Common Equity Tier 1 Capital (to RWA) | 12.4% | 4.5% | 6.5% | | Tier 1 Leverage Ratio (to Adjusted Total Assets) | 9.6% | 4.0% | 5.0% | - At September 30, 2021, the Bank was categorized as **'Well Capitalized'** under Prompt Corrective Action Provisions, exceeding all minimum regulatory requirements[170](index=170&type=chunk)[321](index=321&type=chunk) [NOTE 9 – STOCK-BASED COMPENSATION](index=49&type=section&id=NOTE%209%20%E2%80%93%20STOCK-BASED%20COMPENSATION) Details the Company's stock-based compensation plans and the related compensation expense recognized - The 2018 Equity Incentive Plan has **350,000 shares reserved**, with 163,974 restricted shares granted as of September 30, 2021[174](index=174&type=chunk) - Net compensation expense for restricted stock awards was **$221 thousand** for the three months and **$614 thousand** for the nine months ended September 30, 2021[176](index=176&type=chunk) - Stock option expense was **$2 thousand** for the three months and **$7 thousand** for the nine months ended September 30, 2021[180](index=180&type=chunk) [NOTE 10 – FAIR VALUE ACCOUNTING](index=50&type=section&id=NOTE%2010%20%E2%80%93%20FAIR%20VALUE%20ACCOUNTING) Describes the fair value measurement hierarchy and presents financial instruments measured at fair value Assets Measured at Fair Value on a Recurring Basis (in thousands) as of Sep 30, 2021 | Asset Type | Fair Value | Level 1 | Level 2 | Level 3 | |:---|:---|:---|:---|:---| | U.S. government agency obligations | $28,410 | $0 | $28,410 | $0 | | Mortgage-backed securities | $120,802 | $0 | $120,802 | $0 | | Corporate debt securities | $41,218 | $0 | $41,218 | $0 | | Total Investment Securities | $234,425 | $0 | $234,425 | $0 | Assets Measured at Fair Value on a Nonrecurring Basis (in thousands) as of Sep 30, 2021 | Asset Type | Carrying Value | Fair Value (Level 3) | |:---|:---|:---| | Foreclosed and repossessed assets, net | $4 | $4 | | Impaired loans with allocated allowances | $7,976 | $7,976 | | Mortgage servicing rights | $4,082 | $4,161 | - Fair value for impaired loans and foreclosed assets is determined using **third-party appraisals** and/or internal valuations, with estimated costs to sell (10%-15%) as a significant unobservable input[190](index=190&type=chunk)[191](index=191&type=chunk)[193](index=193&type=chunk)[194](index=194&type=chunk) [NOTE 11—EARNINGS PER SHARE](index=53&type=section&id=NOTE%2011%E2%80%94EARNINGS%20PER%20SHARE) Provides the reconciliation of basic and diluted earnings per share Earnings Per Share (EPS) (in thousands, except per share data) | Metric | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | |:---|:---|:---|:---|:---| | Net income attributable to common stockholders | $4,997 | $3,480 | $15,209 | $9,155 | | Weighted average common shares outstanding (basic) | 10,610 | 11,153 | 10,788 | 11,173 | | Basic earnings per share | $0.47 | $0.31 | $1.41 | $0.82 | | Weighted average common shares outstanding (diluted) | 10,623 | 11,153 | 10,798 | 11,173 | | Diluted earnings per share | $0.47 | $0.31 | $1.41 | $0.82 | [NOTE 12 – OTHER COMPREHENSIVE INCOME (LOSS)](index=54&type=section&id=NOTE%2012%20%E2%80%93%20OTHER%20COMPREHENSIVE%20INCOME%20(LOSS)) Details the components of other comprehensive income (loss), including unrealized gains and losses on securities Other Comprehensive Income (Loss) (in thousands) | Metric | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | |:---|:---|:---|:---|:---| | Net unrealized (losses) gains arising during the period (before tax) | -$1,099 | $1,220 | -$278 | $2,052 | | Reclassification adjustment for gains included in net income (before tax) | -$42 | $0 | -$78 | -$156 | | Other comprehensive (loss) income, net of tax | -$828 | $885 | -$258 | $1,375 | | Accumulated Other Comprehensive Income (Loss), net of tax (End of Period) | N/A | N/A | $1,232 | $904 | [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=56&type=section&id=ITEM%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Provides management's perspective on financial condition and results of operations for the reporting period [FORWARD-LOOKING STATEMENTS](index=56&type=section&id=FORWARD-LOOKING%20STATEMENTS) - The report contains forward-looking statements, identified by words like 'anticipate,' 'believe,' 'expect,' and 'will,' which are subject to uncertainties in operations and the business environment[204](index=204&type=chunk) - Key factors that could affect actual results include **financial market and economic conditions**, impacts from the COVID-19 pandemic, interest rate risk, lending risk, and regulatory changes[205](index=205&type=chunk) [GENERAL](index=57&type=section&id=GENERAL) - This discussion analyzes the consolidated financial condition as of September 30, 2021, and results of operations for the three and nine months ended September 30, 2021, compared to the same periods in 2020[207](index=207&type=chunk) [CRITICAL ACCOUNTING ESTIMATES](index=57&type=section&id=CRITICAL%20ACCOUNTING%20ESTIMATES) - Critical accounting estimates include the **Allowance for Loan Losses (ALL)**, Goodwill, Fair Value Measurements, and Income Taxes, all requiring significant management judgment[208](index=208&type=chunk)[209](index=209&type=chunk)[212](index=212&type=chunk)[215](index=215&type=chunk)[217](index=217&type=chunk) - The ALL is based on quarterly assessments of probable incurred losses, considering loan types, historical loss experience, borrower ability to repay, collateral values, and economic conditions[209](index=209&type=chunk) - Goodwill is tested for impairment annually at the reporting unit level, with **no impairment identified** as of December 31, 2020[212](index=212&type=chunk)[214](index=214&type=chunk) [STATEMENT OF OPERATIONS ANALYSIS](index=59&type=section&id=STATEMENT%20OF%20OPERATIONS%20ANALYSIS) [Net Interest Income](index=59&type=section&id=Net%20Interest%20Income) Analyzes net interest income and margin, highlighting impacts from SBA PPP loans and liability costs Net Interest Income (in thousands) | Metric | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | Change (YoY) | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | Change (YoY) | |:---|:---|:---|:---|:---|:---|:---| | Net Interest Income | $13,688 | $11,909 | $1,779 | $39,285 | $36,883 | $2,402 | | Net Interest Margin | 3.34% | 3.11% | 0.23% | 3.29% | 3.36% | -0.07% | - Net interest income for the three months ended September 30, 2021, **increased by $1.8 million**, primarily due to a $1.9 million accretion of deferred fees from SBA PPP loans and lower liability costs[222](index=222&type=chunk) - The net interest margin for the three-month period **increased by 23 basis points**, driven by a 29 basis point increase in SBA PPP deferred loan fee accretion and 37 basis points of lower deposit costs[223](index=223&type=chunk) - For the nine months ended September 30, 2021, net interest income increased by $2.4 million, but the **net interest margin decreased by 7 basis points**[222](index=222&type=chunk)[224](index=224&type=chunk) [Provision for Loan Losses](index=63&type=section&id=Provision%20for%20Loan%20Losses) The provision for loan losses was $0 for the reporting periods in 2021, reflecting improved economic conditions Provision for Loan Losses (in thousands) | Metric | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | Change (YoY) | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | Change (YoY) | |:---|:---|:---|:---|:---|:---|:---| | Provision for Loan Losses | $0 | $1,500 | -$1,500 | $0 | $5,250 | -$5,250 | - The **$0 provision for loan losses** in 2021 was positively impacted by reductions in ALL allocations for general economic conditions and lower loan deferral balances[240](index=240&type=chunk) - In 2020, the provision for loan losses was **$1.5 million (three months)** and **$5.25 million (nine months)** due to loan growth and increased qualitative factors related to pandemic uncertainty[240](index=240&type=chunk) [Non-interest Income](index=64&type=section&id=Non-interest%20Income) Non-interest income decreased due to lower loan servicing income and gains on sale of loans Non-Interest Income (in thousands) | Metric | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | % Change | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | % Change | |:---|:---|:---|:---|:---|:---|:---| | Service charges on deposit accounts | $463 | $431 | 7.42% | $1,256 | $1,336 | -5.99% | | Interchange income | $600 | $556 | 7.91% | $1,776 | $1,509 | 17.69% | | Loan servicing income | $842 | $1,144 | -26.40% | $2,560 | $3,144 | -18.58% | | Gain on sale of loans | $1,014 | $1,987 | -48.97% | $4,131 | $4,585 | -9.90% | | Net gains (losses) on investment securities | $73 | -$1 | N/M | $344 | $97 | 254.64% | | Total Non-Interest Income | $3,448 | $5,062 | -31.88% | $11,415 | $13,678 | -16.54% | - Loan servicing income decreased due to **reduced capitalization of mortgage servicing rights** from lower mortgage loan origination fees[246](index=246&type=chunk) - Gain on sale of loans decreased due to **lower mortgage loan origination volumes**[247](index=247&type=chunk) - Net gains on investment securities **increased significantly**, primarily due to unrealized gains on equity securities and realized gains on trust-preferred securities[250](index=250&type=chunk) [Non-interest Expense](index=65&type=section&id=Non-interest%20Expense) Non-interest expense decreased, driven by lower mortgage servicing rights expense and advertising costs Non-Interest Expense (in thousands) | Metric | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | % Change | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | % Change | |:---|:---|:---|:---|:---|:---|:---| | Compensation and related benefits | $5,733 | $5,538 | 3.52% | $16,802 | $16,881 | -0.47% | | Data processing | $1,558 | $1,331 | 17.05% | $4,296 | $3,735 | 15.02% | | Mortgage servicing rights expense, net | $37 | $603 | -93.86% | $28 | $2,330 | -98.80% | | Advertising, marketing and public relations | $220 | $260 | -15.38% | $576 | $802 | -28.18% | | FDIC premium assessment | $148 | $188 | -21.28% | $395 | $436 | -9.40% | | Total Non-Interest Expense | $10,320 | $10,724 | -3.77% | $30,007 | $32,847 | -8.65% | - Mortgage servicing rights expense, net, **decreased significantly** due to the reversal of $1.3 million in previously recognized impairment charges[256](index=256&type=chunk) - Compensation expense for the three-month period increased due to **higher incentive compensation**, while the nine-month period saw a decrease due to lower variable mortgage production compensation[255](index=255&type=chunk) [Income Taxes](index=66&type=section&id=Income%20Taxes) Income tax expense increased with a consistent effective tax rate compared to the prior year Income Tax Expense (in thousands) | Metric | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | Change (YoY) | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | Change (YoY) | |:---|:---|:---|:---|:---|:---|:---| | Income tax expense | $1,800 | $1,267 | $533 | $5,484 | $3,309 | $2,175 | | Effective tax rate | 26.7% | 26.7% | 0.0% | 26.5% | 26.5% | 0.0% | [BALANCE SHEET ANALYSIS](index=66&type=section&id=BALANCE%20SHEET%20ANALYSIS) [Investment Securities](index=66&type=section&id=Investment%20Securities) The investment portfolio significantly increased, driven by purchases of mortgage-backed and corporate debt securities Investment Securities Portfolio (in millions) | Security Type | Sep 30, 2021 | Dec 31, 2020 | Change | |:---|:---|:---|:---| | Securities available for sale (AFS) | $234.4 | $144.2 | $90.2 | | Securities held to maturity (HTM) | $67.7 | $43.6 | $24.1 | | **Total Investment Securities** | **$302.1** | **$187.8** | **$114.3** | - The increase in the AFS portfolio was primarily due to purchases of **mortgage-backed securities and corporate debt securities**[263](index=263&type=chunk) - The HTM portfolio increase was largely due to the purchase of **agency mortgage-backed securities**[264](index=264&type=chunk) [Loans](index=68&type=section&id=Loans) Total loans increased modestly, with originated loan growth offsetting reductions in SBA PPP loans Loan Portfolio Composition (in thousands) | Loan Type | Sep 30, 2021 | Dec 31, 2020 | Change | % Change | |:---|:---|:---|:---|:---| | Commercial/Agricultural real estate | $880,484 | $700,139 | $180,345 | 25.76% | | Residential mortgage | $103,702 | $137,646 | -$33,944 | -24.66% | | C&I/Agricultural operating | $137,060 | $149,338 | -$12,278 | -8.22% | | Consumer installment | $27,619 | $39,064 | -$11,445 | -29.30% | | SBA PPP loans | $31,301 | $123,702 | -$92,401 | -74.70% | | **Gross Loans** | **$1,280,166** | **$1,249,889** | **$30,277** | **2.42%** | | Loans receivable, net | $1,231,822 | $1,220,538 | $11,284 | 0.92% | - The originated loan portfolio (excluding SBA PPP loans) **increased by $171.1 million**, while total SBA PPP loans decreased by $92.4 million due to $148.3 million in debt forgiveness[269](index=269&type=chunk) - Acquired loans **decreased by $69.4 million**[269](index=269&type=chunk) [Allowance for Loan Losses](index=69&type=section&id=Allowance%20for%20Loan%20Losses) The allowance for loan losses modestly decreased, representing 1.38% of loans receivable (excluding SBA PPP loans) Allowance for Loan Losses (ALL) Ratios | Metric | Sep 30, 2021 | Dec 31, 2020 | |:---|:---|:---| | ALL to loans net of SBA PPP loans and deferred fees | 1.38% | 1.53% | | ALL to loans, end of period | 1.35% | 1.38% | | ALL to NCOs (annualized) | 3,988.63% | 1,659.49% | | NCOs (annualized) to average loans | 0.02% | 0.08% | - The ALL **decreased to $16.8 million** at September 30, 2021, from $17.0 million at December 31, 2020, primarily due to modest loan charge-offs[275](index=275&type=chunk) - The ALL represents management's estimate of **probable and inherent credit losses**, considering factors like historical loss experience, economic conditions, and collateral values[272](index=272&type=chunk)[276](index=276&type=chunk) [Nonperforming Loans, Potential Problem Loans and Foreclosed Properties](index=70&type=section&id=Nonperforming%20Loans,%20Potential%20Problem%20Loans%20and%20Foreclosed%20Properties) Nonperforming assets increased slightly, while criticized loans decreased overall Nonperforming Assets (NPAs) (in thousands) | Metric | Sep 30, 2021 | Dec 31, 2020 | Change | |:---|:---|:---|:---| | Total Nonaccrual Loans | $11,706 | $10,747 | $959 | | Accruing loans past due 90 days or more | $425 | $586 | -$161 | | Total Nonperforming Loans (NPLs) | $12,131 | $11,333 | $798 | | Other real estate owned | $2 | $156 | -$154 | | Other collateral owned | $2 | $41 | -$39 | | **Total Nonperforming Assets (NPAs)** | **$12,135** | **$11,530** | **$605** | | NPAs to total assets | 0.69% | 0.70% | -0.01% | | NPLs to total loans | 0.97% | 0.92% | 0.05% | - The increase in NPAs was largely due to a **$4.5 million commercial real estate loan** secured by a senior living facility[282](index=282&type=chunk) - Nonaccrual TDR loans **decreased to $4.3 million** at September 30, 2021, from $6.7 million at December 31, 2020[284](index=284&type=chunk) Criticized Loans (in thousands) | Metric | Sep 30, 2021 | Dec 31, 2020 | Change | |:---|:---|:---|:---| | Special mention loan balances | $2,548 | $6,672 | -$4,124 | | Substandard loan balances | $27,137 | $28,541 | -$1,404 | | **Criticized loans, end of period** | **$29,685** | **$35,213** | **-$5,528** | - Hotel and restaurant sector loans totaled approximately **$109 million and $41 million**, respectively, at September 30, 2021[288](index=288&type=chunk)[289](index=289&type=chunk)[290](index=290&type=chunk) [Mortgage Servicing Rights](index=74&type=section&id=Mortgage%20Servicing%20Rights) The fair market value of the MSR asset increased, leading to a reversal of impairment charges - The fair market value of the MSR asset **increased from $3.3 million to $4.2 million** between December 31, 2020, and September 30, 2021[292](index=292&type=chunk) - A **$1.3 million reversal of previously recorded MSR impairment** was recognized during the nine-month period ended September 30, 2021[292](index=292&type=chunk) - The MSR asset as a percentage of the servicing portfolio was **0.75%** at September 30, 2021, up from 0.59% at December 31, 2020[293](index=293&type=chunk) [Deposits](index=74&type=section&id=Deposits) Deposits increased significantly, driven by non-maturity deposit growth Deposits by Type (in thousands) | Deposit Type | Sep 30, 2021 | Dec 31, 2020 | Change | % Change | |:---|:---|:---|:---|:---| | Non-interest bearing demand deposits | $280,611 | $238,348 | $42,263 | 17.73% | | Interest bearing demand deposits | $381,315 | $301,764 | $79,551 | 26.36% | | Savings accounts | $229,623 | $196,348 | $33,275 | 16.95% | | Money market accounts | $291,242 | $245,549 | $45,693 | 18.61% | | Certificate accounts | $225,524 | $313,247 | -$87,723 | -28.01% | | **Total Deposits** | **$1,408,315** | **$1,295,256** | **$113,059** | **8.73%** | - Total deposits **increased by $113.1 million**, primarily from non-maturity deposit growth in both retail and commercial segments[294](index=294&type=chunk) - Retail certificates of deposit **decreased by $87.7 million** as the Company chose not to match higher rate local retail certificate competition[294](index=294&type=chunk) [Federal Home Loan Bank (FHLB) advances (borrowings) and Other Borrowings](index=75&type=section&id=Federal%20Home%20Loan%20Bank%20(FHLB)%20advances%20(borrowings)%20and%20Other%20Borrowings) FHLB advances decreased due to terminations and maturities, while other borrowings remained stable FHLB Advances and Other Borrowings (in thousands) | Borrowing Type | Sep 30, 2021 | Dec 31, 2020 | Change | |:---|:---|:---|:---| | FHLB Advances, net | $111,512 | $123,498 | -$11,986 | | Senior Notes | $28,856 | $28,856 | $0 | | Subordinated Notes | $30,000 | $30,000 | $0 | | **Total Borrowings** | **$169,912** | **$181,826** | **-$11,914** | - FHLB advances **decreased by $12.0 million** due to $8.0 million in terminated advances and a $4.0 million advance maturity[306](index=306&type=chunk) - The Bank's available and unused FHLB borrowing capacity **increased to approximately $162.9 million** at September 30, 2021[298](index=298&type=chunk)[315](index=315&type=chunk) - The FRB PPPLF program expired on July 30, 2021, and the Bank had **no outstanding borrowings** under this facility[307](index=307&type=chunk)[315](index=315&type=chunk) [Stockholders' Equity](index=76&type=section&id=Stockholders'%20Equity) Total stockholders' equity increased, driven by net income and partially offset by share repurchases Stockholders' Equity (in thousands) | Metric | Sep 30, 2021 | Dec 31, 2020 | Change | |:---|:---|:---|:---| | Total Stockholders' Equity | $165,926 | $160,564 | $5,362 | - The increase in equity was due to **net income of $15.2 million**, partially offset by the repurchase of approximately 604 thousand common shares ($7.7 million) and cash dividends paid ($2.5 million)[310](index=310&type=chunk) - The Company repurchased approximately **144 thousand shares** under a new share repurchase program adopted on July 23, 2021, with an additional 389 thousand shares authorized for repurchase[311](index=311&type=chunk)[343](index=343&type=chunk)[344](index=344&type=chunk) [Liquidity and Asset / Liability Management](index=76&type=section&id=Liquidity%20and%20Asset%20/%20Liability%20Management) The Company maintains adequate liquidity through deposits, investments, and borrowings - Primary sources of funds include **deposits, loan amortizations, short-term investments, and borrowings**[312](index=312&type=chunk) - The on-balance sheet liquidity ratio was **20.7%** at September 30, 2021[312](index=312&type=chunk) - The Company has access to additional funds through FHLB borrowings (**$162.9 million available**) and other lines of credit[315](index=315&type=chunk)[316](index=316&type=chunk) [Off-Balance Sheet Liabilities](index=77&type=section&id=Off-Balance%20Sheet%20Liabilities) Off-balance sheet liabilities primarily consist of unused commitments for lines of credit - Unused commitments totaled **$320.1 million** at September 30, 2021, an increase from $247.3 million at December 31, 2020[318](index=318&type=chunk) [Capital Resources](index=77&type=section&id=Capital%20Resources) The Bank maintained capital levels exceeding 'Well Capitalized' requirements Bank Capital Ratios as of Sep 30, 2021 | Capital Ratio | Actual Ratio | Minimum for Well Capitalized | |:---|:---|:---:| | Total capital (to risk weighted assets) | 13.6% | 10.0% | | Tier 1 capital (to risk weighted assets) | 12.4% | 8.0% | | Common equity tier 1 capital (to risk weighted assets) | 12.4% | 6.5% | | Tier 1 leverage ratio (to adjusted total assets) | 9.6% | 5.0% | - The Bank was categorized as **'Well Capitalized'** by the OCC at September 30, 2021[321](index=321&type=chunk) [ITEM 3. Quantitative and Qualitative Disclosures about Market Risk](index=79&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) Discusses the Company's exposure to interest rate risk and its management strategies - Interest rate risk is the Company's **most significant market risk**, managed by the Asset and Liability Management Committee (ALCO)[325](index=325&type=chunk)[326](index=326&type=chunk) Estimated Changes in Economic Value of Equity (EVE) (in thousands) | Rate Shock | Sep 30, 2021 (% Change in EVE) | Dec 31, 2020 (% Change in EVE) | |:---|:---|:---| | +300 bp | -3% | 15% | | +200 bp | -2% | 11% | | +100 bp | -1% | 7% | | -100 bp | 6% | 0% | Projected Change in Net Interest Income (NII) Over One Year Horizon | Rate Shock | Sep 30, 2021 (% Change in NII) | Dec 31, 2020 (% Change in NII) | |:---|:---|:---| | +300 bp | -7% | 3% | | +200 bp | -4% | 3% | | +100 bp | -2% | 2% | | -100 bp | 1% | -1% | - The Company is now **modestly liability sensitive**, a shift from asset sensitivity in Q1 2021, due to planned actions including investment portfolio growth and loan growth[328](index=328&type=chunk) [ITEM 4. Controls and Procedures](index=81&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Confirms the effectiveness of disclosure controls and procedures as of September 30, 2021 - The Company's disclosure controls and procedures were **effective** as of September 30, 2021, providing reasonable assurance of achieving desired control objectives[335](index=335&type=chunk) - **No material changes** occurred in the Company's internal control over financial reporting during the most recently completed fiscal quarter[336](index=336&type=chunk) PART II – OTHER INFORMATION [Item 1. LEGAL PROCEEDINGS](index=81&type=section&id=Item%201.%20LEGAL%20PROCEEDINGS) Discloses that legal proceedings are not expected to materially impact the Company's financial condition - Management believes that any liability from legal proceedings would **not have a material adverse effect** on the Company's business or financial condition[337](index=337&type=chunk) [Item 1A. RISK FACTORS](index=82&type=section&id=Item%201A.%20RISK%20FACTORS) Refers readers to risk factors detailed in previous SEC filings for a comprehensive understanding of potential risks - Readers are directed to review risk factors described in Item 1A of the **2020 10-K and prior 10-Q filings** for a complete understanding of potential risks[339](index=339&type=chunk) [Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=82&type=section&id=Item%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) Details the Company's common stock repurchase activities under recent programs - The Company completed repurchases under its **November 2020 stock repurchase program** during the quarter ended September 30, 2021[343](index=343&type=chunk) - A new share repurchase program was adopted on July 23, 2021, authorizing the repurchase of up to approximately **5% of outstanding common stock** (532,962 shares)[343](index=343&type=chunk) Issuer Purchases of Equity Securities (3 Months Ended Sep 30, 2021) | Period | Total Shares Purchased | Average Price Paid per Share | |:---|:---|:---| | July 1 - July 31, 2021 | 13,568 | $13.63 | | August 1 - August 31, 2021 | 130,000 | $13.90 | | September 1 - September 30, 2021 | 37,200 | $13.77 | | **Total** | **180,768** | **$13.85** | - As of September 30, 2021, **389,028 shares remained authorized for repurchase** under the July 2021 program[344](index=344&type=chunk) [Item 3. DEFAULTS UPON SENIOR SECURITIES](index=82&type=section&id=Item%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) This item is not applicable to the Company for the reporting period [Item 4. MINE SAFETY DISCLOSURES](index=82&type=section&id=Item%204.%20MINE%20SAFETY%20DISCLOSURES) This item is not applicable to the Company for the reporting period [Item 5. OTHER INFORMATION](index=82&type=section&id=Item%205.%20OTHER%20INFORMATION) This item is not applicable to the Company for the reporting period [Item 6. EXHIBITS](index=83&type=section&id=Item%206.%20EXHIBITS) Lists the exhibits filed with the Form 10-Q, including amendments and certifications - Exhibits include an Amendment to the Bylaws, a Business Note Renewal, Rule 13a-14(a) Certifications from the CEO and CFO, and Section 1350 Certifications[349](index=349&type=chunk) SIGNATURES [SIGNATURES](index=84&type=section&id=SIGNATURES) Contains the required signatures of the Company's authorized officers confirming the report's submission - The report is signed by Stephen M. Bianchi, Chief Executive Officer, and James S. Broucek, Chief Financial Officer, on **November 8, 2021**[353](index=353&type=chunk)[354](index=354&type=chunk)[355](index=355&type=chunk)

Financial Performance - Net interest income for Q2 2021 was $12.8 million, compared to $12.3 million in Q2 2020, reflecting a year-over-year increase of 4.1%[215] - For the six months ended June 30, 2021, net interest income was $25.6 million, up from $25.0 million for the same period in 2020, indicating a growth of 2.4%[215] - Net interest income for the six months ended June 30, 2021, was $25,595 thousand, compared to $24,974 thousand for the same period in 2020, reflecting a 2.5% increase[225] - Non-interest income for the three months ended June 30, 2021, was $3.793 million, a decrease of 24.34% from $5.013 million in the same period of 2020; for the six months, it was $7.969 million, down 7.51% from $8.616 million[238] Interest Margin and Rates - The net interest margin for Q2 2021 was 3.22%, a decrease from 3.34% in Q2 2020, primarily due to higher cash balances and lower yields on loans[216] - The net interest margin for the first half of 2021 was 3.26%, down from 3.48% in the same period of 2020, attributed to lower accretion from purchased credit impaired loans and Federal Reserve rate cuts[217] - The net interest margin decreased to 3.22% in Q2 2021 from 3.34% in Q2 2020, indicating a decline in profitability from interest-earning assets[221] - The average yield on loans was 4.72% in Q2 2021, compared to 4.66% in Q2 2020, showing a slight improvement in loan profitability[221] - The interest rate spread narrowed to 3.06% in Q2 2021 from 3.16% in Q2 2020, indicating tighter margins[221] Loan Portfolio and Allowance for Loan Losses - The company’s allowance for loan losses is based on ongoing assessments of probable incurred losses, considering factors such as historical loss experience and economic conditions[202] - The company’s financial condition as of June 30, 2021, reflects ongoing evaluations of its loan portfolio and adherence to regulatory guidance regarding loan loss allowances[202] - The allowance for loan losses was $16.8 million as of June 30, 2021, compared to $17.0 million at December 31, 2020[260] - The company identified impaired loans totaling $38.9 million as of June 30, 2021, a decrease from $43.4 million at December 31, 2020[264] - Total provision for loan losses for the three and six months ended June 30, 2021, was $0, compared to $1.75 million and $3.75 million for the same periods in 2020, reflecting improvements in nonperforming assets and lower loan charge-offs[234] Deposits and Funding - Total deposits rose to $1,118,950 thousand in Q2 2021, up from $1,052,638 thousand in Q2 2020, marking a 6.3% increase[221] - Total deposits increased by $76.0 million to $1.371 billion at June 30, 2021, from $1.295 billion at December 31, 2020[284] - The Bank's on-balance sheet liquidity ratio was 22.8% as of June 30, 2021, with approximately $110.5 million of certificate of deposit accounts maturing in 2021 at a weighted average cost of approximately 1.0%[300] - The company has approximately $144.7 million available under its borrowing arrangement with the Federal Home Loan Bank, an increase from $118.4 million at December 31, 2020[303] Asset Quality and Nonperforming Loans - Total nonperforming assets (NPAs) decreased by $2.7 million to $8.8 million at June 30, 2021, primarily due to reductions in acquired non-performing loans[273] - The total number of nonperforming loans (NPLs) was 8,617 as of June 30, 2021, down from 11,333 at December 31, 2020[271] - Nonperforming assets decreased to $8.8 million or 0.51% of total assets at June 30, 2021, compared to $11.5 million or 0.70% at December 31, 2020[276] - Nonaccrual loans decreased to $8.075 million at June 30, 2021, down from $8.678 million at March 31, 2021, reflecting a reduction in troubled debt restructurings[275] Capital and Equity - Total stockholders' equity increased to $164.0 million as of June 30, 2021, from $160.6 million at December 31, 2020, driven by a net income of $10.2 million and an unrealized gain of $0.57 million on available-for-sale securities[298] - The Bank's Tier 1 capital to risk-weighted assets ratio was 13.5% as of June 30, 2021, exceeding the required minimum of 6.0%[309] - The Bank's total capital to risk-weighted assets ratio was 14.7% as of June 30, 2021, consistent with the "Well Capitalized" designation under regulatory provisions[309] Economic and Interest Rate Risk Management - The Asset and Liability Management Committee (ALCO) regularly reviews economic conditions and interest rate outlook to manage interest rate risk exposure limits[315] - Strategies to manage interest rate risk include originating shorter-term loans and variable rate loans, as well as selling longer-term fixed-rate loans in the secondary market[315] - The overall interest rate sensitivity is assessed through net interest income shock analysis over the next 12 months[318] - The projected change in net interest income over a one-year horizon at +300 basis points was a decrease of 4% as of June 30, 2021, compared to an increase of 3% at December 31, 2020[318]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock, $.01 par value per share CZWI NASDAQ Global Market FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission ...

Financial Performance - As of December 31, 2020, total gross outstanding loans amounted to $1.25 billion, with $797.1 million in commercial agricultural real estate loans, $273.0 million in C&I/agricultural operating loans, $137.6 million in residential mortgage loans, and $39.1 million in consumer installment loans[30]. - Total deposits reached $1.30 billion, including interest-bearing deposits of $1.06 billion and non-interest-bearing deposits of $0.24 billion as of December 31, 2020[32]. - The projected change in net interest income for a 300 basis point increase in interest rates is 3% at December 31, 2020, while it was a decrease of 5% in 2019[182]. Regulatory Environment - The company is subject to various regulations, including the Sarbanes-Oxley Act, which requires management to assess the adequacy of internal controls over financial reporting[38]. - The Dodd-Frank Act has significantly changed the regulatory structure for financial institutions, impacting lending, deposit, and investment activities[41]. - The maximum per depositor FDIC insurance amount increased from $100,000 to $250,000 under the Dodd-Frank Act[50]. - The Bank's compliance with the Community Reinvestment Act is evaluated based on actual lending service and investment performance[50]. Capital and Funding - The company’s capital conservation buffer requires a CET1 capital ratio of 7.0% to avoid restrictions on capital distributions and discretionary bonus payments[43]. - The Bank's total risk-based capital ratio is at least 10%, with a Tier 1 risk-based capital ratio of at least 8% and a CET1 capital ratio of at least 6.5%[50]. - The company’s primary sources of funds include deposits, amortization, prepayments, and maturities of outstanding loans, along with other short-term investments[32]. - The Bank is required to maintain strong capital positions above minimum supervisory levels, especially when experiencing internal growth or making acquisitions[50]. Interest Rate Risk Management - The Asset and Liability Management Committee (ALCO) regularly reviews economic conditions and interest rate outlook to manage interest rate risk exposure limits[178]. - The company has adopted strategies focusing on shorter-term secured loans and variable-rate loans to manage interest rate risk[178]. - The company monitors interest rate risk using third-party reporting software and conducts net present value of portfolio equity analysis[178]. - The assumptions for measuring interest rate risk include interest rates, loan prepayment rates, and deposit decay rates[184]. - The company’s interest rate sensitivity is assessed through net interest income shock analysis over a 12-month horizon[182]. Employee and Operational Information - The Bank has 234 full-time employees and a total of 251 employees, with no unionized staff[54]. - The company aims to reduce non-interest expenses and improve efficiency through technology enhancements[178]. Competitive Landscape - Competitive factors for attracting deposits include interest rates, personalized services, and technology, while loan competition is influenced by interest rates and loan origination fees[33][35]. - The Federal Reserve Board's monetary policies significantly affect the operating results of the Bank and its holding company[52]. Compliance and Risk Management - The Bank has implemented policies to comply with anti-money laundering laws and regulations, including the Bank Secrecy Act and the Patriot Act[46]. - The Bank's CRA rating was "Satisfactory" as of its most recent regulatory examination[50]. - The increase in EVE estimates is attributed to the growth in non-maturity deposits and a net reduction in longer-term fixed-rate loans[180]. - As of December 31, 2020, a 300 basis point increase in interest rates would result in a 15% increase in Economic Value of Equity (EVE), compared to a 1% increase in 2019[180]. Filing Status - The company has become an "accelerated filer" due to its public float exceeding $75 million, which increases the complexity and cost of compliance with SEC regulations[37]. Taxation - The Tax Cuts and Jobs Act reduced corporate Federal income tax rates from 34% to 24.5% for 2018, and to 21% for 2019 and 2020, which is expected to lower federal income tax liability in future years[51].

Financial Performance - Net interest income for Q3 2020 was $11.9 million, compared to $11.6 million in Q3 2019, and for the nine months ended September 30, 2020, it was $36.9 million, up from $31.7 million in the same period of 2019[223]. - Net interest income for the three months ended September 30, 2020, was $11,909 thousand, up from $11,593 thousand in the same period of 2019, representing an increase of 2.7%[229]. - The company reported a net interest income increase of $5,145 thousand for the nine months ended September 30, 2020, compared to the same period in 2019, totaling $36,883 thousand[232]. - Total non-interest income increased by 39.80% to $5,062 million for the three months ended September 30, 2020, compared to $3,621 million in the prior year[243]. - Loan servicing income rose by 60.22% to $1,144 million for the three months ended September 30, 2020, driven by higher mortgage loan origination fees[243]. - Gain on sale of loans increased by 192.64% to $1,987 million for the three months ended September 30, 2020, reflecting higher origination volumes[243]. Interest Margin and Rates - The net interest margin for Q3 2020 was 3.11%, down from 3.34% in Q3 2019, primarily due to the Federal Reserve's actions that lowered overnight interest rates by 125 basis points in March 2020[224]. - For the nine months ended September 30, 2020, the net interest margin was 3.36%, slightly up from 3.35% in the same period of 2019, attributed to an increase in the accretion of purchased credit impaired discounts[225]. - The net interest margin exceeded the interest rate spread due to non-interest-bearing sources of funds supporting interest-earning assets[222]. - The interest rate spread decreased to 2.92% for the three months ended September 30, 2020, down from 3.11% in the same period of 2019[229]. - The average yield on loans decreased to 4.48% for the three months ended September 30, 2020, down from 5.08% in the same period of 2019[229]. Loan and Deposit Growth - The company originated $139 million in SBA Paycheck Protection Program loans during Q3 2020, contributing to the increase in net interest income[223]. - Total deposits rose to $1,064,077 thousand for the three months ended September 30, 2020, compared to $1,005,084 thousand in the same period of 2019, marking a growth of 5.9%[229]. - Loans increased to $1,258,224 thousand for the three months ended September 30, 2020, from $1,143,252 thousand in the same period of 2019, reflecting a growth of 10.1%[229]. - Total loans outstanding increased by $53 million to $1.23 billion as of September 30, 2020, from $1.18 billion at December 31, 2019[265]. - Total loans increased to $12.579 billion as of September 30, 2020, compared to $5.396 billion at December 31, 2019, reflecting a growth of 133%[284]. Allowance for Loan Losses - The allowance for loan losses is based on ongoing assessments of estimated probable incurred losses, considering factors such as historical loss experience and prevailing economic conditions[210]. - The company continues to refine its allowance for loan losses methodology, emphasizing historical performance adjusted for economic and qualitative factors[211]. - The allowance for loan losses increased to $14.8 million at September 30, 2020, representing 1.21% of loans receivable, up from $10.3 million or 0.88% at December 31, 2019[272]. - The allowance for loan losses (ALL) increased to $14,836 million at the end of the period, up from $10,320 million at the beginning of the period, representing a 43.0% increase[279]. - The company added $5,250 million to the ALL via provision for loan losses charged to operations during the period[279]. Asset and Equity Changes - Cash and cash equivalents increased to $115.5 million at September 30, 2020, from $55.8 million at December 31, 2019, reflecting robust deposit levels and loan growth[258]. - Total assets at the end of the period were $1,622,593 million, an increase from $1,531,249 million at the end of the previous year, representing a growth of 6.0%[279]. - Total stockholders' equity rose to $157.3 million at September 30, 2020, from $150.6 million at December 31, 2019, primarily due to net income of $9.2 million[299]. Nonperforming Assets and Loan Performance - Total nonperforming assets (NPAs) decreased by $6.7 million to $14,916 million as of September 30, 2020, from $21,620 million as of December 31, 2019, primarily due to reductions in acquired non-performing loans[281]. - The ratio of nonperforming loans (NPLs) to total loans was 1.15% as of September 30, 2020, down from 1.71% a year earlier, indicating improved loan performance[279]. - Nonperforming assets decreased to $14.9 million or 0.92% of total assets at September 30, 2020, down from $21.6 million or 1.41% at December 31, 2019[284]. Capital and Liquidity - The Bank's Tier 1 capital to risk-weighted assets ratio was 13.7% as of September 30, 2020, exceeding the required minimum of 6.0%[310]. - Total capital to risk-weighted assets ratio was 15.0% as of September 30, 2020, above the minimum requirement of 8.0%[310]. - The Bank's liquidity is considered adequate, with no known events likely to materially affect liquidity[305]. - The Bank could borrow $139.2 million under the Federal Reserve's PPPLF facility as of September 30, 2020[303]. - The Company maintains a line of credit with the Federal Reserve Bank with a capacity of $1.0 million[304].

Financial Performance - Net interest income for Q2 2020 was $12.3 million, up from $10.1 million in Q2 2019, reflecting growth from the F&M acquisition and organic loan growth [215]. - For the six months ended June 30, 2020, net interest income was $25.0 million, compared to $20.1 million for the same period in 2019 [215]. - Net interest income for the three months ended June 30, 2020, was $12,303, compared to $10,083 for the same period in 2019, representing a year-over-year increase of 21.8% [220]. - The net interest income for the six months ended June 30, 2020, was $24,974, up from $20,145 in 2019, reflecting a 24.0% increase [223]. Net Interest Margin - The net interest margin for Q2 2020 was 3.34%, slightly up from 3.30% in Q2 2019, driven by increased accretion of purchased credit impaired discounts [215]. - The net interest margin for the six months ended June 30, 2020, was 3.48%, compared to 3.36% for the same period in 2019 [216]. - The company’s net interest margin for the six-month period, after adjustments, was 3.23%, compared to 3.28% for the same period in 2019 [216]. - The interest rate spread increased to 3.16% for the three months ended June 30, 2020, compared to 3.05% in 2019, while the net interest margin improved to 3.34% from 3.30% [220]. Loan and Deposit Growth - The company originated $137 million in SBA PPP loans during Q2 2020, contributing 4 basis points to the net interest margin [215]. - Total deposits for the six months ended June 30, 2020, were $1,037,658, with interest expense of $5,787, compared to $876,893 and $5,519 in 2019, marking a 18.3% increase in deposits [223]. - Deposits increased by $76.5 million to $1.272 billion at June 30, 2020, from $1.196 billion at December 31, 2019, driven by growth in retail and commercial non-maturity deposits [285]. - Total loans outstanding increased by $103.8 million to $1.28 billion as of June 30, 2020, from $1.18 billion at December 31, 2019 [257]. Allowance for Loan Losses - The allowance for loan losses is based on ongoing assessments of estimated probable incurred losses in the loan portfolio [202]. - The allowance for loan losses increased to $13.4 million at June 30, 2020, representing 1.04% of loans receivable, up from $10.3 million or 0.88% at December 31, 2019 [263]. - The provision for loan losses for the three months ended June 30, 2020, was $1,750, with $1,250 attributed to COVID-19 related impacts, indicating proactive measures in response to economic conditions [232]. - The ratio of ALL to total loans was 1.04% at June 30, 2020, up from 0.88% at December 31, 2019 [276]. Non-Interest Income and Expenses - Non-interest income for the three months ended June 30, 2020, decreased by 4.30% to $5,013 million compared to $5,238 million in the same period of 2019 [238]. - Total non-interest expense increased by 21.33% to $11,392 million for the three months ended June 30, 2020, compared to $9,389 million in the same period of 2019 [246]. - Compensation and related benefits rose by 28.32% to $5,908 million for the three months ended June 30, 2020, compared to $4,604 million in the prior year [246]. - Gain on sale of loans surged by 217.28% to $1,818 million for the three months ended June 30, 2020, compared to $573 million in the same period of 2019 [238]. Asset Quality - Nonperforming assets decreased by $4.2 million to $17.4 million at June 30, 2020, from $21.6 million at December 31, 2019 [274]. - Total nonaccrual loans amounted to $14.8 million at June 30, 2020, down from $19.1 million at March 31, 2020 [276]. - The total nonperforming loans (NPLs) were $16.7 million at June 30, 2020, down from $20.2 million at the same time last year [276]. - Impaired loans totaled $51.7 million at June 30, 2020, down from $63.2 million at December 31, 2019, with 343 impaired loans identified [262]. Capital and Liquidity - Total stockholders' equity increased to $152.8 million at June 30, 2020, from $150.6 million at December 31, 2019, largely due to net income of $5.7 million [293]. - The company was categorized as "Well Capitalized" under Prompt Corrective Action Provisions as of June 30, 2020 [306]. - The Tier 1 capital to risk-weighted assets ratio was 12.9% as of June 30, 2020, above the required 6.0% [303]. - The company reported a Tier 1 leverage ratio of 9.9% as of June 30, 2020, exceeding the minimum requirement of 4.0% [303]. Risk Management - The company’s interest rate risk is significant, with net interest income projected to change by 1% with a 300 basis point increase in interest rates as of June 30, 2020 [313]. - The company adopted asset and liability management policies to align maturities and re-pricing terms of interest-earning assets and interest-bearing liabilities [310]. - The company plans to manage funding needs by utilizing core deposits and brokered certificates of deposits to extend terms and lock in fixed interest rates [310].

Financial Performance - Net interest income for the three months ended March 31, 2020, was $12.7 million, an increase from $10.1 million for the same period in 2019, driven by growth from the F&M acquisition and organic loan growth [208]. - The net interest margin for the three-month period ended March 31, 2020, was 3.64%, up from 3.43% for the same period in 2019, primarily due to increased accretion of purchased credit impaired discounts [208]. - Net interest income for Q1 2020 was $12,671 million, up from $10,062 million in Q1 2019, reflecting an increase of 25.9% [212]. - Total non-interest income rose to $3,603 million in Q1 2020, a 54.5% increase from $2,332 million in Q1 2019, largely driven by the F&M acquisition [221]. - Gains on the sale of loans increased by 153.25% to $780 million in Q1 2020 from $308 million in Q1 2019, attributed to higher mortgage activity [221]. - Non-interest expense for Q1 2020 was $10,731 million, an 8.46% increase from $9,894 million in Q1 2019, influenced by the F&M acquisition [230]. - Compensation and benefits expense increased by 15.49% to $5,435 million in Q1 2020 from $4,706 million in Q1 2019, reflecting higher salaries and employee benefit costs [230]. Loan and Asset Management - The company maintains an allowance for loan losses based on ongoing assessments of estimated probable incurred losses in its loan portfolio [196]. - Total provision for loan losses for Q1 2020 was $2,000 million, compared to $1,225 million in Q1 2019, indicating a significant increase due to anticipated economic impacts from COVID-19 [218]. - Total loans outstanding increased by $3.6 million to $1.181 billion as of March 31, 2020, from $1.177 billion at December 31, 2019 [243]. - The total allowance for loan losses was $11.835 million as of March 31, 2020, compared to $10.320 million at December 31, 2019 [245]. - The composition of the loan portfolio included $520.15 million in commercial real estate loans as of March 31, 2020, up from $514.46 million at December 31, 2019 [245]. - Total impaired loans decreased to $56.0 million at March 31, 2020, from $63.2 million at December 31, 2019, reflecting a reduction in classified assets and certain acquired loan decreases [259]. - Nonperforming assets decreased by $2.4 million to $19.2 million, primarily due to decreases in nonaccrual loans acquired in the F&M acquisition [257]. Capital and Liquidity - Total stockholders' equity decreased to $147.9 million at March 31, 2020, from $150.6 million at December 31, 2019, with a book value per share of $13.27 [274]. - The Tier 1 capital ratio was 12.6% as of March 31, 2020, exceeding the required minimum of 6.0% for being considered "Well Capitalized" [279]. - The Company had $208.2 million in unused commitments as of March 31, 2020, down from $246.7 million at December 31, 2019 [278]. - The Bank's on-balance sheet liquidity ratio was 12.2% as of March 31, 2020, with $240.1 million of its $382.3 million (63%) CD portfolio maturing within the next 12 months [275]. - As of March 31, 2020, the Bank had approximately $193.6 million available under its borrowing arrangement with the Federal Home Loan Bank, compared to $203.9 million at December 31, 2019 [276]. Market and Economic Conditions - The company emphasizes the importance of maintaining its reputation and market share amidst competitive pressures and economic conditions [192]. - Interest rate risk is identified as the most significant market risk affecting the company's operations, influenced by changes in market interest rates and economic conditions [284]. - The Asset and Liability Management Committee (ALCO) regularly reviews economic conditions and interest rate outlook to manage interest rate risk and liquidity needs [285]. - The estimated change in Economic Value of Equity (EVE) for a +300 basis points shift in interest rates was a 1% increase as of March 31, 2020 [289]. - For a -100 basis points shift in interest rates, the EVE showed a 12% decrease as of March 31, 2020 [289]. Tax and Regulatory Compliance - The company’s financial statements are prepared in accordance with GAAP, requiring significant estimates and judgments that can materially affect reported amounts [195]. - The assessment of deferred tax assets involves estimates and assumptions that could materially impact the company's consolidated results [204]. - Income tax expense for Q1 2020 was $937 million, up from $322 million in Q1 2019, reflecting similar effective tax rates in both periods [234].

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2019 OR ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-33003 CITIZENS COMMUNITY BANCORP, INC. (Exact name of registrant as specified in its charter) Maryland 20-5120010 (State or other jur ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2019 OR ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-33003 CITIZENS COMMUNITY BANCORP, INC. (Exact name of registrant as specified in its charter) Maryland 20-5120010 (State or ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2019 OR ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-33003 CITIZENS COMMUNITY BANCORP, INC. (Exact name of registrant as specified in its charter) Maryland 20-5120010 (State or other ...