Citizens munity Bancorp(CZWI) - 2025 Q4 - Annual Report

Financial Performance - As of December 31, 2025, total gross outstanding loans amounted to $1.343 billion, with $1.074 billion in commercial/agricultural real estate loans, $139.3 million in C&I/agricultural operating loans, $123.8 million in residential mortgage loans, and $6.2 million in consumer installment loans [26]. - Total deposits reached $1.524 billion, including interest-bearing deposits of $1.260 billion and non-interest-bearing deposits of $0.264 billion as of December 31, 2025 [29]. - The company maintains a portfolio of investments primarily in mortgage-backed securities, asset-backed securities, U.S. Government sponsored agency securities, and corporate debt securities [27]. Lending Activities - The company focuses its lending activities on individual consumers and small commercial borrowers, primarily in Wisconsin and Minnesota, facing competitive and economic pressures [25]. - The company’s lending policies are established by management and approved by the Board of Directors, focusing on maintaining credit quality in its loan portfolio [25]. - The company focuses on originating shorter-term secured loans and variable rate loans to manage interest rate risk [262]. Regulatory Environment - The capital conservation buffer requires a CET1 capital of 2.5% of risk-weighted assets, effectively increasing minimum capital ratios to 7.0% for CET1, 8.5% for Tier 1, and 10.5% for total capital [45]. - The company is subject to extensive regulation and supervision by the Federal Reserve and the OCC, impacting its growth and earnings performance [39]. - The company is subject to various anti-money laundering laws and regulations, including the Bank Secrecy Act and the Patriot Act [54][55]. - The Community Reinvestment Act requires banks to meet the credit needs of their communities, including low- and moderate-income neighborhoods [68]. - The Federal Reserve requires a total risk-based capital ratio of at least 10% for a "well-capitalized" bank [61]. - The Federal Reserve may impose higher capital requirements for holding companies experiencing internal growth or making acquisitions [62]. - The Federal Reserve, FDIC, and OCC issued a final rule to amend CRA regulations, with most provisions applicable from January 1, 2026 [70]. Competition - The company competes for deposits and loans based on interest rates, personalized services, and the quality of financial services, facing competition from banks, credit unions, and non-bank entities [31]. - The company was selected for inclusion in the Russell 3000 Index as part of the 2025 annual reconstitution [36]. Risk Management - The company's interest rate risk is its most significant market risk, influenced by changes in market interest rates and economic conditions [258]. - The Asset and Liability Management Committee (ALCO) regularly reviews economic conditions and interest rate outlook to manage interest rate risk exposure [260]. - The estimated changes in Economic Value of Equity (EVE) at December 31, 2025, show a 6% increase with a +300 basis point shift in interest rates, compared to a 2% increase at December 31, 2024 [264]. - Projected change in net interest income at December 31, 2025, indicates a decrease of 4% with a +300 basis point shift in interest rates, compared to a decrease of 8% at December 31, 2024 [267]. - The analysis of interest rate risk includes assumptions on interest rates, loan prepayment rates, and deposit decay rates, which may vary from actual market conditions [268]. - The ALCO's objectives include managing assets and funding sources to align with liquidity, cash flow, capital adequacy, and profitability goals [260]. - The company has adopted policies to align the maturities and re-pricing terms of interest-earning assets and interest-bearing liabilities [260]. - The company utilizes brokered certificates of deposits and borrowings to manage funding needs, which may have fixed rates with varying maturities [262]. Employment - As of March 5, 2026, the company had 217 full-time employees and a total of 238 employees, with no unionized workforce [78]. Insurance and Ratings - The current maximum per depositor FDIC insurance amount is $250,000 [63]. - The Bank's CRA rating was "Satisfactory" as of its most recent regulatory examination [69]. - The FDIC applies a risk-based system for setting deposit insurance assessments based on capital levels and supervisory ratings [63]. Corporate Governance - The company has adopted a clawback policy consistent with Section 10D of the Securities Exchange Act of 1934, as mandated by the Dodd-Frank Act [41].