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].
Citizens munity Bancorp(CZWI) - 2020 Q4 - Annual Report