• Citizens Community Bancorp, Inc. Reports Earnings of $0.35 Per Share in 1Q23; Deposit and Loan Balances Increase From Prior Quarter

    ソース: Nasdaq GlobeNewswire / 25 4 2023 08:30:01   America/New_York

    EAU CLAIRE, Wis., April 25, 2023 (GLOBE NEWSWIRE) -- Citizens Community Bancorp, Inc. (the “Company”) (Nasdaq: CZWI), the parent company of Citizens Community Federal N.A. (the “Bank” or “CCFBank”), today reported earnings of $3.7 million and earnings per diluted share of $0.35 for the quarter ended March 31, 2023, compared to $4.7 million and $0.45 per diluted share for the quarter ended December 31, 2022, and $4.7 million and $0.45 per diluted share for the quarter ended March 31, 2022, respectively.

    The Company’s first quarter of 2023 operating results reflected the following changes from the fourth quarter of 2022: (1) lower net interest income due to the impact of higher deposit costs; and (2) lower non-interest income of $0.6 million due to decreases in net gains on investment securities, partially offset by lower credit loss provision due to lower loan growth and improved asset quality.

    “Despite unusual challenges presented to us by rapidly rising interest rates, highly publicized bank failures and continued discussion of a pending economic recession, our underlying resilience and teamwork produced a return on tangible shareholders’ equity of 12% for our first quarter of 2023. Much effort has been put into the Bank’s operations designed to ensure efficiency, diversification of deposits and loans and continued growth in franchise value. Our largely small and rural markets have provided stability in employment and deposits with customer outlooks generally positive about 2023. The stability of our deposit base also benefits from the fact that 82% are either insured or collateralized,” stated Stephen Bianchi, Chairman, President and Chief Executive Officer. “We expect to see annual loan growth moderating to low single digit percentage growth in 2023 as higher interest rates appear to be affecting new project feasibility. Asset quality improved further with a 25% reduction in criticized loans to $22.1 million, non-performing assets to total assets of .63%, and minimal loan net charge offs of $23 thousand.”

    Book value per share was $15.70 at March 31, 2023, compared to $16.03 at December 31, 2022, and $15.72 at March 31, 2022. Tangible book value per share (non-GAAP)1 was $12.48 at March 31, 2023, compared to $12.77 at December 31, 2022, and $12.40 at March 31, 2022. For the quarter, tangible book value was positively influenced by net income, intangible amortization and lower accumulated other comprehensive loss on investment securities, offset by dividend payments to shareholders and the adoption of the Accounting Standards Update (“ASU”) 2016-13, Financial Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments (“CECL”).

    March 31, 2023 Highlights: (as of or for the 3-month period ended March 31, 2023 compared to December 31, 2022 and March 31, 2022.)

    • Quarterly earnings of $3.7 million, or $0.35 per diluted share for the quarter ended March 31, 2023, decreased from the quarter ended December 31, 2022, earnings of $4.7 million or $0.45 per diluted share, and decreased from the quarter ended March 31, 2022, earnings of $4.7 million or $0.45 per diluted share.
    • Quarterly earnings, as adjusted (non-GAAP)1, were $3.7 million, or $0.35 per diluted share for the quarter ended March 31, 2023, compared to $5.2 million or $0.49 per diluted share for the quarter ended December 31, 2022, and $4.7 million or $0.45 per diluted share for the quarter ended March 31, 2022.
    • Net interest income decreased $1.7 million to $12.8 million for the quarter ended March 31, 2023 from $14.5 million the previous quarter and decreased $0.4 million from the first quarter of 2022. First quarter 2023 net interest income without SBA PPP net loan fee accretion and loan purchase accretion decreased $1.5 million from the fourth quarter of 2022 and increased $0.1 million from the first quarter of 2022. The decrease in net interest income and net interest margin from year end is due to a reduction in commercial non-interest-bearing balances in January, replaced with higher cost borrowings, higher CD costs, an increase in indexed municipal deposits rates and other customer rate increases more than offsetting the 9 basis points increase in asset yields.
    • The net interest margin without SBA PPP net loan fee accretion and loan purchase accretion was 2.99% for the quarter ended March 31, 2023 compared to 3.33% for the previous quarter and 3.11% for the comparable quarter one year earlier.
    • The first quarter provision for credit losses was $0.05 million due to modest loan growth and strong credit results, compared to $0.70 million for the preceding quarter. No credit loss provision was realized during the first quarter a year ago due to low net charge-offs, decreases in criticized assets and stable economic conditions in our markets.
    • The Company adopted CECL using the modified retrospective approach effective January 1, 2023 and, as a result, increased the allowance for credit losses (“ACL”) on loans by $4.7 million and established an off-balance sheet reserve of $1.5 million. The increase in ACL is primarily CRE and is primarily due to the impact of the remaining maturity of the portfolio.
    • The efficiency ratio increased to 66% for the quarter ended March 31, 2023 from 61% for the quarter December 31, 2022, as lower non-interest expense was more than offset by lower net interest income.
    • Gross loans increased by $9.0 million during the first quarter of 2023. Draws on construction loans increased $12.5 million. As a result of current market conditions, residential 10/1 ARM loan originations were added to the portfolio which resulted in residential mortgage loan growth of $5.0 million. The commercial and industrial loan decrease of $5.1 million was largely due to the reduction and payoff of a special mention credit. Agricultural operating loans decreased $4.7 million due to normal seasonality.
    • Nonperforming assets were $11.7 million at March 31, 2023, compared to $12.7 million at December 31, 2022.
    • Substandard loans decreased by $1.9 million to $15.4 million at March 31, 2022, compared to $17.3 million at December 31, 2022.
    • Our office loan portfolio is $45 million and consists of 72 loans. There are no criticized loans in the portfolio and there have been no charge-offs in the trailing twelve months.
    • Special mention loans decreased $5.5 million from the December 31, 2022 balance of $12.2 million to $6.6 million at March 31, 2023, as a large C&I loan paid off in the first quarter of 2023.
    • Stockholders’ equity as a percent of total assets was 8.84% at March 31, 2023, compared to 9.20% at December 31, 2022. Tangible common equity (“TCE”) as a percent of tangible assets (non-GAAP)1 was 7.16% at March 31, 2023, compared to 7.47% at December 31, 2022. The impact of the adoption of CECL of $4.4 million, the annual dividend payment of $3.0 million and modest asset growth outweighed the impact of net income, a decrease in unrealized losses in the available for sale portfolio and amortization of intangibles.
    • Consumer, commercial and government deposits have been stable since January 31, 2023 and since the two large coastal bank failures in early March. There are no material customer or industry concentrations. A decrease in deposits during January occurred as a couple of commercial accounts invested funds in their businesses.
    • At March 31, 2023 our deposit portfolio composition was 55% consumer, 27% commercial, 14% public and 4% brokered deposits. At December 31, 2022 our deposit portfolio composition was 57% consumer, 28% commercial, 12% public and 3% brokered deposits.
    • Uninsured and uncollateralized deposits were $252.7 million, or 18% of total deposits, at March 31, 2023 and $298.8 million, or 21% of total deposits, at December 31, 2022. Uninsured deposits alone at March 31, 2023 were $413.5 million, or 29% of total deposits, and $441.2 million, or 31% of total deposits at December 31, 2022, with the difference being fully secured government deposits.  
    • On-balance sheet liquidity, collateralized borrowing and uncommitted federal funds availability was 205% of uninsured and uncollateralized deposits at March 31, 2023 and 191% at December 31, 2022.
    • On-balance sheet liquidity, collateralized borrowing and uncommitted federal funds availability was $517.4 million at March 31, 2023 and $570.0 million at December 31, 2022.

    Balance Sheet and Asset Quality

    Total assets increased modestly by $44.3 million during the quarter to $1.86 billion at March 31, 2023, compared to $1.82 billion at December 31, 2022.

    Cash and cash equivalents increased $29.7 million during the quarter to $65.1 million at March 31, 2023, largely due to an increase in interest-bearing deposits of $20 million.

    Securities available for sale increased $7.4 million during the quarter ended March 31, 2023 to $173.4 million from $166.0 million at December 31, 2022. This increase was primarily due to the purchase of floating-rate SBA backed pass-through securities, with a modest increase in the market value of the portfolio more than offsetting principal repayments.

    Securities held to maturity decreased $1.1 million to $95.3 million during the quarter ended March 31, 2023 from $96.4 million at December 31, 2022 due to principal repayments.

    Total loans receivable increased to $1.421 billion at March 31, 2023 from $1.412 billion at December 31, 2022.   Draws on construction loans increased $12.5 million during the first quarter. As a result of current market conditions, residential 10/1 ARM loan originations were added to the portfolio which resulted in residential mortgage loan growth of $5.0 million. The commercial and industrial loan portfolio decrease of $5.1 million was largely due to the reduction and payoff of a special mention credit. Agricultural operating loans decreased $4.7 million due to normal seasonality.

    The allowance for credit losses on loans increased to $22.7 million at March 31, 2023, largely as a result of the $4.7 million CECL transition adjustment, representing 1.60% of total loans receivable. At December 31, 2022, the allowance for loan losses was 1.27% of total loans receivable. For the quarter ended March 31, 2023, the Bank had net charge offs of $23 thousand.

    Allowance for Credit Losses (“ACL”) - Loans Percentage

    (in thousands, except ratios)

      March 31, 2023 December 31, 2022 September 30, 2022 June 30, 2022
    Loans, end of period $1,420,955  $1,411,784  $1,375,876  $1,346,855 
    Allowance for credit losses - Loans $22,679       
    Allowance for loan losses “ALL”   $17,939  $17,217  $16,825 
    ACL - Loans as a percentage of loans, end of period  1.60%      
    ALL as a percentage of loans, end of period    1.27%  1.25%  1.25%
                   

    Allowance for Credit Losses - Unfunded Commitments:
    (in thousands)

    In addition to the ACL - Loans, the Company has established an ACL - Unfunded Commitments of $1,530 at March 31, 2023 and $0 at December 31, 2022, classified in other liabilities on the consolidated balance sheets.

      March 31, 2023
    and Three Months
    Ended    		 December 31, 2022
    and Three Months
    Ended
    ACL - Unfunded commitments - beginning of period $—  $—
    Cumulative effect of ASU 2016-13 adoption  1,537   —
    Reductions to ACL - Unfunded commitments via provision for credit losses charged to operations  (7)  —
    ACL - Unfunded commitments - end of period $1,530  $—
            

    Nonperforming assets declined to $11.7 million or 0.63% of total assets at March 31, 2023, compared to $12.7 million or 0.70% at December 31, 2022.

      (in thousands)
      March 31, 2023 December 31, 2022 September 30, 2022 June 30, 2022 March 31, 2022
    Special mention loan balances $6,636 $12,170 $20,178 $17,274 $1,849
    Substandard loan balances  15,439  17,319  20,227  20,680  24,822
    Criticized loans, end of period $22,075 $29,489 $40,405 $37,954 $26,671
                    

    Special mention loans decreased $5.5 million, largely due to a payoff of a commercial loan. Substandard loans decreased modestly by $1.9 million to $15.4 million at March 31, 2023, compared to $17.3 million at December 31, 2022.

    From a month-end perspective, deposits remained stable. From March 7, 2023 to March 31, 2023, a period closely monitored for unusual withdrawal activity, balances remained stable. Deposit composition changed during the quarter ended March 31, 2023, as both business and retail depositors sought higher yields on deposit accounts. For the quarter, retail deposits remained stable, with customers returning to higher yielding certificates with money moving from money market and savings accounts. In January 2023, commercial non-interest bearing deposits fell as commercial customers decreased their cash balances to support the needs of their businesses. Modest brokered deposit growth supplemented deposit growth, with $10 million of brokered money market growth and $15 million of brokered certificate growth.

    Deposit Portfolio Composition
    (in thousands)

      March 31, 2023 February 28, 2023 January 31, 2023 December 31, 2022
    Consumer deposits $786,614 $784,162 $779,476 $805,598
    Commercial deposits  391,534  388,770  385,071  405,733
    Public deposits  194,683  193,213  195,115  173,548
    Brokered deposits  63,962  53,963  39,841  39,841
    Total deposits $1,436,793 $1,420,108 $1,399,503 $1,424,720
                 

    Deposit Composition
    (in thousands)

      March 31, 2023 December 31, 2022 March 31, 2022
    Non-interest bearing demand deposits $247,735 $284,722 $269,481
    Interest bearing demand deposits  390,730  371,210  423,251
    Savings accounts  214,537  220,019  241,072
    Money market accounts  309,005  323,435  321,409
    Certificate accounts  274,786  225,334  173,010
    Total deposits $1,436,793 $1,424,720 $1,428,223
              

    Federal Home Loan Bank advances increased $40 million to $182.5 million at March 31, 2023 from $142.5 million one quarter earlier. Relative to brokered deposits and maturity sensitivity, FHLB advances provided a less expensive funding option.

    The Company did not repurchase any of the Company’s common stock in the first quarter of 2023. As of March 31, 2023, approximately 243 thousand shares remain available for repurchase under the current share repurchase authorization.

    Review of Operations

    Net interest income was $12.8 million for the first quarter ended March 31, 2023, compared to $14.5 million for the quarter ended December 31, 2022, and decreased slightly from $13.2 million for the quarter ended March 31, 2022. Net interest income for the first quarter of 2022, included $0.3 million of SBA PPP net loan fee accretion. “The decrease in net interest income in the first quarter was due to funding costs exceeding increases in assets yields. Though our one-year interest rate risk profile remains nearly neutral with repricing borrowings and deposits modestly exceeding repricing assets, we expect to see a reduction in the net interest margin in the second quarter of 2023, due to increasing CD costs as ending certificate rates exceeded the first quarter average by 50 basis points and the full quarter impact of late first quarter deposit repricing,” said Jim Broucek, Executive Vice President and Chief Financial Officer.

    Net interest income and net interest margin analysis:
    (in thousands, except yields and rates)

      Three months ended
      March 31, 2023 December 31, 2022 September 30, 2022 June 30, 2022 March 31, 2022
      Net
    Interest
    Income    		 Net
    Interest
    Margin    		 Net
    Interest
    Income    		 Net
    Interest
    Margin    		 Net
    Interest
    Income    		 Net
    Interest
    Margin    		 Net
    Interest
    Income    		 Net
    Interest
    Margin    		 Net
    Interest
    Income    		 Net
    Interest
    Margin
    As reported $12,795  3.02% $14,478  3.40% $14,457  3.43% $14,267  3.46% $13,167  3.25%
    Less non-accretable difference realized as interest from payoff of purchased credit impaired (“PCI”) loans  —  —%  (109) (0.02)%  (34) (0.01)%  (70) (0.02)%  (26) (0.01)%
    Less accelerated accretion from payoff of certain PCI loans with transferred non-accretable differences  —  —%  (32) (0.01)%  (117) (0.06)%  (308) (0.08)%  (11) —%
    Less accretion for PCD loans  (37) (0.01)%  —  —%  —  —%  —  —%  —  —%
    Less scheduled accretion interest  (84) (0.02)%  (169) (0.04)%  (247) (0.03)%  (255) (0.06)%  (264) (0.07)%
    Without loan purchase accretion $12,674  2.99% $14,168  3.33% $14,059  3.33% $13,634  3.30% $12,866  3.17%
    Less SBA PPP net loan fee accretion  —  —%  —  —%  —  —%  (39) (0.01)%  (259) (0.06)%
    Without SBA PPP net loan fee accretion and loan purchase accretion $12,674  2.99% $14,168  3.33% $14,059  3.33% $13,595  3.29% $12,607  3.11%
                                        

    Credit loss provisions for the quarter ended March 31, 2023 were $50 thousand reflecting the expanding loan portfolio. Loan loss provisions for the quarters ended December 31, 2022, and March 31, 2022, were $0.7 million and $0, respectively.

    Non-interest income decreased to $2.3 million in the quarter ended March 31, 2023, compared to $2.9 million in the quarter ended December 31, 2022 and $2.7 million in the quarter ended March 31, 2022. The decrease in the first quarter of 2023, compared to the fourth quarter of 2022, was largely due to lower gains on investment securities. Relative to the comparable quarter one year earlier, non-interest income was lower as a result of lower gain on sale of loans and lower loan servicing income.

    Total non-interest expense decreased $215 thousand in the first quarter of 2023 to $10.1 million, compared to $10.3 million for the quarter ended December 31, 2022, and $9.7 million for the quarter ended March 31, 2022. The decrease from the fourth quarter of 2022 was due to: (1) lower other non-interest expense of $0.5 million, largely due to fourth quarter branch closure costs primarily associated with reductions in value of the two closed branches totaling $0.7 million; (2) new market tax credit depletion being reclassified to tax expense (see provision for taxes below); (3) lower marketing expenses due to seasonality; and (4) a reduction in the amortization of core deposit intangibles. These decreases were partially offset by the impact of a one-time seasonal $0.3 million reduction in compensation expense recognized in the fourth quarter of 2022 and increases in other related benefits, occupancy and data processing.

    Provision for income taxes decreased to $1.3 million in the first quarter of 2023 from $1.6 million in the fourth quarter of 2022 due primarily to lower pre-tax income. However, income tax provisions were impacted by the adoption of new accounting practices related to tax credit investments. “Effective January 1, 2023, the Company early adopted ASU 2023-02. This guidance results in new market tax credit depletion being reclassified from non-interest expense to tax expense and changes the amortization method to be proportional to the tax credit realized. As a result, retained earnings increased $130 thousand, effective January 1, 2023, non-interest expense decreased by $162 thousand from the previous quarter results, and the effective tax rate increased to 25.5% in the first quarter,” said Broucek. The effective tax rate was 25.6% in the previous quarter due to higher net income and 24.2% for the comparable prior year quarter.

    These financial results are preliminary until the Form 10-Q is filed in May 2023.

    About the Company

    Citizens Community Bancorp, Inc. (NASDAQ: “CZWI”) is the holding company of the Bank, a national bank based in Altoona, Wisconsin, currently serving customers primarily in Wisconsin and Minnesota through 23 branch locations. Its primary markets include the Chippewa Valley Region in Wisconsin, the Twin Cities and Mankato markets in Minnesota, and various rural communities around these areas. The Bank offers traditional community banking services to businesses, ag operators and consumers, including residential mortgage loans.

    Cautionary Statement Regarding Forward-Looking Statements

    Certain statements contained in this release are considered “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may be identified using forward-looking words or phrases such as “anticipate,” “believe,” “could,” “expect,” “estimates,” “intend,” “may,” “on pace,” “preliminary,” “planned,” “potential,” “should,” “will,” “would” or the negative of those terms or other words of similar meaning. Such forward-looking statements in this release are inherently subject to many uncertainties arising in the operations and business environment of the Company and the Bank. These uncertainties include conditions in the financial markets and economic conditions generally; adverse impacts to the Company or Bank arising from the COVID-19 pandemic; acts of terrorism and political or military actions by the United States or other governments; the possibility of a deterioration in the residential real estate markets; interest rate risk; lending risk; higher lending risks associated with our commercial and agricultural banking activities; the sufficiency of loan allowances; changes in the fair value or ratings downgrades of our securities; competitive pressures among depository and other financial institutions; disintermediation risk; our ability to maintain our reputation; our ability to maintain or increase our market share; our ability to realize the benefits of net deferred tax assets; our inability to obtain needed liquidity; our ability to raise capital needed to fund growth or meet regulatory requirements; our ability to attract and retain key personnel; our ability to keep pace with technological change; prevalence of fraud and other financial crimes; cybersecurity risks; the possibility that our internal controls and procedures could fail or be circumvented; our ability to successfully execute our acquisition growth strategy; risks posed by acquisitions and other expansion opportunities, including difficulties and delays in integrating the acquired business operations or fully realizing the cost savings and other benefits; restrictions on our ability to pay dividends; the potential volatility of our stock price; accounting standards for credit losses; legislative or regulatory changes or actions, or significant litigation, adversely affecting the Company or Bank; public company reporting obligations; changes in federal or state tax laws; and changes in accounting principles, policies or guidelines and their impact on financial performance. Stockholders, potential investors, and other readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. Such uncertainties and other risks that may affect the Company’s performance are discussed further in Part I, Item 1A, “Risk Factors,” in the Company’s Form 10-K, for the year ended December 31, 2022, filed with the Securities and Exchange Commission (“SEC”) on March 7, 2023 and the Company’s subsequent filings with the SEC. The Company undertakes no obligation to make any revisions to the forward-looking statements contained in this news release or to update them to reflect events or circumstances occurring after the date of this release.

    1 Non-GAAP Financial Measures

    This press release contains non-GAAP financial measures, such as net income as adjusted, net income as adjusted per share, tangible book value, tangible book value per share, tangible common equity as a percent of tangible assets and return on average tangible common equity, which management believes may be helpful in understanding the Company’s results of operations or financial position and comparing results over different periods.

    Net income as adjusted and net income as adjusted per share are non-GAAP measures that eliminate the impact of certain expenses such as branch closure costs and related severance pay, accelerated depreciation expense and lease termination fees, and the gain on sale of branch deposits and fixed assets. Tangible book value, tangible book value per share, tangible common equity as a percent of tangible assets and return on average tangible common equity are non-GAAP measures that eliminate the impact of goodwill and intangible assets on our financial position. Management believes these measures are useful in assessing the strength of our financial position.

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

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

    (CZWI-ER)

    CITIZENS COMMUNITY BANCORP, INC.
    Consolidated Balance Sheets
    (in thousands, except shares and per share data)

      March 31, 2023
    (unaudited)    		 December 31, 2022
    (audited)    		 March 31, 2022
    (unaudited)
    Assets      
    Cash and cash equivalents $65,050  $35,363  $84,364 
    Other interest bearing deposits  249   249   1,511 
    Securities available for sale “AFS”  173,423   165,991   187,905 
    Securities held to maturity “HTM”  95,301   96,379   104,894 
    Equity investments  2,151   1,794   1,291 
    Other investments  17,428   15,834   15,084 
    Loans receivable  1,420,955   1,411,784   1,290,176 
    Allowance for credit losses  (22,679)  (17,939)  (16,818)
    Loans receivable, net  1,398,276   1,393,845   1,273,358 
    Loans held for sale  761   —   2,528 
    Mortgage servicing rights, net  4,120   4,262   4,614 
    Office properties and equipment, net  20,197   20,493   21,393 
    Accrued interest receivable  5,550   5,285   4,179 
    Intangible assets  2,245   2,449   3,499 
    Goodwill  31,498   31,498   31,498 
    Foreclosed and repossessed assets, net  1,113   1,271   1,368 
    Bank owned life insurance (“BOLI”)  25,118   24,954   24,464 
    Other assets  18,240   16,719   13,519 
    TOTAL ASSETS $1,860,720  $1,816,386  $1,775,469 
    Liabilities and Stockholders’ Equity      
    Liabilities:      
    Deposits $1,436,793  $1,424,720  $1,428,223 
    Federal Home Loan Bank (“FHLB”) advances  182,530   142,530   85,530 
    Other borrowings  67,300   72,409   87,062 
    Other liabilities  9,536   9,639   9,160 
    Total liabilities  1,696,159   1,649,298   1,609,975 
    Stockholders’ equity:      
    Common stock— $0.01 par value, authorized 30,000,000; 10,482,821, 10,425,119 and 10,526,781 shares issued and outstanding, respectively  105   104   105 
    Additional paid-in capital  119,327   119,240   119,789 
    Retained earnings  61,720   65,400   52,562 
    Accumulated other comprehensive loss  (16,591)  (17,656)  (6,962)
    Total stockholders’ equity  164,561   167,088   165,494 
    TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $1,860,720  $1,816,386  $1,775,469 

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


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

      Three Months Ended
      March 31, 2023
    (unaudited)    		 December 31, 2022
    (unaudited)    		 March 31, 2022
    (unaudited)
    Interest and dividend income:      
    Interest and fees on loans $17,126  $17,042  $13,767 
    Interest on investments  2,547   2,317   1,609 
    Total interest and dividend income  19,673   19,359   15,376 
    Interest expense:      
    Interest on deposits  4,348   2,695   1,068 
    Interest on FHLB borrowed funds  1,493   1,127   311 
    Interest on other borrowed funds  1,037   1,059   830 
    Total interest expense  6,878   4,881   2,209 
    Net interest income before provision for credit losses  12,795   14,478   13,167 
    Provision for credit losses  50   700   — 
    Net interest income after provision for credit losses  12,745   13,778   13,167 
    Non-interest income:      
    Service charges on deposit accounts  485   513   488 
    Interchange income  551   583   549 
    Loan servicing income  569   527   701 
    Gain on sale of loans  298   144   722 
    Loan fees and service charges  80   179   92 
    Net gains (losses) on investment securities  56   708   (37)
    Other  253   219   198 
    Total non-interest income  2,292   2,873   2,713 
    Non-interest expense:      
    Compensation and related benefits  5,338   5,241   5,398 
    Occupancy  1,423   1,353   1,365 
    Data processing  1,460   1,355   1,301 
    Amortization of intangible assets  204   252   399 
    Mortgage servicing rights expense, net  158   157   (327)
    Advertising, marketing and public relations  136   255   212 
    FDIC premium assessment  201   118   115 
    Professional services  505   555   402 
    Gains on repossessed assets, net  (29)  (378)  (7)
    New market tax credit depletion  —   162   163 
    Other  725   1,266   647 
    Total non-interest expense  10,121   10,336   9,668 
    Income before provision for income taxes  4,916   6,315   6,212 
    Provision for income taxes  1,254   1,619   1,506 
    Net income attributable to common stockholders $3,662  $4,696  $4,706 
    Per share information:      
    Basic earnings $0.35  $0.45  $0.45 
    Diluted earnings $0.35  $0.45  $0.45 
    Cash dividends paid $0.29  $—  $0.26 
    Book value per share at end of period $15.70  $16.03  $15.72 
    Tangible book value per share at end of period (non-GAAP) $12.48  $12.77  $12.40 

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


    Reconciliation of GAAP Net Income and Net Income as Adjusted (non-GAAP)
    (in thousands, except per share data)

      Three Months Ended
      March 31, 2023 December 31, 2022 March 31, 2022
          
    GAAP pretax income $4,916 $6,315 $6,212
    Branch closure costs (1)  —  646  —
    Pretax income as adjusted (2)  4,916  6,961  6,212
    Provision for income tax on net income as adjusted (3)  1,254  1,785  1,506
    Net income as adjusted (non-GAAP) (2) $3,662 $5,176 $4,706
    GAAP diluted earnings per share, net of tax $0.35 $0.45 $0.45
    Branch closure costs, net of tax (4)  —  0.04  —
    Diluted earnings per share, as adjusted, net of tax (non-GAAP) $0.35 $0.49 $0.45
           
    Average diluted shares outstanding  10,477,610  10,460,025  10,541,306

    (1) Branch closure costs include severance pay recorded in compensation and benefits and accelerated depreciation expense included in other non-interest expense in the consolidated statement of operations.
    (2) Pretax income as adjusted and net income as adjusted is a non-GAAP measure that management believes enhances the market’s ability to assess the underlying business performance and trends related to core business activities.
    (3) Provision for income tax on net income as adjusted is calculated at our effective tax rate for each respective period presented.
    (4) Branch closure costs, net of tax is rounded to $0.04 to balance to diluted earnings per share, as adjusted, net of tax (non-GAAP).

    Loan Composition

    (in thousands)

      March 31, 2023 December 31, 2022 March 31, 2022
    Total Loans:      
    Commercial/Agricultural real estate:      
    Commercial real estate $726,748  $725,971  $689,774 
    Agricultural real estate  90,958   87,908   75,716 
    Multi-family real estate  207,786   208,908   179,487 
    Construction and land development  114,951   102,492   87,880 
    C&I/Agricultural operating:      
    Commercial and industrial  130,943   136,013   121,022 
    Agricultural operating  24,146   28,806   28,757 
    Residential mortgage:      
    Residential mortgage  110,379   105,389   84,773 
    Purchased HELOC loans  3,206   3,262   3,487 
    Consumer installment:      
    Originated indirect paper  9,314   10,236   14,508 
    Other consumer  6,728   7,150   8,191 
    Gross loans before SBA PPP loans $1,425,159  $1,416,135  $1,293,595 
    SBA PPP loans  —   —   2,071 
    Gross loans $1,425,159  $1,416,135  $1,295,666 
    Unearned net deferred fees and costs and loans in process  (2,689)  (2,585)  (2,223)
    Unamortized discount on acquired loans  (1,515)  (1,766)  (3,267)
    Total loans receivable $1,420,955  $1,411,784  $1,290,176 
                 


    Nonperforming Assets

    (in thousands, except ratios)

      March 31, 2023 (1) December 31, 2022 March 31, 2022
    Nonperforming assets:      
    Nonaccrual loans      
    Commercial real estate $5,514  $5,736  $5,503 
    Agricultural real estate  2,496   2,742   3,454 
    Construction and land development  —   —   129 
    Commercial and industrial (“C&I”)  452   552   284 
    Agricultural operating  794   890   1,064 
    Residential mortgage  1,131   1,253   1,334 
    Consumer installment  23   31   90 
    Total nonaccrual loans $10,410  $11,204  $11,858 
    Accruing loans past due 90 days or more  224   246   398 
    Total nonperforming loans (“NPLs”)  10,634   11,450   12,256 
    Foreclosed and repossessed assets, net  1,113   1,271   1,368 
    Total nonperforming assets (“NPAs”) $11,747  $12,721  $13,624 
    Loans, end of period $1,420,955  $1,411,784  $1,290,176 
    Total assets, end of period $1,860,720  $1,816,386  $1,775,469 
    Ratios:      
    NPLs to total loans  0.75%  0.81%  0.95%
    NPAs to total assets  0.63%  0.70%  0.77%

    (1) Loan balances are at amortized cost.


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

      Three Months Ended
    March 31, 2023    		 Three Months Ended
    December 31, 2022    		 Three Months Ended
    March 31, 2022
      Average
    Balance    		 Interest
    Income/
    Expense    		 Average
    Yield/
    Rate (1)    		 Average
    Balance    		 Interest
    Income/
    Expense    		 Average
    Yield/
    Rate (1)    		 Average
    Balance    		 Interest
    Income/
    Expense    		 Average
    Yield/
    Rate (1)
    Average interest earning assets:                  
    Cash and cash equivalents $18,270 $140 3.11% $8,134 $88 4.29% $35,208 $13 0.15%
    Loans receivable  1,412,409  17,126 4.92%  1,399,244  17,041 4.83%  1,304,141  13,767 4.28%
    Interest bearing deposits  249  1 1.63%  337  2 2.35%  1,511  8 2.15%
    Investment securities (1)  270,174  2,175 3.22%  264,064  1,990 3.01%  288,261  1,416 1.99%
    Other investments  16,663  231 5.62%  15,783  238 5.98%  15,258  172 4.57%
    Total interest earning assets (1) $1,717,765 $19,673 4.64% $1,687,562 $19,359 4.55% $1,644,379 $15,376 3.79%
    Average interest bearing liabilities:                  
    Savings accounts $216,169 $382 0.72% $226,082 $312 0.55% $233,642 $99 0.17%
    Demand deposits  391,635  1,432 1.48%  379,011  836 0.88%  410,890  213 0.21%
    Money market accounts  301,710  1,096 1.47%  316,791  710 0.89%  299,004  216 0.29%
    CD’s  255,567  1,438 2.28%  205,201  837 1.62%  189,185  540 1.16%
    Total deposits $1,165,081 $4,348 1.51% $1,127,085 $2,695 0.95% $1,132,721 $1,068 0.38%
    FHLB advances and other borrowings  232,166  2,530 4.42%  212,051  2,186 4.09%  166,118  1,141 2.79%
    Total interest bearing liabilities $1,397,247 $6,878 2.00% $1,339,136 $4,881 1.45% $1,298,839 $2,209 0.69%
    Net interest income   $12,795     $14,478     $13,167  
    Interest rate spread     2.64%     3.10%     3.10%
    Net interest margin (1)     3.02%     3.40%     3.25%
    Average interest earning assets to average interest bearing liabilities     1.23      1.26      1.27 

    (1) Fully taxable equivalent (FTE). The average yield on tax exempt securities is computed on a tax equivalent basis using a tax rate of 21% for the quarters ended March 31, 2023, December 31, 2022 and March 31, 2022. The FTE adjustment to net interest income included in the rate calculations totaled $0, $0 and $1 thousand for the three months ended March 31, 2023, December 31, 2022 and March 31, 2022, respectively.


    Key Financial Metric Ratios Based on a Net Income as Adjusted Basis:

      Three Months Ended
      March 31, 2023 December 31, 2022 March 31, 2022
    Ratios based on net income:      
    Return on average assets (annualized) 0.81% 1.03% 1.09%
    Return on average equity (annualized) 9.03% 11.32% 11.38%
    Return on average tangible common equity4 (annualized) 11.85% 14.85% 15.32%
    Efficiency ratio 66% 61% 58%
    Net interest margin with loan purchase accretion 3.02% 3.40% 3.25%
    Net interest margin without loan purchase accretion 2.99% 3.33% 3.17%
    Ratios based on net income as adjusted (non-GAAP)      
    Return on average assets as adjusted2 (annualized) 0.81% 1.14% 1.09%
    Return on average equity as adjusted3 (annualized) 9.03% 12.47% 11.38%
              

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

      Three Months Ended
      March 31, 2023 December 31, 2022 March 31, 2022
        
    GAAP earnings after income taxes $3,662  $4,696  $4,706 
    Net income as adjusted after income taxes (non-GAAP) (1) $3,662  $5,176  $4,706 
    Average assets $1,823,748  $1,803,155  $1,750,114 
    Return on average assets (annualized)  0.81%  1.03%  1.09%
    Return on average assets as adjusted (non-GAAP) (annualized)  0.81%  1.14%  1.09%

    (1) See Reconciliation of GAAP Net Income and Net Income as Adjusted (non-GAAP)


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

      Three Months Ended
      March 31, 2023 December 31, 2022 March 31, 2022
    GAAP earnings after income taxes $3,662  $4,696  $4,706 
    Net income as adjusted after income taxes (non-GAAP) (1) $3,662  $5,176  $4,706 
    Average equity $164,426  $164,621  $167,746 
    Return on average equity (annualized)  9.03%  11.32%  11.38%
    Return on average equity as adjusted (non-GAAP) (annualized)  9.03%  12.47%  11.38%

    (1) See Reconciliation of GAAP Net Income and Net Income as Adjusted (non-GAAP)


    Reconciliation of tangible book value per share (non-GAAP)
    (in thousands, except per share data)

    Tangible book value per share at end of period March 31, 2023 December 31, 2022 March 31, 2022
    Total stockholders’ equity $164,561  $167,088  $165,494 
    Less: Goodwill  (31,498)  (31,498)  (31,498)
    Less: Intangible assets  (2,245)  (2,449)  (3,499)
    Tangible common equity (non-GAAP) $130,818  $133,141  $130,497 
    Ending common shares outstanding  10,482,821   10,425,119   10,526,781 
    Book value per share $15.70  $16.03  $15.72 
    Tangible book value per share (non-GAAP) $12.48  $12.77  $12.40 
                 


    Reconciliation of tangible common equity as a percent of tangible assets (non-GAAP)
    (in thousands, except ratios)

    Tangible common equity as a percent of tangible assets at end of period  March 31, 2023 December 31, 2022 March 31, 2022
    Total stockholders’ equity $164,561  $167,088  $165,494 
    Less: Goodwill  (31,498)  (31,498)  (31,498)
    Less: Intangible assets  (2,245)  (2,449)  (3,499)
    Tangible common equity (non-GAAP) $130,818  $133,141  $130,497 
    Total Assets $1,860,720  $1,816,386  $1,775,469 
    Less: Goodwill  (31,498)  (31,498)  (31,498)
    Less: Intangible assets  (2,245)  (2,449)  (3,499)
    Tangible Assets (non-GAAP) $1,826,977  $1,782,439  $1,740,472 
    Total stockholders’ equity to total assets ratio  8.84%  9.20%  9.32%
    Tangible common equity as a percent of tangible assets (non-GAAP)  7.16%  7.47%  7.50%
                 


    Reconciliation of Return on Average Tangible Common Equity (non-GAAP)
    (in thousands, except ratios)

      Three Months Ended
      March 31, 2023 December 31, 2022 March 31, 2022
    Total stockholders’ equity $164,561  $167,088  $165,494 
    Less: Goodwill  (31,498)  (31,498)  (31,498)
    Less: Intangible assets  (2,245)  (2,449)  (3,499)
    Tangible common equity (non-GAAP) $130,818  $133,141  $130,497 
    Average tangible common equity (non-GAAP) $130,582  $130,577  $132,550 
    GAAP earnings after income taxes  3,662   4,696   4,706 
    Amortization of intangible assets, net of tax  152   190   302 
    Tangible net income $3,814  $4,886  $5,008 
    Return on average tangible common equity (annualized)  11.85%  14.85%  15.32%
                 


    Reconciliation of Efficiency Ratio
    (in thousands, except ratios)

     Three Months Ended
     March 31, 2023 December 31, 2022 March 31, 2022
    Non-interest expense (GAAP)$10,121  $10,336  $9,668 
    Less amortization of intangibles (204)  (252)  (399)
    Efficiency ratio numerator (GAAP)$9,917  $10,084  $9,269 
          
    Non-interest income$2,292  $2,873  $2,713 
    Loss (Gain) on investment securities (56)  (708)  37 
    Net interest margin 12,795   14,478   13,167 
    Efficiency ratio denominator (GAAP)$15,031  $16,643  $15,917 
    Efficiency ratio (GAAP) 66%  61%  58%

    1Net income as adjusted and net income as adjusted per share are non-GAAP financial measures that management believes enhances investors’ ability to better understand the underlying business performance and trends related to core business activities. For a detailed reconciliation of GAAP to non-GAAP results, see the accompanying financial table “Reconciliation of GAAP Net Income and Net Income as Adjusted (non-GAAP)”.

    2Return on average assets as adjusted is a non-GAAP measure that management believes enhances investors’ ability to better understand the underlying business performance and trends relative to average assets. For a detailed reconciliation of GAAP to non-GAAP results, see the accompanying financial table “Reconciliation of Return on Average Assets as Adjusted (non-GAAP)”.

    3Return on average equity as adjusted is a non-GAAP measure that management believes enhances investors’ ability to better understand the underlying business performance and trends relative to average equity. For a detailed reconciliation of GAAP to non-GAAP results, see the accompanying financial table “Reconciliation of Return on Average Equity as Adjusted (non-GAAP)”.

    4Tangible book value, tangible book value per share, tangible common equity as a percent of tangible assets and return on tangible common equity are non-GAAP measures that management believes enhances investors’ ability to better understand the Company’s financial position. For a detailed reconciliation of GAAP to non-GAAP results, see the accompanying financial table “Reconciliation of tangible book value per share (non-GAAP)”, “Reconciliation of tangible common equity as a percent of tangible assets (non-GAAP)”, and “Reconciliation of return on average tangible common equity)”.


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