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Citizens Community Bancorp Inc. (CZWI) SEC Filing 8-K Material Event for the period ending Monday, January 23, 2023

Citizens Community Bancorp Inc.

HISTORY TOOLS
CIK: 1367859 Ticker: CZWI

EXHIBIT 99.1
bancorp_logoa34a.jpg
Citizens Community Bancorp, Inc. Reports Earnings of $0.45 Per Share in 4Q22
and $1.69 Per Share in 2022;
Net Loan Growth Up 2.6% From Prior Quarter;
Board of Directors Increase Annual Dividend 12% to $0.29 Per Share

EAU CLAIRE, WI, January 23, 2023 - 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 $4.7 million and earnings per diluted share of $0.45 for the quarter ended December 31, 2022, compared to $4.0 million and $0.38 per diluted share for the quarter ended September 30, 2022, and $6.1 million and $0.58 per diluted share for the quarter ended December 31, 2021, respectively. For the fiscal year ended December 31, 2022, earnings were $17.8 million, or $1.69 per diluted share, compared to earnings of $21.3 million, or $1.98 per diluted share for the prior year.
The Company’s fourth quarter 2022 operating results reflected the following changes from the third quarter of 2022: (1) higher non-interest income of $0.4 million due to increases in net gains on investment securities of $0.8 million due to the write-up on equity securities to estimated fair value, partially offset by lower fee income; (2) lower non-interest expense of $0.9 million primarily due to various compensation decreases and gains on sale of repossessed assets; and (3) higher loan loss provision due to loan growth.
“Our fourth quarter results reflect strong loan growth and improved operating efficiencies,” stated Stephen Bianchi, Chairman, President and Chief Executive Officer. “In anticipation of inflationary increases within vendor contracts and higher compensation expense, our team continued to identify expense savings including the closing of two branches during the fourth quarter and one branch during the prior quarter. Net loan growth of 2.6% compared to the linked quarter was solid, although we see annual loan growth moderating to low single digit percentage growth in 2023 and typically Q1 is challenging as winter persists. Higher interest rates also appear to be affecting new project feasibility, but we continue to see unemployment below national averages in our markets and customer attitudes are generally positive about the coming year.”
Book value per share was $16.03 at December 31, 2022, compared to $15.59 at September 30, 2022, and $16.27 at December 31, 2021. Tangible book value per share (non-GAAP)1 was $12.77 at December 31, 2022, compared to $12.32 at September 30, 2022, and $12.90 at December 31, 2021. For the quarter, tangible book value increased by net income and intangible amortization, partially offset by an increase in unrealized losses in the securities available for sale portfolio. These unrealized losses have negatively impacted both book and tangible book value in the second, third and fourth quarters, with the amount of the unrealized loss moderating in the third and fourth quarters of 2022. For the year, net income was mostly offset by the unrealized loss impact on book value resulting in tangible book value per share declining slightly at December 31, 2022 compared to one year earlier.



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December 31, 2022 Highlights: (as of or for the 3-month period ended December 31, 2022 compared to September 30, 2022 and December 31, 2021.)

•Quarterly earnings of $4.7 million, or $0.45 per diluted share for the quarter ended December 31, 2022, increased from the quarter ended September 30, 2022, earnings of $4.0 million or $0.38 per diluted share, and decreased from the quarter ended December 31, 2021, earnings of $6.1 million or $0.58 per diluted share.

•Quarterly earnings, as adjusted (non-GAAP)1, were $5.2 million, or $0.49 per diluted share for the quarter ended December 31, 2022, compared to $4.2 million or $0.40 per diluted share for the quarter ended September 30, 2022, and $6.1 million or $0.58 per diluted share for the fourth quarter ended December 31, 2021.

•Earnings for the year ended December 31, 2022, were $17.8 million, or $1.69 per share, which is a decrease from $21.3 million, or $1.98 per share, for the prior year. The Company grew net interest income, despite lower SBA PPP net loan fee accretion in 2022 compared to 2021. The positive benefit of higher net interest income was more than offset by higher provision for loan losses, lower gain on sale of loans and a modest increase in non-interest expense. The non-interest expense increase in 2022 reflected the new market tax credit depletion and branch closure expenses. Annual earnings as adjusted (non-GAAP)1 were $18.5 million, or $1.76 per diluted share for the year ended December 31, 2022, compared to $21.3 million, or $1.99 per diluted share for the year ended December 31, 2021.

•Net interest income was flat from the third quarter of 2022 at $14.5 million and increased $0.1 million from the fourth quarter of 2021 and $2.7 million for the year ended December 31, 2022, to $56.4 million. Net interest income was positively impacted by loan growth, the contractual increase in loan and investment yields and lower interest expense on debt due to the mid-August redemption of $15 million of 6.75% subordinated debt. Meanwhile, interest expense on deposits and FHLB borrowed funds increased due to repricing of deposits to higher rates and a larger balance of FHLB borrowings.

•The net interest margin without SBA PPP net loan fee accretion and loan purchase accretion was flat relative to the previous quarter, ending seven quarters of net interest margin expansion. For the quarter ended December 31, 2022, the net interest margin without SBA PPP net loan fee accretion and loan purchase accretion was 3.33% compared to 3.09% for the comparable quarter one year earlier.

•The provision for loan losses for the quarter ended December 31, 2022, was $0.70 million due to loan growth, compared to $0.38 million for the quarter ended September 30, 2022, and $1.48 million for the year ended December 31, 2022. No loan loss provision was realized during the quarter ended December 31, 2021, or the year ended December 31, 2021, due to lower CARES Act Section 4013 deferrals, low net charge-off or low net recoveries, decreases in criticized assets and improving economic conditions in our markets.

•The efficiency ratio improved to 61% for the quarter ended December 31, 2022, from 64% for the quarter September 30, 2022.

•Originated loans increased by $46.3 million during the fourth quarter of 2022, with strong originations in commercial real estate, multi-family real estate and residential mortgages held in the loan portfolio. As a result of current market conditions, residential 10/1 ARM loan originations were added to the portfolio. The acquired loan portfolio declined $10.5 million.

•Nonperforming assets were $12.7 million at December 31, 2022 compared to $12.6 million at September 30, 2022.

•Substandard loans decreased by $2.9 million to $17.3 million at December 31, 2022, compared to $20.2 million at September 30, 2022.

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•Special mention loans decreased $8.0 million during the quarter ended December 31, 2022.

•The Company repurchased 58 thousand shares of the Company’s common stock in the fourth quarter. As of December 31, 2022, approximately 243 thousand shares remain available for repurchase under the current share repurchase authorization.

•Stockholders’ equity as a percent of total assets was 9.20% at December 31, 2022, compared to 9.17% at September 30, 2022. Tangible common equity (“TCE”) as a percent of tangible assets (non-GAAP)1 was 7.47% at December 31, 2022, compared to 7.40% at September 30, 2022.

•
On January 19, 2023, the Board of Directors declared a $0.29 per share annual dividend, an increase of 12%, to shareholders of record as of February 3, 2023 and payable February 17, 2023.

•In December 2022, a new branch was opened in La Crosse, Wisconsin, bringing the branch count to 23. La Crosse is a market similar to Eau Claire and Mankato and the branch should enhance the efforts of the Company’s commercial bankers already working in that market.

Balance Sheet and Asset Quality
Total assets increased modestly by $36.2 million during the quarter to $1.82 billion at December 31, 2022, compared to $1.78 billion at September 30, 2022.
Securities available for sale decreased $1.8 million during the quarter ended December 31, 2022, to $166.0 million from $167.8 million at September 30, 2022. This decrease was primarily due to principal repayments and a modest reduction in the market value of the portfolio, partially offset by the purchase of bank holding company issued capital instruments of $2.8 million.
Securities held to maturity decreased $1.2 million to $96.4 million during the quarter ended December 31, 2022, from $97.6 million at September 30, 2022, due to principal repayments.
Total loans receivable increased to $1.412 billion at December 31, 2022, from $1.376 billion at September 30, 2022. The originated loan portfolio increased $46.3 million in the quarter. The growth was due to strong loan fundings and growth in the commercial, multi-family and residential real estate portfolios totaling $49.8 million.
The allowance for loan losses increased to $17.9 million at December 31, 2022, representing 1.27% of total loans receivable. At September 30, 2022, the allowance for loan losses was 1.25% of total loans receivable. For the quarter ended December 31, 2022, the Bank had net recoveries of $22 thousand.
Allowance for Loan Losses Percentages
(in thousands, except ratios)
December 31, 2022September 30, 2022June 30, 2022December 31, 2021
Loans, end of period$1,411,784 $1,375,876 $1,346,855 $1,310,963 
SBA PPP loans, net of deferred fees— — — (8,457)
Loans, net of SBA PPP loans and deferred fees$1,411,784 $1,375,876 $1,346,855 $1,302,506 
Allowance for loan losses$17,939 $17,217 $16,825 $16,913 
ALL as a percentage of loans, end of period1.27 %1.25 %1.25 %1.29 %

Nonperforming assets remained relatively flat at $12.7 million or 0.70% of total assets at December 31, 2022, compared to $12.6 million or 0.71% at September 30, 2022, as the sale of a closed branch office was offset by the addition of OREO properties associated with recently closed branch office buildings. Acquired nonaccrual loans
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decreased to $2.3 million at December 31, 2022, from $2.5 million at September 30, 2022. Originated nonperforming assets increased to $10.2 million or 0.56% of total assets for the most recent quarter.
(in thousands)
December 31, 2022September 30, 2022June 30, 2022March 31, 2022December 31, 2021
Special mention loan balances$12,170 $20,178 $17,274 $1,849 $4,536 
Substandard loan balances17,319 20,227 20,680 24,822 22,817 
Criticized loans, end of period$29,489 $40,405 $37,954 $26,671 $27,353 
Special mention loans decreased $8.0 million, largely due to principal repayments received.
Substandard loans decreased modestly by $2.9 million to $17.3 million at December 31, 2022, compared to $20.2 million at September 30, 2022. The decrease in the fourth quarter was largely due to the payoff of substandard loans.
Deposits decreased $9.6 million to $1.42 billion at December 31, 2022, from $1.43 billion at September 30, 2022. All deposit categories reflected lower balances except certificate of deposit (“CD”) accounts, which increased $36.2 million. The increase partially reflects the addition of $20 million of brokered CD’s. The remaining increase in CD’s was partially due to customers moving savings balances to CD accounts. Commercial deposits fell in the quarter as commercial customers decreased their cash balances to support the needs of their businesses.
The Company repurchased 58 thousand shares of the Company’s common stock in the fourth quarter. As of December 31, 2022, approximately 243 thousand shares remain available for repurchase under the current share repurchase authorization.

Review of Operations
Net interest income remained flat at $14.5 million for the fourth quarter ended December 31, 2022, relative to the quarter ended September 30, 2022, and increased slightly from $14.4 million for the quarter ended December 31, 2021, which included $1.3 million of SBA PPP net loan fee accretion. “Our interest rate risk profile remains neutral with repricing asset yields largely offsetting repricing borrowings and deposits. We expect to see a modest reduction in the net interest margin in the first quarter of 2023, due to end of period CD interest rates at December 31, 2022 exceeding average fourth quarter 2022 CD interest rates by 39 basis points. At December 31, 2022, our 13% on-balance sheet liquidity ratio, along with our almost $260 million FHLB borrowing availability was more than sufficient to offset future funding needs,” said Jim Broucek, Executive Vice President and Chief Financial Officer.

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The table below shows the impact of accretion related to purchased credit impaired loans and SBA PPP net loan fees on interest income and NIM.

Net interest income and net interest margin analysis:
(in thousands, except yields and rates)
Three months ended
December 31, 2022September 30, 2022June 30, 2022March 31, 2022December 31, 2021
Net Interest IncomeNet Interest MarginNet Interest IncomeNet Interest MarginNet Interest IncomeNet Interest MarginNet Interest IncomeNet Interest MarginNet Interest IncomeNet Interest Margin
As reported$14,478 3.40 %$14,457 3.43 %$14,267 3.46 %$13,167 3.25 %$14,384 3.50 %
Less non-accretable difference realized as interest from payoff of purchased credit impaired (“PCI”) loans$(109)(0.02)%$(34)(0.01)%$(70)(0.02)%$(26)(0.01)%$(2)— %
Less accelerated accretion from payoff of certain PCI loans with transferred non-accretable differences$(32)(0.01)%$(117)(0.06)%$(308)(0.08)%$(11)— %$(200)(0.05)%
Less scheduled accretion interest$(169)(0.04)%$(247)(0.03)%$(255)(0.06)%$(264)(0.07)%$(264)(0.06)%
Without loan purchase accretion$14,168 3.33 %$14,059 3.33 %$13,634 3.30 %$12,866 3.17 %$13,918 3.39 %
Less SBA PPP net loan fee accretion$— — %$— — %$(39)(0.01)%$(259)(0.06)%$(1,251)(0.30)%
Without SBA PPP net loan fee accretion and loan purchase accretion$14,168 3.33 %$14,059 3.33 %$13,595 3.29 %$12,607 3.11 %$12,667 3.09 %
Loan loss provisions for the quarter ended December 31, 2022, were $0.7 million largely reflecting the expanding loan portfolio. Loan loss provisions for the quarters ended September 30, 2022, and June 30, 2022, were $0.4 million, with both quarters helped by reductions in specific reserves due to payoffs on the underlying loans. There were no loan loss provisions for the quarters ended March 31, 2022 or December 31, 2021.
Non-interest income increased to $2.9 million in the quarter ended December 31, 2022, compared to $2.5 million in the quarter ended September 30, 2022, and decreased from $4.4 million in the quarter ended December 31, 2021. The increase in the fourth quarter of 2022, compared to the third quarter of 2022, was largely due to gains on investment securities partially offset by slightly lower service charges on deposit accounts, loan servicing income and loan fees, and service charge income. 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 $0.9 million in the fourth quarter of 2022 to $10.3 million, compared to $11.3 million for the quarter ended September 30, 2022, and $10.5 million for the quarter ended December 31, 2021. The decrease from the third quarter of 2022 was due to: (1) (a) a decrease in compensation of $0.7 million due to a lower incentive compensation related to the third quarter catch-up accruals of $0.2 million, (b) lower compensation paid due to a lower head count of $0.2 million and (c) some one-time seasonal factors of $0.3 million; (2) a reduction in the amortization of core deposit intangible assets of $0.2 million; and (3) gains on sale of repossessed assets of $0.4 million due to the sale of a closed branch office. Partially offsetting these decreases were increases in other non-interest expense of $0.3 million, due to higher branch closure costs primarily associated with reductions in value of the two closed branches in the quarter of $0.6 million.
Provision for income taxes increased to $1.6 million in the fourth quarter of 2022 from $1.3 million in the third quarter of 2022. The provision for income taxes decreased to $5.8 million for fiscal year 2022 from $7.7 million for fiscal year 2021. The decrease in fiscal year 2022 is due to lower pre-tax income and a lower tax rate due to the impact of the new market tax credit purchased in the first quarter of 2022. The tax credits are expected to be realized over the next seven years. The effective tax rate was 25.6% in the fourth quarter of 2022, compared to 24.3% the previous quarter and
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26.7% for the comparable prior year quarter. The effective tax rate for 2022 was 24.7% compared to 26.6% for the prior year.
These financial results are preliminary until the Form 10-K is filed in March 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 loan 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, 2021, filed with the Securities and Exchange Commission (“SEC”) on March 2, 2022 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
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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)

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CITIZENS COMMUNITY BANCORP, INC.
Consolidated Balance Sheets
(in thousands, except shares and per share data)
December 31, 2022 (unaudited)September 30, 2022 (unaudited)December 31, 2021 (audited)
Assets
Cash and cash equivalents$35,363 $29,411 $47,691 
Other interest bearing deposits249 368 1,511 
Securities available for sale “AFS”165,991 167,764 203,068 
Securities held to maturity “HTM”96,379 97,610 71,141 
Equity investments1,794 1,461 1,328 
Other investments15,834 15,907 15,305 
Loans receivable1,411,784 1,375,876 1,310,963 
Allowance for loan losses(17,939)(17,217)(16,913)
Loans receivable, net1,393,845 1,358,659 1,294,050 
Loans held for sale— 666 6,670 
Mortgage servicing rights, net4,262 4,371 4,161 
Office properties and equipment, net20,493 21,427 21,169 
Accrued interest receivable5,285 4,716 3,916 
Intangible assets2,449 2,701 3,898 
Goodwill31,498 31,498 31,498 
Foreclosed and repossessed assets, net1,271 1,584 1,408 
Bank owned life insurance (“BOLI”)24,954 24,784 24,312 
Other assets16,719 17,275 8,502 
TOTAL ASSETS$1,816,386 $1,780,202 $1,739,628 
Liabilities and Stockholders’ Equity
Liabilities:
Deposits$1,424,720 $1,434,368 $1,387,535 
Federal Home Loan Bank (“FHLB”) advances142,530 102,530 111,527 
Other borrowings72,409 72,351 58,426 
Other liabilities9,639 7,634 11,274 
Total liabilities1,649,298 1,616,883 1,568,762 
Stockholders’ equity:
Common stock— $0.01 par value, authorized 30,000,000; 10,425,119, 10,478,210 and 10,502,442 shares issued and outstanding, respectively104 105 105 
Additional paid-in capital119,240 119,638 119,925 
Retained earnings65,400 60,833 50,675 
Accumulated other comprehensive (loss) income (17,656)(17,257)161 
Total stockholders’ equity167,088 163,319 170,866 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY$1,816,386 $1,780,202 $1,739,628 
        Note: Certain items previously reported were reclassified for consistency with the current presentation.
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CITIZENS COMMUNITY BANCORP, INC.
Consolidated Statements of Operations
(in thousands, except per share data)
 Three Months EndedTwelve Months Ended
December 31, 2022 (unaudited)September 30, 2022 (unaudited)December 31, 2021 (unaudited)December 31, 2022 (unaudited)December 31, 2021 (audited)
Interest and dividend income: 
Interest and fees on loans$17,042 $15,937 $15,158 $61,639 $58,172 
Interest on investments2,317 2,022 1,604 7,758 5,863 
Total interest and dividend income19,359 17,959 16,762 69,397 64,035 
Interest expense:
Interest on deposits2,695 1,681 1,261 6,429 5,850 
Interest on FHLB borrowed funds1,127 568 388 2,303 1,572 
Interest on other borrowed funds1,059 1,253 729 4,296 2,946 
Total interest expense4,881 3,502 2,378 13,028 10,368 
Net interest income before provision for loan losses14,478 14,457 14,384 56,369 53,667 
Provision for loan losses700 375 — 1,475 — 
Net interest income after provision for loan losses13,778 14,082 14,384 54,894 53,667 
Non-interest income:
Service charges on deposit accounts513 535 470 2,018 1,726 
Interchange income583 597 577 2,343 2,354 
Loan servicing income527 611 762 2,439 3,322 
Gain on sale of loans144 194 1,268 1,474 5,399 
Loan fees and service charges179 267 158 679 705 
Net gains (losses) on investment securities708 (55)879 541 1,224 
Other219 323 293 936 1,094 
Total non-interest income2,873 2,472 4,407 10,430 15,824 
Non-interest expense:
Compensation and related benefits5,241 5,900 5,987 22,128 22,723 
Occupancy1,353 1,429 1,384 5,490 5,327 
Data processing1,355 1,382 1,186 5,453 5,560 
Amortization of intangible assets252 399 399 1,449 1,596 
Mortgage servicing rights expense, net157 197 163 222 191 
Advertising, marketing and public relations255 300 409 1,017 986 
FDIC premium assessment118 119 156 470 551 
Professional services555 382 350 1,707 1,542 
Gains on repossessed assets, net(378)(8)(50)(395)(199)
New market tax credit depletion162 163 — 650 — 
Other1,266 1,014 541 3,552 2,255 
Total non-interest expense10,336 11,277 10,525 41,743 40,532 
Income before provision for income taxes6,315 5,277 8,266 23,581 28,959 
Provision for income taxes1,619 1,284 2,209 5,820 7,693 
Net income attributable to common stockholders$4,696 $3,993 $6,057 $17,761 $21,266 
Per share information:
Basic earnings $0.45 $0.38 $0.58 $1.69 $1.98 
Diluted earnings$0.45 $0.38 $0.58 $1.69 $1.98 
Cash dividends paid$— $— $— $0.26 $0.23 
Book value per share at end of period$16.03 $15.59 $16.27 $16.03 $16.27 
Tangible book value per share at end of period (non-GAAP)$12.77 $12.32 $12.90 $12.77 $12.90 
Note: Certain items previously reported were reclassified for consistency with the current presentation.
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Reconciliation of GAAP Net Income and Net Income as Adjusted (non-GAAP)
(in thousands, except per share data)

 Three Months EndedTwelve Months Ended
December 31, 2022September 30, 2022December 31, 2021December 31, 2022December 31, 2021
GAAP pretax income$6,315 $5,277 $8,266 $23,581 $28,959 
Branch closure costs (1)646 302 — 981 — 
FHLB borrowings prepayment fee (2)— — — — 102 
Pretax income as adjusted (3)6,961 5,579 8,266 24,562 29,061 
Provision for income tax on net income as adjusted (4)1,785 1,357 2,209 6,062 7,722 
Net income as adjusted (non-GAAP) (3)$5,176 $4,222 $6,057 $18,500 $21,339 
GAAP diluted earnings per share, net of tax$0.45 $0.38 $0.58 $1.69 $1.98 
Branch closure costs, net of tax (5)0.04 0.02 — 0.07 — 
FHLB borrowings prepayment fee— — — — 0.01 
Diluted earnings per share, as adjusted, net of tax (non-GAAP)$0.49 $0.40 $0.58 $1.76 $1.99 
Average diluted shares outstanding10,460,025 10,519,079 10,516,130 10,513,773 10,726,539 

(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) FHLB borrowings prepayment fee resulted from the early termination of $8 million in FHLB borrowings at a weighted average rate of 2.19% and weighted average maturity of 8.75 months included in other non-interest expense in the consolidated statement of operations.
(3) 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.
(4) Provision for income tax on net income as adjusted is calculated at our effective tax rate for each respective period presented.
(5) 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).



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Loan Composition (in thousands)December 31, 2022September 30, 2022June 30, 2022December 31, 2021
Originated Loans:
Commercial/Agricultural real estate:
Commercial real estate$640,816 $610,348 $596,001 $578,395 
Agricultural real estate69,431 62,302 57,323 52,372 
Multi-family real estate205,601 193,758 175,964 174,050 
Construction and land development101,681 116,147 114,017 78,613 
C&I/Agricultural operating:
Commercial and industrial127,115 124,350 124,113 107,937 
Agricultural operating23,124 20,847 20,287 26,202 
Residential mortgage:
Residential mortgage84,783 77,307 65,707 63,855 
Purchased HELOC loans3,262 3,357 3,419 3,871 
Consumer installment:
Originated indirect paper10,236 11,234 12,736 15,971 
Other consumer6,894 7,016 7,472 8,473 
Originated loans before SBA PPP loans1,272,943 1,226,666 1,177,039 1,109,739 
SBA PPP loans— — — 8,755 
Total originated loans$1,272,943 $1,226,666 $1,177,039 $1,118,494 
Acquired Loans:
Commercial/Agricultural real estate:
Commercial real estate$85,155 $91,340 $106,916 $120,070 
Agricultural real estate18,477 19,405 20,484 26,123 
Multi-family real estate3,307 3,914 3,965 4,299 
Construction and land development811 1,703 1,171 907 
C&I/Agricultural operating:
Commercial and industrial8,898 10,465 14,889 14,230 
Agricultural operating5,682 5,186 4,182 5,386 
Residential mortgage:
Residential mortgage20,606 21,426 22,868 27,135 
Consumer installment:
Other consumer256 294 313 401 
Total acquired loans$143,192 $153,733 $174,788 $198,551 
Total Loans:
Commercial/Agricultural real estate:
Commercial real estate$725,971 $701,688 $702,917 $698,465 
Agricultural real estate87,908 81,707 77,807 78,495 
Multi-family real estate208,908 197,672 179,929 178,349 
Construction and land development102,492 117,850 115,188 79,520 
C&I/Agricultural operating:
Commercial and industrial136,013 134,815 139,002 122,167 
Agricultural operating28,806 26,033 24,469 31,588 
Residential mortgage:
Residential mortgage105,389 98,733 88,575 90,990 
Purchased HELOC loans3,262 3,357 3,419 3,871 
Consumer installment:
Originated indirect paper10,236 11,234 12,736 15,971 
Other consumer7,150 7,310 7,785 8,874 
Gross loans before SBA PPP loans$1,416,135 $1,380,399 $1,351,827 $1,308,290 
SBA PPP loans— — — 8,755 
Gross loans$1,416,135 $1,380,399 $1,351,827 $1,317,045 
Unearned net deferred fees and costs and loans in process(2,585)(2,447)(2,338)(2,482)
Unamortized discount on acquired loans(1,766)(2,076)(2,634)(3,600)
Total loans receivable$1,411,784 $1,375,876 $1,346,855 $1,310,963 


11



Nonperforming Originated and Acquired Assets
(in thousands, except ratios)
December 31, 2022September 30, 2022June 30, 2022December 31, 2021
Nonperforming assets:
Originated nonperforming assets:
Nonaccrual loans$8,947 $8,294 $7,770 $6,448 
Accruing loans past due 90 days or more213 169 700 63 
Total originated nonperforming loans (“NPL”)9,160 8,463 8,470 6,511 
Other real estate owned (“OREO”)1,041 — — — 
Other collateral owned6 — 10 2 
Total originated nonperforming assets (“NPAs”)$10,207 $8,463 $8,480 $6,513 
Acquired nonperforming assets:
Nonaccrual loans$2,257 $2,478 $2,664 $5,217 
Accruing loans past due 90 days or more33 79 14 97 
Total acquired nonperforming loans (“NPL”)2,290 2,557 2,678 5,314 
Other real estate owned (“OREO”)224 1,584 1,427 1,406 
Other collateral owned— — — — 
Total acquired nonperforming assets (“NPAs”)$2,514 $4,141 $4,105 $6,720 
Total nonperforming assets (“NPAs”)$12,721 $12,604 $12,585 $13,233 
Loans, end of period$1,411,784 $1,375,876 $1,346,855 $1,310,963 
Total assets, end of period$1,816,386 $1,780,202 $1,763,607 $1,739,628 
Ratios:
Originated NPLs to total loans0.65 %0.61 %0.63 %0.50 %
Acquired NPLs to total loans0.16 %0.19 %0.20 %0.41 %
Originated NPAs to total assets0.56 %0.48 %0.48 %0.37 %
Acquired NPAs to total assets0.14 %0.23 %0.23 %0.39 %































12



Nonperforming Assets
(in thousand, except ratios)
December 31, 2022September 30, 2022June 30, 2022December 31, 2021
Nonperforming assets:
Nonaccrual loans
Commercial real estate$5,736 $5,848 $5,275 $5,374 
Agricultural real estate2,742 2,729 3,169 3,490 
Construction and land development— 43 43 — 
Commercial and industrial (“C&I”)552 188 211 298 
Agricultural operating890 668 555 993 
Residential mortgage1,253 1,246 1,122 1,433 
Consumer installment31 50 59 77 
Total nonaccrual loans$11,204 $10,772 $10,434 $11,665 
Accruing loans past due 90 days or more246 248 714 160 
Total nonperforming loans (“NPLs”)11,450 11,020 11,148 11,825 
Foreclosed and repossessed assets, net1,271 1,584 1,437 1,408 
Total nonperforming assets (“NPAs”)$12,721 $12,604 $12,585 $13,233 
Troubled Debt Restructurings (“TDRs”)$7,788 $9,336 $8,712 $12,523 
Nonaccrual TDRs$2,617 $2,426 $2,549 $4,539 
Loans, end of period$1,411,784 $1,375,876 $1,346,855 $1,310,963 
Total assets, end of period$1,816,386 $1,780,202 $1,763,607 $1,739,628 
Ratios:
NPLs to total loans0.81 %0.80 %0.83 %0.90 %
NPAs to total assets0.70 %0.71 %0.71 %0.76 %


Deposit Composition
(in thousands)
December 31, 2022September 30, 2022June 30, 2022December 31, 2021
Non-interest bearing demand deposits$284,722 $285,670 $276,815 $276,631 
Interest bearing demand deposits371,210 394,924 401,857 396,231 
Savings accounts220,019 236,107 239,322 222,674 
Money market accounts323,435 328,544 328,718 288,985 
Certificate accounts225,334 189,123 153,498 203,014 
Total deposits$1,424,720 $1,434,368 $1,400,210 $1,387,535 















13




Average Balances, Interest Yields and Rates
(in thousands, except yields and rates)
 Three Months Ended
December 31, 2022		Three Months Ended
September 30, 2022		Three Months Ended
December 31, 2021
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$8,134 $88 4.29 %$11,043 $60 2.16 %$45,758 $15 0.13 %
Loans receivable1,399,244 17,041 4.83 %1,370,897 15,937 4.61 %1,271,956 15,158 4.73 %
Interest bearing deposits337 2 2.35 %1,079 7 2.57 %1,512 8 2.10 %
Investment securities (1)264,064 1,990 3.01 %274,868 1,768 2.57 %296,444 1,404 1.88 %
Other investments15,783 238 5.98 %14,910 187 4.98 %15,081 177 4.66 %
Total interest earning assets (1)$1,687,562 $19,359 4.55 %$1,672,797 $17,959 4.26 %$1,630,751 $16,762 4.08 %
Average interest bearing liabilities:
Savings accounts$217,537 $307 0.56 %$227,985 $204 0.36 %$217,460 $92 0.17 %
Demand deposits379,011 836 0.88 %413,033 575 0.55 %384,477 259 0.27 %
Money market accounts316,791 710 0.89 %331,469 519 0.62 %288,683 207 0.28 %
CD’s180,146 773 1.70 %136,624 335 0.97 %183,137 607 1.31 %
IRA’s33,600 69 0.81 %34,446 48 0.55 %38,453 96 0.99 %
Total deposits$1,127,085 $2,695 0.95 %$1,143,557 $1,681 0.58 %$1,112,210 $1,261 0.45 %
FHLB advances and other borrowings212,051 2,186 4.09 %192,338 1,821 3.76 %170,475 1,117 2.60 %
Total interest bearing liabilities$1,339,136 $4,881 1.45 %$1,335,895 $3,502 1.04 %$1,282,685 $2,378 0.74 %
Net interest income$14,478 $14,457 $14,384 
Interest rate spread3.10 %3.22 %3.34 %
Net interest margin (1)3.40 %3.43 %3.50 %
Average interest earning assets to average interest bearing liabilities1.26 1.25 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 December 31, 2022, September 30, 2022 and December 31, 2021. The FTE adjustment to net interest income included in the rate calculations totaled $0, $0 and $0 thousand for the three months ended December 31, 2022, September 30, 2022 and December 31, 2021, respectively.
 

14



 Twelve Months Ended
 December 31, 2022		Twelve Months Ended
 December 31, 2021
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$19,796 $203 1.03 %$99,839 $122 0.12 %
Loans receivable1,351,052 61,639 4.56 %1,216,244 58,172 4.78 %
Interest bearing deposits1,106 24 2.17 %2,047 45 2.20 %
Investment securities (1)278,056 6,767 2.43 %271,715 5,009 1.84 %
Other investments15,230 764 5.02 %15,025 687 4.57 %
Total interest earning assets (1)$1,665,240 $69,397 4.17 %$1,604,870 $64,035 3.99 %
Average interest bearing liabilities:
Savings accounts$225,204 $730 0.32 %$212,867 $369 0.17 %
Demand deposits403,289 1,881 0.47 %367,103 1,047 0.29 %
Money market accounts317,879 1,721 0.54 %269,620 783 0.29 %
CD’s153,085 1,853 1.21 %224,708 3,200 1.42 %
IRA’s35,192 244 0.69 %39,699 451 1.14 %
Total deposits$1,134,649 $6,429 0.57 %$1,113,997 $5,850 0.53 %
FHLB advances and other borrowings189,274 6,599 3.49 %173,029 4,518 2.61 %
Total interest bearing liabilities$1,323,923 $13,028 0.98 %$1,287,026 $10,368 0.81 %
Net interest income$56,369 $53,667 
Interest rate spread3.19 %3.18 %
Net interest margin (1)3.39 %3.34 %
Average interest earning assets to average interest bearing liabilities1.26 1.25 
(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 twelve months ended December 31, 2022 and December 31, 2021. The FTE adjustment to net interest income included in the rate calculations totaled $1 and $3 thousand for the twelve months ended December 31, 2022 and December 31, 2021, respectively.













15



The following table reports key financial metric ratios based on a net income as adjusted basis:
 Three Months EndedTwelve Months Ended
December 31, 2022September 30, 2022December 31, 2021December 31, 2022December 31, 2021
Ratios based on net income:
Return on average assets (annualized)1.03 %0.89 %1.37 %1.00 %1.23 %
Return on average equity (annualized)11.32 %9.57 %14.29 %10.70 %12.97 %
Return on average tangible common equity4 (annualized)
14.85 %12.99 %19.00 %14.36 %17.56 %
Efficiency ratio61 %64 %57 %61 %57 %
Net interest margin with loan purchase accretion3.40 %3.43 %3.50 %3.39 %3.34 %
Net interest margin without loan purchase accretion3.33 %3.33 %3.39 %3.29 %3.25 %
Ratios based on net income as adjusted (non-GAAP)
Return on average assets as adjusted2 (annualized)
1.14 %0.94 %1.37 %1.04 %1.24 %
Return on average equity as adjusted3 (annualized)
12.47 %10.12 %14.29 %11.15 %13.01 %

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

 Three Months EndedTwelve Months Ended
December 31, 2022September 30, 2022December 31, 2021December 31, 2022December 31, 2021
GAAP earnings after income taxes$4,696 $3,993 $6,057 $17,761 $21,266 
Net income as adjusted after income taxes (non-GAAP) (1)$5,176 $4,222 $6,057 $18,500 $21,339 
Average assets$1,803,155 $1,780,942 $1,751,609 $1,775,049 $1,722,483 
Return on average assets (annualized)1.03 %0.89 %1.37 %1.00 %1.23 %
Return on average assets as adjusted (non-GAAP) (annualized) 1.14 %0.94 %1.37 %1.04 %1.24 %
(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 EndedTwelve Months Ended
December 31, 2022September 30, 2022December 31, 2021December 31, 2022December 31, 2021
GAAP earnings after income taxes$4,696 $3,993 $6,057 $17,761 $21,266 
Net income as adjusted after income taxes (non-GAAP) (1)$5,176 $4,222 $6,057 $18,500 $21,339 
Average equity$164,621 $165,528 $168,165 $165,921 $163,987 
Return on average equity (annualized)11.32 %9.57 %14.29 %10.70 %12.97 %
Return on average equity as adjusted (non-GAAP) (annualized) 12.47 %10.12 %14.29 %11.15 %13.01 %
(1) See Reconciliation of GAAP Net Income and Net Income as Adjusted (non-GAAP)





16



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

Tangible book value per share at end of periodDecember 31, 2022September 30, 2022December 31, 2021
Total stockholders’ equity$167,088 $163,319 $170,866 
Less: Goodwill(31,498)(31,498)(31,498)
Less: Intangible assets(2,449)(2,701)(3,898)
Tangible common equity (non-GAAP)$133,141 $129,120 $135,470 
Ending common shares outstanding10,425,119 10,478,210 10,502,442 
Book value per share$16.03 $15.59 $16.27 
Tangible book value per share (non-GAAP)$12.77 $12.32 $12.90 


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 December 31, 2022September 30, 2022December 31, 2021
Total stockholders’ equity$167,088 $163,319 $170,866 
Less: Goodwill(31,498)(31,498)(31,498)
Less: Intangible assets(2,449)(2,701)(3,898)
Tangible common equity (non-GAAP)$133,141 $129,120 $135,470 
Total Assets$1,816,386 $1,780,202 $1,739,628 
Less: Goodwill(31,498)(31,498)(31,498)
Less: Intangible assets(2,449)(2,701)(3,898)
Tangible Assets (non-GAAP)$1,782,439 $1,746,003 $1,704,232 
Total stockholders’ equity to total assets ratio9.20 %9.17 %9.82 %
Tangible common equity as a percent of tangible assets (non-GAAP)7.47 %7.40 %7.95 %


Reconciliation of Return on Average Tangible Common Equity (non-GAAP)
(in thousands, except ratios)
Three Months EndedTwelve Months Ended
December 31, 2022September 30, 2022December 31, 2021December 31, 2022December 31, 2021
Total stockholders’ equity$167,088 $163,319 $170,866 $167,088 $170,866 
Less: Goodwill(31,498)(31,498)(31,498)(31,498)(31,498)
Less: Intangible assets(2,449)(2,701)(3,898)(2,449)(3,898)
Tangible common equity (non-GAAP)$133,141 $129,120 $135,470 $133,141 $135,470 
Average tangible common equity (non-GAAP)$130,577 $131,130 $132,569 $131,305 $127,793 
GAAP earnings after income taxes$4,696 $3,993 $6,057 $17,761 $21,266 
Amortization of intangible assets, net of tax190 302 292 1,095 1,171 
Tangible net income$4,886 $4,295 $6,349 $18,856 $22,437 
Return on average tangible common equity (annualized)14.85 %12.99 %19.00 %14.36 %17.56 %





17



Reconciliation of Efficiency Ratio
(in thousands, except ratios)
 Three Months EndedTwelve Months Ended
December 31, 2022September 30, 2022December 31, 2021December 31, 2022December 31, 2021
Non-interest expense (GAAP)$10,336 $11,277 $10,525 $41,743 $40,532 
Less amortization of intangibles(252)(399)(399)(1,449)(1,596)
Efficiency ratio numerator (GAAP) $10,084 $10,878 $10,126 $40,294 $38,936 
Non-interest income$2,873 $2,472 $4,407 $10,430 $15,824 
Loss (Gain) on investment securities(708)55 (879)(541)(1,224)
Net interest margin14,478 14,457