GlobeNewswire Inc | Jul 23, 2021 04:30PM EDT

July 23, 2021

EMLENTON, Pa., July 23, 2021 (GLOBE NEWSWIRE) -- Emclaire Financial Corp (NASDAQ:EMCF), the parent holding company of The Farmers National Bank of Emlenton, reported consolidated net income available to common stockholders of $1.8million, or $0.67per diluted common share, for the three months ended June 30, 2021, an increase of $636,000, or 52.9%, from $1.2million, or $0.44per diluted common share, reported for the comparable period in 2020. Net income available to common shareholders for the six-month period ended June 30, 2021 was $4.0 million, or $1.46 per diluted common share, an increase of $1.6 million, or 67.7%, from $2.4 million, or $0.88 per diluted common share, for the same period in 2020. The increase in net income for both periods compared to the same periods in 2020resulted from an increasein net interest income and adecrease in the provision for loan losses, partially offset by a decrease in noninterest income and increases in noninterest expense and the provision for income taxes.

William C. Marsh, Chairman, President and Chief Executive Officer of the Corporation and the Bank, noted, As we emerge from thepandemic, the Bank continues to prove its strength and resiliencythrough solid earnings, strong credit quality and significant balance sheet growth. During the quarter, deposit volumesreached a record high and we saw consumer spending and loan demand increase toward pre-pandemic levels. We continued lendingunderthe Small Business Administration's Paycheck Protection Program (PPP) through which we provided an additional $26.7 million ofloans to 421local small businesses during the first half of2021. We remain focused on meeting our customers' needs and have fully reopened all branch banking offices and welcomed all employees back to the office. We are optimistic that the burdens of the pandemic are now behind us."

QUARTERLY OPERATING RESULTS OVERVIEW

Net income available to common stockholders increased $636,000, or 52.9%,to $1.8million, or $0.67per diluted common share, for the three months ended June 30, 2021, compared to net income of $1.2 million, or $0.44per diluted common shareforsame period in 2020. The increase resulted from a $296,000increasein net interest income and a$850,000 decrease in the provision for loan losses, partially offset by a $300,000 decrease in noninterest income and increases in noninterest expense and the provision for income taxes of$77,000 and $129,000, respectively.

Net interest income increased $296,000, or 4.3%, to $7.2million for the three months ended June 30, 2021from $6.9million for the same period in 2020. The increase in net interest income resulted from a decrease in interest expense of $765,000, or 35.4%, partially offset by a decrease in interest income of $469,000, or 5.2%. The Corporation's cost of funds decreased 41basis points to 0.57% for the three months ended June 30, 2021, compared to 0.98% for the same period in 2020, resulting in an $834,000 decrease in interest expense. The decrease in the cost of funds was partially offset by a $69,000 increase in interest expense caused by a $60.2million increase in average interest-bearing deposits to $722.3 million for the three months ended June 30, 2021, compared to $662.1 million for the same period in 2020.The decrease in interest income occurred primarily as the Corporation experienced a 41basis point decrease in the yield on loans to 3.87% for the three months ended June 30, 2021 from 4.28% for the same period in 2020, causing a $911,000 decrease in interest income.Without the PPP loans, the Corporation would have experienced a 3basis point decrease inthe yield on loans to 3.84% for the three months ended June 30, 2021. This decrease in yield was partially offset by a$12.4 million increase in the average balance of loans outstanding as a result of record loan production during 2020 and the addition of PPPloans in2020 and2021. This additional loan volume added $453,000 in interest income. During the three months ended June 30, 2021, the Corporation recognized $361,000 of interest income related to the PPP loans.

The provision for loan losses decreased $850,000, or 77.3%, to $250,000 for the three months ended June 30, 2021from $1.1 million for the same period in 2020.The higher provision for loan losses recorded during the second quarter of 2020 was due to growth in the residential and consumer loan portfolios, an increase in the specific pandemic qualitative allowance factor, risk rating changes for loans which were granted payment deferrals and an increase in criticized and classified loans. Criticized and classified loans increased $200,000during the quarter ended June 30, 2021to $43.0million, or 3.9%, of total assetsfrom $42.8 million, or 4.0%, of total assets at March 31, 2021.

Noninterest income decreased $300,000, or 21.8%, to $1.1million for the three months ended June 30, 2021from $1.4million for the same period in 2020due to a $553,000 decreasein gains on the sale of securities, partially offset by increases in other income, gains on the sale of loans and fees and service chargesof $104,000, $100,000and $47,000, respectively. During the quarter ended June 30, 2020, the Corporation sold a total of $31.2 million of low-yielding mortgage-backed and collateralized mortgage obligation securities and realized a net gain of $557,000. The sale proceeds were utilized to repay $15.0 million of Federal Home Loan Bank (FHLB) term advances and purchase higher yielding municipal securities. During the quarter ended June 30, 2021, the Corporation sold $5.3million of residential mortgage loans to the FHLB and realized a net gain of $100,000. The increase in other income was primarily related to an increase in interchange fee income and the increase in fees and service charges was primarily due to a increase in overdraft charges, both resulting fromeasing pandemic restrictions leading to an increase in consumer spending.

Noninterest expense increased $77,000, or 1.4%, to $5.7 million for the three months ended June 30, 2021from $5.6 million for the same period in 2020.The increase was primarily attributable to increases in compensation and benefits expense, professional fees andFDIC insurance expense, of $94,000, $82,000, and $50,000, respectively, partially offset by a decrease in other noninterest expense of $145,000. The decrease in other noninterest expense primarily related to prepayment penalties of $238,000 incurred during the quarter ended June 30, 2020 as a result of the aforementioned early repayment of FHLB debt.

The provision for income taxes increased $129,000, or 48.5%, to$395,000 for the three months ended June 30, 2021from $266,000 for the same period in 2020as a result of the increase in net income before provision for income taxes.

YEAR-TO-DATE OPERATING RESULTS OVERVIEW

Net income available to common stockholders increased $1.6 million, or 67.7%,to $4.0million, or $1.46per diluted common share, for the six months ended June 30, 2021, compared to net income of $2.4 million, or $0.88per diluted common shareforsame period in 2020. The increase resulted from a $1.3 million increasein net interest income and a$1.4 million decrease in the provision for loan losses, partially offset by a $273,000 decrease in noninterest income and increases in noninterest expense and the provision for income taxes of$399,000 and $329,000, respectively.

Net interest income increased $1.3 million, or 9.2%, to $14.9million for the six months ended June 30, 2021from $13.6million for the same period in 2020. The increase in net interest income resulted from a decrease in interest expense of $1.5 million, or 35.0%, partially offset by a decrease in interest income of $274,000, or 1.5%. The Corporation's cost of funds decreased 43basis points to 0.60% for the six months ended June 30, 2021, compared to 1.03% for the same period in 2020, resulting in a$1.7 million decrease in interest expense. The decrease in the cost of funds was partially offset by a $134,000 increase in interest expense caused by a $60.7million increase in average interest-bearing deposits to $708.2 million for the six months ended June 30, 2021, compared to$647.5 million for the same period in 2020.The decrease in interest income occurred as the Corporation experienced a 33basis point decrease in the yield on loans to 4.04% for the six months ended June 30, 2021, compared to 4.37% for the same period in 2020, causing a $1.6 million decrease in interest income. Without the PPP loans, the Corporation would have experienced a 13 basis point decrease inthe yield on loans to 3.91% for the six months ended June 30, 2021. This decrease in yield was partially offset by a $46.3million increase in the average balance of loans outstanding as a result of record loan production during 2020 and the addition of PPPloans in 2020 and 2021. During the six months ended June 30, 2021, the Corporation recognized $1.1 million of interest income related to the PPP loans.

The provision for loan losses decreased $1.4 million, or 72.3%, to $525,000 for the six months ended June 30, 2021from $1.9 million for the same period in 2020.The higher provision for loan losses recorded during the first six months of2020 was due to growth in the residential and consumer loan portfolios, the addition of a specific pandemic qualitative allowance factor, risk rating changes for loans which were granted payment deferrals and an increase in criticized and classified loans. Criticized and classified loans decreased $1.4 million during the six months ended June 30, 2021to $43.0million, or 3.9%, of total assetsfrom $44.4 million, or 4.3%, of total assets at December 31, 2020.

Noninterest income decreased $273,000, or 11.4%, to $2.1 million for the six months ended June 30, 2021, compared to $2.4 million for the same period in 2020due to decreases in gains on the sale of securities and fees and service charges of $606,000 and $78,000, respectively, partially offset by increases in other income andgains on the sale of loans of$206,000and $202,000, respectively. During the six months ended June 30, 2020, the Corporation sold a total of $39.4 million of low-yielding mortgage-backed and collateralized mortgage obligation securities and realized a net gain of $635,000. As aforementioned, the sale proceeds were utilized to repay FHLBterm advances and purchase higher yielding municipal securities. During the six months ended June 30, 2021, the Corporation sold $8.4 million of residential mortgage loans to the FHLB and realized a net gain of $202,000. The increase in other income was primarily related to an increase in interchange fee income resulting fromeasing pandemic restrictions leading to an increase in consumer spending.

Noninterest expense increased $399,000, or 3.6%, to $11.5million for the six months ended June 30, 2021, compared to $11.1million for the same period in 2020.The increase was primarily attributable to increases in compensation and benefits expense, professional fees,FDIC insurance expense and premises and equipment expenseof $203,000, $132,000, $105,000 and $64,000, respectively, partially offset by a decrease in other noninterest expense of $100,000. The decrease in other noninterest expense primarily related to prepayment penalties of $238,000 incurred during the six months ended June 30, 2020 as a result of the aforementioned early repayment of FHLB debt.

The provision for income taxes increased $329,000, or 64.8%, to$837,000 for the six months ended June 30, 2021from $508,000 for the same period in 2020as a result of the increase in net income before provision for income taxes.

CONSOLIDATED BALANCE SHEET & ASSET QUALITY OVERVIEW

Total assets increased $74.7 million, or 7.2%,to $1.1 billion at June 30, 2021from $1.0 billion at December 31, 2020. The increasein assetswas driven primarily by an increase in securities and cash and equivalents of $70.6 million and $13.1 million, respectively, partially offset by a $6.0 million decrease in net loans receivable. Liabilities increased $73.0 million, or 7.8%, to $1.0 billion at June 30, 2021from$940.8 million at December 31, 2020due to an increasein customer deposits of $65.7million.

Nonperforming assetsdecreased $985,000 to $3.5million, or 0.31% of total assets at June 30, 2021, compared to $4.4million, or 0.43% of total assets at December 31, 2020.Classified and criticized assets decreased $1.4million to $43.0 million or 3.9% of total assetsat June 30, 2021, compared to$44.4 million or 4.3% of total assets at December 31, 2020. Classified and criticized assets remain elevated largely due to the impact of COVID-19 on the hospitality loan portfolio. At June 30, 2021 the Corporation's hotel portfolio totaled $32.2 million, of which $30.1 million was rated classified or criticized.

The COVID-19 pandemic has impacted the global and local economies and some customers' ability to continue making timely loan payments. The Corporation addressed the challenges of those facing hardship due to the pandemic by granting payment deferrals on 402 loans, which totaled $108.1 million. At June 30, 2021, seven loan relationships comprised of15loans totaling $25.3million remained on deferral, all of which are associated with borrowers within the hospitality industry. The Corporation continues to carefully monitor these loans and the entire loan portfolio and is well-positioned to weather a potential weakening of asset quality that may occur related to current circumstances.

Stockholders equity increased $1.8 millionto $93.2million at June 30, 2021from $91.5 million at December 31, 2020primarily due to a $2.4 million increase in retained earnings as a result of $4.0million of net income available to common stockholders, less $1.6 million of common dividends paid, partially offset by an$852,000decrease in accumulated other comprehensive income. The Corporation remains well capitalized and is wellpositioned for continued growth with total stockholders equity at 8.4% of total assets. Book value per common share was $32.72at June 30, 2021, compared to $32.07at December 31, 2020.

This news release may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements may contain words such as believe, expect, anticipate, estimate, should, may, can, will, outlook, project, appears or similar expressions. Such forward-looking statements are subject to risk and uncertainties which could cause actual results to differ materially from those currently anticipated due to a number of factors. Such factors include, but are not limited to, changes in interest rates which could affect net interest margins and net interest income, the possibility that increased demand or prices for the Corporation's financial services and products may not occur, changing economic and competitive conditions, technological and regulatory developments, and other risks and uncertainties, including those detailed in the Corporation's filings with the Securities and Exchange Commission. The Corporation does not undertake, and specifically disclaims any obligation to update any forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of such statements.

INVESTOR RELATIONS CONTACT:William C. MarshChairman, President andChief Executive OfficerPhone: (844) 800-2193

EMCLAIRE FINANCIAL CORPConsolidated Financial Highlights(Unaudited - Dollar amounts in thousands, except share data) CONSOLIDATEDOPERATING RESULTS Three month period Six month period DATA: ended June 30, ended June 30, 2021 2020 2021 2020 Interest income $ 8,613 $ 9,082 $ 17,711 $ 17,985 Interest expense 1,395 2,160 2,841 4,373 Net interest 7,218 6,922 14,870 13,612 incomeProvision for 250 1,100 525 1,892 loan lossesNoninterest 1,078 1,378 2,130 2,403 incomeNoninterest 5,717 5,640 11,530 11,131 expenseIncome beforeprovision for 2,329 1,560 4,945 2,992 income taxesProvision for 395 266 837 508 income taxesNet income 1,934 1,294 4,108 2,484 Preferred stock 95 91 95 91 dividendsNet incomeavailable to $ 1,839 $ 1,203 $ 4,013 $ 2,393 commonstockholders Basic earnings $ 0.68 $ 0.44 $ 1.47 $ 0.88 per common shareDiluted earnings $ 0.67 $ 0.44 $ 1.46 $ 0.88 per common shareDividends per $ 0.30 $ 0.30 $ 0.60 $ 0.60 common share Return on average 0.72 % 0.53 % 0.79 % 0.52 %assets (1)Return on average 8.44 % 5.92 % 9.03 % 5.70 %equity (1)Return on average 8.41 % 5.78 % 9.25 % 5.77 %common equity (1)Yield on averageinterest-earning 3.41 % 3.96 % 3.62 % 4.07 %assetsCost of averageinterest-bearing 0.74 % 1.22 % 0.77 % 1.26 %liabilitiesCost of funds 0.57 % 0.98 % 0.60 % 1.03 %Net interest 2.86 % 3.03 % 3.05 % 3.08 %marginEfficiency ratio 68.02 % 71.91 % 67.05 % 71.42 %_______________________(1)Returns are annualized for the periods reported.

CONSOLIDATED BALANCE SHEET DATA: As of As of 6/30/2021 12/31/2020 Total assets $ 1,107,059 $ 1,032,323 Cash and equivalents 50,518 37,439 Securities 183,684 113,056 Loans, net 794,291 800,413 Intangible assets 20,465 20,543 Deposits 959,319 893,627 Borrowed funds 32,050 32,050 Common stockholders' equity 89,027 87,274 Stockholders' equity 93,233 91,480 Book value per common share $ 32.72 $ 32.07 Net loans to deposits 82.80 % 89.57 %Allowance for loan losses to total loans 1.22 % 1.18 %Nonperforming assets to total assets 0.31 % 0.43 %Stockholders' equity to total assets 8.42 % 8.86 %Shares of common stock outstanding 2,721,212 2,721,212