GlobeNewswire Inc | Jul 26, 2021 04:30PM EDT

July 26, 2021

EAU CLAIRE, Wis., July 26, 2021 (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 $4.7 million or $0.44 per diluted share for the quarter ended June 30, 2021 compared to $5.5 million, or $0.50 per diluted share for the quarter ended March 31, 2021, and $3.1 million, or $0.28 per diluted share for the quarter ended June 30, 2020. Net income as adjusted (non-GAAP)1 was also $4.7 million or $0.44 per diluted share for the second quarter of 2021 as there were no adjustments to any income or expense items during the quarter, compared to net income as adjusted of $5.6 million, or $0.51 per diluted share for the preceding quarter and $2.8 million or $0.25 per diluted share for the second quarter a year ago. For the first six months of 2021, earnings increased 80% to a record $10.2 million, or $0.94 per diluted share compared to earnings of $5.7 million or $0.51 per share, for the first six months of 2020. On July 23, 2021, the Board of Directors approved a new 5% stock repurchase plan as described below.

The Companys second quarter 2021 operating results reflected the following changes from the first quarter of 2021: (1) modest increase in net interest income resulting from an increase in the investment portfolio size and lower deposit cost; which was largely offset by a decrease in the accretion of deferred fees on the Small Business Administrations Paycheck Protection Program (SBA PPP) and a decrease in accretion due to reductions of purchased credit impaired loans; (2) lower gains on securities sales; and (3) an increase in net mortgage servicing expenses of $0.9 million largely due to the reversal of $0.9 million of previously recorded MSR impairment in the first quarter of 2021.

Book value per share was $15.33 at June 30, 2021, compared to $14.75 at March 31, 2021, and $13.70 at June 30, 2020. Tangible book value per share (non-GAAP)5 was $11.95 at June 30, 2021 compared to $11.39 at March 31, 2021 and $10.31 at June 30, 2020. Book value per share increased $1.63 over the past 12 months, an 11.9% increase from June 30, 2020. Tangible book value per share increased $1.64 over the past 12 months, a 15.9% increase from June 30, 2020. Additionally, the Company increased and paid an annual dividend, which increased 10% to $0.23 per share on February 25, 2021.

Our effort over the last year and a half to strengthen our culture of caring for customers and colleagues and accountability for our strategic and tactical execution is evidenced in our results. The 16% increase in tangible book value year over year, further asset quality improvements to peer group levels and disciplined expense management are examples of a focused team. We saw a nice rebound this quarter in loan growth (12% annualized) following the seasonally slow first quarter which was supported by low unemployment rates in our markets that are below the national averages. Our loan pipeline remains strong entering the summer months and we are optimistic about our loan growth prospects in the third quarter, said Stephen Bianchi, Chairman, President and Chief Executive Officer.

June 30, 2021 Highlights: (as of or for the 3-month period ended June 30, 2021 compared to March 31, 2021 and June 30, 2020.)

-- Quarterly earnings of $4.7 million, or $0.44 per diluted share for the second quarter ended June 30, 2021, were the second highest in the Companys history, down modestly from the record quarter ended March 31, 2021 earnings of $5.5 million or $0.50 per diluted share. Fiscal 2021 earnings are on pace to exceed fiscal 2020s record earnings. Year-over-year earnings for the six-month ended June 30, 2021 were $10.2 million, or $0.94 per share compared to $5.7 million, or $0.51 per share for the six months ended June 30, 2020. -- Stockholders equity as a percent of total assets was 9.57% at June 30, 2021, compared to 9.27% at March 31, 2021. Tangible common equity (TCE) as a percent of tangible assets (non-GAAP)5 was 7.62% at June 30, 2021, compared to 7.32% at March 31, 2021. We were pleased with growth in equity ratios during the quarter as we approach 8.00%. We utilized a portion of our strong earnings to repurchase 198 thousand shares of stock during the quarter at an average price of $13.21. We balance the positive effect on earnings per share with the impact on TCE ratio and regulatory capital ratios. The shares repurchased have reduced outstanding shares by almost 5% which impacts earnings per share positively, while reducing TCE ratio growth by approximately 35 basis points. said James Broucek, Executive Vice President and CFO. -- No loan loss provision was realized during the quarter ended June 30, 2021 due to improved asset quality, lower CARES Act Section 4013 deferrals, and low charge-off activity. Economic conditions in our markets continued to improve from those seen in the last quarter of 2020. This has led to improving trends for businesses most impacted by the pandemic, which allowed the Company to reduce its general economic Q-Factor allocation in its allowance calculation. Further reductions in loans deferred under Section 4013 of the CARES Act and improvements in our markets business activities due to the timing and efficacy of vaccinations, and related impact on consumer behavior and business activities would allow further reductions in this economic Q-Factor. -- The Banks COVID-19 related modifications under Section 4013 of the CARES Act totaled $35.7 million, or 3% of gross loans at June 30, 2021, versus $57.3 million, or 5% of gross loans at March 31, 2021. At June 30, 2021, hotel industry sector loans represent $31.1 million of the approved deferrals. The Company granted a third deferral on two urban hotels for interest only payments with similar ownership totaling $19.2 million, with the borrower depositing two years worth of principal and interest at the Bank. The occupancy rate on the Banks hotel portfolio has increased each month for the past five months ending May 31, 2021. Approximately $14 million of commercial loan modifications are scheduled to return to making their original principal and interest payments in the third quarter. -- The allowance for loan losses on originated loans, excluding SBA PPP loans, decreased to 1.72% at June 30, 2021, from 1.84% at March 31, 2021 due to loan growth and no provision for loan losses. Since SBA PPP loans are guaranteed by the SBA, they are excluded from this reserve calculation. Additionally, loans resulting from Bank acquisitions were effectively marked to market value at the time of their acquisition and were also excluded from this reserve calculation. The allowance for loan losses of $16.8 million, is allocated $15.0 million to the originated loan portfolio and $1.8 million to the acquired loan portfolio.

-- Nonperforming assets continued to decline and at June 30, 2021, were $8.8 million compared to $9.3 million one quarter earlier, or a reduction of 6%. -- On July 23, 2021, the Board of Directors of the Company approved a stock repurchase program. Under this program the Company may repurchase up to 532 thousand shares of its common stock, or 5% of the current outstanding shares, after the existing repurchase program is completed. The repurchase program permits shares to be repurchased in open market or private transactions, from time to time, through block trades, and pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 of the Securities and Exchange Commission. Repurchases may be made at managements discretion at prices management considers to be attractive and in the best interests of both the Company and its stockholders, subject to the availability of stock, general market conditions, the applicable trading price, future alternative advantageous uses for capital, and the Companys financial performance. Open market purchases will be conducted in accordance with the limitations set forth in Rule 10b-18 of the Securities and Exchange Commission and other applicable legal requirements. The repurchase program may be suspended, terminated or modified at any time for any reason, including market conditions, the cost of repurchasing shares, the availability of alternative investment opportunities, liquidity, and other factors deemed appropriate. These factors may also affect the timing and amount of share repurchases. The repurchase program does not obligate the Company to purchase any particular number of shares.

Balance Sheet and Asset Quality

Total assets decreased $17.8 million during the quarter to $1.71 billion at June 30, 2021, compared to $1.73 billion at March 31, 2021, largely due to modest shrinkage in liabilities in the quarter which allowed the Bank to reduce interest-bearing cash and shrink assets.

Securities available for sale increased $58.6 million during the quarter ended June 30, 2021 to $243.7 million from $185.2 million at March 31, 2021. This growth was largely through the purchase of 30-year agency mortgage-backed securities and subordinated debt issued by banks.

Loans receivable decreased by $10 million to $1.182 billion at June 30, 2021. The originated loan portfolio before SBA PPP loans increased $60.5 million in the quarter. Acquired loans decreased by $26.7 million. Total SBA PPP loans decreased $44.0 million.

The allowance for loan losses was $16.8 million and remained flat at June 30, 2021, representing 1.43% of loans receivable compared to $16.9 million at March 31, 2021, representing 1.41% of loans receivable. Excluding the SBA PPP loans, which are guaranteed by the SBA, the allowance for loan losses was 1.52% at June 30, 2021, compared to 1.57% at March 31, 2021. Approximately 21% of the loan portfolio, excluding SBA loans at June 30, 2021, consists of loans purchased through whole bank acquisitions resulting in these loans being recorded at fair market value at acquisition. The allowance for loan losses as a percent of originated loans excluding SBA PPP loans was 1.72% at June 30, 2021, compared to 1.84% at March 31, 2021 due to growth in the originated loan portfolio. For the quarter ended June 30, 2021, the Bank had net charge-offs of $0.015 million.

Allowance for Loan Losses Percentages

(in thousands, except ratios)

June 30, 2021 March 31, 2021 December 31, June 30, 2020 2020Originatedloans, netof deferred $ 877,534 $ 817,261 $ 835,769 $ 789,075 fees andcostsSBA PPPloans, net 71,508 115,920 120,711 132,800 of deferredfeesAcquiredloans, netof 232,516 258,945 281,101 359,300 unamortizeddiscountLoans, end $ 1,181,558 $ 1,192,126 $ 1,237,581 $ 1,281,175 of periodSBA PPPloans, net (71,508 ) (115,920 ) (120,711 ) (132,800 )of deferred feesLoans, netof SBA PPPloans and $ 1,110,050 $ 1,076,206 $ 1,116,870 $ 1,148,375 deferredfeesAllowancefor loanlossesallocated $ 15,059 $ 15,028 $ 14,819 $ 12,109 tooriginatedloansAllowancefor loanlosses 1,786 1,832 2,224 1,264 allocatedto otherloansAllowancefor loan $ 16,845 $ 16,860 $ 17,043 $ 13,373 lossesALL as apercentageof loans, 1.43 % 1.41 % 1.38 % 1.04 %end ofperiodALL as apercentageof loans,net of SBA 1.52 % 1.57 % 1.53 % 1.16 %PPP loansanddeferredfeesALLallocatedtooriginatedloans as apercentage 1.72 % 1.84 % 1.77 % 1.53 %oforiginatedloans, netof deferredfees andcosts

Nonperforming assets decreased 5.8% to $8.8 million or 0.51% of total assets at June 30, 2021 compared to $9.3 million or 0.54% of total assets at March 31, 2021. Included in nonperforming assets at June 30, 2021 are $6.3 million of nonperforming assets acquired during recent whole-bank acquisitions. Originated nonperforming assets were $2.5 million, or 0.21% of total assets for the most recent quarter. Over the past year, nonperforming assets declined 50% from $17.4 million at June 30, 2020 to $8.8 million at June 30, 2021. Over the past year, total criticized loans decreased 46.3% from $55.9 million at June 30, 2020, to $38.2 million at June 30, 2021.

(in thousands) June 30, March 31, December September June 30, 2021 2021 31, 2020 30, 2020 2020Specialmention $ 12,308 $ 13,659 $ 6,672 $ 7,777 $ 19,958 loanbalancesSubstandardloan 25,890 26,064 28,541 32,922 35,911 balancesCriticizedloans, end $ 38,198 $ 39,723 $ 35,213 $ 40,699 $ 55,869 of period

Deposits decreased $9 million to $1.37 billion at June 30, 2021, from $1.38 billion at March 31,2021. The decrease in certificates of deposit more than offset the $23 million increase in non-maturity deposits. The decrease in certificates of deposit was due to the Company choosing not to match higher rate local retail certificate competition.

Review of Operations

Net interest income was $12.8 million for the second quarter ended June 30, 2021 compared to $12.8 million for the first quarter ended March 31, 2021 and $12.3 million for the quarter ended June 30, 2020. Net interest income benefited from growth in the investment portfolio and lower deposit costs offset by lower SBA PPP net loan fee accretion, largely due to the impact of changes in accretion on debt forgiveness and decreased accretion due to reductions of purchased credit impaired loans compared to the prior quarter. The net interest margin (NIM) decreased to 3.22% in the second quarter ended June 30, 2021, compared to 3.31% for the first quarter ended March 31, 2021. This decrease is largely due to a (1) 12 basis point reduction in SBA PPP net loan fee accretion and a (2) 3 basis point decrease in accretion due to reductions of purchased credit impaired loans, partially offset by the impact of lower liability costs.

The NIM decreased to 3.22% for the quarter ended June 30, 2021 from 3.34% for the quarter ended June 30, 2020. The NIM decreased approximately 12 basis points due to the higher interest-bearing cash balances during 2021 compared to 2020. Lower accretion on the reduction of purchased credit impaired loans decreased the NIM by 7 basis points in 2021 compared to 2020. Other reductions to NIM included lower yielding loans and investment securities as a result of the dramatic reduction in interest rates in March 2020. The NIM benefited 27 basis points from lower liability costs and 19 basis points from increased SBA PPP net loan fee accretion quarter over quarter.

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

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

Three months ended June 30, 2021 March 31, 2021 December 31, 2020 September 30, 2020 June 30, 2020 Net Net Net Net Net Net Net Net Net Net Interest Interest Interest Interest Interest Interest Interest Interest Interest Interest Income Margin Income Margin Income Margin Income Margin Income MarginAs reported $ 12,831 3.22 % $ 12,764 3.31 % $ 13,372 3.51 % $ 11,909 3.11 % $ 12,303 3.34 %Lessnon-accretabledifferencerealized asinterest from $ (37 ) (0.01 )% $ (58 ) (0.02 )% $ (324 ) (0.08 )% $ (130 ) (0.03 )% $ (196 ) (0.05 )%payoff ofpurchasedcreditimpaired(?PCI?) loansLessacceleratedaccretion frompayoff ofcertain PCI $ ? ? % $ (90 ) (0.02 )% $ (872 ) (0.23 )% $ ? ? % $ (99 ) (0.03 )%loans withtransferrednon-accretabledifferencesLess scheduledaccretion $ (265 ) (0.07 )% $ (266 ) (0.07 )% $ (252 ) (0.07 )% $ (276 ) (0.07 )% $ (247 ) (0.07 )%interestWithout loanpurchase $ 12,529 3.14 % $ 12,350 3.20 % $ 11,924 3.13 % $ 11,503 3.01 % $ 11,761 3.19 %accretionLess SBA PPPnet loan fee $ (1,309 ) (0.33 )% $ (1,750 ) (0.45 )% $ (985 ) (0.26 )% $ (643 ) (0.17 )% $ (500 ) (0.14 )%accretionWithout SBAPPP purchase $ 11,220 2.81 % $ 10,600 2.75 % $ 10,939 2.87 % $ 10,860 2.84 % $ 11,261 3.05 %and net loanfee accretion

The table below lists the SBA PPP loans and net deferred loan fee accretion balances related to 2020 and 2021 SBA PPP loan originations:

2020 Originations 2021 Originations Total Net Net Net Balance Deferred Balance Deferred Balance Deferred Fee Fee Fee Income Income IncomeSBA PPPLoans, $ 123,702 $ 2,991 $ ? $ ? $ 123,702 $ 2,991 December 31,20202021 SBA PPPLoan ? ? 55,790 3,485 55,790 3,485 OriginationsLess: 2021SBA PPP LoanForgiveness (102,295 ) (2,683 ) (2,272 ) (376 ) (104,567 ) (3,059 )and FeeAccretionBalance,June 30, $ 21,407 $ 308 $ 53,518 $ 3,109 $ 74,925 $ 3,417 2021

The Bank continued to manage deposit interest rates, as various non-maturity deposit product rates were reduced, and interest rates on new and renewed certificates of deposit were lower than the previous quarter. These actions reduced the cost of deposits by 9 basis points in the quarter ended June 30, 2021. At June 30, 2021, the Bank had approximately $110 million of certificate of deposit accounts maturing in 2021 with a weighted average cost of approximately 1.0% and approximately $127 million of certificate of deposit accounts maturing in 2022 with a weighted average cost of approximately 1.8%. The 2021 maturities are generally evenly spread throughout the remainder of the year, with approximately 85% of the 2022 maturities occurring in the first half of 2022. The approximate weighted average cost of new certificates in the second quarter of 2021 was below 0.5%.

Loan loss provisions were zero for the quarters ended June 30, 2021, March 31, 2021 and $1.8 million one year earlier. During the quarter ended June 30, 2021, asset quality improved as indicated by a lower level of non-performing assets, substandard assets and lower loan deferrals under Section 4013 of the Cares Act. Improved general business activity also allowed the Company to reduce its general economic Q-factor, which reduced the allowance allocated for this factor. In addition, a reduction in loan deferrals reduced the allowance allocated to such deferrals. These reductions were largely offset by allowance allocation increases due to loan growth and a modest increase in specific reserves. For the six-month ended June 30, 2021, provision for loan losses was zero compared to $3.75 million for the six months ended June 30, 2020. The year-to-date June 30, 2020 provision for loan losses expense due to the impact of the pandemic was approximately $2 million, with the remaining provision split evenly due to loan growth and changes in credit quality.

Non-interest income decreased to $3.8 million in the quarter ended June 30, 2021, compared to $4.2 million in the quarter ended March 31, 2021 and decreased $1.2 million from the quarter ended June 30, 2020. The decrease in the second quarter compared to the first quarter was largely due to a reduction in gain on sale of securities of $0.2 million. Gains on sale of loans decreased during the quarter due to lower mortgage origination activity partially offset by increased gains on sale of SBA loans. The decrease in non-interest income during the current quarter compared to the comparable prior year quarter year was a result of the following factors: (1) lower gain on sale of loans, (2) lower loan servicing income, (3) no gain on sale of acquired business lines, (4) no settlement income and (5) no insurance commission income in the second quarter of 2021.

Total non-interest expense increased $0.7 million in the second quarter of 2021 to $10.2 million compared to $9.5 million for the quarter ended March 31, 2021 and decreased from $11.4 million for the quarter ended June 30, 2020. The increase from the first quarter was largely due to the reversal of $0.9 million of previously recorded MSR impairment in the first quarter of 2021, partially offset by the first quarter debt termination cost of $0.1 million and second quarter lower compensation and FDIC premium assessment. The decrease from the second quarter of 2020 was largely due to higher interest rates which decreased variable incentive compensation and resulted in lower MSR impairment and amortization of $0.5 million. In addition, compensation was impacted by fewer FTEs in the second quarter of 2021.

Provisions for income taxes, decreased to $1.7 million in the second quarter of 2021 from the first quarter of 2021 at $1.9 million. The effective tax rate for the most recent quarter was 26.8% compared to 26.1% for the prior quarter. The effective tax rate was 26.5% for the comparable prior year quarter.

These financial results are preliminary until the Form 10-Q is filed in August 2021.

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 25 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 the conditions in the financial markets and economic conditions generally; adverse impacts to the Company or Bank arising from the COVID-19 pandemic; the possibility of a deterioration in the residential real estate markets; interest rate risk; lending risk; the sufficiency of loan allowances; changes in the fair value or ratings downgrades of our securities; competitive pressures among depository and other financial institutions; our ability to maintain our reputation; our ability to realize the benefits of net deferred tax assets; our ability to maintain or increase our market share; acts of terrorism and political or military actions by the United States or other governments; legislative or regulatory changes or actions, or significant litigation, adversely affecting the Company or Bank; increases in FDIC insurance premiums or special assessments by the FDIC; disintermediation risk; our inability to obtain needed liquidity; 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; our ability to raise capital needed to fund growth or meet regulatory requirements; the possibility that our internal controls and procedures could fail or be circumvented; our ability to attract and retain key personnel; our ability to keep pace with technological change; cybersecurity risks; changes in federal or state tax laws; changes in accounting principles, policies or guidelines and their impact on financial performance; restrictions on our ability to pay dividends; and the potential volatility of our stock price. 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 Companys performance are discussed further in Part I, Item 1A, Risk Factors, in the Companys Form 10-K, for the year ended December 31, 2020, filed with the Securities and Exchange Commission (SEC) on March 8, 2021 and the Companys 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.

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, return on average tangible common equity and return on average tangible common equity as adjusted, which management believes may be helpful in understanding the Companys 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 acquisition and branch closure costs and related data processing termination fees, legal costs, severance pay, accelerated depreciation expense and lease termination fees, the gain on sale of branch deposits and fixed assets and the net impact of the Tax Cuts and Jobs Act of 2017, which management believes enhances investors ability to better understand the underlying business performance and trends related to core business activities. Merger related charges represent expenses to either satisfy contractual obligations of acquired entities without any useful benefit to the Company or to convert and consolidate customer records onto the Company platforms. These costs are unique to each transaction based on the contracts in existence at the merger date. 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 preferred stock equity, 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)

June 30, 2021 March 31, December 31, June 30, 2020 (unaudited) 2021 2020 (unaudited) (unaudited) (audited)Assets Cash and cash $ 128,440 $ 196,039 $ 119,440 $ 39,581 equivalentsOtherinterest-bearing 1,512 2,016 3,752 3,752 depositsSecuritiesavailable for 243,746 185,160 144,233 162,716 sale ?AFS?Securities heldto maturity 59,582 57,419 43,551 10,541 ?HTM?Equitysecurities withreadily 297 297 200 188 determinablefair valueOther 14,966 15,069 14,948 15,193 investmentsLoans receivable 1,181,558 1,192,126 1,237,581 1,281,175 Allowance for (16,845 ) (16,860 ) (17,043 ) (13,373 )loan lossesLoans 1,164,713 1,175,266 1,220,538 1,267,802 receivable, netLoans held for 3,109 2,267 3,075 8,876 saleMortgageservicing 3,862 3,999 3,252 3,509 rights, netOfficeproperties and 21,121 21,081 21,165 21,318 equipment, netAccrued interest 4,898 5,464 5,652 5,855 receivableIntangible 4,696 5,095 5,494 6,293 assetsGoodwill 31,498 31,498 31,498 31,498 Foreclosed andrepossessed 145 85 197 734 assets, netBank owned lifeinsurance 23,991 23,837 23,684 23,357 (?BOLI?)Other assets 7,896 7,702 8,416 6,301 TOTAL ASSETS $ 1,714,472 $ 1,732,294 $ 1,649,095 $ 1,607,514 Liabilities andStockholders? EquityLiabilities: Deposits $ 1,371,226 $ 1,380,202 $ 1,295,256 $ 1,272,197 Federal HomeLoan Bank 111,496 115,481 123,498 124,484 (?FHLB?)advancesOther borrowings 58,380 58,354 58,328 43,595 Other 9,354 17,595 11,449 14,448 liabilitiesTotal 1,550,456 1,571,632 1,488,531 1,454,724 liabilitiesStockholders? equity:Common stock?$0.01 par value,authorized30,000,000;10,696,075 ,10,893,872; 107 109 111 112 11,056,349 and11,150,695shares issuedand outstanding,respectivelyAdditional 121,732 123,766 126,154 126,900 paid-in capitalRetained 40,117 35,783 32,809 25,759 earningsAccumulatedother 2,060 1,004 1,490 19 comprehensiveincomeTotalstockholders? 164,016 160,662 160,564 152,790 equityTOTALLIABILITIES AND $ 1,714,472 $ 1,732,294 $ 1,649,095 $ 1,607,514 STOCKHOLDERS?EQUITY

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 Six Months Ended June 30, March 31, June 30, June 30, June 30, 2021 2021 2020 2021 2020 (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)Interest anddividend income:Interest andfees on $ 13,960 $ 14,517 $ 14,687 $ 28,477 $ 30,146 loansInterest on 1,518 1,103 1,199 2,621 2,648 investmentsTotalinterest and 15,478 15,620 15,886 31,098 32,794 dividendincomeInterest expense:Interest on 1,521 1,714 2,607 3,235 5,787 depositsInterest onFHLB and FRB 384 411 448 795 956 borrowedfundsInterest onother 742 731 528 1,473 1,077 borrowedfundsTotalinterest 2,647 2,856 3,583 5,503 7,820 expenseNet interestincomebefore 12,831 12,764 12,303 25,595 24,974 provisionfor loanlossesProvisionfor loan ? ? 1,750 ? 3,750 lossesNet interestincome afterprovision 12,831 12,764 10,553 25,595 21,224 for loanlossesNon-interest income:Servicecharges on 395 398 345 793 905 depositaccountsInterchange 647 530 489 1,177 953 incomeLoanservicing 825 893 1,315 1,718 2,000 incomeGain on sale 1,522 1,595 1,818 3,117 2,598 of loansLoan feesand service 151 278 244 429 721 chargesInsurancecommission ? ? 195 ? 474 incomeNet gains oninvestment 37 235 25 272 98 securitiesNet gain onsale ofacquired ? ? 252 ? 252 businesslinesSettlement ? ? 131 ? 131 proceedsOther 216 247 199 463 484 Totalnon-interest 3,793 4,176 5,013 7,969 8,616 incomeNon-interest expense:Compensationand related 5,473 5,596 5,908 11,069 11,343 benefitsOccupancy 1,314 1,316 1,336 2,630 2,710 Data 1,396 1,342 1,212 2,738 2,404 processingAmortizationof 399 399 412 798 824 intangibleassetsMortgageservicing 441 (450 ) 991 (9 ) 1,727 rightsexpense, netAdvertising,marketing 194 163 303 357 542 and publicrelationsFDIC premium 82 165 180 247 248 assessmentProfessional 381 521 353 902 957 servicesGains onrepossessed (29 ) (117 ) (22 ) (146 ) (90 )assets, netOther 547 554 719 1,101 1,458 Totalnon-interest 10,198 9,489 11,392 19,687 22,123 expenseIncomebeforeprovision 6,426 7,451 4,174 13,877 7,717 for incometaxesProvisionfor income 1,720 1,945 1,105 3,665 2,042 taxesNet incomeattributable $ 4,706 $ 5,506 $ 3,069 $ 10,212 $ 5,675 to commonstockholdersPer share information:Basic $ 0.44 $ 0.50 $ 0.28 $ 0.94 $ 0.51 earningsDiluted $ 0.44 $ 0.50 $ 0.28 $ 0.94 $ 0.51 earningsCashdividends $ ? $ 0.23 $ ? $ 0.23 $ 0.21 paidBook valueper share at $ 15.33 $ 14.75 $ 13.70 $ 15.33 $ 13.70 end ofperiodTangiblebook valueper share at $ 11.95 $ 11.39 $ 10.31 $ 11.95 $ 10.31 end ofperiod(non-GAAP)

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 Six Months Ended June 30, March 31, June 30, June 30, June 30, 2021 2021 2020 2021 2020 GAAP pretax $ 6,426 $ 7,451 $ 4,174 $ 13,877 $ 7,717 incomeNet gain onsale ofacquired ? ? (252 ) ? (252 )businesslines (1)Settlementproceeds ? ? (131 ) ? (131 )(2)FHLBborrowings ? 102 ? 102 prepaymentfee (3)Pretaxincome as 6,426 7,553 3,791 13,979 7,334 adjusted(4)Provisionfor incometax on net 1,720 1,971 1,005 3,692 1,944 income asadjusted(5)Net incomeas adjustedafterincome $ 4,706 $ 5,582 $ 2,786 $ 10,287 $ 5,390 taxes(non-GAAP)(4)GAAPdilutedearnings $ 0.44 $ 0.50 $ 0.28 $ 0.94 $ 0.51 per share,net of taxNet gain onsale ofacquired ? ? (0.02 ) ? (0.02 )businesslinesSettlement ? ? (0.01 ) ? (0.01 )proceedsFHLBborrowings $ ? $ 0.01 ? $ 0.01 ? prepaymentfeeDilutedearningsper share,as $ 0.44 $ 0.51 $ 0.25 $ 0.95 $ 0.48 adjusted,net of tax(non-GAAP) Averagediluted 10,789,843 10,985,994 11,150,785 10,887,409 11,183,216 sharesoutstanding

(1) Net gain on sale of acquired business lines resulted from the sale of Wells Insurance Agency (2) Settlement proceeds includes litigation income from a JP Morgan Residential Mortgage-Backed Security (RMBS) claim. This distribution represents a supplement to the proceeds received in March 2017 from a JP Morgan RMBS previously owned by the Bank and sold in 2011. (3) 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. (4) Net income as adjusted is a non-GAAP measure that management believes enhances the markets ability to assess the underlying business performance and trends related to core business activities. (5) Provision for income tax on net income as adjusted is calculated at our effective tax rate for each respective period presented.

LoanComposition June 30, 2021 March 31, 2021 December 31, June 30, 2020(in 2020thousands)Originated Loans:Commercial/Agricultural real estate:Commercial $ 420,565 $ 365,603 $ 351,113 $ 314,390 real estateAgricultural 42,925 38,140 31,741 35,138 real estateMulti-family 113,790 111,503 112,731 90,617 real estateConstructionand land 89,586 83,936 91,241 94,856 developmentC&I/Agricultural operating:Commercialand 80,783 76,693 95,290 80,369 industrialAgricultural 23,014 21,149 24,457 25,813 operatingResidential mortgage:Residential 72,965 82,285 86,283 95,664 mortgagePurchased 4,949 5,291 6,260 6,861 HELOC loansConsumer installment:Originatedindirect 20,377 23,186 25,851 32,031 paperOther 10,296 10,951 12,056 14,175 consumerOriginatedloans before 879,250 818,737 837,023 789,914 SBA PPPloansSBA PPP 74,925 118,931 123,702 137,330 loansTotaloriginated $ 954,175 $ 937,668 $ 960,725 $ 927,244 loansAcquired Loans:Commercial/Agricultural real estate:Commercial $ 139,497 $ 149,586 $ 156,562 $ 195,335 real estateAgricultural 29,740 32,427 37,054 43,054 real estateMulti-family 7,401 7,485 9,421 13,022 real estateConstructionand land 1,202 6,796 7,276 15,276 developmentC&I/Agricultural operating:Commercialand 19,701 19,240 21,263 29,477 industrialAgricultural 4,893 7,101 8,328 12,124 operatingResidential mortgage:Residential 33,781 40,046 45,103 56,760 mortgageConsumer installment:Other 648 913 1,157 1,639 consumerTotalacquired $ 236,863 $ 263,594 $ 286,164 $ 366,687 loansTotal Loans: Commercial/Agricultural real estate:Commercial $ 560,062 $ 515,189 $ 507,675 $ 509,725 real estateAgricultural 72,665 70,567 68,795 78,192 real estateMulti-family 121,191 118,988 122,152 103,639 real estateConstructionand land 90,788 90,732 98,517 110,132 developmentC&I/Agricultural operating:Commercialand 100,484 95,933 116,553 109,846 industrialAgricultural 27,907 28,250 32,785 37,937 operatingResidential mortgage:Residential 106,746 122,331 131,386 152,424 mortgagePurchased 4,949 5,291 6,260 6,861 HELOC loansConsumer installment:Originatedindirect 20,377 23,186 25,851 32,031 paperOther 10,944 11,864 13,213 15,814 consumerGross loansbefore SBA 1,116,113 1,082,331 1,123,187 1,156,601 PPP loansSBA PPP 74,925 118,931 123,702 137,330 loansGross loans $ 1,191,038 $ 1,201,262 $ 1,246,889 $ 1,293,931 Unearned netdeferredfees and (5,133 ) (4,487 ) (4,245 ) (5,369 )costs andloans inprocessUnamortizeddiscount on (4,347 ) (4,649 ) (5,063 ) (7,387 )acquiredloansTotal loans $ 1,181,558 $ 1,192,126 $ 1,237,581 $ 1,281,175 receivable

Nonperforming Originated and Acquired Assets(in thousands, except ratios)

June 30, 2021 March 31, December 31, June 30, 2020 and 2021 and 2020 and and Three Months Three Months Three Months Three Months Ended Ended Ended EndedNonperforming assets:Originatednonperforming assets:Nonaccrual $ 2,420 $ 2,344 $ 3,649 $ 3,951 loansAccruing loanspast due 90 88 391 415 1,455 days or moreTotaloriginated 2,508 2,735 4,064 5,406 nonperformingloans (?NPL?)Other realestate owned ? ? 63 270 (?OREO?)Othercollateral 16 28 41 42 ownedTotaloriginated $ 2,524 $ 2,763 $ 4,168 $ 5,718 nonperformingassets (?NPAs?)Acquirednonperforming assets:Nonaccrual $ 5,655 $ 6,335 $ 7,098 $ 10,836 loansAccruing loanspast due 90 454 145 171 425 days or moreTotal acquirednonperforming 6,109 6,480 7,269 11,261 loans (?NPL?)Other realestate owned 129 57 93 422 (?OREO?)Othercollateral ? ? ? ? ownedTotal acquirednonperforming $ 6,238 $ 6,537 $ 7,362 $ 11,683 assets (?NPAs?)Totalnonperforming $ 8,762 $ 9,300 $ 11,530 $ 17,401 assets (?NPAs?)Loans, end of $ 1,181,558 $ 1,192,126 $ 1,237,581 $ 1,281,175 periodTotal assets, $ 1,714,472 $ 1,732,294 $ 1,649,095 $ 1,607,514 end of periodRatios: Originated NPLs 0.21 % 0.23 % 0.33 % 0.42 %to total loansAcquired NPLs 0.52 % 0.54 % 0.59 % 0.88 %to total loansOriginated NPAs 0.15 % 0.16 % 0.25 % 0.36 %to total assetsAcquired NPAs 0.36 % 0.38 % 0.45 % 0.73 %to total assets

Nonperforming Total Assets(in thousand, except ratios)

June 30, 2021 March 31, December 31, June 30, 2020 and 2021 and 2020 and and Three Months Three Months Three Months Three Months Ended Ended Ended EndedNonperforming assets:Nonaccrual loansCommercial real $ 1,027 $ 760 $ 827 $ 3,221 estateAgricultural 3,716 4,511 5,084 5,979 real estateCommercial andindustrial (?C& 313 391 357 1,306 I?)Agricultural 1,163 764 1,872 1,496 operatingResidential 1,768 2,167 2,451 2,666 mortgageConsumer 88 86 156 119 installmentTotalnonaccrual $ 8,075 $ 8,679 $ 10,747 $ 14,787 loansAccruing loanspast due 90 542 536 586 1,880 days or moreTotalnonperforming 8,617 9,215 11,333 16,667 loans (?NPLs?)Foreclosed andrepossessed 145 85 197 734 assets, netTotalnonperforming $ 8,762 $ 9,300 $ 11,530 $ 17,401 assets (?NPAs?)Troubled DebtRestructurings $ 16,597 $ 17,442 $ 18,477 $ 13,119 (?TDRs?)Nonaccrual TDRs $ 4,861 $ 5,690 $ 6,735 $ 6,992 Loans, end of $ 1,181,558 $ 1,192,126 $ 1,237,581 $ 1,281,175 periodTotal assets, $ 1,714,472 $ 1,732,294 $ 1,649,095 $ 1,607,514 end of periodRatios: NPLs to total 0.73 % 0.77 % 0.92 % 1.30 %loansNPAs to total 0.51 % 0.54 % 0.70 % 1.08 %assets

Deposit Composition (in thousands)

June 30, March 31, December 31, June 30, 2021 2021 2020 2020Non-interestbearing $ 253,097 $ 257,042 $ 238,348 $ 223,536 demanddepositsInterestbearing 375,005 352,302 301,764 270,116 demanddepositsSavings 220,698 222,448 196,348 185,816 accountsMoney market 263,390 258,942 245,549 242,536 accountsCertificate 259,036 289,468 313,247 350,193 accountsTotal $ 1,371,226 $ 1,380,202 $ 1,295,256 $ 1,272,197 deposits

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

Three months ended June 30, 2021 Three months ended March, 31 2021 Three months ended June 30, 2020 Interest Average Interest Average Interest Average Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/ Balance Expense Rate Balance Expense Rate Balance Expense Rate (1) (1) (1)Averageinterest earningassets:Cash andcash $ 113,561 $ 28 0.10 % $ 129,642 $ 29 0.09 % $ 19,995 $ 5 0.10 %equivalentsLoans 1,186,439 13,960 4.72 % 1,213,562 14,517 4.85 % 1,266,273 14,687 4.66 %receivableInterestbearing 1,754 9 2.06 % 3,437 20 2.36 % 3,788 23 2.44 %depositsInvestmentsecurities 283,557 1,308 1.85 % 202,981 885 1.77 % 174,875 988 2.27 %(1)Other 15,020 173 4.62 % 15,038 169 4.56 % 15,160 183 4.86 %investmentsTotalinterest $ 1,600,331 $ 15,478 3.88 % $ 1,564,660 $ 15,620 4.05 % $ 1,480,091 $ 15,886 4.32 %earningassets (1)Averageinterest bearingliabilities:Savings $ 219,804 $ 99 0.18 % $ 197,647 $ 83 0.17 % $ 171,285 $ 99 0.23 %accountsDemand 360,314 257 0.29 % 330,674 251 0.31 % 267,429 260 0.39 %depositsMoney market 258,638 182 0.28 % 254,120 202 0.32 % 243,264 350 0.58 %accountsCD?s 240,224 868 1.45 % 266,044 1,043 1.59 % 328,543 1,706 2.09 %IRA?s 39,970 115 1.15 % 40,877 135 1.34 % 42,117 192 1.83 %Total $ 1,118,950 $ 1,521 0.55 % $ 1,089,362 $ 1,714 0.64 % $ 1,052,638 $ 2,607 1.00 %depositsFHLBadvances and 171,261 1,126 2.64 % 180,635 1,142 2.56 % 186,191 976 2.11 %otherborrowingsTotalinterest $ 1,290,211 $ 2,647 0.82 % $ 1,269,997 $ 2,856 0.91 % $ 1,238,829 $ 3,583 1.16 %bearingliabilitiesNet interest $ 12,831 $ 12,764 $ 12,303 incomeInterest 3.06 % 3.14 % 3.16 %rate spreadNet interest 3.22 % 3.31 % 3.34 %margin (1)Averageinterestearningassets to 1.24 1.23 1.19 averageinterestbearingliabilities

(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 June30, 2021, March 31, 2021 and June30, 2020. The FTE adjustment to net interest income included in the rate calculations totaled $1, $1 and $0 thousand for the three months ended June30, 2021, March 31, 2021 and June30, 2020, respectively.

Six months ended June 30, 2021 Six months ended June 30, 2020 Interest Average Interest Average Average Income/ Yield/ Average Income/ Yield/ Balance Expense Rate Balance Expense Rate (1) (1)Averageinterest earningassets:Cash andcash $ 121,557 $ 57 0.09 % $ 25,532 $ 123 0.97 %equivalentsLoans 1,199,925 28,477 4.79 % 1,219,905 30,146 4.97 %receivableInterestbearing 2,591 29 2.26 % 4,075 50 2.47 %depositsInvestmentsecurities 243,492 2,193 1.82 % 177,081 2,119 2.41 %(1)Other 15,029 342 4.59 % 15,083 356 4.75 %investmentsTotalinterest $ 1,582,594 $ 31,098 3.96 % $ 1,441,676 $ 32,794 4.57 %earningassets (1)Averageinterest bearingliabilities:Savings $ 208,787 $ 182 0.18 % $ 162,941 $ 250 0.31 %accountsDemand 345,576 507 0.30 % 251,125 635 0.51 %depositsMoney market 256,391 384 0.30 % 239,867 959 0.80 %accountsCD?s 253,063 1,911 1.52 % 341,319 3,552 2.09 %IRA?s 40,421 251 1.25 % 42,406 391 1.85 %Total $ 1,104,238 $ 3,235 0.59 % $ 1,037,658 $ 5,787 1.12 %depositsFHLBadvances and 175,922 2,268 2.60 % 180,927 2,033 2.26 %otherborrowingsTotalinterest $ 1,280,160 $ 5,503 0.87 % $ 1,218,585 $ 7,820 1.29 %bearingliabilitiesNet interest $ 25,595 $ 24,974 incomeInterest 3.09 % 3.28 %rate spreadNet interest 3.26 % 3.48 %margin (1)Averageinterestearningassets to 1.24 1.18 averageinterestbearingliabilities

(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 six months ended June30, 2021 and June30, 2020, respectively. The FTE adjustment to net interest income included in the rate calculations totaled $2 and $1 thousand for the six months ended June30, 2021 and June30, 2020, respectively.

The following table reports key financial metric ratios based on a net income and net income as adjusted basis:

Three Months Ended Six Months Ended June March June June June 30, 31, 30, 30, 30, 2021 2021 2020 2021 2020Ratios based on net income:Return on average 1.10 % 1.33 % 0.78 % 1.22 % 0.73 %assets (annualized)Return on average 11.63 % 13.97 % 8.23 % 12.78 % 7.61 %equity (annualized)Return on averagetangible common 14.98 % 18.14 % 11.06 % 16.53 % 10.25 %equity^5 (annualized)Efficiency ratio 61 % 56 % 66 % 59 % 66 %Net interest marginwith loan purchase 3.22 % 3.31 % 3.34 % 3.26 % 3.48 %accretionNet interest marginwithout loan purchase 3.14 % 3.20 % 3.19 % 3.17 % 3.23 %accretionRatios based on netincome as adjusted (non-GAAP):Return on averageassets as adjusted^2 1.10 % 1.35 % 0.71 % 1.22 % 0.70 %(annualized)Return on averageequity as adjusted^3 11.63 % 14.16 % 7.47 % 12.87 % 7.23 %(annualized)Return on averagetangible common 14.98 % 18.39 % 10.04 % 16.65 % 9.73 %equity as adjusted^5(annualized)Efficiency ratio^4 as 61 % 55 % 67 % 58 % 67 %adjusted (non-GAAP)

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

Three Months Ended Six Months Ended June 30, 2021 March 31, 2021 June 30, June 30, 2021 June 30, 2020 2020 GAAPearnings $ 4,706 $ 5,506 $ 3,069 $ 10,212 $ 5,675 after incometaxesNet incomeas adjustedafter income $ 4,706 $ 5,582 $ 2,786 $ 10,288 $ 5,390 taxes(non-GAAP)(1)Average $ 1,716,394 $ 1,682,064 1,585,421 $ 1,694,505 $ 1,557,837 assetsReturn onaverage 1.10 % 1.33 % 0.78 % 1.22 % 0.73 %assets(annualized)Return onaverageassets as 1.10 % 1.35 % 0.71 % 1.22 % 0.70 %adjusted(non-GAAP)(annualized)

(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 Six Months Ended June 30, March 31, June 30, June 30, June 30, 2021 2021 2020 2021 2020 GAAPearnings $ 4,706 $ 5,506 $ 3,069 $ 10,212 $ 5,675 after incometaxesNet incomeas adjustedafter income $ 4,706 $ 5,582 $ 2,786 $ 10,288 $ 5,390 taxes(non-GAAP)(1)Average $ 162,361 $ 159,881 149,973 $ 161,186 $ 149,960 equityReturn onaverage 11.63 % 13.97 % 8.23 % 12.78 % 7.61 %equity(annualized)Return onaverageequity as 11.63 % 14.16 % 7.47 % 12.87 % 7.23 %adjusted(non-GAAP)(annualized)

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

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

Three Months Ended Six Months Ended June 30, March 31, June 30, June 30, June 30, 2021 2021 2020 2021 2020Totalstockholders? $ 164,016 $ 160,662 $ 152,790 $ 164,016 $ 152,790 equityLess: (31,498 ) (31,498 ) (31,498 ) (31,498 ) (31,498 )Goodwill Less: )Intangible (4,696 ) (5,095 ) (6,293 ) (4,696 ) (6,293 assetsTangiblecommon equity $ 127,822 $ 124,069 $ 114,999 $ 127,822 $ 114,999 (non-GAAP)Averagetangible $ 125,967 $ 123,088 $ 111,624 $ 124,593 $ 111,355 common equity(non-GAAP)GAAP earningsafter income $ 4,706 $ 5,506 $ 3,069 $ 10,212 $ 5,675 taxesNet income asadjustedafter income $ 4,706 $ 5,582 $ 2,786 $ 10,288 $ 5,390 taxes(non-GAAP)(1)Return onaveragetangible 14.98 % 18.14 % 11.06 % 16.53 % 10.25 %common equity(annualized)Return onaveragetangiblecommon equity 14.98 % 18.39 % 10.04 % 16.65 % 9.73 %as adjusted(non-GAAP)(annualized)

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

Reconciliation of Efficiency Ratio as Adjusted (non-GAAP) (in thousands, except ratios)

Three Months Ended Six Months Ended June 30, March 31, June 30, June 30, June 30, 2021 2021 2020 2021 2020 Non-interest $ 10,198 $ 9,489 $ 11,392 $ 19,687 $ 22,123 expense (GAAP)FHLB borrowingsprepayment fee ? (102 ) ? (102 ) ? (1)Non-interestexpense as 10,198 9,387 11,392 19,585 22,123 adjusted(non-GAAP)Non-interest 3,793 4,176 5,013 7,969 8,616 incomeNet interest 12,831 12,764 12,303 25,595 24,974 marginEfficiency ratiodenominator $ 16,624 $ 16,940 $ 17,316 $ 33,564 $ 33,590 (GAAP)Net gain onacquired ? ? (252 ) ? (252 )business lines (1)Settlement ? ? (131 ) ? (131 )proceeds (1) Efficiency ratiodenominator $ 16,624 $ 16,940 $ 16,933 $ 33,564 $ 33,207 (non-GAAP)Efficiency ratio 61 % 56 % 66 % 59 % 66 %(GAAP)Efficiency ratioas adjusted 61 % 55 % 67 % 58 % 67 %(non-GAAP)

(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 June 30, March 31, June 30,end of period 2021 2021 2020Total stockholders? equity $ 164,016 $ 160,662 $ 152,790 Less: Goodwill (31,498 ) (31,498 ) (31,498 )Less: Intangible assets (4,696 ) (5,095 ) (6,293 )Tangible common equity (non-GAAP) $ 127,822 $ 124,069 $ 114,999 Ending common shares outstanding 10,696,075 10,893,872 11,150,695 Book value per share $ 15.33 $ 14.75 $ 13.70 Tangible book value per share $ 11.95 $ 11.39 $ 10.31 (non-GAAP)

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

Tangible common equity as a March 31,percent of tangible assets at June 30, 2021 2021 June 30, 2020end of periodTotal stockholders? equity $ 164,016 $ 160,662 $ 152,790 Less: Goodwill (31,498 ) (31,498 ) (31,498 )Less: Intangible assets (4,696 ) (5,095 ) (6,293 )Tangible common equity $ 127,822 $ 124,069 $ 114,999 (non-GAAP)Total Assets $ 1,714,472 $ 1,732,294 $ 1,607,514 Less: Goodwill (31,498 ) (31,498 ) (31,498 )Less: Intangible assets (4,696 ) (5,095 ) (6,293 )Tangible Assets (non-GAAP) $ 1,678,278 $ 1,695,701 $ 1,569,723 Less SBA PPP Loans (74,925 ) (118,931 ) (137,330 )Tangible Assets, excluding SBA $ 1,603,353 $ 1,576,770 $ 1,432,393 PPP Loans (non-GAAP)Total stockholders? equity to 9.57 % 9.27 % 9.50 %total assets ratioTangible common equity as apercent of tangible assets 7.62 % 7.32 % 7.33 %(non-GAAP)Tangible common equity as apercent of tangible assets, 7.97 % 7.87 % 8.03 %excluding SBA PPP Loans(non-GAAP)

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).

4The efficiency ratio as adjusted (non-GAAP) is a non-GAAP measure that management believes enhances investors ability to better understand the underlying business performance and the Companys ability to use what it has to generate the most profit possible for shareholders relative to core business activities. For a detailed reconciliation of GAAP to non-GAAP results, see the accompanying financial table Reconciliation of Efficiency Ratio as Adjusted (non-GAAP).

5Tangible book value, tangible book value per share, tangible common equity as a percent of tangible assets, return on tangible common equity and return on tangible common equity as adjusted are non-GAAP measures that management believes enhances investors ability to better understand the Companys 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 and Reconciliation of Return on Average Tangible Common Equity as Adjusted (non-GAAP).