GlobeNewswire Inc | Oct 27, 2020 08:30AM EDT

October 27, 2020

EAU CLAIRE, Wis., Oct. 27, 2020 (GLOBE NEWSWIRE) -- Citizens Community Bancorp, Inc. (the Company) (Nasdaq: CZWI), the parent company of Citizens Community Federal N.A. (the Bank or CCFBank), today reported earnings of $3.5 million, or $0.31 per share for the quarter ended September 30, 2020, compared to $3.1 million, or $0.28 per diluted share for the quarter ended June 30, 2020. Net income as adjusted (non-GAAP)1 of $3.3 million, or $0.30 per share was reported for the quarter ended September 30, 2020, compared to $2.8 million, or $0.25 per share for the quarter ended June 30, 2020.

The Companys third quarter operating results reflected: (1) modestly lower net interest income largely due to loan portfolio reductions, (2) lower loan loss provisions, while increasing COVID-19-related qualitative provision, (3) a continued robust refinancing market which led to all-time high gains on sale of mortgage loans and (4) lower non-interest expenses due to reduced compensation expense and decreased impairment of mortgage servicing right assets.

Book value per share was $14.10 at September 30, 2020 compared to $13.70 at June 30, 2020 and $13.13 at September 30, 2019. Book value per share increased $0.74, or a 7% annualized increase, from December 31, 2019. Tangible book value per share (non-GAAP)5 was $10.75 at September 30, 2020 compared to $10.31 at June 30, 2020 and $9.60 at September 30, 2019.

The increase in book value and tangible book value (non-GAAP)5 in the third quarter reflects net income of $3.5 million and a quarterly increase in accumulated other comprehensive income unrealized gain of $0.9 million. Additionally, the increase in tangible book value (non-GAAP)5 in the third quarter reflects the reduction of core deposit intangibles of $0.4 million.

We were pleased with the continued execution of our strategic priorities. This year we have increased tangible book value $0.86 per share, or a 12% annualized increase. Asset quality continued to improve with a quarterly decrease of 14% and year-to-date decrease of 31% in non-performing assets, an $18 million reduction, or 28%, in criticized assets from March 31 levels and $37 thousand of net charge-offs in the quarter. We completed an extensive review of our business during the COVID-19 pandemic to build more efficient workflows and staffing models, to better manage operating expenses, announced branch closings effective in the fourth quarter and strengthened our culture centered on caring for our customers and colleagues, said Stephen Bianchi, Chairman, President and Chief Executive Officer.

As expected, COVID-19 deferrals remain concentrated in the hospitality segment where occupancy rates have been tracking with national averages. We are working with our clients as the pandemic persists by requiring additional support from the borrower in exchange for further deferral periods. Restaurants, especially quick service, have rebounded and many have resumed full payment status. All other segments have or are scheduled to return to regular payment status. Nevertheless, we have increased loan loss reserves adding $3.5 million in COVID-19 qualitative reserves over the last three quarters, continued Bianchi.

For the nine months ended September 30, 2020, the Company earned $9.2 million or $0.82 per share compared to earnings of $6.3 million, or $0.57 per share for the nine months ended September 30, 2019.

September 30, 2020 Highlights: (as of or for the 3-month period ended September 30, 2020, compared to June 30, 2020)

-- Stockholders equity as a percent of total assets increased from 9.51% to 9.70% during the quarter. Tangible common equity (non-GAAP)5 relative to tangible assets (non-GAAP)5, less SBA Paycheck Protection Program (PPP) loans increased to 8.29% at September 30, 2020 compared to 8.03% at June 30, 2020. -- The Bank recorded provision for loan losses of $1.50 million for the quarter ended September 30, 2020, compared to $1.75 million for the quarter ended June 30, 2020. In continued anticipation of a COVID-19 related adverse economic impact, the COVID-19 related provision was $1.5 million in the quarter ended September 30, 2020 increasing the allowance for loan losses allocated to COVID-19 to $3.5 million. This was a modest increase from the $1.25 million provided for COVID-19 for the quarter ended June 30, 2020. The COVID-19 pandemic continued to result in reduced operating capacity and uncertainty regarding potential future revenue and cash flows for certain businesses, including bank borrowers. Hotels and restaurants represent our portfolios two industry sectors most directly and adversely affected by the COVID-19 pandemic. These sectors loans totaled approximately $102 million and $39 million, respectively, at September 30, 2020. -- As of September 30, 2020, the Banks COVID-19 related modifications under Section 4013 of the CARES Act, totaled $126.7 million, or 10% of gross loans versus $197.3 million, or 15% of gross loans at June 30, 2020. At September 30, 2020, hotel industry sector loans represent approximately $71 million of the approved deferrals and the restaurant industry sectors represent approximately $5 million. The Bank has approximately $50 million of total payment deferrals expiring in the fourth quarter of 2020. -- The sum of special mention and substandard assets, or criticized assets, decreased $15.2 million to $40.7 million at September 30, 2020 from $55.9 million at June 30, 2020, a decrease of 27%. -- The allowance for loan losses on originated loans, excluding PPP loans, increased to 1.65%. Since PPP loans are guaranteed by the SBA, they are excluded from this reserve calculation. Additionally, loans acquired through acquisition were effectively marked to market value at the time of their acquisition and were also excluded from this reserve calculation. -- On August 12, 2020, the Bank announced the fourth quarter closure of three branch operations located at Minnesota Lake, Minnesota, Eau Claire, Wisconsin, and Eleva, Wisconsin. The branch operations will be consolidated into nearby branch locations.

Balance Sheet and Asset Quality

Total assets increased $15 million during the quarter to $1.62 billion at September 30, 2020 compared to $1.61 billion at June 30, 2020. The increase is primarily due to increases in cash and cash equivalents, partially offset by decreases in the loan portfolio.

Cash and cash equivalents increased to $115.5 million at September 30, 2020 from $39.6 million the prior quarter. Deposit levels remain robust, while the Bank experienced loan shrinkage and chose to maintain the investment portfolio at previous levels due to low yielding investment options. As such, the Company has chosen to maintain a high level of liquidity.

Loans receivable decreased to $1.23 billion at September 30, 2020 from $1.28 billion at June 30, 2020. New loan originations actually remain at previous account levels. However, due to repayments of criticized assets, $12 million in loan payoffs in acquired loans due to sale of property and the Banks decision not to match selected acquired loans refinancing interest rates totaling $14 million, the portfolio shrank.

The originated loan portfolio declined $9.7 million to $917.5 million at September 30, 2020 compared to $927.2 million at June 30, 2020. Acquired loans declined $42.4 million to $324.3 million in the current quarter from $366.7 million in the previous quarter.

The allowance for loan losses increased to $14.8 million at September 30, 2020 representing 1.21% of loans receivable at September 30, 2020 compared to 1.04% of loans receivable at June 30, 2020. Excluding the PPP loans which are guaranteed by the SBA, the allowance for loan losses was 1.35% at September 30, 2020 compared to 1.16% the prior quarter. A significant portion of the current loan portfolio includes loans purchased through whole bank acquisitions resulting in purchased credit impairments which are not included in the allowance for loan losses. The allowance for loan losses as a percent of originated loans excluding PPP loans was 1.65% at September 30, 2020 compared to 1.53% the prior quarter. The increase in the allowance in the third quarter of 2020 was primarily due to the $1.5 million loan loss provisions related to anticipated COVID-19 adverse economic impacts.

Allowance for Loan Losses Percentages

(in thousands, except ratios)

September 30, June 30, 2020 December 31, September 30, 2020 2019 2019Originatedloans, net of $ 777,340 $ 789,075 $ 762,127 $ 687,290 deferred feesand costsSBA PPP loans,net of 135,177 132,800 ? ? deferred feesAcquiredloans, net of 317,622 359,300 415,253 437,088 unamortizeddiscountLoans, end of $ 1,230,139 $ 1,281,175 $ 1,177,380 $ 1,124,378 periodSBA PPP loans,net of (135,177) (132,800) ? ? deferred feesLoans, net ofSBA PPP loans $ 1,094,962 $ 1,148,375 $ 1,177,380 $ 1,124,378 and deferredfeesAllowance forloan lossesallocated to $ 12,809 $ 12,109 $ 9,551 $ 8,694 originatedloansAllowance forloan losses 2,027 1,264 769 483 allocated toother loansAllowance for $ 14,836 $ 13,373 $ 10,320 $ 9,177 loan lossesNon-accretabledifference onpurchased $ 1,661 $ 3,355 $ 6,290 $ 6,737 creditimpaired loansALL as apercentage of 1.21% 1.04% 0.88% 0.82% loans, end ofperiodALL as apercentage ofloans, net of 1.35% 1.16% 0.88% 0.82% SBA PPP loansand deferredfeesALL allocatedto originatedloans as apercentage of 1.65% 1.53% 1.25% 1.26% originatedloans, net ofdeferred feesand costsALL plusnon-accretabledifference asa percentageof loans, net 1.51% 1.46% 1.41% 1.42% of SBA PPPloans anddeferred feesand costs

One of the Companys strategic objectives for 2020 was to reduce nonperforming assets and classified assets. Nonperforming assets decreased to $14.9 million or 0.92% of total assets at September 30, 2020 compared to $17.4 million or 1.08% of total assets at June 30, 2020. Included in nonperforming assets at September 30, 2020 are $10.5 million of nonperforming assets acquired during recent whole-bank acquisitions. Originated nonperforming assets were only $4.4 million, 0.27% of total assets for the most recent quarter compared to $5.7 million, or 0.36% the prior quarter.

Substandard and special mention loans declined $15.2 million, or 27%, during the quarter ended September 30, 2020. The table below shows the decreases in substandard loans by quarter during 2020.

(in thousands) September 30, June 30, 2020 March 31, December 31, September 30, 2020 2020 2019 2019Specialmention $ 7,777 $ 19,958 $ 19,387 $ 10,856 $ 12,959 loanbalancesSubstandardloan 32,922 35,911 38,393 39,892 38,527 balancesCriticizedloans, end $ 40,699 $ 55,869 $ 57,780 $ 50,748 $ 51,486 of period

Deposits decreased $1 million to $1.271 billion at September 30, 2020 compared to $1.272 billion at June 30, 2020. Certificates of deposit represented all the deposit decline while money market, demand and savings accounts reflected increased balances. Certificates of deposit decreased by $26.4 million as the Company chose not to match higher rate local retail certificate competition.

On August 27, 2020, the Company issued ten-year, 6.00% fixed-to-floating subordinated notes totaling $15 million. The notes have a five-year non-call feature. The Company plans to use the funds for general corporate purposes with the ability to downstream to the Bank as capital if needed.

Review of OperationsNet interest income was $11.9 million for the third quarter of 2020 compared to $12.3 million for the second quarter of 2020, and $11.6 million for the quarter ended September 30, 2019. The net interest margin decreased to 3.11% for the third quarter of 2020 compared to 3.34% for both the second quarter of 2020 and the third quarter ended September 30, 2019. For the quarter ended September 30, 2020, the decrease in net interest income was primarily due to lower yields on interest-earning assets and loan portfolio shrinkage compared to the previous quarter.

Net interest income and net interest margin with and without loan purchase accounting:(in thousands, except yields and rates)

Three months ended September 30, 2020 June 30, 2020 March 31, 2020 December 31, 2019 September 30, 2019 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 MarginWith loan purchase $ 11,909 3.11% $ 12,303 3.34% $ 12,671 3.64% $ 11,775 3.41% $ 11,593 3.34% accretionLess non-accretabledifference realized asinterest from payoff (130) (0.03) (196) (0.05) (1,043) (0.30) (271) (0.08) (50) (0.01) of % % % % %purchased creditimpaired loansLess acceleratedaccretion from payoffof certain PCI loans ? ?% (99) (0.03) ? ?% ? ?% ? ?% with transferred %non-accretabledifferencesLess scheduled (276) (0.07) (247) (0.07) (233) (0.07) (233) (0.07) (233) (0.08) accretion interest % % % % %Without loan purchase $ 11,503 3.01% $ 11,761 3.19% $ 11,395 3.27% $ 11,271 3.26% $ 11,310 3.25% accretion

The yield on interest earning assets was 3.98% for the third quarter of 2020, compared to 4.32% the prior quarter, and 4.67% for the third quarter one year earlier. From the second quarter, the decrease in yield on interest earning assets is largely due to the increase in interest-bearing cash and cash equivalents. The cost of interest-bearing liabilities decreased to 1.06% for the third quarter from 1.16% one quarter earlier and 1.56% one year earlier. The primary decrease in the third quarter funding costs was due to lower deposit costs as the Bank repriced various deposit products and relied less on higher-costing certificates of deposit. For the nine months ended September 30, 2020, the net interest margin was 3.36% compared to 3.35% for the same time period one year earlier.

Loan loss provisions were $1.50 million for the quarter ended September 30, 2020 compared to $1.75 million for the quarter ended June 30, 2020 and $575,000 one year earlier. As previously mentioned, the Company provided $1.5 million related to the COVID-19 Q-factor in the third quarter bringing the 2020 COVID-19 Q-factor to $3.5 million. For the nine months ended September 30, 2020, provisions for loan losses were $5.25 million compared to $2.13 million for the nine months ended September 30, 2019.

Non-interest income increased to a quarter end high of $5.1 million for the quarter ended September 30, 2020 from the previous quarter end high of $5.0 million for the quarter ended June 30, 2020. The increase is largely due to higher gains on sale of mortgage loans, an increase in retail customer activity and the annual incentive paid on higher debit card activity, which is recorded in other income. Additionally, in the quarter ended September 30, 2020, the Banks acquired wealth management business partner exercised their contractual call originated prior to the acquisition, resulting in the sale of the wealth management business. The sale resulted in a $180 thousand gain recorded in the current quarter. For the nine months ended September 30, 2020, total non-interest income was $13.7 million compared to $11.2 million for the same period one year earlier.

Total non-interest expense declined to $10.7 million for the quarter ended September 30, 2020, or 6% from $11.4 million for the quarter ended June 30, 2020. This was due to a lower compensation expense and lower impairment on mortgage servicing rights (MSR), partially offset by increased data processing expenses associated with a larger average asset size and some seasonal increases in occupancy. For the nine months ended September 30, 2020, total non-interest expenses were $32.8 million compared to $32.3 million for the nine months ended June 30, 2019. The impact of the F&M acquisition on July 1, 2019 increased non-interest expense in 2020 in addition to the items discussed above.

Provisions for income taxes were $1.3 million for the third quarter ended September 30, 2020 compared to $1.1 million during the preceding quarter. For the nine months ended September 30, 2020, provisions for income taxes were $3.3 million compared to $2.3 million for the nine months ended September 30, 2019. The effective tax rate for the most recent quarter was 26.7% compared to 26.5% the prior quarter. For the nine-month period ended September 30, 2020, the effective tax rate was 26.6% compared to 26.4% for the corresponding period one year earlier.

These financial results are preliminary until the Form 10-Q is filed in November 2020.

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 28 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, 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; risks related to the ongoing integration of F. & M. Bancorp. of Tomah, Inc. into the Companys operations; 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, 2019 filed with the Securities and Exchange Commission (SEC) on March 10, 2020 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 and tangible common equity as a percent of tangible assets, 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 eliminates 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 and tangible common equity as a percent of tangible assets 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

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

September 30, June 30, 2020 December 31, September 30, 2020 (unaudited) (unaudited) 2019 (audited) 2019 (unaudited)Assets Cash and cash $ 115,474 $ 39,581 $ 55,840 $ 52,276 equivalentsOtherinterest-bearing 3,752 3,752 4,744 5,245 depositsSecuritiesavailable for 150,908 162,716 180,119 182,956 sale ?AFS?Securities heldto maturity 16,927 10,541 2,851 3,665 ?HTM?Equitysecurities withreadily 187 188 246 241 determinablefair valueOther 15,075 15,193 15,005 12,622 investmentsLoans receivable 1,230,139 1,281,175 1,177,380 1,124,378 Allowance for (14,836) (13,373) (10,320) (9,177) loan lossesLoans 1,215,303 1,267,802 1,167,060 1,115,201 receivable, netLoans held for 4,938 8,876 5,893 3,262 saleMortgage 3,498 3,509 4,282 4,245 servicing rightsOfficeproperties and 21,607 21,318 21,106 20,938 equipment, netAccrued interest 5,829 5,855 4,738 4,993 receivableIntangible 5,893 6,293 7,587 7,999 assetsGoodwill 31,498 31,498 31,498 31,841 Foreclosed andrepossessed 812 734 1,460 1,373 assets, netBank owned lifeinsurance 23,514 23,357 23,063 22,895 (?BOLI?)Other assets 7,378 6,301 5,757 5,612 TOTAL ASSETS $ 1,622,593 $ 1,607,514 $ 1,531,249 $ 1,475,364 Liabilities andStockholders? EquityLiabilities: Deposits $ 1,270,778 $ 1,272,197 $ 1,195,702 $ 1,161,750 Federal HomeLoan Bank(?FHLB?) and 124,491 124,484 130,971 113,466 Federal ReserveBank (?FRB?)advancesOther borrowings 58,297 43,595 43,560 44,545 Other 11,704 14,448 10,463 7,574 liabilitiesTotal 1,465,270 1,454,724 1,380,696 1,327,335 liabilitiesStockholders? equity:Common stock?$0.01 par value,authorized30,000,000;11,154,645;11,150,695; 112 112 113 113 11,266,954 and11,270,710shares issuedand outstanding,respectivelyAdditional 127,778 127,734 128,856 128,926 paid-in capitalRetained 29,239 25,759 22,517 19,348 earningsUnearneddeferred (710) (834) (462) (630) compensationAccumulatedother 904 19 (471) 272 comprehensiveincome (loss)Totalstockholders? 157,323 152,790 150,553 148,029 equityTOTALLIABILITIES AND $ 1,622,593 $ 1,607,514 $ 1,531,249 $ 1,475,364 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 Nine Months Ended September 30, June 30, September 30, September 30, September 30, 2020 2020 2019 2020 2019 (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)Interest anddividend income:Interest andfees on $ 14,154 $ 14,687 $ 14,646 $ 44,300 $ 40,036 loansInterest on 1,064 1,199 1,577 3,712 4,241 investmentsTotalinterest and 15,218 15,886 16,223 48,012 44,277 dividendincomeInterest expense:Interest on 2,255 2,607 3,371 8,042 8,890 depositsInterest onFHLB and FRB 430 448 639 1,386 2,213 borrowedfundsInterest onother 624 528 620 1,701 1,436 borrowedfundsTotalinterest 3,309 3,583 4,630 11,129 12,539 expenseNet interestincomebefore 11,909 12,303 11,593 36,883 31,738 provisionfor loanlossesProvisionfor loan 1,500 1,750 575 5,250 2,125 lossesNet interestincome afterprovision 10,409 10,553 11,018 31,633 29,613 for loanlossesNon-interest income:Servicecharges on 431 345 625 1,336 1,756 depositaccountsInterchange 556 489 476 1,509 1,267 incomeLoanservicing 1,144 1,315 714 3,144 1,902 incomeGain on sale 1,987 1,818 679 4,585 1,560 of loansLoan feesand service 320 244 471 1,041 860 chargesInsurancecommission 1 195 197 475 573 incomeNet gains(losses) on (1) 25 96 97 151 investmentsecuritiesNet gain(loss) on ? ? ? ? 2,295 sale ofbranchNet gain(loss) onsale of 180 252 ? 432 ? acquiredbusinesslinesSettlement ? 131 ? 131 ? proceedsOther 444 199 363 928 827 Totalnon-interest 5,062 5,013 3,621 13,678 11,191 incomeNon-interest expense:Compensationand related 5,538 5,908 5,295 16,881 14,605 benefitsOccupancy 993 899 905 2,898 2,725 Office 532 575 599 1,650 1,649 Data 1,145 1,024 1,092 3,165 2,953 processingAmortizationof 399 412 412 1,223 1,085 intangibleassetsMortgageservicing 603 991 325 2,330 822 rightsexpenseAdvertising,marketing 260 303 315 802 974 and publicrelationsFDIC premium 188 180 78 436 318 assessmentProfessional 434 353 561 1,391 1,961 servicesGains onrepossessed (105) (22) (16) (195) (143) assets, netOther 737 769 3,409 2,266 5,309 Totalnon-interest 10,724 11,392 12,975 32,847 32,258 expenseIncomebeforeprovision 4,747 4,174 1,664 12,464 8,546 for incometaxesProvisionfor income 1,267 1,105 430 3,309 2,252 taxesNet incomeattributable $ 3,480 $ 3,069 $ 1,234 $ 9,155 $ 6,294 to commonstockholdersPer share information:Basic $ 0.31 $ 0.28 $ 0.11 $ 0.82 $ 0.57 earningsDiluted $ 0.31 $ 0.28 $ 0.11 $ 0.82 $ 0.57 earningsCashdividends $ ? $ ? $ ? $ 0.21 $ 0.20 paidBook valueper share at $ 14.10 $ 13.70 $ 13.13 $ 14.10 $ 13.13 end ofperiodTangiblebook valueper share at $ 10.75 $ 10.31 $ 9.60 $ 10.75 $ 9.60 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 Nine Months Ended September 30, June 30, 2020 September 30, September 30, September 30, 2020 2019 2020 2019 GAAP pretax $ 4,747 $ 4,174 $ 1,664 $ 12,464 $ 8,546 incomeMergerrelated ? ? 2,911 ? 3,776 costsBranchclosure ? ? ? ? 15 costs (1)Audit andFinancial ? ? ? ? 358 Reporting(2)Net gain onsale of ? ? ? ? (2,295) branch (3)Net gain onsale ofacquired (180) (252) ? (432) ? businesslines (4)Settlementproceeds ? (131) ? (131) ? (5)Pretaxincome as 4,567 3,791 4,575 11,901 10,400 adjusted(6)Provisionfor incometax on net 1,219 1,005 1,180 3,166 2,746 income asadjusted(7)Net incomeas adjustedafterincome $ 3,348 $ 2,786 $ 3,395 $ 8,735 $ 7,654 taxes(non-GAAP)(6)GAAPdilutedearnings $ 0.31 $ 0.28 $ 0.11 $ 0.82 $ 0.57 per share,net of taxMergerrelated ? ? 0.19 ? 0.25 costs, netof taxBranchclosure ? ? ? ? ? costs, netof taxAudit andFinancial ? ? ? ? 0.02 ReportingNet gain onsale of ? ? ? ? (0.15) branchNet gain onsale ofacquired (0.01) (0.02) ? (0.03) ? businesslinesSettlement ? (0.01) ? (0.01) ? proceedsDilutedearningsper share,as $ 0.30 $ 0.25 $ 0.30 $ 0.78 $ 0.69 adjusted,net of tax(non-GAAP) Averagediluted 11,155,337 11,150,785 11,276,005 11,172,641 11,068,227 sharesoutstanding

(1) Branch closure costs include severance pay recorded in compensation and benefits, accelerated depreciation expense and lease termination fees included in occupancy and other costs included in other non-interest expense in the consolidated statement of operations. (2) Audit and financial reporting costs include additional audit and professional fees related to the change in our year end from September 30 to December 31, effective December 31, 2018.(3) Gain on sale of branch resulted from the sale of our sole Michigan office in Rochester Hills.(4) Gain on sale of acquired business lines resulted from (1) the sale of Wells Insurance Agency and (2) the termination and sale of the wealth management business line sales contract acquired in a former acquisition. (5) 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.(6) 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.(7) Provision for income tax on net income as adjusted is calculated at our effective tax rate for each respective period presented.



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

September 30, June 30, 2020 December 31, September 30, 2020 and 2019 2019 and Three Three Months and Three and Three Months Ended Months Months Ended Ended EndedNonperforming assets:Originatednonperforming assets:Nonaccrual $ 3,255 $ 3,951 $ 4,285 $ 4,816 loansAccruingloans past 698 1,455 946 842 due 90 daysor moreTotaloriginated 3,953 5,406 5,231 5,658 nonperformingloans (?NPL?)Other realestate owned 352 270 441 195 (?OREO?)Othercollateral 56 42 28 25 ownedTotaloriginatednonperforming $ 4,361 $ 5,718 $ 5,700 $ 5,878 assets(?NPAs?)Acquirednonperforming assets:Nonaccrual $ 9,899 $ 10,836 $ 14,771 $ 14,206 loansAccruingloans past 252 425 158 257 due 90 daysor moreTotalacquired 10,151 11,261 14,929 14,463 nonperformingloans (?NPL?)Other realestate owned 404 422 988 1,153 (?OREO?)Othercollateral ? ? 3 ? ownedTotalacquirednonperforming $ 10,555 $ 11,683 $ 15,920 $ 15,616 assets(?NPAs?)Totalnonperforming $ 14,916 $ 17,401 $ 21,620 $ 21,494 assets(?NPAs?)Loans, end of $ 1,230,139 $ 1,281,175 $ 1,177,380 $ 1,124,378 periodTotal assets, $ 1,622,593 $ 1,607,514 $ 1,531,249 $ 1,475,364 end of periodRatios: OriginatedNPLs to total 0.32% 0.42% 0.44% 0.50% loansAcquired NPLsto total 0.83% 0.88% 1.27% 1.29% loansOriginatedNPAs to total 0.27% 0.35% 0.37% 0.40% assetsAcquired NPAsto total 0.65% 0.73% 1.04% 1.06% assets

Nonperforming Total Assets

(in thousand, except ratios)

September 30, June 30, 2020 December 31, September 30, 2020 and 2019 2019 and Three Three Months and Three and Three Months Ended Months Months Ended Ended EndedNonperforming assets:Nonaccrual loansCommercial $ 2,762 $ 3,221 $ 5,705 $ 6,324 real estateAgricultural 5,252 5,979 7,568 6,191 real estateCommercial andindustrial (?C 853 1,306 1,850 2,072 &I?)Agricultural 1,651 1,496 1,702 1,989 operatingResidential 2,536 2,666 2,063 2,255 mortgageConsumer 100 119 168 191 installmentTotalnonaccrual $ 13,154 $ 14,787 $ 19,056 $ 19,022 loansAccruing loanspast due 90 950 1,880 1,104 1,099 days or moreTotalnonperforming 14,104 16,667 20,160 20,121 loans (?NPLs?)Foreclosed andrepossessed 812 734 1,460 1,373 assets, netTotalnonperforming $ 14,916 $ 17,401 $ 21,620 $ 21,494 assets(?NPAs?)Troubled DebtRestructurings $ 19,778 $ 13,119 $ 12,594 $ 11,795 (?TDRs?)Nonaccrual $ 7,199 $ 6,992 $ 7,198 $ 4,601 TDRsLoans, end of $ 1,230,139 $ 1,281,175 $ 1,177,380 $ 1,124,378 periodTotal assets, $ 1,622,593 $ 1,607,514 $ 1,531,249 $ 1,475,364 end of periodRatios: NPLs to total 1.15% 1.30% 1.71% 1.79% loansNPAs to total 0.92% 1.08% 1.41% 1.46% assets

Allowance for Loan Losses(in thousand, except ratios)

September 30, June 30, 2020 December 31, September 30, 2020 and 2019 2019 and Three Three Months and Three and Three Months Ended Months Months Ended Ended EndedAllowancefor loanlosses $ 13,373 $ 11,835 $ 9,177 $ 8,759 (?ALL?), atbeginning ofperiodLoans charged off:Commercial/Agricultural ? ? (156 ) ? real estateC&I/Agricultural (103 ) (246 ) ? ? operatingResidential (51 ) ? (16 ) (133 ) mortgageConsumer (10 ) (65 ) (119 ) (46 ) installmentTotal loans (164 ) (311 ) (291 ) (179 ) charged offRecoveriesof loans previouslycharged off:Commercial/Agricultural 73 76 ? ? real estateC&I/Agricultural 33 ? ? ? operatingResidential 1 6 3 1 mortgageConsumer 20 17 31 21 installmentTotalrecoveriesof loans 127 99 34 22 previouslycharged off:Net loanscharged off (37 ) (212 ) (257 ) (157 ) (?NCOs?)Additions toALL viaprovisionfor loan 1,500 1,750 1,400 575 lossescharged tooperationsALL, at end $ 14,836 $ 13,373 $ 10,320 $ 9,177 of periodAverageoutstanding $ 1,258,224 $ 1,266,273 $ 1,136,330 $ 1,143,252 loan balanceRatios: NCOs(annualized) 0.01% 0.07% 0.09% 0.05% to averageloans

LoanComposition September 30, June 30, 2020 December 31, September 30,(in 2020 2019 2019thousands)Originated Loans:Commercial/Agricultural real estate:Commercial $ 322,028 $ 314,390 $ 302,546 $ 244,809 real estateAgricultural 32,530 35,138 34,026 34,527 real estateMulti-family 100,148 90,617 71,877 69,556 real estateConstructionand land 80,992 94,856 71,467 52,319 developmentC&I/Agricultural operating:Commercialand 79,959 80,369 89,730 80,941 industrialAgricultural 24,324 25,813 20,717 22,057 operatingResidential mortgage:Residential 90,100 95,664 108,619 114,507 mortgagePurchased 6,547 6,861 8,407 10,120 HELOC loansConsumer installment:Originatedindirect 28,535 32,031 39,585 42,894 paperOther 13,221 14,175 15,546 15,718 consumerOriginatedloans before 778,384 789,914 762,520 687,448 SBA PPPloansSBA PPP 139,166 137,330 ? ? loansTotaloriginated $ 917,550 $ 927,244 $ 762,520 $ 687,448 loansAcquired Loans:Commercial/Agricultural real estate:Commercial $ 178,645 $ 195,335 $ 211,913 $ 220,237 real estateAgricultural 40,613 43,054 51,337 54,914 real estateMulti-family 9,520 13,022 15,131 18,202 real estateConstructionand land 8,346 15,276 14,943 13,231 developmentC&I/Agricultural operating:Commercialand 24,413 29,477 44,004 46,291 industrialAgricultural 9,634 12,124 17,063 17,770 operatingResidential mortgage:Residential 51,754 56,760 67,713 73,563 mortgageConsumer installment:Other 1,409 1,639 2,640 3,052 consumerTotalacquired $ 324,334 $ 366,687 $ 424,744 $ 447,260 loansTotal Loans: Commercial/Agricultural real estate:Commercial $ 500,673 $ 509,725 $ 514,459 $ 465,046 real estateAgricultural 73,143 78,192 85,363 89,441 real estateMulti-family 109,668 103,639 87,008 87,758 real estateConstructionand land 89,338 110,132 86,410 65,550 developmentC&I/Agricultural operating:Commercialand 104,372 109,846 133,734 127,232 industrialAgricultural 33,958 37,937 37,780 39,827 operatingResidential mortgage:Residential 141,854 152,424 176,332 188,070 mortgagePurchased 6,547 6,861 8,407 10,120 HELOC loansConsumer installment:Originatedindirect 28,535 32,031 39,585 42,894 paperOther 14,630 15,814 18,186 18,770 consumerGross loansbefore SBA 1,102,718 1,156,601 1,187,264 1,134,708 PPP loansSBA PPP 139,166 137,330 ? ? loansGross loans $ 1,241,884 $ 1,293,931 $ 1,187,264 $ 1,134,708 Unearned netdeferredfees and (5,033) (5,369) (393) (158) costs andloans inprocessUnamortizeddiscount on (6,712) (7,387) (9,491) (10,172) acquiredloansTotal loans $ 1,230,139 $ 1,281,175 $ 1,177,380 $ 1,124,378 receivable

Deposit Composition(in thousands)

September 30, June 30, December 31, September 30, 2020 2020 2019 2019Non-interestbearing $ 229,217 $ 223,536 $ 168,157 $ 174,202 demanddepositsInterestbearing 279,648 270,116 223,102 209,644 demanddepositsSavings 191,511 185,816 156,599 165,419 accountsMoney market 246,651 242,536 246,430 193,654 accountsCertificate 323,751 350,193 401,414 418,831 accountsTotal $ 1,270,778 $ 1,272,197 $ 1,195,702 $ 1,161,750 deposits

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

Three months ended September 30, 2020 Three months ended June 30, 2020 Three months ended September 30, 2019 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 $ 77,774 $ 18 0.09 % $ 19,995 $ 5 0.10 % $ 32,376 $ 203 2.49 %equivalentsLoans 1,258,224 14,154 4.48 % 1,266,273 14,687 4.66 % 1,143,252 14,646 5.08 %receivableInterestbearing 3,752 23 2.44 % 3,788 23 2.44 % 5,577 34 2.42 %depositsInvestmentsecurities 166,622 846 2.02 % 174,875 988 2.27 % 185,921 1,174 2.56 %(1)Other 15,145 177 4.65 % 15,160 183 4.86 % 13,072 166 5.04 %investmentsTotalinterest $ 1,521,517 $ 15,218 3.98 % $ 1,480,091 $ 15,886 4.32 % $ 1,380,198 $ 16,223 4.67 %earningassets (1)Averageinterest bearingliabilities:Savings $ 183,381 $ 98 0.21 % $ 171,285 $ 99 0.23 % $ 158,967 $ 155 0.39 %accountsDemand 285,993 231 0.32 % 267,429 260 0.39 % 219,955 550 0.99 %depositsMoney market 255,160 280 0.44 % 243,264 350 0.58 % 200,647 593 1.17 %accountsCD?s 297,691 1,469 1.96 % 328,543 1,706 2.09 % 381,331 1,870 1.95 %IRA?s 41,852 177 1.68 % 42,117 192 1.83 % 44,184 203 1.82 %Total $ 1,064,077 $ 2,255 0.84 % $ 1,052,638 $ 2,607 1.00 % $ 1,005,084 $ 3,371 1.33 %depositsFHLBadvances and 173,758 1,054 2.41 % 186,191 976 2.11 % 169,908 1,259 2.94 %otherborrowingsTotalinterest $ 1,237,835 $ 3,309 1.06 % $ 1,238,829 $ 3,583 1.16 % $ 1,174,992 $ 4,630 1.56 %bearingliabilitiesNet interest $ 11,909 $ 12,303 $ 11,593 incomeInterest 2.92 % 3.16 % 3.11 %rate spreadNet interest 3.11 % 3.34 % 3.34 %margin (1)Averageinterestearningassets to 1.23 1.19 1.17 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 September 30, 2020, June 30, 2020 and September 30, 2019. The FTE adjustment to net interest income included in the rate calculations totaled $0, $0 and $27 thousand for the three months ended September 30, 2020, June 30, 2020, and September 30, 2019, respectively.

Nine months ended September 30, 2020 Nine months ended September 30, 2019 Interest Average Interest Average Average Income/ Yield/ Average Income/ Yield/ Balance Expense Rate Balance Expense Rate (1) (1)Averageinterest earningassets:Cash andcash $ 42,946 $ 141 0.44 % $ 29,489 $ 542 2.46 %equivalentsLoans 1,232,678 44,300 4.80 % 1,054,492 40,036 5.08 %receivableInterestbearing 3,967 73 2.46 % 6,153 107 2.33 %depositsInvestmentsecurities 173,595 2,965 2.28 % 167,023 3,119 2.58 %(1)Other 15,104 533 4.71 % 11,853 473 5.34 %investmentsTotalinterest $ 1,468,290 $ 48,012 4.37 % $ 1,269,010 $ 44,277 4.68 %earningassets (1)Averageinterest bearingliabilities:Savings $ 169,754 $ 348 0.27 % $ 156,851 $ 479 0.41 %accountsDemand 262,748 865 0.44 % 200,387 1,288 0.86 %depositsMoney market 244,965 1,240 0.68 % 172,671 1,423 1.10 %accountsCD?s 326,776 5,021 2.05 % 348,139 5,163 1.98 %IRA?s 42,221 568 1.80 % 41,576 537 1.73 %Total $ 1,046,464 $ 8,042 1.03 % $ 919,624 $ 8,890 1.29 %depositsFHLBadvances and 185,256 3,087 2.23 % 153,960 3,649 3.17 %otherborrowingsTotalinterest $ 1,231,720 $ 11,129 1.21 % $ 1,073,584 $ 12,539 1.56 %bearingliabilitiesNet interest $ 36,883 $ 31,738 incomeInterest 3.16 % 3.12 %rate spreadNet interest 3.36 % 3.35 %margin (1)Averageinterestearningassets to 1.19 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 nine months ended September 30, 2020 and September 30, 2019. The FTE adjustment to net interest income included in the rate calculations totaled $1 thousand and $103 thousand for the nine months ended September 30, 2020 and September 30, 2019, respectively.

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

Three Months Ended Nine Months Ended September June 30, September September September 30, 2020 2020 30, 30, 2020 30, 2019 2019Ratios based on net income:Return onaverage assets 0.85 % 0.78 % 0.34 % 0.87 % 0.61 %(annualized)Return onaverage equity 8.93 % 8.23 % 3.35 % 9.05 % 5.94 %(annualized)Efficiency 63 % 66 % 85 % 65 % 75 %ratioNet interestmargin with 3.11 % 3.34 % 3.34 % 3.36 % 3.35 %loan purchaseaccretionNet interestmargin without 3.01 % 3.19 % 3.25 % 3.15 % 3.27 %loan purchaseaccretionRatios based onnet income as adjusted(non-GAAP):Return onaverage assets 0.82 % 0.71 % 0.93 % 66 % 75 %as adjusted^2(annualized)Return onaverage equity 8.59 % 7.47 % 9.22 % 7.69 % 7.23 %as adjusted^3(annualized)Efficiencyratio^4 as 64 % 67 % 66 % 66 % 69 %adjusted(non-GAAP)

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

Three Months Ended Nine Months Ended September 30, June 30, 2020 September 30, September 30, September 30, 2020 2019 2020 2019 GAAPearnings $ 3,480 $ 3,069 $ 1,234 $ 9,155 $ 6,294 after incometaxesNet incomeas adjustedafter income $ 3,348 $ 2,786 $ 3,395 $ 8,735 $ 7,654 taxes(non-GAAP)(1)Average $ 1,627,497 $ 1,585,421 $ 1,454,455 $ 1,580,733 $ 1,368,430 assetsReturn onaverage 0.85 % 0.78 % 0.34 % 0.87 % 0.61 %assets(annualized)Return onaverageassets as 0.82 % 0.71 % 0.93 % 0.66 % 0.75 %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 Nine Months Ended September 30, June 30, 2020 September 30, September 30, September 30, 2020 2019 2020 2019 GAAPearnings $ 3,480 $ 3,069 $ 1,234 $ 9,155 $ 6,294 after incometaxesNet incomeas adjustedafter income $ 3,348 $ 2,786 $ 3,395 $ 8,735 $ 7,654 taxes(non-GAAP)(1)Average $ 154,996 $ 149,973 $ 146,116 $ 151,691 $ 141,608 equityReturn onaverage 8.93 % 8.23 % 3.35 % 9.05 % 5.94 %equity(annualized)Return onaverageequity as 8.59 % 7.47 % 9.22 % 7.69 % 7.23 %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 Nine Months Ended September 30, June 30, 2020 September 30, September 30, September 30, 2020 2019 2020 2019 Non-interestexpense $ 10,724 $ 11,392 $ 12,975 $ 32,847 $ 32,258 (GAAP)Mergerrelated ? ? (2,911 ) ? (3,776 ) Costs (1)BranchClosure ? ? ? ? (15 ) Costs (1)Audit andfinancial ? ? ? ? (358 ) reporting(1)Non-interestexpense as 10,724 11,392 10,064 32,847 28,109 adjusted(non-GAAP)Non-interest 5,062 5,013 3,621 13,678 11,191 incomeNet interest 11,909 12,303 11,593 36,883 31,738 marginEfficiencyratio $ 16,971 $ 17,316 $ 15,214 $ 50,561 $ 42,929 denominator(GAAP)Net gain onsale of ? ? ? ? (2,295 ) branch (1)Net gain onacquired (180 ) (252 ) ? (432 ) ? businesslines (1)Settlement ? (131 ) ? (131 ) ? proceeds (1)Efficiencyratio $ 16,791 $ 16,933 $ 15,214 $ 49,998 $ 40,634 denominator(non-GAAP)Efficiency 63% 66% 85% 65% 75% ratio (GAAP)Efficiencyratio as 64% 67% 66% 66% 69% adjusted(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 September 30, June 30, 2020 September 30,share at end of period 2020 2019Total stockholders? equity $ 157,323 $ 152,790 $ 148,029 Less: Goodwill (31,498) (31,498) (31,841) Less: Intangible assets (5,893) (6,293) (7,999) Tangible common equity $ 119,932 $ 114,999 $ 108,189 (non-GAAP)Ending common shares 11,154,645 11,150,695 11,270,710 outstandingBook value per share $ 14.10 $ 13.70 $ 13.13 Tangible book value per $ 10.75 $ 10.31 $ 9.60 share (non-GAAP)

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

Tangible common equityas a percent of September 30, June 30, 2020 September 30,tangible assets at end 2020 2019of periodTotal stockholders? $ 157,323 $ 152,790 $ 148,029 equityLess: Goodwill (31,498 ) (31,498 ) (31,841 ) Less: Intangible (5,893 ) (6,293 ) (7,999 ) assetsTangible common equity $ 119,932 $ 114,999 $ 108,189 (non-GAAP)Total Assets $ 1,622,593 $ 1,607,514 $ 1,475,364 Less: Goodwill (31,498 ) (31,498 ) (31,841 ) Less: Intangible (5,893 ) (6,293 ) (7,999 ) assetsTangible Assets $ 1,585,202 $ 1,569,723 $ 1,435,524 (non-GAAP)Less SBA PPP Loans (139,166 ) (137,330 ) ? Tangible Assets,excluding SBA PPP Loans $ 1,446,036 $ 1,432,393 $ 1,435,524 (non-GAAP)Total stockholders?equity to total assets 9.70 % 9.50% 10.03 % ratioTangible common equityas a percent of 7.57 % 7.33% 7.54 % tangible assets(non-GAAP)Tangible common equityas a percent oftangible assets, 8.29 % 8.03% 7.54 % 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 and tangible common equity as a percent of tangible assets are non-GAAP measure 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) and Reconciliation of tangible common equity as a percent of tangible assets (non-GAAP).