GlobeNewswire Inc | Oct 22, 2021 04:30PM EDT

October 22, 2021

EMLENTON, Pa., Oct. 22, 2021 (GLOBE NEWSWIRE) -- Emclaire Financial Corp (NASDAQ:EMCF), the parent holding company of The Farmers National Bank of Emlenton, reported consolidated net income available to common stockholders of $3.4million, or $1.23per diluted common share, for the three months ended September 30, 2021, an increase of $1.6 million, or 87.7%, from $1.8 million, or $0.66per diluted common share, reported for the comparable period in 2020. Net income available to common shareholders for the nine-month period ended September 30, 2021 was $7.4 million, or $2.69 per diluted common share, an increase of $3.2 million, or 76.3%, from $4.2 million, or $1.54 per diluted common share, for the same period in 2020. The increase in net income for both periods compared to the same periods in 2020resulted from an increasein net interest income and adecrease in the provision for loan losses, partially offset by increases in noninterest expense and the provision for income taxes.

William C. Marsh, Chairman, President and Chief Executive Officer of the Corporation and the Bank, noted, We are extremely pleased to announce record earnings for the third quarter. The Bank hasachieved solid earnings, balance sheet growth and strong credit quality while navigatingthrough the ongoing pandemic, staffing challengesand industry-wide margin compression. We continueto process and benefit from forgiveness requests related tothe Small Business Administration's Paycheck Protection Program (PPP) through which we provided a total of$81.6million ofloans to local small businesses of which only $10.5 million remained outstanding at quarter end. We remain focused on meeting our customers' needs and providing a competitive return to our shareholders."

QUARTERLY OPERATING RESULTS OVERVIEW

Net income available to common stockholders increased $1.6 million, or 87.7%,to $3.4million, or $1.23per diluted common share, for the three months ended September 30, 2021, compared to net income of $1.8million, or $0.66per diluted common shareforsame period in 2020. The increase resulted from increases in net interest income and noninterest income of $1.4 million and $208,000, respectively, and a$625,000 decrease in the provision for loan losses, partially offset by increases in noninterest expense and the provision for income taxes of$306,000 and $350,000, respectively.

Net interest income increased $1.4 million, or 19.4%, to $8.6million for the three months ended September 30, 2021from $7.2million for the same period in 2020. The increase in net interest income resulted from a decrease in interest expense of $756,000, or 39.1%, and anincrease in interest income of $644,000, or 7.0%. The Corporation's cost of funds decreased 37basis points to 0.47% for the three months ended September 30, 2021, compared to 0.84% for the same period in 2020, resulting in an $832,000 decrease in interest expense. The decrease in the cost of funds was partially offset by an $85,000 increase in interest expense caused by a $35.2 million increase in average interest-bearing deposits to $729.6 million for the three months ended September 30, 2021, compared to $694.4 million for the same period in 2020.The increase in interest income resulted primarily from a 25basis point increase in the yield on loans to 4.36% for the three months ended September 30, 2021 from 4.11% for the same period in 2020, causing a $527,000 increase in interest income.During the three months ended September 30, 2021,the Corporation recognized $1.2 million of interest income related to the PPP loans, compared to $389,000 for the same period in 2020. Without the PPP loans, the Corporation would have experienced a 25basis point decrease inthe yield on loans to 3.86% for the three months ended September 30, 2021. Theincrease in loan yield was partially offset by a$22.5 million decrease in the average balance of loans outstanding as a result of PPP loan forgiveness and a reduction in the Bank's residential mortgage and home equity loan portfolios.Thedecrease in loan volume caused a reduction of $237,000 in interest income for the quarter.Additionally,average security balances increased $93.4 million to $186.4 million for the three months ended September 30, 2021, compared to $93.1 million for the same period in 2020, causing a $500,000 increase in interest income. This was partially offset by a 36 basis point decrease in the yield on securities to 2.08% for the three months ended September 30, 2021 from 2.44% for the same period in 2020, causing a $91,000 decrease in interest income.

The provision for loan losses decreased $625,000, or 83.3%, to $125,000 for the three months ended September 30, 2021from $750,000 for the same period in 2020.The higher provision for loan losses recorded during the third quarter of 2020 was due to growth in the residential and consumer loan portfolios, an increase in the specific pandemic qualitative allowance factor, increased risk ratings for loans which were granted payment deferrals and an increase in criticized and classified loans. Criticized and classified loans decreased $3.7 million during the quarter ended September 30, 2021to $39.3 million, or 3.6%, of total assetsfrom $43.0 million, or 3.9%, of total assets at June 30, 2021.

Noninterest income increased $208,000, or 18.3%, to $1.3million for the three months ended September 30, 2021from $1.1million for the same period in 2020due to increases in gains on the sale of securities, other income and fees and service chargesof $170,000, $51,000and $18,000, respectively, partially offset by a decreasein gains on the sale of loans of$30,000. During the quarter ended September 30, 2021, the Corporation sold a total of $4.4 million of primarily low-yielding mortgage-backedsecurities and realized a net gain of $170,000. The sale proceeds were utilized to repay a $5.0 millionFederal Home Loan Bank (FHLB) term advance. The increase in other income was primarily related to an increase in interchange fee income resulting fromeasing pandemic restrictions leading to an increase in consumer spending.

Noninterest expense increased $306,000, or 5.6%, to $5.8million for the three months ended September 30, 2021from $5.4million for the same period in 2020.The increase was primarily attributable to increases in other noninterest expense, professional fees, compensation and benefits expenseandintangible amortization expense, of $191,000, $57,000, $56,000 and $27,000, respectively. The increase in other noninterest expense was primarily related to prepayment penalties of $173,000 incurred during the quarter ended September 30, 2021as a result of the aforementioned early repayment of FHLB debt.

The provision for income taxes increased $350,000, or 91.2%, to$734,000 for the three months ended September 30, 2021from $384,000 for the same period in 2020as a result of the increase in net income before provision for income taxes.

YEAR-TO-DATE OPERATING RESULTS OVERVIEW

Net income available to common stockholders increased $3.2million, or 76.3%,to $7.4million, or $2.69per diluted common share, for the nine months ended September 30, 2021, compared to net income of $4.2million, or $1.54per diluted common shareforsame period in 2020. The increase resulted from a $2.7million increasein net interest income and a$2.0 million decrease in the provision for loan losses, partially offset by a $65,000 decrease in noninterest income and increases in noninterest expense and the provision for income taxes of$706,000 and $679,000, respectively.

Net interest income increased $2.7million, or 12.8%, to $23.5million for the nine months ended September 30, 2021from $20.8 million for the same period in 2020. The increase in net interest income resulted from a decrease in interest expense of $2.3million, or 36.3%, and a $371,000, or 1.4%, increase in interest income. The Corporation's cost of funds decreased 40basis points to 0.56% for the nine months ended September 30, 2021, compared to 0.96% for the same period in 2020, resulting in a$2.5million decrease in interest expense. The decrease in the cost of funds was partially offset by a $204,000 increase in interest expense caused by a $52.2million increase in average interest-bearing deposits to $715.4million for the nine months ended September 30, 2021, compared to$663.2 million for the same period in 2020.The decrease in interest income resulted from a 13basis point decrease in the yield on loans to 4.15% for the nine months ended September 30, 2021, compared to 4.28% for the same period in 2020, causing a $789,000 decrease in interest income. Without the PPP loans, the Corporation would have experienced a 38 basis point decrease inthe yield on loans to 3.90% for the nine months ended September 30, 2021. This decrease in yield was partially offset by a $23.3million increase in the average balance of loans outstanding as a result of record loan production during 2020 and the addition of PPPloans in 2020 and 2021, causing a $734,000 increase in interest income. During the nine months ended September 30, 2021,the Corporation recognized $2.3 million of interest income related to the PPP loans, compared to $654,000 for the same period in 2020. Additionally,average security balances increased $49.5 million to $153.4 million for the nine months ended September 30, 2021, compared to $103.9million for the same period in 2020, causing a $860,000 increase in interest income. This was partially offset by a 30basis point decrease in the yield on securities to 2.26% for the nine months ended September 30, 2021 from 2.56% for the same period in 2020, causing a $257,000 decrease in interest income.

The provision for loan losses decreased $2.0million, or 75.4%, to $650,000 for the nine months ended September 30, 2021from $2.6million for the same period in 2020.The higher provision for loan losses recorded during the first nine months of2020 was due to growth in the residential and consumer loan portfolios, the addition of a specific pandemic qualitative allowance factor, increased risk ratingsfor loans which were granted payment deferrals and an increase in criticized and classified loans. Criticized and classified loans decreased $5.1million during the nine months ended September 30, 2021to $39.3 million, or 3.6%, of total assetsfrom $44.4 million, or 4.3%, of total assets at December 31, 2020.

Noninterest income decreased $65,000, or 1.8%, to $3.5million for the nine months ended September 30, 2021, compared to $3.5million for the same period in 2020due to decreases in gains on the sale of securities and fees and service charges of $434,000 and $59,000, respectively, partially offset by increases in other income andgains on the sale of loans of$253,000and $172,000, respectively. During the nine months ended September 30, 2021, the Corporation sold a total of $4.6million of primarily low-yielding mortgage-backedsecurities and realized a net gain of $201,000. The sale proceeds were utilized to repay a $5.0 millionFederal Home Loan Bank (FHLB) term advance. During the nine months ended September 30, 2020, the Corporation sold a total of $39.4 million of low-yielding mortgage-backed and collateralized mortgage obligation securities and realized a net gain of $635,000. The sale proceeds were utilized to repay $15.0 million in FHLBterm advances and purchase higher yielding municipal securities.The increase in other income was primarily related to an increase in interchange fee income resulting fromeasing pandemic restrictions leading to an increase in consumer spending.During the nine months ended September 30, 2021, the Corporation sold $13.5million of residential mortgage loans to the FHLB and realized a net gain of $353,000, compared to sales of $4.1million and a net gainof $181,000 recognized during the same period in 2020.

Noninterest expense increased $706,000, or 4.3%, to $17.3 million for the nine months ended September 30, 2021, compared to $16.6 million for the same period in 2020.The increase was primarily attributable to increases in compensation and benefits expense, professional fees,FDIC insurance expense, other noninterest expense,premises and equipment expense and intangible amortization expense of $260,000, $189,000, $97,000, $92,000, $46,000 and $22,000, respectively.

The provision for income taxes increased $679,000, or 76.1%, to$1.6 million for the nine months ended September 30, 2021from $892,000 for the same period in 2020as a result of the increase in net income before provision for income taxes.

CONSOLIDATED BALANCE SHEET & ASSET QUALITY OVERVIEW

Total assets increased $52.7 million, or 5.1%,to $1.1 billion at September 30, 2021from $1.0 billion at December 31, 2020. The increasein assetswas driven primarily by a $73.9 millionincrease in securities, partially offset by an $18.8million decrease in net loans receivable. Liabilities increased $49.7 million, or 5.3%, to $990.5 million at September30, 2021from$940.8 million at December 31, 2020due to a $54.9 million increasein customer deposits, partially offset by a $5.0 million reduction in borrowed funds.

Nonperforming assetsdecreased $1.4 millionto $3.0million, or 0.28% of total assets at September 30, 2021, compared to $4.4million, or 0.43% of total assets at December 31, 2020.Classified and criticized assets decreased $5.1 million to $39.3 million or 3.6% of total assetsat September 30, 2021, compared to$44.4 million or 4.3% of total assets at December 31, 2020. Classified and criticized assets remain elevated largely due to the impact of COVID-19 on the hospitality loan portfolio. At September30, 2021 the Corporation's hotel portfolio totaled $32.1 million, of which $30.1 million was rated classified or criticized.

The COVID-19 pandemic has impacted the global and local economies and some customers' ability to continue making timely loan payments. The Corporation addressed the challenges of those facing hardship due to the pandemic by granting payment deferrals on 402 loans, which totaled $108.1 million. At September30, 2021, four loan relationships comprised of10loans totaling $16.0million remained on deferral, all of which are associated with borrowers within the hospitality industry. The Corporation continues to carefully monitor these loans and the entire loan portfolio and is well-positioned to weather a potential weakening of asset quality that may occur related to current circumstances.

Stockholders equity increased $3.0 million, or 3.2%, to $94.4 million at September 30, 2021from $91.5 million at December 31, 2020primarily due to a $4.9million increase in retained earnings as a result of $7.4 million of net income available to common stockholders, less $2.4 million of common dividends paid, partially offset by a$2.3 million decrease in accumulated other comprehensive income. The Corporation remains well capitalized and is wellpositioned for continued growth with total stockholders equity at 8.7% of total assets. Book value per common share was $33.16 at September 30, 2021, compared to $32.07at December 31, 2020.

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

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



EMCLAIRE FINANCIAL CORPConsolidated Financial Highlights(Unaudited - Dollar amounts in thousands, except share data)

CONSOLIDATEDOPERATING RESULTS Three month period Nine month period DATA: ended September 30, ended September 30, 2021 2020 2021 2020 Interest income $ 9,816 $ 9,172 $ 27,527 $ 27,156 Interest expense 1,179 1,935 4,020 6,308 Net interest 8,637 7,237 23,507 20,848 incomeProvision for 125 750 650 2,642 loan lossesNoninterest 1,348 1,140 3,478 3,543 incomeNoninterest 5,751 5,445 17,281 16,575 expenseIncome beforeprovision for 4,109 2,182 9,054 5,174 income taxesProvision for 734 384 1,571 892 income taxesNet income 3,375 1,798 7,483 4,282 Preferred stock - - 95 91 dividendsNet incomeavailable to $ 3,375 $ 1,798 $ 7,388 $ 4,191 commonstockholders Basic earnings $ 1.24 $ 0.66 $ 2.72 $ 1.55 per common shareDiluted earnings $ 1.23 $ 0.66 $ 2.69 $ 1.54 per common shareDividends per $ 0.30 $ 0.30 $ 0.90 $ 0.90 common share Return on average 1.22 % 0.70 % 0.94 % 0.58 %assets (1)Return on average 14.15 % 8.01 % 10.79 % 6.49 %equity (1)Return on average 14.81 % 8.41 % 11.16 % 6.67 %common equity (1)Yield on averageinterest-earning 3.78 % 3.83 % 3.68 % 3.99 %assetsCost of averageinterest-bearing 0.62 % 1.06 % 0.72 % 1.19 %liabilitiesCost of funds 0.47 % 0.84 % 0.56 % 0.96 %Net interest 3.33 % 3.03 % 3.15 % 3.07 %marginEfficiency ratio 57.54 % 64.14 % 63.57 % 68.85 %

(1 ) Returns are annualized for the periods reported.

CONSOLIDATED BALANCE SHEET DATA: As of As of 9/30/2021 12/31/2020 Total assets $ 1,084,974 $ 1,032,323 Cash and equivalents 38,066 37,439 Securities 186,930 113,056 Loans, net 781,859 800,413 Intangible assets 20,397 20,543 Deposits 948,523 893,627 Borrowed funds 27,050 32,050 Common stockholders' equity 90,234 87,274 Stockholders' equity 94,440 91,480 Book value per common share $ 33.16 $ 32.07 Net loans to deposits 82.43 % 89.57 %Allowance for loan losses to total loans 1.26 % 1.18 %Nonperforming assets to total assets 0.28 % 0.43 %Stockholders' equity to total assets 8.70 % 8.86 %Shares of common stock outstanding 2,721,212 2,721,212