GlobeNewswire Inc | Oct 25, 2021 08:30AM EDT

October 25, 2021

EAU CLAIRE, Wis., Oct. 25, 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 $5.0 million and earnings per diluted share of $0.47 for the quarter ended September 30, 2021, compared to $4.7 million and $0.44 per diluted share for the quarter ended June 30, 2021, and $3.5 million and $0.31 per diluted share for the quarter ended September 30, 2020, respectively. Net income as adjusted (non-GAAP)1 was $5.0 million and $0.47 per diluted share for the third quarter of 2021, compared to net income as adjusted of $4.7 million and $0.44 per diluted share for the preceding quarter, and $3.3 million and $0.30 per diluted share for the third quarter a year ago. For the first nine months of 2021, earnings increased 66% to a record $15.2 million, or $1.41 per diluted share compared to earnings of $9.2 million or $0.82 per diluted share, for the first nine months of 2020.

The Companys third quarter 2021 operating results reflected the following changes from the second quarter of 2021: (1) increase in loan interest income due to an increase of $0.6 million in the accretion of deferred fees on the Small Business Administrations Paycheck Protection Program (SBA PPP); (2) modest increase in net interest income resulting from an increase in the investment portfolio size and lower deposit cost; (3) decreases in gain on sale of loans of $0.5 million due to lower loan origination and sales activity; (4) an increase in compensation expense of $0.3 million largely due to higher incentive compensation based on performance, including loan growth; and (5) the reversal of MSR impairment of $0.4 million.

Book value per share was $15.77 at September 30, 2021, compared to $15.33 at June 30, 2021, and $14.10 at September 30, 2020. Tangible book value per share (non-GAAP)5 was $12.37 at September 30, 2021, compared to $11.95 at June 30, 2021 and $10.75 at September 30, 2020. Book value per share increased $1.67 over the past 12 months, an 11.8% increase from September 30, 2020. Tangible book value per share increased $1.62 over the past 12 months, a 15.1% increase from September 30, 2020. These increases were net of the Companys payment of the annual shareholder dividend in the first quarter of 2021 of $0.23 per share.

We were pleased with our continued focus on building market share, the significant progress with PPP loan forgiveness for our clients and further improvements in support areas. Our execution has produced strong results, including the 15% increase in tangible book value year over year, 9% year-to-date loan growth rate, and disciplined operational and expense management. Stronger employment dynamics in our markets than national averages and the seasonal strength of summer also contributed to exceptionally strong loan growth in all commercial loan types this quarter. SBA PPP loans decreased by $44 million to $31 million or 16% of the total in SBA PPP loans originated. Our current loan pipeline is understandably softer following the strong quarterly performance and the seasonal slowdown we see in the fall and winter, said Stephen Bianchi, Chairman, President and Chief Executive Officer.

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

-- Quarterly earnings of $5.0 million, or $0.47 per diluted share for the third quarter ended September 30, 2021, were the highest third quarter earnings in the companys history and up modestly from the quarter ended June 30, 2021, earnings of $4.7 million or $0.44 per diluted share, and increased from the quarter ended September 30, 2020, earnings of $3.5 million or $0.31 per diluted share. Fiscal 2021 earnings have exceeded fiscal 2020s previous record earnings. Year-over-year earnings for the nine-months ended September 30, 2021, were $15.2 million, or $1.41 per share compared to $9.2 million, or $0.82 per share for the nine months ended September 30, 2020. -- Stockholders equity as a percent of total assets was 9.46% at September 30, 2021, compared to 9.57% at June 30, 2021. Tangible common equity (TCE) as a percent of tangible assets (non-GAAP)5 was 7.58% at September 30, 2021, compared to 7.62% at June 30, 2021. The modest quarterly asset growth offset the growth in shareholders equity. We utilized a portion of our strong quarterly earnings to repurchase 180 thousand shares of stock during the quarter. Repurchases made during the third quarter used all remaining shares authorized under our November 30, 2020 share repurchase program. On July 23, 2021, the Board of Directors adopted a new share repurchase program, pursuant to which the Company may repurchase up to 533 thousand shares of its common stock, or approximately 5% of the outstanding shares on that date. As of September 30, 2021, we have approximately 389 thousand shares remaining under this new share repurchase program. We balance the positive effect on earnings per share accretion with the impact on TCE ratio and regulatory capital ratios. The shares repurchased have reduced outstanding shares by above 6% in the past twelve months which impacts earnings per share positively, while reducing TCE ratio growth by approximately 50 basis points. said James Broucek, Executive Vice President and CFO. -- No loan loss provision was realized during the quarter ended September 30, 2021, or in the quarter ended June 30, 2021, due to lower CARES Act Section 4013 deferrals, low charge-off activity, decreases in criticized assets and improving economic conditions in our markets 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 may allow further reductions in this economic Q-Factor. -- The Banks COVID-19 related modifications under Section 4013 of the CARES Act decreased to $20.6 million, or 1.6% of gross loans at September 30, 2021, versus $35.7 million, or 3% of gross loans at June 30, 2021. At September 30, 2021, hotel industry sector loans represent $19.2 million of the approved deferrals. -- The allowance for loan losses on originated loans, excluding SBA PPP loans, decreased to 1.54% at September 30, 2021, from 1.72% at June 30, 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. The allowance for loan losses to total loans decreased to 1.35% at September 30, 2021, down from 1.43% at June 30, 2021, and up from 1.21% at September 30, 2020. 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. -- Nonperforming assets increased modestly to $12.1 million at September 30, 2021, compared to $8.8 million one quarter earlier. This increase was due to a $4.5 million commercial real estate loan secured by a senior living facility in our market. We are working with this borrower on a plan to improve cash flow and return to accrual status. This resulted in substandard assets increasing to $27.1 million at September 30, 2021, compared to $25.9 million at June 30, 2021. These increases were more than offset by the $9.8 million decrease in special mention loans to $2.5 million. The decrease in special mention loans largely related to acquired loans.

Balance Sheet and Asset Quality

Total assets increased $39.0 million during the quarter to $1.75 billion at September 30, 2021, compared to $1.71 billion at June 30, 2021, largely due to loan growth, funded by deposit growth.

Securities available for sale decreased $9.3 million during the quarter ended September 30, 2021, to $234.4 million from $243.7 million at June 30, 2021. This decrease was primarily due to principal repayments. In addition, the Company sold $7.1 million of securities, primarily consisting of lower yielding trust preferred securities issued by large bank holding companies. This decrease was partially offset by $6.5 million in purchases of subordinated debt issued by banks.

Securities held to maturity increased $8.1 million to $67.7 million during the quarter ended September 30, 2021, from $59.6 million at June 30, 2021, primarily due to a net increase in agency mortgage-backed securities as purchases exceeded principal reductions.

Loans receivable increased by $67.1 million to $1.249 billion at September 30, 2021, from $1.181 billion as of June 30, 2021. The originated loan portfolio before SBA PPP loans increased $128.8 million in the quarter. This growth was largely in multifamily and commercial real estate loans, with almost all categories increasing. Acquired loans decreased by $20.1 million and total SBA PPP loans decreased $43.6 million during the current quarter.

The allowance for loan losses was $16.8 million at September 30, 2021, representing 1.35% of total loans receivable compared to $16.8 million at June 30, 2021, representing 1.43% of total loans receivable. Excluding the SBA PPP loans, which are guaranteed by the SBA, the allowance for loan losses was 1.38% at September 30, 2021, compared to 1.52% at June 30, 2021. Approximately 18% of the loan portfolio, excluding SBA loans at September 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 allocated to originated loans as a percent of originated loans excluding SBA PPP loans was 1.54% at September 30, 2021, compared to 1.72% at June 30, 2021, with the decrease due to growth in the originated loan portfolio. For the quarter ended September 30, 2021, the Bank had modest net charge-offs of $13 thousand.

Allowance for Loan Losses Percentages

(in thousands, except ratios)

September 30, June 30, 2021 December 31, 2020 September 30, 2021 2020Originatedloans, netof deferred $ 1,006,159 $ 877,534 $ 835,769 $ 777,340 fees andcostsSBA PPPloans, net 29,753 71,508 120,711 135,177 of deferredfeesAcquiredloans, netof 212,742 232,516 281,101 317,622 unamortizeddiscountLoans, end $ 1,248,654 $ 1,181,558 $ 1,237,581 $ 1,230,139 of periodSBA PPPloans, net (29,753 ) (71,508 ) (120,711 ) (135,177 ) of deferredfeesLoans, netof SBA PPPloans and $ 1,218,901 $ 1,110,050 $ 1,116,870 $ 1,094,962 deferredfeesAllowancefor loanlossesallocated $ 15,505 $ 15,059 $ 14,819 $ 12,809 tooriginatedloansAllowancefor loanlosses 1,327 1,786 2,224 2,027 allocatedto otherloansAllowancefor loan $ 16,832 $ 16,845 $ 17,043 $ 14,836 lossesALL as apercentageof loans, 1.35 % 1.43 % 1.38 % 1.21 %end ofperiodALL as apercentageof loans,net of SBA 1.38 % 1.52 % 1.53 % 1.35 %PPP loansanddeferredfeesALLallocatedtooriginatedloans as apercentage 1.54 % 1.72 % 1.77 % 1.65 %oforiginatedloans, netof deferredfees andcosts

Nonperforming assets increased to $12.1 million or 0.69% of total assets at September 30, 2021, compared to $8.8 million or 0.51% of total assets at June 30, 2021. The increase in non-performing assets was largely due to a $4.5 million loan. This loan is secured by a senior living facility located in one of our markets and the current estimated collateral value of the loan approximates the loans carrying value. Included in nonperforming assets at September 30, 2021, are $5.4 million of nonperforming assets acquired during recent whole-bank acquisitions. Originated nonperforming assets were $6.7 million, or 0.38% of total assets for the most recent quarter. Over the past year, nonperforming assets declined 19% from $14.9 million at September 30, 2020, to $12.1 million at September 30, 2021. Over the past year, total criticized loans decreased 27% from $40.7 million at September 30, 2020, to $29.7 million at September 30, 2021.

(in thousands) September 30, June 30, 2021 March 31, December 31, September 30, 2021 2021 2020 2020Specialmention $ 2,548 $ 12,308 $ 13,659 $ 6,672 $ 7,777 loanbalancesSubstandardloan 27,137 25,890 26,064 28,541 32,922 balancesCriticizedloans, end $ 29,685 $ 38,198 $ 39,723 $ 35,213 $ 40,699 of period

Deposits increased $37.1 million to $1.408 billion at September 30, 2021, from $1.371 billion at June 30, 2021. The growth of non-maturity deposits of $70.6 million was partially offset by a decrease in certificates of deposit of $33.5 million. The decrease in certificates of deposit was due to the Company choosing not to match higher rate local retail certificate competition and some of these closed certificates were transferred to money market deposits.

Review of Operations

Net interest income was $13.7 million for the third quarter ended September 30, 2021, compared to $12.8 million for the second quarter ended June 30, 2021, and $11.9 million for the quarter ended September 30, 2020. Compared to the second quarter, net interest income benefited from increases in: (1) the accretion on SBA PPP debt forgiveness of $0.6 million; (2) growth in the investment portfolio; and (3) lower deposit costs.

The net interest margin (NIM) increased to 3.34% in the third quarter ended September 30, 2021, compared to 3.22% for the second quarter ended June 30, 2021, and 3.11% for the quarter ended September 30, 2020. This increase in NIM from the second quarter is largely due to a 13 basis point increase in SBA PPP net loan fee accretion and an 8 basis point reduction in deposit costs. This increase was partially offset by lower loan yields, primarily due to the change in nonaccrual loans.

In comparison to the quarter ended September 30, 2020, the current quarter NIM benefited 29 basis points from increased SBA PPP net loan fee accretion and 37 basis points from lower deposit costs. This increase was partially offset by decreases in NIM largely due to lower loan and investment yields due to reductions in market rates, and the increases in the balances of lower yielding investments and interest-bearing cash.

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 September 30, 2021 June 30, 2021 March 31, 2021 December 31, 2020 September 30, 2020 Net Interest Net Net Interest Net Net Interest Net Net Interest Net Net Interest Net Income Interest Income Interest Income Interest Income Interest Income Interest Margin Margin Margin Margin MarginAs reported $ 13,688 3.34 % $ 12,831 3.22 % $ 12,764 3.31 % $ 13,372 3.51 % $ 11,909 3.11 %Less non-accretabledifference realizedas interest from $ (8 ) ? % $ (37 ) (0.01 ) % $ (58 ) (0.02 ) % $ (324 ) (0.08 ) % $ (130 ) (0.03 ) %payoff of purchasedcredit impaired(?PCI?) loansLess acceleratedaccretion from payoffof certain PCI loans $ (12 ) ? % $ ? ? % $ (90 ) (0.02 ) % $ (872 ) (0.23 ) % $ ? ? %with transferrednon-accretabledifferencesLess scheduled $ (261 ) (0.06 ) % $ (265 ) (0.07 ) % $ (266 ) (0.07 ) % $ (252 ) (0.07 ) % $ (276 ) (0.07 ) %accretion interestWithout loan purchase $ 13,407 3.28 % $ 12,529 3.14 % $ 12,350 3.20 % $ 11,924 3.13 % $ 11,503 3.01 %accretionLess SBA PPP net loan $ (1,878 ) (0.46 ) % $ (1,309 ) (0.33 ) % $ (1,750 ) (0.45 ) % $ (985 ) (0.26 ) % $ (643 ) (0.17 ) %fee accretionWithout SBA PPPpurchase and net loan $ 11,529 2.82 % $ 11,220 2.81 % $ 10,600 2.75 % $ 10,939 2.87 % $ 10,860 2.84 %fee 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 ? ? 47,467 1,770 47,467 1,770 OriginationsLess: 2021SBA PPP LoanForgiveness (52,238 ) (1,750 ) ? ? (52,238 ) (1,750 )and FeeAccretionSBA PPPLoans, March 71,464 1,241 47,467 1,770 118,931 3,011 31, 20212021 SBA PPPLoan ? ? 8,323 1,715 8,323 1,715 OriginationsLess: 2021SBA PPP LoanForgiveness (50,057 ) (933 ) (2,272 ) (376 ) (52,329 ) (1,309 )and FeeAccretionSBA PPPLoans, June 21,407 308 53,518 $ 3,109 74,925 3,417 30, 20212021 SBA PPPLoan ? ? 64 9 64 9 OriginationsLess: 2021SBA PPP LoanForgiveness (18,286 ) (279 ) (25,402 ) (1,599 ) (43,688 ) (1,878 )and FeeAccretionSBA PPPLoans, $ 3,121 $ 29 $ 28,180 $ 1,519 $ 31,301 $ 1,548 September30, 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 8 basis points in the quarter ended September 30, 2021. Some of this reduction was due to the cost of CDs decreasing 15 basis points from 1.45% at June 30, 2021, to 1.30% at September 30, 2021. At September 30, 2021, the Bank had approximately $47 million of certificate of deposit accounts maturing in the fourth quarter with a weighted average cost of approximately 0.80% and approximately $156 million of certificate of deposit accounts maturing in 2022 with a weighted average cost of approximately 1.50%. Approximately 80% of the 2022 maturities occur in the first half of 2022. The approximate weighted average cost of new certificates in the third quarter of 2021 was below 0.3%.

Loan loss provisions were zero for the quarters ended September 30, 2021, June 30, 2021, and $1.5 million for the quarter ended September 30, 2020. No loan loss provision was realized during the quarters ended September 30, 2021, and June 30, 2021, due to lower CARES Act Section 4013 deferrals, low charge-off activity, decreases in criticized assets and improving economic conditions in our markets from those seen in the last quarter of 2020. Continued improving economic conditions in our markets, have resulted in improving trends for businesses, especially for those most impacted by the pandemic. For the nine-months ended September 30, 2021, provision for loan losses was zero compared to $5.25 million for the nine months ended September 30, 2020. The year-to-date September 30, 2020, provision for loan losses expense due to the impact of the pandemic was approximately $3.5 million, with the remaining provision split due to loan growth and changes in credit quality.

Non-interest income decreased to $3.4 million in the quarter ended September 30, 2021, compared to $3.8 million in the quarter ended June 30, 2021, and $5.1 million in the quarter ended September 30, 2020. The decrease in the third quarter compared to the second quarter was largely due to a reduction in gain on sale of loans of $0.5 million due to lower volume of loans originated and sold. This decrease was modestly offset by the receipt of the Companys annual debit card incentive in the third quarter of $0.1 million recorded in other income. The decrease in non-interest income during the current quarter compared to the comparable prior year quarter was a result of the following factors: (1) lower gain on sale of loans; (2) lower loan servicing income; and (3) no gain on sale of acquired business lines.

Total non-interest expense increased $0.1 million in the third quarter of 2021 to $10.3 million, compared to $10.2 million for the quarter ended June 30, 2021, and decreased from $10.7 million for the quarter ended September 30, 2020. The increase from the second quarter was largely due to the increase in compensation, as incentives increased based on performance, including strong loan originations. The reversal of $0.4 million of previously recorded MSR impairment in the third quarter offset other non-interest expense increases. The decrease from the third quarter of 2020 was due to the reversal of MSR impairment in third quarter of 2021 and a modest impairment recorded in the third quarter of 2020. This was partially offset by $0.2 million of higher incentive compensation as discussed above which more than offset the reduction in full time equivalent employees from a year ago.

Provisions for income taxes, increased to $1.8 million in the third quarter of 2021 from the second quarter of 2021 at $1.7 million. The effective tax rate for the most recent quarter was 26.7% compared to 26.8% for the prior quarter. The effective tax rate was 26.7% for the comparable prior year quarter.

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

September 30, June 30, 2021 December 31, September 30, 2021 (unaudited) 2020 2020 (unaudited) (audited) (unaudited)Assets Cash and cash $ 102,341 $ 128,440 $ 119,440 $ 115,474 equivalentsOtherinterest-bearing 1,512 1,512 3,752 3,752 depositsSecuritiesavailable for 234,425 243,746 144,233 150,908 sale ?AFS?Securities heldto maturity 67,739 59,582 43,551 16,927 ?HTM?Equitysecurities withreadily 327 297 200 187 determinablefair valueOther 14,965 14,966 14,948 15,075 investmentsLoans receivable 1,248,654 1,181,558 1,237,581 1,230,139 Allowance for (16,832 ) (16,845 ) (17,043 ) (14,836 )loan lossesLoans 1,231,822 1,164,713 1,220,538 1,215,303 receivable, netLoans held for 1,675 3,109 3,075 4,938 saleMortgageservicing 4,082 3,862 3,252 3,498 rights, netOfficeproperties and 21,730 21,121 21,165 21,607 equipment, netAccrued interest 4,882 4,898 5,652 5,829 receivableIntangible 4,297 4,696 5,494 5,893 assetsGoodwill 31,498 31,498 31,498 31,498 Foreclosed andrepossessed 4 145 197 812 assets, netBank owned lifeinsurance 24,149 23,991 23,684 23,514 (?BOLI?)Other assets 8,029 7,896 8,416 7,378 TOTAL ASSETS $ 1,753,477 $ 1,714,472 $ 1,649,095 $ 1,622,593 Liabilities andStockholders? EquityLiabilities: Deposits $ 1,408,315 $ 1,371,226 $ 1,295,256 $ 1,270,778 Federal HomeLoan Bank 111,512 111,496 123,498 124,491 (?FHLB?)advancesOther borrowings 58,400 58,380 58,328 58,297 Other 9,324 9,354 11,449 11,704 liabilitiesTotal 1,587,551 1,550,456 1,488,531 1,465,270 liabilitiesStockholders? equity:Common stock?$0.01 par value,authorized30,000,000;10,518,885,10,696,075; 105 107 111 112 11,056,349 and11,154,645shares issuedand outstanding,respectivelyAdditional 119,929 121,732 126,154 127,068 paid-in capitalRetained 44,660 40,117 32,809 29,239 earningsAccumulatedother 1,232 2,060 1,490 904 comprehensiveincomeTotalstockholders? 165,926 164,016 160,564 157,323 equityTOTALLIABILITIES AND $ 1,753,477 $ 1,714,472 $ 1,649,095 $ 1,622,593 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 June 30, September September September 30, 2021 2021 30, 2020 30, 2021 30, 2020 (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)Interest anddividend income:Interest andfees on $ 14,537 $ 13,960 $ 14,154 $ 43,014 $ 44,300 loansInterest on 1,638 1,518 1,064 4,260 3,712 investmentsTotalinterest and 16,175 15,478 15,218 47,274 48,012 dividendincomeInterest expense:Interest on 1,354 1,521 2,255 4,589 8,042 depositsInterest onFHLB and FRB 389 384 430 1,183 1,386 borrowedfundsInterest onother 744 742 624 2,217 1,701 borrowedfundsTotalinterest 2,487 2,647 3,309 7,989 11,129 expenseNet interestincomebefore 13,688 12,831 11,909 39,285 36,883 provisionfor loanlossesProvisionfor loan ? ? 1,500 ? 5,250 lossesNet interestincome afterprovision 13,688 12,831 10,409 39,285 31,633 for loanlossesNon-interest income:Servicecharges on 463 395 431 1,256 1,336 depositaccountsInterchange 600 647 556 1,776 1,509 incomeLoanservicing 842 825 1,144 2,560 3,144 incomeGain on sale 1,014 1,522 1,987 4,131 4,585 of loansLoan feesand service 118 151 320 547 1,041 chargesInsurancecommission ? ? ? ? 474 incomeNet gains(losses) on 73 37 (1 ) 344 97 investmentsecuritiesNet gain onsale ofacquired ? ? 180 ? 432 businesslinesSettlement ? ? ? ? 131 proceedsOther 338 216 445 801 929 Totalnon-interest 3,448 3,793 5,062 11,415 13,678 incomeNon-interest expense:Compensationand related 5,733 5,473 5,538 16,802 16,881 benefitsOccupancy 1,313 1,314 1,396 3,943 4,106 Data 1,558 1,396 1,331 4,296 3,735 processingAmortizationof 399 399 399 1,197 1,223 intangibleassetsMortgageservicing 37 441 603 28 2,330 rightsexpense, netAdvertising,marketing 220 194 260 576 802 and publicrelationsFDIC premium 148 82 188 395 436 assessmentProfessional 347 381 434 1,250 1,391 servicesGains onrepossessed (3 ) (29 ) (105 ) (150 ) (195 )assets, netOther 568 547 680 1,670 2,138 Totalnon-interest 10,320 10,198 10,724 30,007 32,847 expenseIncomebeforeprovision 6,816 6,426 4,747 20,693 12,464 for incometaxesProvisionfor income 1,819 1,720 1,267 5,484 3,309 taxesNet incomeattributable $ 4,997 $ 4,706 $ 3,480 $ 15,209 $ 9,155 to commonstockholdersPer share information:Basic $ 0.47 $ 0.44 $ 0.31 $ 1.41 $ 0.82 earningsDiluted $ 0.47 $ 0.44 $ 0.31 $ 1.41 $ 0.82 earningsCashdividends $ ? $ ? $ ? $ 0.23 $ 0.21 paidBook valueper share at $ 15.77 $ 15.33 $ 14.10 $ 15.77 $ 14.10 end ofperiodTangiblebook valueper share at $ 12.37 $ 11.95 $ 10.75 $ 12.37 $ 10.75 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 June 30, September September September 30, 2021 2021 30, 2020 30, 2021 30, 2020 GAAP pretax $ 6,816 $ 6,426 $ 4,747 $ 20,693 $ 12,464 incomeNet gain onsale ofacquired ? ? (180 ) ? (432 )businesslines (1)Settlementproceeds ? ? ? ? (131 )(2)FHLBborrowings ? ? ? 102 ? prepaymentfee (3)Pretaxincome as 6,816 6,426 4,567 20,795 11,901 adjusted(4)Provisionfor incometax on net 1,819 1,720 1,219 5,511 3,166 income asadjusted(5)Net incomeas adjusted $ 4,997 $ 4,706 $ 3,348 $ 15,284 $ 8,735 (non-GAAP)(4)GAAPdilutedearnings $ 0.47 $ 0.44 $ 0.31 $ 1.41 $ 0.82 per share,net of taxNet gain onsale ofacquired ? ? (0.01 ) ? (0.03 )businesslinesSettlement ? ? ? ? (0.01 )proceedsFHLBborrowings $ ? $ ? ? $ 0.01 ? prepaymentfeeDilutedearningsper share,as $ 0.47 $ 0.44 $ 0.30 $ 1.42 $ 0.78 adjusted,net of tax(non-GAAP) Averagediluted 10,622,595 10,789,843 11,155,337 10,797,502 11,172,641 sharesoutstanding

(1) Net 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. (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 September 30, June 30, 2021 December 31, September 30,(in 2021 2020 2020thousands)Originated Loans:Commercial/Agricultural real estate:Commercial $ 508,540 $ 420,565 $ 351,113 $ 322,028 real estateAgricultural 49,082 42,925 31,741 32,530 real estateMulti-family 150,094 113,790 112,731 100,148 real estateConstructionand land 84,399 89,586 91,241 80,992 developmentC&I/Agricultural operating:Commercialand 90,581 80,783 95,290 79,959 industrialAgricultural 25,390 23,014 24,457 24,324 operatingResidential mortgage:Residential 68,986 72,965 86,283 90,100 mortgagePurchased 3,921 4,949 6,260 6,547 HELOC loansConsumer installment:Originatedindirect 17,689 20,377 25,851 28,535 paperOther 9,414 10,296 12,056 13,221 consumerOriginatedloans before 1,008,096 879,250 837,023 778,384 SBA PPPloansSBA PPP 31,301 74,925 123,702 139,166 loansTotaloriginated $ 1,039,397 $ 954,175 $ 960,725 $ 917,550 loansAcquired Loans:Commercial/Agricultural real estate:Commercial $ 129,784 $ 139,497 $ 156,562 $ 178,645 real estateAgricultural 27,552 29,740 37,054 40,613 real estateMulti-family 5,928 7,401 9,421 9,520 real estateConstructionand land 1,139 1,202 7,276 8,346 developmentC&I/Agricultural operating:Commercialand 16,554 19,701 21,263 24,413 industrialAgricultural 4,541 4,893 8,328 9,634 operatingResidential mortgage:Residential 30,795 33,781 45,103 51,754 mortgageConsumer installment:Other 516 648 1,157 1,409 consumerTotalacquired $ 216,809 $ 236,863 $ 286,164 $ 324,334 loansTotal Loans: Commercial/Agricultural real estate:Commercial $ 638,324 $ 560,062 $ 507,675 $ 500,673 real estateAgricultural 76,634 72,665 68,795 73,143 real estateMulti-family 156,022 121,191 122,152 109,668 real estateConstructionand land 85,538 90,788 98,517 89,338 developmentC&I/Agricultural operating:Commercialand 107,135 100,484 116,553 104,372 industrialAgricultural 29,931 27,907 32,785 33,958 operatingResidential mortgage:Residential 99,781 106,746 131,386 141,854 mortgagePurchased 3,921 4,949 6,260 6,547 HELOC loansConsumer installment:Originatedindirect 17,689 20,377 25,851 28,535 paperOther 9,930 10,944 13,213 14,630 consumerGross loansbefore SBA 1,224,905 1,116,113 1,123,187 1,102,718 PPP loansSBA PPP 31,301 74,925 123,702 139,166 loansGross loans $ 1,256,206 $ 1,191,038 $ 1,246,889 $ 1,241,884 Unearned netdeferredfees and (3,486 ) (5,133 ) (4,245 ) (5,033 )costs andloans inprocessUnamortizeddiscount on (4,066 ) (4,347 ) (5,063 ) (6,712 )acquiredloansTotal loans $ 1,248,654 $ 1,181,558 $ 1,237,581 $ 1,230,139 receivable

Nonperforming Originated and Acquired Assets

(in thousands, except ratios)

September 30, June 30, 2021 December 31, September 30, 2021 and Three and Three 2020 and Three 2020 and Months Ended Months Ended Months Ended Three Months EndedNonperforming assets:Originatednonperforming assets:Nonaccrual $ 6,408 $ 2,420 $ 3,649 $ 3,255 loansAccruingloans past 295 88 415 698 due 90 daysor moreTotaloriginated 6,703 2,508 4,064 3,953 nonperformingloans (?NPL?)Other realestate owned ? ? 63 352 (?OREO?)Othercollateral 2 16 41 56 ownedTotaloriginatednonperforming $ 6,705 $ 2,524 $ 4,168 $ 4,361 assets(?NPAs?)Acquirednonperforming assets:Nonaccrual $ 5,298 $ 5,655 $ 7,098 $ 9,899 loansAccruingloans past 130 454 171 252 due 90 daysor moreTotalacquired 5,428 6,109 7,269 10,151 nonperformingloans (?NPL?)Other realestate owned 2 129 93 404 (?OREO?)Othercollateral ? ? ? ? ownedTotalacquirednonperforming $ 5,430 $ 6,238 $ 7,362 $ 10,555 assets(?NPAs?)Totalnonperforming $ 12,135 $ 8,762 $ 11,530 $ 14,916 assets(?NPAs?)Loans, end of $ 1,248,654 $ 1,181,558 $ 1,237,581 $ 1,230,139 periodTotal assets, $ 1,753,477 $ 1,714,472 $ 1,649,095 $ 1,622,593 end of periodRatios: OriginatedNPLs to total 0.54 % 0.21 % 0.33 % 0.32 %loansAcquired NPLsto total 0.43 % 0.52 % 0.59 % 0.83 %loansOriginatedNPAs to total 0.38 % 0.15 % 0.25 % 0.27 %assetsAcquired NPAsto total 0.31 % 0.36 % 0.45 % 0.65 %assets

Nonperforming Total Assets

(in thousand, except ratios)

September 30, June 30, 2021 December 31, September 30, 2021 and Three and Three 2020 and Three 2020 and Three Months Ended Months Ended Months Ended Months EndedNonperforming assets:Nonaccrual loansCommercial $ 5,427 $ 1,027 $ 827 $ 2,762 real estateAgricultural 3,567 3,716 5,084 5,252 real estateCommercial andindustrial (?C 311 313 357 853 &I?)Agricultural 1,063 1,163 1,872 1,651 operatingResidential 1,263 1,768 2,451 2,536 mortgageConsumer 75 88 156 100 installmentTotalnonaccrual $ 11,706 $ 8,075 $ 10,747 $ 13,154 loansAccruing loanspast due 90 425 542 586 950 days or moreTotalnonperforming 12,131 8,617 11,333 14,104 loans (?NPLs?)Foreclosed andrepossessed 4 145 197 812 assets, netTotalnonperforming $ 12,135 $ 8,762 $ 11,530 $ 14,916 assets(?NPAs?)Troubled DebtRestructurings $ 15,689 $ 16,597 $ 18,477 $ 19,778 (?TDRs?)Nonaccrual $ 4,324 $ 4,861 $ 6,735 $ 7,199 TDRsLoans, end of $ 1,248,654 $ 1,181,558 $ 1,237,581 $ 1,230,139 periodTotal assets, $ 1,753,477 $ 1,714,472 $ 1,649,095 $ 1,622,593 end of periodRatios: NPLs to total 0.97 % 0.73 % 0.92 % 1.15 %loansNPAs to total 0.69 % 0.51 % 0.70 % 0.92 %assets

Deposit Composition(in thousands)

September 30, June 30, December 31, September 30, 2021 2021 2020 2020Non-interestbearing $ 280,611 $ 253,097 $ 238,348 $ 229,217 demanddepositsInterestbearing 381,315 375,005 301,764 279,648 demanddepositsSavings 229,623 220,698 196,348 191,511 accountsMoney market 291,242 263,390 245,549 246,651 accountsCertificate 225,524 259,036 313,247 323,751 accountsTotal $ 1,408,315 $ 1,371,226 $ 1,295,256 $ 1,270,778 deposits

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

Three months ended September 30, 2021 Three months ended June 30, 2021 Three months ended September 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 $ 111,192 $ 50 0.18 % $ 113,561 $ 28 0.10 % $ 77,774 $ 18 0.09 %equivalentsLoans 1,192,636 14,537 4.84 % 1,186,439 13,960 4.72 % 1,258,224 14,154 4.48 %receivableInterestbearing 1,512 8 2.10 % 1,754 9 2.06 % 3,752 23 2.44 %depositsInvestmentsecurities 303,325 1,412 1.85 % 283,557 1,308 1.85 % 166,622 846 2.02 %(1)Other 14,961 168 4.46 % 15,020 173 4.62 % 15,145 177 4.65 %investmentsTotalinterest $ 1,623,626 $ 16,175 3.95 % $ 1,600,331 $ 15,478 3.88 % $ 1,521,517 $ 15,218 3.98 %earningassets (1)Averageinterest bearingliabilities:Savings $ 216,304 $ 95 0.17 % $ 219,804 $ 99 0.18 % $ 183,381 $ 98 0.21 %accountsDemand 392,080 280 0.28 % 360,314 257 0.29 % 285,993 231 0.32 %depositsMoney market 276,582 193 0.28 % 258,638 182 0.28 % 255,160 280 0.44 %accountsCD?s 207,494 682 1.30 % 240,224 868 1.45 % 297,691 1,469 1.96 %IRA?s 39,525 104 1.04 % 39,970 115 1.15 % 41,852 177 1.68 %Total $ 1,131,985 $ 1,354 0.47 % $ 1,118,950 $ 1,521 0.55 % $ 1,064,077 $ 2,255 0.84 %depositsFHLBadvances and 169,891 1,133 2.65 % 171,261 1,126 2.64 % 173,758 1,054 2.41 %otherborrowingsTotalinterest $ 1,301,876 $ 2,487 0.76 % $ 1,290,211 $ 2,647 0.82 % $ 1,237,835 $ 3,309 1.06 %bearingliabilitiesNet interest $ 13,688 $ 12,831 $ 11,909 incomeInterest 3.19 % 3.06 % 2.92 %rate spreadNet interest 3.34 % 3.22 % 3.11 %margin (1)Averageinterestearningassets to 1.25 1.24 1.23 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 September30, 2021, June 30, 2021 and September30, 2020. The FTE adjustment to net interest income included in the rate calculations totaled $1, $1 and $0 thousand for the three months ended September30, 2021, June 30, 2021 and September30, 2020, respectively.

Nine months ended September 30, 2021 Nine months ended September 30, 2020 Interest Average Interest Average Average Income/ Yield/ Average Income/ Yield/ Balance Expense Rate Balance Expense Rate (1) (1)Averageinterest earningassets:Cash andcash $ 118,064 $ 107 0.12 % $ 42,946 $ 141 0.44 %equivalentsLoans 1,197,469 43,014 4.80 % 1,232,678 44,300 4.80 %receivableInterestbearing 2,227 37 2.22 % 3,967 73 2.46 %depositsInvestmentsecurities 263,655 3,606 1.83 % 173,595 2,965 2.28 %(1)Other 15,006 510 4.54 % 15,104 533 4.71 %investmentsTotalinterest $ 1,596,421 $ 47,274 3.96 % $ 1,468,290 $ 48,012 4.37 %earningassets (1)Averageinterest bearingliabilities:Savings $ 211,320 $ 277 0.18 % $ 169,754 $ 348 0.27 %accountsDemand 361,248 788 0.29 % 262,748 865 0.44 %depositsMoney market 263,195 577 0.29 % 244,965 1,240 0.68 %accountsCD?s 237,706 2,592 1.46 % 326,776 5,021 2.05 %IRA?s 40,119 355 1.18 % 42,221 568 1.80 %Total $ 1,113,588 $ 4,589 0.55 % $ 1,046,464 $ 8,042 1.03 %depositsFHLBadvances and 173,889 3,400 2.61 % 185,256 3,087 2.23 %otherborrowingsTotalinterest $ 1,287,477 $ 7,989 0.83 % $ 1,231,720 $ 11,129 1.21 %bearingliabilitiesNet interest $ 39,285 $ 36,883 incomeInterest 3.13 % 3.16 %rate spreadNet interest 3.29 % 3.36 %margin (1)Averageinterestearningassets to 1.24 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 nine months ended September30, 2021 and September30, 2020, respectively. The FTE adjustment to net interest income included in the rate calculations totaled $3 and $1 thousand for the nine months ended September30, 2021 and September30, 2020, 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, 2021 2021 30, 2020 30, 2021 30, 2020Ratios basedon net income:Return onaverage 1.13 % 1.10 % 0.85 % 1.19 % 0.77 %assets(annualized)Return onaverage 12.00 % 11.63 % 8.93 % 12.51 % 8.06 %equity(annualized)Return onaveragetangible 15.34 % 14.98 % 11.79 % 16.12 % 10.78 %commonequity^5(annualized)Efficiency 60 % 61 % 63 % 59 % 65 %ratioNet interestmargin withloan 3.34 % 3.22 % 3.11 % 3.29 % 3.36 %purchaseaccretionNet interestmarginwithout loan 3.28 % 3.14 % 3.01 % 3.21 % 3.15 %purchaseaccretionRatios basedon netincome as adjusted(non-GAAP):Return onaverageassets as 1.13 % 1.10 % 0.82 % 1.19 % 0.74 %adjusted^2(annualized)Return onaverageequity as 12.00 % 11.63 % 8.59 % 12.57 % 7.69 %adjusted^3(annualized)Return onaveragetangiblecommon 15.34 % 14.98 % 11.34 % 16.20 % 10.29 %equity asadjusted^5(annualized)Efficiencyratio^4 as 60 % 61 % 64 % 59 % 66 %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, 2021 September 30, September 30, September 30, 2021 2020 2021 2020 GAAPearnings $ 4,997 $ 4,706 $ 3,480 $ 15,209 $ 9,155 after incometaxesNet incomeas adjustedafter income $ 4,997 $ 4,706 $ 3,348 $ 15,284 $ 8,735 taxes(non-GAAP)(1)Average $ 1,748,065 $ 1,716,394 $ 1,627,497 $ 1,713,932 $ 1,580,733 assetsReturn onaverage 1.13 % 1.10 % 0.85 % 1.19 % 0.77 %assets(annualized)Return onaverageassets as 1.13 % 1.10 % 0.82 % 1.19 % 0.74 %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, 2021 September 30, September 30, September 30, 2021 2020 2021 2020 GAAPearnings $ 4,997 $ 4,706 $ 3,480 $ 15,209 $ 9,155 after incometaxesNet incomeas adjustedafter income $ 4,997 $ 4,706 $ 3,348 $ 15,284 $ 8,735 taxes(non-GAAP)(1)Average $ 165,203 $ 162,361 $ 154,996 $ 162,510 $ 151,691 equityReturn onaverage 12.00 % 11.63 % 8.93 % 12.51 % 8.06 %equity(annualized)Return onaverageequity as 12.00 % 11.63 % 8.59 % 12.57 % 7.69 %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 Nine Months Ended September 30, June 30, 2021 September 30, September 30, September 30, 2021 2020 2021 2020Totalstockholders? $ 165,926 $ 164,016 $ 157,323 $ 165,926 $ 157,323 equityLess: (31,498 ) (31,498 ) (31,498 ) (31,498 ) (31,498 ) GoodwillLess:Intangible (4,297 ) (4,696 ) (5,893 ) (4,297 ) (5,893 ) assetsTangiblecommon equity $ 130,131 $ 127,822 $ 119,932 $ 130,131 $ 119,932 (non-GAAP)Averagetangible $ 129,208 $ 125,967 $ 117,466 $ 126,116 $ 113,411 common equity(non-GAAP)GAAP earningsafter income $ 4,997 $ 4,706 $ 3,480 $ 15,209 $ 9,155 taxesNet income asadjustedafter income $ 4,997 $ 4,706 $ 3,348 $ 15,284 $ 8,735 taxes(non-GAAP)(1)Return onaveragetangible 15.34 % 14.98 % 11.79 % 16.12 % 10.78 %common equity(annualized)Return onaveragetangiblecommon equity 15.34 % 14.98 % 11.34 % 16.20 % 10.29 %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 Nine Months Ended September June 30, September September September 30, 2021 2021 30, 2020 30, 2021 30, 2020 Non-interestexpense $ 10,320 $ 10,198 $ 10,724 $ 30,007 $ 32,847 (GAAP)FHLBborrowings ? ? ? (102 ) ? prepaymentfee (1)Non-interestexpense as 10,320 10,198 10,724 29,905 32,847 adjusted(non-GAAP)Non-interest 3,448 3,793 5,062 11,415 13,678 incomeNet interest 13,688 12,831 11,909 39,285 36,883 marginEfficiencyratio $ 17,136 $ 16,624 $ 16,971 $ 50,700 $ 50,561 denominator(GAAP)Net gain onacquired ? ? (180 ) ? (432 ) businesslines (1)Settlement ? ? ? ? (131 ) proceeds (1)Efficiencyratio $ 17,136 $ 16,624 $ 16,791 $ 50,700 $ 49,998 denominator(non-GAAP)Efficiency 60 % 61 % 63 % 59 % 65 %ratio (GAAP)Efficiencyratio as 60 % 61 % 64 % 59 % 66 %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 share at September June 30, Septemberend of period 30, 2021 2021 30, 2020Total stockholders? equity $ 165,926 $ 164,016 $ 157,323 Less: Goodwill (31,498 ) (31,498 ) (31,498 )Less: Intangible assets (4,297 ) (4,696 ) (5,893 )Tangible common equity (non-GAAP) $ 130,131 $ 127,822 $ 119,932 Ending common shares outstanding 10,518,885 10,696,075 11,154,645 Book value per share $ 15.77 $ 15.33 $ 14.10 Tangible book value per share $ 12.37 $ 11.95 $ 10.75 (non-GAAP)

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

Tangible common equity as September 30, September 30,a percent of tangible 2021 June 30, 2021 2020assets at end of periodTotal stockholders? $ 165,926 $ 164,016 $ 157,323 equityLess: Goodwill (31,498 ) (31,498 ) (31,498 ) Less: Intangible assets (4,297 ) (4,696 ) (5,893 ) Tangible common equity $ 130,131 $ 127,822 $ 119,932 (non-GAAP)Total Assets $ 1,753,477 $ 1,714,472 $ 1,622,593 Less: Goodwill (31,498 ) (31,498 ) (31,498 ) Less: Intangible assets (4,297 ) (4,696 ) (5,893 ) Tangible Assets $ 1,717,682 $ 1,678,278 $ 1,585,202 (non-GAAP)Total stockholders?equity to total assets 9.46 % 9.57 % 9.70 %ratioTangible common equity asa percent of tangible 7.58 % 7.62 % 7.57 %assets (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).