GlobeNewswire Inc | Jan 28, 2022 04:30PM EST

January 28, 2022

EMLENTON, Pa, Jan. 28, 2022 (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 $10.0million, or $3.63 per diluted common share, for the year ended December 31, 2021, an increase of $3.4million, or 52.0%, from $6.6million, or $2.41 per diluted common share, reported for the year ended December 31, 2020. The increase in net income resulted primarily from increases in net interest income and noninterest 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 year. The Corporation hasachieved solid earnings, balance sheet growth and strong credit quality while navigatingthrough the ongoing pandemic, which has led to staffing challengesand industry-wide margin compression. We benefitted greatly fromthe 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 $1.2 million remained outstanding at year end. We remain focused on meeting our customers' needs and providing a competitive return to our shareholders."

2021 OPERATING RESULTS OVERVIEW

Net income available to common stockholders increased $3.4million, or 52.0%,to $10.0million, or $3.63per diluted common share, for the yearended December 31, 2021, compared to net income of $6.6million, or $2.41per diluted common sharefor2020. The increase resulted primarily from increases in net interest income and noninterest income of $2.4million and $227,000, respectively, and a$2.2 million decrease in the provision for loan losses, partially offset by increases in noninterest expense and the provision for income taxes of$578,000 and $779,000, respectively.

Net interest income increased $2.4 million, or 8.2%, to $31.5million for the yearended December 31, 2021from $29.1million for2020. The increase in net interest income resulted from a decrease in interest expense of $2.9 million, or 36.4%, partially offset by adecrease in interest income of $566,000, or 1.5%. The Corporation's cost of funds decreased 38basis points to 0.53% for the year ended December 31, 2021, compared to 0.91% for 2020, resulting in a$3.1 million decrease in interest expense. Additionally, interest expense decreased $248,000 as average borrowed funds decreased $10.1 million to $29.8 million for 2021, compared to $39.9 million for 2020. Thesedecreases were partially offset by a$408,000 increase in interest expense caused by a $40.4 million increase in average interest-bearing deposits to $713.9 million for the year ended December 31, 2021, compared to $673.4million for2020.The decrease in interest income resulted from a 20basis point decrease in the yield on loans to 4.12% for the year ended December 31, 2021, compared to 4.32% for2020, causing a $1.6 million decrease in interest income. Without the PPP loans, the Corporation would have experienced a 42basis point decrease inthe yield on loans to 3.90% for 2021. This decrease in yield was partially offset by a $7.3 million 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 $311,000 increase in interest income. During 2021,the Corporation recognized $2.6million of interest income related to the PPP loans, compared to $1.6 million in 2020. Additionally,average securitiesbalances increased $57.4 million to $161.4 million for the year ended December 31, 2021, compared to $104.0 million for 2020, causing a $1.3 million increase in interest income. This was partially offset by a 31basis point decrease in the yield on securities to 2.22% for the year ended December 31, 2021 from 2.53% for 2020, causing a $346,000 decrease in interest income.

The provision for loan losses decreased $2.2million, or 67.2%, to $1.1 millionfor the year ended December 31, 2021from $3.2million for the same period in 2020.The higher provision for loan losses recorded during2020 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 $6.2million during the year ended December 31, 2021to $38.2million, or 3.6%, of total assetsfrom $44.4 million, or 4.3%, of total assets at December 31, 2020.

Noninterest income increased $227,000, or 5.2%, to $4.6million for the year ended December 31, 2021, compared to $4.4million for2020due to increases in other income, gains on the sale of loans and earnings on bank-owned life insurance of $549,000, $149,000 and $34,000, respectively, partially offset by decreases in gains on the sale of securities and fees and service charges of $442,000 and $63,000, respectively. The increase in other income was primarily related to a non-recurring $337,000 write down in the value of a bank-owned property recognized during 2020 and an increase in interchange fee income in 2021resulting fromeasing pandemic restrictions leading to an increase in consumer spending.During 2021, the Corporation sold $14.2 million of residential mortgage loans to the Federal Home Loan Bank (FHLB) and realized a net gain of $390,000, compared to sales of $5.2 million and a net gainof $241,000 recognized during 2020.During 2021, the Corporation sold a total of $8.6million of primarily low-yielding mortgage-backedsecurities and realized a net gain of $245,000. The sale proceeds were utilized to repay $10.0 million in FHLBterm advances. During 2020, the Corporation sold a total of $43.9million of low-yielding mortgage-backed and collateralized mortgage obligation securities and realized a net gain of $687,000. The sale proceeds were utilized to repay $15.0 million in FHLBterm advances and purchase higher yielding municipal and corporate securities.

Noninterest expense increased $578,000, or 2.6%, to $22.6million for the year ended December 31, 2021, compared to $22.0million for2020.The increase was primarily attributable to increases in compensation and benefits expense, other noninterest expense, professional fees,FDIC insurance expense and intangible amortization expense of $192,000, $188,000, $176,000, $41,000 and $21,000, respectively partially offset by a $40,000 decrease in premises and equipment expense.

The provision for income taxes increased $779,000, or 54.3%, to$2.2 million for the yearended December 31, 2021from $1.4 million for 2020as a result of the increase in net income before provision for income taxes.

FOURTH QUARTER OPERATING RESULTS OVERVIEW

Net income available to common stockholders increased $215,000, or 9.1%,to $2.6million, or $0.94per diluted common share, for the three months ended December 31, 2021, compared to net income of $2.4million, or $0.87per diluted common shareforsame period in 2020. The increase resulted from a $293,000increasein noninterest income and decreases in the provision for loan losses and noninterest expense of $189,000 and $128,000, respectively, partially offset by a $287,000 decrease in net interest income and a $101,000increaseinthe provision for income taxes.

Net interest income decreased $287,000, or 3.5%, to $7.9million for the three months ended December 31, 2021from $8.2 million for the same period in 2020. The decrease in net interest income resulted from a decrease in interest income of $936,000, or 9.4%, partially offset by a decrease in interest expense of $649,000, or 37.0%.The decrease in interest income resulted from a 41basis point decrease in the yield on loans to 4.03% for the three months ended December 31, 2021, compared to 4.44% for2020, causing a $817,000 decrease in interest income. Additionally,a $40.4 million decrease in the average balance of loans outstanding causeda $436,000 decrease in interest income. Without the PPP loans, the Corporation would have experienced a 54basis point decrease inthe yield on loans to 3.90% for the three months ended December 31, 2021. During the fourth quarter of 2021,the Corporation recognized $309,000of interest income related to the PPP loans, compared to $992,000for the same period in 2020. Partially offsetting the decrease in interest income due to loan rates and volumes,average securitiesbalances increased $80.9 million to $185.2 million for the three months ended December 31, 2021, compared to $104.2 million for the same period in 2020, causing a $442,000 increase in interest income. This was partially offset by a 29basis point decrease in the yield on securities to 2.13% for the three months ended December 31, 2021 from 2.42% for the same period in 2020, causing an $83,000 decrease in interest income.The Corporation's cost of funds decreased 30basis points to 0.46% for the three months ended December 31, 2021, compared to 0.76% for the same period in 2020, resulting in a$624,000 decrease in interest expense.

The provision for loan losses decreased $189,000, or 31.2%, to $416,000 for the three months ended December 31, 2021from $605,000 for the same period in 2020.The higher provision for loan losses recorded during the fourth quarter of2020 was due to risk rating changes for the Corporation's hospitalityloans, which were granted additional payment deferrals as a result of the pandemic.

Noninterest income increased $293,000, or 35.8%, to $1.1million for the three months ended December 31, 2021, compared to $819,000 for the same period in 2020due to a $294,000 increasein other income,primarily related to a non-recurring $337,000 write down in the value of a bank-owned property during the fourth quarter of2020.

Noninterest expense decreased $128,000, or 2.4%, to $5.3 million for the three months ended December 31, 2021, compared to $5.4million for the same period in 2020.The decrease was primarily attributable to decreases in premises and equipment expense, compensation and benefits expense, FDIC insurance expense and professional fees of $86,000, $68,000, $56,000 and $12,000, respectively, partially offset by a $95,000 decrease in other noninterest expense.

The provision for income taxes increased $101,000, or 18.6%, to$643,000 for the three months ended December 31, 2021from $542,000 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 $27.2million, or 2.6%,to $1.1 billion at December 31, 2021from $1.0 billion at December 31, 2020. The increasein assetswas driven primarily by a $73.2millionincrease in securities, partially offset by decreases in cash and equivalents and net loans receivable of $28.4 million and $20.3 million. The decrease in net loans receivable was driven by a $29.2 million reduction in PPP loans to $1.2 million at December 31, 2021, from $30.4 million at December 31, 2020. Liabilities increased $21.7million, or 2.3%, to $962.5 million at December 31, 2021from$940.8 million at December 31, 2020due to a $24.9 million increasein customer deposits, partially offset by a $10.0 million reduction in borrowed funds.

Nonperforming assetsdecreased $1.1millionto $3.3million, or 0.32% of total assets at December 31, 2021, compared to $4.4million, or 0.43% of total assets at December 31, 2020.Classified and criticized assets decreased $6.2million to $38.2million or 3.6% of total assetsat December 31, 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 December 31, 2021, the Corporation's hotel loan portfolio totaled $32.0million, of which $30.0million 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 December31, 2021, only one $3.9 million loan collateralized by an operating hotelremained on deferral, although $30.0 million of the Corporation's hotel loan portfolio was rated classified or criticized. The Corporation continues to carefully monitor the loan portfolio and is well-positioned to weather a potential weakening of asset quality that may occur related to current circumstances.

Stockholders equity increased $5.5million, or 6.0%, to $97.0million at December 31, 2021from $91.5 million at December 31, 2020primarily due to a $6.7million increase in retained earnings as a result of $10.0million of net income available to common stockholders, less $3.3million of common dividends paid, partially offset by a$1.7million decrease in accumulated other comprehensive income. The Corporation remains well capitalized and is wellpositioned for continued growth with total stockholders equity at 9.2% of total assets. Book value per common share was $33.91 at December 31, 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 YearDATA: ended December 31, ended December 31, 2021 2020 2021 2020 Interest income $ 9,054 $ 9,990 $ 36,581 $ 37,147 Interest expense 1,105 1,754 5,124 8,062 Net interest 7,949 8,236 31,457 29,085 incomeProvision for 416 605 1,066 3,247 loan lossesNoninterest 1,112 819 4,590 4,363 incomeNoninterest 5,314 5,442 22,596 22,018 expenseIncome beforeprovision for 3,331 3,008 12,385 8,183 income taxesProvision for 643 542 2,214 1,435 income taxesNet income 2,688 2,466 10,171 6,748 Preferred stock 102 95 196 186 dividendsNet incomeavailable to $ 2,586 $ 2,371 $ 9,975 $ 6,562 commonstockholders Basic earnings $ 0.95 $ 0.87 $ 3.66 $ 2.42 per common shareDiluted earnings $ 0.94 $ 0.87 $ 3.63 $ 2.41 per common shareDividends per $ 0.30 $ 0.30 $ 1.20 $ 1.20 common share Return on average 1.00 % 0.95 % 0.95 % 0.68 %assets (1)Return on average 11.21 % 10.86 % 10.90 % 7.61 %equity (1)Return on average 11.28 % 10.95 % 11.19 % 7.76 %common equity (1)Yield on averageinterest-earning 3.61 % 4.14 % 3.66 % 4.03 %assetsCost of averageinterest-bearing 0.60 % 0.95 % 0.69 % 1.13 %liabilitiesCost of funds 0.46 % 0.76 % 0.53 % 0.91 %Net interest 3.17 % 3.42 % 3.15 % 3.16 %marginEfficiency ratio 58.13 % 59.66 % 62.20 % 66.32 % (1)Returns are annualized for the periods reported.

CONSOLIDATED BALANCE SHEET DATA: As of As of 12/31/2021 12/31/2020 Total assets $ 1,059,508 $ 1,032,323 Cash and equivalents 9,080 37,439 Securities 186,275 113,056 Loans, net 780,479 800,413 Intangible assets 20,359 20,543 Deposits 918,496 893,627 Borrowed funds 22,050 32,050 Common stockholders' equity 92,753 87,274 Stockholders' equity 96,959 91,480 Book value per common share $ 33.91 $ 32.07 Net loans to deposits 84.97 % 89.57 %Allowance for loan losses to total loans 1.31 % 1.18 %Nonperforming assets to total assets 0.32 % 0.43 %Stockholders' equity to total assets 9.15 % 8.86 %Shares of common stock outstanding 2,735,212 2,721,212