Citizens Community Bancorp Inc.
For the period ended Mar 31, 2025. Filed May 8, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed May 8, 2025
CZWI$23.38-1.5%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-11-05.
0001367859-24-000112
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-08.
0001367859-25-000052
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 173 previous paragraphs and 163 current paragraphs.
93 unchanged; 51 reworded; 14 added; 26 removed; 3 previous and 5 current paragraphs rearranged.
Tables are not compared: 30 previous and 32 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (14)
Current report
Non-interest income decreased $0.7 million in the first quarter of 2025 compared to the first quarter of 2024, primarily due to $0.3 lower gain on sale of loans, $0.2 million decrease on loan, deposit and interchange revenue due to lower customer activity and $0.2 million lower gain on equity securities.
Current report
Provision for income taxes decreased to $0.8 million in the first quarter of 2025, from $1.1 million in the first quarter of 2024, primarily due to a decrease in the effective tax rate. The decrease in the effective tax rate is primarily due to the positive impact of higher permanent tax deductions in 2025.
Current report
Allowance for Credit Losses
Current report
Net interest income was $11.6 million for the three months ended March 31, 2025, compared to $11.9 million for the three months ended March 31, 2024. Interest income for the three months ended March 31, 2025 decreased from the same period one year ago due to a lower balance of loans and investment securities, partially offset by a higher balance of interest-bearing cash. In addition, lower asset yields were primarily due to the impact of lower short-term interest rates of 100 basis points due to lower Federal Open Market Committee reductions in later 2024 on all asset categories. The decrease in interest income was partially offset by lower interest expense due to both lower balances of FHLB advances, a decrease in liability costs and the impact of a higher net interest margin. The decrease in loans was primarily due to the impact of shrinkage in non-strategic loan relationships, with the proceeds used to reduce FHLB advances. The net interest margin for the three-month period ended March 31, 2025, increased to 2.85%, compared to 2.77%, for the three-month period ended March 31, 2024. The higher net interest margin was due to a 20 basis point decrease in liability costs, partially offset by lower asset yields of 10 basis points. Lower asset yields were favorably impacted by the impact of new loan originations and loan repricing.
Current report
(Dollar amounts in thousands)
Current report
(Dollar amounts in thousands)
Current report
The table below shows the principal balance and current contractual rate of fixed rate certificates of deposit as of March 31, 2025. The table also shows the principal balance and current contractual rate of fixed rate loans and securities as of March 31, 2025, that mature or reprice.
Current report
Portfolio Contractual Repricing:
Current report
(in millions, except yields)
Current report
Service charges on deposit accounts decreased $48 thousand from the first quarter of 2024 to the first quarter of 2025 primarily due to lower customer activity.
Current report
Income Taxes. Provision for income taxes decreased to $0.8 million in the first quarter of 2025, from $1.1 million in the first quarter of 2024, primarily due to a decrease in the effective tax rate. The decrease in the effective tax rate was primarily due to the positive impact of higher permanent tax deductions in 2025.
Current report
Cash and Cash Equivalents. Cash and cash equivalents increased $50.0 million to $100.2 million at March 31, 2025, compared to $50.2 million at December 31, 2024. This increase was primarily due to the net proceeds from loan shrinkage and deposit growth increasing on-balance sheet liquidity and growing interest-bearing deposits.
Current report
Nonperforming assets were $14.5 million at March 31, 2025, compared to $14.3 million at December 31, 2024. This modest increase was due to a $0.4 million increase in residential loans delinquent more than 90 days not on nonaccrual status.
Current report
(3) There were no FHLB borrowings outstanding as of March 31, 2025. The weighted-average interest rate on FHLB borrowings, with maturities less than twelve months, outstanding as of December 31, 2024, was 1.45%.
Removed paragraphs (26)
Previous report
Non-interest income increased $0.4 million in the third quarter of 2024 compared to the third quarter of 2023, primarily due to $0.5 million higher gain on sale of loans.
Previous report
Provision for income taxes decreased to $0.9 million in the third quarter of 2024, from $2.5 million in the third quarter of 2023, primarily due to a decrease in the effective tax rate. The decrease in the effective tax rate is primarily due to the Wisconsin state budget, signed by Governor Evers on July 5, 2023, which provides financial institutions a tax exemption on income earned on Wisconsin commercial and agricultural loans up to $5 million retroactive to January 1, 2023, the impact of which began to be recognized in the third quarter of 2023. This change reduces the Company’s 2023 Wisconsin state income tax rate and thus, its overall effective tax rate. The third quarter ended September 30, 2023, reflects three quarters of the related 2023 tax benefit, retroactive to January 1, 2023, as a reduction of income tax expense. This positive impact was more than offset by a one-time tax expense of $1.8 million reflecting the impact of the lower 2023 Wisconsin state tax rate on the future realization of existing net deferred tax assets.
Previous report
Compared to 2023, for the nine-month period ended September 30, 2024, net interest income decreased $1.8 million, primarily due to the impact of higher short-term interest rates on the Bank’s liability-sensitive balance sheet, i.e., higher deposit costs, and customer account shifts to higher-cost certificates, partially offset by higher yields on assets. The Company’s interest-bearing liabilities increased from 2.46% for the nine months ended September 30, 2023, to 3.18% for the same period in 2024. This increase in interest-bearing liabilities cost was partially offset by higher interest income on interest earning assets of $5.4 million primarily due to the impact of higher interest rates.
Previous report
The total benefit, i.e., negative provision, for credit losses was $2.725 million for the nine months ended September 30, 2024, compared to a provision for credit losses of $0.175 million for the nine months ended September 30, 2023. For the nine months ended September 30, 2024, the negative provision was due to decreases in ACL related to: (1) the $0.9 million impact of loan portfolio decreases and credit quality improvements; (2) $0.6 million due to improvements in the Moody’s economic scenario per our third-party provider; (3) reductions in off-balance sheet reserves to fund commitments of $0.9 million; (4) a decrease in the allowance for credit losses on individually evaluated loans of $0.5 million largely in the first quarter; and (5) net loan recoveries. The provision for credit losses for the nine months ended September 30, 2023, was $0.175 million, primarily due to growth in the loan portfolio, partially offset by the impact of net recoveries of $0.187 million, reductions in reserves on individually evaluated loans, and third quarter loan payoffs.
Previous report
Non-interest income for the nine months ended September 30, 2024, increased $0.3 million compared to the nine-months ended September 30, 2023. Higher gains on loan sales, loan fees and service charges and a bank owned life insurance death benefit were partially offset by net losses on equity securities.
Previous report
Non-interest expense for the nine months ended September 30, 2024, increased $1.6 million largely due to higher compensation expense of $0.9 million, related to higher incentive costs and the impact of annual merit increases, and higher other expenses, primarily due to the establishment of a $0.4 million SBA recourse reserve..
Previous report
Provision for income taxes decreased to $0.9 million in the third quarter of 2024, from $2.5 million in the third quarter of 2023, primarily due to a decrease in the effective tax rate. The lower effective tax rate is primarily due to the Wisconsin state budget, signed by Governor Evers on July 5, 2023, which provides financial institutions a tax exemption on income earned on Wisconsin commercial and agricultural loans up to $5 million retroactive to January 1, 2023, the impact of which began to be recognized in the third quarter of 2023. The Wisconsin state budget, signed by Governor Evers on July 5, 2023, provides financial institutions a tax exemption on income earned on Wisconsin commercial and agricultural loans up to $5 million retroactive to January 1, 2023. This change reduces the Company’s 2023 Wisconsin state income tax rate and thus, its overall effective tax rate. The third quarter ended September 30, 2023, reflects three quarters of the related 2023 tax benefit, retroactive to January 1, 2023, as a reduction of income tax expense. This positive impact was more than offset by a one-time tax expense of $1.8 million reflecting the impact of the lower 2023 Wisconsin state tax rate on the future realization of existing net deferred tax assets.
Previous report
Allowance for Credit Losses - Loans.
Previous report
Goodwill.
Previous report
We account for goodwill and other intangible assets in accordance with ASC Topic 350, “Intangibles - Goodwill and Other.” The Company records the excess of the cost of acquired entities over the fair value of identifiable tangible and intangible assets acquired, less liabilities assumed, as goodwill. The Company does not amortize goodwill, but reviews goodwill for impairment at a reporting unit level on an annual basis, or when events or changes in circumstances indicate that the carrying amounts may be impaired. A reporting unit is defined as any distinct, separately identifiable component of the Company’s one operating segment for which complete, discrete financial information is available and reviewed regularly by the segment’s management. The Company has one reporting unit as of September 30, 2024, which is related to its banking activities. The Company performed the required goodwill impairment test and determined that goodwill was not impaired as of December 31, 2023. The Company has monitored events and conditions since December 31, 2023, and has determined that no triggering event has occurred that would require goodwill to be tested for impairment.
Previous report
Net interest income was $11.3 million for the three months ended September 30, 2024, compared to $12.1 million for the three months ended September 30, 2023. Interest income for the three months ended September 30, 2024, decreased from the same period one year ago due to higher net interest-bearing deposit balances and costs. This was partially offset by increases in asset yields due to (1) contractual repricing and higher coupons on new loans; and (2) principal reductions in low-yielding investments. The net interest margin for the three-month period ended September 30, 2024, decreased to 2.63%, compared to 2.79%, for the three-month period ended September 30, 2023. The lower net interest margin was due to higher deposit costs attributable to higher market interest rates and customers moving from lower cost savings and money market accounts to higher yielding certificate accounts; and the impact of higher short-term interest rates which increased FHLB advance and other borrowing costs. This was partially offset by increases in loan yields due to contractual repricing and rates on new loans exceeding the portfolio as a whole.
Previous report
Net interest income was $34.8 million for the nine months ended September 30, 2024, compared to $36.6 million for the nine months ended September 30, 2023. Net interest income for the nine months ended September 30, 2024, decreased from the same period one year ago, due to higher interest-bearing balances and costs, which increased 72 basis points. This was partially offset by: (1) positive loan volume variance due to growth in loans outstanding; (2) increases in loan and investment yields due to: (a) contractual repricing and higher coupons on new loans; (b) principal reductions in low-yielding investments; and (c) one-time income in the first and second quarters of $0.4 million recognized on nonaccrual payoffs and $0.4 million recognized from curing technical defaults on performing loans.
Previous report
The net interest margin for the nine-month period ended September 30, 2024, was 2.71%, compared to 2.85%, for the nine-month period ended September 30, 2023. The decreased net interest margin was due to: (1) higher liability costs due to higher market interest rates; (2) customers moving balances from lower cost savings and money market accounts to higher yielding certificate accounts, increasing deposit costs; and (3) the impact of higher short-term interest rates which increased FHLB advance and other borrowing costs. This was partially offset by: (1) increases in loan yields due to contractual repricing; (2) rates on new loans exceeding the portfolio as a whole; and (3) a six-basis point increase in yield due to income recognized on nonaccrual loan payoffs and curing technical defaults on performing loans in the first and second quarter; and 4) principal reductions in low-yielding investments
Previous report
Nine months ended September 30, 2024, compared to the nine months ended September 30, 2023:
Previous report
RATE / VOLUME ANALYSIS
Previous report
Nine months ended September 30, 2024, compared to the nine months ended September 30, 2023.
Previous report
The total benefit, i.e., negative provision, for credit losses was $2.725 million for the nine months ended September 30, 2024, compared to a provision for credit losses of $0.175 million for the nine months ended September 30, 2023. For the nine months ended September 30, 2024, the negative provision was due to decreases in ACL related to: (1) the $0.9 million impact of loan portfolio decreases and credit quality improvements; (2) $0.6 million due to improvements in the Moody’s economic scenario per our third-party provider; (3) reductions in off-balance sheet reserves to fund commitments of $0.9 million; (4) a decrease in the allowance for credit losses on individually evaluated loans of $0.5 million largely in the first quarter; and (5) net loan recoveries. The provision for credit losses for the nine months ended September 30, 2023, was $0.175 million, primarily the result of growth in the loan portfolio, partially offset by the impact of net recoveries of $0.187 million, reductions in reserves on individually evaluated loans and third quarter 2023 loan payoffs.
Previous report
In the second quarter of 2024, the Company recognized $0.18 million of life insurance proceeds above the carrying value of the underlying insurance policy on an employee who passed, which is reflected in Bank Owned Life Insurance (BOLI) death benefit.
Previous report
Mortgage servicing rights expenses, net, increased in the three months ended September 30, 2024 compared to the same period in 2023, primarily due to an impairment of $0.04 million due to higher forecasted future prepayments in a small tranche of higher coupon recent loan production, partially offset by slowing prepayments on the majority of the servicing portfolio, and to a lesser extent, a smaller servicing portfolio. Mortgage servicing rights expenses, net, decreased slightly in the nine-month period ended September 30, 2024, compared to the comparable 2023 period, due to the impact of slowing prepayments, and to a lesser extent, a smaller servicing portfolio, partially offset by the third quarter 2024 impairment.
Previous report
Advertising expense increased for the three and nine months ended September 30, 2024, compared to the same periods in 2023, due to higher marketing spends to support commercial loan and deposit growth and increased market analytics.
Previous report
Income Taxes. Provision for income taxes decreased to $0.9 million in the third quarter of 2024 from $2.5 million in the third quarter of 2023. Provision for income taxes for the nine-month period ending September 30, 2024, decreased $1.9 million, to $3.0 million, compared to $4.9 million for the nine-month period ended September 30, 2023, as pre-tax income decreased $0.169 million. The decrease in the effective tax rate in 2024 is primarily due to the Wisconsin state budget, signed by Governor Evers on July 5, 2023, which provides financial institutions a tax exemption on income earned on Wisconsin commercial and agricultural loans up to $5 million retroactive to January 1, 2023. This change reduces the Company’s 2023 Wisconsin state income tax rate and thus, its overall effective tax rate. The third quarter ended September 30, 2023, reflects three quarters of the related 2023 tax benefit, retroactive to January 1, 2023, as a reduction of income tax expense. This positive impact was more than offset by a one-time tax expense of $1.8 million reflecting the impact of the lower 2023 Wisconsin state tax rate on the future realization of existing net deferred tax assets.
Previous report
Cash and Cash Equivalents. Cash and cash equivalents decreased $0.5 million to $36.6 million at September 30, 2024, compared to $37.1 million at December 31, 2023.
Previous report
Allowance for Credit Losses - Loans.
Previous report
Nonperforming assets were $17.1 million at September 30, 2024, compared to $15.4 million at December 31, 2023. Nonperforming assets increased largely due to one agricultural real estate loan relationship in forestry services that moved from special mention to substandard and was placed on nonaccrual in the third quarter. This increase was offset by nonperforming loan payoffs of $5.4 million during the first quarter of 2024.
Previous report
(3) The weighted-average interest rate on FHLB borrowings maturing within twelve months as of September 30, 2024 and December 31, 2023 were 3.28% and 4.16%, respectively.
Previous report
(4) In June 2024, the FHLB called the $10.0 million, 3.82% advance maturing in 2028.
Reworded paragraphs (51)
Previous wording
Factors that could affect actual results or outcomes include the matters described under the caption “Risk Factors” in Item 1A of our annual report on Form 10-K for the year ended December 31, 2023, filed with the SEC on March 5, 2024 (“2023 10-K”), the matters described in “Risk Factors” in Item 1A of the quarterly reports on Form 10-Q for the quarter ended March 31, 2024, filed with the SEC on May 8, 2024; the matters described in “Risk Factors” in Item 1A of the quarterly reports on Form 10-Q for the quarter ended June 30, 2024, filed with the SEC on August 6, 2024; the matters described in “Risk Factors” in Item 1A of this Form 10-Q, and the following:
Current wording
Factors that could affect actual results or outcomes include the matters described under the caption “Risk Factors” in Item 1A of our annual report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 13, 2025 (“2024 10-K”), and the following:
Previous wording
•adverse impacts on the regional banking industry and the business environment in which it operates;
Current wording
•adverse impacts on the regional banking industry and the business environment in which we operate;
Previous wording
The following discussion sets forth management’s discussion and analysis of our consolidated financial condition as of September 30, 2024, and our consolidated results of operations for the three and nine months ended September 30, 2024, compared to the same periods in the prior fiscal year ended September 30, 2023. This discussion should be read in conjunction with the interim consolidated financial statements and the condensed notes thereto included with this report and with Management’s Discussion and Analysis of Financial Condition and Results of Operations and the financial statements and notes related thereto included in our 2023 10-K. Unless otherwise stated, all monetary amounts in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, other than share, per share and capital ratio amounts, are stated in thousands.
Current wording
The following discussion sets forth management’s discussion and analysis of our consolidated financial condition as of March 31, 2025, and our consolidated results of operations for the three months ended March 31, 2025, compared to the same period in the prior fiscal year ended March 31, 2024. This discussion should be read in conjunction with the interim consolidated financial statements and the condensed notes thereto included with this report and with Management’s Discussion and Analysis of Financial Condition and Results of Operations and the financial statements and notes related thereto included in our 2024 10-K. Unless otherwise stated, all monetary amounts in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, other than share, per share and capital ratio amounts, are stated in thousands.
Previous wording
The following is a summary of some of the significant factors that affected our operating results for the three and nine months ended September 30, 2024, and September 30, 2023. Compared to third quarter 2023, third quarter 2024 net interest income decreased $0.8 million. The decrease was primarily due to the impact of higher short-term interest rates on the Bank’s liability-sensitive balance sheet, i.e., higher deposit costs, and customer account shifts to higher-cost certificates, partially offset by higher yields on assets, and a decrease in lower yielding on-balance sheet assets included in liquidity to more normal levels.
Current wording
The following is a summary of some of the significant factors that affected our operating results for the three months ended March 31, 2025, and March 31, 2024. Compared to the first quarter of 2024, net interest income decreased $0.3 million. The decrease was primarily due to the impact of a smaller loan portfolio, partially offset by a temporary increase in a higher balance of lower yielding cash and higher net interest margin.
Previous wording
The total benefit, i.e., negative provision, for credit losses for the third quarter ended September 30, 2024,was $0.4 million compared to a negative provision for credit losses of $0.3 million for the quarter ended September 30, 2023. The third quarter of 2024 negative provision was due to decreases in ACL related to: (1) on-balance sheet ACL of $0.1 million; and (2) reductions in off-balance sheet reserves to fund commitments of $0.3 million. The third quarter ended September 30, 2023, negative provision for credit losses was primarily due to net recoveries on an agricultural credit and the impact of the payoff of two large loans.
Current wording
The total benefit, i.e., negative provision, for credit losses for the first quarter ended March 31, 2025, was $0.3 million compared to a negative provision for credit losses of $0.8 million for the quarter ended March 31, 2024. The first quarter of 2025 negative provision was due to decreases in ACL related to: (1) on-balance sheet ACL of $0.1 million, and (2) reductions in off-balance sheet reserves to fund commitments of $0.3 million. The first quarter ended March 31, 2024, negative provision for credit losses was primarily due to net recoveries on an agricultural credit and the impact of the payoff of two large loans.
Previous wording
Non-interest expense increased $0.4 million in the third quarter of 2024 from $10.0 million in the third quarter of 2023. The increase was primarily related to higher compensation expense due to both the impact of 2024 merit increases and higher incentive compensation.
Current wording
Non-interest expense decreased $0.3 million in the first quarter of 2025 from $10.8 million in the first quarter of 2024. The decrease was primarily due to a $0.4 million decrease in other expense due to a lower SBA recourse reserve, partially offset by $0.1 million higher compensation expense due to the impact of 2024 merit increases.
Previous wording
We reported net income of $3.3 million and $11.0 million, or $0.32 and $1.07 per diluted share for the three and nine months ended September 30, 2024, compared to net income of $2.5 million and $9.4 million or $0.24 and $0.89 per diluted share for the three and nine months ended September 30, 2023.
Current wording
We reported net income of $3.2 million, or $0.32 per diluted share for the three months ended March 31, 2025, compared to net income of $4.1 million or $0.39 per diluted share for the three months ended March 31, 2024.
Previous wording
We maintain an allowance for credit losses to absorb probable and inherent losses in our loan portfolio. The allowance is based on ongoing quarterly assessments of the estimated lifetime losses in our loan portfolio. In evaluating the level of the allowance for credit losses, we consider the types of loans and the amount of loans in our loan portfolio, historical loss experience, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, prevailing economic conditions, and other relevant factors determined by management. We follow all applicable regulatory guidance, including the “Interagency Policy Statement on Allowances for Credit losses,” issued by the Office of the Comptroller of the Currency, Department of the Treasury, Federal Deposit Insurance Corporation, and National Credit Union Administration. We believe that the Bank’s Allowance for Credit Losses Policy conforms to all applicable regulatory requirements. However, based on periodic examinations by regulators, the amount of the allowance for credit losses recorded during a particular period may be adjusted.
Current wording
Allowance for Credit Losses - Loans. We maintain an allowance for credit losses to absorb probable and inherent losses in our loan portfolio. The allowance is based on ongoing quarterly assessments of the estimated lifetime losses in our loan portfolio. In evaluating the level of the allowance for credit losses, we consider the types of loans and the amount of loans in our loan portfolio, historical loss experience, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, prevailing economic conditions, and other relevant factors determined by management. We follow all applicable regulatory guidance, including the “Interagency Policy Statement on Allowances for Credit losses,” issued by the Office of the Comptroller of the Currency, Department of the Treasury, Federal Deposit Insurance Corporation, and National Credit Union Administration. We believe that the Bank’s Allowance for Credit Losses Policy conforms to all applicable regulatory requirements. However, based on periodic examinations by regulators, the amount of the allowance for credit losses recorded during a particular period may be adjusted.
Previous wording
Interest rate spread and net interest margin are used to measure and explain changes in net interest income. Interest rate spread is the difference between the yield on interest earning assets and the rate paid for interest-bearing liabilities that fund those assets. Net interest margin is expressed as the percentage of net interest income to average interest earning assets. Net interest margin currently exceeds interest rate spread because non-interest-bearing sources of funds (“net free funds”), principally demand deposits and stockholders’ equity, also support interest earning assets. The narrative below discusses net interest income, and net interest margin for the three-month and nine-month periods ended September 30, 2024, and September 30, 2023, respectively.
Current wording
Interest rate spread and net interest margin are used to measure and explain changes in net interest income. Interest rate spread is the difference between the yield on interest earning assets and the rate paid for interest-bearing liabilities that fund those assets. Net interest margin is expressed as the percentage of net interest income to average interest earning assets. Net interest margin currently exceeds interest rate spread because non-interest-bearing sources of funds (“net free funds”), principally demand deposits and stockholders’ equity, also support interest earning assets. The narrative below discusses net interest income, and net interest margin for the three-month period ended March 31, 2025, and March 31, 2024, respectively.
Previous wording
Rate/Volume Analysis. The following tables present the dollar amount of changes in interest income and interest expense for the components of interest earning assets and interest-bearing liabilities that are presented in the preceding table. For each category of interest earning assets and interest-bearing liabilities, information is provided on changes attributable to: (1) changes in volume, which are changes in the average outstanding balances multiplied by the prior period rate (i.e., holding the initial rate constant); and (2) changes in rate, which are changes in average interest rates multiplied by the prior period volume (i.e., holding the initial balance constant). Rate changes have been discussed previously in the net interest income section above. For the three month period ended September 30, 2024, compared to the same period in 2023, average earning assets decreased modestly due to net principal repayments on available for sale (“AFS”) and held-to-maturity (“HTM”) security portfolios and a less than 1% decline in loan balances. Average interest-bearing liabilities saw customer preferences leading to growth in money market and certificate accounts, with the growth in deposits funding a decrease in FHLB advances. For the nine-month period ended September 30, 2024, compared to the same period in 2023, loan volume increases due to organic growth, primarily in late 2023 and early 2024, more than offset a reduction in low-yielding AFS and HTM securities. For the nine-month period ended September 30, 2024, the volume change in interest-bearing liabilities are similar to the three months ended September 30, 2024, explanation.
Current wording
Rate/Volume Analysis. The following tables present the dollar amount of changes in interest income and interest expense for the components of interest earning assets and interest-bearing liabilities that are presented in the preceding table. For each category of interest earning assets and interest-bearing liabilities, information is provided on changes attributable to: (1) changes in volume, which are changes in the average outstanding balances multiplied by the prior period rate (i.e., holding the initial rate constant); and (2) changes in rate, which are changes in average interest rates multiplied by the prior period volume (i.e., holding the initial balance constant). Rate and volume changes have been discussed previously in the net interest income section above.
Previous wording
The total benefit, i.e., negative provision, for credit losses for the third quarter ended September 30, 2024,was $0.4 million compared to a negative provision for credit losses of $0.3 million for the quarter ended September 30, 2023. The third quarter of 2024 negative provision was due to decreases in ACL related to: (1) on-balance sheet ACL of $0.1 million; and (2) reductions in off-balance sheet reserves to fund commitments of $0.3 million. The third quarter ended September 30, 2023, negative provision for credit losses was primarily due to net recoveries on an agricultural credit and the impact of the payoff of two large loans.
Current wording
The total benefit, i.e., negative provision, for credit losses for the first quarter ended March 31, 2025,was $0.3 million compared to a negative provision for credit losses of $0.8 million for the quarter ended March 31, 2024. The first quarter of 2025 negative provision was due to decreases in ACL related to a decrease in on-balance sheet ACL of $0.35 million; partially offset by an increase in off-balance sheet reserves to fund commitments of $0.1 million. The first quarter of 2024 negative provision for credit losses was primarily due to net recoveries on an agricultural credit and the impact of the payoff of two large loans.
Previous wording
Continued strong economic conditions in our markets, as evidenced by unemployment rates below the national average in our two largest population centers, have resulted in positive overall economic trends for businesses. The impact of higher interest rates and the impact of an inverted yield forecast are factors that the third-party model used for economic conditions in computing the ACL level.
Current wording
Continued stable economic conditions in our markets, as evidenced by unemployment rates below the national average in our two largest population centers, have resulted in positive overall economic trends for businesses. The impact of higher interest rates and the impact of an inverted yield forecast are factors that the third-party model used for economic conditions in computing the ACL level.
Previous wording
Management believes that the provision recorded for the current year’s three- and nine-month periods is adequate in view of the present condition of our loan portfolio and the sufficiency of collateral supporting our non-performing loans. We continually monitor non-performing loan relationships and will adjust our provision, as necessary, if changing facts and circumstances require a change in the ACL. In addition, a decline in the quality of our loan portfolio as a result of general economic conditions, factors affecting particular borrowers or our market areas, or otherwise, could all affect the adequacy of our ACL. If there are significant charge-offs against the ACL, or we otherwise determine that the ACL is inadequate, we will need to record an additional provision in the future.
Current wording
Management believes that the provision recorded for the current year’s three-month period is adequate in view of the present condition of our loan portfolio and the sufficiency of collateral supporting our non-performing loans. We continually monitor non-performing loan relationships and will adjust our provision, as necessary, if changing facts and circumstances require a change in the ACL. In addition, a decline in the quality of our loan portfolio as a result of general economic conditions, factors affecting particular borrowers, or our market areas, or otherwise, could all affect the adequacy of our ACL. If there are significant charge-offs against the ACL, or we otherwise determine that the ACL is inadequate, we will need to record an additional provision in the future.
Previous wording
Non-interest Income. The following table reflects the various components of non-interest income for the three and nine-month periods ended September 30, 2024 and 2023, respectively.
Current wording
Non-interest Income. The following table reflects the various components of non-interest income for the three-month periods ended March 31, 2025 and 2024, respectively.
Previous wording
Gain on sale of loans increased in the three-month period ended September 30, 2024, compared to the three-month period ended September 30, 2023, with the increase approximately 80% attributable to higher gains on SBA loan sales and the remainder due to residential gains on sale of loans. For the nine-month periods ending September 30, 2024, and 2023, gain on sale of loans increased approximately 60% due to higher SBA gains on sale of loans and approximately 40% due to higher residential gains on sale of loans.
Current wording
Gain on sale of loans decreased in the three-month period ended March 31, 2025, compared to the three-month period ended March 31, 2024, primarily due to lower gains on SBA loan sales.
Previous wording
Loan fees and services charges are higher for the three-month and nine-month periods ended September 30, 2024, compared to the same periods in 2023, due to forbearance fees and higher late charges.
Current wording
Loan fees and services charges were lower for the three-month period ended March 31, 2025, compared to the same periods in 2024, due to lower customer activity.
Previous wording
The decrease in net (losses) gains on equity securities between the three-month period ended September 30, 2024, and the three-month period ended September 30, 2023, is primarily the result of equity mark-to-market losses in the third quarter of 2024, and mark-to-market gains in the third quarter of 2023. The decrease in net (losses) gains on equity securities between the nine-month period ended September 30, 2024, and the nine-month period ended September 30, 2023, is primarily the result of the $0.4 million loss recognized as a result of an exchange of senior debt for preferred equity of a community development financial institution in the second quarter of 2024. See Investment Securities for more details. In addition, there were other equity mark-to-market losses in the second and third quarters of 2024.
Current wording
The decrease in net gains on equity securities between the three-month period ended March 31, 2025, and the three-month period ended March 31, 2024, was primarily due to the impact of equity mark-to-market losses.
Previous wording
Non-interest Expense. The following table reflects the various components of non-interest expense for the three and nine-month periods ended September 30, 2024 and 2023, respectively.
Current wording
Non-interest Expense. The following table reflects the various components of non-interest expense for the three-month periods ended March 31, 2025 and 2024, respectively.
Previous wording
Compensation expense for the three and nine-month periods ended September 30, 2024, increased from the same period in 2023, largely due to annual employee pay raises effective late first quarter of 2024, along with higher incentive compensation in both the three and nine months ended September 30, 2024.
Current wording
Compensation expense for the three-month period ended March 31, 2025, increased from the same period in 2024, largely due to annual employee pay raises, effective late first quarter of 2024.
Previous wording
Data processing for the three and nine months ended September 30, 2024, increased from the same 2023 periods, largely due to inflationary pressures and the impact of new software implementation costs to aid in future efficiency efforts.
Current wording
Data processing expense for the three months ended March 31, 2025, increased from the same 2024 periods, largely due to inflationary pressures and the impact of new software implementation costs to aid in future efficiency efforts.
Previous wording
The increase in other non-interest expense for the nine months ended September 30, 2024, from the comparable prior year period is largely due to: 1) the establishment of an SBA valuation reserve of $0.4 million in the first quarter of 2024, and 2) the second quarter 2024 write down of the remaining lease asset of a closed branch of $0.2 million, partially offset by selected one-time expense recoveries of $0.1 million.
Current wording
The decrease in other non-interest expense for the three months ended March 31, 2025, compared to the same period in 2024 is primarily due to the establishment of an SBA valuation reserve of $0.4 million in the first quarter of 2024.
Previous wording
Investment Securities. We manage our securities portfolio to provide liquidity, modify interest rate risk and enhance income. Our investment portfolio is comprised of securities available for sale and securities held to maturity. Securities available for sale decreased $6.3 million during the nine months ended September 30, 2024, to $149.4 million from $155.7 million at December 31, 2023. Along with principal repayments and changes in fair value, there was an exchange of a community development financial institution’s senior debt for a preferred equity security in the company’s operating subsidiary of $2.25 million, resulting in a decrease in AFS securities and an increase in equity securities during the second quarter of 2024. The exchange resulted in the recognition of $0.168 million of unrealized losses on available-for-sale securities, previously included in other comprehensive income, as well as an additional $0.270 million loss, for a total loss of $0.438 million. This total loss of $0.438 million was recognized on the June 30, 2024, consolidated statement of operations as net losses on equity securities.
Current wording
Investment Securities. We manage our securities portfolio to provide liquidity, modify interest rate risk and enhance income. Our investment portfolio is comprised of securities available-for-sale and securities held-to-maturity. Securities available-for-sale decreased $3.3 million during the three months ended March 31, 2025, to $139.6 million from $142.9 million at December 31, 2024. There were principal repayments of $2.6 million and a maturity of $2.5 million, partially offset by a decrease in the unrealized loss of $1.9 million.
Previous wording
Securities held to maturity decreased $4.2 million to $87.0 million during the nine-month period ended September 30, 2024, from $91.2 million at December 31, 2023, due to principal repayments.
Current wording
Securities held-to-maturity decreased $1.2 million to $84.3 million during the three-month period ended March 31, 2025, from $85.5 million at December 31, 2024, due to principal repayments.
Previous wording
At December 31, 2023, the Bank has pledged certain of its mortgage-backed securities with a carrying value of $29.2 million as collateral to secure a line of credit with the Federal Reserve Bank. As of December 31, 2023, there were no borrowings outstanding on this Federal Reserve Bank line of credit. As of December 31, 2023, the Bank has pledged certain of its U.S. Government Agency securities with a carrying value of $0.5 million and mortgage-backed securities with a carrying value of $1.9 million as collateral against specific municipal deposits. As of December 31, 2023, the Bank also has mortgage-backed securities with a carrying value of $0.2 million and U.S. Government Agencies with a carrying value of $0.4 million pledged as collateral to the Federal Home Loan Bank of Des Moines.
Current wording
At March 31, 2025, the Bank has pledged certain of its mortgage-backed securities with a carrying value of $33.6 million as collateral to secure a line of credit with the Federal Reserve Bank. As of March 31, 2025, there were no borrowings outstanding on this Federal Reserve Bank line of credit. As of March 31, 2025, the Bank has pledged certain of its U.S. Government Agency securities with a carrying value of $0.3 million and mortgage-backed securities with a carrying value of $2.0 million as collateral against specific municipal deposits. As of March 31, 2025, the Bank also has mortgage-backed securities with a carrying value of $0.5 million pledged as collateral to the Federal Home Loan Bank of Des Moines.
Previous wording
At September 30, 2024, the Bank has pledged certain of its mortgage-backed securities with a carrying value of $34.7 million as collateral to secure a line of credit with the Federal Reserve Bank. As of September 30, 2024, there were no borrowings outstanding on this Federal Reserve Bank line of credit. As of September 30, 2024, the Bank has pledged certain of its U.S. Government Agency securities with a carrying value of $0.4 million and mortgage-backed securities with a carrying value of $1.8 million as collateral against specific municipal deposits. As of September 30, 2024, the Bank also has mortgage-backed securities with a carrying value of $0.1 million pledged as collateral to the Federal Home Loan Bank of Des Moines.
Current wording
At December 31, 2024, the Bank has pledged certain of its mortgage-backed securities with a carrying value of $34.0 million as collateral to secure a line of credit with the Federal Reserve Bank. As of December 31, 2024, there were no borrowings outstanding on this Federal Reserve Bank line of credit. As of December 31, 2024, the Bank has pledged certain of its U.S. Government Agency securities with a carrying value of $0.3 million and mortgage-backed securities with a carrying value of $1.8 million as collateral against specific municipal deposits. As of December 31, 2024, the Bank also has mortgage-backed securities with a carrying value of $0.5 million pledged as collateral to the Federal Home Loan Bank of Des Moines.
Previous wording
Loans. Total loans outstanding, net of deferred loan fees and costs and unamortized discount on acquired loans, decreased by $36.0 million, to $1.42 billion as of September 30, 2024, from $1.46 billion at December 31, 2023. The following table reflects the composition, of our loan portfolio at September 30, 2024, and December 31, 2023:
Current wording
Loans. Total loans outstanding, net of deferred loan fees and costs and unamortized discount on acquired loans, decreased by $0.02 billion, to $1.35 billion as of March 31, 2025, from $1.37 billion at December 31, 2024. The following table reflects the composition, of our loan portfolio at March 31, 2025, and December 31, 2024:
Previous wording
Commercial real estate (”CRE”) lending typically involves higher loan principal amounts and the repayment of these loans is generally largely dependent on the successful operation of the property or the business conducted on the property securing the loan. Commercial real estate loans may be more adversely affected by conditions in the real estate markets or in the general economy. The level of owner-occupied property versus non-owner-occupied property are tracked and monitored on a regular basis. The following table lists the portfolio characteristics of our major commercial real estate loan portfolio at September 30, 2024:
Current wording
Commercial real estate (”CRE”) lending typically involves higher loan principal amounts and the repayment of these loans is generally largely dependent on the successful operation of the property or the business conducted on the property securing the loan. Commercial real estate loans may be more adversely affected by conditions in the real estate markets or in the general economy. The level of owner-occupied property versus non-owner-occupied property are tracked and monitored on a regular basis.
Previous wording
The Allowance for Credit Losses - Loans (“ACL”) is a valuation allowance for expected future credit losses in the Company’s loan portfolio as of the balance sheet date. In determining the allowance, the Company estimates credit losses over the loan’s entire contractual term, adjusted for expected prepayments when appropriate. The allowance estimate considers qualitative and quantitative relevant information from internal and external sources relating to historical loss experience; known and inherent risks in our portfolio; information about specific borrowers’ ability to repay; estimated collateral values; current economic conditions; reasonable and supportable forecasts for future conditions; and other relevant factors determined by management. To ensure that the ACL is maintained at an adequate level, a detailed analysis is performed on a quarterly basis and an appropriate provision is made to adjust the allowance. The entire ACL balance is available for any loan that, in management’s judgment, should be charged off.
Current wording
Allowance for Credit Losses - Loans. The Allowance for Credit Losses - Loans (“ACL”) is a valuation allowance for expected future credit losses in the Company’s loan portfolio as of the balance sheet date. In determining the allowance, the Company estimates credit losses over the loan’s entire contractual term, adjusted for expected prepayments when appropriate. The allowance estimate considers qualitative and quantitative relevant information from internal and external sources relating to historical loss experience; known and inherent risks in our portfolio; information about specific borrowers’ ability to repay; estimated collateral values; current economic conditions; reasonable and supportable forecasts for future conditions; and other relevant factors determined by management. To ensure that the ACL is maintained at an adequate level, a detailed analysis is performed on a quarterly basis and an appropriate provision is made to adjust the allowance. The entire ACL balance is available for any loan that, in management’s judgment, should be charged off.
Previous wording
The determination of the ACL requires significant judgement to estimate credit losses. The ACL is measured collectively on a pooled basis when similar risk characteristics exist, and on an individual basis when management determines that the loan does not share similar risk characteristics with other loans. The ACL on loans collectively evaluated is measured using the loss rate model. The Company categorizes its loan portfolio into four segments based on similar risk characteristics. Loans within each segment are pooled based on individual loan characteristics. Aggregated risk drivers are then calculated at a pool level. Risk drivers are identified attributes that have proven to be predictive of loan loss rates and vary based on loan segment and type. A loss rate is calculated and applied to the pool utilizing a model that combines the pool’s risk drivers, historical loss experience, and reasonable and supportable future economic forecasts to project lifetime losses. The loss rate is then combined with the loan’s balance and contractual maturity, adjusted for expected prepayments, to determine expected future losses.
Current wording
The determination of the ACL requires significant judgement to estimate credit losses. The ACL is measured collectively on a pooled basis when similar risk characteristics exist, and on an individual basis when management determines that the loan does not share similar risk characteristics with other loans. The ACL on loans collectively evaluated is measured using the loss rate model. The Company categorizes its loan portfolio into four segments based on similar risk characteristics. Loans within each segment are pooled based on individual loan characteristics. Aggregated risk drivers are then calculated at a pool level. Risk drivers are identified attributes that have proven to be predictive of loan loss rates and vary based on loan segment and type. A loss rate is calculated and applied to the pool utilizing a model that combines the pool’s risk drivers, historical loss experience, and reasonable and supportable future economic forecasts to project lifetime losses. The loss rate is then combined with the loan’s balance and contractual maturity, adjusted for expected prepayments, to determine expected future losses. Future and supportable economic forecasts are based on national economic conditions and their reversion to the mean is implicit in the model and generally occurs over a period of two years.
Previous wording
The following table present the balance and activity in the allowance for credit losses (“ACL”) - loans by portfolio segment for the twelve months ended December 31, 2023:
Current wording
The following table presents the balance and activity in the allowance for credit losses (“ACL”) - loans by portfolio segment for the twelve months ended December 31, 2024:
Previous wording
In addition to the ACL - Loans, the Company has established an ACL - Unfunded Commitments of $0.46 million at September 30, 2024, and $1.25 million at December 31, 2023, classified in other liabilities on the consolidated balance sheets.
Current wording
In addition to the ACL - Loans, the Company has established an ACL - Unfunded Commitments of $0.44 million at March 31, 2025, and $0.33 million at December 31, 2024, classified in other liabilities on the consolidated balance sheets.
Previous wording
The table below shows a summary of criticized loans, split by special mention and substandard for the past five quarters. From September 30, 2023 through June 30, 2024, special mention credit loans decreased in each quarter. In the first and second quarters of 2024, this was due to loan payoffs. Special mention loans increased by $2.2 million to $11.0 million at September 30, 2024, compared to $8.8 million at June 30, 2024. The increase was largely due to one loan of $8.7 million, which is secured by a multi-family unit. The addition of the multi-family unit to special mention was partially offset by the movement of a $7.7 million agricultural real estate loan relationship in forestry services that moved to substandard and was placed on nonaccrual.
Current wording
The table below shows a summary of criticized loans, split by special mention and substandard for the past five quarters. The increase in criticized loans from March 31, 2024, was primarily due to (1) one forestry services credit that moved from special mention to substandard in the third quarter of 2024 and (2) an increase in special mention commercial loans due to a new special mention C&I relationship in the first quarter of 2025 that showed weaker cash flow than expected. There was a payoff of a special mention loan in the second quarter of 2024.
Previous wording
The fair market value of the Company’s MSR asset was $5.0 million at September 30, 2024, compared to $5.6 million at December 31, 2023. At September 30, 2024, the MSR valuation allowance was $0.36 million due to higher forecasted future prepayments in a small tranche of higher coupon recent loan production. At December 31, 2023, there was no MSR impairment or related valuation allowance.
Current wording
The fair market value of the Company’s MSR asset was $5.1 million at March 31, 2025, compared to $5.4 million at March 31, 2024.
Previous wording
The unpaid balances of one-to-four family residential real estate loans serviced for others as of September 30, 2024, and December 31, 2023, were $482.9 million and $495.5 million, respectively. The fair market value of the Company’s MSR asset as a percentage of its servicing portfolio at September 30, 2024, and December 31, 2023, was 1.04% and 1.13%, respectively.
Current wording
The unpaid balances of one-to-four family residential real estate loans serviced for others as of March 31, 2025, and December 31, 2024, were $475.8 million and $479.6 million, respectively. The fair market value of the Company’s MSR asset as a percentage of its servicing portfolio at March 31, 2025, and December 31, 2024, was 1.07% and 1.09%, respectively.
Previous wording
Deposits. Total deposits increased $1.1 million during the quarter ended September 30, 2024, to $1.52 billion. Consumer deposits increased $22.1 million, including an increase in CDs of $17.9 million. Commercial deposits increased by $20.0 million. Brokered deposits decreased $30.1 million as the company decreased brokered MMDAs by $24.6 million and $5.5 million in brokered CDs matured and were not replaced. Public deposits decreased $10.9 million, largely due to expected seasonal outflows. Deposits by type for five quarters are detailed below:
Current wording
Deposits. Total deposits increased $35.5 million during the quarter ended March 31, 2025, to $1.52 billion. Consumer deposits increased $9.7 million. Commercial deposits increased by $11.3 million. Public deposits increased $20.8 million, largely due to expected seasonal inflows. Deposits by type for five quarters are detailed below:
Previous wording
At September 30, 2024, the deposit portfolio composition was 56% consumer, 28% commercial, 12% public, and 4% brokered deposits compared to 54% consumer, 28% commercial, 12% public and 6% brokered deposits at December 31, 2023.
Current wording
At March 31, 2025, the deposit portfolio composition was 56% consumer, 28% commercial, 14% public, and 2% wholesale deposits compared to 57% consumer, 28% commercial, 13% public and 2% brokered deposits at December 31, 2024.
Previous wording
Uninsured and uncollateralized deposits were $267.1 million, or 18% of total deposits, at September 30, 2024, and $275.8 million, or 18% of total deposits, at December 31, 2023. Uninsured deposits alone, i.e., excluding fully secured government deposits, at September 30, 2024, were $413.6 million, or 27% of total deposits, and $427.5 million, or 28% of total deposits at December 31, 2023.
Current wording
Uninsured and uncollateralized deposits were $271.7 million, or 18% of total deposits, at March 31, 2025, and $265.4 million, or 18% of total deposits, at December 31, 2024. Uninsured deposits alone at March 31, 2025, were $444.4 million, or 29% of total deposits, and $428.0 million, or 29% of total deposits at December 31, 2024.
Previous wording
On-balance sheet liquidity collateralized new borrowing capacity and uncommitted federal funds borrowing availability was $718 million, or 269% of uninsured and uncollateralized deposits at September 30, 2024. At December 31, 2023, on-balance sheet liquidity, collateralized borrowing and uncommitted federal funds availability totaled $673.6 million, or 244% of uninsured and uncollateralized deposits.
Current wording
On-balance sheet liquidity collateralized new borrowing capacity and uncommitted federal funds borrowing availability was $852 million, or 314% of uninsured and uncollateralized deposits at March 31, 2025. At December 31, 2024, on-balance sheet liquidity, collateralized borrowing and uncommitted federal funds availability totaled $724.8 million, or 273% of uninsured and uncollateralized deposits.
Previous wording
(1) The FHLB advances bear fixed rates, require interest-only monthly payments, and are collateralized by a blanket lien on pre-qualifying first mortgages, home equity lines, multi-family loans and certain other loans which had a pledged balance of $1,082.0 million and $1,106.3 million at September 30, 2024 and December 31, 2023, respectively. At September 30, 2024, the Bank’s available and unused portion under the FHLB borrowing arrangement was approximately $414.4 million compared to $370.6 million as of December 31, 2023.
Current wording
(1) The FHLB advances bear fixed rates, require interest-only monthly payments, and are collateralized by a blanket lien on pre-qualifying first mortgages, home equity lines, multi-family loans and certain other loans which had a pledged balance of $1,032.3 million and $1,075.0 million at March 31, 2025 and December 31, 2024, respectively. At March 31, 2025, the Bank’s available and unused portion under the FHLB borrowing arrangement was approximately $501.5 million compared to $424.7 million as of December 31, 2024.
Previous wording
(2) Maximum month-end borrowed amounts outstanding under this borrowing agreement were $81.0 million and $217.5 million, during the nine months ended September 30, 2024 and the twelve months ended December 31, 2023, respectively.
Current wording
(2) Maximum month-end borrowed amounts outstanding under this borrowing agreement were $5.0 million and $81.0 million, during the three months ended March 31, 2025 and the twelve months ended December 31, 2024, respectively.
Showing the first 40 of 51 pairs. Open the source sections for the rest.
Rearranged current paragraphs (5)
Current report — wording carried from elsewhere
The following table lists the portfolio characteristics of our major commercial real estate loan portfolio at March 31, 2025:
Current report — wording carried from elsewhere
The following table lists the portfolio characteristics of our major commercial real estate loan portfolio at December 31, 2024:
Current report — wording carried from elsewhere
The table below lists the above CRE portfolio by geographical location:
Current report — wording carried from elsewhere
The following table further disaggregates the composition of our commercial real estate loan portfolio by selected industry components at December 31, 2024:
Current report — wording carried from elsewhere
The table below lists our CRE portfolio selected industry components by geographical location:
Rearranged previous paragraphs (3)
Previous report — wording carried elsewhere
The following is a summary of some of the significant factors that affected our operating results for the nine months ended September 30, 2024, and September 30, 2023.
Previous report — wording carried elsewhere
NET INTEREST INCOME ANALYSIS ON A TAX EQUIVALENT BASIS
Previous report — wording carried elsewhere
Future and supportable economic forecasts are based on national economic conditions and their reversion to the mean is implicit in the model and generally occurs over a period of two years.