Citizens Community Bancorp Inc.
For the period ended Mar 31, 2026. Filed May 6, 2026.
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, 2026 · Filed May 6, 2026
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 2025-09-30; filed 2025-11-04.
0001367859-25-000088
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-03-31; filed 2026-05-06.
0001367859-26-000034
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 180 previous paragraphs and 166 current paragraphs.
96 unchanged; 54 reworded; 15 added; 29 removed; 1 previous and 1 current paragraphs rearranged.
Tables are not compared: 34 previous and 33 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 (15)
Current report
•future pandemics;
Current report
•competitive pressures from others in the financial services industry, including non-depository institutions;
Current report
•disintermediation risk (including the use of emerging financial technologies, such as cryptocurrencies);
Current report
Compared to the first quarter of 2025, the first quarter of 2026 net interest income increased $1.4 million. The first quarter 2026 increase from the same period in 2025 was largely due to: (1) a 20 basis point increase in loan yields due to new loan originations and existing loans repricing at higher rates; and (2) a 28 basis point decrease in deposits costs; (3) a reduction in other borrowings, largely due to the redemption of subordinated debt on September 1, 2025, partially offset by a lower average balance of loans with growth in lower yielding interest-bearing cash.
Current report
Non-interest income increased $0.5 million in the first quarter of 2026, compared to the first quarter of 2025, primarily due to higher gains on the sale of loans, due in part to the backlog of SBA loans unable to be sold during the fourth quarter of 2025, due to the government shutdown and then sold in the first quarter of 2026.
Current report
Provision for income taxes increased to $0.88 million in the first quarter of 2026, from $0.78 million in the first quarter of 2025, primarily due to the impact of a 2025 tax credit investment.
Current report
Net interest income was $13.0 million for the three months ended March 31, 2026, compared to $11.6 million for the three months ended March 31, 2025. Compared to the first quarter of 2025, the first quarter of 2026 net interest income increased $1.4 million. The first quarter 2026 increase from the same period in 2025 was largely due to: (1) a 20 basis point increase in loan yields due to new loan originations and existing loans repricing at higher rates; and (2) a 28 basis point decrease in deposit rates, largely due to lower short-term interest rates resulting from Federal Open Market Committee
Current report
(“ FOMC”) decreases in the overnight Fed Funds rate; and (3) a reduction in other borrowings largely due to the redemption of subordinated debt on September 1, 2025; partially offset by a 75 basis point decrease in interest-bearing cash yields due to FOMC decreases in the overnight Fed Funds rate.
Current report
(Dollar amounts in thousands)
Current report
(Dollar amounts in thousands)
Current report
Loan servicing income increased largely due to servicing income received for semi-annual agricultural loan payments serviced for others.
Current report
The increase in other income for the three-month period ending March 31, 2026, compared to the same period in 2025, was primarily due to the termination of the remaining lease obligation on a previously closed branch.
Current report
Data processing expense for the three-months ended March 31, 2026, decreased from the same 2025 period, largely due to contract renegotiations which lowered our costs.
Current report
Income Taxes. Provision for income taxes increased to $0.88 million in the first quarter of 2026, or an effective tax rate of 18.9%, from $0.78 million in the first quarter of 2025, or an effective tax rate of 19.6%, due to higher pre-tax income.
Current report
Nonperforming assets were $18.2 million at March 31, 2026, compared to $16.7 million at December 31, 2025. This net increase was largely due to the addition of the government guaranteed portion of loans totaling $1.4 million in the quarter ended March 31, 2026. The government guaranteed portion of loans was $2.4 million at March 31, 2026. In addition, the unguaranteed portion of loans originated with government guarantees increased $0.6 million in the quarter. The unguaranteed portion of loans originated with government guarantees was $1.5 million at March 31, 2026. For the nonaccrual unguaranteed loan portion of $1.5 million, there were specific reserves of approximately 50% of the loan balance at March 31, 2026.
Removed paragraphs (29)
Previous report
•future pandemics (including new variants of COVID-19);
Previous report
•competitive pressures among depository and other financial institutions;
Previous report
•disintermediation risk;
Previous report
Compared to the third quarter of 2024, the third quarter of 2025 net interest income increased $1.9 million. The third quarter 2025 increase from the same period in 2024 was largely due to: (1) $1.3 million in lower liability expense due to 50 basis point lower cost of funds; (2) $0.4 million of interest income recognized on the payoff of nonaccrual loans and loans with purchase credit discounts; (3) $0.4 million of accretion on the aforementioned payoffs; and (4) with higher asset yields offsetting a 4% decrease in interest-earning assets.
Previous report
Non-interest income increased $0.1 million in the third quarter of 2025, compared to the third quarter of 2024, primarily due to higher gains on sale of loans.
Previous report
Provision for income taxes decreased to $0.85 million in the third quarter of 2025, from $0.9 million in the third quarter of 2024, primarily due to a lower effective tax rate. The decrease in the effective tax rate was primarily due to the positive impact of higher permanent tax deductions in 2025.
Previous report
For the nine months ended September 30, 2025, net interest income increased $3.4 million from the same period in 2024. The increase in net interest income was largely due to: (1) lower liability interest costs of 33 basis points; (2) income from the payoff of nonaccrual loans and loans with purchase credit discounts, which increased $0.8 million; partially offset by the impact of a 4% decrease in interest-earnings assets.
Previous report
The total provision for credit losses for the nine months ended September 30, 2025, was $1.750 million compared to a negative provision for credit losses of $2.725 million for the nine months ended September 30, 2024. The 2025 provision for ACL was primarily due to the impact of higher reserves on impaired loans and the impact of higher delinquencies. For the nine months ended 2024, the total provision for ACL was a negative provision of $2.725 million. The decrease was primarily due to:
Previous report
(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 assumptions utilized by our third party provider; (3) reduction in off-balance sheet ACL to fund loan commitments of $0.9 million; (4) a decrease in the allowance for credit losses of $0.5 million, largely in the first quarter; and (5) net recoveries.
Previous report
Non-interest income increased $0.4 million for the nine-month period ended September 30, 2025, compared to the same period in 2024, primarily due to: (1) $0.6 million higher gain on equity securities, and (2) higher gain on sale of loans of $0.4 million, partially offset by the (3) Bank Owned Life Insurance death benefit of $0.2 million recognized in the second quarter of 2024, and (4) lower service charges on deposit accounts, loan fees and service charges due to lower customer activity.
Previous report
Non-interest expense increased $0.8 million in the nine-month period ended September 30, 2025, compared to the same period in 2024, primarily due to higher compensation expense for the reason discussed above, partially offset by the establishment in the first quarter 2024 of the SBA recourse reserve of $0.4 million.
Previous report
Provision for income taxes decreased to $2.4 million in the nine months ended September 30, 2025, compared to the same period in 2024, due to a decrease in pre-tax income and a lower effective tax rate. The decrease in the effective tax rate was primarily due to the positive impact of higher permanent tax deductions in 2025.
Previous report
When comparing year-over-year results, changes in net interest income, provision for credit losses, non-interest income, non-interest expense, and provision for income taxes are primarily due to the items discussed above. See the remainder of this section for a more thorough discussion.
Previous report
Net interest income was $13.2 million for the three months ended September 30, 2025, compared to $11.3 million for the three months ended September 30, 2024. Compared to the third quarter of 2024, the third quarter of 2025 net interest income increased $1.9 million. The third quarter 2025 increase from the same period in 2024, was largely due to: (1) $1.3 million in lower liability interest expense due to 50 basis point lower cost of funds; (2) $0.4 million of interest income recognized on the payoff of nonaccrual loans and loans with purchase credit discounts; (3) $0.4 million of accretion on the aforementioned payoffs; and (4) with higher asset yields offsetting a 4% decrease in interest-earning assets.
Previous report
Net interest income was $38.1 million for the nine-month period ended September 30, 2025, compared to $34.8 million for the nine months ended September 30, 2024. For the nine months ended September 30, 2025, net interest income increased $3.3 million from the same period in 2024. The increase in net interest income was largely due to: (1) lower liability costs of 33 basis points; (2) income from the payoff of nonaccrual loans and loans with purchase credit discounts, increased $0.8 million; partially offset by the impact of a 4% decrease in interest-earnings assets.
Previous report
The net interest margin for the nine-month period ended September 30, 2025, increased to 3.11%, compared to 2.71%, for the nine-month period ended September 30, 2024. The higher net interest margin was primarily due to: (1) a decrease in liability costs of 33 basis points; and (2) the net favorable impact of the $0.74 million payoffs of nonaccrual loans and loans with purchase credit discounts, net of income recognized on loans modified.
Previous report
Nine months ended September 30, 2025, compared to the nine months ended September 30, 2024:
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RATE / VOLUME ANALYSIS
Previous report
Nine months ended September 30, 2025, compared to the nine months ended September 30, 2024.
Previous report
The total provision for credit losses for the nine months ended September 30, 2025, was $1.750 million compared to a negative provision for credit losses of $2.725 million for the nine months ended September 30, 2024. The 2025 provision for ACL was primarily due to the impact of higher reserves on impaired loans and the impact of higher delinquencies. For the nine months ended 2024, the total provision for ACL was a negative provision of $2.725 million. The decrease was primarily due 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 assumptions utilized by our third party provider; (3) reduction in off-balance sheet ACL to fund loan commitments of $0.9 million; (4) a decrease in the allowance for credit losses of $0.5 million, largely in the first quarter; and (5) net recoveries.
Previous report
Service charges on deposit accounts decreased $64 thousand from the third quarter of 2024, compared to the third quarter of 2025, and decreased $170 thousand for the nine months ended September 30, 2025, compared to the same period in 2024, primarily due to lower customer activity.
Previous report
Loan fees and services charges were lower in the nine-month period ended September 30, 2025, compared to the same periods in 2024, due to lower customer activity.
Previous report
Net gains (losses) on equity securities increased for the nine-month period ended September 30, 2025, compared to the same period in 2024. The change was due to second quarter 2024 losses, partially offset by gains recognized in the first quarter of 2024, due to increased valuations of equity securities.
Previous report
The decrease in other income for the three- and nine-month periods ending September 30, 2025, compared to the same periods in 2024, is due to changes in annual debit card incentives in 2025, due to lower customer spending.
Previous report
Data processing expense for the three and nine-months ended September 30, 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 report
The decrease in other non-interest expense for the nine-months ended September 30, 2025, compared to the same period in 2024, is largely due to $0.2 million in branch closure costs in the second quarter of 2024 and the establishment of an SBA valuation reserve of $0.4 million in the first quarter of 2024, partially offset by additional SBA costs in 2025 of $0.1 million.
Previous report
Income Taxes. Provision for income taxes decreased to $0.85 million in the third quarter of 2025, from $0.9 million in the third quarter of 2024. For the nine months ended September 30, 2025, income tax expense decreased $0.6 million to $2.4 million, compared to the same period in 2024. The decrease in both periods is primarily due to lower pre-tax income and to a lesser extent, a lower effective tax rate, due to the positive impact of higher permanent tax deductions in 2025.
Previous report
Nonperforming assets were $16.7 million at September 30, 2025, compared to $14.3 million at December 31, 2024. This net increase was largely due to a $9 million multi-family loan moved to nonaccrual in the third quarter due to slower than expected leasing activity, partially offset by decreases largely due to: (1) a payoff of an agricultural relationship in the second quarter of 2025 and (2) a payoff of a $5.2 million forestry services agricultural loans in the third quarter of 2025.
Previous report
(b) A $5.0 million line of credit, maturing August 1, 2026, that remains undrawn upon, and was renewed for a term of one year on August 1, 2025.
Reworded paragraphs (54)
Previous wording
•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;
Current wording
•risks posed by acquisitions and other expansion opportunities, including difficulties and delays in integrating acquired business operations or fully realizing the cost savings and other benefits;
Previous wording
•the potential volatility of our stock price;
Current wording
•volatility of our stock price (including possible removal from the Russell 3000® Index and related indexes);
Previous wording
The following discussion sets forth management’s discussion and analysis of our consolidated financial condition as of September 30, 2025, and our consolidated results of operations for the nine months ended September 30, 2025, compared to the same period in the prior fiscal year ended September 30, 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.
Current wording
The following discussion sets forth management’s discussion and analysis of our consolidated financial condition as of March 31, 2026, and our consolidated results of operations for the three months ended March 31, 2026, compared to the same period in the prior fiscal year ended March 31, 2025. 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 2025 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
We reported net income of $3.7 million and $10.1 million, or $0.37 and $1.02 per diluted share for the three and nine months ended September 30, 2025, compared to 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, respectively.
Current wording
We reported net income of $3.8 million or $0.39 per diluted share for the three months ended March 31, 2026, compared to net income of $3.2 million or $0.32 per diluted share for the three months ended March 31, 2025, respectively.
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, 2025, and September 30, 2024.
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, 2026, and March 31, 2025.
Previous wording
The total provision for credit losses for the third quarter ended September 30, 2025, was $0.650 million compared to a negative provision for credit losses of $0.400 million for the quarter ended September 30, 2024. The third quarter of 2025 provision was largely due to: (1) the impact of changes in credit quality, i.e. changes in reserve on impaired loans, and the impact of delinquent loans at June 30, 2025, becoming delinquent at September 30, 2025; (2) net shrinkage of the loan portfolio of $0.1 million; (3) $51 thousand of net recoveries; (4) a decrease in off-balance sheet commitments for new construction loan originations of $0.1 million. The total benefit, i.e., negative provision, for credit losses for the third quarter ended September 30, 2024, of $0.400 million was due to decreases in ACL related to on-balance sheet ACL of $0.1 million; and reductions in off-balance sheet reserves to fund commitments of $0.3 million.
Current wording
The total provision for credit losses for the first quarter ended March 31, 2026, was $0.75 million compared to a negative provision for credit losses of $0.25 million for the quarter ended March 31, 2025. The first quarter of 2026 provision was largely due to: (1) a net increase of $0.4 million, with increases in reserves on impaired loans, partially offset by loss rates on collectively evaluated loans; (2) modest charge-offs of $0.2 million; (3) an increase in economic scenarios based on information provided by our third-party model provider of $0.1 million; and (4) the net impact of new loan growth, net of a decrease in the portfolio duration of $0.05 million. The first quarter ended March 31, 2025, negative provision for credit losses was primarily 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.
Previous wording
Non-interest expense increased $0.7 million in the third quarter of 2025 from $10.4 million in the third quarter of 2024. The increase was primarily due to an increase in compensation expense due to annual employee pay raises, higher incentive accruals, and higher medical costs.
Current wording
Non-interest expense increased $0.2 million in the first quarter of 2026 from $10.5 million in the first quarter of 2025. The increase was primarily due to an increase in compensation due to the full quarter impact of the 2025 annual employee pay raises and benefit expenses, partially offset by lower data processing costs.
Previous wording
We adopted ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), “Measurement of Credit Losses on Financial Instruments” through a cumulative-effect adjustment on January 1, 2023. We have selected a loss estimation methodology, utilizing a third-party model. See also Notes 1 and 3 to the unaudited consolidated financial statements for further discussion of our adoption of ASU 2016-13.
Current wording
We have selected a loss estimation methodology, utilizing a third-party model. See also Notes 1 and 3 to the unaudited consolidated financial statements for further discussion of our adoption of ASU 2016-13.
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, 2025, and September 30, 2024, 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 periods ended March 31, 2026, and March 31, 2025, respectively.
Previous wording
The net interest margin for the three-month period ended September 30, 2025, increased to 3.20%, compared to 2.63%, for the three-month period ended September 30, 2024. The higher net interest margin was due to: (1) a decrease in liability costs of 48 basis points; (2) the net favorable impacts of the $0.4 million of payoffs of nonaccrual loans and loans with purchase credit discounts or 10 basis points; and (3) a net increase of 4 basis points in asset yields in addition to those discussed above.
Current wording
The net interest margin for the three-month period ended March 31, 2026, increased to 3.18%, compared to 2.85%, for the three-month period ended March 31, 2025. The higher net interest margin was due to: (1) a decrease in liability costs of 30 basis points; (2) a net increase of 20 basis points in loan yields; partially offset by (3) lower yields on interest-bearing cash at the Federal Reserve; and (4) the combination of a decrease in average balances of higher yielding loans and an increase in the average balance of lower yielding cash.
Previous wording
Average Balances, Net Interest Income, Yields Earned and Rates Paid. The following net interest income analysis table presents interest income from average interest earning assets, expressed in dollars and yields, and interest expense on average interest-bearing liabilities, expressed in dollars and rates on a tax equivalent basis. Shown below is the weighted average tax equivalent yield on interest earning assets, rates paid on interest-bearing liabilities and the resultant spread at or during the three and nine-month periods ended September 30, 2025, and September 30, 2024. Non-accruing loans have been included in the table as loans carrying a zero yield.
Current wording
Average Balances, Net Interest Income, Yields Earned and Rates Paid. The following net interest income analysis table presents interest income from average interest earning assets, expressed in dollars and yields, and interest expense on average interest-bearing liabilities, expressed in dollars and rates on a tax equivalent basis. Shown below is the weighted average tax equivalent yield on interest earning assets, rates paid on interest-bearing liabilities and the resultant spread at or during the three-month periods ended March 31, 2026, and March 31, 2025. Non-accruing loans have been included in the table as loans carrying a zero yield.
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 and volume changes have been discussed previously in the net interest income section above.
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 changes have been discussed previously in the net interest income section above. Changes in asset volume include an increase in interest-bearing cash, resulting from the cash deployment of the 2025 loan shrinkage as the bank reduced non-strategic relationships, and the reinvestment of investment securities amortization of mortgage-backed certificates, U.S. government securities and student loan asset-backed securities into interest-bearing cash.
Previous wording
The table below shows the principal balance and current contractual rate of fixed rate certificates of deposit as of September 30, 2025. The table also shows the principal balance and current contractual rate of fixed rate loans and securities as of September 30, 2025, that mature or reprice.
Current wording
The table below shows the principal balance and current contractual rate of fixed-rate loans, securities, and certificates of deposits as of March 31, 2026, that mature or reprice for the remaining three quarters of 2026 and the four quarters of 2027.
Previous wording
The total provision for credit losses for the third quarter ended September 30, 2025, was $0.650 million compared to a negative provision for credit losses of $0.400 million for the quarter ended September 30, 2024. The third quarter of 2025 provision was largely due to: (1) the impact of changes in credit quality, i.e. changes in reserve on impaired loans, and the impact of delinquent loans at June 30, 2025, becoming current at September 30, 2025; (2) net shrinkage of the loan portfolio of $0.1 million; (3) $51 thousand of net recoveries; (4) a decrease in off-balance sheet commitments for new construction loan originations of $0.1 million. The total benefit, i.e., negative provision, for credit losses for the third quarter ended September 30, 2024, of $0.400 million, was due to decreases in the ACL related to on-balance sheet ACL of $0.1 million; and reductions in off-balance sheet reserves to fund commitments of $0.3 million.
Current wording
The total provision for credit losses for the first quarter ended March 31, 2026, was $0.75 million compared to a negative provision for credit losses of $0.25 million for the quarter ended March 31, 2025. The first quarter of 2026 provision was largely due to: (1) a net increase of $0.4 million, with increases in reserves on impaired loans, partially offset by lower loss rates on collectively evaluated loans; (2) modest charge-offs of $0.2 million; (3) an increase in economic scenarios based on information provided by our third-party model provider of $0.1 million; and (4) the net impact of new loan growth, net of a decrease in the portfolio duration of $0.05 million. The total benefit, i.e., negative provision, for credit losses for the first quarter ended March 31, 2025, of $0.25 million 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.
Previous 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.
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 factored into the third-party model used for economic conditions in computing the ACL.
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, 2025 and 2024, 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, 2026 and 2025, respectively.
Previous wording
Gain on sale of loans increased in the three-month period ended September 30, 2025, compared to the three-month period ended September 30, 2024. Higher gains on SBA loan sales account for approximately 2/3 of the increase, with the remainder of the increase also impacted by higher gains on sale of residential loans. For the nine-month periods ending September 30, 2025, and 2024, loan sale gains increased approximately 60% due to higher SBA loan sales and 40% higher residential gains on sale
Current wording
Gain on sale of loans increased in the three-month period ended March 31, 2026, compared to the three-month period ended March 31, 2025. Higher gains on SBA loan sales account for approximately two-thirds of the increase, with the remainder of the increase due to higher gains on sale of residential loans.
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, 2025 and 2024, 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, 2026 and 2025, respectively.
Previous wording
Compensation expense for the three-month period ended September 30, 2025, increased from the same period in 2024, due to annual employee pay raises, effective late first quarter of 2025, higher incentive accruals, and higher medical costs. The increase for the nine-month period ending September 30, 2025, was largely due to the same reason as in the third quarter period.
Current wording
Compensation expense for the three-month period ended March 31, 2026, increased from the same period in 2025, due to annual employee pay raises, effective late first quarter of 2025, higher incentive accruals due to higher pre-tax income, and higher benefit costs.
Previous wording
Amortization of intangibles decreased for both the three and nine-month periods ending September 30, 2025, from the same 2024 periods, as an intangible was fully amortized in the third quarter of 2025.
Current wording
Amortization of intangibles decreased for the three-month period ending March 31, 2026, from the same 2025 period, as an intangible was fully amortized in the third quarter of 2025.
Previous wording
Cash and Cash Equivalents. Cash and cash equivalents increased $32.2 million to $82.4 million at September 30, 2025, compared to $50.2 million at December 31, 2024. This increase was primarily due to the net proceeds from loan shrinkage increasing on-balance sheet liquidity and growing interest-bearing cash.
Current wording
Cash and Cash Equivalents. Cash and cash equivalents increased $30.3 million to $149.2 million at March 31, 2026, compared to $118.9 million at December 31, 2025. This increase was primarily due to an increase in interest-bearing cash provided by deposit growth, partially offset by loan growth.
Previous wording
Investment Securities. We manage our securities portfolio to provide liquidity, manage 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 $5.3 million during the nine months ended September 30, 2025, to $137.6 million from $142.9 million at December 31, 2024. There were principal repayments of $8.9 million, and a net decrease in the corporate debt portfolio due to calls of $5.0 million and maturities of $2.5 million. These reductions were partially offset by purchases of $7.0 million of corporate debt and a decrease in the unrealized loss of $4.2 million.
Current wording
Investment Securities. We manage our securities portfolio to provide liquidity, manage 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 $3.2 million during the three months ended March 31, 2026, to $130.9 million from $134.1 million at December 31, 2025. There were principal repayments of $3.0 million, and a net decrease in the corporate debt portfolio due to redemptions of $1.3 million. These reductions were partially offset by purchases of $0.8 million of corporate debt and a decrease in the unrealized loss of $0.3 million.
Previous wording
Securities held-to-maturity decreased $4.0 million to $81.5 million during the nine-month period ended September 30, 2025, from $85.5 million at December 31, 2024, due to principal repayments.
Current wording
Securities held-to-maturity decreased $1.2 million to $79.0 million during the three-month period ended March 31, 2026, from $80.2 million at December 31, 2025, due to principal repayments.
Previous 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.
Current wording
At March 31, 2026, the Bank has pledged certain of its mortgage-backed securities with a carrying value of $31.6 million as collateral to secure a line of credit with the Federal Reserve Bank. As of March 31, 2026, there were no borrowings outstanding on this Federal Reserve Bank line of credit. As of March 31, 2026, the Bank has pledged certain of its U.S. Government Agency securities with a carrying value of $0.1 million and mortgage-backed securities with a carrying value of $1.5 million as collateral against specific municipal deposits. As of March 31, 2026, the Bank also has mortgage-backed securities with a carrying value of $0.4 million pledged as collateral to the Federal Home Loan Bank of Des Moines.
Previous wording
At September 30, 2025, the Bank has pledged certain of its mortgage-backed securities with a carrying value of $32.6 million as collateral to secure a line of credit with the Federal Reserve Bank. As of September 30, 2025, there were no borrowings outstanding on this Federal Reserve Bank line of credit. As of September 30, 2025, the Bank has pledged certain of its U.S. Government Agency securities with a carrying value of $0.2 million and mortgage-backed securities with a carrying value of $1.9 million as collateral against specific municipal deposits. As of September 30, 2025, the Bank also has mortgage-backed securities with a carrying value of $0.4 million pledged as collateral to the Federal Home Loan Bank of Des Moines.
Current wording
At December 31, 2025, the Bank has pledged certain of its mortgage-backed securities with a carrying value of $32.1 million as collateral to secure a line of credit with the Federal Reserve Bank. As of December 31, 2025, there were no borrowings outstanding on this Federal Reserve Bank line of credit. As of December 31, 2025, the Bank has pledged certain of its U.S. Government Agency securities with a carrying value of $0.2 million and mortgage-backed securities with a carrying value of $1.8 million as collateral against specific municipal deposits. As of December 31, 2025, the Bank also has mortgage-backed securities with a carrying value of $0.4 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 $0.05 billion, to $1.32 billion as of September 30, 2025, from $1.37 billion at December 31, 2024. The following table reflects the composition, of our loan portfolio at September 30, 2025, and December 31, 2024:
Current wording
Loans. Total loans outstanding, net of deferred loan fees and costs and unamortized discount on acquired loans, increased by $0.02 billion, to $1.36 billion as of March 31, 2026, from $1.34 billion at December 31, 2025. The following table reflects the composition of our loan portfolio at March 31, 2026, and December 31, 2025:
Previous wording
In addition to the ACL - Loans, the Company has established an ACL - Unfunded Commitments of $0.49 million at September 30, 2025, and $0.33 million at December 31, 2024, 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 $0.48 million at March 31, 2026, and $0.49 million at December 31, 2025, classified in other liabilities on the consolidated balance sheets.
Previous wording
There were no Loan Modifications made to Borrowers Experiencing Financial Difficulty during the three months ended September 30, 2025.
Current wording
The tables below detail Loan Modifications Made to Borrowers Experiencing Financial Difficulty during the three months ended March 31, 2026:
Previous wording
The table below shows a summary of criticized loans, split by special mention and substandard loans for the past five quarters. The increase in special mention loans in 2025 was primarily due to an increase in special mention commercial loans in the first quarter of 2025 largely due to a C&I relationship in the first quarter of 2025 that showed weaker cash flow than expected, and in the second quarter of 2025, one new $9 million multi-family loan that is experiencing slower leasing activity than expected. In the third quarter, the $9 million special mention loan moved to substandard and nonaccrual, which was partially offset by the payoff of a $5.2 million substandard loan that was on nonaccrual.
Current wording
The table below shows a summary of criticized loans, split by special mention and substandard loans for the past five quarters. Changes in balances over $3 million include changes in special mention commercial loans in the second quarter of 2025, due to one new $9 million multi-family loan that is experiencing slower leasing activity than expected. In the third quarter of 2025, the $9 million special mention loan moved to substandard and nonaccrual, which was partially offset by the payoff of a $5.2 million substandard loan that was on nonaccrual.
Previous wording
The fair market value of the Company’s MSR asset was $4.8 million at September 30, 2025, compared to $5.0 million at September 30, 2024.
Current wording
The fair market value of the Company’s MSR asset was $4.8 million at March 31, 2026, compared to $5.1 million at March 31, 2025.
Previous wording
The unpaid balances of one-to-four family residential real estate loans serviced for others as of September 30, 2025, and December 31, 2024, were $475.9 million and $479.6 million, respectively. The fair market value of the Company’s MSR asset as a percentage of its servicing portfolio at September 30, 2025, and December 31, 2024, was 1.01% and 1.09%, respectively.
Current wording
The unpaid balances of one-to-four family residential real estate loans serviced for others as of March 31, 2026, and December 31, 2025, were $473.0 million and $474.0 million, respectively. The fair market value of the Company’s MSR asset as a percentage of its servicing portfolio at March 31, 2026, and December 31, 2025, was 1.02% and 0.98%, respectively.
Previous wording
Deposits. Total deposits decreased $7.6 million during the nine months ended September 30, 2025, to $1.48 billion. The decrease is largely due to the reduction in brokered deposits. Public deposits are seasonal and the seasonal decrease for the nine months ended September 30, 2025, was largely offset by growth in commercial and consumer deposits. Deposits by type for five quarters are detailed below:
Current wording
Deposits. Total deposits increased $41.5 million during the three months ended March 31, 2026, to $1.57 billion. The increase was largely due to the growth in commercial and public deposits, most of which are seasonal. Deposits by type for five quarters are detailed below:
Previous wording
At September 30, 2025, the deposit portfolio composition was 58% consumer, 28% commercial, 12% public, and 2% wholesale deposits compared to 57% consumer, 28% commercial, 13% public and 2% brokered deposits at December 31, 2024.
Current wording
At March 31, 2026, the deposit portfolio composition was 57% consumer, 28% commercial, 14% public, and 1% wholesale deposits compared to 57% consumer, 28% commercial, 14% public and 1% wholesale deposits at December 31, 2025. Deposit composition by type for five quarters are detailed below:
Previous wording
Uninsured and uncollateralized deposits were $277.7 million, or 19% of total deposits, at September 30, 2025, and $265.4 million, or 18% of total deposits, at December 31, 2024. Uninsured deposits alone at September 30, 2025, were $421.5 million, or 28% of total deposits, and $428.0 million, or 29% of total deposits at December 31, 2024.
Current wording
Uninsured and uncollateralized deposits were $322.6 million, or 20% of total deposits, at March 31, 2026, and $323.5 million, or 21% of total deposits, at December 31, 2025. Uninsured deposits alone at March 31, 2026, were $499.6 million, or 32% of total deposits, and $478.4 million, or 31% of total deposits at December 31, 2025.
Previous wording
On-balance sheet liquidity, collateralized new borrowing capacity, and uncommitted federal funds borrowing availability was $741 million, or 267% of uninsured and uncollateralized deposits at September 30, 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.
Current wording
On-balance sheet liquidity, collateralized new borrowing capacity, and uncommitted federal funds borrowing availability was $799 million, or 248% of uninsured and uncollateralized deposits at March 31, 2026. At December 31, 2025, on-balance sheet liquidity, collateralized new borrowing capacity and uncommitted federal funds availability totaled $792 million, or 243% of uninsured and uncollateralized deposits.
Previous wording
(1) FHLB advances 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 $1,028.7 million and $1,075.0 million at September 30, 2025 and December 31, 2024, respectively. At September 30, 2025, the Bank’s available and unused portion under the FHLB borrowing arrangement was approximately $414.4 million compared to $424.7 million as of December 31, 2024.
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 pledged balances of $1,039.3 million and $1,017.6 million at March 31, 2026 and December 31, 2025, respectively. At March 31, 2026, the Bank’s available and unused portion under the FHLB borrowing arrangement was approximately $410.1 million compared to $433.7 million as of December 31, 2025.
Previous wording
(2) Maximum month-end borrowed amounts outstanding under this borrowing agreement were $5.0 million and $81.0 million, during the nine months ended September 30, 2025 and the twelve months ended December 31, 2024, respectively.
Current wording
(2) Maximum month-end borrowed amounts outstanding under this borrowing agreement were $0 million and $5.0 million, during the three months ended March 31, 2026 and the twelve months ended December 31, 2025, respectively.
Previous wording
(3) There were no FHLB borrowings outstanding as of September 30, 2025. The weighted-average interest rate on FHLB borrowings, with maturities less than twelve months, outstanding as of December 31, 2024, was 1.45%.
Current wording
(3) There were no FHLB borrowings outstanding as of March 31, 2026 and December 31, 2025.
Previous wording
(4) Senior notes, entered into by the Company in June 2019 consist of the following:
Current wording
(4) Senior notes, entered into by the Company consist of the following:
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Current report — wording carried from elsewhere
(b) A $5.0 term note entered into in October 2025, requiring quarterly interest-only payments through October 2028, and quarterly principal and interest payments thereafter. Interest is variable, based on US Prime rate minus 75 basis points with a floor rate of 4.00%.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
NET INTEREST INCOME ANALYSIS ON A TAX EQUIVALENT BASIS