Citizens Community Bancorp Inc.
For the period ended Sep 30, 2026. Filed Nov 9, 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.
Sep 30, 2026 · Filed Nov 9, 2026
CZWI$23.66+1.2%Stored close · as of Nov 9, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2026-06-30; filed 2026-08-06.
0001367859-26-000050
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-09-30; filed 2026-11-09.
0001367859-26-000063
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 178 current paragraphs.
109 unchanged; 53 reworded; 16 added; 18 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 34 previous and 36 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 (16)
Current report
•the effectiveness of our internal control over financial reporting and disclosure controls and procedures;
Current report
•our ability to remediate the material weakness in our internal control over financial reporting;
Current report
Compared to the third quarter of 2025, the third quarter of 2026 net interest income increased $1.3 million. The third quarter 2026 increase from the same period in 2025 was largely due to an increase in average loan balances and lower interest-bearing liabilities costs, with the impact of higher average deposit balances, largely offset by higher interest-bearing cash.
Current report
Provision for income taxes increased to $1.21 million in the third quarter of 2026, from $0.85 million in the third quarter of 2025, primarily due to higher pre-tax income.
Current report
For the nine months ended September 30, 2026, net interest income increased $2.9 million from the same period in 2025 due to the impact of lower deposit costs along with both the rate and volume impact of calling and redeeming the 6% subordinated debt in the third quarter of 2025. Rising loan yields in 2026 were partially offset the $1.4 million of income recognized in 2025 largely due to payoffs of nonaccrual loans and loans with purchase discount accretions.
Current report
The total provision for credit losses for the nine months ended September 30, 2026, was $5.2 million compared to a provision for credit losses of $1.8 million for the nine months ended September 30, 2025. The $3.4 million increase was attributable to the factors discussed above. The provision for 2026 was largely due to increases in specific reserves, net charge offs, and net loan growth partially offset by lower required ACL due to changes in loan characteristics. The 2025 provision for ACL was primarily due to the impact of higher reserves on impaired loans and the impact of higher delinquencies.
Current report
Non-interest income increased $0.1 million for the nine-month period ended September 30, 2026, compared to the same period in 2025, primarily due to an increase in loan servicing income and net gains on equities, largely offset by lower gain on sale of loans.
Current report
Non-interest expense decreased by $0.4 million in the nine-month period ended September 30, 2026, compared to the same period in 2025, largely due to lower data processing expense, partially offset by loan workout expenses included in other expenses.
Current report
Provision for income taxes decreased by $0.2 million in the nine months ended September 30, 2026, largely due to a lower effective tax rate.
Current report
The net interest margin for the three-month period ended September 30, 2026, increased to 3.37%, compared to 3.20%, for the three-month period ended September 30, 2025. The higher net interest margin was largely due to a 20-basis point reduction in the cost of interest-bearing liabilities.
Current report
Nine months ended September 30, 2026, compared to the nine months ended September 30, 2025:
Current report
Nine months ended September 30, 2026, compared to the nine months ended September 30, 2025:
Current report
The total provision for credit losses for the third quarter ended September 30, 2026, was $0.125 million compared to a provision for credit losses of $0.650 million for the quarter ended September 30, 2025. The third quarter of 2026 provision was largely due to: (1) an increase in specific reserves; (2) the impact of net loan growth: partially offset by (3) lower required ACL provision based on changes in loans characteristics. The third quarter of 2025 provision was largely due to the impact of changes in credit quality, partially offset by loan shrinkage.
Current report
The total provision for credit losses for the nine months ended September 30, 2026, was $5.200 million compared to a provision for credit losses of $1.750 million for the nine months ended September 30, 2025. The provision for 2026 was largely due to increases in specific reserves, net charge offs, and net loan growth partially offset by lower required ACL due to changes in loan characteristics. The 2025 provision for ACL was primarily due to the impact of higher reserves on impaired loans and the impact of higher delinquencies.
Current report
The following table presents the amortized cost basis of loans at September 30, 2026 that were both experiencing financial difficulty and modified during the three months ended September 30, 2026, by class and by type of modification. The percentage of the amortized cost basis of loans that were modified to borrowers in financial distress as compared to the amortized cost basis of each class of financing receivable is also presented below:
Current report
The following table presents the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty for the three months ended September 30, 2026:
Removed paragraphs (18)
Previous report
•the possibility that our internal controls and procedures could fail or be circumvented;
Previous report
Compared to the second quarter of 2025, the second quarter of 2026 net interest income increased $0.2 million. The second quarter of 2026 increase from the same period in 2025 was largely due to: (1) a $0.7 million decrease in interest expense due to lower deposit costs; (2) the impact of the September 2025 subordinated debt redemption; and (3) the impact of higher portfolio yields which was partially offset by: (1) a $0.5 million decrease in interest income due to $1.1 million of loan payoff income recognized in the second quarter of 2025; (2) the impact of higher nonaccrual loan balances; and (3) the repurchase of delinquent government loans in the second quarter of 2026.
Previous report
The total provision for credit losses for the second quarter ended June 30, 2026, was $4.325 million compared to a provision for credit losses of $1.350 million for the quarter ended June 30, 2025. The second quarter of 2026 provision was largely due to: (1) a net increase of $3.1 million in specific reserves on nonaccrual loans to $6.3 million and (2) charge-offs of $1.4 million. The second quarter of 2025 provision was largely due to: (1) the impact of three 30-89 days delinquent commercial relationships resulting in a $0.7 million provision; (2) the impact of modestly worsening macro-economic assumptions used by our third party provider of $0.3 million; (3) provision on new loans with longer contractual life outpacing previously established provisions on prepaying and maturing loans of $0.15 million; and (4) an increase in off-balance sheet commitments for new construction loan originations of $0.2 million.
Previous report
Provision for income taxes decreased to $0.14 million in the second quarter of 2026, from $0.78 million in the second quarter of 2025, primarily due to lower pre-tax income and a lower effective tax rate.
Previous report
For the six months ended June 30, 2026, net interest income increased $1.6 million from the same period in 2025. The impact of higher loan portfolio yields and lower deposit interest expense in the first quarter of 2026 compared to the first quarter of 2025 were the primary reasons for the change along with the second quarter of 2026 changes discussed above.
Previous report
The total provision for credit losses for the six months ended June 30, 2026, was $5.075 million compared to a provision for credit losses of $1.100 million for the six months ended June 30, 2025. The $3.0 million was attributable to the factors discussed above. 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 report
Non-interest income increased $0.3 million for the six-month period ended June 30, 2026, compared to the same period in 2025, primarily due to an increase in other income in the first quarter of 2026 due to the reversal of a $0.1 million lease liability and $0.1 million higher loan servicing income.
Previous report
Non-interest expense increased slightly by $63 thousand in the six-month period ended June 30, 2026, compared to the same period in 2025, primarily due to higher second quarter other expense primarily due to higher nonperforming asset, higher compensation expense and higher professional services, partially offset by lower data processing expenses.
Previous report
Provision for income taxes decreased by 0.5 million in the six months ended June 30, 2026, compared to the same period in 2025, due to a decrease in pre-tax income and a lower effective tax rate.
Previous report
The net interest margin for the three-month period ended June 30, 2026, decreased to 3.22%, compared to 3.27%, for the three-month period ended June 30, 2025. The lower net interest margin was due to a 28 basis point reduction in loan yields due to loan interest income discussed above partially offset by lower liability costs of 27 basis points.
Previous report
Six months ended June 30, 2026, compared to the six months ended June 30, 2025:
Previous report
Six months ended June 30, 2026, compared to the six months ended June 30, 2025:
Previous report
The total provision for credit losses for the second quarter ended June 30, 2026, was $4.325 million compared to a provision for credit losses of $1.350 million for the quarter ended June 30, 2025. The second quarter of 2026 provision was largely due to: (1) a net increase of $3.1 million, in specific reserves on nonaccrual loans to $6.3 million and (2) charge-offs of
Previous report
$1.4 million. The second quarter of 2025 provision expense was largely due to: (1) the impact of three 30-89 day delinquent commercial relationships resulting in a $0.7 million provision; (2) the impact of modestly worsening macro-economic assumptions used by our third party provider of $0.3 million; (3) provisions on new loans with longer contractual life outpacing previously established provisions on prepaying and maturing loans of $0.15 million; and (4) an increase in off-balance sheet commitments from new construction loan originations of $0.2 million.
Previous report
The total provision for credit losses for the six months ended June 30, 2026, was $5.075 million compared to a provision for credit losses of $1.100 million for the six months ended June 30, 2025. The second quarter of 2026 changes compared to the second quarter of 2025 are discussed above. 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 report
Loan servicing income increased for the six months ended June 30, 2026, compared to the six months ended June 30, 2025, largely due to higher originated servicing income recorded due to higher residential gains on sale.
Previous report
Compensation expense for the three-month period ended June 30, 2026, decreased from the same period in 2025, due to lower incentive accruals partially offset by the annual merit raises included in the last payroll period of the first quarter.
Previous report
There were no loan modifications made to borrowers experiencing financial difficulty during the three months ended June 30, 2026.
Reworded paragraphs (53)
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, 2025, filed with the SEC on March 5, 2026, (“2025 10-K”), Item 1A in Part II of this report, 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, 2025, filed with the SEC on March 5, 2026 (“2025 10-K”), our quarterly report on Form 10-Q for the quarterly period ended June 30, 2026, filed with the SEC on August 6, 2026 (“2Q26 10-Q”), and Item 1A in Part II of this report, and the following:
Previous wording
The following discussion sets forth management’s discussion and analysis of our consolidated financial condition as of June 30, 2026, and our consolidated results of operations for the three and six months ended June 30, 2026, compared to the same period in the prior fiscal year ended June 30, 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.
Current wording
The following discussion sets forth management’s discussion and analysis of our consolidated financial condition as of September 30, 2026, and our consolidated results of operations for the three and nine months ended September 30, 2026, compared to the same periods in 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 $1.1 million and $4.9 million, or $0.11 and $0.50 per diluted share for the three and six months ended June 30, 2026, compared to net income of $3.3 million and $6.5 million, or $0.33 and $0.65 per diluted share for the three and six months ended June 30, 2025, respectively.
Current wording
We reported net income of $5.4 million and $10.3 million, or $0.56 and $1.06 per diluted share for the three and nine months ended September 30, 2026, compared to 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, respectively.
Previous wording
The following is a summary of some of the significant factors that affected our operating results for the three and six months ended June 30, 2026, and June 30, 2025.
Current 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, 2026, and September 30, 2025.
Previous wording
Non-interest income decreased $0.2 million in the second quarter of 2026, compared to the second quarter of 2025, primarily due to lower gains on the sale of loans of $0.3 million.
Current wording
The total provision for credit losses for the third quarter ended September 30, 2026, was $0.125 million compared to a provision for credit losses of $0.650 million for the quarter ended September 30, 2025. The third quarter of 2026 provision was largely due to: (1) an increase in specific reserves; (2) the impact of net loan growth: partially offset by (3) lower required ACL provision based on changes in loan characteristics. The third quarter of 2025 provision was largely due to the impact of changes in credit quality, partially offset by loan shrinkage. Non-interest income decreased $0.1 million in the third quarter of 2026, compared to the third quarter of 2025, primarily due to lower gains on the sale of loans of $0.5 million, partially offset by higher net gains on equities of $0.3 million.
Previous wording
Non-interest expense decreased $0.2 million in the second quarter of 2026 from $10.8 million in the second quarter of 2025. The decrease was primarily due to lower compensation costs and lower data processing costs.
Current wording
Non-interest expense decreased $0.4 million in the third quarter of 2026 from $11.1 million in the third quarter of 2025. The decrease was primarily due to lower compensation costs due to lower incentive compensation and lower data processing costs, partially offset by higher loan workout expenses in other expenses.
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 six-month periods ended June 30, 2026, and June 30, 2025, 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 and nine-month periods ended September 30, 2026, and September 30, 2025, respectively.
Previous wording
Net interest income was $13.5 million for the three months ended June 30, 2026, compared to $13.3 million for the three months ended June 30, 2025. The second quarter 2026 increase from the same period in 2025 was largely due to: (1) $0.7 million decrease in interest expense largely due to the impact of the Federal Open Market Committee (“FOMC’) overnight Fed Funds interest rates decreasing 75 basis points in the third and fourth quarters of 2025 and lower expense due to the redemption of $15 million of 6% subordinated debt in the third quarter of 2025; and (2) higher loan portfolio interest rates, partially offset by: (1) a reduction in loan interest income of $1.1 million as the second quarter of 2025 and various income recognized, largely due to loan payoffs; (2) lower interest income in the second quarter of 2026 due to the impact of an increase in nonaccrual loans and the repurchase of delinquent government loans; and (3) the impact of lower interest rates on cash and cash equivalents resulting from a 75 basis points reduction in overnight interest rates in the third and fourth quarter of 2025 by the FOMC.
Current wording
Net interest income was $14.5 million for the three months ended September 30, 2026, compared to $13.2 million for the three months ended September 30, 2025. The third quarter 2026 increase from the same period in 2025 was largely due to: (1) a $0.3 million decrease in interest expense largely due to: (a) the impact of the Federal Open Market Committee (“FOMC’) overnight Fed Funds interest rates decreasing 75 basis points in the third and fourth quarters of 2025 and (b) lower expense due to the redemption of $15 million of 6% subordinated debt in the third quarter of 2025; and (2) higher average loan balances and growth in other earnings assets. These increases were partially offset by: (1) lower average investment securities balances; (2) lower interest income in the second quarter and third quarter of 2026 due to the impact of an increase in nonaccrual loans and the repurchase of delinquent government loans; and (3) the impact of lower interest rates on cash and cash equivalents resulting from a 75 basis points reduction in overnight interest rates in the third and fourth quarter of 2025 by the FOMC.
Previous wording
Net interest income was $26.5 million for the six-month period ended June 30, 2026, compared to $24.9 million for the six months ended June 30, 2025. The impact of higher loan portfolio yields and lower deposit interest expense in the first quarter of 2026 compared to the first quarter of 2025 were the primary reasons for the change along with the second quarter of 2026 changes discussed above.
Current wording
Net interest income was $41.0 million for the nine-month period ended September 30, 2026, compared to $38.1 million for the nine months ended September 30, 2025. The impact of lower deposit interest expense in the first quarter of 2026 compared to the first quarter of 2025 was the primary reason for the change, along with the second quarter 2026 changes discussed above. Rising loan yields in 2026 were partially offset the $1.4 million of income recognized in 2025 largely due to payoffs of nonaccrual loans and loans with purchase discount accretion.
Previous wording
The net interest margin for the six-month period ended June 30, 2026, increased to 3.20%, compared to 3.06%, for the six-month period ended June 30, 2025. The higher net interest margin was primarily due to a decrease in liability costs of 29 basis points, mainly due to: (1) lower short-term Fed Funds interest rates discussed above; (2) a decrease in the cost of FHLB advances; and (3) the September 2025 redemption of 6% $15 million subordinated debt; which was partially offset by: (1) lower short-term interest rates effecting both cash and cash equivalent and equity security yields; (2) lower comparable loan yields due to one-time June 2025 loan income recognition, largely due to loan payoffs; and (3) the second quarter 2026 negative impact of an increase in nonaccrual loans and the repurchase of government guaranteed loans, which was partially offset by higher loan portfolio yields.
Current wording
The net interest margin for the nine-month period ended September 30, 2026, increased to 3.26%, compared to 3.11%, for the nine-month period ended September 30, 2025. The higher net interest margin was primarily due to a decrease in interest-bearing liability costs of 26 basis points, mainly due to: (1) lower short-term Fed Funds interest rates discussed above; (2) a decrease in the cost of FHLB advances; and (3) the September 2025 redemption of 6% $15 million subordinated debt; which was partially offset by a 7 basis point decrease in interest earning assets due to lower yields on cash. Rising loan yields in 2026 partially offset the $1.4 million of income recognized in 2025 largely due to payoffs of nonaccrual loans and loans with purchase discount accretion.
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 six-month periods ended June 30, 2026, and June 30, 2025. 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 and nine-month periods ended September 30, 2026, and September 30, 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 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 and the increase in deposits being invested in interest-bearing cash at the Federal Reserve.
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. For both the three and nine-month periods ended September 30, 2026 and 2025, asset volumes changed to higher yielding loans from lower yielding investment securities, with deposit growth largely invested in cash and cash equivalents.
Previous wording
The table below shows the principal balance and current contractual rate of fixed-rate loans, securities, and certificates of deposits as of June 30, 2026, that mature or reprice for the remaining two quarters of 2026 and the four quarters of 2027.
Current wording
The table below shows the principal balance and current contractual rate of fixed-rate loans, securities, and certificates of deposits as of September 30, 2026, that mature or reprice for the remaining quarter of 2026 and the four quarters of 2027.
Previous wording
Management believes that the provision recorded for the current year’s three and six-month periods is adequate in view of the present condition of our loan portfolio and the sufficiency of collateral supporting our nonperforming loans. We continually monitor nonperforming 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 and nine-month periods is adequate in view of the present condition of our loan portfolio and the sufficiency of collateral supporting our nonperforming loans. We continually monitor nonperforming 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 six-month periods ended June 30, 2026 and 2025, respectively.
Current 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, 2026 and 2025, respectively.
Previous wording
Gain on sale of loans decreased in the three-month period ended June 30, 2026, compared to the three-month period ended June 30, 2025. Lower gains on SBA loan sales contributed to most of the decrease, partially offset by higher residential gains on sale.
Current wording
Gain on sale of loans decreased in the three-month and nine-month periods ended September 30, 2026, compared to the same periods in 2025. Lower gains on SBA loan sales contributed to most of the decrease, partially offset by higher residential gains on sale.
Previous wording
Loan fees and service charges decreased for the three-month and six-month period ended June 30, 2026, compared to the same periods in 2025 due to lower customer activity in the second quarter of 2026.
Current wording
Loan fees and service charges decreased for the three-month and nine-month periods ended September 30, 2026, compared to the same periods in 2025 due to lower customer activity.
Previous wording
Other income increased for the six-month period ending June 30, 2026, compared to the same period in 2025, primarily due to the termination of the remaining lease obligation in the first quarter of 2026 on a previously closed branch. To a lesser extent, income for Bank owned life insurance increased.
Current wording
Other income increased for the nine-month period ended September 30, 2026, compared to the same period in 2025, primarily due to the termination of the remaining lease obligation in the first quarter of 2026 on a previously closed branch. To a lesser extent, income on Bank owned life insurance increased.
Previous wording
Non-interest Expense. The following table reflects the various components of non-interest expense for the three and six-month periods ended June 30, 2026 and 2025, respectively.
Current 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, 2026 and 2025, respectively.
Previous wording
Data processing expense for the three and six-months ended June 30, 2026, decreased from the same 2025 periods, largely due to contract renegotiations which lowered our costs.
Current wording
Data processing expense for the three and nine-month periods ended September 30, 2026, decreased from the same 2025 periods, largely due to contract renegotiations which lowered our costs.
Previous wording
Amortization of intangibles decreased for the three-month and six-month periods ending June 30, 2026, from the same 2025 periods, as an intangible was fully amortized in the third quarter of 2025.
Current wording
Amortization of intangibles decreased for the nine-month period ended September 30, 2026, from the same 2025 period, as an intangible was fully amortized in the third quarter of 2025.
Previous wording
Other expense for the three and six-months ended June 30, 2026, increased from the same 2025 periods, primarily due to costs associated with higher nonperforming assets in the second quarter of 2026.
Current wording
Other expense for the three and nine-months ended September 30, 2026, increased from the same 2025 periods, primarily due to loan workout expenses.
Previous wording
Income Taxes. Provision for income taxes decreased to $0.14 million in the second quarter of 2026, from $0.78 million in the second quarter of 2025. For the six months ended June 30, 2026, income tax expense decreased $0.5 million to $1.0 million, compared to the same period in 2025. The effective tax rate was 10.9% for the quarter ended June 30, 2026, compared to 18.9% for the quarter ended March 31, 2026, and 19.2% for the quarter ended June 30, 2025. The decrease in the effective tax rate in the second quarter of 2026 from the first quarter of 2026 was due to (1) the reduction in the effective tax rate for the full year, based on lower pre-tax income, with the six-month impact recognized in the second quarter resulting in a lower effective tax rate of 4.6% and (2) a reduction in the effective tax rate of 3.4% due to the increased benefit of securities maturities.
Current wording
Income Taxes. Provision for income taxes increased to $1.21 million in the third quarter of 2026, from $0.85 million in the third quarter of 2025. For the nine months ended September 30, 2026, income tax expense decreased $0.2 million to $2.2 million, compared to the same period in 2025. The effective tax rate was 18.2% for the quarter ended September 30, 2026, compared to 18.8% for the quarter ended September 30, 2025. The increase in the effective tax rate in the third quarter of 2026 was due to the effective tax rate normalizing to historical levels after the extremely low effective rate in the second quarter due to the impact of lower net income.
Previous wording
Cash and Cash Equivalents. Cash and cash equivalents increased $2.9 million to $121.8 million at June 30, 2026, compared to $118.9 million at December 31, 2025. This increase was primarily due to deposit growth partially offset by loan growth.
Current wording
Cash and Cash Equivalents. Cash and cash equivalents decreased $23.4 million to $95.4 million at September 30, 2026, compared to $118.9 million at December 31, 2025. This decrease was primarily due to 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 $5.7 million during the six months ended June 30, 2026, to $128.4 million from $134.1 million at December 31, 2025. There were principal repayments of $7.6 million and redemptions of $3.1 million in the corporate debt portfolio. These reductions were partially offset by purchases of $4.3 million of corporate debt and a decrease in the unrealized loss of $0.7 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 $3.5 million during the nine months ending September 30, 2026, to $130.6 million from $134.1 million at December 31, 2025. There were principal repayments of $9.7 million and redemptions of $7.4 million in the corporate debt portfolio and an increase in the unrealized loss of $3.7 million. These reductions were partially offset by purchases of $10 million of U.S. Treasury 2-year notes and $7.3 million of corporate debt
Previous wording
Securities held-to-maturity decreased $2.8 million to $77.4 million during the six-month period ended June 30, 2026, from $80.2 million at December 31, 2025, due to principal repayments.
Current wording
Securities held-to-maturity decreased $4.1 million to $76.1 million during the nine-month period ending September 30, 2026, from $80.2 million at December 31, 2025, due to principal repayments.
Previous wording
At June 30, 2026, the Bank has pledged certain of its mortgage-backed securities with a carrying value of $31.1 million as collateral to secure a line of credit with the Federal Reserve Bank. As of June 30, 2026, there were no borrowings outstanding on this Federal Reserve Bank line of credit. As of June 30, 2026, the Bank has pledged certain of its U.S. Government Agency securities with a carrying value of $0.04 million and mortgage-backed securities with a carrying value of $1.7 million as collateral against specific municipal deposits. As of June 30, 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.
Current wording
At September 30, 2026, the Bank has pledged certain of its mortgage-backed securities with a carrying value of $30.6 million as collateral to secure a line of credit with the Federal Reserve Bank. As of September 30, 2026, there were no borrowings outstanding on this Federal Reserve Bank line of credit. As of September 30, 2026, the Bank has pledged certain of its U.S. Government Agency securities with a carrying value of $0.04 million and mortgage-backed securities with a carrying value of $1.6 million as collateral against specific municipal deposits. As of September 30, 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
Loans. Total loans outstanding, net of deferred loan fees and costs and unamortized discount on acquired loans, increased by $0.04 billion, to $1.38 billion as of June 30, 2026, from $1.34 billion at December 31, 2025. The following table reflects the composition of our loan portfolio at June 30, 2026, and December 31, 2025:
Current wording
Loans. Total loans outstanding, net of deferred loan fees and costs and unamortized discount on acquired loans, increased by $0.05 billion, to $1.39 billion as of September 30, 2026, from $1.34 billion at December 31, 2025. The following table reflects the composition of our loan portfolio at September 30, 2026, and December 31, 2025:
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.
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 is tracked and monitored on a regular basis.
Previous wording
In addition to the ACL - Loans, the Company has established an ACL - Unfunded Commitments of $0.457 million at June 30, 2026, and $0.490 million at December 31, 2025, 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 $0.337 million at September 30, 2026, and $0.490 million at December 31, 2025, classified in other liabilities on the consolidated balance sheets.
Previous wording
Nonperforming assets were $32.4 million at June 30, 2026, compared to $16.7 million at December 31, 2025. The increase was largely due to the addition of a $4.2 million owner-occupied commercial real estate loan secured by real estate and equipment, with a specific reserve established equal to the owner-occupied real estate loan exposure, a local loan relationship totaling $5.7 million secured by two campgrounds, a multi-use multi-family/retail loan of $2.7 million that had performed for 10 years and a net increase in repurchased government guaranteed loans totaling $2.8 million. The non-guaranteed portion of the loans originated with partial government guarantees increased $0.7 million for the six months ended June 30, 2026, to $1.2 million. There are specific reserves of approximately 25% on the non-guaranteed government loans.
Current wording
Nonperforming assets were $32.2 million at September 30, 2026, compared to $16.7 million at December 31, 2025. The increase was largely due to: (1) the addition of commercial real estate loans, with the largest relationship being local, secured by two campgrounds, which total $5.7 million, and the second largest being the addition of a $4.2 million owner-occupied commercial real estate loan secured by real estate and equipment, with a specific reserve established equal to the owner-occupied real estate loan exposure after a $1.2 million charge-off was recorded; (2) a net increase in repurchased government guaranteed loans totaling $2.2 million. The non-guaranteed portion of the loans originated with partial government guarantees increased $0.4 million for the nine months ended September 30, 2026, to $0.9 million. There are specific reserves of approximately 25% on the non-guaranteed government loans.
Previous wording
The table below shows a summary of criticized loans, split by special mention and substandard loans for the past five quarters. Special mention loans decreased $4.6 million to $19.9 million at June 30, 2026, from $24.5 million at December 31, 2025, primarily due to a $5.4 million owner-occupied commercial real estate loan secured by real estate and equipment which moved to substandard. Substandard loans increased $13.8 million to $35.2 million at June 30, 2026, from $21.4 million at December 31, 2025, primarily due to: (1) a $4.2 million owner-occupied commercial real estate loan secured by real estate and equipment, with a specific reserve established equal to the owner-occupied real estate loan exposure with the loan balance reduced by $1.2 million due to a charge-off moving from special mention; (2) a local loan relationship totaling $5.7 million secured by two campgrounds; (3) a multi-use multi-family/retail loan of $2.7 million that had performed for 10 years; and (4) a net increase in repurchased government guaranteed loans totaling $2.8 million.
Current wording
The table below shows a summary of criticized loans, split by special mention, substandard and doubtful loans, for the past five quarters. Special mention loans decreased $10.8 million to $13.7 million at September 30, 2026, from $24.5 million at December 31, 2025, primarily due to the movement of loans to substandard. The largest were a $5.4 million loan secured by owner-occupied commercial real estate and equipment which moved to substandard in the third quarter, and the $4.2 million loan that moved to nonaccrual. Substandard loans increased $23.5 million to $44.9 million at September 30, 2026, from $21.4 million at December 31, 2025, primarily due to: (1) the movement of loans from special mention discussed above; (2) a local loan relationship totaling $5.7 million secured by two campgrounds; (3) a multi-use multi-family/retail loan of $2.7 million that had performed for 10 years; and (4) a net increase in repurchased government guaranteed loans totaling $2.8 million. Doubtful loans include a $2.7 million owner-occupied commercial real estate loan secured by real estate, with a specific reserve established equal to the loan exposure.
Previous wording
Special mention loans increased $1.3 million to $24.5 million at December 31, 2025, from June 30, 2025, largely due to increases in the fourth quarter of 2025, due to the addition of two loan relationships: (1) a $5.7 million relationship on 3 businesses, largely secured by real estate; (2) a $5.3 million owner-occupied commercial real estate and equipment loan, partially offset by; and (3) a $9 million special mention loan that moved to substandard in the third quarter of 2025. Substandard loans increased $3.5 million primarily due to an increase in nonaccrual loan balances due to changes in the third quarter of one new $9 million multi-family loan that is experiencing slower leasing activity than expected moving from special mention, which was partially offset by the payoff of a $5.2 million substandard loan that was on nonaccrual.
Current wording
Special mention loans increased $11.6 million to $24.5 million at December 31, 2025, from September 30, 2025, largely due to increases in the fourth quarter of 2025, due to the addition of two loan relationships: (1) a $5.7 million relationship on three businesses, largely secured by real estate; and (2) a $5.3 million owner-occupied commercial real estate and equipment loan.
Previous wording
The fair market value of the Company’s MSR asset was $5.1 million at June 30, 2026, and $4.7 million at December 31, 2025.
Current wording
The fair market value of the Company’s MSR asset was $5.6 million at September 30, 2026, and $4.7 million at December 31, 2025.
Previous wording
The unpaid balances of one-to-four family residential real estate loans serviced for others as of June 30, 2026, and December 31, 2025, were $471.8 million and $474.0 million, respectively. The fair market value of the Company’s MSR asset as a percentage of its servicing portfolio at June 30, 2026, and December 31, 2025, was 1.08% and 0.98%, respectively.
Current wording
The unpaid balances of one-to-four family residential real estate loans serviced for others as of September 30, 2026, and December 31, 2025, were $473.1 million and $474.0 million, respectively. The fair market value of the Company’s MSR asset as a percentage of its servicing portfolio at September 30, 2026, and December 31, 2025, was 1.18% and 0.98%, respectively.
Previous wording
Deposits. Total deposits increased $30.3 million during the six months ended June 30, 2026, to $1.55 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:
Current wording
Deposits. Total deposits increased $12.6 million during the nine months ending September 30, 2026, to $1.54 billion. The increase was largely due to the increase in commercial deposits and the decrease in public deposits, most of which are seasonal. Deposits by type for five quarters are detailed below:
Previous wording
At June 30, 2026, the deposit portfolio composition was 57% consumer, 28% commercial, 13% public, and 2% wholesale deposits compared to 58% consumer, 28% commercial, 12% public and 2% wholesale deposits at December 31, 2025. Deposit composition by type for five quarters are detailed below:
Current wording
At September 30, 2026, the deposit portfolio composition was 57% consumer, 30% commercial, 11% public, and 2% wholesale deposits compared to 58% consumer, 28% commercial, 12% public and 2% wholesale deposits at December 31, 2025. Deposit composition by type for five quarters are detailed below:
Previous wording
Uninsured and uncollateralized deposits were $312.5 million, or 20% of total deposits, at June 30, 2026, and $323.5 million, or 21% of total deposits, at December 31, 2025. Uninsured deposits alone at June 30, 2026, were $479.4 million, or 31% of total deposits, and $478.4 million, or 31% of total deposits at December 31, 2025.
Current wording
Uninsured and uncollateralized deposits were $277 million, or 18% of total deposits, at September 30, 2026, and $324 million, or 21% of total deposits, at December 31, 2025. Uninsured deposits alone at September 30, 2026, were $385 million, or 25% of total deposits, and $478 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 $781 million, or 246% of uninsured and uncollateralized deposits at June 30, 2026. At December 31, 2025, on-balance sheet liquidity, collateralized new borrowing capacity and uncommitted federal funds availability totaled $792 million, or 245% of uninsured and uncollateralized deposits.
Current wording
On-balance sheet liquidity, collateralized new borrowing capacity, and uncommitted federal funds borrowing availability was $772 million, or 279% of uninsured and uncollateralized deposits at September 30, 2026. At December 31, 2025, on-balance sheet liquidity, collateralized new borrowing capacity and uncommitted federal funds availability totaled $792 million, or 245% 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 pledged balances of $1,054.2 million and $1,017.6 million at June 30, 2026 and December 31, 2025, respectively. At June 30, 2026, the Bank’s available and unused portion under the FHLB borrowing arrangement was approximately $427.5 million compared to $433.7 million as of December 31, 2025.
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 $1,061.7 million and $1,017.6 million at September 30, 2026 and December 31, 2025, respectively. At September 30, 2026, the Bank’s available and unused portion under the FHLB borrowing arrangement was approximately $445.7 million compared to $433.7 million as of December 31, 2025.
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