SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Fiscal Year Ended December 31, 1997
Commission File No. 000-22547
CITIZENS COMMUNITY BANCORP, INC.
A Florida Corporation (IRS Employer Identification No. 65-0614044)
650 East Elkcam Circle
Marco Island, Florida 34145
(941) 389-1800
Securities Registered Pursuant to Section 12(b)
of the Securities Exchange Act of 1934:
NONE
Securities Registered Pursuant to Section 12(g)
of the Securities Exchange Act of 1934:
COMMON STOCK
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Check if disclosure of delinquent filers pursuant to Item 405 of Regulation S-B
is not contained in this form, and will not be contained, to the best of
Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ X ]
Revenues for the fiscal year ended December 31, 1997: $2,795,879
The aggregate market value of the common stock of the Registrant held by
nonaffiliates of the Registrant (954,394 shares) on February 28, 1998 was
approximately $8,589,546. As of such date, no organized trading market existed
for the common stock of the Registrant. The aggregate market value was computed
by reference to recent trading activity of the common stock of the Registrant at
$9.00 per share. For the purposes of this response, directors, officers and
holders of 5% or more of the Registrant's common stock are considered the
affiliates of the Registrant at that date.
The number of shares outstanding of the Registrant's Common Stock, as of March
13, 1998: 1,579,774 shares of $0.01 par value common stock.
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of the Annual Report to Shareholders for the Fiscal
Year ended December 31, 1997. (Part II)
2. Portions of Proxy Statement for the 1998 Annual Meeting of
Shareholders. (Part III)
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TABLE OF CONTENTS
Consolidated--Citizens Community Bancorp, Inc. and Affiliates
NOTE: Certain information required by Form 10-KSB is incorporated by
reference from the 1997 Annual Report and 1998 Annual Meeting Proxy Statement as
indicated below. Only that information expressly incorporated by reference is
deemed filed with the Commission.
Page
PART I Number
------
Item 1 Business................................................ 3
Item 2 Properties.............................................. 8
Item 3 Legal Proceedings....................................... 9
Item 4 Submission of Matters to a Vote of Security Holders -... 9
PART II
Item 5 Market for Common Equity and Related Stockholder Matters 1(1)
Item 6 Management's Discussion and Analysis of Financial Condition
and Results of Operations............................... 6(1)
Item 7 Financial Statements and Supplementary Data............. 19(1)
Item 8 Changes in and disagreements with Accountants on
Accounting and Financial Disclosure
PART III
Item 9 Directors and Executive Officers of the Registrant:..... 3(2)
Item 10 Executive Compensation.................................. 5(2)
Item 11 Security Ownership of Certain
Beneficial Owners and Management........................ 2(2)
Item 12 Certain Relationships and Related Transactions.......... 11
PART IV
Item 13 Exhibits, Financial Statement Schedules, and
Reports on Form 8-K..................................... 14
- --------------------------------------------------------------
(1) These items are incorporated by reference from the Company's
1997 Annual Report pursuant to Instruction E 2 of Form 10-KSB.
(2) The material required by Items 9 through 11 is hereby
incorporated by reference from the Company's definitive proxy
statement pursuant to Instruction E 3 of Form 10-KSB.
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PART I
ITEM 1. - BUSINESS
Description
General
Citizens Community Bancorp, Inc. (the "Company") is a registered bank holding
company under the Federal Bank Holding Company Act of 1956, as amended, and owns
100% of the issued and outstanding common stock of Citizens Community Bank of
Florida, Marco Island, Florida (the "Bank"). The Company was incorporated under
the laws of the State of Florida on May 22, 1995 to acquire 100 percent of the
shares to be issued by the Bank during its organizational stage and to enhance
the Bank's ability to serve its future customers' requirements for financial
services. The Company provides flexibility for expansion of the Company's
banking business through acquisition of other financial institutions and
provision of additional banking-related services which the traditional
commercial bank may not provide under present laws.
The Bank is a state-chartered commercial bank, which opened for business on
March 8, 1996. The Bank offers a full range of interest-bearing and
noninterest-bearing accounts, including commercial and retail checking accounts,
negotiable order of withdrawal ("NOW") accounts, money market accounts,
individual retirement accounts, regular interest bearing statement savings
accounts, certificates of deposit, commercial loans, real estate loans, home
equity loans and consumer/installment loans. In addition, the Bank provides such
consumer services as U.S. Savings Bonds, travelers checks, safe deposit boxes,
bank by mail services, direct deposit services, automatic teller services, and
secondary mortgage loan origination services.
Market Area
The primary service and assessment areas for the Bank encompasses the entire
city of Marco Island, Isle of Capri, Goodland as well as Naples and the rest of
Collier County. Competition among financial institutions in this area is
intense. There are 6 commercial banking offices and 1 savings and loan office
within the primary service area of the Bank. Most of these offices are branches
of or are affiliated with major bank holding companies. The Bank operates a
branch office at 5101 Tamiami Trail East, Naples, Florida which opened for
business in June, 1997.
The Bank is in competition with existing area financial institutions other than
commercial banks and savings and loan associations, including insurance
companies, consumer finance companies, brokerage houses, credit unions and other
business entities which have over the years, engaged more and more in providing
services which have historically been traditional banking services. Due to the
growth of the Collier County area in general and the Bank's primary service area
in partricular, it is anticipated that competition will increase because of new
entrants to the market.
Investments
As of December 31, 1997, investment securities and federal funds sold comprised
approximately 26.0% of the Company's assets and net loans comprised
approximately 59.5% of the Company's assets. The Company has invested primarily
in obligations of the United States or obligations guaranteed as to principal
and interest by the United States. In addition, the Company enters into Federal
Funds transactions with its principal correspondent banks, and acts as a seller
of such funds.
Loan Portfolio
The Bank engages in a wide range of lending activities, including the
origination and purchase of commercial, consumer/installment and real estate
loans.
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Commercial lending is directed principally toward businesses whose demands for
funds fall within the Bank's legal lending limits and which are potential
deposit customers of the bank. This category of loans includes loans made to
individual, partnership or corporate borrowers, and obtained for a variety of
business purposes. Particular emphasis is placed on loans to small and
medium-sized businesses. The Bank's real estate loans consist of residential and
commercial first and second mortgage loans.
The Bank's consumer loans consist primarily of installment loans to individuals
for personal, family and household purposes, including automobile loans to
individuals and pre-approved lines of credit. This category of loans also
includes term loans secured by second mortgages on the residences of borrowers
for a variety of purposes including home improvements, education and other
personal expenditures.
The Bank's general policy is not to accrue interest on loans delinquent over
ninety days unless fully secured and in the process of collection. It is the
Bank's policy that the accrued and unpaid interest is reversed against current
income and thereafter interest is recognized only to the extent payments are
received. It is the Bank's policy that non-accrual loans are restored to accrual
basis when interest and principal payments are current and prospects for
recovery are no longer in doubt.
As of December 31, 1997, there were no loans where known information about
possible credit problems of borrowers caused management to have serious doubts
as to the ability of such borrowers to comply with the present loan repayment
terms.
The majority of the Company's loans are secured by real estate in Collier
County, Florida, where the Bank and its branch office are located. Accordingly,
the ultimate collectibility of a substantial portion of the loan portfolio is
susceptible to changes in market conditions in this County.
Loan Loss Reserves
In considering the adequacy of the Company's allowance for loan losses,
management has considered that as of December 31, 1997, 64.3% of outstanding
loans are in the commercial loan category, including loans secured by commercial
real estate. Commercial loans are generally considered by management as having
greater risk than other categories of loans in the Company's loan portfolio.
However, the majority of these commercial loans at December 31, 1997 were made
on a secured basis, with collate
ral consisting primarily of real estate,
accounts receivable, inventory, assignment of mortgages and equipment.
Management believes that the secured condition of the preponderant portion of
its commercial loan portfolio reduces any risk of loss inherently present in
commercial loans.
The Company's consumer loan portfolio at December 31, 1997 consisted primarily
of lines of credit and installment loans secured by automobiles, boats and other
consumer goods. Management believes that the risk associated with these types of
loans has been adequately provided for in the loan loss allowance.
Residential real estate mortgage loans constitute 27.2% of outstanding loans at
December 31, 1997. Management considers these loans to have minimal risk due to
the fact that these loans represent conventional residential real estate
mortgages where the amount of the original loan does not exceed 80% of the
appraisal value of the collateral or is otherwise covered by private mortgage
insurance.
The Company's Board of Directors monitors the loan portfolio monthly in order to
enable it to evaluate the adequacy of the allowance for loan losses. In addition
to reviews by regulatory agencies, the services of outside consultants have been
engaged to assist in the evaluation of credit quality and loan administration.
These professionals compliment the system implemented by the Company which
identifies potential problem credits as early as possible, categorizes the
credits as to risk and includes a reporting process to monitor the progress of
the credits.
The allowance for loan losses represents the cumulative total of monthly
provisions for loan losses. The allowance for loan losses is established through
a provision for loan losses charged to expense. Loans will be charged off
against the allowance when management believes the collectibility of principal
is unlikely. The monthly provision for loan losses is based on management's
judgment, after considering known and inherent risks in the portfolio, past loss
experience of the Company, adverse situations that may affect the borrower's
ability to repay, assumed values of the underlying collateral securing the
loans, the current and
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prospective financial condition of the borrower, and the prevailing and
anticipated economic condition of the local market. The Company did not charge
off any loans during the year ended December 31, 1997.
The Company maintains the allowance for loan losses at a level sufficient to
absorb all estimated losses in the loan portfolio. The allowance for loan losses
is made up of two primary components: (i) amounts allocated to loans based on
collateral type and (ii) amounts allocated for loans reviewed on an individual
basis in accordance with a credit risk grading system.
Deposits
The Bank offers a wide range of interest-bearing and noninterest-bearing
accounts, including commercial and retail checking accounts, negotiable order of
withdrawal ("NOW") accounts, money market accounts, individual retirement
accounts, regular interest-bearing statement savings accounts and certificates
of deposit with fixed rates and a range of maturity date options. The sources of
deposits are residents, businesses and employees of businesses within the Bank's
market area, obtained through the personal solicitation of the Bank's officers
and directors, direct mail solicitation and advertisements published in the
local media. The Bank pays competitive interest rates on time and savings
deposits up to the maximum permitted by law or regulation. In addition, the Bank
has implemented a service charge fee schedule competitive with other financial
institutions in the Bank's market area, covering such matters as maintenance
fees on checking accounts, per item processing fees, returned check charges and
the like.
Correspondent Banking
The Bank purchases correspondent services offered by larger banks, including
check collections, purchase or sale of Federal Funds, security safekeeping,
investment services, coin and currency supplies, overline and liquidity loan
participations and sales of loans to or participations with correspondent banks.
At December 31, 1997 the Company had sold $9,057,000 in Federal Funds.
The Bank sells loan participations to correspondent banks with respect to loans
which exceed the Bank's lending limit of approximately $1.1 million. For the
fiscal year ended December 31, 1997, the bank had sold loan participations
totalling approximately $4.7 million.
Data Processing
The Bank has a data processing servicing agreement with First National Bank of
Omaha, Nebraska. This servicing agreement provides for the Bank to receive a
full range of data processing services including an automated general ledger,
deposit accounting, commercial, real estate and installment lending data
processing, central information file ("CIF") and ATM processing. The data
processing servicing agreement provides for the Bank to pay a monthly fee based
on the type, kind and volume of data processing services provided, priced at a
stipulated rate schedule.
Employees
The Bank currently employs 23 full time and 5 part time persons, including 6
officers. The Bank will hire additional persons as needed.
Monetary Policies
The results of operations of the Company and the Bank are affected by credit
policies of monetary authorities, particularly the Federal Reserve Board. The
instruments of monetary policy employed by the Federal Reserve Board include
open market operations in U.S. Government securities, changes in the discount
rate on member bank borrowings, changes in reserve requirements against member
bank deposits and limitations on interest rates which member banks may pay on
time and savings deposits. In view of changing conditions in the national
economy and in the money market, as well as the effect of action by monetary and
fiscal authorities, including the Federal Reserve Board, no prediction can be
made as to possible future changes in interest rates, deposit levels, loan
demand, or the business and earnings of the Bank.
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Supervision and Regulation
The Company and the Bank operate in a highly regulated environment, and their
business activities are governed by statute, regulation and administrative
policies. The business activities of the Company and the Bank are supervised by
a number of federal regulatory agencies, including the Federal Reserve Board,
the Florida Department of Banking and Finance ("Department") and the Federal
Deposit Insurance Corporation ("FDIC").
The Company is regulated by the Federal Reserve Board under the federal Bank
Holding Company Act, which requires every bank holding company to obtain the
prior approval of the Federal Reserve Board before acquiring more than 5% of the
voting shares of any bank or all or substantially all of the assets of a bank,
and before merging or consolidating with another bank holding company. The
Federal Reserve Board (pursuant to regulation and published policy statements)
has maintained that a bank holding company must serve as a source of financial
strength to its subsidiary banks. In adhering to the Federal Reserve Board
Policy, the Company may be required to provide financial support for a
subsidiary bank at a time when, absent such Federal Reserve Board policy, the
Company may not deem it advisable to provide such assistance.
A bank holding company is generally prohibited from acquiring control of any
company which is not a bank and from engaging in any business other than the
business of banking or managing and controlling banks. However, there are
certain activities which have been identified by the Federal Reserve Board to be
so closely related to banking as to be a proper incident thereto and thus
permissible for bank holding companies.
As a state bank, the Bank is subject to the supervision of the Department, the
FDIC and the Federal Reserve Board. With respect to expansion, the Bank may
establish branch offices anywhere within the State of Florida. The Bank is also
subject to the Florida banking and usury laws restricting the amount of interest
which it may charge in making loans or other extensions of credit. In addition,
the bank, as a subsidiary of the Company, is subject to restrictions under
federal law in dealing with the Company and other affiliates, if any. These
restrictions apply to extensions of credit to an affiliate, investments in the
securities of an affiliate and the purchase of assets from an affiliate.
Loans and extensions of credit by state banks are subject to legal lending
limitations. Under state law, a state bank may grant unsecured loans and
extensions of credit in an amount up to 15% of its unimpaired capital and
surplus to any person. In addition, a state bank may grant additional loans and
extensions of credit to the same person up to 10% of its unimpaired capital and
surplus, provided that the transactions are fully secured. This 10% limitation
is separate from, and in addition to, the 15% limitation for unsecured loans.
Loans and extensions of credit may exceed the general lending limit if they
qualify under one of several exceptions.
Both the Company and the Bank are subject to regulatory capital requirements
imposed by the Federal Reserve Board, the FDIC and the Department. Both the
Federal Reserve Board and the FDIC have established risk-based capital
guidelines for bank holding companies and banks which make regulatory capital
requirements more sensitive to differences in risk profiles of various banking
organizations. The capital adequacy guidelines issued by the Federal Reserve
Board are applied to bank holding companies on a consolidated basis with the
banks owned by the holding company. The FDIC's risk capital guidelines apply
directly to state banks regardless of whether they are a subsidiary of a bank
holding company. Both agencies' requirements (which are substantially similar)
provide that banking organizations must have capital equivalent to 8% of
weighted risk assets. The risk weights assigned to assets are based primarily on
credit risks. Depending upon the riskiness of a particular asset, it is assigned
to a risk category. For example, securities with an unconditional guarantee by
the United States government are assigned to the lowest risk category. A risk
weight of 50% is assigned to loans secured by owner-occupied one to four family
residential mortgages. The aggregate amount of assets assigned to each risk
category is multiplied by the risk weight assigned to that category to determine
the weighted values, which are added together to determine total risk-weighted
assets. At December 31, 1997, the Company's total risk-based capital and Tier 1
ratio were 17.67% and 16.57%, respectively. Both the Federal Reserve Board and
the FDIC have also implemented minimum capital leverage ratios to be used in
tandem with the risk-based guidelines in assessing the overall capital adequacy
of bank and bank holding companies. Under these rules, banking institutions are
required to maintain a ratio of 3% "Tier 1" capital to total assets (net of
goodwill). Tier 1 capital includes common stockholders equity, noncumulative
perpetual preferred stock and minority interests in the equity accounts of
consolidated subsidiaries.
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Both the risk-based capital guidelines and the leverage ratio are minimum
requirements, applicable only to top-rated banking institutions. Institutions
operating at or near these levels are expected to have well-diversified risk,
excellent asset quality, high liquidity, good earnings and in general, have to
be considered strong banking organizations, rated composite 1 under the CAMELS
rating system for banks or the BOPEC rating system for bank holding companies.
Institutions with lower ratings and institutions with high levels of risk or
experiencing or anticipating significant growth would be expected to maintain
ratios 100 to 200 basis points above the stated minimums.
The Federal Deposit Insurance Corporation Improvement Act of 1991 (or FDICIA),
created five "capital categories" ("well capitalized, " "adequately
capitalized," "undercapitalized," "significantly undercapitalized" and
"critically undercapitalized") which are defined in the Act and which are used
to determine the severity of corrective action the appropriate regulator may
take in the event an institution reaches a given level of undercapitalization.
For example, an institution which becomes "undercapitalized" must submit a
capital restoration plan to the appropriate regulator outlining the steps it
will take to become adequately capitalized. Upon approving the plan, the
regulator will monitor the institution's compliance. Before a capital
restoration plan will be approved, any entity controlling a bank (i.e., holding
companies) must guarantee compliance with the plan until the institution has
been adequately capitalized for four consecutive calendar quarters. The
liability of the holding company is limited to the lesser of five percent of the
institution's total assets or the amount which is necessary to bring the
institution into compliance with all capital standards. In addition,
"undercapitalized" institutions will be restricted from paying management fees,
dividends and other capital distributions, will be subject to certain asset
growth restrictions and will be required to obtain prior approval from the
appropriate regulator to open new branches or expand into new lines of business.
As an institution drops to lower capital levels, the extent of action to be
taken by the appropriate regulator increases, restricting the types of
transactions in which the institution may engage and ultimately providing for
the appointment of a receiver for certain institutions deemed to be critically
undercapitalized.
The FDICIA required each federal banking agency to prescribe for all insured
depository institutions and their holding companies standards relating to
internal controls, information systems and audit systems, loan documentation,
credit underwriting, interest rate risk exposure, asset growth, and
compensation, fees and benefits and such other operational and managerial
standards as the agency deems appropriate. In addition, the federal banking
regulatory agencies were required to prescribe by regulation standards
specifying: (i) maximum classified assets to capital ratios; (ii) minimum
earnings sufficient to absorb losses without impairing capital; (iii) to the
extent feasible, a minimum ratio of market value to book value for publicly
traded shares of depository institutions or the depository institution holding
companies; and (iv) such other standards relating to asset quality, earnings and
valuation as the agency deems appropriate. Finally, each federal banking agency
was required to prescribe standards for employment contracts and other
compensation arrangements of executive officers, employees, directors and
principal stockholders of insured depository institutions that would prohibit
compensation and benefits and other arrangements that are excessive or that
could lead to a material financial loss for the institution. If an insured
depository institution or its holding company fails to meet any of its standards
described above, it will be required to submit to the appropriate federal
banking agency a plan specifying the steps that will be taken to cure the
deficiency. If an institution fails to submit an acceptable plan or fails to
implement the plan, the appropriate federal banking agency will require the
institution or holding company, to correct the deficiency and until corrected,
may impose restrictions on the institution or the holding company including any
of the restrictions applicable under the prompt corrective action provisions of
the FDICIA. The Federal banking agencies final rule implementing the safety and
soundness provisions of the FDICIA was effective on August 9, 1995.
In response to the directive issued under the Act, the regulators have adopted
regulations which, among other things, prescribe the capital thresholds for each
of the five capital categories established by the Act. The following table
reflects the capital thresholds:
[TABLE FOLLOWS THIS PAGE]
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<TABLE>
<CAPTION>
Total Risk - Tier 1 Risk - Tier 1
Based Capital Based Capital Leverage
Ratio Ratio Ratio
------------- ------------- --------
<S> <C> <C> <C>
Well capitalized (1) 10% 6% 5%
Adequately capitalized (1) 8% 4% 4% (2)
Undercapitalized (3) less than 8% less than 4% less than 4%
Significantly Undercapitalized (3) less than 6% less than 3% less than 3%
Critically Undercapitalized - - less than 2%
- ---------------------------------
(1) An institution must meet all three minimums.
(2) 3% for composite 1-rated institutions, subject to appropriate federal
banking agency guidelines.
(3) An institution falls into this category if it is below the specified
capital level for any of the three capital measures.
</TABLE>
The Act also provided that banks must meet new safety and soundness standards.
In order to comply with the Act, the Federal Reserve Board, and the FDIC,
adopted a final Rule which institutes guidelines defining operational and
managerial standards relating to internal controls, loan documentation, credit
underwriting, interest rate exposure, asset growth, director and officer
compensation, asset quality, earnings and stock valuation. Both the capital
standards and the safety and soundness standards which the Act implements were
designed to bolster and protect the deposit insurance fund.
As a state bank, the bank is subject to examination and review by the
Department. The Bank submits to the Department quarterly reports of condition,
as well as such additional reports as may be required by the state banking laws.
Under the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994,
existing restrictions on interstate acquisitions of banks by bank holding
companies were repealed on September 29, 1995, such that the Company and any
other bank holding company located in Florida would be able to acquire any
Florida-based bank, subject to certain deposit percentage and other
restrictions. The legislation also provides that, unless an individual state
elects beforehand either (i) to accelerate the effective date or (ii) to
prohibit out-of-state banks from operating interstate branches within its
territory, on or after June 1, 1997, adequately capitalized and managed bank
holding companies will be able to consolidate. De novo branching by an
out-of-state bank would be permitted only if it is expressly permitted by the
laws of the host state. The authority of a bank to establish and operate
branches within a state will continue to be subject to applicable state
branching laws. During its 1996 Legislative Session the Florida Legislature
adopted Legislation which permits interstate branching by acquisition, but not
by de novo branching.
As a bank holding company, the Company is required to file with the Federal
Reserve Board an annual report of its operations at the end of each fiscal year
and such additional information as the Federal Reserve Board may require
pursuant to the Act. The Federal Reserve Board may also make examinations of the
Company and each of its subsidiaries.
The scope of regulation and permissible activities of the Company and the Bank
is subject to change by future federal and state legislation.
ITEM 2. - DESCRIPTION OF PROPERTY
The Bank commenced business operations on March 8, 1996 in a temporary
facility located at 604 Elkcam Circle, Marco Island, Florida. On January
13, 1997 the Bank occupied its new permanent facility located at the same
site. The Company's headquarters was also relocated to this facility. The
facility is a one-story modern bank building consisting of 4,500 square
feet. The Bank opened a branch office at 5101 East Tamiami Trail, Naples,
Florida in June, 1997. This facility is owned by the Company and consists
of a 2 story mixed use office facility. The first floor, consisting of
3,900 square feet, is occupied by the Bank.
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ITEM 3. - LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Company or the Bank
is a party or of which any of their properties are subject; nor are there
material proceedings known to the Company to be contemplated by any governmental
authority; nor are there material proceedings known to the Company, pending or
contemplated, in which any director, officer, affiliate or any principal
security holder of the Company, or any associate of any of the foregoing is a
party or has an interest adverse to the Company or the Bank.
ITEM 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - None
PART II
ITEM 5. - MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS
During the period covered by this report and to date, there has been no
established public trading market for the Company's Common Stock.
As of February 28, 1998, the approximate number of holders of record of the
Company's Common Stock was 532.
To date, the Company has not paid any dividends on its Common Stock. It is the
present policy of the Board of Directors of the Company to reinvest earnings for
such period of time as is necessary to ensure the success of the operations of
the Company and of the Bank. There are no current plans to initiate payment of
cash dividends, and future dividend policy will depend on the Bank's earnings,
capital requirements, financial condition and other factors considered relevant
by the Board of Directors of the Company.
The Bank is restricted in its ability to pay dividends under Florida banking
laws and by regulations of the Federal Deposit Insurance Corporation. Pursuant
to Section 658.37, Florida Statutes, a state bank may not pay dividends from its
capital. All dividends must be paid out of net profits then on hand, after
charging off bad debts, depreciation, and other worthless assets. Payment of
dividends out of net profits is further limited by Federal regulation which
prohibits the payment of dividends if such payment would bring the Bank's
capital below required levels.
The Company commenced its initial public offering of common stock on December 7,
1995 which was the effective date of the Securities Act registration statement,
File No. 33-98090, filed in connection therewith. The offering is a continuous
offering made under Rule 415 whereby the Company offered up to 1,105,000 shares
of common stock for an aggregate of $9,945,000. The Company was committed to
issue up to 335,000 shares pursuant to 670,000 warrants issued during the
initial offering period. On December 15, 1997 the Company declared a two-for-one
stock split resulting in the warrant shares being adjusted upward to 670,000
shares. The warrant exercise period was still open as of December 31, 1997 and
an additional 169,140 shares adjusted for the stock split were sold resulting in
the Company obtaining $754,380 in additional offering proceeds. As of December
31, 1997, the Company had sold a total of 1,571,624 adjusted shares of common
stock at $4.50 per share for a total of $7,065,558 in offering proceeds.
From the Effective Date of Registration to and including December 31, 1997 the
Company had incurred $45,728 in expenses associated with the offering, issuance
and distribution of the common stock sold through December 31, 1997. No such
expenses were paid to directors, officers or 10% shareholders of the Company, or
their affiliates. All such payments were made to others. After deducting the
above expenses, the Company has received a total of $7,019,830 in net proceeds.
Of this amount, the Company purchased 100% of the issued and outstanding shares
of Citizens Community Bank of Florida for $4,580,000 and has retained $2,446,230
for working capital.
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ITEM 6. - MANAGEMENT'S DISCUSSION AND ANALYSIS & FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Company hereby incorporates by reference the section entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations" on
pages 6 through 18 of the 1997 Annual Report to Shareholders for the year ended
December 31, 1997 filed as an Exhibit under Item 13 herein.
ITEM 7. - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company hereby incorporates by reference the Report of the Independent
Auditors and the Consolidated Financial Statements contained in the 1997 Annual
Report to Shareholders for the year ended December 31, 1997 filed as an Exhibit
under Item 13 herein.
ITEM 8. - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE MATTERS - None
PART III
ITEM 9. - DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
The Company hereby incorporates by reference the sections entitled "Election of
Directors" and "Board of Directors Meeting" contained at pages 2 and 5 of the
Proxy Statement filed as an Exhibit under Item 13 herein.
ITEM 10. - EXECUTIVE COMPENSATION
The Company hereby incorporates by reference the section entitled "Executive
Compensation" contained at pages 5 and 6 of the Proxy Statement filed as an
Exhibit under Item 13 herein.
ITEM 11. - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners
The Company hereby incorporates by reference the sections entitled "Election of
Directors" and "Certain Shareholders" contained at page 2 of the Proxy Statement
filed as an Exhibit under Item 13 herein.
(b) Security Ownership of Management
The Company hereby incorporates by reference the section entitled "Election of
Directors" contained at pages 2 through 4 of the Proxy Statement filed as an
Exhibit under Item 13 herein.
(c) Changes in Control
The Company is not aware of any arrangements, including any pledge by any person
of securities of the Company, the operation of which may at a subsequent date
result in a change of control of the Company.
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ITEM 12. - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Neither the Bank nor the Company has engaged in any reportable transactions,
including loans, to the Bank's or the Company's directors, executive officers,
their associates and members of the immediate families of such directors and
executive officers.
ITEM 13. - EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits. The following exhibits are filed with or incorporated by reference
into this report. The exhibits which are denominated by an asterisk (*) were
previously filed as a part of, and are hereby incorporated by reference from the
Company's Registration Statement on Form SB-2 under the Securities Act of 1933
for the Company, as effective with the Securities and Exchange Commission on
December 7, 1995, Registration No. 33-98090 (referred to as "Registration
Statement"). The exhibit numbers correspond to the exhibit numbers in the
referenced documents.
Exhibit No. Description of Exhibit
- ----------- ----------------------
*3.1 Amended and Restated Articles of Incorporation of the
Company (Registration Statement)
*3.2 By-laws of the Company (Registration Statement)
*4.1 Specimen Common Stock Certificate (Registration
Statement)
*4.2 Specimen Warrant Certificate (Registration Statement)
*4.4 Company's Warrant Plan (Registration Statement)
22.1 The Company's 1998 Annual Meeting Proxy Statement
22.2 The Company's 1997 Annual Report for the year ended
December 31, 1997
(b) Reports on Form 8-K. The Company filed a Form 8-K on October 23, 1997 in
which it reported a two (2) for one (1) split of the Company's Common Stock.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 15(d) of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
Citizens Community Bancorp, Inc.
Dated: March 17, 1998 By: /s/ Richard Storm, Jr.
-----------------------
Richard Storm, Jr.
Chairman of the Board
Dated: March 17, 1998 By: /s/ Stephen A. McLaughlin
--------------------------
Stephen A. McLaughlin
Vice President
(Chief Financial and Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated:
/s/ Diane M. Beyer March 17, 1998
- -----------------------
DIANE M. BEYER
Class I Director
/s/ Joel M. Cox, Sr. March 17, 1998
- -----------------------
JOEL M. COX, SR.
Class I Director
/s/ Thomas B. Garrison March 17, 1998
- -----------------------
THOMAS B. GARRISON
Class II Director
/s/ James S. Hagedorn March 17, 1998
- -----------------------
JAMES S. HAGEDORN
Class I Director
/s/ Dennis J. Lynch March 17, 1998
- -----------------------
DENNIS J. LYNCH
Class II Director
/s/ Stephen A. McLaughlin March 17, 1998
- -----------------------
STEPHEN A. MCLAUGHLIN
Class III Director
/s/ Louis J. Smith March 17, 1998
- -----------------------
LOUIS J. SMITH
Class II Director
12
<PAGE>
/s/ Richard Storm, Jr. March 17, 1998
- -----------------------
RICHARD STORM, JR.
Class III Director
/s/ John J. Wolf March 17, 1998
- -----------------------
JOHN J. WOLF
Class III Director
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO
SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED
SECURITIES PURSUANT TO SECTION 12 OF THE ACT.
The Company's Proxy Statement and 1997 Annual Report are included as Exhibits
22.1 and 22.2 of this filing.
13
<PAGE>
Exhibit 22.1
The Company's 1998 Annual Meeting
Proxy Statemnt
<PAGE>
[GRAPHIC OMITTED]
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
April 30, 1998
-----------------------------------------------------
Solicitation and Voting of Proxies
This Proxy Statement and the accompanying Proxy are being furnished to
shareholders of Citizens Community Bancorp, Inc. ("Citizens" or the "Company"),
the parent company of Citizens Community Bank of Florida (the "Bank") in
connection with the solicitation of proxies by the Board of Directors to be used
at the Company's Annual Meeting of Shareholders ("Annual Meeting") or any
adjournment thereof, which will be held on Tuesday, April 30, 1998, at 4:00
p.m., Eastern Time at the Marriott's Marco Island Resort and Golf Club, 400
South Collier Boulevard, Marco Island, Florida.
Regardless of the number of shares of common stock owned, it is
important that shareholders be represented by Proxy or in person at the Annual
Meeting. Shareholders are requested to vote by completing the enclosed Proxy and
returning it signed and dated in the enclosed postage prepaid envelope.
Shareholders are urged to indicate the way they wish to vote in the space
provided on the Proxy. Proxies solicited by the Board of Directors of the
Company will be voted in accordance with the directions given therein. Where no
instructions are indicated, proxies will be voted "FOR" the management director
nominees set forth below, "FOR" adoption of the Company's 1998 Directors Stock
Option Plan, "FOR" adoption of the amendment to the Company's 1996 Incentive
Stock Option Plan, and "FOR" ratification of the appointment of Hacker, Johnson,
Cohen & Grieb, PA as the independent auditors of Citizens for the fiscal year
ending December 31, 1998.
Revocation of Proxy
A shareholder's presence at this Annual Meeting will not automatically
revoke his or her Proxy. Shareholders may revoke a Proxy at any time prior to
its exercise by filing with the Secretary of the Company a written notice of
revocation, by delivering to the Company a duly executed Proxy bearing a later
date, or by attending this Annual Meeting and voting in person.
Voting Securities
The securities which may be voted at this Annual Meeting consist of
shares of common stock of Citizens ("Common Stock") with each share entitling
its owner to one vote for the election of directors and any other matters that
may come before the Annual Meeting. The close of business on March 13, 1997, has
been fixed by the Board of Directors as the record date ("Record Date") for the
determination of shareholders entitled to notice of and to vote at this Annual
Meeting and any adjournment thereof. The total number of shares of the Company's
Common Stock outstanding on the record date was 1,579,774 shares, which are held
by approximately 532 shareholders.
The presence, in person or by Proxy, of at least a majority of the
total number of outstanding shares of Common Stock is necessary to constitute a
quorum at the Annual Meeting. In the event there are not sufficient votes for a
quorum to approve any Proposal at the time of the Annual Meeting, this Annual
Meeting may be adjourned in order to permit further solicitation of proxies.
Page 1
<PAGE>
Certain Shareholders
As of March 13, 1998, no persons or apparent groups of persons, other
than Officers or Directors of the Company or the Bank, and the following person,
are known by management to own beneficially five percent or more of the
outstanding shares of Citizens' Common Stock:
Amount of
Name Common Stock Percent of Class
---- ------------ ----------------
Paul F. Janssens-Lens 151,590 9.65%
PROPOSAL I -- ELECTION OF DIRECTORS
The Board of Directors of Citizens is composed of nine members, divided
into three classes. The terms of each class are staggered so that approximately
one-third of the directors are elected each year. There are three Class I
Directors and two Class III Directors who, by virtue of their class, are not
required to be elected this year. The Board has nominated three Class II
Directors who will be elected to a three-year term to stand for election at this
Annual Meeting. In addition, the Board has nominated John J. Wolf to fill the
remaining term of Ms. Heidi J. Mayerhofer, a Class III Director who resigned
during the year. Mr. Wolf was appointed during 1997 to fill the vacancy created
upon the resignation of Ms. Mayerhofer.
Management's nominees to fill the Class II terms are Thomas B.
Garrison, Louis J. Smith, Dennis J. Lynch and John J. Wolf to fill the unexpired
portion of Ms. Mayerhofer's term. Each of the nominees are presently directors
of the Company.
It is intended that the proxies solicited by the Board of Directors
will be voted "FOR" the election of said nominees. If any nominee is unable to
serve, the shares represented by all valid proxies will be voted for the
election of such substitute as the Board may recommend. At this time the Board
of Directors knows of no reason why any nominee might not be able to serve.
The Board of Directors recommends that shareholders vote "FOR" election
of the nominees.
The following table describes the period that each board member and
each nominee has served as a director of Citizens, his position and offices held
with the Company, his principal occupation or employment, and further contains
information as of March 13, 1998, with respect to the beneficial ownership (as
such term is defined under the Rules and Regulations of the Securities Exchange
Commission) of the Company's Common Stock held by each nominee, each director,
and all directors as a group.
Page 2
<PAGE>
<TABLE>
<CAPTION>
Amount and nature Percent
Name, age, principal Current of Beneficial of Class
occupation, directorships, Director Term Ownership of Including
and business experience since Expires Common Stock Warrants(1)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Management's Nominees for Three-Year Term:
Class II Directors
- ------------------
Thomas B. Garrison, Age 52 1995 1998 23,500(2) 1.48%
Director, Citizens Community Bank
of Florida since 1995. Network
Technology Manager for Barron-Collier
Companies since 1988.
Louis J. Smith, Age 74 1997 1998 400(3) ---
Director of the Company, since 1997.
Retired Pharmacist. Owns and
operates Pat's Hallmark in the Shops
of Marco on Marco Island. Formerly
a bank director for the 1st Wisconsin
Bank of Wisconsin (now First-Star)
from 1969 to 1987.
Dennis J. Lynch, Age 55 1995 1998 58,500(4) 3.66%
Director, Citizens Community Bank
of Florida since 1995. Owner and
President of Dennis J. Lynch and
Associates, a commercial real estate
sales agency since 1979.
Management's Nominee for One-Year Term:
Class III Director
- ------------------
John J. Wolf, Age 51 1997 1998 39,000(5) 2.45%
Assistant Treasurer and a Director
of the Company since 1997. A
practicing dentist in Naples, Florida
since 1981.
Board Members Not Standing for Election
Class I Directors
- -----------------
Diane M. Beyer, Age 58 1995 2000 10,000(6) .63%
Director, Citizens Community Bank
of Florida since 1995. Human
Resources Consultant since 1993.
Joel M. Cox, Sr., Age 59 1995 2000 58,730(7) 3.68%
Chairman and Director, Citizens
Community Bank of Florida since 1995.
Vice President and Director of Cox's
Insurance Agency since 1985.
Page 3
<PAGE>
Amount and nature
Amount and nature Percent
Name, age, principal Current of Beneficial of Class
occupation, directorships, Director Term Ownership of Including
and business experience since Expires Common Stock Warrants(1)
- ----------------------------------------------------------------------------------------------------------------
James S. Hagedorn, Age 55 1996 2000 20,000(8) 1.27%
Director, Citizens Community Bank
of Florida since 1996. President and
Director of Waterside Development
Corp. 1995-Present. Chairman, President,
and CEO The Merchant Bank of Florida,
Brandon, Florida 1986-1994. President
the Merchant Bancorporation of Florida
1986-1994.
Class III Directors
- -------------------
Stephen A. McLaughlin, Age 51 1995 1999 62,000(9) 3.88%
Director, Citizens Community Bank of
Florida since 1995. Vice President
Citizens Community Bank of Florida
since October 1996. Secretary/Treasurer
of Citizens Community Bancorp, Inc.
since April 1996. Owner and Operator
of Stillwater Land & Lumber Limited, a
Maine based real estate sales and consulting
firm since 1980.
Richard Storm, Jr., Age 56 1995 1999 450,080(10) 25.9%
Director, Citizens Community Bank
of Florida and Chairman of the Company
since 1995. President, Loanstar Capital,
Inc. since 1996. Owner and President of Storm
& Company, Inc. since 1990. President
of Cumberland Properties, Inc. since 1985.
- ----------------------------------------------------
</TABLE>
(1) Percentage computed on 1,579,774 shares issued and outstanding as of the
record date of March 13, 1998, on an individual basis, plus 234,640 shares
subject to presently exercisable stock purchase warrants issued to the
above persons in connection with the Company's stock offering, and 2,000
shares subject to exercisable stock options granted under the Company's
1996 Incentive Stock Option Plan for a total of 1,816,414 beneficial
shares.
(2) Includes 4,500 shares subject to presently exercisable stock purchase
warrants issued in connection with the Company's initial stock offering;
11,600 shares owned individually by Mr. Garrison; 6,400 shares held by his
individual retirement account; and 1,000 shares held by his wife's
individual retirement account.
(3) Includes only the 400 shares held individually; amount is less than 1%.
(4) Includes 19,500 shares subject to presently exercisable stock purchase
warrants issued in connection with the Company's initial stock offering;
29,000 shares held by his individual retirement account; and 10,000 shares
held by his wife's individual retirement account.
(5) Includes 26,000 shares held individually and 13,000 unexercised shares
subject to Warrants.
(6) Includes 1,600 shares subject to presently exercisable stock purchase
warrants issued in connection with the Company's initial stock offering
and 8,400 shares owned jointly by Mrs. Beyer and her spouse.
Page 4
<PAGE>
(7) Includes 18,310 shares subject to presently exercisable stock purchase
warrants issued in connection with the Company's initial stock offering;
20,000 shares owned by the Joel M. Cox Revocable Trust for which Mr. Cox
is trustee; 11,000 shares held by Cede & Company f/b/o for Mr. Cox; 6,200
shares held by Cox's Insurance of which Mr. Cox is the Vice-President;
2,000 shares owned by Joan C. Cox, Mauale M. Greene and William Greene;
1,220 shares owned by the Joan C. Cox Revocable Trust.
(8) Includes 19,000 shares held by Robert W. Baird & Co. as trustee FBO James
S. Hagedorn IRA; and 1,000 shares held by Robert W. Baird & Co. as trustee
FBO for Mr. Hagedorn's spouse.
(9) Includes 20,000 shares subject to presently exercisable stock purchase
warrants issued in connection with the Company's initial stock offering;
2,000 options vested under the 1996 Incentive Stock Option Plan; 15,000
shares owned individually by Mr. McLaughlin; 8,000 shares held by the
Stillwater Land & Lumber Limited Pension Plan of which Mr. McLaughlin is
the administrator and sole beneficiary; and 17,000 shares held by the
Stillwater Land & Lumber Limited Profit Sharing Plan of which Mr.
McLaughlin is the administrator and sole beneficiary.
(10) Includes 157,730 shares subject to presently exercisable stock purchase
warrants issued in connection with the Company's initial stock offering;
196,810 shares owned individually by Mr. Storm; 4,000 shares owned by
Storm & Company; 51,000 shares held by the Richard Storm Profit Sharing
Plan; 10,000 shares owned by the Kathleen Storm Profit Sharing Plan; 540
shares owned by his wife, Kathleen Storm; and 30,000 held by US Clearing
FBO Richard Storm, Jr. profit sharing plan.
Board of Directors Meetings
During the year ended December 31, 1997, the Board of Directors held 12
meetings. No current director of the Company attended fewer than 75% of the
total meetings of the Board of Directors for the full year. The Company does not
presently compensate directors for Board or Committee meetings. Effective
November 1, 1997, the Bank began paying directors' fees to its outside
directors. Directors receive $100 for each Board meeting attended and $25 for
each Committee meeting attended.
Committees of the Board of Directors
The Board of Directors of the Company conducts business through the
following standing Committees: Executive Committee and Audit Committee.
Report of the Board of Directors on Executive Compensation
Compensation Philosophy. Citizens Board of Directors ("Board") believes
that there is a close relationship between the financial interests of the
Company's shareholders and its officers and key employees, including officers of
its subsidiaries. The Board further believes that compensation for officers and
key employees should be structured in such a way that total compensation
consists of a base salary, and short- and long-term incentive awards. To that
end, Citizens has created a compensation program which provides for a base
salary which the Company believes is competitive within the industry for persons
with comparable responsibilities, combined with annual cash bonus awards tied to
specific company performance, as well as long-term stock option awards, which
are also related to the Company's performance and the performance of the officer
or key employees and base salary levels.
Executive Base Salary. Base salaries for executive officers are
established primarily through the use of peer group salary evaluations. The
Board utilized published compensation studies with regard to compensation levels
and practices of comparable commercial banks and similar financial institutions
Page 5
<PAGE>
in order to formulate its recommendation regarding executive officer salaries
for the year ended December 31, 1997. For the fiscal year 1998, Mr. Micallef's
base salary was established using the Board's evaluation of salaries paid to
Chief Executive Officers with similar duties at comparable financial
institutions.
Annual Cash Bonus Awards. Cash bonus awards to executive officers, if
any, are determined annually by the Board of Directors and are based primarily
on the financial results of the Company for each year. Objectives are
established annually by the Board and cash bonus awards are determined in
relationship to the achievements relating to these objectives.
Long-Term Pay Compensation. The Company's long-term compensation plan
is structured around the Company's 1996 Incentive Stock Option Plan.
The following Summary Compensation Table shows compensation information
regarding Richard Storm, Jr. , Chairman of the Board and Chief Executive Officer
of the Company and Michael A. Micallef, Jr., President and Chief Executive
Officer of the Bank, during the last three fiscal years. No other executive
officer received compensation at a level required to be reported herein by
Securities and Exchange regulations.
<TABLE>
<CAPTION>
Summary Compensation Table
Long term compensation*
------------------------------------------
Annual compensation Awards Payouts
------------------------------------ ------------------------------ -------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Securities
Name and Other annual Restricted stock underlying LTIP All other
principal position Year Salary($) Bonus($) compensation($) award(s)($) options payouts($) compensation($)
- ------------------ ---- ------------------ --------------- ----------- ------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Richard Storm, Jr. 1997 -- -- -- -- -- -- --
Chairman , 1996 -- -- -- -- -- -- --
President and 1995 (1) -- -- -- -- -- --
CEO of Company
Michael Micallef, Jr. 1997 $ 48,396 $ 5,000 $ 9,115 -- 30,000 -- --
President and 1996 (2) -- -- -- -- -- --
CEO of Bank 1995 (1) -- -- -- -- -- --
- ----------------------
(1) Company had not commenced operations.
(2) Employment effective May 13, 1997.
</TABLE>
Explanation of Columns
(c) Base Salary - total base salary paid during the calendar year. Mr.
Micallef's current base salary is $79,000. Mr. Storm is not compensated for his
services. The Bank was responsible for 100% of Mr. Micallef's cash compensation
for the year ended December 31, 1997.
(d) Annual Cash Bonus Award - annual incentive awards paid for results
achieved during the calendar year, which were paid during the year immediately
following the years indicated.
Page 6
<PAGE>
(e) Other Annual Compensation - all additional forms of cash and non-cash
compensation paid, awarded or earned. Amount includes auto allowances for 6
months and moving expenses of $6,000. The value of all other personal benefits
and perquisites received by Mr. Micallef was less than the required reporting
threshold.
(f) Restricted Stock Awards - stock awarded to an executive that carries
vesting restrictions.
(g) Securities Underlying Options - grants of stock options made under the
Company's 1996 Incentive Stock Option Plan.
(h) "LTIPs" - the dollar value of all payouts pursuant to long-term
incentive plans.
(i) All Other Compensation - All other compensation that does not fall
under any of the aforementioned categories.
Benefits
Insurance: Full-time officers and employees of the Bank are provided
hospitalization, major medical, short-and long-term disability, dental
insurance, and term life insurance under group plans on generally the same basis
to all full-time employees.
Employment Contracts
Citizens Community Bancorp, Inc. does not have an employment agreement with
any of its officers. The Bank has an employment agreement ("Agreement") with its
President and Chief Executive Officer, Michael A. Micallef, Jr. The Agreement,
which became effective June 2, 1997, is for a one-year term and is automatically
renewed for a successive six month term unless either party notifies the other
of their desire to terminate the Agreement at the expiration of the term. Such
notice must be given at least 30 days prior to the expiration of the current
term.
The Agreement provides Mr. Micallef with a $79,000 base salary, plus
reimbursement of reasonable business expenses. In addition, Mr. Micallef may be
granted an annual performance bonus, which is solely at the discretion of the
Board of Directors. Under the Agreement, Mr. Micallef was granted Incentive
Options for 15,000 shares of Common Stock at a grant price of $10.00 per share
(adjusted to 30,000 shares at $5.00 per share as a result of the December 15,
1997, two for one stock split) which options vest 20% per year and expire 10
years from the date of grant. Mr. Micallef is also provided an automobile
allowance and three-months disability coverage.
Mr. Micallef may participate in all employee benefits, stock option plans,
pension plans, insurance plans and other fringe benefits programs commensurate
with his position. The Agreement provides for termination by the Bank for "good
cause". In the event the Bank chooses to terminate Mr. Micallef's employment for
reasons other than for good cause, he (or in the event of death, his
beneficiaries) would be entitled to a severance payment equal to the total
annual compensation for the remainder of the term of the Agreement, or six
months pay, whichever is greater. In the event of a change of control of the
Company, Mr. Micallef will be entitled to one- year's annual compensation.
In the event Mr. Micallef voluntarily terminates his employment other than
for the reasons mentioned herein, all rights and benefits under the Agreement
shall immediately terminate upon the effective date of termination.
Page 7
<PAGE>
PROPOSAL II -- APPROVAL OF CITIZENS'
1998 DIRECTORS STOCK OPTION PLAN
On February 24, 1998, the Company adopted its non-employee 1998 Directors
Stock Option and Limited Rights Plan ("Directors' Plan") to provide for the
grant of stock options to purchase shares of the Company's Common Stock to
non-employee directors of the Company. Non-employee directors are those
directors who do not receive a salary from the Company or any of its
subsidiaries. The purpose of the Directors' Plan is to advance the interests of
the Company, its subsidiaries, and its shareholders by providing the directors
of the Company or its wholly owned subsidiaries, upon whose judgment,
initiative, and oversight of the conduct of the business of the Company depends
with an additional incentive to serve on the Board of Directors of the Company
or its subsidiaries, as well as to attract persons of experience, integrity, and
ability to serve as directors in the future.
The maximum number of shares of Common Stock that may be issued pursuant to
options granted under the Directors' Plan is 150,000. Under the Directors' Plan,
non-employee directors of the Company will each be granted a stock option for
10,000 shares of common stock and non-employee directors of the Bank who are not
also directors of the Company will each be granted a stock option for 5,000
shares of Common Stock at an exercise price of $7.50 per share. The stock
options to be granted to the respective Boards of Directors are not cumulative.
The stock options will not be granted until the Directors' Plan is approved by a
majority vote of the Company's shareholders at the Annual Meeting of
Shareholders.
The Directors' Stock Options are for a term of ten years from the effective
date of the Directors' Plan, February 24, 1998. Future stock options will be
granted at an exercise price determined at the time of issuance to be the "fair
Market value" of the underlying common stock on the date the stock option was
granted. Options to be granted effective February 24, 1998 will be at an
exercise price of $7.50 per share or the fair market value on that date. Stock
options will vest from a director's Affiliation Date, which is defined as the
date on which a director was elected or appointed to his or her position, as
follows: 50% of the grant on the second anniversary of the Director's
Affiliation Date; 75% on the third anniversary of the Affiliation Date; and 100%
on the fourth anniversary of the Affiliation Date. The stock options held by an
outside director are canceled immediately if such director is removed for
"cause", as defined in the Directors' Plan. Neither the Directors' Plan nor the
options to be granted thereunder will be effective unless and until the Plan is
approved by the Company's shareholders.
The Board of Directors recommends that shareholders vote "FOR" adoption of
the Directors Stock Option Plan.
Page 8
<PAGE>
PROPOSAL III -- AMEND THE COMPANY'S
1996 INCENTIVE STOCK OPTION PLAN
The Company's 1996 Incentive Stock Option Plan ("Plan") for officers and
employees of the Company and its wholly owned subsidiaries was approved by the
Company's shareholders at the 1996 Annual Meeting of Shareholders. The Plan
provides for the issuance of up to 200,000 shares (adjusted for the two for one
stock split) of the Company's Common Stock pursuant to options granted under the
Plan. The exercise price of the 36,000 shares granted in 1996 was $9.00 per
share (adjusted to 72,000 shares at $4.50 per share as a result of the two for
one stock split on December 15, 1997). In 1997, 129,000 Incentive Options were
granted at between $9.00 and $12.00 per share (with an adjusted price of $4.50
and $6.00 per share to reflect the December 15, 1997, two for one stock split).
At December 31, 1997, Incentive Options for 155,400 shares remained outstanding,
and 36,600 unallocated shares were available for grant. The Incentive Options
have 10 year terms from the date of the grant and vest at a rate of 20% per
year.
The following table sets forth information concerning the Incentive Options
that have been granted (as adjusted to reflect the December 15, 1997, two for
one stock split) to the executive officers of the Company and the Bank.
<TABLE>
<CAPTION>
Price
Name Shares Granted(1) Date of Grant Per Share(1)
---- ----------------- ------------- ------------
<S> <C> <C> <C>
David Klein 15,000 April 1, 1997 4.75
3,000 August 19, 1997 5.50
3,000 October 21, 1997 6.00
Bruce Fedor 10,000 November 10, 1997 6.00
Sharon Ginn 10,000 October 20, 1997 5.63
Stephen A. McLaughlin 10,000 October 8, 1996 4.50
10,000 May 21, 1997 5.00
Michael A. Micallef, Jr. 30,000 June 4, 1997 5.00
W. Terrell Upson 20,000 May 20, 1996 4.50
10,000 February 18, 1997 4.50
- -----------------------------
(1) Adjusted for stock split
</TABLE>
The Board of Directors adopted an amendment to the Plan on February 3,
1998, increasing the number of shares available for issuance to 275,000 shares.
The Board believes that these additional shares are necessary in order to
continue to attract qualified and dedicated officers and staff to join the
Company's employee team. All other terms of the Plan remain unchanged.
Page 9
<PAGE>
The Board of Directors recommends that shareholders vote "FOR" adoption of
the Amendment to the Company's 1996 Incentive Stock Option Plan.
PROPOSAL IV -- RATIFICATION OF APPOINTMENT OF
AUDITORS FOR FISCAL YEAR ENDING DECEMBER 31, 1998
Citizens' independent auditors for the fiscal year ended December 31, 1997,
were Hacker, Johnson, Cohen & Grieb, PA. The Board of Directors has appointed
Hacker, Johnson, Cohen & Grieb, PA to be its independent auditors for the fiscal
year ending December 31, 1998, subject to shareholder ratification.
The Board of Directors recommends that shareholders vote "FOR" the
ratification of the appointment of Hacker, Johnson, Cohen & Grieb, PA as
independent auditors for the fiscal year ending December 31, 1998.
Solicitation
The cost of soliciting proxies on behalf of the Board of Directors for the
Annual Meeting will be borne by Citizens. Proxies may be solicited by directors,
officers or regular employees of the Company or the Bank in person or by
telephone, telegraph or mail. Citizens will request persons, firms and
corporations holding shares in their names, or in the names of their nominees,
which are beneficially owned by others, to send proxy materials to and obtain
proxies from such beneficial owners, and will reimburse such holders for their
reasonable out-of-pocket expenses in doing so.
Shareholder Proposals
In order to be eligible for inclusion in Citizens' Proxy material for next
year's Annual Meeting of Shareholders, any shareholder proposal to take action
at such Annual Meeting must be received at the Corporate Office of the Company,
650 East Elkcam Circle, Marco Island, Florida 34145 on or before January 4,
1998. Proposals must comply with the provisions of 17 C.F.R. Section 240.14a-8
("Rule 14a") of the rules and regulations of the Securities and Exchange
Commission in order to be included in the Company's Proxy materials.
New business may be taken up at the Annual Meeting, provided the proposal
is stated in writing and filed with the Secretary of the Company at least five
(5) days before the Annual Meeting. Any shareholder may make any other proposal
at the Annual Meeting and the same may be discussed and considered, but unless
stated in writing and filed with the Company's Secretary by the above date, such
proposal shall be laid over for action at an adjourned Annual Meeting or at a
Special Meeting taking place 30 or more days thereafter. This provision does not
prevent the consideration and approval or disapproval at the Annual Meeting of
reports of officers, directors, and committees. In connection with such reports,
however, no new busine ss shall be acted upon at such Annual Meeting unless
stated and filed as provided herein.
Page 10
<PAGE>
Financial Statements
The Bank's 1997 Annual Report containing audited financial statements for
the year ending December 31,
1997, accompany this Proxy Statement.
Other Matters
The Board of Directors knows of no other matters to be brought before the
Annual Meeting. If other matters should, however, come before the Annual
Meeting, it is the intention of the persons named in the enclosed Revocable
Proxy to vote the Proxy in accordance with their judgment and in the best
interest of the Company.
Citizens Community Bancorp, Inc.
Marco Island, Florida
March 31, 1998
Page 11
<PAGE>
1998 DIRECTORS
STOCK OPTION AND
LIMITED RIGHTS PLAN
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CITIZENS COMMUNITY BANCORP, INC.
1998 DIRECTORS' STOCK OPTION AND LIMITED RIGHTS PLAN
1. PURPOSE
The purpose of Citizens Community Bancorp, Inc.'s ("Company") 1998
Directors' Stock Option and Limited Rights Plan ("Directors' Plan") is to
advance the interests of the Company, its subsidiaries and its shareholders by
providing the directors of the Company or its wholly owned subsidiaries,
("Subsidiaries"), upon whose judgment, initiative and oversight the successful
conduct of the business of the Company depends, with an additional incentive to
serve on the Board of Directors for the Company or its Subsidiaries, as well as,
to attract people of experience and ability to serve as Directors in the future.
2. DEFINITIONS
(a) "Board of Directors" means the Board of Directors of the Company.
(b) "Award" means an Award of Non-Statutory Stock Options and/or Limited
Rights granted under the provisions of the Directors' Plan.
(c) "Committee" means the Compensation Committee of the Board of
Directors.
(d) "Directors' Plan Year or Years" means a calendar year or years
commencing on or after January 1, 1998.
(e) "Date of Grant" means the actual date on which an Award is granted by
the Committee.
(f) "Common Stock" means the common stock of the Company, par value, $0.01
per share.
(g) "Fair Market Value" means, when used in connection with the Common
Stock on a certain date, the reported closing price of the Common
Stock as reported by the National Association of Securities Dealers
Automated Quotation System (as published by the Wall Street Journal,
if published) on the day prior to such date or if the Common Stock was
not traded on such date, on the next preceding day on which the Common
Stock was traded thereon. If the Common Stock is not traded on a
national market reported by the National Association of Securities
Dealers Automated Quotation System, the Fair Market Value means the
average of the closing bid and ask sale prices on the last previous
date on which a sale is reported in an over-the-counter transaction.
In the absence of any over-the-counter transactions, the Fair Market
Value means the highest price at which the stock has sold in an arms
length transaction during the 90 days immediately preceeding the grant
date. In the absence of an arms length transaction during such 90
days, Fair Market Value means the book value of the common stock or
the adjusted original issue price of $4.50 per share, whichever is
higher.
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(h) "Limited Right" means the right to receive an amount of cash based
upon the terms set forth in Section 8.
(i) "Termination for Cause" means the termination upon an intentional
failure to perform stated duties, breach of a fiduciary duty
involving personal dishonesty, which results in material loss to the
Company or one of its affiliates or willful violation of any law,
rule or regulation (other than traffic violations or similar
offenses) or final cease-and-desist order issued to the Company or
one of its subsidiaries.
(j) "Participant" for the Plan means a director of the Company or its
Subsidiaries chosen by the Committee to participate in the Directors'
Plan.
(k) "Change in Control" of the Company means a change in control that
would be required to be reported in response to Item 6(e) of Schedule
14A of Regulation 14A promulgated under the Securities Exchange Act of
1934, as amended ("Exchange Act") or any successor disclosure item;
provided that, without limitation, such a Change in Control (as set
forth in 12 U.S.C. Section 1841[a][2] of the Bank Holding Company Act
of 1956, as amended) shall be deemed to have occurred if any person
(as such term is used in Sections 13[d] and 14[d] of the Exchange Act
in effect on the date first written above), other than any person who
on the date hereof is a director or officer of the Company, (i)
directly or indirectly, or acting through one or more other persons,
owns, controls or has power to vote 25% or more of any class of the
then outstanding voting securities of the Company; or (ii) controls in
any manner the election of the directors of the Company. For purposes
of this Agreement, a "Change in Control" shall be deemed not to have
occurred in connection with a reorganization, e.g. consolidation or
merger of the Company where the stockholders of the Company,
immediately before the consummation of the transaction, will own at
least 50% of the total combined voting power of all classes of stock
entitled to vote of the surviving entity immediately after the
transaction.
(l) "Date of Affiliation" means the date on which a director was first
elected or appointed to the Board of Directors of the Company or one
of its Subsidiaries whichever is earlier.
3. ADMINISTRATION
The Directors' Plan shall be administered by the Compensation Committee of
the Board of Directors. The Committee is authorized, subject to the provisions
of the Directors' Plan, to establish such rules and regulations as it deems
necessary for the proper administration of the Directors' Plan and to make
whatever determinations and interpretations in connection with the Directors'
Plan it deems as necessary or advisable. All determinations and interpretations
made by the Committee shall be binding and conclusive on all Participants in the
Directors' Plan and on their legal representatives and beneficiaries.
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4. TYPES OF AWARDS
Awards under the Directors' Plan may be granted in any one or a combination
of the following, as defined below in Sections 7 and 8 of the Directors' Plan:
(a) Non-Statutory Stock Options; and
(b) Limited Rights
5. STOCK SUBJECT TO THE DIRECTORS' PLAN
Subject to adjustment as provided in Section 12, the maximum number of
shares reserved for issuance under the Directors' Plan is 150,000 shares of
Common Stock outstanding (sometimes referred to herein as "Option Shares"). To
the extent that options or rights granted under the Directors' Plan are
exercised, the shares covered will be unavailable for future grants under the
Directors' Plan; to the extent that options together with any related rights
granted under the Directors' Plan terminate, expire or are canceled without
having been exercised or, in the case of Limited Rights exercised for cash, new
Awards may be made with respect to these shares.
6. ELIGIBILITY
The directors of the Company and its Subsidiaries ("Directors"), except for
those directors who are also salaried officers of the Company or its
Subsidiaries, shall be eligible to receive Non-Statutory Stock Options and/or
Limited Rights under the Directors' Plan. The maximum number of Option Shares
that a Participant shall be eligible to be awarded shall be: (i) Company
Directors - 10,000; (ii) Subsidiary Directors - 5,000.
7. GRANT OF NON-STATUTORY STOCK OPTIONS
The Committee may, from time to time, grant Non-Statutory Stock Options to
Directors. Non-Statutory Stock Options granted under this Directors' Plan are
subject to the following terms and conditions:
(a) Price.
The purchase price per share of Common Stock deliverable upon the exercise
of each Non-Statutory Stock Option shall not be less than 110% of the Fair
Market Value of the Common Stock on the date the option is granted or $5.00
whichever is greater. Shares may be purchased only upon full payment of the
purchase price. Payment of the purchase price may be made, in whole or in
part, through the surrender of shares of the Common Stock of the Company at
the Fair Market Value of such shares determined in the manner described in
Section 2(g).
(b) Terms of Options.
The term during which each Non-Statutory Stock Option may be exercised
shall be determined by the Committee, but in no event shall a Non-Statutory
Stock Option be exercisable in whole or in part more than 10 years and one
day from the Date of Grant.
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(c) Vesting.
The Committee shall determine the date on which each Non-Statutory Stock
Option shall become exercisable in installments. Any required vesting
period shall commence on the Participant's Date of Affiliation. The shares
comprising each installment may be purchased in whole or in part at any
time after such installment becomes exercisable. The Committee may, in its
sole discretion, accelerate the time at which any Non-Statutory Stock
Option may be exercised in whole or in part. Notwithstanding the above, in
the event of a Change in Control of the Company, or the death of a
Director, all Non-Statutory Stock Options shall become immediately
exercisable.
(d) Termination of Service.
Upon the termination of a Directors' service for any reason other than
retirement, death or disability or termination for cause, his or her
Non-Statutory Stock Options shall be exercisable only as to those shares
which were immediately purchasable by him at the date of termination and
only for a period of 30 days following termination and in the event of
retirement 90 days following retirement. In the event of termination for
cause, all rights under his Non-Statutory Stock Options shall expire upon
termination. In the event of the death or disability of a Director, all
Non-Statutory Stock Options held by the Director, whether or not
exercisable at such time, shall be exercisable by the Director, or the
Director's legal representatives or beneficiaries for twelve (12) months
following the date of his death or disability; provided that in no event
shall the period extend beyond the expiration of the Non-Statutory Stock
Option term.
8. GRANT OF LIMITED RIGHTS
The Committee may grant a Limited Right simultaneously with the grant of
any option, with respect to all or some of the shares covered by such option.
Limited Rights granted under the Directors' Plan are subject to the following
terms and conditions:
(a) Terms of Rights.
In no event shall a Limited Right be exercisable in whole or in part before
the expiration of six months from the date of grant of the Limited Right. A
Limited Right may be exercised only upon the occurrence of all of the
following conditions: (i) a Change in Control of the Company; and (ii) the
Fair Market Value of the underlying shares on the day of exercise is
greater than the exercise price of the related option.
Upon exercise of a Limited Right, the related option shall cease to be
exercisable. Upon exercise or termination of an option, any related Limited
Rights shall terminate. The Limited Rights may be for no more than 100% of
the difference between the exercise price and the Fair Market Value of the
Common Stock subject to the underlying option pursuant to Section 2(g)
herein. The Limited Right is transferable only when the underlying option
is transferable and under the same conditions.
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(b) Payment.
Upon exercise of a Limited Right, the holder shall promptly receive from
the Company an amount of cash equal to the difference between the Fair
Market Value on the Date of Grant of the related option and the Fair Market
Value of the underlying shares on the date the Limited Right is exercised,
multiplied by the number of shares with respect to which such Limited Right
is being exercised.
(c) Termination of Service.
Upon the termination of a Directors' service for any reason other than
retirement, death or disability or termination for cause, any Limited
Rights held by him shall be exercisable only as to those shares of the
related option which were immediately purchasable by him at the date of
termination and only for a period of 30 days following termination. In the
event of Termination for Cause, all Limited Rights shall expire upon
termination. In the event of termination of service for reason of death or
disability, all Limited Rights held by the Director, whether or not
exercisable at such time, shall be exercisable by the Director or his legal
representatives or beneficiaries for twelve (12) months following the date
of his death or disability; provided that in no event shall the period
extend beyond the expiration of the related Non-Statutory Stock Option
term.
9. RIGHTS OF A SHAREHOLDER: NONTRANSFERABILITY
An optionee shall have no rights as a shareholder with respect to any
shares covered by a Non-Statutory Stock Option until the date of issuance of a
stock certificate for such shares. Nothing in the Directors' Plan or in any
Award granted confers on any person any right to continue to serve as a director
for the Company or its Subsidiaries.
No Award under the Directors' Plan shall be transferable by the optionee
other than by will or the laws of descent and distribution and may only be
exercised during his lifetime by the optionee, or by a guardian or legal
representative.
10. AGREEMENT WITH PARTICIPANTS
Each Award of Options and/or Limited Rights will be evidenced by a written
agreement, executed by the Participant and the Company which describes the
conditions for receiving the Awards including the date of Award, the purchase
price, applicable periods, and any other terms and conditions as may be required
by the Board of Directors or applicable securities law.
11. DESIGNATION OF BENEFICIARY
A Participant may, with the consent of the Committee, designate a person or
persons to receive, in the event of death, any stock option or Limited Rights
Award to which he would then be entitled. Such designation will be made upon
forms supplied by and delivered to the Company and may be revoked in writing. If
a Participant fails effectively to designate a beneficiary, then his estate will
be deemed to be the beneficiary.
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12. DILUTION AND OTHER ADJUSTMENTS
In the event of any change in the outstanding shares of Common Stock of the
Company by reason of any stock dividend, split, recapitalization, merger,
consolidation, spin-off, reorganization, combination or exchange of shares, or
other similar corporate change, the Committee will make such adjustments to
previously granted Awards, to prevent dilution or enlargement of the rights of
the Participant, including any or all of the following:
(a) adjustments in the aggregate number or kind of shares of Common Stock
which may be awarded under the Directors' Plan;
(b) adjustments in the aggregate number or kind of shares of Common Stock
covered by Awards already made under the Directors' Plan;
(c) adjustments in the purchase price of outstanding Non-Statutory Stock
Options, or any Limited Rights attached to such options.
No such adjustments may, however, materially change the value of benefits
available to a Participant under a previously granted Award.
13. WITHHOLDING
There will be deducted from each distribution of cash and/or Common Stock
under the Directors' Plan the amount of tax required to be withheld by any
governmental authority if any.
14. AMENDMENT OF THE DIRECTORS' PLAN
The Board of Directors may at any time, and from time to time, modify or
amend the Directors' Plan in any respect; provided however, that if necessary to
continue to qualify the Directors' Plan under the Securities and Exchange
Commission Rule 16(b)-3, shareholder approval would be required for any such
modification or amendments which:
(a) increases the maximum number of shares for which options may be
granted under the Directors' Plan (subject, however, to the provisions
of Section 13 hereof);
(b) reduces the minimum purchase price at which Awards may be granted;
(c) extends the period during which options may be granted or exercised
beyond the times originally prescribed; or
(d) changes the persons eligible to participate in the Directors' Plan.
Failure to ratify or approve amendments or modifications to Subsections (a)
through (d) of this Section by shareholders shall be effective only as to the
specific amendment or modification requiring such ratification. Other
provisions, sections, and subsections of this Directors' Plan will remain in
full force and effect.
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No such termination, modification or amendment may affect the rights of a
Participant under an outstanding Award.
15. EFFECTIVE DATE OF DIRECTORS' PLAN
The Directors' Plan shall be adopted by the Board of Directors and shall
become effective upon such date of adoption, or other date as determined by the
Board ("Effective Date"). Following the Effective Date of the Directors' Plan,
the Directors' Plan shall be submitted to the Company's shareholders for
approval. If the Directors' Plan is not approved by shareholders the Directors'
Plan and any Awards granted thereunder shall be null and void.
16. TERMINATION OF DIRECTORS' PLAN
The right to grant Awards under the Directors' Plan will terminate upon the
earlier of 10 years after the Effective Date of the Directors' Plan or the
issuance of Common Stock or the exercise of options or related rights equaling
the maximum number of shares reserved under the Directors' Plan as set forth in
Section 5. The Board of Directors has the right to suspend or terminate the
Directors' Plan at any time, provided that no such action will, without the
consent of a Participant, adversely affect his rights under a previously granted
Award.
17. APPLICABLE LAW
The Directors' Plan will be administered in accordance with the laws of the
State of Florida.
Adopted this 24th day of February, 1998 by the Board of Directors of the
Company.
/s/Stephen A. McLaughlin
---------------------
Stephen A. McLaughlin, Secretary
Adopted on the ____ day of _____________, 1998 by the Company's
shareholders.
---------------------
Richard Storm, Jr.
Page 7
Exhibit 22.2
The Company's 1997 Annual Report
<PAGE>
CITIZENS COMMUNITY BANCORP, INC.
1997 ANNUAL REPORT
<PAGE>
1997 ANNUAL REPORT
Contents Page
Corporate Profile and General Information................................1
Common Stock Prices and Dividends........................................1
Consolidated Financial Highlights........................................2
Message from the Chairman..............................................3-4
Selected Financial Data..................................................5
Management's Discussion and Analysis of Financial Condition
and Results of Operations....................................6-18
Consolidated Financial Statements....................................19-34
Independent Auditors' Report............................................20
Officers and Directors..................................................36
<PAGE>
CORPORATE PROFILE
Citizens Community Bancorp, Inc. (the "Holding Company") was incorporated on May
24, 1995. The Holding Company owns 100% of the outstanding common stock of
Citizens Community Bank of Florida (the "Bank") and Citizens Financial Corp.
("Citizens Financial") (collectively the "Company"). The Holding Company was
organized simultaneously with the Bank and its only business is the ownership
and operation of the Bank and Citizens Financial. The Bank is a Florida
state-chartered commercial bank and is insured by the Federal Deposit Insurance
Corporation. The Bank opened for business on March 8, 1996, and provides
community banking services to businesses and individuals in Collier County,
Florida. Citizens Financial is a mortgage broker operating in Southwest Florida.
The Company has adopted a fiscal year ending December 31. At December 31, 1997,
the Company operated two retail banking offices, one in Marco Island, Florida
and one in Naples, Florida and had total assets of $44.4 million and total
stockholders' equity of $6.8 million. The Board of Directors voted to split the
Company's common stock two-for-one effective December 15, 1997; all share
information presented in this report reflects this stock split.
GENERAL INFORMATION
Corporate
Headquarters 650 East Elkcam Circle Marco Island, Florida 34145
(941) 389-1800
Annual Meeting The Annual Meeting of the Stockholders will be held
at the Marriotts' Marco Island Resort and Golf Club
located at 400 South Collier Boulevard, Marco
Island, Florida at 4:00 P.M., April 30, 1998.
Form 10-K A copy of the Form 10-KSB, as filed with the
Securities and Exchange Commission, may be obtained
by stockholders without charge upon written request
to Mr. Stephen A. McLaughlin, Vice President -
Secretary - Treasurer, Citizens Community Bancorp,
Inc., 650 East Elkcam Circle, Marco Island, Florida
34145.
Transfer Agent and
Registrar Citizens Community Bancorp, Inc.
650 East Elkcam Circle
Marco Island, Florida 34145
Corporate Counsel Igler & Dougherty, P.A.
1501 Park Avenue East
Tallahassee, Florida 32301
Independent
Auditors Hacker, Johnson, Cohen & Grieb PA
Certified Public Accountants
500 North Westshore Boulevard
Tampa, Florida 33609
COMMON STOCK PRICES AND DIVIDENDS
Although there is no established public trading market for the Company's common
stock, the brokerage firm of A.G. Edwards & Sons, Inc., from time-to-time
facilitates occasional trades of the Company's common stock in the
over-the-counter market. The stock was originally offered and sold in a public
offering in 1996 for $4.50 per share. The Company has never paid cash dividends.
Future dividends, if any, will be determined by the Board of Directors.
As of February 5, 1998, the Company had 532 holders of record of common stock.
1
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<TABLE>
<CAPTION>
CONSOLIDATED FINANCIAL HIGHLIGHTS
At December 31, or For the Year Then Ended
(Dollars in thousands, except per share figures)
1997 1996
---- ----
<S> <C> <C>
At Year End:
Assets............................................................................... $ 44,422 25,027
Loans, net........................................................................... 26,420 12,116
Securities........................................................................... 2,499 2,240
Deposits............................................................................. 36,938 17,885
Stockholders' equity................................................................. 6,771 5,964
Book value per share................................................................. 4.31 4.22
Shares outstanding (1)............................................................... 1,571,624 1,415,220
Equity-to-assets ratio............................................................... 15.24% 23.83%
Nonperforming assets-to-total assets ratio........................................... NIL NIL
For The Year:
Interest income...................................................................... 2,523 740
Net income (loss).................................................................... 110 (342)
Basic earnings (loss) per share (1).................................................. .07 (.26)
Diluted earnings (loss) per share (1)................................................ .07 (.26)
Return on average assets............................................................. .30% (2.71%)
Return on average equity............................................................. 1.72% (10.35%)
Average equity-to-average assets ratio............................................... 17.47% 26.16%
Noninterest expenses to average assets............................................... 3.45 7.24
Average Yield
or Rate
During the
Year Ended
December 31,
1997 1996
---- ----
Yields and Rates:
Loan portfolio....................................................................... 9.32% 8.39%
Securities........................................................................... 6.01 5.78
Other interest-earnings assets....................................................... 5.50 5.62
All interest-earnings assets......................................................... 8.04 6.61
Deposits and borrowings.............................................................. 4.02 4.28
Interest-rate spread (2)............................................................. 4.02 2.33
Net interest margin (3).............................................................. 4.20 4.08
- -----------------
</TABLE>
(1) All share amounts reflect the 2 for 1 stock split effective December
15, 1997.
(2) Average yield on all interest-earning assets less average rate paid on
all interest-bearing liabilities.
(3) Net interest income divided by average interest-earning assets.
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MESSAGE FROM THE CHAIRMAN
On behalf of management and the Board of Directors, I am pleased to
present the 1997 Annual Report for Citizens Community Bancorp, Inc. The Annual
Report is presented in a standard format and the information and financial
statements contained therein are set forth in accordance with generally accepted
accounting principals. References to share amounts have been adjusted to reflect
the two-for-one stock split, effective December 15, 1997.
The year ended December 31, 1997, was the Company's first full year of
operation and a number of important initiatives and goals were achieved. I would
like to take this opportunity to discuss some of the more notable
accomplishments for 1997.
Earnings. For the first time since commencing its operations, the
Company achieved positive earnings in all four consecutive quarters.
Consolidated net earnings for the year ended December 31, 1997, were $109,506,
or $.07 per share, as compared to a loss of $(342,255) or $(.26) per share for
1996. While we are pleased that Citizens became profitable in its first full
year of operations, we must continue to strive to steadily increase earnings for
1998.
Growth. For the year ended December 31, 1997, the Company had total
consolidated assets of $44.4 million from $25.0 million for the year ended
December 31, 1996, an 89% increase for the 12-month period. Consolidated net
loans increased to $26.4 million, which represents an increase of 118% for the
period. Consolidated stockholders' equity was $6.8 million, or 15.2% of total
assets. As of December 31, 1997 there were 646,375 shares available for issue
under Warrants that had not been exercised. The Warrants will expire on June 16,
1998. If the Warrants are fully exercised, the Company's stockholders' equity
would increase to approximately $10.0 million. This capital level would make
Citizens one of the better capitalized small banks in Southwest Florida, which
we believe will provide sufficient capital to support anticipated growth.
Personnel. Our goal in 1997 was to establish a solid executive banking
staff. We believe we accomplished this goal with the addition of Michael A.
Micallef, David Klein and Sharon Ginn. The first addition was David Klein, who
was hired as Vice President and Loan Officer for Citizens Community Bank and
presently serves as EVP. David has almost 20 years of banking experience in all
areas of commercial lending. He was formerly with Bank of Bowie in Prince
George's County, Maryland, where he served as Vice President and Loan Officer.
Michael Micallef was brought in to add stability and experience to the
President and Chief Executive position at Citizens Community Bank. Michael has
over 30 years of banking experience, the past 19 years of which have been in
South Florida. He was formerly the President and Chief Executive Officer of Bank
Boynton, Boynton Beach, Florida.
The final addition was Sharon Ginn, who was named Vice President and
Cashier of Citizens Community Bank in November, 1997. Sharon brings with her an
extensive bank accounting background. She was formerly with First National Bank
and Trust Co. of the Treasure Coast, Stuart, Florida, where she served as an
AVP/Accounting Manager.
At December 31, 1997, the Company had 19 full-time employees and 6
part-time employees.
Other. With the continued consolidation within the banking industry due
to mergers and acquisitions, the most recent being the acquisitions of Barnett
Banks, Inc., Jacksonville, Florida by NationsBank and Mercantile Bank in Naples,
Florida, by First National Bank of Pennsylvania, we envision that new
opportunities will arise which will allow the Company to expand its presence in
Southwest Florida. One of the major advantages that a locally-owned community
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bank has is its ability to be responsive to customer needs. The operative word
is service. We can make credit decisions locally, which provides a quick turn
around for loan applications. While we will not compromise our underwriting
standards, we believe customers want to know as quickly as possible if your
institution will be able to accommodate their loan request.
We intend to develop long-term banking relationships within the
communities we serve. This will require us to remain competitive in the products
and technological services that we offer. We recognize that as a young bank we
cannot provide every service or product that is available. Rather, we intend to
provide the services and products which best suit the expertise of our staff and
will provide greater profitability to the Company. To meet the business needs of
Marco Island and Naples, we have instituted a Courier Service which went into
effect in mid-February, 1998. We have also targeted new branch locations in
Naples to further expand our presence and customer base in our primary service
area. The Company will continue to explore potential growth areas as they become
available, with our ultimate focus on enhancing shareholder value.
The Company has a web site (www.ccbank.com) where our customers and
shareholders, can obtain the latest information about the Company. In
conclusion, we want to thank you for your continued support of our efforts.
Sincerely,
CITIZENS COMMUNITY BANCORP, INC.
/s/ Richard Storm, Jr.
Richard Storm, Jr.
Chairman
March 31, 1998
4
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<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
At December 31, or for the Year then Ended
(Dollars in thousands, except per share figures)
1997 1996
---- ----
<S> <C> <C>
At Year End:
Cash and cash equivalents................................................................. $ 12,211 8,042
Securities................................................................................ 2,499 2,240
Loans, net................................................................................ 26,420 12,116
All other assets.......................................................................... 3,292 2,630
------- --------
Total assets..................................................................... $ 44,422 25,028
====== =======
Deposit accounts.......................................................................... 36,938 17,885
All other liabilities..................................................................... 713 1,179
Stockholders' equity...................................................................... 6,771 5,964
------ -------
Total liabilities and stockholders' equity....................................... $ 44,422 25,028
====== =======
For the Year:
Total interest income..................................................................... 2,523 740
Total interest expense.................................................................... 1,208 283
------ --------
Net interest income....................................................................... 1,315 457
Provision for loan losses................................................................. 153 145
------- --------
Net interest income after provision for loan losses....................................... 1,162 312
------ --------
Noninterest income........................................................................ 273 70
Noninterest expenses...................................................................... 1,260 915
------ --------
Earnings (loss) before income tax credit.................................................. 175 (533)
Income taxes (benefit).................................................................... 65 (191)
------- --------
Net earnings (loss)....................................................................... $ 110 (342)
====== ========
Basic earnings (loss) per share (1)....................................................... $ .07 (.26)
====== =========
Diluted earnings (loss) per share (1)..................................................... .07 (.26)
====== =========
Ratios and Other Data:
Return on average assets.................................................................. .30% (2.71%)
Return on average equity.................................................................. 1.72% (10.35%)
Average equity to average assets.......................................................... 17.47% 26.16%
Interest-rate spread during the period.................................................... 4.02% 2.33%
Net yield on average interest-earning assets.............................................. 8.04% 6.61%
Noninterest expenses to average assets.................................................... 3.45% 7.24%
Ratio of average interest-earning assets to average
interest-bearing liabilities..................................................... 1.05 1.69
Nonperforming loans and foreclosed real estate as a percentage of
total assets at end of year...................................................... NIL NIL
Allowance for credit losses as a percentage
of total loans at end of year.................................................... 1.12% 1.18%
Total number of banking offices........................................................... 2 1
Total shares outstanding at end of year (1)............................................... 1,571,624 1,415,220
Book value per share at end of year....................................................... $ 4.31 4.22
</TABLE>
(1) Share amounts reflect the two-for-one stock split effective December
15, 1997.
5
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Year Ended December 31, 1997 and 1996
General
Citizens Community Bancorp, Inc. (the "Holding Company") was incorporated on May
24, 1995. The Holding Company owns 100% of the outstanding common stock of
Citizens Community Bank (the "Bank") and Citizens Financial Corp. ("Citizens
Financial") (collectively the "Company"). The Holding Company was organized
simultaneously with the Bank and its primary business is the ownership and
operation of the Bank and Citizens Financial. The Bank is a Florida
state-chartered commercial bank and is insured by the Federal Deposit Insurance
Corporation. The Bank opened for business on March 8, 1996, and provides
community banking services to businesses and individuals in Collier County,
Florida. Citizens Financial which was incorporated on March 27, 1997 as a
mortgage origination company, but is currently inactive.
Liquidity and Capital Resources
A state-chartered commercial bank is required under Florida Law and FDIC
regulations to maintain a liquidity reserve of at least 15% of its total
transaction accounts and 8% of its total non-transaction accounts subject to
certain restrictions. The reserve may consist of cash-on-hand, demand deposits
due from correspondent banks, and other investments and short-term marketable
securities.
The Company's primary source of cash during the year ended December 31, 1997 was
from net deposit inflows of $19.1 million. Cash was used primarily to originate
loans. At December 31, 1997, the Company had outstanding commitments to
originate loans totaling $1.0 million and commitments to borrowers for available
lines of credit totaling $5.1 million. At December 31, 1997, the Bank exceeded
its regulatory liquidity requirements.
Regulation and Legislation
As a state-chartered commercial bank, the Bank is subject to extensive
regulation by the Florida Department of Banking and Finance ("Florida DBF") and
the Federal Deposit Insurance Corporation ("FDIC"). The Bank files reports with
the Florida DBF and the FDIC concerning its activities and financial condition,
in addition to obtaining regulatory approvals prior to entering into certain
transactions such as mergers with or acquisitions of other financial
institutions. Periodic examinations are performed by the Florida DBF and the
FDIC to monitor the Bank's compliance with the various regulatory requirements.
The Holding Company and the Bank are also subject to regulation and examination
by the Federal Reserve Board of Governors.
Year 2000 Compliance
Management has an ongoing program designed to ensure that its operational and
financial systems will not be adversely affected by year 2000 software failures,
due to processing errors arising from calculations using the year 2000 date.
Based on current estimates the Bank expects to incur from between $25,000 and
$30,000 over the next three years on its program to redevelop, replace, or
repair its computer applications to make them "year 2000 compliant." While
management believes it is doing everything technologically possible to assure
year 2000 compliance, it is to some extent dependent upon vendor cooperation.
Management is requiring its computer system and software vendors to represent
that the products provided are, or will be, year 2000 compliant, and has planned
a program of testing for compliance. It is recognized that any year 2000
compliance failures could result in additional expense to the Bank.
Credit Risk
The Company's primary business is making commercial, business, consumer, and
real estate loans. That activity entails potential loan losses, the magnitude of
which depend on a variety of economic factors affecting borrowers which are
beyond the control of the Company. While the Company has instituted underwriting
6
<PAGE>
guidelines and credit review procedures to protect the Company from avoidable
credit losses, some losses will inevitably occur. At December 31, 1996 or 1997,
the Company had no nonperforming assets on loans delinquent 90 days or more, and
has no charge-off experience.
7
<PAGE>
The following table presents information regarding the Company's total allowance
for losses as well as the allocation of such amounts to the various categories
of loans (dollars in thousands):
<TABLE>
<CAPTION>
At December 31,
---------------------------------------
1997 1996
---------------------------------------
Loans Loans
To To
Total Total
Amount Loans Amount Loans
------ ----- ------ -----
<S> <C> <C> <C> <C>
Commercial real estate loans............................ $ 94 35% $ 62 31%
Residential real estate loans........................... 42 27 22 36
Commercial loans........................................ 117 29 55 31
Consumer loans.......................................... 45 9 6 2
---- ---- --- ---
Total allowance for loan losses......................... $ 298 100% $ 145 100%
=== === === ===
Allowance for credit losses as a percentage
of the total loans outstanding....................... 1.12% 1.18%
==== ====
</TABLE>
Loan Portfolio Composition
Commercial real estate loans and land loans comprise the largest group of loans
in the Company's portfolio amounting to $9.4 million, or 35% of the total loan
portfolio as of December 31, 1997. Commercial real estate loans consist of $8.6
million of loans secured by other nonresidential property and $800,000 of loans
secured by undeveloped land.
Residential real estate loans comprise the second largest group of loans in the
Company's loan portfolio, amounting to $7.3 million or 27% of the total loan
portfolio as of December 31, 1997, of which approximately 98% are first mortgage
loans. As of December 31, 1997, consumer loans and savings account loans,
amounted to $2.3 million or 9% of the total loan portfolio.
The following table sets forth the composition of the Company's loan portfolio:
<TABLE>
<CAPTION>
At December 31,
--------------------------------------
1997 1996
--------------------------------------
% of % of
Amount Total Amount Total
------ ----- ------ -----
(in thousands)
<S> <C> <C> <C> <C>
Commercial real estate........................................ $ 9,423 35% $ 3,758 31%
Residential real estate....................................... 7,261 27 4,384 36
Commercial.................................................... 7,710 29 3,815 31
Consumer...................................................... 2,261 9 305 2
------ ----- ------ ---
26,655 100% 12,262 100%
=== ===
Add (Subtract):
Deferred costs (fees) net................................... 63 (1)
Allowance for credit losses................................. (298) (145)
------- ------
Loans, net.................................................... $ 26,420 $ 12,116
====== ======
</TABLE>
8
<PAGE>
Securities
The securities portfolio is comprised primarily of U.S. Treasury and U.S.
Government agency securities. According to Financial Accounting Standards No.
115, the securities portfolio is categorized as either "held to maturity",
"available for sale" or "trading". Securities held to maturity represent those
securities which the Company has the positive intent and ability to hold to
maturity. These securities are carried at amortized cost and were comprised of
U.S. Treasury and U.S. Government agency securities at December 31, 1997.
Securities available for sale represent those investments which may be sold for
various reasons including changes in interest rates and liquidity
considerations. These securities are reported at fair market value with
unrealized gains and losses being reported as a separate component of
stockholders equity, net of income taxes. Trading securities are held primarily
for resale and are recorded at their fair values. Unrealized gains or losses on
trading securities are included immediately in earnings. At December 31, 1997,
the Company had no securities categorized as available for sale or trading.
The following table sets forth the carrying value of the Company's securities
portfolio:
<TABLE>
<CAPTION>
At December 31,
---------------
1997 1996
---- ----
(in thousands)
Securities held to maturity:
<S> <C> <C>
U.S. Treasury securities......................................................... $ 250 1,743
U.S. Government agency securities................................................ 2,249 497
----- -----
$ 2,499 2,240
===== =====
</TABLE>
The following table sets forth, by maturity distribution, certain information
pertaining to the securities held to maturity portfolio as follows (dollars in
thousands):
<TABLE>
<CAPTION>
After One Year
One Year or Less to Five Years Total
---------------- ------------- -----
Carrying Average Carrying Average Carrying Average
Value Yield Value Yield Value Yield
----- ----- ----- ----- ----- -----
December 31, 1997:
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury securities............... $ 250 6.04% $ - - % $ 250 6.04%
U.S. Government
agency securities.................. 749 5.80 1,500 6.00 2,249 5.93
--- ----- -----
Total.................................. $ 999 5.81% $ 1,500 6.00% $ 2,499 5.94%
=== ==== ===== ==== ===== ====
December 31, 1996:
U.S. Treasury securities............... 247 6.00% 1,496 5.78% 1,743 5.80%
U.S. Government
agency securities.................. 497 5.80 - - 497 5.80
--- ------ -----
Total.................................. $ 744 5.88% $ 1,496 5.78% $ 2,240 5.80%
=== ==== ===== ==== ===== ====
</TABLE>
10
<PAGE>
Regulatory Capital Requirements
Under FDIC regulations, the Bank is required to meet certain minimum regulatory
capital requirements. This is not a valuation allowance and has not been created
by charges against earnings. It represents a restriction on stockholders'
equity.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the table
below) of total and Tier I capital (as defined in the regulations) to
risk-weighted assets (as defined), and of Tier I capital (as defined) to average
assets (as defined). Management believes, as of December 31, 1997, that the Bank
meets all capital adequacy requirements to which it is subject.
<TABLE>
<CAPTION>
To Be Well
Capitalized
Minimum for Purposes
For Capital of Prompt and
Actual Adequacy Purposes: Corrective Action
--------------------- ------------------ -----------------
Amount % Amount % Amount %
--------------------- ------------------ -----------------
(dollars in thousands)
As of December 31, 1997:
Total capital (to Risk-
<S> <C> <C> <C> <C> <C> <C>
Weighted Assets)........... $ 4,643 17.67% $ 2,102 8.00% $ 2,627 10.0%
Tier I Capital (to Risk-
Weighted Assets)........... 4,354 16.57 1,051 4.00 1,576 6.0
Tier I Capital
(to Average Assets)........ 4,354 10.67 1,633 4.00 2,041 5.0
As of December 31, 1996:
Total capital (to Risk-
Weighted Assets)........... 3,890 30.80% 1,011 8.00% 1,264 10.0%
Tier I Capital (to Risk-
Weighted Assets)........... 3,747 29.65 505 4.00 758 6.0
Tier I Capital
(to Average Assets)........ 3,747 19.46 770 4.00 963 5.0
</TABLE>
Market Risk
Market risk is the risk of loss from adverse changes in market prices and rates.
The Company's market risk arises primarily from interest-rate risk inherent in
its lending and deposit taking activities. To that end, management actively
monitors and manages its interest-rate risk exposure. The measurement of market
risk associated with financial instruments is meaningful only when all related
and offsetting on- and off-balance-sheet transactions are aggregated, and the
resulting net positions are identified. Disclosures about the fair value of
financial instruments, which reflect changes in market prices and rates, can be
found in Note 7 of Notes to Consolidated Financial Statements.
The Company's primary objective in managing interest-rate risk is to minimize
the adverse impact of changes in interest rates on the Bank's net interest
income and capital, while adjusting the Company's asset-liability structure to
obtain the maximum yield-cost spread on that structure. The Company relies
primarily on its asset-liability structure to control interest rate risk.
However, a sudden and substantial increase in interest rates may adversely
impact the Company's earnings, to the extent that the interest rates borne by
assets and liabilities do not change at the same speed, to the same extent, or
on the same basis. The Company does not engage in trading activities.
11
<PAGE>
Asset - Liability Structure
As part of its asset and liability management, the Company has emphasized
establishing and implementing internal asset-liability decision processes, as
well as communications and control procedures to aid in managing the Company's
earnings. Management believes that these processes and procedures provide the
Company with better capital planning, asset mix and volume controls,
loan-pricing guidelines, and deposit interest-rate guidelines which should
result in tighter controls and less exposure to interest-rate risk.
The matching of assets and liabilities may be analyzed by examining the extent
to which such assets and liabilities are "interest rate sensitive" and by
monitoring an institution's interest rate sensitivity "gap." An asset or
liability is said to be interest rate sensitive within a specific time period if
it will mature or reprice within that time period. The interest-rate sensitivity
gap is defined as the difference between interest-earning assets and
interest-bearing liabilities maturing or repricing within a given time period.
The gap ratio is computed as rate sensitive assets/rate sensitive liabilities. A
gap ratio of 1.0% represents perfect matching. A gap is considered positive when
the amount of interest-rate sensitive assets exceeds interest-rate sensitive
liabilities. A gap is considered negative when the amount of interest-rate
sensitive liabilities exceeds interest-rate sensitive assets. During a period of
rising interest rates, a negative gap would adversely affect net interest
income, while a positive gap would result in an increase in net interest income.
During a period of falling interest rates, a negative gap would result in an
increase in net interest income, while a positive gap would adversely affect net
interest income.
In order to minimize the potential for adverse effects of material and prolonged
increases in interest rates on the results of operations, the Company's
management continues to monitor asset and liability management policies to
better match the maturities and repricing terms of its interest-earning assets
and interest-bearing liabilities. Such policies have consisted primarily of: (i)
emphasizing the origination of adjustable-rate loans; (ii) maintaining a stable
core deposit base; and (iii) maintaining a significant portion of liquid assets
(cash and short-term securities).
12
<PAGE>
The following table sets forth certain information relating to the Company's
interest-earning assets and interest-bearing liabilities at December 31, 1997
that are estimated to mature or are scheduled to reprice within the period shown
(dollars in thousands):
<TABLE>
<CAPTION>
More
Than More
Three Than Six More
Months Months Than One Over
Three to Six to One Year to More Than Ten
Months Months Year Five Years Five Years Years Total
------ ------ ---- ---------- ---------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Mortgage and commercial loans (1):
Variable rate .................... $ 6,346 1,069 893 1,904 101 - 10,313
Fixed rate .................... 803 331 1,363 12,004 762 1,079 16,342
------- ------ ------ ------ ------ ----- ------
Total loans.................. 7,149 1,400 2,256 13,908 863 1,079 26,655
Federal funds sold.................... 9,057 - - - - - 9,057
Securities (2)........................ 500 - 499 1,500 - - 2,499
------- -------- ------ ------ ------- -------- ------
Total rate-sensitive assets.. 16,706 1,400 2,755 15,408 863 1,079 38,211
------ ----- ----- ------ ----- ----- ------
Deposit accounts (3):
Money market deposits............. 1,302 - - - - - 1,302
NOW deposits...................... 15,462 - - - - - 15,462
Savings deposits.................. 839 - - - - - 839
Certificates of deposit........... 3,440 2,800 5,293 4,547 102 - 16,182
------ ----- ------ ------ ------ -------- ------
Total rate-sensitive
liabilities.............. 21,043 2,800 5,293 4,547 102 - 33,785
====== ===== ====== ====== ====== ======== ======
GAP repricing differences............. $ (4,337) (1,400) (2,538) 10,861 761 1,079 4,426
====== ===== ===== ====== ====== ===== ======
Cumulative GAP........................ (4,337) (5,737) (8,275) 2,586 3,347 4,426
====== ===== ===== ====== ===== =====
Cumulative GAP/total assets........... (9.8%) (12.9%) (18.6%) 5.8% 7.5% 10.0%
==== ==== ==== ======= ====== =====
</TABLE>
(1) In preparing the table above, adjustable-rate loans are included in the
period in which the interest rates are next scheduled to adjust rather
than in the period in which the loans mature. Fixed-rate loans are
scheduled, including repayment, according to their maturities.
(2) Securities are scheduled through the maturity dates.
(3) Money-market, NOW, and savings deposits are regarded as ready
accessible withdrawable accounts. Time deposits are scheduled through
the maturity dates.
13
<PAGE>
The following table reflects the contractual principal repayments by period of
the Company's loan portfolio at December 31, 1997 (in thousands):
<TABLE>
<CAPTION>
Commercial
Residential Real
Years Ending Commercial Mortgage Estate Consumer
December 31, Loans Loans Loans Loans Total
------------ ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
1998............................. $ 2,466 1,323 3,013 447 7,249
1999............................. 494 540 604 252 1,890
2000............................. 1,140 1,095 1,393 221 3,849
2001-2002........................ 1,233 482 2,207 214 4,136
2003-2004........................ 1,481 489 1,810 255 4,035
2005 and beyond.................. 896 3,332 396 872 5,496
------- ----- ------ ----- ------
Total............................ $ 7,710 7,261 9,423 2,261 26,655
===== ===== ===== ===== ======
</TABLE>
Of the $19.4 million of loans due after 1998, 71% of such loans have fixed
interest rates and 29% have adjustable interest rates.
Scheduled contractual principal repayments of loans do not reflect the actual
life of such assets. The average life of loans is substantially less than their
average contractual terms due to prepayments. In addition, due-on-sale clauses
on loans generally give the Company the right to declare a conventional loan
immediately due and payable in the event, among other things, that the borrower
sells the real property subject to the mortgage and the loan is not repaid. The
average life of mortgage loans tends to increase, however, when current mortgage
loan rates are substantially higher than rates on existing mortgage loans and,
conversely, decrease when rates on existing mortgages are substantially higher
than current mortgage loan rates.
Origination, Sale and Repayment of Loans. The Company generally originates loans
on real estate located in its primary geographical lending area in Southwest
Florida. Residential mortgage loan originations by the Company are attributable
to depositors, other existing customers, advertising and referrals from real
estate brokers and developers. The Company's residential mortgage loans
generally are originated to ensure compliance with documentation and
underwriting standards which permit their sale to the Federal National Mortgage
Association ("Fannie Mae") and other investors in the secondary market.
The Company has, to a limited extent, engaged in the sale of whole loans. The
Company utilizes the sale of fixed-rate loans and ARM loans to provide liquidity
and funding sources for higher yielding loans.
The following table sets forth total loans originated, repaid and sold:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1997 1996
---- ----
(in thousands)
<S> <C> <C>
Originations:
Commercial loans................................................................ $ 756 3,855
Commercial real estate loans.................................................... 9,426 3,797
Residential mortgage loans...................................................... 13,897 4,384
Consumer loans.................................................................. 2,888 305
------ -------
Total loans originated...................................................... 26,967 12,341
Less:
Principal reductions............................................................ 7,887 79
Loans sold...................................................................... 4,687 -
------ ------
Increase (decrease) in total loans.............................................. $ 14,393 12,262
====== ======
</TABLE>
14
<PAGE>
Deposits and Other Sources of Funds
General. In addition to deposits, the sources of funds available for lending and
other business purposes include loan repayments, loan sales, and securities sold
under agreements to repurchase. Loan repayments are a relatively stable source
of funds, while deposit inflows and outflows are influenced significantly by
general interest rates and money market conditions. Borrowings may be used on a
short-term basis to compensate for reductions in other sources, such as deposits
at less than projected levels and are also used to fund the origination of
mortgage loans designated to be sold in the secondary markets.
Deposits. Deposits are attracted principally from the Company's primary
geographic market areas in Collier County, Florida. The Company offers a broad
selection of deposit instruments including demand deposit accounts, NOW
accounts, money market accounts, regular savings accounts, term certificate
accounts and retirement savings plans (such as IRA accounts). Certificate of
deposit rates are set to encourage longer maturities as cost and market
conditions will allow. Deposit account terms vary, with the primary differences
being the minimum balance required, the time period the funds must remain on
deposit and the interest rate.
The Company has emphasized commercial banking relationships in an effort to
increase demand deposits as a percentage of total deposits. The Company's
courier service is expected to be in operation by the end of the first quarter
of 1998. The courier service will serve the Company's business customers in
Marco Island and Naples.
Management sets the deposit interest rates weekly based on a review of deposit
flows for the previous week, a survey of rates among competitors and other
financial institutions in Florida.
The following table shows the distribution of, and certain other information
relating to, the Company's deposit accounts by type (dollars in thousands):
<TABLE>
<CAPTION>
At December 31,
------------------------------------------------------
1997 1996
------------------------------------------------------
% of % of
Amount Deposits Amount Deposits
------ -------- ------ --------
<S> <C> <C> <C> <C>
Demand deposits...................................... $ 3,153 8.54% $ 2,366 13.23%
NOW deposits......................................... 15,462 41.86 8,311 46.47
Money-market deposits................................ 1,302 3.52 418 2.34
Savings deposits..................................... 839 2.27 360 2.01
-------- ------ ------- ------
Subtotal.................................... 20,756 56.19 11,455 64.05
Certificate of deposits:
4.00% - 4.99%............................... 1,101 2.98 447 2.50
5.00% - 5.99%............................... 8,221 22.26 4,966 27.77
6.00% - 6.99%............................... 6,860 18.57 1,017 5.68
------ ------ ------ ------
Total certificates of deposit (1).................... 16,182 43.81 6,430 35.95
------ ------ ------ ------
Total deposit........................................ $ 36,938 100.00% $ 17,885 100.00%
====== ====== ====== ======
</TABLE>
(1) Includes individual retirement accounts ("IRAs") totaling $611,000 and
$253,000 at December 31, 1997 and 1996, all of which are in the form of
certificates of deposit.
16
<PAGE>
<TABLE>
<CAPTION>
Jumbo certificates ($100,000 and over) mature as follows (in thousands):
At December 31,
1997 1996
<S> <C> <C>
Due three months or less........................................................... $ 872 -
Due over three months to six months................................................ 411 507
Due over six months to one year.................................................... 1,831 260
Due over one year.................................................................. 905 700
------ -----
$ 4,019 1,467
===== =====
</TABLE>
17
<PAGE>
Results of Operations
The operating results of the Company depend primarily on its net interest
income, which is the difference between interest income on interest-earning
assets and interest expense on interest-bearing liabilities, consisting
primarily of deposits. Net interest income is determined by the difference
between yields earned on interest-earning assets and rates paid on
interest-bearing liabilities ("interest-rate spread") and the relative amounts
of interest-earning assets and interest-bearing liabilities. The Company's
interest-rate spread is affected by regulatory, economic, and competitive
factors that influence interest rates, loan demand, and deposit flows. In
addition, the Company's net earnings are also affected by the level of
nonperforming loans and foreclosed real estate, as well as the level of its
noninterest income, and its noninterest expenses, such as salaries and employee
benefits, occupancy and equipment costs and income taxes.
The following table sets forth, for the periods indicated, information regarding
(i) the total dollar amount of interest and dividend income of the Company from
interest-earning assets and the resultant average yield; (ii) the total dollar
amount of interest expense on interest-bearing liabilities and the resultant
average costs; (iii) net interest/dividend income; (iv) interest rate spread;
(v) net interest margin. Average balances are based on average daily balances.
<TABLE>
<CAPTION>
1997 1996
-------------------------------------------------------------------
Interest Average Interest Average
Average and Yield/ Average and Yield/
Balance Dividends Rate Balance Dividends Rate
------- --------- ---- ------- --------- ----
Interest-earning assets:
<S> <C> <C> <C> <C> <C> <C>
Loans...................................... $ 20,537 1,914 9.32% $ 3,842 323 8.39%
Securities................................. 2,346 141 6.01 2,052 119 5.78
Other interest-earning assets (1).......... 8,516 468 5.50 5,306 298 5.62
------- ----- ------ --- ----
Total interest-earning assets.......... 31,399 2,523 8.04 11,200 740 6.61
----- ---
Noninterest-earning assets...................... 5,157 1,443
------ ------
Total assets........................... $ 36,556 $ 12,643
====== ======
Interest-bearing liabilities:
Demand, money market and
NOW deposits........................... 17,638 517 2.93 4,087 148 3.62
Savings.................................... 573 17 3.01 163 5 2.99
Certificates of deposit.................... 11,704 664 5.67 2,296 124 5.39
Other...................................... 125 10 8.00 66 6 9.42
------- ----- ------- ---
Total interest-bearing liabilities..... 30,040 1,208 4.02 6,612 283 4.28
----- ---
Noninterest-bearing liabilities................. 128 2,724
Stockholders' equity............................ 6,388 3,307
------ ------
Total liabilities and
stockholders' equity................. $ 36,556 $ 12,643
====== ======
Net interest/dividend income.................... $ 1,315 $ 457
===== ===
Interest-rate spread (2)........................ 4.02% 2.33%
==== ====
Net interest margin (3)......................... 4.20% 4.08%
==== ====
Ratio of average interest-earning assets to
average interest-bearing liabilities....... 1.05 1.69
==== ====
- ----------------------------------------
</TABLE>
(1) Includes interest-bearing deposits and federal funds sold.
18
<PAGE>
(2) Interest-rate spread represents the difference between the average yield on
interest-earning assets and the average cost of interest-bearing
liabilities.
(3) Net interest margin is net interest income dividend by average
interest-earning assets.
19
<PAGE>
Rate/Volume Analysis
The following table sets forth certain information regarding changes in interest
income and interest expense of the Company for the periods indicated. For each
category of interest-earning assets and interest-bearing liabilities,
information is provided on changes attributable to (1) changes in rate (change
in rate multiplied by prior volume), (2) changes in volume (change in volume
multiplied by prior rate) and (3) changes in rate-volume (change in rate
multiplied by change in volume).
<TABLE>
<CAPTION>
Year Ended December 31,
1997 vs. 1996
--------------------------
Increase (Decrease) Due to
--------------------------
Rate/
Rate Volume Volume Total
---- ------ ------ -----
(In thousands)
<S> <C> <C> <C> <C>
Interest earning assets:
Loans.................................................................... $ 35 1,401 155 1,591
Securities............................................................... 5 17 - 22
Other interest-earning assets............................................ (6) 180 (4) 170
--- ----- ---- -----
Total.................................................................. 34 1,598 151 1,783
-- ----- --- -----
Interest-bearing liabilities:
Deposits:
Demand, money-market and NOW deposits.................................. (28) 491 (94) 369
Savings................................................................ - 12 - 12
Certificates of deposit................................................ 7 507 26 540
Other.................................................................. (1) 6 (1) 4
--- ------ --- -----
Total.................................................................. (22) 1,016 (69) 925
-- ----- --- -----
Net change in net interest income............................................ $ 56 582 220 858
== ====== === =====
</TABLE>
20
<PAGE>
Results of Operations
Comparison of Years Ended December 31, 1997 and 1996
General. Net earnings for the year ended December 31, 1997 were $109,506 or
$.07 per basic share ($.07 per diluted share) compared to a net loss
$(342,295) or $(.26) per basic share ($.26 per diluted share) for the year
ended December 31, 1996. This improvement in the Company's net operating
results was primarily due to an increase in net interest income and
noninterest income partially offset by an increase in noninterest
expenses.
Interest Income and Expense. Interest income increased by $1.8 million from
$.7 million for the year ended December 31, 1996 to $2.5 million for the
year ended December 31, 1997. Interest income on loans increased $1.6
million due an increase in the average loan portfolio balance from $3.8
million for the year ended December 31, 1996 to $20.5 million for 1997, as
well as an increase in the weighted-average yield of 93 basis points.
Interest on securities increased $22,000 due to an increase in the average
securities balance from $2.1 million in 1996 to $2.3 million in 1997, as
well as an increase in the average yield from 5.78% in 1996 to 6.01% in
1997. Interest on other interest-earning assets increased $170,000
primarily due to an increase from $5.3 million in average other
interest-earning assets in 1996 to $8.5 million in 1997.
Interest expense increased $925,000 in 1997 compared to 1996. Interest
expense increased due to an increase of 5 basis points in the average
yield paid on deposits for the year ended December 31, 1997 compared to
1996, and an increase in average deposits from $6.5 million to $29.9
million from 1996 to 1997.
Provision for Loan Losses. The provision for loan losses was charged to
earnings to bring the total allowance to a level deemed appropriate by
management and is based upon historical experience, the volume and type of
lending conducted by the Company, industry standards, the amounts of
nonperforming loans, general economic conditions, particularly as they
relate to the Company's market areas, and other factors related to the
collectibility of the Company's loan portfolio. Management believes that
the allowance for loan losses of $298,000 is adequate at December 31,
1997.
Other Income. Other income increased from $70,000 in 1996 to $273,000 in
1997 primarily because of gains from the sale of loans of $68,000 in 1997
with no corresponding amount in 1996 and increased service charges on
deposit accounts in 1997 compared to 1996.
Other Expense. Total other expense increased $345,000 for the year ended
December 31, 1997 compared to 1996, primarily due to increases in employee
compensation and benefits of $310,000 due to additional employees. All
other operating expenses increased primarily due to the growth of the
Bank.
Income Taxes. The income tax provision was $66,000 (an effective rate of
37.6%) for 1997 compared to a credit of $(191,000) (an effective rate of
(35.8)%) for 1996).
21
<PAGE>
Impact of Inflation and Changing Prices
The financial statements and related data presented herein have been prepared in
accordance with GAAP, which requires the measurement of financial position and
operating results in terms of historical dollars, without considering changes in
the relative purchasing power of money over time due to inflation. Unlike most
industrial companies, substantially all of the assets and liabilities of the
Company are monetary in nature. As a result, interest rates have a more
significant impact on the Bank's performance than the effects of general levels
of inflation. Interest rates do not necessarily move in the same direction or in
the same magnitude as the prices of goods and services, since such prices are
affected by inflation to a larger extent than interest rates.
Future Accounting Requirements
Financial Accounting Standards 130 - Reporting Comprehensive Income establishes
standards for reporting comprehensive income. The Standard defines comprehensive
income as the change in equity of an enterprise except those resulting from
stockholder transactions. All components of comprehensive income are required to
be reported in a new financial statement that is displayed with equal prominence
as existing financial statements. The Company will be required to adopt this
Standard effective January 1, 1998. As the Statement addresses reporting and
presentation issues only, there will be no impact on operating results from the
adoption of this Standard.
Financial Accounting Standards 131 - Disclosures about Segments of an Enterprise
and Related Information establishes standards for related disclosures about
products and services, geographic areas, and major customers. The Company will
be required to adopt this Standard effective January 1, 1998. As the Standard
addresses reporting and disclosure issues only, there will be no impact on
operating results from adoption of this Standard.
22
<PAGE>
CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Marco Island, Florida
Audited Consolidated Financial Statements
December 31, 1997 and 1996 and For the Years Then Ended
(Together with Independent Auditors' Report)
23
<PAGE>
Independent Auditors' Report
Board of Directors
Citizens Community Bancorp, Inc.
Marco Island, Florida:
We have audited the accompanying consolidated balance sheets of Citizens
Community Bancorp, Inc. and Subsidiaries (the "Company") at December 31, 1997
and 1996, and the related consolidated statements of operations, changes in
stockholders' equity, and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Company at
December 31, 1997 and 1996, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
/s/HACKER, JOHNSON, COHEN & GRIEB PA
- ------------------------------------
HACKER, JOHNSON, COHEN & GRIEB PA
Tampa, Florida
February 6, 1998
24
<PAGE>
<TABLE>
<CAPTION>
CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
At December 31,
---------------
1997 1996
---- ----
<S> <C> <C>
Assets
Cash and due from banks.............................................................. $ 3,153,577 1,353,777
Federal funds sold................................................................... 9,057,000 6,688,000
---------- ----------
Cash and cash equivalents.............................................. 12,210,577 8,041,777
Securities held to maturity.......................................................... 2,498,614 2,240,290
Loans, net of allowance for loan losses of $298,000 and $145,000..................... 26,420,149 12,115,911
Premises and equipment, net.......................................................... 2,845,997 2,293,140
Accrued interest receivable and other assets......................................... 308,152 132,406
Deferred income taxes................................................................ 138,043 204,000
---------- ----------
Total assets........................................................... $ 44,421,532 25,027,524
========== ==========
Liabilities and Stockholders' Equity
Liabilities:
Demand deposits.................................................................. 3,153,135 2,366,487
Savings and NOW deposits......................................................... 16,300,813 8,670,357
Money-market deposits............................................................ 1,302,296 417,775
Time deposits.................................................................... 16,182,123 6,430,485
---------- ----------
Total deposits......................................................... 36,938,367 17,885,104
Official checks.................................................................. 473,521 579,703
Mortgage payable................................................................. - 525,000
Accrued interest payable and other liabilities................................... 238,886 73,534
---------- ----------
Total liabilities...................................................... 37,650,774 19,063,341
---------- ----------
Commitments (Note 7)
Stockholders' Equity:
Preferred stock, $.01 value, 2,000,000 shares authorized,
none issued or outstanding.................................................. - -
Common stock, $.01 par value 8,000,000 shares authorized
and 1,571,624 and 707,610 shares issued and outstanding..................... 15,716 7,076
Additional paid-in capital....................................................... 7,010,515 6,322,086
Accumulated deficit.............................................................. (255,473) (364,979)
----------- ----------
Total stockholders' equity............................................. 6,770,758 5,964,183
---------- ----------
Total liabilities and stockholders' equity............................. $ 44,421,532 25,027,524
========== ==========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
25
<PAGE>
<TABLE>
<CAPTION>
CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
Year Ended December 31,
-----------------------
1997 1996
---- ----
<S> <C> <C>
Interest income:
Loans ........................................................................ $ 1,913,828 322,538
Securities..................................................................... 140,545 118,531
Federal funds sold............................................................. 468,404 254,864
Deposits in banks.............................................................. - 43,863
----------- -------
Total interest income................................................... 2,522,777 739,796
----------- -------
Interest expense:
Deposits....................................................................... 1,197,823 276,691
Other ........................................................................ 9,573 6,182
----------- --------
Total interest expense.................................................. 1,207,396 282,873
----------- -------
Net interest income................................................................ 1,315,381 456,923
Provision for loan losses.......................................................... 153,000 145,000
----------- -------
Net interest income after provision for loan losses..................... 1,162,381 311,923
----------- -------
Noninterest income:
Gain on sale of loans.......................................................... 68,476 -
Other service charges and fees................................................. 176,974 57,412
Other ........................................................................ 27,652 12,297
----------- --------
Total noninterest income................................................ 273,102 69,709
----------- --------
Noninterest expense:
Compensation and benefits..................................................... 641,693 332,124
Occupancy and equipment........................................................ 167,755 153,548
Advertising.................................................................... 31,917 20,491
Organizational expenses........................................................ - 100,079
Professional fees.............................................................. 18,108 35,257
Office supplies................................................................ 30,120 68,982
Data processing................................................................ 62,195 33,765
Other ........................................................................ 308,232 170,681
----------- -------
Total noninterest expense............................................... 1,260,020 914,927
----------- -------
Earnings (loss) before income taxes (benefit)...................................... 175,463 (533,295)
Income taxes (benefit).................................................. 65,957 (191,000)
----------- -------
Net earnings (loss)................................................................ $ 109,506 (342,295)
=========== =======
Earnings (loss) per share:
Basic................................................................... $ .07 (.26)
=========== ========
Diluted................................................................. $ .07 (.26)
=========== ========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
26
<PAGE>
<TABLE>
<CAPTION>
CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity
Common Stock
-----------------------------------
Number Additional Total
Preferred of Paid-In Accumulated Stockholders'
Stock Shares Amount Capital Deficit Equity
----- ------ ------ ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995........... $ 21,000 - - - (22,684) (1,684)
Redemption of 210 shares of
preferred stock................... (21,000) - - - - (21,000)
Issuance of 707,610 shares of
common stock...................... - 707,610 7,076 6,322,086 - 6,329,162
Net loss ............................ - - - - (342,295) (342,295)
---------- ---------- ------ --------- ------- ---------
Balance at December 31, 1996........... - 707,610 7,076 6,322,086 (364,979) 5,964,183
Issuance shares of common
stock at $9.00.................... - 77,452 774 689,545 - 690,319
Two-for-one stock split on
December 15, 1997................. - 785,062 7,851 (7,851) - -
Issuance of shares at $4.50............ - 1,500 15 6,735 - 6,750
Net earnings........................... - - - - 109,506 109,506
----------------------- ------ --------- ------- ---------
Balance at December 31, 1997........... $ - 1,571,624 15,716 7,010,515 (255,473) 6,770,758
========== ========= ====== ========= ======= =========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
27
<PAGE>
<TABLE>
<CAPTION>
CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Year Ended December 31,
-----------------------
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss)............................................................ $ 109,506 (342,295)
Adjustments to reconcile net earnings (loss) to net cash used in
operating activities:
Depreciation.............................................................. 82,818 73,610
Provision for loan losses................................................. 153,000 145,000
Provision (credit) for deferred income taxes.............................. 65,957 (191,000)
Amortization of loan fees, premiums and discounts......................... (148,005) (19,340)
(Increase) decrease in accrued interest receivable and other assets....... (175,746) 14,592
Loans originated for sale................................................. (4,687,283) -
Sale of loans originated for sale......................................... 4,755,759 -
Gain on sale of loans..................................................... (68,476) -
Increase in accrued interest payable and other liabilities................ 165,352 24,503
----------- -----------
Net cash provided by (used in) operating activities.............. 252,882 (294,930)
----------- -----------
Cash flows from investing activities:
Purchase of securities held to maturity........................................ (1,750,000) (5,220,309)
Maturities of securities held to maturity...................................... 1,500,000 3,000,000
Net increase in loans.......................................................... (14,317,557) (12,261,552)
Purchase of premises and equipment............................................. (635,675) (1,163,961)
----------- -----------
Net cash used in investing activities............................ (15,203,232) (15,645,822)
------------ -----------
Cash flows from financing activities:
Net increase in demand, savings, NOW and money-market deposits................. 9,301,625 11,454,619
Net increase in time deposits.................................................. 9,751,638 6,430,485
Net (decrease) increase in official checks..................................... (106,182) 579,703
Repayment of advances from organizers.......................................... - (239,000)
Redemption of preferred stock.................................................. - (21,000)
Sale of common stock........................................................... 697,069 6,329,162
Payment of mortgage payable.................................................... (525,000) (593,806)
----------- ------------
Net cash provided by financing activities........................ 19,119,150 23,940,163
---------- -----------
Net increase in cash and cash equivalents.......................................... 4,168,800 7,999,411
Cash and cash equivalents at beginning of year..................................... 8,041,777 42,366
---------- -----------
Cash and cash equivalents at end of year........................................... $12,210,577 8,041,777
========== ===========
Supplemental disclosure of cash flow information: Cash paid during the year for:
Interest ................................................................. $ 1,093,507 233,273
========== ===========
Income taxes.............................................................. $ - -
=========== ===========
Noncash transactions-
Issuance of mortgage payable for acquisition of property.................. $ - 525,000
============== ===========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
28
<PAGE>
CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the Years Ended December 31, 1997 and 1996
(1) Summary of Significant Accounting Policies
Organization. Citizens Community Bancorp, Inc. (the "Holding Company") was
incorporated on May 24, 1995. The Holding Company owns 100% of the
outstanding common stock of Citizens Community Bank of Florida (the
"Bank") and 100% of Citizens Financial Corp. ("Citizens Financial")
(collectively the "Company"). The Holding Company was organized
simultaneously with the Bank and its primary business is the ownership
and operation of the Bank and Citizens Financial. The Bank is a Florida
state-chartered commercial bank and is insured by the Federal Deposit
Insurance Corporation. The Bank opened for business on March 8, 1996
and provides community banking services to businesses and individuals
in Collier County, Florida. Citizens Financial was formed and commenced
business as a mortgage broker in 1997.
Basis of Presentation. The accompanying consolidated financial statements of
the Company include the accounts of the Holding Company, the Bank and
Citizens Financial. All significant intercompany accounts and
transactions have been eliminated in consolidation. The accounting and
reporting practices of the Company conform to generally accepted
accounting principles and to general practices within the banking
industry.
Estimates. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from those estimates.
Securities Held to Maturity. United States government treasury and agency
securities for which the Company has the positive intent and ability to hold
to maturity are reported at cost, adjusted for amortization of premiums and
accretion of discounts which are recognized in interest income using the
interest method over the period to maturity.
Loans Held for Sale. Mortgage loans originated and intended for sale in the
secondary market are carried at the lower of cost or estimated market
value in the aggregate. At December 31, 1997 and 1996 there were no
loans held for sale.
Loans Receivable. Loans receivable that management has the intent and
ability to hold for the foreseeable future or until maturity or pay-off
are reported at their outstanding principal adjusted for any
charge-offs, the allowance for loan losses, and any deferred fees or
costs on originated loans and unamortized premiums or discounts on
purchased loans.
Loan origination fees and certain direct origination costs are
capitalized and recognized as an adjustment of the yield of the related
loan.
The accrual of interest on impaired loans is discontinued when, in
management's opinion, the borrower may be unable to meet payments as
they become due. When interest accrual is discontinued, all unpaid
accrued interest is reversed. Interest income is subsequently
recognized only to the extent cash payments are received.
The allowance for loan losses is increased by charges to income and
decreased by charge-offs (net of recoveries). Management's periodic
evaluation of the adequacy of the allowance is based on the Company's
past loan loss experience, known and inherent risks in the portfolio,
adverse situations that may affect the borrower's ability to repay, the
estimated value of any underlying collateral, and current economic
conditions.
29
<PAGE>
CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(1) Summary of Significant Accounting Policies, Continued
Premises and Equipment. Premises and equipment are stated at cost less
accumulated depreciation. Depreciation expense is computed on the
straight-line basis over the estimated useful life of each type of asset.
Stock-Based Compensation. Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation" ("Statement 123")
establishes a "fair value" based method of accounting for stock-based
compensation plans and encourages all entities to adopt that method of
accounting for all of their employee stock compensation plans. However,
it also allows an entity to continue to measure compensation cost for
those plans using the intrinsic value based method of accounting
prescribed by APB Opinion No. 25, "Accounting for Stock Issued to
Employees" (Opinion 25). The Company has elected to follow Opinion 25
and related interpretations in accounting for its employee stock
options. Statement 123 requires the disclosure of proforma net earnings
and earnings per share determined as if the Company accounted for its
employee stock options under the fair value method of that Statement.
Income Taxes. Deferred tax assets and liabilities are reflected at currently
enacted income tax rates applicable to the period in which the deferred
tax assets or liabilities are expected to be realized or settled. As
changes in tax laws or rates are enacted, deferred tax assets and
liabilities are adjusted through the provision for income taxes.
Off-Balance-Sheet Instruments. In the ordinary course of business the
Company has entered into off-balance-sheet financial instruments
consisting of commitments to extend credit. Such financial instruments
are recorded in the financial statements when they are funded.
Advertising. The Company expenses all media advertising as incurred.
Fair Values of Financial Instruments. The following methods and assumptions
were used by the Company in estimating fair values of financial
instruments disclosed herein:
Cash and Cash Equivalents. The carrying amounts of cash and cash
equivalents approximate their fair value.
Securities Held to Maturity. Fair values for securities are based on
quoted market prices, where available. If quoted market prices are not
available, fair values are based on quoted market prices of comparable
instruments.
Loans. For variable-rate loans that reprice frequently and have no
significant change in credit risk, fair values are based on carrying
values. Fair values for certain fixed-rate mortgage (e.g. one-to-four
family residential), commercial real estate and commercial loans are
estimated using discounted cash flow analyses, using interest rates
currently being offered for loans with similar terms to borrowers of
similar credit quality.
Deposit Liabilities. The fair values disclosed for demand, NOW,
money-market and savings deposits are, by definition, equal to the
amount payable on demand at the reporting date (that is, their carrying
amounts). Fair values for fixed-rate certificates of deposit are
estimated using a discounted cash flow calculation that applies
interest rates currently being offered on certificates to a schedule of
aggregated expected monthly maturities on time deposits.
Accrued Interest. The carrying amounts of accrued interest approximate
their fair values.
Off-Balance-Sheet Instruments. Fair values for off-balance-sheet
lending commitments are based on fees currently charged to enter into
similar agreements, taking into account the remaining terms of the
agreements and the counterparties' credit standing.
30
<PAGE>
CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(1) Summary of Significant Accounting Policies, Continued
Earnings (Loss) Per Share. Earnings (loss) per share ("EPS") of common stock
has been computed on the basis of the weighted-average number of shares
of common stock outstanding. For purposes of calculating diluted EPS
because there is no active trading market for the Company's common
stock, the average book value per share was used. For 1997 and 1996,
outstanding warrants and stock options were not dilutive. The weighted
average number of shares outstanding in 1997 and 1996 were 1,558,457
and 1,331,624, respectively.
Future Accounting Requirements. Financial Accounting Standards 130 -
Reporting Comprehensive Income establishes standards for reporting
comprehensive income. The Standard defines comprehensive income as the
change in equity of an enterprise except those resulting from
stockholder transactions. All components of comprehensive income are
required to be reported in a new financial statement that is displayed
with equal prominence as existing financial statements. The Company
will be required to adopt this Standard effective January 1, 1998. As
the Statement addresses reporting and presentation issues only, there
will be no impact on operating results from the adoption of this
Standard.
Financial Accounting Standards 131 - Disclosures about Segments of an
Enterprise and Related Information establishes standards for related
disclosures about products and services, geographic areas, and major
customers. The Company will be required to adopt this Standard
effective January 1, 1998. As the Standard addresses reporting and
disclosure issues only, there will be no impact on operating results
from adoption of this Standard.
(2) Securities Held to Maturity
Securities have been classified as held to maturity, in accordance with
management's intent. The carrying amount of securities and their
approximate fair values are as follows:
<TABLE>
<CAPTION>
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- ----
<S> <C> <C> <C> <C>
December 31, 1997:
U.S. Treasuries................... $ 249,786 56 - 249,842
U.S. Government agencies.......... 2,248,828 - (1,410) 2,247,418
--------- ------ ----- ---------
$ 2,498,614 56 (1,410) 2,497,260
========= ====== ===== =========
December 31, 1996:
U.S. Treasuries................... 1,743,345 10,069 (2,251) 1,751,163
U.S. Government agencies.......... 496,945 - (5,079) 491,866
--------- ------ ----- ---------
$ 2,240,290 10,069 (7,330) 2,243,029
========= ====== ===== =========
</TABLE>
There were no sales of securities in 1997 or 1996.
<TABLE>
<CAPTION>
The scheduled maturities of securities at December 31, 1997 are as follows:
Amortized Fair
Cost Value
--------- -----
<S> <C> <C>
Due in one or less.......................................................... $ 998,614 998,200
Due after one through five years............................................. 1,500,000 1,499,060
--------- ---------
$ 2,498,614 2,497,260
========= =========
</TABLE>
31
<PAGE>
CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(3) Loans
The components of loans are as follows:
<TABLE>
<CAPTION>
At December 31,
---------------
1997 1996
---- ----
<S> <C> <C>
Commercial real estate.................................................... $ 9,422,955 3,757,335
Residential real estate................................................... 7,260,686 4,384,301
Commercial................................................................ 7,710,001 3,814,584
Consumer.................................................................. 2,261,622 305,332
---------- ----------
26,655,264 12,261,552
Add (Subtract):
Deferred costs (fees), net.............................................. 62,885 (641)
Allowance for loan losses............................................... (298,000) (145,000)
----------- -----------
Loans, net................................................................ $ 26,420,149 12,115,911
========== ==========
An analysis of the change in the allowance for loan losses follows:
Year Ended December 31,
1997 1996
---- ----
<S> <C> <C>
Beginning balance......................................................... $ 145,000 -
Provision for loan losses................................................. 153,000 145,000
------- -------
$ 298,000 145,000
======= =======
The Company had no impaired loans in 1997 or 1996.
</TABLE>
32
<PAGE>
CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
<TABLE>
<CAPTION>
(4) Premises and Equipment
A summary of premises and equipment follows:
At December 31,
---------------
1997 1996
---- ----
<S> <C> <C>
Land.................................................................. $ 931,056 931,056
Bank premises......................................................... 1,581,383 536,576
Construction in progress.............................................. - 696,276
Furniture, fixtures and equipment..................................... 442,775 163,566
--------- ---------
Total, at cost.................................................... 2,955,214 2,327,474
Less accumulated depreciation..................................... 109,217 34,334
---------- ---------
Premises and equipment, net....................................... $ 2,845,997 2,293,140
========= =========
</TABLE>
(5) Deposits
The aggregate amount of certificates of deposit with a minimum denomination
of $100,000, was approximately $4,019,000 and $1,467,000 at December
31, 1997 and 1996, respectively.
<TABLE>
<CAPTION>
A schedule of maturities of certificates of deposit follows:
Year Ending
December 31, Amount
------------ ------
<S> <C> <C>
1998.............................................................. $ 11,532,779
1999.............................................................. 4,261,691
2000.............................................................. 285,653
2001.............................................................. -
2002 and thereafter............................................... 102,000
-----------
$ 16,182,123
</TABLE>
(6) Mortgage Payable
At December 31, 1996, the Company had an 8% note payable collateralized by
a mortgage on a future branch site. The note was payable based on a 20
year amortization with a balloon payment due 2001. This note was repaid
during 1997.
33
<PAGE>
CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(7) Financial Instruments
The Company is a party to financial instruments with off-balance-sheet risk
in the normal course of business to meet the financing needs of its
customers. These financial instruments are commitments to extend credit
and may involve, to varying degrees, elements of credit and
interest-rate risk in excess of the amount recognized in the balance
sheet. The contract amounts of these instruments reflect the extent of
involvement the Company has in these financial instruments.
The Company's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit is
represented by the contractual amount of those instruments. The Company uses
the same credit policies in making commitments as it does for
on-balance-sheet instruments.
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Since some of the commitments are
expected to expire without being drawn upon, the total commitment amounts do
not necessarily represent future cash requirements. The Company evaluates
each customer's credit worthiness on a case-by-case basis. The amount of
collateral obtained if deemed necessary by the Company upon extension of
credit is based on management's credit evaluation of the counterparty.
The estimated fair values of the Company's financial instruments were as
follows (in thousands):
<TABLE>
<CAPTION>
At December 31, 1997 At December 31, 1996
-------------------- --------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
------ ----- ------ -----
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents..................... $ 12,211 12,211 8,042 8,042
Securities held to maturity................... 2,499 2,497 2,241 2,243
Loans receivable.............................. 26,420 26,681 12,116 12,116
Accrued interest receivable................... 220 220 101 101
Financial liabilities:
Deposit liabilities........................... 36,938 37,053 17,885 17,921
A summary of the notional amounts of the Company's financial instruments,
which approximates market value with off balance sheet risk at December
31, 1997 follows (in thousands):
<S> <C>
Unfunded loan commitments at variable rates............................. $ 997
======
Available lines of credit............................................... $ 5,110
=====
</TABLE>
34
<PAGE>
CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(8) Credit Risk
The Company grants the majority of its loans to borrowers throughout
Collier County, Florida. Although the Company has a diversified loan
portfolio, a significant portion of its borrowers' ability to honor
their contracts is dependent upon the economy in Collier County,
Florida.
(9) Income Taxes
The income tax provision (benefit) consisted of the following:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1997 1996
---- ----
Deferred:
<S> <C> <C>
Federal................................................................... $ 56,317 (163,000)
State..................................................................... 9,640 (28,000)
------ -------
Total deferred provision (credit)...................................... $ 65,957 (191,000)
====== =======
</TABLE>
The reasons for the differences between the statutory federal income tax
rate and the effective tax rate are summarized as follows:
<TABLE>
<CAPTION>
1997 1996
------------------ ------------------
% of % of
Pretax Pretax
Amount Earnings Amount Loss
------ -------- ------ ----
Income tax benefit at statutory Federal
<S> <C> <C> <C> <C>
income tax rate...................................... $ 59,657 34.0% $(181,320) (34.0)%
Increase (decreases) resulting from
State taxes, net of federal tax benefit.............. 6,362 3.6 (18,480) (3.4)
Other................................................ (62) - 8,800 1.6
-------- ------- ------- ----
$ 65,957 37.6% $(191,000) (35.8)%
====== ==== ======= ====
(continued)
</TABLE>
35
<PAGE>
CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(9) Income Taxes, Continued
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are
presented below.
<TABLE>
<CAPTION>
At December 31,
---------------
1997 1996
---- ----
<S> <C> <C>
Deferred tax assets:
Allowance for loan losses........................................... $ - 45,000
Contributions....................................................... 1,451 1,000
Net operating loss carryforward..................................... 154,500 158,000
Organization and start-up costs..................................... 33,753 -
------- -------
Total deferred tax asset.......................................... 189,704 204,000
------- -------
Deferred tax liabilities:
Depreciation........................................................ 25,522 -
Accrual to cash adjustment.......................................... 24,154 -
Allowance for loan losses........................................... 1,985 -
------- ------
Total deferred tax liabilities.................................... 51,661 -
------- ------
Net deferred income taxes......................................... $ 138,043 204,000
======= =======
</TABLE>
At December 31, 1997, the Company had a net operating loss carryforward
for federal and state income tax purposes of approximately $411,000 to
offset future taxable income, which expires in the year 2011.
(10) Stock Options
The Company established an Incentive Stock Option plan for officers and
employees and reserved 200,000 shares of common stock for the plan. At
December 31, 1997, 36,600 shares remain available for grant. The
options vest at the rate of 20% per year beginning one year after
grant.
<TABLE>
<CAPTION>
Range
of Per Weighted-
Number Share Average Aggregate
of Option Per Share Option
Shares Price Price Price
------ ----- ----- -----
<S> <C> <C> <C> <C>
Outstanding at December 31, 1995.................... - $ - - -
Options granted..................................... 51,000 4.50 4.50 229,500
------ -------
Outstanding at December 31, 1996.................... 51,000 4.50 4.50 229,500
Options granted..................................... 125,000 4.50-6.00 5.18 648,090
Options terminated.................................. (12,600) 4.50 4.50 (56,700)
Options exercised................................... (8,000) 4.50 4.50 (36,000)
------- -------
Outstanding at December 31, 1997.................... 155,400 $ 4.50-6.00 5.05 784,890
======= ========= ==== =======
</TABLE>
The weighted-average remaining contractual of the outstanding stock options
at December 31, 1997 and 1996 was 114 months and 76.8 months,
respectively.
(continued)
36
<PAGE>
CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(10) Stock Options, Continued
These options are exercisable as follows:
Year Ending
-----------
1998......................................... 43,800
1999......................................... 28,600
2000......................................... 28,600
2001......................................... 25,800
2002......................................... 28,600
-------
155,400
=======
In order to calculate the fair value of the options, it was assumed that the
risk-free interest rate was 6.0%, there would be no dividends paid by the
Company over the exercise period, the expected life of the options would
be the entire exercise period and stock volatility would be zero due to
the lack of an active market for the stock. The following information
pertains to the fair value of the options granted to purchase common
stock:
<TABLE>
<CAPTION>
1997 1996
---- ----
Weighted-average grant-date fair value of options
<S> <C> <C>
issued during the year......................................... $ 168,041 59,505
======= ======
</TABLE>
Forpurposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The
Company's pro forma net earnings and earnings per share were as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Net earnings (loss) - as reported ................................... $ 109,506 (342,295)
Net earnings (loss) - pro forma...................................... 97,605 (342,295)
Basic earnings (loss) per share - as reported........................ .07 (.26)
Basic earnings (loss) per share - pro forma.......................... .06 (.26)
</TABLE>
(11) Stockholders' Equity
TheBoard of Directors voted to split the common shares on a two-for-one
basis effective December 15, 1997. All share amounts reflect this split.
TheBank is subject to certain restrictions on the amount of dividends that
it may declare without prior regulatory approval. At December 31, 1997,
the Bank had no amounts available for dividends.
As of December 31, 1996, the Company had sold 1,415,220 shares of common
stock for an aggregate of $6,368,490. The Company incurred $39,328 in
offering expenses relating to their public offering of the Company's
common stock and warrants. Offering expenses were deducted from the
proceeds received from the sale of common stock and warrants.
During the initial offering period shares were offered in units with a unit
consisting of one share of common stock and one warrant. Each warrant
entitles the holder thereof to purchase one share of additional common
stock for $4.50 per share during the 24 month period ending June 16,
1998. There were 670,000 warrants issued and as of December 31, 1997
there were 642,775 warrants outstanding entitling the holders to purchase
642,775 shares of the Company's stock.
(continued)
37
<PAGE>
CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(12) Regulatory Matters
TheHolding Company and the Bank are subject to various regulatory capital
requirements administered by various regulatory banking agencies. Failure
to meet minimum capital requirements can initiate certain mandatory and
possibly additional discretionary actions by regulators that, if
undertaken, could have a direct material effect on the Company's
financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet
specific capital guidelines that involve quantitative measures of the
Bank's assets, liabilities, and certain off-balance-sheet items as
calculated under regulatory accounting practices. The Bank's capital
amounts and classification are also subject to qualitative judgments by
the regulators about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the
table below) of total and Tier I capital (as defined in the regulations)
to risk- weighted assets (as defined), and of Tier I capital (as defined)
to average assets (as defined). Management believes, as of December 31,
1997, that the Company meets all capital adequacy requirements to which
it is subject.
As of December 31, 1997, the most recent notification from the regulatory
authorities categorized the Bank as well capitalized under the regulatory
framework for prompt corrective action. To be categorized as well
capitalized the Bank must maintain minimum total risk-based, Tier I
risk-based, and Tier I leverage ratios as set forth in the table. There are
no conditions or events since that notification that management believes
have changed the Bank's category. The Bank's actual capital amounts and
ratios are also presented in the table (dollars in thousands).
<TABLE>
<CAPTION>
To Be Well
Capitalized Under
Minimum the Provisions
For Capital of Prompt and
Actual Adequacy Purposes: Corrective Action
----------------------- ---------------------- ------------------------
Amount % Amount % Amount %
------ ------ ------ ------ ------ ------
As of December 31, 1997:
Total capital (to Risk
<S> <C> <C> <C> <C> <C> <C>
Weighted Assets).......... $ 4,643 17.67% $ 2,102 8.00% $ 2,627 10.0%
Tier I Capital (to Risk
Weighted Assets).......... 4,354 16.57 1,051 4.00 1,576 6.0
Tier I Capital
(to Average Assets)....... 4,354 10.67 1,633 4.00 2,041 5.0
As of December 31, 1996:
Total capital (to Risk
Weighted Assets).......... 3,890 30.80 1,011 8.00 1,264 10.0
Tier I Capital (to Risk
Weighted Assets).......... 3,747 29.65 505 4.00 758 6.0
Tier I Capital
(to Average Assets)....... 3,747 19.46 770 4.00 963 5.0
</TABLE>
(continued)
38
<PAGE>
CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(13) Parent Company Only Financial Information
The Holding Company's financial information is as follows:
<TABLE>
<CAPTION>
Condensed Balance Sheets
(In thousands)
At December 31,
---------------
1997 1996
---- ----
Assets
<S> <C> <C>
Cash............................................................................. $ 271 1,313
Loans receivable................................................................. 1,261 661
Investment in subsidiary......................................................... 4,458 3,747
Premises and equipment, net...................................................... 785 754
Other assets..................................................................... - 23
-------- -----
Total assets................................................................. $ 6,775 6,498
===== =====
Liabilities and Stockholders' Equity
Mortgage payable................................................................. - 525
Liabilities...................................................................... 4 9
Stockholders' equity............................................................. 6,771 5,964
----- -----
Total liabilities and stockholders' equity................................... $ 6,775 6,498
===== =====
Condensed Statements of Operations
(In thousands)
Year Ended
December 31,
------------
1997 1996
---- ----
Revenues......................................................................... $ 162 69
Expenses......................................................................... (146) (78)
--- ---
Income (loss) before income (loss) of subsidiary............................. 16 (9)
Income (loss) of subsidiary.................................................. 94 (333)
----- ---
Net income (loss)............................................................ $ 110 (342)
=== ===
</TABLE>
(continued)
39
<PAGE>
CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(13) Parent Company Only Financial Information, Continued
<TABLE>
<CAPTION>
Condensed Statements of Cash Flows
(In thousands)
Year Ended
December 31,
------------
1997 1996
---- ----
Cash flows from operating activities:
<S> <C> <C>
Net earnings (loss)............................................................. $ 110 (342)
Adjustments to reconcile net earnings (loss) to net cash provided
by operating activities:
Equity in undistributed (earnings) loss of subsidiaries..................... (94) 333
Net decrease in other assets................................................ 23 137
Decrease in other liabilities............................................... (5) (40)
Depreciation................................................................ 17 3
------ -----
Net cash provided by operating activities................................... 51 91
------ -----
Cash flows from investing activities:
Purchase of property and equipment, net of transfer to subsidiary............... (48) 446
Net increase in loans receivable................................................ (600) (661)
------ -----
Net cash used in investing activities....................................... (648) (215)
------ -----
Cash flows from financing activities:
Repayment of mortgage note payable.............................................. (525) (594)
Net proceeds from issuance of common stock...................................... 697 6,329
Retire preferred stock.......................................................... - (21)
Repayment of advances from organizers........................................... - (239)
Investment in subsidiary........................................................ (617) (4,080)
------ -----
Net cash provided by financing activities................................... (445) 1,395
------- -----
Net (decrease) increase in cash...................................................... (1,042) 1,271
Cash at beginning of the year........................................................ 1,313 42
----- ------
Cash at end of year.................................................................. $ 271 1,313
===== =====
</TABLE>
40
<PAGE>
DIRECTORS AND OFFICERS
CITIZENS COMMUNITY BANCORP, INC.
OFFICERS
Richard Storm, Jr.
Chairman and Chief Executive Officer & President
James S. Hagedorn
Vice Chairman
Stephen A. McLaughlin
Vice President
Secretary/Treasurer
Diane M. Beyer
Assistant Secretary
Jack Wolf
Assistant Treasurer
Bruce G. Fedor
Vice President General Counsel
DIRECTORS
Richard Storm, Jr.
Chairman
President Storm & Company
President Loanstar Capital
Joel M. Cox, Sr.
Vice President and Director of Cox's Insurance Agency
Stephen A. McLaughlin
Vice President-Secretary/Treasurer
James S. Hagedorn
Vice Chairman
President Waterside Properties
Diane M. Beyer
Human Resources Consultant
Thomas B. Garrision
Network Technology Manager for Barron-Collier
Companies
Dennis J. Lynch
Owner and President of Dennis J. Lynch and Associates, a
commercial real estate sales agency
Jack Wolf
Practicing Dentist in Naples, Florida
Louis Smith
Owner of Pat's Hallmark Card Store
41
<PAGE>
CITIZENS COMMUNITY BANK OF FLORIDA
OFFICERS
Michael A. Micallef, Jr.
President and Chief Executive Officer
Joel M. Cox, Sr.
Chairman
James S. Hagedorn
Vice Chairman
David E. Klein
Executive Vice President
Bruce G. Fedor
Vice President & Compliance Officer
Stephen A. McLaughlin
Vice President, Secretary to the Board
Sharon K. Ginn
Vice President-Cashier
Scott Dupes
Vice President/Branch Manager - East Trail
Jamie Greusel
Assistant Secretary
DIRECTORS
Joel M. Cox, Sr.
Chairman
James S. Hagedorn
Vice Chairman
Michael A. Micallef, Jr.
President
Stephen A. McLaughlin
Secretary
Diane M. Beyer
Human Resources Consultant
Thomas B. Garrison
Network Technology Manager for Barron-Collier
Companies
Jamie B. Greusel
Partner - Berry & Greusel
Attorneys
Dennis J. Lynch
Owner and President of Dennis J. Lynch and Associates, a
commercial real estate sales agency
Linda Sandlin
Realtor - REMAX
Richard Storm, Jr.
President Storm & Company
President Loanstar Capital
Robert Marks, CLU
Retired
42
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 3,154
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 9,057
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 2,499
<INVESTMENTS-MARKET> 2,497
<LOANS> 26,718
<ALLOWANCE> 298
<TOTAL-ASSETS> 44,422
<DEPOSITS> 36,938
<SHORT-TERM> 0
<LIABILITIES-OTHER> 713
<LONG-TERM> 0
0
0
<COMMON> 16
<OTHER-SE> 6,755
<TOTAL-LIABILITIES-AND-EQUITY> 44,422
<INTEREST-LOAN> 1,914
<INTEREST-INVEST> 141
<INTEREST-OTHER> 468
<INTEREST-TOTAL> 2,523
<INTEREST-DEPOSIT> 1,198
<INTEREST-EXPENSE> 10
<INTEREST-INCOME-NET> 1,315
<LOAN-LOSSES> 153
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,260
<INCOME-PRETAX> 175
<INCOME-PRE-EXTRAORDINARY> 175
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 110
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
<YIELD-ACTUAL> 4.20
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 145
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 298
<ALLOWANCE-DOMESTIC> 298
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
