- --------------------------------------------------------------------------------
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
X Quarterly report under Section 13 or 15(d) of the
- ---- Securities Exchange Act of 1934
For the quarterly period ended September 30, 1999
Transition report under Section 13 or 15(d) of the Exchange Act
- ----
For the transition period from to
----------- ------------
Commission file number 33-98090
--------
CITIZENS COMMUNITY BANCORP, INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
Florida 65-0614044
- ---------------------------- ----------------
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
650 East Elkcam Circle
Marco Island, Florida 34145
----------------------------------------
(Address of Principal Executive Offices)
(941) 389-1800
------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
---------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year, if Changed
Since Last Report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 12, 13 or 15(d) of the Exchange Act during the past 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
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
Common stock, par value $.01 per share 3,472,543
- -------------------------------------- ----------------------------
(class) Outstanding at September 30, 1999
- --------------------------------------------------------------------------------
<PAGE>
CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements Page
Condensed Consolidated Balance Sheets -
September 30, 1999 (unaudited) and December 31, 1998.....................................................2
Condensed Consolidated Statements of Earnings -
Three and Nine Months ended September 30, 1999 and 1998 (unaudited)......................................3
Condensed Consolidated Statement of Stockholders' Equity -
Nine Months ended September 30, 1999 (unaudited).........................................................4
Condensed Consolidated Statements of Cash Flows -
Nine Months ended September 30, 1999 and 1998 (unaudited)................................................5
Notes to Condensed Consolidated Financial Statements (unaudited).........................................6-7
Review By Independent Certified Public Accountants.........................................................8
Report on Review by Independent Certified Public Accountants...............................................9
Item 2. Management's Discussion and Analysis or Plan of Operations.......................................10-15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings..................................................................................16
Item 2. Changes in Securities and Use of Proceeds..........................................................16
Item 5. Other Information..................................................................................16
Item 6. Exhibits and Reports on Form 8-K...................................................................17
SIGNATURES.....................................................................................................18
</TABLE>
-1-
<PAGE>
CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30, December 31,
Assets 1999 1998
---- ----
(unaudited)
<S> <C> <C>
Cash and due from banks........................................................... $ 4,158,948 5,481,992
Federal funds sold and securities purchase under agreements
to resell .................................................................. 10,220,971 19,181,095
------------ ----------
Cash and cash equivalents............................................. 14,379,919 24,663,087
Securities held to maturity....................................................... 13,000,000 8,499,968
Securities available for sale..................................................... 2,769,913 -
Federal Home Loan Bank stock, at cost............................................. 214,900 127,100
Loans, net of allowance for loan losses of $807,462
and $453,211 .............................................................. 71,272,448 44,932,943
Premises and equipment, net....................................................... 4,719,696 3,549,924
Accrued interest receivable and other assets...................................... 682,326 453,104
----------- ----------
Total assets.......................................................... $ 107,039,202 82,226,126
=========== ==========
Liabilities and Stockholders' Equity
Liabilities:
Noninterest-bearing demand deposits........................................... 8,114,049 6,365,180
Savings and NOW deposits...................................................... 32,300,481 33,307,881
Money-market deposits......................................................... 15,152,677 4,010,998
Time deposits .............................................................. 32,178,562 20,306,399
----------- ----------
Total deposits........................................................ 87,745,769 63,990,458
Official checks .............................................................. 1,057,325 697,458
Income taxes payable.......................................................... 53,860 19,850
Accrued interest payable and other liabilities................................ 433,281 293,832
----------- ----------
Total liabilities..................................................... 89,290,235 65,001,598
----------- ----------
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,
3,472,543 and 3,455,039 shares issued and outstanding..................... 34,725 34,550
Additional paid-in capital.................................................... 19,242,566 19,158,862
Accumulated deficit........................................................... (1,522,178) (1,968,884)
Accumulated other comprehensive income (loss)................................. (6,146) -
----------- ----------
Total stockholders' equity............................................ 17,748,967 17,224,528
----------- ----------
Total liabilities and stockholders' equity............................ $ 107,039,202 82,226,126
=========== ==========
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
-2-
<PAGE>
CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
1999 1998 1999 1998
---- ---- ---- ----
(unaudited) (unaudited)
Interest income:
<S> <C> <C> <C> <C>
Loans $1,430,116 791,158 3,710,293 2,272,218
Securities 228,659 159,568 654,762 376,085
Other interest-earning assets 156,066 190,721 481,226 498,737
---------- ---------- ---------- ----------
Total interest income 1,814,841 1,141,447 4,846,281 3,147,040
Interest expense on deposits 755,682 527,604 1,944,807 1,524,627
---------- ---------- ---------- ----------
Net interest income 1,059,159 613,843 2,901,474 1,622,413
Provision for loan losses 103,000 36,500 357,000 107,500
---------- ---------- ---------- ----------
Net interest income after provision for
loan losses 956,159 577,343 2,544,474 1,514,913
---------- ---------- ---------- ----------
Noninterest income:
Service charges and fees 113,485 74,112 315,804 185,148
Other 25,956 43,346 90,725 119,994
---------- ---------- ---------- ----------
Total noninterest income 139,441 117,458 406,529 305,142
---------- ---------- ---------- ----------
Noninterest expense:
Salaries and employee benefits 392,778 283,753 1,077,389 749,779
Occupancy and equipment 119,085 107,074 353,174 274,021
Advertising 38,958 35,559 117,668 85,383
Professional fees 34,812 14,582 118,406 25,696
Office supplies 26,316 27,644 87,164 80,782
Data processing 54,970 41,379 165,391 109,977
Other 93,293 19,934 339,027 185,180
---------- ---------- ---------- ----------
Total noninterest expense 760,212 529,925 2,258,219 1,510,818
---------- ---------- ---------- ----------
Earnings before income taxes 335,388 164,876 692,784 309,237
Income taxes 126,198 61,703 246,078 111,499
---------- ---------- ---------- ----------
Net earnings $ 209,190 103,173 446,706 197,738
========== ========== ========== ==========
Earnings per share:
Basic $ .06 .03 .13 .07
========== ========== ========== ==========
Diluted $ .06 .03 .13 .06
========== ========== ========== ==========
Weighted-average number of shares outstanding:
Basic 3,472,327 3,189,007 3,465,974 2,997,361
========== ========== ========== ==========
Diluted 3,549,897 3,231,857 3,545,901 3,060,656
========== ========== ========== ==========
Dividends per share $ -- -- -- --
========== ========== ========== ==========
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
-3-
<PAGE>
CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Condensed Consolidated Statement of Stockholders' Equity
Nine-Month Period Ended September 30, 1999
<TABLE>
<CAPTION>
Accumulated
Other
Compre-
Common Stock Additional hensive Total
Number of Paid-in Accumulated Income Stockholders'
Shares Amount Capital Deficit (Loss) Equity
------ ------ ------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1998 3,455,039 $ 34,550 19,158,862 (1,968,884) - 17,224,528
----------
Comprehensive income:
Net earnings (unaudited) - - - 446,706 - 446,706
Net change in unrealized
gain on securities
available for sale
(unaudited) - - - - (6,146) (6,146)
------------
Comprehensive income (unaudited) 440,560
Shares issued under stock
option plan (unaudited) 17,504 175 83,704 - - 83,879
---------- --------- ----------- ------------- -------- ------------
Balance at September 30, 1999
(unaudited) 3,472,543 $ 34,725 19,242,566 (1,522,178) (6,146) 17,748,967
========= ====== ========== ========= ===== ==========
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
-4-
<PAGE>
CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
---------------------
1999 1998
---- ----
(unaudited)
Cash flows from operating activities:
<S> <C> <C>
Net earnings $ 446,706 197,738
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation 161,074 107,950
Provision for loan losses 357,000 107,500
Provision for deferred income taxes 37,718 113,581
Net amortization of loan fees, premiums and discounts (156,471) 85,665
Increase in accrued interest receivable and other assets (229,222) (128,084)
Increase in accrued interest payable and
other liabilities 139,449 57,365
Net increase in official checks 359,867 720,700
------------ ----------
Net cash provided by operating activities 1,116,121 1,262,415
----------- ---------
Cash flows from investing activities:
Net increase in loans (26,599,689) (12,764,530)
Purchases of securities available for sale (2,879,927) -
Purchase of securities held to maturity (22,432,064) (8,500,000)
Maturities of securities held to maturity 17,996,627 2,999,806
Principal paydowns of securities available for sale 95,220 -
Purchase of Federal Home Loan Bank stock (87,800) (127,100)
Purchase of premises and equipment (1,330,846) (826,892)
----------- ------------
Net cash used in investing activities (35,238,479) (19,218,716)
---------- ----------
Cash flows from financing activities:
Net increase in deposits 23,755,311 10,077,938
Payment of stock offering costs - (76,745)
Common stock issued 83,879 10,314,809
------------ ----------
Net cash provided by financing activities 23,839,190 20,316,002
---------- ----------
Net (decrease) increase in cash and cash equivalents (10,283,168) 2,359,701
Cash and cash equivalents at beginning of period 24,663,087 12,210,577
---------- ----------
Cash and cash equivalents at end of period $ 14,379,919 14,570,278
========== ==========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 1,819,563 1,466,382
=========== ==========
Income taxes $ 195,000 -
============ ==========
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
-5-
<PAGE>
CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (unaudited)
(1) General. In the opinion of management, the accompanying condensed
consolidated financial statements of Citizens Community Bancorp, Inc.
and Subsidiaries (the "Company") contain all adjustments (consisting
principally of normal recurring accruals) necessary to present fairly
the financial position at September 30, 1999, and the results of
operations for the three-month and nine-month periods ended September
30, 1999 and 1998 and the cash flows for the nine-month periods ended
September 30, 1999 and 1998. The results of operations for the three and
nine months ended September 30, 1999 are not necessarily indicative of
the results to be expected for the full year.
(2) Loan Impairment and Credit Losses. No loans were identified as impaired
at September 30, 1999 or September 30, 1998. The activity in the
allowance for loan losses was as follows:
<TABLE>
<CAPTION>
For the Three For the Nine
Months Ended Months Ended
September 30, September 30,
------------- -------------
1999 1998 1999 1998
---- ---- ---- ----
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Balance at beginning of period $ 707,211 369,000 453,211 298,000
Provision charged to earnings 103,000 36,500 357,000 107,500
Charge-offs (2,749) - (2,749) -
--------- ------- ------- -------
Balance at end of period $ 807,462 405,500 807,462 405,500
======= ======= ======= =======
</TABLE>
(3) Earnings Per Share. Earnings per share ("EPS") of common stock has been
computed on the basis of the weighted-average number of shares of common
stock outstanding. Prior to the public stock offering in April, 1998,
there was no public market for the Company=s common stock. For purposes
of calculating diluted EPS the $7.50 stock offering price is assumed to
be the market price for the three and nine months ended September 30,
1998; for 1999 the calculation is based on actual trading activity. For
the three and nine months ended September 30, 1999 outstanding options
are considered dilutive securities for purposes of calculating diluted
EPS which is computed using the treasury stock method. All per share
amounts reflect the 8% stock dividend effective December 31, 1998. The
following table presents the calculations of EPS (dollars in thousands,
except per share amounts).
<TABLE>
<CAPTION>
For the Three Months Ended September 30,
--------------------------------------------------------------------------------------------------------
1999 1998
--------------------------------------------------------------------------------------------------------
Earnings Shares Per Share Earnings Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- ------ ----------- ------------- ------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS:
Net earnings available
to common stockholders $ 209 3,472,327 $ .06 $ 103 3,189,007 $ .03
=== ===
Effect of dilutive securities-
Incremental shares from
assumed conversion
of options 77,570 42,850
--------- ----------
Diluted EPS:
Net earnings available
to common stockholders
and assumed conversions $ 209 3,549,897 $ .06 $ 103 3,231,857 $ .03
=== ========= === === ========= ===
</TABLE>
(continued)
-6-
<PAGE>
CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (unaudited)
(3) Earnings Per Share, Continued.
<TABLE>
<CAPTION>
For the Nine Months Ended September 30,
---------------------------------------------------------------------------------------
1999 1998
---------------------------------------------------------------------------------------
Earnings Shares Per Share Earnings Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- ------ ----------- ------------- ------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS:
Net earnings available
to common
stockholders $ 447 3,465,974 $ .13 $ 198 2,997,361 $ .07
=== ===
Effect of dilutive securities-
Incremental shares from
assumed conversion
of options 79,927 63,295
--------- ----------
Diluted EPS:
Net earnings available
to common stockholders
and assumed conversions $ 447 3,545,901 $ .13 $ 198 3,060,656 $ .06
=== ========= === === ========= ===
</TABLE>
(4) Regulatory Capital. The Citizens Community Bank of Florida (the primary
operating subsidiary) is required to maintain certain minimum regulatory
capital requirements. The following is a summary at September 30, 1999
of the regulatory capital requirements and the Bank's capital on a
percentage basis:
<TABLE>
<CAPTION>
Ratios of Regulatory
the Bank Requirement
-------- -----------
<S> <C> <C>
Total capital to risk-weighted assets 12.86% 8.00%
Tier I capital to risk-weighted assets 11.76% 4.00%
Tier I capital to total assets - leverage ratio 8.17% 4.00%
</TABLE>
-7-
<PAGE>
CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Review by Independent Certified Public Accountants
Hacker, Johnson, Cohen & Grieb PA, the Company's independent certified public
accountants, have made a limited review of the financial data as of September
30, 1999, and for the three- and nine-month periods ended September 30, 1999 and
1998 presented in this document, in accordance with standards established by the
American Institute of Certified Public Accountants.
Their report furnished pursuant to Article 10 of Regulation S-X is included
herein.
-8-
<PAGE>
Report on Review by Independent Certified Public Accountants
The Board of Directors
Citizens Community Bancorp, Inc.
Marco Island, Florida:
We have reviewed the accompanying condensed consolidated balance sheet of
Citizens Community Bancorp, Inc. and Subsidiaries (the "Company") as of
September 30, 1999, and the related condensed consolidated statements of
earnings for the three- and nine-month periods ended September 30, 1999 and
1998, and the condensed consolidated statement of stockholders' equity for the
nine month period ended September 30, 1999 and cash flows for the nine-month
periods ended September 30, 1999 and 1998. These financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the condensed consolidated financial statements referred to
above for them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 1998, and the
related consolidated statements of operations, stockholders' equity and cash
flows for the year then ended (not presented herein); and in our report dated
January 29, 1999 we expressed an unqualified opinion on those consolidated
financial statements. In our opinion, the information set forth in the
accompanying condensed consolidated balance sheet as of December 31, 1998, is
fairly stated, in all material respects, in relation to the consolidated balance
sheet from which it has been derived.
HACKER, JOHNSON, COHEN & GRIEB PA
Tampa, Florida
October 22, 1999
-9-
<PAGE>
CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis
or Plan of Operations
Comparison of September 30, 1999 and December 31, 1998
Liquidity and Capital Resources
The Company's primary source of cash during the nine months ended September
30, 1999 was from net deposit inflows. Cash was used primarily for loan
originations and for the purchase of securities. At September 30, 1999, the
Company had outstanding commitments to fund existing and new loans of $14.6
million. It is expected that these requirements will be funded from the
sources described above. At September 30, 1999, the Bank exceeded its
regulatory liquidity requirements.
The following table shows selected ratios for the periods ended or at the
dates indicated:
<TABLE>
<CAPTION>
Nine Months
Ended Year Ended
September 30, December 31,
1999 1998
-------------- -------------
<S> <C> <C>
Average equity as a percentage
of average assets............................................... 18.01% 18.91%
Equity to total assets at end of period............................ 16.58% 20.95%
Return on average assets (1)....................................... 0.61% 0.32%
Return on average equity (1)....................................... 3.41% 1.71%
Noninterest expense to average assets (1).......................... 3.10% 3.04%
Nonperforming loans and foreclosed real estate to
total assets at end of period................................... NIL NIL
</TABLE>
(1) Annualized for the nine months ended September 30, 1999.
-10
<PAGE>
CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES
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 yields; (ii) the total dollar
amount of interest expense on interest-bearing liabilities and the resultant
average cost; (iii) net interest income; (iv) interest-rate spread; and (v) net
interest margin (dollar amounts in thousands).
<TABLE>
<CAPTION>
Three Months Ended September 30,
-----------------------------------------------------------------------------
1999 1998
-----------------------------------------------------------------------------
Interest Average Interest Average
Average and Yield/ Average and Yield/
Balance Dividends Rate Balance Dividends Rate
------- --------- ---- ------- --------- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans $ 68,456 1,430 8.29% $ 35,072 791 8.95%
Securities 15,205 229 6.02 10,125 160 6.27
Other interest-earning assets (1) 12,991 156 4.76 11,297 191 6.71
--------- ------ ------- ------
Total interest-earning assets 96,652 1,815 7.45 56,494 1,142 8.02
----- -----
Noninterest-earning assets 9,420 6,491
--------- -------
Total assets $ 106,072 $ 62,985
======= ======
Interest-bearing liabilities:
Savings, NOW and money-market deposit
accounts 46,839 354 3.00 23,519 254 4.28
Time deposits 30,952 402 5.15 19,192 274 5.66
------- ------ ------ ------
Total interest-bearing liabilities 77,791 756 3.86 42,711 528 4.91
------ ------
Noninterest-bearing liabilities 10,644 7,949
Stockholders' equity 17,637 12,325
------- ------
Total liabilities and stockholders' $ 106,072 $ 62,985
======= ======
equity
Net interest income $ 1,059 $ 614
===== ======
Interest-rate spread (2) 3.59% 3.12%
==== ====
Net interest margin (3) 4.35% 4.35%
==== ====
Ratio of average interest-earning assets to
average interest-bearing liabilities 1.24 1.32
==== ====
</TABLE>
(1) Includes federal funds sold, Federal Home Loan Bank stock and
securities purchased under agreements to resell.
(2) Interest-rate spread represents the difference between the average
yield on interest-earning assets and the average rate of
interest-bearing liabilities.
(3) Net interest margin is net interest income divided by average
interest-earning assets.
-11-
<PAGE>
CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES
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 yields; (ii) the total dollar
amount of interest expense on interest-bearing liabilities and the resultant
average cost; (iii) net interest income; (iv) interest-rate spread; and (v) net
interest margin (dollar amounts in thousands).
<TABLE>
<CAPTION>
Nine Months Ended September 30,
---------------------------------------------------------------------------
1999 1998
---------------------------------------------------------------------------
Interest Average Interest Average
Average and Yield/ Average and Yield/
Balance Dividends Rate Balance Dividends Rate
------- --------- ---- ------- --------- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans $ 59,378 3,710 8.35% $ 32,082 2,272 9.47%
Securities 15,327 655 5.71 8,086 376 6.22
Other interest-earning assets (1) 13,592 481 4.73 10,654 499 6.26
------- ------ ------ ------
Total interest-earning assets 88,297 4,846 7.34 50,822 3,147 8.28
----- -----
Noninterest-earning assets 8,680 6,539
------- -------
Total assets $ 96,977 $ 57,361
====== ======
Interest-bearing liabilities:
Savings, NOW and money-market deposit
accounts 43,417 926 2.85 23,842 701 3.93
Time deposits 25,775 1,019 5.29 19,173 824 5.75
------ ----- ------ ------
Total interest-bearing liabilities 69,192 1,945 3.76 43,015 1,525 4.74
----- -----
Noninterest-bearing liabilities 10,323 4,823
Stockholders' equity 17,462 9,523
------ -------
Total liabilities and stockholders' $ 96,977 $ 57,361
====== ======
equity
Net interest income $ 2,901 $ 1,622
===== =====
Interest-rate spread (2) 3.58% 3.54%
==== ====
Net interest margin (3) 4.39% 4.26%
==== ====
Ratio of average interest-earning assets to
average interest-bearing liabilities 1.28 1.18
==== ====
</TABLE>
(1) Includes federal funds sold, Federal Home Loan Bank stock and
securities purchased under agreements to resell.
(2) Interest-rate spread represents the difference between the average
yield on interest-earning assets and the average rate of
interest-bearing liabilities.
(3) Net interest margin is net interest income divided by average
interest-earning assets.
-12-
<PAGE>
CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Comparison of the Three-Month Periods Ended September 30, 1999 and 1998
Results of Operations:
General. Net earnings for the three months ended September 30, 1999 were
$209,190 or $.06 per basic and diluted share compared to net earnings of
$103,173 or $.03 per basic and diluted share for the three months ended
September 30, 1998. This increase in the Company's net earnings was
primarily due to an increase in net interest income, partially offset by
an increase in noninterest expense due to the overall growth of the
Company. Per share amounts reflect the 8% stock dividend effective
December 31, 1998.
Interest Income and Expense. Interest income increased by $673,394 from
$1,141,447 for the three months ended September 30, 1998 to $1,814,841 for
the three months ended September 30, 1999. Interest income on loans
increased $638,958 to $1,430,116 in 1999 due to an increase in the average
loan portfolio balance for the three months ended September 30, 1999 to
$68.5 million compared to $35.1 million during the 1998 period partially
offset by a decrease in the weighted-average yield from 8.95% in 1998 to
8.34% in 1999. Interest on securities increased $69,091 to $228,659 in
1999 due to a increase in the average securities portfolio during the
three months ended September 30, 1999 to $15.2 million from $10.1 million
during 1998. Interest on other interest-earning assets decreased $34,655
to $156,066 in 1999 due to a decrease in the average yield of such assets
from 1998 to 1999.
Interest expense on deposit accounts increased to $755,682 for the three
months ended September 30, 1999 from $527,604 for the three months ended
September 30, 1998. Interest expense increased primarily because of an
increase in the average balance from 1998 to 1999. The average balance for
the three months ended September 30, 1999 was $77.8 million compared to
$42.7 million during 1998.
Provision for Loan Losses. The provision for loan losses is 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 amount 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. The provision for the
three months ended September 30, 1999 and 1998 was $103,000 and $36,500,
respectively. Management believes the balance in the allowance for loan
losses of $807,462 at September 30, 1999 is adequate.
Noninterest Income. Noninterest income increased to $139,441 in 1999 from
$117,458 in 1998 primarily because of increases in service charges on
deposit accounts and a higher level of deposit accounts in 1999.
Noninterest Expense. Total noninterest expense increased $230,287 to $760,212
for the three months ended September 30, 1999 from $529,925 for the three
months ended September 30, 1998, primarily due to an increase in employee
compensation and benefits of $109,025 as well as an increase in other
noninterest expense and occupancy and equipment expense all due to the
overall growth of the Company.
Provision for Income Taxes. The income tax provision for the three months
ended September 30, 1999 was $126,198, an effective rate of 37.63%
compared to $61,703, an effective rate of 37.4% for the comparable 1998
period.
-13-
<PAGE>
CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Comparison of the Nine-Month Periods Ended September 30, 1999 and 1998
Results of Operations:
General. Net earnings for the nine months ended September 30, 1999 were
$446,706 or $.13 per basic and diluted share compared to net earnings of
$197,738 or $.07 per basic and $.06 per diluted share for the nine months
ended September 30, 1998. This increase in the Company's net earnings was
primarily due to an increase in net interest income, partially offset by
an increase in noninterest expenses. Per share amounts reflect the 8%
stock dividend effective December 31, 1998.
Interest Income and Expense. Interest income increased by $1,699,241 to
$4,846,281 for the nine months ended September 30, 1999 from $3,147,040
for the nine months ended September 30, 1998. Interest income on loans
increased $1,438,075 to $3,710,293 in 1999 due to an increase in the
average loan portfolio balance for the nine months ended September 30,
1999 to $59.4 million compared to $32.1 million during 1998. Interest on
securities increased $278,677 to $654,762 in 1999 due to an increase in
the average securities portfolio during the nine months ended September
30, 1999 to $15.3 million from $8.1 million during 1998 partially offset
by a decrease in the weighted-average yield from 6.22% in 1998 to 5.71% in
1999. Interest on other interest-earning assets decreased $17,511 to
$481,226 in 1999 primarily due to a decrease in the average yield of these
assets from 1998 to 1999.
Interest expense on deposit accounts increased to $1,944,807 for the nine
months ended September 30, 1999 from $1,524,627 for the nine months ended
September 30, 1998. Interest expense increased primarily because of an
increase in the average balance of deposits from 1998 to 1999. The average
balance for the nine months ended September 30, 1999 was $69.2 million
compared to $43.0 million during 1998.
Provision for Loan Losses. The provision for loan losses is 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 amount 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. The provision increased
from $107,500 for the nine months ended September 30, 1998 to $357,000 for
the nine months ended September 30, 1999.
Noninterest Income. Noninterest income increased to $406,529 in 1999 from
$305,142 in 1998 primarily because of increases in service charges on
deposit accounts in 1999, partially offset by a decrease in other
noninterest income.
Noninterest Expense. Total noninterest expense increased $747,401 to
$2,258,219 for the nine months ended September 30, 1999 from $1,510,818
for the nine months ended September 30, 1998, primarily due to an increase
in employee compensation and benefits of $327,610 as well as an increase
in occupancy and equipment expenses, advertising, professional fees and
data processing and other noninterest expenses, all due to the overall
growth of the Company.
Provision for Income Taxes. The income tax provision for the nine months
ended September 30, 1999 was $246,078, an effective rate of 35.5% compared
to $111,499, an effective rate of 36.1% for the comparable 1998 period.
-14-
<PAGE>
CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Year 2000 Issues
The Company is acutely aware of the many areas affected by the Year 2000
computer issue and has formed a Year 2000 committee that is charged with
oversight of completing the Year 2000 project on a timely basis. Citizens
Community Bank ("Citizens") also has a Year 2000 committee which is actively
involved in managing the Year 2000 computer challenges, following the guidance
provided by its regulatory bodies and documented in the interagency statements
issued by the Federal Financial Institutions Examination Council ("FFIEC").
Citizens has a Year 2000 Technology Plan, approved by the Board of Directors,
which includes multiple phases, tasks to be completed and target dates for
completion. Issues addressed therein include awareness, assessment, renovation,
validation, implementation, testing and contingency planning.
Citizens routinely upgrades and purchases technology advanced software and
hardware on a continual basis. All future purchases and upgrades will be Year
2000 compliant. Citizens has determined that the cost of making modifications to
correct any Year 2000 issues will not substantially affect reported operating
results.
Citizens' main service provider considers the awareness phase of its Year 2000
Project to be substantially complete from an internal standpoint. Their
assessment phase of its Year 2000 Project is substantially complete for internal
mission critical systems.
The testing phase of Citizens' main service provider involved the testing of
various internal and external mission critical systems. The service provider has
completed its testing phase of testing its internal and external mission
critical systems and services with Year 2000 date information. The service
provider substantially completed testing of mission critical systems and
services as of June 30, 1999.
Citizens also recognizes the importance of determining if its customers are
preparing for the Year 2000 problem in a timely manner to avoid deterioration of
the loan portfolio solely due to this issue. Significant relationships have been
identified and questionnaires have been completed to assess the inherent risks.
Customers have received statement stuffers and informational material in this
regard. Citizens plans to be prepared on a one-on-one basis with significant
borrowers who have been identified as having high Year 2000 risk exposure.
Citizens stresses the importance of determining that its major depositors and
borrowers are ready to face the Year 2000 problem in order to avoid difficulties
surrounding the issue. Citizens plans to continue in its efforts to be active in
informing its customers of the Year 2000 issue.
Citizens has developed a contingency plan relative to the Year 2000 issues which
addresses a "worst case scenario." The plan covers various options for handling
interruptions of the internal and external mission critical systems and
services. Citizens, for example, has developed plans for meeting unusually high
demands for cash generated by the publicity surrounding the Year 2000 issue. The
Contingency Plan will be continuously monitored to incorporate and address
various operational elements as needed. Furthermore, Citizens' contingency plan
covers systems which can be handled manually on an interim basis. Should outside
service providers not be able to provide compliant systems, Citizens will
terminate those relationships and transfer to other vendors.
-15-
<PAGE>
CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is party to various legal proceedings in the ordinary course of
business. Management does not believe that there is any pending or threatened
proceeding against the Company which, if determined adversely, would have a
material adverse effect on the Company's business, results of operations, or
financial position.
Item 2. Changes in Securities and Use of Proceeds
The following sales of shares of the Company's common stock, par value $0.01 per
share, were not registered pursuant to the Securities Act of 1933, as amended
(the "Securities Act"), but were issued pursuant to the exemptions indicated
below:
During the nine months ended September 30, 1999, five former employees of the
Company exercised options and purchased 17,504 shares of Citizens Community
Bancorp, Inc. stock, for an aggregate price of $83,879. These transactions were
made in reliance on the exemption set forth in Section 4(2) of the Securities
Act.
Proceeds from the sale of the above securities were used for general corporate
purposes.
Item 5. Other Information
During the quarter ended September 30, 1999 Michael A. Micallef resigned as
Director, President and Chief Executive Officer of Citizens Community Bank of
Florida (the "Bank"), the Company's principal operating subsidiary. Gregory E.
Smith, the Bank's Senior Vice President and Cashier was appointed President of
the Bank; he remains Senior Vice President and Chief Financial Officer of
Citizens Community Bancorp, Inc. At the same time, Richard Storm, Sr. the
Chairman of the Board of the Bank was also appointed Chief Executive Officer; he
remains Chairman of the Board and Chief Executive Officer of Citizens Community
Bancorp, Inc.
-16-
<PAGE>
CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 6. 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 marked by a single
asterisk (*) were previously filed as a part, and are hereby incorporated
by reference from the Company=s Registration Statement on Form SB-2, as
effective with the Securities and Exchange Commission on December 7, 1995,
Registration No. 33-98090. The exhibits which are marked by a double
asterisk (**) were previously filed as part of, and are hereby
incorporated by reference from the Company=s Registration Statement on
Form SB-2 as filed with the Securities and Exchange Commission on March
12, 1998, Registration No. 333-47813. 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)
**10.1 1996 Incentive Stock Option Plan
**10.2 Company's 1998 Directors Stock Option Plan
**10.3 Employment Contract with Michael A. Micallef, Jr.
27 Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K. There were no Form 8-K=s filed during the three
months ended September 30, 1999.
* 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.
** Previously filed as an exhibit to the Form 10-QSB for the quarter ended
June 30, 1998.
17
<PAGE>
CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
SIGNATURES
Pursuant to the requirements 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.
(Registrant)
Date: November 12, 1999 By: /s/ Richard Storm, Jr.
----------------------------- -----------------------
Richard Storm, Jr.,
Chairman of the Board,
President and
Chief Executive Officer
Date: November 12, 1999 By: /s/ Gregory E. Smith
----------------------------- ---------------------
Gregory E. Smith,
Senior Vice President
and Chief Financial
Officer
18
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from Form 10-QSB
for the period ended September 30, 1999 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 4,159
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 10,221
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 2,770
<INVESTMENTS-CARRYING> 13,000
<INVESTMENTS-MARKET> 12,656
<LOANS> 72,079
<ALLOWANCE> 807
<TOTAL-ASSETS> 107,039
<DEPOSITS> 87,746
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,544
<LONG-TERM> 0
0
0
<COMMON> 35
<OTHER-SE> 17,714
<TOTAL-LIABILITIES-AND-EQUITY> 107,039
<INTEREST-LOAN> 3,710
<INTEREST-INVEST> 599
<INTEREST-OTHER> 481
<INTEREST-TOTAL> 4,790
<INTEREST-DEPOSIT> 1,889
<INTEREST-EXPENSE> 1,889
<INTEREST-INCOME-NET> 2,901
<LOAN-LOSSES> 357
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,258<F1>
<INCOME-PRETAX> 693
<INCOME-PRE-EXTRAORDINARY> 693
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 447
<EPS-BASIC> .13
<EPS-DILUTED> .13
<YIELD-ACTUAL> 0<F2>
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 453
<CHARGE-OFFS> (3)
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 807
<ALLOWANCE-DOMESTIC> 807
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
<FN>
<F1>Other expense includes: salaries and employee benefits fo $1,077, occupancy of
$353, professional fees of $118 and other expenses which totaled $710.
<F2>Calculated at year-end.
</FN>
</TABLE>
