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 June 30, 1999
Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from ____________ to ______________
Commission file number 000-22547
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 3,472,111
- -------------------------------------- --------------------------------
(class) Outstanding at June 30, 1999
- --------------------------------------------------------------------------------
<PAGE>
CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements Page
Condensed Consolidated Balance Sheets - June 30, 1999
(unaudited) and December 31, 1998 .......................................2
Condensed Consolidated Statements of Earnings Three and Six
Months ended June 30, 1999 and 1998 (unaudited) .........................3
Condensed Consolidated Statement of Stockholders' Equity -
Six Months ended June 30, 1999 (unaudited) ..............................4
Condensed Consolidated Statements of Cash Flows Six Months
ended June 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 of Financial
Condition and Results of Operations .................................10-15
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds ...........................16
Item 4. Submission of Matters to a Vote of Security Holders .............16-17
Item 6. Exhibits and Reports on Form 8-K ....................................18
SIGNATURES .............................................................18
<PAGE>
<TABLE>
<CAPTION>
CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
June 30, December 31,
-------- ------------
Assets 1999 1998
---- ----
(unaudited)
<S> <C> <C>
Cash and due from banks ................................................ $ 4,401,270 5,481,992
Federal funds sold and securities purchase under agreements
to resell ...................................................... 9,578,064 19,181,095
------------ ----------
Cash and cash equivalents .............................................. 13,979,334 24,663,087
Securities held to maturity ............................................ 13,024,567 8,499,968
Securities available for sale .......................................... 1,606,778 --
Restricted securities, Federal Home Loan Bank stock, at cost ........... 214,900 127,100
Loans, net of allowance for loan losses of $707,211
and $453,211 ........................................................... 64,638,155 44,932,943
Premises and equipment, net ............................................ 3,594,439 3,549,924
Accrued interest receivable and other assets ........................... 729,701 453,104
------------ ----------
Total assets ........................................................... $ 97,787,874 82,226,126
============ ==========
Liabilities and Stockholders' Equity
Liabilities:
Demand deposits ........................................................ 8,747,581 6,365,180
Savings and NOW deposits ............................................... 30,070,250 33,307,881
Money-market deposits .................................................. 14,215,840 4,010,998
Time deposits .......................................................... 26,239,817 20,306,399
------------ ----------
Total deposits ......................................................... 79,273,488 63,990,458
Official checks ........................................................ 572,334 697,458
Income taxes payable ................................................... 55,498 19,850
Accrued interest payable and other liabilities ......................... 353,369 293,832
------------ ----------
Total liabilities ...................................................... 80,254,689 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,
3,472,111 and 3,455,039 shares issued and outstanding .................. 34,721 34,550
Additional paid-in capital ............................................. 19,239,569 19,158,862
Accumulated deficit .................................................... (1,731,368) (1,968,884)
Accumulated other comprehensive income (loss) .......................... (9,737) --
------------ ----------
Total stockholders' equity ............................................. 17,533,185 17,224,528
------------ ----------
Total liabilities and stockholders' equity ............................. $ 97,787,874 82,226,126
============ ==========
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
2
<PAGE>
<TABLE>
<CAPTION>
CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings
Three Months Ended Six Months Ended
------------------ ----------------
June 30, June 30,
1999 1998 1999 1998
---- ---- ---- ----
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Interest income:
Loans ........................................ $1,249,903 771,079 2,280,177 1,481,060
Securities ................................... 245,374 158,711 426,103 216,517
Other interest-earning assets ................ 134,969 144,925 325,160 308,016
--------- --------- --------- ---------
Total interest income ........................ 1,630,246 1,074,715 3,031,440 2,005,593
--------- --------- --------- ---------
Interest expense on deposits ................. 641,733 533,556 1,189,125 997,023
Net interest income ....................... 988,513 541,159 1,842,315 1,008,570
Provision for loan losses .................... 133,000 15,000 254,000 71,000
--------- --------- --------- ---------
Net interest income after provision
for loan losses ......................... 855,513 526,159 1,588,315 937,570
--------- --------- --------- ---------
Noninterest income:
Other service charges and fees ............... 84,277 59,613 202,319 111,036
Other ........................................ 49,152 40,203 64,769 76,647
--------- --------- --------- ---------
Total noninterest income ..................... 133,429 99,816 267,088 187,683
--------- --------- --------- ---------
Noninterest expense:
Salaries and employee benefits ............... 346,401 242,697 684,611 466,026
Occupancy and equipment ...................... 128,634 83,197 234,089 166,947
Professional fees ............................ 43,810 8,180 83,594 11,114
Other ........................................ 236,640 186,613 495,713 336,806
--------- --------- --------- ---------
Total noninterest expense .................... 755,485 520,687 1,498,007 980,893
--------- --------- --------- ---------
Earnings before income taxes ................. 233,457 105,288 357,396 144,360
Income taxes ................................. 82,780 34,796 119,880 49,796
--------- --------- --------- ---------
Net earnings ................................. $ 150,677 70,492 237,516 94,564
========= ========= ========= =========
Earnings per share:
Basic ........................................ $ .04 .04 .07 .05
========= ========= ========= =========
Diluted ...................................... $ .04 .03 .07 .05
========= ========= ========= =========
Weighted-average number of shares outstanding:
Basic ........................................ 3,469,051 1,993,203 3,462,608 1,851,222
========= ========= ========= =========
Diluted ...................................... 3,563,893 2,048,856 3,555,843 1,906,737
========= ========= ========= =========
Dividends per share .......................... $ -- -- -- --
========= ========= ========= =========
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
3
<PAGE>
<TABLE>
<CAPTION>
CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Condensed Consolidated Statement of Stockholders' Equity
Six Months Ended June 30, 1999
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) -- -- -- 237,516 -- 237,516
Net change in unrealized
gain on securities
available for sale
(unaudited) -- -- -- -- (9,737) (9,737)
---------- ------ ----------
Comprehensive income (unaudited) -- -- -- 237,516 (9,737) 227,779
Shares issued under stock
option plan (unaudited) 17,072 171 80,707 -- -- 80,878
--------- ----------- ---------- ---------- ------ ----------
Balance at June 30, 1999
(unaudited) 3,472,111 $ 34,721 19,239,569 (1,731,368) (9,737) 17,533,185
========= =========== ========== ========== ====== ==========
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
4
<PAGE>
<TABLE>
<CAPTION>
CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
Six Months Ended
June 30,
----------------
1999 1998
(unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net earnings ........................................................ $ 237,516 94,564
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation ........................................................ 53,917 71,374
Provision for loan losses ........................................... 254,000 71,000
Provision for deferred income taxes ................................. 41,521 33,418
Net amortization of loan fees, premiums and discounts ............... (145,514) 55,737
Increase in accrued interest receivable and other assets ............ (276,597) (223,512)
Increase (decrease) in accrued interest payable and other liabilities 59,537 (22,810)
Net (decrease) increase in official checks .................. (125,124) 257,035
----------- -----------
Net cash provided by operating activities ........................... 99,256 336,806
----------- -----------
Cash flows from investing activities:
Purchase of securities available for sale ........................... (1,632,430) --
Purchase of securities held to maturity ............................. (22,432,064) (8,500,000)
Maturities of securities held to maturity ........................... 17,996,627 500,000
Purchase of restricted securities, Federal Home Loan Bank stock ..... (87,800) (127,100)
Net increase in loans ............................................... (19,892,818) (7,963,518)
Purchase of premises and equipment .................................. (98,432) (668,886)
----------- -----------
Net cash used in investing activities ............................... (26,146,917) (16,759,504)
----------- -----------
Cash flows from financing activities:
Net increase in noninterest-bearing demand,
savings and NOW deposits ............................................ 9,349,612 9,690,324
Net increase in time deposits ....................................... 5,933,418 3,273,838
Payment of stock offering costs ..................................... -- (78,744)
Sale of common stock ................................................ 80,878 6,471,058
----------- -----------
Net cash provided by financing activities ........................... 15,363,908 19,356,476
----------- -----------
Net increase (decrease) in cash and cash equivalents ................ (10,683,753) 2,933,778
Cash and cash equivalents at beginning of period .................... 24,663,087 12,210,577
----------- -----------
Cash and cash equivalents at end of period .......................... $ 13,979,334 15,144,355
=========== ===========
Supplemental disclosure of cash flow information-
Cash paid during the period for:
Interest ............................................................ $ 1,163,952 963,207
=========== ===========
Income taxes ........................................................ $ 65,000 --
=========== ===========
</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 the 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 June 30, 1999, and the results of operations for the
three-month and six-month periods ended June 30, 1999 and 1998 and the cash
flows for the six-month periods ended June 30, 1999 and 1998. The results
of operations for the three and six months ended June 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
June 30, 1999 or June 30, 1998. The activity in the allowance for loan
losses was as follows:
For the Six
Months Ended
June 30,
------------
1999 1998
---- ----
Balance at beginning of period $ 453,211 298,000
Provision charged to earnings 254,000 71,000
Charge-offs, net of recoveries - -
--------- -------
Balance at end of period $ 707,211 369,000
========= =======
(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 six months ended June 30, 1998; for 1999 the
calculation is based on actual trading activity. For the three and six
months ended June 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 June 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 $ 151 3,469,051 $ .04 $ 70 1,993,203 $ .04
======= =======
Effect of dilutive
securities-
Incremental shares from
assumed conversion
of options 94,842 55,653
------ ------
Diluted EPS:
Net earnings available
to common stockholders
and assumed conversions $ 151 3,563,893 $ .04 $ 70 2,048,856 $ .03
========= ========= ======= ====== ========= =======
</TABLE>
(continued)
6
<PAGE>
CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (unaudited)
<TABLE>
<CAPTION>
(3) Earnings Per Share, Continued.
For the Six Months Ended June 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 $ 238 3,462,608 $ .07 $ 95 1,851,222 $ .05
Effect of dilutive
securities-
Incremental shares from
assumed conversion
of options 93,235 55,515
Diluted EPS:
Net earnings available
to common stockholders
and assumed conversions $ 238 3,555,843 $ .07 $ 95 1,906,737 $ .05
</TABLE>
(4) Regulatory Capital. The Citizens Community Bank of Florida (the Company's
Banking Subsidiary) ("Citizens") is required to maintain certain minimum
regulatory capital requirements. The following is a summary at June 30,
1999 of the regulatory capital requirements and the Bank's capital on a
percentage basis:
Ratios of Regulatory
the Bank Requirement
-------- -----------
Total capital to risk-weighted assets 12.85% 8.00%
Tier I capital to risk-weighted assets 11.75% 4.00%
Tier I capital to total assets - leverage ratio 7.77% 4.00%
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 June 30,
1999, and for the three- and six-month periods ended June 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 June 30,
1999, and the related condensed consolidated statements of earnings for the
three- and six-month periods ended June 30, 1999 and 1998, and the condensed
consolidated statement of stockholders' equity and cash flows for the six-month
period ended June 30, 1999. 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
July 15, 1999
9
<PAGE>
CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations
Comparison of June 30, 1999 and December 31, 1998
Liquidity and Capital Resources
The Company's primary source of cash during the six months ended June 30, 1999
was from net deposit inflows and maturities of securities held to maturity. Cash
was used primarily for loan originations and for the purchase of securities. At
June 30, 1999, the Company had outstanding commitments to fund existing and new
loans of $21.6 million. It is expected that these requirements will be funded
from the sources described above. At June 30, 1999, the Bank exceeded its
regulatory liquidity requirements.
The following table shows selected ratios for the periods ended or at the dates
indicated:
Six Months
Ended Year Ended
June 30, December 31,
1999 1998
---- ----
Average equity as a percentage
of average assets ............................... 18.81% 18.91%
Equity to total assets at end of period ......... 17.93% 20.95%
Return on average assets (1) .................... .51% 0.32%
Return on average equity (1) .................... 2.73% 1.71%
Noninterest expense to average assets (1) ....... 3.24% 3.04%
Nonperforming loans and foreclosed real estate to
total assets at end of period ................... NIL NIL
(1) Annualized for the six months ended June 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 June 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 $60,690 1,250 8.26% $34,257 771 9.03%
Securities 17,694 245 5.55 10,406 159 6.13
Other interest-earning assets (1) 11,391 135 4.75 9,385 145 6.20
------ --- ------ ---
Total interest-earning assets 89,775 1,630 7.28 54,048 1,075 7.98
----- -----
Noninterest-earning assets 7,769 6,209
----- -----
Total assets $97,544 $60,257
======= =======
Interest-bearing liabilities:
Savings, NOW and money-market deposit
accounts 44,902 309 2.76 27,802 249 3.59
Time deposits 24,687 332 5.39 19,744 285 5.79
------ --- ------ ---
Total interest-bearing liabilities 69,589 641 3.69 47,546 534 4.50
--- ---
Noninterest-bearing liabilities 10,538 5,293
Stockholders' equity 17,417 7,418
Total liabilities and stockholders' $97,544 $60,257
equity ======= =======
Net interest income $ 989 $ 541
===== =====
Interest-rate spread (2) 3.59% 3.48%
==== ====
Net interest margin (3) 4.41% 4.00%
==== ====
Ratio of average interest-earning assets to
average interest-bearing liabilities 1.29 1.14
==== ====
</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>
Six Months Ended June 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 $54,764 2,280 8.40% $31,956 1,481 9.35%
Securities 15,389 426 5.58 7,050 217 6.21
Other interest-earning assets (1) 13,897 325 4.72 10,707 308 5.80
------ --- ------ ---
Total interest-earning assets 84,050 3,031 7.27 49,713 2,006 8.12
----- -----
Noninterest-earning assets 8,305 6,450
----- -----
Total assets $92,355 $56,163
======= =======
Interest-bearing liabilities:
Savings, NOW and money-market deposit
accounts 41,678 573 2.80 24,930 447 3.62
Time deposits 23,143 616 5.41 19,163 550 5.79
------ --- ------ ---
Total interest-bearing liabilities 64,821 1,189 3.70 44,093 997 4.56
----- ---
Noninterest-bearing liabilities 10,160 4,939
Stockholders' equity 17,374 7,131
------ -----
Total liabilities and stockholders' $92,355 $56,163
======= =======
equity
Net interest income $ 1,842 $ 1,009
======= =======
Interest-rate spread (2) 3.57% 3.56%
==== ====
Net interest margin (3) 4.42% 4.06%
==== ====
Ratio of average interest-earning assets to
average interest-bearing liabilities 1.30 1.13
==== ====
</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
Results of Operations
Comparison of the Three-Month Periods Ended June 30, 1999 and 1998
General. Net earnings for the three months ended June 30, 1999 were $150,700 or
$.04 basic and diluted earnings per share compared to net earnings of
$70,500 or $.04 basic and $.03 diluted earnings per share for the three
months ended June 30, 1998. This increase in the Company's net earnings was
primarily due to an increase in net interest income and noninterest income
and was partially offset by an increase in noninterest expense due to the
overall growth of the Company.
Interest Income and Expense. Interest income increased by $555,500 from
$1,074,700 for the three months ended June 30, 1998 to $1,630,200 for the
three months ended June 30, 1999. Interest income on loans increased
$478,900 to $1,249,900 due primarily to an increase in the average loan
portfolio balance for the three months ended June 30, 1999. Interest on
securities increased to $246,000 due primarily to an increase in the
average securities portfolio during the three months ended June 30, 1999.
Interest on other interest-earning assets increased to $135,000 due to a
increase in the average balance of such assets from 1998 to 1999.
Interest expense on deposit accounts increased to $641,700 for the three
months ended June 30, 1999 from $533,600 for the three months ended June
30, 1998. Interest expense increased primarily because of an increase in
the average balance from 1998 to 1999.
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
estimated collectibility of the Company's loan portfolio. The provision for
the three months ended June 30, 1999 and 1998 was $133,000 and $15,000,
respectively. The increase in the provision for loan losses in 1999 is
primarily due to the higher level of loan originations. Management believes
the balance in the allowance for loan losses of $707,200 at June 30, 1999
is adequate.
Noninterest Income. Total noninterest income increased to $133,400 in 1999 from
$99,800 in the same period in 1998. The primary reason for the improvement
was increased fees and service charges and the growth in deposit accounts.
Noninterest Expense. Total noninterest expense increased $234,800 to $755,500
for the three months ended June 30, 1999 from $520,700 for the three months
ended June 30, 1998, primarily due to an increase in employee compensation
and benefits of $103,700, increased occupancy and equipment expenses of
$45,400 as well as an increase in other noninterest expense of $50,000 all
due to the opening of the third branch office in the third quarter of 1998
and the continued growth of the Company.
Provision for Income Taxes. The income tax provision for the three months ended
June 30, 1999 was $82,780 (an effective rate of 35.5%) compared to $34,800
(an effective rate of 33.1%) for the comparable 1998 period.
13
<PAGE>
CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Results of Operations:
Comparison of the Six-Month Periods Ended June 30, 1999 and 1998
General. Net earnings for the six months ended June 30, 1999 were $237,500 or
$.07 basic and diluted earnings per share compared to $94,600 or $.05 basic
and diluted earnings per share for the six months ended June 30, 1998. This
increase in the Company's net earnings was primarily due to the
year-over-year growth in the Company which resulted in an increase in net
interest income, partially offset by an increase in noninterest expenses
and the provision for loan losses.
Interest Income and Expense. Interest income increased by $1,025,800 from
$2,005,600 for the six months ended June 30, 1998 to $3,031,400 for the six
months ended June 30, 1999. Interest income on loans increased $799,100 to
$2,280,200 due primarily to an increase in the average loan portfolio
balance for the six months ended June 30, 1999. Interest on securities
increased $209,600 to $426,100 due primarily to an increase in the average
securities portfolio during the six months ended June 30, 1999. Interest on
other interest-earning assets increased $17,200 to $325,200 primarily due
to an increase in the average balance of securities purchased under
agreements to resell and partially offset by a decrease in the average rate
on other interest-earning assets.
Interest expense on deposit accounts increased to $1,189,100 for the six
months ended June 30, 1999 from $997,000 for the six months ended June 30,
1998. The rate of growth of interest expense was less than the interest
income as a result of the Bank's successful efforts to generate low cost
core deposit accounts.
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 estimated
collectibility of the Company's loan portfolio. The provision increased to
$254,000 for the six months ended June 30, 1999 from $71,000 for the six
months ended June 30, 1998. The increase in the provision for loan losses
in 1999 is primarily due to the higher level of loan orgination during the
first six months of 1999.
Noninterest Income. Total noninterest income increased to $267,100 in 1999 from
$187,700 in the 1998 period. The primary reason for the increase was
increased fees and service charges on increased deposit accounts.
Noninterest Expense. Total noninterest expense increased $517,100 to $1,498,000
for the six months ended June 30, 1999 from $980,900 for the six months
ended June 30, 1998, primarily due to an increase in employee compensation
and benefits of $218,600 an increase in occupancy and equipment expense of
$67,100, and an increase in other noninterest expense of $158,900 all due
to the overall growth of the Company during 1999 compared to 1998.
Provision for Income Taxes. The income tax provision for the six months ended
June 30, 1999 was $119,880 (an effective rate of 33.6%) compared to $49,800
(an effective rate of 34.5%) 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 involves the testing
of various internal and external mission critical systems. The service
provider is into 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 2. Changes in Securities and Use of Proceeds
The following sales of shares of Citizens Community Bancorp common stock,
par value $0.01 per share ("Citizens Community Bancorp"), 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 six months ended June 30, 1999, four former employees of
Citizens Community Bancorp, pursuant to the exercise of options, purchased
an aggregate of 17,072 shares of Citizens Community Bancorp stock, for an
aggregate price of $80,878. This transaction was 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 purpose.
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Shareholders (the "Annual Meeting") of the Company,
was held on April 20, 1999, to consider the election of three directors to
three-year terms, the amendment to the Articles of Incorporation to
eliminate staggered terms for directors in future elections, the
ratification of the appointment of the Company's independent auditors for
the year ending December 31, 1999 and to approve adjournment of the annual
meeting to solicit additional proxies.
At the Annual Meeting, 2,702,184 shares were present in person or by proxy.
The following is a summary and tabulation of the matters that were voted
upon at the Annual Meeting:
Proposal I.
The election of directors:
For % Withhold %
--- -- -------- --
Steven A. McLaughlin 2,683,770 99.3 18,414 .7
Richard Storm, Jr 2,688,522 99.5 13,662 .5
John G. Wolf 2,684,634 99.4 17,550 .6
16
<PAGE>
CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Item 4. Submission of Matters to a Vote of Security Holders, Continued
Proposal II:
To approve the Amendment to Article VIII, Section 3, of the Articles of
Incorporation, to eliminate staggered terms for directors in future elections.
For % Against % Abstain % Non-Vote %
--------- ---- ------ --- ------ -- ------- ----
2,277,030 84.3 61,532 2.3 22,572 .8 341,050 12.6
Proposal III:
Ratification of the appointment of Hacker, Johnson, Cohen & Grieb PA as
independent auditors of Citizens for fiscal year ending December 31, 1999.
For % Against % Abstain %
--------- ---- ----- -- ------ ---
2,669,460 98.8 5,508 .2 27,216 1.0
Proposal IV:
To approve the adjournment of the Annual Meeting to solicit additional proxies
in the event that there are not sufficient votes to approve one or more of the
foregoing proposals.
For % Against % Abstain %
--------- ---- ------- -- ------- ---
2,615,840 96.8 61,936 2.3 24,408 .9
17
<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 marked by a triple asterisk (***)
was filed as an exhibit to the Company's Form 10-KSB for 1998. 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
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 June 30, 1999.
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: , 1999 By: /s/ Richard Storm, Jr.
------------------- ------------------------------------
Richard Storm, Jr.,
Chairman of the Board
and Chief Executive Officer
Date: , 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 contain summary financial information extracted from Form 10-QSB
for the period ended June 30, 1999 and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 4,401
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 9,578
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,607
<INVESTMENTS-CARRYING> 13,025
<INVESTMENTS-MARKET> 12,602
<LOANS> 65,345
<ALLOWANCE> 707
<TOTAL-ASSETS> 97,788
<DEPOSITS> 79,273
<SHORT-TERM> 0
<LIABILITIES-OTHER> 981
<LONG-TERM> 0
0
0
<COMMON> 35
<OTHER-SE> 17,498
<TOTAL-LIABILITIES-AND-EQUITY> 97,788
<INTEREST-LOAN> 2,280
<INTEREST-INVEST> 426
<INTEREST-OTHER> 375
<INTEREST-TOTAL> 3,031
<INTEREST-DEPOSIT> 1,189
<INTEREST-EXPENSE> 1,189
<INTEREST-INCOME-NET> 1,842
<LOAN-LOSSES> 254
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,498<F1>
<INCOME-PRETAX> 357
<INCOME-PRE-EXTRAORDINARY> 357
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 238
<EPS-BASIC> .07
<EPS-DILUTED> .07
<YIELD-ACTUAL> 4.42
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 453
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 707
<ALLOWANCE-DOMESTIC> 707
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
<FN>
<F1>Other expense includes: salaries and employee benefits of $685, occupancy of
$234, professional fees of $84, and other expenses which totaled $495.
</FN>
</TABLE>
