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, 1999
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, 1999: $7,384,000
The aggregate market value of the common stock of the Registrant held by
nonaffiliates of the Registrant (2,476,257 shares) on February 29, 2000 was
approximately $18,571,928. 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
$7.50 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
February 29, 2000: 3,486,767 shares of $0.01 par value common stock.
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of CCBI's Annual Report. (Part II)
2. Portions of the Proxy Statement for the 2000 Annual Meeting of Shareholders
filed electronically with the Securities and Exchange Commission on March
10, 2000. (Part III)
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TABLE OF CONTENTS
Consolidated--Citizens Community Bancorp, Inc. and subsidiaries ("Registrant").
NOTE: Certain information required by Form 10-KSB is incorporated by
reference from the 1999 Annual Report and 2000 Annual Meeting Proxy Statement as
indicated below. Only that information expressly incorporated by reference is
deemed filed with the Securities and Exchange Commission.
Page Number
PART I
Item 1 Business......................................................... 3
Item 2 Properties....................................................... 9
Item 3 Legal Proceedings................................................10
Item 4 Submission of Matters to a Vote of Security Holders..............10
PART II
Item 5 Market for Common Equity and Related Stockholder Matters.........10(1)
Item 6 Management's Discussion and Analysis of Financial Condition
and Results of Operations........................................10(1)
Item 7 Financial Statements and Supplementary Data......................10(1)
Item 8 Changes in and disagreements with Accountants on
Accounting and Financial Disclosure..............................10
PART III
Item 9 Directors and Executive Officers of the Registrant:..............10(2)
Item 10 Executive Compensation...........................................11(2)
Item 11 Security Ownership of Certain Beneficial Owners and Management...11(2)
Item 12 Certain Relationships and Related Transactions...................11
PART IV
Item 13 Exhibits, Financial Statement Schedules, and Reports on
Form 8-K.......................................................11
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(1) These Items are incorporated by reference from Registrant's 1999
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 Registrant'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. ("Citizens") is a one-bank holding company
under the Bank Holding Company Act of 1956, owning 100% of the issued and
outstanding common stock of Citizens Community Bank of Florida, Marco Island,
Florida ("CCB"). Citizens 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 CCB
during its organizational stage and to enhance CCB's ability to serve its future
customers' requirements for financial services. Citizens provides flexibility
for expansion of its banking business through acquisition of other financial
institutions and provision of additional banking-related services which a
traditional commercial bank may not provide under present laws.
Subsidiaries
As of December 31, 1999, Citizens had three wholly-owned subsidiaries, CCB and
two non-bank subsidiaries, Citizens Financial Corp. ("CFC") and CCB Mortgage
Corporation ("CCB Mortgage").
CCB is a state-chartered commercial bank, which opened for business on March 8,
1996. CCB 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, CCB provides consumer services such as
U.S. Savings Bonds, travelers checks, safe deposit boxes, bank by mail services,
direct deposit services, and automatic teller services.
CFC is a commercial loan brokerage company, specializing in construction,
mini-perm and permanent loans. CFC also offers conduit non-recourse loans for
properties with stable and proven cash flows. CFC is also a source of loan
referrals to both CCB and CCB Mortgage.
CCB Mortgage commenced activities in the fourth quarter of 1999. CCB Mortgage is
a licensed residential mortgage brokerage business. CCB Mortgage originates a
variety of mortgage loans for sale in the secondary market or to CCB.
Market Area
The primary service and assessment area for Citizens encompasses the cities of
Naples, Marco Island, Isle of Capri, and Goodland, as well as the rest of
Collier County. There is strong competition among financial institutions in this
area, as evidenced by the eight commercial banks and one savings and loan
headquartered within our primary service area. There are 84 banking offices and
three savings and loan association offices, most of which are branches of or are
affiliated with major regional bank holding companies. CCB operates offices at
650 E. Elkcam Circle, Marco Island, Florida, ("Marco Office") which opened for
business in January, 1997; 5101 Tamiami Trail East, Naples, Florida, ("East
Trail Office") which opened for business in June, 1997; and 2375 N. Tamiami
Trail, Naples, Florida, ("Moorings Office") which opened for business in August,
1998. CCB also operates a courier service in its primary service area.
Citizens is in competition with 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 that have historically been traditional banking services. Due to the
growth of the Collier County area in general, it is anticipated that competition
will increase because of new entrants to the market.
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Investments
As of December 31, 1999, investment securities, interest-bearing deposits,
federal funds, and securities purchased under agreements to resell, comprised
approximately 24% of Citizens' consolidated total assets. Net loans comprised
approximately 65% of Citizens' total assets. Citizens investment portfolio
includes primarily obligations of Agencies of the United States Government. On a
daily basis, CCB enters into Federal Funds transactions with its principal
correspondent bank, primarily with the sale of such funds.
Loan Portfolio
Through its subsidiaries, Citizens engages in a wide range of lending
activities, primarily focused on the origination of commercial and residential
real estate secured loans, commercial loans secured by non-real estate
collateral and consumer loans.
Real estate loans consist of commercial and residential first and second
mortgage loans. All of these loans are located in Florida, the majority of which
are in our primary service and assessment area. These loans also include home
equity term loans secured by second mortgages on the residences of borrowers for
a variety of purposes, including home improvements, education and other personal
expenditures.
Commercial lending is directed principally toward businesses whose demands for
funds fall within our legal lending limits and which are potential deposit
customers of CCB. These loans also include 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.
Consumer loans consist primarily of installment loans to individuals for
personal, family and household purposes, including automobile and boat loans to
individuals.
Citizens policy is to discontinue the accrual of interest on loans delinquent
over ninety days unless fully secured and in the process of collection. It is
our policy that the accrued and unpaid interest is reversed against current
income and thereafter interest is recognized only to the extent payments are
received. 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, 1999, 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 our loans are secured by real estate in Collier County, Florida,
where our branch offices are located. Accordingly, the ultimate collectibility
of a substantial portion of our loan portfolio is susceptible to changes in
market conditions in Collier County.
Loan Loss Reserves
In considering the adequacy of the allowance for loan losses, we looked at the
risk's associated with our loan portfolio. As of December 31, 1999,
approximately 52% of outstanding loans are commercial real estate secured loans.
Commercial loans are generally considered to have a greater risk than other
categories of loans. We believe that the real estate collateral securing our
commercial real estate loans reduces the risk of loss inherently present in
commercial loans.
At December 31, 1999, the consumer loan portfolio consisted primarily of lines
of credit and installment loans secured by automobiles, boats and other consumer
goods, generally to customers who also have deposit relationships with us. We do
not purchase consumer loans through dealers or brokers, which generally have
higher risk of losses. Management believes that the risk associated with the
consumer loan portfolio has been adequately provided for in the loan loss
allowance.
Residential real estate mortgage loans constitute approximately 31% of
outstanding loans at December 31, 1999. These loans are considered by management
to have less risk due to the fact that they are secured by residential real
estate, where the amount of the original loan generally does not exceed 80% of
the appraised value of the collateral or is otherwise covered by private
mortgage insurance.
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Management reports to the Board of Directors monthly on the loan portfolio in
order 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 complement our internal system, 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, the past
loss experience, adverse situations that may affect the borrower's ability to
repay, assumed values of the underlying collateral securing the loans, the
current and prospective financial condition of the borrower, and the prevailing
and anticipated economic conditions of the local market. During the year ended
December 31, 1999, we charged off one loan in the amount of $1,132 against the
allowance for loan losses. In addition, $3,462 was charged-off for uncollected
overdrafts from our deposit customers.
The allowance for loan losses is maintained at a level which we believe is
sufficient to absorb all potential 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
A wide range of interest-bearing and noninterest-bearing accounts are offered
through CCB, 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 our market
area, obtained through the personal solicitation of our officers and directors,
direct mail solicitation and advertisements published in the local media. We pay
competitive interest rates on time and savings deposits up to the maximum
permitted by law or regulation. In addition, we have implemented a service
charge fee schedule which is competitive with other financial institutions in
our market area, covering such matters as maintenance fees on checking accounts,
per item processing fees, returned check charges and the like.
Correspondent Banking
CCB 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, 1999, CCB had sold $7,593,000 in Federal Funds. In addition, CCB had a $2.0
million interest bearing deposit from a correspondent financial institution,
which matured on January 31, 2000.
Loan participations are sold by CCB without recourse to correspondent banks with
respect to loans which exceed the bank's legal lending limit, which at December
31, 1999, was $2.1 million. To minimize our credit risk exposure, we established
an internal bank lending limit which, at December 31, 1999, was $1.4 million.
Both CFC and CCB Mortgage originate loans that are closed and funded by
correspondent banks. Since CFC and CCB Mortgage both act as mortgage brokers,
neither company will close loans in their own name. In some instances, loans
originated by CFC and CCB Mortgage are referred to CCB and are retained by the
bank.
Data Processing
CCB has a data processing servicing agreement with First National Bank of Omaha,
Nebraska. This servicing agreement provides us with 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. For this service, CCB pays a
monthly fee based on the type, kind and volume of data processing services
provided, priced at a stipulated rate schedule.
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Employees
We currently employ 55 full time and 4 part time persons, including 17 officers.
Employees are hired as needed to meet company-wide personnel demands.
Monetary Policies
The results of our operations 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
credit losses and earnings.
Supervision and Regulation
Citizens and CCB operate in a highly regulated environment. Our business
activities, which are governed by statute, regulation and administrative
policies, 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 banking industry is highly regulated, with numerous federal and state laws
and regulations governing its activities. The following is a brief summary of
the more recent legislation which affects Citizens and our subsidiaries:
In November 1999, the financial services regulations were significantly reformed
with the adoption of the Gramm- Leach-Bliley Act ("GLA"). The GLA provides for
the streamlining of the regulatory oversight functions of the various federal
banking agencies. Of significance, the GLA permits bank holding companies that
are well managed, well capitalized and that have at least a satisfactory
Community Reinvestment Act rating to operate as Financial Holding Companies
("FHC"). In addition to activities that are permissible for bank holding
companies and their subsidiaries, the GLA permits FHCs and their subsidiaries to
engage in a wide variety of other activities that are "financial in nature" or
are incidental to financial activities. These new activities will enable
Citizens and its subsidiaries to consider and engage in new lines of business.
The GLA also requires financial institutions to permit, with few exceptions,
their customers to "opt out" of having their personal financial information
shared with nonaffiliated third parties. The GLA bars financial institutions
from disclosing customer account numbers to direct marketers and mandates that
institutions provide annual disclosure to their customers regarding the
institution's privacy policies and procedures.
Citizens is regulated by the Federal Reserve Board under the Bank Holding
Company Act of 1956, 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, Citizens may be required to provide financial support for a subsidiary
bank at a time when, absent such Federal Reserve Board policy, Citizens 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.
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As a bank holding company, Citizens 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 Citizens and each
of its subsidiaries.
As a publicly traded company with its shares of common stock registered under
the Securities Act of 1933, Citizens is required to file periodic public
disclosure reports with the Securities and Exchange Commission pursuant to the
Securities and Exchange Act of 1934, and the regulations promulgated thereunder.
Form 10-KSB is a required annual report that must contain a complete overview of
Citizens' business, financial, management, regulatory, legal, ownership and
organizational status. Citizens must file Form 10-KSB by March 31 of each year.
Similarly, Form 10-QSB, must contain information concerning Citizens on a
quarterly basis. Although Form 10-KSB requires the inclusion of audited
financial statements, unaudited statements are sufficient for inclusion on Form
10-QSB. Additionally, any significant non-recurring events that occur during the
subject quarter, as well as changes in securities, any defaults and the
submission of any maters to a vote of security holders, must also be reported on
Form 10-QSB.
Additionally, if any of six significant events (a change in control, an
acquisition or disposition of significant assets, bankruptcy or receivership, a
change in certifying accountant, any resignation of directors or a change in
fiscal year end) occurs in a period between the filing of Form 10-KSB or a Form
10-QSB, such event must be reported on a Form 8- KSB within 15 days of the
event.
When communicating with shareholders, Citizens' proxy solicitations for its
Annual Meetings of Shareholders must contain certain detailed disclosures
regarding the current status of Citizens. In addition, Citizens' Annual Report
must contain certain information, including audited financial statements,
similar to what is found on Form 10-KSB.
Individual directors, officers and owners of more than 10% of Citizens' stock,
must also file individual disclosures of the amount of Citizens securities
(stock, options or warrants) they beneficially own and of any transactions in
such securities to which they are parties. The initial status of all such
persons was reported on individual Form 3s. Subsequent securities transactions
will be reported on Form 4 as they occur, and an annual report of ownership is
filed on Form 5. In certain instances, the filing of a Form 4 or a Form 5 can
relieve the reporting individual of their duty to file the other.
Recently, the National Association of Securities Dealers adopted a rule
requiring the audit committees of Boards of Directors of reporting corporations
such as Citizens to undertake certain organizational and operational steps. The
Securities and Exchange Commission is considering adopting a similar rule. These
standards will require our audit committee to be comprised solely of
independent, non-employee directors who are financially literate. Furthermore,
the audit committee will need to adopt a formal charter defining the scope for
its operations. The Securities and Exchange Commission's proposed rule will also
require our auditors to review the financial statements contained in our Form
10-QSBs, in addition to our Form 10-KSBs.
As a state-chartered bank, CCB is subject to the supervision of the Department
and the FDIC. With respect to expansion, CCB may establish branch offices
anywhere within the State of Florida. CCB 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. The usury laws also apply to CFC and CCB
Mortgage. In addition, CCB, as a subsidiary of Citizens, is subject to
restrictions under federal law in dealing with Citizens 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.
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Both Citizens and CCB 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, 1999, our total risk-based capital and Tier I capital
ratio were 12.2% and 8.25%, 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 I"capital to total assets (net of goodwill).
Tier I capital includes common stockholders equity, noncumulative perpetual
preferred stock and minority interests in the equity accounts of consolidated
subsidiaries.
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 ("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., a holding company) 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 5% 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
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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>
Total Risk - Tier I Risk - Tier I
Based Capital Based Capital Leverage
Ratio Ratio Ratio
------------- --------------- --------
<S> <C> <C> <C> <C>
Well capitalized (1) 10% 6% 5%
Adequately capitalized (1) 8% 4% 4% (2)
Undercapitalized (3) < 8% < 4% < 4%
Significantly Undercapitalized (3) < 6% < 3% < 3%
Critically Undercapitalized < 2%
-
<FN>
(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.
</FN>
</TABLE>
Based upon the above regulatory ratios, CCB is considered to be well
capitalized.
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.
Under the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994,
restrictions on interstate acquisitions of banks by bank holding companies were
repealed, such that Citizens and any other bank holding company is 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 is 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. Florida
permits interstate branching through acquisition, but does not allow de novo
branching.
The scope of regulation and permissible activities of Citizens and our
subsidiaries is subject to change by future federal and state legislation.
ITEM 2. - DESCRIPTION OF PROPERTY
The Marco Island main office facility is a one-story modern bank building
consisting of 7,500 square feet. The headquarters of Citizens, CFC and CCB
Mortgage are also located in this facility. The East Trail Office consists of a
2-story (12,000 square feet) facility. The entire building is occupied by
Citizens' staff and includes a branch office, and executive and operations staff
for CCB and CCB Mortgage. The Moorings Office consists of 3,864 square feet
located in a 3-story professional office condominium building, and is also the
headquarters for CFC. All three facilities are owned by CCB.
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ITEM 3. - LEGAL PROCEEDINGS
There are no material pending legal proceedings to which Citizens or our
subsidiaries is a party or of which any of our properties is subject; nor are
there material proceedings known to us to be contemplated by any governmental
authority; nor are there material proceedings known to us, pending or
contemplated, in which any director, officer, affiliate or any principal
security holder of Citizens, or any associate of any of the foregoing is a party
or has an interest adverse to Citizens or our subsidiaries.
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 Citizens' common stock. On October 14,
1999, Citizens filed an application with the Nasdaq for approval for listing its
common stock on the Nasdaq SmallCap Market. It is expected that the
qualification process will be finalized during the first half of 2000.
As of February 29, 2000, the approximate number of holders of record of
Citizens' common stock was 785.
On February 14, 2000, Citizens paid a cash dividend of $.05 per share to
shareholders of record as of January 31, 2000. Citizens also paid an 8% stock
dividend in January, 1999 to stockholders of record as of December 31, 1998. No
other cash or stock dividends have been paid. It is the present policy of the
Board of Directors of Citizens to reinvest earnings for such period of time as
is necessary to ensure the success of our overall operations. Future cash
dividends will depend on our earnings, capital requirements, financial condition
and other factors considered relevant by our Board of Directors.
CCB is restricted in its ability to pay dividends to Citizens under Florida
banking laws and by regulations of the Federal Deposit Insurance Corporation.
Pursuant to Section 658.37, Florida Statutes, a state-chartered 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 CCB's
capital below required levels.
ITEM 6. - MANAGEMENT'S DISCUSSION AND ANALYSIS & FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Citizens hereby incorporates by reference the section entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in the
1999 Annual Report to Shareholders filed as an Exhibit under Item 13 herein.
ITEM 7. - FINANCIAL STATEMENTS
Citizens hereby incorporates by reference the Independent Auditors' Report and
the Consolidated Financial Statements contained in the 1999 Annual Report to
Shareholders 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
Citizens hereby incorporates by reference the sections entitled "Proposal I -
Election of Directors" and "Board of Directors Meeting" contained at pages 3
through 7 of the Proxy Statement filed electronically with the Securities and
Exchange Commission on March 10, 2000.
10
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ITEM 10. - EXECUTIVE COMPENSATION
Citizens hereby incorporates by reference the section entitled "Executive
Compensation" contained at pages 11 through 12 of the Proxy Statement.
ITEM 11. - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners
Citizens hereby incorporates by reference the section titled "Certain
Shareholders" on page 2 of the Proxy Statement.
(b) Security Ownership of Management
Citizens hereby incorporates by reference the section entitled "Beneficial Stock
Ownership" contained at page 7 of the Proxy Statement.
(c) Changes in Control
Citizens is not aware of any arrangements, including any pledge by any person of
securities of Citizens, the operation of which may at a subsequent date result
in a change of control of Citizens.
ITEM 12. - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Neither Citizens nor its subsidiaries have engaged in any reportable
transactions, including loans, to Citizens' or its subsidiaries' 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 marked by a single asterisk (*) were
previously filed as a part of, and are hereby incorporated by reference from
Citizens' 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 Citizens' 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 Citizens
*3.2 Bylaws of Citizens
*4.1 Specimen Common Stock Certificate
*4.2 Specimen Warrant Certificate
*4.4 Warrant Plan
**10.1 Incentive Stock Option Plan for Key Officers and Employees
**10.2 1998 Directors Stock Option Plan
**10.3 Employment Contract with Michael A. Micallef, Jr.
10.4 Employment Contract with Richard Storm, Jr.
10.5 Employment Contract with Gregory E. Smith
22.1 1999 Annual Report
22.2 Proxy Statement for 2000 Annual Meeting of Shareholders
27.0 Financial Data Schedule
(b) Reports on Form 8-K. Citizens hereby incorporates by reference the Form 8-K
filed with the Securities and Exchange Commission on November 1, 1999.
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 22, 2000 By: /s/ Richard Storm, Jr.
----------------------
Richard Storm, Jr.
Chairman of the Board and Chief
Executive Officer
Dated: March 22, 2000 By: /s/ Gregory E. Smith
--------------------
Gregory E. Smith
President and Principal
Financial 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 22, 2000
- ------------------------------------
DIANE M. BEYER
Assistant Secretary/Director
/s/ John V. Cofer March 23, 2000
- ------------------------------------
JOHN V. COFER
Director
/s/ Joel M. Cox, Sr. March 22, 2000
- ------------------------------------
JOEL M. COX, SR.
Director
/s/ Thomas B. Garrison March 23, 2000
- ------------------------------------
THOMAS B. GARRISON
Director
/s/ James S. Hagedorn March 22, 2000
- ------------------------------------
JAMES S. HAGEDORN
Vice Chairman/Director
/s/ Dennis J. Lynch March 22, 2000
- ------------------------------------
DENNIS J. LYNCH
Director
/s/ Robert A. Marks March 22, 2000
- ------------------------------------
ROBERT A. MARKS
Director
12
<PAGE>
/s/ Stephen A. McLaughlin March 22, 2000
- ------------------------------------
STEPHEN A. MCLAUGHLIN
Director
/s/ Louis J. Smith March 22, 2000
- ------------------------------------
LOUIS J. SMITH
Director
/s/ Richard Storm, Jr. March 22, 2000
- ------------------------------------
RICHARD STORM, JR.
Chairman, Chief Executive Officer
and Director
/s John G. Wolfe March 23, 2000
- ------------------------------------
JOHN G. WOLF
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.
Citizens' 1999 Annual Report is included as Exhibit 22.1 of this
filing.
Citizens' Proxy Statement for 2000 Annual Meeting of Shareholders is
included as Exhibit 22.2 of this filing.
13
EXHIBIT 10.4
Employment Contract with
Richard Storm, Jr.
14
<PAGE>
EMPLOYMENT AGREEMENT
FOR
RICHARD STORM, JR.
THIS EMPLOYMENT AGREEMENT ("Agreement") is being entered into this 9th
day of February, 2000, by and among CITIZENS COMMUNITY BANCORP, INC. ("CCBI"),
CITIZENS COMMUNITY BANK OF FLORIDA ("Bank") and RICHARD STORM, JR. ("Employee").
CCBI, the Bank and the subsidiaries of CCBI and the Bank are collectively
referred to herein as the "Company." CCBI, the Bank and Employee are
collectively referred to herein as the "Parties."
RECITALS
WHEREAS, CCBI and the Bank wish to retain Employee as their Chief
Executive Officer to perform the duties and responsibilities as are described in
this Agreement and as the respective Boards of Directors (collectively, the
"Board") may assign to Employee from time to time; and
WHEREAS, Employee desires to define the terms of his employment with
CCBI and the Bank.
NOW, THEREFORE, in consideration of the mutual agreements contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Parties hereto represent, warrant, undertake,
covenant and agree as follows:
OPERATIVE TERMS
1. Employment and Term. The Company shall employ Employee, and Employee
shall be employed, pursuant to the terms of this Agreement to perform the
services specified in Section 2 herein. The term of employment shall be for one
(1) year, commencing on January 1, 2000 (the "Effective Date"). Upon each new
day of the one (1) year period of employment from the Effective Date until the
Employee's 65th (sixty-fifth) birthday, the term of this Agreement shall be
automatically extended for one (1) additional day, to be added to the end of the
then-existing one (1) year term. Accordingly, at all times prior to (i) the
Employee's attaining age sixty-five (65) or (ii) the delivery of a Notice Of
Termination, as defined in Section 11 (or an actual termination) the term of
this Agreement shall be one (1) full year. However, either Party may terminate
the automatic renewals by giving the other Party written notice of their intent
not to renew. The automatic extensions of the term of this Agreement shall
immediately be suspended upon an employment termination by reason of death or
disability or retirement, or an employment termination made voluntarily by the
Employee (other than for good reason as defined in Section 9[d], or
involuntarily for just cause as defined in Section 9[b]). Additionally, the
Board shall, on an annual basis, review Employee's performance to determine
whether this Agreement should continue to be extended. The Board's action will
be reflected in the Board Meeting Minutes.
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In the event the Employee gives a Notice Of Termination, the term of
this Agreement shall expire upon the date indicated in the Notice Of
Termination, subject to the provisions of Section 11 herein. Except as otherwise
provided in the following paragraph with respect to a voluntary
termination for good reason, a voluntary employment termination by the Employee
shall result in the termination of the rights and obligations of the parties
under this Agreement; provided, however, that the terms and provisions of
Sections 12 and 13 shall continue to apply.
In the event the Company desires to involuntarily terminate the
employment of Employee (for purposes of this Agreement, a voluntary employment
termination by the Employee for good reason shall be treated as an involuntary
termination of the Employee's employment without just cause), the Company shall
deliver to the Employee a Notice Of Termination, and the following provisions
shall apply:
(a) In the event the involuntary termination is forjust
cause, this Agreement shall terminate immediately
upon delivery to the Employee of such Notice Of
Termination. Such a tennination forjust cause shall
result in the termination of all rights and
obligations of the Parties under this Agreement;
provided, however, that the terms and provisions of
Sections 12 and 13 shall continue to apply.
(b) In the event the involuntary termination is without
just cause, the Employee shall be entitled to receive
the severance benefits set forth in Sections 9(f) and
9(g) herein and the terms and provisions of Sections
12 and 13 shall continue to apply.
2. Position, Responsibilities and Duties. During the term of this
Agreement, Employee shall serve in the following capacities and shall fulfill
the following responsibilities and duties:
(a) Specific Duties: Employee shall serve as the Chief
Executive Officer of CCB1 and the Bank, through election by the Board.
In such capacity, Employee shall have the same powers, duties and
responsibilities of supervision and management usually accorded to the
Chief Executive Officer of a bank holding company or financial
institution. In addition, Employee shall use his best efforts to
perform the duties and responsibilities described in this Agreement and
any other duties assigned to Employee by the Board and to utilize and
develop contacts and customers to enhance the business of the Company.
Specifically, Employee shall devote his full business time and
attention and use his best efforts to accomplish and fulfill the
following duties and responsibilities, as well as other duties assigned
to Employee from time to time by the Board:
(i) serve as Chief Executive Officer of CCBI and
the Bank;
(ii) serve as the Chairman of the Boards of CCBI
and the Bank, if and when elected to such
positions;
(iii) serve on such committees as appointed by the
Board from time to time;
(iv) coordinate all management contact with the
members of the Board;
2
<PAGE>
(v) have the ultimate responsibility for the
preparation and approval of the agendas for
all meetings of the Board and Chair those
meetings, emphasizing participation by the
Board and efficient time usage;
(vi) work in close coordination with the
Presidents of CCBI, the Bank and their
subsidiaries on the strategic planning
process for the Company;
(vii) develop, review and monitor all compensation
systems in the Company, with particular
emphasis on officers and supervisors;
(viii) coordinate the budgeting process for the
Company with the President/CFO to insure
that budgetary goals and projections are
being met;
(ix) lead the strategic planning process of the
Company (including the identification,
development and implementation of approved
complementary business activities and
subsidiaries;
(x) monitor daily financial statements for the
Company;
(xi) assess the developmental needs and career
paths of all officers of the Company and
make recommendations to the respective
Executive Committee members;
(xii) establish and implement marketing efforts to
increase the business of the Company; and
(xiii) coordinate with the Company's attorneys and
accountants, and other service providers to
the extent necessary to further the business
of the Company, keeping in compliance with
government laws and regulations and
otherwise keeping the Company in as good a
financial and legal posture as possible.
(b) GeneralDuties: During the term of this Agreement, and
except for illness, vacation periods and leaves of absences, Employee
shall devote a minimum of 120 hours per month of his working time,
attention, skill and best efforts to accomplish and faithfully perform
all of the duties assigned to Employee. Such working time may be on or
off site at the discretion of Employee. Employee shall, at all times,
conduct himself in a manner that will reflect positively upon the
Company. Employee shall obtain such licenses, certificates,
accreditations and professional memberships and designations as the
Company may reasonably require.
3
<PAGE>
3. Compensation. During the term of this Agreement, Employee
shall be compensated as follows:
(a) Base Salary: Employee shall receive an annual salary of
Sixty-Three Thousand Dollars ($63,000) (the "Base Salary"), payment of
which shall be allocated between CCBI and the Bank as determined by the
Board. The Base Salary shall be payable in equal installments, in
accordance with the Company's standard payroll practices, reduced
appropriately by deductions for federal income withholding taxes,
social security taxes and other deductions required by applicable laws.
The Company may adjust the Base Salary from time to time, based upon
the Board's evaluation of Employee's performance. In no event, however,
will the Base Salary be reduced without Employee's written concurrence.
(b) Performance Bonus: In each year, in the event the
Company's year end pretax earnings are $ 1.0 million or less, Employee
shall receive a performance bonus of 2% of the Company's pre-tax
earnings. Should the Company's pre-tax earnings at year end exceed $
1.0 million, Employee's performance bonus shall be 1 % of the Company's
pre-tax earnings
(c) Profit Sharing Plan: Employee shall be entitled to share
with the Bank's President, as allocated by the Board, a percentage of
the Bank's profit sharing pool as determined by the Board, at its sole
discretion.
(d) Stock Appreciation Incentive Bonus: Each year, Employee
shall be entitled to a cash bonus equal to the increase in the "Fair
Market Value" of 25,000 shares of CCBI common stock from January 1 of
that year to December 31 of that year ("SAI bonus"). The Board of the
Company may, from year to year, increase the number of shares of CCBI
common stock on which the SAI bonus is predicated.
For purposes of this Section 3, the Fair Market Value of a
share of CCBI common stock shall be the closing sale price of a share
on the date in question (or, if such day is not a trading day in the
U.S. markets, on the nearest preceding trading day), as reported with
respect to the principal market (or the composite of the markets, if
more than one) or national quotation system in which such shares are
then traded, or if no such closing prices are reported, the mean
between the high bid and low asked prices that day on the principal
market or national quotation system then in use, or if no such
quotations are available, the price furnished by a professional
securities dealer making a market in such shares as selected by the
Board. 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 preceding the
date in question. In the absence of an arms length transaction during
such 90 days, Fair Market Value means the book value of a share of
common stock.
Notwithstanding the provisions of the preceding two
paragraphs, in the event of a change in control (as defined in Section
9[e] of this Agreement), Employee shall be immediately entitled to
receive his SAI bonus for that year. In this instance, the amount of
the SAI bonus shall be equal to the increase in the Fair Market Value
of the number of SAI shares from December 31 of the preceding year to
the price paid for the number of shares of CCBI common stock equal to
the number of SAI shares in the transaction that effects the change in
control; the SAI bonus shall be paid simultaneously with that closing.
4
<PAGE>
(e) Stock and Other Benefit Plans: During the term of this
Agreement, the Employee will be entitled to participate in and receive
the benefits of any stock option plans, stock ownership plans,
profit-sharing plans, 401 (k) plans, deferred compensation plans, or
other plans, benefits and privileges given to employees and executives
of the Company which are currently in effect at the execution of this
Agreement or which may come into existence thereafter to the extent the
Employee is otherwise eligible and qualifies to so participate in and
receive such benefits or privileges. The Company shall not make any
changes in such plans, benefits or privileges which would adversely
affect the Employee's rights or benefits thereunder, unless such change
occurs pursuant to a program applicable to all executive officers (Vice
President or above) and does not result in a proportionately greater
adverse change in the rights of or benefits to the Employee as compared
with any other executive officer of the Company. Nothing paid to the
Employee under any plan or arrangement presently in effect or made
available in the future shall be deemed to be in lieu of the Base
Salary payable to the Employee pursuant to Section 3(a) herein.
4. Payment of Business Expenses. Employee is authorized to incur
reasonable expenses in performing his duties. The Company will reimburse
Employee for authorized expenses, according to the Company's established
policies, promptly after Employee's presentation of an itemized account of such
expenditures.
5. Vacation. Employee is entitled to three (3) weeks paid
vacation time per year on a non-cumulative basis.
6. Fringe Benefits.
(a) Medical Benefits: Employee is entitled to participate in
all medical and health care benefit plans through health insurance,
corporate funds, medical reimbursement plans or other plans, if any,
provided, or to be provided, by the Company for its employees.
(b) Automobile Allowance: The Company will provide Employee
with a $600 per month automobile allowance during Employee's term of
employment. All expenses and upkeep of the automobile will be bome by
the Employee. Employee shall be responsible for apportioning the time
allocated for personal use for purposes of compliance with the Internal
Revenue Code of 1986, as amended.
(c) Country Club Membership: The Company will pay for a full
membership for Employee at the Marco Island Yacht Club located in
Collier County, Florida. Employee shall comply with all applicable
federal income tax laws and regulations governing Employee's personal
use of this membership. The Company will also pay Employee's membership
costs in other clubs or organizations when such membership will benefit
the Company as determined in advance by the Board. Employee shall
maintain records of both business and personal use of such facilities
and shall submit those records to CCBI monthly.
5
<PAGE>
7. Disability/Illness.
(a) Illness: Employee shall be paid his full Base Salary for
any period of his illness or incapacity, provided that such illness or
incapacity does not render Employee unable to perform his duties under
this Agreement for a period longer than sixty (60) consecutive days. At
the end of such sixty (60) day period, the Company may terminate
Employee's employment and this Agreement.
(b) Disability: Regardless of whether the Company terminates
Employee's employment and this Agreement pursuant to Section 7(a)
herein, if an illness or incapacity lasts for longer than sixty (60)
consecutive days, Employee shall receive payments under the disability
insurance plan provided by the Company and not his full Base Salary.
(c) Continuation of Coverages: During any period of illness or
disability, the Company may continue any other life, health and
disability coverages that Employee was entitled to participate in
immediately prior to the date of receiving benefits or payments under
any disability insurance plan; provided, however, that the Employee's
continued participation is possible under the general terms and
provisions of such plans and programs, and that:
(i) such coverages shall cease upon the earlier
of. (A) sixty (60) days after the date of
any termination of employment hereunder
(with the exception of disability insurance
coverage); or (B) the date of Employee's
death; and
(ii) the continuation of such coverages is not
violative of any disability insurance policy
that Employee is receiving benefits or
payments under.
(d) No Reduction in Base Salary: During the period in which
Employee is disabled or subject to illness or incapacity, other than as
described in Section 7(b) herein, there shall be no reduction in
Employee's Base Salary.
(e) Annual Physical: Once a year, Employee agrees to undergo a
routine physical examination. The costs of the examination will be
reimbursed by the Company. The results of the physical examination, or
a summary thereof, shall be made part of Employee's personnel file.
8. Death During Employment. In the event of Employee's death during the
term of this Agreement, the Company's obligation to Employee shall be limited to
the portion of Employee's compensation which would be payable up to the first
working day of the first month after Employee's death, except that any accrued
compensation payable to Employee under any benefit plan maintained by the
Company will be paid pursuant to its tenns.
9. Termination.
(a) Illness, Incapacity or Death: This Agreement shall
terminate upon Employee's illness, incapacity or death in
accordance with the provisions of Sections 7 and 8 herein.
6
<PAGE>
(b) Termination for Just Cause: The Company shall have the
right at anytime, upon prior written notice of termination satisfying
the requirements of Section 11 herein, to terminate the Employee's
employment hereunder, including termination forjust cause. For the
purpose of this Agreement, termination for "just cause" shall mean
termination for personal dishonesty, incompetence, willful misconduct,
material breach of fiduciary duty, intentional failure to perform the
duties stated in this Agreement, willful violation of any law, rule or
regulation (other than traffic violations or similar offenses), willful
violation of a final cease-and-desist order, willful or intentional
breach or negligence or misconduct in the performance of such duties or
material breach of any provision of this Agreement as determined by a
court of competent jurisdiction or in final agency action by a federal
or state regulatory agency having jurisdiction over the Company. For
purposes of this Section, no act, or failure to act, on the Employee's
part shall be considered "willful" unless done, or omitted to be done,
by him not in good faith and without reasonable belief that his action
or omission was in the best interest of the Company; provided that any
act or omission to act by the Employee in reasonable reliance upon an
opinion of Corporate Counsel to the Company shall not be deemed to be
willful. In the event Employee is terminated for just cause, Employee
shall have no right to compensation or other benefits for any period
after such date of termination.
(c) Involuntary Termination: If the Employee is terminated by
the Company other than for just cause or in connection with a change in
control of the Company (as defined in Section 9[e] herein), Employee's
right to compensation and other benefits under this Agreement shall be
as set forth in Sections 9(f)(i) and 9(g) herein. In the event the
Employee is terminated by the Company in connection with a change in
control of the Company, Employee's right to compensation and other
benefits under this Agreement shall be as set forth in Sections
9(f)(ii) and 9(g) herein.
(d) Termination for Good Reason: Employee may terminate his
employment hereunder for good reason. For purposes of this Agreement,
"good reason" shall mean (i) a failure by the Company to comply with
any material provision of this Agreement, which failure has not been
cured within fifteen (15) days after a notice of such noncompliance has
been given by the Employee to the Company; or (ii) subsequent to a
change in control as defined in Section 9(e) herein.
(e) Change in Control: For purposes of this Agreement, a
"change in control" shall mean a change in ownership of stock of CCB1
or the Bank whereby a person: (i) acquires 50%, plus one share of the
outstanding shares of voting stock of CCBI or the Bank through direct
or indirect ownership or proxy; or (ii) controls in any manner the
election of a majority of the directors of the Board.
(b) Severance Payment:
(i) If the Employee shall terminate his
employment for good reason as defined in of
Section 9(d) herein, or if the Employee is
terininated by the Company for other
thanjust cause pursuant to Section 9(c)
herein, then in lieu of any further salary
payments to the Employee for periods
subsequent to the date of termination, the
Employee shall be paid, as severance, an
amount which would equal the Employee's
7
<PAGE>
total Base Salary for the remainder of the
term of the Agreement, plus any bonus,
profit sharing, or incentive compensation
that the Employee would have been entitled
to hereunder;
(ii) In the event Employee's employment is
terminated as a result of a change in
control or a change in control of the Bank
occurs within twelve (12) months of the
Employees' involuntary termination or
termination for good reason, Employee
shall be entitled to a severance payment
equal to two (2) times his current Base
Salary and any bonus, profit sharing or
incentive compensation that would then
be due Employee. Any payment under Section
9(f)(i) and 9(f)(ii) shall be made in
substantially equal semi-monthly
installments on the fifteenth and last days
of each month until paid in full.
(g) Additional Severance Benefits: Unless the Employee is
terminated for just cause pursuant to Section 9(b) herein, pursuant to
Section 10(b) herein, pursuant to Section 7 herein, or pursuant to a
termination of employment by the Employee for other than good reason,
the Company shall maintain in full force and effect, for the continued
benefit of the Employee for the remaining term of this Agreement, or
twelve (12) months (whichever is longer), all employee benefit plans
and programs in which the Employee was entitled to participate in
immediately prior to the date of termination; provided, however, that
the Employee's continued participation is possible under the general
terms and provisions of such plans and programs. Further, the Company
shall pay for the same or similar benefits if such benefits are
available to the employee on an individual or group basis as a result
of contractual or statutory provisions requiring or permitting such
availability including, but not limited to, health insurance covered
under COBRA.
(h) Mitigation: Employee shall not be required to mitigate the
amount of any payment provided for in Sections 9(f) and 9(g) of this
Agreement by seeking other employment or otherwise.
10. Required Provisions by Regulation. The Company and Employee
acknowledge that the laws and regulations governing the Parties require that
certain provisions be provided in each employment agreement with officers and
employees of the Bank. The Parties, therefore, agree to be bound by the
following provisions:
(a) Suspension: If the Employee is suspended from office
and/or temporarily prohibited from participating in the conduct of the
Bank's affairs pursuant to notice served under Section 8(e)(3) or
Section 8(g)(1) of the Federal Deposit Insurance Act ("FDIA") (12
U.S.C. Section 1818[e][3] and Section 1818[g][1]), the Bank's
obligations under this Agreement shall be suspended as of the date of
service, unless stayed by appropriate proceedings. If the charges in
the notice are dismissed, the Bank may, in its discretion: (i) pay the
Employee all or part of the compensation withheld while its obligations
under this Agreement were suspended, and (ii) reinstate (in whole or in
part) any of its obligations which were suspended.
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<PAGE>
(b) Permanent Prohibition: If the Employee is removed from
office and/or permanently prohibited from participating in the conduct
of the Bank's affairs by an order issued under Section 655.037, Florida
Statutes, or Section 8(e)(4) or Section 8(g)(1) of the FDIA (12 U.S.C.
Sections 1818[e](4] and [g][1]), all obligations of the Bank under this
Agreement shall terminate as of the effective date of the order, but
vested rights of the Employee and the Bank as of the date of
termination shall not be affected.
(c) Default Under FDIA: If the Bank is in default, as defined
in Section 3(x)(1) of the FDIA (12 U.S.C. Section 1813[x][1]), all
obligations under this Agreement shall terminate as of the date of
default, but vested rights of the Employee and the Bank as of the date
of termination shall be not affected.
(d) Regulatory Termination: All obligations of the Bank under
this Agreement shall be terminated, except to the extent that a
determination has been made that continuation of this Agreement is
necessary for continued operation of the Bank:
(i) by the Director of the Federal Deposit
Insurance Corporation (or his or her
designee) (the "FDIC") at the time the FDIC
enters into an agreement to provide
assistance to or on behalf of the Bank under
the authority to contained in Section 13(c)
of the Federal Deposit Insurance Act; or
(ii) by the Department or the Director (or his or
her designee) at the time the Department or
the Director (or his or her designee)
approves a supervisory merger to resolve
problems related to operation of the Bank or
when the Bank's determined by the Director
to be in unsafe or unsound condition.
Any of Employee's rights that have already vested, however, shall not
be affected by such action.
11. Notice of Termination.
(a) Employee's Notice: Employee shall have the right, upon
prior written notice of termination of not less than sixty (60) days,
to terminate his employment hereunder. In such event, Employee shall
have no right after the date of termination to compensation or other
benefits as provided in this Agreement, unless such termination is for
"good reason", as defined in Section 9(d) herein. If the Employee
provides a notice of termination for good reason, the date of
termination shall be the date on which the notice of termination is
given.
(b) Specificity:Any termination of the Employee's employment
by the Company or by Employee shall be communicated by written notice
of termination to the other party hereto. For purposes of this
Agreement, a "notice of termination" shall mean a dated notice which
shall: (i) indicate the specific termination provision in the Agreement
relied upon; (ii) set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the
Employee's employment under the provision so indicated; and
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(iii) set forth the date of termination, which shall be not less than
thirty (30) days nor more than forty-five (45) days after such notice
of termination is given, except in the case of the Company's
termination of the Employee's employment forjust cause, in which case
date of termination shall be the date such notice of termination is
given.
(c) Delivery of Notices: All notices given or required to be
given herein shall be in writing, sent by United States first-class
certified or registered mail, postage prepaid, by way of overnight
carrier or by hand delivery. If to the Employee (or to the Employee's
spouse or estate upon the Employee's death) notice shall be sent to
Employee's last-known address, and if to the Company, notice shall be
sent to the corporate headquarters of CCBL All such notices shall be
effective when deposited in the mail if sent via first-class certified
or registered mail, or upon delivery if by hand delivery or sent via
overnight carrier. Either Party, by notice in writing, may change or
designate the place for receipt of all such notices.
12. Post-Termination Obligations. The Company shall pay to Employee
such compensation as is required pursuant to this Agreement; provided, however,
any such payment shall be subject to Employee's post-termination cooperation.
Such cooperation shall include the following:
(i) Employee shall furnish such information and
assistance as may be reasonably required by the
Company, or its attorneys, in connection with any
litigation or settlement of any dispute between the
Company, a borrower and/or any other third parties
(including without limitation serving as a witness in
court or other proceedings); and
(ii) Employee shall provide such information or assistance
as may be reasonably required by the Company in
connection with any regulatory examination by any
state or federal regulatory agency.
13. Maintenance of Trade Secrets and Confidential Information. Employee
shall use his best efforts and utmost diligence to guard and protect all of the
Company's trade secrets and confidential information. Employee shall not, either
during the term or after tennination of this Agreement, for whatever reason,
use, in any capacity, or divulge or disclose in any manner, to any Person, the
identity of the Company's customers, or its customer lists, methods of
operation, marketing and promotional methods, processes, techniques, systems,
formulas, programs or other trade secrets or confidential information relating
to the Company's business.
14. Competitive Activities. Employee agrees that during the term of
this Agreement, except with the express consent of the Board, Employee will not,
directly or indirectly, engage or participate in, become a director of, or
render advisory or other services for, or in connection with, or make any
financial investment in any financial institution that directly competes with
the business of the Bank in Collier County, Florida; provided, however, that
Employee shall not be precluded or prohibited from owning passive investments,
including investments in the securities of other financial institutions.
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3. Remedies for Breach.
(a) Arbitration: The Parties agree that, except for the
specific remedies for injunctive relief and other equitable relief
contained in Sections 15(b) and 15(c) herein, any controversy or claim
arising out of or relating to this Agreement or any breach thereof,
including, without limitation, any claim that this Agreement or any
portion thereof is invalid, illegal or otherwise voidable, shall be
submitted to binding arbitration before and in accordance with the
rules of the American Arbitration Association and judgment upon the
determination and/or award of such arbitrator may be entered in any
court having jurisdiction thereof-, provided, however, that this clause
shall not be construed to permit the award of punitive damages to
either party. The prevailing party to said arbitration shall be
entitled to an award of reasonable Attorneys' Fees. The venue of
arbitration shall be in Collier County, Florida.
(b) Injunctive Relief. The Parties acknowledge and agree that
the services to be performed by Employee are special and unique and
that money damages cannot fully compensate the Company in the event of
Employee's violation of the provisions of Section 14 of this Agreement.
Thus, in the event of a breach of any of the provisions of such
Section, Employee agrees that the Company, upon application to a court
of competent jurisdiction, shall be entitled to an injunction
restraining Employee from any further breach of the terms and provision
of such Section. Should the Company prevail in an action seeking an
injunction restraining Employee, Employee shall pay all costs and
reasonable Attorneys' Fees incurred by the Company in and relating to
obtaining such injunction. Such injunctive relief may be obtained
without bond and Employee's sole remedy, in the event of the improper
entry of such injunction, shall be the dissolution of such injunction.
Employee hereby waives any and all claims for damages by reason of the
wrongful issuance of any such injunction.
(c) Cumulative Remedies: Notwithstanding any other provision
of this Agreement, the injunctive relief described in Section 15(b)
herein and all other remedies provided for in this Agreement which are
available to the Company as a result of Employee's breach of this
Agreement, are in addition to and shall not limit any and all remedies
existing at or in equity which may also be available to the Company.
16. Assignment. This Agreement shall inure to the benefit of and be
binding upon the Employee, and to the extent applicable, his heirs, assigns,
executors, and personal representatives, and to the Bank, and to the extent
applicable, its successors, and assigns, including, without limitation, any
person, partnership, or corporation which may acquire all or substantially all
of the Bank's assets and business, or with or into which the Bank may be
consolidated or merged, and this provision shall apply in the event of any
subsequent merger, consolidation, or transfer, unless such merger or
consolidation or subsequent merger or consolidation is a transaction of the type
which would result in termination under Sections 1 O(c) and 1 O(d) herein.
17. Miscellaneous.
(a) Amendments to the Agreement: Unless as otherwise
provided herein, this Agreement may not be modified or amended except
in writing signed by the Parties.
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(b) Certain Definitions: For purposes of this Agreement,
the following terms whenever capitalized herein shall have the
following meanings:
(i) "Person" shall mean any natural person,
corporation, partnership (general or
limited), trust, association or any other
business entity.
(ii) "Attorneys' Fees" shall include the legal
fees and disbursements charged by attorneys
and their related travel and lodging
expenses, court costs, paralegal fees, etc.
incurred in settlement, trial, appeal or in
bankruptcy proceedings.
(c) Headings for Reference Only: The headings of the Sections
and the Subsections herein are included solely for convenient
reference and shall not control the meaning or the interpretation of
any of the provisions of this Agreement.
(d) Governing LawlJurisdiction: This Agreement shall be
construed in accordance with and governed by the laws of the State of
Florida. Any litigation involving the Parties and their rights and
obligations hereunder shall be brought in the appropriate courts in and
for Collier County, Florida.
(e) Severability: If any of the provisions of this Agreement
shall be held invalid for any reason, the remainder of this Agreement
shall not be affected thereby and shall remain in full force and effect
in accordance with the remainder of its terms.
(f) Entire Agreement: This Agreement and all other documents
incorporated or referred to herein, contain the entire agreement of the
Parties and there are no representations, inducements or
otherprovisions other than those expressed in writing herein. This
Agreement amends, supplants and supersedes any and all prior agreements
between the Parties. No modification, waiver or discharge of any
provision or any breach of this Agreement shall be effective unless it
is in writing signed by both Parties. A Party's waiver of the other
Party's breach of any provision of this Agreement, shall not operate,
or be construed, as a waiver of any subsequent breach of that provision
or of any other provision of this Agreement.
(g) Waiver: No course of conduct by the Company or Employee
and no delay or omission of the Company or Employee to exercise any
right or power given under this Agreement shall: (i) impair the
subsequent exercise of any right or power, or (ii) be construed to be a
waiver of any default or any acquiescence in or consent to the curing
of any default while any other default shall continue to exist, or be
construed to be a waiver of such continuing default or of any other
right or power that shall theretofore have arisen. Any power and/or
remedy granted by law and by this Agreement to any party hereto may be
exercised from time to time, and as often as may be deemed expedient.
All such rights and powers shall be cumulative to the fullest extent
permitted by law.
(h) Pronouns: As used herein, words in the singular include
the plural, and the masculine include the feminine and neutral gender,
as appropriate.
(i) Recitals: The Recitals set forth at the beginning of this
Agreement shall 1~ deemed to be incorporated into this Agreement by
this reference as if fully set forth herein, and this Agreement shall
be interpreted with reference to and in light of such Recitals.
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<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the day and year first written above.
CITIZENS COMMUNITY BANCORP, INC.
/s/ Richard Storm, Jr. By:/s/ Joel M. Cox
- ----------------------------- ---------------------
Richard Storm, Jr. Joel M. Cox
Chairman of the Executive Committee
/s/ Gregory E. Smith /s/ Gregory E. Smith
- ----------------------------- --------------------
Witness Witness
CITIZENS COMMUNITY BANK OF FLORIDA
/s/ Richard Storm, Jr. By:/s/ Diane M. Beyer
- ----------------------------- -------------------
Richard Storm, Jr. Diane M. Beyer
Chairman of the Executive Committee
/s/ Gregory E. Smith /s/ Gregory E. Smith
- ----------------------------- --------------------
Witness Witness
13
EXHIBIT 10.5
Employment Contract with
Gregory E. Smith
15
<PAGE>
EMPLOYMENT AGREEMENT
FOR
GREGORY E. SMITH
THIS EMPLOYMENT AGREEMENT ("Agreement") is being entered into this 24th
day of February, 2000, by and among CITIZENS COMMUNITY BANCORP, INC. ("CCBI"),
CITIZENS COMMUNITY BANK OF FLORIDA ("Bank") and GREGORY E. SMITH ("Employee").
CCBI, the Bank and the subsidiaries of CCBI and the Bank are collectively
referred to herein as the "Company." CCBI, the Bank and Employee are
collectively referred to herein as the "Parties."
RECITALS
WHEREAS, CCBI wishes to retain Employee as its President and Chief
Financial Officer and the Bank wishes to retain Employee as its President and
Chief Operations Officer to perform the duties and responsibilities as are
described in this Agreement and as the respective Boards of Directors
(collectively, the "Board") may assign to Employee from time to time; and
WHEREAS, Employee desires to define the terms of his employment with
CCBI and the Bank.
NOW, THEREFORE, in consideration of the mutual agreements contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Parties hereto represent, warrant, undertake,
covenant and agree as follows:
OPERATIVE TERMS
1. Employment and Term. The Company shall employ Employee and Employee
shall be employed pursuant to the terms of this Agreement to perform the
services specified in Section 2 herein. The term of employment shall be for one
(1) year, commencing on January 1, 2000 (the "Effective Date"). Upon each new
day of the one (1) year period of employment from the Effective Date until the
Employee's 65th (sixty-fifth) birthday, the term of this Agreement shall be
automatically extended for one (1) additional day, to be added to the end of the
then-existing one (1) year term. Accordingly, at all times prior to: (i) the
Employee's attaining age sixty-five (65), or (ii) the delivery of a Notice Of
Termination, as defined in Section 11 (or an actual termination) the term of
this Agreement shall be one (1) full year. However, either Party may terminate
the automatic renewals by giving the other Party written notice of their intent
not to renew. The automatic extensions of the term of this Agreement shall
immediately be suspended upon an employment termination by reason of death or
disability or retirement, an employment termination made voluntarily by the
Employee (other than for good reason as defined in Section 9[d], or
involuntarily for just cause as defined in Section 9[b]), or upon a change in
control of CCBI or the Bank as defined in Section 9(e), unless, however, the
Company or the acquiror affirmatively state to Employee that the renewals shall
continue. Additionally, the Board shall, on an annual basis, review Employee's
performance to determine whether this Agreement should continue to be extended.
The Board's action will be reflected in the Board Meeting Minutes.
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In the event the Employee gives a Notice Of Termination, the term of
this Agreement shall expire upon the date indicated in the Notice Of
Termination, subject to the provisions of Section 11 herein. Except as otherwise
provided in the following paragraph with respect to a voluntary termination for
good reason, a voluntary employment termination by the Employee shall result in
the immediate termination of the rights and obligations of the parties under
this Agreement; provided, however, that the terms and provisions of Sections 12,
13, 14 and 15 shall continue to apply.
In the event the Company desires to involuntarily terminate the
employment of Employee (for purposes of this Agreement, a voluntary employment
termination by the Employee for good reason shall be treated as an involuntary
termination of the Employee's employment without just cause), the Company shall
deliver to the Employee a Notice Of Termination, and the following provisions
shall apply:
(a) In the event the involuntary termination is for just
cause, this Agreement shall terminate immediately
upon delivery to the Employee of such Notice Of
Termination. Such a termination for just cause shall
result in the termination of all rights and
obligations of the Parties under this Agreement;
provided, however, that the terms and provisions of
Sections 12, 13, 14 and 15 shall continue to apply.
(b) In the event the involuntary termination is without
just cause, the Employee shall be entitled to receive
the severance benefits set forth in Sections 9(f) and
9(g) herein and the terms and provisions of Sections
12, 13, 14 and 15 shall continue to apply.
2. Position, Responsibilities and Duties. During the term of this
Agreement, Employee shall serve in the following capacities and shall fulfill
the following responsibilities and duties:
(a) Specific Duties: Employee shall serve as the President and
Chief Financial Officer of CCBI and the President and Chief Operations
Officer of the Bank, through election by the Board. In such capacities,
Employee shall have the same powers, duties and responsibilities of
supervision and management usually accorded the same officers of
similar bank holding companies or financial institutions. In addition,
Employee shall use his best efforts to perform the duties and
responsibilities described in this Agreement and any other duties
assigned to Employee by the Chief Executive Officer and/or the Board
and to utilize and develop contacts and customers to enhance the
business of the Company. Specifically, Employee shall devote his full
business time and attention and use his best efforts to accomplish and
fulfill the following duties and responsibilities, as well as other
duties assigned to Employee from time to time by the Board:
(i) serve as an Executive Officer of CCBI and
President and Chief Operations Officer of
the Bank;
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<PAGE>
(ii) serve as a member of the Board, if and when
elected to such positions;
(iii) serve on such committees as appointed by the
Board from time to time;
(iv) develop, review and monitor all operating
systems for the Bank;
(v) develop, review and monitor all financial
reporting, auditing and record keeping
systems for CCBI;
(vi) coordinate the budgeting process for the
Company with the Chief Executive Officer to
insure that budgetary goals and
projections are being met;
(vii) participate with the Chief Executive Officer
in the strategic planning process of the
Company (this includes the identification,
development and implementation of approved
complementary business activities and
subsidiaries;
(viii) monitor daily financial statements for the
Company;
(ix) assess the developmental needs and career
paths of all employees of the Company and
make recommendations to the Chief Executive
Officer of the Company; and
(x) coordinate with the Company's attorneys and
accountants, and other service providers to
the extent necessary to further the business
of the Company, keeping in compliance with
government laws and regulations and
otherwise keeping the Company in as good a
financial and legal posture as possible.
(b) General Duties: During the term of this Agreement, and
except for illness, vacation periods and leaves of absences, Employee
shall devote a minimum of 160 hours per month of his working time,
attention, skill and best efforts to accomplish and faithfully perform
all of the duties assigned to Employee. Employee shall, at all times,
conduct himself in a manner that will reflect positively upon the
Company. Employee shall obtain such licenses, certificates,
accreditations and professional memberships and designations as the
Company may reasonably require.
3. Compensation. During the term of this Agreement, Employee
shall be compensated as follows:
(a) Base Salary: Employee shall receive an annual salary
of Ninety Thousand Dollars ($90,000) (the "Base Salary"), payment of
which shall be allocated between CCBI and the Bank as determined by the
Board. The Base Salary shall be payable in equal
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<PAGE>
installments, in accordance with the Company's standard payroll
practices, reduced appropriately by deductions for federal income
withholding taxes, social security taxes and other deductions required
by applicable laws. The Company may adjust the Base Salary from time to
time, based upon the Board's evaluation of Employee's performance. In
no event, however, will the Base Salary be reduced without Employee's
written concurrence.
(b) Profit Sharing Plan: Employee shall be entitled to share
with the Bank's Chief Executive Officer, as allocated by the Board, a
percentage of the Bank's profit sharing pool as determined by the
Board, at its sole discretion.
(c) Stock Appreciation Incentive Bonus: Each year, Employee
shall be entitled to a cash bonus equal to the increase in the "Fair
Market Value" of 10,000 shares of CCBI common stock from December 31 of
the preceding year to December 31 of the year for which the bonus is
awarded ("SAI bonus"). The Board of the Company may, from year to year,
increase or decrease the number of shares of CCBI common stock on which
the SAI bonus is predicated ("SAI shares").
For purposes of this Section 3, the Fair Market Value of a
share of CCBI common stock shall be the closing sale price of a share
on the date in question (or, if such day is not a trading day in the
U.S. markets, on the nearest preceding trading day), as reported with
respect to the principal market (or the composite of the markets, if
more than one) or national quotation system in which such shares are
then traded, or if no such closing prices are reported, the mean
between the high bid and low asked prices that day on the principal
market or national quotation system then in use, or if no such
quotations are available, the price furnished by a professional
securities dealer making a market in such shares as selected by the
Board. 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 preceding the
date in question. In the absence of an arms length transaction during
such 90 days, Fair Market Value means the book value of a share of
common stock.
Notwithstanding the provisions of the preceding two
paragraphs, in the event of a change in control (as defined in Section
9[e] of this Agreement), Employee shall be immediately entitled to
receive his SAI bonus for that year. In this instance, the amount of
the SAI bonus shall be equal to the increase in the Fair Market Value
of the number of SAI shares from December 31 of the preceding year to
the price paid for the number of shares of CCBI common stock equal to
the number of SAI shares in the transaction that effects the change in
control; the SAI bonus shall be paid simultaneously with that closing.
(d) Stock and Other Benefit Plans: During the term of this
Agreement, the Employee will be entitled to participate in and receive
the benefits of any stock option plans, stock ownership plans,
profit-sharing plans, 401(k) plans, deferred compensation plans, or
other plans, benefits and privileges given to employees and executives
of the Company which are currently in effect at the execution of this
Agreement or which may come into existence thereafter to the extent
the Employee is otherwise eligible and qualifies to so participate in
and receive such benefits or privileges. The Company shall not make
any changes in such plans, benefits or privileges which would
adversely affect the Employee's rights or benefits thereunder, unless
such change occurs pursuant to a program applicable to
4
<PAGE>
all executive officers (Vice President or above) and does not result in
a proportionately greater adverse change in the rights of or benefits
to the Employee as compared with any other executive officer of the
Company. Nothing paid to the Employee under any plan or arrangement
presently in effect or made available in the future shall be deemed to
be in lieu of the Base Salary payable to the Employee pursuant to
Section 3(a) herein.
4. Payment of Business Expenses. Employee is authorized to incur
reasonable expenses in performing his duties. The Company will reimburse
Employee for authorized expenses, according to the Company's established
policies, promptly after Employee's presentation of an itemized account of such
expenditures.
5. Vacation. Employee is entitled to three (3) weeks paid
vacation time per year on a non-cumulative basis.
6. Fringe Benefits.
(a) Medical Benefits: Employee is entitled to participate in
all medical and health care benefit plans through health insurance,
corporate funds, medical reimbursement plans or other plans, if any,
provided, or to be provided, by the Company for its employees.
(b) Automobile Allowance: The Company will provide Employee
with a $600 per month automobile allowance during Employee's term of
employment. All expenses and upkeep of the automobile will be borne by
the Employee. Employee shall be responsible for apportioning the time
allocated for personal use for purposes of compliance with the Internal
Revenue Code of 1986, as amended.
(c) Club Memberships: The Company will pay Employee's
membership costs in any clubs or organizations that are deemed to be a
benefit to the Company, as determined in advance by the Board. Employee
shall maintain records of both business and personal use of such
facilities and shall submit those records to CCBI monthly.
7. Disability/Illness.
(a) Illness: Employee shall be paid his full Base Salary for
any period of his illness or incapacity, provided that such illness or
incapacity does not render Employee unable to perform his duties under
this Agreement for a period longer than sixty (60) consecutive days. At
the end of such sixty (60) day period, the Company may terminate
Employee's employment and this Agreement.
(b) Disability: Regardless of whether the Company terminates
Employee's employment and this Agreement pursuant to Section 7(a)
herein, if an illness or incapacity lasts for longer than sixty (60)
consecutive days, Employee shall receive payments under the disability
insurance plan provided by the Company and not his full Base Salary.
(c) Continuation of Coverages: During any period of illness or
disability, the Company may continue any other life, health and
disability coverages that Employee was entitled to participate in
immediately prior to the date of receiving benefits or payments under
any disability insurance plan; provided, however, that the Employee's
5
<PAGE>
continued participation is possible under the general terms and
provisions of such plans and programs, and that:
(i) such coverages shall cease upon the earlier
of: (A) sixty (60) days after the date of
any termination of employment hereunder
(with the exception of disability insurance
coverage); or (B) the date of Employee's
death; and
(ii) the continuation of such coverages is not
violative of any disability insurance policy
that Employee is receiving benefits or
payments under.
(d) No Reduction in Base Salary: During the period in which
Employee is disabled or subject to illness or incapacity, other than as
described in Section 7(b) herein, there shall be no reduction in
Employee's Base Salary.
(e) Annual Physical: Once a year, Employee agrees to undergo a
routine physical examination. The costs of the examination will be
reimbursed by the Company. The results of the physical examination, or
a summary thereof, shall be made part of Employee's personnel file.
8. Death During Employment. In the event of Employee's death during the
term of this Agreement, the Company's obligation to Employee shall be limited to
the portion of Employee's compensation which would be payable up to the first
working day of the first month after Employee's death, except that any accrued
compensation payable to Employee under any benefit plan maintained by the
Company will be paid pursuant to its terms.
9. Termination.
(a) Illness, Incapacity or Death: This Agreement shall
terminate upon Employee's illness, incapacity or death in accordance
with the provisions of Sections 7 and 8 herein.
(b) Termination for Just Cause: The Company shall have the
right at any time, upon prior written notice of termination satisfying
the requirements of Section 11 herein, to terminate the Employee's
employment hereunder, including termination for just cause. For the
purpose of this Agreement, termination for "just cause" shall mean
termination for personal dishonesty, incompetence, willful misconduct,
material breach of fiduciary duty, intentional failure to perform the
duties stated in this Agreement, willful violation of any law, rule or
regulation (other than traffic violations or similar offenses), willful
violation of a final cease-and-desist order, willful or intentional
breach or negligence or misconduct in the performance of such duties or
material breach of any provision of this Agreement as determined by a
court of competent jurisdiction or in final agency action by a federal
or state regulatory agency having jurisdiction over the Company. For
purposes of this Section, no
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<PAGE>
act, or failure to act, on the Employee's part shall be considered
"willful" unless done, or omitted to be done, by him not in good faith
and without reasonable belief that his action or omission was in the
best interest of the Company; provided that any act or omission to act
by the Employee in reasonable reliance upon an opinion of Corporate
Counsel to the Company shall not be deemed to be willful. In the event
Employee is terminated for just cause, Employee shall have no right to
compensation or other benefits for any period after such date of
termination.
(c) Involuntary Termination: If the Employee is terminated by
the Company other than for just cause, Employee's right to compensation
and other benefits under this Agreement shall be as set forth in
Sections 9(f) and 9(g) herein.
(d) Termination for Good Reason: Employee may terminate his
employment hereunder for good reason. For purposes of this Agreement,
"good reason" shall mean (i) a failure by the Company to comply with
any material provision of this Agreement, which failure has not been
cured within fifteen (15) business days after a notice of such
noncompliance has been given by the Employee to the Company; or (ii)
subsequent to a change in control (as defined in Section 9[e] herein)
where the acquiror reduces Employee's Base Salary within two years
after a change in control. So long as Employee remains employed with
the acquiror, or one of the acquiror's subsidiaries, and Employee
receives his Base Salary as compensation, Employee cannot trigger
termination for good reason simply due to a change in control.
(e) Change in Control: For purposes of this Agreement, a
"change in control" shall mean a change in ownership of stock of CCBI
or the Bank whereby a person: (i) acquires 50%, plus one share of the
outstanding shares of voting stock of CCBI or the Bank through direct
or indirect ownership or proxy; or (ii) controls in any manner the
election of a majority of the directors of the Board.
(f) Severance Payments:
(i) If Employee terminates his employment for
other than good reason or if the Company
terminates his employment for just cause,
Employee shall receive no severance
payments.
(ii) If Employee terminates his employment for
good reason or if the Company terminates his
employment for other than just cause,
Employee shall be paid, as severance, an
amount which would equal the Employee's six
month Base Salary.
(iii) Notwithstanding Section 9(f)(ii), if
Employee terminates his employment for good
reason as provided in Section 9(d)(ii),
Employee shall be paid, as severance, his
Base Salary until the second anniversary of
the change in control. In the event such
termination occurs in the second year
following the change in control, Employee
shall be paid, as severance, one (1) years'
Base Salary.
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(iv) Any payments under this Section 9(f) shall
be made in substantially equal semi-monthly
installments on the fifteenth and last days
of each month until paid in full.
(g) Additional Severance Benefits: Unless the Employee is
terminated for just cause pursuant to Section 9(b) herein, pursuant to
Section 7 herein, pursuant to Section 10(b) herein, pursuant to a
termination of employment by the Employee for other than good reason,
or incident to a change in control as described in Section (9)(d)(ii),
the Company shall maintain in full force and effect, for the continued
benefit of the Employee for the remaining term of this Agreement, or
six months (whichever is longer), all employee benefit plans and
programs in which the Employee was entitled to participate in
immediately prior to the date of termination; provided, however, that
the Employee's continued participation is possible under the general
terms and provisions of such plans and programs. Further, the Company
shall pay for the same or similar benefits if such benefits are
available to the Employee on an individual or group basis as a result
of contractual or statutory provisions requiring or permitting such
availability including, but not limited to, health insurance covered
under COBRA.
(h) Mitigation: Employee shall not be required to mitigate the
amount of any payment provided for in Sections 9(f) and 9(g) of this
Agreement by seeking other employment or otherwise.
10. Required Provisions by Regulation. The Company and Employee
that the laws and regulations governing the Parties require that certain
provisions be provided in each employment agreement with officers and employees
of the Bank. The Parties, therefore, agree to be bound by the following
provisions:
(a) Suspension: If the Employee is suspended from office
and/or temporarily prohibited from participating in the conduct of the
Bank's affairs pursuant to notice served under Section 8(e)(3) or
Section 8(g)(1) of the Federal Deposit Insurance Act ("FDIA") (12
U.S.C. Section 1818[e][3] and Section 1818[g][1]), the Bank's
obligations under this Agreement shall be suspended as of the date of
service, unless stayed by appropriate proceedings. If the charges in
the notice are dismissed, the Bank may, in its discretion: (i) pay the
Employee all or part of the compensation withheld while its obligations
under this Agreement were suspended, and (ii) reinstate (in whole or in
part) any of its obligations which were suspended.
(b) Permanent Prohibition: If the Employee is removed from
office and/or permanently prohibited from participating in the conduct
of the Bank's affairs by an order issued under Section 655.037, Florida
Statutes, or Section 8(e)(4) or Section 8(g)(1) of the FDIA (12 U.S.C.
Sections 1818[e](4] and [g][1]), all obligations of the Bank under this
Agreement shall terminate as of the effective date of the order, but
vested rights of the Employee and the Bank as of the date of
termination shall not be affected.
(c) Default Under FDIA: If the Bank is in default, as
defined in Section 3(x)(1) of the FDIA (12 U.S.C. Section 1813[x][1]),
8
<PAGE>
all obligations under this Agreement shall terminate as of the date of
default, but vested rights of the Employee and the Bank as of the date
of termination shall be not affected.
(d) Regulatory Termination: All obligations of the Bank under
this Agreement shall be terminated, except to the extent that a
determination has been made that continuation of this Agreement is
necessary for continued operation of the Bank:
(iii) by the Director of the Federal Deposit
Insurance Corporation (or his or her
designee) (the "FDIC") at the time the FDIC
enters into an agreement to provide
assistance to or on behalf of the Bank under
the authority to contained in Section 13(c)
of the Federal Deposit Insurance Act; or
(iv) by the Department or the Director (or his or
her designee) at the time the Department or
the Director (or his or her designee)
approves a supervisory merger to resolve
problems related to operation of the Bank or
when the Bank's determined by the Director
to be in unsafe or unsound condition.
Any of Employee's rights that have already vested, however, shall not
be affected by such action.
11. Notice of Termination.
(a) Employee's Notice: Employee shall have the right, upon
prior written notice of termination of not less than sixty (60) days,
nor more than ninety (90) days, to terminate his employment hereunder.
In such event, Employee shall have no right after the date of
termination to compensation or other benefits as provided in this
Agreement, unless such termination is for "good reason", as defined in
Section 9(d) herein. If the Employee provides a notice of termination
for good reason, the date of termination shall be the date on which the
notice of termination is given.
(b) Specificity: Any termination of the Employee's employment
by the Company or by Employee shall be communicated by written notice
of termination to the other party hereto. For purposes of this
Agreement, a "notice of termination" shall mean a dated notice which
shall: (i) indicate the specific termination provision in the Agreement
relied upon; and (ii) set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the
Employee's employment under the provision so indicated.
(c) Date of Termination: The notice of termination shall
specify the date of termination. In the case of the Employee giving
notice, the date shall not be less than sixty (60) days, nor more than
ninety (90) days. The Company may shorten the time as it deems
appropriate. In the case of the Company giving notice, the date shall
be as of the date such notice is given, or such time as the Company
deems appropriate.
(d) Delivery of Notices: All notices given or required
to be given herein shall be in writing, sent by United States first-
class certified or registered mail, postage prepaid, by
9
<PAGE>
way of overnight carrier or by hand delivery. If to the Employee (or to
the Employee's spouse or estate upon the Employee's death) notice shall
be sent to Employee's last-known address, and if to the Company, notice
shall be sent to the corporate headquarters of CCBI. All such notices
shall be effective when deposited in the mail if sent via first-class
certified or registered mail, or upon delivery if by hand delivery or
sent via overnight carrier. Either Party, by notice in writing, may
change or designate the place for receipt of all such notices.
12. Post-Termination Obligations. The Company shall pay to Employee
such compensation as is required pursuant to this Agreement; provided, however,
any such payment shall be subject to Employee's post-termination cooperation.
Such cooperation shall include the following:
(i) Employee shall furnish such information and assistance as
may be reasonably required by the Company, or its attorneys, in
connection with any litigation or settlement of any dispute between the
Company, a borrower and/or any other third parties (including without
limitation serving as a witness in court or other proceedings); and
(ii) Employee shall provide such information or assistance as
may be reasonably required by the Company in connection with any
regulatory examination by any state or federal regulatory agency.
13. Maintenance of Trade Secrets and Confidential Information. Employee
shall use his best efforts and utmost diligence to guard and protect all of the
Company's trade secrets and confidential information. Employee shall not, either
during the term or after termination of this Agreement, for whatever reason,
use, in any capacity, or divulge or disclose in any manner, to any Person, the
identity of the Company's customers, or its customer lists, methods of
operation, marketing and promotional methods, processes, techniques, systems,
formulas, programs or other trade secrets or confidential information relating
to the Company's business.
14. Competitive Activities. Employee agrees that during the term of
this Agreement, except with the express consent of the Board, Employee will not,
directly or indirectly, engage or participate in, become a director of, or
render advisory or other services for, or in connection with, or make any
financial investment in any financial institution that directly competes with
the business of the Bank in Collier County, Florida; provided, however, that
Employee shall not be precluded or prohibited from owning passive investments,
including investments in the securities of other financial institutions.
Employee acknowledges that by virtue of his employment with the
Company, Employee will acquire an intimate knowledge of its activities and
affairs, including trade secrets and other confidential matters. Employee,
therefore, agrees that during the term of this Agreement, and for a period of
one (1) year after the termination of his employment for any reason, Employee
shall not become employed, directly or indirectly, whether as an employee,
independent contractor, consultant, or otherwise, in the financial services
industry with any business enterprise or business entity, or person whose intent
is to organize another financial institution in Collier County and Lee
10
<PAGE>
County, Florida, or in any other Florida County where the Bank may have a full
service branch office. Employee hereby agrees that the duration of the
anticompetitive covenant set forth herein is reasonable, and its geographic
scope is not unduly restrictive.
15. Remedies for Breach.
(a) Arbitration: The Parties agree that, except for the
specific remedies for injunctive relief and other equitable relief
contained in Sections 15(b) and 15(c) herein, any controversy or claim
arising out of or relating to this Agreement or any breach thereof,
including, without limitation, any claim that this Agreement or any
portion thereof is invalid, illegal or otherwise voidable, shall be
submitted to binding arbitration before and in accordance with the
rules of the American Arbitration Association and judgment upon the
determination and/or award of such arbitrator may be entered in any
court having jurisdiction thereof; provided, however, that this clause
shall not be construed to permit the award of punitive damages to
either party. The prevailing party to said arbitration shall be
entitled to an award of reasonable Attorneys' Fees. The venue of
arbitration shall be in Collier County, Florida.
(b) Injunctive Relief: The Parties acknowledge and agree that
the services to be performed by Employee are special and unique and
that money damages cannot fully compensate the Company in the event of
Employee's violation of the provisions of Section 14 of this Agreement.
Thus, in the event of a breach of any of the provisions of such
Section, Employee agrees that the Company, upon application to a court
of competent jurisdiction, shall be entitled to an injunction
restraining Employee from any further breach of the terms and provision
of such Section. Should the Company prevail in an action seeking an
injunction restraining Employee, Employee shall pay all costs and
reasonable Attorneys' Fees incurred by the Company in and relating to
obtaining such injunction. Such injunctive relief may be obtained
without bond and Employee's sole remedy, in the event of the improper
entry of such injunction, shall be the dissolution of such injunction.
Employee hereby waives any and all claims for damages by reason of the
wrongful issuance of any such injunction.
(c) Cumulative Remedies: Notwithstanding any other provision
of this Agreement, the injunctive relief described in Section 15(b)
herein and all other remedies provided for in this Agreement which are
available to the Company as a result of Employee's breach of this
Agreement, are in addition to and shall not limit any and all remedies
existing at or in equity which may also be available to the Company.
16. Assignment. This Agreement shall inure to the benefit of and be
binding upon the Employee, and to the extent applicable, his heirs, assigns,
executors, and personal representatives, and to the Bank, and to the extent
applicable, its successors, and assigns, including, without limitation, any
person, partnership, or corporation which may acquire all or substantially all
of the Bank's assets and business, or with or into which the Bank may be
consolidated or merged, and this provision shall apply in the event of any
11
<PAGE>
subsequent merger, consolidation, or transfer, unless such merger or
consolidation or subsequent merger or consolidation is a transaction of the type
which would result in termination under Sections 10(c) and 10(d) herein.
17. Miscellaneous.
(a) Amendments to the Agreement: Unless as otherwise
provided herein, this Agreement may not be modified or amended except
in writing signed by the Parties.
(b) Certain Definitions: For purposes of this Agreement,
the following terms whenever capitalized herein shall have the
following meanings:
(i) "Person" shall mean any natural person,
corporation, partnership (general or
limited), trust, association or any other
business entity.
(ii) "Attorneys' Fees" shall include the legal
fees and disbursements charged by attorneys
and their related travel and lodging
expenses, court costs, paralegal fees, etc.
incurred in settlement, trial, appeal or in
bankruptcy proceedings.
(c) Headings for Reference Only: The headings of the Sections
and the Subsections herein are included solely for convenient
reference and shall not control the meaning or the interpretation of
any of the provisions of this Agreement.
(d) Governing Law/Jurisdiction: This Agreement shall be
construed in accordance with and governed by the laws of the State of
Florida. Any litigation involving the Parties and their rights and
obligations hereunder shall be brought in the appropriate courts in and
for Collier County, Florida.
(e) Severability: If any of the provisions of this Agreement
shall be held invalid for any reason, the remainder of this Agreement
shall not be affected thereby and shall remain in full force and effect
in accordance with the remainder of its terms.
(f) Entire Agreement: This Agreement and all other documents
incorporated or referred to herein, contain the entire agreement of the
Parties and there are no representations, inducements or other
provisions other than those expressed in writing herein. This Agreement
amends, supplants and supersedes any and all prior agreements between
the Parties. No modification, waiver or discharge of any provision or
any breach of this Agreement shall be effective unless it is in writing
signed by both Parties. A Party's waiver of the other Party's breach of
any provision of this Agreement, shall not operate, or be construed, as
a waiver of any subsequent breach of that provision or of any other
provision of this Agreement.
(g) Waiver: No course of conduct by the Company or
Employee and no delay or omission of the Company or Employee to
exercise any right or power given under this Agreement shall: (i)
impair the subsequent exercise of any right or power, or (ii) be
construed to be a waiver of any default or any acquiescence in or
12
<PAGE>
consent to the curing of any default while any other default shall
continue to exist, or be construed to be a waiver of such continuing
default or of any other right or power that shall theretofore have
arisen. Any power and/or remedy granted by law and by this Agreement
to any party hereto may be exercised from time to time, and as often
as may be deemed expedient. All such rights and powers shall be
cumulative to the fullest extent permitted by law.
(h) Pronouns: As used herein, words in the singular
include the plural, and the masculine include the feminine and neutral
gender, as appropriate.
(i) Recitals: The Recitals set forth at the beginning of this
Agreement shall be deemed to be incorporated into this Agreement by
this reference as if fully set forth herein, and this Agreement shall
be interpreted with reference to and in light of such Recitals.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the day and year first written above.
CITIZENS COMMUNITY BANCORP, INC.
/s/ Gregory E. Smith By: /s/ Richard Storm, Jr.
- ------------------------------- ----------------------
Gregory E. Smith Richard Storm, Jr.
Chairman of the Board of Directors
/s/ Joel M. Cox /s/ Diane Beyer
- ------------------------------- -----------------------
Witness Witness
CITIZENS COMMUNITY BANK OF FLORIDA
/s/ Gregory E. Smith By: /s/ Richard Storm, Jr.
- ------------------------------- ----------------------
Gregory E. Smith Richard Storm, Jr.
Chairman of the Board of Directors
/s/ Joel M. Cox /s/ Diane Beyer
- -------------------------------- -----------------------
Witness Witness
13
EXHIBIT 22.1
Citizens' 1999 Annual Report
16
<PAGE>
"Community is our middle name"
Citizens Community Bancorp, Inc.
1999 Annual Report
<PAGE>
Financial Highlights
Citizens Community Bancorp, Inc. and Subsidiaries
At December 31, or For the Year Then Ended
(Dollars in thousands, except per share figures)
1999 1998
At Year End:
Assets............................................ $122,193 82,226
Loans, net........................................ 79,988 44,933
Securities........................................ 19,022 8,500
Deposits.......................................... 102,498 63,990
Stockholders' equity.............................. 17,984 17,225
Book value per share.............................. 5.16 4.99
Shares outstanding (1)............................ 3,486,767 3,455,039
Equity as a percentage of assets.................. 14.72% 20.95%
Nonperforming assets to total assets ratio........ NIL NIL
For The Year:
Interest income..................................... 6,792 4,129
Net earnings....................................... 615 206
Basic earnings per share (1)....................... .18 .08
Diluted earnings per share (1)..................... .17 .08
Return on average assets........................... .61% 32%
Return on average equity........................... 3.50% 1.71%
Average equity to average assets................... 17.51% 18.91%
Noninterest expenses to average assets............. 3.22% 3.04%
(1) All share amounts reflect the 8% stock dividend to stockholders of
record on December 31, 1998.
[graphic omitted]
<PAGE>
About Citizens Community Bancorp, Inc.
Citizens Community Bancorp, Inc. ("Citizens") is a one-bank holding
company, established on May 24, 1995. Citizens' three wholly-owned subsidiaries
are Citizens Community Bank of Florida ("CCB"), Citizens Financial Corp. ("CFC")
and CCB Mortgage Corporation ("CCB Mortgage"). CCB is a state chartered
commercial bank which provides traditional community banking services through
its three full-service office facilities strategically located in Collier
County, Florida, which is one of the fastest growing community in the Nation.
CCB's deposit accounts are insured by the Federal Deposit Insurance Corporation.
CCB offers a broad range of retail and commercial banking services, including a
variety of deposit accounts and loan products for consumers and businesses. As
part of its "customer first" pledge, CCB offers a courier service to commercial
account customers. CFC and CCB Mortgage are mortgage origination companies
operating in Southwest Florida. CFC specializes in commercial mortgage loans,
while CCB Mortgage offers a variety of fixed and adjustable-rate residential
mortgage products.
At December 31, 1999, Citizens had $122 million in total consolidated
assets and $18 million in stockholders' equity.
Common Stock Prices and Dividends
Although there has been no established public trading market for Citizens'
common stock, the brokerage firm of A.G. Edwards & Sons, Inc., facilitates
trades of Citizens' common stock in the over the counter market with other
brokerage firms. On October 14, 1999, Citizens filed an application with Nasdaq
for approval for listing its common stock on the Nasdaq Smallcap Market. It is
expected that the qualification process will be finalized during the first half
of 2000. The stock was originally offered and sold in a public offering in 1996
for $4.18 per share. A secondary offering was completed in 1998 at $6.94 per
share. Citizens paid a cash dividend of $.05 per share for the first time to
shareholders of record of January 31, 2000 and was paid on February 14, 2000.
Future dividends, if any, will be determined by the Board of Directors. Per
share amounts above and throughout this report reflect the 2-for-1 stock split
effective December 15, 1997 and the 8% stock dividend to shareholders on
December 31, 1998.
As of January 31, 2000, Citizens had approximately 785 holders of record of
common stock.
Special Note Regarding Forward Looking Statements
This Annual Report contains certain forward looking statements which
represent management's expectations or beliefs, including, but not limited to,
statements concerning the banking industry and the issuer's operations,
performance, financial condition and growth. For this purpose, any statements
contained in this Report that are not statements of historical fact may be
deemed to be forward looking statements. Without limiting the generality of the
foregoing, words such as "may," "will," "expect," "believes." "anticipate,"
"intend," "could," "should," "can," "estimate," or "continue" or the negative of
other variations thereof or comparable terminology are intended to identify
forward-looking statements. These statements by their nature involve substantial
risks and uncertainties, certain of which are beyond management's control, and
actual results may differ materially depending on a variety of important
factors, including competition, general economic conditions, potential changes
in interest rates, and changes in the value of real estate securing loans, among
other things.
Table of Contents
Financial Highlights.......................................Inside Front Cover
Message to Shareholders.................................................2-4
Directors of Citizens.....................................................5
Directors of CCB..........................................................6
Selected Financial Data...................................................7
Management's Discussion and Analysis of
Financial Condition and Results of Operations........................8-20
Consolidated Financial Statements.....................................21-38
Independent Auditors' Report.............................................39
Officers - Citizens and Subsidiaries.....................................40
Corporate Information.....................................Inside Back Cover
<PAGE>
Message To Shareholders
As we close out the millennium we are excited about our excellent growth
and earnings for 1999. The foundations established during our first three years
have begun to build momentum, which is reflected in the dramatic improvement in
earnings and growth during 1999. Our focus continues to be a customer-driven
community bank, with great emphasis on service, and building profitable loan and
deposit relationships. We are pleased that your Board of Directors declared its
first cash dividend of $.05 per share that was paid to shareholders in February
2000.
Earnings
Net earnings for 1999 were $615,259, triple our earnings of $205,854 for
1998. The improved earnings for 1999 was primarily attributable to a $2.7
million, or 64% increase in interest income which was partially offset by a
$740,000, or 37% increase in interest expense and a $1.0 million, or 66%
increase in net non-interest expenses. On a basic per share basis, our earnings
were $.18 in 1999 compared to $.08 in 1998. The per share calculations were
adjusted for the 8% stock dividend paid as of December 31, 1998. In addition,
the 1998 per share calculations were impacted by the exercise of the warrants
and the additional shares issued from the successful stock offering in mid 1998.
Growth
In the highly competitive market for financial services, there are always
new opportunities for the growth of the Citizens Community Bancorp, Inc. and
subsidiaries (the "Company"). Recently enacted banking legislation also gives
banks authority to provide additional services to customers. With the capital
the Company raised in 1998, we are well positioned for growth from internal
sources and through strategic alliances with other financial institutions. There
are numerous financial and non-financial considerations which will be reviewed
to evaluate future services and possible target acquisitions. The considerations
will include size, historical performance, projected operating efficiencies,
office locations, management and resources required to integrate the target
institution. We believe that the exciting expansion of the South Florida market
area will provide significant opportunities to deploy our capital strength for
both internal growth and acquisitions which will enhance the size and value of
our Company.
Total assets for the Company at the end of 1999 were $122.2 million
compared to $82.2 million at December 31, 1998, representing a 49%
year-over-year growth. Total deposits reached $102.5 million at the end of 1999,
up 60% from $64.0 million at the end of 1998. Total loans grew 78% in 1998
reaching $80.0 million at December 31, 1999, compared to $44.9 million at
December 31, 1998.
Our strong loan growth during 1999 was a significant factor in the
Company's improvement in core earnings. Under the supervision of Executive Vice
President and Senior Lender, James F. Schaffer, we have been successful in our
continuing efforts to build a strong loan origination staff in the competitive
market for high quality personnel. While we have focused on the growth of the
loan portfolio, we have remained vigilant for borrowers with strong credit
qualifications. Our ongoing focus on quality is evidenced by the fact that we
had virtually no charge-offs or significant delinquencies or foreclosures in the
portfolio during 1999.
<PAGE>
Citizens Financial Corp.
Also instrumental for the loan growth during 1999, was the impact of
Citizens Financial Corp. ("CFC"), a commercial mortgage brokerage business,
which is operated as a separate subsidiary of Citizens. Robert David is
President and Chief Executive Officer of CFC. Bob joined the Company at the end
of 1998 and has worked virtually his entire career in banking in the Naples
area. Through Bob's contacts, he contributed both fee income to the Company
through the loans sold to third parties and also had a significant impact on
building the loan portfolio of the bank. We expect that CFC will continue to
play an instrumental role in the future growth of the Company through the loan
referrals and brokerage fee income.
CCB Mortgage Corp.
CCB Mortgage Corp. ("CCB Mortgage") is a wholly owned subsidiary of
Citizens, and is a residential mortgage loan origination company, which
commenced operations in November 1999. Tony Iannotta is President and Chief
Executive Officer of CCB Mortgage. Prior to joining CCB Mortgage, Tony was the
owner of Island Mortgage, Inc. which he established in 1988. Tony and his staff
from Island Mortgage, Inc., who have also joined CCB Mortgage, have an excellent
reputation for quality service to their customers. CCB Mortgage offers a wide
variety or residential mortgage products including fixed and adjustable rate
mortgage loans and construction and lot loan financing. The successful mortgage
loan origination volume during the first few months of operations exceeded our
expectations. The staff of CCB Mortgage and Citizens Community Bank are working
closely to develop cross-sale efforts of the mortgage loan and deposit products.
The integration of the mortgage team has gone very well and we expect it will
enhance the Company's future growth and profitability. In the year 2000, CCB
Mortgage intends to add additional residential origination staff to be housed in
each of the bank's branch locations. In addition, the CCB Mortgage website
www.ccbmtgcorp.com offers potential mortgage customers useful information to
assist them with their mortgage selection.
Marco Expansion
In September 1999, the Company completed the 3,000 square foot expansion of
the Marco Island facility. The expanded branch facility includes offices for CCB
Mortgage Corp., Citizens' Executive Offices, and additional branch offices for
our Chairman's Club customers. A "Community Room" has also been added for
meetings, or training programs of Company staff and local organizations. From
November 15, 1999 through March 30, 2000, the Community Room has been dedicated
to a display of the original "Key Marco Cat", which is on loan from the
Smithsonian Institution, together with various other artifacts, paintings and
photographs from archeological excavations of a Calusa Indian village on Marco
Island. This is the first time the original "Key Marco Cat" has been returned to
Marco Island. The exhibit is shown in conjunction with and for the benefit of
the Marco Island Historical Society. We are excited about our ability to support
the local community through the use of our Community Room facility.
East Trail Expansion
In December 1999, the Company completed the renovation of the second floor
of our 12,000 square foot, 2-story Tamiami Trail East office. Our administration
and operations staff are now housed in one centralized facility to better serve
our rapidly growing customer base. Enhanced computer network, e-mail and
Internet access have also contributed to improve staff efficiency and internal
communications.
Year 2000 Update
After significant planning, review and updates to our computer systems, we
were very pleased that the much-publicized Y2K event has passed with virtually
no effect on our operating systems. We committed significant resources and
efforts during 1999 for the Y2K event, and feel these efforts have enhanced our
data processing systems, which will pay dividends through improved information
systems in the upcoming years.
<PAGE>
New Branch Development
In the year 2000 we plan to open our fourth branch on Airport Road near the
rapidly developing Vanderbilt Beach Road intersection. This exciting corridor in
north Naples has numerous residential and golf communities and is the future
site of the Ritz Carlton Hotel and Golf Complex. Kim Williams-Poorman has been
designated the Branch Manager for the new branch office. Kim is a third
generation resident of Collier County and has spent virtually her entire career
in business development and management with increased responsibility in local
financial institutions.
With the introduction of our Chairman's Club, our new checking account
products, and our internet banking services, we feel we are well positioned to
provide our present and future customers with the banking services they will
need in the rapidly evolving financial services market. Our strong loan
origination team in the bank, together with CCB Mortgage Corp. and CFC, provides
us the resources and loan products to meet the borrowing needs for a broad array
of customers. Please check our bank website at www.ccbank.com for our internet
banking service and other information about Citizens Community Bank. For updated
stock quotes and more information about our holding company activities, visit
our Citizens Community Bancorp website at www.ccbancorpfl.com.
We appreciate your continued support and referrals as shareholders and
customers of our exciting financial services franchise.
Richard Storm, Jr. Gregory E. Smith
Chairman of the Board and President and
Chief Executive Officer Chief Financial Officer
<PAGE>
Citizens Community Bancorp
Board of Directors
<PAGE>
<TABLE>
SELECTED FINANCIAL DATA
At December 31, or for the Year then Ended
(Dollars in thousands, except per share figures)
1999 1998 1997 1996
---- ---- ---- ----
At Year End:
<S> <C> <C> <C> <C>
Cash and cash equivalents.......................................... $ 16,928 24,663 12,211 8,042
Securities available for sale...................................... 6,022 - -
Securities held to maturity........................................ 13,000 8,500 2,499 2,240
Loans, net......................................................... 79,988 44,933 26,420 12,116
All other assets................................................... 6,255 4,130 3,292 2,630
---------- ------ ------- ------
Total assets.............................................. $ 122,193 82,226 44,422 25,028
======= ====== ====== ======
Deposit accounts................................................... 102,498 63,990 36,938 17,885
All other liabilities.............................................. 1,711 1,011 713 1,179
Stockholders' equity............................................... 17,984 17,225 6,771 5,964
------- ------ ------ ------
Total liabilities and stockholders' equity................ $ 122,193 82,226 44,422 25,028
======= ====== ====== ======
For the Year:
Total interest income.............................................. 6,792 4,129 2,523 740
Total interest expense............................................. 2,750 2,009 1,208 283
-------- ------ ------ -------
Net interest income....................................... 4,042 2,120 1,315 457
Provision for loan losses.......................................... 437 162 153 145
-------- ------- ------- ------
Net interest income after provision for loan losses....... 3,605 1,958 1,162 312
-------- ------ ------ ------
Noninterest income................................................. 592 341 273 70
Noninterest expenses............................................... 3,234 1,935 1,260 915
------- ------ ------ -----
Earnings (loss) before income tax credit........................... 963 364 175 (533)
Income taxes (benefit)............................................. 348 158 65 (191)
-------- ------ ------- ------
Net earnings (loss)................................................ $ 615 206 110 (342)
======= ====== ====== ======
Basic earnings (loss) per share (1)................................ $ .18 .08 .06 (.22)
======== ======= ====== =======
Diluted earnings (loss) per share (1).............................. .17 .08 .06 (.22)
======== ======= ====== =======
Ratios and Other Data:
Return on average assets........................................... .61% .32% .30% (2.71)
Return on average equity........................................... 3.50% 1.71% 1.72% (10.35)
Average equity to average assets................................... 17.51% 18.91% 17.47% 26.16%
Interest-rate spread during the period............................. 3.62% 3.00% 3.50% 2.33%
Net yield on average interest-earning assets....................... 7.43% 7.36% 8.04% 6.61%
Noninterest expenses to average assets............................. 3.22% 3.04% 3.45% 7.24%
Ratio of average interest-earning assets to average
interest-bearing liabilities.............................. 1.27 1.22 1.18 1.69
Nonperforming loans and foreclosed real estate as a percentage
of total assets at end of year............................ NIL NIL NIL NIL
Allowance for credit losses as a percentage
of total loans at end of year............................. 1.11% 1.01% 1.12% 1.18%
Total number of banking offices.................................... 3 3 2 1
Total shares outstanding at end of year (1)........................ 3,486,767 3,455,039 1,697,354 1,528,438
Book value per share at end of year................................ $ 5.16 4.99 3.99 3.91
- ------------------------
<FN>
(1) Share amounts reflect the two-for-one stock split effective December 15, 1997, and the 8% stock dividend to
stockholders of record on December 31, 1998.
</FN>
</TABLE>
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
Citizens Community Bancorp, Inc. ("Citizens") owns 100% of the outstanding
common stock of Citizens Community Bank ("CCB") and Citizens Financial Corp.
("CFC") and CCB Mortgage Corporation ("CCB Mortgage") (collectively the entities
are referred to as the "Company". Citizens was organized simultaneously with CCB
and its primary business is the ownership and operation of CCB, CFC and CCB
Mortgage. CCB is a Florida state-chartered commercial bank and its deposits are
insured by the Federal Deposit Insurance Corporation. CCB opened for business on
March 8, 1996, and provides community banking services, through three banking
offices, to businesses and individuals in Collier County, Florida. CFC was
formed and commenced business as a commercial mortgage broker in 1997. CCB
Mortgage was formed and commenced business in 1999 as a residential mortgage
broker, offering a variety of fixed and adjustable rate residential permanent,
construction and lot loans.
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, 1999 was
from net deposit inflows of $38.5 million. Cash was used primarily to originate
loans and purchase securities. At December 31, 1999, the Company had outstanding
commitments to originate loans totaling $11.0 million, commitments to borrowers
for available lines of credit totaling $4.5 million and time deposits maturing
in the next year of $27.3 million. At December 31, 1999, CCB exceeded its
regulatory liquidity requirements.
Regulation and Legislation
As a state-chartered commercial bank, CCB is subject to extensive regulation by
the Florida Department of Banking and Finance ("Florida DBF") and the Federal
Deposit Insurance Corporation ("FDIC"). CCB 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 CCB's
compliance with the various regulatory requirements. Citizens and CCB are also
subject to regulation and examination by the Federal Reserve Board of Governors.
Year 2000 Compliance
The Company's operating and financial systems have been found to be compliant;
the "Y2K Problem" did not adversely affect the Company's operations nor does
management expect that it will.
Credit Risk
The Company's primary business is providing deposit related services and making
real estate secured residential and commercial loans as well as other business
and consumer loans. The lending activities entail potential loan losses, the
magnitude of which depend on a variety of economic factors affecting borrowers
which are beyond our control. We have instituted underwriting guidelines and
credit review procedures to protect the Company from avoidable credit losses,
some losses will inevitably occur. At December 31, 1999 and 1998, the Company
had no nonperforming assets or loans which were delinquent 90 days or more or
were nonperforming.
8
<PAGE>
The following table presents information regarding total allowance for losses as
well as the allocation of such amounts to the various categories of loans
(dollars in thousands):
<TABLE>
At December 31,
--------------------------------------------------------------------------------------
1999 1998 1997 1996
--------------------------------------------------------------------------------------
Loans Loans Loans Loans
To To To To
Total Total Total Total
Amount Loans Amount Loans Amount Loans Amount Loans
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial real estate loans..... $ 527 52% $ 315 48% $ 94 35% $ 62 31%
Residential real estate loans.... 99 31 51 32 42 27 22 36
Commercial loans................. 221 7 68 11 117 29 55 31
Consumer loans................... 38 10 19 9 45 9 6 2
----- ---- --- ---- --- ---- --- ---
Total allowance for loan
losses....................... $ 885 100% $ 453 100% $ 298 100% $ 145 100%
=== === === === === === === ===
Allowance for credit losses as
a percentage of the total
loans outstanding............ 1.11% 1.02% 1.12% 1.18%
==== ==== ==== ====
</TABLE>
Loan Portfolio Composition
Commercial real estate loans and land loans comprise the largest group of loans
in the portfolio, amounting to approximately $42.3 million, or 52% of the total
loan portfolio as of December 31, 1999. Commercial real estate loans consist of
approximately $26.1 million of loans secured by nonresidential property and
approximately $16.2 million of loans secured by undeveloped land.
Residential real estate loans comprise the second largest group of loans in our
loan portfolio, amounting to $24.9 million or 31% of the total loan portfolio as
of December 31, 1999, of which approximately 96% are first mortgage loans. As of
December 31, 1999, consumer loans and savings account loans, amounted to $7.7
million or 10% of the total loan portfolio.
The following table sets forth the loan portfolio composition:
<TABLE>
At December 31,
--------------------------------------------------------------------------------------
1999 1998 1997 1996
--------------------------------------------------------------------------------------
% of % of % of % of
Amount Total Amount Total Amount Total Amount Total
------- ----- ------ ----- ------- ----- ------- -----
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial real estate.............. $ 42,287 52% $ 21,820 48% $ 9,423 35% $ 3,758 31%
Residential real estate............. 24,921 31 14,571 32 7,261 27 4,384 36
Commercial.......................... 5,706 7 4,994 11 7,710 29 3,815 31
Consumer ........................... 7,703 10 3,827 9 2,261 9 305 2
------- ---- ------- ---- ------ --- ----- ---
Loans, gross............... 80,617 100% 45,212 100% 26,655 100% 12,262 100%
=== === === ===
Add (subtract):
Deferred costs, net............ 256 174 63 (1)
Allowance for loans losses..... (885) (453) (298) (145)
------- -------- ------ ------
Loans, net................. $ 79,988 $ 44,933 $ 26,420 $ 12,116
======= ======== ====== ======
</TABLE>
9
<PAGE>
Securities
The securities portfolio is comprised primarily of U.S. Government agency
securities. According to Financial Accounting Standards No. 115, the securities
portfolio must be 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. Government
agency securities at December 31, 1999. 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 net
amount in other comprehensive income, net of income taxes and were comprised of
U.S. government agency securities, mortgage-backed securities and equity
securities at December 31, 1999. 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, 1999
and 1998, the Company had no securities categorized for trading purposes.
The following table sets forth the carrying value of the Company's securities
portfolio:
<TABLE>
At December 31,
1999 1998
---- ----
(In thousands)
Securities available for sale:
<S> <C>
U.S. Government agency securities................................................ $ 4,878 -
Mortgage-backed securities....................................................... 954 -
Equity securities................................................................ 190 -
------- ----
Total available for sale................................................... $ 6,022 -
====== ====
Securities held to maturity-
U.S. Government agency securities................................................ $ 13,000 8,500
====== =====
</TABLE>
The following table sets forth, by maturity distribution, certain information
pertaining to the securities portfolio (dollars in thousands):
<TABLE>
After One Year After Five Years
One Year or Less to Five Year to Ten Years After Ten Years Total
------------------- ---------------- ----------------- ----------------- -------------------
Carrying Average Carrying Average Carrying Average Carrying Average Carrying Average
Value Yield Value Yield Value Yield Value Yield Value Yield
--------- -------- -------- ------- --------- ------- -------- ------- -------- -------
At December 31, 1999:
U.S. Government
agency
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
securities........ $ 750 6.01% $ 13,992 5.86% $ 1,058 6.65% $ 2,078 7.63% $ 17,878 6.12%
=== ==== ====== ==== ===== ==== ===== ==== ====
Mortgage-backed securities.................................................................... 954
Equity securities............................................................................. 190
------
Total....................................................................................... $ 19,022
======
At December 31, 1998:
U.S. Government
agency
securities........ $ - -% $ 8,500 5.17% $ - - % $ - -% $ 8,500 5.17%
=== ===== ====== ==== ===== ==== ===== ==== ====== ====
</TABLE>
10
<PAGE>
Regulatory Capital Requirements
All Banks are required to meet certain minimum regulatory capital requirements.
These capital requirements are intended to promote safety and soundness in the
banking industry and the requirement provide limits to the amount of assets a
bank may have in light of its capital structure.
Quantitative measures established by regulation to ensure capital adequacy
require CCB 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).
To be categorized as well capitalized, an institution must maintain minimum
total risk-based, Tier I risk-based, and Tier I leverage percentages as set
forth in the following tables. There are no conditions or events since that
notification that management believes have changed CCB's category. As of
December 31, 1999, CCB meet all capital adequacy requirements as set forth
below:
<TABLE>
To Be Well
Capitalized
Minimum for Purposes
For Capital of Prompt and
Actual Adequacy Purposes: Corrective Action:
------------------------ ---------------------- --------------------
Amount % Amount % Amount %
------ ------ ------ ------- ------ ----
(Dollars in thousands)
<S> <C> <C>
As of December 31, 1999:
Total Capital (to Risk-
Weighted Assets).......... $ 9,232 12.17% $ 5,927 8.00% $ 7,409 10.00%
Tier I Capital (to Risk-
Weighted Assets).......... 8,427 11.11 2,964 4.00 4,445 6.00
Tier I Capital
(to Average Assets)....... 8,427 8.25 4,085 4.00 5,106 5.00
As of December 31, 1998:
Total Capital (to Risk-
Weighted Assets) ......... 6,808 15.34 3,551 8.00 4,439 10.00
Tier I Capital (to Risk-
Weighted Assets) ......... 6,375 14.36 1,776 4.00 2,663 6.00
Tier I Capital
(to Average Assets)........ 6,375 10.36 2,461 4.00 3,077 5.00
</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 6 of Notes to Consolidated Financial Statements.
The primary objective in managing interest-rate risk is to maximize earnings and
minimize the potential adverse impact of changes in interest rates on CCB"s net
interest income and capital, while adjusting the company"s asset-liability
structure to obtain the maximum yield-cost spread on that structure. We rely
primarily on our asset-liability structure to manage interest rate risk.
However, a sudden and substantial increase in interest rates may adversely
impact our earnings, to the extent that the interest-earning assets and
interest-bearing liabilities do not change at the same speed, to the same
extent, or on the same basis. The Company does not engage in securities 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
asset and liability mix and to improve earnings. We believe 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 by dividing rate sensitive assets by interest 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 generally
be expected to adversely affect net interest income since more liabilities than
assets are subject to maturity or repricing, conversely, a positive gap would
generally result in an increase in net interest income with rising rates. 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, asset and liability
management policies are monitored to better match the maturities and repricing
terms of both 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).
The following table reflects the contractual principal repayments by period of
the Company's loan portfolio at December 31, 1999 (in thousands):
<TABLE>
Commercial
Real Residential
Years Ending Estate Commercial Mortgage Consumer
December 31, Loans Loans Loans Loans Total
---------- ---------- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
2000............................. $ 7,259 3,909 2,407 1,775 15,350
2001............................. 8,691 484 944 707 10,826
2002............................. 5,626 525 1,555 596 8,302
2003-2004........................ 3,328 500 1,345 496 5,669
2005-2006........................ 3,544 68 644 396 4,652
2007 and beyond.................. 13,839 220 18,026 3,733 35,818
------ ------ ------ ----- ------
Total............................ $ 42,287 5,706 24,921 7,703 80,617
====== ===== ====== ===== ======
</TABLE>
Of the $65.3 million of loans due after 2000, 30% of such loans have fixed
interest rates and 70% 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.
12
<PAGE>
The following table sets forth certain information relating to our
interest-earning assets and interest-bearing liabilities at December 31, 1999
that are estimated to mature or are scheduled to reprice within the period shown
(dollars in thousands):
<TABLE>
More
Than More
Three Than Six More
Months Months Than One
Three to Six to One Year to More Than
Months Months Year Five Years Five Years Total
Mortgage, commercial and consumer loans (1):
<S> <C> <C> <C> <C> <C> <C>
Variable rate........................... $ 24,381 143 2,542 27,010 560 54,636
Fixed rate.............................. 1,751 1,313 2,818 17,992 2,107 25,981
------- ------ ------ ------ ------ -------
Total loans........................ 26,132 1,456 5,360 45,002 2,667 80,617
Interest bearing deposits................... 2,000 - - - - 2,000
Federal funds sold and securities
purchased under agreements
to resell............................... 8,893 - - - - 8,893
Federal Home Loan Bank stock................ 215 - - - - 215
Securities held to maturity (2)............. - - - 13,000 - 13,000
Securities available for sale............... 4,090 - 750 992 190 6,022
------ ------ ------ ------ ------ -------
Total rate-sensitive assets........ 41,330 1,456 6,110 58,994 2,857 110,747
------ ------ ------ ------ ------ -------
Deposit accounts (3):
NOW deposits .......................... 27,173 - - - - 27,173
Money-market deposits................... 21,722 - - - - 21,722
Savings deposits........................ 7,119 - - - - 7,119
Time deposit .......................... 15,768 3,878 7,553 7,076 - 34,275
------- ------ ------ ------ ------ -------
Total rate-sensitive
liabilities.................... $ 71,782 3,878 7,553 7,076 - 90,289
====== ====== ====== ====== ====== =======
GAP repricing differences................... $(30,452) (2,422) (1,443) 51,918 2,857 20,458
====== ====== ====== ====== ====== =======
Cumulative GAP .......................... $(30,452) (32,874) (34,317) 17,601 20,458
====== ====== ====== ====== ======
Cumulative GAP/total assets................. (25)% (27)% (28)% 14% 17%
====== ====== ====== ====== ======
<FN>
(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.
</FN>
</TABLE>
13
<PAGE>
Origination, Sale and Repayment of Loans. The Company generally originate loans
on real estate located in our primary geographical lending area in Southwest
Florida. Residential mortgage loan originations are generated from depositors,
other existing customers, advertising and referrals from mortgage and 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.
Since November, 1999, substantially all residential mortgage loans were
originated by the Company through CCB Mortgage. For certain adjustable rate,
construction and lot loans, the loans were closed by CCB for its permanent loan
portfolio. All other loans originated by CCB Mortgage Corp. were sold to, closed
and funded by other third party banks or mortgage companies. Both CCB and CCB
Mortgage intend to continue to cross sell loan and deposit products that meet
the bank's desired asset liability mix and generate additional revenues for the
Company.
Similar to CCB Mortgage, CFC originates loans, some of which are closed and
funded by CCB and some of which are closed and funded by third parties. During
the year ending December 31, 1999, there were no loans closed in the name of CCB
Mortgage or CFC, all loans originated by both subsidiaries were closed by CCB or
third parties. The Company intends to continue to utilize both subsidiaries for
the origination referrals.
The following table sets forth total loans originated, repaid and sold:
<TABLE>
Year Ended December 31,
--------------------------------------------------
1999 1998 1997 1996
---- ---- ---- ----
(In thousands)
Originations:
<S> <C> <C> <C> <C>
Commercial loans.......................................... $ 3,379 2,964 756 3,855
Commercial real estate loans.............................. 22,884 11,798 9,426 3,797
Residential mortgage loans................................ 18,442 10,785 13,897 4,384
Consumer loans............................................ 5,600 2,800 2,888 305
------ ------ ------ ------
Total loans originated................................ 50,305 28,347 26,967 12,341
Principal reductions......................................... 14,900 9,209 7,887 79
Loans sold................................................... - 565 4,687 -
------ ------ ------ ------
Increase in total loans...................................... $ 35,405 18,573 14,393 12,262
====== ====== ====== ======
</TABLE>
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 Federal Home
Loan Bank ("FHLB") advances. Loan repayments are a relatively stable source of
funds, while deposit inflows and outflows are influenced significantly by
general interest rates and market conditions. FHLB advances may be used on a
short-term or long-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.
Deposits. Deposits are attracted principally from our primary geographic market
areas in Collier County, Florida. CCB 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. Deposit interest rates are set weekly based on a review of deposit flows
for the previous week, a survey of rates among competitors and other financial
institutions in Southwest Florida. Commercial banking relationships are
emphasized in an effort to increase demand deposits as a percentage of total
deposits. A courier service is provided to better serve the banks' business
customers.
14
<PAGE>
The following table shows the distribution of, and certain other information
relating to deposit accounts by type (dollars in thousands):
<TABLE>
At December 31,
1999 1998
----------------------------------------------------------
% of % of
Amount Deposits Amount Deposits
<S> <C> <C> <C> <C>
Noninterest-bearing demand deposits.................. $ 12,210 11.91% $ 6,365 9.95%
NOW deposits......................................... 27,173 26.51 25,073 39.18
Money-market deposits................................ 21,722 21.19 4,011 6.27
Savings deposits..................................... 7,119 6.95 8,235 12.87
-------- ------ ------- ------
Subtotal.................................... 68,224 66.56 43,684 68.27
------- ------ ------ ------
Time deposits:
2.00% - 3.99%............................... 262 .26 265 .41
4.00% - 4.99%............................... 10,371 10.12 3,093 4.83
5.00% - 5.99%............................... 18,765 18.31 11,952 18.68
6.00% - 6.99%............................... 4,876 4.75 4,996 7.81
-------- ------- ------- -------
Total time deposits (1).............................. 34,274 33.44 20,306 31.73
------- ------ ------ ------
Total deposit........................................ $ 102,498 100.00% $ 63,990 100.00%
======= ====== ====== ======
<FN>
(1) Includes individual retirement accounts ("IRAs") totaling $1,896,095 and $1,514,387 at December 31, 1999 and
1998, all of which are in the form of time deposits.
</FN>
</TABLE>
Jumbo time deposits ($100,000 and over) mature as follows (in thousands):
<TABLE>
At December 31,
1999 1998
<S> <C> <C>
Due three months or less........................................................... $ 4,929 825
Due over three months to six months................................................ 1,840 409
Due over six months to one year.................................................... 3,328 2,399
Due over one year.................................................................. 2,521 1,809
------ -----
$ 12,618 5,442
====== =====
</TABLE>
15
<PAGE>
Results of Operations
The Company's operating results 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 net earnings are also affected
by provisions for future loan losses, the level of nonperforming loans and
foreclosed real estate, as well as the level of our noninterest income, and
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 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; and (vi) the ratio of average interest-earning assets
to average interest-bearing liabilities. Average balances are based on average
daily balances (dollars in thousands).
<TABLE>
1999 1998 1997
----------------------------------------------------------------------------------------------------------
Interest Average Interest Average Interest Average
Average and Yield/ Average and Yield/ Average and Yield/
Balance Dividends Rate Balance Dividends Rate Balance Dividends Rate
------- --------- ------- ------- --------- -------- ------- --------- ------
Interest-earning assets:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loans....................... $ 63,483 5,275 8.31% $ 35,329 2,944 8.33% $ 20,537 1,914 9.32%
Securities.................. 15,521 902 5.81 7,670 476 6.21 2,346 141 6.01
Other interest-earning
assets (1).............. 12,356 615 4.98 13,131 709 5.40 8,516 468 5.50
------- ------ ------ ----- ------- -----
Total interest-earning
assets................ 91,360 6,792 7.43 56,130 4,129 7.36 31,399 2,523 8.04
------- ----- -----
Noninterest-earning assets....... 9,107 7,420 5,157
------- ------- ------
Total assets............ $ 100,467 $ 63,550 $ 36,556
======= ====== ======
Interest-bearing liabilities:
Savings, money-market and
NOW deposits............ 44,641 1,303 2.92 26,748 912 3.41 14,768 534 3.62
Time deposits............... 27,556 1,447 5.25 19,302 1,097 5.68 11,704 664 5.67
Other....................... - - - - - - 125 10 8.00
------- ------ ------- ----- ------ -----
Total interest-bearing
liabilities........... 72,197 2,750 3.81 46,050 2,009 4.36 26,597 1,208 4.54
----- ----- -----
Noninterest-bearing liabilities.. 10,674 5,484 3,571
Stockholders' equity............. 17,596 12,016 6,388
------- ------ ------
Total liabilities and
stockholders' equity.. $ 100,467 $ 63,550 $ 36,556
======= ====== ======
Net interest/dividend income..... $ 4,042 $ 2,120 $ 1,315
===== ===== =====
Interest-rate spread (2)......... 3.62% 3.00% 3.50%
==== ==== ====
Net interest margin (3).......... 4.42% 3.78% 4.20%
==== ==== ====
Ratio of average interest-earning
assets to average interest-
bearing liabilities......... 1.27 1.22 1.18
==== ==== ====
<FN>
(1) Includes interest-bearing deposits and federal funds sold.
(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 divided by average
interest-earning assets.
</FN>
</TABLE>
16
<PAGE>
Rate/Volume Analysis
The following table sets forth certain information regarding changes in interest
income and interest expense 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>
Year Ended December 31, 1999 vs. 1998:
Increase (Decrease) Due to
Rate/
Rate Volume Volume Total
------- ------- ------ -------
(In thousands)
Interest-earning assets:
<S> <C> <C> <C> <C>
Loans.................................................................... $ (7) 2,345 (7) 2,331
Securities............................................................... (31) 488 (31) 426
Other interest-earning assets............................................ (55) (42) 3 (94)
--- ------ ---- ------
Total.................................................................. (93) 2,791 (35) 2,663
--- ----- --- -----
Interest-bearing liabilities:
Deposits:
Savings, demand, money-market and NOW deposits......................... (131) 610 (88) 391
Time deposits.......................................................... (83) 469 (36) 350
--- ------ --- ------
Total.................................................................. (214) 1,079 (124) 741
--- ----- --- -----
Net change in net interest income............................................ $ 121 1,712 89 1,922
=== ===== ==== =====
Year Ended December 31, 1998 vs. 1997:
Interest-earning assets:
Loans.................................................................... $(203) 1,379 (146) 1,030
Securities............................................................... 5 320 10 335
Other interest-earning assets............................................ (9) 254 (4) 241
---- ------ ---- -----
Total.................................................................. (207) 1,953 (140) 1,606
--- ----- --- -----
Interest-bearing liabilities:
Deposits:
Demand, money-market and NOW deposits.................................. (34) 368 (24) 310
Savings................................................................ 3 56 9 68
Time deposits.......................................................... 1 430 2 433
Other.................................................................. - (10) - (10)
----- ----- ----- ------
Total.................................................................. (30) 844 (13) 801
--- ----- --- -----
Net change in net interest income............................................ $(177) 1,109 (127) 805
=== ===== === =====
</TABLE>
Comparison of Years Ended December 31, 1999 and 1998
17
<PAGE>
General. Net earnings for the year ended December 31, 1999 were $615,259 or
$.18 per basic and $.17 per diluted share compared to net earnings
$205,854 or $.08 per basic and diluted share for the year ended December
31, 1998. This improvement in net operating results was primarily due to
an increase in net interest income and noninterest income, partially
offset by an increase in noninterest expenses and the provision for loan
losses, all as a result of growth of the Company.
Interest Income and Expense. Interest income increased by $2.7 million from
$4.1 million for the year ended December 31, 1998 to $6.8 million for the
year ended December 31, 1999. Interest income on loans increased to $5.3
million from $2.9 million due an increase in the average loan portfolio
balance for the year ended December 31, 1999, partially offset by a
decrease in the weighted-average yield earned to 8.31% for 1999 from 8.33%
for 1998. Interest on securities increased to $.9 million due to an
increase in the average securities balance in 1999, partially offset by a
decrease in the average yield earned from 6.21% in 1998 to 5.81% in 1999.
Interest on other interest-earning assets decreased to $.6 million
primarily due to a decrease in the average balance and a decrease in the
weighted-average yield earned on those assets.
Interest expense increased to $2.7 million in 1999 from $2.0 million in
1998. Interest expense increased due to the $26.1 million growth in
average interest-bearing deposits in 1999, partially offset by a decrease
in the weighted-average rate paid.
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. In addition, industry standards, the
amounts of nonperforming loans, general economic conditions, particularly
as they relate to market areas, and other factors related to the
collectibility of the Company's loan portfolio were considered. The
provision for loan losses increased from $161,711 in 1998 to $437,000 in
1999. The year-over-year increase was due to the $35 million increase in
loan portfolio during the year. Management believes that the allowance for
loan losses of $885,617 is adequate at December 31, 1999.
Noninterest Income. Noninterest income increased from $341,397 in 1998 to
$592,202 in 1999 primarily due to increased service charges on deposit
accounts in 1999 compared to 1998.
Noninterest Expense. Total noninterest expense increased to $3.2 million for
the year ended December 31, 1999 compared to $1.9 million in 1998,
primarily due to increases in employee compensation and benefits and
occupancy and equipment expense resulting, in part, from the opening of
the Moorings office in September 1998. All other operating expenses also
increased primarily due to the overall growth of the Company.
Income Taxes. The income tax provision was $347,876 (an effective rate of
36.1%) for 1998 compared to a $157,893 (an effective rate of 43.4%) for
1998.
18
<PAGE>
Comparison of Years Ended December 31, 1998 and 1997
General. Net earnings for the year ended December 31, 1998 were $205,854 or
$.08 per basic and diluted share compared to net earnings $109,506 or $.06
per basic and diluted share for the year ended December 31, 1997. This
improvement in net operating results was primarily due to an increase in
net interest income and noninterest income, partially offset by an
increase in noninterest expenses, all as a result of growth of the
Company.
Interest Income and Expense. Interest income increased by $1.6 million from
$2.5 million for the year ended December 31, 1997 to $4.1 million for the
year ended December 31, 1998. Interest income on loans increased to $2.9
million from $1.9 million due to an increase in the average loan portfolio
balance for the year ended December 31, 1998, partially offset by a
decrease in the weighted-average yield to 8.33% for 1998 from 9.32% for
1997. Interest on securities increased to $.5 million due to an increase
in the average securities balance in 1998, as well as an increase in the
average yield from 6.01% in 1997 to 6.21% in 1998. Interest on other
interest-earning assets increased to $.7 million primarily due to an
increase in average other interest-earning assets, partially offset by a
decrease in the weighted-average yield earned on those assets.
Interest expense increased to $2.0 million in 1998 from $1.2 million in
1997. Interest expense increased due to the growth in average deposits in
1998, partially offset by a decrease in the weighted-average rate paid on
deposits.
Provision for Loan Losses. As mentioned earlier, the provision for loan
losses was charged to earnings to bring the total allowance to a level
deemed appropriate by management. The provision for loan losses charged to
expenses was $161,711 and $153,000 for the years ended December 31, 1998
and 1997, respectively. Management believes that the allowance for loan
losses of $453,211 was adequate at December 31, 1998.
Noninterest Income. Noninterest income increased from $273,102 in 1997
to $341,397 in 1998 primarily due to increased service charges on deposit
accounts.
Noninterest Expense. Total noninterest expense increased to $1.9 million for
the year ended December 31, 1998 compared to $1.3 million in 1997,
primarily due to increases in employee compensation and benefits and
occupancy and equipment expense resulting from the opening of additional
offices in 1997 and 1998. All other operating expenses also increased
primarily due to the overall growth of the Company.
Income Taxes. The income tax provision was $157,893 (an effective rate of
43.4%) for 1998 compared to a $66,000 (an effective rate of 37.6%) for
1997.
19
<PAGE>
Impact of Inflation and Changing Prices
The financial statements and related data presented herein have been prepared in
accordance with generally accepted accounting principles, 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 Company'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 133 - Accounting for Derivative Investments and
Hedging Activities requires companies to record derivatives on the balance sheet
as assets or liabilities, measured at fair value. Gains or losses resulting from
changes in the values of those derivatives would be accounted for depending on
the use of the derivatives and whether they qualify for hedge accounting. The
key criterion for hedge accounting is that the hedging relationship must be
highly effective in achieving offsetting changes in fair value or cash flows.
The Company will be required to adopt this Statement January 1, 2001. This
Statement is not expected to have a material impact on the Company.
Selected Quarterly Results
Selected quarterly results of operations for the four quarters ended December 31
are as follows (in thousands, except share amounts:
<TABLE>
1999 1998
---------------------------------------------------------------------------------------
Fourth Third Second First Fourth Third Second First
Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income............ $ 1,946 1,815 1,630 1,401 982 1,142 1,075 931
Interest expense........... 805 756 642 547 484 528 534 464
Net interest income........ 1,141 1,059 988 854 498 614 541 467
Provision for loan
losses.................. 80 103 133 121 54 37 15 56
Noninterest income......... 187 139 133 133 35 117 100 89
Noninterest expense........ 977 760 755 742 424 529 521 461
Earnings before
income taxes............ 271 335 233 124 54 165 105 39
Net earnings............... 169 209 151 87 9 103 70 24
Basic earnings per
common share (1)........ .05 .06 .04 .03 - .03 .04 .01
Diluted earnings per
common share (1)........ .05 .06 .04 .03 - .03 .03 .01
Cash dividends declared
per common share........ - - - - - - - -
<FN>
(1) All per share information presented reflects the 1998 stock dividend.
</FN>
</TABLE>
20
<PAGE>
CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
At December 31,
1999 1998
---- ----
Assets
<S> <C> <C>
Cash and due from banks.............................................................. $ 6,035,589 5,481,992
Interest-bearing deposits............................................................ 2,000,000 -
Federal funds sold and securities purchased under agreements to resell............... 8,892,655 19,181,095
----------- ----------
Cash and cash equivalents.............................................. 16,928,244 24,663,087
Securities available for sale........................................................ 6,022,103 -
Securities held to maturity.......................................................... 13,000,000 8,499,968
Loans, net of allowance for loan losses of $885,617 and $453,211..................... 79,987,726 44,932,943
Premises and equipment, net.......................................................... 5,039,789 3,549,924
Federal Home Loan Bank stock, at cost................................................ 214,800 127,100
Deferred tax asset................................................................... 32,775 -
Accrued interest receivable and other assets......................................... 967,253 453,104
----------- ----------
Total assets........................................................... $ 122,192,690 82,226,126
=========== ==========
Liabilities and Stockholders' Equity
Liabilities:
Noninterest-bearing demand deposits.............................................. 12,208,961 6,365,180
Savings and NOW deposits......................................................... 34,292,059 33,307,881
Money-market deposits............................................................ 21,722,006 4,010,998
Time deposits.................................................................... 34,274,902 20,306,399
----------- ----------
Total deposits......................................................... 102,497,928 63,990,458
Official checks.................................................................. 1,060,366 697,458
Deferred income taxes............................................................ - 19,850
Accrued interest payable and other liabilities................................... 650,769 293,832
----------- ----------
Total liabilities...................................................... 104,209,063 65,001,598
----------- ----------
Commitments and contingency (Note 6 and 14)
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, 3,486,767
and 3,455,039 shares issued and outstanding................................. 34,868 34,550
Additional paid-in capital....................................................... 19,310,313 19,158,862
Accumulated deficit.............................................................. (1,353,625) (1,968,884)
Accumulated other comprehensive income (loss).................................... (7,929) -
----------- -----------
Total stockholders' equity............................................. 17,983,627 17,224,528
----------- ----------
Total liabilities and stockholders' equity............................. $ 122,192,690 82,226,126
=========== ==========
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
21
<PAGE>
CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Earnings
<TABLE>
Year Ended December 31,
--------------------------------------
1999 1998 1997
---- ---- ----
Interest income:
<S> <C> <C> <C>
Loans .............................................................. $ 5,274,975 2,943,598 1,913,828
Securities.......................................................... 901,457 476,060 140,545
Other interest-earning assets....................................... 615,424 709,403 468,404
--------- --------- ---------
Total interest income......................................... 6,791,856 4,129,061 2,522,777
--------- --------- ---------
Interest expense:
Deposits............................................................ 2,749,603 2,009,177 1,197,823
Other .............................................................. - - 9,573
--------- --------- ---------
Total interest expense........................................ 2,749,603 2,009,177 1,207,396
--------- --------- ---------
Net interest income.................................................... 4,042,253 2,119,884 1,315,381
Provision for loan losses..................................... 437,000 161,711 153,000
--------- --------- ---------
Net interest income after provision for loan losses.................... 3,605,253 1,958,173 1,162,381
--------- --------- ---------
Noninterest income:
Service charges and fees............................................ 498,094 280,970 176,974
Gain on sale of loans............................................... - - 68,476
Other .............................................................. 94,108 60,427 27,652
--------- --------- ---------
Total noninterest income...................................... 592,202 341,397 273,102
--------- --------- ---------
Noninterest expenses:
Compensation and benefits.......................................... 1,624,999 899,761 641,693
Occupancy and equipment............................................. 440,281 330,474 167,755
Advertising......................................................... 134,026 104,710 31,917
Office supplies..................................................... 122,965 107,577 30,120
Data processing..................................................... 170,575 78,024 62,195
Professional fees................................................... 182,770 67,672 13,538
Other .............................................................. 558,704 347,605 312,802
--------- --------- ---------
Total noninterest expenses.................................... 3,234,320 1,935,823 1,260,020
--------- --------- ---------
Earnings before income taxes........................................... 963,135 363,747 175,463
Income taxes.................................................. 347,876 157,893 65,957
--------- --------- ---------
Net earnings .......................................................... $ 615,259 205,854 109,506
========= ========= =========
Earnings per share:
Basic.........................................................$ .18 .08 .06
========= ======== ========
Diluted.......................................................$ .17 .08 .06
========== ========= =========
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
22
<PAGE>
<TABLE>
CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity
Years Ended December 31, 1999, 1998 and 1997
Common Stock Accumulated
Number Additional Other Total
of Paid-In Accumulated Comprehensive Stockholders'
Shares Amount Capital Deficit Income (Loss) Equity
------- -------- ---------- ----------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996............... 707,610 $ 7,076 6,322,086 (364,979) - 5,964,183
Issuance of 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 common stock at $4.50.......... 1,500 15 6,735 - - 6,750
Net earnings and comprehensive income...... - - - 109,506 - 109,506
---------- --------- ---------- --------- ------- ---------
Balance at December 31, 1997.............. 1,571,624 15,716 7,010,515 (255,473) - 6,770,758
----------
Net earnings and comprehensive
income............................ - - - 205,854 - 205,854
Sale of shares of common
stock at $7.50 per share ............ 1,000,000 10,000 7,413,256 - - 7,423,256
Issuance of shares of common
stock to holders of warrants........ 625,513 6,255 2,808,553 - - 2,814,808
Stock options exercised................... 2,000 20 9,832 - - 9,852
Stock dividend............................ 255,902 2,559 1,916,706 (1,919,265) - -
---------- ------- ---------- --------- ------- -----------
Balance at December 31, 1998.............. 3,455,039 34,550 19,158,862 (1,968,884) - 17,224,528
----------
Comprehensive income:
Net earnings......................... - - - 615,259 - 615,259
Net change in unrealized loss on
securities available for sale..... - - - - (7,929) (7,929)
----------
Comprehensive income................. - - - - - 607,330
----------
Stock options exercised................... 31,728 318 151,451 - - 151,769
---------- -------- ---------- --------- ------- ----------
Balance at December 31, 1999.............. 3,486,767 $ 34,868 19,310,313 (1,353,625) (7,929) 17,983,627
========== ======== ========== ========= ======= ==========
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
23
<PAGE>
<TABLE>
CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Year Ended December 31,
1999 1998 1997
---- ---- ----
Cash flows from operating activities:
<S> <C> <C> <C>
Net earnings ...................................................... $ 615,259 205,854 109,506
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Depreciation................................................... 216,949 191,670 82,818
Provision for loan losses...................................... 437,000 161,711 153,000
(Credit) provision for deferred income taxes................... (47,844) 157,893 65,957
Amortization of loan fees, premiums and discounts.............. (76,665) (103,785) (148,005)
Increase in accrued interest receivable and other assets....... (514,149) (144,952) (175,746)
Loans originated for sale...................................... - (565,000) (4,687,283)
Proceeds from sale of loans originated for sale................ - 565,000 4,755,759
Gain on sale of loans.......................................... - - (68,476)
Increase in accrued interest payable and other liabilities..... 356,637 54,946 165,352
---------- ---------- ----------
Net cash provided by operating activities............... 987,187 523,337 252,882
---------- ---------- ----------
Cash flows from investing activities:
Purchase of securities available for sale.......................... (6,207,508) - -
Purchases of securities held to maturity........................... (8,000,000) (13,499,095) (1,750,000)
Purchase of Federal Home Loan Bank stock........................... (87,700) (127,100) -
Maturities of securities available for sale........................ 160,090 - -
Maturities of securities held to maturity.......................... 3,499,045 7,500,000 1,500,000
Net increase in loans.............................................. (35,401,290) (18,572,979) (14,317,557)
Purchase of premises and equipment, net............................ (1,706,814) (895,597) (635,675)
---------- ---------- ----------
Net cash used in investing activities................... (47,744,177) (25,594,771) (15,203,232)
---------- ---------- ----------
Cash flows from financing activities:
Net increase deposits.............................................. 38,507,470 27,052,091 19,053,263
Net increase (decrease) in official checks......................... 362,908 223,937 (106,182)
Sales of common stock.............................................. 151,769 10,247,916 697,069
Repayment of mortgage payable...................................... - - (525,000)
---------- ---------- ----------
Net cash provided by financing activities............... 39,022,147 37,523,944 19,119,150
---------- ---------- ----------
Net (decrease) increase in cash and cash equivalents................... (7,734,843) 12,452,510 4,168,800
Cash and cash equivalents at beginning of year......................... 24,663,087 12,210,577 8,041,777
---------- ---------- ----------
Cash and cash equivalents at end of year............................... $ 16,928,244 24,663,087 12,210,577
========== ========== ==========
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest....................................................... $ 2,536,826 1,952,818 1,093,507
========== ========== ==========
Income taxes................................................... $ 345,000 - -
========== ========== ==========
Noncash transaction-
Issuance of mortgage payable for acquisition of property.......$ - - 525,000
========== ========== ==========
Change in unrealized loss on securities available for
sale........................................................$ (7,929) - -
========== ========== ==========
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
24
<PAGE>
CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1999 and 1998 and for each the
Years In the Three-Year Period
Ended December 31, 1999
(1) Summary of Significant Accounting Policies
Organization. Citizens Community Bancorp, Inc. ("Citizens") is a one-bank
holding company and owns 100% of the outstanding common stock of
Citizens Community Bank of Florida ("CCB") Citizens Financial Corp.
("CFC") and CCB Mortgage Company ("CCB Mortgage"). Citizens was
organized simultaneously with CCB. Citizens' primary business is the
ownership and operation of CCB, CFC and CCB Mortgage. CCB is a Florida
state-chartered commercial bank and its deposits are insured by the
Federal Deposit Insurance Corporation. CCB provides community banking
services to businesses and individuals predominantly in Collier County,
Florida. CFC and CCB Mortgage are a mortgage origination companies
operating in Southwest Florida. CFC specializes in commercial mortgage
organizations while CCB Mortgage is a residential real estate brokerage
company. Collectively the entities are referred to as the "Company." The
Company operates predominantly in one reportable industry segment:
banking.
Basis of Presentation. The accompanying consolidated financial statements
include the accounts of Citizens, CCB, CFC and CCB Mortgage. 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.
Use of Estimates. In preparing consolidated financial statements in
conformity with generally accepted accounting principles, management is
required to make estimates and assumptions that affect the reported
amounts of assets and liabilities as of the date of the balance sheet
and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates. Material
estimates that are particularly susceptible to significant change in the
near term relate to the determination of the allowance for loan losses,
and deferred tax assets.
Cash and Cash Equivalents. For purposes of the consolidated statements of
cash flows, cash and cash equivalents include cash and balances due from
banks, interest-bearing deposits, federal funds sold and securities
purchased under agreements to resell, all of which mature within ninety
days.
Securities. Securities may be classified as trading, held to maturity or
available for sale. Trading securities are held principally for resale
and recorded at their fair values. Unrealized gains and losses on
trading securities are included immediately in earnings. The Company
does not maintain any securities in a trading portfolio.
Held-to-maturity securities are those which the Company has the
positive intent and ability to hold to maturity and are reported at
amortized cost. Available-for-sale securities consist of securities not
classified as trading securities nor as held-to-maturity securities.
Unrealized holding gains and losses, net of tax, on available-for-sale
securities are reported as a net amount in a other comprehensive
income. Gains and losses on the sale of available-for-sale securities
are determined using the specific-identification method. Premiums and
discounts on securities available for sale and held to maturity 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, 1999 and 1998, 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.
(continued)
25
<PAGE>
CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(1) Summary of Significant Accounting Policies, Continued
Loans Receivable, ontinued. 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 loans is discontinued at the time the loan is
ninety days delinquent unless the credit is well-secured and in process
of collection. In all cases, loans are placed on nonaccrual or
charged-off at an earlier date if collection of principal or interest is
considered doubtful.
All interest accrued but not collected for loans that are placed on
nonaccrual or charged-off is reversed against interest income. The
interest on these loans is accounted for on the cash-basis or
cost-recovery method, until qualifying for return to accrual. Loans are
returned to accrual status when all the principal and interest amounts
contractually due are brought current and future payments are reasonably
assured.
Allowance for Loan Losses. The allowance for loan losses is established as
losses are estimated to have occurred through a provision for loan
losses charged to earnings. Loan losses are charged against the
allowance when management believes the uncollectibility of a loan
balance is confirmed. Subsequent recoveries, if any, are credited to the
allowance.
The allowance for loan losses is evaluated on a regular basis by
management and is based upon management's periodic review of the
collectibility of the loans in light of historical experience, the
nature and volume of the loan portfolio, adverse situations that may
affect the borrower's ability to repay, estimated value of any
underlying collateral and prevailing economic conditions. This
evaluation is inherently subjective as it requires estimates that are
susceptible to significant revision as more information becomes
available.
A loan is considered impaired when, based on current information and
events, it is probable that the Company will be unable to collect the
scheduled payments of principal or interest when due according to the
contractual terms of the loan agreement. Factors considered by
management in determining impairment include payment status, collateral
value, and the probability of collecting scheduled principal and
interest payments when due. Loans that experience insignificant payment
delays and payment shortfalls generally are not classified as impaired.
Management determines the significance of payment delays and payment
shortfalls on a case-by-case basis, taking into consideration all of the
circumstances surrounding the loan and the borrower, including the
length of the delay, the reasons for the delay, the borrower's prior
payment record, and the amount of the shortfall in relation to the
principal and interest owed. Impairment is measured on a loan by loan
basis for commercial loans by either the present value of expected
future cash flows discounted at the loan's effective interest rate, the
loan's obtainable market price, or the fair value of the collateral if
the loan is collateral dependent.
Large groups of smaller balance homogeneous loans are collectively
evaluated for impairment. Accordingly, the Company does not separately
identify individual consumer and residential loans for impairment
disclosures.
(continued)
26
<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 Compensation Plans. Statement of Financial Accounting Standards (SFAS)
No. 123, Accounting for Stock-Based Compensation, encourages all
entities to adopt a fair value based method of accounting for employee
stock compensation plans, whereby compensation cost is measured at the
grant date based on the value of the award and is recognized over the
service period, which is usually the vesting period. 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
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued
to Employees, whereby compensation cost is the excess, if any, of the
quoted market price of the stock at the grant date (or other measurement
date) over the amount an employee must pay to acquire the stock. Stock
options issued under the Company's stock option plan have no intrinsic
value at the grant date, and under Opinion No. 25 no compensation cost
is recognized for them. The Company has elected to continue with the
accounting methodology in Opinion No. 25 and, as a result, has provided
proforma disclosures of net earnings and earnings per share and other
disclosures, as if the fair value based method of accounting had been
applied.
Transfer of Financial Assets. Transfers of financial assets are accounted
for as sales, when control over the assets has been surrendered. Control
over transferred assets is deemed to be surrendered when (1) the assets
have been isolated from the Company, (2) the transferee obtains the
right (free of conditions that constrain it from taking advantage of
that right) to pledge or exchange the transferred assets, and (3) the
Company does not maintain effective control over the transferred assets
through an agreement to repurchase them before their maturity.
Income Taxes. Deferred income tax assets and liabilities are recorded to
reflect the tax consequences on future years of temporary differences
between revenues and expenses reported for financial statement and those
reported for income tax purposes. Deferred tax assets and liabilities
are measured using the enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to
be realized or settled. Valuation allowances are provided against assets
which are not likely to be realized.
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.
(continued)
27
<PAGE>
CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(1) Summary of Significant Accounting Policies, Continued
Fair Values of Financial Instruments. The fair value of a financial
instrument is the current amount that would be exchanged between willing
parties, other than in a forced liquidation. Fair value is best
determined based upon quoted market prices. However, in many instances,
there are no quoted market prices for the Company's various financial
instruments. In cases where quoted market prices are not available, fair
values are based on estimates using present value or other valuation
techniques. Those techniques are significantly affected by the
assumptions used, including the discount rate and estimates of future
cash flows. Accordingly, the fair value estimates may not be realized in
an immediate settlement of the instrument. SFAS 107 excludes certain
financial instruments and all nonfinancial instruments from its
disclosure requirements. Accordingly, the aggregate fair value amounts
presented may not necessarily represent the underlying fair value of the
Company. The following methods and assumptions were used by the Company
in estimating fair values of financial instruments:
Cash and Cash Equivalents. The carrying amounts of cash and cash
equivalents approximates their fair value.
Securities. Fair values for securities held to maturity and available
for sale 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. The carrying value of Federal Home
Loan Bank stock approximates fair value due to the redemption provisions
of Federal Home Loan Bank stock.
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 time deposits are estimated using a
discounted cash flow calculation that applies interest rates currently
being offered on these accounts 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.
Earnings Per Share. Basic earnings per share is computed on the basis of the
weighted-average number of common shares outstanding. Diluted earnings
per share is computed based on the weighted-average number of shares
outstanding plus the effect of outstanding stock options, computed using
the treasury stock method.
Future Accounting Requirements. Financial Accounting Standards 133 -
Accounting for Derivative Investments and Hedging Activities requires
companies to record derivatives on the balance sheet as assets or
liabilities, measured at fair value. Gains or losses resulting from
changes in the values of those derivatives would be accounted for
depending on the use of the derivatives and whether they qualify for
hedge accounting. The key criterion for hedge accounting is that the
hedging relationship must be highly effective in achieving offsetting
changes in fair value or cash flows. The Company will be required to
adopt this Statement effective January 1, 2001. Management does not
anticipate that this Statement will have a material impact on the
Company.
Reclassifications. Certain amounts in the 1998 consolidated financial
statements have been reclassified to conform with the 1999 presentation.
(continued)
28
<PAGE>
CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(2) Securities
Securities have been classified as available for sale or held to maturity,
in accordance with management's intent. The carrying amount of
securities and their approximate fair values are as follows:
<TABLE>
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- --------- ---------- ----------
Securities Available for Sale:
December 31, 1999:
<S> <C> <C> <C> <C>
U.S. Government agencies................... $ 4,880,563 4,515 7,500 4,877,578
Mortgage-backed securities................. 964,245 - 9,720 954,525
Equity securities.......................... 190,000 - - 190,000
---------- ------ ------- ----------
Total...................................... $ 6,034,808 4,515 17,220 6,022,103
========== ====== ======= ==========
Securities Held to Maturity:
December 31, 1999-
U.S. Government agencies................... $ 13,000,000 - 438,400 12,561,600
========== ====== ======= ==========
December 31, 1998-
U.S. Government agencies................... $ 8,499,968 2,565 - 8,502,533
========== ====== ======= ==========
</TABLE>
<TABLE>
The scheduled maturities of securities are as follows:
Available for Sale Held to Maturity
-------------------------- --------------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
December 31, 1999:
<S> <C> <C>
Due in one or less............................ $ 750,000 750,078 - -
Due after one through five years............... 1,000,000 992,500 13,000,000 12,561,600
Due after five years through ten years......... 1,053,063 1,057,500 - -
Due after ten years............................ 2,077,500 2,077,500 - -
Mortgage-backed securities..................... 964,245 954,525 - -
Equity securities.............................. 190,000 190,000 - -
---------- ----------- ------------ ------------
$ 6,034,808 6,022,103 13,000,000 12,561,600
========= ========= ========== ==========
</TABLE>
There were no sales of securities in 1999, 1998 or 1997.
(continued)
29
<PAGE>
CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(3) Loans
The components of loans are as follows:
<TABLE>
At December 31,
1999 1998
---- ----
<S> <C> <C>
Commercial real estate.................................................. $ 42,286,675 21,820,359
Residential real estate................................................. 24,920,678 14,570,558
Commercial.............................................................. 5,706,516 4,993,954
Consumer................................................................ 7,703,412 3,827,444
---------- ----------
80,617,281 45,212,315
Add (Subtract):
Deferred costs, net................................................... 256,062 173,839
Allowance for loan losses............................................. (885,617) (453,211)
---------- ----------
Loans, net.............................................................. $ 79,987,726 44,932,943
========== ==========
</TABLE>
An analysis of the change in the allowance for loan losses follows:
<TABLE>
Year Ended December 31,
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of year................................... $ 453,211 298,000 145,000
Loans charged-off.............................................. (4,594) (6,500) -
Provision for loan losses...................................... 437,000 161,711 153,000
------- ------- -------
Balance at end of year......................................... $ 885,617 453,211 298,000
======= ======= =======
</TABLE>
The Company had no impaired loans in 1999, 1998 or 1997.
(4) Premises and Equipment
A summary of premises and equipment follows:
<TABLE>
At December 31,
1999 1998
---- ----
<S> <C> <C>
Land.................................................................. $ 1,768,020 931,056
Bank premises......................................................... 2,340,036 2,092,525
Furniture, fixtures and equipment..................................... 1,430,067 807,727
--------- ----------
Total, at cost.................................................... 5,538,123 3,831,308
Less accumulated depreciation......................................... 498,334 281,384
--------- ----------
Premises and equipment, net....................................... $ 5,039,789 3,549,924
========= ==========
</TABLE>
(continued)
30
<PAGE>
CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(5) Deposits
The aggregate amount of time deposits with a minimum denomination of
$100,000, was approximately $12,618,000 and $5,442,000 at December 31,
1999 and 1998, respectively.
At December 31, 1999 the scheduled maturities of time deposits are as
follows:
Year Ending
December 31, Amount
2000.......................................... $ 27,317,186
2001.......................................... 5,809,714
2002.......................................... 621,195
2003.......................................... 221,629
2004 and thereafter........................... 305,178
-----------
$ 34,274,902
(6) 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 financial instruments were as follows (in
thousands):
<TABLE>
At December 31, 1999 At December 31, 1998
------------------------ ---------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
--------- -------- ---------- --------
Financial assets:
<S> <C> <C> <C> <C>
Cash and cash equivalents..................... $ 16,928 16,928 24,663 24,663
Securities available for sale................. 6,022 6,022 - -
Securities held to maturity................... 13,000 12,562 8,500 8,503
Loans receivable.............................. 79,988 79,880 44,933 45,353
Accrued interest receivable................... 739 739 351 351
Financial liabilities:
Deposit liabilities........................... 102,498 102,595 63,990 64,252
</TABLE>
(continued)
31
<PAGE>
CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(6) Financial Instruments, Continued
A summary of the amounts of the Company's financial instruments, which
approximates market value with off-balance sheet risk at December 31,
1999 follows (in thousands):
Unfunded loan commitments............................. $ 10,988
======
Available lines of credit............................. $ 4,501
=======
(7) 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.
(8) Income Taxes
The income tax provision consisted of the following:
<TABLE>
Year Ended December 31,
1999 1998 1997
---- ---- ----
Current:
<S> <C>
Federal....................................................... $ 340,930 - -
State......................................................... 54,790 - -
------- ------- ------
Total current provision.................................... 395,720 - -
------- ------- ------
Deferred:
Federal....................................................... (43,651) 134,815 56,317
State......................................................... (4,193) 23,078 9,640
------- ------- ------
Total deferred (credit) provision.......................... (47,844) 157,893 65,957
------- ------- ------
Total...................................................... $ 347,876 157,893 65,957
======= ======= ======
</TABLE>
The reasons for the differences between the statutory federal income tax
rate and the effective tax rate are summarized as follows:
<TABLE>
1999 1998 1997
---------------------------------------------------------------------
% of % of % of
Pretax Pretax Pretax
Amount Earnings Amount Earnings Amount Loss
--------- -------- --------- -------- -------- -------
Income tax expense (benefit) at statutory
<S> <C> <C> <C> <C> <C> <C>
Federal income tax rate............ $ 327,464 34.0% $ 123,674 34.0% $ 59,657 34.0%
Increase (decreases) resulting from:
State taxes, net of federal tax
benefit........................ 33,394 3.5 15,231 4.2 6,362 3.6
Other.............................. (12,982) (1.4) 18,988 5.2 (62) -
------- ---- ------- ---- ------ ----
$ 347,876 36.1% $ 157,893 43.4% $ 65,957 37.6%
======= ==== ======= ==== ====== ====
</TABLE>
(continued)
32
<PAGE>
CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(8) 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>
At December 31,
1999 1998
---- ----
Deferred tax assets:
<S> <C> <C>
Allowance for loan losses........................................... $ 223,310 58,867
Contributions....................................................... - 2,111
Organization and start-up costs..................................... 13,318 23,536
Unrealized loss on securities available for sale.................... 4,781 -
------- -------
Total deferred tax asset.......................................... 241,409 84,514
------- -------
Deferred tax liabilities:
Depreciation........................................................ 115,802 46,117
Accrual to cash adjustment.......................................... 92,832 58,247
------- -------
Total deferred tax liabilities.................................... 208,634 104,364
------- -------
Net deferred income tax asset (liability)......................... $ 32,775 (19,850)
======= =======
</TABLE>
(9) Stock Options
The Company has established two Stock Option plans, one for directors and
one for officers and employees. A total of 459,000 shares of common
stock has been reserved for the plans. At December 31, 1999, 11,560
shares remain available for grant. The directors options have terms of
ten years and vest over three years. The officers and employee options
have terms of ten years and vest over five years.
<TABLE>
Range
of Per Weighted-
Share Average
Number Option Per Share Aggregate
of Exercise Exercise Option
Shares Price Price Price
--------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at December 31, 1996.................... 55,080 $ 4.17 4.17 229,684
Options granted..................................... 135,000 4.17-5.56 4.80 648,090
Options terminated.................................. (13,600) 4.17 4.17 (56,700)
Options exercised................................... (8,640) 4.17 4.17 (36,000)
------- ----------
Outstanding at December 31, 1997.................... 167,840 4.17-5.56 4.68 785,074
Options granted..................................... 268,812 6.48-9.25 7.56 2,033,513
Options terminated.................................. (67,651) 4.67-9.26 5.46 (369,576)
Options exercised................................... (2,160) 4.67-5.21 4.59 (9,920)
------- ----------
Outstanding at December 31, 1998.................... 366,841 4.17-9.26 6.65 2,439,091
Options granted..................................... 156,500 9.00-9.50 9.36 1,464,840
Options terminated.................................. (44,173) 4.63-9.26 6.03 (266,573)
Options exercised................................... (31,728) 4.17-6.95 4.78 (151,769)
------- ----------
Outstanding at December 31, 1999................... 447,440 $ 4.17-9.50 7.82 3,485,589
======= ========= ==== ==========
</TABLE>
The weighted-average remaining contractual life of the outstanding stock
options at both December 31, 1999 and 1998 was 92 months and 100
months.
(continued)
33
<PAGE>
CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(9) Stock Options, Continued
These options are exercisable as follows:
<TABLE>
Weighted- Remaining
Average Contractual
Exercise Life in
Year Ending Price Months
----------- -------- ----------
<S> <C> <C> <C> <C>
2000......................................... 200,151 $ 7.30 90
2001......................................... 117,788 7.73 79
2002......................................... 74,572 8.43 70
2003......................................... 39,917 8.58 62
2004......................................... 15,012 9.40 55
-------
447,440 7.79 92
======= ==== ==
</TABLE>
FASB Statement 123 requires proforma information regarding net earnings and
earnings per share. This proforma information has been determined as if
the Company had accounted for its employee stock options under the fair
value method of that statement and is as follows:
<TABLE>
Year Ended December 31,
1999 1998 1997
---- ---- ----
Net earnings:
<S> <C> <C> <C>
As reported............................................. $ 615,259 205,854 109,506
======= ======= =======
Proforma................................................ $ 175,256 106,098 97,605
======= ======= =======
Basic earnings per share:
As reported............................................. $ .18 .08 .06
======== ======= =======
Proforma ...............................................$ .05 .04 .06
======== ======= =======
Diluted earnings per share:
As reported.............................................$ .17 .08 .06
======== ======= =======
Proforma................................................$ .05 .04 .06
======== ======= =======
Fair value per share granted............................$ 4.49 2.65 .75
======== ======= =======
</TABLE>
The fair value of each option grant is estimated on the date of grant using
the minimum value method with the following assumptions:
<TABLE>
Year Ended December 31,
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Risk-free interest rate........................................... 6% 5% 6%
Dividend yield.................................................... - % - % - %
Volatility ....................................................... 14.03% - % - %
Expected life in years............................................ 10 10 10
</TABLE>
(continued)
34
<PAGE>
CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(10) Earnings Per Share ("EPS")
The following is a reconciliation of the numerators and denominators of the
basic and diluted earnings per share computations.
<TABLE>
For the Year Ended December 31,
1999 1998 1997
----------------------------------------------------------------------------------------------------------
Weighted- Per Weighted- Per Weighted- Per
Average Share Average Share Average Share
Earnings Shares Amount Earnings Shares Amount Earnings Shares Amount
Basic EPS:
Net earnings
available to
common
<S> <C> <C> <C> <C> <C> <C> <C> <C>
stockholders...... $ 615,259 3,470,664 $ .18 $ 205,854 2,597,330 $ .08 $ 109,506 1,697,354 $ .06
=== ==== ===
Effect of dilutive
securities:
Incremental shares
from assumed
exercise of
options .......... 98,118 44,602 -
--------- --------- ---------
Diluted EPS:
Net earnings
available to
common
stockholders
and assumed
conversions....... $ 615,259 3,568,782 $ .17 $ 205,854 2,641,932 $ .08 $ 109,506 1,697,354 $ .06
======= ========= === ======= ========= === ======= ========= ===
</TABLE>
(11) Stockholders' Equity
The Board of Directors approved the split of the Company"s common shares on
a two-for-one basis effective December 15, 1997 and to pay an 8% stock
dividend to stockholders of record on December 31, 1998. All share
amounts reflect this split and stock dividend.
(12) Profit Sharing Plan
During 1998, the Company began sponsoring a Section 401(k) profit sharing
plan. The profit sharing plan is available to all employees electing to
participate after meeting certain age and length of service
requirements. Expense related to the Company"s contributions to the
profit sharing plan included in the accompanying consolidated
statements of earnings was approximately $5,000 and $3,000 for the
years ended December 31, 1999 and 1998, respectively.
(continued)
35
<PAGE>
CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(13) Regulatory Matters
Federal and state banking regulations place certain restrictions on
dividends paid and loans or advances made by CCB to Citizens. As of
December 31, 1999, CCB had not paid any dividends to Citizens.
CCB is subject to various regulatory capital requirements administered by
the federal and state 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 financial statements of the Company.
Under capital adequacy guidelines and the regulatory framework for
prompt corrective action, CCB must meet specific capital guidelines
that involve quantitative measures of their assets, liabilities, and
certain off-balance-sheet items as calculated under regulatory
accounting practices. The capital amounts and classification are also
subject to qualitative judgements by the regulators about components,
risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require CCB to maintain minimum amounts and percentages (set forth in
the following table) of total and Tier 1 capital (as defined in the
regulations) to risk-weighted assets (as defined) and of Tier 1 capital
(as defined) to average assets (as defined). Management believes, as of
December 31, 1999 and 1998, that CCB met all capital adequacy
requirements to which it is subject.
To be categorized as well capitalized, an institution must maintain
minimum total risk-based, Tier I risk-based, and Tier I leverage
percentages as set forth in the following tables. There are no
conditions or events since that notification that management believes
have changed CCB's category. CCB's actual capital amounts and
percentages as of December 31, 1999 are also presented in the table
(dollars in thousands).
<TABLE>
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, 1999:
<S> <C> <C> <C> <C> <C> <C>
Total Capital (to Risk-
Weighted Assets).......... $ 9,232 12.17% $ 5,927 8.00% $ 7,409 10.00%
Tier I Capital (to Risk-
Weighted Assets).......... 8,427 11.11 2,964 4.00 4,445 6.00
Tier I Capital
(to Average Assets)....... 8,427 8.25 4,085 4.00 5,106 5.00
As of December 31, 1998:
Total Capital (to Risk-
Weighted Assets).......... 6,808 15.34 3,551 8.00 4,439 10.00
Tier I Capital (to Risk-
Weighted Assets).......... 6,375 14.36 1,776 4.00 2,663 6.00
Tier I Capital
(to Average Assets)....... 6,375 10.36 2,461 4.00 3,077 5.00
</TABLE>
(14) Year 2000 Issues
The Company's operating and financial systems have been found to be
compliant; the "Y2K Problem" has not adversely affected the Company's
operations nor does management expect that it will.
(continued)
36
<PAGE>
CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(15) Parent Company Only Financial Information Citizens' unconsolidated
financial information is as follows:
<TABLE>
Condensed Balance Sheets
(In thousands)
At December 31,
1999 1998
------- ------
Assets
<S> <C> <C>
Cash and interest-bearing deposits............................................... $ 1,112 131
Securities purchased under agreements to resell.................................. 1,300 8,705
Securities available for sale.................................................... 190 -
Loans receivable................................................................. 5,751 2,036
Investment in subsidiaries....................................................... 8,663 6,456
Premises and equipment, net...................................................... 883 -
Other assets..................................................................... 85 12
------ -----
Total assets................................................................. $ 17,984 17,340
====== ======
Liabilities and Stockholders' Equity
Liabilities...................................................................... - 115
Stockholders' equity............................................................. 17,984 17,225
------ ------
Total liabilities and stockholders' equity................................... $ 17,984 17,340
====== ======
</TABLE>
<TABLE>
Condensed Statements of Operations
(In thousands)
Year Ended December 31,
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Revenues.............................................................. $ 753 416 162
Expenses.............................................................. (254) (106) (138)
--- --- ---
Income before income of subsidiaries
and income taxes................................................ 499 310 24
Income of subsidiaries................................................ 294 11 94
--- --- ---
Earnings before income taxes...................................... 793 321 118
Income taxes.......................................................... 178 115 8
--- --- ---
Net earnings...................................................... $ 615 206 110
=== === ===
</TABLE>
(continued)
37
<PAGE>
CITIZENS COMMUNITY BANCORP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(15) Parent Company Only Financial Information, Continued
<TABLE>
Condensed Statements of Cash Flows
(In thousands)
Year Ended December 31,
1999 1998 1997
---- ---- ----
Cash flows from operating activities:
<S> <C> <C> <C>
Net earnings........................................................... $ 615 206 110
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Equity in undistributed earnings of subsidiaries................... (294) (11) (94)
(Increase) decrease in other assets................................ (73) (12) 23
(Decrease) increase in other liabilities........................... (115) 111 (5)
Depreciation....................................................... - 15 17
------ ------ ------
Net cash provided by operating activities.......................... 133 309 51
------ ----- ------
Cash flows from investing activities:
Securities purchased under agreements to resell........................ 7,405 (8,705) -
Purchase of available for sale securities.............................. (190) - -
Purchase of property and equipment, net of transfer to subsidiary...... (883) (467) (48)
Net increase in loans receivable....................................... (3,715) (775) (600)
----- ------ ------
Net cash provided by (used in) investing activities................ 2,617 (9,947) (648)
----- ------ ------
Cash flows from financing activities:
Repayment of mortgage note payable..................................... - - (525)
Net proceeds from issuance of common stock............................. 152 10,248 697
Investment in subsidiary............................................... (1,921) (750) (617)
----- ------ ------
Net cash (used in) provided by financing activities................ (1,769) 9,498 (445)
----- ------ ------
Net increase (decrease) in cash............................................. 981 (140) (1,042)
Cash and cash equivalents at beginning of the year.......................... 131 271 1,313
----- ------ -----
Cash and cash equivalents at end of year.................................... $ 1,112 131 271
===== ====== ======
</TABLE>
38
<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, 1999 and 1998, and the related consolidated statements of earnings, changes
in stockholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 1999. 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 audit 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, 1999 and 1998, and the results of its operations and its cash
flows for each of the years in the three-year period ended December 31, 1999, in
conformity with generally accepted accounting principles.
HACKER, JOHNSON, COHEN & GRIEB PA
Tampa, Florida
January 14, 2000
39
<PAGE>
Citizens Community Bancorp Officers
Richard Storm, Jr.
Chairman of the Board
Chief Executive Officer
Gregory E. Smith John G. Wolf
President Asst. Treasurer
Chief Financial Officer
Treasurer
James S. Hagedorn Bruce G. Fedor
Vice Chairman Vice President
Secretary
General Counsel
Robert J. David Diane M. Beyer
Senior Vice President Asst. Secretary
Citizens Community Bank Officers
Richard Storm, Jr. Clifford H. Ford
Chairman of the Board Vice President
Chief Executive Officer Commercial Lending Officer
Gregory E. Smith Guy W. Harris
President Vice President
Chief Operating Officer Cashier
Jeffrey L. Merwin Diana M. Newell
Executive Vice President Vice President
Senior Administrative Officer Branch Manager
James F. Schaffer Nancy A. Obrochta
Executive Vice President Vice President
Senior Lender Loan Operations Manager
Robert J. David Patricia V. Paris
Senior Vice President Vice President
Marketing Branch Manager
David E. Klein Melissa R. Prickett
Senior Vice President Vice President
Loan Officer Human Resources Director
Bruce G. Fedor Kim Williams- Poorman
Vice President Asst. Vice President
General Counsel Branch Manager
Citizens Financial Corp. Officers
Robert J. David Bruce G. Fedor Gregory E. Smith
President Secretary Treasurer
Chief Executive Officer
CCB Mortgage Corp. Officers
Tony J. Iannotta Bruce G. Fedor Gregory E. Smith
President Secretary Treasurer
Chief Executive Officer
<PAGE>
Corporate Information
Corporate
Offices 650 East Elkcam Circle
Marco Island, Florida 34145
(941) 393-2333
Annual Meeting The Annual Meeting of the Stockholders will be held at the
Deck, located in the Shops of Marco, 1839 San Marco Road, Marco
Island, Florida 34145 at 11:00 a.m., April 18, 2000.
Common Stock National Quotation Bureau, Inc., Pink Sheets; Stock Symbol
"CCBI"
Available
Information Citizens Community Bancorp, Inc. is subject to the informational
requirements of the Securities Exchange Act of 1934, as amended,
and, in accordance therewith, files electronically with the
Securities and Exchange Commission ("Commission") through the
Commission's Electronic Data Gathering Analysis and Retrieval
("EDGAR") system, reports, proxy statements and other information
which may also be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549 and 3475 Lenox Road, N.E., Suite
1000, Atlanta, GA 30326 1232. Copies of such material may also be
reviewed on the Commission's Web Site, http://www.sec.gov.
Copies of Forms 10-KSB and 10-QSB, as filed with the Securities
and Exchange Commission, may also be obtained by stockholders,
without charge, upon written request to Mr. Gregory E. Smith -
President and Chief Financial Officer, Citizens Community
Bancorp, Inc., 650 East Elkcam Circle, Marco Island, Florida
34145, telephone number (941) 389-1800 Extension 280.
Transfer Agent
and Registrar Registrar and Transfer Company
10 Commerce Drive
Cranford, NJ 07016
(800) 368-5948
Corporate
Counsel Igler & Dougherty, P.A.
1501 Park Avenue East
Tallahassee, Florida 32301
(850) 878-2411
Independent
Auditors Hacker, Johnson, Cohen & Grieb PA
Certified Public Accountants
500 North Westshore Boulevard
Suite 1000
Tampa, Florida 33609
(813) 286-2424
<PAGE>
Corporate Offices Marco Island Branch
650 E. Elkcam Circle 650 S. Elkcam Circle
Marco Island, Florida 34145 Marco Island, Florida 34145
941.393.2333 941.389.1800
East Trail Branch Moorings Branch
5101 East Tamiami Trail 2375 North Tamiami Trail
Naples, Florida 34113 Naples, Florida 34103
941.775.0748 941.430.1775
Citizens Financial Corp. CCB Mortgage Corporation
5101 Tamiami Trail North 650 E. Elkam Circle
Naples, Florida 34113 Marco Island, Florida 34145
941.659.0422 941.394.4433 or 800.310.8234
Visit Us On The Web:
www.ccbancorpfl.com
Your Independent Bank
EXHIBIT 22.2
Citizens' Proxy Statement for
2000 Annual Meeting of Shareholders
17
<PAGE>
[GRAPHIC OMITTED]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The 2000 Annual Meeting of the Shareholders of Citizens Community
Bancorp, Inc. will be held at The Deck, located in the Shops of Marco, 1839 San
Marco Road, Marco Island, Florida on:
Tuesday, April 18, 2000
at
11:00 a.m. Eastern Standard Time
for the following purposes:
PROPOSAL I. To elect eight (8) directors to one year terms expiring in 2001.
PROPOSAL II. To consider and vote upon Citizens Community Bancorp, Inc. Year
2000 Advisory Board Members' Stock Option and Limited Rights
Plan.
PROPOSAL III. To consider and vote upon an amendment to Citizens Community
Bancorp, Inc.'s 1996 Incentive Stock Option Plan, to increase the
number of shares of common stock available to be granted to
351,000.
PROPOSAL IV. To ratify the appointment of Hacker, Johnson, Cohen & Grieb,
P.A., as the independent auditors of Citizens Community Bancorp,
Inc. for the fiscal year ending December 31, 2000.
PROPOSAL V. Approve the adjournment of the Annual Meeting to solicit
additional proxies in the event that there are not sufficient
votes to approve any one or more of the foregoing proposals.
o To transact such other business as properly may come before the
Annual Meeting.
Only those shareholders who were shareholders of record at the close of
business on February 29, 2000, will be entitled to vote in person or by proxy at
the Annual Meeting or any adjournment thereof.
All shareholders are cordially invited to attend the Annual Meeting in
person, but we urge you to complete, sign, and date the enclosed proxy and
return it in the envelope provided as promptly as possible, whether or not you
plan to attend the Annual Meeting. If you do attend the Annual Meeting, you may
revoke the proxy and vote in person.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Bruce G. Fedor
-----------------------------------
Bruce G. Fedor, Corporate Secretary
Marco Island, Florida
March 10, 2000
<PAGE>
[GRAPHIC OMITTED]
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
APRIL 18, 2000
--------------------------
Solicitation and Voting of Proxies
This Proxy Statement and the accompanying Proxy Card are being
furnished to shareholders of Citizens Community Bancorp, Inc. ("Company"), the
parent company of Citizens Community Bank of Florida ("Citizens Bank"), Citizens
Financial Corp. and CCB Mortgage Corp., 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 18, 2000, at 11:00 a.m., Eastern Time at The Deck located in
the Shops of Marco, 1839 San Marco Road, Marco Island, Florida.
Regardless of the number of shares of common stock that you may own, it
is important that as a shareholder you be represented by proxy or in person at
the Annual Meeting. We would ask that you complete the enclosed Proxy Card and
return it signed and dated in the enclosed postage paid envelope. Please
remember to indicate the way you wish your shares to be voted in the space
provided on the Proxy Card. 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 director nominees;
"FOR" the adoption of the Citizens Community Bancorp, Inc. Year 2000
Advisory Board Members' Stock Option and Limited Rights Plan;
"FOR" an amendment to the Company's 1996 Incentive Stock Option Plan to
increase the number of shares available to be granted to 351,000 shares
of common stock;
"FOR" the ratification of the appointment of Hacker, Johnson, Cohen &
Grieb, P.A., as the independent auditors of the Company for the fiscal
year ending December 31, 2000; and
"FOR" the adjournment of the Annual Meeting to solicit additional
proxies in the event there are not sufficient votes to approve one or
more of the foregoing proposals.
Revocation of Proxy
Your presence at the Annual Meeting will not automatically revoke your
proxy. You may revoke a proxy at any time prior to the polls closing at the
Annual Meeting by:
o Filing with the Company's Corporate Secretary a written notice of
revocation;
o By delivering to the Company a duly executed Proxy Card
bearing a later date; or
o By attending the Annual Meeting and voting in person.
<PAGE>
Citizens Community Bancorp, Inc. April 18, 2000
Proxy Statement
Page 2
Voting Securities
The Securities which may be voted at this Annual Meeting consist of
shares of common stock of the Company, 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 February 29, 2000, 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 common
stock outstanding on the Record Date was 3,486,767, which are held by
approximately 785 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.
If your shares are held in street name, your brokerage firm, under
certain circumstances, may vote your shares. Brokerage firms have authority
under New York Stock Exchange rules to vote customers' unvoted shares on certain
"routine" matters, including election of directors. There are two non-routine
matters being considered at this Annual Meeting; Proposal II, the adoption of
the Citizens Community Bancorp, Inc. Year 2000 Advisory Board Member Stock
Option and Limited Rights Plan; and Proposal III, an amendment to the Company's
1996 Incentive Stock Option Plan. If you do not vote your proxy, your brokerage
firm may either:
o Vote your shares on routine matters; or
o Leave your shares unvoted.
We encourage you to provide instructions to your brokerage firm as to
how your proxy should be voted. This ensures your shares will be voted at the
Annual Meeting.
When a brokerage firm votes its customers' unvoted shares on routine
matters, these shares are counted for purposes of establishing a quorum to
conduct business at the meeting. A brokerage firm cannot vote customer shares on
non-routine matters. Accordingly, these shares are not counted in regard to
non-routine matters, rather than as votes against a matter.
Certain Shareholders
As of February 29, 2000, no persons or apparent groups of persons,
other than officers of directors of the Company and its subsidiaries, and the
following person, are known by management to beneficially own five percent or
more of the outstanding shares of the Company's common stock:
Name Amount of Common Stock Percent of Class
- -------------------------- -------------------------- -----------------
Richard Storm, Jr. 508,229 (1) 14.57%
215 Waterside Circle #201
Marco Island, Florida 34145
(1) Amount does not include stock options to acquire 10,800 shares of common
stock, as disclosed on page 7 of this Proxy Statement.
650 East Elkcam Circle - Marco Island, Florida 34145
<PAGE>
Citizens Community Bancorp, Inc. April 18, 2000
Proxy Statement
Page 3
PROPOSAL I - ELECTION OF DIRECTORS
The Company's Board of Directors is composed of eleven members. At the
1999 Annual Meeting, the Company's shareholders approved an amendment to the
Articles of Incorporation which reduced the terms of the directors from three
years to one year. Directors whose three year terms had not expired are being
permitted to complete their full three year terms.
The Board of Directors has nominated eight directors to stand for
election for one year terms at this Annual Meeting. The nominees to fill the
terms are Diane M. Beyer, John V. Cofer, Joel M. Cox Sr., Thomas B. Garrison,
James S. Hagedorn, Dennis J. Lynch, Robert A. Marks and Louis J. Smith.
It is intended that the proxies solicited by the Board of Directors
will be voted "FOR" the election of the director 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 we know
of no reason why any nominee might not be able to serve.
The following table presents information concerning each of the
director nominees, as well as the continuing directors.
DIRECTORS STANDING FOR ELECTION
DIANE M. BEYER - Director since 1995.
Term will expire 2001.
Photo Ms. Beyer, age 60, is a founding director and Assistant
Secretary of the Company and is a member of its Executive, Audit
and Loan Committees. She is also a founding director and Vice
Chairman of the Board of Directors of Citizens Bank, chairing its
Executive and Compensation & Personnel Committees. She is also a
member of Citizens Bank's Audit, CRA and Leadership Awards
Committees. Ms. Beyer, a human resources consultant, has business
experience in administration. She is currently a Managing Partner
of RFB Associates, L.L.C., a Naples-based consulting firm. Before
relocating to Naples, Florida in 1993, Ms. Beyer was Corporate
Secretary and Human Resources Manager of a large real estate
development company in Southern California. Ms. Beyer is a member
of the National Association of Women in Construction and is on
the Board of Directors of a non-profit volunteer organization
providing needed services to women in Naples and surrounding
communities.
JOHN V. COFER - Director since 1999.
Term will expire 2001.
Photo Mr. Cofer, age 56, is a member of the Board of Directors of
the Company. Mr. Cofer is Chairman of the Strategic Planning
Committee. Mr. Cofer's prior business interests included Senior
Partner of Oxford Development Corp. of Bethesda, MD, where Mr.
Cofer was responsible for the development of over 16,000 housing
units and the management of over 27,000 housing units in nine
states. He was also President of Krupp Development of Boston, MA.
Mr. Cofer is a member of the Beach Committee and the Architect
Review Committee of the Marco Island Civic Association and a
member of the Board of Directors of Gulfview Condominium.
650 East Elkcam Circle - Marco Island, Florida 34145
<PAGE>
Citizens Community Bancorp, Inc. April 18, 2000
Proxy Statement
Page 4
JOEL M. COX, SR. - Director since 1995.
Term will expire 2001.
Photo Mr. Cox, age 61, has 38 years of experience in banking and
insurance. Mr. Cox is a founding director of the Company and
serves as Chairman of the Executive Committee. Mr. Cox is a
member of the Board of Citizens Bank and is Chairman of the
Asset/Liability Committee and the Vice Chairman of the Loan
Committee. He also serves on Citizens Bank's Audit, Building and
Facilities, Compensation and Personnel and Executive Committees.
Mr. Cox has been Vice President and Director of Cox Insurance
Agency, Inc. of Marco Island, Florida, since 1985. He currently
serves as Vice President of the Kiwanis Club of Marco Island and
serves on the Chamber of Economic Development Committee.
JAMES S. HAGEDORN - Director since 1996.
Term will expire 2001.
Photo Mr. Hagedorn, age 57, is a director and the Vice Chairman of
the Company. He is also a member of the Executive Committee. Mr.
Hagedorn is a member of the Board of Directors of Citizens Bank,
where he serves as Chairman of the Loan Committee. Mr. Hagedorn
has been President and Director of Waterside Development Corp.
since 1995. He served as Chairman, President and CEO of The
Merchant Bancorporation of Florida from 1986 through 1994.
THOMAS B. GARRISON - Director since 1995.
Term will expire 2001.
Photo Mr. Garrison, age 54, is a founding director of the Company
and served as Chairman of the Year 2000 Committee. Mr. Garrison
has over 30 years of experience in the design and development of
major software projects. Formerly with the Barron-Collier
Companies, where he served as the Management Information Systems
Director and Chief Information Officer. Mr. Garrison has been a
Collier County resident, residing in Naples, Florida, since 1988
and has been an active member of several Collier County civic
organizations, including Toastmasters, Naples Investment Club,
Small CAP Investment Club, Naples Computer Club, and the
Latin-American Business Association.
650 East Elkcam Circle - Marco Island, Florida 34145
<PAGE>
Citizens Community Bancorp, Inc. April 18, 2000
Proxy Statement
Page 5
DENNIS J. LYNCH - Director since 1995.
Term will expire 2001.
Photo Mr. Lynch, age 58, is a founding director of the Company and
serves as Chairman of the ALCO and is a member of the Executive
and Loan Committees, and Chairman of the Board of Directors of
Citizens Financial Corp. Mr. Lynch has been involved in the real
estate sales and development business since moving to Naples in
1971. He has been the owner and President of Dennis J. Lynch and
Associates, a real estate sales agency established in 1979. Since
1979, his firm has developed and been involved in the management
of over 560,000 square feet of commercial real estate space in
Collier County.
ROBERT A. MARKS, CLU - Director since 1999.
Term will expire 2001.
Photo Mr. Marks, age 68, is a member of the Board of Directors of
the Company. Mr. Marks is a Director of Citizens Bank and is
Chairman of its CRA Committee, Chairman of its Advisory Board and
a member of Audit, Building and Facilities, Compensation and
Personnel, Executive and Loan Committees. Mr. Marks' prior
business interest is in the insurance industry as Regional
Manager with Metropolitan Life in Nashville Tennessee, where he
was in charge of the company's operations in the states of
Tennessee and Kentucky. He retired in 1986 after 30 years
Metropolitan Life.
LOUIS J. SMITH - Director since 1997.
Term will expire 2001.
Photo Mr. Smith, age 75, is a member of the Board of Directors of
the Company and serves on its Audit Committee. Mr. Smith was a
self-employed pharmacist for 34 years, and currently owns and
operates Pat's Hallmark in the Shops of Marco on Marco Island and
is the Officer in Charge of the U.S. Post Office in Marco Island.
Mr. Smith was formerly a director for the 1st Wisconsin Bank of
Wisconsin (now First-Star).
650 East Elkcam Circle - Marco Island, Florida 34145
<PAGE>
Citizens Community Bancorp, Inc. April 18, 2000
Proxy Statement
Page 6
CONTINUING DIRECTORS
STEPHEN A. McLAUGHLIN - Director since 1995.
Term will expire 2002.
Photo Mr. McLaughlin, age 53, is a founding director of the
Company and of Citizens Bank. He serves as Chairman of the Loan
Committee and was also a member of the Year 2000 Committee. Mr.
McLaughlin's business involves the operations of several
Maine-based real estate consulting and timber companies,
including Stillwater Land & Lumber Limited.
RICHARD STORM, JR. - Director since 1995.
Term will expire 2002.
Photo Mr. Storm, age 58, is a 20 year resident of Collier County,
Florida and is a founding director, Chairman of the Board and CEO
of the Company and also serves on the Executive and Strategic
Planning Committees of the Board. He is also the Chairman of the
Board and CEO of Citizens Bank, where he serves on the Executive,
Loan, Building Facilities, and Loan Loss Recovery Committees. Mr.
Storm has over 25 years of director experience in banking and
recently completed a term as an at- large director for Group VI
of the Community Bankers of Florida. From 1987 to 1994, Mr. Storm
served as Director and Corporate Secretary, and also served on
various Board Committees for Citizens National Corporation, a
bank holding company located in Naples, Florida. Following
Citizens National's merger with AmSouth Bank of Florida in 1994,
Mr. Storm served as a City Director of AmSouth Bank until April
1995. Prior to moving to Florida, Mr. Storm served on the Board
of Directors of Danbury Bank and Trust in Connecticut. In
addition to his bank affiliations, Mr. Storm has an extensive
background in real estate management, marketing, finance and
development. He is currently Chairman of Community Broadcasting
Corporation, President of LoanStar Capital, Inc. (a mortgage and
venture capital company), President of Deer Run Properties, Inc.
(a real estate development company) and Chairman and President of
Cumberland Properties, Inc., a shopping center owner/operator
with principal offices in Windham, Maine.
JOHN G. WOLF - Director since 1997.
Term will Expire 2002.
Photo Dr. Wolf, age 52, is Assistant Treasurer and a member of the
Board of Directors of the Company and serves as the Chairman of
the Audit Committee. Dr. Wolf is a practicing dentist in Naples,
Florida and is on the Board of Directors of the Florida Sports
Shooting Association, and a member of the Governor's Council on
Sports and Fitness. Dr. Wolf is also involved in health care
delivery and the development and marketing of dental practices.
650 East Elkcam Circle - Marco Island, Florida 34145
<PAGE>
Citizens Community Bancorp, Inc. April 18, 2000
Proxy Statement
Page 7
Beneficial Stock Ownership
The following table contains information regarding the current
beneficial ownership of common stock by each of the Company's directors and
executive officers, and all of the directors and executive officers as a group,
as of the Record Date. As required by Rule 13d-3, under the Securities Act of
1933, the number and percentage of shares held by each person reflects the
number of shares that person currently owns, plus the number of shares that
person has the right to acquire.
<TABLE>
Number of % of Beneficial
Name Shares Owned (1) Right to Acquire (2) Ownership
<S> <C> <C> <C>
Diane M. Beyer 19,008 10,800 0.85%
John V. Cofer 500 10,800 0.32%
Joel M. Cox, Sr. (3) 66,107 10,800 2.20%
Bruce G. Fedor (6) 2,160 10,800 0.37%
Thomas B. Garrison(4) 57,780 10,800 1.96%
Robert J. David (6) -0- 26,600 0.76%
James S. Hagedorn (5) 25,380 10,800 1.04%
Dennis J. Lynch 77,200 10,800 2.52%
Robert A. Marks 16,200 10,800 0.77%
Stephen A. McLaughlin 99,360 10,800 3.16%
Gregory E. Smith (6) -0- 35,000 0.99%
Louis J. Smith 11,230 10,800 0.63%
Richard Storm, Jr.(7) 508,229 10,800 14.89%
John J. Wolf 59,400 10,800 2.01%
All Directors and Executive
Officers as a Group (14 persons) 942,554 191,200 30.83%
<FN>
(1) Includes shares for which the named person:
o has sole voting and investment power,
o has shared voting and investment power with a spouse, or
o holds in an IRA or other retirement plan program, unless otherwise
indicated in these footnotes, but
o does not include shares that may be acquired by exercising stock
options.
(2) Includes shares that may be acquired by exercising vested stock options.
(3) Includes 19,791 shares owned by various family members.
(4) Includes 1,080 shares held by his wife's Individual Retirement Account.
(5) Includes 1,080 shares held by Robert W. Baird & Co. as trustee FBO for Mr.
Hagedorn's spouse.
(6) An executive officer, not a director.
(7) Includes 29,015 shares held by his wife, Kathleen Storm, in her Profit
Sharing Plan.
</FN>
</TABLE>
The Board of Directors recommends that shareholders vote "FOR"
election of the nominees.
650 East Elkcam Circle - Marco Island, Florida 34145
<PAGE>
Citizens Community Bancorp, Inc. April 18, 2000
Proxy Statement
Page 8
Board of Director Meetings
The Board of Directors holds meetings on a regular basis. No current
director attended fewer than 75% of the total meetings of the Board of Directors
during 1999. The Company, Citizens Bank and Citizens Financial Corp. each pay
directors' fees to their outside directors. Directors receive $100 for each
Board meeting attended and $25 for each Committee meeting attended. Chairmen of
each committee receive $50 for each meeting attended.
The Board is divided into five standing committees. Their duties are
described as follows:
ALCO - Establishes the asset and liability management policies of the
Company, monitors and sets limitations for interest-rate risk and formulates
loan pricing.
Audit Committee - Reviews auditing, accounting, financial reporting and
internal control functions. Recommends the Company's independent accountant and
reviews their services. All members are non-employee directors.
Executive Committee - Meets as needed and has limited powers to act on
behalf of the Board whenever the Board is not in session. If any non-employee
director requests that a matter be addressed by the entire Board rather than the
Executive Committee, such matter is automatically submitted to the full Board.
Loan Committee - Meets as required to act upon loan requests to be
handled singularly by the Company or jointly with Citizens Bank.
Year 2000 Committee - Met monthly with management to evaluate the
progress made and the steps taken to ensure that the Company's computer and data
processing systems were Year 2000 compliant.
The following table reflects each director's committee assignments for
1999.
Year
Board ALCO Audit Executive Loan 2000
Diane M. Beyer X X X X X
Joel M. Cox, Sr. X X X X
John V. Cofer X
Thomas B. Garrison X X
James S. Hagedorn X X
Dennis J. Lynch X X X X
Robert A. Marks X
Stephen A. McLaughlin X X X
Louis J. Smith X X
Richard Storm, Jr. X X
John J. Wolf X X X
- --------------------------------------------------------------------------------
Meetings Held in 1999 8 2 3 4 1 14
- --------------------------------------------------------------------------------
650 East Elkcam Circle - Marco Island, Florida 34145
<PAGE>
Citizens Community Bancorp, Inc. April 18, 2000
Proxy Statement
Page 9
Report of the Board of Directors on Executive Compensation
Compensation Philosophy - The Board of Directors believes that there is
a close relationship between the financial interests of the Company's
shareholders and our officers and key employees, including the officers of the
Company's 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, as well as short- and long-term
incentive awards. To that end, the Company has created a compensation program
that provides for base salaries that are believed to be competitive within the
industry for persons with comparable responsibilities, combined with annual cash
bonus awards tied to specific 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 employee and their base salary levels.
Executive Base Salary - Base salaries for executive officers are
established primarily through the use of peer group salary evaluations. The
Board of Directors utilizes published compensation studies with regard to
compensation levels and practices of comparable commercial banks and financial
institutions in order to formulate its recommendation regarding executive
officer salaries. For fiscal year 2000, the base salaries for Richard Storm,
Jr., Chief Executive Officer of the Company and Citizens Bank and Gregory E.
Smith, President and Chief Financial Officer of the Company and President and
Chief Operations Officer of Citizens Bank were 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 Company's financial results for that year. Objectives are established
annually by the Board and cash bonus awards are determined in relationship to
achievements relative to these objectives.
Long-Term Pay Compensation - The 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 Citizens Bank, Gregory E. Smith, President and Chief
Financial Officer of the Company and President and Chief Operations Officer of
Citizens Bank and Michael Micallef, Jr., former President and Chief Executive
Officer of Citizens Bank. No other executive officer received compensation at a
level required to be reported herein by Securities and Exchange Commission
regulations.
(Table to Follow on Next Page)
650 East Elkcam Circle - Marco Island, Florida 34145
<PAGE>
Citizens Community Bancorp, Inc. April 18, 2000
Proxy Statement
Page 10
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term Compensation
-------------------------------------------------
Annual Compensation Awards Payouts
------------------------------------- ----------- -----------
(d) (e) (f) (g) (h) (i)
Name and Principal Year Salary($) Bonus($) Other Annual Restricted Securities LTIP All Other
Position Compensation Awards Underlying Payouts Compensations
($) Options ($) ($)
<S> <C> <C>
Richard Storm, Jr. 1999 $18,400 - - - - - -
Chairman and CEO of 1998 $24,000 - - - - - -
the Company and
Citizens Bank.
Michael Micallef, Jr. 1999 $54,154 - - - - - -
President and CEO of 1998 $82,000 - $6,612 - - - -
Citizens Bank. (1) 1997 $48,396 $5,000 $9,115 - 32,400 - -
Gregory E. Smith 1999 $59,039 - $12,500 - 35,000(3) - -
President and CFO of
the Company and
President and COO of
Citizens Bank. (2)
<FN>
(1) Mr. Micallef resigned his positions effective August 13, 1999.
(2) Mr. Smith's employment as Chief Financial Officer became effective on March
8, 1999. Mr. Smith was named President of Citizens Bank effective August 13,
1999, and President of the Company on January 7, 2000.
(3) In 1999, options were granted for 25,000 shares. On January 7, 2000, the
Board granted options for an additional 10,000 shares.
</FN>
</TABLE>
Explanation of Columns
(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.
(e) Other Annual Compensation- All additional forms of cash and non-cash
compensation paid, awarded or earned. Mr. Smith's total includes an automobile
allowance for five months and moving expenses of $10,000. The value of all other
personal benefits and perquisites received by Mr. Storm and Mr. Smith 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) "LTIP" - 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 of the Company and its subsidiaries 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.
650 East Elkcam Circle - Marco Island, Florida 34145
<PAGE>
Citizens Community Bancorp, Inc. April 18, 2000
Proxy Statement
Page 11
Employment Contracts
The Company and Citizens Bank have entered into joint employment
agreements with two executive officers, Richard Storm, Jr., Chairman of the
Board and Chief Executive Officer of both the Company and Citizens Bank and
Gregory E. Smith, President and Chief Financial Officer of the Company, and
President and Chief Operations Officer of Citizens Bank. The following is a
summary of the pertinent terms of these agreements.
Richard Storm, Jr.'s employment agreement became effective on January
1, 2000. Pursuant to its terms, Mr. Storm is to receive an annual base salary of
$63,000, plus an automobile allowance and a local business club membership. Each
year, Mr. Storm is entitled to: (i) receive a performance bonus based upon the
Company's pre-tax income; (ii) participate in Citizens Bank's profit sharing
pool; (iii) receive a stock appreciation incentive bonus ("SAI bonus") based on
the annual increase in the "Fair Market Value" (as that term is defined in the
employment agreement) of 25,000 shares of the Company's common stock. The SAI
bonus will be paid in cash at the end of each calendar year.
The original term of the employment agreement is one year. Each day
during the term of the employment agreement, until Mr. Storm's 65th birthday,
the employment agreement automatically renews for one additional day. Therefore,
at all times, Mr. Storm's employment agreement has a one year term. Any party to
the agreement may cease the automatic renewals by notifying the other parties of
their intent to not renew. In addition, any party may terminate the agreement by
delivering to the others a notice of termination. If Mr. Storm terminates the
agreement and his employment, his notice must specify a date of termination not
less than 60 days form the date of the notice. If the Company or Citizens Bank
terminates the agreement, the date of termination must be not less than 30, nor
more than 45, days from when their notice is given.
Mr. Storm's employment agreement permits termination by the Company or
Citizens Bank for "just cause" and by Mr. Storm for "good reason," which
includes termination due to a "change in control" of the Company or Citizens
Bank, as those terms are defined in the agreement. In the event the agreement is
terminated by the Company or Citizens Bank for reasons other than "just cause"
or by Mr. Storm for "good reason," Mr. Storm is to receive, as severance, his
base salary for the longer of the remainder of the term of the agreement or
twelve months, and any bonus, profit sharing or incentive compensation he would
then have been entitled to under the employment agreement. In the event Mr.
Storm terminates his employment for other than "good reason" or the Company or
the Bank terminate his employment for "just cause," Mr. Storm shall be entitled
to no severance payment.
Gregory E. Smith's employment agreement became effective on January 1,
2000. Pursuant to its terms, Mr. Smith is to receive an annual base salary of
$90,000, plus an automobile allowance. In addition, Mr. Smith is eligible to
participate in Citizens Bank's profit sharing pool, and will also be entitled to
a stock appreciation incentive bonus ("SAI bonus") based on the annual increase
in the "Fair Market Value" (as that term is defined in the employment agreement)
of 10,000 shares of the Company's common stock. The SAI bonus will be paid in
cash at the end of each calendar year.
The original term of the employment agreement is one year. Each day
during the term of the agreement, until Mr. Smith's 65th birthday, the
employment agreement automatically renews for one additional day. Therefore, at
all times, Mr. Smith's employment agreement has a one year term. Any party to
the agreement may cease the automatic renewals by notifying the other parties of
their intent to not renew. In addition, any party may terminate the agreement by
delivering to the others a notice of termination.
650 East Elkcam Circle - Marco Island, Florida 34145
<PAGE>
Citizens Community Bancorp, Inc. April 18, 2000
Proxy Statement
Page 12
If Mr. Smith terminates the employment agreement and his employment,
his notice must specify a date of termination not less than 60 days, nor more
than 90 days, from the date of the notice. At the Company's or Citizens Bank's
option, that time may be shortened. If the Company of Citizens Bank terminates
the agreement, the date of termination is, at the discretion of the Company or
Citizens Bank, either a date specified in the notice the date the notice is
given. Mr. Smith's employment agreement permits termination by the Company or
Citizens Bank for reasons other than "just cause" and by Mr. Smith for "good
reason," as those terms are defined in the agreement. In the event the agreement
is terminated by the Company or Citizens Bank for reasons other than "just
cause" or by Mr. Smith for "good reason," Mr. Smith is to receive, as severance,
his base salary for six months. In the event the Company or Citizens Bank
undergoes a change in control (as defined in the employment agreement), Mr.
Smith is guaranteed to receive two years' base salary whether or not the
acquiror retains him as an employee. Therefore, if an acquiror reduces Mr.
Smith's base salary within two years of the acquisition, Mr. Smith may terminate
the employment agreement for "good reason" and receive, as severance, his base
salary until the second anniversary following the change in control. However, in
the event such termination is within the second year following the change in
control, Mr. Smith is guaranteed to receive, as severance, a minimum of one
years' base salary. Should Mr. Smith terminate his employment for other than
"good reason" or the Company or Citizens Bank terminate his employment for "just
cause," Mr. Smith will not be receive any severance compensation.
Upon the termination of Mr. Smith's employment for any reason,
including the expiration of the agreement, Mr. Smith will be prohibited from
working for any financial institution in Collier and Lee Counties, Florida for a
period of one year.
PROPOSAL II - APPROVAL OF CITIZENS
COMMUNITY BANCORP, INC. YEAR 2000 ADVISORY BOARD MEMBERS'
STOCK OPTION AND LIMITED RIGHTS PLAN
On December 16, 1999, the Board of Directors adopted the Citizens
Community Bancorp, Inc. Year 2000 Advisory Board Members' Stock Option and
Limited Rights Plan ("Adviser's Plan") to provide for the grant of non-
statutory stock options to purchase shares of the Company's common stock and
limited rights (stock appreciation rights) to members of the Advisory Boards for
the Company and its subsidiaries. Advisory Board members are those individuals
who act as advisers to and business developers for the Company, and its
subsidiaries. A copy of the Adviser's Plan is attached hereto as Appendix A.
The purpose of the Adviser's Plan is to advance the interests of the
Company and its subsidiaries by providing its advisers, individuals with strong
community ties and interests, an additional incentive and to attract additional
persons of experience and ability to serve as advisers in the future.
The maximum number of shares of common stock that may be issued
pursuant to options granted under the Adviser's Plan is 10,000. Under the
Adviser's Plan, participants may each be granted an option to purchase up to 200
shares of common stock at a price not less than 100% of its "Fair Market Value"
(as that term is defined in the Adviser's Plan) on the date the option is
granted or $5.00, whichever is greater. At no time may any participant hold
options to purchase more than 200 shares under the Adviser's Plan and no options
will be granted until the Adviser's Plan is approved by a majority vote of the
Company's shareholders.
650 East Elkcam Circle - Marco Island, Florida 34145
<PAGE>
Citizens Community Bancorp, Inc. April 18, 2000
Proxy Statement
Page 13
No stock options may be granted under the Advisers' Plan until one year
after the recipient was first appointed to an Advisory Board. Stock options
granted under the Adviser's Plan will vest in four equal, annual installments
beginning in the year of grant. At the discretion of the Adviser's Plan
administrators, limited rights may be granted in tandem with any options granted
under the Adviser's Plan. Limited rights may only be exercised after six months
from the date of their grant and will terminate upon the exercise or termination
of their underlying option.
All stock options and limited rights held under the Adviser's Plan will
be immediately canceled when the holder is removed from an Advisory Board for
"cause" (as that term is defined in the Adviser's Plan). In the event of the
death or disability of a participant, all options and limited rights held under
the Adviser's Plan, whether or not then exercisable, shall be exercisable (by
the participant or his or her legal representative) for a period of 12 months
following such death or disability. In the event a participant retires from the
Advisory Board, any options or limited rights held under the Adviser's Plan,
whether or not then exercisable, shall be exercisable for a period of 90 days
after such retirement.
The Board of Directors recommends that shareholders vote "FOR" adoption of the
Citizens Community Bancorp Inc. Year 2000 Advisory Board Member Stock Option
and Limited Rights Plan.
PROPOSAL III - AMENDMENT TO THE 1996 INCENTIVE STOCK OPTION PLAN
The Company's 1996 Incentive Stock Option Plan ("Incentive 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. The Incentive
Plan was amended at the 1998 Annual Meeting increasing the amount of stock
subject to the Incentive Plan to 297,000. All other terms of the Stock Option
Plan remained unchanged. At December 31, 1999, incentive options for 296,240
shares remained outstanding, and 760 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 Board of Directors has approved an amendment to the Incentive Plan
to provide an additional 54,000 shares to be available for future grants. The
aggregate number of shares would be increased from 297,000 to 351,000. 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 Incentive Plan will remain unchanged, upon
passage of this amendment. A copy of the proposed amendment is attached hereto
as Appendix B.
The following table sets forth information concerning the incentive
stock options that have been granted to the directors and the executive officers
of the Company. The share amounts and price per share have been adjusted to
reflect the December 15, 1997, two-for-one stock split, and the December 31,
1998, 8% stock dividend, as appropriate.
(Table to Follow on Next Page)
650 East Elkcam Circle - Marco Island, Florida 34145
<PAGE>
Citizens Community Bancorp, Inc. April 18, 2000
Proxy Statement
Page 14
<TABLE>
Name Shares Granted Effective Date of Grant Price Per Share
- ------------------------------------ ------------------------------- --------------------------------- ----------------------------
<S> <C> <C> <C> <C>
Diane M. Beyer 10,800 May 30, 1995 $ 6.95
Joel M. Cox, Sr. 10,800 May 30, 1995 6.95
John V. Cofer 10,800 November 18, 1999 9.00
Robert J. David 21,600 (1) October 22, 1998 8.80
5,000 (2) August 1, 1999 9.50
Bruce G. Fedor 10,800 (1) November 10, 1997 5.56
Thomas B. Garrison 10,800 May 30, 1995 6.95
James S. Hagedorn 10,800 July 16, 1996 6.95
Dennis J. Lynch 10,800 May 30, 1995 6.95
Robert A. Marks 5,400 January 21, 1997 6.95
5,400 December 16, 1999 9.00
Stephen A. McLaughlin 10,800 July 23, 1998 6.95
Gregory E. Smith 15,000 (1) June 8, 1999 9.50
10,000 (2) August 1, 1999 9.50
10,000 (2) January 7, 2000 9.00
Louis J. Smith 10,800 September 30, 1997 6.95
Richard Storm, Jr. 10,800 May 30, 1995 6.95
Amos D. Watson (Estate) 10,800 November 18, 1999 9.00
John J. Wolf 10,800 April 29, 1997 6.95
- ------------------------------------ ------------------------------- --------------------------------- ----------------------------
<FN>
(1) Granted in connection with initial employment.
(2) Granted for performance in fiscal year 1999.
</FN>
</TABLE>
The Board of Directors recommends that shareholders vote "FOR" the 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, 2000
The Company's independent auditors since its incorporation and for the
fiscal year ended December 31, 1999, has been Hacker, Johnson, Cohen & Grieb,
P.A. The Board of Directors have appointed Hacker, Johnson, Cohen & Grieb, P.A.,
to be its independent auditors for the fiscal year ending December 31, 2000,
subject to shareholder ratification.
The Board of Directors recommends that shareholders vote "FOR" the ratification
of the appointment of Hacker, Johnson, Cohen & Grieb, P.A., as the independent
auditors for the fiscal year ending December 31, 2000.
PROPOSAL V - ADJOURNMENT OF ANNUAL MEETING
The Company seeks approval to adjourn the Annual Meeting in the event
that the number of proxies sufficient to approve Proposals I, II, III or IV are
not received by April 18, 2000. In order to permit proxies that have been
received by the Company at the time of the Annual Meeting to be voted, if
necessary, for the adjournment, the Company is submitting the question of
adjournment to the shareholders as a separate proposal.
650 East Elkcam Circle - Marco Island, Florida 34145
<PAGE>
Citizens Community Bancorp, Inc. April 18, 2000
Proxy Statement
Page 15
If it becomes necessary to adjourn the Annual Meeting, and the adjournment is
for a period less than 30 days, no notice of the time and place of the adjourned
meeting will be given to the shareholders, other than an announcement made at
the Annual Meeting.
The Board of Directors recommends that shareholders vote "FOR"
the approval of the adjournment of the Annual Meeting.
Solicitation
The cost of soliciting proxies on behalf of the Board of Directors for
the Annual Meeting will be borne by the Company. Proxies may be solicited by
directors, officers or regular employees of the Company or its subsidiaries in
person or by telephone, telegraph or mail. The Company 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 for 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 the Proxy materials 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 December 23,
2000. 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 Company's Corporate Secretary
at least five 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 Corporate 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 days or more 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 business shall be acted upon at such Annual
Meeting unless stated and filed as provided herein.
Financial Statements
The 1999 Annual Report containing consolidated audited financial
statements for the year ended December 31, 1999, accompanies 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 names in the enclosed Revocable
Proxy to vote in accordance with their judgement and in the best interest of the
Company.
CITIZENS COMMUNITY BANCORP, INC.
Marco Island, Florida
March 10, 2000
650 East Elkcam Circle - Marco Island, Florida 34145
<PAGE>
APPENDIX A
CITIZENS COMMUNITY BANCORP, INC.
YEAR 2000 ADVISORY BOARD MEMBERS'
STOCK OPTION AND LIMITED RIGHTS PLAN
1. PURPOSE
The purpose of Citizens Community Bancorp, Inc.'s ("Company") Year 2000
Advisory Board Members' Stock Option and Limited Rights Plan ("Members'
Plan") is to advance the interests of the Company, its subsidiaries and
its shareholders by providing the Advisory Board Members of the
Company's wholly owned subsidiaries, upon whose advice the Company and
its subsidiaries depends, with an additional incentive to serve on
Advisory Boards for the Company's subsidiaries, as well as, to attract
people of experience and ability to serve as Advisory Board Members in
the future.
2. DEFINITIONS
(a) "Advisory Board Members" means the Advisory Board Members of the
Company and its subsidiaries.
(b) "Award" means an Award of Non-Statutory Stock Options and/or
Limited Rights granted under the provisions of the Advisory Board
Members' Plan.
(c) "Committee" means the Executive Committee of the Board of
Directors of the Company.
(d) "Members' Plan Year or Years" means a calendar year or years
commencing on or after January 1, 2000.
(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 asked 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 preceding
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.
Appendix A - Page 1 of 7
<PAGE>
(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 subsidiaries 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 an Advisory Board Member of the
Company's subsidiaries chosen by the Committee to participate in
the Members' 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 an Advisory Board
Member was first appointed to an Advisory Board of one of the
Company's subsidiaries.
3. ADMINISTRATION
The Advisory Board Members' Plan shall be administered, as appropriate
depending upon meeting schedule, by either the Executive Committee of
the Board of Directors or the Board of Directors of the Company, which
shall hereinafter collectively be referred to as "Committee". The
Committee is authorized, subject to the provisions of the Advisory
Board Members' Plan, to establish such rules and regulations as it
deems necessary for the proper administration of the Advisory Board
Members' Plan and to make whatever determinations and interpretations
in connection with the Advisory Board Members' 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 Advisory Board Members' Plan and on their legal representatives and
beneficiaries.
Appendix A - Page 2 of 7
<PAGE>
4. TYPES OF AWARDS
Awards under the Advisory Board Members' Plan may be granted in any one
or a combination of the following, as defined below in Sections 7 and 8
of the Advisory Board Members' Plan:
(a) Non-Statutory Stock Options; and
(b) Limited Rights
5. STOCK SUBJECT TO THE MEMBERS' PLAN
Subject to adjustment as provided in Section 12, the maximum number of
shares reserved for issuance under the Members' Plan is 10,000 shares
of Common Stock outstanding (sometimes referred to herein as "Option
Shares"). To the extent that options or right granted under the
Advisory Board Members' Plan are exercised, the shares covered will be
unavailable for future grants under the Advisory Board Members' Plan;
to the extent that options together with any related rights granted
under the Advisory Board Members' 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 Advisory Board Members of the Company's subsidiaries ("Members"),
except for those Advisory Board Members 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 Members'
Plan one year after appointment to an Advisory Board. The maximum
number of Option Shares that a Participant shall be eligible to be
awarded shall be 200.
7. GRANT OF NON-STATUTORY STOCK OPTIONS
The Committee may, from time to time, grant Non-Statutory Stock Options
to Members. Non-Statutory Stock Options granted under this Members'
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 100% 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 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 five years and one day from the Date of Grant.
(c) Vesting. The Committee shall determine the date on which each
Non-Statutory Stock Option shall become exercisable in installments.
Any required vesting period, but no less than twelve (12) months, 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.
Appendix A - Page 3 of 7
<PAGE>
Notwithstanding the above, in the event of a Change in Control of the
Company, or the death of a Member, all Non-Statutory Stock Options
shall become immediately exercisable.
(d) Termination of Service. Upon the termination of a Member's 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 or her 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 or her Non-Statutory Stock Options shall expire upon
termination. In the event of the death or disability of a Member all
Non-Statutory Stock Options held by the Member, whether or not
exercisable at such time, shall be exercisable by the Member, or the
Member's legal representatives or beneficiaries for twelve (12) months
following the date of his or her 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 Members' 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.
(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 Member's service
for any reason other than retirement, death or disability or
termination for cause, any Limited Rights held by him or her shall be
exercisable only as to those shares of the related option which were
immediately purchasable by him or her at the date of termination and
only for a period of 90 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 Member, whether or not
exercisable at such time, shall be exercisable by the Member or his or
her legal representatives or beneficiaries for twelve (12) months
following the date of his or her death or disability; provided that in
no event shall the period extend beyond the expiration of the related
Non-Statutory Stock Option term.
Appendix A - Page 4 of 7
<PAGE>
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
Members' Plan or in any Award granted confers on any person any right
to continue to serve as an Advisory Board Member of the Company's
subsidiaries.
No Award under the Members' 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 or her 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 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 or she 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 or her estate will be
deemed to be the beneficiary.
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 Members' Plan;
(b) adjustments in the aggregate number or kind of shares of Common
Stock covered by Awards already made under the Members' 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 Members' Plan the amount of tax required to be withheld
by any governmental authority if any.
Appendix A - Page 5 of 7
<PAGE>
14. AMENDMENT OF THE MEMBERS' PLAN
The Board of Directors of the Company may at any time, and from time to
time, modify or amend the Members' Plan in any respect; provided
however, that if necessary to continue to qualify the Members' 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 Members' 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 Members' 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
Members' Plan will remain in full force and effect.
No such termination, modification or amendment may affect the rights of
a Participant under an outstanding Award.
15. EFFECTIVE DATE OF MEMBERS' PLAN
The Members' Plan shall be adopted by the Board of Directors of the
Company and shall become effective upon such date of adoption, or other
date as determined by the Board of Directors of the Company ("Effective
Date"). Following the Effective Date of the Members' Plan, the Members'
Plan shall be submitted to the Company's shareholders for approval. If
the Members' Plan is not approved by shareholders the Members' Plan and
any Awards granted thereunder shall be null and void.
16. TERMINATION OF MEMBERS' PLAN
The right to grant Awards under the Members' Plan will terminate upon
the earlier of 10 years after the Effective Date of the Members' Plan
or the issuance of Common Stock or the exercise of options or related
rights equaling the maximum number of shares reserved under the
Members' Plan as set forth in Section 5. The Board of Directors of the
Company has the right to suspend or terminate the Members' Plan at any
time, provided that no such action will, without the consent of a
Participant, adversely affect his or her rights under a previously
granted Award.
17. APPLICABLE LAW
The Members' Plan will be administered in accordance with the laws of
the State of Florida.
Appendix A - Page 6 of 7
<PAGE>
Adopted this 16th day of December, 1999 by the Executive Committee of the Board
of Directors of the Company.
/s/ Bruce G. Fedor
---------------------------------------
Bruce G. Fedor
Secretary of the Company
Adopted on the ___ day of___________, 2000 by the Company's shareholders.
------------------------------
Richard Storm, Jr.
Chairman of the Company
Appendix A - Page 7 of 7
<PAGE>
APPENDIX B
SECOND AMENDMENT
TO
1996 INCENTIVE STOCK OPTION PLAN
At a regular meeting of the Board of Directors of Citizens Community
Bancorp, Inc. ("Company") held on February 24, 2000, the Board of Directors
adopted a second amendment to "Section 5, Stock Subject to the Plan", of the
1996 Incentive Stock Option Plan ("Incentive Plan"). The Company's shareholders
ratified this amendment at their Annual Meeting held on April 18, 2000. The
amendment increases the amount of stock eligible to be issued under the Plan;
Section 5 of the Plan now states:
5. STOCK SUBJECT TO THE PLAN. Subject to adjustment as provided in Section 13,
the maximum number of shares reserved for issuance under the Plan is 351,000
shares of Common Stock of CCB, par value $0.01 per share. To the extent that
options or rights granted under the Plan are exercised, the shares covered will
be unavailable for future grants under the Plan; to the extent that options
together with any related rights granted under the 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.
Adopted this 24th day of February, 2000 by the Board of Directors of the
Company.
/s/ Bruce G. Fedor
------------------------------------
Bruce G. Fedor
Secretary of the Company
Adopted on the ___ day of___________, 2000 by the Company's shareholders.
------------------------------
Richard Storm, Jr.
Chairman of the Company
<PAGE>
X PLEASE MARK VOTES REVOCABLE PROXY
AS IN THIS EXAMPLE CITIZENS COMMUNITY BANCORP, INC.
This Proxy is Solicited on behalf of
the Board of Directors of
Citizens Community Bancorp, Inc. ("Company")
The undersigned shareholder of the Company hereby appoints Bruce G. Fedor
and/or Stephen A. McLaughlin as Proxies, each with the power to appoint his
substitute and hereby authorizes either of them to represent and to vote, as
designated below, all the shares of the Company held of record by the
undersigned on February 29, 2000, at the Annual Meeting of Shareholders ("Annual
Meeting") to be held at 11:00 a.m. Eastern Time, on Tuesday, April 18, 2000, at
The Deck, located at Shops of Marco, 1839 San Marco Road, Marco Island, Florida
or any adjournment thereof;
I. ELECTION OF DIRECTORS FOR FOR WITHHOLD FOR ALL
ONE-YEAR TERMS EXCEPT
---- ---- ----
Diane M. Beyer Thomas B. Garrison Louis J. Smith
John V. Cofer Dennis J. Lynch James S. Hagedorn
Joel M. Cox, Sr. Robert A. Marks
INSTRUCTION: To withhold authority to vote for any individual nominee, mark "For
All Except" and write that nominee's name in the space provided below.
- ------------------------------------------
For Against Abstain
II. To approve the Citizens Community Bancorp,
Inc. Year 2000 Advisory Board Members' Stock
Option and Limited Rights Plan. ----- ----- -----
III. To approve an amendment to the Company's
1996 Incentive Stock Option Plan to increase
the number of shares available to be granted to
351,000 shares of common stock. ----- ----- -----
IV. Ratification of the appointment of Hacker,
Johnson, Cohen & Grieb, PA as Independent
Auditors of the Company for fiscal year ending
December 31,2000. ----- ----- -----
V. 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. ----- ----- -----
PLEASE MARK THIS BOX IF YOU PLAN TO ATTEND THE
ANNUAL MEETING.
-> ------------
In their discretion, the proxy holders are authorized to transport and to vote
upon such other business as may properly come before this Annual Meeting or any
adjournments thereof.
NOTE: When properly executed this Proxy will be voted in the manner
directed by the undersigned shareholder(s). UNLESS CONTRARY DIRECTION IS GIVE,
THIS PROXY WILL BE VOTED FOR THE PROPOSALS LISTED.
Please be sure to sign and date
this Proxy in the box below. Date
______________________________________________________________________________
______________________________________________________________________________
Shareholder sign above Co-holder (if any) sign above
Detach above card, sign, date and mail in postage paid envelope provided.
CITIZENS COMMUNITY BANCORP, INC.
The above signed shareholder may revoke the Proxy at any time before it is voted
by either filing with the Corporate Secretary of the Company a written notice of
revocation, delivering to the Company a duly executed Proxy bearing a later date
or by attending the Annual Meeting and voting in person.
IMPORTANT: Please sign your name exactly as it appears on this Proxy. When
shares are held by joint tenants, both should sign. When signing as attorney,
executor, administrator, agent, trustee or guardian, please give full title. If
shareholder is a corporation, please sign in full corporate name by president or
other authorized officer. If shareholder is a partnership, please sign in
partnership name by authorized person.
The above signed acknowledges receipt from the Company, prior to the execution
of this Proxy, of a Notice of Annual Meeting, a Proxy Statement dated March 10,
2000, and the Annual Report which includes audited financial statements for the
period ended December 31, 1999.
NOTE: IF YOU RECEIVE MORE THAN ONE PROXY, PLEASE SIGN AND RETURN ALL PROXIES IN
THE ACCOMPANYING ENVELOPE.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
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<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-START> Jan-01-1999
<PERIOD-END> Dec-31-1999
<CASH> 6,036
<INT-BEARING-DEPOSITS> 2,000
<FED-FUNDS-SOLD> 8,893
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 6,022
<INVESTMENTS-CARRYING> 13,000
<INVESTMENTS-MARKET> 12,562
<LOANS> 80,873
<ALLOWANCE> 885
<TOTAL-ASSETS> 122,193
<DEPOSITS> 102,498
<SHORT-TERM> 0
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0
0
<OTHER-SE> 17,949
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<LOAN-LOSSES> 437
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<EXPENSE-OTHER> 3,234
<INCOME-PRETAX> 963
<INCOME-PRE-EXTRAORDINARY> 963
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 615
<EPS-BASIC> .18
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<YIELD-ACTUAL> 4.42
<LOANS-NON> 0
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<ALLOWANCE-OPEN> 453
<CHARGE-OFFS> (5)
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 885
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