UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________
FORM 10-K
| [X] |
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| |
|
For the fiscal year ended September 30, 2006 OR |
| |
| [ ] |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number: 001-33003
CITIZENS COMMUNITY BANCORP, INC.
(Exact name of small business issuer as specified in its charter)
Maryland
(State or other jurisdiction of incorporation or organization)
|
|
20-5120010
(I.R.S. Employer Identification No.)
|
| |
|
|
2174 EastRidge Center, Eau Claire, Wisconsin
(Address of principal executive offices)
|
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54701
(Zip Code)
|
Registrant's telephone number, including area code: (715) 836-9994
Securities registered pursuant to Section 12(b) of the Act: None
| Securities registered pursuant to Section 12(g)of the Act: |
Common Stock, par value $0.01 per share
(Title of Class)
|
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES NO X
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES NO X
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 NO X
Indicate by check mark whether disclosure of delinquent filers pursuant to Item 405 of Regulation S-B is not contained herein, and
will not be contained, to the best of the registrant's knowledge, in definitive proxy or other information statements incorporated by
reference in Part III of this Form 10-K or any amendments to this Form 10-K. X
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.
Large accelerated filer Accelerated filer Non-accelerated filer X
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES NO X
The aggregate market value of the voting stock held by non-affiliates of the registrant, computed by reference to the average of
the bid and asked price of such stock as of the last business day of the registrant's most recently completed second fiscal quarter, was $0.
(The exclusion from such amount of the market value of the shares owned by any person shall not be deemed an admission by the
registrant that such person is an affiliate of the registrant.)
As of December 20, 2006, there were issued and outstanding 7,116,380 shares of the Registrant's common stock.
DOCUMENTS INCORPORATED BY REFERENCE
Part II of Form 10-K - Annual Report to Stockholders for the fiscal year ended September 30, 2006.
Part III of Form 10-K - Portions of the Proxy Statement for the 2007 Annual Meeting of Stockholders.
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PART I
Item 1. Description of Business
General
Historically, Citizens Community Federal (the "Bank") was a federal credit union. The Bank accepted deposits
and made loans to members, who were the people who live, work or worship in the Wisconsin counties of Chippewa
and Eau Claire, and parts of Pepin, Buffalo and Trempealeau. In addition, this included businesses and other entities
located in these counties, and members and employees of the Hocak Nation. In December 2001, the Bank converted
to a federal mutual savings bank in order to better serve our customers and the local community through the broader
lending ability of a federal savings bank, and to expand our customer base beyond the limited field of membership
permitted for credit unions. As a federal savings bank, the Bank has expanded authority in structuring residential
mortgage and consumer loans, and the ability to make commercial loans, although the Bank does not currently have
any immediate plans to commence making commercial loans. In 2004, Citizens Community Federal reorganized into
the mutual holding company form of organization. The Bank is a federally chartered stock savings institution with
twelve full service offices.
On July 1, 2005, Citizens Community Bancorp acquired Community Plus Savings Bank, Rochester Hills,
Michigan, through a merger with and into Citizens Community Federal. In accordance with the merger agreement,
Citizens Community Bancorp issued 705,569 additional shares to Citizens Community MHC, based on the $9.25
million independently appraised value of Community Plus Savings Bank. At June 30, 2005, Community Plus Savings
Bank had total assets of $46.0 million and deposits and other liabilities of $41.8 million, prior to purchase accounting
adjustments.
On October 31, 2006, Citizens Community MHC (the "MHC") completed its reorganization into stock form and
Citizens Community Bancorp, Inc. (the "Company") succeeded to the business of Citizens Community Bancorp, the
MHC's former stock holding company subsidiary. Each outstanding share of common stock of the former mid-tier
stock holding company (other than shares held by the MHC which were canceled) was converted into 1,826,380 shares
of common stock of the Company. As part of the second-step mutual to stock conversion transaction, the Company
sold a total of 5,290,000 shares to eligible depositors of the Bank in a subscription offering at $10.00 per share,
including 341,501 shares purchased by the Bank's employee stock ownership plan with funds borrowed from the
Company.
Citizens Community Bancorp, Inc. is incorporated under the laws of the State of Maryland to hold all of the stock
of Citizens Community Federal. Citizens Community Bancorp, Inc. is a unitary savings and loan holding company and
is subject to regulation by the Office of Thrift Supervision. Citizens Community Bancorp, Inc. has no significant assets
other than all of the outstanding shares of common stock of Citizens Community Federal, the net proceeds of the
Reorganization it kept and its loan to the Citizens Community Bancorp Employee Stock Ownership Plan.
At September 30, 2006, the Company had total assets of $284 million, total deposits of $186.7 million and
stockholders' equity of $30.1 million. The Company and the Bank are examined and regulated by the Office of Thrift
Supervision, its primary federal regulator. The Company and the Bank are also regulated by the FDIC. The Bank is
required to have certain reserves set by the Federal Reserve Board and is a member of the Federal Home Loan Bank
of Chicago, which is one of the 12 regional banks in the Federal Home Loan Bank System.
Forward Looking Statements
This document, including information incorporated by reference, contains forward-looking statements about the
Company and its subsidiaries which we believe are within the meaning of the Private Securities Litigation Reform Act
of 1995. These forward-looking statements include, without limitation, statements with respect to anticipated future
operating and financial performance, growth opportunities, interest rates, cost savings and funding advantages expected
or anticipated to be realized by management. Words such as "may," "could," "should," "would," "believe," "anticipate,"
"estimate," "expect," "intend," "plan" and similar expressions are intended to identify these forward-looking statements.
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Forward-looking statements by the Company and its management are based on beliefs, plans, objectives, goals,
expectations, anticipations, estimates and the intentions of management and are not guarantees of future performance.
The Company disclaims any obligation to update or revise any forward-looking statements based on the occurrence of
future events, the receipt of new information, or otherwise. The important factors we discuss below, as well as other
factors discussed under the caption "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and identified in our filings with the SEC and those presented elsewhere by our management from time
to time, could cause actual results to differ materially from those indicated by the forward-looking statements made in
this document:
- further developments in the Company's ongoing review of and efforts to resolve the problem credit
relationship described in this report, which could result in, among other things, further downgrades
of aforementioned loans, additional provisions to the loan loss reserve and the incurrence of other
material non-cash and cash charges;
- the strength of the United States economy in general and the strength of the local economies in which
we conduct operations;
- the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate
policies of the Federal Reserve Board;
- inflation, interest rate, market and monetary fluctuations;
- the timely development of and acceptance of our new products and services and the perceived overall
value of these products and services by users, including the features, pricing and quality compared
to competitors' products and services;
- the willingness of users to substitute our products and services for products and services of our
competitors;
- the impact of changes in financial services' laws and regulations (including laws concerning taxes,
banking, securities and insurance);
- the impact of technological changes;
- acquisitions;
- changes in consumer spending and saving habits; and
- our success at managing the risks involved in the foregoing.
The Company disclaims any obligation to update or revise any forward-looking statements based on the
occurrence of future events, the receipt of new information, or otherwise.
Market Area
The Bank is a community-oriented financial institution offering a variety of financial services to meet the needs
of the communities we serve. The Bank is headquartered in Eau Claire, Wisconsin, and has twelve retail offices
primarily serving Eau Claire, Buffalo, Jackson, Sauk, Barron and Chippewa counties in Wisconsin; Blue Earth and
Washington Counties in Minnesota; and Oakland and McComb counties in Michigan. The geographic market area for
loans and deposits is principally northwestern and central Wisconsin, Minnesota, and southeastern Michigan.
In all but Washington, Oakland and McComb counties the economy is historically based in manufacturing, but
has moved to a more service-oriented economy in the last four decades. Median household income and per capita
income for this area are below the state and national averages, reflecting the lack of urban nature of the market and
availability of high paying white collar and technical jobs. Washington, Oakland and McComb counties, all located
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in or near large metropolitan areas, have a more diverse economy. Major employers in the Eau Claire market area
include Chippewa Valley Technical College, Consumer Co-op Association and the University of Wisconsin-Eau Claire.
In the Mankato, Minnesota area, major employers include Minnesota State University, Immanuel Saint Joseph's
Hospital and Taylor Corporation. Anderson Windows, 3M and Imation are the largest employers in the Oakdale,
Minnesota region. In Michigan's Oakland and McComb counties, the largest employers are Delphi Automated Systems,
Affinia Group and Spectrum Health Hospitals.
Competition
The Bank faces strong competition in originating real estate and other loans and in attracting deposits.
Competition in originating real estate loans comes primarily from other savings institutions, commercial banks, credit
unions and mortgage bankers. Other savings institutions, commercial banks, credit unions and finance companies
provide vigorous competition in consumer lending.
The Bank attracts deposits through its branch office system. Competition for those deposits is principally from
other savings institutions, commercial banks and credit unions located in the same community, as well as mutual funds
and other alternative investments. The Bank competes for these deposits by offering superior service and a variety of
deposit accounts at competitive rates. Based on branch deposit data provided by the FDIC at June 30, 2006, the Bank's
share of deposits was approximately 8.49% in Eau Claire County and less than 2.64% in all other market area counties.
Internet Website
The Company maintains a website at www.citizenscommunityfederal.net. The information contained on that
website is not included as part of, or incorporated by reference into, this Annual Report on Form 10-K. Citizens
Community Bancorp, Inc. currently makes available on or through its website its Annual Report on Form 10-K,
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K or amendments to these reports. These materials
are also available free of charge on the Securities and Exchange Commission's website at www.sec.gov.
Selected Consolidated Financial Information
This information is incorporated by reference from pages 2 and 3 of the 2006 Annual Report to Stockholders
attached hereto as Exhibit 13 ("Annual Report").
Yields Earned and Rates Paid
This information contained under the section captioned "Average Balances, Net Interest Income, Yields Earned
and Rates Paid" is incorporated herein by reference from page 12 of the Annual Report.
Rate/Volume Analysis
This information is incorporated by reference from page 13 of the Annual Report.
Average Balance, Interest and Average Yields and Rates
This information contained under the section captioned "Average Balances, Net Interest Income, Yields Earned
and Rates Paid" is incorporated herein by reference from page 12 of the Annual Report.
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Lending Activities
General. Citizens Community Federal's first mortgage loans currently being originated carry a fixed rate of
interest. First mortgage loans generally are long-term and amortize on a monthly basis with principal and interest due
each month. A majority of Citizens Community Federal's first mortgage loans also contain a payable on demand clause,
which allows Citizens Community Federal to call the loan due after a stated period, usually between two and five years
from origination. Citizens Community Federal also has home equity loans in its portfolio, which have an interest rate
that adjusts based on the prime rate. At September 30, 2006, the net loan portfolio totaled $258.5 million, which
constituted 91.0% of total assets.
Mortgage loans up to $500,000 and consumer loans may be approved at various levels by loan officers and senior
management. The President may approve loans up to our regulatory lending limit, along with recommendations from
the Chief Financial Officer and the Executive Vice President. Loans outside our general underwriting guidelines must
be approved by the board of directors. At September 30, 2006, our regulatory lending limit to any one borrower and
the borrower's related entities was approximately $3.1 million. The largest lending relationship to a single borrower
or a group of related borrowers consisted of three loans to a single borrower with a total balance of $522,000. These
loans were current as of September 30, 2006.
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Loan Portfolio Composition. The following table presents information concerning the composition of the Citizen Community Federal's loan portfolio in dollar
amounts and in percentages (before deductions for allowances for loan losses) as of the dates indicated.
|
At September 30,
|
2006
|
2005
|
2004
|
2003
|
2002
|
|
Amount
|
Percent
|
Amount
|
Percent
|
Amount
|
Percent
|
Amount
|
Percent
|
Amount
|
Percent
|
|
(Dollars in thousands) |
| Real Estate Loans: |
|
|
|
|
|
|
|
|
|
|
|
One- to four-family first mortgages |
$156,235 |
60.3% |
$136,647 |
62.5% |
$ 89,841 |
58.8% |
$ 71,108 |
57.5% |
$ 54,505 |
52.2% |
|
Second mortgages |
9,161 |
3.5 |
7,630 |
3.5 |
5,398 |
3.5 |
4,661 |
3.8 |
5,687 |
5.4 |
|
Multi-family and commercial |
240
|
0.1
|
274
|
0.1
|
321
|
0.2
|
239
|
0.3
|
147
|
0.1
|
|
|
Total real estate loans |
165,636
|
63.9
|
144,551
|
66.1
|
95,560
|
62.5
|
76,008
|
61.6
|
60,339
|
57.7
|
|
|
|
|
|
|
|
|
|
|
|
| Consumer Loans: |
|
|
|
|
|
|
|
|
|
|
|
Automobile (1) |
24,445 |
9.4 |
25,980 |
11.9 |
25,808 |
16.9 |
26,905 |
21.7 |
29,882 |
28.6 |
|
Other secured personal loans (2) |
64,384 |
24.9 |
43,460 |
19.8 |
27,607 |
18.0 |
17,028 |
13.8 |
10,615 |
10.2 |
|
Unsecured personal loans (3) |
4,774
|
1.8
|
4,743
|
2.2
|
3,955
|
2.6
|
3,633
|
2.9
|
3,604
|
3.5
|
|
|
Total consumer loans |
93,603
|
36.1
|
74,183
|
33.9
|
57,370
|
37.5
|
47,566
|
38.4
|
44,101
|
42.3
|
|
|
|
|
|
|
|
|
|
|
|
| Gross loans |
259,239 |
100.0% |
218,734 |
100.0% |
152,930 |
100.0% |
123,574 |
100.0% |
104,440 |
100.0% |
|
Net deferred loan costs |
63 |
|
- |
|
- |
|
- |
|
-- |
|
|
Allowance for loan losses |
(835)
|
|
(803)
|
|
(554)
|
|
(467)
|
|
(349)
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total loans receivable, net |
$258,467 |
|
$217,931 |
|
$152,376 |
|
$123,107 |
|
$104,091 |
|
_______________
| (1) |
Includes both direct and indirect lending activities. |
| (2) |
Includes both direct and indirect lending activities for personal items other than automobiles. |
| (3) |
Includes only direct lending. |
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The following table shows the composition of Citizen Community Federal's loan portfolio by fixed- and adjustable-rate at the dates indicated.
|
At September 30,
|
2006
|
2005
|
2004
|
2003
|
2002
|
| |
Amount
|
Percent
|
Amount
|
Percent
|
Amount
|
Percent
|
Amount
|
Percent
|
Amount
|
Percent
|
|
(Dollars in Thousands) |
| Fixed Rate Loans: |
|
|
|
|
|
|
|
|
|
|
|
Real estate |
|
|
|
|
|
|
|
|
|
|
| |
One - to four-family first mortgages(1) |
$148,211 |
57.0% |
$128,300 |
58.7% |
$ 89,841 |
58.8% |
$ 71,108 |
57.5% |
$ 54,505 |
52.2% |
| |
Second mortgages |
8,367 |
3.2 |
6,189 |
2.8 |
4,772 |
3.1 |
4,099 |
3.3 |
5,303 |
5.1 |
| |
Multi-family and commercial |
240
|
0.1
|
274
|
0.1
|
321
|
0.2
|
239
|
0.3
|
147
|
0.1
|
| |
|
Total fixed-rate real estate loans |
156,818 |
60.3 |
134,763 |
61.6 |
94,934 |
62.1 |
75,446 |
61.1 |
59,955 |
57.4 |
| |
Consumer loans |
93,603
|
36.3
|
74,183
|
33.9
|
57,370
|
37.5
|
47,566
|
38.5
|
44,101
|
42.2
|
| |
|
Total fixed rate loans |
250,421 |
96.6
|
208,946 |
95.5
|
152,304 |
99.6
|
123,012 |
99.6
|
104,056 |
99.6
|
|
|
|
|
|
|
|
|
|
|
|
|
| Adjustable Rate Loans: |
|
|
|
|
|
|
|
|
|
|
|
Real estate |
|
|
|
|
|
|
|
|
|
|
|
One - to four-family first mortgages |
8,024 |
3.1 |
8,347 |
3.8 |
--- |
--- |
--- |
--- |
--- |
--- |
|
Second mortgages |
794 |
0.3 |
1,441 |
0.7 |
626 |
0.4 |
562 |
0.4 |
384 |
0.4 |
|
Multi-family and commercial |
---
|
---
|
---
|
---
|
---
|
---
|
---
|
---
|
---
|
---
|
|
|
Total adjustable rate real estate loans |
8,818 |
3.4 |
9,788 |
4.5 |
626 |
0.4 |
562 |
0.4 |
384 |
0.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer |
---
|
---
|
---
|
---
|
---
|
---
|
---
|
---
|
---
|
---
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total adjustable rate loans |
8,818
|
3.4
|
9,788
|
4.5
|
626
|
0.4
|
562
|
0.4
|
384
|
0.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans |
259,239 |
100.0% |
218,734 |
100.0% |
152,930 |
100.0% |
123,574 |
100.0% |
104,440 |
100.0% |
|
|
Net deferred loan costs |
63 |
|
- |
|
- |
|
- |
|
-- |
|
|
|
|
Allowance for loan losses |
(835)
|
|
(803)
|
|
(554)
|
|
(467)
|
|
(349)
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
Total loans receivable, net |
$258,467 |
|
$217,931 |
|
$152,376 |
|
$123,107 |
|
$104,091 |
|
__________________
| (1) |
Includes $122.2 million in 2006, $102.9 million in 2005, $81.6 million in 2004, $66.4 million in 2003, $51.2 million in 2002 and $41.3 million in 2001 of loans with a payable on demand clause. |
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The following schedule illustrates the contractual maturity of Citizen Community Federal's loan portfolio at September 30, 2006. Mortgages which have
adjustable or renegotiable interest rates are shown as maturing in the period during which the contract is due. The schedule does not reflect the effects of possible
prepayments or enforcement of due-on-demand clauses.
|
Real Estate
|
Consumer
|
|
One- to Four-Family
First Mortgage(1)
|
Second Mortgage
|
Multi-Family and
Commercial
|
Automobile
|
Secured Personal
|
Unsecured Personal
|
Total
|
|
Amount
|
Weighted
Average
Rate
|
Amount
|
Weighted
Average
Rate
|
Amount
|
Weighted
Average
Rate
|
Amount
|
Weighted
Average
Rate
|
Amount
|
Weighted
Average
Rate
|
Amount
|
Weighted
Average
Rate
|
Amount
|
Weighted
Average
Rate
|
|
(Dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2007(2) |
$ 1,064 |
5.97% |
$1,136 |
9.34% |
$137 |
7.25% |
$ 879 |
8.51% |
$ 1,853 |
7.83% |
$2,279 |
13.51% |
$ 7,348 |
9.62% |
| 2008 |
3,914 |
4.56 |
539 |
7.55 |
-- |
-- |
2,967 |
8.45 |
2,196 |
8.23 |
477 |
9.90 |
10,063 |
6.90 |
| 2009 |
2,838 |
4.96 |
1,124 |
8.00 |
57 |
6.75 |
6,228 |
7.97 |
5,055 |
7.61 |
632 |
9.71 |
15,934 |
7.39 |
| 2010-2011 |
2,321 |
5.49 |
3,318 |
7.94 |
-- |
-- |
12,529 |
8.30 |
15,110 |
8.01 |
1,376 |
10.31 |
34,654 |
80.3 |
| 2012-2013 |
1,417 |
6.14 |
780 |
8.32 |
14 |
5.75 |
1,513 |
7.59 |
8,186 |
7.76 |
-- |
-- |
11,910 |
7.58 |
| 2014-2028 |
51,105 |
5.99 |
1,994 |
7.94 |
32 |
6.50 |
329 |
7.75 |
31,984 |
7.42 |
40 |
2.94 |
85,484 |
6.58 |
| 2029 and after |
93,576
|
6.36 |
270
|
5.99 |
--
|
-- |
--
|
-- |
--
|
-- |
--
|
-- |
93,846
|
6.36 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$156,235 |
6.15 |
$9,161 |
8.07 |
$240 |
6.95 |
$24,445 |
8.19 |
$64,384 |
7.66 |
$4,774 |
11.66 |
$259,239 |
6.89 |
_______________
| (1) |
Includes $122.2 million of loans with a payable on demand clause. |
| (2) |
Includes home equity lines of credit, credit card loans, loans having no stated maturity and overdraft loans. |
The total amount of loans due after September 30, 2006 which have predetermined interest rates is $250.4 million, while the total amount of loans due after
such date which have floating or adjustable interest rates is $8.8 million.
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First Mortgage Lending. Citizens Community Federal focuses its lending efforts primarily on the origination
of loans secured by first mortgages on owner-occupied, one- to four-family residences in our market area. At
September 30, 2006, one- to four-family residential mortgage loans totaled $156.2 million, or 60.0% of the gross loan
portfolio.
For the year, mortgage originations increased primarily due to general increases in demand throughout all of our
markets. In addition, Citizens Community Federal's new branch in Oakdale, Minnesota and the acquisition of
Community Plus Savings Bank in Michigan accounted for mortgage increases over the previous year.
Citizens Community Federal generally underwrites its one- to four-family loans based on the applicant's
employment and credit history, their debt to income ratio and the appraised value of the subject property. Presently,
Citizens Community Federal generally lends up to 80% of the appraised value for one- to four-family residential loans
and up to 70% for non-owner occupied residential loans. For loans used to purchase the property with a loan-to-value
ratio in excess of 80%, Citizens Community Federal requires private mortgage insurance in order to reduce our exposure
below 80%. Properties securing one- to four-family loans are appraised by independent fee appraisers approved by the
board of directors to the extent the loan exceeds $50,000. In-house appraisals, prepared by persons other than the
originating loan officer, may be used for loans of less than $50,000, or loans of less than $100,000 if the loan-to-value
ratio is less than 50%. Citizens Community Federal requires its borrowers to obtain evidence of clear title and hazard
insurance, and flood insurance, if necessary.
Citizens Community Federal currently originates most of its one- to four-family mortgage loans on a fixed-rate
basis. Citizens Community Federal's pricing strategy for mortgage loans includes setting interest rates that benefit our
asset/liability management strategies. Our one- to four-family loans are not assumable.
Most mortgage loans include a payable on demand clause, which allows the loan to be called at any time after
the demand date. Citizens Community Federal has had no reason to utilize the clause over the past several years,
because rates have been historically low during this period (although they have moved up over the last 18 months). May
2000 was the last and only time the clause was utilized. At that time, 13 loans, totaling $541,442, were called. It is
Citizens Community Federal's policy to write the majority of its real estate loans with a payable on demand clause. The
intent of the clause is to give Citizens Community Federal some ability to protect against sharp and prolonged interest
rate increases and their impact on net interest margin. The clause is not intended for responding to temporary interest
rate fluctuations. The following factors are considered in determining whether and when to utilize the clause: (1) a
significant, prolonged increase in market rates of interest; (2) the liquidity needs of Citizens Community Federal; (3)
Citizens Community Federal's desire to restructure its balance sheet; and (4) an unsatisfactory payment history,
including real estate taxes. Other factors considered include the remaining term of the loan (i.e., a shorter remaining
term could justify not calling a loan with the same rate as a loan with a longer remaining term), other lending
relationships, payment history and the equity position of the borrower. When Citizens Community Federal determines
to utilize the clause, we call loans with the lowest interest rates first.
The following trigger guidelines are used to determine whether to utilize the payable on demand clause: (1)
when rates available for six month investment certificates of deposit exceed the rate on loans eligible to be called under
the payable on demand clause by more than 75 basis points; or (2) when local market rates of interest for real estate
loans exceed the rate on existing loans with the payable on demand clause by 150 basis points. If either of these triggers
are reached, management has 12 months to utilize the clause and call loans, if management determines that doing so
would be in the overall best interests of Citizens Community Federal. The existence of the payable on demand clauses
is not considered as a factor in determining our accounting policies for loan origination fees and costs, because we have
only used the clause once in May 2000 with respect to 13 loans.
The demand date is set based on the loan to value ratio and other underwriting criteria, and is usually two to five
years from the date of origination. During the fiscal year ended September 30, 2006, Citizens Community Federal
originated $42.3 million of one- to four-family loans that included the payable on demand clause. Fixed-rate loans
secured by one- to four-family residences have contractual maturities of up to 30 years, and are generally fully
amortizing, with payments due monthly.
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We recently implemented a mortgage banking operation, primarily in our Minnesota and Michigan markets. We
utilize internal marketing efforts to originate real estate loans in these areas. We fund these loans and sell them with
servicing released in the secondary market to Countrywide Financial Corporation. This generates additional loan fee
income and gains/losses on the sale of loans.
Second Mortgage Lending. Citizens Community Federal also offers second mortgage loans and home equity
lines of credit. Home equity lines of credit totaled $794,000 and comprised 0.3% of the gross loan portfolio at
September 30, 2006. These loans may be originated in amounts, together with the amount of the existing first
mortgage, of up to 80% of the value of the property securing the loan. A loan may go over 80% of the value of the
property securing the loan if Citizens Community Federal holds the first mortgage. Home equity lines of credit are
originated with an adjustable rate of interest, based on the prime rate of interest plus a margin, fixed for the first year
and adjustable monthly thereafter. Home equity lines of credit have up to a 10-year draw period and require the
payment of 1.5% of the outstanding loan balance per month during the draw period, which amount may be re-borrowed
at any time during the draw period. Once the draw period has lapsed, the payment is fixed based on the loan balance
at that time. At September 30, 2006, un-funded commitments on these lines of credit totaled $1.2 million.
Citizens Community Federal also offers second mortgage loans with a fixed rate of interest. These loans may
be amortized up to 15 years with a balloon payment at three, five or 10 years. At September 30, 2006, fixed-rate second
mortgage loans totaled $9.2 million, or 3.5% of the gross loan portfolio.
Consumer Lending. At September 30, 2006, consumer and other loans totaled $93.6 million, or 36.1% of the
gross loan portfolio. Citizens Community Federal offers a variety of secured consumer loans, including new and used
auto, motorcycle, boat and recreational vehicle loans, loans secured by savings deposits, and a limited amount of
unsecured loans. Citizens Community Federal originates consumer and other loans primarily in its market areas. For
fiscal 2006, consumer lending increased primarily due to Citizens Community Federal's increased presence in the
Minneapolis/St. Paul metropolitan market.
Auto loans totaled $24.4 million at September 30, 2006, or 9.4% of gross loans. Auto loans may be written for
up to five years for a new car and four years for a used car with fixed rates of interest. Loan-to-value ratios are up to
100% of the sales price for new autos and 100% of the retail value on used autos, based on a valuation from official
used car guides. In addition, Citizens Community Federal may, on occasion, originate auto secured loans in excess of
100% loan-to-value ratio based upon the credit quality of the borrower. Auto loans also may be originated through
Citizens Community Federal's indirect lending program. Indirect auto loans are made using the same underwriting
guidelines as auto loans originated directly by Citizens Community Federal.
Citizens Community Federal also originates secured loans on an indirect basis through its indirect dealer
program. These secured consumer loans consist of loans for a wide variety of products, including motorcycles,
recreational vehicles, pianos, all-terrain vehicles, televisions and sewing machines. An indirect dealer network is
currently comprised of 279 active dealers with businesses located throughout Citizens Community Federal's market
area. In some instances, the participating dealer may receive a premium rate for the amount over our initial interest rate.
The loans are generally originated with terms from 36 to 60 months and carry fixed rates of interest. Citizens
Community Federal follows its internal underwriting guidelines in evaluating loans obtained through the indirect dealer
program, including using credit scoring to approve loans.
Citizens Community Federal originates secured direct loans on a variety of collateral with terms varying from
36 to 60 months. At September 30, 2006, Citizens Community Federal had secured direct consumer loans totaling
$31.9 million, of which $17.8 million was for automobiles. At September 30, 2006, the indirect lending portfolio
totaled $57.3 million, of which $6.6 million was for automobiles.
Citizens Community Federal also originates unsecured consumer loans consisting primarily of credit card loans
totaling $1.4 million at September 30, 2006, overdraft protection loans totaling $573,000 at September 30, 2006 and
loans made through the Freedom Loan program. The Freedom Loan program offers unsecured loans to consumers with
a fixed rate of interest for a maximum term of 48 months for amounts not to exceed $20,000 per individual. At
September 30, 2006, loans originated through the Freedom Loan program totaled $2.7 million.
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Consumer loans generally have shorter terms to maturity, which reduces Citizens Community Federal's exposure
to changes in interest rates, and carry higher rates of interest than do one- to four-family residential mortgage loans.
In addition, management believes that offering consumer loan products helps to expand and create stronger ties to our
existing customer base by increasing the number of customer relationships and providing cross-marketing opportunities.
Consumer and other loans may entail greater risk than do one- to four-family residential mortgage loans,
particularly in the case of consumer loans which are secured by rapidly depreciable assets, such as automobiles and
recreational vehicles. In these cases, any repossessed collateral for a defaulted loan may not provide an adequate source
of repayment of the outstanding loan balance. As a result, consumer loan collections are dependent on the borrower's
continuing financial stability and, thus, are more likely to be adversely affected by job loss, divorce, illness or personal
bankruptcy.
Multi-family and Commercial Real Estate Lending. We generally do not engage in this type of lending, but
may consider doing so in the future. However, as part of the acquisition of the Chippewa Falls branch on November
1, 2002, Citizens Community Federal obtained a nominal amount of multi-family and commercial real estate loans.
At September 30, 2006, our two multi-family and commercial real estate loans totaled $240,000, or 0.1% of our loan
portfolio. In order to monitor the adequacy of cash flows on these loans, the borrower is requested or required to
provide periodic financial information.
Loan Originations and Repayments
Citizens Community Federal originates loans through marketing efforts and our existing and walk-in customers.
The ability to originate loans is dependent upon customer demand for loans in Citizens Community Federal's market
areas. Demand is affected by competition and the interest rate environment. Since becoming a savings bank, Citizens
Community Federal has significantly increased its origination of residential real estate loans. During the past few years,
Citizens Community Federal, like many other financial institutions, has experienced significant prepayments on loans
due to the low interest rate environment prevailing in the United States. In periods of economic uncertainty, the ability
of financial institutions, including Citizens Community Federal, to originate or purchase large dollar volumes of real
estate loans may be substantially reduced or restricted, with a resultant decrease in interest income.
We recently implemented a mortgage banking operation in the Minneapolis/St. Paul and Detroit markets. We
will originate these loans using our internal marketing efforts. We intend to fund these loans and sell them in the
secondary market to Countrywide Financial Corporation with servicing released. As of September 30, 2006, we had
originated loans totaling $420,000 through this new operation. These loans have been subsequently sold in the
secondary market. Citizens Community Federal does not purchase any loans and does not service any loans other than
those it originates.
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The following table shows the loan origination, purchase, sale and repayment activities of Citizens Community
Federal for the periods indicated.
|
|
|
Year Ended September 30,
|
|
|
|
2006
|
2005
|
2004
|
|
|
|
(In thousands) |
| Originations by type: |
|
|
|
|
Real estate(1) |
$ 48,280 |
$ 53,731 |
$43,604 |
|
Non-real estate-consumer |
70,286
|
55,010
|
46,044
|
|
|
Total loans originated |
118,566 |
108,741 |
89,648 |
|
|
|
|
|
|
| Loans obtained through merger |
--- |
26,670 |
--- |
|
|
|
|
|
|
| Repayments: |
|
|
|
| Principal repayments |
77,564 |
69,405 |
60,292 |
| Loans transferred to other |
|
|
|
|
real estate/collateral |
434
|
203
|
---
|
| Net increase(decrease) |
$ 40,568 |
$ 65,803 |
$29,356 |
______________
| (1) |
Real estate loans include loans with a payable on demand feature of $42.3 million in fiscal 2006, $45.0 million in fiscal 2005 and
$35.0 million in fiscal 2004. Real estate loans also include home equity lines of credit of $125,000 for fiscal 2006, $274,000 in
fiscal 2005 and $203,000 in fiscal 2004. |
Asset Quality
Procedures. When a borrower fails to make a payment on a mortgage loan on or before the due date, a late
notice is mailed five days after the due date. When the loan is 10 days past due, a loan officer will begin contacting the
borrower by phone. This process will continue until satisfactory payment arrangements have been made. If the loan
becomes two payments and ten days past due, a notice of right-to-cure default is sent. If the loan becomes over 90 days
delinquent, a drive-by inspection is done while further attempts to contact the borrower by phone are made. After the
loan is 120 days past due, and acceptable arrangements have not been made, Citizens Community Federal will generally
refer the loan to legal counsel, with instructions to prepare a notice of intent to foreclose. This notice allows the
borrower up to 30 days to bring the loan current. During this 30 day period, Citizens Community Federal will still
attempt to contact the borrower to implement satisfactory payment arrangements. If the loan becomes 150 days past
due and satisfactory arrangements have not been made, foreclosure will be instituted.
For consumer loans a similar process is followed, with the initial written contact being made once the loan is five
days past due. Follow-up contacts are generally on an accelerated basis compared to the mortgage loan procedure.
Citizens Community Federal divides its loans into two categories, mortgage loans and non-mortgage loans. For
all loans in both categories, Citizens Community Federal employs a dual loss reserve strategy. First, using a running
five-year history, all loans, excluding classified loans, are assigned an inherent loss reserve. Next, each loan (mortgage
and non-mortgage) that becomes over 61 days delinquent is reviewed by senior management. In addition, Citizens
Community Federal assesses several factors including negative change in income, negative change in collateral,
negative change in employment and other characteristics.
The procedure for charging off consumer loans does not differentiate between the different types of consumer
loans. Citizens Community Federal's loan underwriting is based mainly on the borrowers' ability to pay, along with
the value of the collateral. All closed-end consumer loans are either charged off or recognized as a specific loss after
they become delinquent 120 days. All open-end consumer loans are charged off or recognized as a specific loss after
they become delinquent 180 days. Consumer loans with collateral are charged off or recognized as a specific loss down
to collateral resale value less 10 percent if repossession of collateral is assured.
In lieu of charging off the entire balance, loans with non-real estate collateral may be written down to the value
of the collateral, if repossession is assured and in process. For open-end and closed-end loans secured by real estate,
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a current assessment of value will be made no later than 180 days past due. Any outstanding loan balance in excess
of the value of the property, less selling costs, is charged off.
Delinquent Loans. The following table sets forth our loan delinquencies by type, number and amount at
September 30, 2006.
|
Loans Delinquent For:
|
|
60-89 Days
|
90 Days and Over
|
Total Delinquent Loans
|
|
Number
|
Amount
|
Number
|
Amount
|
Number
|
Amount
|
|
(Dollars in thousands) |
|
| Real estate |
3 |
$246 |
6 |
$ 406 |
9 |
$ 652 |
|
| Consumer(1) |
188
|
557
|
211
|
984
|
399
|
1,541
|
|
| Total |
191 |
$803 |
217 |
$1,390 |
408 |
$2,193 |
__________
(1) Includes credit card accounts.
Non-performing Assets. The table below sets forth the amounts and categories of non-performing assets in our
loan portfolio. Loans are placed on non-accrual status when the loan becomes more than 90 days delinquent. At all
dates presented, we had no troubled debt restructurings which involve forgiving a portion of interest or principal on any
loans or making loans at a rate materially less than that of market rates. Foreclosed assets owned include assets acquired
in settlement of loans.
| |
|
|
At September 30,
|
| |
|
|
2006
|
2005
|
2004
|
2003
|
2002
|
| |
|
|
(Dollars in thousands) |
| Non-accruing loans: |
|
|
|
|
|
|
One- to four-family |
$ 406 |
$207 |
$300 |
$162 |
$ 51 |
|
Consumer(1) |
984
|
462
|
397
|
400
|
483
|
|
|
Total |
1,390
|
669
|
697
|
562
|
534
|
| |
|
|
|
|
|
|
|
| Foreclosed assets: |
|
|
|
|
|
|
One- to four-family |
376 |
--- |
--- |
--- |
73 |
|
Consumer |
13
|
32
|
---
|
---
|
---
|
|
|
Total |
389
|
32
|
---
|
---
|
73
|
| |
|
|
|
|
|
|
|
| Total non-performing assets |
$1,779 |
$701 |
$697 |
$562 |
$607 |
| |
|
|
|
|
|
|
|
| Total as a percentage of |
|
|
|
|
|
|
total assets |
0.63% |
0.29% |
0.43% |
0.43% |
0.53% |
___________
| (1) |
Includes credit card accounts. |
For the years ended September 30, 2006 and 2005, gross interest income which would have been recorded had
the non-accruing loans been current in accordance with their original terms amounted to $52,400 and $36,000,
respectively. No amount was included in interest income on these loans for these periods.
Other Loans of Concern. In addition to the non-performing assets set forth in the table above, as of September
30, 2006, there was also an aggregate of $1.0 million of loans with respect to which known information about the
possible credit problems of the borrowers have caused management to have doubts as to the ability of the borrowers
to comply with present loan repayment terms and which may result in the future inclusion of such items in the
non-performing asset categories. These loans are not considered "classified" due to their delinquency status; however,
they are identified as "watch" loans. They are not reserved for in the allowance for loan losses other than as part of the
inherent portion. These loans have been considered in management's determination of the adequacy of our allowance
for loan losses.
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Classified Assets. OTS regulations provide for the classification of loans and other assets, such as debt and
equity securities considered to be of lesser quality, as "substandard," "doubtful" or "loss." An asset is considered
"substandard" if it is inadequately protected by the current net worth and paying capacity of the obligor or of the
collateral pledged, if any. "Substandard" assets include those characterized by the "distinct possibility" that the insured
institution will sustain "some loss" if the deficiencies are not corrected. Assets classified as "doubtful" have all of the
weaknesses inherent in those classified "substandard," with the added characteristic that the weaknesses present make
"collection or liquidation in full," on the basis of currently existing facts, conditions, and values, "highly questionable
and improbable." Assets classified as "loss" are those considered "uncollectible" and of such little value that their
continuance as assets without the establishment of a specific loss reserve is not warranted.
When we classify problem assets as either substandard or doubtful, we may establish general allowances for loan
losses in an amount deemed prudent by management and approved by the board of directors. General allowances
represent loss allowances which have been established to recognize the inherent risk associated with lending activities,
but which, unlike specific allowances, have not been allocated to particular problem assets. When we classify problem
assets as "loss," we are required either to establish a specific allowance for losses equal to 100% of that portion of the
asset so classified or to charge off such amount. Our determination as to the classification of our assets and the amount
of its valuation allowances is subject to review by the OTS and the FDIC, which may order the establishment of
additional general or specific loss allowances.
In connection with the filing of our periodic reports with the OTS and in accordance with our classification of
assets policy, we regularly review the problem assets in our portfolio to determine whether any assets require
classification in accordance with applicable regulations. On the basis of management's review of our assets, at
September 30, 2006, Citizens Community Federal had classified $1.4 million of the loans in its portfolio as substandard,
all of which was included in non-performing assets, $0 as doubtful and $0 as loss. The total amount classified
represented 4.65% of CCB's equity capital and 0.49% of assets at September 30, 2006.
Provision for Loan Losses. Citizens Community Federal recorded a provision for loan losses for the year ended
September 30, 2006 of $251,000, compared to $414,000 for the year ended September 30, 2005 and $396,000 for the
year ended September 30, 2004. The provision for loan losses is charged to income to bring the allowance for loan
losses to reflect probable incurred losses based on the factors discussed below under "Allowance for Loan Losses."
The provision for loan losses for the year ended September 30, 2006 was based on management's review of such factors
which indicated that the allowance for loan losses reflected probable incurred losses in the loan portfolio as of the year
ended September 30, 2006.
Allowance for Loan Losses. Citizens Community Federal maintains an allowance for loan losses to absorb
probable incurred losses in the loan portfolio. The allowance is based on ongoing, quarterly assessments of the
estimated probable incurred losses in the loan portfolio. In evaluating the level of the allowance for loan losses,
management considers the types of loans and the amount of loans in the loan portfolio, historical loss experience,
adverse situations that may affect the borrower's ability to repay, estimated value of any underlying collateral, and
prevailing economic conditions.
At September 30, 2006, the allowance for loan losses was $835,000, or 0.32%, of the total loan portfolio.
Assessing the allowance for loan losses is inherently subjective as it requires making material estimates, including the
amount and timing of future cash flows expected to be received on impaired loans, that may be susceptible to significant
change. In the opinion of management, the allowance, when taken as a whole, reflects estimated probable loan losses
in our loan portfolios.
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The following table sets forth an analysis of our allowance for loan losses.
|
|
|
Year Ended September 30,
|
2006
|
2005
|
2004
|
2003
|
2002
|
|
|
|
(Dollars in thousands) |
|
|
|
|
|
|
|
|
| Balance at beginning of period |
$803 |
$554 |
$467 |
$349 |
$306 |
|
|
|
|
|
|
|
|
| Charge-offs: |
|
|
|
|
|
|
One- to four-family |
(19) |
(24) |
--- |
(16) |
(2) |
|
Consumer |
(228)
|
(212)
|
(342)
|
(297)
|
(340)
|
|
|
Total charge-offs |
(247)
|
(236)
|
(342)
|
(313)
|
(342)
|
|
|
|
|
|
|
|
|
| Recoveries: |
|
|
|
|
|
|
Consumer |
28
|
31
|
33
|
25
|
10
|
|
|
Total recoveries |
28
|
31
|
33
|
25
|
10
|
|
|
|
|
|
|
|
|
| Net charge-offs |
(219) |
(205) |
(309) |
(288) |
(332) |
| Other-obtained through merger |
--- |
40 |
--- |
--- |
--- |
| Additions charged to operations |
251
|
414
|
396
|
406
|
375
|
| Balance at end of period |
$835 |
$803 |
$554 |
$467 |
$349 |
|
|
|
|
|
|
|
|
| Ratio of allowance for loan losses to |
|
|
|
|
|
|
net loans outstanding at |
|
|
|
|
|
|
end of period |
0.32% |
0.37% |
0.36% |
0.38% |
0.34% |
|
|
|
|
|
|
|
|
| Ratio of net charge-offs during the |
|
|
|
|
|
|
period to average loans outstanding |
|
|
|
|
|
|
during the period |
0.08% |
0.12% |
0.22% |
0.25% |
0.33% |
|
|
|
|
|
|
|
|
| Ratio of net charge-offs during the |
|
|
|
|
|
|
period to average non-performing |
|
|
|
|
|
|
assets |
17.66% |
28.37% |
49.05% |
49.23% |
65.61% |
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The distribution of our allowance for losses on loans at the dates indicated is summarized as follows:
|
|
At September 30,
|
|
|
2006
|
2005
|
2004
|
|
|
Amount of
Loan Loss
Allowance
|
Loan
Amounts by
Category
|
Percent of
Loans in Each
Category to
Total Loans
|
Amount of
Loan Loss
Allowance
|
Loan
Amounts by
Category
|
Percent of
Loans in Each
Category to
Total Loans
|
Amount of
Loan Loss
Allowance
|
Loan
Amounts by
Category
|
Percent of
Loans in Each
Category to
Total Loans
|
| |
|
(Dollars in Thousands) |
| Real estate |
$ 52 |
$165,636 |
64% |
$ 59 |
$144,551 |
66% |
$ 61 |
$ 95,560 |
62% |
| Consumer |
783 |
93,603 |
36 |
744 |
74,183 |
34 |
490 |
57,370 |
38 |
| Unallocated |
---
|
---
|
---
|
---
|
---
|
---
|
3
|
---
|
---
|
| |
Total |
$835 |
$259,239 |
100% |
$803 |
$218,734 |
100% |
$554 |
$152,930 |
100% |
| |
|
At September 30,
|
| |
|
2003
|
2002
|
|
|
Amount of
Loan Loss
Allowance
|
Loan
Amounts by
Category
|
Percent of
Loans in Each
Category to
Total Loans
|
Amount of
Loan Loss
Allowance
|
Loan
Amounts by
Category
|
Percent of
Loans in Each
Category to
Total Loans
|
|
| |
|
(Dollars in Thousands) |
|
|
|
|
|
|
|
|
|
| Real estate |
$ 9 |
$ 75,769 |
61% |
$ 4 |
$ 60,192 |
58% |
| Consumer |
433 |
47,805 |
39 |
340 |
44,248 |
42 |
| Unallocated |
25
|
---
|
---
|
5
|
---
|
---
|
|
Total |
$467 |
$123,574 |
100% |
$349 |
$104,440 |
100% |
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Investment Activities
Federally chartered savings institutions have the authority to invest in various types of liquid assets, including
United States Treasury obligations, securities of various federal agencies, including callable agency securities, certain
certificates of deposit of insured banks and savings institutions, certain bankers' acceptances, repurchase agreements
and federal funds. Subject to various restrictions, federally chartered savings institutions may also invest their assets
in investment grade commercial paper and corporate debt securities and mutual funds whose assets conform to the
investments that a federally chartered savings institution is otherwise authorized to make directly.
The chief financial officer has the basic responsibility for the management of our investment portfolio, subject
to the direction and guidance of the investment committee. The chief financial officer considers various factors when
making decisions, including the marketability, maturity and tax consequences of the proposed investment. The maturity
structure of investments will be affected by various market conditions, including the current and anticipated slope of
the yield curve, the level of interest rates, the trend of new deposit inflows, and the anticipated demand for funds via
deposit withdrawals and loan originations and purchases.
The general objectives of our investment portfolio are to provide liquidity when loan demand is high, to assist
in maintaining earnings when loan demand is low and to maximize earnings while satisfactorily managing risk,
including credit risk, reinvestment risk, liquidity risk and interest rate risk.
Our investment securities have historically consisted solely of certificates of deposit with insured financial
institutions and the Federal Home Loan Bank of Chicago. In the fourth quarter of fiscal 2005, we acquired an
investment portfolio consisting of corporate notes, mortgage-backed securities and mutual funds in our merger with
Community Plus Savings Bank. At September 30, 2006, we had $782,000 in mortgage-backed securities remaining
from the Community Plus acquisition.
The following table sets forth the composition of Citizens Community Federal's investment securities and
interest-bearing deposits at the dates indicated.
|
|
At September 30,
|
2006
|
2005
|
2004
|
|
|
Book
Value
|
% of Total
|
Book
Value
|
% of Total
|
Book
Value
|
% of Total
|
|
|
|
(Dollars in thousands) |
|
|
|
|
|
|
|
|
| Investment securities: |
|
|
|
|
|
|
|
Federal Home Loan Bank stock |
$3,060 |
63.74% |
$2,095 |
37.24% |
$828 |
100.00% |
|
Interest-bearing deposits with banks |
959 |
19.97 |
1,444 |
25.67 |
--- |
--- |
|
Mortgage-backed securities |
782 |
16.29 |
946 |
16.81 |
--- |
--- |
|
Corporate notes |
--- |
--- |
981 |
17.44 |
--- |
--- |
|
Mutual funds |
---
|
---
|
160
|
2.84
|
---
|
---
|
|
|
$4,801 |
100.00% |
$5,626 |
100.00% |
$828 |
100.00% |
Sources of Funds
General. Citizens Community Federal's sources of funds are deposits, borrowings, payment of principal and
interest on loans, interest earned on or maturation of other investment securities and funds provided from operations.
Deposits. Citizens Community Federal offers a variety of deposit accounts to both consumers and businesses
having a wide range of interest rates and terms. Deposits consist of savings accounts, money market deposit accounts,
demand accounts and certificates of deposit. Citizens Community Federal solicits deposits primarily in its market areas
and from financial institutions and has accepted a limited amount of brokered deposits. At September 30, 2006, Citizens
Community Federal had $3.0 million of brokered deposits. We obtain these deposits from seven brokers when the rates
requested are 20 to 30 basis points less than the amount we pay our retail customers. The typical term for these
brokered deposits are 12 to 18 months. Our experience is that these are not volatile deposits subject to significant early
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withdrawal. Citizens Community Federal primarily relies on competitive pricing policies, marketing and customer
service to attract and retain these deposits. Citizens Community Federal from time to time participates in an auction
for brokered deposits to assist in finding the lowest cost deposits possible. Citizens Community Federal constantly
searches for the most cost-effective source of funds, either through brokered deposits, or through marketing our own
rates to protect our margin and maintain our sales culture.
The flow of deposits is influenced significantly by general economic conditions, changes in money market and
prevailing interest rates and competition. The variety of deposit accounts we offer has allowed us to be competitive
in obtaining funds and to respond with flexibility to changes in consumer demand. We have become more susceptible
to short-term fluctuations in deposit flows, as customers have become more interest rate conscious. We try to manage
the pricing of our deposits in keeping with our asset/liability management, liquidity and profitability objectives, subject
to competitive factors. Based on experience, management believes that Citizens Community Federal's deposits are
relatively stable sources of funds. Despite this stability, the ability to attract and maintain these deposits and the rates
paid on them has been and will continue to be significantly affected by market conditions.
Deposit Flow
The following table sets forth deposit flows during the periods indicated.
|
Year Ended September 30,
|
|
2006
|
2005
|
2004
|
|
(Dollars in thousands) |
|
|
|
|
| Opening balance |
$177,469 |
$127,976 |
$114,963 |
| Deposits assumed in merger |
--- |
41,571 |
--- |
| Net deposits |
4,060 |
4,659 |
10,208 |
| Interest credited |
5,182
|
3,263
|
2,805
|
|
|
|
|
| Ending balance |
$186,711 |
$177,469 |
$127,976 |
|
|
|
|
| Net increase |
$ 9,242 |
$ 49,493 |
$ 13,013 |
|
|
|
|
| Percent increase |
5.2% |
38.7% |
11.3% |
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The following table sets forth the dollar amount of savings deposits in the various types of deposit programs we
offered at the dates indicated.
|
|
At September 30,
|
|
|
2006
|
2005
|
2004
|
|
|
Amount
|
Percent
of Total
|
Amount
|
Percent
of Total
|
Amount
|
Percent
of Total
|
|
|
(Dollars in thousands) |
Transaction Accounts
and Savings Deposits: |
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
| |
Demand accounts |
$ 18,669 |
10.00% |
$ 19,315 |
10.88% |
$ 11,447 |
8.94% |
| |
Savings accounts |
24,975 |
13.38 |
27,193 |
17.09 |
15,420 |
12.05 |
| |
Money market accounts |
22,262
|
11.92
|
30,323
|
15.33
|
23,629
|
18.46
|
| |
|
|
|
|
|
|
|
| |
|
Total non-certificates |
65,906
|
35.30
|
76,831
|
43.30
|
50,496
|
39.46
|
| |
|
|
|
|
|
|
|
| Certificates: |
|
|
|
|
|
|
|
6-12 month |
26,413 |
14.14 |
15,519 |
8.74 |
17,274 |
13.50 |
|
15-18 month |
44,715 |
23.95 |
33,818 |
19.05 |
12,294 |
9.61 |
|
24-60 month |
25,313 |
13.56 |
30,368 |
17.11 |
31,021 |
24.24 |
|
Anniversary |
463 |
0.25 |
493 |
0.28 |
553 |
0.43 |
| |
Institutional |
14,796 |
7.92 |
12,415 |
7.00 |
8,908 |
6.96 |
|
Borrowers |
-- |
-- |
1 |
0.01 |
28 |
0.02 |
|
IRA |
9,105
|
4.88
|
8,024
|
4.51
|
7,402
|
5.78
|
| |
|
|
|
|
|
|
|
|
|
Total certificates |
120,805
|
64.70
|
100,638
|
56.70
|
77,480
|
60.54
|
| |
|
|
|
|
|
|
|
| Total Deposits |
$186,711 |
100.00% |
$177,469 |
100.00% |
$127,976 |
100.00% |
The following table shows rate and maturity information for Citizens Community Federal's certificates of deposit
at September 30, 2006.
|
0.00-
1.99%
|
2.00-
3.99%
|
4.00-
5.99%
|
Total
|
Percent
of Total
|
| |
(Dollars in thousands) |
Certificate accounts maturing during
the twelve months ended: |
|
|
|
|
|
| September 30, 2007 |
$ 957 |
$23,556 |
$64,433 |
$ 88,946 |
73.6% |
| September 30, 2008 |
167 |
6,033 |
14,066 |
20,266 |
16.8 |
| September 30, 2009 |
- |
498 |
9,619 |
10,117 |
8.4 |
| September 30, 2010 |
- |
2 |
1,471 |
1,473 |
1.2 |
| Thereafter |
- |
-- |
3 |
3 |
-- |
| |
|
|
|
|
|
|
|
Total |
$1,124 |
$30,089 |
$89,592 |
$120,805 |
100.0% |
| |
|
|
|
|
|
|
|
Percent of total |
0.9% |
24.9% |
74.2% |
|
|
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The following table indicates the amount of Citizens Community Federal's certificates of deposit by time
remaining until maturity as of September 30, 2006.
|
3 Months
or Less
|
Over 3 to
6 Months
|
Over 6 to
12 Months
|
Over
12 Months
|
Total
|
|
(In thousands) |
|
|
|
|
|
|
| Certificates of deposit |
|
|
|
|
|
| less than $100,000 |
$12,792 |
$20,614 |
$36,417 |
$27,670 |
$ 97,493 |
|
|
|
|
|
|
| Certificates of deposit |
|
|
|
|
|
| of $100,000 or more |
1,805 |
5,363 |
11,954 |
4,190 |
23,312 |
|
|
|
|
|
|
| Total certificates of deposit |
$14,597 |
$25,977 |
$48,371 |
$31,860 |
$120,805 |
Borrowings. Although deposits are our primary source of funds, Citizens Community Federal may utilize
borrowings when they are a less costly source of funds and can be invested at a positive interest rate spread, when it
desires additional capacity to fund loan demand or when they meet asset/liability management goals. Borrowings
consist of advances from the Federal Home Loan Bank of Chicago. See Note 10 of the Notes to Consolidated Financial
Statements.
Citizens Community Federal may obtain advances from the Federal Home Loan Bank of Chicago upon the
security of certain of our mortgage loans and mortgage-backed and other securities. These advances may be made
pursuant to several different credit programs, each of which has its own interest rate, range of maturities and call
features. At September 30, 2006, Citizens Community Federal had $61.2 million in Federal Home Loan Bank advances
outstanding and the ability to borrow an additional $53.6 million.
Citizens Community Federal is authorized to borrow from the Federal Reserve Bank of Chicago's "discount
window" after it has exhausted other reasonable alternative sources of funds, including Federal Home Loan Bank
borrowings. We have never borrowed from our Federal Reserve Bank.
The following table sets forth the maximum month-end balance and average balance of borrowings for the
periods indicated.
|
Year Ended September 30,
|
|
2006
|
2005
|
2004
|
|
(In thousands) |
| |
|
|
|
| Maximum Balance: |
|
|
|
| |
FHLB advances |
$61,200 |
$36,200 |
$13,500 |
| |
|
|
|
| Average Balance: |
|
|
|
| |
FHLB advances |
$48,700 |
$24,850 |
$ 8,600 |
The following table sets forth certain information as to Citizens Community Federal's borrowings at the dates
indicated.
|
At September 30,
|
|
2006
|
2005
|
2004
|
|
(Dollars in thousands) |
| |
|
|
|
| FHLB advances |
$61,200 |
$36,200 |
$13,500 |
| |
|
|
|
| Weighted average interest rate |
|
|
|
| |
of FHLB advances |
5.52% |
4.09% |
2.21% |
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Subsidiary and Other Activities
As a federally chartered savings bank, Citizens Community Federal is permitted by OTS regulations to invest
up to 2% of assets, or $5.7 million at September 30, 2006, in the stock of, or unsecured loans to, service corporation
subsidiaries. Citizens Community Federal may invest an additional 1% of our assets in service corporations where such
additional funds are used for inner-city or community development purposes. Citizens Community Federal does not
currently have any subsidiary service corporations.
Employees
At September 30, 2006, the Bank had a total of 73 full-time employees and 76 part-time employees. Employees
are not represented by any collective bargaining group. Management considers its employee relations to be good.
REGULATION
Set forth below is a brief description of certain laws and regulations that are applicable to Citizens Community
Bancorp, Inc. and Citizens Community Federal. The description of these laws and regulations, as well as descriptions
of laws and regulations contained elsewhere herein, does not purport to be complete and is qualified in its entirety by
reference to the applicable laws and regulations.
Legislation is introduced from time to time in the United States Congress that may affect our operations. In
addition, the regulations governing Citizens Community Bancorp, Inc. and Citizens Community Federal may be
amended from time to time by the OTS, the FDIC or the SEC, as appropriate. Any such legislative or regulatory
changes in the future could adversely affect our operations and financial condition. No assurance can be given as to
whether or in what form any such changes may occur.
Citizens Community Federal
Citizens Community Federal, as a federally chartered savings bank, is subject to regulation and oversight by the
OTS extending to all aspects of its operations. Citizens Community Federal also is subject to regulation and
examination by the FDIC, which insures the deposits of Citizens Community Federal to the maximum extent permitted
by law. This regulation of Citizens Community Federal is intended for the protection of depositors and the insurance
of accounts fund and not for the purpose of protecting stockholders. Citizens Community Federal is required to
maintain minimum levels of regulatory capital and is subject to some limitations on the payment of dividends to Citizens
Community Bancorp, Inc. See "- Regulatory Capital Requirements" and "- Limitations on Dividends and Other Capital
Distributions." As a federal savings bank, Citizens Community Federal is required to file periodic reports with the OTS
and is subject to periodic examinations by the OTS.
OTS Regulation. Our relationship with our depositors and borrowers is regulated to a great extent by federal
laws and OTS regulations, especially in such matters as the ownership of savings accounts and the form and content
of our mortgage requirements. In addition, the branching authority of Citizens Community Federal is regulated by the
OTS. Citizens Community Federal is generally authorized to branch nationwide.
The investment and lending authority of Citizens Community Federal is prescribed by federal laws and
regulations, and it is prohibited from engaging in any activities not permitted by such laws and regulations. This
includes a 35% of total assets limit on consumer loans, commercial paper and corporate debt securities. When Citizens
Community Federal converted from a credit union to a federal savings bank, the OTS granted it a waiver of that 35%
limit. The waiver expired December 10, 2005. At September 30, 2006, Citizens Community Federal had 32.96% of
its assets in consumer loans, commercial paper and corporate debt securities, in compliance with the limit.
As a federal savings bank, Citizens Community Federal is required to meet a qualified thrift lender test. This
test requires Citizens Community Federal to have at least 65% of its portfolio assets, as defined by regulation, in
qualified thrift investments on a monthly average for nine out of every 12 months on a rolling basis. As an alternative,
we may maintain 60% of its assets in those assets specified in Section 7701(a)(19) of the Internal Revenue Code. Under
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either test, we are required to maintain a significant portion of our assets in residential-housing-related loans and
investments. Any institution that fails to meet the qualified thrift lender test becomes subject to certain restrictions on
its operations and must convert to a national bank charter, unless it re-qualifies as, and thereafter remains, a qualified
thrift lender. If such an institution has not requalified or converted to a national bank within three years after the failure,
it must divest of all investments and cease all activities not permissible for a national bank. We were not subject to a
similar requirement when we were a credit union and were not in compliance with this requirement at the time we
became a federal savings bank. As of September 30, 2006, Citizens Community Federal met this requirement with a
qualified thrift lender percentage of 84.24%.
Under OTS regulations, Citizens Community Federal is subject to a lending limit for loans to one borrower or
group of related borrowers. This lending limit is equal to the greater of $500,000 or 15% of unimpaired capital and
surplus (except for loans fully secured by certain readily marketable collateral, in which case the limit is increased to
25% of impaired capital and surplus). At September 30, 2006, Citizens Community Federal's lending limit under this
restriction was $3.1 million. Our outstanding loans are in compliance with this lending limit.
The OTS's oversight of Citizens Community Federal includes reviewing its compliance with the customer
privacy requirements imposed by the Gramm-Leach-Bliley Act of 1999 and the anti-money laundering provisions of
the USA Patriot Act. The Gramm-Leach-Bliley privacy requirements place limitations on the sharing of consumer
financial information with unaffiliated third parties. They also require each financial institution offering financial
products or services to retail customers to provide such customers with its privacy policy and with the opportunity to
"opt out" of the sharing of their personal information with unaffiliated third parties. The USA Patriot Act significantly
expands the responsibilities of financial institutions in preventing the use of the United States financial system to fund
terrorist activities. Its anti-money laundering provisions require financial institutions operating in the United States to
develop anti-money laundering compliance programs and due diligence policies and controls to ensure the detection
and reporting of money laundering. These compliance programs are intended to supplement existing compliance
requirements under the Bank Secrecy Act and the Office of Foreign Assets Control Regulations.
We are subject to periodic examinations by the OTS. During these examinations, the examiners may require
Citizens Community Federal to provide for higher general or specific loan loss reserves, which can impact our capital
and earnings. As a federal savings bank, Citizens Community Federal is subject to a semi-annual assessment, based
upon its total assets, to fund the operations of the OTS.
Transactions between Citizens Community Federal and its affiliates generally are required to be on terms as
favorable to the institution as transactions with non-affiliates, and certain of these transactions, such as loans to an
affiliate, are restricted to a percentage of Citizens Community Federal's capital. In addition, Citizens Community
Federal may not lend to any affiliate engaged in activities not permissible for a bank holding company or acquire the
securities of most affiliates. Citizens Community Bancorp, Inc. will be an affiliate of Citizens Community Federal.
Citizens Community Federal will enter into an expense allocation agreement and tax allocation agreement with Citizens
Community Bancorp, Inc. in order to meet these requirements.
The OTS has adopted guidelines establishing safety and soundness standards on such matters as loan
underwriting and documentation, asset quality, earnings standards, internal controls and audit systems, interest rate risk
exposure and compensation and other employee benefits. Any institution regulated by the OTS that fails to comply with
these standards must submit a compliance plan.
The OTS has extensive enforcement authority over all savings associations and their holding companies,
including, Citizens Community Federal and Citizens Community Bancorp, Inc. This enforcement authority includes,
among other things, the ability to assess civil money penalties, to issue cease-and-desist or removal orders and to initiate
injunctive actions. In general, these enforcement actions may be initiated for violations of laws and regulations and
unsafe or unsound practices. Other actions or inactions may provide the basis for enforcement action, including
misleading or untimely reports filed with the OTS. Except under certain circumstances, public disclosure of final
enforcement actions by the OTS is required by law.
FDIC Regulation and Insurance of Accounts. Citizens Community Federal's deposits are insured up to the
applicable limits by the FDIC, and such insurance is backed by the full faith and credit of the United States Government.
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As insurer, the FDIC imposes deposit insurance premiums and is authorized to conduct examinations of and to require
reporting by FDIC-insured institutions. Under new FDIC regulations, we expect our deposit insurance premiums to
increase in 2007. It also may prohibit any FDIC-insured institution from engaging in any activity the FDIC determines
by regulation or order to pose a serious risk to the deposit insurance fund. The FDIC also has the authority to initiate
enforcement actions against Citizens Community Federal and may terminate our deposit insurance if it determines that
we have engaged in unsafe or unsound practices or is in an unsafe or unsound condition.
Citizens Community Bancorp, Inc.
As a savings association holding company, Community Bancorp, Inc. is subject to regulation, supervision and
examination by the OTS. Applicable federal law and regulations limit the activities of Citizens Community Bancorp,
Inc. and require the approval of the OTS for any acquisition or divestiture of a subsidiary, including another financial
institution or holding company thereof. Citizens Community Bancorp, Inc. is an affiliate of Citizens Community
Federal, so its transactions with Citizens Community Federal is subject to regulatory limits and must be on terms as
favorable to Citizens Community Federal as in transactions with non-affiliates.
If Citizens Community Federal fails the qualified thrift lender test, Citizens Community Bancorp, Inc. must obtain the approval of the OTS prior to continuing after such
failure, directly or through other subsidiaries, any business activity other than those approved for bank holding
companies or their subsidiaries. In addition, within one year of such failure Citizens Community Bancorp, Inc. must
register as, and will become subject to, the restrictions applicable to bank holding companies.
Regulatory Capital Requirements
Capital Requirements for Citizens Community Federal. Citizens Community Federal is required to maintain
minimum levels of regulatory capital under OTS regulations. These regulations established three capital standards, a
tangible capital requirement, a leverage or core capital requirement and a risk-based capital requirement. The OTS is
also authorized to impose capital requirements in excess of these standards on a case-by-case basis.
The capital regulations require tangible capital of at least 1.5% of adjusted total assets, as defined by regulation.
Tangible capital generally includes common stockholders' equity and retained earnings, and certain noncumulative
perpetual preferred stock and related earnings and excludes most intangible assets, which also are deducted from assets
for purposes calculating this capital ratio. At September 30, 2006, Citizens Community Federal had tangible capital
of $19.8 million, or 7.2% of adjusted total assets, which was approximately $15.7 million above the required level.
The capital standards require core or Tier 1 capital equal to at least 3.0% of adjusted total assets for the strongest
institutions with the highest examination rating and 4.0% of adjusted total assets for all other institutions, unless the
OTS requires a higher level based on the particular circumstances or risk profile of the institution. Core capital
generally consists of tangible capital, plus certain intangibles. At September 30, 2006, Citizens Community Federal
had $7.3 million of intangibles, $0 of which were included in core capital. At September 30, 2006, Citizens Community
Federal had core capital equal to $19.8 million, or 7.2% of adjusted total assets, which was $8.8 million above the
required level of 4%.
The OTS also requires Citizens Community Federal to have total capital of at least 8.0% of risk-weighted assets.
Total capital consists of core or Tier 1 capital, as defined above, and Tier 2 capital, which consists of certain permanent
and maturing capital instruments that do not qualify as Tier 1 capital and of the allowance for possible loan and lease
losses up to a maximum of 1.25% of risk-weighted assets. Tier 2 capital may be used to satisfy this risk-based
requirement only to the extent of Tier 1 capital. In determining the amount of risk-weighted assets, all assets, including
certain off-balance sheet items, will be multiplied by a risk weight, ranging from 0% to 100%, based on the risk inherent
in the type of asset. The OTS is authorized to require Citizens Community Federal to maintain an additional amount
of total capital to account for concentration of credit risk, level of interest rate risk, equity investments in non-financial
companies and the risk of non-traditional activities. At September 30, 2006, Citizens Community Federal had $186.5
million in risk-weighted assets and total capital of $20.4 million, or 11.0% of risk-weighted assets, which was $5.5
million above the required level.
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The OTS is authorized and, under certain circumstances, required to take certain actions against savings banks
that fail to meet these capital requirements, or that fail to maintain an additional capital ratio of Tier 1 capital of at least
4.0% of risk weighted-assets. The OTS is generally required to take action to restrict the activities of an
"undercapitalized institution," which is an institution with less than either a 4.0% core capital ratio, a 4.0% Tier 1
risked-based capital ratio or an 8.0% total risk-based capital ratio. Any such institution must submit a capital restoration
plan, and, until such plan is approved by the OTS, it may not increase its assets, acquire another institution, establish
a branch or engage in any new activities, and generally may not make capital distributions. The OTS is authorized to
impose the additional restrictions on undercapitalized institutions.
Any institution that fails to comply with its capital plan or has Tier 1 risk-based or core capital ratios of less than
3.0% or a total risk-based capital ratio of less than 6.0% is considered "significantly undercapitalized" and must be made
subject to one or more additional specified actions and operating restrictions that may cover all aspects of its operations
and may include a forced merger or acquisition of the institution. An institution with tangible equity to total assets of
less than 2.0% is "critically undercapitalized" and becomes subject to further mandatory restrictions on its. The OTS
generally is authorized to reclassify an institution into a lower capital category and impose the restrictions applicable
to such category if the institution is engaged in unsafe or unsound practices or is in an unsafe or unsound condition.
The imposition by the OTS of any of these measures on Citizens Community Federal may have a substantial adverse
effect on its operations and profitability.
Institutions with at least a 4.0% core capital ratio, a 4.0% Tier 1 risked-based capital ratio and an 8.0% total
risk-based capital ratio are considered "adequately-capitalized." An institution is deemed a "well-capitalized" institution
if it has at least a 5% leverage capital ratio, a 6.0% Tier 1 risked-based capital ratio and an 10.0% total risk-based capital
ratio. At September 30, 2006, Citizens Community Federal was considered a "well-capitalized" institution.
The OTS is also generally authorized to reclassify an institution into a lower capital category and impose the
restrictions applicable to such category if the institution is engaged in unsafe or unsound practices or is in an unsafe or
unsound condition. The imposition by the OTS of any of these measures on Citizens Community Federal may have
a substantial adverse effect on its operations and profitability.
Capital Requirements for Citizens Community Bancorp, Inc. Citizens Community Bancorp, Inc. is not subject
to any specific capital requirements. The OTS, however, does expect Citizens Community Bancorp, Inc. to support
Citizens Community Federal, including providing additional capital when Citizens Community Federal does not meet
its capital requirements. As a result of this expectation, the OTS regulates the ability of Citizens Community Federal
to pay dividends to Citizens Community Bancorp, Inc.
Limitations on Dividends and Other Capital Distributions
OTS regulations impose various restrictions on savings institutions with respect to the ability of Citizens
Community Federal to make distributions of capital, which include dividends, stock redemptions or repurchases,
cash-out mergers and other transactions charged to the capital account. Citizens Community Federal must file a notice
or application with the OTS before making any capital distribution. Citizens Community Federal generally may make
capital distributions during any calendar year in an amount up to 100% of net income for the year-to-date plus retained
net income for the two preceding years, so long as it is well-capitalized after the distribution. If Citizens Community
Federal, however, proposes to make a capital distribution when it does not meet its current minimum capital
requirements (or will not following the proposed capital distribution) or that will exceed these net income limitations,
it must obtain OTS approval prior to making such distribution. The OTS may always object to any distribution based
on safety and soundness concerns.
Citizens Community Bancorp, Inc. is not subject to OTS regulatory restrictions on the payment of dividends.
Dividends from Citizens Community Bancorp, Inc., however, may depend, in part, upon its receipt of dividends from
Citizens Community Federal. In addition, Citizens Community Federal may not make a distribution that would
constitute a return of capital during the three-year term of the business plan submitted in connection with this mutual
holding company reorganization and stock issuance. No insured depositary institution may make a capital distribution
if, after making the distribution, the institution would be undercapitalized.
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Federal Securities Law
The stock of Citizens Community Bancorp, Inc. is registered with the SEC under the Securities Exchange Act
of 1934, as amended. Citizens Community Bancorp, Inc. is subject to the information, proxy solicitation, insider trading
restrictions and other requirements of the SEC under the Securities Exchange Act of 1934.
Citizens Community Bancorp, Inc. stock held by persons who are affiliates of Citizens Community Bancorp,
Inc. may not be resold without registration unless sold in accordance with certain resale restrictions. Affiliates are
generally considered to be officers, directors and principal stockholders. If Citizens Community Bancorp, Inc. meets
specified current public information requirements, each affiliate of Citizens Community Bancorp, Inc. will be able to
sell in the public market, without registration, a limited number of shares in any three-month period.
The SEC and the Nasdaq have adopted regulations and policies under the Sarbanes-Oxley Act of 2002 that apply
to Citizens Community Bancorp, Inc. as a registered company under the Securities Exchange Act of 1934 and a Nasdaq
traded company. The stated goals of these Sarbanes-Oxley requirements are to increase corporate responsibility,
provide for enhanced penalties for accounting and auditing improprieties at publicly traded companies and to protect
investors by improving the accuracy and reliability of corporate disclosures pursuant to the securities laws. The SEC
and Nasdaq Sarbanes-Oxley-related regulations and policies include very specific additional disclosure requirements
and new corporate governance rules. The Sarbanes-Oxley Act represents significant federal involvement in matters
traditionally left to state regulatory systems, such as the regulation of the accounting profession, and to state corporate
law, such as the relationship between a board of directors and management and between a board of directors and its
committees.
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Taxation
Federal Taxation
General. Citizens Community Bancorp, Inc., and Citizens Community Federal are subject to federal income
taxation in the same general manner as other corporations, with some exceptions discussed below. The following
discussion of federal taxation is intended only to summarize certain pertinent federal income tax matters and is not a
comprehensive description of the tax rules applicable to Citizens Community Bancorp, Inc. or Citizens Community
Federal. Prior to December 2001, Citizens Community Federal was a credit union and was not generally subject to
corporate income tax. The Company files consolidated federal tax returns with Citizens Community Federal. Neither
the Company nor Citizens Community Federal has been audited by the Internal Revenue Service during the past five
years.
Method of Accounting. For federal income tax purposes, Citizens Community Federal currently reports its
income and expenses on the accrual method of accounting and uses a fiscal year ending on September 30, for filing its
federal income tax return.
Minimum Tax. The Internal Revenue Code imposes an alternative minimum tax at a rate of 20% on a base of
regular taxable income plus certain tax preferences, called alternative minimum taxable income. The alternative
minimum tax is payable to the extent such alternative minimum taxable income is in excess of the regular tax. Net
operating losses can offset no more than 90% of alternative minimum taxable income. Certain payments of alternative
minimum tax may be used as credits against regular tax liabilities in future years. Citizens Community Federal has not
been subject to the alternative minimum tax, nor do we have any such amounts available as credits for carryover.
Net Operating Loss Carryovers. A financial institution may carryback net operating losses to the preceding two
taxable years and forward to the succeeding 20 taxable years. This provision applies to losses incurred in taxable years
beginning after August 6, 1997. At September 30, 2006, Citizens Community Federal had no net operating loss
carryforwards for federal income tax purposes.
Corporate Dividends-Received Deduction. Assuming Citizens Community Bancorp, Inc. elects to file a
consolidated return with Citizens Community Federal, dividends it receives from Citizens Community Federal will not
be included as income to Citizens Community Bancorp, Inc. The corporate dividends-received deduction is 100% or
80%, in the case of dividends received from corporations with which a corporate recipient does not file a consolidated
tax return, depending on the level of stock ownership of the payer of the dividend.
State Taxation
Citizens Community Bancorp, Inc. and Citizens Community Federal are subject to the Wisconsin corporate
franchise (income) tax, which is assessed at the rate of 7.9% of taxable income. Wisconsin taxable income generally
is the same as federal taxable income with certain adjustments. Citizens Community Federal has branch offices in
Minnesota and Michigan and, accordingly, is subject to state taxes in these states as well. Neither the Company nor
Citizens Community Federal has been audited by Wisconsin or any other state taxing authorities during the past five
years.
As a Maryland corporation, Citizens Community Bancorp, Inc. is required to file an annual report with and pay
an annual fee to the State of Maryland.
26
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Item 1A.
Risk Factors
An investment in our common stock is subject to risks inherent in our business. Before making an investment
decision, you should carefully consider the risks and uncertainties described below together with all of the other
information included and incorporated by reference in this report. In addition to the risks and uncertainties described
below, other risks and uncertainties not currently known to us or that we currently deem to be immaterial also may
materially and adversely affect our business, financial condition and results of operations. The value or market price
of our common stock could decline due to any of these identified or other risks, and you could lose all or part of your
investment.
Risks Related to Our Business
Our loan portfolio possesses increased risk due to our substantial number of consumer loans.
Our consumer loans accounted for approximately $93.6 million, or 36.2% of our total loan portfolio as of
September 30, 2006, of which $24.4 million consisted of automobile loans, $64.4 million consisted of personal loans
secured by other collateral and $4.8 million consisted of unsecured personal loans. Generally, we consider these types
of loans to involve a higher degree of risk compared to first mortgage loans on one- to four-family, owner-occupied
residential properties. As a result of our large portfolio of consumer loans, it may become necessary to increase the
level of our provision for loan losses, which could hurt our profits. Consumer loans generally entail greater risk than
do one- to four-family residential mortgage loans, particularly in the case of loans that are secured by rapidly
depreciable assets, such as automobiles. In these cases, any repossessed collateral for a defaulted loan may not provide
an adequate source of repayment of the outstanding loan balance. In addition, $6.6 million of our automobile loans and
$50.7 million of our other secured consumer loans were indirect loans originated by or through third parties, which
present greater risk than our direct lending products. See "Lending Activities -- Consumer Lending" and "Asset
Quality."
If our allowance for loan losses is not sufficient to cover actual loan losses, our earnings could decrease.
We make various assumptions and judgments about the collectibility of our loan portfolio, including the
creditworthiness of our borrowers and the value of the real estate and other assets serving as collateral for the repayment
of many of our loans. In determining the amount of the allowance for loan losses, we review our loans and our loss and
delinquency experience and evaluate economic conditions. Management recognizes that significant new growth in the
loan portfolio and the refinancing of existing loans can result in completely new portfolios of unseasoned loans that may
not perform in a historical or projected manner. If our assumptions are incorrect, our allowance for loan losses may
not be sufficient to cover actual losses, resulting in additions to our allowance. Material additions to our allowance
could materially decrease our net income. Our allowance for loan losses was 0.32% of net loans, and 0.60% of
non-performing loans at September 30, 2006. Our regulators periodically review our allowance for loan losses and may
require us to increase our provision for loan losses or recognize additional loan charge-offs. Any increase in our
allowance for loan losses or loan charge-offs as required by these regulatory authorities will have a material adverse
effect on our financial condition and results of operations. As of September 30, 2006, we believe that the current
allowance reflects probable incurred credit losses in the portfolio.
Rising interest rates may hurt our profits.
To be profitable we have to earn more interest on our loans and investments than we pay on our deposits and
borrowings. Interest rates have increased in fiscal 2005 and fiscal 2006 to date. If interest rates continue to rise, our
net interest income and the value of our assets could be reduced if interest paid on interest-bearing liabilities, such as
deposits and borrowings, increases more quickly than interest received on interest-earning assets, such as loans and
investments. This is most likely to occur if short-term interest rates increase at a faster rate than long-term interest rates,
which would cause income to go down. In addition, rising interest rates may hurt our income, because they may reduce
the demand for loans and the value of our securities. A flat yield curve also may hurt our income, because it would
reduce our ability to reinvest proceeds from loan and investment repayments at higher rates. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations - Quantitative and Qualitative Disclosures
About Market Risk" in the Annual Report, attached hereto as Exhibit 13.
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During 2005 and 2006, interest rates on deposits have been increasing at a slightly faster pace than rates on loans,
which has reduced our net interest margin, return on assets and return on equity. See "Selected Consolidated Financial
Information and Other Data" and "Management's Discussion and Analysis of Financial Condition and Results of
Operations - Quantitative and Qualitative Disclosures About Market Risk" in the Annual Report, attached hereto as
Exhibit 13.
We operate in a highly regulated environment and may be affected adversely by negative examination results and
changes in laws and regulations.
Citizens Community Federal is subject to extensive regulation, supervision and examination by the OTS, our
chartering authority, and by the Federal Deposit Insurance Corporation ("FDIC"), the insurer of our deposits. Citizens
Community Bancorp, Inc. is subject to regulation and supervision by the OTS. This regulation and supervision governs
the activities in which we may engage and are intended primarily for the protection of the deposit insurance fund
administered by the FDIC and our depositors. Regulatory authorities have extensive discretion in their supervisory and
enforcement activities, including the imposition of restrictions on our operations, the classification of our assets and
determination of the level of our allowance for loan losses. Any change in this regulation and oversight, whether in the
form of regulatory policy, regulations, legislation or supervisory action, may have a material impact on our operations
and profitability.
Strong competition within our market areas may limit our growth and profitability.
Competition in the banking and financial services industry is intense. In our market areas, we compete with
numerous commercial banks, savings institutions, mortgage brokerage firms, credit unions, finance companies, mutual
funds, insurance companies, and brokerage and investment banking firms operating locally and elsewhere. Some of
our competitors have substantially greater resources and broader lending authority than we have, have greater name
recognition and market presence, which benefit them in attracting business, and offer certain services that we do not
or cannot provide. In addition, larger competitors may be able to price loans and deposits more aggressively than we
do. Our profitability depends upon our continued ability to successfully compete in our market areas. The greater
resources and deposit and loan products offered by some of our competitors may limit our ability to increase our
interest-earning assets.
Our business is geographically concentrated in Wisconsin, Minnesota and Michigan and a downturn in economic
conditions in these states could reduce our profits.
Most of our loans are to individuals located in Wisconsin, Minnesota and Michigan. Any decline in the economy
of these states could have an adverse impact on our earnings. Decreases in local real estate values could adversely affect
the value of property used as collateral. Adverse changes in the economy also may have a negative effect on the ability
of our borrowers to make timely repayments of their loans, which would have an adverse impact on our earnings.
Item 1B.
Unresolved Staff Comments
None.
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Item 2.
Description of Properties
The following table provides a list of the Bank's main and branch offices and indicates whether the properties
are owned or leased.
Location
|
Owned or
Leased
|
Lease Expiration
Date
|
Net Book Value at
September 30,2006
(In Thousands) |
|
|
|
|
| ADMINISTRATIVE OFFICES: |
Leased |
April 30, 2009 |
N/A |
| 2174 EastRidge Center |
|
|
|
| Eau Claire, WI 54701 |
|
|
|
|
|
|
|
| 414 Main Street |
|
|
|
| Rochester Hills, MI 48306 |
Leased |
July 31, 2007 |
N/A |
|
|
|
|
| BRANCH OFFICES: |
|
|
|
|
|
|
|
| Westside Branch |
Owned |
N/A |
$300 |
| 2125 Cameron Street |
|
|
|
| Eau Claire, WI 54703 |
|
|
|
|
|
|
|
| Eastside Branch |
Owned |
N/A |
$361 |
| 1028 N. Hillcrest Parkway |
|
|
|
| Altoona, WI 54720 |
|
|
|
|
|
|
|
| Fairfax Branch |
Owned |
N/A |
$808 |
| 219 Fairfax Street |
|
|
|
| Altoona, W I54720 |
|
|
|
|
|
|
|
| Mondovi Branch |
Leased |
June 30, 2007 |
N/A |
| 695 E. Main Street |
|
|
|
| Mondovi, WI 54755 |
|
|
|
|
|
|
|
| Rice Lake Branch |
Leased |
April 30, 2007 |
N/A |
| 2462 S. Main Street |
|
|
|
| Rice Lake, WI 54868 |
|
|
|
|
|
|
|
| Chippewa Falls Branch |
Owned |
N/A |
$375 |
| 427 W. Prairie View Road |
|
|
|
| Chippewa Falls, WI 54729 |
|
|
|
|
|
|
|
| Baraboo Branch |
Owned(1) |
N/A |
$0 |
| S. 2423 Highway 12 |
|
|
|
| Baraboo, WI 53913 |
|
|
|
|
|
|
|
| Black River Falls Branch |
Owned(1) |
N/A |
$25 |
| W. 9036 Highway 54 E. |
|
|
|
| Black River Falls, WI 54615 |
|
|
|
|
|
|
|
| Mankato Branch |
Leased |
October 30, 2010 |
N/A |
| 1410 Madison Avenue |
|
|
|
| Mankato, MN 56001 |
|
|
|
|
|
|
|
| Oakdale Branch |
Leased |
September 30, 2009 |
N/A |
| 7035 10th Street North |
|
|
|
| Oakdale, MN 55128 |
|
|
|
|
|
|
|
| Lake Orion Branch(2) |
Leased |
February 28, 2012 |
N/A |
| 688 S. Lapeer Road |
|
|
|
| Lake Orion, MI 48362 |
|
|
|
|
|
|
|
| Rochester Hills Branch |
Owned |
N/A |
$587 |
| 310 West Tienken Road |
|
|
|
| Rochester Hills, MI 48306 |
|
|
|
______________
| (1) |
The building is owned and the land is leased. |
| (2) |
Citizens Community Federal has a right to cancel this lease on or after March 1, 2007, with the cancellation to take effect 90 days
after it exercises the right to cancel. |
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Item 3.
Legal Proceedings
In the opinion of management, the Bank is not a party to any other pending claims or lawsuits that are expected
to have a material effect on the Bank's financial condition or operations. Periodically, there have been various claims
and lawsuits involving the Bank mainly as a defendant, such as claims to enforce liens, condemnation proceedings on
properties in which the Bank holds security interests, claims involving the making and servicing of real property loans
and other issues incident to the Bank's business. Aside from such pending claims and lawsuits, which are incident to
the conduct of the Bank's ordinary business, the Bank is not a party to any material pending legal proceedings that
would have a material effect on the financial condition or operations of the Bank.
Item 4.
Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the quarter ended September 30, 2006.
PART II
Item 5.
Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
(a) The information contained in the section captioned "Stockholder Information" in the Annual Report,
attached hereto as Exhibit 13, is incorporated herein by reference.
(b)
Use of Proceeds. The Company commenced its stock offering in connection with the second-step
conversion of Citizens Community, MHC from the mutual holding company form of organization
to a full stock corporation on September 21, 2006 and completed the offering and conversion on
October 31, 2006. Keefe, Bruyette & Woods, Inc. assisted the Company in its selling efforts on a best
efforts basis. The Company sold 5,290,000 shares of its common stock, par value $0.10 per share,
at $10.00 per share, representing the super-maximum of the offering range. In addition, each share
of common stock held by the public stockholders of Citizens Community Bancorp, the former
middle-tier stock holding company, was converted into 1.91067 shares of common stock of the
Company, resulting in an aggregate of 1,826,380 exchange shares. Accordingly, upon completion of
the Conversion, the Company had 7,116,380 total shares outstanding. Shares of the Company began
trading on November 1, 2006 on the Nasdaq Global Market under the symbol "CZWI."
The Company paid an underwriting commission to Keefe, Bruyette & Woods, Inc. of 1.35% of the
aggregate amount of common stock sold, not counting exchange shares issued to holders of Citizens
Community Bancorp common stock and excluding (i) 86,272 shares purchased in the offering by
directors, officers and employees of the Company and its subsidiaries and (ii) 341,501 shares
purchased in the offering by the Bank's employee stock ownership plan. Offering expenses,
excluding underwriting commissions of $656,401, totaled $1.6 million and net proceeds of the
offering were $51.3 million. The Company used $3.4 million of the net proceeds to make a loan to
the Bank's employee stock ownership plan for the plan's purchase of 341,501 shares in the offering.
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(c)
Issuer Purchases of Equity Securities.
|
(a)
Total Number of
Shares (or Units)
Purchased
|
(b)
Average Paid per
Share (or Unit)
|
(c)
Total Number of
Shares (or Units)
Purchased as part of
Publicly Announced
Plans or Programs
|
(d)
Maximum Number (or
Approximate Dollar
Value) of Shares (or
Units) that May Yet Be
Purchased Under Plans or
Programs
|
| Period |
|
|
|
|
| Quarter ended September 30, 2006 |
--- |
N/A |
--- |
$ --- |
Item 6.
Selected Financial Data
The information contained in the section captioned "Selected Consolidated Financial Information" in the Annual
Report is incorporated herein by reference.
Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations
The information contained in the section captioned "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in the Annual Report is incorporated herein by reference.
Item 7A
Quantitative and Qualitative Disclosures About Market Risk
The information contained in the section captioned "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Quantitative and Qualitative Disclosures about Market Risk" in the Annual
Report is incorporated herein by reference.
Item 8.
Financial Statements and Supplementary Data
Report From Independent Registered Accounting Firm*
| |
(a) |
Consolidated Balance Sheets as of September 30, 2006 and 2005* |
|
(b) |
Consolidated Statements of Income for the Years Ended September 30, 2006, 2005 and 2004* |
|
(c) |
Consolidated Statements of Changes in Stockholders' Equity For the Years Ended September
30, 2006, 2005 and 2004* |
|
(d) |
Consolidated Statements of Cash Flows For the Years Ended September 30, 2006, 2005 and
2004* |
|
(e) |
Notes to Consolidated Financial Statements* |
____________
| | * |
Contained in the Annual Report filed as an exhibit hereto and incorporated herein by reference. All schedules have
been omitted as the required information is either inapplicable or contained in the Consolidated Financial Statements
or related Notes contained in the Annual Report. |
Item 9.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
No disclosure under this item is required.
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Item 9A.
Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures
The Company does not expect that its disclosure controls and procedures will prevent all error and all fraud. A
control procedure, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance
that the objectives of the control procedure are met. Because of the inherent limitations in all control procedures, no
evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the
Company have been detected. These inherent limitations include the realities that judgments in decision-making can
be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented
by the individual acts of some persons, by collusion of two or more people, or by management override of the control.
The design of any control procedure also is based in part upon certain assumptions about the likelihood of future events,
and there can be no assurance that any design will succeed in achieving its stated goals under all potential future
conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance
with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control
procedure, misstatements due to error or fraud may occur and not be detected.
We performed an evaluation of the significant policies, controls and procedures of the Company and have
concluded that the Company's disclosure controls and procedures are effective in ensuring that information required
to be disclosed in the reports is accumulated and communicated to management in a timely manner and recorded,
processed and summarized accurately.
Section 404 of the Sarbanes-Oxley Act of 2002 requires that companies evaluate and annually report on their
systems of internal control over financial reporting. We are in the process of evaluating, documenting and testing our
system of internal control over financial reporting to provide the basis for our report that will, for the first time, be a
required part of our annual report on Form 10-K for the fiscal year ending September 30, 2008. In addition, our
independent accountants must report on management's evaluation in the subsequent years. Due to the ongoing
evaluation and testing of our internal controls, there can be no assurance that if any control deficiencies are identified
they will be remediated before the end of the 2008 fiscal year, or that there may not be significant deficiencies or
material weaknesses that would be required to be reported. In addition, we expect the evaluation process and any
required remediation, if applicable, to increase our accounting, legal and other costs and divert management resources
from core business operations.
Item 9B.
Other Information
None.
PART III
Item 10. Directors, Executive Officers, Promoters and Control Persons; Compliance with
Section 16(a) of the Exchange Act
Directors
Information concerning the Directors of the Company is incorporated herein by reference from the definitive
proxy statement for the annual meeting of shareholder to be held February 22, 2007, a copy of which will be filed not
later than 120 days after the close of the fiscal year.
Executive Officers
Information concerning the Executive Officers of the Company is incorporated herein by reference from the
definitive proxy statement for the annual meeting of shareholders to be held February 22, 2007, except for information
contained under the headings "Compensation Committee Report" and "Stock Performance Presentation," a copy of
which will be field not later than 120 days after the close of the fiscal year.
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Section 16(a) Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires that the Company's directors and executive
officers, and persons who own more than 10% of the Company's Common Stock, file with the SEC initial reports of
ownership and reports of changes in ownership of the Company's Common Stock. Officers, directors and greater than
10% shareholders are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they
file. To the Company's knowledge no late reports occurred during the fiscal year ended September 30, 2006. All other
Section 16(a) filing requirements applicable to our executive officers, directors and greater than 10% beneficial owners
were complied with.
Code of Ethics
The Company's code of conduct, adopted on October 31, 2006, is applicable to its principal executive officer,
principal financial officer and principal accounting officer (as well as all other employees), does meet the definition of
"code of ethics" set forth in Item 406 of SEC Regulation S-K. A copy of this document is available free of charge by
contacting John D. Zettler, our Investor Relations Officer, at (715) 836-9994. A copy of the Company's Code of Ethics
is being filed with the SEC as Exhibit 14 to this Annual Report on Form 10-K for the fiscal year ending September 30,
2006.
Item 11.
Executive Compensation
Information concerning executive compensation is incorporated herein by reference from the definitive proxy
statement for the annual meeting of shareholders to be held February 22, 2007, except for information contained under
the headings "Compensation Committee Report" and "Stock Performance Presentation," a copy of which will be filed
not later than 120 days after the close of the fiscal year.
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Information concerning security ownership of certain beneficial owners and management is incorporated herein
by reference from the definitive proxy statement for the annual meeting of shareholders to be held February 22, 2007,
except for information contained under the headings "Compensation Committee Report" and "Stock Performance
Presentation," a copy of which will be filed not later than 120 days after the close of the fiscal year.
The following table sets forth information as of September 30, 2006 with respect to compensation plans under
which shares of common stock were issued.
Equity Compensation Plan Information
Plan Category
|
Number of securities to
be issued upon exercise
of outstanding options
warrants and rights
|
Weighted-average
exercise price of
outstanding options
warrants and rights
|
Number of Securities
remaining available for
future issuance under
equity compensation plans
|
| |
|
|
|
Equity Compensation Plans
Approved By Security Holders |
202,201(1) |
$7.04(1) |
82,578(1) |
Equity Compensation Plans Not
Approved By Security Holders |
--- |
--- |
--- |
____________________
| (1) |
Reflects amounts after exchange ratio related to second-step offering. |
Item 13.
Certain Relationships and Related Transactions
Information concerning certain relationships and related transactions is incorporated herein by reference from
the definitive proxy statement for the annual meeting of shareholders to be held February 22, 2007, except for
information contained under the headings "Compensation Committee Report" and "Stock Performance Presentation,"
a copy of which will be filed not later than 120 days after the close of the fiscal year.
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PART IV
Item 14.
Principal Accountant Fees and Services
Information concerning fees and services by our principal accountants is incorporated herein by reference from
our definitive Proxy Statement for the 2007 Annual Meeting of Stockholders, a copy of which will be filed not later
than 120 days after the close of the fiscal year.
Item 15.
Exhibits and Financial Statement Schedules
(a)(1) Financial Statements:
Part II, Item 8 is hereby incorporated by reference.
(a)(2) Financial Statement Schedules:
All financial statement schedules have been omitted as the information is not required under the related
instructions or is not applicable.
(a)(3) Exhibits:
Regulation S-K
Exhibit Number
|
Document
|
Reference to
Prior Filing
or Exhibit Number
Attached Hereto
|
| 3(i) |
Articles of Incorporation of the Registrant |
* |
| 3(ii) |
Bylaws of the Registrant |
* |
| 10 |
Material contracts: |
|
|
|
(a) |
Registrant's 2004 Stock Option Plan |
** |
|
|
(b) |
Registrant's 2004 Recognition and Retention Plan |
** |
|
|
(c) |
Employment Agreements: |
|
|
|
|
(i) |
James G. Cooley |
* |
|
|
|
(ii) |
Johnny W. Thompson |
* |
|
|
|
(iii) |
John D. Zettler |
* |
|
|
|
(iv) |
Timothy J. Cruciani |
* |
|
|
|
(v) |
Rebecca Johnson |
* |
|
|
|
(vi) |
Brian P. Ashley |
*** |
|
|
(e) |
Tax Allocation Agreement |
** |
| 13 |
2006 Annual Report to Stockholders |
13 |
| 14 |
Code of Conduct and Ethics |
14 |
| 21 |
Subsidiaries of the Registrant |
21 |
| 23 |
Consent of Auditors |
23 |
| 31 |
Rule 13a-14(a)/15d-14(a) Certifications |
31 |
| 32 |
Section 1350 Certifications |
32 |
_______________________
| * |
Filed as exhibit to the Company's registration statement filed on June 30, 2006 (File No.333-135527) pursuant to Section 5 of the
Securities Act of 1933. All of such previously filed documents are hereby incorporated herein by reference in accordance with
Item 601 of Regulation S-K. |
| ** |
Filed as exhibit to Citizen Community Bancorp's Annual Report on Form 10-KSB for the fiscal year ended September 30, 2004. |
| *** |
Filed as exhibit to Citizen Community Bancorp's Annual Report on Form 10-KSB for the fiscal year ended September 30, 2005. |
34
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SIGNATURES
Pursuant to the requirements of section 13 or 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. |
|
|
|
|
|
| Date: |
December 21, 2006 |
|
By: |
/s/ James G. Cooley
James G. Cooley
President and Chief Executive Officer
(Duly Authorized Representative) |
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.
| By: |
/s/ Richard McHugh
Richard McHugh
Chairman of the Board |
|
December 21, 2006
|
| |
|
|
|
| By: |
/s/ James G. Cooley
James G. Cooley
President, Chief Executive Officer and Director
(Principal Executive Officer) |
|
December 21, 2006
|
| |
|
|
|
| By: |
/s/ Thomas C. Kempen
Thomas C. Kempen
Vice Chairman of the Board |
|
December 21, 2006
|
| |
|
|
|
| By: |
/s/ Brian R. Schilling
Brian R. Schilling
Director and Treasurer |
|
December 21, 2006
|
| |
|
|
|
| By: |
/s/ Adonis E. Talmage
Adonis E. Talmage
Director and Secretary |
|
December 21, 2006
|
| |
|
|
|
| By: |
/s/ David B. Westrate
David B. Westrate
Director |
|
December 21, 2006
|
| |
|
|
|
| By: |
/s/ John D. Zettler
John D. Zettler
Senior Vice President and Chief Financial Officer
(Principal Financial Officer) |
|
December 21, 2006
|
35
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Index to Exhibits
Regulation S-K
Exhibit Number
|
Document
|
| |
|
| 13 |
2006 Annual Report to Stockholders |
| |
|
| 14 |
Code of Conduct and Ethics |
| |
|
| 21 |
Subsidiaries of the Registrant |
| |
|
| 23 |
Consent of Auditors |
| |
|
| 31 |
Rule 13a-14(a)/15d-14(a) Certifications |
| |
|
| 32 |
Section 1350 Certifications |
End.