EX-99.3 41 exhibit9938kafmproforma.htm EXHIBIT 99.3 Exhibit



Exhibit 99.3
CITIZENS COMMUNITY BANCORP, INC.
 
UNAUDITED CONDENSED COMBINED PRO FORMA FINANCIAL INFORMATION

    
The following unaudited pro forma condensed combined financial information and explanatory notes present how the combined balance sheets of Citizens Community Bancorp, Inc. ("the Company") and F. & M. Bancorp of Tomah, Inc. and Subsidiary ("Tomah") are based on assumptions and adjustments described in the accompanying notes to the unaudited pro forma condensed combined financial information. The unaudited pro forma condensed combined balance sheet is presented as if the acquisition had occurred on June 30, 2019. The unaudited pro forma condensed combined statement of operations for the twelve months ended September 30, 2018 is presented as if the acquisition had occurred October 1, 2017. The unaudited pro forma condensed combined statement of operations for the six months ended June 30, 2019 is presented as if the acquisition had occurred January 1, 2019. The consolidated historical financial information of Citizens Community Bancorp, Inc. has been adjusted to reflect factually supportable items that are directly attributable to the acquisition and, with respect to the statements of operations only, expected to have a continuing impact on consolidated results of operations. The pro forma condensed combined financial information is not necessarily indicative of what would have occurred had the acquisition taken place on the indicated dates.

The unaudited pro forma condensed combined financial information shows the impact of the acquisition on the condensed combined balance sheets and the condensed combined statement of operations under the acquisition method of accounting for business combinations under accounting principles generally accepted in the United States, with Citizens Community Bancorp, Inc. treated as the acquirer. Under this method of accounting, the assets and liabilities of F. & M. Bancorp of Tomah, Inc. and Subsidiary are recorded by Citizens Community Bancorp, Inc. at their estimated fair market values as of the date the acquisition was completed. The unaudited pro forma adjustments have been made solely for the purposes of providing unaudited pro forma condensed combined financial information. Certain reclassifications have been made to the historical financial information of F. & M. Bancorp of Tomah, Inc. and Subsidiary to conform to the presentation of Citizens Community Bancorp, Inc.’s consolidated financial information.

The unaudited pro forma condensed financial information is derived from and should be read in conjunction with the historical consolidated financial statements and related notes of Citizens Community Bancorp, Inc.























The following unaudited pro forma condensed combined balance sheet gives effect to the acquisition by Citizens Community Bancorp, Inc. of F. & M. Bancorp of Tomah, Inc. and Subsidiary using the acquisition method of accounting, assuming the acquisition was consummated on June 30, 2019.

CITIZENS COMMUNITY BANCORP, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET AT
June 30, 2019
(in thousands)
 
Citizens Community Bancorp, Inc.
F. & M. Bancorp of Tomah, Inc.
Pro Forma Adjustments
 
Pro Forma Combined
Assets
 
 
 
 
 
Cash and cash equivalents
$
47,008

$
15,758

$
(24,758
)
(1)
$
38,008

Other interest bearing deposits
5,980

992

—

 
6,972

Securities available for sale "AFS"
154,760

37,346

—

 
192,106

Securities held to maturity "HTM"
3,828

—

—

 
3,828

Equity securities
12,720

2,393

—

 
15,113

Loans receivable
1,019,957

130,294

(4,064
)
(3)
1,146,187

Allowance for loan losses
(8,759
)
(3,047
)
3,047

(4)
(8,759
)
Loans receivable, net
1,011,198

127,247

(1,017
)
 
1,137,428

Loans held for sale
2,475

—

—

 
2,475

Mortgage servicing rights assets
4,319

—

—

 
4,319

Office properties and equipment, net
15,287

1,833

822

(5)
17,942

Accrued interest receivable
4,452

693

—

 
5,145

Intangible assets
6,828

—

1,582

(6)
8,410

Goodwill
31,474

—

956

(9)
32,430

Foreclosed and repossessed assets, net
1,387

—

—

 
1,387

Bank owned life insurance ("BOLI")
18,022

4,719

—

 
22,741

Escrow merger settlement proceeds
20,555

—

—

 
20,555

Other assets
8,127

1,301

316

(10)
9,744

TOTAL ASSETS
$
1,348,420

$
192,282

$
(22,099
)
 
$
1,518,603

 
 
 
 
 
 
Liabilities and Stockholders’ Equity
 
 
 
 
 
Liabilities:
 
 
 
 
 
Deposits
$
1,015,459

$
148,472

$
165

(7)
$
1,164,096

Federal Home Loan Bank advances
135,844

18,030

92

(8)
153,966

Other borrowings
44,551

2,000

—

 
46,551

Other liabilities
9,324

917

—

 
10,241

Total liabilities
1,205,178

169,419

257

 
1,374,854

Stockholders’ equity:
 
 
 
 
 
Common stock
110

95

(95
)
(2)
110

Treasury stock
—

(7,412
)
7,412

(2)
—

Additional paid-in capital
125,822

2,557

(2,050
)
(2)
126,329

Retained earnings
18,114

27,453

(27,453
)
(2)
18,114

Unearned deferred compensation
(757
)
—

—

 
(757
)
Accumulated other comprehensive (loss)/income
(47
)
170

(170
)
(2)
(47
)
Total stockholders’ equity
143,242

22,863

(22,356
)
 
143,749

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
$
1,348,420

$
192,282

$
(22,099
)
 
$
1,518,603





The following unaudited pro forma condensed combined statement of operations gives effect to the acquisition by Citizens Community Bancorp, Inc. of F. & M. Bancorp of Tomah, Inc. using the acquisition method of accounting, assuming the acquisition was consummated on October 1, 2017.

CITIZENS COMMUNITY BANCORP, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
For The Twelve Months Ended September 30, 2018
(in thousands, except per share data)

 
Citizens Community Bancorp, Inc. Twelve Months Ended 9/30/2018
F. & M. Bancorp of Tomah, Inc. Twelve Months Ended 9/30/2018
Pro Forma Adjustments
 
Pro Forma Combined
Interest and dividend income:
 
 
 
 
 
Interest and fees on loans
$
35,539

$
6,483

$
131

(11)
$
42,153

Interest on investments
3,357

1,171

—

 
4,528

Total interest and dividend income
38,896

7,654

131

 
46,681

Interest expense:
 
 
 
 
 
Interest on deposits
5,543

915

(160
)
(12)
6,298

Interest on FHLB borrowed funds
1,310

413

(42
)
(13)
1,681

Interest on other borrowed funds
1,740

71

945

(14)
2,756

Total interest expense
8,593

1,399

743

 
10,735

Net interest income before provision for loan losses
30,303

6,255

(612
)
 
35,946

Provision for loan losses
1,300

—

—

 
1,300

Net interest income after provision for loan losses
29,003

6,255

(612
)
 
34,646

Non-interest income
7,370

844

—

 
8,214

Non-interest expense
29,764

5,337

282

(15) (16)
35,383

Income before provision for income tax
6,609

1,762

(894
)
 
7,477

Provision for income taxes
2,326

568

(315
)
(17)
2,579

Net income attributable to common stockholders
$
4,283

$
1,194

$
(579
)
 
$
4,898

 
 
 
 
 
 
Per share information:
 
 
 
 
 
Basic earnings
$
0.72

 
 
 
$
0.79

Diluted earnings
$
0.58

 
 
 
$
0.64

Cash dividends paid
$
0.20

 
 
 
$
0.20

Book value per share at end of period
$
12.45

 
 
 
$
12.17














The following unaudited pro forma condensed combined statement of operations gives effect to the acquisition by Citizens Community Bancorp, Inc. of F. & M. Bancorp of Tomah, Inc. using the acquisition method of accounting, assuming the acquisition was consummated on January 1, 2019.

CITIZENS COMMUNITY BANCORP, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
For The Six Months Ended June 30, 2019
(in thousands, except per share data)

 
Citizens Community Bancorp, Inc. Six Months Ended 6/30/2019
F. & M. Bancorp of Tomah, Inc. Six Months Ended 6/30/2019
Pro Forma Adjustments
 
Pro Forma Combined
Interest and dividend income:
 
 
 
 
 
Interest and fees on loans
$
25,390

$
3,182

$
65

(18)
$
28,637

Interest on investments
2,664

664

—

 
3,328

Total interest and dividend income
28,054

3,846

65

 
31,965

Interest expense:
 
 
 
 
 
Interest on deposits
5,519

547

(84
)
(19)
5,982

Interest on FHLB borrowed funds
1,574

210

(25
)
(20)
1,759

Interest on other borrowed funds
816

39

473

(21)
1,328

Total interest expense
7,909

796

364

 
9,069

Net interest income before provision for loan losses
20,145

3,050

(299
)
 
22,896

Provision for loan losses
1,550

175

—

 
1,725

Net interest income after provision for loan losses
18,595

2,875

(299
)
 
21,171

Non-interest income
7,570

1,867

—

 
9,437

Non-interest expense
19,283

3,315

141

(22) (23)
22,739

Income before provision for income tax
6,882

1,427

(440
)
 
7,869

Provision for income taxes
1,822

420

(119
)
(24)
2,123

Net income attributable to common stockholders
$
5,060

$
1,007

$
(321
)
 
$
5,746

 
 
 
 
 
 
Per share information:
 
 
 
 
 
Basic earnings
$
0.46

 
 
 
$
0.51

Diluted earnings
$
0.46

 
 
 
$
0.51

Cash dividends paid
$
0.20

 
 
 
$
0.20

Book value per share at end of period
$
13.04

 
 
 
$
12.75






NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The unaudited pro forma condensed combined financial information has been prepared to include the estimated adjustments necessary to record the assets and liabilities of F. & M. Bancorp of Tomah, Inc. ("Tomah") at their respective fair values and represents management’s best estimate based upon the information available at this time. The pro forma adjustments included herein are subject to change as additional information becomes available and as additional analyses are performed. Such adjustments, when compared to the information shown in this document, may change the amount of the purchase price allocation to goodwill, while changes to assets and liabilities may impact the statement of operations due to adjustments in the amortization and/or depreciation of the adjusted assets and liabilities. Explanations for specific purchase accounting adjustments are as follows:

(1)
Adjustment to record cash purchase price consideration and estimated merger expense of $24,758

(2)
Elimination of all equity accounts of Tomah; Common stock ($95), Treasury Stock $7,412, Additional paid-in capital ($2,557), and Retained earnings ($27,453), Accumulated other comprehensive income ($170), respectively and estimated capital issued of $507.

(3)
Estimated fair value adjustment on the loan portfolio, resulting in an estimated discount of $4,064, estimated at 3.15% of total loans. The discount consists of $814 on performing loans, and $3,250 on purchased credit impaired loans.

(4)
Reversal of Tomah’s allowance for loan losses of $3,047 in accordance with acquisition method of accounting for the acquisition.

(5)
Estimated fair value adjustment on acquired office properties of $822, based on current appraisals or property analyses.

(6)
Adjustment to record fair value of estimated core deposit intangible of $1,582.

(7)
Estimated fair value adjustment of Tomah’s time deposits of $165.

(8)
Estimated fair value adjustment to FHLB advances of $92.


























(9)
Adjustment to record estimated goodwill of $956 created by the merger, based on the purchase price allocation to the fair value of assets acquired and liabilities assumed as follows:
Purchase Price:
 
Costs to acquire F. & M. Bancorp of Tomah, Inc.:
 
Cash paid by buyer
$
24,758

Total consideration paid for F. & M. Bancorp of Tomah, Inc.
$
24,758

 
 
The Company has preformed a preliminary valuation analysis of the fair market value
 
of Tomah's assets and liabilities. The following table summarizes the allocation
 
of the preliminary purchase price as of June 30, 2019:
 
 
 
Fair value of assets acquired:
 
Cash and cash equivalents
$
15,758

Other interest bearing deposits
992

Securities available for sale "AFS"
37,346

Equity securities
2,393

Loans receivable, net
126,230

Office properties and equipment, net
2,655

Intangible assets
1,582

Cash value of life insurance
4,719

Other assets
2,310

Total assets
$
193,985

 
 
Fair value of liabilities assumed:
 
Deposits
148,637

Other borrowings
20,122

Other liabilities
917

Stock issued
507

Total liabilities
$
170,183

Net assets acquired
$
23,802

Preliminary pro forma goodwill
$
956


(10)
Adjustment to record the tax impact of purchase accounting adjustments estimated at $316 at a 27% tax rate.

(11)
12 month adjustment to record accretion of loan discount ($814) on a straight line basis over approximately 6 years.

(12)
12 month adjustment to record amortization of the deposit premium on a straight line basis over the estimated lives of the underlying deposits ranging from 7 months to approximately 20 months.

(13)
12 month adjustment to record amortization of the FHLB borrowings premium on a straight line basis over the estimated lives of the underlying advances ranging from 4 months up to approximately 33 months.

(14)
12 month adjustment to record interest expense on funds borrowed to fund the acquisition of Tomah.

(15)
12 month adjustment to record depreciation effect on fair value adjustment on acquired office properties, on a straight line basis over 25 years.





(16)
12 month adjustment to record amortization of core deposit intangible ($1,582) on a straight line basis over approximately 6 years.

(17)
12 month adjustment to record income tax effect of pro forma adjustments using Citizens Community Bancorp, Inc. 2018 effective rate of 35%.

(18)
6 month adjustment to record accretion of loan discount ($814) on a straight line basis over approximately 6 years.

(19)
6 month adjustment to record amortization of the deposit premium on a straight line basis over the estimated lives of the underlying deposits ranging from 7 months to approximately 20 months.

(20)
6 month adjustment to record amortization of the FHLB borrowings premium on a straight line basis over the estimated lives of the underlying advances ranging from 4 months up to approximately 33 months.

(21)
6 month adjustment to record interest expense on funds borrowed to fund the acquisition of Tomah.

(22)
6 month adjustment to record depreciation effect on fair value adjustment on acquired office properties, on a straight-line basis over 25 years.

(23)
6 month adjustment to record amortization of core deposit intangible ($1,582) on a straight line basis over approximately 6 years.

(24)
6 month adjustment to record income tax effect of pro forma adjustments using a rate of 27%.