CZWI 10-K & 10-Q changes, risk factors and insider trading

Our business may be adversely affected by conditions in the financial markets and economic conditions generally. We operate primarily in the Wisconsin and Minnesota markets. As a result, our financial condition, results of operations and cash flows are significantly impacted by changes in the economic conditions in those areas. In addition, our business is susceptible to broader economic trends within the United States economy. Economic conditions have a significant impact on the demand for our products and services, as well as the ability of our customers to repay loans, the value of the collateral securing loans and the stability of our deposit funding sources. A significant decline in general economic conditions caused by inflation, recession, trade policies, tariffs, unemployment, changes in securities markets, rate cuts by the Federal Reserve, changes in housing market prices, geopolitical uncertainties, natural disasters, pandemics and election outcomes or other factors could impact economic conditions and, in turn, could have a material adverse effect on our financial condition and results of operations.

Geopolitical tensions, including current or anticipated impact of military conflicts, could adversely affect general economic industry conditions. Geopolitical tensions may affect our earnings. Adverse economic conditions may result from a variety of factors including domestic and global economic and political developments, including civil unrest, terrorism, foreign investment restrictions, various political or military action, such as the armed conflict between Ukraine and Russia and corresponding sanctions imposed by the United States and other countries or the conflict in Israelthe Middle East and the surrounding areas, geopolitical events (including China-Taiwan and U.S.-China relations), and new or evolving legal and regulatory requirements on business investment, hiring, migration, labor supply and global supply chains.

Future pandemics (including new variants of COVID-19), could materially affect our results of operations, financial position and/or liquidity. COVID-19 presented, and any futureFuture pandemics (including new variants of COVID-19) could present, the following risks, among others: inflation; increased unemployment levels; disruptions in global supply chains and financial markets; adverse legislative or regulatory actions; operational disruptions; increased general and administrative expenses; financial market disruption; and an economic downturn. These risks could materially and adversely impact our results of operations, financial position and/or liquidity.

We rely on network and information systems and other technologies, and, as a result, we are subject to various Cybersecuritycybersecurity risks. Cybersecurity refers to the combination of technologies, processes and procedures established to protect information technology systems and data from unauthorized access, attack, or damage. Our business involves the storage and transmission of customers’ personal information. While we have internal policies and procedures designed to prevent or limit the effect of a failure, interruption or security breach of our information systems, as well as contracts and service agreements with applicable outside vendors, we cannot be assured that any such failures, interruptions or security breaches will not occur or, if they do, that they will be addressed adequately. Any failure or interruption of these systems could result in failures or disruptions in our loan, deposit, general ledger and other systems. We rely on the secure processing, storage and transmission of confidential and other information on our computer systems and networks. Unauthorized disclosure of sensitive or confidential client or customer information, whether through a breach of our computer systems or otherwise, could severely harm our business. Although we have implemented measures to prevent security breaches, cyber incidents and other security threats, our facilities and systems, and those of third party service providers, may be vulnerable to security breaches, acts of vandalism, computer viruses, misplaced or lost data, programming and/or human error, or other similar events that could have a material adverse effect on our business. Additionally, emerging technologies, including the use of automation, artificial intelligence and robotics, introduces new information security risks and exposure for us and for our third-party service providers, and, additionally, such technologies may be used to identify vulnerabilities. Such technologies have also resulted in a substantial increase in the volume and sophistication of cyberattacks against financial and other institutions, including the use of generative artificial intelligence to conduct more sophisticated social engineering attacks.

Although, to date, we have not experienced any material losses relating to cyber-attacks or other information security breaches, there can be no assurance that we will not suffer such losses in the future. Our risk and exposure to these matters remains heightened because of, among other things, the evolving nature of these threats, the outsourcing of some of our business operations, the continued uncertain global economic environment, the increased sophistication and activities of organized crime, hackers, terrorists, nation-states, nation-state supported actors, activists and other external parties. Additionally, the techniques used by cyber criminals change frequently, may not be recognized until launched (or may evade detection for considerable time), can be initiated from a variety of sources, and may increase in frequency and effectiveness by the use of artificial intelligence.sources. As cyber threats continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any information security vulnerabilities. Our ability to maintain, timely update and replace systems can become more challenging as the speed, frequency, volume, interconnectivity and complexity of the information on these systems increases. Furthermore, the storage and transmission of such data is regulated at the federal and state level. Increasing privacy information security laws and regulation changes, and compliance therewith, may result in cost increases due to system changes and the development of new administrative processes. If we fail to comply with applicable laws and regulations or experience a data security breach involving the misappropriation, loss or other unauthorized disclosure of confidential information, whether by us or our vendors, our reputation could be damaged, possibly resulting in lost future business, and we could be subject to fines, penalties, administrative orders and other legal risks as a result of a breach or non-compliance. Additionally risks could arise in connection with any failure, or perceived failure, to timely or sufficiently update or expand our privacy notices and policies to be fully compliant with quickly evolving state privacy requirements, and any failure to sufficiently respond to, or respond in a sufficiently timely manner to, consumer rights and other requests exercised under such state privacy laws, in each case to the extent they are applicable to us.

The Company is exposed to the risk that when a peer financial institution experiences financial difficulties, there could be an adverse impact on the regional banking industry and the business environment in which it operates. The bank failures of Silicon Valley Bank in California, Signature Bank in New York, and First Republic Bank in California during the first and second quarters of 2023 have caused a degree of concern and uncertainty in the investor community and among bank customers generally. Uncertainty may be compounded by the reach and depth of media attention and its ability to disseminate concerns about these types of events. In addition, institutions larger than the Company may have the advantage of being perceived by the public as more secure in times of financial uncertainty as evidenced by the migration of deposits to large banks in response to such banks’ failures. This public uncertainty and concern could potentially affect the Bank despite its relatively high percentage of deposits (82%79% as of December 31, 20242025) that are either insured or collateralized and its balance sheet liquidity and collateralized borrowing capacity being well in excess of the uninsured deposit balances. While the Company does not believe that the circumstances of these three banks' failures are indicators of broader issues with the banking system, the failures may reduce customer confidence, affect sources of funding and liquidity, increase regulatory requirements and costs, adversely affect financial markets and/or have a negative reputational ramification for the banking industry, including the Company. The Company will continue to monitor the ongoing events concerning these three banks as well as any future potential bank failures and volatility within the banking industry generally, together with any responsive measures taken by the banking regulators to mitigate or manage potential turmoil in the banking industry.

CompetitionCompetitive pressure from others in the financial services industry, including non-depository institutions, may affect our results. Competition in the banking and financial services industry is intense. Our profitability depends upon our continued ability to compete in our primary market area. We face strong competition in originating loans, in seeking deposits and in offering other banking services. We compete with commercial banks, trust companies, mortgage banking firms, credit unions, finance companies, mutual funds, insurance companies and brokerage and investment banking firms. Our market area is also served by commercial banks and savings associations that are substantially larger than us in terms of deposits and loans, have greater human and financial resources, and may offer certain services that we do not or cannot provide. This competitive climate can make it difficult to establish, maintain and retain relationships with new and existing customers and can lower the rate we are able to charge on loans, increase the rates we must offer on deposits, and affect our charges for other services. Those factors can, in turn, adversely affect our results of operations and profitability. Credit union competitors benefit from competitive advantages, including the credit union exemption from paying federal income tax and can, therefore, more aggressively price many products and services. The impact of the existing regulatory framework and any future changes to it could negatively affect our ability to compete with these institutions, which could have a material adverse effect on our results of operations. We expect that competition in the financial services industry will remain intense, with new competitors in the financial services industry continuing to emerge. For example, technological advances and the growth of e-commerce have made it possible for non-depository institutions to offer products and services that traditionally were banking products. Actions by competitors could put pressure on the pricing of our products and services. In addition, advocacy by non-banking competitors for exemptions from regulatory requirements could significantly disadvantage traditional financial institutions. The rise in technological advances in the financial services industry has led to simpler opportunities for consumers to shop for higher deposit interest rates at banks across the country, which may offer higher rates because they have few or no physical branches and open deposit accounts electronically. Further, in 2025, the United States passed the Guiding and Establishing National Innovation for U.S. Stablecoins Act (the “GENIUS Act”), which provides a regulatory framework for the issuance and adoption of stablecoins in the United States. The passage of the GENIUS Act may result in increased competition from issuers of stablecoins and providers of related technology, as well as non-bank competitors and financial institutions that offer to hold stablecoin reserve assets or custody stablecoins.

Customers may decide not to use emerging financial technologies such as cryptocurrencies rather than banks to complete their financial transactions, which could result in a loss of income to us. Technology and other changes are allowing customers to complete financial transactions that historically have involved banks at one or both ends of the transaction. For example, customers can now pay bills and transfer funds directly without going through a bank. These advances have also allowed financial institutions and other companies to provide electronic and internet-based financial solutions. The process of eliminating banks as intermediaries, known as disintermediation, could result in the loss of fee income, as well as the loss of customer deposits. Additionally, customers may decide to remove money from accounts with us in favor of other banks or other types of cash management products, such as emerging financial technologies, including digital wallets, non-fungible tokens and digital currencies and cryptocurrencies. Competition from payment and exchange services in ways that were not previously possible may adversely affect our results of operations.

We are a community bank and our ability to maintain our reputation is critical to the success of our business and the failure to do so may materially adversely affect our performance. We are a community bank, and our reputation is one of the most valuable components of our business. A key component of our business strategy is to rely on our reputation for customer service and knowledge of local markets to expand our presence by capturing new business opportunities from existing and prospective customers in our market area and contiguous areas. As such, we strive to conduct our business in a manner that enhances our reputation. This is done, in part, by recruiting, hiring and retaining employees who share our core values of being an integral part of the communities we serve, delivering superior service to our customers and caring about our customers and associates. If our reputation is negatively affected by the actions of our employees, by our inability to conduct our operations in a manner that is appealing to current or prospective customers, or otherwise, our business and, therefore, our operating results may be materially adversely affected. Additionally, we are subject to reputational risk associated with environmental, social and governance,governance issues – including different perspectives on the meaning of these issues. Such differing perspectives may expose us to increased scrutiny and criticism. In response to ESG developments (including, in particular DEI initiatives), there are increasing instances of “anti-ESG” legislation and anti-DEI executive orders, adverse media coverage, regulation, and litigation that could have unintended impacts on ordinary banking operations and increase litigation or reputational risk related to actions we choose to take and impact the results of our operations.

We continually encounter technological change. The financial services industry is continually undergoing rapid technological change with frequent introductions of new technologytechnology-driven driveninnovations by(such newas orthe modifieduse of artificial intelligence and machine learning), products and services.services as well as evolving industry standards. The effective use of technology increases efficiency and enables financial institutions to better serve customers and to reduce costs. Our future success depends, in part, upon our ability to address the needs of our customers by using technology to provide products and services that will satisfy customer demands, as well as to create additional efficiencies in our operations. ManyOur success in the competitive environment in which we operate requires investment of capital and human resources in innovation, particularly in light of the current “FinTech” environment, in which the financial services industry is undergoing rapid technological changes and financial institutions are investing significantly in evaluating new technologies, such as artificial intelligence, machine learning, blockchain and other distributed ledger technologies, and developing potentially industry-changing new products, services and industry standards. Our investment is directed at generating new products and services, and adapting existing products and services to the evolving standards and demands of the marketplace. Among other things, investing in innovation helps us maintain a mix of products and services that keeps pace with our competitors and achieve acceptable margins. However, many of our competitors have substantially greater resources to invest in technological improvements. We may not be able to effectively implement new technology driven products and services or be successful in marketing these products and services to our customers. Failure to successfully keep pace with technological change affecting the financial services industry could have a material adverse impact on our business and, in turn, our financial condition and results of operations.

Our internal controls and procedures may fail or be circumvented. Management regularly reviews and updates our internal controls, disclosure controls and procedures, and corporate governance policies and procedures. Any system of controls, however well-designed and operated, is based in part on certain assumptions and can provide only reasonable assurances that the objectives of the system are met. Management believes that our internal controls over financial reporting are currently effective. While management will continue to assess our controls and procedures and take action to remediate any future issues, there can be no guarantee of the effectiveness of these controls and procedures on an ongoing basis. Any (a) failure or circumvention of our controls and procedures, (b) failure to adequately address any internal control deficiencies, or (c) failure to comply with regulations related to controls and procedures could have a material effect on our business, consolidated financial condition and results of operations. See Item 9A “Controls and Procedures” for further discussion of our internal controls.

Our growth strategy includes selectively acquiring businesses through acquisitions of other banks, and our ability to consummate these acquisitions on economically advantageous terms acceptable to us in the future is unknown. Our growth strategy includes acquisitions of other banks that serve customers or markets we find desirable. The market for acquisitions remains highly competitive, and we may be unable to find satisfactory acquisition candidates in the future that fit our acquisition and growth strategy. This competition could increase prices for potential acquisitions that we believe are attractive. Any such acquisitions could be funded through cash from operations, the issuance of equity and/or the incurrence of additional indebtedness, which amount may be material, or a combination thereof. Any acquisition could be dilutive to our earnings and stockholders’ equity per share of our common stock. Also, acquisitions are subject to various regulatory approvals. Regulatory approval is required for acquisitions we seek to consummate. Among other things, our regulators consider our capital, liquidity, profitability, regulatory compliance and levels of goodwill and intangibles when considering acquisition and expansion proposals. Additionally, as the Company grows through acquisitions and pursues new initiatives that improve our operations and cost structure, the Company is also expanding and improving its information technologies, resulting in a larger technological presence, utilization of “cloud” computing services, and corresponding exposure to cybersecurity risk. Certain new technologies, such as use of artificial intelligence, present new and significant cybersecurity safety risks that must be analyzed and addressed before implementation. If we fail to assess and identify cybersecurity risks associated with acquisitions and new initiatives, we may become increasingly vulnerable to such risks. If we are unable to find suitable acquisition candidates, this component of our growth strategy may be lost.

The ability of the Bank to pay dividends to us is also subject to its profitability, financial condition, capital expenditures and other cash flow requirements. The Bank may not be able to generate adequate cash flow to pay us dividends in the future. The Company’s ability to pay dividends is also subject to the terms of its Subordinated Note Purchase AgreementsAgreement dated August 27, 2020 and March 11, 2022 and Business Note AgreementAgreements dated June 26, 2019 and October 30, 2025, each of which prohibits the Company from declaring or paying dividends while an event of default has occurred and is continuing under each respective agreement. The Company has pledged 100% of Bankthe Bank’s stock as collateral for the loan and credit facilities provided for by the Business Note Agreement.Agreements. The inability to receive dividends from the Bank could have an adverse effect on our business and financial condition.

Our shares of common stock are thinly traded and our stock price may be more volatile. Because our common stock is thinly traded, its market price may fluctuate significantly more than the stock market in general or the stock prices of similar companies, which are exchanged, listed or quoted on the NASDAQ Stock Market. There are approximately 9.69.2 million shares of our common stock held by nonaffiliates as of March 13,5, 2025.2026. Thus, our common stock will be less liquid than the stock of companies with broader public ownership, and as a result, the trading prices for our shares of common stock may be more volatile, which may make it difficult for investors to resell shares at the volume, prices and times desired. Among other things, trading of a relatively small volume of our common stock may have a greater impact on the trading price of our stock than would be the case if our public float were larger. In addition, on June 29, 2025, the FTSE selected Citizens Community Bancorp, Inc. for inclusion in the Russell 3000® Index as part of the 2025 annual reconstitution. If our common stock does not continue to remain on the Russell 3000® Index and is removed because it does not meet the criteria for continued inclusion in such index, index funds, institutional investors, or other holders attempting to track the composition of that index may be required to sell our common stock, which would adversely impact the price and the frequency at which it trades.

We operate in a highly regulated environment, and are subject to changes, which could increase our cost structure or have other negative impacts on our operations. The banking industry is extensively regulated at the federal and state levels. Insured depository institutions and their holding companies are subject to comprehensive regulation and supervision by financial regulatory authorities covering all aspects of their organization, management and operations. We are also subject to regulation by the SEC. Our compliance with these regulations, including compliance with regulatory commitments, is costly. Regulation includes, among other things, capital and reserve requirements, the level of deposit insurance premiums assessed, permissible investments and lines of business, mergers and acquisitions, restrictions on transactions with insiders and affiliates, anti-money laundering regulations, dividend limitations, community reinvestment requirements, limitations on products and services offered, loan limits, geographical limits, and consumer credit regulations. The system of supervision and regulation applicable to us establishes a comprehensive framework for our operations and is intended primarily for the protection of the DIF, our depositors and the public, rather than our stockholders. The electioncurrent ofU.S. aPresidential new Presidentadministration together with changes in the membership of Congress, including change in control of the Senate, will likely lead to changes in the laws or policies applicable to us and the agencies that regulate us. Further, some of the laws and regulations finalized in the prior administration that are applicable to financial institutions are subject to ongoing litigation creating further uncertainty. Additionally, different approaches to regulation by different jurisdictions, including potentially conflicting state-level regulation, could increase compliance costs or risks of non-compliance. Any change in such regulation and oversight, whether in the form of regulatory policy, new regulations or legislation, or additional deposit insurance premiums could have a material impact on our operations. Failure to comply with applicable laws, regulations or policies could result in sanction by regulatory agencies, civil monetary penalties, and/or damage to our reputation, which could have a material adverse effect on our business, consolidated financial condition and results of operations. In addition, any change in government regulation could have a material adverse effect on our business or our ability to pay dividends.

Our reporting obligations as a public company are costly. Reporting requirements of a public company change depending on the reporting classification in which the Company falls as of the end of its second quarter of each fiscal year. The Company is currently a “smaller reporting company” which allows us to provide certain simplified and scaled disclosures in our filings. We will remain a smaller reporting company for so long as the market value of the Company’s common stock held by non-affiliates as of the end of its most recently completed second fiscal quarter is less than $250 million, or as of the same period the Company’s annual revenues are less than $100 million and its public float is less than $700 million. In addition, the Company is currently considered a “non-accelerated filer” and will maintain that status for so long as the Company’s annual revenues are less than $100 million, and its public float is more than $75 million but less than $700 million. If the Company were to be classified asAs an “accelerated filer” rather than a “non-accelerated filer,” which we believe is probable in 2025, then we would becomeare subject to the provisions of Section 404(b) of the Sarbanes-Oxley Act. Section 404(b) requires that an independent registered public accounting firm provide an attestation report on the Company’s internal control over financial reporting and the operating effectiveness of these controls, making the public reporting process more costly.

The following is a summary of some of the significant factors that affected our operating results for the twelve months ended December 31, 2024,2025, compared to the same 20232024 period. In 2024,2025, net interest income decreasedincreased $1.9$4.7 million, primarily due to: (1) the ongoing impact of higherlower short-term interest rates on the Bank’s liability-sensitive balance sheet,sheet i.e.,which lowered liability costs; (2) higher depositasset costs, with growth in higher-cost money market accounts and certificates, along with increased borrowing costs,yields; partially offset by higher(3) assetthe yields.impact of lower interest income due to a smaller sized balance sheet. The Company recorded a $1.950 million provision for credit losses largely due to the impact of changes in credit quality, largely due to an increase in reserves on individually evaluated loans. The $3.175 million of negative provision for credit losses in 2024 was largely due to the impact of improving forecasted future economic conditions, as forecasted by Moody’s, who the Company utilizes for economic forecasts and the impact of balance sheet optimization, which resulted in loan portfolio shrinkage. The $0.475 million of negative provision for credit losses in 2023 was largely due to net recoveries of $0.451 million. Non-interest income for the twelve months ended December 31, 2024,2025, compared to the same period in 20232024 decreasedincreased approximately $150$1.0 thousand.million. This decreaseincrease was largely due to: losses(1) higher gains on equity securities,securities; largely offset by(2) higher gain on sale of loans, due to an approximate equal increase in SBA gains and mortgage gainsgains, with SBA being about two thirds of the increase; partially offset by (3) lower fee income on deposit activity, due to lower activity; and an(4) increasea decrease in loan fees and service charges primarily due to higherlower fees collected on loan payoffs. Non-interest expense increased approximately 5%1.5% or $2.2$0.6 million primarily due to a $1.6$1.1 million increase in compensation due to higher incentive compensation and merit increases.increases, partially offset by a decrease in other expense due to lower SBA recourse expense.

When comparing year-over-year results, changes in net interest income, provision for credit losses, non-interest income and non-interest expense are primarily due to the items discussed above. See the remainder of this section for a more thorough discussion. Unless otherwise stated, all monetary amounts in the tables (but not the narrative) set forth in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, other than share, per share and capital ratio amounts, are stated in thousands.

The Company utilized a balance sheet optimization strategy in 2024,2025, which resulted in the runoff of non-strategic loan relationshiprelationships with the proceeds used to reducedreduce more expensiveall borrowings at the Bank and reductions in wholesale deposits.

We adoptedutilize a loss estimation methodology and third-party model to determine our allowance for credit losses, under the guidance of ASU 2016-13, Financial Instruments-CreditInstruments - Credit Losses (Topic 326), “Measurement of Credit Losses on Financial Instruments” through a cumulative-effect adjustment on January 1, 2023. We have selected a loss estimation methodology, utilizing a third-party model.. See also Notes 1 and 3 to the audited consolidated financial statements for further discussion of our adoption of ASU 2016-13.

Our determination of the allowance for credit losses - loans is based on: (1) an individual allowance for specifically identified and evaluated loans that management has determined have unique risk characteristics. For these loans, the estimated loss is based on likelihood of default, payment history, and net realizable value of underlying collateral. Specific allocations for collateral dependent loans are based on the fair value of the underlying collateral relative to the amortized cost of the loans. For loans that are not collateral dependent, the specific allocation is based on the present value of expected future cash flows discounted at the loan’s original effective interest rate through the repayment period; and (2) a collective allowance for loans not specifically identified in (1) above. The allowance for these loans is estimated by pooling loans with a similar risk profile and calculating a collective loss rate using the pool’s risk drivers, historical loss experience, and reasonable and supportable future economic forecasts to project lifetime losses. This collectively estimated loss is adjusted for qualitative factors.

Net interest income was $51.2 million for 2025 compared to $46.5 million for 2024 compared to $48.3 million for 2023.2024. The decrease,increase overall, iswas largely due to the impact of higherlower short-term interest rates which, with the Company’s liability sensitive balance sheet (See Market Risk Section of the MD&A), resulted in higherlower deposit costscosts, a decrease in other borrowing expense due to customerlower retention strategiesbalances and increasedmodestly borrowinghigher costsnet yield on FHLB advancesassets. These decreasesincreases to net interest income were partially offset by increases$61 million lower asset balances, including an $84 million decrease in average loan yieldsbalances, duepartially tooffset contractualby repricinghigher balances in lower yielding cash and couponscash on new loans.equivalents.

The net interest margin for 20242025 was 2.73%3.12% compared to 2.81%2.73% for 2023.2024. The decreaseincrease in the net interest margin was largely due to higherlower depositliability andcosts borrowingof costs. The decrease was partially offset by increases in loan yields.0.36%.

Average Balances, Net Interest Income, Yields Earned and Rates Paid. The following table shows interest income from average interest earning assets, expressed in dollars and yields, and interest expense on average interest bearing liabilities, expressed in dollars and rates. Also presented is the weighted average yield on interest earning assets on a tax-equivalent basis,assets, rates paid on interest bearing liabilities and the resultant spread at December 31, 20242025 and December 31, 2023.2024. Non-accruing loans average balances are included in the table with the loans carrying a zero yield.

Rate/Volume Analysis. The following table presents the dollar amount of changes in interest income and interest expense for the components of interest earning assets and interest bearing liabilities that are presented in the preceding table. For each category of interest earning assets and interest bearing liabilities, information is provided on changes attributable to: (1) changes in volume, which are changes in the average outstanding balances multiplied by the prior period rate (i.e., holding the initial rate constant); and (2) changes in rate, which are changes in average interest rates multiplied by the prior period volume (i.e., holding the initial balance constant). Rate variances were discussed previously above. Volume variances for the twelve months ended December 31, 20242025, compared to the same period in 20232024 arewere: (1) lower investmentaverage securitiestotal averageloan balances in 2024,2025, asdue principal repayments onto the lowerfull yieldingyear investmentimpact securityof portfolio2024 wereloan notshrinkage beingand reinvested,additional 2025 loan shrinkage; partially offset by (2) higher average balances of interest-bearing cash, (3) lower average balances in moneycertificates marketdue to lower brokered deposit balances, and CD’s(4) inlower 2024borrowing comparedbalances due to 2023, which resultedreductions in being able to reduce higher cost FHLB advances and borrowingsubordinated in 2024 compared to 2023.debt.

Total benefit, i.e., negative provision,provision for credit losses for the twelve months ended December 31, 2024,2025, was $3.175$1.950 million, compared to negative provision of $0.475$3.175 million for the twelve months ended December 31, 2023.2024. The Company’s $1.950 million provision for credit losses in 2025 was largely due to the impact of changes in credit quality, largely due to an increase in reserves on individually evaluated loans. The $3.175 million negative provision for credit losses in 2024 was largely due to the impact of improving forecasted future economic conditions by Moody’s, who the Company utilizes for economic forecasts and the impact of balance sheet optimization, which resulted in loan portfolio shrinkage. The $0.475 million of negative provision for credit losses in 2023 was largely due to net recoveries of $0.451 million Continued improving economic conditions in our markets, as evidenced by unemployment rates below the national average in our two largest population centers, have resulted in good overall economic trends for businesses.

The increase in gain on sale of loans for the twelve months ended December 31, 2024,2025, compared to the same period in 20232024 iswas duesplit tobetween an approximately equal increase in SBA loans sold and higher mortgage gains.gains, with about two-thirds of the increase due to higher SBA loans sold.

The increasedecrease in loan fees and servicesservice charges for the twelve months ended December 31, 2024,2025, compared to the same period in 20232024, iswas primarily due to higherlower fees collected due to loan payoffs.

The decreaseincrease in net gains on equity securities for the twelve months ended December 31, 2024,2025, compared to the same period in 20232024, iswas primarily due to the income recognized on the change in valuations of equity securities.

The increasedecrease in Bank Owned Life Insurance death benefit orfor the twelve months ended December 31, 2024,2025, compared to the same period in 20232024 BOLIBOLI, iswas due to the passing of an employee in 2024.

Mortgage servicing rights expense, net decreasedincreased for the twelve months ended December 31, 2024,2025, compared to the same period in 20232024 due to lowerhigher amortization primarily resulting from lowerhigher forecasted prepayments and the impact of a lower balance of loans serviced for others.prepayments.

ProfessionalLosses feeson increasedsale of repossessed assets decreased for the twelve months ended December 31, 2024,2025, compared to the same period in 20232024 largely due to higherthe audit2024 andwrite-down consultingof fees.one large real estate owned property.

The decrease in other expenses for the twelve months ended December 31, 2024,2025, compared to the same period in 20232024 iswas primarily due to lower loanSBA originationrecourse costs due to lower loan volumes in 2024.expense.

Income tax expense recorded in the accompanying Consolidated Statements of Operations involves interpretation and application of certain accounting pronouncements and federal and state tax codes and is, therefore, considered a critical accounting policy.codes. We undergo examinations by various taxing authorities. Such taxing authorities may require that changes in the amount of tax expense or the amount of the valuation allowance be recognized when their interpretations differ from those of management, based on their judgments about information available to them at the time of their examinations. As noted above, a Wisconsin income tax valuation allowance was created due to the Wisconsin budget law change, resulting in reduction of the realization of Wisconsin deferred tax assets.

Total assets decreasedincreased by $102.9$33.2 million to $1.78 billion at December 31, 2025, from $1.75 billion at December 31, 2024, from $1.85 billion at December 31, 2023.2024.

Securities AFS (recorded at fair value), which represent the majority of our investment portfolio, decreased to $134.1 million at December 31, 2025, compared with $142.9 million at December 31, 2024, compared with $155.7 million at December 31, 2023.2024. This decrease iswas due to principal repayments and maturities,maturities on amortizing securities of $15 million, and calls of corporate debt securities of $9 million, partially offset by the increase in CRA mortgage-backed securitiespurchases of $2.8$10 million and lower unrealized losses of $1.1$5.2 million.

Securities held to maturity decreased to $80.2 million at December 31, 2025, compared to $85.5 million at December 31, 2024, compared to $91.2 million at December 31, 2023.2024. The decrease was largely due to principal repayments. The unrealizedunrecognized loss on the held to maturity portfolio increaseddecreased by $1.9$3.8 million during the year to $19.8$16.1 million at December 31, 2024.2025.

Unrealized losses reflected in the preceding tables have not been included in results of operations because the unrealized loss was not due to credit impairment. Management has determined that the Company neither intends to sell, nor will it be required to sellsell, each debt security before its anticipated recovery, and therefore recovery of cost will occur.

At December 31, 2023,2024, the Bank pledged certain of its mortgage-backed securities with a carrying value of $29.2$34.0 million as collateral to secure a line of credit with the Federal Reserve Bank. As of December 31, 2023,2024, there were no borrowings outstanding on this Federal Reserve Bank line of credit. As of December 31, 2023,2024, the Bank has pledged certain of its U.S. Government Agency securities with a carrying value of $0.5$0.3 million and mortgage-backed securities with a carrying value of $1.9$1.8 million as collateral against specific municipal deposits. As of December 31, 2023,2024, the Bank also has mortgage-backed securities with a carrying value of $0.2 million and U.S. Government Agencies with a carrying value of $0.4$0.5 million pledged as collateral to the Federal Home Loan Bank of Des Moines.

TheIn 2025 and 2024, the Company’s planned balance sheet optimization resulted in a reduction in loan balances which focused on the runoff of largely non-strategic loans.loan relationships.

The following table sets forth, as of December 31, 20242025 and December 31, 20232024, respectivelyrespectively, the fixed and adjustable-rate loans in our loan portfolio:

The determination of the ACL requires significant judgementjudgment to estimate credit losses. The ACL is measured collectively on a pooled basis when similar risk characteristics exist, and on an individual basis when management determines that the loan does not share similar risk characteristics with other loans. The ACL on loans collectively evaluated is measured using the loss rate model. The Company categorizes its loan portfolio into four segments based on similar risk characteristics. Loans within each segment are pooled based on individual loan characteristics. Aggregated risk drivers are then calculated at a pool level. Risk drivers are identified attributes that have proven to be predictive of loan loss rates and vary based on loan segment and type. A loss rate is calculated and applied to the pool utilizing a model that combines the pool’s risk drivers, historical loss experience, and reasonable and supportable future economic forecasts to projected lifetime losses. The loss rate is then combined with the loan’s balance and contractual maturity, adjusted for expected prepayments, to determine expected future losses. As the Company’s commercial lending function started after the Great Recession, the Company’s historical credit experience is insufficient to estimate expected credit loss. The Company utilized peer information to supplement expected loss experience. Peer selection was a review of institutions with comparable asset size, geography, and portfolio concentrations. Management judgementjudgment is required at each point in the measurement process.Futureprocess. Future and supportable economic forecasts are based on national economic conditions and their reversion to the mean is implicit in the model and generally occurs over a period of two years.

Loans that exhibit different risk characteristics from the pool are individually evaluated for impairment. Loans can be identified for individual evaluation for a variety of reasons including delinquency, nonaccrual status, risk rating and loan modification. Accruing loans that exhibit different risk characteristics from their pool may also be within scope. On these loans, an allowance may be established so that the loan is reported, net, at the lower of: (a) its amortized cost; (b) the present value of the loan’s estimated future cash flows using the loan’s existing rate; or (c) at the fair value of any loan collateral, less estimated disposal costs, if the loan is collateral dependent. Collateral dependency is determined using the practical expedient when: (1) the borrower is experiencing financial difficulty; and (2) repayment is expected to be provided substantially through the sale or operation of the collateral. However, if it is probable that the Company will foreclose on the collateral, the use of the fair value of the collateral to calculate the allowance for credit loss is required.

Allowance for Credit Losses - Loans Roll Forward (in thousands, except ratios)

Allowance for Credit Losses - Loans to Percentage (in thousands, except ratios)

•Commercial/agricultural real estate loans,loans past due 90 days or more;

Nonaccrual loans remainedincreased flatby $2.7 million to $15.9 million at approximatelyDecember 31, 2025, from $13.2 million at both December 31, 2024, and December 31, 2023, with onea largethird quarter 2025 multi-family loan payoffaddition, inpartially offset by the second quarter and other payments received offsetting the additionpayoff of a $7.3 million relationship secured by collateral in the forestry services industry. Approximately $1.4 million of the payments received in the fourth quarter are related to this relationship.

The table below shows a summary of criticized loans, split by special mention and substandard balances, as of the past five quarter-ends. Criticized loans decreasedincreased by $10.6$18.5 million in the twelve months ended December 31, 2024.2025. Special mention loans decreasedincreased $9.9$16.0 million during 2025, largely due to additions of a $6.0 million owner occupied CRE loan relationship and a $5 million owner occupied CRE loan relationship. Substandard loans increased $2.5 million from December 31, 2024, primarily due to the $8.6addition of a $9 million reduction in a forestry servicesmulti-family loan whichpartially paidoffset down in the first two quarters and then movement of the remaining $7.4 million loan to substandard in the third quarter 2024. Substandard loans decreased $0.7 million from December 31, 2023, primarily due toby the payoff of a $4.4 million nonaccrual loan in the fist quarter and other reductions, partially offset by the addition of the $5.8$5 million forestry services loan in 2024, which is also a nonaccrual loan. This forestry services loan was special mention at December 31, 2023, and moved to substandard in the quarter-end September 30, 2024.relationship.

The fair market value of the Company’s MSR asset was $4.7 million at December 31, 2025, and $5.2 million at December 31, 2024, and $5.6 million at December 31, 2023.2024. At December 31, 2024,2025, and December 31, 2023,2024, the Company did not have an MSR impairment, or related valuation allowance. The fair market value of the Company’s MSR asset as a percentage of its servicing portfolio at December 31, 2024,2025, and December 31, 2023,2024, werewas 1.09%0.98% and 1.13%,1.09%, respectively.

Intangible Assets. We havehad intangible assets of $0.4 million at December 31, 2025, compared to $1.0 million at December 31, 2024, compared to $1.7 million at December 31, 2023.2024. The intangible assets at December 31, 2024,2025, were comprisedconsisted of core deposit intangible assets arising from a 2017 andacquisition. Intangible assets associated with a 2019 acquisitions.acquisition became fully amortized during 2025. Amortization of these intangibles was $0.6 million in 2025, and $0.7 million in 2024. Amortization expense is scheduled to be $0.6 million in 2025 and $0.4 million in 2026.

Deposits. At December 31, 2024,2025, deposits decreased modestlyincreased by $30.9$36.0 million compared to December 31, 2023,2024, balances. Some of the loan shrinkage proceeds were utilized to decrease wholesale deposits by $73.1 million in 2024. Some of this shrinkage was funded by the netThe growth in retail,money market accounts was largely due to growth in retail accounts, and to a lesser extent, commercial and public deposits, totaling $42 million during 2024.accounts.

Deposit Composition by Type

Consumer, commercial and government deposits have been stable since January 31, 2023, and followingover the twoperiods large coastal bank failures in early March 2023.reported. There are no material customer or industry deposit concentrations.

Uninsured and uncollateralized deposits were $323.5 million, or 21% of total deposits at December 31, 2025, and $265.4 million, or 18% of total deposits, at December 31, 2024,2024. andUninsured $275.8deposits at December 31, 2025, were $478.4 million, or 18%31% of total deposits, and $428.0 million, or 29% of total deposits at December 31, 2023. Uninsured deposits at December 31, 2024, were $428.0 million, or 29% of total deposits, and $427.5 million, or 28% of total deposits at December 31, 2023, with the difference being an increase in fully secured government deposits.

(1) The FHLB advances bear fixed rates, require interest-only monthly payments, and are collateralized by a blanket lien on pre-qualifying first mortgages, home equity lines, multi-family loans and certain other loans which had pledged balances of $1,075,001$1.018 billion and $1,106,267$1.075 billion at December 31, 20242025 and 2023,2024, respectively. At December 31, 2024,2025, the Bank’s available and unused portion under the FHLB borrowing arrangement was approximately $424,658$434 million compared to $370,569$425 million as of December 31, 2023.2024.

(2) Maximum month-end borrowed amounts outstanding under this borrowing agreement were $81,000$5.0 million and $217,530,$81.0 million, during the twelve months ended December 31, 20242025 and December 31, 2023,2024, respectively.

(3) There were no FHLB borrowings outstanding as of December 31, 2025. The weighted-average interest rates on FHLB borrowings, with maturities less than twelve months, outstanding as of December 31, 2024 andwas December 31, 2023 were 1.45% and 4.16%, respectively.1.45%.

(54) Senior notes, entered into by the Company in June 2019 consist of the following:

(a) A term note, which was originally entered into in June 2019 and subsequently refinanced in March 2022, modified in February of 2023, and refinanced in May 2024, requiring quarterly interest-only payments through January 2029, and quarterly principal and interest payments thereafter. Interest is variable, based on US Prime rate minus 75 basis points with a floor rate of 3.00%.

(a) The Company’s Subordinated Note Purchase Agreement entered into with certain purchasers in August 2020, which bearsbore a fixed interest rate of 6.00% for five years. InOn SeptemberJuly 7, 2025, the fixedBoard interestof rateDirectors willapproved bethe resetredemption quarterlyof the entire $15.0 million balance of the 6% subordinated debentures due September 1, 2030, which were scheduled to equalreprice on September 1, 2025, to the three-month term Secured Overnight Financing Rate (“SOFR”) plus 591 basis points. The noteredemption isoccurred callableon bySeptember the1, Bank when, and anytime after, the floating rate is initially set. Interest-only payments are due semi-annually each year during the fixed interest period and quarterly during the floating interest period.2025.

(b) The Company’s Subordinated Note Purchase Agreement entered into with certain purchasers in March 2022, which bears a fixed interest rate of 4.75% for five years. In April 2027, the fixed interest rate will be reset quarterly to equal the three-month term Secured Overnight Financing RateSOFR plus 329 basis points. The note is callable by the Bank when, and anytimeany time after, the floating rate is initially set. Interest-only payments are due semi-annually each year during the fixed interest period and quarterly during the floating interest period.

Factors that could affect actual results or outcomes include the matters described under the caption “Risk Factors” in Item 1A of our annual report on Form 10-K for the year ended December 31, 2025, filed with the SEC on March 5, 2026, (“2025 10-K”), Item 1A in Part II of this report, and the following:

The following discussion sets forth management’s discussion and analysis of our consolidated financial condition as of MarchJune 31,30, 2026, and our consolidated results of operations for the three and six months ended MarchJune 31,30, 2026, compared to the same period in the prior fiscal year ended MarchJune 31,30, 2025. This discussion should be read in conjunction with the interim consolidated financial statements and the condensed notes thereto included with this report and with Management’s Discussion and Analysis of Financial Condition and Results of Operations and the financial statements and notes related thereto included in our 2025 10-K. Unless otherwise stated, all monetary amounts in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, other than share, per share and capital ratio amounts, are stated in thousands.

We reported net income of $3.8$1.1 million and $4.9 million, or $0.39$0.11 and $0.50 per diluted share for the three and six months ended MarchJune 31,30, 2026, compared to net income of $3.2$3.3 million and $6.5 million, or $0.32$0.33 and $0.65 per diluted share for the three and six months ended MarchJune 31,30, 2025, respectively.

The following is a summary of some of the significant factors that affected our operating results for the three and six months ended MarchJune 31,30, 2026, and MarchJune 31,30, 2025.

The total provision for credit losses for the firstsecond quarter ended MarchJune 31,30, 2026, was $0.75$4.325 million compared to a negative provision for credit losses of $0.25$1.350 million for the quarter ended MarchJune 31,30, 2025. The firstsecond quarter of 2026 provision was largely due to: (1) a net increase of $0.4$3.1 million, with increasesmillion in specific reserves on impaired loans, partially offset by loss rates on collectively evaluatednonaccrual loans to $6.3 million and (2) charge-offs of $1.4 million. The second quarter of 2025 provision was largely due to: (1) the impact of three 30-89 days delinquent commercial relationships resulting in a $0.7 million provision; (2) modestthe charge-offsimpact of $0.2modestly worsening macro-economic assumptions used by our third party provider of $0.3 million; (3) an increase in economic scenarios basedprovision on informationnew providedloans bywith ourlonger third-partycontractual modellife provideroutpacing previously established provisions on prepaying and maturing loans of $0.1$0.15 million; and (4) thean net impact of new loan growth, net of a decrease in the portfolio duration of $0.05 million. The first quarter ended March 31, 2025, negative provision for credit losses was primarily due to decreases in ACL related to: (1) on-balance sheet ACL of $0.1 million, and (2) reductionsincrease in off-balance sheet reservescommitments tofor fundnew commitmentsconstruction loan originations of $0.3$0.2 million.

Provision forNon-interest income taxesdecreased increased to $0.88$0.2 million in the firstsecond quarter of 2026, fromcompared $0.78 million into the firstsecond quarter of 2025, primarily due to lower gains on the impactsale of aloans 2025of tax$0.3 credit investment.million.

Our determination of the allowance for credit losses - loans is based on: (1) an individual allowance for specifically identified and evaluated loans that management has determined have unique risk characteristics. For these loans, the estimated loss is based on likelihood of default, payment history, and net realizable value of underlying collateral. Allowance for credit losses for collateral dependent loans are based on the fair value of the underlying collateral relative to the amortized cost of the loans. For loans that are not collateral dependent, the allowance for credit losses is based on the present value of expected future cash flows discounted at the loan’s original effective interest rate through the repayment period; and (2) a collective allowance for loans not specifically identified in (1) above. The allowance for these loans is estimated by pooling loans with a similar risk profile and calculating a collective loss rate using the pool’s risk drivers, historical loss experience, and reasonable and supportable future economic forecasts to project lifetime losses. This collectively estimated loss is adjusted for qualitative factors.

Interest rate spread and net interest margin are used to measure and explain changes in net interest income. Interest rate spread is the difference between the yield on interest earning assets and the rate paid for interest-bearing liabilities that fund those assets. Net interest margin is expressed as the percentage of net interest income to average interest earning assets. Net interest margin currently exceeds interest rate spread because non-interest-bearing sources of funds (“net free funds”), principally demand deposits and stockholders’ equity, also support interest earning assets. The narrative below discusses net interest income, and net interest margin for the three-month and six-month periods ended MarchJune 31,30, 2026, and MarchJune 31,30, 2025, respectively.

The net interest margin for the three-month period ended MarchJune 31,30, 2026, increaseddecreased to 3.18%,3.22%, compared to 2.85%,3.27%, for the three-month period ended MarchJune 31,30, 2025. The higherlower net interest margin was due to: (1) a decrease28 basis point reduction in loan yields due to loan interest income discussed above partially offset by lower liability costs of 3027 basis points; (2) a net increase of 20 basis points in loan yields; partially offset by (3) lower yields on interest-bearing cash at the Federal Reserve; and (4) the combination of a decrease in average balances of higher yielding loans and an increase in the average balance of lower yielding cash.points.

Average Balances, Net Interest Income, Yields Earned and Rates Paid. The following net interest income analysis table presents interest income from average interest earning assets, expressed in dollars and yields, and interest expense on average interest-bearing liabilities, expressed in dollars and rates on a tax equivalent basis. Shown below is the weighted average tax equivalent yield on interest earning assets, rates paid on interest-bearing liabilities and the resultant spread at or during the three-monththree and six-month periods ended MarchJune 31,30, 2026, and MarchJune 31,30, 2025. Non-accruing loans have been included in the table as loans carrying a zero yield.

Three months ended MarchJune 31,30, 2026, compared to the three months ended MarchJune 31,30, 2025.2025:

The table below shows the principal balance and current contractual rate of fixed-rate loans, securities, and certificates of deposits as of MarchJune 31,30, 2026, that mature or reprice for the remaining threetwo quarters of 2026 and the four quarters of 2027.

Portfolio Contractual Fixed Rate Repricing by Future Quarters:

The total provision for credit losses for the six months ended June 30, 2026, was $5.075 million compared to a provision for credit losses of $1.100 million for the six months ended June 30, 2025. The second quarter of 2026 changes compared to the second quarter of 2025 are discussed above. The total provision for credit losses for the first quarter ended March 31, 2026, was $0.75 million compared to a negative provision for credit losses of $0.25 million for the quarter ended March 31, 2025. The first quarter of 2026 provision was largely due to: (1) a net increase of $0.4 million, with increases in reserves on impaired loans, partially offset by lower loss rates on collectively evaluated loans; (2) modest charge-offs of $0.2 million; (3) an increase in economic scenarios based on information provided by our third-party model provider of $0.1 million; and (4) the net impact of new loan growth, net of a decrease in the portfolio duration of $0.05 million. The total benefit, i.e., negative provision, for credit losses for the first quarter ended March 31, 2025, of $0.25 million was due to decreases in ACL related to a decrease in on-balance sheet ACL of $0.35 million; partially offset by an increase in off-balance sheet reserves to fund commitments of $0.1 million.

Management believes that the provision recorded for the current year’s three-monththree periodand six-month periods is adequate in view of the present condition of our loan portfolio and the sufficiency of collateral supporting our non-performingnonperforming loans. We continually monitor non-performingnonperforming loan relationships and will adjust our provision, as necessary, if changing facts and circumstances require a change in the ACL. In addition, a decline in the quality of our loan portfolio as a result of general economic conditions, factors affecting particular borrowers, or our market areas, or otherwise, could all affect the adequacy of our ACL. If there are significant charge-offs against the ACL, or we otherwise determine that the ACL is inadequate, we will need to record an additional provision in the future.

Non-interest Income. The following table reflects the various components of non-interest income for the three-monththree and six-month periods ended MarchJune 31,30, 2026 and 2025, respectively.

Gain on sale of loans increaseddecreased in the three-month period ended MarchJune 31,30, 2026, compared to the three-month period ended MarchJune 31,30, 2025. HigherLower gains on SBA loan sales accountcontributed forto approximately two-thirdsmost of the increase,decrease, withpartially theoffset remainder of the increase due toby higher residential gains on sale of residential loans.sale.

TheLoan increasefees inand otherservice incomecharges decreased for the three-month and six-month period endingended MarchJune 31,30, 2026, compared to the same periodperiods in 2025, was primarily2025 due to lower customer activity in the terminationsecond quarter of the remaining lease obligation on a previously closed branch.2026.

Non-interest Expense. The following table reflects the various components of non-interest expense for the three-monththree and six-month periods ended MarchJune 31,30, 2026 and 2025, respectively.

Compensation expense for the three-month period ended MarchJune 31,30, 2026, increaseddecreased from the same period in 2025, due to annual employee pay raises, effective late first quarter of 2025, higherlower incentive accruals duepartially tooffset higherby pre-taxthe income,annual andmerit higherraises benefitincluded costs.in the last payroll period of the first quarter.

Data processing expense for the three-monthsthree and six-months ended MarchJune 31,30, 2026, decreased from the same 2025 period,periods, largely due to contract renegotiations which lowered our costs.

Amortization of intangibles decreased for the three-month periodand six-month periods ending MarchJune 31,30, 2026, from the same 2025 period,periods, as an intangible was fully amortized in the third quarter of 2025.

Cash and Cash Equivalents. Cash and cash equivalents increased $30.3$2.9 million to $149.2$121.8 million at MarchJune 31,30, 2026, compared to $118.9 million at December 31, 2025. This increase was primarily due to an increase in interest-bearing cash provided by deposit growth,growth partially offset by loan growth.

Investment Securities. We manage our securities portfolio to provide liquidity, manage interest rate risk, and enhance income. Our investment portfolio is comprised of securities available-for-sale and securities held-to-maturity. Securities available-for-sale decreased $3.2$5.7 million during the threesix months ended MarchJune 31,30, 2026, to $130.9$128.4 million from $134.1 million at December 31, 2025. There were principal repayments of $3.0$7.6 million,million and aredemptions netof decrease$3.1 million in the corporate debt portfolio due to redemptions of $1.3 million.portfolio. These reductions were partially offset by purchases of $0.8$4.3 million of corporate debt and a decrease in the unrealized loss of $0.3$0.7 million.