Citizens Community Bancorp Inc. (Form: 10-Q, Received: 05/13/2016 09:15:15)

Large accelerated filer

Accelerated filer

Non-accelerated filer

¨ (do not check if a smaller reporting company)

Smaller reporting company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2016



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-33003

CITIZENS COMMUNITY BANCORP, INC.

(Exact name of registrant as specified in its charter)



Maryland		20-5120010
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification Number)

2174 EastRidge Center, Eau Claire, WI 54701

(Address of principal executive offices)

715-836-9994

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of "large accelerated filer", "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date:

At May 13, 2016 there were 5,245,181 shares of the registrant’s common stock, par value $0.01 per share, outstanding.

CITIZENS COMMUNITY BANCORP, INC.

FORM 10-Q

March 31, 2016

INDEX



			Page Number
Part I – FINANCIAL INFORMATION
	Item 1.	Financial Statements
		Consolidated Balance Sheets as of March 31, 2016 (Unaudited) and September 30, 2015	3
		Consolidated Statements of Operations (Unaudited) for the three and six months ended March 31, 2016 and 2015	4
		Consolidated Statements of Comprehensive Income (Unaudited) for the six months ended March 31, 2016 and 2015	5
		Consolidated Statement of Changes in Stockholders’ Equity (Unaudited) for the six months ended March 31, 2016	6
		Consolidated Statements of Cash Flows (Unaudited) for the six months ended March 31, 2016 and 2015	7
		Condensed Notes to Consolidated Financial Statements (Unaudited)	8
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	46
	Item 4.	Controls and Procedures	48
Part II – OTHER INFORMATION			48
	Item 1.	Legal Proceedings	48
	Item 1A.	Risk Factors	49
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	49
	Item 3.	Defaults Upon Senior Securities	49
	Item 4.	Mine Safety Disclosures	49
	Item 5.	Other Information	49
	Item 6.	Exhibits	49
SIGNATURES			50

PART 1 – FINANCIAL INFORMATION


ITEM 1.	FINANCIAL STATEMENTS

CITIZENS COMMUNITY BANCORP, INC.

Consolidated Balance Sheets

March 31, 2016 (unaudited) and September 30, 2015

(derived from audited financial statements)

(in thousands, except share data)



	March 31, 2016			September 30, 2015
Assets
Cash and cash equivalents	$	22,012		$	23,872
Other interest-bearing deposits	2,992			2,992
Investment securities (available for sale securities at fair value of $86,114 and $79,921, and held to maturity securities at cost of $7,427 and $8,012 at March 31, 2016 and September 30, 2015, respectively)	93,541			87,933
Non-marketable equity securities, at cost	4,626			4,626
Loans receivable	466,492			450,510
Allowance for loan losses	(6,303		)	(6,496		)
Loans receivable, net	460,189			444,014
Office properties and equipment, net	2,834			2,669
Accrued interest receivable	1,725			1,574
Intangible assets	341			104
Goodwill	435			—
Foreclosed and repossessed assets, net	832			902
Other assets	12,273			11,462
TOTAL ASSETS	$	601,800		$	580,148


Liabilities and Stockholders’ Equity
Liabilities:
Deposits	$	473,833		$	456,298
Federal Home Loan Bank advances	61,474			58,891
Other liabilities	4,422			4,424
Total liabilities	539,729			519,613

Stockholders’ equity:
Common stock— $0.01 par value, authorized 30,000,000, 5,245,181 and 5,232,579 shares issued and outstanding, respectively	52			52
Additional paid-in capital	54,825			54,740
Retained earnings	7,177			6,245
Unearned deferred compensation	(235		)	(288		)
Accumulated other comprehensive income (loss)	252			(214		)
Total stockholders’ equity	62,071			60,535
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	601,800		$	580,148

See accompanying condensed notes to unaudited consolidated financial statements.

CITIZENS COMMUNITY BANCORP, INC.

Consolidated Statements of Operations (unaudited)

Three and Six Months Ended March 31, 2016 and 2015

(in thousands, except per share data)



	Three Months Ended				Six Months Ended
	March 31, 2016		March 31, 2015		March 31, 2016		March 31, 2015
Interest and dividend income:
Interest and fees on loans	$	5,301	$	5,375	$	10,551	$	10,971
Interest on investments	441		317		865		681
Total interest and dividend income	5,742		5,692		11,416		11,652
Interest expense:
Interest on deposits	951		946		1,907		1,898
Interest on borrowed funds	164		161		329		328
Total interest expense	1,115		1,107		2,236		2,226
Net interest income before provision for loan losses	4,627		4,585		9,180		9,426
Provision for loan losses	—		150		75		385
Net interest income after provision for loan losses	4,627		4,435		9,105		9,041
Non-interest income:
Net gains on available for sale securities	4		45		4		47
Service charges on deposit accounts	331		378		754		850
Loan fees and service charges	263		292		584		647
Other	212		209		418		414
Total non-interest income	810		924		1,760		1,958
Non-interest expense:
Salaries and related benefits	2,188		2,178		4,406		4,353
Occupancy	712		664		1,281		1,484
Office	262		252		514		508
Data processing	420		395		829		784
Amortization of core deposit intangible	21		14		35		28
Advertising, marketing and public relations	145		186		282		284
FDIC premium assessment	84		104		169		208
Professional services	241		270		392		589
Other	294		358		553		675
Total non-interest expense	4,367		4,421		8,461		8,913
Income before provision for income taxes	1,070		938		2,404		2,086
Provision for income taxes	369		342		843		775
Net income attributable to common stockholders	$	701	$	596	$	1,561	$	1,311
Per share information:
Basic earnings	$	0.13	$	0.11	$	0.30	$	0.25
Diluted earnings	$	0.13	$	0.11	$	0.30	$	0.25
Cash dividends paid	$	0.12	$	0.08	$	0.12	$	0.08

See accompanying condensed notes to unaudited consolidated financial statements.

CITIZENS COMMUNITY BANCORP, INC.

Consolidated Statements of Comprehensive Income (unaudited)

Six months ended March 31, 2016 and 2015

(in thousands, except per share data)



	Six Months Ended
	March 31, 2016			March 31, 2015
Net income attributable to common stockholders	$	1,561		$	1,311
Other comprehensive income (loss), net of tax:
Securities available for sale
Net unrealized gains arising during period	498			615
Reclassification adjustment for gains included in net income	3			28
Unrealized gains on securities	501			643
Defined benefit plans:
Amortization of unrecognized prior service costs and net gains	(35		)	—
Total other comprehensive income, net of tax	466			643
Comprehensive income	$	2,027		$	1,954

Reclassifications out of accumulated other comprehensive income for the six months ended March 31, 2016 were as follows:



Details about Accumulated Other Comprehensive Income Components	Amounts Reclassified from Accumulated Other Comprehensive Income			(1)	Affected Line Item on the Statement of Operations
Unrealized gains and losses
Sale of securities	$	4			Net gain on sale of available for sale securities
	(2		)		Provision for income taxes
Total reclassifications for the period	$	2			Net income attributable to common shareholders

(1) Amounts in parentheses indicate decreases to profit/loss.

See accompanying condensed notes to unaudited consolidated financial statements.

CITIZENS COMMUNITY BANCORP, INC.

Consolidated Statement of Changes in Stockholders’ Equity (unaudited)

Six Months Ended March 31, 2016

(in thousands, except shares and per share data)



					Additional Paid-In Capital			Retained Earnings			Unearned Deferred Compensation			Accumulated Other Comprehensive Income (Loss)			Total Stockholders' Equity
	Common Stock
	Shares		Amount
Balance, October 1, 2015	5,232,579		$	52	$	54,740		$	6,245		$	(288	)	$	(214	)	$	60,535
Net income								1,561									1,561
Other comprehensive income, net of tax														466			466
Surrender of restricted shares of common stock	(4,670	)			(42		)										(42		)
Common stock options exercised	17,272				95												95
Stock option expense					32												32
Amortization of restricted stock											53						53
Cash dividends ($0.12 per share)								(629		)							(629		)
Balance, March 31, 2016	5,245,181		$	52	$	54,825		$	7,177		$	(235	)	$	252		$	62,071

See accompanying condensed notes to unaudited consolidated financial statements.

CITIZENS COMMUNITY BANCORP, INC.

Consolidated Statements of Cash Flows (unaudited)

Six Months Ended March 31, 2016 and 2015

(in thousands, except per share data)



	Six Months Ended
	March 31, 2016			March 31, 2015
Cash flows from operating activities:
Net income attributable to common stockholders	$	1,561		$	1,311
Adjustments to reconcile net income to net cash provided by operating activities:
Net amortization of premium/discount on securities	620			428
Depreciation	390			704
Provision for loan losses	75			385
Net realized gain on sale of securities	(4		)	(47		)
Amortization of core deposit intangible	35			28
Amortization of restricted stock	53			44
Stock based compensation expense	32			28
Loss on sale of office properties	—			—
Provision (benefit) for deferred income taxes	280			(168		)
Net gains from disposals of foreclosed properties	(79		)	(39		)
Provision for valuation allowance on foreclosed properties	—			34
Increase in accrued interest receivable and other assets	(1,534		)	(222		)
(Decrease) increase in other liabilities	(21		)	325
Total adjustments	(153		)	1,500
Net cash provided by operating activities	1,408			2,811
Cash flows from investing activities:
Purchase of investment securities	(14,404		)	(17,079		)
Net increase in interest-bearing deposits	—			(1,250		)
Proceeds from sale of securities available for sale	3,725			22,065
Principal payments on investment securities	5,289			3,634
Proceeds from sale of Federal Reserve Bank (FRB) Stock	—			239
Proceeds from sale of foreclosed properties	610			759
Net (increase) decrease in loans	(348		)	15,778
Net capital expenditures	(518		)	(91		)
Net cash received from branch acquisition	10,001			—
Net cash received from sale of office properties	—			8
Net cash provided by investing activities	4,355			24,063
Cash flows from financing activities:
Net increase (decrease) in Federal Home Loan Bank advances	2,583			(8,000		)
Net (decrease) increase in deposits	(9,596		)	5,720
Surrender of restricted shares of common stock	(42		)	(29		)
Exercise of common stock options	95			299
Termination of director retirement plan/supplemental executive retirement plan	(34		)	—
Cash dividends paid	(629		)	(419		)
Net cash used in financing activities	(7,623		)	(2,429		)
Net (decrease) increase in cash and cash equivalents	(1,860		)	24,445
Cash and cash equivalents at beginning of period	23,872			11,434
Cash and cash equivalents at end of period	$	22,012		$	35,879
Supplemental cash flow information:
Cash paid during the period for:
Interest on deposits	$	1,887		$	1,896
Interest on borrowings	$	327		$	330
Income taxes	$	1,123		$	720
Supplemental noncash disclosure:
Transfers from loans receivable to foreclosed and repossessed assets	$	461		$	755

See accompanying condensed notes to unaudited consolidated financial statements.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1 – NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying consolidated financial statements include the accounts of Citizens Community Bancorp, Inc. (the “Company”) and its wholly owned subsidiary, Citizens Community Federal N.A. (the "Bank"), and have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements. As used in this quarterly report, the terms “we”, “us”, “our”, and “Citizens Community Bancorp, Inc.” mean the Company and its wholly owned subsidiary, the Bank, unless the context indicates other meaning.

On April 16, 2014, the U.S. Office of the Comptroller of the Currency (the "OCC"), the primary federal regulator for

the Company and the Bank, provided written notice to the Bank of the OCC's approval for the Bank to convert to a national banking association (a "National Bank") and operate under the title of Citizens Community Federal National Association ("Citizens Community Federal N.A."). The consummation of the conversion to a National Bank was effective as of May 31, 2014.

On April 18, 2014, Citizens Community Bancorp, Inc. received written notice from the Federal Reserve Bank of

Minneapolis (the "FRB") notifying the Company of the FRB's approval of the Company becoming a bank holding company as

a result of the proposed conversion of the Bank from a federally-chartered savings bank to a National Bank, which approval

was also effective as of May 31, 2014.

The consolidated income of the Company is principally derived from the income of the Bank, the Company’s wholly owned subsidiary. The Bank originates residential, commercial, agricultural, consumer and commercial and industrial (C&I) loans and accepts deposits from customers, primarily in Wisconsin, Minnesota and Michigan. The Bank operates 16 full-service offices, eight stand-alone locations and 8 branches predominantly located inside Walmart Supercenters.

The Bank is subject to competition from other financial institutions and non-financial institutions providing financial products. Additionally, the Bank is subject to the regulations of certain regulatory agencies and undergoes periodic examination by those regulatory agencies.

In preparing these consolidated financial statements, we evaluated the events and transactions that occurred through May 13, 2016 , the date on which the financial statements were available to be issued. As of May 13, 2016 , there were no subsequent events which required recognition or disclosure.

On February 10, 2016, the Bank entered into a Plan and Agreement of Merger (the “Agreement”) by and among Old Murry Bancorp, Inc., a Wisconsin Corporation ("Old Murray") and Community Bank of Northern Wisconsin ("CBN"), a Wisconsin State Bank with its headquarters located in Rice Lake, Wisconsin (the "Merger"). All of CBN's outstanding shares of stock are owned by Old Murry.

Pursuant to the Agreement, the Bank will acquire all of the assets and liabilities of CBN. The purchase price to be paid for the net assets of CBN is expected to be funded by a combination of cash and newly issued debt of the Company. On April 22, 2016, the OCC approved the proposal for the merger of CBN with and into the Bank. The Merger is expected to close on May 16, 2016.

The accompanying consolidated interim financial statements are unaudited. However, in the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Unless otherwise stated herein, and except for shares and per share amounts, all amounts are in thousands.

Principles of Consolidation – The accompanying consolidated financial statements include the accounts of the Company and the Bank. All significant intercompany accounts and transactions have been eliminated.

Use of Estimates – Preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying disclosures. These estimates are based on management’s best knowledge of current events and actions the Company may undertake in the future. Estimates are used in accounting for, among other items, fair value of financial instruments, the allowance for loan losses, valuation of acquired intangible assets, useful lives for depreciation and amortization, indefinite-lived intangible assets and long-lived assets, deferred tax assets, uncertain income tax positions and contingencies. Management does not anticipate any material changes to estimates made herein in the near term. Factors that may cause sensitivity to the aforementioned estimates include, but are not limited to, external market factors such as market interest rates and unemployment rates, changes to operating policies and

procedures, and changes in applicable banking regulations. Actual results may ultimately differ from estimates, although management does not generally believe such differences would materially affect the consolidated financial statements in any individual reporting period.

Investment Securities; Held to Maturity and Available for Sale – Management determines the appropriate classification of investment securities at the time of purchase and reevaluates such designation as of the date of each balance sheet. Securities are classified as held to maturity when the Company has the positive intent and ability to hold the securities to maturity. Held to maturity securities are stated at amortized cost. Investment securities not classified as held to maturity are classified as available for sale. Available for sale securities are stated at fair value, with unrealized holding gains and losses deemed other than temporarily impaired due to non-credit issues being reported in other comprehensive income (loss), net of tax. Unrealized losses deemed other-than-temporary due to credit issues are reported in the Company’s net income in the period in which the losses arise. Interest income includes amortization of purchase premium or accretion of purchase discount. Amortization of premiums and accretion of discounts are recognized in interest income using the interest method over the estimated lives of the underlying securities.

The Company evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. As part of such monitoring, the credit quality of individual securities and their issuer is assessed. Significant inputs used to measure the amount of other-than-temporary impairment related to credit loss include, but are not limited to, default and delinquency rates of the underlying collateral, remaining credit support, and historical loss severities. Adjustments to market value of available for sale securities that are considered temporary are recorded as separate components of equity, net of tax. If the unrealized loss of a security is identified as other-than-temporary based on information available, such as the decline in the creditworthiness of the issuer, external market ratings, or the anticipated or realized elimination of associated dividends, such impairments are further analyzed to determine if credit loss exists. If there is a credit loss, it will be recorded in the Company's consolidated statement of operations. Unrealized losses on available for sale securities, other than credit, will continue to be recognized in other comprehensive income (loss), net of tax. Unrealized losses reflected in the preceding tables have not been included in results of operations because the unrealized loss was not deemed other-than-temporary. Management has determined that more likely than not, the Company neither intends to sell, nor will it be required to sell each debt security before its anticipated recovery, and therefore recovery of cost will occur.

Loans – Loans that management has the intent and ability to hold for the foreseeable future, until maturity or payoff are reported at the principal balance outstanding, net of unearned interest, and net of deferred loan fees and costs. Interest income is accrued on the unpaid principal balance of these loans. Loan origination fees, net of certain direct origination costs, are deferred and recognized in interest income using the interest method without anticipating prepayments. Delinquency fees are recognized into income when chargeable, assuming collection is reasonably insured.

Interest income on commercial, mortgage and consumer loans is discontinued according to the following schedules:

• Commercial loans, including agricultural and C&I loans, past due 90 days or more;

• Closed end consumer loans past due 120 days or more; and

• Real estate loans and open ended consumer loans past due 180 days or more.

Past due status is based on the contractual terms of the loan. In all cases, loans are placed on nonaccrual status or charged off at an earlier date if collection of principal or interest is considered doubtful. All interest accrued but not received for a loan placed on nonaccrual status is reversed against interest income. Interest received on such loans is accounted for on the cash basis or cost recovery method, and is generally applied against principal, until qualifying for return to accrual status. Loans are returned to accrual status when payments are made that bring the loan account current with the contractual term of the loan and a 6 month payment history has been established. Interest on impaired loans considered troubled debt restructurings (“TDRs”) or substandard, less than 90 days delinquent, is recognized as income as it accrues based on the revised terms of the loan over an established period of continued payment. Substandard loans, as defined by the OCC, our primary banking regulator, are loans that are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any.

Real estate loans and open ended consumer loans are charged off to estimated net realizable value less estimated selling costs at the earlier of when (a) the loan is deemed by management to be uncollectible, or (b) the loan becomes past due 180 days or more. Closed end consumer loans are charged off to net realizable value at the earlier of when (a) the loan is deemed by management to be uncollectible, or (b) the loan becomes past due 120 days or more. Commercial loans, including agricultural and C&I loans, are charged off to net realizable value at the earlier of when (a) the loan is deemed by management to be uncollectible, or (b) the loan becomes past due 90 days or more.

Allowance for Loan Losses – The allowance for loan losses (“ALL”) is a valuation allowance for probable and inherent credit losses in our loan portfolio. Loan losses are charged against the ALL when management believes that the collectability of a loan balance is unlikely. Subsequent recoveries, if any, are credited to the ALL. Management estimates the required ALL balance taking into account the following factors: past loan loss experience; the nature, volume and composition of our loan portfolio; known and inherent risks in our loan portfolio; information about specific borrowers’ ability to repay; estimated collateral values; current economic conditions; and other relevant factors determined by management. The ALL consists of specific and general components. The specific component relates to loans that are individually classified as impaired. The general component covers non-impaired loans and is based on historical loss experience adjusted for certain qualitative factors. The entire ALL balance is available for any loan that, in our management’s judgment, should be charged off.

A loan is impaired when full payment under the loan terms is not expected. Impaired loans consist of all TDRs, as well as individual substandard loans not considered a TDR when full payment under the loan terms is not expected. All TDRs are individually evaluated for impairment. See Note 3, “Loans, Allowance for Loan Losses and Impaired Loans” for more information on what we consider to be a TDR. If a TDR or substandard loan is deemed to be impaired, a specific ALL allocation may be established so that the loan is reported, net, at the lower of (a) outstanding principal balance, (b) the present value of estimated future cash flows using the loan’s existing rate; or (c) at the fair value of any collateral, less estimated disposal costs, if repayment is expected solely from the underlying collateral of the loan. For TDRs less than 90 days past due, and certain substandard loans that are less than 90 days delinquent, the likelihood of the loan migrating to over 90 days past due is also taken into account when determining the specific ALL allocation for these particular loans. Large groups of smaller balance homogeneous loans, such as consumer and residential real estate loans, as well as non-TDR commercial loans, are collectively evaluated for impairment, and accordingly, are not separately identified for impairment disclosures.

Foreclosed and Repossessed Assets, net – Assets acquired through foreclosure or repossession are initially recorded at fair value, less estimated costs to sell, which establishes a new cost basis. If the fair value declines subsequent to foreclosure or repossession, a valuation allowance is recorded through expense. Costs incurred after acquisition are expensed and are included in non-interest expense, other on our Consolidated Statements of Operations.

Income Taxes – The Company accounts for income taxes in accordance with the Financial Accounting Standards Board ("FASB") Accounting Standards Codification (“ASC”) Topic 740, “Income Taxes.” Under this guidance, deferred taxes are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates that will apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized as income or expense in the period that includes the enactment date. See Note 6, "Income Taxes" for details on the Company’s income taxes.

The Company regularly reviews the carrying amount of its net deferred tax assets to determine if the establishment of a valuation allowance is necessary. If based on the available evidence, it is more likely than not that all or a portion of the Company’s net deferred tax assets will not be realized in future periods, a deferred tax valuation allowance would be established. Consideration is given to various positive and negative factors that could affect the realization of the deferred tax assets. In evaluating this available evidence, management considers, among other things, historical performance, expectations of future earnings, the ability to carry back losses to recoup taxes previously paid, the length of statutory carryforward periods, any experience with utilization of operating loss and tax credit carryforwards not expiring, tax planning strategies and timing of reversals of temporary differences. Significant judgment is required in assessing future earnings trends and the timing of reversals of temporary differences. Accordingly, the Company’s evaluation is based on current tax laws as well as management’s expectations of future performance.

Earnings Per Share – Basic earnings per common share is net income or loss divided by the weighted average number of common shares outstanding during the period. Diluted earnings per common share includes the dilutive effect of additional potential common shares issuable during the period, consisting of stock options outstanding under the Company’s stock incentive plans that have an exercise price that is less than the Company's stock price on the reporting date.

Reclassifications – Certain items previously reported were reclassified for consistency with the current presentation.

Recent Accounting Pronouncements - In March 2016, the FASB issued Accounting Standards Update ("ASU") 2016-09 Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. ASU 2016-09 is intended to simplify certain areas of share-based payment transaction accounting, including the income tax consequences, equity or liability classification of certain share awards, and classification on the statement of cash flows. ASU 2016-09 is effective for the annual periods, and interim periods within those annual periods, beginning after December 15, 2016. Early adoption is permitted. The Company is currently evaluating the effect on the consolidated results of operations, financial position and cash flows.

In February 2016, the FASB issued ASU 2016-02 "Leases (Topic 842)". ASU 2016-02 is intended to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. ASU 2016-02 is effective for the annual periods, and interim periods within those annual periods, beginning after December 15, 2018. Early adoption is permitted. The Company expects the adoption of ASU 2016-02 to have no material effect on the Company's consolidated results of operations, financial position or cash flows.

In January 2016, the FASB issued ASU 2016-01 "Financial Instruments-overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities”. ASU 2016-01 is intended to address certain aspects of recognition, measurement, presentation and disclosure of financial instruments. For public entities, ASU 2016-01 is effective for the annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is not permitted, except for certain provisions of ASU 2016-01, which are not applicable to the Company. The Company expects the adoption of ASU 2016-01 to have no material effect on the Company's consolidated results of operations, financial position or cash flows.

In August 2014, the FASB issued ASU 2014-14; "Receivables - Troubled Debt Restructurings by Creditors (Subtopic 310-40): Classification of Certain Government-Guaranteed Mortgage Loans upon Foreclosure (a consensus of the FASB Emerging Issues Task Force)". ASU 2014-14 is intended to improve accounting and disclosure consistency related to how creditors classify government-guaranteed mortgage loans, including the Federal HOusing Adminstration ("FHA") or UNited States Department of Veterans Affairs ("VA") guaranteed loans, upon foreclosure. For public entities, ASU 2014-09 is effective on a prospective basis for the annual periods, and interim periods within those annual periods, beginning after December 15, 2014. The Company has adopted ASU 2014-14 effective December 31, 2015. The adoption of ASU 2014-04 had no effect on the Company's consolidated results of operations, financial position or cash flows.

In May 2014, the FASB issued ASU 2014-09; "Revenue from Contracts with Customers (Topic 606). ASU 2014-09 is intended to clarify and simplify revenue recognition principles, develop a common revenue standard across industries and accounting frameworks, and improve the usefulness and consistency of revenue reporting. The effective dates for ASU 2014-09 were deferred one year when the FASB issued ASU 2015-14 "Revenue from Contracts with Customers (Topic 606: Deferral of the Effective Date" in August 2015. For public entities, ASU 2014-09 is effective on a retrospective basis for the annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is not permitted. The Company expects the adoption of ASU 2014-09 will have no material effect on the Company's consolidated results of operations, financial position or cash flows.

In January 2014, the FASB issued ASU 2014-04; "Receivables - Troubled Debt Restructurings by Creditors (Subtopic 310-40): Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure (a consensus of the FASB Emerging Issues Task Force)". ASU 2014-04 is intended to improve consistency among reporting entities by clarifying when an in substance foreclosure occurs, that is, when a creditor should derecognize a loan and recognize the corresponding real estate collateral as a separate asset. For public entities, ASU 2014-04 is effective for the annual periods, and interim periods within those annual periods, beginning after December 15, 2014. The Company has adopted ASU 2014-04 effective December 31, 2015. The adoption of ASU 2014-04 had no effect on the Company's consolidated results of operations, financial position or cash flows.

NOTE 2 – FAIR VALUE ACCOUNTING

ASC Topic 820-10, “ Fair Value Measurements and Disclosures ” establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The statement describes three levels of inputs that may be used to measure fair value:

Level 1- Quoted prices (unadjusted) for identical assets or liabilities in active markets that the Company has the ability to access as of the measurement date.

Level 2- Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3- Significant unobservable inputs that reflect the Company’s assumptions about the factors that market participants would use in pricing an asset or liability.

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input within the valuation hierarchy that is significant to the fair value measurement.

The fair value of securities available for sale is determined by obtaining market price quotes from independent third parties wherever such quotes are available (Level 1 inputs); or matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs). Where such quotes are not available, the Company utilizes independent third party valuation analysis to support the Company’s estimates and judgments in determining fair value (Level 3 inputs).

Assets Measured on a Recurring Basis

The following tables present the financial instruments measured at fair value on a recurring basis as of March 31, 2016 and September 30, 2015 :



	Fair Value		Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
March 31, 2016
Investment securities:
U.S. government agency obligations	$	16,279	$	—	$	16,279	$	—
Obligations of states and political subdivisions	30,145		—		30,145		—
Mortgage-backed securities	39,610		—		39,610		—
Federal Agricultural Mortgage Corporation	80		—		80		—
Total	$	86,114	$	—	$	86,114	$	—
September 30, 2015
Investment securities:
U.S. government agency obligations	$	15,020	$	—	$	15,020	$	—
Obligations of states and political
subdivisions	27,407		—		27,407		—
Mortgage-backed securities	37,440		—		37,440		—
Federal Agricultural Mortgage Corporation	54		—		54		—
Total	$	79,921	$	—	$	79,921	$	—

Assets Measured on a Nonrecurring Basis

The following tables present the financial instruments measured at fair value on a nonrecurring basis as of March 31, 2016 and September 30, 2015 :



	Fair Value		Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
March 31, 2016
Foreclosed and repossessed assets, net	$	832	$	—	$	—	$	832
Impaired loans with allocated allowances	1,821		—		—		1,821
Total	$	2,653	$	—	$	—	$	2,653
September 30, 2015
Foreclosed and repossessed assets, net	$	902	$	—	$	—	$	902
Impaired loans with allocated allowances	2,349		—		—		2,349
Total	$	3,251	$	—	$	—	$	3,251

The fair value of impaired loans referenced above was determined by obtaining independent third party appraisals and/or internally developed collateral valuations to support the Company’s estimates and judgments in determining the fair value of the underlying collateral supporting impaired loans.

The fair value of foreclosed and repossessed assets was determined by obtaining market price valuations from independent third parties wherever such quotes were available for other collateral owned. The Company utilized independent third party appraisals to support the Company’s estimates and judgments in determining fair value for other real estate owned.

Fair Values of Financial Instruments

ASC 825-10 and ASC 270-10, Interim Disclosures about Fair Value Financial Instruments , require disclosures about fair value financial instruments and significant assumptions used to estimate fair value. The estimated fair values of financial instruments not previously disclosed are determined as follows:

Cash and Cash Equivalents

Due to their short-term nature, the carrying amounts of cash and cash equivalents are considered to be a reasonable estimate of fair value and represents a level 1 measurement.

Other Interest-Bearing Deposits

Fair value of interest bearing deposits is estimated using a discounted cash flow analysis based on current interest rates being offered by instruments with similar terms and represents a level 3 measurement.

Non-marketable Equity Securities, at cost

Non-marketable equity securities are comprised of Federal Home Loan Bank stock and Federal Reserve Bank stock carried at cost, which are their redeemable fair values since the market for each category of this stock is restricted and represents a level 1 measurement.

Loans Receivable, net

Fair value is estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type such as real estate, C&I and consumer. The fair value of loans is calculated by discounting scheduled cash flows through the estimated maturity date using market discount rates reflecting the credit and interest rate risk inherent in the loan. The estimate of maturity is based on the Bank’s repayment schedules for each loan classification. The fair value of variable rate loans approximates carrying value. The fair value of loans is considered to be a level 3 measurement.

Accrued Interest Receivable and Payable

Due to their short-term nature, the carrying amounts of accrued interest receivable and payable are considered to be a reasonable estimate of fair value and represents a level 1 measurement.

Deposits

The fair value of deposits with no stated maturity, such as demand deposits, savings accounts, and money market accounts, is the amount payable on demand at the reporting date and represents a level 1 measurement. The fair value of fixed rate certificate accounts is calculated by using discounted cash flows applying interest rates currently being offered on similar certificates and represents a level measurement.

Federal Home Loan Bank Advances

The fair value of long-term borrowed funds is estimated using discounted cash flows based on the Bank’s current incremental borrowing rates for similar borrowing arrangements. The carrying value of short-term borrowed funds approximates their fair value and represents a level 2 measurement.

Off-Balance Sheet Instruments

The fair value of off-balance sheet commitments would be estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements, the current interest rates, and the present creditworthiness of the customers. Since this amount is immaterial to the Company’s consolidated financial statements, no amount for fair value is presented.

The table below represents what we would receive to sell an asset or what we would have to pay to transfer a liability in an orderly transaction between market participants at the measurement date. The carrying amount and estimated fair value of the Company's financial instruments as of the dates indicated below were as follows:



	March 31, 2016				September 30, 2015
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Financial assets:
Cash and cash equivalents	$	22,012	$	22,012	$	23,872	$	23,872
Interest-bearing deposits	2,992		3,061		2,992		3,022
Investment securities	93,541		93,773		87,933		88,140
Non-marketable equity securities, at cost	4,626		4,626		4,626		4,626
Loans receivable, net	460,189		479,624		444,014		462,227
Accrued interest receivable	1,725		1,725		1,574		1,574
Financial liabilities:
Deposits	$	473,833	$	477,794	$	456,298	$	460,450
FHLB advances	61,474		61,567		58,891		59,357
Accrued interest payable	38		38		18		18

NOTE 3 – LOANS, ALLOWANCE FOR LOAN LOSSES AND IMPAIRED LOANS

Credit Quality/Risk Ratings : Management utilizes a numeric risk rating system to identify and quantify the Bank’s risk of loss within its loan portfolio. Ratings are initially assigned prior to funding the loan, and may be changed at any time as circumstances warrant.

Ratings range from the highest to lowest quality based on factors that include measurements of ability to pay, collateral type and value, borrower stability and management experience. The Bank’s loan portfolio is presented below in accordance with the risk rating framework that has been commonly adopted by the federal banking agencies. The definitions of the various risk rating categories are as follows:

1 through 4 - Pass. A "Pass" loan means that the condition of the borrower and the performance of the loan is satisfactory or better.

5 - Watch. A "Watch" loan has clearly identifiable developing weaknesses that deserve additional attention from management. Weaknesses that are not corrected or mitigated, may jeopardize the ability of the borrower to repay the loan in the future.

6 - Special Mention. A "Special Mention" loan has one or more potential weakness that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or in the institution’s credit position in the future.

7 - Substandard. A "Substandard" loan is inadequately protected by the current net worth and paying capacity of the obligor or the collateral pledged, if any. Assets classified as substandard must have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.

8 - Doubtful. A "Doubtful" loan has all the weaknesses inherent in a Substandard loan with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable.

9 - Loss. Loans classified as "Loss" are considered uncollectible, and their continuance as bankable assets is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value, and a partial recovery may occur in the future.

Below is a breakdown of loans by risk rating as of March 31, 2016 :



	1 to 5		6		7		8		9		TOTAL
Real estate loans:
Consumer	$	171,848	$	—	$	1,476	$	—	$	—	$	173,324
Commercial/agricultural	85,821		—		—		—		—		85,821
Total real estate loans	257,669		—		1,476		—		—		259,145
Consumer and other loans:	204,883		—		472		—		2		205,357
Gross loans	$	462,552	$	—	$	1,948	$	—	$	2	$	464,502
Net deferred loan costs (fees)											1,990
Allowance for loan losses											(6,303		)
Loans receivable, net											$	460,189

Below is a breakdown of loans by risk rating as of September 30, 2015 :



	1 to 5		6		7		8		9		TOTAL
Real estate loans:
Consumer	$	179,946	$	—	$	1,260	$	—	$	—	$	181,206
Commercial/agricultural	63,266		—		—		—		—		63,266
Total real estate loans	243,212		—		1,260		—		—		244,472
Consumer and other loans:	203,054		—		547		—		7		203,608
Gross loans	$	446,266	$	—	$	1,807	$	—	$	7	$	448,080
Net deferred loan costs (fees)											2,430
Allowance for loan losses											(6,496		)
Loans receivable, net											$	444,014

The ALL represents management’s estimate of probable and inherent credit losses in the Bank’s loan portfolio. Estimating the amount of the ALL requires the exercise of significant judgment and the use of estimates related to the amount and timing of expected future cash flows on impaired loans, estimated losses on pools of homogeneous loans based on historical loss experience, and consideration of other qualitative factors such as current economic trends and conditions, all of which may be susceptible to significant change.

There are many factors affecting the ALL; some are quantitative, while others require qualitative judgment. The process for determining the ALL (which management believes adequately considers potential factors which result in probable credit losses), includes subjective elements and, therefore, may be susceptible to significant change. To the extent actual outcomes differ from management estimates, additional provision for loan losses could be required that could adversely affect the

Company’s earnings or financial position in future periods. Allocations of the ALL may be made for specific loans but the entire ALL is available for any loan that, in management’s judgment, should be charged-off or for which an actual loss is realized.

As an integral part of their examination process, various regulatory agencies also review the Bank’s ALL. Such agencies may require that changes in the ALL be recognized when such regulators’ credit evaluations differ from those of our management based on information available to the regulators at the time of their examinations.

Changes in the ALL by loan type for the periods presented below were as follows:



	Consumer Real Estate			Commercial/Agriculture Real Estate		Consumer and Other			Unallocated		Total
Six Months Ended March 31, 2016:
Allowance for Loan Losses:
Beginning balance, October 1, 2015	$	2,364		$	1,617	$	2,263		$	252	$	6,496
Charge-offs	(55		)	—		(308		)	—		(363		)
Recoveries	4			—		91			—		95
Provision	30			10		35			—		75
Allowance allocation adjustment	(420		)	208		182			30		—
Ending balance, March 31, 2016	$	1,923		$	1,835	$	2,263		$	282	$	6,303
Allowance for Loan Losses at March 31, 2016:
Amount of allowance for loan losses arising from loans individually evaluated for impairment	$	136		$	—	$	26		$	—	$	162
Amount of allowance for loan losses arising from loans collectively evaluated for impairment	$	1,787		$	1,835	$	2,237		$	282	$	6,141
Loans Receivable as of March 31, 2016:
Ending balance	$	172,915		$	85,821	$	207,756		$	—	$	466,492
Ending balance: individually evaluated for impairment	$	4,429		$	—	$	704		$	—	$	5,133
Ending balance: collectively evaluated for impairment	$	168,486		$	85,821	$	207,052		$	—	$	461,359



	Consumer Real Estate			Commercial/Agriculture Real Estate		Consumer and Other			Unallocated		Total
Year Ended September 30, 2015:
Allowance for Loan Losses:
Beginning balance, October 1, 2014	$	2,759		$	—	$	3,747		$	—	$	6,506
Charge-offs	(405		)	—		(601		)	—		(1,006		)
Recoveries	69			—		271			—		340
Provision	382			16		258			—		656
Allowance allocation adjustment	(441		)	1,601		(1,412		)	252		—
Ending balance, September 30, 2015	$	2,364		$	1,617	$	2,263		$	252	$	6,496
Allowance for Loan Losses at September 30, 2015:
Amount of allowance for loan losses arising from loans individually evaluated for impairment	$	463		$	—	$	119		$	—	$	582
Amount of allowance for loan losses arising from loans collectively evaluated for impairment	$	1,901		$	1,617	$	2,144		$	252	$	5,914
Loans Receivable as of September 30, 2015:
Ending balance	$	180,693		$	63,266	$	206,551		$	—	$	450,510
Ending balance: individually evaluated for impairment	$	4,466		$	—	$	848		$	—	$	5,314
Ending balance: collectively evaluated for impairment	$	176,227		$	63,266	$	205,703		$	—	$	445,196

The Bank has originated substantially all loans currently recorded on the Company’s accompanying Consolidated Balance Sheet, except as noted below.

In February 2016, the Bank selectively purchased loans and deposits from Central Bank in Rice Lake and Barron, Wisconsin in the amount of $16,363 and $27,131 , respectively.

During October 2012, the Bank entered into an agreement to purchase short term consumer loans from a third party on an ongoing basis. As part of the servicer agreement entered into in connection with this purchase agreement, the third party seller agreed to purchase or substitute performing consumer loans for all contracts that become 120 days past due. Pursuant to the ongoing loan purchase agreement, a Board of Director determinant was originally established to limit the purchase of these consumer loans under this arrangement to a maximum of $40,000 and a restricted reserve account was established at 3% of the outstanding consumer loan balances purchased up to a maximum of $1,000 , with such percentage amount of the loans being deposited into a segregated reserve account. The funds in the reserve account are to be released to compensate the Bank for any purchased loans that are not purchased back by the seller or substituted with performing loans and are ultimately charged off by the Bank. During the first quarter of fiscal 2015, the Board of Directors increased the limit of these purchased consumer loans to a maximum of $50,000 . As of March 31, 2016 , the balance of the consumer loans purchased was $ 45,635 . The balance in the cash reserve account has reached the maximum allowed balance of $1,000 , which is included in Deposits on the accompanying Consolidated Balance Sheet. To date, the Company has not charged off or experienced losses related to the purchased loans.

The weighted average rate earned on these purchased consumer loans was 4.24% as of March 31, 2016 . Since March 2014, the rate earned for all new loan originations of these purchased consumer loans was 4.00% . As of January 2016, new loans purchased are at an interest rate of 4.25% due to the increase in the Prime Rate.

Loans receivable by loan type as of the end of the periods shown below were as follows:



	Real Estate Loans				Commercial/Agriculture Real Estate Loans				Consumer and Other Loans				Total Loans
	March 31, 2016		September 30, 2015		March 31, 2016		September 30, 2015		March 31, 2016		September 30, 2015		March 31, 2016		September 30, 2015
Performing loans
Performing TDR loans	$	2,953	$	3,206	$	—	$	—	$	353	$	472	$	3,306	$	3,678
Performing loans other	168,819		176,650		85,821		63,266		207,067		205,695		461,707		445,611
Total performing loans	171,772		179,856		85,821		63,266		207,420		206,167		465,013		449,289

Nonperforming loans (1)
Nonperforming TDR loans	524		273		—		—		59		59		583		332
Nonperforming loans other	619		564		—		—		277		325		896		889
Total nonperforming loans	1,143		837		—		—		336		384		1,479		1,221
Total loans	$	172,915	$	180,693	$	85,821	$	63,266	$	207,756	$	206,551	$	466,492	$	450,510


(1)	Nonperforming loans are either 90+ days past due or nonaccrual.

An aging analysis of the Company’s real estate, commercial/agriculture real estate, consumer and other loans and purchased third party loans as of March 31, 2016 and September 30, 2015 , respectively, was as follows:



	30-59 Days Past Due		60-89 Days Past Due		Greater Than 89 Days		Total Past Due		Current		Total Loans		Recorded Investment > 89 days and Accruing
March 31, 2016
Real estate loans	$	1,246	$	55	$	734	$	2,035	$	170,880	$	172,915	$	163
Commercial/Agriculture real estate	—		—		—		—		85,821		85,821		—
Consumer and other loans	427		22		103		552		161,569		162,121		1
Purchased third party loans	427		183		123		733		44,902		45,635		123
Total	$	2,100	$	260	$	960	$	3,320	$	463,172	$	466,492	$	287
September 30, 2015
Real estate loans	$	555	$	500	$	387	$	1,442	$	179,251	$	180,693	$	244
Commercial/Agriculture real estate	—		—		—		—		63,266		63,266		—
Consumer and other loans	386		65		135		586		166,260		166,846		52
Purchased third party loans	238		189		177		604		39,101		39,705		177
Total	$	1,179	$	754	$	699	$	2,632	$	447,878	$	450,510	$	473

At March 31, 2016 , the Company has identified $3,889 of TDR loans and $1,244 of substandard loans as impaired, totaling $5,133 , which includes $3,306 of performing TDR loans. A loan is identified as impaired when, based on current information and events, it is probable that the Bank will be unable to collect all amounts due according to the contractual terms of the loan agreement. Performing TDRs consist of loans that have been modified and are performing in accordance with the modified terms for a sufficient length of time, generally six months, or loans that were modified on a proactive basis. A summary of the Company’s impaired loans as of March 31, 2016 and September 30, 2015 was as follows:



	With No Related Allowance Recorded								With An Allowance Recorded								Totals
	Consumer Real Estate		Commercial/Agricultural Real Estate		Consumer and Other		Total		Consumer Real Estate		Commercial/Agricultural Real Estate		Consumer and Other		Total		Consumer Real Estate		Commercial/Agricultural Real Estate		Consumer and Other		Total
Recorded investment at March 31, 2016	$	2,779	$	—	$	533	$	3,312	$	1,650	$	—	$	171	$	1,821	$	4,429	$	—	$	704	$	5,133
Unpaid balance at March 31, 2016	2,779		—		533		3,312		1,650		—		171		1,821		4,429		—		704		5,133
Recorded investment at September 30, 2015	2,494		—		471		2,965		1,972		—		377		2,349		4,466		—		848		5,314
Unpaid balance at September 30, 2015	2,494		—		471		2,965		1,972		—		377		2,349		4,466		—		848		5,314
Average recorded investment; Six months ended March 31, 2016	2,866		—		542		3,408		1,665		—		235		1,900		4,531		—		777		5,308
Average recorded investment; twelve months ended September 30, 2015	3,178		—		485		3,663		2,220		—		556		2,776		5,398		—		1,041		6,439
Interest income received; six months ended March 31, 2016	60		—		23		83		20		—		3		23		80		—		26		106
Interest income received; twelve months ended September 30, 2015	136		—		35		171		61		—		23		84		197		—		58		255

Troubled Debt Restructuring – A TDR includes a loan modification where a borrower is experiencing financial difficulty and the Bank grants a concession to that borrower that the Bank would not otherwise consider except for the borrower’s financial difficulties. Concessions include an extension of loan terms, renewals of existing balloon loans, reductions in interest rates and consolidating existing Bank loans at modified terms. A TDR may be either on accrual or nonaccrual status based upon the performance of the borrower and management’s assessment of collectability. If a TDR is placed on nonaccrual status, it remains there until a sufficient period of performance under the restructured terms has occurred at which time it is returned to accrual status. There were 5 delinquent TDRs greater than 59 days past due with a recorded investment of $273 at March 31, 2016 , compared to 4 such loans with a recorded investment of $191 at September 30, 2015 . A summary of loans by loan type modified in a troubled debt restructuring as of March 31, 2016 and March 31, 2015 , and during each of the six months then ended was as follows:



	Consumer Real Estate			Commercial/Agricultural Real Estate		Consumer and Other			Total
March 31, 2016 and
Six Months then Ended:
Accruing / Performing:
Beginning balance	$	3,206		$	—	$	472		$	3,678
Principal payments	(62		)	—		(80		)	(142		)
Charge-offs	—			—		—			—
Advances	—			—		1			1
New restructured (1)	223			—		6			229
Class transfers out (2)	—			—		—			—
Transfers between accrual/non-accrual	(414		)	—		(46		)	(460		)
Ending balance	$	2,953		$	—	$	353		$	3,306
Non-accrual / Non-performing:
Beginning balance	$	273		$	—	$	59		$	332
Principal payments	(131		)	—		(22		)	(153		)
Charge-offs	(34		)	—		(25		)	(59		)
Advances	2			—		1			3
New restructured (1)	—			—		—			—
Class transfers out (2)	—			—		—			—
Transfers between accrual/non-accrual	414			—		46			460
Ending balance	$	524		$	—	$	59		$	583
Totals:
Beginning balance	$	3,479		$	—	$	531		$	4,010
Principal payments	(193		)	—		(102		)	(295		)
Charge-offs	(34		)	—		(25		)	(59		)
Advances	2			—		2			4
New restructured (1)	223			—		6			229
Class transfers out (2)	—			—		—			—
Transfers between accrual/non-accrual	—			—		—			—
Ending balance	$	3,477		$	—	$	412		$	3,889


(1)	“New restructured” represent loans restructured during the applicable period that met TDR criteria in accordance with the Bank’s policy at the time of the restructuring.


(2)	“Class transfers out” represent previously restructured loans that are in compliance with the modified terms for a minimum of one year, are yielding a market rate and conform to normal underwriting standards.



	Consumer Real Estate			Commercial/Agricultural Real Estate		Consumer and Other			Total
March 31, 2015 and
Six Months then Ended:
Accruing / Performing:
Beginning balance	$	4,535		$	—	$	797		$	5,332
Principal payments	(398		)	—		(136		)	(534		)
Charge-offs	—			—		(2		)	(2		)
Advances	10			—		—			10
New restructured (1)	17			—		14			31
Class transfers out (2)	(181		)	—		—			(181		)
Transfers between accrual/non-accrual	—			—		(42		)	(42		)
Ending balance	$	3,983		$	—	$	631		$	4,614
Non-accrual / Non-performing:
Beginning balance	$	202		$	—	$	47		$	249
Principal payments	(102		)	—		(4		)	(106		)
Charge-offs	(16		)	—		(31		)	(47		)
Advances	—			—		—			—
New restructured (1)	—			—		—			—
Class transfers out (2)	—			—		—			—
Transfers between accrual/non-accrual	—			—		42			42
Ending balance	$	84		$	—	$	54		$	138
Totals:
Beginning balance	$	4,737		$	—	$	844		$	5,581
Principal payments	(500		)	—		(140		)	(640		)
Charge-offs	(16		)	—		(33		)	(49		)
Advances	10			—		—			10
New restructured (1)	17			—		14			31
Class transfers out (2)	(181		)	—		—			(181		)
Transfers between accrual/non-accrual	—			—		—			—
Ending balance	$	4,067		$	—	$	685		$	4,752


(1)	“New restructured” represent loans restructured during the applicable period that met TDR criteria in accordance with the Bank’s policy at the time of the restructuring.


(2)	“Class transfers out” represent previously restructured loans that are in compliance with the modified terms for a minimum of one year, are yielding a market rate and conform to normal underwriting standards.

Below is a breakdown of troubled debt restructurings:



	March 31, 2016			September 30, 2015
	Number of Modifications	Recorded Investment		Number of Modifications	Recorded Investment
Troubled debt restructurings:
Consumer Real Estate	33	$	3,477	34	$	3,479
Commercial/Agricultural Real Estate	—	—		—	—
Consumer and other	28	412		39	531
Total troubled debt restructurings	61	$	3,889	73	$	4,010

NOTE 4 – INVESTMENT SECURITIES

The amortized cost, estimated fair value and related unrealized gains and losses on securities available for sale and held to maturity as of March 31, 2016 and September 30, 2015 , respectively, were as follows:



Available for sale securities	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
March 31, 2016
U.S. government agency obligations	$	16,346	$	33	$	100	$	16,279
Obligations of states and political subdivisions	29,830		361		46		30,145
Mortgage-backed securities	39,447		202		39		39,610
Federal Agricultural Mortgage Corporation	71		9		—		80
Total available for sale securities	$	85,694	$	605	$	185	$	86,114

September 30, 2015
U.S. government agency obligations	$	15,240	$	—	$	220	$	15,020
Obligations of states and political subdivisions	27,573		81		247		27,407
Mortgage-backed securities	37,451		133		144		37,440
Federal Agricultural Mortgage Corporation	71		—		17		54
Total available for sale securities	$	80,335	$	214	$	628	$	79,921



Held to maturity securities	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
March 31, 2016
Obligations of states and political subdivisions	$	1,317	$	9	$	—	$	1,326
Mortgage-backed securities	6,110		223		—		6,333
Total held to maturity securities	$	7,427	$	232	$	—	$	7,659

September 30, 2015
Obligations of states and political subdivisions	$	1,319	$	3	$	4	$	1,318
Mortgage-backed securities	6,693		208		—		6,901
Total held to maturity securities	$	8,012	$	211	$	4	$	8,219

As of March 31, 2016 , the Bank has pledged U.S. Government Agency securities with a carrying value of $4,137 as collateral against a borrowing line of credit with the Federal Reserve Bank. However, as of March 31, 2016 , there were no borrowings outstanding on this Federal Reserve Bank line of credit. As of March 31, 2016 , the Bank has pledged U.S. Government Agency securities with a carrying value of $5,500 and mortgage-backed securities with a carrying value of $4,184 as collateral against specific municipal deposits.

NOTE 5 – FEDERAL HOME LOAN BANK ADVANCES

A summary of Federal Home Loan Bank advances at March 31, 2016 and September 30, 2015 was as follows:



	As of		Weighted Average Rate		As of		Weighted Average Rate
Maturing during the fiscal year	March 31,				September 30,
Ended September 30,	2016				2015
2016	$	36,183	0.60	%	$	33,600	0.67	%
2017	15,461		1.46	%	15,461		1.46	%
2018	6,100		2.24	%	6,100		2.24	%
2019	3,730		1.87	%	3,730		1.87	%
2020	—		—	%	—		—	%
Total fixed maturity	$	61,474	1.06	%	$	58,891	1.12	%
Advances with amortizing principal	—		—	%	—		—	%
Total advances	$	61,474	1.06	%	$	58,891	1.12	%
Irrevocable standby letters of credit	$	15,560			$	24,040
Total credit outstanding	$	77,034			$	82,931

The Bank has an irrevocable Standby Letter of Credit Master Reimbursement Agreement with the Federal Home Loan Bank. This irrevocable standby letter of credit ("LOC") is supported by loan collateral as an alternative to directly pledging investment securities on behalf of a municipal customer as collateral for their interest bearing deposit balances.

At March 31, 2016 , the Bank’s available and unused portion of this borrowing arrangement was approximately $63,700 . The weighted average remaining term of the borrowings at March 31, 2016 is 9.25 months compared to 14.25 months at September 30, 2015.

Maximum month-end amounts outstanding were $63,974 and $53,891 during the six month periods ended March 31, 2016 and 2015 , respectively.

Each Federal Home Loan Bank advance is payable at the maturity date, with a prepayment penalty for fixed rate advances. These advances are secured by $181,358 of real estate mortgage loans.

NOTE 6 – INCOME TAXES

Income tax expense (benefit) for each of the periods shown below consisted of the following:



	Six months ended March 31, 2016		Six months ended March 31, 2015
Current tax provision
Federal	$	482	$	820
State	81		123
	563		943
Deferred tax (benefit) provision
Federal	235		(169		)
State	45		1
	280		(168		)
Total	$	843	$	775

The provision for income taxes differs from the amount of income tax determined by applying statutory federal income tax rates to pretax income as result of the following differences:



	Six months ended March 31, 2016					Six months ended March 31, 2015
	Amount			Rate		Amount			Rate
Tax expense at statutory rate	$	817		34.0	%	$	709		34.0	%
State income taxes net of federal taxes	126			5.2		124			6.0
Tax exempt interest	(76		)	(3.2	)	(23		)	(1.1	)
Other	(24		)	(0.9	)	(35		)	(1.7	)
Total	$	843		35.1	%	$	775		37.2	%

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The following is a summary of the significant components of the Company’s deferred tax assets and liabilities as of March 31, 2016 and September 30, 2015 , respectively:



	March 31, 2016			September 30, 2015
Deferred tax assets:
Allowance for loan losses	$	2,469		$	2,544
Deferred loan costs/fees	113			145
Director/officer compensation plans	545			536
Net unrealized loss on securities available for sale	—			166
Economic performance accruals	386			388
Other	120			132
Deferred tax assets	3,633			3,911
Deferred tax liabilities:
Office properties and equipment	(253		)	(114		)
Net unrealized gain on securities available for sale	(168		)	—
Other	(117		)	(110		)
Deferred tax liabilities	(538		)	(224		)
Net deferred tax assets	$	3,095		$	3,687

The Company regularly reviews the carrying amount of its deferred tax assets to determine if the establishment of a valuation allowance is necessary, as further discussed in Note 1 “Nature of Business and Summary of Significant Accounting Policies,” above. At March 31, 2016 and September 30, 2015 , respectively, management determined that no valuation allowance was necessary for any of the deferred tax assets.

The Company’s income tax returns are subject to review and examination by federal, state and local government authorities. As of March 31, 2016 , years open to examination by the U.S. Internal Revenue Service include taxable years ended September 30, 2012 to present. The years open to examination by state and local government authorities varies by jurisdiction.

The tax effects from uncertain tax positions can be recognized in the consolidated financial statements, provided the position is more likely than not to be sustained on audit, based on the technical merits of the position. The Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the consolidated financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. The Company applied the foregoing accounting standard to all of its tax positions for which the statute of limitations remained open as of the date of the accompanying consolidated financial statements.

The Company’s policy is to recognize interest and penalties related to income tax issues as components of other noninterest expense. During the six month periods ended March 31, 2016 and 2015 , the Company did not recognize any interest or penalties related to income tax issues in its consolidated statements of operations. The Company had no recorded accrual or liability for the payment of interest and penalties related to income tax issues as of March 31, 2016 or September 30, 2015 respectively.

NOTE 7 – STOCK-BASED COMPENSATION

In February 2005, the Company’s stockholders approved the Company’s 2004 Recognition and Retention Plan. This plan provides for the grant of up to 113,910 shares of the Company’s common stock to eligible participants under this plan. As of March 31, 2016 , 113,910 restricted shares under this plan were granted. In February 2005, the Company’s stockholders also approved the Company’s 2004 Stock Option and Incentive Plan. This plan provides for the grant of nonqualified and incentive stock options and stock appreciation rights to eligible participants under the plan. The plan provides for the grant of awards for up to 284,778 shares of the Company’s common stock. At March 31, 2016 , 284,778 options had been granted under this plan to eligible participants.

In February 2008, the Company’s stockholders approved the Company’s 2008 Equity Incentive Plan. The aggregate number of shares of common stock reserved and available for issuance under the 2008 Equity Incentive Plan is 597,605 shares. Under this Plan, the Compensation Committee may grant stock options and stock appreciation rights that, upon exercise, result in the issuance of 426,860 shares of the Company’s common stock. The Committee may also grant shares of restricted stock and restricted stock units for an aggregate of 170,745 shares of Company common stock under this plan. As of March 31, 2016 , 32,500 restricted shares under this plan were granted. As of March 31, 2016 , 112,000 options had been granted to eligible participants.

Restricted shares granted to date under these plans were awarded at no cost to the employee and vest pro rata over a five -year period from the grant date. Options granted to date under these plans vest pro rata over a five -year period from the grant date. Unexercised, nonqualified stock options expire within 15 years of the grant date and unexercised incentive stock options expire within 10 years of the grant date.

Compensation expense related to restricted stock awards from both the 2004 Recognition and Retention Plan and the 2008 Equity Incentive Plan was $26 and $53 for the three and six months ended March 31, 2016 , respectively. Compensation expense related to restricted stock awards from both the 2004 Recognition and Retention Plan and the 2008 Equity Incentive Plan was $26 and $44 for the three and six months ended March 31, 2015 , respectively.

Restricted Common Stock Award

	March 31, 2016				September 30, 2015
	Number of Shares		Weighted Average Grant Price		Number of Shares		Weighted Average Grant Price
Restricted Shares
Unvested and outstanding at beginning of fiscal year	46,857		$	7.59	41,014		$	6.51
Granted	—		—		17,500		9.20
Vested	(10,595	)	7.56		(11,657	)	6.18
Forfeited	—		—		—		—
Unvested and outstanding fiscal to date	36,262		$	7.60	46,857		$	7.59

The Company accounts for stock-based employee compensation related to the Company’s 2004 Stock Option and Incentive Plan and the 2008 Equity Incentive Plan using the fair-value-based method. Accordingly, management records compensation expense based on the value of the award as measured on the grant date and then the Company recognizes that cost over the vesting period for the award. The compensation cost recognized for stock-based employee compensation related to both plans for the three and six month periods ended March 31, 2016 was $16 and $32 , respectively. The compensation cost recognized for stock-based employee compensation related to both plans for the three and six month periods ended March 31, 2015 was $16 and $28 , respectively.

Common Stock Option Awards

	Option Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
2016
Outstanding at September 30, 2015	171,737		$	7.46
Granted	17,000		9.21
Exercised	(17,272	)
Forfeited or expired	—
Outstanding at March 31, 2016	171,465		$	7.83	7.15
Exercisable at March 31, 2016	69,120		$	7.49	5.59	$	103
Fully vested and expected to vest	171,465		$	7.83	7.15	$	209
2015
Outstanding at September 30, 2014	179,192		$	6.52
Granted	50,000		9.20
Exercised	(51,955	)
Forfeited or expired	(5,500	)
Outstanding at September 30, 2015	171,737		$	7.46	7.58
Exercisable at September 30, 2015	63,764		$	6.79	5.33
Fully vested and expected to vest	171,737		$	7.46	7.58

Information related to the 2004 Stock Option and Incentive Plan and 2008 Equity Incentive Plan during each year follows:



	2016		2015
Intrinsic value of options exercised	$	60	$	180
Cash received from options exercised	$	95	$	299
Tax benefit realized from options exercised	$	—	$	9

Set forth below is a table showing relevant assumptions used in calculating stock option expense related to the Company’s 2004 Stock Option and Incentive Plan and 2008 Equity Incentive Plan:



	2016		2015
Dividend yield	0.87	%	0.88	%
Risk-free interest rate	2.1	%	2.1	%
Weighted average expected life (years)	10		10
Expected volatility	3	%	2	%

NOTE 8 – OTHER COMPREHENSIVE INCOME (LOSS)

The following table shows the tax effects allocated to each component of other comprehensive income for the six months ended March 31, 2016 :



	Before-Tax Amount			Tax Expense			Net-of-Tax Amount
Unrealized gains (losses) on securities:
Net unrealized gains arising during the period	$	831		(333		)	$	498
Less: reclassification adjustment for gains included in net income	4			(1		)	3
Defined benefit plans:
Amortization of unrecognized prior service costs and net gains	(58		)	23			(35		)
Other comprehensive income	$	777		$	(311	)	$	466

The changes in the accumulated balances for each component of other comprehensive income (loss) for the six months ended March 31, 2016 were as follows:



	Unrealized Gains (Losses) on Securities			Defined Benefit Plans			Other Comprehensive Income (Loss)
Balance, October 1, 2015	$	(249	)	$	35		$	(214	)
Current year-to-date other comprehensive income, net of tax	501			(35		)	466
Ending balance, March 31, 2016	$	252		$	—		$	252

NOTE 9 – TERMINATION OF CERTAIN RETIREMENT PLANS

The Company maintained a Supplemental Benefit Plan For Key Employees ("SERP") which was an unfunded, unsecured, non-contributory defined benefit plan, providing retirement benefits for certain former key employees previously designated by the Company’s Board of Directors. Benefits under the SERP generally were based on such former employees’ years of service and compensation during the years preceding their retirement. In May 2009, any additional accrual of benefits under the SERP was suspended.

The Company also maintained a Directors’ Retirement Plan ("DRP"), which was an unfunded, unsecured, non-contributory defined benefit plan, providing for supplemental pension benefits for its directors following their termination of service as a director of the Company. Benefits were based on a formula that included each participant’s past and future earnings and years of service with Citizens. Moreover, the benefit amounts owed by the Company under the DRP were determined by individual director agreements entered into by the Company with such participants. The remaining DRP liability related to current and former Directors of the Company.

The Company's Board of Directors voted to terminate each of the SERP and the DRP at its regularly scheduled Board meeting on November 19, 2015, with such termination being effective as of the same date. In connection with the termination of each plan, the Board of Directors, in accordance with applicable law and each applicable participant’s plan participation agreement, negotiated lump sum payments to the participants in satisfaction of the Company’s total liability to each participant under the SERP and DRP. In accordance with the final settlement of the Company’s obligations under such plans, the Company will make two payments (each for 50% of the total liability owed) to each plan participant. The first payment will occur in December 2016 and the second and final payment will occur in January 2017.

In connection with the settlement of all obligations owed by the Company to the participants in the SERP and the DRP, the Company retained an independent consultant during the three months ended March 31, 2016 to perform an actuarial calculation of the final amount of the accumulated benefit owed by the Company to each plan participant. In making this calculation, the consultant made certain assumptions regarding the applicable discount rate to be used and regarding certain other relevant factors to determine the amount of the benefit obligation due each participant, in each case taking into account the terms of each participant’s negotiated plan benefit agreement and the terms of each plan. Differences between the amount of the projected accrued benefit obligation previously recorded by the Company in its consolidated financial statements in connection with these plans and the actual amount of the benefit obligation to be paid to the participants, based upon the calculations of the independent consultant, is recorded in the aggregate as a gain of $41 during the quarter ended March 31, 2016 on the accompanying Consolidated Statements of Operations line item "Salaries and related benefits" as a reduction to the expense. Moreover, as of March 31, 2016, the Company recorded a liability on the accompanying Consolidated Balance Sheet of $1,084 for the aggregate amount of the benefit obligation due plan participants currently receiving monthly and quarterly payments and the final lump sum payment amounts due in December 2016 and January 2017.

The components of the SERP and Directors' Retirement plans' cost at March 31, 2016 are summarized below.



	2016
Beginning accrued benefit cost	$	1,120
Service cost	—
Interest cost	44
Amortization of prior service costs	1
Net plan termination Credit	(41		)
Net periodic benefit cost	4
Benefits paid	(40		)
Ending accrued benefit cost	$	1,084

Amounts recognized in consolidated balance sheets:



	March 31, 2016
Pension obligation	$	1,084

Prior service cost	—
Net loss (gain)	—
Total accumulated other comprehensive income, before tax	—


ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

Certain statements contained in this report are considered “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may be identified by the use of forward-looking words or phrases such as “anticipate,” “believe,” “could,” “expect,” “intend,” “may,” “planned,” “potential,” “should,” “will,” “would,” or the negative of those terms or other words of similar meaning. Such forward-looking statements in this report are inherently subject to many uncertainties arising in the Company’s operations and business environment. These uncertainties include general economic conditions, in particular, relating to consumer demand for the Bank’s products and services; the Bank’s ability to maintain current deposit and loan levels at current interest rates; competitive and technological developments; deteriorating credit quality, including changes in the interest rate environment reducing interest margins; prepayment speeds, loan origination and sale volumes, charge-offs and loan loss provisions; the Bank’s ability to maintain required capital levels and adequate sources of funding and liquidity; maintaining capital requirements may limit the Bank’s operations and potential growth; changes and trends in capital markets; competitive pressures among depository institutions; effects of critical accounting estimates and judgments; changes in accounting policies or procedures as may be required by the Financial Accounting Standards Board (FASB) or other regulatory agencies overseeing the Bank; the Bank’s ability to implement its cost-savings and revenue enhancement initiatives including managing costs associated with its branch consolidation and new market branch growth initiatives; legislative or regulatory changes or actions, or significant litigation, adversely affecting the Bank or the Company; fluctuation of the Company’s stock price; the Bank's ability to attract and retain key personnel; the Bank's ability to secure confidential information through the use of computer systems and telecommunications networks; and the impact of reputational risk created by these developments on such matters as business generation and retention, funding and liquidity. Shareholders, potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. Such uncertainties and other risks that may affect the Company’s performance are discussed further in Part I, Item 1A, “Risk Factors,” in the Company’s Form 10-K, for the year ended September 30, 2015 filed with the Securities and Exchange Commission on December 7, 2015. The Company undertakes no obligation to make any revisions to the forward-looking statements contained in this report or to update them to reflect events or circumstances occurring after the date of this report.

GENERAL

The following discussion sets forth management’s discussion and analysis of our consolidated financial condition as of March 31, 2016 , and our consolidated results of operations for the six months ended March 31, 2016 , compared to the same period in the prior fiscal year for the six months ended March 31, 2015 . 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 the Company’s annual report on Form 10-K filed with the Securities and Exchange Commission on December 7, 2015. 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.

PERFORMANCE SUMMARY

The following table sets forth our results of operations and related summary information for the three and six month periods ended March 31, 2016 and 2015 , respectively:



	Three Months Ended March 31,						Six Months Ended March 31,
	2016			2015			2016			2015
Net income as reported	$	701		$	596		$	1,561		$	1,311
EPS - basic, as reported	$	0.13		$	0.11		$	0.30		$	0.25
EPS - diluted, as reported	$	0.13		$	0.11		$	0.30		$	0.25
Cash dividends paid	$	0.12		$	0.08		$	0.12		$	0.08
Return on average assets (annualized)	0.48		%	0.42		%	0.53		%	0.46		%
Return on average equity (annualized)	4.56		%	4.10		%	5.08		%	4.52		%
Efficiency ratio, as reported (1)	76.88		%	78.05		%	75.09		%	75.39		%


(1)	The efficiency ratio is calculated as non-interest expense minus branch closure costs divided by the sum of net interest income plus non-interest income, excluding net impairment losses recognized in net income. A lower ratio indicates greater efficiency.

Key factors behind these results were:

•

Net interest income was $4,627 and $9,180 for the three and six month periods ended March 31, 2016 , an increase of $42 or 0.92% from the prior three month period and a decrease of $246 or 2.61% from the prior year period. The six month decrease was primarily due to loan sales in prior years of fixed rate longer term consumer real estate loans, the continued pressure on interest earning asset yields from the low interest rate environment and from market competition. These loan sales were part of the Company's ongoing loan portfolio and balance sheet management activities undertaken to manage, among other things, interest rate risk and liquidity. The three month increase is due primarily to increased investment income on our slightly larger investment portfolio.


•	The net interest margin of 3.28% for the three months ended March 31, 2016 represents a 7 bp decrease from a net interest margin of 3.35% for the three months ended March 31, 2015 . The net interest margin of 3.25 % for the six months ended March 31, 2016 represents a 16 bp decrease from a net interest margin of 3.41% for the six months ended March 31, 2015 .

•

Total loans were $466,492 at March 31, 2016 , an increase of $15,982 , or 3.55% , from their balances at September 30, 2015 , due to commercial loan growth and the Central Bank Rice Lake and Barron, Wisconsin selective loans purchase in the amount of $16,363, offset by scheduled payments and payoffs on consumer loans. Total deposits were $473,833 at March 31, 2016 , an increase of $17,535 , or 3.84% , from their balances at September 30, 2015 , mainly due to deposits received from the Central Bank Rice Lake and Barron, Wisconsin selective deposits purchase in the amount of $27,131, offset by decreases in balances of brokered deposits in the amount of $10,317.

•

Net loan charge-offs decreased from $338 for the six months ended March 31, 2015 to $268 for the six months ended March 31, 2016 , as a result of overall credit quality improvement within our loan portfolio. Continued lower levels of net loan charge-offs in recent periods led to a decreased provision for loan losses of $75 for the six month period ended March 31, 2016 , compared to $385 for the six months ended March 31, 2015 . Annualized net loan charge-offs as a percentage of average loans were 0.12% for the six months ended March 31, 2016 , compared to 0.15% for the six months ended March 31, 2015 .


•	Non-interest income decreased from $924 and $1,958 for the three and six months ended March 31, 2015 to $810 and $1,760 for the three and six months ended March 31, 2016 , due to a decrease in overdraft fee income, secondary market loan origination fees and a loan sale premium received in the first quarter of the previous year in the amount of $89 recorded in loan fees and service charges.

•

Non-interest expense decreased $54 and $452 for the three and six months ended March 31, 2016 from $4,421 to $4,367 and from $8,913 to $8,461 , respectively, compared to the three and six month periods ending March 31, 2015 . During the current three month period, occupancy expense increased due to contractual rent payments due from two retail branches closed during the current quarter in the amount of $187. During the current six month period, occupancy expenses decreased due to efficiencies and cost savings realized over recent periods through management initiatives including branch closures and technology improvements. Occupancy costs consist primarily of office rental and depreciation expenses. Other non-interest expense reductions, including professional services, reflected reduced expenses as part of our branch rationalization plan.

CRITICAL ACCOUNTING ESTIMATES

Our consolidated financial statements are prepared in accordance with GAAP. In connection with the preparation of our financial statements, we are required to make assumptions and estimates about future events, and apply judgments that affect the reported amount of assets, liabilities, revenue, expenses and their related disclosures. We base our assumptions, estimates and judgments on historical experience, current trends and other factors that our management believes to be relevant at the time our consolidated financial statements are prepared. Some of these estimates are more critical than others. In addition to the policies included in Note 1, “Nature of Business and Summary of Significant Accounting Policies,” to the Consolidated Financial Statements included as an exhibit to our Form 10-K annual report for the fiscal year ending September 30, 2015 , our critical accounting estimates are as follows:

Allowance for Loan Losses.

We maintain an allowance for loan losses to absorb probable incurred losses in our loan portfolio. The allowance is based on ongoing, quarterly assessments of the estimated probable and inherent losses in our loan portfolio. In evaluating the level of

the allowance for loan loss, we consider the types of loans and the amount of loans in our loan portfolio, historical loss experience, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying loan collateral and prevailing economic conditions. We follow all applicable regulatory guidance, including the “Interagency Policy Statement on the Allowance for Loan and Lease Losses,” issued by the Federal Financial Institutions Examination Council ("FFIEC"). We believe that the Bank’s Allowance for Loan Losses Policy conforms to all applicable regulatory requirements. However, based on periodic examinations by regulators, the amount of the allowance for loan losses recorded during a particular period may be adjusted.

Our determination of the allowance for loan losses is based on (1) specific allowances for specifically identified and evaluated impaired loans and their corresponding estimated loss based on likelihood of default, payment history, and net realizable value of underlying collateral; and (2) a general allowance on loans not specifically identified in (1) above, based on historical loss ratios which are adjusted for qualitative and general economic factors. We continue to refine our allowance for loan losses methodology, with an increased emphasis on historical performance adjusted for applicable economic and qualitative factors.

Assessing the allowance for loan losses is inherently subjective as it requires making material estimates, including estimating the amount and timing of future cash flows expected to be received on impaired loans, any of which estimates may be susceptible to significant change. In our opinion, the allowance for loan losses, when taken as a whole, reflects estimated probable and inherent loan losses in our loan portfolio.

Income Taxes.

The assessment of tax assets and liabilities involves the use of estimates, assumptions, interpretations, and judgments concerning certain accounting pronouncements and federal and state tax codes. There can be no assurance that future events, such as court decisions or positions of federal and state taxing authorities, will not differ from management’s current assessment, the impact of which could be material to our consolidated results of our operations and reported earnings. We believe that the tax assets and liabilities are adequate and properly recorded in the accompanying consolidated financial statements. As of March 31, 2016 , management does not believe a valuation allowance related to the realizability of its deferred tax assets is necessary.

STATEMENT OF OPERATIONS ANALYSIS

Net Interest Income. Net interest income represents the difference between the dollar amount of interest earned on interest-bearing assets and the dollar amount of interest paid on interest-bearing liabilities. The interest income and expense of financial institutions (including those of the Bank) are significantly affected by general economic conditions, competition, policies of regulatory authorities and other 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, interest rate spread, and net interest margin for the six month periods ended March 31, 2016 and 2015, respectively.

Tax equivalent net interest income was $4,693 and $9,306 for the three and six months ended March 31, 2016 , compared to $4,604 and $9,465 for the three and six months ended March 31, 2015 . The net interest margin for the three and six month periods ended March 31, 2016 was 3.28% and 3.25% compared to 3.35% and 3.41% for the three and six month periods ended March 31, 2015 .

As shown in the rate/volume analysis in the following pages, volume changes resulted in an increase of $105 and $47 in net interest income for the three and six month periods ended March 31, 2016 compared to the comparable prior year period. The increase and changes in the composition of interest earning assets resulted in an increase of $137 and $88 for the three and six month periods ended March 31, 2016 , compared to the same period in the prior year. Rate changes on interest earning assets decreased net interest income by $40 and $237 for the three and six month periods ended March 31, 2016 . Rate changes on interest-bearing liabilities decreased interest expense by $24 and $31 over the same period in the prior year, resulting in a net decrease of $16 and $206 in net interest income as a result of changes in interest rates due to competitive pricing during the three and six month periods ended March 31, 2016 . Rate decreases on loans are reflective of the overall lower market interest rate environment versus historic levels.

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 yield on interest earning assets, rates paid on interest-bearing liabilities and the resultant spread at or during the six month period ended March 31, 2016 , and for the comparable prior year six month periods. Non-accruing loans have been included in the table as loans carrying a zero yield.

Average interest earning assets were $575,037 and $572,132 for the three and six month periods ended March 31, 2016 , compared to $556,671 and $556,213 for the comparable prior year periods. Interest income on interest earning assets was $5,808 and $11,542 for the three and six month periods ended March 31, 2016 compared to $5,711 and $11,691 for the same periods in the prior year. Interest income is comprised primarily of interest income on loans and interest income on investment securities adjusted for the tax benefit of tax-exempt securities. Interest income on loans was $5,301 and $10,551 for the three and six month periods ended March 31, 2016 , compared to $5,375 and $10,971 for the comparable prior year periods. The decrease in loan interest income in the current year three and six month periods was primarily due to a heightened level of competition for new loans in the current year periods over the comparable periods in the prior year. Interest income on investment securities was $429 and $853 for the three and six month periods ended March 31, 2016 , compared to $288 and $630 for the similar prior year periods. The increase is due to an increase in our investment portfolio from funds received from the Central Bank selective loans and deposits purchase.

Average interest-bearing liabilities were $500,031 and $498,718 for the three and six month periods ended March 31, 2016 , compared to $487,782 and $488,401 for the similar prior year periods. Interest expense on interest-bearing liabilities was $1,115 and $2,236 for the three and six month periods ended March 31, 2016 , compared to $1,107 and $2,226 for the same periods in the prior year. Interest expense remained relatively flat during the current three and six month periods compared to the comparable prior year periods, as increases in deposit balances were offset by corresponding changes in deposit mix, resulting in slightly lower rates paid on deposits.

For the three and six months ended March 31, 2016 , interest expense on interest-bearing deposits increased $8 and $5 from volume and mix changes and decreased $3 and increased $4 from the impact of the rate environment, resulting in an aggregate increase of $5 and $9 in interest expense on interest-bearing deposits during such periods. Due to our need to attract deposits in our core markets to replace deposits from closed branches, the rates paid on these deposits have been at a slightly higher interest rate. Interest expense on FHLB advances increased $24 and $36 from volume and mix changes and decreased

$21 and $35 from the impact of the rate environment during the three and six month periods ended March 31, 2016 for an aggregate increase of $3 and $1 for the three and six month periods. The net decrease in average rates was primarily due to maturing FHLB borrowings advanced with shorter terms.

NET INTEREST INCOME ANALYSIS ON A TAX-EQUIVALENT BASIS

(Dollar amounts in thousands)

Three months ended March 31, 2016 compared to the three months ended March 31, 2015 :



	Three months ended March 31, 2016						Three months ended March 31, 2015
	Average Balance		Interest Income/ Expense		Average Yield/ Rate		Average Balance		Interest Income/ Expense		Average Yield/ Rate
Average interest earning assets:
Cash and cash equivalents	$	13,212	$	18	0.55	%	$	24,010	$	12	0.20	%
Loans	459,465		5,301		4.64	%	457,517		5,375		4.76	%
Interest-bearing deposits	3,117		16		2.06	%	1,370		7		2.07	%
Investment securities (1)	94,617		429		1.82	%	68,498		288		1.71	%
Non-marketable equity securities, at cost	4,626		44		3.83	%	5,276		29		2.23	%
Total interest earning assets	$	575,037	$	5,808	4.06	%	$	556,671	$	5,711	4.16	%
Average interest-bearing liabilities:
Savings accounts	$	28,308	$	7	0.10	%	$	27,904	$	7	0.10	%
Demand deposits	26,625		46		0.69	%	20,529		38		0.75	%
Money market	138,248		141		0.41	%	140,278		160		0.46	%
CD’s	222,176		689		1.25	%	223,624		676		1.23	%
IRA’s	23,221		68		1.18	%	22,306		65		1.18	%
Total deposits	438,578		951		0.87	%	434,641		946		0.88	%
FHLB Advances	61,453		164		1.07	%	53,141		161		1.23	%
Total interest-bearing liabilities	$	500,031	$	1,115	0.90	%	$	487,782	$	1,107	0.92	%
Net interest income			$	4,693					$	4,604
Interest rate spread					3.16	%					3.24	%
Net interest margin					3.28	%					3.35	%
Average interest earning assets to average interest-bearing liabilities					1.15						1.14

(1) For the three months ended March 31, 2016 and 2015 , the average balances of the tax exempt investment securities, included in investment securities, were $28,565 and $9,781, respectively. The interest income on tax exempt securities is computed on a tax-equivalent basis using a tax rate of 34% for all periods presented.

Six months ended March 31, 2016 compared to the six months ended March 31, 2015 :



	Six months ended March 31, 2016						Six months ended March 31, 2015
	Average Balance		Interest Income/ Expense		Average Yield/ Rate		Average Balance		Interest Income/ Expense		Average Yield/ Rate
Average interest earning assets:
Cash and cash equivalents	$	17,188	$	33	0.38	%	$	18,940	$	20	0.21	%
Loans	455,921		10,551		4.63	%	461,074		10,971		4.77	%
Interest-bearing deposits	3,063		33		2.15	%	1,066		11		2.07	%
Investment securities (1)	91,334		853		1.87	%	69,817		630		1.81	%
Non-marketable equity securities, at cost	4,626		72		3.11	%	5,316		59		2.23	%
Total interest earning assets	$	572,132	$	11,542	4.03	%	$	556,213	$	11,691	4.22	%
Average interest-bearing liabilities:
Savings accounts	$	27,787	$	15	0.11	%	$	27,816	$	14	0.10	%
Demand deposits	25,324		90		0.71	%	19,623		72		0.74	%
Money market	141,263		295		0.42	%	139,819		311		0.45	%
CD’s	221,064		1,372		1.24	%	224,653		1,370		1.22	%
IRA’s	22,925		135		1.18	%	22,313		131		1.18	%
Total deposits	438,363		1,907		0.87	%	434,224		1,898		0.88	%
FHLB Advances	60,355		329		1.09	%	54,177		328		1.21	%
Total interest-bearing liabilities	$	498,718	$	2,236	0.90	%	$	488,401	$	2,226	0.91	%
Net interest income			$	9,306					$	9,465
Interest rate spread					3.13	%					3.31	%
Net interest margin					3.25	%					3.41	%
Average interest earning assets to average interest-bearing liabilities					1.15						1.14

(1) For the six months ended ended March 31, 2016 and 2015 , the average balances of the tax exempt investment securities, included in investment securities, were $27,455 and $9,648, respectively. The interest income on tax exempt securities is computed on a tax-equivalent basis using a tax rate of 34% for all periods presented.

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). Changes due to both rate and volume which cannot be segregated have been allocated in proportion to the relationship of the dollar amounts of the change in each category.

RATE / VOLUME ANALYSIS

(Dollar amounts in thousands)

Three months ended March 31, 2016 compared to the three months ended March 31, 2015 :



	Increase (decrease) due to
	Volume			Rate			Net
Interest income:
Cash and cash equivalents	$	(8	)	$	14		$	6
Loans	23			(97		)	(74		)
Interest-bearing deposits	9			—			9
Investment securities	117			24			141
Non-marketable equity securities, at cost	(4		)	19			15
Total interest earning assets	137			(40		)	97
Interest expense:
Savings accounts	—			—			—
Demand deposits	11			(3		)	8
Money market accounts	(2		)	(17		)	(19		)
CD’s	(4		)	17			13
IRA’s	3			—			3
Total deposits	8			(3		)	5
FHLB Advances	24			(21		)	3
Total interest bearing liabilities	32			(24		)	8
Net interest income	$	105		$	(16	)	$	89

Six months ended March 31, 2016 compared to the six months ended March 31, 2015 .



	Increase (decrease) due to
	Volume			Rate			Net
Interest income:
Cash and cash equivalents	$	(2	)	$	15		$	13
Loans	(122		)	(298		)	(420		)
Interest-bearing deposits	21			1			22
Investment securities	200			23			223
Non-marketable equity securities, at cost	(9		)	22			13
Total interest earning assets	88			(237		)	(149		)
Interest expense:
Savings accounts	—			1			1
Demand deposits	20			(2		)	18
Money market accounts	3			(19		)	(16		)
CD’s	(22		)	24			2
IRA’s	4			—			4
Total deposits	5			4			9
FHLB Advances	36			(35		)	1
Total interest bearing liabilities	41			(31		)	10
Net interest income (loss)	$	47		$	(206	)	$	(159	)

Provision for Loan Losses. We determine our provision for loan losses (“provision”, or “PLL”) based on our desire to provide an adequate allowance for loan losses (“ALL”) to reflect probable and inherent credit losses in our loan portfolio. Prior to the past 3 years, higher charge off levels and the negative influence of certain qualitative and general economic factors discussed above under “ Critical Accounting Estimates — Allowance for Loan Losses ”, made it necessary to increase our provision to ensure an adequate ALL. Within the last year, we have experienced lower levels of charge-offs and nonperforming loans. With both local and national unemployment rates improving slightly in recent quarters and improved asset quality due to our stricter underwriting standards, we anticipate our actual charge-off experience to remain stable throughout the remainder of the fiscal year ending September 30, 2016.

Net loan charge-offs for the six month period ended March 31, 2016 were $268 , compared to $338, for the comparable prior year period. Annualized net charge-offs to average loans were 0.12% for the six months ended March 31, 2016 , compared to 0.15% for the comparable period in the prior year. Non-accrual loans were $1,192 at March 31, 2016 , compared to $748 at September 30, 2015 . Even though we are experiencing a slight increase in our nonperforming loans, we believe our credit and underwriting policies have supported more effective lending decisions by the Bank, resulting in improved loan quality. Refer to the “Allowance for Loan Losses” and “Nonperforming Loans, Potential Problem Loans and Foreclosed Properties” sections below for more information related to non-performing loans.

We recorded a provision for loan losses of $75 for the three and six month periods ended March 31, 2016 , compared to $150 and $385 for the comparable prior year periods. Management believes that the provision taken for the current year three and six month periods is adequate in view of the present condition of our loan portfolio and the sufficiency of collateral supporting our non-performing loans. We continually monitor non-performing loan relationships and will make adjustments to our provision, as necessary, if changing facts and circumstances require a change in the ALL. 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 ALL. If there are significant charge-offs against the ALL, or we otherwise determine that the ALL is inadequate, we will need to record an additional PLL in the future. See the section below captioned “Allowance for Loan Losses” in this discussion for further analysis of our provision for loan losses.

Non-interest Income (Loss) . The following table reflects the various components of non-interest income for the three and six month periods ended March 31, 2016 and 2015 , respectively.



	Three months ended March 31,				%		Six months ended March 31,				%
	2016		2015		Change		2016		2015		Change
Non-interest Income:
Net gain (loss) on available for sale securities	$	4	$	45	(91.11	)%	$	4	$	47	(91.49	)%
Service charges on deposit accounts	331		378		(12.43	)	754		850		(11.29	)%
Loan fees and service charges	263		292		(9.93	)	584		647		(9.74	)%
Other	212		209		1.44		418		414		0.97	%
Total non-interest income	$	810	$	924	(12.34	)%	$	1,760	$	1,958	(10.11	)%

The decrease of $47 and $96 in service charges on deposit accounts for the three and six month periods ended March 31, 2016 , respectively, was primarily due to a decrease in overdraft fee income as a result of a change in our deposit mix during the current three and six month periods ended March 31, 2016 . The decrease of $114 and $198 in non-interest income during the current year three and six month periods ended March 31, 2016 over the prior year periods, was primarily due to a decrease in overdraft fee income, secondary market loan origination fees and a loan sale premium received in the first quarter of the previous year in the amount of $89 recorded in loan fees and service charges.

Non-interest Expense. The following table reflects the various components of non-interest expense for the three and six month periods ended March 31, 2016 and 2015 , respectively.



	Three months ended March 31,						%		Six months ended March 31,						%
	2016			2015			Change		2016			2015			Change
Non-interest Expense:
Salaries and related benefits	$	2,188		$	2,178		0.46	%	$	4,406		$	4,353		1.22	%
Occupancy - net	712			664			7.23		1,281			1,484			(13.68	)
Office	262			252			3.97		514			508			1.18
Data processing	420			395			6.33		829			784			5.74
Amortization of core deposit intangible	21			14			50.00		35			28			25.00
Advertising, marketing and public relations	145			186			(22.04	)	282			284			(0.70	)
FDIC premium assessment	84			104			(19.23	)	169			208			(18.75	)
Professional services	241			270			(10.74	)	392			589			(33.45	)
Other	294			358			(17.88	)	553			675			(18.07	)
Total non-interest expense	$	4,367		$	4,421		(1.22	)%	$	8,461		$	8,913		(5.07	)%

Non-interest expense (annualized) / Average assets	2.99		%	3.10		%	(3.55	)%	2.86		%	3.13		%	(8.63	)%

Non-interest expense decreased $54 and $452 , respectively, for the three and six month periods ended March 31, 2016 , compared to the same periods in the prior year. During the current three month period, occupancy expense increased due to contractual rent payments due from two retail branches closed during the current quarter in the amount of $187. During the current six month period, occupancy expense decreased due to efficiencies and cost savings realized over recent periods through management initiatives including branch closures and technology improvements. Occupancy costs consist primarily of office rental and depreciation expenses. Data processing expenses increased during the three and six month periods ended March 31, 2016 , due to conversion costs related to the Central Bank selective deposits and loans purchase and the previously announced agreement to acquire Community Bank of Northern Wisconsin. Amortization of core deposit intangible expense increased due to the premium paid for the Central Bank selective deposits purchase for the current three and six month periods ended March 31, 2016 , compared to the same periods in the prior year. We are continuing to focus on technology to provide progressive, online and mobile banking services that complement friendly, knowledgeable bankers in convenient community bank locations. As we redefine and expand our footprint, we expect these costs to continue to remain higher. Professional services expense decreased in the current year three month period primarily due to higher professional services costs and related accruals in the comparable prior period related to branch closures.

Income Taxes. Income tax expense was $369 and $843 for the three and six months ended March 31, 2016 , compared to $342 and $775 for the same period in the prior year. The effective tax rate decreased from 37.2% to 35.1% for the six month periods ended March 31, 2015 and 2016 , respectively.

BALANCE SHEET ANALYSIS

Loans. Gross Loan balances increased by $15,982 , or 3.55% , to $466,492 as of March 31, 2016 from $450,510 at September 30, 2015 . At March 31, 2016 , the loan portfolio was comprised of $258,736 of loans secured by real estate, or 55.5% of total loans including $85,821 in commercial and agricultural real estate loans, and $207,756 of consumer and other loans, or 44.5% of total loans. Consumer and other loans include secured consumer indirect loans of $122,504 secured primarily by boats and travel trailers, $45,635 of third party purchased indirect loans secured primarily by household goods, $13,451 of automobile loans and C&I loans totaling $16,372. At September 30, 2015 , the loan portfolio mix included real estate loans of $243,959, or 54.1% of total loans including $63,266 in commercial and agricultural real estate loans, and consumer and other loans of $207,301, or 45.9% of total loans. Consumer and other loans include secured consumer loans of $130,880 in indirect loans, $39,705 of third party purchased indirect loans, $14,113 of automobile loans and C&I loans totaling $10,010. The weighted average remaining term for our secured consumer direct loans was 3.3 years at March 31, 2016 and 3.5 years at September 30, 2015 . The weighted average remaining term for our secured consumer indirect loans was 7.0 years at March 31, 2016 and 7.3 years at September 30, 2015 . The weighted average remaining term for our overall loan portfolio was 7.9 years at March 31, 2016 and 8.3 years at September 30, 2015 .

During the quarter ended March 31, 2016, we entered into an agreement to originate and sell longer term secured consumer indirect paper loans. Our expectation is that this will reduce our secured consumer indirect loan portfolio growth, while increasing our non-interest loan fee income due to the origination fee income generated with each loan sold.

Allowance for Loan Losses. The loan portfolio is our primary asset subject to credit risk. To address this credit risk, we maintain an ALL for probable and inherent credit losses through periodic charges to our earnings. These charges are shown in our consolidated statements of operations as PLL. See “Provision for Loan Losses” earlier in this quarterly report. We attempt to control, monitor and minimize credit risk through the use of prudent lending standards, a thorough review of potential borrowers prior to lending and ongoing and timely review of payment performance. Asset quality administration, including early identification of loans performing in a substandard manner, as well as timely and active resolution of problems, further enhances management of credit risk and minimization of loan losses. Any losses that occur and that are charged off against the ALL are periodically reviewed with specific efforts focused on achieving maximum recovery of both principal and interest.

At least quarterly, we review the adequacy of the ALL. Based on an estimate computed pursuant to the requirements of ASC 450-10, “Accounting for Contingencies ” and ASC 310-10, “Accounting by Creditors for Impairment of a Loan ” , the analysis of the ALL consists of three components: (i) specific credit allocation established for expected losses relating to specific impaired loans for which the recorded investment in the loan exceeds its fair value; (ii) general portfolio allocation based on historical loan loss experience for significant loan categories; and (iii) general portfolio allocation based on qualitative factors such as economic conditions and other relevant factors specific to the markets in which we operate. We continue to refine our ALL methodology by introducing a greater level of granularity to our loan portfolio. We currently segregate loans into pools based on common risk characteristics for purposes of determining the ALL. The additional segmentation of the portfolio is intended to provide a more effective basis for the determination of qualitative factors affecting our ALL. In addition, management continually evaluates our ALL methodology to assess whether modifications in our methodology are appropriate in light of underwriting practices, market conditions, identifiable trends, regulatory pronouncements or other factors. We believe that any modifications or changes to the ALL methodology would be to enhance the ALL. However, any such modifications could result in materially different ALL levels in future periods.

The specific credit allocation for the ALL is based on a regular analysis of all loans that are considered impaired. In compliance with ASC 310-10, the fair value of the loan is determined based on either the present value of expected cash flows discounted at the loan’s effective interest rate, the market price of the loan, or, if the loan is collateral dependent, the fair value of the underlying collateral less the expected cost of sale for such collateral. At March 31, 2016 , we had 111 such impaired loans, all secured by real estate or personal property with an aggregate recorded investment of $5,133 . Of the 111 impaired loans, there were 33 such individual loans where estimated fair value was less than their book value (i.e. we deemed impairment to exist) totaling $1,821 for which $162 in specific ALL was recorded as of March 31, 2016 .

At March 31, 2016 , the ALL was $6,303 , or 1.35% of our total loan portfolio, compared to ALL of $6,496 , or 1.44% of the total loan portfolio at September 30, 2015 . This level was based on our analysis of the loan portfolio risk at March 31, 2016 , taking into account the factors discussed above. At March 31, 2016 , the ALL was 1.50% of our total loan portfolio, excluding the third party purchased consumer loans referenced elsewhere herein, compared to 1.58% of the total loan portfolio excluding these third party purchased consumer loans at September 30, 2015 . We have established a separate restricted reserve account for these third party purchased consumer loans. The funds in the reserve account are to be released to compensate the Bank for any nonperforming purchased loans that are not purchased back by the seller or substituted with performing loans and are ultimately charged off.

All of the nine factors identified in the FFIEC's Interagency Policy Statement on the Allowance for Loan and Lease Losses are taken into account in determining the ALL. The impact of the factors in general categories are subject to change; thus the allocations are management’s estimate of the loan loss categories in which the probable and inherent loss has occurred as of the date of our assessment. Of the nine factors, we believe the following have the greatest impact on our customers’ ability to repay loans and our ability to recover potential losses through collateral sales: (1) lending policies and procedures; (2) economic and business conditions; and (3) the value of the underlying collateral. As loan balances and estimated losses in a particular loan type decrease or increase and as the factors and resulting allocations are monitored by management, changes in the risk profile of the various parts of the loan portfolio may be reflected in the allocated allowance. The general component covers non-impaired loans and is based on historical loss experience adjusted for these and other qualitative factors. In addition, management continues to refine the ALL estimation process as new information becomes available. These refinements could also cause increases or decreases in the ALL. The unallocated portion of the ALL is intended to account for imprecision in the estimation process or relevant current information that may not have been considered in the process.

Nonperforming Loans, Potential Problem Loans and Foreclosed Properties. We practice early identification of non-accrual and problem loans in order to minimize the Bank's risk of loss. Non-performing loans are defined as non-accrual loans and restructured loans that were 90 days or more past due at the time of their restructure, or when management determines that such classification is warranted. The accrual of interest income is discontinued on our loans according to the following schedule:

• Commercial loans, including agricultural and C&I loans, past due 90 days or more;

• Closed end consumer loans past due 120 days or more; and

• Real estate loans and open ended consumer loans past due 180 days or more.

When interest accruals are discontinued, interest credited to income is reversed. If collection is in doubt, cash receipts on non-accrual loans are used to reduce principal rather than being recorded as interest income. A TDR typically involves the granting of some concession to the borrower involving a loan modification, such as modifying the payment schedule or making interest rate changes. TDR loans may involve loans that have had a charge-off taken against the loan to reduce the carrying amount of the loan to fair market value as determined pursuant to ASC 310-10.

The following table identifies the various components of non-performing assets and other balance sheet information as of the dates indicated below and changes in the ALL for the periods then ended:



	March 31, 2016 and Six Months Then Ended			September 30, 2015 and Twelve Months Then Ended
Nonperforming assets:
Nonaccrual loans	$	1,192		$	748
Accruing loans past due 90 days or more	287			473
Total nonperforming loans (“NPLs”)	1,479			1,221
Other real estate owned	739			838
Other collateral owned	93			64
Total nonperforming assets (“NPAs”)	$	2,311		$	2,123
Troubled Debt Restructurings (“TDRs”)	$	3,889		$	4,010
Nonaccrual TDRs	420			332
Average outstanding loan balance	445,687			460,438
Loans, end of period (1)	466,492			450,510
Total assets, end of period	601,800			580,148
ALL, at beginning of period	$	6,496		$	6,506
Loans charged off:
Real estate loans	(55		)	(405		)
Consumer and other loans	(308		)	(601		)
Total loans charged off	(363		)	(1,006		)
Recoveries of loans previously charged off:
Real estate loans	4			69
Consumer and other loans	91			271
Total recoveries of loans previously charged off:	95			340
Net loans charged off (“NCOs”)	(268		)	(666		)
Additions to ALL via provision for loan losses charged to operations	75			656
ALL, at end of period	$	6,303		$	6,496
Ratios:
ALL to NCOs (annualized)	1,175.93		%	975.38		%
NCOs (annualized) to average loans	0.12		%	0.14		%
ALL to total loans	1.35		%	1.44		%
NPLs to total loans	0.32		%	0.27		%
NPAs to total assets	0.38		%	0.37		%

(1) Total loans at March 31, 2016 , include $ 45,635 in consumer and other loans purchased from a third party. See Note 3 in the accompanying Condensed Consolidated Financial Statements regarding the separate restricted reserve account established for these purchased consumer loans.

Loans 30 days or more past due increased at March 31, 2016 compared to their balances as of September 30, 2015 due to seasonal loan delinquency. While, loans 30 to 59 days past due have increased during the three month period ended March 31, 2016 compared to December 31, 2015, loans greater than 59 days past due have decreased. We believe our credit and underwriting policies continue to support more effective lending decisions by the Bank, which increases the likelihood of maintaining loan quality going forward. Moreover, we believe the favorable trends noted in previous quarters regarding our nonperforming loans and nonperforming assets reflect our continued adherence to improved underwriting criteria and practices along with improvements in macroeconomic factors in our credit markets. We believe our current ALL is adequate to cover probable losses in our current loan portfolio.

Non-performing loans of $1,479 at March 31, 2016 , which included $420 of non-accrual troubled debt restructured loans, reflected an increase of $258 from the non-performing loans balance of $1,221 at September 30, 2015 . These non-performing loan relationships are secured primarily by collateral including residential real estate or the consumer assets financed by the loans.

Our non-performing assets were $2,311 at March 31, 2016 , or 0.38% of total assets, compared to $2,123 , or 0.37% of total assets at September 30, 2015 . The increase in non-performing assets since September 30, 2015 was primarily a result of an increase in nonperforming loans.

Other real estate owned ("OREO") decreased by $99, from $838 at September 30, 2015 to $739 at March 31, 2016 . Other collateral owned increased $29 during the six months ended March 31, 2016 to $93 from the September 30, 2015 balance of $64 . We continue to aggressively liquidate OREO and other collateral owned as part of our overall credit risk strategy.

Net charge offs for the six month period ended March 31, 2016 were $268 , compared to $338 for the same prior year period. The ratio of annualized net charge-offs to average loans receivable was 0.12% for the six month period ended March 31, 2016 , compared to 0.14% for the twelve months ended September 30, 2015 . Improved net charge-offs during the current year to date period were primarily a result of the overall credit quality improvement within our loan portfolio.

Investment Securities. We manage our securities portfolio in an effort to enhance income and provide liquidity. Our investment portfolio is comprised of securities available for sale and securities held to maturity. The weighted average life of the investment portfolio was 4.3 years at March 31, 2016 , compared with 4.6 years at September 30, 2015 . The modified duration of the investment portfolio was 4.0 years at March 31, 2016 , compared with 4.2 years at September 30, 2015 .

Securities held to maturity were $7,427 at March 31, 2016 , compared with $8,012 at September 30, 2015 . Securities available for sale, which represent the majority of our investment portfolio, were $86,114 at March 31, 2016 , compared with $79,921 at September 30, 2015 . We increased our investment portfolio with funds received from the Central Bank loans and deposits purchase.

The amortized cost and market values of our available for sale securities by asset categories as of the dates indicated below were as follows:



Securities available for sale	Amortized Cost		Fair Value
March 31, 2016
U.S. government agency obligations	$	16,346	$	16,279
Obligations of states and political subdivisions	29,830		30,145
Mortgage-backed securities	39,447		39,610
Federal Agricultural Mortgage Corporation	71		80
Totals	$	85,694	$	86,114
September 30, 2015
U.S. government agency obligations	$	15,240	$	15,020
Obligations of states and political subdivisions	27,573		27,407
Mortgage-backed securities	37,451		37,440
Federal Agricultural Mortgage Corporation	71		54
Totals	$	80,335	$	79,921

The amortized cost and fair value of our held to maturity securities by asset categories as of the dates noted below were as follows:



Securities held to maturity	Amortized Cost		Fair Value
March 31, 2016
Obligations of states and political subdivisions	$	1,317	$	1,326
Mortgage-backed securities	6,110		6,333
Totals	$	7,427	$	7,659
September 30, 2015
Obligations of states and political subdivisions	$	1,319	$	1,318
Mortgage-backed securities	6,693		6,901
Totals	$	8,012	$	8,219

The composition of our available for sale portfolios by credit rating as of the dates indicated below was as follows:



	March 31, 2016				September 30, 2015
Securities available for sale	Amortized Cost		Fair Value		Amortized Cost		Fair Value
U.S. government agency	$	55,793	$	55,889	$	52,692	$	52,460
AAA	732		745		734		735
AA	24,587		24,800		22,228		22,057
A	3,227		3,311		2,970		2,959
BBB	—		—		—		—
Below investment grade	—		—		—		—
Non-rated	1,355		1,369		1,711		1,710
Total	$	85,694	$	86,114	$	80,335	$	79,921

The composition of our held to maturity portfolio by credit rating as of the dates indicated was as follows:



	March 31, 2016				September 30, 2015
Securities held to maturity	Amortized Cost		Fair Value		Amortized Cost		Fair Value
U.S. government agency	$	6,110	$	6,333	$	6,693	$	6,901
AAA	—		—		—		—
AA	—		—		—		—
A	967		973		969		968
BBB	—		—		—		—
Below investment grade	—		—		—		—
Non-rated	350		353		350		350
Total	$	7,427	$	7,659	$	8,012	$	8,219

At March 31, 2016 , securities with a carrying value of $4,137 were pledged against a line of credit with the Federal Reserve Bank of Minneapolis. As of March 31, 2016 , this line of credit had a zero balance. The Bank has pledged U.S. Government Agency securities with a carrying value of $5,500 and mortgage-backed securities with a carrying value of $4,184 as collateral against specific municipal deposits.

Deposits. Deposits increased to $473,833 at March 31, 2016 , from $456,298 at September 30, 2015 , largely due to deposits purchased from Central Bank in Rice Lake and Barron, Wisconsin in the amount of $27,131, offset by decreases in balances of brokered deposits in the amount of $10,317.

Since December 2012, we have closed eleven branches and sold the deposits and loans in one retail branch, resulting in nine markets we have exited. As of September 30, 2015 , the deposit account balances remaining in these nine exited markets totaled $56,915. As of March 31, 2016 , these deposit account balances have declined to $50,405. We expect these deposit balances to continue to decline as certificates mature and accounts are closed.

Our objective is to grow core deposits and build customer relationships in our core markets by expanding our deposit product offerings and providing excellent customer service. Management expects to continue to place emphasis on both retaining and generating additional core deposits in 2016 through competitive pricing of deposit products, our branch delivery systems that have already been established and electronic banking.

Institutional certificates of deposit as a funding source decreased to $28,326 at March 31, 2016 from $32,099 as of September 30, 2015 . Institutional certificates of deposit remain an important part of our deposit mix as we continue to pursue funding sources to lower the Bank's cost of funds.

The Bank had $12,456 and $22,773 in brokered deposits at March 31, 2016 and September 30, 2015 , respectively. Brokered deposit levels are within all regulatory directives thereon.

Federal Home Loan Bank (FHLB) advances (borrowings). FHLB advances were $61,474 as of March 31, 2016 and $58,891 as of September 30, 2015 .

Stockholders’ Equity. Total stockholders’ equity was $62,071 at March 31, 2016 , compared to $60,535 at September 30, 2015 . Total stockholders’ equity increased by $1,536 , primarily as a result of an increase in retained earnings and accumulated other comprehensive income during the six months ended March 31, 2016 .

Liquidity and Asset / Liability Management . Liquidity management refers to our ability to ensure cash is available in a timely manner to meet loan demand and depositors’ needs, and meet other financial obligations as they become due without undue cost, risk or disruption to normal operating activities. Asset / liability management refers to our ability to efficiently and effectively utilize customer deposits and other funding sources to generate sufficient risk-weighted yields on interest earning assets. We manage and monitor our short-term and long-term liquidity positions and needs through a regular review of maturity profiles, funding sources, and loan and deposit forecasts to minimize funding risk. A key metric we monitor is our liquidity ratio, calculated as cash and investments with maturities less than one-year divided by deposits with maturities less than one-year. At March 31, 2016 , our liquidity ratio was 11.33%, which is above our targeted liquidity ratio of 10.0%.

Our primary sources of funds are deposits; amortization, prepayments and maturities of outstanding loans; other short-term investments; and funds provided from operations. We use our sources of funds primarily to meet ongoing commitments, to pay maturing certificates of deposit and savings withdrawals, and to fund loan commitments. While scheduled payments from the amortization of loans and maturing short-term investments are relatively predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions and competition. Although $125,155 of our $249,254 (50.21%) CD portfolio as of March 31, 2016 will mature within the next 12 months, we have historically retained a majority of our maturing CD’s. However, $21,299, or 17.02%, of the CD maturities within the next 12 months are from deposits located within the nine markets we have exited and don't expect to retain these CD's. Through new deposit product offerings to our consumer and commercial loan customers, we are currently attempting to strengthen customer relationships by building core deposit relationships. In the present interest rate environment, and based on maturing yields, this should also improve our cost of funds. While we believe that our branch network attracts core deposits and enhances the Bank's long-term liquidity, a key component to our broader liquidity management strategy, we continue to analyze the profitability of our branch network.

We maintain access to additional sources of funds including FHLB borrowings and lines of credit with the Federal Reserve Bank, US Bank and Bankers’ Bank. We utilize FHLB borrowings to leverage our capital base, to provide funds for our lending and investment activities, and to manage our interest rate risk. Our borrowing arrangement with the FHLB calls for pledging certain qualified real estate loans, and borrowing up to 75% of the value of those loans, not to exceed 35% of the Bank’s total assets. Currently, we have approximately $63,700 available under this arrangement. We also maintain lines of credit of $3,290 with the Federal Reserve Bank, $5,000 with US Bank and $13,500 with Bankers’ Bank as part of our contingency funding plan. The Federal Reserve Bank line of credit is based on 80% of the collateral value of the agency securities being held at the Federal Reserve Bank. The Bankers’ Bank line of credit is a discretionary line of credit. As of March 31, 2016 , our line of credit balance with the Federal Home Loan Bank was $61,474 . As of the same date, our line of credit balance with the Federal Reserve Bank, US Bank and Bankers' Bank was $0.

Off-Balance Sheet Liabilities . Some of our financial instruments have off-balance sheet risk. These instruments include unused commitments for lines of credit, overdraft protection lines of credit and home equity lines of credit, as well as commitments to extend credit. As of March 31, 2016 , the Company had $21,584 in unused commitments, compared to $24,097 in unused commitments as of September 30, 2015 .

Capital Resources. As of March 31, 2016 , as shown in the table below, our Tier 1 and Risk-based capital levels exceeded levels necessary to be considered “Well Capitalized” under Prompt Corrective Action provisions.



	Actual				For Capital Adequacy Purposes					To Be Well Capitalized Under Prompt Corrective Action Provisions
	Amount		Ratio		Amount			Ratio		Amount			Ratio
As of March 31, 2016 (Unaudited)
Total capital (to risk weighted assets)	$	65,436,000	16.0	%	$	32,803,000	>=	8.0	%	$	41,004,000	>=	10.0	%
Tier 1 capital (to risk weighted assets)	60,296,000		14.7	%	24,602,000		>=	6.0	%	32,803,000		>=	8.0	%
Common equity tier 1 capital (to risk weighted assets)	60,296,000		14.7	%	18,452,000		>=	4.5	%	26,652,000		>=	6.5	%
Tier 1 leverage ratio (to adjusted total assets)	60,296,000		10.2	%	23,660,000		>=	4.0	%	29,575,000		>=	5.0	%
As of September 30, 2015 (Audited)
Total capital (to risk weighted assets)	$	64,930,000	16.5	%	$	31,443,000	>=	8.0	%	$	39,304,000	>=	10.0	%
Tier 1 capital (to risk weighted assets)	59,997,000		15.3	%	23,583,000		>=	6.0	%	31,443,000		>=	8.0	%
Common equity tier 1 capital (to risk weighted assets)	59,997,000		15.3	%	17,687,000		>=	4.5	%	25,548,000		>=	6.5	%
Tier 1 leverage ratio (to adjusted total assets)	59,997,000		10.4	%	23,031,000		>=	4.0	%	28,788,000		>=	5.0	%

At March 31, 2016 , the Bank was categorized as "Well Capitalized" under Prompt Corrective Action Provisions, as determined by the OCC, our primary regulator.


ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our Risk When Interest Rates Change . The rates of interest we earn on assets and pay on liabilities generally are established contractually for a period of time. Market interest rates change over time and are not predictable or controllable. Accordingly, our results of operations, like those of other financial institutions, are impacted by changes in interest rates and the interest rate sensitivity of our assets and liabilities. Like other financial institutions, our interest income and interest expense are affected by general economic conditions and policies of regulatory authorities, including the monetary policies of the Federal Reserve. The risk associated with changes in interest rates and our ability to adapt to these changes is known as interest rate risk and is our most significant market risk.

How We Measure Our Risk of Interest Rate Changes . As part of our attempt to manage our exposure to changes in interest rates and comply with applicable regulations, we monitor our interest rate risk through several means including through the use of third party reporting software. In monitoring interest rate risk we continually analyze and manage assets and liabilities based on their payment streams and interest rates, the timing of their maturities, and their sensitivity to actual or potential changes in market interest rates.

In order to manage the potential for adverse effects of material and prolonged increases in interest rates on our results of operations, we adopted asset and liability management policies to better align the maturities and re-pricing terms of our interest-earning assets and interest-bearing liabilities. These policies are implemented by our Asset and Liability Management Committee ("ALCO"). The ALCO is comprised of members of senior management and the Board of Directors. The ALCO establishes guidelines for and monitors the volume and mix of our assets and funding sources, taking into account relative costs and spreads, interest rate sensitivity and liquidity needs. The Committee’s objectives are to manage assets and funding sources to produce results that are consistent with liquidity, cash flow, capital adequacy, growth, risk and profitability goals for the Bank. The ALCO meets on a regularly scheduled basis to review, among other things, economic conditions and interest rate outlook, current and projected liquidity needs and capital position, anticipated changes in the volume and mix of assets and liabilities and interest rate risk exposure limits versus current projections pursuant to net present value of portfolio equity analysis. At each meeting, the Committee recommends strategy changes, as appropriate, based on this review. The Committee

is responsible for reviewing and reporting on the effects of the policy implementations and strategies to the Bank’s Board of Directors on a regularly scheduled basis.

In order to manage our assets and liabilities and achieve desired levels of liquidity, credit quality, cash flow, interest rate risk, profitability and capital targets, we have focused our strategies on:


•	originating shorter-term secured consumer, commercial and agricultural loan maturities;


•	managing our funding needs by utilizing core deposits, institutional certificates of deposits and borrowings as appropriate to extend terms and lock in fixed interest rates;


•	reducing non-interest expense and managing our efficiency ratio by implementing technologies to enhance customer service and increase employee productivity;


•	realigning supervision and control of our branch network by modifying their configuration, staffing, locations and reporting structure to focus resources on our most productive markets;


•	managing our exposure to changes in interest rates, including but not limited to the sale of longer term fixed rate consumer loans. In fiscal 2015, the Bank sold approximately $15.7 million in fixed rate longer term consumer real estate loans to lessen our exposure to changes in interest rates. Additional loan sales may occur in the future if the analysis proves advantageous to the Bank; and


•	originating balloon mortgage loans with a term of 7 years or less to minimize the impact of sudden rate changes.

At times, depending on the level of general interest rates, the relationship between long- and short-term interest rates, market conditions and competitive factors, the ALCO may determine to increase or decrease the Bank’s interest rate risk position somewhat in order to manage net interest margin.

The following table sets forth, at December 31, 2015 (the most recent date available), an analysis of our interest rate risk as measured by the estimated changes in Economic Value of Equity ("EVE") resulting from an immediate and permanent shift in the yield curve (up 300 basis points and down 100 basis points). As of March 31, 2016 , due to the current level of interest rates, EVE estimates for decreases in interest rates greater than 100 basis points are not meaningful.



Change in Interest Rates in Basis Points (“bp”) Rate Shock in Rates (1)	Economic Value of Equity (EVE)							EVE Ratio (EVE as a % of Assets)
	Amount		Change			% Change		EVE Ratio		Change
	(Dollars in thousands)
+300 bp	$	35,324	$	(44,722	)	(56	)%	6.78	%	(684	)	bp
+200 bp	53,967		(26,079		)	(33	)%	9.90	%	(372	)
+100 bp	69,154		(10,892		)	(14	)%	12.18	%	(144	)
0 bp	80,046		—			—		13.62	%	—
-100 bp	83,687		3,641			5	%	13.90	%	28


(1)	Assumes an immediate and parallel shift in the yield curve at all maturities.

The following table sets forth, at September 30, 2015, an analysis of our interest rate risk as measured by the estimated changes in EVE resulting from an immediate and permanent shift in the yield curve (up 300 basis points and down 100 basis points).



Change in Interest Rates in Basis Points (“bp”) Rate Shock in Rates (1)	Economic Value of Equity (EVE)							EVE Ratio (EVE as a % of Assets)
	Amount		Change			% Change		EVE Ratio		Change
	(Dollars in thousands)
+300 bp	$	36,916	$	(41,454	)	(53	)%	7.10	%	(505	)	bp
+200 bp	54,752		(23,618		)	(30	)%	10.06	%	(209	)
+100 bp	68,836		(9,534		)	(12	)%	12.15	%	(121	)
0 bp	78,370		—			—		13.36	%	—
-100 bp	80,768		2,398			3	%	13.45	%	9

(1) Assumes an immediate and parallel shift in the yield curve at all maturities.

Our overall interest rate sensitivity is demonstrated by net interest income shock analysis which measures the change in net interest income in the event of hypothetical changes in interest rates. This analysis assesses the risk of change in our net

interest income over the next 12 months in the event of an immediate and parallel shift in the yield curve (up 300 basis points and down 100 basis points). The table below presents our projected change in net interest income for the various rate shock levels at December 31, 2015 (the most recent date available) and September 30, 2015.



	Change in Net Interest Income Over One Year Horizon
	At December 31, 2015					At September 30, 2015
Change in Interest Rates in Basis Points (“bp”) Rate Shock in Rates (1)	Dollar Change in Net Interest Income (in thousands)			Percentage Change		Dollar Change in Net Interest Income (in thousands)			Percentage Change

+300 bp	$	(2,768	)	(13.46	)%	$	(1,921	)	(9.53	)%
+200 bp	(1,503		)	(7.31	)%	(909		)	(4.50	)%
+100 bp	(735		)	(3.58	)%	(368		)	(1.83	)%
0 bp	(343		)	(1.67	)%	(221		)	(1.09	)%
-100 bp	(215		)	(1.05	)%	(309		)	(1.53	)%


(1)	Assumes an immediate and parallel shift in the yield curve at all maturities.

Note: The table above may not be indicative of future results.

The assumptions used to measure and assess interest rate risk include interest rates, loan prepayment rates, deposit decay (runoff) rates, and the market values of certain assets under differing interest rate scenarios. Actual values may differ from those projections set forth above should market conditions vary from the assumptions used in preparing the analysis. Further, the computations do not contemplate any actions we may undertake in response to changes in interest rates.


ITEM 4.	CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934), as amended (The "Exchange Act") that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that the information required to be disclosed in reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

In designing and evaluating the disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply judgment in evaluating the cost-benefit relationship of possible controls and procedures. We have designed our disclosure controls and procedures to reach a level of reasonable assurance of achieving the desired control objectives. We carried out an evaluation as of March 31, 2016 , under the supervision and with the participation of the Company’s management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2016 at reaching a level of reasonable assurance.

There was no change in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act during the Company’s most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II – OTHER INFORMATION


Item 1.	LEGAL PROCEEDINGS

In the normal course of business, the Company occasionally becomes involved in various legal proceedings. In our opinion, any liability from such proceedings would not have a material adverse effect on the business or financial condition of the Company.


Item 1A.	RISK FACTORS

There are no material changes from the risk factors disclosed in Part I, Item 1A, “Risk Factors,” of the Company’s Form 10-K, for the fiscal year ended September 30, 2015 . Please refer to that section for disclosures regarding the risks and uncertainties relating to our business.


Item 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS


(a)	Not applicable.


(b)	Not applicable.


(c)	Not applicable.


Item 3.	DEFAULTS UPON SENIOR SECURITIES

Not applicable.


Item 4.	MINE SAFETY DISCLOSURES

Not applicable.


Item 5.	OTHER INFORMATION

Not applicable.


Item 6.	EXHIBITS

(a) Exhibits



2.1*		Plan and Agreement of Merger dated February 10, 2016, by and among Old Murry Bancorp, Inc., the Control Shareholders, Community Bank of Northern Wisconsin and Citizens Community Federal, N.A.
31.1		Rule 13a-14(a) Certification of the Company’s Chief Executive Officer
31.2		Rule 13a-14(a) Certification of the Company’s Chief Financial Officer
32.1**		Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 (Section 906 of the Sarbanes-Oxley Act of 2002).
101		The following materials from Citizens Community Bancorp, Inc.’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2016 formatted in XBRL (eXtensible Business Reporting Language) and furnished electronically herewith: (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Operations; (iii) Consolidated Statements of Comprehensive Income (Loss); (iv) Consolidated Statement of Changes in Stockholders’ Equity; (v) Consolidated Statements of Cash Flows; and (vi) Condensed Notes to Consolidated Financial Statements.



*	Schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule or exhibit will be furnished supplementally to the Securities and Exchange Commission upon request; provided, however that Citizens Community Bancorp, Inc. may request confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended, for any schedules or exhibits so furnished.
**	This certification is not “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.

SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, as amended, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



	CITIZENS COMMUNITY BANCORP, INC.

Date: May 13, 2016	By:	/s/ Edward H. Schaefer
		Edward H. Schaefer
		Chief Executive Officer

Date: May 13, 2016	By:	/s/ Mark C. Oldenberg
		Mark C. Oldenberg
		Chief Financial Officer

Execution Copy

EXHIBIT 2.1

PLAN AND AGREEMENT OF MERGER

COMMUNITY BANK OF NORTHERN WISCONSIN

THIS PLAN AND AGREEMENT OF MERGER, including the Exhibits and Schedules referred to herein (this “Agreement”), made as of the 10 ^th day of February, 2016, by and among Old Murry Bancorp, Inc., a Wisconsin corporation (hereinafter the “Seller”), those individuals set forth on Exhibit A to this Agreement (such individuals, collectively, shall hereinafter be referred to as the “Control Shareholders”), Community Bank of Northern Wisconsin (the “Bank”), a state bank duly organized and existing under the laws of the State of Wisconsin, and Citizens Community Federal, N.A., a federally-chartered national banking association duly organized and existing under the law of the United States (the “Buyer”).

W I T N E S S E T H:

WHEREAS, the Seller is a Wisconsin corporation with 21,425 shares of issued and outstanding voting common stock, 46.83% of which is owned by the Control Shareholders;

WHEREAS, the Bank has authorized capital consisting of 5,028.39 shares of common stock, $100.00 par value per share, of which there are currently outstanding 4,351 shares (hereinafter referred to as the “Bank Shares”), all of which are owned by the Seller;

WHEREAS, the management and boards of directors of the Buyer, the Seller and the Bank believe that the proposed merger of the Bank with and into the Buyer, all as more fully set forth in Section 1.1 (the “Merger”), to be accomplished in the manner set forth in this Agreement, is in the best interests of their respective corporations or association, as applicable, and their respective shareholders;

WHEREAS, the Parties intend by this Agreement to set forth the terms and conditions of the Merger as a “merger” pursuant to the authority given by and in accordance with the provisions of the National Bank Act, dated November 7, 1918, as amended, and other applicable federal laws, and the provisions of applicable laws of the State of Wisconsin;

WHEREAS, the Seller, the Bank and the Buyer desire to have the Bank merge with and into the charter of the Buyer and to have the banking offices of the Bank become banking offices of the Buyer.

NOW, THEREFORE, in consideration of the foregoing premises and further in consideration of the mutual covenants and agreements herein contained and set forth, the parties hereto hereby agree as follows:

ARTICLE 1.
THE MERGER

1.1. The Merger and Effect of Same . Upon the terms and subject to the conditions of this Agreement, at the Effective Time, and in accordance with the provisions of 12 U.S.C. § 215a-1 and 12 U.S.C. § 1831(u), Wisconsin Statutes Section 221.0702, and other applicable federal, Wisconsin and other laws governing the merger between financial institutions, in the Merger, the Bank shall be merged with and into the Buyer and continue under the charter of the Buyer, with the Buyer deemed to be the surviving banking organization of both the Bank and the Buyer, whereupon the separate corporate existence of the Bank shall cease, its charter shall be surrendered and returned to the State of Wisconsin, and the Buyer shall continue as the surviving bank under the name “Citizens Community Federal, N.A., with all the rights, privileges, immunities, powers and franchises and subject to all the duties, restrictions and liabilities of a national banking association organized under the laws of the United States (the “Surviving Bank”). From and after the Effective Time, all rights, privileges, immunities, powers, franchises, of a public as well as a private nature, and interests of the Bank in and to every type of property (real, personal and mixed) and choses in action shall be transferred to and vested in the Surviving Bank by virtue of such Merger without any deed or other transfer, and the Surviving Bank, without any order or other act on the part of any court or otherwise, shall hold and enjoy all rights of property, privileges, immunities, powers, franchises and interests including, without limitation, appointments, designations and nominations, all other rights and interests as trustee, executor, administrator, registrar of stocks and bonds, guardian of estates, assignee, receiver and committee of estates of incompetence and in every other fiduciary capacity, in the same manner and to the same extent as such rights, property, privileges, immunities, powers, franchises and interests are held or enjoyed by the Bank immediately before the Effective Time of the Merger. The Surviving Bank shall be liable for all liabilities of the Bank; and all deposits, debts, liabilities, obligations and contracts of the Bank, matured or unmatured, whether accrued, absolute, contingent or otherwise and whether or not reflected or reserved against on balance sheets,

WHD/12223603.9

books of account or records of the Bank, shall be those of the Surviving Bank and shall not be released or impaired by the Merger. All rights of creditors and other obligees and all liens on property of the Bank shall be preserved unimpaired.

1.2. Closing and Effective Time of Merger . Upon the terms and subject to the conditions of this Agreement, the closing of the Merger contemplated by this Agreement (the “Closing”) shall take place at the offices of Winthrop & Weinstine, P.A., 225 South 6 ^th Street, Suite 3500, Minneapolis, Minnesota 55402, at 10:00 a.m., no later than the fifth (5 ^th ) business day following receipt by the Buyer of all necessary regulatory approvals and the expiration of all applicable waiting periods, or on such other day or at such other time or place as may be mutually agreed upon by the Buyer and the Seller (said day of closing hereinbefore and hereinafter called the “Closing Date”). The Merger shall become effective as of 12:01a.m. on the Closing Date (the “Effective Time”).

1.3. Articles of Association, Bylaws, Board of Directors and Officers of Surviving Bank . As a result of the Merger and at the Effective Time, the following shall occur:


(a)	Articles of Association of Surviving Bank . The Articles of Association of the Buyer in effect immediately prior to the Effective Time shall be the Articles of Association of the Surviving Bank. After the Effective Time, the Articles of Association of the Surviving Bank may be amended in accordance with their terms and as provided under applicable law.


(b)	Bylaws of Surviving Bank . The Bylaws of the Buyer in effect immediately prior to the Effective Time shall be the Bylaws of the Surviving Bank. After the Effective Time, the Bylaws of the Surviving Bank may be amended in accordance with their terms and as provided by the Articles of Association of the Surviving Bank and applicable law.


(c)	Board of Directors of the Surviving Bank . The board of directors of the Buyer as constituted immediately prior to the Effective Time shall be the board of directors of the Surviving Bank, each to hold office in accordance with the Articles of Association and the Bylaws of the Surviving Bank.


(d)	Officers of the Surviving Bank . The officers of the Buyer as constituted immediately prior to the Effective Time and such other officers as may be appointed by the board of directors of the Buyer or the Surviving Bank shall be the officers of the Surviving Bank, each to hold office in accordance with the Articles of Association and the Bylaws of the Surviving Bank.

1.4. Effect on Capital Stock . At the Effective Time, by virtue of the Merger and without any act on the part of the Seller, the Buyer or the Bank, the following shall occur:


(a)	Outstanding Buyer Equity . Each issued and outstanding share of Buyer Common Stock and any and all other issued and outstanding Equity Securities (as hereinafter defined) of the Buyer immediately prior to the Effective Time will, on and after the Effective Time, continue unchanged and shall evidence ownership of such shares of the Surviving Bank.

(b)

Conversion, Cancellation and Retirement of Bank Stock . Each share of Bank Shares outstanding immediately prior to the Effective Time shall cease to be outstanding, shall automatically be canceled and retired and shall cease to exist, and each certificate evidencing Bank Stock shall cease to have any rights with respect thereto, except that upon surrender of the certificate(s) evidencing the Bank Shares, such certificate(s) evidencing the Bank Shares shall be converted into the right to receive, in the aggregate, a cash payment in an amount equal to the Merger Consideration (as hereinafter defined in Article 2).

ARTICLE 2.
MERGER CONSIDERATION

2.1. Merger Consideration . The aggregate merger consideration to be paid by Buyer to Seller pursuant to and in connection with the Merger (the “Merger Consideration”) shall be equal to the sum of the following: (i) the Bank’s Book Value (as hereinafter defined) as of the Determination Date (as hereinafter defined); plus (ii) interest on item (i) above at an annual rate of five percent (5%) for the period from the Determination Date through, and including, the Closing Date, provided the Bank’s Book Value is higher on the Closing Date than the Determination Date; plus (iii) Five Million Dollars ($5,000,000).

WHD/12223603.9 - 2 -

For purposes of this Agreement, “Book Value” shall be equal to the sum of the balances, determined as of the Determination Date, in the Bank’s ledger accounts for its capital stock, its surplus, and its undivided profits (including year-to-date earnings after distribution for income taxes, but excluding (i) the net unrealized loss or gain on securities classified as available for sale recorded under the provisions of ASC 320-10 and (ii) any intangible assets of the Bank. Book Value shall be determined from the Determination Date Balance Sheet as prepared and agreed upon by the parties in accordance with Section 2.5 at least three (3) days prior to the Closing Date.

For purposes of this Agreement, “Determination Date” shall be the month-end prior to the Closing Date.

Based on the foregoing computation, for purposes of illustration, an example of the computation of the Merger Consideration, assuming a December 31, 2015 Determination Date is set forth on Exhibit B to this Agreement.

2.2. Capital Dividend . In the event the Bank’s Book Value on the Determination Date exceeds eight percent (8%) of the Bank’s total average assets (the “Excess Capital”), averaged over the three (3) calendar months prior to the Determination Date (the “Bank Assets”), then, subject to receipt of all necessary regulatory approvals, the Bank shall declare a dividend to the Seller equal to the Excess Capital which shall be paid to the Seller on or before the Closing Date, in order to reduce the Bank’s Book Value to eight percent (8%) of the Bank Assets (the “Capital Dividend”).

2.3. Payment Terms . The Merger Consideration shall be paid by the Buyer to the Seller in immediately available funds as follows:

(a)

Earnest Money . The sum of Seventy-Five Thousand dollars ($75,000) (the “Earnest Money”) has been paid to the Seller upon the execution of this Agreement and the receipt of said $75,000 is hereby acknowledged by the Seller. The Earnest Money shall be paid into an interest-bearing account in the name of the Seller and Buyer at the Bank. The Earnest Money shall only be withdrawn pursuant to the terms and conditions of this Agreement.

The parties hereby agree that if the transaction contemplated herein cannot be consummated as set forth in this Agreement due either (i) to a misrepresentation or breach of any warranty or covenant contained herein by Seller, including, without limitation, Buyer’s termination of this Agreement pursuant to Section 14(b) if such termination is the result of Seller’s actions or failures, or (ii) the Buyer’s termination of this Agreement pursuant to Section 14(c) or 14(d), or (iii) by mutual written consent of the Seller and Buyer, the Earnest Money paid hereunder plus any accrued interest thereon shall be immediately refunded to Buyer. Should the transaction contemplated herein not be consummated for any reason other than specifically hereinabove described, including, without limitation, failure to obtain approval of the transaction from regulatory authorities and the termination of this Agreement by either the Buyer or the Seller pursuant to the terms of Section 14 of this Agreement (other than those sections of Section 14 specifically referenced above), Seller shall be entitled to all of the Earnest Money (plus any accrued interest thereon). In the event the transaction herein is consummated, the Earnest Money (plus any interest accrued thereon) shall be applied to the Merger Consideration.


(b)	Balance of Merger Consideration . The Merger Consideration less the Earnest Money (plus any accrued interest thereon), shall be paid by Buyer to Seller on the Closing Date in immediately available funds.

2.4. RESERVED.

2.5. Accounting Standards . The Seller shall cause the Bank to prepare and deliver to the Seller and the Buyer a balance sheet of the Bank as of the Determination Date (the “Determination Date Balance Sheet”). The Determination Date Balance Sheet shall be prepared in accordance with Generally Accepted Accounting Principles (“GAAP”), as modified by applicable regulatory accounting principles applied on a consistent basis (the “Accounting Standards”); provided that the Bank has deemed the following items to be immaterial and they will not be included in the Determination Date Balance Sheet: (i) any accrued but unused PTO, vacation time or other compensated absences, (ii) any deferred loan fees and deferred loan costs, and (iii) normal recurring month end accounts payable for items such as utility bills received after month end. Further, the Seller will not be responsible for any termination costs associated with any of the Bank’s contracts and the Bank shall not be required to record or reserve for any such costs on the Determination Date Balance Sheet. The Merger Consideration calculation set forth in Section 2.1 above shall be calculated based upon the Determination Date Balance Sheet. A copy of the Determination Date Balance Sheet shall be provided to the Buyer as soon as practicable, but not less than five (5) business days prior to the Closing Date. The

WHD/12223603.9 - 3 -

Buyer shall notify the Seller of any disputes regarding the Determination Date Balance Sheet prior to the Closing Date. Any disputes regarding the Determination Date Balance Sheet which arise prior to the Closing Date shall be submitted to the independent accounting firm of RSM US, LLP (the “Independent Accounting Firm”) for a binding resolution. Cost of retaining the Independent Accounting Firm shall be born 50% by Buyer and 50% by Seller. Notwithstanding Section 15.1, all claims relating to issues of dispute regarding the Determination Date Balance Sheet will be barred after the Closing Date where the Buyer is aware of such claim prior to the Closing Date. Therefore, any such issues of dispute regarding the Determination Date Balance Sheet shall be resolved by the parties prior to the Closing Date.

2.6. Tax Matters . The Seller shall cause the Bank to prepare and file all tax returns for the Bank for all periods ending on or prior to the Closing Date that are filed after the Closing Date. The reasonable expense of preparation and filing of any and all income tax returns required to be filed by the Bank for the period ended December 31, 2015 and for the period from December 31, 2015 through the Closing Date shall be paid on or prior to the Closing by the Seller or the Bank to the extent such fees are due and payable. The Seller and the Bank shall not revoke the Seller’s election to be taxed as an S Corporation within the meaning of Sections 1361 and 1362 of the Internal Revenue Code of 1986, as amended (the “Code”). The Seller and the Bank shall not take or allow any action that would result in termination of the Bank’s status as a qualified Subchapter S subsidiary within the meaning of Sections 1361(b)(3)(B) of the Code.

ARTICLE 3.
ALLOCATION OF THE MERGER CONSIDERATION

The Seller and Buyer agree that the Merger shall be treated as a purchase of assets for federal income tax purposes and Seller and Buyer shall reach agreement on a methodology for completing a copy of IRS Form 8594 and any required exhibits thereto with the proposed allocation of the consideration payable hereunder (the “Allocation Statement”). After the Closing, the Seller and the Buyer shall cooperate in good faith to prepare the Allocation Statement as soon as practicable based upon the agreed upon methodology; provided that if Buyer and the Seller are unable to agree to the Allocation Statement within 30 days following the Closing Date, the Allocation Statement shall be determined conclusively by the Independent Accounting Firm. The fees of the Independent Accounting Firm incurred in preparing the Allocation shall be paid by Buyer and Seller in equal shares. The allocation reflected on the Allocation Statement is intended to comply with and shall be made in accordance with the allocation method required by Section 1060 of the Code. The Buyer and the Seller, as the case may be, shall (i) each report the federal, state, local and other tax consequences of the transactions contemplated herein (including the filing of IRS Form 8594) in a manner consistent with such Allocation Statement (including with respect to any adjustment to any item of consideration or any asset) and (ii) take no position in any tax filing, return, proceeding, audit or otherwise which is inconsistent with the Allocation Statement.

ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF SELLER

In connection with and as an inducement to the Buyer to enter into this Agreement and for the Buyer to be bound by the terms of this Agreement, the Seller represents and warrants to the Buyer that, as of the date hereof (and, unless a schedule specifies a specific date, as of the Closing Date):

4.1. Organization and Authority . The Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Wisconsin and is duly qualified to do business and is in good standing in all jurisdictions where its ownership or leasing of property or the conduct of its business requires it to be so qualified and has the corporate power and authority to own its properties and assets and to carry on its business as it is now being conducted. The Seller is registered as a bank holding company with the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”) under the Bank Holding Company Act of 1956, as amended (the “Act”). The Bank is a corporation duly organized, validly existing and in good standing under the laws of the State of Wisconsin, is duly qualified to do business and is in good standing in all jurisdictions where its ownership or leasing of property or the conduct of its business requires it to be so qualified and has the corporate power and authority to own its properties and assets and to carry on its business as it is now being conducted.

4.2. Subsidiaries . The Bank has no “Subsidiaries” (as defined in Section 225.2(o) of Regulation Y promulgated by the Federal Reserve Board).

4.3. Book Capitalization . The authorized capital of the Bank consists of 5,028.39 shares of common stock with a $100.00 par value, of which 4,351 shares are issued and outstanding. Except for the Bank Shares, there are no Equity Securities of the Bank issued and outstanding. “Equity Securities” of an issuer means capital stock or other equity securities of such issuer, options, warrants, or arrangements by which such issuer is or may become bound to issue

WHD/12223603.9 - 4 -

additional shares of its capital stock. The Bank Shares are validly issued, fully paid and nonassessable and have not been issued in violation of any preemptive right of any stockholder of the Bank.

4.4. Insured Status . The Bank is an insured bank under the provisions of Chapter 16 of Title 12 of United States Code Annotated, relating to the Federal Deposit Insurance Corporation, and no act or default on the part of the Bank has occurred which might materially and adversely affect the status of the Bank as an insured bank under said Chapter.

4.5. Authority . Subject to receiving necessary regulatory approvals and the approval of the Shareholders of the Seller as set forth in Article 6, the Seller has the power and authority to enter into, execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution, delivery and performance of this Agreement by the Seller and the consummation of the transactions contemplated hereby in accordance with and subject to the terms of this Agreement have been duly authorized by all necessary corporate action.

4.6. No Violation . Except as provided in Schedule 4.6 , neither the execution and delivery by the Seller of this Agreement nor the consummation of the transactions contemplated hereby nor compliance by the Seller with any of the provisions hereof will:


(a)	violate or conflict with any provision of the Articles of Incorporation or the Bylaws of the Seller, or violate or conflict with any provision of the Articles of Incorporation or the Bylaws of the Bank;

(b)

violate in any material respect or constitute a default under or give rise to any right of termination, cancellation or acceleration under any of the terms, conditions or provisions of any material agreement or instrument to which the Seller or the Bank is a party or by which any of them or any of their properties or assets is bound, except as has been duly and validly waived, consented to or approved by the other parties to such agreement or instrument;


(c)	result in the creation or imposition of any security interest, lien or other encumbrance upon any assets of the Seller or the Bank under any agreement or commitment to which the Seller or the Bank is a party or by which the Seller or the Bank is bound or to which any of the Seller’s or the Bank’s assets is subject; or


(d)	violate any statute or law or any judgment, order, decree, regulation or rule of any court or governmental authority applicable to the Seller or the Bank or any of their assets.

4.7. Financial Statements . The following financial statements of the Bank have been or will be delivered to the Buyer and are incorporated by reference herein: The December 31, 2013, and 2014 and December 31, 2015 Reports of Condition and Reports of Income of the Bank and the Reports of Condition and Income of the Bank for each calendar quarter end between the date hereof and the Closing Date (collectively the “Bank Financial Statements”).

The Bank Financial Statements are in accordance with the Accounting Standards and are true and correct in all material respects, and together they fairly and accurately present the financial position and results of operations of the Bank as of the dates and for the periods therein set forth; provided that the Bank has deemed the following items to be immaterial and as such they have not been recorded on the Bank Financial Statements: (1) any accrued but unused PTO, vacation time or other compensated absences, (2) any deferred loan fees and deferred loan costs, and (3) normal recurring month end accounts payable for items such as utility bills received after month end. Since December 31, 2015, there has been no material change in the financial condition, results of operation, business or prospects of the Bank (other than changes in the ordinary course of business, none of which, individually or in the aggregate, has been materially adverse) nor has there been any other event or condition of any character that has materially and adversely affected the financial condition, results of operations, business or prospects of the Bank, taken as a whole; provided, however, Seller makes no representation regarding any adverse change (material or otherwise) that is caused by changes in the Accounting Standards, applicable law or regulation or general economic or market conditions applicable to all banks generally (e.g. interest rate changes).

4.8. Loans . Except as set forth on Schedule 4.8 , all notes and other evidences of indebtedness executed and delivered to the Bank in connection with any of the loans reflected in the records of the Bank or in the Bank Financial Statements, including, without limitation, any and all security agreements, guarantees, mortgages and other collateral documents accompanying the same, (i) are not subject to any claim of set-off or counterclaim, nor will the exercise of any right thereunder render such note or other evidence of indebtedness unenforceable, in whole or in part, or subject to any right of rescission, claim of set-off or counterclaim, and no such right of rescission, claim of set-off or counterclaim has been asserted in any proceeding, (ii) are correct in amount, genuine as to signatures of the makers, endorsers or

WHD/12223603.9 - 5 -

signatories thereof or thereto, were given for a valid consideration in the full amount shown on the books and records of the Bank and (iii) represent binding claims against such makers, endorsers or signatories for the full amount shown on the books and records of the Bank, subject to the enforcement of equitable remedies, bankruptcy, insolvency, moratorium and other laws affecting the rights of creditors generally and the judicial limitation of the performance of the remedy of specific performance. To Seller's Knowledge there are no material misstatements or inaccuracies in any documentation provided to the Bank, or in any representations or warranties made, by any borrower in connection with any loans issued by the Bank or any notes or other evidences of indebtedness executed and delivered to the Bank. To Seller’s Knowledge, all liens in favor of the Bank, and all security interests granted to the Bank, in connection with any loans issued by the Bank or any notes or other evidences of indebtedness executed and delivered to the Bank have been validly granted and perfected. Notwithstanding the foregoing representations or any other representation contained in this Article 4, the Seller makes no representation as to the following and Buyer acknowledges and agrees that it is relying on its own evaluation with respect to: (i) the collectability of any of the Bank’s loans due to any borrower’s financial inability to pay; (ii) the adequacy of any collateral; (iii) the value of any other real estate owned; or (iv) the adequacy of the Bank’s allowance for loan and lease losses.

4.9. Insider Loans . Set forth on Schedule 4.9 , as of the date of this Agreement, is a list of any and all outstanding notes or other evidences of indebtedness executed and delivered by Insiders (as defined below) of the Bank to the Bank. For purposes of this Section 4.9, “Insider” shall mean any officer or director of the Seller or the Bank or any shareholder of the Seller owning 10% or more of the Seller’s stock or any members of the immediate families or related interests of such officers, directors or shareholders, as the terms “immediate families” and “related interests” are defined in §§ 215.2(g) and (n) of Regulation O (12 C.F.R. §§ 215.2(g) and (n)).

4.10. Participation Loans . Schedule 4.10 fully describes all outstanding loans or other evidences of indebtedness, as of the date of this Agreement, in which the Bank has participated with other parties either as the originating lender or otherwise.

4.11. Taxes .

(a)

There are no taxes of any kind or character for which the Bank is or may be liable which are now past due, delinquent and/or unpaid. On or prior to January 3, 2003, the shareholders of the Seller and the Seller elected, and the IRS accepted an election for the Seller to become an S corporation pursuant to Section 1362 of the Code and the Seller elected, and the IRS accepted, a qualified Subchapter S subsidiary election for the Bank. Since January 3, 2003, the Bank has been a qualified Subchapter S subsidiary within the meaning of Section 1361(b)(3)(B) of the Code. The Seller’s S corporation election and the Bank’s Subchapter S subsidiary election has not been revoked, nor has the Seller or, to its Knowledge, the shareholders of the Seller, taken any action (or failed to take any action) that would result in the termination of the Seller’s S corporation election or the Bank’s Subchapter S subsidiary election.

(b)

The Bank and Seller have complied in all material respects with all laws relating to Taxes and has timely filed all Tax returns required to be filed by it. All such Tax returns were true, correct and complete in all material respects. For these purposes, “Tax” or “Taxes” means any net income, net receipts, capital gains, gross income, gross receipts, sales, use, transfer, ad valorem, franchise, privilege, profits, license, capital, withholding, payroll, estimated, employment, excise, goods and services, severance, stamp, occupation, premium, property, unclaimed property, social security, environmental, alternative or add-on, value added, registration, windfall profits or customs duties or other Tax, of any kind, imposed by any governmental authority, or any interest, any penalties, additions to Tax or additional amounts incurred or accrued under applicable Tax law or properly assessed or charged by any governmental authority, in each case, whether disputed or not.

(c)

The Bank has provided or made available to Buyer (i) true, correct and complete copies of all Tax returns filed by the Bank and Seller (in relation to the business of the Bank) for all years beginning after December 31, 2010 or for which the statute of limitations has not expired, and (ii) true, correct and complete copies of all notices of deficiencies, notices of proposed adjustments, notices of assessments, revenue agent reports, closing agreements, settlement agreements, information document requests, protests, and any other similar document, notice, or correspondence of any kind, in each case, that the Seller of Bank (or a representative of the Seller or Bank) has received from, sent to, or entered into with the IRS or any other governmental authority since December 31, 2010 that relates to any Taxes or Tax return which is not closed by the applicable statute of limitations that relates to the business of the Bank. No written claim has been received by the Seller or Bank from

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any governmental authority in the last six (6) years that the Seller or Bank has not properly paid Taxes or filed Tax returns in a jurisdiction in which the Seller or Bank do not file a Tax return that relates to the business of the Bank.


(d)	There are no liens for Taxes on any assets of the Bank, other than statutory liens for Taxes not yet due and payable.

(e)

Neither the Seller nor the Bank have ever been a member of any consolidated, combined or unitary group for federal, state, local or foreign Tax purposes, other than any such group of which the Seller is or was the common parent. The Bank is not liable for Taxes of any other Person as a result of transferee liability, successor liability, joint and/or several liability (including pursuant to Treasury Regulation Section 1.1502-6 (or similar provisions of state, local or non-U.S. Law)), contractual liability, or otherwise. The Bank had been subject to a Tax-sharing agreement with the Seller and its subsidiaries, but such agreement was terminated prior to the Closing Date without liability to the Bank.


(f)	The Bank or Seller has timely and properly withheld (i) all required amounts from payments to Bank’s employees, agents, contractors, nonresidents, and other persons paid by the Bank and (ii) all sales, use and value added Taxes of the Bank. The Bank or Seller timely remitted all such withheld Taxes.


(g)	No federal, state, local or foreign Tax audits or other proceedings are presently in progress, pending or, to the Sellers’ Knowledge, threatened with regard to any Taxes or Tax returns of either the Seller (in relation to the business of the Bank) or the Bank.


(h)	The Bank is not subject to a Tax holiday or Tax incentive or grant in any jurisdiction that will terminate (or could be subject to clawback or recapture) as a result of any transaction contemplated by this Agreement.

4.12. Judgments . Except as set forth in Schedule 4.12 , there are no unsatisfied judgments of record against the Bank.

4.13. Regulatory Reporting . Since January 1, 2011, the Bank has filed all reports, registrations and statements, together with any required amendments thereto, that it was required to file, if any, with (i) the Board of Governors of the Federal Reserve System (the “Federal Reserve”), (ii) Federal Deposit Insurance Corporation, (iii) the Wisconsin Department of Financial Institutions (“WDFI”), and (iv) any other applicable federal or state banking authorities. All such reports and statements filed with any such regulatory body or authority are collectively referred to herein as the “Reports.” Except as set forth in Schedule 4.13 , the Bank has not received any notice from any governmental or regulatory authority that it has failed to file a Report or that a Report is inaccurate or complete.

4.14. Employment Contracts . Except as disclosed on Schedule 4.14 , the Bank has no written employment contracts with any of its respective officers or employees.

4.15. Title to Bank Shares . Except as disclosed on Schedule 4.15 , the Seller owns the Bank Shares free and clear of any and all security interests, liens, encumbrances, restrictions, claims or other defects in title and the Bank Shares constitute 100% of the issued and outstanding Equity Securities of the Bank. On the Closing Date, the Seller will deliver the Bank Shares to Buyer free and clear of any and all security interests, liens, encumbrances, restrictions, claims or other defects in title.

4.16. Insurance . The Bank has maintained and continues to maintain insurance with respect to its properties of the type and in such amounts as are set forth on Schedule 4.16 . A complete list and summary description of all insurance policies maintained by the Bank are set forth in said Schedule. The policies listed on said Schedule are in full force and effect, all premiums due thereon have been paid, and the Bank has not received any notice of cancellation, termination or nonrenewal of such policies. Schedule 4.16 sets forth a complete list of all pending claims against such insurance policies and any circumstances giving rise to potential claims against such insurance policies.

4.17. Litigation . Except as set forth on Schedule 4.17, there are no actions, proceedings, investigations or inquiries pending or, to the Seller’s knowledge, threatened (i) which question the validity of this Agreement or any action taken or to be taken pursuant hereto or (ii) which could reasonably be expected, either in any case or in the aggregate, to materially and adversely affect the business, operations, affairs, properties or prospects of the Bank or materially impair the right or the ability of the Bank to carry on its business as now conducted.

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4.18. Title to Property . Except as described in Schedule 4.18 , the Bank has good and marketable title to all of its material properties (personal, tangible and intangible) and assets reflected in the Bank Financial Statements or otherwise represented as being owned by it, free and clear of all mortgages, pledges, liens, conditional sales agreements or other encumbrances of any kind or nature except those reflected as liabilities on the Bank Financial Statements and except (i) liens for taxes, assessments or other governmental charges not yet delinquent, and (ii) such imperfections of title and minor easements, defects, encumbrances and encroachments, if any, as do not materially detract from present use of such properties.

4.19. Real Property .

(a)

A list of each parcel of real property owned by the Bank (other than real property acquired in foreclosure or in lieu of foreclosure in the course of the collection of loans and being held by the Bank for disposition as required by law) is set forth in Schedule 4.19(a) under the heading “Owned Real Property” (such real property being herein referred to as the “Owned Real Property”). A list of each parcel of real property leased by the Bank is also set forth in Schedule 4.19(a) under the heading “Leased Real Property” (such real property being herein referred to as the “Leased Real Property”). Collectively, the Owned Real Property and the Leased Real Property are herein referred to as the “Real Property.”


(b)	There is no pending action involving the Bank as to the title of or the right to use any of the Real Property.


(c)	Except as set forth in the Title Commitments to be delivered to Buyer in accordance with Section 12.4, the Bank has good and marketable fee simple title to all Owned Real Property, free and clear of all mortgages, pledges, liens, conditional sales agreements or other encumbrances of any kind or nature except for taxes, assessments or other governmental charges not yet delinquent.


(d)	Except as disclosed on Schedule 4.19(d) , the Bank does not have any interest in any real property other than as described above in Section 4.19(a) except interests as a mortgagee; provided that Schedule 4.19(d) sets forth a list of real property acquired by Bank in foreclosure or in lieu of foreclosure and being held for disposition as required by law.

(e)

None of the buildings, structures or improvements located on the Owned Real Property are the subject of any official complaint or notice by any governmental authority of violation of any applicable zoning ordinance or building code, and to the Seller’s Knowledge, there is no zoning ordinance, building code, use or occupancy restriction or condemnation action or proceeding pending or, threatened, with respect to any such building, structure or improvement which will or could reasonably be expected to materially interfere with the use of any of the Owned Real Property. To the Seller’s Knowledge, the Owned Real Property is in generally good condition for its intended purpose, ordinary wear and tear excepted.

(f)

The Bank has not caused or, to Seller’s Knowledge, allowed the use, generation, treatment, storage, disposal or release at any Real Property of any Toxic Substance, except in accordance in all respects with all applicable federal, state and local laws and regulations. “Toxic Substance” means any hazardous, toxic or dangerous substance, pollutant, waste, gas or material, including, without limitation, petroleum and petroleum products, metals, liquids, semi-solids or solids, that are regulated under any federal, state or local statute, ordinance, rule, regulation or other law pertaining to environmental protection, contamination, quality, waste management or cleanup. To Seller’s Knowledge, there are no underground storage tanks located on, in or under any Owned Real Property.

4.20. Leases . The Schedule of Leases attached hereto in Schedule 4.20 sets forth a complete and correct listing of all leases of personal and real property to which the Bank is a lessee including, without limitation, those leases for any Leased Real Property (collectively, the “Bank Leases”). The Seller has provided to the Buyer access to all lease agreements described in said Schedule together with any and all amendments thereto, and each such lease agreement is valid and subsisting and, to Seller’s Knowledge, no event or condition exists which constitutes, or after notice or lapse of time or both, would constitute a material default thereunder by Bank. Except as set forth on Schedule 4.20 , neither the execution or delivery of this Agreement nor the consummation or performance of the sale of the Bank Shares will, directly or indirectly (with or without notice or lapse of time) contravene, conflict with or result in a violation or breach of any provision of, or give any party the right to declare a default or exercise any remedy under, or accelerate the maturity or performance of, or to cancel, terminate or modify any of the Bank Leases.

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4.21. Condition of Assets . Except as set forth on Schedule 4.21 , there is no material asset used by the Bank in the conduct of its business which is not either owned by the Bank or leased to the Bank; and all such assets owned or used by the Bank are, and on the Closing Date will be, in good operating condition subject to normal wear and tear and maintenance requirements.

4.22. Agreements, Commitments and Contracts . Except for contracts, commitments and agreements described in Schedule 4.22(b) attached hereto, or listed in any other schedule attached hereto, and contracts, commitments and agreements entered into in the ordinary course of business (including credit and deposit contracts of the Bank), the Bank is not a party to any contract, commitment or agreement which:


(a)	extends beyond twelve (12) months from the date of this Agreement;


(b)	individually might involve payment by or to the Bank of an aggregate amount of more than $15,000, which may be due or expected to be due within 90 days of the Closing Date; or


(c)	contains a termination fee or penalty that is triggered by the Closing.

4.23. Employee Benefit Plans . Except as provided on Schedule 4.23 , the Bank does not maintain any Employee Pension Benefit Plans, as defined under Section 3(2) of the Employee Retirement Income Security Act of 1974 (ERISA), as amended, nor does it maintain any Employee Welfare Benefit Plans, as defined in Section 3(1) of ERISA, or make any contributions to such Plans, including any Multi‑Employer Welfare Plans, nor is it required to make any contributions to such plans, including but not limited to any pension plans, whether Defined Benefit, Money Purchase, or Target Benefit, Profit Sharing Plans, Stock Bonus Plans, Employee Stock Ownership Plans, 401(k) Plans, Employee Pension Plans, Annuity Plans, and other qualified deferred compensation plans, including any Multi‑Employer Pension Plans.

Except as set forth in Schedule 4.23 , the Bank is not a party to nor does it maintain, contribute to or have any other obligations under any plan (including but not limited to health insurance, life insurance, disability insurance, deferred compensation, contractual death benefits or stock option) exempt from the requirements of ERISA, including vesting, participation and/or funding requirements, and not qualified under the Internal Revenue Code.

4.24. Compliance with Law . Except as set forth in Schedule 4.24 , since January 1, 2011, to the Seller’s Knowledge, the Bank has complied with all applicable federal, state and local laws, regulations, orders and guidelines relating to the Bank’s business, the violation of which could result in a material adverse change in the financial condition or business operations of the Bank taken as a whole. The Bank has not received notice of any violation of any environmental or zoning laws, building, fire or other regulatory laws, statutes, ordinances or regulations relating to the Owned Real Property or the Leased Real Property. The Bank has all permits and licenses from governmental authorities required to conduct its business as now conducted.

4.25. Fidelity Bonds . Except as disclosed on Schedule 4.25 , since January 1, 2011, the Bank has continually maintained a fidelity bond insuring it against acts of dishonesty by its employees in such amounts as are disclosed in Schedule 4.25 . Except as disclosed on Schedule 4.25 , since January 1, 2011, no claims have been made under such bond, and to Seller’s Knowledge, no facts exist which would form the basis of a claim under any such bonds; nor does either Seller or Bank have any reason to believe that such fidelity coverage will not be renewed by the existing carrier on substantially the same terms as existing coverage.

4.26. Regulatory Matters . The Bank is not subject to or to the Seller’s Knowledge, threatened with any consent order or proceeding or other order, memorandum, agreement or proceeding initiated by any federal or state regulatory authority.

4.27. Record Books . To the Seller’s Knowledge, the minute books and stock record books of the Bank are complete and correct in all material respects and reflect all material transactions required to be recorded under any and all applicable state and federal laws or regulations.

4.28. Disclosure . No representation or warranty by the Seller in this Agreement and no statement contained in this Agreement or in any document delivered or to be delivered pursuant hereto contains or will contain an untrue statement of material fact or omits or will omit to state any material fact necessary to make the statements herein or therein contained, in light of the circumstances under which made, not misleading; it being understood that as used in this subparagraph, “material” means material to any individual statement or omission and in the aggregate as to all statements and omissions.

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4.29. Brokers and Finders . Neither the Seller nor the shareholders of Seller, nor the Bank has employed any broker or finder in connection with the transaction contemplated by this Agreement and the Bank will thus have no liability or obligation to pay any such broker or finder.

4.30. Seller’s Knowledge . For purposes of this Agreement, references to “Seller’s Knowledge” (or the like) means no information has come to the attention of any of the directors or officers of Seller that gives (or should give) him or her current conscious awareness that any such statements, representations or warranties are not accurate.

Except as expressly set forth in this Agreement, Buyer is consummating the Merger without any additional representations or warranties whatsoever.

ARTICLE 5.
REPRESENTATIONS AND WARRANTIES OF THE BUYER

In connection with and as an inducement to the Seller to enter into and be bound by the terms of this Agreement, the Buyer warrants and represents to the Seller that, as of the date hereof (and as of the Closing Date):

5.1. Organization and Corporate Power . Buyer is a national banking association duly organized, validly existing and in good standing under the laws of the United States of America. Subject to receiving the necessary regulatory approvals, the Buyer has all requisite power, authority, charters, licenses and franchises necessary or required by law to acquire the Bank Shares from the Seller.

5.2. Authority Relative to this Agreement . The execution and delivery of this Agreement by the Buyer and the consummation by the Buyer of the transactions contemplated hereby have been duly authorized by the Board of Directors of the Buyer, and no other corporate proceedings on the part of the Buyer are necessary to authorize this Agreement and such transactions.

5.3. Execution and Enforceability . This Agreement has been duly executed and delivered by the Buyer and constitutes a valid and binding obligation of the Buyer enforceable in accordance with its terms subject to the enforcement of equitable remedies, bankruptcy, insolvency, moratorium and other laws affecting the rights of creditors generally and the judicial limitations of the performance of the remedy of specific performance.

5.4. Consents and Approvals . Except for the filing of the Applications, no consents or approvals of, or filings or registrations with any governmental entity or with any third party are necessary in connection with the execution and delivery by the Buyer of this Agreement, or the consummation by the Buyer of the transactions contemplated herein.

5.5. Financing . The Buyer possesses and will possess on the Closing Date sufficient financial resources to consummate the transactions contemplated by this Agreement as described herein, including, without limitation, the payment of the Merger Consideration pursuant to Article 2 of this Agreement.

5.6. Regulatory Approval . To the Buyer’s Knowledge, no facts or circumstances pertaining to the Buyer exist on the date hereof that may prevent or unreasonably delay the Buyer’s receipt of the regulatory approvals for the transactions contemplated by this Agreement.

5.7. Brokers and Finders . Neither the Buyer nor any of its respective officers, directors or employees has employed any broker or finder or incurred any liability for any financial advisory fees, brokerage fees, commissions or finder’s fees, and no broker or finder has acted directly or indirectly for the Buyer in connection with this Agreement or the transactions contemplated hereby.

5.8. Absence of Default . Neither the execution nor the delivery of this Agreement, the consummation of the transactions contemplated hereby or the fulfillment of the terms hereof will (i) conflict with, or result in a breach of the terms, conditions, or provisions, or constitute a default under any agreement or instrument under which the Buyer is obligated, (ii) violate any law, rule or regulation to which the Buyer is subject, or (iii) violate the Buyer’s Articles of Incorporation or Bylaws.

5.9. Litigation . There is no litigation, proceeding, or investigation pending, or, to the Knowledge of the Buyer, threatened against the Buyer, which questions the validity of any action to be taken pursuant to or in connection with the provisions of this Agreement, and the Buyer does not know of any basis for any such litigation, proceeding or investigation.

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5.10. Buyer’s Knowledge . For purposes of this Agreement, references to “Buyer’s Knowledge” (or the like) means no information has come to the attention of any of the directors or officers of Buyer that gives (or should give) him or her current conscious awareness that any such statements, representations or warranties are not accurate.

Except as expressly set forth in this Agreement, Seller is consummating the Merger without any additional representations or warranties whatsoever.

ARTICLE 6.
APPLICATION AND NOTICE TO THE OFFICE OF COMPTROLLER OF THE CURRENCY AND WISCONSIN DEPARTMENT OF FINANCIAL INSTITUTIONS

As soon as practicable, but in no event later than ten (10) business days from the date of this Agreement, the Buyer shall file an application for combination with the Office of the Comptroller of the Currency (the “OCC”), the WDFI, and such other applications and notices required by other state and federal regulatory agencies, of its intention to consummate the Merger (the “Applications”). The Seller agrees to provide to the Buyer such nonfinancial assistance as necessary to obtain approvals as the Buyer shall reasonably request. The Buyer shall use its commercially reasonable efforts to obtain all appropriate approvals of the acquisition of the Bank Shares in accordance with the terms of this Agreement. The Buyer shall provide the Seller with copies of the non-confidential portions of the Applications to be filed by the Buyer with regulatory authorities for approval of the transactions contemplated by this Agreement, and the Buyer shall keep the Seller informed as to the progress of the Applications and provide the Seller with copies of all non-confidential correspondence or orders evidencing final action by regulatory authorities with regard to the Applications. Nothing herein, however, shall be deemed to require the Buyer to provide the Seller with copies of any confidential portions of the Applications, unless such portions ultimately are not accorded confidential treatment by the appropriate regulatory authority.

ARTICLE 7.
DELIVERY OF DOCUMENTS

On or before the Closing Date (as applicable), the Buyer and the Seller shall execute and/or deliver to the other party the following documents, instruments and agreements, together with such other documents, instruments and agreements as the other party (or its counsel) may reasonably request to consummate the purchase and sale contemplated hereby:

7.1. By the Buyer to the Seller:


(a)	immediately available funds in the amount required in Section 2.4(b) hereof, pursuant to written instructions delivered by the Seller; and


(b)	the “Buyer Certificate” (as that term is defined in Section 8.1 hereof);


(c)	the merger letter received from the OCC providing for the consummation of the Merger; and


(d)	certified copies of a resolution of the directors of Buyer approving of the Merger and the execution and delivery of this Agreement and all documents, instruments and agreements required to be executed and delivered by the Seller pursuant to this Agreement.

7.2. By the Seller to the Buyer:


(a)	certificates evidencing all of the Bank Shares being cancelled hereunder pursuant to the Merger, duly endorsed or otherwise accompanied by duly executed stock powers sufficient to transfer ownership of the said certificates and the shares of stock evidenced thereby to the Buyer;


(b)	resignations duly signed by such directors of the Bank as may be requested by the Buyer on or before the Closing Date and effective on the Closing Date, pursuant to which such directors resign from their positions as directors of the Bank;


(c)	the “Seller Certificate” (as that term is defined in Section 9.1 hereof);


(d)	at least three (3) days prior to the Closing Date, a copy of the Determination Date Balance Sheet (agreed upon by the Buyer and Seller in accordance with Section 2.5);

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(e)	evidence of the obtainment of Tail Coverage pursuant to Section 12.3 of this Agreement;


(f)	evidence of a release of that certain bank stock loan with Dairyland State Bank, secured by the Bank Shares;


(g)	two (2) days prior to the Closing Date, an updated set of Schedules to this Agreement only reflecting the addition of any new facts or circumstances requiring disclosure thereon which have arisen or occurred between the date hereof and the date that is two (2) days prior to the Closing Date; and


(h)	certified copies of a resolution of the directors of Seller approving of the Merger and the execution and delivery of this Agreement and all documents, instruments and agreements required to be executed and delivered by the Seller pursuant to this Agreement.

ARTICLE 8.
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLER

All of the agreements and obligations of the Seller under this Agreement are subject to the fulfillment, on or prior to the Closing Date, of the following conditions precedent, any or all of which may be waived, in whole or in part, in writing by the Seller:

8.1. Performance and Compliance . Except as to the extent such representations and warranties are by their express provisions made as of a specified date, all representations and warranties of the Buyer set forth in this Agreement shall be true and correct in all material respects (or, to the extent such representations and warranties are already qualified by materiality, such representations and warranties shall be true and correct in all respects) as of the Closing Date to the same extent and with the same effect as if made at and as of such date; the Buyer shall have performed and complied in all material respects with all of the agreements, covenants and conditions required by this Agreement to be performed or complied with by the Buyer on or prior to the Closing Date; and the Buyer shall have delivered to the Seller a certificate, dated as of the Closing Date, to all such effects (hereinafter referred to as the “Buyer Certificate”).

8.2. Regulatory Approval . Any regulatory approval as required by the Act, or otherwise required by applicable law or regulation shall have been obtained.

8.3. No Termination . Neither the Buyer nor the Seller shall have terminated this Agreement as permitted herein.

8.4. Articles of Merger . Any articles or certificates of merger as required by applicable law shall have been executed, acknowledged, filed, and accepted.

8.5. Shareholder Approval . The transactions contemplated by this Agreement, this Agreement and related matters shall have been approved and adopted by the requisite vote of the shareholders of the Seller in accordance with applicable Wisconsin state law and the Seller’s Articles of Incorporation and Bylaws.

ARTICLE 9.
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE BUYER

All of the agreements and obligations of the Buyer under this Agreement are subject to the fulfillment, on or prior to the Closing Date, of the following conditions precedent, any or all of which may be waived, in whole or in part, in writing by the Buyer:

9.1. Performance and Compliance . Except as to the extent such representations and warranties are by their express provisions made as of a specified date, all representations and warranties of the Seller set forth in this Agreement shall be true and correct in all material respects (or, to the extent such representations and warranties are already qualified by materiality, such representations and warranties shall be true and correct in all respects) as of the Closing Date to the same extent and with the same effect as if made at and as of such date; the Seller shall have performed and complied in all material respects with all of the agreements, covenants and conditions required by this Agreement to be performed or complied with by the Buyer on or prior to the Closing Date; and the Seller shall have delivered to the Buyer a certificate, dated as of the Closing Date, to all such effects (hereinafter referred to as the “Seller Certificate”).

9.2. Regulatory Approval . Any regulatory approval as required by applicable state or federal law or regulation shall have been obtained, and all waiting and appeal periods prescribed by applicable law or regulation shall have expired.

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9.3. No Termination . Neither the Buyer nor the Seller shall have terminated this Agreement as permitted herein.

9.4. Shareholder Approval . The transactions contemplated by this Agreement, this Agreement and related matters shall have been approved and adopted by the requisite vote of the shareholders of the Seller in accordance with applicable Wisconsin state law and the Seller’s Articles of Incorporation and Bylaws.

9.5. Articles of Merger . Any articles or certificates of merger as required by applicable law shall have been executed, acknowledged, filed, and accepted.

9.6. Material Adverse Effect . From the date of this Agreement, there shall not have occurred any Material Adverse Effect (as defined below), nor shall any event or events have occurred that, individually or in the aggregate, with or without the lapse of time, could reasonably be expected to result in a Material Adverse Effect, provided that if a Material Adverse Effect has occurred through no fault of Bank or Seller and this Agreement is subsequently terminated by either party as a result of the Material Adverse Effect, Seller shall be entitled to retain the Earnest Money set forth in Section 2.3(a) of this Agreement. “Material Adverse Effect” means any event, occurrence, fact, condition or change that is, or could reasonably be expected to become, individually or in the aggregate, materially adverse to (a) the business, results of operations, condition (financial or otherwise) or assets of the Bank, or (b) the ability of the Bank to consummate the transactions contemplated hereby on a timely basis; provided, however, that “Material Adverse Effect” shall not include any event, occurrence, fact, condition or change, directly or indirectly, arising out of or attributable to: (i) general economic or political conditions; (ii) conditions generally affecting the industries in which the Company operates; (iii) any changes in financial or securities markets in general; (iv) acts of war (whether or not declared), armed hostilities or terrorism, or the escalation or worsening thereof; (v) any action required or permitted by this Agreement, except for the filing of applications, notices and other documents necessary to obtain, and the receipt of regulatory approvals as provided herein; or (vi) the public announcement, pendency or completion of the transactions contemplated by this Agreement.

ARTICLE 10.
COVENANT NOT TO COMPETE

From the Closing Date and for a period of five (5) years thereafter, the Seller and the Control Shareholders shall not, either directly or indirectly:

(a)

within the a thirty-five (35) mile radius of any branch of the Bank, own, manage, operate or control or participate in the ownership, management, operation or control of, or be employed by any corporation, partnership, person, firm or other business that is engaged in the business of banking; provided, however, that the foregoing restriction shall not affect or limit Al Gerber’s current ownership stake in Community Bank of Cameron and such current ownership stake shall not be a violation hereof.


(b)	call upon, solicit, divert or attempt to take away any of the customers or business of the Bank;


(c)	disclose, make available or divulge to any corporation, partnership, individual, firm, other business or person any trade secret information concerning the business and affairs of the Bank or other information concerning the business and affairs of the Bank; or


(d)	induce or attempt to induce any employee of the Bank to do any of the foregoing or to discontinue such employee's employment with the Bank.

Notwithstanding anything contained above, nothing set forth in this Article 10 shall be deemed to preclude the Control Shareholders from owning, directly or indirectly, less than five percent (5%) of the stock of any company whose stock is publicly traded notwithstanding that such company or a subsidiary may be engaged in the banking business in Wisconsin. Further, nothing in this Article 10 shall prohibit a Control Shareholder from operating, owning, controlling or otherwise engaging in the operation of an insurance agency or the sale of insurance policies and products, including, without limitation, the sale of annuities. Finally, nothing in this Article 10 shall prohibit a Control Shareholder from providing consulting, advisory or audit services on loan files and lending functions for Community Bank of Cameron.

The Seller and Control Shareholders acknowledge and agree that the Merger Consideration paid to the Seller in Section 2.1 is adequate and sufficient consideration for the Seller’s and the Control Shareholders’ non-competition and non-solicitation obligations under this Article 10. The Seller and the Control Shareholders agree that any breach of covenants (a), (b), (c) or (d) above will cause the Bank or the Buyer irreparable harm for which there is no adequate remedy at

WHD/12223603.9 - 13 -

law, and, without limiting whatever other rights and remedies the Buyer may have under this Section, the Seller and the Control Shareholders consent to the issuance of an injunction in favor of the Bank or the Buyer enjoining the breach of any of the aforesaid covenants by any court of competent jurisdiction. If any or all of the aforesaid covenants are held to be unenforceable because of the scope or duration of such covenant or the area covered thereby, the parties agree that the court making such determination shall have the power to reduce the scope, duration and area of such covenant to the extent that allows the maximum scope, duration and/or area permitted by applicable law.

ARTICLE 11.
EXPENSES AND BROKERS

The Buyer and the Seller shall each pay their respective costs and expenses of any character incurred in connection with this Agreement or the transaction contemplated hereby, including, without limitation, any commissions, fees or other compensation payable to any finder or broker acting on behalf of such party in connection with the transaction contemplated by this Agreement.

ARTICLE 12.
COVENANTS

12.1. Operations Pending Closing . The Seller hereby covenants to and agrees with the Buyer that, from the date hereof to the Closing Date or the termination of this Agreement, and subject to the requirement of the regulators that the Seller must control its own operations in accordance with past operating practice, the Seller shall not without the written consent of the Buyer, cause or allow the Bank to:


(a)	fail to carry on its business in substantially the same manner as now being conducted;


(b)	declare, pay or make any cash dividend, stock dividend or other distribution with respect to the Bank Shares outside of the ordinary course of business, except for (i) the Capital Dividend in accordance with Section 2.2 and (ii) dividends or distributions paid to Seller in the ordinary course in connection with the issuance of S-corporation tax dividends to Seller’s shareholders;


(c)	issue or directly or indirectly sell, transfer or otherwise dispose of, or purchase, redeem, retire or otherwise acquire any Equity Securities of the Bank, or agree to commit to do so;


(d)	subdivide or in any way reclassify any of the Equity Securities of the Bank;


(e)	grant any option or right to purchase or execute any agreement or otherwise commit to issue any Equity Securities of the Bank;


(f)	invest or take any actions to inject any additional capital or equity into the Bank other than increases in the Bank’s capital accounts arising due to earnings in the ordinary course of business;


(g)	sell, transfer, lease, mortgage, pledge or otherwise dispose of or encumber any of the Bank’s assets or cancel any of the Bank’s claims except, in each case, in the ordinary course of business.


(h)	fail to use its reasonable efforts to preserve the Bank’s business, organization and goodwill and its existing relationships with its respective customers;


(i)	amend the Bank’s Articles of Incorporation or Bylaws;


(j)	incur any obligation or liability or enter into any transaction except in the ordinary course of the Bank’s business;


(k)	fail to take any action necessary and appropriate to maintain in full force and effect the Bank’s corporate existence, rights, licenses and franchises;


(l)	pay or commit to pay any salary, fee or other compensation at a rate in excess of that prevailing on January 31, 2016;


(m)	fail to maintain all existing policies of insurance with respect to the Bank in their present form and with their present coverage or comparable substitute policies;

WHD/12223603.9 - 14 -


(n)	enter into any employment, agency or other contract or agreement with respect to the performance of personal services which is not terminable by the Bank without liability, on thirty (30) days or less notice;


(o)	pay or commit to pay any bonus or other incentive compensation to any of the Bank officers, directors or employees outside of the ordinary course of business or as set forth on Schedule 12.1(o) ;


(p)	make or grant any increase any contributions under any Employee Benefit Plan identified in Schedule 4.23 outside of the ordinary course of business, or amend or terminate any such Employee Benefit Plan or adopt any new Employee Benefit Plan, except to the extent required by law;


(q)	sell any portion or all of the Bank’s investment portfolio except for those investments which mature or are called in the ordinary course and sell any portion or all of the Bank’s loan portfolio outside of the ordinary course of business;


(r)	make any single capital expenditure or commitment for capital expenditure in excess of $25,000 other than written commitments or obligations in existence as of the date of this Agreement and disclosed on Schedule 12.1(r) ;


(s)	commit to make a loan or grant an extension of credit to any borrower (including any renewals of existing loans or additional advances on loans to existing borrowers of the Bank) which does not comply with the Bank’s loan policy and is not consistent with the past lending practices of the Bank;

(t)

except pursuant to contracts to lend money in effect on the date of this Agreement (whether or not any advancement of funds thereunder is discretionary), make, renew or agree to make or renew, any loan or advance on any existing loan if (i) such loan or advance is unsecured and is in excess of $100,000 to any borrower or related borrowers; (i) such loan or advance is secured and is in excess of $1,000,000 to any borrower or related borrowers and is unsecured; or (iii) such loan is in excess of $100,000 and such loan has been declared in default or classified, by the Bank’s officers or directors, (including the Bank’s watch list) provided, however, that the Bank may make such loan in the event that (i) the Bank has delivered to the Buyer or its designated representative a notice of its intention to make such loan and such information as the Buyer or its designated representative shall require in respect thereof and (ii) the Buyer or its designated representative shall not have objected to such loan by giving written or facsimile notice of such objection within two (2) business days following delivery to the Buyer or its designated representative of the notice of intention and information as aforesaid;


(u)	make loans to insiders as that term is defined in Section 4.9;


(v)	repurchase or enter into any agreement to repurchase all or any portion of any loan previously participated to any other financial institution;


(w)	originate any loan which is thereafter participated to another financial institution providing for payment on any basis other than pro rata;


(x)	make any investments or invest any of the Bank’s assets in any marketable securities except in the ordinary course of business and consistent with prior practices and the Bank’s policies, and in no event with a maturity in excess of 24 months;


(y)	except in the ordinary course of business, release or agree to release any collateral securing any loan;


(z)	take any action outside the ordinary course of business which will decrease the Book Value of the Bank between the Determination Date and the Closing Date; or


(aa)	enter into or amend any other contract, agreement, understanding, arrangement or commitment not already described or addressed in this Section 12.1 that is outside the ordinary course of business and involves an aggregate obligation by the Bank of more than $25,000, other than contracts entered into in respect of deposit agreements.

WHD/12223603.9 - 15 -

12.2. Due Diligence and Current Information . The Buyer acknowledges that it has had the opportunity to conduct due diligence and investigation with respect to the Bank, and in no event shall Seller have any liability to the Buyer with respect to a breach of any representation, warranty or covenant under this Agreement with respect to which Buyer had Due Diligence Knowledge (as that term is defined below) prior to the Closing Date. From the date of this Agreement until the Closing Date, the Seller shall promptly furnish the Buyer with copies of all unaudited monthly and quarterly financial statements of the Bank as the same become available and shall use reasonable efforts to cause its designated representative to respond to inquiries from time to time from the designated representative of the Buyer. Should the Buyer obtain Due Diligence Knowledge of any non-compliance with this Agreement, Buyer agrees to promptly inform Seller of any evidence of such non-compliance with this Agreement discovered in any review of the Bank. For purposes of this Section 12.2, “Due Diligence Knowledge” means the Knowledge of either or both of Edward H. Schaefer and/or Mark Oldenberg. Each party shall promptly notify the other party of any material change in its business or operations and of any governmental complaints, investigations or hearings (or communications indicating that the same may be contemplated), or the institution or the threat of material litigation involving such party, and shall keep the other party fully informed of such events as permitted by law. The Seller and the Buyer will notify each other in writing of their respective designated representative within five (5) business days after the date of this Agreement.

12.3. Tail Coverage . On or prior to the Determination Date, the Seller will obtain an extended reporting period (“Tail Coverage”) on liability insurance insuring officers and directors of Bank. Said insurance shall provide coverage terms (including, without limitation, the amount of each policy’s deductible) comparable to the Seller’s current directors and officers liability policy for a period of not less than one (1) year after the Closing Date.

12.4. Title Commitments and Surveys . The Seller agrees to deliver to the Buyer (at the Seller’s expense) within 35 days from the date of this Agreement title commitments of a title company reasonably acceptable to the Buyer for any Owned Real Property (the “Title Commitments”). The Title Commitments shall include special assessment searches on said real estate, showing all exceptions to title, including, but not limited to, covenants, conditions, restrictions, reservations, easements, rights and rights-of-way, liens and other matters of record. Each of the Title Commitments shall be in the amount of the fair market value of the property described in each of the Title Commitments and have attached thereto copies of all documents referred to therein. Likewise, promptly after the date hereof, Seller shall deliver to Buyer all existing surveys, if any, for the Owned Real Property, in the possession of Seller. Buyer may, at its sole cost and expense, cause to be prepared an update of such survey, or obtain its own survey (each a “Survey”) and field notes describing the Owned Real Property and showing the “Improvements” (defined as follows), prepared and certified by a surveyor satisfactory to Buyer. “Improvements” shall mean all parking areas and all buildings, structures, facilities and improvements located on the Owned Real Property and including, without limitation, all mechanical systems, fixtures and equipment; heating systems, fixtures and equipment; air conditioning systems, fixtures and equipment; and plumbing systems, fixtures and equipment, electrical systems, fixtures and equipment; and ventilating systems, fixtures and equipment. Buyer shall have the right to review the Title Commitments and any Survey for a period of fifteen days from the date which is the later of the last Title Commitment or Survey received (the “Review Period”). The Buyer shall promptly, and in no event later than the expiration of the Review Period notify the Seller, in writing, of the Buyer’s disapproval of any exceptions to title shown in said Title Commitment or objections to the items disclosed in any Survey (other than imperfections of title and minor easements, defects, encumbrances and encroachments, if any, as do not materially detract from present use of such properties) (the “Objections”). In the event of such Objections, the Seller shall have fifteen days from the date of the Objections (the “Cure Period”) within which to attempt to eliminate any such Objections or agree to indemnify and hold harmless the Buyer for any losses, damages or costs incurred by the Buyer due to such Objections. In the event such Objections are not eliminated or satisfied to the reasonable satisfaction of the Buyer or the Seller have not agreed to indemnify and hold the Buyer harmless from and against any damages and losses suffered or incurred by the Buyer as a result of such Objections, and/or any cost or expenses to be incurred by the Buyer to eliminate such Objections within the Cure Period, the Buyer may terminate this Agreement pursuant to Article 14 hereof.

12.5. Environmental Assessment . The Seller shall cause the Bank to grant the Buyer (or its agents) reasonable access to the premises of Bank for the purpose of conducting Phase I Hazardous Waste Assessments (the “Assessments”) of Owned Real Property at the option of the Buyer. The cost of the Assessments shall be paid by the Buyer. The Assessments shall be completed within thirty days after the date of this Agreement. Upon the Buyer’s receipt, the Buyer shall provide the Seller with a copy of the Assessments. The Buyer shall promptly, and in no event later than fifteen days after receipt of such Assessment, give written notice to the Seller stating either that (i) the Assessments are approved by the Buyer or (ii) such Assessments are not approved by the Buyer and the reasons therefor. If the Buyer does not give any such notice within such fifteen day period, then any Assessment for which no notice was given shall be deemed approved by the Buyer.

WHD/12223603.9 - 16 -

If the Buyer gives a notice pursuant to (ii) above which sets forth specific objections to the Assessments (the “Environmental Objections”), then the Buyer may, at its option, terminate this Agreement in accordance with Article 14 hereof, effective as of the date which is thirty (30) days after the date of such notice unless during such thirty (30) day period the Seller either (a) commences action to correct or satisfies such Environmental Objections to the reasonable satisfaction of the Buyer, or (b) agrees to indemnify and hold the Buyer harmless from and against any damage or loss suffered or incurred by the Buyer as a result of the environmental problem(s) which is the subject of the Environmental Objection(s), such indemnification to be on terms reasonably acceptable to the Buyer.

Within five (5) days after the date of this Agreement, the Seller shall provide the Buyer with copies of any environmental reports or assessments regarding the Owned Real Property which are in the possession of the Bank or the Seller.

12.6. Shareholder Meeting . The Seller shall call a special meeting of the shareholders of the Seller (the “Shareholder Meeting”) for the purpose of voting upon the sale of the Bank Shares, the transactions contemplated by this Agreement and this Agreement and any other necessary matters related to this Agreement, and deliver notice of the Shareholder Meeting to the shareholders of the Seller in accordance with applicable Wisconsin law and as may be required by the Articles of Incorporation, Bylaws or other agreements or governing documents of the Seller. The Seller shall use its best efforts to hold the Shareholder Meeting as soon as practicable after the date hereof but in no event later than forty-five (45) days after the date of this Agreement. The Seller will, through its Board of Directors, (a) unanimously recommend to the shareholders of the Seller approval of the transactions contemplated by this Agreement, this Agreement and related matters; (b) not withdraw, modify or amend such recommendations; and (c) use its best efforts to obtain the requisite approval of the shareholders of the Seller.

12.7. Bank Owned Property . Following the Determination Date but prior to the Closing Date, Buyer agrees that the following purchases of property from the Bank shall be permitted: (i) the Bank shall be permitted to sell to the appropriate parties those vehicles set forth on Schedule 12.7 hereto at a purchase price equal to the depreciated book value of the vehicle on the Bank’s books as of the Determination Date; and (ii) Jerry Gerber shall purchase from the Bank that certain artwork in his office identified on Schedule 12.7 hereto for the fair market value of the artwork as of the Determination Date.

12.8. Cooperation on Conversion Matters . The Seller, the Bank and the Buyer shall, before and after the Closing Date, cooperate in good faith and shall make all reasonable efforts to cause their respective data processing service providers to cooperate to ensure the orderly and efficient consummation of the Merger and the conversion of the Bank and the Buyer hereunder, to complete all reasonable steps for an orderly transfer of all applicable data files and processing information, and to facilitate an electronic and systematic conversion of all applicable data regarding the Bank’s assets and liabilities to the Buyer’s own system of electronic data processing by the next business day following the Closing Date and the corresponding deconversion of all applicable data or information of Bank as soon as practicable but in no event later than ninety (90) calendar days after the Closing Date (the “Conversion”). To this end, and to the extent not otherwise provided in this Agreement, the Bank and the Buyer shall meet and agree upon appropriate procedures for notification of customers, employees and suppliers, for conversion of data processing and check clearing systems and for notification of customer inquiries. This Section 12.8 is not intended to create nor shall it create a financial obligation of the part of the Seller, which shall include, without limitation, Buyer reimbursing Seller for any deconversion costs charged to Seller by its third party service providers in connection with Seller assisting Buyer and delivering necessary information for Buyer to consummate the Conversion; provided, however, that Seller shall provide Buyer with written notice of the amount and substance of any such reimbursable costs prior to incurring such costs.

12.9. Bank Owned Life Insurance Policies . Following the Determination Date but prior to the Closing Date, Buyer agrees that the Bank shall be permitted to, at its option and if it so determines in its sole discretion: (i) assign and transfer to Jerry Gerber that certain bank owned life insurance policy on the life of Jerry Gerber, policy #55-603-024 (the “Gerber BOLI Policy”) in exchange for payment of the cash surrender value of the Gerber BOLI Policy as of the Determination Date; (ii) assign and transfer to Ernie Gerber that certain bank owned life insurance policy on the life of Ernie Gerber, policy #0002949440 (the “Ernie BOLI Policy”) in exchange for payment of the cash surrender value of the Ernie BOLI Policy as of the Determination Date; and (iii) assign and transfer to Dwight Marquardt that certain bank owned life insurance policy on the life of Dwight Marquardt, policy #0003549990 (the “Marquardt BOLI Policy”) in exchange for payment of the cash surrender value of the Marquardt BOLI Policy as of the Determination Date.

WHD/12223603.9 - 17 -

ARTICLE 13.
INDEMNIFICATION

13.1. By the Seller and Control Shareholders . The Seller and the Control Shareholders (collectively, the “Indemnitors”) hereby, jointly and severally, agree to and shall, immediately upon demand, indemnify and hold harmless the Buyer, after the date of this Agreement, against and in respect of:


(a)	any damages, losses, deficiencies, costs and expenses resulting from any misrepresentation, breach of any warranty or representation or non‑fulfillment or breach of any agreement or covenant on the part of the Seller under this Agreement, any certificate or other instrument furnished or to be furnished to the Buyer; and


(b)	all actions, suits, proceedings, demands, assessments, judgments, costs and expenses (including, without limitation, reasonable attorneys’ and professional fees) incident to or arising or resulting from any of the foregoing (collectively, the “the Buyer Losses”).

Notwithstanding any provision of this Article 13 to the contrary, the obligation of the Indemnitors to indemnify the Buyer for the Buyer Losses pursuant to Section 13.1 shall only become operative after the total amount of all the Buyer Losses for indemnification pursuant to this Section 13.1 exceeds One Hundred Thousand Dollars ($100,000) after taking into account any allowable tax benefits, insurance or other third party reimbursements attributable to the losses which gave rise to the indemnification claim (the “Threshold Amount”), in which event the Indemnitors shall be responsible only for the Buyer Losses exceeding the Threshold Amount. The aggregate amount payable to the Buyer shall be the full amount of all the Buyer Losses in excess of the Threshold Amount, after taking into account any allowable tax benefits, insurance or other third party reimbursements attributable to the Buyer Losses which gave rise to the indemnification claim, but subject to the limits set forth in Section 13.2. This exclusion of the first $100,000 of loss or damages incurred by the Buyer shall not applicable to any damages or losses resulting from (i) any breach of this Agreement arising from fraud; (ii) any breach of the non-competition provisions contained in Article 10; or (iii) any breach of Sections 4.1, 4.2, 4.3, 4.5, 4.11, 4.15, or 4.29 of this Agreement (the foregoing items (i), (ii), and (iii) being referred to as, the “Seller Fundamental Items”). Written notice of any such claim for indemnification under this paragraph shall be given to the Indemnitors as set forth below. In such notice, the Indemnitors may require the Buyer to make available information, documents and files of the Buyer, the Bank or any surviving bank, to its attorney, and in such event, the Buyer shall fully respond to the Indemnitors and their attorney.

The Buyer shall provide written notice to the Indemnitors of any claim for which the Buyer is entitled to or may seek indemnification within 30 days of discovery by the Buyer of such claim. Such notice shall state the nature of the claim and the amount of the claim. The Buyer shall allow the Indemnitors the right to select counsel for any third party claim, which counsel shall be reasonably satisfactory to the Buyer, to defend any such action, proceeding, claim, demand or assessment giving rise to claim for indemnification pursuant to this Section 13.1, all at the sole cost and expense of the Indemnitors; provided, however, that the Buyer shall be allowed, at its expense, to participate in such defense; provided, further that no settlement shall be entered into without the approval of the Buyer; provided, further that in the event the Indemnitors offer to settle a claim on terms acceptable to the third party claimant, which settlement the Buyer does not consent to, the Buyer shall be responsible for all the Buyer Losses with respect to such claim which exceed the proposed settlement amount, including all legal expenses and costs incurred after the date the Indemnitors initially gave notice to the Buyer seeking its consent to the proposed settlement. Should the Indemnitors refuse to accept the tender, it shall be the Buyer’s obligation to reasonably inform the Indemnitors of the status and progress of any ensuing litigation provided such information is requested by the Indemnitors. The Buyer will make a good faith effort to defend against such third party claim as if no indemnification was available hereunder. The Indemnitors shall cooperate with the Buyer in the defense of any third party claim. The Buyer shall provide the Indemnitors the opportunity to participate in (but not control) the defense of such third party claim at the Indemnitors’ expense in the event the Indemnitors refuse to accept the tender and the Indemnitors shall allow the Buyer to participate in (but not control) the defense of such third party claim at their own expense in the event the Indemnitors accept the tender.

13.2. Limitation of Indemnitors’ Liability . Notwithstanding anything contained in this Article 13 or this Agreement to the contrary, the indemnification obligations of the Indemnitors to Buyer shall not, in the aggregate, exceed $450,000 (the “Cap”). The Cap shall not apply to any damages or losses resulting from any breach of this Agreement arising from any of the Seller Fundamental Items.

13.3. By the Buyer . The Buyer does hereby agree to and shall immediately upon demand indemnify and hold harmless the Seller, after the date of this Agreement, against and in respect of:

WHD/12223603.9 - 18 -


(a)	any damages, losses, deficiencies, costs and expenses resulting from any misrepresentation, breach of any warranty or representation or non‑fulfillment or breach of any agreement or covenant on the part of the Buyer under this Agreement, any certificate or other instrument furnished or to be furnished to the Seller; and


(b)	all actions, suits, proceedings, demands, assessments, judgments, costs and expenses (including, without limitation, reasonable attorneys’ and professional fees) incident to or arising or resulting from any of the foregoing (collectively, the “Seller Losses”).

Notwithstanding any provision of this Article 13 to the contrary, the obligation of the Buyer to indemnify the Seller for the Seller Losses pursuant to Section 13.2 shall only become operative after the total amount of all the Seller Losses for indemnification pursuant to this Section 13.2 exceeds One Hundred Thousand Dollars after taking into account any allowable tax benefits, insurance or other third party reimbursements attributable to the losses which gave rise to the indemnification claim ($100,000) (the “Seller Threshold Amount”), in which event the Buyer shall be responsible only for the Seller Losses exceeding the Seller Threshold Amount. The aggregate amount payable to the Seller shall be the full amount of all the Seller Losses in excess of the Seller Threshold Amount, after taking into account any allowable tax benefits, insurance or other third party reimbursements attributable to the Seller Losses which gave rise to the indemnification claim, but subject to the Buyer Cap. This exclusion of the first $100,000 of loss or damages incurred by the Seller shall not applicable to any damages or losses resulting from any breach of this Agreement arising from fraud or a breach of Sections 5.1, 5.2, or 5.7 (collectively, the “Buyer Fundamental Items”) and is not applicable to the payment by the Buyer of the Merger Consideration. Written notice of any such claim for indemnification under this paragraph shall be given to the Buyer. In such notice, the Buyer may require the Seller to make available information, documents and files of the Seller to its attorney, and in such event, the Seller shall fully respond to the Buyer and their attorney.

The Seller shall provide written notice to the Buyer of any claim for which the Seller is entitled to or may seek indemnification within 90 days of discovery by the Seller of such claim. Such notice shall state the nature of the claim and the amount of the claim. Failure to give such notice within 90 days of discovery by the Seller of such claim shall in no way abrogate or diminish the obligations of the Buyer in under this Section if the Buyer has or receives knowledge of the existence of any such claim by any other means or if such failure does not materially prejudice the ability of the Buyer to defend such claim. The Seller shall allow the Buyer the right to select counsel for any third party claim, which counsel shall be reasonably satisfactory to the Seller, to defend any such action, proceeding, claim, demand or assessment giving rise to claim for indemnification pursuant to this Section 13.2, all at the sole cost and expense of the Buyer; provided, however, that the Seller shall be allowed, at its expense, to participate in such defense; provided, further that no settlement shall be entered into without the approval of the Seller; provided, further that in the event the Buyer offers to settle a claim on terms acceptable to the third party claimant, which settlement the Seller does not consent to, the Seller shall be responsible for all losses with respect to such claim which exceed the proposed settlement amount, including all legal expenses and costs incurred after the date the Buyer initially gave notice to the Seller seeking its consent to the proposed settlement. Should the Buyer refuse to accept the tender, it shall be the Seller’s obligation to reasonably inform the Buyer of the status and progress of any ensuing litigation provided such information is requested by the Buyer. The Seller will make a good faith effort to defend against such third party claim as if no indemnification was available hereunder. The Buyer shall cooperate with the Seller in the defense of any third party claim. The Seller shall provide the Buyer the opportunity to participate in (but not control) the defense of such third party claim at the Buyer’s expense in the event the Buyer refuses to accept the tender and the Buyer shall allow the Seller to participate in (but not control) the defense of such third party claim at its own expense in the event the Buyer accepts the tender.

13.4. Limitation of Buyer’s Liability . Notwithstanding anything contained in this Article 13 or this Agreement to the contrary, the indemnification obligations of the Buyer to Seller shall not, in the aggregate, exceed the Cap. The Cap shall not apply to any damages or losses resulting from any breach of this Agreement arising from any of the Buyer Fundamental Items and is not applicable to the payment by the Buyer of the Merger Consideration.

13.5. Survival of Representations . Except as specified below, the representations and warranties of the Seller and the Buyer contained in or made pursuant to this Agreement shall survive the consummation of the purchase and sale contemplated hereby for a period of nine (9) months from the Closing Date; provided, however, that the Seller Fundamental Items and the Buyer Fundamental Items shall survive for the statute of limitation applicable to such representation or warranty. This survival period shall not apply to any damages or losses resulting from any breach of this Agreement arising from fraud.

13.6. Exclusive Remedy . The rights and remedies set forth in this Article 13 constitute the exclusive rights and remedies of the parties in respect of the matters indemnified under this Article 13. In addition, amounts recoverable

WHD/12223603.9 - 19 -

pursuant to this Article 13 shall not include any lost profits or special, exemplary, consequential or punitive damages, and no indemnifying party shall be liable for any such damages under this Agreement.

13.7. Confidentiality . The parties agree that they will treat as confidential any payments made to each other pursuant to the terms of Article 13 of this Agreement.

ARTICLE 14.
TERMINATION

14.1. Termination . This Agreement may be terminated and the transactions contemplated hereby abandoned at any time prior to the Closing Date:


(i)	by mutual written consent of the Seller and the Buyer;


(j)	by the Seller (as one party) or by the Buyer (as another party) upon written notice thereof to the other party if:

(i)

the purchase and sale contemplated hereby has not been consummated within four (4) months from the date of this Agreement, unless such purchase and sale has not been so consummated because of, or as a result of any knowing or willful actions or failure to act that is contrary to a party’s obligations under this Agreement on the part of the party seeking to terminate this Agreement pursuant to this Subsection (i); or


(ii)	there has been a failure by the other party to perform or comply with any material agreement, covenant or condition herein required to be performed or complied with by such other party within the time required and such breach or failure has continued for fifteen (15) days following written notice thereof to such other party; or


(k)	by the Buyer pursuant to the terms of Section 12.6 regarding title to the Owned Real Property;


(l)	by the Buyer pursuant to the terms of Section 12.7 regarding the Assessments;

Upon termination of this Agreement by either party pursuant to this Article 14, and upon disposition of the Earnest Money in accordance with Section 2.3(a) of this Agreement, this Agreement shall be of no further force or effect and neither party shall have any liability to the other as a result of such termination except where such termination results from a willful and material breach of this Agreement and except for the confidentiality obligations of Section 15.1 below which shall survive the termination of this Agreement.

ARTICLE 15.
GENERAL PROVISIONS

15.1. Access to Books and Record; Confidentiality .

(c)

From and after the date of this Agreement to the Closing Date or the date on which this Agreement is terminated pursuant to Article 14 hereof, the Seller shall cause the Bank to grant reasonable access to the Buyer (or its agents) to the premises, properties, books, records and officers of the Bank, including, but not limited to, the working papers of the Bank’s accountants, to make copies thereof and extracts therefrom, to determine the truth and accuracy of the representations and warranties of the Seller contained herein, to confirm that the Seller has performed or complied with all of the agreements and covenants to be performed or complied with by it hereunder and for any other purpose related to this Agreement or the transaction contemplated hereby; provide however, that Buyer shall not have access to premises, property, books, records or materials of Seller which would violate applicable law or which would eliminate any attorney‑client privilege between Seller and its attorneys, as determined by Seller in its sole discretion. The Buyer agrees that all such information provided to it by the Seller or the Bank will be used by it only in connection with this Agreement and for no other purpose and that all such information shall be treated confidentially.


(d)	Between the date of this Agreement and the Closing Date, the Buyer will promptly notify the Seller in writing if the Buyer becomes aware of any fact or condition that causes any of the Seller’s representations and warranties as of the date of this Agreement to be inaccurate, or if the Buyer

WHD/12223603.9 - 20 -

becomes aware of the occurrence after the date of this Agreement of any fact or condition that would (except as expressly contemplated by this Agreement) cause of any such representation or warranty to be inaccurate had such representation or warranty been made as of the time of occurrence or discovery of such fact or condition. During the same period, the Buyer will promptly notify the Seller of the occurrence of any breach of any covenant of the Seller or the Buyer in this Agreement or of the occurrence of any event that may make the satisfaction of the conditions in this Agreement impossible or unlikely. Without waiving any termination rights under Article 14 hereof, upon any notification pursuant to this Section 15.1, the Buyer and the Seller shall consult as to how to proceed based on such information. Nothing set forth in this Section 15.1 shall be construed to limit the obligations, representations and warranties of the Seller in this Agreement.

(e)

Each party (each, a “Recipient”) acknowledges that it has received, or may receive, certain information regarding the other party or the Bank (each, a “Discloser”) that is either non-public, confidential or proprietary in nature. Such information, in whole or in part including, without limitation, information delivered orally, electronically or digitally, visually or in hard copy, together with analyses, compilations, studies or other documents prepared by a Discloser, its directors, officers, employees, agents or advisers, which contain or otherwise reflect such information, is hereinafter referred to as “Information.” In addition, the existence of this Agreement and the fact that such information will be or has been disclosed itself constitutes Information for purposes of this Agreement. The term “Information” does not include information that (a) becomes generally available to the public other than as a result of a disclosure by a Discloser or anyone to whom such Discloser transmits information, (b) was available to the Recipient on a non-confidential basis prior to its disclosure by a Discloser to Recipient, (c) becomes available to Recipient on a non-confidential basis from a source other than a Discloser who, to such Recipient’s actual knowledge, is not bound by a confidentiality agreement or other obligation of secrecy with respect to such information, (d) was known to such Recipient or in such Recipient’s possession prior to the date it was disclosed to such Recipient or (e) was independently developed by such Recipient. All Information will be kept confidential and will not, without the prior written consent of the Discloser, be disclosed by a Recipient, its directors, officers, employees, agents or advisers, in any manner whatsoever, in whole or in part, and will not be used by any of the foregoing other than in connection with the transaction contemplated by this Agreement. Moreover, each party agrees to transmit Information only to such party’s directors, officers, employees, agents and advisers who need to know Information and who are informed of the confidential nature of the Information. Each party will be responsible for any breach of any provision of this Section 15.1(c) by such party’s directors, officers, employees, agents and advisers. This Section 15.1(c) shall survive termination of this Agreement. Notwithstanding the foregoing, the Buyer shall be permitted to disclose Information of the Seller to the extent such disclosure is required in connection with the Buyer’s regulatory Applications referenced in Article 6.

15.2. Parties in Interest and Assignment . All the terms and provisions of this Agreement shall be binding upon, and inure to the benefit of and be enforceable by the personal representatives, successors and permitted assigns of the Seller and the Buyer, it being understood, however, that such assignment shall in no way relieve the parties to this Agreement of their responsibilities and obligations under this Agreement and no assignment shall be permitted unless consented to by the Seller and the Buyer.

15.3. Notices . All notices, requests, instructions and other communications required or permitted to be given under this Agreement after the date hereof by any party to any other party shall be in writing, may be delivered personally, by nationally recognized overnight courier service, sent via registered or certified mail (return receipt requested) through the United States postal service, or sent via e mail, and shall be deemed to be duly received (a) on the date given if delivered personally, (b) on the date received if delivered via courier or via U.S. mail, (c) if sent via e-mail, on the date sent if sent before 5:00 p.m., Central time, on a business day, or on the next business day if sent on a non-business day or after 5:00 p.m., Central time, on a business day, to the parties at the following addresses:


(c)	If to the Buyer:

Citizens Community Federal, N.A.

2174 Eastridge Center

Eau Claire, WI 54701

Email: moldenberg@ccf.us

Attention: Mark Oldenberg, Exec. VP and CFO

WHD/12223603.9 - 21 -

With a copy to:

Whyte Hirschboeck Dudek S.C.

555 East Wells Street, Suite 1900

Milwaukee, WI 53202-3819

Email: elenzen@whdlaw.com

Attention: Eric E. Lenzen

or at such other address as Buyer shall have advised the Seller in writing; and


(d)	If to the Seller:

Old Murry Bancorp

1204 W. Knapp Street

Rice Lake, WI 54868

Email: jgerber@cbnwi.com

Attention: Jerry Gerber

With a copy to:

Winthrop & Weinstine, P.A.

225 South 6th Street

Suite 3500

Minneapolis, MN 55402

Email: amoch@winthrop.com

Attention: Anton J. Moch

or at such other address as Seller may have advised the Buyer in writing.

15.4. Entire Agreement . This Agreement, the attached Schedules, and any agreement delivered herewith express the whole agreement between the parties with respect to the purchase and sale contemplated hereby, there being no representations, warranties or other agreements (oral or written) not expressly set forth or provided for herein.

15.5. Counterparts . This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Agreement, and each other agreement or instrument entered into in connection with or contemplated by this Agreement, to the extent signed and delivered by means of a facsimile machine, shall be treated in all manner and respects as an original agreement or instrument and shall be considered to have the same binding legal effect as if it were the original signed version thereof delivered in person.

15.6. Amendments . Any and all agreements by the parties hereto to amend, change, extend, revise or discharge this Agreement, in whole or in part, shall be binding upon the parties to such agreement, even though such agreements may lack legal consideration, provided such agreements are in writing and executed by the party agreeing to be bound thereby.

15.7. Headings, etc . The various headings in this Agreement are inserted for convenience only and shall not affect the meaning or interpretation of this Agreement or any Section or provision hereof or any Exhibit annexed hereto. All Exhibits and Schedules referred to herein are hereby incorporated by reference and made a part of this Agreement as though fully set forth herein.

15.8. Governing Law . This Agreement shall be deemed to be a contract made under the laws of the State of Wisconsin, and for all purposes it, plus any related or supplemental documents and notices, shall be construed in accordance with and governed by the laws of such state.

15.9. Construction . Wherever possible, each provision of this Agreement and each related document shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement or any related document shall be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity without invalidating the remainder of such provision or the remaining provisions of this Agreement or such related documents.

WHD/12223603.9 - 22 -

15.10. Waiver . No failure on the part of either party to exercise, and no delay in exercising, any right or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right or remedy granted hereby or by any related document or by law.

15.11. Specific Performance . The Seller agrees that the material breach of this Agreement by the Seller will cause the Buyer irreparable harm for which there is no adequate remedy at law, and, without limiting whatever other rights and remedies the Buyer may have under this Agreement, the Buyer is entitled to the remedy of specific performance to enforce this Agreement and the Seller consents to the issuance of an order by a court of competent jurisdiction requiring the specific performance of this Agreement by the Seller.

15.12. Press Releases . Except as required by applicable law (including regulations promulgated by the U.S. Securities and Exchange Commission) or required to be made in connection with the Regulatory Applications, neither the Buyer nor the Seller shall issue any press release or otherwise make public (other than to employees) any information with respect to this Agreement nor the transactions contemplated thereby, prior to the Closing Date, without the prior written consent of the other party, which consent will not be unreasonably withheld.

{Signature Page to Follow}

WHD/12223603.9 - 23 -

Execution Copy

IN WITNESS WHEREOF, the Seller, the Buyer, the Bank and the Control Shareholders have executed and delivered to the other party this Agreement effective as of the day and year first above written.

BUYER: SELLER:

CITIZENS COMMUNITY FEDERAL, N.A. OLD MURRY BANCORP, INC.

By By

Its Its

BANK: CONTROL SHAREHOLDERS:

COMMUNITY BANK OF NORTHERN

WISCONSIN

By________________________________

Its________________________________ Jerry Gerber

Ernie Gerber

Al Gerber

SIGNATURE PAGE TO THAT CERTAIN

PLAN AND AGREEMENT OF MERGER

DATED FEBRUARY 10, 2016

WHD/12223603.9

EXHIBIT A

CONTROL SHAREHOLDERS

Shareholder Shares Owned Percentage

Jerry Gerber 4,166 19.44%

Ernie Gerber 3,000 14.00%

Al Gerber 2,867 13.38%

WHD/12223603.9



Exhibit B
Purchase Price Computation Example
Assuming December 31, 2015 Determination Date and January 15, 2016 Closing Date

	Base Capital and Fixed Premium Computation	Call Report Line		Amount
	Quarterly Average Total Assets	RCON3368		154,729,000
	Less Intangibles:
	Goodwill	RCON3163		-
	Other Intangibles	RCON5507		-
	Average tangible assets			154,729,000
				8	%
	Target Capital			12,378,320

	Fixed Premium Amount			5,000,000


	Book Value Computation
	Common stock	RCON3230		503,000
	Surplus (exclude all surplus related to preferred stock)	RCON3839		7,618,000
	Retained earnings	RCON3632		8,588,000
	Subtotal			16,709,000
	Less Intangibles:
	Goodwill	RCON3163		-
	Other Intangibles	RCON5507		-
	Book Value (as defined)			16,709,000

	Purchase Price Computation
	Book Value (as defined)			16,709,000
	Less: Capital Dividend (as Defined)			(4,330,680)
	Book Value (as defined) after dividend			12,378,320
	Interest Rate	5	%
	Daily Interest	1,695.66
	Number of Days	15
	Interest			25,435
	Fixed Premium			5,000,000
	Total Purchase Price			17,403,755

	Total Consideration to Old Murry
	Total Purchase Price			17,403,755
	Dividend of Capital in Excess of 8%			4,330,680
	Total Consideration to Old Murry			21,734,435

WHD/12223603.9 - 26 -

LIST OF SCHEDULES

Schedule 4.6 ‑ No Violation

Schedule 4.8 -- Loans

Schedule 4.9 ‑ Insider Loans

Schedule 4.10 ‑ Participation Loans

Schedule 4.12 ‑ Judgments

Schedule 4.13 ‑ Regulatory Reporting

Schedule 4.14 ‑ Employment Contracts

Schedule 4.15 ‑ Bank Shares

Schedule 4.16 ‑ Insurance

Schedule 4.17 ‑ Litigation

Schedule 4.18 ‑ Title to Property

Schedule 4.19(a) ‑ Owned Real Property and Leased Real Property

Schedule 4.19(d) ‑ Any Real Property

Schedule 4.20 ‑ Leases

Schedule 4.21 ‑ Condition of Assets

Schedule 4.22(b) ‑ Contract Exceptions

Schedule 4.23 ‑ Employee Benefit Plans

Schedule 4.24 ‑ Compliance with Law

Schedule 4.25 ‑ Fidelity Bonds

Schedule 12.1(o) ‑ Bonuses

Schedule 12.1(r) ‑ Capital Expenditures

Schedule 12.7 ‑ Vehicles and Artwork

11359403v7

WHD/12223603.9 - 27 -

EX-31.1 2 d342121dex311.htm EX-31.1

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Edward H. Schaefer, certify that:


1)	I have reviewed this quarterly report on Form 10-Q of Citizens Community Bancorp, Inc.;


2)	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3)	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4)	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5)	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date: May 13, 2016	By:	/s/ Edward H. Schaefer
		Edward H. Schaefer
		Chief Executive Officer

EX-31.2 3 d342121dex312.htm EX-31.2

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Mark C. Oldenberg, certify that:


1)	I have reviewed this quarterly report on Form 10-Q of Citizens Community Bancorp, Inc.;


2)	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3)	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4)	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5)	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date: May 13, 2016	By:	/s/ Mark C. Oldenberg
		Mark C. Oldenberg
		Chief Financial Officer

EX-32.1 4 d342121dex321.htm EX-32.1

EXHIBIT 32.1

CERTIFICATION OF PERIODIC FINANCIAL REPORT

PURSUANT TO 18 U.S.C. SECTION 1350

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, each of the undersigned officers of Citizens Community Bancorp, Inc. (the “Company”) certifies that the Quarterly Report of the Company on Form 10-Q for the quarter ended March 31, 2016 , fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended, and that the information contained in such report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the financial statements included in such report.



Date: May 13, 2016	By:	/s/ Edward H. Schaefer
		Edward H. Schaefer
		Chief Executive Officer



Date: May 9, 2016	By:	/s/ Mark C. Oldenberg
		Mark C. Oldenberg
		Chief Financial Officer

The above certifications are made solely for the purpose of 18 U.S.C. Section 1350, subject to the knowledge standard contained therein, and not for any other purpose.