Citizens Community Bancorp Inc.CZWI
Citizens Community Bancorp Inc. Commitments Disclosure
COMMITMENTS AND CONTINGENCIES
Financial Instruments with Off-Balance-Sheet Risk—The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include off-balance-sheet credit instruments consisting of commitments to make loans. The face amounts for these items represent the exposure to loss, before considering customer collateral or ability to repay. Such financial instruments are recorded when they are funded.
The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit is represented by the contract or notional amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.
The following table presents a summary of commitments described below as of December 31, 2025 and 2024, respectively:
| Contract or Notional Amount at December 31, | Contract or Notional Amount at December 31, | |||||||||||||
| 2025 | 2024 | |||||||||||||
| Commitments to extend credit | $ | 198,817 | $ | 137,038 | ||||||||||
| Commercial standby letter of credit | $ | 2,698 | $ | 2,061 | ||||||||||
| Commitment to contribute capital to SBIC | $ | 1,050 | $ | 1,800 | ||||||||||
| Commitment to contribute capital to investment company | $ | 2,190 | $ | 1,140 | ||||||||||
Commitments to extend credit—Commitments to extend credit are agreements to lend to a customer provided there is no violation of any condition established in the contract. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.
Letters of credit—Letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers. The Company evaluates each customer’s credit worthiness on a case-by-case basis. The credit and collateral policy for commitments and letters of credit is comparable to that for granting loans. The Company has recorded no liability associated with standby letters of credit as of December 31, 2025 and 2024.
Capital Contributions—The Company has commitments to invest in a SBIC and investment company that call for capital contributions up to an amount specified in the partnership agreements.
Loss Contingencies—Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated.
The Company sells the guaranteed portions of SBA 7(a) and 504 loans to third parties. The Company has a continuing involvement in each of the transferred lending arrangements by way of relationship management and servicing the loans, as well as being subject to normal and customary requirements of the SBA loan program and standard representations and warranties related to sold amounts. In the event of a loss resulting from default and a determination by the SBA that there is a deficiency in the manner in which the loan was originated, funded, or serviced by the Company, the SBA may require the Company to repurchase the loan, deny its liability under the guaranty, reduce the amount of the guaranty, or, if it has already paid under the guaranty, seek recovery of the principal loss related to the deficiency from the Company. The Company must comply with applicable SBA regulations in order to maintain the guarantee. In addition, the Company retains the option to repurchase the sold guaranteed portion of an SBA loan if the loan defaults.
Management has assessed estimated losses inherent in the outstanding portions of the SBA loans sold in accordance with ASC 450, Contingencies, and determined a recourse reserve based on the probability of future losses for these loans to be $530 and $420 at December 31, 2025 and 2024, respectively, which is reported in other liabilities on the Consolidated Balance Sheets.
| As of and For the Year Ended December 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| Balance at the beginning of the period | $ | 420 | $ | — | ||||||||||
| SBA recourse provision | 110 | 420 | ||||||||||||
| Balance at the end of the period | $ | 530 | $ | 420 | ||||||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 5, 2026 | Showing above |
| 2024 | Mar 13, 2025 | |
| 2023 | Mar 5, 2024 | |
| 2022 | Mar 7, 2023 | |
| 2021 | Mar 2, 2022 | |
About Commitments Disclosures
Commitments and contingencies disclosures catalog a company's off-balance-sheet obligations and legal exposures — purchase commitments, guarantee arrangements, pending litigation, and regulatory proceedings. These items represent potential future cash outflows that may not appear as liabilities on the balance sheet until they become probable and estimable.
Key signals: litigation reserves and disclosed loss ranges quantify management's estimate of legal exposure, but unquantified "reasonably possible" losses often represent the larger risk. Watch for changes in language around pending cases — shifts from "remote" to "reasonably possible" or increases in estimated loss ranges signal deteriorating outcomes. Unconditional purchase obligations and take-or-pay contracts create fixed cost structures that reduce operational flexibility. Guarantee arrangements for subsidiaries or joint ventures can create cascading obligations. Compare the total commitment schedule against projected free cash flow to assess whether the company can meet its obligations without additional financing.