Citizens Community Bancorp Inc.CZWI
Citizens Community Bancorp Inc. Fair Value Disclosure
FAIR VALUE ACCOUNTING
During the year ended December 31, 2024, $2,082 of senior debt, previously measured as a Level 1 instrument, was exchanged for preferred equity, now measured as a Level 3 instrument, resulting in a transfer out of Level 1 fair value
(1) Investments valued at NAV are excluded from being reported under the fair value hierarchy but are presented to permit reconciliation with the balance sheet in accordance with ASC 820-10-35-54B.
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 topic 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, we utilize independent third party valuation analysis to support our own 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 December 31, 2025 and December 31, 2024.
| Fair Value | Quoted Prices in Active Markets for Identical Instruments (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||
| December 31, 2025 | |||||||||||||||||||||||
| Investment securities: | |||||||||||||||||||||||
| U.S. government agency obligations | $ | 10,773 | $ | — | $ | 10,773 | $ | — | |||||||||||||||
| Mortgage-backed securities | 66,684 | — | 66,684 | — | |||||||||||||||||||
| Corporate debt securities | 40,682 | — | 40,682 | — | |||||||||||||||||||
| Student loan asset-backed securities | 15,964 | — | 15,964 | — | |||||||||||||||||||
| Total investment securities | 134,103 | — | 134,103 | — | |||||||||||||||||||
| Equity investments: | |||||||||||||||||||||||
| Farmer Mac equity securities | 505 | 505 | — | — | |||||||||||||||||||
| Preferred equity | 1,125 | — | — | 1,125 | |||||||||||||||||||
Equity investments measured at NAV(1) | 4,210 | — | — | — | |||||||||||||||||||
| Total equity investments | 5,840 | 505 | — | 1,125 | |||||||||||||||||||
| Total | $ | 139,943 | $ | 505 | $ | 134,103 | $ | 1,125 | |||||||||||||||
| December 31, 2024 | |||||||||||||||||||||||
| Investment securities: | |||||||||||||||||||||||
| U.S. government agency obligations | $ | 13,753 | $ | — | $ | 13,753 | $ | — | |||||||||||||||
| Mortgage-backed securities | 68,386 | — | 68,386 | — | |||||||||||||||||||
| Corporate debt securities | 41,716 | — | 41,716 | — | |||||||||||||||||||
| Student loan asset-backed securities | 18,996 | — | 18,996 | — | |||||||||||||||||||
| Total Investment Securities | 142,851 | — | 142,851 | — | |||||||||||||||||||
| Equity investments: | |||||||||||||||||||||||
| Farmer Mac equity securities | 569 | 569 | — | — | |||||||||||||||||||
| Preferred equity | 1,362 | — | — | 1,362 | |||||||||||||||||||
Equity investments measured at NAV(1) | 2,771 | — | — | — | |||||||||||||||||||
| Total equity investments | 4,702 | 569 | — | 1,362 | |||||||||||||||||||
| Total | $ | 147,553 | $ | 569 | $ | 142,851 | $ | 1,362 | |||||||||||||||
(1) Investments valued at NAV are excluded from being reported under the fair value hierarchy but are presented to permit reconciliation with the balance sheet in accordance with ASC 820-10-35-54B.
During the three months ended June 30, 2024, senior debt of a community development financial institution, classified as available-for-sale securities was exchanged for preferred equity of the financial institution’s operating subsidiary. At December 31, 2025, the Company owned $1,125 preferred equity investments for which the Company utilized significant unobservable inputs (Level 3 inputs) to determine fair value. At December 31, 2024, the Company owned $1,362 preferred equity investments for which the Company utilized significant unobservable inputs (Level 3 inputs) to determine fair value.
There were no transfers in or out of Level 1, Level 2 or Level 3 fair value measurements relating to the available-for-sale securities above during the twelve months ended December 31, 2025. There were no losses included in earnings attributable to the change in unrealized gains or losses relating to the available-for-sale securities above with fair value measurements utilizing significant unobservable inputs for the year ended December 31, 2025.
measurement to Level 3 fair value measurement. The exchange resulted in the recognition of $168 of unrealized losses on available-for-sale securities during the year ended December 31, 2024, previously included in other comprehensive income, as well as an additional $270 loss, for a total loss of $438. This total loss of $438 was recognized on the consolidated statement of operations as net losses on equity securities.
Assets Measured on a Nonrecurring Basis
The following tables present the financial instruments measured at fair value on a nonrecurring basis as of December 31, 2025 and December 31, 2024:
| Carrying Value | Quoted Prices in Active Markets for Identical Instruments (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||
| December 31, 2025 | |||||||||||||||||||||||
| Foreclosed and repossessed assets, net | $ | 857 | $ | — | $ | — | $ | 857 | |||||||||||||||
| Collateral dependent loans | 10,360 | — | — | 10,360 | |||||||||||||||||||
| Total | $ | 11,217 | $ | — | $ | — | $ | 11,217 | |||||||||||||||
| December 31, 2024 | |||||||||||||||||||||||
| Foreclosed and repossessed assets, net | $ | 915 | $ | — | $ | — | $ | 915 | |||||||||||||||
| Collateral dependent loans | 3,107 | — | — | 3,107 | |||||||||||||||||||
| Total | $ | 4,022 | $ | — | $ | — | $ | 4,022 | |||||||||||||||
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.
The fair value of collateral dependent loans with allowances 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 following table represents additional quantitative information about assets measured at fair value on a recurring and nonrecurring basis and for which we have utilized Level 3 inputs to determine their fair value at December 31, 2025 and December 31, 2024.
| Fair Value | Valuation Techniques (1) | Significant Unobservable Inputs (2) | Range | ||||||||||||||||||||
| December 31, 2025 | |||||||||||||||||||||||
| Foreclosed and repossessed assets, net | $ | 857 | Appraisal value | Estimated costs to sell | 10% - 15% | ||||||||||||||||||
| Collateral dependent loans with allocated allowances | $ | 10,360 | Appraisal value / Internal collateral valuations | Estimated costs to sell | 10% - 15% | ||||||||||||||||||
| December 31, 2024 | |||||||||||||||||||||||
| Foreclosed and repossessed assets, net | $ | 915 | Appraisal value | Estimated costs to sell | 10% - 15% | ||||||||||||||||||
| Collateral dependent loans with allocated allowances | $ | 3,107 | Appraisal value / Internal collateral valuations | Estimated costs to sell | 10% - 15% | ||||||||||||||||||
(1) Fair value is generally determined through independent third-party appraisals of the underlying
collateral, which generally includes various level 3 inputs which are not observable.
(2) The fair value basis of collateral dependent loans, and real estate owned may be adjusted to reflect management
estimates of disposal costs including, but not limited to, real estate brokerage commissions, legal fees,
and delinquent property taxes.
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:
| December 31, 2025 | December 31, 2024 | |||||||||||||||||||||||||
| Valuation Method Used | Carrying Amount | Estimated Fair Value | Carrying Amount | Estimated Fair Value | ||||||||||||||||||||||
| Financial assets: | ||||||||||||||||||||||||||
| Cash and cash equivalents | (Level I) | $ | 118,853 | $ | 118,853 | $ | 50,172 | $ | 50,172 | |||||||||||||||||
| Securities available-for-sale "AFS" | (Level II) | 134,103 | 134,103 | 142,851 | 142,851 | |||||||||||||||||||||
| Securities held-to-maturity "HTM" | (Level II) | 80,210 | 64,117 | 85,504 | 65,622 | |||||||||||||||||||||
| Farmer Mac equity securities | (Level I) | 505 | 505 | 569 | 569 | |||||||||||||||||||||
| Preferred equity | (Level III) | 1,125 | 1,125 | 1,362 | 1,362 | |||||||||||||||||||||
| Equity investments valued at NAV (1) | N/A | 4,210 | N/A | 2,771 | N/A | |||||||||||||||||||||
| Other investments | (Level II) | 12,506 | 12,506 | 12,500 | 12,500 | |||||||||||||||||||||
| Loans receivable, net | (Level III) | 1,317,924 | 1,297,841 | 1,348,432 | 1,315,657 | |||||||||||||||||||||
| Loans held for sale - Residential mortgage | (Level I) | 2,338 | 2,338 | 441 | 441 | |||||||||||||||||||||
| Loans held for sale - SBA / FSA | (Level II) | 2,616 | 2,616 | 888 | 888 | |||||||||||||||||||||
| Mortgage servicing rights | (Level III) | 3,494 | 4,652 | 3,663 | 5,227 | |||||||||||||||||||||
| Accrued interest receivable | (Level I) | 6,126 | 6,126 | 5,653 | 5,653 | |||||||||||||||||||||
| Financial liabilities: | ||||||||||||||||||||||||||
| Deposits (excluding demand deposits) | (Level III) | $ | 891,747 | $ | 891,663 | $ | 879,742 | $ | 879,086 | |||||||||||||||||
| FHLB advances | (Level II) | — | — | 5,000 | 4,979 | |||||||||||||||||||||
| Other borrowings | (Level II) | 51,804 | 49,988 | 61,606 | 58,625 | |||||||||||||||||||||
| Accrued interest payable | (Level I) | 3,680 | 3,680 | 5,842 | 5,842 | |||||||||||||||||||||
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 Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.