Citizens Community Bancorp Inc. Form 8-K Summary
Business Context and Reporting Period
This Current Report on Form 8-K, dated August 17, 2017, reports the completion of a previously announced merger by Citizens Community Bancorp, Inc. (the "Company") with Wells Financial Corp. ("Wells"). The merger became effective on August 18, 2017, resulting in the cessation of Wells' separate corporate existence and the survival of the Company. Additionally, Wells Federal Bank merged into Citizens Community Federal N.A.
Key Financial Metrics and Transaction Details
The filing details the financial structure of the merger and a new debt obligation incurred to finance the transaction:
- Merger Consideration: The aggregate consideration paid to Wells shareholders consisted of approximately $32,206,970 in cash and 592,448 shares of Company common stock.
- Exchange Ratio: Each share of Wells common stock was converted into the right to receive $41.31 in cash and 0.7598982 shares of Company common stock, plus cash in lieu of fractional shares.
- New Debt Obligation: The Company borrowed $5 million under a term loan facility with First Tennessee, National Association ("FTN") to finance the merger.
- Loan Terms: The loan carries a floating interest rate of three-month LIBOR plus 270 basis points (reset quarterly), a five-year maturity, and a ten-year amortization schedule.
- Collateral: The Company pledged all outstanding shares of its wholly-owned subsidiary, Citizens Community Federal National Association, as collateral.
The filing does not provide specific revenue, profit, cash flow, or margin figures for the reporting period, as these are expected to be included in future amendments containing financial statements and pro forma information.
Material Changes
The primary material change is the acquisition of Wells Financial Corp. and its subsidiary bank. This transaction expands the Company's footprint and asset base. Concurrently, the Company's debt load increased by $5 million due to the new term loan, replacing a previously terminated $3 million revolving line of credit.
Outlook, Risks, and Contingencies
Financial Statements: The financial statements of the acquired business and pro forma financial information are not included in this filing. They are scheduled to be filed by amendment no later than 71 days after the filing date of this report.
Risks and Covenants: The new Loan Agreement contains customary affirmative and negative covenants and events of default, including payment defaults, cross-defaults, covenant breaches, and bankruptcy events. In the event of a default, the lender may accelerate payment of all obligations.
Key Facts for Investor Verification
- Verify the final pro forma financial impact of the merger once the amendment is filed within 71 days.
- Confirm the integration progress of Wells Federal Bank into Citizens Community Federal N.A.
- Monitor the Company's ability to meet the covenants and amortization requirements of the new $5 million term loan.
- Review the press release (Exhibit 99.1) for management's immediate commentary on the strategic rationale.