Citizens Community Bancorp, Inc. (NASDAQ:CZWI) is a bank holding company that operates through its wholly-owned subsidiary, Citizens Community Federal N.A. (the "Bank"). The Bank serves customers primarily in Wisconsin and Minnesota through 23 branch locations, with a focus on the Chippewa Valley Region in Wisconsin, the Mankato and Twin Cities markets in Minnesota, and various rural communities around these areas. The Bank offers traditional community banking services to businesses, agricultural operators, and consumers, including one-to-four family residential mortgages.

Financials

For the fiscal year ended December 31, 2023, Citizens Community Bancorp reported annual net income of $13,059,000 and annual revenue of $93,821,000. The company's annual operating cash flow was -$33,783,000, and its annual free cash flow was -$35,150,000.

In the first quarter of 2024, the company reported net income of $4,088,000, or $0.39 per diluted share, compared to net income of $3,662,000, or $0.35 per diluted share, in the first quarter of 2023. Total revenue for the first quarter of 2024 was $22,679,000, up from $19,673,000 in the same period of the prior year. The increase in revenue was primarily driven by higher interest income on loans and investments, as well as an increase in non-interest income from higher gain on sale of loans and loan fees.

Net interest income for the first quarter of 2024 was $11,905,000, compared to $12,795,000 in the first quarter of 2023. The decrease in net interest income was due to higher deposit costs and the impact of higher short-term interest rates on the Bank's liability-sensitive balance sheet, partially offset by higher yields on assets. The net interest margin for the first quarter of 2024 was 2.77%, compared to 3.02% in the same period of the prior year.

The provision for credit losses decreased from $50,000 in the first quarter of 2023 to a negative provision of $800,000 in the first quarter of 2024. The negative provision was primarily due to a decrease in allowance for credit losses reserves on individually evaluated loans, the reduction in commitments to fund construction loans, and net loan recoveries.

Non-interest income increased $972,000 in the first quarter of 2024 compared to the first quarter of 2023, primarily due to higher gain on sale of loans and higher loan fees. Non-interest expenses increased $656,000 in the first quarter of 2024 from $10,121,000 in the first quarter of 2023, primarily related to the establishment of a SBA recourse reserve and inflationary increases in compensation and data processing costs.

Balance Sheet Strength

The company's balance sheet remains strong, with total assets of $1.82 billion and total deposits of $1.53 billion as of March 31, 2024. The Bank's Tier 1 and Risk-based capital levels exceeded levels necessary to be considered "Well Capitalized" under Prompt Corrective Action provisions as of March 31, 2024.

Liquidity

Liquidity management is a key focus for the company, and it maintains access to additional sources of funds, including FHLB borrowings and lines of credit with the Federal Reserve Bank and correspondent banks. As of March 31, 2024, the company's on-balance sheet liquidity collateralized new borrowing capacity and uncommitted federal funds borrowing availability totaled $696.8 million, or 263% of uninsured and uncollateralized deposits.

Geographic Breakdown

In terms of geographic breakdown, the majority of the company's operations are concentrated in the Chippewa Valley Region of Wisconsin and the Mankato and Twin Cities markets in Minnesota. The company's loan portfolio is diversified across commercial/agricultural real estate, commercial and industrial/agricultural operating, residential mortgage, and consumer installment loans.

Outlook

Looking ahead, the company has not provided any specific financial guidance for the remainder of 2024. However, management has emphasized its focus on maintaining a strong balance sheet, prudent risk management, and delivering value to its shareholders and communities it serves.

Conclusion

Overall, Citizens Community Bancorp appears to be a well-capitalized and liquid community bank that is navigating the evolving financial landscape effectively. The company's diversified loan portfolio, focus on risk management, and access to additional funding sources position it well to weather potential economic challenges and capitalize on opportunities in its local markets.