10-K: Citizens Community Bancorp Reports $13.75 Million Net Income for 2024, Announces Share Repurchase Program

Citizens Community Bancorp reports a net income increase for 2024, driven by strategic balance sheet management and improved economic forecasts, while also announcing a continued focus on shareholder value through a share repurchase program.

Summary

• Citizens Community Bancorp, Inc. reported a net income of $13.75 million for the year ended December 31, 2024, compared to $13.06 million for the previous year.
• Diluted earnings per share increased to $1.34 from $1.25 in the prior year.
• The company's return on average assets was 0.76%, up from 0.71% in 2023.
• Net interest income decreased by $1.9 million due to higher deposit and borrowing costs, partially offset by increased loan yields.
• A negative provision for credit losses of $3.175 million was recorded, primarily due to improving economic forecasts and balance sheet optimization.
• Non-interest income decreased slightly by $150 thousand, mainly due to losses on equity securities, offset by gains on loan sales.
• Non-interest expense increased by $2.2 million, largely due to higher compensation costs.
• Total assets decreased by $102.9 million to $1.75 billion, reflecting a balance sheet optimization strategy.
• Loans decreased to $1.37 billion, while deposits decreased modestly by $30.9 million.
• The company repurchased approximately 476 thousand shares of its common stock.
• A stock repurchase program authorizing the purchase of up to 5% of outstanding shares was approved.
• The company's liquidity ratio increased to 11.75%.

Sentiment

Score: 6

Explanation: The sentiment is neutral to slightly positive. While net income increased, there were also decreases in net interest income and total assets. The announcement of a share repurchase program is a positive sign for shareholders.

Positives

• Net income and diluted earnings per share increased year-over-year.
• The company recorded a negative provision for credit losses, indicating improved asset quality.
• A share repurchase program was authorized, returning capital to shareholders.
• The return on average assets increased.
• The company's liquidity ratio increased.

Negatives

• Net interest income decreased due to higher deposit and borrowing costs.
• Non-interest income decreased slightly.
• Non-interest expense increased, primarily due to higher compensation costs.
• Total assets and loans decreased, reflecting a balance sheet optimization strategy.

Risks

• Conditions in the financial markets and economic conditions generally could adversely affect the company's business.
• Inflation may have an adverse impact on the company's business and on its customers.
• The company is subject to higher lending risks with respect to its commercial and agricultural banking activities.
• Future pandemics (including new variants of COVID-19) could materially affect the company's results of operations, financial position and/or liquidity.
• The company relies on network and information systems and other technologies, and, as a result, it is subject to various Cybersecurity risks.
• The impact of larger or similar-sized financial institutions encountering financial difficulties may adversely affect the Company's business, earnings and financial condition.
• The company is subject to interest rate risk.
• The company is subject to lending risk.
• Changes in the fair value or ratings downgrades of the company's securities may reduce its stockholders' equity, net earnings, or regulatory capital ratios.
• The company's allowance for credit losses loans may be insufficient.
• Competition may affect the company's results.
• Customers may decide not to use banks to complete their financial transactions, which could result in a loss of income to the company.
• The company is a community bank and its ability to maintain its reputation is critical to the success of its business and the failure to do so may materially adversely affect its performance.
• Maintaining or increasing the company's market share may depend on lowering prices and market acceptance of new products and services.
• The company could experience an unexpected inability to obtain needed liquidity.
• Future growth, operating results or regulatory requirements may require the company to raise additional capital but that capital may not be available.
• The company may not be able to attract or retain key people.
• The company continually encounters technological change.
• The company's business may be adversely affected by an increasing prevalence of fraud and other financial crimes.
• The company's internal controls and procedures may fail or be circumvented.
• The company's growth strategy includes selectively acquiring businesses through acquisitions of other banks, and its ability to consummate these acquisitions on economically advantageous terms acceptable to it in the future is unknown.
• Acquisition and expansion activities may disrupt the company's business, dilute existing stockholders and adversely affect its operating results.
• The company's ability to pay dividends depends primarily on dividends from its banking subsidiary, the Bank, which is subject to regulatory and other limitations.
• The company's shares of common stock are thinly traded and its stock price may be more volatile.
• Climate change manifesting as physical or transition risks could adversely affect the company's operations, businesses, and customers.
• The company operates in a highly regulated environment, and is subject to changes, which could increase its cost structure or have other negative impacts on its operations.
• Federal law restricts the amount of voting stock of a bank holding company or a bank, that a person or group may acquire, without the prior approval of banking regulators.
• The company's reporting obligations as a public company are costly.
• Changes in federal or state tax laws could adversely affect the company's business, financial condition and results of operations.
• The company is subject to changes in accounting principles, policies or guidelines.

Future Outlook

The company's future performance is subject to various factors, including economic conditions, interest rate risk, lending risk, regulatory changes, and competition. The company undertakes no obligation to publicly update forward-looking statements.

Management Comments

• The Company utilized a balance sheet optimization strategy in 2024, which resulted in the runoff of non-strategic loan relationship with the proceeds used to reduced more expensive borrowings and wholesale deposits.

Industry Context

The announcement reflects trends in the banking industry, including managing interest rate risk, adapting to technological changes, and navigating a competitive landscape. The company's focus on community banking and small-business solutions aligns with strategies employed by other regional banks.

Comparison to Industry Standards

• The report does not provide enough information to make a detailed comparison to industry standards.
• To make a comparison, we would need to know the performance of similar banks in the same geographic area and with similar asset sizes.
• For example, comparing Citizens Community Bancorp to banks like River Valley Bancorp or Nicolet Bankshares, Inc. would provide a more detailed comparison.
• We would also need to compare the company's key financial metrics, such as net interest margin, return on assets, and efficiency ratio, to the averages for its peer group.

Legal Proceedings

• In the normal course of business, the Company and/or the Bank occasionally become involved in various legal proceedings.

Related Party Transactions

• Certain directors and executive officers of the Company are defined as related parties and were loan customers of the Bank during the twelve months ended December 31, 2024 and December 31, 2023.

Stakeholder Impact

• Shareholders may benefit from the share repurchase program and increased earnings per share.
• Customers may be affected by changes in interest rates and loan terms.
• Employees may be affected by changes in compensation and benefits.
• The community may benefit from the company's commitment to community development projects.

Next Steps

• The company will continue to execute its balance sheet optimization strategy.
• The company will continue to monitor and manage interest rate risk.
• The company will continue to evaluate potential acquisitions and expansion opportunities.
• The company will continue to implement its share repurchase program.

Key Dates