PART 1: ANALYSIS OF PERFORMANCE
Citizens Community Bancorp Inc. reported a net income of $17.76 million for the fiscal year 2022 which is a decrease from the $21.27 million of net income reported in the fiscal year 2021. The diluted earnings per share were $1.69 for the fiscal year 2022, compared to $1.98 in the fiscal year 2021. The return on average assets was 1.00%, compared to 1.23% in the fiscal year 2021. Similarly, the return on average equity was 10.70% in the fiscal year 2022, compared to 12.97% in the fiscal year 2021.
In the fiscal year 2022, the net interest income increased as a result of growth in the loan portfolio and investment securities portfolio. Additionally, the positive impact of higher interest rates on loan yields on new, renewing and repricing loans also contributed to the growth in net interest income. However, the reduction in the accretion of the Small Business Administration Paycheck Protection Program (“SBA PPP”) loan fees of $5.9 million impacted net interest income negatively. The provision for loan losses increased to $1.5 million in the fiscal year 2022, largely due to loan growth and net charge-offs, partially offset by a reduction in specific reserves. In the fiscal year 2021, no provision for loan losses was recorded largely due to the qualitative factor decreases to reflect greater certainty and improvement in current general economic conditions which offset the impact of organic loan growth.
The Company experienced fewer mortgage loans originated for sale due to the higher interest rate and tight housing supply environment in the fiscal year 2022 which led to a decrease in gain on sale and income recorded in loan servicing income from the capitalization of mortgage servicing rights. Non-interest expense increased modestly in the fiscal year 2022, largely due to the cost of closing branches.
PART 2: FORWARD LOOKING ANALYSIS
The Company could face several challenges in the future such as the ongoing economic and market uncertainties and the unprecedented COVID-19 pandemic. The adverse effects of the pandemic are likely to continue to have an impact on the financial performance of the Company in the year ahead. The rising competition in the financial industry that is fueled by digitization and innovation could also threaten the long-term growth of the Company. The Institution may face higher credit and liquidity risks if it does not effectively manage the risk exposures that may arise due to changes in market, legal, regulatory and operating environments.
One of the factors that could positively impact the future performance of the Company is its ability to invest in modern infrastructure, products, and systems. The Institution plans to continue investing in its banking platforms and customer experience and, in doing so, expand and diversify its current customer base. Additionally, the Company is well-positioned in market areas with growing populations that are comparatively underserved by community banks.
According to John H. Kim, the President and CEO of Citizens Community Bancorp Inc., "We are committed to building long-term relationships with our customers, focusing on building and maintaining a diversified loan portfolio, and executing on our strategic initiatives over the long term. With our dedicated and hard-working team, we remain convinced that we are well positioned for continued success in the future."
In the near future, improvement in the general economic environment may support the Company’s future growth. The Company anticipates growth in commercial, agriculture and consumer loans, which will contribute to increased loan growth in the future. The rising interest rate scenario could improve the margins of the Company which would help to offset the negative impact of the decline in gain on sale and income through loan servicing income that the Company experienced in the fiscal year 2022. Furthermore, the Company expects to continue to close low-performing branches in order to reduce costs and streamline operations.
Overall, while the Company has demonstrated good financial performance, investors should consider the uncertainties and risks that may impact the Institution in the future. The Company is fully aware of these potential risks and has plans to mitigate them. The strategic initiatives put in place by the Company, such as continued investment in modern infrastructure and focus on expense management, growth, and risk management should support the Company's long-term success in the future.