Citizens munity Bancorp(US:CZWI)2023-05-03 16:00Financial Performance - Net interest income for Q1 2023 was $12.8 million, a decrease from $13.2 million in Q1 2022, attributed to higher deposit and borrowing costs and reduced accretion on purchased loans [209]. - The net interest margin for Q1 2023 was 3.02%, down from 3.25% in Q1 2022, primarily due to increased deposit costs and a decrease in SBA PPP deferred loan fee accretion [210]. - For the three months ended March 31, 2023, net interest income was $12.795 million, a decrease from $13.167 million in the same period of 2022 [214]. - Non-interest income decreased to $2.292 million, down 15.52% from $2.713 million in the prior year, primarily due to a significant drop in loan servicing income and gains on loan sales [225]. - Total non-interest expense increased to $10.121 million, a rise of 4.69% from $9.668 million in the same period of 2022 [229]. - Income tax expense for Q1 2023 was $1.3 million, down from $1.5 million in Q1 2022, with an effective tax rate of 25.5% compared to 24.2% in the prior year [237]. Credit Losses and Allowances - The company adopted ASU 2016-13 for credit loss measurement on January 1, 2023, utilizing a third-party model for loss estimation [195]. - The allowance for credit losses on loans is based on quarterly assessments of estimated lifetime losses, considering various factors including historical loss experience and economic conditions [197]. - The company does not record an allowance for credit losses on held-to-maturity securities, as they are backed by governments or government agencies, minimizing credit loss risk [196]. - The provision for credit losses for the first quarter of 2023 was $0.05 million, compared to no provision in the same period of 2022, reflecting growth in the loan portfolio [220]. - The allowance for credit losses (ACL) on loans was $22.7 million at March 31, 2023, representing 1.60% of loans receivable, up from $17.9 million or 1.27% at December 31, 2022 [250]. - The ACL on unfunded commitments was established at $1.5 million as of March 31, 2023, following the adoption of ASU 2016-13 [250]. - The net loans charged off (NCOs) for the three months ended March 31, 2023, were $(23,000), compared to $(95,000) for the same period in 2022, indicating a significant improvement [259]. - Total nonperforming assets (NPAs) decreased to $11,747,000 or 0.63% of total assets at March 31, 2023, down from $12,721,000 or 0.70% at December 31, 2022 [259]. Asset and Liability Management - Total interest earning assets increased to $1.718 billion with a yield of 4.64%, compared to $1.644 billion and a yield of 3.79% in the prior year [214]. - The average interest-bearing liabilities increased to $1.397 billion with an interest expense of $6.878 million, compared to $1.299 billion and $2.209 million in the prior year [214]. - The interest rate spread decreased to 2.64% from 3.10% year-over-year, indicating a tighter margin environment [214]. - The company experienced a significant increase in FDIC premium assessments, rising 74.78% to $201 thousand due to an increase in the FDIC assessment rate [229]. - The company pledged mortgage-backed securities with a carrying value of $30.4 million as collateral against a borrowing line of credit with the Federal Reserve Bank [241]. - The liquidity ratio increased to 13.7% at March 31, 2023, up from 13.0% at December 31, 2022, largely due to an increase in interest-bearing cash [287]. Deposits and Funding - Total deposits increased to $1.44 billion at March 31, 2023, from $1.42 billion at December 31, 2022, marking a growth of 0.5% [273]. - Consumer deposits were $786.6 million at March 31, 2023, compared to $805.6 million at December 31, 2022, indicating a decrease of 2.4% [273]. - FHLB advances increased by $40 million to $182.5 million as of March 31, 2023, compared to $142.5 million at December 31, 2022, driven by loan growth and liquidity management [281]. - Uninsured and uncollateralized deposits were $252.7 million, or 18% of total deposits, at March 31, 2023, down from $298.8 million, or 21%, at December 31, 2022 [274]. - The composition of the deposit portfolio at March 31, 2023, was 55% consumer, 27% commercial, 14% public, and 4% brokered deposits [273]. Interest Rate Risk Management - The company is focusing on originating shorter-term secured loans and variable rate loans to manage interest rate risk [303]. - The strategy includes selling a majority of longer-term fixed-rate residential loans in the secondary market while retaining servicing [303]. - The company plans to adjust its provision for credit losses as necessary based on the changing conditions of the loan portfolio and economic environment [223]. - Interest rate risk assessments are based on various assumptions, including interest rates and loan prepayment rates, which may vary from actual market conditions [306]. - The computations do not account for potential actions the company may take in response to changes in interest rates [306]. Capital Ratios - Total capital to risk-weighted assets ratio was 14.6% as of March 31, 2023, exceeding the required 8.0% for being "Well Capitalized" [296]. - Tier 1 capital to risk-weighted assets ratio was 13.3% at March 31, 2023, above the required 6.0% [296]. - Common equity tier 1 capital to risk-weighted assets ratio was 13.3% at March 31, 2023, exceeding the required 4.5% [296]. - The Company maintains access to additional funding sources, including $213.4 million available to borrow under FHLB arrangements as of March 31, 2023 [292].