Citizens Community Bancorp, Inc. (Wisconsin) :CZWI-US: Earnings Analysis: 2016 By the Numbers : January 6, 2017

Citizens Community Bancorp, Inc. (Wisconsin) reports financial results for the year ended September 30, 2016.

Highlights

  • Net interest income margins widened from 82.59% to 83.68% compared to the same period last year.
  • Net loan assets changed 28.01% compared to same period last year and 28.01% from previous period, total deposits changed 22.22% compared to same period last year and 22.22% from previous period.
  • Change in operating cash flow of -1.37% compared to same period last year is about the same as change in earnings, likely no significant movement in accruals or reserves.
  • Earnings decline from worsening in operating margins as well as one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income (See complete table at the end of this report):

2016 2015 2014 2013 2012
Relevant Numbers (Annual)
Revenues 23.99 22.48 23.25 23.11 23.5
Revenue Growth (YOY) N/A N/A N/A N/A N/A
Earnings 2.57 2.81 1.78 1.05 0.21
Earnings Growth (YOY) -8.3 57.38 70.3 408.25 6.74
Net Margin 10.72 12.48 7.67 4.53 0.88
EPS 0.49 0.54 0.34 0.2 0.04
Return on Equity 4.08 4.73 3.2 1.92 0.38
Return on Assets 0.4 0.49 0.32 0.19 0.04

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Earnings Growth Analysis

The company’s year-on-year earnings decline has not come as a result of decline in net interest income margins or because of any loan loss provisions. Both net interest income margins and net interest income after provisions margins have actually improved. In fact, net interest income margins went from 82.59% to 83.68% and net interest income after provisions margins improved from 79.67% to 83.37% over this period. In addition, loan loss provisions as a percentage of net interest income were 0.37% this period , and 3.53% a year ago.

Net Interest Income Margin History
Loan Loss Provisions Margin History

Net Loans and Total Deposits

A financial institution’s core operations represented by Net Interest Income and Net Interest Income after Provisions are dependent on both the growth and quality of its deposits as well as the growth and quality of its loans. A firm could boost its interest income in the short-term by just increasing its loan assets with less concern about their quality – but this would eventually lead to greater loan loss provisions. Similarly a drive to increase deposits could result in higher interest expenses and eventually effect the firm’s equity. It is thus important to understand net interest income performance in context to loan loss provisions, loan assets and deposits.

Loan Assets Growth Rate History (HY YOY)
Total Deposits Growth Rate History (HY YOY)

The firm’s improvement in net interest income margins was influenced by both the relative increase in the levels of net loan assets and the level of total deposits as a percentage of equity. On an absolute basis, net loan assets changed 28.01% compared to the same period last year and 28.01% from the previous period. Total deposits changed 22.22% compared to the same period last year and 22.22% from the previous period.

Cash Versus Earnings – Sustainable Performance?

CZWI-US‘s year-on-year change in operating cash flow of -1.37% is around its change in earnings. This suggests that there are likely no significant movement in accruals or reserves for managing earnings this period.

Margins

The company’s decline in earnings has been influenced by the following factors: (1) Contraction of operating margins from 19.66% to 16.08% and (2) One-time items that contributed to a decrease in pretax margins from 19.66% to 16.08%

EBIT Margin History
PreTax Margin History

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Company Profile

Citizens Community Bancorp, Inc. operates as a holding company for Citizens Community Federal Bank. It offers a variety of products including residential mortgages, home equity lines-of-credit, consumer loans, demand deposits, various savings and money-market accounts, and certificates of deposits. The company was founded in 2004 and is headquartered in Eau Claire, WI.

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