Citizens Community Bancorp Inc.CZWI
Citizens Community Bancorp Inc. Income Taxes Disclosure
INCOME TAXES
Income tax expense (benefit) for 2025 consisted of the following:
| Year ended December 31, | ||||||||
| 2025 | ||||||||
| Current tax provision | ||||||||
| Federal | $ | 4,098 | ||||||
| State | 361 | |||||||
| 4,459 | ||||||||
| Deferred tax provision (benefit) | ||||||||
| Federal | (1,355) | |||||||
| State | (83) | |||||||
| (1,438) | ||||||||
| Total | $ | 3,021 | ||||||
The Company is not subject to income taxes in any foreign jurisdictions.
Income tax expense (benefit) for 2024 consisted of the following:
| Year ended December 31, | ||||||||
| 2024 | ||||||||
| Current tax provision | ||||||||
| Federal | $ | 2,742 | ||||||
| State | 578 | |||||||
| 3,320 | ||||||||
| Deferred tax provision (benefit) | ||||||||
| Federal | 496 | |||||||
| State | (1,235) | |||||||
| (739) | ||||||||
| Change in valuation allowance | 1,118 | |||||||
| Total | $ | 3,699 | ||||||
The provision for income taxes differs from the amount of income tax determined by applying statutory federal income tax rates to pretax income as a result of the following differences for the year ended December 31, 2025:
| Year ended December 31, | ||||||||||||||
| 2025 | ||||||||||||||
| Amount | Rate | |||||||||||||
| Tax expense at statutory rate | $ | 3,662 | 21.0 | % | ||||||||||
| State income taxes, net of federal | 220 | 1.2 | % | |||||||||||
| Tax credits | (441) | (2.5) | % | |||||||||||
| Non-taxable items | ||||||||||||||
| Bank owned life insurance | (169) | (1.0) | % | |||||||||||
| Tax exempt interest | (89) | (0.5) | % | |||||||||||
| Other | (162) | (0.9) | % | |||||||||||
| Total | $ | 3,021 | 17.3 | % | ||||||||||
Tax credits are net of proportional amortization expenses. State income tax expense for the state of Minnesota is more than 50% of state income tax expense.
The provision for income taxes differs from the amount of income tax determined by applying statutory federal income tax rates to pretax income as a result of the following differences for the year ended December 31, 2024:
| Year ended December 31, | ||||||||||||||
| 2024 | ||||||||||||||
| Amount | Rate | |||||||||||||
| Tax expense at statutory rate | $ | 3,665 | 21.0 | % | ||||||||||
| State income taxes, net of federal | (519) | (3.0) | % | |||||||||||
| Tax credits | (210) | (1.2) | % | |||||||||||
| Bank owned life insurance | (162) | (0.9) | % | |||||||||||
| Tax exempt interest | (81) | (0.5) | % | |||||||||||
| Change in valuation allowance | 1,118 | 6.4 | % | |||||||||||
| Other | (112) | (0.6) | % | |||||||||||
| Total | $ | 3,699 | 21.2 | % | ||||||||||
Federal and state income taxes paid were as follows:
| Year ended December 31, | ||||||||
| 2025 | ||||||||
| Federal | $ | 1,800 | ||||||
| State and local | ||||||||
| Minnesota | 240 | |||||||
| All other states | 25 | |||||||
| Total | $ | 2,065 | ||||||
State income taxes paid in Wisconsin, Illinois and Missouri were not significant, i.e.were less than 5% of total income taxes paid, with state income taxes paid to Minnesota more than 5% of total income taxes paid.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The following is a summary of the significant components of the Company’s deferred tax assets and liabilities as of December 31, 2025 and December 31, 2024, respectively:
| Year ended December 31, | Year ended December 31, | |||||||||||||
| 2025 | 2024 | |||||||||||||
| Deferred tax assets: | ||||||||||||||
| Allowance for credit losses | $ | 6,263 | $ | 5,361 | ||||||||||
| Deferred loan costs/fees | 655 | 574 | ||||||||||||
| Restricted stock | 48 | 231 | ||||||||||||
| Economic performance accruals | 1,161 | 988 | ||||||||||||
| Other real estate owned | 126 | 314 | ||||||||||||
| Loan discounts | 31 | 218 | ||||||||||||
| Lease liability | 260 | 276 | ||||||||||||
| Net operating loss | 1,498 | 970 | ||||||||||||
| Net unrealized losses on securities available-for-sale | 4,792 | 6,333 | ||||||||||||
| Other | 296 | 199 | ||||||||||||
| Deferred tax assets | $ | 15,130 | $ | 15,464 | ||||||||||
| Deferred tax liabilities: | ||||||||||||||
| Office properties and equipment | (1,544) | (2,160) | ||||||||||||
| Federal Home Loan Bank stock | (129) | (121) | ||||||||||||
| Intangibles | (789) | (788) | ||||||||||||
| Net gain on equity securities | (596) | (715) | ||||||||||||
| Prepaid expenses | (267) | (233) | ||||||||||||
| Mortgage servicing rights | (956) | (940) | ||||||||||||
| Leases; right of use asset | (209) | (209) | ||||||||||||
| Deferred tax liabilities | $ | (4,490) | $ | (5,166) | ||||||||||
| Valuation allowance | (3,160) | (2,852) | ||||||||||||
| Net deferred tax assets | $ | 7,480 | $ | 7,446 | ||||||||||
The Company regularly reviews the carrying amount of its deferred tax assets to determine if the establishment of a valuation allowance is necessary, as further discussed in Note 1 “Nature of Business and Summary of Significant Accounting Policies”, above. Management determined a valuation allowance of $3,160 was necessary at December 31, 2025, and a valuation allowance of $2,852 was necessary at December 31, 2024, due to changes in the realization of deferred tax assets due to a Wisconsin change in the non-taxation of loans under $5 million reducing the effective tax rate.
The Company’s income tax returns are subject to review and examination by federal, state and local government authorities. As of December 31, 2025, years open to examination by the U.S. Internal Revenue Service include taxable years ended December 31, 2022 to present. The years open to examination by state and local government authorities vary by jurisdiction.
The tax effects from uncertain tax positions can be recognized in the consolidated financial statements, provided the position is more likely than not to be sustained on audit, based on the technical merits of the position. The Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than fifty percent likelihood of being realized, upon ultimate settlement with the relevant tax authority. The Company applied the foregoing accounting standard to all of its tax positions for which the statute of limitations remained open as of the date of the accompanying consolidated financial statements.
The Company’s policy is to recognize interest and penalties related to income tax issues as components of other non-interest expense. The Company recognized no material expense on income tax related interest or penalties during any of the periods presented.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 5, 2026 | Showing above |
| 2024 | Mar 13, 2025 | |
| 2023 | Mar 5, 2024 | |
| 2022 | Mar 7, 2023 | |
| 2021 | Mar 2, 2022 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.