Civista Bancshares, Inc. — Q3 2021 Form 10-Q
Period: Quarter and nine months ended September 30, 2021. Financial statements are unaudited; amounts below are in millions unless stated otherwise. Civista is an Ohio-based financial holding company operating primarily as a regional bank across Ohio, Indiana and Kentucky.
Financial performance and condition
| Metric | Q3 2021 / Sep. 30, 2021 | Comparable period / prior year-end |
|---|---|---|
| Net income | $9.642; diluted EPS $0.64 | Q3 2020: $7.682; diluted EPS $0.48 |
| Net income, nine months | $29.564; diluted EPS $1.90 | Nine months 2020: $22.019; diluted EPS $1.36 |
| Net interest income | Q3: $24.433; nine months: $72.102 | Q3 2020: $22.006; nine months 2020: $66.196 |
| Net interest margin, fully tax-equivalent | Q3: 3.62%; nine months: 3.48% | Q3 2020: 3.44%; nine months 2020: 3.70% |
| Total assets | $2,952.236 | $2,768.862 at Dec. 31, 2020 |
| Total loans / net loans | $2,004.814 / $1,978.246 | Total loans down 2.6% from year-end |
| Deposits | $2,434.766 | $2,189.398 at Dec. 31, 2020 |
| Cash and cash equivalents | $253.165 | $139.522 at Dec. 31, 2020 |
| Shareholders’ equity | $348.450; 11.8% of assets | $350.108; 12.7% of assets at Dec. 31, 2020 |
- Profitability: Q3 net interest income rose $2.427 year over year, reflecting higher interest income and lower interest expense. Nine-month noninterest income increased 20.1% to $24.641, while noninterest expense rose 14.2% to $61.311. The nine-month provision for loan losses fell to $0.830 from $7.862.
- Cash flow: For the first nine months, operating activities provided $34.295, investing activities used $83.948, and financing activities provided $163.296. Cash and cash equivalents increased $113.643.
- Credit: The allowance for loan losses was $26.568, or 1.33% of total loans, versus 1.22% at year-end 2020. Nonaccrual loans were $3.519, down from $5.125. Net recoveries were $0.710 for the nine-month period.
- Funding and debt: Deposits increased 11.2%; the net loan-to-deposit ratio declined to 81.2% from 92.8%. Long-term FHLB advances were $75.000, down from $125.000; repurchase agreements were $23.331 and subordinated debentures $29.427.
- Capital: Reported September 30 ratios were 15.4% total risk-based capital, 14.2% Tier 1 risk-based capital, 12.7% CET1 and 10.0% leverage; each exceeded the stated regulatory minimums.
Material changes and notable items
- Compared with Q3 2020, net income rose $1.960 and diluted EPS increased from $0.48 to $0.64. For the nine months, net income rose $7.545 and diluted EPS increased from $1.36 to $1.90.
- Loan balances declined partly as PPP loans were forgiven: PPP balances fell to $83.287 from $217.295 at year-end 2020. Commercial real estate—non-owner occupied loans increased $83.826, while commercial and agriculture loans declined $133.135.
- Available-for-sale securities increased to $498.149 from $363.464. The nine-month comprehensive income statement included a $5.321 other comprehensive loss, primarily from unrealized securities losses; accumulated other comprehensive income declined to $9.298 from $14.619.
- Q3 provision expense was zero versus $2.250 in Q3 2020. Management cited stable credit metrics and improving conditions, while retaining caution about classified loans—particularly hotel exposure—and pandemic-related uncertainty.
- The company prepaid a $50.000 FHLB advance in Q2, incurring a $3.717 pretax prepayment charge recorded in other operating expenses. The nine-month period also included a $1.785 gain from selling Visa Class B shares.
- The company repurchased $20.557 of common shares during the first nine months. It paid $5.932 in dividends; the Q3 dividend was $0.14 per share.
Outlook, risks and contingencies
- The filing provides no specific earnings or revenue guidance. Management says the 2021 results are not necessarily indicative of full-year results.
- Management identifies continuing COVID-19 and Delta-variant uncertainty, supply-chain and staffing constraints, inflation risk, and potential effects on borrowers’ revenues and repayment capacity. Commercial and commercial real estate lending are expected to be most affected; the filing also notes concentration in lessors of nonresidential and residential buildings.
- Interest-rate and liquidity risk are principal market risks. The filing’s modeled net portfolio value increases under the disclosed rate scenarios, but actual results may differ; Q3 and nine-month net interest margins moved in opposite directions year over year.
- Other stated risks include real estate market weakness, credit losses, changes in rates, LIBOR transition, regulatory or tax changes, operational and cybersecurity failures, and litigation. Management says no material risk-factor changes occurred this quarter.
- At September 30, 18 loans totaling $18.787 remained on CARES Act payment modifications. Off-balance-sheet credit commitments totaled $541.539 ($31.827 fixed rate and $509.712 variable rate); management did not anticipate material losses.
- Ordinary-course legal proceedings are disclosed; management, after consultation with counsel, does not expect them to materially affect financial position, results or liquidity. The company had not quantified the expected financial effect of adopting CECL; it planned adoption for fiscal years beginning after December 15, 2022.
Important facts for investors to verify
- Whether the lower loan-loss provision and current $26.568 allowance adequately reflect remaining classified credits, hotel exposure, and commercial real estate concentration.
- How much future earnings depend on PPP fee amortization, loan-sale gains, seasonal tax-refund processing fees, and other potentially variable or nonrecurring income.
- Whether deposit growth and elevated cash balances can be deployed profitably while preserving funding stability and net interest margin.
- The effects of the FHLB prepayment charge, share repurchases and dividends on capital, and the remaining authorization under the buyback program.
- The filing’s liquidity discussion states FHLB availability figures “as of September 30, 2020,” although this is a 2021 report; verify the applicable date and current borrowing capacity.
- Management’s evolving CECL methodology and the eventual adoption impact, as well as sensitivity to interest rates, inflation, COVID-related borrower stress and supply-chain or staffing disruption.