Filing summary
Entity discrepancy: The request identifies Civista Bancshares, Inc., but the supplied Form 10-Q is for First Citizens Banc Corp. This summary reflects the filing provided, not the company named in the request.
Business context and reporting period
Unaudited quarterly report for the three and six months ended June 30, 2011; balance-sheet comparisons are to December 31, 2010. First Citizens Banc Corp is an Ohio-based banking company operating primarily in Ohio. Amounts below are in thousands of dollars, except per-share data and ratios.
Financial performance and condition
| Metric | Q2 2011 | Q2 2010 | Six months 2011 | Six months 2010 |
|---|---|---|---|---|
| Net interest income | $10,153 | $10,441 | $20,525 | $20,641 |
| Provision for loan losses | $2,700 | $4,600 | $5,700 | $8,340 |
| Noninterest income | $2,526 | $2,456 | $5,194 | $4,748 |
| Noninterest expense | $9,483 | $8,991 | $18,671 | $17,987 |
| Net income (loss) | $523 | $(259) | $1,276 | $(222) |
| Net income (loss) available to common shareholders | $230 | $(553) | $689 | $(810) |
| Basic and diluted EPS | $0.03 | $(0.07) | $0.09 | $(0.11) |
- Net interest margin was 3.93% in Q2 2011 versus 3.99% a year earlier; for the first half it was 3.90% versus 3.97%.
- Total assets were $1.089 billion, down 1.0% from year-end 2010. Net loans were $743.9 million, down 0.2%; available-for-sale securities were $207.4 million, up $22.5 million.
- Deposits were $880.3 million, down $12.2 million from year-end, principally reflecting lower interest-bearing balances and CDARS deposits. The net loan-to-deposit ratio rose to 84.5% from 83.5%.
- Shareholders’ equity was $99.8 million, or 9.2% of assets, compared with $97.0 million, or 8.8%, at year-end. Regulatory capital ratios at June 30 were 14.9% total risk-based, 13.0% Tier 1 risk-based, and 9.0% leverage; each exceeded the stated well-capitalized thresholds.
- Cash and due from financial institutions fell to $42.3 million from $79.0 million. Six-month operating cash flow was $7.9 million, investing cash outflow was $28.9 million, and financing cash outflow was $15.8 million. The company reported $111.6 million of FHLB credit availability, of which $50.3 million was outstanding, plus $10 million in federal-funds borrowing lines.
- Borrowings included $50.3 million of FHLB advances and $29.4 million of subordinated debentures. The disclosed fair value of the subordinated debentures was $16.2 million; carrying value was $29.4 million.
Material changes and credit quality
- Six-month net income improved by $1.5 million from a year-earlier loss. Lower loan-loss provisions and higher noninterest income supported the improvement; lower net interest income and higher operating expenses partly offset it. Q2 also returned to profitability.
- Six-month net charge-offs increased to $5.7 million from $4.7 million, despite the provision declining to $5.7 million. The allowance was $21.7 million, or 2.84% of total loans, unchanged as a percentage from year-end.
- Management reported nonperforming loans increased $1.6 million from year-end. At June 30, loans 90 or more days past due totaled $3.3 million; nonaccrual loans totaled $22.7 million. Total past-due loans were $13.8 million versus $10.6 million at year-end. The filing’s definitions and tables include different loan populations, so these figures should not be treated as interchangeable.
- Loans graded substandard were $63.9 million, down from $74.6 million at year-end; special-mention loans increased to $26.2 million from $19.4 million. Commercial real estate loans rose $15.5 million to $351.7 million, while mortgage, commercial/agricultural, construction, and consumer balances declined.
- Noninterest expense increased 3.8% in the first half, including a 12.9% increase in salaries and benefits, attributed mainly to added credit and special-assets staff and higher commissions. Noninterest income rose 9.4%, including fees from a tax-refund facilitation program.
Outlook, risks, contingencies, and unusual items
- The filing provides no specific earnings guidance or quantified forecast. Management cautions that interim results are not necessarily indicative of full-year results.
- Management cites regional economic conditions and unemployment, credit quality, interest-rate movements, regulation, and FDIC assessments among factors that could cause results to differ from forward-looking statements. Interest-rate risk is identified as the primary market risk, with liquidity risk also noted. The company reported no derivative instruments or trading portfolio.
- The company purchased $5.0 million of bank-owned life insurance during the first half, describing it as an alternative investment intended to help recover employee-benefit costs. It also exchanged two FHLB advances for lower-rate, longer-term advances; related prepayment penalties of $1.3 million are to be amortized over the replacement advances’ terms.
- The company participates in the Treasury’s CPP/TARP, with $23.184 million of preferred shares outstanding and a warrant for 469,312 common shares at $7.41 per share. Preferred dividends accrue at 5% annually for the first five years and 9% thereafter. CPP restrictions limit common-stock repurchases without Treasury approval; no common dividend was paid in the first half.
- A bank subsidiary is pursuing debt collection and foreclosure in litigation in which defendants counterclaimed for more than $1 million in compensatory damages and $5 million in punitive damages, plus fees and costs. The company considers the claims meritless and intends to defend itself. No estimate of potential financial exposure is provided.
- Management said disclosure controls were effective as of June 30, 2011, and reported no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Confirm the intended issuer: the supplied filing is First Citizens Banc Corp, not Civista Bancshares, Inc.
- Review subsequent credit trends, particularly charge-offs, past-due and nonaccrual loans, commercial real estate exposure, and allowance adequacy.
- Assess the cash decline, deposit mix and CDARS outflows, and the company’s reliance on available borrowing capacity for liquidity.
- Check the terms and effect of CPP/TARP preferred dividends, repurchase restrictions, and the outstanding Treasury warrant.
- Monitor the litigation and any later disclosure of its outcome or financial impact; the filing does not quantify a potential loss.
- Reconcile the first-half 2010 comparative EPS: the income statement reports $(0.11), while MD&A describes it as approximately $(0.10).