Civista Bancshares, Inc. — Q1 2024 Form 10-Q
Business context and period. Civista is an Ohio-based bank holding company operating primarily through Civista Bank, with lending and deposit operations in Ohio, Indiana, and Kentucky. This unaudited filing covers the three months ended March 31, 2024; balance-sheet comparisons are with December 31, 2023. Unless stated otherwise, amounts below are in millions.
Financial performance and position
| Metric | Q1 2024 / March 31, 2024 | Comparable period / prior date |
|---|---|---|
| Net income | $6.36; diluted EPS $0.41 | Q1 2023: $12.89; diluted EPS $0.82 |
| Interest and dividend income | $50.13 | Q1 2023: $42.93 |
| Net interest income | $28.37 | Q1 2023: $32.60 |
| Net interest margin | 3.22% fully tax-equivalent | Q1 2023: 3.99% |
| Provision for credit losses | $2.04 on loans; net benefit of $0.05 on off-balance-sheet exposures | Q1 2023: $0.62 on loans; $0.20 provision on off-balance-sheet exposures |
| Noninterest income / expense | $8.50 / $27.69 | Q1 2023: $11.07 / $27.43 |
| Cash flows | Operating +$0.75; investing −$34.17; financing +$23.32; cash decreased $10.10 to $50.31 | Q1 2023: operating +$19.79; investing −$38.64; financing +$28.20 |
| Total assets / shareholders’ equity | $3,880.26 / $369.66 | December 31, 2023: $3,861.42 / $372.00 |
| Deposits / loans | Deposits $2,980.70; loans $2,898.14 gross and $2,859.29 net | Deposits at December 31, 2023: $2,985.03 |
| Borrowings | Short-term FHLB advances $368.50; long-term FHLB advances $2.21; subordinated debentures $103.98; other borrowings $8.11 | Short-term FHLB advances at December 31, 2023: $338.00 |
Material changes and key drivers
- Net income fell about 51% year over year. Net interest income declined about 13%, as higher interest expense more than offset increased interest income. Interest expense rose to $21.76 from $10.32, including a sharp increase in deposit costs; interest-bearing deposit rates and balances were higher.
- Average loan yield increased to 6.20% from 5.78%, while average loans increased about 8% year over year. Fully tax-equivalent net interest margin compressed to 3.22% from 3.99%.
- Noninterest income fell 23%, principally because the company exited tax refund processing (Q1 2023 income was $1.90) and did not repeat a $1.50 million Mastercard contract-renewal fee recorded in 2023. Noninterest expense rose less than 1%.
- At quarter-end, total deposits were nearly flat with year-end, but noninterest-bearing deposits declined $63.71 million, partly offset by growth in savings and money-market and time deposits. Uninsured deposits were estimated at $446.96 million, down from $499.43 million.
- Gross loans grew during the quarter, particularly in non-owner-occupied commercial real estate, residential real estate, construction, and equipment leasing. The net loan-to-deposit ratio was 95.9%, versus 94.6% at year-end. Non-owner-occupied commercial real estate was the largest loan category at $1.19 billion.
- The allowance for loan losses was $38.85 million, or 1.34% of gross loans, versus $37.16 million, or 1.30%, at year-end. Management attributed higher reserves principally to loan growth and downgrades of three credits. Net charge-offs were $0.35 million, compared with $0.13 million in Q1 2023.
- Nonaccrual loans increased to $13.24 million from $12.47 million at year-end; loans 90 days or more past due totaled $8.03 million, compared with $4.14 million at year-end. The filing reports no loan modifications to borrowers experiencing financial difficulty during the quarter.
- Available-for-sale securities declined to $606.25 million. Gross unrealized losses were $64.29 million, primarily attributed by management to higher market interest rates; the company stated it did not intend to sell and did not expect to be required to sell before recovery. The quarter’s after-tax other comprehensive loss was $6.23 million, reducing equity.
Liquidity, capital, outlook, and risks
- Company capital ratios exceeded stated regulatory minimums at March 31, 2024: total risk-based capital 14.5%, Tier 1 risk-based capital 10.8%, CET1 9.8%, and leverage 8.6%. Equity was 9.5% of assets.
- Management described liquidity as conservative. Reported remaining FHLB borrowing capacity was approximately $445.47 million; federal funds borrowing lines totaled $50 million, and a separate $15 million credit line had no outstanding balance. Short-term FHLB borrowing increased $30.50 million during the quarter to support loan growth.
- The filing provides no specific earnings or margin guidance. Management notes that future results depend on economic conditions, interest rates, deposit levels and funding costs, loan demand and repayment, real estate values, and credit quality. It also identifies operational, cybersecurity, competitive, regulatory, legal, and acquisition-related risks.
- Management reported effective disclosure controls and no material changes to internal control over financial reporting during the quarter. It stated that pending and threatened legal proceedings were not expected to have a material adverse effect, based on current knowledge.
Important facts for investors to verify
- Reconcile reported cash-flow figures: the cash-flow statement reports operating cash flow of $0.75 million and investing cash flow of −$34.17 million, while MD&A gives different figures ($0.25 million and −$33.67 million). The statement’s reported cash decrease reconciles to its own cash-flow totals.
- Reconcile prior-period loan balances: the balance sheet and loan note show December 31, 2023 gross loans of $2,861.73 million and net loans of $2,824.57 million, while the MD&A loan comparison table shows $2,843.88 million and $2,806.72 million, respectively.
- Track deposit mix and pricing, reliance on FHLB advances, and the elevated loan-to-deposit ratio alongside continued loan growth.
- Monitor credit migration, nonaccrual and past-due loans, allowance adequacy, and commercial real estate concentration.
- Assess the effect of securities’ unrealized losses and future interest-rate movements on capital, liquidity, and net interest margin.