Civista Bancshares, Inc. — FY2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. Civista is an Ohio-based community bank holding company, operating primarily through Civista Bank, with equipment leasing and financing through its CLF division. Unless otherwise noted, financial amounts below are in millions of dollars.
Financial performance and condition
| Metric | 2023 | 2022 | Change / context |
|---|---|---|---|
| Total assets | $3,861.4 | $3,639.4 | Up 6.1% |
| Net loans | $2,824.6 | $2,619.8 | Up 7.8% |
| Total deposits | $2,985.0 | $2,620.0 | Up 13.9% |
| Net interest income | $125.5 | $110.2 | Up 13.9%; net interest margin was 3.70% versus 3.65% |
| Net income | $43.0 | $39.4 | Up 9.0%; diluted EPS was $2.73 versus $2.60 |
| Provision for credit losses | $4.4 | $1.8 | Increase attributed primarily to loan growth |
| Noninterest income | $37.2 | $29.1 | Up 27.8%, including higher CLF lease revenue |
| Noninterest expense | $107.6 | $90.5 | Up 18.9%, including compensation and equipment costs |
| Operating cash flow | $62.7 | $25.2 | Investing cash outflow was $311.8; financing cash inflow was $266.1 |
Margins and funding costs: Average earning-asset yield rose to 5.35% from 4.16%, while the average cost of interest-bearing liabilities rose to 2.38% from 0.79%. The increase in funding costs was driven by higher deposit rates and use of short-term FHLB advances. The audited statements report total interest expense of $57.2 in 2023, versus $16.0 in 2022.
Credit quality: Gross loans were $2,861.7 at year-end. The allowance for credit losses was $37.2, or 1.30% of loans. Nonaccrual loans increased to $12.5 from $6.5, and their share of loans rose to 0.44% from 0.25%. Net charge-offs were $1.0, compared with net recoveries of $0.1 in 2022. Commercial real estate represented approximately 54% of loans; residential real estate was approximately 23%.
Liquidity, debt, and capital: Cash and equivalents were $60.4 and available-for-sale securities were $618.3. The company reported approximately $426.8 of remaining FHLB borrowing capacity. Year-end deposits included $499.4 of estimated uninsured deposits and $517.2 of brokered deposits. Short-term FHLB advances were $338.0; subordinated debentures were $103.9. Shareholders’ equity was $372.0. Company regulatory ratios were 14.4% total risk-based capital, 9.7% CET1, and 8.8% leverage; Civista Bank was reported well capitalized.
Material changes and unusual items
- Deposit growth was concentrated in certificates of deposit, which increased $585.4; noninterest-bearing deposits declined $124.6. Average CD rates rose to 4.12% from 0.95%, and the year-end weighted average rate on CDs was reported at 4.51% in the notes.
- CLF contributed a full year of leasing operations after the 2022 VFG acquisition; VFG was merged into Civista Bank effective August 31, 2023. The company also completed the 2022 Comunibanc acquisition.
- CECL was adopted January 1, 2023. The adoption included a $6.1 after-tax reduction to retained earnings and established an allowance for unfunded commitments; 2022 comparative figures were not restated for the accounting change.
- Available-for-sale securities had $57.7 of gross unrealized losses and $54.6 of net unrealized losses at year-end, primarily attributed to interest-rate movements. Management said it did not intend, and did not expect to be required, to sell the securities before recovery; it identified no credit impairment.
- The filing indicates prior-period corrections to certain 2022 and 2021 disclosures: loan participations were reclassified as secured borrowings, increasing reported loans and borrowings, and the 2022 loan fair value disclosure was corrected. The filing says these revisions did not affect net income. The cover page marks that the financial statements reflect correction of an error; the restatement-related compensation recovery box is not checked.
Outlook, risks, and contingencies
The filing provides no quantified earnings, growth, or margin guidance. Management describes priorities of growing core deposits and community relationships, managing expenses, expanding mortgage activity, and maintaining capital and liquidity. Results remain sensitive to deposit pricing, interest rates, loan demand, and credit conditions.
- Key disclosed risks include real-estate market deterioration and concentration, borrower repayment capacity, higher deposit costs, interest-rate changes, competition, cybersecurity and operational disruption, and reliance on third-party service providers, including a key banking systems vendor.
- Interest-rate modeling showed net portfolio value down approximately 1% under a +200 basis-point scenario and down approximately 3% under a -200 basis-point scenario, relative to the base case.
- Loan commitments and letters of credit totaled approximately $787.8, predominantly variable-rate commitments. Management stated that material losses were not anticipated.
- Management said pending and threatened legal matters were not expected to materially affect financial position, results, or liquidity. The auditor issued unqualified opinions on the financial statements and internal control; internal control was assessed as effective.
Investor facts to verify
- Reconcile the interest-expense disclosures: MD&A states $53.8 for 2023, while the audited income statement reports $57.2; MD&A also gives differing 2022 figures. Confirm the audited statement and related interest-margin calculations.
- Review deposit mix, CD repricing and maturities, uninsured and brokered deposit balances, and the availability and terms of contingent borrowing capacity.
- Track nonaccrual loans, criticized credits, charge-offs, and allowance adequacy, particularly in commercial real estate and commercial/agricultural lending.
- Assess the size and duration of unrealized securities losses and the potential effects of any need to sell securities or use them as collateral.
- Review the CECL adoption impact and the prior-period corrections described in the notes, including their treatment in comparative analysis.