First Citizens Banc Corp — Q1 2013 Form 10-Q
Entity note: The filing identifies the registrant as First Citizens Banc Corp, not Civista Bancshares, Inc. Confirm that this is the intended filing. Amounts below are in thousands of dollars unless otherwise stated.
Business context and reporting period
Unaudited consolidated results for the three months ended March 31, 2013, compared with Q1 2012; balance-sheet comparisons are to December 31, 2012. The Ohio-based company reports primarily one segment, banking, with commercial, real estate, residential mortgage and consumer lending operations.
Financial results and position
| Metric | Q1 2013 / March 31, 2013 | Comparable period / prior year-end |
|---|---|---|
| Interest and dividend income | $11,287 | $12,118 in Q1 2012 |
| Net interest income | $9,988 | $10,445 in Q1 2012 |
| Provision for loan losses | $500 | $2,400 in Q1 2012 |
| Noninterest income / expense | $3,215 / $10,208 | $2,966 / $9,320 in Q1 2012 |
| Net income | $1,913; $0.21 per common share | $1,293; $0.13 per share in Q1 2012 |
| Operating cash flow | $2,767 | $4,170 in Q1 2012 |
| Total assets | $1,173,686 | $1,136,971 at December 31, 2012 |
| Loans, net of allowance | $787,166 | $795,811 at December 31, 2012 |
| Deposits | $965,816 | $926,389 at December 31, 2012 |
| Shareholders’ equity | $105,053 | $103,980 at December 31, 2012 |
Management reported a net yield of 3.44%, down from 3.74% in Q1 2012. The average-balance schedule separately reports a tax-equivalent net yield of 3.75% versus 4.06%; these figures use different presentation bases. The allowance for loan losses was $19,710, or 2.44% of total loans, versus $19,742, or 2.42%, at year-end. Nonaccrual loans were $28,949, down from $29,855. Net charge-offs were $532, compared with $1,633 in Q1 2012.
Cash and due from financial institutions rose to $90,492 from $46,131 at year-end. Cash flows were $2,767 from operations, $5,839 provided by investing activities and $35,755 provided by financing activities. Deposit growth was the main financing source. Reported borrowings included $40,253 of FHLB advances, $20,076 of repurchase agreements and $29,427 of subordinated debentures. Regulatory capital ratios at March 31 were 15.1% total risk-based, 13.6% Tier 1 risk-based and 9.1% leverage; each exceeded the stated well-capitalized thresholds.
Material changes versus prior periods
- Net income rose $620, or about 48%, chiefly as the loan-loss provision fell by $1,900; net interest income declined $457.
- Interest income declined $831 as lower asset yields more than offset growth in average earning assets; interest expense fell $374.
- Noninterest income increased $249, while noninterest expense increased $888, including higher salary and benefit costs, professional fees and other operating expenses.
- Loans declined $8,645 from year-end, while deposits increased $39,427 and assets grew 3.2%. The net loan-to-deposit ratio fell to 81.5% from 85.9%.
- Comprehensive income was $1,594, including a $319 other comprehensive loss, mainly reflecting a decline in the fair value of available-for-sale securities.
Outlook, risks and unusual items
The filing provides no specific earnings or financial guidance. Management described improving asset quality but cited continuing economic uncertainty, high local unemployment and past-due loans; it maintained a higher level of unallocated loan-loss reserves. Management expects future loan funding to come from deposits, loan repayments, securities maturities or sales, and borrowing capacity. The company reported $130,178 of FHLB credit availability, of which $40,253 was outstanding, plus $20,000 in federal funds borrowing lines.
Key risks include regional economic and borrower credit conditions, interest-rate movements, liquidity, regulation and FDIC assessments. The company reported no derivatives or trading portfolio and did not expect to use derivatives in the near term. Hypothetical net portfolio value increased 7% under a 200-basis-point rate rise and 17% under a 100-basis-point decline at March 31; these are modeled sensitivities, not forecasts. Securities with unrealized losses totaled $406; management attributed the losses primarily to market yields and stated it intended and was able to hold the securities for recovery. Off-balance-sheet commitments to extend credit totaled approximately $162,071; management did not anticipate material losses. No new material legal proceedings or material changes to risk factors were reported.
Important facts for investors to verify
- Confirm the registrant identity against the requested company; the filing is for First Citizens Banc Corp.
- Assess whether lower credit-loss provisioning is sustainable, given $28,949 of nonaccrual loans and ongoing local economic risks.
- Review the drivers and persistence of declining net interest income and margin, alongside higher operating expenses.
- Check the composition and durability of Q1 deposit growth, including seasonally fluctuating tax-processing deposits and public funds.
- Reconcile the cash-flow discussion: the cash-flow statement reports $35,755 of financing cash inflow, while the MD&A contains a conflicting reference to $12,552.
- Evaluate the loan portfolio, securities valuation and modeled interest-rate sensitivity assumptions, including unobservable fair-value inputs.