Filing summary
Reporting period: Quarter ended September 30, 2012; financial statements are unaudited. The supplied filing identifies the registrant as First Citizens Banc Corp, not Civista Bancshares, Inc. Verify the company and filing identity before relying on this summary. Unless noted otherwise, amounts below are in millions of dollars.
Financial performance
| Metric | Q3 2012 | Q3 2011 | Nine months 2012 | Nine months 2011 |
|---|---|---|---|---|
| Net interest income | $10.028 | $10.439 | $30.619 | $30.964 |
| Provision for loan losses | $1.700 | $2.000 | $5.565 | $7.700 |
| Noninterest income | $2.627 | $2.664 | $8.333 | $7.858 |
| Noninterest expense | $9.141 | $9.599 | $28.745 | $28.269 |
| Net income | $1.384 | $1.193 | $3.613 | $2.469 |
| Net income available to common shareholders | $1.068 | $0.900 | $2.710 | $1.588 |
| Basic and diluted EPS | $0.14 | $0.12 | $0.35 | $0.21 |
For the first nine months, the net yield on interest-earning assets was 3.94%, up from 3.91%; for Q3 it was 3.87%, down from 3.94%. Nine-month net interest income declined modestly as lower asset yields outweighed reduced funding costs. Net income improved, supported by a lower loan-loss provision and higher noninterest income. The effective tax rate was 22.2% for the nine-month period, versus 13.5%.
Financial position, cash flow and credit
- Balance sheet: Total assets were $1,121.9 at September 30, up 0.8% from year-end 2011. Net loans were $781.2, up 2.2%; total deposits were $915.2, up $14.0. Shareholders’ equity was $104.9, or 9.4% of assets, compared with $102.5, or 9.2%, at year-end.
- Funding and debt: FHLB advances totaled $40.3, down from $50.3 at year-end after a $10.0 advance matured without replacement. Repurchase-agreement funding was $20.5; subordinated debentures were $29.4. The net loan-to-deposit ratio was 85.4%, versus 84.8% at year-end.
- Liquidity and cash flow: Cash and due from financial institutions was $38.9, down from $52.1. Nine-month operating cash flow was $12.5; investing activities used $29.1 and financing activities provided $3.3. The company reported $98.9 of FHLB credit availability, of which $40.3 was outstanding, and $20.0 in correspondent-bank federal-funds borrowing lines.
- Capital: At September 30, total risk-based capital was 15.0%, Tier 1 risk-based capital 13.3%, and leverage 9.4%; all exceeded the stated regulatory minimums for well-capitalized institutions.
- Credit quality: The allowance for loan losses was $21.5, or 2.68% of total loans, versus 2.71% at year-end. Nine-month net charge-offs were $5.333, down from $6.781. Nonaccrual loans rose to $33.7 from $25.8 at year-end; total loans 90 days or more past due were $18.3, compared with $16.5. The filing says nonperforming loans increased by $8.0, principally from higher nonaccrual balances.
- Portfolio concentration: Commercial real estate loans were $405.5, about half of total loans. Management says repayment capacity depends in part on local real-estate and economic conditions and reports no significant concentration to any one industry or customer.
Changes, management commentary and notable items
- Commercial real estate loans increased $33.7 and construction loans $5.6 from year-end; residential mortgage loans decreased $18.2. Management attributed growth to opportunities in larger markets and increased construction-loan demand, and the mortgage decline partly to originating and selling most mortgage loans in the secondary market.
- Management cited regional economic weakness and high unemployment as continuing pressures on some borrowers. It considered the $5.565 nine-month provision appropriate after portfolio analysis, despite increased specific reserves; it also reported fewer net charge-offs.
- Nine-month salaries and benefits increased $1.0, and professional services increased $0.6, including costs associated with staffing, consulting and the Treasury preferred-share auction. Total noninterest expense increased $0.5.
- On July 3, 2012, the U.S. Treasury sold all 23,184 preferred shares it held in the company. On September 5, the company repurchased the Treasury warrant for approximately $564,000. The filing says related TARP compensation and governance standards no longer applied after the Treasury’s preferred-share sale.
- Common dividends of $0.03 per share were paid in February, May and August 2012; no common dividend was paid in the first nine months of 2011. The company also paid preferred dividends.
- Management describes liquidity as conservative and securities as available for sale. It reports no derivatives or trading portfolio and no planned near-term use of derivatives. Its interest-rate sensitivity analysis indicates a modeled decline in net portfolio value under +100 and +200 basis-point scenarios and an increase under a -100 basis-point scenario. The table’s period heading appears inconsistent with the accompanying text; verify the underlying disclosure.
- No formal earnings or financial guidance is provided. Management cautions that interim results are not necessarily indicative of full-year results. Cited risks include economic conditions, interest-rate movements, credit quality, regulation, deposit-insurance costs and changes in clients’ financial condition.
- The filing reports no new material legal proceedings and no material changes to previously disclosed risk factors. Management concluded disclosure controls were effective and reported no material change in internal control over financial reporting.
Most important facts to verify
- Confirm the registrant: the filing text names First Citizens Banc Corp, while the request names Civista Bancshares, Inc.
- Review the rise in nonaccrual loans and past-due balances, especially commercial real estate and residential real estate exposures, and assess collateral and reserve assumptions.
- Assess whether deposit growth, including increased brokered deposits, and available borrowing capacity adequately support loan growth and liquidity needs.
- Reconcile the interest-rate sensitivity table’s stated date with the September 30, 2012 reporting period and validate the scenario assumptions.
- Check the impact of the Treasury warrant repurchase, preferred-stock ownership change, preferred dividends and common-dividend policy on common-shareholder returns and capital.