CIVB Civista Bancshares Inc

SANDUSKY, Ohio, July 29, 2024 /PRNewswire/ -- Civista Bancshares, Inc. (NASDAQ: CIVB) ("Civista") announced its unaudited financial results for the three- and six-month periods ended June 30, 2024. 

Second quarter and year-to-date 2024 highlights:

• Earnings per diluted share (EPS) for the quarter were $0.45, higher by $0.04, or 10%, than the prior quarter, and lower by $0.19, or 30%, from the year-ago quarter.
• Net income of $7.1 million increased $0.7 million, or 11%, from the prior quarter and decreased $3.0 million, or 30%, compared to $10.0 million for the second quarter of 2023.
• Cost of deposits of 210 basis points and total funding costs of 261 basis points for the quarter.
• Based on the June 30, 2024 market close share price of $15.49, the $0.16 second quarter dividend is equivalent to an annualized yield of 4.13% and a dividend payout ratio of 35.6%.

CEO Commentary:

"Our second quarter earnings report shows solid loan and revenue growth compared to the last quarter, even with the higher interest expense on deposits", said Dennis G. Shaffer, CEO and President of Civista.

"We kept our credit quality strong while funding new loans, especially in residential real estate and construction. This growth highlights our focus on expanding our lending to meet the rising demand for housing and construction financing. By offering customized loan solutions, we've been able to support the needs of our customers and communities.", Shaffer commented.

Results of Operations:

For the three-month periods ended June 30 and March 31, 2024 and June 30, 2023

Net interest income decreased $0.6 million, or 2.2%, for the second quarter of 2024 compared to the first quarter of 2024.  Interest income increased $0.5 million, which was more than offset by an increase in interest expense of $1.1 million.  Both increases were driven by increases in rates and volume.      

Compared to the same period of 2023 net interest income decreased $3.6 million, or 11.4%, for the second quarter of 2024.  The lower net interest income was primarily driven by an increase in interest expense of $9.6 million, which was partially offset by an increase in interest income of $6.0 million.

The increase in interest income from the comparable prior year quarter was due to a 27-basis point increase in yield as well as a $264.8 million increase in average earning assets.  The increase in volume can be attributed to organic growth.

The increase in interest expense from the comparable prior year quarter was due to the average rate paid on interest-bearing liabilities increasing 104 basis points as well as average interest-bearing liabilities increasing $428.2 million.  The increase in interest-bearing liabilities was primarily in brokered time deposits and short-term borrowings to fund growth.  This shift in the funding mix, as well as rising interest rates, continues to drive the increase in funding costs.  Deposit costs have increased 118  basis points compared to a year ago.   Net interest margin was 3.09% for the second quarter of 2024.  It decreased 13 basis points from the first quarter of 2024, when it was 3.22%, and it decreased 66 basis points from the second quarter of 2023, when it was 3.75%.

For the six-month periods ended June 30, 2024 and 2023

Net interest income decreased $7.8 million, or 12.2%, compared to the same period in 2023.  Net interest margin decreased 71 basis points to 3.16% for the six months of 2024, compared to 3.87% for the same period a year ago.

Interest income increased $13.2 million, or 15.1%, for the first six months of 2024.  Average earning assets increased $251.9 million and average yields increased 35 basis points. The increase in volume can be attributed to organic growth.

Interest expense increased $21.0 million, or 89%, for the first six months of 2024 compared to the same period of 2023.  Average rates increased 121 basis points and average interest-bearing liabilities increased $419.7 million.  

Provision for credit losses for the second quarter of 2024 was $1.8 million compared to $861 thousand for the second quarter of 2023.  Provision for unfunded commitments for the second quarter of 2024 was ($145) thousand compared to $264 thousand for the second quarter of 2023. 

Year-to-date 2024 provision for credit losses was $3.8 million compared to $1.5 million for the same period of 2023.  The year-to-date 2024 provision for unfunded commitments was ($195) thousand compared to $465 thousand for the same period of 2023.

The increases in provision during the second quarter and the first six months of 2024 over the comparable prior year periods were primarily attributable to funding loan growth, as well as a charge-off associated with a discrete fraud event in the second quarter of 2024.    

The reserve ratio as of June 30, 2024 was 1.32%, up from 1.30% at December 31, 2023.

For the second quarter of 2024, noninterest income totaled $10.5 million, an increase of $1.4 million, or 15.2%, compared to the prior year's second quarter.

Service charges for the second quarter of 2024 decreased $343 thousand as we have eliminated our representment fee and reduced our overdraft charges, the effect of which was partially offset by an increase in service fees.    

Net gain/loss on equity securities was the result of a market valuation adjustment.

Lease revenue and residual income for the second quarter of 2024 increased $1.3 million due to increased income from leasing operations.

Tax refund processing fee income is now zero as we exited our relationship with a third-party processor that was in the tax refund processing business.

For the six months ended June 30, 2024, noninterest income totaled $19.0 million, a decrease of $1.2 million, or 5.8%, compared to the same period in the prior year.

Service charges for the first six months of 2024 decreased $676 thousand as we have eliminated our representment fee and reduced our overdraft charges, the effect of which was partially offset by an increase in service fees. 

Net gain/loss on equity securities was the result of a market valuation adjustment.    

Net gain on sale of loans for the first six months of 2024 increased primarily due to an increase in volume of loans sold.

Lease revenue and residual income for the first six months of 2024 increased $956 thousand principally due to increased revenue from leasing operations.

Tax refund processing fee income is now zero as we exited our relationship with a third-party processor that was in the tax refund processing business.

For the second quarter of 2024, noninterest expense totaled $28.6 million, an increase of $866, or 3.1%, compared to the first quarter of 2024, and an increase of $906 thousand, or 3.3%, compared to the prior year's second quarter.

Compensation expense for the second quarter of 2024 increased primarily due to annual merit increases, employee insurance and other payroll related expenses.    

The decrease in occupancy and equipment expense for the second quarter of 2024 was primarily due to a decrease in equipment depreciation from leasing operations as operating leases mature.

The increase in software maintenance expense for the second quarter of 2024 was due to an increase in software maintenance contracts, including investments in digital banking.

Other expenses include expenses for the SBA, CDARS and ICS programs and additional ATM/Debit card losses.

The efficiency ratio was 72.6% for the quarter ended June 30, 2024, compared to 66.0% for the quarter ended June 30, 2023. The increase in the efficiency ratio was driven largely as a result of the decrease in net interest income.

For the six months ended June 30, 2024, noninterest expense totaled $56.2 million, an increase of $1.2 million, or 2.1%, compared to the same period in the prior year.

Compensation expense for the first six months of 2024 increased primarily due to annual merit increases, employee insurance and other payroll related expenses. The year-to-date average full time equivalent (FTE) employees were 538 at June 30, 2024, an increase of 6 FTEs over the same period in 2023. 

The decrease in occupancy and equipment expense for the first six months of 2024 was primarily due to a decrease in equipment depreciation from leasing operations as operating leases mature.

Professional services for the first six months of 2024 decreased primarily due to advisory fees in 2023 for the company's MasterCard contract of $400 thousand. 

The increase in software maintenance expense for the first six months of 2024 was due to an increase in software maintenance contracts, including on new software related to digital banking investments.   

Other expenses include expenses for the SBA, CDARS and ICS programs and ATM/Debit card losses.

The efficiency ratio was 72.5% for the first six months ended June 30, 2024 compared to 63.4% for the first six months ended June 30, 2023. The increase in the efficiency ratio was driven largely as a result of the decrease in net interest income and the reduction in non-interest income related to the exit from the tax refund processing business.

Income Taxes

Civista's effective income tax rate for the second quarter 2024 was 12.6% compared to 14.3% in 2023. The effective income tax rate for the six months ended June 30, 2024 was 12.1% compared to 15.5% for the six months ended June 30, 2023.

Balance Sheet

Total assets increased $131.7 million, or 3.4%, from March 31, 2024 to June 30, 2024, primarily due to growth in the loan portfolio.

Total assets increased $150.5 million, or 3.9%, from December 31, 2023 to June 30, 2024, and $303.8 million, or 8.2% from June 30, 2023 to June 30, 2024.

End of period loans and leases:

Loan and lease balances increased $153.3 million, or 5.4% since December 31, 2023.  Commercial Real Estate loans continued to grow due to consistent demand in the Non-owner Occupied category, especially in multi-family in the major Ohio metropolitan areas.  Real Estate Construction loans have increased with consistent demand for more projects across our footprint.  The undrawn construction availability continues to be near all-time highs.  Residential Real Estate loans have grown primarily due to more home construction loans and continued new production in our Community Reinvestment Act ("CRA") product. 

Deposits

Total deposits decreased $3.1 million or 0.1%, from March 31, 2024 to June 30, 2024.

Total deposits increased $34.8 million or 1.2%, from June 30, 2023 to June 30, 2024 and decreased $7.4 million, or 0.2%, from December 31, 2023 to June 30, 2024.

The $80.5 million decrease in noninterest-bearing demand deposits from December 31, 2023 was primarily due to a $49.0 million decrease in noninterest-bearing business accounts and a $24.8 million decrease in noninterest-bearing accounts related to the former tax refund processing program. 

The $39.6 million decrease from December 31, 2023 in interest-bearing demand deposits was primarily due to a $17.2 million decrease in interest-bearing personal accounts, a $8.5 million decrease in Jumbo NOW accounts, and a $5.8 million decrease in interest-bearing business accounts.

The $77.2 million increase from December 31, 2023 in savings and money market was primarily due to a $54.1 million increase in brokered money market accounts, and a $6.8 million increase in business money market accounts.   

The increase in time certificates from December 31, 2023 was primarily due to a $17.3 million increase in Jumbo time certificates, and a $18.3 million increase in retail time certificates, partially offset by a $19.3 million decrease in brokered time deposits.    

FHLB overnight advances totaled $500.5 million on June 30, 2024, up from $338.0 million on December 31, 2023.  FHLB term advances totaled $1.8 million on June 30, 2024, down from $2.4 million on December 31, 2023.

Stock Repurchase Program

On April 18, 2024, Civista announced a new common share repurchase program pursuant to which the Company was authorized to repurchase a maximum aggregate value of $13,500,000 of its outstanding common shares through April 15, 2025. As of June 30, 2024, no common shares had been repurchased under this common share repurchase program. During January 2024, a total of 8,262 shares (valued at $18.38 per share) were surrendered by employees to satisfy tax obligations stemming from vesting of restricted shares.

Shareholders' Equity

Total shareholders' equity at June 30, 2024 increased $3.8 million, or 1.0% from March 31, 2024, primarily due to a $4.5 million, or 2.4% increase in retained earnings, partially offset by a $0.6 million, or 1.1%, increase in accumulated other comprehensive loss.

Total shareholders' equity at June 30, 2024 increased $1.8 million from December 31, 2023, primarily due to an $8.4 million increase in retained earnings, partially offset by an additional accumulated other comprehensive loss of $6.8 million.

Total shareholders' equity at June 30, 2024 increased $23.9 million, or 6.8%, from June 30, 2023, due to increased retained earnings of $23.4 million, or 13.9%, and an additional accumulated other comprehensive loss of $1.4 million.

Asset Quality

Civista recorded net charge-offs of $1.1 million for the first six months of 2024 compared to net charge-offs of $36 thousand for the same period of 2023.  The allowance for credit losses to loans ratio was 1.32% at June 30, 2024 and 1.30% at December 31, 2023.  The increase in charge-offs was partially attributable to a $500 thousand charge-off on a commercial and industrial loan related to a fraud.  

Non-performing assets at June 30, 2024 were $17.1 million, a 13%, or $1.9 million increase from December 31, 2023. The non-performing assets to total assets ratio was 0.37% at June 30, 2024 and 0.39% at December 31, 2023, a decrease of 0.02%.  The allowance for credit losses to non-performing loans was 233.47% at June 30, 2024, a decrease from 245.66% at December 31, 2023 and 327.05% at June 30, 2023.

Non-performing Assets:

Conference Call and Webcast

Civista Bancshares, Inc. will host a conference call to discuss the Company's financial results for the second quarter of 2024 at 1:00 p.m. ET on Monday, July 29, 2024.  Interested parties can access the live webcast of the conference call through the Investor Relations section of the Company's website, www.civb.com.  Participants can also listen to the conference call by dialing 800-836-8184 and ask to be joined into the Civista Bancshares, Inc. second quarter 2024 earnings call.  Please log in or dial in at least 10 minutes prior to the start time to ensure a connection.

An archive of the webcast will be available for one year on the Investor Relations section of the Company's website (www.civb.com).

Forward Looking Statements

This press release may contain forward-looking statements regarding the financial performance, business prospects, growth and operating strategies of Civista.  For these statements, Civista claims the protections of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.   Statements in this press release should be considered in conjunction with the other information available about Civista, including the information in the filings we make with the Securities and Exchange Commission.  Forward-looking statements provide current expectations or forecasts of future events and are not guarantees of future performance.  The forward-looking statements are based on management's expectations and are subject to a number of risks and uncertainties.  We have tried, wherever possible, to identify such statements by using words such as "anticipate," "estimate," "project," "intend," "plan," "believe," "will" and similar expressions in connection with any discussion of future operating or financial performance. Although management believes that the expectations reflected in such forward-looking statements are reasonable, actual results may differ materially from those expressed or implied in such statements.  Risks and uncertainties that could cause actual results to differ materially include risk factors relating to the banking industry and the other factors detailed from time to time in Civista' reports filed with the Securities and Exchange Commission, including those described in "Item 1A Risk Factors" of Part I of Civista's Annual Report on Form 10-K for the fiscal year ended December 31, 2023, and any additional risks identified in the Company's subsequent Form 10-Q's.  Undue reliance should not be placed on the forward-looking statements, which speak only as of the date hereof.  Civista does not undertake, and specifically disclaims any obligation, to update any forward-looking statement to reflect the events or circumstances after the date on which the forward-looking statement is made, or reflect the occurrence of unanticipated events, except to the extent required by law.

Civista Bancshares, Inc., is a $4.0 billion financial holding company headquartered in Sandusky, Ohio.  Its primary subsidiary, Civista Bank, was founded in 1884 and provides full-service banking, commercial lending, mortgage, and wealth management services.  Today, Civista Bank operates 43 locations across Ohio, Southeastern Indiana and Northern Kentucky.  Civista Bank also offers commercial equipment leasing services for businesses nationwide through its Civista Leasing and Finance Division (formerly Vision Financial Group, Inc.), headquartered in Pittsburgh, Pennsylvania.  Civista Bancshares' common shares are traded on the NASDAQ Capital Market under the symbol "CIVB".  Learn more at www.civb.com.

Civista Bancshares, Inc.
Financial Highlights
(Unaudited, dollars in thousands, except share and per share amounts)