CIVB Civista Bancshares Inc

SANDUSKY, Ohio, Feb. 8, 2024 /PRNewswire/ -- Civista Bancshares, Inc. (NASDAQ:CIVB) ("Civista") announced its unaudited financial results for the three and twelve month periods ending December 31, 2023. 

Fourth quarter and year-to-date 2023 highlights:

• Net income of $9.7 million, or $0.62 per diluted share, for the fourth quarter of 2023, compared to $12.1 million, or $0.77 per diluted share, for the fourth quarter of 2022.
• Net income of $43.0 million, or $2.73 per diluted share, compared to $39.4 million, or $2.60 per diluted share, for the twelve months ended December 31, 2023 and 2022, respectively.
• Cost of deposits of 179 basis points and total funding costs of 219 basis points for the quarter.
• Based on the December 29, 2023 market close share price of $18.44, the $0.16 fourth quarter dividend is equivalent to an annualized yield of 3.47% and a dividend payout ratio of 25.81%.

"Overall, another solid quarter as we grew loans by $45.8 million.  We also increased noninterest income and decreased our noninterest expense when compared to the linked quarter.  This helped offset continued net interest margin pressure and allowed us to beat analyst's consensus by four cents for the quarter" said Dennis G. Shaffer, CEO and President of Civista.

Results of Operations:

For the three-month periods ended December 31, 2023 and 2022

Net interest income decreased $2.5 million, or 7.7%, for the fourth quarter of 2023 compared to the same period of 2022.  Interest income increased $9.2 million while interest expense increased $11.7 million.  The increase in interest income was driven by both increases in rates and increases in volume.  The increase in interest expense was driven by rate and volume as well, but also by a shift in the mix of funding sources.       

Net interest margin decreased 57 basis points to 3.44% for the fourth quarter of 2023, compared to 4.01% for the same period a year ago.

The increase in interest income was due to increases in both yield and in asset volume.  The 68 basis point increase in yield led to a $5.6 million increase in interest income, while the $249.7 million increase in average earning assets led to a $3.6 million increase in interest income.  The increase in volume can be attributed to organic growth.

Interest expense increased $11.7 million, or 171.4%, for the fourth quarter of 2023, compared to the same period last year.  The average rate paid on interest-bearing liabilities increased 167 basis points, while average interest-bearing liabilities increased $329.2 million.  The increase in interest-bearing liabilities was primarily in brokered time deposits and short-term FHLB borrowings to fund growth.  The increase in funding cost, as well as the shift in the funding mix, are driving the increase in interest.   

For the twelve-month periods ended December 31, 2023 and 2022

Net interest income increased $15.3 million, or 13.9%, compared to the same period in 2022.

Interest income increased $56.6 million, or 44.8%, for the twelve months of 2023.  Average earning assets increased $351.6 million, resulting in an increase in interest income of $23.2 million.  Average yields increased 119 basis points, resulting in an increase in interest income of $33.4 million.  The increase in volume can be attributed to both organic growth and to the acquisitions during 2022 of Comunibanc Corp ("Comunibanc") and Civista Leasing and Financing ("CLF"), formerly known as Vision Financial group ("VFG").  

Interest expense increased $41.3 million, or 258.8%, for the twelve months of 2023 compared to the same period of 2022.  Average rates increased 159 basis points compared to 2022, resulting in $26.3 million of the increase in interest expense.  Average interest-bearing liabilities increased $399.0 million, resulting in $15.0 million of the increase in interest expense.    

Net interest margin increased 5 basis points to 3.70% for the twelve months of 2023, compared to 3.65% for the same period a year ago.  

Provision for credit losses for the fourth quarter of 2023 was $2.3 million compared to $752 thousand for the fourth quarter of 2022, primarily related to loan and lease growth.

On January 1, 2023, Civista adopted CECL, which resulted in an adjustment to the reserve of approximately $4.3 million.  For the twelve months ended December 31, 2023, provision for credit losses was $4.4 million, compared to $1.8 million for the same period of 2022.  The reserve ratio increased to 1.30% as of December 31, 2023 from 1.08% at December 31, 2022.

The adoption of CECL also resulted in an additional $3.4 million reserve for unfunded commitments, which is reflected as a liability in the consolidated financial statements.  Provision for unfunded commitments for the fourth quarter of 2023 was ($80) thousand and $515 thousand for the twelve months ended December 31, 2023.  There was no provision for unfunded commitments during the twelve months of 2022.

For the fourth quarter of 2023, noninterest income totaled $8.8million, a decrease of $1.2 million, or 12.3%, compared to the prior year's fourth quarter. 

The decrease in service charge income of $321 thousand is primarily made up of a $249 thousand decrease in other business service charges related to our tax processing program as well as a $76 thousand decrease in consumer overdraft charges.

The net gain on sale of loans and leases decreased by $376 thousand compared to the same period last year.  CLF generated a $579 thousand gain on the sale of $13.3 million in commercial loans and leases compared to a $923 thousand gain on the sale of $28 million for the same period last year.  The sale of mortgage loans generated a $296 thousand gain on the sale of $14.3 million compared to a $328 thousand gain on the sale of $20.2 million for the same period in 2022.

Lease revenue and residual income contributed $1.4 million to noninterest income compared to $2.3 million for the same period of 2022, a decrease of $874 thousand.  The decrease in lease revenue and residual income is attributable to a decrease in operating lease revenue.

Swap fees increased $228 thousand for the three months ended December 31, 2023 compared to the same period of 2022.  The increase was due to an increase in volume driven by the rate environment.

For the twelve months ended December 31, 2023, noninterest income totaled $37.2 million, an increase of $8.1 million, or 27.8%, compared to the same period in the prior year. 

The net gain on sale of loans and leases decreased by $489 thousand compared to the same period last year.  CLF generated a $1.7 million gain on the sale of $46.2 million in commercial loans and leases as compared to a $923 thousand gain on the sale of $28 million during the fourth quarter of 2022.  The sale of mortgage loans generated a $1.2 million gain on the sale of $56.8 million, compared to a $2.473 million gain on $127.8 million in volume for the same period of 2022. 

Lease revenue and residual income increased $5.3 million due to the acquisition of CLF during the fourth quarter of 2022.

Swap fees increased $426 thousand compared to the same period of 2022.  The increase was due to an increase in volume driven by the rate environment.

Other income increased as result of a $1.5 million fee collected associated with the renewal of the company's contract with MasterCard.  Other income also increased as result of $629 thousand in other noninterest income generated by the acquisition of Civista Leasing and Finance primarily attributable to interim rent.

For the fourth quarter of 2023, noninterest expense totaled $25.3 million, a decrease of $2.0 million, or 7.3%, compared to the prior year's fourth quarter. 

Compensation expense decreased primarily due to reduction in expense accruals related to incentives, success sharing and SERP.

The decrease in occupancy and equipment expense is primarily due to a $192 thousand decrease in equipment depreciation and expense related to CLF.  Additionally,  equipment expense decreased $255 thousand due to a one-time adjustment to equipment expense in 2022.

Taxes and assessments increased due to an increase in the FDIC assessment rate charged.

Professional services decreased during the fourth quarter of 2023 compared to 2022 due to $635 thousand in acquisitions-related consulting and legal and audit fees expensed in 2022.

Marketing expense decreased $634 thousand compared to the same period in 2022 due to nonrecurring advertising and marketing efforts in new markets due to the acquisitions and the new branch opening in 2022.

The efficiency ratio was 64.1% for the quarter ended December 31, 2023, compared to 63.2% for the quarter ended December 31, 2022.  The change in the efficiency ratio is primarily due to a decrease in noninterest income and in net interest income, partially offset by a decrease noninterest expense.

Civista's effective income tax rate for the fourth quarter 2023 was 14.1% compared to 16.7% in 2022.

For the twelve months ended December 31, 2023, noninterest expense totaled $107.6 million, an increase of $17.1 million, or 18.9%, compared to the same period in the prior year. 

Compensation expense increased primarily due to $6.2 million of expense related to the acquisition of CLF.  Other increases related to salaries were a result of annual merit increases and add-to-staff positions as well as increases in employee insurance.  The year-to-date average full time equivalent (FTE) employees were 531 at December 31, 2023, an increase of 50 FTEs over the same period in 2022.

The increase in occupancy and equipment expense is primarily due to a $6.1 million increase in equipment depreciation related to the acquisition of CLF.

Amortization of intangible assets increased $283 thousand in 2023 compared to 2022 related to the core deposit intangible associated with the acquisition of Comunibanc.

Software expense increased $734 thousand, primarily due to a $364 thousand increase attributable to the digital banking platform in 2023.  Additionally, new software platforms, as well as other increases related to converting systems and regular increases in monthly software fees, led to an increase of $110 thousand.

The increase in other operating expense is primarily due to a $467 thousand increase in bad check loss expense, a $313 thousand provision for credit losses on unfunded commitments, and additional expenses related to CLF of $422 thousand.  Business promotion, dues and subscriptions, travel & lodging and donations all increased as well. 

The efficiency ratio was 65.2% for the twelve months ended December 31, 2023 compared to 64.0% for the twelve months ended December 31, 2022.  The change in the efficiency ratio is primarily due to an increase in noninterest expense, partially offset by increases in net interest income and noninterest income.

Civista's effective income tax rate was 15.1% for the twelve months ended December 31, 2023 and 16.2% for the twelve months ended December 31, 2022.   

Balance Sheet

Total assets increased $222.0 million, or 6.1%, from December 31, 2022 to December 31, 2023, primarily due to growth in the loan portfolio.         

Loan and lease balances increased $213.4 million, or 8.1% since December 31, 2022 and $106.8 million, or 3.9% in the fourth quarter.  Commercial growth is predominantly due to loan production from the leasing division and an increase in new commercial customers.  The revolving line of credit balances in our portfolio continue to be less than forty percent advanced.  Commercial Real Estate continued to grow due to consistent demand in the Non-owner Occupied category, especially in the multi-family area in the major Ohio metropolitan areas.  Real Estate Construction has increased with consistent demand for more projects across the state of Ohio.  The undrawn construction availability continues to be near all-time highs.  Residential Real Estate has grown with continued new production in our Community Reinvestment Act ("CRA") product, more home construction loans, and more on balance sheet ARM products in this continued higher rate environment.  At December 31, 2022, certain participated loan agreements contained restrictive language that precluded sales accounting treatment.  During the third quarter of 2023, these agreements were amended with language that met derecognition conditions, signed and returned by our customers, thus qualifying for sales accounting treatment.  The balances of such agreements were revised and accounted for as secured borrowings as of December 31, 2022.  In addition, interest income and expense were also revised during the time derecognition conditions were not met. 

Deposits

Total deposits increased $365.0 million, or 13.9%, from December 31, 2022 to December 31, 2023. 

The decrease in noninterest-bearing demand of $124.6 million was primarily due to a $76.8 million decrease in noninterest-bearing business accounts and $35.2 million noninterest-bearing personal accounts.  The $78.4 million decrease in interest-bearing demand deposits was primarily due to a $41.6 million decrease in interest-bearing public fund accounts, an $18.6 million decrease in interest-bearing business accounts and a $10.3 million decrease in Jumbo NOW accounts.  The decrease in savings and money market was primarily due to a $73.5 million decrease in statement savings, an $15.1 million decrease in corporate savings, a $36.7 million decrease in personal money markets, partially offset by a $58.9 million increase in brokered money market accounts, a $41.7 million increase in business money market accounts and a $12.6 million increase in public money market accounts.  The increase in time certificates was primarily due to a $454.5 million increase in brokered time deposits.  In addition, Jumbo time certificates increased $86.1 million and retail time certificates increased $44.8 million.  

FHLB overnight advances totaled $338.0 million on December 31, 2023, down from $393.7 million on December 31, 2022.  FHLB term advances totaled $2.4 million on December 31, 2023, down from $3.6 million on December 31, 2022.

Stock Repurchase Program

During the twelve months of 2023, Civista repurchased 84,230 shares for $1.5 million at a weighted average price of $17.77 per share.  We have approximately $12.0 million remaining of the current $13.5 million repurchase authorization.  The current repurchase plan will expire in May 2024.  In January, Civista liquidated 5,620 shares held by employees, at $21.52 per share, to satisfy tax obligations stemming from vesting of restricted shares.

Shareholders' Equity

Total shareholders' equity increased $37.2 million from December 31, 2022 to December 31, 2023, primarily due to a $27.3 million increase in retained earnings and to a $10.5 million decrease in accumulated other comprehensive loss.     

Asset Quality

Civista recorded net losses of $979 thousand for the twelve months of 2023 compared to net recoveries of $118 thousand for the same period of 2022.  The allowance for credit losses to loans ratio was 1.30% at December 31, 2023 and 1.08% at December 31, 2022.     

Non-performing assets at December 31, 2023 were $15.1 million, a 38.7% increase from December 31, 2022.  The non-performing assets to assets ratio was 0.30% at December 31, 2023 and 0.31% at December 31, 2022.  The allowance for credit losses to non-performing loans decreased from 261.45% at December 31, 2022 to 245.67% at December 31, 2023.  

Conference Call and Webcast
Civista Bancshares, Inc. will also host a conference call to discuss the Company's financial results for the fourth quarter of 2023 at 1:00 p.m. ET on Thursday, February 8, 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 join the Civista Bancshares, Inc. fourth quarter 2023 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, 2022, 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 $3.9 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 Leasing & Finance, a division of Civista Bank, offers commercial equipment leasing services for businesses nationwide.  Civista Bancshares' common shares are traded on the NASDAQ Capital Market under the symbol "CIVB".  Learn more at www.civb.com.