CIVB - Civista Bancshares Inc. Announces Second Quarter 2022 Financial Results

PR Newswire

SANDUSKY, Ohio , July 28, 2022 /PRNewswire/ -- Civista Bancshares, Inc. (NASDAQ:CIVB) ("Civista") announced its unaudited financial results for the three and six month periods ending June 30 , 2022.

Second quarter and year-to-date 2022 highlights:

• Net income of $7.7 million , or $0.53 per diluted share, for the second quarter of 2022, compared to $9.2 million , or $0.59 per diluted share, for the second quarter of 2021.
• Net income of $16.2 million , or $1.10 per diluted share, compared to $19.9 million , or $1.27 per diluted share, for the six months ended June 30, 2022 and 2021, respectively.
• COVID–19 loan deferrals decreased to $2.7 million , or 0.13% of total loans at period end, compared to 21.3% at the June 30, 2020 high point.
• Paycheck Protection Program loans are down to $3.7 million .
• Based on the June 30, 2022 market close share price of $21.26 , the $0.14 second quarter dividend is equivalent to an annualized yield of 2.63% and a dividend payout ratio of 26.42%.
• On July 1, 2022 , we consummated the merger of Comunibanc Corp. with and into Civista and Henry County Bank, a wholly owned subsidiary of Comunibanc, with and into Civista Bank.
• On June 27, 2022 we opened a branch office in Gahanna, Ohio .

"We turned in another solid Civista quarter highlighted by loan growth.  We closed the merger of Comunibanc Corp. and The Henry County Bank ("HCB") into Civista Bancshares, Inc. and Civista Bank effective July 1st and did incur some additional expenses related to the acquisition that negatively impacted our noninterest expense.  This had an adverse impact to our earnings of approximately $0.02 per share for the quarter.  The integration and conversion of HCB's systems remain on schedule to be concluded in late October.  HCB's employees are working hard with our folks toward those goals.  We welcome these new employees to the Civista family" said Dennis G. Shaffer , CEO and President of Civista.

Results of Operations :

For the three-month period ended June 30, 2022 and 2021

Net interest income increased $427 thousand , or 1.8%, for the second quarter of 2022 compared to the same period of 2021, due to an increase in interest income partially offset by an increase in interest expense.  Accretion of PPP fees was $423 thousand during the second quarter 2022 compared to $2.8 million for the same period in 2021.

Net interest margin decreased 10 basis points to 3.43% for the second quarter of 2022, compared to 3.53% for the same period a year ago.  The decrease in margin is primarily due to the reduction in PPP fees in 2022.

The decrease in interest income was due to a $2.9 million decrease in PPP interest and fees and a $200 thousand decrease in accretion income related to loan portfolios acquired through acquisitions.  Average earning assets increased $90.2 million , partially offset by a 10 basis point decrease in the yield.  The decrease in yield is primarily due to the reduction in PPP fees in 2022.  During the three-month period, the Bank had average PPP Loans totaling $10.3 million compared to $207.5 million for the same period last year.  For the three months ended June 30, 2022 , these loans had an average yield of 17.52% including the amortization of PPP fees, which increased the margin by 9 basis points.

Interest expense increased $139 thousand , or 8.4%, for the second quarter of 2022, compared to the same period last year.  The average rate paid on interest-bearing liabilities increased 1 basis point, while average interest-bearing liabilities increased $92.2 million .  The increase in the rate is primarily due to the addition of the subordinated debt, partially offset by lower deposit costs.  The increase in market rates for us, and the industry, have not yet translated to significant increases in deposit costs.

For the six-month period ended June 30, 2022 and 2021

Net interest income decreased $469 thousand , or 1.0%, compared to the same period in 2021.

Interest income decreased $494 thousand , or 1.0%, for the first six months of 2022.  Although average earning assets decreased $50.1 million , interest income increased $1.5 million due to a shift in the asset mix away from cash toward investment securities.  Average yields decreased 1 basis point which resulted in a $2.0 million decrease in interest income.  During the six-month period, the Bank had average PPP Loans totaling $19.5 million compared to $228.1 million for the same period last year.  For the six months ended June 30, 2022 , these loans had an average yield of 17.58% including the amortization of PPP fees, which increased the margin by 9 basis points.

Interest expense decreased $25 thousand , or 0.7%, for the first six months of 2022 compared to the same period of 2021.  Average rates decreased 2 basis points, resulting in a $799 thousand decrease in interest expense.  Average interest-bearing liabilities increased $101.0 million which led to an increase in interest expense of $774 thousand .

Net interest margin decreased 1 basis point to 3.40% for the first six months of 2022, compared to 3.41% for the same period a year ago.

Provision for loan losses was $400 thousand for the second quarter of 2022 while nothing was provided in the second quarter of 2021.  Provision for loan losses was $700 thousand for the first six months of 2022 compared to $830 thousand for the first six months of 2021.  The reserve ratio was 1.33% at both June 30, 2022 and December 31, 2021 .

For the second quarter of 2022, noninterest income totaled $5.6 million , a decrease of $3.4 million , or 37.6%, compared to the prior year's second quarter.

Service charges increased due to a $222 thousand increase in overdraft fees.

Net gain on sale of securities decreased due to the $1.8 million gain on the sale of Visa Class B shares in 2021.

Net gain on sale of loans decreased primarily because of a decrease in volume of loans sold, which was primarily driven by increased market rates.  Proceeds from the sale of loans sold totaled $35.5 million and $69.2 million during the three months ended June 30, 2022 and 2021, respectively.

Other income decreased as result of an increase in insurance loss reserves from Civista's reinsurance subsidiary.

For the six months ended June 30, 2022 , noninterest income totaled $13.3 million , a decrease of $4.9 million , or 27.1%, compared to the same period in the prior year.

Service charges increased due to a $445 thousand increase overdraft fees and a $101 thousand increase in service charges.

Net gain on sale of securities decreased due to the $1.8 million gain on the sale of Visa Class B shares in 2021.

Net gain on sale of loans decreased primarily because of a decrease in volume of loans sold, which was primarily driven by increased market rates.  Proceeds from the sale of loans sold totaled $73.7 million and $147.8 million during the six months ended June 30, 2022 and 2021, respectively.

Wealth management fees increased due to an increase in the average rate earned on the assets in 2022.

Other income decreased as result of an increase in insurance loss reserves from Civista's reinsurance subsidiary.

For the second quarter of 2022, noninterest expense totaled $20.4 million , a decrease of $1.9 million , or 8.5%, compared to the prior year's second quarter.

Compensation expense increased primarily due to annual salary increases, which occur every year in April, and commission expense.  Salaries, Overtime and Temp fees increased $348.7 thousand , or 5.2%.  Commissions increased $141.2 thousand , or 7.8%.

Taxes and assessments increased as Franchise tax expense increased due to an increase in equity capital, which is the basis of the Ohio Financial Institutions tax.  This was partially offset by a decrease in FDIC assessments due to lower assessment multipliers charged to Civista.

Professional services primarily increased due to a $236 thousand increase in consulting fees and a $118 thousand increase in merger related legal and audit.

The quarter-over-quarter decrease in ATM/Interchange expense is primarily the result of a $94 thousand decrease in billings from MasterCard.

The increase in Software maintenance expense is due to both increases in software maintenance contracts as well as the implementation of the new digital banking platform.

The decrease in other operating expense is primarily due to a prepayment fee paid in the second quarter of 2021 related to the prepayment of an FHLB long-term advance.

The efficiency ratio was 67.0% for the quarter ended June 30, 2022 compared to 66.9% for the quarter ended June 30 , 2021.  The change in the efficiency ratio is primarily due to a decrease in noninterest interest income.

Civista's effective income tax rate for the second quarter 2022 was 15.6% compared to 13.6% in 2021.

For the six months ended June 30, 2022 , noninterest expense totaled $40.6 million , a decrease of $815 thousand , or 2.0%, compared to the same period in the prior year.

The increase in compensation expense was due to increased payroll, 401k expenses, payroll taxes and commission and incentive-based costs.  Payroll and payroll related expenses increased due to annual pay increases.

Contracted data processing fees increased due to merger related system deconversion fees of $234 , offset by a decrease in computer processing fees.

The decrease in ATM/Interchange expense is the result of a decrease in billings from MasterCard 2022 and lower processing fees.

Professional services primarily increased due to a $428 thousand increase in merger related legal and audit and a $240 thousand increase in consulting fees.

The increase in software maintenance expense is due to both increases in software maintenance contracts as well as the implementation of the new digital banking platform.

The decrease in other expense is due to the 2021 prepayment penalty of $3.7 million related to the early payoff of an FHLB long-term advance.  This was partially offset by a $393 thousand credit valuation adjustment to mortgage servicing rights.

The efficiency ratio was 66.1% for the six months ended June 30, 2022 compared to 62.1% for the six months ended June 30 , 2021.  The change in the efficiency ratio is primarily due to a decrease in noninterest interest income.

Civista's effective income tax rate for the first six months of 2022 was 15.5% compared to 15.6% in same period in 2021.

Balance Sheet

Total assets increased $26.2 million , or 0.9%, from December 31, 2021 to June 30, 2022 , primarily due to an increase in the loan portfolio of $66.3 million , or 3.3%.  This increase was partially offset by a $31.0 million , or 11.7%, decrease in cash and a $29.1 million , or 5.2%, decrease in the investment portfolio.

Loan balances increased $66.3 million , or 3.3% in the first half of 2022, including the PPP balance decline.  Removing the effect of the PPP loans, the loan portfolio increased $105.8 million or 5.4%.  Commercial Real Estate continued to grow due to consistent demand in both the Non-owner Occupied and Owner Occupied categories.  Residential Real Estate has grown due to residential construction loans rolling into the portfolio as well as demand for Jumbo Loans and for our Community View CRA product.  Commercial and Agriculture loans continue to grow as we successfully onboard new clients aided by our upgrade in both our Treasury Management suite of products and digital banking.  Real Estate Construction continues to increase as the construction season is at its peak in the Midwest.  Construction demand remains strong and construction availability continues to be at all-time highs.

Paycheck Protection Program

In total, we processed over 3,600 loans totaling $399.4 million of PPP loans.  Of the total PPP loans we have originated, $395.7 million have been forgiven or have paid off.  We recognized $424 thousand of PPP fees in income during the quarter and $1.6 million of PPP fees in income during the six months ended June 30 , 2022.  As of June 30, 2022 , $160 thousand of unearned PPP fees remain.

Deposits

Total deposits increased $38.8 million , or 1.6%, from December 31, 2021 to June 30 , 2022.

The increase in noninterest-bearing demand of $53.6 million was primarily due to a $39.5 million increase in balances related to the tax refund processing program, which is a seasonal increase.  Public fund demand accounts also increased $14.3 million .  Interest-bearing demand deposits decreased due to a $29.7 million decrease in business demand accounts, partially offset by a $20.0 million increase in public fund demand accounts.  The increase in savings and money market was primarily due to a $27.9 million increase in statement savings, a $16.0 million increase in personal money markets, and a $9.4 million increase in public fund money markets.  These increases were partially offset by decreases of $19.0 million in brokered money market accounts and $19.2 million in business money market accounts.  Time deposits, both under $100 thousand and over $100 thousand , have decreased.

FHLB advances totaled $75.0 million at June 30, 2022 , unchanged from December 31, 2021 .

Stock Repurchase Program

During the first six months of 2022, Civista repurchased 448,199 shares for $10.5 million at a weighted average price of $23.40 per share, including 392,847 shares repurchased under the previous authorization for $9.3 million .  We have approximately $12.3 million remaining of the current $13.5 million repurchase authorization, which was approved in April 2022.  In addition, Civista liquidated 5,403 shares held by employees, at $24.66 per share, to satisfy tax obligations stemming from vesting of restricted shares.

Shareholders' Equity

Total shareholders' equity decreased $53.2 million from December 31, 2021 to June 30, 2022 , primarily due to a $55.1 million decrease in accumulated other comprehensive income(loss).  The decrease in other comprehensive income(loss) does not impact our capital adequacy ratios. Shareholders' equity also decreased due to a $10.6 million repurchase of treasury shares.  Retained earnings increased $12.0 million .

Asset Quality

Civista recorded net recoveries of $94 thousand for the six months of 2022 compared to net recoveries of $399 thousand for the same period of 2021.  The allowance for loan losses to loans was 1.33% at June 30, 2022 and 1.33% at December 31 , 2021.

Non-performing assets at June 30, 2022 were $4.8 million , a 10.8% decrease from December 31, 2021 . The non-performing assets to assets ratio decreased to 0.16% from 0.18% at December 31 , 2021.  The allowance for loan losses to non-performing loans increased to 572.78% from 496.10% at December 31 , 2021.

Conference Call and Webcast
Civista Bancshares, Inc. will also host a conference call to discuss the Company's financial results for the second quarter of 2022 at 1:00 p.m. ET on Thursday , July 28, 2022.  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 855-238-2712 and ask to be joined into the Civista Bancshares, Inc. second quarter 2022 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, 2021 , 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 $3.0 billion financial holding company headquartered in Sandusky, Ohio . Prior to the merger, Civista's banking subsidiary, Civista Bank, operated 36 locations in Northern, Central and Southwestern Ohio , Southeastern Indiana and Northern Kentucky.  Upon completion of the merger, Civista will be an approximately $3.3 billion financial holding company, and Civista Bank will operate an additional seven locations in Northwestern Ohio.  Additional information on Civista may be accessed at www.civb.com , but information at that website is not part of this press release nor is it part of any filing by Civista with the Securities and Exchange Commission.  Civista's common shares are traded on the NASDAQ Capital Market under the symbol "CIVB".