Civista Bancshares, Inc. Announces Third Quarter 2022 Financial Results

SANDUSKY, Ohio, Oct. 27, 2022 /PRNewswire/ -- Civista Bancshares, Inc. (NASDAQ: CIVB) ("Civista") announced its unaudited financial results for the three and nine month periods ending September 30, 2022.

Civista Bancshares, Inc.

Third quarter and year-to-date 2022 highlights:

• Net income of $11.1 million, or $0.72 per diluted share, for the third quarter of 2022, compared to $9.6 million, or $0.64 per diluted share, for the third quarter of 2021.

• Net income of $27.3 million, or $1.82 per diluted share, compared to $29.6 million, or $1.90 per diluted share, for the nine months ended September 30, 2022 and 2021, respectively.

• Low cost of deposits of 14 basis points and total funding costs of 29 basis points for the quarter.

• Based on the September 30, 2022 market close share price of $20.76, the $0.14 third quarter dividend is equivalent to an annualized yield of 2.70% and a dividend payout ratio of 19.44%.

• 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.

• Negotiated the merger of Vision Financial Group, a leasing company based in Pittsburgh, PA, with and into Civista Bank.  The deal closed in the fourth quarter 2022.

"We are extremely pleased with our third quarter results.  Due to our strong core funding and rising interest rates, our net interest margin increased 60 basis points to 4.03% compared to the previous quarter.  Net interest income increased 25.4% compared to the previous quarter as we primarily benefitted from our first full quarter of earnings from the Henry County Bank acquisition, the rising interest rate environment, and excellent organic loan growth" said Dennis G. Shaffer, CEO and President of Civista.

Results of Operations:

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

Net interest income increased $6.0 million, or 24.6%, for the third quarter of 2022 compared to the same period of 2021.  Interest income increased $6.7 million while interest expense increased $743 thousand.  Both increases were primarily due to rates.  Accretion of PPP fees was $122 thousand during the third quarter 2022 compared to $2.5 million for the same period in 2021. 

Net interest margin increased 41 basis points to 4.03% for the third quarter of 2022, compared to 3.62% for the same period a year ago.  The increase in margin is primarily due to increases in the volume of earning assets and to the yield on earning assets.

The increase in interest income was primarily due to a $254.8 million increase in average earning assets, which led to a $4.6 million increase in interest income.  Additionally, increased interest rates led to a 48 basis point increase in asset yield and a $2.1 million increase in interest income.

Interest expense increased $743 thousand, or 55.0%, for the third quarter of 2022, compared to the same period last year.  The average rate paid on interest-bearing liabilities increased 13 basis points, while average interest-bearing liabilities increased $177.5 million.  The increase in the rate is primarily due to the issuance of $75 million, 3.25%  subordinated debt in November 2021.  The increase in interest rates has not yet translated to significant increases in deposit costs.

Average Balance Analysis
(Unaudited - Dollars in thousands)
	Three Months Ended September 30,
	2022				2021
	Average		Yield/		Average		Yield/
Assets:	balance	Interest	rate *		balance	Interest	rate *
Interest-earning assets:
Loans **	$   2,289,588	$ 27,176	4.71 %		$   2,010,665	$ 22,704	4.48 %
Taxable securities ***	354,597	2,936	3.06 %		264,655	1,423	2.18 %
Non-taxable securities ***	268,327	1,998	3.47 %		217,987	1,555	3.91 %
Interest-bearing deposits in other banks	89,744	423	1.87 %		254,143	102	0.16 %
Total interest-earning assets ***	$   3,002,256	32,533	4.30 %		$   2,747,450	25,784	3.82 %
Noninterest-earning assets:
Cash and due from financial institutions	58,581				33,803
Premises and equipment, net	28,633				22,845
Accrued interest receivable	8,907				7,417
Intangible assets	84,265				84,949
Bank owned life insurance	53,131				46,557
Other assets	48,013				38,189
Less allowance for loan losses	(27,546)				(26,683)
Total Assets	$   3,256,240				$   2,954,527
Liabilities and Shareholders' Equity:
Interest-bearing liabilities:
Demand and savings	$   1,457,112	$      379	0.10 %		$   1,331,032	$      302	0.09 %
Time	280,903	557	0.79 %		257,047	668	1.03 %
Short-term FHLB advances	6,713	48	2.84 %		-	-	0.00 %
Long-term FHLB advances	25,336	133	2.08 %		75,000	194	1.03 %
Subordinated debentures	103,751	975	3.73 %		29,427	182	2.45 %
Repurchase agreements	19,277	2	0.04 %		23,084	5	0.09 %
Total interest-bearing liabilities	$   1,893,092	2,094	0.44 %		$   1,715,590	1,351	0.31 %
Noninterest-bearing deposits	980,999				849,501
Other liabilities	77,015				40,466
Shareholders' equity	305,134				348,970
Total Liabilities and Shareholders' Equity	$   3,256,240				$   2,954,527
Net interest income and interest rate spread		$ 30,439	3.86 %			$ 24,433	3.50 %
Net interest margin ***			4.03 %				3.62 %
*  Average yields are presented on a tax equivalent basis. The tax equivalent effect associated with loans and investments, included in the yields above, was $532 thousand and $414 thousand for the periods ended September 30, 2022 and 2021, respectively.
**  Average balance includes nonaccrual loans
***  Average yield on investments were calculated by adjusting the average balances of taxable and nontaxable securities by unrealized losses of $46.9 million in 2022 and by unrealized gains of $24.5 million in 2021.  These adjustments were also made when calculating the yield on earning assets and the margin.

For the nine-month period ended September 30, 2022 and 2021

Net interest income increased $5.5 million, or 7.7%, compared to the same period in 2021.

Interest income increased $6.3 million, or 8.1%, for the first nine months of 2022.  Average earning assets increased $52.6 million, resulting in an increase in interest income of $6.1 million.  While average yields increased 17 basis points, interest income only increased $152 thousand due to yield.  During the nine-month period, the Bank had average PPP Loans totaling $13.7 million compared to $187.4 million for the same period last year.  For the nine months ended September 30, 2022, these loans had an average yield of 17.82% including the amortization of PPP fees, which increased the margin by 7 basis points.

Interest expense increased $718 thousand, or 14.6%, for the first nine months of 2022 compared to the same period of 2021.  Average rates increased 3 basis points and average interest-bearing liabilities increased $126.8 million, resulting in a $1.4 million increase in interest expense. 

Net interest margin increased 14 basis points to 3.62% for the first nine months of 2022, compared to 3.48% for the same period a year ago.

Average Balance Analysis
(Unaudited - Dollars in thousands)
	Nine Months Ended September 30,
	2022				2021
	Average		Yield/		Average		Yield/
Assets:	balance	Interest	rate *		balance	Interest	rate *
Interest-earning assets:
Loans **	$   2,111,019	$ 70,065	4.44 %		$   2,044,741	$ 68,140	4.46 %
Taxable securities ***	322,262	6,431	2.53 %		214,979	3,928	2.51 %
Non-taxable securities ***	262,790	5,669	3.55 %		211,538	4,599	4.02 %
Interest-bearing deposits in other banks	199,019	1,098	0.74 %		371,204	341	1.20 %
Total interest-earning assets ***	$   2,895,090	83,263	3.88 %		$   2,842,462	77,008	3.71 %
Noninterest-earning assets:
Cash and due from financial institutions	108,220				37,763
Premises and equipment, net	24,429				22,578
Accrued interest receivable	8,025				8,146
Intangible assets	84,268				84,817
Bank owned life insurance	48,965				46,310
Other assets	44,077				37,504
Less allowance for loan losses	(27,168)				(26,288)
Total Assets	$   3,185,906				$   3,053,292
Liabilities and Shareholders' Equity:
Interest-bearing liabilities:
Demand and savings	$   1,414,215	$      860	0.08 %		$   1,297,217	$      979	0.10 %
Time	250,230	1,491	0.80 %		270,139	2,387	1.18 %
Short-term FHLB advances	2,380	49	2.75 %		-	-	0.00 %
Long-term FHLB advances	58,263	515	1.18 %		100,458	968	1.29 %
Subordinated debentures	103,726	2,701	3.48 %		29,427	553	2.51 %
Repurchase agreements	21,910	8	0.05 %		26,695	19	0.10 %
Total interest-bearing liabilities	$   1,850,724	5,624	0.41 %		$   1,723,936	4,906	0.38 %
Noninterest-bearing deposits	936,686				940,123
Other liabilities	76,748				39,952
Shareholders' equity	321,748				349,281
Total Liabilities and Shareholders' Equity	$   3,185,906				$   3,053,292
Net interest income and interest rate spread		$ 77,639	3.48 %			$ 72,102	3.33 %
Net interest margin ***			3.62 %				3.48 %
*  Average yields are presented on a tax equivalent basis. The tax equivalent effect associated with loans and investments, included in the yields above, was $1.5 million and $1.2 million for the periods ended September 30, 2022 and 2021, respectively.
**  Average balance includes nonaccrual loans
***  Average yield on investments were calculated by adjusting the average balances of taxable and nontaxable securities by unrealized losses of $24.7 million in 2022 and by unrealized gains of $23.9 million in 2021.  These adjustments were also made when calculating the yield on earning assets and the margin.

Provision for loan losses was $300 thousand for the third quarter of 2022 while nothing was provided in the third quarter of 2021.  Provision for loan losses was $1.0 million for the first nine months of 2022 compared to $830 thousand for the first nine months of 2021.  The reserve ratio was 1.19% at September 30, 2022 and 1.33% at December 31, 2021.  Loans outstanding at September 30, 2022 include approximately $174.3 million related to the acquisition of Comunibanc, including a $2.8 million credit mark.

For the third quarter of 2022, noninterest income totaled $5.7 million, a decrease of $692 thousand, or 10.8%, compared to the prior year's third quarter.

Noninterest income
(unaudited - dollars in thousands)	Three months ended September 30,
	2022		2021		$ change		% change
Service charges	$    1,885		$    1,519		$       366		24.1 %
Net gain on sale of securities	4		4		-		0.0 %
Net gain/(loss) on equity securities	(133)		50		(183)		-366.0 %
Net gain on sale of loans	637		1,612		(975)		-60.5 %
ATM/Interchange fees	1,394		1,330		64		4.8 %
Wealth management fees	1,208		1,236		(28)		-2.3 %
Bank owned life insurance	255		261		(6)		-2.3 %
Other	484		373		111		29.8 %
Total noninterest income	$    5,734		$    6,426		$      (692)		-10.8 %

Service charges increased due to a $196 thousand increase service charges on deposit accounts and a $130 thousand increase in overdraft fees.

Net loss on equity securities increased as a result of market value decreases.

Net gain on sale of loans decreased primarily because of a decrease in volume of loans sold, which was driven by increased interest rates.  Proceeds from the sale of loans sold totaled $11.7 million and $21.2 million during the three months ended September 30, 2022 and 2021, respectively.

Other income increased as result of an increase in servicing fee income.  Loans serviced total $457.1 million at September 30, 2022 compared to $395.3 million at September 30, 2021.

For the nine months ended September 30, 2022, noninterest income totaled $19.0 million, a decrease of $5.6 million, or 22.8%, compared to the same period in the prior year.

Noninterest income
(unaudited - dollars in thousands)	Nine months ended September 30,
	2022		2021		...