Civista Bancshares Inc (CIVB) Reports Mixed Results Amidst Interest Margin Pressure
Net Interest Income: Decreased by $2.5 million or 7.7% in Q4 2023 compared to Q4 2022.
Loan Growth: Loans increased by $45.8 million in Q4 2023, contributing to a $213.4 million growth year-over-year.
Noninterest Income: Decreased by $1.2 million or 12.3% in Q4 2023 compared to the same period last year.
Noninterest Expense: Decreased by $2.0 million or 7.3% in Q4 2023 compared to Q4 2022.
Provision for Credit Losses: Increased to $2.3 million in Q4 2023 from $752 thousand in Q4 2022.
Net Interest Margin: Decreased by 57 basis points to 3.44% in Q4 2023 from 4.01% in Q4 2022.
Share Repurchase: Civista repurchased 84,230 shares for $1.5 million at an average price of $17.77 per share in 2023.
On February 8, 2024, Civista Bancshares Inc (NASDAQ:CIVB) released its 8-K filing, announcing unaudited financial results for the fourth quarter and full year of 2023. As a financial holding company operating through its subsidiary, Civista engages in community banking, offering a range of services including deposit collection, loan origination, securities purchasing, and trust services. The company's loan portfolio is diverse, with a focus on commercial, agricultural, and real estate lending.
Performance Overview
Civista Bancshares Inc faced a challenging quarter with a decrease in net interest income by $2.5 million or 7.7% for the fourth quarter of 2023 compared to the same period in 2022. Despite an increase in interest income driven by higher rates and loan volume, a significant rise in interest expense due to rate hikes and a shift in funding sources led to a net interest margin decrease of 57 basis points to 3.44%. The company's CEO, Dennis G. Shaffer, acknowledged the pressure on net interest margin but highlighted the solid quarter with loan growth and improved noninterest income and expense figures.
For the full year, net interest income saw an increase of $15.3 million or 13.9%, with net interest margin slightly up by 5 basis points to 3.70%. The provision for credit losses rose to $2.3 million in the fourth quarter, reflecting loan and lease growth and the adoption of the Current Expected Credit Loss (CECL) model, which also added a $3.4 million reserve for unfunded commitments.
Financial Achievements and Challenges
Despite the challenges, Civista Bancshares Inc achieved loan growth, with an 8.1% increase since December 31, 2022, and a 3.9% rise in the fourth quarter alone. This growth is significant for the company and the banking industry, as it indicates an expanding customer base and a robust demand for lending services. However, the decline in net interest income and margin pressures could pose problems if the trend continues, potentially impacting profitability.
Noninterest income for the fourth quarter decreased by 12.3% due to lower service charges and net gains on sales of loans and leases. However, for the full year, noninterest income increased by 27.8%, bolstered by the acquisition of Civista Leasing and Financing and increased swap fees. Noninterest expense for the fourth quarter decreased by 7.3%, with reductions in compensation, occupancy, and contracted data processing expenses. However, the full-year noninterest expense increased by 18.9%, primarily due to the acquisition of CLF.
Balance Sheet and Asset Quality
Total assets grew by $222.0 million or 6.1%, driven by the loan portfolio expansion. Deposits also increased by $365.0 million or 13.9%, with a notable rise in brokered time deposits. Shareholders' equity saw a $37.2 million increase, mainly from retained earnings and a decrease in accumulated other comprehensive loss.
Asset quality showed some deterioration, with net losses of $979 thousand for the full year compared to net recoveries in the previous year. Non-performing assets rose by 38.7%, but the ratio of non-performing assets to total assets remained stable.
Conclusion and Forward Outlook
Civista Bancshares Inc's mixed financial results reflect both the resilience and challenges faced by the banking sector. Loan growth and cost management efforts are commendable, but the company must navigate interest rate fluctuations and margin pressures. Investors will watch closely how Civista adapts to these conditions and maintains its growth trajectory in the competitive banking landscape.
For more detailed information, investors are encouraged to review the full 8-K filing and join the conference call scheduled for February 8, 2024, at 1:00 p.m. ET.
Explore the complete 8-K earnings release (here) from Civista Bancshares Inc for further details.
This article first appeared on GuruFocus.
