SANDUSKY, Ohio, Oct. 29, 2024 /PRNewswire/ -- Civista Bancshares, Inc. (NASDAQ: CIVB) ("Civista") announced its unaudited financial results for the three- and nine-month periods ending September 30, 2024. 

Third quarter and year-to-date 2024 highlights:

• Net income of $8.4 million, or $0.53 per diluted share, for the third quarter of 2024, compared to $10.4 million, or $0.66 per diluted share, for the third quarter of 2023.
• Net income of $21.8 million, or $1.39 per diluted share, compared to $33.3 million, or $2.12 per diluted share, for the nine months ended September 30, 2024 and 2023, respectively.
• Replaced nearly $5.7 million in non-interest income, for the nine months ended September 30, 2024 compared to the same period in 2023. This includes reductions in overdraft fees ($1.8 million), tax refund processing revenue ($2.4 million), and the 2023 MasterCard renewal fee ($1.5 million). Despite these decreases, non-interest income for the nine months ended September 30, 2024, is $0.4 million higher than the same period in 2023.
• Cost of deposits of 218 basis points and total funding costs of 261 basis points for the quarter.
• Based on the September 30, 2024, market close share price of $17.82, the $0.16 third quarter dividend is equivalent to an annualized yield of 3.59% and a dividend payout ratio of 30.2%.

CEO Commentary:

"We're pleased with our third-quarter earnings and performance. This quarter, we maintained a disciplined approach to loan and deposit pricing and effectively implemented our downward beta strategy. We also launched some of our deposit initiatives, that better aligned our lending and core funding. As a result, we increased deposits by $246 million and reduced wholesale borrowings by $213 million, contributing to an Earnings Per Share of $0.53, up from $0.45 last quarter.", said Dennis G. Shaffer, CEO and President of Civista.

"Our credit quality remains strong, as we continue to support lending and deepen our customer relationships. We're committed to meeting the rising demand for housing and construction financing, ensuring we address the needs of our customers and communities.  With a strong third quarter coupled with the inflection in our net interest margin, we're well positioned for a strong finish to 2024.", Shaffer commented.

Results of Operations:

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

Net interest income increased $1.5 million, or 5.3%, for the third quarter of 2024 compared to the second quarter of 2024. 

Interest income increased $2.1 million attributed to average interest-earning assets increasing $86 million coupled with a 6 basis point increase in asset yield.

The increase in interest income was partially offset by a $0.7 million increase in interest expenses. This was due to $246 million growth in deposits ($139 million in average balances) and a $214 million reduction in FHLB borrowings ($53 million in average balances), resulting in a net increase of $86 million in average interest-bearing liabilities when comparing Q3 2024 to Q2 2024.

When comparing the third quarter of 2024 to the same period of 2023.  Net interest income declined $2.3 million.  Interest income increased $6.1 million while interest expense increased $8.4 million.

Net interest margin decreased 53 basis points to 3.16% for the third quarter of 2024, compared to 3.69% for the same period a year ago.

The increase in interest income was primarily due to a 30-basis point increase in interest-earning asset yield, which led to $2.6 million of the increase in interest income. Additionally, a $325.7 million increase in average interest-earning assets led to $4.4 million of the increase in interest income.

Interest expense increased $8.4 million for the third quarter of 2024, compared to the same period last year.  The average rate paid on interest-bearing liabilities increased 78 basis points, while average interest-bearing liabilities increased $583.9 million.  The increase in interest-bearing liabilities was $320.3 million in time-deposits, $118.9 million in demand and savings, and $154.5 million in short-term borrowings to fund growth.  This shift in the funding mix, as well as rising rates, is driving the increase in the funding rate.  The 78-basis point increase in funding yield led to $4.5 million additional interest expense.  Additionally, the $583.9 million of additional funds led to $4.7 million of additional interest expense.  Interest-bearing deposit costs have increased 65.6% compared to a year ago.   

For the nine-month periods ended September 30, 2024 and 2023

Net interest income decreased $10.1 million, or 10.6%, compared to the same period in 2023.

Interest income increased $22.8 million, or 17.5%, for the nine months of 2024 compared to the same period of 2023.  Average interest-earning assets increased $342.2 million.  Average yields increased 32 basis points.  The increase in volume is due to organic loan growth. 

Interest expense increased $32.9 million, or 93.4%, for the nine months of 2024 compared to the same period of 2023.  Average rate paid on interest-bearing liabilities increased 117 basis points compared to 2023.  Average interest-bearing liabilities increased $540.3 million for the nine months of 2024 compared to the same period of 2023.  Demand, Savings and Time deposits increased $461.2 million, collectively, and FHLB borrowings increased $102.5 million for the the nine months of 2024 compared to the same period of 2023 to fund growth.

Net interest margin decreased of 72 basis points to 3.16% for the nine months of 2024, compared to 3.88% for the same period a year ago. 

Provision for credit losses for the third quarter of 2024 was $1.3 million compared to $0.6 million for the third quarter of 2023.  Provision for unfunded commitments for the third quarter of 2024 was (-$0.3) million compared to $0.1 million for the third quarter of 2023. 

Year-to-date 2024 provision for credit losses (including provision for unfunded commitments) was $4.7 million compared to $2.7 million for the same period of 2023.

The Allowance to total loans ratio as of September 30, 2024 was 1.36%, up from 1.32% on June 30, 2024 and up from 1.30% at December 31, 2023.  The increased reserve requirement is attributed to longer expected lives of certain loans due to slower expected prepayments of lower interest rate loans in this higher interest rate environment.

For the third quarter of 2024, noninterest income totaled $9.7 million, a decrease of $0.9 million or 8.1% from second quarter 2024 and an increase of $1.6 million, or 19.2%, compared to the prior year's third quarter.    

Service charges for the third quarter of 2024 decreased year over year as we have eliminated our representment fee as well as reduced our overdraft charges, the effect of which was partially offset by an increase in service fees in consumer and treasury management.

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

Net gain on sale of loans includes gain/loss on sale of mortgages, adjustments to mortgage service rights (MSR), and gain/loss on sales of loans and leases from the Civista Leasing and Finance division; which continues to provide a strong and consistent revenue source for Civista.

Wealth management fees increased from organic growth in the trust and investment services business.

Lease revenue and residual income increased as we shifted away from operating leases to more finance leases, resulting in residual and lease rental income.

Income from Bank Owned Life Insurance (BOLI) increased due to a death benefit on an insured individual in the third quarter of 2024.

Other income decreased in the third quarter which includes loan fees, loan servicing fees, and leasing rental income.

For the nine months ended September 30, 2024, noninterest income totaled $28.7 million, an increase of $391 thousand, or 1.4%, compared to the same period in the prior year.  This reflects the replacement of the tax refund processing business exited in 2023.

Service charges for the first nine months of 2024 decreased resulting from the elimination of our representment fee and reducing our overdraft charges, the effect of which was partially offset by an increase in service fees in consumer and treasury management.

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

Net gain on sale of loans increased primarily due to an increase in the volume of mortgage and Civista Leasing and Finance leases as well as loans sold.

Wealth management fees increased from organic growth in the trust and investment services business.

Lease revenue and residual income increased from prior year as we shifted from operating leases to more finance leases, resulting in residual and lease rental income; as the Civista Leasing and Finance business continues to increase.

Income from Bank Owned Life Insurance (BOLI) increased due to death benefit on an insured individual in 2024.

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.

Other income – includes $1.1 million of loan and loan servicing fees and $1.3 million of leasing rental income.  2023 includes a $1.5 million fee collected with the renewal of the company's contract with MasterCard.

For the third quarter of 2024, noninterest expense totaled $28.0 million, a decrease of $0.6 million or 2.0% when compared to the second quarter of 2024.  When compared to the prior years' third quarter, noninterest expense increased $1.4 million, or 5.1%.

Compensation expense increased primarily due to a merit increases, employee insurance, and other payroll-related expenses.  The quarter-to-date average number of full time equivalent (FTE) employees was 526 at September 30, 2024, compared with an average number of 528 for the same period in 2023. 

Equipment maintenance and depreciation expense decreased $342 thousand primarily due to depreciation associated with Civista Leasing and Finance as operating leases mature.

Software maintenance expense increased $136 thousand due to increases in both software maintenance contracts as well as the implementation of the new digital banking platform.

In the third quarter of 2024, other expenses include a $0.8 million reserve to address a reconciling item related to a system conversion, which is expected to be completed in the fourth quarter of 2024.

The efficiency ratio was 70.2% for the quarter ended September 30, 2024, compared to 65.6% for the quarter ended September 30, 2023.  The change in the efficiency ratio is primarily due to a 5.3% increase in noninterest expenses and a 7.2% decrease in net interest income; partially offset by a 19.2% increase in noninterest income.

Civista's effective income tax rate for the third quarter of 2024 was 15.6% compared to 15.2% in the third quarter of 2023.  

For the nine months ended September 30, 2024, noninterest expense totaled $84.2 million, an increase of $2.5 million, or 3.1%, compared to the same period in the prior year. 

Compensation expense increased primarily due to merit increases, employee insurance, and other payroll-related expenses. The year-to-date average number of full time equivalent (FTE) employees was 534 for the nine-months ended September 30, 2024, compared with an average number of 531 for the same period in 2023. 

Equipment maintenance and depreciation expense decreased by $900 thousand, primarily from a decrease of $785 thousand in depreciation of equipment on operating leases as operating leases mature.

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

The efficiency ratio was 71.7% for the nine months ended September 30, 2024 compared to 64.5% for the nine months ended September 30, 2023.  The change in the efficiency ratio is primarily due to an 3.2% increase in noninterest expense and a 10.6% decrease in net interest income, partially offset by an 1.4% increase in noninterest income.

Civista's effective income tax rate for the nine months ended September 30, 2024 was 13.5% compared to 15.4% for the nine months ended September 30, 2023. 

Balance Sheet

Total assets at September 30, 2024, were $4.1 billion, an increase of $200.0 million, or 5.2%, from December 31, 2023.

End of period loan and lease balances