Civista Bancshares, Inc. Announces Third Quarter 2024 Financial Results of $0.53 per Common Share
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.
Average Balance Analysis
(Unaudited - Dollars in thousands)
Three Months Ended September 30,
2024
2023
Average
Yield/
Average
Yield/
Assets:
balance
Interest
rate *
balance
Interest
rate *
Interest-earning assets:
Loans **
$
3,031,884
46,899
6.15
%
$
2,679,679
$
40,547
5.88
%
Taxable securities ***
363,584
3,258
3.24
%
359,154
2,999
2.95
%
Non-taxable securities ***
291,254
2,369
3.83
%
286,048
2,336
3.77
%
Federal funds sold
-
-
0.00
%
-
-
0.00
%
Interest-bearing deposits in other banks
19,144
215
4.47
%
55,288
719
5.16
%
Total interest-earning assets ***
$
3,705,866
$
52,741
5.64
%
$
3,380,169
$
46,601
5.34
%
Noninterest-earning assets:
Cash and due from financial institutions
36,868
22,542
Premises and equipment, net
51,342
50,999
Accrued interest receivable
13,802
11,673
Intangible assets
134,083
128,215
Bank owned life insurance
63,190
53,879
Other assets
57,856
64,008
Less allowance for loan losses
(40,068)
(34,283)
Total Assets
$
4,022,939
$
3,677,202
Liabilities and Shareholders' Equity:
Interest-bearing liabilities:
Demand and savings
$
1,452,850
$
4,074
1.12
%
$
1,333,903
$
2,189
0.65
%
Time
952,369
12,853
5.37
%
632,111
7,395
4.64
%
Short-term FHLB borrowings
388,022
5,328
5.46
%
233,547
4,061
5.51
%
Long-term FHLB borrowings
1,697
10
2.34
%
2,644
15
2.25
%
Other borrowings
-
-
0.00
%
8,026
198
9.91
%
Subordinated debentures
104,040
1,243
4.75
%
103,894
1,239
4.73
%
Repurchase agreements
-
-
0.00
%
993
-
0.00
%
Total interest-bearing liabilities
$
2,898,978
$
23,508
3.23
%
$
2,315,118
$
15,097
2.45
%
Noninterest-bearing deposits
687,364
980,835
Other liabilities
55,205
33,040
Shareholders' equity
381,392
348,209
Total Liabilities and Shareholders' Equity
$
4,022,939
$
3,677,202
Net interest income and interest ratespread
$
29,233
2.42
%
$
31,504
2.89
%
Net interest margin ***
3.16
%
3.69
%
* - Average yields are presented on a tax equivalent basis. The tax equivalent effect associated with loans and investments,included in the yields above, was $630 thousand and $621 thousand for the periods ended September 30, 2024 and 2023,respectively
** - Average balance includes nonaccrual loans
*** - Average yield on investments were calculated by adjusting the average balances of taxable and nontaxable securitiesby unrealized losses of $57.2 million and $69.2 million, respectively. These adjustments were also made when calculatingthe yield on earning assets and the margin
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.
Average Balance Analysis
(Unaudited - Dollars in thousands)
Nine Months Ended September 30,
2024
2023
Average
Yield/
Average
Yield/
Assets:
balance
Interest
rate *
balance
Interest
rate *
Interest-earning assets:
Loans **
$
2,959,031
$
136,330
6.15
%
$
2,607,632
$
114,108
5.85
%
Taxable securities ***
355,329
9,262
3.12
%
367,946
8,817
2.89
%
Non-taxable securities ***
291,589
7,116
3.85
%
285,250
6,917
3.79
%
Interest-bearing deposits in other banks
20,419
754
4.93
%
23,382
818
4.67
%
Total interest-earning assets ***
$
3,626,368
$
153,462
5.61
%
$
3,284,210
$
130,660
5.29
%
Noninterest-earning assets:
Cash and due from financial institutions
34,807
33,918
Premises and equipment, net
53,318
58,338
Accrued interest receivable
13,254
11,176
Intangible assets
134,474
133,154
Bank owned life insurance
62,176
53,796
Other assets
61,225
61,669
Less allowance for loan losses
(38,876)
(33,138)
Total Assets
$
3,946,746
$
3,603,123
Liabilities and Shareholders' Equity:
Interest-bearing liabilities:
Demand and savings
$
1,392,082
$
11,113
1.07
%
$
1,360,692
$
4,818
0.47
%
Time
927,306
37,305
5.37
%
497,458
15,532
4.17
%
Short-term FHLB borrowings
385,801
15,921
5.51
%
282,214
10,617
5.03
%
Long-term FHLB borrowings
2,000
35
2.34
%
3,062
51
2.23
%
Other borrowings
-
-
0.00
%
11,953
587
6.57
%
Subordinated debentures
103,999
3,732
4.79
%
103,854
3,607
4.67
%
Repurchase agreements
-
-
0.00
%
11,611
4
0.05
%
Total interest-bearing liabilities
$
2,811,188
$
68,106
3.24
%
$
2,270,844
$
35,216
2.07
%
Noninterest-bearing deposits
702,696
941,842
Other liabilities
60,282
44,739
Shareholders' equity
372,580
345,698
Total Liabilities and Shareholders' Equity
$
3,946,746
$
3,603,123
Net interest income and interest rate spread
$
85,356
2.37
%
$
95,444
3.22
%
Net interest margin ***
3.16
%
3.88
%
* - Average yields are presented on a tax equivalent basis. The tax equivalent effect associated with loans and investments,included in the yields above, was $1.9 million and $1.8 million for the periods ended September 30, 2024 and 2023,respectively
** - Average balance includes nonaccrual loans
*** - 2024 and 2023 average yield on investments were calculated by adjusting the average balances of taxable andnontaxable securities by unrealized losses of $61.9 million and $64.3 million, respectively. These adjustments were alsomade when calculating the yield on earning assets and the margin
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.
Noninterest income
(unaudited - dollars in thousands)
Three months ended September 30,
2024
2023
$ change
% change
Service charges
$
1,595
$
1,853
$
(258)
-13.9
%
Net gain/(loss) on equity securities
223
69
154
223.2
%
Net gain on sale of loans
1,427
787
640
81.3
%
ATM/Interchange fees
1,402
1,424
(22)
-1.5
%
Wealth management fees
1,443
1,197
246
20.6
%
Lease revenue and residual income
2,428
1,913
515
26.9
%
Bank owned life insurance
717
266
451
169.5
%
Swap fees
(14)
21
(35)
-166.7
%
Other
465
595
(130)
-21.8
%
Total noninterest income
$
9,686
$
8,125
$
1,561
19.2
%
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.
Noninterest income
(unaudited - dollars in thousands)
Nine months ended September 30,
2024
2023
$ change
% change
Service charges
$
4,523
$
5,457
$
(934)
-17.1
%
Net gain/(loss) on equity securities
156
(169)
325
192.3
%
Net gain on sale of loans
3,179
2,033
1,146
56.4
%
ATM/Interchange fees
4,201
4,227
(26)
-0.6
%
Wealth management fees
4,055
3,570
485
13.6
%
Lease revenue and residual income
7,630
6,160
1,470
23.9
%
Bank owned life insurance
1,434
830
604
72.8
%
Swap fees
165
198
(33)
-16.7
%
Tax Refund Processing Fee
-
2,375
(2,375)
-100.0
%
Other
3,390
3,661
(271)
-7.4
%
Total noninterest income
$
28,733
$
28,342
$
391
1.4
%
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%.
Noninterest expense
(unaudited - dollars in thousands)
Three months ended September 30,
2024
2023
$ change
% change
Compensation expense
$
15,726
$
14,054
$
1,672
11.9
%
Net occupancy Expense
