Civista Bancshares, Inc. Announces Fourth Quarter and Year-to-date 2021 Financial Results

SANDUSKY, Ohio, Feb. 4, 2022 /PRNewswire/ -- Civista Bancshares, Inc. (NASDAQ:CIVB) ("Civista") announced its unaudited financial results for the three and twelve months ending December 31, 2021. 

Fourth quarter and year-to-date 2021 highlights:

• Net income of $11.0 million, or $0.73 per diluted share, for the fourth quarter of 2021, compared to $10.2 million, or $0.64 per diluted share, for the fourth quarter of 2020.  
• Net income of $40.5 million, or $2.63 per diluted share, compared to $32.2 million, or $2.00 per diluted share, for the twelve months ended December 31, 2021 and 2020, respectively.
• COVID–19 loan deferrals decreased to 0.26% of total loans at period end, compared to 3.6% at December 31, 2020 and 21.3% at June 30, 2020. 
• Based on the December 31, 2021 market close of $24.40, the $0.14 fourth quarter dividend  is equivalent to an annualized yield of 2.30% and a dividend payout ratio of 21.30%.
• In the fourth quarter, we began the redeployment of $100.0 million excess liquidity into investment securities, yielding 2.01%.  
• In November we completed a private placement of $75 million in aggregate principal amount of its 3.25% Fixed-to-Floating Rate Subordinated Notes due 2031.
• In January we announced the signing of a definitive merger agreement pursuant to which Civista will acquire Comunibanc Corp., the parent company of The Henry County Bank.

"We turned in another solid Civista quarter highlighted by solid loan growth and reduced operating expenses.  Although Civista remains well capitalized, we did successfully raise $75 million in subordinated debt.  This money will allow us to continue to accelerate our growth plans, both organically and through acquisition" said Dennis G. Shaffer, CEO and President of Civista.

Mr. Shaffer continued, "Shortly after the beginning of the new year, we did announce that Civista had entered into a definitive agreement to acquire Comunibanc, Corp., the parent company of The Henry County Bank headquartered in Napoleon Ohio.  This gives us a presence in Northwest Ohio, and we look forward to welcoming their employees and customers to the Civista family".

Results of Operations:

For the three-month period ended December 31, 2021, and 2020

Net interest income decreased $208 thousand, or 0.9%, for the fourth quarter of 2021 compared to the same period of 2020, due to a decrease in interest income partially offset by a decrease in interest expense.  Accretion of PPP fees was $1.6 million during the quarter for the fourth quarter 2021 compared to $2.3 million for the same period in 2020.  

Net interest margin decreased 49 basis points to 3.42% for the fourth quarter of 2021, compared to 3.69% for the same period a year ago. 

The decrease in interest income was due to a $726 thousand decrease in PPP fees of $407 thousand decrease in accretion income related to loan portfolios acquired through acquisitions and a decrease in the average rate earned on assets of 40 basis points.  Average earning assets increased $169.5 million, partially offsetting these decreases. 

Interest expense decreased $779 thousand, or 35.6%, for the fourth quarter of 2021, compared to the same period last year.  The average rate paid on interest-bearing liabilities decreased 18 basis points, while average interest-bearing liabilities increased $37.3 million.  

For the twelve-month period ended December 31, 2021, and 2020

Net interest income increased $5.7 million, or 6.4%, compared to the same period in 2020.

Interest income increased $1.9 million, or 1.9%, for the twelve months of 2021.  Average earning assets increased $328.9 million, which resulted in a $5.7 million increase in net interest income.  Average yields decreased 41 basis points which resulted in a $1.9 million decrease in interest income.  During the twelve-month period, the Bank had average PPP Loans totaling $155.2 million.  These loans had an average yield of 7.43% including the amortization of PPP fees, which increased the margin by 23 basis points.

Interest expense decreased $3.8 million, or 37.7%, for the twelve months of 2021 compared to the same period of 2020.  Average rates decreased 26 basis points, resulting in a $3.2 million decrease in interest expense.  Average interest-bearing liabilities increased $109.4 million, but a mix shift toward interest-bearing demand deposits led to a decrease in interest expense of $664 thousand.

Net interest margin decreased 23 basis points to 3.47% for the twelve months of 2021, compared to 3.70% for the same period a year ago. 

No provision for loan losses was recorded during the fourth quarter while we recorded $830 thousand for the first twelve months of 2021.  The provision for loan losses was $2.3 million for the fourth quarter of 2020 and $10.1 million for the twelve months of 2020.  The reserve ratio increased to 1.33% at December 31, 2021 from 1.22% at December 31, 2020.  The reserve ratio without $43.2 million of PPP loans would have been 3 basis points higher.

For the fourth quarter of 2021, noninterest income totaled $6.8 million, a decrease of $855 thousand, or 11.2%, compared to the prior year's fourth quarter. 

Net gain on sale of loans decreased primarily as a result of a decrease in volume of loans sold.  Proceeds from the sale of loans sold totaled $54.8 million and $91.8 million during the three months ended December 31, 2021 and 2020, respectively.   

Service charges increased as a result of higher overdraft fees and service charges.  During 2020, customer behavior changed as a result of the COVID-19 pandemic, resulting in fewer overdrafts.  Overdraft fees are trending toward pre-pandemic levels.  

ATM/Interchange fees increased as a result of increased volume of transactions and incentives from our network providers. 

Wealth management fees increased due to an increase in average assets under management as well as an increase in the average rate earned on the assets in 2021.  

Bank owned life insurance ("BOLI") increased due to death benefits paid during the three-months ended December 31, 2021. 

Swap fees decreased due to the volume.  For the quarter, we recorded one $7.6 million swap compared to $19.6 million during the same period last year.  We reduced the loans we entered into swaps on as a part of our asset liability management program.  Given current rates, we have chosen to book the variable rate loan that we might otherwise have swapped to a fixed rate.

Other decreased due to a loss on the sale of OREO property, a decrease in item processing fees and a decrease in deluxe income.

For the twelve months ended December 31, 2021, noninterest income increased $3.3 million, or 11.6%, compared to the same period in the prior year. 

Service charges increased due to increased account service charges and overdraft fees of $510 and $107, respectively.  

Net gain on sale of securities increased as a result of the sale of Visa Class B shares. 

Net gain (loss) on equity securities increased as a result of market value increases.

Net gain on sale of loans decreased due to a $43.7 million decrease in the volume of loans sold. 

ATM/Interchange fees increased as a result of increased volume of transactions and incentives from our network providers. 

Wealth management fees increased due to an increase in average assets under management as well as an increase in the average rate earned on the assets in 2021. 

Swap fees decreased as a result of a decline in the volume of loans.  Year to date we swapped $13.3 million compared to $104.4 million during the same period last year.  We reduced the loans we entered into swaps on as a part of our asset liability management program.  Given current rates, we have chosen to book the variable rate loan that we might otherwise have swapped to a fixed rate.

BOLI income increased due to death benefits paid.

Other increased due to increases in wire transfer fees, the amortization of mortgage servicing rights, merchant credit card fees and gains on the sale of OREO properties.

For the fourth quarter of 2021, noninterest expense totaled $17.2 million, an increase of $205 thousand, or 1.2%, compared to the prior year's fourth quarter.

Compensation expense included decreased primarily due to a $1.2 million decline in commission, partially offset by increases in salaries of $182 thousand, unemployment taxes of $103 thousand and employee insurance of $180 thousand.  The increase in salaries is due to annual pay increases, which occur every year in April.  The increase in employee insurance is due to increased claims experience. 

The decrease in Contracted data processing fees is due to lower core processing fees and payments in 2020 for early termination fees.  

The increase in Taxes and assessments was due to increases in the assessment bases associated with both the FDIC assessment and the Ohio Financial Institutions tax.  

The increase in Marketing expense is primarily due to increases in marketing expenses as a result of lower expenses in 2020.  The decreases in 2020 are related to lower advertising and business promotion expenses, primarily due to COVID-19.

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

The efficiency ratio was 56.2% for the quarter ended December 31, 2021 compared to 53.7% for the quarter ended December 31, 2020.  

Civista's effective income tax rate for the fourth quarter 2021 was 15.3% compared to 15.1% in 2020.

For the twelve months ended December 31, 2021, noninterest expense totaled $78.5 million, an increase of $7.8 million, or 11.1%, compared to the same period in the prior year.

Compensation expense included increases in salaries of $1.0 million and Employee insurance of $480 thousand.  The increase in salaries is primarily due to annual pay increases which occur in April.  The increase in employee insurance is due to increased claims experience.

The increase in Taxes and assessments was due to increases in the assessment bases associated with both the FDIC assessment and the Ohio Financial Institutions tax, as well as to $64 thousand small bank assessment credits applied to the 2020 assessments and a $172 thousand increase in state franchise tax related to additional taxes paid on the Company's 2019 franchise tax return.

The increase in ATM/Interchange expense is primarily due to additional volume and to a settlement received in the second quarter of 2020.

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 increase in Other expense is primarily due to the prepayment penalty of $3.7 million related to the early payoff of an FHLB long-term advance.  

The efficiency ratio was 61.1% for the twelve months ended December 31, 2021, compared to 59.1% for the twelve months ended December 31, 2020.  Removing the effect of the FHLB prepayment and the gain on the sale of the VISA B shares, the 2021 efficiency ratio would have been 59.0%.

Civista's effective income tax rate for the twelve months of 2021 was 14.8% compared to 13.3% in same period in 2020.   

Balance Sheet

Total assets increased $243.1 million, or 8.8%, from December 31, 2020 to December 31, 2021, primarily due to an increase in Securities available for sale of $196.4 million, or 54.0% and an increase in cash of $126.4 million, or 90.6%.  The decrease in PPP loans of $174.1 million drove the overall loan portfolio decrease of $59.6 million.         

Loan balances have declined during 2021, primarily due to a decline in PPP loans.  Removing the effects of PPP loans, the loan portfolio would have increased $114.5 million, or 6.2%.  Commercial real estate continued to grow due to consistent demand in the Non-owner occupied category and the movement of successfully completed projects from the Real estate construction category.  Construction availability remains high going into 2022.  Real estate construction loans also reduced due to completed projects refinanced into the permanent market.  All markets contributed to the loan growth but was especially driven by our metro markets.  The decrease in Residential real estate was a result of portfolio loans refinanced into saleable mortgage products.

Paycheck Protection Program

During 2021, we processed approximately 1,300 loans totaling $131.1 million of PPP loans as part of the second round of the PPP.  This is in addition to the $268.3 million that we processed in round one during 2020.  Of the total PPP loans we have originated, $356.2 million have been forgiven or have paid off.  We recognized $1.6 million of PPP fees in income during the quarter, and $10.0 million for the twelve months ended December 31, 2021.  On December 31, 2021, $1.8 million of unearned PPP fees remain.

COVID-19 Loan Modifications

As of December 31, 2021, the remaining loans modified under the CARES Act total $5.1 million, or 0.26% of total loans at period end, compared to 3.6% at December 31, 2020.  Details with respect to the loan modifications that remain on deferred status are as follows:

Deposits

Total deposits increased $227.3 million, or 10.4%, from December 31, 2020 to December 31, 2021. 

The increase in Noninterest-bearing demand of $68.1 million was primarily due to a $36.3 million increase in business demand deposit accounts and a $23.6 million increase in public fund demand deposit accounts.  Interest-bearing demand deposits increased $127.4 million, primarily due to a $43.3 million increase in non-public fund accounts, a $41.4 million increase in public fund accounts and a $36.4 million increase in business accounts.  The increase in Savings and money market was primarily due to a $60.1 million increase in statement savings, a $28.2 million increase in personal money markets and a $15.7 million increase in public fund money markets, partially offset by a $40.1 million decrease in brokered money market accounts.

FHLB advances totaled $75.0 million at December 31, 2021, down $50.0 million from December 31, 2020.  The decrease was due to the prepayment of a $50 million, 2.06% long-term advance.

Stock Repurchase Program

During 2021, Civista repurchased 983,400 shares for $22.2 million at a weighted average price of $22.59 per share.  We have approximately $9.3 million remaining of the current $13.5 million repurchase authorization, which was approved in August 2021.  In addition, Civista liquidated 5,065 shares held by employees, at $17.71 per share, to satisfy tax obligations stemming from vesting of restricted shares.

Shareholder Equity

Total Shareholders' equity increased $5.1 million from December 31, 2020 to December 31, 2021, primarily due to an increase in Retained earnings of $32.5 million, net of a $22.3 million repurchase of treasury shares and a decrease in accumulated other comprehensive income of $5.8 million.        

Asset Quality

Civista recorded net recoveries of $783 thousand for the twelve months of 2021 compared to net recoveries of $149 thousand for the same period of 2020.  The allowance for loan losses to loans was 1.33% at December 31, 2021 and 1.22% at December 31, 2020.  Without the PPP loans, the 2021 and 2020 allowance ratios would have been 3 basis points higher and 14 basis points higher, respectively.     

Non-performing assets at December 31, 2021 were $5.4 million, a 26.7% decrease from December 31, 2020.  The non-performing assets to assets ratio decreased to 0.18% from 0.27% at December 31, 2020.  The allowance for loan losses to non-performing loans increased to 496.10% from 343.05% at December 31, 2020.   

Conference Call and Webcast

Civista Bancshares, Inc. will also host a conference call to discuss the Company's financial results for the fourth quarter of, and year ending 2020 at 1:00 p.m. ET on Friday, February 4, 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. 2021 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, 2020, 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.  The Company's banking subsidiary, Civista Bank, operates 35 locations in Northern, Central and Southwestern Ohio, Southeastern Indiana and Northern Kentucky.  Civista Bancshares, Inc. may be accessed at HUwww.civb.comUH.  The Company's common shares are traded on the NASDAQ Capital Market under the symbol "CIVB". 

SOURCE Civista Bancshares, Inc.