Civista Bancshares, Inc. Announces Second Quarter 2019 Earnings

SANDUSKY, Ohio, July 26, 2019 /PRNewswire/ -- Civista Bancshares, Inc. CIVB ("Civista") reported net income available to common shareholders of $8.5 million, or $0.51 per diluted share, for the second quarter of 2019, compared with $2.7 million, or $0.24 per diluted share, for the prior year period.  For the six-month period ended June 30, 2019, Civista reported net income available to common shareholders of $18.0 million or $1.08 per diluted share, compared to $9.4 million or $0.79 per diluted share, in the same period of 2018. 

Factors Affecting Comparability

Civista acquired United Community Bancorp ("UCB") in September 2018.  The financial position and results of operations of UCB prior to its acquisition date are not included in the Company's financial results for periods prior to the acquisition date.

Adjusted Earnings

Financial results for the second quarter and six months ended June 30, 2018 included $3.2 million in pre-tax acquisition and integration expenses.  Excluding these expenses, adjusted earnings were $5.2 million, or $0.44 diluted earnings per share, for the second quarter of 2018 and $11.9 million, or $0.99 diluted earnings per share, for the six months ended June 30, 2018.

A reconciliation of adjusted earnings to net income according to accounting principles generally accepted in the United States ("GAAP") is provided in the financial tables at the end of this press release.

"I am proud of our second quarter, 2019 results.   Comparing 2019 to our adjusted earnings in 2018 diluted earnings per share increased 15.9% for the quarter and 9.1% year to date.  Our annualized loan growth was 6.5% for the quarter and 4.8% for the year.  We saw additional expansion of our net interest margin and continued strong asset quality," said Dennis G. Shaffer, President and CEO of Civista.

Results of Operations:

Net interest income increased $7.0 million, or 47.2% for the second quarter of 2019, and $13.9 million or 47.1% and for the six months ended June 30, compared to the same periods of 2018.  Interest income increased $8.8 million, or 54.2% for the second quarter of 2019 and $17.4 million or 54.3% for the six-month period ended June 30.  Average earning assets increased $558.9 million for the second quarter of 2019 and $536.9 million for the six-month period ended June 30.  The increase in average earning assets resulted in $6.7 million and $13.0 million of the increase in interest income, respectively.  Additionally, yields increased 54 basis points for the second quarter of 2019 and 60 basis points for the six-month period ended June 30^th, accounting for $2.1 million and $4.4 million increase in interest income, respectively. 

Interest expense increased $1.8 million, or 128.4%, for the second quarter of 2019 and $3.5 million, or 137.6%, for the six-months ended June 30 compared to the same periods of 2018.  The increase in interest expense is due to both an increase in average balances of $410.4 million, resulting in $756 thousand of the increase for the second quarter of 2019, and $397.3 million, resulting in $1.5 million of the increase for the six-months ended June 30.  Additionally, cost of interest-bearing liabilities increased 35 basis points and 37 basis points, respectively.  The increase in yield accounted for $1.0 million and $2.0 million of the increase in interest expense. 

The tax equivalent net interest margin increased 28 basis points to 4.49% for the second quarter of 2019, compared to 4.21% for the same period a year ago and increased 34 basis points to 4.47% for the six months ended June 30, 2019, compared to 4.13% for the same period a year ago.  Accretion of the purchase accounting adjustments accounted for 25 basis points of the second quarter and 23 basis points of the year-to-date margin.

 

 

No provision for loan losses was recorded during 2019 and 2018.  With low net charge offs, improved asset quality and strengthened problem loan coverage ratios, we felt comfortable with no provision so far in 2019, despite the loan growth.

For the second quarter of 2019, noninterest income totaled $5.1 million, an increase of $714 thousand, or 16.3%, compared to the prior year's second quarter.  Noninterest income for the first six-months of 2019 totaled $11.4 million, an increase of $1.4 million, or 13.8%, compared to the prior year's first six months.   

Service charge fees increased $193 thousand, or 14.2%, and $515 thousand, or 20.7%, for the three and six-month periods ended June 30.  ATM/Interchange fees increased $363 thousand, or 61.7%, and $715 thousand, or 62.6%, for the three and six-month periods ended June 30.   Bank owned life insurance increased $108 thousand, or 75.0%, and $213 thousand, or 74.5%, for the three and six-month periods ended June 30.  The increases in service charge fee income, ATM/Interchange fees and bank owned life insurance income are primarily attributable to the Company's acquisition of UCB during the third quarter of 2018. 

For the second quarter of 2019, noninterest expense totaled $16.6 million, an increase of $711 thousand, or 4.5%, compared to the prior year's second quarter.  Noninterest expense for the first six-months of 2019 increased $5.0 million, or 17.6%, when compared to the first six-months of 2018.

Compensation expense increased $2.2 million, or 29.3%, for the second quarter and $4.6 million, or 31.1%, for the six-month period ending June 30, 2019.  The increase in compensation expense is comprised of salaries of $1.6 million for the three months and $3.4 million for the six months, employee benefits of $593 thousand for the three months and $1.2 million for the six months ended June 30, 2019.  The increases are primarily due to the increased size of the company due to the UCB acquisition.  Year-to-date average FTE employees were 433.3 at June 30, 2019, an increase of 88.3 FTEs over 2018.  Net occupancy and equipment expense increased $258 thousand, or 21.8%, and $626, or 27.0%, for the three and six-month periods ended June 30, 2019, primarily due to the addition of 9 locations from the UCB acquisition.  Contracted data processing expenses decreased $2.3 million, or 83.7%, and $2.2 million, or 71.9%, for the three and six-month periods ended June 30, 2019, primarily due to expenses incurred for the data processing conversion of UCB in 2018 which totaled approximately $2.4 million.  Professional services costs decreased $783 thousand, or 52.8%, for the second quarter and $640 thousand, or 31.4%, for the six-month period ending June 30, 2019.  Both periods of 2018 included approximately $700 thousand of legal and consulting expenses related to the UCB acquisition.      

The efficiency ratio was 59.5% for the six months ended June 30, 2019, compared to 70.3% for the six months ended June 30, 2018.  The improvement in the efficiency ratio is due primarily to $3.2 million of pre-tax expenses related to the merger with UCB, as well as an increase in net interest income.  The merger expenses in the second quarter of 2018 accounted for 790 basis points of the change. 

Civista's effective income tax rate for the six months ended June 30, 2019 was 15.8% compared to 12.3% for the same period in 2018.  The effective income tax rate for second quarter 2019 was 15.1% compared to 6.6% in 2018.   The 2018 effective tax rate is skewed by expenses incurred related to the UCB acquisition. 

Balance Sheet

Total assets increased $64.0 million, or 3.0%, from December 31, 2018 to June 30, 2019, primarily due to an increase in the loan portfolio of $36.8 million.     

The $36.8 million, or 2.4%, increase in the loan portfolio from December 31, 2018 to June 30, 2019 is spread across the loan portfolio, with the exception of the Farm Real Estate and Consumer loan portfolios.    

Total deposits increased $52.8 million, or 3.3%, from December 31, 2018 to June 30, 2019.  The increase was due primarily to increases in demand deposits, both noninterest-bearing and interest-bearing.  A reduction of brokered deposits partially offset these increases. 

The increase in noninterest-bearing demand is due to an increase in deposits from the tax refund processing program of $29.5 million.  Interest-bearing demand deposits increased due to a $41.4 million increase in public funds accounts.  Brokered deposits decreased $19.3 million and Federal Home Loan Bank advances decreased $17.3 million due to a shift in wholesale funding requirements.

Asset Quality

The Company recorded net recoveries of $107 thousand for the first half of 2019 compared to net charge-offs $267 thousand for the same period of 2018.    

The allowance for loan losses to loans was 0.86% at June 30, 2019 and 0.88% at December 31, 2018.  The non-performing assets to assets ratio decreased to 0.38% from 0.46% in 2018.  The allowance for loan losses to non-performing loans increased to 164.7% from 137.9% in 2018.   

Non-performing assets at June 30, 2019 were $8.4 million, a 15.6% decrease from December 31, 2018. Nonaccrual loans include $551 thousand and $1.0 million of purchased credit-impaired ("PCI") loans at June 30, 2019 and December 31, 2018, respectively.

Conference Call and Webcast

Civista Bancshares, Inc. will also host a conference call to discuss the Company's financial results for the second quarter of 2019 at 1:00 p.m. ET on Friday, July 26, 2019.  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. Second Quarter 2019 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, 2018.  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 $2.2 billion financial holding company headquartered in Sandusky, Ohio.  The Company's banking subsidiary, Civista Bank, operates 38 locations in Northern, Central and Southwestern Ohio, Southeastern Indiana and Northern Kentucky.  Civista Bancshares, Inc. may be accessed at www.civb.com.  The Company's common shares are traded on the NASDAQ Capital Market under the symbol "CIVB".  The Company's depositary shares, each representing a 1/40^th ownership interest in a Series B Preferred Share, are traded on the NASDAQ Capital Market under the symbol "CIVBP".

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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SOURCE Civista Bancshares, Inc.