CIVISTA BANCSHARES, INC. - FORM 8-K - EX-99.1

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8-K - FORM 8-K - CIVISTA BANCSHARES, INC.	d375915d8k.htm

Exhibit 99.1

LOGO

Civista Bancshares, Inc. Announces First Quarter 2017 Earnings

Sandusky, Ohio, April 28, 2017 /PRNewswire/– Civista Bancshares, Inc. (NASDAQ:CIVB) (“Civista”) reported net income available to common shareholders of $4.3 million, or $0.40 per diluted share, for the first quarter of 2017, compared with $4.3 million, or $0.43 per diluted share, for the prior year period.

“The first quarter of 2017 has provided a very solid start to the year. During the quarter we successfully raised $35 million in common stock, which was hugely oversubscribed. We opened a new loan production office in Westlake, Ohio. We grew our loan balances at an annualized rate of 7.6% and have maintained stable asset quality.” said James O. Miller, Chairman, President and CEO of Civista.

Results of Operations:

Net interest income for the first quarter of 2017 increased $657 thousand, or 5.4% compared to the same period of 2016. For the three-month period ended March 31, an increase in average loans outstanding primarily contributed to the increase in interest income compared to 2016. Tax equivalent net interest margin was 3.67% for the first quarter, compared to 3.53% for the same period a year ago. Net interest margin was reduced in both periods due to the impact of additional interest-earning cash on deposit related to the tax refund processing program. The impact to net interest margin related to the tax refund processing program in the first quarter was a reduction of 32 basis points in 2017 and 49 basis points in 2016.

Summary Average Balance Sheet

(Tax-equivalent basis / dollars in thousands)


	Three months ended March 31,
	2017							2016
	Average balance		Interest		Yield / rate			Average balance		Interest		Yield / rate
Assets
Loans	$	1,067,903	$	11,777		4.47	%	$	1,000,720	$	11,317		4.55	%
Securities		210,962		1,559		3.77	%		211,995		1,456		3.54	%
Interest-bearing deposits		188,813		356		0.76	%		227,738		280		0.49	%

Total interest earning assets	$	1,467,678	$	13,692		3.89	%	$	1,440,453	$	13,053		3.76	%

Liabilities
Int-bearing demand and savings	$	577,809	$	123		0.09	%	$	556,240	$	113		0.08	%
Time deposits		189,985		342		0.73	%		209,550		377		0.72	%
FHLB advances and other borrowings		81,448		335		1.66	%		91,724		328		1.44	%

Total interest-bearing liabilities	$	849,242	$	800		0.38	%	$	857,514	$	818		0.38	%
Noninterest-bearing deposits	$	624,315						$	608,085
Net interest income and interest rate spread			$	12,892		3.51	%			$	12,235		3.38	%
Net interest margin						3.67	%						3.53	%

No provision for loan losses was made for the first quarter of 2017 or 2016.

During the first quarter 2017, noninterest income totaled $5.1 million, compared to $5.3 million for the prior year’s first quarter.


Noninterest income
(dollars in thousands)	Three months ended March 31,
	2017		2016
Service charges	$	1,045	$	1,129
Net gain on sale of securities		—		(5	)
Net gain on sale of loans		257		394
ATM fees		510		508
Wealth management fees		707		634
Tax refund processing fees		2,200		2,200
Other		419		400

Total noninterest income	$	5,138	$	5,260

Service charge income decreased $84 thousand, or 7.4%, for the three-month period primarily due to an increase in the business account earnings credits. Overdraft charges were also down, related to consumer account activity. Gain on sale of loans decreased $137 thousand for the three-month period ended March 31, due partially to a lesser volume of loans sold this year.

Additionally, the first quarter of 2016 included a gain associated with Commercial loans which totaled $77 thousand. Wealth management fees increased $73 thousand for the three-month period as assets under management have increased $26.7 million since the end of the first quarter 2016. Tax refund processing fees remained unchanged.

Noninterest expense totaled $11.5 million for the first quarter 2017, an increase of $595 thousand, or 5.5%, compared to the prior year’s first quarter.


Noninterest expense
(dollars in thousands)	Three months ended March 31,
	2017		2016
Salaries, Wages and benefits	$	7,118	$	6,324
Net occupancy and equipment		987		927
Contracted data processing		388		355
Taxes and assessments		422		470
Professional services		451		501
Amortization of intangible assets		167		183
Marketing		252		287
Other		1,717		1,860

Total noninterest expense	$	11,502	$	10,907

Salaries, wages and benefits expense increased $794 thousand for the first quarter 2017, compared to last year. The increases in salaries, wages and benefits expense were due to additional employees, normal merit raises, and an increase in benefit costs. Net occupancy and equipment increased $60 thousand for the three-month period ended March 31 2017, due primarily to repair and maintenance expense.

The efficiency ratio was 62.5% during the first quarter 2017 compared to 61.1% for 2016.

Balance Sheet

Total assets increased $191.8 million, or 13.9%, from December 31, 2016 to March 31, 2017, due increased cash balances of $145.0 million, primarily related to the tax refund processing program, an increase in the loan portfolio of $19.7 million and an increase in investment securities of $27.4 million.

The $19.7 million, or 1.9%, increase in the loan portfolio from December 31, 2016 to March 31, 2017 continues to come from growth in our Commercial and Agriculture, Commercial Real Estate and Residential Real Estate loan portfolios.

End of period loan balances

(dollars in thousands)


	March 31, 2017		December 31, 2016		$ Change			% Change

Commercial and Agriculture	$	139,449	$	135,462	$	3,987			2.9	%
Commercial Real Estate:
Owner Occupied		167,904		161,364		6,540			4.1	%
Non-owner Occupied		400,411		395,931		4,480			1.1	%
Residential Real Estate		255,578		247,308		8,270			3.3	%
Real Estate Construction		55,266		56,293		(1,027	)		-1.8	%
Farm Real Estate		38,035		41,170		(3,135	)		-7.6	%
Consumer and Other		18,597		17,978		619			3.4	%

Total Loans	$	1,075,240	$	1,055,506	$	19,734			1.9	%

Mr. Miller continued, “We normally see a decrease in loans during the first quarter of the year. The first quarter of 2017 we saw a 1.9%, or 7.6% annualized, increase. The addition of several lenders and the opening of the Westlake, Ohio loan production office have provided a good foundation for growth. Our loan pipeline remains strong heading into the second quarter.”

Total deposits increased $190.4 million, or 17.0%, from December 31, 2016 to March 31, 2017. The increase was due primarily to the additional cash balances related to the tax refund processing program.

End of period deposit balances

(dollars in thousands)


	March 31,		December 31,
	2017		2016		$ Change			% Change
Noninterest-bearing demand	$	569,749	$	345,588	$	224,161			64.9	%
Interest-bearing demand		183,370		183,759		(389	)		-0.2	%
Savings and money market		393,547		384,330		9,217			2.4	%
Time deposits		164,787		207,426		(42,639	)		-20.6	%

Total Deposits	$	1,311,453	$	1,121,103	$	190,350			17.0	%

Federal Home Loan Bank advances decreased $33.5 million or 69.1% from December 31, 2016 to March 31, 2017, primarily due to the increase in deposits.

Total shareholders’ equity increased $37.1 million, or 27.0%, from December 31, 2016 to March 31, 2017 primarily due to approximately $32.8 million of additional common equity raised in February. Retained earnings also increased by $3.8 million.

Asset Quality

The Company recorded net charge-offs of $5 thousand for the first quarter of 2017 compared to net recoveries of $72 thousand for the same period of 2016.

Allowance for Loan Losses

(dollars in thousands)


	March 31,			March 31,
	2017			2016
Beginning of period	$	13,305		$	14,361
Charge-offs		(131	)		(126	)
Recoveries		126			198
Provision		—			—

End of period	$	13,300		$	14,433

Nonperforming assets at March 31, 2017 were $11.7 million, a small decrease from December 31, 2016.

Non-performing Assets

(dollars in thousands)


	March 31,		December 31,
	2017		2016
Non-accrual loans	$	7,950	$	7,518
Restructured loans		3,682		4,180

Total non-performing loans		11,632		11,698
Other Real Estate Owned		17		37

Total non-performing assets	$	11,649	$	11,735

Civista Bancshares, Inc. is a $1.6 billion financial holding company headquartered in Sandusky, Ohio. The Company’s banking subsidiary, Civista Bank, operates 29 locations in Northern, Mid- Central and Southwestern Ohio.

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”.

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, 2016. 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.

For additional information, contact:

James O. Miller

Chairman, President and CEO

Civista Bancshares, Inc.

888-645-4121

Civista Bancshares, Inc.

Financial Highlights

(dollars in thousands, except share amounts)

Consolidated Condensed Statement of Income


	Three Months Ended March 31, (unaudited)
	2017			2016
Interest income		13,692			13,053
Interest expense		800			818

Net interest income		12,892			12,235
Provision for loan losses		—			—

Net interest income after provision		12,892			12,235
Noninterest income		5,138			5,260
Noninterest expense		11,502			10,907

Income before taxes		6,528			6,588
Income tax expense		1,893			1,863

Net income		4,635			4,725
Preferred stock dividends		319			391

Net income available to common shareholders		4,316			4,334
Dividends per common share	$	0.06		$	0.05
Earnings per common share, basic	$	0.47		$	0.55
diluted	$	0.40		$	0.43
Average shares outstanding, basic		9,100,329			7,845,768
diluted		11,608,333			10,924,013
Selected financial ratios:
Return on average assets		1.15	%		1.17	%
Return on average equity		12.37	%		14.97	%
Dividend payout ratio		11.78	%		8.30	%
Net interest margin (tax equivalent)		3.67	%		3.53	%

Selected Balance Sheet Items


	March 31, 2017			December 31, 2016
	(unaudited)			(unaudited)
Cash and due from financial institutions	$	182,446		$	36,695
Investment securities		223,245			195,864
Loans held for sale		1,740			2,268
Loans		1,075,240			1,055,506
Less allowance for loan losses		13,300			13,305

Net loans		1,061,940			1,042,201
Other securities		14,072			14,055
Fixed assets		17,952			17,920
Goodwill and other intangibles		28,727			28,879
Bank owned life insurance		24,696			24,552
Other assets		14,197			14,829

Total assets	$	1,569,015		$	1,377,263

Total deposits	$	1,311,453		$	1,121,103
Federal Home Loan Bank advances		15,000			48,500
Securities sold under agreements to repurchase		23,674			28,925
Subordinated debentures		29,427			29,427
Accrued expenses and other liabilities		14,724			11,692
Total shareholders’ equity		174,737			137,616

Total liabilities and shareholders’ equity	$	1,569,015		$	1,377,263

Shares outstanding at period end		10,143,070			8,343,509

Book value per share	$	15.48		$	14.22
Equity to asset ratio		11.14	%		9.99	%

Selected asset quality ratios:
Allowance for loan losses to total loans		1.24	%		1.26	%
Non-performing assets to total assets		0.74	%		0.85	%
Allowance for loan losses to non-performing loans		114.34	%		113.74	%

Non-performing asset analysis
Nonaccrual loans	$	7,950		$	7,518
Troubled debt restructurings		3,682			4,180
Other real estate owned		17			37

Total	$	11,649		$	11,735

Average Balance Analysis

(Unaudited - Dollars in thousands except share data)



	Three Months Ended March 31,
	2017								2016
Assets:	Average balance			Interest		Yield/ rate*			Average balance			Interest		Yield/ rate*
Interest-earning assets:
Loans	$	1,067,903		$	11,777		4.47	%	$	1,000,720		$	11,317		4.55	%
Taxable securities		132,152			847		2.62	%		137,795			801		2.38	%
Non-taxable securities		78,810			712		5.69	%		74,200			655		5.69	%
Interest-bearing deposits in other banks		188,813			356		0.76	%		227,738			280		0.49	%

Total interest-earning assets	$	1,467,678			13,692		3.89	%	$	1,440,453			13,053		3.76	%

Noninterest-earning assets:
Cash and due from financial institutions		98,472								114,551
Premises and equipment, net		18,124								16,871
Accrued interest receivable		3,933								4,019
Intangible assets		28,827								29,447
Other assets		10,328								9,906
Bank owned life insurance		24,602								21,562
Less allowance for loan losses		(13,311	)							(14,504	)

Total Assets	$	1,638,653							$	1,622,305

Liabilities and Shareholders’ Equity:
Interest-bearing liabilities:
Demand and savings	$	577,809		$	123		0.09	%	$	556,240		$	113		0.08	%
Time		189,985			342		0.73	%		209,550			377		0.72	%
FHLB		28,440			88		1.25	%		38,436			110		1.15	%
Subordinated debentures		29,427			241		3.32	%		29,427			212		2.90	%
Repurchase agreements		23,581			6		0.10	%		23,861			6		0.10	%

Total interest-bearing liabilities	$	849,242			800		0.38	%	$	857,514			818		0.38	%

Noninterest-bearing deposits		624,315								608,085
Other liabilities		13,168								29,730
Shareholders’ equity		151,928								126,976

Total Liabilities and Shareholders’ Equity	$	1,638,653							$	1,622,305

Net interest income and interest rate spread				$	12,892		3.51	%				$	12,235		3.38	%
Net interest margin							3.67	%							3.53	%

* - All yields and costs are presented on an annualized basis

Supplemental Financial Information

(Unaudited - Dollars in thousands except share data)


End of Period Balances	March 31, 2017			December 31, 2016			September 30, 2016			June 30, 2016			March 31, 2016
Assets
Cash and due from banks	$	182,446		$	36,695		$	33,229		$	41,772		$	214,407
Securities available for sale		223,245			195,864			200,967			200,643			201,786
Loans held for sale		1,740			2,268			2,827			5,167			2,193
Loans		1,075,240			1,055,506			1,046,967			1,028,922			1,005,803
Allowance for loan losses		(13,300	)		(13,305	)		(13,451	)		(14,547	)		(14,433	)

Net Loans		1,061,940			1,042,201			1,033,516			1,014,375			991,370
Other securities		14,072			14,055			13,926			13,734			13,550
Fixed assets		17,952			17,920			17,340			16,711			16,773
Goodwill and other intangibles		28,727			28,879			29,038			29,186			29,337
Bank owned life insurance		24,696			24,552			24,404			24,255			23,218
Other assets		14,197			14,829			17,033			14,068			14,262

Total Assets	$	1,569,015		$	1,377,263		$	1,372,280		$	1,359,911		$	1,506,896

Liabilities
Total deposits	$	1,311,453		$	1,121,103		$	1,134,153		$	1,115,007		$	1,279,780
Federal Home Loan Bank advances		15,000			48,500			35,000			47,300			17,500
Securities sold under agreement to repurchase		23,674			28,925			21,713			17,725			24,272
Subordinated debentures		29,427			29,427			29,427			29,427			29,427
Accrued expenses and other liabilities		14,724			11,692			13,678			14,249			25,377

Total liabilities		1,394,278			1,239,647			1,233,971			1,223,708			1,376,356

Shareholders’ Equity
Preferred shares, Series B		17,708			18,950			19,776			22,124			22,273
Common stock		153,167			118,975			118,126			115,750			115,442
Accumulated earnings		23,073			19,263			16,471			13,640			9,242
Treasury stock		(17,235	)		(17,235	)		(17,235	)		(17,235	)		(17,235	)
Accumulated other comprehensive income (loss)		(1,976	)		(2,337	)		1,171			1,924			818

Total shareholders’ equity		174,737			137,616			138,309			136,203			130,540

Total Liabilities and Shareholders’ Equity	$	1,569,015		$	1,377,263		$	1,372,280		$	1,359,911		$	1,506,896


Quarterly Average Balances
Assets:
Earning assets	$	1,467,678		$	1,274,928		$	1,271,069		$	1,301,101		$	1,440,453
Securities		210,962			211,458			215,470			215,059			211,995
Loans		1,067,903			1,044,121			1,042,721			1,015,687			1,000,720
Liabilities and Shareholders’ Equity
Total deposits	$	1,392,109		$	1,147,351		$	1,130,181		$	1,191,298		$	1,373,875
Interest-bearing deposits		767,794			788,549			782,269			765,908			765,790
Interest-bearing liabilities		81,448			73,012			84,389			68,445			91,724
Total shareholders’ equity		151,928			137,717			136,737			132,267			126,976

Supplemental Financial Information

(Unaudited - Dollars in thousands except share data)


	Three Months Ended
	March 31,			December 31,			September 30,			June 30,			March 31,
Income statement	2017			2016			2016			2016			2016
Total interest income	$	13,692		$	13,407		$	13,370		$	13,739		$	13,053
Total interest expense		800			849			844			799			818

Net interest income		12,892			12,558			12,526			12,940			12,235
Provision for loan losses		—			—			—			(1,300	)		—
Noninterest income		5,138			3,143			3,653			4,075			5,260
Noninterest expense		11,502			10,702			11,195			11,050			10,907

Income before taxes		6,528			4,999			4,984			7,265			6,588
Income tax expense		1,893			1,368			1,304			2,084			1,863

Net income		4,635			3,631			3,680			5,181			4,725
Preferred stock dividends		319			345			374			391			391

Net income available to common shareholders	$	4,316		$	3,286		$	3,306		$	4,790		$	4,334

Common shares dividend paid	$	507		$	495		$	474		$	392		$	392

Per share data
Basic net income per common share	$	0.47		$	0.40		$	0.41		$	0.61		$	0.55
Diluted net income per common share		0.40			0.33			0.34			0.47			0.43
Dividends per common share		0.06			0.06			0.06			0.05			0.05
Average common shares outstanding - basic		9,100,329			8,273,167			8,042,422			7,877,119			7,845,768
Average common shares outstanding - diluted		11,608,333			10,963,109			10,965,031			10,951,521			10,924,013

Asset quality
Allowance for loan losses, beginning of period	$	13,305		$	13,451		$	14,547		$	14,433		$	14,361
Charge-offs		(131	)		(287	)		(1,183	)		(230	)		(126	)
Recoveries		126			141			87			1,644			198
Provision		—			—			—			(1,300	)		—

Allowance for loan losses, end of period	$	13,300		$	13,305		$	13,451		$	14,547		$	14,433


Ratios
Allowance to total loans		1.24	%		1.26	%		1.28	%		1.41	%		1.43	%
Allowance to nonperforming assets		114.17	%		113.38	%		102.71	%		105.20	%		93.12	%
Allowance to nonperforming loans		114.34	%		113.74	%		103.21	%		106.02	%		93.46	%

Nonperforming assets
Nonperforming loans	$	11,632		$	11,698		$	13,033		$	13,721		$	15,443
Other real estate owned		17			37			62			107			56

Total nonperforming assets	$	11,649		$	11,735		$	13,095		$	13,828		$	15,499

Capital and liquidity
Tier 1 leverage ratio		11.08	%		10.55	%		10.38	%		9.85	%		8.24	%
Tier 1 risk-based capital ratio		15.93	%		12.98	%		12.84	%		12.76	%		12.52	%
Total risk-based capital ratio		17.12	%		14.20	%		14.08	%		14.01	%		13.77	%
Tangible common equity ratio		8.37	%		6.70	%		6.71	%		6.42	%		5.38	%

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