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

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8-K - 8-K - CIVISTA BANCSHARES, INC.	d927923d8k.htm

Exhibit 99.1

Civista Bancshares, Inc. Announces Second Quarter 2020 Earnings

Sandusky, Ohio, July 24, 2020 /PRNewswire/– Civista Bancshares, Inc. (NASDAQ:CIVB) (“Civista”) reported net income available to common shareholders of $6.5 million, or $0.41 per diluted share, for the second quarter of 2020, compared with $8.5 million, or $0.51 per diluted share, for the prior year period. For the six-month period ended June 30, 2020, Civista reported net income available to common shareholders of $14.3 million or $0.88 per diluted share, compared to $18.0 million or $1.08 per diluted share, in the same period of 2019.

“The challenges for 2020 continued through the second quarter. Much of our market area was under a stay at home order during a large part of the second quarter. We continued to work with customers providing loan payment deferrals as well as relief from overdraft and service charge fees. Along with this economic uncertainty comes the need to increase our provision for loan losses. Despite these challenging times, we are extremely pleased with our second quarter earnings.” said Dennis G. Shaffer, President and CEO of Civista.

Results of Operations:

For the three-month period ended June 30, 2020 and 2019

Net interest income increased $333 thousand, or 1.5%, for the second quarter of 2020 compared to the same period of 2019. The decrease in net interest income is a result of a decrease in interest income, partially offset by a decrease in interest expense.

Interest income decreased $342 thousand, or 1.4%, for the second quarter of 2020. Average yields decreased 113 basis points which resulted in a $5.3 million decrease in interest income. The decrease in average yields was partially offset by an increase in average earning assets of $541.2 million, which resulted in a $4.9 million increase in interest income. Accretion income associated with purchased loan portfolios totaled $758 thousand for the second quarter of 2020 and $1.1 million for the second quarter of 2019. During the quarter, the Bank had average Paycheck Protection Program (“PPP”) Loans totaling $189.4 million. These loans had an average yield of 3.46% including the amortization of PPP fees. Removing the impact of PPP loans, Interest income would have decreased $1.6 million and average asset yield would have been 4.29%.

Interest expense decreased $675 thousand, or 21.2%, for the second quarter of 2020 compared to the same period of 2019. Average interest-bearing liabilities increased $303.5 million, resulting in a $141 thousand increase in interest expense. Average rates decreased 35 basis points, resulting in an $816 thousand decrease in interest expense.

Net interest margin decreased 88 basis points to 3.61% for the second quarter of 2020, compared to 4.49% for the same period a year ago. Accretion income associated with purchased loan portfolios contributed approximately 13 basis points and 25 basis points to net interest margin for the second quarter of 2020 and 2019, respectively.

For the six-month period ended June 30, 2020 and 2019

Net interest income increased $730 thousand, or 1.7%, compared to the same period in 2019.

Interest income increased $76 thousand, or 0.2%, for the first six months of 2020. Average earning assets increased $378.0 million, which resulted in a $7.5 million increase in interest income. Average yields decreased 78 basis points which resulted in a $7.4 million decrease in interest income. Year-to-date accretion income associated with purchased loan portfolios totaled $1.5 million for 2020 and $2.1 million for 2019. During the six-month period, the Bank had average PPP Loans totaling $94.7 million. These loans had an average yield of 3.46% including the amortization of PPP fees. Removing the impact of PPP loans Interest income would have decreased $1.6 million and average yields would have been 4.45%.

Interest expense decreased $654 thousand, or 10.8%, for the first six months of 2020 compared to the same period of 2019. Average interest-bearing liabilities increased $206.9 million, resulting in a $546 thousand increase in interest expense. Average rates decreased 22 basis points, resulting in a $1.2 million decrease in interest expense.

Net interest margin decreased 63 basis points to 3.84% for the first six months of 2020, compared to 4.47% for the same period a year ago. Accretion income associated with purchased loan portfolios contributed approximately 14 basis points and 23 basis points to net interest margin for the first six months of 2020 and 2019, respectively.


Average Balance Analysis
(Unaudited—Dollars in thousands)

	Three Months Ended June 30,
	2020								2019
Assets:	Average balance			Interest		Yield/ rate*			Average balance			Interest		Yield/ rate*
Interest-earning assets:
Loans**	$	1,972,969		$	21,613		4.41	%	$	1,583,533		$	21,657		5.49	%
Taxable securities		185,956			1,359		3.05	%		202,995			1,694		3.39	%
Non-taxable securities		200,882			1,541		4.19	%		171,004			1,408		4.39	%
Interest-bearing deposits in other banks		168,199			71		0.17	%		29,309			167		2.29	%

Total interest-earning assets	$	2,528,006			24,584		4.01	%	$	1,986,841			24,926		5.14	%

Noninterest-earning assets:
Cash and due from financial institutions		84,961								38,558
Premises and equipment, net		22,535								21,819
Accrued interest receivable		9,312								7,324
Intangible assets		84,906								85,865
Bank owned life insurance		45,334								44,328
Other assets		43,297								22,193
Less allowance for loan losses		(17,098	)							(13,884	)

Total Assets	$	2,801,253							$	2,193,044

Liabilities and Shareholders’ Equity:
Interest-bearing liabilities:
Demand and savings	$	1,027,678		$	439		0.17	%	$	858,781		$	721		0.34	%
Time		289,658			1,363		1.89	%		271,183			1,255		1.86	%
FHLB		125,034			447		1.44	%		138,271			831		2.41	%
Other borrowings		124,819			4		0.01	%		—			—		0.00	%
Subordinated debentures		29,427			250		3.42	%		29,427			372		5.07	%
Repurchase agreements		22,987			6		0.15	%		18,442			5		0.11	%

Total interest-bearing liabilities	$	1,619,603			2,509		0.62	%	$	1,316,104			3,184		0.97	%

Noninterest-bearing deposits		790,891								540,283
Other liabilities		60,235								21,219
Shareholders’ equity		330,524								315,438

Total Liabilities and Shareholders’ Equity	$	2,801,253							$	2,193,044


Net interest income and interest rate spread				$	22,075		3.39	%				$	21,742		4.17	%

Net interest margin							3.61	%							4.49	%
* - Average yields are presented on a tax equivalent basis. The tax equivalent effect associated with loans and investments, included in the yields above, was $413 thousand and $378 thousand for the periods ended June 30, 2020 and 2019, respectively.
** - Average balance includes nonaccrual loans


Average Balance Analysis
(Unaudited—Dollars in thousands)

	Six Months Ended June 30,
	2020								2019
	Average					Yield/			Average					Yield/
Assets:	balance			Interest		rate*			balance			Interest		rate*
Interest-earning assets:
Loans**	$	1,849,327		$	43,286		4.71	%	$	1,573,924		$	42,619		5.46	%
Taxable securities		186,780			2,775		3.10	%		205,285			3,442		3.41	%
Non-taxable securities		199,233			3,053		4.21	%		164,349			2,760		4.44	%
Interest-bearing deposits in other banks		144,748			472		0.66	%		58,541			689		2.37	%

Total interest-earning assets	$	2,380,088			49,586		4.30	%	$	2,002,099			49,510		5.08	%

Noninterest-earning assets:
Cash and due from financial institutions		126,655								65,567
Premises and equipment, net		22,636								21,872
Accrued interest receivable		8,031								6,931
Intangible assets		84,994								85,990
Bank owned life insurance		45,210								43,987
Other assets		36,229								22,394
Less allowance for loan losses		(16,013	)							(13,885	)

Total Assets	$	2,687,830							$	2,234,955


Liabilities and Shareholders’ Equity:
Interest-bearing liabilities:
Demand and savings	$	961,285		$	1,044		0.22	%	$	857,232		$	1,429		0.34	%
Time		285,179			2,743		1.93	%		270,847			2,438		1.82	%
FHLB		141,391			1,028		1.46	%		117,882			1,429		2.44	%
Other borrowings		62,410			4		0.01	%		—			—		0.00	%
Federal funds purchased		305			3		1.98	%		—			—		0.00	%
Subordinated debentures		29,427			563		3.85	%		29,427			744		5.10	%
Repurchase agreements		22,555			11		0.10	%		20,309			10		0.10	%

Total interest-bearing liabilities	$	1,502,552			5,396		0.72	%	$	1,295,697			6,050		0.94	%

Noninterest-bearing deposits		795,215								610,265
Other liabilities		58,500								20,408
Shareholders’ equity		331,563								308,585

Total Liabilities and Shareholders’ Equity	$	2,687,830							$	2,234,955


Net interest income and interest rate spread				$	44,190		3.58	%				$	43,460		4.14	%

Net interest margin							3.84	%							4.47	%
* - Average yields are presented on a tax equivalent basis. The tax equivalent effect associated with loans and investments, included in the yields above, was $819 thousand and $741 thousand for the periods ended June 30, 2020 and 2019, respectively.
** - Average balance includes nonaccrual loans

Provision for loan losses was $3.5 million for the second quarter of 2020 and $5.6 million for the six months ended June 30, 2020. No provision was recorded during the first six months of 2019. The reserve ratio increased to 1.01% from 0.86% at December 31, 2019 due to an increase in the bank’s qualitative factors related to the economic shutdown that is driven by COVID-19. The reserve ratio without $257.6 million of PPP loans would have been 1.16% at June 30, 2020. Economic impacts include the loss of revenue being experience by our business clients, disruption of supply chains, additional employee costs for businesses due to the pandemic, higher unemployment rates throughout our footprint and a large number of customers requesting payment relief. We expect our Commercial, Commercial Real Estate and Consumer portfolios to be impacted the most.

For the second quarter of 2020, noninterest income totaled $6.9 million, an increase of $1.8 million, or 34.3%, compared to the prior year’s second quarter.


Noninterest income
(unaudited - dollars in thousands)	Three months ended June 30,
	2020			2019			$ change			% change
Service charges	$	930		$	1,552		$	(622	)		-40.1	%
Net gain on sale of securities		—			10			(10	)		-100.0	%
Net loss on equity securities		(5	)		(33	)		28			84.8	%
Net gain on sale of loans		2,261			555			1,706			307.4	%
ATM/Interchange fees		1,149			951			198			20.8	%
Wealth management fees		904			911			(7	)		-0.8	%
Bank owned life insurance		240			252			(12	)		-4.8	%
Tax refund processing fees		475			550			(75	)		-13.6	%
Swap fees		764			15			749			NM
Other		136			341			(205	)		-60.1	%

Total noninterest income	$	6,854		$	5,104		$	1,750			34.3	%

N/M - not meaningful

Service charge income decreased primarily due a $476.8 thousand decrease in overdraft fees. The Company also waived $93 thousand in service charges related to the COVID-19 pandemic.

Gain on sale of loans increased due to an increase in the volume of loans sold of $63.5 million, from $27.9 million in the second quarter of 2019 to $91.4 million in the second quarter of 2020. The premium on sold loans also increased by 49 basis points in the second quarter this year compared to last year.

ATM/Interchange fees increased as a result of increased transaction fees and the receipt of MasterCard fees.

Swap fees increased as a result of the declining interest rate environment and more customers looking to lock in lower fixed rate loans. During the quarter, we swapped $44.8 million in loans.

Tax refund processing fees decreased due to a decline in volume processed.

For the six months ended June 30, 2020, noninterest income totaled $13.7 million, an increase of $2.3 million, or 20.6%, compared to the same period in the prior year.


Noninterest income
(unaudited - dollars in thousands)	Six months ended June 30,
	2020			2019			$ change			% change
Service charges	$	2,398		$	3,008		$	(610	)		-20.3	%
Net gain on sale of securities		—			14			(14	)		-100.0	%
Net loss on equity securities		(146	)		(31	)		(115	)		-371.0	%
Net gain on sale of loans		3,088			886			2,202			248.5	%
ATM/Interchange fees		2,043			1,857			186			10.0	%
Wealth management fees		1,910			1,758			152			8.6	%
Bank owned life insurance		490			499			(9	)		-1.8	%
Tax refund processing fees		2,375			2,750			(375	)		-13.6	%
Swap fees		1,102			88			1,014			NM
Other		470			559			(89	)		-15.9	%

Total noninterest income	$	13,730		$	11,388		$	2,342			20.6	%

N/M - not meaningful

Service charge income decreased primarily due a $447.5 thousand decrease in overdraft fees. The Company also waived $93 thousand in service charges related to the COVID-19 pandemic.

The increased gain on sale of loans is primarily due to an increase in volume of loans sold of $82.4 million, from $44.4 million year-to-date in 2019 to $126.8 million year-to-date in 2020. The premium on sold loans also increased by 44 basis points during the six months this year compared to last year.

ATM/Interchange fees increased as a result of increased transaction fees and the receipt of MasterCard fees.

Wealth management fees increased due to an increase in average assets under management as well as a 5 basis points increase in the conversion ratio, to 0.71%, in 2020.

Swap fees increased as a result of the declining interest rate environment and more customers looking to lock in lower fixed rate loans. Year to date we have swapped $77.4 million in loans to provide low fixed rate loans for customers and variable rate loans for Civista.

Tax refund processing fees decreased due to a decline in volume processed.

For the second quarter of 2020, noninterest expense totaled $18.1 million, an increase of $1.5 million, or 8.9%, compared to the prior year’s second quarter.


Noninterest expense
(unaudited - dollars in thousands)	Three months ended June 30,
	2020		2019		$ change			% change
Compensation expense	$	10,597	$	9,548	$	1,049			11.0	%
Net occupancy and equipment		1,571		1,444		127			8.8	%
Contracted data processing		475		447		28			6.3	%
Taxes and assessments		631		605		26			4.3	%
Professional services		883		700		183			26.1	%
Amortization of intangible assets		228		235		(7	)		-3.0	%
ATM/Interchange expense		331		546		(215	)		-39.4	%
Marketing		339		367		(28	)		-7.6	%
Software maintenance expense		407		356		51			14.3	%
Other		2,652		2,391		261			10.9	%

Total noninterest expense	$	18,114	$	16,639	$	1,475			8.9	%

Compensation expense increased due to an increase in employees, annual pay increases and commission expense. Full time equivalent (“FTE”) employees increased by 20, or 4.6%, to 456 FTE. Annual pay increases in 2020 were an average of 3.3%. Employee insurance decreased 4.1% for 2020. Commission expense increased $418.1 thousand, or 88.7%, and overtime expense increased $166.2 thousand, or 119.2%, both as a result of increased loan activity.

The increase in net occupancy is the result of COVID-19 pandemic related increases to janitorial services and supplies of $123 thousand.

The increase in professional services costs is the result of increased consulting services to implement cost savings and customer services.

The decrease in ATM/interchange expense is primarily due to a settlement received in the second quarter of 2020 and savings realized by a vendor change.

The increase in software maintenance expense is due to a general increase in software maintenance contracts.

The increase in other operating expense is primarily due to increases in loan origination expense of $137.4 thousand, Mortgage Servicing Rights (“MSR”) valuation expense of $121.6 thousand, postage expense of $50.4 thousand, communications expense of $38.6 thousand and education and training expense of $25.0 thousand. These increases were partially offset by a decrease in travel and lodging expense of $182.3 thousand.

The efficiency ratio was 61.7% for the quarter ended June 30, 2020 compared to 61.1% for the quarter ended June 30, 2019. The change in the efficiency ratio is due primarily to the increase in noninterest expense.

Civista’s effective income tax rate for the second quarter 2020 was 11.3% compared to 15.1% in 2019.

For the six months ended June 30, 2020, noninterest expense totaled $36.0 million, an increase of $2.9 million, or 8.7%, compared to the same period in the prior year.


Noninterest expense
(unaudited - dollars in thousands)	Six months ended June 30,
	2020		2019		$ change			% change
Compensation expense	$	21,468	$	19,353	$	2,115			10.9	%
Net occupancy and equipment		3,053		2,947		106			3.6	%
Contracted data processing		925		866		59			6.8	%
Taxes and assessments		1,210		1,197		13			1.1	%
Professional services		1,620		1,395		225			16.1	%
Amortization of intangible assets		459		475		(16	)		-3.4	%
ATM/Interchange expense		778		924		(146	)		-15.8	%
Marketing		695		707		(12	)		-1.7	%
Software maintenance expense		844		705		139			19.7	%
Other		4,918		4,519		399			8.8	%

Total noninterest expense	$	35,970	$	33,088	$	2,882			8.7	%

Compensation expense increased due to an increase in employees, annual pay increases and commission expense. FTE employees increased by 21, or 4.8%, to 454 FTE. Annual pay increases in 2020 were an average of 3.3%. Employee insurance increased 2.6% for 2020. Commission expense increased $508.7 thousand, or 54.8%, and overtime expense increased $189.6 thousand, or 78.5%, both as a result of increased loan activity.

The decrease in ATM/Interchange expense is primarily due to a settlement received in the second quarter of 2020 and savings realized by a vendor change.

The increase in software maintenance expense is due to a general increase in software maintenance contracts.

The increase in other operating expense is primarily due to increases in loan origination expense of $207.5 thousand, MSR valuation expense of $162.7 thousand, postage expense of $100.9 thousand, communications expense of $55.2 thousand, ATM/debit card losses of $51.5 thousand and education and training expense of $50.0 thousand. These increases were partially offset by a decrease in travel and lodging expense of $255.4 thousand.

The efficiency ratio was 61.2% for the six months ended June 30, 2020 compared to 59.5% for the six months ended June 30, 2019. The change in the efficiency ratio is due primarily to the increase in noninterest expense.

Civista’s effective income tax rate for the first six months of 2020 was 12.2% compared to 15.8% in same period in 2019.

Balance Sheet

Total assets increased $502.6 million, or 21.8%, from December 31, 2019 to June 30, 2020, due primarily to a $314.0 million, or 18.4%, increase in the loan portfolio. Loans that are held for sale increased $16.2 million, or 710.6%, and cash increased $148.0 million, primarily related to the proceeds from Small Business Association’s (“SBA”) Paycheck Protection Program (“PPP”) loans held on deposit.


End of period loan balances
(unaudited - dollars in thousands)
	June 30, 2020		December 31, 2019		$ Change			% Change
Commercial and Agriculture	$	442,444	$	203,110	$	239,334			117.8	%
Commercial Real Estate:
Owner Occupied		252,914		245,606		7,308			3.0	%
Non-owner Occupied		646,792		592,222		54,570			9.2	%
Residential Real Estate		453,067		463,032		(9,965	)		-2.2	%
Real Estate Construction		178,318		155,825		22,493			14.4	%
Farm Real Estate		35,441		34,114		1,327			3.9	%
Consumer and Other		13,989		15,061		(1,072	)		-7.1	%

Total Loans	$	2,022,965	$	1,708,970	$	313,995			18.4	%

Loan growth during 2020 totaled $314.0 million, including $257.6 million of PPP loans. Otherwise, loan growth was led by increases of $61.9 million in Commercial Real Estate and $22.5 million in Real Estate Construction. The Commercial Real Estate growth continues to be aided by some successful real estate projects we kept on balance sheet by using longer term swaps that might otherwise have been refinanced on the commercial mortgage-backed securities market. Our construction portfolio continues to be vibrant, especially in the Central Ohio market. The decrease in Residential Real Estate was expected as we successfully refinance many on balance sheet mortgages and home equity loans into saleable mortgage products. All regions have contributed to the growth in the first six months, aided by many new clients and prospects from our success in PPP originations.

Paycheck Protection Program

We began accepting applications for the PPP loans on April 3, 2020 and during the first six months of 2020 processed 2,290 loans totaling $257.6 million. SBA fees, which will be earned over the life of the PPP loans, total approximately $9.8 million, which are being recognized in interest income over the life of the loans. We are approved to borrow from the Paycheck Protection Program Lending Facility (“PPPLF”), and have borrowed $183.7 million.

“By participating in the SBA PPP lending program we were able to directly assist our small business customers, impacting more than 36,000 jobs. This program will make a real difference in the businesses and lives of our customers and their employees.” said Dennis G. Shaffer, President and CEO of Civista.

COVID-19 Loan Modifications

During the first six months, Civista modified 813 loans totaling $431.3 million, primarily consisting of the deferral of principal and/or interest payments. All of the loans modified were performing at the time of the modification and comply with the provisions of the CARES Act to not be considered a troubled debt restructuring. Details with respect to actual loan modifications processed through June 30, 2020 are as follows:


Loans modified under COVID-19 programs
(unaudited - dollars in thousands)
Type of Loan	Number of Loans		Balance		Weighted average interest rate
Commercial and Agriculture		229	$	47,686		4.56	%
Commercial Real Estate:
Owner Occupied		193		91,831		4.82	%
Non-owner Occupied		179		234,543		4.47	%
Residential Real Estate		170		29,012		4.67	%
Real Estate Construction		18		26,296		4.39	%
Farm Real Estate		9		1,783		4.94	%
Consumer and Other		15		132		8.01	%

		813	$	431,283		4.57	%

“We took a very proactive approach with our customers to offer deferrals with the onset of COVID-19 and the stay at home orders. The deferrals were for 90 days and many are expiring late this month.” said Dennis G. Shaffer, President and CEO of Civista.

Total deposits increased $390.5 million, or 23.3%, from December 31, 2019 to June 30, 2020.


End of period deposit balances
(unaudited - dollars in thousands)
	June 30, 2020		December 31, 2019		$ Change		% Change
Noninterest-bearing demand	$	693,848	$	512,553	$	181,295		35.4	%
Interest-bearing demand		408,980		301,674		107,306		35.6	%
Savings and money market		673,524		588,697		84,827		14.4	%
Time deposits		292,909		275,840		17,069		6.2	%

Total Deposits	$	2,069,261	$	1,678,764	$	390,497		23.3	%

The increase in noninterest-bearing demand of $181.3 million was due to a $134.1 million increase in business demand deposit accounts and a $21.4 million increase in personal demand deposit accounts. Much of the increase in the business demand deposit accounts is due to the PPP loan proceeds. Interest-bearing demand deposits increased, primarily due to increases in non-public fund accounts. The increase in savings and money market was primarily due to an increases in money markets and brokered money market accounts. The increase in time deposits is due to public fund time deposit accounts.

FHLB advances totaled $125.0 million at June 30, 2020, a decrease of $101.5 million, or 44.8%, from December 31, 2019. The increase in deposits reduced the need for wholesale funding. The Company also borrowed $183.7 million from the PPPLF to help fund PPP loans.

Stock Repurchase Program

Civista approved a share repurchase plan in December 2019, authorizing the repurchase of up to 672,000 shares of outstanding common stock. As of April 4 2020, Civista repurchased all 672,000 shares for $11.4 million, which equates to a weighted average price of $16.90 per share. A new share repurchase program for $13.5 million was approved in April 2020. There have not been any share repurchases under this new program.

Shareholder Equity

Total shareholders’ equity increased $6.5 million, or 2.0%, from December 31, 2019 to June 30, 2020 as a result of a $10.7 million increase in retained earnings and an increase in other comprehensive income of $6.8 million. These increases were partially offset by an $11.5 million decrease related to the repurchase of shares.

Asset Quality

Civista recorded net recoveries of $41 thousand for the six months of 2020 compared to net recoveries of $107 thousand for the same period of 2019. The allowance for loan losses to loans was 1.01% at June 30, 2020 and 0.86% at December 31, 2019. The allowance ratio at June 30, 2020, without the PPP loans was 1.16%.


Allowance for Loan Losses
(unaudited - dollars in thousands)
	Six months ended June 30,
	2020			2019
Beginning of period	$	14,767		$	13,679
Charge-offs		(140	)		(395	)
Recoveries		181			502
Provision		5,612			—

End of period	$	20,420		$	13,786

Non-performing assets at June 30, 2020 were $7.8 million, a 14.6% decrease from December 31, 2019. The non-performing assets to assets ratio decreased to 0.28% from 0.39% at December 31, 2019. The allowance for loan losses to non-performing loans increased to 262.13% from 161.95% At December 31, 2019.


Non-performing Assets
(unaudited - dollars in thousands)	June 30,		December 31,
	2020		2019
Non-accrual loans	$	5,441	$	6,115
Restructured loans		2,349		3,004

Total non-performing loans		7,790		9,119
Other Real Estate Owned		—		—

Total non-performing assets	$	7,790	$	9,119

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 2020 at 1:00 p.m. ET on Friday, July 24, 2020. 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 2020 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, 2019, 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 $2.8 billion financial holding company headquartered in Sandusky, Ohio. The Company’s banking subsidiary, Civista Bank, operates 37 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”.

For additional information, contact:

Dennis G. Shaffer

President and CEO

Civista Bancshares, Inc.

888-645-4121

Civista Bancshares, Inc.

Financial Highlights

(Unaudited, dollars in thousands, except share and per share amounts)


Consolidated Condensed Statement of Income

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2020			2019			2020			2019
Interest income	$	24,584		$	24,926		$	49,586		$	49,510
Interest expense		2,509			3,184			5,396			6,050

Net interest income		22,075			21,742			44,190			43,460
Provision for loan losses		3,486			—			5,612			—

Net interest income after provision		18,589			21,742			38,578			43,460
Noninterest income		6,854			5,104			13,730			11,388
Noninterest expense		18,114			16,639			35,970			33,088

Income before taxes		7,329			10,207			16,338			21,760
Income tax expense		825			1,546			2,001			3,430

Net income		6,504			8,661			14,337			18,330
Preferred stock dividends		—			164			—			328

Net income available to common shareholders	$	6,504		$	8,497		$	14,337		$	18,002

Dividends paid per common share	$	0.11		$	0.11		$	0.22		$	0.20

Earnings per common share,
basic	$	0.41		$	0.54		$	0.88		$	1.15
diluted	$	0.41		$	0.51		$	0.88		$	1.08

Average shares outstanding,
basic		16,044,125			15,628,537			16,280,935			15,618,154
diluted		16,044,125			16,922,712			16,280,935			16,912,329

Selected financial ratios:
Return on average assets		0.93	%		1.58	%		1.07	%		1.65	%
Return on average equity		7.91	%		11.01	%		8.70	%		11.98	%
Dividend payout ratio		27.13	%		19.85	%		24.98	%		17.04	%
Net interest margin (tax equivalent)		3.61	%		4.49	%		3.84	%		4.47	%

Selected Balance Sheet Items

(Dollars in thousands, except share and per share amounts)


	June 30,			December 31,
	2020			2019
	(unaudited)

Cash and due from financial institutions	$	196,520		$	48,535
Investment securities		369,181			359,690
Loans held for sale		18,523			2,285
Loans		2,022,965			1,708,970
Less: allowance for loan losses		(20,420	)		(14,767	)

Net loans		2,002,545			1,694,203
Other securities		20,537			20,280
Premises and equipment, net		23,137			22,871
Goodwill and other intangibles		84,852			85,156
Bank owned life insurance		45,489			44,999
Other assets		51,369			31,538

Total assets	$	2,812,153		$	2,309,557


Total deposits	$	2,069,261		$	1,678,764
Federal Home Loan Bank advances		125,000			226,500
Securities sold under agreements to repurchase		23,608			18,674
Other borrowings		183,695			—
Subordinated debentures		29,427			29,427
Accrued expenses and other liabilities		44,549			26,066
Total shareholders’ equity		336,613			330,126

Total liabilities and shareholders’ equity	$	2,812,153		$	2,309,557


Shares outstanding at period end		16,052,979			16,687,542

Book value per share	$	20.97		$	19.78
Equity to asset ratio		11.97	%		14.29	%

Selected asset quality ratios:
Allowance for loan losses to total loans		1.01	%		0.86	%
Non-performing assets to total assets		0.28	%		0.39	%
Allowance for loan losses to non-performing loans		262.13	%		161.95	%

Non-performing asset analysis
Nonaccrual loans	$	5,441		$	6,115
Troubled debt restructurings		2,349			3,004
Other real estate owned		—			—

Total	$	7,790		$	9,119

Supplemental Financial Information

(Unaudited—dollars in thousands except share data)


End of Period Balances	June 30, 2020			March 31, 2020			December 31, 2019			September 30, 2019			June 30, 2019
Assets
Cash and due from banks	$	196,520		$	256,023		$	48,535		$	62,219		$	49,839
Investment securities		369,181			366,689			359,690			356,439			360,512
Loans held for sale		18,523			7,632			2,285			8,983			2,563
Loans		2,022,965			1,743,125			1,708,970			1,648,640			1,598,770
Allowance for loan losses		(20,420	)		(16,948	)		(14,767	)		(14,144	)		(13,786	)

Net Loans		2,002,545			1,726,177			1,694,203			1,634,496			1,584,984
Other securities		20,537			20,280			20,280			20,280			20,280
Premises and equipment, net		23,137			22,443			22,871			22,201			21,720
Goodwill and other intangibles		84,852			84,919			85,156			85,461			85,706
Bank owned life insurance		45,489			45,249			44,999			44,745			44,491
Other assets		51,369			46,444			31,538			34,241			32,900

Total Assets	$	2,812,153		$	2,575,856		$	2,309,557		$	2,269,065		$	2,202,995


Liabilities
Total deposits	$	2,069,261		$	1,991,939		$	1,678,764		$	1,632,621		$	1,632,720
Federal Home Loan Bank advances		125,000			142,000			226,500			236,100			176,300
Securities sold under agreement to repurchase		23,608			22,699			18,674			15,088			15,554
Other borrowings		183,695			—			—			—			—
Subordinated debentures		29,427			29,427			29,427			29,427			29,427
Accrued expenses and other liabilities		44,549			61,624			26,066			26,566			24,782

Total liabilities		2,475,540			2,247,689			1,979,431			1,939,802			1,878,783

Shareholders’ Equity
Preferred shares, Series B		—			—			—			9,158			9,364
Common shares		276,841			276,546			276,422			267,559			267,275
Retained earnings		78,712			73,972			67,974			62,023			56,199
Treasury shares		(32,594	)		(32,239	)		(21,144	)		(21,144	)		(17,235	)
Accumulated other comprehensive income		13,654			9,888			6,874			11,667			8,609

Total shareholders’ equity		336,613			328,167			330,126			329,263			324,212

Total Liabilities and Shareholders’ Equity	$	2,812,153		$	2,575,856		$	2,309,557		$	2,269,065		$	2,202,995


Quarterly Average Balances
Assets:
Earning assets	$	2,528,006		$	2,232,168		$	2,070,175		$	2,021,780		$	1,986,841
Securities		386,838			385,187			372,639			379,525			373,999
Loans		1,972,969			1,725,685			1,676,769			1,626,010			1,583,533
Liabilities and Shareholders’ Equity
Total deposits	$	2,108,227		$	1,975,133		$	1,661,452		$	1,622,527		$	1,670,247
Interest-bearing deposits		1,317,336			1,175,593			1,160,499			1,139,632			1,129,964
Other interest-bearing liabilities		302,267			209,909			252,908			246,235			186,140
Total shareholders’ equity		330,524			332,602			329,634			326,103			315,438


Supplemental Financial Information
(Unaudited—dollars in thousands except share data)

	Three Months Ended
Income statement	June 30, 2020		March 31, 2020		December 31, 2019		September 30, 2019		June 30, 2019
Total interest and dividend income	$	24,584	$	25,002	$	24,521	$	24,023	$	24,926
Total interest expense		2,509		2,887		3,299		3,605		3,184

Net interest income		22,075		22,115		21,222		20,418		21,742
Provision for loan losses		3,486		2,126		885		150		—
Noninterest income		6,854		6,876		5,627		5,429		5,104
Noninterest expense		18,114		17,856		17,128		16,731		16,639

Income before taxes		7,329		9,009		8,836		8,966		10,207
Income tax expense		825		1,176		995		1,258		1,546

Net income		6,504		7,833		7,841		7,708		8,661
Preferred stock dividends		—		—		157		162		164

Net income available to common shareholders	$	6,504	$	7,833	$	7,684	$	7,546	$	8,497

Common shares dividend paid	$	1,764	$	1,835	$	1,702	$	1,722	$	1,719

Per share data
Basic earnings per common share	$	0.41	$	0.47	$	0.49	$	0.48	$	0.54
Diluted earnings per common share		0.41		0.47		0.47		0.46		0.51
Dividends paid per common share		0.11		0.11		0.11		0.11		0.11
Average common shares outstanding—basic		16,044,125		16,517,745		15,796,713		15,577,371		15,628,537
Average common shares outstanding—diluted		16,044,125		16,517,745		16,734,391		16,849,887		16,922,712

Asset quality
Allowance for loan losses, beginning of period	$	16,948	$	14,767	$	14,144	$	13,786	$	13,822
Charge-offs		(116)		(24)		(345)		(36)		(156)
Recoveries		102		79		83		244		120
Provision		3,486		2,126		885		150		—

Allowance for loan losses, end of period	$	20,420	$	16,948	$	14,767	$	14,144	$	13,786


Ratios
Allowance to total loans		1.01%		0.97%		0.86%		0.86%		0.86%
Allowance to nonperforming assets		262.14%		197.97%		161.95%		149.91%		164.69%
Allowance to nonperforming loans		262.14%		197.97%		161.95%		149.91%		164.69%

Nonperforming assets
Nonperforming loans	$	7,790	$	8,561	$	9,119	$	9,435	$	8,371
Other real estate owned		—		—		—		—		—

Total nonperforming assets	$	7,790	$	8,561	$	9,119	$	9,435	$	8,371

Capital and liquidity
Tier 1 leverage ratio		10.43%		10.66%		12.35%		12.37%		12.44%
Tier 1 risk-based capital ratio		12.99%		14.33%		15.26%		15.50%		15.94%
Total risk-based capital ratio		13.97%		15.25%		16.10%		16.32%		16.78%
Tangible common equity ratio ⁽¹⁾		9.29%		9.82%		11.08%		10.81%		10.89%

(1)	See reconciliation of non-GAAP measures at the end of this press release.

Reconciliation of Non-GAAP Financial Measures

(Unaudited—dollars in thousands except share data)


	Three Months Ended
	June 30, 2020		March 31, 2020		December 31, 2019		September 30, 2019		June 30, 2019
Tangible Common Equity
Total Shareholder’s Equity—GAAP	$	336,613	$	328,167	$	330,126	$	329,263	$	324,212
Less: Preferred Equity		—		—		—		9,158		9,364
Less: Goodwill and intangible assets		83,135		83,363		83,595		83,829		84,064

Tangible common equity (Non-GAAP)	$	253,478	$	244,804	$	246,531	$	236,276	$	230,784

Total Shares Outstanding		16,052,979		16,064,010		16,687,542		15,473,275		15,633,059

Tangible book value per share	$	15.79	$	15.24	$	14.77	$	15.27	$	14.76

Tangible Assets
Total Assets—GAAP	$	2,812,153	$	2,575,856	$	2,309,557	$	2,269,065	$	2,202,995
Less: Goodwill and intangible assets		83,135		83,363		83,595		83,829		84,064

Tangible assets (Non-GAAP)	$	2,729,018	$	2,492,493	$	2,225,962	$	2,185,236	$	2,118,931

Tangible common equity to tangible assets		9.29%		9.82%		11.08%		10.81%		10.89%

CIVISTA BANCSHARES, INC. - FORM 8-K - EX-99.1 - July 24, 2020

Attached files

CIVISTA BANCSHARES, INC. Reports