Overview of Financial Performance

Civista Bancshares, Inc. (Civista) reported net income of $31,683 for the year ended December 31, 2024, a decrease from $42,964 in 2023. This change was primarily due to a decrease in net interest income and an increase in noninterest expense, partially offset by an increase in noninterest income.

Revenue and Profit Trends

Net interest income, which is the difference between interest earned on loans and securities and interest paid on deposits and borrowings, decreased by $8,786, or 7.0%, to $116,710 in 2024 from $125,496 in 2023. This was due to an increase in interest expense that outpaced the increase in interest income.

Interest income increased by $23,961, or 13.1%, to $206,695 in 2024, driven by a $22,823 increase in interest and fees on loans. The average balance of loans grew by $262,115, or 9.6%, to $2,984,912 in 2024, and the yield on the loan portfolio increased to 6.15% from 5.90% in 2023.

However, interest expense increased by $32,747, or 57.2%, to $89,985 in 2024. This was primarily due to a $32,046 increase in interest paid on deposits, as the average rate paid on interest-bearing deposits rose to 1.53% in 2024 from 0.57% in 2023. The average balance of interest-bearing deposits also increased by $450,532.

The provision for credit losses increased by $929, or 20.9%, to $5,364 in 2024 compared to $4,435 in 2023, primarily to support organic loan growth.

Noninterest income increased by $585, or 1.6%, to $37,748 in 2024, driven by increases in net gain on sale of loans and leases, lease revenue and residual income, bank owned life insurance, and wealth management fees. These were partially offset by decreases in service charges.

Noninterest expense increased by $4,909, or 4.6%, to $112,520 in 2024, mainly due to increases in compensation, FDIC assessments, professional services, and software expense, partially offset by a decrease in equipment expense.

Strengths and Weaknesses

A key strength of Civista is its strong net interest margin, which was 3.21% in 2024 despite the increase in interest rates and funding costs. The company has been able to grow its loan portfolio at a healthy pace while maintaining asset quality, as evidenced by the low net charge-off ratio of 0.11% in 2024.

Another strength is Civista’s diversified revenue streams, with noninterest income contributing 24.5% of total revenue in 2024. The company has seen growth in areas like wealth management, leasing, and mortgage banking, which helps offset pressure on the net interest margin.

However, a weakness is the increase in noninterest expense, which grew faster than revenue in 2024. The company will need to carefully manage its cost structure going forward, particularly in areas like compensation, professional services, and technology investments.

Additionally, Civista’s reliance on deposit funding, which made up 81.0% of total liabilities at the end of 2024, exposes it to rising interest rates and potential deposit competition. The company will need to closely monitor its deposit pricing and composition to maintain a stable funding base.

Outlook and Future Prospects

Looking ahead, Civista faces a challenging interest rate environment, with the Federal Reserve continuing to raise rates to combat inflation. This will put pressure on the company’s net interest margin, as asset yields may not keep pace with the rise in funding costs.

To offset this, Civista will need to focus on growing loans and fee-based businesses, while carefully managing its deposit pricing and composition. The company’s strong capital position, with a total risk-based capital ratio of 13.8% at the end of 2024, provides a buffer to withstand potential credit losses or margin compression.

Additionally, Civista’s investments in technology and digital capabilities should help improve efficiency and the customer experience, which could support future growth. The company’s history of prudent risk management and disciplined underwriting also position it well to navigate the economic uncertainties ahead.

Overall, Civista remains a well-capitalized and profitable community bank, but it will need to continue adapting its business model to the changing interest rate and competitive landscape to sustain its performance in the coming years.