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Press Release: Civista Bancshares, Inc. Announces -2-

· 02/05/2021 08:30
Noninterest expense (unaudited - dollars in thousands) Three months ended December 31, 2020 2019 $ change % change Compensation expense $ 10,417 $ 10,097 $ 320 3.2% Net occupancy and equipment 1,528 1,671 (143) -8.6% Contracted data processing 540 530 10 1.9% Taxes and assessments 716 286 430 150.3% Professional services 506 693 (187) -27.0% Amortization of intangible assets 227 235 (8) -3.4% ATM/Interchange expense 552 450 102 22.7% Marketing 18 300 (282) -94.0% Software maintenance expense 483 422 61 14.5% Other 1,981 2,444 (463) -18.9% -------- -------- --------- Total noninterest expense $ 16,968 $ 17,128 $ (160) -0.9%Noninterest income (unaudited - dollars in thousands) Twelve months ended December 31, 2020 2019 $ change % change Service charges $ 5,288 $ 6,395 $ (1,107) -17.3% Net gain on sale of securities 94 32 62 193.8% Net gain/(loss) on equity securities (57) 121 (178) -147.1% Net gain on sale of loans 8,563 2,707 5,856 216.3% ATM/Interchange fees 4,472 4,056 416 10.3% Wealth management fees 3,981 3,670 311 8.5% Bank owned life insurance 977 1,007 (30) -3.0% Tax refund processing fees 2,375 2,750 (375) -13.6% Swap fees 1,459 516 943 182.8% Other 1,030 1,189 (159) -13.4% -------- -------- --------- Total noninterest income $ 28,182 $ 22,443 $ 5,739 25.6% N/M - not meaningfulNoninterest income (unaudited - dollars in thousands) Three months ended December 31, 2020 2019 $ change % change Service charges $ 1,476 $ 1,662 $ (186) -11.2% Net gain on sale of securities 2 15 (13) -86.7% Net gain on equity securities 69 40 29 72.5% Net gain on sale of loans 3,062 1,006 2,056 204.4% ATM/Interchange fees 1,246 1,185 61 5.1% Wealth management fees 1,065 937 128 13.7% Bank owned life insurance 244 254 (10) -3.9% Swap fees 199 230 (31) -13.5% Other 303 298 5 1.7% -------- -------- --------- Total noninterest income $ 7,666 $ 5,627 $ 2,039 36.2% N/M - not meaningfulIntangible assets 84,953 85,744 Bank owned life insurance 45,454 44,352 Other assets 37,675 24,273 Less allowance for loan losses (19,231) (13,984) ----------- ----------- Total Assets $ 2,754,708 $ 2,241,111 Liabilities and Shareholders' Equity: -------------------- Interest-bearing liabilities: Demand and savings $ 1,050,544 $ 1,813 0.17% $ 869,340 $ 2,871 0.33% Time 288,262 5,068 1.76% 269,823 5,186 1.92% FHLB 133,151 1,932 1.45% 161,047 3,452 2.14% Other borrowings 101,295 354 0.35% - - 0.00% Federal funds purchased 288 1 0.35% 137 3 2.19% Subordinated debentures 29,427 945 3.21% 29,427 1,423 4.84% Repurchase agreements 24,390 25 0.10% 18,321 19 0.10% ----------- -------- ----------- -------- Total interest-bearing liabilities $ 1,627,357 10,138 0.62% $ 1,348,095 12,954 0.96% ----------- -------- ------ ----------- -------- ------ Noninterest-bearing deposits 739,648 550,638 Other liabilities 51,242 24,072 Shareholders' equity 336,461 318,306 ----------- ----------- Total Liabilities and Shareholders' Equity $ 2,754,708 $ 2,241,111 Net interest income and interest rate spread $ 89,727 3.48% $ 85,100 3.99% Net interest margin 3.70% 4.31% * - Average yields are presented on a tax equivalent basis. The tax equivalent effect associated with loans and investments, included in the yields above, was $1.64 million and $1.52 million for the periods ended December 31, 2020 and 2019, respectively. ** - Average balance includes nonaccrual loans

Provision for loan losses was $2.3 million for the fourth quarter of 2020 and $10.1 million for the year ended December 31, 2020. Provision for loan losses was $885 thousand for the fourth-quarter and $1.0 million for the year ended December 31, 2019. The increase in provision is due to an increase in the bank's qualitative factors related to the economic shutdown that is driven by COVID-19 and the ongoing payment deferrals on loans modified under the CARES Act. Economic impacts include the loss of revenue experienced 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.

For the fourth quarter of 2020, noninterest income totaled $7.7 million, an increase of $2.0 million, or 36.2%, compared to the prior year's fourth quarter.

Service charge income decreased primarily due to a $273.4 thousand decrease in overdraft fees. Customer behavior changed during the COVID-19 pandemic, resulting in fewer overdrafts.

Net gain on sale of loans increased due to an increase in the volume of loans sold of $46.7 million as well as an increase in the premium on sold loans of 112 basis points.

Wealth management fees increased as a result of increased assets under management, primarily driven by market gains, as well as an increase in the conversion ratio.

For the twelve months ended December 31, 2020, noninterest income increased $5.7 million, or 25.6%, compared to the same period in the prior year.

Service charge income decreased primarily due a $1.1 million decrease in overdraft fees. Customer behavior changed during the COVID-19 pandemic, resulting in fewer overdrafts.

During the twelve months ended December 31, 2020, Civista sold $304.0 million of mortgage loans, an increase of $178.2 million from the same period in 2019. The premium on sold loans also increased by 67 basis points during the twelve months this year compared to last year. These two factors contributed to the increase in net gain on sale of loans.

ATM/Interchange fees increased as a result of increased transaction volume.

Swap fees increased as a result of the declining interest rate environment and more customers looking to lock in lower fixed rate loans. During 2020, Civista entered into swap agreements with a notional value of $104.4 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.

Wealth management fees increased as a result of increased assets under management, primarily driven by market gains, as well as an increase in the conversion ratio.

For the fourth quarter of 2020, noninterest expense totaled $17.0 million, a decrease of $160 thousand, or 0.9%, compared to the prior year's fourth quarter.

Compensation expense increased primarily due to annual pay increases and commission and incentive expense. Annual pay increases in 2020 were an average of 3.3%. Employee insurance decreased $270.1 thousand, or 26.7%, for the fourth quarter 2020, compared to the same period in 2019. Commission and incentive expense increased $400.1 thousand, or 24.5% as a result of increased loan activity.

The quarter-over-quarter increase in taxes and assessments was attributable to an increase in the FDIC assessment base and a $159.0 thousand credit for small banks, applied to the December 2019 assessments. State franchise tax increased $73.6 thousand related to a State of Ohio audit of the tax years 2018 and 2019.

The decrease in marketing expense is due to decreases in both advertising and business promotion expenses, primarily related to the COVID-19 pandemic. Event cancellations and postponed outreach efforts contributed to the decrease as our focus was on communicating changes in operations, safety protocols, alternative delivery channels, and economic relief programs with the safety and financial wellness of our employees and customers in mind.

The decrease in other operating expense is primarily due to a decreases in travel and lodging expense of $264.4 thousand, education and training of $164.9 thousand and donations of $149.4 thousand. These decreases were partially offset by increases in loan origination expenses of $126.5 thousand.

The efficiency ratio was 53.7% for the quarter ended December 31, 2020 compared to 62.9% for the quarter ended December 31, 2019. The change in the efficiency ratio is due to increases in both noninterest income and the increase in net interest income.

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February 05, 2021 08:30 ET (13:30 GMT)