Civista Bancshares, Inc. Announces 2017 Earnings

SANDUSKY, Ohio, Jan. 26, 2018 /PRNewswire/ -- Civista Bancshares, Inc. (NASDAQ: CIVB) ("Civista") reported net income available to common shareholders of $3.7 million, or $0.32 per diluted share, for the fourth quarter of 2017, compared with $3.3 million, or $0.33 per diluted share, for the prior year period.  For the year ended December 31, 2017, Civista reported net income available to common shareholders of $14.6 million or $1.28 per diluted share, compared to $15.7 million, or $1.57 per diluted share, in the same period of 2016.  The fourth quarter and year ended December 31, 2017 results included two loan recoveries which added $252 thousand, after tax.  The 2016 results for twelve-month period were impacted by a large loan recovery that resulted in approximately $1.5 million net income after taxes.  In addition, we issued approximately 1.6 million new shares in February 2017 related to raising $32.8 million of additional capital, net of costs.  The 2017 impact of the Tax Cut and Jobs Act was a net write down of $511 thousand, or approximately $0.05 per diluted share of net deferred tax assets.

"2017 was another strong year for Civista.  We had many financial and non-financial accomplishments.  When you remove the noise from the loan recoveries both in 2016 and 2017 and the tax expense impact of the Tax Cut and Jobs Act, our net income is up $389 thousand.  We had a very successful $32.8 million capital raise in February which was largely oversubscribed.  We have invested in a loan production office in Westlake and added lenders in our more vibrant markets.  Our loan growth for the year was 10.3%.  We were successful in improving our CRA rating, which allows us to pursue acquisitions again.  Finally, we have completed our CEO succession with the retirement of Jim Miller.  We thank Jim for his 31 years of service and look forward to his continued involvement on our board," said Dennis G. Shaffer, President and CEO of Civista.

Results of Operations:

Net interest income for the fourth quarter of 2017 increased $2.0 million, or 16.0% compared to the same period of 2016 and for the year ended December 31 increased $4.2 million, or 8.4%, compared to 2016.  An increase in average loans outstanding primarily contributed to the increase in interest income for the fourth quarter and year ended 2017.  The net interest income for the fourth quarter of 2017 included approximately $387 thousand of recovered interest income on two previously nonaccrual loans, which resulted in approximately 10 basis points of additional net interest margin for the fourth quarter and 2 basis points for the year ended 2017.  The net interest income for the twelve-month period in 2016 included approximately $919 thousand of recovered interest income on a previous nonaccrual loan, which resulted in approximately 9 basis points of additional net interest margin.  An increase in market interest rates and an increase in brokered deposits contributed to the increase in interest expense.  The Federal Reserve increased short-term interest rates 75 basis points during 2017.  Tax equivalent net interest margin was 4.24% for the fourth quarter, compared to 4.05% for the same period a year ago and was 4.01% for the twelve months ended December 31, 2017, compared to 3.93% for the same period a year ago.  

No provision for loan losses was made during 2017 and a credit provision of $1.3 million was recorded for the twelve months ended December 31, 2016 due to a large loan recovery. 

During the quarter, noninterest income totaled $3.6 million, an increase of $487 thousand, compared to the prior year's fourth quarter.  Year-to-date noninterest income totaled $16.3 million, an increase of $202 thousand, or 1.3%, compared to the prior year.    

Gain on sale of loans increased $129 thousand, or 31.5%, for the quarter ended December 31, 2017 compared to 2016.  ATM/Interchange fees increased $151 thousand and $210 thousand for the quarter and year ended December 31, 2017, primarily due to $100 thousand incentive received related the 2017 debit card conversion.  Wealth management fees increased $146 thousand, or 21.2%, and $390 thousand, or 14.6%, for the quarter and year ended December 31, 2017 due to increased assets under management as well as market conditions.  Assets under management have increased $17.0 million since the end of the third quarter 2017 and $48.8 million during 2017.  Other income decreased $341 for the year ended December 31, 2017, compared to 2016, primarily due to a $173 thousand decrease in swap income and a $180 thousand decrease in gain/loss on sale of OREO properties.

During the quarter, noninterest expense totaled $12.4 million, an increase of $1.7 million, or 15.7%, compared to the prior year's fourth quarter.  Year-to-date noninterest expense increased $4.7 million, or 10.8%, when compared to the twelve months of 2016.

Compensation expense increased $1.3 million for the fourth quarter and $3.9 million for the year ending December 31, 2017. 

The increases in compensation expense for both periods were due to an increase of fourteen full time equivalent employees, $864 thousand and $2.6 million of normal merit raises, commissions and incentives, $186 thousand and $526 thousand of insurance costs and $259 thousand and $740 thousand of pension expense.  The pension expense increases are due to a pension curtailment incurred upon the retirement of some senior executives.  Professional services costs increased $137 thousand for the fourth quarter and $405 thousand for the year ended December 31, 2017, primarily attributable to the Company retaining professional services to analyze its' workflow systems and recommend process improvements and the reintroduction of state examination fees.  Other expenses increased $443 thousand for the year ended December 31, 2017.  Approximately $243 thousand of the increase is attributable to ATM/Interchange expenses, due to vendor credits that expired in the second quarter of 2016 and unreimbursed expenses related to the 2017 debit card conversion.   

The efficiency ratio was 67.0% for the twelve months ended December 31, 2017 compared to 64.7% for the twelve months ended December 31, 2016.  The increase in the efficiency ratio is due primarily to the increase in noninterest expense, partially offset by an increase in net interest income.  

Balance Sheet

Total assets increased $148.6 million, or 10.8%, from December 31, 2016 to December 31, 2017, primarily due to an increase in the loan portfolio of $109.2 million and an increase in investment securities of $35.2 million.   

The $109.2 million, or 10.3%, increase in the loan portfolio from December 31, 2016 to December 31, 2017, continues to come from growth in our Commercial and Agriculture, Commercial Real Estate and Residential Real Estate loan portfolios.  The majority of the loan growth continued to come from our metropolitan markets.  Real Estate Construction loans also increased this year, due to very successful development lending and multi-family projects.    

Total deposits increased $83.8 million, or 7.5%, from December 31, 2016 to December 31, 2017.  The increase was due primarily to $67.4 million of additional brokered deposits.  Brokered deposits are used to fund loan growth. 

Federal Home Loan Bank advances increased $23.4 million or 48.2% from December 31, 2016 to December 31, 2017, primarily to fund loan growth.

Total shareholders' equity increased $46.8 million, or 34.0%, from December 31, 2016 to December 31, 2017, primarily due to approximately $32.8 million of additional common equity raised in February.  Retained earnings also increased by $12.4 million.        

Asset Quality

The Company recorded net charge-offs of $171 thousand for the twelve months of 2017 compared to net recoveries of $244 thousand for the same period of 2016.    

The allowance for loan losses to loans was 1.13% for 2017 and 1.26% for 2016.  The decrease is due to the loan growth during 2017.  Asset quality improved with non-performing assets to assets ratio decreasing to 0.63% from 0.85% in 2016.  The allowance for loan losses to non-performing loans increased to 137.82% from 113.74% in 2016. 

Non-performing assets at December 31, 2017 were $9.5 million, an 18.7% decrease from December 31, 2016. 

Mr. Shaffer continued, "As we close out another successful year we are very pleased with our results.  Our core net income is up, our asset quality has continued to improve and we are free from our CRA issue.  Our 2018 initiatives will include continued loan growth, maintaining our asset quality, mergers and acquisitions and deposit acquisition strategies."

Civista Bancshares, Inc. is a $1.5 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 HUwww.civb.comUH.  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.

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SOURCE Civista Bancshares, Inc.