SANDUSKY, Ohio, April 30, 2024 /PRNewswire/ -- Civista Bancshares, Inc. (NASDAQ:CIVB) ("Civista") announced its unaudited financial results for the three months ending March 31, 2024.  First quarter highlights Net income of $6.4 million, or $0.41 per diluted share, for the first quarter of 2024, compared to $12.9 million, or $0.82 per diluted share, for the first quarter of 2023.    Low cost of deposits of 214 basis points and total funding costs of 254 basis points for the quarter. Based on the March 29, 2024 market close share price of $15.38, the $0.16 first quarter dividend is equivalent to an annualized yield of 4.16% and a dividend payout ratio of 42.11%. "Although I was disappointed in our first quarter results, we knew there would be head winds as we exited the third-party payment tax refund business, and that we would not have the benefit of the $1.5 million one-time bonus from the prior year's renegotiation of our debit brand agreement.  In late 2023, we implemented changes in the way we process overdrafts which reduced service charge income.  As a result of these three items, we had approximately $3.8 million of noninterest income to replace from the previous year," said Dennis G. Shaffer, CEO and President of Civista. Results of Operations: For the three-month period ended March 31, 2024 and 2023 Net interest income decreased $4.2 million, or 13.0%, for the first quarter of 2024 compared to the same period of 2023, due to an increase in interest expense partially offset by an increase in interest income.  Noninterest income also decreased, primarily due to the company's decision to step away from our income tax refund business for 2024.      Net interest margin decreased 77 basis points to 3.22% for the first quarter of 2024, compared to 3.99% for the same period a year ago.  The increase in interest income was due to increases in both yield and in asset volume.  The 41 basis point increase in yield led to a $3.7 million increase in interest income, while the $239.3 million increase in average earning assets led to a $3.5 million increase in interest income.  The increase in volume can be attributed to organic growth. Interest expense increased $12.8 million, or 143.4%, for the first quarter of 2024, compared to the same period last year.  The average rate paid on interest-bearing liabilities increased 140 basis points, which led to a $6.9 million increase in interest expense.  Average interest-bearing liabilities increased $411.6 million, leading to a $4.5 million increase in interest expense.  The increase in interest-bearing liabilities was primarily in time deposits.  The increase in funding cost, as well as the shift in the funding mix, are driving the increase in interest.   Average Balance Analysis (Unaudited - Dollars in thousands) Three Months Ended March 31, 2024 2023 Average Yield/ Average Yield/ Assets: balance Interest rate * balance Interest rate * Interest-earning assets: Loans ** $   2,880,031 $ 44,485 6.20 % $   2,649,901 $ 37,784 5.78 % Taxable securities 350,815 2,934 3.00 % 374,851 2,834 2.77 % Non-taxable securities 295,388 2,375 3.85 % 281,136 2,262 3.81 % Interest-bearing deposits in other banks 26,318 334 5.09 % 7,397 45 2.47 % Total interest-earning assets $   3,552,552 50,128 5.64 % $   3,313,285 42,925 5.23 % Noninterest-earning assets: Cash and due from financial institutions 29,599 54,136 Premises and equipment, net 54,980 62,776 Accrued interest receivable 12,724 10,655 Intangible assets 134,872 135,554 Bank owned life insurance 61,456 53,630 Other assets 58,472 61,292 Less allowance for credit losses (37,356) (30,454)       Total Assets $   3,867,299 $   3,660,874 Liabilities and Shareholders' Equity: Interest-bearing liabilities: Demand and savings $   1,383,225 $   3,986 1.16 % $   1,384,070 $   1,084 0.32 % Time 902,442 12,001 5.33 % 308,400 2,148 2.82 % Short-term FHLB advances 328,687 4,515 5.51 % 372,226 4,258 4.64 % Long-term FHLB advances 2,275 13 2.29 % 3,442 19 2.24 % Other borrowings - - 0.00 % 116,200 1,643 5.73 % Subordinated debentures 103,957 1,241 4.79 % 103,814 1,169 4.57 % Repurchase agreements - - 0.00 % 20,823 3 0.06 % Total interest-bearing liabilities $   2,720,586 21,756 3.21 % $   2,308,975 10,324 1.81 % Noninterest-bearing deposits 712,483 961,886 Other liabilities 63,778 48,854 Shareholders' equity 370,452 341,159 Total Liabilities and Shareholders' Equity $   3,867,299 $   3,660,874 Net interest income and interest rate spread $ 28,372 2.43 % $ 32,601 3.42 % Net interest margin 3.22 % 3.99 % * Average yields are presented on a tax equivalent basis. The tax equivalent effect associated with loans and investments, included in the yields above, was $632 thousand and $601 thousand for the periods ended March 31, 2024 and 2023, respectively.   **  Average balance includes nonaccrual loans ***  Average yield on investments were calculated by adjusting the average balances of taxable and nontaxable securities by unrealized losses of $59.2 million in 2024 and by unrealized losses of $63.2 million in 2023.  These adjustments were also made when calculating the yield on earning assets and the margin. Provision for credit losses for the first quarter of 2024 was $2.0 million compared to $620 thousand for the first quarter of 2023.  Provision for unfunded commitments for the first quarter of 2024 was ($50) thousand compared to $201 thousand for the first quarter of 2023.  The reserve ratio as of March 31, 2024 was 1.34%, up from 1.30% at December 31, 2023. For the first quarter of 2024, noninterest income totaled $8.5 million, a decrease of $2.6 million, or 23.2%, compared to the prior year's first quarter.  Noninterest income (unaudited - dollars in thousands) Three months ended March 31, 2024 2023 $ change % change Service charges $    1,440 $    1,773 $     (333) -18.8 % Net loss on sale of securities - - - 0.0 % Net gain (loss) on equity securities (141) (68) (73) -107.4 % Net gain on sale of loans 863 631 232 36.8 % ATM/Interchange fees 1,383 1,353 30 2.2 % Wealth management fees 1,276 1,193 83 7.0 % Bank owned life insurance 350 253 97 38.3 % Lease revenue and residual income 1,674 2,046 (372) -18.2 % Tax refund processing fees - 1,900 (1,900) -100.0 % Swap fees 57 61 (4) -6.6 % Other 1,602 1,926 (324) -16.8 % Total noninterest income $    8,504 $  11,068 $  (2,564) -23.2 % Service charges decreased due to a $375 thousand decrease in overdraft fees.  We have reduced our per instance charge and have eliminated charges for representment of items for payment.      The net gain on sale of loans and leases increased by $232 thousand compared to the same period last year.  The sale of mortgage loans generated a $423 thousand gain on the sale of $20.2 million, an increase in the gain of $191 thousand and a $10.9 million increase in 2024 volume, compared to 2023.   CLF generated a $440 thousand gain on the sale of $12.6 million in commercial loans and leases, an increase in the gain of $41 thousand and a $1.4 million increase in 2024 volume, compared to 2023. Lease revenue and residual income decreased $372 thousand due to a decrease in operating lease activity. Tax refund processing fee income is now zero as we exited our third-party processor that was in the tax refund processing business. Other income decreased primarily as result of a $1.5 million nonrecurring fee collected in 2023 associated with the renewal of the company's contract with MasterCard. For the first quarter of 2024, noninterest expense totaled $27.7 million, an increase of $257 thousand, or 0.9%, compared to the prior year's first quarter. Noninterest expense (unaudited - dollars in thousands) Three months ended March 31, 2024 2023 $ change % change Compensation expense $  15,457 $  15,105 $       352 2.3 % Net occupancy and equipment  3,903 4,120 (217) -5.3 % Contracted data processing 545 520 25 4.8 % Taxes and assessments 969 774 195 25.2 % Professional services 1,149 1,555 (406) -26.1 % Amortization of intangible assets 391 398 (7) -1.8 % ATM/Interchange expense 625 580 45 7.8 % Marketing 479 505 (26) -5.1 % Software maintenance expense 1,189 878 311 35.4 % Other 2,982 2,997 (15) -0.5 % Total noninterest expense $  27,689 $  27,432 $       257 0.9 % Compensation expense increased primarily due to a $614 thousand increase in salary expense.  Merit increases awarded in the second quarter of 2023.   Employee insurance expense increased $222 thousand compared to the same period last year.  Commission expense decreased $515 thousand compared to the same period last year. The decrease in occupancy and equipment expense is primarily due to a decrease in equipment depreciation.  Taxes & assessments increased primarily due to an increase in the FDIC assessment rate charged. Professional services decreased due to $400 thousand advisory fees for renegotiation of the company's MasterCard contract paid in 2023.  The increase in Software maintenance expense is primarily due to expense of our digital banking platform. The efficiency ratio was 73.8% for the quarter ended March 31, 2024 compared to 62.0% for the quarter ended March 31, 2023.  The change in the efficiency ratio is primarily due to a decrease in net interest income and a decrease in noninterest income. Civista's effective income tax rate for the first quarter 2024 was 11.8% compared to 16.4% in 2023. Balance Sheet Total assets increased $18.8 million, or less than 1%, from December 31, 2023 to March 31, 2024, primarily due to an increase in the loan portfolio of $36.4 million, or 1.3%.  The increase in loans was partially offset by a $10.1 million decrease in cash and a $10.8 million decrease in the securities portfolio.    End of period loan balances (unaudited - dollars in thousands) March 31, December 31, 2024 2023 $ Change % Change Commercial and Agriculture $          302,663 $          304,793 $    (2,130) -0.7 % Commercial Real Estate: Owner Occupied 367,419 377,322 (9,903) -2.6 % Non-owner Occupied 1,185,688 1,161,893 23,795 2.0 % Residential Real Estate 676,800 659,841 16,959 2.6 % Real Estate Construction 267,737 260,409 7,328 2.8 % Farm Real Estate 24,908 24,771 137 0.6 % Lease financing receivable 56,680 54,642 2,038 3.7 % Consumer and Other 16,244 18,056 (1,812) -10.0 % Total Loans $       2,898,139