Civista Bancshares(US:CIVB)2021-10-27 19:24Financial Data and Key Metrics Changes - The company reported net income of $9.6 million or $0.64 per diluted share for Q3 2021, and $29.6 million or $1.90 per diluted share for the nine months ending September 30, 2021 [7] - Earnings per share for the quarter increased by 33.3% compared to Q3 2020 and 39.7% compared to the first nine months of 2020 [8] - Net interest income increased by $592,000 or 2.5% over the linked quarter and by $2.4 million or 11% year over year [16] - The net interest margin was 3.62% for the quarter, slightly lower than the previous year but higher than the linked quarter [17] Business Line Data and Key Metrics Changes - Excluding PPP loans, loans grew by 3% or 12% on an annualized basis, with the largest increase in commercial real estate [12] - Non-interest income declined by $814,000 or 11.2% compared to the linked quarter but increased by $2.3 million or 11.4% year over year [21] - Mortgage banking remains the largest driver of non-interest income, with third-quarter gains on the sale of mortgage loans at $1.6 million, down from $2.2 million in the linked quarter [23] Market Data and Key Metrics Changes - Total deposits increased by $245.4 million or 11.2% since the beginning of the year, with significant growth in non-interest bearing demand accounts [33] - The criticized loan portfolio declined from $148.1 million at the end of 2020 to $106.1 million at September 30, 2021, indicating improved asset quality [35] Company Strategy and Development Direction - The company is focused on growing and diversifying revenue streams while managing expenses effectively [8][29] - There is an ongoing strategy to leverage a new digital banking platform, with plans to roll out online account openings [44] - The company is actively engaging in discussions for potential mergers and acquisitions, indicating a strategic interest in growth through consolidation [54] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism despite challenges such as labor shortages and supply chain issues affecting customers [43] - The company anticipates that most remaining PPP phase two loans will be forgiven by the end of 2021 [44] - There is a focus on maintaining a solid loan pipeline and expectations for continued loan growth in the mid-single digits for 2021 [32][66] Other Important Information - The company announced a quarterly dividend of $0.14, representing an annualized yield of 2.41% [9] - Share repurchases totaled 404,620 shares during the quarter, with a year-to-date total of 909,859 shares [41] Q&A Session Summary Question: Inquiry about software maintenance expenses and digital banking platform - Management indicated that the run rate for software maintenance expenses is expected to be around $200,000 per quarter going forward, with no additional expenses anticipated for the online account opening feature [46][48] Question: Discussion on new loan yields and margin competition - Management noted that competition remains strong in the commercial real estate loan market, with no significant ability to pass on treasury rate increases to customers [49] Question: Breakdown of mortgage activity - The breakdown for September showed 64% of mortgage activity was for purchases and 36% for refinancing, a trend that has been consistent [51] Question: Capital allocation strategy and M&A appetite - Management confirmed ongoing discussions with smaller banks for potential M&A opportunities, indicating a more active landscape than usual [54] Question: Outlook for balance sheet and expenses - Management expects core expenses to grow in the range of 2% to 4% year-over-year, with wage inflation being a significant factor [58][59]