Civista Bancshares, Inc. (NASDAQ:CIVB) Q3 2020 Earnings Conference Call - Final Transcript

Oct 23, 2020 • 01:00 pm ET


Civista Bancshares, Inc. (NASDAQ:CIVB) Q3 2020 Earnings Conference Call - Final Transcript


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Dennis G. Shaffer

modifications during the quarter.

We began to gain some clarity of our customers' financial positions and their ability to perform moving forward. This clarity, along with our strong capital position allowed us to resume share repurchases. During the quarter, we repurchased 107,500 shares at an average price of $12.15 per share. We view share repurchases as an integral part of our capital management strategy.

Our return on average assets was 1.08% for both the quarter and year-to-date, while our return on average equity was 9.01% for the quarter and 8.8% year-to-date. Despite the lower interest rate environment, net interest income for the quarter was $22 million, which was consistent with the linked quarter and $1.6 million greater than the prior year. Our net interest margin did contract to 3.44% compared to 3.61% for the linked quarter and 3.70% year-to-date.

While the $259 million of PPP loans provided positive net interest income in dollars, they make -- made up 12.7% of our average loans for the quarter and 7.8% year-to-date at an average yield that approximate 3%. They do have a negative impact on our margins. Without the PPP loans, our margin would improve by 40 basis points to 3.84% for the quarter and by 23 basis points to 3.93% year-to-date.

During the quarter, non-interest income was fairly consistent with that of our second quarter at $6.8 million and increased $1.4 million or 25% over the same quarter in the prior year. During the first nine months, non-interest income increased $3.7 million or 22% over the prior year. The low interest rate environment continues to drive the mortgage markets across our footprint and mortgage banking continued to be the largest driver of non-interest income. Third quarter gains on the sale of mortgage loans were $2.4 million or 6.7% greater than the linked quarter and $1.6 million or 196.1% greater than the third quarter of the previous year. Similarly, the year-to-date gain on sale of mortgage loans was $5.5 million or 223.4% higher than the previous year.

During the quarter, we sold $84.1 million in residential mortgage loans at an average premium of 286 basis points compared to $91.5 million in the linked quarter and $36 million in the prior year. Year-to-date we have sold $211.1 million in mortgages, compared to $80.5 million in the previous year-to-date. Our mortgage pipeline remains very strong. Other significant drivers of non-interest income were interchange fees and wealth management fees. Swap fee income was down for the third quarter, but it's 339% higher year-to-date.

Service charges have decreased compared to 2019 levels. We did see some rebound in service charges compared to the linked quarter with an increase of $484,000 or 52%. A $183,000 of the increase was due to reinstating several customer service charges that we suspended during the second quarter to provide relief to our deposit customers. Overdraft fees also increased $270,000 compared to the linked quarter.

While non-interest expense increased both during the quarter and the nine-month period compared to 2019, we did