Civista Bancshares Q4 2024 Earnings Report

Civista Bancshares EPS Results

• Actual EPS: $0.63
• Consensus EPS: $0.53
• Beat/Miss: Beat by +$0.10
• One Year Ago EPS: N/A

Civista Bancshares Revenue Results

• Actual Revenue: N/A
• Expected Revenue: $39.79 million
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Civista Bancshares Announcement Details

• Quarter: Q4 2024
• Date: 1/30/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, January 30, 2025
• Conference Call Time: 1:00PM ET

Civista Bancshares (NASDAQ:CIVB) operates as the financial holding company for Civista Bank that provides community banking services. It collects a range of customer deposits; and offers commercial and agriculture, commercial and residential real estate, farm real estate, real estate construction, consumer, and other loans, as well as letters of credit. The company also holds and manages securities portfolio; leases general equipment; and provides captive insurance products. It operates in North Central, West Central, South Western Ohio, South Eastern Indiana, and Northern Kentucky. The company was formerly known as First Citizens Banc Corp and changed its name to Civista Bancshares, Inc. in May 2015. Civista Bancshares, Inc. was founded in 1884 and is headquartered in Sandusky, Ohio.

Civista Bancshares Q4 2024 Earnings Call Transcript

Presentation

[Operator]

Good afternoon, ladies and gentlemen, and welcome to the Savista Bancshares Inc. Fourth Quarter twenty twenty four Earnings Conference Call. At this time, all lines are in a listen only mode. Before we begin, I would like to remind you that this conference call may contain forward looking statements with respect to the future performance and financial condition of Savista Bancshares Inc. That involve risks and uncertainties.

[Operator]

Various factors could cause actual results to be materially different from any future results expressed or implied by such forward looking statements. These factors are discussed in the company's SEC filings, which are available on the company's website. The company disclaims any obligation to update any forward looking statements made during the call. Additionally, management may refer to non GAAP measures, which are intended to supplement but not substitute the most directly comparable GAAP measures. The press release also available on the company's website contains the financial and other quantitative information to be discussed today as well as the reconciliation of the GAAP to non GAAP measures.

[Operator]

This call will be recorded and made available on Savista Bankures' website at www.civv.com. At the conclusion of Mr. Schafer's remarks, he and the Savista management team will take any questions you may have. Now, I will turn the call over to Mr. Schafer.

[Dennis Shaffer, President and CEO at Civista Bancshares]

Thank you. Good afternoon. This is Dennis Schafer, President and CEO of Savista Bancshares. And I would like to thank you for joining us for our I'm joined today by Chuck Pertcher, EVP of the company and President and Chief Lending Officer of the bank Rich Dutton, SVP of the company and Chief Operating Officer of the bank Ian Wyndham, SVP of the company and Chief Financial Officer of the bank and other members of our executive team. This morning, we reported net income for the of $990,000,0.0 or $0,.63 per diluted share, which represents a $150,000,0.0 or 18% increase over the linked quarter and a $237,000 increase over our in 2023.

[Dennis Shaffer, President and CEO at Civista Bancshares]

We also reported net income for the year of $3,170,000,0.0 or $2,.01 per diluted share, which compares to $43,000,000 or $2,.73 per diluted share for 2023. Our ROA for the year was 0.8%. However, it was 0.97% for the quarter continuing our strength of improving our ROA for each quarter of 2024. As I have mentioned during previous calls, 2024 was a year of transition for Savista as we look to replace nearly $520,000,0.0 of 2023 non interest income. This included $140,000,0.0 due to changes to the way we process overdrafts, dollars 240,000,0.0 in tax refund processing revenue and a 1500000.0 Mastercard renewal fee.

[Dennis Shaffer, President and CEO at Civista Bancshares]

I am happy to report that our non interest income for 2024 was $585,000 greater than our non interest income for 2023. We were able to make up this lost revenue by increasing other service charges, increased gains on the sale of mortgages, increased lease and loan originations and increased lease and residual fee income. Loan demand continues to be strong in each of our markets. However, we continue to be disciplined in our approach to loan and lease pricing, which had the intended impact of slowing growth. Our loan and lease portfolio grew at an annualized rate of 4.9% during the and a respectable rate of 7.7% for the year.

[Dennis Shaffer, President and CEO at Civista Bancshares]

Core deposit funding continues to be a focus and we were pleased that our core deposit funding grew organically by over $36,000,000 during the quarter, which allowed us to reduce our reliance on brokered funding. While overall, the impact was a slight decline in total deposits from the end of our this represents a shift toward more relationship funding that we believe contributes to the overall value of our core deposit franchise. Currently, we have a number of core deposit gathering initiatives underway and I continue to be encouraged by our ability to remain disciplined in pricing both our loans and deposits for this entire interest rate cycle. We reported net interest income for the quarter of $3,140,000,0.0 which represents an increase of $210,000,0.0 or 7.3% compared to our linked quarter. While our earning asset yield increased by 1 basis point, the increase in net interest income was primarily attributable to a 19 basis point decline in our overall funding costs, which ended the year at 2.41%.

[Dennis Shaffer, President and CEO at Civista Bancshares]

Our decline in our funding costs was largely attributable to $200,000,000 in brokered CDs that matured in Oct. 0. They carried a rate of 5.58% and we were able to reduce or replace them by laddering brokered CDs over the subsequent twelve months at a blended rate of 4.32%. The result was that our margin expanded by 20 basis points during the quarter to 3.36 and was 3.21% for the year. Similarly, we had $150,000,000 in brokered CDs that matured in the last December, that carried a rate of 5.08%.

[Dennis Shaffer, President and CEO at Civista Bancshares]

We were able to reduce and replace them with $125,000,000 of CDs laddered over the next twelve months at a blended rate of 4.37% representing a savings of 71 basis points. While this had little impact on our results, we do anticipate that it will further reduce our overall funding costs in the We also have another $150,000,000 of brokerage CDs at a rate of 5.18% that will mature at the end of the that we anticipate being able to replace at a lower cost. We believe that our margin trough during the and will continue to expand over the next few quarters. Earlier this month, we announced a $0,.01 per share increase in our quarterly dividend to $0,.17 per share. Based on our year end market close of $21,.51 this represents an annualized yield of 3.16%.

[Dennis Shaffer, President and CEO at Civista Bancshares]

During the quarter, non interest income decreased $671,000 or 6.9 percent from the linked quarter and increased $192,000 or 2.2% from the The primary driver of the decline from our linked quarter was a $110,000,0.0 decline in lease revenue and residual fees. As we have noted, leasing fees, particularly residual income, is less predictable than more traditional banking fees. The primary drivers for the increase from the prior year's were a 333 hundred and $84,000 increase in gains from the sale of mortgage loans and leases and the receipt of a $319,000 debt benefit on life insurance policy held on a former employee. As I mentioned, we are particularly proud of the fact that our year to date non interest income increased $585,000 or 1.6% in comparison to the prior year. Non interest expense for the quarter of $2,830,000,0.0 represents a 1.1% increase from our linked quarter.

[Dennis Shaffer, President and CEO at Civista Bancshares]

Our continued focus on expense control yielded improvement in nearly every category of non interest expense. However, these declines in non interest expense were offset by an increase in professional fees as we continued using consultants as we transitioned in our new finance team as our controller retired in July 0 and we experienced the resignations of 2 other tenured employees in our finance department during the These positions have all been filled. We will continue to utilize consultants at a reduced capacity during the and do not anticipate needing them beyond the end of the As we discussed during last quarter's call, we are in the process of converting our lease accounting and servicing systems. This will consolidate a number of systems and introduce automation to a number of tasks currently being manually performed. We noted during our last call that we had identified a reconciling item and established a reserve against it, which was included in other non interest expense.

[Dennis Shaffer, President and CEO at Civista Bancshares]

As we continued the process, we increased the reserve by another $482,000 during the quarter. We expect the conversion to be completed during the Year to date, non interest expense increased 4900000.0 or 4.6% over the prior year. Compensation expense increased $350,000,0.0 over the prior year due to merit increases, insurance and other payroll related expenses. Taxes and assessments increased $1,000,000 primarily due to an FDIC accrual adjustment in the coupled with an increase year over year in our total assessment base. Software maintenance expense was up $777,000 due to a new software contract, aiding and improving our ability to detect and mitigate fraud losses as well as increases in costs associated with existing software contracts.

[Dennis Shaffer, President and CEO at Civista Bancshares]

These increases were partially offset by $150,000,0.0 decline in depreciation on equipment we own related to our operating lease contracts, which are included in equipment, maintenance and depreciation. We continue to originate fewer operating leases in our purchasing residual value insurance on those operating leases that we do originate with a goal of eventually eliminating depreciation expense related to operating leases. We remain a very tax efficient company. Our effective tax rate was 13.1% for the quarter and 13.4% year to date. Our efficiency ratio for the quarter was 68.3%, which is an improvement over the linked quarter, but continues to be higher than we would like.

[Dennis Shaffer, President and CEO at Civista Bancshares]

We did close a branch in Dec. 0 and anticipate $142,000 in annual savings as a result and are transitioning our after hour calls away from a third party provider to our automated system, which should yield another $180,000 in annual savings and improve our customer experience. We will continue our efforts in 2025 looking for revenue enhancements and cost efficiencies across the organization to bring this ratio more in line with our expectations. Turning our focus to the balance sheet. For the year, total loans and leases grew by $21,950,000,0.0 This represented a growth rate of 7.7% as we experienced increases in commercial and ag loans, non owner occupied CRE loans, residential real estate and real estate construction loans.

[Dennis Shaffer, President and CEO at Civista Bancshares]

During the quarter, total loans and leases grew by $3,730,000,0.0 This represents an annualized growth rate of 4.8%. The loans we originate for our portfolio continue to be virtually all adjustable rate and our leases all have maturities of five years or less. Given today's rates, we expect approximately $180,000,000 of our loans to reprice at higher rates over the next twelve months. The Vista remains a CRE lending bank. However, we continue to be aggressive in pricing C and I loans and remain disciplined in how we are pricing commercial real estate loans as we work to manage our CRE to risk based capital ratio and better align our lending and core funding.

[Dennis Shaffer, President and CEO at Civista Bancshares]

During the quarter, new and renewed commercial loans were originated at an average rate of 7.72%. Portfolio and sold residential real estate loans were originated at 6.41% and loans and leases originated by our leasing division were at an average rate of 9.32. At December '31, loans secured by office buildings made up 5.2% of our total loan portfolio. As we have stated previously, these loans are not secured by high rise metro office buildings, rather they are predominantly secured by single or 2 story office buildings located outside of central business districts. Along with year to date loan production, our pipelines remain solid and our undrawn construction lines were $2.38,000,000 dollars at December '31.

[Dennis Shaffer, President and CEO at Civista Bancshares]

We anticipate continuing to manage our loan growth to be in the low single digit range for the next several quarters, allowing us to optimize funding and further improve our capital ratios. Our commercial lenders, treasury management officers, private bankers and retail teams continue to focus on deepening relationships and attracting core deposits. Total deposits were relatively unchanged from the linked quarter. However, we did lower our balance of broker deposits by $48,000,000 For the year, total deposits grew by $22,680,000,0.0 or 7.6% on increases in savings in money market accounts and time deposits. In addition to the initiatives of our frontline teams, we were successful in adding money market deposits from the State of Ohio's Homebuyer Plus program and cash deposits held in our wealth management clients' accounts, which represented $9,570,000,0.0 and $97,000,000 respectively.

[Dennis Shaffer, President and CEO at Civista Bancshares]

At December '31, our loan to deposit ratio was 96%. During the quarter, our cost of interest bearing deposits declined by 1 basis point to 2.79% as we became more aggressive in pricing, higher balance money market accounts and time deposits as part of our initiative to replace wholesale funding with core deposits. Our deposit base continues to be fairly granular with our average deposit account excluding CDs approximately $27,000 At Dec. 31, 2024, non interest bearing deposits made up 21.9% of total deposits. With respect to FDIC insured deposits, excluding Savista's own deposit accounts, 13.4% or $43,170,000,0.0 of our deposits were in excess of the FDIC limits at year end and our cash and unpledged securities of $49,930,000,0.0 more than covered those uninsured deposits.

[Dennis Shaffer, President and CEO at Civista Bancshares]

Other than $46,330,000,0.0 of public funds with various municipalities across our footprint, we had no deposit concentrations at December '31. We believe Savista's low cost deposit franchise continues to be 1 of our most valuable characteristics, contributing significantly to our solid net interest margin and overall profitability. We view our security portfolio as a source of liquidity. At December '31, our security portfolio was $6.52,000,000 dollars which represents 15.9% of our balance sheet and when combined with cash balances represents 22.3 of our total deposit. At December '31, 01/00 of our securities were classified as available for sale and had $5,340,000,0.0 of unrealized losses associated with them.

[Dennis Shaffer, President and CEO at Civista Bancshares]

This represents an increase in unrealized losses of $1,350,000,0.0 from our linked quarter and $580,000,0.0 increase since Dec. 31, 2023. Earnings continue to create capital and our overall goal remains to maintain capital adequate to support organic growth and potential acquisitions. Although we did not repurchase any shares during the quarter or year, we continue to believe our stock is a value. We ended the year with our Tier 1 leverage ratio at 8.6%, which is deemed well capitalized for regulatory purposes.

[Dennis Shaffer, President and CEO at Civista Bancshares]

Although earnings were strong, increasing our tangible common equity ratio from 6.36% at the previous year end to 6.43% at Dec. 31, 2024. We recognize our tangible common equity ratio screens low and our guidance remains that we would like to rebuild our TCE ratio back to between 77.5%. To that end, we will continue to focus on earnings and we'll balance any repurchases and the payment of dividends with building capital to support growth. Despite the uncertainties associated with the national economy, the economy across Ohio and Southeastern Indiana is showing no signs of deterioration.

[Dennis Shaffer, President and CEO at Civista Bancshares]

Our credit quality remains strong. Our ratio of the allowance for credit losses to total loans is 1.29% at Dec. 31, 2024, which is consistent with 1.3% at Dec. 31, 2023. However, our allowance for credit losses to non performing loans declined from 246% at Dec.

[Dennis Shaffer, President and CEO at Civista Bancshares]

31, 2023 to 124% at Dec. 31, 2024. This was attributable to 2 loans totaling $1,640,000,0.0 that were downgraded to non performing during the quarter. 1 is an $8,000,000 loan on a multifamily property that is under contract to be sold that is expected to close during the The second is an $840,000,0.0 C and I loan that is current, but out of compliance with our loan terms. We have met with the borrowers and believe that the loan will be brought back into compliance during the During the quarter, we did make a $697,000 provision, which was partially attributable to loan growth, but primarily attributable to the historically low prepayment and curtailment rates in our loan portfolio and its impact on our CECL model.

[Dennis Shaffer, President and CEO at Civista Bancshares]

As many of you may have seen, we are happy to announce last week or we're happy to announce last week that we have promoted Chuck Pertzer to Executive Vice President and Chief Lending Officer of the company and President and Chief Lending Officer of the bank. I will continue in my role of CEO and President of the company and CEO of the bank. This change reflects Savista's succession plan and our organization's commitment to stability, growth and a strong future. Chuck's promotion is a well deserved recognition of his contributions and I look forward to working together with him to serve our customers, employees and shareholders. In summary, we are very pleased with our and full year end results.

[Dennis Shaffer, President and CEO at Civista Bancshares]

Our disciplined approach to loan pricing and the way our teams continue executing on our deposit initiatives is bringing our lending and core funding into alignment. These efforts coupled with our expanding net interest margin yielded solid results that I believe sets us up for a strong 2025. Remains focused on creating shareholder value and serving our customers and communities. Thank you for your attention this afternoon and your investment. And now we will be happy to address any questions that you may have.

[Operator]

Thank you. And ladies and gentlemen, we will now begin the question and answer session. And your first question comes from the line of Brandon Nossel with Hovde Group. Please go ahead.

[Brendan Nosal, Director - Equity Research at Hovde Group]

Hey, Good afternoon, guys. Hope you're doing well.

[Dennis Shaffer, President and CEO at Civista Bancshares]

Hi, Brandon.

[Brendan Nosal, Director - Equity Research at Hovde Group]

Maybe just starting off on fee income. You guys did a really nice job this year replacing what you lost from the tax business. I know that certain pieces of the fee base tend to be volatile, particularly the leasing fee piece. So maybe offer some thoughts on the run rate for that specific line item as well as the overall fee basis we move through 2025? Thanks.

[Dennis Shaffer, President and CEO at Civista Bancshares]

Well, I think on fees, I think the leasing, we're pretty optimistic there as we move forward. We feel we've gained pretty good traction over the last six months or so. So we can we expect that to continue as it relates to the leasing fees. I think also we have higher assets under management on the wealth side, and we saw some nice improvement year over year with our wealth management fees. So I think that we'll hopefully continue.

[Dennis Shaffer, President and CEO at Civista Bancshares]

We're growing that business nicely. We're managing now over $800,000,000 in assets there, so we're growing that. We continue to analyze and review our service charges. So we did replace some of that loss income with service charge increases last year. But as fraud has kind of taken off within the industry, we've been able to push a few more of our treasury management process or products out.

[Dennis Shaffer, President and CEO at Civista Bancshares]

So I think we're seeing we think that we'll continue to see some improvement in our treasury management fees. The wild card on fees next year, I think, will be really residential mortgage loans. And that's all rate deposit dependent. But we did have almost $1,000,000 more in residential gain on sale income than we had in 2023. So that's the wild card, but we really think we've got some seasoned and experienced residential mortgage lenders.

[Dennis Shaffer, President and CEO at Civista Bancshares]

And as long as rates hold in there okay, I think we can at least equal what we did this past year.

[Brendan Nosal, Director - Equity Research at Hovde Group]

Okay. All right. That's helpful color. Maybe staying on the topic of fee income here, the net gain on sale of loans line, I know that includes both the CLF volume plus traditional 1 to 4 family residential. Do you have the split between those businesses for the quarter both in terms of fee income and sales?

[Ian Whinnem, Interim Principal Accounting Officer, Senior VP & CFO at Civista Bancshares]

Yes. So on about $130,000,0.0 on a gain on sale, with around 40% for CLF of leasing and 60% mortgage. So that equates out to about $510,000 for leasing and about $750,000 per mortgage. In terms of the sold volume in the mortgage volume was about $40,000,000 that compares to $38,000,000 in the And the leasing was just under $12,000,000 that equates or is equal or similar to the $14,000,000 we had in the Fantastic.

[Brendan Nosal, Director - Equity Research at Hovde Group]

That's super helpful.

[Brendan Nosal, Director - Equity Research at Hovde Group]

Thank you.

[Dennis Shaffer, President and CEO at Civista Bancshares]

Thanks, Brendan.

[Operator]

Your next question comes from the line of Justin Crowley with Piper Sandler. Please go ahead.

[Justin Crowley, Research Analyst at Piper Sandler Companies]

Hey, good morning everyone or good afternoon rather.

[Dennis Shaffer, President and CEO at Civista Bancshares]

Good morning, Justin.

[Justin Crowley, Research Analyst at Piper Sandler Companies]

I wanted to start just on the margin discussion and some of the inputs there. You've got to think about $700,000,000 in loans, if I have that right, that were priced immediately. Can you remind us for that $180,000,000 that you mentioned in fixed rate loans that come due over the next twelve months? What yields those are coming off at? And then perhaps similar detail out to 2026 if you have it?

[Dennis Shaffer, President and CEO at Civista Bancshares]

They're probably those loans are probably Brendan, we don't have exactly what that is, but most likely those loans are in the high 4s, the low 5s. High 4s, the low 5s. They're probably going to somewhere reprice into the high 6s.

[Justin Crowley, Research Analyst at Piper Sandler Companies]

Okay, got it.

[Dennis Shaffer, President and CEO at Civista Bancshares]

Well, that's probably the

[Richard Dutton, Senior VP & COO at Civista Bancshares]

low 7, yes, probably the

[Richard Dutton, Senior VP & COO at Civista Bancshares]

low 7 given where treasury yields have gone.

[Richard Dutton, Senior VP & COO at Civista Bancshares]

Almost all those are based on a five year treasury from that perspective, Justin.

[Justin Crowley, Research Analyst at Piper Sandler Companies]

Okay, got it. And then sticking with the margin, it looks like deposit costs on a net basis were flat quarter over quarter. You had to step down in rates paid on time and brokered with some payoffs there, but looks like it was offset by a pickup across other categories. Can you talk a little bit about efforts to drop rates outside of the repricing dynamics within the CV book and what of the Fed to 100 basis points and cut so far has filtered through?

[Dennis Shaffer, President and CEO at Civista Bancshares]

Yes. We have been very proactive, I think, in reducing rates as the Fed has lowered rates. I mean, we are almost reducing them immediately. We have reduced them in nearly every category. Again, broker deposits, we're going to pick up some pricing.

[Dennis Shaffer, President and CEO at Civista Bancshares]

Our total funding costs should continue to migrate down. But I think overall deposit costs may trend a little bit higher as we get more aggressive in trying to generate core deposits. Most of them in this rate environment will probably be money market and CD accounts. And that increase will really be related to more volume as we gather those funds to pay down borrowings or to pay off broker deposit, more expensive broker deposits or borrowings. So you'll see those that cost kind of remain relatively flat, maybe tick up slightly as we but overall funding costs should come down.

[Justin Crowley, Research Analyst at Piper Sandler Companies]

Okay. I appreciate that. And then shifting gears a little bit, you spoke about some expected savings on the expense side. Are you able to provide some more granular detail on how or if inflation across some other categories may offset that and where you maybe expect cost to shake out in the and then beyond?

[Ian Whinnem, Interim Principal Accounting Officer, Senior VP & CFO at Civista Bancshares]

Yes, I can do that 1. So in the we had some accrual adjustments just on marketing and some professional fees. We also mentioned we had some non recurring items associated with the finance staff transition as well as our leasing conversion project. So in the we're going to have a little bit of that expense remaining. It will start dropping off in the We are expecting the expenses to be around 28.8% and then also some of our cost savings that we've mentioned that are either started in Dec.

[Ian Whinnem, Interim Principal Accounting Officer, Senior VP & CFO at Civista Bancshares]

0 or underway in the are going to start taking effect really in that as well as we'll add some offset to that of investments that we're making as we move towards attracting some digital deposits.

[Dennis Shaffer, President and CEO at Civista Bancshares]

We are being very aggressive with some of our vendors trying to see if they'll hold the line on some of the passing those off and when those contracts are coming up, they're going out the bid and we're telling them kind of our expectation. So just with sheer inflation stuff, we are being much more we're really working the expense side. We'll continue to look to identify cost savings. And as I mentioned, we picked up a couple of those cost savings there in the We'll really realize those throughout 2025. So we do know we have merit increases and stuff coming generally in April 0.

[Dennis Shaffer, President and CEO at Civista Bancshares]

But for the most part, we are aggressively looking to reduce expenses where we can. We are making though that offsets that is investment in technology that initially bears some expense on the front end and the revenue comes on the back end. So Ian and Rich will probably give you some sort of guidance there, run rate guidance as we move forward. But just realize that some of that, at least on the technology side, that expense, we won't recognize some of that revenue until the back end.

[Justin Crowley, Research Analyst at Piper Sandler Companies]

Okay. And then, then I guess with that in the would your bias be toward starting to see a leg down as we head through the year or would it kind of be stable at that level?

[Ian Whinnem, Interim Principal Accounting Officer, Senior VP & CFO at Civista Bancshares]

I would expect it to be stable at that level, excluding some investments we'll be doing into that place to attract some digital deposits. So we could see a little bit of a tick up because of marketing or software expenses.

[Justin Crowley, Research Analyst at Piper Sandler Companies]

Okay, got you. I will leave it there. Thanks so much everyone.

[Dennis Shaffer, President and CEO at Civista Bancshares]

Thank you.

[Operator]

Your next question comes from the line of Tim Switzer with KBW. Please go ahead.

[Tim Switzer, Vice President at Keefe, Bruyette & Woods (KBW)]

Hey, good afternoon. Thanks for taking my questions.

[Dennis Shaffer, President and CEO at Civista Bancshares]

Hey, Tim.

[Tim Switzer, Vice President at Keefe, Bruyette & Woods (KBW)]

Appreciate some of the commentary you guys gave towards loan growth and working towards low single digits near term. What are some of the puts and takes that could cause an acceleration here? I know it might be a little early for this, but with the change in the administration,

[Tim Switzer, Vice President at Keefe, Bruyette & Woods (KBW)]

with the kind

[Tim Switzer, Vice President at Keefe, Bruyette & Woods (KBW)]

of a weird macro outlook and we're still not sure about the impact on tariffs or where rates will go. Are you seeing that result in any caution at all from some of your borrowers or in certain industries that kind of go in the other direction where they're a lot more bullish and has that impacted your loan pipeline in any way?

[Richard Dutton, Senior VP & COO at Civista Bancshares]

Not a whole lot, Tim. I mean, the some of the people that are very dependent upon imports actually got ahead of it and pre bought some either some inventory or some supplies. So we see how it shakes out. We haven't really seen a whole lot from the bullish side of it yet. So I would say no there, but I would say that overall the attitude of our customers is definitely better today than it was three months ago.

[Dennis Shaffer, President and CEO at Civista Bancshares]

Yes. And I would just add there, I think our biggest restriction, Tim, is going to be funding. That's the biggest restriction. But we think we can generate some decent deposits. 1, we've never been a high CD payer, and we're going to get a little bit more aggressive as long as we can bring in funds that cheaper than what we're borrowing at.

[Dennis Shaffer, President and CEO at Civista Bancshares]

And I think we're going to see some we'll get some lift there. So that will be our biggest challenge. I think we can generate the loans. The loan demand is there in our markets. We've talked previously about all the stuff that's happening in Central Ohio with Intel.

[Dennis Shaffer, President and CEO at Civista Bancshares]

Last week, the State of Ohio announced the largest job creation expansion project in the history of the State Of Ohio. We have a defense contractor moving in to Central Ohio there that's going to create 4500 new jobs over the next ten years. So that and intel and what that means for the whole state because there'll be suppliers locating throughout the state. We've already started to see that somewhat and neither of those projects are fully implemented now. But I do think that you're going to that the loan demand is going to be there.

[Dennis Shaffer, President and CEO at Civista Bancshares]

And so really, our biggest restriction is just generating those deposits. And we're making investments in our online new account opening. And it's a system that's going to not only help us be able to simplify how we open accounts online. It's also we're going to take that same experience into the branches and also when our bankers are out making calls in people's offices and stuff. I think we will see some deposit lift because of that investment as well.

[Dennis Shaffer, President and CEO at Civista Bancshares]

So those are that's really where our restriction lies and what we can do. Our teams are really seasoned, really experienced, very well connected, and they can generate quite a bit of loan demand if we turn them fully loose.

[Tim Switzer, Vice President at Keefe, Bruyette & Woods (KBW)]

Great. That's good to hear. And then outside of the 2 credits you guys mentioned earlier, are there any areas or geographies you're seeing a little bit more pressure on the credit side and any color you provide there would be helpful?

[Michael Mulford, Senior VP & Chief Credit Officer at Civista Bancshares]

Hi, this is Mike, Chief Credit Officer. No, we're not seeing any specific areas where we're having any issues, any systemic issues at all. So any credit issues typically are 1 offs. And so nothing in the way of geographic or concentration areas have we had any heightened risk.

[Tim Switzer, Vice President at Keefe, Bruyette & Woods (KBW)]

Okay, great. That's good to hear. And then the last question I have is, you guys have talked about wanting to build the TCE ratio to 7%, seven point five % over time. If we forget about the impact of AOCI going forward, assuming rates stay consistent, do you have the timeline of getting there and does this preclude you from doing buybacks at all or any

[Tim Switzer, Vice President at Keefe, Bruyette & Woods (KBW)]

other kind of capital deployment?

[Dennis Shaffer, President and CEO at Civista Bancshares]

Well, again, it's all based on our earnings, but we do think we did increase the dividend there last quarter for the And I think it's all just depending on our earnings, but we are bullish where we think our earnings go. I mean, we wouldn't have done that if we didn't think our earnings were going to remain strong. So some of that depends on the earnings. And then the other wild card is the interest rates and what they're tied to.

[Dennis Shaffer, President and CEO at Civista Bancshares]

We would hopefully buy a bit closer to 7% by the end of the year, I would think. And we continue to discuss our capital needs as we move forward.

[Tim Switzer, Vice President at Keefe, Bruyette & Woods (KBW)]

Okay, got it. Well, that's all for

[Tim Switzer, Vice President at Keefe, Bruyette & Woods (KBW)]

me and congrats to Chuck in the promotion.

[Charles Parcher, Senior VP & Chief Lending Officer at Civista Bancshares]

Thank you, Tim.

[Operator]

Your next question comes from the line of Terry McEvoy with Stephens Inc. Please go ahead.

[Terry Mcevoy, MD & Research Analyst at Stephens Inc]

Thank you. Good afternoon. Echo earlier comments on the impressive job replacing the fee income last year and also congratulations Chuck on your new role at the company. Maybe just a first question, do you have any targeted loan to deposit ratio is about 96% at the end of the year? And, I guess just as a follow-up question there, broker deposits were in the regulatory crosshairs a bit last year.

[Terry Mcevoy, MD & Research Analyst at Stephens Inc]

Is there any I don't want to use the word pressure, but any incentive to drive those balances lower outside of just building more core relationships?

[Dennis Shaffer, President and CEO at Civista Bancshares]

Well, I think the loan to deposit, we will come from where that 90% to 95% range that's where ideally we would like to operate, because I think we're utilizing our balance sheet best at that level there. No regulatory pressure or anything on brokered deposits. And we just think that we can generate maybe cheaper deposits some CDs and stuff that are less expensive than brokered and borrowing on our FHLB line. So that's really why we want to drive core deposits those core deposits higher and getting a little bit more aggressive on our CDs. So if you were up until a year or two ago, we didn't have the need we always felt the broker deposits was a very efficient way to attract deposits, but we really didn't have the need.

[Dennis Shaffer, President and CEO at Civista Bancshares]

We were always kind of at somewhere in that 75% to 90% range. But as our loan growth accelerated coming out of the pandemic, particularly in 2022 and 2023, we had 7% loan growth in 2024 for the year is not a it is pretty good as that loan growth, these deposits didn't keep up. So we've kind of shifted our focus and said, let's get a little bit more aggressive to try to attract some of our own money as opposed to continuing to increase that with our broker deposits.

[Terry Mcevoy, MD & Research Analyst at Stephens Inc]

I appreciate that. And then just as a follow-up, a fair amount of your loan growth has been non owner occupied multifamily. Could you just in Metro Ohio markets, could you just talk about renter demand, occupancy rates, construction activity and the overall health of those markets because there are some soft patches we're hearing about elsewhere across the country? Thank you.

[Richard Dutton, Senior VP & COO at Civista Bancshares]

Yes. I would tell you, Terry, we're not really seeing that right now as far as most of the especially the construction projects that we're bringing on, the rents are actually higher than what they are that they were projected in the appraisals. So we're not really seeing a softening of demand from that piece of it. And they're filling up on schedule, I guess, from that. The absorption rates have been pretty much spot on, if not a little bit better.

[Richard Dutton, Senior VP & COO at Civista Bancshares]

So knock on wood, we feel really good about the especially the 3 major I guess the 3 Cs, where we've got a lot of those projects at.

[Dennis Shaffer, President and CEO at Civista Bancshares]

And the rents are really higher, I think, because the borrower that makes the project work having to put in more capital, more equity into the deal. So to get their return, they've got to charge higher rates. It appears so far we're still seeing demand.

[Terry Mcevoy, MD & Research Analyst at Stephens Inc]

Thanks again.

[Dennis Shaffer, President and CEO at Civista Bancshares]

Thank you, Terry.

[Operator]

Your next question comes from the line of Manuel Navez with D. A. Davidson. Please go ahead.

[Manuel Navas, MD & Senior Research Analyst at D.A. Davidson]

Hey, good afternoon guys. Can you go into more detail on your future deposit gathering initiatives? You had great success with the Ohio Homebuyers Program, wealth management transfer in, brokered last year. I mean, all of that was kind of, it allowed you to keep core deposits untouched. So I just would love to hear more about what you're going to do going forward and kind of how you're going to keep from the new money market accounts cannibalizing any deposit costs?

[Dennis Shaffer, President and CEO at Civista Bancshares]

Good question. So we have a number of initiatives underway, Manuel. One of those is, I think with our new finance and accounting team and Lender Ian's leadership, you're going to see the utilization of more dashboards that our front line bankers are going to have available for them, which will allow them to kind of look at that total relationship. It's a more of a manual process for our bankers to do that. And I think so we're migrating to more of these more dashboards and profitability models.

[Dennis Shaffer, President and CEO at Civista Bancshares]

I think that 1 will help. We have identified and run our whole book of business and identified a number of accounts where we have either no deposit relationship or low deposits with. And we are reaching out and through all of our business lines, our retail bankers, our commercial bankers, our private banking group, our treasury banking group, they really are focused on those lists and working those lists. So that's a project that's underway. In addition, we made this investment.

[Dennis Shaffer, President and CEO at Civista Bancshares]

We've invested in a product called Mantle. And Mantle, we think, is probably the premier on new account online new account opening system out there. So we think that's we've looked at a number of those. When we invested in a product called Q2 about one point five years, two years ago, they had an online account opening solution. But we found that we weren't real pleased with that solution.

[Dennis Shaffer, President and CEO at Civista Bancshares]

We still have we're still using the platform, but we're going to have mantle. We think that it's a much superior product. And again, once we kick that off, we just think it's going to be much more efficient for the our bankers and the customer. It's going to be a much better customer experience. It's going to allow us to gather some deposits through a channel where we really haven't tapped into yet, and that's the digital channel.

[Dennis Shaffer, President and CEO at Civista Bancshares]

So we think that will also enhance some of those. We look at deposit rates weekly. We were leading very frequently with our deposit rates. So obviously, we try to keep an eye so we're not cannibalizing deposit costs. But I think it kind of goes back to those comments I made on 1 of the earlier questions that I think some of those deposit costs will inch up just because we're gathering more volume as opposed to just paying higher rates throughout across the board.

[Ian Whinnem, Interim Principal Accounting Officer, Senior VP & CFO at Civista Bancshares]

Well, Anne, I'll add, I think we're pretty focused on high balance money market accounts. Again, we're trying to do everything we can not to cannibalize that core deposit balance that we value so much. So we're doing some things with index based pricing that we haven't done in the past. And I think our depositors understand better and we get some decent feedback from the early big depositors and that they don't have

[Ian Whinnem, Interim Principal Accounting Officer, Senior VP & CFO at Civista Bancshares]

to worry about shopping whether or not we're charging them a fair rate. Our lenders and the other folks, treasury management folks that are

[Ian Whinnem, Interim Principal Accounting Officer, Senior VP & CFO at Civista Bancshares]

out in the field can explain that product to them. And we

[Ian Whinnem, Interim Principal Accounting Officer, Senior VP & CFO at Civista Bancshares]

still have

[Ian Whinnem, Interim Principal Accounting Officer, Senior VP & CFO at Civista Bancshares]

to take care of them, but that's something that they understand. And again, initially, it seems like we've got some pretty solid feedback on that. But again, those are aimed at really high dollar deposits, so that we don't cannibalize the smaller deposits that we have so many of.

[Manuel Navas, MD & Senior Research Analyst at D.A. Davidson]

For new money? Or is it if it's a large enough commercial relationship, you would offer the index product anyway?

[Ian Whinnem, Interim Principal Accounting Officer, Senior VP & CFO at Civista Bancshares]

Absolutely, if it's a large commercial product or customer we would, but it's geared toward new money, but I don't

[Ian Whinnem, Interim Principal Accounting Officer, Senior VP & CFO at Civista Bancshares]

think we've said it has to be new money.

[Richard Dutton, Senior VP & COO at Civista Bancshares]

It's really geared toward that deposit customer. It's a $1,000,000 deposit or no.

[Manuel Navas, MD & Senior Research Analyst at D.A. Davidson]

Sure.

[Richard Dutton, Senior VP & COO at Civista Bancshares]

That's cannibalizing the entire book, obviously.

[Manuel Navas, MD & Senior Research Analyst at D.A. Davidson]

And do you have like a what's like the initial index price that obviously will float around with Fed movements I'm sure or some percentage of Fed movements? What's like kind of the initial price though?

[Ian Whinnem, Interim Principal Accounting Officer, Senior VP & CFO at Civista Bancshares]

Manuel, you give me a call after this and we'll sign you up. We

[Ian Whinnem, Interim Principal Accounting Officer, Senior VP & CFO at Civista Bancshares]

have it tiered based on

[Ian Whinnem, Interim Principal Accounting Officer, Senior VP & CFO at Civista Bancshares]

the size of balances. So there's a bottom threshold as Chuck alluded to and then we're tiering it out with Fed funds.

[Manuel Navas, MD & Senior Research Analyst at D.A. Davidson]

And then the digital channel, I heard something about marketing costs. Is it all branded with Savista? Is it some outside partnerships?

[Dennis Shaffer, President and CEO at Civista Bancshares]

No, it's all branded with Savista. And marketing, we're going to be doing most of that marketing through social media, which really there's not a lot of cost. They'll run campaigns that they're helping us with. But I think most of the cost to market is just internally stuff that we're going to do. But most of that will be through social media as we've been really utilizing that channel.

[Dennis Shaffer, President and CEO at Civista Bancshares]

That's how we hope to gather deposits and then in branch signage and things like that.

[Manuel Navas, MD & Senior Research Analyst at D.A. Davidson]

This has been very helpful. I appreciate kind of this detail. Can I just take a kind of a bigger picture view? Do you have a sense I want to do you have a sense for kind of where the near term NIM can go? Where can it go by the end of the year?

[Manuel Navas, MD & Senior Research Analyst at D.A. Davidson]

And like what are you thinking in terms of the rate environment for the year?

[Ian Whinnem, Interim Principal Accounting Officer, Senior VP & CFO at Civista Bancshares]

Yes. So we finished with a three thirty six NIM. We know we have additional loans that are going to reprice on those lower rates as we mentioned. The broker benefit that happened in Dec. 0 of those repricing and we have another tranche that's going to happen in for $150,000,000 In terms of where the Fed is going, it changed really quickly in the last thirty days.

[Ian Whinnem, Interim Principal Accounting Officer, Senior VP & CFO at Civista Bancshares]

We're definitely not economists to be able to figure that out. But it's quite likely that there's 1 rate cut in the first half of the year. Right now, we're kind of thinking we'll get to maybe in the low to mid-340s and then level out from there.

[Manuel Navas, MD & Senior Research Analyst at D.A. Davidson]

That's helpful. And that's just by in this first half of the year or kind of

[Ian Whinnem, Interim Principal Accounting Officer, Senior VP & CFO at Civista Bancshares]

Yes, we think we'll get there kind of by and then probably level out from there depending on what the Fed does second half of the year.

[Manuel Navas, MD & Senior Research Analyst at D.A. Davidson]

Just with your deposit initiatives with loan and brokerage repricing and this NIM outlook, has pricing competition on either side of the balance sheet picked up? Where does it kind of stand right now?

[Dennis Shaffer, President and CEO at Civista Bancshares]

I would say the pricing has not really picked up. It's probably fairly stable right now. I mean, we're I mean, it's competitive on both sides. If you look at both deposit and loan pricing is still competitive, but it's been competitive throughout all of last year. So I wouldn't say it's any more intense.

[Dennis Shaffer, President and CEO at Civista Bancshares]

We think we're going to get more competitive. So we'll have to see what the rest of the marketplace does, but it's been what what we feel has been pretty competitive over the last year. So I'm not sure it picks up in the marketplace, but there are a number of community banks that are in the same situation we're in and looking for deposits. We just wanted to make sure we're ready to not only when we get a little bit more aggressive, but we're not just aggressive on price, we're aggressive in being able to deliver kind of a better customer experience. And that was again the investment in demand hole and stuff that kind of triggered that.

[Dennis Shaffer, President and CEO at Civista Bancshares]

So we wanted to kind of do those things in conjunction.

[Manuel Navas, MD & Senior Research Analyst at D.A. Davidson]

That's helpful. And my last question is about the securities book. You offered it up as a potential source of liquidity. Does that give you a little more flexi like where can that end what are the cash flows coming out for that? Where can that end the year, in terms of that, do you want it to be at the same size, larger?

[Manuel Navas, MD & Senior Research Analyst at D.A. Davidson]

And does that give you flexibility to kind of manage your deposits well? Just kind of Yes,

[Ian Whinnem, Interim Principal Accounting Officer, Senior VP & CFO at Civista Bancshares]

we'll end up keeping it relatively the same size as a percentage of deposits. So we do believe in just having that liquidity available. So as the cash flows come out, we'll reinvest those and have to increase that investment portfolio if deposits start to go up or when.

[Dennis Shaffer, President and CEO at Civista Bancshares]

Yes. We don't want

[Dennis Shaffer, President and CEO at Civista Bancshares]

to decrease we don't want to decrease that as a percentage of deposits. We feel liquidity is probably the biggest thing that can harm hurt a bank, more so than credit. Banks have failed because of liquidity issues. So we have a certain targeted percentage that we shoot for. And so most likely we'll decrease that and use that for to fund loans.

[Manuel Navas, MD & Senior Research Analyst at D.A. Davidson]

That makes sense. Thank you. Thank you. I'll step back into the queue. I appreciate the commentary.

[Operator]

Thank you. And there are no further questions at this time. I would like to turn it back to Mr. Schafer for closing remarks.

[Dennis Shaffer, President and CEO at Civista Bancshares]

Well, I just want to thank everyone for joining us for today's call. This quarter and our year end results were due to a large and due in large part to a lot of the hard work and discipline of our team. So I want to first and foremost thank them for all of their efforts. We will continue to focus on growing Savista the right way. And I believe that our focus on improving our strong core deposit franchise and our proven and disciplined approach that we take in pricing our loans and deposits and managing the company positions us very well for the future.

[Dennis Shaffer, President and CEO at Civista Bancshares]

So I look forward to talking with all of you again in a few months to share our results calls. So have a great rest of the afternoon. Thank you.

[Operator]

Thank you, President. And this concludes today's conference call. Thank you all for participating. You may now disconnect.

Participants

Executives

• Dennis Shaffer, President and CEO
• Ian Whinnem, Interim Principal Accounting Officer, Senior VP & CFO
• Richard Dutton, Senior VP & COO
• Michael Mulford, Senior VP & Chief Credit Officer
• Charles Parcher, Senior VP & Chief Lending Officer

Analysts

• Brendan Nosal, Director - Equity Research at Hovde Group
• Justin Crowley, Research Analyst at Piper Sandler Companies
• Tim Switzer, Vice President at Keefe, Bruyette & Woods (KBW)
• Terry Mcevoy, MD & Research Analyst at Stephens Inc
• Manuel Navas, MD & Senior Research Analyst at D.A. Davidson