Civista Bancshares Q1 2025 Earnings Report

Civista Bancshares EPS Results

• Actual EPS: $0.66
• Consensus EPS: $0.50
• Beat/Miss: Beat by +$0.16
• One Year Ago EPS: N/A

Civista Bancshares Revenue Results

• Actual Revenue: $40.63 million
• Expected Revenue: $40.33 million
• Beat/Miss: Beat by +$302.00 thousand
• YoY Revenue Growth: N/A

Civista Bancshares Announcement Details

• Quarter: Q1 2025
• Date: 4/24/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, April 24, 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 Q1 2025 Earnings Call Transcript

Key Takeaways

• Reported Q1 net income of $10.2 million or $0.66 per diluted share, a 60% increase year-over-year and 11.9% linked-quarter growth in pre-provision net revenue.
• Net interest margin widened by 15 basis points to 3.51% as funding costs fell 11 bps through repricing of maturing brokered CDs and disciplined loan and deposit pricing.
• Core deposits grew organically by over $67 million, cutting reliance on brokered funding and supporting a 95.8% loan-to-deposit ratio with a 90–95% target range.
• Non-interest expenses declined 4.1% from the prior quarter, boosting the efficiency ratio to 64.9% via headcount reductions and lower benefit costs.
• Capital strength improved with tangible common equity up to 6.59%, a renewed authorization to repurchase 13.5 million shares, and a quarterly dividend yielding 3.48%.

Presentation

[Operator]

Before we begin, I would like to remind you that this conference call may contain forward looking statement with respect to the future performance and financial condition of Civista Bancshares Inc. That involve risk and uncertainties. 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 statement made during the call.

[Operator]

Additionally, management may refer to the 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. This call will be recorded and made available on Vista Bancshares' website at www.civb.com. At the conclusion of mister Schafer's remarks, he and the Civista management team will take any questions you may have. Now I will turn the call over to mister Schafer.

[Dennis Shaffer, President, CEO & Vice Chairman 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 first quarter twenty twenty five earnings call. I am joined today by Rich Dutton, SVP of the company and Chief Operating Officer of the bank Ian Wynnum, SVP of the company and Chief Financial Officer of the bank and other members of our executive team Chuck Parcher, EVP of the company and Chief Lending Officer of the bank is on vacation.

[Dennis Shaffer, President, CEO & Vice Chairman at Civista Bancshares]

This morning, we reported net income for the first quarter of $10,200,000 or $0.66 per diluted share, which represents a $3,800,000 or 60% increase over our first quarter of twenty twenty four and a $275,000 increase over our linked quarter. This also represents an increase in pre provision net revenue of $4,300,000 or 47% over our first quarter in 2024, and a $1,400,000 or 11.9% increase over our linked quarter. Core deposit funding continues to be a priority, and we were pleased that our deposit funding, excluding brokered deposits, grew organically by over $67,000,000 during the quarter, which allowed us to continue reducing our reliance on brokered funding. We believe this shift toward more relationship funding contributes to the overall value of our core deposit franchise. I continue to be encouraged by our ability to remain disciplined in pricing both our deposits and loans through this interest rate cycle.

[Dennis Shaffer, President, CEO & Vice Chairman at Civista Bancshares]

Net interest income for the quarter was $32,800,000 which represents an increase of $1,400,000 or 4.5% compared to our linked quarter. The increase was attributable to our earning asset yield increasing six basis points to 5.71%, and our overall funding costs decreasing by 11 basis points to 2.31%. Our decline in funding costs was largely attributable to a 150,000,000 in brokered CDs that matured in late December that I mentioned on our last call. They carried a rate of 5.08%, and we were able to replace and reduce them by laddering $125,000,000 in brokered CDs over the subsequent twelve months at a blended rate of 4.37%, representing a savings of 71 basis points. Similarly, we had $150,000,000 in brokered CDs that matured in March that carried a rate of 5.18%.

[Dennis Shaffer, President, CEO & Vice Chairman at Civista Bancshares]

We were also able to replace and reduce these deposits with $125,000,000 of CDs laddered over the next twelve months at a blended rate of 4.26%, representing a savings of 92 basis points. While this had little impact on our first quarter results, we anticipate that it will further reduce our overall funding costs and lead to further margin expansion. We have solid loan demand in each of our markets. However, we continue to be disciplined in our approach to loan and lease pricing, which has had the intended impact of building growth. Our loan and lease portfolio grew at an annualized rate of 2.8% during the first quarter.

[Dennis Shaffer, President, CEO & Vice Chairman at Civista Bancshares]

We anticipate continuing to hold loan and lease rates higher as we work to maintain our loan to deposit ratio, ideally within a range of 90% to 95. The result of our continued discipline in managing both our loan and lease pricing, as well as our funding costs was the continued expansion of our margin, which grew by 15 basis points during the quarter to 3.51%. Our ROA for the quarter was 1%, continuing our strength of improving our ROA in each of the past four quarters. Our ROE for the quarter was 10.39%. Earlier this month, we announced the renewal of our stock repurchase program.

[Dennis Shaffer, President, CEO & Vice Chairman at Civista Bancshares]

The program authorizes management to repurchase up to 13,500,000 in outstanding shares and expires on 04/15/2026. While we have not been active in repurchasing shares and remain committed to increasing our tangible common equity, we feel it is important to have the ability to repurchase shares should it become prudent to do so. Last week we also announced a quarterly dividend of $0.17 per share based on the quarter end market close of $19.54 this represents an annualized yield of 3.48%. During the quarter, our non interest expense was $27,100,000 which represents a $1,200,000 or 4.1% decline from our linked quarter and is the result of improvement in nearly every non interest expense category. We continue to focus on controlling those expenses that are within our control.

[Dennis Shaffer, President, CEO & Vice Chairman at Civista Bancshares]

The largest decline was in compensation related expenses and was primarily due to five fewer FTEs, a reduction in benefit costs, and an increase in the amount of compensation deferred related to loan originations. Compared to the prior year's first quarter, non interest expense declined $315,000 or 1.1. And while the improvement did not include as many categories, the results had a similar impact. The largest decline in comparison to the first quarter of the prior year was also attributable to 19 fewer FTEs, a reduction in benefit costs and an increase in the amount of compensation deferred relating to loan originations. This reduction in expense was partially offset by an increase in professional services related to projects and the conversion of our lease accounting and servicing system.

[Dennis Shaffer, President, CEO & Vice Chairman at Civista Bancshares]

Non interest income declined 1,200,000.0 or 12.8% in comparison to the linked quarter and 396,000 or 4.8% in comparison to the first quarter of the prior year. The primary drivers of the decrease from our linked quarter were a $655,000 decline in gains on the sale of loans, which are made up of mortgages and loans and leases originated by our leasing division due to typically less mortgage and leasing originations during the first quarter, coupled with the impact of higher interest rates. A $314,000 decline in ATM and interchange revenue due to the shift from pre holiday to post holiday debit card use, a $124,000 decline in wealth management fees due to market declines during the quarter as assets under management decreased and a $384,000 decline in BOI revenue as we received $314,000 in proceeds from a debt benefit in the prior quarter. These declines were offset by an increase of $616,000 in lease revenue and residual income generated by our leasing division. The primary drivers for the decline from the prior year's first quarter were attributable to a $396,000 decline in gains on the sale of loans due to the same seasonality and high interest rates previously mentioned and lower lease rate related fees, which are included in other income.

[Dennis Shaffer, President, CEO & Vice Chairman at Civista Bancshares]

The combination of increased revenue and disciplined expense control resulted in an efficiency ratio of 64.9% for the quarter compared to 68.3% for the linked quarter and 73.8% for the prior year's first quarter. Turning our focus to the balance sheet. For the quarter, total loans and leases grew by $22,800,000 This represents an annualized growth rate of 2.8%. While we experienced increases in commercial and ag, both owner occupied and non owner occupied commercial real estate and residential real estate, we saw small declines in all other loan categories. As we shared on previous calls, we continue to price commercial and ag loan opportunities aggressively and are being more conservative in how we price commercial real estate opportunities as we try to manage the overall mix in our loan portfolio.

[Dennis Shaffer, President, CEO & Vice Chairman at Civista Bancshares]

The loans we originate for our portfolio are virtually all adjustable rate loans and our leases all have maturities of five years or less. New and renewed commercial loans were originated at an average rate of 7.16% during the quarter, which is similar to our origination rate during the linked quarter. Loans secured by office buildings make up 5.25% 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 two story offices located outside of central business districts. Along with year to date loan production, our pipelines are solid and our undrawn construction lines were $226,000,000 at March 31.

[Dennis Shaffer, President, CEO & Vice Chairman at Civista Bancshares]

We continue to see loan opportunities in each of our markets, and we anticipate loan growth to be in the mid single digit range for the balance of 2025. However, loan demand may be impacted the longer the economic uncertainty persists. On the funding side, total deposits increased $27,000,000 or an annualized growth rate of 3.2%. However, if we back out brokered deposits, our deposits balance grew by $67,100,000,000 or 2.5% for the quarter, which we believe is the result of our focus on deepening customer relationships. We did see some migration from non interest bearing accounts into higher rate deposit accounts during the quarter, but our cost of deposits, excluding broker deposits, declined by 12 basis points from the linked quarter.

[Dennis Shaffer, President, CEO & Vice Chairman at Civista Bancshares]

Our deposit base remains fairly granular with our average deposit account, excluding CDs, approximately $28,000 With respect to FDIC insured deposits, excluding Savista's own deposit accounts, 13.1% or $419,800,000 of our deposits were in excess of the FDIC limits at quarter end. Our cash and unpledged securities at March 31 were $523,700,000 which more than covers these uninsured deposits. Other than $568,000,000 of public funds, which are primarily operating accounts with the various municipalities across our footprint, we had no deposit concentration at March 31. At quarter end, our loan to deposit ratio was 95.8%. Our commercial bankers, treasury management officers, private bankers, and retail staff continue to have success gathering additional deposits from our commercial, small business, and retail customers as evidenced by our organic deposit growth.

[Dennis Shaffer, President, CEO & Vice Chairman at Civista Bancshares]

We believe our low cost deposit franchise is one of Savista's most valuable characteristics, contributing significantly to our solid net interest margin and overall profitability. At March 31, our security portfolio was $648,500,000 which represents 15.6% of our balance sheet. The interest rate environment continues to put pressure on bond portfolios. At March 31, all of our securities were classified as available for sale and had $60,000,000 of unrealized losses associated with that. This represented a decrease in unrealized losses of $2,500,000 since 12/31/2024.

[Dennis Shaffer, President, CEO & Vice Chairman at Civista Bancshares]

We ended the quarter with our Tier one leverage ratio at 8.66%, which is deemed well capitalized for regulatory purposes. Our tangible common equity ratio was 6.59% at March 31, an increase from 6.43% at 12/31/2024. So this is earnings continue to create capital and our overall goal remains to grow our capital to a level adequate to support organic growth. We did increase our dividend in the prior quarter. And although we have not purchased any shares during the past five quarters, we continue to believe our stock is a value.

[Dennis Shaffer, President, CEO & Vice Chairman at Civista Bancshares]

While our capital levels remain strong, We recognize our tangible common equity ratio still streams low. Our previous 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 the payment of dividends and any stock repurchases with building capital to support our growth. During the quarter, we made a $1,600,000 provision. We had charge offs of $976,000 of which $800,000 was related to one of the non performing credits we discussed in the fourth quarter.

[Dennis Shaffer, President, CEO & Vice Chairman at Civista Bancshares]

That loan is expected to pay off today. The balance of the provision was attributable to loan growth and the impact historically low prepayments in our loan portfolio have had on our CECL model. Our ratio of the allowance for credit losses to total loans is 1.3% at 03/31/2025, which is consistent with 1.29% at 12/31/2024. Other than a general concern over the impact of macroeconomic uncertainties, the economy across Ohio and Southeastern Indiana is showing no signs of deterioration and our credit quality remains strong. In summary, we are very pleased with the continued expansion of our net interest margin and our ability to control non interest expense during the quarter.

[Dennis Shaffer, President, CEO & Vice Chairman at Civista Bancshares]

We are pleased with our team's success in attracting more lower cost funding and anticipate low to mid single digit loan growth for the balance of 2025 as we temper loan growth to match our ability to fund that growth at a reasonable cost. Overall, 2025 is off to a solid start and our focus continues to be on creating shareholder value. Thank you for your attention this afternoon and investment. And now we will be happy to address any questions that you may have.

[Operator]

Thank you. Ladies and gentlemen, we will now conduct a question and answer session. If you have a question, please press star key followed by one on your touch tone phone. You will hear a one tone prompt acknowledging your request. Your request will be pulled in the order they are received.

[Operator]

If you would like to decline from the calling process, please press the pound key. Please ensure you lift the handset and if you Our first question comes from the line of Justin Crowley from Piper Sandler. Your line is open.

[Justin Crowley, Research Analyst at Piper Sandler Companies]

Hey, good afternoon, guys.

[Dennis Shaffer, President, CEO & Vice Chairman at Civista Bancshares]

Hi, Justin.

[Justin Crowley, Research Analyst at Piper Sandler Companies]

Just wanted to

[Justin Crowley, Research Analyst at Piper Sandler Companies]

start on some of the margin inputs. Obviously, a lot of success in moving core deposit costs lower in the quarter with some of that brokered repricing. I guess outside of the brokered you'd mentioned, repricing in the quarter down to the 4.2%, four point three % range. How much opportunity is there left in the back book to see funding move lower? Has that largely run through at this point?

[Justin Crowley, Research Analyst at Piper Sandler Companies]

And then how does that counteract against how aggressive you need to be on incremental funding?

[Dennis Shaffer, President, CEO & Vice Chairman at Civista Bancshares]

Yeah, I think there's still opportunity there, Justin. On the deposit book, we do anticipate maybe four to five basis points again this coming quarter of margin expansion as we pretty much have been able to on the higher interest rate stuff that we just organically had other than the broker. We have been pretty much that's almost been as Fed has cut rate. We've cut immediately to almost on a 100% beta on that stuff. We also have opportunity on the loan side.

[Dennis Shaffer, President, CEO & Vice Chairman at Civista Bancshares]

There's $110,000,000 that will reprice over the next two quarters. So those rates, we should pick up a couple hundred basis points as those loans reprice. And then new loan yields are still going on, as I said in my call in the 715, 7 16, 7 20 5 range. So we think there's opportunity there. So we think there's opportunity to continue to expand the margin here in the near term over the next quarter or two.

[Justin Crowley, Research Analyst at Piper Sandler Companies]

Okay. So you mentioned that four to five basis points of perhaps NIM pickup in the second quarter. So you think that that type of acceleration could sort of continue through the balance of the year, at least for the next couple of quarters? And then does it maybe stabilize just to throw a number out there that three sixty level? How are you thinking about It

[Dennis Shaffer, President, CEO & Vice Chairman at Civista Bancshares]

does start to stabilize as we get deeper into the year. I think third quarter, we have a little calculator that we try to run different scenarios on. I think we're anticipating maybe four to five basis points in the second quarter and two to three basis points in the third quarter right now. That's if rates stay fairly similar to where they're at today.

[Justin Crowley, Research Analyst at Piper Sandler Companies]

Okay. And so how sensitive would that be to potential cuts out of the Fed?

[Dennis Shaffer, President, CEO & Vice Chairman at Civista Bancshares]

That model's in cut. We can model in cuts. I guess we've modeled in. Ian, do want to

[Dennis Shaffer, President, CEO & Vice Chairman at Civista Bancshares]

speak to that?

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

Yeah, Justin. This is Ian Linham. So we factored in a cut in June, another one in September. And so the numbers that Dennis referenced include those.

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

So it's in that range of about four to five basis points second quarter, an additional two to three basis points of expansion in the third quarter.

[Justin Crowley, Research Analyst at Piper Sandler Companies]

Okay. That's super helpful. I appreciate that. And then just moving over to expenses. I believe you had talked about some elevated spend last quarter tied to some staff turnover and then the leasing conversion project you had mentioned.

[Justin Crowley, Research Analyst at Piper Sandler Companies]

Did a lot of that or did most of that normalize back down in the first quarter? And if so, how should we think about further investment into areas like digital potentially offsetting the decline in the base that you saw this quarter?

[Dennis Shaffer, President, CEO & Vice Chairman at Civista Bancshares]

Yeah, the professional fees did not they'll go away going into the second quarter, some of them. But as we alluded to, we do our investing back into a couple of some technology things and other investments. And we generally sometimes use consultants for those projects. So Ian or Rich, you want

[Dennis Shaffer, President, CEO & Vice Chairman at Civista Bancshares]

to touch more on the expense side?

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

Yeah, happy to. This is Ian. So from where we were in Q4 in the fourth quarter, we had some adjustments within accruals, both incentive accrual as well as just other accruals that related to FDIC expense that made Q4 a little bit higher than normal. Q1, we started to normalize.

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

We slapped some seasonal or onetime type expenses or professional fees, as well as items related to annual audits and annual meeting expenses. So we expect the second quarter to come in around the same level as the first quarter. That will offset the reduction in professional fees that Dennis just mentioned, but also include our annual merit increases that we give to our employees. So that'll keep us about flat from where we are now, maybe up a little bit. And then in the third and fourth quarter, we'll have some of that additional expense coming in for the reinvestment into the company, both in software expenses, professional fees, and some marketing expense as we start to do the digital online account opening.

[Dennis Shaffer, President, CEO & Vice Chairman at Civista Bancshares]

And Justin, just

[Dennis Shaffer, President, CEO & Vice Chairman at Civista Bancshares]

to get some color around some of the expense reductions that we had, they were attributable to the elimination of our after hour call center and our call center. So we saved some costs there that we were spending for the after hour stuff and some employee costs. We also closed a branch in the fourth quarter. So we really saw that impact of some FTE saves. And there, we renegotiated our insurance and really kept the same level of coverage and picked up $160,000 And with something like that, we did a record purge that and eliminated some accounts that we were paying for on our Jack Henry system.

[Dennis Shaffer, President, CEO & Vice Chairman at Civista Bancshares]

So that's where all that expense reduction, a lot of it came from in the first quarter. And we're going to continue to look for those things. The team has done a really good job of identifying things. So we've identified a few more things. But also, we're and we need to do that because we're investing back into the company.

[Justin Crowley, Research Analyst at Piper Sandler Companies]

Okay. And then, I guess just from a budgeting standpoint, just putting that all together, is there a scenario where you're able to keep costs for the full year flat just for the full year when I compare it to 2024? Is that within the realm of possibility? If I think about maybe kind of stable expenses next quarter and then maybe a tick higher back closer to, call it, 28,000,000 a quarter through the back half. Is that realistic?

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

It is, yeah. We expect us to be less than $28,000,000 in the second half.

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

Investments.

[Operator]

Our next question comes from the line of Brandon O'Sullivan from Hofty Coop. Your line is open.

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

Hey, good afternoon folks. Hope you're doing well. Hey, how are you? Good. Good.

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

Good. Thanks for all the detail you just offered on margin and expenses. That's super helpful. Maybe turning to the fee base. Seemed like it was a bit lighter than I was thinking for the quarter and down a bit year over year.

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

Can you just kind of walk through the outlook for the various line items and kind of wrap it into an overall expectation for fee income in the near term? Thank you.

[Dennis Shaffer, President, CEO & Vice Chairman at Civista Bancshares]

Yeah, we do think there'll be a bounce back here coming in the second quarter. Mortgages is usually light for us in that first quarter. It was a little bit lighter than the first quarter a year ago, but it wasn't way off. And we do expect that to pick up. Pipelines appear to be pretty good.

[Dennis Shaffer, President, CEO & Vice Chairman at Civista Bancshares]

So we do expect that to pick up some. And then the leasing has it's been a little choppy trying to get a handle on that. So but we do expect that that was a little bit lighter than we also anticipated. And we do expect that volume to pick back up as we go into the next as we're into this second quarter.

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

Yeah. And this is Ian. Just adding to that on top of that would be the wealth management fees that are still behaving as we would expect, except the AUMs is dropping because of the market volatility. Right.

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

Yeah, yeah, of course. That makes sense. Okay, excellent. Maybe sticking to the topic of fees, just more of a modeling question here. Do you folks happen to have the gain on sale split between mortgage and CLF for the quarter, both in terms of volumes and fee revenue?

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

Yes. I have that in front of me. So of the $600,000 gain on sale in the first quarter, about 45% of that was from the leasing and finance business, 55% for mortgage. That works out to be about $270,000 for CLF and $330,000 for mortgage. In terms of the volume that was sold on mortgages, about $19,000,000 and on the volume that was sold for the leasing, about $7,600,000 So mortgage is comparable to the first quarter of twenty twenty four, which was $20,000,000 at the time, 19,000,000 for this quarter, and the leasing was $7,600,000 a little bit less than this time last year, which was $12,600,000 in the first quarter of last year.

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

We did see was the gain on sale on the mortgage side softening. We saw an average of 1.75% of the gain on sale in the first quarter of this year compared to 2.1% in the first quarter of last year.

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

Okay. That's helpful color. I appreciate it. Thanks for taking the questions.

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

Thank you. Thanks, Brandon.

[Operator]

Our next question comes from the line of Terry McVoy from Stephens. Your line is open.

[Terry Mcevoy, Managing Director at Stephens Inc]

Hi. Good afternoon, guys.

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

Hi, Terry.

[Terry Mcevoy, Managing Director at Stephens Inc]

Hi.

[Terry Mcevoy, Managing Director at Stephens Inc]

Loan yield the increase in the loan yield is up nine basis points. Really nice And I'm just wondering, were there any interest recoveries or anything contributing to that or was that just new loans repricing higher and then kind of fixed rates doing the same thing?

[Dennis Shaffer, President, CEO & Vice Chairman at Civista Bancshares]

No, there was nothing unusual in there. So it's just new loans repricing higher. Our team's really staying disciplined in their pricing. So they've really done a nice job there. And we think we'll continue to get some benefit there.

[Dennis Shaffer, President, CEO & Vice Chairman at Civista Bancshares]

As I mentioned, 110,000,000 of loans repricing over the next two quarters and then with the new stuff going on those rates, we think there's room for improvement there.

[Terry Mcevoy, Managing Director at Stephens Inc]

Yeah, no, real nice to see. And then last quarter, the two loans, the multifamily loan under contract and the C and I loan that was going to be back in compliance. Dennis, you mentioned one of them. Which one of the two loans was going to be resolved tomorrow? And then what's the status on the other one?

[Dennis Shaffer, President, CEO & Vice Chairman at Civista Bancshares]

The multifamily should be resolved today or today or tomorrow, we should say. We're pretty confident that's going to go through. It was we had thought it might be cleared up at the end of the first quarter, but the buyer wanted to extend that. It's a participation loan. The banks got together and said, we'll extend it, but you got to put a significant deposit down to do that.

[Dennis Shaffer, President, CEO & Vice Chairman at Civista Bancshares]

And they went hard with a significant amount of money to be able to extend that. So we're real confident on that. I was hoping to have the answer that it had paid off before this call. The other loan is more of that as I mentioned on the last call, it's more of a community loan. And we're not at all concerned with It's just taking a little bit of time to work through some of their issues.

[Dennis Shaffer, President, CEO & Vice Chairman at Civista Bancshares]

The project was bonded, so we're waiting to hear from the bonding company. And then hopefully, we'll continue to work, but we'll have greater clarity on that hopefully in the next three or four weeks. Okay.

[Terry Mcevoy, Managing Director at Stephens Inc]

Then maybe one more, Dennis. What are you hearing from kind of commercial borrowers or real estate developers? Any sense of kind of cautiousness in putting things on pause given the tariffs and the trade situation?

[Dennis Shaffer, President, CEO & Vice Chairman at Civista Bancshares]

Yes, so we've been reaching out to different customers and it's really, it's been very enlightening. There are some businesses that view it as a positive and others view it as a negative. I would say the sentiment has been kind of a wait and see type of attitude for most of our borrowers, at least as to what the long term effect will be. I do think it will slow some of the CapEx spending from some of our business from some of our business borrowers in the first here in the near term this quarter, maybe next quarter, as they just wait to see what happens. We think it impacts maybe people that are selling the finished product more so than those that are selling a piece or a part.

[Dennis Shaffer, President, CEO & Vice Chairman at Civista Bancshares]

Those customers seem like, as we've talked to, they're able to pass on that cost. The person selling that end piece or that finished product to the end user, they seemed a little bit more concerned whether they're going to be able to pass that on or not. But overall, I just think it's more of a wait and see type approach. And I do think it'll slow some CapEx spending.

[Terry Mcevoy, Managing Director at Stephens Inc]

Great. Thanks for your insight.

[Dennis Shaffer, President, CEO & Vice Chairman at Civista Bancshares]

Thanks, Terry.

[Operator]

Our next question comes from the line of Manuel Navas from D. A. Davidson. Your line is open.

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

Hey, I appreciate the color on kind of sentiment. Is that evident You said there's a little bit of CapEx spending slowing a bit. Is that already showing up near term on the second quarter? And then can you kind of talk about the range of growth?

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

What could drive to the high end of your guide and what could drive to the low end of your guide?

[Dennis Shaffer, President, CEO & Vice Chairman at Civista Bancshares]

On loan book, are you talking very well?

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

Yes, yes, loan book.

[Dennis Shaffer, President, CEO & Vice Chairman at Civista Bancshares]

Yeah, okay. Don't think it's in the current pipeline. I don't think it has much impact at $231,000,000 I think those people are far enough along and they're not stopping all of a sudden. So I don't think it has. But I think from this point on, may slow a little bit of that CapEx spending.

[Dennis Shaffer, President, CEO & Vice Chairman at Civista Bancshares]

As far as what's our economies are pretty good here in Ohio and Southeastern Indiana. There's just a lot of activity still going on. Most of the Central Ohio and then the Cincinnati market and stuff, they still are getting a lot of technology driven companies. Microsoft has announced a significant investment into Central Ohio, Google, and Amazon. They're all building facilities down there.

[Dennis Shaffer, President, CEO & Vice Chairman at Civista Bancshares]

And then you got Andrew Roll, the defense contractor and stuff. So as those things take hold, I think it's going to continue to fuel the economy and the housing demand. You're going to see a pickup. There's a lot more that we see builders building products and stuff. So think things like that will continue to fuel things.

[Dennis Shaffer, President, CEO & Vice Chairman at Civista Bancshares]

And it benefits really the whole state because as you have companies like Vanderall or Intel or something, they've got suppliers and those suppliers tend to locate closer to where they're building at. And that helps. It may not be in that exact market, but it could be three or four counties away, which benefits the way our footprint covers really the whole state and Southeastern Indiana. So I think those things will help us as we move forward. In our Northeast Ohio market, that's been a really good market for us.

[Dennis Shaffer, President, CEO & Vice Chairman at Civista Bancshares]

And Sherwin Williams just completed their building, downtown building, their new headquarter building where they're moving into. They'll add a few jobs to that. And it's things like that, I think, that this will continue to help our overall economy here for the short term.

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

And Will, this is Rich. I know Dennis talked about last call and I think on this call too.

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

I mean, a governor for us, I mean, the thing that kind of gauges whether it be more loans or less loans is really our ability to fund those loans and whether or not we can attract the low cost deposits. We've had good success if we continue to have that success. And if we're able to implement the digital or online account opening successfully like we intend to in the back half of the year, that really would, I think, allow us to kind of hit the upper levels of kind of the projections that we shared.

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

That's helpful.

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

In your So the note you should write down is it only gets better.

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

Well, we have had three consecutive quarters of pretty good deposit growth. Even though if you look at just the deposit growth we had this quarter, remember that we reduced those brokered deposits by 50,000,000 or $60,000,000

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

What is contemplated from the lease business in your growth guide and the fee guide? I know there's a little bit of a bounce back in fees. This is also a seasonally slower leasing quarter. Just kind of talk through kind of expectations for the year from leasing.

[Dennis Shaffer, President, CEO & Vice Chairman at Civista Bancshares]

Well leasing I think we're projecting about $115,000,000 of total of originations. And I think through the first quarter that was the slowest quarter for them. So I think what we do in leasing revenue production $1,617,000,000 or 20,000,000. We don't have that number, but that would have been their slowest quarter. So we do anticipate that to pick up as the year goes on.

[Dennis Shaffer, President, CEO & Vice Chairman at Civista Bancshares]

We don't have the exact numbers, if that gives you any feel for that.

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

Okay. That's helpful.

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

And continue to tell about half.

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

Tell about half. Okay.

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

That was the other piece. Okay. That's helpful. Lot of my other questions have been asked and answered. So I appreciate the commentary today.

[Dennis Shaffer, President, CEO & Vice Chairman at Civista Bancshares]

Okay. Thank you.

[Operator]

Our next question comes from the line of Emily Lee from KBW. Your line is open.

[Emily Lee, Analyst at Keefe, Bruyette & Woods (KBW)]

Hi, everyone. This is Emily stepping in for Tim Switzer. Thank you for taking my question.

[Dennis Shaffer, President, CEO & Vice Chairman at Civista Bancshares]

Hi, Emily. How are you?

[Emily Lee, Analyst at Keefe, Bruyette & Woods (KBW)]

So I wanted to ask about deposit repricing. What are your expectations for deposit repricing if we were to get a scenario with, say, no rate cuts? I know you mentioned that you factored in two rate cuts into your guidance, so just curious on your thoughts there.

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

Yeah, so we have this is Ian, Emily. So we have in terms of retail CDs that are coming up for maturity, and we're probably somewhere in the neighborhood of about 100,000,000 to $140,000,000 a quarter that are coming up for maturing, We should be picking up maybe 10 to 15 basis points on each of those as they come through renewals. We have put our highest rate on the shorter term, so our highest rate right now is on a seven month CD. We plan on keeping it that way just with all the uncertainty and volatility. That will keep us protected from that standpoint.

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

Also, with our online account opening software solution that we'll be launching in July, We expect our deposit cost would go up slightly, but

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

our total cost of funding should decline. So we'll raise our own deposits organically through probably some CDs and stuff and pay off that more expensive borrowed money or brokered deposits.

[Emily Lee, Analyst at Keefe, Bruyette & Woods (KBW)]

Okay, great. Thank you. And given that credit metrics improved a bit this quarter, can you give some details on your expectations for credit going forward, especially given the macro uncertainty?

[Dennis Shaffer, President, CEO & Vice Chairman at Civista Bancshares]

Yeah, we still feel good about our loan book. Mean delinquencies are actually down quarter over quarter and they're still pretty close to historically low levels. There's always some one offs and stuff. We've had some repricing of the some of the we have repriced higher, and that's caused some loans to be downgraded because the rates are higher and the cash flow doesn't quite meet our standards. But it's not significantly below thresholds.

[Dennis Shaffer, President, CEO & Vice Chairman at Civista Bancshares]

And in the same regard, although we've moved some credits in, we're moving credits out. We feel good where the credit is. Our allowance is really healthy. We have 1.3% in the allowance. And we could charge off We basically could we have eleven years of if we took our charge offs that we've had, we got an eleven year run on that.

[Dennis Shaffer, President, CEO & Vice Chairman at Civista Bancshares]

If we took out all took out is that to criticize?

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

That's the net charge offs.

[Dennis Shaffer, President, CEO & Vice Chairman at Civista Bancshares]

That's the net charge offs. Over the last twelve months. Yeah. So you take the net charge offs over the last twelve months. If you took what those were, there's eleven years in that allowance.

[Emily Lee, Analyst at Keefe, Bruyette & Woods (KBW)]

That's great. Thanks so much.

[Dennis Shaffer, President, CEO & Vice Chairman at Civista Bancshares]

Thank you.

[Operator]

There are no further questions at this time. Mr. Schaefer, please continue.

[Dennis Shaffer, President, CEO & Vice Chairman at Civista Bancshares]

Okay. Well, you, everyone. I just want to recap in summary, just tell you how pleased I am with the quarter. I want to thank everyone for joining the call. Our quarter results were really attributable to the hard work that all of our team put in over the past several months and continues to put in.

[Dennis Shaffer, President, CEO & Vice Chairman at Civista Bancshares]

While we're pleased with the results of the first quarter, we are confident that our strong core deposit franchise and our proven disciplined approach to managing the company really positions us well for future success. So I just thank you again for joining the call and look forward to talking to everyone in the next few months to share our second quarter results. So thank you for your time today.

[Operator]

Ladies and gentlemen, this concludes the conference call for today. Thank you for participating. You may now disconnect.

Participants

Executives

• Dennis Shaffer, President, CEO & Vice Chairman
• Ian Whinnem, Interim Principal Accounting Officer, Senior VP & CFO
• Richard Dutton, Senior VP & COO

Analysts

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