Civista Bancshares Q2 2025 Earnings Report

Civista Bancshares EPS Results

• Actual EPS: $0.66
• Consensus EPS: $0.69
• Beat/Miss: Missed by -$0.03
• One Year Ago EPS: N/A

Civista Bancshares Revenue Results

• Actual Revenue: $41.40 million
• Expected Revenue: $43.07 million
• Beat/Miss: Missed by -$1.67 million
• YoY Revenue Growth: N/A

Civista Bancshares Announcement Details

• Quarter: Q2 2025
• Date: 7/24/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, July 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 Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Net income rose to $11.0 million in Q2, up 56% YoY, while net interest income increased 6.2% from the prior quarter, driving a margin expansion to 3.64%.
• Positive Sentiment: Savista entered into a definitive agreement to acquire Farmers Savings Bank and completed an $88.5 million follow-on capital offering, boosting tangible common equity above 8% and funding future growth.
• Positive Sentiment: Organic loan and lease balances grew at a 6.8% annualized rate with pipelines remaining strong; management expects mid-single-digit loan growth for the rest of 2025, accelerating in 2026.
• Negative Sentiment: Non-interest income declined 16.2% from Q1 and $3.8 million year-over-year, driven by Savista Leasing & Finance core conversion adjustments and lower leasing and residential fee revenue.
• Positive Sentiment: Credit quality remains strong with an allowance-to-loans ratio of 1.28% and coverage at 175% of non-performing loans, while Tier 1 leverage is 8.8% (10.6% pro forma).

Presentation

[Operator]

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 involves risks 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 statements made during the call.

[Operator]

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. This call will be recorded and made available on the Sevista Bank's website at www.civb.com. At the conclusion of Mr. Schaefer's remarks, he and the Savista management team will take any questions you may have.

[Operator]

Now, I will turn the call over to Mr. Schaefer.

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

Good afternoon. This is Dennis Schaefer, President and CEO of Savista Bancshares. And I would like to thank you for joining us for our second quarter twenty twenty five earnings call. I'm joined today by Chuck Percher, 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 Wim, 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 second quarter of $11,000,000 or $0.71 per diluted share which represents a $4,000,000 or 56% increase over our second quarter in 2024 and an $847,000 increase over our linked quarter.

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

This also represents an increase in pre provision net revenue of $3,300,000 or 37.5 percent over our second quarter in 2024 and a $770,000 or 6.7% increase over our linked quarter. Our second quarter results included a $757,000 positive non recurring adjustment related to finalizing the conversion of our leasing division's core system. Absent this adjustment, net income for the second quarter would have been $10,300,000 or $0.66 per diluted share. Net interest income for the quarter was $34,800,000 which represents an increase of $2,000,000 or 6.2% compared to our linked quarter. The increase was attributable to our earning asset yield increasing 13 basis points to 5.84% while holding our overall funding costs steady at 2.32%.

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

Our cost of core deposits increased by six basis points to 1.48%, which was offset by the repricing of $150,000,000 brokered CD that matured in late March that carried a rate of 5.18%. We were also able to reduce and replace 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. This resulted in our margin expanding by 13 basis points to 3.64 compared to the linked quarter. We continue to have solid loan demand across our footprint. Our loan and lease portfolio grew at an annualized rate of 6.8% during the quarter.

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

This was organic growth, and we believe it is indicative of the continued strength of our markets and our organization. We continued our focus on holding loan rates at higher levels to ensure an appropriate return for the use of our liquidity and capital. Earlier this week, we announced a quarterly dividend of $0.17 per share, which is consistent with the prior quarter. Based on our July 22 dividend declaration date, closing share price of 21.26, This represents a 3.2% yield and a dividend payout ratio of nearly 24%. This month, we also announced entering into a definitive agreement to acquire the former Savings Bank based in Spencer, Ohio, and the announcement of an $88,500,000 follow on capital offering.

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

The acquisition was not contingent on raising capital, but we felt the additional earnings the acquisition will provide would offset the earnings dilution created by issuing additional shares. We have been considering raising capital for some time and viewed pairing it with an acquisition as a great opportunity to improve our TCE ratio above 8% and reduce our CRE ratio below 300%. The additional capital will allow us to grow our franchise by accelerating organic loan and deposit growth, investing in technology and infrastructure, and future acquisitions. We were presented with the Farmers Opportunity early this year and felt it was both strategically and financially compelling. We have very similar philosophies in how we view our employees, our customers, and the communities that we serve.

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

As we have in prior acquisitions, our strategy will be to leverage Farmers $233,000,000 in low cost core deposits and their $161,000,000 security portfolio to fund loan growth into Farmers current markets, Greater Northeast Ohio and across the Vistas footprint. We look forward to closing the transaction during the fourth quarter and welcoming them into the Vista family. With respect to the capital raise, we have said for some time that we would need to raise capital to support our strong organic growth. Ideally, we wanted to raise that additional capital in conjunction with an acquisition. The Farmers transaction presented us with that opportunity.

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

We successfully closed our following offering, raising 76,274,000 share of additional capital, net of offering costs, and issuing 3,788,238 additional shares. The immediate use of the proceeds generated from the offering will be to reduce overnight borrowings with the longer term strategy to convert these funds into loans over the next several quarters. We will work as quickly as possible to close the Farmers transaction and begin including the additional earnings it will provide to offset the dilution in earnings created by the additional shares. During the quarter, non interest income declined $1,300,000 or 16.2% from the first quarter and $3,800,000 from the second quarter of twenty twenty four. The primary drivers of the decline from our linked quarter were $1,400,000 in fees related to leasing operations at Savista Leasing and Finance.

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

This decline was primarily attributable to the nonrecurring adjustments related to our Leasing and Finance division's core system conversion. The primary drivers for the $3,800,000 decline from the prior year's second quarter were a $2,000,000 decline in fees generated from leasing operations due to stronger lease originations in 'twenty four and lower residential fee revenue in 2025, along with the nonrecurring adjustments that occurred in the second quarter. Non interest expense for the quarter was $27,500,000 and represents a $356,000 or 1.3% increase over the first quarter. This was due to an increase in compensation and is primarily attributable to merit increases which take effect in April of each year. In addition, we made a few individual salary adjustments for in demand positions to get those employees into an appropriate salary range.

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

This increase was partially offset by declines in professional fees as we concluded our annual audit during the first quarter and equipment expense as we continue to execute our residual value insurance strategy reducing depreciation expense related to operating leases. Compared to the prior year's second quarter, non interest expense declined $907,000 or 3.2%. The decline is attributable to a reduction in equipment expense for the reason previously mentioned and a reduction in compensation expense is the result of 11 fewer FTEs. This reflects closing a branch during the fourth quarter of last year, shutting down our call center in the first quarter of this year and not replacing a few positions. Our efficiency ratio for the quarter improved to 64.5% compared to 64.9% for the linked quarter and 72.6% for the prior year second quarter.

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

Our effective tax rate was 14.6 for the quarter and 14.7% year to date. Turning our focus to the balance sheet. For the quarter, total loans and leases grew by $47,100,000 This represents an annualized growth rate of 6.1%. While we experienced increases in nearly every loan category, our most significant increase was in residential loans, which increased by $42,000,000 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. As we have 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]

During the quarter, new and renewed commercial loans were originated at an average rate of 7.48%. Residential real estate loans were originated at 6.53% and loans and leases originated by our leasing division were at an average rate of 9.05%. Loans secured by office buildings make up 4.8% 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 steady and our undrawn construction lines were $188,000,000 at June 30.

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

Post capital raise and farmers acquisition, our pro form a CRE to risk based capital ratio will be 292%. And while we anticipate maintaining this ratio at no more than three twenty five percent, this will allow us to be a little bit more aggressive in our CRE lending. We anticipate loan growth will remain in the mid single digit for the balance of 2025 and accelerate into the high single digits in 2026 as we leverage the excess farmers deposits and our loan pipeline to build. On the funding side, total deposits were mostly flat, declining just $42,700,000 or 1.3% for the quarter. This was primarily attributable to one municipal customer that deposited approximately $47,000,000 during the first quarter and transferred those funds out during the second quarter.

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

We continue to focus on growing core funding. In July, we launched our new digital deposit account opening platform using mail that we expect to ramp up during the third and fourth quarters, focusing our marketing on new customers outside our current branch locations. Our overall cost of funding only increased one basis point to 2.32%. We continue to see migration from lower rate interest bearing accounts into higher rate deposit accounts during the quarter. As a result, our cost of deposits excluding brokered deposits increased by six basis points from the linked quarter to 1.48%.

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

Our deposit base continues to be fairly granular with our average deposit account excluding CDs approximately $27,000 Non interest bearing deposits and business operating accounts continue to be a focus. In addition to our new digital platform, we have several initiatives underway to gather these types of deposits, including monthly marketing blitzes and marketing to low and no deposit balance loan customers. At quarter end, our loan to deposit ratio was 98.6%, which is up from our linked quarter and is higher than we would like it to be. We anticipate reducing this ratio to our targeted range of 90% to 95% as our deposit initiatives take hold and the Farmers acquisition closes. With respect to FDIC insured deposits, 12.5% or three ninety six million dollars of our deposits were in excess of the FDIC limits at quarter end.

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

Our cash and unpledged securities at June 30 were $507,900,000 which more than covered our uninsured deposits. Other than the $518,400,000 of public funds with various municipalities across our footprint, we had no deposit concentrations at June 30. We believe our low cost deposit franchise is one of Sunnyssa's most valuable characteristics contributing significantly to our solid net interest margin and overall profitability and look forward to adding farmers deposit base. Interest rate environment continues to put pressure on our bond portfolios. At June 30, our securities were all classified as available for sale and had $63,100,000 of unrealized losses associated with them.

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

This represented an increase in unrealized losses of 5,600,000 since 12/31/2024. At June 30, our security portfolio was $645,000,000 which represented 15.4% of our balance sheet. And when combined with cash balances, it represented 22.5% of our deposits. We ended the quarter with our Tier one leverage ratio at 8.8%, which is deemed well capitalized for regulatory purposes. Our tangible common equity ratio was 6.7% at June 30, up from 6.59% at March 31.

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

Post capital raise and farmers acquisition, our tier one leverage ratio increases to 10.6% and our tangible common equity ratio increases to 8.6%, which we feel gives us capital to support organic growth due to strategic transactions and general corporate purposes. And this is earnings continue to create capital and our overall goal remains to maintain adequate capital to support organic growth and potential acquisitions. We will continue to focus on earnings and will balance the payment of dividends and any repurchases with building capital to support our growth. Although we did not repurchase any shares during the quarter, we do continue to believe that our stock is a value. Despite the uncertainties associated with the economy and the expense pressures our borrowers face, our credit quality remains strong and our credit metrics remain stable.

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

For the quarter, criticized credits declined by $2,000,000 with the biggest movement coming from a substandard and non performing $7,200,000 loan payoff. We did make a $1,200,000 provision during the quarter, which was primarily attributable to funding loan growth and a $549,000 charge off, which was associated with a non operating hotel loan that had been in work out. Our ratio of allowance for credit losses to total loans is 1.28% at June 30, which is consistent with the 1.29% at 12/31/2024. In addition, our allowance for credit losses to non performing loans is 175% at 06/30/2025, an improvement when compared to 122% at 12/31/2024. In summary, it's been a very busy and productive quarter.

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

I could not be more bullish for Savista and our shareholders given the success of our follow on offering and our new partnership with Farmers Savings. I look forward to watching our teams work together over the next few quarters to prepare farmers for a successful integration into the Savista family. Our margins remain strong and we will continue our focus on generating more lower cost funding. We anticipate loan growth will remain in the mid single digit range for the balance of 2025 and accelerate into the high single digits in 2026 as we leverage the excess arbors deposits in our loan pipelines build. While our newly issued shares will put some pressure on our earnings per share for the next several quarters, I am confident in Savista's ability to leverage our new capital, generate solid earnings, and create long term shareholder value while meeting the needs of our customers and communities.

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

We also look forward to welcoming Thermo's customers, employees, and their communities into this Vista family. Thank you for your attention this afternoon and your investment. And now we'll be happy to address any questions you may have.

[Operator]

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the one on your touch tone phone. You. Your first question comes from Brendan Nosal with Hovde Group. Your line is now open.

[Brendan Nosal, Director at Hovde Group]

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

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

Hey, Brendan.

[Brendan Nosal, Director at Hovde Group]

Maybe just starting off here on the core margin. It's the one time noise that you guys called out. It more or less came in as expected. It was up minus 6% in the first quarter. Any thoughts on how that core margin trends over the balance of the second half as you weigh deposit competition with a pickup in asset yields on remixing?

[Ian Whinnem, CFO at Civista Bancshares]

Yes. Hi, Brent. This is Ian. So as we kind of think of Q2 going into Q3, now early in Q2, we shifted our focus on our CDs into a shorter term as we expected some rate cuts occurring in the third and fourth quarters. So now our highest rate on those three months CDs as opposed to seven and twelve months that we were doing earlier in the year.

[Ian Whinnem, CFO at Civista Bancshares]

Also, we have a good amount of the loans that are coming up for repricing as they come forward into the year. That's going be helping us also. Have about $50,000,000 in the third quarter, another $50,000,000 in the fourth quarter. They're going to reprice up about 150 basis points. So as we factor in those as well as the immediate benefit that we get out of the net $75,000,000 of capital, that's paying down borrowings immediately.

[Ian Whinnem, CFO at Civista Bancshares]

That's going to pay off near 4.5% of the borrowings. All in all, we expect our margin for the third quarter to come in maybe low to mid 350s, so somewhere around three fifty two, three fifty three, and then expanding a little bit more in the fourth quarter.

[Brendan Nosal, Director at Hovde Group]

Fantastic. And I appreciate the color there. That's helpful. One more for you before I step back. Can you just update us on the competitive environment and how it's evolved for both lending and funding?

[Brendan Nosal, Director at Hovde Group]

We're hearing that several larger regionals are starting to step back into certain asset classes and trying to grow loans again. So just kind of curious what your experience is.

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

We're seeing some of the same thing you're just alluding to. Think the regions are getting a little more aggressive. Think the West Bank of Premier thing, as it kind of settles through, I think West Bank of is going get a little bit more aggressive as well. We are seeing some opportunities in the marketplace of that acquisition, both with talent and with new clients. So we look forward to that.

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

But it is a very competitive market across both deposits and lending.

[Brendan Nosal, Director at Hovde Group]

Okay, wonderful. Thank you for the color.

[Operator]

Your next question comes from Terry McEvoy with Stephens. Your line is now open.

[Terry Mcevoy, Managing Director at Stephens Inc]

Thanks. Good afternoon, everybody.

[Ian Whinnem, CFO at Civista Bancshares]

Hi, Jerry.

[Terry Mcevoy, Managing Director at Stephens Inc]

Dennis, you said in your prepared remarks you're seeing solid loan growth across the footprint. Could you just talk about maybe specific markets or sectors that are behind the demand? And were you maybe a bit more selective on loan growth in the second quarter given the loan to deposit ratio? And I think that kind of feeds into your optimism for accelerated loan growth next year?

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

Yeah, I think we've been muting loan growth for a while now. A lot of that loan growth in the second quarter was residential loan growth. We've been muting kind of the CRE just because of our high, the higher concentration. So I think the additional capital is going to help us accelerate that organic growth. And we felt we were kind of at a point where we needed to do something to be able to accelerate that.

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

Know that the next quarter or two we'll probably take a step back as far as EPS growth and things like that. But then we really look long term, we think we can accelerate it and keep growing that and improving our ROA, improving our earnings and stuff. So we do see loan growth accelerating because there's lot of opportunities over the last year to eighteen months that we passed on. The opportunities are really throughout our footprint. Ohio has really become a business friendly state.

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

So we are adding jobs all throughout the state. There's been some significant companies announcing investments into Ohio. So we feel really bullish that and we see that with our loan demand. We see our lenders bringing in stuff from all across our footprint. So I'll let Chuck hear your comment, see if he has other comments. He's probably even closer to it than I am.

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

Well, just think Dennis alluded to it, but the nice part of Ohio right now is the three major cities, Cleveland, Columbus, Cincinnati are all doing quite well, all expanding marketplaces from a jobs perspective and from a population perspective slightly. We feel good about that. We really never saw any major deterioration in our office, even though we don't have much central city office, but very little at all. All of our office really held in there pretty good, the demand around especially the suburbs of those three cities and then you throw in Dayton and Toledo are doing very well as well. So, we feel good about where we're positioned inside of the Midwest right now.

[Terry Mcevoy, Managing Director at Stephens Inc]

Thanks. And then as a follow-up, Dennis, thanks for running through some of the deposit initiatives. Believe it last year when you announced a few other initiatives, one I believe with the state of Ohio. Can you just talk about the last year's deposit growth strategy and those initiatives? Are they at capacity?

[Terry Mcevoy, Managing Director at Stephens Inc]

And then what do you think some of these newer initiatives can add to the balance sheet over the next few years?

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

Yes, some of the little things we did last year are probably at capacity. I mean, were specifically the Ohio homebuyers was a specific program and stuff. So I think some of the new initiatives are limitless for us. We've made a big investment into this mantle product And that's a new deposit account origination system that really can expand our footprint and stuff and provide people in just an easier way to open accounts. We'll initially lead with, as Ian was alluding to when he addressed the margin question, a kind of higher rate CD to attract people.

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

But that's still cheaper than some of the broker deposits and borrowings that we have. So the goal is to raise enough deposits to keep pace with our loan growth. So that was a significant investment. We already talked about targeting these low and no deposit balances. I think in our strategic plan, call for maybe hiring some more treasury management officers.

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

We've had great success in growing and adding deposits and growing fee income over the last several years. That's one of our initiatives that we'd like to kick off and stuff. Maybe some branch adding some branches in areas where we've identified where we think there's growth and opportunity for us. So there are just a number of initiatives that we've outlined in our strategic plan that we are starting to execute. And some of those, they take a little while to take hold.

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

But hopefully, we're able to execute and increase our deposits to help keep pace with a lot of that what we see is on the opportunity on the loan side.

[Terry Mcevoy, Managing Director at Stephens Inc]

That's great color. Thanks for taking my questions.

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

Thanks, Terry.

[Operator]

Your next question comes from Tim Switzer with KBW. Your line is now open.

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

Hey. Good afternoon. Thanks for taking my questions.

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

Hi, Tim.

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

I've been jumping around calls, so sorry if this is already covered. But after adjusting for the one timer and leasing fee income this quarter, still a little bit below what we had, and I know that that line item can jump around quite a bit. Can you give us an update on maybe what we should be projecting going forward there?

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

Chuck, you got thoughts on that?

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

Well, think our gain on sale and mortgage will continue to stay relatively consistent. We're hoping the back half of the leasing year will be a little bit better. Think Trump's big, beautiful, whatever you want to call it, bill brought back accelerated depreciation. We feel like the back half of the year in the leasing side will have a little bit more volume there from that perspective.

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

They don't have their pipelines are a little bit

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

Pipeline we're up.

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

That they're reporting. So we don't have our real good number for you yet, Tim. But it's been very lumpy for us because we've been just tweaking. Like I said, we did the core conversion and there too. So that's been a little bit.

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

It just made things lumpy. But we'll see if we can get a better number and provide some guidance here to everyone a little bit later.

[Ian Whinnem, CFO at Civista Bancshares]

And this is Ian.

[Ian Whinnem, CFO at Civista Bancshares]

Just to add little, think the first half, as Dennis just mentioned, was slow because of the CapEx spending on businesses on the leasing side. And then also, I think our sales team just had some distractions because of our core system conversion. So as we take those two items away of getting bonus depreciation put in, maybe a little bit more comfort on what the future looks like with tariffs, we do expect to see that business rebound in the second half.

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

Okay. All right. That makes sense. And you just touched on my next question related to the tariffs. Have you guys done kind of like a good deep dive into your loan book, see where you have exposure, if any, and what were the results of that?

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

We did look at it and we've had quite a few conversations especially our larger manufacturers. Believe it or not, most of them are optimistic, feel like if we do bring more stuff back domestically from overseas, that there's opportunity there. Almost all of them said the capacity isn't there right now, take on all that work, it would all come back tomorrow. But most are optimistic. Now, at the same time, as Ian just alluded to, CapEx spending, everybody is still kind of waiting to see how it totally plays out, and at least CapEx spending for our, what I would call, major middle market borrowers has not accelerated yet to look at that.

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

I think everybody is still waiting a little bit to see how it totally plays out.

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

That's great color. Thank you, guys.

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

Thanks, Tim.

[Operator]

Ladies and gentlemen, as a reminder, should you have a question, please press one. Your next question comes from Emmanuel Nava with D. A. Davidson. Your line is now open.

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

Hey, good afternoon. Hey, low growth was a little bit higher through May. Was there some payoffs in commercial by the end of the quarter in June? Just trying to understand that shift.

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

Yeah, not anything drastic from that perspective. Our run rate's been pretty consistent. I I don't know, are you picking that up from, I guess?

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

I guess the update through May, I think had a little bit more loan growth. And the mantle initiative, is there any numbers around that so far in terms of amounts that is brought in here in July or just you've just been pretty excited about how Yeah

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

we don't really we just kicked it off July 7. So we do see some positive we do see some positive pickup in those CD balances. But we're two weeks into it. So there's it was not major, like we haven't raised a $100,000,000 in deposits. We got lots of toys in our family so far.

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

I appreciate the commentary on leasing recovery. Is that also impacting the loan balances as well? Or the lease balance?

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

On the leasing side, yes.

[Ian Whinnem, CFO at Civista Bancshares]

Yeah, on the leasing side, we sell about half of them. And so that would increase our leases that go on to the balance sheet too, if that's what your question is.

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

Okay. And then in the average balance sheet, was there anything interesting going on in deposit costs? It seems like CDs came down, but then your other line saw a jump in deposit costs. Is that just some of the public funds? Your overall deposit costs were fine, but does it seem like some of the geographies shifted around?

[Ian Whinnem, CFO at Civista Bancshares]

Yeah. We have seen a little bit of shift in some larger deposits that are in some of the different pricing buckets for public funds.

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

That gives us back to the think if the competitive environment remain well, some of those higher deposit balances we've had to tweak up. We've of priced it to our effective Fed funds rate, but we did see a little bit of shift in some of them higher deposit balances. A discount to the effective funds rate. Right. We did. A discount to them. Right.

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

Okay. I appreciate that. That's all I've got right now.

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

Thank you.

[Operator]

There are no further questions at this time. I will now turn the call over to Dennis Schaeffer for closing remarks.

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

Well, in closing, I just want to thank everyone for joining us for today's call. The quarter is strong. We had this quarter strong financial results. Our announcement of the Farmers deal and the follow on offering were due in large part just a lot of hard work and discipline from our team. I'm really confident as we move forward that we continue to improve on our strong core deposit franchise and we take this disciplined approach to managing the company.

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

And I think it's just going to lead to a lot of long term future success for us. So I look forward to talking to everyone again in a few months to share our third quarter results. Thank you for your time today.

[Operator]

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.

Participants

Executives

• Dennis Shaffer, President, CEO & Vice Chairman
• Ian Whinnem, CFO
• Charles Parcher, EVP & Chief Lending Officer

Analysts

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