Civista Bancshares Q3 Earnings Call Highlights

Key Points

• Strong third-quarter performance: Net income rose 26% year over year to $16 million, or $0.77 per diluted share, while pre-provision net revenue increased 33%. The net interest margin expanded to 3.93%, supported by lower funding costs and growth in core deposits.
• Loan growth and funding improved: Loans and leases grew $38 million, or 4.7% annualized, despite $47 million in early payoffs, with management citing strong pipelines and construction activity. Civista also reduced brokered funding by 41% over nine quarters while adding non-interest-bearing and money-market deposits.
• Expenses and credit remained controlled: The efficiency ratio improved to 55.3%, and net charge-offs were limited to $139,000 as management reported stable credit conditions. Civista maintained its $0.18 quarterly dividend, repurchased 82,075 shares, and said it continues to evaluate acquisitions without an imminent deal.

Civista Bancshares NASDAQ: CIVB reported third-quarter net income of $16 million, or $0.77 per diluted share, up 26% from the same quarter of 2025 and 12% from the prior quarter. President and CEO Chuck Parcher said pre-provision net revenue increased 33% year over year and 11% sequentially.

“This was another solid Civista quarter,” Parcher said, citing higher net interest margin, diversified non-interest income and expense control. The third quarter was also Parcher’s first earnings call as president and CEO.

Margin Expands as Core Deposits Grow

Net interest income totaled $39.4 million, a 2% increase from the second quarter. Net interest margin expanded 4 basis points sequentially to 3.93% and was 35 basis points higher than the prior-year first nine-month period.

Funding costs increased 3 basis points during the quarter to 1.97%, though they were 30 basis points below the third quarter of 2025. Civista’s cost of core deposits, excluding brokered funding, was 1.61%, up 2 basis points from the prior quarter.

The company added $30.3 million in non-interest-bearing deposits and $15.8 million in savings and money market balances, primarily from business and municipal customers. Total deposits rose $19 million despite a $25 million reduction in brokered deposits.

Parcher said the company replaced $150 million of brokered certificates of deposit carrying a weighted average rate of 3.89% with $125 million of brokered CDs maturing over the next nine months at an average rate of 4.08%. Over the past nine quarters, Civista has reduced brokered funding by $223 million, or 41%.

Chief Financial Officer Ian Whinnem said management expects interest-bearing deposit betas of roughly 50%, with a lag in pricing. Civista has generally not needed to change its posted deposit rates, although Whinnem said some customers have requested rate exceptions.

Looking ahead, Whinnem said the company expects fourth-quarter net interest margin to be approximately 1 to 2 basis points above the third-quarter level, including the impact of subordinated debt repricing in December. The debt will move from a 3.25% fixed rate to a variable rate tied to three-month SOFR plus 219 basis points. Management expects the debt repricing to reduce fourth-quarter margin by about 2 basis points and to have a 5- to 6-basis-point quarterly effect once reflected for a full quarter.

Loan Growth Continues Despite Payoffs

Total loans and leases increased $38 million during the quarter, representing a 4.7% annualized growth rate. The increase came despite $47 million in early loan payoffs, which Parcher said were largely tied to businesses and properties being sold and real estate projects moving to the commercial mortgage-backed securities permanent market.

Civista’s lending and leasing teams generated $343 million of new organic production during the quarter. Residential loans increased $25 million, while real estate construction loans rose $15 million.

Undrawn construction lines totaled $268 million at Sept. 30, up from $250 million at June 30, $208 million at March 31 and $195 million at the end of 2025. Parcher said the construction pipeline, additions to the lending team and economic conditions in Ohio and the broader Midwest support the company’s expectation for mid-single-digit loan growth through the end of 2026 and into 2027.

New and renewed commercial loans originated during the quarter carried an average rate of 6.87%, while residential real estate originations averaged 6.45%. Loans and leases originated by the leasing division averaged 9.75%.

Chief Lending Officer Bob Katitus said loan pipelines remain strong, including the residential pipeline, and that the company had not yet seen a significant pullback in borrower activity from higher rates. Parcher said some transactions may require additional borrower equity if rates rise further. He added that Civista was originating five-year loans in the mid- to high-7% range while seeking to maintain spreads of about 2.75%.

Fees, Expenses and Securities Actions

Non-interest income increased $644,000, or 7%, from the second quarter and was consistent with the third quarter of 2025. During the call, Whinnem said Civista separated gain-on-sale income between mortgage and leasing lines in its fee-income presentation.

Management expects fourth-quarter non-interest income of $9 million to $9.5 million, with results dependent partly on interest-rate effects on the mortgage business. Whinnem said interchange income could be stronger in the fourth quarter because of holiday spending, while the leasing business is also expected to remain strong.

Non-interest expense declined $675,000, or 2.4%, sequentially and fell $349,000, or 1.2%, from a year earlier. The efficiency ratio improved to 55.3%, compared with 58.2% in the second quarter and 61.4% a year earlier.

Whinnem said fourth-quarter expenses are expected to range from $28.7 million to $29.5 million, reflecting investments in personnel, marketing and technology that were made late in the third quarter or early in the fourth quarter. Management said it plans to continue making revenue-generating investments in 2027.

The company received $1.8 million in net insurance proceeds related to a branch fire in December of the prior year, recorded in other income. Civista also sold about $8 million of fixed-rate securities yielding 1.3%, recording a $1.6 million loss, and purchased about $6.6 million of floating-rate securities yielding 4.6%.

Capital, Credit and Shareholder Returns

Civista repurchased 82,075 shares during the quarter at an average price of $26.96. Its tangible common equity ratio was 9.88% at quarter-end, up from 9.54% at Dec. 31, 2025. The company also declared a quarterly dividend of $0.18 per share, unchanged from the prior quarter.

The company recorded an $823,000 provision for credit losses and a $472,000 provision for unfunded commitments, while net charge-offs were $139,000. The allowance for credit losses equaled 1.29% of total loans at Sept. 30, compared with 1.28% at the end of 2025. Parcher said credit metrics remained well managed and that the economies in Ohio and southeastern Indiana showed no signs of deterioration, aside from broader macroeconomic uncertainty.

On potential bank acquisitions, Parcher said Civista has no imminent transaction but continues to hold discussions. He said the company would seek deals that are profitable for shareholders and have a short payback period, rather than transactions that are highly dilutive or extend beyond its financial parameters.

About Civista Bancshares (NASDAQ:CIVB)

Civista Bancshares, Inc is a financial holding company headquartered in Sandusky, Ohio. The company operates primarily through its subsidiary, Civista Bank, a community-oriented institution that provides banking and financial services to individuals, families, businesses and agricultural customers.

Civista Bank offers deposit products, residential and commercial real estate loans, commercial and industrial financing, agricultural lending, consumer loans and other credit services. Its additional offerings include treasury management, online and mobile banking, wealth management, trust services, investment services and insurance solutions.

Through its branch network and other delivery channels, Civista serves customers in communities across Ohio, Indiana and Kentucky.

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