Civista Bancshares (CIVB) 23 Jul 212021 Q2 Earnings call transcript

Good afternoon and welcome to Civista Bancshares Second Quarter Earnings Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. Please note that this event is being recorded.

Now, I would like to turn the conference over to Mr. CEO. and President Shaffer, Dennis Please go ahead.

the second is Good of for President call. the our of CEO Chief and Shaffer, members team. our Bank; Bancshares, afternoon. Chuck joining and SVP the joined and by for you This Civista thank and I and Chief Operating the executive to SVP earnings other Dennis would today XXXX quarter of Dutton, us company of Lending I’m Bank; company like Rich Officer Parcher, Officer of of

any Before I be conference disclaims such uncertainties. expressed on and update are obligation and Inc. begin, materially from the with would filings, we future Bancshares, you factors These like risks company’s to company performance by that available call respect any Various to which statements factors in during this are financial statements. future statements The Civista involves remind any implied condition could discussed of website. contains cause or forward-looking the forward-looking that the call. results the to actual made to forward-looking company’s SEC results different

on financial Additionally, to measures. substitute to but measures. press website comparable the directly GAAP non-GAAP as reconciliation which refer GAAP non-GAAP be and the well the other available today, intended quantitative not the to discussed most release contains to management are the of may supplement, The measures, information as

may at Bancshares’ my have. XXXX you will Again, make earnings We Civista of take the available to website At conclusion will remarks, any www.civb.com. and Civista record this second call. call welcome on we Bancshares questions quarter it

and second income This that per income several million for of million XXXX. share $X.XX diluted noting $X.XX of occurred XX, per share the of morning, remarks $XX.X we Let during me ended off my June net XXXX significant quarter accomplishments second start six or for diluted net the or or $X.X months reported transactions quarter. the by

the a This to on stream the first XXXX, well XX.X% provides our that for XXXX. quarter focus we of company. as to share launched result both the per Digital disciplined second revenue take Banking, new earnings successfully On as is quarter XX.X% our online direct increased in and better the compared Civista X, of the Our the months growing June and continued compared of customer experience we platforms. which diversifying managing and a mobile in six approach the

in We this be our out branch online later and also will opening account year. rolling process opening improving account

another we interest to our sheet be to steps in for took seem margin also restructure lower rate balance longer as We improve environment. and our

we quarter, a the basis. During paid able offset FHLB to $X do off of on annual million $X.X paid VISA our the gains with sale of penalty that advances, which on we expense by shares our reduce penalty to million an long-term million. that, B but some $X.X will were interest We of

put cash to investments. additional margin. quarter seen also more be our effect third We of The these some will whole transactions in work and

quarter see quarter. did our points the in However, uptick we basis to nice margin XX this compared of linked

quarterly our in on a $X.XX ratio share, represents increase XX% per dividend XX.X%. which a approved payout X Directors of of Board July our Finally, to dividend

to stock our of continue in We program. the opportunistic repurchase be execution

a numbers. our talk bit let’s little about Now quarterly

construction loans quarter estate. largest the was two XX.X% real in commercial saw Non-owner for loan Our increases growth the PPP and categories The we excluding estate that X.X% annualized. Occupied or real

loan to be pipelines strong. continue Our

we million business gain this of with that continues income to banking recorded the $X.X nearly linked million generating quarter, mortgage quarter. Our the in keeping non-interest pace gains drive $X.X

whole. We quality continue managing loan focus asset our well on as COVID-XX a as deferrals as

with customers resume XXXX. deal deferrals X.X% XX, with shortage we the attributable with to working increased have these borrowers not XXXX. which quarter low quarters to strength operations the income of of was of loans June businesses, any have $X.X at efforts X.X% Many six and more as our of defaults levels. continued have spring to XXXX to million seasonal to the December deferrals compared to quarter the fourth or or exiting $X.X at Our the total of until did from interest in borrowers experienced borrowers, people consistent income the and not late of XX. of Net the our and first year-over-year. their remain and million delinquencies XXXX first We and returning our Due for our third X.X% of continue for interest anticipate seasonal work. Net in increased to X% improve months historically pandemic

X.XX% was and measures months X.XX% but the comparable Both than the the quarter of margin first are than lower XXXX the interest net six respectively. XXXX. period, for of for quarter Our XXXX and first higher

by we significantly our a had a As as on tax of our both stimulus experienced shared program, quarter margin. release, increase earnings created result cash processing our negative program excess federal in the we liquidity and the first impact the government

Our that I balance second restructuring, to previously margin rebounded quarter and expect sheet will further to mentioned. continue we due the improve has it

funding and the comparing We to to the XXXX of the to first to costs when quarter when $XXX,XXX $X.X compared rate costs XXXX. of quarter months Funding $XXX,XXX continue the million at second XXXX down went see lower second linked same interest period environment. XXXX, to the six comparing quarter decreases of due the by in our of

We expect balance a of decreases more sheet the to see result restructuring. as

the balance of the six interest cash. that in down for compared The first earn. the which reduces decrease The due XXXX average interest quarter on XXXX. rate the the assets the to earning yield quarters yield Our same overall the in increase reason bearing and comparable the in increased, bearing cash periods for low to months is of is we largest for

in put is first comparable second of late the the yield down tumble the rates cash part of The restructuring, interest began balance to As XXXX. period some for work six to the we quarter. sheet also quarter during month as

the declined million $X.X and increased comparison year-over-year. income or X.X% non-interest quarter linked quarter XX.X% the During $XXX,XXX to in or

we have or would year-over-year. to stock, declined However, on $X.X and our effect in quarter gain million comparison if out back of VISA $XXX,XXX X.X% of non-interest the increased the or $X sale income million the the linked B XX.X%

of a the first processing which year larger of reason that to the for quarter the quarter. quarter primary the tax we includes first earn, in The from the fees portion was the decline second fees

the the of mortgage of the loans. most $X.X For the six moving due income income. compared of is Mortgage B million non-interest million, sale gain be to driver this of our continues banking increase we’re to increase months first residential on XXXX increased $X.X non-interest gain shares, on VISA is XXXX, largest the to

recorded the on loans slightly $X.X prior $X.X mortgage million for gains of the with sale gains million, in of linked quarter Second quarter the the consistent down were from we quarter. year our and

loans For from $XX.X first of XXXX. mortgage million measures XXXX, XXXX, of to first $X.X quarter the in and months six compared the our we $X.X million million volume the of from compared down to We quarter increases XXXX, the X.XX% to reduced six the recorded during for both first XXXX $XXX,XXX compared sale linked $XXX.X sold increased basis while XXXX months second to of gains second in the on $X during softened in the of is quarter million We million months decline second in of our premium the the demand over points quarter. average Service $XXX,XXX recognized the for quarter. six X.XX% quarter a and as XXXX. by charge linked of pricing loans resulting XX revenue

with first $XXX,XXX $XXX,XXX six of onset the XXXX, You XXXX, quarter of for quarter as $XXX,XXX second revenue may and the the as first the our customers six many of of of management months and charges for our XXXX. dealt to Wealth Civista buying Interchange pandemic. and increased the consumers service recall continued online retail their suspended revenue options. during for the the quarter cashless $XXX,XXX increased months shift for

affected pandemic the management asset negative year’s wealth our fees, last adversely Our base the markets on revenue. impact and

Our refund from at quarters consistent non-interest each quarter first Income $XXX,XXX. be processing to continues during with our during the and the income to year. program income was important that year second prior an our tax contributor program second

a for FHLB had of the and swap prepayment million penalty We swaps $X.X the we into included of XXXX months liability in six first our as asset borrowing. loans, fees the both long-term on we as a management quarter part expense Non-interest also decrease reduced entered program.

for numbers reported show increase first six Our increase a the XX% months. quarter XX.X% and for a the

moving We’re for increase X% the prepayment of penalty first the is the the quarter the effect X.X% and months. six for

Additionally decreased expenses non-interest the quarter. compared have to adjusted linked X.X% would

the was quarter ratio for efficiency been our XX.X% quarter XX.X%, XX.X% While the efficiency linked XX% to adjusted for year-over-year. ratio compared would and our have

XXXX. of million focus to six net $XX.X declined our loans reduction in first months the Year-to-date our the loans balance million. a had We $XX.X sheet. total PPP of of Turning

Excluding would million PPP X.X%. loans, our loan grown $XX have portfolio or

for or estate increased construction across Non-owner XX.X% quarter commercial loan Occupied estate season $XX.X was Real growth Demand construction Second footprint as million real up. fully the opened loans continued. annualized. demand our

encouraged are by well construction high. and time totaling lines $XXX quarter, near across during strong in the as which loans the million, undrawn the We all as booked our footprint demand are

portfolio We that our for loan expect grow XXXX. we a will at mid-single-digit rate

June million except increasing to On up by with demand of the compared total bearing year. beginning of made at $XXX.X in experienced every category funding XXXX. deposits demand deposits since XX.X% our or time the deposits accounts, XX, the growth we grew $XXX.X which million side, Non-interest December X.X% total XX,

our tax processing program as the to loan increase, bearing million from of accounts, deposited customers business up income of PPP non-interest the related made balances $XX.X business came growth While $XX.X million proceeds. our

by million increase increase experienced driven fund $XX.X in demand We bearing million $XX.X also in a our a accounts public interest accounts.

pandemic, period. initial downgraded the that modification requested loans During we beyond the automatically concessions commercial XX-day

at total million. June portfolio to recoveries, from hotels substandard totaling in still with XXXX. we of XXXX continues December of these the in $XXX,XXX XXXX. we in million second uncertainties loans criticized have while associated at loan as The to XX, are revenues largest reduction all the hotel $XXX.X million anticipate portfolio, be there borrowers occupancy increase $XX.X further are and includes realized our which segment quarter Our Year-to-date, declined XX, classified net of criticized a $XXX.X loans And Many stabilize. economy. experienced criticized

We see and both economy our improvement positions. in the financial to continue customers’

X.XX%, As during exclusive this ratio our end PPP to XXXX allowance of a The a expense year ratio the record result, at to X.XX% loans, loan provision been for not would loans the from X.XX%. of increased quarter. it was to losses have necessary

points. to end of Our the ratio a XXX.XX% at the PPP in TCE ended non-performing loans with tangible million tax of loans had to business X.XX% quarter for the to at by of to $XXX quarter We effect approximately XXXX. XX loan XXXX, compared ratio end $XX.X related basis equity reducing combined XX, processing liquidity at from the December quarter of the our our refund also income million allowance losses extra common increased of end the XXX.X% X.XX% at with

create to continue We capital through earnings.

dividends overall of is Two for have acquisitions. parts and management capital are repurchases. share both to our capital adequate growth, strategy Our and goal organic for important

As increase stated, quarter recently share. dividend previously per $X.XX we of our the third announced to

during average December XX, XXXX. our XXX,XXX repurchased for million share. shares XXX,XXX,XXX for $X.X of or quarter Year-to-date, have $XX.XX shares Additionally, repurchased that we of were of X.X% per the common stock we at an price shares outstanding

of interest quality. We approximately growth, improved margin remaining increased million we credit fueled net by In another the current summary, have with pleased and repurchase solid are program. earnings, quarter very expansion, $X.X low

progresses. we During We open economy life the XXXX, normal. first returning seen remain year to half up the and as optimistic have the of

are pipelines solid. loan Our

remaining forgiven We during expect will of in all X PPP of XXXX. of the many balance X Phase that the be loans Phase nearly the loans

to I'll this customer to better attention you a afternoon. Thank will new us any you experience. may your are now have. questions digital be tools, allow which our We happy rollout address to provide continuing And banking for that

comes ahead. Instructions] Please of [Operator First Terry question Stephens. McEvoy from go

drives Maybe understand last can to through margin year, expansion? so, just that afternoon. actions beyond second quarter? think what with the you message we the do run Should if that I half I start want correctly. the core Good the of And were this increases again, let's think about sure margin the margin. you sheet make balance

May. So occurred Terry, That this late Rich. in is transaction

if that didn't the XX on period at modeling, So impact our see XX entire the said the the we're Does in year. XX annualized, basis the I of we we expect six to month numbers over points more month numbers. growth really quarter sense related or obviously basis And even would that? a make – for that looking margin probably points over or through

your got I answers. Yes,

Yes. Okay.

that, question I were what did beyond asking another you So or have me? you did answer

expansion were ran I guess funding that additional those some beyond the above you was that reduce costs in margin down – lower? there's there transaction come math beyond and and the you as occurred just implying through, there

the kind funding to there's of some that Don't forget about room certainly stimulus. costs down. Well, bring

is term of the occur will technical the beginning the think year. I right That snafu. at

drag for will also of So And runs tax, cash number the the margin rolls that had we decline six will of another month as our tax that continue cash month diminish that and our points had XX to basis the points out. that. out. to again, as continue the year And six And XX on drag margin. basis excess

that – we've I of little So balance and noise the Terry, we a there. most in stimulus if because Then transaction. was more because the error tax have of bit program, the did sheet

fees a plus lot PPP of second and collect we the So, in quarter.

in noise there quite bit So a there. is of

loan Non-Owner this be Do bright mid-single-digit back up. all in clearing the spot pricing in growth just then just Occupied second of about and that terms of the really half looks going for the of for loan CRE driver the as Thanks in quarter. follow-up. outlook that it year, like this you a maybe was that's And growth market to category? year the talk within think The competition

that's we're butter is Obviously estate. Non-owner and in this that Yes. – our real Occupied Chuck. Terry, bread

still commercial under been payoff side. amount I a at a from lines from really cash really We've government C&I had X/XX. demand. good a XX% so about from the got of good bit revolving few little companies little the to stimulus. the just on We've pipelines loan softer now. really had have at have XX% excess We cash. just fell looking and XX% right that loans utilization XX/XX they all We from It more lot And of was – at our because a

maybe some me get drawback asked hoping about of we're So competition. those all-in-all, on some you But we lines.

competitive ever. think I it's as as

cash all the almost have sheet. – are balance of on most like think, of much a us I banks lot

holding seems margin Probably, pretty now, right year. it good keep comfortable a So that through deals than like the pipeline job we where more but trying been going we've normal? every deal a like that lost where we the out with really we competitive, is but Have of it's mid-single-digit end done we've – to at. feel few yes, of

Thanks enjoy that and Great. for weekend.

Thank you.

question ahead. Cucharale next of Piper Our Sandler. from go comes Please Nick

Good afternoon, everyone.

vacation breakout more are leveraged you business those terms of In the a those oriented? are accommodation travel hotels of do versus deferrals, have to that that destination or

are there's Yes, too on Stark. more of all Virtually to business. business. That's We is some really Paul the travel leisure hotels this don't of than say that are many finance not mixed. focused that are not

XX, and most for color more hotels. already our that's half just think of So of – interest. on of deferred that outstanding that $XX the about I are for of part on They're the over lot those, payments. just little of Almost deferrals million XX a resumed up catching a have

a line deferrals. and as call taken that were we So conservative those continuing to on

of the right are most all been, heading, had headed them all direction. say, should they're So I in

just of little pretty some want that. kind want sustainability make that have kind to their bit making of had then say out both and Nick, lot a is clients the bounced back would of calls of those, we're but sure that lot to of and a I hearing been and to a Paul positive. teams for see revenues And of We and of we Chuck Yes. stuff those

and revenue in our to think So be bit we portfolio to number being my that upgrades And the deferral see a I continue hopefully approach be to fourth quarters and to sustained. third I sure is, comments, mentioned slower go we do down. that is make little criticized that and you'll anticipate in as more able

color. great That’s

that trending have to average fair been and positively. rate occupancy daily it’s say So

Yes.

I respect Okay. this or to but slow And time in for then relative volatile, fees, with level XXXX swap expecting are down you they to levels. know line pickup at this being? staying be can the item a

close go longer it what some X.XX% on tell year, you some for tell unless probably and put we you major of now, the little be to right the would sense now. level LIBOR range take pretty would mortgages makes same in-house to to I half than curve. on to plus through the the the in right sheet X.XX% change next us a that more I Chuck, yield balance And back see –

tax Okay. a That’s down fair. expecting And little you then lastly, bumped this rate forward the basis? what quarter, are a go on

probably I’m going not XX% XX%, run bounce it forward. is sure. rate think a I going What did but down to, forward, good

gap a tax rate basis. on effect an But effective

Yes.

you. Thank taking questions. for Thanks my

You bet.

KBW. Thank you. Tim ahead. our And go is from next of Switzer question Please

This is for afternoon. good Tim Switzer on Perito. Mike Hey,

And capital there’s board $X.X from levels amount strong right a million. buyback on of pretty around have still authorization now. the guys You good

So I bit expect continues for maybe I’m at rest you the a kind opportunities pace year? do well. And in guys M&A that similar capital have a environment, hold going to then more may up. plans was for keep preparation assuming this you buyback any to wondering, to on of come of the any all

think level, publicly to that we’ve stated company from TCE trying about from the been I the manage kind to a X% Anyways, capital level Yes, of we’ve standpoint. the there.

that. above We’re

So or I think about we’re so. X.X%

the I some think aggressive, that of to of we’ve we fairly repurchase good stock been view And undervalued. as So capital. program that, deploy we we’re a way because think

as fairly long been probably probably more we’ve as stay, continue aggressive where to front. than are have that on a yeah, So bit our little we aggressive stay and and we earnings

any the And Okay. whole. plans at all

right. add. Dennis to was want just I

normalize it closer to higher got the I all XX.X, that. another basis Our for XX PPP the up and TCE probably think than points is if we’ve but it X.X%, you money, tax

continue to will, So like repurchase capital, Dennis plenty of got to said, if you we’ve shares.

the for just holding as it on depends deal. far on it acquisitions, As

deal. deal, of the that I think and percentage stock the size cash of into Tim, the

kind we but have kind one, to so a question done been or deal But that’s two of end on like two, answer, our get deal, a earnings because of would to have been do that hard higher a we strong. here. in So

why, capital position that’s think but our strong. is So we very

Great. your quick this adjusted I Thanks. solid. on then follow-up had expenses a pretty quarter And

sub-XX%, efficiency despite ratio good some have You tech your of initiatives.

of you going I like? XXXX is the expense do expand near as you look capabilities XX% guess into So your of kind sort level think and efficiency the trajectory What’s your maintain to what here? you can going tech your ratio

you’re when yes. if tax front is, this bank shorter So with is of with were kind we – think and end I Tim, loaded the the answer familiar get Rich. as And you money. But the

got first the revenue we’ve So maybe in more second and quarters.

So of on We’ve made point year new. things ratio one a always There’s is XX%, to at kind all our we efficiency the the first the we’re I we’re for investments we’ve that of and and second loan the near-term whatnot. bank. said, think make XX% going least efficiency the quarters. digital mean, of that nothing for

XX% or XX% a is think where of can you us I So being. think

Yes. a of our forefront the some at We’ll into earnings to of these technology from to to us technology back – company the company continue mood into in invest to and keep to terms invest just think, is the I continue stuff.

back So out, like lot that going that of that product digital happens will the we that’s really revenue a rolled recognize – I new not the that. slow, of say to on end we digital

should more year accounts, start So terms The expand and piece we bring will that digital we it collections do more should opening that the our which enhance interchange when service online in footprint. to just new bring later account this will could our piece also of recognize charges.

the things revenues for will us. down those to road of think all lead increased So I

revenues? account targets you your you willing or any do on you’re And quickly kind how you of at to Great. think growth all related share accelerate could have

into of back year, mean, really that No. of little maybe half that We’ll this this efforts, that working most I bit conservative on on a now, spend pretty the but effort more next some year. we’ve got we’ll as year back really right be we of hard head but time half

later, that. share things to in with maybe quarter maybe So the some able fourth on

you. Thank great. Okay,

question comes Russell Davidson. ahead. Next Instructions] [Operator go Please D.A. from Gunther,

Hey, good afternoon guys.

Hey, Russell.

growth. first few Just the here, a on follow-ups loan couple

guys were ex-PPPs expecting. out strong, quarter second stronger turned not as if than So you

thoughts half any organic to mid so potential growth on are what and just just the the be? to expect back upside loan curious the for drivers And that to digit year, an for as your of single number basis

I upside. Russell, we Chuck. do have mean, this – is little might a We

things to that few coming quite watching a the construction construction an of as and – projects One got I’m coming close to large fruition pretty are end. we’ve

third to So and we’re staring go what would those I fourth call, of payoff quite as quarter, permanent bit that a market. the money projects in

of of the road. some of we’re tempering right record pipelines to So kind due our that high – kind our now payoff record down

extra mid-single of I’m pushed a more I’d if in, end exceed comfortable come So But digit But that some get number comfortable you year. year the mid still those payoffs in projects digit. we’re the into tell single in that. or that next of we couple could for that much off of

the color the appreciate as there. I Understood. to And discussion. last then a one just margin follow-up

additional think other the about I to costs putting excess from you that some liquidity of reduction restructuring, kind mentioned guys some work. basis of and like funding talked balance catalysts, So sheet an positive XX points

share So shakes quarters? could margin the as to of out you where kind next think glide the couple the you path over of guys

when that whatnot. PPP the I of guess, says, and my that’s guess prepays. Well, and the quick back you normalize I math sheet how PPP I wildcard put Russell, mean, on the

if depends off that X.X%, X.X% guess be kind it I PPP. it number. the take on of So table, could the I you just a mean, Well,

Understood.

shaken where was I too. up about Okay. That

it. So questions. I appreciate for my taking Thanks

Russell. Thanks,

This concludes our question-and-answer session.

conference over closing Shaffer Now Dennis to turn like ahead. remarks. back I’d go Please for the Mr. to

our with quarter share results. quarter want Thank our to listening I to thank closing, talking months thank a in look few just in second for the everyone you again that forward and are very those to Again, In participated call. we third and you. pleased to

time So thank for your today. you

Thank conference concluded. presentation. attending today’s you now The for is

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