Civista Bancshares (CIVB) 7 Feb 232022 Q4 Earnings call transcript

Good day, and welcome to the Civista Bancshares year-end 2022 Earnings Conference Call. [Operator Instructions].

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 conditions of Civista 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. in company's SEC website. discussed available which are the on factors the filings, company's are These The any during forward-looking disclaims statements company any made the obligation call. to update

supplement, measures, Additionally, be information comparable directly Mr. will to other as website, The available today are and management to contains to www.civb.com. the non-GAAP today, take measures. on also may that measures. substitute will a Bancshares well non-GAAP made be he any team release, the reconciliation of may Civista you call intended the available have. the discussed refer GAAP GAAP to At This the Shaffer's as and quantitative recorded on website but at questions press most the management not for and conclusion Civista of which company's remarks financial

I Shaffer. Mr. over will Please go call turn Now sir. to the ahead,

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

or quarter. morning, million by prior year's reported $XX.X earnings the significant me occurred fourth a per accomplishments This XXXX X% several fourth which noting represents of quarter. we over Let during for start or diluted fourth transactions the increase that quarter share, the $X.XX

for income or prior the consistent million of of XXXX, with net million. share our results year diluted $XX.X which full were XX, year Our income per is $XX.X net ended year December $X.XX

our near-record helping work in I of we year, acquisitions, us to During for these accomplishments. achieved the organization their to organic record the good their in X for loan and thank to want take growth all and employees opportunity commitment Central Ohio this profits. expanded had achieve completed

return of closed $XXX,XXX the the our share with been per and we acquisition for with was average and nonrecurring XX.XX% in the X acquisition Vision Comunibanc year, the expenses earnings $X.X adjust while have Inc., on the on If return equity on the fourth on quarter $X.XX the our July Financial assets Corp, for for which and October associated for was $X.XX quarter and quarter in the Our nonrecurring Group million year. for the the which expenses closed of X.XX% average XX.XX% X.XX% X, would for for year. associated

$XXX.X loans During leases annualized grew the rate quarter, XX.X%. by and growth million of or an

Excluding net loans loans acquisition, BFG rate $XXX.X of and million XX.X%. leases an quarter, the occurred which or during annualized by grew our from

quarterly that our While we are VFG's pleased earnings. was loan contribution, our strong it drove growth with

to that growth Excluding organic annual which repayment $XX and of the PPP came in Comunibanc loans growth year, million million XX.X%. addition Financial back the leases is Vision us of through loans, of and experienced and rate the an $XXX.X we for loan in adding

compared points to linked to XX year points compared Our basis the when expanded basis prior margin and interest quarter. XX quarter net by by the

the compared when year points previous expanded to For interest our the X.XX%. XX net year, to margin basis

our us. business closed completed In is our finance do and originates diversify successfully will the the of of equipment that. Also October, sources help income This will we Pittsburgh, in on MSA. managing revenue operating early loans of on to a conversions and allow our deposit Ohio Toledo of leasing suite rates. our to is acquisition strong Northwest a in core offer extension which us in systems, small new the line we customers in Vision Pennsylvania which our have We the leasing other October, leases us products, and of standard we reflection leasing, franchise Comunibanc deposit take and disciplined products and natural Small based for now equipment a company looking were them our represents approach a and system for help Group, to legacy of nationally. Financial that and lending announced

Now our $X.X our the increased the for million same X% to over Net XX.X% million attention or or the $X.X quarter interest quarter quarter the the year. performance in let's and year. turn prior for over and income linked

environment, XX.X% half to addition rate year a to Financial in result of footprint, the interest the rates latter The Corp or Comunibanc XXXX. disciplined the the rising Our of was strong across increased $XX.X net deposit of year. organic approach interest managing primarily our increase compared income and the our growth for million loan and Vision

margin expanded by XX basis for period. the quarter to linked quarter net for the expansion was X.XX%. from interest XXXX the margin and Our measures X.XX% reflect comparable over Both year. X.XX% Similarly, X.XX% the over our points

by basis and books quarter basis over points new the linked to originated XXX existing our and as by team increased on prior assets loans to higher reprice earning at the on compared yield XX our quarter loans continue points Our year rates.

the by earning by Our XX in and our to interest year-over-year points, fees. the for XXXX points of grew for XX by the basis cost same XX Funding our $XX.X even loan period while increased million were quarter augmented XXXX, basis compared yields costs assets yield XXXX accretion basis points. funding though PPP linked by in on increased

continue to We our with rates and large negotiate depositors. always have

conjunction time to some to offering mid-December Fed's market deposits the starting feel on money remain in rates we are rate competitive, in recent and higher pure our increased move. pressure with We deposit most accounts select

solid, remained quarter. over the million linked $X.X increasing income noninterest Our

$X.X to from income experienced strengthening every also category as stream. in in included our revenue noninterest we company, the increases we our virtually our noninterest quarter million focus quarter and leasing diversifying While linked on over income continue

$XXX,XXX million increasing comparison and or million to $X.X expenses to previous XXXX, a contributor, $X.X systems increase nonrecurring during linked of strong was If that linked our Noninterest Comunibanc compared for offset the Financial on of XXXX. quarter. conversion million year, million revenue Comunibanc service charges the former charges the of acquisition with of quarter severance noninterest sale the stock was gain associated the comparable $X.X in the expenses sale increases the be to we to of The in back Service of the visa leasing the of quarter. B and XX.X% $X.X $XXX,XXX over the loans. income in year impact increased Group in in the and employees Vision associated quarter the second the as of primarily mortgage out million nonrecurring continue $XX.X occurred payments result declines with expenses that on gain and our to of our in

related expenses, to compensation maintenance new Excluding Financial increased $XX.X sheet replaced prior expense, have by these increases expenses and in employees. professional compensation restructuring or additional Group onetime noninterest to expense, million software on occupancy expense XX.X% transactions. related primarily costs were increased as X.X%, our other fees would year-over-year the million by Noninterest $X.X and expense, expenses Comunibanc Vision nonrecurring year balance our expense

noninterest Vision for have Total expectations occupancy compensation with Excluding line expenses and the additional expenses year. employees to million by Financial additional primarily new totaled related and XX.X%, Comunibanc related on facilities. increased expenses, nonrecurring and expenses to $X.X year were the and our transactions would in for

XX.X% had for of each Our efficiency XX.X% been our adjusted onetime ratio those deal efficiency for would costs, ratio respectively. was If year-to-date. have XX.X% periods we and and XX%

and Turning $XXX.X Group loans balance includes from Comunibanc, by total Financial to of repayment a Vision PPP leases the loans. our sheet. $XX.X from which in increased $XXX.X of the in million loans and Year-to-date, million, loans addition million million $XX.X

loans, organic loan was $XXX.X an PPP loan Excluding Group on strong or in growth portfolio annualized of an million growth loan of our was the virtually our or construction the our every we projects adjustments production, Comunibanc, quarter various have strong fourth to commercial XX.X% commercial $XXX.X same Along Financial attributable of annualized continue our million demand basis. at grew year-to-date for completion. loan XX.X%. by This and stages markets. with Vision Making basis one to on

construction XXXX. we lines December high, Our near unfound XX, million remain $XXX were and record at

rate will of for at mid-single-digit the inevitably the believe believe loan will least higher interest a the growth, half and we While grow slow we at environment our portfolio XXXX. loan first economy rate

demand $XXX.X the total exclude XXXX from have and million XXXX every year-end except higher-yielding increase to we category, interest-bearing into acquired from with accounts deposit interest-bearing savings Comunibanc, If similar been we deposits the reported higher-yielding deposit accounts total would unchanged in accounts. to into deposits increases demand although were funding we migrated deposits. deposits time customers XXXX from from year-end seen migration in side, a On as XXXX, accounts have would to

deposits XX.X% at attracting noninterest-bearing demand on which focus our to continue of total year-end. made We up accounts,

customers. municipal made our These of up of primarily and operating business accounts accounts are

contribute continue deposit peer-leading the is most seen characteristics positions in have We footprint. valuable our significantly economy, to our any with Despite not our of associated profitability. net margin believe financial and our deterioration interest one to we the franchise across customers' Civista's uncertainties and

In precoded fact, and levels classified year-end improved loan are levels. have below

in than during portfolio was $XXX,XXX rather and While provision loan make the the it to attributable did quarter, our we solely growth economic lease stress.

end of December XXXX to compared our XXX.XX% nonperforming in In which for The December XXXX was slightly of for loan year. loans did our allowance to XX, from addition, recoveries X.XX% $XXX,XXX allowance XXX.XX% losses during XXXX. from loan to the at realized year-end we losses ratio the at net to declined as loans, X.XX% at

would and that ratio Financial of include the to credit would with note mark our Vision loan for at I X.XX% been Group loans losses if the of associated $X.X allowance have we year. the leases, Comunibanc million end of loans

commitments liability the the million. recording allowance to losses not our we XXXX, in entries increasing forward of look earnings unfunded they a quarter $X.X as will we will and initial $X.X and impact credit for by million be As through anticipate equity. of adoption recorded These CECL for of first

have rate moderated, higher on interest While continues the rates longer-term bond pressure interest put portfolios. to environment

portfolio did December XXXX losses in XXXX, the losses unrealized in moderate in other securities Although XX, we experience December from portfolio. begin quarter, income related to $XX.X unrealized a investment decline our comprehensive to to XX, million in fourth our

adequate quarter As potential a the result, capital X.XX% is remains X.XX% XXXX. have X.XX% growth X of with decline, Tier ratio at strategy support equity December repurchases. XX, to and purposes. remains common payment continues through our continue and of Two deemed to this management organic tangible above capitalized be overall create our of share and leverage well we capital and at regulatory Civista ended for acquisitions. important to what goal dividends to December parts earnings, capital well Despite XX compared the to was ratio our

is We continue to a believe our value. stock

fourth an at average stock $XXX,XXX While repurchase price X,XXX shares repurchases we $XX.XX for the quarter, share. common we did the of of pace slow during did per of

$XX.XX per of of repurchased This For price we were December that XXXX. at $XXX,XXX represents shares the an year, outstanding X% share. XX, XX shares and at and average our

We approximately have an our authorization current of remaining in repurchase $X.X program. million

and a you As know, leasing Civista Vision added Group, October. small we to in finance companies Financial equipment

pleased in to would loans team. XXXX. our that a fourth In of quarter I loan efforts of of the have excellent leases average have into our well to $XX.X without We and management and X.X%, be like our quality. $XXX.X during say of are integrating quarter would with to loans another and originated the and Vision growth this budgeted leases them million and retained and team exceptional way on earnings, are million originate solid during possible our credit year we in again organization. yield summary, them none at weighted we

loan attention remain have have your to footprint and communities you solid, we'll balance we pressures our Financial uncertain have. sheets, consumers Thank who this our as to the fortunate and our we inflationary the successfully the rates well and as customers, Civista is greater to this integrated have care surrounding continue strong in questions So optimistic. other. all you our into interest are Despite fee each and now economy and afternoon, people that Comunibanc we Group Businesses our shareholders, facing, be across the happy Vision pipelines family. may remain about any address for

McEvoy Terry with And Instructions]. today's first Stephens. question from [Operator comes

loan or Could discuss just the outflow funding overall growth. of you strategy to continues about talked you deposits. an Maybe strategy industry experience your if deposit mid-single-digit maybe

our have the think that I we half first program of little we're that in a bit in unique year. tax

to we So well. try that as to manage

out, be use deposits so an big. that in see -- They able of will and although are roll to go We we'll they those balances it. influx

that of we be borrowings we'll pay use big of have. So able some down to to kind that

So we our of that. deposits kind manage to

highest and be We funds that think to markets need to beta was think base that migrating pretty do continue do those -- into necessarily doesn't a will or virtually franchise. we we we have. accounts. need think deposit strong moving But we we believe deposit nothing. Those of pay have higher-yielding core accounts CDs loyal for year there our out the We that necessarily don't noninterest deposit do a do have the we rate, money

We were that fourth about in XX quarter. basis points

deposit the think quicker than in do we is beta to So going XXXX. move

So and banks banks that to the And sign telling don't retain be our the see highest we get base. that's banks deposit I think bit be deposits forward, our not. have to want which we still paying going deposit really bank deposits. we We really core aggressive a we will there strong you're to more rates again, going be strong we and think do for competitive but the which pricing, have think core fair to little to we have to to offer have clients. But in as move

of headed, probably here have 'XX 'XX. aggressive we're were be we but little that's will a bit So how than kind in we more in to

a And of lease the some booked as residual end residual the of deal. income from there the then I follow-up, had notes that $X.X income my leasing quarter was revenue last million. and at or

the rate asking, do was given you incremental going in run a that quarter more some maybe fourth that deal the I'm see what normal? Is closed? So gains forward? normal there Or

enough And So different quarter I residual to forward. it Rich. leasing Terry, it But the what net piece than this lumpy. revenue you fourth is know tell of and kind that going we that the we're expect was makes experts don't of certainly, lease yet

until I think typical as you I use would tell otherwise. we that

seen. I of we from from what reasonable we've newest think the it our looked pretty have heard and members team what

bit. kind under say, Fourth Terry, load quarter mean leasing quarter usually I normal end back than a of quarter. usually production. It second higher gets Yes. or little would first a is I little

as a along here. go So we'll more give said, Rich I guidance as you guess, of kind little we

from comes our D.A. next Davidson. question And with today Manuel Navas

we mid-single-digit loan look in half half, portion balance there? you walk those to still I year. growth first at is Are sheet? growth Just of early XXXX mix it's the can target, loan that of kind that you As kind originations. mid-single-digit of good a good a through the the expectations lease planning portion in on the guess What of -- of the are keep only

really on would for bank kind tell forecasting we mid-single-digit growth as would what guess I the I of And of for did the we're you the the to -- year, call was rate that. layer then I top bank the loan portfolio. going

bottom or got we the look move funding say projection throughout bit. I into production leasing side. kind going the about out. little the that's half marketplace. as a $XXX we probably at sell model Obviously, think how our But right one half year, that to it way our on now. we'll I we modeled hold of to line other out of the kind is We've and think, roughly we're about And to was, million of

the the in all? that deposit end expectations changed December at what the Any of pricing going of targeting are guidance at of are changes our what that kind portfolio, kind kind you of Like of forward? the has of kind With end? firm on beta

definitely beta change. Well, will

for there as a a think to more get there. my I bit aggressive I us guidance Rich got comments, I little alluded to think is...

was, the what first forward big up. deposit But out to half of don't what, probably in rates will expand we've to a year, compressing. I Again, kind you're expand, I points on it basis hang I our lagged want the and probably on lag, what kind But move Well, think is makes up the of down. think, the XX of I to again, our like, I of there going I I it modeled and will Fed half back going continue think deposit year. and until XX the point mean pick the the to in more And increases or of but I see continue say we've beta think think velocity to to does fourth a think our for is It points. see quarter bid margin basis depends I going

watching the the it's gotten rate a curve, -- keep this the more think bit kind interest slope I we of Well, inverted. of little

I So banks I other think side you'll trying lending spreads see us probably to think yields -- up, more. on -- the push their loan their push up

that and up the rate try to think I a bit into think we're you'll normalize spreads interest I little push lease see going more keeping spreads they go of well. velocity for in as 'XX as At with And pace our 'XX. to own the least were us, we increases.

of inflows kind how As back you year, Like normal much first X, back? in kind of can deposits borrowings quickly? the to seasonal get half Are targeting some get of you XQ the pay of the your of in how to levels?

Well, but the average I around $XXX million, that's million, tell mean, in you years, I over last and that X program in guess the each have you last X X from quarter X years. would been [indiscernible] tax I first the deposits pretty the $XXX know, been and our right or or steady never

again, week a pay of in, we could money sometime we and see quarter, anticipate. flow it's when the if about we you start $XXX So bunch what is it, February have to over in we'll more that averaged the XX, beginning. starting But million whole back the

And would that borrowings? go off to

what overnight $XXX end at year, think, what borrow we'll million, is of the mean I I fungible. the work. Yes. we

what that's again, for. So it's

loans the are and yielding leases currently? BFG What

we Fourth What production --... average... the was quarter X.X% originally

Manuel. X.X% Was

bit It digits. up, you seems guys upside? the on for Is real uncertainty? talk there holds a some for like is loan conservatism economy in had to that's about Perito. just basis. want given organic I have economic the kind the there guidance some like momentum of from little an mid-single deceleration a And Mike of quick On recent growth there the

Tim, a might we this obviously, shop. -- backwards year, somewhere -- Yes. Chuck. normally we've Last We been between had single is There you digit look be, year. mid- to fantastic if high

completed as is down on first compared touch will of the Our paying coming, then be know a in one where larger pipelines going got large are our and couple we've were companies they a and We payoffs one a sold the into quarter. of fourth here quarter. off project

bit little don't might deals, aren't conservative. we the we're would but into relatively be right by they're pipelines more than We momentum the tell larger quite honest seeing you, same now to see first stretching what And say I with solid. just mean quarter. the a deals. So more, main going less I bad anything is be

the still them has the putting rates the lot are based same into doing we're capital their cap money and fallen little number in that the work But don't a see bit. people interest think we I of back smaller have more marketplace, to a today. out -- deals rates on the still make of the the day deals, demand

like area? about probably us update trying you're talk what to some some you been. the I to And about and know and hire on geography-wise, maybe look Columbus Can can those that's spots. And give Toledo how new you lenders

more last trading Cincinnati, we backwards, do were in Columbus, more of dollars, growing -- for good as little our I tell you bit would Columbus our lending development down so was Cleveland, tell a we lot markets we there. market us. do you, biggest a really Cleveland look all year. would I But largest

through other them, yesterday community on lost just little a XX-year keeping people more the books there They've So XX-plus-year that the to an Cleveland just deals. we person where And just and good. a a over the do to of lot Cincinnati. we're up actually ramp activity bank We from down in lot been X hired forward, of start and from person in going marketplace employee we're piece. State bit, one really there starting Bank. A Huntington They deal. the Toledo, one, we're get stuff of very paid next finishing a kind off.

potential bit So marketplace. upgraded our the piece first more as past well. and that like be time really over our kind financial spending getting feel in of I'm we've over going to of now a there that quarter little we the upgraded we're really talent vision there

Toledo So ramp we're looking for sure. in up to here XXXX

the little last footprint. bit them. as you the was had Huntington we we think more we've a throughout unique Huntington M&A had Cleveland Farmers X Cortland we probably little really. fact When that And bit they been that in I just mentioned had market has playing look have had little think in back a comments, the deal, that opportunity bit. over in unrest. And a our growth you bought TCF, the years, FirstMerit you our

us. there bit growth going you've Intel and they've the on with a more are area. has opportunity the So In is what you for a at little tremendous got unrest, in consolidating created others had which Columbus, look Cincinnati market and down Amazon just when going banks. community

of So have Chuck then Toledo about, we in there. tremendous an most that's as banking market. And his -- we can was Chuck that's that Toledo, think make was career and you area inroads talking

the So contacts. the know bankers, have we businesses. we know We

in make we we So have continue those inroads. to tremendous all markets to of think opportunity

we're quarterly a by of inflationary reasonable expectation, real saves cost some that kind exiting rate, saves, some I more of cost million you like run run offset $XX.X $XX move should core XXXX, getting and be is quick. community the just we to Can at Do bank kind rate as is and of like like looking guess, you investment. here, guys million, expenses expenses are the

We would number. love to hit that

forecasting the fourth the expense back the or we'll for of I think payroll quarter. think seeing to more next we're because noninterest XX.X% of quarter million if expenses attached kind of in year what that what is out I $XX.X is we're have is about quarter first you kind first onetime stuff

ideas year. changes of have in our be And at increases, whatnot of quarter a run to that expense. rest noninterest or looking a merit any significant for the and million $XX.X next second the emissions Second quarter terms would number probably out we're we'll that, barring I year, think,

next the Scott. from with comes Montgomery today Daniel Janney question Cardenas And

me. questions housecleaning of couple a Just for

On that the number? how at posted margin it 'XX? accretion that baked much in was And this quarter, into look we you how yield should

So in accounting fourth purchase that. of basis quarter about points was X the

without actually as think year, good mean the that's that out And have X been kind same that, just it And for way. forward, So it lower. would going that's basis work I was would the number, points of the to use anyway. think a or one is but in. -- I number point might the as X, next for X everything a basis it quarters other, I way

And notice credit I on quality then of quarter. an linked the driving on was front, nonperformers did your a uptick bit What that?

Nothing Paul. is This significant.

covering hotel And and We has covet shut some because finally necessarily the but issues. have been that been not mechanical stop paying. one then down, sponsor has for of reasons, them

So It's consider in we a as remember, far some as don't consumer in big portfolio, and I of there. HCB the Again, culture fallen some as get what brought trend. in shifted terms that's chunk By that dealing it. of that you more we're the just stuff mine, we've of a has fluctuation of with.

then a rate, is you of good And a of for guys? assumption XX% assumption still kind kind tax

about Yes, XX.X% XX.X% about Daniel.

question from with next our a And today follow-up McEvoy Terry Stephens. is

on to X are building thoughts here quarters? then capital from CECL? years? the over Will what be Will few management. wanted with question impact phased next capital on over follow up the the your that Just in capital And just

will It can first happen this Paul X immediately me, correct over quarter. be but baked in Well, will years. it in

Paul's So nodding.

forward, then growing we the our move So we think that we're -- capital. right as And like I answer.

handle Our to earnings, to earnings. we be going going things repurchases be like we very continue there. We're have share how strong mindful of that. We're to and

back the really quarter. You'll in that notice we've that on fourth pulled

move to be forward. we're think just there I mindful so as And we continuing

do strong. the -- some kind to as well. flat Our think We there impacted really of quarter. the we want it pretty capital was levels are acquisition in TCE that We fourth that had

that, here think start for we to in continue other going us that So direction will the 'XX. the

since maybe platform ask got this is the you, And to and question. the I've

bank, acquired it. integrated You a

company the the hit you off, deal. are with running leasing You ground

guess I nonbank question thoughts for are in So what on M&A is, or my company? your bank your XXXX

adjustments for do continue the to that. want explore benefits There it a can deal grow in think we are get to right employees some our We we I it's We when if with challenges you marks shareholders M&A to think M&A been give we very at scare portfolio, it think we have now that We doing do in the that want that right the us these well. in will try an Well, integrate pretty the you deals. to and to customers. and We we've AOCI look manner to continue we and deal away. all have credit successful obviously but that. us to doesn't profitable do greater

want company. we're we to be and pursuing because to We actively as get continue So going a size to looking continue think to a other we we certain deals. to get more efficient become more

along the And and have for pursue right our we'll dialogue. if the comes company, So fit deal it's right continue that. we'll to

ladies And final over team I'd our concludes this question-and-answer and the like you. remarks. conference for Thank any to the back session. gentlemen, management turn to

a for us. of talking on thank XXXX in our months pleased very to And few strong to we for Thank that participated challenges. the year those fourth full the very, year in you. results. be In look year, with quarter thank those our call. are listening while of results and share want closing, here again everyone of and meeting to I and a would to challenges the first all another quarter new you very forward We Again, just for to

today. for you So time your thank

thank attending concludes call. you, Thank all We conference today's today's for This presentation. sir. you

now disconnect may your You lines, and have evening. wonderful a