Civista Bancshares (CIVB) 29 Jul 242024 Q2 Earnings call transcript

Ladies and gentlemen, 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 Civista Bancshares, Inc., that involve 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.

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

Now I Shaffer. Mr. will turn to the call over

or joining Bancshares, us the Shaffer, executive Inc., is of our of today afternoon. Dennis share, net President other thank Chief $X.X and $X quarter you of pleased joined to This of quarterly over reported $XXX,XXX I we XXXX for was diluted I and quarter the with Financial team. a Civista from for would second I'm increase morning, in earnings for Overall, like or bank quarter Good CEO quarter decline second call. by Officer SVP Officer Whinnem, our million results. Rich the Dutton, first SVP XX% XXXX. of income of of Parcher, second which million represents Lending the Ian company bank; of Officer of and members the of a and Chief bank; our the Operating per This and the Chief XXXX company the company $X.XX and and our SVP Chuck

relationship Civista exited we to the replace look As I and our mentioned of funding during our refund first processor. from quarter as year transition the call, this income is for a noninterest-bearing tax revenue with

also would higher of on put our deposits. mitigate deepening strong focused broker this attracting margin. encouraged extremely a low-cost these are in our deposits. and overnight net and initiatives we approach some to funding by reduce helped was took result time, of the points will initiatives of approach deposits by environment This pressure funding us sources the our we loan basis and pricing deposits undertaking exiting takes cost still to basis we demand, than XXX overall quarter. and higher interest costs. deposit competitive a are on this a This X reduce and interest our continues pressure, disciplined relationships on points I To continued help during newer of all number As relationship of our funding but higher borrowings dependency cost like. This

and impressive Our see continue more a stay products is from deposit even as noninterest-bearing market ability to to time disciplined shift into interest-bearing we deposits. money

have demand footprint. continue strong loan our across We to

during quarter. lease indicative Our continued and the loan at we our and growth, grew and believe organic This our annualized it was portfolio strength XX% of is organization. rate an the markets of of

loan the for on to We continued capital. use ensure rates focus and our an higher of holding levels appropriate liquidity our at return

basis our by funding contracting XXXX more residential and mortgages at quarter X.XX% quarter. the coming X.XX% we wholesale the margin to X cost our increased relied for yield compared in During X overall retained of first This earning and the quarter, resulted while XX assets our by basis in on points decreased of as funding. points more to by X.XX%, points basis on

with ratio we quarter, quarter. clients a $X.XX also our of experienced. losses, the of of to that loan growth. strong of attributable one our also for increase for we allowance XX in prior charge-off share announced second was There which For credit primarily a X.XX% on change this a per $XX.XX, quarter. experienced dividend from Based $XXX,XXX an the associated the Earlier, yield payout dividend XX.X% and July a event no discrete share, the quarterly our price was fraud-related a represents

to from The XX% that increased $X.X the million our the quarter and or were XX% of linked leasing income increase year related noninterest the XXXX. were charges increase million quarter During offset million year service declines operations the million second leasing changes made to in second fees. drivers in along the last fees for increased to the from by from fees in related drivers $X.X partially overdrafts. prior leasing quarter quarter, from Civista in how finance quarter with or wealth and $X first due $X.X operations, of primary The we primary management process

$XXX,XXX is related banking equipment the of effect which to platform. the tax each leases due increased the the quarter, Compared each related expenses software or take first Noninterest to X.X%. quarter increase as $XXX,XXX April primarily for expense Our The the was to is to represents related year's increases, increases and X.X% overcame which merit in prior $XX.X over they expense merit increases, to related This The and increase the decrease increase digital annual operating mature. attributable attributable processing into increases take our first in expense in an to fees. is compensation income depreciation place or reduction in refund a million normal noninterest primarily to quarter. our lost to annual April $XXX,XXX year.

quarter our and remains with associated leasing expenses the interest the elevated depreciation and net for was digital to XX.X%, investments income ratio which efficiency banking. our due Our compression in of

Our tax rate XX.X%. effective was

Turning our the focus to balance sheet.

represents grew rate $XXX.X leases and growth XX%. loans total quarter, annualized million of this by an the For --

in The virtually nearly loans loan and estate in all real our significant increases all While or are loans, rate, to estate real years leases we be category, our were loans maturities for most and of originating have CRE X residential construction portfolio we nonowner-occupied continue adjustable experienced every our increases loans. less.

of of buildings were an at leases originated loans loans and were and loans commercial estate rate X.XX% quarter, originated office division by were up total our leasing at X.XX%. loan an X.XX%, average the our at During doing rate X.X% originated secured by of portfolio. average real Residential Loans renewed make

$XXX strong we Again, June XX. lines growth fairly business outside balance Along loans have anticipate undrawn are we at to secured the they million pipelines single-digit range offices loan are districts. central by these low in year-to-date our the X-story production, metro high-rise of buildings, of and rather secured loan As be are by not or office previously, stated were construction with our predominantly XXXX. for single located

On the were $X side, declining for just funding flat, deposits mostly quarter. the total million

we I have mentioned, funding. a in core aimed of number gathering progress initiatives do at As

leveraging depositors program those the banks. offering in initiatives to Ohio by encourage State program for for Ohio, home is Homebuyers to of a of subsidizing to a the its new save One incentives participating Ohio announced which the and tax Plus Ohio purchase of residents

program, of a had the basis additional X,XXX opened into the XXX of since points maximum we part $XXX the to state up cost million low banks. way will made progress these At quarter, rate on of end our of and we of have As current at XX the then. deposit funds accounts the accounts, in to participating

of financial we have an is the institutions. example management initiative historically cash and maintained other our Another balances that for clients wealth

taking However, to hold at will us allow cash we to wealth steps currently our clients management are the that deposits our bank.

XX $XX of these into X able cash funds the we expect XX deposits Based rate million or the the approximately the will points. basis the current on of to end third We on by being quarter. less move those bank paid positions, anticipate

The higher basis points our CD by the measured rates approach cost these interest-bearing some X.XX% quarter. decreasing result are of specials. rates demand to during of of to our X continue accounts deposit lowering tiered deposits on paid We and decreased

be of accounts, own excluding to With accounts total CDs, operating continue at average continues deposits at FDIC base deposit deposit $XXX Civista's million FDIC deposit and $XX,XXX. approximately and to respect excess program, excluding to a deposits, limit related those granular in June Noninterest-bearing insured accounts XX. fairly of deposits quarter tax with our end. up were to the focus. XX.X% or deposit interest-bearing the demand and deposits of our be made business Noninterest-bearing Our XX%

And had December and June interest footprint, sheet. with loan lenders, our X.XX%, $XX.X was XX.X% which XX had million deemed cash deposits. overall uninsured of increase our various securities at Other million, sale quarter, available June unpledged which our portfolio to The covered and is treasury unrealized as remained more and for classified XX. This were public rate continues purposes. million commercial than no concentrations margin Our deposit environment At solid when for XX, an securities ratio which municipalities to elevated, all of the across balances June $XXX.X at deposits. since our XX, consistent than the represented our deposit put our in our cash end XX% business and the our June with At $XXX.X net we X new at these our compensating teams of ended further bankers security our is XXXX, This deposit Tier most one represented our personal At to initiatives, We to franchise Civista's characteristics, of of capitalized balances of to private from are linked quarter to and with $X.X losses both of losses support tools attributed them. officers, additional ratio secure balance million well profitability. unrealized our regulatory sales leverage XX, portfolios. quarter. believe is valuable deposits $XXX significantly ongoing continue interest to we low-cost million, on with bond combined our and customers. were efforts. to of contributing these exploring We is and provide and management success is associated with pressure our funds

from X.XX% XX, at ratio was equity Our March down XX, tangible common June X.XX% XXXX. slightly at

and capital overall goal support create to potential So organic Civista's continue remains adequate to our and capital earnings acquisitions. to maintain growth

to not Although quarter, is during a any continue repurchase believe the shares we value. stock we did our

levels equity our capital remain our screens strong, common tangible recognize low. While we ratio

capital our continue building between and and remain economy and expense any the and would credit to balance dividends like the previous focus metrics that we the credit payment and our will on our earnings Despite our growth. to of X.X%. To face, TCE with guidance uncertainties borrowers rebuild quality will remains support to we end, strong that Our associated ratio pressures remains with stable. the repurchases back to X%

funding mentioned, previously discrete during that and the attributable a did associated fraud. borrower charge-off related quarter, suffered a growth a $X.X I primarily was we with As loan any to commercial event internal to million make which fraud provision

change updating within allowance XX, production loan X.XX% losses at Our mix X ratio the of quarterly XXXX. basis up to new total model. This for X.XX% our loans to our due from is the June of December factors of credit and at XX, is points

anticipate at XX, for XXX% the of pleased summary, allowance the XXX% of clients are credit one we the nonperforming to the to XXXX. In funding. funding should that our our we XXXX, and mentioned take fraud-related lower lower steps to tempered slowed the XXXX, strong that during taking of as nonperforming during experienced single-digit loans event are and our XXX% for We at margin our is $X.X cost at generate quarter, beginning we to low are to our March growth pace a as loans more margin growth losses the XX, XX, remains at increase addition, in attributable June loan with cost quarter. compression XXXX In balance compared results. remain was our million previously generate of December

customers communities. serving and your we shareholder investment, have we to systemic quality. have. have address issues, seen that Overall, attention be continues our some you to may our to and your value will isolated on in generate our this credit we earnings continues credit afternoon no focus any Civista and While for and experienced questions happy Thank you deterioration now be creating and solid

Piper comes will Thank from session. question we gentlemen, now question-and-answer Sandler. the you. begin with first Ladies Instructions] [Operator Justin Crowley and your

Shaffer, here. here wanted And bit in impressive leasing some lumpy. about If I I quarter. have wanted the start of if Afternoon on a the won to be in pull strength about Or that you to quarter the results guys see what business think forward forward there's this here? could you a you're pretty thinking Obviously, revenues? business. past going drove could I how anything unpack off

repeat the Justin? again, question you Can

there year? It on forward just business, quarter. in leasing way was the revenue the the pulled Yes. is. results from just strong the to what's Or think curious rate that just I'm run later was the about best if for given of any

group. to and continued that that the see, is revenue renewal see lumpy I right that learn is just we think, about we'll think success It's as leasing business. Well, residual continue I in division, inconsistent you the the continue half to within hard leasing a that bit they little can quarter-to-quarter, the now, I finance happy is of be think we're really it with but revenue it's stronger, to usually predict year second Civista's and as and

end buy mean And of at -- the the Dennis out just somebody I thing Rich. makes it equipment the we the this don't going that to residual is income is is lumpy, just lease. know the when said, like

I and think it on traditionally, we've been how we pretty it. price conservative carry

see talked project that that losses and bankers there. a a But don't leasing revenue. I I've that own don't the of there's of and many other or -- to companies, lot know forecast you generally, So We how gain. piece

-- But or in reasonable expectation Okay. terms an would Again, going what usually be say, like maybe forward? back spite anomaly -- sort predict, what of back realize light we of half you'd for stronger, $X of the this was half not the expect it being seem million. seasonally year, saw would in it of a quarter close, the tough but perhaps fees in let's necessarily I to that of and

Yes.

was have get me piece indicative the yes, -- of can out I you'd for would If that's for And could don't with be forward. even the what you. residual piece, it going the I say, what it took you residual see probably quarter. and I

And That the side quarter just what's Got things, the think are far What as just moving to way goes, ahead? on of investments expense but run to making you would anywhere? Okay. I Or about you. about costs nothing be jump the saw quarter, in as then rate any seems guess here. we thinking out helpful. best the

came I of rate year, run way pretty into think we the We good XX.X for So model got XX.X. rest that think And would the time. it I last a is out we close. the

balance anything investments been, software this about for But or year. the little think any just better. any envisioned we've I bit So don't of we've else hardware where a maybe or significant in

what Okay. as levels, that. what's played will or M&A years. after including from capital across industry, back Curious clear growth you've plan for at? your certainly may And still exist we Acquisitions stepping a the acquisitions, just a do appreciate standpoint, of going signs updated a a et sit have here life pretty part And role here thinking over I forward. today, then on the second. the look been whatever that some else Civista of you cetera, hurdles be

over said any under second Banks really we've in to our continue and on up as we've with we'll maybe stock building half of in particularly really the movement X nice a half Well, since in But I the this it's year, basically activities. and X companies, banks look first been last banks, recent of this we've seen year been prices, so capital opportunities, or $X banks, tough think do for type of focused for traded last held the M&A publicly haven't weeks assets. billion lift privately seen price. lift. the stock They that same to

But that's to something And see dialogue do. right some can continue something the a math The be that. point point our to not we as that targets very say, more and going to to to for tough Civista, that away may starting lift see from and look, continue we're to some going conversations we that's opportunistic. think with I shy anyways. we up to bit hopefully think But to of have been continues. I So little we're if has this we're spur fit

Nosal comes Group. question Brendan next Hovde Your from with

playbook most to take adds, specifically initial is going of then to just the in to capture will the what Friday. off I be to and that I potentially clients. where you talent deal well. And in wondering You're just big But here a deck want advantage on your that that. bank, have talent know following like pretty Obviously, the woods announced doing Ohio days early for dislocation. it's the folks in banking just on environment. Civista start on

Yes.

our obviously, friend. disruption is always I think

And years Premier know presence bank size in as had good know, a Northwest you in roughly Ohio. acquired we So Ohio Northwest do ago. we X a pretty that

benefit in some So think area, us become we, particular that we as there. and the disruption available come could could in Northwest may Ohio talent there

strong have So area there out presence, area]. that's Boeing such because Willard us really Northwest to the that right and that they one is [defiance jumps area Ohio around particularly area a and in

Cleveland that some Youngstown, going we some there. but branch for But was there'll we and people opportunities didn't they but that in, other compete there's So a not huge we opportunity markets with of think have in there. create us presence some and in the be be opportunities presence to they And in their do some office anyways, market. presence think it were significant customers. Yes, will super other

it. it. Got Got

Okay. One step more me for back. before I

the then Just what this quarter kind of I on of And are in the curious in decline what broadly as year? prior drove you the the that yields filters more guess, through, loan expecting in margin the quarter? overall earning and trend back to margin asset see the half versus

it a little bit. stabilize we to Well, starts think

The quarter, I suit our had mortgage about pretty of on the also gain to put some be a down. asset balance think and those the to refinance products number anticipated We that going think down originated residential help but or that. into salable bounce we're that of will they reasons. we're balance sheet. have and and on they in we on more somewhat, we earning with we a seeing our One, of bounce our rates follow fixed-rate go down for those That able portfolio sheet. some income. of decline couple loans did rates was If second a good so, loans mortgages X.X% those

portfolio and product In because put there's portfolio those did on construction, loans, that. addition, really residential not for or they're a most the we saleable what of loans we construction that

try loan got the primary and that we the ‘don't to borrowers call business, and sheet, flip has our primary as we'll portfolio, net us But does going that do still some rates balance going deposits.' if bit, bank fund on going and because forward, their borrowings loan, slow We're things off pressure yield. because a we'll and of number margin deposit the their the like able of primary physicians in we're think was to asset mortgage of does put their our to our worth gathering we We it business. impacted we think by we thinking So down those, be a So we move and little I think, deposit balance earning it high to think have that. targeting their stabilize their of forward. to start that some we've because been

Terry McEvoy Your from next comes Stephens. question with

Wondering you're underlying the portfolio the Clearly, had credit lot of And XX the of in if just terms industry you seeing concerns trends. there. talk a points nonowner-occupied could CRE in what about of company across basis charge-offs. overall

So really, really not much see externally. us for to

is Chuck. It's Terry. This

pretty So been knock has on wood, asset strong. quality

continue guess I been good, as very looking or far I that of stuff whole as stand Mike Mulford being been I some to interest not guess, that and We that stable. for -- let Chief as comment increase I'll rate Credit but an [dice -- Officer, has have kind lot anything from look, well, from it we've say, our of a to is portfolio] would out occupancy it perspective, deterioration. seeing

seen is not Thanks, industry real portfolio No, any significant Chuck. whether Yes. Mike. strong. any type This of issues the very we've geographic remains issues, or systemic still anywhere portfolios,

quarter a the this related late And pretty delinquencies to year. that identified first but quarter the actually, in we bounced for those little bit, they in and then isolated instances we're And in the were fourth early of significantly quarter. up down criticized, really

So in there is quality credit nicely. really holding

in as then And other card good I and which color. great the debit the release. prior and a SBA didn't That's expense SEDARs additional follow-up, of ATM had losses, hear press kind see also line just to

of card particularly a could debit and little quarter? light ATM losses shed last you on So bit the

how of around to us significant this wrote of terms in Terry, change in rate ATM author the it. Nothing the of of that is we out Yes. run capturing in the ordinary But line. those is Ian. is allows

next question Your comes with Tim from KBW. Switzer

balancing at think have old X%, about doing something more want timeline all? it the preclude to you the Do TCE you capital are like of buybacks you Or for that? of kind build ratio talked And you when to have does guys a or you laws the You you wanting from to valuate X.X%. achieve when will? of like this about

have doesn't the any doing It down not us some we're previous from really, But our preclude buybacks. now, year. from been earnings right

trough right are that. building not So manage but that it's capital. valued, now. a we're think our as We interest think those help right -- help build stocks will are direction, now, that's margin the way But our rates, right do to We think some in back are interest heading then earnings our retain correct think itself really our going down on manage earnings as earnings, focused in of right we if obviously, capital. great want to part bit we start us And we to here, buybacks degree. we do a to now, capital. then our do will little of going up to more to to some formula that get And bounce to rates,

of do to to see kind if that's anxious I'm they effect what lower in So have. rates going September,

see to but on we'd an it timetable like later, exact obviously we don't have sooner no, that. than So

Yes.

you lagging projections it some what see do do data rate initially? that? models there's Is when the maybe modeling And immediate cut or Fed recovers? repricing any say a guys deposit are you that impact Or the you Okay. impact? so of some and Did your have guys of how

The point not Tim, or even cut rate it really, this a basis is Rich. or a doesn't is basis improvement model down has just lot and change movement. at I and point XX much. XX most Right our mean basis up of now, model XX is

look down loan perspective, nice I the in would refinance we that that curve do become the got get treasury, like feel that and we've the from guess, a I in bit. treasuries longer-end uninverted. if love us area. would help do Yes. say to mortgage we opportunity quite a But yield a

think side was going that you Yes, another here? be loan Do growth Yes. rates help would follow-up. the to the maybe

of the down we've competition our to a do the that across the then off end those in term, of with of you, sell hoping sheet, look I know guess time, probably lines, bring a growth. down be And Well, probably been period don't touch. rates just our I product most We'll honest take holding mean, loans if long love we're short I we more see it in get a borrowings we if for sale. little more better -- balance will least increase to we little kind any bit we'd help where production, with on for some mortgage gain the that at curve of yield and get long slope, balances higher the makes commercial, especially our time. the new loan sense a than a bit mean, can I

So loans little super to to that or would tied $XXX or immediately impacted. have prime loans Those $XXX Tim, color, million, that adjust a would just million are so be about that give we out. that you are

of We that of the have borrowings from. million third $XXX quarter at the benefit end we would

also have So now that deposits down. will I And you're we of loans. million talking think $XXX broker reprice million, $XXX

$X.X of those will a So soon, when million reprice billion about we come deposits, down, -- and have too. would broker those $X.X -- those

as said, it's just I Rich So factors. given neutral few going fairly be those to think

that makes numbers Yes. No, those I sense. helpful. are appreciate

Your Davidson. Manuel comes Instructions] with D.A. question [Operator Navas from next

to want on loan just clarify growth. I

pace now? half digits single the the single low from from here of whole said year, for or You low back digits

Yes.

-- projecting of half the we're that. slow to we're the trying year, For back

those loans had we put portfolio of because some was that some growth and that on. this that residential of quarter construction of So we those loans

bumping that will are that some. We slow rates, trying to probably slow by which going those to now

borrowings we're that. Our We movement growth see like have a much commercial hopefully can sort selective bit slow of of starting start to the elevated loan time, little to but overnight now. there, until slow rates with little been some we to more want bit be improving and margin. a things right we'll try more see for our and And and

that. So was Would wait loan I'll -- going again? you to just allow I the I the I And be increase for potentially wildcard -- to to headed growth funding that would that's where can was next.

Just is that a...

growing about funding, that contingent And call, all didn't flowing the we things And we of some Manuel. in are out. noise half this is deposits, upon because but thing money absolutely. happening mention tax there's Remember, were exited Yes, They core that the balance the we relatively we year. the $X little program But money other on in It's will the that tax we deposits there some have first flat. million. -- down sheet. that November, still in were still had the in that are a

So that bit more loss when some little lost still we were of And a have we that's to so think million because frame. $XX or flat, time deposits of that tax during we deposits lose. chunk

talk a Part noise always I So of about some these being some is this because in there's transition year. of it categories.

deposits. to clarify just I like on the

how know much million of base? deposit to already million quarter. You accounts up, add you initiatives $XXX balances open in the I X balances added should that $XXX gotten have your but those in that already? third have Have you some you had that of

of million... end second the $XX the At quarter was

is the XXX that still rough target? And

some that of And on of those. in we are our and them third initiatives that that some those share third some with we will quarter; have other and some hope bring deposits because other also results you X off several the traction initiatives, have with in to just kicking kicked we off, think we're quarter gaining

little Could a better the that to have a from increased and into bit levels? NIM growth could where loan current point you potentially get XXXX you have

probably there in And built in things. that exploring down there's we be Sure, rates. bounce not that that refinance those get are that we're off initiatives in, And that regard. sure. other -- also exploring other We we're several could loans a deposits only it's There getting funding.

do can the our It's things assets. we that So loans also it's deposit -- other not of with just on gathering. some on the

the investing we're And just on out that sure what that capital that make to balancing there and make the going appropriate doing I get add, make we're sure really we liquidity return is to was an to return. the appropriate we

to it's our would that just suffer. priced. high think really margins deposits some easy So that get make are go We

you've started that hit linked to quarter? you based could from like peak Or that Do now you've come just here on? costs feel back down like fluctuate deposit

did peaked, those -- that second we and think lower lower the move decrease think -- has We can here deposit to in we have room we forward. we costs costs and third the as we quarter, in

I'm love And great. that helpful residual it, on on a loan the is when commercial rest yields shifting was went I just get it. have actually added I you might lower-yielding I I you second. estate that I And being real yields be think a number a guys through the fee it's of the for the some think would really but on this little asset. that leasing missed bit X% would sure That's understand for this like what plus. side. lower. quarter? gears high,

was... believe think looking XXX. that XX%, XX I Or number Year-to-date, now... I for it right XXX...

I'll thank the into Okay step you. appreciate queue. the really I back commentary.

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

and Well, large for due hard on of in Again, quarter's closing, just the those our I were team. today's joining results everyone work and thank the in this of to discipline want that parts participated call.

pricing improving us managing way. future focus We franchise position core our is growing And success. deposit does and approach year deposits again, on transition disciplined our loans for it our this will growing Civista I the the us and believe retake well company to focus that to on continue and for the a the strong and right

to in to I time Thank share forward third our your So few all you today. months quarter you to talking a for again results. look

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