Civista Bancshares (NASDAQ:CIVB) released first-quarter financial results and hosted an earnings call on Wednesday. Read the complete transcript below.
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View the webcast at https://app.webinar.net/QbAxlV6l5OB
Summary
Civista Bancshares Inc reported a net income of $15 million for Q1 2026, a 47% increase compared to Q1 2025.
The company successfully completed the core system conversion of Farmer’s Savings Bank, impacting net income by $400,000 in one-time expenses.
Net interest margin expanded to 3.85% with a strategic reduction in brokered deposits and an increase in core deposit funding.
Loan production was strong at $214 million despite significant payoffs, with a focus on maintaining a diversified loan portfolio.
The company announced a consistent quarterly dividend of $0.18 per share and renewed a $25 million stock repurchase program.
Non-interest income saw a decline from the linked quarter but increased compared to the prior year, driven by gains on loan sales and other income.
Operational highlights include a reduction in non-interest expense due to a commission accrual adjustment and an increase in compensation expenses.
Future outlook includes expectations of mid-single-digit loan and deposit growth for 2026, with a focus on maintaining a strong net interest margin.
Management is confident in their ability to manage costs and capitalize on market opportunities, particularly in Ohio and southeastern Indiana.
Full Transcript
OPERATOR
Before we begin, I would like to remind you that this conference call may contain forward looking statements with respect to the future performance and financial condition of 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 press release, also available on the Company’s website, contains the financial and other quantitative information to be discussed today as well as the reconciliation of the GAAP to non GAAP measures. This call will be recorded and made available on Civista Bancshares’ website at www.civb.com. at the conclusion of Mr. Shaffer’s remarks, he and the Civista management team will take any questions you may have now. I will turn the call over to Mr. Shaffer. Please go ahead.
Dennis Schaefer (President and CEO)
Good afternoon, this is Dennis Schaefer, President and CEO of Civista Bancshares and I would like to thank you for joining us for our first quarter 2026 earnings call. I’m joined today by Chuck Parcher, EVP of the company and President of the Bank Rich Dutton, SVP of the Company and Chief Operating Officer Ian Whittom, SVP of the Company and Chief Financial Officer and other members of our executive team. This morning we reported net income for the first quarter of $15 million or $0.72 per diluted share, which represents a $4.8 million or 47% increase over our first quarter of 2025 and a $2.7 million or 22% increase over our linked quarter. This also represented an increase in pre provision net revenue of $3.8 million, or 29% over our first quarter in 2025 and a $3.2 million or 3.8% increase over our linked quarter. Our first quarter highlights include the successful completion of the core system conversion of the Farmer’s Savings bank that we acquired during the fourth quarter of 2025. As a result, our first quarter earnings include what should be the last expenses associated with the acquisition. These onetime expenses impacted our first quarter net income by approximately $400,000 or $0.02 for common share. For the quarter, core deposit funding increased organically by over $60 million. This allowed us to reduce brokered deposits by $25 million. This represents the sixth consecutive quarter in which we reduced brokered funding. Our net interest margin expanded by 16 basis points to 3.85% as we continued our disciplined approach to managing our asset pricing and funding costs. Our earning asset yield for the quarter increased by 5 basis points over our linked quarter to 5.66%. Our cost of funds was 1.96% for the quarter, down 35 basis points from the first quarter of 2025 and 12 basis points from the linked quarter, while our cost of deposits was 1.81%, down 19 basis points year over year and 11 basis points sequentially. Our decline in funding costs was largely attributable to $125 million in brokered CDs that matured in late December that carried a weighted average rate of 4.23%. We were able to replace and reduce These maturing brokerage CDs with $100 million in brokerage CDs with a weighted average rate of 3.87%, representing a savings of 36 basis points. In addition to reducing the amount of broker funding, net interest income for the quarter was $37.8 million, which represents an increase of $5.1 million, or 15%, compared to the first quarter of 2025 and an increase of $1.4 million, or 4% compared to our linked quarter. Despite loan balances being down, we had strong loan production across our footprint during the quarter that was offset by significant payoffs. Our lending teams generated $214 million of new loan production during the quarter that was offset by $83 million. In addition to normal principal pay down, our ROA for the quarter was 1.41%. Our ROE for the quarter improved to 10.97% and our tangible book value per share improved to $19.70. Our continued strong financial performance and ability to consistently create capital gives us options as we think about the best ways to to deploy our capital. Earlier this week we announced a quarterly dividend of $0.18 per share, which is consistent with our prior dividend and the renewal of our stock repurchase program authorizing management to repurchase up to $25 million in outstanding common shares during the quarter. Non interest income declined by $453,000, or 4.6%, from our linked quarter and increased $1.6 million, or 20% over the first quarter of 2025. The primary driver of the decline from our linked quarter was a $336,000 decline in card fees due to the typical elevated spending that comes during the holiday. The primary drivers of the increase in non interest income over the prior year for a $190,000 increase in service charges, a $1 million increase in net gains on loan and lease sales, and a $444,000 increase in other income related to reserves that have been established at our insurance subsidiary for claims that subsequently never materialize. Non interest expense declined by $1.1 million, or 3.6% from our linked quarter and decreased or increased $2.7 million, or 10% over the prior year. The decline from our linked quarter was the result of a commission accrual adjustment in the fourth quarter of 2025. Our actual commission expense was $1.4 million lower than what had been accrued and was adjusted in the fourth quarter. We are now adjusting all accruals at least quarterly. The primary driver of the increase in non interest expense over the prior year was a $2.2 million increase in compensation expense associated with increased salaries, commissions and medical expenses. In addition to annual increases, our average FTE employees increased from 520 in the first quarter of last year to 535 in the first quarter of 2026. Much of the increase in FTEs came from the employees that joined us through our recent farmers acquisition. We also had $400,000 in other expenses that we believe will be the last significant expenses related to the acquisition. Our efficiency ratio for the quarter improved to 60.1% compared to 64.9% for the prior year. First quarter our effective tax rate was 16.8% for the quarter. Turning our focus to the balance sheet. Strong loan production across our footprint was offset by significant payoffs during the quarter. Our lending teams generated $214 million of new loan production during the quarter. That was offset by $83 million in payoffs in addition to normal principal paydown. This compares to the prior year’s first quarter when we originated $181 million in new we experienced $21 million in loan payoffs. We consider these good payoffs as they were successful real estate projects that were sold or taken to the permanent market. We also had a few loans to operating companies that were sold during the quarter and paid off their loans. Loan production grew with each month’s production during the quarter from $49 million in January to $59 million in February to to $106 million in large during the quarter. New and renewed commercial loans were originated at an average rate of 6.52% and leases were originated at an average rate of 9.03%. Additionally, our undrawn construction lines were $175 million at quarter end compared to $161 million at year end. We ended the quarter with a loan to deposit ratio of 92%. Loans secured by office buildings make up only 4.7% of our total loan portfolio. As we have stated previously, these loans are not secured by high rise metro office buildings. Rather, they are predominantly secured by single or two story offices located outside of central business districts. We also have very little exposure to non deposit financial institutions. As a commercial real estate lending bank, we are mindful of our non owner occupied CRE concentration and continue to diversify our loan portfolio. At 3-31-2026, our CRE to risk based capital ratio was 261%. While we experienced a reduction in total loans during the quarter, loan demand remains solid in each of our markets and our pipelines continue to grow. At 3-31-2026, our residential mortgage loan pipeline was up 25% and our commercial loan pipeline was up 102% over the prior year. We anticipate growing the loan portfolio at a mid single digit rate over the balance of the year. On the funding side, total deposits increased $35.4 million or an annualized growth rate of 4%. However, if we back out the broker deposits, our core deposit balances grew by $60.4 million or 8% for the quarter. This represents six of the last seven quarters in which we have grown our core deposit balances while reducing our cost of funds. Much of this growth came in interest bearing demand accounts and in our savings and money market accounts. This increase in lower rate deposits combined with our continued shift from broker deposits to more deposit funding Contributed to an 11 basis point decline in our cost of deposits from the linked quarter. Our deposit base remains fairly granular with our average deposit account excluding CDs approximately $28,000. Other than the $523 million of public funds which are primarily operating accounts with various municipalities across our footprint, we had no deposit concentrations at quarter ed. Our commercial bankers, treasury management officers, private bankers and retail staff continue to have success gathering additional deposits from our commercial, small business and retail customers. As evidenced by our organic deposit growth. We believe our low cost deposit franchise continues to be one of civista’s most valuable characteristics contributing contributing significantly to our solid net interest margin and overall profitability. We view our securities portfolio as a significant source of liquidity. At quarter end our securities portfolio totaled $682 billion which represents 16% of our balance sheet and when combined with our cash balances represents 22% of our total deposit. Our securities are classified as available for sale and had $49 …
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