Civista Bancshares(CIVB) - 2025 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported net income of $12.8 million, or $0.68 per diluted share, representing a 53% increase from Q3 2024 and a 16% increase from the linked quarter [3][4] - Pre-provision net revenue increased by $4.9 million or 45% compared to Q3 2024, and by $1.9 million or 14% from the linked quarter [4][18] - Net interest income totaled $34.5 million, consistent with the linked quarter, while the net interest margin declined by six basis points to 3.58% [4][12] Business Line Data and Key Metrics Changes - Non-interest income increased by $3 million or 46.2% over the linked quarter, driven primarily by a $1.4 million increase in leasing operation fees [6][7] - Non-interest expense was $28.3 million, an increase of $845,000 or 3.1% over the linked quarter, mainly due to non-recurring acquisition expenses related to the merger [7][8] - The efficiency ratio improved to 61.5% compared to 64.5% for the linked quarter and 70.5% for the prior year's third quarter [8] Market Data and Key Metrics Changes - Total deposits grew by $33.4 million, with a $56.4 million increase in core deposit funding during the quarter [12][15] - The loan-to-deposit ratio was 95.8%, down from the linked quarter, with expectations to reduce this ratio further post-acquisition [15][16] - The securities portfolio was $657 million, representing 16% of the balance sheet, with unrealized losses of $44.5 million [16] Company Strategy and Development Direction - The company completed a follow-on common stock offering, raising $80.5 million to support organic growth and investments in technology and infrastructure [5][19] - The merger with Farmers Savings Bank is expected to enhance liquidity and expand the customer base, with preparations for system conversion underway [5][19] - The focus remains on organic growth, deepening customer relationships, and enhancing fee income through capital investments in technology and automation [24][25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the economic environment across their footprint, noting strong credit quality and stable credit metrics [17][18] - The company anticipates loan growth to return to a mid-single-digit range for Q4 and increase into the mid to high single digits in 2026 [11][30] - The effective tax rate for the quarter was 18.5%, with expectations to remain in the 16 to 16.5% range for the remainder of the year [26] Other Important Information - The company announced a quarterly dividend of $0.17 per share, consistent with the prior quarter, representing a 3.3% yield [6] - The tangible common equity ratio increased from 6.7% to 9.21% due to strong earnings and the capital raise, with expectations of a decline post-merger [16] Q&A Session Summary Question: Margin outlook with potential rate cuts - Management anticipates a margin expansion of about five basis points in Q4, considering potential rate cuts [22] Question: Capital priorities post-Farmers acquisition - The focus will be on organic growth and increasing tangible book value, with a disciplined approach to M&A [23][24] Question: Confidence in achieving loan growth targets - Management expressed confidence due to a strong pipeline and historical loan-generating capabilities [30] Question: Fee income expectations - Anticipated fee income for Q4 is around $9.2 million, including contributions from Farmers Savings Bank [35] Question: Loan yield decline explanation - The decline was attributed to a mix shift and pricing competition, with expectations for yield improvement in the coming quarters [38][39] Question: Timing of Farmers acquisition closure - The acquisition is expected to close shortly after the Farmers shareholders meeting on November 4 [46] Question: Loan competition and pricing - Competition remains aggressive, with rates falling below 6.5% for better deals [50]