Civista Bancshares Q2 Earnings Call Highlights

Civista Bancshares (NASDAQ:CIVB) reported higher second-quarter earnings from a year earlier as net interest margin expanded, funding costs declined and loan production remained solid across its markets, management said on the company’s second-quarter 2026 earnings call.

President and Chief Executive Officer Dennis Shaffer said the company earned net income of $14.3 million, or $0.69 per diluted share, for the quarter. That was up $3.3 million, or 30%, from the second quarter of 2025, but down $674,000 from the linked quarter. Pre-provision net revenue increased $5 million, or 36%, from the year-earlier quarter and rose $1.6 million, or 9%, from the first quarter.

Shaffer, who said this would be his final earnings call as CEO before Chuck Parcher assumes the role next month, told investors that the first half of 2026 positioned the company for “another good year.” He will remain chairman of the board.

Margin expands as funding costs ease

Net interest income totaled $38.6 million, up $770,000, or 2%, from the linked quarter. Shaffer attributed the increase to a one-basis-point rise in earning asset yield to 5.67% and a two-basis-point decline in overall funding costs to 1.94%. Net interest margin expanded four basis points to 3.89%.

The company continued to reduce its use of brokered funding. Shaffer said Civista replaced $150 million of brokered certificates of deposit that matured in late March, which carried a weighted average rate of 3.92%, with $125 million of CDs laddered over nine months at an average rate of 3.80%. Over the past eight quarters, he said, Civista has reduced brokered funding by $276 million, or 44%.

In response to an analyst question, Chief Financial Officer Ian Whinnem said that, assuming no rate changes, Civista expects third-quarter margin to be roughly flat, plus or minus one to two basis points, with another one to two basis points of expansion possible in the fourth quarter. He said any expansion would come from the earning asset side, partially offset by higher funding costs.

Loan demand remains solid despite elevated payoffs

Total loans and leases grew by $25.2 million during the quarter, an annualized growth rate of 3.1%, despite $68 million in early payoffs. Shaffer said lending teams generated $351 million in new organic loan production in the quarter. Year to date, Civista has generated $565 million in organic loan production and experienced $151 million in payoffs, compared with $405 million of originations and $46 million of payoffs in the first six months of the prior year.

Shaffer characterized the payoffs as “good payoffs,” citing successful real estate projects that were sold or moved to the permanent market, as well as some loans to operating companies that were acquired. Undrawn construction lines totaled $250 million at June 30, up from $175 million at March 31 and $161 million at Dec. 31.

Management said it expects loan growth at a mid-single-digit rate over the balance of the year. Shaffer said payoffs are expected to subside in the second half, while the company’s pipelines remain robust. At June 30, the residential mortgage pipeline was up 14% and the commercial loan pipeline was up 42% from the prior year.

New and renewed commercial loans were originated at an average rate of 6.68% during the quarter, residential real estate loans at 6.32%, and loans and leases from the leasing division at 9.05%. Shaffer said loans, including construction loans secured by office buildings, made up 4.6% of the loan portfolio and were predominantly backed by single- or two-story offices outside central business districts.

Expenses improve, fee income mixed

Non-interest income was $9 million in the quarter, down $424,000 from the first quarter. Shaffer said the decline was primarily tied to $444,000 in other income recognized in the first quarter from claims reserved for by the company’s captive insurance subsidiary that did not materialize. Year to date, non-interest income was $18.4 million, up $4 million, or 27.6%, from the prior-year period.

Non-interest expense totaled $28.7 million, down $1.2 million, or 4.1%, from the linked quarter. Shaffer said the decline reflected lower compensation expense, contracted data processing, professional services and equipment expense related to Farmers Savings Bank operational costs, partially offset by merit increases and investments in the company. The efficiency ratio improved to 58.2%, compared with 60.1% in the linked quarter and 64.5% in the prior-year quarter.

Whinnem said second-quarter expenses were below the company’s prior guidance and that Civista plans additional investments in revenue-producing employees, marketing and technology. He said expenses are expected to be $29.6 million to $30 million in the third quarter, with the fourth quarter likely around the same level.

Deposits decline modestly as competition remains intense

Total deposits declined $44 million, or 1.2%, during the quarter, including a $25 million reduction in brokered deposits. Shaffer said tax payments by commercial and retail customers and municipal fund collection and distribution also pressured deposit balances, consistent with prior years.

Management said Civista remains focused on growing core funding and has grown its core deposit base in six of the last eight quarters while reducing its cost of funds by 71 basis points over that period. Excluding brokered deposits, the cost of deposits increased four basis points from the linked quarter to 1.59% as customers continued moving from lower-rate accounts into higher-rate products.

Asked about the funding environment, Shaffer said it remains “very competitive” across commercial, retail and public funds. Parcher added that competition is broad across markets, with some “irrational rates” appearing in nearly every market. Management said Civista plans to reduce brokered deposits by $25 million in each of the next two quarters.

Credit quality holds steady; capital options remain open

Civista recorded a $1.3 million provision to the allowance for loan losses, a $519,000 provision for undrawn construction lines and net charge-offs of $74,000. The ratio of allowance for credit losses to total loans was 1.28% at June 30, consistent with Dec. 31, 2025. Shaffer said credit metrics remain strong and that the economy across Ohio and southeastern Indiana is “showing no signs of deterioration.”

Chief Credit Officer Mike said the bank has a few credits it is working through, but they are “appropriately reserved for,” and management does not see systemic issues in the loan book. Shaffer also noted Civista has no non-depository financial institution financing and very little office exposure.

Shaffer said return on assets was 1.34% and return on equity was 10.23% for the quarter. Tangible book value per share increased for the seventh consecutive quarter to $20.43. Civista declared a quarterly dividend of $0.18 per share, consistent with the prior quarter, representing a 2.55% yield based on the June 30 closing share price of $28.22 and a payout ratio of 26.14%.

On capital deployment, Shaffer said the company has been investing in technology, people and infrastructure, including producers in lending, treasury management and private banking. He said Civista continues to evaluate share repurchases, dividends and M, though acquisition activity remains quiet in Ohio and Indiana. Parcher added that management is also analyzing how to handle sub-debt coming due in December.

“Our focus continues to be on creating value for our shareholders,” Shaffer said.

About Civista Bancshares (NASDAQ:CIVB)

Civista Bancshares, Inc is a bank holding company headquartered in Saginaw, Michigan, operating through its wholly owned subsidiary, Civista Bank. The company offers a full suite of commercial and retail banking products and services to individuals, small- and mid-sized businesses, governmental entities and nonprofit organizations. Core offerings include deposit accounts, commercial and industrial loans, consumer and residential real estate mortgages, master-planned construction financing and treasury management solutions.

Beyond traditional banking, Civista Bancshares provides wealth management, trust and investment advisory services under the Civista Wealth Enterprises brand.

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