Business Overview and History Civista Bancshares, Inc. (NASDAQ:CIVB) is a $4.1 billion financial holding company headquartered in Sandusky, Ohio. The company's primary subsidiary, Civista Bank, has proudly served its local communities since 1884, providing a full suite of banking, commercial lending, and wealth management services. Over the decades, Civista has navigated economic cycles and industry changes with a steadfast focus on prudent risk management and delivering long-term value for its shareholders.
Civista Bancshares was organized under the laws of the State of Ohio on February 19, 1987 and became a registered financial holding company under the Gramm-Leach-Bliley Act in 2000. The company's roots trace back to 1884 when its primary banking subsidiary, Civista Bank, was first established as The Citizens National Bank. In 1898, it was reorganized under Ohio banking law as The Citizens Bank and Trust Company, and in 1908, it surrendered its trust charter to operate as The Citizens Banking Company.
The name Civista Bank was introduced during the first quarter of 2015 to solidify the company's dual "Citizens-Champaign" brand and distinguish itself from other banks using the "Citizens" name in its existing and prospective markets. In 2007, the company formed First Citizens Investments, Inc. to hold and manage its securities portfolio, further diversifying its operations.
Today, Civista Bank operates a network of 37 branch locations across Ohio, Indiana, and Kentucky, serving a diverse customer base ranging from retail consumers to commercial clients. The bank's lending activities are concentrated in commercial real estate, residential mortgages, and equipment leasing, with a focus on serving small-to-medium sized businesses in its regional markets.
In recent years, Civista has faced challenges, including the loss of noninterest income due to changes in overdraft processing and the discontinuation of its tax refund processing program. However, the company successfully replaced nearly $5.2 million in lost noninterest income in 2024 through increased service charges, gains on the sale of mortgages and leases, and growth in its wealth management fees.
Throughout its history, Civista has maintained a strong core deposit franchise, which has been a key contributor to its profitability. The company's disciplined approach to risk management has helped it navigate various economic cycles and preserve the quality of its loan portfolio.
Financial Performance and Ratios Civista Bancshares has consistently demonstrated solid financial performance, even amidst the challenges of the past few years. For the full year 2024, the company reported net income of $31.7 million, or $2.01 per diluted share, compared to $43.0 million, or $2.73 per diluted share, in 2023. The company's return on assets (ROA) for 2024 was 0.80%, while its return on equity (ROE) stood at 8.28%. However, the ROA improved to 0.97% in the fourth quarter of 2024, indicating a positive trend.
The company's net interest margin, a key measure of profitability, expanded by 20 basis points to 3.36% in the fourth quarter of 2024, contributing to a full-year net interest margin of 3.21%. Civista has been successful in managing its funding costs, as evidenced by a 19-basis point decline in its overall cost of funds during the fourth quarter.
Civista's balance sheet remains well-capitalized, with a Tier 1 leverage ratio of 8.60% as of December 31, 2024, which is considered "well-capitalized" by regulatory standards. The company's tangible common equity ratio, an important measure of financial strength, stood at 6.43% at the end of 2024, up from 6.36% a year earlier. Management has set a target to rebuild this ratio to 7-7.5% in the coming periods.
For the fourth quarter of 2024, Civista reported revenue of $62.4 million and net income of $9.9 million, or $0.63 per diluted share, compared to $9.7 million, or $0.62 per diluted share, for the fourth quarter of 2023. This represents an 18% increase over the linked quarter, primarily due to an increase in net interest income of $2.1 million, or 7.3%.
Liquidity and Cash Flows Civista Bancshares maintains a conservative liquidity position, with a substantial portfolio of securities classified as available-for-sale. As of December 31, 2024, the company's securities portfolio totaled $652 million, representing 15.9% of its total assets. Additionally, Civista had $63.2 million in cash and cash equivalents, providing ample liquidity to fund its operations and support future growth.
The company's operating cash flow for 2024 was $48.3 million, while its free cash flow reached $44.1 million. These strong cash flow metrics have enabled Civista to reinvest in its business, fund strategic acquisitions, and return capital to shareholders through dividends and share repurchases.
In terms of liquidity ratios, Civista reported cash of $63.16 million and an available credit line of $370.13 million as of the end of 2024. The company's debt-to-equity ratio, current ratio, and quick ratio were not specifically disclosed in the provided information.
Business Segments and Product Lines Civista Bancshares operates through several key business segments:
Lending: The company's primary lending activities include commercial and agricultural loans, commercial real estate loans, residential real estate loans, real estate construction loans, farm real estate loans, and lease financing receivables. In 2024, commercial and agricultural loans comprised 11% of the total loan portfolio, remaining relatively flat compared to previous years. Commercial real estate loans, both owner-occupied and non-owner-occupied, made up 52% of the portfolio in 2024, down slightly from 54% in 2023. Residential real estate loans increased from 23% of the portfolio in 2023 to 25% in 2024. Real estate construction loans grew from 9.1% of total loans in 2023 to 9.9% in 2024. The lease financing receivables segment, acquired through the purchase of Vision Financial Group in 2022, comprised 1.5% of the total loan portfolio in 2024.
Deposit-Taking: Civista experienced growth across its deposit products, with total deposits increasing 7.6% from 2023 to 2024, reaching $3.21 billion. This growth was driven by a 33.5% increase in savings and money market accounts and a 5.1% rise in certificate of deposit accounts. Noninterest-bearing demand deposits declined 9.9% over the same period. The bank's ratio of uninsured deposits to total deposits was approximately 15% at the end of 2024.
Fee Income: Civista generates noninterest income from various sources, including service charges, net gains on the sale of loans and leases, wealth management fees, bank-owned life insurance income, and lease revenue and residual income. Noninterest income increased 1.6% in 2024 compared to 2023, primarily due to higher net gains on loan and lease sales, increased lease revenue, and growth in wealth management fees.
Outlook and Growth Initiatives Looking ahead, Civista Bancshares remains focused on executing its strategy of prudent growth, enhanced customer relationships, and operational efficiency. The company's management team is closely monitoring economic conditions and industry trends to adapt its approach as needed.
One of Civista's key priorities is to continue strengthening its core deposit franchise, which management views as a significant competitive advantage. The company has implemented several initiatives to attract and retain low-cost, relationship-based deposits, including the rollout of a new online account opening platform and targeted efforts to deepen existing customer ties.
Additionally, Civista is committed to maintaining disciplined loan underwriting and pricing, balancing asset growth with the preservation of its strong credit quality. The company's commercial and residential lending teams are well-positioned to capitalize on opportunities in their respective markets, while the leasing division continues to contribute to the diversification of Civista's revenue streams.
In terms of inorganic growth, Civista remains vigilant for potential acquisition opportunities that could further strengthen its regional presence and capabilities. The company's track record of successful integrations, such as the 2022 acquisitions of Comunibanc Corp. and Vision Financial Group, demonstrates its ability to thoughtfully expand its footprint and create long-term value for shareholders.
Based on management's guidance, Civista expects its net interest margin to continue expanding, potentially reaching the low to mid-340 basis points range by the second quarter of 2025 before leveling out. The company plans to manage loan growth to be in the low single-digit range for the next several quarters to optimize funding and improve capital ratios. Civista is also focused on growing its core deposit base to replace more expensive brokered deposits and borrowings.
Risks and Challenges As with any financial institution, Civista Bancshares faces a variety of risks that could impact its future performance. These include, but are not limited to, interest rate risk, credit risk, operational risk, and regulatory risk.
The company's net interest margin, a critical driver of profitability, is susceptible to changes in market interest rates and the competitive landscape. Civista's ability to maintain its lending discipline and effectively manage its funding costs will be crucial in navigating any future shifts in the interest rate environment.
Additionally, Civista's loan portfolio, which is heavily concentrated in commercial real estate and equipment leasing, exposes the company to potential credit quality issues. While Civista's credit metrics have remained strong, a significant deterioration in economic conditions could lead to elevated loan losses and impact the company's financial performance.
Operational risks, such as cybersecurity threats, system failures, and employee misconduct, are also areas of concern for Civista. The company has invested in robust risk management frameworks and continues to enhance its technology infrastructure to mitigate these risks.
Regulatory oversight is another factor that could affect Civista's operations, as changes in banking laws and industry regulations may require the company to adapt its business practices and allocate additional resources to compliance efforts.
Industry Trends The banking industry has seen increased net interest margins as the Federal Reserve has raised interest rates, which has benefited Civista. However, the industry has also faced challenges around noninterest income, as banks have had to adapt to changes in customer behavior and regulations around fees such as overdrafts. Civista has successfully navigated these challenges by diversifying its revenue streams and focusing on fee-based services like wealth management.
Conclusion Civista Bancshares has demonstrated its resilience and commitment to sustainable growth over its 140-year history. The company's focus on prudent risk management, strong customer relationships, and operational efficiency has enabled it to navigate economic cycles and industry changes while delivering consistent financial performance.
As Civista continues to expand its regional footprint, diversify its revenue streams, and invest in technology and talent, the company appears well-positioned to capitalize on future opportunities and generate long-term value for its shareholders. The company's recent financial results, including the expansion of its net interest margin and the successful replacement of lost noninterest income, demonstrate its ability to adapt to changing market conditions.
However, Civista must remain vigilant in managing the various risks inherent to the banking industry to ensure its continued success. The company's plans to manage loan growth, focus on core deposit growth, and rebuild its capital ratios indicate a strategic approach to balancing growth with risk management.
Overall, Civista Bancshares' combination of a solid balance sheet, disciplined growth strategy, and experienced management team makes it an intriguing investment opportunity for those seeking exposure to a well-run community bank with a proven track record of weathering challenges and delivering shareholder returns. As the company executes its strategic initiatives and capitalizes on its strong market position, it is well-positioned to continue its trajectory of sustainable growth and value creation.