Operator: Afternoon. My name is Hannah, and I will be your moderator for today. 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 Incorporated. 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 statement. These factors are discussed in the company's SEC filings 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 the other quantitative information to be discussed today. As well as the reconciliation of the gap to non GAAP measures. This call will be recorded and, made available on Civista Bancshares website at wwwcivd.com. At the conclusion of mister Shaffer's remarks, he and the Civista management team will take any questions you may have. Now I will turn the call over to mister Shaffer.
Dennis G. Shaffer: Good afternoon. This is Dennis Shaffer, president and CEO of Civista Bancshares, and I would like to thank you for joining us for our second quarter 2026 earnings call. I am joined today by Chuck Parcher, EVP of the company and president of the bank, Richard J. Dutton, SVP of the company and chief operating officer of the bank, Ian Whinnem, SVP of the company and chief financial officer of the bank and other members of our executive team. This morning, we reported net income for the second quarter of $14.3 million or $0.69 per diluted share, which represents a $3.3 million or 30% increase over our second quarter in 2025, and a $674 thousand decline from our linked quarter. This also represents an increase in pre provision net revenue of $5 million or 36% over our second quarter in 2025 and a $1.6 million or 9% increase over the linked quarter. Net interest income for the quarter was $38.6 million which represents an increase of $770 thousand or 2% compared to the linked quarter. The increase was attributable to an increase in our earning yield of 1 basis point to 5.67% while our overall funding cost declined by 2 basis points to 1.94%. Our net interest margin expanded by 4 basis points to 3.89% as we continued our disciplined approach to managing our asset pricing and funding costs. Our cost of funds was 1.94% for the quarter, down 37 basis points from the second quarter of 25 and 2 basis points from the linked quarter while our cost of deposits was 1.83% down 13 basis points year over year and 2 basis points higher than our linked quarter sequentially. Our cost of core deposits increased by 4 basis points to 1.59% compared to our linked quarter which was offset by the repricing of $150 million of brokered CDs that matured in late March that carried a weighted average rate of 3.92%. We were again able to reduce our brokered funding and replace these deposits with a $125 million of CDs laddered over the next 9 months at an average rate of 3.80%, representing a savings of 12 basis points. Over the last 8 quarters, we have reduced our reliance on brokered funding by $276 million or 44%. Despite $68 million in early payoffs, our loan balances grew by $25.2 million or an annual growth rate of 3.1% during the quarter. Our lending teams generated $351 million in new organic loan production during the quarter that was partially offset by early payoffs in addition to normal principal paydowns. Our ROA for the quarter was 1.34%, Our ROE for the quarter was 10.23%, and our tangible book value per share grew for the 7th consecutive quarter to $20.43 which represents an average return of 15 and a half percent over that period. Earlier this week, we announced a quarterly dividend of $0.18 per share, which is consistent with our prior quarter. Based on our June 30 closing share price of $28.22 this represents a 2.55% yield and a dividend payout ratio of 26.14%. Our strong financial performance and our ability to consistently create capital continues to give us options as we evaluate the best ways to put our capital to use. Noninterest income for the second quarter was $9 million which represented a decline of $424 thousand from our first quarter. The primary driver of the decline from our linked quarter was $444 thousand in other income recognized during the first quarter that was the result of claims that had been reserved for by our captive insurance subsidiary that subsequently did not materialize. Noninterest income year to date was $18.4 million which represented a $4 million or 27.6% increase over the same period in the prior year. The primary drivers of this increase were a $500 thousand increase in service charges which were related to increased fees from our business customers and increased overdraft fees generated from retail accounts, a $1.7 million increase in net gains on the sale of mortgage loans and leases related to increased sales volume on both loans and leases coupled with more favorable pricing, the $444 thousand in other income recognized during the first quarter, that was the result of claims that had been reserved for by our captive insurance subsidiary that subsequently did not materialize, and a $600 thousand increase in lease revenue and residual income resulting from nonrecurring adjustments from our leasing division's core system conversion last year. Non interest expense for the quarter was $28.7 million and represents a $1.2 million or 4.1% decrease from our linked quarter. This decline was attributable to reductions in compensation expense contracted data processing, professional services, and equipment expense associated with Farmers Savings Bank related to operational expenses, which were partially offset by merit increases and investments into the company. Compared to the prior year's second quarter, noninterest expense increased $1.2 million or 4.3%. The increase was attributable to increases in compensation marketing, the amortization on our core deposit intangible, and software maintenance, and was partially offset by reductions in our FDIC assessment and professional services. Our efficiency ratio for the quarter improved to 58.2% compared to 60.1% for the linked quarter and 64.5% for the prior year second quarter. Our effective tax rate was 16.66% for the quarter and 16.72% year to date. Turning our focus to the balance sheet. For the quarter, total loans and leases grew by $25 million which represents an annualized growth rate of 3.1%. As we signaled during our last quarter's call, solid loan production across our footprint continued into the second quarter with our lending teams generating nearly $351 million of new loans during the quarter. We did experience $68 million in payoff which part partially offset our loan growth. To put this in perspective, year to date, we have generated $565 million in organic loan production, and have experienced a $151 million in payoffs. This compares to the prior year's first 6 months when we originated $405 million in new loans, and we experienced $46 million in loan payoffs. We do consider our payoffs 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 acquired and those loans were also paid off. Additionally, our undrawn construction lines were 250 million at June 30, which compares to 175 million at March 31, and 161 million at December 31. During the quarter, new and renewed commercial loans were originated at an average rate of 6.68%, Residential real estate loans were originated at 6.32%, and loans and leases originated by our leasing division were at an average rate of 9.05%. Loans including construction secured by office buildings make up just 4.6% of our total loan portfolio. These loans are not secured by high rise metro office buildings rather they are predominantly secured by single- or 2-story offices located outside of central business districts. We remain mindful of our non owner occupied CRE concentration and continue to focus on diversifying our loan portfolio. At June 30, 2026, our CRE to risk based capital ratio was 262%. Loan demand remains solid in each of our markets and our pipelines continue to grow. At June 30, 2026, our residential mortgage loan pipeline was up 14%, and our commercial loan pipeline was up 42% 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 were mostly flat declining 44 million or 1.2% for the quarter. Part of this decline was due to a $25 million reduction in brokered deposits. In addition, as in previous years, tax payments by our commercial and retail customers as well as the collection and distribution of funds by our municipal customers put pressure on our deposit balances during the second quarter. While deposits backed up slightly this quarter, we remain focused on growing core funding, which has allowed us to grow our core deposit base in 6 of the last 8 quarters while reducing our cost of funds during this time by 71 basis points. While our overall cost of funding declined by 2 basis points to 1.94%, we continue to see migration from lower interest bearing accounts into higher rate deposit accounts. As a result, our cost of deposits excluding broker deposits, increased by 4 basis points from the linked quarter 1.59%. Our deposit base continues to be fairly granular, with our average deposit account excluding CDs approximately $29 thousand. Other than the $555 million of public funds, which are primarily operating accounts, with various municipalities across our footprint, We had no deposit concentration at quarter end. We believe our low cost deposit franchise continues to be 1 of Civista's most valuable characteristics 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 $670 million which represented 16% of our balance sheet and when combined with our cash balances, represents 21% of our total deposits. Our securities are classified as available for sale and had $34.9 million or 5.2% of unrealized losses associated with them. Civista's strong earnings, continue to create capital, and our overall goal remains to maintain our capital at a level that supports organic growth and allows for prudent investment into our company. Earlier this week, we announced an $0.18 per share dividend based on the quarter end market close of $28.22 This represents an annualized yield of 2.55% and a payout ratio of 26.14%. We view this as a sign of confidence, management, and our board of directors have in Civista's ability to continue generating strong earnings. While we have not repurchased any shares over the past several quarters, our regulatory capital and tangible common equity ratios are strong and continue to grow. Even with the recent increase in our stock price, we continue to believe our stock is a value, and we will continue to evaluate opportunities. During the quarter, we made a $1.3 million provision to our allowance for loan losses, a $519 thousand provision for undrawn construction lines, and had net charge offs of $74 thousand. While our credit metrics continue to normalize, our credit metrics remain strong. Our ratio of the allowance for credit losses to total loans is 1.28% at 06/30/2026. Which is consistent with 1.28% at 12/31/2025. Similarly, our ratio of allowance to nonperforming loans of almost 137% improved slightly when comparing the same periods. Other than the general concern over the impact of macroeconomic and uncertainties, the economy across Ohio and Southeastern Indiana is showing no signs of deterioration, and our credit quality remains strong. In summary, we are pleased with the increase in our pre provision net revenue the continued expansion of our net interest margin our ability to generate non interest income from diversified revenue streams, and our continued control of non interest expense. Our core funding remains stable, allowing us to further reduce our brokered funding, and loan demand across our footprint continues to build, giving us confidence in our ability to grow both core deposits and loans at a mid single digit rate for the balance of 2026. The first half of 2 thousand 26 has set us up for what should be another good year, and our focus continues to be on creating value for our shareholders. As most of you are aware that, while I will remain in my capacity as chairman of the board, this will be my final earnings call as chief executive officer of Civista Bancshares. It has been my privilege to serve our customers, communities, shareholders, and my colleagues throughout my 17 years here at Civista. I am grateful for the dedication of our employees, and the support of our board throughout my tenure. As Chuck Parcher assumes the role of president and CEO next month, I am confident Civista is well positioned for continued success. Chuck brings extensive leadership experience a deep understanding of our company and our markets, and a strong commitment to our customers, employees, and communities. I could not be more confident in Chuck, our leadership team, and in our employees. Thank you for your attention this afternoon and your investment in our company. And now we will be happy to address any questions that you may have. Thank you.
Operator: Ladies and gentlemen, we will now begin the question and answer session. If you have a question, please press the star followed by the number 1 on your touch tone phone. You will hear a prompt that your hand has been raised. Did you wish to decline from the polling process? Please press the star followed by the number 2. If you are using a speakerphone, please lift the handset before pressing the keys. Your first question comes from Jeff Rulis of D. A. Davidson. Please go ahead.
Jeff Rulis: Yeah. Thanks, Appreciate it. Maybe just on the expense side. It looks like a pretty encouraging level, I guess, your thoughts on you know, maintaining that level or maybe growth from here Any expectation on the expense side?
Ian Whinnem: Yeah. So on the noninterest expense, this is Ian, by the way, On the noninterest expense side, so we had expenses of 28.7 million a little bit better than the guidance we gave of $29.2 million to $29.7 million. For the remainder of the year, we are going to do some reinvestments back into the company for revenue producing colleagues, marketing spend, and technology investments. You know? I think we expect our expenses to be in that $29.6 million to $30 million in Q3 and probably Q4 about the same.
Jeff Rulis: Okay. Appreciate it. And then maybe if I were to hop to the margin, just wanna kinda check-in on any further room for growth. I think it laid out the kind of the funding side and the push and pull. But just wanted to see if there is any other opportunities to support any further expansion or do you see sort of a flattish outlook on the margin front?
Ian Whinnem: Yes. So right now, if we think of no rate movement, we would expect Q3 to be flat from where we are. Plus or minus 1 to 2 basis points. And then in Q4, we could see another 1 to 2 basis points of expansion. So it could end up in the upper 380s to low 390s.
Jeff Rulis: And, Ian, that would be more on the expansion leading to the on the earning asset side of the book or loan repricing opportunities? Is that what is the positive?
Ian Whinnem: Correct. Yeah. it is gonna be that side of it. Partially offset by the higher funding costs. Got it.
Jeff Rulis: Well, thank you. And Dennis, I always great energy for the business. All the best in the career transition. So thanks.
Dennis G. Shaffer: Thanks, Jeff.
Operator: Your next question comes from Brendan Nosal of Public Group. Please go ahead.
Brendan Nosal: Hey. Good afternoon, everybody. And, Dennis, congratulations on this being your final earnings call. Hope you are all doing well.
Dennis G. Shaffer: Thank you, Brendan. Yeah.
Brendan Nosal: Maybe starting off here on capital. I have gotta go pretty far back in my model to find a quarter with a TCU ratio that is got a 10-handle. It just it feels like organic growth is probably never going to be enough to fully absorb the level you have today and the generation you will have in the future. So maybe just update us on how you think about putting this level of capital to work outside of just kind of natural growth in the business.
Dennis G. Shaffer: Yeah. Sure. And, you know, right now, we have been deploying most of our capital into technology and people and infrastructure. We have filled some open positions and added some producers. Particularly on the lending side and treasury management and private banking. We are looking also at some existing areas and some of our growth markets to add a few more branches, and we have been looking at some technology investments that we believe can help us continue to grow revenue and profitability. So although as it pertains to, like, stock repurchases, we do think our stock is a value. And, you know, we have not--with the price being--you know, stock price being up, we have not bought any shares back. We do believe, you know, investment into our people and technology and the infrastructure generates a higher, I think, long term return for us and that does help us scale efficiency and lower you know, some of our deposit and operating cost. And, you know, I think just having that robust stack you know, capital stack, does provide us a lot of strategic flexibility, you know, as and helps us just absorb risk and as the economy you know, shifts as it does. But, you know, everything's on the table, and we continue to evaluate and determine, you know, dividend increases the best use of the capital, share repurchases. Obviously, we continue to have dialogue as it relates to M&A, you know, just to keep good relations. it is been awful quiet here in Ohio. But those are other good ways to deploy our capital. But right now, the focus has really been in investing back into the company because we think that does generate a little bit of a higher long term return for us.
Charles A. Parcher: And I would add this is Chuck. I would add that, you know, the other thing that we are analyzing with, you know, some of that excess capital is we have got the sub debt coming due in December. You know, and how we are going to handle that piece of it as well besides all the other items that Dennis listed. Yeah.
Brendan Nosal: Okay. Okay. Thanks for the thoughts there. Maybe pivoting to funding. Can you just update us on the competitive landscape for core funding and maybe speak to how it is evolved over the past couple of months?
Dennis G. Shaffer: Yes. it is been very competitive, I think. For us, you know, we still think if we can raise deposits at a cheaper cost because we still have some broker deposits We brought those down substantially. And, you know, if we can still raise deposits, that are cheaper than some of the brokered funds, it does make sense for us. But it is more competitive today both on the commercial and retail side. We see it in all aspects even on the public fund side. You know, people looking for yield. And many of the projects that we have working on at the bank, and we have a big focus on trying to drive in core operating accounts, the accounts that you know, that are a little bit less costly and stuff, But the competitive landscape is it has been very competitive. So, Chuck, I know if you have anything to add.
Charles A. Parcher: No. I would just say that it is it is equally competitive in all of our markets. I would not say there is any 1 market any more competitive than any other market we are seeing. You know, I do not want to say irrational rates, but we are seeing some irrational rates in almost every market.
Dennis G. Shaffer: And Brendan, we have added, as I mentioned, we are adding producers. And some of those producers--you know, we have added on the treasury maintenance side, the private banking side. Those people have, you know, some experience and have some books of business that, hopefully, we can they can move over deposits as well. So we are investing some of that capital in the people that can bring us deposits, not just loans because we have got to, you know, we want to kind of mirror those 2 as we move forward.
Brendan Nosal: Yep. Yep. Okay. Fantastic. Thanks for taking my questions.
Operator: Your next question comes from Adam Kroll of Piper Sandler.
Adam Kroll: Hey. I hope you are doing well and for taking my questions.
Dennis G. Shaffer: You are welcome.
Adam Kroll: So maybe starting on the mid single digit loan growth guide for the back half, It seems like payoff levels have remained elevated for you guys while production seems to be accelerating. So I guess I would be curious if you could expand on the growth guide. You know, do you expect a pickup in growth to be more a function of less payoffs or greater loan production? And more broadly, just what segments you expect to kind of drive the growth?
Charles A. Parcher: I would think it is really both, I guess, is the right way to say it. And we do not feel like our back half payoffs are gonna be at the same level that our first half was. And based on our pipeline and the growth of what we have got right now in unused construction funds that will get drawn down here over the construction season. And we feel pretty confident in that mid single digit number.
Dennis G. Shaffer: And our commercial lenders, they know their customers. So we kind of know when payoffs the pay payouts are not surprises to us. So we are able to kinda track. We know if a company's gonna sell or we know if a loan's gonna go to the you know, the permanent market. And based on, you know, what we know, you know, we do think payoffs will subside a little bit through in the second half of the year. And then as I mentioned in the when I had in my earlier comments, the pipelines are pretty robust, and even our construction pipeline is up. So we do feel pretty good where we are, you know, where we are headed with loan growth.
Adam Kroll: Got it. I appreciate the color there. And, you know, just a question on loan pricing. It sounds like from your comments, on a blended basis, it is still coming on above the portfolio, but I would just be curious to hear from competitive landscape, how pricing has been in your markets?
Charles A. Parcher: it is definitely competitive just like the deposit pricing. You know, obviously, if this 5-year holds and continues to push up a few more basis points, you know, a lot of the new loans are going to have to have, you know, a high 6, low 7 handle to make sense for us to put on the book. But we feel like, we are losing a ton of stuff to rate just because of our relationships with our customers. But, it is definitely been a little bit more of a struggle as that 5-year pushed up to get the increased yield with that increase in 5 year.
Adam Kroll: Got it. And last 1 for me, maybe for Ian. With core fee income down a bit during the quarter, I know leasing can jump around quarter to quarter, but I was just curious how you are thinking about core fee income run rate in the back half?
Ian Whinnem: Yeah. So it becomes really dependent on interest rates and how that mortgage business ends up with originations. So, you know, we came in a little bit below the guidance we had last time at $9 million. We are expecting for Q3 to be between $9 million to $9.3 million and then be flat in Q4.
Adam Kroll: Got it. Thanks for taking my questions, and Dennis, wish you best of luck in retirement.
Dennis G. Shaffer: Thank you, Adam.
Operator: Your next question comes from Tyler Kaczak of Stephens Incorporated. Please go ahead.
Analyst: Hey. Good morning. This is, Tyler on for Matt Breese.
Dennis G. Shaffer: Hi there.
Charles A. Parcher: Hi, Tyler.
Analyst: Hey. Could you just update us on the percentage of the loan portfolio that is pure floating rate today? And then maybe if you have a dollar amount on how much of the portfolio is scheduled to reprice throughout 2026 and 2027?
Dennis G. Shaffer: We have about $900 million or so that is purely floating. You know, $900 million. Richard is looking for the exact numbers today. Fast as can. But I think we have $900 million maybe a maybe a close to $1 billion. It just is 30 days or less. Yeah.
Richard J. Dutton: So 880 million reprices in the next 30 days. Now that is not all floating daily, but most of that is Yeah. And like Dennis said, right at a billion, will reprice in the next 6 months. And then another $140 million in the next year. So, again, that is about 50% of the portfolio that will reprice in the next 12 months.
Dennis G. Shaffer: Yeah. that is the commercial floor. Portfolio. And everything we put on the books is generally most of it is 5 years or less. For the most part, even if we are portfolio or a residential loan. it is you know, it would be 5 years or less.
Analyst: Okay. Great. that is helpful. And then just headed back to funding, I think the brokered runoff has been about 20 or $25 to $30 million a quarter. Is that how you are thinking about it going forward?
Ian Whinnem: Yes. We are planning on reducing brokered by $25 million each of the next 2 quarters.
Analyst: Great. And then just lastly, I do not think it is been touched on yet. Could you just give us an update on M&A and maybe how discussions have transitioned from last quarter to this 1?
Dennis G. Shaffer: Yes. Still very quiet in Ohio and Indiana. On the M&A front as far as some of our targets. And, you know, continue to maintain very good relations with them, continue to reach out just to, you know, some of our, you know, targets and people that we think would make good partners But very, very quiet right now on the M&A front. So again, we you know, think that is a you know, could potentially, if the numbers work out, would be a good way to deploy some of the excess capital. But, right now, know, we have only been focused on organically growing the bank. And that is what we have kind of stated when we raised the capital We wanted to, kind of, include you know, organically grow the bank, really drive our EPS up, and the tangible book value. And I think in my earlier comments, you have seen that we have been successful in growing both of those things. So you know, we will just continue to evaluate how we deploy capital as we move forward. Great. And then Dennis, I would be remiss if I did not echo the congratulations on the career step. Wish you the best of luck, and that will be it for me. Yeah. Yeah. Thank you.
Operator: Next question comes from Timothy Switzer of KBW. Please go ahead.
Timothy Switzer: Hi, everyone. This is Timothy Switzer stepping in for Timothy Switzer today. Thank you for taking my question.
Dennis G. Shaffer: Hi, Timothy.
Ian Whinnem: Hi, Timothy.
Timothy Switzer: My question is related to credit. Credit came in really solid this quarter. But are there any larger commercial credits that maybe you are keeping an eye on currently? Or any areas that you guys wanna pull back at all or any areas or levels of concern?
Analyst: This is Mike. There certainly are any areas that we are really pulling back from. there is some areas that we have some higher underwriting standards for if we are gonna do them, but we have not do not have any lending types that we have said no to that we are not just not gonna do any And we have we have a few credits that we are working through, but the appropriately reserved for And so we are managing those and working through. Yeah.
Dennis G. Shaffer: And the nice part is, Timothy, we do not see any really systemic issues in the in the book at all. And, Timothy, we have no nondepository financial institution financing. We have, you know, very little office that we mentioned in the earlier comments. So those are areas although that we do not really say we are not going, we do not have any, really much or any exposure in some of those areas.
Timothy Switzer: Great. Great to hear. And then just on your commentary regarding strong pipelines, are there any particular geographies or category have been looking stronger than others at the moment?
Charles A. Parcher: It is. it is really well spread out through all our regions. So I would say, no, we do not have any anything that sticks out from 1 major geographic location.
Dennis G. Shaffer: I mean, Ohio economy and, you know, Southeastern Indiana, which is just right across the river, in South Western Ohio, it will remain strong, very, very strong. We are adding jobs and I think that is fueling some of that demand. The whole state is really there are companies moving into Ohio and creating employment and I think that is helping, you know, drive some of that loan demand.
Timothy Switzer: that is great. And then just 1 more for me. You touched on some investments you are making on the technology front. Are you making any investments in AI, or have you kind of realized any use cases or efficiencies related to that?
Ian Whinnem: Yeah. This is Ian. I would say that we are we have made minor investments into AI. We are doing more of a human in the loop, colleague based approach to AI. Looking at it from a data standpoint, using it from a prospecting standpoint, no real efficiencies gained at this time. In addition to the AI, we have some robotics process automation that we are seeing some good results on. But really, we think of it as building some bandwidth that allows us to grow without having to hire additional people as the company grows. Understood.
Timothy Switzer: Thank you so much, and congrats, Dennis. As well.
Dennis G. Shaffer: Thank you, Timothy.
Operator: As a reminder, if you wish to ask a question, please press 1. There are no further questions at this time. I will now I will now turn the call over to Mr. Shaffer. Please continue.
Dennis G. Shaffer: Thank you. Well, in closing, I just want to thank everyone for your investment in Civista and for joining today's call. This quarter's results were due in large part to the continued hard work and discipline of our team and our employees. I am pleased with this quarter's accomplishments, our strong financial results, and just the disciplined approach we take to managing Civista And I remain confident that we are well positioned for future long term success. And I just look forward to listening in a few months as Chuck and the team share next quarter's results. So thank you for your time today.
Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
