Civista Bancshares, Inc. (CIVB) Earnings Call Transcript & Summary

Good day, and welcome to the Civista Bancshares, Inc. 2021 Annual Meeting of Shareholders. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Jim Miller, Chairman. Please go ahead.

Good morning, everyone, and welcome to our Annual Meeting of the Shareholders of Civista Bancshares. Due to the extraordinary circumstances in which we find ourselves, this meeting is being conducted by telephone. We want to thank you for your cooperation and understanding. And please be aware that the -- all participants using the phone lines will be muted until we come to the question portion of the meeting. And when we go to that portion, each shareholder who wishes to ask a question will be entered into the queue, and we will take those questions in turn. So let's call the meeting to order. Today, we have Dennis Shaffer, CEO and President of Civista Bancshares; Lance Morrison, General Counsel and Corporate Secretary of Civista Bancshares; Amy Grant, who is our Recording Secretary; [ Brian Michell ] from BKD, will be available to respond to questions from shareholders; and Tony Weis from the firm of Vorys, Sater, Seymour and Pease. The Board has appointed American Stock Transfer & Trust Company as inspector of elections. And with us today, we have [ Kimberly Koskowitz ], who is a representative of American Stock Transfer and is participating by telephone as well.

Will the inspector present the affidavit regarding notice of the meeting, please?

I present the affidavit of American Stock Transfer & Trust Company, LLC, showing that the notice of this Annual Meeting of Shareholders was duly mailed, postage prepaid on March 15, 2021, to each shareholder of record on February 19, 2021, and that each was accompanied by a proxy statement, proxy card and the 2020 annual report to shareholders of the company.

Thank you. Pursuant to the company's regulations, the holders of a majority of the outstanding Civista common shares must be present in person or by proxy at this Annual Meeting to constitute a quorum. Can the inspector please tell us whether there is a quorum present?

On February 19, 2021, the record date for this annual meeting, there were 15,882,838 common shares outstanding and eligible to vote at this meeting. There are 13,227,117 shares present in person or by proxy, which is 83.2% of the total shares outstanding and eligible to vote. A quorum is present.

Thank you, Kimberly. Based on this count, a quorum is present and the meeting is lawfully convened. First item I have are the minutes of the April 20, 2020 Annual Meeting of Shareholders.

This is Bill Ritzmann, and I move to dispense with the reading of the minutes.

This is Harry Singer, I second the motion.

All right. I have a motion and a second. All in favor, signify by saying aye. [Voting]

There are 3 matters to be considered and voted upon at this meeting. We will introduce an appropriate resolution with respect to each matter to be acted upon. We will postpone the actual voting on each matter, however, until all the resolutions have been introduced.

As previously indicated, this meeting is taking place by phone and audio webcast. However, if any shareholder has determined to attend in person, we have placed these persons in other rooms here at Water Street, if necessary, in accordance with the social distancing requirements of the Ohio Governor's office. Therefore, they are able to hear the meeting and present themselves as necessary. If any shareholder who is attending in person has not registered on our attendance sheets as you entered the building, or if any proxy holder has not delivered his or her proxy to the inspector of election, will he or she please do so now? For those who are in the adjacent rooms, if you would raise your hand now if you have a proxy to turn in and the proctor in your room will collect it and bring it forth. If your shares are registered in your name or you hold a legal proxy from your brokerage firm and you wish to vote in person, then you must revoke your proxy and complete a ballot at this meeting. If you wish to vote in person by ballot, please raise your hand now to register with the inspector of elections and the proctor in your room again will assist you. We will pass off ballots after all matters have been presented.

Thank you, Lance. The first matter to be considered and voted upon is the election of the nominees of the Board listed in the proxy. As there is no notice of any other nominations as required by Article 3 Section 2 of the regulations, the nominations are closed. May I have a motion to elect the slate nominated?

This is E.G. McLaughlin, I move for the election of the slate nominated by the Board.

Thank you, E.G. May I have a second?

This is Barry Boerger, I second the motion.

Thank you, Barry. Proposal #2, the second matter to be considered and voted upon is a proposal to approve in a nonbinding advisory vote, the compensation of the corporation's named executive officers as disclosed in the proxy statement for this annual meeting. May I have a motion on this proposal?

So moved, Bill Ritzmann.

Thank you, Bill. Do I have a second?

This is Harry Singer, I second the motion.

Thank you, Harry. The third and final matter to be considered and voted upon is a proposal to ratify the appointment of BKD, LLP as the independent public accounting firm of the corporation for the fiscal year ending December 31, 2021. May I have a motion on this proposal?

This is Dennis Murray, so moved.

Thank you, Mr. Murray. May I have a second?

This is Patricia Oliver, I second the motion.

Thank you, Pat.

Ms. Lisa Rhenish, on behalf of the inspector of election, will now pass out a ballot to anyone who has indicated that they wish to vote in person. Only those shareholders who have not voted by proxy or who wish to revoke the previously given proxy and vote in person should request a ballot. Does anyone need a ballot? If so, please mark your ballot and return it to the inspector. When the ballots are collected, the polls will be closed.

Okay. We will proceed with our management presentation while the inspector continues her count of the ballots. At the conclusion of Mr. Shaffer's presentation, we will take shareholder questions. Dennis?

Thanks, Jim. Well, first off, I'd like to start off my comments by thanking all of our employees for their resilience and hard work throughout the pandemic. I'd also like to thank our Board of Directors for their engagement and leadership during the crisis. 2020 was a year unlike any in our lifetime. The COVID-19 virus swept across our great nation and the world, disrupting the lives of all of us. On behalf of all of us at Civista Bank, our condolences go out to all of those that lost loved ones. I thought I would share with you today how we, at Civista, dealt with the pandemic, then briefly share with you some of our financial highlights from last year and then conclude with some thoughts about a few of our projects that we are currently working on and our future. As the virus began to spread last year, we enacted our pandemic and continuity plan in early March. Although we had a plan in place, it certainly didn't cover all that we were about to encounter. Management met on a daily basis to discuss protocols and concerns. Our main priorities were to determine how we continue to operate in a safe environment that protected our employees and customers and how we were going to provide financial assistance to those individuals and businesses within our communities that were facing financial hardships. Prior to state and health officials issuing any restrictions, we purchased software and licenses that, if needed, would allow employees to work remotely from home. At that time, We also increased our data line bandwidth and [ enforced ] our security policies and procedures to ensure that our data would remain secure in a remote environment. As our government officials announced stay-at-home orders and closed nonessential businesses, we asked approximately 70% of employees to work from home, and we split operations for those areas that couldn't work from home. At the onset of the pandemic, to help slow the spread of the virus, we did limit lobby services to by appointment only at all of our locations, and we restricted employee movement between our offices. We operated in this manner for most of 2020. Other actions that we took to minimize service disruptions for our customers were to expand the hours of our customer care center so that representatives are now available 24/7, 365 days a year to assist customers. We enacted Civista Curbside Banking, which provides a limited contact option for clients to conduct a select noncash transactions from the comfort of their vehicles. We also invested in video chat technology that allows individuals to interact with our bankers from the safety of their homes and offices. And we continue to invest in upgrading our digital services such as mobile banking, online banking and digital wallet. These products provide convenient, easy and safe options for our customers to bank with us. To help our customers that have been impacted by COVID-19, the bank rolled out a number of financial assistance programs for those facing financial hardship. These included consumer, mortgage and commercial loan payment deferral programs and the continued funding of businesses through conventional loans and through the SBA Paycheck Protection Program better known as PPP, which is the government stimulus program to aid small businesses. The bank made over 2,300 PPP loans, totaling over $259.1 million. Nearly all of these loans were made to small businesses within our branch footprint. These businesses employed over 36,000 employees. These are just a few of the pandemic-related accomplishments. I'm extremely proud and grateful for all of our employees who worked countless hours and many long days this past year to serve our customers and our communities. Financially, the bank had one of its most successful years on record. We earned net income of $32.2 million and we recorded the highest pretax pre-provision net income of $47.2 million in our 136-year history. Some of our more significant accomplishments in 2020 included an increase of $348.5 million in our loan portfolio, which included $217.3 million of PPP loans that were still on the books at year-end. Removing the effect of the PPP loans, the loan portfolio grew by $131.2 million or 7.7% with growth coming across our entire footprint. We also experienced record loan production from our residential mortgage lenders who generated over $304 million in secondary market loans, which created an additional $5.9 million more income than the previous year. Deposit balances grew by $510.6 million or 30.4%. It is important to note that nearly all of that growth occurred in core deposit accounts with noninterest demand deposits growing $208.3 million. Our bankers continue to work very hard to diversify our income stream. Noninterest income was $28.2 million, an increase of $5.7 million or 25.6%. In addition to the previously mentioned strong residential mortgage production, we had increased earnings in interchange fees, treasury management and wealth management. I might also note that we did waive personal deposit service charges for 2 months during the pandemic, and stay-at-home orders did impact or negatively impacted overdraft fee collection. Other accomplishments in 2020 included the launching of several financial literacy programs through our Bank at Work program and through our website with the creation of the Civista Learning Vault. The Learning Vault offers quick and easy online modules to help customers build their financial knowledge so that they can make more informed financial decisions. We created our first Diversity, Equity and Inclusion Council consisting of employees from all departments throughout the bank. We, as a company, are committed to providing a welcoming equitable environment, and the council will help us ensure that all voices are heard, valued and embraced. By listening and respecting different perspectives, we will all gain a better understanding of one another and who we are as a company. We also relocated and opened a new full-service branch office in Willard, Ohio. This new location is more centrally located in the heart of the community and is much more accessible to our customers. Finally, as we move through 2021 and beyond, we are and we will continue to invest in technology to make the organization more efficient, to make it easier to do business with us and to enhance the overall customer experience. Several notable projects are currently underway, including a digital banking project that is the single largest technology upgrade in the history of the company. This project will enhance and improve most of our digital and electronic banking products and services, including mobile banking, online banking, bill pay and treasury management services. We will have the ability to open deposit accounts online and streamline our in-branch new account opening process. Also underway is a customer communication project that will improve the format, design and content of customer statements, invoices and notices. We just recently completed the update of our residential mortgage loan statements and work has started on consumer and commercial deposit and loan statements. The new statements provide more information, and the design and format is easier to read. We're also working on a process to improve our commercial lending workflow from origination through the loan documentation and closing stages. This will eliminate duplication within the system to make us more efficient. Civista will continue to invest in the communities that we serve. Each year, we donate significant dollars to our local schools and civic and nonprofit organizations. Our employees donate their time serving in leadership roles as active volunteers at hundreds of organizations within our footprint. We take tremendous pride in being a community leader, and we'll continue to do what we can do to make our communities a great place to live and work. Our goal here at Civista Bank is to remain independent and continue to grow our organization. Growth has helped us have record profits over the last several years, which has allowed us to increase our dividend payout to shareholders to provide more opportunities to our employees and to invest more into our communities. We believe that we have the infrastructure in place to support a bigger company and that more earning assets supported by this infrastructure should result in better earnings and more profitability. More size should also lead to more scalability and allow us to invest some of the increased earnings back into the company to continue to build out our fee-based business lines. These services help to diversify our revenue stream. Growth also provides us with larger lending limits and allows us to expand our relationships with some of our most creditworthy larger clients. I'm extremely confident that through our disciplined approach to managing Civista and our long-term focus on driving shareholder value that we will continue to produce positive results. I'll now turn it back over to the operator to begin the question-and-answer session and we'll be glad to answer any questions that you may have.

Also, this is Lance Morrison, I wanted to note that the polls are closed.

[Operator Instructions] I'm showing no further questions, this concludes our question-and-answer session. I would like to turn the conference back over to Jim Miller.

Kimberly, may I have the election results for the election of Directors?

Yes. I have inspected the signed proxies and ballots, and the 10 nominees have received the greatest number of the votes cast for election.

Then I declare that each of the nominees has been duly elected and qualified as a Director for the coming year. May I have the voting results on the issue of executive compensation?

I have inspected the signed proxies and ballots, and I can report that a majority of the votes cast have been cast in favor of the nonbinding advisory resolution to approve the compensation of the corporation's named executive officers as disclosed in the proxy statement.

The proposal regarding the executive compensation has passed. May I have the voting results on the approval of the independent accounting firm?

I have inspected the signed proxies and ballots, and I can report that a majority of the votes cast have been cast in favor of approval of the public accounting firm.

The proposal to approve BKD, LLP as the corporation's independent public accounting firm for 2021 has passed. Are there any comments from shareholders? Okay. There are no other matters to properly come before this annual meeting. So may I have a motion to adjourn?

This is Bill Ritzmann, I move to adjourn.

Thank you, Bill.

This is Harry Singer, I second the motion.

Thank you, Harry. The meeting is adjourned. Thank you all for attending.

This conference has now concluded. Thank you for attending today's presentation. You may now disconnect.