8-K: Civista Bancshares Announces Strategic Acquisition of Farmers Savings Bank and $70 Million Public Share Offering to Fuel Growth

Civista Bancshares, Inc. has announced a definitive merger agreement to acquire The Farmers Savings Bank and concurrently launched an underwritten public offering of common shares to support organic growth and future strategic transactions.

Summary

• Civista Bancshares, Inc. (Civista) entered into an underwriting agreement to issue and sell 3,294,120 common shares in a registered public offering, with a 30-day option for underwriters to purchase an additional 494,118 shares.
• The net proceeds from the offering are expected to be approximately $65.5 million, or $75.5 million if the underwriters' option is fully exercised.
• Civista also entered into an Agreement and Plan of Merger with The Farmers Savings Bank (Farmers), where Farmers will merge into Civista Bank.
• The merger consideration for Farmers shareholders includes $34.925 million in cash and 1,434,491 Civista common shares, totaling an implied aggregate deal value of approximately $70.4 million based on Civista's July 9, 2025 closing price of $24.72.
• The merger consideration is subject to potential adjustment based on Farmers' closing shareholders' equity relative to a $56.0 million equity minimum.
• Preliminary financial estimates for Civista for the quarter ended June 30, 2025, include total consolidated assets of approximately $4.2 billion, net loans of approximately $3.1 billion, and total deposits of approximately $3.2 billion.
• Civista anticipates reporting net income between $10.3 million and $11.1 million, and earnings per diluted common share between $0.67 and $0.72 for Q2 2025.
• Net interest margin for Q2 2025 is anticipated to be between 3.63% and 3.69%.
• Non-performing assets are expected to be approximately $24.0 million at June 30, 2025, a decrease of $7.2 million from $31.2 million at March 31, 2025.
• Net charge-offs are expected to be approximately $1.0 million for Q2 2025, up from $0.6 million for Q1 2025.
• Q2 2025 net income was positively impacted by approximately $0.6 million pre-tax from loan valuation adjustments due to a core system conversion and approximately $0.3 million pre-tax from the release of a reserve related to a system conversion.

Sentiment

Score: 8

Explanation: The document conveys a strong positive sentiment, driven by a strategic acquisition expected to be accretive to earnings and a successful capital raise to support future growth. While there are standard risks and some mixed preliminary financial metrics (e.g., increased charge-offs), the overall narrative emphasizes expansion, financial strength, and positive outlook.

Positives

• The acquisition of Farmers Savings Bank strengthens Civista's presence in Northeast Ohio, adding two branches in Medina and Lorain Counties.
• The merger is expected to add approximately $183 million in low-cost core deposits to Civista's portfolio.
• The acquisition is anticipated to be approximately 10% accretive to Civista's diluted earnings per share once cost savings are fully realized.
• Tangible book value dilution from the transaction is expected to be earned back in approximately three years after closing.
• Post-closing, Civista's capital ratios are projected to continue exceeding well-capitalized regulatory standards.
• Farmers' low loan-to-deposit ratio of 46% provides excess liquidity that Civista plans to deploy for continued growth.
• Preliminary Q2 2025 non-performing assets are expected to decrease by $7.2 million to $24.0 million from $31.2 million at March 31, 2025.
• Net income for Q2 2025 was positively impacted by non-recurring adjustments totaling approximately $0.9 million pre-tax.

Negatives

• Net charge-offs are expected to increase to approximately $1.0 million for Q2 2025, compared to $0.6 million for Q1 2025.
• The public offering of common shares will result in dilution for existing shareholders.
• The merger consideration is subject to potential adjustment based on Farmers' equity, introducing some variability.

Risks

• Risks related to the proposed merger, including the possibility of failure to complete the merger on the terms and timing currently contemplated or at all.
• Risk of not realizing the expected benefits of the merger.
• Integration of Farmers may divert the attention of management teams and cause a loss of momentum in ongoing businesses.
• Risk of unforeseen and underestimated liabilities of Farmers.
• Potential business disruptions or loss of key employees in connection with the merger.
• Adverse developments in the equity markets or overall economy could affect the trading price of Civista's common shares and the ability to complete the proposed follow-on offering on favorable terms or at all.
• Other risks identified in Civista's public filings with the SEC, including those in Item 1A. Risk Factors of Part I of Civista's Annual Report on Form 10-K for the fiscal year ended December 31, 2024, and in Item 1A. Risk Factors of Part II of Civista's Quarterly Report on Form 10-Q for the quarter ended March 31, 2025.

Future Outlook

Civista intends to use the net proceeds from the public offering for general corporate purposes, including supporting organic growth opportunities and future strategic transactions. The acquisition of Farmers Savings Bank is expected to close in the fourth quarter of 2025 and is projected to be approximately 10% accretive to Civista's diluted earnings per share once anticipated cost savings are fully phased-in. Any tangible book value dilution from the transaction is expected to be earned back in approximately three years after closing, with capital ratios continuing to exceed well-capitalized regulatory standards.

Management Comments

• Dennis G. Shaffer, President & CEO of Civista: "We are excited to welcome Farmers Savings Bank into the Civista family. This acquisition not only strengthens our presence in northeast Ohio but also reflects our shared commitment to community banking. By combining our resources and expertise, we're positioned to deliver greater value to our shareholders while continuing to support the individuals, families, and businesses that make Spencer, Wellington and the surrounding communities so special."
• Tom Lee, CEO & President of Farmers Savings Bank: "This partnership with Civista marks an exciting new chapter for Farmers Savings Bank and the communities we serve. Civista shares our deep commitment to personalized service and community values. We are confident this transition will bring expanded opportunities and enhanced resources to our customers while preserving the trusted relationships we've built over the years."

Industry Context

This announcement reflects a continued trend of consolidation within the regional banking sector, particularly in the Midwest, as larger community banks like Civista seek to expand their geographic footprint and deposit base through strategic acquisitions. The focus on acquiring banks with strong, low-cost core deposits and excess liquidity, like Farmers, aligns with broader industry efforts to optimize funding costs and deploy capital efficiently for loan growth in a competitive interest rate environment. The concurrent capital raise indicates a proactive approach to funding both organic expansion and M&A activities, a common strategy for banks aiming to enhance scale and market share.

Comparison to Industry Standards

• The acquisition's expected 10% accretion to diluted earnings per share and a tangible book value earn-back period of approximately three years are generally considered favorable metrics for bank M&A transactions, often aligning with or exceeding typical industry benchmarks for successful integrations.
• Farmers' 46% loan-to-deposit ratio is significantly lower than the industry average for community banks, which typically ranges from 70-85%, indicating substantial excess liquidity that Civista can leverage for loan growth, a key strategic advantage.
• The preliminary Tier 1 leverage ratio of approximately 8.85% for Civista indicates a strong capital position, comfortably above the 'well-capitalized' regulatory standard of 5% for banks, suggesting robust financial health post-transaction.

Management Changes

Corporate Governance

Legal Proceedings

• No new material legal or governmental actions, suits, investigations, inquiries, or proceedings are pending or threatened against Civista or its Subsidiaries, or Farmers, that would reasonably be expected to have a Material Adverse Effect or materially prevent/delay the transactions.

Related Party Transactions

• The directors and other key shareholders of Farmers (Lee Family Trust, Firestone Family Revocable Trust, Ann E. Wolcott, James B. Wolcott II, and Nancy Ann Wolcott Doyle) have entered into voting agreements with Civista to vote their Farmers common shares in favor of the merger.
• Key Shareholders of Farmers have entered into Lock-Up Agreements with Civista, restricting the sale of Civista Common Shares received as merger consideration for a period of 6 months, and then limiting sales to 20,000 shares per 30-day period for an additional 18 months.
• Members of the Lee Family (Thomas W. Lee and the Lee Family Trust) will enter into a Deposit Agreement with Civista Bank, agreeing to retain at least 95% of their aggregate account balances on deposit with Farmers (as of March 7, 2025) with the Surviving Bank for a period of not less than two years following the Effective Time.

Stakeholder Impact

• **Shareholders (Civista):** Potential dilution from the public offering, but expected earnings accretion from the merger. Share price may be influenced by the capital raise and strategic acquisition.
• **Shareholders (Farmers):** Will receive a mix of cash and Civista common shares as merger consideration. Key shareholders are subject to voting and lock-up agreements.
• **Employees (Farmers):** Will become eligible to participate in Civista's benefit plans, with recognition of prior service for eligibility and vesting. Severance benefits are provided for certain employees terminated without cause post-merger. Farmers' SEP Plan will be terminated, with rollover options to Civista's 401(k).
• **Customers (Farmers):** Expected to benefit from expanded opportunities and enhanced resources through the partnership with Civista, while preserving existing trusted relationships.
• **Customers (Civista):** May benefit from an expanded branch network and enhanced commercial lending platform.
• **Regulatory Authorities:** Require various approvals (Federal Reserve, ODFI, SEC, Nasdaq) for the merger and offering to proceed, ensuring compliance and oversight.

Next Steps

• Civista to file a final prospectus supplement relating to the common shares offering.
• Expected closing of the public offering on July 14, 2025.
• Civista to file a Registration Statement on Form S-4, including a proxy statement for Farmers, with the SEC.
• Civista to use commercially reasonable efforts to have the Form S-4 declared effective.
• Farmers to mail or deliver the proxy statement to its shareholders.
• Farmers to convene a shareholders meeting to vote on the approval of the merger agreement.
• Civista to cause the Civista Common Shares to be issued in the merger to be authorized for listing on Nasdaq.
• Obtain all required regulatory approvals from the Federal Reserve and the Ohio Division of Financial Institutions.
• Expected closing of the merger in the fourth quarter of 2025.
• Civista to release its second quarter results on July 24, 2025.
• Farmers to adopt resolutions to amend and terminate The Farmers Savings Bank Simplified Employee Pension Plan (SEP Plan) immediately prior to the Effective Time.
• Civista to permit Farmers SEP Plan participants to roll over account balances to Civista's 401(k) Plan.
• Civista to purchase a Directors and Officers Liability Insurance policy for a period of six years beginning on the Effective Date.
• Civista and Farmers to cooperate to facilitate the integration of their businesses effective as of the Closing Date or a later determined date.

Key Dates

Keywords

Civista Bancshares, CIVB, The Farmers Savings Bank, Merger, Acquisition, Public Offering, Common Shares, Financial Services, Banking, Ohio, Capital Raise, Earnings Per Share Accretion, Deposits, Loans, Non-performing Assets, Net Interest Margin, SEC Filing, Form 8-K