425: Civista Bancshares to Acquire Farmers Savings Bank, Launches $70 Million Public Offering

Civista Bancshares, Inc. announced a definitive merger agreement to acquire The Farmers Savings Bank, which will expand its Northeast Ohio presence, alongside the pricing of a $70 million underwritten public offering of common shares to support growth and strategic transactions.

Summary

• Civista Bancshares, Inc. (Civista) and Civista Bank entered into an underwriting agreement to issue and sell 3,294,120 common shares in a registered public offering, with underwriters having a 30-day option to purchase an additional 494,118 common 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, intended for general corporate purposes, including organic growth and future strategic transactions.
• Civista and Civista Bank also signed a definitive merger agreement with The Farmers Savings Bank (Farmers) on July 10, 2025, under which Farmers will merge into Civista Bank.
• The merger consideration for Farmers shareholders totals $34.925 million in cash and 1,434,491 Civista common shares, implying an 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, with an equity minimum of $56.0 million.
• The acquisition is expected to close in the fourth quarter of 2025, contingent on Farmers' shareholder approval and all required regulatory approvals.
• The acquisition is projected to be approximately 10% accretive to Civista's diluted earnings per share once anticipated cost savings are fully phased-in, with tangible book value dilution expected to be earned back in approximately three years.
• Civista's preliminary financial projections for the second 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 for Q2 2025, with earnings per diluted common share between $0.67 and $0.72, and a net interest margin 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, while net charge-offs are expected to be approximately $1.0 million for Q2 2025, up from $0.6 million in Q1 2025.
• Q2 2025 net income was positively impacted by non-recurring adjustments totaling approximately $0.9 million pre-tax, stemming from loan valuation adjustments and a reserve release related to a core system conversion.

Sentiment

Score: 8

Explanation: The document presents a strong strategic move through the acquisition of Farmers Savings Bank, which is expected to be accretive to EPS and have a reasonable tangible book value earn-back period. The concurrent capital raise provides ample funding for growth initiatives. Preliminary Q2 2025 financial projections show a decrease in non-performing assets, although net charge-offs increased slightly. The overall outlook is positive, emphasizing growth, synergy, and strong capital management.

Positives

• The strategic acquisition of The Farmers Savings Bank strengthens Civista's presence in Northeast Ohio, adding two branches in Medina and Lorain Counties.
• Farmers contributes approximately $183 million in low-cost core deposits, enhancing Civista's funding base.
• Farmers' low loan-to-deposit ratio of 46% provides significant excess liquidity that Civista can deploy to drive continued loan growth and optimize asset utilization.
• The acquisition is expected to be approximately 10% accretive to Civista's diluted earnings per share once anticipated cost savings are fully realized.
• The tangible book value dilution created by the transaction is expected to be earned back in a relatively short period of approximately three years.
• Civista's capital ratios are projected to remain above well-capitalized regulatory standards post-closing, indicating strong financial health.
• Preliminary Q2 2025 results show a significant decrease in non-performing assets, down $7.2 million to $24.0 million from $31.2 million at March 31, 2025.
• Non-recurring adjustments from a core system conversion and reserve release positively impacted Q2 2025 net income by approximately $0.9 million pre-tax.

Negatives

• Net charge-offs for Q2 2025 are expected to increase to approximately $1.0 million, compared to $0.6 million for Q1 2025.
• The acquisition will result in tangible book value dilution, although it is expected to be earned back within three years.
• Integration of Farmers may divert the attention of management teams and potentially cause a loss of momentum in ongoing businesses.
• There is a risk of unforeseen and underestimated liabilities of Farmers that may exist.
• The merger could lead to business disruptions or the loss of key employees.

Risks

• Risks related to the proposed merger, including the possibility that the parties may fail to complete the merger on the terms and timing currently contemplated or at all, and/or fail to realize the expected benefits of the merger.
• The integration of Farmers may divert the attention of the management teams of Civista and Farmers, potentially causing a loss of momentum in their ongoing businesses.
• The risk of unforeseen and underestimated liabilities of Farmers that may exist.
• 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.
• Regulatory approvals from Governmental Entities may not be obtained, or their receipt may be materially delayed, or they may impose restrictions, requirements, or conditions that would have a Material Adverse Effect on Civista or the Surviving Bank.
• The exercise of dissenters' rights by holders of more than 10% of the outstanding Farmers Common Shares could impact the merger.

Future Outlook

Civista intends to use the net proceeds from its public offering for general corporate purposes, including supporting organic growth opportunities and future strategic transactions. The acquisition of The Farmers Savings Bank is expected to close in the fourth quarter of 2025, subject to regulatory and shareholder approvals. This merger is anticipated to be approximately 10% accretive to Civista's diluted earnings per share once cost savings are fully phased-in, with tangible book value dilution expected to be earned back in approximately three years. Post-closing, Civista's capital ratios are projected to continue exceeding well-capitalized regulatory standards. Civista also expects to release its second quarter 2025 financial results on July 24, 2025.

Management Comments

• Dennis G. Shaffer, President & CEO, 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, 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

The acquisition of The Farmers Savings Bank by Civista Bancshares reflects a broader trend of consolidation within the regional banking sector, particularly in the Midwest. This merger allows Civista to expand its geographic footprint in Northeast Ohio, leveraging Farmers' existing branch network and deposit base. The focus on deploying Farmers' substantial excess liquidity (indicated by its low 46% loan-to-deposit ratio) for growth aligns with strategies seen in the banking industry to optimize asset utilization and enhance profitability. The concurrent public offering to fund general corporate purposes, including strategic transactions, indicates a proactive approach to capital management to support both organic and inorganic growth initiatives in a competitive and evolving financial services landscape.

Comparison to Industry Standards

• The projected 10% accretion to diluted earnings per share from the acquisition is a strong indicator of value creation, generally considered favorable for bank mergers and often exceeding typical accretion targets in the industry.
• The expected tangible book value earn-back period of approximately three years is efficient and falls within or is better than the typical 3-5 year range for bank acquisitions, suggesting a well-structured deal with manageable dilution.
• Farmers' 46% loan-to-deposit ratio is significantly lower than the industry average for community banks, which often ranges from 70-80%, highlighting a substantial pool of deployable liquidity that Civista can leverage for loan growth, a key driver of profitability in banking.
• The commitment to maintain capital ratios above 'well-capitalized regulatory standards' post-closing is a critical benchmark for financial institutions, demonstrating adherence to regulatory requirements and financial stability, comparable to best practices in the banking sector.

Corporate Governance

Legal Proceedings

• No legal, administrative, arbitral, or other proceedings, claims, actions, suits, or investigations of any nature are pending or, to Farmers' knowledge, threatened against or affecting Farmers or its current or former directors or executive officers that would have a Material Adverse Effect on Farmers or prevent/delay the merger.
• Farmers is not party to or otherwise subject to any cease-and-desist or other order or enforcement action, written agreement, consent agreement, memorandum of understanding, commitment letter, or similar undertaking, or any order or directive with or from any Governmental Entity that restricts its business or relates to capital adequacy, dividends, credit policies, or management, other than those of general application.
• No legal, administrative, arbitral, or other proceedings, claims, actions, suits, or investigations of any nature are pending or, to Civista's knowledge, threatened against or affecting Civista or its Subsidiaries or current or former directors or executive officers that would have a Material Adverse Effect on Civista or prevent/delay the merger.
• No injunction, order, award, judgment, settlement, decree, Regulatory Agreement, or other regulatory restriction (other than those of general application) is imposed upon Civista or any of its Subsidiaries that would reasonably be expected to have a Material Adverse Effect on Civista.

Related Party Transactions

• No outstanding amounts payable to or receivable from, or advances by Farmers to, and Farmers is not otherwise a creditor or debtor to, any shareholder owning five percent (5%) or more of the outstanding Farmers Common Shares or any director, employee, or affiliate of Farmers, other than as part of the normal and customary terms of such persons' employment or service as a director with Farmers.
• Farmers is not a party to any transaction or agreement with any of its respective affiliates, shareholders owning five percent (5%) or more of the outstanding Farmers Common Shares, directors, or executive officers, or any material transaction or agreement with any employee other than executive officers, except as specifically disclosed in Section 3.27 of the Farmers Disclosure Schedule.
• All agreements between Farmers and any of its affiliates comply, to the extent applicable, with Regulation W promulgated under the Federal Reserve Act.
• The Lee Family (Thomas W. Lee and the Lee Family Trust), identified as key shareholders, will enter into a Deposit Agreement with Civista Bank 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):** Expected to benefit from approximately 10% EPS accretion post-merger and a relatively quick tangible book value earn-back period of three years. The public offering provides capital for future growth and strategic transactions, potentially enhancing long-term shareholder value.
• **Shareholders (Farmers):** Will receive a combination of cash and Civista common shares as merger consideration. Key shareholders have committed to voting in favor of the merger and are subject to lock-up agreements on the Civista shares received, aligning their interests with the combined entity's stability.
• **Employees (Farmers):** Will be eligible to participate in Civista's benefit plans, with prior service recognized for eligibility and vesting. Employees whose positions are eliminated or who are not offered comparable employment within six months post-merger will receive severance benefits, providing a safety net during the transition.
• **Customers (Farmers):** Expected to gain access to expanded opportunities and enhanced resources from the larger combined banking entity, while the intent is to preserve existing trusted relationships and ensure a smooth transition of deposit accounts.
• **Management (Civista & Farmers):** The integration process may divert management attention, posing a potential challenge to maintaining momentum in ongoing businesses, but the strategic rationale aims for long-term benefits.
• **Regulatory Authorities:** The merger requires approvals from the Federal Reserve and the Ohio Division of Financial Institutions, ensuring regulatory oversight and compliance throughout the transaction.

Next Steps

• Civista will prepare and file a prospectus supplement pursuant to Rule 424(b) under the 1933 Act.
• The public offering of common shares is expected to close on July 14, 2025.
• Civista expects to release its second quarter results on July 24, 2025.
• Civista will host an investor conference call and webcast on July 11, 2025, at 2:00 PM ET, to discuss the merger and offering.
• Civista will file a Registration Statement on Form S-4 (including a proxy statement of Farmers and a prospectus of Civista) with the SEC for the proposed merger.
• Farmers will mail the proxy statement to its shareholders after the Form S-4 is declared effective by the SEC.
• Farmers will convene a meeting of its shareholders to consider and vote upon the approval of the merger agreement.
• Civista will work to obtain all necessary state securities Law or Blue Sky permits and approvals required for the transactions.
• The merger is expected to close in the fourth quarter of 2025, subject to required regulatory and shareholder approvals.
• Farmers will adopt resolutions and take action to amend and terminate The Farmers Savings Bank Simplified Employee Pension Plan (SEP Plan) immediately prior to the Effective Time.
• Civista will purchase a Directors and Officers Liability Insurance (D&O Policy) to be effective for a period of six years beginning on the Effective Date.
• The Lee Family will enter into a Deposit Agreement with Civista Bank to retain at least 95% of their aggregate account balances on deposit with Farmers with the Surviving Bank for a period of not less than two years following the Effective Time.
• Key Shareholders of Farmers will adhere to lock-up agreements, restricting the sale of Civista Common Shares received as merger consideration for six months, and then limiting sales to no more than 20,000 shares in any 30-day period for an additional eighteen months.

Key Dates

Recommendation

Keywords

Civista Bancshares, CIVB, The Farmers Savings Bank, Merger, Acquisition, Public Offering, Common Shares, Banking, Financial Services, Ohio, Capital Raise, Earnings Per Share, Tangible Book Value, Deposits, Loans, Non-Performing Assets, Net Interest Margin, Underwriting Agreement, Corporate Governance, Risk Management