Thank you for watching. and many more. Thank you for watching. Thank you. . . . Thank you for watching. Good afternoon, ladies and gentlemen, and welcome to the Sevista Bancshares, Inc. 3rd Quarter 2026 Earnings Call. If at any time during this call you require immediate assistance, please press star 0 for the operator. 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 Sevista Bancshares, Inc. 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 statements. These factors are discussed in the company's SEC filings, which 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-gov measures which are intended to supplement but not substitute The most directly comparable gap measures. The press release, also available on the company's website, contains the financial and other quantitative information to be discussed today, as well as the reconciliation of the gap to non-gap measures. The call will be recorded and made available on Sylvester Bancshares' website at www.civb.com. At the conclusion of Mr. Parcher's remarks, he and the Savista management team will take any questions you may have. Now, I will turn the call over to Mr. Parcher. Thank you. Please go ahead.

Good afternoon. This is Chuck Parcher, President and CEO of Savista Bancshares. I would like to thank you for joining us for our third quarter 2026 earnings call. I am joined today by Rich 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 third quarter of $16 million, or 77 cents per diluted share, which represents a $3.3 million, or 26% increase over our third quarter in 2025, and a $1.7 million, or 12% increase over our linked quarter. This also represents an increase in pre-provisioned net revenue of $5.3 million, or 33% over our third quarter in 2025, and a $2.2 million, or 11% increase over our linked quarter. Net interest income for the quarter totaled $39.4 million, which is 2% higher than the linked quarter. As a result, our net interest margin expanded by four basis points over our linked quarter to 3.93%, and by 35 basis points over the prior year's first nine months. Our funding costs for the quarter increased by three basis points to 1.97%, which is 30 basis points lower than the previous year's third quarter as we continue our disciplined approach to managing how we fund our balance sheet. A big part of our funding story during the quarter was our ability to grow non-interest-bearing deposits by $30.3 million and savings and money market accounts by $15.8 million. as we were able to attract new and additional deposits primarily from our business and municipal customers. Our cost of core deposits was 1.61%, excluding brokered funding, which is just a two basis point increase compared to our linked quarter, as we were able to replace our recent trend of CD growth with growth in lower cost deposit accounts. This success in attracting core funding allowed us to again reduce our reliance on brokered funding, During the quarter, we replaced 150 million of brokered CDs during a weighted average rate of 3.89%, with 125 million of brokered CDs maturing over the next nine months with an average rate of 4.08%. During the past nine quarters, we have reduced our brokered funding by $223 million, or 41%. Another big part of our story is the return of solid organic loan growth. Despite the continued headwinds of $47 million in early payoffs during the quarter, our loan balances grew by $38 million, or at an annual growth rate of 4.7%. Our lending and leasing teams generated $343 million in new organic production during the quarter that was partially offset by those early payoffs in addition to normal principal paydowns. Our ROA and ROE for the quarter were 1.48% and 11.21% respectively. This continued strong financial performance and our ability to consistently create capital continues to provide options as we evaluate the most optimal ways to put our capital to use. One of those options is repurchasing shares when we feel the opportunity warrants, as it did during the quarter. During the quarter, we repurchased 82,075 shares of Treasury stock at an average price of $26.96. and ended the quarter with a healthy, tangible common equity ratio of 9.88% compared to 9.54% at December 31st, 2025. Earlier this week, we announced a quarterly dividend of 18 cents per share, which is consistent with our prior quarter. Based on our September 30 closing share price of $26.38, this represents a 2.73% yield and a dividend payout ratio of 24.75%. During the quarter, non-interest income increased $644,000, or 7%, over the linked quarter and was consistent with the third quarter of 2025. Controlling expenses is another area of focus and is evidenced by slight declines when comparing non-interest expense to both our linked quarter, which declined $675,000, or 2.4% in our prior year's quarter, which declined $349,000 or 1.2%. While there was some noise from non-recurring costs associated with our acquisition of Farmer Savings Bank and our leasing division's core conversion in the prior year, there were no other significant changes in our non-interest expense categories. Our efficiency ratio for the quarter improved to 55.3% compared to 58.2% for the linked quarter and 61.4% for the prior year's third quarter. Our effective tax rate was 19.1% for the quarter and 17.6% year-to-date. Turning our focus to the balance sheet, for the quarter, total loans and leases grew by $38 million for an annualized rate of 4.7%. Loan demand remained solid across our footprint. While early payoffs seemed to subside, we experienced over 47 million of payoffs during the quarter. These early payoffs were primarily the result of businesses and properties being sold and real estate projects leasing up and moving on to the CMBS permanent market. While we view these payoffs as good due to their successful nature, they continue to present headwinds to growing our loan totals. While loans were steady in nearly every category, we did experience a $25 million increase in our residential loan portfolio and a $15 million increase in our real estate construction. The loans we originate for our portfolio continue to be virtually all adjustable rate, and our leases primarily all have maturities of five years or less. Additionally, our undrawn construction lines were $268 million at September 30, which compares favorably to $250 million at June 30, $208 million at March 31, and $195 million at December 31. This trend coupled with additions to our lending team and the solid economic performance of Ohio and the greater Midwest give us confidence that we will continue with mid-single-digit growth as we finish out 2026 and move into 2027. During the quarter, new and renewed commercial loans originated at an average rate of 6.87%, residential real estate loans originated at 6.45%, and loans and leases originated by our leasing division were at an average rate of 9.75%. With the rapid increase in interest rates during the second quarter of September, we anticipate that these rates will continue increasing during the fourth quarter. On the funding side, total deposits grew by $19 million, which is meaningful given that we were able to further reduce our dependence on broker deposits by $25 million during the quarter. As I mentioned, this growth was a result of a $30 million increase in non-interest-bearing accounts and a nearly $16 million increase in savings and money market accounts. This represents a $44 million increase in core deposit funding during the quarter as we continue to focus on core deposit generating initiatives. And while a quarter does not imply a trend, migration from non-interest-bearing and interest-bearing demand accounts into higher rate time deposits subsided during the quarter with our time deposit balances remaining unchanged during the quarter. The result, our total funding costs increased by only three basis points during the quarter as we continue to focus on attracting lower cost core deposits from our retail customers and operating accounts from our business and municipal customers. Our deposit base continues to be fairly granular with our average deposit account excluding CDs of approximately $29,000. At quarter end, Our loan-to-deposit ratio was 94.7%, which is consistent with our linked quarter. Other than $544 million of public funds with various municipalities across our footprint, we had no deposit concentrations at September 30th. We believe our low-cost deposit franchise is one of Savista'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 $640 million, which represented 15% of our balance sheet, and when combined with our cash balances, represents 20% of our total deposits. Our securities are classified as available for sale and had $59.9 million, or 9.3% of unrealized losses associated. A few of the more significant non-recurring items during the quarter included the receipt of a $1.8 million of net insurance proceeds related to last December's ranch fire, which was reported as other income. Separately, we sold approximately $8 million of fixed-rate securities yielding 1.3%, recognizing a $1.6 million loss and purchased approximately $6.6 million of floating rate securities, currently yielding 4.6%. This is an example of the kind of opportunistic improvement in our securities portfolio that we think makes sense for Svinta and our shareholders. As I mentioned, we purchased 82,075 shares of Treasury stock during the quarter at an average price of $26.96. We continue to believe our stock is of value and will continue to evaluate repurchase opportunities. The business earnings continue to create capital, and our overall goal remains to maintain adequate capital to support organic growth and prudent investment into our company. We will continue to focus on earnings and will balance the payments of dividends and any repurchases with building capital to support our growth. During the quarter, we made an $823,000 provision to our allowance for credit losses and a $472,000 provision for unfunded commitments. and had net charge-offs of $139,000. Our ratio of the allowance for credit loss total loans is 1.29% at September 30, 2026, which is consistent with the 1.28% at December 31, 2025. Our ratio of allowance to nonperforming loans of almost 153.3% improved when compared to the same period. This was largely the result of charging off a relationship that had been in work out for some time and had been fully reserved during 2025. Other than general concern over the impact of macroeconomic uncertainties, the economy across Ohio and southeastern Indiana is showing no signs of deterioration. Overall, I would characterize our credit metrics as well-managed and continuing to normalize. In summary, this was another solid CIVISTA quarter. We are pleased with the increase in our pre-provisioned net revenue, which was the result of continued expansion in our net interest margin, our ability to generate non-interest income from diversified revenue streams, and our continued control of non-interest expense. Our growth in core funding allowed us to further reduce our reliance on broker 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 as we end 2026 and beyond. The first three quarters of 2026 have set us up for what should be another good year. I don't know what I could have asked for for a better start to my tenure as President and CEO. Savista will continue taking care of our customers, supporting our communities, investing in our people, and creating value for our shareholders. Thank you for your attention this afternoon and your investment, and now we will be happy to address any questions you may have.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the one on your telephone keypad. You will hear a prompt that your hand has been raised. And should you wish to cancel your request, please press star followed by the two. If you're using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Thank you. And your first question comes from the line of Brandon Nosal from HovDev Group. Please go ahead.

Hey, good afternoon, folks. Thanks for taking the questions. Hey, Brandon. Hi, Brandon.

Maybe just starting off on fee income here, I think you folks restated some of your fee lines. And if I were to guess, you took the lease gain on sale income out of the gain on sale line and put it into the lease revenue. Is that the right way to interpret that change broadly?

Yeah, we separated out the gain on sale into both the mortgage and the leasing lines.

Okay, perfect. And then just kind of about a related follow-up, you know, nice strong fee income result this quarter at almost $9.4 million. Any thoughts on kind of the major drivers for fee income as we kind of move through the next few quarters?

Yeah, I think for the most part, you know, the fourth quarter will end up being a little bit stronger for interchange income just because of holiday spending. Interest rates can be a big driver on the mortgage side. The leasing side really had a strong third quarter, as well as we're anticipating a strong fourth quarter from them also. Now, from a guidance standpoint, Q3 was strong. We came in a little bit above the guidance that we provided back in July. I think for the fourth quarter, we'd anticipate a nine to nine and a half, the fourth quarter, with that being dependent on just really what interest rates do to the mortgage business.

Yep, yep, that's helpful. I'm going to sneak one more in here. Just pivoting to the expense base, I mean, costs just came in a lot lower than your outlook from last call for the, you know, what was the third and fourth quarter at the time. When we look forward to next quarter, does the cost run rate stay at this $28 million level, or does it revert back to the prior outlook, which I think was $29.6 million to $30 million?

Yeah, it's, you know, the 28 did come in better than expected as a result of good expense management, as well as we ended up with slightly better operating losses than what we anticipated. You know, some of the investments that we talked about back in July for colleagues, some marketing, and some IT spend, those would have occurred late in the third quarter or even early in the fourth quarter, and so what we do anticipate is probably that that expense being in the fourth quarter being closer to the 28.7 to 29.5 range. Got it.

Thanks so much for taking my questions. Thank you. Thanks.

Thank you. And your next question comes from the line of Jeff Orlis from DA Davidson. Please go ahead.

Thanks. Appreciate it. On the noninterest bearing, the strength there really is strong quarter. You outlined kind of both commercial and public funds. I've got to assume maybe some seasonal trends in there, but also just any other detail about attributing that strength in the quarter.

This is Ian again. I think from a deposit standpoint, we do seasonally hit our kind of low point in deposits at the end of second quarter. And so that's primarily kind of a rundown in those public funds. as maybe some consumer spending that occurs around that too. So in that third quarter, we end up with a rebound and additional in the fourth quarter. We did a nice investment over the last year within treasury management colleagues as well as private banking, and that's done a nice contributor into building up those non-interest bearing and non-maturity deposits.

That's great. And I guess kind of roll the deposit strength into the next question on the margin. You've got some pieces there. We're running down the brokered. You talked about the asset repricing tailwinds. Maybe I'd step back. The securities repositioning. Are there any timing of when that occurred in the quarter? And is there a tail of maybe benefit that you didn't fully capture in the third quarter from that piece alone?

Yeah, there is a tail to that. It happened towards the end of the quarter.

Okay. And so, Ian, if I package a lot of these sort of tailwinds into the fourth quarter, sounds like a nice margin uptick late quarter in the third quarter. safe to assume there's still some upward trajectory here?

Yeah, I think that the headwind that we're going to have, or at least for one item, is going to be that subordinated debt that reprices. It moves from a three and a quarter fixed rate on December 1st to a variable rate of three months so far plus 219. And so that's going to cost us on a quarterly basis between five and six basis points is what we're anticipating now in the In the fourth quarter alone, it's only there for one month. So it's really only a two basis point impact for that. So we think that for the fourth quarter, you know, we came in in line with the guidance we had for July. Going forward, we anticipate, you know, probably plus or minus one to two basis points above where we came in for third quarter, including that offset for the subject. And then as with any kind of a rate increase that happens in December, Heading into 2027, probably another one to two basis points improvement there.

Okay. And then, Ian, I guess the full subdebt impact is maybe an offset for the full quarter in the first quarter then? Is that? That's correct.

Yeah, that's the right way to think of that.

Okay.

Okay. And, Jeff, we do feel we have some tailwinds, too, on the repricing of some of our commercial portfolios. Bob can speak to it, but I mean, I think we've got about $270 million over the next 12 months, 930 to 930. They're going to reprice off of a roughly 5% rate into something 250 to 300 over the five-year treasury.

No, that's great. Sounds positive. Thank you. Thank you.

Thank you. And your next question comes from the line of Adam Kroll from Piper Sandler. Please go ahead.

Hey guys, hope you're doing well. Thank you.

Maybe starting out for Ian on funding costs, 50% interest rate and deposit beta, but I'd be curious to hear just sort of expectations for deposit betas. with this hike and potentially additional hikes, just given some of the optimization you've had within your funding base over the past several quarters?

Yeah. From a beta standpoint, we've put into place our playbook, which anticipates both a lag as well as a beta approach. I think 50% is probably about right with a lag associated with that. We have... at some customers that are asking for some exceptions or rate increases, but for the most part, we haven't had to move our rack rates. Our best rates are still on the 15 to 36 month at 4% and less than one year at 375 for our CDs.

Got it.

and maybe moving to loan growth on the mid-single-digit loan growth guide. I'd just be curious to hear which segments you kind of expect to drive that over the next several quarters and just how the pipelines are shaking out today.

Yeah, this is Papi Titus. And, you know, I think from a general perspective, we are... There's not really any specific lines. I mean, you know, you have office and, you know, you have some categories that we're definitely more bearish in. But overall, it's really more about the relationship for us. So I'm not sure there's any segments that we truly shy away from, per se. As far as the pipelines, the pipelines are actually quite strong. Feel really good about where we're at there, including the residential pipeline, which, you know, we expect some headwinds with increased rates. So, so far, so good from that perspective.

We do feel good about it. We do feel good, Adam, about what we talked about with the amount of unfunded construction loans that are out there right now. You know, it's built back up to $270 million on our balance sheet at quarter end. You know, that's just, that's funds that will go out the door, you know, some through the balance of the year. It'll be winter pretty soon, and the construction will slow down a little bit. It'll give us a nice jump start into the end of the first quarter, second quarter of next year.

Got it.

I appreciate the color there. And maybe just one last one for me, a follow-up on expenses. You know, you've had another quarter of really strong cost controls, but I was just curious how you're thinking about expenses in 27 and if there's any significant investments within tech or talent additions planned within that.

I think that's the plan. You know, we are looking at revenue-generating investments. So whether that be colleagues, marketing, or in technology investments that drive revenue. So some of those do have a little bit of a period where it takes time to get to that break-even point, but we do anticipate the continuation of those investments.

Got it. Thanks for taking my questions.

Thank you. Once again, should you have a question, please press star four, beta one on your telephone keypad. Your next question comes from the line of Timothy Switzer from KBW. Please go ahead.

Hey, good afternoon. Thanks for taking my questions, and Chuck, congrats on the good first quarter. Hey, thanks, Tim. I had a follow-up on the beta question. and many more.

Yeah, as I mentioned earlier, we're seeing good results and not a lot of pressure to raise our RAC rates or even exceptions right now. So we're staying positive with that. But as more rate increases come, whether it be later this year or into next year, might be a little more pressure on that. But we think our playbook is going to work, allowing us to keep that lag going.

Okay, I guess that's kind of a reflection maybe of pretty rational deposits pricing in your markets right now?

Yeah, there's some of that. We still see some irrational offers. There's a lot of fine print on them, and so our sales team is, you know, knowledgeable about that and teaching our customers about the fine print and the value of the relationship that's in this to bring, so that's making them A lot of those customers not necessarily moved for a small change.

I'd love to say there was not any irrational competition out there, but it seems like every market's got one or two.

Okay, yeah, makes sense. And then the last one is, you know, any updated thoughts you guys have on participating in Bank M&A? Just your level of interest generally, and then maybe what criteria you'd be looking for.

Yeah, I don't think really, Tim, our criteria has changed much. You know, obviously, I'm talking to a lot of people, and I think, you know, it'll be interesting to see what the sentiment is kind of coming out the backside of the election, because it seems like some people are starting to at least think about, you know, what the future of their banks are. But, you know, we don't have anything imminent right now, but we're continuing to have dialogue, and if it makes sense to us, You know, we're not going to, unless it was a massively strategic thing, we're not going to get outside of any parameters that would be considered, you know, anything really, you know, longer than three years or very diluted. You know, we really want to protect our shareholders. But if we can do the right deals that are profitable to them with a short payback, you know, we'll consider them.

Okay, great. Thank you. Thanks, Tim.

Thank you. And your next question comes from the line of Tyler Casciatori from Stevens. Please go ahead.

Hey, good morning. This is Tyler on for Matt Brees. How are you doing, Tyler? I'm just starting on loan demands. With the higher rates, are you starting to see any impact on borrower activity or the pipeline? And then just on overall yields, can you talk a little bit about roll-on versus roll-off dynamics?

Yeah, I mean, we really haven't seen a whole lot of full pack so far. And I think we're expecting it. But so far, the pipelines continue to increase. And, you know, we feel good about right now where things are going. So, again, I remain bullish in that single-digit growth. That's very achievable.

And I think, Tyler, if we get, you know, much more increase, I think some of the deals will become bigger. You're going to have to see some pullback, or you're going to have to see more equity in the deals. I mean, a couple of deals we've seen already that got a little tight, they've agreed to put more equity in to make the deals work. But obviously, you know, depending on where the Fed goes and where the long-term treasury goes, that'll kind of affect that going forward.

Rachel, we'll put one in. Oh, Rachel, I'm sorry. Rachel, we're putting them on. We're in the, you know, mid to high sevens right now on a five-year. You know, trying to hold that 275 type margin and following the market. If anything, we might be coming down on duration a little bit just to remain competitive.

Got it. That's helpful. And then just on the sub-debt, I hear you on the impacts there, but any thoughts on redeeming that when it comes due in December? Or are you prioritizing buybacks and organic growth out of that?

Yeah, this is Ian. You know, we've done our analysis, kind of looked at different scenarios. As of now, there's no plans to redeem the sub-debt nor even do partial payout, pay down of it. We just think of this, you know, even though the capital efficacy is declining on December 1st, it's still a good rate in terms of the borrowing side of it and for the amount of capital that we get from it. So we'll continue to evaluate that, but right now, we think the best use for capital is either to have it there for organic growth or for some of that stock buyback.

Got it. And then, sorry if I missed it, but, you know, how do more hikes affect the margin here?

Yeah, for each rate hike, we would anticipate one to two basis points per quarter, or with each hike, I should say, of expansion, yes.

as we maintain a slightly asset-sensitive position. Thanks. That'll be it for me. Thanks, Alex. Thank you.

Thank you. And there are no further questions at this time. I will now hand the call back to Mr. Parcher for any closing remarks.

In closing, I'd like to thank everyone for joining me today for my first earnings call as the President and CEO and for your investment in Savista. I remain confident that this quarter's list of accomplishments And this does conclude today's call. Thank you for participating. You may all disconnect.