CIVISTA BANCSHARES, INC. (CIVB) stock intrinsic value fair value estimate & owner earnings analysis

Civista Bancshares owns Civista Bank, a community bank founded in 1884 in Sandusky, Ohio, with 44 locations across northern and central Ohio, southeastern Indiana and northern Kentucky. It takes local deposits and lends them out as commercial real estate, residential mortgage, commercial, agricultural and consumer loans. It also runs an equipment-leasing business, Civista Leasing and Finance, bought as Vision Financial Group in 2022, and that business is shrinking. At June 30, 2026 the bank had about $4.3 billion of assets and $3.46 billion of deposits. Net loans were $3.23 billion at the end of 2025. The bank has grown partly by acquiring smaller neighbours: United Community Bancorp in 2018, Comunibanc in 2022 and The Farmers Savings Bank in November 2025. Farmers Savings added $268 million of assets, $106 million of loans, $236 million of deposits and two branches in Medina and Lorain counties. How we measure earnings. For a bank, deposits and other borrowings are the raw material of the business, so we value the cash left for shareholders after all interest is paid and do not subtract that debt again. We start with net income. We add back the part of the loan-loss provision that went beyond loans actually written off, depreciation of branches and equipment, and amortization of acquired deposit relationships. We then subtract stock compensation and the spending needed to maintain premises. Depreciation on equipment the leasing business rents out is not added back, because it is a real cost of earning that rent and the equipment is not being replaced. On this basis, owner earnings per share were $2.68 in 2020, $2.77 in 2021, $2.56 in 2022, $3.14 in 2023, $2.20 in 2024 (when deposit costs squeezed margins) and $2.86 in 2025. A tax-refund processing contract that paid $2.375 million a year ended after 2023, so we remove it from the earlier years. That leaves a 2020 to 2025 median of about $2.60 per share, and that is our starting level. The six-year window starts after the 2018 acquisition was absorbed and covers both the near-zero rates of 2020 and 2021 and the funding squeeze of 2023 and 2024. Earlier years describe a much smaller bank. The share count rose by about a third in 2025. The bank sold 3.79 million shares at $21.25 in July 2025 for net proceeds of about $75.7 million, which first went to pay down short-term Federal Home Loan Bank advances, and it issued 1.43 million shares for Farmers Savings Bank. Diluted shares are now about 20.75 million. Per-share earnings have held up on the larger count: diluted earnings per share were $1.41 in the first half of 2026, against $1.37 a year earlier. We value the business on today's share count. Tangible equity at June 30, 2026 was about $425 million, or about $20.47 a share. Debt. The holding company owes $75 million of subordinated notes. They have paid a fixed 3.25% since 2021, and from December 1, 2026 they reset quarterly to three-month SOFR plus 2.19%. On today's rates that adds roughly $2 million a year of pre-tax interest, about $0.08 a share, and every case carries that cost. The notes can be redeemed from that date. Including trust preferred securities, subordinated debt totals about $104 million. All of this interest is already deducted from the earnings we value, so no debt is subtracted a second time. The value of each case below is the value to shareholders after the lenders are paid. Growth-path check. Owner earnings per share grew 30% in 2025, from $2.20 to $2.86, as funding costs eased. We do not extend that rate. Year one of the base case is $2.70, which is below the 2025 result and below our estimate of the first-half 2026 pace, roughly $2.90. It is 4% above the $2.60 median, because a full year of Farmers Savings Bank earnings is already showing in the 2026 results, and it is held down by the note reset. Base case: $49.21 per share. Earnings start at $2.70 and grow 2.5% a year for ten years, to about $3.37. That is slower than the bank's own loan growth, which was $82 million, about 2.7%, in 2025 excluding the acquisition, and well below the roughly 8% a year at which owner earnings per share grew from 2016 to 2025. It is also trimmed for the steady run-off of acquired deposit relationships, whose amortization is added back in the earnings figure. Growth is not free. Each year we hold back the capital a bank must keep against a larger balance sheet, equal to 2.5% of tangible equity, about $0.51 a share in year one, so shareholders receive less cash early on. We credit no future acquisitions: past deals were paid for largely with new shares, and none is announced. After year ten we assume no further growth, only that earnings hold at about $3.37. What sustains them is a local deposit and lending franchise that has operated continuously for more than 140 years, through the 2008 to 2010 and 2020 downturns. About 64% of the base value lies beyond year ten, so the estimate depends heavily on that franchise continuing to work much as it does today. The business is worth $49.21 per share, its borrowings are already paid for in that figure, and equity value is $49.21. Bear case: $31.56 per share. This is a full credit cycle of the kind this bank has actually been through. In 2011, 2012 and 2013, as it worked through the aftermath of the 2008 to 2010 credit crisis, Civista wrote off 1.35%, 1.01% and 0.53% of its loans, against about 0.1% in 2024 and 2025. We apply those same loss rates, less today's normal 0.1%, to a loan book of about $3.27 billion. That is roughly $41 million, $30 million and $14 million of extra pre-tax losses over three years. We also add a one-time rebuild of the loan-loss reserve to 2% of loans, from 1.28% today, costing about $24 million; 2% is below the 2.71% the bank carried at the end of 2011. Owner earnings start from the 2024 squeezed level of $2.20 less the note reset, about $2.12. They fall to about -$0.33 a share in year one, $0.99 in year two and $1.58 in year three. They then recover only to $2.12, with no growth, for good. Cumulative after-tax losses of about $86 million are about a fifth of tangible equity, and pre-provision earnings largely absorb them over the three years, so we assume no new shares are issued. Interest on the holding company's debt, about $6 million a year after the reset, stays covered once the first year is past. The case allows only one cycle in the decade, and commercial real estate is now about half of all loans, so a cycle centred on commercial property could cut deeper. The bear value is above tangible book of about $20.47 a share. That rests on the deposit franchise, which stayed profitable for common shareholders in every year of the 2011 to 2013 loss period. It also rests on the case's assumption that earnings recover to the squeezed 2024 level and not below it. The business is worth $31.56 per share with its lenders already paid. Bull case: $56.96 per share. The recent run rate holds: year one is $2.82, the first-half 2026 pace less the note reset. Loans and deposits keep growing on their own at 5% a year for ten years, below the roughly 8% a year the bank's per-share owner earnings grew from 2016 to 2025, paid for out of retained earnings at the same capital ratio. After that, earnings hold level at about $4.38. The business is worth $56.96 per share with its lenders already paid. What changed since our previous analysis. The business picture is essentially unchanged from late September; no new financial report has been filed since then. The bear case is now about $3.30 lower because it is built from the bank's own 2011 to 2013 loss record and a reserve rebuild, rather than a flat half-percent loss rate. The base and bull cases are within a few cents of the previous figures. What would make this wrong. The value rests on loan losses staying near the bank's record outside recessions and on the deposit base keeping its cost advantage. A commercial real estate loss cycle deeper than 2011 to 2013, one that forced a share sale at a low price, would break the downside. If earnings simply stayed flat near $2.40 a share with no growth, the shares would be worth about $40. If we are wrong about both the level and the cycle, the shares are worth roughly the bear figure in the low $30s. Things we could not fully reconcile. The filings do not show the leasing business's equipment purchases separately in the cash-flow statement, and figures for that business were restated between the 2024 and 2025 annual reports. We used the latest figures wherever they exist. Margin-of-safety price: $24. We are fairly confident in the earnings level. Six years spanning both near-zero and squeezed rates landed between $2.20 and $3.14 a share, and the first half of 2026 confirms the current pace on the larger share count. We are less sure of credit. Half the loans are commercial real estate, and this bank has written off more than 1% of its loans in a single year before. The worst plausible outcome is a regional recession that hits commercial property values in Ohio while deposit costs rise. The structure would very likely survive it: the bank funds itself with $3.46 billion of local deposits, holding-company debt is only about $104 million, and tangible equity of about $425 million covers the bear case's cumulative losses about five times. But it could stop the dividend and cut the value to the low $30s. The dividend is $0.18 a quarter, $0.72 a year. From $24, if the shares move to the base value over a four-year holding period, the base case implies about 22% a year including dividends. Over three years it implies about 29%, and over five years about 18%. The bear case, at $31.56, implies a modest gain from that price even with the dividend halved. The margin-of-safety price is about $24. At that price a modest delay, or the bear case, still implies a gain, and the base case need only be roughly right within about four years.