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Civista Bancshares picks up core deposits in Cincinnati MSA with United deal

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Civista Bancshares picks up core deposits in Cincinnati MSA with United deal

With its planned acquisition of Indiana-based United Community Bancorp, Civista Bancshares Inc. will gain a strong core deposit franchise to expand its lending capacity and position itself for growth in a new major Ohio market, executives said.

Civista will pick up three branches in rural southeastern Indiana and five in the Cincinnati Metropolitan Statistical Area via the $114.4 million deal announced March 12. President and CEO Dennis Shaffer said United's mix of rural and urban branches will allow Civista to gain low-cost deposits while beefing up its presence near downtown Cincinnati.

The Sandusky, Ohio-based company currently has 27 branches and two loan production offices across 12 Ohio counties, including locations in the Akron, Cleveland, Columbus and Dayton MSAs. The Cincinnati MSA is home to over 2.1 million people, and it is expected to grow 1.9% over the next five years, according to presentation materials.

The combined company will have $2.1 billion in assets, $1.5 billion in loans and $1.7 billion in deposits. Shaffer said 95% of Lawrenceburg, Ind.-based United's $462 million deposit franchise consists of core deposits. Civista expects its pro forma cost of deposits to increase by 5 basis points to 32 basis points, which Shaffer said is "still low averages."

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Shaffer said United's 64% loan-to-deposit ratio will lower Civista's to 87.6% after the merger, giving the company liquidity to fund additional loan growth. Currently, Civista's loan-to-deposit ratio is 96.7%, and its loan portfolio is largely composed of commercial real estate and one- to four-family lending.

The deal is also expected to significantly lower Civista's CRE risk-based capital ratio from 324% to 223%. United has recently expanded its commercial focus and is in the process of building a commercial lending platform in the Cincinnati MSA, which Civista should be able to leverage and supplement with its existing team.

"While we haven't added any pressure from our regulators to reduce our CRE ratio, this transaction provides us additional cushion," Shaffer added. "Secondly, this opportunity will enable us to look at more, and possibly larger, lending opportunities in our existing markets."

Civista anticipates cost savings of 41% of United's noninterest expense base. Civista is not planning to consolidate any branch locations; it is anticipating significant savings related to systems and salaries.