UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
|
|
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: ended - September 30, 20172023
OR
|
|
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 001-36192
Civista Bancshares, Inc.
(Exact name of registrant as specified in its charter)
Ohio | 34-1558688 | |
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) | |
100 East Water Street, Sandusky, Ohio | 44870 | |
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (419) (419) 625-4121
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common | CIVB | NASDAQ Capital Market |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” or ancompany,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (check one):
Large accelerated filer | ☐ | Accelerated filer | ☒ | ||||
Non-accelerated filer | ☐ |
| Smaller reporting company | ☐ | |||
Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. Common Shares, no par value, outstanding at November 3, 2017—10,170,9356, 2023—15,695,997 shares
CIVISTACIVISTA BANCSHARES, INC.
Index
PART I. | 2 | |||||
Item 1. | 2 | |||||
Consolidated Balance Sheets (Unaudited) September 30, |
| |||||
| ||||||
4 | ||||||
5 | ||||||
| ||||||
Notes to Interim Consolidated Financial Statements (Unaudited) |
| |||||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
| ||||
Item 3. | Quantitative and Qualitative Disclosures |
| ||||
Item 4. |
| |||||
PART II. | 56 | |||||
Item 1. |
| |||||
Item 1A. |
| |||||
Item 2. |
| |||||
Item 3. |
| |||||
Item 4. |
| |||||
Item 5. |
| |||||
Item 6. |
| |||||
| ||||||
Part I – FinancialFinancial Information
ITEM 1. Financial Statements
CIVISTA BANCSHARES, INC.
Consolidated Balance Sheets (Unaudited)
(In thousands, except share data)
|
| September 30, 2023 |
|
|
|
| ||||||||||
|
| September 30, 2017 |
|
| December 31, 2016 |
|
| (Unaudited) |
|
| December 31, 2022 |
| ||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Cash and due from financial institutions |
| $ | 33,394 |
|
| $ | 36,695 |
|
| $ | 50,316 |
|
| $ | 43,361 |
|
Securities available for sale |
|
| 229,419 |
|
|
| 195,864 |
| ||||||||
Investments in time deposits |
|
| 1,472 |
|
|
| 1,477 |
| ||||||||
Securities available-for-sale |
|
| 593,487 |
|
|
| 615,402 |
| ||||||||
Equity securities |
|
| 2,021 |
|
|
| 2,190 |
| ||||||||
Loans held for sale |
|
| 4,662 |
|
|
| 2,268 |
|
|
| 1,589 |
|
|
| 683 |
|
Loans, net of allowance of $12,946 and $13,305 |
|
| 1,129,046 |
|
|
| 1,042,201 |
| ||||||||
Loans, net of allowance for credit losses of $35,280 and $28,511 |
|
| 2,719,610 |
|
|
| 2,518,155 |
| ||||||||
Other securities |
|
| 14,247 |
|
|
| 14,055 |
|
|
| 34,224 |
|
|
| 33,585 |
|
Premises and equipment, net |
|
| 17,688 |
|
|
| 17,920 |
|
|
| 58,989 |
|
|
| 64,018 |
|
Accrued interest receivable |
|
| 4,999 |
|
|
| 3,854 |
|
|
| 11,489 |
|
|
| 11,178 |
|
Goodwill |
|
| 27,095 |
|
|
| 27,095 |
|
|
| 125,078 |
|
|
| 125,695 |
|
Other intangibles |
|
| 1,360 |
|
|
| 1,784 |
| ||||||||
Other intangible assets, net |
|
| 9,920 |
|
|
| 10,759 |
| ||||||||
Bank owned life insurance |
|
| 24,981 |
|
|
| 24,552 |
|
|
| 54,053 |
|
|
| 53,543 |
|
Swap assets |
|
| 19,784 |
|
|
| 16,579 |
| ||||||||
Deferred taxes |
|
| 25,112 |
|
|
| 16,009 |
| ||||||||
Other assets |
|
| 9,197 |
|
|
| 10,975 |
|
|
| 25,772 |
|
|
| 25,196 |
|
Total assets |
| $ | 1,496,088 |
|
| $ | 1,377,263 |
|
| $ | 3,732,916 |
|
| $ | 3,537,830 |
|
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Deposits |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Noninterest-bearing |
| $ | 357,539 |
|
| $ | 345,588 |
|
| $ | 802,614 |
|
| $ | 896,333 |
|
Interest-bearing |
|
| 843,750 |
|
|
| 775,515 |
|
|
| 1,993,129 |
|
|
| 1,723,651 |
|
Total deposits |
|
| 1,201,289 |
|
|
| 1,121,103 |
|
|
| 2,795,743 |
|
|
| 2,619,984 |
|
Federal Home Loan Bank advances |
|
| 56,750 |
|
|
| 48,500 |
| ||||||||
Short-term Federal Home Loan Bank advances |
|
| 431,500 |
|
|
| 393,700 |
| ||||||||
Securities sold under agreements to repurchase |
|
| 15,148 |
|
|
| 28,925 |
|
|
| - |
|
|
| 25,143 |
|
Long-term Federal Home Loan Bank advances |
|
| 2,573 |
|
|
| 3,578 |
| ||||||||
Subordinated debentures |
|
| 29,427 |
|
|
| 29,427 |
|
|
| 103,921 |
|
|
| 103,799 |
|
Other borrowings |
|
| 10,964 |
|
|
| 15,516 |
| ||||||||
Swap liabilities |
|
| 19,784 |
|
|
| 16,579 |
| ||||||||
Securities purchased payable |
|
| 1,755 |
|
|
| 1,338 |
| ||||||||
Tax refunds in process |
|
| 493 |
|
|
| 278 |
| ||||||||
Accrued expenses and other liabilities |
|
| 11,493 |
|
|
| 11,692 |
|
|
| 33,438 |
|
|
| 23,080 |
|
Total liabilities |
|
| 1,314,107 |
|
|
| 1,239,647 |
|
|
| 3,400,171 |
|
|
| 3,202,995 |
|
SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Preferred shares, no par value, 200,000 shares authorized, Series B Preferred shares, $1,000 liquidation preference, 18,975 shares issued at September 30, 2017 and 20,481 shares issued at December 31, 2016, net of issuance costs |
|
| 17,557 |
|
|
| 18,950 |
| ||||||||
Common shares, no par value, 20,000,000 shares authorized, 10,918,899 shares issued at September 30, 2017 and 9,091,473 shares issued at December 31, 2016 |
|
| 153,562 |
|
|
| 118,975 |
| ||||||||
Common shares, no par value, 40,000,000 shares authorized, 19,288,674 shares issued |
|
| 310,975 |
|
|
| 310,182 |
| ||||||||
Retained earnings |
|
| 28,494 |
|
|
| 19,263 |
|
|
| 176,644 |
|
|
| 156,492 |
|
Treasury shares, 747,964 common shares at cost |
|
| (17,235 | ) |
|
| (17,235 | ) | ||||||||
Treasury shares, 3,592,677 common shares at September 30, 2023 and 3,502,827 common |
|
| (75,412 | ) |
|
| (73,794 | ) | ||||||||
Accumulated other comprehensive loss |
|
| (397 | ) |
|
| (2,337 | ) |
|
| (79,462 | ) |
|
| (58,045 | ) |
Total shareholders’ equity |
|
| 181,981 |
|
|
| 137,616 |
|
|
| 332,745 |
|
|
| 334,835 |
|
Total liabilities and shareholders’ equity |
| $ | 1,496,088 |
|
| $ | 1,377,263 |
|
| $ | 3,732,916 |
|
| $ | 3,537,830 |
|
See notes to interim unaudited consolidated financial statements
Page 2
Consolidated Statements of Operations (Unaudited)
(In thousands, except per share data)
|
| Three months ended |
|
| Nine Months Ended |
| ||||||||||||||||||||||||||
|
| Three months ended September 30, |
|
| Nine months ended September 30, |
|
| September 30, |
|
| September 30, |
| ||||||||||||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||
Interest and dividend income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Loans, including fees |
| $ | 13,022 |
|
| $ | 11,824 |
|
| $ | 37,211 |
|
| $ | 35,311 |
|
| $ | 39,732 |
|
| $ | 27,176 |
|
| $ | 114,108 |
|
| $ | 70,065 |
|
Taxable securities |
|
| 977 |
|
|
| 872 |
|
|
| 2,764 |
|
|
| 2,494 |
|
|
| 2,999 |
|
|
| 2,936 |
|
|
| 8,817 |
|
|
| 6,431 |
|
Tax-exempt securities |
|
| 812 |
|
|
| 664 |
|
|
| 2,307 |
|
|
| 1,979 |
|
|
| 2,336 |
|
|
| 1,998 |
|
|
| 6,917 |
|
|
| 5,669 |
|
Federal funds sold and other |
|
| 25 |
|
|
| 10 |
|
|
| 473 |
|
|
| 376 |
| ||||||||||||||||
Total interest income |
|
| 14,836 |
|
|
| 13,370 |
|
|
| 42,755 |
|
|
| 40,160 |
| ||||||||||||||||
Deposits in other banks |
|
| 719 |
|
|
| 423 |
|
|
| 818 |
|
|
| 1,098 |
| ||||||||||||||||
Total interest and dividend income |
|
| 45,786 |
|
|
| 32,533 |
|
|
| 130,660 |
|
|
| 83,263 |
| ||||||||||||||||
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Deposits |
|
| 607 |
|
|
| 506 |
|
|
| 1,500 |
|
|
| 1,480 |
|
|
| 9,584 |
|
|
| 936 |
|
|
| 20,350 |
|
|
| 2,351 |
|
Federal Home Loan Bank advances |
|
| 276 |
|
|
| 111 |
|
|
| 534 |
|
|
| 312 |
|
|
| 3,261 |
|
|
| 181 |
|
|
| 10,668 |
|
|
| 564 |
|
Subordinated debentures |
|
| 268 |
|
|
| 221 |
|
|
| 766 |
|
|
| 650 |
|
|
| 1,239 |
|
|
| 975 |
|
|
| 3,606 |
|
|
| 2,701 |
|
Other |
|
| 5 |
|
|
| 6 |
|
|
| 16 |
|
|
| 17 |
| ||||||||||||||||
Securities sold under agreements to repurchase and other |
|
| 198 |
|
|
| 2 |
|
|
| 592 |
|
|
| 8 |
| ||||||||||||||||
Total interest expense |
|
| 1,156 |
|
|
| 844 |
|
|
| 2,816 |
|
|
| 2,459 |
|
|
| 14,282 |
|
|
| 2,094 |
|
|
| 35,216 |
|
|
| 5,624 |
|
Net interest income |
|
| 13,680 |
|
|
| 12,526 |
|
|
| 39,939 |
|
|
| 37,701 |
|
|
| 31,504 |
|
|
| 30,439 |
|
|
| 95,444 |
|
|
| 77,639 |
|
Provision (credit) for loan losses |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,300 | ) | ||||||||||||||||
Net interest income after provision (credit) for loan losses |
|
| 13,680 |
|
|
| 12,526 |
|
|
| 39,939 |
|
|
| 39,001 |
| ||||||||||||||||
Provision for credit losses |
|
| 630 |
|
|
| 300 |
|
|
| 2,111 |
|
|
| 1,000 |
| ||||||||||||||||
Net interest income after provision for loan losses |
|
| 30,874 |
|
|
| 30,139 |
|
|
| 93,333 |
|
|
| 76,639 |
| ||||||||||||||||
Noninterest income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Service charges |
|
| 1,177 |
|
|
| 1,194 |
|
|
| 3,609 |
|
|
| 3,714 |
|
|
| 1,853 |
|
|
| 1,885 |
|
|
| 5,457 |
|
|
| 5,004 |
|
Net gain (loss) on sale of securities |
|
| (9 | ) |
|
| 18 |
|
|
| (9 | ) |
|
| 20 |
| ||||||||||||||||
Net gain on sale of loans |
|
| 472 |
|
|
| 541 |
|
|
| 1,207 |
|
|
| 1,341 |
| ||||||||||||||||
ATM fees |
|
| 567 |
|
|
| 541 |
|
|
| 1,643 |
|
|
| 1,584 |
| ||||||||||||||||
Net gain on sale of securities |
|
| — |
|
|
| 4 |
|
|
| — |
|
|
| 10 |
| ||||||||||||||||
Net gain (loss) on equity securities |
|
| 69 |
|
|
| (133 | ) |
|
| (169 | ) |
|
| (44 | ) | ||||||||||||||||
Net gain on sale of loans and leases |
|
| 787 |
|
|
| 637 |
|
|
| 2,033 |
|
|
| 2,146 |
| ||||||||||||||||
ATM/Interchange fees |
|
| 1,424 |
|
|
| 1,394 |
|
|
| 4,227 |
|
|
| 3,990 |
| ||||||||||||||||
Wealth management fees |
|
| 787 |
|
|
| 688 |
|
|
| 2,233 |
|
|
| 1,989 |
|
|
| 1,197 |
|
|
| 1,208 |
|
|
| 3,570 |
|
|
| 3,713 |
|
Lease revenue and residual income |
|
| 1,913 |
|
|
| — |
|
|
| 6,160 |
|
|
| — |
| ||||||||||||||||
Bank owned life insurance |
|
| 142 |
|
|
| 149 |
|
|
| 429 |
|
|
| 415 |
|
|
| 266 |
|
|
| 255 |
|
|
| 830 |
|
|
| 732 |
|
Tax refund processing fees |
|
| — |
|
|
| — |
|
|
| 2,750 |
|
|
| 2,750 |
|
|
| — |
|
|
| — |
|
|
| 2,375 |
|
|
| 2,375 |
|
Swap fees |
|
| 21 |
|
|
| — |
|
|
| 198 |
|
|
| — |
| ||||||||||||||||
Other |
|
| 329 |
|
|
| 522 |
|
|
| 842 |
|
|
| 1,176 |
|
|
| 595 |
|
|
| 484 |
|
|
| 3,661 |
|
|
| 1,086 |
|
Total noninterest income |
|
| 3,465 |
|
|
| 3,653 |
|
|
| 12,704 |
|
|
| 12,989 |
|
|
| 8,125 |
|
|
| 5,734 |
|
|
| 28,342 |
|
|
| 19,012 |
|
Noninterest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Salaries, wages and benefits |
|
| 7,389 |
|
|
| 6,375 |
|
|
| 21,684 |
|
|
| 19,053 |
| ||||||||||||||||
Compensation expense |
|
| 14,054 |
|
|
| 12,484 |
|
|
| 44,137 |
|
|
| 36,654 |
| ||||||||||||||||
Net occupancy expense |
|
| 690 |
|
|
| 708 |
|
|
| 2,002 |
|
|
| 2,009 |
|
|
| 1,368 |
|
|
| 1,252 |
|
|
| 4,096 |
|
|
| 3,428 |
|
Equipment expense |
|
| 350 |
|
|
| 494 |
|
|
| 1,097 |
|
|
| 1,158 |
|
|
| 2,687 |
|
|
| 637 |
|
|
| 8,214 |
|
|
| 1,694 |
|
Contracted data processing |
|
| 357 |
|
|
| 397 |
|
|
| 1,174 |
|
|
| 1,147 |
|
|
| 651 |
|
|
| 846 |
|
|
| 1,730 |
|
|
| 1,899 |
|
FDIC assessment |
|
| 115 |
|
|
| 166 |
|
|
| 414 |
|
|
| 597 |
|
|
| 438 |
|
|
| 170 |
|
|
| 1,215 |
|
|
| 568 |
|
State franchise tax |
|
| 255 |
|
|
| 251 |
|
|
| 767 |
|
|
| 709 |
|
|
| 590 |
|
|
| 629 |
|
|
| 1,770 |
|
|
| 1,848 |
|
Professional services |
|
| 534 |
|
|
| 431 |
|
|
| 1,718 |
|
|
| 1,450 |
|
|
| 1,010 |
|
|
| 1,335 |
|
|
| 3,804 |
|
|
| 3,593 |
|
Amortization of intangible assets |
|
| 158 |
|
|
| 172 |
|
|
| 483 |
|
|
| 527 |
|
|
| 398 |
|
|
| 456 |
|
|
| 1,195 |
|
|
| 890 |
|
ATM expense |
|
| 233 |
|
|
| 183 |
|
|
| 700 |
|
|
| 379 |
| ||||||||||||||||
ATM/Interchange expense |
|
| 619 |
|
|
| 604 |
|
|
| 1,814 |
|
|
| 1,659 |
| ||||||||||||||||
Marketing |
|
| 240 |
|
|
| 249 |
|
|
| 768 |
|
|
| 810 |
|
|
| 497 |
|
|
| 372 |
|
|
| 1,542 |
|
|
| 1,069 |
|
Software maintenance expense |
|
| 1,052 |
|
|
| 942 |
|
|
| 2,989 |
|
|
| 2,440 |
| ||||||||||||||||
Other operating expenses |
|
| 1,846 |
|
|
| 1,769 |
|
|
| 5,410 |
|
|
| 5,314 |
|
|
| 3,388 |
|
|
| 2,828 |
|
|
| 9,792 |
|
|
| 7,450 |
|
Total noninterest expense |
|
| 12,167 |
|
|
| 11,195 |
|
|
| 36,217 |
|
|
| 33,153 |
|
|
| 26,752 |
|
|
| 22,555 |
|
|
| 82,298 |
|
|
| 63,192 |
|
Income before taxes |
|
| 4,978 |
|
|
| 4,984 |
|
|
| 16,426 |
|
|
| 18,837 |
|
|
| 12,247 |
|
|
| 13,318 |
|
|
| 39,377 |
|
|
| 32,459 |
|
Income tax expense |
|
| 1,318 |
|
|
| 1,304 |
|
|
| 4,534 |
|
|
| 5,251 |
|
|
| 1,860 |
|
|
| 2,206 |
|
|
| 6,068 |
|
|
| 5,180 |
|
Net Income |
|
| 3,660 |
|
|
| 3,680 |
|
|
| 11,892 |
|
|
| 13,586 |
|
| $ | 10,387 |
|
| $ | 11,112 |
|
| $ | 33,309 |
|
| $ | 27,279 |
|
Preferred stock dividends |
|
| 308 |
|
|
| 374 |
|
|
| 935 |
|
|
| 1,156 |
| ||||||||||||||||
Net income available to common shareholders |
| $ | 3,352 |
|
| $ | 3,306 |
|
| $ | 10,957 |
|
| $ | 12,430 |
| ||||||||||||||||
Earnings per common share, basic |
| $ | 0.33 |
|
| $ | 0.41 |
|
| $ | 1.12 |
|
| $ | 1.57 |
|
| $ | 0.66 |
|
| $ | 0.72 |
|
| $ | 2.12 |
|
| $ | 1.82 |
|
Earnings per common share, diluted |
| $ | 0.29 |
|
| $ | 0.34 |
|
| $ | 0.97 |
|
| $ | 1.24 |
|
| $ | 0.66 |
|
| $ | 0.72 |
|
| $ | 2.12 |
|
| $ | 1.82 |
|
See notes to interim unaudited consolidated financial statements
Page 3
Consolidated Statements of Comprehensive Income (Loss) (Unaudited)
(In thousands)
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||||||||||||||||||
|
| Three months ended September 30, |
|
| Nine months ended September 30, |
|
| September 30, |
|
| September 30, |
| ||||||||||||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||
Net income |
| $ | 3,660 |
|
| $ | 3,680 |
|
| $ | 11,892 |
|
| $ | 13,586 |
|
| $ | 10,387 |
|
| $ | 11,112 |
|
| $ | 33,309 |
|
| $ | 27,279 |
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Unrealized holding gains (losses) on available for sale securities |
|
| 86 |
|
|
| (1,225 | ) |
|
| 1,993 |
|
|
| 2,273 |
| ||||||||||||||||
Unrealized holding (losses) on available-for-sale securities |
|
| (30,058 | ) |
|
| (29,926 | ) |
|
| (27,217 | ) |
|
| (99,837 | ) | ||||||||||||||||
Tax effect |
|
| 6,366 |
|
|
| 6,300 |
|
|
| 5,800 |
|
|
| 21,043 |
| ||||||||||||||||
Reclassification of gains recognized in net income |
|
| — |
|
|
| (4 | ) |
|
| — |
|
|
| (10 | ) | ||||||||||||||||
Tax effect |
|
| (29 | ) |
|
| 417 |
|
|
| (678 | ) |
|
| (772 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2 |
|
Pension liability adjustment |
|
| 426 |
|
|
| 83 |
|
|
| 946 |
|
|
| 249 |
|
|
| — |
|
|
| 69 |
|
|
| — |
|
|
| 208 |
|
Tax effect |
|
| (144 | ) |
|
| (28 | ) |
|
| (321 | ) |
|
| (84 | ) |
|
| — |
|
|
| (15 | ) |
|
| — |
|
|
| (44 | ) |
Total other comprehensive income (loss) |
|
| 339 |
|
|
| (753 | ) |
|
| 1,940 |
|
|
| 1,666 |
| ||||||||||||||||
Comprehensive income |
| $ | 3,999 |
|
| $ | 2,927 |
|
| $ | 13,832 |
|
| $ | 15,252 |
| ||||||||||||||||
Total other comprehensive (loss) |
|
| (23,692 | ) |
|
| (23,576 | ) |
|
| (21,417 | ) |
|
| (78,638 | ) | ||||||||||||||||
Comprehensive income (loss) |
| $ | (13,305 | ) |
| $ | (12,464 | ) |
| $ | 11,892 |
|
| $ | (51,359 | ) | ||||||||||||||||
See notes to interim unaudited consolidated financial statements
Page 4
(In thousands, except share data)
|
| Preferred Shares |
|
| Common Shares |
|
|
|
|
|
|
|
|
|
| Accumulated Other |
|
| Total |
| ||||||||||||
|
| Outstanding Shares |
|
| Amount |
|
| Outstanding Shares |
|
| Amount |
|
| Retained Earnings |
|
| Treasury Shares |
|
| Comprehensive Loss |
|
| Shareholders’ Equity |
| ||||||||
Balance, December 31, 2016 |
|
| 20,481 |
|
| $ | 18,950 |
|
|
| 8,343,509 |
|
| $ | 118,975 |
|
| $ | 19,263 |
|
| $ | (17,235 | ) |
| $ | (2,337 | ) |
| $ | 137,616 |
|
Net Income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 11,892 |
|
|
| — |
|
|
| — |
|
|
| 11,892 |
|
Other comprehensive income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,940 |
|
|
| 1,940 |
|
Conversion of Series B preferred shares to common shares |
|
| (1,506 | ) |
|
| (1,393 | ) |
|
| 192,568 |
|
|
| 1,393 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Common stock issuance, net of costs |
|
| — |
|
|
| — |
|
|
| 1,610,000 |
|
|
| 32,821 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 32,821 |
|
Stock-based compensation |
|
| — |
|
|
| — |
|
|
| 25,069 |
|
|
| 377 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 377 |
|
Common stock dividends ($0.18 per share) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,726 | ) |
|
| — |
|
|
| — |
|
|
| (1,726 | ) |
Preferred stock dividend |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (935 | ) |
|
| — |
|
|
| — |
|
|
| (935 | ) |
Retirement of common stock |
|
|
|
|
|
|
|
|
|
| (211 | ) |
|
| (4 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (4 | ) |
Balance, September 30, 2017 |
|
| 18,975 |
|
| $ | 17,557 |
|
|
| 10,170,935 |
|
| $ | 153,562 |
|
| $ | 28,494 |
|
| $ | (17,235 | ) |
| $ | (397 | ) |
| $ | 181,981 |
|
|
| Common Shares |
|
|
|
|
|
|
|
| Accumulated |
|
| Total |
| |||||||||
|
| Outstanding |
|
| Amount |
|
| Retained |
|
| Treasury |
|
| Comprehensive |
|
| Shareholders’ |
| ||||||
Balance, June 30, 2023 |
|
| 15,780,227 |
|
| $ | 310,784 |
|
| $ | 168,777 |
|
| $ | (73,915 | ) |
| $ | (55,770 | ) |
| $ | 349,876 |
|
Net Income |
|
| — |
|
|
| — |
|
|
| 10,387 |
|
|
| — |
|
|
| — |
|
|
| 10,387 |
|
Other comprehensive loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (23,692 | ) |
|
| (23,692 | ) |
Stock-based compensation |
|
| (84,230 | ) |
|
| 191 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 191 |
|
Common stock dividends |
|
| — |
|
|
| — |
|
|
| (2,520 | ) |
|
| — |
|
|
| — |
|
|
| (2,520 | ) |
Purchase of common stock |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,497 | ) |
|
| — |
|
|
| (1,497 | ) |
Balance, September 30, 2023 |
|
| 15,695,997 |
|
| $ | 310,975 |
|
| $ | 176,644 |
|
| $ | (75,412 | ) |
| $ | (79,462 | ) |
| $ | 332,745 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
| Common Shares |
|
|
|
|
|
|
|
| Accumulated |
|
| Total |
| |||||||||
|
| Outstanding |
|
| Amount |
|
| Retained |
|
| Treasury |
|
| Comprehensive |
|
| Shareholders’ |
| ||||||
Balance, June 30, 2022 |
|
| 14,537,433 |
|
| $ | 278,240 |
|
| $ | 137,592 |
|
| $ | (67,528 | ) |
| $ | (46,242 | ) |
| $ | 302,062 |
|
Net Income |
|
| — |
|
|
| — |
|
|
| 11,112 |
|
|
| — |
|
|
| — |
|
|
| 11,112 |
|
Other comprehensive loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (23,576 | ) |
|
| (23,576 | ) |
Stock-based compensation |
|
| — |
|
|
| 153 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 153 |
|
Stock issued for acquisition of Comunibanc Corp. |
|
| 984,723 |
|
|
| 21,122 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 21,122 |
|
Common stock dividends |
|
| — |
|
|
| — |
|
|
| (2,158 | ) |
|
| — |
|
|
| — |
|
|
| (2,158 | ) |
Purchase of common stock |
|
| (286,611 | ) |
|
| — |
|
|
| — |
|
|
| (6,113 | ) |
|
| — |
|
|
| (6,113 | ) |
Balance, September 30, 2022 |
|
| 15,235,545 |
|
| $ | 299,515 |
|
| $ | 146,546 |
|
| $ | (73,641 | ) |
| $ | (69,818 | ) |
| $ | 302,602 |
|
See notes to interim unaudited consolidated financial statements
Page 5
|
| Common Shares |
|
|
|
|
|
|
|
| Accumulated |
|
| Total |
| |||||||||
|
| Outstanding |
|
| Amount |
|
| Retained |
|
| Treasury |
|
| Comprehensive |
|
| Shareholders’ |
| ||||||
Balance, December 31, 2022 |
|
| 15,728,234 |
|
| $ | 310,182 |
|
| $ | 156,492 |
|
| $ | (73,794 | ) |
| $ | (58,045 | ) |
| $ | 334,835 |
|
Cumulative-effect adjustment for adoption of |
|
| — |
|
|
| — |
|
|
| (6,069 | ) |
|
| — |
|
|
| — |
|
|
| (6,069 | ) |
Balance January 1, 2023 |
|
| 15,728,234 |
|
| $ | 310,182 |
|
| $ | 150,423 |
|
| $ | (73,794 | ) |
| $ | (58,045 | ) |
| $ | 328,766 |
|
Net Income |
|
| — |
|
|
| — |
|
|
| 33,309 |
|
|
| — |
|
|
| — |
|
|
| 33,309 |
|
Other comprehensive loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (21,417 | ) |
|
| (21,417 | ) |
Stock-based compensation |
|
| 57,613 |
|
|
| 793 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 793 |
|
Common stock dividends |
|
| — |
|
|
| — |
|
|
| (7,088 | ) |
|
| — |
|
|
| — |
|
|
| (7,088 | ) |
Purchase of common stock |
|
| (89,850 | ) |
|
| — |
|
|
| — |
|
|
| (1,618 | ) |
|
| — |
|
|
| (1,618 | ) |
Balance, September 30, 2023 |
|
| 15,695,997 |
|
| $ | 310,975 |
|
| $ | 176,644 |
|
| $ | (75,412 | ) |
| $ | (79,462 | ) |
| $ | 332,745 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
| Common Shares |
|
|
|
|
|
|
|
| Accumulated |
|
| Total |
| |||||||||
|
| Outstanding |
|
| Amount |
|
| Retained |
|
| Treasury |
|
| Comprehensive |
|
| Shareholders’ |
| ||||||
Balance, December 31, 2021 |
|
| 14,954,200 |
|
| $ | 277,741 |
|
| $ | 125,558 |
|
| $ | (56,907 | ) |
| $ | 8,820 |
|
| $ | 355,212 |
|
Net Income |
|
| — |
|
|
| — |
|
|
| 27,279 |
|
|
| — |
|
|
| — |
|
|
| 27,279 |
|
Other comprehensive loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (78,638 | ) |
|
| (78,638 | ) |
Stock-based compensation |
|
| 36,860 |
|
|
| 652 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 652 |
|
Stock issued for acquisition of Comunibanc Corp. |
|
| 984,723 |
|
|
| 21,122 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 21,122 |
|
Common stock dividends |
|
| — |
|
|
| — |
|
|
| (6,291 | ) |
|
| — |
|
|
| — |
|
|
| (6,291 | ) |
Purchase of common stock |
|
| (740,238 | ) |
|
| — |
|
|
| — |
|
|
| (16,734 | ) |
|
| — |
|
|
| (16,734 | ) |
Balance, September 30, 2022 |
|
| 15,235,545 |
|
| $ | 299,515 |
|
| $ | 146,546 |
|
| $ | (73,641 | ) |
| $ | (69,818 | ) |
| $ | 302,602 |
|
CIVISTA BANCSHARES, INC.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
|
| Nine months ended September 30, |
| |||||
|
| 2017 |
|
| 2016 |
| ||
Net cash from operating activities |
| $ | 11,821 |
|
| $ | 11,318 |
|
Cash flows used for investing activities: |
|
|
|
|
|
|
|
|
Maturities and calls of securities, available-for-sale |
|
| 23,529 |
|
|
| 23,264 |
|
Purchases of securities, available-for-sale |
|
| (57,005 | ) |
|
| (31,130 | ) |
Sale of securities available for sale |
|
| 953 |
|
|
| 4,379 |
|
Purchases of other securities |
|
| (192 | ) |
|
| (474 | ) |
Purchase of bank owned life insurance |
|
| — |
|
|
| (3,885 | ) |
Net loan originations |
|
| (86,678 | ) |
|
| (43,285 | ) |
Loans purchased, installment |
|
| — |
|
|
| (1,643 | ) |
Proceeds from sale of other real estate owned properties |
|
| 72 |
|
|
| 238 |
|
Proceeds from sale of premises and equipment |
|
| 139 |
|
|
| — |
|
Premises and equipment purchases |
|
| (755 | ) |
|
| (1,292 | ) |
Net cash used for investing activities |
|
| (119,937 | ) |
|
| (53,828 | ) |
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Repayment of long-term FHLB advances |
|
| (2,500 | ) |
|
| — |
|
Net change in short-term FHLB advances |
|
| 10,750 |
|
|
| (36,200 | ) |
Increase in deposits |
|
| 80,186 |
|
|
| 82,120 |
|
Decrease in securities sold under repurchase agreements |
|
| (13,777 | ) |
|
| (3,327 | ) |
Net proceeds from common stock issuance |
|
| 32,821 |
|
|
| — |
|
Cash payment for retirement of common stock |
|
| (4 | ) |
|
| — |
|
Common dividends paid |
|
| (1,726 | ) |
|
| (1,259 | ) |
Preferred dividends paid |
|
| (935 | ) |
|
| (1,156 | ) |
Net cash provided by financing activities |
|
| 104,815 |
|
|
| 40,178 |
|
Decrease in cash and due from financial institutions |
|
| (3,301 | ) |
|
| (2,332 | ) |
Cash and due from financial institutions at beginning of period |
|
| 36,695 |
|
|
| 35,561 |
|
Cash and due from financial institutions at end of period |
| $ | 33,394 |
|
| $ | 33,229 |
|
Cash paid during the period for: |
|
|
|
|
|
|
|
|
Interest |
| $ | 2,753 |
|
| $ | 2,442 |
|
Income taxes |
|
| 4,300 |
|
|
| 4,700 |
|
Supplemental cash flow information: |
|
|
|
|
|
|
|
|
Transfer of loans from portfolio to other real estate owned |
|
| 78 |
|
|
| 73 |
|
Transfer of premises to held-for-sale |
|
| 3 |
|
|
| — |
|
Transfer of loans held for sale to portfolio |
|
| 419 |
|
|
| — |
|
Conversion of preferred shares to common shares |
|
| 1,393 |
|
|
| 2,497 |
|
Securities purchased not settled |
|
| 1,609 |
|
|
| — |
|
Securities sold not settled |
|
| — |
|
|
| 2,386 |
|
See notes to interim unaudited consolidated financial statements
Page 6
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
|
| Nine Months Ended September 30, |
| |||||
|
| 2023 |
|
| 2022 |
| ||
Net cash provided by operating activities |
| $ | 60,593 |
|
| $ | 27,421 |
|
Cash flows used for investing activities: |
|
|
|
|
|
| ||
Maturities, paydowns and calls of investments in time deposits |
|
| — |
|
|
| 245 |
|
Proceeds from sale of time certificates |
|
| — |
|
|
| 742 |
|
Maturities, paydowns and calls of securities, available-for-sale |
|
| 7,907 |
|
|
| 36,910 |
|
Purchases of securities, available-for-sale |
|
| (13,241 | ) |
|
| (117,974 | ) |
Proceeds from sale of securities available-for-sale |
|
| — |
|
|
| 57,322 |
|
Purchase of other securities |
|
| (27,890 | ) |
|
| (1,606 | ) |
Redemption of other securities |
|
| 27,251 |
|
|
| 1,592 |
|
Purchase of equity securities |
|
| — |
|
|
| (1,000 | ) |
Net change in loans |
|
| (208,689 | ) |
|
| (158,909 | ) |
Acquisition, net of cash acquired |
|
| — |
|
|
| (21,870 | ) |
Premises and equipment purchases |
|
| (2,164 | ) |
|
| (3,208 | ) |
Net cash used for investing activities |
|
| (216,826 | ) |
|
| (207,756 | ) |
Cash flows from financing activities: |
|
|
|
|
|
| ||
Repayment of long-term FHLB advances |
|
| (1,005 | ) |
|
| (89,983 | ) |
Net change in short-term FHLB advances |
|
| 37,800 |
|
|
| 55,000 |
|
Repayment of other borrowings |
|
| (15,516 | ) |
|
| — |
|
Increase in deposits |
|
| 175,758 |
|
|
| 20,358 |
|
Decrease in securities sold under repurchase agreements |
|
| (25,143 | ) |
|
| (5,340 | ) |
Purchase of treasury shares |
|
| (1,618 | ) |
|
| (16,734 | ) |
Common dividends paid |
|
| (7,088 | ) |
|
| (6,291 | ) |
Net cash provided by (used for) financing activities |
|
| 163,188 |
|
|
| (42,990 | ) |
Increase (decrease) in cash and cash equivalents |
|
| 6,955 |
|
|
| (223,325 | ) |
Cash and cash equivalents at beginning of period |
|
| 43,361 |
|
|
| 264,239 |
|
Cash and cash equivalents at end of period |
| $ | 50,316 |
|
| $ | 40,914 |
|
Cash paid during the period for: |
|
|
|
|
|
| ||
Interest |
| $ | 26,393 |
|
| $ | 4,969 |
|
Income taxes |
|
| 7,333 |
|
|
| 3,737 |
|
Supplemental cash flow information: |
|
|
|
|
|
| ||
Change in fair value of swap asset |
|
| (3,205 | ) |
|
| (7,376 | ) |
Change in fair value of swap liability |
|
| 3,205 |
|
|
| 7,376 |
|
Securities purchased not settled |
|
| 1,753 |
|
|
| 2,611 |
|
The Company purchased all of the capital stock of Comunibanc Corp. for $46,090 on July 1, 2022. In conjunction with the acquisition, liabilities were assumed as follows: |
|
|
|
|
|
| ||
Fair value of assets acquired |
| $ | — |
|
| $ | 340,649 |
|
Less: common stock issued |
|
| — |
|
|
| 21,122 |
|
Cash paid for the capital stock |
|
| — |
|
|
| 24,968 |
|
Liabilities assumed |
| $ | — |
|
| $ | 294,559 |
|
|
|
|
|
|
| |||
See notes to interim unaudited consolidated financial statements
Page 7
Civista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
(1) Consolidated Financial Statements
Nature of Operations and Principles of Consolidation: Civista Bancshares, Inc. (CBI) is an Ohio corporation and a registered financial holding company. The Consolidated Financial Statements include the accounts of CBI and its wholly-owned direct and indirect subsidiaries: Civista Bank (Civista), First Citizens Insurance Agency, Inc. (FCIA), Water Street Properties, Inc. (Water St.), CIVB Risk Management, Inc. (CRMI) and FC Refund Solutions, Inc. (FCRS). FCRS was formed to facilitate payment of individual state and federal income tax refunds. First Citizens Capital LLC (FCC) is wholly-owned by Civista and holds inter-company debt. The operations of FCC are located in Wilmington, Delaware. First Citizens Investments, Inc. (FCI) is wholly-owned by Civista and holds and manages its securities portfolio. The operations of FCI are located in Wilmington, Delaware. The above companies together are referred to as the “Company.” Intercompany balances and transactions are eliminated in consolidation. First Citizens Insurance Agency, Inc. was formed to allow the Company to participate in commission revenue generated through its third party insurance agreement. Insurance commission revenue was less than 1.0% of total revenue through September 30, 2017. Water Street Properties was formed to hold properties repossessed by CBI subsidiaries. Revenue from Water St. was less than 1.0% of total revenue through September 30, 2017. Management considers the Company to operate primarily in one reportable segment, banking..
The Consolidated Financial Statements have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the Company’s financial position as of September 30, 2017 and its results of operations and changes in cash flows for the periods ended September 30, 2017 and 2016 have been made. The accompanying Consolidated Financial Statements have been prepared in accordance with instructions of Form 10-Q, and therefore certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America have been omitted. The results of operations for the periods ended September 30, 2017 are not necessarily indicative of the operating results for the full year. Reference is made to the accounting policies of the Company described in the notes to the audited financial statements contained in the Company’s 2016 annual report. The Company has consistently followed these policies in preparing this Form 10-Q.
The CompanyCivista provides financial services through its offices in the Ohio counties of Erie, Crawford, Champaign, Franklin, Logan, Madison, Summit, Huron, Ottawa, Richland, Montgomery, Henry, Wood and Cuyahoga.Cuyahoga, in the Indiana counties of Dearborn and Ripley and in the Kentucky county of Kenton. Its primary deposit products are checking, savings, and term certificate accounts, and its primary lending products are residential mortgage, commercial, and installment loans. Substantially all loans are secured by specific items of collateral including business assets, consumer assets and commercial and residential real estate. Commercial loans are expected to be repaid from cash flow from operations of businesses. The bank has two concentrations, one is to Lessors of Non-Residential Buildings and Dwellings totaling $284,218, or 24.8% of total loans, as of September 30, 2017 and the other is to Lessors of Residential Buildings and Dwellings totaling $155,616, or 13.6% of total loans, as of September 30, 2017. These segments of the portfolio are stable and have been conservatively underwritten, monitored and managed by experienced commercial bankers. However, the customers’ ability to repay their loans is dependent on the real estate market and general economic conditions in the area. Other financialFinancial instruments that potentially represent concentrations of credit risk include Federal Funds sold and deposit accounts in other financial institutions that are in excess of federally insured limits. In October of 2022, Civista acquired Vision Financial Group (VFG) as a wholly-owned subsidiary engaging in general equipment leasing and financing, headquartered in Pittsburgh, Pennsylvania. As of August 31, 2023, VFG was merged into Civista and now operates as a division and has been rebranded as Civista Leasing and Finance (CLF).
FCIA is wholly-owned by CBI and was formed to allow the Company to participate in commission revenue generated through its third-party insurance agreement. Water St. is wholly-owned by CBI and was formed to hold properties repossessed by CBI subsidiaries. CRMI is a captive insurance company that is wholly-owned by CBI and allows CBI and its subsidiaries to insure against certain risks unique to their operations. The operations of CRMI are located in Wilmington, Delaware. FCI is wholly-owned by Civista and holds and manages its securities portfolio. The operations of FCI are located in Wilmington, Delaware.
The above companies together are referred to as the “Company.” Intercompany balances and transactions are eliminated in consolidation.Management considers the Company to operate primarily in one reportable segment, banking.
The Consolidated Financial Statements have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the Company’s financial position as of September 30, 2023 and its results of operations and changes in cash flows for the periods ended September 30, 2023 and 2022 have been made. The accompanying Unaudited Consolidated Financial Statements have been prepared in accordance with instructions of Form 10-Q, and therefore certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America have been omitted. The results of operations for the period ended September 30, 2023 are not necessarily indicative of the operating results for the full year. Reference is made to the accounting policies of the Company described in the notes to the audited financial statements contained in the Company’s 2022 annual report. The Company has consistently followed these policies in preparing this Form 10-Q.
(2) Significant Accounting Policies
Allowance for LoanCredit Losses: On January 1, 2023, the Company adopted Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments – Credit Losses (Topic 326) – Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). ASU 2016-13 introduces a new credit loss methodology, Current Expected Credit Losses ("CECL"), which requires earlier recognition of credit losses, while also providing additional transparency about credit risk. ASU 2016-13 amends guidance on reporting credit losses for financial assets held at amortized cost basis and available for sale debt securities. ASU 2016-13 eliminates the probable initial recognition threshold previously required under Generally Accepted Accounting Principles ("GAAP") and instead, requires an entity to reflect its current estimate of all expected credit losses based on historical experience, current conditions and reasonable and supportable forecasts. The allowance for loancredit losses is regularly reviewed by management to determinea valuation account that is deducted from the amount is considered adequate to absorb probable losses in the loan portfolio. If not, an additional provision is made to increase the allowance. This evaluation includes specific loss estimates on certain individually reviewed impaired loans, the pooling of commercial credits risk graded as special mention and substandard that are not individually analyzed, and general loss estimates that are based upon the size, quality, and concentration characteristicsamortized cost basis of the various loan portfolios, adverse situations that may affect a borrower’s abilityfinancial assets to repay,present the net amount expected to be collected. ASU 2016-13 also expands the disclosure requirements regarding an entity’s assumptions, models, and current economic and industry conditions, among other items.methods for estimating the reserve for credit losses. In addition, entities need to disclose the amortized cost balance for each class of financial asset by credit quality indicator, disaggregated by the year of origination.
Those judgments and assumptions that are most critical to the application of this accounting policy are assessing the initial and on-going credit-worthiness of the borrower, the amount and timing of future cash flows of the borrower that are available for repayment of the loan, the sufficiency of underlying collateral, the enforceability of third-party guarantees, the frequency and subjectivity of loan reviews and risk ratings, emerging or changing trends that might not be fully captured in the historical loss experience, and charges against the allowance for actual losses that are greater than previously estimated. These judgments and assumptions are dependent upon or can be influenced by a variety of factors, including the breadth and depth of experience of lending officers, credit administration and the corporate loan review staff that periodically review the status of the loan, changing economic and industry conditions, changes in the financial condition of the borrower and changes in the value and availability of the underlying collateral and guarantees.
Pension Benefits: Pension costs and liabilities are dependent on assumptions used in calculating such amounts. These assumptions include discount rates, benefits earned, interest costs, expected return on plan assets, mortality rates, and other factors. In accordance with GAAP, actual results that differ from the assumptions are accumulated and amortized over future periods and, therefore, generally affect recognized expense
Page 78
Civista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
The Company adopted Accounting Standards Certification ("ASC") 326 using the modified retrospective method for all financial assets measured at amortized cost and off-balance sheet credit exposures. Results for the periods beginning after January 1, 2023 are presented under Accounting Standards Codification (“ASC”) 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP. The Company adopted ASC 326 using the prospective transition approach for purchased credit deteriorated ("PCD") financial assets that were previously classified as purchased credit impaired ("PCI") and accounted for under ASC 310-30. In accordance with ASC 326, management did not reassess whether PCI assets met the criteria of PCD assets as of the date of adoption. On January 1, 2023, the amortized cost basis of the PCD assets was adjusted to reflect the addition of $1,668 to the allowance for credit losses. The remaining noncredit discount (based on the adjusted amortized cost basis) will be accreted into interest income at the effective interest rate as of January 1, 2023. The adoption of CECL resulted in an increase to our total allowance for credit losses (“ACL”) on loans held for investment of $4.3 million, an increase in allowance for credit losses on unfunded loan commitments of $3.4 million, a reclassification of PCI discount from loans to the ACL of $1.7 million, and an increase in deferred tax asset of $1.6 million. The Company also recorded a net reduction of retained earnings of $6.1 million upon adoption.
The allowance for credit losses is evaluated on a regular basis and established through charges to earnings in the form of a provision for credit losses. When a loan or portion of a loan is determined to be uncollectible, the portion deemed uncollectible is charged against the allowance and subsequent recoveries, if any, are credited to the allowance. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.
Portfolio Segmentation (“Pooled Loans”)
Portfolio segmentation is defined as the pooling of loans based upon similar risk characteristics such that quantitative methodologies and qualitative adjustment factors for estimating the allowance for credit losses are constructed for each segment. The Company has identified eight portfolio segments of loans including Commercial & Agriculture, Commercial Real Estate – Owner Occupied, Commercial Real Estate – Non-Owner Occupied, Residential Real Estate, Real Estate Construction, Farm Real Estate, Lease Financing Receivable and Consumer and Other Loans.
The allowance for credit losses for Pooled Loans is estimated based upon periodic review of the collectability of the loans quantitatively correlating historical loan experience with reasonable and supportable forecasts using forward looking information. The Company utilized a discounted cash flow (DCF) method to estimate the quantitative portion of the allowance for credit losses for loans evaluated on a collective pooled basis. For each segment, a loss driver analysis (LDA) was performed in order to identify appropriate loss drivers and create a regression model for use in forecasting cash flows. The LDA utilized the Company’s own Federal Financial Institutions Examination Council’s (“FFIEC”) Call Report data for all segments except indirect auto and all new and unknown values. Peer data was incorporated into the analysis for all segments except indirect auto and all new and unknown values. The Company has established a one-year reasonable and supportable forecast period with a one-year straight-line reversion to the long-term historical average. The Company’s policy is to utilize its own data, which includes loan-level loss data from March 31, 2004 through December 31, 2019 and from December 31, 2021 through June 30, 2022, whenever possible. The two-year period from December 31, 2019 to December 31, 2021 was excluded due to modeling errors stemming from the impact of the COVID-19 pandemic. Peer data is utilized when there are not sufficient defaults for a satisfactory sound calculation, or if the Company does not have its own loan-level detail reflecting similar economic conditions as the forecasted loss drivers.
Key inputs into the DCF model include loan-level detail, including the amortized cost basis of individual loans, payment structure, loss history, and forecasted loss drivers. The Company uses the central tendency midpoint seasonally adjusted forecasts from the Federal Open Market Committee (FOMC). Other key assumptions include the probability of default (PD), loss given default (LGD), and prepayment/curtailment rates. When possible, the Company utilizes its own PDs for the reasonable and supportable forecast period. When it is not possible to use the Company’s own PDs, the LDA is utilized to determine PDs based on the forecasted economic factors. In all cases, the LDA is then utilized to determine the long-term historical average, which is reached over the reversion period. When possible, the Company utilizes its own LGDs for the reasonable and supportable forecast period. When it is not possible to use the Company’s own LGDs, the LGD is derived using a method referred to as Frye Jacobs. The Frye Jacobs method is a mathematical formula that traces the relationship between LGD and PD over time and projects the LGD based on the level of PD forecasted. In all cases, the Frye Jacobs method is utilized to calculate LGDs during the reversion period and long-term historical average. Prepayment and curtailment rates were calculated based on the Company’s own data utilizing a one-year average. When the discounted cash flow method is used to determine the allowance for credit losses, management incorporates expected prepayments to determine the effective interest rate utilized to discount expected cash flow.
Page 9
Civista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
Adjustments to the quantitative evaluation may be made to account for differences in current or expected qualitative risk characteristics such as changes in: underwriting standards, changes in the value of underlying collateral dependent loans, the existence and effect of portfolio concentration, delinquency level, regulatory environment, economic conditions, Company management and the status of portfolio administration including the Company’s loan review function.
Purchased Credit Deteriorated (PCD) Loans
The Company has purchased loans, some of which have shown evidence of credit deterioration since origination. Upon adoption of ASC 326, the Company elected to maintain pools of loans that were previously accounted for under ASC 310-30 and will continue to account for these pools as a unit of account. Loans are only removed from the existing pools if they are written off, paid off, or sold. Upon adoption of ASC 326, the allowance for credit losses was determined for each pool and added to the pool's carrying amount to establish a new amortized cost basis. The difference between the unpaid principal balance of the pool and the new amortized cost basis is the noncredit premium or discount which will be amortized into interest income over the remaining life of the pool. Changes to the allowance for credit losses after adoption are recorded obligationthrough provision expense.
Individually Evaluated Loans
The Company establishes a specific reserve for individually evaluated loans which do not share similar risk characteristics with the loans included in the forecasted allowance for credit losses. These individually evaluated loans are removed from the pooling approach discussed above for the forecasted allowance for credit losses, and include nonaccrual loans, loan and lease modifications experiencing financial difficulty, and other loans deemed appropriate by management.
Available for Sale (“AFS”) Debt Securities
For AFS securities in an unrealized loss position, we first assess whether (i) we intend to sell, or (ii) it is more likely than not that we will be required to sell the security before recovery of future periods. Whileits amortized cost basis. If either case is affirmative, any previously recognized allowances are charged-off and the security's amortized cost is written down to fair value through income. If neither case is affirmative, the security is evaluated to determine whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management believesconsiders the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency and any adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the assumptions usedfair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income. Adjustments to the allowance are appropriate, differencesreported in actual experienceour income statement as a component of credit loss expense. AFS securities are charged-off against the allowance or, changes in assumptions may affectthe absence of any allowance, written down through income when deemed uncollectible by management or when either of the aforementioned criteria regarding intent or requirement to sell is met.
Accrued Interest Receivable
Upon adoption of ASU 2016-13 and its related amendments on January 1, 2023, the Company made the following elections regarding accrued interest receivable:
Page 10
Civista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
Reserve for Unfunded Commitments
The reserve for unfunded commitments (the “Unfunded Reserve”) represents the expected credit losses on off-balance sheet commitments such as unfunded commitments to extend credit and standby letters of credit. No allowance is recognized if the Company has the unconditional right to cancel the obligation. The Company is defining unconditionally cancelable in its literal sense, meaning that a commitment may be cancelled by the Company for any, or for no reason whatsoever. However, the Company in its business dealings, has no practical history of unconditionally canceling commitments. Commitments are not typically cancelled until a default or a defined condition occurs. Being that its historical practice has been to not cancel credit commitments unconditionally, the Company has made the decision to reserve for Unfunded Commitments. The Unfunded Reserve is recognized as a liability (included within other liabilities in the Consolidated Balance Sheets), with adjustments to the reserve recognized as a provision for credit loss expense in the Consolidated Statements of Operations. The Unfunded Reserve is determined by estimating expected future expense.fundings, under each segment, and applying the expected loss rates. Expected future fundings over the estimated life of commitments are based on historical averages of funding rates (i.e., the likelihood of draws taken). To estimate future fundings on unfunded balances, current funding rates are compared to historical funding rates. Estimate of credit losses are determined using the same loss rates as funded loans.
Revisions: An immaterial revision has been made to the Consolidated Financial Statements for a change in the fair market value of loans for the period ended December 31, 2022, as set forth in Note 13 herein. This revision did not have a significant impact on the affected financial statement line item or total assets, equity or net income.
Use of Estimates: To prepare financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in financial statements and the disclosures provided, and future results could differ. The allowance for loancredit losses, consideration of impairment of goodwill, fair values of financial instruments, deferred taxes, swap assets/liabilities and pension obligations are particularly subject to change.
Income Taxes : Income tax expense is based on the effective tax rate expected to be applicable for the entire year. Income tax expense is the totalAdoption of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax basis of assets and liabilities, computed using enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized.
Business Combinations: At the date of acquisition the Company records the assets and liabilities of the acquired companies on the Consolidated Balance Sheet at their fair value. The results of operations for acquired companies are included in the Company’s Consolidated Statements of Operations beginning at the acquisition date. Expenses arising from acquisition activities are recorded in the Consolidated Statements of Operations during the period incurred.
Reclassifications: Some items in the prior year financial statements were reclassified to conform to the current presentation. Such reclassifications had no effect on net income or shareholders’ equity.
Derivative Instruments and Hedging Activities : The Company enters into interest rate swap agreements to facilitate the risk management strategies of a small number of commercial banking customers. All derivatives are accounted for in accordance with ASC-815, Derivatives and Hedging . The Company mitigates the risk of entering into these agreements by entering into equal and offsetting swap agreements with highly rated third party financial institutions. The swap agreements are free-standing derivatives and are recorded at fair value in the Company’s consolidated balance sheets. The Company is party to master netting arrangements with its financial institution counterparties; however, the Company does not offset assets and liabilities under these arrangements for financial statement presentation purposes because the Company does not currently intend to execute a setoff with its’ counterparties. The master netting arrangements provide for a single net settlement of all swap agreements, as well as collateral, in the event of default on, or termination of, any one contract. Collateral, usually in the form of marketable securities, is posted by the counterparty with net liability positions in accordance with contract thresholds.
Effect of Newly Issued but Not Yet EffectiveNew Accounting Standards:
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (a new revenue recognition standard). The Update’s core principle is that a company will recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, this Update specifies the accounting for certain costs to obtain or fulfill a contract with a customer and expands disclosure requirements for revenue recognition. This Update is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. However, in August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606) to defer the effective date of ASU 2014-09 for all entities by one year. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in ASU 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. All other entities should apply the guidance in ASU 2014-09 to annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. Because the guidance does not apply to revenue associated with financial instruments, including loans and securities, we do not expect the new standard, or any of the amendments, to result in a material change from our current accounting for revenue because the majority of the Company’s financial instruments are not within the scope of Topic 606. However, we do expect that the standard will result in new disclosure requirements, which are currently being evaluated.
In January 2016, the FASB issued ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities . This Update applies to all entities that hold financial assets or owe financial liabilities and is intended to provide more useful information on the recognition, measurement, presentation, and disclosure of financial instruments. Among other things, this Update (a) requires equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income; (b) simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment; (c) eliminates the requirement to disclose the fair value of financial instruments measured at amortized cost for entities that are not public business entities; (d) eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; (e) requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; (f) requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk
Page 8
Civista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments; (g) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements; and (h) clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. For all other entities including not-for-profit entities and employee benefit plans within the scope of Topics 960 through 965 on plan accounting, the amendments in this Update are effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. All entities that are not public business entities may adopt the amendments in this Update earlier as of the fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial position or results of operations.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) . The standard in this Update requires lessees to recognize the assets and liabilities that arise from leases on the balance sheet. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. A short-term lease is defined as one in which: (a) the lease term is 12 months or less, and (b) there is not an option to purchase the underlying asset that the lessee is reasonably certain to exercise. For short-term leases, lessees may elect to recognize lease payments over the lease term on a straight-line basis. For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2018, and interim periods within those years. For all other entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2019, and for interim periods within fiscal years beginning after December 15, 2020. The amendments should be applied at the beginning of the earliest period presented using a modified retrospective approach with earlier application permitted as of the beginning of an interim or annual reporting period. The Company is currently assessing the practical expedients it may elect at adoption, but does not anticipate the amendments will have a significant impact to the financial statements. Based on the Company’s preliminary analysis of its current portfolio, the impact to the Company’s balance sheet is estimated to result in less than a 1% increase in assets and liabilities. The Company also anticipates additional disclosures to be provided at adoption.
In June 2016, the FASBFinancial Accounting Standards Board (the “FASB”) issued ASUAccounting Standards Update (“ASU”) 2016-13, Financial Instruments-CreditInstruments – Credit Losses: Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”),. The ASU introduces a new credit loss methodology, CECL, which changes the impairment model for most financial assets. This ASU is intended to improve financial reporting by requiring timelier recordingrequires earlier recognition of credit losses, onwhile also providing additional transparency about credit risk. Since its original issuance in 2016, the FASB has issued several updates to the original ASU.
The CECL methodology utilizes a lifetime “expected credit loss” measurement objective for the recognition of credit losses for loans, held-to-maturity securities and other financial instruments held by financial institutions and other organizations. The underlying premise of ASU 2016-13 is that financial assets measured at amortized cost should be presentedreceivables at the net amounttime the financial asset is originated or acquired. The expected tocredit losses are adjusted each period for changes in expected lifetime credit losses. The methodology replaces the multiple existing impairment methods under prior GAAP, which generally require that a loss be collected,incurred before it is recognized. For available-for-sale securities where fair value is less than cost, credit-related impairment, if any, is recognized through an allowance for credit losses thatand adjusted each period for changes in credit risk.
On January 1, 2023, the Company adopted the guidance prospectively with a cumulative adjustment to retained earnings. The Company has not restated comparative information for 2022 and, therefore, the comparative information for 2022 is deducted fromreported under the amortized cost basis. Theold model and is not comparable to the information presented for 2023.
Page 11
Civista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
At adoption, the Company recognized an incremental allowance for credit losses should reflect management’s current estimateon its loans to customers of $4.3 million, a liability for off-balance sheet unfunded commitments of $3.4 million and a reclassification of the discount on PCI loans to the ACL of $1.7 million. Additionally, the Company recorded a $6.1 million after tax decrease in retained earnings associated with the increased estimated credit losses that are expected to occur overlosses. The “Day 1” impact of CECL adoption is summarized below:
CECL Adoption |
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| December 31, 2022 |
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Allowance for Credit Losses: |
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Commercial & Agriculture |
| $ | 3,011 |
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| $ | 429 |
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| $ | 390 |
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| $ | 3,830 |
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Commercial Real Estate: |
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|
|
|
|
|
|
|
|
|
|
| ||||
Owner Occupied |
|
| 4,565 |
|
|
| 1,075 |
|
|
| 179 |
|
|
| 5,819 |
|
Non-Owner Occupied |
|
| 14,138 |
|
|
| (2,847 | ) |
|
| — |
|
|
| 11,291 |
|
Residential Real Estate |
|
| 3,145 |
|
|
| 2,762 |
|
|
| 386 |
|
|
| 6,293 |
|
Real Estate Construction |
|
| 2,293 |
|
|
| 1,502 |
|
|
| — |
|
|
| 3,795 |
|
Farm Real Estate |
|
| 291 |
|
|
| (28 | ) |
|
| — |
|
|
| 263 |
|
Lease Financing Receivable |
|
| 429 |
|
|
| 1,743 |
|
|
| 635 |
|
|
| 2,807 |
|
Consumer and Other |
|
| 98 |
|
|
| 201 |
|
|
| 78 |
|
|
| 377 |
|
Unallocated |
|
| 541 |
|
|
| (541 | ) |
|
| — |
|
|
| — |
|
Total Allowance for Credit Losses |
| $ | 28,511 |
|
| $ | 4,296 |
|
| $ | 1,668 |
|
| $ | 34,475 |
|
Reserve for Unfunded Commitments |
|
| — |
|
|
| 3,386 |
|
|
| — |
|
|
| 3,386 |
|
Total Reserve for Credit Losses |
| $ | 28,511 |
|
| $ | 7,682 |
|
| $ | 1,668 |
|
| $ | 37,861 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Retained Earnings |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total Pre-tax Impact |
|
|
|
| $ | (7,682 | ) |
|
|
|
|
|
| |||
Tax Effect |
|
|
|
|
| 1,613 |
|
|
|
|
|
|
| |||
Decrease to Retained Earnings |
|
|
|
| $ | (6,069 | ) |
|
|
|
|
|
| |||
The Company did not record an allowance for available-for-sale securities on Day 1 as the remaining lifeinvestment portfolio consists primarily of a financial asset.debt securities explicitly or implicitly backed by the U.S. Government for which credit risk is deemed minimal. The income statementimpact going forward will be effected fordepend on the measurementcomposition, characteristics, and credit quality of credit losses for newly recognized financial assets,the securities portfolio as well as the expected increases or decreases of expected credit losses that have taken place duringeconomic conditions at future reporting periods.
On January 1, 2023, the period. ASU 2016-13 is effective for annual and interim periods beginning after December 15, 2019, and early adoption is permitted for annual and interim periods beginning after December 15, 2018. We expect to recognize a one-time cumulative effect adjustment to the allowance for loan losses as of the beginning of the first reporting period in which the new standard is effective, but cannot yet determine the magnitude of any such one-time adjustment or the overall impact of the new guidance on the Company’s consolidated financial statements.
In January 2017, the FASB issuedCompany adopted ASU 2017-04, Intangibles – Goodwill and Other (Topic 350):Simplifying the Test for Goodwill Impairment. To simplify the subsequent measurement of goodwill, the FASB eliminated Step 2 from the goodwill impairment test. In computing the implied fair value of goodwill under Step 2, an entity had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Instead, under the amendments in this Update, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. A public business entity that is a U.S. Securities and Exchange Commission (“SEC”)an SEC filer, shouldsuch as the Company, was to adopt the amendments in this Update for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. A public business entityIn November 2019, however, the FASB issued ASU 2019-10, Financial Instruments ‒ Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842), which deferred the effective date for ASC 350, Intangibles – Goodwill and Other, for SEC filers that is not an SEC filer should adoptwere eligible to be smaller reporting companies as of November 15, 2019, such as the amendments in this Update for its annual or any interim goodwill impairment tests inCompany, to fiscal years beginning after December 15, 2020. All other entities, including not-for-profit entities, that are adopting the amendments in this Update should do so for their annual or any2022, and interim goodwill impairment tests inperiods within those fiscal years beginning after December 15, 2021.years. The Company is currently evaluating the impact the adoption of the standard willASU provisions did not have a significant impact on the Company’s financial position or results of operations.Company's Consolidated Financial Statements.
In March 2017, the FASB issued ASU 2017-07, Compensation—Retirement Benefits (Topic 715) . The amendments in this Update require that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost as defined in paragraphs 715-30-35-4 and 715-60-35-9 are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. If a separate line item or items are used to present the other components of net benefit cost, that line item or items must be appropriately described. If a separate line item or items are not used, the line item or items used in the income statement to present the other
Page 912
Civista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
components of net benefit cost must be disclosed.On January 1, 2023, the Company adopted ASU 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures ("ASU 2022-02"). ASU 2022-02 eliminates the recognition and measurement guidance for troubled debt restructurings and requires enhanced disclosures about loan modifications for borrowers experiencing financial difficulty. This ASU also requires enhanced disclosure for loans that have been charged off. The guidance is effective for public business entities for annual reporting periods beginning after December 15, 2017, and interim periods within that reporting period. For all other entities (including all nonprofit organizations “NPOs”), it is effective for annual periods beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019. This guidance is required to be applied on a retrospective basis for the presentation of the service cost component and the other components of net benefit cost and on a prospective basis for the capitalization of only the service cost component of net benefit cost. The Company is currently evaluating the impact the adoption of the standard willASU 2022-02 provisions did not have a significant impact on the Company’s financial position or resultsConsolidated Financial Statements.
Effect of operations.Newly Issued but Not Yet Effective Accounting Standards:
In March 2017,2020, the FASB issued ASU 2017-08, Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20). The amendments in this Update shorten the amortization period for certain callable debt securities held at a premium. Specifically, the amendments require the premium to be amortized to the earliest call date. The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. For public business entities, the amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as2020-04, Reference Rate Reform (Topic 848): Facilitation of the beginningEffects of ReferenceRate Reform on Financial Reporting. The Update is designed to provide relief from the fiscal yearaccounting analysis and impacts that includes that interim period. An entity shouldmay otherwise be required for modifications to agreements necessitated by reference rate reform. The Update also provides optional expedients to enable companies to continue to apply the amendments in this Update on a modified retrospective basis through a cumulative-effect adjustment directlyhedge accounting to retained earnings as of the beginning of the period of adoption. Additionally, in the period of adoption, an entity should provide disclosures about a change in accounting principle. The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial position or results of operations.
In May 2017, the FASB issued ASU 2017-09, Compensation – Stock Compensation (Topic 718) , which affects any entity that changes the terms or conditions of a share-based payment award. This Update amends the definition of modificationcertain hedging relationships impacted by qualifying that modification accounting does not apply to changes to outstanding share-based payment awards that do not affect the total fair value, vesting requirements, or equity/liability classification of the awards.reference rate reform. The amendments in this Update are effective for all entities for annual periods, and interim periods within those annual periods, beginning afteras of March 12, 2020 through December 15, 2017. Early adoption is permitted, including adoption31, 2022; however, a deferral of the implementation of reference rate reform was issued in any interim period, for (1) public business entities for reporting periods forDecember of 2022, which financial statements have not yet been issued and (2) all other entities for reporting periods for which financial statements have not yet been made available for issuance. The amendments in this Update should be applied prospectivelyextends the implementation to an award modified on or after the adoption date.December 31, 2024. The Company is currentlyworking through this transition via a multi-disciplinary project team. We are still evaluating the impact the adoption of the standardchange from LIBOR to a benchmark like SOFR or Prime Rate will have on the Company’sour financial position orcondition, results of operations.operations or cash flows.
In July 2017,
Other recent ASU’s issued by the FASB issued ASU 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), and Derivative and Hedging (Topic 815). The amendments in Part I of this Update change the classification analysis of certain equity-linked financial instruments (or embedded features) with down-round features. When determining whether certain financial instruments should be classified as liabilitiesdid not, or equity instruments,are not believed by management to have, a down-round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down-round feature. For freestanding equity classified financial instruments, the amendments require entities that present earnings per share (“EPS”) in accordance with Topic 260 to recognize thematerial effect of the down-round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. Convertible instruments with embedded conversion options that have down- round features are now subject to the specialized guidance for contingent beneficial conversion features (in Subtopic 470-20, Debt—Debt with Conversion and Other Options ), including related EPS guidance (in Topic 260). The amendments in Part II of this Update recharacterize the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content in the Accounting Standards Codification, to a scope exception. Those amendments do not have an accounting effect. For public business entities, the amendments in Part I of this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. For all other entities, the amendments in Part I of this Update are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted for all entities, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The amendments in Part I of this Update should be applied either retrospectively to outstanding financial instruments with a down-round feature by means of a cumulative-effect adjustment to the statement of financial position as of the beginning of the first fiscal year and interim period(s) in which the pending content that links to this paragraph is effective or retrospectively to outstanding financial instruments with a down-round feature for each prior reporting period presented in accordance with the guidance on accounting changes in paragraphs 250-10-45-5 through 45-10. The amendments in Part II of this Update do not require any transition guidance because those amendments do not have an accounting effect. The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial positionpresent or results of operations.
In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 850), the objective of which is to improve the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements. In addition, the amendments in this Update make certain targeted improvements to simplify the application and disclosure of the hedge accounting guidance in current general accepted accounting principles. For public business entities, the amendments in this Update are effective for fiscal
Page 10
Civista Bancshares, Inc.
Notes to Interimfuture Consolidated Financial Statements (Unaudited)Statements.
Form 10-Q
(Amounts in thousands, except share data)
years beginning after December 15, 2018, and interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods beginning after December 15, 2020. Early application is permitted in any period after issuance. For cash flow and net investment hedges existing at the date of adoption, an entity should apply a cumulative-effect adjustment related to eliminating the separate measurement of ineffectiveness to accumulated other comprehensive income with a corresponding adjustment to the opening balance of retained earnings as of the beginning of the fiscal year that an entity adopts the amendments in this Update. The amended presentation and disclosure guidance is required only prospectively. The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial position or results of operations.
In September 2017, the FASB issued ASU 2017-13, Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842): Amendments to SEC Paragraphs Pursuant to the Staff Announcement at the July 20, 2017 EITF Meeting and Rescission of Prior SEC Staff Announcements and Observer Comments. The SEC Observer said that the SEC staff would not object if entities that are considered public business entities only because their financial statements or financial information is required to be included in another entity’s SEC filing use the effective dates for private companies when they adopt ASC 606, Revenue from Contracts with Customers, and ASC 842, Leases. The Update also supersedes certain SEC paragraphs in the Codification related to previous SEC staff announcements and moves other paragraphs, upon adoption of ASC 606 or ASC 842. This Update is not expected to have a significant impact on the Company’s financial statements.
(3) Securities
The amortized cost and fair market value of available for saleavailable-for-sale securities and the related gross unrealized gains and losses recognized in accumulated other comprehensive loss were as follows:
September 30, 2023 |
| Amortized |
|
| Gross |
|
| Gross |
|
| Fair Value |
| ||||
U.S. Treasury securities and obligations of U.S. government |
| $ | 77,081 |
|
| $ | 192 |
|
| $ | (5,978 | ) |
| $ | 71,295 |
|
Obligations of states and political subdivisions |
|
| 360,019 |
|
|
| 45 |
|
|
| (49,529 | ) |
|
| 310,535 |
|
Mortgage-backed securities in government sponsored entities |
|
| 250,503 |
|
|
| 5 |
|
|
| (38,851 | ) |
|
| 211,657 |
|
Total debt securities |
| $ | 687,603 |
|
| $ | 242 |
|
| $ | (94,358 | ) |
| $ | 593,487 |
|
December 31, 2022 |
| Amortized |
|
| Gross |
|
| Gross |
|
| Fair Value |
| ||||
U.S. Treasury securities and obligations of U.S. government |
| $ | 66,495 |
|
| $ | 20 |
|
| $ | (5,486 | ) |
| $ | 61,029 |
|
Obligations of states and political subdivisions |
|
| 350,104 |
|
|
| 784 |
|
|
| (33,640 | ) |
|
| 317,248 |
|
Mortgage-backed securities in government sponsored entities |
|
| 265,752 |
|
|
| 15 |
|
|
| (28,642 | ) |
|
| 237,125 |
|
Total debt securities |
| $ | 682,351 |
|
| $ | 819 |
|
| $ | (67,768 | ) |
| $ | 615,402 |
|
September 30, 2017 |
| Amortized Cost |
|
| Gross Unrealized Gains |
|
| Gross Unrealized Losses |
|
| Fair Value |
| ||||
U.S. Treasury securities and obligations of U.S. government agencies |
| $ | 30,972 |
|
| $ | 178 |
|
| $ | (87 | ) |
| $ | 31,063 |
|
Obligations of states and political subdivisions |
|
| 109,443 |
|
|
| 4,397 |
|
|
| (225 | ) |
|
| 113,615 |
|
Mortgage-backed securities in government sponsored entities |
|
| 83,486 |
|
|
| 793 |
|
|
| (356 | ) |
|
| 83,923 |
|
Total debt securities |
|
| 223,901 |
|
|
| 5,368 |
|
|
| (668 | ) |
|
| 228,601 |
|
Equity securities in financial institutions |
|
| 481 |
|
|
| 337 |
|
|
| — |
|
|
| 818 |
|
Total |
| $ | 224,382 |
|
| $ | 5,705 |
|
| $ | (668 | ) |
| $ | 229,419 |
|
December 31, 2016 |
| Amortized Cost |
|
| Gross Unrealized Gains |
|
| Gross Unrealized Losses |
|
| Fair Value |
| ||||
U.S. Treasury securities and obligations of U.S. government agencies |
| $ | 37,406 |
|
| $ | 117 |
|
| $ | (77 | ) |
| $ | 37,446 |
|
Obligations of states and political subdivisions |
|
| 92,177 |
|
|
| 3,395 |
|
|
| (574 | ) |
|
| 94,998 |
|
Mortgage-backed securities in government sponsored entities |
|
| 62,756 |
|
|
| 483 |
|
|
| (597 | ) |
|
| 62,642 |
|
Total debt securities |
|
| 192,339 |
|
|
| 3,995 |
|
|
| (1,248 | ) |
|
| 195,086 |
|
Equity securities in financial institutions |
|
| 481 |
|
|
| 297 |
|
|
| — |
|
|
| 778 |
|
Total |
| $ | 192,820 |
|
| $ | 4,292 |
|
| $ | (1,248 | ) |
| $ | 195,864 |
|
The amortized cost and fair value of securities at September 30, 2017,2023, by contractual maturity, is shown below. Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations. Securities not due at a single maturity date, primarily mortgage-backed securities, and equity securities are shown separately.
Available for sale |
| Amortized Cost |
|
| Fair Value |
|
| Amortized |
|
| Fair |
| ||||
Due in one year or less |
| $ | 5,099 |
|
| $ | 5,108 |
|
| $ | 6,195 |
|
| $ | 6,149 |
|
Due after one year through five years |
|
| 30,106 |
|
|
| 30,180 |
|
|
| 76,198 |
|
|
| 69,124 |
|
Due after five years through ten years |
|
| 33,441 |
|
|
| 35,104 |
|
|
| 38,390 |
|
|
| 35,162 |
|
Due after ten years |
|
| 71,769 |
|
|
| 74,286 |
|
|
| 316,317 |
|
|
| 271,395 |
|
Mortgage-backed securities |
|
| 83,486 |
|
|
| 83,923 |
|
|
| 250,503 |
|
|
| 211,657 |
|
Equity securities |
|
| 481 |
|
|
| 818 |
| ||||||||
Total securities available for sale |
| $ | 224,382 |
|
| $ | 229,419 |
| ||||||||
Total securities available-for-sale |
| $ | 687,603 |
|
| $ | 593,487 |
| ||||||||
Page 1113
Civista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
Proceeds from sales of securities available-for-sale, gross realizedunrealized gains and gross realized losses were as follows:
|
| Three months ended |
|
| Nine Months Ended |
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||||||||||||
|
| September 30, |
|
| September 30, |
|
| September 30, |
|
| September 30, |
| ||||||||||||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||
Sale proceeds |
| $ | 953 |
|
| $ | 2,385 |
|
| $ | 953 |
|
| $ | 4,379 |
|
| $ | — |
|
| $ | 57,322 |
|
| $ | — |
|
| $ | 57,322 |
|
Gross realized gains |
|
| — |
|
|
| 18 |
|
|
| — |
|
|
| 18 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Gross realized losses |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Gains (losses) from securities called or settled by the issuer |
|
| (9 | ) |
|
| — |
|
|
| (9 | ) |
|
| 2 |
|
|
| — |
|
|
| 4 |
|
|
| — |
|
|
| 10 |
|
Securities were pledged to secure public deposits, other deposits and liabilities as required by law. The carrying value of pledged securities was approximately $130,367$210,369 and $139,179$218,344 as of September 30, 20172023 and December 31, 2016,2022, respectively.
Securities withThe following tables show gross unrealized losses and fair value, aggregated by investment category, and length of time that individual securities have been in a continuous unrealized loss position at September 30, 20172023 and December 31, 2016 not recognized in income are as follows:2022:
September 30, 2017 |
| 12 Months or less |
|
| More than 12 months |
|
| Total |
| |||||||||||||||||||||||||||||||||||||||
September 30, 2023 |
| 12 Months or less |
|
| More than 12 months |
|
| Total |
| |||||||||||||||||||||||||||||||||||||||
Description of Securities |
| Fair Value |
|
| Unrealized Loss |
|
| Fair Value |
|
| Unrealized Loss |
|
| Fair Value |
|
| Unrealized Loss |
|
| Fair |
|
| Unrealized |
|
| Fair |
|
| Unrealized |
|
| Fair |
|
| Unrealized |
| ||||||||||||
U.S. Treasury securities and obligations of U.S. government agencies |
| $ | 13,574 |
|
| $ | (48 | ) |
| $ | 3,761 |
|
| $ | (39 | ) |
| $ | 17,335 |
|
| $ | (87 | ) |
| $ | 715 |
|
| $ | (3 | ) |
| $ | 59,404 |
|
| $ | (5,975 | ) |
| $ | 60,119 |
|
| $ | (5,978 | ) |
Obligations of states and political subdivisions |
|
| 4,960 |
|
|
| (51 | ) |
|
| 5,462 |
|
|
| (174 | ) |
|
| 10,422 |
|
|
| (225 | ) |
|
| 143,524 |
|
|
| (7,518 | ) |
|
| 155,603 |
|
|
| (42,011 | ) |
|
| 299,127 |
|
|
| (49,529 | ) |
Mortgage-backed securities in gov’t sponsored entities |
|
| 21,758 |
|
|
| (108 | ) |
|
| 15,062 |
|
|
| (248 | ) |
|
| 36,820 |
|
|
| (356 | ) |
|
| 21,364 |
|
|
| (1,784 | ) |
|
| 189,711 |
|
|
| (37,067 | ) |
|
| 211,075 |
|
|
| (38,851 | ) |
Total temporarily impaired |
| $ | 40,292 |
|
| $ | (207 | ) |
| $ | 24,285 |
|
| $ | (461 | ) |
| $ | 64,577 |
|
| $ | (668 | ) |
| $ | 165,603 |
|
| $ | (9,305 | ) |
| $ | 404,718 |
|
| $ | (85,053 | ) |
| $ | 570,321 |
|
| $ | (94,358 | ) |
December 31, 2022 |
| 12 Months or less |
|
| More than 12 months |
|
| Total |
| |||||||||||||||
Description of Securities |
| Fair |
|
| Unrealized |
|
| Fair |
|
| Unrealized |
|
| Fair |
|
| Unrealized |
| ||||||
U.S. Treasury securities and obligations of |
| $ | 21,042 |
|
| $ | (880 | ) |
| $ | 39,567 |
|
| $ | (4,606 | ) |
| $ | 60,609 |
|
| $ | (5,486 | ) |
Obligations of states and political subdivisions |
|
| 169,594 |
|
|
| (13,016 | ) |
|
| 73,967 |
|
|
| (20,624 | ) |
|
| 243,561 |
|
|
| (33,640 | ) |
Mortgage-backed securities in gov’t sponsored entities |
|
| 111,639 |
|
|
| (4,713 | ) |
|
| 124,622 |
|
|
| (23,929 | ) |
|
| 236,261 |
|
|
| (28,642 | ) |
Total temporarily impaired |
| $ | 302,275 |
|
| $ | (18,609 | ) |
| $ | 238,156 |
|
| $ | (49,159 | ) |
| $ | 540,431 |
|
| $ | (67,768 | ) |
December 31, 2016 |
| 12 Months or less |
|
| More than 12 months |
|
| Total |
| |||||||||||||||
Description of Securities |
| Fair Value |
|
| Unrealized Loss |
|
| Fair Value |
|
| Unrealized Loss |
|
| Fair Value |
|
| Unrealized Loss |
| ||||||
U.S. Treasury securities and obligations of U.S. government agencies |
| $ | 13,271 |
|
| $ | (61 | ) |
| $ | 893 |
|
| $ | (16 | ) |
| $ | 14,164 |
|
| $ | (77 | ) |
Obligations of states and political subdivisions |
|
| 17,167 |
|
|
| (558 | ) |
|
| 519 |
|
|
| (16 | ) |
|
| 17,686 |
|
|
| (574 | ) |
Mortgage-backed securities in gov’t sponsored entities |
|
| 35,453 |
|
|
| (566 | ) |
|
| 2,849 |
|
|
| (31 | ) |
|
| 38,302 |
|
|
| (597 | ) |
Total temporarily impaired |
| $ | 65,891 |
|
| $ | (1,185 | ) |
| $ | 4,261 |
|
| $ | (63 | ) |
| $ | 70,152 |
|
| $ | (1,248 | ) |
At September 30, 2017,2023, there were fifty-eighta total of 574 securities in the portfolio with unrealized losses mainly due to higher current market rates when compared to the time of purchase. Unrealized losses on securities have not been recognized into income because the issuers’ securities are of high credit quality, management has the intent and ability to hold these securities for the foreseeable future, and the decline in fair value is largely due to currently higher market yields increasing.rates when compared to the time of purchase. The fair value is expected to recover as the securities approach their maturity date or reset date. The Company does not intend to sell until recovery and does not believe selling will be required before recovery.
(4) Loans
Loan balances were as follows:
|
| September 30, 2017 |
|
| December 31, 2016 |
| ||
Commercial and agriculture |
| $ | 147,537 |
|
| $ | 135,462 |
|
Commercial real estate- owner occupied |
|
| 167,678 |
|
|
| 161,364 |
|
Commercial real estate- non-owner occupied |
|
| 424,430 |
|
|
| 395,931 |
|
Residential real estate |
|
| 267,839 |
|
|
| 247,308 |
|
Real estate construction |
|
| 77,978 |
|
|
| 56,293 |
|
Farm Real Estate |
|
| 38,966 |
|
|
| 41,170 |
|
Consumer and other |
|
| 17,564 |
|
|
| 17,978 |
|
Total loans |
|
| 1,141,992 |
|
|
| 1,055,506 |
|
Allowance for loan losses |
|
| (12,946 | ) |
|
| (13,305 | ) |
Net loans |
| $ | 1,129,046 |
|
| $ | 1,042,201 |
|
IncludedThe following table presents the net gains and losses on equity investments recognized in total loans above are deferred loan (fees) costsearnings for the three- and nine-months ended September 30, 2023 and 2022 and the portion of $(80)unrealized gains and losses for the period that relates to equity investments held at September 30, 20172023 and $94 at December 31, 2016.2022:
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Net gains (losses) recognized on equity securities |
| $ | 69 |
|
| $ | (133 | ) |
| $ | (169 | ) |
| $ | (44 | ) |
Less: Net losses realized on the sale of |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Unrealized gains (losses) recognized on equity |
| $ | 69 |
|
| $ | (133 | ) |
| $ | (169 | ) |
| $ | (44 | ) |
Page 1214
Civista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
(4) Loans
Loan balances were as follows:
|
| September 30, 2023 |
|
| December 31, 2022 |
| ||
Commercial & Agriculture |
| $ | 301,877 |
|
| $ | 278,595 |
|
Commercial Real Estate- Owner Occupied |
|
| 375,851 |
|
|
| 371,147 |
|
Commercial Real Estate- Non-Owner Occupied |
|
| 1,102,932 |
|
|
| 1,018,736 |
|
Residential Real Estate |
|
| 614,304 |
|
|
| 552,781 |
|
Real Estate Construction |
|
| 269,291 |
|
|
| 243,127 |
|
Farm Real Estate |
|
| 24,109 |
|
|
| 24,708 |
|
Lease Financing Receivable |
|
| 48,259 |
|
|
| 36,797 |
|
Consumer and Other |
|
| 18,267 |
|
|
| 20,775 |
|
Total loans |
|
| 2,754,890 |
|
|
| 2,546,666 |
|
Allowance for credit losses |
|
| (35,280 | ) |
|
| (28,511 | ) |
Net loans |
| $ | 2,719,610 |
|
| $ | 2,518,155 |
|
Included in Commercial & Agriculture loans above are $399 and $566 of Paycheck Protection Program (“PPP”) loans as of September 30, 2023 and December 31, 2022, respectively.
Included in total loans above are net deferred loan fees of $2,542 and $1,652 at September 30, 2023 and December 31, 2022, respectively.
The Company elected to exclude accrued interest receivable from the amortized cost basis of loans disclosed throughout this Note 4 and Note 5 (Allowance for Credit Losses). As of September 30, 2023 and December 31, 2022, accrued interest receivable totaled $11,489 and $11,178, respectively, and is included in the accrued interest receivable line item on the Company's Consolidated Balance Sheet.
(5) Allowance for LoanCredit Losses
Management has an establishedAs previously mentioned in Note 2 Significant Accounting Policies, the Company’s January 1, 2023, adoption of ASU No. 2016-13, “Measurement of Credit Losses on Financial Instruments,” resulted in a significant change to our methodology to determinefor estimating the adequacyACL since December 31, 2022. As a result of the allowance for loan losses that assesses the risks and losses inherent in the loan portfolio. For purposes of determining the allowance for loan and lease losses,this adoption, the Company has segmented certain loans inrecorded a $5,193 increase to the portfolio by product type. Loss migration rates for each risk category are calculated and usedACL as the basis for calculating loan loss allowance allocations. Loss migration rates are calculated over a three-year period for all portfolio segments. Management also considers certain economic factors for trends that management uses to account for the qualitative and environmental changes in risk, which affects the level of the reserve. cumulative-effect adjustment on January 1, 2023.
The following economic factors are analyzed:
Changes in lending policies and procedures
Changes in experience and depth of lending and management staff
Changes in quality of credit review system
Changes in nature and volume of the loan portfolio
Changes in past due, classified and nonaccrual loans and TDRs
Changes in economic and business conditions
Changes in competition or legal and regulatory requirements
Changes in concentrations within the loan portfolio
Changes in the underlying collateral for collateral dependent loans
The total allowance reflects management’s estimate of loan losses inherent in the loan portfolio at the balance sheet date. The Company considers the allowance for loan losses of $12,946 adequate to cover loan losses inherent in the loan portfolio, at September 30, 2017. The following tables present,table presents, by portfolio segment, the changes in the allowance for loan lossesACL for the threethree- and ninenine-months ended September 30, 2023 and 2022.
Allowance for credit losses:
For the three months ended September 30, 2023 |
| Beginning balance |
|
| Charge-offs |
|
| Recoveries |
|
| Provision |
|
| Ending Balance |
| |||||
Commercial & Agriculture |
| $ | 5,540 |
|
| $ | (614 | ) |
| $ | 84 |
|
| $ | 146 |
|
| $ | 5,156 |
|
Commercial Real Estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Owner Occupied |
|
| 5,531 |
|
|
| — |
|
|
| — |
|
|
| (50 | ) |
|
| 5,481 |
|
Non-Owner Occupied |
|
| 11,646 |
|
|
| — |
|
|
| 9 |
|
|
| (100 | ) |
|
| 11,555 |
|
Residential Real Estate |
|
| 6,515 |
|
|
| (1 | ) |
|
| 64 |
|
|
| 253 |
|
|
| 6,831 |
|
Real Estate Construction |
|
| 3,447 |
|
|
| — |
|
|
| 4 |
|
|
| 288 |
|
|
| 3,739 |
|
Farm Real Estate |
|
| 243 |
|
|
| — |
|
|
| — |
|
|
| (16 | ) |
|
| 227 |
|
Lease Financing Receivables |
|
| 1,947 |
|
|
| — |
|
|
| — |
|
|
| (115 | ) |
|
| 1,832 |
|
Consumer and Other |
|
| 272 |
|
|
| (51 | ) |
|
| 6 |
|
|
| 21 |
|
|
| 248 |
|
Unallocated |
|
| 8 |
|
|
| — |
|
|
| — |
|
|
| 203 |
|
|
| 211 |
|
Total |
| $ | 35,149 |
|
| $ | (666 | ) |
| $ | 167 |
|
| $ | 630 |
|
| $ | 35,280 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Page 15
Civista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
For the three months ended September 30, 2017 and 2016.
Allowance2023, the Company provided $630 to the allowance for loan losses:
Forcredit losses, as compared to a provision of $300 for the ninethree months ended September 30, 20172022. The increase in the reserves was principally related to loan growth during the quarter.
September 30, 2017 |
| Beginning balance |
|
| Charge-offs |
|
| Recoveries |
|
| Provision |
|
| Ending Balance |
| |||||
Commercial & Agriculture |
| $ | 2,018 |
|
| $ | (11 | ) |
| $ | 134 |
|
| $ | (530 | ) |
| $ | 1,611 |
|
Commercial Real Estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner Occupied |
|
| 2,171 |
|
|
| (301 | ) |
|
| 26 |
|
|
| 177 |
|
|
| 2,073 |
|
Non-Owner Occupied |
|
| 4,606 |
|
|
| (38 | ) |
|
| 42 |
|
|
| 663 |
|
|
| 5,273 |
|
Residential Real Estate |
|
| 3,089 |
|
|
| (312 | ) |
|
| 164 |
|
|
| (462 | ) |
|
| 2,479 |
|
Real Estate Construction |
|
| 420 |
|
|
| — |
|
|
| 32 |
|
|
| 215 |
|
|
| 667 |
|
Farm Real Estate |
|
| 442 |
|
|
| — |
|
|
| 2 |
|
|
| (20 | ) |
|
| 424 |
|
Consumer and Other |
|
| 314 |
|
|
| (135 | ) |
|
| 38 |
|
|
| 108 |
|
|
| 325 |
|
Unallocated |
|
| 245 |
|
|
| — |
|
|
| — |
|
|
| (151 | ) |
|
| 94 |
|
Total |
| $ | 13,305 |
|
| $ | (797 | ) |
| $ | 438 |
|
| $ | — |
|
| $ | 12,946 |
|
Allowance for credit losses:
For the three months ended September 30, 2022 |
| Beginning balance |
|
| Charge-offs |
|
| Recoveries |
|
| Provision |
|
| Ending Balance |
| |||||
Commercial & Agriculture |
| $ | 2,790 |
|
| $ | (22 | ) |
| $ | 12 |
|
| $ | (51 | ) |
| $ | 2,729 |
|
Commercial Real Estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Owner Occupied |
|
| 4,729 |
|
|
| — |
|
|
| 15 |
|
|
| 182 |
|
|
| 4,926 |
|
Non-Owner Occupied |
|
| 14,711 |
|
|
| — |
|
|
| 16 |
|
|
| (300 | ) |
|
| 14,427 |
|
Residential Real Estate |
|
| 2,859 |
|
|
| (39 | ) |
|
| 64 |
|
|
| 152 |
|
|
| 3,036 |
|
Real Estate Construction |
|
| 1,969 |
|
|
| — |
|
|
| — |
|
|
| 44 |
|
|
| 2,013 |
|
Farm Real Estate |
|
| 236 |
|
|
| — |
|
|
| 1 |
|
|
| 14 |
|
|
| 251 |
|
Consumer and Other |
|
| 130 |
|
|
| (13 | ) |
|
| 4 |
|
|
| 21 |
|
|
| 142 |
|
Unallocated |
|
| 11 |
|
|
| — |
|
|
| — |
|
|
| 238 |
|
|
| 249 |
|
Total |
| $ | 27,435 |
|
| $ | (74 | ) |
| $ | 112 |
|
| $ | 300 |
|
| $ | 27,773 |
|
For the ninethree months ended September 30, 2017,2022, the Company provided $300 to the allowance for credit losses. The provision in the third quarter of 2022 reflected the Company’s strong loan growth during the quarter. Our credit quality metrics remained stable despite the ongoing headwinds of the challenging international, national, regional and local economic conditions. While COVID-19 vaccinations and improved treatments had created a level of optimism, there remained caution due to the lingering concerns over potential infection spikes. We remained cautious given the level of classified loans in the portfolio, particularly loans to borrowers in the hotel industry as well as the challenges businesses face in today’s environment. As of September 30, 2022 economic impacts related to the COVID-19 pandemic had improved somewhat, but continued concerns lingered due to the disruption of supply chains, additional employee costs, higher challenges throughout our footprint, rising inflationary pressures and the prospects of recession.
Page 16
Civista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
During the three months ended September 30, 2022, the allowance for Commercial & Agriculture loans was reduced by a decrease in general reserves as a result of lower loss rates. The result was represented as a decrease in the provision. The allowance for Commercial Real Estate – Owner Occupied loans was reduced by a decrease in general reserves and charge-offs. The allowance for Commercial Real Estate – Non-Owner Occupied loans increaseddecreased due to an increase in general reserves required for this type as a result of higher loan balances. The allowance for Residential Real Estate loans was reduced by a decrease in general reserves required for this type as a result of a decrease in loss rates, represented by a decrease in the provision. The allowance for Real Estate Construction loans increased due to higher outstanding loan balances for this type of loan. The allowance for Farm Real Estate loans was reduced by a decrease in general reserves required for this type as a result of lower outstanding loan balances. The result was represented as a decrease in the provision. The allowance for Consumer and Other loans increased due to an increase in general reserves required for this type as a result of higher loss rates. Management feels that the unallocated amount is appropriate and within the relevant range for the allowance that is reflective of the risk in the portfolio.
Page 13
Civista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
For the nine months ended September 30, 2016
|
| Beginning balance |
|
| Charge-offs |
|
| Recoveries |
|
| Provision |
|
| Ending Balance |
| |||||
Commercial & Agriculture |
| $ | 1,478 |
|
| $ | (870 | ) |
| $ | 79 |
|
| $ | 1,023 |
|
| $ | 1,710 |
|
Commercial Real Estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner Occupied |
|
| 2,467 |
|
|
| (166 | ) |
|
| 53 |
|
|
| (44 | ) |
|
| 2,310 |
|
Non-Owner Occupied |
|
| 4,657 |
|
|
| (23 | ) |
|
| 1,365 |
|
|
| (1,456 | ) |
|
| 4,543 |
|
Residential Real Estate |
|
| 4,086 |
|
|
| (280 | ) |
|
| 384 |
|
|
| (735 | ) |
|
| 3,455 |
|
Real Estate Construction |
|
| 371 |
|
|
| (115 | ) |
|
| 8 |
|
|
| 160 |
|
|
| 424 |
|
Farm Real Estate |
|
| 538 |
|
|
| — |
|
|
| — |
|
|
| (108 | ) |
|
| 430 |
|
Consumer and Other |
|
| 382 |
|
|
| (85 | ) |
|
| 40 |
|
|
| 0 |
|
|
| 337 |
|
Unallocated |
|
| 382 |
|
|
| — |
|
|
| — |
|
|
| (140 | ) |
|
| 242 |
|
Total |
| $ | 14,361 |
|
| $ | (1,539 | ) |
| $ | 1,929 |
|
| $ | (1,300 | ) |
| $ | 13,451 |
|
For the nine months ended September 30, 2016, the allowance for Commercial & Agriculture loans increased due to an increase in general reserves as a result of higher balances and higher loss rates in criticized loans. The result was represented as an increase in the provision. The allowance for Commercial Real Estate – Owner Occupied loans was reduced not only by a decrease in specific reserves required for this type, but also by decreases in past due, classified and non-accrual loans for this type. The result of these changes was represented as a decrease in the provision. The decrease in allowance for Commercial Real Estate – Non-Owner Occupied loans was the result of a decrease in general reserves required as a result of lower loss rates and improvement in past due, classified and non-accrual loans for this type. In addition, a payoff on a previously charged down loan was received resulting in a recovery of approximately $1,303. The net result was represented as a decrease in the provision. The allowance for Residential Real Estate loans was reduced by a decrease in general reserves required for this type as a result of a decrease in loss rates, represented by a decrease in the provision. The allowance for Real Estate Construction loans increased due to an increase in loss rates for this type of loan, which was represented as an increase in the provision. The allowance for Farm Real Estate loans was reduced by a decrease in general reserves required for this type as a result of lower outstanding loan balances and a decrease in loss rates. The result of these changes was represented as a decrease induring the provision. Management feels that the unallocated amount is appropriate and within the relevant range for the allowance that is reflective of the risk in the portfolio.
Allowance for loan losses:
For the three months ended September 30, 2017
|
| Beginning balance |
|
| Charge-offs |
|
| Recoveries |
|
| Provision |
|
| Ending Balance |
| |||||
Commercial & Agriculture |
| $ | 1,608 |
|
| $ | (10 | ) |
| $ | 51 |
|
| $ | (38 | ) |
| $ | 1,611 |
|
Commercial Real Estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner Occupied |
|
| 2,010 |
|
|
| (91 | ) |
|
| 8 |
|
|
| 146 |
|
|
| 2,073 |
|
Non-Owner Occupied |
|
| 4,739 |
|
|
| (38 | ) |
|
| 33 |
|
|
| 539 |
|
|
| 5,273 |
|
Residential Real Estate |
|
| 2,676 |
|
|
| (116 | ) |
|
| 77 |
|
|
| (158 | ) |
|
| 2,479 |
|
Real Estate Construction |
|
| 482 |
|
|
| — |
|
|
| 13 |
|
|
| 172 |
|
|
| 667 |
|
Farm Real Estate |
|
| 425 |
|
|
| — |
|
|
| 2 |
|
|
| (3 | ) |
|
| 424 |
|
Consumer and Other |
|
| 324 |
|
|
| (54 | ) |
|
| 24 |
|
|
| 31 |
|
|
| 325 |
|
Unallocated |
|
| 783 |
|
|
| — |
|
|
| — |
|
|
| (689 | ) |
|
| 94 |
|
Total |
| $ | 13,047 |
|
| $ | (309 | ) |
| $ | 208 |
|
| $ | — |
|
| $ | 12,946 |
|
For the three months ended September 30, 2017, the allowance for Commercial & Agriculture loans increased due to an increase in general reserves as a result of higher loan balances, offset by net recoveries.quarter. The result was represented as a decrease in the provision. The allowance for Commercial Real Estate – Owner Occupied loans increased due to an increase in general reserves required for this type as a result of higher outstandingincreased loan balances and loss rates.balances. The result was represented as an increase in the provision. The allowance for Commercial Real Estate – Non-Owner Occupied loans decreased due to a decrease in risk rated loans and lower loss rates, offset by an increase in general reserves required as a result of an increase in loan balances. This was represented as a decrease in the provision. The allowance for Residential Real Estate loans increased due to an increase in general reserves required for this type as a result of higher loan balances and by higher loss rates. The allowance for Residential Real Estate loans was reduced by a decrease in general reserves required for this type as a result of a decrease in loss rates, represented by a decrease in the provision. The allowance for Real Estate Construction loans increased due to higher outstanding loan balances for this type of loan and recoveries. Management feels that the unallocated amount is appropriate and within the relevant range for the allowance that is reflective of the risk in the portfolio.
Page 14
Civista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
For the three months ended September 30, 2016
|
| Beginning balance |
|
| Charge-offs |
|
| Recoveries |
|
| Provision |
|
| Ending Balance |
| |||||
Commercial & Agriculture |
| $ | 1,557 |
|
| $ | (828 | ) |
| $ | 44 |
|
| $ | 937 |
|
| $ | 1,710 |
|
Commercial Real Estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner Occupied |
|
| 2,393 |
|
|
| (124 | ) |
|
| 1 |
|
|
| 40 |
|
|
| 2,310 |
|
Non-Owner Occupied |
|
| 4,969 |
|
|
| (23 | ) |
|
| 6 |
|
|
| (409 | ) |
|
| 4,543 |
|
Residential Real Estate |
|
| 3,899 |
|
|
| (55 | ) |
|
| 23 |
|
|
| (412 | ) |
|
| 3,455 |
|
Real Estate Construction |
|
| 366 |
|
|
| (115 | ) |
|
| 6 |
|
|
| 167 |
|
|
| 424 |
|
Farm Real Estate |
|
| 476 |
|
|
| — |
|
|
| — |
|
|
| (46 | ) |
|
| 430 |
|
Consumer and Other |
|
| 358 |
|
|
| (38 | ) |
|
| 7 |
|
|
| 10 |
|
|
| 337 |
|
Unallocated |
|
| 529 |
|
|
| — |
|
|
| — |
|
|
| (287 | ) |
|
| 242 |
|
Total |
| $ | 14,547 |
|
| $ | (1,183 | ) |
| $ | 87 |
|
| $ | — |
|
| $ | 13,451 |
|
For the three months ended September 30, 2016, the allowance for Commercial & Agriculture loans increased due to an increase in general reserves as a result of higher loss rates and an increase in loan balances. The result was represented asby an increase in the provision. The decrease in allowance for Commercial Real Estate – Non-Owner Occupied loans was the result of a decrease in general reserves required as a result of lower loss rates and improvement in past due, classified and non-accrual loans for this type. The net result was represented as a decrease in the provision. The allowance for Residential Real Estate loans was reduced by a decrease in general reserves required for this type as a result of a decrease in loss rates, represented by a decrease in the provision. The allowance for Real Estate Construction loans increased due to an increase in loss rates for this type of loan whichbalances. This was represented as an increase in the provision. The allowance for Farm Real Estate loans was reduced by a decrease in general reserves required for this type as a result of lower outstanding loan balances, represented as a decrease in the provision. Management feels that the unallocated amount is appropriate and within the relevant range for the allowance that is reflective of the risk in the portfolio.portfolio at September 30, 2022.
Allowance for credit losses:
For the nine months ended September 30, 2023 |
| Beginning balance |
|
| CECL Adoption Day 1 Impact |
|
| Impact of Adopting ASC 326 - PCD Loans 1 |
| Charge-offs |
|
| Recoveries |
|
| Provision |
|
| Ending Balance |
| |||||||
Commercial & Agriculture |
| $ | 3,011 |
|
| $ | 429 |
|
| $ | — |
| $ | (754 | ) |
| $ | 131 |
|
| $ | 2,339 |
|
| $ | 5,156 |
|
Commercial Real Estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Owner Occupied |
|
| 4,565 |
|
|
| 1,075 |
|
|
| 19 |
|
| — |
|
|
| — |
|
|
| (178 | ) |
|
| 5,481 |
|
Non-Owner Occupied |
|
| 14,138 |
|
|
| (2,847 | ) |
|
| — |
|
| — |
|
|
| 25 |
|
|
| 239 |
|
|
| 11,555 |
|
Residential Real Estate |
|
| 3,145 |
|
|
| 2,762 |
|
|
| 166 |
|
| (12 | ) |
|
| 118 |
|
|
| 652 |
|
|
| 6,831 |
|
Real Estate Construction |
|
| 2,293 |
|
|
| 1,502 |
|
|
| — |
|
| — |
|
|
| 13 |
|
|
| (69 | ) |
|
| 3,739 |
|
Farm Real Estate |
|
| 291 |
|
|
| (28 | ) |
|
| — |
|
| — |
|
|
| — |
|
|
| (36 | ) |
|
| 227 |
|
Lease Financing Receivables |
|
| 429 |
|
|
| 1,743 |
|
|
| 635 |
|
| — |
|
|
| — |
|
|
| (975 | ) |
|
| 1,832 |
|
Consumer and Other |
|
| 98 |
|
|
| 201 |
|
|
| 77 |
|
| (89 | ) |
|
| 33 |
|
|
| (72 | ) |
|
| 248 |
|
Unallocated |
|
| 541 |
|
|
| (541 | ) |
|
| — |
|
| — |
|
|
| — |
|
|
| 211 |
|
|
| 211 |
|
Total |
| $ | 28,511 |
|
| $ | 4,296 |
|
| $ | 897 |
| $ | (855 | ) |
| $ | 320 |
|
| $ | 2,111 |
|
| $ | 35,280 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
1 Day 1 impact of $1,668, of adopting ASC 326-PCD loans was netted by changes in estimates of $771. |
| ||||||||||||||||||||||||||
For the nine months ended September 30, 2023, the Company provided $2,111 to the allowance for credit losses, as compared to a provision of $1,000 for the nine months ended September 30, 2022. Upon adoption of CECL on January 1, 2023, we recorded an increase in the allowance for credit losses of $5,193 in the first quarter of 2023. The increase in the reserves was principally related to loan growth during the quarter.
Allowance for credit losses:
For the nine months ended September 30, 2022 |
| Beginning balance |
|
| Charge-offs |
|
| Recoveries |
|
| Provision |
|
| Ending Balance |
| |||||
Commercial & Agriculture |
| $ | 2,600 |
|
| $ | (22 | ) |
| $ | 16 |
|
| $ | 135 |
|
| $ | 2,729 |
|
Commercial Real Estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Owner Occupied |
|
| 4,464 |
|
|
| — |
|
|
| 42 |
|
|
| 420 |
|
|
| 4,926 |
|
Non-Owner Occupied |
|
| 13,860 |
|
|
| — |
|
|
| 68 |
|
|
| 499 |
|
|
| 14,427 |
|
Residential Real Estate |
|
| 2,597 |
|
|
| (97 | ) |
|
| 140 |
|
|
| 396 |
|
|
| 3,036 |
|
Real Estate Construction |
|
| 1,810 |
|
|
| — |
|
|
| — |
|
|
| 203 |
|
|
| 2,013 |
|
Farm Real Estate |
|
| 287 |
|
|
| — |
|
|
| 5 |
|
|
| (41 | ) |
|
| 251 |
|
Consumer and Other |
|
| 176 |
|
|
| (45 | ) |
|
| 25 |
|
|
| (14 | ) |
|
| 142 |
|
Unallocated |
|
| 847 |
|
|
| — |
|
|
| — |
|
|
| (598 | ) |
|
| 249 |
|
Total |
| $ | 26,641 |
|
| $ | (164 | ) |
| $ | 296 |
|
| $ | 1,000 |
|
| $ | 27,773 |
|
For the nine months ended September 30, 2022, the Company provided $1,000 to the allowance for loan losses. During the nine months ended September 30, 2022, The increase in provision was due to the strong loan growth during the first nine months of 2022. In addition,
Page 17
Civista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
the challenges of the international, national, regional,and local economic conditions, particularly inflation, have taken greater focus from the prior economic shutdown and restrictions in response to the COVID-19 pandemic. Despite these concerns our portfolio quality has remained stable overall with decreases in criticized loans. We continue to be optimistic that asset quality will continue to remain strong despite ongoing headwinds. While we remain cautious given the impact of inflation on all of our borrowers, we are encouraged by strong loan growth. Management felt that the unallocated amount was appropriate and within the relevant range for the allowance that was reflective of the risk in the portfolio at September 30, 2022.
The following tables present, by portfolio segment, the allocation of the allowance for loancredit losses and related loan balances as of September 30, 2017 and December 31, 2016.2022.
September 30, 2017 |
| Loans acquired with credit deterioration |
|
| Loans individually evaluated for impairment |
|
| Loans collectively evaluated for impairment |
|
| Total |
| ||||||||||||||||||||
Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
December 31, 2022 |
| Loans acquired |
|
| Loans individually |
|
| Loans collectively |
|
| Total |
| ||||||||||||||||||||
Allowance for credit losses: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Commercial & Agriculture |
| $ | 81 |
|
| $ | 122 |
|
| $ | 1,408 |
|
| $ | 1,611 |
|
| $ | 6 |
|
| $ | — |
|
| $ | 3,005 |
|
| $ | 3,011 |
|
Commercial Real Estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Owner Occupied |
|
| — |
|
|
| 4 |
|
|
| 2,069 |
|
|
| 2,073 |
|
|
| 3 |
|
|
| 6 |
|
|
| 4,556 |
|
|
| 4,565 |
|
Non-Owner Occupied |
|
| — |
|
|
| — |
|
|
| 5,273 |
|
|
| 5,273 |
|
|
| — |
|
|
| — |
|
|
| 14,138 |
|
|
| 14,138 |
|
Residential Real Estate |
|
| 52 |
|
|
| 114 |
|
|
| 2,313 |
|
|
| 2,479 |
|
|
| — |
|
|
| 1 |
|
|
| 3,144 |
|
|
| 3,145 |
|
Real Estate Construction |
|
| — |
|
|
| — |
|
|
| 667 |
|
|
| 667 |
|
|
| — |
|
|
| — |
|
|
| 2,293 |
|
|
| 2,293 |
|
Farm Real Estate |
|
| — |
|
|
| 6 |
|
|
| 418 |
|
|
| 424 |
|
|
| — |
|
|
| — |
|
|
| 291 |
|
|
| 291 |
|
Consumer and Other |
|
| — |
|
|
| — |
|
|
| 325 |
|
|
| 325 |
|
|
| — |
|
|
| — |
|
|
| 98 |
|
|
| 98 |
|
Lease Financing Receivables |
|
| — |
|
|
| — |
|
|
| 429 |
|
|
| 429 |
| ||||||||||||||||
Unallocated |
|
| — |
|
|
| — |
|
|
| 94 |
|
|
| 94 |
|
|
| — |
|
|
| — |
|
|
| 541 |
|
|
| 541 |
|
Total |
| $ | 133 |
|
| $ | 246 |
|
| $ | 12,567 |
|
| $ | 12,946 |
|
| $ | 9 |
|
| $ | 7 |
|
| $ | 28,495 |
|
| $ | 28,511 |
|
Outstanding loan balances: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Commercial & Agriculture |
| $ | 89 |
|
| $ | 1,170 |
|
| $ | 146,278 |
|
| $ | 147,537 |
|
| $ | 863.00 |
|
| $ | — |
|
| $ | 277,732 |
|
| $ | 278,595 |
|
Commercial Real Estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Owner Occupied |
|
| — |
|
|
| 1,039 |
|
|
| 166,639 |
|
|
| 167,678 |
|
|
| 1,988 |
|
|
| 232 |
|
|
| 368,927 |
|
|
| 371,147 |
|
Non-Owner Occupied |
|
| — |
|
|
| 50 |
|
|
| 424,380 |
|
|
| 424,430 |
|
|
| 119 |
|
|
| — |
|
|
| 1,018,617 |
|
|
| 1,018,736 |
|
Residential Real Estate |
|
| 139 |
|
|
| 1,386 |
|
|
| 266,314 |
|
|
| 267,839 |
|
|
| 1,414 |
|
|
| 392 |
|
|
| 550,975 |
|
|
| 552,781 |
|
Real Estate Construction |
|
| — |
|
|
| — |
|
|
| 77,978 |
|
|
| 77,978 |
|
|
| — |
|
|
| — |
|
|
| 243,127 |
|
|
| 243,127 |
|
Farm Real Estate |
|
| — |
|
|
| 613 |
|
|
| 38,353 |
|
|
| 38,966 |
|
|
| — |
|
|
| — |
|
|
| 24,708 |
|
|
| 24,708 |
|
Lease Financing Receivables |
|
| — |
|
|
| — |
|
|
| 36,797 |
|
|
| 36,797 |
| ||||||||||||||||
Consumer and Other |
|
| — |
|
|
| — |
|
|
| 17,564 |
|
|
| 17,564 |
|
|
| 1 |
|
|
| — |
|
|
| 20,774 |
|
|
| 20,775 |
|
Total |
| $ | 228 |
|
| $ | 4,258 |
|
| $ | 1,137,506 |
|
| $ | 1,141,992 |
|
| $ | 4,385 |
|
| $ | 624 |
|
| $ | 2,541,657 |
|
| $ | 2,546,666 |
|
Page 15
Civista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
December 31, 2016 |
| Loans acquired with credit deterioration |
|
| Loans individually evaluated for impairment |
|
| Loans collectively evaluated for impairment |
|
| Total |
| ||||
Allowance for loan losses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial & Agriculture |
| $ | 86 |
|
| $ | 82 |
|
| $ | 1,850 |
|
| $ | 2,018 |
|
Commercial Real Estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner Occupied |
|
| — |
|
|
| 4 |
|
|
| 2,167 |
|
|
| 2,171 |
|
Non-Owner Occupied |
|
| — |
|
|
| — |
|
|
| 4,606 |
|
|
| 4,606 |
|
Residential Real Estate |
|
| 89 |
|
|
| 102 |
|
|
| 2,898 |
|
|
| 3,089 |
|
Real Estate Construction |
|
| — |
|
|
| — |
|
|
| 420 |
|
|
| 420 |
|
Farm Real Estate |
|
| — |
|
|
| — |
|
|
| 442 |
|
|
| 442 |
|
Consumer and Other |
|
| — |
|
|
| — |
|
|
| 314 |
|
|
| 314 |
|
Unallocated |
|
| — |
|
|
| — |
|
|
| 245 |
|
|
| 245 |
|
Total |
| $ | 175 |
|
| $ | 188 |
|
| $ | 12,942 |
|
| $ | 13,305 |
|
Outstanding loan balances: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial & Agriculture |
| $ | 88 |
|
| $ | 1,983 |
|
| $ | 133,391 |
|
| $ | 135,462 |
|
Commercial Real Estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner Occupied |
|
| — |
|
|
| 1,896 |
|
|
| 159,468 |
|
|
| 161,364 |
|
Non-Owner Occupied |
|
| — |
|
|
| 359 |
|
|
| 395,572 |
|
|
| 395,931 |
|
Residential Real Estate |
|
| 168 |
|
|
| 1,686 |
|
|
| 245,454 |
|
|
| 247,308 |
|
Real Estate Construction |
|
| — |
|
|
| — |
|
|
| 56,293 |
|
|
| 56,293 |
|
Farm Real Estate |
|
| — |
|
|
| 614 |
|
|
| 40,556 |
|
|
| 41,170 |
|
Consumer and Other |
|
| — |
|
|
| 1 |
|
|
| 17,977 |
|
|
| 17,978 |
|
Total |
| $ | 256 |
|
| $ | 6,539 |
|
| $ | 1,048,711 |
|
| $ | 1,055,506 |
|
The following tables present credit exposures by internally assigned risk grades as of September 30, 20172023 and December 31, 2016.2022. The risk rating analysis estimates the capability of the borrower to repay the contractual obligations of the loan agreements as scheduled or at all. The Company’s internal credit risk grading system is based on experiences with similarly graded loans.
The Company’s internally assigned risk grades are as follows:
Pass – loans which are protected by the current net worth and paying capacity of the obligor or by the value of the underlying collateral.
Special Mention – loans where a potential weakness or risk exists, which could cause a more serious problem if not corrected.
Substandard – loans that have a well-defined weakness based on objective evidence and are characterized by the distinct possibility that Civista will sustain some loss if the deficiencies are not corrected.
Doubtful – loans classified as doubtful have all the weaknesses inherent in a substandard asset. In addition, these weaknesses make collection or liquidation in full highly questionable and improbable, based on existing circumstances.
Loss – loans classified as a loss are considered uncollectible, or of such value that continuance as an asset is not warranted.
Page 1618
Civista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
Based on the most recent analysis performed, the risk category of loans, by type and year of originations, at September 30, 2023, is as follows:
|
| Term Loans Amortized Cost Basis by Origination Year |
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Revolving |
|
|
|
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Loans |
|
|
|
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Revolving |
|
| Converted |
|
|
|
| |||||||||
September 30, 2023 |
| 2023 |
|
| 2022 |
|
| 2021 |
|
| 2020 |
|
| 2019 |
|
| Prior |
|
| Loans |
|
| to Term |
|
| Total |
| |||||||||
Commercial & Agriculture |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Pass |
| $ | 60,223 |
|
| $ | 72,407 |
|
| $ | 46,378 |
|
| $ | 12,263 |
|
| $ | 7,418 |
|
| $ | 15,439 |
|
| $ | 79,760 |
|
| $ | — |
|
| $ | 293,888 |
|
Special Mention |
|
| 906 |
|
|
| — |
|
|
| 340 |
|
|
| 1,797 |
|
|
| — |
|
|
| 113 |
|
|
| 176 |
|
|
| — |
|
|
| 3,332 |
|
Substandard |
|
| 408 |
|
|
| — |
|
|
| 62 |
|
|
| 117 |
|
|
| 283 |
|
|
| 195 |
|
|
| 3,592 |
|
|
| — |
|
|
| 4,657 |
|
Doubtful |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total Commercial & Agriculture |
| $ | 61,537 |
|
| $ | 72,407 |
|
| $ | 46,780 |
|
| $ | 14,177 |
|
| $ | 7,701 |
|
| $ | 15,747 |
|
| $ | 83,528 |
|
| $ | — |
|
| $ | 301,877 |
|
Commercial & Agriculture: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Current-period gross charge-offs |
| $ | — |
|
| $ | 673 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 81 |
|
| $ | — |
|
| $ | — |
|
| $ | 754 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Commercial Real Estate - Owner Occupied |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Pass |
| $ | 28,733 |
|
| $ | 81,961 |
|
| $ | 67,764 |
|
| $ | 57,827 |
|
| $ | 30,558 |
|
| $ | 96,394 |
|
| $ | 6,488 |
|
| $ | — |
|
| $ | 369,725 |
|
Special Mention |
|
| 529 |
|
|
| 219 |
|
|
| 745 |
|
|
| 294 |
|
|
| 3,098 |
|
|
| 287 |
|
|
| — |
|
|
| — |
|
|
| 5,172 |
|
Substandard |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 954 |
|
|
| — |
|
|
| — |
|
|
| 954 |
|
Doubtful |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total Commercial Real Estate - Owner Occupied |
| $ | 29,262 |
|
| $ | 82,180 |
|
| $ | 68,509 |
|
| $ | 58,121 |
|
| $ | 33,656 |
|
| $ | 97,635 |
|
| $ | 6,488 |
|
| $ | — |
|
| $ | 375,851 |
|
Commercial Real Estate - Owner Occupied: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Current-period gross charge-offs |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Commercial Real Estate - Non-Owner Occupied |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Pass |
| $ | 118,399 |
|
| $ | 261,880 |
|
| $ | 195,881 |
|
| $ | 138,388 |
|
| $ | 121,917 |
|
| $ | 219,770 |
|
| $ | 23,446 |
|
| $ | — |
|
| $ | 1,079,681 |
|
Special Mention |
|
| — |
|
|
| 5,816 |
|
|
| 6,227 |
|
|
| — |
|
|
| - |
|
|
| 7,373 |
|
|
| 277 |
|
|
| — |
|
|
| 19,693 |
|
Substandard |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 129 |
|
|
| 3,429 |
|
|
| — |
|
|
| — |
|
|
| 3,558 |
|
Doubtful |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total Commercial Real Estate - Non-Owner Occupied |
| $ | 118,399 |
|
| $ | 267,696 |
|
| $ | 202,108 |
|
| $ | 138,388 |
|
| $ | 122,046 |
|
| $ | 230,572 |
|
| $ | 23,723 |
|
| $ | — |
|
| $ | 1,102,932 |
|
Commercial Real Estate - Non-Owner Occupied: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Current-period gross charge-offs |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Residential Real Estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Pass |
| $ | 62,756 |
|
| $ | 106,652 |
|
| $ | 95,914 |
|
| $ | 73,032 |
|
| $ | 35,184 |
|
| $ | 80,593 |
|
| $ | 153,753 |
|
| $ | — |
|
| $ | 607,884 |
|
Special Mention |
|
| — |
|
|
| - |
|
|
| 224 |
|
|
| 98 |
|
|
| — |
|
|
| 250 |
|
|
| 55 |
|
|
| — |
|
|
| 627 |
|
Substandard |
|
| — |
|
|
| 352 |
|
|
| 442 |
|
|
| 85 |
|
|
| 583 |
|
|
| 3,049 |
|
|
| 1,282 |
|
|
| — |
|
|
| 5,793 |
|
Doubtful |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total Residential Real Estate |
| $ | 62,756 |
|
| $ | 107,004 |
|
| $ | 96,580 |
|
| $ | 73,215 |
|
| $ | 35,767 |
|
| $ | 83,892 |
|
| $ | 155,090 |
|
| $ | — |
|
| $ | 614,304 |
|
Residential Real Estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Page 19
Civista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
Current-period gross charge-offs |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 12 |
|
| $ | — |
|
| $ | — |
|
| $ | 12 |
|
Real Estate Construction |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Pass |
| $ | 62,658 |
|
| $ | 137,265 |
|
| $ | 31,871 |
|
| $ | 15,563 |
|
| $ | 2,678 |
|
| $ | 2,708 |
|
| $ | 12,271 |
|
| $ | — |
|
| $ | 265,014 |
|
Special Mention |
|
| — |
|
|
| 1,129 |
|
|
| 926 |
|
|
| 2,019 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 4,074 |
|
Substandard |
|
| — |
|
|
| — |
|
|
| 42 |
|
|
| — |
|
|
| 161 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 203 |
|
Doubtful |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total Real Estate Construction |
| $ | 62,658 |
|
| $ | 138,394 |
|
| $ | 32,839 |
|
| $ | 17,582 |
|
| $ | 2,839 |
|
| $ | 2,708 |
|
| $ | 12,271 |
|
| $ | — |
|
| $ | 269,291 |
|
Real Estate Construction: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Current-period gross charge-offs |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Farm Real Estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Pass |
| $ | 816 |
|
| $ | 987 |
|
| $ | 2,309 |
|
| $ | 4,552 |
|
| $ | 806 |
|
| $ | 13,295 |
|
| $ | 1,161 |
|
| $ | — |
|
| $ | 23,926 |
|
Special Mention |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 183 |
|
|
| — |
|
|
| — |
|
|
| 183 |
|
Substandard |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Doubtful |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total Farm Real Estate |
| $ | 816 |
|
| $ | 987 |
|
| $ | 2,309 |
|
| $ | 4,552 |
|
| $ | 806 |
|
| $ | 13,478 |
|
| $ | 1,161 |
|
| $ | — |
|
| $ | 24,109 |
|
Farm Real Estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Current-period charge-offs |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Lease Financing Receivables |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Pass |
| $ | 21,794 |
|
| $ | 14,071 |
|
| $ | 6,605 |
|
| $ | 3,754 |
|
| $ | 1,964 |
|
| $ | 18 |
|
| $ | — |
|
| $ | — |
|
| $ | 48,206 |
|
Special Mention |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Substandard |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Doubtful |
|
| — |
|
|
| — |
|
|
| 53 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 53 |
|
Total Lease Financing Receivables |
| $ | 21,794 |
|
| $ | 14,071 |
|
| $ | 6,658 |
|
| $ | 3,754 |
|
| $ | 1,964 |
|
| $ | 18 |
|
| $ | — |
|
| $ | — |
|
| $ | 48,259 |
|
Lease Financing Receivables: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Current-period charge-offs |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Consumer and Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Pass |
| $ | 5,014 |
|
| $ | 4,741 |
|
| $ | 4,103 |
|
| $ | 1,875 |
|
| $ | 639 |
|
| $ | 322 |
|
| $ | 1,536 |
|
| $ | — |
|
| $ | 18,230 |
|
Special Mention |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Substandard |
|
| — |
|
|
| — |
|
|
| 14 |
|
|
| 17 |
|
|
| — |
|
|
| 6 |
|
|
| — |
|
|
| — |
|
|
| 37 |
|
Doubtful |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total Consumer and Other |
| $ | 5,014 |
|
| $ | 4,741 |
|
| $ | 4,117 |
|
| $ | 1,892 |
|
| $ | 639 |
|
| $ | 328 |
|
| $ | 1,536 |
|
| $ | — |
|
| $ | 18,267 |
|
Consumer and Other: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Current-period charge-offs |
| $ | 1 |
|
| $ | 27 |
|
| $ | 40 |
|
| $ | 6 |
|
| $ | 10 |
|
| $ | — |
|
| $ | 5 |
|
| $ | — |
|
| $ | 89 |
|
Total Loans |
| $ | 362,236 |
|
| $ | 687,480 |
|
| $ | 459,900 |
|
| $ | 311,681 |
|
| $ | 205,418 |
|
| $ | 444,378 |
|
| $ | 283,797 |
|
| $ | — |
|
| $ | 2,754,890 |
|
Total Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Current-period charge-offs |
| $ | 1 |
|
| $ | 700 |
|
| $ | 40 |
|
| $ | 6 |
|
| $ | 10 |
|
| $ | 93 |
|
| $ | 5 |
|
| $ | — |
|
| $ | 855 |
|
Page 20
Civista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
Prior to the adoption of CECL, Residential Real Estate, Real Estate Construction and Consumer and Other loans are not risk-graded, except when collateral is used for a business purpose. Only those loans that have been risk rated as of December 31, 2022 are included below.
September 30, 2017 |
| Pass |
|
| Special Mention |
|
| Substandard |
|
| Doubtful |
|
| Ending Balance |
| |||||||||||||||||||||||||
December 31, 2022 |
| Pass |
|
| Special Mention |
|
| Substandard |
|
| Doubtful |
|
| Ending Balance |
| |||||||||||||||||||||||||
Commercial & Agriculture |
| $ | 140,866 |
|
| $ | 4,697 |
|
| $ | 1,974 |
|
| $ | — |
|
| $ | 147,537 |
|
| $ | 273,291 |
|
| $ | 2,558 |
|
| $ | 2,746 |
|
| $ | — |
|
| $ | 278,595 |
|
Commercial Real Estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Owner Occupied |
|
| 156,583 |
|
|
| 7,119 |
|
|
| 3,976 |
|
|
| — |
|
|
| 167,678 |
|
|
| 367,652 |
|
|
| 734 |
|
|
| 2,761 |
|
|
| — |
|
|
| 371,147 |
|
Non-Owner Occupied |
|
| 421,452 |
|
|
| 2,174 |
|
|
| 804 |
|
|
| — |
|
|
| 424,430 |
|
|
| 1,003,942 |
|
|
| 10,947 |
|
|
| 3,847 |
|
|
| — |
|
|
| 1,018,736 |
|
Residential Real Estate |
|
| 63,081 |
|
|
| 2,054 |
|
|
| 5,998 |
|
|
| — |
|
|
| 71,133 |
|
|
| 114,021 |
|
|
| 183 |
|
|
| 5,787 |
|
|
| — |
|
|
| 119,991 |
|
Real Estate Construction |
|
| 73,581 |
|
|
| 15 |
|
|
| 27 |
|
|
| — |
|
|
| 73,623 |
|
|
| 198,734 |
|
|
| — |
|
|
| 221 |
|
|
| — |
|
|
| 198,955 |
|
Farm Real Estate |
|
| 30,604 |
|
|
| 6,513 |
|
|
| 1,849 |
|
|
| — |
|
|
| 38,966 |
|
|
| 24,283 |
|
|
| 379 |
|
|
| 46 |
|
|
| — |
|
|
| 24,708 |
|
Lease Financing Receivables |
|
| 36,223 |
|
|
| — |
|
|
| 401 |
|
|
| 173 |
|
|
| 36,797 |
| ||||||||||||||||||||
Consumer and Other |
|
| 1,598 |
|
|
| — |
|
|
| 75 |
|
|
| — |
|
|
| 1,673 |
|
|
| 839 |
|
|
| — |
|
|
| 163 |
|
|
| — |
|
|
| 1,002 |
|
Total |
| $ | 887,765 |
|
| $ | 22,572 |
|
| $ | 14,703 |
|
| $ | — |
|
| $ | 925,040 |
|
| $ | 2,018,985 |
|
| $ | 14,801 |
|
| $ | 15,972 |
|
| $ | 173 |
|
| $ | 2,049,931 |
|
December 31, 2016 |
| Pass |
|
| Special Mention |
|
| Substandard |
|
| Doubtful |
|
| Ending Balance |
| |||||
Commercial & Agriculture |
| $ | 127,867 |
|
| $ | 4,300 |
|
| $ | 3,295 |
|
| $ | — |
|
| $ | 135,462 |
|
Commercial Real Estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner Occupied |
|
| 151,659 |
|
|
| 4,016 |
|
|
| 5,689 |
|
|
| — |
|
|
| 161,364 |
|
Non-Owner Occupied |
|
| 393,592 |
|
|
| 1,676 |
|
|
| 663 |
|
|
| — |
|
|
| 395,931 |
|
Residential Real Estate |
|
| 59,015 |
|
|
| 1,661 |
|
|
| 6,911 |
|
|
| — |
|
|
| 67,587 |
|
Real Estate Construction |
|
| 50,678 |
|
|
| 16 |
|
|
| 27 |
|
|
| — |
|
|
| 50,721 |
|
Farm Real Estate |
|
| 31,814 |
|
|
| 5,673 |
|
|
| 3,683 |
|
|
| — |
|
|
| 41,170 |
|
Consumer and Other |
|
| 2,135 |
|
|
| — |
|
|
| 109 |
|
|
| — |
|
|
| 2,244 |
|
Total |
| $ | 816,760 |
|
| $ | 17,342 |
|
| $ | 20,377 |
|
| $ | — |
|
| $ | 854,479 |
|
The following tables present performing and nonperforming loans based solely on payment activity for the periodsperiod ended September 30, 2017 and December 31, 20162022 that havewere not been assigned an internal risk grade. The types of loans presented here are not assigned a risk grade unless there is evidence of a problem. Payment activity is reviewed by management on a monthly basis to evaluate performance. Loans are considered to be nonperforming when they become 90 days past due or if management thinks that we may not collect all of our principal and interest. Nonperforming loans also include certain loans that have been modified in Troubled Debt Restructurings (TDRs) where economic concessions have been granted to borrowers who have experienced or are expected to experience financial difficulties. These concessions typically result from the Company’s loss mitigation activities and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance or other actions due to economic status. Certain TDRs are classified as nonperforming at the time of restructure and may only be returned to performing status after considering the borrower’s sustained repayment performance for a reasonable period, generally six months.
September 30, 2017 |
| Residential Real Estate |
|
| Real Estate Construction |
|
| Consumer and Other |
|
| Total |
| ||||||||||||||||||||
December 31, 2022 |
| Residential |
|
| Real Estate |
|
| Consumer |
|
| Total |
| ||||||||||||||||||||
Performing |
| $ | 196,706 |
|
| $ | 4,355 |
|
| $ | 15,847 |
|
| $ | 216,908 |
|
| $ | 432,790 |
|
| $ | 44,172 |
|
| $ | 19,773 |
|
| $ | 496,735 |
|
Nonperforming |
|
| — |
|
|
| — |
|
|
| 44 |
|
|
| 44 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total |
| $ | 196,706 |
|
| $ | 4,355 |
|
| $ | 15,891 |
|
| $ | 216,952 |
|
| $ | 432,790 |
|
| $ | 44,172 |
|
| $ | 19,773 |
|
| $ | 496,735 |
|
December 31, 2016 |
| Residential Real Estate |
|
| Real Estate Construction |
|
| Consumer and Other |
|
| Total |
| ||||
Performing |
| $ | 179,721 |
|
| $ | 5,572 |
|
| $ | 15,725 |
|
| $ | 201,018 |
|
Nonperforming |
|
| — |
|
|
| — |
|
|
| 9 |
|
|
| 9 |
|
Total |
| $ | 179,721 |
|
| $ | 5,572 |
|
| $ | 15,734 |
|
| $ | 201,027 |
|
Page 17
Civista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
The following tables include an aging analysis of the recorded investment of past due loans outstanding as of September 30, 20172023 and December 31, 2016.2022.
September 30, 2023 |
| 30-59 |
|
| 60-89 |
|
| 90 Days |
|
| Total Past |
|
| Current |
|
| Total Loans |
|
| Past Due |
| |||||||
Commercial & Agriculture |
| $ | 834 |
|
| $ | 1,284 |
|
| $ | 1,469 |
|
| $ | 3,587 |
|
| $ | 298,290 |
|
| $ | 301,877 |
|
| $ | — |
|
Commercial Real Estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Owner Occupied |
|
| 87 |
|
|
| — |
|
|
| 34 |
|
|
| 121 |
|
|
| 375,730 |
|
|
| 375,851 |
|
|
| — |
|
Non-Owner Occupied |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,102,932 |
|
|
| 1,102,932 |
|
|
| — |
|
Residential Real Estate |
|
| 731 |
|
|
| 791 |
|
|
| 1,812 |
|
|
| 3,334 |
|
|
| 610,970 |
|
|
| 614,304 |
|
|
| — |
|
Real Estate Construction |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 269,291 |
|
|
| 269,291 |
|
|
| — |
|
Farm Real Estate |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 24,109 |
|
|
| 24,109 |
|
|
| — |
|
Lease Financing Receivables |
|
| 237 |
|
|
| 52 |
|
|
| 653 |
|
|
| 942 |
|
|
| 47,317 |
|
|
| 48,259 |
|
|
| — |
|
Consumer and Other |
|
| 156 |
|
|
| 59 |
|
|
| 9 |
|
|
| 224 |
|
|
| 18,043 |
|
|
| 18,267 |
|
|
| — |
|
Total |
| $ | 2,045 |
|
| $ | 2,186 |
|
| $ | 3,977 |
|
| $ | 8,208 |
|
| $ | 2,746,682 |
|
| $ | 2,754,890 |
|
| $ | — |
|
Page 21
Civista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
December 31, 2022 |
| 30-59 |
|
| 60-89 |
|
| 90 Days |
|
| Total Past |
|
| Current |
|
| Purchased |
|
| Total Loans |
|
| Past Due |
| ||||||||
Commercial & Agriculture |
| $ | 247 |
|
| $ | 78 |
|
| $ | 534 |
|
| $ | 859 |
|
| $ | 276,873 |
|
| $ | 863 |
|
| $ | 278,595 |
|
| $ | — |
|
Commercial Real Estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Owner Occupied |
|
| 21 |
|
|
| 13 |
|
|
| 76 |
|
|
| 110 |
|
|
| 369,049 |
|
|
| 1,988 |
|
|
| 371,147 |
|
|
| — |
|
Non-Owner Occupied |
|
| — |
|
|
| — |
|
|
| 1,164 |
|
|
| 1,164 |
|
|
| 1,017,453 |
|
|
| 119 |
|
|
| 1,018,736 |
|
|
| — |
|
Residential Real Estate |
|
| 3,133 |
|
|
| 857 |
|
|
| 1,107 |
|
|
| 5,097 |
|
|
| 546,270 |
|
|
| 1,414 |
|
|
| 552,781 |
|
|
| — |
|
Real Estate Construction |
|
| — |
|
|
| — |
|
|
| 219 |
|
|
| 219 |
|
|
| 242,908 |
|
|
| — |
|
|
| 243,127 |
|
|
| — |
|
Farm Real Estate |
|
| 7 |
|
|
| — |
|
|
| — |
|
|
| 7 |
|
|
| 24,701 |
|
|
| — |
|
|
| 24,708 |
|
|
| — |
|
Lease Financing Receivables |
|
| 1,040 |
|
|
| — |
|
|
| 341 |
|
|
| 1,381 |
|
|
| 35,416 |
|
|
| — |
|
|
| 36,797 |
|
|
| — |
|
Consumer and Other |
|
| 293 |
|
|
| 49 |
|
|
| 74 |
|
|
| 416 |
|
|
| 20,358 |
|
|
| 1 |
|
|
| 20,775 |
|
|
| — |
|
Total |
| $ | 4,741 |
|
| $ | 997 |
|
| $ | 3,515 |
|
| $ | 9,253 |
|
| $ | 2,533,028 |
|
| $ | 4,385 |
|
| $ | 2,546,666 |
|
| $ | — |
|
September 30, 2017 |
| 30-59 Days Past Due |
|
| 60-89 Days Past Due |
|
| 90 Days or Greater |
|
| Total Past Due |
|
| Current |
|
| Purchased Credit- Impaired Loans |
|
| Total Loans |
|
| Past Due 90 Days and Accruing |
| ||||||||
Commercial & Agriculture |
| $ | 389 |
|
| $ | — |
|
| $ | 664 |
|
| $ | 1,053 |
|
| $ | 146,395 |
|
| $ | 89 |
|
| $ | 147,537 |
|
| $ | — |
|
Commercial Real Estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner Occupied |
|
| — |
|
|
| 174 |
|
|
| 516 |
|
|
| 690 |
|
|
| 166,988 |
|
|
| — |
|
|
| 167,678 |
|
|
| — |
|
Non-Owner Occupied |
|
| 164 |
|
|
| 108 |
|
|
| 420 |
|
|
| 692 |
|
|
| 423,738 |
|
|
| — |
|
|
| 424,430 |
|
|
| — |
|
Residential Real Estate |
|
| 218 |
|
|
| 242 |
|
|
| 878 |
|
|
| 1,338 |
|
|
| 266,362 |
|
|
| 139 |
|
|
| 267,839 |
|
|
| — |
|
Real Estate Construction |
|
| — |
|
|
| 68 |
|
|
| 27 |
|
|
| 95 |
|
|
| 77,883 |
|
|
| — |
|
|
| 77,978 |
|
|
| — |
|
Farm Real Estate |
|
| — |
|
|
| — |
|
|
| 193 |
|
|
| 193 |
|
|
| 38,773 |
|
|
| — |
|
|
| 38,966 |
|
|
| — |
|
Consumer and Other |
|
| 86 |
|
|
| 10 |
|
|
| 48 |
|
|
| 144 |
|
|
| 17,420 |
|
|
| — |
|
|
| 17,564 |
|
|
| 44 |
|
Total |
| $ | 857 |
|
| $ | 602 |
|
| $ | 2,746 |
|
| $ | 4,205 |
|
| $ | 1,137,559 |
|
| $ | 228 |
|
| $ | 1,141,992 |
|
| $ | 44 |
|
December 31, 2016 |
| 30-59 Days Past Due |
|
| 60-89 Days Past Due |
|
| 90 Days or Greater |
|
| Total Past Due |
|
| Current |
|
| Purchased Credit- Impaired Loans |
|
| Total Loans |
|
| Past Due 90 Days and Accruing |
| ||||||||
Commercial & Agriculture |
| $ | 156 |
|
| $ | 20 |
|
| $ | 152 |
|
| $ | 328 |
|
| $ | 135,046 |
|
| $ | 88 |
|
| $ | 135,462 |
|
| $ | — |
|
Commercial Real Estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owner Occupied |
|
| 722 |
|
|
| 553 |
|
|
| 280 |
|
|
| 1,555 |
|
|
| 159,809 |
|
|
| — |
|
|
| 161,364 |
|
|
| — |
|
Non-Owner Occupied |
|
| 147 |
|
|
| — |
|
|
| 316 |
|
|
| 463 |
|
|
| 395,468 |
|
|
| — |
|
|
| 395,931 |
|
|
| — |
|
Residential Real Estate |
|
| 1,812 |
|
|
| 507 |
|
|
| 1,049 |
|
|
| 3,368 |
|
|
| 243,772 |
|
|
| 168 |
|
|
| 247,308 |
|
|
| — |
|
Real Estate Construction |
|
| — |
|
|
| — |
|
|
| 27 |
|
|
| 27 |
|
|
| 56,266 |
|
|
| — |
|
|
| 56,293 |
|
|
| — |
|
Farm Real Estate |
|
| 93 |
|
|
| — |
|
|
| — |
|
|
| 93 |
|
|
| 41,077 |
|
|
| — |
|
|
| 41,170 |
|
|
| — |
|
Consumer and Other |
|
| 215 |
|
|
| 31 |
|
|
| 31 |
|
|
| 277 |
|
|
| 17,701 |
|
|
| — |
|
|
| 17,978 |
|
|
| 9 |
|
Total |
| $ | 3,145 |
|
| $ | 1,111 |
|
| $ | 1,855 |
|
| $ | 6,111 |
|
| $ | 1,049,139 |
|
| $ | 256 |
|
| $ | 1,055,506 |
|
| $ | 9 |
|
The following table presents loans on nonaccrual status excluding purchased credit-impaired (PCI) loans, as of September 30, 2017 and2023.
September 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
| Nonaccrual loans with a related ACL |
|
| Nonaccrual loans without a related ACL |
|
| Total Nonaccrual loans |
|
| Interest Income Recognized |
| ||||
Commercial & Agriculture |
| $ | 362 |
|
| $ | 1,294 |
|
| $ | 1,656 |
|
| $ | — |
|
Commercial Real Estate: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Owner Occupied |
|
| — |
|
|
| 270 |
|
|
| 270 |
|
|
| 3 |
|
Non-Owner Occupied |
|
| 306 |
|
|
| 899 |
|
|
| 1,205 |
|
|
| — |
|
Residential Real Estate |
|
| — |
|
|
| 4,391 |
|
|
| 4,391 |
|
|
| 13 |
|
Real Estate Construction |
|
| — |
|
|
| 203 |
|
|
| 203 |
|
|
| — |
|
Farm Real Estate |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Lease Financing Receivables |
|
| 151 |
|
|
| 794 |
|
|
| 945 |
|
|
| — |
|
Consumer and Other |
|
| — |
|
|
| 43 |
|
|
| 43 |
|
|
| — |
|
Total |
| $ | 819 |
|
| $ | 7,894 |
|
| $ | 8,713 |
|
| $ | 16 |
|
The following table presents loans on nonaccrual status as of December 31, 2016.2022, excluding PCI loans.
|
| September 30, 2017 |
|
| December 31, 2016 |
|
| December 31, 2022 |
| |||
Commercial & Agriculture |
| $ | 1,889 |
|
| $ | 1,622 |
|
| $ | 774 |
|
Commercial Real Estate: |
|
|
|
|
|
|
|
|
|
|
| |
Owner Occupied |
|
| 1,989 |
|
|
| 1,461 |
|
|
| 386 |
|
Non-Owner Occupied |
|
| 566 |
|
|
| 464 |
|
|
| 1,109 |
|
Residential Real Estate |
|
| 2,798 |
|
|
| 3,266 |
|
|
| 3,926 |
|
Real Estate Construction |
|
| 27 |
|
|
| 27 |
|
|
| 221 |
|
Farm Real Estate |
|
| 193 |
|
|
| 2 |
|
|
| — |
|
Lease Financing Receivables |
|
| — |
| ||||||||
Consumer and Other |
|
| 70 |
|
|
| 101 |
|
|
| 91 |
|
Total |
| $ | 7,532 |
|
| $ | 6,943 |
|
| $ | 6,507 |
|
Nonaccrual Loans: Loans are considered for nonaccrual status upon reaching 90 days delinquency, unless the loan is well secured and in the process of collection, although the Company may be receiving partial payments of interest and partial repayments of principal on such loans. When a loan is placed on nonaccrual status, previously accrued but unpaid interest is deducted from interest income. Payments received on nonaccrual loans are applied to the unpaid principal balance. A loan may be returned to accruing status only if one of threetwo conditions are met: the loan is well-secured and none of the principal and interest has been past due for a minimum of 90 days; the loan is a TDR and has made a minimum of six months payments;days or the principal and interest payments are reasonably assured and a sustained period of performance has occurred, generally six months.
Page 1822
Civista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
Modifications: A modification of a loan constitutes a TDR whenModifications to Borrowers Experiencing Financial Difficulty: From time to time, the Company for economic or legal reasons relatedmay modify certain loans to a borrower’sborrowers who are experiencing financial difficulties grants a concessiondifficulty. In some cases, these modifications result in new loans. Loan modifications to borrowers experiencing financial difficulty may be in the borrower that it would not otherwise consider. The Company offers various types of concessions when modifying a loan, however, forgivenessform of principal is rarely granted. Commercial Real Estate loans modified in a TDR often involve reducing theforgiveness, interest rate lower thanreduction, term extension, other-than-significant payment delay or a combination thereof, among other things. During the current market rate for new debt with similar risk. Real Estate loans modified in a TDR were primarily comprised of interest rate reductions where monthly payments were lowered to accommodate the borrowers’ financial needs.
Loans modified in a TDR are typically already on non-accrual status and partial charge-offs have in some cases already been taken against the outstanding loan balance. As a result, loans modified in a TDR may have the financial effect of increasing the specific allowance associated with the loan. An allowance for impaired loans that have been modified in a TDR are measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate or the fair value of the collateral, less any selling costs, if the loan is collateral dependent. Management exercises significant judgment in developing these estimates. As of September 30, 2017, TDRs accounted for $298 of the allowance for loan losses. As of December 31, 2016, TDRs accounted for $278 of the allowance for loan losses.
Loan modifications that are considered TDRs completed during the periodsnine months ended September 30, 2017 and September 30, 2016 were as follows:
|
| For the Nine-Month Period Ended September 30, 2017 |
| |||||||||
|
| Number of Contracts |
|
| Pre- Modification Outstanding Recorded Investment |
|
| Post- Modification Outstanding Recorded Investment |
| |||
Commercial & Agriculture |
|
| — |
|
| $ | — |
|
| $ | — |
|
Commercial Real Estate—Owner Occupied |
|
| — |
|
|
| — |
|
|
| — |
|
Commercial Real Estate—Non-Owner Occupied |
|
| — |
|
|
| — |
|
|
| — |
|
Residential Real Estate |
|
| 1 |
|
|
| 13 |
|
|
| 13 |
|
Real Estate Construction |
|
| — |
|
|
| — |
|
|
| — |
|
Farm Real Estate |
|
| — |
|
|
| — |
|
|
| — |
|
Consumer and Other |
|
| — |
|
|
| — |
|
|
| — |
|
Total Loan Modifications |
|
| 1 |
|
| $ | 13 |
|
| $ | 13 |
|
|
| For the Nine-Month Period Ended September 30, 2016 |
| |||||||||
|
| Number of Contracts |
|
| Pre- Modification Outstanding Recorded Investment |
|
| Post- Modification Outstanding Recorded Investment |
| |||
Commercial & Agriculture |
|
| 4 |
|
| $ | 529 |
|
| $ | 529 |
|
Commercial Real Estate—Owner Occupied |
|
| — |
|
|
| — |
|
|
| — |
|
Commercial Real Estate—Non-Owner Occupied |
|
| — |
|
|
| — |
|
|
| — |
|
Residential Real Estate |
|
| 2 |
|
|
| 308 |
|
|
| 308 |
|
Real Estate Construction |
|
| — |
|
|
| — |
|
|
| — |
|
Farm Real Estate |
|
| 3 |
|
|
| 700 |
|
|
| 700 |
|
Consumer and Other |
|
| — |
|
|
| — |
|
|
| — |
|
Total Loan Modifications |
|
| 9 |
|
| $ | 1,537 |
|
| $ | 1,537 |
|
Page 19
Civista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
| ||||||||||||
|
|
| ||||||||||
|
|
|
|
|
| |||||||
|
|
|
| |||||||||
|
|
|
| |||||||||
|
|
|
| |||||||||
|
|
|
| |||||||||
|
|
|
| |||||||||
|
|
|
| |||||||||
|
|
|
|
|
| |||||||
|
| For the Three-Month Period Ended September 30, 2016 |
| |||||||||
|
| Number of Contracts |
|
| Pre- Modification Outstanding Recorded Investment |
|
| Post- Modification Outstanding Recorded Investment |
| |||
Commercial & Agriculture |
|
| — |
|
| $ | — |
|
| $ | — |
|
Commercial Real Estate—Owner Occupied |
|
| — |
|
|
| — |
|
|
| — |
|
Commercial Real Estate—Non-Owner Occupied |
|
| — |
|
|
| — |
|
|
| — |
|
Residential Real Estate |
|
| — |
|
|
| — |
| �� |
| — |
|
Real Estate Construction |
|
| — |
|
|
| — |
|
|
| — |
|
Farm Real Estate |
|
| 1 |
|
|
| 86 |
|
|
| 86 |
|
Consumer and Other |
|
| — |
|
|
| — |
|
|
| — |
|
Total Loan Modifications |
|
| 1 |
|
| $ | 86 |
|
| $ | 86 |
|
Recidivism, or the borrower defaulting on its obligation pursuant to a modified loan, results in the loan once again becoming a non-accrual loan. Recidivism occurs at a notably higher rate than do defaults on new origination loans, so modified loans present a higher risk of loss than do new origination loans.
During both the three- and nine-month periods ended September 30, 2017 and September 30, 2016,2023, there were no defaults on modifications of loans that were modified and considered TDRs during the respective twelve previous months.to borrowers experiencing financial difficulty.
ImpairedIndividually Evaluated Loans: Larger (greater(greater than $350)$350) Commercial & Agricultural and Commercial Real Estate loan relationships, all TDRs and Residential Real Estate and Consumer loans that are part of a larger relationship are tested for impairment on a quarterly basis. These loans are analyzed to determine if it is probable that all amounts will not be collected according to the contractual terms of the loan agreement. If management determines that the value of the impaired loan is less than the recorded investment in the loan (net of previous charge-offs, deferred loan fees or costs and unamortized premium or discount), impairment is recognized through an allowance estimate or a charge-off to the allowance. The Company’s policy for recognizing interest income on impaired loans does not differ from its overall policy for interest recognition.
The following table presents the amortized cost basis of collateral dependent loans, which are individually evaluated to determine expected credit losses, and the related allowance for credit losses allocated to these loans.
September 30, 2023 |
| Real Estate |
|
| Other |
|
| Allowance for Credit Losses |
| |||
Commercial & Agriculture |
| $ | — |
|
| $ | 4,846 |
|
| $ | 408 |
|
Commercial Real Estate: |
|
|
|
|
|
|
|
|
| |||
Owner Occupied |
|
| — |
|
|
| — |
|
|
| — |
|
Non-Owner Occupied |
|
| 1,205 |
|
|
| — |
|
|
| 306 |
|
Residential Real Estate |
|
| — |
|
|
| — |
|
|
| — |
|
Real Estate Construction |
|
| — |
|
|
| — |
|
|
| — |
|
Farm Real Estate |
|
| — |
|
|
| — |
|
|
| — |
|
Lease Financing Receivables |
|
| — |
|
|
| 525 |
|
|
| 150 |
|
Consumer and Other |
|
| — |
|
|
| — |
|
|
| — |
|
Total |
| $ | 1,205 |
|
| $ | 5,371 |
|
| $ | 864 |
|
Collateral-dependent loans consist primarily of Residential Real Estate, Commercial Real Estate and Commercial and Agricultural loans. These loans are individually evaluated when foreclosure is probable or when the repayment of the loan is expected to be provided substantially through the operation or sale of the underlying collateral. In the case of Commercial and Agricultural loans secured by equipment, the fair value of the collateral is estimated by third-party valuation experts. Loan balances are charged down to the underlying collateral value when they are deemed uncollectible. Note that the Company did not elect to use the collateral maintenance agreement practical expedient available under CECL.
Page 2023
Civista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
The following table includes the recorded investment and unpaid principal balances for impaired financing receivables, excluding PCI loans with the associated allowance amount, if applicable, as of September 30, 2017 and December 31, 2016.2022, excluding PCI loans.
|
| September 30, 2017 |
|
| December 31, 2016 |
|
| December 31, 2022 |
| |||||||||||||||||||||||||||||||||||
|
| Recorded Investment |
|
| Unpaid Principal Balance |
|
| Related Allowance |
|
| Recorded Investment |
|
| Unpaid Principal Balance |
|
| Related Allowance |
|
| Recorded |
|
| Unpaid |
|
| Related |
|
| Average Recorded |
|
| Interest |
| |||||||||||
With no related allowance recorded: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Commercial & Agriculture |
| $ | — |
|
| $ | — |
|
|
|
|
|
| $ | 1,230 |
|
| $ | 1,751 |
|
|
|
|
|
| $ | — |
|
| $ | — |
|
|
|
|
| $ | 86 |
|
| $ | 3 |
| |
Commercial Real Estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Owner Occupied |
|
| 814 |
|
|
| 1,069 |
|
|
|
|
|
|
| 1,658 |
|
|
| 1,803 |
|
|
|
|
|
|
| 82 |
|
|
| 82 |
|
|
|
|
|
| 192 |
|
|
| 22 |
| |
Non-Owner Occupied |
|
| 50 |
|
|
| 53 |
|
|
|
|
|
|
| 359 |
|
|
| 386 |
|
|
|
|
|
|
| — |
|
|
| — |
|
|
|
|
|
| 35 |
|
|
| 1 |
| |
Residential Real Estate |
|
| 996 |
|
|
| 1,068 |
|
|
|
|
|
|
| 1,259 |
|
|
| 1,590 |
|
|
|
|
|
|
| 385 |
|
|
| 410 |
|
|
|
|
|
| 595 |
|
|
| 33 |
| |
Farm Real Estate |
|
| 149 |
|
|
| 149 |
|
|
|
|
|
|
| 614 |
|
|
| 614 |
|
|
|
|
|
|
| — |
|
|
| — |
|
|
|
|
|
| 381 |
|
|
| 14 |
| |
Consumer and Other |
|
| — |
|
|
| — |
|
|
|
|
|
|
| 1 |
|
|
| 1 |
|
|
|
|
| ||||||||||||||||||||
Total |
|
| 2,009 |
|
|
| 2,339 |
|
|
|
|
|
|
| 5,121 |
|
|
| 6,145 |
|
|
|
|
|
|
| 467 |
|
|
| 492 |
|
|
|
|
|
| 1,289 |
|
|
| 73 |
| |
With an allowance recorded: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Commercial & Agriculture |
|
| 1,170 |
|
|
| 1,720 |
|
| $ | 122 |
|
|
| 753 |
|
|
| 1,303 |
|
| $ | 82 |
|
|
| — |
|
|
| — |
|
| $ | — |
|
|
| — |
|
|
| — |
|
Commercial Real Estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Owner Occupied |
|
| 225 |
|
|
| 225 |
|
|
| 4 |
|
|
| 238 |
|
|
| 238 |
|
|
| 4 |
|
|
| 150 |
|
|
| 150 |
|
|
| 6 |
|
|
| 214 |
|
|
| — |
|
Non-Owner Occupied |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| ||||||||||||||||||||
Residential Real Estate |
|
| 390 |
|
|
| 394 |
|
|
| 114 |
|
|
| 427 |
|
|
| 431 |
|
|
| 102 |
|
|
| 7 |
|
|
| 11 |
|
|
| 1 |
|
|
| 19 |
|
|
| — |
|
Farm Real Estate |
|
| 464 |
|
|
| 464 |
|
|
| 6 |
|
|
| — |
|
|
| — |
|
|
| — |
| ||||||||||||||||||||
Lease Financing Receivables |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| ||||||||||||||||||||||||
Consumer and Other |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| ||||||||||||||||||||||||
Total |
|
| 2,249 |
|
|
| 2,803 |
|
|
| 246 |
|
|
| 1,418 |
|
|
| 1,972 |
|
|
| 188 |
|
|
| 157 |
|
|
| 161 |
|
|
| 7 |
|
|
| 233 |
|
|
| — |
|
Total: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Commercial & Agriculture |
|
| 1,170 |
|
|
| 1,720 |
|
|
| 122 |
|
|
| 1,983 |
|
|
| 3,054 |
|
|
| 82 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 86 |
|
|
| 3 |
|
Commercial Real Estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Owner Occupied |
|
| 1,039 |
|
|
| 1,294 |
|
|
| 4 |
|
|
| 1,896 |
|
|
| 2,041 |
|
|
| 4 |
|
|
| 232 |
|
|
| 232 |
|
|
| 6 |
|
|
| 406 |
|
|
| 22 |
|
Non-Owner Occupied |
|
| 50 |
|
|
| 53 |
|
|
| — |
|
|
| 359 |
|
|
| 386 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 35 |
|
|
| 1 |
|
Residential Real Estate |
|
| 1,386 |
|
|
| 1,462 |
|
|
| 114 |
|
|
| 1,686 |
|
|
| 2,021 |
|
|
| 102 |
|
|
| 392 |
|
|
| 421 |
|
|
| 1 |
|
|
| 614 |
|
|
| 33 |
|
Farm Real Estate |
|
| 613 |
|
|
| 613 |
|
|
| 6 |
|
|
| 614 |
|
|
| 614 |
|
|
| — |
| ||||||||||||||||||||
Lease Financing Receivables |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 381 |
|
|
| 14 |
| ||||||||||||||||||||||||
Consumer and Other |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1 |
|
|
| 1 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total |
| $ | 4,258 |
|
| $ | 5,142 |
|
| $ | 246 |
|
| $ | 6,539 |
|
| $ | 8,117 |
|
| $ | 188 |
|
| $ | 624 |
|
| $ | 653 |
|
| $ | 7 |
|
| $ | 1,522 |
|
| $ | 73 |
|
The following table includestables include the average recorded investment and interest income recognized for impaired financing receivables for the three-three and nine-month periods ended September 30, 2017 and 2016.2022.
|
| September 30, 2017 |
|
| September 30, 2016 |
| ||||||||||||||||||
For the nine months ended: |
| Average Recorded Investment |
|
| Interest Income Recognized |
|
| Average Recorded Investment |
|
| Interest Income Recognized |
| ||||||||||||
|
| September 30, 2022 |
| |||||||||||||||||||||
For the three months ended |
| Average |
|
| Interest |
| ||||||||||||||||||
Commercial & Agriculture |
| $ | 1,609 |
|
| $ | 27 |
|
| $ | 1,453 |
|
| $ | 19 |
|
| $ | 172 |
|
| $ | — |
|
Commercial Real Estate—Owner Occupied |
|
| 1,632 |
|
|
| 66 |
|
|
| 1,954 |
|
|
| 66 |
|
|
| 504 |
|
|
| 3 |
|
Commercial Real Estate—Non-Owner Occupied |
|
| 280 |
|
|
| 5 |
|
|
| 1,519 |
|
|
| 858 |
|
|
| 70 |
|
|
| — |
|
Residential Real Estate |
|
| 1,554 |
|
|
| 56 |
|
|
| 1,699 |
|
|
| 60 |
|
|
| 503 |
|
|
| 9 |
|
Real Estate Construction |
|
| — |
|
|
| — |
|
|
| 473 |
|
|
| — |
|
|
| — |
|
|
| — |
|
Farm Real Estate |
|
| 614 |
|
|
| 21 |
|
|
| 1,123 |
|
|
| 17 |
|
|
| 247 |
|
|
| 2 |
|
Lease Financing Receivables |
|
| — |
|
|
| — |
| ||||||||||||||||
Consumer and Other |
|
| — |
|
|
| — |
|
|
| 2 |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total |
| $ | 5,689 |
|
| $ | 175 |
|
| $ | 8,223 |
|
| $ | 1,020 |
|
| $ | 1,496 |
|
| $ | 14 |
|
Page 2124
Civista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
|
| September 30, 2022 |
| |||||
For the nine months ended |
| Average |
|
| Interest |
| ||
Commercial & Agriculture |
| $ | 86 |
|
| $ | — |
|
Commercial Real Estate—Owner Occupied |
|
| 349 |
|
|
| 10 |
|
Commercial Real Estate—Non-Owner Occupied |
|
| 35 |
|
|
| — |
|
Residential Real Estate |
|
| 516 |
|
|
| 19 |
|
Real Estate Construction |
|
| — |
|
|
| — |
|
Farm Real Estate |
|
| 381 |
|
|
| 14 |
|
Lease Financing Receivables |
|
| — |
|
|
| — |
|
Consumer and Other |
|
| — |
|
|
| — |
|
Total |
| $ | 1,367 |
|
| $ | 43 |
|
|
| September 30, 2017 |
|
| September 30, 2016 |
| ||||||||||
For the three months ended: |
| Average Recorded Investment |
|
| Interest Income Recognized |
|
| Average Recorded Investment |
|
| Interest Income Recognized |
| ||||
Commercial & Agriculture |
| $ | 1,366 |
|
| $ | 7 |
|
| $ | 2,401 |
|
| $ | 8 |
|
Commercial Real Estate—Owner Occupied |
|
| 1,377 |
|
|
| 18 |
|
|
| 1,774 |
|
|
| 21 |
|
Commercial Real Estate—Non-Owner Occupied |
|
| 202 |
|
|
| 2 |
|
|
| 556 |
|
|
| 1 |
|
Residential Real Estate |
|
| 1,437 |
|
|
| 17 |
|
|
| 1,873 |
|
|
| 21 |
|
Real Estate Construction |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Farm Real Estate |
|
| 614 |
|
|
| 8 |
|
|
| 1,032 |
|
|
| 7 |
|
Consumer and Other |
|
| — |
|
|
| — |
|
|
| 2 |
|
|
| — |
|
Total |
| $ | 4,996 |
|
| $ | 52 |
|
| $ | 7,638 |
|
| $ | 58 |
|
Changes in the amortizableaccretable yield for PCI loans as of September 30, 2022 were as follows, since acquisition:
|
| For the Nine-Month Period Ended September 30, 2017 |
|
| For the Nine-Month Period Ended September 30, 2016 |
|
| For the |
| |||
|
| (In Thousands) |
|
| (In Thousands) |
|
| (In Thousands) |
| |||
Balance at beginning of period |
| $ | 49 |
|
| $ | 82 |
|
| $ | 216 |
|
Acquisition of PCI loans |
|
| — |
|
|
| — |
|
|
| — |
|
Accretion |
|
| (27 | ) |
|
| (24 | ) |
|
| (7 | ) |
Transfer from non-accretable to accretable |
|
| 7 |
| ||||||||
Balance at end of period |
| $ | 22 |
|
| $ | 58 |
|
| $ | 216 |
|
|
| For the Three-Month Period Ended September 30, 2017 |
|
| For the Three-Month Period Ended September 30, 2016 |
| ||
|
| (In Thousands) |
|
| (In Thousands) |
| ||
Balance at beginning of period |
| $ | 31 |
|
| $ | 66 |
|
Acquisition of PCI loans |
|
| — |
|
|
| — |
|
Accretion |
|
| (9 | ) |
|
| (8 | ) |
Balance at end of period |
| $ | 22 |
|
| $ | 58 |
|
The Company has acquired loans, for which there was, at acquisition, evidence of deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected. Upon the Company's adoption of ASU 2016-13, remaining credit-related discount on these assets were re-classified to the ACL. The Company elected the prospective transition approach and all loans previously considered PCI are now classified as PCD. The remaining non-credit discount will continue to be accreted into income over the remaining lives of the assets. The following table presents additional information regarding loans acquired and accounted for in accordance with ASC 310-30:310-30 as of December 31, 2022:
|
| At December 31, 2022 |
| |
|
| Acquired Loans with |
| |
|
| (In Thousands) |
| |
Outstanding balance |
| $ | 5,220 |
|
Carrying amount |
|
| 4,386 |
|
|
| At September 30, 2017 |
|
| At December 31, 2016 |
| ||
|
| Acquired Loans with Specific Evidence of Deterioration of Credit Quality (ASC 310-30) |
|
| Acquired Loans with Specific Evidence of Deterioration of Credit Quality (ASC 310-30) |
| ||
|
| (In Thousands) |
| |||||
Outstanding balance |
| $ | 795 |
|
| $ | 850 |
|
Carrying amount |
|
| 228 |
|
|
| 256 |
|
There has been $133 and $175 inwas no allowance for loan losses recorded for acquired loans with or without specific evidence of deterioration in credit quality as of September 30, 2017 and December 31, 2016, respectively.2022.
Page 22
Civista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
Foreclosed Assets Held For Sale
Foreclosed assets acquired in settlement of loans are carried at fair value less estimated costs to sell and are included in otherOther assets on the Consolidated Balance Sheet. As of September 30, 20172023 and December 31, 2016, a total of $27 and $37, respectively of2022 there were no foreclosed assets were included within Other assets.
Page 25
Civista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
Allowance for Credit Losses on Off-Balance-Sheet Credit Exposures
The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk from a contractual obligation to extend credit. The allowance for credit losses on off-balance-sheet credit exposures is adjusted as a provision for credit loss expense recognized within other assets. Asnon-interest expense on the Consolidated Statements of Operations. The estimated credit loss includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life. The estimate of expected credit loss is based on the historical loss rate for the loan class in which the loan commitments would be classified as if funded.
The following table lists the allowance for credit losses on off-balance sheet credit exposures as of September 30, 2017, included within the foreclosed assets is $27 of consumer residential mortgages that were foreclosed on or received via a deed in lieu transaction prior to the period end. As of September 30, 2017 and December 31, 2016, the Company had initiated formal foreclosure procedures on $251 and $710, respectively, of consumer residential mortgages.2023:
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||
|
| September 30, |
|
| September 30, |
| ||||||||
|
| 2023 |
| 2022 |
|
| 2023 |
| 2022 |
| ||||
Beginning of Period |
| $ | 3,851 |
|
| — |
|
| — |
|
| — |
| |
CECL adoption adjustments |
|
| — |
|
| — |
|
|
| 3,386 |
|
| — |
|
Charge-offs |
|
| — |
|
| — |
|
|
| — |
|
| — |
|
Recoveries |
|
| — |
|
| — |
|
|
| — |
|
| — |
|
Provision |
|
| 130 |
|
| — |
|
|
| 595 |
|
| — |
|
End of Period |
| $ | 3,981 |
| — |
|
| $ | 3,981 |
|
| — |
| |
(6) Accumulated Other Comprehensive Income (Loss)
The following table presents the changes in each component of accumulated other comprehensive income (loss), net of tax.tax for the three-month periods ended September 30, 2023 and September 30, 2022.
|
| For the Three-Month Period Ended |
|
| For the Three-Month Period Ended |
| ||||||||||||||||||
|
| September 30, 2023(a) |
|
| September 30, 2022(a) |
| ||||||||||||||||||
|
| Unrealized |
|
| Defined |
|
| Total (a) |
|
| Unrealized |
|
| Defined |
|
| Total (a) |
| ||||||
Beginning balance |
| $ | (50,496 | ) |
| $ | (5,274 | ) |
| $ | (55,770 | ) |
| $ | (40,497 | ) |
| $ | (5,745 | ) |
| $ | (46,242 | ) |
Other comprehensive loss before reclassifications |
|
| (23,692 | ) |
|
| — |
|
|
| (23,692 | ) |
|
| (23,626 | ) |
|
| — |
|
|
| (23,626 | ) |
Amounts reclassified from accumulated other |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (4 | ) |
|
| 54 |
|
|
| 50 |
|
Net current-period other comprehensive income (loss) |
|
| (23,692 | ) |
|
| — |
|
|
| (23,692 | ) |
|
| (23,630 | ) |
|
| 54 |
|
|
| (23,576 | ) |
Ending balance |
| $ | (74,188 | ) |
| $ | (5,274 | ) |
| $ | (79,462 | ) |
| $ | (64,127 | ) |
| $ | (5,691 | ) |
| $ | (69,818 | ) |
|
| For the Nine-Month Period Ended |
|
| For the Nine-Month Period Ended |
| ||||||||||||||||||
|
| September 30, 2017 (a) |
|
| September 30, 2016 (a) |
| ||||||||||||||||||
|
| Unrealized Gains and Losses on Available-for- Sale Securities |
|
| Defined Benefit Pension Items |
|
| Total |
|
| Unrealized Gains and Losses on Available-for- Sale Securities |
|
| Defined Benefit Pension Items |
|
| Total |
| ||||||
Beginning balance |
| $ | 2,008 |
|
| $ | (4,345 | ) |
| $ | (2,337 | ) |
| $ | 3,554 |
|
| $ | (4,049 | ) |
| $ | (495 | ) |
Other comprehensive income before reclassifications |
|
| 1,309 |
|
|
| — |
|
|
| 1,309 |
|
|
| 1,514 |
|
|
| — |
|
|
| 1,514 |
|
Amounts reclassified from accumulated other comprehensive loss |
|
| 6 |
|
|
| 625 |
|
|
| 631 |
|
|
| (13 | ) |
|
| 165 |
|
|
| 152 |
|
Net current-period other comprehensive income |
|
| 1,315 |
|
|
| 625 |
|
|
| 1,940 |
|
|
| 1,501 |
|
|
| 165 |
|
|
| 1,666 |
|
Ending balance |
| $ | 3,323 |
|
| $ | (3,720 | ) |
| $ | (397 | ) |
| $ | 5,055 |
|
| $ | (3,884 | ) |
| $ | 1,171 |
|
Page 26
Civista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
|
|
The following table presents the amounts reclassified out of each component of accumulated other comprehensive income (loss). for the three-month periods ended September 30, 2023 and September 30, 2022.
|
| Amount Reclassified from |
|
|
| |||||
Details about Accumulated Other |
| For the Three |
|
| For the Three |
|
| Affected Line Item in the | ||
Unrealized gains (losses) on available-for-sale securities |
| $ | — |
|
| $ | 4 |
|
| Net gain on sale |
Tax effect |
|
| — |
|
|
| — |
|
| Income tax expense |
|
|
| — |
|
|
| 4 |
|
|
|
Amortization of defined benefit pension items |
|
|
|
|
|
|
|
| ||
Actuarial gains/(losses) (b) |
|
| — |
|
|
| (69 | ) |
| Other operating expenses |
Tax effect |
|
| — |
|
|
| 15 |
|
| Income tax expense |
|
|
| — |
|
|
| (54 | ) |
|
|
Total reclassifications for the period |
| $ | — |
|
| $ | (50 | ) |
|
|
|
| Amount Reclassified from Accumulated Other Comprehensive Income (Loss) (a) |
|
|
| |||||
Details about Accumulated Other Comprehensive (Loss) Components |
| For the nine months ended September 30, 2017 |
|
| For the nine months ended September 30, 2016 |
|
| Affected Line Item in the Statement Where Net Income is Presented | ||
Unrealized gains and losses on available-for-sale securities |
| $ | (9 | ) |
| $ | 20 |
|
| Net gain (loss) on securities available for sale |
Tax effect |
|
| 3 |
|
|
| (7 | ) |
| Income tax expense |
|
|
| (6 | ) |
|
| 13 |
|
| Net of tax |
Amortization of defined benefit pension items |
|
|
|
|
|
|
|
|
|
|
Actuarial gains/(losses) (b) |
|
| (946 | ) |
|
| (249 | ) |
| Salaries, wages and benefits |
Tax effect |
|
| 321 |
|
|
| 84 |
|
| Income tax expense |
|
|
| (625 | ) |
|
| (165 | ) |
| Net of tax |
Total reclassifications for the period |
| $ | (631 | ) |
| $ | (152 | ) |
| Net of tax |
The following table presents the changes in each component of accumulated other comprehensive income (loss), net of tax for the nine month periods ended September 30, 2023 and September 30, 2022.
(a) Amounts in parentheses indicate debits on the Consolidated Balance Sheets |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
Page 2327
Civista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
|
| For the Three-Month Period Ended |
|
| For the Three-Month Period Ended |
| ||||||||||||||||||
|
| September 30, 2017 (a) |
|
| September 30, 2016 (a) |
| ||||||||||||||||||
|
| Unrealized Gains and Losses on Available-for- Sale Securities |
|
| Defined Benefit Pension Items |
|
| Total |
|
| Unrealized Gains and Losses on Available-for- Sale Securities |
|
| Defined Benefit Pension Items |
|
| Total |
| ||||||
Beginning balance |
| $ | 3,266 |
|
| $ | (4,002 | ) |
| $ | (736 | ) |
| $ | 5,863 |
|
| $ | (3,939 | ) |
| $ | 1,924 |
|
Other comprehensive income before reclassifications |
|
| 51 |
|
|
| — |
|
|
| 51 |
|
|
| (796 | ) |
|
| — |
|
|
| (796 | ) |
Amounts reclassified from accumulated other comprehensive loss |
|
| 6 |
|
|
| 282 |
|
|
| 288 |
|
|
| (12 | ) |
|
| 55 |
|
|
| 43 |
|
Net current-period other comprehensive income |
|
| 57 |
|
|
| 282 |
|
|
| 339 |
|
|
| (808 | ) |
|
| 55 |
|
|
| (753 | ) |
Ending balance |
| $ | 3,323 |
|
| $ | (3,720 | ) |
| $ | (397 | ) |
| $ | 5,055 |
|
| $ | (3,884 | ) |
| $ | 1,171 |
|
|
|
The following table presents the amounts reclassified out of each component of accumulated other comprehensive income (loss). for the nine month periods ended September 30, 2023 and September 30, 2022.
|
| Amount Reclassified from Accumulated Other Comprehensive Income (Loss) (a) |
|
|
| |||||||||||||||
Details about Accumulated Other Comprehensive (Loss) Components |
| For the three months ended September 30, 2017 |
|
| For the three months ended September 30, 2016 |
|
| Affected Line Item in the Statement Where Net Income is Presented | ||||||||||||
Unrealized gains and losses on available-for-sale securities |
| $ | (9 | ) |
| $ | 18 |
|
| Net gain (loss) on securities available for sale | ||||||||||
|
| Amount Reclassified from |
|
| ||||||||||||||||
Details about Accumulated Other |
| For the Nine |
|
| For the Nine |
|
| Affected Line Item in the | ||||||||||||
Unrealized gains (losses) on available-for-sale securities |
| $ | — |
|
| $ | 10 |
|
| Net gain on sale | ||||||||||
Tax effect |
|
| 3 |
|
|
| (6 | ) |
| Income tax expense |
|
| — |
|
|
| (2 | ) |
| Income tax expense |
|
|
| (6 | ) |
|
| 12 |
|
| Net of tax |
|
| — |
|
|
| 8 |
|
|
|
Amortization of defined benefit pension items |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Actuarial gains/(losses) (b) |
|
| (426 | ) |
|
| (83 | ) |
| Salaries, wages and benefits |
|
| — |
|
|
| (208 | ) |
| Other operating expenses |
Tax effect |
|
| 144 |
|
|
| 28 |
|
| Income tax expense |
|
| — |
|
|
| 44 |
|
| Income tax expense |
|
|
| (282 | ) |
|
| (55 | ) |
| Net of tax |
|
| — |
|
|
| (164 | ) |
|
|
Total reclassifications for the period |
| $ | (288 | ) |
| $ | (43 | ) |
| Net of tax |
| $ | — |
|
| $ | (156 | ) |
|
|
(a) Amounts in parentheses indicate expenses/losses and other amounts indicate income/benefit.
(b) These accumulated other comprehensive loss components are included in the computation of net periodic pension cost.
|
|
|
|
(7) Goodwill and Intangible Assets
The carrying amount of goodwill has decreased $617 since December 31, 2022 as a result of adjustments to estimated fair values of the assets acquired and liabilities assumed since the date of acquisition. The balance of goodwill was $27,095$125,078 at September 30, 20172023 and December 31, 2016. Management performs an annual evaluation of goodwill for impairment, or more frequently if events or changes in circumstances indicate that the asset might be impaired. Management last performed an evaluation of the Company’s goodwill during the fourth quarter of 2016 and concluded that the Company’s goodwill was not impaired$125,695 at December 31, 2016.2022.
There was no change in the carrying amount of goodwill for the periods ended September 30, 2017 and December 31, 2016.
Acquired intangible assets, other than goodwill, as of September 30, 20172023 and December 31, 20162022 were as follows:
|
| 2017 |
|
| 2016 |
| ||||||||||||||||||||||||||||||||||||||||||
|
| Gross Carrying Amount |
|
| Accumulated Amortization |
|
| Net Carrying Amount |
|
| Gross Carrying Amount |
|
| Accumulated Amortization |
|
| Net Carrying Amount |
|
| September 30, 2023 |
|
| December 31, 2022 |
| ||||||||||||||||||||||||
Amortized intangible assets(1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
MSRs |
| $ | 1,022 |
|
| $ | 302 |
|
| $ | 720 |
|
| $ | 912 |
|
| $ | 250 |
|
| $ | 662 |
| ||||||||||||||||||||||||
|
| Gross |
|
| Accumulated |
|
| Net |
|
| Gross |
|
| Accumulated |
|
| Net |
| ||||||||||||||||||||||||||||||
Amortized intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||
Core deposit intangibles |
|
| 7,274 |
|
|
| 6,634 |
|
|
| 640 |
|
|
| 7,274 |
|
|
| 6,152 |
|
|
| 1,122 |
|
| $ | 12,952 |
|
| $ | 6,078 |
|
| $ | 6,874 |
|
| $ | 12,953 |
|
| $ | 4,883 |
|
| $ | 8,070 |
|
Total amortized intangible assets |
| $ | 8,296 |
|
| $ | 6,936 |
|
| $ | 1,360 |
|
| $ | 8,186 |
|
| $ | 6,402 |
|
| $ | 1,784 |
|
| $ | 12,952 |
|
| $ | 6,078 |
|
| $ | 6,874 |
|
| $ | 12,953 |
|
| $ | 4,883 |
|
| $ | 8,070 |
|
|
|
Page 24
Civista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
Aggregate core deposit intangible amortization expense was $158, $172, $483$398, and $527$456, for the threethree-months ended September 30, 2023 and 2022, respectively. Aggregate core deposit intangible amortization expense was $1,195 and $890 for the nine-months ended September 30, 20172023 and 2016,September 30, 2022, respectively.
AggregatePage 28
Civista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
Activity for mortgage servicing rights amortization was $23, $30, $51(MSRs) and $45the related valuation allowance for the threethree- and nine-monthsnine- months ended September 30, 20172023 and 2016, respectively.September 30, 2022 were as follows:
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Loan Servicing Rights: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Balance at Beginning of Period |
| $ | 3,056 |
|
| $ | 2,664 |
|
| $ | 2,689 |
|
| $ | 2,642 |
|
Additions |
|
| 76 |
|
|
| 91 |
|
|
| 600 |
|
|
| 317 |
|
Additions from acquisition |
|
| — |
|
|
| 419 |
|
|
| — |
|
|
| 419 |
|
Disposals |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Amortized to expense |
|
| (86 | ) |
|
| (95 | ) |
|
| (243 | ) |
|
| (299 | ) |
Other charges |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Change in valuation allowance |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Balance at End of Period |
| $ | 3,046 |
|
| $ | 3,079 |
|
| $ | 3,046 |
|
| $ | 3,079 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
|
|
|
|
| |||||
Valuation allowance: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Balance at Beginning of Period |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
Additions expensed |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Reductions credited to operations |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Direct write-offs |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Balance at End of Period |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
Estimated amortization expense for each of the next five years and thereafter is as follows:
|
| MSRs |
|
| Core deposit |
|
| Total |
| |||
2023 |
| $ | 43 |
|
| $ | 384 |
|
| $ | 427 |
|
2024 |
|
| 171 |
|
|
| 1,489 |
|
|
| 1,660 |
|
2025 |
|
| 170 |
|
|
| 1,312 |
|
|
| 1,482 |
|
2026 |
|
| 168 |
|
|
| 1,193 |
|
|
| 1,361 |
|
2027 |
|
| 163 |
|
|
| 1,071 |
|
|
| 1,234 |
|
Thereafter |
|
| 2,331 |
|
|
| 1,425 |
|
|
| 3,756 |
|
| $ | 3,046 |
|
| $ | 6,874 |
|
| $ | 9,920 |
| |
Page 29
Civista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
|
| MSRs |
|
| Core deposit intangibles |
|
| Total |
| |||
2017 |
| $ | 30 |
|
| $ | 104 |
|
| $ | 134 |
|
2018 |
|
| 40 |
|
|
| 111 |
|
|
| 151 |
|
2019 |
|
| 40 |
|
|
| 88 |
|
|
| 128 |
|
2020 |
|
| 40 |
|
|
| 72 |
|
|
| 112 |
|
2021 |
|
| 40 |
|
|
| 68 |
|
|
| 108 |
|
Thereafter |
|
| 530 |
|
|
| 197 |
|
|
| 727 |
|
|
| $ | 720 |
|
| $ | 640 |
|
| $ | 1,360 |
|
(8) Short-Term and Other Borrowings
Short-term and other borrowings, which consist of federal funds purchased, securities sold under agreements to repurchase and other short-term borrowings, are included in Federal Home Loan Bank advances on the Consolidated Balance Sheets and are summarized as follows:
|
| At September 30, 2017 |
|
| At December 31, 2016 |
| ||||||||||
|
| Federal Funds Purchased |
|
| Short-term Borrowings |
|
| Federal Funds Purchased |
|
| Short-term Borrowings |
| ||||
Outstanding balance |
| $ | — |
|
| $ | 41,750 |
|
| $ | — |
|
| $ | 31,000 |
|
Maximum indebtedness |
|
| 22,500 |
|
|
| 115,050 |
|
|
| 20,000 |
|
|
| 70,400 |
|
Average balance |
|
| 156 |
|
|
| 42,102 |
|
|
| 116 |
|
|
| 10,483 |
|
Average rate paid |
|
| 1.71 | % |
|
| 1.08 | % |
|
| 0.86 | % |
|
| 0.42 | % |
Interest rate on balance |
|
| — |
|
|
| 1.17 | % |
|
| — |
|
|
| 0.64 | % |
|
| At September 30, 2023 |
|
| At December 31, 2022 |
| ||||||||||
|
| Federal Funds |
|
| Short-term |
|
| Federal Funds |
|
| Short-term |
| ||||
Outstanding balance |
| $ | — |
|
| $ | 431,500 |
|
| $ | — |
|
| $ | 393,700 |
|
Interest rate on balance |
|
| — |
|
|
| 5.45 | % |
|
| — |
|
|
| 4.24 | % |
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||||||||||||||||||
|
| 2023 |
|
| 2023 |
|
| 2022 |
|
| 2022 |
|
| 2023 |
|
| 2023 |
|
| 2022 |
|
| 2022 |
| ||||||||
|
| Federal Funds |
|
| Short-term |
|
| Federal Funds |
|
| Short-term |
|
| Federal Funds |
|
| Short-term |
|
| Federal Funds |
|
| Short-term |
| ||||||||
Maximum indebtedness |
| $ | — |
|
| $ | 431,500 |
|
| $ | — |
|
| $ | 56,000 |
|
| $ | — |
|
| $ | 540,000 |
|
| $ | — |
|
| $ | 56,000 |
|
Average balance |
|
| — |
|
|
| 233,547 |
|
|
| — |
|
|
| 6,713 |
|
|
| — |
|
|
| 282,214 |
|
|
| — |
|
|
| 2,380 |
|
Average rate paid |
|
| — |
|
|
| 5.51 | % |
|
| — |
|
|
| 2.84 | % |
|
| — |
|
|
| 5.03 | % |
|
| — |
|
|
| 2.75 | % |
Average balance during the period representrepresents daily averages. Average rate paid represents interest expense divided by the related average balances.
These borrowing
Short-term borrowings and federal funds purchased transactions can range from overnight to six months in maturity. The average maturity was one day at September 30, 2017 and December 31, 2016.2023.
Securities sold under agreements to repurchase are used to facilitate the needs of our customers as well as to facilitate our short-term funding needs. Securities sold under repurchase agreements are carried at the amount of cash received in association with the agreement. We continuously monitor the collateral levels and may be required, from time to time, to provide additional collateral based on the fair value of the underlying securities. Securities pledged as collateral under repurchase agreements are maintained with our safekeeping agents.
The following table presents detail regarding the securities pledged as collateral under repurchase agreements as of September 30, 20172023 and December 31, 2016.2022. All of the repurchase agreements are overnight agreements. As of July 2023, the Company no longer offers repurchase agreements.
|
| September 30, 2017 |
|
| December 31, 2016 |
|
| September 30, 2023 |
|
| December 31, 2022 |
| ||||
Securities pledged for repurchase agreements: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
U.S. Treasury securities |
| $ | 742 |
|
| $ | 1,761 |
|
| $ | — |
|
| $ | 25,143 |
|
Obligations of U.S. government agencies |
|
| 14,406 |
|
|
| 27,164 |
|
|
| — |
|
|
| — |
|
Total securities pledged |
| $ | 15,148 |
|
| $ | 28,925 |
|
| $ | — |
|
| $ | 25,143 |
|
Gross amount of recognized liabilities for repurchase agreements |
| $ | 15,148 |
|
| $ | 28,925 |
|
| $ | — |
|
| $ | 25,143 |
|
Amounts related to agreements not included in offsetting disclosures above |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
Page 2530
Civista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
The Company has granted restricted stock awards with non-forfeitable rights (with respect to dividends), which are considered participating securities. Accordingly, earnings per common share is computed using the two-class method as required by ASC 260-10-45. Basic earnings per common share are computed as net income available to common shareholders divided by the weighted average number of common shares outstanding during the period. period, which excludes the participating securities. Diluted earnings per common share include the dilutive effect, if any, of additional potential common shares issuable under the Company’s equity incentive plan, computed using the treasury stock method, andmethod. The Company had no dilutive securities for the impact of the Company’s convertible preferred stock using the “if converted” method.
|
| Three months ended |
|
| Nine months ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
Basic |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
| $ | 3,660 |
|
| $ | 3,680 |
|
| $ | 11,892 |
|
| $ | 13,586 |
|
Preferred stock dividends |
|
| 308 |
|
|
| 374 |
|
|
| 935 |
|
|
| 1,156 |
|
Net income available to common shareholders—basic |
| $ | 3,352 |
|
| $ | 3,306 |
|
| $ | 10,957 |
|
| $ | 12,430 |
|
Weighted average common shares outstanding—basic |
|
| 10,170,734 |
|
|
| 8,042,303 |
|
|
| 9,815,118 |
|
|
| 7,922,170 |
|
Basic earnings per common share |
| $ | 0.33 |
|
| $ | 0.41 |
|
| $ | 1.12 |
|
| $ | 1.57 |
|
Diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common shareholders—basic |
| $ | 3,352 |
|
| $ | 3,306 |
|
| $ | 10,957 |
|
| $ | 12,430 |
|
Preferred stock dividends |
|
| 308 |
|
|
| 374 |
|
|
| 935 |
|
|
| 1,156 |
|
Net income available to common shareholders—diluted |
| $ | 3,660 |
|
| $ | 3,680 |
|
| $ | 11,892 |
|
| $ | 13,586 |
|
Weighted average common shares outstanding for basic earnings per common share |
|
| 10,170,734 |
|
|
| 8,042,303 |
|
|
| 9,815,118 |
|
|
| 7,922,170 |
|
Add: Dilutive effects of convertible preferred shares |
|
| 2,426,565 |
|
|
| 2,922,609 |
|
|
| 2,455,008 |
|
|
| 3,024,712 |
|
Average shares and dilutive potential common shares outstanding—diluted |
|
| 12,597,299 |
|
|
| 10,964,912 |
|
|
| 12,270,126 |
|
|
| 10,946,882 |
|
Diluted earnings per common share |
| $ | 0.29 |
|
| $ | 0.34 |
|
| $ | 0.97 |
|
| $ | 1.24 |
|
For the three-month periodthree-months ended September 30, 2017 there were 2,426,565 dilutive shares related to the Company’s convertible preferred stock. For the nine-month period ended September 30, 2017 there were 2,455,008 dilutive shares related to the Company’s convertible preferred stock. For the three-month period ended September 30, 2016 there were 2,922,609 dilutive shares related to the Company’s convertible preferred stock. For the nine-month period ended September 30, 2016 there were 3,024,712 dilutive shares related to the Company’s convertible preferred stock. Under the “if converted” method, all convertible preferred shares are assumed to be converted into common shares at the corresponding conversion rate. These additional shares are then added to the common shares outstanding to calculate diluted earnings per share.2023 and 2022.
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Basic |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net income |
| $ | 10,387 |
|
| $ | 11,112 |
|
| $ | 33,309 |
|
| $ | 27,279 |
|
Less allocation of earnings and dividends to participating securities |
|
| 388 |
|
|
| 52 |
|
|
| 1,220 |
|
|
| 123 |
|
Net income available to common shareholders—basic |
| $ | 9,999 |
|
| $ | 11,060 |
|
| $ | 32,089 |
|
| $ | 27,156 |
|
Weighted average common shares outstanding |
|
| 15,735,007 |
|
|
| 15,394,898 |
|
|
| 15,747,648 |
|
|
| 14,974,862 |
|
Less average participating securities |
|
| 588,715 |
|
|
| 71,604 |
|
|
| 576,902 |
|
|
| 67,323 |
|
Weighted average number of shares outstanding used in the calculation of basic earnings per common share |
|
| 15,146,292 |
|
|
| 15,323,294 |
|
|
| 15,170,746 |
|
|
| 14,907,539 |
|
Earnings per common share: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Basic |
| $ | 0.66 |
|
| $ | 0.72 |
|
| $ | 2.12 |
|
| $ | 1.82 |
|
Diluted |
|
| 0.66 |
|
|
| 0.72 |
|
|
| 2.12 |
|
|
| 1.82 |
|
(10) Commitments, Contingencies and Off-Balance Sheet Risk
Some financial instruments, such as loan commitments, credit lines, letters of credit and overdraft protection, are issued to meet customers’ financing needs. These are agreements to provide credit or to support the credit of others, as long as the conditions established in the contract are met, and usually have expiration dates. Commitments may expire without being used. Off-balance-sheet risk of credit loss exists up to the face amount of these instruments, although material losses are not anticipated. The same credit policies are used to make such commitments as are used for loans, including obtaining collateral at exercise of commitment. The contractual amounts of financial instruments with off-balance-sheet risk were as follows forat September 30, 20172023 and December 31, 2016:2022:
|
| Contract Amount |
| |||||||||||||
|
| September 30, 2023 |
|
| December 31, 2022 |
| ||||||||||
|
| Fixed Rate |
|
| Variable |
|
| Fixed Rate |
|
| Variable |
| ||||
Commitment to extend credit: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Lines of credit and construction loans |
| $ | 62,910 |
|
| $ | 692,184 |
|
| $ | 42,184 |
|
| $ | 599,185 |
|
Overdraft protection |
|
| 10 |
|
|
| 45,606 |
|
|
| 10 |
|
|
| 45,182 |
|
Letters of credit |
|
| 875 |
|
|
| 424 |
|
|
| 960 |
|
|
| 630 |
|
|
| $ | 63,795 |
|
| $ | 738,214 |
|
| $ | 43,154 |
|
| $ | 644,997 |
|
|
| Contract Amount |
| |||||||||||||
|
| September 30, 2017 |
|
| December 31, 2016 |
| ||||||||||
|
| Fixed Rate |
|
| Variable Rate |
|
| Fixed Rate |
|
| Variable Rate |
| ||||
Commitment to extend credit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lines of credit and construction loans |
| $ | 8,042 |
|
| $ | 271,718 |
|
| $ | 6,905 |
|
| $ | 202,923 |
|
Overdraft protection |
|
| 6 |
|
|
| 32,223 |
|
|
| 5 |
|
|
| 29,075 |
|
Letters of credit |
|
| 624 |
|
|
| 317 |
|
|
| 600 |
|
|
| 349 |
|
|
| $ | 8,672 |
|
| $ | 304,258 |
|
| $ | 7,510 |
|
| $ | 232,347 |
|
Page 26
Civista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
Commitments to make loans are generally made for a period of one year or less. Fixed rate loan commitments included in the table above had interest rates ranging from 3.25%2.66% to 8.00%14.00% at September 30, 20172023 and from 3.25%3.25% to 8.75%8.00% at December 31, 2016.2022. Maturities extend up to 30 years.
Civista is required to maintain certain reserve balances on hand in accordance with the Federal Reserve Board requirements. The averageNo reserve balance was maintained, or required to be maintained, in accordance with such requirements was $5,223 onat September 30, 20172023 and $2,887 on December 31, 2016.2022.
Page 31
Civista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
(11) Pension Information
The Company sponsors a pension plan which is a noncontributory defined benefit retirement plan. Annual payments, subject to the maximum amount deductible for federal income tax purposes, are made to a pension trust fund. In 2006, the Company amended the pension plan to provide that no employee could be added as a participant to the pension plan after December 31, 2006. In 2014, the Company amended the pension plan again to provide that no additional benefits would accrue beyond April 30, 2014.
Net periodic pension benefitcost was as follows:
|
| Three months ended |
|
| Nine months ended |
|
| Three months ended |
|
| Nine Months Ended |
| ||||||||||||||||||||
|
| September 30, |
|
| September 30, |
|
| September 30, |
|
| September 30, |
| ||||||||||||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||
Service cost |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
Interest cost |
|
| 171 |
|
|
| 170 |
|
|
| 509 |
|
|
| 509 |
|
|
| 125 |
|
|
| 103 |
|
|
| 376 |
|
|
| 310 |
|
Expected return on plan assets |
|
| (283 | ) |
|
| (274 | ) |
|
| (844 | ) |
|
| (821 | ) |
|
| (132 | ) |
|
| (144 | ) |
|
| (397 | ) |
|
| (432 | ) |
Other components |
|
| 426 |
|
|
| 83 |
|
|
| 946 |
|
|
| 249 |
|
|
| — |
|
|
| 69 |
|
|
| — |
|
|
| 208 |
|
Net periodic pension benefit |
| $ | 314 |
|
| $ | (21 | ) |
| $ | 611 |
|
| $ | (63 | ) | ||||||||||||||||
Net periodic pension cost |
| $ | (7 | ) |
| $ | 28 |
|
| $ | (21 | ) |
| $ | 86 |
| ||||||||||||||||
The total amount of pension contributions expected to be paid by the Company in 2017 is $2,000. The Company contributed $500does not expect to make any contribution to its pension plan in 2016.2023. The Company made no contribution to its pension plan in 2022.
(12) Equity Incentive Plan
At the Company’s 2014 annual meeting, the shareholders adopted the Company’s 2014 Incentive Plan (“2014 Incentive Plan”). The 2014 Incentive Plan authorizes the Company to grant options, stock awards, stock units and other awards for up to 375,000 common shares of the Company. There were 292,20960,049 common shares available for future grants under this plan at September 30, 2017.2023.
During each ofNo options were granted under the last three years,2014 Incentive Plan during the nine- months ended September 30, 2023 and 2022.
Each year, the Board of Directors has awarded restricted common shares to senior officers of the Company. The restricted shares vest ratably over a three-year or five-year period following the grant date. The product of the number of restricted shares granted and the grant date market price of the Company’s common shares determines the fair value of restricted shares awarded under the Company’s 2014 Incentive Plan. Management recognizes compensation expense for the fair value of restricted shares on a straight-line basis over the requisite service period for the entire award.
On January 4, 2016, directors of the Company’s banking subsidiary, Civista, were paid a retainer in the form of non-restricted common shares of the Company. The aggregate of 2,730 common shares were issued to Civista directors as payment of their retainer for their service on the Civista Board of Directors covering the period up to the 2016 Annual Meeting. This issuance was expensed in its entirety when the shares were issued in the amount of $32.
On May 17, 2016, directors of the Company’s banking subsidiary, Civista, were paid a retainer in the form of non-restricted common shares of the Company. The aggregate of 12,285 common shares were issued to Civista directors as payment of their retainer for their service on the Civista Board of Directors covering the period up to the 2017 Annual Meeting. This issuance was expensed in its entirety when the shares were issued in the amount of $130.
On May 16, 2017, directors of the Company’s banking subsidiary, Civista, were paid a retainer in the form of non-restricted common shares of the Company. The aggregate of 6,804 common shares were issued to Civista directors as payment of their retainer for their service on the Civista Board of Directors covering the period up to the 2018 Annual Meeting. This issuance was expensed in its entirety when the shares were issued in the amount of $144.
Finally, on September 11, 2017, a newly appointed director of the Company’s banking subsidiary, Civista, was paid a retainer in the form of non-restricted common shares of the Company. The aggregate of 367 common shares was issued as payment of her retainer for her service on the Civista Board of Directors covering the period up to the 2018 Annual Meeting. This issuance was expensed in its entirety when the shares were issued in the amount of $8.
Page 27
Civista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
No options had been granted under the 2014 Incentive Plan as of September 30, 2017 and 2016.
The Company classifies share-based compensation for employees with “Salaries, wages and benefits”“Compensation expense” in the consolidated statementsConsolidated Statements of operations. Additionally, generally accepted accounting principles require the Company to report: (1) the expense associated with the grants as an adjustment to operating cash flows, and (2) any benefits of realized tax deductions in excess of previously recognized tax benefits on compensation expense as an operating cash flow.Operations.
The following is a summary of the status of the Company’s outstanding restricted common shares and changes therein for the three- and nine-month periods ended September 30, 2017:2023:
|
| Three months ended |
|
| Nine months ended |
|
| Three months ended |
|
| Nine Months Ended |
| ||||||||||||||||||||
|
| September 30, 2017 |
|
| September 30, 2017 |
|
| September 30, 2023 |
|
| September 30, 2023 |
| ||||||||||||||||||||
|
| Number of Restricted Shares |
|
| Weighted Average Grant Date Fair Value |
|
| Number of Restricted Shares |
|
| Weighted Average Grant Date Fair Value |
|
| Number of |
|
| Weighted |
|
| Number of |
|
| Weighted |
| ||||||||
Nonvested at beginning of period |
|
| 42,138 |
|
| $ | 15.60 |
|
|
| 37,050 |
|
| $ | 10.77 |
|
|
| 88,422 |
|
| $ | 21.98 |
|
|
| 70,096 |
|
| $ | 21.88 |
|
Granted |
|
| — |
|
|
| — |
|
|
| 17,898 |
|
|
| 22.15 |
|
|
| — |
|
|
| — |
|
|
| 47,536 |
|
|
| 21.85 |
|
Vested |
|
| — |
|
|
| — |
|
|
| (12,810 | ) |
|
| 10.76 |
|
|
| — |
|
|
| — |
|
|
| (27,470 | ) |
|
| 21.52 |
|
Forfeited |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,740 | ) |
|
| 21.74 |
|
Nonvested at September 30, 2017 |
|
| 42,138 |
|
| $ | 15.60 |
|
|
| 42,138 |
|
| $ | 15.60 |
| ||||||||||||||||
Nonvested at end of period |
|
| 88,422 |
|
| $ | 21.98 |
|
|
| 88,422 |
|
| $ | 21.98 |
| ||||||||||||||||
Page 32
Civista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
The following is a summary of the status of the Company’s awardedoutstanding restricted common shares as of September 30, 2017:2023:
At September 30, 2017 |
| |||||||||||
Date of Award |
| Shares |
|
| Remaining Expense |
|
| Remaining Vesting Period (Years) |
| |||
March 17, 2015 |
|
| 16,699 |
|
| $ | 9 |
|
|
| 0.25 |
|
March 11, 2016 |
|
| 15,748 |
|
|
| 41 |
|
|
| 1.25 |
|
March 20, 2017 |
|
| 11,713 |
|
|
| 126 |
|
|
| 2.25 |
|
January 15, 2016 |
|
| 10,260 |
|
|
| 72 |
|
|
| 3.25 |
|
March 20, 2017 |
|
| 6,185 |
|
|
| 119 |
|
|
| 4.25 |
|
|
|
| 60,605 |
|
| $ | 367 |
|
|
| 2.93 |
|
At September 30, 2023 |
| |||||||||||
Date of Award |
| Shares |
|
| Remaining Expense |
|
| Remaining Vesting |
| |||
March 14, 2019 |
|
| 1,924 |
|
| $ | 9 |
|
|
| 0.25 |
|
March 14, 2020 |
|
| 4,265 |
|
|
| 51 |
|
|
| 1.25 |
|
March 3, 2021 |
|
| 7,776 |
|
|
| 103 |
|
|
| 2.25 |
|
March 3, 2021 |
|
| 6,793 |
|
|
| 33 |
|
|
| 0.25 |
|
March 3, 2022 |
|
| 9,554 |
|
|
| 177 |
|
|
| 3.25 |
|
March 3, 2022 |
|
| 11,261 |
|
|
| 160 |
|
|
| 1.25 |
|
March 14, 2023 |
|
| 17,103 |
|
|
| 296 |
|
|
| 4.25 |
|
March 14, 2023 |
|
| 29,746 |
|
|
| 466 |
|
|
| 2.25 |
|
|
| 88,422 |
|
| $ | 1,295 |
|
|
| 2.37 |
| |
DuringThe Company recorded $191 and $153 of share-based compensation expense during the ninethree months ended September 30, 2017, the Company recorded $225 of share-based compensation expense2023 and $152 of director retainer fees for shares granted under the 2014 Incentive Plan.2022, respectively. At September 30, 2017,2023, the total compensation cost related to unvested awards not yet recognized is $367,was $1,296, which iswas expected to be recognized over the weighted average remaining life of the grants of 2.932.37 years.
(13) Fair Value Measurement
The Company uses a fair value hierarchy to measure fair value. This hierarchy describes three levels of inputs that may be used to measure fair value.value: Level 1: Quoted prices for identical assets in active markets that are identifiable on the measurement date; Level 2: Significant other observable inputs, such as quoted prices for similar assets, quoted prices in markets that are not active and other inputs that are observable or can be corroborated by observable market data; and Level 3: Significant unobservable inputs that reflect the Company’s own view about the assumptions that market participants would use in pricing an asset.
Debt securities: The fair values of securities available for saleavailable-for-sale are determined by matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities, but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs).
Equity securities: The Company’s equity securities are not actively traded in an open market. The fair valuesvalue of these equity securities available for saleavailable-for-sale not actively traded in an open market is determined by using market data inputs for similar securities that are observable (Level 2 inputs).
The fair value of the swap asset/liability: The fair value of the swap asset and liability is based on an external derivative model using data inputs based on similar transactions as of the valuation date and classified Level 2. The changes in fair value of these assets/liabilities had no impact on net income or comprehensive income.
Mortgage servicing rights: Mortgage servicing rights do not trade in an active market with readily observable market data. As a result, the Company estimates the fair value of mortgage servicing rights by using a discounted cash flow model to calculate the present value of estimated future net servicing income. The Company stratifies its mortgage servicing portfolio on the basis of loan type. The assumptions used in the discounted cash flow model are those that the Company believes market participants would use in estimating future net servicing income. Significant assumptions in the valuation of mortgage servicing rights include estimated loan repayment rates, the discount rate, servicing costs, and the timing of cash flows, among other factors. Mortgage servicing rights are classified as Level 3 measurements due to the use of significant unobservable inputs, as well as significant management judgment and estimation.
Page 2833
Civista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
Impaired loans: The Company has measured impairment on impaired loans generally based on the fair value of the loan’s collateral. Fair value is generally determined based upon independent third-party appraisals of the properties. In some cases, management may adjust the appraised value due to the ageof the appraisal, changes in market conditions, or observable deterioration of the property since the appraisal was completed. Additionally, management makes estimates about expected costs to sell the property which are also included in the net realizable value. If the fair value of the collateral dependent loan is less than the carrying amount of the loan, a specific reserve for the loan is made in the allowance for loan losses or a charge-off is taken to reduce the loan to the fair value of the collateral (less estimated selling costs)
Assets and the loan is included as a Level 3 measurement.
Other real estate owned: OREO is carried at the lower of cost or fair value, which is measured at the date of foreclosure. If the fair value of the collateral exceeds the carrying amount of the loan, no charge-off or adjustment is necessary, the loan is not considered to be carried at fair value, and is therefore not included in the table below. If the fair value of the collateral is less than the carrying amount of the loan, management will charge the loan down to its estimated realizable value. Management may adjust the appraised value due to the age of the appraisal, changes in market conditions, or observable deterioration of the property since the appraisal was completed. In these cases, the properties are categorized in the below table as Level 3 measurements since these adjustments are considered to be unobservable inputs. Income and expenses from operations are included in other operating expenses. Further declines in the fair value of the collateral subsequent to foreclosure are included in net gain on sale of other real estate owned.
Assetsliabilities measured at fair value are summarized in the tables below.
Fair Value Measurements at September 30, 2023 Using: | ||||||||||||
Assets: | (Level 1) | (Level 2) | (Level 3) | |||||||||
Assets measured at fair value on a recurring basis: | ||||||||||||
Securities available-for-sale | ||||||||||||
U.S. Treasury securities and obligations of U.S. | $ | — | $ | 71,295 | $ | — | ||||||
Obligations of states and political subdivisions | — | 310,535 | — | |||||||||
Mortgage-backed securities in government sponsored | — | 211,657 | — | |||||||||
Total securities available-for-sale | — | 593,487 | — | |||||||||
Equity securities | — | 2,021 | — | |||||||||
Swap asset | — | 19,784 | — | |||||||||
Liabilities measured at fair value on a recurring basis: | ||||||||||||
Swap liability | $ | — | $ | 19,784 | $ | — | ||||||
Assets measured at fair value on a nonrecurring basis: | ||||||||||||
Mortgage servicing rights | $ | — | $ | — | $ | 3,046 | ||||||
|
| Fair Value Measurements at December 31, 2022 Using: |
| |||||||||
Assets: |
| (Level 1) |
|
| (Level 2) |
|
| (Level 3) |
| |||
Assets measured at fair value on a recurring basis: |
|
|
|
|
|
|
|
|
| |||
Securities available-for-sale |
|
|
|
|
|
|
|
|
| |||
U.S. Treasury securities and obligations of U.S. |
| $ | — |
|
| $ | 61,029 |
|
| $ | — |
|
Obligations of states and political subdivisions |
|
| — |
|
|
| 317,248 |
|
|
| — |
|
Mortgage-backed securities in government |
|
| — |
|
|
| 237,125 |
|
|
| — |
|
Total securities available-for-sale |
|
| — |
|
|
| 615,402 |
|
|
| — |
|
Equity securities |
|
| — |
|
|
| 2,190 |
|
|
| — |
|
Swap asset |
|
| — |
|
|
| 16,579 |
|
|
| — |
|
Liabilities measured at fair value on a recurring |
|
|
|
|
|
|
|
|
| |||
Swap liability |
|
| — |
|
|
| 16,579 |
|
|
| — |
|
Assets measured at fair value on a nonrecurring |
|
|
|
|
|
|
|
|
| |||
Mortgage servicing rights |
| $ | — |
|
| $ | — |
|
| $ | 2,689 |
|
|
| Fair Value Measurements at September 30, 2017 Using: |
| |||||||||
Assets: |
| (Level 1) |
|
| (Level 2) |
|
| (Level 3) |
| |||
Assets measured at fair value on a recurring basis: |
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities and obligations of U.S. Government agencies |
| $ | — |
|
| $ | 31,063 |
|
| $ | — |
|
Obligations of states and political subdivisions |
|
| — |
|
|
| 113,615 |
|
|
| — |
|
Mortgage-backed securities in government sponsored entities |
|
| — |
|
|
| 83,923 |
|
|
| — |
|
Equity securities in financial institutions |
|
| — |
|
|
| 818 |
|
|
| — |
|
Swap asset |
|
| — |
|
|
| 1,706 |
|
|
| — |
|
Liabilities measured at fair value on a recurring basis: |
|
|
|
|
|
|
|
|
|
|
|
|
Swap liability |
|
| — |
|
|
| 1,706 |
|
|
| — |
|
Assets measured at fair value on a nonrecurring basis: |
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans |
| $ | — |
|
| $ | — |
|
| $ | 1,639 |
|
Other real estate owned |
|
| — |
|
|
| — |
|
|
| 27 |
|
|
| Fair Value Measurements at December 31, 2016 Using: |
| |||||||||
Assets: |
| (Level 1) |
|
| (Level 2) |
|
| (Level 3) |
| |||
Assets measured at fair value on a recurring basis: |
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities and obligations of U.S. Government agencies |
| $ | — |
|
| $ | 37,446 |
|
| $ | — |
|
Obligations of states and political subdivisions |
|
| — |
|
|
| 94,998 |
|
|
| — |
|
Mortgage-backed securities in government sponsored entities |
|
| — |
|
|
| 62,642 |
|
|
| — |
|
Equity securities in financial institutions |
|
| — |
|
|
| 778 |
|
|
| — |
|
Swap asset |
|
| — |
|
|
| 1,839 |
|
|
| — |
|
Liabilities measured at fair value on a recurring basis: |
|
|
|
|
|
|
|
|
|
|
|
|
Swap liability |
|
| — |
|
|
| 1,839 |
|
|
| — |
|
Assets measured at fair value on a nonrecurring basis: |
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans |
| $ | — |
|
| $ | — |
|
| $ | 952 |
|
Other real estate owned |
|
| — |
|
|
| — |
|
|
| 37 |
|
Page 29
Civista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
The following table presentstables present quantitative information about the Level 3 significant unobservable inputs for assets and liabilities measured at fair value on a nonrecurring basis atas of September 30, 2017.
|
| Quantitative Information about Level 3 Fair Value Measurements |
| |||||||||||
September 30, 2017 |
| Fair Value |
|
| Valuation Technique |
| Unobservable Input |
| Range |
| Weighted Average |
| ||
Impaired loans |
| $ | 1,639 |
|
| Appraisal of collateral |
| Appraisal adjustments |
| 10% - 48% |
|
| 34% |
|
|
|
|
|
|
|
|
| Liquidation expense |
| 0% - 10% |
|
| 4% |
|
|
|
|
|
|
|
|
| Holding period |
| 0 - 30 months |
| 20 months |
| |
Other real estate owned |
| $ | 27 |
|
| Appraisal of collateral |
| Appraisal adjustments |
| 10% - 30% |
|
| 10% |
|
|
|
|
|
|
|
|
| Liquidation expense |
| 0% - 10% |
|
| 10% |
|
The following table presents quantitative information about the Level 3 significant unobservable inputs for assets2023 and liabilities measured at fair value on a nonrecurring basis at December 31, 2016.2022.
|
| Quantitative Information about Level 3 Fair Value Measurements | ||||||||||
September 30, 2023 |
| Fair Value |
|
| Valuation Technique |
| Unobservable Input |
| Range |
| Weighted Average | |
Mortgage Servicing |
| $ | 3,046 |
|
| Discounted Cash Flow |
| Constant Prepayment |
| 4.3% - 10.4% |
| 6% |
|
|
|
|
|
|
| Discount Rate |
| 12% |
| 12% | |
|
| Quantitative Information about Level 3 Fair Value Measurements | ||||||||||
December 31, 2022 |
| Fair Value |
|
| Valuation Technique |
| Unobservable Input |
| Range |
| Weighted Average | |
Mortgage Servicing |
| $ | 2,689 |
|
| Discounted Cash Flow |
| Constant Prepayment |
| 5% - 20% |
| 7% |
|
|
|
|
|
|
| Discount Rate |
| 12% |
| 12% | |
Page 34
Civista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
|
| Quantitative Information about Level 3 Fair Value Measurements |
| |||||||||||
December 31, 2016 |
| Fair Value |
|
| Valuation Technique |
| Unobservable Input |
| Range |
| Weighted Average |
| ||
Impaired loans |
| $ | 952 |
|
| Appraisal of collateral |
| Appraisal adjustments |
| 10% - 67% |
|
| 64% |
|
|
|
|
|
|
|
|
| Liquidation expense |
| 0% - 10% |
|
| 4% |
|
|
|
|
|
|
|
|
| Holding period |
| 0 - 30 months |
| 19 months |
| |
Other real estate owned |
| $ | 37 |
|
| Appraisal of collateral |
| Appraisal adjustments |
| 10% - 30% |
|
| 10% |
|
|
|
|
|
|
|
|
| Liquidation expense |
| 0% - 10% |
|
| 10% |
|
The carrying amount and fair values of financial instruments arenot measured at fair value on a recurring or nonrecurring basis at September 30, 2023 were as follows:
September 30, 2017 |
| Carrying Amount |
|
| Total Fair Value |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| |||||||||||||||||||||||||
September 30, 2023 |
| Carrying |
|
| Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| |||||||||||||||||||||||||
Financial Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Cash and due from financial institutions |
| $ | 33,394 |
|
| $ | 33,394 |
|
| $ | 33,394 |
|
| $ | — |
|
| $ | — |
|
| $ | 50,316 |
|
| $ | 50,316 |
|
| $ | 50,316 |
|
| $ | — |
|
| $ | — |
|
Securities available for sale |
|
| 229,419 |
|
|
| 229,419 |
|
|
| — |
|
|
| 229,419 |
|
|
| — |
| ||||||||||||||||||||
Other securities |
|
| 14,247 |
|
|
| 14,247 |
|
|
| 14,247 |
|
|
| — |
|
|
| — |
|
|
| 34,224 |
|
|
| 34,224 |
|
|
| 34,224 |
|
|
| — |
|
|
| — |
|
Loans, held for sale |
|
| 4,662 |
|
|
| 4,662 |
|
|
| 4,662 |
|
|
| — |
|
|
| — |
|
|
| 1,589 |
|
|
| 1,589 |
|
|
| 1,589 |
|
|
| — |
|
|
| — |
|
Loans, net of allowance for loan losses |
|
| 1,129,046 |
|
|
| 1,130,083 |
|
|
| — |
|
|
| — |
|
|
| 1,130,083 |
| ||||||||||||||||||||
Loans, net of allowance |
|
| 2,719,610 |
|
|
| 2,627,715 |
|
|
| — |
|
|
| — |
|
|
| 2,627,715 |
| ||||||||||||||||||||
Bank owned life insurance |
|
| 24,981 |
|
|
| 24,981 |
|
|
| 24,981 |
|
|
| — |
|
|
| — |
|
|
| 54,053 |
|
|
| 54,053 |
|
|
| 54,053 |
|
|
| — |
|
|
| — |
|
Accrued interest receivable |
|
| 4,999 |
|
|
| 4,999 |
|
|
| 4,999 |
|
|
| — |
|
|
| — |
|
|
| 11,489 |
|
|
| 11,489 |
|
|
| 11,489 |
|
|
| — |
|
|
| — |
|
Swap asset |
|
| 1,706 |
|
|
| 1,706 |
|
|
| — |
|
|
| 1,706 |
|
|
| — |
| ||||||||||||||||||||
Financial Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Nonmaturing deposits |
|
| 947,262 |
|
|
| 947,262 |
|
|
| 947,262 |
|
|
| — |
|
|
| — |
|
|
| 2,139,757 |
|
|
| 2,139,782 |
|
|
| 2,139,782 |
|
|
| — |
|
|
| — |
|
Time deposits |
|
| 254,027 |
|
|
| 254,017 |
|
|
| — |
|
|
| — |
|
|
| 254,017 |
|
|
| 655,986 |
|
|
| 653,827 |
|
|
| — |
|
|
| — |
|
|
| 653,827 |
|
Short-term FHLB advances |
|
| 41,750 |
|
|
| 41,722 |
|
|
| 41,722 |
|
|
| — |
|
|
| — |
|
|
| 431,500 |
|
|
| 430,534 |
|
|
| 430,534 |
|
|
| — |
|
|
| — |
|
Long-term FHLB advances |
|
| 15,000 |
|
|
| 14,966 |
|
|
| — |
|
|
| — |
|
|
| 14,966 |
|
|
| 2,573 |
|
|
| 2,543 |
|
|
| — |
|
|
| — |
|
|
| 2,543 |
|
Other borrowings |
|
| 10,964 |
|
|
| 10,964 |
|
|
| — |
|
|
| — |
|
|
| 10,964 |
| ||||||||||||||||||||
Securities sold under agreement to repurchase |
|
| 15,148 |
|
|
| 15,148 |
|
|
| 15,148 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Subordinated debentures |
|
| 29,427 |
|
|
| 29,470 |
|
|
| — |
|
|
| — |
|
|
| 29,470 |
|
|
| 103,921 |
|
|
| 99,264 |
|
|
| — |
|
|
| — |
|
|
| 99,264 |
|
Accrued interest payable |
|
| 244 |
|
|
| 244 |
|
|
| 244 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Swap liability |
|
| 1,706 |
|
|
| 1,706 |
|
|
| — |
|
|
| 1,706 |
|
|
| — |
| ||||||||||||||||||||
The carrying amount and fair values of financial instruments not measured at fair value on a recurring or nonrecurring basis at December 31, 2022 were as follows:
December 31, 2022 |
| Carrying |
|
| Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| |||||
Financial Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Cash and due from financial institutions |
| $ | 43,361 |
|
| $ | 43,361 |
|
| $ | 43,361 |
|
| $ | — |
|
| $ | — |
|
Other securities |
|
| 33,585 |
|
|
| 33,585 |
|
|
| 33,585 |
|
|
| — |
|
|
| — |
|
Loans, held for sale |
|
| 683 |
|
|
| 698 |
|
|
| 698 |
|
|
| — |
|
|
| — |
|
Loans, net of allowance |
|
| 2,518,155 |
|
|
| 2,427,291 |
|
|
| — |
|
|
| — |
|
|
| 2,427,291 |
|
Bank owned life insurance |
|
| 53,543 |
|
|
| 53,543 |
|
|
| 53,543 |
|
|
| — |
|
|
| — |
|
Accrued interest receivable |
|
| 11,178 |
|
|
| 11,178 |
|
|
| 11,178 |
|
|
| — |
|
|
| — |
|
Financial Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Nonmaturing deposits |
|
| 2,300,215 |
|
|
| 2,300,215 |
|
|
| 2,300,215 |
|
|
| — |
|
|
| — |
|
Time deposits |
|
| 319,769 |
|
|
| 318,886 |
|
|
| — |
|
|
| — |
|
|
| 318,886 |
|
Short-term FHLB advances |
|
| 393,700 |
|
|
| 393,247 |
|
|
| 393,247 |
|
|
| — |
|
|
| — |
|
Long-term FHLB advances |
|
| 3,578 |
|
|
| 3,534 |
|
|
| — |
|
|
| — |
|
|
| 3,534 |
|
Securities sold under agreement to repurchase |
|
| 25,143 |
|
|
| 25,143 |
|
|
| 25,143 |
|
|
| — |
|
|
| — |
|
Subordinated debentures |
|
| 103,799 |
|
|
| 98,513 |
|
|
| — |
|
|
| — |
|
|
| 98,513 |
|
Other borrowings |
|
| 15,516 |
|
|
| 15,806 |
|
|
| — |
|
|
| — |
|
|
| 15,806 |
|
Accrued interest payable |
|
| 668 |
|
|
| 668 |
|
|
| 668 |
|
|
| — |
|
|
| — |
|
An immaterial revision has been made to the fair market value of loans for the period ended December 31, 2022. This revision did not have a significant impact on the financial statement line item affected or total assets, equity or net income.
Page 3035
Civista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
(14) Derivatives
December 31, 2016 |
| Carrying Amount |
|
| Total Fair Value |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| |||||
Financial Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due from financial institutions |
| $ | 36,695 |
|
| $ | 36,695 |
|
| $ | 36,695 |
|
| $ | — |
|
| $ | — |
|
Securities available for sale |
|
| 195,864 |
|
|
| 195,864 |
|
|
| — |
|
|
| 195,864 |
|
|
| — |
|
Loans, held for sale |
|
| 2,268 |
|
|
| 2,268 |
|
|
| 2,268 |
|
|
| — |
|
|
| — |
|
Loans, net of allowance for loan losses |
|
| 1,042,201 |
|
|
| 1,047,329 |
|
|
| — |
|
|
| — |
|
|
| 1,047,329 |
|
Other securities |
|
| 14,055 |
|
|
| 14,055 |
|
|
| 14,055 |
|
|
| — |
|
|
| — |
|
Bank owned life insurance |
|
| 24,552 |
|
|
| 24,552 |
|
|
| 24,552 |
|
|
| — |
|
|
| — |
|
Accrued interest receivable |
|
| 3,854 |
|
|
| 3,854 |
|
|
| 3,854 |
|
|
| — |
|
|
| — |
|
Swap asset |
|
| 1,839 |
|
|
| 1,839 |
|
|
| — |
|
|
| 1,839 |
|
|
| — |
|
Financial Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonmaturing deposits |
|
| 913,677 |
|
|
| 913,677 |
|
|
| 913,677 |
|
|
| — |
|
|
| — |
|
Time deposits |
|
| 207,426 |
|
|
| 207,784 |
|
|
| — |
|
|
| — |
|
|
| 207,784 |
|
Short-term FHLB advances |
|
| 31,000 |
|
|
| 31,007 |
|
|
| 31,007 |
|
|
| — |
|
|
| — |
|
Long-term FHLB advances |
|
| 17,500 |
|
|
| 17,553 |
|
|
| — |
|
|
| — |
|
|
| 17,553 |
|
Securities sold under agreement to repurchase |
|
| 28,925 |
|
|
| 28,925 |
|
|
| 28,925 |
|
|
| — |
|
|
| — |
|
Subordinated debentures |
|
| 29,427 |
|
|
| 27,414 |
|
|
| — |
|
|
| — |
|
|
| 27,414 |
|
Accrued interest payable |
|
| 181 |
|
|
| 181 |
|
|
| 181 |
|
|
| — |
|
|
| — |
|
Swap liability |
|
| 1,839 |
|
|
| 1,839 |
|
|
| — |
|
|
| 1,839 |
|
|
| — |
|
Cash and due from financial institutions: The carrying amounts for cash and due from financial institutions approximate fair value because they have original maturities of less than 90 days and do not present unanticipated credit concerns.
Securities available for sale: The fair value of securities are determined by matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for specific securities, but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs). For equity securities, management uses market information related to the value of similar institutions to determine the fair value (Level 2 inputs).
Other securities: The carrying value of regulatory stock approximates fair value based on applicable redemption provisions.
Loans, held-for-sale: Loans held for sale are priced individually at market rates on the day that the loan is locked for commitment to an investor. Because the holding period of such loans is typically short, the carrying value generally approximates the fair value at the time the commitment is received. All loans in the held-for-sale account conform to Fannie Mae underwriting guidelines, with specific intent of the loan being purchased by an investor at the predetermined rate structure.
Loans, net of allowance for loan losses: Fair values for loans, other than impaired, are estimated for portfolios of loans with similar financial characteristics. The fair value of performing loans has been estimated by discounting expected future cash flows of the underlying portfolios. The discount rates used in these calculations are generally derived from the treasury yield curve and are calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect the credit and interest rate inherent in the loan. The estimated maturity is based on the Company’s historical experience with repayments for each loan classification. Changes in these significant unobservable inputs used in discounted cash flow analysis, such as the discount rate or prepayment speeds, could lead to changes in the underlying fair value.
Bank owned life insurance: The carrying value of bank owned life insurance approximates the fair value based on applicable redemption provisions.
Accrued interest receivable and payable and securities sold under agreements to repurchase: The carrying amounts for accrued interest receivable, accrued interest payable and securities sold under agreements to repurchase approximate fair value because they are generally received or paid in 90 days or less and do not present unanticipated credit concerns.
Deposits: The fair value of deposits with no stated maturity, such as noninterest-bearing demand deposits, savings and NOW accounts, and money market accounts, is equal to the amount payable on demand.
Page 31
Civista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
The fair value of certificates of deposit is based on the discounted value of contractual cash flows. The discount rate is estimated using the market rates currently offered for deposits of similar remaining maturities.
The deposits’ fair value estimates do not include the benefit that results from the low-cost funding provided by the deposit liabilities compared to the cost of borrowing funds in the market, commonly referred to as the core deposit intangible.
Federal Home Loan Bank (“FHLB”) advances: Rates available to the Company for borrowed funds with similar terms and remaining maturities are used to estimate the fair value of borrowed funds.
Subordinated debentures: The fair value of subordinated debentures is based on the discounted value of contractual cash flows of the underlying debt agreements. The discount rate is estimated using the current rate for the borrowing from the FHLB with the most similar terms.
Fair value swap asset and liability: The fair value of the swap asset and liability is based on an external derivative model using data inputs as of the valuation date.
(14) Derivative Hedging Instruments
To accommodate customer need and to support the Company’s asset/liability positioning, on occasion we enter into interest rate swaps with a customer and a bank counterparty. The interest rate swaps are free-standing derivatives and are recorded at fair value. The Company enters into a floating rate loan and a fixed rate swap with our customer. Simultaneously, the Company enters into an offsetting fixed rate swap with a bank counterparty. In connection with each swap transaction, the Company agrees to pay interest to the customer on a notional amount at a variable interest rate and receive interest from the customer on the same notional amount at a fixed interest rate. At the same time, the Company agrees to pay a bank counterparty the same fixed interest rate on the same notional amount and receive the same variable interest rate on the same notional amount. These transactions allow the Company’s customer to effectively convert variable rate loans to fixed rate loans. Since the Company acts as an intermediary for its customer, changes in the fair value of the underlying derivative contracts offset each other and do not significantly impact the Company’s results of operations. None of the Company’s derivatives are designated as hedging instruments.
The Company presents derivative positions net on the balance sheet for customers and financial institution counterparty positions subject to master netting arrangements. The following table summarizesreflects the Company’s interest ratederivatives recorded on the balance sheet:
|
| September 30, 2023 |
|
| December 31, 2022 |
| ||||||||||
|
| Notional |
|
| Fair Value |
|
| Notional |
|
| Fair Value |
| ||||
Included in other assets: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest rate swaps with loan customers in an |
| $ | 2,250 |
|
| $ | 11 |
|
| $ | 6,980 |
|
| $ | 269 |
|
Counterparty positions with financial institutions |
|
| 207,225 |
|
|
| 19,773 |
|
|
| 212,570 |
|
|
| 16,310 |
|
Total included in other assets |
|
|
|
| $ | 19,784 |
|
|
|
|
| $ | 16,579 |
| ||
Included in accrued expenses and other liabilities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest rate swaps with loan customers in a |
| $ | 204,975 |
|
| $ | 19,784 |
|
| $ | 205,590 |
|
| $ | 16,579 |
|
Counterparty positions with financial institutions |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total included in accrued expenses and |
|
|
|
| $ | 19,784 |
|
|
|
|
| $ | 16,579 |
| ||
Gross notional positions with customers |
| $ | 207,225 |
|
|
|
|
| $ | 212,570 |
|
|
|
| ||
Gross notional positions with financial institution |
| $ | 207,225 |
|
|
|
|
| $ | 212,570 |
|
|
|
| ||
The presentation for derivatives for the current and prior periods was revised to present derivative positions net for customer positions. Fair value of swap positionsassets and liabilities for the impactprior period was not impacted.
The effect of a 1 basis point change in interest ratesswap fair value changes on the Consolidated Statement of Operations are as of September 30, 2017.follows:
|
| Notional Amount |
|
| Weighted Average Rate Received/(Paid) |
|
| Impact of a 1 basis point change in interest rates |
|
| Repricing Frequency | |||
Derivative Assets |
| $ | 60,711 |
|
|
| 5.09 | % |
| $ | 35 |
|
| Monthly |
Derivative Liabilities |
|
| (60,711 | ) |
|
| -5.09 | % |
|
| (35 | ) |
| Monthly |
Net Exposure |
| $ | — |
|
|
|
|
|
| $ | — |
|
|
|
Location of | Amount of Gain or (Loss) | |||||||||
Derivatives | Gain or (Loss) | Recognized in | ||||||||
Not Designated | Recognized in | Income on Derivatives | ||||||||
as Hedging Instruments | Income on Derivative | September 30, 2023 | September 30, 2022 | |||||||
Interest rate swaps related to customer loans | Other income | $ | — | $ | — | |||||
Total | $ | — | $ | — | ||||||
The following table summarizes the Company’s interest rate swap positions and the impact of a 1 basis point change in interest rates as of December 31, 2016.
|
| Notional Amount |
|
| Weighted Average Rate Received/(Paid) |
|
| Impact of a 1 basis point change in interest rates |
|
| Repricing Frequency | |||
Derivative Assets |
| $ | 52,975 |
|
|
| 5.07 | % |
| $ | 30 |
|
| Monthly |
Derivative Liabilities |
|
| (52,975 | ) |
|
| -5.07 | % |
|
| (30 | ) |
| Monthly |
Net Exposure |
| $ | — |
|
|
|
|
|
| $ | — |
|
|
|
The Company monitors and controls all derivative products with a comprehensive Board of Director approved commercial loan swap policy. All hedgeinterest rate swap transactions must be approved in advance by the Lenders Loan Committee or the Directors Loan Committee of the Board of Directors. The Company classifies changes in fair value of derivatives in other noninterest income in the Consolidated Statements of Operation.
At September 30, 2023 and December 31, 2022, the Company did not have any cash or securities pledged for collateral on its interest rate swaps with third party financial institutions. Cash pledged for collateral on interest rate swaps is classified as restricted cash on the Consolidated Balance Sheet.
Page 3236
Civista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
(15) Qualified Affordable Housing Project Investments
The Company invests in certain qualified affordable housing projects. At September 30, 20172023 and December 31, 2016,2022, the balance of the investment forCompany's investments in qualified affordable housing projects was $3,079$13,401 and $2,754,$14,149, respectively. These balances are reflected in the otherOther assets line on the Consolidated Balance Sheet. The unfunded commitments related to the investments in qualified affordable housing projects totaled $4,741$3,913 and $2,313$5,634 at September 30, 20172023 and December 31, 2016,2022, respectively. These balances are reflected in the Accrued expenses and other liabilities line on the Consolidated Balance Sheet.
During the ninethree months ended September 30, 20172023 and 2016,2022, the Company recognized amortization expense with respect to its investments in qualified affordable housing projects of $247$252 and $231,$239, respectively, offset by tax credits and other benefits from its investmentinvestments in affordable housing tax credits of $414$426 and $442,$396, respectively. During the quartersthree- and nine-months ended September 30, 20172023 and 2016,2022, the Company recognized amortization expense with respectdid not incur any impairment losses related to its investments in qualified affordable housing projectsprojects.
(16) Revenue Recognition
The Company accounts for revenues from contracts with customers under ASC 606, Revenue from Contracts with Customers. Revenue associated with financial instruments, including revenue from loans and securities, are outside the scope of $82ASC 606 and $77, offset by tax creditsaccounted for under other existing GAAP. In addition, certain noninterest income streams such as fees associated with mortgage servicing rights, financial guarantees, derivatives, and certain credit card fees are also not in scope of the guidance. Noninterest revenue streams in-scope of ASC 606 are discussed below.
Service Charges
Service charges consist of account analysis fees (i.e., net fees earned on analyzed business and public checking accounts), monthly service fees, and other benefitsdeposit account related fees. The Company’s performance obligation for account analysis fees and monthly service fees is generally satisfied, and the related revenue recognized, over the period in which the service is provided. Other deposit account related fees are largely transactional based, and therefore, the Company’s performance obligation is satisfied, and related revenue recognized, at a point in time. Payment for service charges on deposit accounts is primarily received immediately or in the following month through a direct charge to customers’ accounts.
ATM/Interchange Fees
Fees, exchange, and other service charges are primarily comprised of debit and credit card income, ATM fees and other service charges. Debit and credit card income is primarily comprised of interchange fees earned whenever the Company’s debit and credit cards are processed through card payment networks such as Mastercard. ATM fees are primarily generated when a Company cardholder uses a non-Company ATM or a non-Company cardholder uses a Company ATM. The Company’s performance obligation for fees, exchange, and other service charges are largely satisfied, and related revenue recognized, when the services are rendered or upon completion. Payment is typically received immediately or in the following month.
Wealth Management Fees
Wealth management fees are primarily comprised of fees earned from its investmentthe management and administration of trusts and other customer assets. The Company’s performance obligation is generally satisfied over time and the resulting fees are recognized monthly, based upon the month-end market value of the assets under management and the applicable fee rate. Payment is generally received in affordable housingthe following month through a direct charge to customers’ accounts. The Company does not earn performance-based incentives. The Company’s performance obligation for these transactional-based services is generally satisfied, and related revenue recognized, at a point in time (i.e., as incurred). Payment is received shortly after services are rendered.
Page 37
Civista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
Tax Refund Processing Fees
The Company facilitates the payment of federal and state income tax creditsrefunds in partnership with a third-party vendor. Refund Transfers (“RTs”) are fee-based products whereby a tax refund is issued to the taxpayer after the Company has received the refund from the federal or state government. As part of $138this agreement the Company earns fee income, the majority of which is received in the first quarter of the year. The Company’s fee income revenue is recognized based on the estimated percent of business completed by each date.
Other
Other noninterest income consists of other recurring revenue streams such as check order fees, wire transfer fees, safety deposit box rental fees, item processing fees and $147, respectively. Duringother miscellaneous revenue streams. Check order income mainly represents fees charged to customers for checks. Wire transfer fees represent revenue from processing wire transfers. Safe deposit box rental fees are charged to the threecustomer on an annual basis and nine monthsrecognized upon receipt of payment. The Company determined that since rentals and renewals occur fairly consistently over time, revenue is recognized on a basis consistent with the duration of the performance obligation. Item processing fee income represents fees charged to other financial institutions for processing their transactions. Payment is typically received in the following month.
The following presents noninterest income, segregated by revenue streams in-scope and out-of-scope of Topic 606, for the three- and nine-months ended September 30, 20172023 and 2016, the Company did not incur impairment losses related to its investment in qualified affordable housing projects.2022.
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| September 30, |
|
| September 30, |
| ||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Noninterest Income |
|
|
|
|
|
|
|
|
|
|
|
| ||||
In-scope of Topic 606: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Service charges |
| $ | 1,853 |
|
| $ | 1,885 |
|
| $ | 5,457 |
|
| $ | 5,004 |
|
ATM/Interchange fees |
|
| 1,424 |
|
|
| 1,394 |
|
|
| 4,227 |
|
|
| 3,990 |
|
Wealth management fees |
|
| 1,197 |
|
|
| 1,208 |
|
|
| 3,570 |
|
|
| 3,713 |
|
Tax refund processing fees |
|
| — |
|
|
| — |
|
|
| 2,375 |
|
|
| 2,375 |
|
Other |
|
| 646 |
|
|
| 274 |
|
|
| 3,500 |
|
|
| 574 |
|
Noninterest Income (in-scope of Topic 606) |
|
| 5,120 |
|
|
| 4,761 |
|
|
| 19,129 |
|
|
| 15,656 |
|
Noninterest Income (out-of-scope of Topic 606) |
|
| 3,005 |
|
|
| 973 |
|
|
| 9,213 |
|
|
| 3,356 |
|
Total Noninterest Income |
| $ | 8,125 |
|
| $ | 5,734 |
|
| $ | 28,342 |
|
| $ | 19,012 |
|
Page 3338
Civista Bancshares, Inc.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Form 10-Q
(Amounts in thousands, except share data)
Introduction
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Introduction
The following discussion focuses on the consolidated financial condition of the Company at September 30, 20172023 compared to December 31, 2016,2022, and the consolidated results of operations for the three- and nine-month periodperiods ended September 30, 2017,2023, compared to the same periodperiods in 2016.2022. This discussion should be read in conjunction with the consolidated financial statementsConsolidated Financial Statements and footnotes included in this Form 10-Q.
Forward-Looking Statements
This Quarterly Report on Form 10-Q may contain “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), relating to such matters as the Company’s financial condition, anticipated operating results, cash flows, business line results, credit quality expectations, prospects for new lines of business, economic trends (including interest rates) and similar matters. Forward-looking statements reflect our expectations, estimates or projections concerning future results or events. These statements are generally identified by the use of forward-looking words or phrases such as “believe,” “belief,” “expect,” “anticipate,” “may,” “could,” “intend,” “intent,” “estimate,” “plan,” “foresee,” “likely,” “will,” “should” or other similar words or phrases. Forward-looking statements are not guarantees of performance and are inherently subject to known and unknown risks, uncertainties and assumptions that are difficult to predict and could cause our actual results, performance or achievements to differ materially from those expressed in or implied by the forward-looking statements. Factors that could cause actual results, performance or achievements to differ from resultsthose discussed in the forward-looking statements include, but are not limited to,to:
Page 39
Civista Bancshares, Inc.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Form 10-Q
(Amounts in thousands, except share data)
The Company does not undertake, and specifically disclaims, any obligation to publicly release the result of any revisions that may be made to any forward-looking statements to reflect occurrence of anticipated or unanticipated events or circumstances after the date of such statements, except as required by law.
Financial Condition
Total assets of the Company at September 30, 20172023 were $1,496,088$3,732,916 compared to $1,377,263$3,537,830 at December 31, 2016,2022, an increase of $118,825,$195,086, or 8.6%5.5%. The increase in total assets was mainly attributabledue to increases in securities available for sale,net loans held for saleof $201,455, accompanied by other increases in cash, swap assets and loans.deferred taxes of $6,955, $3,205, and $9,103, respectively. Total liabilities at September 30, 20172023 were $1,314,107$3,400,171 compared to $1,239,647$3,202,995 at December 31, 2016,2022, an increase of $74,460,$197,176, or 6.0%6.2%. The increase in total liabilities was mainlyprimarily attributable to increasesan increase in total depositsdeposit accounts of $175,759 accompanied by an increase short term FHLB borrowings of $37,800, swap liabilities of $3,205 and FHLB overnight advancesaccrued interest, taxes and other liabilities of $10,358, partially offset by a decreasedecreases in long term FHLB borrowings, securities sold under agreements to repurchase.repurchase, and other borrowings of $1,005, $25,143 and $4,552 respectively.
Loans outstanding as of September 30, 2017 and December 31, 2016 were as follows:
|
| September 30, 2017 |
|
| December 31, 2016 |
| ||
Commercial & Agriculture |
| $ | 147,537 |
|
| $ | 135,462 |
|
Commercial Real Estate—Owner Occupied |
|
| 167,678 |
|
|
| 161,364 |
|
Commercial Real Estate—Non-Owner Occupied |
|
| 424,430 |
|
|
| 395,931 |
|
Residential Real Estate |
|
| 267,839 |
|
|
| 247,308 |
|
Real Estate Construction |
|
| 77,978 |
|
|
| 56,293 |
|
Farm Real Estate |
|
| 38,966 |
|
|
| 41,170 |
|
Consumer and Other |
|
| 17,564 |
|
|
| 17,978 |
|
Total loans |
|
| 1,141,992 |
|
|
| 1,055,506 |
|
Allowance for loan losses |
|
| (12,946 | ) |
|
| (13,305 | ) |
Net loans |
| $ | 1,129,046 |
|
| $ | 1,042,201 |
|
Net loans have increased $86,845 or 8.3% since December 31, 2016. The Commercial & Agriculture, Commercial Real Estate – Owner Occupied, Commercial Real Estate – Non-Owner Occupied, Residential Real Estate and Real Estate Construction loan portfolios increased $12,075, $6,314, $28,499, $20,531 and $21,685, respectively, since December 31, 2016, while the Farm Real Estate and Consumer and Other loan portfolios decreased $2,204 and $414, respectively, since December 31, 2016.
Page 3440
Civista Bancshares, Inc.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Form 10-Q
(Amounts in thousands, except share data)
Loans outstanding as of September 30, 2023 and December 31, 2022 were as follows:
|
| September 30, 2023 |
|
| December 31, 2022 |
|
| $ Change |
|
| % Change |
| ||||
Commercial & Agriculture |
| $ | 301,877 |
|
| $ | 278,595 |
|
| $ | 23,282 |
|
|
| 8.4 | % |
Commercial Real Estate—Owner Occupied |
|
| 375,851 |
|
|
| 371,147 |
|
|
| 4,704 |
|
|
| 1.3 | % |
Commercial Real Estate—Non-Owner Occupied |
|
| 1,102,932 |
|
|
| 1,018,736 |
|
|
| 84,196 |
|
|
| 8.3 | % |
Residential Real Estate |
|
| 614,304 |
|
|
| 552,781 |
|
|
| 61,523 |
|
|
| 11.1 | % |
Real Estate Construction |
|
| 269,291 |
|
|
| 243,127 |
|
|
| 26,164 |
|
|
| 10.8 | % |
Farm Real Estate |
|
| 24,109 |
|
|
| 24,708 |
|
|
| (599 | ) |
|
| -2.4 | % |
Lease Financing Receivables |
|
| 48,259 |
|
|
| 36,797 |
|
|
| 11,462 |
|
|
| 31.1 | % |
Consumer and Other |
|
| 18,267 |
|
|
| 20,775 |
|
|
| (2,508 | ) |
|
| -12.1 | % |
Total loans |
|
| 2,754,890 |
|
|
| 2,546,666 |
|
|
| 208,224 |
|
|
| 8.2 | % |
Allowance for credit losses |
|
| (35,280 | ) |
|
| (28,511 | ) |
|
| (6,769 | ) |
|
| 23.7 | % |
Net loans |
| $ | 2,719,610 |
|
| $ | 2,518,155 |
|
| $ | 201,455 |
|
|
| 8.0 | % |
Included in Commercial & Agriculture loans above were $370 of PPP loans as of September 30, 2023 and $566 of PPP loans as of December 31, 2022.
Loans held for sale have increased $2,394$906, or 105.6%132.7%, since December 31, 2016,2022. The increase was due to an increaseincreases in originations.average loan balance held for sale. At September 30, 2017,2023, 6 loans totaling $1,589 were held for sale as compared to 7 loans totaling $683 at December 31, 2022.
Net loans have increased $201,455, or 8.0%, since December 31, 2022. The increase at September 30, 2023 can be attributed to all categories, primarily Commercial Real Estate and Residential Real Estate.Farm Real Estate and Consumer and Other showed small decreases. At September 30, 2023, the net loan to deposit ratio was 94.0%97.3% compared to 93.0%96.1% at December 31, 2016.2022.The increase in the net loan to deposit ratio is primarily the result of an increase in loans.
Upon adoption of CECL on January 1, 2023 we recorded an increase in the allowance for credit losses of $5,193. During the first six months of 2023 we recorded a provision for credit losses of $2,111, an increase of $1,111, from $1,000 during the same period of 2022. The increase in the reserves was principally related to loan growth during the first nine months of 2017, there were no provisions madethe year. As time progresses the results of economic conditions will require CECL model assumption inputs to change and further refinements to the allowance for loan losses from earnings. During the first nine months of 2016, the Company received a payoff on a nonperforming loan. This particular loan had been analyzed previously and had been charged down based on a deterioration of real estate collateral values during the recent recession. As a result of the payoff of the loan, the Company recovered the charged down amount of approximately $1,303. The result of the transaction was a credit of $1,300 from the allowance for loan losses during the nine months of operations in 2016. estimation process may also be identified.
Net charge-offschargeoffs for the first nine months of 20172023 totaled $359,$535, compared to a net recoveryrecoveries of $390$133 in the first nine months of 2016.2022. For the first nine months of 2017,2023, the Company charged off a total of fifty-four52 loans. Twenty-four Real Estate Mortgage loans totaling $312, twoFourteen Commercial and Agriculture loanloans totaling $11, four Commercial$754, three Residential Real Estate – Owner Occupied loans totaling $301, one Commercial Real Estate – Non-Owner Occupied totaling $38$12 and twenty-threethirty five Consumer and Other loans totaling $135$89 were charged off in the first nine months of the year. In addition, during the first nine months of 2017,2023, the Company had recoveries on previously charged-off Commercial and Agriculture loans of $134, Commercial Real Estate – Owner Occupied loans of $26,$129, Commercial Real Estate – Non-Owner Occupied loans of $42,$24, Residential Real Estate Mortgage loans of $164,$119, Real Estate Construction loans of $32, Farm Real Estate of $2$13 and Consumer and Other loans of $38.$35. For each loan category, as well as in total, the percentage of net charge-offs to loans was less than one percent. Nonperforming loans increased by $624 since December 31, 2016, which was due to an increase in loans on nonaccrual status of $589 and an increase in loans past due 90 days and accruing of $35. Each of these factors was considered by management as part of the examination of both the level and mix of the allowance by loan type as well as the overall level of the allowance.
Management specifically evaluates loans that are impaireddo not share common risk characteristics for estimates of loss. To evaluate the adequacy of the allowance for loancredit losses to cover probable losses in the loan portfolio, management considers specific reserve allocations for identified portfolio loans, reserves for delinquencies and historical reserve allocations. Loss migration rates are calculated over a three-year period for all portfolio segments. Management also considers certain economic factors for trends that management uses to account for the qualitative and environmental changes in risk, which affects the level of the reserve.
Page 41
Civista Bancshares, Inc.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Form 10-Q
(Amounts in thousands, except share data)
Management analyzes each impairedindividually evaluated Commercial & Agriculture and Commercial Real Estate loan relationship with a balance of $350 or larger, on an individual basis and designates a loan as impairedindividually evaluated when it is in nonaccrual status or when an analysis of the borrower’s operating results and financial condition indicateindicates that underlying cash flows are not adequate to meet its debt service requirements. In addition, loansLoans held for sale are excluded from consideration as impaired. Loans are generally moved to nonaccrual status when 90 days or more past due. Impaired loans,Loans, or portions thereof, are charged-off when deemed uncollectible. The allowance for loancredit losses as a percent of total loans was 1.13%1.28% at September 30, 20172023 and 1.26%1.12% at December 31, 2016.2022.
The available for saleavailable-for-sale security portfolio increaseddecreased by $33,555,$21,915, from $195,864$615,402 at December 31, 20162022 to $229,419$593,487 at September 30, 2017. The increase in the available for sale security portfolio is due to the investment of the net proceeds from the public offering completed by the Company on February 24, 2017.2023. Management continually evaluates our securities portfolio in response to established asset/liability management objectives, changing market conditions that could affect profitability and the level of interest rate risk to which the Company is exposed. These evaluations may cause the Company to change the level of funds it deploys into investment securities and change the composition of its investment securities portfolio. As of September 30, 2017,2023, the Company was in compliance with all pledging requirements.
Premises and equipment, net, have decreased $232$5,029 from December 31, 20162022 to September 30, 2017.2023. The decrease is primarily the result of new purchasesequipment depreciation associated with CLF of $755, offset$4,757.
Goodwill decreased by disposals, net$617, from $125,695 at December 31, 2022 to $125,078 at September 30, 2023. The decrease is due to adjustments to estimated fair values of gainsthe assets acquired and liabilities assumed since the date of $72, depreciation of $912 and the transfer of $3 of assets to premises and equipment held for sale.acquisition.
Bank owned life insurance (BOLI) increased $429$510 from December 31, 20162022 to September 30, 2017.2023. The differenceincrease is the result of increases in the cash surrender value of the underlying insurance policies.
Swap assets increased $3,205 from December 31, 2022 to September 30, 2023. The increase is primarily the result of an increase in market value.
Total deposits as of September 30, 20172023 and December 31, 20162022 were as follows:
|
| September 30, 2023 |
|
| December 31, 2022 |
|
| $ Change |
|
| % Change |
| ||||
Noninterest-bearing demand |
| $ | 802,614 |
|
| $ | 896,333 |
|
| $ | (93,719 | ) |
|
| -10.5 | % |
Interest-bearing demand |
|
| 464,338 |
|
|
| 527,879 |
|
|
| (63,541 | ) |
|
| -12.0 | % |
Savings and money market |
|
| 872,805 |
|
|
| 876,427 |
|
|
| (3,622 | ) |
|
| -0.4 | % |
Time deposits |
|
| 655,986 |
|
|
| 319,345 |
|
|
| 336,641 |
|
|
| 105.4 | % |
Total Deposits |
| $ | 2,795,743 |
|
| $ | 2,619,984 |
|
| $ | 175,759 |
|
|
| 6.7 | % |
The Company had approximately $494,799 and $563,092 of uninsured deposits as of September 30, 2023 and December 31, 2022, respectively. Uninsured deposit amounts are as follows:estimated based on the portions of customer account balances that exceed the FDIC insurance limit of $250,000.
|
| September 30, 2017 |
|
| December 31, 2016 |
| ||
Noninterest-bearing demand |
| $ | 357,539 |
|
| $ | 345,588 |
|
Interest-bearing demand |
|
| 188,570 |
|
|
| 183,759 |
|
Savings and money market |
|
| 401,153 |
|
|
| 384,330 |
|
Time deposits |
|
| 254,027 |
|
|
| 207,426 |
|
Total Deposits |
| $ | 1,201,289 |
|
| $ | 1,121,103 |
|
Total deposits at September 30, 2023 increased $175,759 from year-end 2022. Noninterest-bearing deposits decreased $93,719 from year-end 2022, while interest-bearing deposits, including savings and time deposits, increased $269,478 from December 31, 2022. This increase was partially offset by a $71,547 decrease in noninterest-bearing business accounts and a $32,283 decrease in noninterest-bearing personal accounts. The $63,541 decrease in interest-bearing demand accounts was spread across personal, business, and public fund accounts. The decrease in money market and savings accounts was primarily due to a $62,521 decrease in statement savings, partially offset by a $22,593 increase in money market accounts. The increase in time certificates was primarily due to a $202,500 increase in brokered time deposits. Jumbo time certificates also increased $61,382 while retail time certificates increased $28,763. The year-to-date average balance of total deposits increased $198,861, compared to the average balance for the same period in 2022, mainly due to a $247,228 increase in the average balance of time deposits.
Short-term FHLB advances increased $37,800 from December 31, 2022 to September 30, 2023. The increase is due to funding needs to support loan growth.
Securities sold under agreements to repurchase, which tend to fluctuate based on the liquidity needs of customers and short-term nature of the instrument, decreased $25,143 from December 31, 2022 to September 30, 2023.
Page 3542
Civista Bancshares, Inc.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Form 10-Q
(Amounts in thousands, except share data)
Total deposits at September 30, 2017Securities purchased payable increased $80,186 from year-end 2016. Noninterest-bearing deposits increased $11,951 from year-end 2016, while interest-bearing deposits, including savings and time deposits, increased $68,235$417 from December 31, 2016.2022 to September 30, 2023. The increase is the result of an increase in noninterest-bearing deposits was primarily due to increases in public fund deposits and cash balances remainingaccounts payable related to the Company’s participation in a tax refund processing program. This increase is temporary as transactions are processed and is expected to return to levels more consistent with December 31, 2016 over the next quarter. The interest-bearing deposit increase was mainly due to increases in brokered deposits. The year-to-date average balance of total depositssecurities purchased but not yet funded.
Swap liabilities increased $11,370 compared to the average balance of the same period in 2016 due to increases in demand deposits and savings and money market accounts. The increase in average balance is due to increases of $18,086 in demand deposit accounts, $11,867 in money market accounts, $6,332 in NOW accounts and $10,264 in statement saving accounts, offset by decreases of $18,569 in time certificates, $5,953 in CDARS deposits and $9,177 in interest-bearing public funds.
FHLB advances increased $8,250$3,205 from December 31, 20162022 to September 30, 2017.2023. The increase of $147 is the result of an increase in fair value of swap liabilities.
Accrued expenses and other liabilities increased $10,358 from December 31, 2022 to September 30, 2023. The increase is due toprimarily the result of an increase in overnight fundsallowance for credit losses on unfunded commitments of $10,750. In addition, on January 11, 2017, an FHLB advance in$3,851 as a result of the amountCompany's adoption of $2,500 matured. This advance had terms of one hundred and twenty months with a fixed rate of 4.25%. The advance was not replaced. Securities sold under agreements to repurchase, which tend to fluctuate, have decreased $13,777 from December 31, 2016 to September 30, 2017.ASU 2013-16.
Shareholders’ equity at September 30, 20172023 was $181,981,$332,745, or 12.2%8.9% of total assets, compared to $137,616,$334,835, or 10.0%9.5% of total assets, at December 31, 2016.2022. The increase in the ratio of equity to total assetsdecrease was the result of increases in total assets as well as shareholders’ equity. The increase in shareholders’ equity resulted primarily from the completion of the Company’s public offering of its common stock on February 24, 2017, which resulted in net proceeds of $32,821. Shareholders’ equity was also positively impacted by net income of $11,892, a decrease in the Company’s pension liability, net of tax, of $625, an increase in the fair value of securities available for sale,available-for-sale, net of tax, of $1,315 and$21,417. Net income of $33,309, partially offset by dividends on preferred stockcommon shares of $7,088, the purchase of treasury shares of $1,497 and common stockthe one-time cumulative effect of $935 and $1,726, respectively. adopting ASU 2016-13 of $8,774.
Total outstanding common shares at September 30, 20172023 were 10,170,935. Total outstanding15,695,997, which increased from 15,728,234 common shares outstanding at December 31, 2016 were 8,343,509. The increase in common2022. Common shares outstanding is the result of a public offering of 1,610,000 shares completed on February 24, 2017, the conversion of 1,506 shares of the Company’s previously issued preferred shares into 192,568 common shares,increased due to the grant of 17,89847,536 restricted common shares to certain officers under the Company’s 2014 Incentive Plan, the grant of 7,171offset by 5,620 common shares surrendered by officers to directors of the Company as a retainer for their serviceto pay taxes upon vesting of restricted shares and the retirement of 2111,740 restricted common shares on September 22, 2017.forfeited.
Results of Operations
Nine
Three Months Ended September 30, 20172023 and 20162022
The Company had net income of $11,892$10,387 for the ninethree months ended September 30, 2017, a2023, an decrease of $1,694$725 from net income of $13,586$11,112 for the same ninethree months of 2016.2022. Basic earnings per common share were $1.12$0.66 for the periodquarter ended September 30, 2017,2023, compared to $1.57$0.72 for the same period in 2016.2022. Diluted earnings per common share were $0.97$0.66 for the periodquarter ended September 30, 2017,2023, compared to $1.24$0.72 for the same period in 2016.2022. The primary reasons for the changes in net income are explained below.
Net interest income for the ninethree months ended September 30, 20172023 was $39,939,$31,504, an increase of $2,238$1,065 from $37,701 in$30,439 for the same ninethree months of 2016. Total2022. This increase is the result of an increase of $13,253 in total interest income, foroffset by an increase of $12,188 in interest expense. Interest-earning assets averaged $3,380,169 during the ninethree months ended September 30, 2017 was $42,755,2023, an increase of $2,595$377,913 from $40,160 in$3,002,256 for the same nine monthsperiod of 2016. Average earning assets2022. The Company’s average interest-bearing liabilities increased 5.0%from $1,893,092 during the ninethree months ended September 30, 2017 as compared2022 to $2,315,118 during the same period in 2016. Average loans, taxable securities, non-taxable securities and bank stocks for the first nine months of 2017 increased 7.3%, 4.4%, 14.4% and 4.2%, respectively, compared to the first nine months of last year. The increases were offset by a decrease in interest-bearing deposits in other banks. Interest-bearing deposits in other banks decreased mainly due to our tax refund processing program. The timing of cash inflows and outflows leads to large, but temporary, fluctuations in cash on deposit. The yield on the loan portfolio decreased 8 basis points for the first nine months of 2017 compared to the first nine months of last year. The yield on earning assets increased 6 basis points for the first nine months of 2017 compared to the first nine months of last year. Total interest expense for the ninethree months ended September 30, 2017 was $2,816, an increase of $357 from $2,459 in the same nine months of 2016. Interest expense on time deposits decreased $48 in the first nine months of 2017 compared to the same period in 2016. Average time deposits for the first nine months of 2017 decreased 11.9% compared to the first nine months of 2016. Interest expense on demand and savings accounts, FHLB borrowings and trust preferred securities increased $68, $222 and $116, respectively, in the first nine months of 2017 compared to the same period in 2016.2023. The interest rate paid on FHLB borrowings during the first nine months of 2017 decreased 10 basis points as compared to the same period in 2016, while the average balance increased 84.9%. The interest rate paid on trust preferred securities during the first nine months of 2017 increased 53 basis points as compared to the same period in 2016. The Company’s fully tax equivalent net interest margin for the ninethree months ended September 30, 20172023 and 2022 was 3.93% compared to 3.89%3.69% and 4.03%, respectively.
Total interest and dividend income was $45,786 for the periodthree months ended September 30, 2016.2023, an increase of $13,253 from $32,533 of total interest and dividend income for the same period in 2022. The increase in interest and dividend income is attributable to a $12,556 increase in interest and fees on loans, a $63 increase in interest income on taxable securities and a $338 increase in tax-exempt securities. The $12,556 increase in interest and fees on loans is attributable to average balances as well as loan yield. The average balance of loans increased by $390,091, or 17.0%, to $2,679,679 for the three months ended September 30, 2023 as compared to $2,289,588 for the same period in 2022. The loan yield increased to 5.88% for the three months ended September 30, 2023, from 4.71% for the same period in 2022.
Page 3643
Civista Bancshares, Inc.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Form 10-Q
(Amounts in thousands, except share data)
Interest on taxable securities increased to $2.999 for the three months ended September 30, 2023, compared to $2,936 for the same period in 2022. The average balance of taxable securities was $359,154 for the three months ended September 30, 2023, as compared to $354,597 for the same period in 2022. The yield on taxable securities decreased 11 basis points to 2.95% for 2023, compared to 3.06% for 2022. Interest on tax-exempt securities increased $338 to $2,336 for the three months ended September 30, 2023, compared to $1,998 for the same period in 2022. The average balance of tax-exempt securities increased $17,721 to $286,048 for the three months ended September 30, 2023, as compared to $268,327 for the same period in 2022. The yield on tax-exempt securities increased 30 basis points to 3.77% for 2023, compared to 3.47% for 2022 .
Interest expense increased $12,188, or 582.0%, to $14,282 for the three months ended September 30, 2023, compared with $2,094 for the same period in 2022. The change in interest expense can be attributed primarily to increases in rates on interest-bearing liabililities accompanies by an increase in the average balance of interest-bearing liabilities. For the three months ended September 30, 2023, the average balance of interest-bearing liabilities increased $422,026 to $2,315,118 as compared to $1,893,092 for the same period in 2022. Interest incurred on deposits increased by $8,648 to $9,584 for the three months ended September 30, 2023, compared to $936 for the same period in 2022. The average balance of interest-bearing deposits increased by $227,999, as compared to the same period in 2022. Additionally, the rate paid on demand and savings and time deposit accounts increased from 0.21% in 2022 to 1.93% in 2023. The average balance on long-term FHLB balances decreased $22,692 as a result of a prepayment, while the rate paid increased 17 basis points. In addition, the average balance of short-term FHLB balances increased $226,834, compared to the same period in 2022. The rate paid on subordinated debentures increased 100 basis points for the three-month period ended September 30, 2023, as compared to the same period in 2022.
Page 44
Civista Bancshares, Inc.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Form 10-Q
(Amounts in thousands, except share data)
The following table presents the condensed average balance sheets for the ninethree months ended September 30, 20172023 and 2016.2022. The daily average loan amounts outstanding are net of unearned income and include loans held for sale and nonaccrual loans. The average balance of securities is computed using the carrying value of securities. Rates are annualized and taxable equivalent yields are computed using a 35%21% tax rate for tax-exempt interest income. The average yield has been computed using the historical amortized cost average balance for available-for-sale securities.
|
| Nine Months Ended September 30, |
|
| Three Months Ended September 30, |
| ||||||||||||||||||||||||||||||||||||||||||
|
| 2017 |
|
| 2016 |
|
| 2023 |
|
| 2022 |
| ||||||||||||||||||||||||||||||||||||
Assets: |
| Average balance |
|
| Interest |
|
| Yield/ rate* |
|
| Average balance |
|
| Interest |
|
| Yield/ rate* |
|
| Average |
|
| Interest |
|
| Yield/ |
|
| Average |
|
| Interest |
|
| Yield/ |
| ||||||||||||
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Loans, including fees |
| $ | 1,094,401 |
|
| $ | 37,211 |
|
|
| 4.55 | % |
| $ | 1,019,793 |
|
| $ | 35,311 |
|
|
| 4.63 | % | ||||||||||||||||||||||||
Loans, including fees** |
| $ | 2,679,679 |
|
| $ | 39,732 |
|
|
| 5.86 | % |
| $ | 2,289,588 |
|
| $ | 27,176 |
|
|
| 4.71 | % | ||||||||||||||||||||||||
Taxable securities |
|
| 144,379 |
|
|
| 2,764 |
|
|
| 2.59 | % |
|
| 138,374 |
|
|
| 2,494 |
|
|
| 2.45 | % |
|
| 359,154 |
|
|
| 2,999 |
|
|
| 2.95 | % |
|
| 354,597 |
|
|
| 2,936 |
|
|
| 3.06 | % |
Tax-exempt securities |
|
| 86,713 |
|
|
| 2,307 |
|
|
| 5.65 | % |
|
| 75,806 |
|
|
| 1,979 |
|
|
| 5.64 | % |
|
| 286,048 |
|
|
| 2,336 |
|
|
| 3.77 | % |
|
| 268,327 |
|
|
| 1,998 |
|
|
| 3.47 | % |
Interest-bearing deposits in other banks |
|
| 78,576 |
|
|
| 473 |
|
|
| 0.80 | % |
|
| 103,336 |
|
|
| 376 |
|
|
| 0.49 | % |
|
| 55,288 |
|
|
| 719 |
|
|
| 5.16 | % |
|
| 89,744 |
|
|
| 423 |
|
|
| 1.87 | % |
Total interest-earning assets |
| $ | 1,404,069 |
|
|
| 42,755 |
|
|
| 4.20 | % |
| $ | 1,337,309 |
|
|
| 40,160 |
|
|
| 4.14 | % |
| $ | 3,380,169 |
|
| $ | 45,786 |
|
|
| 5.34 | % |
| $ | 3,002,256 |
|
| $ | 32,533 |
|
|
| 4.30 | % |
Noninterest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Cash and due from financial institutions |
|
| 53,487 |
|
|
|
|
|
|
|
|
|
|
| 58,864 |
|
|
|
|
|
|
|
|
|
|
| 22,542 |
|
|
|
|
|
|
|
|
| 58,581 |
|
|
|
|
|
|
| ||||
Premises and equipment, net |
|
| 18,084 |
|
|
|
|
|
|
|
|
|
|
| 16,860 |
|
|
|
|
|
|
|
|
|
|
| 50,999 |
|
|
|
|
|
|
|
|
| 28,633 |
|
|
|
|
|
|
| ||||
Accrued interest receivable |
|
| 4,446 |
|
|
|
|
|
|
|
|
|
|
| 4,262 |
|
|
|
|
|
|
|
|
|
|
| 11,673 |
|
|
|
|
|
|
|
|
| 8,907 |
|
|
|
|
|
|
| ||||
Intangible assets |
|
| 28,682 |
|
|
|
|
|
|
|
|
|
|
| 29,289 |
|
|
|
|
|
|
|
|
|
|
| 128,215 |
|
|
|
|
|
|
|
|
| 84,265 |
|
|
|
|
|
|
| ||||
Other assets |
|
| 10,164 |
|
|
|
|
|
|
|
|
|
|
| 9,986 |
|
|
|
|
|
|
|
|
|
|
| 53,879 |
|
|
|
|
|
|
|
|
| 48,013 |
|
|
|
|
|
|
| ||||
Bank owned life insurance |
|
| 24,747 |
|
|
|
|
|
|
|
|
|
|
| 23,111 |
|
|
|
|
|
|
|
|
|
|
| 64,008 |
|
|
|
|
|
|
|
|
| 53,131 |
|
|
|
|
|
|
| ||||
Less allowance for loan losses |
|
| (13,156 | ) |
|
|
|
|
|
|
|
|
|
| (14,516 | ) |
|
|
|
|
|
|
|
|
|
| (34,283 | ) |
|
|
|
|
|
|
|
| (27,546 | ) |
|
|
|
|
|
| ||||
Total Assets |
| $ | 1,530,523 |
|
|
|
|
|
|
|
|
|
| $ | 1,465,165 |
|
|
|
|
|
|
|
|
|
| $ | 3,677,202 |
|
|
|
|
|
|
|
| $ | 3,256,240 |
|
|
|
|
|
|
| ||||
Liabilities and Shareholders Equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Demand and savings |
| $ | 582,716 |
|
| $ | 413 |
|
|
| 0.09 | % |
| $ | 564,743 |
|
| $ | 345 |
|
|
| 0.08 | % |
| $ | 1,333,903 |
|
| $ | 2,189 |
|
|
| 0.65 | % |
| $ | 1,457,112 |
|
| $ | 379 |
|
|
| 0.10 | % |
Time |
|
| 181,931 |
|
|
| 1,087 |
|
|
| 0.80 | % |
|
| 206,620 |
|
|
| 1,135 |
|
|
| 0.73 | % |
|
| 632,111 |
|
|
| 7,395 |
|
|
| 4.64 | % |
|
| 280,903 |
|
|
| 557 |
|
|
| 0.79 | % |
FHLB |
|
| 57,195 |
|
|
| 534 |
|
|
| 1.25 | % |
|
| 30,933 |
|
|
| 312 |
|
|
| 1.35 | % | ||||||||||||||||||||||||
Short-term FHLB advances |
|
| 233,547 |
|
|
| 3,246 |
|
|
| 5.51 | % |
|
| 6,713 |
|
|
| 48 |
|
|
| 2.08 | % | ||||||||||||||||||||||||
Long-term FHLB advances |
|
| 2,644 |
|
|
| 15 |
|
|
| 2.25 | % |
|
| 25,336 |
|
|
| 133 |
|
|
| 2.84 | % | ||||||||||||||||||||||||
Other borrowings |
|
| 7,928 |
|
|
| 198 |
|
|
| 9.91 | % |
|
| — |
|
|
| — |
|
|
| 0.00 | % | ||||||||||||||||||||||||
Federal funds purchased |
|
| 156 |
|
|
| 2 |
|
|
| 1.71 | % |
|
| 155 |
|
|
| 1 |
|
|
| 0.86 | % |
|
| 98 |
|
|
| — |
|
|
| 0.00 | % |
|
| — |
|
|
| — |
|
|
| 0.00 | % |
Subordinated debentures |
|
| 29,427 |
|
|
| 766 |
|
|
| 3.48 | % |
|
| 29,427 |
|
|
| 650 |
|
|
| 2.95 | % |
|
| 103,894 |
|
|
| 1,239 |
|
|
| 4.73 | % |
|
| 103,751 |
|
|
| 975 |
|
|
| 3.73 | % |
Repurchase Agreements |
|
| 18,597 |
|
|
| 14 |
|
|
| 0.10 | % |
|
| 21,015 |
|
|
| 16 |
|
|
| 0.10 | % |
|
| 993 |
|
|
| — |
|
|
| 0.00 | % |
|
| 19,277 |
|
|
| 2 |
|
|
| 0.04 | % |
Total interest-bearing liabilities |
| $ | 870,022 |
|
|
| 2,816 |
|
|
| 0.43 | % |
| $ | 852,893 |
|
|
| 2,459 |
|
|
| 0.39 | % |
| $ | 2,315,118 |
|
| $ | 14,282 |
|
|
| 2.45 | % |
| $ | 1,893,092 |
|
| $ | 2,094 |
|
|
| 0.44 | % |
Noninterest-bearing deposits |
|
| 478,137 |
|
|
|
|
|
|
|
|
|
|
| 460,051 |
|
|
|
|
|
|
|
|
|
|
| 980,835 |
|
|
|
|
|
|
|
|
| 980,999 |
|
|
|
|
|
|
| ||||
Other liabilities |
|
| 12,881 |
|
|
|
|
|
|
|
|
|
|
| 20,211 |
|
|
|
|
|
|
|
|
|
|
| 33,040 |
|
|
|
|
|
|
|
|
| 77,015 |
|
|
|
|
|
|
| ||||
Shareholders’ Equity |
|
| 169,483 |
|
|
|
|
|
|
|
|
|
|
| 132,010 |
|
|
|
|
|
|
|
|
|
|
| 348,209 |
|
|
|
|
|
|
|
|
| 305,134 |
|
|
|
|
|
|
| ||||
Total Liabilities and Shareholders’ Equity |
| $ | 1,530,523 |
|
|
|
|
|
|
|
|
|
| $ | 1,465,165 |
|
|
|
|
|
|
|
|
|
| $ | 3,677,202 |
|
|
|
|
|
|
|
| $ | 3,256,240 |
|
|
|
|
|
|
| ||||
Net interest income and interest rate spread |
|
|
|
|
| $ | 39,939 |
|
|
| 3.77 | % |
|
|
|
|
| $ | 37,701 |
|
|
| 3.75 | % |
|
|
|
| $ | 31,504 |
|
|
| 2.89 | % |
|
|
|
| $ | 30,439 |
|
|
| 3.86 | % | ||
Net interest margin |
|
|
|
|
|
|
|
|
|
| 3.93 | % |
|
|
|
|
|
|
|
|
|
| 3.89 | % |
|
|
|
|
|
|
|
| 3.69 | % |
|
|
|
|
|
|
|
| 4.03 | % | ||||
*—AllAverage yields and costs are presented on an annualized basisa tax equivalent basis. The tax equivalent effect associated with loans and investments, included in the yields above, was $621 and $532 for the periods ended September 30, 2023 and 2022, respectively.
**—Average balance includes nonaccrual loans.
Page 3745
Civista Bancshares, Inc.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Form 10-Q
(Amounts in thousands, except share data)
Net interest income may also be analyzed by comparing the volume and rate components of interest income and interest expense. The following table provides an analysis of the changes in interest income and expense between the ninethree months ended September 30, 20172023 and 2016. 2022.
|
| Increase (decrease) due to: |
| |||||||||
|
| Volume (1) |
|
| Rate (1) |
|
| Net |
| |||
|
| (Dollars in thousands) |
| |||||||||
Interest income: |
|
|
|
|
|
|
|
|
| |||
Loans, including fees |
| $ | 5,099 |
|
| $ | 7,457 |
|
| $ | 12,556 |
|
Taxable securities |
|
| 166 |
|
|
| (103 | ) |
|
| 63 |
|
Tax-exempt securities |
|
| 163 |
|
|
| 175 |
|
|
| 338 |
|
Interest-bearing deposits in other banks |
|
| (214 | ) |
|
| 510 |
|
|
| 296 |
|
Total interest income |
| $ | 5,214 |
|
| $ | 8,039 |
|
| $ | 13,253 |
|
Interest expense: |
|
|
|
|
|
|
|
|
| |||
Demand and savings |
| $ | (35 | ) |
| $ | 1,845 |
|
| $ | 1,810 |
|
Time |
|
| 1,390 |
|
|
| 5,448 |
|
|
| 6,838 |
|
Short-term FHLB advances |
|
| 3,111 |
|
|
| 87 |
|
|
| 3,198 |
|
Long-term FHLB advances |
|
| (128 | ) |
|
| 10 |
|
|
| (118 | ) |
Other borrowings |
|
| (2 | ) |
|
| — |
|
|
| (2 | ) |
Federal funds purchased |
|
| — |
|
|
| — |
|
|
| — |
|
Subordinated debentures |
|
| 1 |
|
|
| 263 |
|
|
| 264 |
|
Repurchase agreements |
|
| 198 |
|
|
| — |
|
|
| 198 |
|
Total interest expense |
| $ | 4,535 |
|
| $ | 7,653 |
|
| $ | 12,188 |
|
Net interest income |
| $ | 679 |
|
| $ | 386 |
|
| $ | 1,065 |
|
|
| Increase (decrease) due to: |
| |||||||||
|
| Volume (1) |
|
| Rate (1) |
|
| Net |
| |||
|
| (Dollars in thousands) |
| |||||||||
Interest income: |
|
|
|
|
|
|
|
|
|
|
|
|
Loans, including fees |
| $ | 2,546 |
|
| $ | (646 | ) |
| $ | 1,900 |
|
Taxable securities |
|
| 133 |
|
|
| 137 |
|
|
| 270 |
|
Tax-exempt securities |
|
| 356 |
|
|
| (28 | ) |
|
| 328 |
|
Interest-bearing deposits in other banks |
|
| (106 | ) |
|
| 203 |
|
|
| 97 |
|
Total interest income |
| $ | 2,929 |
|
| $ | (334 | ) |
| $ | 2,595 |
|
Interest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
Demand and savings |
| $ | 11 |
|
| $ | 57 |
|
| $ | 68 |
|
Time |
|
| (142 | ) |
|
| 94 |
|
|
| (48 | ) |
FHLB |
|
| 247 |
|
|
| (25 | ) |
|
| 222 |
|
Federal funds purchased |
|
| — |
|
|
| 1 |
|
|
| 1 |
|
Subordinated debentures |
|
| — |
|
|
| 116 |
|
|
| 116 |
|
Repurchase agreements |
|
| (2 | ) |
|
| — |
|
|
| (2 | ) |
Total interest expense |
| $ | 114 |
|
| $ | 243 |
|
| $ | 357 |
|
Net interest income |
| $ | 2,815 |
|
| $ | (577 | ) |
| $ | 2,238 |
|
|
|
The Company provides for loan losses through regular provisions to the allowance for loancredit losses. NoUpon adoption of CECL on January 1, 2023, we recorded an increase in the allowance for credit losses of $5,193. During the third quarter of 2023 we recorded a provision for loancredit losses was providedof $630, an increase of $330, from $300 during the ninethree months ended September 30, 2017. During2022. The increase in the first nine months of 2016, the Company received a payoff on a nonperforming loan. This particularreserves was principally related to loan had been analyzed previously and had been charged down based on a deterioration of real estate collateral valuesgrowth during the recent recession.quarter. As a resulttime progresses the results of economic conditions will require CECL model assumption inputs to change and further refinements to the payoff of the loan, the Company recovered the charged-down amount of approximately $1,303. The result of the transaction was a reversal of $1,300 from the allowance for loan losses during the nine months of operations in 2016.estimation process may also be identified.
Noninterest income for the nine-monththree-month periods ended September 30, 20172023 and 20162022 are as follows:
|
| Nine months ended September 30, |
|
| Three months ended September 30, |
| ||||||||||||||||||
|
| 2017 |
|
| 2016 |
|
| 2023 |
|
| 2022 |
|
| $ Change |
|
| % Change |
| ||||||
Service charges |
| $ | 3,609 |
|
| $ | 3,714 |
|
| $ | 1,853 |
|
| $ | 1,885 |
|
| $ | (32 | ) |
|
| -1.7 | % |
Net gain on sale of securities |
|
| (9 | ) |
|
| 20 |
|
|
| — |
|
|
| 4 |
|
|
| (4 | ) |
|
| -100.0 | % |
Net gain on sale of loans |
|
| 1,207 |
|
|
| 1,341 |
| ||||||||||||||||
ATM fees |
|
| 1,643 |
|
|
| 1,584 |
| ||||||||||||||||
Net gain (loss) on equity securities |
|
| 69 |
|
|
| (133 | ) |
|
| 202 |
|
|
| -151.9 | % | ||||||||
Net gain on sale of loans and leases |
|
| 787 |
|
|
| 637 |
|
|
| 150 |
|
|
| 23.5 | % | ||||||||
ATM/Interchange fees |
|
| 1,424 |
|
|
| 1,394 |
|
|
| 30 |
|
|
| 2.2 | % | ||||||||
Wealth management fees |
|
| 2,233 |
|
|
| 1,989 |
|
|
| 1,197 |
|
|
| 1,208 |
|
|
| (11 | ) |
|
| -0.9 | % |
Lease revenue and residual income |
|
| 1,913 |
|
|
| — |
|
|
| 1,913 |
|
|
| 0.0 | % | ||||||||
Bank owned life insurance |
|
| 429 |
|
|
| 415 |
|
|
| 266 |
|
|
| 255 |
|
|
| 11 |
|
|
| 4.3 | % |
Tax refund processing fees |
|
| 2,750 |
|
|
| 2,750 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 0.0 | % |
Swap fees |
|
| 21 |
|
|
| — |
|
|
| 21 |
|
|
| 0.0 | % | ||||||||
Other |
|
| 842 |
|
|
| 1,176 |
|
|
| 595 |
|
|
| 484 |
|
|
| 111 |
|
|
| 22.9 | % |
Total noninterest income |
| $ | 12,704 |
|
| $ | 12,989 |
|
| $ | 8,125 |
|
| $ | 5,734 |
|
| $ | 2,391 |
|
|
| 41.7 | % |
Noninterest income for the nine months ended September 30, 2017 was $12,704, a decrease of $285 or 2.2% from $12,989 for the same period of 2016. The primary reasons for the decrease follow.
Service charge fee income for the period ended September 30, 2017 was $3,609, down $105 or 2.8% over the same period of 2016. The decrease is primarily due to decreases in business service charges and overdraft charges.
Gain on sale of loans decreased $134 during the first nine months of 2017 compared to the same period of 2016. The decrease is due to a decrease in the premium on loans sold. The decrease in the premium was offset by an increase in the volume of loans sold during the first nine months of 2017. Volume was $53,091, up $1,860 or 3.6% as compared to the same period in 2016.
Page 3846
Civista Bancshares, Inc.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Form 10-Q
(Amounts in thousands, except share data)
Wealth management feeNoninterest income is comprisedfor the three months ended September 30, 2023 was $8,125, an increase of fees earned$2,391, or 41.7%, from $5,734 for the managementsame period of 2022. The increase was primarily due to the addition of Lease revenue and administrationresidual income of trusts and other customer assets. These fees are largely based upon$1,913 for the market valuethree months ended September 30, 2023, as a result of the assets that we manageacquisition of Vision Financial Group, Inc. (VFG) in October 2022. As of August 31, 2023, VFG was merged into Civista and now operates as a division of Civista and has been rebranded as Civista Leasing and Finance (CLF). Net gain/loss on equity securities increased $202 thousand as the fee rate chargedresult of a market valuation adjustment. The net gain on sale of loans and leases increased by $150 thousand compared to customers. Wealth management fee incomethe same period last year. CLF generated a $466 thousand gain on the sale of $10.9 million in commercial loans and leases. The sale of mortgage loans generated a $321 thousand gain on the sale of $16.2 million, a decrease in the gain of $316 thousand and a $17.7 million decrease in volume in 2023, compared to 2022.
Noninterest expense for the three-month periods ended September 30, 2023 and 2022 are as follows:
|
| Three months ended September 30, |
| |||||||||||||
|
| 2023 |
|
| 2022 |
|
| $ Change |
|
| % Change |
| ||||
Compensation expense |
| $ | 14,054 |
|
| $ | 12,484 |
|
| $ | 1,570 |
|
|
| 12.6 | % |
Net occupancy expense |
|
| 1,368 |
|
|
| 1,252 |
|
|
| 116 |
|
|
| 9.3 | % |
Equipment expense |
|
| 2,687 |
|
|
| 637 |
|
|
| 2,050 |
|
|
| 321.8 | % |
Contracted data processing |
|
| 651 |
|
|
| 846 |
|
|
| (195 | ) |
|
| -23.0 | % |
FDIC assessment |
|
| 438 |
|
|
| 170 |
|
|
| 268 |
|
|
| 157.6 | % |
State franchise tax |
|
| 590 |
|
|
| 629 |
|
|
| (39 | ) |
|
| -6.2 | % |
Professional services |
|
| 1,010 |
|
|
| 1,335 |
|
|
| (325 | ) |
|
| -24.3 | % |
Amortization of intangible assets |
|
| 398 |
|
|
| 456 |
|
|
| (58 | ) |
|
| -12.7 | % |
ATM/Interchange expense |
|
| 619 |
|
|
| 604 |
|
|
| 15 |
|
|
| 2.5 | % |
Marketing |
|
| 497 |
|
|
| 372 |
|
|
| 125 |
|
|
| 33.6 | % |
Software maintenance expense |
|
| 1,052 |
|
|
| 942 |
|
|
| 110 |
|
|
| 11.7 | % |
Other |
|
| 3,388 |
|
|
| 2,828 |
|
|
| 560 |
|
|
| 19.8 | % |
Total noninterest expense |
| $ | 26,752 |
|
| $ | 22,555 |
|
| $ | 4,197 |
|
|
| 18.6 | % |
Noninterest expense for the three months ended September 30, 2023 was $26,752, an increase of $4,197, or 18.6%, from $22,555 reported for the same period of 2022. Compensation expense increased $244 or 12.3% duringprimarily due to the first nine monthsacquisition of 2017VFG resulting in an additional $1,300. The quarter-to-date average full time equivalent (FTE) employees were 528 at September 30, 2023, an increase of 85 FTEs over the same period in 2022. The increase in occupancy and equipment expense is primarily due to a $2,000 increase in equipment depreciation and expense related to the acquisition of VFG. The decrease in professional services of $325 is attributable to higher consulting expense in 2022 related to the acquisition of Comunibanc Corp. ("Comunibanc") on July 1, 2022. The increase in other operating expense is primarily due to a $130 thousand provision for credit losses on unfunded commitments as well as an increase in bad check loss of $255 thousand compared to the same period in 2016. The increase is mainly2022. Additional increases related to increasesthe acquisition of VFG are also attributable to the increase in assets under management and market conditions2023.
Income tax expense for the three months ended September 30, 2023 totaled $1,860, down $346 compared to the same period in 2016.
The Company processes state and federal income tax refund payments for customers of third-party income tax preparation vendors. The third-party vendors pay us a fee for processing the payments. Tax refund processing fees were $2,750 during the first nine months of 2017 and 2016. This fee income is seasonal in nature, the majority of which is received in the first quarter of the year.
Other income decreased $334 during the first nine months of 2017 compared to the same period of 2016. The decrease is mainly due to decreases in swap related income and gain/loss on sale of OREO properties during the first nine months of 2017 as compared to the same period in 2016.
Noninterest expense for the nine-month periods ended September 30, 2017 and 2016 are as follows:
|
| Nine months ended September 30, |
| |||||
|
| 2017 |
|
| 2016 |
| ||
Salaries, Wages and benefits |
| $ | 21,684 |
|
| $ | 19,053 |
|
Net occupancy expense |
|
| 2,002 |
|
|
| 2,009 |
|
Equipment expense |
|
| 1,097 |
|
|
| 1,158 |
|
Contracted data processing |
|
| 1,174 |
|
|
| 1,147 |
|
FDIC assessment |
|
| 414 |
|
|
| 597 |
|
State franchise tax |
|
| 767 |
|
|
| 709 |
|
Professional services |
|
| 1,718 |
|
|
| 1,450 |
|
Amortization of intangible assets |
|
| 483 |
|
|
| 527 |
|
ATM expense |
|
| 700 |
|
|
| 379 |
|
Marketing |
|
| 768 |
|
|
| 810 |
|
Other |
|
| 5,410 |
|
|
| 5,314 |
|
Total noninterest expense |
| $ | 36,217 |
|
| $ | 33,153 |
|
Noninterest expense for the nine months ended September 30, 2017 was $36,217, an increase of $3,064, from $33,153 reported for the same period of 2016. The primary reasons for the increase follow.
Salaries, wages and benefits were $21,684, up $2,631 or 13.8% as compared to the same period of 2016. These increases are mainly due to an increase in payroll and payroll related expenses resulting from an increase in full time equivalent (FTE) employees and annual pay increases. FTE employees increased 13.7, to 347 FTE, as compared to the same period of 2016. In addition, incentive based costs, higher employee insurance costs and pension costs increased, as compared to the same period of 2016.
FDIC assessments were $414, down $183 or 30.7% compared to the same period in 2016. The year-over-year decrease is the result of a new lower assessment rate schedule that became effective in 2016.
State franchise taxes were $767, up $58 or 8.2% compared to the same period in 2016. The year-over-year increase was attributable to an increase in the Company’s equity capital, on which the Ohio financial institutions tax is based.
Professional services costs increased $268, or 18.5% from the same period of 2016. The year-over-year increase was attributable to recruitment activities, facilities management and professional services to analyze workflow systems and recommend process improvements.
ATM costs were $700, up $321 or 84.7% compared to the same period in 2016. The increase is primarily due to vendor credits that expired in the second quarter of 2016, expenses incurred with the Company’s debit card program conversion, increased cardholder usage and ATM card related expenses.
Page 39
Civista Bancshares, Inc.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Form 10-Q
(Amounts in thousands, except share data)
Income tax expense for the nine months ended September 30, 2017 totaled $4,534, down $717 compared to the same period in 2016.2022. The effective tax rates for the nine-monththree-month periods ended September 30, 20172023 and September 30, 20162022 were 27.6%15.2% and 27.9%16.6%, respectively. The difference between the statutory federal income tax rate and the Company’s effective tax rate is the permanent tax differences, primarily consisting of tax-exempt interest income from municipal investments and loans, low income housing tax credits, tax-deductible captive insurance premiums and bank owned life insurance income.
Three
Nine Months Ended September 30, 20172023 and 20162022
The Company had net income of $3,660$33,309 for the threenine months ended September 30, 2017, a decrease2023, an increase of $20$6,030 from net income of $3,680$27,279 for the same threenine months of 2016.2022. Basic earnings per common share were $0.33$2.12 for the quarterperiod ended September 30, 2017,2023, compared to $0.41$1.82 for the same period in 2016.2022. Diluted earnings per common share were $0.29$2.12 for the quarterperiod ended September 30, 2017,2023, compared to $0.34$1.82 for the same period in 2016.2022. The primary reasons for the changes in net income are explained below.
Net interest income for the three months ended September 30, 2017 was $13,680, an increase of $1,154 from $12,526 in the same three months of 2016. Total interest income for the three months ended September 30, 2017 was $14,836, an increase of $1,466 from $13,370 in the same three months of 2016. Average earning assets increased 8.3% during the quarter ended September 30, 2017 as compared to the same period in 2016. Average loans, taxable securities, non-taxable securities and bank stocks for the third quarter of 2017 increased 7.6%, 9.6%, 20.2% and 3.6%, respectively, compared to the third quarter of last year. The increases were partially offset by a decrease in interest-bearing deposits in other banks. The yield on the loan portfolio increased 9 basis points for the third quarter of 2017 compared to the third quarter of last year. The yield on earning assets increased 10 basis points for the third quarter of 2017 compared to the third quarter of last year. Total interest expense for the three months ended September 30, 2017 was $1,156, an increase of $312 from $844 in the same three months of 2016. Interest expense on time deposits increased $59 in the third quarter of 2017 compared to the same period in 2016. Average time deposits for the third quarter of 2017 decreased 6.5% compared to the same period in 2016. Interest expense on savings and money market accounts, FHLB borrowings and trust preferred securities increased $44, $165 and $47, respectively, in the third quarter of 2017 compared to the same period in 2016. The interest rate paid on FHLB borrowings during the third quarter of 2017 increased 4 basis points as compared to the same period in 2016, while the average balance increased 140.6%. The interest rate paid on trust preferred securities during the third quarter of 2017 increased 62 basis points as compared to the same period in 2016. The Company’s net interest margin for the three months ended September 30, 2017 and 2016 was 4.08% and 4.06%, respectively.
Page 4047
Civista Bancshares, Inc.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Form 10-Q
(Amounts in thousands, except share data)
Net interest income for the nine months ended September 30, 2023 was $95,444, an increase of $17,805, from $77,639 in the same nine months of 2022. This increase is the result of an increase of $47,397 in total interest income, partially offset by an increase of $29,592 in total interest expense. Interest-earning assets averaged $3,284,210 during the nine months ended September 30, 2023, an increase of $389,120 from $2,895,090 for the same period of 2022. The Company’s average interest-bearing liabilities increased from $1,850,724 for the first nine months of 2022 to $2,270,844 for the same period in 2023. The Company’s fully tax equivalent net interest margin for the nine months ended September 30, 2023 and 2022 was 3.88% and 3.62%, respectively.
Total interest and dividend income increased $47,397 to $130,660 for the period ended September 30, 2023 This change was the result of an increase in the average balance of loans, accompanied by a higher yield on the portfolio. The average balance of loans increased by $496,613, or 23.5%, to $2,607,632 for the period ended September 30, 2023, as compared to $2,111,019 for the period ended September 30, 2022. The loan yield increased to 5.85% for 2023, from 4.44% in 2022.
Interest on taxable securities increased $2,386 to $8,817 for the period ended September 30, 2023, compared to $6,431 for the same period in 2022. The average balance of taxable securities increased $45,864 to $367,946 for the period ended September 30, 2023, as compared to $322,262 for the period ended September 30, 2022. The yield on taxable securities increased 36 basis points to 2.89% for 2023, compared to 2.53% for 2022. Interest on tax-exempt securities increased $1,248 to $6,917 for the period ended September 30, 2023, compared to $5,669 for the same period in 2022. The average balance of tax-exempt securities increased $22,460 to $285,250 for the period ended September 30, 2023, as compared to $262,790 for the period ended September 30, 2022. The yield on tax-exempt securities increased 24 basis points to 3.79% for 2023, compared to 3.55%for 2022.
Interest on interest-bearing deposits in other banks decreased $280 to $818 for the period ended September 30, 2023, compared to $1,098 for the same period in 2022. The average balance of interest-bearing deposits in other banks decreased $175,637 to $23,382 for the period ended September 30, 2023, as compared to $199,019 for the period ended September 30, 2022. The yield on interest-bearing deposits in other banks increased 393 basis points to 4.67% for 2023, compared to 0.74% for 2022.
Interest expense increased $29,592, or 526%, to $35,216 for the period ended September 30, 2023, compared with $5,624 for the same period in 2022. The change in interest expense can be attributed to an increase in rate and an increase in the average balance of interest-bearing liabilities. For the period ended September 30, 2023, the average balance of interest-bearing liabilities increased $420,120 to $2,270,844, compared to $1,850,724 for the period ended September 30, 2022. Interest incurred on deposits increased by $17,999 to $20,350 for the period ended September 30, 2023, compared to $2,351 for the same period in 2022. The average balance of interest-bearing deposits increased by $193,705 during the period and the rate paid on demand and savings accounts increased from 0.19% in 2022 to 1.46%in 2023. The rate paid on time deposits increased from 0.80% in 2022 to 4.17% in 2023. The average balance on long-term FHLB balances decreased $55,201 as a result of prepayment, while the rate paid increased 105 basis points. In addition, the average balance of short-term FHLB balances increased to $282,214, compared to the same period in 2022. The rate paid on subordinated debentures increased 119 basis points for the period ended September 30, 2023, as compared to the same period in 2022.
Page 48
Civista Bancshares, Inc.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Form 10-Q
(Amounts in thousands, except share data)
The following table presents the condensed average balance sheets for the threenine months ended September 30, 20172023 and 2016.2022. The daily average loan amounts outstanding are net of unearned income and include loans held for sale and nonaccrual loans. The average balance of securities is computed using the carrying value of securities. Rates are annualized and taxable equivalent yields are computed using a 35%21% tax rate for tax-exempt interest income. The average yield has been computed using the historical amortized cost average balance for available-for-sale securities.
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||||||||||||||||||||||||||||||||||
|
| 2017 |
|
| 2016 |
|
| 2023 |
|
| 2022 |
| ||||||||||||||||||||||||||||||||||||
Assets: |
| Average balance |
|
| Interest |
|
| Yield/rate* |
|
| Average balance |
|
| Interest |
|
| Yield/rate* |
|
| Average |
|
| Interest |
|
| Yield/ |
|
| Average |
|
| Interest |
|
| Yield/ |
| ||||||||||||
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Loans, including fees |
| $ | 1,122,131 |
|
| $ | 13,022 |
|
|
| 4.60 | % |
| $ | 1,042,721 |
|
| $ | 11,824 |
|
|
| 4.51 | % | ||||||||||||||||||||||||
Loans, including fees** |
| $ | 2,607,632 |
|
| $ | 114,108 |
|
|
| 5.85 | % |
| $ | 2,111,019 |
|
| $ | 70,065 |
|
|
| 4.44 | % | ||||||||||||||||||||||||
Taxable securities |
|
| 150,534 |
|
|
| 977 |
|
|
| 2.61 | % |
|
| 138,092 |
|
|
| 872 |
|
|
| 2.56 | % |
|
| 367,946 |
|
|
| 8,817 |
|
|
| 2.89 | % |
|
| 322,262 |
|
|
| 6,431 |
|
|
| 2.53 | % |
Tax-exempt securities |
|
| 93,022 |
|
|
| 812 |
|
|
| 5.53 | % |
|
| 77,378 |
|
|
| 664 |
|
|
| 5.56 | % |
|
| 285,250 |
|
|
| 6,917 |
|
|
| 3.79 | % |
|
| 262,790 |
|
|
| 5,669 |
|
|
| 3.55 | % |
Interest-bearing deposits in other banks |
|
| 11,450 |
|
|
| 25 |
|
|
| 0.87 | % |
|
| 12,878 |
|
|
| 10 |
|
|
| 0.31 | % |
|
| 23,382 |
|
|
| 818 |
|
|
| 4.67 | % |
|
| 199,019 |
|
|
| 1,098 |
|
|
| 0.74 | % |
Total interest-earning assets |
| $ | 1,377,137 |
|
|
| 14,836 |
|
|
| 4.42 | % |
| $ | 1,271,069 |
|
|
| 13,370 |
|
|
| 4.32 | % |
| $ | 3,284,210 |
|
| $ | 130,660 |
|
|
| 5.29 | % |
| $ | 2,895,090 |
|
| $ | 83,263 |
|
|
| 3.88 | % |
Noninterest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Cash and due from financial institutions |
|
| 24,652 |
|
|
|
|
|
|
|
|
|
|
| 24,591 |
|
|
|
|
|
|
|
|
|
|
| 33,918 |
|
|
|
|
|
|
|
|
| 108,220 |
|
|
|
|
|
|
| ||||
Premises and equipment, net |
|
| 18,000 |
|
|
|
|
|
|
|
|
|
|
| 16,975 |
|
|
|
|
|
|
|
|
|
|
| 58,338 |
|
|
|
|
|
|
|
|
| 24,429 |
|
|
|
|
|
|
| ||||
Accrued interest receivable |
|
| 4,460 |
|
|
|
|
|
|
|
|
|
|
| 4,134 |
|
|
|
|
|
|
|
|
|
|
| 11,176 |
|
|
|
|
|
|
|
|
| 8,025 |
|
|
|
|
|
|
| ||||
Intangible assets |
|
| 28,541 |
|
|
|
|
|
|
|
|
|
|
| 29,136 |
|
|
|
|
|
|
|
|
|
|
| 133,154 |
|
|
|
|
|
|
|
|
| 84,268 |
|
|
|
|
|
|
| ||||
Other assets |
|
| 10,352 |
|
|
|
|
|
|
|
|
|
|
| 10,196 |
|
|
|
|
|
|
|
|
|
|
| 61,669 |
|
|
|
|
|
|
|
|
| 44,077 |
|
|
|
|
|
|
| ||||
Bank owned life insurance |
|
| 24,889 |
|
|
|
|
|
|
|
|
|
|
| 24,308 |
|
|
|
|
|
|
|
|
|
|
| 53,796 |
|
|
|
|
|
|
|
|
| 48,965 |
|
|
|
|
|
|
| ||||
Less allowance for loan losses |
|
| (12,988 | ) |
|
|
|
|
|
|
|
|
|
| (14,424 | ) |
|
|
|
|
|
|
|
|
|
| (33,138 | ) |
|
|
|
|
|
|
|
| (27,168 | ) |
|
|
|
|
|
| ||||
Total Assets |
| $ | 1,475,043 |
|
|
|
|
|
|
|
|
|
| $ | 1,365,985 |
|
|
|
|
|
|
|
|
|
| $ | 3,603,123 |
|
|
|
|
|
|
|
| $ | 3,185,906 |
|
|
|
|
|
|
| ||||
Liabilities and Shareholders Equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Demand and savings |
| $ | 594,088 |
|
| $ | 160 |
|
|
| 0.11 | % |
| $ | 574,322 |
|
| $ | 118 |
|
|
| 0.08 | % |
| $ | 1,360,692 |
|
| $ | 4,818 |
|
|
| 0.47 | % |
| $ | 1,414,215 |
|
| $ | 860 |
|
|
| 0.08 | % |
Time |
|
| 194,364 |
|
|
| 447 |
|
|
| 0.91 | % |
|
| 207,947 |
|
|
| 388 |
|
|
| 0.74 | % |
|
| 497,458 |
|
|
| 15,532 |
|
|
| 4.17 | % |
|
| 250,230 |
|
|
| 1,491 |
|
|
| 0.80 | % |
FHLB |
|
| 85,840 |
|
|
| 276 |
|
|
| 1.28 | % |
|
| 35,673 |
|
|
| 111 |
|
|
| 1.24 | % | ||||||||||||||||||||||||
Short-term FHLB advance |
|
| 282,214 |
|
|
| 10,617 |
|
|
| 5.03 | % |
|
| 2,380 |
|
|
| 49 |
|
|
| — |
| ||||||||||||||||||||||||
Long-term FHLB advance |
|
| 3,062 |
|
|
| 51 |
|
|
| 2.23 | % |
|
| 58,263 |
|
|
| 515 |
|
|
| 2.75 | % | ||||||||||||||||||||||||
Other borrowings |
|
| 11,810 |
|
|
| 582 |
|
|
| 6.59 | % |
|
| — |
|
|
| — |
|
|
| — |
| ||||||||||||||||||||||||
Federal funds purchased |
|
| 462 |
|
|
| 2 |
|
|
| 1.72 | % |
|
| 462 |
|
|
| 1 |
|
|
| 0.86 | % |
|
| 143 |
|
|
| 5 |
|
|
| 4.67 | % |
|
| — |
|
|
| — |
|
|
| — |
|
Subordinated debentures |
|
| 29,427 |
|
|
| 268 |
|
|
| 3.61 | % |
|
| 29,427 |
|
|
| 221 |
|
|
| 2.99 | % |
|
| 103,854 |
|
|
| 3,607 |
|
|
| 4.64 | % |
|
| 103,726 |
|
|
| 2,701 |
|
|
| 3.48 | % |
Repurchase Agreements |
|
| 14,328 |
|
|
| 3 |
|
|
| 0.08 | % |
|
| 18,827 |
|
|
| 5 |
|
|
| 0.11 | % |
|
| 11,611 |
|
|
| 4 |
|
|
| 5.00 | % |
|
| 21,910 |
|
|
| 8 |
|
|
| 5.00 | % |
Total interest-bearing liabilities |
| $ | 918,509 |
|
|
| 1,156 |
|
|
| 0.50 | % |
| $ | 866,658 |
|
|
| 844 |
|
|
| 0.39 | % |
| $ | 2,270,844 |
|
| $ | 35,216 |
|
|
| 2.07 | % |
| $ | 1,850,724 |
|
| $ | 5,624 |
|
|
| 0.41 | % |
Noninterest-bearing deposits |
|
| 363,783 |
|
|
|
|
|
|
|
|
|
|
| 347,912 |
|
|
|
|
|
|
|
|
|
|
| 941,842 |
|
|
|
|
|
|
|
|
| 936,686 |
|
|
|
|
|
|
| ||||
Other liabilities |
|
| 12,826 |
|
|
|
|
|
|
|
|
|
|
| 14,678 |
|
|
|
|
|
|
|
|
|
|
| 44,739 |
|
|
|
|
|
|
|
|
| 76,748 |
|
|
|
|
|
|
| ||||
Shareholders’ Equity |
|
| 179,925 |
|
|
|
|
|
|
|
|
|
|
| 136,737 |
|
|
|
|
|
|
|
|
|
|
| 345,698 |
|
|
|
|
|
|
|
|
| 321,748 |
|
|
|
|
|
|
| ||||
Total Liabilities and Shareholders’ Equity |
| $ | 1,475,043 |
|
|
|
|
|
|
|
|
|
| $ | 1,365,985 |
|
|
|
|
|
|
|
|
|
| $ | 3,603,123 |
|
|
|
|
|
|
|
| $ | 3,185,906 |
|
|
|
|
|
|
| ||||
Net interest income and interest rate spread |
|
|
|
|
| $ | 13,680 |
|
|
| 3.91 | % |
|
|
|
|
| $ | 12,526 |
|
|
| 3.93 | % |
|
|
|
| $ | 95,444 |
|
|
| 3.22 | % |
|
|
|
| $ | 77,639 |
|
|
| 3.47 | % | ||
Net interest margin |
|
|
|
|
|
|
|
|
|
| 4.08 | % |
|
|
|
|
|
|
|
|
|
| 4.06 | % |
|
|
|
|
|
|
|
| 3.88 | % |
|
|
|
|
|
|
|
| 3.62 | % | ||||
*—AllAverage yields and costs are presented on an annualized basisa tax equivalent basis. The tax equivalent effect associated with loans and investments, included in the yields above, was $1,839 and $1,509 for the periods ended September 30, 2023 and 2022, respectively.
**—Average balance includes nonaccrual loans.
Page 4149
Civista Bancshares, Inc.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Form 10-Q
(Amounts in thousands, except share data)
Net interest income may also be analyzed by comparing the volume and rate components of interest income and interest expense. The following table provides an analysis of the changes in interest income and expense between the threenine months ended September 30, 20172023 and 2016.2022. The table is presented on a fully tax-equivalent basis.
|
| Increase (decrease) due to: |
|
| Increase (decrease) due to: |
| ||||||||||||||||||
|
| Volume (1) |
|
| Rate (1) |
|
| Net |
|
| Volume (1) |
|
| Rate (1) |
|
| Net |
| ||||||
|
| (Dollars in thousands) |
|
| (Dollars in thousands) |
| ||||||||||||||||||
Interest income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Loans, including fees |
| $ | 917 |
|
| $ | 281 |
|
| $ | 1,198 |
|
| $ | 18,713 |
|
| $ | 25,330 |
|
| $ | 44,043 |
|
Taxable securities |
|
| 88 |
|
|
| 17 |
|
|
| 105 |
|
|
| 1,412 |
|
|
| 974 |
|
|
| 2,386 |
|
Tax-exempt securities |
|
| 160 |
|
|
| (12 | ) |
|
| 148 |
|
|
| 854 |
|
|
| 394 |
|
|
| 1,248 |
|
Interest-bearing deposits in other banks |
|
| (1 | ) |
|
| 16 |
|
|
| 15 |
|
|
| (1,703 | ) |
|
| 1,422 |
|
|
| (281 | ) |
Total interest income |
| $ | 1,164 |
|
| $ | 302 |
|
| $ | 1,466 |
|
| $ | 19,276 |
|
| $ | 28,120 |
|
| $ | 47,396 |
|
Interest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Demand and savings |
| $ | 4 |
|
| $ | 38 |
|
| $ | 42 |
|
| $ | (34 | ) |
| $ | 3,992 |
|
| $ | 3,958 |
|
Time |
|
| (27 | ) |
|
| 86 |
|
|
| 59 |
|
|
| 2,653 |
|
|
| 11,388 |
|
|
| 14,041 |
|
FHLB |
|
| 161 |
|
|
| 4 |
|
|
| 165 |
| ||||||||||||
Short-term FHLB advance |
|
| 10,494 |
|
|
| 74 |
|
|
| 10,568 |
| ||||||||||||
Long-term FHLB advance |
|
| (711 | ) |
|
| 247 |
|
|
| (464 | ) | ||||||||||||
Other borrowings |
|
| 587 |
|
|
| — |
|
|
| 587 |
| ||||||||||||
Federal funds purchased |
|
| — |
|
|
| 1 |
|
|
| 1 |
|
|
| — |
|
|
| — |
|
|
| — |
|
Subordinated debentures |
|
| — |
|
|
| 47 |
|
|
| 47 |
|
|
| 3 |
|
|
| 903 |
|
|
| 906 |
|
Repurchase agreements |
|
| (1 | ) |
|
| (1 | ) |
|
| (2 | ) |
|
| (4 | ) |
|
| — |
|
|
| (4 | ) |
Total interest expense |
| $ | 137 |
|
| $ | 175 |
|
| $ | 312 |
|
| $ | 12,988 |
|
| $ | 16,604 |
|
| $ | 29,592 |
|
Net interest income |
| $ | 1,027 |
|
| $ | 127 |
|
| $ | 1,154 |
|
| $ | 6,288 |
|
| $ | 11,516 |
|
| $ | 17,804 |
|
|
|
(1) The change in interest income and interest expense due to changes in both volume and rate, which cannot be segregated, has been allocated proportionately to the change due to volume and the change due to rate.
The Company provides for loan losses through regular provisions to the allowance for loan losses. Upon adoption of CECL on January 1, 2023, we recorded an increase in the allowance for credit losses of $5,193. During the quartersnine months ended September 30, 2017 and2023 we recorded a provision for credit losses of $2,111, an increase of $1,111, from $1,000 during the nine months ended September 30, 2016, no provision for2022. The increase in the reserves was principally related to loan losses was provided.growth during the year. As time progresses the results of economic conditions will require CECL model assumption inputs to change and further refinements to the estimation process may also be identified.
Noninterest
The components of noninterest income for the three-monthnine-month periods ended September 30, 20172023 and 2016 are2022 were as follows:
|
| Three months ended September 30, |
|
| Nine months ended September 30, |
| ||||||||||||||||||
|
| 2017 |
|
| 2016 |
|
| 2023 |
|
| 2022 |
|
| $ Change |
|
| % Change |
| ||||||
Service charges |
| $ | 1,177 |
|
| $ | 1,194 |
|
| $ | 5,457 |
|
| $ | 5,004 |
|
| $ | 453 |
|
|
| 9.1 | % |
Net gain on sale of securities |
|
| (9 | ) |
|
| 18 |
|
|
| — |
|
|
| 10 |
|
|
| (10 | ) |
|
| -100.0 | % |
Net gain on sale of loans |
|
| 472 |
|
|
| 541 |
| ||||||||||||||||
ATM fees |
|
| 567 |
|
|
| 541 |
| ||||||||||||||||
Net gain (loss) on equity securities |
|
| (169 | ) |
|
| (44 | ) |
|
| (125 | ) |
|
| 284.1 | % | ||||||||
Net gain on sale of loans and leases |
|
| 2,033 |
|
|
| 2,146 |
|
|
| (113 | ) |
|
| -5.3 | % | ||||||||
ATM/Interchange fees |
|
| 4,227 |
|
|
| 3,990 |
|
|
| 237 |
|
|
| 5.9 | % | ||||||||
Wealth management fees |
|
| 787 |
|
|
| 688 |
|
|
| 3,570 |
|
|
| 3,713 |
|
|
| (143 | ) |
|
| -3.9 | % |
Lease revenue and residual income |
|
| 6,160 |
|
|
| 0 |
|
|
| 6,160 |
|
|
| 0.0 | % | ||||||||
Bank owned life insurance |
|
| 142 |
|
|
| 149 |
|
|
| 830 |
|
|
| 732 |
|
|
| 98 |
|
|
| 13.4 | % |
Tax refund processing fees |
|
| 2,375 |
|
|
| 2,375 |
|
|
| — |
|
|
| 0.0 | % | ||||||||
Swap fees |
|
| 198 |
|
|
| — |
|
|
| 198 |
|
|
| 0.0 | % | ||||||||
Other |
|
| 329 |
|
|
| 522 |
|
|
| 3,661 |
|
|
| 1,086 |
|
|
| 2,575 |
|
|
| 237.1 | % |
Total noninterest income |
| $ | 3,465 |
|
| $ | 3,653 |
|
| $ | 28,342 |
|
| $ | 19,012 |
|
| $ | 9,330 |
|
|
| 49.1 | % |
Noninterest income for the three months ended September 30, 2017 was $3,465, a decrease of $188 or 5.1% from $3,653 for the same period of 2016. The primary reasons for the increase follow.
Gain on sale of loans decreased $69 or 12.8% during the third quarter of 2017 compared to the same period of 2016. The decrease is due to a decrease in the premium on loans sold. The decrease in the premium was offset by an increase in the volume of loans sold during the third quarter of 2017. Volume was $22,153, up $629 or 2.9% as compared to the same period in 2016.
Page 4250
Civista Bancshares, Inc.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Form 10-Q
(Amounts in thousands, except share data)
Noninterest income for the nine months ended September 30, 2023 was $28,342, an increase of $9,330, or 49.1%, from $19,012 for the same period of 2022. The increase was primarily due to increases in lease revenue and residual income of $6,160 due to the acquisition of VFG during the fourth quarter of 2022. The increase in service charge income is split between $115 in personal service charges and $149 in business service charges. Overdraft fees also increased by $188. The net gain/loss on equity securities decrease was the result of a market valuation adjustment. The net gain on sale of loans and leases decreased by $113 thousand compared to the same period last year. CLF generated a $1.1 million gain on the sale of $32.9 million in commercial loans and leases. The sale of mortgage loans generated a $911 thousand gain on the sale of $42.2 million, a decrease in the gain of $1.2 million and a $65.4 million decrease in volume in 2023, compared to 2022.
Other income increased as result of a $1.5 million fee collected associated with the renewal of the company's contract with MasterCard. Other income also increased as result of $707 thousand in interim rent at CLF, and $198 thousand increase in swap fee income.
Tax refund processing fees were $2,375 for each of the nine months ended September 30, 2023 and 2022. These fees are received for processing state and federal income tax refund payments for customers of third party income tax preparation vendors. This fee income is comprisedseasonal in nature, the majority of which is earned in the first quarter of the year.
The components of noninterest expense for the nine-month periods ended September 30, 2023 and 2022 are as follows:
|
| Nine months ended September 30, |
| |||||||||||||
|
| 2023 |
|
| 2022 |
|
| $ Change |
|
| % Change |
| ||||
Compensation expense |
| $ | 44,137 |
|
| $ | 36,654 |
|
| $ | 7,483 |
|
|
| 20.4 | % |
Net occupancy expense |
|
| 4,096 |
|
|
| 3,428 |
|
|
| 668 |
|
|
| 19.5 | % |
Equipment expense |
|
| 8,214 |
|
|
| 1,694 |
|
|
| 6,520 |
|
|
| 384.9 | % |
Contracted data processing |
|
| 1,730 |
|
|
| 1,899 |
|
|
| (169 | ) |
|
| -8.9 | % |
FDIC assessment |
|
| 1,215 |
|
|
| 568 |
|
|
| 647 |
|
|
| 113.9 | % |
State franchise tax |
|
| 1,770 |
|
|
| 1,848 |
|
|
| (78 | ) |
|
| -4.2 | % |
Professional services |
|
| 3,804 |
|
|
| 3,593 |
|
|
| 211 |
|
|
| 5.9 | % |
Amortization of intangible assets |
|
| 1,195 |
|
|
| 890 |
|
|
| 305 |
|
|
| 34.3 | % |
ATM/Interchange expense |
|
| 1,814 |
|
|
| 1,659 |
|
|
| 155 |
|
|
| 9.3 | % |
Marketing |
|
| 1,542 |
|
|
| 1,069 |
|
|
| 473 |
|
|
| 44.2 | % |
Software maintenance expense |
|
| 2,989 |
|
|
| 2,440 |
|
|
| 549 |
|
|
| 22.5 | % |
Other operating expenses |
|
| 9,792 |
|
|
| 7,450 |
|
|
| 2,342 |
|
|
| 31.4 | % |
Total noninterest expense |
| $ | 82,298 |
|
| $ | 63,192 |
|
| $ | 19,106 |
|
|
| 30.2 | % |
Noninterest expense for the nine months ended September 30, 2023 was $82,298, an increase of $19,106, or 30.2%, from $63,192 reported for the same period of 2022. The primary reasons for the increase were increases in compensation expense, equipment expense, FDIC assessment, professional fees, earned from the management and administration of trustsamortization expense, software maintenance expense and other customer assets. These fees are largely based uponoperating expense. Compensation expense increased primarily due to $4.6 million of salaries related to the market valueacquisition of VFG. Other increases related to salaries were a result of annual merit increases and add-to-staff positions as well as increases in employee insurance. The year-to-date average full time equivalent (FTE) employees were 531 at September 30, 2023, an increase of 67 FTEs over the same period in 2022. The increase in occupancy and equipment expense is primarily due to a $6.1 million increase in equipment depreciation related to the acquisition of VFG. The $305 increase in amortization of intangible assets that we manageis related to the core deposit intangible associated with the acquisition of Comunibanc. Marketing expense increased due to an increase in marketing efforts in newly acquired markets related to the Comunibanc and VFG acquisitions totaling $1,542 for the fee rate chargedfirst nine months of 2023 compared to customers. Wealth management fee income$1,069 for the same period in 2022. The increase in software maintenance is due to increases in maintenance contracts related to the digital banking platform. Other operating expenses increased $99 or 14.4% duringfrom 2022 by $2,342 primarily due to a $595 thousand provision for credit losses on unfunded commitments, a $353 increase in bad check loss expense and additional expenses related to CLF of $608 thousand. Business promotion, travel and lodging, donations and education and training all increased as well.
Income tax expense for the third quarter of 2017nine months ended September 30, 2023 totaled $6,068, up $888 compared to the same period in 2016.2022. The increase is mainly relatedeffective tax rate for the nine-month period ended September 30, 2023 was 15.4% compared to increases in assets under management and market conditions compared to16% for the same period in 2016.
Other income decreased $193 during the third quarter of 2017 compared to the same period of 2016. The decrease is mainly due to decreases in swap related income and gain/loss on sale of OREO properties during the third quarter of 2017 as compared to the same period in 2016.
Noninterest expense for the three-month periods ended September 30, 2017 and 2016 are as follows:
|
| Three months ended September 30, |
| |||||
|
| 2017 |
|
| 2016 |
| ||
Salaries, Wages and benefits |
| $ | 7,389 |
|
| $ | 6,375 |
|
Net occupancy expense |
|
| 690 |
|
|
| 708 |
|
Equipment expense |
|
| 350 |
|
|
| 494 |
|
Contracted data processing |
|
| 357 |
|
|
| 397 |
|
FDIC assessment |
|
| 115 |
|
|
| 166 |
|
State franchise tax |
|
| 255 |
|
|
| 251 |
|
Professional services |
|
| 534 |
|
|
| 431 |
|
Amortization of intangible assets |
|
| 158 |
|
|
| 172 |
|
ATM expense |
|
| 233 |
|
|
| 183 |
|
Marketing |
|
| 240 |
|
|
| 249 |
|
Other |
|
| 1,846 |
|
|
| 1,769 |
|
Total noninterest expense |
| $ | 12,167 |
|
| $ | 11,195 |
|
Noninterest expense for the three months ended September 30, 2017 was $12,167, an increase of $972, or 8.7%, from $11,195 reported for the same period of 2016. The primary reasons for the increase follow.
Salaries, wages and benefits were $7,389, up $1,014 or 15.9% as compared to the same period of 2016. These increases are mainly due to an increase in payroll and payroll related expenses due to an increase in full time equivalent (FTE) employees and annual pay increases. FTE employees increased 14.6, to 353.7 FTE, as compared to the same period of 2016. In addition, incentive based costs, employee insurance costs and pension costs increased, as compared to the same period of 2016.
Equipment expenses were $350, down $144 or 29.1% compared to the same period in 2016. The quarter-over-quarter increase was attributable to lower repair and maintenance expense during the third quarter of 2017 as compared to the same period.
FDIC assessments were $115, down $51 or 30.7% compared to the same period in 2016. The quarter-over-quarter decrease is the result of a new lower assessment rate schedule that became effective in 2016.
Professional services costs increased $103, or 23.9% from the same period of 2016. The quarter-over-quarter increase was attributable to recruitment activities, facilities management and professional services to analyze workflow systems and recommend process improvements.
ATM costs were $233, up $50 or 27.3% compared to the same period in 2016. The increase is primarily due to increases in cardholder usage and ATM card expenses during the third quarter of 2017.
Income tax expense for the three months ended September 30, 2017 totaled $1,318, up $14 compared to the same period in 2016. The effective tax rates for the three-month periods ended September 30, 2017 and September 30, 2016 were 26.5% and 26.2%, respectively.2022. The difference between the statutory federal income tax rate and the Company’s effective tax rate is the permanent tax differences, primarily consisting of tax-exempt interest income from municipal investments and loans, low income housing tax credits, tax-deductible captive insurance premiums and bank owned life insurance income.
Capital Resources
Shareholders’ equity totaled $181,981 at September 30, 2017 compared to $137,616 at December 31, 2016. The increase in shareholders’ equity resulted primarily from the completion of the Company’s public offering of its common stock on February 24, 2017, which resulted in net proceeds of $32,821. Shareholders’ equity was also positively impacted by net income of $11,892, a $625 net decrease in the Company’s pension
Page 4351
Civista Bancshares, Inc.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Form 10-Q
(Amounts in thousands, except share data)
liability and an increase
Capital Resources
Shareholders’ equity totaled $332,745 at September 30, 2023, compared to $334,835 at December 31, 2022. Shareholders’ equity decreased during the first nine months of 2023 as a result of a decrease in the fair value of securities available for sale,available-for-sale, net of tax, of $1,315, which was$21,417, dividends on common shares of $7,088, the purchase of treasury shares of $1,618 and the cumulative effect of adopting ASU 2016-13 of $6,069, partially offset by dividends on preferred stock and common stocknet income of $935 and $1,726, respectively.$33,309.
All of the Company’s capital ratios exceeded the regulatory minimum guidelines as of September 30, 20172023 and December 31, 20162022 as identified in the following table:
|
| Total Risk Based Capital |
|
| Tier I Risk Based Capital |
|
| CET1 Risk Based Capital |
|
| Leverage Ratio |
| ||||||||||||||||||||
Company Ratios—September 30, 2017 |
|
| 16.6 | % |
|
| 15.5 | % |
|
| 11.6 | % |
|
| 12.7 | % | ||||||||||||||||
Company Ratios—December 31, 2016 |
|
| 14.2 | % |
|
| 13.0 | % |
|
| 8.6 | % |
|
| 10.6 | % | ||||||||||||||||
|
| Total Risk |
|
| Tier I Risk |
|
| CET1 Risk |
|
| Leverage |
| ||||||||||||||||||||
Company Ratios—September 30, 2023 |
|
| 14.5 | % |
|
| 10.7 | % |
|
| 9.7 | % |
|
| 8.8 | % | ||||||||||||||||
Company Ratios—December 31, 2022 |
|
| 14.5 | % |
|
| 10.8 | % |
|
| 9.7 | % |
|
| 8.9 | % | ||||||||||||||||
For Capital Adequacy Purposes |
|
| 8.0 | % |
|
| 6.0 | % |
|
| 4.5 | % |
|
| 4.0 | % |
|
| 8.0 | % |
|
| 6.0 | % |
|
| 4.5 | % |
|
| 4.0 | % |
To Be Well Capitalized Under Prompt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Corrective Action Provisions |
|
| 10.0 | % |
|
| 8.0 | % |
|
| 6.5 | % |
|
| 5.0 | % |
|
| 10.0 | % |
|
| 8.0 | % |
|
| 6.5 | % |
|
| 5.0 | % |
The Company paid a cash dividend of $0.06 per common share on February 1, 2017, on May 1, 2017 and on August 1, 2017. In 2016, the Company paid a cash dividend of $0.05 per common share on February 1, 2016 and on May 1, 2016 and paid a cash dividend of $0.06 per common share on August 1, 2016. The Company also paid a 6.50% cash dividend on its Series B preferred shares in the amount of approximately $319 on March 15, 2017 and approximately $308 on June 15, 2017 and on September 15, 2017. In 2016, the Company paid a 6.50% cash dividend on its Series B preferred shares in the amount of approximately $391 on March 15, 2016 and on June 15, 2016 and approximately $374 on September 15, 2016.
Liquidity
The Company maintains a conservative liquidity position. All securities, with the exception of equity securities, are classified as available for sale.available-for-sale. Securities, with maturities of one year or less, totaled $5,108,$6,149, or 2.2%1.04% of the total security portfolio at September 30, 2017.2023. The available for saleavailable-for-sale portfolio helps to provide the Company with the ability to meet its funding needs. The Condensed Consolidated Statements of Cash Flows (Unaudited) contained in the consolidated financial statementsConsolidated Financial Statements detail the Company’s cash flows from operating activities resulting from net earnings.
As reported in the Condensed Consolidated Statements of Cash Flows (Unaudited), our cash flows are classified for financial reporting purposes as operating, investing or financing cash flows. Net cash provided by operating activities was $11,821$60,593 and $11,318$27,421 for the nine months ended September 30, 20172023 and 2016, respectively. These amounts differ from net income due to a variety of cash receipts and disbursements that did not affect net income for the respective periods. Net2022, respectively.Net cash used forby investing activities was $119,937$216,826 and $53,828$207,756 for the nine months ended September 30, 20172023 and 2016,2022, respectively, principally reflecting our loan and investment security activities. Cash provided by deposits borrowings and net proceeds from our common equity offering comprised most of our financing activities, which resulted in net cash provided by of $104,815$163,188 and $40,178used of $42,990 for the nine months ended September 30, 20172023 and 2016,2022, respectively.
Future loan demand of Civista may be funded by increases in deposit accounts, proceeds from payments on existing loans, the maturity of securities, and the sale of securities classified as available for sale.available-for-sale. Additional sources of funds may also come from borrowing in the Federal Funds market and/or borrowing from the FHLB. Through its correspondent banks, Civista maintains federal funds borrowing lines totaling $42,500.$50,000. As of September 30, 2017,2023, Civista had total credit availability with the FHLB of $355,367$771,067 with standby letters of credit totaling $19,600$33,400 and a remaining borrowing capacity of approximately $279,017.$303,594. In addition, Civista Bancshares, Inc.CBI maintains a credit line with a third party lender totaling $7,500.$15,000. No borrowings were outstanding by CBI under this credit line as of September 30, 2023.
Page 4452
Civista Bancshares, Inc.
Quantitative and Qualitative Disclosures About Market Risk
Form 10-Q
(Amounts in thousands, except share data)
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
The Company’s primary market risk exposure is interest-rate risk and, to a lesser extent, liquidity risk. All of the Company’s transactions are denominated in U.S. dollars with no specific foreign exchange exposure.
Interest-rate risk is the exposure of a banking organization’s financial condition to adverse movements in interest rates. Accepting this risk can be an important source of profitability and shareholder value. However, excessive levels of interest-rate risk can pose a significant threat to the Company’s earnings and capital base. Accordingly, effective risk management that maintains interest-rate risk at prudent levels is essential to the Company’s safety and soundness.
Evaluating a financial institution’s exposure to changes in interest rates includes assessing both the adequacy of the management process used to control interest-rate risk and the organization’s quantitative level of exposure. When assessing the interest-rate risk management process, the Company seeks to ensure that appropriate policies, procedures, management information systems and internal controls are in place to maintain interest-rate risk at prudent levels with consistency and continuity. Evaluating the quantitative level of interest rate risk exposure requires the Company to assess the existing and potential future effects of changes in interest rates on its consolidated financial condition, including capital adequacy, earnings, liquidity and, where appropriate, asset quality.
The Federal Reserve Board, together with the Office of the Comptroller of the Currency and the Federal Deposit Insurance Company, adopted a Joint Agency Policy Statement on interest-rate risk, effective June 26, 1996. TheCorporation, issue policy statement providesstatements and guidance to examiners and bankers on sound practices for managing interest-rate risk, which will form the basis for ongoing evaluation of the adequacy of interest-rate risk management at supervised institutions. The policy statementguidance also outlines fundamental elements of sound management that have been identified in prior Federal Reserve guidance and discusses the importance of these elements in the context of managing interest-rate risk. Specifically, theThe guidance emphasizes the need for active board of director and senior management oversight and a comprehensive risk-management process that effectively identifies, measures, and controls interest-rate risk.
Financial institutions derive their income primarily from the excess of interest collected over interest paid. The rates of interest an institution earns on its assets and owes on its liabilities generally are established contractually for a period of time. Since market interest rates change over time, an institution is exposed to lower profit margins (or losses) if it cannot adapt to interest-rate changes. For example, assume that an institution’s assets carry intermediate- or long-term fixed rates and that those assets were funded with short-term liabilities. If market interest rates rise by the time the short-term liabilities must be refinanced, the increase in the institution’s interest expense on its liabilities may not be sufficiently offset if assets continue to earn at the long-term fixed rates. Accordingly, an institution’s profits could decrease on existing assets because the institution will have either lower net interest income or, possibly, net interest expense. Similar risks exist when assets are subject to contractual interest-rate ceilings, or rate sensitive assets are funded by longer-term, fixed-rate liabilities in a decreasing-rate environment.
Several techniques may be used by an institution to minimize interest-rate risk. One approach used by the Company is to periodically analyze its assets and liabilities and make future financing and investment decisions based on payment streams, interest rates, contractual maturities, and estimated sensitivity to actual or potential changes in market interest rates. Such activities fall under the broad definition of asset/liability management. The Company’s primary asset/liability management technique is the measurement of the Company’s asset/liability gap, that is, the difference between the cash flow amounts of interest sensitive assets and liabilities that will be refinanced (or repriced) during a given period. For example, if the asset amount to be repriced exceeds the corresponding liability amount for a certain day, month, year, or longer period, the institution is in an asset sensitive gap position. In this situation, net interest income would increase if market interest rates rose or decrease if market interest rates fell. If, alternatively, more liabilities than assets will reprice, the institution is in a liability sensitive position. Accordingly, net interest income would decline when rates rose and increase when rates fell. Also, these examples assume that interest rate changes for assets and liabilities are of the same magnitude, whereas actual interest rate changes generally differ in magnitude for assets and liabilities.
Page 53
Civista Bancshares, Inc.
Quantitative and Qualitative Disclosures About Market Risk
Form 10-Q
(Amounts in thousands, except share data)
Several ways an institution can manage interest-rate risk include selling existing assets or repaying certain liabilities; matching repricing periods for new assets and liabilities, for example, by shortening terms of new loans or securities; and hedging existing assets, liabilities, or anticipated transactions. An institution might also invest in more complex financial instruments intended to hedge or otherwise change interest-rate risk. Interest rate swaps, futures contracts, options on futures, and other such derivative financial instruments often are used for this purpose. Because these instruments are sensitive to interest rate changes, they require management expertise to be effective. The Company has not purchased derivative financial instruments to hedge interest rate risk in the past and does not currently intend to purchase such instruments in the near future. Financial institutions are also subject to prepayment risk in falling rate environments. For example, mortgage loans and other financial assets may be prepaid by a debtor so that the debtor may refinance its obligations at new, lower rates. Prepayments of assets carrying higher rates reduce the Company’s interest income and overall asset yields. A large portion of an institution’s liabilities may be short-term or due on demand, while most of its assets may be invested in long-term loans or securities. Accordingly, the Company seeks to have in place sources of cash to meet short-term demands. These funds can be obtained by increasing deposits, borrowing, or selling assets. FHLB advances and wholesale borrowings may also be used as important sources of liquidity for the Company.
Page 45
Civista Bancshares, Inc.
Quantitative and Qualitative Disclosures About Market Risk
Form 10-Q
(Amounts in thousands, except share data)
The following table provides information about the Company’s financial instruments that were sensitive to changes in interest rates as of December 31, 20162022 and September 30, 2017,2023, based on certain prepayment and account decay assumptions that management believes are reasonable. The table shows the changes in the Company’s net portfolio value (in amount and percent) that would result from hypothetical interest rate increases of 200 basis points and 100 basis points and an interest rate decreasedecreases of 100 basis points and 200 basis points at September 30, 20172023 and December 31, 2016.2022.
The Company had derivative financial instruments as of December 31, 2016 and September 30, 2017. The changes in fair value of the assets and liabilities of the underlying contracts offset each other. Expected maturity date values for interest-bearing core deposits were calculated based on estimates of the period over which the deposits would be outstanding. The Company’s borrowings were tabulated by contractual maturity dates and without regard to any conversion or repricing dates.
Net Portfolio Value |
| |||||||||||||||||||||||
|
| September 30, 2023 |
|
| December 31, 2022 |
| ||||||||||||||||||
Change in Rates |
| Dollar |
|
| Dollar |
|
| Percent |
|
| Dollar |
|
| Dollar |
|
| Percent |
| ||||||
+200bp |
|
| 578,836 |
|
|
| 233 |
|
| >1% |
|
|
| 571,328 |
|
|
| 14,733 |
|
|
| 3 | % | |
+100bp |
|
| 578,433 |
|
|
| 2,830 |
|
| >1% |
|
|
| 566,596 |
|
|
| 10,001 |
|
|
| 2 | % | |
Base |
|
| 575,603 |
|
|
| — |
|
|
| — |
|
|
| 556,595 |
|
|
| — |
|
|
| — |
|
-100bp |
|
| 578,576 |
|
|
| 2,973 |
|
|
| 1 | % |
|
| 548,575 |
|
|
| (8,020 | ) |
|
| (1 | )% |
-200bp |
|
| 568,172 |
|
|
| (7,431 | ) |
|
| (1 | )% |
|
| 526,702 |
|
|
| (29,893 | ) |
|
| (5 | )% |
Net Portfolio Value |
| |||||||||||||||||||||||
|
| September 30, 2017 |
|
| December 31, 2016 |
| ||||||||||||||||||
Change in Rates |
| Dollar Amount |
|
| Dollar Change |
|
| Percent Change |
|
| Dollar Amount |
|
| Dollar Change |
|
| Percent Change |
| ||||||
+200bp |
|
| 257,937 |
|
|
| 34,479 |
|
|
| 15 | % |
|
| 229,366 |
|
|
| 31,559 |
|
|
| 16 | % |
+100bp |
|
| 246,494 |
|
|
| 23,036 |
|
|
| 10 | % |
|
| 219,008 |
|
|
| 21,201 |
|
|
| 11 | % |
Base |
|
| 223,458 |
|
|
| — |
|
|
| — |
|
|
| 197,807 |
|
|
| — |
|
|
| — |
|
-100bp |
|
| 221,782 |
|
|
| (1,676 | ) |
|
| -1 | % |
|
| 186,624 |
|
|
| (11,183 | ) |
|
| -6 | % |
The change in net portfolio value from December 31, 20162022 to September 30, 2017,2023, can be attributed to twoa couple of factors. While theThe yield curveremains inverted but has flattened fromshifted upward since the end of the year,year. Additionally, both the volume and mix of assets and funding sources has changed. Cash, as it relates to the tax refund processing program, has decreased while theThe volume of loans has increased, and securitiesthe asset mix remains centered on loans. The volume of certificates of deposit has increased and both deposits and borrowed money have both increased. This change in the mix of assets tends to increase volatility.decreased. The funding volume and mix has shiftedshifts from borrowed moneythe end of the year contributed to deposits and CDs, which tends to increase volatility. The increased volume of loans and securities led to thean increase in the base.base net portfolio value. Beyond the change in the base level of net portfolio value, projected movements in rates, up or down, would also lead to changes in market values. The change in the rates up scenarios for both the 100 and 200 basis point movements would lead to a fasterslightly larger decrease in the fairmarket value of liabilities compared tothan assets. Accordingly, we would see ana slight increase in the net portfolio value. However, a downwardThe change in the rates down scenario for 200 basis point movements would lead to a larger increase in the market value of liabilities than in assets, leading to a decrease in the net portfolio value as the fair value of liabilities would increase more quickly than the fair value of assets.value.
Page 4654
Civista Bancshares, Inc.
Controls and Procedures
Form 10-Q
(Amounts in thousands, except share data)
ITEM 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive and our principal financial officers, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, our principal executive and our principal financial officers concluded that our disclosure controls and procedures as of September 30, 2017,2023, were effective.
Changes in Internal Control over Financial Reporting
There have not been any changes in the Company’s internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred during the Company’s most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Page 4755
Other Information
Form 10-Q
Part II—Other Information
There were no new materialItem 1. Legal Proceedings
In the ordinary course of their respective businesses, CBI or Civista or their respective properties may be named or otherwise subject as a plaintiff, defendant or other party to various pending and threatened legal proceedings and various actual and potential claims. In view of the inherent difficulty of predicting the outcome of such matters, the Company cannot state what the eventual outcome of any such matters will be. However, based on current knowledge and after consultation with legal counsel, management believes these proceedings will not have a material adverse effect on the consolidated financial position, results of operations or material changes to existing legal proceedings during the current period.liquidity of CBI or Civista.
There were no material changes during the current period toItem 1A. Risk Factors
The following information updates our risk factors and should be read in conjunction with the risk factors disclosed in “Item 1A. Risk Factors” of Part I of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016.2022.
There are certain risks and uncertainties in our business that could cause our actual results to differ materially from those anticipated. A detailed discussion of our risk factors is included in “Item 1A. Risk Factors” of Part I of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, as supplemented by “Item IA. Risk Factors” of Part II of the Company’s Quarterly Reports on Form 10-Q.
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Mine Safety Disclosures
Not applicable
Item 5. Other Information
Rule 10b5-1 Trading Plans
During the quarter ended September 30, 2023, none of our directors or officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted or terminated any “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.
Page 56
Civista Bancshares, Inc.
Other Information
Form 10-Q
Item 6. Exhibits
None
| Stock Purchase Agreement, dated as of September 29, 2022, by and among Civista Bancshares, Inc., Civista Bank, Vision Financial Group, Inc. and Frederick Summers | Filed as Exhibit 2.1 to Civista Bancshares, Inc.’s Current Report on Form 8-K filed on September 30, 2022 and incorporated herein by reference. (File No. 001-36192) |
None
Not applicable
None
| Filed as Exhibit 3.1 to Civista Bancshares, Inc.’s Current Report on Form 8-K, filed on November 16, 2018 and incorporated herein by reference. (File No. 001-36192) |
3.2 | Filed as Exhibit 3.2 to Civista Bancshares, Inc.’s Quarterly Report on Form 10-Q for the period ended September 30, 2017, filed on November 8, 2017 and incorporated herein by reference. (File No. 001-36192) |
31.1 | Rule 13a-14(a)/ | Included herewith |
31.2 | Rule 13a-14(a)/ | Included herewith |
32.1 | Included herewith |
| Included herewith | |||
101 | The following materials from | Included herewith | ||
104 | Cover page formatted in Inline Extensible Business Reporting Language. | Included herewith |
Page 4857
Form 10-Q
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Civista Bancshares, Inc.
/s/ Dennis G. Shaffer | November 9, 2023 | |
|
| |
|
|
|
/s/ Todd A. Michel | November | |
Todd A. Michel | Date | |
Senior Vice President, Controller |
Page 4958