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 - March 31,September 30, 2023
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) 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 every Interactive Data File required to be submitted 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 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,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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 May 3,November 6, 2023—15,768,41015,695,997 shares
CIVISTA BANCSHARES, INC.
Index
PART I. |
| 2 |
| |||
Item 1. |
| 2 |
| |||
| Consolidated Balance Sheets (Unaudited) | |||||
2 | ||||||
| Consolidated Statements of |
| ||||
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. |
| |||||
Item 4. |
| |||||
|
|
| ||||
PART II. |
|
|
| |||
Item 1. |
| |||||
Item 1A. |
| |||||
Item 2. |
| |||||
Item 3. |
| |||||
Item 4. |
| |||||
Item 5. |
| |||||
Item 6. |
| |||||
|
|
Part I – Financial Information
ITEM 1. Financial Statements
CIVISTA BANCSHARES, INC.
Consolidated Balance Sheets
(In thousands, except share data)
|
| March 31, 2023 |
|
|
|
|
| September 30, 2023 |
|
|
|
| ||||
|
| (Unaudited) |
|
| December 31, 2022 |
|
| (Unaudited) |
|
| December 31, 2022 |
| ||||
ASSETS |
|
|
|
|
|
|
|
|
|
| ||||||
Cash and due from financial institutions |
| $ | 52,723 |
|
| $ | 43,361 |
|
| $ | 50,316 |
|
| $ | 43,361 |
|
Investments in time deposits |
|
| 1,721 |
|
|
| 1,477 |
|
|
| 1,472 |
|
|
| 1,477 |
|
Securities available-for-sale |
|
| 627,707 |
|
|
| 615,402 |
|
|
| 593,487 |
|
|
| 615,402 |
|
Equity securities |
|
| 2,122 |
|
|
| 2,190 |
|
|
| 2,021 |
|
|
| 2,190 |
|
Loans held for sale |
|
| 1,465 |
|
|
| 683 |
|
|
| 1,589 |
|
|
| 683 |
|
Loans, net of allowance for credit losses of $34,196 and $28,511 |
|
| 2,545,870 |
|
|
| 2,518,155 |
| ||||||||
Loans, net of allowance for credit losses of $35,280 and $28,511 |
|
| 2,719,610 |
|
|
| 2,518,155 |
| ||||||||
Other securities |
|
| 35,383 |
|
|
| 33,585 |
|
|
| 34,224 |
|
|
| 33,585 |
|
Premises and equipment, net |
|
| 61,895 |
|
|
| 64,018 |
|
|
| 58,989 |
|
|
| 64,018 |
|
Accrued interest receivable |
|
| 10,254 |
|
|
| 11,178 |
|
|
| 11,489 |
|
|
| 11,178 |
|
Goodwill |
|
| 125,078 |
|
|
| 125,695 |
|
|
| 125,078 |
|
|
| 125,695 |
|
Other intangible assets, net |
|
| 10,730 |
|
|
| 10,759 |
|
|
| 9,920 |
|
|
| 10,759 |
|
Bank owned life insurance |
|
| 53,796 |
|
|
| 53,543 |
|
|
| 54,053 |
|
|
| 53,543 |
|
Swap assets |
|
| 13,350 |
|
|
| 16,579 |
|
|
| 19,784 |
|
|
| 16,579 |
|
Deferred taxes |
|
| 17,196 |
|
|
| 16,009 |
|
|
| 25,112 |
|
|
| 16,009 |
|
Other assets |
|
| 25,268 |
|
|
| 25,196 |
|
|
| 25,772 |
|
|
| 25,196 |
|
Total assets |
| $ | 3,584,558 |
|
| $ | 3,537,830 |
|
| $ | 3,732,916 |
|
| $ | 3,537,830 |
|
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Deposits |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Noninterest-bearing |
| $ | 938,967 |
|
| $ | 896,333 |
|
| $ | 802,614 |
|
| $ | 896,333 |
|
Interest-bearing |
|
| 1,904,549 |
|
|
| 1,723,651 |
|
|
| 1,993,129 |
|
|
| 1,723,651 |
|
Total deposits |
|
| 2,843,516 |
|
|
| 2,619,984 |
|
|
| 2,795,743 |
|
|
| 2,619,984 |
|
Short-term Federal Home Loan Bank advances |
|
| 212,000 |
|
|
| 393,700 |
|
|
| 431,500 |
|
|
| 393,700 |
|
Securities sold under agreements to repurchase |
|
| 15,631 |
|
|
| 25,143 |
|
|
| - |
|
|
| 25,143 |
|
Long-term Federal Home Loan Bank advances |
|
| 3,361 |
|
|
| 3,578 |
|
|
| 2,573 |
|
|
| 3,578 |
|
Subordinated debentures |
|
| 103,841 |
|
|
| 103,799 |
|
|
| 103,921 |
|
|
| 103,799 |
|
Other borrowings |
|
| 13,938 |
|
|
| 15,516 |
|
|
| 10,964 |
|
|
| 15,516 |
|
Swap liabilities |
|
| 13,350 |
|
|
| 16,579 |
|
|
| 19,784 |
|
|
| 16,579 |
|
Securities purchased payable |
|
| — |
|
|
| 1,338 |
|
|
| 1,755 |
|
|
| 1,338 |
|
Tax refunds in process |
|
| 5,752 |
|
|
| 278 |
|
|
| 493 |
|
|
| 278 |
|
Accrued expenses and other liabilities |
|
| 25,472 |
|
|
| 23,080 |
|
|
| 33,438 |
|
|
| 23,080 |
|
Total liabilities |
|
| 3,236,861 |
|
|
| 3,202,995 |
|
|
| 3,400,171 |
|
|
| 3,202,995 |
|
SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Common shares, no par value, 40,000,000 shares authorized, 19,276,857 shares issued |
|
| 310,412 |
|
|
| 310,182 |
| ||||||||
Common shares, no par value, 40,000,000 shares authorized, 19,288,674 shares issued |
|
| 310,975 |
|
|
| 310,182 |
| ||||||||
Retained earnings |
|
| 161,110 |
|
|
| 156,492 |
|
|
| 176,644 |
|
|
| 156,492 |
|
Treasury shares, 3,508,447 common shares at March 31, 2023 and 3,502,827 common |
|
| (73,915 | ) |
|
| (73,794 | ) | ||||||||
Treasury shares, 3,592,677 common shares at September 30, 2023 and 3,502,827 common |
|
| (75,412 | ) |
|
| (73,794 | ) | ||||||||
Accumulated other comprehensive loss |
|
| (49,910 | ) |
|
| (58,045 | ) |
|
| (79,462 | ) |
|
| (58,045 | ) |
Total shareholders’ equity |
|
| 347,697 |
|
|
| 334,835 |
|
|
| 332,745 |
|
|
| 334,835 |
|
Total liabilities and shareholders’ equity |
| $ | 3,584,558 |
|
| $ | 3,537,830 |
|
| $ | 3,732,916 |
|
| $ | 3,537,830 |
|
See notes to interim unaudited consolidated financial statements
Page 2
CIVISTA BANCSHARES, INC.
Consolidated Statements of Operations (Unaudited)
(In thousands, except per share data)
|
| Three months ended |
|
| Three months ended |
|
| Nine Months Ended |
| |||||||||||||||
|
| March 31, |
|
| September 30, |
|
| September 30, |
| |||||||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||
Interest and dividend income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Loans, including fees |
| $ | 36,398 |
|
| $ | 21,038 |
|
| $ | 39,732 |
|
| $ | 27,176 |
|
| $ | 114,108 |
|
| $ | 70,065 |
|
Taxable securities |
|
| 2,834 |
|
|
| 1,720 |
|
|
| 2,999 |
|
|
| 2,936 |
|
|
| 8,817 |
|
|
| 6,431 |
|
Tax-exempt securities |
|
| 2,262 |
|
|
| 1,789 |
|
|
| 2,336 |
|
|
| 1,998 |
|
|
| 6,917 |
|
|
| 5,669 |
|
Deposits in other banks |
|
| 45 |
|
|
| 119 |
|
|
| 719 |
|
|
| 423 |
|
|
| 818 |
|
|
| 1,098 |
|
Total interest and dividend income |
|
| 41,539 |
|
|
| 24,666 |
|
|
| 45,786 |
|
|
| 32,533 |
|
|
| 130,660 |
|
|
| 83,263 |
|
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Deposits |
|
| 3,232 |
|
|
| 705 |
|
|
| 9,584 |
|
|
| 936 |
|
|
| 20,350 |
|
|
| 2,351 |
|
Federal Home Loan Bank advances |
|
| 4,277 |
|
|
| 190 |
|
|
| 3,261 |
|
|
| 181 |
|
|
| 10,668 |
|
|
| 564 |
|
Subordinated debentures |
|
| 1,169 |
|
|
| 836 |
|
|
| 1,239 |
|
|
| 975 |
|
|
| 3,606 |
|
|
| 2,701 |
|
Securities sold under agreements to repurchase and other |
|
| 260 |
|
|
| 3 |
|
|
| 198 |
|
|
| 2 |
|
|
| 592 |
|
|
| 8 |
|
Total interest expense |
|
| 8,938 |
|
|
| 1,734 |
|
|
| 14,282 |
|
|
| 2,094 |
|
|
| 35,216 |
|
|
| 5,624 |
|
Net interest income |
|
| 32,601 |
|
|
| 22,932 |
|
|
| 31,504 |
|
|
| 30,439 |
|
|
| 95,444 |
|
|
| 77,639 |
|
Provision for credit losses |
|
| 620 |
|
|
| 300 |
|
|
| 630 |
|
|
| 300 |
|
|
| 2,111 |
|
|
| 1,000 |
|
Net interest income after provision for loan losses |
|
| 31,981 |
|
|
| 22,632 |
|
|
| 30,874 |
|
|
| 30,139 |
|
|
| 93,333 |
|
|
| 76,639 |
|
Noninterest income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Service charges |
|
| 1,773 |
|
|
| 1,579 |
|
|
| 1,853 |
|
|
| 1,885 |
|
|
| 5,457 |
|
|
| 5,004 |
|
Net gain on sale of securities |
|
| — |
|
|
| 4 |
|
|
| — |
|
|
| 10 |
| ||||||||
Net gain (loss) on equity securities |
|
| (68 | ) |
|
| 50 |
|
|
| 69 |
|
|
| (133 | ) |
|
| (169 | ) |
|
| (44 | ) |
Net gain on sale of loans |
|
| 631 |
|
|
| 936 |
| ||||||||||||||||
Net gain on sale of loans and leases |
|
| 787 |
|
|
| 637 |
|
|
| 2,033 |
|
|
| 2,146 |
| ||||||||
ATM/Interchange fees |
|
| 1,353 |
|
|
| 1,241 |
|
|
| 1,424 |
|
|
| 1,394 |
|
|
| 4,227 |
|
|
| 3,990 |
|
Wealth management fees |
|
| 1,193 |
|
|
| 1,277 |
|
|
| 1,197 |
|
|
| 1,208 |
|
|
| 3,570 |
|
|
| 3,713 |
|
Lease revenue and residual income |
|
| 2,046 |
|
|
| — |
|
|
| 1,913 |
|
|
| — |
|
|
| 6,160 |
|
|
| — |
|
Bank owned life insurance |
|
| 253 |
|
|
| 244 |
|
|
| 266 |
|
|
| 255 |
|
|
| 830 |
|
|
| 732 |
|
Tax refund processing fees |
|
| 1,900 |
|
|
| 1,900 |
|
|
| — |
|
|
| — |
|
|
| 2,375 |
|
|
| 2,375 |
|
Swap fees |
|
| 61 |
|
|
| — |
|
|
| 21 |
|
|
| — |
|
|
| 198 |
|
|
| — |
|
Other |
|
| 1,926 |
|
|
| 416 |
|
|
| 595 |
|
|
| 484 |
|
|
| 3,661 |
|
|
| 1,086 |
|
Total noninterest income |
|
| 11,068 |
|
|
| 7,643 |
|
|
| 8,125 |
|
|
| 5,734 |
|
|
| 28,342 |
|
|
| 19,012 |
|
Noninterest expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Compensation expense |
|
| 15,105 |
|
|
| 12,223 |
|
|
| 14,054 |
|
|
| 12,484 |
|
|
| 44,137 |
|
|
| 36,654 |
|
Net occupancy expense |
|
| 1,359 |
|
|
| 1,150 |
|
|
| 1,368 |
|
|
| 1,252 |
|
|
| 4,096 |
|
|
| 3,428 |
|
Equipment expense |
|
| 2,761 |
|
|
| 495 |
|
|
| 2,687 |
|
|
| 637 |
|
|
| 8,214 |
|
|
| 1,694 |
|
Contracted data processing |
|
| 520 |
|
|
| 620 |
|
|
| 651 |
|
|
| 846 |
|
|
| 1,730 |
|
|
| 1,899 |
|
FDIC assessment |
|
| 248 |
|
|
| 203 |
|
|
| 438 |
|
|
| 170 |
|
|
| 1,215 |
|
|
| 568 |
|
State franchise tax |
|
| 526 |
|
|
| 591 |
|
|
| 590 |
|
|
| 629 |
|
|
| 1,770 |
|
|
| 1,848 |
|
Professional services |
|
| 1,555 |
|
|
| 1,049 |
|
|
| 1,010 |
|
|
| 1,335 |
|
|
| 3,804 |
|
|
| 3,593 |
|
Amortization of intangible assets |
|
| 398 |
|
|
| 217 |
|
|
| 398 |
|
|
| 456 |
|
|
| 1,195 |
|
|
| 890 |
|
ATM/Interchange expense |
|
| 580 |
|
|
| 513 |
|
|
| 619 |
|
|
| 604 |
|
|
| 1,814 |
|
|
| 1,659 |
|
Marketing |
|
| 505 |
|
|
| 317 |
|
|
| 497 |
|
|
| 372 |
|
|
| 1,542 |
|
|
| 1,069 |
|
Software maintenance expense |
|
| 878 |
|
|
| 708 |
|
|
| 1,052 |
|
|
| 942 |
|
|
| 2,989 |
|
|
| 2,440 |
|
Other operating expenses |
|
| 3,198 |
|
|
| 2,172 |
|
|
| 3,388 |
|
|
| 2,828 |
|
|
| 9,792 |
|
|
| 7,450 |
|
Total noninterest expense |
|
| 27,633 |
|
|
| 20,258 |
|
|
| 26,752 |
|
|
| 22,555 |
|
|
| 82,298 |
|
|
| 63,192 |
|
Income before taxes |
|
| 15,416 |
|
|
| 10,017 |
|
|
| 12,247 |
|
|
| 13,318 |
|
|
| 39,377 |
|
|
| 32,459 |
|
Income tax expense |
|
| 2,528 |
|
|
| 1,551 |
|
|
| 1,860 |
|
|
| 2,206 |
|
|
| 6,068 |
|
|
| 5,180 |
|
Net Income |
| $ | 12,888 |
|
| $ | 8,466 |
|
| $ | 10,387 |
|
| $ | 11,112 |
|
| $ | 33,309 |
|
| $ | 27,279 |
|
Earnings per common share, basic |
| $ | 0.82 |
|
| $ | 0.57 |
|
| $ | 0.66 |
|
| $ | 0.72 |
|
| $ | 2.12 |
|
| $ | 1.82 |
|
Earnings per common share, diluted |
| $ | 0.82 |
|
| $ | 0.57 |
|
| $ | 0.66 |
|
| $ | 0.72 |
|
| $ | 2.12 |
|
| $ | 1.82 |
|
See notes to interim unaudited consolidated financial statements
Page 3
CIVISTA BANCSHARES, INC.
Consolidated Statements of Comprehensive Income (Loss) (Unaudited)
(In thousands)
|
| Three Months Ended |
|
| Three Months Ended |
|
| Nine Months Ended |
| |||||||||||||||
|
| March 31, |
|
| September 30, |
|
| September 30, |
| |||||||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||
Net income |
| $ | 12,888 |
|
| $ | 8,466 |
|
| $ | 10,387 |
|
| $ | 11,112 |
|
| $ | 33,309 |
|
| $ | 27,279 |
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Unrealized holding gains (losses) on available-for-sale securities |
|
| 10,302 |
|
|
| (37,446 | ) | ||||||||||||||||
Unrealized holding (losses) on available-for-sale securities |
|
| (30,058 | ) |
|
| (29,926 | ) |
|
| (27,217 | ) |
|
| (99,837 | ) | ||||||||
Tax effect |
|
| (2,167 | ) |
|
| 7,882 |
|
|
| 6,366 |
|
|
| 6,300 |
|
|
| 5,800 |
|
|
| 21,043 |
|
Reclassification of gains recognized in net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (4 | ) |
|
| — |
|
|
| (10 | ) |
Tax effect |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2 |
|
Pension liability adjustment |
|
| — |
|
|
| 69 |
|
|
| — |
|
|
| 69 |
|
|
| — |
|
|
| 208 |
|
Tax effect |
|
| — |
|
|
| (14 | ) |
|
| — |
|
|
| (15 | ) |
|
| — |
|
|
| (44 | ) |
Total other comprehensive income (loss)loss |
|
| 8,135 |
|
|
| (29,509 | ) | ||||||||||||||||
Total other comprehensive (loss) |
|
| (23,692 | ) |
|
| (23,576 | ) |
|
| (21,417 | ) |
|
| (78,638 | ) | ||||||||
Comprehensive income (loss) |
| $ | 21,023 |
|
| $ | (21,043 | ) |
| $ | (13,305 | ) |
| $ | (12,464 | ) |
| $ | 11,892 |
|
| $ | (51,359 | ) |
See notes to interim unaudited consolidated financial statements
Page 4
CIVISTA BANCSHARES, INC.
(In thousands, except share data)
|
| Common Shares |
|
|
|
|
|
|
|
| Accumulated |
|
| Total |
|
| Common Shares |
|
|
|
|
|
|
|
| Accumulated |
|
| Total |
| ||||||||||||||||||
|
| Outstanding |
|
| Amount |
|
| Retained |
|
| Treasury |
|
| Comprehensive |
|
| Shareholders’ |
|
| 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 |
| ||||||||||||||||||||||||
Balance, June 30, 2023 |
|
| 15,780,227 |
|
| $ | 310,784 |
|
| $ | 168,777 |
|
| $ | (73,915 | ) |
| $ | (55,770 | ) |
| $ | 349,876 |
| ||||||||||||||||||||||||
Net Income |
|
| — |
|
|
| — |
|
|
| 12,888 |
|
|
| — |
|
|
| — |
|
|
| 12,888 |
|
|
| — |
|
|
| — |
|
|
| 10,387 |
|
|
| — |
|
|
| — |
|
|
| 10,387 |
|
Other comprehensive loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 8,135 |
|
|
| 8,135 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (23,692 | ) |
|
| (23,692 | ) |
Stock-based compensation |
|
| 45,796 |
|
|
| 230 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 230 |
|
|
| (84,230 | ) |
|
| 191 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 191 |
|
Common stock dividends |
|
| — |
|
|
| — |
|
|
| (2,201 | ) |
|
| — |
|
|
| — |
|
|
| (2,201 | ) | ||||||||||||||||||||||||
Common stock dividends |
|
| — |
|
|
| — |
|
|
| (2,520 | ) |
|
| — |
|
|
| — |
|
|
| (2,520 | ) | ||||||||||||||||||||||||
Purchase of common stock |
|
| (5,620 | ) |
|
| — |
|
|
| — |
|
|
| (121 | ) |
|
| — |
|
|
| (121 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,497 | ) |
|
| — |
|
|
| (1,497 | ) |
Balance, March 31, 2023 |
|
| 15,768,410 |
|
| $ | 310,412 |
|
| $ | 161,110 |
|
| $ | (73,915 | ) |
| $ | (49,910 | ) |
| $ | 347,697 |
| ||||||||||||||||||||||||
Balance, September 30, 2023 |
|
| 15,695,997 |
|
| $ | 310,975 |
|
| $ | 176,644 |
|
| $ | (75,412 | ) |
| $ | (79,462 | ) |
| $ | 332,745 |
| ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
|
| Common Shares |
|
|
|
|
|
|
|
| Accumulated |
|
| Total |
|
| Common Shares |
|
|
|
|
|
|
|
| Accumulated |
|
| Total |
| ||||||||||||||||||
|
| Outstanding |
|
| Amount |
|
| Retained |
|
| Treasury |
|
| Comprehensive |
|
| Shareholders’ |
|
| Outstanding |
|
| Amount |
|
| Retained |
|
| Treasury |
|
| Comprehensive |
|
| Shareholders’ |
| ||||||||||||
Balance, December 31, 2021 |
|
| 14,954,200 |
|
| $ | 277,741 |
|
| $ | 125,558 |
|
| $ | (56,907 | ) |
| $ | 8,820 |
|
| $ | 355,212 |
| ||||||||||||||||||||||||
Balance, June 30, 2022 |
|
| 14,537,433 |
|
| $ | 278,240 |
|
| $ | 137,592 |
|
| $ | (67,528 | ) |
| $ | (46,242 | ) |
| $ | 302,062 |
| ||||||||||||||||||||||||
Net Income |
|
| — |
|
|
| — |
|
|
| 8,466 |
|
|
| — |
|
|
| — |
|
|
| 8,466 |
|
|
| — |
|
|
| — |
|
|
| 11,112 |
|
|
| — |
|
|
| — |
|
|
| 11,112 |
|
Other comprehensive loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (29,509 | ) |
|
| (29,509 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (23,576 | ) |
|
| (23,576 | ) |
Stock-based compensation |
|
| 31,774 |
|
|
| 178 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 178 |
|
|
| — |
|
|
| 153 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 153 |
|
Stock issued for acquisition of Comunibanc Corp. |
|
| 984,723 |
|
|
| 21,122 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 21,122 |
| ||||||||||||||||||||||||
Common stock dividends |
|
| — |
|
|
| — |
|
|
| (2,090 | ) |
|
| — |
|
|
| — |
|
|
| (2,090 | ) |
|
| — |
|
|
| — |
|
|
| (2,158 | ) |
|
| — |
|
|
| — |
|
|
| (2,158 | ) |
Purchase of common stock |
|
| (188,760 | ) |
|
| — |
|
|
| — |
|
|
| (4,565 | ) |
|
| — |
|
|
| (4,565 | ) |
|
| (286,611 | ) |
|
| — |
|
|
| — |
|
|
| (6,113 | ) |
|
| — |
|
|
| (6,113 | ) |
Balance, March 31, 2022 |
|
| 14,797,214 |
|
| $ | 277,919 |
|
| $ | 131,934 |
|
| $ | (61,472 | ) |
| $ | (20,689 | ) |
| $ | 327,692 |
| ||||||||||||||||||||||||
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 |
|
See notes to interim unaudited consolidated financial statements
Page 6
CIVISTA BANCSHARES, INC.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
|
| Three Months Ended March 31, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Net cash provided by operating activities |
| $ | 19,794 |
|
| $ | 9,114 |
|
| $ | 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 |
|
| 4,980 |
|
|
| 16,731 |
|
|
| 7,907 |
|
|
| 36,910 |
|
Purchases of securities, available-for-sale |
|
| (7,179 | ) |
|
| (47,156 | ) |
|
| (13,241 | ) |
|
| (117,974 | ) |
Proceeds from sale of securities available-for-sale |
|
| — |
|
|
| 57,322 |
| ||||||||
Purchase of other securities |
|
| (9,126 | ) |
|
| (1,500 | ) |
|
| (27,890 | ) |
|
| (1,606 | ) |
Redemption of other securities |
|
| 7,328 |
|
|
| — |
|
|
| 27,251 |
|
|
| 1,592 |
|
Purchase of equity securities |
|
| — |
|
|
| (1,000 | ) | ||||||||
Net change in loans |
|
| (34,085 | ) |
|
| (18,809 | ) |
|
| (208,689 | ) |
|
| (158,909 | ) |
Proceeds from sale of premises and equipment |
|
| 692 |
|
|
| — |
| ||||||||
Acquisition, net of cash acquired |
|
| — |
|
|
| (21,870 | ) | ||||||||
Premises and equipment purchases |
|
| (1,245 | ) |
|
| (138 | ) |
|
| (2,164 | ) |
|
| (3,208 | ) |
Net cash used for investing activities |
|
| (38,635 | ) |
|
| (50,872 | ) |
|
| (216,826 | ) |
|
| (207,756 | ) |
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Repayment of long-term FHLB advances |
|
| (217 | ) |
|
| — |
|
|
| (1,005 | ) |
|
| (89,983 | ) |
Net change in short-term FHLB advances |
|
| (181,700 | ) |
|
| — |
|
|
| 37,800 |
|
|
| 55,000 |
|
Repayment of other borrowings |
|
| (1,578 | ) |
|
| — |
|
|
| (15,516 | ) |
|
| — |
|
Increase in deposits |
|
| 223,532 |
|
|
| 198,436 |
|
|
| 175,758 |
|
|
| 20,358 |
|
Decrease in securities sold under repurchase agreements |
|
| (9,512 | ) |
|
| (1,564 | ) |
|
| (25,143 | ) |
|
| (5,340 | ) |
Purchase of treasury shares |
|
| (121 | ) |
|
| (4,565 | ) |
|
| (1,618 | ) |
|
| (16,734 | ) |
Common dividends paid |
|
| (2,201 | ) |
|
| (2,090 | ) |
|
| (7,088 | ) |
|
| (6,291 | ) |
Net cash provided by financing activities |
|
| 28,203 |
|
|
| 190,217 |
| ||||||||
Increasein cash and cash equivalents |
|
| 9,362 |
|
|
| 148,459 |
| ||||||||
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 |
|
|
| 43,361 |
|
|
| 264,239 |
|
Cash and cash equivalents at end of period |
| $ | 52,723 |
|
| $ | 412,698 |
|
| $ | 50,316 |
|
| $ | 40,914 |
|
Cash paid during the period for: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest |
| $ | 1,628 |
|
| $ | 570 |
|
| $ | 26,393 |
|
| $ | 4,969 |
|
Income taxes |
|
| 10 |
|
|
| — |
|
|
| 7,333 |
|
|
| 3,737 |
|
Supplemental cash flow information: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Transfer of loans from portfolio to other real estate owned |
|
| 26 |
|
|
| — |
| ||||||||
Change in fair value of swap asset |
|
| 3,229 |
|
|
| 4,220 |
|
|
| (3,205 | ) |
|
| (7,376 | ) |
Change in fair value of swap liability |
|
| (3,229 | ) |
|
| (4,220 | ) |
|
| 3,205 |
|
|
| 7,376 |
|
Securities purchased not settled |
|
| — |
|
|
| 1,876 |
|
|
| 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 67
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), Vision Financial Group, Inc. (VFG), First Citizens Insurance Agency, Inc. (FCIA), Water Street Properties, Inc. (Water St.), CIVB Risk Management, Inc. (CRMI) and First Citizens Investments, Inc. (FCI).
Civista 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, 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. Financial instruments that potentially represent concentrations of credit risk include deposit accounts in other financial institutions that are in excess of federally insured limits. In October of 2022, Civista also engagesacquired Vision Financial Group (VFG) as a wholly-owned subsidiary engaging in a general equipment leasing and financing, business through its wholly-owned subsidiary, VFG, which was acquired in October 2022 and is 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 March 31,September 30, 2023 and its results of operations and changes in cash flows for the periods ended March 31,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 March 31,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 Credit 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. Topic 326ASU 2016-13 eliminates the probable initial recognition threshold in current GAAPpreviously 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 credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net amount expected to be collected. ASU 2016-13 also expands the disclosure requirements regarding an entity’s assumptions, models, and 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.
Page 78
Civista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
The Company adopted ASCAccounting 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 PCD that were previously classified as PCIpurchased 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 purchased credit-impairedPCI 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 wereare 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 RelaReal Estate, Real Estate Construction, Farm Real Estate, Lease Financing Receivable and Consumer and Other Loans.
The allowance for credit losses for Pooled Loans estimate 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 DCFdiscounted cash flow (DCF) method to estimate the quantitative portion of the allowance for credit losses for loans evaluated inon 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 analysis 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 FOMC.the Federal Open Market Committee (FOMC). Other key assumptions include the PD, LGD,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 89
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 through 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 its 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 considers 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 fair 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 reported in our income statement as a component of credit loss expense. AFS securities are charged-off against the allowance or, in the 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.
Page 9
Civista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
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, and 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)Consolidated Balance Sheets), with adjustments to the reserve recognized as a provision for credit loss expense in the consolidated statementsConsolidated Statements of income.Operations. The Unfunded Reserve is determined by estimating expected future fundings, under each segment, and applying the expected loss rates. Expected future fundings over itsthe 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 statementsConsolidated 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 affected 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.
Adoption of New Accounting Standards:
In June 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). The ASU introduces a new credit loss methodology, Current Expected Credit Losses (“CECL”),CECL, which requires earlier recognition of credit losses, while also providing additional transparency about credit risk. Since its original issuance in 2016, the FASB has issued several updates to the original ASU.
Page 10
Civista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
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 receivables at the time the financial asset is originated or acquired. The expected credit losses are adjusted each period for changes in expected lifetime credit losses. The methodology replaces the multiple existing impairment methods in current Generally Accepted Accounting Principles (“GAAP”),under prior GAAP, which generally require that a loss be 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 and 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 reported under the old 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 on 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 ("PCD") on purchased credit-impaired (PCI)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. The “Day 1” impact of CECL adoption is summarized below:
CECL Adoption |
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| Impact of |
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| CECL Adoption |
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| Adopting ASC 326 - |
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| December 31, 2022 |
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| Impact |
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| PCD Loans |
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| January 1, 2023 |
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Allowance for Credit Losses: |
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Commercial & Agriculture |
| $ | 3,011 |
|
| $ | 429 |
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| $ | 390 |
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| $ | 3,830 |
|
Commercial Real Estate: |
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| ||||
Owner Occupied |
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| 4,565 |
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|
| 1,075 |
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|
| 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 |
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| 2,293 |
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|
| 1,502 |
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|
| — |
|
|
| 3,795 |
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Farm Real Estate |
|
| 291 |
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|
| (28 | ) |
|
| — |
|
|
| 263 |
|
Lease Financing Receivable |
|
| 429 |
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|
| 1,743 |
|
|
| 635 |
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|
| 2,807 |
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Consumer and Other |
|
| 98 |
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|
| 201 |
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|
| 78 |
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|
| 377 |
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Unallocated |
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| 541 |
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|
| (541 | ) |
|
| — |
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|
| — |
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Total Allowance for Credit Losses |
| $ | 28,511 |
|
| $ | 4,296 |
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| $ | 1,668 |
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| $ | 34,475 |
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Reserve for Unfunded Commitments |
|
| — |
|
|
| 3,386 |
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|
| — |
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|
| 3,386 |
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Total Reserve for Credit Losses |
| $ | 28,511 |
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| $ | 7,682 |
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| $ | 1,668 |
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| $ | 37,861 |
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Retained Earnings |
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Total Pre-tax Impact |
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| $ | (7,682 | ) |
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Tax Effect |
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| 1,613 |
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Decrease to Retained Earnings |
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| $ | (6,069 | ) |
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The Company did not record an allowance for available-for-sale securities on Day 1 as the investment portfolio consists primarily of debt securities explicitly or implicitly backed by the U.S. Government for which credit risk is deemed minimal. The impact going forward will depend on the composition, characteristics, and credit quality of the securities portfolio as well as the economic conditions at future reporting periods.
Page 11
Civista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
On January 1, 2023, the Company 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 an SEC filer, such 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. In 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 were eligible to be smaller reporting companies as of November 15, 2019, such as the Company, to fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. The adoption of the ASU provisions did not have a significant impact on the Company's consolidated financial statements.Consolidated Financial Statements.
Page 12
Civista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
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"). The 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 adoption of the ASU 2022-02 provisions did not have a significant impact on the Company’s consolidated financial statements.Consolidated Financial Statements.
Effect of Newly Issued but Not Yet Effective Accounting Standards:
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The Update is designed to provide relief from the accounting analysis and impacts that may 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 hedge accounting to certain hedging relationships impacted by reference rate reform. The amendments in this Update are effective for all entities as of March 12, 2020 through December 31, 2022; however, a deferral of the implementation of reference rate reform was issued in December of 2022, which extends the implementation to December 31, 2024. The Company is working through this transition via a multi-disciplinary project team. We are still evaluating the impact the change from LIBOR to a benchmark like SOFR or Prime Rate will have on our financial condition, results of operations or cash flows.
Other recent ASU’s issued by the FASB did not, or are not believed by management to have, a material effect on the Company’s present or future Consolidated Financial Statements.
(3) Securities
The amortized cost and fair market value of available-for-sale securities and the related gross unrealized gains and losses recognized were as follows:
March 31, 2023 |
| Amortized |
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| Gross |
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| Gross |
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| Fair Value |
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U.S. Treasury securities and obligations of U.S. government |
| $ | 66,781 |
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| $ | 22 |
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| $ | (4,290 | ) |
| $ | 62,513 |
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Obligations of states and political subdivisions |
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| 356,250 |
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| 1,902 |
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| (27,514 | ) |
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| 330,638 |
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Mortgage-backed securities in government sponsored entities |
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| 261,324 |
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| 24 |
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| (26,792 | ) |
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| 234,556 |
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Total debt securities |
| $ | 684,355 |
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| $ | 1,948 |
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| $ | (58,596 | ) |
| $ | 627,707 |
|
Page 12
Civista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
September 30, 2023 |
| Amortized |
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| Gross |
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| Gross |
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| Fair Value |
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U.S. Treasury securities and obligations of U.S. government |
| $ | 77,081 |
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| $ | 192 |
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| $ | (5,978 | ) |
| $ | 71,295 |
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Obligations of states and political subdivisions |
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| 360,019 |
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| 45 |
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| (49,529 | ) |
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| 310,535 |
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Mortgage-backed securities in government sponsored entities |
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| 250,503 |
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| 5 |
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| (38,851 | ) |
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| 211,657 |
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Total debt securities |
| $ | 687,603 |
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| $ | 242 |
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| $ | (94,358 | ) |
| $ | 593,487 |
|
December 31, 2022 |
| Amortized |
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| Gross |
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| Gross |
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| Fair Value |
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U.S. Treasury securities and obligations of U.S. government |
| $ | 66,495 |
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| $ | 20 |
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| $ | (5,486 | ) |
| $ | 61,029 |
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Obligations of states and political subdivisions |
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| 350,104 |
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| 784 |
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| (33,640 | ) |
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| 317,248 |
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Mortgage-backed securities in government sponsored entities |
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| 265,752 |
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| 15 |
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| (28,642 | ) |
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| 237,125 |
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Total debt securities |
| $ | 682,351 |
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| $ | 819 |
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| $ | (67,768 | ) |
| $ | 615,402 |
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The amortized cost and fair value of securities at March 31,September 30, 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, are shown separately.
Available for sale |
| Amortized |
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| Fair |
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| Amortized |
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| Fair |
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Due in one year or less |
| $ | 6,449 |
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| $ | 6,299 |
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| $ | 6,195 |
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| $ | 6,149 |
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Due after one year through five years |
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| 50,074 |
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| 47,145 |
|
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| 76,198 |
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|
| 69,124 |
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Due after five years through ten years |
|
| 66,175 |
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|
| 62,011 |
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| 38,390 |
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|
| 35,162 |
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Due after ten years |
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| 300,333 |
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| 277,696 |
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| 316,317 |
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| 271,395 |
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Mortgage-backed securities |
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| 261,324 |
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| 234,556 |
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| 250,503 |
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| 211,657 |
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Total securities available-for-sale |
| $ | 684,355 |
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| $ | 627,707 |
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| $ | 687,603 |
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| $ | 593,487 |
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At March 31, 2023 and March 31, 2022 there were Page 13
noCivista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
proceeds
Proceeds from sales of securities available-for-sale, gross realizedunrealized gains and gross realized losses.losses were as follows:
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| Three Months Ended |
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| Nine Months Ended |
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| September 30, |
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| September 30, |
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| 2023 |
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| 2022 |
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| 2023 |
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| 2022 |
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Sale proceeds |
| $ | — |
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| $ | 57,322 |
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| $ | — |
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| $ | 57,322 |
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Gross realized gains |
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| — |
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| — |
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| — |
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| — |
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Gross realized losses |
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| — |
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| — |
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| — |
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|
| — |
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Gains (losses) from securities called or settled by the issuer |
|
| — |
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|
| 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 $238,726210,369 and $218,344 as of March 31,September 30, 2023 and December 31, 2022, respectively.
The 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 March 31,September 30, 2023 and December 31, 2022:
March 31, 2023 |
| 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 |
|
| Unrealized |
|
| Fair |
|
| Unrealized |
|
| Fair |
|
| Unrealized |
|
| Fair |
|
| Unrealized |
|
| Fair |
|
| Unrealized |
|
| Fair |
|
| Unrealized |
| ||||||||||||
U.S. Treasury securities and obligations of |
| $ | 20,129 |
|
| $ | (482 | ) |
| $ | 41,506 |
|
| $ | (3,808 | ) |
| $ | 61,635 |
|
| $ | (4,290 | ) |
| $ | 715 |
|
| $ | (3 | ) |
| $ | 59,404 |
|
| $ | (5,975 | ) |
| $ | 60,119 |
|
| $ | (5,978 | ) |
Obligations of states and political subdivisions |
|
| 55,169 |
|
|
| (620 | ) |
|
| 148,004 |
|
|
| (26,894 | ) |
|
| 203,173 |
|
|
| (27,514 | ) |
|
| 143,524 |
|
|
| (7,518 | ) |
|
| 155,603 |
|
|
| (42,011 | ) |
|
| 299,127 |
|
|
| (49,529 | ) |
Mortgage-backed securities in gov’t sponsored entities |
|
| 91,267 |
|
|
| (2,381 | ) |
|
| 139,927 |
|
|
| (24,411 | ) |
|
| 231,194 |
|
|
| (26,792 | ) |
|
| 21,364 |
|
|
| (1,784 | ) |
|
| 189,711 |
|
|
| (37,067 | ) |
|
| 211,075 |
|
|
| (38,851 | ) |
Total temporarily impaired |
| $ | 166,565 |
|
| $ | (3,483 | ) |
| $ | 329,437 |
|
| $ | (55,113 | ) |
| $ | 496,002 |
|
| $ | (58,596 | ) |
| $ | 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 | ) |
Page 13
Civista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
At March 31,September 30, 2023, there were a total of 413574 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 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.
The following table presents the net gains and losses on equity investments recognized in earnings for the three monthsthree- and nine-months ended March 31,September 30, 2023 and 2022 and the portion of unrealized gains and losses for the period that relates to equity investments held at March 31,September 30, 2023 and 2022:
|
| Three Months Ended March 31, |
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| |||||||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||
Net gains (losses) recognized on equity securities |
| $ | (68 | ) |
| $ | 50 |
|
| $ | 69 |
|
| $ | (133 | ) |
| $ | (169 | ) |
| $ | (44 | ) |
Less: Net losses realized on the sale of |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Unrealized gains (losses) recognized on equity |
| $ | (68 | ) |
| $ | 50 |
|
| $ | 69 |
|
| $ | (133 | ) |
| $ | (169 | ) |
| $ | (44 | ) |
Page 14
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:
|
| March 31, 2023 |
|
| December 31, 2022 |
|
| September 30, 2023 |
|
| December 31, 2022 |
| ||||
Commercial & Agriculture |
| $ | 271,160 |
|
| $ | 278,595 |
|
| $ | 301,877 |
|
| $ | 278,595 |
|
Commercial Real Estate- Owner Occupied |
|
| 375,825 |
|
|
| 371,147 |
|
|
| 375,851 |
|
|
| 371,147 |
|
Commercial Real Estate- Non-Owner Occupied |
|
| 1,043,635 |
|
|
| 1,018,736 |
|
|
| 1,102,932 |
|
|
| 1,018,736 |
|
Residential Real Estate |
|
| 560,978 |
|
|
| 552,781 |
|
|
| 614,304 |
|
|
| 552,781 |
|
Real Estate Construction |
|
| 247,253 |
|
|
| 243,127 |
|
|
| 269,291 |
|
|
| 243,127 |
|
Farm Real Estate |
|
| 24,040 |
|
|
| 24,708 |
|
|
| 24,109 |
|
|
| 24,708 |
|
Lease Financing Receivable |
|
| 37,570 |
|
|
| 36,797 |
|
|
| 48,259 |
|
|
| 36,797 |
|
Consumer and Other |
|
| 19,605 |
|
|
| 20,775 |
|
|
| 18,267 |
|
|
| 20,775 |
|
Total loans |
|
| 2,580,066 |
|
|
| 2,546,666 |
|
|
| 2,754,890 |
|
|
| 2,546,666 |
|
Allowance for credit losses |
|
| (34,196 | ) |
|
| (28,511 | ) |
|
| (35,280 | ) |
|
| (28,511 | ) |
Net loans |
| $ | 2,545,870 |
|
| $ | 2,518,155 |
|
| $ | 2,719,610 |
|
| $ | 2,518,155 |
|
Included in Commercial & Agriculture loans above are $464399 and $566 of Paycheck Protection Program (“PPP”) loans as of March 31,September 30, 2023 and December 31, 2022, respectively.
Included in total loans above are net deferred loan fees of $2,0662,542 and $1,652 at March 31,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 March 31,September 30, 2023 and December 31, 2022, accrued interest receivable totaled $10,25411,489 and $11,178, respectively, and is included in the accrued interest receivable line item on the Company's Consolidated Balance Sheet.
Page 14
Civista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
(5) Allowance for Credit Losses
As 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 for estimating the ACL since December 31, 2022. As a result of this adoption, the Company recorded a $5,193 increase to the ACL as a cumulative-effect adjustment on January 1, 2023.
The following tables present,table presents, by portfolio segment, the changes in the ACL for the three monthsthree- and nine-months ended March 31, 2023.September 30, 2023 and 2022.
Allowance for credit losses:
For the three months ended March 31, 2023 |
| Beginning balance |
|
| CECL Adoption Day 1 Impact |
|
| Impact of Adopting ASC 326 - PCD Loans 1 |
|
| Charge-offs |
|
| Recoveries |
|
| Provision |
|
| Ending Balance |
| |||||||||||||||||||||||||||
For the three months ended September 30, 2023 |
| Beginning balance |
|
| Charge-offs |
|
| Recoveries |
|
| Provision |
|
| Ending Balance |
| |||||||||||||||||||||||||||||||||
Commercial & Agriculture |
| $ | 3,011 |
|
| $ | 429 |
|
| $ | — |
|
| $ | (140 | ) |
| $ | 6 |
|
| $ | 10 |
|
| $ | 3,316 |
|
| $ | 5,540 |
|
| $ | (614 | ) |
| $ | 84 |
|
| $ | 146 |
|
| $ | 5,156 |
|
Commercial Real Estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Owner Occupied |
|
| 4,565 |
|
|
| 1,075 |
|
|
| 19 |
|
|
| — |
|
|
| — |
|
|
| 74 |
|
|
| 5,733 |
|
|
| 5,531 |
|
|
| — |
|
|
| — |
|
|
| (50 | ) |
|
| 5,481 |
|
Non-Owner Occupied |
|
| 14,138 |
|
|
| (2,847 | ) |
|
| — |
|
|
| — |
|
|
| 7 |
|
|
| 462 |
|
|
| 11,760 |
|
|
| 11,646 |
|
|
| — |
|
|
| 9 |
|
|
| (100 | ) |
|
| 11,555 |
|
Residential Real Estate |
|
| 3,145 |
|
|
| 2,762 |
|
|
| 166 |
|
|
| (10 | ) |
|
| 22 |
|
|
| (151 | ) |
|
| 5,934 |
|
|
| 6,515 |
|
|
| (1 | ) |
|
| 64 |
|
|
| 253 |
|
|
| 6,831 |
|
Real Estate Construction |
|
| 2,293 |
|
|
| 1,502 |
|
|
| — |
|
|
| — |
|
|
| 4 |
|
|
| 121 |
|
|
| 3,920 |
|
|
| 3,447 |
|
|
| — |
|
|
| 4 |
|
|
| 288 |
|
|
| 3,739 |
|
Farm Real Estate |
|
| 291 |
|
|
| (28 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 6 |
|
|
| 269 |
|
|
| 243 |
|
|
| — |
|
|
| — |
|
|
| (16 | ) |
|
| 227 |
|
Lease Financing Receivables |
|
| 429 |
|
|
| 1,743 |
|
|
| 635 |
|
|
| — |
|
|
| — |
|
|
| 100 |
|
|
| 2,907 |
|
|
| 1,947 |
|
|
| — |
|
|
| — |
|
|
| (115 | ) |
|
| 1,832 |
|
Consumer and Other |
|
| 98 |
|
|
| 201 |
|
|
| 77 |
|
|
| (25 | ) |
|
| 8 |
|
|
| (5 | ) |
|
| 354 |
|
|
| 272 |
|
|
| (51 | ) |
|
| 6 |
|
|
| 21 |
|
|
| 248 |
|
Unallocated |
|
| 541 |
|
|
| (541 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3 |
|
|
| 3 |
|
|
| 8 |
|
|
| — |
|
|
| — |
|
|
| 203 |
|
|
| 211 |
|
Total |
| $ | 28,511 |
|
| $ | 4,296 |
|
| $ | 897 |
|
| $ | (175 | ) |
| $ | 47 |
|
| $ | 620 |
|
| $ | 34,196 |
|
| $ | 35,149 |
|
| $ | (666 | ) |
| $ | 167 |
|
| $ | 630 |
|
| $ | 35,280 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
1 Day 1 impact of $1,668, of adopting ASC 326-PCD loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended March 31, 2023, the Company provided $620 to the allowance for credit losses, as compared to a provision of $300 for the three months ended March 31, 2022. Upon adoption of CECL we recorded an increase in the allowance for credit losses of $5,193. The increase in the reserves was principally related to loan growth during the quarter.
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, 2023, the Company provided $630 to the allowance for credit losses, as compared to a provision of $300 for the three months ended September 30, 2022. The increase in the reserves was principally related to loan growth during the quarter.
Allowance for credit losses:
For the three months ended March 31, 2022 |
| Beginning balance |
|
| Charge-offs |
|
| Recoveries |
|
| Provision |
|
| Ending Balance |
| |||||||||||||||||||||||||
For the three months ended September 30, 2022 |
| Beginning balance |
|
| Charge-offs |
|
| Recoveries |
|
| Provision |
|
| Ending Balance |
| |||||||||||||||||||||||||
Commercial & Agriculture |
| $ | 2,600 |
|
| $ | — |
|
| $ | 1 |
|
| $ | (17 | ) |
| $ | 2,584 |
|
| $ | 2,790 |
|
| $ | (22 | ) |
| $ | 12 |
|
| $ | (51 | ) |
| $ | 2,729 |
|
Commercial Real Estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Owner Occupied |
|
| 4,464 |
|
|
| — |
|
|
| — |
|
|
| 130 |
|
|
| 4,594 |
|
|
| 4,729 |
|
|
| — |
|
|
| 15 |
|
|
| 182 |
|
|
| 4,926 |
|
Non-Owner Occupied |
|
| 13,860 |
|
|
| — |
|
|
| 48 |
|
|
| 669 |
|
|
| 14,577 |
|
|
| 14,711 |
|
|
| — |
|
|
| 16 |
|
|
| (300 | ) |
|
| 14,427 |
|
Residential Real Estate |
|
| 2,597 |
|
|
| (1 | ) |
|
| 61 |
|
|
| (45 | ) |
|
| 2,612 |
|
|
| 2,859 |
|
|
| (39 | ) |
|
| 64 |
|
|
| 152 |
|
|
| 3,036 |
|
Real Estate Construction |
|
| 1,810 |
|
|
| — |
|
|
| — |
|
|
| 53 |
|
|
| 1,863 |
|
|
| 1,969 |
|
|
| — |
|
|
| — |
|
|
| 44 |
|
|
| 2,013 |
|
Farm Real Estate |
|
| 287 |
|
|
| — |
|
|
| 2 |
|
|
| (40 | ) |
|
| 249 |
|
|
| 236 |
|
|
| — |
|
|
| 1 |
|
|
| 14 |
|
|
| 251 |
|
Consumer and Other |
|
| 176 |
|
|
| (29 | ) |
|
| 10 |
|
|
| (21 | ) |
|
| 136 |
|
|
| 130 |
|
|
| (13 | ) |
|
| 4 |
|
|
| 21 |
|
|
| 142 |
|
Unallocated |
|
| 847 |
|
|
| — |
|
|
| — |
|
|
| (429 | ) |
|
| 418 |
|
|
| 11 |
|
|
| — |
|
|
| — |
|
|
| 238 |
|
|
| 249 |
|
Total |
| $ | 26,641 |
|
| $ | (30 | ) |
| $ | 122 |
|
| $ | 300 |
|
| $ | 27,033 |
|
| $ | 27,435 |
|
| $ | (74 | ) |
| $ | 112 |
|
| $ | 300 |
|
| $ | 27,773 |
|
For the three months ended March 31,September 30, 2022, the Company provided $300 to the allowance for credit losses. The provision in the firstthird quarter of 2022 was due toreflected the stability of ourCompany’s strong loan growth during the quarter. Our credit quality metrics coupled withremained stable despite the continued stabilization and, in some cases, improvementongoing headwinds of the challenging international, national, regional and local economic conditions that were adversely impacted by the prior economic shutdown and restrictions in response to the ongoingconditions. While COVID-19 pandemic. While vaccinations and improved treatments had created a level of optimism, in the business community, there remained caution due to the lingering concerns over potential infection spikes. We remained cautious during the first quarter of 2022 given the level of classified loans in the portfolio, particularly loans to borrowers in the hotel industry as well as the challenging environment thatchallenges businesses continued to face.face in today’s environment. As of March 31,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, and rising inflationary pressures. While somepressures and the prospects of these pressures had eased, ongoing supply chain and staffing challenges, as well as the impact of higher inflation remained.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 March 31,September 30, 2022, the allowance for Commercial & Agriculture loans decreased due to a decrease in general reserves required for this type as a result of a decrease in PPP loan balances. Commercial and& Agriculture loan balances decreased during the quarter mainly due to the forgiveness or payoff of PPP loans during the 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 increased loan balances, accompanied by an increase in classified loans balances. The result was represented as an increase in the provision. The allowance for Commercial Real Estate – Non-Owner Occupied loans increaseddecreased 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 an increasea decrease in the provision. The allowance for Residential Real Estate loans increased due to net recoveriesan increase in general reserves required for this type as a result of loan.increased loan balances. The result was represented by a decreasean increase in the provision. The allowance for Real Estate Construction loans increased due to an increase in loan balances. This was represented as an increase in the provision. The allowance for Consumer and Other loans decreased due to a decrease in loan balances. This was represented as a decrease in the provision. Management determinedfeels that the unallocated amount wasis appropriate and within the relevant range for the allowance that wasis reflective of the risk in the portfolio at March 31,September 30, 2022.
Page 16
Civista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)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. |
|
The following tables present, by portfolio segment,
For the allocation ofnine months ended September 30, 2023, the Company provided $2,111 to the allowance for credit losses, andas 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 balances as of March 31, 2023 and December 31, 2022.growth during the quarter.
March 31, 2023 |
| Loans individually |
|
| Loans collectively |
|
| Total |
| |||
Allowance for credit losses: |
|
|
|
|
|
|
|
| ||||
Commercial & Agriculture |
| $ | 12 |
|
| $ | 3,304 |
|
| $ | 3,316 |
|
Commercial Real Estate: |
|
|
|
|
|
|
|
|
| |||
Owner Occupied |
|
| 7 |
|
|
| 5,726 |
|
|
| 5,733 |
|
Non-Owner Occupied |
|
| — |
|
|
| 11,760 |
|
|
| 11,760 |
|
Residential Real Estate |
|
| 2 |
|
|
| 5,932 |
|
|
| 5,934 |
|
Real Estate Construction |
|
| — |
|
|
| 3,920 |
|
|
| 3,920 |
|
Farm Real Estate |
|
| — |
|
|
| 269 |
|
|
| 269 |
|
Lease Financing Receivables |
|
| 371 |
|
|
| 2,536 |
|
|
| 2,907 |
|
Consumer and Other |
|
| 77 |
|
|
| 277 |
|
|
| 354 |
|
Unallocated |
|
| — |
|
|
| 3 |
|
|
| 3 |
|
Total |
| $ | 469 |
|
| $ | 33,727 |
|
| $ | 34,196 |
|
Outstanding loan balances: |
|
|
|
|
|
|
|
|
| |||
Commercial & Agriculture |
| $ | 165 |
|
| $ | 270,995 |
|
| $ | 271,160 |
|
Commercial Real Estate: |
|
|
|
|
|
|
|
|
| |||
Owner Occupied |
|
| 1,514 |
|
|
| 374,311 |
|
|
| 375,825 |
|
Non-Owner Occupied |
|
| 119 |
|
|
| 1,043,516 |
|
|
| 1,043,635 |
|
Residential Real Estate |
|
| 1,838 |
|
|
| 559,140 |
|
|
| 560,978 |
|
Real Estate Construction |
|
| — |
|
|
| 247,253 |
|
|
| 247,253 |
|
Farm Real Estate |
|
| — |
|
|
| 24,040 |
|
|
| 24,040 |
|
Lease Financing Receivables |
|
| 328 |
|
|
| 37,242 |
|
|
| 37,570 |
|
Consumer and Other |
|
| 77 |
|
|
| 19,528 |
|
|
| 19,605 |
|
Total |
| $ | 4,041 |
|
| $ | 2,576,025 |
|
| $ | 2,580,066 |
|
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 credit losses and related loan balances as of December 31, 2022.
December 31, 2022 |
| Loans acquired |
|
| Loans individually |
|
| Loans collectively |
|
| Total |
| ||||
Allowance for credit losses: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Commercial & Agriculture |
| $ | 6 |
|
| $ | — |
|
| $ | 3,005 |
|
| $ | 3,011 |
|
Commercial Real Estate: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Owner Occupied |
|
| 3 |
|
|
| 6 |
|
|
| 4,556 |
|
|
| 4,565 |
|
Non-Owner Occupied |
|
| — |
|
|
| — |
|
|
| 14,138 |
|
|
| 14,138 |
|
Residential Real Estate |
|
| — |
|
|
| 1 |
|
|
| 3,144 |
|
|
| 3,145 |
|
Real Estate Construction |
|
| — |
|
|
| — |
|
|
| 2,293 |
|
|
| 2,293 |
|
Farm Real Estate |
|
| — |
|
|
| — |
|
|
| 291 |
|
|
| 291 |
|
Consumer and Other |
|
| — |
|
|
| — |
|
|
| 98 |
|
|
| 98 |
|
Lease Financing Receivables |
|
| — |
|
|
| — |
|
|
| 429 |
|
|
| 429 |
|
Unallocated |
|
| — |
|
|
| — |
|
|
| 541 |
|
|
| 541 |
|
Total |
| $ | 9 |
|
| $ | 7 |
|
| $ | 28,495 |
|
| $ | 28,511 |
|
Outstanding loan balances: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Commercial & Agriculture |
| $ | 863.00 |
|
| $ | — |
|
| $ | 277,732 |
|
| $ | 278,595 |
|
Commercial Real Estate: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Owner Occupied |
|
| 1,988 |
|
|
| 232 |
|
|
| 368,927 |
|
|
| 371,147 |
|
Non-Owner Occupied |
|
| 119 |
|
|
| — |
|
|
| 1,018,617 |
|
|
| 1,018,736 |
|
Residential Real Estate |
|
| 1,414 |
|
|
| 392 |
|
|
| 550,975 |
|
|
| 552,781 |
|
Real Estate Construction |
|
| — |
|
|
| — |
|
|
| 243,127 |
|
|
| 243,127 |
|
Farm Real Estate |
|
| — |
|
|
| — |
|
|
| 24,708 |
|
|
| 24,708 |
|
Lease Financing Receivables |
|
| — |
|
|
| — |
|
|
| 36,797 |
|
|
| 36,797 |
|
Consumer and Other |
|
| 1 |
|
|
| — |
|
|
| 20,774 |
|
|
| 20,775 |
|
Total |
| $ | 4,385 |
|
| $ | 624 |
|
| $ | 2,541,657 |
|
| $ | 2,546,666 |
|
The following tables present credit exposures by internally assigned risk grades as of March 31,September 30, 2023 and December 31, 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:
Page 18
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 March 31,September 30, 2023, is as follows:
|
| Term Loans Amortized Cost Basis by Origination Year |
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Revolving |
|
|
|
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Loans |
|
|
|
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Revolving |
|
| Converted |
|
|
|
| |||||||||
March 31, 2023 |
| 2023 |
|
| 2022 |
|
| 2021 |
|
| 2020 |
|
| 2019 |
|
| Prior |
|
| Loans |
|
| to Term |
|
| Total |
| |||||||||
Commercial & Agriculture |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Pass |
| $ | 29,720 |
|
| $ | 57,104 |
|
| $ | 40,428 |
|
| $ | 11,291 |
|
| $ | 10,846 |
|
| $ | 3,204 |
|
| $ | 115,283 |
|
| $ | — |
|
| $ | 267,876 |
|
Special Mention |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 135 |
|
|
| — |
|
|
| — |
|
|
| 1,409 |
|
|
| — |
|
|
| 1,544 |
|
Substandard |
|
| — |
|
|
| — |
|
|
| 542 |
|
|
| 466 |
|
|
| 93 |
|
|
| 93 |
|
|
| 276 |
|
|
| — |
|
|
| 1,470 |
|
Doubtful |
|
| — |
|
|
| 184 |
|
|
| 61 |
|
|
| 25 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 270 |
|
Total Commercial & Agriculture |
| $ | 29,720 |
|
| $ | 57,288 |
|
| $ | 41,031 |
|
| $ | 11,917 |
|
| $ | 10,939 |
|
| $ | 3,297 |
|
| $ | 116,968 |
|
| $ | — |
|
| $ | 271,160 |
|
Commercial & Agriculture: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Current-period gross charge-offs |
| $ | — |
|
| $ | 59 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 81 |
|
| $ | — |
|
| $ | — |
|
| $ | 140 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Commercial Real Estate - Owner Occupied |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Pass |
| $ | 11,769 |
|
| $ | 92,658 |
|
| $ | 73,561 |
|
| $ | 62,938 |
|
| $ | 35,118 |
|
| $ | 92,494 |
|
| $ | 5,152 |
|
| $ | — |
|
| $ | 373,690 |
|
Special Mention |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 400 |
|
|
| 320 |
|
|
| — |
|
|
| — |
|
|
| 720 |
|
Substandard |
|
| — |
|
|
| — |
|
|
| 3 |
|
|
| — |
|
|
| — |
|
|
| 1,408 |
|
|
| 4 |
|
|
| — |
|
|
| 1,415 |
|
Doubtful |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total Commercial Real Estate - Owner Occupied |
| $ | 11,769 |
|
| $ | 92,658 |
|
| $ | 73,564 |
|
| $ | 62,938 |
|
| $ | 35,518 |
|
| $ | 94,222 |
|
| $ | 5,156 |
|
| $ | — |
|
| $ | 375,825 |
|
Commercial Real Estate - Owner Occupied: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Current-period gross charge-offs |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Commercial Real Estate - Non-Owner Occupied |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Pass |
| $ | 43,761 |
|
| $ | 288,143 |
|
| $ | 216,483 |
|
| $ | 150,088 |
|
| $ | 115,865 |
|
| $ | 192,348 |
|
| $ | 19,286 |
|
| $ | — |
|
| $ | 1,025,974 |
|
Special Mention |
|
| — |
|
|
| 5,207 |
|
|
| — |
|
|
| — |
|
|
| 277 |
|
|
| 8,235 |
|
|
| 277 |
|
|
| — |
|
|
| 13,996 |
|
Substandard |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 146 |
|
|
| 3,519 |
|
|
| — |
|
|
| — |
|
|
| 3,665 |
|
Doubtful |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total Commercial Real Estate - Non-Owner Occupied |
| $ | 43,761 |
|
| $ | 293,350 |
|
| $ | 216,483 |
|
| $ | 150,088 |
|
| $ | 116,288 |
|
| $ | 204,102 |
|
| $ | 19,563 |
|
| $ | — |
|
| $ | 1,043,635 |
|
Commercial Real Estate - Non-Owner Occupied: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Current-period gross charge-offs |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Residential Real Estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Pass |
| $ | 19,267 |
|
| $ | 103,972 |
|
| $ | 92,892 |
|
| $ | 78,060 |
|
| $ | 39,193 |
|
| $ | 91,023 |
|
| $ | 130,964 |
|
| $ | — |
|
| $ | 555,371 |
|
Special Mention |
|
| — |
|
|
| 54 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 46 |
|
|
| 55 |
|
|
| — |
|
|
| 155 |
|
Substandard |
|
| — |
|
|
| 29 |
|
|
| 271 |
|
|
| 155 |
|
|
| 768 |
|
|
| 3,574 |
|
|
| 655 |
|
|
| — |
|
|
| 5,452 |
|
Doubtful |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total Residential Real Estate |
| $ | 19,267 |
|
| $ | 104,055 |
|
| $ | 93,163 |
|
| $ | 78,215 |
|
| $ | 39,961 |
|
| $ | 94,643 |
|
| $ | 131,674 |
|
| $ | — |
|
| $ | 560,978 |
|
Residential Real Estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Current-period gross charge-offs |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 10 |
|
| $ | — |
|
| $ | — |
|
| $ | 10 |
|
|
| 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 |
| $ | 10,367 |
|
| $ | 124,262 |
|
| $ | 73,422 |
|
| $ | 28,258 |
|
| $ | — |
|
| $ | — |
|
| $ | 10,727 |
|
| $ | — |
|
| $ | 247,036 |
|
| $ | 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 |
|
| — |
|
|
| — |
|
|
| 44 |
|
|
| — |
|
|
| 173 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 217 |
|
|
| — |
|
|
| — |
|
|
| 42 |
|
|
| — |
|
|
| 161 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 203 |
|
Doubtful |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total Real Estate Construction |
| $ | 10,367 |
|
| $ | 124,262 |
|
| $ | 73,466 |
|
| $ | 28,258 |
|
| $ | 173 |
|
| $ | — |
|
| $ | 10,727 |
|
| $ | — |
|
| $ | 247,253 |
|
| $ | 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 |
| $ | 572 |
|
| $ | 1,368 |
|
| $ | 2,284 |
|
| $ | 5,418 |
|
| $ | 840 |
|
| $ | 12,723 |
|
| $ | 602 |
|
| $ | — |
|
| $ | 23,807 |
|
| $ | 816 |
|
| $ | 987 |
|
| $ | 2,309 |
|
| $ | 4,552 |
|
| $ | 806 |
|
| $ | 13,295 |
|
| $ | 1,161 |
|
| $ | — |
|
| $ | 23,926 |
|
Special Mention |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 189 |
|
|
| — |
|
|
| — |
|
|
| 189 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 183 |
|
|
| — |
|
|
| — |
|
|
| 183 |
|
Substandard |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 44 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 44 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Doubtful |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total Farm Real Estate |
| $ | 572 |
|
| $ | 1,368 |
|
| $ | 2,284 |
|
| $ | 5,462 |
|
| $ | 840 |
|
| $ | 12,912 |
|
| $ | 602 |
|
| $ | — |
|
| $ | 24,040 |
|
| $ | 816 |
|
| $ | 987 |
|
| $ | 2,309 |
|
| $ | 4,552 |
|
| $ | 806 |
|
| $ | 13,478 |
|
| $ | 1,161 |
|
| $ | — |
|
| $ | 24,109 |
|
Farm Real Estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||
Current-period charge-offs |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||
Lease Financing Receivables |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||
Pass |
| $ | 11,925 |
|
| $ | 16,335 |
|
| $ | 5,210 |
|
| $ | 2,252 |
|
| $ | 1,492 |
|
| $ | 248 |
|
| $ | — |
|
| $ | — |
|
| $ | 37,462 |
|
| $ | 21,794 |
|
| $ | 14,071 |
|
| $ | 6,605 |
|
| $ | 3,754 |
|
| $ | 1,964 |
|
| $ | 18 |
|
| $ | — |
|
| $ | — |
|
| $ | 48,206 |
|
Special Mention |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Substandard |
|
| — |
|
|
| — |
|
|
| 47 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 47 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Doubtful |
|
| — |
|
|
| — |
|
|
| 26 |
|
|
| — |
|
|
| 35 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 61 |
|
|
| — |
|
|
| — |
|
|
| 53 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 53 |
|
Total Lease Financing Receivables |
| $ | 11,925 |
|
| $ | 16,335 |
|
| $ | 5,283 |
|
| $ | 2,252 |
|
| $ | 1,527 |
|
| $ | 248 |
|
| $ | — |
|
| $ | — |
|
| $ | 37,570 |
|
| $ | 21,794 |
|
| $ | 14,071 |
|
| $ | 6,658 |
|
| $ | 3,754 |
|
| $ | 1,964 |
|
| $ | 18 |
|
| $ | — |
|
| $ | — |
|
| $ | 48,259 |
|
Lease Financing Receivables: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||
Current-period charge-offs |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||
Consumer and Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||
Pass |
| $ | 1,693 |
|
| $ | 6,214 |
|
| $ | 5,736 |
|
| $ | 2,451 |
|
| $ | 984 |
|
| $ | 618 |
|
| $ | 1,715 |
|
| $ | — |
|
| $ | 19,411 |
|
| $ | 5,014 |
|
| $ | 4,741 |
|
| $ | 4,103 |
|
| $ | 1,875 |
|
| $ | 639 |
|
| $ | 322 |
|
| $ | 1,536 |
|
| $ | — |
|
| $ | 18,230 |
|
Special Mention |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Substandard |
|
| — |
|
|
| 141 |
|
|
| 33 |
|
|
| 12 |
|
|
| — |
|
|
| 8 |
|
|
| — |
|
|
| — |
|
|
| 194 |
|
|
| — |
|
|
| — |
|
|
| 14 |
|
|
| 17 |
|
|
| — |
|
|
| 6 |
|
|
| — |
|
|
| — |
|
|
| 37 |
|
Doubtful |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total Consumer and Other |
| $ | 1,693 |
|
| $ | 6,355 |
|
| $ | 5,769 |
|
| $ | 2,463 |
|
| $ | 984 |
|
| $ | 626 |
|
| $ | 1,715 |
|
| $ | — |
|
| $ | 19,605 |
|
| $ | 5,014 |
|
| $ | 4,741 |
|
| $ | 4,117 |
|
| $ | 1,892 |
|
| $ | 639 |
|
| $ | 328 |
|
| $ | 1,536 |
|
| $ | — |
|
| $ | 18,267 |
|
Consumer and Other: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||
Current-period charge-offs |
| $ | — |
|
| $ | 1 |
|
| $ | 10 |
|
| $ | 2 |
|
| $ | 10 |
|
| $ | — |
|
| $ | 2 |
|
| $ | — |
|
| $ | 25 |
|
| $ | 1 |
|
| $ | 27 |
|
| $ | 40 |
|
| $ | 6 |
|
| $ | 10 |
|
| $ | — |
|
| $ | 5 |
|
| $ | — |
|
| $ | 89 |
|
Total Loans |
| $ | 129,074 |
|
| $ | 695,671 |
|
| $ | 511,043 |
|
| $ | 341,593 |
|
| $ | 206,230 |
|
| $ | 410,050 |
|
| $ | 286,405 |
|
| $ | — |
|
| $ | 2,580,066 |
|
| $ | 362,236 |
|
| $ | 687,480 |
|
| $ | 459,900 |
|
| $ | 311,681 |
|
| $ | 205,418 |
|
| $ | 444,378 |
|
| $ | 283,797 |
|
| $ | — |
|
| $ | 2,754,890 |
|
Total Loans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||
Current-period charge-offs |
| $ | — |
|
| $ | 60 |
|
| $ | 10 |
|
| $ | 2 |
|
| $ | 10 |
|
| $ | 91 |
|
| $ | 2 |
|
| $ | — |
|
| $ | 175 |
|
| $ | 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)
Generally,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.
December 31, 2022 |
| Pass |
|
| Special Mention |
|
| Substandard |
|
| Doubtful |
|
| Ending Balance |
| |||||
Commercial & Agriculture |
| $ | 273,291 |
|
| $ | 2,558 |
|
| $ | 2,746 |
|
| $ | — |
|
| $ | 278,595 |
|
Commercial Real Estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Owner Occupied |
|
| 367,652 |
|
|
| 734 |
|
|
| 2,761 |
|
|
| — |
|
|
| 371,147 |
|
Non-Owner Occupied |
|
| 1,003,942 |
|
|
| 10,947 |
|
|
| 3,847 |
|
|
| — |
|
|
| 1,018,736 |
|
Residential Real Estate |
|
| 114,021 |
|
|
| 183 |
|
|
| 5,787 |
|
|
| — |
|
|
| 119,991 |
|
Real Estate Construction |
|
| 198,734 |
|
|
| — |
|
|
| 221 |
|
|
| — |
|
|
| 198,955 |
|
Farm Real Estate |
|
| 24,283 |
|
|
| 379 |
|
|
| 46 |
|
|
| — |
|
|
| 24,708 |
|
Lease Financing Receivables |
|
| 36,223 |
|
|
| — |
|
|
| 401 |
|
|
| 173 |
|
|
| 36,797 |
|
Consumer and Other |
|
| 839 |
|
|
| — |
|
|
| 163 |
|
|
| — |
|
|
| 1,002 |
|
Total |
| $ | 2,018,985 |
|
| $ | 14,801 |
|
| $ | 15,972 |
|
| $ | 173 |
|
| $ | 2,049,931 |
|
The following tables present performing and nonperforming loans based solely on payment activity for the period ended December 31, 2022 that havewere not been assigned an internal risk grade.
December 31, 2022 |
| Residential |
|
| Real Estate |
|
| Consumer |
|
| Total |
| ||||
Performing |
| $ | 432,790 |
|
| $ | 44,172 |
|
| $ | 19,773 |
|
| $ | 496,735 |
|
Nonperforming |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total |
| $ | 432,790 |
|
| $ | 44,172 |
|
| $ | 19,773 |
|
| $ | 496,735 |
|
The following tables include an aging analysis of the recorded investment of past due loans outstanding as of March 31,September 30, 2023 and December 31, 2022.
March 31, 2023 |
| 30-59 |
|
| 60-89 |
|
| 90 Days |
|
| Total Past |
|
| Current |
|
| Total Loans |
|
| Past Due |
| |||||||
Commercial & Agriculture |
| $ | 834 |
|
| $ | 201 |
|
| $ | 684 |
|
| $ | 1,719 |
|
| $ | 269,441 |
|
| $ | 271,160 |
|
| $ | — |
|
Commercial Real Estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Owner Occupied |
|
| 44 |
|
|
| — |
|
|
| 39 |
|
|
| 83 |
|
|
| 375,742 |
|
|
| 375,825 |
|
|
| — |
|
Non-Owner Occupied |
|
| 347 |
|
|
| 6,500 |
|
|
| 1,294 |
|
|
| 8,141 |
|
|
| 1,035,494 |
|
|
| 1,043,635 |
|
|
| — |
|
Residential Real Estate |
|
| 2,751 |
|
|
| 355 |
|
|
| 978 |
|
|
| 4,084 |
|
|
| 556,894 |
|
|
| 560,978 |
|
|
| — |
|
Real Estate Construction |
|
| 506 |
|
|
| — |
|
|
| — |
|
|
| 506 |
|
|
| 246,747 |
|
|
| 247,253 |
|
|
| — |
|
Farm Real Estate |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 24,040 |
|
|
| 24,040 |
|
|
| — |
|
Lease Financing Receivables |
|
| 1,032 |
|
|
| 87 |
|
|
| 110 |
|
|
| 1,229 |
|
|
| 36,341 |
|
|
| 37,570 |
|
|
| 47 |
|
Consumer and Other |
|
| 101 |
|
|
| 27 |
|
|
| 78 |
|
|
| 206 |
|
|
| 19,399 |
|
|
| 19,605 |
|
|
| — |
|
Total |
| $ | 5,615 |
|
| $ | 7,170 |
|
| $ | 3,183 |
|
| $ | 15,968 |
|
| $ | 2,564,098 |
|
| $ | 2,580,066 |
|
| $ | 47 |
|
December 31, 2022 |
| 30-59 |
|
| 60-89 |
|
| 90 Days |
|
| Total Past |
|
| Current |
|
| Purchased |
|
| Total Loans |
|
| Past Due |
| ||||||||||||||||||||||||||||||||||||
September 30, 2023 |
| 30-59 |
|
| 60-89 |
|
| 90 Days |
|
| Total Past |
|
| Current |
|
| Total Loans |
|
| Past Due |
| |||||||||||||||||||||||||||||||||||||||
Commercial & Agriculture |
| $ | 247 |
|
| $ | 78 |
|
| $ | 534 |
|
| $ | 859 |
|
| $ | 276,873 |
|
| $ | 863 |
|
| $ | 278,595 |
|
| $ | — |
|
| $ | 834 |
|
| $ | 1,284 |
|
| $ | 1,469 |
|
| $ | 3,587 |
|
| $ | 298,290 |
|
| $ | 301,877 |
|
| $ | — |
|
Commercial Real Estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Owner Occupied |
|
| 21 |
|
|
| 13 |
|
|
| 76 |
|
|
| 110 |
|
|
| 369,049 |
|
|
| 1,988 |
|
|
| 371,147 |
|
|
| — |
|
|
| 87 |
|
|
| — |
|
|
| 34 |
|
|
| 121 |
|
|
| 375,730 |
|
|
| 375,851 |
|
|
| — |
|
Non-Owner Occupied |
|
| — |
|
|
| — |
|
|
| 1,164 |
|
|
| 1,164 |
|
|
| 1,017,453 |
|
|
| 119 |
|
|
| 1,018,736 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,102,932 |
|
|
| 1,102,932 |
|
|
| — |
|
Residential Real Estate |
|
| 3,133 |
|
|
| 857 |
|
|
| 1,107 |
|
|
| 5,097 |
|
|
| 546,270 |
|
|
| 1,414 |
|
|
| 552,781 |
|
|
| — |
|
|
| 731 |
|
|
| 791 |
|
|
| 1,812 |
|
|
| 3,334 |
|
|
| 610,970 |
|
|
| 614,304 |
|
|
| — |
|
Real Estate Construction |
|
| — |
|
|
| — |
|
|
| 219 |
|
|
| 219 |
|
|
| 242,908 |
|
|
| — |
|
|
| 243,127 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 269,291 |
|
|
| 269,291 |
|
|
| — |
|
Farm Real Estate |
|
| 7 |
|
|
| — |
|
|
| — |
|
|
| 7 |
|
|
| 24,701 |
|
|
| — |
|
|
| 24,708 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 24,109 |
|
|
| 24,109 |
|
|
| — |
|
Lease Financing Receivables |
|
| 1,040 |
|
|
| — |
|
|
| 341 |
|
|
| 1,381 |
|
|
| 35,416 |
|
|
| — |
|
|
| 36,797 |
|
|
| — |
|
|
| 237 |
|
|
| 52 |
|
|
| 653 |
|
|
| 942 |
|
|
| 47,317 |
|
|
| 48,259 |
|
|
| — |
|
Consumer and Other |
|
| 293 |
|
|
| 49 |
|
|
| 74 |
|
|
| 416 |
|
|
| 20,358 |
|
|
| 1 |
|
|
| 20,775 |
|
|
| — |
|
|
| 156 |
|
|
| 59 |
|
|
| 9 |
|
|
| 224 |
|
|
| 18,043 |
|
|
| 18,267 |
|
|
| — |
|
Total |
| $ | 4,741 |
|
| $ | 997 |
|
| $ | 3,515 |
|
| $ | 9,253 |
|
| $ | 2,533,028 |
|
| $ | 4,385 |
|
| $ | 2,546,666 |
|
| $ | — |
|
| $ | 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 |
|
| $ | — |
|
The following table presents loans on nonaccrual status as of March 31,September 30, 2023.
March 31, 2023 |
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
September 30, 2023 |
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
|
| Nonaccrual loans with a related ACL |
|
| Nonaccrual loans without a related ACL |
|
| Total Nonaccrual loans |
|
| Interest Income Recognized |
|
| Nonaccrual loans with a related ACL |
|
| Nonaccrual loans without a related ACL |
|
| Total Nonaccrual loans |
|
| Interest Income Recognized |
| ||||||||
Commercial & Agriculture |
| $ | 12 |
|
| $ | 945 |
|
| $ | 957 |
|
| $ | — |
|
| $ | 362 |
|
| $ | 1,294 |
|
| $ | 1,656 |
|
| $ | — |
|
Commercial Real Estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Owner Occupied |
|
| — |
|
|
| 358 |
|
|
| 358 |
|
|
| 3 |
|
|
| — |
|
|
| 270 |
|
|
| 270 |
|
|
| 3 |
|
Non-Owner Occupied |
|
| — |
|
|
| 1,294 |
|
|
| 1,294 |
|
|
| — |
|
|
| 306 |
|
|
| 899 |
|
|
| 1,205 |
|
|
| — |
|
Residential Real Estate |
|
| — |
|
|
| 3,892 |
|
|
| 3,892 |
|
|
| 29 |
|
|
| — |
|
|
| 4,391 |
|
|
| 4,391 |
|
|
| 13 |
|
Real Estate Construction |
|
| — |
|
|
| 217 |
|
|
| 217 |
|
|
| — |
|
|
| — |
|
|
| 203 |
|
|
| 203 |
|
|
| — |
|
Farm Real Estate |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Lease Financing Receivables |
|
| — |
|
|
| 61 |
|
|
| 61 |
|
|
| — |
|
|
| 151 |
|
|
| 794 |
|
|
| 945 |
|
|
| — |
|
Consumer and Other |
|
| 77 |
|
|
| 124 |
|
|
| 201 |
|
|
| — |
|
|
| — |
|
|
| 43 |
|
|
| 43 |
|
|
| — |
|
Total |
| $ | 89 |
|
| $ | 6,891 |
|
| $ | 6,980 |
|
| $ | 32 |
|
| $ | 819 |
|
| $ | 7,894 |
|
| $ | 8,713 |
|
| $ | 16 |
|
The following table presents loans on nonaccrual status as of December 31, 2022, excluding PCI loans.
|
| December 31, 2022 |
| |
Commercial & Agriculture |
| $ | 774 |
|
Commercial Real Estate: |
|
|
| |
Owner Occupied |
|
| 386 |
|
Non-Owner Occupied |
|
| 1,109 |
|
Residential Real Estate |
|
| 3,926 |
|
Real Estate Construction |
|
| 221 |
|
Farm Real Estate |
|
| — |
|
Lease Financing Receivables |
|
| — |
|
Consumer and Other |
|
| 91 |
|
Total |
| $ | 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 two 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 or the principal and interest payments are reasonably assured and a sustained period of performance has occurred, generally six months.
Modifications: A modification of a loan constitutes a TDR when the Company for economic or legal reasons related to a borrower’s financial difficulties grants a concession to the borrower that it would not otherwise consider. The Company offers various types of concessions when modifying a loan, however, forgiveness of principal is rarely granted. Commercial Real Estate loans modified in a TDR often involve reducing the interest rate lower than the current market rate for new debt with similar risk. Residential Real Estate loans modified in a TDR primarily involve interest rate reductions where monthly payments are 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. Allowances 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 December 31, 2022, TDRs accounted for $7 of the ACL.
Page 22
Civista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
There were noModifications to Borrowers Experiencing Financial Difficulty: From time to time, the Company may modify certain loans modified as TDRs during the three-month period ended March 31, 2022.
Recidivism, or the borrower defaulting on its obligation pursuant to a modified loan, resultsborrowers who are experiencing financial difficulty. In some cases, these modifications result in new loans. Loan modifications to borrowers experiencing financial difficulty may be in the loan once again becomingform of principal forgiveness, interest rate reduction, term extension, other-than-significant payment delay or 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.
combination thereof, among other things. During the three-month periodnine months ended March 31, 2022,September 30, 2023, there were no defaults onmodifications of loans that were modified and considered TDRs during the respective previous twelve months.
to borrowers experiencing financial difficulty.
Individually Evaluated Loans: Larger (greater than $350) Commercial & Agricultural and Commercial Real Estate loan relationships, 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.
March 31, 2023 |
| Real Estate |
|
| Other |
|
| Allowance for Credit Losses |
| |||||||||||||||
September 30, 2023 |
| Real Estate |
|
| Other |
|
| Allowance for Credit Losses |
| |||||||||||||||
Commercial & Agriculture |
| $ | 49 |
|
| $ | 116 |
|
| $ | 12 |
|
| $ | — |
|
| $ | 4,846 |
|
| $ | 408 |
|
Commercial Real Estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Owner Occupied |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Non-Owner Occupied |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,205 |
|
|
| — |
|
|
| 306 |
|
Residential Real Estate |
|
| 689 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Real Estate Construction |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Farm Real Estate |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Lease Financing Receivables |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 525 |
|
|
| 150 |
|
Consumer and Other |
|
| — |
|
|
| 77 |
|
|
| 77 |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total |
| $ | 738 |
|
| $ | 193 |
|
| $ | 89 |
|
| $ | 1,205 |
|
| $ | 5,371 |
|
| $ | 864 |
|
Collateral-dependent loans consist primarily of residential real estate, commercial real estateResidential Real Estate, Commercial Real Estate and commercialCommercial and industrialAgricultural 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 commercialCommercial and industrialAgricultural 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 23
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 loans with the associated allowance amount, if applicable, as of December 31, 2022, excluding PCI loans.
|
| December 31, 2022 |
|
| December 31, 2022 |
| ||||||||||||||||||||||||||||||||||
|
| Recorded |
|
| Unpaid |
|
| Related |
|
| Average Recorded |
|
| Interest |
|
| Recorded |
|
| Unpaid |
|
| Related |
|
| Average Recorded |
|
| Interest |
| ||||||||||
With no related allowance recorded: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Commercial & Agriculture |
| $ | — |
|
| $ | — |
|
|
|
|
| $ | 86 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
|
|
|
| $ | 86 |
|
| $ | 3 |
| ||
Commercial Real Estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Owner Occupied |
|
| 82 |
|
|
| 82 |
|
|
|
|
|
| 192 |
|
|
| 6 |
|
|
| 82 |
|
|
| 82 |
|
|
|
|
|
| 192 |
|
|
| 22 |
| ||
Non-Owner Occupied |
|
| — |
|
|
| — |
|
|
|
|
|
| 35 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
|
|
|
| 35 |
|
|
| 1 |
| ||
Residential Real Estate |
|
| 385 |
|
|
| 410 |
|
|
|
|
|
| 595 |
|
|
| 40 |
|
|
| 385 |
|
|
| 410 |
|
|
|
|
|
| 595 |
|
|
| 33 |
| ||
Farm Real Estate |
|
| — |
|
|
| — |
|
|
|
|
|
| 381 |
|
|
| 14 |
|
|
| — |
|
|
| — |
|
|
|
|
|
| 381 |
|
|
| 14 |
| ||
Total |
|
| 467 |
|
|
| 492 |
|
|
|
|
|
| 1,289 |
|
|
| 60 |
|
|
| 467 |
|
|
| 492 |
|
|
|
|
|
| 1,289 |
|
|
| 73 |
| ||
With an allowance recorded: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Commercial & Agriculture |
|
| — |
|
|
| — |
|
| $ | — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
| $ | — |
|
|
| — |
|
|
| — |
|
Commercial Real Estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Owner Occupied |
|
| 150 |
|
|
| 150 |
|
|
| 6 |
|
|
| 214 |
|
|
| — |
|
|
| 150 |
|
|
| 150 |
|
|
| 6 |
|
|
| 214 |
|
|
| — |
|
Residential Real Estate |
|
| 7 |
|
|
| 11 |
|
|
| 1 |
|
|
| 19 |
|
|
| — |
|
|
| 7 |
|
|
| 11 |
|
|
| 1 |
|
|
| 19 |
|
|
| — |
|
Lease Financing Receivables |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Consumer and Other |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total |
|
| 157 |
|
|
| 161 |
|
|
| 7 |
|
|
| 233 |
|
|
| — |
|
|
| 157 |
|
|
| 161 |
|
|
| 7 |
|
|
| 233 |
|
|
| — |
|
Total: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Commercial & Agriculture |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 86 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 86 |
|
|
| 3 |
|
Commercial Real Estate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Owner Occupied |
|
| 232 |
|
|
| 232 |
|
|
| 6 |
|
|
| 406 |
|
|
| 6 |
|
|
| 232 |
|
|
| 232 |
|
|
| 6 |
|
|
| 406 |
|
|
| 22 |
|
Non-Owner Occupied |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 35 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 35 |
|
|
| 1 |
|
Residential Real Estate |
|
| 392 |
|
|
| 421 |
|
|
| 1 |
|
|
| 614 |
|
|
| 40 |
|
|
| 392 |
|
|
| 421 |
|
|
| 1 |
|
|
| 614 |
|
|
| 33 |
|
Lease Financing Receivables |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 381 |
|
|
| 14 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 381 |
|
|
| 14 |
|
Consumer and Other |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total |
| $ | 624 |
|
| $ | 653 |
|
| $ | 7 |
|
| $ | 1,522 |
|
| $ | 60 |
|
| $ | 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-monththree and nine-month periods ended March 31,September 30, 2022.
|
| March 31, 2022 |
|
| September 30, 2022 |
| ||||||||||
For the three months ended |
| Average |
|
| Interest |
|
| Average |
|
| Interest |
| ||||
Commercial & Agriculture |
| $ | — |
|
| $ | — |
|
| $ | 172 |
|
| $ | — |
|
Commercial Real Estate—Owner Occupied |
|
| 193 |
|
|
| 3 |
|
|
| 504 |
|
|
| 3 |
|
Commercial Real Estate—Non-Owner Occupied |
|
| — |
|
|
| — |
|
|
| 70 |
|
|
| — |
|
Residential Real Estate |
|
| 530 |
|
|
| 7 |
|
|
| 503 |
|
|
| 9 |
|
Real Estate Construction |
|
| — |
|
|
| — |
| ||||||||
Farm Real Estate |
|
| 514 |
|
|
| 6 |
|
|
| 247 |
|
|
| 2 |
|
Lease Financing Receivables |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Consumer and Other |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total |
| $ | 1,237 |
|
| $ | 16 |
|
| $ | 1,496 |
|
| $ | 14 |
|
Page 24
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 |
|
Changes in the accretable yield for PCI loans as of March 31,September 30, 2022 were as follows, since acquisition:
|
| For the |
|
| For the |
| ||
|
| (In Thousands) |
|
| (In Thousands) |
| ||
Balance at beginning of period |
| $ | 217 |
|
| $ | 216 |
|
Acquisition of PCI loans |
|
| — |
|
|
| — |
|
Accretion |
|
| (16 | ) |
|
| (7 | ) |
Transfer from non-accretable to accretable |
|
| 15 |
|
|
| 7 |
|
Balance at end of period |
| $ | 216 |
|
| $ | 216 |
|
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 allowance for credit losses.ACL. The Company elected the prospective transition approach and all loans previously considered purchased credit impairedPCI are now classified as purchased with credit deterioration.PCD. The remaining non-credit discount will continue to be accreted into income over the reminingremaining lives of the assets. The following table presents additional information regarding loans acquired and accounted for in accordance with ASC 310-30 as of December 31, 2022:
|
| At December 31, 2022 |
| |
|
| Acquired Loans with |
| |
|
| (In Thousands) |
| |
Outstanding balance |
| $ | 5,220 |
|
Carrying amount |
|
| 4,386 |
|
There was no allowance for loan losses recorded for acquired loans with or without specific evidence of deterioration in credit quality as of December 31, 2022.
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 Other assets on the Consolidated Balance Sheet. As of MarchSeptember 30, 2023 and December 31, 2023,2022 there were $26 ofno foreclosed assets included in Other assets. As of December 31, 2022, there were
noPage 25
Civista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
foreclosed assets included in Other assets. As of March 31, 2023 and December 31, 2022, the Company had initiated formal foreclosure procedures on $210 and $399, respectively, of consumer residential mortgages.
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 non-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.
Page 25
Civista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
The following table lists the allowance for credit losses on off-balance sheet credit exposures as of March 31,September 30, 2023:
|
| Allowance for |
| |
March 31, 2023 |
| Credit Losses |
| |
Commercial & Agriculture |
| $ | 648 |
|
Commercial Real Estate: |
|
|
| |
Owner Occupied |
|
| 91 |
|
Non-Owner Occupied |
|
| 159 |
|
Residential Real Estate |
|
| 486 |
|
Real Estate Construction |
|
| 2,143 |
|
Farm Real Estate |
|
| 26 |
|
Lease Financing Receivables |
|
| — |
|
Consumer and Other |
|
| 34 |
|
Total allowance for credit losses |
| $ | 3,587 |
|
|
| 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 LossIncome (Loss)
The following table presents the changes in each component of accumulated other comprehensive loss,income (loss), net of tax for the three-month periods ended March 31,September 30, 2023 and March 31,September 30, 2022.
|
| For the Three-Month Period Ended |
|
| For the Three-Month Period Ended |
|
| For the Three-Month Period Ended |
|
| For the Three-Month Period Ended |
| ||||||||||||||||||||||||||||||||||||
|
| March 31, 2023(a) |
|
| March 31, 2022(a) |
|
| September 30, 2023(a) |
|
| September 30, 2022(a) |
| ||||||||||||||||||||||||||||||||||||
|
| Unrealized |
|
| Defined |
|
| Total (a) |
|
| Unrealized |
|
| Defined |
|
| Total (a) |
|
| Unrealized |
|
| Defined |
|
| Total (a) |
|
| Unrealized |
|
| Defined |
|
| Total (a) |
| ||||||||||||
Beginning balance |
| $ | (52,771 | ) |
| $ | (5,274 | ) |
| $ | (58,045 | ) |
| $ | 14,675 |
|
| $ | (5,855 | ) |
| $ | 8,820 |
|
| $ | (50,496 | ) |
| $ | (5,274 | ) |
| $ | (55,770 | ) |
| $ | (40,497 | ) |
| $ | (5,745 | ) |
| $ | (46,242 | ) |
Other comprehensive income (loss) before reclassifications |
|
| 8,135 |
|
|
| — |
|
|
| 8,135 |
|
|
| (29,564 | ) |
|
| — |
|
|
| (29,564 | ) | ||||||||||||||||||||||||
Amounts reclassified from accumulated other |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 55 |
|
|
| 55 |
| ||||||||||||||||||||||||
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) |
|
| 8,135 |
|
|
| — |
|
|
| 8,135 |
|
|
| (29,564 | ) |
|
| 55 |
|
|
| (29,509 | ) |
|
| (23,692 | ) |
|
| — |
|
|
| (23,692 | ) |
|
| (23,630 | ) |
|
| 54 |
|
|
| (23,576 | ) |
Ending balance |
| $ | (44,636 | ) |
| $ | (5,274 | ) |
| $ | (49,910 | ) |
| $ | (14,889 | ) |
| $ | (5,800 | ) |
| $ | (20,689 | ) |
| $ | (74,188 | ) |
| $ | (5,274 | ) |
| $ | (79,462 | ) |
| $ | (64,127 | ) |
| $ | (5,691 | ) |
| $ | (69,818 | ) |
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 lossincome (loss) for the three-month periods ended March 31,September 30, 2023 and March 31,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 | ) |
|
|
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.
|
| For the Nine-Month Period Ended |
|
| For the Nine-Month Period Ended |
| ||||||||||||||||||
|
| September 30, 2023(a) |
|
| September 30, 2022(a) |
| ||||||||||||||||||
|
| Unrealized |
|
| Defined |
|
| Total (a) |
|
| Unrealized |
|
| Defined |
|
| Total (a) |
| ||||||
Beginning balance |
| $ | (52,771 | ) |
| $ | (5,274 | ) |
| $ | (58,045 | ) |
| $ | 14,675 |
|
| $ | (5,855 | ) |
| $ | 8,820 |
|
Other comprehensive loss before reclassifications |
|
| (21,417 | ) |
|
| — |
|
|
| (21,417 | ) |
|
| (78,794 | ) |
|
| — |
|
|
| (78,794 | ) |
Amounts reclassified from accumulated other |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (8 | ) |
|
| 164 |
|
|
| 156 |
|
Net current-period other comprehensive income (loss) |
|
| (21,417 | ) |
|
| — |
|
|
| (21,417 | ) |
|
| (78,802 | ) |
|
| 164 |
|
|
| (78,638 | ) |
Ending balance |
| $ | (74,188 | ) |
| $ | (5,274 | ) |
| $ | (79,462 | ) |
| $ | (64,127 | ) |
| $ | (5,691 | ) |
| $ | (69,818 | ) |
(a) Amounts in parentheses indicate debits on the Consolidated Balance Sheets
Page 27
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 nine month periods ended September 30, 2023 and September 30, 2022.
|
| 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 |
|
| — |
|
|
| (2 | ) |
| Income tax expense |
|
| — |
|
|
| 8 |
|
|
| |
Amortization of defined benefit pension items |
|
|
|
|
|
|
|
| ||
Actuarial gains/(losses) (b) |
|
| — |
|
|
| (208 | ) |
| Other operating expenses |
Tax effect |
|
| — |
|
|
| 44 |
|
| Income tax expense |
|
| — |
|
|
| (164 | ) |
|
| |
Total reclassifications for the period |
| $ | — |
|
| $ | (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 $125,078 at March 31,September 30, 2023 and $125,695 at December 31, 2022.
Acquired intangible assets, other than goodwill, as of March 31,September 30, 2023 and December 31, 2022 were as follows:
|
| March 31, 2023 |
|
| December 31, 2022 |
|
| September 30, 2023 |
|
| December 31, 2022 |
| ||||||||||||||||||||||||||||||||||||
|
| Gross |
|
| Accumulated |
|
| Net |
|
| Gross |
|
| Accumulated |
|
| Net |
|
| Gross |
|
| Accumulated |
|
| Net |
|
| Gross |
|
| Accumulated |
|
| Net |
| ||||||||||||
Amortized intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Core deposit intangibles |
| $ | 12,953 |
|
| $ | 5,282 |
|
| $ | 7,671 |
|
| $ | 12,953 |
|
| $ | 4,883 |
|
| $ | 8,070 |
|
| $ | 12,952 |
|
| $ | 6,078 |
|
| $ | 6,874 |
|
| $ | 12,953 |
|
| $ | 4,883 |
|
| $ | 8,070 |
|
Total amortized intangible assets |
| $ | 12,953 |
|
| $ | 5,282 |
|
| $ | 7,671 |
|
| $ | 12,953 |
|
| $ | 4,883 |
|
| $ | 8,070 |
|
| $ | 12,952 |
|
| $ | 6,078 |
|
| $ | 6,874 |
|
| $ | 12,953 |
|
| $ | 4,883 |
|
| $ | 8,070 |
|
Aggregate core deposit intangible amortization expense was $398, and $217456, for the three-months ended March 31,September 30, 2023 and 2022, respectively. Aggregate core deposit intangible amortization expense was $1,195 and $890 for the nine-months ended September 30, 2023 and September 30, 2022, respectively.
Page 2728
Civista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
Activity for mortgage servicing rights (MSRs) and the related valuation allowance for the three-month periodsthree- and nine- months ended March 31,September 30, 2023 and March 31,September 30, 2022 were as follows:
|
| Three Months Ended March 31, |
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| |||||||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||
Loan Servicing Rights: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Balance at Beginning of Period |
| $ | 2,689 |
|
| $ | 2,642 |
|
| $ | 3,056 |
|
| $ | 2,664 |
|
| $ | 2,689 |
|
| $ | 2,642 |
|
Additions |
|
| 436 |
|
|
| 145 |
|
|
| 76 |
|
|
| 91 |
|
|
| 600 |
|
|
| 317 |
|
Additions from acquisition |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 419 |
|
|
| — |
|
|
| 419 |
|
Disposals |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Amortized to expense |
|
| (66 | ) |
|
| (109 | ) |
|
| (86 | ) |
|
| (95 | ) |
|
| (243 | ) |
|
| (299 | ) |
Other charges |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Change in valuation allowance |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Balance at End of Period |
| $ | 3,059 |
|
| $ | 2,678 |
|
| $ | 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 |
|
| MSRs |
|
| Core deposit |
|
| Total |
| ||||||
2023 |
| $ | 130 |
|
| $ | 1,181 |
|
| $ | 1,311 |
|
| $ | 43 |
|
| $ | 384 |
|
| $ | 427 |
|
2024 |
|
| 171 |
|
|
| 1,489 |
|
|
| 1,660 |
|
|
| 171 |
|
|
| 1,489 |
|
|
| 1,660 |
|
2025 |
|
| 170 |
|
|
| 1,312 |
|
|
| 1,482 |
|
|
| 170 |
|
|
| 1,312 |
|
|
| 1,482 |
|
2026 |
|
| 167 |
|
|
| 1,193 |
|
|
| 1,360 |
|
|
| 168 |
|
|
| 1,193 |
|
|
| 1,361 |
|
2027 |
|
| 163 |
|
|
| 1,071 |
|
|
| 1,234 |
|
|
| 163 |
|
|
| 1,071 |
|
|
| 1,234 |
|
Thereafter |
|
| 2,258 |
|
|
| 1,425 |
|
|
| 3,683 |
|
|
| 2,331 |
|
|
| 1,425 |
|
|
| 3,756 |
|
| $ | 3,059 |
|
| $ | 7,671 |
|
| $ | 10,730 |
|
| $ | 3,046 |
|
| $ | 6,874 |
|
| $ | 9,920 |
|
Page 2829
Civista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
(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 summarized as follows:
|
| At March 31, 2023 |
|
| At December 31, 2022 |
|
| At September 30, 2023 |
|
| At December 31, 2022 |
| ||||||||||||||||||||
|
| Federal Funds |
|
| Short-term |
|
| Federal Funds |
|
| Short-term |
|
| Federal Funds |
|
| Short-term |
|
| Federal Funds |
|
| Short-term |
| ||||||||
Outstanding balance |
| $ | — |
|
| $ | 212,000 |
|
| $ | — |
|
| $ | 393,700 |
|
| $ | — |
|
| $ | 431,500 |
|
| $ | — |
|
| $ | 393,700 |
|
Interest rate on balance |
|
| — |
|
|
| 4.86 | % |
|
| — |
|
|
| 4.24 | % |
|
| — |
|
|
| 5.45 | % |
|
| — |
|
|
| 4.24 | % |
|
| Three Months Ended March 31, |
| |||||||||||||
|
| 2023 |
|
| 2023 |
|
| 2022 |
|
| 2022 |
| ||||
|
| Federal Funds |
|
| Short-term |
|
| Federal Funds |
|
| Short-term |
| ||||
Maximum indebtedness |
| $ | 30,000 |
|
| $ | 540,000 |
|
| $ | — |
|
| $ | 15,800 |
|
Average balance |
|
| 333 |
|
|
| 372,226 |
|
|
| — |
|
|
| 358 |
|
Average rate paid |
|
| 5.96 | % |
|
| 4.64 | % |
|
| — |
|
|
| 0.30 | % |
|
| 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 represents daily averages. Average rate paid represents interest expense divided by the related average balances.
Short-term borrowings and federal funds purchased transactions can range from overnight to six months in maturity. The average maturity was one day at March 31,September 30, 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 March 31,September 30, 2023 and December 31, 2022. All of the repurchase agreements are overnight agreements. As of July 2023, the Company no longer offers repurchase agreements.
|
| March 31, 2023 |
|
| December 31, 2022 |
|
| September 30, 2023 |
|
| December 31, 2022 |
| ||||
Securities pledged for repurchase agreements: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
U.S. Treasury securities |
| $ | 15,631 |
|
| $ | 25,143 |
|
| $ | — |
|
| $ | 25,143 |
|
Obligations of U.S. government agencies |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total securities pledged |
| $ | 15,631 |
|
| $ | 25,143 |
|
| $ | — |
|
| $ | 25,143 |
|
Gross amount of recognized liabilities for repurchase |
| $ | 15,631 |
|
| $ | 25,143 |
|
| $ | — |
|
| $ | 25,143 |
|
Amounts related to agreements not included in offsetting |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
Page 2930
Civista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
(9) Earnings per Common Share
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, 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. The Company had no dilutive securities for the three-months ended March 31,September 30, 2023 and 2022.
|
| Three Months Ended |
|
| Three Months Ended |
|
| Nine Months Ended |
| |||||||||||||||
|
| March 31, |
|
| September 30, |
|
| September 30, |
| |||||||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||
Basic |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net income |
| $ | 12,888 |
|
| $ | 8,466 |
|
| $ | 10,387 |
|
| $ | 11,112 |
|
| $ | 33,309 |
|
| $ | 27,279 |
|
Less allocation of earnings and dividends to participating securities |
|
| 452 |
|
|
| 32 |
|
|
| 388 |
|
|
| 52 |
|
|
| 1,220 |
|
|
| 123 |
|
Net income available to common shareholders—basic |
| $ | 12,436 |
|
| $ | 8,434 |
|
| $ | 9,999 |
|
| $ | 11,060 |
|
| $ | 32,089 |
|
| $ | 27,156 |
|
Weighted average common shares outstanding |
|
| 15,732,092 |
|
|
| 14,909,192 |
|
|
| 15,735,007 |
|
|
| 15,394,898 |
|
|
| 15,747,648 |
|
|
| 14,974,862 |
|
Less average participating securities |
|
| 552,882 |
|
|
| 55,905 |
|
|
| 588,715 |
|
|
| 71,604 |
|
|
| 576,902 |
|
|
| 67,323 |
|
Weighted average number of shares outstanding used in the calculation of basic earnings per common share |
|
| 15,179,210 |
|
|
| 14,853,287 |
|
|
| 15,146,292 |
|
|
| 15,323,294 |
|
|
| 15,170,746 |
|
|
| 14,907,539 |
|
Earnings per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Basic |
| $ | 0.82 |
|
| $ | 0.57 |
|
| $ | 0.66 |
|
| $ | 0.72 |
|
| $ | 2.12 |
|
| $ | 1.82 |
|
Diluted |
|
| 0.82 |
|
|
| 0.57 |
|
|
| 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 at March 31,September 30, 2023 and December 31, 2022:
|
| Contract Amount |
|
| Contract Amount |
| ||||||||||||||||||||||||||
|
| March 31, 2023 |
|
| December 31, 2022 |
|
| September 30, 2023 |
|
| December 31, 2022 |
| ||||||||||||||||||||
|
| Fixed Rate |
|
| Variable |
|
| Fixed Rate |
|
| Variable |
|
| Fixed Rate |
|
| Variable |
|
| Fixed Rate |
|
| Variable |
| ||||||||
Commitment to extend credit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Lines of credit and construction loans |
| $ | 49,661 |
|
| $ | 615,797 |
|
| $ | 42,184 |
|
| $ | 599,185 |
|
| $ | 62,910 |
|
| $ | 692,184 |
|
| $ | 42,184 |
|
| $ | 599,185 |
|
Overdraft protection |
|
| 10 |
|
|
| 45,518 |
|
|
| 10 |
|
|
| 45,182 |
|
|
| 10 |
|
|
| 45,606 |
|
|
| 10 |
|
|
| 45,182 |
|
Letters of credit |
|
| 960 |
|
|
| 708 |
|
|
| 960 |
|
|
| 630 |
|
|
| 875 |
|
|
| 424 |
|
|
| 960 |
|
|
| 630 |
|
|
| $ | 50,631 |
|
| $ | 662,023 |
|
| $ | 43,154 |
|
| $ | 644,997 |
|
| $ | 63,795 |
|
| $ | 738,214 |
|
| $ | 43,154 |
|
| $ | 644,997 |
|
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 3.102.66% to 8.5014.00% at March 31,September 30, 2023 and from 3.25% to 8.00% at December 31, 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. No reserve balance was maintained, or required to be maintained, in accordance with such requirements at March 31,September 30, 2023 and December 31, 2022.
Page 3031
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 cost was as follows:
|
| Three months ended |
|
| Three months ended |
|
| Nine Months Ended |
| |||||||||||||||
|
| March 31, |
|
| September 30, |
|
| September 30, |
| |||||||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||
Service cost |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
Interest cost |
|
| 125 |
|
|
| 103 |
|
|
| 125 |
|
|
| 103 |
|
|
| 376 |
|
|
| 310 |
|
Expected return on plan assets |
|
| (132 | ) |
|
| (144 | ) |
|
| (132 | ) |
|
| (144 | ) |
|
| (397 | ) |
|
| (432 | ) |
Other components |
|
| — |
|
|
| 69 |
|
|
| — |
|
|
| 69 |
|
|
| — |
|
|
| 208 |
|
Net periodic pension cost |
| $ | (7 | ) |
| $ | 28 |
|
| $ | (7 | ) |
| $ | 28 |
|
| $ | (21 | ) |
| $ | 86 |
|
The Company does not expect to make any contribution to its pension plan in 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 71,86660,049 common shares available for future grants under this plan at March 31,September 30, 2023.
No options were granted under the 2014 Incentive Plan during the periodsnine- months ended March 31,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.
The Company classifies share-based compensation for employees with “Compensation expense” in the Consolidated Statements of Operations.
The following is a summary of the Company’s outstanding restricted common shares and changes therein for the three-monththree- and nine-month periods ended March 31,September 30, 2023:
|
| Three months ended |
|
| Three months ended |
|
| Nine Months Ended |
| |||||||||||||||
|
| March 31, 2023 |
|
| September 30, 2023 |
|
| September 30, 2023 |
| |||||||||||||||
|
| Number of |
|
| Weighted |
|
| Number of |
|
| Weighted |
|
| Number of |
|
| Weighted |
| ||||||
Nonvested at beginning of period |
|
| 70,475 |
|
| $ | 21.88 |
|
|
| 88,422 |
|
| $ | 21.98 |
|
|
| 70,096 |
|
| $ | 21.88 |
|
Granted |
|
| 47,536 |
|
|
| 21.85 |
|
|
| — |
|
|
| — |
|
|
| 47,536 |
|
|
| 21.85 |
|
Vested |
|
| (27,694 | ) |
|
| 21.52 |
|
|
| — |
|
|
| — |
|
|
| (27,470 | ) |
|
| 21.52 |
|
Forfeited |
|
| (1,740 | ) |
|
| 21.74 |
|
|
| — |
|
|
| — |
|
|
| (1,740 | ) |
|
| 21.74 |
|
Nonvested at end of period |
|
| 88,577 |
|
| $ | 21.98 |
|
|
| 88,422 |
|
| $ | 21.98 |
|
|
| 88,422 |
|
| $ | 21.98 |
|
Page 3132
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 outstanding restricted common shares as of March 31,September 30, 2023:
At March 31, 2023 |
| |||||||||||||||||||||||
At September 30, 2023 | At September 30, 2023 |
| ||||||||||||||||||||||
Date of Award |
| Shares |
|
| Remaining Expense |
|
| Remaining Vesting |
|
| Shares |
|
| Remaining Expense |
|
| Remaining Vesting |
| ||||||
March 14, 2019 |
|
| 1,924 |
|
| $ | 28 |
|
|
| 0.75 |
|
|
| 1,924 |
|
| $ | 9 |
|
|
| 0.25 |
|
March 14, 2020 |
|
| 4,265 |
|
|
| 72 |
|
|
| 1.75 |
|
|
| 4,265 |
|
|
| 51 |
|
|
| 1.25 |
|
March 3, 2021 |
|
| 7,776 |
|
|
| 125 |
|
|
| 2.75 |
|
|
| 7,776 |
|
|
| 103 |
|
|
| 2.25 |
|
March 3, 2021 |
|
| 6,852 |
|
|
| 98 |
|
|
| 0.75 |
|
|
| 6,793 |
|
|
| 33 |
|
|
| 0.25 |
|
March 3, 2022 |
|
| 9,554 |
|
|
| 204 |
|
|
| 3.75 |
|
|
| 9,554 |
|
|
| 177 |
|
|
| 3.25 |
|
March 3, 2022 |
|
| 11,357 |
|
|
| 223 |
|
|
| 1.75 |
|
|
| 11,261 |
|
|
| 160 |
|
|
| 1.25 |
|
March 14, 2023 |
|
| 17,103 |
|
|
| 337 |
|
|
| 4.75 |
|
|
| 17,103 |
|
|
| 296 |
|
|
| 4.25 |
|
March 14, 2023 |
|
| 29,746 |
|
|
| 588 |
|
|
| 2.75 |
|
|
| 29,746 |
|
|
| 466 |
|
|
| 2.25 |
|
|
| 88,577 |
|
| $ | 1,675 |
|
|
| 2.87 |
|
|
| 88,422 |
|
| $ | 1,295 |
|
|
| 2.37 |
|
The Company recorded $230191 and $178153 of share-based compensation expense during the three months ended March 31,September 30, 2023 and 2022, respectively. At March 31,September 30, 2023, the total compensation cost related to unvested awards not yet recognized was $1,6751,296, which was expected to be recognized over the weighted average remaining life of the grants of 2.872.37 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: 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-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 value of these equity securities available-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 3233
Civista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
Assets and liabilities measured at fair value are summarized in the tables below.
|
| Fair Value Measurements at March 31, 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. |
| $ | — |
|
| $ | 62,513 |
|
| $ | — |
|
Obligations of states and political subdivisions |
|
| — |
|
|
| 330,638 |
|
|
| — |
|
Mortgage-backed securities in government sponsored |
|
| — |
|
|
| 234,556 |
|
|
| — |
|
Total securities available-for-sale |
|
| — |
|
|
| 627,707 |
|
|
| — |
|
Equity securities |
|
| — |
|
|
| 2,122 |
|
|
| — |
|
Swap asset |
|
| — |
|
|
| 13,350 |
|
|
| — |
|
Liabilities measured at fair value on a recurring basis: |
|
|
|
|
|
|
|
|
| |||
Swap liability |
| $ | — |
|
| $ | 13,350 |
|
| $ | — |
|
Assets measured at fair value on a nonrecurring basis: |
|
|
|
|
|
|
|
|
| |||
Mortgage servicing rights |
| $ | — |
|
| $ | — |
|
| $ | 3,059 |
|
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 |
|
Page 33
Civista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
The following tables present quantitative information about the Level 3 significant unobservable inputs for assets and liabilities measured at fair value on a nonrecurring basis as of March 31,September 30, 2023 and December 31, 2022.
|
| Quantitative Information about Level 3 Fair Value Measurements |
| Quantitative Information about Level 3 Fair Value Measurements | ||||||||||||||||||||
March 31, 2023 |
| Fair Value |
|
| Valuation Technique |
| Unobservable Input |
| Range |
| Weighted Average | |||||||||||||
September 30, 2023 |
| Fair Value |
|
| Valuation Technique |
| Unobservable Input |
| Range |
| Weighted Average | |||||||||||||
Mortgage Servicing |
| $ | 3,059 |
|
| Discounted Cash Flow |
| Constant Prepayment |
| 3% - 11.5% |
| 6% |
| $ | 3,046 |
|
| Discounted Cash Flow |
| Constant Prepayment |
| 4.3% - 10.4% |
| 6% |
|
|
|
| Discount Rate |
| 12% |
| 12% |
|
|
| 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% |
The carrying amount and fair values of financial instruments not measured at fair value on a recurring or nonrecurring basis at March 31, 2023 were as follows:
March 31, 2023 |
| Carrying |
|
| Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| |||||
Financial Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Cash and due from financial institutions |
| $ | 52,723 |
|
| $ | 52,723 |
|
| $ | 52,723 |
|
| $ | — |
|
| $ | — |
|
Other securities |
|
| 35,383 |
|
|
| 35,383 |
|
|
| 35,383 |
|
|
| — |
|
|
| — |
|
Loans, held for sale |
|
| 1,465 |
|
|
| 1,495 |
|
|
| 1,495 |
|
|
| — |
|
|
| — |
|
Loans, net of allowance |
|
| 2,545,870 |
|
|
| 2,450,816 |
|
|
| — |
|
|
| — |
|
|
| 2,450,816 |
|
Bank owned life insurance |
|
| 53,796 |
|
|
| 53,796 |
|
|
| 53,796 |
|
|
| — |
|
|
| — |
|
Accrued interest receivable |
|
| 10,254 |
|
|
| 10,254 |
|
|
| 10,254 |
|
|
| — |
|
|
| — |
|
Financial Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Nonmaturing deposits |
|
| 2,316,737 |
|
|
| 2,316,737 |
|
|
| 2,316,737 |
|
|
| — |
|
|
| — |
|
Time deposits |
|
| 526,779 |
|
|
| 529,525 |
|
|
| — |
|
|
| — |
|
|
| 529,525 |
|
Short-term FHLB advances |
|
| 212,000 |
|
|
| 211,595 |
|
|
| 211,595 |
|
|
| — |
|
|
| — |
|
Long-term FHLB advances |
|
| 3,361 |
|
|
| 3,047 |
|
|
| — |
|
|
| — |
|
|
| 3,047 |
|
Other borrowings |
|
| 13,938 |
|
|
| 14,199 |
|
|
| — |
|
|
| — |
|
|
| 14,199 |
|
Securities sold under agreement to repurchase |
|
| 15,631 |
|
|
| 15,631 |
|
|
| 15,631 |
|
|
| — |
|
|
| — |
|
Subordinated debentures |
|
| 103,841 |
|
|
| 102,529 |
|
|
| — |
|
|
| — |
|
|
| 102,529 |
|
Accrued interest payable |
|
| 1,628 |
|
|
| 1,628 |
|
|
| 1,628 |
|
|
| — |
|
|
| — |
|
Page 34
Civista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
The carrying amount and fair values of financial instruments not measured at fair value on a recurring or nonrecurring basis at September 30, 2023 were as follows:
September 30, 2023 |
| Carrying |
|
| Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| |||||
Financial Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Cash and due from financial institutions |
| $ | 50,316 |
|
| $ | 50,316 |
|
| $ | 50,316 |
|
| $ | — |
|
| $ | — |
|
Other securities |
|
| 34,224 |
|
|
| 34,224 |
|
|
| 34,224 |
|
|
| — |
|
|
| — |
|
Loans, held for sale |
|
| 1,589 |
|
|
| 1,589 |
|
|
| 1,589 |
|
|
| — |
|
|
| — |
|
Loans, net of allowance |
|
| 2,719,610 |
|
|
| 2,627,715 |
|
|
| — |
|
|
| — |
|
|
| 2,627,715 |
|
Bank owned life insurance |
|
| 54,053 |
|
|
| 54,053 |
|
|
| 54,053 |
|
|
| — |
|
|
| — |
|
Accrued interest receivable |
|
| 11,489 |
|
|
| 11,489 |
|
|
| 11,489 |
|
|
| — |
|
|
| — |
|
Financial Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Nonmaturing deposits |
|
| 2,139,757 |
|
|
| 2,139,782 |
|
|
| 2,139,782 |
|
|
| — |
|
|
| — |
|
Time deposits |
|
| 655,986 |
|
|
| 653,827 |
|
|
| — |
|
|
| — |
|
|
| 653,827 |
|
Short-term FHLB advances |
|
| 431,500 |
|
|
| 430,534 |
|
|
| 430,534 |
|
|
| — |
|
|
| — |
|
Long-term FHLB advances |
|
| 2,573 |
|
|
| 2,543 |
|
|
| — |
|
|
| — |
|
|
| 2,543 |
|
Other borrowings |
|
| 10,964 |
|
|
| 10,964 |
|
|
| — |
|
|
| — |
|
|
| 10,964 |
|
Securities sold under agreement to repurchase |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Subordinated debentures |
|
| 103,921 |
|
|
| 99,264 |
|
|
| — |
|
|
| — |
|
|
| 99,264 |
|
Accrued interest payable |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
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 35
Civista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
(14) Derivatives
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.
Page 35
Civista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
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 reflects the derivatives recorded on the balance sheet:
|
| March 31, 2023 |
|
| December 31, 2022 |
|
| September 30, 2023 |
|
| December 31, 2022 |
| ||||||||||||||||||||
|
| Notional |
|
| Fair Value |
|
| Notional |
|
| Fair Value |
|
| Notional |
|
| Fair Value |
|
| Notional |
|
| Fair Value |
| ||||||||
Included in other assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Interest rate swaps with loan customers in an |
| $ | 19,275 |
|
| $ | 726 |
|
| $ | 6,980 |
|
| $ | 269 |
|
| $ | 2,250 |
|
| $ | 11 |
|
| $ | 6,980 |
|
| $ | 269 |
|
Counterparty positions with financial institutions |
|
| 211,117 |
|
|
| 12,624 |
|
|
| 212,570 |
|
|
| 16,310 |
|
|
| 207,225 |
|
|
| 19,773 |
|
|
| 212,570 |
|
|
| 16,310 |
|
Total included in other assets |
|
|
|
| $ | 13,350 |
|
|
|
|
| $ | 16,579 |
|
|
|
|
| $ | 19,784 |
|
|
|
|
| $ | 16,579 |
| ||||
Included in accrued expenses and other liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Interest rate swaps with loan customers in a |
| $ | 191,842 |
|
| $ | 13,350 |
|
| $ | 205,590 |
|
| $ | 16,579 |
|
| $ | 204,975 |
|
| $ | 19,784 |
|
| $ | 205,590 |
|
| $ | 16,579 |
|
Counterparty positions with financial institutions |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total included in accrued expenses and |
|
|
| $ | 13,350 |
|
|
|
|
| $ | 16,579 |
|
|
|
| $ | 19,784 |
|
|
|
|
| $ | 16,579 |
| ||||||
Gross notional positions with customers |
| $ | 211,117 |
|
|
|
| $ | 212,570 |
|
|
|
|
| $ | 207,225 |
|
|
|
| $ | 212,570 |
|
|
|
| ||||||
Gross notional positions with financial institution |
| $ | 211,117 |
|
|
|
| $ | 212,570 |
|
|
|
|
| $ | 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 assets and liabilities for the prior period was not impacted.
The effect of swap fair value changes on the Consolidated Statement of Operations are as follows:
|
| 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 |
|
|
|
|
|
| ||
Interest rate swaps related to customer loans |
| Other income |
| $ | — |
|
| $ | — |
|
Total |
|
|
| $ | — |
|
| $ | — |
|
The Company monitors and controls all derivative products with a comprehensive Board of Director approved commercial loan swap policy. All interest 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 with “Other”in other noninterest income in the Consolidated Statements of Operation.
At March 31,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 36
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 March 31,September 30, 2023 and December 31, 2022, the balance of the Company's investments in qualified affordable housing projects was $13,90613,401 and $14,149, respectively. These balances are reflected in the Other assets line on the Consolidated Balance Sheet. The unfunded commitments related to the investments in qualified affordable housing projects totaled $5,4933,913 and $5,634 at March 31,September 30, 2023 and December 31, 2022, respectively. These balances are reflected in the Accrued expenses and other liabilities line on the Consolidated Balance Sheet.
Page 36
Civista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
During the three months ended March 31,September 30, 2023 and 2022, the Company recognized amortization expense with respect to its investments in qualified affordable housing projects of $243252 and $239, respectively, offset by tax credits and other benefits from its investments in affordable housing tax credits of $364426 and $390396, respectively. During the three monthsthree- and nine-months ended March 31,September 30, 2023 and 2022, the Company did not incur any impairment losses related to its investments in qualified affordable housing projects.
(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 ASC 606 and accounted 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 deposit 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 the 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 the 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 refunds 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 this 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.
Page 37
Civista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
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 other 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 customer on an annual basis and recognized 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 monthsthree- and nine-months ended March 31, 2023.September 30, 2023 and 2022.
|
| Three Months Ended |
|
| Three Months Ended |
|
| Nine Months Ended |
| |||||||||||||||
|
| March |
|
| September 30, |
|
| September 30, |
| |||||||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||
Noninterest Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
In-scope of Topic 606: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Service charges |
| $ | 1,773 |
|
| $ | 1,579 |
|
| $ | 1,853 |
|
| $ | 1,885 |
|
| $ | 5,457 |
|
| $ | 5,004 |
|
ATM/Interchange fees |
|
| 1,353 |
|
|
| 1,241 |
|
|
| 1,424 |
|
|
| 1,394 |
|
|
| 4,227 |
|
|
| 3,990 |
|
Wealth management fees |
|
| 1,193 |
|
|
| 1,277 |
|
|
| 1,197 |
|
|
| 1,208 |
|
|
| 3,570 |
|
|
| 3,713 |
|
Tax refund processing fees |
|
| 1,900 |
|
|
| 1,900 |
|
|
| — |
|
|
| — |
|
|
| 2,375 |
|
|
| 2,375 |
|
Other |
|
| 4,136 |
|
|
| 277 |
|
|
| 646 |
|
|
| 274 |
|
|
| 3,500 |
|
|
| 574 |
|
Noninterest Income (in-scope of Topic 606) |
|
| 10,355 |
|
|
| 6,274 |
|
|
| 5,120 |
|
|
| 4,761 |
|
|
| 19,129 |
|
|
| 15,656 |
|
Noninterest Income (out-of-scope of Topic 606) |
|
| 713 |
|
|
| 1,369 |
|
|
| 3,005 |
|
|
| 973 |
|
|
| 9,213 |
|
|
| 3,356 |
|
Total Noninterest Income |
| $ | 11,068 |
|
| $ | 7,643 |
|
| $ | 8,125 |
|
| $ | 5,734 |
|
| $ | 28,342 |
|
| $ | 19,012 |
|
Page 38
Civista Bancshares, Inc.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Form 10-Q
(Amounts in thousands, except share data)
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 March 31,September 30, 2023 compared to December 31, 2022, and the consolidated results of operations for the three-monththree- and nine-month periods ended March 31,September 30, 2023, compared to the same periods in 2022. This discussion should be read in conjunction with the Consolidated 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 those discussed in the forward-looking statements include, but are not limited 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 March 31,September 30, 2023 were $3,584,558$3,732,916 compared to $3,537,830 at December 31, 2022, an increase of $46,728,$195,086, or 1.3%5.5%. The increase in total assets was due to increases in cash and cash equivalentsnet loans of $9,362,$201,455, accompanied by other increases in securities available for sale, other securities and loans of $12,305, $1,798 and $27,715, respectively, partially offset by decreases in office premises and equipment, net andcash, swap assets and deferred taxes of $2,123$6,955, $3,205, and $3,229,$9,103, respectively. Total liabilities at March 31,September 30, 2023 were $3,236,861$3,400,171 compared to $3,202,995 at December 31, 2022, an increase of $33,866,$197,176, or 1.1%6.2%. The increase in total liabilities was primarily attributable to an increase in total deposit accounts of $223,532,$175,759 accompanied by an increase in tax refunds in processshort term FHLB borrowings of $37,800, swap liabilities of $3,205 and accrued interest, taxes and other liabilities of $5,474 and $2,392, respectively,$10,358, partially offset by decreases in shortlong term FHLB borrowings, securities sold under agreements to repurchase, and swap liabilitiesother borrowings of $181,700, $9,512$1,005, $25,143 and $3,229,$4,552 respectively.
Page 40
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 March 31,September 30, 2023 and December 31, 2022 were as follows:
|
| March 31, 2023 |
|
| December 31, 2022 |
|
| $ Change |
|
| % Change |
|
| September 30, 2023 |
|
| December 31, 2022 |
|
| $ Change |
|
| % Change |
| ||||||||
Commercial & Agriculture |
| $ | 271,160 |
|
| $ | 278,595 |
|
| $ | (7,435 | ) |
|
| -2.7 | % |
| $ | 301,877 |
|
| $ | 278,595 |
|
| $ | 23,282 |
|
|
| 8.4 | % |
Commercial Real Estate—Owner Occupied |
|
| 375,825 |
|
|
| 371,147 |
|
|
| 4,678 |
|
|
| 1.3 | % |
|
| 375,851 |
|
|
| 371,147 |
|
|
| 4,704 |
|
|
| 1.3 | % |
Commercial Real Estate—Non-Owner Occupied |
|
| 1,043,635 |
|
|
| 1,018,736 |
|
|
| 24,899 |
|
|
| 2.4 | % |
|
| 1,102,932 |
|
|
| 1,018,736 |
|
|
| 84,196 |
|
|
| 8.3 | % |
Residential Real Estate |
|
| 560,978 |
|
|
| 552,781 |
|
|
| 8,197 |
|
|
| 1.5 | % |
|
| 614,304 |
|
|
| 552,781 |
|
|
| 61,523 |
|
|
| 11.1 | % |
Real Estate Construction |
|
| 247,253 |
|
|
| 243,127 |
|
|
| 4,126 |
|
|
| 1.7 | % |
|
| 269,291 |
|
|
| 243,127 |
|
|
| 26,164 |
|
|
| 10.8 | % |
Farm Real Estate |
|
| 24,040 |
|
|
| 24,708 |
|
|
| (668 | ) |
|
| -2.7 | % |
|
| 24,109 |
|
|
| 24,708 |
|
|
| (599 | ) |
|
| -2.4 | % |
Lease Financing Receivables |
|
| 37,570 |
|
|
| 36,797 |
|
|
| 773 |
|
|
| 2.1 | % |
|
| 48,259 |
|
|
| 36,797 |
|
|
| 11,462 |
|
|
| 31.1 | % |
Consumer and Other |
|
| 19,605 |
|
|
| 20,775 |
|
|
| (1,170 | ) |
|
| -5.6 | % |
|
| 18,267 |
|
|
| 20,775 |
|
|
| (2,508 | ) |
|
| -12.1 | % |
Total loans |
|
| 2,580,066 |
|
|
| 2,546,666 |
|
|
| 33,400 |
|
|
| 1.3 | % |
|
| 2,754,890 |
|
|
| 2,546,666 |
|
|
| 208,224 |
|
|
| 8.2 | % |
Allowance for credit losses |
|
| (34,196 | ) |
|
| (28,511 | ) |
|
| (5,685 | ) |
|
| 19.9 | % |
|
| (35,280 | ) |
|
| (28,511 | ) |
|
| (6,769 | ) |
|
| 23.7 | % |
Net loans |
| $ | 2,545,870 |
|
| $ | 2,518,155 |
|
| $ | 27,715 |
|
|
| 1.1 | % |
| $ | 2,719,610 |
|
| $ | 2,518,155 |
|
| $ | 201,455 |
|
|
| 8.0 | % |
Included in Commercial & Agriculture loans above were $464$370 of PPP loans as of March 31,September 30, 2023 and $566 of PPP loans as of December 31, 2022.
Loans held for sale increased $782,$906, or 114.5%132.7%, since December 31, 2022. The increase was due to increases in both the number of loans and average loan balance held for sale. At March 31,September 30, 2023, 106 loans totaling $1,465$1,589 were held for sale as compared to 7 loans totaling $683 at December 31, 2022.
Net loans have increased $27,715,$201,455, or 1.1%8.0%, since December 31, 2022. The increase at September 30, 2023 can be attributed to all categories, primarily Commercial Real Estate – Owner Occupied, Commercial Real Estate – Non-Owner Occupied,and Residential Real Estate, Real Estate Construction and Lease Financing Receivables loan portfolios increased $4,678, $24,899, $8,197, $4,126 and $773, respectively, since December 31, 2022, while the Commercial & Agriculture, FarmEstate.Farm Real Estate and Consumer and Other loan portfolios decreased $7,435, $668 and $1,170, respectively, since December 31, 2022.showed small decreases. At March 31,September 30, 2023, the net loan to deposit ratio was 89.5%97.3% compared to 96.1% at December 31, 2022. The decreaseincrease in the net loan to deposit ratio is primarily the result of an increase in deposits.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 quartersix months of 2023 we recorded a provision for credit losses of $620,$2,111, an increase of $320,$1,111, from $300$1,000 during the three months ended March 31,same period of 2022. The increase in the reserves was principally related to loan growth during the quarter.first nine months of 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.
Net charge-offschargeoffs for the first threenine months of 2023 totaled $175,$535, compared to net recoveries of $92$133 in the first threenine months of 2022. For the first threenine months of 2023, the Company charged off a total of 1552 loans. FiveFourteen Commercial and Agriculture loanloans totaling $140, one$754, three Residential Real Estate loanloans totaling $10$12 and ninethirty five Consumer and Other loans totaling $25$89 were charged off in the first threenine months of the year. In addition, during the first threenine months of 2023, the Company had recoveries on previously charged-off Commercial and Agriculture loans of $6,$129, Commercial Real Estate – Non-Owner Occupied loans of $7,$24, Residential Real Estate loans of $22,$119, Real Estate Construction loans of $4$13 and Consumer and Other loans of $8.$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 $520 since December 31, 2022, which was due to a $473 increase in loans on nonaccrual status and an increase in loans past due 90 days and accruing of $47. 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 individually 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 individually evaluated when it is in nonaccrual status or when an analysis of the borrower’s operating results and financial condition indicates that underlying cash flows are not adequate to meet its debt service requirements. Loans 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 credit losses as a percent of total loans was 1.33%1.28% at March 31,September 30, 2023 and 1.12% at December 31, 2022.
The available-for-sale security portfolio increaseddecreased by $12,305,$21,915, from $615,402 at December 31, 2022 to $627,707$593,487 at March 31,September 30, 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 March 31,September 30, 2023, the Company was in compliance with all pledging requirements.
Premises and equipment, net, decreased $2,123$5,029 from December 31, 2022 to March 31,September 30, 2023. The decrease is primarily the result of new purchasesequipment depreciation associated with CLF of $1,245, offset by depreciation of $2,676 and disposals of $692.$4,757.
Goodwill decreased by $617, from $125,695 at December 31, 2022 to $125,078 at March 31,September 30, 2023. The decrease is due to adjustments to estimated fair values of the assets acquired and liabilities assumed since the date of acquisition.
Bank owned life insurance (BOLI) increased $253$510 from December 31, 2022 to March 31,September 30, 2023. The increase is the result of increases in the cash surrender value of the underlying insurance policies.
Swap assets decreased $3,229increased $3,205 from December 31, 2022 to March 31,September 30, 2023. The decreaseincrease is primarily the result of a decreasean increase in market value.
Total deposits as of March 31,September 30, 2023 and December 31, 2022 were as follows:
|
| March 31, 2023 |
|
| December 31, 2022 |
|
| $ Change |
|
| % Change |
|
| September 30, 2023 |
|
| December 31, 2022 |
|
| $ Change |
|
| % Change |
| ||||||||
Noninterest-bearing demand |
| $ | 938,967 |
|
| $ | 896,333 |
|
| $ | 42,634 |
|
|
| 4.8 | % |
| $ | 802,614 |
|
| $ | 896,333 |
|
| $ | (93,719 | ) |
|
| -10.5 | % |
Interest-bearing demand |
|
| 541,027 |
|
|
| 527,879 |
|
|
| 13,148 |
|
|
| 2.5 | % |
|
| 464,338 |
|
|
| 527,879 |
|
|
| (63,541 | ) |
|
| -12.0 | % |
Savings and money market |
|
| 836,743 |
|
|
| 876,427 |
|
|
| (39,684 | ) |
|
| -4.5 | % |
|
| 872,805 |
|
|
| 876,427 |
|
|
| (3,622 | ) |
|
| -0.4 | % |
Time deposits |
|
| 526,779 |
|
|
| 319,345 |
|
|
| 207,434 |
|
|
| 65.0 | % |
|
| 655,986 |
|
|
| 319,345 |
|
|
| 336,641 |
|
|
| 105.4 | % |
Total Deposits |
| $ | 2,843,516 |
|
| $ | 2,619,984 |
|
| $ | 223,532 |
|
|
| 8.5 | % |
| $ | 2,795,743 |
|
| $ | 2,619,984 |
|
| $ | 175,759 |
|
|
| 6.7 | % |
The Company had approximately $594,376$494,799 and $563,092 of uninsured deposits as of March 31,September 30, 2023 and December 31, 2022, respectively. Uninsured deposit amounts are estimated based on the portions of customer account balances that exceed the FDIC insurance limit of $250,000.
Total deposits at March 31,September 30, 2023 increased $223,532$175,759 from year-end 2022. Noninterest-bearing deposits increased $42,634decreased $93,719 from year-end 2022, while interest-bearing deposits, including savings and time deposits, increased $180,898$269,478 from December 31, 2022. TheThis increase was partially offset by a $71,547 decrease in noninterest-bearing depositsbusiness accounts and a $32,283 decrease in noninterest-bearing personal accounts. The $63,541 decrease in interest-bearing demand accounts was partially due to increases in cash balances related to the Company’s participation in a tax refund processing program, which added noninterest-bearing deposits of $82,013. This increase is temporary as transactions are processedspread across personal, business, and is expected to return to levels more consistent with December 31, 2022 over the next two quarters. In addition, public fund demand depositaccounts. The decrease in money market and savings accounts increased $10,350, offset by decreases in personal and business demand deposit accounts of $7,497 and $37,690, respectively. The increase in interest-bearing deposits was primarily due to increases in brokered deposits and public fund interest-bearing demand accounts of $201,201 and $15,796, respectively, accompanied by decreasesa $62,521 decrease in statement savings, business savings andpartially offset by a $22,593 increase in money market savings accounts of $14,539, $5,179 and $19,060, respectively. Timeaccounts. The increase in time certificates over $250,was primarily due to a $202,500 increase in brokered time deposits. Jumbo time certificates also increased $61,382 while retail time certificates increased $3,732 from year-end 2022.$28,763. The year-to-date average balance of total deposits increased $68,486,$198,861, compared to the average balance for the same period in 2022, mainly due to a $67,788$247,228 increase in the average balance of time deposits.
Short-term FHLB advances decreased $181,700increased $37,800 from December 31, 2022 to March 31,September 30, 2023. The decreaseincrease is due to funding needs to support loan growth.
Securities sold under agreements to repurchase, which tend to fluctuate based on the repaymentliquidity needs of overnight borrowings.customers and short-term nature of the instrument, decreased $25,143 from December 31, 2022 to September 30, 2023.
Page 42
Civista Bancshares, Inc.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Form 10-Q
(Amounts in thousands, except share data)
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 $9,512purchased payable increased $417 from December 31, 2022 to March 31, 2023.
Securities purchased payable decreased $1,338 from December 31, 2022 to March 31,September 30, 2023. The decreaseincrease is primarily the result of a decreasean increase in accounts payable related to securities purchased but not yet funded of $1,338.
Tax refunds in process increased $5,474 from December 31, 2022 to March 31, 2023. The increase is primarily the result of an increase in a clearing account related to our tax refund processing program of $5,474.funded.
Swap liabilities decreased $3,229increased $3,205 from December 31, 2022 to March 31,September 30, 2023. The decreaseincrease of $3,229$147 is primarily the result of a decreasean increase in fair value of swap liabilities.
Accrued expenses and other liabilities increased $2,392$10,358 from December 31, 2022 to March 31,September 30, 2023. The increase is primarily the result of an increase in allowance for credit losses on unfunded commitments of $3,587$3,851 as a result of the Company's adoption of ASU 2013-16.
Shareholders’ equity at March 31,September 30, 2023 was $347,697,$332,745, or 9.7%8.9% of total assets, compared to $334,835, or 9.5% of total assets, at December 31, 2022. The increasedecrease was the result of an increasea decrease in the fair value of securities available-for-sale, net of tax, of $8,135 and net$21,417. Net income of $12,888,$33,309, partially offset by dividends on common shares of $2,201,$7,088, the purchase of treasury shares of $121$1,497 and the one-time cumulative effect of adopting ASU 2016-13 of $6,069.$8,774.
Total outstanding common shares at March 31,September 30, 2023 were 15,768,410,15,695,997, which increased from 15,728,234 common shares outstanding at December 31, 2022. Common shares outstanding increased due to the grant of 47,536 restricted common shares to certain officers under the Company’s 2014 Incentive Plan, offset by 5,620 common shares surrendered by officers to the Company to pay taxes upon vesting of restricted shares and 1,740 restricted common shares forfeited.
Results of Operations
Three Months Ended March 31,September 30, 2023 and 2022
The Company had net income of $12,888$10,387 for the three months ended March 31,September 30, 2023, an increasedecrease of $4,422$725 from net income of $8,466$11,112 for the same three months of 2022. Basic earnings per common share were $0.82$0.66 for the quarter ended March 31,September 30, 2023, compared to $0.57$0.72 for the same period in 2022. Diluted earnings per common share were $0.82$0.66 for the quarter ended March 31,September 30, 2023, compared to $0.57$0.72 for the same period in 2022. The primary reasons for the changes in net income are explained below.
Net interest income for the three months ended March 31,September 30, 2023 was $32,601,$31,504, an increase of $9,669$1,065 from $22,932$30,439 for the same three months of 2022. This increase is the result of an increase of $16,873$13,253 in total interest income, offset by an increase of $7,204$12,188 in interest expense. Interest-earning assets averaged $3,211,902$3,380,169 during the three months ended March 31,September 30, 2023, an increase of $397,313$377,913 from $2,814,589$3,002,256 for the same period of 2022. The Company’s average interest-bearing liabilities increased from $1,828,283$1,893,092 during the three months ended March 31,September 30, 2022 to $2,207,592$2,315,118 during the three months ended March 31,September 30, 2023. The Company’s fully tax equivalent net interest margin for the three months ended March 31,September 30, 2023 and 2022 was 4.11%3.69% and 3.38%4.03%, respectively.
Total interest and dividend income was $41,539$45,786 for the three months ended March 31,September 30, 2023, an increase of $16,873$13,253 from $24,666$32,533 of total interest and dividend income for the same period in 2022. The increase in interest and dividend income is attributable to increasesa $12,556 increase in interest and fees on loans, anda $63 increase in interest income on taxable securities and a $338 increase in tax-exempt securities of $15,360, $1,114,securities. The $12,556 increase in interest and $473, respectively. Interestfees on loans increased $15,360is attributable to $36,398 for the three months ended March 31, 2023,average balances as compared to $21,038 for the same period in 2022.well as loan yield. The average balance of loans increased by $541,534,$390,091, or 27.0%17.0%, to $2,548,518$2,679,679 for the three months ended March 31,September 30, 2023 as compared to $2,006,984$2,289,588 for the same period in 2022. The loan yield increased to 5.79%5.88% for the three months ended March 31,September 30, 2023, from 4.25%4.71% for the same period in 2022.
Page 43
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 $1,114 to $2,834$2.999 for the three months ended March 31,September 30, 2023, compared to $1,720$2,936 for the same period in 2022. The average balance of taxable securities increased $60,358 to $374,851was $359,154 for the three months ended March 31,September 30, 2023, as compared to $314,493$354,597 for the same period in 2022. The yield on taxable securities increased 57decreased 11 basis points to 2.77%2.95% for 2023, compared to 2.20%3.06% for 2022. Interest on tax-exempt securities increased $473$338 to $2,262$2,336 for the three months ended March 31,September 30, 2023, compared to $1,789$1,998 for the same period in 2022. The average balance of tax-exempt securities increased $20,270$17,721 to $281,136$286,048 for the three months ended March 31,September 30, 2023, as compared to $260,866$268,327 for the same period in 2022. The yield on tax-exempt securities decreased 14increased 30 basis points to 3.81%3.77% for 2023, compared to 3.67%3.47% for 2022 .
Interest expense increased $7,204,$12,188, or 415.5%582.0%, to $8,938$14,282 for the three months ended March 31,September 30, 2023, compared with $1,734$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, accompanied by increases in rates.liabilities. For the three months ended March 31,September 30, 2023, the average balance of interest-bearing liabilities increased $379,309$422,026 to $2,207,592,$2,315,118 as compared to $1,828,283$1,893,092 for the same period in 2022. Interest incurred on deposits decreasedincreased by $2,527$8,648 to $3,232$9,584 for the three months ended March 31,September 30, 2023, compared to $705$936 for the same period in 2022. The average balance of interest-bearing deposits increased by $68,486 for the three months ended March 31, 2023,$227,999, as compared to the same period in 2022, accompanied by an increase in2022. Additionally, the rate paid on demand and savings and time depositsdeposit accounts increased from 0.79%0.21% in 2022 to 2.82%1.93% in 2023. Interest expense incurredThe average balance on short-termlong-term FHLB advances increasedbalances decreased $22,692 as a result of highera prepayment, while the rate paid increased 17 basis points. In addition, the average balances onbalance of short-term FHLB advances of $371,868 for the three months ended March 31, 2023, asbalances increased $226,834, compared to the same period in 2022, as a result of increased overnight borrowings. Interest expense incurred on subordinated debentures increased $333, to $1,169 for the three months ended March 31, 2023, compared to $836 for the same period in 2022. The rate paid on subordinated debentures increased from 3.27%100 basis points for the three-month period ended September 30, 2023, as compared to the same period in 2022 to 4.57% in 20232022.
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 three months ended March 31,September 30, 2023 and 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 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 March 31, |
|
| Three Months Ended September 30, |
| ||||||||||||||||||||||||||||||||||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||||||||||||||||||||||||||||||
Assets: |
| Average |
|
| Interest |
|
| Yield/ |
|
| Average |
|
| Interest |
|
| Yield/ |
|
| Average |
|
| Interest |
|
| Yield/ |
|
| Average |
|
| Interest |
|
| Yield/ |
| ||||||||||||
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Loans, including fees** |
| $ | 2,548,518 |
|
| $ | 36,398 |
|
|
| 5.79 | % |
| $ | 2,006,984 |
|
| $ | 21,038 |
|
|
| 4.25 | % |
| $ | 2,679,679 |
|
| $ | 39,732 |
|
|
| 5.86 | % |
| $ | 2,289,588 |
|
| $ | 27,176 |
|
|
| 4.71 | % |
Taxable securities |
|
| 374,851 |
|
|
| 2,834 |
|
|
| 2.77 | % |
|
| 314,493 |
|
|
| 1,720 |
|
|
| 2.20 | % |
|
| 359,154 |
|
|
| 2,999 |
|
|
| 2.95 | % |
|
| 354,597 |
|
|
| 2,936 |
|
|
| 3.06 | % |
Tax-exempt securities |
|
| 281,136 |
|
|
| 2,262 |
|
|
| 3.81 | % |
|
| 260,866 |
|
|
| 1,789 |
|
|
| 3.67 | % |
|
| 286,048 |
|
|
| 2,336 |
|
|
| 3.77 | % |
|
| 268,327 |
|
|
| 1,998 |
|
|
| 3.47 | % |
Interest-bearing deposits in other banks |
|
| 7,397 |
|
|
| 45 |
|
|
| 2.47 | % |
|
| 232,246 |
|
|
| 119 |
|
|
| 0.21 | % |
|
| 55,288 |
|
|
| 719 |
|
|
| 5.16 | % |
|
| 89,744 |
|
|
| 423 |
|
|
| 1.87 | % |
Total interest-earning assets |
| $ | 3,211,902 |
|
| $ | 41,539 |
|
|
| 5.22 | % |
| $ | 2,814,589 |
|
| $ | 24,666 |
|
|
| 3.63 | % |
| $ | 3,380,169 |
|
| $ | 45,786 |
|
|
| 5.34 | % |
| $ | 3,002,256 |
|
| $ | 32,533 |
|
|
| 4.30 | % |
Noninterest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Cash and due from financial institutions |
|
| 54,136 |
|
|
|
|
|
|
|
|
| 223,353 |
|
|
|
|
|
|
|
|
| 22,542 |
|
|
|
|
|
|
|
|
| 58,581 |
|
|
|
|
|
|
| ||||||||
Premises and equipment, net |
|
| 62,776 |
|
|
|
|
|
|
|
|
| 22,320 |
|
|
|
|
|
|
|
|
| 50,999 |
|
|
|
|
|
|
|
|
| 28,633 |
|
|
|
|
|
|
| ||||||||
Accrued interest receivable |
|
| 10,655 |
|
|
|
|
|
|
|
|
| 7,157 |
|
|
|
|
|
|
|
|
| 11,673 |
|
|
|
|
|
|
|
|
| 8,907 |
|
|
|
|
|
|
| ||||||||
Intangible assets |
|
| 135,554 |
|
|
|
|
|
|
|
|
| 84,374 |
|
|
|
|
|
|
|
|
| 128,215 |
|
|
|
|
|
|
|
|
| 84,265 |
|
|
|
|
|
|
| ||||||||
Other assets |
|
| 61,292 |
|
|
|
|
|
|
|
|
| 37,346 |
|
|
|
|
|
|
|
|
| 53,879 |
|
|
|
|
|
|
|
|
| 48,013 |
|
|
|
|
|
|
| ||||||||
Bank owned life insurance |
|
| 53,630 |
|
|
|
|
|
|
|
|
| 46,726 |
|
|
|
|
|
|
|
|
| 64,008 |
|
|
|
|
|
|
|
|
| 53,131 |
|
|
|
|
|
|
| ||||||||
Less allowance for loan losses |
|
| (30,454 | ) |
|
|
|
|
|
|
|
| (26,775 | ) |
|
|
|
|
|
|
|
| (34,283 | ) |
|
|
|
|
|
|
|
| (27,546 | ) |
|
|
|
|
|
| ||||||||
Total Assets |
| $ | 3,559,491 |
|
|
|
|
|
|
|
| $ | 3,209,090 |
|
|
|
|
|
|
|
| $ | 3,677,202 |
|
|
|
|
|
|
|
| $ | 3,256,240 |
|
|
|
|
|
|
| ||||||||
Liabilities and Shareholders Equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Demand and savings |
| $ | 1,384,070 |
|
| $ | 1,084 |
|
|
| 0.32 | % |
| $ | 1,383,372 |
|
| $ | 234 |
|
|
| 0.07 | % |
| $ | 1,333,903 |
|
| $ | 2,189 |
|
|
| 0.65 | % |
| $ | 1,457,112 |
|
| $ | 379 |
|
|
| 0.10 | % |
Time |
|
| 308,400 |
|
|
| 2,148 |
|
|
| 2.82 | % |
|
| 240,612 |
|
|
| 471 |
|
|
| 0.79 | % |
|
| 632,111 |
|
|
| 7,395 |
|
|
| 4.64 | % |
|
| 280,903 |
|
|
| 557 |
|
|
| 0.79 | % |
Short-term FHLB advances |
|
| 372,226 |
|
|
| 4,258 |
|
|
| 4.64 | % |
|
| 358 |
|
|
| — |
|
|
| 0.00 | % |
|
| 233,547 |
|
|
| 3,246 |
|
|
| 5.51 | % |
|
| 6,713 |
|
|
| 48 |
|
|
| 2.08 | % |
Long-term FHLB advances |
|
| 3,442 |
|
|
| 19 |
|
|
| 2.24 | % |
|
| 75,000 |
|
|
| 190 |
|
|
| 1.03 | % |
|
| 2,644 |
|
|
| 15 |
|
|
| 2.25 | % |
|
| 25,336 |
|
|
| 133 |
|
|
| 2.84 | % |
Other borrowings |
|
| 14,484 |
|
|
| 252 |
|
|
| 7.06 | % |
|
| — |
|
|
| — |
|
|
| 0.00 | % |
|
| 7,928 |
|
|
| 198 |
|
|
| 9.91 | % |
|
| — |
|
|
| — |
|
|
| 0.00 | % |
Federal funds purchased |
|
| 333 |
|
|
| 5 |
|
|
| 6.09 | % |
|
| — |
|
|
| — |
|
|
| 0.00 | % |
|
| 98 |
|
|
| — |
|
|
| 0.00 | % |
|
| — |
|
|
| — |
|
|
| 0.00 | % |
Subordinated debentures |
|
| 103,814 |
|
|
| 1,169 |
|
|
| 4.57 | % |
|
| 103,713 |
|
|
| 836 |
|
|
| 3.27 | % |
|
| 103,894 |
|
|
| 1,239 |
|
|
| 4.73 | % |
|
| 103,751 |
|
|
| 975 |
|
|
| 3.73 | % |
Repurchase Agreements |
|
| 20,823 |
|
|
| 3 |
|
|
| 0.06 | % |
|
| 25,228 |
|
|
| 3 |
|
|
| 0.05 | % |
|
| 993 |
|
|
| — |
|
|
| 0.00 | % |
|
| 19,277 |
|
|
| 2 |
|
|
| 0.04 | % |
Total interest-bearing liabilities |
| $ | 2,207,592 |
|
| $ | 8,938 |
|
|
| 1.64 | % |
| $ | 1,828,283 |
|
| $ | 1,734 |
|
|
| 0.38 | % |
| $ | 2,315,118 |
|
| $ | 14,282 |
|
|
| 2.45 | % |
| $ | 1,893,092 |
|
| $ | 2,094 |
|
|
| 0.44 | % |
Noninterest-bearing deposits |
|
| 961,886 |
|
|
|
|
|
|
|
|
| 933,654 |
|
|
|
|
|
|
|
|
| 980,835 |
|
|
|
|
|
|
|
|
| 980,999 |
|
|
|
|
|
|
| ||||||||
Other liabilities |
|
| 48,854 |
|
|
|
|
|
|
|
|
| 99,851 |
|
|
|
|
|
|
|
|
| 33,040 |
|
|
|
|
|
|
|
|
| 77,015 |
|
|
|
|
|
|
| ||||||||
Shareholders’ Equity |
|
| 341,159 |
|
|
|
|
|
|
|
|
| 347,302 |
|
|
|
|
|
|
|
|
| 348,209 |
|
|
|
|
|
|
|
|
| 305,134 |
|
|
|
|
|
|
| ||||||||
Total Liabilities and Shareholders’ Equity |
| $ | 3,559,491 |
|
|
|
|
|
|
|
| $ | 3,209,090 |
|
|
|
|
|
|
|
| $ | 3,677,202 |
|
|
|
|
|
|
|
| $ | 3,256,240 |
|
|
|
|
|
|
| ||||||||
Net interest income and interest rate spread |
|
|
|
| $ | 32,601 |
|
|
| 3.58 | % |
|
|
|
| $ | 22,932 |
|
|
| 3.25 | % |
|
|
|
| $ | 31,504 |
|
|
| 2.89 | % |
|
|
|
| $ | 30,439 |
|
|
| 3.86 | % | ||||
Net interest margin |
|
|
|
|
|
|
|
| 4.11 | % |
|
|
|
|
|
|
|
| 3.38 | % |
|
|
|
|
|
|
|
| 3.69 | % |
|
|
|
|
|
|
|
| 4.03 | % |
*—Average yields are presented on a tax equivalent basis. The tax equivalent effect associated with loans and investments, included in the yields above, was $601$621 and $476$532 for the periods ended March 31,September 30, 2023 and 2022, respectively.
**—Average balance includes nonaccrual loans.
Page 45
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 three months ended March 31,September 30, 2023 and 2022.
|
| 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 |
| $ | 6,555 |
|
| $ | 8,805 |
|
| $ | 15,360 |
|
| $ | 5,099 |
|
| $ | 7,457 |
|
| $ | 12,556 |
|
Taxable securities |
|
| 598 |
|
|
| 516 |
|
|
| 1,114 |
|
|
| 166 |
|
|
| (103 | ) |
|
| 63 |
|
Tax-exempt securities |
|
| 404 |
|
|
| 69 |
|
|
| 473 |
|
|
| 163 |
|
|
| 175 |
|
|
| 338 |
|
Interest-bearing deposits in other banks |
|
| (218 | ) |
|
| 144 |
|
|
| (74 | ) |
|
| (214 | ) |
|
| 510 |
|
|
| 296 |
|
Total interest income |
| $ | 7,339 |
|
| $ | 9,534 |
|
| $ | 16,873 |
|
| $ | 5,214 |
|
| $ | 8,039 |
|
| $ | 13,253 |
|
Interest expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Demand and savings |
| $ | — |
|
| $ | 850 |
|
| $ | 850 |
|
| $ | (35 | ) |
| $ | 1,845 |
|
| $ | 1,810 |
|
Time |
|
| 166 |
|
|
| 1,511 |
|
|
| 1,677 |
|
|
| 1,390 |
|
|
| 5,448 |
|
|
| 6,838 |
|
Short-term FHLB advances |
|
| 4,258 |
|
|
| — |
|
|
| 4,258 |
|
|
| 3,111 |
|
|
| 87 |
|
|
| 3,198 |
|
Long-term FHLB advances |
|
| (277 | ) |
|
| 106 |
|
|
| (171 | ) |
|
| (128 | ) |
|
| 10 |
|
|
| (118 | ) |
Other borrowings |
|
| 252 |
|
|
| — |
|
|
| 252 |
|
|
| (2 | ) |
|
| — |
|
|
| (2 | ) |
Federal funds purchased |
|
| 5 |
|
|
| — |
|
|
| 5 |
|
|
| — |
|
|
| — |
|
|
| — |
|
Subordinated debentures |
|
| 1 |
|
|
| 332 |
|
|
| 333 |
|
|
| 1 |
|
|
| 263 |
|
|
| 264 |
|
Repurchase agreements |
|
| (1 | ) |
|
| 1 |
|
|
| — |
|
|
| 198 |
|
|
| — |
|
|
| 198 |
|
Total interest expense |
| $ | 4,404 |
|
| $ | 2,800 |
|
| $ | 7,204 |
|
| $ | 4,535 |
|
| $ | 7,653 |
|
| $ | 12,188 |
|
Net interest income |
| $ | 2,935 |
|
| $ | 6,734 |
|
| $ | 9,669 |
|
| $ | 679 |
|
| $ | 386 |
|
| $ | 1,065 |
|
The Company provides for loan losses through regular provisions to the allowance for loancredit losses. Upon adoption of CECL on January 1, 2023, we recorded an increase in the allowance for credit losses of $5,193. During the firstthird quarter of 2023 we recorded a provision for credit losses of $620,$630, an increase of $320,$330, from $300 during the three months ended March 31,September 30, 2022. The increase in the reserves was principally related to loan growth during the quarter. 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 income for the three-month periods ended March 31,September 30, 2023 and 2022 are as follows:
|
| Three months ended March 31, |
|
| Three months ended September 30, |
| ||||||||||||||||||||||||||
|
| 2023 |
|
| 2022 |
|
| $ Change |
|
| % Change |
|
| 2023 |
|
| 2022 |
|
| $ Change |
|
| % Change |
| ||||||||
Service charges |
| $ | 1,773 |
|
| $ | 1,579 |
|
| $ | 194 |
|
|
| 12.3 | % |
| $ | 1,853 |
|
| $ | 1,885 |
|
| $ | (32 | ) |
|
| -1.7 | % |
Net gain on sale of securities |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 0.0 | % |
|
| — |
|
|
| 4 |
|
|
| (4 | ) |
|
| -100.0 | % |
Net gain (loss) on equity securities |
|
| (68 | ) |
|
| 50 |
|
|
| (118 | ) |
|
| -236.0 | % |
|
| 69 |
|
|
| (133 | ) |
|
| 202 |
|
|
| -151.9 | % |
Net gain on sale of loans |
|
| 631 |
|
|
| 936 |
|
|
| (305 | ) |
|
| -32.6 | % | ||||||||||||||||
Net gain on sale of loans and leases |
|
| 787 |
|
|
| 637 |
|
|
| 150 |
|
|
| 23.5 | % | ||||||||||||||||
ATM/Interchange fees |
|
| 1,353 |
|
|
| 1,241 |
|
|
| 112 |
|
|
| 9.0 | % |
|
| 1,424 |
|
|
| 1,394 |
|
|
| 30 |
|
|
| 2.2 | % |
Wealth management fees |
|
| 1,193 |
|
|
| 1,277 |
|
|
| (84 | ) |
|
| -6.6 | % |
|
| 1,197 |
|
|
| 1,208 |
|
|
| (11 | ) |
|
| -0.9 | % |
Lease revenue and residual income |
|
| 2,046 |
|
|
| — |
|
|
| 2,046 |
|
|
| 0.0 | % |
|
| 1,913 |
|
|
| — |
|
|
| 1,913 |
|
|
| 0.0 | % |
Bank owned life insurance |
|
| 253 |
|
|
| 244 |
|
|
| 9 |
|
|
| 3.7 | % |
|
| 266 |
|
|
| 255 |
|
|
| 11 |
|
|
| 4.3 | % |
Tax refund processing fees |
|
| 1,900 |
|
|
| 1,900 |
|
|
| — |
|
|
| 0.0 | % |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 0.0 | % |
Swap fees |
|
| 61 |
|
|
| — |
|
|
| 61 |
|
|
| 0.0 | % |
|
| 21 |
|
|
| — |
|
|
| 21 |
|
|
| 0.0 | % |
Other |
|
| 1,926 |
|
|
| 416 |
|
|
| 1,510 |
|
|
| 363.0 | % |
|
| 595 |
|
|
| 484 |
|
|
| 111 |
|
|
| 22.9 | % |
Total noninterest income |
| $ | 11,068 |
|
| $ | 7,643 |
|
| $ | 3,425 |
|
|
| 44.8 | % |
| $ | 8,125 |
|
| $ | 5,734 |
|
| $ | 2,391 |
|
|
| 41.7 | % |
Page 46
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 three months ended March 31,September 30, 2023 was $11,068,$8,125, an increase of $3,425,$2,391, or 44.8%41.7%, from $7,643$5,734 for the same period of 2022. The increase was primarily due to the addition of Lease revenue and residual income of $2,046$1,913 for the three months ended March 31,September 30, 2023, as a result of the acquisition of Vision Financial Group, Inc. (VFG) in October 2022. As of August 31, 2023, coupled with increases in service chargesVFG was merged into Civista and other income , offset by decreases in net gain (loss)now operates as a division of Civista and has been rebranded as Civista Leasing and Finance (CLF). Net gain/loss on equity securities andincreased $202 thousand as the result of a market valuation adjustment. The net gain on sale of loans. Service chargesloans and leases increased dueby $150 thousand compared to higher service charges of $105 and overdraft fees of $89. Other income increased as result ofthe same period last year. CLF generated a $1,500 fee collected with the renewal of the company's contract with MasterCard. Net gain (loss) on equity securities decreased as a result of market value decreases. Net$466 thousand gain on the sale of $10.9 million in commercial loans decreased primarily asand leases. The sale of mortgage loans generated a result$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 of loans sold. During the three-months ended March 31,in 2023, 63 loans were sold, totaling $9,239. During the three-months ended March 31, 2022, 208 loans were sold, totaling $38,164.compared to 2022.
Additionally, the Company processes state and federal income tax refunds for customers of third-party income tax preparation vendors for which we receive a fee for processing the refund payments. Tax refund processing fees were $1,900 for each of the three months ended March 31, 2023 and 2022. This fee income is seasonal in nature, the majority of which is earned in the first quarter of the year.
Noninterest expense for the three-month periods ended March 31,September 30, 2023 and 2022 are as follows:
|
| Three months ended March 31, |
|
| Three months ended September 30, |
| ||||||||||||||||||||||||||
|
| 2023 |
|
| 2022 |
|
| $ Change |
|
| % Change |
|
| 2023 |
|
| 2022 |
|
| $ Change |
|
| % Change |
| ||||||||
Compensation expense |
| $ | 15,105 |
|
| $ | 12,223 |
|
| $ | 2,882 |
|
|
| 23.6 | % |
| $ | 14,054 |
|
| $ | 12,484 |
|
| $ | 1,570 |
|
|
| 12.6 | % |
Net occupancy expense |
|
| 1,359 |
|
|
| 1,150 |
|
|
| 209 |
|
|
| 18.2 | % |
|
| 1,368 |
|
|
| 1,252 |
|
|
| 116 |
|
|
| 9.3 | % |
Equipment expense |
|
| 2,761 |
|
|
| 495 |
|
|
| 2,266 |
|
|
| 457.8 | % |
|
| 2,687 |
|
|
| 637 |
|
|
| 2,050 |
|
|
| 321.8 | % |
Contracted data processing |
|
| 520 |
|
|
| 620 |
|
|
| (100 | ) |
|
| -16.1 | % |
|
| 651 |
|
|
| 846 |
|
|
| (195 | ) |
|
| -23.0 | % |
FDIC assessment |
|
| 248 |
|
|
| 203 |
|
|
| 45 |
|
|
| 22.2 | % |
|
| 438 |
|
|
| 170 |
|
|
| 268 |
|
|
| 157.6 | % |
State franchise tax |
|
| 526 |
|
|
| 591 |
|
|
| (65 | ) |
|
| -11.0 | % |
|
| 590 |
|
|
| 629 |
|
|
| (39 | ) |
|
| -6.2 | % |
Professional services |
|
| 1,555 |
|
|
| 1,049 |
|
|
| 506 |
|
|
| 48.2 | % |
|
| 1,010 |
|
|
| 1,335 |
|
|
| (325 | ) |
|
| -24.3 | % |
Amortization of intangible assets |
|
| 398 |
|
|
| 217 |
|
|
| 181 |
|
|
| 83.4 | % |
|
| 398 |
|
|
| 456 |
|
|
| (58 | ) |
|
| -12.7 | % |
ATM/Interchange expense |
|
| 580 |
|
|
| 513 |
|
|
| 67 |
|
|
| 13.1 | % |
|
| 619 |
|
|
| 604 |
|
|
| 15 |
|
|
| 2.5 | % |
Marketing |
|
| 505 |
|
|
| 317 |
|
|
| 188 |
|
|
| 59.3 | % |
|
| 497 |
|
|
| 372 |
|
|
| 125 |
|
|
| 33.6 | % |
Software maintenance expense |
|
| 878 |
|
|
| 708 |
|
|
| 170 |
|
|
| 24.0 | % |
|
| 1,052 |
|
|
| 942 |
|
|
| 110 |
|
|
| 11.7 | % |
Other |
|
| 3,198 |
|
|
| 2,172 |
|
|
| 1,026 |
|
|
| 47.2 | % |
|
| 3,388 |
|
|
| 2,828 |
|
|
| 560 |
|
|
| 19.8 | % |
Total noninterest expense |
| $ | 27,633 |
|
| $ | 20,258 |
|
| $ | 7,375 |
|
|
| 36.4 | % |
| $ | 26,752 |
|
| $ | 22,555 |
|
| $ | 4,197 |
|
|
| 18.6 | % |
Noninterest expense for the three months ended March 31,September 30, 2023 was $27,633,$26,752, an increase of $7,375,$4,197, or 36.4%18.6%, from $20,258$22,555 reported for the same period of 2022. The primary reasons for the increase were increases in compensationCompensation expense net occupancy, equipment expense, FDIC assessment, professional services, amortization expense, ATM/Interchange expense, marketing, software maintenance expense and other operating expense, offset by decreases in contracted data processing expense and state franchise tax. The increase in compensation expense wasincreased primarily due to increased salaries, payroll taxes and employee insurance.the acquisition of VFG resulting in an additional $1,300. The quarter-to-date average full time equivalent (FTE) employees were 532.4528 at March 31,September 30, 2023, an increase of 8985 FTEs over the same period of 2022 due to the acquisitions of Comunibanc Corp. and VFG in 2022. The increase in occupancy and equipment expense is primarily due to increasesa $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. and the opening of a new branch in Ohio. Equipment expense increased due to increases in equipment depreciation related to the acquisition of VFG. Contracted data processing fees decreased due to the payment of deconversion fees related to the merger with Comunibanc Corp. in the first quarter of("Comunibanc") on July 1, 2022. The quarter-over-quarter increase in FDIC assessments was attributable to higher average consolidated assets and average tangible equity. The decrease in state franchise tax expense was attributable to lower estimated tax payments during the first quarter of 2023 as compared to the same period in 2022. Professional services increased due to acquisition advisory costs of $115, advisory fees for the company's MasterCard contract of $400 and consulting fees related to CECL implementation of $29. The increase in amortization of intangible assets is related to the merger with Comunibanc Corp. Marketing expense increased due to a general increase in marketing and increase marketing efforts in newly acquired markets. The increase in software maintenance expense is due to a general increase in legacy software maintenance contracts and the implementation of our new digital banking. The increase in other operating expense is primarily due to increases in promotional expenses of $274, loan related expenses of $11, bad check losses of $115, ATM/ACH losses of $217 and a $130 thousand provision for credit losses on unfunded commitments as well as an increase in bad check loss of $201.$255 thousand compared to the same period in 2022. Additional increases related to the acquisition of VFG are also attributable to the increase in 2023.
Income tax expense for the three months ended March 31,September 30, 2023 totaled $2,528, up $977$1,860, down $346 compared to the same period in 2022. The effective tax rates for the three-month periods ended March 31,September 30, 2023 and 2022 were 16.4%15.2% and 15.5%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.
Nine Months Ended September 30, 2023 and 2022
The Company had net income of $33,309 for the nine months ended September 30, 2023, an increase of $6,030 from net income of $27,279 for the same nine months of 2022. Basic earnings per common share were $2.12 for the period ended September 30, 2023, compared to $1.82 for the same period in 2022. Diluted earnings per common share were $2.12 for the period ended September 30, 2023, compared to $1.82 for the same period in 2022. The primary reasons for the changes in net income are explained below.
Page 47
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 nine months ended September 30, 2023 and 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 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, |
| |||||||||||||||||||||
|
| 2023 |
|
| 2022 |
| ||||||||||||||||||
Assets: |
| Average |
|
| Interest |
|
| Yield/ |
|
| Average |
|
| Interest |
|
| Yield/ |
| ||||||
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Loans, including fees** |
| $ | 2,607,632 |
|
| $ | 114,108 |
|
|
| 5.85 | % |
| $ | 2,111,019 |
|
| $ | 70,065 |
|
|
| 4.44 | % |
Taxable securities |
|
| 367,946 |
|
|
| 8,817 |
|
|
| 2.89 | % |
|
| 322,262 |
|
|
| 6,431 |
|
|
| 2.53 | % |
Tax-exempt securities |
|
| 285,250 |
|
|
| 6,917 |
|
|
| 3.79 | % |
|
| 262,790 |
|
|
| 5,669 |
|
|
| 3.55 | % |
Interest-bearing deposits in other banks |
|
| 23,382 |
|
|
| 818 |
|
|
| 4.67 | % |
|
| 199,019 |
|
|
| 1,098 |
|
|
| 0.74 | % |
Total interest-earning assets |
| $ | 3,284,210 |
|
| $ | 130,660 |
|
|
| 5.29 | % |
| $ | 2,895,090 |
|
| $ | 83,263 |
|
|
| 3.88 | % |
Noninterest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Cash and due from financial institutions |
|
| 33,918 |
|
|
|
|
|
|
|
|
| 108,220 |
|
|
|
|
|
|
| ||||
Premises and equipment, net |
|
| 58,338 |
|
|
|
|
|
|
|
|
| 24,429 |
|
|
|
|
|
|
| ||||
Accrued interest receivable |
|
| 11,176 |
|
|
|
|
|
|
|
|
| 8,025 |
|
|
|
|
|
|
| ||||
Intangible assets |
|
| 133,154 |
|
|
|
|
|
|
|
|
| 84,268 |
|
|
|
|
|
|
| ||||
Other assets |
|
| 61,669 |
|
|
|
|
|
|
|
|
| 44,077 |
|
|
|
|
|
|
| ||||
Bank owned life insurance |
|
| 53,796 |
|
|
|
|
|
|
|
|
| 48,965 |
|
|
|
|
|
|
| ||||
Less allowance for loan losses |
|
| (33,138 | ) |
|
|
|
|
|
|
|
| (27,168 | ) |
|
|
|
|
|
| ||||
Total Assets |
| $ | 3,603,123 |
|
|
|
|
|
|
|
| $ | 3,185,906 |
|
|
|
|
|
|
| ||||
Liabilities and Shareholders Equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Demand and savings |
| $ | 1,360,692 |
|
| $ | 4,818 |
|
|
| 0.47 | % |
| $ | 1,414,215 |
|
| $ | 860 |
|
|
| 0.08 | % |
Time |
|
| 497,458 |
|
|
| 15,532 |
|
|
| 4.17 | % |
|
| 250,230 |
|
|
| 1,491 |
|
|
| 0.80 | % |
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 |
|
| 143 |
|
|
| 5 |
|
|
| 4.67 | % |
|
| — |
|
|
| — |
|
|
| — |
|
Subordinated debentures |
|
| 103,854 |
|
|
| 3,607 |
|
|
| 4.64 | % |
|
| 103,726 |
|
|
| 2,701 |
|
|
| 3.48 | % |
Repurchase Agreements |
|
| 11,611 |
|
|
| 4 |
|
|
| 5.00 | % |
|
| 21,910 |
|
|
| 8 |
|
|
| 5.00 | % |
Total interest-bearing liabilities |
| $ | 2,270,844 |
|
| $ | 35,216 |
|
|
| 2.07 | % |
| $ | 1,850,724 |
|
| $ | 5,624 |
|
|
| 0.41 | % |
Noninterest-bearing deposits |
|
| 941,842 |
|
|
|
|
|
|
|
|
| 936,686 |
|
|
|
|
|
|
| ||||
Other liabilities |
|
| 44,739 |
|
|
|
|
|
|
|
|
| 76,748 |
|
|
|
|
|
|
| ||||
Shareholders’ Equity |
|
| 345,698 |
|
|
|
|
|
|
|
|
| 321,748 |
|
|
|
|
|
|
| ||||
Total Liabilities and Shareholders’ Equity |
| $ | 3,603,123 |
|
|
|
|
|
|
|
| $ | 3,185,906 |
|
|
|
|
|
|
| ||||
Net interest income and interest rate spread |
|
|
|
| $ | 95,444 |
|
|
| 3.22 | % |
|
|
|
| $ | 77,639 |
|
|
| 3.47 | % | ||
Net interest margin |
|
|
|
|
|
|
|
| 3.88 | % |
|
|
|
|
|
|
|
| 3.62 | % |
*—Average yields are presented on a 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 49
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 nine months ended September 30, 2023 and 2022. The table is presented on a fully tax-equivalent basis.
|
| Increase (decrease) due to: |
| |||||||||
|
| Volume (1) |
|
| Rate (1) |
|
| Net |
| |||
|
| (Dollars in thousands) |
| |||||||||
Interest income: |
|
|
|
|
|
|
|
|
| |||
Loans, including fees |
| $ | 18,713 |
|
| $ | 25,330 |
|
| $ | 44,043 |
|
Taxable securities |
|
| 1,412 |
|
|
| 974 |
|
|
| 2,386 |
|
Tax-exempt securities |
|
| 854 |
|
|
| 394 |
|
|
| 1,248 |
|
Interest-bearing deposits in other banks |
|
| (1,703 | ) |
|
| 1,422 |
|
|
| (281 | ) |
Total interest income |
| $ | 19,276 |
|
| $ | 28,120 |
|
| $ | 47,396 |
|
Interest expense: |
|
|
|
|
|
|
|
|
| |||
Demand and savings |
| $ | (34 | ) |
| $ | 3,992 |
|
| $ | 3,958 |
|
Time |
|
| 2,653 |
|
|
| 11,388 |
|
|
| 14,041 |
|
Short-term FHLB advance |
|
| 10,494 |
|
|
| 74 |
|
|
| 10,568 |
|
Long-term FHLB advance |
|
| (711 | ) |
|
| 247 |
|
|
| (464 | ) |
Other borrowings |
|
| 587 |
|
|
| — |
|
|
| 587 |
|
Federal funds purchased |
|
| — |
|
|
| — |
|
|
| — |
|
Subordinated debentures |
|
| 3 |
|
|
| 903 |
|
|
| 906 |
|
Repurchase agreements |
|
| (4 | ) |
|
| — |
|
|
| (4 | ) |
Total interest expense |
| $ | 12,988 |
|
| $ | 16,604 |
|
| $ | 29,592 |
|
Net interest income |
| $ | 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 nine months ended September 30, 2023 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, 2022. The increase in the reserves was principally related to loan 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.
The components of noninterest income for the nine-month periods ended September 30, 2023 and 2022 were as follows:
|
| Nine months ended September 30, |
| |||||||||||||
|
| 2023 |
|
| 2022 |
|
| $ Change |
|
| % Change |
| ||||
Service charges |
| $ | 5,457 |
|
| $ | 5,004 |
|
| $ | 453 |
|
|
| 9.1 | % |
Net gain on sale of securities |
|
| — |
|
|
| 10 |
|
|
| (10 | ) |
|
| -100.0 | % |
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 |
|
| 3,570 |
|
|
| 3,713 |
|
|
| (143 | ) |
|
| -3.9 | % |
Lease revenue and residual income |
|
| 6,160 |
|
|
| 0 |
|
|
| 6,160 |
|
|
| 0.0 | % |
Bank owned life insurance |
|
| 830 |
|
|
| 732 |
|
|
| 98 |
|
|
| 13.4 | % |
Tax refund processing fees |
|
| 2,375 |
|
|
| 2,375 |
|
|
| — |
|
|
| 0.0 | % |
Swap fees |
|
| 198 |
|
|
| — |
|
|
| 198 |
|
|
| 0.0 | % |
Other |
|
| 3,661 |
|
|
| 1,086 |
|
|
| 2,575 |
|
|
| 237.1 | % |
Total noninterest income |
| $ | 28,342 |
|
| $ | 19,012 |
|
| $ | 9,330 |
|
|
| 49.1 | % |
Page 50
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 seasonal 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, amortization expense, software maintenance expense and other operating expense. Compensation expense increased primarily due to $4.6 million of salaries related to the acquisition 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 is 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 first nine months of 2023 compared to $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 from 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 nine months ended September 30, 2023 totaled $6,068, up $888 compared to the same period in 2022. The effective tax rate for the nine-month period ended September 30, 2023 was 15.4% compared to 16% for the same period in 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.
Page 51
Civista Bancshares, Inc.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Form 10-Q
(Amounts in thousands, except share data)
Capital Resources
Shareholders’ equity totaled $347,697$332,745 at March 31,September 30, 2023, compared to $334,835 at December 31, 2022. Shareholders’ equity increaseddecreased during the first threenine months of 2023 as a result of an increasea decrease in the fair value of securities available-for-sale, net of tax, of $8,135 and net income of $12,888, offset by$21,417, dividends on common shares of $2,201,$7,088, the purchase of treasury shares of $121$1,618 and the cumulative effect of adopting ASU 2016-13 of $6,069.$6,069, partially offset by net income of $33,309.
All of the Company’s capital ratios exceeded the regulatory minimum guidelines as of March 31,September 30, 2023 and December 31, 2022 as identified in the following table:
|
| Total Risk |
|
| Tier I Risk |
|
| CET1 Risk |
|
| Leverage |
|
| Total Risk |
|
| Tier I Risk |
|
| CET1 Risk |
|
| Leverage |
| ||||||||
Company Ratios—March 31, 2023 |
|
| 14.7 | % |
|
| 10.8 | % |
|
| 9.7 | % |
|
| 8.6 | % | ||||||||||||||||
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 | % |
|
| 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 | % |
Liquidity
The Company maintains a conservative liquidity position. All securities, with the exception of equity securities, are classified as available-for-sale. Securities, with maturities of one year or less, totaled $6,299,$6,149, or 1.0%1.04% of the total security portfolio at March 31,September 30, 2023. The available-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 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 $19,794$60,593 and $9,114$27,421 for the threenine months ended March 31,September 30, 2023 and 2022, respectively. The primary additions to cash from operating activities are from proceeds from the sale of loans. The primary use of cash from operating activities is from loans originated for sale. Netrespectively.Net cash used by investing activities was $38,635$216,826 and $50,872$207,756 for the threenine months ended March 31,September 30, 2023 and 2022, respectively, principally reflecting our loan and investment security activities. Cash provided by and used for deposits and purchase of treasury shares comprised most of our financing activities, which resulted in net cash provided by of $28,203$163,188 and $190,217used of $42,990 for the threenine months ended March 31,September 30, 2023 and 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. 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 $30,000.$50,000. As of March 31,September 30, 2023, Civista had total credit availability with the FHLB of $880,481$771,067 with standby letters of credit totaling $32,920$33,400 and a remaining borrowing capacity of approximately $632,200.$303,594. In addition, CBI maintains a credit line with a third party lender totaling $10,000.$15,000. No borrowings were outstanding by CBI under this credit line as of March 31,September 30, 2023.
Page 4852
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 Corporation, issue policy statements and guidance on sound practices for managing interest-rate risk, which form the basis for ongoing evaluation of the adequacy of interest-rate risk management at supervised institutions. The guidance also outlines fundamental elements of sound management and discusses the importance of these elements in the context of managing interest-rate risk. The 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 4953
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.
The following table provides information about the Company’s financial instruments that were sensitive to changes in interest rates as of December 31, 2022 and March 31,September 30, 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 interest rate decreases of 100 basis points and 200 basis points at March 31,September 30, 2023 and December 31, 2022.
The Company had derivative financial instruments as of December 31, 2022 and March 31, 2023. 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 | Net Portfolio Value |
| Net Portfolio Value |
| ||||||||||||||||||||||||||||||||||||||||||||
|
| March 31, 2023 |
|
| December 31, 2022 |
|
| September 30, 2023 |
|
| December 31, 2022 |
| ||||||||||||||||||||||||||||||||||||
Change in Rates |
| Dollar |
|
| Dollar |
|
| Percent |
|
| Dollar |
|
| Dollar |
|
| Percent |
|
| Dollar |
|
| Dollar |
|
| Percent |
|
| Dollar |
|
| Dollar |
|
| Percent |
| ||||||||||||
+200bp |
|
| 601,071 |
|
|
| 20,539 |
|
|
| 4 | % |
|
| 571,328 |
|
|
| 14,733 |
|
|
| 3 | % |
|
| 578,836 |
|
|
| 233 |
|
| >1% |
|
|
| 571,328 |
|
|
| 14,733 |
|
|
| 3 | % | |
+100bp |
|
| 594,553 |
|
|
| 14,021 |
|
|
| 2 | % |
|
| 566,596 |
|
|
| 10,001 |
|
|
| 2 | % |
|
| 578,433 |
|
|
| 2,830 |
|
| >1% |
|
|
| 566,596 |
|
|
| 10,001 |
|
|
| 2 | % | |
Base |
|
| 580,532 |
|
|
| — |
|
|
| — |
|
|
| 556,595 |
|
|
| — |
|
|
| — |
|
|
| 575,603 |
|
|
| — |
|
|
| — |
|
|
| 556,595 |
|
|
| — |
|
|
| — |
|
-100bp |
|
| 568,591 |
|
|
| (11,941 | ) |
|
| (2 | )% |
|
| 548,575 |
|
|
| (8,020 | ) |
|
| (1 | )% |
|
| 578,576 |
|
|
| 2,973 |
|
|
| 1 | % |
|
| 548,575 |
|
|
| (8,020 | ) |
|
| (1 | )% |
-200bp |
|
| 543,911 |
|
|
| (36,621 | ) |
|
| (6 | )% |
|
| 526,702 |
|
|
| (29,893 | ) |
|
| (5 | )% |
|
| 568,172 |
|
|
| (7,431 | ) |
|
| (1 | )% |
|
| 526,702 |
|
|
| (29,893 | ) |
|
| (5 | )% |
The change in net portfolio value from December 31, 2022 to March 31,September 30, 2023, can be attributed to a couple of factors. The yield curveremains inverted but has fallen and invertedshifted upward since the end of the year, andyear. Additionally, both the volume and mix of assets and funding sources has changed. The volume of loans and securities havehas increased, and the asset mix remains centered on loans. While the loan portfolio increased due to growth, the market value of loans has decreased due to interest rate increases. The volume of certificates of deposit havehas increased and both deposits and borrowed money hashave decreased. The volume and mix shifts from the end of the year contributed to an increase in the base net portfolio value, which was partially offset by the decrease due to interest rate changes.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 slightly larger decrease in the market value of liabilities than assets. Accordingly, we see ana slight increase in the net portfolio value. The change in the rates down scenario for both the 100 and 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.
Page 5054
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 March 31,September 30, 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 5155
Civista Bancshares, Inc.
Other Information
Form 10-Q
Part II—Other Information
Item 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 liquidity of CBI or Civista.
Item 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, 2022.
RecentThere are certain risks and future bank failures may adversely affectuncertainties 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 business, earnings and financial condition.
The failure of other U.S. banks can significantly impact the national, regional and local banking industry and the business environment in which the Company operates. The recent bank failures of Silicon Valley Bank in California, Signature Bank in New York, and First Republic Bank in California during the first and second quarters of 2023 have caused a degree of panic and uncertainty in the investor community and among bank customers generally. While the Company does not believe that the circumstances of these three bank failures are indicators of broader issues with the banking system, these and any future bank failures may reduce customer confidence, affect sources of funding and liquidity, increase regulatory requirements and costs, adversely affect financial markets and/or have a negative reputational ramificationCompany’s Annual Report on Form 10-K for the Company andyear ended December 31, 2022, as supplemented by “Item IA. Risk Factors” of Part II of the banking industry as a whole. The Company will continue to monitor the ongoing events concerning these three bank failures, as well as any future potential bank failures and/or volatility within the banking industry in general, together with any responsive measures taken by the banking regulators to mitigate or manage potential turmoil in the banking industry.Company’s Quarterly Reports on Form 10-Q.
Item 2. Unregistered Sales of Equity Securities, and Use of Proceeds, and Issuer Purchases of Equity Securities
During the first quarter of 2023, the Company purchased common shares as follows:
Period |
| Total Number of |
|
| Average Price Paid |
|
| Total Number of Shares |
|
| Maximum Number |
| ||||
January 1, 2023 - |
|
| 5,620 |
|
| $ | 21.52 |
|
|
| — |
|
| $ | 6,055,711 |
|
February 1, 2023 - |
|
| — |
|
| $ | — |
|
|
| — |
|
| $ | 6,055,711 |
|
March 1, 2023 - |
|
| — |
|
| $ | — |
|
|
| — |
|
| $ | 6,055,711 |
|
Total |
|
| 5,620 |
|
| $ | 21.52 |
|
|
| — |
|
| $ | 6,055,711 |
|
On January 3, 2023, the Company repurchased 5,620 common shares that were surrendered by officers to the Company to pay taxes upon vesting of restricted shares.
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Mine Safety Disclosures
Not applicable
Item 5. Other Information
NoneRule 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 5256
Civista Bancshares, Inc.
Other Information
Form 10-Q
Item 6. Exhibits
Exhibit |
| Description |
| Location |
|
|
|
|
|
2.1 |
|
| Filed as Exhibit 2.1 to Civista Bancshares, Inc.’s Current Report on Form 8-K dated and filed on January 10, 2022 and incorporated herein by reference. (File No. 001-36192)
| |
2.2 |
|
| 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) | |
|
|
|
|
|
3.1 |
|
| 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 |
| Amended and Restated Code of Regulations of Civista Bancshares, Inc. (adopted April 15, 2008) |
| 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)/15-d-14(a) Certification of Chief Executive Officer. |
| Included herewith |
|
|
|
|
|
31.2 |
| Rule 13a-14(a)/15-d-14(a) Certification of Principal Accounting Officer. |
| Included herewith |
|
|
|
|
|
32.1 |
|
| Included herewith | |
|
|
|
|
|
32.2 |
|
| Included herewith | |
|
|
|
|
|
101 |
| The following materials from the Company’s Quarterly Report on Form 10-Q for the quarterly period ended |
| Included herewith |
|
|
|
|
|
104 |
| Cover page formatted in Inline Extensible Business Reporting Language. |
| Included herewith |
Page 5357
Civista Bancshares, Inc.
Signatures
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 |
|
|
Dennis G. Shaffer |
| Date |
Chief Executive Officer and President |
|
|
|
|
|
/s/ Todd A. Michel |
|
|
Todd A. Michel |
| Date |
Senior Vice President, Controller |
|
|
Page 5458