1
EXHIBIT 99
THE CIVISTA CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS
2
KPMG Peat Marwick LLP
Certified Public Accountants
1 Cascade Plaza, Suite 1110
Akron, OH 44308
INDEPENDENT AUDITORS' REPORT
The Board of Directors
The CIVISTA Corporation:
We have audited the accompanying consolidated statements of condition of The
CIVISTA Corporation and subsidiaries as of September 30, 1994 and 1993, and
the related consolidated statements of operations, shareholders' equity and
cash flows for each of the years in the three-year period ended September 30,
1994. These consolidated financial statements are the responsibility of the
Corporation's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatements. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of The CIVISTA
Corporation and subsidiaries as of September 30, 1994 and 1993, and the results
of their operations and their cash flows for each of the years in the
three-year period ended September 30, 1994 in conformity with generally
accepted accounting principles.
As discussed in Note 1(i) to the consolidated financial statements, the
Corporation adopted the provisions of Financial Accounting Standards Board's
Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes, on October 1, 1993.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
November 23, 1994
3
THE CIVISTA CORPORATION
CONSOLIDATED STATEMENTS OF CONDITION
SEPTEMBER 30, 1994 AND 1993
ASSETS 1994 1993
Cash including short-term cash investments
of $9,848,713 and $6,537,815, respectively $ 25,394,899 19,189,901
Investment securities with market values of
$129,961,000 and $154,378,000, respectively (note 3) 133,498,917 151,134,497
Mortgage-backed securities, net with market values
of $88,806,000 and $83,813,000, respectively (note 4) 94,068,918 82,685,272
Mortgage loans, net (notes 5 and 12) 481,392,368 478,136,520
Mortgage loans, available for sale, with
market value of $240,000 (note 5) 242,400 --
Other loans, net (note 6) 23,602,411 23,821,520
--------------- ---------------
TOTAL MORTGAGE-BACKED SECURITIES
AND LOANS RECEIVABLE, NET 599,306,097 584,643,312
--------------- ---------------
Accrued interest receivable, net 4,565,348 5,063,846
Real estate acquired in settlement of loans, net (note 7) 937,255 1,449,456
Real estate investment property, net (notes 8 and 13) 12,638,047 13,543,632
Federal Home Loan Bank stock 5,284,200 5,618,200
Office properties and equipment, net (note 9) 5,903,478 6,284,520
Real estate development assets, net (note 10) 7,842,121 9,385,979
Other assets 3,045,179 2,701,953
--------------- ---------------
TOTAL ASSETS $ 798,415,541 799,015,296
=============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Customer deposits (note 11) $ 678,630,798 684,068,900
Notes payable to Federal Home Loan Bank (note 12) 9,802,167 14,327,037
Mortgage loans payable (note 13) 9,020,121 9,133,871
Advance payments by borrowers for taxes and insurance 3,127,988 2,991,037
Other liabilities 6,053,619 5,533,314
--------------- ---------------
TOTAL LIABILITIES 706,634,693 716,054,159
--------------- ---------------
Shareholders' equity (notes 15 and 17):
Serial preferred stock, without par value;
authorized and unissued 5,000,000 shares -- --
Common stock, without par value, 5,000,000 shares
authorized; 3,506,552 and 3,493,352 shares issued,
respectively 11,869,905 11,751,380
Retained earnings, substantially restricted 80,053,797 71,276,053
Valuation allowance on Federated ARMS Fund ( 76,558) --
Treasury stock, 8,248 shares, at cost ( 66,296) ( 66,296)
--------------- ---------------
TOTAL SHAREHOLDERS' EQUITY 91,780,848 82,961,137
Commitments (notes 5, 6, 9 and 16)
--------------- ---------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 798,415,541 799,015,296
=============== ===============
<FN>
See accompanying notes to consolidated financial statements.
4
THE CIVISTA CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED SEPTEMBER 30, 1994, 1993 AND 1992
1994 1993 1992
Interest on mortgage and other loans $ 40,856,491 44,304,863 48,420,552
Interest on mortgage-backed securities 5,404,774 5,892,966 7,695,353
Interest on investment securities 7,293,823 5,326,741 3,510,180
Other interest and dividend income 654,196 1,094,826 1,865,459
---------------- ---------------- ----------------
TOTAL INTEREST INCOME 54,209,284 56,619,396 61,491,544
Interest on customer deposits (note 11) 23,092,632 24,342,579 31,803,368
Interest on notes payable to Federal Home
Loan Bank and other borrowings 1,211,924 1,019,614 1,490,864
---------------- ---------------- ----------------
TOTAL INTEREST EXPENSE 24,304,556 25,362,193 33,294,232
---------------- ---------------- ----------------
NET INTEREST INCOME 29,904,728 31,257,203 28,197,312
---------------- ---------------- ----------------
Provision for loan losses (notes 5 and 6) 162,634 816,625 1,308,179
---------------- ---------------- ----------------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 29,742,094 30,440,578 26,889,133
---------------- ---------------- ----------------
Other income:
Real estate operations (note 8) 4,504,358 4,264,085 3,906,334
Real estate development sales (note 10) 962,781 1,436,939 2,687,045
Data processing sales and service 4,207,897 5,345,646 6,264,722
Commissions on annuity and mutual fund sales 1,388,848 1,223,956 1,307,679
Investment security gains, net (note 3) 729,075 625 3,750
Gains on sales of mortgage loans and mortgage-
backed securities, net (notes 4 and 5) 38,110 2,387,361 707,509
Customer service fees 1,120,216 1,132,363 1,160,778
Other income 829,191 798,000 602,678
---------------- ---------------- ----------------
TOTAL OTHER INCOME 13,780,476 16,588,975 16,640,495
Other expenses:
Compensation and related expenses (note 16) 12,097,255 12,327,987 11,445,741
Office occupancy (note 9) 3,017,144 3,127,711 3,432,586
Deposit insurance premiums 1,572,918 1,150,697 1,416,152
Ohio financial institution tax 870,424 976,948 915,810
Real estate operations (note 8) 2,926,069 3,254,390 3,041,187
Cost of real estate development sales (note 10) 951,998 1,325,200 2,666,046
Provision for real estate losses (notes 7 and 10) 564,487 50,000 705,712
Other expense 4,423,873 4,965,258 4,872,756
---------------- ---------------- ----------------
TOTAL OTHER EXPENSES 26,424,168 27,178,191 28,495,990
---------------- ---------------- ----------------
EARNINGS BEFORE FEDERAL INCOME TAXES 17,098,402 19,851,362 15,033,638
---------------- ---------------- ----------------
Federal income taxes (benefit) (note 14):
Current 6,087,000 7,006,000 6,470,000
Deferred ( 37,000) ( 227,000) ( 993,000)
---------------- ---------------- ----------------
6,050,000 6,779,000 5,477,000
---------------- ---------------- ----------------
NET EARNINGS $ 11,048,402 13,072,362 9,556,638
================= ================ ================
NET EARNINGS PER SHARE $ 3.02 3.64 2.71
================= ================ ================
<FN>
See accompanying notes to consolidated financial statements.
5
THE CIVISTA CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30, 1994, 1993 AND 1992
RETAINED
EARNINGS,
SUBSTANTIALLY TOTAL
COMMON RESTRICTED SHAREHOLDERS'
STOCK (NOTE 15) OTHER EQUITY
BALANCE, SEPTEMBER 30, 1991 $ 11,426,105 51,815,943 ( 63,847) 63,178,201
Net earnings -- 9,556,638 -- 9,556,638
Cash dividends - $.41-1/4 per share -- ( 1,429,228) -- ( 1,429,228)
Stock options exercised 164,650 -- -- 164,650
Treasury stock purchased -- -- ( 2,449) ( 2,449)
------------- ------------ ------------ -------------
BALANCE, SEPTEMBER 30, 1992 11,590,755 59,943,353 ( 66,296) 71,467,812
Net earnings -- 13,072,362 -- 13,072,362
Cash dividends - $.50 per share -- ( 1,739,662) -- ( 1,739,662)
Stock options exercised 160,625 -- -- 160,625
------------- ------------ ------------ -------------
BALANCE, SEPTEMBER 30, 1993 11,751,380 71,276,053 ( 66,296) 82,961,137
Net earnings -- 11,048,402 -- 11,048,402
Cash dividends - $.65 per share -- ( 2,270,658) -- ( 2,270,658)
Stock options exercised 118,525 -- -- 118,525
Valuation allowance on
Federated AMS Fund -- -- ( 76,558) ( 76,558)
------------- ------------ ------------ --------------
BALANCE, SEPTEMBER 30, 1994 $ 11,869,905 80,053,797 ( 142,854) 91,780,848
============= ============ ============ ==============
<FN>
See accompanying notes to consolidated financial statements.
6
THE CIVISTA CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 1994, 1993 AND 1992
1994 1993 1992
OPERATING ACTIVITIES:
Net earnings $ 11,048,402 13,072,362 9,556,638
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Decrease (increase) in accrued interest receivable 498,498 ( 179,436) ( 202,008)
Provision for loan losses 162,634 816,625 1,308,179
Provision for real estate losses 564,487 50,000 705,712
Depreciation and amortization 1,689,258 1,719,587 1,625,897
Federal Home Loan Bank stock dividend ( 347,900) ( 252,000) ( 262,300)
Investment security gains, net ( 729,075) ( 625) ( 3,750)
Increase (decrease) in deferred loan
origination fees, net ( 185,203) 13,283 278,040
Amortization of deferred loan
origination fees ( 892,110) ( 1,342,508) ( 813,213)
Gains on sales of real estate
acquired in settlement of loans, net ( 84,741) ( 157,759) ( 20,951)
Increase (decrease) in federal
income taxes 670,485 ( 766,256) ( 1,278,734)
Investment securities available for sale:
Purchases ( 6,000,000) ( 500,000) --
Proceeds from sales 6,733,877 500,625 338,750
Mortgage loans available for sale:
Proceeds from sales 8,058,478 510,857 7,456,673
Losses (gains) on sales, net ( 38,110) ( 6,367) 24,713
Originations ( 8,262,768) ( 504,490) ( 1,431,200)
Mortgage-backed securities available for sale:
Principal collected -- 13,794,033 643,724
Proceeds from sales -- 54,678,322 26,483,841
Gains on sales, net -- ( 2,380,994) ( 732,222)
Other loans available for sale:
Proceeds from sales 1,591,797 1,543,999 3,267,018
Originations ( 1,945,000) -- --
Other ( 168,672) ( 575,126) ( 628,048)
-------------- ------------- -------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 12,364,337 80,034,132 46,316,759
-------------- ------------- -------------
INVESTING ACTIVITIES:
Proceeds from maturities of investment securities 54,705,679 42,542,094 24,050,765
Purchases of investment securities ( 37,378,127) ( 113,515,322) ( 75,645,757)
Principal collected on mortgage loans 91,518,723 92,807,906 86,959,752
Principal collected on mortgage-backed securities 15,930,934 9,194,710 12,077,851
Principal collected on other loans 15,196,707 15,454,286 16,412,022
Mortgage loan originations ( 94,483,724) ( 97,876,023) ( 79,897,309)
Other loan originations ( 14,609,239) ( 14,899,019) ( 15,344,011)
Purchase of mortgage loans ( 17,667) ( 1,911,696) ( 300,978)
Purchase of mortgage-backed securities ( 27,683,309) ( 65,392,868) ( 34,886,640)
(Continued)
7
THE CIVISTA CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 1994, 1993 AND 1992
1994 1993 1992
Purchase of office properties and
equipment, net ( 452,792) ( 970,082) ( 306,020)
Proceeds from sale of mortgage loan 596,381 -- --
Proceeds from sales of real estate acquired in
settlement of loans 706,352 1,384,851 1,016,076
Proceeds from sales of real estate
investment property 745,539 429,677 276,005
Investment in real estate investment property ( 482,718) ( 1,195,378) ( 334,566)
Redemption of Federal Home Loan Bank stock 681,900 358,900 215,000
Purchase of Federal Home Loan Bank stock -- ( 2,400) ( 356,100)
Sales of real estate development assets 962,781 1,436,939 2,687,045
Reduction (investment) in real estate
development assets ( 4,855) 5,988 ( 311,724)
------------- -------------- --------------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES 5,932,565 ( 132,147,437) ( 63,688,589)
------------- -------------- --------------
FINANCING ACTIVITIES:
Net increase in customer transaction and
savings accounts 1,468,849 38,583,721 83,582,446
Proceeds from sales of certificates of deposit 21,678,159 28,371,000 21,968,000
Payments for maturing certificates of deposit ( 28,585,110) ( 44,773,000) ( 94,874,000)
Proceeds from mortgage loan payable -- -- 1,500,000
Principal payments on mortgage loans and
notes payable ( 113,750) ( 102,695) ( 673,456)
Cash dividends ( 2,270,658) ( 1,739,662) ( 1,429,228)
Stock options exercised 118,525 160,625 164,650
Purchase of treasury stock -- -- ( 2,449)
Borrowing from the Federal Home Loan Bank 99,700,000 14,000,000 10,500,000
Repayments to the Federal Home Loan Bank (104,224,870) ( 24,870) ( 20,521,143)
Net increase in advance payments
by borrowers for taxes and insurance 136,951 145,723 79,621
------------- -------------- --------------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES ( 12,091,904) 34,620,842 294,441
------------- -------------- --------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 6,204,998 ( 17,492,463) ( 17,077,389)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 19,189,901 36,682,364 53,759,753
------------- -------------- --------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 25,394,899 19,189,901 36,682,364
============= ============== ==============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest on customer deposits and borrowings $ 24,308,755 25,314,594 33,390,157
============= ============== ==============
Federal income taxes $ 3,675,605 5,865,256 6,755,734
============= ============== ==============
SUPPLEMENTAL SCHEDULE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES
Real estate acquired in settlement
of loans $ 380,970 1,395,983 371,637
============= ============== ==============
<FN>
See accompanying notes to consolidated financial statements.
8
THE CIVISTA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1994, 1993 AND 1992
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a description of the more significant accounting and
reporting policies of The CIVISTA Corporation (CIVISTA) and its
subsidiaries which are followed in preparing and presenting its
consolidated financial statements. CIVISTA's activities are considered
to be a single industry segment for financial reporting purposes.
A. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of
CIVISTA and its wholly owned subsidiaries, Citizens Savings Bank
of Canton (Citizens Savings Bank), Citizens Savings Corporation
(CSC), The CASNET Group, Inc. (CASNET), Crest Investments, Inc.,
and Citizens Investment Corporation. All significant
intercompany accounts and transactions have been eliminated in
consolidation.
B. REVENUE RECOGNITION
Interest income is recognized on the accrual basis as earned
based on rates applied to principal amounts outstanding.
C. CASH EQUIVALENTS
Cash equivalents include short-term investments in amounts due
from banks, interest bearing deposits and federal funds sold with
original maturity of three months or less. Generally, federal
funds sold are purchased and sold for one-day periods.
D. PROVISION FOR LOAN LOSSES
Provisions for losses on loans are charged to earnings when it is
determined that the investment in such assets is greater than the
estimated net realizable value. Additionally, accrual of
interest on potential problem loans is excluded from income (by
an offsetting increase in a specific allowance for loss) when, in
the opinion of management, such suspension is warranted. In
addition to providing reserves on specific loans, CIVISTA
establishes general reserves for losses based upon the overall
portfolio composition and general market conditions. While
management uses the best available information to make these
evaluations, future adjustments to the reserves may be necessary
if economic circumstances differ substantially from the
information and assumptions used.
E. LOAN ORIGINATION FEES
Loan origination fees and certain direct origination costs are
deferred and amortized, generally, over the contractual life of
the related loan using a level yield method.
9
THE CIVISTA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
F. MORTGAGE LOANS AND MORTGAGE-BACKED SECURITIES
Mortgage loans and mortgage-backed securities held for investment
are carried at cost and the related premium or discount is
amortized using the level yield method over the estimated
remaining lives of the underlying investments. These investments
are carried at cost because of management's intention and
CIVISTA's ability to hold them to maturity.
Mortgage loans and mortgage-backed securities available for sale
are carried at the lower of cost or estimated market value in the
aggregate. CIVISTA classifies as available for sale, certain
mortgage loans and mortgage-backed securities which it expects to
hold for indefinite periods of time. Such assets may be sold in
response to changes in interest rates. Gains or losses on the
sales of mortgage loans and mortgage-backed securities are
recognized on realization.
G. OFFICE PROPERTIES AND EQUIPMENT AND REAL ESTATE INVESTMENT
PROPERTY
Office properties and equipment are depreciated using a
straight-line method over the estimated useful lives of the
related assets. Estimated lives for buildings are 50 years and
furniture and equipment 3-10 years. Leasehold improvements are
amortized over the shorter of the estimated useful life of the
asset or the term of the lease.
Real estate investment property is depreciated generally using a
straight-line method over the estimated useful lives. Estimated
lives for buildings are 25-55 years and furniture and fixtures
3-20 years.
Maintenance and repairs are charged to appropriate expense
accounts in the year incurred.
H. INVESTMENT SECURITIES
Investment securities are carried at cost, adjusted for
amortization of premium. Investment securities are carried at
cost because of management's intention and CIVISTA's ability to
hold them to maturity. Marketable equity securities are carried
at the lower of cost or market. Gains or losses on the sales of
securities are recognized on realization.
I. FEDERAL INCOME TAXES
CIVISTA adopted Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes" on October 1, 1993. This
statement prescribes the asset and liability method of accounting
for income taxes. Deferred income taxes are recognized for the
tax consequences of "temporary differences" by applying enacted
statutory tax rates to differences between the financial
statement carrying amounts and the tax bases of existing assets
and liabilities. The effect of a change in tax rates is
recognized in income in the period of the enactment date. The
impact of the adoption of this method for income taxes was
insignificant.
Prior to fiscal 1994, deferred income taxes were provided for
income and expense items which were reported for tax purposes in
different years than for financial statement purposes.
10
THE CIVISTA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
J. REAL ESTATE ACQUIRED IN SETTLEMENT OF LOANS
Real estate acquired through foreclosure is initially recorded at
the lower of cost or fair value. Subsequent to acquisition, real
estate acquired through foreclosure is carried at the lower of
cost or fair value minus estimated costs to sell. Declines in
value are reserved through the allowance disclosed in note 7 and
subsequently charged off if appropriate. Costs relating to
development and improvement are capitalized up to fair value
minus estimated costs to sell.
K. REAL ESTATE DEVELOPMENT ASSETS
Real estate development assets are held for sale and are carried
at the lower of cost or net realizable value. Costs relating to
development and improvement are capitalized up to net realizable
value.
L. PENSION PLAN
CIVISTA's policy is to fund pension costs in accordance with the
Employee Retirement Income Security Act of 1974.
M. POSTRETIREMENT HEALTH CARE
In 1992, CIVISTA adopted Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions" with immediate recognition of the
transition obligation. This change did not have a material
impact on net earnings and net earnings per share.
N. NET EARNINGS PER SHARE
Net earnings per share are based upon the weighted average number
of common shares and common share equivalents outstanding during
each year, adjusted to reflect the two-for-one stock split of
November 22, 1993. The weighted average number of common shares
and common share equivalents outstanding during 1994, 1993 and
1992 was 3,663,862, 3,594,718 and 3,529,640, respectively.
O. RECLASSIFICATIONS
Certain previously reported financial statement amounts have been
reclassified to conform to the 1994 presentation.
2. PENDING MERGER
On August 10, 1994, CIVISTA entered into an Agreement of Affiliation and
Plan of Merger with First Bancorporation of Ohio (FBOH). Pursuant of
this agreement, CIVISTA will be merged into FBOH and the merger will be
accounted for as a pooling of interests. It is contemplated that
Citizens Savings Bank will merge with The First National Bank in
Massillon, a Stark County subsidiary of FBOH. Under the terms of the
agreement, FBOH will exchange 1.723 shares of its common stock for each
outstanding CIVISTA share. CIVISTA has granted FBOH an option to
acquire 350,655 shares of CIVISTA preferred stock at $33.50 per share,
which option becomes exercisable upon the occurrence of specified events
not consistent with the merger being consummated. Subject to regulatory
approval, the merger is expected to be completed during the first
calendar quarter of 1995.
11
THE CIVISTA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
3. INVESTMENT SECURITIES
A summary of investment securities follows:
SEPTEMBER 30, 1994
GROSS GROSS
CARRYING MARKET UNREALIZED UNREALIZED
VALUE VALUE GAINS LOSSES
United States Government
and agency obligations $ 128,485,330 124,399,000 -- 4,086,330
Ford Motor Credit note 5,000,000 4,988,000 -- 12,000
FNMA and SLMA common
stock, available for sale 13,587 574,000 560,413 --
-------------- ------------- ------------ -----------
TOTAL $ 133,498,917 129,961,000 560,413 4,098,330
============== ============= ============ ===========
SEPTEMBER 30, 1993
GROSS GROSS
CARRYING MARKET UNREALIZED UNREALIZED
VALUE VALUE GAINS LOSSES
United States Government
and agency obligations $ 146,115,705 147,963,000 1,847,295 --
Ford Motor Credit Note 5,000,000 5,000,000 -- --
FNMA and SLMA common
stock, available for sale 18,792 1,415,000 1,396,208 --
-------------- ------------- ------------ -----------
TOTAL $ 151,134,497 154,378,000 3,243,503 --
============== ============= ============ ===========
A summary of United States Government and agency obligations at September 30, 1994 by maturity follows:
CARRYING MARKET
VALUE VALUE
Due in one year or less $ 38,973,610 38,832,000
Due after one year through five years 76,510,176 73,383,000
Due after five years through seven years 13,001,544 12,184,000
-------------- ------------
TOTAL $ 128,485,330 124,399,000
============= ===========
<FN>
The $5,000,000 Ford Motor Credit note matures September 16, 1998.
12
THE CIVISTA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
A summary of sales proceeds and realized gains and losses follows:
YEARS ENDED SEPTEMBER 30,
1994 1993 1992
Sales proceeds $ 6,733,877 500,625 338,750
Realized gains 729,075 625 3,750
Realized losses -- -- --
============ ============== ==============
4. MORTGAGE-BACKED SECURITIES
Mortgage-backed securities consist of the following:
SEPTEMBER 30, 1994
GROSS GROSS
CARRYING MARKET UNREALIZED UNREALIZED
VALUE VALUE GAINS LOSSES
Held for investment:
FHLMC participation
certificates $ 39,094,987 37,350,000 44,662 1,789,649
FNMA participation
certificates 51,818,189 48,300,000 -- 3,518,189
Federated ARMS fund 3,155,742 3,156,000 258 --
-------------- ------------- ------------- -----------
TOTAL $ 94,068,918 88,806,000 44,920 5,307,838
============== ============= ============= ===========
13
THE CIVISTA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
SEPTEMBER 30, 1993
GROSS GROSS
CARRYING MARKET UNREALIZED UNREALIZED
VALUE VALUE GAINS LOSSES
Held for investment -
FHLMC participation
certificates $ 39,556,402 40,469,000 922,006 9,408
FNMA participation
certificates 40,038,491 40,250,000 212,492 983
Federated ARMS fund 3,090,379 3,094,000 3,621 --
-------------- ------------- ------------ -----------
TOTAL $ 82,685,272 83,813,000 1,138,119 10,391
============== ============= ============ ===========
The contractual maturities of mortgage-backed securities are as follows.
Actual maturities are expected to be less than contractual maturities
due to anticipated prepayments.
SEPTEMBER 30, 1994
CARRYING MARKET
VALUE VALUE
Due in one year or less $ 344,522 344,000
Due after one year through five years 16,096,369 15,825,000
Due after five years through ten years 75,164,488 70,173,000
Due after ten years 2,463,539 2,464,000
----------------- -----------------
TOTAL $ 94,068,918 88,806,000
================= ================
A summary of sales proceeds and realized gains and losses follows:
YEARS ENDED SEPTEMBER 30,
1994 1993 1992
Sales proceeds $ -- 54,678,322 26,483,841
Realized gains -- 2,380,994 806,672
Realized losses -- -- 74,450
============== ============ =============
14
THE CIVISTA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
5. MORTGAGE LOANS, NET
A summary of mortgage loans follows:
SEPTEMBER 30, SEPTEMBER 30,
1994 1993
Conventional-fixed rate $ 341,881,153 321,809,497
Conventional-adjustable rate 100,180,840 113,370,013
Construction 27,647,006 25,944,699
FHA insured-fixed rate 18,200,224 21,581,697
FHA insured-adjustable rate 4,719,921 5,937,922
VA guaranteed 11,236,865 13,172,017
Loans available for sale (market
value $240,000) 242,400 --
-------------- --------------
504,108,409 501,815,845
Less: Reserve for loan losses 2,566,176 2,553,479
Undisbursed loans in process 17,015,740 18,015,260
Deferred loan fees and discounts 2,891,725 3,110,586
-------------- -------------
TOTAL $ 481,634,768 478,136,520
============== =============
WEIGHTED AVERAGE YIELD AT YEAR-END 7.78 % 8.04 %
===== =====
A summary of sales proceeds and realized gains and losses follows:
YEARS ENDED SEPTEMBER 30,
1994 1993 1992
Sales proceeds $ 8,058,478 510,857 7,456,673
Realized gains 68,174 6,367 3,052
Realized losses 30,064 -- 27,765
============= ============= ===========
Transactions in the reserve for loan losses are summarized as follows:
YEARS ENDED SEPTEMBER 30,
1994 1993 1992
Balance at beginning of year $ 2,553,479 1,775,669 854,968
Provision for losses 132,000 784,400 1,088,484
Losses charged off, net ( 119,303) ( 6,590) ( 167,783)
-------------- ------------ -----------
BALANCE AT END OF YEAR $ 2,566,176 2,553,479 1,775,669
== =========== ============ ===========
<FN>
Interest which was reserved is recognized in income upon collection.
15
THE CIVISTA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Outstanding commitments to fund fixed rate and adjustable rate mortgage
loans aggregated approximately $3,667,000 and $425,000, respectively, at
September 30, 1994.
CIVISTA's primary lending area is within Stark County, Ohio. At
September 30, 1994, approximately $393,747,000 of CIVISTA's gross loans
were to borrowers located in Stark County. In addition, at September
30, 1994, approximately $50,666,000 of CIVISTA's gross loans were
located in other Ohio counties.
At September 30, 1994, 1993, and 1992, CIVISTA serviced loans for others
aggregating approximately $26,737,000, $29,584,000 and $24,016,000,
respectively.
6. OTHER LOANS, NET
A summary of other loans follows:
SEPTEMBER 30, SEPTEMBER 30,
1994 1993
Loans on savings deposits $ 1,972,536 2,189,840
Consumer loans 19,088,384 19,188,218
Education loans, available for sale 2,623,878 2,362,511
Lease financing 84,129 250,902
-------------- ---------------
23,768,927 23,991,471
Less: Reserve for loan losses 159,410 138,663
Unearned discount 7,106 31,288
-------------- ---------------
TOTAL $ 23,602,411 23,821,520
============== ===============
Due to the processing requirements, CIVISTA has adopted the policy of
selling education loans before payments commence. The market value of
education loans approximates book value.
Transactions in the reserve for other loan losses are summarized as follows:
YEARS ENDED SEPTEMBER 30,
1994 1993 1992
Balance at beginning of year $ 138,663 121,661 45,307
Provision for losses 30,634 32,225 219,695
Losses charged off, net ( 9,887) ( 15,223) (143,341)
----------- ---------- ----------
BALANCE AT END OF YEAR $ 159,410 138,663 121,661
=========== ========== ==========
16
THE CIVISTA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
CIVISTA had unused consumer home equity and credit card lines of credit
of $20,812,000 and $10,210,000, respectively, at September 30, 1994.
CIVISTA extends home equity and credit card lines of credit in the
normal course of business to meet the financing needs of customers.
While CIVISTA expects a significant portion of these lines of credit to
remain undrawn, the exposure to credit loss in the event of
nonperformance by the borrower is represented by the amount drawn down.
The credit policies and underwriting guidelines used in issuing lines of
credit are the same as for other loans receivable.
7. REAL ESTATE ACQUIRED IN SETTLEMENT OF LOANS, NET
Transactions in the reserve for losses on real estate acquired in
settlement of loans are summarized as follows:
YEARS ENDED SEPTEMBER 30,
1994 1993 1992
Balance at beginning of year $ 440,213 634,802 1,057,879
Provision for losses -- -- 505,712
Losses charged off, net ( 4,019) ( 194,589) ( 928,789)
------------- ----------- ------------
BALANCE AT END OF YEAR $ 436,194 440,213 634,802
============= =========== ============
8. REAL ESTATE INVESTMENT PROPERTY, NET
Real estate investment property consists primarily of residential
communities of apartments and town houses located in the Canton, Ohio
area. A summary of real estate investment property follows:
SEPTEMBER 30,
1994 1993
Land and land improvements $ 2,195,452 2,388,035
Multi-family residential buildings 18,890,229 19,315,169
Furniture and equipment 1,878,299 1,571,876
--------------- -------------
Total at cost 22,963,980 23,275,080
Less accumulated depreciation 10,325,933 9,731,448
--------------- -------------
TOTAL $ 12,638,047 13,543,632
=============== =============
Depreciation expense was $878,833, $900,118, and $920,985 in 1994, 1993,
and 1992, respectively.
17
THE CIVISTA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
9. OFFICE PROPERTIES AND EQUIPMENT, NET
A summary of office properties and equipment follows:
SEPTEMBER 30,
1994 1993
Land $ 694,131 694,131
Buildings 4,516,009 4,148,391
Furniture and equipment 6,880,765 6,532,218
Leasehold improvements 1,973,425 2,312,216
------------- -----------
Total at cost 14,064,330 13,686,956
Less accumulated depreciation and
amortization 8,160,852 7,402,436
------------- ----------
TOTAL $ 5,903,478 6,284,520
============= ===========
Depreciation and amortization expense was $810,425, $819,469, and
$704,912 in 1994, 1993, and 1992, respectively.
At September 30, 1994, CIVISTA was obligated to pay rental commitments
under noncancellable operating leases on certain offices and equipment
as follows:
YEAR ENDING LEASE
SEPTEMBER 30, COMMITMENTS
1995 $ 583,261
1996 475,447
1997 357,690
1998 240,920
1999 185,358
2000 - 2003 723,006
------------
TOTAL $ 2,565,682
===========
It is anticipated that certain leases which terminate in 1995 will be
renewed.
Rentals charged to operations under all operating leases amounted to
approximately $1,162,000, $1,262,000, and $1,575,000 in 1994, 1993, and
1992, respectively.
18
THE CIVISTA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
10. REAL ESTATE DEVELOPMENT ASSETS, NET
Real estate development assets are summarized as follows:
SEPTEMBER 30,
1994 1993
Enclave Mountain Estates and additional
undeveloped parcel, La Quinta, California $ 8,220,121 8,595,094
Less reserve for losses ( 378,000) --
-------------- --------------
7,842,121 8,595,094
-------------- --------------
Park Madison, Indio, California -- 604,398
Less reserve for losses -- ( 150,000)
-------------- --------------
-- 454,398
-------------- --------------
Non-earning loan -- 476,633
Less reserve for losses -- ( 140,146)
-------------- --------------
-- 336,487
-------------- --------------
TOTAL $ 7,842,121 9,385,979
============== ==============
CIVISTA acquired title to 40 acres in La Quinta, California in June
1990. CIVISTA has developed 27.6 acres into 54 residential lots known
as the Enclave Mountain Estates. In May, 1991, CIVISTA received
approval from the State of California to close sales on the 54
residential lots. CIVISTA has closed sales on seventeen lots as of
September 30, 1994, and is continuing to market the remaining lots.
CIVISTA has not yet finalized plans for the remaining 12.4 acres.
During 1994, CIVISTA completed the sell out of the last six Park Madison
homes and charged off the non-earning loan.
19
THE CIVISTA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Transactions in the reserve for losses on real estate development assets
are summarized as follows:
YEARS ENDED SEPTEMBER 30,
1994 1993 1992
Balance at beginning of year $ 290,146 375,146 175,146
Provision for losses 564,487 50,000 200,000
Losses charged off, net ( 476,633) ( 135,000) --
------------ ----------- ------------
BALANCE AT END OF YEAR $ 378,000 290,146 375,146
=========== =========== ============
Condensed statements of operations for CIVISTA's real estate development
operations are as follows:
YEARS ENDED SEPTEMBER 30,
1994 1993 1992
Income:
Real estate development sales, net $ 962,781 1,436,939 2,687,045
Interest income 849 5,936 6,250
Other income 248,151 6,005 17,754
------------ ------------ ------------
1,211,781 1,448,880 2,711,049
------------ ------------ ------------
Expenses:
Cost of real estate development sales 951,998 1,325,200 2,666,046
Interest expense -- -- 13,998
Other operating expenses 1,017,022 1,067,170 1,417,670
------------ ------------ ------------
1,969,020 2,392,370 4,097,714
------------ ------------ ------------
Loss before federal income taxes 757,239 943,490 1,386,665
Federal income tax benefit 265,034 327,863 471,466
------------ ------------ ------------
NET LOSS $ 492,205 615,627 915,199
============ ============ ============
20
THE CIVISTA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
11. CUSTOMER DEPOSITS
Customer deposit balances are summarized as follows (000's omitted):
SEPTEMBER 30, SEPTEMBER 30,
1994 1993
STATED RATE AMOUNT % STATED RATE AMOUNT %
Checking .00 - 3.00% $ 111,572 16.5% .00- 3.00% 108,651 15.9%
Money market 2.75 - 3.00 16,603 2.4 2.75- 3.00 16,729 2.4
---------- ----- -------- -----
Total transaction 128,175 18.9 125,380 18.3
Savings 2.75 308,747 45.5 3.00 310,074 45.3
Certificates 2.80 - 2.99 10,313 1.5 2.90- 2.99 38,288 5.6
3.00 - 3.99 65,117 9.6 3.00- 3.99 65,397 9.6
4.00 - 4.99 46,775 6.9 4.00- 4.99 24,797 3.6
5.00 - 5.99 43,470 6.4 5.00- 5.99 26,573 3.9
6.00 - 6.99 48,047 7.1 6.00- 6.99 43,485 6.3
7.00 - 7.99 18,179 2.7 7.00- 7.99 37,383 5.5
8.00 - 8.99 4,801 .7 8.00- 8.99 5,486 .8
9.00 - 9.99 2,053 .3 9.00- 9.99 2,161 .3
10.00 - 10.99 2,954 .4 10.00- 10.99 4,572 .7
12.00 - 12.99 -- .-- 12.00- 12.99 473 .1
---------- ----- -------- -----
241,709 35.6 248,615 36.4
---------- ----- -------- -----
TOTAL $ 678,631 100.0% 684,069 100.0%
========== ===== ======== =====
WEIGHTED AVERAGE INTEREST
RATE AT YEAR-END 3.51% 3.70%
====== =====
The components of interest expense were as follows (000's omitted):
YEARS ENDED SEPTEMBER 30,
1994 1993 1992
Transaction accounts $ 3,187 3,196 3,756
Savings 8,656 8,821 10,353
Certificates 11,250 12,326 17,694
---------- --------- ----------
TOTAL $ 23,093 24,343 31,803
========== ========= ==========
21
THE CIVISTA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
At September 30, 1994, certificates of deposit summarized by year of
maturity are as follows (000's omitted):
YEAR ENDING
SEPTEMBER 30, AMOUNT %
1995 $ 125,888 52%
1996 37,850 16
1997 16,685 7
1998 34,001 14
1999 20,970 9
2000 - 2004 6,315 2
----------- ----
TOTAL $ 241,709 100%
=========== ===
Certificates of deposit issued in amounts of $100,000 or more totalled
$18,513,000 at September 30, 1994.
12. NOTES PAYABLE TO THE FEDERAL HOME LOAN BANK
The notes payable to the Federal Home Loan Bank of Cincinnati are
payable at maturity with interest rates ranging from 5.000% to 6.757%
(weighted average 5.111%) at September 30, 1994. Under a blanket
floating lien security agreement with the Federal Home Loan Bank of
Cincinnati, Citizens Savings Bank is required to maintain as collateral
qualifying first mortgage loans equal to 150% of the notes payable.
Principal maturities for notes payable outstanding at September 30, 1994
are as follows by year of maturity:
YEAR ENDING
SEPTEMBER 30, AMOUNT
1995 $ 9,500,000
2006 302,167
--------------
TOTAL $ 9,802,167
==============
22
THE CIVISTA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
13. MORTGAGE LOANS PAYABLE
Mortgage loans payable are summarized as follows:
SEPTEMBER 30, SEPTEMBER 30,
TERMS 1994 1993
Monthly installments of $34,276 including
interest at 10.25%, maturing 2005. $ 3,542,279 3,587,934
Monthly installments of $38,908 including
interest at 10.25%, maturing 2005. 4,020,963 4,072,789
Monthly installments of $14,029 including
interest at 10.375%, maturing 2006. 1,456,879 1,473,148
------------ -------------
TOTAL $ 9,020,121 9,133,871
============ =============
The above loans are secured by real estate investment properties with
book values of $11,262,993 at September 30, 1994.
23
THE CIVISTA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
14. FEDERAL INCOME TAXES
As discussed in Note 1, CIVISTA adopted SFAS No. 109 as of October 1,
1993 on a prospective basis, resulting in no material cumulative
adjustment to current net income or stockholders' equity. CIVISTA files
a consolidated federal income tax return with its subsidiaries.
Citizens Savings Bank has qualified under provisions of the Internal
Revenue Code that permit it to deduct from taxable income an allowance
for bad debts based on experience or a percentage of taxable income
before such deduction. The differences between the statutory tax rates
and the effective tax rates used in determining CIVISTA's tax provision
are as follows (000's omitted):
Years ended September 30,
1994 1993 1992
% of % of % of
pretax pretax pretax
Amount income Amount income Amount income
------ ------ ------ ------ ------ ------
Computed "expected" tax rate $ 5,984 35.0% 6,898 34.8% 5,111 34.0%
Increase (decrease) in rate
resulting from:
Bad debt deductions -- -- ( 567) (2.9) ( 451) (3.0)
Losses on sales of real
estate owned, net and
provisions for losses -- -- 247 1.2 601 4.0
Tax-exempt mortgage interest -- -- -- -- ( 30) ( .2)
Other, net 66 0.4 201 1.0 246 1.6
------- ----- ------- ----- ------- -----
$ 6,050 35.4% 6,779 34.1% 5,477 36.4%
======= ==== ======= ===== ======== =====
The significant temporary differences included in the net deferred tax
asset are as follows (000's omitted):
September 30, 1994
------------------
Deferred tax asset:
Loan origination fees $ 1,000
Reserve for loan losses 928
Differences in pension expense 629
Deferred income 759
Other 915
---------
Total deferred tax assets 4,231
---------
Deferred tax liabilities:
FHLB stock dividends 1,062
Tax reserves on loans 1,519
Prepaid expenses 173
Differences in depreciation expense 784
---------
Total deferred tax liabilities 3,538
---------
Net deferred tax asset $ 693
=========
24
THE CIVISTA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
The net deferred tax asset at October 1, 1993, the date of
implementation of SFAS No. 109, was $656,000. The difference between
this balance and the $693,000 balance at year end results in the
deferred benefit of $37,000. Prior year deferred tax benefits were
calculated using the deferred income method, and have not been restated.
Deferred federal income tax benefit resulted from timing differences in
the recognition of income and expense for tax and financial statement
purposes. The source of these differences and the tax effect of each
are as follows:
YEARS ENDED SEPTEMBER 30,
1993 1992
Deferred loan fees $( 350,343) ( 452,952)
FHLB stock dividend 85,150 91,280
FHLB stock redemption ( 25,856) ( 15,881)
Lease financing ( 22,091) ( 46,145)
Employee benefits ( 296,635) ( 238,583)
Real estate partnerships 19,651 ( 294,229)
Other, net 363,124 ( 36,490)
----------- ----------
TOTAL $( 227,000) ( 993,000)
=========== ==========
As required by SFAS No. 109, CIVISTA has determined that it is not
required to establish a valuation reserve for the deferred tax asset
since it is "more likely than not" that the deferred tax of $693,000
will be principally realized through future reversals of existing
taxable temporary differences, future taxable income, and tax planning
strategies. CIVISTA's conclusion that it is "more likely than not" that
the deferred tax asset will be realized is based on a history of growth
in earnings and the prospects for continued growth including an analysis
of potential uncertainties that may affect future operating results.
CIVISTA will continue to review the tax criteria related to the
recognition of deferred tax assets on a quarterly basis.
25
THE CIVISTA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
15. SHAREHOLDERS' EQUITY
The number of common shares and treasury shares reflect the two-for-one
stock split of November 22, 1993.
OTS regulations require savings institutions to maintain certain minimum
levels of regulatory capital. An institution that fails to comply with
its regulatory capital requirements must obtain OTS approval of a
capital plan and can be subject to a capital directive and certain
restrictions on its operations. At September 30, 1994, the minimum
regulatory capital regulations require institutions to have tangible
capital equal to 1.5 percent of adjusted total assets, a 3 percent
leverage capital ratio and an 8 percent risk-based capital ratio.
The 8 percent risk-based regulatory capital requirement is based solely
on the credit risk weighting of the institution's assets. The OTS has
issued a final regulation adding an interest rate risk component to the
risk-based regulatory capital requirement. This regulation affects
capital calculations beginning March 31, 1995.
On December 19, 1992, the prompt corrective action regulations of the
Federal Deposit Insurance Corporation Improvement Act became effective.
These regulations define specific capital categories based on an
institution's capital ratios. The capital categories are "well
capitalized", "adequately capitalized", "undercapitalized",
"significantly undercapitalized" and "critically undercapitalized".
Institutions categorized as "undercapitalized" or worse are subject to
certain restrictions, including the requirement to file a capital plan
with the OTS, prohibitions on the payment of dividends and management
fees, restrictions on executive compensation and increased supervisory
monitoring, among other things. Other restrictions may be imposed on
the institution either by the OTS or the FDIC, including requirements to
raise additional capital, sell assets or sell the entire institution.
Once an institution becomes "critically undercapitalized" it is
generally placed in receivership or conservatorship within 90 days.
To be considered "well capitalized", an institution must generally have
a leverage ratio of at least 5 percent, a Tier 1 risk-based capital
ratio of at least 6 percent and a total risk-based capital ratio of at
least 10 percent.
At September 30, 1994, Citizens Savings Bank exceeded all regulatory
capital requirements.
For federal income tax purposes, Citizens Savings Bank is allowed a bad
debt deduction on taxable income and is subject to certain limitations
based on aggregate loans and savings deposits at the end of the year.
Retained earnings at September 30, 1994 and 1993 include approximately
$31,158,000 which represents allocations of earnings for bad debt
deductions for tax purposes only. If the amounts which qualify as
deductions for federal income tax purposes are later used for purposes
other than to absorb loan losses, including distributions in
liquidation, they will be subject to federal income tax at the then
current corporate tax rate.
26
THE CIVISTA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
16. EMPLOYEE BENEFIT PLANS
A defined benefit pension plan covers substantially all employees. In
general, benefits are based on years of service and the employee's
compensation.
CIVISTA also maintains a supplemental employee retirement plan in order
to provide certain officers with retirement benefits which had
previously been provided through the qualified pension plan's
integration with Social Security. As a result of changes in the
Internal Revenue Code, the plan's integration with Social Security was
eliminated. In general, benefits are based on years of service and the
employee's compensation.
The following table sets forth the funded status of these plans as of
July 31, 1994 and 1993 and the amounts recognized in the consolidated
financial statements. There are no material differences in the
following data as a result of using a July 31 instead of a September 30
measurement date.
1994 1993
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including
vested benefit of $3,583,700 and
$3,186,000, respectively $ 3,616,400 3,216,400
============== ============
Projected benefit obligation $ 6,935,100 5,289,000
Plan assets at fair value, primarily
U.S. Government obligations, corporate
bonds and common stocks 4,602,500 4,545,700
-------------- ------------
Unfunded projected benefit obligation ( 2,332,600) ( 743,300)
Unrecognized net losses subsequent to
transition 2,636,300 219,700
Unrecognized prior service cost ( 825,400) ( 893,400)
Unrecognized net liability being recognized over
employees' average remaining service life 229,200 243,600
-------------- ------------
ACCRUED PENSION EXPENSE $( 292,500) ( 1,173,400)
============== ============
27
THE CIVISTA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Net pension expense included the following components:
YEARS ENDED SEPTEMBER 30,
1994 1993 1992
Service cost $ 564,500 366,000 341,900
Interest cost on projected benefit obligation 429,200 364,400 332,100
Actual return on plan assets ( 113,900) ( 421,600) ( 360,900)
Net total of other components ( 220,600) 22,400 ( 37,700)
---------- ---------- ---------
NET PENSION EXPENSE $ 659,200 331,200 275,400
========== ========== =========
Significant assumptions used in determining plan obligations and net
pension expense are as follows:
1994 1993 1992
Expected long-term rate of return on assets 6.00% 7.75% 7.75%
Weighted average discount rate 6.00% 7.75% 7.75%
Rate of increase in future compensation 5.00% 5.00% 5.00%
==== ==== ====
In addition to pension benefits, CIVISTA provides certain health care
benefits for retirees who have at least 15 years of full-time service
and elect to continue health care coverage. CIVISTA will contribute the
lesser of 75% of the monthly premiums or certain dollar caps based on
whether the participants are eligible for Medicare. CIVISTA's
postretirement health care plan is an unfunded plan.
28
THE CIVISTA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
CIVISTA's net periodic postretirement benefit cost including accrued
postretirement benefit liability and accumulated postretirement benefit
obligation are as follows:
Accrued Accumulated
Postretirement Postretirement
Benefit Liability Benefit Obligation
1994 1993 1994 1993
BALANCE AT BEGINNING
OF YEAR $( 808,126) ( 745,230) ( 1,017,868) ( 768,869)
Recognition of components of
net periodic postretirement
benefit cost:
Service cost ( 44,421) ( 31,280) ( 44,421) ( 31,280)
Interest cost ( 62,775) ( 60,798) ( 62,775) ( 60,798)
Net amortization ( 5,141) -- ( 5,141) --
------------ ------------- ------------- ------------
( 112,337) ( 92,078) ( 112,337) ( 92,078)
Benefit payments 33,447 29,182 33,447 29,182
Unrecognized net gain (loss) -- -- 123,058 ( 186,103)
------------ ------------ ------------- ------------
Net change ( 78,890) ( 62,896) 44,168 ( 248,999)
------------ ------------ ------------- ------------
BALANCE AT END OF YEAR $( 887,016) ( 808,126) ( 973,700) ( 1,017,868)
============ ============ ============= ============
Accumulated postretirement benefit obligation:
Retirees $ 228,400 252,445
Fully eligible active plan participants 336,500 104,460
Other active plan participants 408,800 660,963
------------- ------------
$ 973,700 1,017,868
============= ============
In determining these amounts, CIVISTA assumed in 1994 that future
increases in health care cost trend rates would be 11.5% for the next
several years and then decline gradually to 5.5% in 2000. In 1993,
CIVISTA assumed that future increases in health care cost trend rates
would be 11.5% for the next several years and then decline gradually to
5.5% in 2000. CIVISTA used 7.00% and 6.00% in 1994 and 1993,
respectively as the discount rates for valuing these future payments.
Based on the dollar caps which CIVISTA has in the plan, a one percentage
point increase in the assumed health care cost trend rate would not
increase the aggregate of the service and interest cost components of
net periodic postretirement health care benefits cost.
29
THE CIVISTA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
17. STOCK OPTION PLAN
In January 1993, shareholders approved the 1993 CIVISTA Corporation
Stock Option Plan with 320,000 common shares authorized for grants of
options and stock appreciation rights to full-time employees at the
discretion of the Stock Option Committee of the Board. The option
prices are fixed by the Stock Option Committee of the Board at not less
than fair market value at the time the option is granted and no option
has a life of more than ten years. Options are exercisable upon grant.
The 1993 Plan superceded the previously existing stock option plan.
Options granted under such previous plan remain outstanding and have
terms identical to the 1993 Plan.
SHARES
AVAILABLE OPTIONS RANGE OF OPTION
FOR GRANT OUTSTANDING PRICE PER SHARE
BALANCE, SEPTEMBER 30, 1991 98,400 221,600 $ 7.44 - $ 8.44
Granted ( 82,800) 82,800 14.25
Exercised -- ( 21,600) 7.44 - 8.44
----------- ----------- ------------------
BALANCE, SEPTEMBER 30, 1992 15,600 282,800 7.44 - 14.25
Approved 320,000 --
Cancelled ( 15,600) --
Granted ( 32,600) 32,600 21.00
Exercised -- ( 20,400) 7.44 - 8.44
----------- ----------- ------------------
BALANCE, SEPTEMBER 30, 1993 287,400 295,000 7.44 - 21.00
Exercised -- ( 13,200) 7.44 - 14.25
----------- ----------- ------------------
BALANCE, SEPTEMBER 30, 1994 287,400 281,800 $ 7.44 - $ 21.00
=========== =========== =================
30
THE CIVISTA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
18. PARENT COMPANY
Citizens Savings Bank's ability to pay future cash dividends to CIVISTA
is limited by regulations and a dividend agreement with the Office of
Thrift Supervision. By regulation, as long as Citizens Savings Bank has
capital immediately prior to, and on a pro forma basis after giving
effect to, a proposed dividend that is equal to or greater than the
amount of its fully phased-in (July 1, 1996) capital requirement,
Citizens Savings Bank can dividend 100 percent of its net income during
a calendar year plus one-half of its surplus capital at the beginning of
the calendar year. Under its dividend agreement, as long as Citizens
Savings Bank exceeds its fully phased-in capital requirement, Citizens
Savings Bank can dividend 100 percent of its net income for the prior
eight quarters less cumulative dividends paid for such prior eight
quarters.
Condensed financial information of CIVISTA (parent company only) is as
follows:
CONDENSED STATEMENTS OF CONDITION
SEPTEMBER 30, 1994 AND 1993
1994 1993
ASSETS:
Cash including short-term cash investments $ 6,628,994 3,442,478
Investment securities with market
values of $4,013,000 and $6,052,000,
respectively 3,990,892 6,034,792
Investment in Citizens Savings Bank, at
equity in underlying value of net assets 62,284,041 60,710,905
Investment in other subsidiaries, at equity
in underlying value of net assets 18,093,461 12,217,399
Real estate investment property, net 8,850,531 8,940,873
Other assets 1,317,656 1,395,102
--------------- ------------
TOTAL ASSETS $ 101,165,575 92,741,549
=============== ============
LIABILITIES AND SHAREHOLDERS' EQUITY:
Mortgage loans payable $ 7,563,242 7,660,723
Amount due CASNET 1,013,934 1,534,948
Other liabilities 807,551 584,741
Shareholders' equity 91,780,848 82,961,137
--------------- ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 101,165,575 92,741,549
=============== ============
31
THE CIVISTA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
CONDENSED STATEMENTS OF OPERATIONS
YEARS ENDED SEPTEMBER 30, 1994, 1993 AND 1992
1994 1993 1992
Income:
Cash dividends from Citizens Savings Bank $ 1,823,000 2,181,000 3,069,000
Cash dividends from other subsidiaries 693,000 371,250 429,000
Interest income 320,442 214,186 203,780
Real estate operations 2,787,764 2,657,795 2,566,970
Other income 27,404 22,517 71,601
-------------- ----------- -----------
5,651,610 5,446,748 6,340,351
-------------- ----------- -----------
Expenses:
Interest expense 789,721 799,302 807,921
Real estate operations 1,649,713 1,539,891 1,526,354
Other 987,164 659,199 645,774
-------------- ----------- -----------
3,426,598 2,998,392 2,980,049
-------------- ----------- -----------
Earnings before federal income taxes
and equity in undistributed income
of subsidiaries 2,225,012 2,448,356 3,360,302
-------------- ----------- -----------
Federal income taxes (benefit) ( 102,000) ( 36,000) ( 47,000)
Equity in undistributed income of subsidiaries 8,721,390 10,588,006 6,149,336
-------------- ----------- -----------
NET EARNINGS $ 11,048,402 13,072,362 9,556,638
============== =========== ===========
32
THE CIVISTA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
CONDENSED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 1994, 1993 AND 1992
1994 1993 1992
OPERATING ACTIVITIES:
Net earnings $ 11,048,402 13,072,362 9,556,638
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Equity in undistributed income of
subsidiaries ( 8,721,390) (10,588,006) ( 6,149,336)
Depreciation 477,693 429,316 399,595
Other 361,750 2,800 ( 1,004,722)
------------ ------------ ------------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 3,166,455 2,916,472 2,802,175
------------ ------------ ------------
INVESTING ACTIVITIES:
Return of investment in
subsidiaries, net 1,170,540 411,085 888,604
Purchase of investment securities ( 992,500) ( 6,044,865) --
Maturities of investment securities 3,000,000 -- --
Purchase of real estate investment
property ( 387,351) ( 268,883) ( 191,398)
------------ ------------ ------------
NET CASH PROVIDED (USED) BY
INVESTING ACTIVITIES 2,790,689 ( 5,902,663) 697,206
------------ ------------ ------------
FINANCING ACTIVITIES:
Mortgage loan payments ( 97,481) ( 88,024) ( 79,482)
Cash dividends ( 2,270,658) ( 1,739,662) ( 1,429,228)
CASNET, (repayment) borrowing ( 521,014) 1,534,948 --
Purchase of treasury stock -- -- ( 2,449)
Stock options exercised 118,525 160,625 164,650
------------ ------------ ------------
NET CASH USED BY
FINANCING ACTIVITIES ( 2,770,628) ( 132,113) ( 1,346,509)
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 3,186,516 ( 3,118,304) 2,152,872
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 3,442,478 6,560,782 4,407,910
------------ ------------ ------------
CASH AND CASH EQUIVALENTS AT
END OF YEAR $ 6,628,994 3,442,478 6,560,782
============ ============ ============
33
THE CIVISTA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
19. QUARTERLY FINANCIAL DATA (UNAUDITED)
Quarterly financial and per share data for the years ended September 30,
1994 and 1993 are summarized as follows:
IN THOUSANDS (EXCEPT FOR PER SHARE DATA)
QUARTERS
FIRST SECOND THIRD FOURTH
1994:
Interest income $ 13,823 13,447 13,369 13,570
Interest expense 6,171 6,015 5,992 6,127
Provision for loan losses 58 45 40 20
Other income 3,329 4,185 3,187 3,080
Other expenses 6,479 7,254 6,507 6,184
Federal income taxes 1,463 1,443 1,468 1,676
--------- -------- --------- --------
NET EARNINGS: $ 2,981 2,875 2,549 2,643
========= ======== ========= ========
PER SHARE: $ .82 .78 .69 .73
========= ======== ========= ========
1993:
Interest income $ 14,579 14,036 14,008 13,996
Interest expense 6,502 6,195 6,249 6,416
Provision for loan losses 241 183 233 160
Other income 3,795 4,588 4,225 3,981
Other expenses 7,170 6,735 6,437 6,836
Federal income taxes 1,523 1,832 1,784 1,640
--------- --------- --------- --------
NET EARNINGS: $ 2,938 3,679 3,530 2,925
========= ======== ========= ========
PER SHARE: $ .82 1.02 .98 .82
========= ======== ========= ========
20. FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards (SFAS) No. 107, "Disclosures
about Fair Value of Financial Instruments", requires disclosure of fair
value information about financial instruments for which it is
practicable to estimate that value. Where quoted market prices are not
available, fair values are based on estimates using present value or
other valuation techniques. These techniques are significantly affected
by the assumptions used, including the discount rate and estimates of
future cash flows. As a result, the derived fair value estimates cannot
be substantiated by comparison to independent markets and, in many
cases, could not be realized in a current market exchange. SFAS No. 107
excludes certain financial instruments and all nonfinancial instruments
from its disclosure requirements. Accordingly, the aggregate fair value
amounts presented do not represent the underlying value of CIVISTA.
34
THE CIVISTA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
The estimated fair values of CIVISTA's financial instruments are as
follows (000's omitted):
SEPTEMBER 30, 1994
CARRYING FAIR
VALUE VALUE
ASSETS:
Cash including short-term cash investments $ 25,395 25,395
Investment securities 133,499 129,961
Mortgage-backed securities 94,069 88,806
Mortgage loans 481,635 474,069
Other loans 23,602 24,067
Federal Home Loan Bank stock 5,284 5,284
LIABILITIES:
Transaction and savings deposits 436,922 436,922
Certificates of deposit 241,709 242,476
Notes payable to Federal Home Loan Bank
and mortgage loans payable 18,822 18,986
CASH INCLUDING SHORT-TERM CASH INVESTMENTS. For cash and short-term
cash investments, the carrying amount is a reasonable estimate of fair
value.
INVESTMENT AND MORTGAGE-BACKED SECURITIES. Fair values for investment
and mortgage-backed securities are based on quoted market prices.
MORTGAGE AND OTHER LOANS. For certain homogeneous categories of loans,
such as some residential mortgages, and consumer loans, fair value is
estimated using the quoted market prices for securities backed by
similar loans, adjusted for differences in loan characteristics. The
fair value of other types of loans is estimated by discounting the
future cash flows using the current rates at which similar loans would
be made to borrowers with similar credit rating and the same remaining
maturities.
FEDERAL HOME LOAN BANK STOCK. The fair value is estimated to be the
carrying value which is par. All transactions in the capital stock of
the Federal Home Loan Bank of Cincinnati are executed at par.
DEPOSITS. The fair value of transaction and savings deposits is the
amount payable on demand at the reporting date. The fair value of
certificates of deposit is estimated using rates currently offered for
deposits of similar remaining maturities.
NOTES PAYABLE TO FEDERAL HOME LOAN BANK AND MORTGAGE LOANS PAYABLE.
Rates currently available to CIVISTA for debt with similar terms and
remaining maturities are used to estimate fair value of existing debt.