10q10k10q10k.net

What changed in CIVISTA BANCSHARES, INC.'s 10-K — 2022 vs 2023

vs

Paragraph-level year-over-year comparison of CIVISTA BANCSHARES, INC.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+255 added−287 removedSource: 10-K (2024-03-14) vs 10-K (2023-03-15)

Top changes in CIVISTA BANCSHARES, INC.'s 2023 10-K

255 paragraphs added · 287 removed · 215 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

56 edited+17 added−19 removed156 unchanged
Biggest changeThrough its subsidiaries, including Civista, the Company is primarily engaged in the business of community banking, which accounts for substantially all of its revenue, operating income and assets. Refer to the Consolidated Financial Statements on pages 64 through 69 of the 2022 Annual Report for additional information.
Biggest changeEffective as of August 31, 2023, VFG was merged with and into Civista, and is now operated as the CLF division of Civista. CBI is a financial holding company. Through its subsidiaries, including Civista, the Company is primarily engaged in the business of community banking, which accounts for substantially all of its revenue, operating income and assets.
We provide individuals, families, business and non-profits with personalized investment management, 401-(k) advisory services for employers, financial planning, trust services, and tailored lending. 4 Core Deposit Growth We plan to continue to focus on growing our core, commercial operating and retail, non-maturity deposit base with an emphasis on relationship banking.
We provide individuals, families, 4 business and non-profits with personalized investment management, 401-(k) advisory services for employers, financial planning, trust services, and tailored lending. Core Deposit Growth We plan to continue to focus on growing our core, commercial operating and retail, non-maturity deposit base with an emphasis on relationship banking.
CBI makes available free of charge on or through its Internet website its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as well as CBI’s definitive proxy statements filed pursuant to Section 14 of the Exchange Act, as soon as reasonably practicable after CBI electronically files such material with, or furnishes it to, the SEC. 17
CBI makes available free of charge on or through its Internet website its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as well as CBI’s definitive proxy statements filed pursuant to Section 14 of the Exchange Act, as soon as reasonably practicable after CBI electronically files such material with, or furnishes it to, the SEC.
Capital levels as measured by these standards are also used to categorize financial institutions for purposes of certain prompt corrective action regulatory provisions. 12 In July 2013, the United States banking regulators issued new capital rules applicable to smaller banking organizations which also implement certain of the provisions of the Dodd-Frank Act (the “Basel III Capital Rules”).
Capital levels as measured by these standards are also used to categorize financial institutions for purposes of certain prompt corrective action regulatory provisions. In July 2013, the United States banking regulators issued new capital rules applicable to smaller banking organizations which also implement certain of the provisions of the Dodd-Frank Act (the “Basel III Capital Rules”).
Civista has established policies and procedures that Civista believes comply with the requirements of the Patriot Act. 11 The Anti-Money Laundering Act of 2020 (the “AMLA”), which amends the Bank Secrecy Act of 1970 (the “BSA”), was enacted in January 2021. The AMLA is intended to be a comprehensive reform and modernization to U.S. bank secrecy and anti-money laundering laws.
Civista has established policies and procedures that Civista believes comply with the requirements of the Patriot Act. The Anti-Money Laundering Act of 2020 (the “AMLA”), which amends the Bank Secrecy Act of 1970 (the “BSA”), was enacted in January 2021. The AMLA is intended to be a comprehensive reform and modernization to U.S. bank secrecy and anti-money laundering laws.
CRMI, as a Delaware-chartered captive insurance company, is subject to the laws and regulations of the State of Delaware and undergoes periodic examinations by the Delaware Division of Insurance. 14 Executive and Incentive Compensation The Dodd-Frank Act requires that the federal banking agencies, including the Federal Reserve Board and the FDIC, issue a rule related to incentive-based compensation.
CRMI, as a Delaware-chartered captive insurance company, is subject to the laws and regulations of the State of Delaware and undergoes periodic examinations by the Delaware Division of Insurance. Executive and Incentive Compensation The Dodd-Frank Act requires that the federal banking agencies, including the Federal Reserve Board and the FDIC, issue a rule related to incentive-based compensation.
We are committed to ensuring that all our employees feel welcomed, valued, respected and heard so that they can fully contribute their unique talents for the benefit of our customers, their careers, our company and our communities. We have recently established a Diversity, Equity and Inclusion Council (“DEI Council”).
We are committed to ensuring that all our employees feel welcomed, valued, respected and heard so that they can fully contribute their unique talents for the benefit of our customers, their careers, our Company and our communities. We have established a Diversity, Equity and Inclusion Council (“DEI Council”).
Qualifying institutions that elected to use the CBLR framework (each, a “CBLR Bank”) and that maintain a leverage ratio of greater than 9.0% will be considered to have satisfied the risk-based and leverage capital requirements in the regulatory agencies' generally applicable capital rules and to have met the well-capitalized ratio requirements.
Qualifying institutions that elected to use the CBLR framework (each, a “CBLR Bank”) and 12 that maintain a leverage ratio of greater than 9.0% will be considered to have satisfied the risk-based and leverage capital requirements in the regulatory agencies' generally applicable capital rules and to have met the well-capitalized ratio requirements.
We offer commercial and personal loans on a secured and unsecured basis, revolving lines of credit, commercial mortgage loans, and residential mortgages on both primary and secondary residences, home equity loans, bridge loans and other personal purpose loans. However, we are not and have not historically been a participant in the sub-prime lending market.
We offer commercial and personal loans on a secured and unsecured basis, revolving lines of credit, commercial mortgage loans, and residential mortgage loans on both primary and secondary residences, home equity loans, bridge loans and other personal purpose loans. However, we are not and have not historically been a participant in the sub-prime lending market.
Our consumer loan portfolio includes unsecured overdraft lines of credit and personal loans as well as loans secured by savings accounts and certificates of deposit on deposit with Civista. Our portfolio lending activities include the origination of one- to four-family first mortgage loans, primarily in our designated market area.
Our consumer loan portfolio includes unsecured overdraft lines of credit and personal loans as well as loans secured by savings accounts and certificates of deposit with Civista. Our portfolio lending activities include the origination of one- to four-family first mortgage loans, primarily in our designated market area.
Our lending is concentrated in these markets and our predominant sources of deposits are the communities in which our offices are located as well as the neighboring communities. The banking business is highly competitive. We face substantial competition both in attracting deposits and in originating loans anf commercial equipment leasing.
Our lending is concentrated in these markets and our predominant sources of deposits are the communities in which our offices are located as well as the neighboring communities. The banking business is highly competitive. We face substantial competition both in attracting deposits and in originating loans and commercial equipment leasing.
Customers who are Federal Deposit Insurance Corporation (“FDIC”) insurance sensitive are able to place large dollar deposits with Civista and Civista uses either outlet to place those funds into certificates of deposit or money markets issued by other banks in the Network.
Customers who are Federal Deposit Insurance Corporation (“FDIC”) insurance sensitive are able to place large dollar deposits with Civista and Civista uses either outlet to place those funds into certificates of deposit or money markets issued by other banks in the IntraFi Network.
At December 31, 2022, both CBI and Civista were in compliance with all of the regulatory capital requirements to which they are subject. For CBI’s and Civista’s capital ratios, see Note 19 to the Company’s 2022 Consolidated Financial Statements.
At December 31, 2023, both CBI and Civista were in compliance with all of the regulatory capital requirements to which they are subject. For CBI’s and Civista’s capital ratios, see Note 19 to the Company’s 2022 Consolidated Financial Statements.
The Federal Reserve Board may require a financial or bank holding company to contribute additional capital to an undercapitalized subsidiary bank and may disapprove of the payment of dividends to shareholders if the Federal Reserve Board believes the payment of such dividends would be an unsafe or unsound practice.
The Federal Reserve Board may require a financial or bank holding 7 company to contribute additional capital to an undercapitalized subsidiary bank and may disapprove of the payment of dividends to shareholders if the Federal Reserve Board believes the payment of such dividends would be an unsafe or unsound practice.
Certain other regulatory requirements applied only to banks with consolidated assets in excess of $50 billion and so did not apply to CBI or Civista even before the enactment of the Regulatory Relief Act.
Certain other regulatory requirements applied only to 10 banks with consolidated assets in excess of $50 billion and so did not apply to CBI or Civista even before the enactment of the Regulatory Relief Act.
These regulations affect how consumer information is transmitted through diversified financial companies and conveyed to outside vendors. 15 Civista is also subject to regulatory guidelines establishing standards for safeguarding customer information.
These regulations affect how consumer information is transmitted through diversified financial companies and conveyed to outside vendors. Civista is also subject to regulatory guidelines establishing standards for safeguarding customer information.
Under the final rule, community banks with $10 billion or less in total consolidated assets and total trading assets and liabilities of 5.0% or less of total consolidated assets were excluded from the restrictions of the Volcker Rule.
Under the final rule, community banks with $10 billion or less in total consolidated assets and total trading assets and 13 liabilities of 5.0% or less of total consolidated assets were excluded from the restrictions of the Volcker Rule.
The Board of Directors has adopted charters for the Audit Committee, the Compensation Committee and the Nominating Committee, as well as a Code of Conduct (Ethics) applicable to all directors, officers and employees of the Company.
The Board of Directors has adopted charters for the Audit Committee, the Compensation Committee, the the Nominating Committee and the Board Risk Committee, as well as a Code of Conduct (Ethics) applicable to all directors, officers and employees of the Company.
Our annualized voluntary turnover is relatively low, as is the case for turnover of our top performers, a record which we attribute to our strong values-based culture, commitment to career development, and attractive compensation and benefit programs. Civista employs approximately 530 full-time equivalent employees to whom a variety of benefits are provided. CBI has no employees.
Our annualized voluntary turnover is relatively low, as is the case for turnover of our top performers, a record which we attribute to our strong values-based culture, commitment to career development, and attractive compensation and benefit programs. Civista employs approximately 532 full-time equivalent employees to whom a variety of benefits are provided. CBI has no employees.
The Company has implemented a clawback policy and it is posted under the “Corporate Overview” tab on the “Governance Documents” page of CBI’s Internet website.
The Company has 14 implemented a clawback policy and it is posted under the “Corporate Overview” tab on the “Governance Documents” page of CBI’s Internet website.
Market Area and Competition At December 31, 2022, our primary market area consisted of the counties in which we currently operate branches, and loan production offices, including Erie, Crawford, Champaign, Cuyahoga, Franklin, Huron, Logan, Madison, Montgomery, Ottawa, Richland, Henry, Wood and Summit Counties in Ohio, Dearborn and Ripley Counties in Indiana and Kenton County in Kentucky.
Market Area and Competition At December 31, 2023, our primary market area consisted of the counties in which we currently operate branches, and loan production offices, including Erie, Crawford, Champaign, Cuyahoga, Franklin, Huron, Logan, Madison, Montgomery, Ottawa, Richland, Henry, Wood and Summit Counties in Ohio, Dearborn and Ripley Counties in Indiana and Kenton County in Kentucky.
At the time of the merger, Comunibanc Corp. had total assets of $315,083, including $175,500 in loans, and $271,081 in deposits.
At the time of the merger, Comunibanc Corp. had total consolidated assets of $315,083, including $175,500 in loans, and $271,081 in deposits.
Civista’s capital at December 31, 2022, met the standards for the highest capital category, a “well-capitalized” bank. Federal Reserve Board regulations also limit the payment of dividends by Civista to CBI. Civista may not pay a dividend if it would cause Civista not to meet its capital requirements.
Civista’s capital at December 31, 2023, met the standards for the highest capital category, a “well-capitalized” bank. Federal Reserve Board regulations also limit the payment of dividends by Civista to CBI. Civista may not pay a dividend if it would cause Civista not to meet its capital requirements.
Public companies will be required, once stock exchanges impose additional listing requirements under the Dodd-Frank Act and rules adopted by the SEC in October 2022, to adopt and implement "clawback" policies for incentive compensation payments and to disclose the details of the procedures which allow recovery of incentive compensation that was paid on the basis of erroneous financial information necessitating a restatement due to material noncompliance with financial reporting requirements.
Following the adoption of additional listing requirements in 2023 to comply with the Dodd-Frank Act and rules adopted by the SEC in October 2022, public companies will be required, once stock exchanges impose additional listing requirements under the Dodd-Frank Act and rules adopted by the SEC in October 2022, to adopt and implement "clawback" policies for incentive compensation payments and to disclose the details of the procedures which allow recovery of incentive compensation that was paid on the basis of erroneous financial information necessitating a restatement due to material noncompliance with financial reporting requirements.
(“FCIA”) was formed as a wholly-owned subsidiary of CBI to allow the Company to participate in commission revenue generated through its third party insurance agreement. Assets of FCIA were not significant as of December 31, 2022. WATER STREET PROPERTIES (“WSP”) was formed as a wholly-owned subsidiary of CBI to hold properties repossessed by CBI subsidiaries.
(“FCIA”) was formed as a wholly owned subsidiary of CBI to allow the Company to participate in commission revenue generated through its third party insurance agreement. Assets of FCIA were not significant as of December 31, 2023. WATER STREET PROPERTIES, INC. (“WSP”) was formed as a wholly owned subsidiary of CBI to hold properties repossessed by CBI subsidiaries.
Prior to the acquisition, VFG was a privately held, independent, full-service equipment leasing and financing company headquartered in Pittsburgh, Pennsylvania. At the time of the acquisition, VFG had total assets of $93,870, including $62,712 in loans and leases. As a result of the acquisition, VFG became a wholly-owned subsidiary of Civista. CBI is a financial holding company.
Prior to the acquisition, VFG was a privately held, independent, full-service equipment leasing and financing company headquartered in Pittsburgh, Pennsylvania. At the time of the acquisition, VFG had total assets of $93,870, including $62,712 in loans and leases. As a result of the acquisition, VFG became a wholly-owned subsidiary of Civista.
The Federal Reserve Board and the OCC review, as part of their respective regular, risk-focused examination process, the incentive compensation arrangements of banking organizations, such as CBI and Civista, that are not “large, complex banking organizations.” These reviews are tailored to each organization based on the scope and complexity of the organization's activities and the prevalence of incentive compensation arrangements.
The Federal Reserve Board reviews, as part of its respective regular, risk-focused examination process, the incentive compensation arrangements of banking organizations, such as CBI and Civista, that are not “large, complex banking organizations.” These reviews are tailored to each organization based on the scope and complexity of the organization's activities and the prevalence of incentive compensation arrangements.
Civista also operates loan production offices in Westlake, Ohio and Fort Mitchell, Kentucky and a leasing company office in Pittsburgh, Pennsylvania. Civista and its consolidated subsidiaries as discussed below, accounted for 99.2% of the Company’s consolidated assets at December 31, 2022. FIRST CITIZENS INSURANCE AGENCY, INC.
Civista also operates loan production offices in Westlake, Ohio and Fort Mitchell, Kentucky and a leasing company office in Pittsburgh, Pennsylvania. Civista and its consolidated subsidiaries as discussed below, accounted for 99.5% of the Company’s consolidated assets at December 31, 2023. FIRST CITIZENS INSURANCE AGENCY, INC.
Assets of WSP were not significant as of December 31, 2022. FIRST CITIZENS INVESTMENTS, INC. (“FCI”) was formed in the fourth quarter of 2007 as a wholly-owned subsidiary of Civista to hold and manage its securities portfolio. The operations of FCI are located in Wilmington, Delaware.
Assets of WSP were not significant as of December 31, 2023. FIRST CITIZENS INVESTMENTS, INC. (“FCI”) was formed in 2007 as a wholly owned subsidiary of Civista to hold and manage its securities portfolio. The operations of FCI are located in Wilmington, Delaware.
Since it was established the CFPB has exercised extensive rulemaking and interpretive authority. 10 Consumer Protection Laws and Regulations: Banks are subject to regular examination to ensure compliance with federal consumer protection statutes and regulations, including, but not limited to, the following: • The Equal Credit Opportunity Act (prohibiting discrimination in any credit transaction on the basis of any of various criteria); • The Truth in Lending Act (requiring that credit terms are disclosed in a manner that permits a consumer to understand and compare credit terms more readily and knowledgeably); • The Fair Housing Act (making it unlawful for a lender to discriminate in its housing-related lending activities against any person on the basis of certain criteria); • The Home Mortgage Disclosure Act (requiring financial institutions to collect data that enables regulatory agencies to determine whether financial institutions are serving the housing credit needs of the communities in which they are located); and • The Real Estate Settlement Procedures Act (requiring that lenders provide borrowers with disclosures regarding the nature and cost of real estate settlements and prohibits abusive practices that increase borrowers’ costs).
Consumer Protection Laws and Regulations: Banks are subject to regular examination to ensure compliance with federal consumer protection statutes and regulations, including, but not limited to, the following: • The Equal Credit Opportunity Act (prohibiting discrimination in any credit transaction on the basis of any of various criteria); • The Truth in Lending Act (requiring that credit terms are disclosed in a manner that permits a consumer to understand and compare credit terms more readily and knowledgeably); • The Fair Housing Act (making it unlawful for a lender to discriminate in its housing-related lending activities against any person on the basis of certain criteria); • The Home Mortgage Disclosure Act (requiring financial institutions to collect data that enables regulatory agencies to determine whether financial institutions are serving the housing credit needs of the communities in which they are located); and • The Real Estate Settlement Procedures Act (requiring that lenders provide borrowers with disclosures regarding the nature and cost of real estate settlements and prohibits abusive practices that increase borrowers’ costs).
Maintain Robust Capital and Liquidity Levels The Company’s capital position provides a source of strength and continues to significantly exceed all regulatory capital guidelines as demonstrated by the December 31, 2022 Tier 1 Leverage ratios of the Company and Civista of 8.9 percent and 10.3 percent, respectively. We plan to continue to maintain robust capital reserves.
Maintain Robust Capital and Liquidity Levels The Company’s capital position provides a source of strength and continues to significantly exceed all regulatory capital guidelines as demonstrated by the December 31, 2023 Tier 1 Leverage ratios of the Company and Civista of 8.8 percent and 10.0 percent, respectively. We plan to continue to maintain robust capital reserves.
Time deposits consist of certificates of deposit, including those held in IRA accounts. Reciprocal deposits are offered through Civista’s participation in the Certificate of Deposit Account Registry Service® (CDARS) and Insured Cash Sweep (ICS) programs offered through Promontory Interfinancial Network, LLC.
Time deposits consist of certificates of deposit, including those held in IRA accounts. Reciprocal deposits are offered through Civista’s participation in the Certificate of Deposit Account Registry Service® (CDARS) and Insured Cash Sweep (ICS) programs offered through IntraFi, LLC.
In June 2010, the Federal Reserve Board, the OCC and the FDIC issued comprehensive final guidance on incentive compensation policies intended to ensure that the incentive compensation policies of banking organizations do not undermine the safety and soundness of such organizations by encouraging excessive risk-taking.
In June 2010, the Federal Reserve Board, the Office of the Comptroller (the "OCC") and the Federal Deposit Insurance Corporation (the "FDIC") issued comprehensive final guidance on incentive compensation policies intended to ensure that the incentive compensation policies of banking organizations do not undermine the safety and soundness of such organizations by encouraging excessive risk-taking.
The Company’s primary focus of lending continues to be real estate loans, both residential and commercial in nature. Commercial real estate loans comprised 55% of the total loan portfolio in 2022, 56% of the total loan portfolio in 2021, and 48% of the total loan portfolio in 2020.
The Company’s primary focus of lending continues to be real estate loans, both residential and commercial in nature. Commercial real estate loans comprised 54% of the total loan portfolio in 2023, 55% of the total loan portfolio in 2022, and 56% of the total loan portfolio in 2021.
CBI and its subsidiaries are sometimes referred to together as the “Company”. The Company had total consolidated assets of $3,537,830 at December 31, 2022. CIVISTA BANK (“Civista”), owned by the Company since 1987, opened for business in 1884 as The Citizens National Bank.
CBI and its subsidiaries are sometimes referred to together as the “Company”. The Company had total consolidated assets of $3,861,418 at December 31, 2023. CIVISTA BANK (“Civista”), owned by the Company since 1987, opened for business in 1884 as The Citizens National Bank.
Such loans are generally originated by and sourced from the same resources and markets as those loans originated and held in our portfolio. Through our equipment leasing and financing business operated by VFG, which was acquired as a whooly-owned subsuduary of Civista in October 2022, we offer commercial equipment leasing services for businesses nationwide.
Such loans are generally originated by and sourced from the same resources and markets as those loans originated and held in our portfolio. Through our equipment leasing and financing business operated by our CLF division, which was acquired as a who1ly-owned subsidiary of Civista in October 2022, we offer commercial equipment leasing services for businesses nationwide.
At December 31, 2022, our liquid assets included $43.3 million of short-term cash and equivalents supplemented by $615.4 million of investment securities classified as available for sale which can be readily sold or pledged as collateral, if necessary.
At December 31, 2023, our liquid assets included $60.4 million of short-term cash and equivalents supplemented by $618.3 million of investment securities classified as available for sale which can be readily sold or pledged as collateral, if necessary.
FIRST CITIZENS CAPITAL LLC (“FCC”) was also formed in the fourth quarter of 2007 as a wholly-owned subsidiary of Civista to hold inter-company debt that is eliminated in consolidation. The operations of FCC were discontinued December 31, 2021 as a result of inactivity. VISION FINANCIAL GROUP, INC.
FIRST CITIZENS CAPITAL LLC (“FCC”) was also formed in 2007 as a wholly owned subsidiary of Civista to hold inter-company debt that is eliminated in consolidation. The operations of FCC were discontinued December 31, 2021 as a result of inactivity. CIVISTA LEASING & FINANCING (“CLF”) formerly known as Vision Financial Group, Inc.
At December 31, 2022, Civista had $55,501 of accumulated net profits available to pay dividends to CBI without approval of the ODFI. The Company’s business is not seasonal, nor is it dependent on a single or small group of customers.
At December 31, 2023, Civista had $56,886 of accumulated net profits available to pay dividends to CBI without approval of the ODFI. The Company’s business is not seasonal, nor is it dependent on a single or small group of customers.
Residential real estate mortgage loans comprised 22% of the total loan portfolio in 2022, 22% of the total loan portfolio in 2021 and 22% of the total loan portfolio in 2020. Commercial and agriculture loans comprised 11% of the total loan portfolio in 2022, 12% in 2021, and 20% in 2020.
Residential real estate mortgage loans comprised 23% of the total loan portfolio in 2023, 22% of the total loan portfolio in 2022 and 22% of the total loan portfolio in 2021. Commercial and agriculture loans comprised 11% of the total loan portfolio in 2023, 11% in 2022, and 12% in 2021.
Ensure the Adequacy of Our Allowance for Credit Losses Despite the economic implications and challenges resulting from the COVID-19 pandemic on our business over the past three years, our reserve levels have remained adequate with total allowance amounting to $28.5 million at December 31, 2022.
Ensure the Adequacy of Our Allowance for Credit Losses Despite the economic implications and challenges resulting from the COVID-19 pandemic on our business over the past four years, our reserve levels have remained adequate with total allowance amounting to $37.2 million at December 31, 2023.
The FDIC rules further changed the method of determining risk-based assessment rates for established banks with less than $10 billion in assets to better ensure that banks taking on greater risks pay more for deposit insurance than banks that take on less risk. As of September 30, 2022, the DRR was 1.26%.
The FDIC rules further changed the method of determining risk-based assessment rates for established banks with less than $10 billion in assets to better ensure that banks taking on greater risks pay more for deposit insurance than banks that take on less risk.
Recently, several states have adopted regulations requiring certain financial institutions to implement cybersecurity programs and providing detailed requirements with respect to these programs, including data encryption requirements. Many states have also recently implemented or modified their data breach notification and data privacy requirements.
State regulators have also been increasingly active in implementing privacy and cybersecurity standards and regulations. Recently, several states have adopted regulations requiring certain financial institutions to implement cybersecurity programs and providing detailed requirements with respect to these programs, including data encryption requirements. Many states have also recently implemented or modified their data breach notification and data privacy requirements.
In addition, we had the capacity to borrow additional funds totaling $374.7 million from the Federal Home Loan Bank of Cincinnati at December 31, 2022.
In addition, we had the capacity to borrow additional funds totaling $426.8 million from the Federal Home Loan Bank of Cincinnati at December 31, 2023.
The CFPB is authorized to prevent unfair, deceptive and abusive acts or practices and seeks to ensure consistent enforcement of laws so that consumers have access to fair, transparent and competitive markets for consumer financial products and services.
The CFPB is authorized to prevent unfair, deceptive and abusive acts or practices and seeks to ensure consistent enforcement of laws so that consumers have access to fair, transparent and competitive markets for consumer financial products and services. Since it was established the CFPB has exercised extensive rulemaking and interpretive authority.
Civista also engages in a general equipment leasing and financing business through its wholly-owned subsidiary, VFG, which was acquired in October 2022. Interest and fees on loans accounted for 69% of total revenue for 2022, 67% of total revenue for 2021, and 69% of total revenue for 2020.
Civista also engages in a general equipment leasing and financing business through its, CLF division, which was acquired in October 2022. Interest and fees on loans accounted for 73% of total revenue for 2023, 69% of total revenue for 2022, and 69% of total revenue for 2021.
The Federal Reserve Board also has extensive enforcement authority over financial and bank holding companies, including the ability to assess civil money penalties, issue cease and desist and removal orders, and require that a financial or bank holding company divest subsidiaries, including its subsidiary banks. 7 Under applicable law and Federal Reserve Board policy, a financial or bank holding company is expected to act as a source of strength to each of its subsidiary banks.
The Federal Reserve Board also has extensive enforcement authority over financial and bank holding companies, including the ability to assess civil money penalties, issue cease and desist and removal orders, and require that a financial or bank holding company divest subsidiaries, including its subsidiary banks.
("VFG") was acquired in the fourth quarter of 2022 as a wholly-owned subsidiary of Civista and is a full-service general equipment leasing & financing company. The operations of VFG are located in Pittsburgh, Pennsylvania. CIVB RISK MANAGEMENT, INC.
("VFG") was acquired in the fourth quarter of 2022 as a wholly owned subsidiary of Civista. Effective as of August 31, 2023, VFG was merged with and into Civista, and CLF is now operated as a full-service general equipment leasing and financing division of Civista. The operations of CLF are located in Pittsburgh, Pennsylvania. CIVB RISK MANAGEMENT, INC.
Regulation of Bank Subsidiary: As an Ohio chartered bank, Civista is subject to supervision and regulation by the State of Ohio Department of Commerce, Division of Financial Institutions (the “ODFI”). In addition, Civista is a member of the Federal Reserve System and, therefore, is subject to supervision and regulation by the Federal Reserve Board.
Regulation of Bank Subsidiary: As an Ohio chartered bank, Civista is subject to supervision and regulation by the ODFI. In addition, Civista is a member of the Federal Reserve System and, therefore, is subject to supervision and regulation by the Federal Reserve Board. Civista is subject to periodic examinations by both ODFI and the Federal 11 Reserve Board.
Separate reporting to CISA will also be required within 24 hours if a ransom payment is made as a result of a ransomware attack. State regulators have also been increasingly active in implementing privacy and cybersecurity standards and regulations.
Separate reporting to CISA will also be required within 24 hours if a ransom payment is made as a result of a ransomware attack.
The FDIC is authorized to prohibit any insured institution from engaging in any activity that poses a serious threat to the insurance fund and may initiate enforcement actions against a bank, after first giving the institution’s primary regulatory authority an opportunity to take such action.
Because Civista's uninsured deposits were less than $5 billion for the quarter ended December 31, 2022, Civista will not be subject to this special assessment. 9 The FDIC is authorized to prohibit any insured institution from engaging in any activity that poses a serious threat to the insurance fund and may initiate enforcement actions against a bank, after first giving the institution’s primary regulatory authority an opportunity to take such action.
Civista is subject to periodic examinations by both ODFI and the Federal Reserve Board. These examinations are designed primarily for the protection of the depositors of the bank and not shareholders.
These examinations are designed primarily for the protection of the depositors of the bank and not shareholders.
Risks and exposures related to cybersecurity attacks are expected to remain high for the foreseeable future due to the rapidly evolving nature and sophistication of these threats, as well as due to the expanding use of Internet banking, mobile banking and other technology-based products and services by us and our customers. 16 Effect of Environmental Regulation Compliance with federal, state and local provisions regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, has not had a material effect upon the capital expenditures, earnings or competitive position of the Company.
Risks and exposures related to cybersecurity attacks are expected to remain high for the foreseeable future due to the rapidly evolving nature and sophistication of these threats, as well as due to the expanding use of Internet banking, mobile banking and other technology-based products and services by us and our customers.
This final rule became effective on October 1, 2020. The Company did not utilize the CBLR in assessing capital adequacy and, instead, continued to follow existing capital rules. 13 In December 2018, the federal banking agencies issued a final rule to address regulatory capital treatment of credit loss allowances under the current expected credit loss (“CECL”) model (accounting standard).
This final rule became effective on October 1, 2020. The Company did not utilize the CBLR in assessing capital adequacy and, instead, continued to follow existing capital rules.
Narrative Description of Business General The Company’s primary business is incidental to the subsidiary bank and its subsidiaries.
Refer to the Consolidated Financial Statements on pages 26 through 31 of the 2023 Annual Report for additional information. Narrative Description of Business General The Company’s primary business is incidental to the subsidiary bank and its subsidiaries.
The FDIC may also terminate the deposit insurance of any institution that has engaged in or is engaging in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, order or condition imposed by the FDIC. 9 COVID-19 Legislation and Initiatives : In response to the novel COVID-19 pandemic (“COVID-19”), the Coronavirus Aid, Relief, and Economic Security Act of 2020, as amended (the “CARES Act”), was signed into law on March 27, 2020, to provide national emergency economic relief measures.
The FDIC may also terminate the deposit insurance of any institution that has engaged in or is engaging in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, order or condition imposed by the FDIC.
Removed
Because the DRR remained below the statutory minimum, the FDIC adopted a final rule in October 2022 increasing the assessment rate from three basis points to five basis points beginning with the first quarterly assessment period of 2023.
Added
Under applicable law and Federal Reserve Board policy, a financial or bank holding company is expected to act as a source of strength to each of its subsidiary banks.
Removed
Many of the CARES Act’s programs are dependent upon the direct involvement of U.S. financial institutions, such as CBI and Civista, and have been implemented through rules and guidance adopted by federal departments and agencies, including the U.S. Department of Treasury, the Federal Reserve Board and other federal banking agencies, including those with direct supervisory jurisdiction over CBI and Civista.
Added
Federal Reserve System: The Federal Reserve Board requires all depository institutions to maintain reserves at specified levels against their transaction accounts, primarily checking accounts. In response to the COVID-19 pandemic, the Federal Reserve Board reduced reserve requirement rations to 0% effective on March 26, 2020, to support lending to households and businesses.
Removed
Furthermore, as COVID-19 evolves, federal regulatory authorities continue to issue additional guidance with respect to the implementation, lifecycle, and eligibility requirements for the various CARES Act programs as well as industry-specific recovery procedures for COVID-19.
Added
The reserve requirement ratio remained at 0% as of December 31, 2023.
Removed
In addition, it is possible that Congress will enact supplementary COVID-19 response legislation, including amendments to the CARES Act or new bills comparable in scope to the CARES Act.
Added
In the FDIC's most recent semiannual update for the Amended Restoration Plan in November 2023, the FDIC noted that increased loss provisions associated with the failures of Silicon Valley Bank, Signature Bank and First Republic Bank in 2023 that reduced the DIF balance, coupled with strong growth in insured deposits, resulted in the reserve ratio declining 15 basis points from 1.25% as of December 31, 2022 to 1.10% as of June 30, 2023.
Removed
For example, on December 27, 2020, the Consolidated Appropriations Act, 2021 (the “CAA”) was signed into law, which, among other things, allowed certain banks to temporarily postpone implementation of the current expected credit loss model (accounting standard), which is described below.
Added
Despite the decline in the reserve ratio, the FDIC staff projected that the reserve ratio remains on track to reach the statutory minimum of 1.35% ahead of the deadline of September 30, 2028. As a result, the FDIC staff recommended no changes to the Amended Restoration Plan and all scheduled assessment rates were maintained.
Removed
The Company is continuing to assess the impact of the CARES Act and other statues, regulations and supervisory guidance related to COVID-19.
Added
On November 16, 2023, the FDIC adopted a final rule implementing a special assessment to recover the loss to the DIF arising from the protection of uninsured depositors following the failures of Silicon Valley Bank and Signature Bank.
Removed
The CARES Act amended the loan program of the Small Business Administration (the “SBA”), in which Civista participates, to create a guaranteed, unsecured loan program, the Paycheck Protection Program (the “PPP”), to fund operational costs of eligible businesses, organizations and self-employed persons during COVID-19.
Added
The assessment base for the special assessment is equal to an insured depository institution's estimated uninsured deposits reported for the quarter ended December 31, 2022, adjusted to exclude the first $5 billion in estimated uninsured deposits.
Removed
These loans are eligible to be forgiven if certain conditions are satisfied and are fully guaranteed by the SBA. In June 2020, the Paycheck Protection Program Flexibility Act was enacted, which, among other things, gave borrowers additional time and flexibility to use PPP loan proceeds.
Added
The FDIC will collect the special assessment at an annual rate of approximately 133.4 basis points, over eight quarterly assessment periods, beginning with the first quarter of 2024.
Removed
After previously being extended by Congress, the application deadline for PPP loans expired on May 31, 2021. No collateral or personal guarantees were required for PPP loans. In addition, neither the government nor lenders have been permitted to charge the recipients of PPP loans any fees.
Added
On October 24, 2023, the federal banking agencies, including the Federal Reserve Board, issued a final rule designed to strengthen and modernize the regulations implementing the CRA.
Removed
On December 27, 2020, the President signed into the CAA, which included the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (the "HHSB Act").
Added
The changes are designed to encourage banks to expand access to credit, investment and banking services in low-and moderate-income communities, adapt to changes in the banking industry, including mobile and internet banking, provide greater clarity and consistency in the application of the CRA regulations, and tailor CRA evaluations and data collection to bank size and type.
Removed
Among other things, the HHSB Act renewed the PPP, allocating $284.45 billion for both new first-time PPP loans under the existing PPP and the expansion of existing PPP loans for certain qualified, existing PPP borrowers. In addition to extending and amending the PPP, the HHSB Act also creates a new grant program for "shuttered venue operators".
Added
The applicability date for the majority of the changes to the CRA regulations is January 1, 2026, and additional requirements will be applicable on January 1, 2027. The Company cannot predict the impact the changes to the CRA will have on its operations at this time.
Removed
As a participating lender in the PPP, Civista continues to monitor legislative, regulatory, and supervisory developments related thereto.
Added
The adoption of CECL resulted in an increase to our total allowance for credit losses (“ACL”) on loans held for investment of $4.3 million, an increase in allowance for credit losses on unfunded loan commitments of $3.4 million, a reclassification of PCI discount from loans to the ACL of $1.7 million, and an increase in deferred tax asset of $1.6 million.

… 12 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

52 edited+1 added−19 removed129 unchanged
Biggest changeWe are further exposed to the risk that our external vendors may be unable to fulfill their contractual obligations (or will be subject to the same risk of fraud or operational errors by their respective employees as we are) and to the risk that our (or our vendors’) consumer compliance, business continuity and data security systems prove to be inadequate.
Biggest changeWe are further exposed to the risk that our external vendors may be unable to fulfill their contractual obligations (or will be subject to the same risk of fraud or operational errors by their respective employees as we are) and to the risk that our (or our vendors’) consumer compliance, business continuity and data security systems prove to be inadequate. 19 Negative public opinion can result from our actual or alleged conduct in any number of activities, including lending practices, corporate governance and acquisitions, social media and other marketing activities, the implementation of environmental, social and governance (ESG) practices, and from actions taken by governmental regulators and community organizations in response to any of the foregoing activities.
We are further exposed to the risk that the third-party service providers may be unable to fulfill their contractual obligations (or will be subject to the same risks as faced by us). These disruptions may interfere with service to our customers, cause additional regulatory scrutiny and result in a financial loss or liability.
We are further exposed to the risk that our third-party service providers may be unable to fulfill their contractual obligations (or will be subject to the same risks as faced by us). These disruptions may interfere with service to our customers, cause additional regulatory scrutiny and result in a financial loss or liability.
We face competition both in originating loans and in attracting deposits within our market area, which includes North Central, West Central, South Western Ohio, South Eastern Indiana and Northern Kentucky. We compete for clients by offering personal service and competitive rates on our loans and deposit products.
We face competition both in originating loans and in attracting deposits within our market area, which includes North Central, West Central and South Western Ohio, South Eastern Indiana and Northern Kentucky. We compete for clients by offering personal service and competitive rates on our loans and deposit products.
Through a periodic review and consideration of the loan portfolio, management determines the amount of the allowance for loan losses by considering general market conditions, the credit quality of the loan portfolio, the collateral supporting the loans and the performance of customers relative to their financial obligations with us. However, every loan we make carries a risk of non-payment.
Through a periodic review and consideration of the loan portfolio, management determines the amount of the allowance for credit losses by considering general market conditions, the credit quality of the loan portfolio, the collateral supporting the loans and the performance of customers relative to their financial obligations with us. However, every loan we make carries a risk of non-payment.
Factors that could impact our trading price include: • our operating and financial results, including how those results vary from the expectations of management, securities analysts and investors; • developments in our business or operations or in the financial sector generally; • future offerings by us of debt or preferred shares, which would be senior to our common shares upon liquidation and for purposes of dividend distributions; • legislative or regulatory changes affecting our industry generally or our business and operations specifically; • the operating and stock price performance of companies that investors consider to be comparable to us; • announcements of strategic developments, acquisitions and other material events by us or our competitors; • actions by our current shareholders, including future sales of common shares by existing shareholders, including our directors and executive officers; and • other changes in U.S. or global financial markets, global economies and general market conditions, such as interest or foreign exchange rates, stock, commodity, credit or asset valuations or volatility.
Factors that could impact our trading price include: 26 • our operating and financial results, including how those results vary from the expectations of management, securities analysts and investors; • developments in our business or operations or in the financial sector generally; • future offerings by us of debt or preferred shares, which would be senior to our common shares upon liquidation and for purposes of dividend distributions; • legislative or regulatory changes affecting our industry generally or our business and operations specifically; • the operating and stock price performance of companies that investors consider to be comparable to us; • announcements of strategic developments, acquisitions and other material events by us or our competitors; • actions by our current shareholders, including future sales of common shares by existing shareholders, including our directors and executive officers; and • other changes in U.S. or global financial markets, global economies and general market conditions, such as interest or foreign exchange rates, stock, commodity, credit or asset valuations or volatility.
Such data breaches could result in us incurring significant expenses to reissue debit cards and cover losses, which could result in a material adverse effect on our results of operations. There can be no assurance that we will not suffer such cyber-attacks or other information security breaches or attempted breaches, incur resulting losses in the future.
Such data breaches could result in us incurring significant expenses to reissue debit cards and cover losses, which could result in a material adverse effect on our results of operations. 20 There can be no assurance that we will not suffer such cyber-attacks or other information security breaches or attempted breaches, incur resulting losses in the future.
New government regulations could also result in new or more stringent forms of ESG oversight and expanding mandatory and voluntary reporting, diligence, and disclosure. CHANGES IN TAX LAWS COULD ADVERSELY AFFECT OUR PERFORMANCE We are subject to extensive federal, state and local taxes, including income, excise, sales/use, payroll, franchise, withholding and ad valorem taxes.
New government regulations 27 could also result in new or more stringent forms of ESG oversight and expanding mandatory and voluntary reporting, diligence, and disclosure. CHANGES IN TAX LAWS COULD ADVERSELY AFFECT OUR PERFORMANCE We are subject to extensive federal, state and local taxes, including income, excise, sales/use, payroll, franchise, withholding and ad valorem taxes.
Future litigation could include claims for substantial compensatory and/or punitive damages or claims for indeterminate amounts of damages. We are also involved from time to time in other reviews, investigations and proceedings (both formal and informal) by governmental and other agencies regarding our business. These matters also could result in adverse judgments, settlements, fines, penalties, injunctions or other relief.
Future litigation could include claims for substantial compensatory and/or punitive damages or claims for indeterminate amounts of damages. We are also involved from time to time in other reviews, investigations and proceedings (both formal and informal) by 25 governmental and other agencies regarding our business. These matters also could result in adverse judgments, settlements, fines, penalties, injunctions or other relief.
If a critical third-party provider is unable to meet the needs of the Company in a timely manner, or if the services or products provided by such third party are terminated or otherwise delayed and if the Company is not able to develop alternative sources for these services and products quickly and cost-effectively, our business could be materially adversely effected.
If a critical third-party provider is unable to meet the 21 needs of the Company in a timely manner, or if the services or products provided by such third party are terminated or otherwise delayed and if the Company is not able to develop alternative sources for these services and products quickly and cost-effectively, our business could be materially adversely effected.
Any decrease in our borrowers’ ability to repay loans would result in higher levels of nonperforming loans, net charge-offs, and provision for loan losses. 25 Despite maintaining a diversified loan portfolio, in the ordinary course of business, we may have concentrated credit exposure to a particular person or entity, industry, region or counterparty.
Any decrease in our borrowers’ ability to repay loans would result in higher levels of nonperforming loans, net charge-offs, and provision for loan losses. Despite maintaining a diversified loan portfolio, in the ordinary course of business, we may have concentrated credit exposure to a particular person or entity, industry, region or counterparty.
We are also at risk of the impact of natural disasters, terrorism and international hostilities on our systems or for the effects of outages or other failures involving power or communications systems operated by others. Misconduct by employees could include fraudulent, improper or unauthorized activities on behalf of clients or improper use of confidential information.
We are also at risk of the impact of natural disasters, terrorism and international hostilities on our systems and effects of outages or other failures involving power or communications systems operated by others. Misconduct by employees could include fraudulent, improper or unauthorized activities on behalf of clients or improper use of confidential information.
Moreover, the Financial Accounting Standards Board ("FASB") has changed its requirements for establishing the allowance for loan losses. On June 16, 2016, the FASB issued Accounting Standard Update ("ASU") 2016-13 "Financial Instruments - Credit Losses", which replaces the incurred loss model with an expected loss model, and is referred to as the current expected credit loss ("CECL") model.
Moreover, the Financial Accounting Standards Board ("FASB") has changed its requirements for establishing the allowance for credit losses. On June 16, 2016, the FASB issued Accounting Standard Update ("ASU") 2016-13 "Financial Instruments - Credit Losses", which replaces the incurred loss model with an expected loss model, and is referred to as the current expected credit loss ("CECL") model.
Our ability to retain executive officers and the current management teams will continue to be important to successful implementation of our strategies. The unexpected loss of services of any key management personnel, or the inability to recruit and retain qualified personnel in the future, could have an adverse effect on our business and financial results.
Our ability to retain executive officers and the current management teams will 23 continue to be important to successful implementation of our strategies. The unexpected loss of services of any key management personnel, or the inability to recruit and retain qualified personnel in the future, could have an adverse effect on our business and financial results.
Such events could affect the stability of our deposit base, impair the ability of borrowers to repay outstanding loans, impair the value of collateral securing loans, cause significant property damage, result in lost revenue or cause us to incur additional expenses. 31 Item 1B. Unresolve d Staff Comments None.
Such events could affect the stability of our deposit base, impair the ability of borrowers to repay outstanding loans, impair the value of collateral securing loans, cause significant property damage, result in lost revenue or cause us to incur additional expenses. Item 1B. Unresolve d Staff Comments None.
Such activity can result in financial liability and harm to our reputation. 22 We have implemented security controls to prevent unauthorized access to the computer systems, and we require our third-party service providers to maintain similar controls. However, we cannot be certain that these measures will be successful.
Such activity can result in financial liability and harm to our reputation. We have implemented security controls to prevent unauthorized access to the computer systems, and we require our third-party service providers to maintain similar controls. However, we cannot be certain that these measures will be successful.
Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have serious reputational consequences for the Company. 23 Our business could be adversely affected through third parties who perform significant operational services on our behalf.
Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have serious reputational consequences for the Company. Our business could be adversely affected through third parties who perform significant operational services on our behalf.
These laws and regulations are primarily intended for the protection of consumers, depositors, borrowers and the deposit insurance fund, not to benefit our shareholders. 27 Regulations affecting banks and financial services businesses are undergoing continuous change and management cannot predict the effect of those changes.
These laws and regulations are primarily intended for the protection of consumers, depositors, borrowers and the deposit insurance fund, not to benefit our shareholders. Regulations affecting banks and financial services businesses are undergoing continuous change and management cannot predict the effect of those changes.
Regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities, including the ability to impose restrictions on the operation of an institution and the ability to determine the adequacy of an institution’s allowance for loan losses.
Regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities, including the ability to impose restrictions on the operation of an institution 24 and the ability to determine the adequacy of an institution’s allowance for loan losses.
OUR ALLOWANCE FOR LOAN LOSSES MAY PROVE TO BE INSUFFICIENT TO ABSORB POTENTIAL LOSSES IN OUR LOAN PORTFOLIO. We maintain an allowance for loan losses that we believe is a reasonable estimate of known and inherent losses within the loan portfolio.
OUR ALLOWANCE FOR CREDIT LOSSES MAY PROVE TO BE INSUFFICIENT TO ABSORB POTENTIAL LOSSES IN OUR LOAN PORTFOLIO. We maintain an allowance for credit losses that we believe is a reasonable estimate of known and inherent losses within the loan portfolio.
If our assumptions prove to be incorrect, our allowance for loan losses may not be sufficient to cover losses inherent in our loan portfolio, resulting in additions to the allowance, which would adversely affect our earnings.
If our assumptions prove to be incorrect, our allowance for credit losses may not be sufficient to cover losses inherent in our loan portfolio, resulting in additions to the allowance, which would adversely affect our earnings.
Adverse changes in the economy may also have a negative effect on the ability of our borrowers to make timely repayments of their loans, which would have an adverse impact on our earnings and cash flows. 18 ADVERSE CHANGES IN THE REAL ESTATE MARKET COULD CAUSE INCREASES IN DELINQUENCIES AND NON-PERFORMING ASSETS, INCLUDING ADDITIONAL LOAN CHARGE-OFFS, AND COULD DEPRESS OUR INCOME, EARNINGS AND CAPITAL.
Adverse changes in the economy may also have a negative effect on the ability of our borrowers to make timely repayments of their loans, which would have an adverse impact on our earnings and cash flows. 17 ADVERSE CHANGES IN THE REAL ESTATE MARKET COULD CAUSE INCREASES IN DELINQUENCIES AND NON-PERFORMING ASSETS, INCLUDING ADDITIONAL LOAN CHARGE-OFFS, AND COULD DEPRESS OUR INCOME, EARNINGS AND CAPITAL.
In addition, federal banking agencies have recently finalized extensive changes to their capital requirements, including the adoption of the final “Basel III” rules as discussed above, which result in higher capital requirements and more restrictive leverage and liquidity ratios than those previously in place. If we experience significant loan losses, addition capital may need to be infused.
In addition, federal banking agencies have recently finalized extensive changes to their capital requirements, including the adoption of the final “Basel III” rules as discussed above, which result in higher capital requirements and more restrictive leverage and liquidity ratios than those previously in place. If we experience significant credit losses, addition capital may need to be infused.
Any of these scenarios could cause us to make fewer loans, increase delinquencies and non-performing assets, require us to charge off a higher percentage of our loans or result in additional increases to our provision for loan losses in future periods, which could adversely affect our business, financial condition and results of operations.
Any of these scenarios could cause us to make fewer loans, increase delinquencies and non-performing assets, require us to charge off a higher percentage of our loans or result in additional increases to our provision for credit losses in future periods, which could adversely affect our business, financial condition and results of operations.
The amount of future losses is also susceptible to changes in economic, operating and other conditions, including changes in interest rates, which may be beyond our control, and these losses may exceed current estimates. We cannot fully predict the amount or timing of losses or whether the allowance for loan losses will be adequate in the future.
The amount of future losses is also susceptible to changes in economic, operating and other conditions, including changes in interest rates, which may be beyond our control, and these losses may exceed current estimates. We cannot fully predict the amount or timing of losses or whether the allowance for credit losses will be adequate in the future.
Excessive loan losses and significant additions to our allowance for loan losses could have a material adverse impact on our financial condition and results of operations. 24 In addition, bank regulators periodically review our allowance for loan losses and may require us to increase our allowance for loan losses or recognize further loan charge-offs.
Excessive loan losses and significant additions to our allowance for credit losses could have a material adverse impact on our financial condition and results of operations. In addition, bank regulators periodically review our allowance for credit losses and may require us to increase our allowance for credit losses or recognize further loan charge-offs.
Thus, the ability of Civista to pay dividends in the future is currently influenced, and could be further influenced, by bank regulatory policies and capital guidelines and may restrict our ability to declare and pay dividends on our common or preferred shares. 29 THE MARKET PRICE OF OUR COMMON SHARES MAY BE SUBJECT TO FLUCTUATIONS AND VOLATILITY.
Thus, the ability of Civista to pay dividends in the future is currently influenced, and could be further influenced, by bank regulatory policies and capital guidelines and may restrict our ability to declare and pay dividends on our common shares. THE MARKET PRICE OF OUR COMMON SHARES MAY BE SUBJECT TO FLUCTUATIONS AND VOLATILITY.
CECL implementation poses operational risk, including the failure to properly transition internal processes or systems, which could lead to call report errors, financial misstatements, or operational losses. 28 WE MAY BE THE SUBJECT OF LITIGATION WHICH COULD RESULT IN LEGAL LIABILITY AND DAMAGE TO OUR BUSINESS AND REPUTATION.
ASU 2016-13 implementation poses operational risk, including the failure to properly transition internal processes or systems, which could lead to call report errors, financial misstatements, or operational losses. WE MAY BE THE SUBJECT OF LITIGATION WHICH COULD RESULT IN LEGAL LIABILITY AND DAMAGE TO OUR BUSINESS AND REPUTATION.
CHANGES IN INTEREST RATES COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR NET INTEREST INCOME. Our results of operations are affected principally by net interest income, which is the difference between interest earned on loans and investments and interest expense paid on deposits and other borrowings.
CHANGES IN INTEREST RATES COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR NET INTEREST INCOME. Our results of operations are affected principally by net interest income, which is the difference between interest earned on loans and investments and interest expense paid on deposits and other borrowings. We cannot predict or control changes in interest rates.
Due in part to improvement in local and general economic conditions, as well as actions we have taken to manage our loan portfolio, our provision for loan losses has declined since the end of the recent recession. However, if we experience higher levels of provision for loan losses in the future, our net income could be negatively affected.
Due in part to improvement in local and general economic conditions, as well as actions we have taken to manage our loan portfolio, our provision for credit losses has declined since the end of the 2007-2008 financial crisis. However, if we experience higher levels of provision for loan losses in the future, our net income could be negatively affected.
At December 31, 2022, approximately 21.7% and 54.6%, respectively, of our loan portfolio was comprised of residential and commercial real estate loans. Adverse changes in economic conditions both nationally and in the communities we serve have and may continue to cause deterioration to the value of real estate Civista uses to secure its loans.
At December 31, 2023, approximately 23.1% and 53.8%, respectively, of our loan portfolio was comprised of residential and commercial real estate loans. Adverse changes in economic conditions both nationally and in the communities we serve may cause deterioration to the value of real estate Civista uses to secure its loans.
The new CECL accounting guidance is effective for annual reporting periods and interim reporting periods within those annual periods, beginning after December 15, 2019. However, the FASB deferred the effective date for this ASU for smaller reporting companies, such as the Company, to annual reporting periods and interim reporting periods within those annual periods, beginning after December 15, 2022.
However, the FASB deferred the effective date for this ASU for smaller reporting companies, such as the Company, at the time, to annual reporting periods and interim 22 reporting periods within those annual periods, beginning after December 15, 2022.
Our necessary dependence upon automated systems to record and process our transaction volume may further increase the risk that technical system flaws or employee tampering or manipulation of those systems will result in losses that are difficult to detect.
Given the volume of transactions we process, certain errors may be repeated or compounded before they are discovered and successfully rectified. Our necessary dependence upon automated systems to record and process our transaction volume may further increase the risk that technical system flaws or employee tampering or manipulation of those systems will result in losses that are difficult to detect.
In the future, we may acquire other financial institutions or branches or assets of other financial institutions. We may also open new branches, enter into new lines of business, or offer new products or services.
ACQUISITIONS OR OTHER EXPANSION MAY ADVERSELY AFFECT OUR FINANCIAL CONDITION AND RESULT OF OPERATIONS. In the future, we may acquire other financial institutions or branches or assets of other financial institutions. We may also open new branches, enter into new lines of business, or offer new products or services.
Any failure or interruption in our operations or information systems, or any security or data breach, could cause reputational damage, jeopardize the confidentiality of customer information, result in a loss of customer business, subject us to regulatory intervention or expose us to civil litigation and financial loss or liability, any of which could have a material adverse effect on us. 21 Given the volume of transactions we process, certain errors may be repeated or compounded before they are discovered and successfully rectified.
Any failure or interruption in our operations or information systems, or any security or data breach, could cause reputational damage, jeopardize the confidentiality of customer information, result in a loss of customer business, subject us to regulatory intervention or expose us to civil litigation and financial loss or liability, any of which could have a material adverse effect on us.
Any increase in our allowance for loan losses or loan charge-offs as required by these regulatory authorities could have a material adverse effect on our financial condition and results of operations.
Additions to the allowance for credit losses will result in a decrease in net earnings and capital and could hinder our ability to grow our assets. Any increase in our allowance for credit losses or loan charge-offs as required by these regulatory authorities could have a material adverse effect on our financial condition and results of operations.
Upon adoption of CECL, credit loss allowances may increase, which would decrease retained earnings and regulatory capital. The federal banking regulators have adopted a regulation that will allow banks to phase in the day-one impact of CECL on regulatory capital over three years.
Upon adoption of CECL, credit loss allowances have increased, which have decreased retained earnings and regulatory capital. While the federal banking regulators adopted rules that allow banks to phase in the day-one impact of CECL on regulatory capital over three years, Civista Bank did not choose to phase in the impact.
These consequences cannot be entirely predicted and could have an adverse impact on the market value for or value of LIBOR-linked securities, loans, and other financial obligations or extensions of credit. The Company has limited exposure to LIBOR, with total exposure as of December 31, 2022 of approximately $274.0 million.
These consequences cannot be entirely predicted and could have an adverse impact on the market value for or value of LIBOR-linked securities, loans, and other financial obligations or extensions of credit.
In the U.S., efforts to identify a set of alternative U.S. dollar reference interest rates are ongoing, and the Alternative Reference Rate Committee (“ARRC”) has recommended the use of a Secured Overnight Funding Rate (“SOFR”) as the set of alternative U.S. dollar reference interest rates.
LIBOR is set based on interest rate information reported by certain banks. In the U.S., as a result of efforts to identify a set of alternative U.S. dollar reference interest rates the Alternative Reference Rate Committee (“ARRC”) recommended the use of a Secured Overnight Funding Rate (“SOFR”) as the set of alternative U.S. dollar reference interest rates.
Financial institutions are facing increasing scrutiny from customers, regulators, investors, and other stakeholders related to their environmental, social, and governance (“ESG”) practices and disclosure. Investor advocacy groups, investment funds, and influential investors are also increasingly focused on these practices, especially as they relate to the environment, health and safety, diversity, labor conditions, and human rights.
Investor advocacy groups, investment funds, and influential investors are also increasingly focused on these practices, especially as they relate to the environment, health and safety, diversity, labor conditions, and human rights.
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make significant estimates that affect the financial statements. Due to the inherent nature of these estimates, actual results may vary materially from management’s estimates. In June 2016, FASB issued a new accounting standard for recognizing current expected credit losses, commonly referred to as CECL.
The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles ("GAAP") requires management to make significant estimates that affect the financial statements. Due to the inherent nature of these estimates, actual results may vary materially from management’s estimates.
Additionally, banking regulators may require Civista to increase its allowance for loan losses in the future, which could have a negative effect on Civista’s financial condition and results of operations. Additions to the allowance for loan losses will result in a decrease in net earnings and capital and could hinder our ability to grow our assets.
The allowance for credit losses may not be sufficient to cover actual loan-related losses. Additionally, banking regulators may require Civista to increase its allowance for credit losses in the future, which could have a negative effect on Civista’s financial condition and results of operations.
Some of these factors include: • inflation; • recession; • unemployment; • money supply; • international disorders; and • instability in domestic and foreign financial markets. 19 The Company’s management uses various measures to monitor interest rate risk and believes it has implemented effective asset and liability management strategies to reduce the potential adverse effects of changes in interest rates on the Company’s financial condition and results of operations.
The Company’s management uses various measures to monitor interest rate risk and believes it has implemented effective asset and liability management strategies to reduce the potential adverse effects of changes in interest rates on the Company’s financial condition and results of operations. Management also periodically adjusts the mix of assets and liabilities to manage interest rate risk.
The Company expects to recognize a one-time cumulative effect adjustment (increase) to the allowance for credit losses upon adoption in the first quarter of 2023. If real estate markets or the economy in general deteriorate, Civista may experience increased delinquencies and credit losses. The allowance for loan losses may not be sufficient to cover actual loan-related losses.
The Company adopted ASU 2016-13 effective January 1, 2023 and, upon adoption, recognized a one-time cumulative effect adjustment (increase) to the retained earnings upon adoption in the first quarter of 2023 of $6,069. If real estate markets or the economy in general deteriorate, Civista may experience increased delinquencies and credit losses.
CECL will result in earlier recognition of credit losses and requires consideration of not only past and current events but also reasonable and supportable forecasts that affect collectability. The Company will be required to comply with the new standard in the first quarter of 2023.
In June 2016, FASB issued a new accounting standard for recognizing current expected credit losses, commonly referred to as CECL. CECL will result in earlier recognition of credit losses and requires consideration of not only past and current events but also reasonable and supportable forecasts that affect collectability. The Company adopted CECL effective January 1, 2023.
Our principal source of funds to support our operations, pay dividends on our common and preferred shares and service our debt is dividends from our subsidiary bank, Civista.
Our principal source of funds to support our operations, pay dividends on our common shares and service our debt is dividends from our subsidiary bank, Civista. In the event that Civista is unable to pay dividends to us, we may not be able to service our debt, pay our other obligations or pay dividends on our common shares.
Various federal and state statutory provisions and regulations limit the amount of dividends that Civista may pay to us without regulatory approval.
Accordingly, our inability to receive dividends from Civista could also have a material adverse effect on our business, financial condition and results of operations. Various federal and state statutory provisions and regulations limit the amount of dividends that Civista may pay to us without regulatory approval.
LIBOR has been used extensively in the United States and globally as a benchmark for various commercial and financial contracts, including adjustable rate mortgages, corporate debt, interest rate swaps and other derivatives. LIBOR is set based on interest rate information reported by certain banks.
A transition away from LIBOR as a reference rate for financial contracts could negatively IMPACT our income and expenses and the value of various financial contracts. LIBOR was used extensively in the United States and globally for many years as a benchmark for various commercial and financial contracts, including adjustable rate mortgages, corporate debt, interest rate swaps and other derivatives.
Management also periodically adjusts the mix of assets and liabilities to manage interest rate risk. However, any significant, unexpected, prolonged change in market interest rates could have a material adverse effect on our financial condition and results of operations.
However, any significant, unexpected, prolonged change in market interest rates could have a material adverse effect on our financial condition and results of operations. 18 See the discussion under "Quantitative and Qualitative Disclosures About Market Risk” on pages 17 through 18 of the Annual Report for additional information related to the Company’s interest rate risk.
Even securities issued by United States government agencies and sponsored entities may entail risk depending on political and economic changes.
Even securities issued by United States government agencies and sponsored entities may entail risk depending on political and economic changes. Regardless of the level of credit risk, all investment securities are subject to changes in market value due to changing interest rates, implied credit spreads and credit ratings.
Regardless of the level of credit risk, all investment securities are subject to changes in market value due to changing interest rates, implied credit spreads and credit ratings. 30 We may experience increasing scrutiny and evolving expectations from customers, regulators, investors, and other stakeholders with respect to the Company’s environmental, social and governance practices.
We may experience increasing scrutiny and evolving expectations from customers, regulators, investors, and other stakeholders with respect to the Company’s environmental, social and governance practices. Financial institutions are facing increasing scrutiny from customers, regulators, investors, and other stakeholders related to their environmental, social, and governance (“ESG”) practices and disclosure.
The Company’s primary exposure to LIBOR relates to its promissory notes with borrowers, swap contracts with clients, offsetting swap contracts with third parties related to the swap contracts with clients, the Company’s LIBOR-based borrowings (if any), and Civista’s swap contracts which can be tied to LIBOR.
The Company’s primary exposure to LIBOR was related to its promissory notes with borrowers, swap contracts with clients and offsetting swap contracts with third parties related to the swap contracts with clients. As of July 2023, all promissory notes and swap contracts were transitioned to SOFR. RISKS RELATED TO OUR BUSINESS OPERATIONS WE ARE EXPOSED TO OPERATIONAL RISK.
Interest rates are highly sensitive to many factors that are beyond our control.
Interest rates are highly sensitive to many factors that are beyond our control. Some of these factors include: • inflation; • recession; • unemployment; • money supply; • international disorders; and • instability in domestic and foreign financial markets.
Removed
The spread between the yield on our interest-earning assets and our overall cost of funds has been compressed in the recent low interest rate environment, and our net interest income may continue to be adversely impacted by an extended period of continued low rates. We cannot predict or control changes in interest rates.
Added
The new CECL accounting guidance is effective for annual reporting periods and interim reporting periods within those annual periods, beginning after December 15, 2019.
Removed
See the discussion under the caption “Quantitative and Qualitative Disclosures About Market Risk” on pages 51 through 52 of the 2022 Annual Report for additional information related to the Company’s interest rate risk. A transition away from LIBOR as a reference rate for financial contracts could negatively IMPACT our income and expenses and the value of various financial contracts.
Removed
The Company’s contracts generally include a LIBOR term (for example, one month, three month, or one year) plus an incremental margin rate. The Company is working through this transition via a multi-disciplinary project team.
Removed
We are still evaluating the impact the change to a benchmark like SOFR or Prime Rate will have on our financial condition, results of operations or cash flows. THE ECONOMIC IMPACT OF THE COVID-19 PANDEMIC, OR AN OUTBREAK OF ANOTHER HIGHLY INFECTIOUS OR CONTAGIOUS DISEASE, COULD ADVERSELY AFFECT OUR BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Removed
The COVID-19 pandemic has negatively impacted global, national and local economies, disrupted global and national supply chains, lowered equity market valuations, and created significant volatility and disruption in financial markets.
Removed
The extent to which COVID-19 will continue to impact our business, results of operations, and financial condition, as well as our regulatory capital and liquidity ratios, will depend on future developments, which are highly uncertain and cannot be predicted. 20 COVID-19, including the spread of new variants thereof, or a new pandemic could subject us to any of the following risks, any of which could, individually or in the aggregate, have a material adverse effect on our business, financial condition, liquidity, and results of operations: • demand for our products and services may decline, making it difficult to grow assets and income; • if the economy experiences new closures or downturns as a result of the COVID-19 pandemic, including the spread of new variants thereof, or a new pandemic, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income; • collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase; • our allowance for loan losses may have to be increased if borrowers experience financial difficulties beyond forbearance periods, which will adversely affect our net income; • the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us; • a prolonged weakness in economic conditions resulting in a reduction of future projected earnings could result in our recording a valuation allowance against our current outstanding deferred tax assets; • we rely on third party vendors for certain services and the unavailability of a critical service due to COVID-19 or new pandemic could have an adverse effect on us; and • adverse economic conditions could result in protracted volatility in the price of our common shares.
Removed
We continue to closely monitor the impact of COVID-19 and related risks as they evolve. To the extent the effects of COVID-19 adversely impact our business, financial condition, liquidity or results of operations, it may also have the effect of heightening many of the other risks described in this section.
Removed
RISKS RELATED TO OUR BUSINESS OPERATIONS WE ARE EXPOSED TO OPERATIONAL RISK.
Removed
Negative public opinion can result from our actual or alleged conduct in any number of activities, including lending practices, corporate governance and acquisitions, social media and other marketing activities, the implementation of environmental, social and governance (ESP) practices, and from actions taken by governmental regulators and community organizations in response to any of the foregoing activities.
Removed
WE DO NOT HAVE ASSURANCE REGARDING THE FUTURE REVENUES OF OUR TAX REFUND PROGRAM. The revenues from our tax refund program are based upon a contract with a third party.
Removed
While the contract has a term of three years expiring October 31, 2023 and contains provisions for automatic renewal after that term, the amount to be paid to us is not fixed for any period after 2022.
Removed
As a result, the amount paid to us may fluctuate, and there is no assurance that the parties will be able to negotiate compensation that is acceptable to us after that year. ACQUISITIONS OR OTHER EXPANSION MAY ADVERSELY AFFECT OUR FINANCIAL CONDITION AND RESULT OF OPERATIONS. We completed two significant acquisitions during the past year.
Removed
On July 1, 2022, CBI completed the acquisition by merger of Comunibanc Corp. Immediately following the merger, Comunibanc Corp.'s banking subsidiary, The Henry County Bank, was merged with and into Civista. As a result of the merger, we acquired seven offices of Comunibanc Corp. in the northwest Ohio communities of Napoleon (3), Malinta, Holgate, Liberty Center and Bowling Green.
Removed
On October 3, 2022, CBI and Civista completed the acquisition by Civista of all of the issued and outstanding shares of capital stock of VFG, a full-service equipment leasing and financing company headquartered in Pittsburgh, Pennsylvania.
Removed
As a result of the acquisition, VFG became a wholly-owned subsidiary of Civista. 26 The earnings, financial condition and prospects of Civista after the Comunibanc Corp. and VFG acquisitions will depend in part on our ability to integrate successfully the respective operations of Comunibanc Corp. (and The Henry County Bank) and VFG and continue to implement our business plan.
Removed
We may not be able to fully achieve our strategic objectives and projected operating efficiencies. The costs and/or challenges involved in integrating the new businesses with our organization may be greater than expected or the cost savings from anticipated economies of scale of the combined organization may be lower or take longer to realize than expected.
Removed
Inherent uncertainties exist in integrating the operations of an acquired entity.
Removed
The success of the acquisitions will depend on a number of factors, including, without limitation: • Our ability to integrate the acquired businesses into our operations; • With regard to the acquisition of Comunibanc Corp. and The Henry County Bank, our ability to limit the outflow of deposits held by new customers and to successfully retain and manage interest-earning assets and relationships (including lending relationships) acquired in the merger; • Our ability to control the incremental non-interest expense from the acquired businesses in a manner that enables us to maintain a favorable overall efficiency ratio; • Our ability to retain and attract key employees and other appropriate personnel; and • Our ability to earn acceptable levels of interest and non-interest income, including fee income, from the acquired businesses.
Removed
In the event that Civista is unable to pay dividends to us, we may not be able to service our debt, pay our other obligations or pay dividends on our common or preferred shares. Accordingly, our inability to receive dividends from Civista could also have a material adverse effect on our business, financial condition and results of operations.

Item 2. Properties

Properties — owned and leased real estate

1 edited+0 added−0 removed2 unchanged
Biggest changeCivista leases branch banking offices in the Ohio communities of Akron, Huron, West Liberty, Dayton, Bowling Green and Beachwood. Civista also leases loan production offices in Westlake, Ohio and Fort Mitchell, Kentucky. VFG leases offices for its equipment leasing and financing business in Pittsburgh, Pennsylvania, Franklin, Tennessee and Dover, New Hampshire.
Biggest changeCivista leases branch banking offices in the Ohio communities of Akron, Huron, West Liberty, Dayton, Bowling Green and Beachwood. Civista also leases loan production offices in Westlake, Ohio and Fort Mitchell, Kentucky. The CLF division of Civista offices for its equipment leasing and financing business in Pittsburgh, Pennsylvania, Franklin, Tennessee and Dover, New Hampshire.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed2 unchanged
Biggest changeHowever, 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 the Company. Item 4. Mine Saf ety Disclosures Not Applicable 32 PART II
Biggest changeHowever, based on current knowledge and after consultation with legal counsel, management believes that any damages or other amounts related to pending legal proceedings will not have a material adverse effect on the consolidated financial position, results of operations or liquidity of the Company. Item 4. Mine Saf ety Disclosures Not Applicable 29 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

5 edited+2 added−1 removed1 unchanged
Biggest changeDuring the fourth quarter of 2022, the Company purchased common shares as follows: Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs October 1, 2022 - October 31, 2022 7,205 $ 21.40 7,205 $ 6,055,711 November 1, 2022 - November 30, 2022 — $ — — $ — December 1, 2022 - December 31, 2022 — $ — — $ — Total 7,205 $ 21.40 7,205 $ 6,055,711 On May 4, 2022, the Company announced a new common share repurchase program to replace its previous repurchase program.
Biggest changePeriod Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs October 1, 2023 - October 31, 2023 - $ - $ - $ 12,003,223 November 1, 2023 - November 30, 2023 - - - - December 1, 2023 - December 31, 2023 573 18.44 - - Total 573 $ 18.44 — $ 12,003,223 On May 8, 2023, the Company announced a new common share repurchase program pursuant to which the Company is authorized to repurchase a maximum aggregate value of $13,500,000 of its outstanding common shares through May 2, 2024.
Item 5. Market for Registrant’s Common Equity, Related Sto ckholder Matters and Issuer Purchases of Equity Securities As of February 21, 2023, there were approximately 1,767 shareholders of record (not including the number of persons or entities holding stock in nominee or street name through various brokerage firms) of the Company’s common shares.
Item 5. Market for Registrant’s Common Equity, Related Sto ckholder Matters and Issuer Purchases of Equity Securities As of February 20, 2024, there were approximately 1,733 shareholders of record (not including the number of persons or entities holding stock in nominee or street name through various brokerage firms) of the Company’s common shares.
(ticker symbol CIVB), based on an initial investment of $100 on December 31, 2017 and assuming reinvestment of dividends, with the cumulative return of the Standard & Poor’s 500 Index, and the S&P U.S. BMI Banks Index. The comparative indices were obtained from S&P Global Market Intelligence.
(ticker symbol CIVB), based on an initial investment of $100 on December 31, 2018 and assuming reinvestment of dividends, with the cumulative return of the Standard & Poor’s 500 Index, and the S&P U.S. BMI Banks Index.
As of December 31, 2022, a total of 349,168 common shares had been repurchased for an aggregate purchase price of $7,444,289 under this repurchase program. 33 Shareholder Return Performance Set forth below is a line graph comparing the five-year cumulative return of the common shares of Civista Bancshares, Inc.
As of December 31, 2023, a total of 90,423 common shares had been repurchased for an aggregate purchase price of $1,628,205 under this repurchase program. Shareholder Return Performance Set forth below is a line graph comparing the five-year cumulative return of the common shares of Civista Bancshares, Inc.
Annual Report on Form 10-K A copy of the Company’s Annual Report on Form 10-K, as filed with the Securities and Exchange Commission, will be furnished, free of charge, to shareholders, upon written request to Lance A. Morrison, Secretary of Civista Bancshares, Inc., 100 East Water Street, Sandusky, Ohio 44870.
The comparative indices were obtained from S&P Global Market Intelligence. 30 Annual Report on Form 10-K A copy of the Company’s Annual Report on Form 10-K, as filed with the Securities and Exchange Commission, will be furnished, free of charge, to shareholders, upon written request to Lance A.
Removed
The new repurchase program authorizes the Company to repurchase a maximum aggregate value of $13,500,000 of its outstanding common shares through May 9, 2023.
Added
The following table details repurchases by the Company and purchases by "affiliated purchasers" as defined in Rule 10b-18(a)(3) under the Exchange Act of the Company's common shares during the fourth quarter of 2023.
Added
Morrison, Secretary of Civista Bancshares, Inc., 100 East Water Street, Sandusky, Ohio 44870.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

82 edited+13 added−29 removed20 unchanged
Biggest changeComparison of Results of Operations for the Years Ended December 31, 2021 and December 31, 2020 A discussion regarding our financial condition and results of operations for the year ended December 31, 2021 and year-to-year comparisons between 2021 and 2020, which are not included in this Form 10-K, can be found under "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2021 and are incorporated by reference herein. 45 Changes in Interest Income and Interest Expense Resulting from Changes in Volume and Changes in Rate The following table sets forth, for the periods indicated, a summary of the changes in interest income and interest expense resulting from changes in volume and changes in rate (Amounts in thousands): Increase (decrease) due to: Volume (1) Rate (1) Net 2022 compared to 2021 Interest income: Loans $ 7,880 $ 5,701 $ 13,581 Taxable securities 3,438 212 3,650 Nontaxable securities 2,275 (666 ) 1,609 Interest-bearing deposits in other banks (393 ) 1,064 671 Total interest income $ 13,200 $ 6,311 $ 19,511 Interest expense: Savings and interest-bearing demand accounts $ 104 $ 119 $ 223 Certificates of deposit (128 ) (430 ) (558 ) Short-term Federal Home Loan Bank advances 2,566 — 2,566 Long-term Federal Home Loan Bank advances (556 ) (97 ) (653 ) Securities sold under repurchase agreements (3 ) (9 ) (12 ) Federal funds purchased — 5 5 Other borrowings 335 — 335 Subordinated debentures 2,313 513 2,826 Total interest expense $ 4,631 $ 101 $ 4,732 Net interest income $ 8,569 $ 6,210 $ 14,779 2021 compared to 2020 Interest income: Loans $ 3,262 $ (1,469 ) $ 1,793 Taxable securities 1,360 (1,246 ) 114 Nontaxable securities 439 (312 ) 127 Interest-bearing deposits in other banks 422 (579 ) (157 ) Total interest income $ 5,483 $ (3,606 ) $ 1,877 Interest expense: Savings and interest-bearing demand accounts $ 382 $ (976 ) $ (594 ) Certificates of deposit (377 ) (1,735 ) (2,112 ) Short-term Federal Home Loan Bank advances (134 ) 0 (134 ) Long-term Federal Home Loan Bank advances (405 ) (230 ) (635 ) Securities sold under repurchase agreements 2 (4 ) (2 ) Federal funds purchased (1 ) 1 — Other borrowings (354 ) — (354 ) Subordinated debentures 187 (177 ) 10 Total interest expense $ (700 ) $ (3,121 ) $ (3,821 ) Net interest income $ 6,183 $ (485 ) $ 5,698 (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. 46 Distribution of Assets, Liabilities and Shareholders’ Equity; Interest Rates and Interest Differential The following table sets forth, for the years ended December 31, 2022, 2021 and 2020, the distribution of assets, including interest amounts and average rates of major categories of interest-earning assets and noninterest-earning assets (Amounts in thousands): 2022 2021 2020 Assets Average balance Interest Yield/ rate Average balance Interest Yield/ rate Average balance Interest Yield/ rate Interest-earning assets: Loans (1)(2)(3)(5) $ 2,199,082 $ 103,151 4.69 % $ 2,026,907 $ 89,570 4.42 % $ 1,953,472 $ 87,777 4.49 % Taxable securities (4) 341,600 9,123 2.49 % 232,813 5,473 2.41 % 183,721 5,359 3.03 % Non-taxable securities (4)(5) 263,981 7,859 3.56 % 217,786 6,250 3.96 % 202,982 6,123 4.15 % Interest-bearing deposits in other banks 146,849 1,120 0.76 % 347,573 449 0.13 % 155,960 606 0.39 % Total interest earning assets 2,951,512 121,253 4.12 % 2,825,079 101,742 3.69 % 2,496,135 99,865 4.10 % Noninterest-earning assets: Cash and due from financial institutions 84,777 35,404 77,848 Premises and equipment, net 34,577 22,617 22,831 Accrued interest receivable 8,650 8,010 9,043 Intangible assets 96,492 84,747 84,953 Other assets 50,765 37,378 37,675 Bank owned life insurance 50,076 46,435 45,454 Less allowance for loan losses (27,721 ) (26,366 ) (19,231 ) Total $ 3,249,128 $ 3,033,304 $ 2,754,708 (1) For purposes of these computations, the daily average loan amounts outstanding are net of unearned income and include loans held for sale.
Biggest changeComparison of Results of Operations for the Years Ended December 31, 2022 and December 31, 2021 A discussion regarding our financial condition and results of operations for the year ended December 31, 2022 and year-to-year comparisons between 2022 and 2021, which are not included in this Annual Report on Form 10-K, can be found under "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2022 and are incorporated by reference herein. 40 Changes in Interest Income and Interest Expense Resulting from Changes in Volume and Changes in Rate The following table sets forth, for the periods indicated, a summary of the changes in interest income and interest expense resulting from changes in volume and changes in rate (Amounts in thousands): Increase (decrease) due to: Volume (1) Rate (1) Net 2023 compared to 2022 Interest income: Loans $ 22,820 $ 29,882 $ 52,702 Taxable securities 1,106 1,489 2,595 Nontaxable securities 896 527 1,423 Interest-bearing deposits in other banks (1,651 ) 1,510 (141 ) Total interest income $ 23,171 $ 33,408 $ 56,579 Interest expense: Savings and interest-bearing demand accounts $ (70 ) $ 6,317 $ 6,247 Certificates of deposit 6,014 17,654 23,668 Short-term Federal Home Loan Bank advances 10,767 1,160 11,927 Long-term Federal Home Loan Bank advances (710 ) 266 (444 ) Securities sold under repurchase agreements (6 ) (1 ) (7 ) Federal funds purchased — — — Other borrowings 5 1,063 1,068 Subordinated debentures (978 ) (194 ) (1,172 ) Total interest expense $ 15,022 $ 26,265 $ 41,287 Net interest income $ 8,149 $ 7,143 $ 15,292 2022 compared to 2021 Interest income: Loans $ 7,250 $ 7,921 $ 15,171 Taxable securities 3,457 193 3,650 Nontaxable securities 2,295 (686 ) 1,609 Interest-bearing deposits in other banks (393 ) 1,064 671 Total interest income $ 12,609 $ 8,492 $ 21,101 Interest expense: Savings and interest-bearing demand accounts $ 104 $ 119 $ 223 Certificates of deposit (128 ) (430 ) (558 ) Short-term Federal Home Loan Bank advances 2,566 — 2,566 Long-term Federal Home Loan Bank advances (556 ) (97 ) (653 ) Securities sold under repurchase agreements (3 ) (9 ) (12 ) Federal funds purchased — 5 5 Other borrowings (298 ) 2,223 1,925 Subordinated debentures 2,313 513 2,826 Total interest expense $ 3,998 $ 2,324 $ 6,322 Net interest income $ 8,611 $ 6,168 $ 14,779 (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. 41 Distribution of Assets, Liabilities and Shareholders’ Equity; Interest Rates and Interest Differential The following table sets forth, for the years ended December 31, 2023, 2022 and 2021, the distribution of assets, including interest amounts and average rates of major categories of interest-earning assets and noninterest-earning assets (Amounts in thousands): 2023 2022 2021 Assets Average balance Interest Yield/ rate Average balance Interest Yield/ rate Average balance Interest Yield/ rate Interest-earning assets: Loans (1)(2)(3)(5) $ 2,722,797 $ 160,755 5.90 % $ 2,286,928 $ 108,053 4.72 % $ 2,127,157 $ 92,882 4.37 % Taxable securities (4) 363,972 11,718 2.88 % 341,600 9,123 2.49 % 232,813 5,473 2.41 % Non-taxable securities (4)(5) 282,678 9,282 3.79 % 263,981 7,859 3.56 % 217,786 6,250 3.96 % Interest-bearing deposits in other banks 21,551 979 4.54 % 146,849 1,120 0.76 % 347,573 449 0.13 % Total interest earning assets 3,390,998 182,734 5.35 % 3,039,358 126,155 4.16 % 2,925,329 105,054 3.68 % Noninterest-earning assets: Cash and due from financial institutions 39,219 84,777 35,404 Premises and equipment, net 58,456 34,577 22,617 Accrued interest receivable 11,499 8,650 8,010 Intangible assets 133,626 96,492 84,747 Other assets 63,152 50,765 37,378 Bank owned life insurance 54,211 50,076 46,435 Less allowance for loan losses (33,814 ) (27,721 ) (26,366 ) Total $ 3,717,347 $ 3,336,974 $ 3,133,554 (1) For purposes of these computations, the daily average loan amounts outstanding are net of unearned income and include loans held for sale.
Tier 2 capital, which can be included in the total capital ratio, includes certain capital instruments (such as subordinated debt) and limited amounts of the allowance for loan and lease losses, subject to new eligibility criteria, less applicable deductions.
Tier 2 capital, which can be included in the total capital ratio, includes certain capital instruments (such as subordinated debt) and limited amounts of the allowance for loan and lease losses, subject to certain eligibility criteria, less applicable deductions.
The BASEL III regulatory capital rules and regulations also place restrictions on the payment of capital distributions, including dividends, and certain discretionary bonus payments to executive officers if the company does not hold a capital conservation buffer of greater than 2.5 percent composed of CET1 capital above its minimum risk-based capital requirements, or if its eligible retained income is negative in that quarter and its capital conservation buffer ratio was less than 2.5 percent at the beginning of the quarter.
The BASEL III regulatory capital rules and regulations also place restrictions on the payment of capital distributions, including dividends, and certain discretionary bonus payments to executive officers if the company does not hold a capital conservation buffer of at least 2.5 percent composed of CET1 capital above its minimum risk-based capital requirements, or if its eligible retained income is negative in that quarter and its capital conservation buffer ratio was less than 2.5 percent at the beginning of the quarter.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (Amounts in thousands, except per share data) General The following paragraphs more fully discuss the significant highlights, changes and trends as they relate to the Company’s financial condition, results of operations, liquidity and capital resources as of December 31, 2022 and 2021, and during the three-year period ended December 31, 2022.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (Amounts in thousands, except per share data) General The following paragraphs more fully discuss the significant highlights, changes and trends as they relate to the Company’s financial condition, results of operations, liquidity and capital resources as of December 31, 2023 and 2022, and during the three-year period ended December 31, 2023.
The primary additions to cash from operating activities are from net income, adjusted for amortization of intangible assets, amortization of securities net of accretion, the provision for loan losses, depreciation and proceeds from sale of loans. The primary use of cash from operating activities is from loans originated for sale.
The primary additions to cash from operating activities are from net income, adjusted for amortization of intangible assets, amortization of securities net of accretion, the provision for credit losses, depreciation and proceeds from sale of loans. The primary use of cash from operating activities is from loans originated for sale.
The following table sets forth the maturities of securities at December 31, 2022 and the weighted average yields of such debt securities. Maturities are reported based on stated maturities and do not reflect principal prepayment assumptions.
The following table sets forth the maturities of securities at December 31, 2023 and the weighted average yields of such debt securities. Maturities are reported based on stated maturities and do not reflect principal prepayment assumptions.
The increase in net occupancy expense was due to increases in building repairs and maintenance and building depreciation. The increase in equipment expense was due to a general increase in computer, printer, office and security equipment costs and an increase in equipment depreciation related to the acquisition of VFG.
The increase in net occupancy expense was due to increases in building repairs and maintenance and building depreciation. The increase in equipment expense was due to a general increase in computer, printer, office and security equipment costs and an increase in equipment depreciation related to the acquisition of VFG in October 2022.
Uninsured deposits as December 31, 2022 and 2021 are based on estimates and include portions of FDIC-insured deposit accounts that exceed the insurance limit of $250,000 per separately insured depositor. Maturities of certificates of deposits and individual retirement accounts of more than $250,000 outstanding at December 31, 2022 are summarized as follows.
Uninsured deposits as of December 31, 2023 and 2022 are based on estimates and include portions of FDIC-insured deposit accounts that exceed the insurance limit of $250,000 per separately insured depositor. Maturities of certificates of deposits and individual retirement accounts (IRAs) of more than $250,000 outstanding at December 31, 2023 are summarized as follows.
(2) Included in loan interest income are loan fees of $2,024 in 2022, $1,661 in 2021 and $1,025 in 2020. (3) Non-accrual loans are included in loan totals and do not have a material impact on the analysis presented. (4) Average balance is computed using the carrying value of securities.
(2) Included in loan interest income are loan fees of $2,960 in 2023, $2,024 in 2022 and $1,661 in 2021. (3) Non-accrual loans are included in loan totals and do not have a material impact on the analysis presented. (4) Average balance is computed using the carrying value of securities.
Income tax expense as a percentage of pre-tax income was 16.2% in 2022 compared to 16.2% in 2021. A lower federal effective tax rate than the statutory rate of 21% in 2022 and 2021 is primarily due to tax-exempt interest income from state and municipal investments, municipal loans, income from BOLI and low income housing credits.
Income tax expense as a percentage of pre-tax income was 15.1% in 2023 compared to 16.2% in 2022. A lower federal effective tax rate than the statutory rate of 21% in 2023 and 2022 is primarily due to tax-exempt interest income from state and municipal investments, municipal loans, income from BOLI and low income housing credits.
In addition, 8,098 common shares were issued to Civista directors as a retainer payment for service on the Civista Board of Directors. Results of Operations The operating results of the Company are affected by general economic conditions, the monetary and fiscal policies of federal agencies and the regulatory policies of agencies that regulate financial institutions.
In addition, 1,817 common shares were issued to Civista directors in 2023 as a retainer payment for service on the Civista Board of Directors. Results of Operations The operating results of the Company are affected by general economic conditions, the monetary and fiscal policies of federal agencies and the regulatory policies of agencies that regulate financial institutions.
All of the Company’s capital ratios exceeded the regulatory minimum guidelines as of December 31, 2022 and 2021 as identified in the following table: Total Risk Based Capital Tier I Risk Based Capital CET1 Risk Based Capital Leverage Ratio Company Ratios—December 31, 2022 14.5 % 10.8 % 9.7 % 8.9 % Company Ratios—December 31, 2021 19.2 % 14.3 % 12.9 % 10.2 % For Capital Adequacy Purposes 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 % 49 Common equity for the CET1 risk-based capital ratio includes common stock (plus related surplus) and retained earnings, plus limited amounts of minority interests in the form of common stock, less the majority of certain regulatory deductions.
All of the Company’s capital ratios exceeded the regulatory minimum guidelines as of December 31, 2023 and 2022 as identified in the following table: Total Risk Based Capital Tier I Risk Based Capital CET1 Risk Based Capital Leverage Ratio Company Ratios—December 31, 2023 14.4 % 10.7 % 9.7 % 8.8 % Company Ratios—December 31, 2022 14.1 % 10.4 % 9.4 % 8.7 % For Capital Adequacy Purposes 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 % 44 Common equity for the CET1 risk-based capital ratio includes common stock (plus related surplus) and retained earnings, plus limited amounts of minority interests in the form of common stock, less the majority of certain regulatory deductions.
The available for sale portfolio helps to provide Civista with the ability to meet its funding needs. The Consolidated Statements of Cash Flows contained in the Consolidated Financial Statements detail the Company’s cash flows from operating activities resulting from net earnings. Net cash provided by operating activities for 2022, 2021 and 2020 was $25,183, $40,761, and $32,654, respectively.
The available for sale portfolio helps to provide Civista with the ability to meet its funding needs. The Consolidated Statements of Cash Flows contained in the Consolidated Financial Statements detail the Company’s cash flows from operating activities resulting from net earnings. Net cash provided by operating activities was $62,698, $25,183, and $40,761 for 2023, 2022 and 2021, respectively.
The fair value of deposits at December 31, 2022 was 100.0% of the carrying value compared to 100.0% at December 31, 2021. Changes in fair value were primarily due to changes in the discount values used to measure fair value. 50
The fair value of deposits at December 31, 2023 was 100.0% of the carrying value compared to 100.0% at December 31, 2022. Changes in fair value were primarily due to changes in the discount values used to measure fair value. 45
The deductions from CET1 capital include goodwill and other intangibles, certain deferred tax assets, mortgage-servicing assets above certain levels, gains on sale in connection with a securitization, investments in a banking organization’s own capital instruments and investments in the capital of unconsolidated financial institutions (above certain levels). These deductions were phased in from 2015 through 2019.
The deductions from CET1 capital include goodwill and other intangibles, certain deferred tax assets, mortgage-servicing assets above certain levels, gains on sale in connection with a securitization, investments in a banking organization’s own capital instruments and investments in the capital of unconsolidated financial institutions (above certain levels).
For further explanation of these items, see Note 1, Note 15 and Note 16 to the Consolidated Financial Statements. The Company paid $0.56 per common share in dividends in 2022 compared to $0.52 per common share in dividends in 2021.
For further explanation of these items, see Note 1, Note 37 15 and Note 16 to the Consolidated Financial Statements. The Company paid $0.61 per common share in dividends in 2023 compared to $0.56 per common share in dividends in 2022.
Net unrealized losses totaled $66,949 on December 31, 2022 compared to net unrealized gains of $18,577 on December 31, 2021. The change in unrealized gains is primarily due to changes in market interest rates. Note 3 to the Consolidated Financial Statements provides additional information on unrealized gains and losses.
Net unrealized losses totaled $54,620 on December 31, 2023 compared to net unrealized losses of $66,949 on December 31, 2022. The change in unrealized gains is primarily due to changes in market interest rates. Note 3 to the Consolidated Financial Statements provides additional information on unrealized gains and losses.
Generally, subject to applicable minimum capital requirements, Civista may declare and pay a dividend without the approval of the Federal Reserve Bank of Cleveland (the “Federal Reserve Bank”) and the State of Ohio Department of Commerce, Division of Financial Institutions, provided the total dividends in a calendar year do not exceed the total of its profits for that year combined with its retained profits for the two preceding years.
Generally, subject to applicable minimum capital requirements, Civista may declare and pay a dividend without the approval of the Federal Reserve Bank of Cleveland (the “Federal Reserve Bank”) and the ODFI, provided the total dividends in a calendar year do not exceed the total of its profits for that year combined with its retained profits for the two preceding years.
(2) Net interest margin is calculated by dividing tax-equivalent adjusted net interest income by average interest-earning assets. 48 Liquidity and Capital Resources Civista maintains a conservative liquidity position. All securities are classified as available for sale. At December 31, 2022, securities with maturities of one year or less totaled $5,796, or 0.9% of the total securities portfolio.
(2) Net interest margin is calculated by dividing tax-equivalent adjusted net interest income by average interest-earning assets. 43 Liquidity and Capital Resources Civista maintains a conservative liquidity position. All securities are classified as available for sale. At December 31, 2023, securities with maturities of one year or less totaled $2,652, or 0.4% of the total securities portfolio.
Civista offers repurchase agreements in the form of sweep accounts to commercial checking account customers. These repurchase agreements totaled $25,143 at December 31, 2022 compared to $25,495 at December 31, 2021. U.S. Treasury securities and obligations of U.S. government agencies maintained under Civista’s control are pledged as collateral for the repurchase agreements.
Civista no longer offers repurchase agreements in the form of sweep accounts to commercial checking account customers, as of July 2023. These repurchase agreements totaled $0 at December 31, 2023 compared to $25,143 at December 31, 2022. U.S. Treasury securities and obligations of U.S. government agencies maintained under Civista’s control were pledged as collateral for the repurchase agreements.
As of December 31, 2022, the Company was in compliance with all applicable pledging requirements. Mortgage-backed securities totaled $237,125 at December 31, 2022 and none were considered unusual or “high risk” securities as defined by regulatory authorities.
As of December 31, 2023, the Company was in compliance with all applicable pledging requirements. 35 Mortgage-backed securities totaled $212,015 at December 31, 2023 and none were considered unusual or “high risk” securities as defined by regulatory authorities.
The allowance for loan losses to total loans decreased from 1.33% in 2021 to 1.12% in 2022. The unallocated reserve of Civista decreased to $541 in 2022 from $847 in 2021. Management considers both the decrease in the unallocated reserve and the end-of-period reserve number to be insignificant and within the loan policy guidelines.
The allowance for credit losses to total loans increased from 1.12% in 2022 to 1.30% in 2023. The unallocated reserve of Civista decreased to $19 in 2023 from $541 in 2022. Management considers both the decrease in the unallocated reserve and the end-of-period reserve number to be insignificant and within the loan policy guidelines.
Of this total, $234,666 consisted of pass-through securities issued by the Federal National Mortgage Association (“FNMA”), Federal Home Loan Mortgage Corporation (“FHLMC”), and Government National Mortgage Association (“GNMA”), and the remaining $2,459 of these securities were collateralized by mortgage-backed securities issued or guaranteed by FNMA, FHLMC, or GNMA.
Of this total, $210,108 consisted of pass-through securities issued by the Federal National Mortgage Association (“FNMA”), Federal Home Loan Mortgage Corporation (“FHLMC”), and Government National Mortgage Association (“GNMA”), and the remaining $1,907 of these securities were collateralized by mortgage-backed securities issued or guaranteed by FNMA, FHLMC, or GNMA.
Quantitative and Qualitative Disclosures about Market Risk” section below. Capital Adequacy Shareholders’ equity totaled $334,835 at December 31, 2022 compared to $355,212 at December 31, 2021.
Quantitative and Qualitative Disclosures about Market Risk” section below. Capital Adequacy Shareholders’ equity totaled $372,002 at December 31, 2023 compared to $334,835 at December 31, 2022.
Net cash used for investing activities was $410,364, $130,496, and $340,982 in 2022, 2021 and 2020, respectively, principally reflecting our loan and investment security activities. Deposits and borrowings comprised most of our financing activities, which resulted in net cash provided of $164,303, $216,925, and $398,802 for 2022, 2021 and 2020, respectively.
Net cash used for investing activities was $311,784, $410,364, and $130,496 in 2023, 2022 and 2021, respectively, principally reflecting our loan and investment security activities. Deposits and borrowings comprised most of our financing activities, which resulted in net cash provided of $266,131, $164,303, and $216,925 in 2023, 2022 and 2021, respectively.
At December 31, 2022, Civista was able to pay approximately $55,501 of dividends to CBI without obtaining regulatory approval. During 2022, Civista paid dividends totaling $26,300 to CBI. This represented approximately 61 percent of Civista’s earnings for the year. The Company manages its liquidity and capital through quarterly Asset/Liability Management Committee (ALCO) meetings.
At December 31, 2023, Civista was able to pay approximately $56,886 of dividends to CBI without obtaining regulatory approval. During 2023, Civista paid dividends totaling $28,100 to CBI. This represented approximately 65 percent of Civista’s earnings for the year. The Company manages its liquidity and capital through quarterly Asset/Liability Management Committee (ALCO) meetings.
This discussion should be read in conjunction with the Consolidated Financial Statements and Notes to the Consolidated Financial Statements, which are included elsewhere in this report. Financial Condition At December 31, 2022, the Company’s total assets were $3,537,830, compared to $3,012,905 at December 31, 2021.
This discussion should be read in conjunction with the Consolidated Financial Statements and Notes to the Consolidated Financial Statements, which are included elsewhere in this report. Financial Condition At December 31, 2023, the Company’s total assets were $3,861,418, compared to $3,639,445 at December 31, 2022.
Loans held for sale and leases are excluded from consideration as impaired. Loans are generally moved to nonaccrual status when 90 days or more past due. Impaired loans or portions thereof are charged-off when deemed uncollectible. Noninterest Income Noninterest income decreased $2,376, or 7.6%, to $29,076 for the year ended December 31, 2022, from $31,452 for the comparable 2021 period.
Loans held for sale and leases are excluded from consideration as impaired. Loans are generally moved to nonaccrual status when 90 days or more past due. Impaired loans or portions thereof are charged-off when deemed uncollectible. Noninterest Income Noninterest income increased $8,087, or 27.8%, to $37,164 for the year ended December 31, 2023, from $29,076 for the comparable 2022 period.
In connection with the acquisition of VFG in October 2022, the Company acquired Commercial & Agriculture loans and Lease financing receivables totaling $25,509 and $35,909, respectively. 35 Maturities and Sensitivities of Loans to Changes in Interest Rates The following table shows the amount of commercial and agriculture, commercial real estate, residential real estate, real estate construction, farm real estate and consumer and other loans outstanding as of December 31, 2022, which, based on the contract terms for repayments of principal, are due in the periods indicated.
Maturities and Sensitivities of Loans to Changes in Interest Rates The following table shows the amount of Commercial and Agriculture, Commercial Real Estate, Residential Real Estate, Real Estate Construction, Farm Real Estate and Consumer and Other Loans and Lease financing receivables outstanding as of December 31, 2023, which, based on the contract terms for repayments of principal, are due in the periods indicated.
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 $172,175, or 8.5%, to $2,199,082 for the year ended December 31, 2022, as compared to $2,026,907 for the year ended December 31, 2021.
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 $523,715, or 23.8%, to $2,722,797 for the year ended December 31, 2023, as compared to $2,199,082 for the year ended December 31, 2022.
The Company continually examines its rate structure to ensure that its interest rates are competitive and reflective of the current rate environment in which it competes. Total interest income increased $19,511 to $121,253 for the year ended December 31, 2022, which is attributable to an increase of $13,581 in interest and fees on loans.
The Company continually examines its rate structure to ensure that its interest rates are competitive and reflective of the current rate environment in which it competes. Total interest income increased $56,579 to $182,734 for the year ended December 31, 2023, which is attributable to an increase of $52,702 in interest and fees on loans.
Obligations of states and political subdivisions available for sale increased by $18,412 from 2021 to 2022. Mortgage-backed securities increased by $23,977 to total $237,125 at December 31, 2022. The Company continues to utilize letters of credit from the Federal Home Loan Bank (FHLB) to replace maturing securities that were pledged for public entities.
Obligations of states and political subdivisions available for sale increased by $21,351 from 2022 to 2023. Mortgage-backed securities decreased by $25,110 to total $212,015 at December 31, 2023. The Company continues to utilize letters of credit from the Federal Home Loan Bank (FHLB) to replace maturing securities that were pledged for public entities.
The increase in compensation expense was due to increased payroll, payroll taxes, employee insurance and commissions and incentives. The year-to-date average full time equivalent (FTE) employees were 480.8 at December 31, 2022, an increase of 29 FTEs over 2021 due to the acquisitions of Comunibanc Corp. and VFG.
The increase in compensation expense was due to increased payroll, payroll taxes, employee insurance and commissions and incentives. The average full time equivalent (FTE) employees were 531 at December 31, 2023, an increase of 50 FTEs over 2022 due to a full year of the additional employees resulting from the prior year acquisitions of Comunibanc and VFG.
Fair Value of Financial Instruments The Company has disclosed the fair value of its financial instruments at December 31, 2022 and 2021 in Note 17 to the Consolidated Financial Statements. The fair value of loans at December 31, 2022 was 85.8% of the carrying value compared to 98.7% at December 31, 2021.
Fair Value of Financial Instruments The Company has disclosed the fair value of its financial instruments at December 31, 2023 and 2022 in Note 17 to the Consolidated Financial Statements. The fair value of loans at December 31, 2023 was 94.9% of the carrying value compared to 96.5% at December 31, 2022.
As of December 31, 2022, Civista had total credit availability with the FHLB of $829,458, of which $454,788 was outstanding, including standby letters of credit of $57,510. On a separate entity basis, CBI’s primary source of funds is dividends paid by its subsidiaries, primarily by Civista.
As of December 31, 2023, Civista had total credit availability with the FHLB of $791,637, of which $364,792 was outstanding, including standby letters of credit of $24,400. On a separate entity basis, CBI’s primary source of funds is dividends paid by its subsidiaries, primarily by Civista.
An additional 5,428 common shares were surrendered by officers to the Company to pay taxes upon vesting of restricted shares and 3,411 restricted common shares were forfeited. The repurchase of common shares was offset by the grant of 31,774 restricted common shares to certain officers under the Company’s 2014 Incentive Plan.
An additional 6,193 common shares were surrendered by officers to the Company to pay taxes upon vesting of restricted shares and 1,740 restricted common shares were forfeited. The repurchase of common shares was offset by the grant of 47,536 restricted common shares to certain officers under the Company’s 2014 Incentive Plan.
The average daily amount of deposits (all in domestic offices) and average rates paid on such deposits is summarized for the years indicated. 2022 2021 Average balance Average rate paid Average balance Average rate paid (Dollars in thousands) Noninterest-bearing demand deposits $ 937,890 N/A $ 907,591 N/A Interest-bearing demand deposits 544,351 0.03 % 497,067 0.03 % Savings, including Money Market deposit accounts 878,783 0.15 % 818,153 0.13 % Certificates of deposit, including IRA’s 253,399 0.95 % 265,294 1.11 % $ 2,614,423 $ 2,488,105 Uninsured deposits at December 31, 2022 and 2021 were $563,092 and $599,380, respectively.
The average daily amount of deposits (all in domestic offices) and average rates paid on such deposits is summarized for the years indicated. 2023 2022 Average balance Average rate paid Average balance Average rate paid (Dollars in thousands) Noninterest-bearing demand deposits $ 900,124 N/A $ 937,890 N/A Interest-bearing demand deposits 497,512 0.03 % 544,351 0.03 % Savings, including Money Market deposit accounts 858,551 1.15 % 878,783 0.15 % Certificates of deposit, including IRA’s 578,032 4.12 % 253,399 0.95 % $ 2,834,219 $ 2,614,423 Uninsured deposits at December 31, 2023 and 2022 were $499,429 and $563,092, respectively.
The loan yield increased to 4.69% for 2022, from 4.42% in 2021. Interest on taxable securities increased $3,650 to $9,123 for the year ended December 31, 2022, compared to $5,473 for the same period in 2021.
The loan yield increased to 5.90% for 2023, from 4.69% in 2022. Interest on taxable securities increased $2,595 to $11,718 for the year ended December 31, 2023, compared to $9,123 for the same period in 2022.
Other income increased due to increases in wire transfer fees, merchant credit card fees, loan servicing fees, amortization of mortgage servicing rights and rental and brokerage fee income from the acquisition of VFG. Noninterest Expense Noninterest expense increased $12,827, or 16.5%, to $90,493 for the year ended December 31, 2022, from $77,666 for the comparable 2021 period.
Other income increased due to increases in wire transfer fees, merchant credit card fees, loan servicing fees, amortization of mortgage servicing rights and fee income from the acquisition of CLF. Noninterest Expense Noninterest expense increased $17,118, or 18.9%, to $107,611 for the year ended December 31, 2023, from $90,493 for the comparable 2022 period.
The average interest rate of the mortgage-backed securities portfolio at December 31, 2022 was 2.4%. The average maturity at December 31, 2022 was approximately 8.4 years. 38 Securities available for sale had a fair value at December 31, 2022 of $615,402. This fair value includes unrealized gains of approximately $819 and unrealized losses of approximately $67,768.
The average interest rate of the mortgage-backed securities portfolio at December 31, 2023 was 2.56%. The average maturity at December 31, 2022 was approximately 14.8 years. Securities available for sale had a fair value at December 31, 2023 of $618,272. This fair value includes unrealized gains of approximately $3,059 and unrealized losses of approximately $57,679.
The decrease in deposit expense was due to a decrease in the average rate paid, as the average rate paid on demand and savings accounts decreased from 0.09% in 2021 to 0.01% in 2022 and the average rate paid on time deposits decreased from 1.11% to 0.95% in 2022, which was partially offset by an increase in the average balance of interest-bearing deposits of $96,019 for the year ended December 31, 2022 as compared to the same period in 2021.
The increase in deposit expense was due to a increase in the average rate paid, as the average rate paid on demand and savings accounts increased from 0.15% in 2022 to 1.15% in 2023 and the average rate paid on time deposits increased from 0.95% in 2022 to 4.125% in 2023, which was coupled with an increase in the average balance of interest-bearing deposits of $258,499 for the year ended December 31, 2023 as compared to the same period in 2022.
The analysis also includes assessment of qualitative factors such as credit trends, unemployment trends, vacancy trends and loan growth. The composition and overall level of the loan portfolio and charge-off activity are also factors used to determine the amount of the allowance for loan losses.
The composition and overall level of the loan portfolio and charge-off activity are also factors used to determine the amount of the allowance for loan losses.
Interest on tax-exempt securities increased $1,609 to $7,859 for the year ended December 31, 2022, compared to $6,250 for the same period in 2021. The average balance of tax-exempt securities increased $46,195 to $263,981 for the year ended December 31, 2022 as compared to $217,786 for the year ended December 31, 2021.
Interest on tax-exempt securities increased $1,423 to $9,282 for the year ended December 31, 2023, compared to $7,859 for the same period in 2022. The average balance of tax-exempt securities increased $18,697 to $282,678 for the year ended December 31, 2023 as compared to $263,981 for the year ended December 31, 2022.
The allowance has been allocated according to the amount deemed to be reasonably necessary to provide for the probable losses estimated to be incurred within the following categories of loans at the dates indicated. 2022 2021 Allowance Percentage of loans to total loans Allowance Percentage of loans to total loans (Dollars in thousands) Commercial & Agriculture $ 3,011 10.9 % $ 2,600 12.3 % Commercial Real Estate—Owner Occupied 4,565 14.5 4,464 14.9 Commercial Real Estate—Non-Owner Occupied 14,138 40.0 13,860 41.5 Real Estate Mortgage 3,145 21.7 2,597 21.5 Real Estate Construction 2,293 9.6 1,810 7.9 Farm Real Estate 291 1.0 287 1.4 Lease financing receivables 429 1.5 0 0.0 Consumer and Other 98 0.8 176 0.5 Unallocated 541 — 847 — $ 28,511 100.0 % $ 26,641 100.0 % 2020 Allowance Percentage of loans to total loans (Dollars in thousands) Commercial & Agriculture $ 2,810 19.9 % Commercial Real Estate—Owner Occupied 4,057 13.6 Commercial Real Estate—Non-Owner Occupied 12,451 34.3 Real Estate Mortgage 2,484 21.5 Real Estate Construction 2,439 8.5 Farm Real Estate 338 1.6 Consumer and Other 209 0.6 Unallocated 240 — $ 25,028 100.0 % Civista measures the adequacy of the allowance for loan losses by using both specific and general components.
The allowance has been allocated according to the amount deemed to be reasonably necessary to provide for expected lifetime credit losses. within the following categories of loans at the dates indicated. 2023 2022 Allowance Percentage of loans to total loans Allowance Percentage of loans to total loans (Dollars in thousands) Commercial & Agriculture $ 7,884 10.6 % $ 3,011 10.9 % Commercial Real Estate—Owner Occupied 4,686 13.2 4,565 14.5 Commercial Real Estate—Non-Owner Occupied 11,788 40.6 14,138 40.0 Real Estate Mortgage 8,489 23.1 3,145 21.7 Real Estate Construction 3,388 9.1 2,293 9.6 Farm Real Estate 260 0.9 291 1.0 Lease financing receivables 306 1.9 429 1.5 Consumer and Other 340 0.6 98 0.8 Unallocated 19 — 541 — $ 37,160 100.0 % $ 28,511 100.0 % 2021 Allowance Percentage of loans to total loans (Dollars in thousands) Commercial & Agriculture $ 2,600 12.3 % Commercial Real Estate—Owner Occupied 4,464 14.9 Commercial Real Estate—Non-Owner Occupied 13,860 41.5 Real Estate Mortgage 2,597 21.5 Real Estate Construction 1,810 7.9 Farm Real Estate 287 1.4 Consumer and Other 176 0.5 Unallocated 847 — $ 26,641 100 % Civista measures the adequacy of the allowance for loan losses by using the CECL methodology and 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 increase in interest expense can be attributed to an increase in the average rate paid, accompanied by an increase in the average balance of interest-bearing liabilities. For the year ended December 31, 2022, the average balance of interest-bearing liabilities increased $181,264 to $1,918,906, as compared to $1,737,642 for the year ended December 31, 2021.
The increase in interest expense can be attributed to an increase in the average rate paid, accompanied by an increase in the average balance of interest-bearing liabilities. For the year ended December 31, 2023, the average balance of interest-bearing liabilities increased $398,903 to $2,405,655 , as compared to $2,006,752 for the year ended December 31, 2022.
Interest incurred on deposits decreased by $335 to $3,840 for the year ended December 31, 2022, compared to $4,175 for the same period in 2021.
Interest incurred on deposits increased by $29,915 to $33,755 for the year ended December 31, 2023, compared to $3,840 for the same period in 2022.
The average balance of taxable securities increased $108,787 to $341,600 for the year ended December 31, 2022, as compared to $232,813 for the year ended December 31, 2021. The yield on taxable securities increased 8 basis points to 2.49% for 2022, compared to 2.41% for 2021.
The average balance of taxable securities increased $22,372 to $363,972 for the year ended December 31, 2023, as compared to $341,600 for the year ended December 31, 2022. The yield on taxable securities increased 39 basis points to 2.88% for 2023, compared to 2.49% for 2022.
(2) The weighted average yield has been computed using the historical amortized cost for available-for-sale securities. Premises and equipment, net of accumulated depreciation, increased $41,573 from December 31, 2021 to December 31, 2022. The increase is the result of new purchases of $6,508, offset by disposals of $183 and depreciation of $4,456.
(2) The weighted average yield has been computed using the historical amortized cost for available-for-sale securities. Premises and equipment, net of accumulated depreciation, decreased $7,249 from December 31, 2022 to December 31, 2023. The decrease is the result of new purchases of $3,218, offset by depreciation of $10,760.
The foregoing decreases to shareholders’ equity were partially offset by net income of $39,427. During the first quarter of 2015, the Company adopted the new BASEL III regulatory capital framework as approved by the federal banking agencies.
During the first quarter of 2015, the Company adopted the new BASEL III regulatory capital framework as approved by the federal banking agencies.
Evaluation of such requests includes a review of the borrower’s credit history, the collateral securing the loan and the purpose for such request. 36 Analysis of the Allowance for Loan Losses The following table shows the daily average loan balances and changes in the allowance for credit losses for the years indicated. 2022 2021 2020 (Dollars in thousands) Total loans outstanding $ 2,546,666 $ 1,997,879 $ 2,057,502 Allowance for credit losses at year end 28,511 26,641 25,028 Loans accounted for on a nonaccrual basis 6,507 3,673 5,125 Allowance for loan losses to total loans outstanding 1.12 % 1.33 % 1.22 % Nonaccrual loans to total loans outstanding 0.26 % 0.18 % 0.25 % Allowance for loan losses to nonaccrual loans 438.16 % 725.32 % 488.35 % Average loans outstanding: Commercial & Agriculture 236,315 338,916 359,820 Commercial Real Estate—Owner Occupied 322,132 278,777 256,962 Commercial Real Estate—Non-Owner Occupied 896,562 755,578 643,622 Real Estate Mortgage 511,973 433,351 462,834 Real Estate Construction 179,183 176,775 175,573 Farm Real Estate 24,388 28,968 33,935 Lease financing receivables 8,382 — — Consumer and Other 20,147 14,542 20,726 Total average loans outstanding 2,199,082 2,026,907 1,953,472 Net charge-offs (recoveries): Commercial & Agriculture (2 ) (150 ) 13 Commercial Real Estate—Owner Occupied (42 ) (7 ) (111 ) Commercial Real Estate—Non-Owner Occupied (74 ) (395 ) (48 ) Real Estate Mortgage (66 ) (182 ) 18 Real Estate Construction (4 ) (1 ) (4 ) Farm Real Estate (6 ) (12 ) (13 ) Lease financing receivables 23 — — Consumer and Other 53 (36 ) (4 ) Total net charge-offs (recoveries) (118 ) (783 ) (149 ) Ratio of net charge-offs (recoveries) during the year to average loans outstanding: Commercial & Agriculture (0.00 )% (0.04 )% 0.00 % Commercial Real Estate—Owner Occupied (0.01 )% (0.00 )% (0.04 )% Commercial Real Estate—Non-Owner Occupied (0.01 )% (0.05 )% (0.01 )% Real Estate Mortgage (0.01 )% (0.04 )% 0.00 % Real Estate Construction (0.00 )% (0.00 )% (0.00 )% Farm Real Estate (0.02 )% (0.04 )% (0.04 )% Lease financing receivables — — Consumer and Other 0.26 % (0.25 )% (0.02 )% Total net recoveries (charge-offs) (0.01 )% (0.04 )% (0.01 )% The amount of net charge-offs fluctuates from year to year due to factors relating to the condition of the general economy, decline in market values of collateral and deterioration of specific businesses.
Evaluation of such requests includes a review of the borrower’s credit history, the collateral securing the loan and the purpose for such request. 33 Analysis of the Allowance for Credit Losses The following table shows the daily average loan balances and changes in the allowance for credit losses for the years indicated. 2023 2022 2021 (Dollars in thousands) Total loans outstanding $ 2,861,727 $ 2,648,281 $ 2,087,258 Allowance for credit losses at year end 37,160 28,511 26,641 Loans accounted for on a nonaccrual basis 12,467 6,507 3,673 Allowance for credit losses to total loans outstanding 1.30 % 1.08 % 1.28 % Nonaccrual loans to total loans outstanding 0.44 % 0.25 % 0.18 % Allowance for credit losses to nonaccrual loans 298.07 % 438.16 % 725.32 % Average loans outstanding: Commercial & Agriculture 276,438 236,315 338,916 Commercial Real Estate—Owner Occupied 372,214 322,132 278,777 Commercial Real Estate—Non-Owner Occupied 1,086,895 896,562 755,578 Real Estate Mortgage 588,739 511,973 433,351 Real Estate Construction 254,429 179,183 176,775 Farm Real Estate 24,250 24,388 28,968 Lease financing receivables 44,014 8,382 — Consumer and Other 10,651 20,147 14,542 Loan participations sold, reflected as secured borrowings 65,167 87,846 100,250 Total average loans outstanding 2,722,797 2,286,928 2,127,157 Net charge-offs (recoveries): Commercial & Agriculture 1,122 (2 ) (150 ) Commercial Real Estate—Owner Occupied (15 ) (42 ) (7 ) Commercial Real Estate—Non-Owner Occupied (46 ) (74 ) (395 ) Real Estate Mortgage (116 ) (66 ) (182 ) Real Estate Construction (37 ) (4 ) (1 ) Farm Real Estate — (6 ) (12 ) Lease financing receivables — 23 — Consumer and Other 72 53 (36 ) Total net charge-offs (recoveries) 980 (118 ) (783 ) Ratio of net charge-offs (recoveries) during the year to average loans outstanding: Commercial & Agriculture 0.41 % (0.00 )% (0.04 )% Commercial Real Estate—Owner Occupied (0.00 )% (0.01 )% (0.00 )% Commercial Real Estate—Non-Owner Occupied (0.00 )% (0.01 )% (0.05 )% Real Estate Mortgage (0.02 )% (0.01 )% (0.04 )% Real Estate Construction (0.01 )% (0.00 )% (0.00 )% Farm Real Estate — (0.02 )% (0.04 )% Lease financing receivables — — Consumer and Other 0.11 % 0.06 % (0.04 )% Total net recoveries (charge-offs) 0.04 % (0.01 )% (0.04 )% The amount of net charge-offs fluctuates from year to year due to factors relating to the condition of the general economy, decline in market values of collateral and deterioration of specific businesses.
Management specifically evaluates loans that are impaired, which includes restructured loans, to estimate potential loss. This analysis includes a review of the loss migration calculation for all loan categories as well as fluctuations and trends in various risk factors that have occurred within the portfolios’ economic life cycle.
This analysis includes a review of the loss migration calculation for all loan categories as well as fluctuations and trends in various risk factors that have occurred within the portfolios’ economic life cycle. The analysis also includes assessment of qualitative factors such as credit trends, unemployment trends, vacancy trends and loan growth.
The decrease in shareholders’ equity resulted primarily from a $581 net increase in the Company’s pension liability and a decrease in the fair value of securities available for sale, net of tax, of $67,446, together with dividends on common shares of $8,493 and repurchase of common shares totaling $16,887 during 2022 pursuant to the Company’s publicly-announced share purchase programs.
The increase in shareholders’ equity resulted primarily from net income of $42,964, which was partially offset by a $768 net increase in the Company’s pension liability and an increase in the fair value of securities available for sale, net of tax, of $9,747, together with dividends on common shares of $9,599 and repurchase of common shares totaling $1,628 during 2023 pursuant to the Company’s publicly-announced share purchase programs.
The yield on tax-exempt securities decreased 40 basis points to 3.56% for 2021, compared to 3.96% for 2021. Total interest expense increased $4,732 or 74.9%, to $11,049 for the year ended December 31, 2022, compared with $6,317 for the same period in 2021.
The yield on tax-exempt securities increased 23 basis points to 3.79% for 2023, compared to 3.56% for 2022. 38 Total interest expense increased $41,287 or 258.8%, to $53,763 for the year ended December 31, 2023, compared with $4,732 for the same period in 2022.
Interest expense incurred on FHLB advances and subordinated debentures increased 223.8% from 2021. The increase was due to an increase in the average balance of short-term FHLB balances and subordinated debentures of $66,875 and $66,956, respectively, accompanied by an increas in rates.
Interest expense incurred on FHLB advances and subordinated debentures increased 93.9% from 2022. The increase was due to an increase in the average balance of short-term FHLB balances and subordinated debentures to $280,887 and $66,875, respectively, accompanied by an increase in rates. The average balance of other borrowings decreased $17,823 for the period ended December 31, 2023.
Refer to “Distribution of Assets, Liabilities and Shareholders’ Equity; Interest Rates and Interest Differential” and “Changes in Interest Income and Interest Expense Resulting from Changes in Volume and Changes in Rate” on pages 46 through 48 for further analysis of the impact of changes in interest-bearing assets and liabilities on the Company’s net interest income. 42 Provision and Allowance for Loan Losses The following table contains information relating to the provision for loan losses, activity in and analysis of the allowance for loan losses as of and for each of the three years in the period ended December 31.
Refer to “Distribution of Assets, Liabilities and Shareholders’ Equity; Interest Rates and Interest Differential” and “Changes in Interest Income and Interest Expense Resulting from Changes in Volume and Changes in Rate” on pages 43 through 45 for further analysis of the impact of changes in interest-bearing assets and liabilities on the Company’s net interest income.
(5) Yield/Rate is calculated using the tax-equivalent adjustment of 21% for 2022, 2021 and 2020. 47 Distribution of Assets, Liabilities and Shareholders’ Equity; Interest Rates and Interest Differential (Continued) The following table sets forth, for the years ended December 31, 2022, 2021 and 2020, the distribution of liabilities, including interest amounts and average rates of major categories of interest-bearing liabilities and shareholders’ equity (Amounts in thousands): 2022 2021 2020 Liabilities and Shareholders’ Equity Average balance Interest Yield/ rate Average balance Interest Yield/ rate Average balance Interest Yield/ rate Interest-bearing liabilities: Savings and interest-bearing demand accounts $ 1,423,134 $ 1,442 0.01 % $ 1,315,220 $ 1,219 0.09 % $ 1,050,544 $ 1,813 0.17 % Certificates of deposit 253,399 2,398 0.95 % 265,294 2,956 1.11 % 288,262 5,068 1.76 % Short-term Federal Home Loan Bank advances 66,875 2,566 3.84 % — — — 8,151 134 1.64 % Long-term Federal Home Loan Bank advances 45,325 510 1.13 % 94,041 1,163 1.24 % 125,000 1,798 1.44 % Other borrowings 4,002 335 8.37 % — — — 101,295 354 0.35 % Securities sold under repurchase agreements 22,293 11 0.05 % 26,165 23 0.09 % 24,390 25 0.10 % Federal funds purchased 137 6 4.38 % 137 1 0.73 % 288 1 0.35 % Subordinated debentures 103,741 3,781 3.64 % 36,785 955 2.66 % 29,427 945 3.21 % Total interest-bearing liabilities 1,918,906 11,049 0.58 % 1,737,642 6,317 0.36 % 1,627,357 10,138 0.62 % Noninterest-bearing liabilities: Demand deposits 937,890 907,591 739,648 Other liabilities 76,189 38,868 51,242 1,014,079 946,459 790,890 Shareholders’ equity 316,143 349,203 336,461 Total $ 3,249,128 $ 3,033,304 $ 2,754,708 Net interest income and interest rate spread (1) $ 110,204 3.54 % $ 95,425 3.33 % $ 89,727 3.48 % Net interest margin (2) 3.75 % 3.47 % 3.70 % (1) Interest rate spread is calculated by subtracting the rate on average interest-bearing liabilities from the yield on average interest-earning assets.
(5) Yield/Rate is calculated using the tax-equivalent adjustment of 21% for 2023, 2022 and 2021. 42 Distribution of Assets, Liabilities and Shareholders’ Equity; Interest Rates and Interest Differential (Continued) The following table sets forth, for the years ended December 31, 2023, 2022 and 2021, the distribution of liabilities, including interest amounts and average rates of major categories of interest-bearing liabilities and shareholders’ equity (Amounts in thousands): 2023 2022 2021 Liabilities and Shareholders’ Equity Average balance Interest Yield/ rate Average balance Interest Yield/ rate Average balance Interest Yield/ rate Interest-bearing liabilities: Savings and interest-bearing demand accounts $ 1,356,789 $ 7,689 0.57 % $ 1,423,134 $ 1,442 0.01 % $ 1,315,220 $ 1,219 0.09 % Certificates of deposit 578,243 26,066 4.51 % 253,399 2,398 0.95 % 265,294 2,956 1.11 % Short-term Federal Home Loan Bank advances 280,887 14,493 5.16 % 66,875 2,566 3.84 % — — — Long-term Federal Home Loan Bank advances 2,909 66 2.27 % 45,325 510 1.13 % 94,041 1,163 1.24 % Other borrowings 74,025 4,058 5.48 % 91,848 5,243 5.70 % 100,250 3,312 3.30 % Securities sold under repurchase agreements 8,685 4 0.05 % 22,293 11 0.05 % 26,165 23 0.09 % Federal funds purchased 244 13 5.33 % 137 6 4.38 % 137 1 0.73 % Subordinated debentures 103,873 4,849 4.67 % 103,741 3,781 3.64 % 36,785 955 2.66 % Total interest-bearing liabilities 2,405,655 57,238 2.38 % 2,006,752 15,957 0.79 % 1,837,892 9,629 0.53 % Noninterest-bearing liabilities: Demand deposits 917,005 937,890 907,591 Other liabilities 50,963 76,189 38,868 967,968 1,014,079 946,459 Shareholders’ equity 343,724 316,143 349,203 Total $ 3,717,347 $ 3,336,974 $ 3,133,554 Net interest income and interest rate spread (1) $ 125,496 2.97 % $ 110,198 3.37 % $ 95,425 3.15 % Net interest margin (2) 3.70 % 3.65 % 3.35 % (1) Interest rate spread is calculated by subtracting the rate on average interest-bearing liabilities from the yield on average interest-earning assets.
The increases in the foregoing loan segments were offset by a decrease in Farm Real Estate loans of $3,711.
The increases in the foregoing loan segments were offset by a decrease in Consumer and Other loans of $2,718.
Additional detail related to these repurchase agreements can be found in Note 12 to the Consolidated Financial Statements. Swap liabilities increased $5,507 from December 31, 2021 to December 31, 2022.
Additional detail related to these repurchase agreements can be found in Note 12 to the Consolidated Financial Statements. Swap liabilities decreased $4,098 from December 31, 2022 to December 31, 2023. The decrease is primarily the result of decreases in the fair value of swap liabilities as compared to December 31, 2022.
The amount of the provision is affected by loan charge-offs, recoveries and changes in specific and general allocations required for the allowance for loan losses. A number of factors impact the provisions for loan losses, such as the level of higher risk loans in the portfolio, changes in practices related to loans, changes in collateral values and other factors.
The Company provides for credit losses through regular provisions to the allowance for credit losses as necessary. The amount of the provision is affected by loan charge-offs, recoveries and changes in specific and general allocations required for the allowance for credit losses.
The level of net interest income is dependent on the interest rate environment and the volume and composition of interest-earning assets and interest-bearing liabilities.
The level of net interest income is dependent on the interest rate environment and the volume and composition of interest-earning assets and interest-bearing liabilities. Net income is also affected by provisions for credit losses, service charges, gains on the sale of assets, other non-interest income, noninterest expense and income taxes.
The increase was primarily due to increases in compensation expense of $6,371, net occupancy expense of $488, equipment expense of $3,232, data processing expense of $1,063, professional services of $2,673, amortization expense of $406, marketing expense of $410 and software expense of $678, which was partially offset by a decrease in FDIC assessments of $450 and other operating expense of $1,960.
The increase was primarily due to increases in compensation expense of $7,230, net occupancy expense of $694, equipment expense of $6,015, amortization expense of $283, software expense of $734, FDIC assessments of $840 and other operating expense of $2,242, increases were partially offset by decreases in data processing expense of $546, professional services of $436, and marketing expense of $161.
The repurchase program publicly announced on May 4, 2022 authorized the Company to repurchase a maximum aggregate value of $13,500 of the Company’s common shares until May 9, 2023. The repurchase plan publicly announced on August 12, 2021 authorized the Company to repurchase a maximum aggregate value of $13,500 of the Company’s common shares until August 10, 2022.
The Company repurchased 84,230 common shares pursuant to a stock repurchase program announced on May 8, 2023, pursuant to which the Company is authorized to repurchase a maximum aggregate value of $13,500 of the Company’s common shares until May 2, 2024.
This increase in deposits at December 31, 2022 compared to December 31, 2021 included increases in noninterest bearing demand deposits of $107,427, or 13.6%, savings and money market accounts of $32,590, or 3.9%, certificate of deposit accounts of $68,734, or 33.6%, and individual retirement accounts of $4,163, or 9.9%, offset by a decrease in interest bearing demand accounts of $9,631, or 1.8%.
This increase in deposits at December 31, 2023 compared to December 31, 2022 included increases in certificate of deposit accounts of $585,401, or 214%, offset by decreases in noninterest bearing demand deposits of $124,634, or 13.9% in interest bearing demand accounts of $78,430, or 14.9%, in savings and money market accounts 36 of $20,129, or 2.3% and in individual retirement accounts of $3,933, or 8.5%.
Securities available for sale increased by $55,528, or 9.9%, from $559,874 at December 31, 2021 to $615,402 at December 31, 2022. U.S. Treasury securities and obligations of U.S. government agencies increased $13,139, or 27.4% from $47,890 at December 31, 2021 to $61,029 at December 31, 2022.
Securities available for sale increased by $2,870, or 0.5%, from $615,402 at December 31, 2022 to $618,272 at December 31, 2023. U.S. Treasury securities and obligations of U.S. government agencies increased $6,629, or 1.1% from $61,029 at December 31, 2022 to $67,658 at December 31, 2023.
Average deposit balances for 2022 were $2,614,423 compared to $2,488,105 for 2021, an increase of 5.1%. Noninterest bearing deposits averaged $937,890 for 2022, compared to $907,591 for 2021, increasing $30,299, or 3.3%. Savings, NOW, and MMDA accounts averaged $1,423,134 for 2022 compared to $1,315,220 for 2021, increasing $107,914, or 8.2%.
Average deposit balances for 2023 were $2,868,823 compared to $2,614,423 for 2022, an increase of 9.7%. Noninterest bearing deposits averaged $934,741 for 2023, compared to $937,890 for 2022, decreasing $3,149, or 0.3%. Savings, NOW, and MMDA accounts averaged $855,946 for 2023 compared to $1,423,134 for 2022, decreasing $567,188, or 39.9%.
We continue to actively manage this process and have provided to maintain the reserve at a level that assures adequate coverage ratios. Provisions for loan losses totaled $1,752, $830 and $10,112 in 2022, 2021 and 2020, respectively.
A number of factors impact the provisions for credit losses, such as the level of higher risk loans in the portfolio, changes in practices related to loans, changes in collateral values and other factors. We continue to actively manage this process and have provided to maintain the reserve at a level that assures adequate coverage ratios.
At December 31, 2022, seven loans totaling $683 were held for sale as compared to 14 loans totaling $1,972 at December 31, 2021. At December 31, 2022, the Company’s net loans totaled $2,518,155 and increased by 27.7% from $1,971,238 at December 31, 2021. The increase in net loans was spread across most segments.
At December 31, 2023, the Company’s net loans totaled $2,824,568 and increased by 7.8% from $2,619,770 at December 31, 2022. The increase in net loans was spread across most segments.
Marketing expense increased due to a general increase in marketing and increased marketing efforts in newly acquired markets. Software expense increase due to a general increase in legacy software maintenance contracts and the implementation of our new digital banking. The decrease in FDIC assessments was attributable to lower assessment multipliers charged to Civista.
The increase in FDIC assessments was attributable to higher assessment multipliers charged to Civista. The increase in amortization expense is related to the a full year of amortization of assets acquired in the acquisition of Comunibanc Corp in July 2022. Software expense increase due to a general increase in legacy software maintenance contracts.
Our Commercial and Commercial Real Estate portfolios have been, and are expected to continue to be, impacted the most. 43 Efforts are continually made to analyze each segment of the loan portfolio and quantify risk to assure that reserves are appropriate for each segment and the overall portfolio.
Efforts are continually made to analyze each segment of the loan portfolio and quantify risk to assure that reserves are appropriate for each segment and the overall portfolio. Management specifically evaluates loans that are impaired, which includes restructured loans, to estimate potential loss.
The change in net income was the result of the items discussed in the following sections. Net Interest Income Net interest income for 2022 was $110,204, an increase of $14,779, or 15.5%, from 2021. From 2021 to 2022, average earning assets increased 4.5%, interest income increased $19,511, and interest expense on interest-bearing liabilities increased $4,732.
Net Interest Income Net interest income for 2023 was $125,496, an increase of $15,292, or 13.9%, from 2022. From 2022 to 2023, average earning assets increased 11.6%, interest income increased $56,579, and interest expense on interest-bearing liabilities increased $41,287.
A loan is considered impaired when it is probable that all of the interest and principal due will not be collected according to the terms of the original contractual agreement. The Company’s policy is to maintain the allowance for loan losses at a level sufficient to provide for probable losses incurred in the current portfolio.
Provision and Allowance for Credit Losses The Company’s policy is to maintain the allowance for credit losses at a level sufficient to provide for probable losses incurred in the current portfolio. Management believes the analysis of the allowance for credit losses supported a reserve of $37,160 at December 31, 2023.
These increases to shareholders’ equity were offset by, an increase in the Company’s pension liability, net of tax, of $581, a decrease in the fair value of securities available for sale, net of tax, of $67,446 and decreases due to the purchase of treasury shares and dividends on common shares of $16,887 and $8,493, respectively.
Accumulated other comprehensive income increased $9,747 due to an increase in the fair value of securities available for sale, net of tax and a $768 increase in the Company’s pension liability, net of tax. The Company repurchased treasury shares for $1,628.
Net income is also affected by provisions for loan losses, service charges, gains on the sale of assets, other non-interest income, noninterest expense and income taxes. 41 Comparison of Results of Operations for the Years Ended December 31, 2022 and December 31, 2021 Net Income The Company’s net income for the year ended December 31, 2022 was $39,427, compared to $40,546 for the year ended December 31, 2021.
Comparison of Results of Operations for the Years Ended December 31, 2023 and December 31, 2022 Net Income The Company’s net income for the year ended December 31, 2023 was $42,964, compared to $39,427 for the year ended December 31, 2022. The change in net income was the result of the items discussed in the following sections.
Net gain on sale of securities decreased due to the 2021 sale of VISA Class B shares, which resulted in a gain of $1,785. Net gain on sale of loans and leases decreased primarily as a result of a decrease in volume of loans sold. During the twelve-months ended December 31, 2022, 692 loans were sold, totaling $127,795.
Which were partially offset by decreases in net gain on equity securities of $139, and net gain on sale of loans and leases of $489. 39 Net gain on sale of loans and leases decreased by $489 for 2023, primarily as a result of a decrease in volume of loans sold.
During the twelve-months ended December 31, 2021, 1,341 loans were sold, totaling $260,294. Bank owned life insurance decreased due to death benefits paid in 2021. Service charges increased due to increased account service charges and overdraft fees of $462 and $680, respectively. Lease revenue and residual income increased due to the acquisition of VFG.
During the twelve-months ended December 31, 2023, 349 loans were sold, totaling $103,036. During the twelve-months ended December 31, 2022, 692 loans were sold, totaling $131,193. Service charges increased due to increased ATM fees of $381. Lease revenue and residual income increased due to a full year of operations for CLF.
Bank owned life insurance (BOLI) increased $6,902 from December 31, 2021 to December 31, 2022. BOLI acquired from the merger with Comunibanc Corp. totaled $5,918. The remaining difference is the result of increases in the cash surrender value of the underlying insurance policies. Deferred taxes increased $15,029 from December 31, 2021 to December 31, 2022.
The remaining difference is the result of increases in the cash surrender value of the underlying insurance policies. Deferred taxes decreased $92 from December 31, 2022 to December 31, 2023. Year-end deposit balances totaled $2,985,028 in 2023 compared to $2,619,984 in 2022, an increase of $365,044, or 13.9%.
The decrease was primarily due to decreases in net gain on sale of securities of $1,776, net gain on sale of loans and leases of $4,645 and bank owned life insurance of $216, which were partially offset by increases in service charges of $1,169, lease revenue and residual income of $2,310 and other income of $812.
The increase was primarily due to increases in lease revenue of $5,285, service charges of $512, bank owned life insurance of $128 and other operating items of $2,508.
Other factors contributing to the change in assets are discussed in the following sections. Loans held for sale decreased $1,289, or 65.4%, from $1,972 at December 31, 2021 to $683 at December 31, 2022. The decrease is due to a decrease in refinances, resulting in lower volume.
Net loans and securities available for sale increased $204,798 and $2,870, respectively, cash and due from financial institutions increased $17,045 from December 31, 2022 to December 31, 2023. Other factors contributing to the change in assets are discussed in the following sections.
Total outstanding common shares at December 31, 2022 were 15,728,234, which increased from 14,954,200 common shares outstanding at December 31, 2021.
Total outstanding common shares at December 31, 2023 were 15,695,424, which decreased from 15,728,234 common shares outstanding at December 31, 2022. Common shares outstanding was impacted by the Company’s repurchase of 90,423 common shares during 2023 at an average repurchase price of $18.01.
The Company’s provision for loan losses increased $922 during 2022, as compared to 2021, primarily to support strong organic loan growth in the portfolio. Of this increase, $452,000 was provided to cover lease production from our VFG subsidiary since acquisition.
Provisions for credit losses totaled $4,435 in 2023, $1,752 in 2022 and $830 in 2021. The Company’s provision for credit losses increased $2,683 during 2023, as compared to 2022, primarily to support strong organic loan growth in the portfolio. In addition, a one-time CECL adoption adjustment of $5,964 was incurred in the first quarter of 2023.

… 44 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

18 edited+7 added−4 removed29 unchanged
Biggest changePension Benefits: Pension costs and liabilities are dependent on assumptions used in calculating such amounts. These assumptions include discount rates, benefits earned, interest costs, expected return on plan assets, mortality rates, and other factors.
Biggest changeThese assumptions include discount rates, benefits earned, interest costs, expected return on plan assets, mortality rates, and other factors. In accordance with GAAP, actual results that differ from the assumptions are accumulated and amortized over future periods and, therefore, generally affect recognized expense and the recorded obligation of future periods.
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.
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, 46 the Company seeks to have in place sources of cash to meet short-term demands.
Critical Accounting Policies Allowance for Loan Losses: The allowance for loan losses is regularly reviewed by management to determine that the amount is considered adequate to absorb probable losses in the loan portfolio. If not, an additional provision is made to increase the allowance.
Critical Accounting Policies Allowance for Credit losses: The allowance for credit losses is regularly reviewed by management to determine that the amount is considered adequate to absorb probable losses in the loan portfolio. If not, an additional provision is made to increase the allowance.
Although the Company had derivative financial instruments as of December 31, 2022 and 2021, the changes in fair value of the assets and liabilities of the underlying contracts offset each other. For more information about derivative financial instruments see Note 22 to the Consolidated Financial Statements.
Although the Company had derivative financial instruments as of December 31, 2023 and 2022, the changes in fair value of the assets and liabilities of the underlying contracts offset each other. For more information about derivative financial instruments see Note 22 to the Consolidated Financial Statements.
The estimated fair value of the Reporting Unit was then compared to the current carrying value to determine if impairment had occurred. It is our opinion that, as of the November 30, 2022 measurement date, the aggregate fair value of the Reporting Unit exceeds the carrying value of the Reporting Unit.
The estimated fair value of the Reporting Unit was then compared to the current carrying value to determine if impairment had occurred. It is our opinion that, as of the November 30, 2023 measurement date, the aggregate fair value of the Reporting Unit exceeds the carrying value of the Reporting Unit.
Derivative financial instruments are stated at fair value on the Consolidated Statement of Conditions with changes in fair value reposted in current earnings. 53
Derivative financial instruments are stated at fair value on the Consolidated Statement of Conditions with changes in fair value reposted in current earnings. 48
Note 1 and Note 5 to the Consolidated Financial Statements provide additional information regarding the Allowance for Loan Losses. 52 Goodwill: The Company accounts for business combinations using the acquisition method of accounting.
Note 1 and Note 5 to the Consolidated Financial Statements provide additional information regarding the Allowance for Credit losses. 47 Goodwill: The Company accounts for business combinations using the acquisition method of accounting.
Therefore management concluded that goodwill was not impaired and made no adjustment in 2022.
Therefore management concluded that goodwill was not impaired and made no adjustment in 2023.
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 assets, leading to a decrease in the net portfolio value.
A 200 basis points change in the rates down scenario would lead to a larger increase in the market value of liabilities than in assets, leading to a decrease in the net portfolio value.
The volume and mix shifts from the end of 2021 led to an increase in the base value, but this was partially offset due to market rate changes. 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 volume and mix shifts from the end of the year contributed to an increase in the base net portfolio value. Beyond the change in the base level of net portfolio value, projected movements in rates, up or down, would also lead to changes in market values.
The change in the rates up scenarios for both the 100 and 200 basis point movements would lead to a larger decrease in the market value of liabilities than assets. Accordingly, we see an increase in the net portfolio value.
A 200 basis point change in the rates up scenario would lead to a slightly larger decrease in the market value of assets than liabilities. Accordingly, we see a decrease in the net portfolio value.
Also, FHLB advances and wholesale borrowings may be used as important sources of liquidity for the Company. 51 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 2021, based on certain prepayment and account decay assumptions that management believes are reasonable.
The following table provides information about the Company’s financial instruments that were sensitive to changes in interest rates as of December 31, 2023 and 2022, based on certain prepayment and account decay assumptions that management believes are reasonable.
The policy statement provides guidance to examiners and bankers on sound practices for managing interest-rate risk, which will form the basis for ongoing evaluation of the adequacy of interest-rate risk management at supervised institutions.
The Federal Reserve Board, together with the OCC and FDIC, adopted a Joint Agency Policy Statement on interest-rate risk, effective June 26, 1996. The policy statement provides guidance to examiners and bankers on sound practices for managing interest-rate risk, which will form the basis for ongoing evaluation of the adequacy of interest-rate risk management at supervised institutions.
In accordance with GAAP, actual results that differ from the assumptions are accumulated and amortized over future periods and, therefore, generally affect recognized expense and the recorded obligation of future periods. While management believes that the assumptions used are appropriate, differences in actual experience or changes in assumptions may affect the Company’s pension obligations and future expense.
While management believes that the assumptions used are appropriate, differences in actual experience or changes in assumptions may affect the Company’s pension obligations and future expense.
Net Portfolio Value December 31, 2022 December 31, 2021 Change in Rates Dollar Amount Dollar Change Percent Change Dollar Amount Dollar Change Percent Change +200bp $ 571,328 $ 14,733 3 % $ 531,385 $ 44,276 9 % +100bp 566,596 10,001 2 % 521,707 34,598 7 % Base 556,595 — — 487,109 — — -100bp 548,575 (8,020 ) (1 )% 495,963 8,854 2 % -200bp 526,702 (29,893 ) (5 )% 548,326 61,217 13 % The change in net portfolio value from December 31, 2021 to December 31, 2022, can be attributed to a couple of factors.
Net Portfolio Value December 31, 2023 December 31, 2022 Change in Rates Dollar Amount Dollar Change Percent Change Dollar Amount Dollar Change Percent Change +200bp $ 603,656 $ (4,077 ) (1 )% $ 571,328 $ 14,733 3 % +100bp 608,399 666 0 % 566,596 10,001 2 % Base 607,733 — — 556,595 — — -100bp 605,047 (2,686 ) (0 )% 548,575 (8,020 ) (1 )% -200bp 591,305 (16,428 ) (3 )% 526,702 (29,893 ) (5 )% The change in net portfolio value from December 31, 2022 to December 31, 2023, can be attributed to a couple of factors.
For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. Other-Than-Temporary Impairment of Investment Securities: The Company performs a quarterly valuation to determine if a decline in the value of an investment security is other than temporary.
For tax positions not meeting the “more likely than not” test, no tax benefit is recorded.
These funds can be obtained by increasing deposits, borrowing, or selling assets.
These funds can be obtained by increasing deposits, borrowing, or selling assets. Also, FHLB advances and wholesale borrowings may be used as important sources of liquidity for the Company.
The yield curve has risen and inverted compared to the end of 2021, and both the volume and mix of assets and funding sources has changed. The volume of cash has decreased, and the mix has shifted toward loans.
The yield remains inverted, and the short end has steepened since the end of the year. Additionally, both the volume and mix of assets and funding sources has changed. The volume of loans has increased, and the asset mix remains centered on loans. The volume of certificates of deposit has increased and both non-maturing deposits and borrowed money have decreased.
Removed
The Federal Reserve Board, together with the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation, adopted a Joint Agency Policy Statement on interest-rate risk, effective June 26, 1996.
Added
Available for Sale (“AFS”) Debt Securities: For AFS securities in an unrealized loss position, management assesses 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.
Removed
The loan portfolio increased due to growth and acquisition, but the market value of loans has decreased due to market rate increases, tempering the increase due to growth. The volume non-maturing deposits has increased due to acquisition, but the market value has decreased.
Added
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.
Removed
Although the term “other than temporary” is not intended to indicate that the decline is permanent, it does indicate that the prospects for a near-term recovery of value are not necessarily favorable, or that there is lack of evidence to support fair values equal to or greater than the carrying value of the investment.
Added
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.
Removed
Once a decline in value is determined to be other than temporary, the value of the security is reduced and a corresponding charge to earnings is recognized. Management utilizes criteria such as the magnitude and duration of the decline, in addition to the reasons underlying the decline, to determine whether the loss in value is other than temporary.
Added
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.
Added
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.
Added
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.
Added
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. Pension Benefits: Pension costs and liabilities are dependent on assumptions used in calculating such amounts.

Other CIVB 10-K year-over-year comparisons