UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended -
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of |
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(I.R.S. Employer |
incorporation or organization) |
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Identification No.) |
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(Address of principal executive offices) |
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(Zip Code) |
Registrant’s telephone number, including area code: (
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. Common Shares, no par value, outstanding at May 4, 2022—
CIVISTA BANCSHARES, INC.
Index
PART I. |
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2 |
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Item 1. |
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2 |
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Consolidated Balance Sheets (Unaudited) March 31, 2022 and December 31, 2021 |
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2 |
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Consolidated Statements of Operations (Unaudited) Three-months ended March 31, 2022 and 2021 |
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3 |
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4 |
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5 |
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6 |
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Notes to Interim Consolidated Financial Statements (Unaudited) |
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7-32 |
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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33-42 |
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Item 3. |
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43-44 |
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Item 4. |
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45 |
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PART II. |
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46 |
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Item 1. |
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46 |
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Item 1A. |
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46 |
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Item 2. |
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46 |
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Item 3. |
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46 |
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Item 4. |
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46 |
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Item 5. |
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46 |
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Item 6. |
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47 |
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48 |
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Part I – Financial Information
ITEM 1. |
Financial Statements |
CIVISTA BANCSHARES, INC.
Consolidated Balance Sheets
(In thousands, except share data)
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March 31, 2022 |
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(Unaudited) |
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December 31, 2021 |
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ASSETS |
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Cash and due from financial institutions |
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$ |
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$ |
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Restricted cash |
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Cash and cash equivalents |
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Investments in time deposits |
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Securities available for sale |
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Equity securities |
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Loans held for sale |
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Loans, net of allowance of $ |
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Other securities |
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Premises and equipment, net |
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Accrued interest receivable |
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Goodwill |
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Other intangible assets, net |
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Bank owned life insurance |
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Swap assets |
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Other assets |
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Total assets |
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$ |
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$ |
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LIABILITIES |
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Deposits |
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Noninterest-bearing |
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$ |
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$ |
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Interest-bearing |
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Total deposits |
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Long-term Federal Home Loan Bank advances |
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Securities sold under agreements to repurchase |
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Subordinated debentures |
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Swap liabilities |
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Accrued expenses and other liabilities |
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Total liabilities |
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SHAREHOLDERS’ EQUITY |
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Common shares, |
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Retained earnings |
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Treasury shares, |
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( |
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( |
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Accumulated other comprehensive income (loss) |
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( |
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Total shareholders’ equity |
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Total liabilities and shareholders’ equity |
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$ |
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$ |
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See notes to interim unaudited consolidated financial statements
Page 2
CIVISTA BANCSHARES, INC.
Consolidated Statements of Operations (Unaudited)
(In thousands, except per share data)
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Three months ended |
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March 31, |
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2022 |
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2021 |
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Interest and dividend income |
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Loans, including fees |
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$ |
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$ |
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Taxable securities |
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Tax-exempt securities |
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Deposits in other banks |
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Total interest and dividend income |
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Interest expense |
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Deposits |
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Federal Home Loan Bank advances |
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Subordinated debentures |
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Securities sold under agreements to repurchase and other |
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Total interest expense |
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Net interest income |
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Provision for loan losses |
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Net interest income after provision for loan losses |
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Noninterest income |
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Service charges |
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Net loss on sale of securities |
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— |
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( |
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Net gain on equity securities |
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Net gain on sale of loans |
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ATM/Interchange fees |
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Wealth management fees |
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Bank owned life insurance |
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Tax refund processing fees |
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Swap fees |
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— |
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Other |
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Total noninterest income |
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Noninterest expense |
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Compensation expense |
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Net occupancy expense |
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Equipment expense |
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Contracted data processing |
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FDIC assessment |
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State franchise tax |
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Professional services |
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Amortization of intangible assets |
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ATM/Interchange expense |
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Marketing |
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Software maintenance expense |
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Other operating expenses |
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Total noninterest expense |
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Income before taxes |
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Income tax expense |
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Net Income |
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$ |
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$ |
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Earnings per common share, basic |
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$ |
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$ |
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Earnings per common share, diluted |
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$ |
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$ |
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Weighted average common shares, basic |
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Weighted average common shares, diluted |
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See notes to interim unaudited consolidated financial statements
Page 3
CIVISTA BANCSHARES, INC.
Consolidated Statements of Comprehensive Income (Unaudited)
(In thousands)
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Three Months Ended |
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March 31, |
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2022 |
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2021 |
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Net income |
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$ |
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$ |
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Other comprehensive income (loss): |
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Unrealized holding losses on available for sale securities |
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( |
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( |
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Tax effect |
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Reclassification of gains recognized in net income |
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— |
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Tax effect |
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— |
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— |
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Pension liability adjustment |
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Tax effect |
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( |
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( |
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Total other comprehensive loss |
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( |
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( |
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Comprehensive income (loss) |
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$ |
( |
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$ |
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See notes to interim unaudited consolidated financial statements
Page 4
CIVISTA BANCSHARES, INC.
Consolidated Statement of Changes in Shareholders’ Equity (Unaudited)
(In thousands, except share data)
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Common Shares |
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Accumulated Other |
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Total |
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Outstanding Shares |
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Amount |
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Retained Earnings |
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Treasury Shares |
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Comprehensive Income (Loss) |
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Shareholders’ Equity |
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Balance, December 31, 2021 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Net Income |
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— |
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— |
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— |
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— |
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Other comprehensive loss |
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— |
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— |
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— |
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— |
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( |
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( |
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Stock-based compensation |
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— |
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— |
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— |
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Common stock dividends ($ |
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— |
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— |
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( |
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— |
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— |
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( |
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Purchase of common stock |
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( |
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— |
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— |
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( |
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— |
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( |
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Balance, March 31, 2022 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Common Shares |
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Accumulated Other |
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Total |
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Outstanding Shares |
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Amount |
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Retained Earnings |
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Treasury Shares |
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Comprehensive Income |
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Shareholders’ Equity |
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Balance, December 31, 2020 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Net Income |
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— |
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— |
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— |
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— |
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Other comprehensive loss |
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— |
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— |
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— |
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— |
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( |
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( |
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Stock-based compensation |
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— |
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— |
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— |
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Common stock dividends ($ |
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— |
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— |
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( |
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— |
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— |
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( |
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Purchase of common stock |
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( |
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— |
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— |
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( |
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— |
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( |
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Balance, March 31, 2021 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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See notes to interim unaudited consolidated financial statements
Page 5
CIVISTA BANCSHARES, INC.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
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Three Months Ended March 31, |
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2022 |
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2021 |
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Net cash from operating activities |
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$ |
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$ |
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Cash flows used for investing activities: |
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Maturities, paydowns and calls of securities, available-for-sale |
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Purchases of securities, available-for-sale |
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( |
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( |
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Purchase of other securities |
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( |
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— |
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Net change in loans |
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( |
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Proceeds from sale of other real estate owned properties |
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— |
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Premises and equipment purchases |
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( |
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( |
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Net cash (used for) provided by investing activities |
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( |
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Cash flows from financing activities: |
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Increase in deposits |
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Increase (decrease) in securities sold under repurchase agreements |
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( |
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Purchase of treasury shares |
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( |
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( |
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Common dividends paid |
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( |
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( |
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Net cash provided by financing activities |
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Increase in cash and cash equivalents |
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Cash and cash equivalents at beginning of period |
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Cash and cash equivalents at end of period |
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$ |
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$ |
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Cash paid during the period for: |
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Interest |
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$ |
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$ |
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Supplemental cash flow information: |
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Transfer of premises to held-for-sale |
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— |
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Change in fair value of swap asset |
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Change in fair value of swap liability |
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( |
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( |
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Securities purchased not settled |
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See notes to interim unaudited consolidated financial statements
Page 6
Civista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
(1) Consolidated Financial Statements
Nature of Operations and Principles of Consolidation: Civista Bancshares, Inc. (CBI) is an Ohio corporation and a registered financial holding company. The Consolidated Financial Statements include the accounts of CBI and its wholly-owned subsidiaries: Civista Bank (Civista), First Citizens Insurance Agency, Inc. (FCIA), Water Street Properties, Inc. (Water St.) and CIVB Risk Management, Inc. (CRMI). CRMI is a wholly-owned captive insurance company which allows CBI and its subsidiaries to insure against certain risks unique to their operations. The operations of CRMI are located in Wilmington, Delaware. First Citizens Capital LLC (FCC) is wholly-owned by Civista and holds inter-company debt. The operations of FCC are located in Wilmington, Delaware. First Citizens Investments, Inc. (FCI) is wholly-owned by Civista and holds and manages its securities portfolio. The operations of FCI are located in Wilmington, Delaware. FCIA was formed to allow the Company to participate in commission revenue generated through its third-party insurance agreement. Water St. was formed to hold properties repossessed by CBI subsidiaries. The above companies together are referred to as the “Company.” Intercompany balances and transactions are eliminated in consolidation. Management considers the Company to operate primarily in one reportable segment, banking.
The Consolidated Financial Statements have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the Company’s financial position as of March 31, 2022 and its results of operations and changes in cash flows for the periods ended March 31, 2022 and 2021 have been made. The accompanying Unaudited Consolidated Financial Statements have been prepared in accordance with instructions of Form 10-Q, and therefore certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America have been omitted. The results of operations for the period ended March 31, 2022 are not necessarily indicative of the operating results for the full year. Reference is made to the accounting policies of the Company described in the notes to the audited financial statements contained in the Company’s 2021 annual report. The Company has consistently followed these policies in preparing this Form 10-Q.
Civista provides financial services through its offices in the Ohio counties of Erie, Crawford, Champaign, Franklin, Logan, Madison, Summit, Huron, Ottawa, Richland, Montgomery and Cuyahoga, in the Indiana counties of Dearborn and Ripley and in the Kentucky county of Kenton. Its primary deposit products are checking, savings, and term certificate accounts, and its primary lending products are residential mortgage, commercial, and installment loans. Substantially all loans are secured by specific items of collateral including business assets, consumer assets and commercial and residential real estate. Commercial loans are expected to be repaid from cash flow from operations of businesses. Financial instruments that potentially represent concentrations of credit risk include deposit accounts in other financial institutions that are in excess of federally insured limits.
(2) Significant 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. This evaluation includes specific loss estimates on certain individually reviewed impaired loans, the pooling of commercial credits risk graded as special mention and substandard that are not individually analyzed, and general loss estimates that are based upon the size, quality, and concentration characteristics of the various loan portfolios, adverse situations that may affect a borrower’s ability to repay, and current economic and industry conditions, among other items.
Those judgments and assumptions that are most critical to the application of this accounting policy are assessing the initial and on-going credit-worthiness of the borrower, the amount and timing of future cash flows of the borrower that are available for repayment of the loan, the sufficiency of underlying collateral, the enforceability of third-party guarantees, the frequency and subjectivity of loan reviews and risk ratings, emerging or changing trends that might not be fully captured in the historical loss experience, and charges against the allowance for actual losses that are greater than previously estimated. These judgments and assumptions are dependent upon or can be influenced by a variety of factors, including the breadth and depth of experience of lending officers, credit administration and the corporate loan review staff that periodically review the status of the loan, changing economic and industry conditions, changes in the financial condition of the borrower and changes in the value and availability of the underlying collateral and guarantees.
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Civista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q
(Amounts in thousands, except share data)
Use of Estimates: To prepare financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in financial statements and the disclosures provided, and future results could differ. The allowance for loan losses, consideration of impairment of goodwill, fair values of financial instruments, deferred taxes, swap assets/liabilities and pension obligations are particularly subject to change.
Effect of Newly Issued but Not Yet Effective Accounting Standards:
In June 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which changes the impairment model for most financial assets. This ASU is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. The underlying premise of ASU 2016-13 is that financial assets measured at amortized cost should be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The allowance for credit losses should reflect management’s current estimate of credit losses that are expected to occur over the remaining life of a financial asset. The income statement will be effected for the measurement of credit losses for newly recognized financial assets, as well as the expected increases or decreases of expected credit losses that have taken place during the period. With certain exceptions, transition to the new requirements will be through a cumulative effect adjustment to opening retained earnings as of the beginning of the first reporting period in which the guidance is adopted. ASU 2016-13 was to be effective for annual and interim periods beginning after December 15, 2019, with early adoption permitted for annual and interim periods beginning after December 15, 2018. In November 2019, however, the FASB issued ASU 2019-10, Financial Instruments ‒ Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842). This Update deferred the effective date of ASU 2016-13 for U.S. Securities and Exchange Commission (“SEC”) filers that were eligible to be smaller reporting companies as of November 15, 2019, such as the Company, to fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. Management is in the process of evaluating the impact adoption of ASU 2016-13 will have on the Company’s Consolidated Financial Statements. This process has engaged multiple areas of the Company in evaluating loss estimation methods and application of these methods to specific segments of the loan portfolio. Management has been actively monitoring FASB developments and evaluating the use of different methods allowed. Due to continuing development of our methodology, additional time is required to quantify the effect this ASU will have on the Company’s Consolidated Financial Statements. Management plans on running parallel calculations and finalizing a method or methods of adoption in time for the effective date.
In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. To simplify the subsequent measurement of goodwill, the FASB eliminated Step 2 from the goodwill impairment test. In computing the implied fair value of goodwill under Step 2, an entity had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Instead, under the amendments in this Update, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. A public business entity that is an SEC filer, such as the Company, was to adopt the amendments in this Update for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. In November 2019, however, the FASB issued ASU 2019-10, Financial Instruments ‒ Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842), which deferred the effective date for ASC 350, Intangibles – Goodwill and Other, for SEC filers that were eligible to be smaller reporting companies as of November 15, 2019, such as the Company, to fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial position or results of operations.
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Civista Bancshares, Inc.
Notes to Interim Consolidated Financial Statements (Unaudited)
Form 10-Q