Civista Bancshares, Inc. Annual Report 2022

FY2022 Annual Report · Civista Bancshares, Inc.
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THREE YEAR CONDENSED 
CONSOLIDATED FINANCIAL SUMMARY

Earnings
Net Income (000)

Per Common Share Earnings

Available To Common Shareholders

Basic and Diluted

Book Value

Dividends Paid

Balances
Assets (millions)

Deposits (millions)

Net Loans (millions)

Shareholders’ Equity (millions)

Performance Ratios
Return On Average Assets

Return On Average Equity

(cid:28)(cid:395)(cid:437)(cid:349)(cid:410)(cid:455)(cid:3)(cid:18)(cid:258)(cid:393)(cid:349)(cid:410)(cid:258)(cid:367)(cid:3)(cid:90)(cid:258)(cid:415)(cid:381)

(cid:69)(cid:286)(cid:410)(cid:3)(cid:62)(cid:381)(cid:258)(cid:374)(cid:400)(cid:3)(cid:100)(cid:381)(cid:3)(cid:24)(cid:286)(cid:393)(cid:381)(cid:400)(cid:349)(cid:410)(cid:3)(cid:90)(cid:258)(cid:415)(cid:381)

Loss Allowance To Total Loans

2022

2021

2020

$39,427

$40,546

$32,192     

$2.60

$21.92

$0.56

$3,537.8

$2,620.0

$2,518.8

$334.8

1.21%

12.47%

(cid:1013)(cid:856)(cid:1008)(cid:1010)(cid:1081)

(cid:1013)(cid:1010)(cid:856)(cid:1005)(cid:1005)(cid:1081)

1.12%

$2.63

$23.75

$0.52

$3,012.9

$2,416.7

$1,971.2

$355.2

1.34%

11.61%

(cid:1005)(cid:1005)(cid:856)(cid:1011)(cid:1013)(cid:1081)

(cid:1012)(cid:1005)(cid:856)(cid:1009)(cid:1011)(cid:1081)

1.33%

$2.00 

$22.02

$0.44

$2,762.9

$2,189.4

$2,032.5

$350.1

1.17%

9.57%

(cid:1005)(cid:1006)(cid:856)(cid:1010)(cid:1011)(cid:1081)

(cid:1013)(cid:1006)(cid:856)(cid:1012)(cid:1007)(cid:1081)

1.22%

Net Income ($ in millions)

$40,546

$39,427
$39,427
$39,427
$39,427
$39,427

$32,192

2020

2021

2022

$40,

000

$30,

000

$20,

000

$10,000

0

ed
Earnings Per Share Diluted
$2.60

ngs Per Sha
$2.63

re Dilut

$2.50

$2.00

$1.50

$1.00

$0.50

$0.00

$2.00

2020

2021

2022

s’ Equity
Average Return on Shareholders’ Equity
12.47%

urn on Share

eholder

12.00%

9.00%

6.00%

3.00%

0.00%

%
11.61%

%
9.57%9.57%

2020

2021

2022

OUR VISION: (cid:116)(cid:381)(cid:396)(cid:364)(cid:349)(cid:374)(cid:336)(cid:3)(cid:410)(cid:381)(cid:336)(cid:286)(cid:410)(cid:346)(cid:286)(cid:396)(cid:3)(cid:410)(cid:381)(cid:3)(cid:271)(cid:286)(cid:3)(cid:410)(cid:346)(cid:286)(cid:3)(cid:272)(cid:381)(cid:373)(cid:373)(cid:437)(cid:374)(cid:349)(cid:410)(cid:455)(cid:859)(cid:400)(cid:3)(cid:410)(cid:396)(cid:437)(cid:400)(cid:410)(cid:286)(cid:282)(cid:3)(cid:302)(cid:374)(cid:258)(cid:374)(cid:272)(cid:349)(cid:258)(cid:367)(cid:3)(cid:393)(cid:396)(cid:381)(cid:448)(cid:349)(cid:282)(cid:286)(cid:396)(cid:856)

MESSAGE FROM CEO & PRESIDENT DENNIS SHAFFER

Dear Shareholder,

The year 2022 was ﬁlled with many challenges. Consumers
and businesses dealt with high inﬂation, supply chain
issues, tight labor markets and political unrest. To control
inﬂation, the Federal Reserve increased interest rates
at the fastest pace in over 40 years. The world and our
country continued to deal with the lingering eﬀects of
coronavirus which has contributed to a reduced workforce
and a tighter labor market. War broke out in Ukraine
further exasperating supply chain issues already stressed
from the pandemic.

$2.0 billion

$2.4 billion

For banks and for Civista, these challenges created other
issues. The higher interest rate environment brought
a slowdown in residential mortgage volume. Higher
consumer spending and the ending of government
stimulus programs that were prevalent the last two years,
led to an outflow of deposits and forced some banks to
turn to other sources to fund their loan demand. The
ending of the government stimulus programs also meant
a loss of PPP income, which had beneﬁted many of the
banks the last several years.

Despite all this, Civista employees rose to the occasion
to record another successful year. During the year,
we completed two acquisitions, expanded in Central
Ohio, had record organic loan growth and achieved near
record proﬁts.

The bank is now approximately $3.5 billion in asset size,
an increase of 16% from the end of last year. We have
41 branches and two loan production oﬃces throughout
Ohio, southeastern Indiana and northern Kentucky.

their commitment

I want to take this opportunity to thank our employees
for
to the organization and for
their outstanding work in helping us achieve these
accomplishments.

GROWTH BY GEOGRAPHIC EXPANSION
The year began with the announcement in early January
that we had entered into a deﬁnitive agreement to
acquire Comunibanc Corp., the parent company of The

Henry County Bank headquartered in Napoleon, Ohio.
Comunibanc had total assets of $315 million, with
approximately $175 million in loans and $271 million in
low-cost deposits.

The transaction closed on July 1, 2022, and expanded
into Northwest Ohio and the Toledo
our footprint
metropolitan statistical area (MSA).

We now operate in the ﬁve largest MSAs in the state of
Ohio, which was a strategic objective of ours as we look
to continue to grow the bank.

The deal was ﬁnancially attractive, and we are estimating
10% to 11% earnings per share accretion once cost saves
are fully recognized in 2023.

In late June, we continued our expansion into Central Ohio
by opening a full-service branch near Gahanna, a suburb
on the east side of Columbus. This is our third full-service
oﬃce in the Columbus MSA, and it is near where Intel
Corporation is investing billions of dollars to construct
several new semiconductor fabrication facilities.

GROWTH BY DIVERSIFICATION
On October 1, 2022, we announced and closed on the
acquisition of Vision Financial Group (VFG), a full-service
equipment leasing and ﬁnancing company based in
Pittsburgh, PA. We were looking for other revenue sources
to help us diversify our income, and leasing, which is a
natural extension of our lending products, will help us
do that. The transaction has brought higher yielding
assets to our balance sheet and our low-cost funding
should help drive stronger growth and more competitive
pricing. We expect the deal to be immediately accretive
to our earnings.

Growth remains a priority for us if it is beneﬁcial for our
shareholders, employees, customers and communities.

As we grow, we want to do so in a proﬁtable manner, that
is accretive to our earnings, and we want ensure that our
investment is earned back in a reasonable period of time.

More growth should bring more revenue and proﬁts.
Greater proﬁts means that there is more money that we
can use to pay to our employees and more dollars that

we can reinvest in our communities. Growth also brings
more structure to our organization which will provide
our employees increased opportunities to advance
their careers.

Continued proﬁtable growth will make us more eﬃcient
and helps us leverage recent and future technology
investments and it will help oﬀset rising compliance and
regulatory costs.

FINANCIAL PERFORMANCE HIGHLIGHTS
For the year, we earned net income of $39.4 million,
or $2.60 per diluted share, compared to $40.5 million,
or $2.63 per diluted share, in 2021. This is particularly
impressive given that we reported $3.8 million in
one-time non-recurring fees related to acquisitions and
collected $12.9 million less in SBA Paycheck Protection
Program (PPP) and residential mortgage fees than we had
the previous year.

Due to our growth and the rising interest rate environment,
our asset sensitive balance sheet beneﬁtted nicely. For
the year, interest income grew by 19% to $121.3 million,
compared to $101.7 million a year ago. Our strong core
deposit base and our disciplined approach to pricing
allowed us to control our interest expense and as a result
our net interest income increased by 15.5% to $110.2
million compared to $95.4 million a year ago.

Net interest margin expanded throughout the year to
4.14% during the fourth quarter of 2022. This is a 72-basis
point increase from the previous year. Approximately
34.2% of our deposits are non-interest bearing. This
is a relative high percentage in relation to our peer
banks. We also have a lower percentage of our deposits,
approximately 12.2% in higher interest-bearing time
deposits. These two factors help us maintain a healthy
margin which drives our proﬁtability.

Despite the rising interest
rates, we had record
organic loan growth. Loans, exclusive of acquisition
loans, grew by $314.1 million or at an annualized
growth rate of 15.7%.

Although residential mortgage loans were adversely
aﬀected by higher interest rates that caused mortgage
loan volume was strong
activity to slow, commercial
the year, we
throughout our entire footprint. For
originated more than $1.4 billion in loans. I am extremely
proud of our lending eﬀorts as it is these borrowed dollars

that are invested back into our local neighborhoods that
make our communities strong. Our loan portfolio balance
at the end of the year was approximately $2.55 billion.

Credit quality and our allowance for loan losses to loans at
1.12% remains strong. Loan balances from Comunibanc
Corp and Vision Financial Group total approximately
$234.6 million and had a combined credit mark of $5.4
million at year end. Credit quality steadily improved
throughout the year and delinquencies and charge-oﬀs
remain at historically low levels. Due to our strong loan
growth, we did provide $1.8 million to our loan loss
provision.

Total deposits increased $203.3 million, or 8.4%, from
December 31, 2021 to December 31, 2022, primarily due
to the addition of deposits related to the Comunibanc
Corp. acquisition. During the second half of the year, we
saw a decline in deposit balances most likely attributed
to higher consumer spending and the end of government
stimulus programs.

Non-interest income was $29.1 million in 2022, a decrease
of $2.4 million, or 7.6% from the previous year. Due to
our acquisitions, we had increased earnings in service
charges,
interchange and lease revenue. This helped
oﬀset a $4.6 million or 57.8% decrease in gain on sale of
mortgage loans as mortgage originations and reﬁnances
slowed due to a higher interest rate environment.

CAPITAL MANAGEMENT
Other accomplishments in 2022 included the approval by
the Board of Directors of a $13.5 million share repurchase
authorization in April. This is an important part of our
capital management plan and provides us a method to
eﬃciently deploy our capital. We continue to believe
our stock is a value and during the year, we repurchased
742,015 shares for $16.8 million at a weighted average
price of $22.58 per share. Of those shares, 392,847
were repurchased under the previous share repurchase
authorization plan which was approved in August 2021
and 349,168 shares were repurchased under the current
authorization plan with a balance of approximately $6.1
million remaining.

WELCOME TO NEW DIRECTORS
In 2022, we said goodbye to three long-time directors.
Retiring from the Board were E. G. McLaughlin, Blythe A.
Friedley, and Thomas A. Depler. I want to recognize and

thank all three of these individuals for their many years of
service to our organization.

We welcomed several new directors to our boards.
Lorina W. Wise joined the Civista Bancshares, Inc. and
Civista Bank boards, while Clyde A.”Chip” Perfect and
Nathan E. Weaks were added to the Civista Bank board.
Ms. Wise is currently Chief Human Resources Oﬃcer at
Nationwide Children’s Hospital in Columbus, Ohio. Mr.
Perfect, is president and CEO of Perfect North Slopes in
Lawrenceburg, Indiana and Mr. Weaks is president of
Automatic Feed Company in Napoleon, Ohio.

ONGOING DIGITAL TRANSFORMATION
The company continues to invest in technology to make
it easier for customers to do business with us. Many of
these investments are aimed at improving the customer
experience and at automating work to increase our
scalability and capacity. Future investments will include
a new small business workﬂow system, enhancements
to our digital products, and the use of robotic process
automation.

INVESTING IN OUR TEAM
We also continue to invest in our people as they are
our greatest resource and the reason for our success.
Civista University, a new online learning management
system (LMS), was built in late 2022 for its January 2023
employee launch. The new LMS allows employees to
enhance both technical and soft skills, while supporting
ongoing compliance training. Several of our young
leaders attended and graduated from bank management
schools hosted by bank trade associations. We’ve created
a Woman in Banking Employee Resource Group that
provides a space for women to address workplace and
career-related challenges and strategies for overcoming
them as well as provides opportunities for networking,
mentorship and professional development.

Our Diversity, Equity and Inclusion (DEI) Council
completed its second year in existence with much of

its focus on education. The council’s goal is to create a
more inclusive and diverse culture and is working to build
industry partnerships and to support DEI eﬀorts in the
communities that we serve. The council now publishes
a monthly employee newsletter that shares employee
stories and diverse cultural celebrations, increasing our
societal knowledge.

One of the highlights of the year was bringing all our
employees together in October for a Day of Learning
at the Columbus Zoo. We had over 500 employees in
attendance and our agenda included topics for personal
and business development,
including innovation in
technology, diversity, equity and inclusion,
ﬁnancial
cyber security, and a question-and-answer session with
executive leadership. Due to the growth of our company
and restrictions from the coronavirus pandemic, many
of our employees were meeting each other face-to-face
for the ﬁrst time in several years, and in some cases for
the ﬁrst time ever. Employees were engaged and have
overwhelmingly asked us to repeat the event in 2023.

Civista and its employees continue to donate signiﬁcant
dollars in all the communities that we serve. In addition,
our employees donate their time serving in leadership
roles or as active volunteers for many organizations where
we live and work.

In November, over 100 employees volunteered their time
during our volunteer week to help local food pantries and
other non-proﬁt organizations. Other employee-driven
charitable fund-raising events during the year included
Casual for a Cause, where employees donate money
monthly to a local charity of choice to dress casually;
and Holiday Happenings, where employees donate items
that are auctioned oﬀ during the holiday season with all
proceeds donated to local charities. Civista employees
are also signiﬁcant contributors to the local United Way

campaign in all our markets. In the case of United Way
and our Holiday Happenings campaign, the company
provided matching contributions to the designated
charities. We, as an organization, take great pride in being
a community leader and through volunteerism hope to
make a diﬀerence in the communities that we serve.

I am pleased to report that for the 12th consecutive year,
Civista was named to the Best Employers in Ohio list,
sponsored by Best Companies Group and Crain’s Cleveland
Business Journal. We are proud to have been named and
grateful for this recognition. I am also happy to report that
during the 2022 year, we were named by Bank Director
Magazine as one of the best U.S. Banks in the country
based on ﬁnancial performance. This recognition was for
bank’s ranging in asset size from $1 billion to $5 billion and
included ﬁnancial metrics measuring proﬁtability, capital
adequacy, asset quality and total shareholder return.

In closing, I am very pleased with our 2022 results and
accomplishments. Our goal is to remain an independent
community bank and our strong ﬁnancial performance
allows us to do so. As we move forward into a new year, I
am conﬁdent that our disciplined approach to managing
Civista and our long-term focus on driving shareholder
value will continue to produce positive results.

As always, please read your proxy and vote your shares.
The annual shareholders meeting is April 18, 2023, at 10
am and will be held at BGSU Firelands College – Cedar Point
Center, One University Drive, Huron, Ohio. We are excited
that the meeting is returning to an in-person format, and
I encourage shareholders to attend. Thank you for your
interest in our company. At Civista, we value relationships
and seek to make a diﬀerence in our communities.

Warmest Regards,

Dennis G. Shaﬀer
CEO and President

Dennis G. Shaﬀer
Chief Executive Oﬃcer
and President

LEADERSHIP

Civista Bancshares
Executive Officers

Robert L. Curry, Jr.
Senior Vice President
Chief Risk Oﬃcer

Richard J. Dutton
Senior Vice President
Chief Operating Oﬃcer

Russell L. Edwards
Senior Vice President
Retail Banking

Donna M.
Waltz-Jaskolski
Senior Vice President
Customer
Experience Oﬃcer

Lance A. Morrison
Senior Vice President
General Counsel and
Corporate Secretary

Carl A. Kessler III
Senior Vice President
Chief Information Oﬃcer

Todd A. Michel
Senior Vice President
Controller

Charles A. Parcher
Senior Vice President
Chief Lending Oﬃcer

Paul J. Stark
Senior Vice President
Chief Credit Oﬃcer

Civista Bank Senior Management Team

Richard
Bast
Technology

Veronica
Doucette
Human Resources

Richard
Finneran
Regional Market
Executive,
North Central Ohio

Douglas
Greulich
Finance

Jodi
Greulich
Marketing and
Communications

Robert
Katitus
Regional Market
Executive,
Northeast Ohio

Debora
Kline
Strategic
Initiatives

Jason
Kuhnle
Wealth
Management

Brenda
Leal
Digital Banking

Michael
Milchen
Underwriting

Jeﬀrey
Rolfsen
Loan
Operations

Mark
Sams
Regional Market
Executive,
SE IN/Cincinnati

David
Shaver
Deposit
Operations

Aaron
Stephens
Regional Market
Executive,
Central Ohio

Jessica
Martin-Steuk
Private
Banking

William
Summers
President
VFG Leasing
& Finance

Jarvis
Woodson III
Mortgage
Banking

BOARD OF DIRECTORS

Front row: Nickles, Wise, Shaffer, Murray, Oliver, Weaks, Mattlin, Boerger.
Back row: Bacon, White, Wurm, Singer, Ritzmann, Miller. Not pictured: Chip Perfect.

Dennis E. Murray Jr.
Chairman of the Board,
Civista Bancshares, Inc.
and Civista Bank
Partner, Murray & Murray Co., LPA

Dennis G. Shaﬀer
CEO, President &
Vice-Chairman of the Board,
Civista Bancshares, Inc.
and Civista Bank

Julie A. Mattlin
Principal and Owner,
DKMG Consulting, LLC.

Dennis E. Murray Jr.
Chairman of the Board,
Civista Bancshares, Inc.
and Civista Bank
Partner, Murray & Murray Co., LPA

Dennis G. Shaﬀer
CEO, President &
Vice-Chairman of the Board,
Civista Bancshares, Inc. and
Civista Bank

John O. Bacon
President and CEO,
The Mack Iron Works Company

Barry W. Boerger
Self-Employed Grain Farm Operator

Julie A. Mattlin
Principal and Owner,
DKMG Consulting, LLC.

James O. Miller
Former Chairman of the Board
Civista Bancshares, Inc. and Civista Bank

Civista Bancshares, Inc.

James O. Miller
Former Chairman of the Board
Civista Bancshares, Inc.
and Civista Bank

Allen R. Nickles
Of Counsel, Payne, Nickles & Company

M. Patricia Oliver
Retired Partner, Tucker, Ellis, LLP
Founder, The Oliver Consulting Group

William F. Ritzmann
Former Chairman of the Board,
United Community Bancorp and
United Community Bank

Civista Bank

Allen R. Nickles
Of Counsel, Payne, Nickles & Company

M. Patricia Oliver
Retired Partner, Tucker, Ellis, LLP
Founder, The Oliver Consulting Group

Clyde A. “Chip” Perfect, Jr.
President and CEO, Perfect North Slopes

William F. Ritzmann
Former Chairman of the Board,
United Community Bancorp and
United Community Bank

Nathan E. Weaks
President, Automatic Feed Company

Harry Singer
President & CEO, Sandusco, Inc.
and ICM Distributing Company, Inc.

Daniel J. White
CEO, Norwalk Furniture Corp.

Harry Singer
President & CEO, Sandusco, Inc.
and ICM Distributing Company, Inc.

Daniel J. White
CEO, Norwalk Furniture Corp.

Lorina W. Wise
Chief Human Resources Oﬃcer
Nationwide Children’s Hospital

Lorina W. Wise
Chief Human Resources Oﬃcer
Nationwide Children’s Hospital

Gerald B. Wurm
President, Wurm’s Woodworking Co.
and Creative Plastics International

Directors Emeritus
Civista Bancshares, Inc
and Civista Bank

James D. Heckelman
Retired, Founder of Dan-Mar Co., Inc.

David A. Voight
Former Chairman of the Board
and Former President and CEO,
Civista Bancshares, Inc. and
Civista Bank

COMMUNITY FOCUSED

Stocking and prepping at the
Akron Canton Regional Food Bank

Loading food boxes for drive-thru
distribution at the Dayton Food Bank

Making sandwiches at the Henry County Fair

Filling boxes for Blessing
Baskets’ Food Drive, Willard

Stocking, organizing and cleaning for the Greater Cleveland Food Bank

Wrapping Christmas Shoe Boxes
for Victory Kitchen, Sandusky

Stocking shelves and cleaning
for Caring Kitchen, Urbana

Organizing clothing for One Dublin

Packing and sorting
for Dearborn County
Clearinghouse, IN

ANNUAL REPORT

CONTENTS

Three –Year Selected Consolidated Financial Data ..............................................................................................

Common Shares and Shareholder Matters.............................................................................................................

General Development of Business.........................................................................................................................

Management’s Discussion and Analysis of Financial Condition and Results of Operations................................

1

4

4

5

Quantitative and Qualitative Disclosures about Market Risk................................................................................

19

Financial Statements

Management’s Report on Internal Control over Financial Reporting ...........................................................
Report of Independent Registered Public Accounting Firm on Internal Control Over Financial
Statements ......................................................................................................................................................
Report of Independent Registered Public Accounting Firm on Financial Statements ..................................
Consolidated Balance Sheets .........................................................................................................................
Consolidated Statements of Operations.........................................................................................................
Consolidated Statements of Comprehensive Income ....................................................................................
Consolidated Statements of Changes in Shareholders’ Equity......................................................................
Consolidated Statements of Cash Flow .........................................................................................................
Notes to Consolidated Financial Statements .................................................................................................

23
24

27
30
31
32
33
34
37

This page left blank intentionally.

Three-Year Selected Consolidated Financial Data

(Amounts in thousands, except per share data)

Statements of income:

Total interest and dividend income
Total interest expense
Net interest income
Provision for loan losses

Net interest income after provision for loan losses

Net gain (loss) on sale of securities
Other noninterest income

Total noninterest income
Total noninterest expense

Income before federal income taxes
Federal income tax expense

Net income

Allocation of earnings and dividends to participating securities

Net income available to common shareholders

Per common share:

Net income available to common shareholders (basic)
Net income available to common shareholders (diluted)
Dividends declared
Book value

Average common shares outstanding:

Basic
Diluted

Year-end balances:

Loans, net
Securities
Total assets
Deposits
Borrowings
Shareholders’ equity

Average balances:
Loans, net
Securities
Total assets
Deposits
Borrowings
Shareholders’ equity

2022

Year ended December 31,
2021

2020

$

$

$

$

$

121,253
11,049
110,204
1,752
108,452
10
29,066
29,076
90,493
47,035
7,608
39,427
498
38,929

2.60
2.60
0.56
21.29

14,970,630
14,970,630

2,518,155
651,177
3,537,830
2,619,984
148,036
334,836

2,199,082
605,581
3,249,128
2,614,423
242,373
316,143

$

$

$

$

$

101,742
6,317
95,425
830
94,595
1,786
29,666
31,452
78,484
47,563
7,017
40,546
173
40,373

2.63
2.63
0.52
23.75

15,343,215
15,343,215

1,971,238
577,957
3,012,905
2,416,701
204,230
355,212

2,026,907
450,599
3,033,304
2,422,938
157,128
349,203

$

$

$

$

$

99,865
10,138
89,727
10,112
79,615
94
28,088
28,182
70,665
37,132
4,940
32,192
98
32,094

2.00
2.00
0.44
22.02

16,080,863
16,080,863

2,032,474
384,887
2,762,918
2,189,398
183,341
350,108

1,953,572
386,703
2,754,708
2,078,454
288,551
336,461

1

Three-Year Selected Ratios

Net interest margin (1)
Return on average total assets
Return on average shareholders’ equity
Dividend payout ratio
Average shareholders’ equity as a percent of

average total assets

Net loan charge-offs (recoveries) as a percent of

average total loans

Allowance for loan losses as a percent of loans at year-end
Shareholders’ equity as a percent of total year-end assets

2022

Year ended December 31,
2021

2020

3.75%
1.21
12.47
21.54

9.73

(0.01)
1.12
9.46

3.47%
1.34
11.61
19.77

11.51

(0.04)
1.33
11.79

3.70%
1.17
9.57
22.00

12.21

(0.01)
1.22
12.67

(1) Calculated on a tax-equivalent basis using an effective tax rate of 21% for 2022, 2021, 2020, 2019 and 2018.

Shareholder Return Performance

Set forth below is a line graph comparing the five-year cumulative return of the common shares of Civista Bancshares,
Inc. (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.

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.

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3

Common Shares and Shareholder Matters

The common shares of Civista Bancshares, Inc. (“CBI”) trade on The NASDAQ Capital Market under the symbol
“CIVB”. As of February 21, 2023, there were 15,722,614 common shares outstanding and held by 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).

CBI paid quarterly dividends on its common shares in the aggregate amounts of $0.56 per share and $0.52 per share
in 2022 and 2021, respectively. The Company presently anticipates continuing to pay quarterly dividends in the future
at similar levels, subject to compliance with applicable restrictions on the payment of dividends as discussed in the
“Liquidity and Capital Resources” section of the Management’s Discussion and Analysis of Financial Condition and
Results of Operations and in Note 19 to the Consolidated Financial Statements.

General Development of Business

(Amounts in thousands)

CBI was organized under the laws of the State of Ohio on February 19, 1987 and is a registered financial holding
company under the Gramm-Leach-Bliley Financial Modernization Act of 1999, as amended. CBI and its subsidiaries
are sometimes referred to together as the “Company”. The Company’s office is located at 100 East Water Street,
Sandusky, Ohio. The Company had total consolidated assets of $3,537,830 at December 31, 2022.

CIVISTA BANK (“Civista”), owned by CBI since 1987, opened for business in 1884 as The Citizens National Bank.
In 1898, Civista was reorganized under Ohio banking law and was known as The Citizens Bank and Trust Company.
In 1908, Civista surrendered its trust charter and began operation as The Citizens Banking Company. The name Civista
Bank was introduced during the first quarter of 2015 to solidify our dual Citizens/Champaign brand and distinguish
ourselves from the many other banks using the “Citizens” name in our existing and prospective markets. Civista
maintains its main office at 100 East Water Street, Sandusky, Ohio and operates branch banking offices in the
following Ohio communities: Sandusky (2), Norwalk (2), Berlin Heights, Huron, Port Clinton, Castalia, New
Washington, Shelby (2), Willard, Greenwich, Plymouth, Shiloh, Akron, Dublin, Plain City, Russells Point, Urbana
(2), West Liberty, Quincy, Dayton (3), Beachwood, Gahanna, Napoleon (3), Malinta, Holgate, Liberty Center,
Bowling Green, and in the following Indiana communities: Lawrenceburg (3), Aurora, West Harrison, Milan, Osgood
and Versailles. Civista also operates loan production offices in Westlake, Ohio and Fort Mitchell, Kentucky and a
leasing company office in Pittsburgh, Pennsylvania. Civista accounted for 99.2% of the Company’s consolidated
assets at December 31, 2022.

FIRST CITIZENS INSURANCE AGENCY INC. (“FCIA”) was formed 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 less than one percent of the Company’s consolidated assets as of December 31, 2022.

WATER STREET PROPERTIES, INC. (“WSP”) was formed as a wholly-owned subsidiary of CBI to hold properties
repossessed by CBI subsidiaries. WSP accounted for less than one percent of the Company’s consolidated assets as
of December 31, 2022.

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.

FIRST CITIZENS CAPITAL LLC (“FCC”) is wholly-owned by Civista and holds 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. ("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. (“CRMI”) is a wholly-owned captive insurance company formed in 2017 which
insures against certain risks unique to the operations of the Company and its subsidiaries and for which insurance may
not be currently available or economically feasible in today's insurance marketplace. Assets of CRMI were less than
one percent of the Company’s consolidated assets as of December 31, 2022.

4

Acquisition of Comunibanc Corp.

On July 1, 2022, CBI completed the acquisition by merger of Comunibanc Corp. in a stock and cash transaction for
aggregate consideration of approximately $46,090. Immediately following the merger, Comunibanc Corp.’s banking
subsidiary, The Henry County Bank, was merged into Civista. At the time of the merger, Comunibanc Corp. had total
assets of $315,083, including $175,500 in loans, and $271,081 in deposits. As a result of the merger, we acquired
seven offices of Comunibanc Corp. in the Ohio communities of Napoleon (3), Malinta, Holgate, Liberty Center, and
Bowling Green.

Acquisition of Vision Financial Group

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 for aggregate cash and stock consideration of approximately $46,544. 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.

Management’s Discussion and Analysis of Financial Condition and Results of Operations—As of December 31,
2022 and December 31, 2021 and for the Years Ended December 31, 2022, 2021 and 2020

(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. 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.

Forward-Looking Statements

This report may contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of
1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), relating to such matters as financial condition, anticipated operating results, cash flows, business
line results, credit quality expectations, prospects for new lines of business, economic trends (including interest rates)
and similar matters. Forward-looking statements reflect our expectations, estimates or projections concerning future
results or events. These statements are generally identified by the use of forward-looking words or phrases such as
“believe,” “belief,” “expect,” “anticipate,” “may,” “could,” “intend,” “intent,” “estimate,” “plan,” “foresee,” “likely,”
“will,” “should” or other similar words or phrases. Forward-looking statements are not guarantees of performance and
are inherently subject to known and unknown risks, uncertainties and assumptions that are difficult to predict and
could cause our actual results, performance or achievements to differ materially from those expressed in or implied
by the forward-looking statements. Factors that could cause actual results, performance or achievements to differ from
those discussed in the forward-looking statements include, but are not limited to, changes in financial markets or
national or local economic or political conditions; adverse changes in the real estate market; volatility and direction
of market interest rates; the transition away from LIBOR as a reference rate for financial contracts; impacts of the
COVID-19 pandemic, or an outbreak of another highly infectious or contagious disease; credit risks of lending
activities; operational risks; changes in the allowance for loan losses; legislation or regulatory changes or actions;
increases in FDIC insurance premiums and assessments; changes in tax laws or examinations or challenges by tax
authorities; accounting changes; inability to raise additional capital if and when needed in the future; unexpected losses
of key management; failure, interruption or breach of security of our communications and information systems or
those of our third party service providers; unforeseen litigation; increased competition in our market area; failures to
manage growth and/or effectively integrate acquisitions; fluctuations in the market price of our common shares; future
revenues of our tax refund processing program; climate change, natural disasters, acts of war or terrorism, and other
external events; and other risks identified from time-to-time in the Company’s other public documents on file with the
Securities and Exchange Commission.

5

The forward-looking statements included in this report are only made as of the date of this report, and we disclaim
any obligation to publicly update any forward-looking statement to reflect subsequent events or circumstances, except
as required by law.

The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements, and the
purpose of this section is to secure the use of the safe harbor provisions.

Financial Condition

At December 31, 2022, the Company’s total assets were $3,537,830, compared to $3,012,905 at December 31, 2021.
The increase in assets is primarily the result of the Company's acquisition by merger of Comunibanc Corp. and VFG
effective July 1, 2022 and October 3, 2022, respectively. In addition, loans and securities increased $546,917 and
$55,528, respectively, partially offset by a decrease in cash and due from financial institutions of $210,098. 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. 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. Commercial & Agriculture loans
increased $32,093, Commercial Real Estate – Owner Occupied loans increased $75,695, Commercial Real Estate -
Non-Owner Occupied loans increased $189,426, Residential Real Estate loans increased $122,721, Real Estate
Construction loans increased $86,000, Lease financing receivables increased $36,797 and Consumer and Other loans
increased $9,766. The increases in the foregoing loan segments were offset by a decrease in Farm Real Estate loans
of $3,711. In connection with the acquisition of Comunibanc Corp. in July 2022, the Company acquired Commercial
& Agriculture loans totaling $9,972, Commercial Real Estate – Owner Occupied loans totaling $30,515, Commercial
Real Estate – Non-Owner Occupied loans totaling $45,917, Residential Real Estate loans totaling $56,621, Real Estate
Construction loans totaling $10,587, Farm Real Estate loans totaling $2,925 and Consumer and Other loans totaling
$12,665.
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.

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. 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. 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. 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. 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.

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. 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.

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. Premises and equipment, net, acquired from the acquisition s of Comunibanc Corp. and VFG totaled $4,665
and $35,039, respectively.

6

Goodwill increased by $48,844, from $76,851 at December 31, 2021 to $125,695 at December 31, 2022. The increase
is due to the goodwill created from the acquisitions of Comunibanc Corp. and VFG. Other intangible assets increased
$3,973 from year-end 2021. The increase includes $4,426 of core deposit intangibles and $419 of mortgage servicing
rights from the acquisition of Comunibanc Corp.

Swap assets increased $5,507 from December 31, 2021 to December 31, 2022. The increase is primarily the result of
increases in the fair value of swap assets as compared to December 31, 2021.

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 increase is primarily the result
of an increase in deferred taxes on available for sale securities of $18,017 as a result of increases in interest rates
during 2022.

Year-end deposit balances totaled $2,619,984 in 2022 compared to $2,416,701 in 2021, an increase of $203,283, or
8.4%. 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%. 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 certificates
of deposit decreased $11,895 to total an average balance of $253,399 for 2022. The increase in year-over-year average
balances was impacted by the acquisition of an aggregate of $271,194 of deposits from the Comunibanc Corp.
acquisition.

FHLB advances increased $322,278 from December 31, 2021 to December 31, 2022. Short-term FHLB advances
increased $393,700 year over year due to an increase in overnight funding. Long-term FHLB advances decreased due
to the repayment in 2022 of an FHLB advance in the amount of $75,000. This advance had terms of one hundred
twenty months with a fixed rate of 1.03% and was puttable. The advance was not replaced. Long-term advances
acquired in the acquisition of Comunibanc Corp. totaled $21,706, of which $18,128 has been paid down.

Other borrowings increased $15,516 from December 31, 2021 to December 31, 2022. Other borrowings increased
due to the assumption of an aggregate of $58,142 of borrowings from the acquisition of VFG and payoffs of $42,626.

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. 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. The increase is primarily the result
of increases in the fair value of swap liabilities as compared to December 31, 2021.

Total shareholders’ equity decreased $20,377, or 5.7%, during 2022 to $334,835. The change in shareholders’ equity
resulted from the issuance of common shares as part of the consideration in the acquisitions of Comunibanc Corp. and
VFG, which added $21,122 and $10,500, respectively, to shareholders equity. Shareholders' equity was also positively
impacted by net income of $39,427. Additionally, $819 was recognized as stock-based compensation in 2022 in
connection with the grant of restricted common shares. 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. 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.

7

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. Common shares outstanding increased due to the issuance of 984,723
common shares to former shareholders of Comunibanc Corp. in connection with the acquisition of Comunibanc Corp.
effective July 1, 2022 and 500,293 common shares in connection with the acquisition of VFG effective October 3,
2022. Additionally, common share outstanding was impacted by the Company’s repurchase of 747,443 common
shares during 2022 at an average repurchase price of $22.59. The Company repurchased 349,168 common shares
pursuant to a stock repurchase program announced on May 4, 2022 and 392,847 common shares pursuant to a stock
repurchase program announced on August 12, 2021. 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. 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. 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. The Company’s cost of
funds is influenced by interest rates on competing investments and general market rates of interest. Lending activities
are influenced by the demand for real estate loans and other types of loans, which in turn is affected by the interest
rates at which such loans are made, general economic conditions and the availability of funds for lending activities.

The Company’s net income primarily depends on its net interest income, which is the difference between the interest
income earned on interest-earning assets, such as loans and securities, and interest expense incurred on interest-bearing
liabilities, such as deposits and borrowings. 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 loan losses, service charges, gains on the sale of assets, other non-interest income,
noninterest expense and income taxes.

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. 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. 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. 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. 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 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. 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. The yield on tax-exempt securities decreased 40
basis points to 3.56% for 2021, compared to 3.96% for 2021.

8

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 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. 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. 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. 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. The average balance of other borrowings increased $4,002 for the period ended December 31, 2022
as compared to the same period in 2021 as a result of the Company’s acquisition of VFG.

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
14 through 16 for further analysis of the impact of changes in interest-bearing assets and liabilities on the Company’s
net interest income.

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.

Net loan charge-offs (recoveries)
Provision for loan losses charged to expense
Net loan charge-offs (recoveries) as a
percent of average outstanding loans

Allowance for loan losses
Allowance for loan losses as a percent of

year-end outstanding loans

Impaired loans, excluding purchase credit

impaired loans (PCI)

Impaired loans as a percent of gross

year-end loans (1)

Nonaccrual and 90 days or more past due

loans, excluding PCI

Nonaccrual and 90 days or more past due
loans, excluding PCI as a percent of
gross year-end loans (1)

As of and for year
ended December 31,
2021

2022

$

(118) $
1,752

$

(783)
830

2020

(149)
10,112

(0.01)%

(0.04)%

(0.01)%

$

28,511

$

26,641

$

25,028

1.12%

1.33%

1.22%

624

$

1,222

$

2,666

0.02%

0.06%

0.13%

6,507

$

3,673

$

5,125

$

$

0.26%

0.18%

0.25%

(1) Nonaccrual loans and impaired loans are defined differently. Some loans may be included in both categories,
whereas other loans may only be included in one category. A loan is considered nonaccrual if it is maintained
on a cash basis because of deterioration in the borrower’s financial condition, where payment in full of principal
or interest is not expected and where the principal and interest have been in default for 90 days, unless the asset
is both well-secured and in process of collection. 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.

9

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. Management believes the analysis of the allowance for loan losses supported a reserve
of $28,511 at December 31, 2022. The Company provides for loan losses through regular provisions to the allowance
for loan 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 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. 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. 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. The Bank strengthened the reserve in 2020 due to the 2020 economic shutdown and restrictions in
response to the ongoing COVID-19 pandemic. While conditions improved in 2021 due to vaccinations and booster
shots, ongoing challenges due to supply chain and workforce shortages slowed the process improvement. Our risk
profile has steadily improved since peak levels, but we remain cautious given the impact of higher inflationary costs,
rising interest rates and other pre-recessionary conditions that impact loan customers.
Our Commercial and
Commercial Real Estate portfolios have been, and are expected to continue to be, impacted the most.

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. 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 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.

Management analyzes each impaired commercial and commercial real estate loan relationship with a balance of $350
or larger, on an individual basis and when it is in nonaccrual status or when an analysis of the borrower’s operating
results and financial condition indicates that underlying cash flows are not adequate to meet its debt service
requirements. Loans held for sale 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. 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.

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. 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.
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. 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.

10

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
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 data processing expense
was due to deconversion fees of $1,032 related to the acquisition of Comunibanc Corp. The increase in professional
services was due to acquisition related costs of $1,718, accompanied by increases in legal and audit fees and consulting
fees. The increase in amortization expense is related to the acquisition of Comunibanc Corp. 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. Other operating expenses decreased due to the prepayment expense of $3,717 paid in 2021 related to the
early payoff of an FHLB long-term advance, offset by increases in travel, lodging and meals, donations, stationery
and supplies and bad check expense.

Income Tax Expense

Income tax expense was $7,608 in 2022 compared to $7,835 in 2021. 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.

Comparison of Results of Operations for the Years Ended December 31, 2021 and December 31, 2020

Net Income

The Company’s net income for the year ended December 31, 2021 was $40,546, compared to $32,192 for the year
ended December 31, 2020. The change in net income was the result of the items discussed in the following sections.

Net Interest Income

Net interest income for 2021 was $95,425, an increase of $5,698, or 6.4%, from 2020. From 2020 to 2021, average
earning assets increased 13.2%, interest income increased $1,877, and interest expense on interest-bearing liabilities
decreased $3,821. 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 $1,877 to $101,742 for the year ended December 31, 2021, which is attributable to an
increase of $1,793 in interest and fees on loans. This change was the result of an increase in the average balance of
loans, accompanied by a slightly lower yield on the portfolio. The average balance of loans increased by $73,435, or
3.8%, to $2,026,907 for the year ended December 31, 2021, as compared to $1,953,472 for the year ended December
31, 2020. The loan yield decreased to 4.42% for 2021, from 4.49% in 2020.

Interest on taxable securities increased $114 to $5,473 for the year ended December 31, 2021, compared to $5,359 for
the same period in 2020. The average balance of taxable securities increased $49,092 to $232,813 for the year ended
December 31, 2021, as compared to $183,721 for the year ended December 31, 2020. The yield on taxable securities
decreased 62 basis points to 2.41% for 2021, compared to 3.03% for 2020. Interest on tax-exempt securities increased
$127 to $6,250 for the year ended December 31, 2021, compared to $6,123 for the same period in 2020. The average
balance of tax-exempt securities increased $14,804 to $217,786 for the year ended December 31, 2021 as compared
to $202,982 for the year ended December 31, 2020. The yield on tax-exempt securities decreased 19 basis points to
3.96% for 2021, compared to 4.15% for 2020.

11

Total interest expense decreased $3,821 or 37.7%, to $6,317 for the year ended December 31, 2021, compared with
$10,138 for the same period in 2020. The decrease in interest expense can be attributed to a decrease in the average
rate paid, partially offset by an increase in the average balance of interest-bearing liabilities. For the year ended
December 31, 2021, the average balance of interest-bearing liabilities increased $109,363 to $1,736,720, as compared
to $1,627,357 for the year ended December 31, 2020. Interest incurred on deposits decreased by $2,706 to $4,175 for
the year ended December 31, 2021, compared to $6,881 for the same period in 2020. 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 0.17% in 2020 to 0.09% in 2021 and the average rate paid on time deposits decreased from 1.76% to 1.11% in
2021, which was partially offset by an increase in the average balance of interest-bearing deposits of $241,708 for the
year ended December 31, 2021 as compared to the same period in 2020. Interest expense incurred on FHLB advances
and subordinated debentures decreased 26.4% from 2020. The decrease was due to a $32,674 decrease in average
balance from 2020 and a decrease in rate from 2020. The average balance of other borrowings decreased $101,295
for the period ended December 31, 2021 as compared to the same period in 2020 as a result of the Company’s
repayment of amounts borrowed under the Paycheck Protection Program Liquidity Facility (“PPPLF”) to fund PPP
loans.

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
14 through 16 for further analysis of the impact of changes in interest-bearing assets and liabilities on the Company’s
net interest income.

Provision and Allowance for Loan Losses

Management believes the analysis of the allowance for loan losses supported a reserve of $26,641 at December 31,
2021.

Provisions for loan losses totaled $830 and, $10,112 in 2021 and 2020, respectively. The Company’s provision for
loan losses decreased $9,282 during 2021, as compared to 2020. The decrease in the provision was due to the stability
of our credit quality metrics coupled with the stabilization and, in some cases, improvement of international, national,
regional and local economic conditions that were adversely impacted by the 2020 economic shutdown and restrictions
in response to the ongoing COVID-19 pandemic. While vaccinations and booster shots in 2021 created some level of
optimism in the business community, there remained uncertainty due to the continued concern over increased
infections from the Delta and Omicron variants of COVID, and we remained cautious given the level of classified
loans in the portfolio, particularly loans to borrowers in the hotel industry. The lingering economic impacts related to
the COVID-19 pandemic have included the loss of revenue experienced by our business clients, disruption of supply
chains, higher employee wages coupled with workforce shortages and increased costs of materials and services. While
some of the pressures eased in 2021, ongoing supply chain and staffing challenges, as well as inflationary pressures
remained. Our Commercial and Commercial Real Estate portfolios have been, and are expected to continue to be,
impacted the most.

Noninterest Income

Noninterest income increased $3,270, or 11.6%, to $31,452 for the year ended December 31, 2021, from $28,182 for
the comparable 2020 period. The increase was primarily due to increases in service charges of $617, net gain on sale
of securities of $1,692, net gain (loss) on equity securities of $243, ATM/Interchange fees of $971, wealth
management fees of $876, BOLI income of $223 and other noninterest income of $498, which were partially offset
by decreases in net gain on sale of loans of $521 and swap fees of $1,252.

12

Service charges increased due to increased account service charges and overdraft fees of $510 and $107, respectively.
Net gain on sale of securities increased due to the sale of Visa Class B shares, which resulted in a gain of $1,785.
Management, from time to time, will reposition the investment portfolio to match liquidity needs of the Company.
Net gain (loss) on equity securities increased as a result of market value increases. Net gain on sale of loans decreased
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. During the twelve-months ended December 31, 2020, 1,575 loans were
sold, totaling $304,026. ATM/Interchange fees increased as a result of increased transaction fees and MasterCard
fees. Wealth management fees increased primarily as a result of an increase in trust and brokerage fees of $633 and
$243, respectively. Trust income increased as a result of new accounts and market conditions while brokerage income
increased due to volume of business. BOLI income increased due to death benefits paid. Swap fees decreased due to
the volume of swaps performed during the twelve-months ended December 31, 2021 as compared to the same period
of 2020. Other noninterest income increased due to increases in wire transfer fees, the amortization of mortgage
servicing rights, merchant credit card fees and gains on the sale of OREO properties.

Noninterest Expense

Noninterest expense increased $7,819, or 11.1%, to $78,484 for the year ended December 31, 2021, from $70,665 for
the comparable 2020 period. The increase was primarily due to increases in compensation expense of $2,210, FDIC
assessments of $328, state franchise tax of $271, ATM/Interchange expense of $446, software maintenance expense
of $922 and other operating expense of $3,905.

The increase in compensation expense was due to increased payroll, payroll taxes, employee insurance and employer
savings contributions, offset by a decrease in commission and incentive based costs. The year-to-date average full
time equivalent (FTE) employees were 451.8 at December 31, 2021, a decrease of 1.6 FTEs over 2020. Payroll and
payroll related expenses increased due to annual pay increases. The year-over-year increase in FDIC assessments was
attributable to small bank assessment credits applied to the 2020 assessment charges. The state franchise tax increase
is related to $172 of additional taxes paid on the Company’s 2019 franchise tax return as a result of findings from a
State of Ohio audit. The increase in ATM/Interchange expense is primarily due to increased transaction fees and a
settlement received in the second quarter of 2020. The increase in software maintenance expense is due to a general
increase in legacy software maintenance contracts and the implementation of our new digital banking. The increase
in other operating expense is primarily due to the prepayment expense of $3,717 related to the early payoff of an
FHLB long-term advance.

Income Tax Expense

Income tax expense was $7,017 in 2021 compared to $4,940 in 2020. Income tax expense as a percentage of pre-tax
income was 14.8% in 2021 compared to 13.3% in 2020. A lower federal effective tax rate than the statutory rate of
21% in 2021 and 2020 is primarily due to tax-exempt interest income from state and municipal investments, municipal
loans, income from BOLI and low income housing credits.

13

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):

Assets
Interest-earning assets:
Loans (1)(2)(3)(5)
Taxable securities (4)
Non-taxable

securities (4)(5)

Interest-bearing

deposits in other
banks
Total interest

earning assets

Noninterest-earning assets:
Cash and due from

financial institutions

Premises and

equipment, net
Accrued interest
receivable

Intangible assets
Other assets
Bank owned life

insurance

Average
balance

2022

Interest

Yield/
rate

Average
balance

2021

Interest

Yield/
rate

Average
balance

2020

Interest

Yield/
rate

$2,199,082
341,600

$103,151
9,123

4.69% $2,026,907
232,813
2.49%

$ 89,570
5,473

4.42% $1,953,472
183,721
2.41%

$87,777
5,359

263,981

7,859

3.56%

217,786

6,250

3.96%

202,982

6,123

4.49%
3.03%

4.15%

146,849

1,120

0.76%

347,573

449

0.13%

155,960

606

0.39%

2,951,512

121,253

4.12% 2,825,079

101,742

3.69% 2,496,135

99,865

4.10%

84,777

34,577

8,650
96,492
50,765

50,076

35,404

22,617

8,010
84,747
37,378

46,435

77,848

22,831

9,043
84,953
37,675

45,454

Less allowance for loan

losses
Total

(27,721)
$3,249,128

(26,366)
$3,033,304

(19,231)
$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.

(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. The average yield has been computed using

the historical amortized cost average balance for available for sale securities.

(5) Yield/Rate is calculated using the tax-equivalent adjustment of 21% for 2022, 2021 and 2020.

14

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):

Liabilities and
Shareholders’ Equity
Interest-bearing liabilities:

Savings and

interest-bearing
demand accounts
Certificates of deposit
Short-term Federal Home
Loan Bank
advances

Long-term Federal Home
Loan Bank
advances

Other borrowings
Securities sold under

repurchase agreements
Federal funds purchased
Subordinated debentures
Total interest-bearing

liabilities

Noninterest-bearing

liabilities:
Demand deposits
Other liabilities

Shareholders’ equity

Total

Net interest income and
interest rate spread (1)

Net interest margin (2)

Average
balance

2022

Interest

Yield/
rate

Average
balance

2021

Interest

Yield/
rate

Average
balance

2020

Interest

Yield/
rate

$1,423,134
253,399

$

1,442
2,398

0.01% $1,315,220
265,294
0.95%

$ 1,219
2,956

0.09% $1,050,544
288,262
1.11%

$ 1,813
5,068

0.17%
1.76%

66,875

2,566

3.84%

—

—

—

8,151

134

1.64%

45,325
4,002

22,293
137
103,741

510
335

11
6
3,781

1.13%
8.37%

0.05%
4.38%
3.64%

94,041
—

26,165
137
36,785

1,163
—

23
1
955

1.24%
—

0.09%
0.73%
2.66%

125,000
101,295

1,798
354

24,390
288
29,427

25
1
945

1.44%
0.35%

0.10%
0.35%
3.21%

1,918,906

11,049

0.58% 1,737,642

6,317

0.36% 1,627,357

10,138

0.62%

937,890
76,189
1,014,079
316,143
$3,249,128

907,591
38,868
946,459
349,203
$3,033,304

739,648
51,242
790,890
336,461
$2,754,708

$110,204

3.54%
3.75%

$95,425

3.33%
3.47%

$89,727

3.48%
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.

(2) Net interest margin is calculated by dividing tax-equivalent adjusted net interest income by average interest-

earning assets.

15

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):

2022 compared to 2021
Interest income:
Loans
Taxable securities
Nontaxable securities
Interest-bearing deposits in other banks
Total interest income
Interest expense:
Savings and interest-bearing demand accounts
Certificates of deposit
Short-term Federal Home Loan Bank advances
Long-term Federal Home Loan Bank advances
Securities sold under repurchase agreements
Federal funds purchased
Other borrowings
Subordinated debentures
Total interest expense
Net interest income
2021 compared to 2020
Interest income:
Loans
Taxable securities
Nontaxable securities
Interest-bearing deposits in other banks
Total interest income
Interest expense:
Savings and interest-bearing demand accounts
Certificates of deposit
Short-term Federal Home Loan Bank advances
Long-term Federal Home Loan Bank advances
Securities sold under repurchase agreements
Federal funds purchased
Other borrowings
Subordinated debentures
Total interest expense
Net interest income

Increase (decrease) due to:
Rate (1)

Volume (1)

Net

$

$

$

$
$

$

$

$

$
$

7,880 $
3,438
2,275
(393)
13,200 $

104 $
(128)
2,566
(556)
(3)
—
335
2,313
4,631 $
8,569 $

3,262 $
1,360
439
422
5,483 $

382 $
(377)
(134)
(405)
2
(1)
(354)
187
(700) $
6,183 $

5,701 $
212
(666)
1,064
6,311 $

119 $
(430)
—
(97)
(9)
5
—
513
101 $
6,210 $

(1,469) $
(1,246)
(312)
(579)
(3,606) $

(976) $

(1,735)
0
(230)
(4)
1
—
(177)
(3,121) $
(485) $

13,581
3,650
1,609
671
19,511

223
(558)
2,566
(653)
(12)
5
335
2,826
4,732
14,779

1,793
114
127
(157)
1,877

(594)
(2,112)
(134)
(635)
(2)
—
(354)
10
(3,821)
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.

16

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. 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 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. 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.

Future loan demand of Civista can be funded by increases in deposit accounts, proceeds from payments on existing
loans, the maturity of securities and the sale of securities classified as available for sale. Additional sources of funds
may also come from borrowing in the Federal Funds market and/or borrowing from the FHLB. 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.
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. 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. The ALCO discusses issues like those in the above paragraphs as well as others that may affect the future
liquidity and capital position of the Company. The ALCO also examines interest rate risk and the effect that changes
in rates will have on the Company. For more information about interest rate risk, please refer to the “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. 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 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. In addition to the other required capital ratios, the BASEL III rules also require the
Company to maintain minimum amounts and ratios of Common Equity Tier 1 (“CET1”) capital to risk-weighted
assets (as these terms are defined in the BASEL III rules). Under the BASEL III rules, the Company elected to opt-
out of including accumulated other comprehensive income in regulatory capital. 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:

17

Company Ratios—December 31, 2022
Company Ratios—December 31, 2021
For Capital Adequacy Purposes
To Be Well Capitalized Under Prompt Corrective

Total Risk
Based
Capital

Tier I Risk
Based
Capital

CET1 Risk
Based
Capital

Leverage
Ratio

14.5%
19.2%
8.0%

10.8%
14.3%
6.0%

9.7%
12.9%
4.5%

8.9%
10.2%
4.0%

Action Provisions

10.0%

8.0%

6.5%

5.0%

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.

Tier 1 capital includes common equity as defined for the CET1 risk-based capital ratio, plus certain non-cumulative
preferred stock and related surplus, cumulative preferred stock and related surplus and trust preferred securities that
have been grandfathered (but which are not permitted going forward), and limited amounts of minority interests in the
form of additional Tier 1 capital instruments, less certain 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 new eligibility criteria, less applicable
deductions.

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.

Under applicable regulatory guidelines, capital is compared to the relative risk related to the balance sheet. To derive
the risk included in the balance sheet, one of several risk weights is applied to different balance sheet and off-balance
sheet assets, primarily based on the relative credit risk of the counterparty. The capital amounts and classification are
also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

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 capital conservation buffer began to phase in starting on
January 1, 2016, at 0.625%, and was fully phased in effective January 1, 2019, at 2.5%. The implementation of Basel
III did not have a material impact on CBI’s or Civista’s capital ratios.

Effects of Inflation

The Company’s balance sheet is typical of financial institutions and reflects a net positive monetary position whereby
monetary assets exceed monetary liabilities. Monetary assets and liabilities are those which can be converted to a fixed
number of dollars and include cash assets, securities, loans, money market instruments, deposits and borrowed funds.

During periods of inflation, a net positive monetary position may result in an overall decline in purchasing power of
an entity. However, no clear evidence exists of a relationship between the purchasing power of an entity’s net positive
monetary position and its future earnings. Moreover, the Company’s ability to preserve the purchasing power of its
net positive monetary position will be partly influenced by the effectiveness of its asset/liability management program.
As part of the asset/liability management process, management reviews and monitors information and projections on
inflation as published by the Federal Reserve Board and other sources. This information speaks to inflation as
determined by its impact on consumer prices and also the correlation of inflation and interest rates. This information
is but one component in an asset/liability management process designed to limit the impact of inflation on the
Company. Management does not believe that the effect of inflation on its nonmonetary assets (primarily bank premises
and equipment) is material as such assets are not held for resale and significant disposals are not anticipated.

18

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. 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.

Quantitative and Qualitative Disclosures about Market Risk

The Company’s primary market risk exposure is interest-rate risk and, to a lesser extent, liquidity risk. All of the
Company’s transactions are denominated in U.S. dollars with no specific foreign exchange exposure.

Interest-rate risk is the exposure of a banking organization’s financial condition to adverse movements in interest rates.
Accepting this risk can be an important source of profitability and shareholder value. However, excessive levels of
interest-rate risk can pose a significant threat to the Company’s earnings and capital base. Accordingly, effective risk
management that maintains interest-rate risk at prudent levels is essential to the Company’s safety and soundness.

Evaluating a financial institution’s exposure to changes in interest rates includes assessing both the adequacy of the
management process used to control interest-rate risk and the organization’s quantitative level of exposure. When
assessing the interest-rate risk management process, the Company seeks to ensure that appropriate policies,
procedures, management information systems and internal controls are in place to maintain interest-rate risk at prudent
levels with consistency and continuity. Evaluating the quantitative level of interest rate risk exposure requires the
Company to assess the existing and potential future effects of changes in interest rates on its consolidated financial
condition, including capital adequacy, earnings, liquidity and, where appropriate, asset quality.

The Federal Reserve Board, together with the Office of the Comptroller of the Currency and the Federal Deposit
Insurance Corporation, 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.
The policy statement also outlines fundamental elements of sound management that have been identified in prior
Federal Reserve guidance and discusses the importance of these elements in the context of managing interest-rate risk.
Specifically, the guidance emphasizes the need for active board of director and senior management oversight and a
comprehensive risk-management process that effectively identifies, measures, and controls interest-rate risk. Financial
institutions derive their income primarily from the excess of interest collected over interest paid. The rates of interest
an institution earns on its assets and owes on its liabilities generally are established contractually for a period of time.
Since market interest rates change over time, an institution is exposed to lower profit margins (or losses) if it cannot
adapt to interest-rate changes. For example, assume that an institution’s assets carry intermediate- or long-term fixed
rates and that those assets were funded with short-term liabilities. If market interest rates rise by the time the short-
term liabilities must be refinanced, the increase in the institution’s interest expense on its liabilities may not be
sufficiently offset if assets continue to earn at the long-term fixed rates. Accordingly, an institution’s profits could
decrease on existing assets because the institution will have either lower net interest income or, possibly, net interest
expense. Similar risks exist when assets are subject to contractual interest-rate ceilings, or rate sensitive assets are
funded by longer-term, fixed-rate liabilities in a decreasing-rate environment.

Several techniques may be used by an institution to minimize interest-rate risk. One approach used by the Company
is to periodically analyze its assets and liabilities and make future financing and investment decisions based on
payment streams, interest rates, contractual maturities, and estimated sensitivity to actual or potential changes in
market interest rates. Such activities fall under the broad definition of asset/liability management. The Company’s
primary asset/liability management technique is the measurement of the Company’s asset/liability gap, that is, the
difference between the cash flow amounts of interest sensitive assets and liabilities that will be refinanced (or repriced)
during a given period. For example, if the asset amount to be repriced exceeds the corresponding liability amount for
a certain day, month, year, or longer period, the institution is in an asset sensitive gap position. In this situation, net
interest income would increase if market interest rates rose or decrease if market interest rates fell.

If, alternatively, more liabilities than assets will reprice, the institution is in a liability sensitive position. Accordingly,
net interest income would decline when rates rose and increase when rates fell. Also, these examples assume that
interest rate changes for assets and liabilities are of the same magnitude, whereas actual interest rate changes generally
differ in magnitude for assets and liabilities.

19

Several ways an institution can manage interest-rate risk include selling existing assets or repaying certain liabilities
and matching repricing periods for new assets and liabilities, for example, by shortening terms of new loans or
securities. Financial institutions are also subject to prepayment risk in falling rate environments. For example,
mortgage loans and other financial assets may be prepaid by a debtor so that the debtor may refinance its obligations
at new, lower rates. The Company does not have significant derivative financial instruments and does not intend to
purchase a significant amount of such instruments in the near future. Prepayments of assets carrying higher rates
reduce the Company’s interest income and overall asset yields. A large portion of an institution’s liabilities may be
short term or due on demand, while most of its assets may be invested in long term loans or securities. Accordingly,
the Company seeks to have in place sources of cash to meet short-term demands. These funds can be obtained by
increasing deposits, borrowing, or selling assets. Also, FHLB advances and wholesale borrowings may be used as
important sources of liquidity for the Company.

The following table provides information about the Company’s financial instruments that were sensitive to changes
in interest rates as of December 31, 2022 and 2021, based on certain prepayment and account decay assumptions that
management believes are reasonable. 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.
Expected maturity date values for interest-bearing core deposits were calculated based on estimates of the period over
which the deposits would be outstanding. The Company’s borrowings were tabulated by contractual maturity dates
and without regard to any conversion or repricing dates.

Change in
Rates
+200bp
+100bp
Base
-100bp
-200bp

Net Portfolio Value

Dollar
Amount

December 31, 2022
Dollar
Change

Percent
Change

Dollar
Amount

December 31, 2021
Dollar
Change

Percent
Change

$ 571,328 $ 14,733
10,001
—
(8,020)
(29,893)

566,596
556,595
548,575
526,702

3% $ 531,385 $ 44,276
34,598
2%
521,707
—
487,109
—
(1)% 495,963
8,854
61,217
(5)% 548,326

9%
7%
—
2%
13%

The change in net portfolio value from December 31, 2021 to December 31, 2022, can be attributed to a couple of
factors. 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 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. 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 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. 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.

20

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. 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.

Note 1 and Note 5 to the Consolidated Financial Statements provide additional information regarding the Allowance
for Loan Losses.

Goodwill: The Company accounts for business combinations using the acquisition method of accounting.
Accordingly, the identifiable assets acquired and the liabilities assumed are recorded at their estimated fair values as
of the date of acquisition with any excess of the cost of the acquisition over the fair value recorded as goodwill. The
Company performs an evaluation of goodwill for impairment on an annual basis, or more frequently if events or
changes in circumstances indicate that the asset might be impaired. The evaluation for impairment involves comparing
the current estimated fair value of the Company to its carrying value. If the current estimated fair value exceeds the
carrying value, no additional testing is required and an impairment loss is not recorded. If the estimated fair value is
less than the carrying value, further valuation procedures are performed that could result in impairment of goodwill
being recorded. Management estimated the fair value of the Reporting Unit as of the measurement date utilizing four
valuation approaches: the comparable transactions approach, the control premium approach, the public market peers
control premium approach and the discounted cash flow approach. These approaches were all considered in reaching
a conclusion on fair value. 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. Therefore management
concluded that goodwill was not impaired and made no adjustment in 2022.

Income Taxes: Management’s determination of the realization of net deferred tax assets is based upon management’s
judgment of various future events and uncertainties, including the timing and amount of future income, as well as the
implementation of various tax planning strategies to maximize realization of the deferred tax assets. A valuation
allowance is provided when it is more likely than not that some portion of the deferred tax asset will not be realized.

Management analyzes material tax positions taken in any income tax return for any tax jurisdiction and determines
the likelihood of the positions being sustained in a tax examination. A tax position is recognized as a benefit only if
it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being
presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being
realized on examination. 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. 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. 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.

21

Pension Benefits: Pension costs and liabilities are dependent on assumptions used in calculating such amounts. These
assumptions include discount rates, benefits earned, interest costs, expected return on plan assets, mortality rates, and
other factors. In accordance with GAAP, actual results that differ from the assumptions are accumulated and amortized
over future periods and, therefore, generally affect recognized expense 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. Our pension benefits are described
further in Note 15 of the “Notes to Consolidated Financial Statements.”

Derivative Financial Instruments: In the ordinary course of business, the Company enters into derivative financial
instruments in connection with its asset/liability management activities and to accommodate the needs of its customers.
Derivative financial instruments are stated at fair value on the Consolidated Statement of Conditions with changes in
fair value reposted in current earnings.

22

Management’s Report on Internal Control over Financial Reporting

We, as management of Civista Bancshares, Inc., are responsible for establishing and maintaining effective internal
control over financial reporting that is designed to produce reliable financial statements in conformity with United
States generally accepted accounting principles. The system of internal control over financial reporting as it relates to
the financial statements is evaluated for effectiveness by management and tested for reliability through a program of
internal audits. Actions are taken to correct potential deficiencies as they are identified. Any system of internal control,
no matter how well designed, has inherent limitations, including the possibility that a control can be circumvented or
overridden and misstatements due to error or fraud may occur and not be detected. Also, because of changes in
conditions, internal control effectiveness may vary over time. Accordingly, even an effective system of internal control
will provide only reasonable assurance with respect to financial statement preparation.

As permitted by guidance provided by the Staff of U.S. Securities and Exchange Commission, the scope of
management’s assessment of internal control over financial reporting as of December 31, 2022, has excluded
Comunibanc Corp. (“Comunibanc”) acquired on July 1, 2022 and Vision Financial Group (“VFG”), acquired on
October 3, 2022. Comunibanc represented 2.68% and 6.41% of consolidated revenue (total interest income and total
noninterest income and consolidated assets, respectively, as of December 31, 2022. VFG represented 3.90% and
)
3.76% of consolidated revenue (total
income and consolidated assets,
respectively, as of December 31, 2022.

income and total noninterest

interest

)

Management assessed the Company’s system of internal control over financial reporting as of December 31, 2022, in
relation to criteria for effective internal control over financial reporting as described in “2013 Internal Control –
Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based
on this assessment, management concludes that, as of December 31, 2022, its system of internal control over financial
reporting is effective and meets the criteria of the “2013 Internal Control – Integrated Framework”. FORVIS, LLP,
independent registered public accounting firm, has issued an audit report on the effectiveness of the Company’s
internal control over financial reporting as of December 31, 2022.

Management is responsible for compliance with the federal and state laws and regulations concerning dividend
restrictions and federal laws and regulations concerning loans to insiders designated by the FDIC as safety and
soundness laws and regulations. Management has assessed compliance by the Company with the designated laws and
regulations relating to safety and soundness. Based on the assessment, management believes that the Company
complied, in all significant respects, with the designated laws and regulations related to safety and soundness for the
year ended December 31, 2022.

Dennis G. Shaffer
President and Chief Executive Officer

Todd A. Michel
Senior Vice President, Controller

Sandusky, Ohio
March 15, 2023

23

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders, Board of Directors and Audit Committee
Civista Bancshares, Inc.
Sandusky, Ohio

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Civista Bancshares, Inc. (the “Company”) as of
December 31, 2022 and 2021, the related consolidated statements of operations, shareholders’ equity, and cash flows9
for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion,
the consolidated financial statements referred to above present fairly, in all material respects, the financial position of
the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for the years then
ended, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2022, based on
criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated March 15, 2023, expressed an unqualified opinion
thereon.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities
and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements,
whether due to error or fraud, and performing procedures that respond to those risks. Such procedures include
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits
also included evaluating the accounting principles used and significant estimates made by management, as well as
evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis
for our opinion.

Critical Audit Matters12F

The critical audit matters communicated below are matters arising from the current-period audit of the financial
statements that were communicated or required to be communicated to the audit committee and that: (1) relate to
accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,
subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion
on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below,
providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Allowance for Loan Losses

As described in Notes 1 and 5 to the consolidated financial statements, the Company’s consolidated allowance for
loan losses (ALL) was $28.5 million at December 31, 2022. The Company describes in Note 1 of the consolidated
financial statements the “Allowance for Loan Losses” accounting policy around this estimate. The ALL is an estimate
of losses inherent in the loan portfolio. The determination of the reserve requires significant judgment reflecting the
Company’s best estimate of probable loan losses.

The allowance for loan losses is established through a provision for loan losses charged to expense. Loans are charged
against the allowance for loan losses when management believes that the collectability of the principal is unlikely.
Subsequent recoveries, if any, are credited to the allowance.

24

Current methodology used by management to estimate the allowance for loan losses takes into consideration such
factors as changes in the nature and volume of the loan portfolio, overall portfolio quality, review of specific problem
loans, historic categorical trends, current delinquency levels as related to historical levels, portfolio growth rates,
changes in composition of the portfolio, the current economic environment, as well as current allowance adequacy in
relation to the portfolio. The Company considers all of these factors prior to making any adjustments to the allowance
due to the subjectivity involved in allocation methodology. This evaluation is inherently subjective as it requires
estimates that are susceptible to significant revision as more information becomes available.

The primary reason for our determination that the allowance for loan losses is a critical audit matter is that auditing
the estimated allowance for loan losses involved significant judgment and complex review. There is a high degree of
subjectivity in evaluating management’s estimate, such as evaluating management’s assessment of economic
conditions and other environmental factors on the loan portfolio, evaluating the adequacy of specific allowances
associated with impaired loans and assessing the appropriateness of loan grades.

Our audit procedures related to the estimated allowance for loan losses included:

•

•

•

•

•

•

•

•

Evaluated and tested the design and operating effectiveness of related controls over the reliability and
accuracy of data used to calculate and tested management’s estimate of various components of the ALL
including:











Classification of loans by segment

Historical loss data and loss rates

Establishment of qualitative adjustments

Grading and risk classification

Establishment of specific reserves on impaired loans\

Testing the clerical and computational accuracy of the formulas and information utilized within the ALL
model

Evaluating the qualitative and environmental adjustment to the historical loss rates, including assessing
the basis for the adjustments and the reasonableness of the significant assumptions

Evaluating the relevance and reliability of data and assumptions

Testing of the loan review function and the accuracy of how loan grades are determined. Specifically,
evaluating the appropriateness of loan grades and to assess the reasonableness of specific impairments on
loans

Evaluating the overall reasonableness of qualitative factors and the appropriateness of their direction and
magnitude and the Company’s support for the direction and magnitude compared to previous years

Evaluating credit quality indicators such as trends in delinquencies, nonaccruals, and charge-offs.

Evaluating the adequacy of disclosures in the consolidated financial statements.

Mergers and Acquisitions

As described in Note 2 to the consolidated financial statements, the Company consummated the acquisitions of two
companies during the year ended December 31, 2022. As part of the acquisitions consummated during the year,
management determined that each acquisition qualified as a business and accordingly all identifiable assets and
liabilities acquired were measured at fair value as of acquisition date. The identification and valuation of such acquired
assets and assumed liabilities requires management to exercise significant judgment to estimate the fair value
allocations.

We identified the consummated acquisitions and the valuation of acquired assets and assumed liabilities as a critical
audit matter. Auditing the acquired balance sheets and acquisition related considerations involved a high degree of
subjectivity in evaluating management's estimate of fair value, purchase price allocations and assessing the
appropriateness of assumptions and methodologies utilized in determining fair value.

25

The primary procedures we performed to address this critical audit matter included:

•

•

•

•

•

•

Obtaining and reviewing executed Plan and Agreement of Merger documents to gain an understanding of
the underlying terms of the consummated acquisitions

Testing the design effectiveness of management’s acquisition controls to gain an understanding of cut-off
procedures performed and identification of acquired assets and liabilities

Testing management’s purchase accounting documentation focusing on the completeness and accuracy
of the assets and liabilities assumed and related fair value purchase price allocations made to identified
assets and liabilities

Challenging management’s analysis of the appropriateness of the fair valuation estimates allocated to
assets acquired and liabilities assumed; including but not limited to, testing all critical inputs, assumptions
applied, and valuation models utilized

Utilization of firm valuation specialists to assist with testing the related fair value purchase price
allocations made to identified assets acquired and liabilities assumed

Reviewing and evaluating the adequacy of disclosures related to the acquisitions

We have served as the Company’s auditor since 2021.

FORVIS, LLP (Formerly, BKD, LLP)
Cincinnati, Ohio
March 15, 2023

26

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders, Board of Directors and Audit Committee
Civista Bancshares, Inc.
Sandusky, Ohio

Opinion on the Internal Control over Financial Reporting

We have audited Civista Bancshares, Inc.’s (the “Company”) internal control over financial reporting as of December
31, 2022, based on criteria established in Internal Control – Integrated Framework: (2013) issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all
material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria
established in Internal Control – Integrated Framework: (2013) issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (“PCAOB”), the consolidated financial statements of the Company as of December 31, 2022 and 2021, and
for the years then ended, and our report dated March 15, 2023, expressed an unqualified opinion on those financial
statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for
its assessment of the effectiveness of internal control over financial reporting, included in the accompanying
Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on
the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities
and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures
as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

As described in Management’s Report on Internal Control Over Financial Reporting, the scope of management’s
assessment of internal control over financial reporting as of December 31, 2022, has excluded Comunibanc Corp. and
Vision Financial Group, Inc. acquired on July 1, 2022 and October 3, 2022, respectively. We have also excluded
Comunibanc Corp. and Vision Financial Group, Inc. from the scope of our audit of internal control over financial
reporting. Comunibanc Corp. and Vision Financial Group, Inc. represented
percent of consolidated revenues for
the year ended December 31, 2022 and 1 percent of consolidated total assets as of December 31, 2022.F

7

0

27

Definitions and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of reliable financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that
could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may
deteriorate.

FORVIS, LLP (Formerly, BKD, LLP)
Cincinnati, Ohio
March 15, 2023

28

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of Civista Bancshares, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated statements of operations, comprehensive income, changes in
shareholders’ equity, and cash flows of Civista Bancshares, Inc. and subsidiaries (the “Company”) for the year ended
December 31, 2020, and the related notes (collectively, the financial statements). In our opinion, the financial
statements present fairly, in all material respects, the consolidated results of operations and cash flows of the Company
for the year ended December 31, 2020, in conformity with accounting principles generally accepted in the United
States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’smanagement. Our responsibility is to express an
opinion on the Company’sfinancial statements based on our audit. We are a public accounting firm registered with
the PCAOB and are required to be independent, with respect to the Company, in accordance with U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

Weconducted our auditin accordance with the standardsof the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements,
whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosuresin the financial statements. Our audit also
included evaluating the accounting principles used and significant estimates made by management, as well as
evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis
for our opinion.

We served as the Company’s auditor from 2009 to 2020.

S.R. Snodgrass, P.C.
Cranberry Township, Pennsylvania
March 15, 2023

29

CIVISTA BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS
December 31, 2022 and 2021
(Amounts in thousands, except share data)

ASSETS
Cash and due from financial institutions
Restricted cash

Cash and cash equivalents
Investments in time deposits
Securities available for sale
Equity securities
Loans held for sale
Loans, net of allowance of $28,511 and $26,641
Other securities
Premises and equipment, net
Accrued interest receivable
Goodwill
Other intangible assets
Bank owned life insurance
Swap assets
Deferred taxes
Other assets

Total assets

LIABILITIES
Deposits

Noninterest-bearing
Interest-bearing
Total deposits

Short-term Federal Home Loan Bank advances
Long-term Federal Home Loan Bank advances
Securities sold under agreements to repurchase
Subordinated debentures
Other borrowings
Swap liabilities
Accrued expenses and other liabilities

Total liabilities

SHAREHOLDERS’ EQUITY
Common stock, no par value, 40,000,000 shares authorized, 19,231,061
shares issued at December 31, 2022 and 17,709,584 shares issued at
December 31, 2021
Accumulated earnings
Treasury stock, 3,502,827 common shares at December 31, 2022 and

2,755,384 common shares at December 31, 2021, at cost

Accumulated other comprehensive income (loss)

Total shareholders’ equity

Total liabilities and shareholders’ equity

2022

2021

$

$

$

$

$

$

43,361
—
43,361
1,477
615,402
2,190
683
2,518,155
33,585
64,018
11,178
125,695
10,759
53,543
16,579
16,009
25,196
3,537,830

896,333
1,723,651
2,619,984
393,700
3,578
25,143
103,799
15,516
16,579
24,696
3,202,995

310,182
156,492

(73,794)
(58,045)
334,835
3,537,830

$

$

253,459
10,780
264,239
1,730
559,874
1,072
1,972
1,971,238
17,011
22,445
7,385
76,851
7,581
46,641
11,072
980
22,814
3,012,905

788,906
1,627,795
2,416,701
—
75,000
25,495
103,735
—
11,072
25,690
2,657,693

277,741
125,558

(56,907)
8,820
355,212
3,012,905

See accompanying notes to consolidated financial statements
30

CIVISTA BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended December 31, 2022, 2021 and 2020
(Amounts in thousands, except per share data)

2022

2021

2020

Interest and dividend income
Loans, including fees
Taxable securities
Tax-exempt securities
Federal funds sold and other

Total interest and dividend income

Interest expense
Deposits
Federal Home Loan Bank advances
Subordinated debentures
Securities sold under agreements to repurchase and other

Total interest expense
Net interest income
Provision for loan losses

Net interest income after provision for loan losses

Noninterest income
Service charges
Net gain on sale of securities
Net gain (loss) on equity securities
Net gain on sale of loans and leases
ATM/Interchange fees
Wealth management fees
Lease revenue & residual income
Bank owned life insurance
Tax refund processing fees
Computer center item processing fees
Swap fees
Other

Total noninterest income

Noninterest expense

Compensation expense
Net occupancy expense
Equipment expense
Contracted data processing
FDIC Assessment
State franchise tax
Professional services
Amortization of intangible assets
ATM/Interchange expense
Marketing expense
Software maintenance expenses
Other operating expenses

Total noninterest expense

Income before income taxes
Income taxes

Net income

Net income available to common shareholders
Earnings per common share, basic
Earnings per common share, diluted

$

$
$
$

103,151
9,123
7,859
1,120
121,253

3,840
3,076
3,781
352
11,049
110,204
1,752
108,452

7,074
10
118
3,397
5,499
4,902
2,310
984
2,375
72
247
2,088
29,076

51,061
4,701
5,070
2,788
797
1,975
5,388
1,296
2,248
1,513
3,433
10,223
90,493
47,035
7,608
39,427
39,427
2.60
2.60

$

$

89,570
5,473
6,250
449
101,742

4,175
1,163
955
24
6,317
95,425
830
94,595

5,905
1,786
186
8,042
5,443
4,857
—
1,200
2,375
175
207
1,276
31,452

44,690
4,213
1,838
1,725
1,056
2,184
2,715
890
2,314
1,103
2,755
12,183
77,666
48,381
7,835
40,546
40,546
2.63
2.63

$
$
$

$
$
$

87,777
5,359
6,123
606
99,865

6,881
1,932
945
380
10,138
89,727
10,112
79,615

5,288
94
(57)
8,563
4,472
3,981
—
977
2,375
252
1,459
778
28,182

42,480
4,079
2,006
1,880
728
1,913
2,795
913
1,868
1,074
1,833
9,096
70,665
37,132
4,940
32,192
32,192
2.00
2.00

See accompanying notes to consolidated financial statements
31

CIVISTA BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Years ended December 31, 2022, 2021 and 2020
(Amounts in thousands)

Net income
Other comprehensive income (loss):

2022

2021

2020

$

39,427

$

40,546

$

32,192

Unrealized holding gains (loss) on available for sale securities
Tax effect
Reclassification of gains recognized in net income
Tax effect
Pension liability adjustment
Tax effect
Reclassification of actuatial gain recognized in net income
Tax effect

Total other comprehensive income (loss)
Comprehensive income (loss)

$

(85,517)
18,079
(10)
2
736
(155)
—
—
(66,865)
(27,438) $

(8,570)
1,799
(1)
—
992
(209)
240
(50)
(5,799)
34,747

$

10,935
(2,297)
(94)
20
(1,326)
279
289
(61)
7,745
39,937

See accompanying notes to consolidated financial statements
32

CIVISTA BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
Years ended December 31, 2022, 2021 and 2020
(Amounts in thousands, except share data)

Common Shares
Shares

Amount

Accumulated Treasury

Earnings

Stock

Accumulated
Other
Comprehensive
Income (Loss)

Total
Shareholders’
Equity

Balance, December 31, 2019

16,687,542 $276,422 $

Net income
Other comprehensive income
Stock-based compensation
Common share dividends ($0.44 per share)
Repurchase of common stock

Balance, December 31, 2020

Net income
Other comprehensive loss
Stock-based compensation
Common share dividends ($0.52 per share)
Repurchase of common stock

Balance, December 31, 2021

41,245

617

(830,755)

15,898,032 $277,039 $

44,633

702

(988,465)

14,954,200 $277,741 $

Net income
Other comprehensive income
Stock-based compensation
Common share dividends ($0.56 per share)
Stock issued for acquisition of Comunibanc Corp.
Stock issued for acquisition of Vision Financial
Group, Inc.
Repurchase of common stock

36,461

819

984,723

21,122

500,293
(747,443)

10,500
—

67,974 $(21,144) $
32,192

(7,118)

(13,454)

93,048 $(34,598) $
40,546

(8,036)

(22,309)

125,558 $(56,907) $
39,427

(8,493)

(16,887)

6,874 $

7,745

14,619 $

(5,799)

8,820 $

(66,865)

Balance, December 31, 2022

15,728,234 $310,182 $

156,492 $(73,794) $

(58,045) $

330,126
32,192
7,745
617
(7,118)
(13,454)
350,108
40,546
(5,799)
702
(8,036)
(22,309)
355,212
39,427
(66,865)
819
(8,493)
21,122

10,500
(16,887)
334,835

See accompanying notes to consolidated financial statements
33

CIVISTA BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 2022, 2021 and 2020
(Amounts in thousands)

Cash flows from operating activities:

Net income
Adjustments to reconcile net income to net cash from

operating activities
Time deposits amortization
Security amortization, net
Depreciation
Amortization of core deposit intangible
Amortization of net deferred loan fees
Net gain on sale of securities
Net (gain) loss on equity securities
Provision for loan losses
Loans originated for sale
Proceeds from sale of loans
Net gain on sale of loans
Increase in cash surrender value of bank owned life insurance
Share-based compensation
Deferred taxes
Change in:

Accrued interest payable
Accrued interest receivable
Other, net

Net cash from operating activities
Cash flows used for investing activities:

Investments in time securities

Maturities
Purchases

Securities available for sale

Maturities, prepayments and calls
Sales
Purchases

Purchases of other securities
Redemption of other securities
Purchase of equity securities
Redemption of equity securities
Proceeds from bank owned life insurance
Net change in loans
Proceeds from sale of OREO properties
Acquisitions, net of cash
Premises and equipment purchases
Disposal of premises and equipment

Net cash used for investing activities

2022

2021

2020

$

39,427

$

40,546

$

32,192

8
1,607
4,456
1,296
(2,859)
(10)
(118)
1,752
(126,507)
131,193
(3,397)
(984)
819
483

302
(2,049)
(20,236)
25,183

1,312
(245)

49,276
57,332
(128,860)
(16,646)
1,625
(1,000)
—
—
(315,190)
—
(51,643)
(6,508)
183
(410,364)

8
1,376
1,976
890
(10,738)
(1,786)
(186)
830
(255,265)
268,336
(8,042)
(1,200)
702
1,319

111
2,036
(152)
40,761

980
(245)

61,927
1,810
(268,309)
—
3,526
—
—
535
71,072
122
—
(1,927)
13
(130,496)

2
1,119
2,253
913
(5,066)
(94)
57
10,112
(308,742)
312,589
(8,563)
(977)
617
(2,277)

(73)
(2,328)
920
32,654

735
(1,250)

58,246
1,455
(54,850)
(257)
—
—
247
—
(343,348)
—
—
(1,972)
12
(340,982)

See accompanying notes to consolidated financial statements
34

CIVISTA BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
Years ended December 31, 2022, 2021 and 2020
(Amounts in thousands)

Cash flows from financing activities:
Increase (decrease) in deposits
Net change in short-term FHLB advances
Repayment of long-term FHLB advances
Repayment of other borrowings
Proceeds from other borrowings
Proceeds from subordinated debentures
Increase (decrease) in securities sold under repurchase
agreements
Repurchase of common stock
Cash dividends paid

Net cash from financing activities

Increase (decrease) in cash and due from financial institutions
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Supplemental disclosures of cash flow information:

Interest paid
Income taxes paid
Transfer of loans from portfolio to other real estate owned
Securities purchased not settled

The Company purchased all of the capital stock of Comunbanc
Corp. for $46,090 on July 1, 2022. In conjunction with the
acquisition, liabilities were assumed as follows:
Fair value of assets acquired
Less: common stock issued
Less: cash paid for the capital
Liabilities assumed

The Company purchased all of the capital stock of Vision
Financial Group for $46,544 on October 1, 2022. In
conjunction with the acquisition, liabilities were assumed
as follows:
Fair value of assets acquired
Less: common stock issued
Less: cash paid for the capital
Liabilities assumed

$

$

$

$

$

$

2022

2021

2020

(67,911)
393,700
(93,128)
(42,626)
—
—

(352)
(16,887)
(8,493)
164,303
(220,878)
264,239
43,361

10,696
3,145
—
1,338

$

$

227,303
—
(50,000)
—
—
73,386

(3,419)
(22,309)
(8,036)
216,925
127,190
137,049
264,239

6,206
6,180
72
3,524

$

$

510,634
(101,500)
—
(183,695)
183,695
—

10,240
(13,454)
(7,118)
398,802
90,474
46,575
137,049

10,211
7,095
31
—

340,649
21,122
24,968
294,559

126,852
10,500
36,044
80,308

See accompanying notes to consolidated financial statements
35

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See accompanying notes to consolidated financial statements
36

CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022, 2021 and 2020
(Amounts in thousands, except share data)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of the accounting policies adopted by Civista Bancshares, Inc., which have a significant
effect on the Consolidated Financial Statements.

Nature of Operations and Principles of Consolidation: The Consolidated Financial Statements include the accounts of
Civista Bancshares, Inc. (“CBI”) and its wholly-owned direct and indirect subsidiaries: Civista Bank (“Civista”), First
Citizens Insurance Agency, Inc. (“FCIA”), Water Street Properties, Inc. (“WSP”), Vision Financial Group, Inc.
("VFG"), FC Refund Solutions, Inc. (“FCRS”), CIVB Risk Management, Inc. (“CRMI”), First Citizens Capital LLC
(“FCC”) and First Citizens Investments, Inc. (“FCI”). The above companies together are sometimes referred to as the
“Company”. Intercompany balances and transactions are eliminated in consolidation.

Civista provides financial services through its offices in the Ohio counties of Erie, Crawford, Champaign, Cuyahoga,
Franklin, Logan, Summit, Huron, Ottawa, Madison, Montgomery, Henry, Wood and Richland, 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. There are no significant concentrations of loans to any one industry or customer. However, our customers’
ability to repay their loans is dependent on the real estate and general economic conditions in the area. Other financial
instruments that potentially represent concentrations of credit risk include deposit accounts in other financial
institutions.

VFG was acquired in the fourth quarter of 2022 as a wholly-owned subsidiary of Civista and os a full-service general
equipment leasing and financing company. The operations of VFG are located in Pittsburgh, Pennsylvania.

FCIA was formed to allow the Company to participate in commission revenue generated through its third party
insurance agreement. Insurance commission revenue was less than 1.0% of total revenue for each of the years ended
December 31, 2022, 2021 and 2020. WSP was formed to hold repossessed assets of CBI’s subsidiaries. WSP revenue
was less than 1% of total revenue for each of the years ended December 31, 2022, 2021 and 2020. FCRS was formed
in 2012 to facilitate payment of individual state and federal tax refunds. The operations of FCRS were discontinued
June 30, 2019. CRMI was formed in 2017 to provide property and casualty insurance coverage to CBI and its
subsidiaries for which insurance may not be currently available or economically feasible in the insurance marketplace.
CRMI revenue was less than 1% of total revenue for each of the years ended December 31, 2022, 2021 and 2020.
FCC was formed as a wholly-owned subsidiary of Civista in Wilmington, Delaware to hold inter-company debt. The
operations of FCC were discontinued December 31, 2021. FCI is wholly-owned by Civista and holds and manages
its securities portfolio. The operations of FCI are located in Wilmington, Delaware.

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 the financial statements and the disclosures provided, and
future results could differ. The allowance for loan losses, determination of goodwill impairment, fair values of
financial instruments, valuation of deferred tax assets, pension obligations and other-than-temporary-impairment of
securities are considered material estimates that are particularly susceptible to significant change in the near term.

Cash Flows: Cash and cash equivalents include cash on hand and demand deposits with financial institutions with
original maturities of less than 90 days. Net cash flows are reported for customer loan and deposit transactions, interest
bearing deposits in other financial institutions, federal funds purchased, short-term borrowings and repurchase
agreements. The Company routinely maintains balances that exceed FDIC insured limits and the the risk of loss is
very low with respect to such deposits.

Securities: Debt securities are classified as available for sale when they might be sold before maturity. Securities
available for sale are carried at fair value, with unrealized holding gains and losses reported in other comprehensive
income, net of tax.

See accompanying notes to consolidated financial statements
37

CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022, 2021 and 2020
(Amounts in thousands, except share data)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Interest income includes amortization of purchase premium or discount. Premiums and discounts on securities are
amortized on the level-yield method without anticipating prepayments, except for mortgage backed securities where
prepayments are anticipated. Gains and losses on sales are based on the amortized cost of the security sold using the
specific identification method.

Securities are evaluated on at least a quarterly basis and more frequently when economic or market conditions warrant
such an evaluation to determine whether a decline in their value is other than temporary. For debt securities,
management considers whether the present value of cash flows expected to be collected are less than the security’s
amortized cost basis, the magnitude and duration of the decline, the reasons underlying the decline and the Company’s
intent to sell the security or whether it is more likely than not that the Company would be required to sell the security
before its anticipated recovery in market value, to determine whether the loss in value is other than temporary. Once
a decline in value is determined to be other than temporary, if the Company does not intend to sell the security, and it
is more likely than not that it will not be required to sell the security, before recovery of the security’s amortized cost
basis, the charge to earnings is limited to the amount of credit loss. Any remaining difference between fair value and
amortized cost is recognized in other comprehensive income, net of applicable taxes. Otherwise, the entire difference
between fair value and amortized cost is charged to earnings.

Other securities which include FHLB stock, Federal Reserve Bank (“FRB”) stock, Federal Agricultural Mortgage
Corporation stock, Bankers’ Bancshares Inc. (“BB”) stock, and Norwalk Community Development Corp (“NCDC”)
stock are carried at cost.

Equity securities: Equity securities are held at fair value. Holding gains and losses are recorded in noninterest income.
Dividends are recognized as income when earned.

Loans Held for Sale: Mortgage loans originated and intended for sale in the secondary market and loans that
management no longer intends to hold for the foreseeable future, are carried at the lower of aggregate cost or fair
value, as determined by outstanding commitments from investors. Net unrealized losses, if any, are recorded as a
valuation allowance and charged to earnings.

Loans and leases: Loans and leases that management has the intent and ability to hold for the foreseeable future or
until maturity or payoff are reported at the principal balance outstanding, net of deferred loan fees and costs, and an
allowance for loan and lease losses. Interest income is accrued on the unpaid principal balance. Loan origination fees,
net of certain direct origination costs, are deferred and recognized in interest income using the level-yield method
without anticipating prepayments.

Interest income on mortgage and commercial loans is discontinued at the time the loan is 90 days delinquent unless
the credit is well-secured and in process of collection. Interest income on consumer loans is discontinued when
management determines future collection is unlikely. In all cases, loans are placed on nonaccrual or charged-off at an
earlier date if collection of principal or interest is considered doubtful.

All interest accrued, but not received, for loans placed on nonaccrual, is reversed against interest income. Interest
received on such loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to
accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought
current and future payments are reasonably assured.

The Company provides financing leases for the purchase of business equipment. At the inception of each lease, the
lease receivables, together with the present value of the estimated unguaranteed residual values are recorded as lease
receivables within loans in the consolidated financial statements. Direct financing leases are carried at the aggregate
of lease payments plus estimated residual value of the leased property, net of unamortized deferred lease origination
fees and costs and unearned income. Only those costs incurred as a direct result of closing a lease transaction are
capitalized and all initial direct costs are expensed immediately. Interest income on direct financing leases is
recognized over the term of the lease to achieve a constant periodic rate of return on the outstanding investment.

See accompanying notes to consolidated financial statements
38

CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022, 2021 and 2020
(Amounts in thousands, except share data)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Purchased Loans: The Company purchases individual loans and groups of loans. Purchased loans that show evidence
of credit deterioration since origination are recorded at the amount paid (or allocated fair value in a purchase business
combination), such that there is no carryover of the seller’s allowance for loan losses. After acquisition, incurred losses
are recognized by an increase in the allowance for loan losses.

Purchased loans are accounted for individually or aggregated into pools of loans based on common risk characteristics
(e.g., credit score, loan type, and date of origination). The Company estimates the amount and timing of expected cash
flows for each purchased loan or pool, and the expected cash flows in excess of amount paid is recorded as interest
income over the remaining life of the loan or pool (accretable yield). The excess of the loan’s, or pool’s, contractual
principal and interest over expected cash flows is not recorded (nonaccretable difference).

Over the life of the loan or pool, expected cash flows continue to be estimated. If the present value of expected cash
flows is less than the carrying amount, a loss is recorded. If the present value of expected future cash flows is greater
than the carrying amount, the excess is recognized as part of future interest income.

Allowance for Loan Losses: The allowance for loan losses (allowance) is calculated with the objective of maintaining
a reserve sufficient to absorb inherent loan losses in the loan portfolio. Management establishes the allowance for loan
losses based upon its evaluation of the pertinent factors underlying the types and quality of loans in the portfolio. In
determining the allowance and the related provision for loan losses, the Company considers three principal elements:
(i) specific impairment reserve allocations (valuation allowances) based upon probable losses identified during the
review of impaired loans in the Commercial loan portfolio, (ii) allocations established for adversely-rated loans in the
Commercial loan portfolio and nonaccrual Real Estate Residential, Consumer installment and Home Equity loans,
and (iii) allocations on all other loans based principally on the use of a three-year period for loss migration analysis.
These allocations are adjusted for consideration of general economic and business conditions, credit quality and
delinquency trends, collateral values, and recent loss experience for these similar pools of loans. The Company
analyzes its loan portfolio each quarter to determine the appropriateness of its allowance for loan losses.

All Commercial, Commercial Real Estate and Farm Real Estate loans are monitored on a regular basis with a detailed
loan review completed for all loan relationships greater than $1,500. All Commercial, Commercial Real Estate and
Farm Real Estate loans that are 90 days past due or in nonaccrual status, are analyzed to determine if they are
“impaired”, which means that it is probable that all amounts will not be collected according to the contractual terms
of the loan agreement. All loans that are delinquent 90 days are classified as substandard and placed on nonaccrual
status unless they are well-secured and in the process of collection. The remaining loans are evaluated and segmented
with loans with similar risk characteristics. The Company allocates reserves based on risk categories and portfolio
segments described below, which conform to the Company’s asset classification policy. In reviewing risk within
Civista’s loan portfolio, management has identified specific segments to categorize loan portfolio risk: (i) Commercial
& Agriculture loans; (ii) Commercial Real Estate – Owner Occupied loans; (iii) Commercial Real Estate – Non-Owner
Occupied loans; (iv) Residential Real Estate loans; (v) Real Estate Construction loans; (vi) Farm Real Estate loans;
and (vii) Consumer and Other loans. Additional information related to economic factors can be found in Note 5.

Loan Charge-off Policies: All unsecured open- and closed-ended retail loans that become past due 90 days from the
contractual due date are charged off in full. In lieu of charging off the entire loan balance, loans with non-real estate
collateral may be written down to the net realizable value of the collateral, if repossession of collateral is assured and
in process. For open- and closed-ended loans secured by residential real estate, a current assessment of fair value is
made no later than 180 days past due. Any outstanding loan balance in excess of the net realizable value of the property
is charged off. All other loans are generally charged down to the net realizable value when Civista recognizes the loan
is permanently impaired, which is generally after the loan is 90 days past due.

See accompanying notes to consolidated financial statements
39

CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022, 2021 and 2020
(Amounts in thousands, except share data)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Troubled Debt Restructurings: In certain situations based on economic or legal reasons related to a borrower’s
financial difficulties, management may grant a concession for other than an insignificant period of time to the borrower
that would not otherwise be considered. The related loan is classified as a troubled debt restructuring (TDR).
Management strives to identify borrowers in financial difficulty early and work with them to modify to more
affordable terms before their loan reaches nonaccrual status. These modified terms may include rate reductions,
principal forgiveness, payment forbearance and other actions intended to minimize the economic loss and to avoid
foreclosure or repossession of the collateral. In cases where borrowers are granted new terms that provide for a
reduction of either interest or principal, management measures any impairment on the restructuring as noted above for
impaired loans. In addition to the allowance for the pooled portfolios, management has developed a separate reserve
for loans that are identified as impaired through a TDR. These loans are excluded from pooled loss forecasts and a
separate reserve is provided under the accounting guidance for loan impairment. Consumer loans whose terms have
been modified in a TDR are also individually analyzed for estimated impairment.

Other Real Estate: Other real estate acquired through or instead of loan foreclosure is initially recorded at fair value
less costs to sell when acquired, establishing a new cost basis and any deficiency in the value is charged off through
the allowance. If fair value declines subsequent to foreclosure, a valuation allowance is recorded through expense.
Operating costs after acquisition are expensed.

Premises and Equipment: Land is carried at cost. Premises and equipment are stated at cost less accumulated
depreciation. Depreciation is computed using both accelerated and straight-line methods over the estimated useful life
of the asset, ranging from three to seven years for furniture and equipment and seven to fifty years for buildings and
improvements.

Equipment Owned Under Operating Leases: As a lessor, the Company finances equipment under leases to a wide
variety of customers, from commercial and industrial to government and healthcare classified as operating leases. The
equipment underlying the operating leases is reported at cost, net of accumulated depreciation, within Premises and
Equipment on the Consolidated Balance Sheets. These operating lease arrangements require the lessee to make a fixed
monthly rental payment over a specified lease term generally ranging from 3 years to 6 years. Revenue consists of the
contractual lease payments and is recognized on a straight-line basis over the lease term and reported in Noninterest
Income on the Consolidated Statements of Operations. Leased assets are depreciated on a straight-line method over
the lease term to the estimate of the equipment’s fair market value at lease termination, also referred to as “residual”
value. The depreciation of these operating lease assets is reported in Noninterest Expense on the Consolidated
Statements of Operations. For equipment leases, fair value may be based upon observable market prices, third-party
valuations, or prices received on sales of similar assets at the end of the lease term. These residual values are reviewed
annually to ensure the recorded amount does not exceed the fair market value at the lease termination. At the end of
the lease, the operating lease asset is either purchased by the lessee or returned to the Company.

Federal Home Loan Bank (FHLB) Stock: Civista is a member of the FHLB of Cincinnati and as such, is required to
maintain a minimum investment in stock of the FHLB that varies with the level of advances outstanding with the
FHLB. The stock is bought from and sold to the FHLB based upon its $100 par value. The stock does not have a
readily determinable fair value and as such is classified as restricted stock, carried at cost and evaluated for impairment
by management. The stock’s value is determined by the ultimate recoverability of the par value rather than by
recognizing temporary declines. The determination of whether the par value will ultimately be recovered is influenced
by criteria such as the following: (a) the significance of the decline in net assets of the FHLB as compared to the
capital stock amount and the length of time this situation has persisted, (b) commitments by the FHLB to make
payments required by law or regulation and the level of such payments in relation to the operating performance, (c)
the impact of legislative and regulatory changes on the customer base of the FHLB, and (d) the liquidity position of
the FHLB. With consideration given to these factors, management concluded that the FHLB stock was not impaired
at December 31, 2022 or 2021. FHLB Stock is included in Other Securities on the Consolidated Balance Sheet.

See accompanying notes to consolidated financial statements
40

CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022, 2021 and 2020
(Amounts in thousands, except share data)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Federal Reserve Bank (FRB) Stock: Civista is a member of the Federal Reserve System. FRB stock is carried at cost,
classified as a restricted security, and periodically evaluated for impairment based on ultimate recovery of par value.
FRB Stock is included in Other Securities on the Consolidated Balance Sheet.

Bank Owned Life Insurance (BOLI): Civista has purchased BOLI policies on certain key executives. BOLI is recorded
at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender
value adjusted for other charges or other amounts due that are probable at settlement. Changes in the cash surrender
value are recorded as income in the period that the change occurs.

Goodwill and Other Intangible Assets: Goodwill results from business acquisitions and represents the excess of the
purchase price over the fair value of acquired tangible assets and liabilities and identifiable intangible assets. Goodwill
is assessed at least annually for impairment and any such impairment will be recognized in the period identified.

Other intangible assets consist of core deposit intangibles arising from whole bank and branch acquisitions. These
intangible assets are measured at fair value and then amortized on an accelerated method over their estimated useful
lives, which range from five to twelve years.

Mortgage Servicing Rights: Mortgage servicing rights are recognized as assets for the allocated value of retained
mortgage servicing rights on loans sold. Mortgage servicing rights are initially recorded at fair value at the date of
transfer. The valuation technique uses the present value of estimated future cash flows using current market discount
rates. Mortgage servicing rights are amortized in proportion to, and over the period of, estimated net servicing
revenues. Impairment is evaluated based on the fair value of the rights, using groupings of the underlying loans as to
interest rates and then, secondarily, prepayment characteristics. Fair value is determined using prices for similar assets
with similar characteristics, when available, or based upon discounted cash flows using market-based assumptions.
Any impairment of a grouping is reported as a valuation allowance to the extent that fair value is less than the
capitalized asset for the grouping.

Long-lived Assets: Premises and equipment and other intangible assets, and other long-term assets are reviewed for
impairment when events indicate their carrying amount may not be recoverable from future undiscounted cash flows.
If impaired, the assets are recorded at fair value.

Repurchase Agreements: Substantially all repurchase agreement liabilities represent amounts advanced by various
customers. Securities are pledged to cover these liabilities, which are not covered by federal deposit insurance.

Loan Commitments and Related Financial Instruments: Financial instruments include off-balance sheet credit
instruments, such as commitments to make loans and commercial letters of credit, issued to meet customer financing
needs. The face amount for these items represents the exposure to loss, before considering customer collateral or
ability to repay.

Income Taxes: Income tax expense is the total of the current year income tax due or refundable and the change in
deferred tax assets and liabilities. Deferred tax assets and liabilities are the expected future tax amounts for the
temporary differences between carrying amounts and tax basis of assets and liabilities, computed using enacted tax
rates. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized.

The Company prescribes a recognition threshold and a measurement attribute for the financial statement recognition
and measurement of a tax position taken or expected to be taken in a tax return. Benefits from tax positions should be
recognized in the financial statements only when it is more likely than not that the tax position will be sustained upon
examination by the appropriate taxing authority that would have full knowledge of all relevant information.

See accompanying notes to consolidated financial statements
41

CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022, 2021 and 2020
(Amounts in thousands, except share data)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

A tax position that meets the more-likely-than-not recognition threshold is measured at the largest amount of benefit
that is greater than 50% likely of being realized upon ultimate settlement. Tax positions that previously failed to meet
the more-likely-than-not recognition threshold should be recognized in the first subsequent financial reporting period
in which that threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not
recognition threshold should be derecognized in the first subsequent financial reporting period in which that threshold
is no longer met. The Company recognizes interest and/or penalties related to income tax matters in income tax
expense.

Stock-Based Compensation: Compensation cost is recognized for stock options and restricted stock awards issued to
employees and directors, based on the fair value of these awards at the grant date. The market price of the Company’s
common shares at the date of the grant is used for restricted shares.

Compensation cost is recognized over the required service period, generally defined as the vesting period. For awards
with graded vesting, compensation cost is recognized on a straight-line basis over the requisite service period for the
entire award.

Retirement Plans: Pension expense is the net of service and interest cost, expected return on plan assets and
amortization of gains and losses not immediately recognized. Employee 401(k) and profit sharing plan expense
consists of the amount of matching contributions. Deferred compensation allocates the benefits over the years of
service.

Earnings per Common Share: Earnings per share is computed using the two-class method. Basic earnings per share
are net income available to common shareholders divided by the weighted average number of common shares
outstanding during the period, which excludes participating securities. Diluted earnings per common share include the
dilutive effect of additional potential common shares issuable related to convertible preferred shares. Treasury shares
are not deemed outstanding for earnings per share calculations.

Comprehensive Income: Comprehensive income consists of net income and other comprehensive income. Other
comprehensive income includes unrealized gains and losses on securities available for sale and changes in the funded
status of the pension plan.

Loss Contingencies: Loss contingencies, including claims and legal actions arising in the ordinary course of business,
are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably
estimated. Management does not believe that any such loss contingencies currently exist that will have a material
effect on the financial statements.

Restrictions on Cash: Cash on hand or on deposit with the Federal Reserve Bank is required to meet regulatory reserve
and clearing requirements. These balances do not earn interest. The required reserve amount at December 31, 2022
was $0. The Company did not have any cash pledged as collateral on its interest rate swaps with third party financial
at December 31, 2022.

Dividend Restriction: Banking regulations require maintaining certain capital levels and may limit the dividends paid
by Civista to CBI or by CBI to shareholders. Additional information related to dividend restrictions can be found in
Note 19.

Fair Value of Financial Instruments: Fair values of financial instruments are estimated using relevant market
information and other assumptions that reflect exit price value, as more fully disclosed in Note 17. Fair value estimates
involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, and other
factors, especially in the absence of broad markets for particular items. Changes in assumptions or in market conditions
could significantly affect these estimates.

See accompanying notes to consolidated financial statements
42

CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022, 2021 and 2020
(Amounts in thousands, except share data)

NOTE(cid:3)1(cid:3)-(cid:3)SUMMARY(cid:3)OF(cid:3)SIGNIFICANT(cid:3)ACCOUNTING(cid:3)POLICIES(cid:3)(Continued)

Operating(cid:3)Segments:(cid:3)While(cid:3)the(cid:3)Company’s(cid:3)chief(cid:3)decision(cid:3)makers(cid:3)monitor(cid:3)the(cid:3)revenue(cid:3)streams(cid:3)of(cid:3)the(cid:3)Company’s(cid:3)
various(cid:3)products(cid:3)and(cid:3)services,(cid:3)operations(cid:3)are(cid:3)managed(cid:3)and(cid:3)financial(cid:3)performance(cid:3)is(cid:3)evaluated(cid:3)on(cid:3)a(cid:3)Company-wide(cid:3)
basis.(cid:3)Operating(cid:3)segments(cid:3)are(cid:3)aggregated(cid:3)into(cid:3)one(cid:3)as(cid:3)operating(cid:3)results(cid:3)for(cid:3)all(cid:3)segments(cid:3)are(cid:3)similar.(cid:3)Accordingly,(cid:3)all(cid:3)
of(cid:3) the(cid:3) Company’s(cid:3) financial(cid:3) service(cid:3) operations(cid:3) are(cid:3) considered(cid:3) by(cid:3) management(cid:3) to(cid:3) be(cid:3) aggregated(cid:3) in(cid:3) one(cid:3) reportable(cid:3)
operating(cid:3)segment.

Treasury(cid:3)Stock:(cid:3)CBI(cid:3)common(cid:3)shares(cid:3)that(cid:3)are(cid:3)repurchased(cid:3)are(cid:3)recorded(cid:3)in(cid:3)treasury(cid:3)stock(cid:3)at(cid:3)cost.

Business(cid:3) Combinations:(cid:3) At(cid:3) the(cid:3) date(cid:3) of(cid:3) acquisition(cid:3) the(cid:3) Company(cid:3) records(cid:3) the(cid:3) assets(cid:3) and(cid:3) liabilities(cid:3) of(cid:3) acquired(cid:3)
companies(cid:3)on(cid:3)the(cid:3)Consolidated(cid:3)Balance(cid:3)Sheets(cid:3)at(cid:3)their(cid:3)fair(cid:3)value.(cid:3)The(cid:3)results(cid:3)of(cid:3)operations(cid:3)for(cid:3)acquired(cid:3)companies(cid:3)
are(cid:3)included(cid:3)in(cid:3)the(cid:3)Company’s(cid:3)Consolidated(cid:3)Statements(cid:3)of(cid:3)Operations(cid:3)beginning(cid:3)at(cid:3)the(cid:3)acquisition(cid:3)date.(cid:3)Expenses(cid:3)
arising(cid:3) from(cid:3) acquisition(cid:3) activities(cid:3) are(cid:3) recorded(cid:3) in(cid:3) the(cid:3) Consolidated(cid:3) Statements(cid:3) of(cid:3) Operations(cid:3) during(cid:3) the(cid:3) period(cid:3)
incurred.

Derivative(cid:3)Instruments(cid:3)and(cid:3)Hedging(cid:3)Activities:(cid:3)The(cid:3)Company(cid:3)enters(cid:3)into(cid:3)interest(cid:3)rate(cid:3)swap(cid:3)agreements(cid:3)to(cid:3)facilitate(cid:3)
the(cid:3)risk(cid:3)management(cid:3)strategies(cid:3)of(cid:3)a(cid:3)small(cid:3)number(cid:3)of(cid:3)commercial(cid:3)banking(cid:3)customers.(cid:3)All(cid:3)derivatives(cid:3)are(cid:3)accounted(cid:3)for(cid:3)
in(cid:3) accordance(cid:3) with(cid:3) ASC-815,(cid:3) Derivatives(cid:3) and(cid:3) Hedging.(cid:3) The(cid:3) Company(cid:3) mitigates(cid:3) the(cid:3) risk(cid:3) of(cid:3) entering(cid:3) into(cid:3) these(cid:3)
agreements(cid:3)by(cid:3)entering(cid:3)into(cid:3)equal(cid:3)and(cid:3)offsetting(cid:3)swap(cid:3)agreements(cid:3)with(cid:3)highly(cid:3)rated(cid:3)third(cid:3)party(cid:3)financial(cid:3)institutions.(cid:3)
The(cid:3) swap(cid:3) agreements(cid:3) are(cid:3) free-standing(cid:3) derivatives(cid:3) and(cid:3) are(cid:3) recorded(cid:3) at(cid:3) fair(cid:3) value(cid:3) in(cid:3) the(cid:3) Company’s(cid:3) Consolidated(cid:3)
Balance(cid:3)Sheets.(cid:3)Changes(cid:3)in(cid:3)fair(cid:3)value(cid:3)are(cid:3)recorded(cid:3)as(cid:3)income(cid:3)or(cid:3)expense(cid:3)in(cid:3)the(cid:3)period(cid:3)that(cid:3)they(cid:3)occur.(cid:3) The(cid:3)Company(cid:3)
is(cid:3)party(cid:3)to(cid:3)master(cid:3)netting(cid:3)arrangements(cid:3)with(cid:3)its(cid:3)financial(cid:3)institution(cid:3)counterparties.(cid:3)The(cid:3)master(cid:3)netting(cid:3)arrangements(cid:3)
provide(cid:3) for(cid:3) a(cid:3) single(cid:3) net(cid:3) settlement(cid:3) of(cid:3) all(cid:3) swap(cid:3) agreements,(cid:3) as(cid:3) well(cid:3) as(cid:3) collateral,(cid:3) in(cid:3) the(cid:3) event(cid:3) of(cid:3) default(cid:3) on,(cid:3) or(cid:3)
termination(cid:3)of,(cid:3)any(cid:3)one(cid:3)contract.(cid:3)Collateral,(cid:3)in(cid:3)the(cid:3)form(cid:3)of(cid:3)cash(cid:3)and(cid:3)marketable(cid:3)securities,(cid:3)is(cid:3)posted(cid:3)by(cid:3)the(cid:3)counterparty(cid:3)
with(cid:3)net(cid:3)liability(cid:3)positions(cid:3)in(cid:3)accordance(cid:3)with(cid:3)contract(cid:3)thresholds.

Re(cid:89)(cid:76)(cid:86)(cid:76)(cid:82)(cid:81)(cid:86):(cid:3) Certain(cid:3) revisions(cid:3) have(cid:3) been(cid:3) made(cid:3) to(cid:3) the(cid:3) 2021(cid:3) consolidated(cid:3) financial(cid:3) statements(cid:3) related(cid:3) to(cid:3) the(cid:3)
deconsolidation(cid:3) of(cid:3) trust(cid:3) preferred(cid:3) debt.(cid:3) Other(cid:3) assets(cid:3) and(cid:3) subordinated(cid:3) debentures(cid:3) both(cid:3) increased(cid:3) $922,000.(cid:3) This(cid:3)
revision(cid:3)did(cid:3)not(cid:3)have(cid:3)a(cid:3)significant(cid:3)impact(cid:3)on(cid:3)the(cid:3)consolidated(cid:3)financial(cid:3)statement(cid:3)line(cid:3)items(cid:3)impacted(cid:3)and(cid:3)had(cid:3)no(cid:3)effect(cid:3)
on(cid:3)net(cid:3)income.

Effect(cid:3)of(cid:3)Newly(cid:3)Issued(cid:3)but(cid:3)Not(cid:3)Yet(cid:3)Effective(cid:3)Accounting(cid:3)Standards:

instruments held by financial

losses on loans and other financial

In June 2016, the Financial Accounting Standards Board ("FASB") issued 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
institutions and other
recording of credit
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 affected 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. ASU 2016-13 is effective for annual and interim periods
beginning after December 15, 2019, and early adoption is permitted for annual and interim periods beginning after
December 15, 2018. On October 16, 2019, the FASB voted to defer the effective date for ASC 326, Financial
Instruments – Credit Losses, for smaller reporting companies to fiscal years beginning after December 15, 2022, and
interim periods within those fiscal years, which was codified in the final ASU issued by the FASB on November 15,
2019. As a result, because the Company qualified as a smaller reporting company, based on its most recent
determination under applicable rules of the Securities and Exchange Commission (“SEC”), as of November 15, 2019,
the Company will not be subject to ASU 2016-13 until its annual and interim periods beginning after December 15,
2022. Civista currently estimates that, upon adoption of ASU 2016-13, that the allowance for credit losses will increase
by approximately $3.3 million. In addition, Civista expects to recognize a liability for unfunded loan commitments
of approximately $3.4 million upon adoption. The impact of adoption will not be significant to Civista's regulatory
capital. Civista will not elect to phase in, over a three-year period, the standards impact on regulatory capital as
permitted by the regulatory transition rules. Civista will finalize the adoption during the first quarter of 2023.

See accompanying notes to consolidated financial statements
43

CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022, 2021 and 2020
(Amounts in thousands, except share data)

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

In January 2017, the FASB issued ASU 2017-04, 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, should adopt the amendments in this Update for its annual or any
interim goodwill impairment tests in fiscal years beginning after December 15, 2019. On October 16, 2019, the FASB
voted to defer the effective date for ASC 350, Intangibles – Goodwill and Other, for smaller reporting companies,
such as the Company, to fiscal years beginning after December 15, 2022, and interim periods within those fiscal years.
The final ASU was issued by the FASB on November 15, 2019. The impact of this new accounting guidance is highly
dependent on changes in financial markets and future events. The Company will monitor indicators of goodwill
impairment and will record impairment when it is determined to have occurred.

In March 2020, the FASB issued ASU 2020-03, Codification Improvements to Financial Instruments. This ASU was
issued to improve and clarify various financial instruments topics, including the current expected credit losses (CECL)
standard issued in 2016. The ASU includes seven issues that describe the areas of improvement and the related
amendments to GAAP; they are intended to make the standards easier to understand and apply and to eliminate
inconsistencies, and they are narrow in scope and are not expected to significantly change practice for most entities.
Among its provisions, the ASU clarifies that all entities, other than public business entities that elected the fair value
option, are required to provide certain fair value disclosures under ASC 825, Financial Instruments, in both interim
and annual financial statements. It also clarifies that the contractual term of a net investment in a lease under Topic
842 should be the contractual term used to measure expected credit losses under Topic 326. Amendments related to
ASU 2019-04 are effective for fiscal years beginning after December 15, 2019, including interim periods within those
fiscal years. Early adoption is not permitted before an entity’s adoption of ASU 2016-01. Amendments related to ASU
2016-13 for entities that have not yet adopted that guidance are effective upon adoption of the amendments in ASU
2016-13. Early adoption is not permitted before an entity’s adoption of ASU 2016-13. Amendments related to ASU
2016-13 for entities that have adopted that guidance are effective for fiscal years beginning after December 15, 2019,
including interim periods within those years. Other amendments are effective upon issuance of this ASU. This Update
is not expected to have a significant impact on the Company’s financial statements.

In January 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of
Reference Rate Reform on Financial Reporting, March 2020, to provide temporary optional expedients and exceptions
to the U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens
of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates, such as
the Secured Overnight Financing Rate (SOFR). Entities can elect not to apply certain modification accounting
requirements to contracts affected by what the guidance calls “reference rate reform” if certain criteria are met. An
entity that makes this election would not have to remeasure the contracts at the modification date or reassess a previous
accounting determination. Also, entities can elect various optional expedients that would allow them to continue
applying hedge accounting for hedging relationships affected by reference rate reform if certain criteria are met, and
can make a one-time election to sell and/or reclassify held-to-maturity debt securities that reference an interest rate
affected by reference rate reform. The amendments in this ASU are effective for all entities upon issuance through
December 31, 2022. However, a deferral of the implementation of reference rate reform was issued in December of
2022, which extends the implementation to December 31, 2024. The Company is working through this transition via
a multi-disciplinary project team. However, the financial impact on our financial condition, results of operations and
cash flows will depend on the population of contracts that are still outstanding on the date the underlying indexes are
no longer published.

See accompanying notes to consolidated financial statements
44

CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022, 2021 and 2020
(Amounts in thousands, except share data)

NOTE 2 - ACQUISITIONS

On July 1, 2022, CBI completed the acquisition by merger of Comunibanc Corp. in a stock and cash transaction for
aggregate consideration of approximately $46,090. As a result of the acquisition, the Company issued 984,723
common shares and paid approximately $24,968 in cash to the former shareholders of Comunibanc Corp. The
Company and Comunibanc Corp. had first announced that they had entered into an agreement to merge in January of
2022. Immediately following the merger, Comunibanc Corp.’s banking subsidiary, The Henry County Bank (HCB),
was merged into CBI’s banking subsidiary, Civista Bank.

The assets and liabilities of Comunibanc Corp. were recorded on the Company’s Consolidted Balance Sheet at their
preliminary estimated fair values as of July 1, 2022, the acquisition date, and Comunibanc Corp.’s results of operations
have been included in the Company’s Consolidated Statements of Operations since that date. The Company recorded
$26,209 in goodwill and $4,426 in core deposit intangibles, representing the principal change in goodwill and
intangibles from December 31, 2021. None of the purchase price is deductible for tax purposes.

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. The transaction was recorded as a purchase and, accordingly, the operating results of
Comunibanc Corp. and HCB have been included in the Company’s Consolidated Financial Statements since the close
of business on July 1, 2022.

Identifiable intangibles are amortized to their estimated residual values over the expected useful lives. Such lives are
also periodically reassessed to determine if any amortization period adjustments are required. The identifiable
intangible assets consist of core deposit intangible which is being amortized over the estimated useful life. The gross
carrying amount of the core deposit intangible at December 31, 2022 was $3,999.

In connection with the Comunibanc merger in 2022, the Company incurred additional third-party acquisition-related
costs of $2.9 million. These expenses are comprised of employee benefits of $210.7 thousand, occupancy and
equipment expenses of $110.7 thousand, software expense of $36.0 thousand, consulting and other professional fees
of $905.2 thousand, data processing costs of $1.0 million and other operating expenses of $647.5 thousand in the
Company’s Consolidated Statement of Operations for the twelve-month period ended December 31, 2022.

As of December 31, 2022, the estimated future amortization expense for the core deposit intangible is as follows:

2023
2024
2025
2026
2027
Thereafter

Core deposit
intangibles

739
684
604
523
443
1,006
3,999

$

$

The following table presents financial information for the former Comunibanc Corp. included in the Consolidated
Statements of Operations from the date of acquisition through December 31, 2022.

Net interest income after provision for loan losses
Noninterest income
Net income

Actual From
Acquisition Date
Through December 31,
2022
(in thousands)

$

3,428
159
1,719

See accompanying notes to consolidated financial statements
45

CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022, 2021 and 2020
(Amounts in thousands, except share data)

NOTE 2 - ACQUISITIONS (Continued)

The following table presents pro forma information for the twelve-month periods ended December 31, 2022, 2021
and 2020 as if the acquisition of Comunibanc Corp. had occurred on January 1, 2020. This table has been prepared
for comparative purposes only and is not indicative of the actual results that would have been attained had the
acquisition occurred as of the beginning of the periods presented, nor is it indicative of future results. Furthermore,
the unaudited pro forma information does not reflect management’s estimate of any revenue-enhancing opportunities
nor anticipated cost savings as a result of the integration and consolidation of the acquisition.

Net interest income after provision for loan losses
Noninterest income
Net income
Pro forma earnings per share:

Basic
Diluted

$

$
$

Pro Formas (unaudited) Twelve Months
ended December 31,
2021
103,583
32,768
42,482

2022
113,689
29,451
39,095

$

$

2020

88,293
29,870
34,374

2.42
2.42

$
$

2.59
2.59

$
$

2.01
2.01

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of
acquisition for Comunibanc Corp. Core deposit intangibles will be amortized over ten years using an accelerated
method. Goodwill will not be amortized, but instead will be evaluated for impairment.

Cash paid
Common shares issued (984,723 shares)

Total

Net assets acquired:

Cash and due from financial institutions
Securities available for sale
Time deposits
Loans, net
Other securities
Premises and equipment
Accrued interest receivable
Core deposit intangible
Bank owned life insurance
Other assets
Noninterest-bearing deposits
Interest-bearing deposits
Other borrowings
Other liabilities

$

$

24,968
21,122
46,090

$

3,098
120,399
742
169,202
1,553
4,665
670
4,426
5,918
3,767
(122,642)
(148,552)
(21,706)
(1,659)

Goodwill resulting from Comunibanc Corp. acquisition

$

19,881
26,209

Loans purchased with evidence of credit deterioration since origination and for which it was probable that all
contractually required payments would not be collected were considered to be credit impaired. Evidence of credit
quality deterioration as of the purchase date included information such as past-due and nonaccrual status, borrower
credit scores and recent loan to value percentages. Purchased credit-impaired loans were accounted for under the
accounting guidance for loans and debt securities acquired with deteriorated credit quality (ASC 310-30) and initially
measured at fair value, which included estimated future credit losses expected to be incurred over the life of the loan.
Accordingly, an allowance for credit losses related to these loans was not carried over and recorded at the acquisition
date. Management estimated the cash flows expected to be collected at acquisition using our internal risk models,
which incorporated the estimate of the current assumptions, such as default rates, severity and prepayment speeds.

See accompanying notes to consolidated financial statements
46

CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022, 2021 and 2020
(Amounts in thousands, except share data)

NOTE 2 - ACQUISITIONS (Continued)

The following table presents additional information regarding loans acquired and accounted for in accordance with
ASC 310-30:

Outstanding balance
Carrying amount

At December 31, 2022
Acquired Loans with
Specific Evidence of
Deterioration of Credit
Quality (ASC 310-30)
(In Thousands)

$

4,768
4,121

The gross principal due under the contract for acquired receivables not subject to ASC 310-30 is $171.1 million. The
fair value adjustment is $2.1 million and the contractual cash flows not expected to be collected is $5.7 million.

The acquired assets and liabilities were measured at estimated fair values. Management made certain estimates and
exercised judgment in accounting for the acquisition.

The amount of goodwill recorded reflects a strategic opportunity to expand into new markets that, while similar to
existing markets, are projected to be more vibrant in population growth and business opportunity growth. The
goodwill represents the excess purchase price over the estimated fair value of the net assets acquired. Additionally,
the acquisition will provide exposure to suburbs of larger urban areas without the commitment of operating inside
large metropolitan areas dominated by regional and national financial organizations. The acquisition is also expected
to create synergies on the operational side of the Company by allowing noninterest expenses to be spread over a larger
operating base.

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 for aggregate cash and stock consideration of approximately $46,544. As a result of the
acquisition, the Company issued 500,293 common shares and paid approximately $36,044 in cash.

The assets and liabilities of VFG were recorded on the Company’s Consolidated Balance Sheet at their preliminary
estimated fair values as of October 3, 2022, the acquisition date, and VFG’s results of operations have been included
in the Company’s Consolidated Statements of Operations since that date. The Company recorded $22,635 in goodwill,
representing the principal change in goodwill from December 31, 2021. None of the purchase price is deductible for
tax purposes.

At the time of the acquisition, VFG had total consolidated assets of $93,870, including $62,712 in loans and leases.
The transaction was recorded as a purchase and, accordingly, the operating results of VFG have been included in the
Company’s Consolidated Financial Statements since the close of business on October 3, 2022.

In connection with the VFG acquisition in 2022, the Company incurred additional third-party acquisition-related costs
of $814.3 thousand. These expenses are comprised of consulting and other professional fees of $812.8 thousand and
other operating expenses of $1.5 thousand in the Company’s Consolidated Statement of Operations for the twelve-
month period ended December 31, 2022.

See accompanying notes to consolidated financial statements
47

CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022, 2021 and 2020
(Amounts in thousands, except share data)

NOTE 2 - ACQUISITIONS (Continued)

The following table presents financial information for VFG included in the Consolidated Statements of Operations
from the date of acquisition through December 31, 2022.

Net interest income after provision for loan losses
Noninterest income
Net loss

Actual From
Acquisition Date
Through December 31,
2022
(in thousands)

$

403
3,926
(992)

Pro forma information for the twelve-month periods ended December 31, 2022, 2021 and 2020 is not presented as the
acquisition of VFG was determined to not to be a significant transaction.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of
acquisition for VFG. Goodwill will not be amortized, but instead will be evaluated for impairment.

Cash paid
Common shares issued (250,145 shares)
Common shares issued (contingent consideration) (250,148 shares)

Total

Net assets acquired:

Cash and due from financial institutions
Time Deposits
Loans, net
Premises and equipment
Other assets
Other borrowings
Other liabilities

Goodwill resulting from VFG acquisition

$

$

$

36,044
5,250
5,250
46,544

23,909
22,635

$

6,271
80
61,418
35,039
1,409
(58,142)
(22,166)

Loans purchased with evidence of credit deterioration since origination and for which it was probable that all
contractually required payments would not be collected were considered to be credit impaired. Evidence of credit
quality deterioration as of the purchase date included information such as past-due and nonaccrual status, borrower
credit scores and recent loan to value percentages. Purchased credit-impaired loans were accounted for under the
accounting guidance for loans and debt securities acquired with deteriorated credit quality (ASC 310-30) and initially
measured at fair value, which included estimated future credit losses expected to be incurred over the life of the loan.
Accordingly, an allowance for credit losses related to these loans was not carried over and recorded at the acquisition
date. Management estimated the cash flows expected to be collected at acquisition using our internal risk models,
which incorporated the estimate of the current assumptions, such as default rates, severity and prepayment speeds.

See accompanying notes to consolidated financial statements
48

CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022, 2021 and 2020
(Amounts in thousands, except share data)

NOTE 2 - ACQUISITIONS (Continued)

The contingent consideration arrangement requires Civista to pay the former owners of VFG, over two years, and
subject to meeting certain lease origination thresholds for each year, or meeting a combined threshold for the two
years, up to a maximum amount of $5,250, undiscounted. The potential undiscounted amount of all future payments
Civista could be required to make under the contingent consideration arrangement is between $0 and $5,250. The fair
value of the contingent consideration arrangement of $5,250 was estimated based on significant inputs that are not
observable in the market, which are considered Level 3 inputs in accordance with ASC Topic 820. Key assumptions
include the CIVB share price at close, management’s assumptions and the probability that the vesting thresholds will
be met. The common shares subject to the contingent consideration arrangement have been issued and are considered
restricted with participating rights with voting, dividends and distribution rights prior to vesting or forfeiture. If the
lease origination thresholds are not met, the shares issued will be forfeited.

The following table presents additional information regarding loans acquired and accounted for in accordance with
ASC 310-30:

Outstanding balance
Carrying amount

At December 31, 2022
Acquired Loans with
Specific Evidence of
Deterioration of Credit
Quality (ASC 310-30)
(In Thousands)

$

635
—

The gross principal due under the contract for acquired receivables not subject to ASC 310-30 is $62.1 million. The
fair value adjustment is $2.3 million and the contractual cash flows not expected to be collected is $658.8 thousand.

The acquired assets and liabilities were measured at estimated fair values. Management made certain estimates and
exercised judgment in accounting for the acquisition.

The amount of goodwill recorded reflects the excess purchase price over the estimated fair value of the net assets
acquired.

See accompanying notes to consolidated financial statements
49

CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022, 2021 and 2020
(Amounts in thousands, except share data)

NOTE 3 - SECURITIES

The amortized cost and fair value of available for sale securities and the related gross unrealized gains and losses
recognized were as follows:

2022
U.S. Treasury securities and obligations of

U.S. government agencies

Obligations of states and political subdivisions
Mortgage-back securities in government sponsored

entities
Total debt securities

2021
U.S. Treasury securities and obligations of

U.S. government agencies

Obligations of states and political subdivisions
Mortgage-back securities in government sponsored

entities
Total debt securities

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Fair Value

$

66,495 $
350,104

20 $
784

(5,486) $
(33,640)

61,029
317,248

265,752
$ 682,351 $

15
237,125
819 $ (67,768) $ 615,402

(28,642)

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Fair Value

$

48,390 $
281,247

30 $

17,696

(530) $
(107)

47,890
298,836

211,660
$ 541,297 $

2,938
20,664 $

(1,450)
213,148
(2,087) $ 559,874

The amortized cost and fair value of securities at year end 2022 by contractual maturity were as follows. Securities
not due at a single maturity date, primarily mortgage-backed securities, are shown separately.

Due in one year or less
Due from one to five years
Due from five to ten years
Due after ten years
Mortgage-backed securities in government sponsored

entities
Total securities available for sale

Available for sale

Amortized
Cost

Fair Value

$

5,990 $
44,482
70,413
295,714

5,796
41,304
64,687
266,490

265,752
682,351 $

237,125
615,402

$

Securities with a carrying value of $218,344 and $168,435 were pledged as of December 31, 2022 and 2021,
respectively, to secure public deposits, other deposits and liabilities as required or permitted by law.

Proceeds from sales of securities, gross realized gains and gross realized losses were as follows:

Sale proceeds
Gross realized gains
Gross realized losses
Gains from securities called or settled by the

issuer

2021

2020

$

2022
57,322 $
—
—

1,810 $
1,785
—

10

1

1,455
94
—

—

See accompanying notes to consolidated financial statements
50

CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022, 2021 and 2020
(Amounts in thousands, except share data)

NOTE 3 – SECURITIES (Continued)

Debt securities with unrealized losses at year end 2022 and 2021 not recognized in income were as follows:

2022

Description of Securities
U.S. Treasury securities and obligations of

U.S. government agencies

Obligations of states and political

subdivisions

Mortgage-backed securities in gov’t

sponsored entities

Total temporarily impaired

2021

Description of Securities
U.S. Treasury securities and obligations of

U.S. government agencies

Obligations of states and political

subdivisions

Mortgage-backed securities in gov’t

sponsored entities

Total temporarily impaired

12 Months or less

More than 12 months

Total

Fair
Value

Unrealized
Loss

Fair
Value

Unrealized
Loss

Fair
Value

Unrealized
Loss

$

21,042 $

(880) $ 39,567 $ (4,606) $ 60,609 $ (5,486)

169,594

(13,016)

73,967

(20,624)

243,561

(33,640)

111,639

(28,642)
$ 302,275 $ (18,609) $238,156 $ (49,159) $540,431 $ (67,768)

(23,929)

124,622

236,261

(4,713)

12 Months or less
Fair
Value

Unrealized
Loss

More than 12 months

Fair
Value

Unrealized
Loss

Total

Fair
Value

Unrealized
Loss

$ 41,432 $

(473) $ 2,014 $

(57) $ 43,446 $

(530)

25,797

(107)

—

— 25,797

(107)

141,327
(1,343)
$208,556 $ (1,923) $ 5,137 $

3,123

144,450

(107)
(1,450)
(164) $213,693 $ (2,087)

The Company periodically evaluates securities for other-than-temporary impairment. An unrealized loss exists when
the current fair value of an individual security is less than its amortized cost basis. Unrealized losses that are
determined to be temporary in nature are recorded, net of tax, in accumulated other comprehensive loss on the
Consolidated Balance Sheet.

The Company has assessed each available for sale security position for credit impairment. Factors considered in
determining whether a loss is temporary include:

•

•

•

•

•

•

The length of time and the extent to which fair value has been below cost;

The severity of impairment;

The cause of the impairment and the financial condition and near-term prospects of the issuer;

If the Company intends to sell the investment;

If it’s more-likely-than-not the Company will be required to sell the investment before recovering its
amortized cost basis; and

If the Company does not expect to recover the investment’s entire amortized cost basis (even if the
Company does not intend to sell the investment).

The Company’s review for impairment generally entails:

•

•

•

•

Identification and evaluation of investments that have indications of impairment;

Analysis of individual investments that have fair values less than amortized cost, including consideration
of length of time each investment has been in unrealized loss position and the expected recovery period;

Evaluation of factors or triggers that could cause individual investments to qualify as having other-than-
temporary impairment; and

Documentation of these analyses, as required by policy.

See accompanying notes to consolidated financial statements
51

CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022, 2021 and 2020
(Amounts in thousands, except share data)

NOTE 3 – SECURITIES (Continued)

At December 31, 2022, the Company owned 474 securities that were considered temporarily impaired. The unrealized
losses on these securities have not been recognized into income because the issuers’ bonds are of high credit quality,
management has the intent and ability to hold these securities for the foreseeable future, and the decline in fair value
is largely due to changes in market interest rates. The Company also considers sector specific credit rating changes in
its analysis. The fair value is expected to recover as the securities approach their maturity date or reset date. The
Company does not intend to sell until recovery and does not believe selling will be required before recovery.

The following table presents the net gains and losses on equity investments recognized in earnings at year-end 2022
and 2021, and the portion of unrealized gains and losses for the period that relates to equity investments held at year-
end 2022 and 2021:

Net gains (losses) recognized on equity securities during the

year

Less: Net gains realized on the sale of equity securities

during the period

Unrealized gains (losses) recognized in equity securities held at

December 31

2022

2021

$

$

118 $

—

118 $

186

—

186

NOTE 4 - LOANS

Loans at year-end were as follows:

Commercial & Agriculture
Commercial Real Estate - Owner Occupied
Commercial Real Estate - Non-Owner Occupied
Residential Real Estate
Real Estate Construction
Farm Real Estate
Lease financing receivable
Consumer and Other

Total Loans

Allowance for loan losses
Net loans

2022

2021

$ 278,595 $ 246,502
295,452
829,310
430,060
157,127
28,419
—
11,009
1,997,879
(26,641)
$ 2,518,155 $ 1,971,238

371,147
1,018,736
552,781
243,127
24,708
36,797
20,775
2,546,666
(28,511)

Included in Commercial & Agriculture loans as of December 31, 2022 and 2021 is $566 and $43,209, respectively,
of Paycheck Protection Program (“PPP”) loans.

See accompanying notes to consolidated financial statements
52

CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022, 2021 and 2020
(Amounts in thousands, except share data)

NOTE 4 – LOANS (Continued)

Included in total loans above are deferred loan fees of $1,652 and $2,924 at December 31, 2022 and 2021,
respectively. Included in net deferred loan fees as of December 31, 2022 and 2021 is $0 and $1,762, respectively, of
net deferred loan fees from PPP loans.

Scheduled maturities of lease financing receivables at December 31, 2022 were as follows:

2023
2024
2025
2026
2027
Thereafter
Total

Paycheck Protection Program

$

$

4
3,509
5,704
6,940
12,527
8,113
36,797

In response to the novel COVID-19 pandemic, 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 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 the COVID-19
pandemic. During 2020, Civista processed over 2,300 PPP loans totaling $268.3 million.

The Consolidated Appropriations Act 2021, was signed into law on December 27, 2020 to provide an additional
funding of $284.5 billion under the PPP and the establishment of PPP Second Draw Loans under the Economic Aid
to Hard-Hit Small Businesses, Nonprofit, and Venues Act (the “Relief Act”). This additional funding was made
available from original PPP lenders on January 19, 2021, and the deadline (as extended) for submitting applications
for PPP Second Draw Loans was May 31, 2021.

Funds provided under the Relief Act were earmarked both for first time PPP borrowers (subject to original PPP
eligibility and limits) as well as ‘Second Draw’ Loans for borrowers that already received an original PPP loan.
Additional Second Draw eligibility requirements were as follows: (1) entities must have no more than 300 employees,
(2) entities must have suffered a 25% of more reduction in gross revenues between comparable quarters in 2019 and
2020, (3) some entities previously excluded are eligible for this round, such as local TV, newspaper, and radio, and
(4) loan size limited to 2.5 times average monthly payroll with a maximum allowable amount of $2 million.

During 2021, Civista received SBA approval on, and funded, 1,340 PPP loans totaling $131,109 under the Relief Act.

Loans to principal officers, directors, and their affiliates at year-end 2022 and 2021 were as follows:

Balance - Beginning of year
New loans and advances
Repayments
Effect of changes to related parties
Balance - End of year

2022
17,447 $
15,408
(9,255)
(2,493)
21,107 $

2021

8,475
15,522
(6,693)
143
17,447

$

$

The Company had credit lines to principal officers, directors, and their affiliates with an availability of $8,017 and
$6,115 as of December 31, 2022 and 2021, respectively.

See accompanying notes to consolidated financial statements
53

CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022, 2021 and 2020
(Amounts in thousands, except share data)

NOTE 5 - ALLOWANCE FOR LOAN LOSSES

Management has an established methodology to determine the adequacy of the allowance for loan losses that assesses
the risks and losses inherent in the loan portfolio. For purposes of determining the allowance for loan losses, the
Company has segmented certain loans in the portfolio by product type. Loans are segmented into the following pools:
Commercial & Agriculture loans, Commercial Real Estate – Owner Occupied loans, Commercial Real Estate – Non-
Owner Occupied loans, Residential Real Estate loans, Real Estate Construction loans, Farm Real Estate loans and
Consumer and Other loans. Loss migration rates for each risk category are calculated and used as the basis for
calculating loan loss allowance allocations. Loss migration rates are calculated over a three-year period for all portfolio
segments. Management also considers certain economic factors for trends that management uses to account for the
qualitative and environmental changes in risk, which affects the level of the reserve. The following economic factors
are analyzed:

•

•

•

•

•

•

•

•

•

Changes in lending policies and procedures

Changes in experience and depth of lending and management staff

Changes in quality of credit review system

Changes in the nature and volume of the loan portfolio

Changes in past due, classified and nonaccrual loans and TDRs

Changes in economic and business conditions

Changes in competition or legal and regulatory requirements

Changes in concentrations within the loan portfolio

Changes in the underlying collateral for collateral dependent loans

See accompanying notes to consolidated financial statements
54

CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022, 2021 and 2020
(Amounts in thousands, except share data)

NOTE 5 - ALLOWANCE FOR LOAN LOSSES (Continued)

The total allowance reflects management’s estimate of loan losses inherent in the loan portfolio at the consolidated
balance sheet date. The Company considers the allowance for loan losses of $28,511 adequate to cover loan losses
inherent in the loan portfolio, at December 31, 2022. The following tables present, by portfolio segment, the changes
in the allowance for loan losses, the ending allocation of the allowance for loan losses and the loan balances
outstanding for the years ended December 31, 2022, 2021 and 2020. The changes can be impacted by overall loan
volume, adversely graded loans, historical charge-offs and economic factors.

Allowance for loan losses:

December 31, 2022
Commercial & Agriculture
Commercial Real Estate:

Owner Occupied
Non-Owner Occupied

Residential Real Estate
Real Estate Construction
Farm Real Estate
Lease financing receivable
Consumer and Other
Unallocated
Total

Beginning
balance

Charge-offs

Recoveries

Provision
(Credit)

Ending
Balance

$

2,600 $

(22) $

24 $

409 $

3,011

4,464
13,860
2,597
1,810
287
—
176
847

$ 26,641 $

—
—
(97)
—
—
(23)
(80)
—
(222) $

42
74
163
4
6
—
27
—
340 $

4,565
59
14,138
204
3,145
482
2,293
479
291
(2)
429
452
98
(25)
(306)
541
1,752 $ 28,511

For the year ended December 31, 2022, the Company provided $1,752 to the allowance for loan losses, as compared
to a provision of $830 for the year ended December 31, 2021. The increase in the provision was 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. Civista strengthened the reserve in 2020 due to the 2020 economic shutdown and
restrictions in response to the ongoing COVID-19 pandemic. While conditions improved in 2021 due to vaccinations
and booster shots, ongoing challenges due to supply chain and workforce shortages slowed the process improvement.
Our risk profile has steadily improved since peak levels, but we remain cautious given the impact of higher inflationary
costs, rising interest rates and other pre-recessionary conditions that impact loan customers. Our Commercial and
Commercial Real Estate portfolios have been, and are expected to continue to be, impacted the most.

For the year ended December 31, 2022, the allowance for Commercial & Agriculture loans increased due to an
increase in general reserves required for this type as a result of an increase in loan balances, accompanied by an
increase in classified loan balances. The result was represented as an increase in the provision. The allowance for
Commercial Real Estate – Owner Occupied loans increased due to an increase in general reserves required for this
type as a result of increased loan balances, partially offset by a decrease in classified loan balances. The result was
represented as an increase in the provision. The allowance for Commercial Real Estate – Non-Owner Occupied loans
increased due to an increase in general reserves required as a result of an increase in loan balances, partially offset by
a decrease in loss rates and classified loan balances. This was represented as an increase in the provision. The
allowance for Residential Real Estate loans increased due to an increase in general reserves required for this type as a
result of increased loan balances. The result was represented by an increase in the provision. The allowance for Real
Estate Construction loans increased due to an increase in loan balances. This was represented as an increase in the
provision. The allowance for Consumer and Other loans decreased due to a decrease in loan balances. This was
represented as a decrease in the provision. Management feels that the unallocated amount is appropriate and within
the relevant range for the allowance that is reflective of the risk in the portfolio at December 31, 2022.

See accompanying notes to consolidated financial statements
55

CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022, 2021 and 2020
(Amounts in thousands, except share data)

NOTE 5 - ALLOWANCE FOR LOAN LOSSES (Continued)

Allowance for loan losses:

December 31, 2021
Commercial & Agriculture
Commercial Real Estate:

Owner Occupied
Non-Owner Occupied

Residential Real Estate
Real Estate Construction
Farm Real Estate
Consumer and Other
Unallocated
Total

Beginning
balance

Charge-offs

Recoveries

Provision
(Credit)

Ending
Balance

$

2,810 $

(15) $

165 $

(360) $

2,600

4,057
12,451
2,484
2,439
338
209
240

$ 25,028 $

—
—
(120)
—
—
(24)
—
(159) $

7
395
302
1
12
60
—
942 $

4,464
400
13,860
1,014
2,597
(69)
1,810
(630)
287
(63)
176
(69)
847
607
830 $ 26,641

For the year ended December 31, 2021, the Company provided $830 to the allowance for loan losses, as compared to
a provision of $10,112 for the year ended December 31, 2020. The decrease in the provision was due to the stability
of our credit quality metrics coupled with the stabilization and, in some cases, improvement of international, national,
regional and local economic conditions that were adversely impacted by the 2020 economic shutdown and restrictions
in response to the ongoing COVID-19 pandemic. While vaccinations and booster shots in 2021 created some level of
optimism in the business community, there remained uncertainty due to the continued concern over increased
infections from the Delta and Omicron variants of COVID, and we remained cautious given the level of classified
loans in the portfolio, particularly loans to borrowers in the hotel industry. The lingering economic impacts related to
the COVID-19 pandemic included the loss of revenue experienced by our business clients, disruption of supply chains,
higher employee wages coupled with workforce shortages and increased costs of materials and services. While some
of the pressures eased in 2021, ongoing supply chain and staffing challenges, as well as inflationary pressures
remained. Our Commercial and Commercial Real Estate portfolios have been, and are expected to continue to be,
impacted the most.

For the year ended December 31, 2021, the allowance for Commercial & Agriculture loans decreased due to a decrease
in general reserves required for this type as a result of a decrease in loss rates. Commercial & Agriculture loan
balances decreased during the year mainly from Civista’s participation in the PPP loan program. The result was
represented as a decrease in the provision. The allowance for Commercial Real Estate – Owner Occupied loans
increased due to an increase in general reserves required for this type as a result of increased loan balances, offset by
a decrease in classified loans balances. The result was represented as an increase in the provision. The allowance for
Commercial Real Estate – Non-Owner Occupied loans increased due to an increase in general reserves required as a
result of an increase in loan balances, offset by decreases in classified loan balances and loss rates. This was
represented as an increase in the provision. The allowance for Residential Real Estate loans increased due to an
increase in loss rates for this type of loan. The result was represented by an increase in the provision. The allowance
for Real Estate Construction loans decreased due to a decrease in loan balances. This was represented as a decrease
in the provision.

See accompanying notes to consolidated financial statements
56

CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022, 2021 and 2020
(Amounts in thousands, except share data)

NOTE 5 - ALLOWANCE FOR LOAN LOSSES (Continued)

Allowance for loan losses:

December 31, 2020
Commercial & Agriculture
Commercial Real Estate:

Owner Occupied
Non-Owner Occupied

Residential Real Estate
Real Estate Construction
Farm Real Estate
Consumer and Other
Unallocated
Total

Beginning
balance

Charge-offs

Recoveries

Provision
(Credit)

Ending
Balance

$

2,219 $

(20) $

7 $

604 $

2,810

2,541
6,584
1,582
1,250
344
247
—

$ 14,767 $

(148)
—
(236)
—
—
(61)
—
(465) $

4,057
1,405
259
12,451
5,819
48
2,484
920
218
2,439
1,185
4
338
(19)
13
209
(42)
65
240
240
—
614 $ 10,112 $ 25,028

For the year ended December 31, 2020, the Company provided $10,112 to the allowance for loan losses. The provision
was primarily the result of an increase in Civista’s qualitative factors, primarily changes in international, national,
regional and local conditions, related to the economic shutdown driven by the ongoing COVID-19 pandemic.
Economic impacts related to the COVID-19 pandemic during 2020 included the loss of revenue by our business
clients, disruption of supply chains, additional employee costs for businesses due to the pandemic, higher
unemployment rates throughout our footprint and a large number of customers requesting payment relief. The
allowance for Commercial & Agriculture loans increased due to an increase in general reserves required for this type
as a result of an increase in loan balances mainly from Civista’s participation in the PPP loan program and by an
increase in loss rates, resulting in an increase in the provision. PPP loans are eligible for a 100% guaranty by the U.S.
Small Business Administration (“SBA”) and, as a result, the reserve percentage for PPP loans is substantially less than
the other loans in this segment. However, in the event of a loss resulting from a default on a PPP loan, and a
determination by the SBA that there was a deficiency in the manner on which the PPP loan was originated or funded,
the SBA may deny its liability under the guaranty.

For the year ended December 31, 2020, the allowance for Commercial Real Estate – Owner Occupied loans increased
due to an increase in general reserves required for this type as a result of higher loan balances, an increase in classified
loans and the volume of loans in payment deferral, and an increase in loss rates. The result was represented as an
increase in the provision. The allowance for Commercial Real Estate – Non-Owner Occupied loans increased due to
an increase in general reserves required as a result of an increase in loan balances, an increase in classified loans and
the volume of loans in payment deferral, and an increase in loss rates. This was represented as an increase in the
provision. The allowance for Residential Real Estate loans increased due to an increase in general reserves required
for this type as a result of factors related to the COVID-19 pandemic, offset by a decrease in loan balances, represented
by an increase in the provision. The allowance for Real Estate Construction loans increased due to an increase in
general reserves required as a result of an increase in loan balances and an increase in loss rates, represented by an
increase in the provision. The allowance for Farm Real Estate loans decreased due to a decrease in general reserves
required as a result of a decrease in loan balances. The result was represented as a decrease in the provision. The
allowance for Consumer and Other loans decreased due to a decrease in general reserves required as a result of a
decrease in loan balances and loss rates. The result was represented as a decrease in the provision.

See accompanying notes to consolidated financial statements
57

CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022, 2021 and 2020
(Amounts in thousands, except share data)

NOTE 5 - ALLOWANCE FOR LOAN LOSSES (Continued)

The following tables present, by portfolio segment, the allocation of the allowance for loan losses and related loan
balances as of December 31, 2022 and December 31, 2021.

December 31, 2022
Allowance for loan losses:
Commercial & Agriculture
Commercial Real Estate:

Owner Occupied
Non-Owner Occupied

Residential Real Estate
Real Estate Construction
Farm Real Estate
Lease financing receivables
Consumer and Other
Unallocated

Total

Outstanding loan balances:
Commercial & Agriculture
Commercial Real Estate:

Owner Occupied
Non-Owner Occupied

Residential Real Estate
Real Estate Construction
Farm Real Estate
Lease financing receivables
Consumer and Other

Total

Loans acquired
with credit
deterioration

Loans
individually
evaluated for
impairment

Loans
collectively
evaluated fo
r
impairment

Total

$

6 $

— $

3,005 $

3,011

3
—
—
—
—
—
—
—
9 $

6
—
1
—
—
—
—
—
7 $

4,556
14,138
3,144
2,293
291
429
98
541
28,495 $

4,565
14,138
3,145
2,293
291
429
98
541
28,511

863 $

— $ 277,732 $ 278,595

1,988
119
1,414
—
—
—
1
4,385 $

232
368,927
371,147
— 1,018,617
1,018,736
392
550,975
552,781
— 243,127
243,127
24,708
—
24,708
36,797
—
36,797
20,775
20,774
—
624 $2,541,657 $2,546,666

$

$

$

See accompanying notes to consolidated financial statements
58

CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022, 2021 and 2020
(Amounts in thousands, except share data)

NOTE 5 - ALLOWANCE FOR LOAN LOSSES (Continued)

December 31, 2021
Allowance for loan losses:
Commercial & Agriculture
Commercial Real Estate:

Owner Occupied
Non-Owner Occupied

Residential Real Estate
Real Estate Construction
Farm Real Estate
Consumer and Other
Unallocated

Total

Outstanding loan balances:
Commercial & Agriculture
Commercial Real Estate:

Owner Occupied
Non-Owner Occupied

Residential Real Estate
Real Estate Construction
Farm Real Estate
Consumer and Other

Total

Loans acquired
with credit
deterioration

Loans
individually
evaluated for
impairment

Loans
collectively
evaluated for
impairment

Total

$

$

$

$

— $

—
—
—
—
—
—
—
— $

— $

7
—
11
—
—
—
—
18 $

2,600 $

2,600

4,457
13,860
2,586
1,810
287
176
847
26,623 $

4,464
13,860
2,597
1,810
287
176
847
26,641

— $

— $

246,502 $

246,502

—
—
290
—
—
—
290 $

187
—
526
—
509
—
1,222 $

295,265
829,310
429,244
157,127
27,910
11,009
1,996,367 $

295,452
829,310
430,060
157,127
28,419
11,009
1,997,879

The following tables represent credit exposures by internally assigned risk ratings for the periods ended December 31,
2022 and 2021. The remaining loans in the Residential Real Estate, Real Estate Construction and Consumer and Other
loan categories that are not assigned a risk grade are presented in a separate table below. The risk rating analysis
estimates the capability of the borrower to repay the contractual obligations of the loan agreements as scheduled or at
all. The Company’s internal credit risk rating system is based on experiences with similarly graded loans.

The Company’s internally assigned grades are as follows:

•

•

•

•

•

•

Pass – loans which are protected by the current net worth and paying capacity of the obligor or by the
value of the underlying collateral.

Special Mention – loans where a potential weakness or risk exists, which could cause a more serious
problem if not corrected.

Substandard – loans that have a well-defined weakness based on objective evidence and are characterized
by the distinct possibility that Civista will sustain some loss if the deficiencies are not corrected.

Doubtful – loans classified as doubtful have all the weaknesses inherent in a substandard asset. In addition,
these weaknesses make collection or liquidation in full highly questionable and improbable, based on
existing circumstances.

Loss – loans classified as a loss are considered uncollectible, or of such value that continuance as an asset
is not warranted.

Unrated – Generally, Residential Real Estate, Real Estate Construction and Consumer and Other loans
are not risk-graded, except when collateral is used for a business purpose.

See accompanying notes to consolidated financial statements
59

CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022, 2021 and 2020
(Amounts in thousands, except share data)

NOTE 5 - ALLOWANCE FOR LOAN LOSSES (Continued)

December 31, 2022
Commercial & Agriculture
Commercial Real Estate:

Owner Occupied
Non-Owner Occupied

Residential Real Estate
Real Estate Construction
Farm Real Estate
Lease financing receivables
Consumer and Other

Total

December 31, 2021
Commercial & Agriculture
Commercial Real Estate:

Owner Occupied
Non-Owner Occupied

Residential Real Estate
Real Estate Construction
Farm Real Estate
Consumer and Other

Total

Pass
273,291 $

$

Special
Mention

Substandard

Doubtful

Ending
Balance

2,558 $

2,746 $

— $

278,595

367,652
1,003,942
114,021
198,734
24,283
36,223
839

$

2,018,985 $

Pass
244,787 $

$

290,617
764,181
77,594
136,149
27,023
764

$

1,541,115 $

734
10,947
183
—
379
—
—
14,801 $

2,761
3,847
5,787
221
46
401
163
15,972 $

—
—
—
—
—
173
—
173 $

Special
Mention

Substandard

Doubtful

371,147
1,018,736
119,991
198,955
24,708
36,797
1,002
2,049,931

Ending
Balance

526 $

1,189 $

— $

246,502

3,119
28,042
164
260
205
—
32,316 $

1,716
37,087
4,455
5
1,191
20
45,663 $

—
—
—
—
—
—
— $

295,452
829,310
82,213
136,414
28,419
784
1,619,094

Due to the business disruptions and shut-downs due to the Covid-19 pandemic, in 2020, management offered payment
deferments to a number of customers that had previously been current in all respects. Civista instituted an enhanced
portfolio management process which included meeting with customers, requesting additional financial information
and evaluating cashflow and adjusting risk ratings as conditions warrant. During this process we systematically
downgraded a significant number of loans to recognize the increased risk attributed to the pandemic. Additionally,
Civista offered longer term deferrals under Section 4013 of the Cares Act, that were also downgraded as appropriate.
Based on improved financial performance, Civista upgraded 48% of criticized loans during 2022. The lodging
industry was hit the hardest and recovery is taking longer for that segment. Civista believes it has prudently identified
risk, assigned appropriate risk ratings, and has a comprehensive portfolio management process to identify and quantify
risk.

The following tables present performing and nonperforming loans based solely on payment activity for the years ended
December 31, 2022 and December 31, 2021 that have not been assigned an internal risk grade. The types of loans
presented here are not assigned a risk grade unless there is evidence of a problem. Payment activity is reviewed by
management on a monthly basis to evaluate performance. Loans are considered to be nonperforming when they
become 90 days past due or if management thinks that we may not collect all of our principal and interest.
Nonperforming loans also include certain loans that have been modified in Troubled Debt Restructurings (TDRs)
where economic concessions have been granted to borrowers who have experienced or are expected to experience
financial difficulties. These concessions typically result from the Company’s loss mitigation activities and could
include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance or other actions due
to economic status. Certain TDRs are classified as nonperforming at the time of restructure and may only be returned
to performing status after considering the borrower’s sustained repayment performance for a reasonable period,
generally six months.

See accompanying notes to consolidated financial statements
60

CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022, 2021 and 2020
(Amounts in thousands, except share data)

NOTE 5 - ALLOWANCE FOR LOAN LOSSES (Continued)

December 31, 2022
Performing
Nonperforming

Total

December 31, 2021
Performing
Nonperforming

Total

Residential
Real Estate
$ 432,790 $

—

$ 432,790 $

Residential
Real Estate
$ 347,847 $

—

$ 347,847 $

Real Estate
Construction

Consumer
and Other

Total

44,172 $
—
44,172 $

19,773 $ 496,735
—
19,773 $ 496,735

—

Real Estate
Construction

Consumer
and Other

Total

20,713 $
—
20,713 $

10,225 $ 378,785
—
10,225 $ 378,785

—

The following tables include an aging analysis of the recorded investment of past due loans outstanding as of
December 31, 2022 and 2021.

December 31, 2022
Commercial & Agriculture
Commercial Real Estate:

Owner Occupied
Non-Owner Occupied

Residential Real Estate
Real Estate Construction
Farm Real Estate
Lease financing receivables
Consumer and Other

Total

30-59
Days
Past Due
$

60-89
Days
Past Due

90 Days
or Greater

Total
Past
Due

247 $

78 $

534 $

Current
859 $ 276,873 $

Purchased
Credit-
Impaired
Loans

Past Due
90 Days
and
Accruing
863 $ 278,595 $ —

Total Loans

21
—
3,133
—
7
1,040
293
$ 4,741 $

1,988
119
1,414

76
1,164
1,107
219
—
341
74

13
—
857
—
—
—
—
49
997 $ 3,515 $ 9,253 $2,533,028 $ 4,385 $2,546,666 $ —

371,147
1,018,736
552,781
— 243,127
24,708
—
36,797
—
20,775
1

369,049
1,017,453
546,270
242,908
24,701
35,416
20,358

110
1,164
5,097
219
7
1,381
416

—
—
—
—
—

December 31, 2021
Commercial &
Agriculture
Commercial Real
Estate:

Owner Occupied
Non-Owner
Occupied

Residential Real Estate
Real Estate
Construction
Farm Real Estate
Consumer and Other

Total

$

30-59
Days
Past Due

60-89
Days
Past Due

90 Days
or Greater

Total
Past
Due

Current

Purchased
Credit-
Impaired
Loans

Total Loans

Past Due
90 Days
and
Accruing

$

249 $

13 $

78 $

340 $ 246,162 $

— $ 246,502 $ —

106

295,346

—

295,452

—

—
1,848

—
—
42
2,139 $

—

—
879

—
—
—
892 $

106

4
842

—
—
9

4
3,569

—
—
51

829,306
426,201

157,127
28,419
10,958

1,039 $ 4,070 $1,993,519 $

—

—
—

—
290

829,310
430,060

—
157,127
—
—
28,419
—
—
11,009
—
290 $1,997,879 $ —

See accompanying notes to consolidated financial statements
61

CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022, 2021 and 2020
(Amounts in thousands, except share data)

NOTE 5 - ALLOWANCE FOR LOAN LOSSES (Continued)

The following table presents loans on nonaccrual status, excluding purchased credit-impaired (PCI) loans, as of
December 31, 2022 and 2021.

Commercial & Agriculture
Commercial Real Estate:

Owner Occupied
Non-Owner Occupied

Residential Real Estate
Real Estate Construction
Farm Real Estate
Lease financing receivables
Consumer and Other

Total

2022

2021

$

774 $

78

386
1,109
3,926
221
—
—
91
6,507 $

334
4
3,232
5
—
—
20
3,673

$

Nonaccrual Loans: Loans are considered for nonaccrual status upon reaching 90 days delinquency, unless the loan is
well secured and in the process of collection, although Civista may be receiving partial payments of interest and partial
repayments of principal on such loans. When a loan is placed on nonaccrual status, previously accrued but unpaid
interest is deducted from interest income. A loan may be returned to accruing status only if one of three conditions are
met: the loan is well-secured and none of the principal and interest has been past due for a minimum of 90 days; the
loan is a TDR and the borrower has made a minimum of six months payments; or the principal and interest payments
are reasonably assured and a sustained period of performance has occurred, generally six months. The gross interest
income that would have been recorded on nonaccrual loans in 2022, 2021 and 2020 if the loans had been current in
accordance with their original terms and had been outstanding throughout the period or since origination, if held for
part of the period, was $384, $307 and $536, respectively. The amount of interest income on such loans recognized
on a cash basis was $451 in 2022, $716 in 2021 and $477 in 2020.

Modifications: A modification of a loan constitutes a TDR when Civista for economic or legal reasons related to a
borrower’s financial difficulties grants a concession to the borrower that it would not otherwise consider. Civista offers
various types of concessions when modifying a loan, however, forgiveness of principal is rarely granted. Commercial
Real Estate loans modified in a TDR often involve reducing the interest rate lower than the current market rate for
new debt with similar risk. Real Estate loans modified in a TDR were primarily comprised of interest rate reductions
where monthly payments were lowered to accommodate the borrowers’ financial needs.

Loans modified in a TDR are typically already on non-accrual status and partial charge-offs have in some cases already
been taken against the outstanding loan balance. As a result, loans modified in a TDR may have the financial effect
of increasing the specific allowance associated with the loan. An allowance for impaired loans that have been modified
in a TDR are measured based on the present value of expected future cash flows discounted at the loan’s effective
interest rate or the estimated fair value of the collateral, less any selling costs, if the loan is collateral dependent.
Management exercises significant judgment in developing these estimates. TDRs accounted for $7 of the allowance
for loan losses as of December 31, 2022, $18 as of December 31, 2021 and $35 as of December 31, 2020.

There were no loans modified in a TDR during the twelve month period ended December 31, 2022, 2021 and 2020.

Recidivism, or the borrower defaulting on its obligation pursuant to a modified loan, results in the loan once again
becoming a non-accrual loan. Recidivism occurs at a notably higher rate than do defaults on new originations loans,
so modified loans present a higher risk of loss than do new origination loans. During the periods ended December 31,
2022, 2021 and 2020, there were no defaults on loans that were modified and considered TDRs during the previous
twelve months.

See accompanying notes to consolidated financial statements
62

CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022, 2021 and 2020
(Amounts in thousands, except share data)

NOTE 5 - ALLOWANCE FOR LOAN LOSSES (Continued)

Impaired Loans: Larger (greater than $350) commercial loan, commercial real estate loan and farm real estate loan
relationships, all TDRs and residential real estate and consumer loans that are part of a larger relationship are tested
for impairment. These loans are analyzed to determine if it is probable that all amounts will not be collected according
to the contractual terms of the loan agreement. If management determines that the value of the impaired loan is less
than the recorded investment in the loan (net of previous charge-offs, deferred loan fees or costs and unamortized
premium or discount), impairment is recognized through an allowance estimate or a charge-off to the allowance.

The following table includes the recorded investment and unpaid principal balances for impaired financing
receivables, excluding PCI loans, with the associated allowance amount, if applicable, as of December 31, 2022 and
2021.

December 31, 2022
Unpaid
Principal
Balance

Recorded
Investment

Related
Allowance

Recorded
Investment

December 31, 2021
Unpaid
Principal
Balance

Related
Allowance

With no related allowance recorded:
Commercial Real Estate:

Owner Occupied
Non-Owner Occupied

Residential Real Estate
Farm Real Estate
Total

With an allowance recorded:
Commercial Real Estate:

Owner Occupied
Residential Real Estate

Total

Total:

Commercial & Agriculture
Commercial Real Estate:

Owner Occupied
Non-Owner Occupied

Residential Real Estate
Farm Real Estate

Total

$

$

82 $
—
385
—
467

82
—
410
—
492

150
7
157

—

232
—
392
—
624 $

150 $
11
161

—

232
—
421
—
653 $

$

— $
—
503
509
1,012

—
—
528
509
1,037

6
1
7

—

6
—
1
—
7 $

187
23
210

—

187
—
526
509

187 $
27
214

—

187
—
555
509

1,222 $ 1,251 $

7
11
18

—

7
—
11
—
18

See accompanying notes to consolidated financial statements
63

CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022, 2021 and 2020
(Amounts in thousands, except share data)

NOTE 5 - ALLOWANCE FOR LOAN LOSSES (Continued)

The following tables include the average recorded investment and interest income recognized for impaired financing
receivables as of, and for the years ended, December 31, 2022, 2021 and 2020.

For the year ended:

December 31, 2022

December 31, 2021

Commercial & Agriculture
Commercial Real Estate:

Owner Occupied
Non-Owner Occupied

Residential Real Estate
Farm Real Estate
Total

Average
Recorded
Investment
$

86 $

406
35
614
381
1,522 $

$

Interest
Income
Recognized

Average
Recorded
Investment

Interest
Income
Recognized
—

15 $

3 $

22
1
33
14
73 $

396
23
629
569
1,632 $

18
1
31
24
74

For the year ended:

December 31, 2020

Commercial & Agriculture
Commercial Real Estate:

Owner Occupied
Non-Owner Occupied

Residential Real Estate
Farm Real Estate
Total

Average
Recorded
Investment
$

88 $

Interest
Income
Recognized
4

520
243
1,361
647
2,859 $

$

27
16
43
26
116

Foreclosed assets acquired in settlement of loans are carried at fair value less estimated costs to sell and are included
in Other assets on the Consolidated Balance Sheet. As of December 31, 2022 and 2021, there were no foreclosed
assets included in Other assets. As of December 31, 2022 and 2021, the Company had initiated formal foreclosure
procedures on $399 and $293, respectively, of Residential Real Estate loans.

Changes in the amortizable yield for PCI loans were as follows, since acquisition:

At December 31,
2022
(In Thousands)

At December 31,
2021
(In Thousands)

Balance at beginning of period
Acquisition of PCI loans
Accretion
Transfers from non-accretable to accretable
Balance at end of period

$

$

217 $
—
(36)
33
214 $

225
—
(77)
69
217

See accompanying notes to consolidated financial statements
64

CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022, 2021 and 2020
(Amounts in thousands, except share data)

NOTE 5 - ALLOWANCE FOR LOAN LOSSES (Continued)

The following table presents additional information regarding loans acquired and accounted for in accordance with
ASC 310-30:

At December 31, 2022
Acquired Loans with
Specific Evidence of
Deterioration of Credit
Quality (ASC 310-30)

At December 31, 2021
Acquired Loans with
Specific Evidence of
Deterioration of Credit
Quality (ASC 310-30)

Outstanding balance
Carrying amount

$

(In Thousands)
5,220 $
4,386

512
290

There was no allowance for loan losses recorded for acquired loans with or without specific evidence of deterioration
in credit quality as of December 31, 2022 and 2021, respectively.

See accompanying notes to consolidated financial statements
65

CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022, 2021 and 2020
(Amounts in thousands, except share data)

NOTE 6 - OTHER COMPREHENSIVE INCOME (LOSS)

The following table presents the components of other comprehensive income (loss), net of tax, as of December 31,
2022, 2021 and 2020:

Year Ended December 31, 2022
Net unrealized losses on investment securities:

Other comprehensive loss before reclassifications
Amounts reclassified from accumulated other comprehensive

loss
Net unrealized losses on investment securities

Defined benefit plans:

Other comprehensive income before reclassifications
Amounts reclassified from accumulated other comprehensive

income
Defined benefit plans, net

Other comprehensive loss

Year Ended December 31, 2021
Net unrealized losses on investment securities:

Other comprehensive loss before reclassifications
Amounts reclassified from accumulated other comprehensive

loss
Net unrealized losses on investment securities

Defined benefit plans:

Other comprehensive income before reclassifications
Amounts reclassified from accumulated other comprehensive

income
Defined benefit plans, net

Other comprehensive loss

Year Ended December 31, 2020
Net unrealized gains on investment securities:

Other comprehensive income before reclassifications
Amounts reclassified from accumulated other comprehensive

income
Net unrealized gains on investment securities

Defined benefit plans:

Other comprehensive loss before reclassifications
Amounts reclassified from accumulated other comprehensive

loss
Defined benefit plans, net
Other comprehensive income

Before Tax

Tax Effect

Net of Tax

$

(85,517) $

(18,079) $

(67,438)

(10)
(85,527)

(2)
(18,081)

(8)
(67,446)

736

155

581

—
736
(84,791) $

—
155
(17,926) $

—
581
(66,865)

(8,570) $

(1,799) $

(6,771)

(1)
(8,571)

—
(1,799)

(1)
(6,772)

992

209

783

240
1,232
(7,339) $

50
259
(1,540) $

190
973
(5,799)

10,935

$

2,297

$

8,638

(94)
10,841

(20)
2,277

(74)
8,564

(1,326)

289
(1,037)
9,804

$

(279)

(1,047)

61
(218)
2,059

$

228
(819)
7,745

$

$

$

$

$

See accompanying notes to consolidated financial statements
66

CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022, 2021 and 2020
(Amounts in thousands, except share data)

NOTE 6 - OTHER COMPREHENSIVE INCOME (LOSS) (Continued)

The following table presents the changes in each component of accumulated other comprehensive income (loss), net
of tax, as of December 31, 2022, 2021 and 2020.

For the Year Ended
December 31, 2022

For the Year Ended
December 31, 2021

For the Year Ended
December 31, 2020

Unrealized
Gains and
Losses on
Available
for Sale
Securities
Beginning balance $ 14,675 $ (5,855) $ 8,820 $ 21,447 $ (6,828) $14,619 $ 12,883 $ (6,009) $ 6,874
Other

Unrealized
Gains and
Losses on
Available
for Sale
Securities

Unrealized
Gains and
Losses on
Available
for Sale
Securities

Defined
Benefit
Pension
Items

Defined
Benefit
Pension
Items

Defined
Benefit
Pension
Items

Total

Total

Total

comprehensive
income (loss)
beforere
classifications

Amounts

reclassified
from
accumulated
other
comprehensive
income (loss)
Net current-period

other
comprehensive
income(loss)
Ending balance

(67,438)

581

(66,857)

(6,771)

783

(5,988)

8,638

(1,047)

7,591

(8)

—

(8)

(1)

190

189

(74)

228

154

(67,446)

7,745
$ (52,771) $ (5,274) $(58,045) $ 14,675 $ (5,855) $ 8,820 $ 21,447 $ (6,828) $14,619

(66,865)

(6,772)

(5,799)

8,564

(819)

581

973

See accompanying notes to consolidated financial statements
67

CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022, 2021 and 2020
(Amounts in thousands, except share data)

NOTE 6 - OTHER COMPREHENSIVE INCOME (LOSS) (Continued)

The following table presents the amounts reclassified out of each component of accumulated other comprehensive
loss as of December 31, 2022, 2021 and 2020.

Amount Reclassified from
Accumulated Other
Comprehensive Loss (a)
For the year ended December 31,

Details about Accumulated Other
Comprehensive Income
(Loss) Components
Unrealized gains (losses) on available for sale

securities
Tax effect

Amortization of defined benefit pension items

Actuarial losses

Tax effect

Total reclassifications for the period

2022

2021

2020

$

$

10
(2)
8

— (b)
—
—
8

$

$

1
—
1

(240) (b)
50
(190)
(189)

$

$

94
(20)
74

(289) (b)
61
(228)
(154)

Affected Line Item in the
Statement Where Net
Income is
Presented

Net gain on sale of
securities
Income taxes

Other operating
expenses
Income taxes

(a) Amounts in parentheses indicate expenses and other amounts indicate income.
(b)

These accumulated other comprehensive income (loss) components are included in the computation of net
periodic pension cost.

NOTE 7 - PREMISES AND EQUIPMENT

Year-end premises and equipment were as follows:

Land and improvements
Buildings and improvements
Furniture and equipment

Total

Accumulated depreciation

Premises and equipment, net

At December 31,
2021
2022

$

$

7,919 $
35,138
63,033
106,090
(42,072)
64,018 $

6,970
29,305
23,786
60,061
(37,616)
22,445

Depreciation expense was $4,456, $1,976 and $2,253 for 2022, 2021 and 2020, respectively.

See accompanying notes to consolidated financial statements
68

CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022, 2021 and 2020
(Amounts in thousands, except share data)

NOTE 8 - GOODWILL AND INTANGIBLE ASSETS

The carrying amount of goodwill has increased $48,844 since December 31, 2021 as a result of the Comunibanc Corp.
and VFG acquisitions, as discussed in Note 2. The balance of goodwill was $125,695 at December 31, 2022 and
$76,851 at December 31, 2021.

Management performs an evaluation of goodwill for impairment on an annual basis, or more frequently if events or
changes in circumstances indicate that the asset might be impaired. Management performed an evaluation of the
Company’s goodwill during the fourth quarter of 2022. Based on this test, management concluded that the Company’s
goodwill was not impaired at December 31, 2022.

Acquired intangible assets were as follows as of year-end.

Gross
Carrying
Amount

2022

Accumulated
Amortization

Net
Carrying
Amount

Gross
Carrying
Amount

2021

Accumulated
Amortization

Net
Carrying
Amount

Core deposit intangible assets(1):

Core deposit intangibles

Total core deposit intangible assets

12,953
$ 12,953 $

4,883
4,883 $

8,070
8,070 $

8,527
8,527 $

3,588
3,588 $

4,939
4,939

(1)

Excludes fully amortized core deposit intangible assets

Aggregate core deposit intangible amortization expense was $1,296, $890 and $913 for 2022, 2021 and 2020,
respectively.

Activity for mortgage servicing rights (MSRs) and the related valuation allowance follows:

2022

2021

Mortgage Servicing Rights:

Beginning of year
Additions
Disposals
Amortized to expense
Other Charges
Change in valuation allowance
End of year

Valuation allowance:
Beginning of year
Additions expensed
Reductions credited to operations
Direct write-offs
End of year

$

$

$

$

2,642
397
—
350
—
—
2,689

$

$

— $
—
—
—
— $

2,246
764
—
572
—
(204)
2,642

204
261
(465)
—
—

The unpaid principal balance of mortgage loans serviced for third parties was $456,149 at December 31, 2022,
compared to $405,786 at December 31, 2021 and $353,473 at December 31, 2020.

Aggregate mortgage servicing rights (MSRs) amortization was $350, $572 and $524 for 2022, 2021 and 2020,
respectively.

Mortgage loan contractual servicing fees were $1,063, $947 and $634 for 2022, 2021 and 2020, respectively.
Mortgage loan contractual servicing fees are included in Other income on the Consolidated Statements of Operations.

See accompanying notes to consolidated financial statements
69

CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022, 2021 and 2020
(Amounts in thousands, except share data)

NOTE 8 - GOODWILL AND INTANGIBLE ASSETS (Continued)

The fair value of servicing rights was $2,689 and $2,642 at year-end 2022 and 2021, respectively. Fair value at year-
end 2022 was determined using a discount rate of 12.0%, prepayment speeds ranging from 5.0% to 20.0%, depending
on the stratification of the specific right, and a weighted average default rate of 0.14%. Fair value at year-end 2021
was determined using a discount rate of 12.0%, prepayment speeds ranging from 8.0% to 35.0%, depending on the
stratification of the specific right, and a default rate of 0.41%.

Estimated amortization expense for each of the next five years and thereafter is as follows:

2023
2024
2025
2026
2027
Thereafter

MSRs

Core deposit
intangibles

$

$

140 $
140
140
139
137
1,993
2,689 $

1,581 $
1,489
1,311
1,193
1,071
1,425
8,070 $

Total

1,721
1,629
1,451
1,332
1,208
3,418
10,759

NOTE 9 - INTEREST-BEARING DEPOSITS

Interest-bearing deposits as of December 31, 2022 and 2021 were as follows:

Demand
Savings and Money markets
Certificates of Deposit:

$250 and over
Other

Individual Retirement Accounts

Total

$

2022
527,879 $
876,427

45,380
227,886
46,079

$ 1,723,651 $

2021

537,510
843,837

55,011
149,521
41,916
1,627,795

Scheduled maturities of certificates of deposit, including IRAs at December 31, 2022 were as follows:

2023
2024
2025
2026
2027
Thereafter
Total

$

$

249,487
51,494
8,172
5,539
3,372
1,281
319,345

Deposits from the Company’s principal shareholders, officers, directors, and their affiliates at year-end 2022 and 2021
were $10,166 and $7,690, respectively.

As of December 31, 2022, CDs and IRAs totaling $50,349 met or exceeded the FDIC’s insurance limit of $250,000.

As of December 31, 2022, brokered deposits totaled $96,400.

See accompanying notes to consolidated financial statements
70

CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022, 2021 and 2020
(Amounts in thousands, except share data)

NOTE 10 - SHORT-TERM BORROWINGS

Short-term borrowings, which consist of federal funds purchased and other short-term borrowings are summarized as
follows:

At December 31, 2022

At December 31, 2021

Outstanding balance at year end
Maximum indebtedness during the year
Average balance during the year
Average rate paid during the year
Interest rate on year end balance

Federal
Funds
Purchased

$

Short-term
Borrowings
393,700
435,500
66,875

3.84%
4.24%

Federal
Funds
Purchased
$

— $

50,000
137
0.73%
—

Short-term
Borrowings

—
—
—
—
—

— $

50,000
137
4.38%
—

Outstanding balance at year end
Maximum indebtedness during the year
Average balance during the year
Average rate paid during the year
Interest rate on year end balance

$

At December 31, 2020

Federal
Funds
Purchased

Short-term
Borrowings
—
102,700
8,151
1.64%
—

— $

50,000
228
0.35%
—

Average balances during the year represent daily averages. Average interest rates represent interest expense divided
by the related average balances.

These borrowing transactions can range from overnight to six months in maturity. The average maturity was 20.2 days
at December 31, 2022. At December 31, 2021 and 2020, there were no short-term borrowings with outstanding
balances.

NOTE 11 - FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWINGS

Long-term advances from the FHLB were $3,578 and $75,000 at December 31, 2022 and December 31, 2021,
respectively. Outstanding balances have a maturity dates between July 2023 and June 2028 with fixed rates ranging
from 1.18% to 2.97%. The average rate on outstanding advances was 2.21% at December 31, 2022. Outstanding
advances are prepayable in whole or in part and could be subject to a termination fee.

Other borrowings totaled $15,516 at December 31, 2022, and include borrowings assumed in the acquisition of VFG.
The weighted average rate on these borrowings was 5.67% and the weighted average life was 39 months.

Scheduled principal reductions of FHLB advances outstanding at December 31, 2022 were as follows:

2023
2024
2025
2026
2027
Thereafter
Total

$

$

1,246
880
636
469
273
74
3,578

See accompanying notes to consolidated financial statements
71

CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022, 2021 and 2020
(Amounts in thousands, except share data)

NOTE 11 - FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWINGS (Continued)

In addition to FHLB borrowings, the Company had outstanding letters of credit with the FHLB totaling $57,510 and
$21,300 at year-end 2022 and 2021, respectively, used for pledging to secure public funds. FHLB borrowings and the
letters of credit were collateralized by FHLB stock and by $932,373 and $737,389 of residential mortgage loans under
a blanket lien arrangement at year-end 2022 and 2021, respectively.

The Company had a FHLB maximum borrowing capacity of $829,458 as of December 31, 2022, with remaining
borrowing capacity of approximately $374,670. The borrowing arrangement with the FHLB is subject to annual
renewal. The maximum borrowing capacity is recalculated at least quarterly.

NOTE 12 - SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

Securities sold under agreements to repurchase are used to facilitate the needs of our customers as well as to facilitate
our short-term funding needs. Securities sold under repurchase agreements are carried at the amount of cash received
in association with the agreement. We continuously monitor the collateral levels and may be required, from time to
time, to provide additional collateral based on the fair value of the underlying securities. Securities pledged as
collateral under repurchase agreements are maintained with our safekeeping agents.

The following table presents detail regarding the securities pledged as collateral under repurchase agreements as of
December 31, 2022 and 2021. All of the repurchase agreements are overnight agreements.

Securities pledged for repurchase agreements:

U.S. Treasury securities
Obligations of U.S. government agencies

Total securities pledged
Gross amount of recognized liabilities for

repurchase agreements

Amounts related to agreements not included in

offsetting disclosures above

December 31,
2022

December 31,
2021

$

$

$

$

25,143 $
—
25,143 $

16,478
9,017
25,495

25,143 $

25,495

— $

—

Information concerning securities sold under agreements to repurchase was as follows:

Outstanding balance at year end
Average balance during the year
Average interest rate during the year
Maximum month-end balance during the year
Weighted average interest rate at year end

$

$

2022
25,143 $
24,390

0.05%
26,044 $
0.05%

2021
25,495 $
24,390

0.09%
34,200 $
0.05%

2020
28,914
24,390

0.10%

31,885

0.10%

See accompanying notes to consolidated financial statements
72

CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022, 2021 and 2020
(Amounts in thousands, except share data)

NOTE 13 - SUBORDINATED DEBENTURES

The following table summarizes the Company's subordinated debentures at December 31, 2022 and 2021:

Subordinated Note - fixed interest rate until November 30, 2026 then variable
interest rate equal to SOFR plus 2.19%, the rate was 3.25% at December
31, 2022 and 2021, respectively - $75,000 maturing December 31, 2031
First Citizens Statutory Trust II - variable interest equal to 3-month LIBOR
plus 3.15%, which was 6.79% and 3.28% at December 31, 2022 and
2021, respectively - $7,732 maturing March 26, 2033

First Citizens Statutory Trust III - variable interest equal to 3-month LIBOR
plus 2.25%, which was 5.78% and 2.37% at December 31, 2022 and
2021, respectively - $12,887 maturing September 20, 2034

First Citizens Statutory Trust IV - variable interest equal to 3-month LIBOR
plus 1.60%, which was 4.89% and 1.72% at December 31, 2022 and
2021, respectively - $5,155 maturing March 23, 2037

Futura TPF Trust I - variable interest rate equal to 3-month LIBOR plus
1.66%, which was 4.95% and 1.78% at December 31, 2022 and 2021,
respectively - $2,578 maturing June 15, 2035

Futura TPF Trust II - variable interest rate equal to 3-month LIBOR plus
1.66%, which was 4.95% and 1.78% at December 31, 2022 and 2021,
respectively - $2,070 maturing June 15, 2035
Total subordinated debentures

December 31, 2022

December 31, 2021

$

73,450

$

73,386

7,732

7,732

12,887

12,887

5,155

2,578

5,155

2,578

1,997
103,799

$

1,997
103,735

$

On November 30, 2021, the Company entered into a Subordinated Note Purchase Agreement pursuant to which the
Company sold and issued $75,000 aggregate principal amount of its 3.25% Fixed-to-Floating Rate Subordinated Notes
due 2031. The Notes have a stated maturity of December 31, 2031.

The Notes will initially bear interest at a fixed rate of 3.25% per annum, from and including November 30, 2021, to
but excluding December 1, 2026, with interest payable semi-annually in arrears. From and including December 1,
2026, to but excluding the stated maturity date or early redemption date, the interest rate will reset quarterly to an
annual floating rate equal the then-current benchmark rate, which will initially be the three-month Secured Overnight
Financing Rate (SOFR) plus 219 basis points, with interest during such period payable quarterly in arrears. If three-
month SOFR cannot be determined during the applicable floating rate period, a different index will be determined and
used in accordance with the terms of Notes and underlying Indenture.

Prior to December 1, 2026, the Company may redeem the Notes, in whole but not in part, only under certain limited
circumstances as set forth in the Indenture. On or after December 1, 2026, the Company may, at its option, redeem
the Notes, in whole or in part, on any interest payment date, subject to the receipt of any required regulatory approvals.
Any redemption by the Company would be at a redemption price equal to 100% of the principal amount of the Notes
to be redeemed plus accrued and unpaid interest to but excluding the date of redemption.

On March 26, 2003, the Company formed First Citizens Statutory Trust II. The Company issued $7,700 of
subordinated debentures to First Citizens Statutory Trust II in exchange for ownership of all the common securities of
the First Citizens Statutory Trust II. The Company is not considered the primary beneficiary of First Citizens Statutory
Trust II; therefore, the trust is not consolidated in the Company's financial statements, but rather the subordinated
debentures are shown as a liability. The Company's investment in the common stock of the trust was $232 and is
included in Other assets.

See accompanying notes to consolidated financial statements
73

CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022, 2021 and 2020
(Amounts in thousands, except share data)

NOTE 13 - SUBORDINATED DEBENTURES (Continued)

On September 20, 2004, the Company formed First Citizens Statutory Trust III. The Company issued $12,900 of
subordinated debentures to First Citizens Statutory Trust III in exchange for ownership of all the common securities
of the First Citizens Statutory Trust III. The Company is not considered the primary beneficiary of First Citizens
Statutory Trust III; therefore, the trust is not consolidated in the Company's financial statements, but rather the
subordinated debentures are shown as a liability. The Company's investment in the common stock of the trust was
$387 and is included in Other assets.

On March 23, 2007, the Company formed First Citizens Statutory Trust IV. The Company issued $5,200 of
subordinated debentures to First Citizens Statutory Trust IV in exchange for ownership of all the common securities
of the First Citizens Statutory Trust IV. The Company is not considered the primary beneficiary of First Citizens
Statutory Trust IV; therefore, the trust is not consolidated in the Company's financial statements, but rather the
subordinated debentures are shown as a liability. The Company's investment in the common stock of the trust was
$155 and is included in Other assets.

In conjunction with the acquisition of Futura Banc Corp. ("Futura") on December 17, 2007, the Company assumed
$4,700 of subordinated debentures that were recorded at a fair value of $4,600 at the time of acquisition. On June 15,
2005, Futura issued $2,600 of subordinated debentures to Futura TPF Trust I in exchange for ownership of all the
common securities of the trust. On June 15, 2005, Futura issued $2,100 of subordinated debentures to Futura TPF
Trust II in exchange for ownership of all the common securities of the trust. The Company is not considered the
primary beneficiary of Futura TPF Trust I or Futura TPF Trust II; therefore, the trusts are not consolidated in the
Company's financial statements, but rather the subordinated debentures are shown as a liability. The Company's
investment in the common stock of the trusts was $148 and is included in Other assets.

For all the debentures mentioned above, interest is payable quarterly. The debentures and the common securities
issued by each of the trusts are redeemable in whole or in part on dates specified in the trust indenture document. All
of the subordinated debentures mentioned above may be included in Tier 1 capital (with certain limitations applicable)
under current regulatory guidelines and interpretations.

NOTE 14 - INCOME TAXES

Income taxes were as follows for the years ended December 31:

Current
State
Deferred

Income taxes

2022

2021

2020

$

$

6,973 $
152
483
7,608 $

5,111 $
587
1,319
7,017 $

6,947
270
(2,277)
4,940

Effective tax rates differed from the statutory federal income tax rate of 21% in 2022, 2021 and 2020 due to the
following:

Income taxes computed at the statutory federal tax

rate

Add (subtract) tax effect of:

Nontaxable interest income, net of nondeductible

interest expense

Low income housing tax credit
Cash surrender value of BOLI
Other

Income tax expense

2022

2021

2020

$

9,878 $

9,988 $

7,798

(1,666)
(679)
(207)
282
7,608 $

(1,315)
(1,402)
(252)
(2)
7,017 $

(1,293)
(1,186)
(205)
(174)
4,940

$

See accompanying notes to consolidated financial statements
74

CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022, 2021 and 2020
(Amounts in thousands, except share data)

NOTE 14 - INCOME TAXES (Continued)

Year-end deferred tax assets and liabilities were due to the following:

Deferred tax assets

Allowance for loan losses
Deferred compensation
Pension costs
Intangible assets
Net operating loss carryforward
Deferred loan fees
Unrealized gain on securities available for sale
Unrealized gain on securities purchased
Other

Deferred tax asset
Deferred tax liabilities

Tax depreciation in excess of book depreciation
Discount accretion on securities
FHLB stock dividends
Purchase accounting adjustments
Unrealized gain on securities available for sale
Prepaids
Other

Deferred tax liability

Net deferred tax asset

2022

2021

$

$

6,106 $
1,143
—
154
699
347
14,218
1,966
295
24,928

(2,124)
(244)
(822)
(2,220)
—
(334)
(735)
(6,479)
18,449 $

5,595
1,213
56
231
—
614
—
258
455
8,422

(973)
(86)
(969)
—
(3,806)
(276)
(1,243)
(7,353)
1,069

No valuation allowance was established at December 31, 2022 and 2021, due to the Company’s ability to carryforward
net operating losses to taxes paid in future years and certain tax strategies, coupled with the anticipated future income
as evidenced by the Company’s earning potential.

The Company files income tax returns in the U.S. Federal and various state jurisdictions. The Company records
interest and penalties, if any, in other interest income.

There is currently no liability for uncertain tax positions and no known unrecognized tax benefits. The Company’s
federal tax returns for taxable years through 2018 have been closed for purposes of examination by the Internal
Revenue Service. At December 21, 2022, the Company had $3.3 million in net operating losses subject to 382
limitations. No valuation allowance is recorded as these are expected to be fully utilized and have no expiration.

NOTE 15 - RETIREMENT PLANS

The Company sponsors a savings and retirement 401(k) plan, which covers all employees who meet certain eligibility
requirements and who choose to participate in the plan. The matching contribution to the 401(k) plan was $1,377,
$1,258 and $1,226 in 2022, 2021 and 2020, respectively. The Company’s matching contribution is 100% of an
employee’s first three percent contributed and 50% of the next two percent contributed.

The Company also sponsors a pension plan which is a noncontributory defined benefit retirement plan for all
employees who have attained the age of 20 1 ⁄ 2, completed six months of service and work 1,000 or more hours per
year. Annual payments, subject to the maximum amount deductible for federal income tax purposes, are made to a
pension trust fund. In 2006, the Company amended the pension plan to provide that no employee could be added as a
participant to the pension plan after December 31, 2006. In April 2014, the Company amended the pension plan again
to provide that no additional benefits would accrue beyond April 30, 2014.

See accompanying notes to consolidated financial statements
75

CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022, 2021 and 2020
(Amounts in thousands, except share data)

NOTE 15 - RETIREMENT PLANS (Continued)

In October 2015, the Company, on behalf of it and its subsidiaries, entered into Pension Shortfall Agreements (the
“Shortfall Agreements”) with ten employees of Civista. When the Company ceased accruals to its defined benefit
pension plan on April 30, 2014, the circumstances of some participants with limited periods until their anticipated
retirement dates would not permit them to use other available alternatives to make up for the shortfall in their expected
pension. The Company calculated the total amount of the shortfall for each of the referenced individuals after
considering its contributions to other retirement benefits. Pension shortfall expense was $145 in 2022, $130 in 2021
and $130 in 2020. Included in pension shortfall expense was interest expense, totaling $24, $9 and $9 in 2022, 2021
and 2020, respectively, which was also recorded in and credited to the accounts of the ten individuals covered by this
plan.

Information about the pension plan is as follows:

2022

2021

Change in benefit obligation:

Beginning benefit obligation
Service cost
Interest cost
Curtailment gain
Settlement loss
Actuarial (gain)/loss
Benefits paid
Settlement payments
Ending benefit obligation

Change in plan assets, at fair value:

Beginning plan assets
Actual return
Employer contribution
Benefits paid
Settlement payments
Administrative expenses
Ending plan assets

$

15,384 $
—
392
—
—
(3,455)
(2,198)
—
10,123

15,120
(1,988)
—
(2,198)
—
—
10,934

Funded status at end of year

$

811 $

16,656
—
378
—
—
(921)
(711)
(18)
15,384

15,257
574
—
(711)
—
—
15,120
(264)

Amounts recognized in accumulated other comprehensive income (loss) at December 31, consist of unrecognized
actuarial loss of $5,274, net of $1,402 tax in 2022 and $5,855, net of $1,556 tax in 2021.

The accumulated benefit obligation for the defined benefit pension plan was $10,123 at December 31, 2022 and
$15,384 at December 31, 2021.

See accompanying notes to consolidated financial statements
76

CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022, 2021 and 2020
(Amounts in thousands, except share data)

NOTE 15 - RETIREMENT PLANS (Continued)

The components of net periodic pension expense were as follows:

Service cost
Interest cost
Expected return on plan assets
Net amortization and deferral

Net periodic pension cost (benefit)

Additional loss due to settlement
Total pension cost (benefit)

Net loss (gain) recognized in other comprehensive

income

Total recognized in net periodic benefit cost
and other comprehensive loss (before tax)

2022

2021

2020

— $
392
(732)
—
(340)
—
(340) $

— $
378
(574)
240
44
—
44 $

—
484
(748)
289
25
—
25

(736) $

(854) $

986

(1,076) $

(810) $

1,011

$

$

$

$

The components of net periodic benefit cost other than the service cost component are included in the line item “Other
operating expenses” in the Consolidated Statement of Operations.

The estimated net loss for the defined benefit pension plan that will be amortized from accumulated other
comprehensive loss into net periodic benefit cost over the next fiscal year is $28. The Company incurred settlement
costs in 2022, 2021 and 2020 of $0, $(18) and $0, respectively.

The weighted average assumptions used to determine benefit obligations at year-end were as follows:

Discount rate on benefit obligation
Long-term rate of return on plan assets
Rate of compensation increase

2022

2021

2020

4.95%
4.84%
0.00%

2.74%
3.84%
0.00%

2.39%
4.44%
0.00%

The weighted average assumptions used to determine net periodic pension cost were as follows:

Discount rate on benefit obligation
Long-term rate of return on plan assets
Rate of compensation increase

2022

2021

2020

2.74%
3.84%
0.00%

2.39%
4.44%
0.00%

3.13%
4.96%
0.00%

The Company uses long-term market rates to determine the discount rate on the benefit obligation. Declines in the
discount rate lead to increases in the actuarial loss related to the benefit obligation.

The expectation for long-term rate of return on the pension assets and the expected rate of compensation increases are
reviewed periodically by management in consultation with outside actuaries and primary investment consultants.
Factors considered in setting and adjusting these rates are historic and projected rates of return on the portfolio and
historic and estimated rates of increases of compensation. Since the pension plan is frozen, the rate of compensation
increase used to determine the benefit obligation for 2022, 2021 and 2020 was zero.

See accompanying notes to consolidated financial statements
77

CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022, 2021 and 2020
(Amounts in thousands, except share data)

NOTE 15 - RETIREMENT PLANS (Continued)

The Company’s pension plan asset allocation at year-end 2022 and 2021 and target allocation for 2023 by asset
category are as follows:

Asset Category
Equity securities
Debt securities

Total

Target
Allocation
2023
0-30%
70-100

Percentage of Plan
Assets
at Year-end

2022

2021

20.0%
80.0
100.0%

20.0%
80.0
100.0%

The Company developed the pension plan investment policies and strategies for plan assets with its pension
management firm. The assets are currently invested in seven diversified investment funds, which include four equity
funds and three bond funds. The long-term guidelines from above were created to maximize the return on portfolio
assets while reducing the risk of the portfolio. The management firm may allocate assets among the separate accounts
within the established long-term guidelines. Transfers among these accounts will be at the management firm’s
discretion based on their investment outlook and the investment strategies that are outlined at periodic meetings with
the Company. The expected long-term rate of return on the plan assets was 4.84% in 2022 and 3.84% in 2021. This
return is based on the expected return for each of the asset categories, weighted based on the target allocation for each
class.

The Company does not expect to make any contribution to its pension plan in 2023. Employer contributions totaled
$0 in 2022 and 2021. An increase in the benefit obligations, offset by a decrease in the fair value of plan assets led to
a decrease in the deficit from $264 at December 31, 2021 to a funded status of $811 at December 31, 2022.

Common/Collective Trust Funds

Valued at the daily NAV as reported by the funds. These funds are not traded in an active market or exchange, and
the NAV per unit is calculated by dividing the net assets of the fund by the number of units outstanding, which includes
observable inputs. The method described above may produce a fair value calculation that may not be indicative of net
realizable value or reflective of future fair values. Furthermore, while the pension plan believes its valuation method
is appropriate and consistent with other market participants, the use of different methodologies or assumptions to
determine the fair value of certain financial instruments could result in a different fair value measurement at the
reporting date.

Certain investments that are measured at fair value using the NAV per share (or its equivalent) as a practical expedient
are not required to be categorized in the fair value hierarchy tables.

Fair Value of Investments in Entities That Use NAV

The following table summarizes investments measured at fair value based on NAV per share as of December 31, 2022
and 2021, respectively:

December 31, 2022

Fair Value

Unfunded
Commitments

Redemption
Frequency (if
currently eligible)

Redemption
Notice Period

Common/collective trust funds

$

10,934

N/A

Daily

Daily

See accompanying notes to consolidated financial statements
78

CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022, 2021 and 2020
(Amounts in thousands, except share data)

NOTE 15 - RETIREMENT PLANS (Continued)

December 31, 2021

Fair Value

Unfunded
Commitments

Redemption
Frequency (if
currently eligible)

Redemption
Notice Period

Common/collective trust funds

$

15,120

N/A

Daily

Daily

The methods described above may produce a fair value calculation that may not be indicative of net realizable value
or reflective of future fair values. Furthermore, while the Pension Plan believes its valuation methods are appropriate
and consistent with other market participants, the use of different methodologies or assumptions to determine the fair
value of certain financial instruments could result in a different fair value measurement at the reporting date.

Expected benefit payments, which reflect expected future service, are as follows:

2023
2024
2025
2026
2027
2028 through 2031
Total

$

$

284
333
410
451
479
3,428
5,385

Supplemental Retirement Plan

Civista established a supplemental retirement plan (“SERP”) in 2013, which covers key members of management.
Under the SERP, participants will receive annually, following retirement, a percentage of their base compensations at
the time of their retirement for a maximum of ten years. The SERP liability recorded at December 31, 2022, was
$3,580, compared to $3,334 at December 31, 2021. The expense related to the SERP was $420, $404 and $429 for
2022, 2021 and 2020, respectively. Distributions to participants made in 2022, 2021 and 2020 totaled $173, $167, and
$168, respectively.

NOTE 16 - EQUITY INCENTIVE PLAN

At the Company’s 2014 annual meeting, the shareholders adopted the Company’s 2014 Incentive Plan (“2014
Incentive Plan”). The 2014 Incentive Plan authorizes the Company to grant options, stock awards, stock units and
other awards for up to 375,000 common shares of the Company. There were 117,662 shares available for grants under
this plan at December 31, 2022.

No options had been granted under the 2014 Incentive Plan as of December 31, 2021 and 2020.

In recent years, the Board of Directors has awarded restricted common shares to senior officers of the Company. The
restricted shares vest ratably over a three-year period following the grant date. The product of the number of restricted
shares granted and the grant date market price of the Company’s common shares determines the fair value of restricted
shares under the Company’s 2014 Incentive Plan. Management recognizes compensation expense for the fair value of
restricted shares on a straight-line basis over the requisite service period for the entire award.

During the twelve months ended December 31, 2022, 2021 and 2020, directors of the Company’s banking subsidiary,
Civista, were paid a retainer in the form of non-restricted common shares of the Company. An aggregate of 8,098,
8,792 and 14,266 common shares were issued to Civista directors in 2022, 2021 and 2020, respectively, as payment
of their retainer for their service on the Civista Board of Directors. The issuances were expensed in their entirety when
the shares were issued in the amounts of $189, $196 and $196, respectively.

The Company includes share-based compensation for employees as “Compensation expense” in the Consolidated
Statements of Operations.

See accompanying notes to consolidated financial statements
79

CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022, 2021 and 2020
(Amounts in thousands, except share data)

NOTE 16 - EQUITY INCENTIVE PLAN (Continued)

The following is a summary of the status of the Company’s restricted shares, and changes therein during the twelve
months ended December 31, 2022:

Nonvested at beginning of period
Granted
Vested
Forfeited
Nonvested at end of period

December 31, 2022

Number of
Restricted
Shares

Weighted
Average
Grant Date
Fair Value

$

69,840
31,774
(27,728)
(3,411)
70,475

20.14
24.51
24.28
21.88
21.88

The following is a summary of the status of the Company’s awarded restricted shares as of December 31, 2022:

Date of Award

Shares

Remaining Expense

Remaining Vesting
Period (Years)

At December 31, 2022

April 10, 2018
March 14, 2019
March 14, 2020
March 14, 2020
March 3, 2021
March 3, 2021
March 3, 2022
March 3, 2022

1,470
4,034
4,304
6,669
10,858
13,692
12,424
17,024
70,475

$

$

—
40
—
90
150
131
236
258
905

0.00
1.00
0.00
2.00
3.00
1.00
4.00
2.00
2.09

During the twelve months ended December 31, 2022, 2021 and 2020,
the Company recorded share-based
compensation expense of $630, $506 and $421, respectively, and director retainer fees of $189, $196 and $196,
respectively, for shares granted under the 2014 Incentive Plan. At December 31, 2022, the total compensation cost
related to unvested awards not yet recognized was $905, which is expected to be recognized over the weighted average
remaining life of the grants of 2.09 years.

NOTE 17 - FAIR VALUE MEASUREMENT

U.S. generally accepted accounting principles establish a hierarchal disclosure framework associated with the level of
observable pricing utilized in measuring assets and liabilities at fair value. The three broad levels defined by the
hierarchy are as follows: Level 1: Quoted prices for identical assets in active markets that are identifiable on the
measurement date; Level 2: Significant other observable inputs, such as quoted prices for similar assets, quoted prices
in markets that are not active and other inputs that are observable or can be corroborated by observable market data;
Level 3: Significant unobservable inputs that reflect the Company’s own view about the assumptions that market
participants would use in pricing an asset.

Securities: The fair values of securities available for sale are determined by matrix pricing, which is a mathematical
technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the
specific securities, but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2
inputs).

See accompanying notes to consolidated financial statements
80

CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022, 2021 and 2020
(Amounts in thousands, except share data)

NOTE 17 - FAIR VALUE MEASUREMENT (Continued)

Equity securities: The Company has two types of equity securities, one is not actively traded in an open market, while
the other is listed on an exchange and is less frequently traded. The fair value of the equity security available for sale
not actively traded in an open market is determined by using market data inputs for similar securities that are
observable. (Level 2 inputs).

Fair value swap asset/liability: The fair value of the swap asset and liability is based on an external derivative model
using data inputs as of the valuation date and classified Level 2.

Impaired loans: The Company generally measures impairment on impaired loans based on the fair value of the loan’s
collateral. Fair value is generally determined based upon independent third-party appraisals of the properties. In some
cases, management may adjust the appraised value due to the age of the appraisal, changes in market conditions, or
observable deterioration of the property since the appraisal was completed. Additionally, management makes
estimates about expected costs to sell the property which are also included in the net realizable value. If the fair value
of the collateral dependent loan is less than the carrying amount of the loan, a specific reserve for the loan is made in
the allowance for loan losses or a charge-off is taken to reduce the loan to the fair value of the collateral (less estimated
selling costs) and the loan is included in the table below as a Level 3 measurement.

Mortgage servicing rights: Mortgage servicing rights do not trade in an active market with readily observable market
data. As a result, the Company estimates the fair value of mortgage servicing rights by using a discounted cash flow
model to calculate the present value of estimated future net servicing income. The Company stratifies its mortgage
servicing portfolio on the basis of loan type. The assumptions used in the discounted cash flow model are those that
the Company believes market participants would use in estimating future net servicing income. Significant
assumptions in the valuation of mortgage servicing rights include estimated loan repayment rates, the discount rate,
servicing costs, and the timing of cash flows, among other factors. Mortgage servicing rights are classified as Level
3 measurements due to the use of significant unobservable inputs, as well as significant management judgment and
estimation.

Other real estate owned: OREO is carried at the lower of cost or fair value, which is measured at the date foreclosure.
If the fair value of the collateral exceeds the carrying amount of the loan, no charge-off or adjustment is necessary,
the loan is not considered to be carried at fair value, and is therefore not included in the table below. If the fair value
of the collateral is less than the carrying amount of the loan, management will charge the loan down to its estimated
realizable value. Management may adjust the appraised value due to the age of the appraisal, changes in market
conditions, or observable deterioration of the property since the appraisal was completed. In these cases, the properties
are categorized in the below table as Level 3 measurements since these adjustments are considered to be unobservable
inputs. Income and expenses from operations are included in other operating expenses. Further declines in the fair
value of the collateral subsequent to foreclosure are included in net gain on sale of other real estate owned.

See accompanying notes to consolidated financial statements
81

CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022, 2021 and 2020
(Amounts in thousands, except share data)

NOTE 17 - FAIR VALUE MEASUREMENT (Continued)

Assets and liabilities measured at fair value are summarized below.

Fair Value Measurements at December 31, 2022 using:

Assets measured at fair value on a recurring basis:
Securities available for sale

U.S. Treasury securities and obligations of

U.S. Government agencies

Obligations of states and political subdivisions
Mortgage-backed securities in government

sponsored entities
Total securities available for sale

Equity securities
Swap asset

Liabilities measured at fair value on a recurring

basis:
Swap liability

Assets measured at fair value on a nonrecurring

basis:
Mortgage servicing rights

Fair Value Measurements at December 31, 2021 using:

(Level 1)

(Level 2)

(Level 3)

$

— $
—

61,029 $
317,248

—
—
—
—

—

237,125
615,402
2,190
16,579

16,579

—
—

—
—
—
—

—

$

— $

— $

2,689

(Level 1)

(Level 2)

(Level 3)

Assets measured at fair value on a recurring basis:
Securities available for sale

U.S. Treasury securities and obligations of

U.S. Government agencies

Obligations of states and political subdivisions
Mortgage-backed securities in government

sponsored entities
Total securities available for sale

Equity securities
Swap asset

Liabilities measured at fair value on a recurring

basis:
Swap liability

Assets measured at fair value on a nonrecurring

basis:
Impaired loans
Mortgage servicing rights

$

$

— $
—

47,890 $
298,836

—
—
—
—

—

213,148
559,874
1,072
11,072

11,072

—
—

—
—
—
—

—

— $
—

— $
—

11
2,642

See accompanying notes to consolidated financial statements
82

CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022, 2021 and 2020
(Amounts in thousands, except share data)

NOTE 17 - FAIR VALUE MEASUREMENT (Continued)

The following tables presents quantitative information about the Level 3 significant unobservable inputs for assets
and liabilities measured at fair value on a nonrecurring basis at December 31, 2022 and 2021.

December 31, 2022

Fair Value

Mortgage Servicing Rights

$

2,689

December 31, 2021

Impaired loans

Fair Value

$

11

Valuation
Technique
Discounted Cash
Flows

Valuation
Technique
Appraisal of
collateral

Quantitative Information about Level 3 Fair Value Measurements
Unobservable
Input

Range

Weighted
Average

Constant
Prepayment Rate
Discount Rate

5% -20%
12%

7%
12%

Quantitative Information about Level 3 Fair Value Measurements
Unobservable
Input

Range

Weighted
Average

Appraisal
adjustments
Holding period
Constant
Prepayment Rate
Discount Rate

10%
24 months

10%
24 months

8% -35%
12%

15%
12%

Mortgage Servicing Rights

$

2,642

Discounted Cash
Flows

The carrying amount and fair value of financial instruments carried at amortized cost were as follows:

December 31, 2022
Financial Assets:

Cash and due from financial institutions
Other securities
Loans, held for sale
Loans, net of allowance for loan losses
Bank owned life insurance
Accrued interest receivable

Financial Liabilities:

Carrying
Amount

Total
Fair Value

Level 1

Level 2

Level 3

$

43,361 $
33,585
683
2,518,155
53,543
11,178

43,361 $
33,585
698
2,160,920
53,543
11,178

43,361 $
33,585
698
—
53,543
11,178

— $
—
—
—
—
—
— 2,160,920
—
—
—
—

Nonmaturing deposits
Time deposits
Short-term FHLB advances
Long-term FHLB advances
Securities sold under agreement to repurchase
Subordinated debentures
Other borrowings
Accrued interest payable

2,300,215
319,769
393,700
3,578
25,143
103,799
15,516
668

2,300,215
318,886
393,247
3,534
25,143
98,513
15,806
668

2,300,215
—
393,247
—
25,143
—
—
668

—
—
—
—
—
—
—
—

—
318,886
—
3,534
—
98,513
15,806
—

See accompanying notes to consolidated financial statements
83

CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022, 2021 and 2020
(Amounts in thousands, except share data)

NOTE 17 - FAIR VALUE MEASUREMENT (Continued)

December 31, 2021
Financial Assets:

Cash and due from financial institutions
Other securities
Loans, held for sale
Loans, net of allowance for loan losses
Bank owned life insurance
Accrued interest receivable

Financial Liabilities:

Carrying
Amount

Total
Fair Value

Level 1

Level 2

Level 3

$

265,969 $
17,011
1,972
1,971,238
47,176
7,385

265,969 $
17,011
2,011
1,945,638
47,176
7,385

265,969 $ — $
17,011
2,011
—
47,176
7,385

—
—
—
—
—
— 1,945,638
—
—
—
—

Nonmaturing deposits
Time deposits
Long-term FHLB advances
Securities sold under agreement to repurchase
Subordinated debentures
Accrued interest payable

2,170,253
246,448
75,000
25,495
102,813
315

2,170,253
247,053
75,930
25,495
111,118
315

2,170,253
—
—
25,495
—
315

—
—
—
—
—
—

—
247,053
75,930
—
111,118
—

NOTE 18 - COMMITMENTS, CONTINGENCIES AND OFF-BALANCE-SHEET RISK

Some financial instruments, such as loan commitments, credit lines, letters of credit, and overdraft protection are
issued to meet customer financing needs. These are agreements to provide credit or to support the credit of others, as
long as conditions established in the contract are met, and usually have expiration dates. Commitments may expire
without being used. Off-balance-sheet risk to credit loss exists up to the face amount of these instruments, although
material losses are not anticipated. The same credit policies are used to make such commitments as are used for loans,
including obtaining collateral at exercise of the commitment.

The contractual amount of financial instruments with off-balance-sheet risk was as follows at year-end.

Commitments to extend credit:

Lines of credit and construction loans
Overdraft protection
Letters of credit

2022

2021

Fixed
Rate

Variable
Rate

Fixed
Rate

Variable
Rate

$

42,184 $ 599,185 $

10
960

45,182
630

$

43,154 $ 644,997 $

33,542 $ 455,777
54,034
731
34,164 $ 510,542

7
615

Commitments to make loans are generally made for a period of one year or less. Fixed-rate loan commitments included
above had interest rates ranging from 3.25% to 8.00% at December 31, 2022 and 3.25% to 8.00% at December 31,
2021. Maturities extend up to 30 years.

Civista is required to maintain certain reserve balances on hand in accordance with the Federal Reserve Board
requirements. The average reserve balance maintained in accordance with such requirements was $0 on December 31,
2022 and December 31, 2021, respectively.

CBI and Civista are parties to various claims and proceedings arising in the normal course of business. Management,
after consultation with legal counsel, believes that the liabilities, if any, arising from such proceedings and claims will
not be material to the consolidated balance sheet or results of operations.

See accompanying notes to consolidated financial statements
84

CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022, 2021 and 2020
(Amounts in thousands, except share data)

NOTE 19 - CAPITAL REQUIREMENTS AND RESTRICTION ON RETAINED EARNINGS

CBI and Civista (collectively, the “Companies”) are subject to various regulatory capital requirements administered
by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory-and
possibly additional discretionary -actions by regulators that, if undertaken, could have a direct material effect on the
financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action,
the Companies must meet specific capital guidelines that involve quantitative measures of the Companies’ assets,
liabilities, and certain off-balance-sheet items as calculated under U.S. GAAP, regulatory reporting requirements, and
regulatory capital standards. The Companies’ capital amounts and classification are also subject to qualitative
judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulatory capital standards to ensure capital adequacy require the Companies
to maintain minimum amounts and ratios (set forth in the following table) of total and Tier 1 capital to risk-weighted
assets, common equity Tier 1 capital to total risk-weighted assets, and Tier 1 capital to average assets. Management
believes, as of December 31, 2022, that the Companies met all capital adequacy requirements to which they were
subject.

See accompanying notes to consolidated financial statements
85

CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022, 2021 and 2020
(Amounts in thousands, except share data)

NOTE 19 - CAPITAL REQUIREMENTS AND RESTRICTION ON RETAINED EARNINGS (Continued)

As of December 31, 2022, and 2021, the most recent notification from the Federal Reserve Bank categorized Civista
as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized,
Civista must maintain minimum total risk-based capital, Tier 1 risk-based capital, common equity Tier 1 risk-based
capital, and Tier 1 leverage ratios as set forth in the table below. There are no conditions or events since that
notification that management believes have changed Civista’s category.

The Company’s and Civista’s actual capital levels and minimum required capital levels at December 31, 2022 and
2021 were as follows:

2022
Total Risk Based Capital

Consolidated
Civista

Tier I Risk Based Capital

Consolidated
Civista

CET1 Risk Based Capital

Consolidated
Civista
Leverage

Consolidated
Civista

2021
Total Risk Based Capital

Consolidated
Civista

Tier I Risk Based Capital

Consolidated
Civista

CET1 Risk Based Capital

Consolidated
Civista
Leverage

Consolidated
Civista

Actual

Amount

Ratio

For Capital
Adequacy Purposes
Ratio
Amount

To Be Well
Capitalized Under
Prompt Corrective
Action Purposes

Amount

Ratio

$ 395,125
366,377

14.5% $ 217,681
219,357
13.4

8.0%
8.0

n/a
$ 274,196

n/a
10.0%

293,164
337,866

263,736
337,866

293,164
337,866

10.8
12.3

9.7
12.3

8.9
10.3

163,261
164,517

122,446
123,388

131,479
131,240

6.0
6.0

4.5
4.5

4.0
4.0

n/a
219,357

n/a
178,227

n/a
164,050

n/a
8.0

n/a
6.5

n/a
5.0

$ 394,164
338,383

19.2% $ 164,498
164,483
16.5

8.0%
8.0

n/a
$ 205,604

n/a
10.0%

295,064
312,671

265,637
312,671

295,064
312,671

14.3
15.2

12.9
15.2

10.2
10.8

123,373
123,362

92,530
92,522

115,543
115,408

6.0
6.0

4.5
4.5

4.0
4.0

n/a
164,483

n/a
133,642

n/a
144,260

n/a
8.0

n/a
6.5

n/a
5.0

CBI’s primary source of funds for paying dividends to its shareholders and for operating expense is the cash
accumulated from dividends received from Civista. Payment of dividends by Civista to CBI is subject to restrictions
by Civista’s regulatory agencies. These restrictions generally limit dividends to the current and prior two years retained
earnings as defined by the regulations. In addition, dividends may not reduce capital levels below minimum regulatory
requirements. At December 31, 2022, Civista had $55,501 of net profits available to pay dividends to CBI without
requiring regulatory approval.

See accompanying notes to consolidated financial statements
86

CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022, 2021 and 2020
(Amounts in thousands, except share data)

NOTE 20 - PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION

Condensed financial information of CBI follows:

Condensed Balance Sheets
Assets:
Cash
Equity securities
Investment in bank subsidiary
Investment in nonbank subsidiaries
Other assets

Total assets

Liabilities:

December 31,

2022

2021

$

21,812 $
2,190
414,263
3,236
3,332

45,800
1,072
408,255
4,396
2,016
$ 444,833 $ 461,539

Deferred income taxes and other liabilities
Subordinated debentures

Total liabilities

$

6,199 $

103,799
109,998

2,592
103,735
106,327

Shareholders’ Equity:
Common stock
Accumulated earnings
Treasury stock
Accumulated other comprehensive income (loss)

Total shareholders’ equity
Total liabilities and shareholders’ equity

310,182
156,492
(73,794)
(58,045)
334,835

277,741
125,558
(56,907)
8,820
355,212
$ 444,833 $ 461,539

Condensed Statements of Operations
Dividends from bank subsidiaries
Dividends from non-bank subsidiaries
Interest expense
Pension expense
Other expense, net

Income before equity in undistributed net

earnings of subsidiaries

Income tax benefit
Equity in undistributed net earnings of subsidiaries
Net income
Comprehensive income (loss)

For the years ended December 31,
2020
2021
2022
15,300
19,900 $
26,300 $
440
1,000
1,150
(945)
(956)
(3,781)
(25)
(47)
340
(1,241)
(1,004)
(2,384)

21,625
1,140
16,662
39,427 $
(27,438) $

18,893
425
21,228
40,546 $
34,747 $

13,529
475
18,188
32,192
39,937

$

$
$

See accompanying notes to consolidated financial statements
87

CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022, 2021 and 2020
(Amounts in thousands, except share data)

NOTE 20 - PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION (Continued)

Condensed Statements of Cash Flows
Operating activities:

Net income
Adjustment to reconcile net income to net cash

from operating activities:
Change in other assets and other liabilities
Equity in undistributed net earnings of

subsidiaries

Net cash from operating activities

Investing activities:

Disposal of minority interest
Acquisition and additional capitalization of

subsidiary, net of cash acquired
Net cash used for investing activities

Financing activities:

Proceeds from subordinated debenture, net of
issuance costs
Purchase of treasury stock
Cash dividends paid

Net cash provided by (used for) financing
activities

Net change in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year

For the years ended December 31,
2020
2021
2022

$

39,427 $

40,546 $

32,192

4,587

2,495

1,925

(16,662)
27,352

(21,228)
21,813

(18,188)
15,929

—

11,500

(25,960)
(25,960)

(50,000)
(38,500)

—

—
—

—
(16,887)
(8,493)

73,386
(22,309)
(8,036)

—
(13,454)
(7,118)

(25,380)
(23,988)
45,800
21,812 $

43,041
26,354
19,446
45,800 $

(20,572)
(4,643)
24,089
19,446

$

See accompanying notes to consolidated financial statements
88

CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022, 2021 and 2020
(Amounts in thousands, except share data)

NOTE 21 - EARNINGS PER COMMON SHARE

The factors used in the earnings per share computation follow.

Basic

Net income
Less allocation of earnings and dividends to

participating securities

Net income available to common

shareholders—basic

Weighted average common shares outstanding
Less average participating securities
Weighted average number of shares outstanding

used in the calculation of basic earnings
per common share
Basic earnings per share

Diluted

Net income available to common

shareholders—basic
Net income available to common

shareholders—diluted

Weighted average common shares

outstanding used in the calculation of
earnings per common share basic
Add: dilutive effects of convertible

preferred shares
Average shares and dilutive potential

common shares outstanding—diluted

Diluted earnings per share

2022

2021

2020

$

39,427 $

40,546 $

32,192

498

173

98

$

$

$

$

$

38,929 $

40,373 $

32,094
15,162,032 15,408,863 16,129,875
49,012

191,402

65,648

14,970,630 15,343,215 16,080,863
2.00

2.63 $

2.60 $

38,929 $

40,373 $

32,094

38,929 $

40,373 $

32,094

14,970,630 15,343,215 16,080,863

—

—

—

14,970,630 15,343,215 16,080,863
2.00

2.63 $

2.60 $

Basic earnings per common share are calculated by dividing net income by the weighted-average number of common
shares outstanding for the period. Diluted earnings per common share include the dilutive effect, if any, of additional
potential common shares issuable under the equity incentive plan, computed using the treasury stock method, and the
impact of the Company’s convertible preferred shares using the “if converted” method.

NOTE 22 - DERIVATIVES

To accommodate customer need and to support the Company’s asset/liability positioning, on occasion we enter into
interest rate swaps with a customer and a bank counterparty. The interest rate swaps are free-standing derivatives and
are recorded at fair value. The Company enters into a floating rate loan and a fixed rate swap with our customer.
Simultaneously, the Company enters into an offsetting fixed rate swap with a bank counterparty. In connection with
each swap transaction, the Company agrees to pay interest to the customer on a notional amount at a variable interest
rate and receive interest from the customer on the same notional amount at a fixed interest rate. At the same time, the
Company agrees to pay a bank counterparty the same fixed interest rate on the same notional amount and receive the
same variable interest rate on the same notional amount. These transactions allow the Company’s customer to
effectively convert variable rate loans to fixed rate loans. Since the Company acts as an intermediary for its customer,
changes in the fair value of the underlying derivative contracts offset each other and do not significantly impact the
Company’s results of operations unless a significant difference in credit risk emerges between the counterparties at
either end of one of the swap contracts. None of the Company’s derivatives are designated as hedging instruments.

See accompanying notes to consolidated financial statements
89

CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022, 2021 and 2020
(Amounts in thousands, except share data)

NOTE 22 - DERIVATIVE HEDGING INSTRUMENTS (Continued)

The Company presents derivative positions gross on the balance sheet for customers and net for financial institution
counterparty positions subject to master netting arrangements. The following table reflects the derivatives recorded
on the balance sheet as of December 31:

2022

Notional
Amount

Fair Value

2021

Notional
Amount

Fair Value

$

6,980 $

269 $

173,490 $

11,072

212,570

16,310
16,579

$

—

$

—
11,072

Included in other assets:
Interest rate swaps with loan customers in

an asset position

Counterparty positions with financial

institutions in an asset position
Total included in other assets

Included in accrued expenses and other

liabilities:
Interest rate swaps with loan customers in a

liability position

$

205,590 $

16,579 $

71,328 $

1,628

Counterparty positions with financial

institutions in an asset position

Counterparty positions with financial
institutions in a liability position
Total included in accrued expenses and

other liabilities

—

—

—

—

71,328

(1,628)

173,490

11,072

$

16,579

$

11,072

Gross notional positions with customers
Gross notional positions with financial

institution counterparties

$

$

212,570

212,570

$

$

244,818

244,818

The effect of swap fair value changes on the Consolidated Statement of Operations for the years ended December 31,
2022, 2021 and 2020 are as follows:

Derivatives
Not Designated
as Hedging Instruments
Interest rate swaps related to
customer loans

Total

Location of
Gain or (Loss)
Recognized in
Income on Derivative

Amount of Gain or (Loss)
Recognized in
Income on Derivatives
2021

2020

2022

Other income

$
$

— $
— $

64 $
64 $

(64)
(64)

The Company monitors and controls all derivative products with a comprehensive Board of Director approved
commercial loan swap policy. All hedge transactions must be approved in advance by the Lenders Loan Committee
or the Directors Loan Committee of the Board of Directors. The Company classifies changes in the fair value of
derivatives with “Other” in the Consolidated Statements of Operation. Any fees paid to enter the swap contract at
inception are recognized in earnings when received. Such fees amounted to $247 and $207 during the years ended
December 31, 2022 and 2021, respectively.

At December 31, 2022, the Company did not have any cash or securities pledged as collateral on its interest rate swaps
with third party financial institutions. At December 31, 2021, the Company had cash and securities at fair value
pledged as collateral on its interest rate swaps with third party financial institutions of $10,780 and $509, respectively.

See accompanying notes to consolidated financial statements
90

CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022, 2021 and 2020
(Amounts in thousands, except share data)

NOTE 23 – QUALIFIED AFFORDABLE HOUSING PROJECT INVESTMENTS

The Company invests in qualified affordable housing projects. At December 31, 2022 and 2021, the balance of the
Company’s investments in qualified affordable housing projects was $14,149 and $13,093, respectively. These
balances are reflected in the other assets line on the Consolidated Balance Sheet. The unfunded commitments related
to the investments in qualified affordable housing projects totaled $5,634 and $5,706 at December 31, 2022 and 2021,
respectively. These balances are reflected in the Accrued expenses and other liabilities line on the Consolidated
Balance Sheet.

During the years ended December 31, 2022, 2021 and 2020, the Company recognized amortization expense with
respect to its investments in qualified affordable housing projects of $1,086, $818 and $661, respectively, which was
included within pre-tax income on the Consolidated Statements of Operations.

Additionally, during the years ended December 31, 2022, 2021 and 2020, the Company recognized tax credits and
other benefits from its investments in affordable housing tax credits of $1,391, $1,402 and $1,186, respectively.
During the years ended December 31, 2022, 2021 and 2020, the Company did not incur impairment losses related to
its investment in qualified affordable housing projects.

NOTE 24 – REVENUE RECOGNITION

The Company accounts for revenues from contracts with customers under ASC 606, Revenue from Contracts with
Customers. Revenue associated with financial instruments, including revenue from loans and securities are outside
the scope of the new standard and accounted for under existing GAAP. In addition, certain noninterest income streams
such as fees associated with mortgage servicing rights, financial guarantees, derivatives and certain credit card fees
are also not in scope of the new guidance. Noninterest revenue streams in-scope of ASC 606 are discussed below.

Service Charges

Service charges consist of account analysis fees (i.e., net fees earned on analyzed business and public checking
accounts), monthly service fees, and other deposit account related fees. The Company’s performance obligation for
account analysis fees and monthly service fees is generally satisfied, and the related revenue recognized, over the
period in which the service is provided. Other deposit account related fees are largely transactional based, and
therefore, the Company’s performance obligation is satisfied, and related revenue recognized, at a point in time.
Payment for service charges on deposit accounts is primarily received immediately or in the following month through
a direct charge to customers’ accounts.

ATM/Interchange Fees

Fees, exchange, and other service charges are primarily comprised of debit and credit card income, ATM fees and
other service charges. Debit and credit card income is primarily comprised of interchange fees earned whenever the
Company’s debit and credit cards are processed through card payment networks such as Mastercard. ATM fees are
primarily generated when a Company cardholder uses a non-Company ATM or a non-Company cardholder uses a
Company ATM. The Company’s performance obligation for fees, exchange, and other service charges are largely
satisfied, and related revenue recognized, when the services are rendered or upon completion. Payment is typically
received immediately or in the following month.

Wealth Management Fees

Wealth management fees are primarily comprised of fees earned from the management and administration of trusts
and other customer assets. The Company’s performance obligation is generally satisfied over time and the resulting
fees are recognized monthly, based upon the month-end market value of the assets under management and the
applicable fee rate. Payment is generally received in the following month through a direct charge to customers’
accounts. The Company does not earn performance-based incentives. The Company’s performance obligation for
these transactional-based services is generally satisfied, and related revenue recognized, at a point in time (i.e., as
incurred). Payment is received shortly after services are rendered.

See accompanying notes to consolidated financial statements
91

CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022, 2021 and 2020
(Amounts in thousands, except share data)

NOTE 24 – REVENUE RECOGNITION (Continued)

Tax Refund Processing Fees

The Company facilitates the payment of federal and state income tax refunds in partnership with a third-party vendor.
Refund Transfers (“RTs”) are fee-based products whereby a tax refund is issued to the taxpayer after the Company
has received the refund from the federal or state government. As part of this agreement the Company earns fee income,
the majority of which is received in the first quarter of the year. The Company’s fee income revenue is recognized
based on the estimated percent of business completed by each date.

Other

Other noninterest income consists of other recurring revenue streams such as check order fees, wire transfer fees,
safety deposit box rental fees, item processing fees and other miscellaneous revenue streams. Check order income
mainly represents fees charged to customers for checks. Wire transfer fees represent revenue from processing wire
transfers. Safe deposit box rental fees are charged to the customer on an annual basis and recognized upon receipt of
payment. The Company determined that since rentals and renewals occur fairly consistently over time, revenue is
recognized on a basis consistent with the duration of the performance obligation.
Item processing fee income
represents fees charged to other financial institutions for processing their transactions. Payment is typically received
in the following month.

The following presents noninterest income, segregated by revenue streams in-scope and out-of-scope of Topic 606,
for the years ended December 31, 2022, 2021 and 2020.

For the years ended
December 31,
2021

2020

2022

Noninterest Income

In-scope of Topic 606:

Service charges
ATM/Interchange fees
Wealth management fees
Tax refund processing fees
Other

Noninterest Income (in-scope of Topic 606)
Noninterest Income (out-of-scope of Topic 606)

Total Noninterest Income

$ 7,074 $ 5,905 $ 5,288
4,472
5,443
3,981
4,857
2,375
2,375
831
1,055
16,947
19,635
11,235
11,817
$ 29,076 $ 31,452 $ 28,182

5,499
4,902
2,375
4,686
24,536
4,540

NOTE 25 - LEASES

We have operating leases for several branch locations and office space. The Company’s lease agreements do not
contain any material residual value guarantees or material restrictive covenants. We also lease certain office equipment
under operating leases. Many of our leases include both lease (e.g., minimum rent payments) and non-lease (e.g.,
common-area or other maintenance costs) components. The Company accounts for each component separately based
on the standalone price of each component. In addition, we have several operating leases with lease terms of less than
one year and therefore, we have elected the practical expedient to exclude these short-term leases from our right-of-
use (ROU) assets and lease liabilities.

Most leases include one or more options to renew. The exercise of lease renewal options is typically at our sole
discretion. The majority of renewals to extend the lease terms are included in our ROU assets and lease liabilities as
they are reasonably certain of exercise.

As most of our leases do not provide an implicit rate, we use the fully collateralized FHLB borrowing rate,
commensurate with the lease terms based on the information available at the lease commencement date in determining
the present value of the lease payments.

See accompanying notes to consolidated financial statements
92

CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022, 2021 and 2020
(Amounts in thousands, except share data)

NOTE 25 – LEASES (Continued)

The balance sheet information related to our operating leases were as follows as of December 31, 2022 and 2021:

Classification on
the Consolidated
Balance Sheet

December 31,
2022

December 31,
2021

Assets:

Operating lease

Other assets

$

2,108

$

2,314

Liabilities:

Operating lease

Accrued expenses
and other liabilities $

2,108

$

2,314

The cost components of our operating leases were as follows for the periods ended December 31, 2022 and 2021:

Lease cost

Operating lease cost
Short-term lease cost
Sublease income

Total lease cost

December 31,
2022

December 31,
2021

$

$

445 $
182
(29)
598 $

427
161
(29)
559

Maturities of our lease liabilities for all operating leases for each of the next five years and thereafter is as follows:

2023
2024
2025
2026
2027
Thereafter

Total lease payments

Less: Imputed Interest

Present value of lease liabilities

$

$

$

494
487
308
258
259
468
2,274
166
2,108

The weighted average remaining lease terms and discount rates for all of our operating leases were as follows as of
December 31, 2022:

Weighted-average remaining lease term - operating leases (years)
Weighted-average discount rate - operating leases

4.29
2.90%

The Company is the lessor of equipment under operating leases to a wide variety of customers, from commercial and
industrial to government and healthcare. The operating lease assets are presented on the balance sheet as Premises and
equipment. The Company records lease revenue over the term of the lease and retains ownership of the related assets
which are depreciated over the estimated useful life, normally two to six years.

The Company also leases equipment to customers under direct financing leases. At the inception of each lease, the
lease receivables, together with the present value of the estimated unguaranteed residual values are presented on the
balance sheet as Loans. The excess of the lease receivables and residual values over the cost of the equipment is
recorded as unearned lease income and will be recognized over the lease term, normally two to six years as well.

See accompanying notes to consolidated financial statements
93

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SHAREHOLDER INFORMATION

Annual Meeting of the Civista Bancshares, Inc. Shareholders
Tuesday, April 18, 2023 | 10:00 AM EDT
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Investor Information
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at www.civb.com.

NASDAQ Exchange | Symbol CIVB

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By mail or phone, contact our Transfer Agent:
Civista Bancshares, Inc.
c/o American Stock Transfer & Trust Company, LLC
6201 15th Avenue | Brooklyn, NY 11219
800.937.5449; outside of U.S. 718.921.8124 

Corporate Headquarters  
Civista Bancshares, Inc.
100 East Water Street
Sandusky, OH  44870
419.625.4121 | 888.645.4121

OUR MISSION: (cid:100)(cid:381)(cid:3)(cid:349)(cid:373)(cid:393)(cid:396)(cid:381)(cid:448)(cid:286)(cid:3)(cid:410)(cid:346)(cid:286)(cid:3)(cid:302)(cid:374)(cid:258)(cid:374)(cid:272)(cid:349)(cid:258)(cid:367)(cid:3)(cid:367)(cid:349)(cid:448)(cid:286)(cid:400)(cid:3)(cid:381)(cid:296)(cid:3)(cid:381)(cid:437)(cid:396)(cid:3)(cid:272)(cid:437)(cid:400)(cid:410)(cid:381)(cid:373)(cid:286)(cid:396)(cid:400)(cid:853)(cid:3)(cid:286)(cid:373)(cid:393)(cid:367)(cid:381)(cid:455)(cid:286)(cid:286)(cid:400)(cid:3)(cid:258)(cid:374)(cid:282)(cid:3)(cid:400)(cid:346)(cid:258)(cid:396)(cid:286)(cid:346)(cid:381)(cid:367)(cid:282)(cid:286)(cid:396)(cid:400)(cid:853) 
(cid:410)(cid:381)(cid:3)(cid:373)(cid:258)(cid:364)(cid:286)(cid:3)(cid:258)(cid:3)(cid:282)(cid:349)(cid:299)(cid:286)(cid:396)(cid:286)(cid:374)(cid:272)(cid:286)(cid:3)(cid:349)(cid:374)(cid:3)(cid:410)(cid:346)(cid:286)(cid:3)(cid:272)(cid:381)(cid:373)(cid:373)(cid:437)(cid:374)(cid:349)(cid:415)(cid:286)(cid:400)(cid:3)(cid:410)(cid:346)(cid:258)(cid:410)(cid:3)(cid:449)(cid:286)(cid:3)(cid:400)(cid:286)(cid:396)(cid:448)(cid:286)(cid:856)

(cid:1005)(cid:1004)(cid:1004)(cid:3)(cid:28)(cid:258)(cid:400)(cid:410)(cid:3)(cid:116)(cid:258)(cid:410)(cid:286)(cid:396)(cid:3)(cid:94)(cid:410)(cid:396)(cid:286)(cid:286)(cid:410)
(cid:94)(cid:258)(cid:374)(cid:282)(cid:437)(cid:400)(cid:364)(cid:455)(cid:853)(cid:3)(cid:75)(cid:44)(cid:3)(cid:3)(cid:1008)(cid:1008)(cid:1012)(cid:1011)(cid:1004)

(cid:1008)(cid:1005)(cid:1013)(cid:856)(cid:1010)(cid:1006)(cid:1009)(cid:856)(cid:1008)(cid:1005)(cid:1006)(cid:1005)
(cid:1012)(cid:1012)(cid:1012)(cid:856)(cid:1010)(cid:1008)(cid:1009)(cid:856)(cid:1008)(cid:1005)(cid:1006)(cid:1005)

(cid:69)(cid:4)(cid:94)(cid:24)(cid:4)(cid:89)(cid:855)(cid:3)(cid:18)(cid:47)(cid:115)(cid:17)

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