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
Equity Capital Ratio
Net Loans To Deposit Ratio
Loss Allowance To Total Loans
2023
2022
2021
$42,964
$39,427
$40,546
$2.73
$23.70
$0.61
$3,861.4
$2,985.0
$2,826.3
$372.0
1.16%
12.50%
9.63%
94.68%
1.30%
$2.60
$21.92
$0.56
$3,639.4
$2,620.0
$2,620.5
$334.8
1.18%
12.47%
9.20%
100.02%
1.08%
$2.63
$23.75
$0.52
$3,102.3
$2,416.7
$2,062.6
$355.2
1.29%
11.61%
11.45%
85.35%
1.28%
Year In Review
A Message from Dennis Shaffer,
President and Chief Executive Officer
Dear Fellow Shareholders,
Every year brings different challenges and the year
2023 was no different for those in the banking
industry. Bankers dealt with an uncertain economy,
rising interest rates and larger regional bank failures.
Throughout it all, Civista employees remained focused
on our core mission of improving the financial lives
of our customers and shareholders and in making a
difference in the communities that we serve. It is this
focus that once again led to another outstanding year.
FINANCIAL PERFORMANCE HIGHLIGHTS
For the year, we earned record net income of $43.0
million, or $2.73 per diluted share, compared to
$39.4 million, or $2.60 per diluted share, in 2022. This
represents a 9% increase over last year’s performance.
The bank is approximately $3.9 billion in asset size,
which is an increase of 6.1% from year end 2022.
The year was highlighted by strong organic loan growth.
Loans and Leases, net of adjusted participations, grew
by $315 million, or 12.4% annually. Demand came from
all areas of our footprint, as we continue to strengthen
market share in most of our rural markets and add new
customers in our urban markets.
Despite uncertainties associated with the economy
and the higher interest rate environment, our credit
quality continues to remain strong and delinquencies
and charge-offs remain at relatively low levels. Our
allowance for loan losses to loans ratio was 1.30% at
year end, compared to 1.08% at December 31, 2022.
The bank’s net interest margin peaked in December
2022. As a result, the bank’s net interest margin did
increase 5 basis points to 3.70% for the 12 months
The year was highlighted by strong organic loan growth.
Loans and Leases, net of adjusted participations, grew
by $315 million, or 12.4% annually.
of 2023, compared to 3.65% for the same period
a year ago.
Total deposits increased $365 million, or 13.9%, for
the year. However, the growth is primarily related to
an increase of $455 million in brokered time deposits,
which we used to fund our loan growth.
Deposit gathering and pricing have become extremely
competitive. Civista’s deposit costs for the fourth
quarter 2023 were 179 basis points compared to 22
basis points for the fourth quarter 2022. This increase
is primarily related to the 525 basis points in Federal
Reserve rate increases over the last 18 months and the
regional bank failures that happened in March 2023
as banks paid higher rates to retain current customers
and attract new ones.
At Civista, we have established a
strong risk management culture and
framework which helps us grow in a
responsible manner. We are proactive
in our approach to identifying,
assessing and mitigating risks, which
provides a solid foundation for sound
decision making.
As a result, even though we had net interest margin
expansion year-over-year, we did start to see net
interest margin contraction throughout much of the
year due to higher interest expense. Much of the
expense is the result of a greater reliance on wholesale
funding to keep up with our strong loan demand and
customers shifting out of non-interest bearing deposits
to interest bearing deposits.
Growth remains a priority for us. As we grow, we
want to do so in a profitable manner, ensuring that
our investment is earned back in a reasonable period
of time and accretive to our earnings. Continued
profitable growth will make us more efficient by helping
us leverage recent and future technology investments
and offsetting rising compliance and regulatory costs.
At Civista, we have established a strong risk
management culture and framework which helps us
grow in a responsible manner. We are proactive in our
approach to identifying, assessing and mitigating risks,
which provides a solid foundation for sound decision
making. And we continuously monitor, evaluate and
refine our risk management strategies, to ensure that
we are adaptable to meet the emerging challenges
facing our industry.
Each year, we continue to invest significant dollars
in technology to help us improve efficiencies and
customer satisfaction. In 2023, we migrated our AI-
based chatbot to a new platform. This new platform
lays the foundation for growing our digital presence at
a significantly lower incremental cost with improved
customer satisfaction. We also made significant strides
in establishing Robotic Process Automation (RPA) in
2023. Several processes have been automated resulting
in improved efficiency and quality.
As we look ahead to 2024, we are set to launch our
new digital small business lending platform which
streamlines our existing process providing quicker
decisioning and greater satisfaction for both customers
and employees. We also plan to introduce a new
omnichannel origination solution enabling us to expand
into new consumer markets while driving efficiency.
We remain committed to enhancing the customer
experience at every interaction. Several enhancements
this year included expanding electronic signature
(e-sign) capability for such services as wire transfer;
and the addition of mortgage text notifications, which
quickly alert applicants to the status of their loan
application and requests for additional information.
We also added the ability for large depositors to
diversify their balances in money market funds and
certificate of deposits through the IntraFi® Network
of participating banks. This allows customers to
maintain FDIC coverage for balances greater than the
standard $250,000 FDIC maximum limit while working
exclusively with Civista. Reciprocal deposits flow back
to Civista, enabling Civista to continue to support more
lending opportunities in the community.
WELCOME TO NEW DIRECTORS
Other highlights in 2023 included the election of two
new directors at our April 18, 2023 Annual Meeting.
Joining the Civista Bancshares, Inc. and Civista Bank
Board of Directors are Darci L. Congrove and Mark J.
Macioce. Ms. Congrove is Managing Director of GBQ
Partners, LLC, a regional accounting firm in Columbus.
Mr. Macioce is Vice President and Chief Information
Officer for MASCO Corporation, parent company of
Kichler Lighting located in Solon, Ohio. They replaced
William F. Ritzmann and Daniel J. White, who both
retired from the corporate and bank boards in April.
Also, retiring from the bank board was Barry W. Boerger.
I want to recognize and thank Mr. Ritzmann, Mr. White,
and Mr. Boerger for their many years of service to our
organization.
leasing and finance company based in Pittsburgh, PA.
On September 1, 2023, with the goal of gaining both
operational and business development synergies, we
merged the VFG subsidiary into the bank and began
operating under the name of Civista Leasing & Finance.
We believe this integration will continue to enhance
revenue opportunities and expand our client services
across Civista business lines.
INVESTING IN OUR EMPLOYEES
We also continue to invest in our employees as they are
our greatest resource and the reason for our success.
Civista University, a new online learning management
system, was launched in January 2023 which provides
personalized training and career development for our
employees. Several of our young leaders attended and
graduated from bank management schools hosted
by bank trade associations. We’ve also created an
Innovation Resource Group, where employees come
together to exchange ideas and bring new ways to look
at issues and drive innovation.
GROWTH BY DIVERSIFICATION
In October 2022, Civista acquired Vision Financial
Group, Inc. (VFG), a small ticket, business equipment
In October, we held our second annual all-employee Day
of Learning at The Ohio State University in Columbus.
We had over 500 employees in attendance and our
Civista Bank 2023 Day of Learning,
The Ohio State University
agenda included two keynote speakers: Harry Miller,
who led a discussion on mental health under his “Don’t
Make it Weird” mantra, and motivational speaker,
Roy Hall, Jr., who spoke about leadership. There was
also a question-and-answer session with myself and
several members of my executive team. This ‘Civista
Crew at the Shoe’ themed day was capped off with
an employee networking event at the OSU stadium,
where employees participated in punt-pass-and kick
games, facility tours and a team photo on the field.
This day is truly a highlight of our continuous learning,
development, and employee engagement initiatives.
INVESTING IN OUR COMMUNITIES
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 at hundreds
of organizations where we live and work. Specific
employee driven charitable fund-raising events
during the year included Casual for a Cause, where
Civista was well-represented at the Ohio Bankers
League “Women in Banking Conference.”
Employees volunteered at Care and Share of Erie County.
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.
AWARDS & RECOGNITION
I am pleased to report that we were again recognized
in 2023, as one of the 2023 Best Banks to Work For and
one of the 2023 Best Employers in Ohio. Both of these
programs are coordinated with Best Companies Group
in partnership with the American Banker publication
and Crain’s Cleveland Business Journal, respectively.
Employees volunteered at The Foodbank, Inc., Dayton.
Dennis Shaffer, President & CEO, accepts the 2023 Shining
Star Award presented by the Ohio Bankers League.
We remain
committed
to enhancing
the customer
experience
at every
interaction.
We were also named and recognized by Bank Director
Magazine for our 2023 financial performance, as one
of The Best U.S. Banks. 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 2023 results
is to remain an
and accomplishments. Our goal
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 Shareholder meeting is April 16, 2024,
at 10 am and will be held at BGSU Firelands College
– Cedar Point Center, One University Drive, Huron,
Ohio. 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
President and Chief Executive Officer
h ff
Civista was honored as 2023 Large Business of the Year
by the Dearborn County (IN) Chamber of Commerce.
Civista was named Business of the Month by the Village of
West Liberty and the West Liberty Business Association.
Employee networking at our 2023 Day of Learning
held at The Ohio State University.
Board of Directors
Civista Bancshares & Civista Bank
Front row: Congrove, Wise, Shaffer, Murray, Oliver, Mattlin, Miller.
Back row: Nickles, Bacon, Wurm, Perfect, Singer, Weaks, Macioce.
Dennis E. Murray Jr.
Chairman of the Board,
Civista Bancshares, Inc. and Civista Bank
Partner, Murray & Murray Co., LPA
Julie A. Mattlin
Principal and Owner,
DKMG Consulting, LLC.
Harry Singer
President and CEO, Sandusco, Inc.
and ICM Distributing Company, Inc.
James O. Miller
Former Chairman of the Board,
Civista Bancshares, Inc. and Civista Bank
Lorina W. Wise
Chief Human Resources Officer,
Nationwide Children’s Hospital
Dennis G. Shaffer
President and CEO,
Vice-Chairman of the Board,
Civista Bancshares, Inc. and Civista Bank
John O. Bacon
President and CEO,
The Mack Iron Works Company
Darci L. Congrove
CPA - Managing Director,
GBQ Partners, LLC
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
Mark J. Macioce
Vice President, Chief Information Officer,
MASCO Corporation
Nathan E. Weaks
President, Automatic Feed Company
Gerald B. Wurm
President, Wurm’s Woodworking Co.
and Creative Plastics International
DIRECTORS EMERITUS
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
Vision:
Working together to be the community’s trusted financial provider.
Sharing financial education
in local schools.
Mission:
To improve the financial lives of our customers, employees, and
shareholders, to make a difference in the communities that we serve.
Leadership
Civista Bancshares Executive Officers
Dennis G. Shaffer
President and
Chief Executive Officer
Robert L. Curry, Jr.
Chief Risk Officer
Richard J. Dutton
Chief Operating Officer
Russell L. Edwards
Senior Vice President
Retail Banking
Donna M. Waltz-Jaskolski
Customer Experience Officer
Carl A. Kessler III
Chief Information Officer
Todd A. Michel
Controller
Lance A. Morrison
General Counsel &
Corporate Secretary
Michael D. Mulford
Chief Credit Officer
Charles A. Parcher
Chief Lending Officer
Paul J. Stark
Chief Credit Officer
Retired December 2023
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
Retired December 2023
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
Civista Leasing
& Finance
Jarvis
Woodson III
Mortgage
Banking
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
3
3
4
Quantitative and Qualitative Disclosures about Market Risk................................................................................
17
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 .................................................................................................
20
21
23
26
27
28
29
30
32
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 credit 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
Three-Year Selected Ratios
2023
Year ended December 31,
2022
2021
$
$
$
$
$
182,734
57,238
125,496
4,435
121,061
0
37,163
37,163
107,611
50,613
7,649
42,964
1,583
41,381
2.73
2.73
0.61
23.70
15,154,767
15,154,767
2,824,568
650,439
3,861,418
2,985,028
116,194
372,002
2,688,983
646,650
3,717,347
2,852,037
470,623
343,724
$
$
$
$
$
126,155
15,951
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
2,619,770
651,177
3,639,445
2,619,984
249,651
334,835
2,259,207
605,581
3,336,974
2,614,423
330,219
316,143
$
$
$
$
$
105,054
9,629
95,425
830
94,595
1,786
29,666
31,452
77,666
48,381
7,835
40,546
173
40,373
2.63
2.63
0.52
23.75
15,343,215
15,343,215
2,060,617
577,957
3,012,905
2,416,701
204,230
355,212
2,100,791
450,599
3,133,554
2,488,105
257,378
349,203
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 credit losses as a percent of loans at year-end
Shareholders’ equity as a percent of total year-end assets
2023
Year ended December 31,
2022
2021
3.70%
1.16
12.50
22.34
9.25
0.04
1.30
9.63
3.65%
1.18
12.47
21.54
9.47
(0.01)
1.08
9.20
3.35%
1.29
11.61
19.77
11.14
(0.04)
1.28
11.79
(1) Calculated on a tax-equivalent basis using a statutory tax rate of 21% for 2023, 2022 and 2021
1
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, 2018 and assuming reinvestment
of dividends, with the cumulative return of the Standard & Poor’s 500 Index, and the S&P U.S. BMI Banks Index.
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.
2
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 20, 2024, there were 15,687,162 common shares outstanding and held by approximately
1,733 shareholders of record (not including the number of persons or entities holding stock in nominee or street name
through various brokerage firms).
CBI paid quarterly dividends on its common shares in the aggregate amounts of $0.61 per share and $0.56 per share
in 2023 and 2022, 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
CIVISTA BANCSHARES, INC. (“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 Act of 1999, as amended (the “GLBA”).
CBI’s office is located at 100 East Water Street, Sandusky, Ohio. CBI and its subsidiaries are sometimes referred to
together as the “Company”. The Company had total consolidated assets of $3,861,418 at December 31, 2023.
CIVISTA BANK (“Civista”), owned by the Company since 1987, opened for business in 1884 as The Citizens
National Bank. 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, Liberty Center, Holgate,
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 and its consolidated subsidiaries as discussed below,
accounted for 99.5% of the Company’s consolidated assets at December 31, 2023.
FIRST CITIZENS INSURANCE AGENCY, INC. (“FCIA”) was formed as a wholly owned subsidiary of CBI to
allow the Company to participate in commission revenue generated through its third party insurance agreement. Assets
of FCIA were not significant as of December 31, 2023.
WATER STREET PROPERTIES, INC. (“WSP”) was formed as a wholly owned subsidiary of CBI to hold properties
repossessed by CBI subsidiaries. Assets of WSP were not significant as of December 31, 2023.
FIRST CITIZENS INVESTMENTS, INC. (“FCI”) was formed in 2007 as a wholly owned subsidiary of Civista to
hold and manage its securities portfolio. The operations of FCI are located in Wilmington, Delaware.
FIRST CITIZENS CAPITAL LLC (“FCC”) was also formed in 2007 as a wholly owned subsidiary of Civista to hold
inter-company debt that is eliminated in consolidation. The operations of FCC were discontinued December 31, 2021
as a result of inactivity.
CIVISTA LEASING & FINANCING (“CLF”) formerly known as Vision Financial Group, Inc. ("VFG") was acquired
in the fourth quarter of 2022 as a wholly owned subsidiary of Civista. Effective as of August 31, 2023, VFG was
merged with and into Civista, and CLF is now operated as a full-service general equipment leasing and financing
division of Civista. The operations of CLF are located in Pittsburgh, Pennsylvania.
3
CIVB RISK MANAGEMENT, INC. (“CRMI”), a wholly owned subsidiary of CBI which was formed and began
operations on December 26, 2017, is a Delaware-based captive insurance company which insures against certain risks
unique to the operations of the Company and for which insurance may not be currently available or economically
feasible in today’s insurance marketplace. CRMI pools resources with several other similar insurance company
subsidiaries of financial institutions to spread a limited amount of risk among themselves. CRMI is subject to
regulations of the State of Delaware and undergoes periodic examinations by the Delaware Division of Insurance.
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
consolidated 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. Effective as of August
31, 2023, VFG was merged with and into Civista, and is now operated as the CLF division of Civista.
Management's Discussion and Analysis of Financial Condition and Results of Operations - As of December 31,
2023 and December 31, 2022 and for the Years Ended December 31, 2023, 2022 and 2021
(Amounts in thousands, except per share data)
General
The following paragraphs more fully discuss the significant highlights, changes and trends as they relate to the
Company’s financial condition, results of operations, liquidity and capital resources as of December 31, 2023 and
2022, and during the three-year period ended December 31, 2023. 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;
4
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.
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, 2023, the Company’s total assets were $3,861,418, compared to $3,639,445 at December 31,
2022. Net loans and securities available for sale increased $204,798 and $2,870, respectively, cash and due from
financial institutions increased $17,045 from December 31, 2022 to December 31, 2023. Other factors contributing to
the change in assets are discussed in the following sections.
Loans held for sale increased $1,042, or 152.6%, from $683 at December 31, 2022 to $1,725 at December 31,
2023. The increase is due to higher balances of held loans. At December 31, 2023, nine loans totaling $1,725 were
held for sale as compared to seven loans totaling $683 at December 31, 2022.
At December 31, 2023, the Company’s net loans totaled $2,824,568 and increased by 7.8% from $2,619,770 at
December 31, 2022. The increase in net loans was spread across most segments. Commercial & Agriculture loans
increased $29,643, Commercial Real Estate – Owner Occupied loans increased $6,173, Commercial Real Estate -
Non-Owner Occupied loans increased $143,158, Residential Real Estate loans increased $107,060, Real Estate
Construction loans increased $17,282, Lease financing receivables increased $17,845 and Farm Real Estate loans
increased $63. The increases in the foregoing loan segments were offset by a decrease in Consumer and Other loans
of $2,718.
The amount of net charge-offs fluctuates from year to year due to factors relating to the condition of the general
economy, decline in market values of collateral and deterioration of specific businesses.
The determination of the balance of the allowance for credit losses is based on the CECL methodology and utilizes a
lifetime “expected credit loss” measurement objective for the recognition of credit losses for loans, held-to-maturity
securities and other receivables at the time the financial asset is originated or acquired. The expected credit losses are
adjusted each period for changes in expected lifetime credit losses. The methodology replaces the multiple existing
impairment methods under prior GAAP, which generally require that a loss be incurred before it is recognized. In
management’s judgment, the CECL methodology produces a result that is adequate to provide for probable credit
losses.
Securities available for sale increased by $2,870, or 0.5%, from $615,402 at December 31, 2022 to $618,272 at
December 31, 2023. U.S. Treasury securities and obligations of U.S. government agencies increased $6,629, or 1.1%
from $61,029 at December 31, 2022 to $67,658 at December 31, 2023. Obligations of states and political subdivisions
available for sale increased by $21,351 from 2022 to 2023. Mortgage-backed securities decreased by $25,110 to total
$212,015 at December 31, 2023. The Company continues to utilize letters of credit from the Federal Home Loan Bank
(FHLB) to replace maturing securities that were pledged for public entities. As of December 31, 2023, the Company
was in compliance with all applicable pledging requirements.
5
Mortgage-backed securities totaled $212,015 at December 31, 2023 and none were considered unusual or “high risk”
securities as defined by regulatory authorities. Of this total, $210,108 consisted of pass-through securities issued by
the Federal National Mortgage Association (“FNMA”), Federal Home Loan Mortgage Corporation (“FHLMC”), and
Government National Mortgage Association (“GNMA”), and the remaining $1,907 of these securities were
collateralized by mortgage-backed securities issued or guaranteed by FNMA, FHLMC, or GNMA. The average
interest rate of the mortgage-backed securities portfolio at December 31, 2023 was 2.56%. The average maturity at
December 31, 2022 was approximately 14.8 years.
Securities available for sale had a fair value at December 31, 2023 of $618,272. This fair value includes unrealized
gains of approximately $3,059 and unrealized losses of approximately $57,679. Net unrealized losses totaled $54,620
on December 31, 2023 compared to net unrealized losses of $66,949 on December 31, 2022. The change in unrealized
gains is primarily due to changes in market interest rates. Note 3 to the Consolidated Financial Statements provides
additional information on unrealized gains and losses.
Premises and equipment, net of accumulated depreciation, decreased $7,249 from December 31, 2022 to December
31, 2023. The decrease is the result of new purchases of $3,218, offset by depreciation of $10,760.
Goodwill decreased by $175, from $125,695 at December 31, 2022 to $125,520 at December 31, 2023. The decrease
is due to an adjustment of goodwill related to the acquisition of VFG in October 2022. Other intangible assets
decreased $1,251 from year-end 2022. The decrease includes $1,580 of core deposit intangibles offset by an increase
of $329 of mortgage servicing rights.
Swap assets decreased $4,098 from December 31, 2022 to December 31, 2023. The decrease is primarily the result of
decreases in the fair value of swap assets as compared to December 31, 2022.
Bank owned life insurance (BOLI) increased $7,850 from December 31, 2022 to December 31, 2023. An additional
$7 of BOLI was purchased in December 2023. The remaining difference is the result of increases in the cash surrender
value of the underlying insurance policies.
Deferred taxes decreased $92 from December 31, 2022 to December 31, 2023.
Year-end deposit balances totaled $2,985,028 in 2023 compared to $2,619,984 in 2022, an increase of $365,044, or
13.9%. This increase in deposits at December 31, 2023 compared to December 31, 2022 included increases in
certificate of deposit accounts of $585,401, or 214%, offset by decreases in noninterest bearing demand deposits of
$124,634, or 13.9% in interest bearing demand accounts of $78,430, or 14.9%, in savings and money market accounts
of $20,129, or 2.3% and in individual retirement accounts of $3,933, or 8.5%. Average deposit balances for 2023
were $2,868,823 compared to $2,614,423 for 2022, an increase of 9.7%. Noninterest bearing deposits averaged
$934,741 for 2023, compared to $937,890 for 2022, decreasing $3,149, or 0.3%. Savings, NOW, and MMDA accounts
averaged $855,946 for 2023 compared to $1,423,134 for 2022, decreasing $567,188, or 39.9%. Average certificates
of deposit decreased $281,549 to total an average balance of $534,947 for 2023.
FHLB advances decreased $56,886 from December 31, 2022 to December 31, 2023. Short-term FHLB advances
decreased $55,700 year over year due to an increase in over night funding. The remaining difference is long-term
FHLB advances decreased due to the repayments in 2023
Other borrowings decreased $5,656 from December 31, 2022 to December 31, 2023. Other borrowings decreased
due to borrowings at the CLF division.
Civista no longer offers repurchase agreements in the form of sweep accounts to commercial checking account
customers, as of July 2023. These repurchase agreements totaled $0 at December 31, 2023 compared to $25,143 at
December 31, 2022. U.S. Treasury securities and obligations of U.S. government agencies maintained under Civista’s
control were pledged as collateral for the repurchase agreements. Additional detail related to these repurchase
agreements can be found in Note 12 to the Consolidated Financial Statements.
Swap liabilities decreased $4,098 from December 31, 2022 to December 31, 2023. The decrease is primarily the result
of decreases in the fair value of swap liabilities as compared to December 31, 2022.
Total shareholders’ equity increased $37,166, or 11.1%, during 2023 to $372,002. Shareholders' equity increased due
to net income of $42,964, partially offset by $9,599 of dividends on common shares and a one-time CECL adoption
6
adjustment of $5,193. Additionally, $984 was recognized as stock-based compensation in 2023 in connection with
the grant of restricted common shares. Accumulated other comprehensive income increased $9,747 due to an increase
in the fair value of securities available for sale, net of tax and a $768 increase in the Company’s pension liability, net
of tax. The Company repurchased treasury shares for $1,628. For further explanation of these items, see Note 1, Note
15 and Note 16 to the Consolidated Financial Statements. The Company paid $0.61 per common share in dividends
in 2023 compared to $0.56 per common share in dividends in 2022.
Total outstanding common shares at December 31, 2023 were 15,695,424, which decreased from 15,728,234 common
shares outstanding at December 31, 2022. Common shares outstanding was impacted by the Company’s repurchase
of 90,423 common shares during 2023 at an average repurchase price of $18.01. The Company repurchased 84,230
common shares pursuant to a stock repurchase program announced on May 8, 2023, pursuant to which the Company
is authorized to repurchase a maximum aggregate value of $13,500 of the Company’s common shares until May 2,
2024. An additional 6,193 common shares were surrendered by officers to the Company to pay taxes upon vesting of
restricted shares and 1,740 restricted common shares were forfeited. The repurchase of common shares was offset by
the grant of 47,536 restricted common shares to certain officers under the Company’s 2014 Incentive Plan. In addition,
1,817 common shares were issued to Civista directors in 2023 as a retainer payment for service on the Civista Board
of Directors.
Results of Operations
The operating results of the Company are affected by general economic conditions, the monetary and fiscal policies
of federal agencies and the regulatory policies of agencies that regulate financial institutions. 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 credit 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, 2023 and December 31, 2022
Net Income
The Company’s net income for the year ended December 31, 2023 was $42,964, compared to $39,427 for the year
ended December 31, 2022. The change in net income was the result of the items discussed in the following sections.
Net Interest Income
Net interest income for 2023 was $125,496, an increase of $15,292, or 13.9%, from 2022. From 2022 to 2023, average
earning assets increased 11.6%, interest income increased $56,579, and interest expense on interest-bearing liabilities
increased $41,287. The Company continually examines its rate structure to ensure that its interest rates are competitive
and reflective of the current rate environment in which it competes.
Total interest income increased $56,579 to $182,734 for the year ended December 31, 2023, which is attributable to
an increase of $52,702 in interest and fees on loans. This change was the result of an increase in the average balance
of loans, accompanied by a higher yield on the portfolio. The average balance of loans increased by $523,715, or
23.8%, to $2,722,797 for the year ended December 31, 2023, as compared to $2,199,082 for the year ended December
31, 2022. The loan yield increased to 5.90% for 2023, from 4.69% in 2022.
Interest on taxable securities increased $2,595 to $11,718 for the year ended December 31, 2023, compared to $9,123
for the same period in 2022. The average balance of taxable securities increased $22,372 to $363,972 for the year
ended December 31, 2023, as compared to $341,600 for the year ended December 31, 2022. The yield on taxable
securities increased 39 basis points to 2.88% for 2023, compared to 2.49% for 2022. Interest on tax-exempt securities
increased $1,423 to $9,282 for the year ended December 31, 2023, compared to $7,859 for the same period in
2022. The average balance of tax-exempt securities increased $18,697 to $282,678 for the year ended December 31,
7
2023 as compared to $263,981 for the year ended December 31, 2022. The yield on tax-exempt securities increased
23 basis points to 3.79% for 2023, compared to 3.56% for 2022.
Total interest expense increased $41,287 or 258.8%, to $53,763 for the year ended December 31, 2023, compared
with $4,732 for the same period in 2022. The increase in interest expense can be attributed to an increase in the
average rate paid, accompanied by an increase in the average balance of interest-bearing liabilities. For the year ended
December 31, 2023, the average balance of interest-bearing liabilities increased $398,903 to $2,405,655 , as compared
to $2,006,752 for the year ended December 31, 2022. Interest incurred on deposits increased by $29,915 to $33,755
for the year ended December 31, 2023, compared to $3,840 for the same period in 2022. The increase in deposit
expense was due to a increase in the average rate paid, as the average rate paid on demand and savings accounts
increased from 0.15% in 2022 to 1.15% in 2023 and the average rate paid on time deposits increased from 0.95% in
2022 to 4.125% in 2023, which was coupled with an increase in the average balance of interest-bearing deposits of
$258,499 for the year ended December 31, 2023 as compared to the same period in 2022. Interest expense incurred
on FHLB advances and subordinated debentures increased 93.9% from 2022. The increase was due to an increase in
the average balance of short-term FHLB balances and subordinated debentures to $280,887 and $66,875, respectively,
accompanied by an increase in rates. The average balance of other borrowings decreased $17,823 for the period ended
December 31, 2023.
Refer to “Distribution of Assets, Liabilities and Shareholders’ Equity; Interest Rates and Interest Differential” and
“Changes in Interest Income and Interest Expense Resulting from Changes in Volume and Changes in Rate” on pages
46 through 48 for further analysis of the impact of changes in interest-bearing assets and liabilities on the Company’s
net interest income.
Provision and Allowance for Credit Losses
The Company’s policy is to maintain the allowance for credit losses at a level sufficient to provide for probable losses
incurred in the current portfolio. Management believes the analysis of the allowance for credit losses supported a
reserve of $37,160 at December 31, 2023. The Company provides for credit losses through regular provisions to the
allowance for credit losses as necessary. The amount of the provision is affected by loan charge-offs, recoveries and
changes in specific and general allocations required for the allowance for credit losses. A number of factors impact
the provisions for credit losses, such as the level of higher risk loans in the portfolio, changes in practices related to
loans, changes in collateral values and other factors. We continue to actively manage this process and have provided
to maintain the reserve at a level that assures adequate coverage ratios.
Provisions for credit losses totaled $4,435 in 2023, $1,752 in 2022 and $830 in 2021. The Company’s provision for
credit losses increased $2,683 during 2023, as compared to 2022, primarily to support strong organic loan growth in
the portfolio. In addition, a one-time CECL adoption adjustment of $5,964 was incurred in the first quarter of 2023.
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 increased $8,087, or 27.8%, to $37,164 for the year ended December 31, 2023, from $29,076 for
the comparable 2022 period. The increase was primarily due to increases in lease revenue of $5,285, service
charges of $512, bank owned life insurance of $128 and other operating items of $2,508. Which were partially offset
by decreases in net gain on equity securities of $139, and net gain on sale of loans and leases of $489.
8
Net gain on sale of loans and leases decreased by $489 for 2023, primarily as a result of a decrease in volume of loans
sold. During the twelve-months ended December 31, 2023, 349 loans were sold, totaling $103,036. During the twelve-
months ended December 31, 2022, 692 loans were sold, totaling $131,193. Service charges increased due to increased
ATM fees of $381. Lease revenue and residual income increased due to a full year of operations for CLF. Other
income increased due to increases in wire transfer fees, merchant credit card fees, loan servicing fees, amortization of
mortgage servicing rights and fee income from the acquisition of CLF.
Noninterest Expense
Noninterest expense increased $17,118, or 18.9%, to $107,611 for the year ended December 31, 2023, from $90,493
for the comparable 2022 period. The increase was primarily due to increases in compensation expense of $7,230, net
occupancy expense of $694, equipment expense of $6,015, amortization expense of $283, software expense of $734,
FDIC assessments of $840 and other operating expense of $2,242, increases were partially offset by decreases in data
processing expense of $546, professional services of $436, and marketing expense of $161.
The increase in compensation expense was due to increased payroll, payroll taxes, employee insurance and
commissions and incentives. The average full time equivalent (FTE) employees were 531 at December 31, 2023, an
increase of 50 FTEs over 2022 due to a full year of the additional employees resulting from the prior year acquisitions
of Comunibanc and VFG. The increase in net occupancy expense was due to increases in building repairs and
maintenance and building depreciation. The increase in equipment expense was due to a general increase in computer,
printer, office and security equipment costs and an increase in equipment depreciation related to the acquisition of
VFG in October 2022. The increase in FDIC assessments was attributable to higher assessment multipliers charged
to Civista. The increase in amortization expense is related to the a full year of amortization of assets acquired in the
acquisition of Comunibanc Corp in July 2022. Software expense increase due to a general increase in legacy software
maintenance contracts. Other operating expenses increased due to increases in travel, lodging and meals, donations,
and bad check expense. The decrease in data processing expense was due to no additional acquisitions in 2023
compared to prior year. The decrease in professional services was due to decreases in legal and audit fees, as well as
a decrease in marketing expense due to no additional marketing for new acquisitions compared to the previous year.
Income Tax Expense
Income tax expense was $7,649 in 2023 compared to $7,608 in 2022. Income tax expense as a percentage of pre-tax
income was 15.1% in 2023 compared to 16.2% in 2022. A lower federal effective tax rate than the statutory rate of
21% in 2023 and 2022 is primarily due to tax-exempt interest income from state and municipal investments, municipal
loans, income from BOLI and low income housing credits.
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
9
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.
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
12 through 14 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 $28,511 at December 31,
2022.
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.
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 $131,193. 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.
10
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.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.
11
Distribution of Assets, Liabilities and Shareholders’ Equity;
Interest Rates and Interest Differential
The following table sets forth, for the years ended December 31, 2023, 2022 and 2021, the distribution of assets,
including interest amounts and average rates of major categories of interest-earning assets and noninterest-earning
assets (Amounts in thousands):
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
2023
Interest
Yield/
rate
Average
balance
2022
Interest
Yield/
rate
Average
balance
2021
Interest
Yield/
rate
$ 2,722,797
363,972
$ 160,755
11,718
5.90% $ 2,286,928
341,600
2.88%
$ 108,053
9,123
4.72% $ 2,127,157
232,813
2.49%
$ 92,882
5,473
282,678
9,282
3.79%
263,981
7,859
3.56%
217,786
6,250
21,551
979
4.54%
146,849
1,120
0.76%
347,573
449
3,390,998
182,734
5.35%
3,039,358
126,155
4.16%
2,925,329
105,054
4.37%
2.41%
3.96%
0.13%
3.68%
39,219
58,456
11,499
133,626
63,152
54,211
84,777
34,577
8,650
96,492
50,765
50,076
35,404
22,617
8,010
84,747
37,378
46,435
Less allowance for loan
losses
Total
(33,814)
$ 3,717,347
(27,721)
$ 3,336,974
(26,366)
$ 3,133,554
(1)
For purposes of these computations, the daily average loan amounts outstanding are net of unearned income and
include loans held for sale.
(2)
Included in loan interest income are loan fees of $2,960 in 2023, $2,024 in 2022 and $1,661 in 2021.
(3) Non-accrual loans are included in loan totals and do not have a material impact on the analysis presented.
(4) Average balance is computed using the carrying value of securities. 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 2023, 2022 and 2021.
12
Distribution of Assets, Liabilities and Shareholders’ Equity;
Interest Rates and Interest Differential (Continued)
The following table sets forth, for the years ended December 31, 2023, 2022 and 2021, the distribution of liabilities,
including interest amounts and average rates of major categories of interest-bearing liabilities and shareholders’ equity
(Amounts in thousands):
Liabilities and
Shareholders’ Equity
Interest-bearing liabilities:
Savings and
interest-bearing
demand accounts
Certificates of deposit
Short-term Federal Home Loan
Bank
Average
balance
2023
Interest
Yield/
rate
Average
balance
2022
Interest
Yield/
rate
Average
balance
2021
Interest
Yield/
rate
$ 1,356,789
578,243
$
7,689
26,066
0.57% $ 1,423,134
253,399
4.51%
$
1,442
2,398
0.01% $ 1,315,220
265,294
0.95%
$ 1,219
2,956
0.09%
1.11%
advances
280,887
14,493
5.16%
66,875
2,566
3.84%
—
—
—
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)
2,909
74,025
8,685
244
103,873
66
4,058
4
13
4,849
2.27%
5.48%
0.05%
5.33%
4.67%
45,325
91,848
22,293
137
103,741
510
5,243
11
6
3,781
1.13%
5.70%
0.05%
4.38%
3.64%
94,041
100,250
26,165
137
36,785
1,163
3,312
23
1
955
2,405,655
57,238
2.38%
2,006,752
15,957
0.79%
1,837,892
9,629
1.24%
3.30%
0.09%
0.73%
2.66%
0.53%
917,005
50,963
967,968
343,724
$ 3,717,347
937,890
76,189
1,014,079
316,143
$ 3,336,974
907,591
38,868
946,459
349,203
$ 3,133,554
$ 125,496
2.97%
3.70%
$ 110,198
3.37%
3.65%
$ 95,425
3.15%
3.35%
(1)
Interest rate spread is calculated by subtracting the rate on average interest-bearing liabilities from the yield on
average interest-earning assets.
(2) Net interest margin is calculated by dividing tax-equivalent adjusted net interest income by average interest-
earning assets
13
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):
2023 compared to 2022
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
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
Increase (decrease) due to:
Rate (1)
Volume (1)
Net
$
$
$
$
$
$
$
$
$
$
22,820 $
1,106
896
(1,651)
23,171 $
(70) $
6,014
10,767
(710)
(6)
—
5
(978)
15,022 $
8,149 $
7,250 $
3,457
2,295
(393)
12,609 $
104 $
(128)
2,566
(556)
(3)
—
(298)
2,313
3,998 $
8,611 $
29,882 $
1,489
527
1,510
33,408 $
6,317 $
17,654
1,160
266
(1)
—
1,063
(194)
26,265 $
7,143 $
7,921 $
193
(686)
1,064
8,492 $
119 $
(430)
—
(97)
(9)
5
2,223
513
2,324 $
6,168 $
52,702
2,595
1,423
(141)
56,579
6,247
23,668
11,927
(444)
(7)
—
1,068
(1,172)
41,287
15,292
15,171
3,650
1,609
671
21,101
223
(558)
2,566
(653)
(12)
5
1,925
2,826
6,322
14,779
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.
(1)
.
14
Liquidity and Capital Resources
Civista maintains a conservative liquidity position. All securities are classified as available for sale. At December 31,
2023, securities with maturities of one year or less totaled $2,652, or 0.4% of the total securities portfolio. The
available for sale portfolio helps to provide Civista with the ability to meet its funding needs. The Consolidated
Statements of Cash Flows contained in the Consolidated Financial Statements detail the Company’s cash flows from
operating activities resulting from net earnings.
Net cash provided by operating activities was $62,698, $25,183, and $40,761 for 2023, 2022 and 2021,
respectively. The primary additions to cash from operating activities are from net income, adjusted for amortization
of intangible assets, amortization of securities net of accretion, the provision for credit losses, depreciation and
proceeds from sale of loans. The primary use of cash from operating activities is from loans originated for sale. Net
cash used for investing activities was $311,784, $410,364, and $130,496 in 2023, 2022 and 2021, respectively,
principally reflecting our loan and investment security activities. Deposits and borrowings comprised most of our
financing activities, which resulted in net cash provided of $266,131, $164,303, and $216,925 in 2023, 2022 and 2021,
respectively.
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,
2023, Civista had total credit availability with the FHLB of $791,637, of which $364,792 was outstanding, including
standby letters of credit of $24,400.
On a separate entity basis, CBI’s primary source of funds is dividends paid by its subsidiaries, primarily by Civista.
Generally, subject to applicable minimum capital requirements, Civista may declare and pay a dividend without the
approval of the Federal Reserve Bank of Cleveland (the “Federal Reserve Bank”) and the ODFI, provided the total
dividends in a calendar year do not exceed the total of its profits for that year combined with its retained profits for
the two preceding years. At December 31, 2023, Civista was able to pay approximately $56,886 of dividends to CBI
without obtaining regulatory approval. During 2023, Civista paid dividends totaling $28,100 to CBI. This represented
approximately 65 percent of Civista’s earnings for the year.
The Company manages its liquidity and capital through quarterly Asset/Liability Management Committee (ALCO)
meetings. 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 “Item 7A. Quantitative
and Qualitative Disclosures about Market Risk” section below.
Capital Adequacy
Shareholders’ equity totaled $372,002 at December 31, 2023 compared to $334,835 at December 31, 2022. The
increase in shareholders’ equity resulted primarily from net income of $42,964, which was partially offset by a $768
net increase in the Company’s pension liability and an increase in the fair value of securities available for sale, net of
tax, of $9,747, together with dividends on common shares of $9,599 and repurchase of common shares totaling $1,628
during 2023 pursuant to the Company’s publicly-announced share purchase programs.
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, 2023 and 2022 as identified in the following table:
Company Ratios—December 31, 2023
Company Ratios—December 31, 2022
For Capital Adequacy Purposes
To Be Well Capitalized Under Prompt Corrective
Action Provisions
Total Risk
Based
Capital
Tier I Risk
Based
Capital
CET1 Risk
Based
Capital
Leverage
Ratio
14.4%
14.1%
8.0%
10.7%
10.4%
6.0%
10.0%
8.0%
9.7%
9.4%
4.5%
6.5%
8.8%
8.7%
4.0%
5.0%
15
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 certain 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).
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 at least 2.5 percent composed of CET1 capital above its minimum risk-based capital
requirements, or if its eligible retained income is negative in that quarter and its capital conservation buffer ratio was
less than 2.5 percent at the beginning of the quarter.
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.
Fair Value of Financial Instruments
The Company has disclosed the fair value of its financial instruments at December 31, 2023 and 2022 in Note 17 to
the Consolidated Financial Statements. The fair value of loans at December 31, 2023 was 94.9% of the carrying value
compared to 96.5% at December 31, 2022. The fair value of deposits at December 31, 2023 was 100.0% of the
carrying value compared to 100.0% at December 31, 2022. Changes in fair value were primarily due to changes in the
discount values used to measure fair value.
16
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 OCC and FDIC, adopted a Joint Agency Policy Statement on interest-
rate risk, effective June 26, 1996. The policy statement provides guidance to examiners and bankers on sound practices
for managing interest-rate risk, which will form the basis for ongoing evaluation of the adequacy of interest-rate risk
management at supervised institutions. 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.
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
17
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, 2023 and 2022, based on certain prepayment and account decay assumptions that
management believes are reasonable. Although the Company had derivative financial instruments as of December 31,
2023 and 2022, the changes in fair value of the assets and liabilities of the underlying contracts offset each other. For
more information about derivative financial instruments see Note 22 to the Consolidated Financial Statements.
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
December 31, 2023
Dollar
Change
Dollar
Amount
Percent
Change
December 31, 2022
Dollar
Change
Dollar
Amount
Percent
Change
$ 603,656 $ (4,077)
666
—
(2,686)
(16,428)
608,399
607,733
605,047
591,305
(1)% $ 571,328 $ 14,733
10,001
0% 566,596
—
556,595
—
(8,020)
(0)% 548,575
(29,893)
(3)% 526,702
3%
2%
—
(1)%
(5)%
The change in net portfolio value from December 31, 2022 to December 31, 2023, can be attributed to a couple of
factors. The yield remains inverted, and the short end has steepened since the end of the year. Additionally, both the
volume and mix of assets and funding sources has changed. The volume of loans has increased, and the asset mix
remains centered on loans. The volume of certificates of deposit has increased and both non-maturing deposits and
borrowed money have decreased. The volume and mix shifts from the end of the year contributed to an increase in
the base net portfolio value. Beyond the change in the base level of net portfolio value, projected movements in rates,
up or down, would also lead to changes in market values. A 200 basis point change in the rates up scenario would
lead to a slightly larger decrease in the market value of assets than liabilities. Accordingly, we see a decrease in the
net portfolio value. A 200 basis points change in the rates down scenario would lead to a larger increase in the market
value of liabilities than in assets, leading to a decrease in the net portfolio value.
Critical Accounting Policies
Allowance for Credit losses: The allowance for credit losses is regularly reviewed by management to determine that
the amount is considered adequate to absorb probable losses in the loan portfolio. If not, an additional provision is
made to increase the allowance. 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 Credit losses.
18
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, 2023 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 2023.
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.
Available for Sale (“AFS”) Debt Securities: For AFS securities in an unrealized loss position, management assesses
whether (i) we intend to sell, or (ii) it is more likely than not that we will be required to sell the security before recovery
of its amortized cost basis. If either case is affirmative, any previously recognized allowances are charged-off and the
security's amortized cost is written down to fair value through income. If neither case is affirmative, the security is
evaluated to determine whether the decline in fair value has resulted from credit losses or other factors. In making this
assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating
of the security by a rating agency and any adverse conditions specifically related to the security, among other factors.
If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the
security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be
collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the
credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not
been recorded through an allowance for credit losses is recognized in other comprehensive income. Adjustments to
the allowance are reported in our income statement as a component of credit loss expense. AFS securities are charged-
off against the allowance or, in the absence of any allowance, written down through income when deemed
uncollectible by management or when either of the aforementioned criteria regarding intent or requirement to sell is
met.
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.
19
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.
Management assessed the Company’s system of internal control over financial reporting as of December 31, 2023, 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, 2023, 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, 2023.
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, 2023.
Dennis G. Shaffer
President and Chief Executive Officer
Todd A. Michel
Senior Vice President, Controller
Sandusky, Ohio
March 14, 2024
20
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, 2023 and 2022, the related consolidated statements of operations, comprehensive income (loss),
changes in shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31,
2023, 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, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the three-
year period ended December 31, 2023, 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, 2023, 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 14, 2024, expressed an unqualified opinion
thereon.
Change in Accounting Principle
As discussed in Notes 1 and 5 to the consolidated financial statements, the Company changed its method of
accounting for the allowance for credit losses as of January 1, 2023 due to the adoption of Accounting Standards
Update No. 2016-13, which established Accounting Standards Codification Topic 326, Financial Instruments -
Credit Losses.
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 matter communicated below is a matter 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 matter
below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which they relate.
Allowance for Credit Losses
As discussed in Notes 1 and 5 to the consolidated financial statements, the Company’s loan portfolio and the associated
allowance for credit losses (“ACL”) were $2.9 billion and $37.2 million as of December 31, 2023, respectively. The
Company estimates the ACL at a level that is appropriate to cover estimated credit losses based on internal and external
information relating to past events, current conditions, and reasonable and supportable forecasts. The Company uses
21
the discounted cash flow method for all loan segments to estimate expected losses on a collective (pool) basis for
loans that share similar risk characteristics. For each loan segment, the Company generates cash flow projections at
the instrument level adjusting payment expectations for estimated prepayment speed, curtailments, time to recovery,
probability of default and loss given default. Additional qualitative adjustments are applied for risk factors that are not
considered within the modeling process but are relevant in assessing the expected credit losses within the loan
segments. Consideration is given to the following factors: changes in experience and depth of lending and management
staff; changes in quality of credit review system; changes in nature and volume of portfolio; changes in past due,
classified and nonaccrual loans; changes in economic and business conditions; changes in competition or legal and
regulatory requirements; changes in concentrations within the portfolio; and changes in underlying collateral for
collateral dependent loans. Loans that do not share risk characteristics are evaluated on an individual basis.
We identified the valuation of the ACL as a critical audit matter. The principal considerations for that determination
included the high degree of judgment and subjectivity involved in evaluating management’s estimates, particularly as
it related to evaluating management’s assessment of the qualitative factors. This required a high degree of auditor
judgment and an increased extent of effort when performing audit procedures to evaluate the reasonableness of
management’s significant estimates and assumptions.
Our primary audit procedures performed related to the ACL included:
•
•
•
•
•
•
•
Obtained an understanding of the Company's process for establishing the ACL, including the qualitative
and forecast factor adjustments of the ACL
Evaluated the design and tested the operating effectiveness of controls related to management's
determination of the ACL, including controls over:
Management's process for identification, basis for development and related adjustments; including
reasonableness, of the qualitative factor components of the ACL
Management's review of reliability and accuracy of data used to calculate and estimate the various
components of the ACL, including accuracy of the calculation
Evaluated and tested the data and inputs within the ACL calculation for completeness and accuracy
including mathematical accuracy for the calculation.
Evaluated the qualitative factors for appropriate identification and application including reasonableness
of the basis for adjustment.
Evaluated the mathmatical accuracy of formulas used in setting qualitative factors and application of the
factors to loan segments.
Utilized the assistance of the firm's internal specialists to test the mathematical operation of the model.
Evaluated the reasonableness of management's application of qualitative factor adjustments to historical
loss rates in the ACL, including:
Evaluated completeness and accuracy of the information utilized as a basis for the qualitative factors
to third party or internal sources
Evaluated the relevance of inputs in the calculation utilized as a basis for the qualitative factors
We have served as the Company’s auditor since 2021.
FORVIS, LLP
Cincinnati, Ohio
March 14, 2024
22
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, 2023, 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, 2023, 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, 2023 and 2022, and
for each of the three years in the period ended December 31, 2023, and our report dated March 14, 2024, 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.
23
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
Cincinnati, Ohio
March 14, 2024
24
This page intentionally left blank.
25
CIVISTA BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS
December 31, 2023 and 2022
(Amounts in thousands, except share data)
ASSETS
Cash and due from financial institutions
Cash and cash equivalents
Investments in time deposits
Securities available for sale
Equity securities
Loans held for sale
Loans, net of allowance of $37,160 and $28,511
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
Secured borrowings
Other borrowings
Swap liabilities
Accrued expenses and other liabilities
Total liabilities
SHAREHOLDERS’ EQUITY
Common stock, no par value, 40,000,000 shares authorized, 19,288,674
shares issued at December 31, 2023 and 19,231,061 shares issued at
December 31, 2022
Accumulated earnings
Treasury stock, 3,593,250 common shares at December 31, 2023 and
3,502,827 common shares at December 31, 2022, at cost
Accumulated other comprehensive loss
Total shareholders’ equity
Total liabilities and shareholders’ equity
2023
2022
$
$
$
$
$
$
60,406
60,406
1,225
618,272
2,169
1,725
2,824,568
29,998
56,769
12,819
125,520
9,508
61,335
12,481
18,357
26,266
3,861,418
771,699
2,213,329
2,985,028
338,000
2,392
—
103,943
—
9,859
12,481
37,713
3,489,416
311,166
183,788
(75,422)
(47,530)
372,002
3,861,418
$
$
43,361
43,361
1,477
615,402
2,190
683
2,619,770
33,585
64,018
11,178
125,695
10,759
53,543
16,579
18,449
22,756
3,639,445
896,333
1,723,651
2,619,984
393,700
3,578
25,143
103,799
101,615
15,516
16,579
24,696
3,304,610
310,182
156,492
(73,794)
(58,045)
334,835
3,639,445
26
CIVISTA BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended December 31, 2023, 2022 and 2021
(Amounts in thousands, except per share data)
2023
2022
2021
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 credit losses
Net interest income after provision for credit 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
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
$
$
$
$
160,755
11,718
9,282
979
182,734
33,755
14,559
4,849
4,075
57,238
125,496
4,435
121,061
7,206
0
(21)
2,908
5,880
4,767
7,595
1,112
2,375
673
4,668
37,163
58,291
5,395
11,085
2,242
1,637
2,026
4,952
1,579
2,420
1,352
4,167
12,465
107,611
50,613
7,649
42,964
42,964
2.73
2.73
$
$
$
$
108,053
9,123
7,859
1,120
126,155
3,840
3,076
3,781
5,254
15,951
110,204
1,752
108,452
7,074
10
118
3,397
5,499
4,902
2,310
984
2,375
247
2,160
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
$
92,882
5,473
6,250
449
105,054
4,175
1,163
955
3,336
9,629
95,425
830
94,595
5,905
1,786
186
8,042
5,443
4,857
—
1,200
2,375
207
1,451
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
$
$
$
27
CIVISTA BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Years ended December 31, 2023, 2022 and 2021
(Amounts in thousands)
Net income
Other comprehensive income (loss):
2023
2022
2021
$
42,964
$
39,427
$
40,546
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)
$
12,330
(2,583)
—
—
972
(204)
—
—
10,515
53,479
$
(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
28
CIVISTA BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
Years ended December 31, 2023, 2022 and 2021
(Amounts in thousands, except share data)
Common Shares
Accumulated Treasury
Shares
Amount
Earnings
Stock
Accumulated
Other
Comprehensive
Income (Loss)
Total
Shareholders’
Equity
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
328,766
42,964
10,515
984
(9,599)
(1,628)
372,002
Balance, December 31, 2020
15,898,032 $ 277,039 $
93,048 $ (34,598) $
40,546
14,619 $
(5,799)
Net income
Other comprehensive loss
Stock-based compensation
Common share dividends ($0.52 per
share)
Repurchase of common stock
44,633
702
(988,465)
(8,036)
(22,309)
Balance, December 31, 2021
14,954,200 $ 277,741 $
125,558 $ (56,907) $
8,820 $
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
Balance, December 31, 2022
Cumulative-effect adjustment for
adoption of
ASC 326
Balance January 1, 2023
Net income
Other comprehensive income
Stock-based compensation
Common share dividends ($0.61 per
share)
Repurchase of common stock
36,461
819
984,723
21,122
500,293
(747,443)
10,500
—
39,427
(8,493)
(66,865)
(16,887)
15,728,234 $ 310,182 $
156,492 $ (73,794) $
(58,045) $
15,728,234 $ 310,182 $ 150,423 $ (73,794) $
(58,045) $
(6,069)
57,613
984
42,964
(9,599)
(90,423)
—
(1,628)
10,515
Balance, December 31, 2023
15,695,424 $ 311,166 $
183,788 $ (75,422) $
(47,530) $
29
CIVISTA BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 2023, 2022 and 2021
(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
Loss on sale of fixed assets
Net gain on sale of securities
Net (gain) loss on equity securities
Provision for loan losses
Loans and leases originated for sale
Proceeds from sale of loans and leases
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 provided by 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
Purchases of bank owned life insurance
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 in investing activities
2023
2022
2021
$
42,964
$
39,427
$
40,546
7
468
10,760
1,579
(1,299)
(82)
0
21
4,435
(101,170)
103,036
(2,908)
(1,112)
984
(675)
8,858
(1,641)
(1,527)
62,698
245
—
23,138
—
(14,146)
(32,311)
35,898
—
(7,000)
320
(314,499)
—
—
(3,429)
0
(311,784)
8
1,607
4,456
1,296
(2,859)
0
(10)
(118)
1,752
(126,507)
131,193
(3,397)
(984)
819
483
302
(2,049)
(20,236)
25,183
1312
(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)
0
(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)
30
CIVISTA BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
Years ended December 31, 2023, 2022 and 2021
(Amounts in thousands)
2023
2022
2021
Cash flows from financing activities:
Increase (decrease) in deposits
Net change in short-term FHLB advances
Repayment of long-term FHLB advances
Change in other borrowings
Proceeds from subordinated debentures
Increase (decrease) in securities sold under repurchase
agreements
Repurchase of common stock
Cash dividends paid
Net cash provided by 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
$
$
365,044
(1,186)
(55,700)
(5,657)
—
(25,143)
(1,628)
(9,599)
266,131
17,045
43,361
60,406
48,380
9,510
—
—
The Company purchased all of the capital stock of Comunibanc
Corp. for $46,090 on July 1, 2022. In conjunction with the
acquisition, liabilities were assumed as follows:
Fair value of assets acquired
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
(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
340,649
21,122
24,968
294,559
126,852
10,500
36,044
80,308
$
$
$
$
$
$
31
CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023, 2022 and 2021
(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”), 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.
Civista Leasing and Finance ("CLF"), formerly known as Vision Financial Group, Inc. ("VFG") was acquired in the
fourth quarter of 2022 as a wholly owned subsidiary of Civista. Effective as of August 31, 2023, VFG was merged
with and into Civista, and CLF is now operated as a full-service general equipment leasing and financing division of
Civista. The operations of CLF are located in Pittsburgh, Pennsylvania.
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, 2023, 2022 and 2021. 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, 2023, 2022 and 2023. 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, 2023, 2022 and 2021. 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 ("GAAP"), 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 credit 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 but believes the risk of loss
is very low with respect to such deposits.
32
CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023, 2022 and 2021
(Amounts in thousands, except share data)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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.
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.
Other securities which include Federal Home Loan Bank ("FHLB") stock, Federal Reserve Bank (“FRB”) stock,
Federal Agricultural Mortgage Corporation stock, United Bankers' Bancorporation Inc. (“UBBI”) stock, and Norwalk
Community Development Corporation (“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 leases 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.
33
CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023, 2022 and 2021
(Amounts in thousands, except share data)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Allowance for Credit Losses: On January 1, 2023, the Company adopted Accounting Standards Update (“ASU”) No.
2016-13, Financial Instruments – Credit Losses (Topic 326) – Measurement of Credit Losses on Financial Instruments
("ASU 2016-13"). ASU 2016-13 introduces a new credit loss methodology, Current Expected Credit Losses
("CECL"), which requires earlier recognition of credit losses, while also providing additional transparency about credit
risk. ASU 2016-13 amends guidance on reporting credit losses for financial assets held at amortized cost basis and
available for sale debt securities. ASU 2016-13 eliminates the probable initial recognition threshold previously
required under Generally Accepted Accounting Principles ("GAAP") and instead, requires an entity to reflect its
current estimate of all expected credit losses based on historical experience, current conditions and reasonable and
supportable forecasts. The allowance for credit losses is a valuation account that is deducted from the amortized cost
basis of the financial assets to present the net amount expected to be collected. ASU 2016-13 also expands the
disclosure requirements regarding an entity’s assumptions, models, and methods for estimating the reserve for credit
losses. In addition, entities need to disclose the amortized cost balance for each class of financial asset by credit quality
indicator, disaggregated by the year of origination.
The Company adopted Accounting Standards Certification ("ASC") 326 using the modified retrospective method for
all financial assets measured at amortized cost and off-balance sheet credit exposures. Results for the periods
beginning after January 1, 2023 are presented under Accounting Standards Codification (“ASC”) 326 while prior
period amounts continue to be reported in accordance with previously applicable GAAP. The Company adopted ASC
326 using the prospective transition approach for purchased credit deteriorated ("PCD") financial assets that were
previously classified as purchased credit impaired ("PCI") and accounted for under ASC 310-30. In accordance with
ASC 326, management did not reassess whether PCI assets met the criteria of PCD assets as of the date of
adoption. On January 1, 2023, the amortized cost basis of the PCD assets was adjusted to reflect the addition of $1,668
to the allowance for credit losses. The remaining noncredit discount (based on the adjusted amortized cost basis) will
be accreted into interest income at the effective interest rate as of January 1, 2023. The adoption of CECL resulted in
an increase to our total allowance for credit losses (“ACL”) on loans held for investment of $4.3 million, an increase
in allowance for credit losses on unfunded loan commitments of $3.4 million, a reclassification of PCI discount from
loans to the ACL of $1.7 million, and an increase in deferred tax asset of $1.6 million. The Company also recorded a
net reduction of retained earnings of $6.1 million upon adoption.
The allowance for credit losses is evaluated on a regular basis and established through charges to earnings in the form
of a provision for credit losses. When a loan or portion of a loan is determined to be uncollectible, the portion deemed
uncollectible is charged against the allowance and subsequent recoveries, if any, are credited to the allowance. This
evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more
information becomes available.
34
CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023, 2022 and 2021
(Amounts in thousands, except share data)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Portfolio Segmentation (“Pooled Loans”)
Portfolio segmentation is defined as the pooling of loans based upon similar risk characteristics such that quantitative
methodologies and qualitative adjustment factors for estimating the allowance for credit losses are constructed for
each segment. The Company has identified nine portfolio segments of loans including Commercial & Agriculture,
Commercial Real Estate – Owner Occupied, Commercial Real Estate – Non-Owner Occupied, Residential Real Estate,
Real Estate Construction, Home Equity Line of Credit, Farm Real Estate, Lease Financing Receivable and Consumer
and Other Loans.
The allowance for credit losses for Pooled Loans is estimated based upon periodic review of the collectability of the
loans quantitatively correlating historical loan experience with reasonable and supportable forecasts using forward
looking information. The Company utilized a discounted cash flow (DCF) method to estimate the quantitative portion
of the allowance for credit losses for loans evaluated on a collective pooled basis. For each segment, a loss driver
analysis (LDA) was performed in order to identify appropriate loss drivers and create a regression model for use in
forecasting cash flows. The LDA utilized the Company’s own Federal Financial Institutions Examination Council’s
(“FFIEC”) Call Report data for all segments except indirect auto and all new and unknown values. Peer data was
incorporated into the analysis for all segments except indirect auto and all new and unknown values. The Company
uses regression analysis to determine suitable loss drivers to utilize when modeling lifetime probability of default and
loss given default for the changes in the economic factors for the loss driver segments. The identified loss drivers for
all segments as of December 31, 2023 are national unemployment rate and national gross domestic product growth.
Peer data is utilized in our model as more statistically supportable data. The Company uses actual loss data for the
lease portfolio due to a lack of appropriate peer leasing data to forecast loss drivers.
Key inputs into the DCF model include loan-level detail, including the amortized cost basis of individual loans,
payment structure, loss history, and forecasted loss drivers. The Company uses the central tendency midpoint
seasonally adjusted forecasts from the Federal Open Market Committee (FOMC). Other key assumptions include the
probability of default (PD), loss given default (LGD), and prepayment/curtailment rates. When possible, the Company
utilizes its own PDs for the reasonable and supportable forecast period. When it is not possible to use the Company’s
own PDs, the LDA is utilized to determine PDs based on the forecasted economic factors. In all cases, the LDA is
then utilized to determine the long-term historical average, which is reached over the reversion period. When possible,
the Company utilizes its own LGDs for the reasonable and supportable forecast period. When it is not possible to use
the Company’s own LGDs, the LGD is derived using a method referred to as Frye Jacobs. The Frye Jacobs method
is a mathematical formula that traces the relationship between LGD and PD over time and projects the LGD based on
the level of PD forecasted. In all cases, the Frye Jacobs method is utilized to calculate LGDs during the reversion
period and long-term historical average. Prepayment and curtailment rates were calculated based on the Company’s
own data utilizing a one-year average. When the discounted cash flow method is used to determine the allowance for
credit losses, management incorporates expected prepayments to determine the effective interest rate utilized to
discount expected cash flow.
Adjustments to the quantitative evaluation may be made to account for differences in current or expected qualitative
risk characteristics such as changes in: (i) lending policies and procedures; (ii) experience and depth of lending and
management staff; (iii) quality of credit review system; (iv) nature and volume of portfolio; (v) past due, classified
and non accrual loans; (vi) economic and business conditions; (vii) competition or legal and regulatory requirements;
(viii) concentrations within the portfolio; (ix) underlying collateral for collateral dependent loans.
Purchased Credit Deteriorated (PCD) Loans
The Company has purchased loans, some of which have shown evidence of credit deterioration since
origination. Upon adoption of ASC 326, the Company elected to maintain pools of loans that were previously
accounted for under ASC 310-30 and will continue to account for these pools as a unit of account. Loans are only
removed from the existing pools if they are written off, paid off, or sold. Upon adoption of ASC 326, the allowance
for credit losses was determined for each pool and added to the pool's carrying amount to establish a new amortized
35
CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023, 2022 and 2021
(Amounts in thousands, except share data)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
cost basis. The difference between the unpaid principal balance of the pool and the new amortized cost basis is the
noncredit premium or discount which will be amortized into interest income over the remaining life of the pool.
Changes to the allowance for credit losses after adoption are recorded through provision expense.
Individually Evaluated Loans
The Company establishes a specific reserve for individually evaluated loans which do not share similar risk
characteristics with the loans included in the forecasted allowance for credit losses. These individually evaluated loans
are removed from the pooling approach discussed above for the forecasted allowance for credit losses, and include
nonaccrual loans, loan and lease modifications experiencing financial difficulty, and other loans deemed appropriate
by management.
Available for Sale (“AFS”) Debt Securities
For AFS securities in an unrealized loss position, we first assess whether (i) we intend to sell, or (ii) it is more likely
than not that we will be required to sell the security before recovery of its amortized cost basis. If either case is
affirmative, any previously recognized allowances are charged-off and the security's amortized cost is written down
to fair value through income. If neither case is affirmative, the security is evaluated to determine whether the decline
in fair value has resulted from credit losses or other factors. In making this assessment, management considers the
extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency and
any adverse conditions specifically related to the security, among other factors. If this assessment indicates that a
credit loss exists, the present value of cash flows expected to be collected from the security are compared to the
amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized
cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount
that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an
allowance for credit losses is recognized in other comprehensive income. Adjustments to the allowance are reported
in our income statement as a component of credit loss expense. AFS securities are charged-off against the allowance
or, in the absence of any allowance, written down through income when deemed uncollectible by management or
when either of the aforementioned criteria regarding intent or requirement to sell is met.
Accrued Interest Receivable
Upon adoption of ASU 2016-13 and its related amendments on January 1, 2023, the Company made the following
elections regarding accrued interest receivable:
•
•
•
•
Presenting accrued interest receivable balances separately within another line item on the statement of
financial condition.
Excluding accrued interest receivable that is included in the amortized cost of financing receivables and
debt securities from related disclosure requirements.
Continuing our policy to write off accrued interest receivable by reversing interest income. For both
commercial and consumer loans, the write off typically occurs upon becoming 90 days past due.
Historically, the Company has not experienced uncollectible accrued interest receivable on its investment
securities. However, the Company would generally write off accrued interest receivable by reversing
interest income if the Company does not reasonably expect to receive payments. Due to the timely manner
in which accrued interest receivables are written off, the amounts of such write offs are immaterial.
Not measuring an allowance for credit losses for accrued interest receivable due to the Company’s policy
of writing off uncollectible accrued interest receivable balances in a timely manner, as described above.
36
CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023, 2022 and 2021
(Amounts in thousands, except share data)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Reserve for Unfunded Commitments
to cancel
The reserve for unfunded commitments (the “Unfunded Reserve”) represents the expected credit losses on off-balance
sheet commitments such as unfunded commitments to extend credit and standby letters of credit. No allowance is
recognized if the Company has the unconditional right
the obligation. The Company is defining
unconditionally cancelable in its literal sense, meaning that a commitment may be cancelled by the Company for any,
or for no reason whatsoever. However,
the Company in its business dealings, has no practical history of
unconditionally canceling commitments. Commitments are not typically cancelled until a default or a defined
condition occurs. Being that its historical practice has been to not cancel credit commitments unconditionally, the
Company has made the decision to reserve for Unfunded Commitments. The Unfunded Reserve is recognized as a
liability (included within other liabilities in the Consolidated Balance Sheets), with adjustments to the reserve
recognized as noninterest expense in the Consolidated Statements of Operations. The Unfunded Reserve is determined
by estimating expected future fundings, under each segment, and applying the expected loss rates. Expected future
fundings over the estimated life of commitments are based on historical averages of funding rates (i.e., the likelihood
of draws taken). To estimate future fundings on unfunded balances, current funding rates are compared to historical
funding rates. Estimate of credit losses are determined using the same loss rates as funded loans.
Use of Estimates: To prepare financial statements in conformity with accounting principles generally accepted in the
United States of America, management makes estimates and assumptions based on available information. These
estimates and assumptions affect the amounts reported in financial statements and the disclosures provided, and future
results could differ. The allowance for credit losses, consideration of impairment of goodwill, fair values of financial
instruments, deferred taxes, swap assets/liabilities and pension obligations are particularly subject to change.
Adoption of New Accounting Standards:
In June 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”)
2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments (“ASU
2016-13”). The ASU introduces a new credit loss methodology, CECL, which requires earlier recognition of credit
losses, while also providing additional transparency about credit risk. Since its original issuance in 2016, the FASB
has issued several updates to the original ASU.
The CECL methodology utilizes a lifetime “expected credit loss” measurement objective for the recognition of credit
losses for loans, held-to-maturity securities and other receivables at the time the financial asset is originated or
acquired. The expected credit losses are adjusted each period for changes in expected lifetime credit losses. The
methodology replaces the multiple existing impairment methods under prior GAAP, which generally require that a
loss be incurred before it is recognized. For available-for-sale securities where fair value is less than cost, credit-
related impairment, if any, is recognized through an allowance for credit losses and adjusted each period for changes
in credit risk.
On January 1, 2023, the Company adopted the guidance prospectively with a cumulative adjustment to retained
earnings. The Company has not restated comparative information for 2022 and, therefore, the comparative information
for 2022 is reported under the old model and is not comparable to the information presented for 2023.
37
CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023, 2022 and 2021
(Amounts in thousands, except share data)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
At adoption, the Company recognized an incremental allowance for credit losses on its loans to customers of $4.3
million, a liability for off-balance sheet unfunded commitments of $3.4 million and a reclassification of the discount
on PCI loans to the ACL of $1.7 million. Additionally, the Company recorded a $6.1 million after tax decrease in
retained earnings associated with the increased estimated credit losses. The “Day 1” impact of CECL adoption is
summarized below:
CECL Adoption
CECL
Adoption
Impact of
Adopting
ASC 326 -
Impact
PCD Loans
January 1,
2023
December
31, 2022
$
3,011
$
429
$
390
$
3,830
179
—
386
—
—
635
78
—
1,668
—
1,668
$
$
5,819
11,291
6,293
3,795
263
2,807
377
—
34,475
3,386
37,861
4,565
14,138
3,145
2,293
291
429
98
541
28,511
—
28,511
$
$
1,075
(2,847)
2,762
1,502
(28)
1,743
201
(541)
4,296
3,386
7,682
(7,682)
1,613
(6,069)
$
$
$
$
$
$
Allowance for Credit Losses:
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 Allowance for Credit Losses
Reserve for Unfunded Commitments
Total Reserve for Credit Losses
Retained Earnings
Total Pre-tax Impact
Tax Effect
Decrease to Retained Earnings
The Company adopted Accounting Standards Certification ("ASC") 326 using the modified retrospective method for
all financial assets measured at amortized cost and off-balance sheet credit exposures. Results for the periods
beginning after January 1, 2023 are presented under Accounting Standards Codification (“ASC”) 326 while prior
period amounts continue to be reported in accordance with previously applicable GAAP. The Company adopted ASC
326 using the prospective transition approach for purchased credit deteriorated ("PCD") financial assets that were
previously classified as purchased credit impaired ("PCI") and accounted for under ASC 310-30. In accordance with
ASC 326, management did not reassess whether PCI assets met the criteria of PCD assets as of the date of
adoption. On January 1, 2023, the amortized cost basis of the PCD assets was adjusted to reflect the addition of $1,668
to the allowance for credit losses. The remaining noncredit discount (based on the adjusted amortized cost basis) will
be accreted into interest income at the effective interest rate as of January 1, 2023. The adoption of CECL resulted in
an increase to our total allowance for credit losses (“ACL”) on loans held for investment of $4.3 million, an increase
in allowance for credit losses on unfunded loan commitments of $3.4 million, a reclassification of PCI discount from
loans to the ACL of $1.7 million, and an increase in deferred tax asset of $1.6 million. The Company also recorded a
net reduction of retained earnings of $6.1 million upon adoption.
The allowance for credit losses is evaluated on a regular basis and established through charges to earnings in the form
of a provision for credit losses. When a loan or portion of a loan is determined to be uncollectible, the portion deemed
uncollectible is charged against the allowance and subsequent recoveries, if any, are credited to the allowance. This
evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more
information becomes available.
38
CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023, 2022 and 2021
(Amounts in thousands, except share data)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
The Company did not record an allowance for available-for-sale securities on Day 1 as the investment portfolio
consists primarily of debt securities explicitly or implicitly backed by the U.S. Government for which credit risk is
deemed minimal. The impact going forward will depend on the composition, characteristics, and credit quality of the
securities portfolio as well as the economic conditions at future reporting periods.
On January 1, 2023, the Company adopted ASU 2022-02, Financial Instruments - Credit Losses (Topic 326):
Troubled Debt Restructurings and Vintage Disclosures ("ASU 2022-02"). ASU 2022-02 eliminates the recognition
and measurement guidance for troubled debt restructurings and requires enhanced disclosures about
loan
modifications for borrowers experiencing financial difficulty. This ASU also requires enhanced disclosure for loans
that have been charged off. The adoption of ASU 2022-02 provisions did not have a significant impact on the
Company’s Consolidated Financial Statements.
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.
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.
39
CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023, 2022 and 2021
(Amounts in thousands, except share data)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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, 2023 or 2022. FHLB Stock is included in Other Securities on the Consolidated Balance Sheet
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.
On January 1, 2023, the Company adopted ASU 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying
the Test for Goodwill Impairment. To simplify the subsequent measurement of goodwill, the FASB eliminated Step 2
from the goodwill impairment test. In computing the implied fair value of goodwill under Step 2, an entity had to
perform procedures to determine the fair value at the impairment testing date of its assets and liabilities (including
unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of
assets acquired and liabilities assumed in a business combination. Instead, under the amendments in this Update, an
entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit
with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying
amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of
goodwill allocated to that reporting unit. A public business entity that is an SEC filer, such as the Company, was to
adopt the amendments in this Update for its annual or any interim goodwill impairment tests in fiscal years beginning
after December 15, 2019. In November 2019, however, the FASB issued ASU 2019-10, Financial Instruments ‒
Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842), which deferred the effective
date for ASC 350, Intangibles – Goodwill and Other, for SEC filers that were eligible to be smaller reporting
companies as of November 15, 2019, such as the Company, to fiscal years beginning after December 15, 2022, and
interim periods within those fiscal years. The adoption of the ASU provisions did not have a significant impact on
the Company's Consolidated Financial Statements.
40
CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023, 2022 and 2021
(Amounts in thousands, except share data)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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.
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.
41
CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023, 2022 and 2021
(Amounts in thousands, except share data)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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 (Loss): Comprehensive income consists of net income and other comprehensive income
(loss). Other comprehensive income (loss) 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, 2023
was $0. The Company did not have any cash pledged as collateral on its interest rate swaps with third party financial
institutions at December 31, 2023.
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.
42
CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023, 2022 and 2021
(Amounts in thousands, except share data)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Operating Segments: While the Company’s chief decision makers monitor the revenue streams of the Company’s
various products and services, operations are managed and financial performance is evaluated on a Company-wide
basis. Operating segments are aggregated into one as operating results for all segments are similar. Accordingly, all
of the Company’s financial service operations are considered by management to be aggregated in one reportable
operating segment.
Treasury Stock: CBI common shares that are repurchased are recorded in treasury stock at cost.
Business Combinations: At the date of acquisition the Company records the assets and liabilities of acquired
companies on the Consolidated Balance Sheets at their fair value. The results of operations for acquired companies
are included in the Company’s Consolidated Statements of Operations beginning at the acquisition date. Expenses
arising from acquisition activities are recorded in the Consolidated Statements of Operations during the period
incurred.
Derivative Instruments and Hedging Activities: The Company enters into interest rate swap agreements to facilitate
the risk management strategies of a small number of commercial banking customers. All derivatives are accounted for
in accordance with ASC-815, Derivatives and Hedging. The Company mitigates the risk of entering into these
agreements by entering into equal and offsetting swap agreements with highly rated third party financial institutions.
The swap agreements are free-standing derivatives and are recorded at fair value in the Company’s Consolidated
Balance Sheets. Changes in fair value are recorded as income or expense in the period that they occur. The Company
is party to master netting arrangements with its financial institution counterparties. The master netting arrangements
provide for a single net settlement of all swap agreements, as well as collateral, in the event of default on, or
termination of, any one contract. Collateral, in the form of cash and marketable securities, is posted by the counterparty
with net liability positions in accordance with contract thresholds.
Revisions: Certain revisions have been made to the 2022 and 2021 consolidated financial statements. The fair market
value for loans disclosed in Note 17 as of December 31, 2022, was revised from $2,160,920 to $2,528,906 due to an
error in the calculation. Loans and secured borrowings increased $101,615 in the Consolidated Balance Sheet as of
December 31, 2022, for certain loan participations sold that were deemed to not qualify for sales accounting under
ASC 860.
Interest income and interest expense increased $4,902 and $3,312, respectively in the Consolidated
Statement of Operations as of and for the years ended December 31, 2022 and 2021 for certain loan participations
sold that were deemed to not qualify for sales accounting under ASC 860. These revisions did not have a significant
impact on the consolidated financial statement line items impacted and had no effect on net income.
Effect of Newly Issued but Not Yet Effective Accounting Standards:
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
43
CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023, 2022 and 2021
(Amounts in thousands, except share data)
NOTE 1 - SUMMRY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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.
In November 2023, the FASB issued ASU 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable
Segment Disclosures." The amendments apply to all public entities that are required to report segment information in
accordance with FASB ASC Topic 280, Segment Reporting. The amendments in the ASU are intended to improve
reportable segment disclosure requirements primarily through enhanced disclosures about significant segment
expenses. The amendments require that a public entity disclose, on an annual and interim basis, significant segment
expenses that are regularly provided to the chief operating decision maker ("CODM") and included within each
reported measure of segment profit or loss. Public entities are required to disclose, on an annual and interim basis, an
amount for other segment items by reportable segment and a description of its composition. In addition, public entities
must provide all annual disclosures about a reportable segment’s profit or loss and assets currently required by FASB
ASC Topic 280, Segment Reporting, in interim periods. The amendments clarify that if the CODM uses more than
one measure of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources,
a public entity may report one or more of those additional measures of segment profit. However, at least one of the
reported segment profit or loss measures (or the single reported measure, if only one is disclosed) should be the
measure that is most consistent with the measurement principles used in measuring the corresponding amounts in the
public entity’s consolidated financial statements. The Amendments require that a public entity disclose the title and
position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss
in assessing segment performance and deciding how to allocate resources. Finally, the amendments require that a
public entity that has a single reportable segment provide all the disclosures required by the amendments in the ASU
and all existing segment disclosures in ASC Topic 280. The ASU is effective for fiscal years beginning after December
15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. A
public entity should apply the amendments retrospectively to all prior periods presented in the financial statements.
Upon transition, the segment expense categories and amounts disclosed in the prior periods should be based on the
significant segment expense categories identified and disclosed in the period of adoption. The Company is currently
evaluating the potential impacts related to the adoption of the ASU.
In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax
Disclosures." The amendments require that public business entities on an annual basis (a) disclose specific categories
in the rate reconciliation and (b) provide additional information for reconciling items that meet a quantitative threshold
(if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying
pretax income or loss by the applicable statutory income tax rate). The amendments also require that all entities
disclose on an annual basis the amount of income taxes paid (net of refunds received) disaggregated by federal
(national), state, and foreign taxes, and the amount of income taxes paid (net of refunds received) disaggregated by
individual jurisdictions in which income taxes paid (net of refunds received) is equal to or greater than 5 percent of
total income taxes paid (net of refunds received). The amendments require that all entities disclose income (or loss)
from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign and
income tax expense (or benefit) from continuing operations disaggregated by federal (national), state, and foreign.
The ASU is effective for public business entities for annual periods beginning after December 15, 2024. Early adoption
is permitted for annual financial statements that have not yet been issued or made available for issuance. The
amendments should be applied on a prospective basis. Retrospective application is permitted. The Company is
currently evaluating the potential impacts related to the adoption of the ASU.
44
CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023, 2022 and 2021
(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 Consolidated Balance Sheet at their
preliminary estimated fair values as of July 1, 2022, the acquisition 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
45
Actual From
Acquisition Date
Through December 31,
2022
(in thousands)
$
3,428
159
1,719
CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023, 2022 and 2021
(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.
46
CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023, 2022 and 2021
(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. 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. Effective as of August
31, 2023, VFG was merged with and into Civista, and CLF is now operated as a full-service general equipment leasing
and financing division of Civista.
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.
47
CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023, 2022 and 2021
(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.
48
CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023, 2022 and 2021
(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.
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:
2023
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
$
71,418 $
315 $
(4,075) $
359,452
2,725
(23,578)
67,658
338,599
242,022
$ 672,892 $
19
212,015
(30,026)
3,059 $ (57,679) $ 618,272
49
CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023, 2022 and 2021
(Amounts in thousands, except share data)
NOTE 3 – SECURITIES (Continued)
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
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Value
$ 66,495 $
350,104
20 $
784
(5,486) $ 61,029
317,248
(33,640)
265,752
$ 682,351 $
15
237,125
819 $ (67,768) $ 615,402
(28,642)
The amortized cost and fair value of securities at year end 2023 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
$
2,652 $
78,395
38,867
310,956
2,652
73,198
37,397
293,010
242,022
212,015
$ 672,892 $ 618,272
Securities with a carrying value of $211,616 and $218,344 were pledged as of December 31, 2023 and 2022,
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
2023
$
— $
—
—
2022
57,332 $
—
—
2021
1,810
1,785
—
—
10
1
Debt securities with unrealized losses at year end 2023 and 2022 not recognized in income were as follows:
2023
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
Fair
Value
Unrealized
Loss
More than 12 months
Unrealized
Fair
Loss
Value
Total
Fair
Value
Unrealized
Loss
$
$
224
$
(1) $ 56,760
$
(4,074) $ 56,984
$
(4,075)
19,168
(78)
162,291
(23,500)
181,459
(23,578)
20,112
39,504
$
(522)
189,319
(601) $ 408,370
$
(29,504)
209,431
(57,078) $ 447,874
$
(30,026)
(57,679)
50
CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023, 2022 and 2021
(Amounts in thousands, except share data)
NOTE 3 – SECURITIES (Continued)
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
12 Months or less
Fair
Value
Unrealized
Loss
More than 12 months
Fair
Value
Unrealized
Loss
Total
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
$ 302,275
$
(4,713)
124,622
(18,609) $ 238,156
$
(23,929)
236,261
(49,159) $ 540,431
$
(28,642)
(67,768)
For AFS securities in an unrealized loss position, we first assess whether (i) we intend to sell, or (ii) it is more likely
than not that we will be required to sell the security before recovery of its amortized cost basis. If either case is
affirmative, any previously recognized allowances are charged-off and the security's amortized cost is written down
to fair value through income. If neither case is affirmative, the security is evaluated to determine whether the decline
in fair value has resulted from credit losses or other factors. In making this assessment, management considers the
extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency and
any adverse conditions specifically related to the security, among other factors. If this assessment indicates that a
credit loss exists, the present value of cash flows expected to be collected from the security are compared to the
amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized
cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount
that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an
allowance for credit losses is recognized in other comprehensive income. Adjustments to the allowance are reported
in our income statement as a component of credit loss expense. AFS securities are charged-off against the allowance
or, in the absence of any allowance, written down through income when deemed uncollectible by management or
when either of the aforementioned criteria regarding intent or requirement to sell is met.
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.
At December 31, 2023, the Company owned 394 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
51
CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023, 2022 and 2021
(Amounts in thousands, except share data)
NOTE 3 – SECURITIES (Continued)
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 2023
and 2022, and the portion of unrealized gains and losses for the period that relates to equity investments held at year-
end 2023 and 2022:
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
2023
2022
$
$
(21) $
—
(21) $
118
—
118
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
Loan participations sold, reflected as secured
borrowings
Total Loans
Allowance for credit losses
Net loans
2023
2022
$ 304,793 $ 278,595
371,147
1,018,736
552,781
243,127
24,708
36,797
20,775
377,321
1,161,894
659,841
260,409
24,771
54,642
18,056
—
2,861,727
(37,160)
101,615
2,648,281
(28,511)
$ 2,824,567 $ 2,619,770
Included in Commercial & Agriculture loans as of December 31, 2023 and 2022 is $326 and $566, respectively, of
Paycheck Protection Program (“PPP”) loans.
Included in total loans above are deferred loan fees of $2,743 and $1,652 at December 31, 2023 and 2022,
respectively.
Scheduled maturities of lease financing receivables at December 31, 2023 were as follows:
2024
2025
2026
2027
2028
Thereafter
Total
$
$
8,834
3,255
5,829
13,158
12,468
11,098
54,642
52
CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023, 2022 and 2021
(Amounts in thousands, except share data)
NOTE 4 - LOANS (Continued)
Loans to principal officers, directors, and their affiliates at year-end 2023 and 2022 were as follows:
Balance - Beginning of year
New loans and advances
Repayments
Effect of changes to related parties
Balance - End of year
2023
2022
$
$
21,107
1,477
(2,205)
(9,829)
10,550
$
$
17,447
15,408
(9,255)
(2,493)
21,107
The Company had credit lines to principal officers, directors, and their affiliates with an availability of $7,231 and
$8,017 as of December 31, 2023 and 2022, respectively.
Paycheck Protection Program
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.
During 2021, Civista received SBA approval on, and funded, 1,340 PPP loans totaling $131,109 under the Relief Act.
At December 31, 2023 Civista had PPP loans outstanding of $326.
53
CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023, 2022 and 2021
(Amounts in thousands, except share data)
NOTE 5 - ALLOWANCE FOR CREDIT LOSSES
The following tables present, by portfolio segment, the changes in the allowance for credit losses, the ending allocation
of the allowance for losses and the loan balances outstanding for the years ended December 31, 2023, 2022 and 2021.
Allowance for credit losses:
December 31, 2023
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
CECL
Adoption
Day 1
Impact
Impact of
Adopting
ASC 326 -
PCD
Loans 1
Beginning
balance
$ 3,011 $
4,565
14,138
3,145
2,293
291
429
98
541
$ 28,511 $
429 $
1,075
(2,847)
2,762
1,502
(28)
1,743
201
(541)
4,296 $
Charge-
offs
— $ (1,300) $
Recoveries
Provision
(Credit)
Ending
Balance
177 $ 5,270 $ 7,587
—
—
(17)
—
—
—
(114)
—
19
—
166
—
—
635
77
—
897 $ (1,431) $
4,723
(951)
15
12,056
719
46
8,489
2,299
134
3,388
(444)
37
260
—
(3)
297
— (2,510)
341
36
43
—
19
19
452 $ 4,435 $37,160
1 Day 1 impact of $1,668 of adopting ASC 326-PCD loans was netted by changes in estimates of $771
For the year ended December 31, 2023, the Company provided $4,435 to the allowance for credit losses, as compared
to a provision of $1,752 for the year ended December 31, 2022. The increase in the provision was to support strong
organic loan growth in the portfolio. A one-time CECL adoption adjustment of $4,296 along with a $897 adjustment
related to ASC 326 adoption was incurred in the first quarter of 2023.
For the year ended December 31, 2023, 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
decreased due to a decrease in general reserves required as a result of an increase in loan balances, offset by a decrease
in loss rates and classified loan balances. This was represented as a decrease 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 Consumer and
loans decreased due to a decrease in loan balances. This was represented as a decrease in the
Other
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.
54
CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023, 2022 and 2021
(Amounts in thousands, except share data)
NOTE 5 - ALLOWANCE FOR CREDIT LOSSES (Continued)
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
$
2,600
4,464
13,860
2,597
1,810
287
0
176
847
$ 26,641
Charge-offs
$
(22) $
Recoveries
24
Provision
(Credit)
Ending
Balance
$
409
$
3,011
—
—
(97)
—
—
(23)
(80)
—
(222) $
42
74
163
4
6
27
—
340
$
59
204
482
479
(2)
452
(25)
(306)
1,752
4,565
14,138
3,145
2,293
291
429
98
541
$ 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 CLF
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.
55
CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023, 2022 and 2021
(Amounts in thousands, except share data)
NOTE 5 - ALLOWANCE FOR CREDIT 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
$
2,810
4,057
12,451
2,484
2,439
338
209
240
$ 25,028
Charge-offs
$
(15) $
Recoveries
165
Provision
(Credit)
Ending
Balance
$
(360) $
2,600
—
—
(120)
—
—
(24)
—
(159) $
7
395
302
1
12
60
—
942
$
400
1,014
(69)
(630)
(63)
(69)
607
830
4,464
13,860
2,597
1,810
287
176
847
$ 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.
56
CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023, 2022 and 2021
(Amounts in thousands, except share data)
NOTE 5 - ALLOWANCE FOR CREDIT LOSSES (Continued)
The following table present, by portfolio segment, the allocation of the allowance for loan losses and related loan
balances as of December 31, 2022.
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 for
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
371,147
368,927
1,018,736
— 1,018,617
552,781
550,975
392
243,127
243,127
—
24,708
24,708
—
36,797
36,797
—
20,775
20,774
—
624 $ 2,541,657 $ 2,546,666
$
$
$
The following tables represent credit exposures by internally assigned risk ratings for the periods ended December 31,
2023 and 2022. The risk rating analysis estimates the capability of the borrower to repay the contractual obligations
of the loan agreements as scheduled or at all. The Company's internal credit risk grading system is based on
experiences with similarly graded loans.
The Company’s internally assigned 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.
57
CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023, 2022 and 2021
(Amounts in thousands, except share data)
NOTE 5 - ALLOWANCE FOR CREDIT LOSSES (Continued)
•
•
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.
December 31, 2023
Commercial & Agriculture
Pass
Special Mention
Substandard
Doubtful
Total Commercial & Agriculture
Commercial & Agriculture:
Current-period gross charge-offs
Commercial Real Estate - Owner
Occupied
Pass
Special Mention
Substandard
Doubtful
Total Commercial Real Estate - Owner
Occupied
Commercial Real Estate - Owner
Occupied:
Current-period gross charge-offs
Commercial Real Estate - Non-Owner
Occupied
Pass
Special Mention
Substandard
Doubtful
Total Commercial Real Estate - Non-
Owner Occupied
Commercial Real Estate - Non-Owner
Occupied:
Current-period gross charge-offs
Residential Real Estate
Pass
Special Mention
Substandard
Doubtful
Total Residential Real Estate
Residential Real Estate:
Current-period gross charge-offs
Term Loans Amortized Cost Basis by Origination Year
2023
2022
2021
2020
2019
Prior
Revolving
Loans
Revolving Converted
to Term
Loans
Total
$ 56,359 $ 64,250 $ 52,258 $ 17,622 $
774
396
—
—
86
—
287
67
—
1,690
131
—
$ 57,529 $ 64,336 $ 52,612 $ 19,443 $
9,516 $ 14,088 $ 82,982 $
106
73
—
9,787 $ 14,267 $ 86,819 $
169
3,668
—
—
271
—
— $ 297,075
3,026
—
4,692
—
—
—
— $ 304,793
$
— $
673 $
532 $
— $
— $
95 $
— $
— $
1,300
$ 36,030 $ 82,502 $ 67,904 $ 56,069 $ 29,784 $ 92,750 $
526
—
—
217
231
—
739
—
—
517
—
—
-
3,098
—
188
922
—
5,844 $
—
—
—
— $ 370,883
2,187
—
4,251
—
—
—
$ 36,556 $ 82,950 $ 68,643 $ 56,586 $ 32,882 $ 93,860 $
5,844 $
— $ 377,321
$
— $
— $
— $
— $
— $
— $
— $
— $
—
$ 183,439 $ 269,334 $ 198,832 $ 136,031 $120,659 $206,267 $ 23,016 $
—
—
—
5,774
—
—
6,171
—
—
—
—
—
-
122
—
8,688
3,284
—
277
—
—
— $1,137,578
20,910
—
3,406
—
—
—
$ 183,439 $ 275,108 $ 205,003 $ 136,031 $120,781 $218,239 $ 23,293 $
— $1,161,894
$
— $
— $
— $
— $
— $
— $
— $
— $
—
$ 90,770 $ 124,695 $ 97,661 $ 71,379 $ 33,534 $ 78,894 $ 157,083 $
—
186
—
-
342
—
221
684
—
97
82
—
—
582
—
245
2,063
—
—
1,323
—
$ 90,956 $ 125,037 $ 98,566 $ 71,558 $ 34,116 $ 81,202 $ 158,406 $
— $ 654,016
563
—
5,262
—
—
—
— $ 659,841
$
— $
6 $
— $
— $
— $
11 $
— $
— $
17
58
CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023, 2022 and 2021
(Amounts in thousands, except share data)
NOTE 5 - ALLOWANCE FOR CREDIT LOSSES (Continued)
December 31, 2023
2023
2022
2021
2020
2019
Prior
Revolving
Loans
Revolving Converted
to Term
Loans
Total
Real Estate Construction
Pass
Special Mention
Substandard
Doubtful
Total Real Estate
Construction
Real Estate Construction:
Current-period gross
charge-offs
$ 108,606 $ 105,222 $
—
—
—
1,226
—
—
20,960 $
926
42
—
6,739 $
2,019
—
—
2,699 $
—
—
—
2,635 $
—
—
—
9,335 $
—
—
—
— $ 256,196
4,171
—
42
—
—
—
$ 108,606 $ 106,448 $
21,928 $
8,758 $
2,699 $
2,635 $
9,335 $
— $ 260,409
$
— $
— $
— $
— $
— $
— $
— $
— $
—
$
Farm Real Estate
Pass
Special Mention
Substandard
Doubtful
Total Farm Real Estate
Farm Real Estate:
Current-period charge-offs $
$
$
Lease Financing
Receivables
Pass
Special Mention
Substandard
Doubtful
Total Lease Financing
Receivables
Lease Financing
Receivables:
Current-period charge-offs $
$
2,207 $
—
—
—
2,207 $
967 $
—
—
—
967 $
2,256 $
—
—
—
2,256 $
4,462 $
—
—
—
4,462 $
789 $ 12,528 $
—
—
—
789 $ 12,798 $
20
250
—
1,292 $
—
—
—
1,292 $
— $
—
—
—
— $
24,501
20
250
—
24,771
— $
— $
— $
— $
— $
— $
— $
— $
—
28,177 $
—
—
—
13,924 $
—
8
139
6,620 $
—
38
—
3,678 $
—
61
15
1,725 $
—
231
8
1 $
—
17
—
— $
—
—
—
— $
—
—
—
54,125
—
355
162
28,177 $
14,071 $
6,658 $
3,754 $
1,964 $
18 $
— $
— $
54,642
— $
— $
— $
— $
— $
— $
— $
— $
—
$
Consumer and Other
Pass
Special Mention
Substandard
Doubtful
Total Consumer and Other $
Consumer and Other:
Current-period charge-offs $
Total Loans
Total Loans:
Current-period charge-offs $
6,510 $
—
—
—
6,510 $
4,135 $
—
2
—
4,137 $
3,615 $
—
14
—
3,629 $
1,578 $
—
15
—
1,593 $
509 $
—
—
—
509 $
248 $
—
6
—
254 $
1,424 $
—
—
—
1,424 $
6 $
5 $
$ 513,980 $ 673,054 $ 459,295 $ 302,185 $ 203,527 $423,273 $ 286,413 $
13 $
40 $
40 $
7 $
3 $
— $
—
—
—
— $
18,019
—
37
—
18,056
— $
114
— $2,861,727
7 $
719 $
572 $
7 $
13 $
109 $
5 $
— $
1,431
59
CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023, 2022 and 2021
(Amounts in thousands, except share data)
NOTE 5 - ALLOWANCE FOR CREDIT 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
Pass
Special
Mention
Substandard
Doubtful
Ending
Balance
$ 273,291 $
2,558 $
2,746 $
— $ 278,595
367,652
1,003,942
114,021
198,734
24,283
36,223
839
734
10,947
183
—
379
—
—
$2,018,985 $ 14,801 $
2,761
3,847
5,787
221
46
401
163
15,972 $
371,147
—
— 1,018,736
119,991
—
198,955
—
24,708
—
36,797
173
—
1,002
173 $2,049,931
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 table presents performing and nonperforming loans based solely on payment activity for the year ended
December 31, 2022 that had not been assigned an internal risk grade.
December 31, 2022
Performing
Nonperforming
Total
Real Estate
Construction
Consumer
and Other
Total
44,172 $
—
44,172 $
19,773 $ 496,735
—
19,773 $ 496,735
—
Residential
Real Estate
$ 432,790 $
—
$ 432,790 $
60
CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023, 2022 and 2021
(Amounts in thousands, except share data)
NOTE 5 - ALLOWANCE FOR CREDIT LOSSES (Continued)
The following tables include an aging analysis of the recorded investment of past due loans outstanding as of
December 31, 2023 and 2022.
December 31, 2023
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, 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
1,228
$
60-89
Days
Past Due
471
$
90 Days
or Greater
1,999
$
Total Past
Due
$
3,698
Current
$ 301,095
Total Loans
304,793
$
Past Due
90 Days
and
Accruing
73
$
4
—
4,581
—
—
950
172
6,935
$
—
—
1,180
—
—
410
23
2,084
$
123
—
1,642
—
—
373
2
4,139
$
127
0
7,403
—
—
1,733
197
13,158
377,194
1,161,894
652,438
260,409
24,771
52,909
17,859
$ 2,848,569
377,321
1,161,894
659,841
260,409
24,771
54,642
18,056
$ 2,861,727
$
$
—
—
—
—
—
—
—
73
30-59
Days
Past Due
247
$
60-89
Days
Past Due
78
$
90 Days
or Greater
534
$
Total
Past
Due
$
859
21
—
3,133
—
7
1,040
293
4,741
$
13
—
857
—
—
—
49
997
$
76
1,164
1,107
219
—
341
74
3,515
$
110
1,164
5,097
219
7
1,381
416
9,253
Purchased
Credit-
Impaired
Loans
$
863
1,988
119
1,414
—
—
—
1
4,385
$
Total
Loans
$ 278,595
371,147
1,018,736
552,781
243,127
24,708
36,797
20,775
$2,546,666
Past Due
90 Days
and
Accruing
—
$
—
—
—
—
—
—
—
$
Current
$ 276,873
369,049
1,017,453
546,270
242,908
24,701
35,416
20,358
$2,533,028
The following table presents loans on nonaccrual status as of December 31, 2023.
December 31, 2023
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
Nonaccrual
loans with a
related ACL
914
$
Nonaccrual
loans without
a related
ACL
Total
Nonaccrual
loans
$
4,891
$
5,805
Interest
Income
Recognized
9
$
269
—
—
—
—
15
—
1,198
$
3
1,167
4,633
41
—
492
42
11,269
$
272
1,167
4,633
41
—
507
42
12,467
$
7
—
26
—
—
—
4
46
$
61
CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023, 2022 and 2021
(Amounts in thousands, except share data)
NOTE 5 - ALLOWANCE FOR CREDIT LOSSES (Continued)
The following table presents loans on nonaccrual status as of December 31, 2022, excluding PCI loans.
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
$
774
386
1,109
3,926
221
—
—
91
6,507
$
Nonaccrual Loans: Loans are considered for nonaccrual status upon reaching 90 days delinquency, unless the loan is
well secured and in the process of collection, although 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 2023, 2022 and 2021 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 $446, $384 and $307, respectively. The amount of interest income on such loans recognized
on a cash basis was $343 in 2023, $451 in 2022 and $716 in 2021.
TDRs and Loan Modifications: Prior to the adoption of ASU 2022-02, 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 credit losses as of December 31, 2022 and $18 as of December 31, 2021.
There were no loans modified in a TDR during the twelve month period ended December 31, 2022 and 2021.
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 and 2021, there were no defaults on loans that were modified and considered TDRs during the previous twelve
months.
62
CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023, 2022 and 2021
(Amounts in thousands, except share data)
NOTE 5 - ALLOWANCE FOR CREDIT LOSSES (Continued)
In accordance with the adoption of ASU 2022-02, Financial Instruments-Credit Losses (Topic 326): Troubled Debt
Restructurings and Vintage Disclosures, accounting guidance for TDRs for creditors has been eliminated. New
guidance with respect to recognition, measurement, and disclosures of loans for borrowers experiencing financial
difficulties supersedes guidance on TDRs. Under ASU 2022-02, the Company is required to evaluate whether a loan
modification represents a new loan or a continuation of an existing loan. The amendment enhanced existing disclosure
requirements and introduced new requirements related to certain modifications of receivables made to borrowers
experiencing financial difficulty under criteria of principal forgiveness, interest rate reduction, other-than-insignificant
payment delay, or term extension.
There were no loans modified to borrowers experiencing financial difficulty during the period ended December 31,
2023.
Individually Evaluated Loans: Larger (greater than $350) Commercial & Agricultural and Commercial Real Estate
loan relationships, and Residential Real Estate and Consumer loans that are part of a larger relationship are tested for
impairment on a quarterly basis. These loans are analyzed to determine if it is probable that all amounts will not be
collected according to the contractual terms of the loan agreement. If management determines that the value of the
impaired loan is less than the recorded investment in the loan (net of previous charge-offs, deferred loan fees or costs
and unamortized premium or discount), impairment is recognized through an allowance estimate or a charge-off to
the allowance. The Company’s policy for recognizing interest income on impaired loans does not differ from its
overall policy for interest recognition.
The following table presents the amortized cost basis of collateral dependent loans, which are individually evaluated
to determine expected credit losses, and the related allowance for credit losses allocated to these loans.
December 31, 2023
Real Estate
Other
Allowance for Credit
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
Total
$
$
— $
4,674
$
308
1,167
149
—
—
—
—
1,624
$
—
—
—
—
—
61
—
4,735
$
945
37
268
—
—
—
15
—
1,265
Collateral-dependent loans consist primarily of Residential Real Estate, Commercial Real Estate and Commercial and
Agricultural loans. These loans are individually evaluated when foreclosure is probable or when the repayment of the
loan is expected to be provided substantially through the operation or sale of the underlying collateral. In the case of
Commercial and Agricultural loans secured by equipment, the fair value of the collateral is estimated by third-party
valuation experts. Loan balances are charged down to the underlying collateral value when they are deemed
uncollectible. Note that the Company did not elect to use the collateral maintenance agreement practical expedient
available under CECL.
63
CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023, 2022 and 2021
(Amounts in thousands, except share data)
NOTE 5 - ALLOWANCE FOR CREDIT LOSSES (Continued)
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.
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
December 31, 2022
Unpaid
Principal
Balance
Related
Allowance
Recorded
Investment
$
$
82
—
385
—
467
150
7
157
—
232
—
392
—
624
$
$
82
—
410
—
492
150
11
161
—
232
—
421
—
653
$
$
6
1
7
—
6
—
1
—
7
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 and 2021.
For the year ended:
Commercial & Agriculture
Commercial Real Estate:
Owner Occupied
Non-Owner Occupied
Residential Real Estate
Farm Real Estate
Total
December 31, 2022
December 31, 2021
Average
Recorded
Investment
86
$
Interest
Income
Recognized
3
$
Average
Recorded
Investment
15
$
Interest
Income
Recognized
0
$
406
35
614
381
1,522
$
$
22
1
33
14
73
$
396
23
629
569
1,632
$
18
1
31
24
74
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, 2023 and 2022, there were no foreclosed
assets included in Other assets. As of December 31, 2023 and 2022, the Company had initiated formal foreclosure
procedures on $1,018 and $399, respectively, of Residential Real Estate loans.
64
CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023, 2022 and 2021
(Amounts in thousands, except share data)
NOTE 5 - ALLOWANCE FOR CREDIT LOSSES (Continued)
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
The following table presents additional information regarding loans acquired and accounted for in accordance with
ASC 310-30:
At December 31, 2022 At December 31, 2021
Acquired Loans with
Acquired Loans with
Specific Evidence of
Specific Evidence of
Deterioration of Credit
Deterioration of Credit
Quality (ASC 310-30)
Quality (ASC 310-30)
$
(In Thousands)
5,220 $
4,386
512
290
Outstanding balance
Carrying amount
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, 2023 and 2022, respectively.
Allowance for Credit Losses on Off-Balance-Sheet Credit Exposures
The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit
risk from a contractual obligation to extend credit. The allowance for credit losses on off-balance-sheet credit
exposures is adjusted within other non-interest expense on the Consolidated Statements of Operations. The estimated
credit loss includes consideration of the likelihood that funding will occur and an estimate of expected credit losses
on commitments expected to be funded over its estimated life. The estimate of expected credit loss is based on the
historical loss rate for the loan class in which the loan commitments would be classified as if funded.
The following table lists the allowance for credit losses on off-balance sheet credit exposures as of December 31,
2023:
Beginning of Period
CECL adoption adjustments
Charge-offs
Recoveries
Provision
End of Period
Twelve Months Ended
December 31,
2023
2022
—
3,386
—
—
515
3,901
$
—
—
—
—
—
—
65
CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023, 2022 and 2021
(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,
2023, 2022 and 2021:
Year Ended December 31, 2023
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, 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
Before Tax
Tax Effect
Net of Tax
$
12,330
$
2,583
$
9,747
—
12,330
972
—
972
13,302
$
—
2,583
204
—
204
2,787
$
—
9,747
768
—
768
10,515
(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)
$
$
$
$
$
66
CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023, 2022 and 2021
(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, 2023, 2022 and 2021.
For the Year Ended
December 31, 2023
For the Year Ended
December 31, 2022
For the Year Ended
December 31, 2021
Unrealized
Gains and
Losses on
Available
for Sale
Securities
Defined
Benefit
Pension
Items
Beginning balance
$
(52,771) $ (5,274)
Unrealized
Gains and
Losses on
Available
for Sale
Securities
$
14,675
Defined
Benefit
Pension
Items
$ (5,855)
Total
$ (58,045)
Unrealized
Gains and
Losses on
Available
for Sale
Securities
Total
$
8,820
$
21,447
Defined
Benefit
Pension
Items
$ (6,828)
Total
$ 14,619
Other
comprehensive
income (loss)
before
classifications
Amounts
reclassified
from
accumulated
other
comprehensive
income (loss)
Net current-period
other
comprehensive
income(loss)
Ending balance
9,747
768
10,515
(67,438)
581
(66,857)
(6,771)
783
(5,988)
0
—
0
(8)
—
(8)
(1)
190
189
9,747
768
(43,024) $ (4,506)
10,515
$ (47,530)
$
(67,446)
(52,771)
581
$ (5,274)
$
(66,865)
(58,045)
$
(6,772)
14,675
973
$ (5,855)
(5,799)
8,820
$
$
The following table presents the amounts reclassified out of each component of accumulated other comprehensive
loss as of December 31, 2023, 2022 and 2021.
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
$
Amount Reclassified from
Accumulated Other
Comprehensive Loss (a)
For the year ended December 31,
2023
2022
2021
$
0
—
0
$
$
10
(2)
8
— (b)
—
—
8
$
$
1
—
1
(240) (b)
50
(190)
(189)
— (b)
—
—
—
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.
67
CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023, 2022 and 2021
(Amounts in thousands, except share data)
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,
2022
2023
$
$
8,392 $
39,874
61,335
109,601
(52,832)
56,769 $
7,919
35,138
63,033
106,090
(42,072)
64,018
Depreciation expense was $10,760 in 2023, $4,456 in 2022 and $1,976 in 2021. The increase in depreciation expense
in 2023 was in large part due to operating leases at the CLF division which are treated as fixed assets.
NOTE 8 - GOODWILL AND INTANGIBLE ASSETS
The carrying amount of goodwill has decreased $175 since December 31, 2022 as a result of a deferred tax correction
related to the CLF acquisition, as discussed in Note 2. The balance of goodwill was $125,520 at December 31, 2023
and $125,695 at December 31, 2022.
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 2023. Based on this test, management concluded that the Company’s
goodwill was not impaired at December 31, 2023.
Acquired intangible assets were as follows as of year-end.
Gross
Carrying
Amount
2023
Accumulated
Amortization
Net
Carrying
Amount
Gross
Carrying
Amount
2022
Accumulated
Amortization
Net
Carrying
Amount
Core deposit intangible assets(1):
Core deposit intangibles
Total core deposit intangible assets
12,668
$ 12,668 $
6,178
6,178 $ 6,490 $ 12,953 $
12,953
6,490
4,883
4,883 $
8,070
8,070
(1)
Excludes fully amortized core deposit intangible assets
Aggregate core deposit intangible amortization expense was $1,579, $1,296 and $890 for 2023, 2022 and 2021,
respectively.
68
CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023, 2022 and 2021
(Amounts in thousands, except share data)
NOTE 8 - GOODWILL AND INTANGIBLE ASSETS (Continued)
Activity for mortgage servicing rights (MSRs) and the related valuation allowance follows:
2023
2022
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
$
$
$
$
2,689
659
—
330
—
—
3,018
$
$
— $
—
—
—
— $
2,642
397
—
350
—
—
2,689
—
—
—
—
—
The unpaid principal balance of mortgage loans serviced for third parties was $442,635 at December 31, 2023,
compared to $456,149 at December 31, 2022 and $405,786 at December 31, 2021.
Aggregate mortgage servicing rights (MSRs) amortization was $330, $350 and $572 for 2023, 2022 and 2021,
respectively.
Mortgage loan contractual servicing fees were $1,137, $1,063 and $947 for 2023, 2022 and 2021, respectively.
Mortgage loan contractual servicing fees are included in Other income on the Consolidated Statements of Operations.
The fair value of servicing rights was $3,018 and $2,689 at year-end 2023 and 2022, respectively. Fair value at year-
end 2023 was determined using a discount rate of 12.0%, prepayment speeds ranging from 4.6% to 11.0%, depending
on the stratification of the specific right, and a weighted average default rate of 0.0%. 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 default rate of 0.14%.
Estimated amortization expense for each of the next five years and thereafter is as follows:
2024
2025
2026
2027
2028
Thereafter
MSRs
Core deposit
intangibles
Total
170 $
169
167
163
155
2,194
3,018 $
1,489 $
1,311
1,193
1,071
782
644
6,490 $
1,659
1,480
1,360
1,234
937
2,838
9,508
$
$
69
CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023, 2022 and 2021
(Amounts in thousands, except share data)
NOTE 9 - INTEREST-BEARING DEPOSITS
Interest-bearing deposits as of December 31, 2023 and 2022 were as follows:
Demand
Savings and Money markets
Certificates of Deposit:
$250 and over
Other
Individual Retirement Accounts
Total
$
2023
449,449 $
863,067
2022
527,879
876,427
92,933
765,734
42,146
45,380
227,886
46,079
$ 2,213,329 $ 1,723,651
Scheduled maturities of certificates of deposit ("CDs"), including IRAs, at December 31, 2023 were as follows:
2024
2025
2026
2027
2028
Thereafter
Total
$
$
867,436
16,991
8,261
4,822
2,500
803
900,813
Deposits from the Company’s principal shareholders, officers, directors, and their affiliates at year-end 2023 and 2022
were $11,546 and $10,166, respectively.
As of December 31, 2023, CDs and IRAs totaling $98,158 met or exceeded the FDIC’s insurance limit of $250,000.
As of December 31, 2023, brokered deposits totaled $517,190.
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, 2023
At December 31, 2022
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
— $ 338,000
521,500
—
280,887
—
—
—
5.12%
5.41%
Federal
Funds
Purchased
$
Short-term
Borrowings
— $ 393,700
435,500
66,875
50,000
137
4.38%
—
3.84%
4.24%
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 one day
at December 31, 2023.
70
CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023, 2022 and 2021
(Amounts in thousands, except share data)
NOTE 11 - FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWINGS
Long-term advances from the FHLB were $2,392 and $3,578 at December 31, 2023 and December 31, 2022,
respectively. Outstanding balances have a maturity dates between July 2024 and June 2028 with fixed rates ranging
from 1.18% to 2.97%. The average rate on outstanding advances was 2.31% at December 31, 2023. Outstanding
advances are prepayable in whole or in part and could be subject to a termination fee.
Other borrowings totaled $9,860 at December 31, 2023, and included borrowings from the CLF division of Civista.
The weighted average rate on these borrowings was 5.74% and the weighted average life was 39 months.
Scheduled principal reductions of FHLB advances outstanding at December 31, 2023 were as follows:
2024
2025
2026
2027
2028
Thereafter
Total
$
$
940
636
469
273
74
—
2,392
In addition to FHLB borrowings, the Company had outstanding letters of credit with the FHLB totaling $24,400 and
$57,510 at year-end 2023 and 2022, respectively, used for pledging to secure public funds. FHLB borrowings and the
letters of credit were collateralized by FHLB stock and by $1,044,027 and $932,373 of residential mortgage loans
under a blanket lien arrangement at year-end 2023 and 2022, respectively.
The Company had a FHLB maximum borrowing capacity of $791,637 as of December 31, 2023, with remaining
borrowing capacity of approximately $426,845. 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
Effective in July 2023, the company no longer sells securities under agreement to repurchase. Prior to that time,
securities sold under agreements to repurchase were used to facilitate the needs of our customers as well as to facilitate
our short-term funding needs. Securities sold under repurchase agreements were 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 were maintained with our safekeeping agents.
71
CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023, 2022 and 2021
(Amounts in thousands, except share data)
NOTE 12 - SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE (Continued)
The following table presents detail regarding the securities pledged as collateral under repurchase agreements as of
December 31, 2023 and 2022. 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,
2023
December 31,
2022
$
$
$
$
— $
—
— $
25,143
—
25,143
— $
25,143
— $
—
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
$
$
2023
— $
8,685
0.05%
21,658
—
2022
25,143
24,390
$
2021
25,495
24,390
0.05%
0.09%
$
26,044
$
34,200
0.05%
0.05%
NOTE 13 - SUBORDINATED DEBENTURES
The following table summarizes the Company's subordinated debentures at December 31, 2023 and 2022:
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, 2023 and 2022, respectively - $75,000 maturing December 31, 2031
First Citizens Statutory Trust II - variable interest equal to 3-month CME
Term
SOFR plus 3.15%, which was 8.81% and 6.79% at December 31, 2023
2022, respectively - $7,732 maturing March 26, 2033
First Citizens Statutory Trust III - variable interest equal to 3-month LIBOR
Term SOFR plus 2.25%, which was 7.91% and 5.78% at December 31,
2023 and 2022, respectively - $12,887 maturing September 20, 2034
First Citizens Statutory Trust IV - variable interest equal to 3-month CME
Term SOFR plus 1.60%, which was 7.27% and 4.89% at December 31,
2023 and 2022, respectively - $5,155 maturing March 23, 2037
Futura TPF Trust I - variable interest rate equal to 3-month CME Term
SOFR plus 1.66%, which was 7.33% and 4.95% at December 31, 2023
and 2022, and respectively - $2,578 maturing June 15, 2035
Futura TPF Trust II - variable interest rate equal to 3-month CME Term
SOFR plus 1.66%, which was 7.33% and 4.95% at December 31, 2023
and 2022, respectively - $2,070 maturing June 15, 2035
Total subordinated debentures
December 31, 2023
December 31, 2022
$
73,594
$
73,450
7,732
7,732
12,887
12,887
5,155
2,578
5,155
2,578
1,997
103,943
$
1,997
103,799
$
72
CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023, 2022 and 2021
(Amounts in thousands, except share data)
NOTE 13 - SUBORDINATED DEBENTURES (Continued)
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"). The Notes have a stated maturity of December 31, 2031.
The Notes 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 the 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.
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.
73
CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023, 2022 and 2021
(Amounts in thousands, except share data)
NOTE 14 - INCOME TAXES
Income taxes were as follows for the years ended December 31:
Current
State
Deferred
Income taxes
2023
2022
2021
$
$
8,256 $
68
(675)
7,649 $
6,973 $
152
483
7,608 $
5,111
587
1,319
7,017
Effective tax rates differed from the statutory federal income tax rate of 21% in 2023, 2022 and 2021 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
2023
2022
2021
$
10,629 $
9,878 $
9,988
(1,938)
(620)
(233)
(189)
7,649 $
(1,666)
(679)
(207)
282
7,608 $
(1,315)
(1,402)
(252)
(2)
7,017
$
Year-end deferred tax assets and liabilities were due to the following:
Deferred tax assets
Lease liability
Allowance for credit losses
Deferred compensation
Unfunded commitment liability
Pension costs
Intangible assets
Net operating loss carryforward
Deferred loan fees
Unrealized loss on securities available for sale
Unrealized loss 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
Right of use asset
Prepaids
Other
Deferred tax liability
Net deferred tax asset
2023
2022
$
$
343
7,711
1,155
819
—
103
6
576
11,633
1,976
923
25,245
(2,625)
(502)
(223)
(1,841)
—
(343)
(314)
(1,040)
(6,888)
18,357 $
—
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
74
CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023, 2022 and 2021
(Amounts in thousands, except share data)
NOTE 14 - INCOME TAXES (Continued)
At December 31, 2023, the Company had $30 in net operating losses subject to 382 limitations. No valuation
allowance was established at December 31, 2023 and 2022, 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.
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 2019 have been closed for purposes of examination by
the Internal Revenue Service.
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 $1,608,
$1,377 and $1,258 in 2023, 2022 and 2021, 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.
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 $118 in 2023, $145 in 2022
and $135 in 2021. Included in pension shortfall expense was interest expense, totaling $36, $24 and $15 in 2023, 2022
and 2021, respectively, which was also recorded in and credited to the accounts of the ten individuals covered by this
plan.
75
CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023, 2022 and 2021
(Amounts in thousands, except share data)
NOTE 15 - RETIREMENT PLANS (Continued)
Information about the pension plan is as follows:
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
Funded status at end of year
2023
2022
10,123 $
—
454
—
—
(637)
(1,921)
—
8,019
10,934
940
—
(1,921)
—
—
9,953
1,934 $
15,384
—
392
—
—
(3,455)
(2,198)
—
10,123
15,120
(1,988)
—
(2,198)
—
—
10,934
811
$
$
Amounts recognized in accumulated other comprehensive income (loss) at December 31, consist of unrecognized
actuarial loss of $4,506, net of $1,198 tax in 2023 and $5,274, net of $1,402 tax in 2022.
The accumulated benefit obligation for the defined benefit pension plan was $8,019 at December 31, 2023 and $10,123
at December 31, 2022.
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)
2023
2022
2021
— $
454
(605)
—
(151)
—
(151) $
— $
392
(732)
—
(340)
—
(340) $
—
378
(574)
240
44
—
44
(972) $
(736) $
(854)
(1,123) $
(1,076) $
(810)
$
$
$
$
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 $169. The Company incurred settlement
costs in 2023, 2022 and 2021 of $0, $0 and $(18), respectively.
76
CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023, 2022 and 2021
(Amounts in thousands, except share data)
NOTE 15 - RETIREMENT PLANS (Continued)
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
2023
2022
2021
4.76%
5.53%
0.00%
4.95%
4.84%
0.00%
2.74%
3.84%
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
2023
2022
2021
4.95%
4.84%
0.00%
2.74%
3.84%
0.00%
2.39%
4.44%
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 2023, 2022 and 2021 was zero.
The Company’s pension plan asset allocation at year-end 2023 and 2022 and target allocation for 2023 by asset
category are as follows:
Asset Category
Equity securities
Debt securities
Total
Target
Allocation
2024
0-30%
70-100
Percentage of Plan
Assets
at Year-end
2023
2022
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 5.53% in 2023 and 4.84% in 2022. 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 2024. Employer contributions totaled
$0 in 2023 and 2022. A decrease in the benefit obligations, offset by a decrease in the fair value of plan assets led to
an increase in the funded status from $811 at December 31, 2022 to a funded status of $1,934 at December 31, 2023.
Common/Collective Trust Funds
Common/Collective Trust Funds are valued at the daily net asset value ("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
77
CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023, 2022 and 2021
(Amounts in thousands, except share data)
NOTE 15 - RETIREMENT PLANS (Continued)
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, 2023
and 2022, respectively:
December 31, 2023
Fair Value
Unfunded
Commitments
Redemption
Frequency (if
currently eligible)
Redemption
Notice Period
Common/collective trust funds
$
9,953
N/A
Daily
Daily
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
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:
2024
2025
2026
2027
2028
2029 through 2033
Total
$
$
315
359
398
431
453
3,278
5,234
Supplemental Executive Retirement Plan
Civista established a supplemental executive retirement plan (“SERP”) in 2011, which covers key members of
management. The SERP was amended and restated effective January 1, 2024. 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, 2023, was $4,083, compared to $4,028 at
December 31, 2022. The expense related to the SERP was $233, $420 and $404 for 2023, 2022 and 2021, respectively.
Distributions to participants made in 2023, 2022 and 2021 totaled $176, $173, and $167, respectively.
78
CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023, 2022 and 2021
(Amounts in thousands, except share data)
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 60,049 shares available for grants under
this plan at December 31, 2023.
No options had been granted under the 2014 Incentive Plan as of December 31, 2023 and 2022.
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, 2023, 2022 and 2021, 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 11,817,
8,098 and 8,792 common shares were issued to Civista directors in 2022, 2021 and 2021, 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.
The following is a summary of the status of the Company’s restricted shares, and changes therein during the twelve
months ended December 31, 2023:
Nonvested at beginning of period
Granted
Vested
Forfeited
Nonvested at end of period
December 31, 2023
Number of
Restricted
Shares
Weighted
Average
Grant Date
Fair Value
$
70,096
47,536
(30,222)
(1,740)
85,670
21.88
21.85
21.62
21.74
21.88
The following is a summary of the status of the Company’s awarded restricted shares as of December 31, 2023:
Date of Award
Shares
Remaining Expense
Remaining Vesting
Period (Years)
At December 31, 2023
March 14, 2019
March 14, 2020
March 3, 2021
March 3, 2021
March 3, 2022
March 3, 2022
March 14, 2023
March 14, 2023
0
41
91
0
164
128
275
405
1,104
0.00
1.00
1.00
0.00
3.00
1.00
4.00
2.00
2.05
1,924
4,265
7,776
6,793
9,554
10,421
17,103
27,834
85,670
$
$
79
CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023, 2022 and 2021
(Amounts in thousands, except share data)
NOTE 16 - EQUITY INCENTIVE PLAN (Continued)
the Company recorded share-based
During the twelve months ended December 31, 2023, 2022 and 2021,
compensation expense of $801, $630 and $506, respectively, and director retainer fees of $182, $189 and $196,
respectively, for shares granted under the 2014 Incentive Plan. At December 31, 2023, the total compensation cost
related to unvested awards not yet recognized was $1,104, which is expected to be recognized over the weighted
average remaining life of the grants of 2.05 years.
NOTE 17 - FAIR VALUE MEASUREMENT
GAAP establishes 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)
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 equity securities available for sale
not actively traded in an open market is determined by using market data inputs for similar securities that are
observable. (Level 2 inputs).
Fair value swap asset/liability: The fair value of swap assets and liabilities is based on an external derivative model
using data inputs as of the valuation date and classified Level 2.
Collateral Dependent 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.
80
CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023, 2022 and 2021
(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, 2023 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
(Level 1)
(Level 2)
(Level 3)
$
— $
—
67,658 $
338,599
—
—
—
—
—
212,015
618,272
2,169
12,481
12,481
—
—
—
—
—
—
—
$
— $
— $
3,018
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
(Level 1)
(Level 2)
(Level 3)
$
— $
—
61,029 $
317,248
—
—
—
—
—
237,125
615,402
2,190
16,579
16,579
—
—
—
—
—
—
—
$
— $
— $
2,689
81
CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023, 2022 and 2021
(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, 2023 and 2022.
December 31, 2023
Fair Value
Mortgage Servicing Rights
$
3,018
December 31, 2022
Fair Value
Mortgage Servicing Rights
$
2,689
Valuation
Technique
Discounted Cash
Flows
Valuation
Technique
Discounted Cash
Flows
Quantitative Information about Level 3 Fair Value Measurements
Unobservable
Input
Range
Weighted
Average
Constant
Prepayment Rate
Discount Rate
4.6% -11%
12%
6%
12%
Quantitative Information about Level 3 Fair Value Measurements
Unobservable
Input
Range
Constant
Prepayment Rate
Discount Rate
5% -20%
12%
Weighted
Average
7%
12%
The carrying amount and fair value of financial instruments carried at amortized cost were as follows:
December 31, 2023
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
$
60,406 $
29,998
1,725
2,824,568
61,335
12,819
60,406 $
29,998
1,725
2,679,988
61,335
12,819
60,406 $
29,998
1,725
—
61,335
12,819
—
— $
—
—
—
—
— 2,679,988
—
—
—
—
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
2,084,216
900,812
338,000
2,392
—
103,943
9,859
9,525
2,084,216
899,443
337,267
2,419
—
101,563
9,859
9,525
2,084,216
—
337,267
—
—
—
—
9,525
—
—
—
—
—
—
—
—
—
899,443
—
2,419
—
101,563
9,859
—
82
CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023, 2022 and 2021
(Amounts in thousands, except share data)
NOTE 17 - FAIR VALUE MEASUREMENT (Continued)
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
2,619,770
53,543
11,178
43,361 $
33,585
698
2,528,906
53,543
11,178
43,361 $
33,585
698
—
53,543
11,178
—
— $
—
—
—
—
— 2,528,906
—
—
—
—
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
—
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
2023
2022
Fixed
Rate
Variable
Rate
Fixed
Rate
Variable
Rate
$
58,318 $ 668,893 $
10
821
59,489
273
$
59,149 $ 728,655 $
42,184 $ 599,185
45,182
630
43,154 $ 644,997
10
960
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 3.5% to 8.5% at December 31, 2023 and 3.25% to 8.00% at December 31, 2022.
Maturities extend up to 30 years.
Civista is required to maintain certain reserve balances on hand in accordance with the Federal Reserve Board
requirements. The average reserve balance maintained in accordance with such requirements was $0 on December 31,
2023 and December 31, 2022, 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.
83
CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023, 2022 and 2021
(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, 2023, that the Companies met all capital adequacy requirements to which they were
subject.
As of December 31, 2023, and 2022, 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, 2023 and
2022 were as follows:
2023
Total Risk Based Capital
Consolidated
Civista
Tier I Risk Based Capital
Consolidated
Civista
CET1 Risk Based Capital
Consolidated
Civista
Leverage
Consolidated
Civista
2022
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
Amount
Ratio
To Be Well
Capitalized Under
Prompt Corrective
Action Purposes
Amount
Ratio
$ 429,080
400,047
14.4% $
13.5
237,604
236,568
8.0%
8.0
n/a
$ 295,710
n/a
10.0%
318,322
363,033
288,895
363,033
318,322
363,033
10.7
12.3
9.7
12.3
8.8
10.0
178,203
177,426
133,652
133,069
145,489
145,245
6.0
6.0
4.5
4.5
4.0
4.0
n/a
236,568
n/a
192,211
n/a
181,556
n/a
8.0
n/a
6.5
n/a
5.0
$ 395,125
366,377
14.1% $
12.9
217,681
219,357
8.0%
8.0
n/a
$ 274,196
n/a
10.0%
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
293,164
337,866
263,736
337,866
293,164
337,866
10.4
11.9
9.4
11.9
8.7
10.0
84
CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023, 2022 and 2021
(Amounts in thousands, except share data)
NOTE 19 - CAPITAL REQUIREMENTS AND RESTRICTION ON RETAINED EARNINGS (Continued)
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
capital requirements. At December 31, 2023, Civista had $56,886 of net profits available to pay dividends to CBI
without requiring regulatory approval.
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:
Deferred income taxes and other liabilities
Subordinated debentures
Total liabilities
Shareholders’ Equity:
Common stock
Accumulated earnings
Treasury stock
Accumulated other comprehensive loss
Total shareholders’ equity
Total liabilities and shareholders’ equity
December 31,
2023
2022
$
8,331 $
2,169
450,791
3,917
12,354
21,812
2,190
414,263
3,236
3,332
$ 477,562 $ 444,833
$
1,618 $
103,943
105,561
6,199
103,799
109,998
311,166
183,787
(75,422)
(47,530)
372,001
310,182
156,492
(73,794)
(58,045)
334,835
$ 477,562 $ 444,833
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,
2021
2022
2023
19,900
26,300 $
28,100 $
1,000
1,150
1,390
(956)
(3,781)
(4,849)
(47)
340
150
(1,004)
(2,384)
(1,518)
21,625
23,273
1,140
1,309
16,662
18,382
39,427 $
42,964 $
53,489 $ (27,438) $
18,893
425
21,228
40,546
34,747
$
$
$
85
CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023, 2022 and 2021
(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 provided by operating activities
Investing activities:
Disposal of minority interest
Acquisition and additional capitalization of
subsidiary, net of cash acquired
Net cash used in investing activities
Financing activities:
Proceeds from subordinated debenture, net of
issuance costs
Purchase of treasury stock
Cash dividends paid
Net cash provided by (used in) 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,
2021
2022
2023
$
42,964 $
39,427 $
40,546
(12,836)
4,587
2,495
(18,382)
11,746
(16,662)
27,352
(21,228)
21,813
—
—
11,500
(14,000)
(14,000)
(25,960)
(25,960)
(50,000)
(38,500)
—
(1,628)
(9,599)
—
(16,887)
(8,493)
73,386
(22,309)
(8,036)
(11,227)
(13,481)
21,812
8,331 $
(25,380)
(23,988)
45,800
21,812 $
43,041
26,354
19,446
45,800
$
86
CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023, 2022 and 2021
(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
Average shares and dilutive potential
common shares outstanding—diluted
Diluted earnings per share
2023
2022
2021
$
42,964 $
39,427 $
40,546
1,583
498
173
41,381 $
$
40,373
15,734,624 15,162,032 15,408,863
65,648
38,929 $
191,402
579,857
15,154,767 14,970,630 15,343,215
2.63
$
2.60 $
2.73 $
$
$
41,381 $
38,929 $
40,373
41,381 $
38,929 $
40,373
15,154,767 14,970,630 15,343,215
15,154,767 14,970,630 15,343,215
2.63
$
2.60 $
2.73 $
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.
NOTE 22 - DERIVATIVE HEDGING INSTRUMENTS
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.
87
CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023, 2022 and 2021
(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:
2023
Notional
Amount
Fair Value
2022
Notional
Amount
Fair Value
$
44,773
$
2,114
$
6,980
$
269
228,873
10,367
12,481
$
212,570
16,310
16,579
$
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
$
184,100
$
12,481
$
205,590
$
16,579
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
—
—
—
—
—
—
—
—
$
12,481
$
16,579
Gross notional positions with customers
Gross notional positions with financial
institution counterparties
$
$
228,873
228,873
$
$
212,570
212,570
The effect of swap fair value changes on the Consolidated Statement of Operations for the years ended December 31,
2023, 2022 and 2021 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
2022
2021
2023
Other income
$
$
— $
— $
— $
— $
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 $673 and $247 during the years ended
December 31, 2023 and 2022, respectively.
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, 2023 or 2022.
88
CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023, 2022 and 2021
(Amounts in thousands, except share data)
NOTE 23 – QUALIFIED AFFORDABLE HOUSING PROJECT INVESTMENTS
The Company invests in qualified affordable housing projects. At December 31, 2023 and 2022, the balance of the
Company’s investments in qualified affordable housing projects was $15,122 and $14,149, respectively. These
balances are reflected in the Other assets line on the Consolidated Balance Sheet. The unfunded commitments related
to the investments in qualified affordable housing projects totaled $5,722 and $5,634 at December 31, 2023 and 2022,
respectively. These balances are reflected in the Accrued expenses and other liabilities line on the Consolidated
Balance Sheet.
During the years ended December 31, 2023, 2022 and 2021, the Company recognized amortization expense with
respect to its investments in qualified affordable housing projects of $1,035, $1,086 and $818, respectively, which
was included within pre-tax income on the Consolidated Statements of Operations.
Additionally, during the years ended December 31, 2023, 2022 and 2021, the Company recognized tax credits and
other benefits from its investments in affordable housing tax credits of $1,655, $1,391 and $1,402, respectively.
During the years ended December 31, 2023, 2022 and 2021, 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.
89
CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023, 2022 and 2021
(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, 2023, 2022 and 2021.
For the years ended
December 31,
2022
2021
2023
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
$ 7,206
5,880
4,767
2,375
10,220
30,448
6,715
$ 37,163
$ 7,074
5,499
4,902
2,375
4,686
24,536
4,540
$ 29,076
$ 5,905
5,443
4,857
2,375
1,055
19,635
11,817
$ 31,452
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.
90
CIVISTA BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2023, 2022 and 2021
(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, 2023 and 2022:
Classification on
the Consolidated
Balance Sheet
December 31,
2023
December 31,
2022
Assets:
Operating lease
Other assets
$
1,632
$
2,108
Liabilities:
Operating lease
Accrued expenses
and other liabilities $
1,632
$
2,108
The cost components of our operating leases were as follows for the periods ended December 31, 2023 and 2022:
Lease cost
Operating lease cost
Short-term lease cost
Sublease income
Total lease cost
December 31,
2023
December 31,
2022
$
$
499 $
160
(26)
633 $
445
182
(29)
598
Maturities of our lease liabilities for all operating leases for each of the next five years and thereafter is as follows:
2024
2025
2026
2027
2028
Thereafter
Total lease payments
Less: Imputed Interest
Present value of lease liabilities
$
$
$
635
459
412
292
-
-
1,798
166
1,632
The weighted average remaining lease terms and discount rates for all of our operating leases were as follows as of
December 31, 2023:
Weighted-average remaining lease term - operating leases (years)
Weighted-average discount rate - operating leases
4.29
2.89%
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.
91
This page left blank intentionally.
This page left blank intentionally.
This page left blank intentionally.
Shareholder Information
Annual Meeting of the Civista Bancshares, Inc. Shareholders
Tuesday, April 16, 2024 | 10:00 AM EDT
The Cedar Point Center |BGSU Firelands
1 University Drive | Huron, OH 44839
Investor Information
Corporate and investor information, including news releases, investor presentations, corporate responsibility
report, governance documents, proxy statements and SEC filings are available from our investor relations site
at www.civb.com.
NASDAQ Exchange | Symbol CIVB
Stock Registrar and Transfer Agent
We encourage you to access your account(s) online at www.amstock.com. Here you can easily initiate a
number of transactions and inquires as well as access important details about your portfolio and general
stock transfer information.
• Update your mailing address
Access statement information
•
Print a duplicate 1099 form
•
Consolidate accounts
•
Enroll in our Direct Stock Purchase Plan
•
•
Request a replacement dividend check
• Download stock transfer form
By mail or phone, contact our Transfer Agent:
Civista Bancshares, Inc.
c/o Equiniti Trust Company, LLC (formerly known as American Stoock Transferr & Trust CCoompany, LLC) (“Equiniti”)
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