シビスタバンクシェアーズの四半期報告

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended - March 31, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-36192

Civista Bancshares, Inc.

(Exact name of registrant as specified in its charter)


Ohio		34-1558688
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

100 East Water Street, Sandusky, Ohio		44870
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (419) 625-4121

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common	CIVB	NASDAQ Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. Common Shares, no par value, outstanding at May 6, 2024—15,727,013 shares

CIVISTA BANCSHARES, INC.

Index


PART I.	Financial Information	2
Item 1.	Financial Statements:	2
	Consolidated Balance Sheets (Unaudited) March 31, 2024 and December 31, 2023
	Consolidated Statements of Operations (Unaudited) Three months ended March 31, 2024 and 2023	2
	Consolidated Statements of Comprehensive Income (Loss) (Unaudited) Three months ended March 31, 2024 and 2023	4
	Consolidated Statement of Changes in Shareholders’ Equity (Unaudited) Three months ended March 31, 2024 and 2023	5
	Condensed Consolidated Statements of Cash Flows (Unaudited) Three months ended March 31, 2024 and 2023	6
	Notes to Interim Consolidated Financial Statements (Unaudited)	7-35
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	36-45
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	46-47
Item 4.	Controls and Procedures	48

PART II.	Other Information	49
Item 1.	Legal Proceedings	49
Item 1A.	Risk Factors	49
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	49
Item 3.	Defaults Upon Senior Securities	49
Item 4.	Mine Safety Disclosures	49
Item 5.	Other Information	49
Item 6.	Exhibits	50
Signatures		51

Part I – Financial Information

ITEM 1. Financial Statements

CIVISTA BANCSHARES, INC.

Consolidated Balance Sheets

(In thousands, except share data)


	March 31, 2024
	(Unaudited)			December 31, 2023
ASSETS
Cash and due from financial institutions	$	50,310		$	60,406
Investments in time deposits		1,450			1,225
Securities available-for-sale		606,249			618,272
Equity securities		2,027			2,169
Loans held for sale		3,716			1,725
Loans, net of allowance for credit losses of $38,849 and $36,170		2,859,290			2,824,568
Other securities		31,360			29,998
Premises and equipment, net		54,280			56,769
Accrued interest receivable		13,513			12,819
Goodwill		125,520			125,520
Other intangible assets, net		9,098			9,508
Bank owned life insurance		61,685			61,335
Swap assets		14,682			12,481
Deferred taxes		20,296			18,357
Other assets		26,782			26,266
Total assets	$	3,880,258		$	3,861,418
LIABILITIES
Deposits
Noninterest-bearing	$	707,993		$	771,699
Interest-bearing		2,272,702			2,213,329
Total deposits		2,980,695			2,985,028
Short-term Federal Home Loan Bank advances		368,500			338,000
Long-term Federal Home Loan Bank advances		2,211			2,392
Subordinated debentures		103,984			103,943
Other borrowings		8,105			9,859
Swap liabilities		14,682			12,481
Accrued expenses and other liabilities		32,422			37,713
Total liabilities		3,510,599			3,489,416
SHAREHOLDERS’ EQUITY
Common shares, no par value, 40,000,000 shares authorized, 19,328,525 shares issued at March 31, 2024 and 19,288,674 shares issued at December 31, 2023, including Treasury shares		311,352			311,166
Retained earnings		187,638			183,788
Treasury shares, 3,601,512 common shares at March 31, 2024 and 3,593,250 common shares at December 31, 2023, at cost		(75,574	)		(75,422	)
Accumulated other comprehensive loss		(53,757	)		(47,530	)
Total shareholders’ equity		369,659			372,002
Total liabilities and shareholders’ equity	$	3,880,258		$	3,861,418

See notes to interim unaudited consolidated financial statements

Page 2

CIVISTA BANCSHARES, INC.

Consolidated Statements of Operations (Unaudited)

(In thousands, except per share data)


	Three months ended
	March 31,
	2024			2023
Interest and dividend income
Loans, including fees	$	44,484		$	37,784
Taxable securities		2,934			2,834
Tax-exempt securities		2,375			2,262
Deposits in other banks		335			45
Total interest and dividend income		50,128			42,925
Interest expense
Deposits		15,987			3,232
Federal Home Loan Bank advances		4,528			4,277
Subordinated debentures		1,241			1,169
Securities sold under agreements to repurchase and other		-			1,646
Total interest expense		21,756			10,324
Net interest income		28,372			32,601
Provision for credit losses - loans		2,042			620
Provision for credit losses - off-balance sheet credit exposures		(50	)		201
Net interest income after provision		26,380			31,780
Noninterest income
Service charges		1,440			1,773
Net gain on sale of securities		—			—
Net gain (loss) on equity securities		(141	)		(68	)
Net gain on sale of loans and leases		863			631
ATM/Interchange fees		1,383			1,353
Wealth management fees		1,276			1,193
Lease revenue and residual income		1,674			2,046
Bank owned life insurance		350			253
Tax refund processing fees		—			1,900
Swap fees		57			61
Other		1,602			1,926
Total noninterest income		8,504			11,068
Noninterest expense
Compensation expense		15,457			15,105
Net occupancy expense		1,368			1,359
Equipment expense		2,535			2,761
Contracted data processing		545			520
FDIC assessment		484			248
State franchise tax		485			526
Professional services		1,149			1,555
Amortization of intangible assets		391			398
ATM/Interchange expense		625			580
Marketing		479			505
Software maintenance expense		1,189			878
Other operating expenses		2,982			2,997
Total noninterest expense		27,689			27,432
Income before taxes		7,195			15,416
Income tax expense		835			2,528
Net Income	$	6,360		$	12,888
Earnings per common share, basic	$	0.41		$	0.82
Earnings per common share, diluted	$	0.41		$	0.82

See notes to interim unaudited consolidated financial statements

Page 3

CIVISTA BANCSHARES, INC.

Consolidated Statements of Comprehensive Income (Loss) (Unaudited)

(In thousands)


	Three Months Ended
	March 31,
	2024			2023
Net income	$	6,360		$	12,888
Other comprehensive income (loss):
Unrealized holding (losses) on available-for-sale securities		(7,899	)		10,302
Tax effect		1,672			(2,167	)
Reclassification of gains recognized in net income		—			—
Tax effect		—			—
Pension liability adjustment		—			—
Tax effect		—			—
Total other comprehensive (loss)		(6,227	)		8,135
Comprehensive income (loss)	$	133		$	21,023

See notes to interim unaudited consolidated financial statements

Page 4

CIVISTA BANCSHARES, INC.

Consolidated Statement of Changes in Shareholders’ Equity (Unaudited)

(In thousands, except share data)


	Common Shares											Accumulated Other			Total
	Outstanding Shares			Amount		Retained Earnings			Treasury Shares			Comprehensive Income (Loss)			Shareholders’ Equity
Balance, December 31, 2023		15,695,424		$	311,166	$	183,788		$	(75,422	)	$	(47,530	)	$	372,002
Net Income		—			—		6,360			—			—			6,360
Other comprehensive loss		—			—		—			—			(6,227	)		(6,227	)
Stock-based compensation		39,851			186		—			—			—			186
Common stock dividends ($0.15 per share)		—			—		(2,510	)		—			—			(2,510	)
Purchase of common stock		(8,262	)		—		—			(152	)		—			(152	)
Balance, March 31, 2024		15,727,013		$	311,352	$	187,638		$	(75,574	)	$	(53,757	)	$	369,659

	Common Shares											Accumulated Other			Total
	Outstanding Shares			Amount		Retained Earnings			Treasury Shares			Comprehensive Income (Loss)			Shareholders’ Equity
Balance, December 31, 2022		15,728,234		$	310,182	$	156,492		$	(73,794	)	$	(58,045	)	$	334,835
Cumulative-effect adjustment for adoption of ASC 326		—			—		(6,069	)		—			—		$	(6,069	)
Balance, January 1, 2023		15,728,234			310,182		150,423			(73,794	)		(58,045	)	$	328,766
Net Income		—			—		12,888			—			—			12,888
Other comprehensive loss		—			—		—			—			8,135			8,135
Stock-based compensation		45,796			230		—			—			—			230
Common stock dividends ($0.14 per share)		—			—		(2,201	)		—			—			(2,201	)
Purchase of common stock		(5,620	)		—		—			(121	)		—			(121	)
Balance, March 31, 2023		15,768,410		$	310,412	$	161,110		$	(73,915	)	$	(49,910	)	$	347,697

See notes to interim unaudited consolidated financial statements

Page 5

CIVISTA BANCSHARES, INC.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)


	Three Months Ended March 31,
	2024			2023
Net cash provided by operating activities	$	752		$	19,794
Cash flows used for investing activities:
Maturities, paydowns and calls of securities, available-for-sale		4,873			4,980
Purchases of securities, available-for-sale		(1,188	)		(7,179	)
Purchase of other securities		(2,785	)		(9,126	)
Redemption of other securities		1,423			7,328
Net change in loans		(36,372	)		(34,085	)
Proceeds from sale of premises and equipment		—			692
Premises and equipment purchases		(123	)		(1,245	)
Net cash used for investing activities		(34,172	)		(38,635	)
Cash flows from financing activities:
Repayment of long-term FHLB advances		(181	)		(217	)
Net change in short-term FHLB advances		30,500			(181,700	)
Repayment of other borrowings		—			(1,578	)
Increase in deposits		(4,333	)		223,532
Decrease in securities sold under repurchase agreements		—			(9,512	)
Purchase of treasury shares		(152	)		(121	)
Common dividends paid		(2,510	)		(2,201	)
Net cash provided by (used for) financing activities		23,324			28,203
Increase (decrease) in cash and cash equivalents		(10,096	)		9,362
Cash and cash equivalents at beginning of period		60,406			43,361
Cash and cash equivalents at end of period	$	50,310		$	52,723
Cash paid during the period for:
Interest	$	6,289		$	1,628
Income taxes		4			10
Supplemental cash flow information:
Change in fair value of swap asset		(2,201	)		3,229
Change in fair value of swap liability		2,201			(3,229	)

See notes to interim unaudited consolidated financial statements

Page 6

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)

(1) Consolidated Financial Statements

Nature of Operations and Principles of Consolidation: Civista Bancshares, Inc. (CBI) is an Ohio corporation and a registered financial holding company. The Consolidated Financial Statements include the accounts of CBI and its wholly-owned direct and indirect subsidiaries: Civista Bank (Civista), First Citizens Insurance Agency, Inc. (FCIA), Water Street Properties, Inc. (Water St.), CIVB Risk Management, Inc. (CRMI) and First Citizens Investments, Inc. (FCI).

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, formerly known as Vision Financial Group, Inc. ("VFG") was acquired in the fourth quarter of 2022 as a wholly owned subsidiary of Civista. As of August 31, 2023, VFG was merged into Civista and now operates as a full-service equipment leasing and financing division of Civista and has been rebranded as Civista Leasing and Finance ("CLF"). The operations of CLF are headquartered in Pittsburgh, Pennsylvania.

FCIA is wholly-owned by CBI and was formed to allow the Company to participate in commission revenue generated through its third-party insurance agreement. Water St. is wholly-owned by CBI and was formed to hold properties repossessed by CBI subsidiaries. CRMI is a captive insurance company that is wholly-owned by CBI and allows CBI and its subsidiaries to insure against certain risks unique to their operations. The operations of CRMI are located in Wilmington, Delaware. FCI is wholly-owned by Civista and holds and manages its securities portfolio. The operations of FCI are located in Wilmington, Delaware.

The above companies together are referred to as the “Company.” Intercompany balances and transactions are eliminated in consolidation. Management considers the Company to operate primarily in one reportable segment, banking.

The accompanying Unaudited Consolidated Financial Statements have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the Company’s financial position as of March 31, 2024 and its results of operations and changes in cash flows for the periods ended March 31, 2024 and 2023 have been made. The accompanying Unaudited Consolidated Financial Statements have been prepared in accordance with instructions of Form 10-Q, and therefore certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America have been omitted. The results of operations for the period ended March 31, 2024 are not necessarily indicative of the operating results for the full year. Reference is made to the accounting policies of the Company described in the notes to the audited financial statements contained in the Company’s 2023 annual report. The Company has consistently followed these policies in preparing this Form 10-Q.

(2) Significant Accounting Policies

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 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.

Page 7

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)

The Company adopted Accounting Standards Codification ("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 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 allowance for credit losses 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.

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.

Page 8

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)

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 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.

Page 9

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)

Reserve for Unfunded Commitments

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 to cancel 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 hprovision 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.

Revisions: Interest income and interest expense increased $1,386 in the Consolidated Statement of Operations as of and for the quarter ended March 31, 2023 for certain loan participations sold that were deemed to not qualify for sales accounting under ASC 860. This revision did not have a significant impact on the consolidated financial statement line items impacted and had no effect on net income.

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 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 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.

Page 10

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)

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
						Impact of
			CECL Adoption			Adopting ASC 326 -
	December 31, 2022		Impact			PCD Loans		January 1, 2023
Allowance for Credit Losses:
Commercial & Agriculture	$	3,011	$	429		$	390	$	3,830
Commercial Real Estate:
Owner Occupied		4,565		1,075			179		5,819
Non-Owner Occupied		14,138		(2,847	)		—		11,291
Residential Real Estate		3,145		2,762			386		6,293
Real Estate Construction		2,293		1,502			—		3,795
Farm Real Estate		291		(28	)		—		263
Lease Financing Receivable		429		1,743			635		2,807
Consumer and Other		98		201			78		377
Unallocated		541		(541	)		—		—
Total Allowance for Credit Losses	$	28,511	$	4,296		$	1,668	$	34,475
Reserve for Unfunded Commitments		—		3,386			—		3,386
Total Reserve for Credit Losses	$	28,511	$	7,682		$	1,668	$	37,861

Retained Earnings
Total Pre-tax Impact			$	(7,682	)
Tax Effect				1,613
Decrease to Retained Earnings			$	(6,069	)

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 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.

Page 11

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)

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.

Effect of Newly Issued but Not Yet Effective Accounting Standards:

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The Update is designed to provide relief from the accounting analysis and impacts that may otherwise be required for modifications to agreements necessitated by reference rate reform. The Update also provides optional expedients to enable companies to continue to apply hedge accounting to certain hedging relationships impacted by reference rate reform. The amendments in this Update are effective for all entities as of March 12, 2020 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 has implemented a replacement for the reference rate using SOFR or the Prime Rate and has determined that the changes to the reference rate is not expected to have a material impact on our financial condition, results of operations or cash flows.

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 does not intend to adopt early. The Company does not anticipate a significant impact to the consolidated financial statements upon adoption.

Page 12

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)

(3) Securities

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


March 31, 2024	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Treasury securities and obligations of U.S. government agencies	$	72,013	$	467	$	(4,438	)	$	68,042
Obligations of states and political subdivisions		358,809		1,294		(26,652	)		333,451
Mortgage-backed securities in government sponsored entities		237,942		14		(33,200	)		204,756
Total debt securities	$	668,764	$	1,775	$	(64,290	)	$	606,249


December 31, 2023	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Treasury securities and obligations of U.S. government agencies	$	71,418	$	315	$	(4,075	)	$	67,658
Obligations of states and political subdivisions		359,452		2,725		(23,578	)		338,599
Mortgage-backed securities in government sponsored entities		242,022		19		(30,026	)		212,015
Total debt securities	$	672,892	$	3,059	$	(57,679	)	$	618,272

The amortized cost and fair value of securities at March 31, 2024, by contractual maturity, is shown below. Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations. Securities not due at a single maturity date, primarily mortgage-backed securities, are shown separately.


Available for sale	Amortized Cost		Fair Value
Due in one year or less	$	5,279	$	5,246
Due after one year through five years		82,371		76,227
Due after five years through ten years		44,592		43,602
Due after ten years		298,580		276,418
Mortgage-backed securities		237,942		204,756
Total securities available-for-sale	$	668,764	$	606,249

There were no proceeds from sales of securities available-for-sale, gross unrealized gains or gross realized losses as of March 31, 2024 or March 31, 2023.

Securities are pledged by the Company from time to time to secure public deposits, other deposits and liabilities as required by law. The carrying value of pledged securities was approximately $203,714 and $211,616 as of March 31, 2024 and December 31, 2023, respectively.

Page 13

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)

The following tables show gross unrealized losses and fair value, aggregated by investment category, and length of time that individual securities have been in a continuous unrealized loss position at March 31, 2024 and December 31, 2023:


March 31, 2024	12 Months or less					More than 12 months					Total
Description of Securities	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
U.S. Treasury securities and obligations of U.S. government agencies	$	2,102	$	(5	)	$	56,010	$	(4,433	)	$	58,112	$	(4,438	)
Obligations of states and political subdivisions		48,073		(323	)		171,551		(26,329	)		219,624		(26,652	)
Mortgage-backed securities in gov’t sponsored entities		746		(12	)		201,675		(33,188	)		202,421		(33,200	)
Total temporarily impaired	$	50,921	$	(340	)	$	429,236	$	(63,950	)	$	480,157	$	(64,290	)


December 31, 2023	12 Months or less					More than 12 months					Total
Description of Securities	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
U.S. Treasury securities and obligations of U.S. government agencies	$	224	$	(1	)	$	56,760	$	(4,074	)	$	56,984	$	(4,075	)
Obligations of states and political subdivisions		19,168		(78	)		162,291		(23,500	)		181,459		(23,578	)
Mortgage-backed securities in gov’t sponsored entities		20,112		(522	)		189,319		(29,504	)		209,431		(30,026	)
Total temporarily impaired	$	39,504	$	(601	)	$	408,370	$	(57,078	)	$	447,874	$	(57,679	)

At March 31, 2024, there were a total of 446 securities in the portfolio with unrealized losses mainly due to higher current market rates when compared to the time of purchase. Unrealized losses on securities have not been recognized into income because the issuers’ securities are of high credit quality, management has the intent and ability to hold these securities for the foreseeable future, and the decline in fair value is largely due to currently higher market rates when compared to the time of purchase. 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 for the three months ended March 31, 2024 and the portion of unrealized gains and losses for the period that relates to equity investments held at March 31, 2024 and 2023:


	Three Months Ended March 31,
	2024			2023
Net losses recognized on equity securities during the period	$	(141	)	$	(68	)
Less: Net losses realized on the sale of equity securities during the period		—			—
Unrealized losses recognized on equity securities held at reporting date	$	(141	)	$	(68	)

Page 14

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)

(4) Loans

Loan balances were as follows:


	March 31, 2024			December 31, 2023
Commercial & Agriculture	$	302,663		$	304,793
Commercial Real Estate- Owner Occupied		367,419			377,321
Commercial Real Estate- Non-Owner Occupied		1,185,688			1,161,894
Residential Real Estate		676,802			659,841
Real Estate Construction		267,737			260,409
Farm Real Estate		24,908			24,771
Lease Financing Receivable		56,680			54,642
Consumer and Other		16,242			18,056
Total loans		2,898,139			2,861,727
Allowance for credit losses		(38,849	)		(37,160	)
Net loans	$	2,859,290		$	2,824,567

Included in Commercial & Agriculture loans above are $289 and $326 of Paycheck Protection Program (“PPP”) loans as of March 31, 2024 and December 31, 2023, respectively.

Included in total loans above are net deferred loan fees of $2,664 and $2,743 at March 31, 2024 and December 31, 2023, respectively.

The Company elected to exclude accrued interest receivable from the amortized cost basis of loans disclosed throughout this Note 4 and Note 5 (Allowance for Credit Losses). As of March 31, 2024 and December 31, 2023, accrued interest receivable totaled $13,513 and $12,819, respectively, and is included in the accrued interest receivable line item on the Company's Consolidated Balance Sheet.

(5) Allowance for Credit Losses

The following table presents, by portfolio segment, the changes in the ACL for the three months ended March 31, 2024.

Allowance for credit losses:


For the three months ended March 31, 2024	Beginning balance		Charge-offs			Recoveries		Provision			Ending Balance
Commercial & Agriculture	$	7,587	$	(212	)	$	152	$	210		$	7,737
Commercial Real Estate:
Owner Occupied		4,723		—			3		(74	)		4,652
Non-Owner Occupied		12,056		(174	)		5		1,081			12,968
Residential Real Estate		8,489		(13	)		120		478			9,074
Real Estate Construction		3,388		—			4		41			3,433
Farm Real Estate		260		—			—		60			320
Lease Financing Receivables		297		(226	)		—		288			359
Consumer and Other		341		(26	)		14		(23	)		306
Unallocated		19		—			—		(19	)		0
Total	$	37,160	$	(651	)	$	298	$	2,042		$	38,849

Page 15

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)

For the three months ended March 31, 2024, the Company provided $2,042 to the allowance for credit losses, as compared to a provision of $620 for the three months ended March 31, 2023. The company experienced an increase in the allowance for credit losses as our CECL model required higher reserves, primarily attributable to three credits, based on the individually analyzed loan and lease portfolio.


For the three months ended March 31, 2023	Beginning balance		CECL Adoption Day 1 Impact			Impact of Adopting ASC 326 - PCD Loans 1		Charge-offs			Recoveries		Provision			Ending Balance
Commercial & Agriculture	$	3,011	$	429		$	—	$	(140	)	$	6	$	10		$	3,316
Commercial Real Estate:
Owner Occupied		4,565		1,075			19		—			—		74			5,733
Non-Owner Occupied		14,138		(2,847	)		—		—			7		462			11,760
Residential Real Estate		3,145		2,762			166		(10	)		22		(151	)		5,934
Real Estate Construction		2,293		1,502			—		—			4		121			3,920
Farm Real Estate		291		(28	)		—		—			—		6			269
Lease Financing Receivables		429		1,743			635		—			—		100			2,907
Consumer and Other		98		201			77		(25	)		8		(5	)		354
Unallocated		541		(541	)		—		—			—		3			3
Total	$	28,511	$	4,296		$	897	$	(175	)	$	47	$	620		$	34,196

1 Day 1 impact of $1,668, of adopting ASC 326-PCD loans was netted by changes in estimates of $771.

For the three months ended March 31, 2023, the Company provided $620 to the allowance for credit losses. Upon adoption of CECL we recorded an increase in the allowance for credit losses of $5,193. The increase in the reserves was principally related to loan growth during the quarter.

Allowance for credit losses:

The following tables present credit exposures by internally assigned risk grades as of March 31, 2024 and December 31, 2023. 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 risk grades are as follows:

•

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

•

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

•

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

•

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

•

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

Page 16

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)

Based on the most recent analysis performed, the risk category of loans, by type and year of originations, at March 31, 2024, is as follows:


	Term Loans Amortized Cost Basis by Origination Year
															Revolving
															Loans
													Revolving		Converted
March 31, 2024	2024		2023		2022		2021		2020		Prior		Loans		to Term		Total
Commercial & Agriculture
Pass	$	12,961	$	57,193	$	59,599	$	49,031	$	15,668	$	21,053	$	80,266	$	—	$	295,771
Special Mention		—		949		162		267		1,581		106		383		—		3,448
Substandard		—		307		192		57		128		396		2,345		—		3,425
Doubtful		—		—		—		11		8		—		—		—		19
Total Commercial & Agriculture	$	12,961	$	58,449	$	59,953	$	49,366	$	17,385	$	21,555	$	82,994	$	—	$	302,663
Commercial & Agriculture:
Current-period gross charge-offs	$	—	$	139	$	—	$	40	$	—	$	33	$	—	$	—	$	212

Commercial Real Estate - Owner Occupied
Pass	$	8,466	$	37,270	$	81,350	$	66,298	$	53,393	$	108,338	$	6,251	$	—	$	361,366
Special Mention		—		523		215		733		512		456		—		—		2,439
Substandard		—		—		227		—		—		3,387		—		—		3,614
Doubtful		—		—		—		—		—		—		—		—		—
Total Commercial Real Estate - Owner Occupied	$	8,466	$	37,793	$	81,792	$	67,031	$	53,905	$	112,181	$	6,251	$	—	$	367,419
Commercial Real Estate - Owner Occupied:
Current-period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Commercial Real Estate - Non-Owner Occupied
Pass	$	3,399	$	189,130	$	285,936	$	195,569	$	135,004	$	325,610	$	25,275	$	—	$	1,159,923
Special Mention		—		584		5,731		6,114		-		8,636		277		—		21,342
Substandard		—		—		—		—		-		4,423		—		—		4,423
Doubtful		—		—		—		—		—		—		—		—		—
Total Commercial Real Estate - Non-Owner Occupied	$	3,399	$	189,714	$	291,667	$	201,683	$	135,004	$	338,669	$	25,552	$	—	$	1,185,688
Commercial Real Estate - Non-Owner Occupied:
Current-period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	174	$	—	$	—	$	174

Residential Real Estate
Pass	$	16,859	$	99,311	$	124,004	$	94,750	$	69,778	$	107,071	$	157,772	$	—	$	669,545
Special Mention		—		286		—		218		95		213		—		—		812
Substandard		1,200		180		579		768		80		2,484		1,154		—		6,445
Doubtful		—		—		—		—		—		—		—		—		—
Total Residential Real Estate	$	18,059	$	99,777	$	124,583	$	95,736	$	69,953	$	109,768	$	158,926	$	—	$	676,802
Residential Real Estate:
Current-period gross charge-offs	$	—	$	—	$	—	$	3	$	—	$	10	$	—	$	—	$	13


Real Estate Construction
Pass	$	8,265	$	127,222	$	88,148	$	21,687	$	8,488	$	4,760	$	7,140	$	—	$	265,710
Special Mention		—		385		1,487		155		—		—		—		—		2,027
Substandard		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—
Total Real Estate Construction	$	8,265	$	127,607	$	89,635	$	21,842	$	8,488	$	4,760	$	7,140	$	—	$	267,737
Real Estate Construction:

Page 17

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)


Current-period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Farm Real Estate
Pass	$	627	$	2,329	$	947	$	2,237	$	4,392	$	12,875	$	1,501	$	—	$	24,908
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—
Total Farm Real Estate	$	627	$	2,329	$	947	$	2,237	$	4,392	$	12,875	$	1,501	$	—	$	24,908
Farm Real Estate:
Current-period charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Lease Financing Receivables
Pass	$	3,087	$	10,764	$	12,248	$	11,891	$	5,068	$	11,976	$	—	$	—		55,034
Special Mention		—		254		—		—		—		—		—		—		254
Substandard		—		444		114		30		44		108		—		—		740
Doubtful		—		193		351		24		15		69		—		—		652
Total Lease Financing Receivables	$	3,087	$	11,655	$	12,713	$	11,945	$	5,127	$	12,153	$	—	$	—	$	56,680
Lease Financing Receivables:
Current-period charge-offs	$	—	$	—	$	151	$	12	$	63	$	—	$	—	$	—	$	226

Consumer and Other
Pass	$	1,117	$	4,994	$	3,629	$	3,155	$	1,293	$	530	$	1,484	$	—	$	16,202
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		4		17		13		6		—		—		40
Doubtful		—		—		—		—		—		—		—		—		—
Total Consumer and Other	$	1,117	$	4,994	$	3,633	$	3,172	$	1,306	$	536	$	1,484	$	—	$	16,242
Consumer and Other:
Current-period charge-offs	$	—	$	2	$	2	$	5	$	4	$	13	$	—	$	—	$	26
Total Loans	$	55,981	$	532,318	$	664,923	$	453,012	$	295,560	$	612,497	$	283,848	$	—	$	2,898,139
Total Loans:
Current-period charge-offs	$	—	$	141	$	153	$	60	$	67	$	230	$	—	$	—	$	651

Page 18

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)

Risk category of loans, by type and year of originations, at December 31, 2023 is as follows:


	Term Loans Amortized Cost Basis by Origination Year
															Revolving
															Loans
													Revolving		Converted
December 31, 2023	2023		2022		2021		2020		2019		Prior		Loans		to Term		Total
Commercial & Agriculture
Pass	$	56,359	$	64,250	$	52,258	$	17,622	$	9,516	$	14,088	$	82,982	$	—	$	297,075
Special Mention		774		—		287		1,690		—		106		169		—		3,026
Substandard		396		86		67		131		271		73		3,668		—		4,692
Doubtful		—		—		—		—		—		—		—		—		—
Total Commercial & Agriculture	$	57,529	$	64,336	$	52,612	$	19,443	$	9,787	$	14,267	$	86,819	$	—	$	304,793
Commercial & Agriculture:
Current-period gross charge-offs	$	—	$	673	$	532	$	—	$	—	$	95	$	—	$	—	$	1,300

Commercial Real Estate - Owner Occupied
Pass	$	36,030	$	82,502	$	67,904	$	56,069	$	29,784	$	92,750	$	5,844	$	—	$	370,883
Special Mention		526		217		739		517		-		188		—		—		2,187
Substandard		—		231		—		—		3,098		922		—		—		4,251
Doubtful		—		—		—		—		—		—		—		—		—
Total Commercial Real Estate - Owner Occupied	$	36,556	$	82,950	$	68,643	$	56,586	$	32,882	$	93,860	$	5,844	$	—	$	377,321
Commercial Real Estate - Owner Occupied:
Current-period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Commercial Real Estate - Non-Owner Occupied
Pass	$	183,439	$	269,334	$	198,832	$	136,031	$	120,659	$	206,267	$	23,016	$	—	$	1,137,578
Special Mention		—		5,774		6,171		—		-		8,688		277		—		20,910
Substandard		—		—		—		—		122		3,284		—		—		3,406
Doubtful		—		—		—		—		—		—		—		—		—
Total Commercial Real Estate - Non-Owner Occupied	$	183,439	$	275,108	$	205,003	$	136,031	$	120,781	$	218,239	$	23,293	$	—	$	1,161,894
Commercial Real Estate - Non-Owner Occupied:
Current-period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Residential Real Estate
Pass	$	90,770	$	124,695	$	97,661	$	71,379	$	33,534	$	78,894	$	157,083	$	—	$	654,016
Special Mention		—		—		221		97		—		245		—		—		563
Substandard		186		342		684		82		582		2,063		1,323		—		5,262
Doubtful		—		—		—		—		—		—		—		—		—
Total Residential Real Estate	$	90,956	$	125,037	$	98,566	$	71,558	$	34,116	$	81,202	$	158,406	$	—	$	659,841
Residential Real Estate:
Current-period gross charge-offs	$	—	$	6	$	—	$	—	$	—	$	11	$	—	$	—	$	17

Page 19

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)


Real Estate Construction
Pass	$	108,606	$	105,222	$	20,960	$	6,739	$	2,699	$	2,635	$	9,335	$	—	$	256,196
Special Mention		—		1,226		926		2,019		—		—		—		—		4,171
Substandard		—		—		42		—		—		—		—		—		42
Doubtful		—		—		—		—		—		—		—		—		—
Total Real Estate Construction	$	108,606	$	106,448	$	21,928	$	8,758	$	2,699	$	2,635	$	9,335	$	—	$	260,409
Real Estate Construction:
Current-period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Farm Real Estate
Pass	$	2,207	$	967	$	2,256	$	4,462	$	789	$	12,528	$	1,292	$	—	$	24,501
Special Mention		—		—		—		—		—		20		—		—		20
Substandard		—		—		—		—		—		250		—		—		250
Doubtful		—		—		—		—		—		—		—		—		—
Total Farm Real Estate	$	2,207	$	967	$	2,256	$	4,462	$	789	$	12,798	$	1,292	$	—	$	24,771
Farm Real Estate:
Current-period charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Lease Financing Receivables
Pass	$	28,177	$	13,924	$	6,620	$	3,678	$	1,725	$	1	$	—	$	—	$	54,125
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		8		38		61		231		17		—		—		355
Doubtful		—		139		—		15		8		—		—		—		162
Total Lease Financing Receivables	$	28,177	$	14,071	$	6,658	$	3,754	$	1,964	$	18	$	—	$	—	$	54,642
Lease Financing Receivables:
Current-period charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Consumer and Other
Pass	$	6,510	$	4,135	$	3,615	$	1,578	$	509	$	248	$	1,424	$	—	$	18,019
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		2		14		15		—		6		—		—		37
Doubtful		—		—		—		—		—		—		—		—		—
Total Consumer and Other	$	6,510	$	4,137	$	3,629	$	1,593	$	509	$	254	$	1,424	$	—	$	18,056
Consumer and Other:
Current-period charge-offs	$	6	$	40	$	40	$	7	$	13	$	3	$	5	$	—	$	114
Total Loans	$	513,980	$	673,054	$	459,295	$	302,185	$	203,527	$	423,273	$	286,413	$	—	$	2,861,727
Total Loans:
Current-period charge-offs	$	6	$	719	$	572	$	7	$	13	$	109	$	5	$	—	$	1,431

Page 20

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)

The following tables include an aging analysis of the recorded investment of past due loans outstanding as of March 31, 2024 and December 31, 2023.


March 31, 2024	30-59 Days Past Due		60-89 Days Past Due		90 Days or Greater Past Due		Total Past Due		Current		Total Loans		Past Due 90 Days and Accruing
Commercial & Agriculture	$	495	$	133	$	1,742	$	2,370	$	300,293	$	302,663	$	314
Commercial Real Estate:
Owner Occupied		365		—		14		379		367,040		367,419		—
Non-Owner Occupied		1,034		—		1,863		2,897		1,182,791		1,185,688		—
Residential Real Estate		4,592		116		1,209		5,917		670,885		676,802		—
Real Estate Construction		—		—		—		—		267,737		267,737		—
Farm Real Estate		—		—		—		—		24,908		24,908		—
Lease Financing Receivables		1,160		—		3,190		4,350		52,330		56,680		2,189
Consumer and Other		119		2		16		137		16,105		16,242		—
Total	$	7,765	$	251	$	8,034	$	16,050	$	2,882,089	$	2,898,139	$	2,503

Page 21

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)


December 31, 2023	30-59 Days Past Due		60-89 Days Past Due		90 Days or Greater Past Due		Total Past Due		Current		Total Loans		Past Due 90 Days and Accruing
Commercial & Agriculture	$	1,228	$	471	$	1,999	$	3,698	$	301,095	$	304,793	$	73
Commercial Real Estate:
Owner Occupied		4		—		123		127		377,194		377,321		—
Non-Owner Occupied		—		—		—		0		1,161,894		1,161,894		—
Residential Real Estate		4,581		1,180		1,642		7,403		652,438		659,841		—
Real Estate Construction		—		—		—		—		260,409		260,409		—
Farm Real Estate		—		—		—		—		24,771		24,771		—
Lease Financing Receivables		950		410		373		1,733		52,909		54,642		—
Consumer and Other		172		23		2		197		17,859		18,056		—
Total	$	6,935	$	2,084	$	4,139	$	13,158	$	2,848,569	$	2,861,727	$	73

The following table presents loans on nonaccrual status as of March 31, 2024.


March 31, 2024	Nonaccrual loans with a related ACL		Nonaccrual loans without a related ACL		Total Nonaccrual loans		Interest Income Recognized
Commercial & Agriculture	$	982	$	2,843	$	3,825	$	6
Commercial Real Estate:
Owner Occupied		32		447		479		21
Non-Owner Occupied		1,059		1,954		3,013		—
Residential Real Estate		—		4,646		4,646		24
Real Estate Construction		—		—		—		2
Farm Real Estate		—		—		—		—
Lease Financing Receivables		585		643		1,228		—
Consumer and Other		—		44		44		1
Total	$	2,658	$	10,577	$	13,235	$	54

The following table presents loans on nonaccrual status as of December 31, 2023.


December 31, 2023	Nonaccrual loans with a related ACL		Nonaccrual loans without a related ACL		Total Nonaccrual loans		Interest Income Recognized
Commercial & Agriculture	$	914	$	4,891	$	5,805	$	9
Commercial Real Estate:
Owner Occupied		269		3		272		7
Non-Owner Occupied		—		1,167		1,167		—
Residential Real Estate		—		4,633		4,633		26
Real Estate Construction		—		41		41		—
Farm Real Estate		—		—		—		—
Lease Financing Receivables		15		492		507		—
Consumer and Other		—		42		42		4
Total	$	1,198	$	11,269	$	12,467	$	46

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 the Company 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. Payments received on nonaccrual loans are applied to the unpaid principal balance. A loan may be returned to accruing status only if one of two 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 or the principal and interest payments are reasonably assured and a sustained period of performance has occurred, generally six months.

Page 22

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)

Modifications to Borrowers Experiencing Financial Difficulty: From time to time, the Company may modify certain loans to borrowers who are experiencing financial difficulty. In some cases, these modifications result in new loans. Loan modifications to borrowers experiencing financial difficulty may be in the form of principal forgiveness, interest rate reduction, term extension, other-than-significant payment delay or a combination thereof, among other things. During the three months ended March 31, 2024, there were no modifications of loans to borrowers experiencing financial difficulty.

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 as of March 31, 2024 and December 31, 2023.


March 31, 2024	Real Estate		Other		Allowance for Credit Losses
Commercial & Agriculture	$	—	$	3,899	$	982
Commercial Real Estate:
Owner Occupied		—		299		32
Non-Owner Occupied		—		3,013		1,059
Residential Real Estate		1,349		—		—
Real Estate Construction		—		—		—
Farm Real Estate		—		—		—
Lease Financing Receivables		—		2,142		585
Consumer and Other		—		—		—
Total	$	1,349	$	9,353	$	2,658



December 31, 2023	Real Estate		Other		Allowance for Credit Losses
Commercial & Agriculture	$	—	$	4,674	$	945
Commercial Real Estate:
Owner Occupied		308		—		37
Non-Owner Occupied		1,167		—		268
Residential Real Estate		149		—		—
Real Estate Construction		—		—		—
Farm Real Estate		—		—		—
Lease Financing Receivables		—		61		15
Consumer and Other		—		—		—
Total	$	1,624	$	4,735	$	1,265

Collateral-dependent loans consist primarily of Residential Real Estate, Commercial Real Estate and Commercial & 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 & 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.

Page 23

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)

Foreclosed Assets Held For Sale

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 March 31, 2024 and December 31, 2023 there were no foreclosed assets included in Other assets.

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 as a provision for credit loss expense recognized within provision for credit losses 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 March 31, 2024:


	Three Months Ended
	March 31,
	2024			2023
Beginning of Period	$	3,901			—
CECL adoption adjustments		—			3,386
Charge-offs		—			—
Recoveries		—			—
Provision		(50	)		201
End of Period	$	3,851		$	3,587

(6) Accumulated Other Comprehensive Income (Loss)

The following table presents the changes in each component of accumulated other comprehensive income (loss), net of tax for the three-month periods ended March 31, 2024 and March 31, 2023.


	For the Three-Month Period Ended									For the Three-Month Period Ended
	March 31, 2024(a)									March 31, 2023(a)
	Unrealized Gains and (Losses) on Available-for- Sale Securities (a)			Defined Benefit Pension Items (a)			Total (a)			Unrealized Gains and (Losses) on Available-for- Sale Securities (a)			Defined Benefit Pension Items (a)			Total (a)
Beginning balance	$	(43,024	)	$	(4,506	)	$	(47,530	)	$	(52,771	)	$	(5,274	)	$	(58,045	)
Other comprehensive loss before reclassifications		(6,227	)		—			(6,227	)		8,135			—			8,135
Amounts reclassified from accumulated other comprehensive income (loss)		—			—			—			—			—			—
Net current-period other comprehensive income (loss)		(6,227	)		—			(6,227	)		8,135			—			8,135
Ending balance	$	(49,251	)	$	(4,506	)	$	(53,757	)	$	(44,636	)	$	(5,274	)	$	(49,910	)

(a)

Amounts in parentheses indicate debits on the Consolidated Balance Sheets.The following table presents the amounts reclassified out of each component of accumulated other comprehensive income (loss) for the three-month periods ended March 31, 2024 and March 31, 2023.

(7) Goodwill and Intangible Assets

The carrying amount of goodwill was $125,520 at March 31, 2024 and December 31, 2023.

Page 24

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)

Acquired intangible assets, other than goodwill, as of March 31, 2024 and December 31, 2023 were as follows:


	March 31, 2024						December 31, 2023
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Amortized intangible assets:
Core deposit intangibles	$	12,668	$	6,569	$	6,099		12,668		6,178	$	6,490
Total amortized intangible assets	$	12,668	$	6,569	$	6,099	$	12,668	$	6,178	$	6,490

Aggregate core deposit intangible amortization expense was $391 and $398, for the three-months ended March 31, 2024 and 2023, respectively.

Activity for mortgage servicing rights (MSRs) and the related valuation allowance for the three months ended March 31, 2024 were as follows:


	Three Months Ended March 31,
	2024			2023
Loan Servicing Rights:
Balance at Beginning of Period	$	3,018		$	2,689
Additions		50			436
Additions from acquisition		—			—
Disposals		—			—
Amortized to expense		(69	)		(66	)
Other charges		—			—
Change in valuation allowance		—			—
Balance at End of Period	$	2,999		$	3,059


Valuation allowance:
Balance at Beginning of Period	$	—		$	—
Additions expensed		—			—
Reductions credited to operations		—			—
Direct write-offs		—			—
Balance at End of Period	$	—		$	—

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


	MSRs		Core deposit intangibles		Total
2024	$	127	$	1,097	$	1,224
2025		169		1,312		1,481
2026		166		1,193		1,359
2027		162		1,071		1,233
2028		155		782		937
Thereafter		2,220		644		2,864
	$	2,999	$	6,099	$	9,098

(8) Short-Term and Other Borrowings

Page 25

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)

Short-term and other borrowings, which consist of federal funds purchased, securities sold under agreements to repurchase and other short-term borrowings, are summarized as follows:


	March 31, 2024					December 31, 2023
	Federal Funds Purchased		Short-term Borrowings			Federal Funds Purchased		Short-term Borrowings
Outstanding balance	$	—	$	368,500		$	—	$	338,000
Interest rate on balance		—		5.42	%		—		5.41	%


	Three Months Ended March 31,
	2024		2024			2023			2023
	Federal Funds Purchased		Short-term Borrowings			Federal Funds Purchased			Short-term Borrowings
Maximum indebtedness	$	—	$	394,000		$	30,000		$	540,000
Average balance		—		329,120			333			372,226
Average rate paid		—		5.44	%		5.96	%		4.64	%

Average balance during the period represents daily averages. Average rate paid represents interest expense divided by the related average balances.

(9) Earnings per Common Share

The Company has granted restricted stock awards with non-forfeitable rights (with respect to dividends), which are considered participating securities. Accordingly, earnings per common share is computed using the two-class method as required by ASC 260-10-45. Basic earnings per common share are computed as net income available to common shareholders divided by the weighted average number of common shares outstanding during the period, which excludes the participating securities. Diluted earnings per common share include the dilutive effect, if any, of additional potential common shares issuable under the Company’s equity incentive plan, computed using the treasury stock method. The Company had no dilutive securities for the three-months ended March 31, 2024 and 2023.

Page 26

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)


	Three Months Ended
	March 31,
	2024		2023
Basic
Net income	$	6,360	$	12,888
Less allocation of earnings and dividends to participating securities		227		452
Net income available to common shareholders—basic	$	6,133	$	12,436
Weighted average common shares outstanding		15,695,963		15,732,092
Less average participating securities		561,344		552,882
Weighted average number of shares outstanding used in the calculation of basic earnings per common share		15,134,619		15,179,210
Earnings per common share:
Basic	$	0.41	$	0.82
Diluted		0.41		0.82

(10) 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 customers’ financing needs. These are agreements to provide credit or to support the credit of others, as long as the conditions established in the contract are met, and usually have expiration dates. Commitments may expire without being used. Off-balance-sheet risk of 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 commitment. The contractual amounts of financial instruments with off-balance-sheet risk were as follows at March 31, 2024 and December 31, 2023:


	Contract Amount
	March 31, 2024				December 31, 2023
	Fixed Rate		Variable Rate		Fixed Rate		Variable Rate
Commitment to extend credit:
Lines of credit and construction loans	$	50,548	$	690,788	$	58,318	$	668,893
Overdraft protection		10		58,934		10		59,489
Letters of credit		806		223		821		273
	$	51,364	$	749,945	$	59,149	$	728,655

Commitments to make loans are generally made for a period of one year or less. Fixed rate loan commitments included in the table above had interest rates ranging from 3.50% to 8.50% at March 31, 2024 and from 3.50% to 8.50% at December 31, 2023. Maturities extend up to 30 years.

Civista is required to maintain certain reserve balances on hand in accordance with the Federal Reserve Board requirements. No reserve balance was maintained, or required to be maintained, in accordance with such requirements at March 31, 2024 and December 31, 2023.

Page 27

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)

(11) Pension Information

The Company sponsors a pension plan which is a noncontributory defined benefit retirement plan. 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 2014, the Company amended the pension plan again to provide that no additional benefits would accrue beyond April 30, 2014.

Net periodic pension cost was as follows:


	Three months ended
	March 31,
	2024			2023
Service cost	$	—		$	—
Interest cost		95			125
Expected return on plan assets		(137	)		(132	)
Other components		—			—
Net periodic pension cost	$	(42	)	$	(7	)

The Company does not expect to make any contribution to its pension plan in 2024. The Company made no contribution to its pension plan in 2023.

(12) 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 20,198 common shares available for future grants under this plan at March 31, 2024. The 2014 Incentive Plan expired in accordance with its terms on April 16, 2024, and no further awards may be granted under the 2014 Incentive Plan after April 16, 2024. On February 20, 2024, the Company's Board of Director's adopted the Civista Bancshares, Inc. 2024 Incentive Plan (the "2024 Incentive Plan"), which was subsequently approved by the shareholders of the Company at the Annual Meeting of Shareholders held on April 16, 2024. The 2024 Incentive Plan authorizes the Company to grant options, stock awards, stock units and other awards for up to 450,000 common shares of the Company.

No options were granted under the 2014 Incentive Plan during the three months ended March 31, 2024 and 2023.

Each year, the Board of Directors has awarded restricted common shares to senior officers of the Company. The restricted shares vest ratably over a three-year or five-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 awarded 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.

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

The following is a summary of the Company’s outstanding restricted common shares and changes therein for the three month period ended March 31, 2024:


	Three months ended
	March 31, 2024
	Number of Restricted Shares			Weighted Average Grant Date Fair Value
Nonvested at beginning of period		85,670		$	21.88
Granted		40,952			15.51
Vested		(34,102	)		18.34
Forfeited		(1,101	)		14.80
Nonvested at end of period		91,419		$	21.98

Page 28

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)

The following is a summary of the status of the Company’s outstanding restricted common shares as of March 31, 2024:


At March 31, 2024
Date of Award	Shares		Remaining Expense		Remaining Vesting Period (Years)
March 14, 2020		2,027		29		0.75
March 3, 2021		4,944		76		1.75
March 3, 2022		6,880		143		2.75
March 3, 2022		5,139		94		0.75
March 14, 2023		13,252		249		3.75
March 14, 2023		18,371		351		1.75
March 12, 2024		26,384		372		4.75
March 12, 2024		14,422		216		2.75
		91,419	$	1,530		3.06

The Company recorded $186 and $230 of share-based compensation expense during the three months ended March 31, 2024 and 2023, respectively. At March 31, 2024, the total compensation cost related to unvested awards not yet recognized was $1,530, which was expected to be recognized over the weighted average remaining life of the grants of 3.06 years.

(13) Fair Value Measurement

The Company uses a fair value hierarchy to measure fair value. This hierarchy describes three levels of inputs that may be used to measure fair value: 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; and Level 3: Significant unobservable inputs that reflect the Company’s own view about the assumptions that market participants would use in pricing an asset.

Debt 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’s equity securities are not actively traded in an open market. The fair value of these 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).

The fair value of the swap asset/liability: The fair value of the swap asset and liability is based on an external derivative model using data inputs based on similar transactions as of the valuation date and classified Level 2. The changes in fair value of these assets/liabilities had no impact on net income or comprehensive income.

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.

Page 29

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)

Assets and liabilities measured at fair value are summarized in the tables below.


	Fair Value Measurements at March 31, 2024 Using:
Assets:	(Level 1)		(Level 2)		(Level 3)
Assets measured at fair value on a recurring basis:
Securities available-for-sale
U.S. Treasury securities and obligations of U.S. Government agencies	$	—	$	68,042	$	—
Obligations of states and political subdivisions		—		333,451		—
Mortgage-backed securities in government sponsored entities		—		204,756		—
Total securities available-for-sale		—		606,249		—
Equity securities		—		2,027		—
Swap asset		—		14,682		—
Liabilities measured at fair value on a recurring basis:
Swap liability	$	—	$	14,682	$	—
Assets measured at fair value on a nonrecurring basis:
Mortgage servicing rights	$	—	$	—	$	2,999


	Fair Value Measurements at December 31, 2023 Using:
Assets:	(Level 1)		(Level 2)		(Level 3)
Assets measured at fair value on a recurring basis:
Securities available-for-sale
U.S. Treasury securities and obligations of U.S. Government agencies	$	—	$	67,658	$	—
Obligations of states and political subdivisions		—		338,599		—
Mortgage-backed securities in government sponsored entities		—		212,015		—
Total securities available-for-sale		—		618,272		—
Equity securities		—		2,169		—
Swap asset		—		12,481		—
Liabilities measured at fair value on a recurring basis:
Swap liability		—		12,481		—
Assets measured at fair value on a nonrecurring basis:
Mortgage servicing rights	$	—	$	—	$	3,018

The following tables present quantitative information about the Level 3 significant unobservable inputs for assets and liabilities measured at fair value on a nonrecurring basis as of March 31, 2024 and December 31, 2023.

         
        Quantitative Information about Level 3 Fair Value Measurements

        March 31, 2024

        Fair Value

        Valuation Technique

        Unobservable Input

        Range

        Weighted Average

Mortgage Servicing
    Rights

2,999

Discounted Cash Flow

Constant Prepayment
    Rate

4.4% - 11.1%

6%

         
        Discount Rate

        12%

        12%

Page 30

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)

         
        Quantitative Information about Level 3 Fair Value Measurements

        December 31, 2023

        Fair Value

        Valuation Technique

        Unobservable Input

        Range

        Weighted Average

Mortgage Servicing
    Rights

3,018

Discounted Cash Flow

Constant Prepayment
    Rate

4.6% - 11%

6%

         
        Discount Rate

        12%

        12%

Page 31

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)

The carrying amount and fair values of financial instruments not measured at fair value on a recurring or nonrecurring basis at March 31, 2024 were as follows:


March 31, 2024	Carrying Amount		Total Fair Value		Level 1		Level 2		Level 3
Financial Assets:
Cash and due from financial institutions	$	50,310	$	50,310	$	50,310	$	—	$	—
Other securities		31,360		31,360		31,360		—		—
Loans, held for sale		3,716		3,716		3,716		—		—
Loans, net of allowance		2,859,290		2,735,265		—		—		2,735,265
Bank owned life insurance		61,685		61,685		61,685		—		—
Accrued interest receivable		13,513		13,513		13,513		—		—
Financial Liabilities:
Nonmaturing deposits		2,071,809		2,071,684		2,071,684		—		—
Time deposits		908,886		907,775		—		—		907,775
Short-term FHLB advances		368,500		367,698		367,698		—		—
Long-term FHLB advances		2,211		2,098		—		—		2,098
Other borrowings		8,105		8,105		—		—		8,105
Subordinated debentures		103,984		103,287		—		—		103,287
Accrued interest payable		6,289		6,289		6,289		—		—

The carrying amount and fair values of financial instruments not measured at fair value on a recurring or nonrecurring basis at December 31, 2023 were as follows:


December 31, 2023	Carrying Amount		Total Fair Value		Level 1		Level 2		Level 3
Financial Assets:
Cash and due from financial institutions	$	60,406	$	60,406	$	60,406	$	—	$	—
Other securities		29,998		29,998		29,998		—		—
Loans, held for sale		1,725		1,725		1,725		—		—
Loans, net of allowance		2,824,568		2,679,988		—		—		2,679,988
Bank owned life insurance		61,335		61,335		61,335		—		—
Accrued interest receivable		12,819		12,819		12,819		—		—
Financial Liabilities:
Nonmaturing deposits		2,084,216		2,084,216		2,084,216		—		—
Time deposits		900,812		899,443		—		—		899,443
Short-term FHLB advances		338,000		337,267		337,267		—		—
Long-term FHLB advances		2,392		2,419		—		—		2,419
Subordinated debentures		103,943		101,563		—		—		101,563
Other borrowings		9,859		9,859		—		—		15,806
Accrued interest payable		9,525		9,525		9,525		—		—

Page 32

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)

(14) Derivatives

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

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


	March 31, 2024				December 31, 2023
	Notional Amount		Fair Value		Notional Amount		Fair Value
Included in other assets:
Interest rate swaps with loan customers in an asset position	$	32,877	$	1,213	$	44,773	$	2,114
Counterparty positions with financial institutions in an asset position		225,104		13,469		228,873		10,367
Total included in other assets			$	14,682			$	12,481
Included in accrued expenses and other liabilities:
Interest rate swaps with loan customers in a liability position	$	192,227	$	14,682	$	184,100	$	12,481
Counterparty positions with financial institutions in a liability position		—		—		—		—
Total included in accrued expenses and other liabilities			$	14,682			$	12,481
Gross notional positions with customers	$	225,104			$	228,873
Gross notional positions with financial institution counterparties	$	225,104			$	228,873

The presentation for derivatives for the current and prior periods was revised to present derivative positions net for customer positions. Fair value of swap assets and liabilities for the prior period was not impacted.

The effect of swap fair value changes on the Consolidated Statement of Operations are as follows:


	Location of	Amount of Gain or (Loss)
Derivatives	Gain or (Loss)	Recognized in
Not Designated	Recognized in	Income on Derivatives
as Hedging Instruments	Income on Derivative	March 31, 2024		March 31, 2023
Interest rate swaps related to customer loans	Other income	$	—	$	—
Total		$	—	$	—

The Company monitors and controls all derivative products with a comprehensive Board of Director approved commercial loan swap policy. All interest rate swap 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 fair value of derivatives in Other noninterest income in the Consolidated Statements of Operation.

At March 31, 2024 and December 31, 2023, the Company did not have any cash or securities pledged for collateral on its interest rate swaps with third party financial institutions. Cash pledged for collateral on interest rate swaps is classified as restricted cash on the Consolidated Balance Sheet.

Page 33

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)

(15) Qualified Affordable Housing Project Investments

The Company invests in certain qualified affordable housing projects. At March 31, 2024 and December 31, 2023, the balance of the Company's investments in qualified affordable housing projects was $14,819 and $15,122, 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 $5,229 and $5,722 at March 31, 2024 and December 31, 2023, respectively. These balances are reflected in the Accrued expenses and other liabilities line on the Consolidated Balance Sheet.

During the three months ended March 31, 2024 and 2023, the Company recognized amortization expense with respect to its investments in qualified affordable housing projects of $304 and $243, respectively, offset by tax credits and other benefits from its investments in affordable housing tax credits of $390 and $364, respectively. During the three months ended March 31, 2024, the Company did not incur any impairment losses related to its investments in qualified affordable housing projects.

(16) 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 ASC 606 and accounted for under other 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 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.

Page 34

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)

Tax Refund Processing Fees

The Company facilitated the payment of federal and state income tax refunds with a third-party payment processor. Refund Transfers (“RTs”) were fee-based products whereby a tax refund was issued to the taxpayer after the Company received the refund from the federal or state government. As part of this agreement the Company earned fee income, the majority of which was received in the first quarter of the year. The Company’s fee income revenue was recognized based on the estimated percent of business completed by each date. Beginning in 2024, the Company discontinued participation in the tax refund processing program.

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 three months ended March 31, 2024 and 2023.


	Three Months Ended
	March 31,
	2024		2023
Noninterest Income
In-scope of Topic 606:
Service charges	$	1,440	$	1,773
ATM/Interchange fees		1,383		1,353
Wealth management fees		1,276		1,193
Tax refund processing fees		—		1,900
Other		1,572		4,136
Noninterest Income (in-scope of Topic 606)		5,671		10,355
Noninterest Income (out-of-scope of Topic 606)		2,833		713
Total Noninterest Income	$	8,504	$	11,068

Page 35

Civista Bancshares, Inc.

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

Form 10-Q

(Amounts in thousands, except share data)

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Introduction

The following discussion focuses on the consolidated financial condition of the Company at March 31, 2024 compared to December 31, 2023, and the consolidated results of operations for the three- and nine-month periods ended March 31, 2024, compared to the same periods in 2023. This discussion should be read in conjunction with the Consolidated Financial Statements and footnotes included in this Form 10-Q.

Forward-Looking Statements

This Quarterly Report on Form 10-Q may contain “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), relating to such matters as the Company’s 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:

•

current and future economic and financial market conditions, including the effects of inflation, recession, unemployment, changes in interest rates, fiscal and monetary policy, an increasing federal government budget deficit, the failure of the federal government to raise the federal debt ceiling and/or possible future U.S. government shutdowns over budget disagreements, slowing gross domestic product, tariffs, a U.S. withdrawal from or renegotiation of trade agreements, trade wars, and other factors beyond our control, any of which may result in adverse impacts on our deposit levels and composition, the quality of investment securities available for purchase, demand for loans, the ability of our borrowers to repay their loans, and the value of the collateral securing loans made by Civista;

•

recent and future bank failures may reduce customer confidence, affect sources of funding and liquidity, increase regulatory requirements and costs, adversely affect financial markets and/or have a negative reputational impact on the banking industry as a whole, and of which could adversely affect the Company’s business, financial condition and results of operations;

•

adverse changes in the real estate market, which could cause increases in delinquencies and non-performing assets, including additional loan charge-offs, and could depress our income, earnings and capital;

•

changes in interest rates resulting from national and local economic conditions and the policies of regulatory authorities, including monetary policies of the Board of Governors of the Federal Reserve System, which may adversely affect interest rates, interest margins, loan demand and interest rate sensitivity;

•

operational risks, reputational risks, legal and compliance risks, and other risks related to potential fraud or theft by employees or outsiders, unauthorized transactions by employees or operational errors, or failures, disruptions or breaches in security of our systems, including those resulting from computer viruses or cyber-attacks;

•

our ability to secure sensitive or confidential client information against unauthorized disclosure or access through computer systems and telecommunication networks, including those of our third-party vendors and other service providers, which may prove inadequate;

•

a failure in or breach of our operational or security systems or infrastructure, or those of our third-party vendors and other service providers, resulting in failures or disruptions in customer account management, general ledger, deposit, loan, or other systems, including as a result of cyber-attacks;

•

competitive pressures and factors among financial services organizations could increase significantly, including product and pricing pressures, changes to third-party relationships and our ability to recruit and retain qualified management and banking personnel;

•

unexpected losses of services of our key management personnel, or the inability to recruit and retain qualified personnel in the future;

•

risks inherent in pursuing strategic growth initiatives, including integration and other risks involved in past, pending and possible future acquisitions;

•

uncertainty regarding the nature, timing, cost and effect of legislative or regulatory changes in the banking industry or otherwise affecting the Company, including major reform of the regulatory oversight structure of the financial services industry and changes in laws and regulations concerning taxes, FDIC insurance premium levels, pensions, bankruptcy, consumer protection, rent regulation and housing, financial accounting and reporting, environmental protection, insurance, bank products and services, bank and bank holding company capital and liquidity standards, fiduciary standards, securities and other aspects of the financial services industry;

Page 36

Civista Bancshares, Inc.

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

Form 10-Q

(Amounts in thousands, except share data)

•

changes in federal, state and/or local tax laws;

•

the effect of changes in accounting policies and practices, as may be adopted by the Financial Accounting Standards Board (FASB), the SEC, the Public Company Accounting Oversight Board and other regulatory agencies, may adversely affect our reported financial condition or results of operations;

•

litigation and regulatory compliance exposure, including the costs and effects of any adverse developments in legal proceedings or other claims and the costs and effects of unfavorable resolution of regulatory and other governmental examinations or inquiries;

•

continued availability of earnings and dividends from Civista and excess capital sufficient for us to service our debt and pay dividends to our shareholders in compliance with applicable legal and regulatory requirements;

•

our ability to raise additional capital in the future if and when needed and/or on terms acceptable to us;

•

our ability to conform and comply with regulatory requirements and increasing scrutiny and evolving expectations from customers, regulatory authorities, shareholders, investors and other stakeholders with regard to our environmental, social and governance (ESG) policies and practices, which could affect our reputation and business and operating results;

•

our ability to anticipate and successfully keep pace with technological changes affecting the financial services industry; and

•

other risks identified from time-to-time in the Company’s other public documents on file with the SEC, including those risks identified in “Item 1A. Risk Factors” of Part I of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023

The Company does not undertake, and specifically disclaims, any obligation to publicly release the result of any revisions that may be made to any forward-looking statements to reflect occurrence of anticipated or unanticipated events or circumstances after the date of such statements, except as required by law.

Financial Condition

Total assets of the Company at March 31, 2024 were $3,880,258 compared to $3,861,418 at December 31, 2023, an increase of $18,840, or 0.5%. The increase in total assets was due to increases in other securities and bank stocks of $1,220, loans held for sale of $1,991, loans of $34,722 and swap assets of $2,201. Increases in assets were partially offset by decreases in cash and cash equivalents of $9,871, accompanied by decreases in securities available for sale of $12,023 and office premises and equipment of $2,489. Total liabilities at March 31, 2024 were $3,510,599 compared to $3,489,416 at December 31, 2023, an increase of $21,183, or 0.6%. The increase in total liabilities was primarily attributable to an increase short term FHLB borrowings of $30,500 and swap liabilities of $2,201 partially offset by decreases in deposits of $4,333 and other borrowings of $1,754.

Page 37

Civista Bancshares, Inc.

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

Form 10-Q

(Amounts in thousands, except share data)

Loans outstanding as of March 31, 2024 and December 31, 2023 were as follows:


	March 31, 2024			December 31, 2023			$ Change			% Change
Commercial & Agriculture	$	302,663		$	304,793		$	(2,130	)		-0.7	%
Commercial Real Estate—Owner Occupied		367,419			377,321			(9,902	)		-2.6	%
Commercial Real Estate—Non-Owner Occupied		1,185,688			1,161,894			23,794			2.0	%
Residential Real Estate		676,802			659,841			16,961			2.6	%
Real Estate Construction		267,737			260,409			7,328			2.8	%
Farm Real Estate		24,908			24,771			137			0.6	%
Lease Financing Receivables		56,680			36,797			19,883			54.0	%
Consumer and Other		16,242			18,056			(1,814	)		-10.0	%
Total loans		2,898,139			2,843,882			54,257			1.9	%
Allowance for credit losses		(38,849	)		(37,160	)		(1,689	)		4.5	%
Net loans	$	2,859,290		$	2,806,722		$	52,568			1.9	%

Included in Commercial & Agriculture loans above were $289 of PPP loans as of March 31, 2024 and $326 of PPP loans as of December 31, 2023.

Loans held for sale increased $1,991, or 115.4%, since December 31, 2023. The increase was due to increases in both the number of loans and average loan balances held for sale. At March 31, 2024, 18 loans totaling $3,716 were held for sale as compared to 9 loans totaling $1,725 at December 31, 2023.

Net loans have increased $34,722, or 1.2%, since December 31, 2023. The increase at March 31, 2024 can be attributed to increases in many categories, primarily Commercial Real Estate Non-Owner Occupied, Residential Real Estate, Construction, and Lease Financing Receivables offset by decreases in Commercial Real Estate – Owner Occupied, Commercial & Agriculture and Consumer and Other. At March 31, 2024, the net loan to deposit ratio was 95.9% compared to 94.6% at December 31, 2023. The increase in the net loan to deposit ratio is primarily the result of an increase in loans.

During the first three months of 2024, provisions made to the allowances for credit losses and off-balance sheet credit exposures totaled $1,992, compared to a provision of $821 during the same period in 2023. The increase in the reserves was principally related to loan growth during the quarter and downgrading of three credits. As time progresses the results of economic conditions will require CECL model assumption inputs to change and further refinements to the estimation process may also be identified.

Net charge-offs for the first three months of 2024 totaled $353, compared to net charge-offs of $128 in the first three months of 2023. For the first three months of 2024, the Company charged off a total of 16 loans. Four Commercial and Agriculture loan totaling $212, Four Lease Financing Receivables totaling $226, two Residential Real Estate loan totaling $13, one Commercial Real Estate Non-Owner Occupied loan for $174, and five Consumer and Other loans totaling $26 were charged off in the first three months of the year. In addition, during the first three months of 2024, the Company had recoveries on previously charged-off Commercial & Agriculture loans of $152, Commercial Real Estate – Non-Owner Occupied loans of $5, Residential Real Estate loans of $119, Real Estate Construction loans of $4, Commercial Real Estate – Owner Occupied loans of $3 and Consumer and Other loans of $14. For each loan category, as well as in total, the percentage of net charge-offs to loans was less than one percent. Each of these factors was considered by management as part of the examination of both the level and mix of the allowance by loan type as well as the overall level of the allowance.

Management specifically evaluates loans that do not share common risk characteristics for estimates of loss. To evaluate the adequacy of the allowance for credit losses to cover probable losses in the loan portfolio, management considers specific reserve allocations for identified portfolio loans, reserves for delinquencies and historical reserve allocations. Loss migration rates are calculated over a three-year period for all portfolio segments. Management also considers certain economic factors for trends that management uses to account for the qualitative and environmental changes in risk, which affects the level of the reserve.

Page 38

Civista Bancshares, Inc.

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

Form 10-Q

(Amounts in thousands, except share data)

Management analyzes each individually evaluated Commercial & Agriculture and Commercial Real Estate loan relationship with a balance of $350 or larger, on an individual basis and designates a loan as individually evaluated 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 are excluded from consideration as impaired. Loans are generally moved to nonaccrual status when 90 days or more past due. Loans, or portions thereof, are charged-off when deemed uncollectible. The allowance for credit losses as a percent of total loans was 1.34% at March 31, 2024 and 1.30% at December 31, 2023.

The available-for-sale security portfolio decreased by $12,023, from $618,272 at December 31, 2023 to $606,249 at March 31, 2024. Management continually evaluates our securities portfolio in response to established asset/liability management objectives, changing market conditions that could affect profitability and the level of interest rate risk to which the Company is exposed. These evaluations may cause the Company to change the level of funds it deploys into investment securities and change the composition of its investment securities portfolio. As of March 31, 2024, the Company was in compliance with all pledging requirements.

Premises and equipment, net, decreased $2,489 from December 31, 2023 to March 31, 2024. The decrease is the result of depreciation of $2,114 and disposals of $498, partially offset by new purchases $123.

Bank owned life insurance (BOLI) increased $350 from December 31, 2023 to March 31, 2024. The increase is the result of increases in the cash surrender value of the underlying insurance policies.

Swap assets increased $2,201 from December 31, 2023 to March 31, 2024. The increase is primarily the result of an increase in market value.

Total deposits as of March 31, 2024 and December 31, 2023 were as follows:


	March 31, 2024		December 31, 2023		$ Change			% Change
Noninterest-bearing demand	$	707,993	$	771,699	$	(63,706	)		-8.3	%
Interest-bearing demand		434,692		449,449		(14,757	)		-3.3	%
Savings and money market		929,126		863,067		66,059			7.7	%
Time deposits		908,884		900,813		8,071			0.9	%
Total Deposits	$	2,980,695	$	2,985,028	$	(4,333	)		-0.1	%

The Company had approximately $446,955 and $499,429 of uninsured deposits as of March 31, 2024 and December 31, 2023, respectively. Uninsured deposit amounts are estimated based on the portions of customer account balances that exceed the FDIC insurance limit of $250,000.

Total deposits at March 31, 2024 increased $4,333 from year-end 2023. Noninterest-bearing deposits decreased $63,706 from year-end 2023, while interest-bearing deposits, including savings and time deposits, increased $59,373 from December 31, 2023. The decrease in noninterest-bearing deposits was primarily due to a $51,700 decrease in noninterest-bearing business accounts and a $19,500 decrease in noninterest-bearing accounts related to the former tax refund processing program. The decrease in interest-bearing demand deposits was primarily due to a decrease of $11,600 in interest-bearing personal accounts, a $7,500 decrease in Jumbo NOW accounts, and a $5,200 decrease in interest-bearing business accounts, which were offset by a $13,600 increase in interest-bearing pubic fund accounts. The $66,100 increase in savings and money market accounts was primarily due to a $65,900 increase in brokered money market accounts and a $9,500 increase in business money market accounts, which increases were partially offset by a $6,400 decrease in statement savings and a $3,100 decrease in business savings accounts. Jumbo time certificates and retail time certificates increased $16,700 and $14,000, respectively; partially offset by a $21,800 decrease in brokered time deposits from year-end 2023. The year-to-date average balance of total deposits increased $146,113, compared to the average balance for the same period in 2023, mainly due to a $324,199 increase in the average balance of time deposits.

Short-term FHLB advances increased $30,500 from December 31, 2023 to March 31, 2024. The increase was due to funding needs to support loan growth.

Swap liabilities increased $2,201 from December 31, 2023 to March 31, 2024. The increase was the result of an increase in fair value of swap liabilities.

Page 39

Civista Bancshares, Inc.

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

Form 10-Q

(Amounts in thousands, except share data)

Accrued expenses and other liabilities decreased $6,574 from December 31, 2023 to March 31, 2024. The decrease is primarily the decrease in accrued interest for Brokered CD’s by $3,620 and decrease in accrued commissions & incentives of $1,846.

Shareholders’ equity at March 31, 2024 was $369,659, or 9.5% of total assets, compared to $372,002, or 9.6% of total assets, at December 31, 2023. The decrease was the result of a decrease in the fair value of securities available-for-sale, net of tax, of $6,227. Net income of $6,360, partially offset by dividends on common shares of $2,510 and the purchase of treasury shares of $152

Total outstanding common shares at March 31, 2024 were 15,727,013, which increased from 15,695,424 common shares outstanding at December 31, 2023. Common shares outstanding increased due to the grant of 40,952 restricted common shares to certain officers under the Company’s 2014 Incentive Plan, offset by 8,262 common shares surrendered by officers to the Company to pay taxes upon vesting of restricted shares and 1,101 restricted common shares forfeited.

Results of Operations

Three Months Ended March 31, 2024 and 2023

The Company had net income of $6,360 for the three months ended March 31, 2024, a decrease of $6,528 from net income of $12,888 for the same three months of 2023. Basic earnings per common share were $0.41 for the quarter ended March 31, 2024, compared to $0.82 for the same period in 2023. Diluted earnings per common share were $0.41 for the quarter ended March 31, 2024, compared to $0.82 for the same period in 2023. The primary reasons for the changes in net income are explained below.

Net interest income for the three months ended March 31, 2024 was $28,372, a decrease of $4,229 from $32,601 for the same three months of 2023. This decrease of an increase of $12,818 in interest expense, partially offset by an increase of $7,203 in total interest income. Interest-earning assets averaged $3,552,552 during the three months ended March 31, 2024, an increase of $239,267 from $3,313,285 for the same period of 2023. The Company’s average interest-bearing liabilities increased from $2,308,975 during the three months ended March 31, 2023 to $2,720,586 during the three months ended March 31, 2024. The Company’s fully tax equivalent net interest margin for the three months ended March 31, 2024 and 2023 was 3.22% and 3.99%, respectively.

Total interest and dividend income was $50,128 for the three months ended March 31, 2024, an increase of $7,203 from $42,925 of total interest and dividend income for the same period in 2023. The increase in interest and dividend income is attributable to an $6,701 increase in interest and fees on loans, a $100 increase in interest income on taxable securities and a $113 increase in tax-exempt securities. The $8,086 increase in interest and fees on loans is attributable to average balances as well as loan yield. The average balance of loans increased by $230,130, or 8.0%, to $2,880,031 for the three months ended March 31, 2024 as compared to $2,649,901 for the same period in 2023. The loan yield increased to 6.20% for the three months ended March 31, 2024, from 5.78% for the same period in 2023.

Page 40

Civista Bancshares, Inc.

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

Form 10-Q

(Amounts in thousands, except share data)

Interest on taxable securities increased $100 to $2,934 for the three months ended March 31, 2024, compared to $2,834 for the same period in 2023. The average balance of taxable securities decreased $24,036 to $350,815 for the three months ended March 31, 2024, as compared to $374,851 for the same period in 2023. The yield on taxable securities increased 23 basis points to 3.0% for 2024, compared to 2.77% for 2023. Interest on tax-exempt securities increased $113 to $2,375 for the three months ended March 31, 2024, compared to $2,262 for the same period in 2023. The average balance of tax-exempt securities increased $14,252 to $295,388 for the three months ended March 31, 2024, as compared to $281,136 for the same period in 2023. The yield on tax-exempt securities increased 4 basis points to 3.85% for 2024, compared to 3.81% for 2023.

Interest expense increased $11,432, or 110.7%, to $21,756 for the three months ended March 31, 2024, compared with $10,324 for the same period in 2023. The change in interest expense can be attributed to an increase in the average balance of interest-bearing liabilities, accompanied by increases in rates. For the three months ended March 31, 2024, the average balance of interest-bearing liabilities increased $411,611 to $2,720,586, as compared to $2,308,975 for the same period in 2023. Interest incurred on deposits increased by 12,755 to $15,987 for the three months ended March 31, 2024, compared to $3,232 for the same period in 2023. The average balance of interest-bearing deposits increased by $593,197 to $2,272,702 for the three months ended March 31, 2024, as compared to the same period in 2023, accompanied by an increase in the rate paid on time deposits from 2.82% in 2023 to 5.33% in 2024. Interest expense incurred on short-term FHLB advances increased as a result of higher average rates on short-term FHLB advances of 5.51% for the three months ended March 31, 2024, as compared to 4.64% to the same period in 2023. Interest expense incurred on subordinated debentures increased $72, to $1,241 for the three months ended March 31, 2024, compared to $1,169 for the same period in 2023. The rate paid on subordinated debentures increased from 4.57% in 2023 to 4.79% in 2024.

Page 41

Civista Bancshares, Inc.

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

Form 10-Q

(Amounts in thousands, except share data)

The following table presents the condensed average balance sheets for the three months ended March 31, 2024 and 2023. The daily average loan amounts outstanding are net of unearned income and include loans held for sale and nonaccrual loans. The average balance of securities is computed using the carrying value of securities. Rates are annualized and taxable equivalent yields are computed using a 21% tax rate for tax-exempt interest income. The average yield has been computed using the historical amortized cost average balance for available-for-sale securities.


	Three Months Ended March 31,
	2024								2023
Assets:	Average balance			Interest		Yield/ rate*			Average balance			Interest		Yield/ rate*
Interest-earning assets:
Loans, including fees**	$	2,880,031		$	44,485		6.20	%	$	2,649,901		$	37,784		5.78	%
Taxable securities		350,815			2,934		3.00	%		374,851			2,834		2.77	%
Tax-exempt securities		295,388			2,375		3.85	%		281,136			2,262		3.81	%
Interest-bearing deposits in other banks		26,318			334		5.09	%		7,397			45		2.47	%
Total interest-earning assets	$	3,552,552		$	50,128		5.64	%	$	3,313,285		$	42,925		5.23	%
Noninterest-earning assets:
Cash and due from financial institutions		29,599								54,136
Premises and equipment, net		54,980								62,776
Accrued interest receivable		12,724								10,655
Intangible assets		134,872								135,554
Other assets		61,456								53,630
Bank owned life insurance		58,472								61,292
Less allowance for loan losses		(37,356	)							(30,454	)
Total Assets	$	3,867,299							$	3,660,874
Liabilities and Shareholders Equity:
Interest-bearing liabilities:
Demand and savings	$	1,383,225		$	3,986		1.16	%	$	1,384,070		$	1,084		0.33	%
Time		902,442			12,001		5.33	%		308,400			2,148		2.82	%
Short-term FHLB advances		328,687			4,515		5.51	%		372,226			4,258		4.64	%
Long-term FHLB advances		2,275			13		2.29	%		3,442			19		2.24	%
Other borrowings		—			—		0.00	%		116,200			1,643		5.73	%
Subordinated debentures		103,957			1,241		4.79	%		103,814			1,169		4.57	%
Repurchase Agreements		—			—		0.00	%		20,823			3		0.06	%
Total interest-bearing liabilities	$	2,720,586		$	21,756		3.21	%	$	2,308,975		$	10,324		1.81	%
Noninterest-bearing deposits		712,483								961,886
Other liabilities		63,778								48,854
Shareholders’ Equity		370,452								341,159
Total Liabilities and Shareholders’ Equity	$	3,867,299							$	3,660,874
Net interest income and interest rate spread				$	28,372		2.43	%				$	32,601		3.42	%
Net interest margin							3.22	%							3.99	%

*—Average yields are presented on a tax equivalent basis. The tax equivalent effect associated with loans and investments, included in the yields above, was $632 and $601 for the periods ended March 31, 2024 and 2023, respectively.

**—Average balance includes nonaccrual loans.

Page 42

Civista Bancshares, Inc.

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

Form 10-Q

(Amounts in thousands, except share data)

Net interest income may also be analyzed by comparing the volume and rate components of interest income and interest expense. The following table provides an analysis of the changes in interest income and expense between the three months ended March 31, 2024 and 2023.


	Increase (decrease) due to:
	Volume (1)			Rate (1)			Net
	(Dollars in thousands)
Interest income:
Loans, including fees	$	3,421		$	3,280		$	6,701
Taxable securities		(156	)		256			100
Tax-exempt securities		62			51			113
Interest-bearing deposits in other banks		203			86			289
Total interest income	$	3,530		$	3,673		$	7,203
Interest expense:
Demand and savings	$	(1	)	$	2,903		$	2,902
Time		6,693			3,160			9,853
Short-term FHLB advances		(535	)		792			257
Long-term FHLB advances		(7	)		1			(6	)
Other borrowings		(1,638	)		—			(1,638	)
Federal funds purchased		(5	)		—			(5	)
Subordinated debentures		2			70			72
Repurchase agreements		(3	)		—			(3	)
Total interest expense	$	4,506		$	6,926		$	11,432
Net interest income	$	(976	)	$	(3,253	)	$	(4,229	)

(1)

The change in interest income and interest expense due to changes in both volume and rate, which cannot be segregated, has been allocated proportionately to the change due to volume and the change due to rate.

The Company provides for loan losses through regular provisions to the allowance for loan losses. During the first quarter of 2024 we recorded a provision for credit losses of $2,042, an increase of $1,422, from $620 during the three months ended March 31, 2023. The increase in the reserves was related to a downgrade in three credits as well as loan growth during the quarter .

Noninterest income for the three-month periods ended March 31, 2024 and 2023 was as follows:


	Three months ended March 31,
	2024			2023			$ Change			% Change
Service charges	$	1,440		$	1,773		$	(333	)		-18.8	%
Net gain on sale of securities		—			—			—			0.0	%
Net gain (loss) on equity securities		(141	)		(68	)		(73	)		107.4	%
Net gain on sale of loans and leases		863			631			232			36.8	%
ATM/Interchange fees		1,383			1,353			30			2.2	%
Wealth management fees		1,276			1,193			83			7.0	%
Lease revenue and residual income		1,674			2,046			(372	)		0.0	%
Bank owned life insurance		350			253			97			38.3	%
Tax refund processing fees		—			1,900			(1,900	)		-100.0	%
Swap fees		57			61			(4	)		-6.6	%
Other		1,602			1,926			(324	)		-16.8	%
Total noninterest income	$	8,504		$	11,068		$	(2,564	)		-23.2	%

Noninterest income for the three months ended March 31, 2024 was $8,504, a decrease of $2,564, or 23.2%, from $11,068 for the same period of 2023. The decrease was primarily due to the elimination of $1,900 in tax refund processing income, as we have exited this line of business. Service charges decreased due to the decrease in overdraft fees of $375. Other income decreased as result of a $1,500 nonrecurring fee which was collected in 2023 associated with the renewal of the Civista's contract with MasterCard. Net gain (loss) on equity securities decreased as a result of market value decreases. Net gain on sale of loans increased primarily as a result of an increase in average loan balance.

Page 43

Civista Bancshares, Inc.

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

Form 10-Q

(Amounts in thousands, except share data)

During the three-months ended March 31, 2024, 53 loans were sold, totaling $11,438. During the three-months ended March 31, 2023, 63 loans were sold, totaling $9,739.

Noninterest expense for the three-month periods ended March 31, 2024 and 2023 was as follows:


	Three months ended March 31,
	2024		2023		$ Change			% Change
Compensation expense	$	15,457	$	15,105	$	352			2.3	%
Net occupancy expense		1,368		1,359		9			0.7	%
Equipment expense		2,535		2,761		(226	)		-8.2	%
Contracted data processing		545		520		25			4.8	%
FDIC assessment		484		248		236			95.2	%
State franchise tax		485		526		(41	)		-7.8	%
Professional services		1,149		1,555		(406	)		-26.1	%
Amortization of intangible assets		391		398		(7	)		-1.8	%
ATM/Interchange expense		625		580		45			7.8	%
Marketing		479		505		(26	)		-5.1	%
Software maintenance expense		1,189		878		311			35.4	%
Other		2,982		2,997		(15	)		-0.5	%
Total noninterest expense	$	27,689	$	27,432	$	257			0.9	%

Noninterest expense for the three months ended March 31, 2024 was $27,689, an increase of $257, or 0.9%, from $27,432 reported for the same period of 2023. The primary reasons for the increase were increases in compensation expense, net occupancy, contracted data processing expense, FDIC assessment, ATM/Interchange expense, and software maintenance expense, offset by decreases in equipment expense, state franchise tax, professional services, amortization expense, marketing, and other operating expenses. The increase in compensation expense was due to increased salaries, payroll taxes and employee insurance. The average full time equivalent (FTE) employees were 539 at March 31, 2024, an increase of seven FTEs over the same period of 2023. Equipment expenses decreased due to a decrease in equipment depreciation. The quarter-over-quarter increase in FDIC assessments was attributable to higher average consolidated assets and average tangible equity. The decrease in state franchise tax expense was attributable to lower estimated tax payments during the first quarter of 2024 as compared to the same period in 2023. Professional services decreased $400 due to advisory fees for the renegotiation of Civista's MasterCard contract which was paid in 2023. The increase in software maintenance expense is primarily due of our digital banking platform.

Income tax expense for the three months ended March 31, 2024 totaled $835, down $1,694 compared to the same period in 2023. The effective tax rates for the three-month periods ended March 31, 2024 and 2023 were 11.8% and 16.4%, respectively. The difference between the statutory federal income tax rate and the Company’s effective tax rate is the permanent tax differences, primarily consisting of tax-exempt interest income from municipal investments and loans, low income housing tax credits, tax-deductible captive insurance premiums and bank owned life insurance income.

Page 44

Civista Bancshares, Inc.

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

Form 10-Q

(Amounts in thousands, except share data)

Capital Resources

Shareholders’ equity totaled $369,659 at March 31, 2024, compared to $372,002 at December 31, 2023. Shareholders’ equity decreased during the first three months of 2024 as a result of a decrease in the fair value of securities available-for-sale, net of tax, of $12,023, dividends on common shares of $2,510, partially offset by net income of $6,528.

All of the Company’s capital ratios exceeded the regulatory minimum guidelines as of March 31, 2024 and December 31, 2023 as identified in the following table:


	Total Risk Based Capital			Tier I Risk Based Capital			CET1 Risk Based Capital			Leverage Ratio
Company Ratios—March 31, 2024		14.5	%		10.8	%		9.8	%		8.6	%
Company Ratios—December 31, 2023		14.4	%		10.7	%		9.7	%		8.8	%
For Capital Adequacy Purposes		8.0	%		6.0	%		4.5	%		4.0	%
To Be Well Capitalized Under Prompt
Corrective Action Provisions		10.0	%		8.0	%		6.5	%		5.0	%

Liquidity

The Company maintains a conservative liquidity position. All securities, with the exception of equity securities, are classified as available-for-sale. Securities, with maturities of one year or less, totaled $5,246, or 0.87% of the total security portfolio at March 31, 2024. The available-for-sale portfolio helps to provide the Company with the ability to meet its funding needs. The Condensed Consolidated Statements of Cash Flows (Unaudited) contained in the Consolidated Financial Statements detail the Company’s cash flows from operating activities resulting from net earnings.

As reported in the Condensed Consolidated Statements of Cash Flows (Unaudited), our cash flows are classified for financial reporting purposes as operating, investing or financing cash flows. Net cash provided by operating activities was $254 and $19,794 for the three months ended March 31, 2024 and 2023, respectively. The primary additions to cash from operating activities are from proceeds from the sale of loans. The primary use of cash from operating activities is from loans originated for sale. Net cash used by investing activities was $33,674 and $38,635 for the three months ended March 31, 2024 and 2023, respectively, principally reflecting our loan and investment security activities. Cash provided by and used for deposits and purchase of treasury shares comprised most of our financing activities, which resulted in net cash provided by of $23,324 and $28,203 for the three months ended March 31, 2024 and 2023, respectively.

Future loan demand of Civista may 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. Through its correspondent banks, Civista maintains federal funds borrowing lines totaling $50,000. As of March 31, 2024, Civista had total credit availability with the FHLB of $840,582 with standby letters of credit totaling $24,400 and a remaining borrowing capacity of approximately $445,471. In addition, CBI maintains a credit line with a third party lender totaling $15,000. No borrowings were outstanding by CBI under this credit line as of March 31, 2024.

Page 45

Civista Bancshares, Inc.

Quantitative and Qualitative Disclosures About Market Risk

Form 10-Q

(Amounts in thousands, except share data)

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

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

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

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

The Federal Reserve Board, together with the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation, issue policy statements and guidance on sound practices for managing interest-rate risk, which form the basis for ongoing evaluation of the adequacy of interest-rate risk management at supervised institutions. The guidance also outlines fundamental elements of sound management and discusses the importance of these elements in the context of managing interest-rate risk. 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.

Page 46

Civista Bancshares, Inc.

Quantitative and Qualitative Disclosures About Market Risk

Form 10-Q

(Amounts in thousands, except share data)

Several ways an institution can manage interest-rate risk include selling existing assets or repaying certain liabilities; matching repricing periods for new assets and liabilities, for example, by shortening terms of new loans or securities; and hedging existing assets, liabilities, or anticipated transactions. An institution might also invest in more complex financial instruments intended to hedge or otherwise change interest-rate risk. Interest rate swaps, futures contracts, options on futures, and other such derivative financial instruments often are used for this purpose. Because these instruments are sensitive to interest rate changes, they require management expertise to be effective. The Company has not purchased derivative financial instruments to hedge interest rate risk in the past and does not currently intend to purchase such instruments in the near future. 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. Prepayments of assets carrying higher rates reduce the Company’s interest income and overall asset yields. A large portion of an institution’s liabilities may be short-term or due on demand, while most of its assets may be invested in long-term loans or securities. Accordingly, the Company seeks to have in place sources of cash to meet short-term demands. These funds can be obtained by increasing deposits, borrowing, or selling assets. FHLB advances and wholesale borrowings may also 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 March 31, 2024, based on certain prepayment and account decay assumptions that management believes are reasonable. The table shows the changes in the Company’s net portfolio value (in amount and percent) that would result from hypothetical interest rate increases of 200 basis points and 100 basis points and interest rate decreases of 100 basis points and 200 basis points at March 31, 2024 and December 31, 2023.


Net Portfolio Value
	March 31, 2024								December 31, 2023
Change in Rates	Dollar Amount		Dollar Change			Percent Change			Dollar Amount		Dollar Change			Percent Change
+200bp		565,611		10,377			2	%		603,656		(4,077	)		(1	)%
+100bp		563,089		7,855			1	%		608,399		666			0	%
Base		555,234		—			—			607,733		—			—
-100bp		545,886		(9,348	)		(2	)%		605,047		(2,686	)		(0	)%
-200bp		524,525		(30,709	)		(6	)%		591,305		(16,428	)		(3	)%

The change in net portfolio value from December 31, 2023 to March 31, 2024, can be attributed to a couple of factors. The yield remains inverted and is lower than at 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 other borrowings has increased and non-maturing deposits have decreased. The volume and mix shifts from the end of the year contributed to a decrease 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 liabilities than assets. Accordingly, we see an increase 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.

Page 47

Civista Bancshares, Inc.

Controls and Procedures

Form 10-Q

(Amounts in thousands, except share data)

ITEM 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive and our principal financial officers, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures as of March 31, 2024, were effective.

Changes in Internal Control over Financial Reporting

There have not been any changes in the Company’s internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred during the Company’s most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Page 48

Civista Bancshares, Inc.

Other Information

Form 10-Q

Part II—Other Information

Item 1. Legal Proceedings

In the ordinary course of their respective businesses, CBI or Civista or their respective properties may be named or otherwise subject as a plaintiff, defendant or other party to various pending and threatened legal proceedings and various actual and potential claims. In view of the inherent difficulty of predicting the outcome of such matters, the Company cannot state what the eventual outcome of any such matters will be. However, based on current knowledge and after consultation with legal counsel, management believes these proceedings will not have a material adverse effect on the consolidated financial position, results of operations or liquidity of CBI or Civista.

Item 1A. Risk Factors

There were no material changes during the current period to the risk factors disclosed in "Item 1A. Risk Factors" of Part 1 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities

The following table details repurchases by the Company and purchases by "affiliated purchasers" as defined in Rule 10b-18(a)(3) under the Exchange Act of the Company's common shares during the first quarter of 2024.


Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs
January 1, 2024 - January 31, 2024		8,262	$	18.38		-	$	12,003,223
February 1, 2024 - February 29, 2024		-		-		-		-
March 1, 2024 - March 31, 2024		-		-		-		-
Total		8,262	$	-		-	$	12,003,223

On May 8, 2023, the Company announced a new common share repurchase program pursuant to which the Company was authorized to repurchase a maximum aggregate value of $13,500,000 of its outstanding common shares through May 2, 2024. As of March 31, 2024, no common shares had been repurchased under this repurchase program.

Item 3. Defaults Upon Senior Securities

None

Item 4. Mine Safety Disclosures

Not applicable

Item 5. Other Information

Rule 10b5-1 Trading Plans

During the quarter ended March 31, 2024, none of our directors or officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted or terminated any “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

Page 49

Civista Bancshares, Inc.

Other Information

Form 10-Q

Item 6. Exhibits


Exhibit	Description	Location

2.1	Agreement and Plan of Merger, dated January 10, 2022 by and between Civista Bancshares, Inc. and Comunibanc Corp.	Filed as Exhibit 2.1 to Civista Bancshares, Inc.’s Current Report on Form 8-K dated and filed on January 10, 2022 and incorporated herein by reference. (File No. 001-36192)
2.2	Stock Purchase Agreement, dated as of September 29, 2022, by and among Civista Bancshares, Inc., Civista Bank, Vision Financial Group, Inc. and Frederick Summers	Filed as Exhibit 2.1 to Civista Bancshares, Inc.’s Current Report on Form 8-K filed on September 30, 2022 and incorporated herein by reference. (File No. 001-36192)

3.1	Second Amended and Restated Articles of Incorporation of Civista Bancshares, Inc., as filed with the Ohio Secretary of State on November 15, 2018.	Filed as Exhibit 3.1 to Civista Bancshares, Inc.’s Current Report on Form 8-K, filed on November 16, 2018 and incorporated herein by reference. (File No. 001-36192)

3.2	Amended and Restated Code of Regulations of Civista Bancshares, Inc. (adopted April 15, 2008)	Filed as Exhibit 3.2 to Civista Bancshares, Inc.’s Quarterly Report on Form 10-Q for the period ended September 30, 2017, filed on November 8, 2017 and incorporated herein by reference. (File No. 001-36192)

31.1	Rule 13a-14(a)/15-d-14(a) Certification of Chief Executive Officer.	Included herewith

31.2	Rule 13a-14(a)/15-d-14(a) Certification of Principal Accounting Officer.	Included herewith

32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	Included herewith

32.2	Certification of Principal Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	Included herewith

101.INS	Inline XBRL Instance Document-the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document	Included herewith

101.SCH	Inline XBRL Taxonomy Extension Schema with Embedded Linkbase Documents	Included herewith

104	Cover page formatted in Inline Extensible Business Reporting Language.	Included herewith

Page 50

Civista Bancshares, Inc.

Signatures

Form 10-Q

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Civista Bancshares, Inc.


/s/ Dennis G. Shaffer		May 9, 2024
Dennis G. Shaffer		Date
Chief Executive Officer and President



/s/ Todd A. Michel		May 9, 2024
Todd A. Michel		Date
Senior Vice President, Controller

Page 51

EX-31.1 2 civb-ex31_1.htm EX-31.1 EX-31.1

Section 302 Certification

For Principal Executive Officer

Exhibit 31.1

I, Dennis G. Shaffer, certify that:

I have reviewed this quarterly report on Form 10-Q of Civista Bancshares, Inc.;

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Signature and Title:		/s/ Dennis G. Shaffer, Chief Executive Officer, President		Date:		May 9, 2024

EX-31.2 3 civb-ex31_2.htm EX-31.2 EX-31.2

Section 302 Certification

For Principal Accounting Officer

Exhibit 31.2

I, Todd A. Michel, certify that:

I have reviewed this quarterly report on Form 10-Q of Civista Bancshares, Inc.;

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Signature and Title:		/s/ Todd A. Michel, Senior Vice President, Controller		Date:		May 9, 2024

EX-32.1 4 civb-ex32_1.htm EX-32.1 EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Civista Bancshares, Inc. (the “Company”) on Form 10-Q for the period ending March 31, 2024 as filed with the Securities and Exchange Commission on the date of this certification (the “Report”), I, Dennis G. Shaffer, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

    /s/ Dennis G. Shaffer

   

    Dennis G. Shaffer

   

    Chief Executive Officer and President

   

    May 9, 2024

   

EX-32.2 5 civb-ex32_2.htm EX-32.2 EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Civista Bancshares, Inc. (the “Company”) on Form 10-Q for the period ending March 31, 2024 as filed with the Securities and Exchange Commission on the date of this certification (the “Report”), I, Todd A. Michel, Senior Vice President and Controller of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

    /s/ Todd A. Michel

   

    Todd A. Michel

   

    Senior Vice President and Controller

   

    May 9, 2024

   