What changed in this filing

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Item 1. Business

2022-03-15 compared with 2021-03-15 · 642 added, 261 removed, 364 unchanged (71% of the section changed)

General Development of

General Development of Business

CIVISTA BANCSHARES, INC.

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Civista and its consolidated subsidiaries as discussed below, accounted for 99.8% of the Company’s consolidated assets at December 31, 2021.

On September 14, 2018, the Company completed its acquisition by merger of United Community Bancorp (“UCB”).

The Company issued 4,277,430 shares of its common stock and paid approximately $12.7 million in cash in the merger for an aggregate merger consideration of approximately $117.3 million.

Upon closing, UCB’s banking subsidiary, United Community Bank, was merged into CBI’s banking subsidiary, Civista Bank and its eight offices in the Indiana communities of Lawrenceburg (3), Aurora, West Harrison, Milan, Osgood and Versailles and a loan production office in Fort Mitchell, Kentucky, became offices of Civista.

The systems integration of United Community Banks into Civista was completed on September 14, 2018.

FIRST CITIZENS INSURANCE AGENCY, INC.

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FIRST CITIZENS CAPITAL LLC (“FCC”) was also formed in the fourth quarter of 2007 as a wholly-owned subsidiary of Civista to hold inter-company debt that is eliminated in consolidation.

The operations of FCC are located in Wilmington, Delaware.

The operations of FCC were discontinued December 31, 2021 as a result of inactivity.

CIVB RISK MANAGEMENT, INC.

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Through its subsidiary bank, the Company is primarily engaged in the business of community banking, which accounts for substantially all of its revenue, operating income and assets.

Refer to Consolidated Financial Statements on pages 28 through 33 of the 2020 Annual Report for additional information.

Refer to the Consolidated Financial Statements on pages 30 through 35 of the 2021 Annual Report for additional information.

Narrative Description of Business

The Company’s primary business is incidental to the subsidiary bank and its subsidiaries.

Civista, located in the Ohio counties of Erie, Crawford, Champaign, Cuyahoga, Franklin, Huron, Logan, Madison, Montgomery, Ottawa, Richland and Summit, in the Indiana counties of Dearborn and Ripley and in the Kentucky county of Kenton, conducts a general banking business that involves collecting customer deposits, making loans, purchasing securities, and offering Trust services.

Civista, through its locations in the Ohio counties of Erie, Crawford, Champaign, Cuyahoga, Franklin, Huron, Logan, Madison, Montgomery, Ottawa, Richland and Summit, in the Indiana counties of Dearborn and Ripley and in the Kentucky county of Kenton, conducts a general banking business that involves collecting customer deposits, making loans, purchasing securities, and offering Trust services.

Interest and fees on loans accounted for 67% of total revenue for 2021, 69% of total revenue for 2020, and 70% of total revenue for 2019.

The Company’s primary focus of lending continues to be real estate loans, both residential and commercial in nature.

Residential real estate mortgages comprised 22% of the total loan portfolio in 2020, 27% of the total loan portfolio in 2019 and 29% of the total loan portfolio in 2018.

Residential real estate mortgage loans comprised 22% of the total loan portfolio in 2021, 22% of the total loan portfolio in 2020 and 27% of the total loan portfolio in 2019.

Commercial real estate loans comprised 56% of the total loan portfolio in 2021, 48% in 2020, and 49% in 2019.

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The ability of Civista to pay dividends is subject to limitations under various laws and regulations and to prudent and sound banking principles.

Generally, subject to certain minimum capital requirements, Civista may declare a dividend without the approval of the State of Ohio Division of Financial Institutions unless the total of the dividends in a calendar year exceeds the total net profits of the bank for the year combined with the retained profits of the bank for the two preceding years.

At December 31, 2020, Civista had $53,484 of accumulated net profits available to pay dividends to CBI without approval of the Ohio Division of Financial Institutions.

Generally, subject to certain minimum capital requirements, Civista may declare a dividend without the approval of the State of Ohio Division of Financial Institutions (the “ODFI”) unless the total of the dividends in a calendar year exceeds the total net profits of the bank for the year combined with the retained profits of the bank for the two preceding years.

At December 31, 2021, Civista had $59,772 of accumulated net profits available to pay dividends to CBI without approval of the ODFI.

The Company’s business is not seasonal, nor is it dependent on a single or small group of customers.

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We emphasize relationship banking by maintaining and growing our customers and contacts with personal interaction by our bankers and management teams in the communities that we serve.

We will continue to do so by offering a full suite of competitive banking products through efficient and varied delivery channels tailored to the needs of our customers and potential customers.

The Bank, through its Civista Wealth Management division, also offers investment and advisory solutions.

We strive to do this by offering a full suite of competitive banking products through efficient and varied delivery channels tailored to the needs of our customers and potential customers.

Civista, through its Civista Wealth Management division, also offers investment and advisory solutions.

Our approach is personalized and focused on what our clients need.

We provide individuals, families, business and non-profits with personalized investment management, 401 (k) advisory services for employers, financial planning, trust services, and tailored lending.

We provide individuals, families, business and non-profits

with personalized investment management, 401-(k)

advisory services for employers, financial planning, trust services, and tailored lending.

Measured Loan Portfolio Growth while Aiding Borrowers Impacted by COVID-19

Our loan growth strategy is to originate high quality commercial loans with strong sponsors and favorable credit metrics on the retail side in order to achieve measured growth.

We believe it is critical to have as a strategic initiative a plan to work with our customers, in the short and medium terms, in navigating the impact of COVlD-19.

As part of this plan, we are focused on the inevitable changing needs and preferences of our customers in a post-COVID-19 environment.

We have utilized all resources at our disposal, including loan modifications and payment deferrals, to proactively aid our borrowers.

As of December 31, 2020, the Company had 55 COVID-19 loan modification agreements with respect to S73.8 million representing 4.1 percent of loans outstanding, excluding Paycheck Protection Program (“PPP”) loans.

The COVID-19 loan modifications are not classified as TDRs as they fall under the CARES Act Section 4013.

We believe it is critical to have as a strategic initiative a plan to work with our customers, in the short and medium terms, in navigating the impacts of the ongoing COVlD-19

As part of this plan, we are focused on the inevitable changing needs and preferences of our customers in a post-COVID-19

We have utilized several resources at our disposal, including loan modifications and payment deferrals, to proactively aid our borrowers.

During 2020, Civista implemented a temporary loan deferral program for customers impacted by COVID-19 pursuant to which Civista provided loan deferrals on an aggregate of 813 loans totaling $431.3 million.

As of December 31, 2021, Civista had seven loans totaling $5.1 million and representing 0.3 percent of loans outstanding, excluding Paycheck Protection Program (“PPP”) loans, that remained on COVID-19

loan deferral.

loan modifications are not classified as TDRs because they satisfied certain requirements as set forth under the Coronavirus Aid, Relief, and Economic Security Act of 2020, as amended (the “CARES Act”) to not be classified as TDRs.

Further details regarding these modifications are provided in the table on page 60 of the Company’s 2021 Annual Report to Shareholders.

For loans subject to the program, each borrower is required to resume making regularly scheduled loan payments at the end of the modification period and the deferred amounts will be moved to the end of the loan term.

Management anticipates this activity will continue beyond fiscal year 2020.

For loans subject to the deferral program, each borrower is required to resume making regularly scheduled loan payments at the end of the modification period and the deferred amounts will be moved to the end of the loan term.

Core Deposit Growth

We plan to continue to focus on growing our core, commercial operating and retail, non-maturity deposit base with an emphasis on relationship banking.

Our business model focuses on gaining the majority of our customers’ banking relationships by implementing many best practices for community banks, including personalized service and technology.

We plan to continue to focus on growing our core, commercial operating and retail, non-maturity

deposit base with an emphasis on relationship banking.

Our business model focuses on gaining the majority of our customers’ banking relationships by implementing

many best practices for community banks, including personalized service and technology.

We believe that these generate “stickier” deposit accounts with larger average balances than might be attracted otherwise.

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Leverage Our Residential Mortgage Banking Infrastructure

We leverage our mortgage banking infrastructure to support the origination of residential mortgage loans for sale into the secondary market, Mortgage loan originations and sales activity are strategies utilized to support growth in our non-interest income, while also serving to help manage the Company’s exposure to interest rate risk through the sale of longer-duration, fixed-rate loans into the secondary market.

We seek to leverage our mortgage banking infrastructure to support the origination of residential mortgage loans for sale into the secondary market, Mortgage loan originations and sales activity are strategies utilized to support growth in our non-interest

income, while also serving to help manage the Company’s exposure to interest rate risk through the sale of longer-duration, fixed-rate loans into the secondary market.

Improve Our Operating Efficiency

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Maintain Robust Capital and Liquidity Levels

The Company’s capital position provides a source of strength and continues to significantly exceed all regulatory capital guidelines as demonstrated by the December 31, 2020 Tier 1 Leverage ratios of the Company and the Bank of 10.8 percent and 9.6 percent, respectively.

We plan to continue to maintain robust capital reserves, in part due to the risks and uncertainties associated with the COVID-19 pandemic.

In addition to our robust capital levels, we maintain significant sources of both on- and off-balance sheet liquidity and plan to continue to do so.

The Company’s capital position provides a source of strength and continues to significantly exceed all regulatory capital guidelines as demonstrated by the December 31, 2021 Tier 1 Leverage ratios of the Company and Civista of 10.2 percent and 10.8 percent, respectively.

We plan to continue to maintain robust capital reserves, in part due to the risks and uncertainties associated with the COVID-19

In addition to our robust capital levels, we maintain significant sources of both on-

and off-balance

sheet liquidity and plan to continue to do so.

At December 31, 2021, our liquid assets included $255.2 million of short-term cash and equivalents supplemented by $559.9 million of investment securities classified as available for sale which can be readily sold or pledged as collateral, if necessary.

In addition, we had the capacity to borrow additional funds totaling $145.0 million from the Federal Home Loan Bank of Cincinnati.

In addition, we had the capacity to borrow additional funds totaling $581.5 million from the Federal Home Loan Bank of Cincinnati at December 31, 2021.

Ensure the Adequacy of Our Allowance

The economic implications of the COVID-19 pandemic and the resulting impact on our asset quality at this time.

Notwithstanding this uncertainty reserve levels remained adequate with total allowance amounting to $25.0 million at December 31, 2020.

The economic implications of the COVID-19

pandemic on our business and the resulting impact on our asset quality are difficult to fully predict at this time.

Notwithstanding this uncertainty, our reserve levels have remained adequate with total allowance amounting to $26.6 million at December 31, 2021.

Market Area and Competition

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We face substantial competition both in attracting deposits and in originating loans.

We compete with numerous financial institutions.

Other competitors include money market mutual funds, mortgage bankers, insurance companies, stock brokerage firms, unregulated small loan companies, credit unions and issuers of commercial paper and other securities.

However, some of Civista’s competitors have greater resources and, as such, higher lending limits, which may adversely affect the ability of Civista to compete.

We compete with numerous financial institutions, including large regional financial institutions, community banks, thrifts and credit unions operating without our market area.

Nontraditional sources of competition for loan and deposit dollars come from captive auto finance companies, mortgage banking companies, internet banks, brokerage companies, insurance companies and direct mutual funds.

As a result of their size, resources and ability to achieve economies of scale, certain of our competitors offer a broader range of products and services than we offer, as well as higher lending limits, which may adversely affect the ability of Civista to compete.

Products and Services

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These include personal and commercial checking accounts, retirement accounts, money market accounts, time and savings accounts, safe deposit boxes, wire transfers, access to automated teller services, internet banking, ACH origination, telephone banking, and mobile/digital banking.

The Bank also offers remote deposit capture banking for both retail and business customers, providing the ability to electronically scan and transmit checks for deposit.

Civista also offers remote deposit capture banking for both retail and business customers, providing the ability to electronically scan and transmit checks for deposit.

Time deposits consist of certificates of deposit, including those held in IRA accounts.

Reciprocal deposits are offered through the Bank’s participation in Promontory Interfinancial Network, LLC (“CDARS”).

Customers who are Federal Deposit Insurance Corporation (“FDIC”) insurance sensitive are able to place large dollar deposits with the Bank and the Bank uses either outlet to place those funds into certificates of deposit or money markets issued by other banks in the Network.

Reciprocal deposits are offered through Civista’s participation in the Certificate of Deposit Account Registry Service ®

(CDARS) and Insured Cash Sweep (ICS) programs offered through Promontory Interfinancial Network, LLC.

Customers who are Federal Deposit Insurance Corporation (“FDIC”) insurance sensitive are able to place large dollar deposits with Civista and Civista uses either outlet to place those funds into certificates of deposit or money markets issued by other banks in the Network.

This occurs in increments of less than the FDIC insurance limits so that both the principal and interest are eligible for complete FDIC insurance coverage.

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We offer commercial and personal loans on a secured and unsecured basis, revolving lines of credit, commercial mortgage loans, and residential mortgages on both primary and secondary residences, home equity loans, bridge loans and other personal purpose loans.

However, we are not and have not historically been a participant in the sub-prime lending market.

Commercial loans are loans made for business purposes and are primarily secured by collateral such as cash balances with the Bank, business assets including accounts receivable, inventory and equipment, and liens on commercial real estate.

However, we are not and have not historically been a participant in the sub-prime

lending market.

Commercial loans are loans made for business purposes and are primarily secured by collateral such as cash balances with Civista, business assets including accounts receivable, inventory and equipment, and liens on commercial real estate.

Construction loans are loans to finance the construction of commercial or residential properties secured by first liens on such properties.

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Consumer loans are made to individuals who qualify for auto loans, cash reserve, and installment loans.

Our consumer loan portfolio includes unsecured overdraft lines of credit and personal loans as well as loans secured by savings accounts and certificates of deposit on deposit with the Bank.

Our portfolio lending activities include the origination of one- to four-family first mortgage loans, primarily in our designated market area.

Our consumer loan portfolio includes unsecured overdraft lines of credit and personal loans as well as loans secured by savings accounts and certificates of deposit on deposit with Civista.

Our portfolio lending activities include the origination of one-

to four-family first mortgage loans, primarily in our designated market area.

The fixed-rate residential mortgage loans that we originate for portfolio generally meet the secondary mortgage market standards.

As a complement to our residential one- to four-family portfolio lending activities, we operate a mortgage banking platform which supports the origination of one- to four-family mortgage loan the secondary mortgage market standards.

As a complement to our residential one-

to four-family portfolio lending activities, we operate a mortgage banking platform which supports the origination of one-

to four-family mortgage loans that generally meet the secondary mortgage market standards.

Such loans are generally originated by and sourced from the same resources and markets as those loans originated and held in our portfolio.

Through our Civista Wealth Management division we offer investment advisory services to individuals, families, businesses and non-profits with personalized investment management, 401(k) advisory services for employers, financial planning, and trust services.

Through our Civista Wealth Management division we offer investment advisory services to individuals, families, businesses and non-profits

with personalized investment management, 401(k) advisory services for employers, financial planning, and trust services.

Human Capital Resources

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We seek to retain our employees by using their feedback to create and continually enhance programs that support their needs.

We use companywide surveys to solicit feedback from our employees.

We use company-wide surveys to solicit feedback from our employees.

We have a formal annual goal setting and performance review process for our employees.

We have a values-based culture, an important factor in retaining our employees.

We promote a values-based culture, an important factor in retaining our employees.

Our training, to share and communicate our culture to all employees, plays an important part in this process.

We are committed to having a diverse workforce, and an inclusive work environment is a natural extension of our culture.

We are committed to having a diverse

workforce, and an inclusive work environment is a natural extension of our culture.

We are committed to ensuring that all our employees feel welcomed, valued, respected and heard so that they can fully contribute their unique talents for the benefit of our customers, their careers, our company and our communities.

We have recently established a Diversity, Equity and Inclusion Council (“DEI Council”).

This companywide diversity and inclusion advisory council stewards the company’s efforts and provides guidance on priorities.

This company-wide diversity and inclusion advisory council stewards the Company’s efforts and provides guidance on priorities.

This council is composed of employees from all areas of our Company and locations where we operate.

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Our annualized voluntary turnover is relatively low, as is the case for turnover of our top performers, a record which we attribute to our strong values-based culture, commitment to career development, and attractive compensation and benefit programs.

CBI has no employees.

Civista employs approximately 441 full-time equivalent employees to whom a variety of benefits are provided.

CBI has no employees.

CBI and its subsidiaries are not parties to any collective bargaining agreements.

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CBI and its subsidiaries are subject to extensive supervision and regulation by federal and state agencies.

The regulation of financial holding companies and their subsidiaries is intended primarily for the protection of consumers, depositors, borrowers, the federal Deposit Insurance Fund (the “DIF”) and the banking system as a whole, and not for the protection of shareholders.

The regulation of financial holding companies and their subsidiaries is intended primarily for the protection of consumers, depositors, borrowers, the Deposit Insurance Fund (the “DIF”) and the banking system as a whole, and not for the protection of shareholders.

Applicable laws and regulations restrict permissible activities and investments and require actions to protect loan, deposit, brokerage, fiduciary and other customers, as well as the DIF.

These laws and regulations also may restrict the ability of CBI to repurchase its common shares or to receive dividends from Civista, and impose capital adequacy and liquidity requirements.

These laws and regulations also may restrict the ability of CBI to pay dividends to its shareholders, to repurchase its common shares or to receive dividends from Civista, and impose capital adequacy and liquidity requirements.

The following is a summary of the regulatory agencies that supervise and regulate CBI and Civista and the statutes and regulations that have, or could have, a material impact on the Company’s business.

This discussion is qualified in its entirety by reference to such statutes and regulations.

The statutes and regulations applicable to the Company are continually under review by the United States Congress and state legislatures and federal and state regulatory

agencies, and a change in statutes, regulations or regulatory policies applicable to the Company could have a material effect on the Company’s business.

The statutes and regulations applicable to the Company are continually under review by the United States Congress and state legislatures and federal and state regulatory agencies, and a change in statutes, regulations or regulatory policies applicable to the Company could have a material effect on the Company’s business.

The Bank Holding Company Act:

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The final rule expands and codifies the presumptions for use in such determinations.

By codifying the presumptions, the final rule provides greater transparency on the types of relationships that the Federal Reserve Board generally views as supporting a facts-and-circumstances determination that one company controls another company.

By codifying the presumptions, the final rule provides greater transparency on the types of relationships that the Federal Reserve Board generally views as supporting a facts-and-circumstances

determination that one company controls another company.

The Federal Reserve Board’s final rule applies to questions of control under the BHCA, but does not extend to the Change in Bank Control Act.

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The financial holding company could also be required to divest of subsidiaries that engage in activities that are not permitted for bank holding companies that are not financial holding companies.

If restrictions are imposed on the activities of a financial holding company, the

existence of such restrictions may not be made publicly available pursuant to confidentiality regulations of the bank regulatory agencies.

If restrictions are imposed on the activities of a financial holding company, the existence of such restrictions may not be made publicly available pursuant to confidentiality regulations of the bank regulatory agencies.

Transactions with Affiliates, Directors, Executive Officers and Shareholders:

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In addition, the amount of loans a bank may make to these affiliated persons is based, in part, on the bank’s capital position, and specified approval procedures must be followed in making loans which exceed specified amounts.

Privacy Provisions:

Under the GLBA, federal banking regulators adopted rules that limit the ability of banks and other financial institutions to disclose non-public information about consumers to non-affiliated third parties.

These rules contain extensive provisions on a customer’s right to privacy of non-public personal information.

Except in certain cases, an institution may not provide personal information to unaffiliated third parties unless the institution discloses that such information may be disclosed and the customer is given the opportunity to opt out of such disclosure.

The privacy provisions of the GLBA affect how consumer information is conveyed to outside vendors.

CBI and its subsidiaries are also subject to certain state laws that govern the use and distribution of non-public personal information.

Federal Deposit Insurance Corporation (“FDIC”):

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This insurance is backed by the full faith and credit of the United States Government.

As insurer, the FDIC is authorized to conduct examinations of and to require reporting by insured institutions, including Civista, to prohibit any insured institution from engaging in any activity the FDIC determines to pose a threat to the Deposit Insurance Fund (the “DIF”), and to take enforcement actions against insured institutions.

As insurer, the FDIC is authorized to conduct examinations of and to require reporting by insured institutions, including Civista, to prohibit any insured institution from engaging in any activity the FDIC determines to pose a threat to the DIF, and to take enforcement actions against insured institutions.

The FDIC may terminate insurance of deposits of any institution if the FDIC finds that the institution has engaged in unsafe and unsound practices, is in an unsafe or unsound condition or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC or other regulatory agency.

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Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”), the FDIC has established 2.0% as the designated reserve ratio (“DRR”), which is the amount in the DIF as a percentage of all DIF insured deposits.

In March 2016, the FDIC adopted final rules designed to meet the statutory minimum DRR of 1.35% by September 30, 2020, the deadline imposed by the Dodd-Frank Act.

In March 2016, the FDIC

adopted final rules designed to meet the statutory minimum DRR of 1.35% by September 30, 2020, the deadline imposed by the Dodd-Frank Act.

The Dodd-Frank Act requires the FDIC to offset the effect on insured institutions with assets of less than $10 billion of the increase in the statutory minimum DRR to 1.35% from the former statutory minimum of 1.15%.

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On June 30, 2019, the DRR reached 1.40%, and the FDIC applied credits for banks with assets of less than $10 billion (“small bank credits”) beginning September 30, 2019.

The FDIC will continue to apply small bank credits so long as the DRR is at least 1.35%.

Civista utilized its $0.5 million assessment credit during the second, third and fourth quarters of 2019 and the first quarter of 2020.

As of June 30, 2020, the DRR fell below the minimum DRR to 1.30%.

As a result, the FDIC adopted a restoration plan requiring the restoration of the DRR to 1.35% within eight years (September 30, 2028).

This restoration plan maintained the scheduled assessment rates for all insured institutions.

As of September 30, 2021, the DRR was 1.27%.

The FDIC rules further changed the method of determining risk-based assessment rates for established banks with less than $10 billion in assets to better ensure that banks taking on greater risks pay more for deposit insurance than banks that take on less risk.

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The FDIC may also terminate the deposit insurance of any institution that has engaged in or is engaging in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, order or condition imposed by the FDIC.

The Coronavirus Aid, Relief, and Economic Security Act of 2020

In response to the novel COVID-19 pandemic (“COVID-19”), the Coronavirus Aid, Relief, and Economic Security Act of 2020, as amended (the “CARES Act”), was signed into law on March 27, 2020, to provide national emergency economic relief measures.

Legislation and Initiatives

In response to the novel COVID-19

pandemic (“COVID-19”),

the Coronavirus Aid, Relief, and Economic Security Act of 2020, as amended (the “CARES Act”), was signed into law on March 27, 2020, to provide national emergency economic relief measures.

Many of the CARES Act’s programs are dependent upon the direct involvement of U.S.

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Department of Treasury, the Federal Reserve Board and other federal banking agencies, including those with direct supervisory jurisdiction over CBI and Civista.

Furthermore, as COVID-19 evolves, federal regulatory authorities continue to issue additional guidance with respect to the implementation, lifecycle, and eligibility requirements for the various CARES Act programs as well as industry-specific recovery procedures for COVID-19.

In addition, it is possible that Congress will enact supplementary COVID-19 response legislation, including amendments to the CARES Act or new bills comparable in scope to the CARES Act.

Furthermore, as COVID-19

evolves, federal regulatory authorities continue to issue additional guidance with respect to the implementation, lifecycle, and eligibility requirements for the various CARES Act programs as well as industry-specific recovery procedures for COVID-19.

In addition, it is possible that Congress will enact supplementary COVID-19

response legislation, including amendments to the CARES Act or new bills comparable in scope to the CARES Act.

For example, on December 27, 2020, the Consolidated Appropriations Act, 2021 (the “CAA”) was signed into law, which, among other things, allowed certain banks to temporarily postpone implementation of the current expected credit loss model (accounting standard), which is described below.

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The CARES Act amended the loan program of the Small Business Administration (the “SBA”), in which Civista participates, to create a guaranteed, unsecured loan program, the Paycheck Protection Program (the “PPP”), to fund operational costs of eligible businesses, organizations and self-employed persons during COVID-19.

These loans are eligible to be forgiven if certain conditions are satisfied and are fully guaranteed by the SBA.

In June 2020, the Paycheck Protection Program Flexibility Act was enacted, which, among other things, gave borrowers additional time and flexibility to use PPP loan proceeds.

Shortly thereafter, and due to the evolving impact of COVID-19, additional legislation was enacted authorizing the SBA to resume accepting PPP applications on July 6, 2020, and extending the PPP application deadline to August 8, 2020.

After previously being extended by Congress, the application deadline for PPP loans expired on May 31, 2021.

No collateral or personal guarantees were required for PPP loans.

In addition, neither the government nor lenders have been permitted to charge the recipients of PPP loans any fees.

On December 27, 2020, the President signed into law omnibus federal spending and economic stimulus legislation titled the “Consolidated Appropriations Act, 2021” that included the Economic Aid to Hard-Hit

Small Businesses, Nonprofits, and Venues Act (the “HHSB Act”).

Among other things, the HHSB Act renewed the PPP, allocating $284.45 billion for both new first-time PPP loans under the existing PPP and the expansion of existing PPP loans for certain qualified, existing PPP borrowers.

In addition to extending and amending the PPP, the HHSB Act also creates a new grant program for “shuttered venue operators”.

As a participating lender in the PPP, Civista continues to monitor legislative, regulatory, and supervisory developments related thereto.

On September 29, 2020, the federal bank regulatory agencies issued a final rule that neutralizes the regulatory capital and liquidity coverage ratio effects of participating in certain COVID-19 liquidity facilities due to the fact there is no credit or market risk in association with exposures pledged to such facilities.

On September 29, 2020, the federal bank regulatory agencies issued a final rule that neutralizes the regulatory capital and liquidity coverage ratio effects of participating in certain COVID-19

liquidity facilities due to the fact there is no credit or market risk in association with exposures pledged to such facilities.

As a result, the final rule supports the flow of credit to households and businesses affected by COVID-19.

The CARES Act encouraged the Federal Reserve Board, in coordination with the Secretary of the Treasury, to establish or implement various programs to help mitigate the adverse effects of COVID-19 on midsize businesses, nonprofits, and municipalities.

In April 2020, the Federal Reserve established the Main Street Lending Program (“MSLP”) to implement certain of these recommendations.

The MSLP supported lending to small and medium-sized businesses that were in sound financial condition before the onset of COVID-19.

On November 19, 2020, Treasury Secretary Steven Mnuchin indicated that he would not reauthorize extending the MSLP past December 31, 2020.

However, the Federal Reserve Board extended the program to January 8, 2021, in order to process loans that were submitted on or before December 14, 2020.

The program ended on January 8, 2021.

On December 2, 2020, the federal bank regulatory agencies issued an interim final rule that provides temporary relief for specified community banking organizations related to certain regulations and reporting requirements as a result, in large part, of their growth in size from the response to COVID-19.

Community banking organizations are subject to different rules and requirements based on their risk profile and asset size.

Due to their involvement in federal COVID-19

response programs (such as the PPP) and other

lending that supports the U.S.

economy, many community banking organizations experienced rapid and unexpected increases in their sizes, which were generally expected to be temporary.

The temporary increase in size could have subjected community banking organizations to new regulations or reporting requirements.

However, community banking organizations, such as CBI and Civista, under $10.0 billion in total assets as of December 31, 2019 were permitted to use asset data as of December 31, 2019, to determine the applicability of various regulatory asset thresholds during calendar years 2020 and 2021.

As such, it was not until January 1, 2022 that asset growth again triggered new regulatory requirements for these community banking organizations.

Consumer Financial Protection Bureau:

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Community Reinvestment Act:

The CRA requires depository institutions to assist in meeting the credit needs of their market areas, including low- and moderate-income areas, consistent with safe and sound banking practice.

The CRA requires depository institutions to assist in meeting the credit needs of their market areas, including low-

and moderate-income areas, consistent with safe and sound banking practice.

Under this Act, each institution is required to adopt a statement for each of its market areas describing the depositary institution’s efforts to assist in its community’s credit needs.

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In addition, all subsidiary banks of a financial holding company must maintain a satisfactory or outstanding rating in order for the financial holding company to avoid limitations on its activities.

Civista received a rating of “satisfactory” in its most recent CRA examination.

Economic Growth, Regulatory Relief and Consumer Protection Act

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Certain other regulatory requirements applied only to banks with consolidated assets in excess of $50 billion and so did not apply to CBI or Civista even before the enactment of the Regulatory Relief Act.

Patriot Act and Anti-Money Laundering:

The Uniting and Strengthening of America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “Patriot Act”) gives the United States government powers to address terrorist threats through enhanced domestic security measures, expanded surveillance powers, increased information sharing and broadened anti-money laundering requirements.

Title III of the Patriot Act encourages information sharing among bank regulatory agencies and law enforcement bodies.

Further, certain provisions of Title III impose affirmative obligations on a broad range of financial institutions.

Further, certain provisions of Title III impose affirmative obligations on a broad range of financial

institutions.

Among other requirements, Title III and related regulations require regulated financial institutions to establish a program specifying procedures for obtaining identifying information from customers seeking to open new accounts and establish enhanced due diligence policies, procedures and controls designed to detect and report suspicious activity.

Civista has established policies and procedures that Civista believes comply with the requirements of the Patriot Act.

The Anti-Money Laundering Act of 2020 (the “AMLA”), which amends the Bank Secrecy Act of 1970 (the “BSA”), was enacted in January 2021.

The AMLA is intended to be a comprehensive reform and modernization to U.S.

bank secrecy and anti-money laundering laws.

Among other things, it codifies a risk-based approach to anti-money laundering compliance for financial institutions;

requires the development of standards for evaluating technology and internal processes for BSA compliance;

expands enforcement-related and investigation-related authority, including increasing available sanctions for certain BSA violations and instituting BSA whistleblower initiatives and protections.

Office of Foreign Assets Control Regulation

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OFAC publishes lists of specially designated targets and countries.

Civista is responsible for, among other things, blocking accounts of, and transactions with, such targets and countries, prohibiting unlicensed trade and financial transactions with them

reporting blocked transactions after their occurrence.

Civista is responsible for, among other things, blocking accounts of, and transactions with, such targets and countries, prohibiting unlicensed trade and financial transactions with them and reporting blocked transactions after their occurrence.

Failure to comply with these sanctions could have serious financial, legal and reputational consequences, including causing applicable bank regulatory authorities not to approve merger or acquisition transactions when regulatory approval is required or to prohibit such transactions even if approval is not required.

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These certifications attest that CBI’s quarterly and annual reports filed with the SEC do not contain any untrue statement of a material fact.

See Item 9A “Controls and Procedures” in Part II of this Form 10-K for CBI’s evaluation of its disclosure controls and procedures.

See Item 9A “Controls and Procedures” in Part II of this Form 10-K

for CBI’s evaluation of its disclosure controls and procedures.

Regulation of Bank Subsidiary:

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Regulatory Capital Requirements:

The Federal Reserve Board has adopted risk-based guidelines for financial holding companies and other bank holding companies as well as state member banks, and the FDIC has adopted risk-based capital guidelines for state non-member banks.

The guidelines provide a systematic analytical framework which makes regulatory capital requirements sensitive to differences in risk profiles among banking organizations, takes off-balance sheet exposures expressly into account in evaluating capital adequacy, and minimizes disincentives to holding liquid, low-risk assets.

The guidelines provide a systematic analytical framework which makes regulatory capital requirements sensitive to differences in risk profiles among banking organizations, takes off-balance

sheet exposures expressly into account in evaluating capital adequacy, and minimizes disincentives to holding liquid, low-risk

Capital levels as measured by these standards are also used to categorize financial institutions for purposes of certain prompt corrective action regulatory provisions.

In July 2013, the United States banking regulators issued new capital rules applicable to smaller banking organizations which also implement certain of the provisions of the Dodd-Frank Act (the “Basel III Capital Rules”).

Community banking organizations, including CBI and Civista, began transitioning to the new rules on January 1, 2015.

Community banking organizations,

including CBI and Civista, began transitioning to the new rules on January 1, 2015.

The new minimum capital requirements became effective on January 1, 2015, whereas a new capital conservation buffer and deductions from common equity capital phased in from January 1, 2016 through January 1, 2019, and most deductions from common equity tier 1 capital phased in from January 1, 2015 through January 1, 2019.

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Common equity for the common equity tier 1 capital ratio generally includes common stock (plus related surplus), retained earnings, accumulated other comprehensive income (unless an institution elects to exclude such income from regulatory capital), and limited amounts of minority interests in the form of common stock, subject to applicable regulatory adjustments and deductions.

Tier 1 capital

includes common equity as defined for the common equity tier 1 capital ratio, plus certain non-cumulative preferred stock and related surplus, cumulative preferred stock and related surplus

trust preferred

securities that have been grandfathered (but which are not permitted going forward), and limited amounts of minority interests in the form of additional Tier 1 capital instruments, less certain deductions.

Tier 1 capital generally includes common equity as defined for the common equity tier 1 capital ratio, plus certain non-cumulative

preferred stock and related surplus, cumulative preferred stock and related surplus, trust preferred securities that have been grandfathered (but which are not permitted going forward), and limited amounts of minority interests in the form of additional Tier 1 capital instruments, less certain deductions.

Tier 2 capital, which can be included in the total capital ratio, generally consists of other preferred stock and subordinated debt meeting certain conditions plus limited amounts of the allowance for loan and lease losses, subject to specified eligibility criteria, less applicable deductions.

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Under the guidelines, capital is compared to the relative risk related to the balance sheet.

To derive the risk included in the balance sheet, one of several risk weights is applied to different balance sheet and off-balance sheet assets, primarily based on the relative credit risk of the counterparty.

To derive the risk included in the balance sheet, one of several risk weights is applied to different balance sheet and off-balance

sheet assets, primarily based on the relative credit risk of the counterparty.

The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

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In September 2019, the Federal Reserve Board, along with other federal bank regulatory agencies, issued a final rule, effective January 1, 2020, that gave community banks, including the Company, the option to calculate a simple leverage ratio to measure capital adequacy if the community banks met certain requirements.

Under the rule, a community bank is eligible to elect the Community Bank Leverage Ratio ("CBLR") framework if it had less than $10 billion in total consolidated assets, limited amounts of certain assets and off-balance sheet exposures, and a leverage ratio greater than 9.0%.

Under the rule, a community bank is eligible to elect the Community Bank Leverage Ratio (“CBLR”) framework if it had less than $10 billion in total consolidated assets, limited amounts of certain assets and off-balance

sheet exposures, and a leverage ratio greater than 9.0%.

Qualifying institutions that elected to use the CBLR framework (each, a “CBLR Bank”) and that maintain a leverage ratio of greater than 9.0% will be considered to have satisfied the risk-based and leverage capital requirements in the regulatory agencies’ generally applicable capital rules and to have met the well-capitalized ratio requirements.

No CBLR Bank was required to calculate or report risk-based capital, and each CBLR Bank could opt out of the framework at any time, without restriction, by reverting to the generally applicable risk-based capital rule.

Pursuant to the CARES Act, on August 26, 2020, the federal banking agencies adopted a final rule that temporarily lowered the CBLR threshold and provides a gradual transition back to the prior level.

Specifically, the CBLR threshold was reduced to 8.0% for the remainder of 2020, increased to 8.5% for 2021, and will return to 9.0% beginning January 1, 2022.

Pursuant to the CARES Act, on August 26, 2020, the federal banking agencies adopted a final rule that temporarily lowered the CBLR threshold and provided a gradual transition back to the prior level.

Specifically, the CBLR threshold was reduced to 8.0% for the remainder of 2020, increased to 8.5% for 2021, and returned to 9.0% on January 1, 2022.

This final rule became effective on October 1, 2020.

The Company does not intend to elect utilization of the CBLR in assessing capital adequacy and intends to continue to follow existing capital rules.

The Company did not utilize the CBLR in assessing capital adequacy and, instead, continued to follow existing capital rules.

In December 2018, the federal banking agencies issued a final rule to address regulatory capital treatment of credit loss allowances under the current expected credit loss (“CECL”) model (accounting standard).

The rule revises the federal banking agencies’ regulatory capital rules to identify which credit loss allowances under the CECL model are eligible for inclusion in regulatory capital and to provide banking organizations the option to phase in over three years the day-one adverse effects on regulatory capital that may result from the adoption of the CECL model.

The Company currently anticipates recording a one-time cumulative effect adjustment upon adoption, and does not anticipate utilizing the three year phase in.

The Company expects to maintain risk-based capital ratios in excess of "well-capitalized" after the impact of the one-time cumulative effect adjustment.

adverse effects on regulatory capital that may result from the adoption of the CECL model.

The Company currently anticipates recording a one-time

cumulative effect adjustment upon adoption, and does not anticipate utilizing the three year phase in.

The Company expects to maintain risk-based capital ratios in excess of “well-capitalized” after the impact of the one-time

cumulative effect adjustment.

At December 31, 2021, both CBI and Civista were in compliance with all of the regulatory capital requirements to which they are subject.

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At each successively lower defined capital category, a bank is subject to more restrictive and numerous mandatory or discretionary regulatory actions or limits, and the Federal Reserve Board has less flexibility in determining how to resolve the problems of the institution.

In addition, the Federal Reserve Board generally can downgrade a bank’s capital category, notwithstanding its capital level, if, after notice and opportunity for hearings, the bank is deemed to be engaged in an unsafe or unsound practice, because it has not corrected deficiencies that resulted in it receiving a less than satisfactory examination

rating on matters other than capital or it is deemed to be in an unsafe or unsound condition.

capital at December 31, 20

, met the standards for

the highest capital

“well-capitalized”

Civista’s capital at December 31, 2021, met the standards for the highest capital category, a “well-capitalized” bank.

Federal Reserve Board regulations also limit the payment of dividends by Civista to CBI.

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To the extent that Civista engages in any of the trading activities or has any ownership interest in or relationship with any of the types of funds regulated by the Volcker Rule, Civista believes that its activities and relationships fall within the scope of one or more of the exceptions provided in the Volcker Rule.

In July 2019, the five federal agencies that adopted the Volcker Rule adopted a final rule to exempt certain community banks, including Civista, from the Volcker Rule, consistent with the Regulatory Relief.

Under the final rule, community banks with $10 billion or less in total consolidated assets and total trading assets and liabilities of 5.0% or less of total consolidated assets are excluded from the restrictions of the Volcker Rule.

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Such rule permits certain banking entities to offer financial services and engage in other activities that do not raise concerns that the Volcker Rule was originally intended to address.

Non-Banking Subsidiaries

The Company’s non-banking subsidiaries are also subject to regulation by the Federal Reserve Board and other applicable federal and state agencies.

The Company’s non-banking

subsidiaries are also subject to regulation by the Federal Reserve Board and other applicable federal and state agencies.

FCIA, as a licensed insurance agency, is subject to regulation by the Ohio Department of Insurance and the state insurance regulatory agencies of those states where it conducts business.

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The Dodd-Frank Act requires that the federal banking agencies, including the Federal Reserve Board and the FDIC, issue a rule related to incentive-based compensation.

No final rule implementing this provision of the Dodd-Frank Act has, as of the date of the filing of this Annual Report on Form 10-K, been adopted, but a proposed rule was published in 2016 that expanded upon a prior proposed rule published in 2011.

No final rule implementing this provision of the Dodd-Frank Act has, as of the date of the filing of this Annual Report on Form 10-K,

been adopted, but a proposed rule was published in 2016 that expanded upon a prior proposed rule published in 2011.

The proposed rule is intended to:

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Although a final rule has not been issued, the Company has undertaken efforts to ensure that the Company’s incentive compensation plans do not encourage inappropriate risks, consistent with the principles identified above.

Pursuant to rules adopted by the stock exchanges and approved by the SEC in January 2013 under the Dodd-Frank Act, public company compensation committee members must meet heightened independence requirements and consider the independence of compensation consultants, legal counsel and other advisors to the compensation committee.

In June 2010, the Federal Reserve Board, the OCC and the FDIC issued comprehensive final guidance on incentive compensation policies intended to ensure that the incentive compensation policies of banking organizations do not undermine the safety and soundness of such organizations by encouraging excessive risk-taking.

The guidance, which covers all employees that have the ability to materially affect the risk profile of an organization, either individually or as part of a group, is based upon the key principles that a banking organization’s incentive compensation arrangements should (i) provide incentives that do not encourage risk-taking beyond the organization’s ability to effectively identify and manage risks, (ii) be compatible with effective internal controls and risk management and (iii) be supported by strong corporate governance, including active and effective oversight by the organization’s board of directors.

These three principles are incorporated into the proposed joint compensation regulations under the Dodd-Frank Act, described above.

The Federal Reserve Board and the OCC review, as part of their respective regular, risk-focused examination process, the incentive compensation arrangements of banking organizations, such as CBI and Civista, that are not “large, complex banking organizations.” These reviews are tailored to each organization based on the scope and complexity of the organization’s activities and the prevalence of incentive compensation arrangements.

Deficiencies will be incorporated into the organization’s supervisory ratings, which can affect the organization’s ability to make acquisitions and take other actions.

Enforcement actions may be taken against a banking organization if its incentive compensation arrangements, or related risk-management control or governance processes, pose a risk to the organization’s safety and soundness and the organization is not taking prompt and effective measures to correct the deficiencies.

Public company compensation committee members must meet heightened independence requirements and consider the independence of compensation consultants, legal counsel and other advisors to the compensation committee.

A compensation committee must have the authority to hire advisors and to have the public company fund reasonable compensation of such advisors.

Public companies will be required, once stock exchanges impose additional listing requirements under the Dodd-Frank Act, to implement "

" procedures for incentive compensation payments and to disclose the details of the procedures which allow recovery of incentive compensation that was paid on the basis of erroneous

financial information necessitating a restatement due to material noncompliance with financial reporting requirements.

policy is intended to apply to compensation paid within a three-year look-back window of the restatement and would cover all executives who received incentive awards.

The Company has implemented a

policy and it is posted under the “

Corporate Overview

” tab on the “

Governance Documents

” page of CBI’s Internet website.

SEC regulations require public companies such as CBI to provide various disclosures about executive compensation in annual reports and proxy statements and to present to their shareholders a non-binding vote on the approval of executive compensation.

Public companies will be required, once stock exchanges impose additional listing requirements under the Dodd-Frank Act, to implement “clawback” procedures for incentive compensation payments and to disclose the details of the procedures which allow recovery of incentive compensation that was paid on the basis of erroneous financial information necessitating a restatement due to material noncompliance with financial reporting requirements.

This clawback policy is intended to apply to compensation paid within a three-year look-back window of the restatement and would cover all executives who received incentive awards.

The Company has implemented a clawback policy and it is posted under the “Corporate Overview” tab on the “Governance Documents” page of CBI’s Internet website.

vote on the approval of executive compensation.

Financial Privacy Provisions:

Federal and state regulations limit the ability of banks and other financial institutions to disclose non-public

information about consumers to non-affiliated

third parties.

These limitations require disclosure of privacy policies to consumers and, in some circumstances, allow consumers to prevent disclosure of certain personal information to a non-affiliated

These regulations affect how consumer information is transmitted through diversified financial companies and conveyed to outside vendors.

Civista is also subject to regulatory guidelines establishing standards for safeguarding customer information.

These guidelines describe the federal bank regulatory agencies’ expectations for the creation, implementation and maintenance of an information security program, which would include administrative, technical and physical safeguards appropriate to the size and complexity of the institution and the nature and scope of its activities.

The standards set forth in the guidelines are intended to ensure the security and confidentiality of customer records and information, protect against any anticipated threats or hazards to the security or integrity of such records and protect against unauthorized access to or use of such records or information that could result in substantial harm or inconvenience to any customer.

Cybersecurity

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The other statement indicates that a financial institution’s management is expected to maintain sufficient business continuity planning processes to ensure the rapid recovery, resumption and maintenance of the financial institution’s operations after a cyber-attack involving destructive malware.

A financial institution is also expected to develop appropriate processes to enable recovery of data and business operations and address rebuilding network capabilities and restoring data if the financial institution or its critical service providers fall victim to this type of cyber-attack.

A financial institution is also expected to develop appropriate processes to enable recovery of data and business operations and address

rebuilding network capabilities and restoring data if the financial institution or its critical service providers fall victim to this type of cyber-attack.

If Civista fails to observe the regulatory guidance, it could be subject to various regulatory sanctions, including financial penalties.

1 unchanged sentence

These SEC guidelines, and any other regulatory guidance, are in addition to notification and disclosure requirements under state and federal banking law and regulations.

In November 2021, the OCC, the Federal Reserve Board and the FDIC issued a final rule requiring banking organizations that experience a computer-security incident to notify certain entities.

A computer-security incident occurs when actual or potential harm to the confidentiality, integrity, or availability of an information system or the information occurs, or there is a violation or imminent threat of a violation to banking security policies and procedures.

The affected bank must notify its respective federal regulator of the computer-security incident as soon as possible and no later than 36 hours after the bank determines a computer-security incident has occurred.

These notifications are intended to promote early awareness of threats to banking organizations and will help banks react to those threats before they manifest into bigger incidents.

This rule also requires bank service providers to notify its customers of a computer-security incident.

State regulators have also been increasingly active in implementing privacy and cybersecurity standards and regulations.

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In the ordinary course of business, the Company relies on electronic communications and information systems to conduct its operations and to store sensitive data.

The Company employs an in-depth, layered, defensive approach that leverages people, processes and technology to manage and maintain cybersecurity controls.

The Company employs an in-depth,

layered, defensive approach that leverages people, processes and technology to manage and maintain cybersecurity controls.

The Company employs a variety of preventative and detective tools to monitor, block, and provide alerts regarding suspicious activity, as well as to report on any suspected advanced persistent threats.

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The Company believes its primary exposure to environmental risk is through the lending activities of Civista.

In cases where management believes environmental risk potentially exists, Civista mitigates its environmental risk

exposure by requiring environmental site assessments at the time of loan origination to confirm collateral quality as to commercial real estate parcels posing higher than normal potential for environmental impact, as determined by reference to present and past uses of the subject property and adjacent sites.

In addition, environmental assessments are typically required prior to any foreclosure activity involving non-residential real estate collateral.

In cases where management believes environmental risk potentially exists, Civista mitigates its environmental risk exposure by requiring environmental site assessments at the time of loan origination to confirm collateral quality as to commercial real estate parcels posing higher than normal potential for environmental impact, as determined by reference to present and past uses of the subject property and adjacent sites.

In addition, environmental assessments are typically required prior to any foreclosure activity involving non-residential

real estate collateral.

Effects of Government Monetary Policy

The earnings of the Company are affected by general and local economic conditions and by the policies of various governmental regulatory authorities.

In particular, the Federal Reserve Board regulates money and credit conditions and interest rates to influence general economic conditions, primarily through open market acquisitions or dispositions of United States Government securities, varying the discount rate on member bank borrowings and setting reserve requirements against member and nonmember bank deposits.

varying the discount rate on member bank borrowings and setting reserve requirements against member and nonmember bank deposits.

Federal Reserve Board monetary policies have had a significant effect on the interest income and interest expense of commercial banks, including Civista, and are expected to continue to do so in the future.

Available Information

CBI maintains an Internet website at

CBI maintains an Internet website at www.civb.com

(this uniform resource locator, or URL, is an inactive textual reference only and is not intended to incorporate CBI’s website into this Annual Report on Form 10-K).

CBI makes available free of charge on or through its Internet website its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the Exchange Act), as well as CBI’s definitive proxy statements filed pursuant to Section 14 of the Exchange Act, as soon as reasonably practicable after CBI electronically files such material with, or furnishes it to, the SEC.

CBI makes available free of charge on or through its Internet website its annual reports on Form 10-K,

quarterly reports on Form 10-Q,

current reports on Form 8-K

and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the Exchange Act), as well as CBI’s definitive proxy statements filed pursuant to Section 14 of the Exchange Act, as soon as reasonably practicable after CBI electronically files such material with, or furnishes it to, the SEC.

Statistical Information

The following section contains certain financial disclosures related to the Company as required under the Securities and Exchange Commission’s Industry Guide 3, “Statistical Disclosures by Bank Holding Companies”, or a specific reference as to the location of the required disclosures in the Registrant’s 2020 Annual Report to Shareholders, portions of which are incorporated in this Form 10-K by reference.

The following section contains certain financial disclosures related to the Company as required under Subpart 1400 of the SEC’s Regulation S-K,

or a specific reference as to the location of the required disclosures in the Registrant’s 2021 Annual Report to Shareholders, portions of which are incorporated in this Form 10-K

by reference.

Distribution of Assets, Liabilities and Shareholders’ Equity;

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Interest Rates and Interest Differential” and “Changes in Interest Income and Interest Expense Resulting from Changes in Volume and Changes in Rate”, within Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Company’s 2021 Annual Report to Shareholders and is incorporated into this Item I by reference.

Investment Portfolio

The following table sets forth the carrying amount of securities at December 31.

(Dollars in thousands)

Available for sale (1)

Treasury securities and obligations of

Government agencies

Obligations of states and political subdivisions

Mortgage-backed securities in government

sponsored entities

Total debt securities

The Corporation had no securities of an “issuer” where the aggregate carrying value of such securities exceeded ten percent of shareholders’ equity.

Investments in Debt Securities

The following table sets forth the maturities of securities at December 31, 2021 and the weighted average yields of such debt securities.

1 unchanged sentence

Within one year

but within five

After five but

3 unchanged sentences

Available for Sale (2)

Treasury securities and

obligations of U.S.

Obligations of states and political

subdivisions (1)

Mortgage-backed securities in

government sponsored entities

Treasury securities and obligations of U.S.

government agencies

Obligations of states and political subdivisions (1)

Mortgage-backed securities in government sponsored entities

Weighted average yields on nontaxable obligations have been computed based on actual yields stated on the security.

The weighted average yield has been computed using the historical amortized cost for available-for-sale securities.

The weighted average yield has been computed using the historical amortized cost for available-for-sale

Loan Portfolio

Types of Loans

The amounts of gross loans outstanding at December 31 are shown in the following table according to types of loans.

Maturities and Sensitivities of Loans to Changes in Interest Rates

The following table shows the amount of commercial and agriculture, commercial real estate, residential real estate, real estate construction, farm real estate and consumer and other loans outstanding as of December 31, 2021, which, based on the contract terms for repayments of principal, are due in the periods indicated.

In addition, the amounts due after one year are classified according to their sensitivity to changes in interest rates.

fifteen years

(Dollars in thousands)

Commercial and Agriculture

Commercial & Agriculture

Commercial Real Estate:

Owner Occupied

Non-owner occupied

Residential Real Estate

2 unchanged sentences

Consumer and Other

Commercial loans are those made for commercial, industrial and professional purposes to individuals, sole proprietorships, partnerships, corporations and other business enterprises.

Agriculture loans are for financing agricultural production, including all costs associated with growing crops or raising livestock.

Commercial and Agriculture loans may be secured, other than by real estate, or unsecured, requiring one single repayment or on an installment repayment schedule.

Commercial and Agriculture loans involve certain risks relating to changes in local and national economic conditions and the resulting effect on the borrowing entities.

Secured loans not collateralized by real estate mortgages maintain a loan-to-value ratio ranging from 50% in the case of certain stocks, to 100% in the case of savings or time deposit accounts.

Unsecured credits rely on the financial strength and previous credit experience of the borrower and in many cases the financial strength of the principals when such credit is extended to a corporation.

Commercial Real Estate mortgage loans are made predicated on having a security interest in real property and are secured wholly or substantially by that lien on real property.

Commercial Real Estate mortgage loans are generally underwritten with a maximum loan-to-value ratio of 80%.

Residential Real Estate mortgage loans and home equity lines of credit are made predicated on security interests in real property and secured wholly or substantially by those liens on real property.

Such real estate mortgage loans are primarily loans secured by one-to-four family real estate.

Residential Real Estate mortgage loans generally pose less risk to the Company due to the nature of the collateral being less susceptible to sudden changes in value.

Real Estate Construction loans are for the construction of residential homes, new buildings or additions to existing buildings.

Generally, these loans are secured by one-to-four family real estate or commercial real estate.

The Company controls disbursements in connection with construction loans.

Construction financing is generally considered to involve a higher degree of risk of loss than long-term financing on improved, occupied real estate.

Risk of loss on a construction loan depends largely upon the accuracy of the initial estimate of the property’s value at completion of construction and the estimated cost (including interest) of construction.

If the estimate of construction cost proves to be inaccurate, the Company may be required to advance funds beyond the amount originally committed to permit completion of the project.

If the estimate of value proves inaccurate, the Company may be confronted, at or prior to the maturity of the loan, with a project having a value insufficient to assure full repayment, should the borrower default.

In the event a default on a construction loan occurs and foreclosure follows, the Company must take control of the project and attempt either to arrange for completion of construction or to dispose of the unfinished project.

Additional risk exists with respect to a loan made to a developer who does not have a project pre-leased or has a buyer for the property, as the developer may lack funds to pay the loan if the property does not have sufficient occupancy levels or is not sold upon completion.

The Company attempts to reduce such risks on loans to developers by normally requiring that Real Estate development and construction loan projects be at least 50% pre-leased or pre-sold and that the co-borrower/guarantor has significant net worth, liquidity, and historical income to help support the project.

Consumer loans are made to individuals for household, family and other personal expenditures.

These expenditures include the purchase of vehicles or furniture, educational expenses, medical expenses, taxes or vacation expenses.

Consumer loans may be secured, other than by real estate, or unsecured, generally requiring repayment on an installment repayment schedule.

Consumer loans pose a relatively higher credit risk.

This higher risk is moderated

certain loan to value limits on secured credits and aggressive collection efforts.

The collectability of consumer loans is influenced by local and national economic conditions.

Letters of credit represent extensions of credit granted in the normal course of business, which are not reflected in the Company’s consolidated financial statements.

As of December 31, 2020 and 2019, the Company was contingently liable for $1,601 and $1,400, respectively, with respect to outstanding letters of credit.

In addition, Civista had issued lines of credit to customers.

Borrowings under such lines of credit are usually for the working capital needs of the borrower.

At December 31, 2020 and 2019, Civista had commitments to extend credit, excluding letters of credit, in the aggregate amounts of approximately $508,051 and $448,962, respectively.

Of these amounts, $466,338 and $411,671 represented lines of credit and construction loans, and $41,713 and $37,291 represented overdraft protection commitments at December 31, 2020 and 2019, respectively.

Such amounts represent the portion of total commitments that had not been used by customers as of December 31, 2020 and 2019.

Maturities and Sensitivities of Loans to Changes in Interest Rates

The following table shows the amount of commercial and agriculture, commercial real estate, residential real estate, real estate construction, farm real estate and consumer and other loans outstanding as of December 31, 2020, which, based on the contract terms for repayments of principal, are due in the periods indicated.

In addition, the amounts due after one year are classified according to their sensitivity to changes in interest rates.

Due After One Year

Variable Rate

(Dollars in thousands)

Commercial and Agriculture

Commercial & Agriculture

Commercial Real Estate:

5 unchanged sentences

Consumer and Other

(Dollars in thousands)

Due after one but within five years

Due after five years

The preceding maturity information is based on contract terms at December 31, 2021 and does not include any possible “rollover” at maturity date.

1 unchanged sentence

Evaluation of such requests includes a review of the borrower’s credit history, the collateral securing the loan and the purpose for such request.

Risk Elements

The following table presents information concerning the amount of loans at December 31 that contain certain risk elements, excluding purchase credit impaired loans.

(Dollars in thousands)

Loans accounted for on a nonaccrual basis (1)

Accruing loans which are contractually past due 90

days or more as to principal or interest payments

Loans that have been modified in a troubled

debt restructuring (2)

Impaired loans included in above totals

Impaired loans not included in above totals

Total impaired loans

A loan is placed on nonaccrual status when doubt exists as to the collectability of the loan, including any accrued interest.

With a few immaterial exceptions, commercial and agriculture, commercial real estate, residential real estate and construction loans past due 90 days are placed on nonaccrual unless they are well collateralized and in the process of collection.

Generally, consumer loans are charged-off by the time they become past due 120 days unless they are well collateralized and in the process of collection.

Once a loan is placed on nonaccrual, interest is only recognized on a cash basis where future collections of principal is probable.

Excludes loans accounted for on a nonaccrual basis and loans contractually past due 90 days or more as to principal or interest payments.

There were no loans as of December 31, 2020, other than those disclosed above, where known information about probable credit problems of borrowers caused management to have serious doubts as to the ability of such borrowers to comply with the present loan repayment terms.

There were no other interest-bearing assets that would be required to be disclosed in the table above, if such assets were loans as of December 31, 2020.

The gross interest income that would have been recorded on nonaccrual loans and restructured loans in 2020 if the loans had been current in accordance with their original terms and had been outstanding throughout the period or since origination, if held for part of the period, was $536.

The amount of cash-basis interest income on such loans actually included in net income in 2020 was $477.

Interest income recognition associated with impaired loans was as follows.

(Dollars in thousands)

Interest income on impaired loans, all of which

was recognized on a cash basis

At December 31, 2020, Civista had two concentrations of loans exceeding 10% of total loans:

one to Lessors of Non-Residential Buildings and Dwellings totaling $523,352, or 25.4 percent of total loans, as of December 31, 2020, and the other to Lessors of Residential Buildings and Dwellings totaling $256,247, or 12.4 percent of total loans, as of December 31, 2020.

These segments of the portfolio are stable and have been conservatively underwritten, monitored and managed by experienced commercial bankers.

However, the customers’ ability to repay their loans is dependent on the real estate market and general economic conditions in the area.

There were no foreign loans outstanding at December 31, 2020.

Summary of Loan Loss Experience

Allowance for Credit Losses

Analysis of the Allowance for Loan Losses

The following table shows the daily average loan balances and changes in the allowance for loan losses for the years indicated.

The following table shows the daily average loan balances and changes in the allowance for credit losses for the years indicated.

(Dollars in thousands)

Daily average amount of loans net of

unearned income

Allowance for loan losses at beginning

Loan charge-offs:

Commercial and Agriculture

Commercial Real Estate—Owner

Total loans outstanding

Allowance for credit losses at year end

Loans accounted for on a nonaccrual basis

Allowance for credit losses to total loans outstanding

Nonaccrual loans to total loans outstanding

Allowance for credit losses to nonaccrual loans

Average loans outstanding:

Commercial & Agriculture

Commercial Real Estate—Owner Occupied

Commercial Real Estate—Non-Owner

3 unchanged sentences

Consumer and Other

Total charge-offs

Recoveries of loans previously charged-off:

Commercial and Agriculture

Commercial Real Estate—Owner

Total average loans outstanding

Net charge-offs (recoveries):

Commercial & Agriculture

Commercial Real Estate—Owner Occupied

Commercial Real Estate—Non-Owner

3 unchanged sentences

Consumer and Other

Total recoveries

Net recoveries (charge-offs) (1)

Provision (credit) for loan losses (2)

Allowance for loan losses at year end

Allowance for loan losses as a percent of

loans at year-end

Ratio of net charge-offs (recoveries) during

the year to average loans outstanding

The amount of net charge-offs fluctuates from year to year due to factors relating to the condition of the general economy, decline in market values of collateral and deterioration of specific businesses.

The determination of the balance of the allowance for loan losses is based on a detailed analysis of the loan portfolio and reflects an amount that, in management’s judgment, is adequate to provide for probable incurred loan losses.

Such analysis is based on a review of specific loans, the character of the loan portfolio, current economic conditions, risk management practices and such other factors as management believes require current recognition in estimating probable incurred loan losses.

Allocation of Allowance for Loan Losses

The following tables allocate the allowance for loan losses at December 31 to each loan category.

The allowance has been allocated according to the amount deemed to be reasonably necessary to provide for the probable losses estimated to be incurred within the following categories of loans at the dates indicated.

(Dollars in thousands)

Commercial and Agriculture

Total net charge-offs (recoveries)

Ratio of net charge-offs (recoveries) during the year to average loans outstanding:

Commercial & Agriculture

Commercial Real Estate—Owner Occupied

Commercial Real Estate—Non-Owner Occupied

Commercial Real Estate—Non-Owner

Real Estate Mortgage

2 unchanged sentences

Consumer and Other

Total net recoveries (charge-offs)

Allocation of Allowance for Credit Losses

The following tables allocate the allowance for loan losses at December 31 to each loan category.

(Dollars in thousands)

1 unchanged sentence

Commercial Real Estate—Owner Occupied

Commercial Real Estate—Non-Owner Occupied

Commercial Real Estate—Non-Owner

Real Estate Mortgage

5 unchanged sentences

Commercial Real Estate—Owner Occupied

Commercial Real Estate—Non-Owner Occupied

Commercial Real Estate—Non-Owner

Real Estate Mortgage

9 unchanged sentences

The unallocated reserve of Civista increased to $847 in 2021 from $240 in 2020.

Management considers both the decrease in unallocated and the end-of-period number to be insignificant and within the loan policy guidelines.

Management considers both the increase in unallocated and the end-of-period

number to be insignificant and within the loan policy guidelines.

The average daily amount of deposits (all in domestic offices) and average rates paid on such deposits is summarized for the years indicated.

2 unchanged sentences

Interest-bearing demand deposits

Savings, including Money Market deposit

Savings, including Money Market deposit accounts

Certificates of deposit, including IRA’s

Maturities of certificates of deposits and individual retirement accounts of $100,000 or more outstanding at December 31, 2020 are summarized as follows.

Uninsured deposits at December 31, 2021 and 2020 were $599,380 and $515,454, respectively.

Uninsured deposits as December 31, 2021 and 2020 are based on estimates and include portions of FDIC-insured deposit accounts that exceed the insurance limit of $250,000 per separately insured depositor.

Maturities of certificates of deposits and individual retirement accounts of more than $250,000 outstanding at December 31, 2021 are summarized as follows.

(Dollars in thousands)

3 unchanged sentences

Over 12 months

Return on Equity and Assets

Information required by this section is incorporated herein by reference from the information appearing under the caption “Five-Year Selected Consolidated Financial Data” located on pages 1 and 2 of the 2020 Annual Report.

The common share dividend payout ratio was 22.0% in 2020, 19.8% in 2019 and 29.1% in 2018.

Short-term Borrowings

See Note 10 to the consolidated financial statements (located on page 67 of the 2020 Annual Report) and “Distribution of Assets, Liabilities and Shareholders’ Equity;

Interest Rates and Interest Differential” (located on pages 14 through 16 of the 2020 Annual Report) for the statistical disclosures for short-term borrowings for 2020, 2019 and 2018.

FOR WARD-LOOKING STATEMENTS

This Annual Report on Form 10-K

may contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), relating to such matters as financial condition, anticipated operating results, cash flows, business line results, credit quality expectations, prospects for new lines of business, economic trends (including interest rates) and similar matters.

Forward-looking statements reflect our expectations, estimates or projections concerning future results or events.

These statements are generally identified by the use of forward-looking words or phrases such as “believe,” “belief,” “expect,” “anticipate,” “may,” “could,” “intend,” “intent,” “estimate,” “plan,” “foresee,” “likely,” “will,” “should” or other similar words or phrases.

Forward-looking statements are not guarantees of performance and are inherently subject to known and unknown risks, uncertainties and assumptions that are difficult to predict and could cause our actual results, performance or achievements to differ materially from those expressed in or implied by the forward-looking statements.

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

Forward-looking statements involve risks and uncertainties.

Actual results may differ materially from those predicted by the forward-looking statements because of various factors and possible events, including those factors and events identified in the risk factors set forth below.

There is also the risk that the Company’s management or Board of Directors incorrectly analyzes these risks and uncertainties or that the strategies the Company develops to address them are unsuccessful.

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

All subsequent written and oral forward-looking statements attributable to the Company or any person acting on the Company’s behalf are qualified in their entirety by the following cautionary statements

ECONOMIC AND POLITICAL RISKS

THE ECONOMIC IMPACT OF THE ONGOING COVID-19

PANDEMIC, OR AN OUTBREAK OF ANOTHER HIGHLY INFECTIOUS OR CONTAGIOUS DISEASE, COULD ADVERSELY AFFECT OUR BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The ongoing COVID-19

pandemic has negatively impacted global, national and local economies, disrupted global and national supply chains, lowered equity market valuations, and created significant volatility and disruption in financial markets.

In addition, the pandemic resulted in temporary closures of many businesses and the institution of social distancing and sheltering in place requirements in many states and communities and may result in the same or similar restrictions in the future.

As a result, the demand for Civista’s products and services has been and may continue to be significantly impacted, which could adversely affect our revenue and results of operations.

Furthermore, the COVID- 19 pandemic could result in the recognition of credit losses in our loan portfolios and increases in our allowance for credit losses, particularly if businesses remain required to operate at diminished capacities or are required to close again, the impact on the global, national and local economies worsen, or more customers draw on their lines of credit or seek additional loans to help finance their businesses.

Our business operations may also be disrupted if significant portions of our workforce are unable to work effectively, including because of illness, quarantines, government actions, or other restrictions in connection with COVID-19.

The extent to which COVID-19 impacts our business, results of operations, and financial condition, as well as our regulatory capital and liquidity ratios, will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the pandemic and actions taken by governmental authorities and other third parties in response to the pandemic.

As of December 31, 2021, we continued to hold and service a limited number of PPP loans.

These PPP loans are subject to the provisions of the CARES Act and to complex and evolving rules and guidance issued by the SBA and other government agencies.

We expect that most if not all of our remaining PPP borrowers will seek full or partial forgiveness of their loan obligations.

We have credit risk on the PPP loans if the SBA determines that there is a deficiency in the manner in which we originated, funded or serviced loans, including any issue with the eligibility of a borrower to receive a PPP loan.

We could face additional risks in our administrative capabilities to service our PPP loans, and risk with respect to the determination of loan forgiveness.

In the event of a loss resulting from a default on a PPP loan and a determination by the SBA that there was a deficiency in the manner in which we originated, funded or serviced the PPP loan, the SBA may deny its liability under the guaranty, reduce the amount of the guaranty or, if the SBA has already paid under the guaranty, seek recovery of any loss related to the deficiency.

The spread of COVID-19,

including new variants thereof, has also caused us to modify our business practices, including employee travel, employee work locations, and cancellation of physical participation in meetings, events and conferences.

technology in employees’ homes may not be as robust as in our offices and could cause the networks, information systems, applications, and other tools available to such employees to be more limited or less reliable.

The continuation of these work-from-home measures also introduces additional operational risk, including increased cybersecurity risk from phishing, malware, and other cybersecurity attacks, all of which could expose us to risks of data or financial loss and could seriously disrupt our operations and the operations of any impacted customers.

including the spread of new variants thereof, or a new pandemic could subject us to any of the following risks, any of which could, individually or in the aggregate, have a material adverse effect on our business, financial condition, liquidity, and results of operations:

demand for our products and services may decline, making it difficult to grow assets and income;

if the economy is unable to fully reopen or experiences additional or new closures or downturns as a result of the COVID-19 pandemic, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income;

collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase;

our allowance for loan losses may have to be increased if borrowers experience financial difficulties beyond forbearance periods, which will adversely affect our net income;

the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us;

a prolonged weakness in economic conditions resulting in a reduction of future projected earnings could result in our recording a valuation allowance against our current outstanding deferred tax assets;

we rely on third party vendors for certain services, and the unavailability of a critical service due to COVID-19

could have an adverse effect on us;

continued adverse economic conditions could result in protracted volatility in the price of our common shares.

Moreover, our future success and profitability substantially depend on the management skills of our executive officers and directors, many of whom have held officer and director positions with us for many years.

The unanticipated loss or unavailability of key employees due to COVID-19,

including new variants thereof, or any similar pandemic could harm our ability to operate our business or execute our business strategy.

We may not be successful in finding and integrating suitable successors in the event of key employee loss or unavailability.

Even after the COVID-19

pandemic subsides, the U.S.

economy will likely require time to recover, the length of which is unknown and during which the United States may experience a recession or market correction.

Our business could be materially and adversely affected by such recession or market correction.

We continue to closely monitor the impact of COVID-19

and related risks as they evolve.

To the extent the effects of COVID-19

adversely impact our business, financial condition, liquidity or results of operations, it may also have the effect of heightening many of the other risks described in this section.

CHANGES IN ECONOMIC AND POLITICAL CONDITIONS COULD ADVERSELY AFFECT OUR EARNINGS THROUGH DECLINES IN DEPOSITS, LOAN DEMAND, THE ABILITY OF OUR CUSTOMERS TO REPAY LOANS AND THE VALUE OF THE COLLATERAL SECURING OUR LOANS.

Our success depends to a significant extent upon local and national economic and political conditions, as well as governmental fiscal and monetary policies.

Conditions such as inflation, recession, unemployment, changes in interest rates, fiscal and monetary policy, an increasing federal government budget deficit, slowing gross domestic product, tariffs, a U.S.

withdrawal from or significant renegotiation of trade agreements, trade wars, and other factors beyond our control may adversely affect Civista’s deposit levels and composition, the quality of investment securities available for purchase, demand for loans, the ability of Civista’s borrowers to repay their loans, and the value of the collateral securing loans made by Civista.

Disruptions in U.S.

and global financial markets, and changes in oil production in the Middle East also affect the economy and stock prices in the U.S., which can affect our earnings capital, as well as the ability of Civista’s customers to repay loans.

Because we have a significant amount of real estate loans, decreases in real estate values could adversely affect the value of property used as collateral and our ability to sell the collateral upon foreclosure.

Adverse changes in the economy, including those resulting from the ongoing COVID-19

pandemic, may also have a negative effect on the ability of our borrowers to make timely repayments of their loans, which would have an adverse impact on our earnings and cash flows.

ADVERSE CHANGES IN THE REAL ESTATE MARKET COULD CAUSE INCREASES IN DELINQUENCIES AND NON-PERFORMING

ASSETS, INCLUDING ADDITIONAL LOAN CHARGE-OFFS, AND COULD DEPRESS OUR INCOME, EARNINGS AND CAPITAL.

At December 31, 202 I, approximately 21.5% and 56.3%, respectively, of our loan portfolio was comprised of residential and commercial real estate loans.

Adverse changes in economic conditions both nationally and in the communities we serve have and may continue to cause deterioration to the value of real estate Civista uses to secure its loans.

Adverse changes in the economy, deterioration of our real estate portfolio, a decrease in real estate values, an increase in unemployment, decreased or nonexistent housing price appreciation or increases in interest rates could reduce our earnings and consequently our financial condition because borrowers may not be able to repay their loans.

The value of the collateral securing our loans and the quality of our loan portfolio may decline and customers may not want or need our products and services.

Any of these scenarios could cause us to make fewer loans, increase delinquencies and non-performing

assets, require us to charge off a higher percentage of our loans or result in additional increases to our provision for loan losses in future periods, which could adversely affect our business, financial condition and results of operations.

CHANGES IN INTEREST RATES COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR NET INTEREST INCOME.

Our results of operations are affected principally by net interest income, which is the difference between interest earned on loans and investments and interest expense paid on deposits and other borrowings.

The spread between the yield on our interest-earning assets and our overall cost of funds has been compressed in the recent low interest rate environment, and our net interest income may continue to be adversely impacted by an extended period of continued low rates.

We cannot predict or control changes in interest rates.

National, regional and local economic conditions and the policies of regulatory authorities, including monetary policies of the Board of Governors of the Federal Reserve System, affect the movement of interest rates and our interest income and interest expense.

If the interest rates paid on deposits and other borrowed funds increase at a faster rate than the interest rates received on loans and other investments, our net interest income, and therefore earnings, could be adversely affected.

Earnings could also be adversely affected if the interest rates received on loans and other investments fall more quickly than the interest rates paid on deposits and other borrowed funds.

In addition, certain assets and liabilities may react in different degrees to changes in market interest rates.

For example, interest rates on some types of assets and liabilities may fluctuate prior to changes in broader market interest rates, while interest rates on other types may lag behind.

Some of our assets, such as adjustable rate mortgages, have features that restrict changes in their interest rates, including rate caps.

Interest rates are highly sensitive to many factors that are beyond our control.

Some of these factors include:

unemployment;

money supply;

international disorders;

instability in domestic and foreign financial markets.

Changes in interest rates may affect the level of voluntary prepayments on our loans and may also affect the level of financing or refinancing by customers.

We believe that the impact on our cost of funds from a rise in interest rates will depend on a number of factors, including but not limited to, the competitive environment in the banking sector for deposit pricing, opportunities for clients to invest in other markets such as fixed income and equity markets, and the propensity of customers to invest in their businesses.

The effect on our net interest income from an increase in interest rates will ultimately depend on the extent to which the aggregate impact of loan re-pricings

exceeds the impact of increases in our cost of funds.

See the discussion under the caption “Quantitative and Qualitative Disclosures About Market Risk” on pages 19 through 21 of the 2021 Annual Report for additional information related to the Company’s interest rate risk.

A TRANSITION AWAY FROM LIBOR AS A REFERENCE RATE FOR FINANCIAL CONTRACTS COULD NEGATIVELY IMPACT OUR INCOME AND EXPENSES AND THE VALUE OF VARIOUS FINANCIAL CONTRACTS.

LIBOR is used extensively in the United States and globally as a benchmark for various commercial and financial contracts, including adjustable rate mortgages, corporate debt, interest rate swaps and other derivatives.

LIBOR is set based on interest rate information reported by certain banks, which may stop reporting such information after 2021.

On July 27, 2017, the United Kingdom’s Financial Conduct Authority (“FCA”) announced that it intends to stop persuading or compelling banks to submit LIBOR rates after 2021.

On November 30, 2020, to facilitate an orderly LIBOR transition, the OCC, the FDIC, and the Federal Reserve Board jointly announced that entering into new contracts using LIBOR as a reference rate after December 31, 2021, would create a safety and soundness risk.

On March 5, 2021, the FCA announced that all LIBOR settings will either cease to be provided by any administrator or no longer be representative immediately after December 31, 202 I, in the case of 1-week and 2-month

LIBOR, and immediately after June 30, 2023, in the case of the remaining LIBOR settings.

In the U.S., efforts to identify a set of alternative U.S.

dollar reference interest rates are ongoing, and the Alternative Reference Rate Committee (“ARRC”) has recommended the use of a Secured Overnight Funding Rate (“SOFR”).

SOFR is different from LIBOR in that it is a backward looking secured rate rather than a forward looking unsecured rate.

These differences could lead to a greater disconnect between our costs to raise funds for SOFR as compared to LIBOR.

For cash products and loans, ARRC has also recommended Term SOFR, which is a forward looking SOFR based on SOFR futures and may in part reduce differences between SOFR and LIBOR.

There are operational issues which may create a delay in the transition to SOFR or other substitute indices, leading to uncertainty across the industry.

These consequences cannot be entirely predicted and could have an adverse impact on the market value for or value of LIBOR-linked securities, loans, and other financial obligations or extensions of credit.

The Company has limited exposure to LIBOR, with total exposure as of December 31, 2021 of approximately $362.9 million.

The Company’s primary exposure to LIBOR relates to its promissory notes with borrowers, swap contracts with clients, offsetting swap contracts with third parties related to the swap contracts with clients, the Company’s LIBOR-based borrowings (if any), and Civista’s swap contracts which can be tied to LIBOR.

The Company’s contracts generally include a LIBOR term (for example, one month, three month, or one year) plus an incremental margin rate.

The Company is working through this transition via a multi-disciplinary project team.

We are still evaluating the impact the change to a benchmark like SOFR or Prime Rate will have on our financial condition, results of operations or cash flows.

RISKS RELATED TO OUR BUSINESS OPERATIONS

WE ARE EXPOSED TO OPERATIONAL RISK.

We are exposed to many types of operational risk, including reputational risk, legal and compliance risk, the risk of fraud or theft by employees or outsiders, unauthorized transactions by employees or operational errors, including clerical or record-keeping errors or those resulting from faulty or disabled computer or telecommunications systems.

Many of these risks are heightened in light of COVID-19.

We rely heavily on communications and information systems to conduct our business.

Any failure, interruption or breach in security of these systems could result in failures or disruptions in our customer relationship management, general ledger, deposit, loan and other systems.

We may be subject to disruptions of our operating systems arising from events that are wholly or partially beyond our control, which may include, for example, computer viruses, cyber-attacks, spikes in transaction volume and/or customer activity, electrical or telecommunications outages, or natural disasters.

Although we have programs in place related to business continuity, disaster recovery and information security to maintain the confidentiality, integrity and availability of our systems, business applications and customer information, such disruptions may give rise to interruptions in service to customers, loss of data privacy and loss or liability to us.

Any failure or interruption in our operations or information systems, or any security or data breach, could cause reputational damage, jeopardize the confidentiality of customer information, result in a loss of customer business, subject us to regulatory intervention or expose us to civil litigation and financial loss or liability, any of which could have a material adverse effect on us.

Given the volume of transactions we process, certain errors may be repeated or compounded before they are discovered and successfully rectified.

Our necessary dependence upon automated systems to record and process our transaction volume may further increase the risk that technical system flaws or employee tampering or manipulation of those systems will result in losses that are difficult to detect.

We may also be subject to disruptions of our operating systems arising from events that are wholly or partially beyond our control (for example, computer viruses or electrical or telecommunications outages), which may give rise to disruption of service to customers and to financial loss or liability.

We are further exposed to the risk that our external vendors may be unable to fulfill their contractual obligations (or will be subject to the same risk of fraud or operational errors by their respective employees as we are) and to the risk that our (or our vendors’) consumer compliance, business continuity and data security systems prove to be inadequate.

Negative public opinion can result from our actual or alleged conduct in any number of activities, including lending practices, corporate governance and acquisitions, social media and other marketing activities, the implementation of environmental, social and governance (ESP) practices, and from actions taken by governmental regulators and community organizations in response to any of the foregoing activities.

Negative public opinion could adversely affect our ability to attract and keep customers, could expose us to potential litigation and regulatory action, and could have a material adverse effect on the price of our common shares or result in heightened volatility of our stock price.

UNAUTHORIZED DISCLOSURE OF SENSITIVE OR CONFIDENTIAL CLIENT INFORMATION OR BREACHES IN SECURITY OF OUR SYSTEMS, COULD SEVERELY HARM OUR BUSINESS.

As part of our financial institution business, we collect, process and store sensitive consumer data by utilizing computer systems and telecommunications networks operated by both us and third-party service providers.

Our necessary dependence upon automated systems to record and process transactions poses the risk that technical system flaws, employee errors, tampering or manipulation of those systems, or attacks by third parties will result in losses and may be difficult to detect.

We have security and backup and recovery systems in place, as well as a business continuity plan, to ensure the computer systems will not be inoperable, to the extent possible.

The Company also routinely reviews documentation of such controls and backups related to third-party service providers.

Our inability to use or access these information systems at critical points in time could unfavorably impact the timeliness and efficiency of our business operations.

In recent years, some banks have experienced denial of service attacks in which individuals or organizations flood the bank’s website with extraordinarily high volumes of traffic, with the goal and effect of disrupting the ability of the bank to process transactions.

Other businesses have been victims of ransomware attacks in which the business becomes unable to access its own information and is presented with a demand to pay a ransom in order to once again have access to its information.

We could be adversely affected if one of our employees or a third-party service provider causes a significant operational break-down or failure, either as a result of human error or where an individual purposefully sabotages or fraudulently manipulates our operations or systems.

We are further exposed to the risk that the third-party service providers may be unable to fulfill their contractual obligations (or will be subject to the same risks as faced by us).

These disruptions may interfere with service to our customers, cause additional regulatory scrutiny and result in a financial loss or liability.

We are also at risk of the impact of natural disasters, terrorism and international hostilities on our systems or for the effects of outages or other failures involving power or communications systems operated by others.

Misconduct by employees could include fraudulent, improper or unauthorized activities on behalf of clients or improper use of confidential information.

We may not be able to prevent employee errors or misconduct, and the precautions we take to detect this type of activity might not be effective in all cases.

Employee errors or misconduct could subject us to civil claims for negligence or regulatory enforcement actions, including fines and restrictions on our business.

In addition, there have been instances where financial institutions have been victims of fraudulent activity in which criminals pose as customers to initiate wire and automated clearinghouse transactions out of customer accounts.

Although we have policies and procedures in place to verify the authenticity of our customers, we cannot assure that such policies and procedures will prevent all fraudulent transfers.

Such activity can result in financial liability and harm to our reputation.

We have implemented security controls to prevent unauthorized access to the computer systems, and we require our third-party service providers to maintain similar controls.

However, we cannot be certain that these measures will be successful.

A security breach of our computer systems and loss of confidential information, such as customer account numbers and related information, could result in a loss of customers’ confidence and, thus, loss of business.

While Civista maintains specific “cyber” insurance coverage, which would apply in the event of various breach scenarios, the amount of coverage may not be adequate in any particular case.

Furthermore, because cyber threat scenarios are inherently difficult to predict and can take many forms, some breaches may not be covered under our cyber insurance coverage.

Further, we may be impacted by data breaches at retailers and other third parties who participate in data interchanges with us and our customers that involve the theft of customer credit and debit card data, which may include the theft of our debit card personal identification numbers (PINs) and commercial card information used to make purchases at such retailers and other third parties.

Such data breaches could result in us incurring significant expenses to reissue debit cards and cover losses, which could result in a material adverse effect on our results of operations.

To date, we have not experienced any material losses relating to cyber-attacks or other information security breaches, but there can be no assurance that we will not suffer such attacks or attempted breaches, or incur resulting losses in the future.

Our risk and exposure to these matters remains heightened because of, among other things, the evolving nature of these threats, and our plans to continue to implement internet and mobile banking capabilities to meet customer demand.

As cyber and other data security threats continue to evolve, we may be required to expend significant additional resources to continue to modify and enhance its protective measures or to investigate and remediate any security vulnerabilities.

Our assets at risk for cyber-attacks include financial assets and non-public

information belonging to customers.

We use several third-party vendors who have access to our assets via electronic media.

Certain cyber security risks arise due to this access, including cyber espionage, blackmail, ransom, and theft.

All of the types of cyber incidents discussed above could result in damage to our reputation, loss of customer business, costs of incentives to customers or business partners in order to maintain their relationships, litigation, increased regulatory scrutiny and potential enforcement actions, repairs of system damage, increased investments in cybersecurity (such as obtaining additional technology, making organizational changes, deploying additional personnel, training personnel and engaging consultants), increased insurance premiums, and loss of investor confidence and a reduction in the price of our common shares, all of which could result in financial loss and material adverse effects on our results of operations and financial condition.

NONCOMPLIANCE WITH THE BANK SECRECY ACT (BSA) AND OTHER ANTI-MONEY LAUNDERING STATUTES AND REGULATIONS COULD CAUSE A MATERIAL FINANCIAL LOSS.

The BSA and the Patriot Act contain anti-money laundering and financial transparency provisions intended to detect and prevent the use of the U.S.

financial system for money laundering and terrorist financing activities.

The BSA, as amended by the Patriot Act and the AMLA, requires depository institutions and their holding companies to undertake activities including maintaining an anti-money laundering program, verifying the identity of clients, monitoring for and reporting suspicious transactions, reporting on cash transactions exceeding specified thresholds, and responding to requests for information by regulatory authorities and law enforcement agencies.

Financial Crimes Enforcement Network (also known as FinCEN), a unit of the Treasury Department that administers the BSA, is authorized to impose significant civil money penalties for violations of those requirements and has recently engaged in coordinated enforcement efforts with the federal bank regulatory agencies, as well as the U.S.

Department of Justice, Drug Enforcement Administration, and Internal Revenue Service.

The AMLA is intended to be a comprehensive reform and modernization to U.S.

bank secrecy and anti-money laundering laws, which includes a codified risk-based

approach to anti-money laundering compliance for financial institutions;

requires the development of standards for evaluating technology and internal processes for BSA compliance;

expands enforcement-related and investigation-related authority, including increasing available sanctions for certain BSA violations and instituting BSA whistleblower incentives and protections.

There is also increased scrutiny of compliance with the rules enforced by the Office of Foreign Assets Control (also known as OFAC).

If the Company’s policies, procedures, and systems are deemed deficient, or if the policies, procedures, and systems of the financial institutions that the Company has already acquired or may acquire in the future are deficient, the Company may be subject to liability, including fines and regulatory actions such as restrictions on the Company’s ability to pay dividends and the necessity to obtain regulatory approvals to proceed with certain planned business activities, including acquisition plans, which could negatively impact our business, financial condition, and results of operations.

Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have serious reputational consequences for the Company.

OUR BUSINESS COULD BE ADVERSELY AFFECTED THROUGH THIRD PARTIES WHO PERFORM SIGNIFICANT OPERATIONAL SERVICES ON OUR BEHALF.

The third parties performing operational services for the Company are subject to risks similar to those faced by the Company relating to cybersecurity, breakdowns or failures of their own systems, or misconduct of their employees.

Further, the operations of our third-party vendors could fail or otherwise become delayed as a result of COVID-19.

Like many other community banks, Civista also relies, in significant part, on a single vendor for the systems which allow Civista to provide banking services to Civista’s customers, for which the systems are maintained on Civista’s behalf by this single vendor.

One or more of the third parties utilized by us may experience a cybersecurity event or operational disruption and, if any such event does occur, it may not be adequately addressed, either operationally or financially, by such third party.

Certain of these third parties may have limited indemnification obligations to us in the event of a cybersecurity event or operational disruption, or may not have the financial capacity to satisfy their indemnification obligations.

Financial or operational difficulties of a third party provider could also impair our operations if those difficulties interfere with such third party’s ability to serve the Company.

If a critical third-party provider is unable to meet the needs of the Company in a timely manner, or if the services or products provided by such third party are terminated or otherwise delayed and if the Company is not able to develop alternative sources for these services and products quickly and cost-effectively, our business could be materially adversely effected.

Additionally, regulatory guidance adopted by federal banking regulators addressing how banks select, engage and manage their third-party relationships, affects the circumstances and conditions under which we work with third parties and the cost of managing such relationships.

STRONG COMPETITION WITHIN OUR MARKET AREA MAY REDUCE OUR ABILITY TO ATTRACT AND RETAIN DEPOSITS AND ORIGINATE LOANS.

We face competition both in originating loans and in attracting deposits within our market area, which includes North Central, West Central, South Western Ohio, South Eastern Indiana and Northern Kentucky.

We compete for clients by offering personal service and competitive rates on our loans and deposit products.

The type of institutions we compete with include large regional financial institutions, community banks, thrifts and credit unions operating within our market areas.

As a result of their size and ability to achieve economies of scale, certain of our competitors offer a broader range of products and services than we offer.

We expect competition to remain intense in the future as a result of legislative, regulatory and technological changes and the continuing trend of consolidation in the financial services industry.

In addition, to stay competitive in our markets we may need to adjust the interest rates on our products to match the rates offered by our competitors, which could adversely affect our net interest margin.

As a result, our profitability depends upon our continued ability to successfully compete in our market areas while achieving our investment objectives.

OUR ALLOWANCE FOR LOAN LOSSES MAY PROVE TO BE INSUFFICIENT TO ABSORB POTENTIAL LOSSES IN OUR LOAN PORTFOLIO.

We maintain an allowance for loan losses that we believe is a reasonable estimate of known and inherent losses within the loan portfolio.

We make various assumptions and judgments about the collectability of our loan portfolio, including the creditworthiness of our borrowers and the value of the real estate and other assets serving as collateral for the repayment of loans.

Through a periodic review and consideration of the loan portfolio, management determines the amount of the allowance for loan losses by considering general market conditions, the credit quality of the loan portfolio, the collateral supporting the loans and the performance of customers relative to their financial obligations with us.

However, every loan we make carries a risk of non-payment.

This risk is affected by, among other things, cash flow of the borrower and/or the project being financed, changes and uncertainties as to the future value of the collateral securing such loan, the credit history of the particular borrower, changes in economic and industry conditions, and the duration of the loan.

The amount of future losses is also susceptible to changes in economic, operating and other conditions, including changes in interest rates, which may be beyond our control, and these losses may exceed current estimates.

We cannot fully predict the amount or timing of losses or whether the allowance for loan losses will be adequate in the future.

If our assumptions prove to be incorrect, our allowance for loan losses may not be sufficient to cover losses inherent in our loan portfolio, resulting in additions to the allowance, which would adversely affect our earnings.

Excessive loan losses and significant additions to our allowance for loan losses could have a material adverse impact on our financial condition and results of operations.

In addition, bank regulators periodically review our allowance for loan losses and may require us to increase our allowance for loan losses or recognize further loan charge-offs.

Moreover, the Financial Accounting Standards Board (“FASB”) has changed its requirements for establishing the allowance for loan losses.

On June 16, 2016, the FASB issued Accounting Standard Update (“ASU”) 2016-13

“Financial Instruments - Credit Losses”, which replaces the incurred loss model with an expected loss model, and is referred to as the current expected credit loss (“CECL”) model.

Under the incurred loss model, loans are recognized as impaired when there is no longer an assumption that future cash flows will be collected in full under the originally contracted terms.

The FASB voted to defer the effective date for this ASU for smaller reporting companies, such as the Company, to annual reporting periods and interim reporting periods within those annual periods, beginning after December 15, 2022.

Under the CECL model, financial institutions will be required to use historical information, current conditions and reasonable forecasts to estimate the expected loss over the life of the loan.

The transition to the CECL model will bring with it significantly greater data requirements and changes to methodologies to accurately account for expected losses under the new parameters.

If the methodologies and assumptions that we use in the CECL model are proven to be incorrect, or inadequate, the allowance for credit losses may not be sufficient, resulting in the need for additional allowance for credit losses to be established, which could have a material adverse impact on our financial condition and results of operations.

We may further experience increased delinquencies, credit losses, and corresponding charges to capital, which could require us to increase our provision for loan losses associated with impacts related to the coronavirus outbreak due to quarantines, market downturns, increased unemployment rates, changes in consumer behavior related to pandemic fears, and related emergency response legislation.

We cannot predict the full impact of the coronavirus outbreak or any other future global pandemic on our business, but we may experience increased delinquencies and credit losses as a result of the outbreak.

Further, if real estate markets or the economy in general deteriorate (due to the coronavirus outbreak or otherwise), Civista may experience increased delinquencies and credit losses.

The allowance for loan losses may not be sufficient to cover actual loan-related losses.

Additionally, banking regulators may require Civista to increase its allowance for loan losses in the future, which could have a negative effect on Civista’s financial condition and results of operations.

Additions to the allowance for loan losses will result in a decrease in net earnings and capital and could hinder our ability to grow our assets.

Any increase in our allowance for loan losses or loan charge-offs as required by these regulatory authorities could have a material adverse effect on our financial condition and results of operations.

THE SMALL TO MEDIUM SIZED BUSINESSES THAT WE LEND TO MAY HAVE FEWER RESOURCES TO WEATHER ADVERSE BUSINESS CONDITIONS, WHICH MAY IMPAIR THEIR ABILITY TO REPAY LOANS, AND SUCH IMPAIRMENT COULD ADVERSELY AFFECT OUR RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

Our business development and marketing strategies primarily result in us serving the banking and financial services needs of small to medium-sized

These businesses generally have fewer financial resources in terms of capital or borrowing capacity than larger entities, frequently have smaller market shares than their competition, may be more vulnerable to economic downturns, often need substantial additional capital to expand or compete and may experience substantial volatility in operating results, any of which may impair a borrower’s ability to repay a loan.

In addition, the success of a small to medium-sized business often depends on the management skills, talents and efforts of one or two people or a small group of people, and the death, disability or resignation of one or more of these people could have a material adverse impact on the business and its ability to repay its loans.

If general economic conditions negatively impact Ohio, Indiana or the specific markets in these states in which we operate and small to medium-sized

businesses are adversely affected or our borrowers are otherwise affected by adverse business conditions, our business, financial condition and results of operations could be adversely affected.

Further, in response to the coronavirus pandemic, the FFCRA was passed on March 18, 2020.

The FFCRA provides wide ranging emergency relief and appropriations for coronavirus testing, expansion of food assistance, Medicaid funding, and unemployment insurance benefits.

In addition, the FFCRA requires that employers with 500 or fewer employees provide emergency paid sick leave and expanded emergency leave under the Family and Medical Leave Act.

In addition to the regulatory compliance costs, the FFCRA could have a significant financial impact on our customers that are small to medium-sized

businesses with 500 or fewer employees as the FFCRA will require these businesses to provide two weeks of paid sick leave and up to 12 weeks of paid (after 10 days) family and medical leave for employees who have worked at the company for at least 30 calendar days and who are unable to work (or even telework) in order to care for their children because of school closures or the unavailability of the child care provider due to the public health emergency.

While the U.S.

Department of Labor has broad authority to waive the applicability of these requirements for small businesses with fewer than 50 employees from the paid leave requirements if compliance with these requirements would affect the viability of the business, the applicability of this waiver, and the impact of these provisions on our impacted customers is unpredictable and unknown.

The FFCRA has the potential to negatively impact our customers’ costs, demand for our customers’ products, and, thus, adversely affect our business, financial condition, and results of operations.

OUR BUSINESS AND FINANCIAL RESULTS ARE SUBJECT TO RISKS ASSOCIATED WITH THE CREDITWORTHINESS OF OUR CUSTOMERS AND COUNTERPARTIES.

Credit risk is inherent in the financial services business and results from, among other things, extending credit to customers, purchasing securities, and entering into financial derivative transactions and certain guarantee contracts.

Credit risk is one of our most significant risks, particularly given the high percentage of our assets represented directly or indirectly by loans, and the importance of lending to our overall business.

We manage credit risk by assessing and monitoring the creditworthiness of our customers and counterparties and by diversifying our loan portfolio.

Many factors impact credit risk.

A borrower’s ability to repay a loan can be adversely affected by individual factors, such as business performance, job losses or health issues.

A weak or deteriorating economy and changes in the United States or global markets also could adversely impact the ability of our borrowers to repay outstanding loans.

Any decrease in our borrowers’ ability to repay loans would result in higher levels of nonperforming loans, net charge-offs, and provision for loan losses.

Despite maintaining a diversified loan portfolio, in the ordinary course of business, we may have concentrated credit exposure to a particular person or entity, industry, region or counterparty.

Events adversely affecting specific customers, industries, regions or markets, a decrease in the credit quality of a customer base or an adverse change in the risk profile of a market, industry, or group of customers could adversely affect us.

Our credit risk may be exacerbated when collateral held by us to secure obligations to us cannot be realized upon or is liquidated at prices that are not sufficient to recover the full amount of the loan or derivative exposure due us.

Due in part to improvement in local and general economic conditions, as well as actions we have taken to manage our loan portfolio, our provision for loan losses has declined since the end of the recent recession.

However, if we experience higher levels of provision for loan losses in the future, our net income could be negatively affected.

WE RELY HEAVILY ON OUR MANAGEMENT TEAM, AND THE UNEXPECTED LOSS OF KEY MANAGEMENT MAY ADVERSELY AFFECT OUR OPERATIONS.

Our success to date has been strongly influenced by our ability to attract and to retain senior management experienced in banking in the markets we serve.

Our ability to retain executive officers and the current management teams will continue to be important to successful implementation of our strategies.

The unexpected loss of services of any key management personnel, or the inability to recruit and retain qualified personnel in the future, could have an adverse effect on our business and financial results.

WE DEPEND UPON THE ACCURACY AND COMPLETENESS OF INFORMATION ABOUT CUSTOMERS AND OTHER PARTIES.

In deciding whether to extend credit or enter into other transactions with customers and counterparties, we may rely on information provided to us by customers and other parties, including financial statements and other financial information.

We may also rely on representations of customers and counterparties as to the accuracy and completeness of that information and, with respect to financial statements, on reports of independent auditors.

For example, in deciding whether to extend credit to a business, we may assume that the customer’s audited financial statements conform with accounting principles generally accepted in the United States and present fairly, in all material respects, the financial condition, results of operations and cash flows of the customer.

We may also rely on the audit report covering those financial statements.

Our financial condition and results of operations could be negatively impacted to the extent we rely on financial statements that do not comply with generally accepted accounting principles or that are materially misleading, or on other financial information that is incomplete or materially misleading.

WE DO NOT HAVE ASSURANCE REGARDING THE FUTURE REVENUES OF OUR TAX REFUND PROGRAM.

The revenues from our tax refund program are based upon a contract with a third party.

While the contract has a term of three years expiring October 31, 2022 and contains provisions for automatic renewal after that term, the amount to be paid to us is not fixed for any period after 2021.

As a result, the amount paid to us may fluctuate, and there is no assurance that the parties will be able to negotiate compensation that is acceptable to us after that year.

FUTURE ACQUISITIONS OR OTHER EXPANSION MAY ADVERSELY AFFECT OUR FINANCIAL CONDITION AND RESULT OF OPERATIONS.

In the future, we may acquire other financial institutions or branches or assets of other financial institutions.

We may also open new branches, enter into new lines of business, or offer new products or services.

On January I 0, 2022, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Comunibanc Corp.

(“Comunicbanc”) pursuant to which we will acquire Comunibanc and its wholly-owned subsidiary, The Henry County Bank.

It is anticipated that The Henry County Bank will be merged with and into Civista upon completion of the transaction, at which time The Henry County Bank’s seven banking offices located in Northwest Ohio will become offices of Civista.

At September 30, 2021, Comunibanc and The Henry County Bank had total consolidated assets of $329 million, total loans of $165 million and total deposits of $276 million.

The merger transaction is anticipated to be completed during the second quarter of 2022, subject to the satisfaction of closing conditions in the Merger Agreement and the approval of the appropriate regulatory authorities and of the shareholders of Comunibanc.

Any future acquisition or expansion of our business, including the contemplated acquisition of Comunibanc, will involve a number of expenses and risks, which may include some or all of the following:

the time and expense associated with identifying and evaluating potential acquisitions or expansions;

the potential inaccuracy of estimates and judgments used to evaluate credit, operations, management and market risk with respect to target institutions;

the time and costs of evaluating new markets, hiring local management and opening new offices, and the delay between commencing these activities and the generation of profits from the expansion;

any financing required in connection with an acquisition or expansion;

the diversion of management’s attention to the negotiation of a transaction and the integration of the operations and personnel of the combining businesses;

entry into unfamiliar markets and the introduction of new products and services into our existing business;

the possible impairment of goodwill associated with an acquisition and possible adverse short-term effects on our results of operations;

the risk of loss of key employees and customers.

We may incur substantial costs to expand, and we can give no assurance that such expansion will result in the levels of profits we expect.

Neither can we assure that integration efforts for any future acquisitions will be successful.

We may issue equity securities in connection with acquisitions, which could dilute the economic and voting interests of our existing shareholders.

LEGISLATIVE, LEGAL AND REGULATORY RISKS

LEGISLATIVE OR REGULATORY CHANGES OR ACTIONS COULD ADVERSELY IMPACT OUR BUSINESS.

The financial services industry is extensively regulated.

We are subject to extensive state and federal regulation, supervision and legislation that govern almost all aspects of our operations.

These laws and regulations are primarily intended for the protection of consumers, depositors, borrowers and the deposit insurance fund, not to benefit our shareholders.

Regulations affecting banks and financial services businesses are undergoing continuous change, particularly in light of COVID-19

and the stimulus programs issued in connection therewith, and management cannot predict the effect of those changes.

While such changes are generally intended to lessen the regulatory burden on financial institutions, the impact of any changes to laws and regulations or other actions by regulatory agencies could adversely affect our business.

Regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities, including the ability to impose restrictions on the operation of an institution and the ability to determine the adequacy of an institution’s allowance for loan losses.

Failure to comply with applicable laws, regulations and policies could result in sanctions being imposed by the regulatory agencies, including the imposition of civil money penalties, which could have a material adverse effect on our operations and financial condition.

Even the reduction of regulatory restrictions could have an adverse effect on us if such lessening of restrictions increases competition within our industry or market areas.

DEPOSIT INSURANCE PREMIUMS MAY INCREASE AND HAVE A NEGATIVE EFFECT ON THE COMPANY’S RESULTS OF OPERATIONS.

The DIF maintained by the FDIC to resolve bank failures is funded by fees assessed on insured depository institutions.

The costs of resolving bank failures increased for a period of time and decreased the DIF.

The FDIC collected a special assessment in 2009 to replenish the DIF and also required a prepayment of an estimated amount of future deposit insurance premiums.

If the costs of future bank failures increase, the deposit insurance premiums required to be paid by Civista may also increase.

The FDIC recently adopted rules revising its assessments in a manner benefitting banks with assets totaling less than $10 billion.

There can be no assurance, however, that assessments will not be changed in the future.

WE ARE SUBJECT TO EXAMINATIONS AND CHALLENGES BY TAX AUTHORITIES.

In the normal course of business, we are routinely subject to examinations and challenges from federal and state tax authorities regarding positions taken regarding their respective tax returns.

State tax authorities have become increasingly aggressive in challenging tax positions taken by financial institutions, especially those positions relating to tax compliance and calculation of taxes subject to apportionment.

Any challenge or examination by a tax authority may result in adjustments to the timing or amount of taxable net worth or taxable income, or deductions or the allocation of income among tax jurisdictions.

Management believes it has taken appropriate positions with respect to all tax returns and does not anticipate that any examination would have a material impact on our Consolidated Financial Statements.

However, the outcome of such examinations and ultimate resolution of any resulting assessments are inherently difficult to predict.

Thus, no assurance can be given that our tax liability for any tax year open to examination will be as reflected in our current and historical Consolidated Financial Statements.

ACCOUNTING CHANGES COULD IMPACT OUR REPORTED FINANCIAL CONDITION OR RESULTS OF OPERATIONS.

The accounting standard setters, including the Financial Accounting Standards Board (the FASB), the SEC and other regulatory bodies, periodically change the financial accounting and reporting guidance that governs the preparation of our consolidated financial statements.

The pace of change continues to accelerate and changes in accounting standards can be hard to predict and could materially impact how we record and report our financial condition and results of operations.

In some cases, we could be required to apply new or revised guidance retroactively, resulting in the restatement of prior period financial statements.

The preparation of consolidated financial statements in conformity with U.S.

GAAP requires management to make significant estimates that affect the financial statements.

Due to the inherent nature of these estimates, actual results may vary materially from management’s estimates.

In June 2016, FASB issued a new accounting standard for recognizing current expected credit losses, commonly referred to as CECL.

CECL will result in earlier recognition of credit losses and requires consideration of not only past and current events but also reasonable and supportable forecasts that affect collectability.

The Company will be required to comply with the new standard in the first quarter of 2023.

Upon adoption of CECL, credit loss allowances may increase, which would decrease retained earnings and regulatory capital.

The federal banking regulators have adopted a regulation that will allow banks to phase in the day-one impact of CECL on regulatory capital over three years.

CECL implementation poses operational risk, including the failure to properly transition internal processes or systems, which could lead to call report errors, financial misstatements, or operational losses.

WE MAY BE THE SUBJECT OF LITIGATION WHICH COULD RESULT IN LEGAL LIABILITY AND DAMAGE TO OUR BUSINESS AND REPUTATION.

From time to time, we may be subject to claims or legal action from customers, employees or others.

Financial institutions like CBI and Civista are facing a growing number of significant class actions, including those based on the manner of calculation of interest on loans and the assessment of overdraft fees.

Future litigation could include claims for substantial compensatory and/or punitive damages or claims for indeterminate amounts of damages.

We are also involved from time to time in other reviews, investigations and proceedings (both formal and informal) by governmental and other agencies regarding our business.

These matters also could result in adverse judgments, settlements, fines, penalties, injunctions or other relief.

Like other large financial institutions, we are also subject to risk from potential employee misconduct, including non-compliance

with policies and improper use or disclosure of confidential information.

Substantial legal liability or significant regulatory action against us could materially adversely affect our business, financial condition or results of operations and/or cause significant reputational harm to our business.

WE COULD FACE LEGAL AND REGULATORY RISK ARISING OUT OF OUR RESIDENTIAL MORTGAGE BUSINESS.

Numerous federal and state governmental, legislative and regulatory authorities are investigating practices in the business of mortgage and home equity loan lending and servicing and in the mortgage-related insurance and reinsurance industries.

We could face the risk of class actions, other litigation and claims from:

the owners of or purchasers of such loans originated or serviced by us, homeowners involved in foreclosure proceedings or various mortgage-related insurance programs, downstream purchasers of homes sold after foreclosure, title insurers, and other potential claimants.

Included among these claims are claims from purchasers of mortgage and home equity loans seeking the repurchase of loans where the loans allegedly breached origination covenants and representations and warranties made to the purchasers in the purchase and sale agreements.

The CFPB has issued new rules for mortgage origination and mortgage servicing.

Both the origination and servicing rules create new private rights of action for consumers against lenders and servicers in the event of certain violations.

RISKS RELATED TO OUR CAPITAL AND STOCK

WE MAY ELECT OR NEED TO RAISE ADDITIONAL CAPITAL IN THE FUTURE, BUT CAPITAL MAY NOT BE AVAILABLE WHEN IT IS NEEDED.

We are required by federal and state regulatory authorities to maintain adequate levels of capital to support our operations.

In addition, federal banking agencies have recently finalized extensive changes to their capital requirements, including the adoption of the final “Basel III” rules as discussed above, which result in higher capital requirements and more restrictive leverage and liquidity ratios than those previously in place.

If we experience significant loan losses, addition capital may need to be infused.

In addition, we may elect to raise additional capital to support business growth and/or to finance acquisitions, if any, or we may otherwise elect or be required to raise additional capital.

Our ability to raise additional capital, if needed, will depend on conditions in the capital markets, economic conditions and a number of other factors, many of which are outside our control, and are based on our financial performance.

Accordingly, we cannot be assured of our ability to raise additional capital if needed or on terms acceptable to us.

If we cannot raise additional capital when needed, it may have a material adverse effect on our financial condition, results of operations and prospects.

WE ARE A HOLDING COMPANY AND DEPEND ON OUR SUBSIDIARY BANK FOR DIVIDENDS.

As a financial holding company, we are a legal entity separate and distinct from our subsidiaries and affiliates.

Our principal source of funds to support our operations, pay dividends on our common and preferred shares and service our debt is dividends from our subsidiary bank, Civista.

In the event that Civista is unable to pay dividends to us, we may not be able to service our debt, pay our other obligations or pay dividends on our common or preferred shares.

Accordingly, our inability to receive dividends from Civista could also have a material adverse effect on our business, financial condition and results of operations.

Various federal and state statutory provisions and regulations limit the amount of dividends that Civista may pay to us without regulatory approval.

Generally, subject to certain minimum capital requirements, Civista may declare a dividend without the approval of the ODFI so long as the total amount of the dividends in a calendar year does not exceed Civista’s total net income for that year combined with its retained net income for the two preceding years.

In addition, the Federal Reserve has issued policy statements that provide that insured banks and bank holding companies should generally only pay dividends out of current operating earnings.

Thus, the ability of Civista to pay dividends in the future is currently influenced, and could be further influenced, by bank regulatory policies and capital guidelines and may restrict our ability to declare and pay dividends on our common or preferred shares.

THE MARKET PRICE OF OUR COMMON SHARES MAY BE SUBJECT TO FLUCTUATIONS AND VOLATILITY.

The market price of our common shares may fluctuate significantly due to, among other things, changes in market sentiment regarding our operations or business prospects, the banking industry generally or the macroeconomic outlook.

Factors that could impact our trading price include:

our operating and financial results, including how those results vary from the expectations of management, securities analysts and investors;

developments in our business or operations or in the financial sector generally;

future offerings by us of debt or preferred shares, which would be senior to our common shares upon liquidation and for purposes of dividend distributions;

legislative or regulatory changes affecting our industry generally or our business and operations specifically;

the operating and stock price performance of companies that investors consider to be comparable to us;

announcements of strategic developments, acquisitions and other material events by us or our competitors;

actions by our current shareholders, including future sales of common shares by existing shareholders, including our directors and executive officers;

other changes in U.S.

or global financial markets, global economies and general market conditions, such as interest or foreign exchange rates, stock, commodity, credit or asset valuations or volatility.

Equity markets in general and our common shares in particular have experienced considerable volatility over the past few years.

The market price of our common shares may continue to be subject to volatility unrelated to our operating performance or business prospects.

Increased volatility could result in a decline in the market price of our common shares.

THE SALE OF SUBSTANTIAL AMOUNTS OF OUR COMMON SHARES OR SECURITIES CONVERTIBLE INTO OUR COMMON SHARES IN THE PUBLIC MARKET COULD DEPRESS THE PRICE OF OUR COMMON SHARES.

In recent years, the stock market has experienced a high level of price and volume volatility, and market prices for the stock of many companies have experienced wide fluctuations that have not necessarily been related to their operating performance.

Therefore, our shareholders may not be able to sell their shares at the volumes, prices, or times that they desire.

We cannot predict the effect, if any, that future sales of our common shares or securities convertible into our common shares in the market, or availability of shares of our common shares or securities convertible into our common shares for sale in the market, will have on the market price of our common shares.

We can give no assurance that sales of substantial amounts of our common shares or securities convertible into our common shares in the market, or the potential for large amounts of sales in the market, would not cause the price of our securities to decline or impair our ability to raise capital through sales of our common shares.

GENERAL RISK FACTORS

ADVERSE CHANGES IN FINANCIAL MARKETS AND ECONOMIC CONDITIONS MAY ADVERSELY IMPACT OUR RESULTS OF OPERATIONS.

Although we primarily invest in securities issued by United States government agencies and sponsored entities and United States state and local governments with limited credit risk, certain of our investment securities possess higher credit risk since they represent beneficial interests in structured investments collateralized by residential mortgages, debt obligations and other similar assets.

Even securities issued by United States government agencies and sponsored entities may entail risk depending on political and economic changes.

Regardless of the level of credit risk, all investment securities are subject to changes in market value due to changing interest rates, implied credit spreads and credit ratings.

WE ARE AT RISK OF INCREASED LOSSES FROM FRAUD.

Criminals are committing fraud at an increasing rate and are using more sophisticated techniques.

In some cases, these individuals are part of larger criminal rings, which allow them to be more effective.

Such fraudulent activity has taken many forms, ranging from wire fraud, debit card fraud, check fraud, mechanical devices attached to ATM machines, social engineering and phishing attacks to obtain personal information, or impersonation of clients through the use of falsified or stolen credentials.

Additionally, an individual or business entity may properly identify itself, yet seek to establish a business relationship for the purpose of perpetrating fraud.

An emerging type of fraud even involves the creation of synthetic identification in which fraudsters “create” individuals for the purpose of perpetrating fraud.

Further, in addition to fraud committed directly against the Company, the Company may suffer losses as a result of fraudulent activity committed against third parties.

Increased deployment of technologies, such as chip card technology, defray and reduce certain aspects of fraud;

however, criminals are turning to other sources to steal personally identifiable information, such as unaffiliated healthcare providers and government entities, in order to impersonate the consumer and thereby commit fraud.

CHANGES IN TAX LAWS COULD ADVERSELY AFFECT OUR PERFORMANCE

We are subject to extensive federal, state and local taxes, including income, excise, sales/use, payroll, franchise, withholding and ad valorem taxes.

Changes to tax laws could have a material adverse effect on our results of operations, fair values of net deferred tax assets and obligations of states and political subdivisions held in our investment securities portfolio.

In addition, our customers are subject to a wide variety of federal, state and local taxes.

Changes in taxes paid by our customers may adversely affect their ability to purchase homes or consumer products, which could adversely affect their demand for our loans and deposit products.

In addition, such negative effects on our customers could result in defaults on the loans we have made and decrease the value of mortgage-backed securities in which we have invested.

WE NEED TO CONSTANTLY UPDATE OUR TECHNOLOGY IN ORDER TO COMPETE AND MEET CUSTOMER DEMANDS.

The financial services market, including banking services, is undergoing rapid technological changes with frequent introductions of new technology-driven products and services.

In addition to better serving customers, the effective use of technology increases efficiency and may enable us to reduce costs.

Our future success will depend, in part, on our ability to use technology to provide products and services that provide convenience to customers and to create additional efficiencies in our operations.

Some of our competitors have substantially greater resources to invest in technological improvements.

We may not be able to effectively implement new technology-driven products and services or be successful in marketing these products and services to our customers.

Failure to successfully keep pace with technological changes affecting the financial services industry could negatively affect our growth, revenue and profit.

WE ARE SUBJECT TO ENVIRONMENTAL LIABILITY RISK ASSOCIATED WITH CIVISTA’S LENDING ACTIVITIES.

A significant portion of Civista’s Joan portfolio is secured by real property.

During the ordinary course of business, Civista forecloses on and takes title to properties securing certain loans.

In doing so, there is a risk that hazardous or toxic substances could be found on these properties.

If hazardous or toxic substances are found, Civista may be liable for remediation costs, as well as for personal injury and property damage.

Environmental laws and evolving regulation may require Civista to incur substantial expenses and may materially reduce the affected property’s value or limit Civista’s ability to use or sell the affected property.

In addition, future laws and regulations or more stringent interpretations or enforcement policies with respect to existing laws or regulations may increase Civista’s exposure to environmental liability.

Environmental reviews of real property before initiating foreclosure actions may not be sufficient to detect all potential environmental hazards.

The remediation costs and any other financial liabilities associated with an environmental hazard could have a material adverse effect on our business, financial condition and results of operations.

CLIMATE CHANGE, SEVERE WEATHER, NATURAL DISASTERS, ACTS OF WAR OR TERRORISM AND OTHER EXTERNAL EVENTS COULD SIGNIFICANTLY IMPACT OUR BUSINESS.

Natural disasters, including severe weather events of increasing strength and frequency due to climate change, acts of war or terrorism, and other adverse external events could have a significant impact on our ability to conduct business or upon third parties who perform operational services for us or our customers.

Such events could affect the stability of our deposit base, impair the ability of borrowers to repay outstanding loans, impair the value of collateral securing loans, cause significant property damage, result in lost revenue or cause us to incur additional expenses.

Unresolved Staff Comments

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business