CIVISTA BANCSHARES, INC. - FORM 10-Q

CIVISTA BANCSHARES, INC. - FORM 10-Q - November 6, 2015

Attached files

Attached files

CIVISTA BANCSHARES, INC. Reports

file	filename
EX-32.2 - EX-32.2 - CIVISTA BANCSHARES, INC.	d96681dex322.htm
EX-31.1 - EX-31.1 - CIVISTA BANCSHARES, INC.	d96681dex311.htm
EX-32.1 - EX-32.1 - CIVISTA BANCSHARES, INC.	d96681dex321.htm
EX-31.2 - EX-31.2 - CIVISTA BANCSHARES, INC.	d96681dex312.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended: September 30, 2015

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

For the transition period from to

Commission File Number: 001-36192

Civista Bancshares, Inc.

(Exact name of registrant as specified in its charter)

Ohio

34-1558688

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)


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

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

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

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

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

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. Common Shares, no par value, outstanding at November 5, 2015 - 7,843,578 shares

CIVISTA BANCSHARES, INC.

Index


PART I.	Financial Information

Item 1.	Financial Statements:
	Consolidated Balance Sheets (Unaudited) September 30, 2015 and December 31, 2014	3

	Consolidated Statements of Income (Unaudited) Three and nine months ended September 30, 2015 and 2014	4

	Consolidated Statements of Comprehensive Income (Unaudited) Three and nine months ended September 30, 2015 and 2014	5

	Condensed Consolidated Statement of Shareholders’ Equity (Unaudited) Nine months ended September 30, 2015	6

	Condensed Consolidated Statements of Cash Flows (Unaudited) Nine months ended September 30, 2015 and 2014	7-8

	Notes to Interim Consolidated Financial Statements (Unaudited)	9-56

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	57-74

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	75-77

Item 4.	Controls and Procedures	78

PART II.	Other Information

Item 1.	Legal Proceedings	79

Item 1A.	Risk Factors	79

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	79

Item 3.	Defaults upon Senior Securities	79

Item 4.	Mine Safety Disclosures	79

Item 5.	Other Information	79

Item 6.	Exhibits	79-80

Signatures		81

Part I – Financial Information

ITEM 1.

Financial Statements

CIVISTA BANCSHARES, INC.

Consolidated Balance Sheets (Unaudited)

(In thousands, except share data)


	September 30, 2015			December 31, 2014
ASSETS
Cash and due from financial institutions	$	33,619		$	29,858
Securities available for sale		198,655			197,905
Loans held for sale		1,223			2,410
Loans, net of allowance of $14,760 and $14,268		985,515			900,589
Other securities		13,324			12,586
Premises and equipment, net		16,200			14,400
Accrued interest receivable		4,880			3,852
Goodwill		27,095			21,720
Other intangibles		2,588			2,025
Bank owned life insurance		19,987			19,637
Other assets		10,245			8,209

Total assets	$	1,313,331		$	1,213,191


LIABILITIES
Deposits
Noninterest-bearing	$	296,863		$	250,701
Interest-bearing		759,096			718,217

Total deposits		1,055,959			968,918
Federal Home Loan Bank advances		72,200			65,200
Securities sold under agreements to repurchase		20,887			21,613
Subordinated debentures		29,427			29,427
Accrued expenses and other liabilities		11,521			12,124

Total liabilities		1,189,994			1,097,282


SHAREHOLDERS’ EQUITY
Preferred shares, no par value, 200,000 shares authorized,
Series B Preferred stock, $1,000 liquidation preference, 24,072 shares issued at September 30, 2015 and 25,000 shares issued at December 31, 2014, net of issuance costs		22,273			23,132
Common shares, no par value, 20,000,000 shares authorized, 8,591,542 shares issued at September 30, 2015 and 8,455,881 shares issued at December 31, 2014		115,267			114,365
Accumulated earnings (deficit)		2,884			(4,306	)
Treasury shares, 747,964 shares at cost		(17,235	)		(17,235	)
Accumulated other comprehensive income (loss)		148			(47	)

Total shareholders’ equity		123,337			115,909


Total liabilities and shareholders’ equity	$	1,313,331		$	1,213,191

See notes to interim unaudited consolidated financial statements

Page 3

CIVISTA BANCSHARES, INC.

Consolidated Statements of Income (Unaudited)

(In thousands, except per share data)


	Three months ended September 30,					Nine months ended September 30,
	2015			2014		2015			2014
Interest and dividend income
Loans, including fees	$	11,755		$	10,218	$	33,271		$	29,850
Taxable securities		810			845		2,439			2,610
Tax-exempt securities		653			595		1,917			1,750
Federal funds sold and other		5			9		98			137

Total interest income		13,223			11,667		37,725			34,347

Interest expense
Deposits		513			552		1,588			1,740
Federal Home Loan Bank advances		111			236		326			887
Subordinated debentures		192			190		565			590
Other		5			5		15			15

Total interest expense		821			983		2,494			3,232

Net interest income		12,402			10,684		35,231			31,115
Provision for loan losses		400			—		1,200			1,500

Net interest income after provision for loan losses		12,002			10,684		34,031			29,615

Noninterest income
Service charges		1,262			1,110		3,487			3,184
Net gain (loss) on sale of securities		(5	)		1		(5	)		114
Net gain on sale of loans		269			239		888			470
ATM fees		520			481		1,484			1,388
Trust fees		659			822		2,159			2,396
Bank owned life insurance		116			118		350			373
Tax refund processing fees		—			6		2,000			2,321
Other		255			235		769			770

Total noninterest income		3,076			3,012		11,132			11,016

Noninterest expense
Salaries, wages and benefits		6,025			5,654		17,732			16,661
Net occupancy expense		595			510		1,833			1,771
Equipment expense		303			320		1,030			1,023
Contracted data processing		399			369		1,392			1,080
FDIC assessment		192			212		654			700
State franchise tax		205			240		661			680
Professional services		597			538		1,716			1,332
Amortization of intangible assets		189			201		522			604
ATM expense		119			203		563			606
Marketing		298			434		842			1,227
Other operating expenses		1,744			1,980		5,258			5,384

Total noninterest expense		10,666			10,661		32,203			31,068

Income before taxes		4,412			3,035		12,960			9,563
Income tax expense		1,159			729		3,414			2,306

Net Income		3,253			2,306		9,546			7,257
Preferred stock dividends and discount accretion		391			406		1,186			1,467

Net income available to common shareholders	$	2,862		$	1,900	$	8,360		$	5,790

Earnings per common share, basic	$	0.36		$	0.25	$	1.07		$	0.75

Earnings per common share, diluted	$	0.30		$	0.21	$	0.87		$	0.64

See notes to interim unaudited consolidated financial statements

Page 4

CIVISTA BANCSHARES, INC.

Consolidated Statements of Comprehensive Income (Unaudited)

(In thousands)


	Three months ended September 30,						Nine months ended September 30,
	2015			2014			2015			2014
Net income	$	3,253		$	2,306		$	9,546		$	7,257

Other comprehensive income:
Unrealized holding gains on available for sale securities		1,183			615			87			4,303
Tax effect		(403	)		(210	)		(30	)		(1,462	)
Pension liability adjustment		70			89			210			4,260
Tax effect		(24	)		(31	)		(72	)		(1,448	)

Total other comprehensive income		826			463			195			5,653

Comprehensive income	$	4,079		$	2,769		$	9,741		$	12,910

See notes to interim unaudited consolidated financial statements

Page 5

CIVISTA BANCSHARES, INC.

Condensed Consolidated Statement of Shareholders’ Equity (Unaudited)

(In thousands, except share data)


																	Accumulated
	Preferred Shares						Common Shares				Accumulated						Other			Total
	Outstanding						Outstanding				Earnings			Treasury			Comprehensive			Shareholders’
	Shares			Amount			Shares		Amount		(Deficit)			Shares			Income (Loss)			Equity

Balance, December 31, 2014		25,000		$	23,132			7,707,917	$	114,365	$	(4,306	)	$	(17,235	)	$	(47	)	$	115,909

Net Income		—			—			—		—		9,546			—			—			9,546

Other comprehensive loss		—			—			—		—		—			—			195			195

Conversion of Series B preferred shares to common shares		(928	)		(859	)		118,678		859		—			—			—			—

Stock-based compensation		—			—			16,983		43		—			—			—			43

Common stock dividends ($.15 per share)		—			—			—		—		(1,170	)		—			—			(1,170	)

Preferred stock dividend		—			—			—		—		(1,186	)		—			—			(1,186	)


Balance, September 30, 2015		24,072		$	22,273			7,843,578	$	115,267	$	2,884		$	(17,235	)	$	148		$	123,337

See notes to interim unaudited consolidated financial statements

Page 6

CIVISTA BANCSHARES, INC.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)


	Nine months ended September 30,
	2015			2014


Net cash from operating activities	$	14,375		$	11,043


Cash flows used for investing activities:
Maturities and calls of securities, available-for-sale		20,538			38,343
Purchases of securities, available-for-sale		(22,250	)		(54,425	)
Sale of securities available for sale		—			18,088
Redemption of Federal Reserve stock		138			11
Redemption of Federal Home Loan Bank stock		—			2,999
Purchase of Federal Reserve stock		(160	)		(140	)
Net loan originations		(9,426	)		(25,406	)
Purchase of consumer loans		(3,826	)		(3,120	)
Proceeds from sale of other real estate owned properties		289			191
Cash acquired in acquisition, net of purchase price		926			—
Proceeds from sale of premises and equipment		—			1,310
Purchases of premises and equipment		(933	)		(257	)

Net cash used for investing activities		(14,704	)		(22,406	)


Cash flows from financing activities:
Repayment of long-term FHLB advances		(5,000	)		(30,226	)
Net change in short-term FHLB advances		12,000			—
Proceeds from short-term FHLB advances		—			8,700
Proceeds from long-term FHLB advances		—			10,000
Increase in deposits		172			38,159
Increase (decrease) in securities sold under repurchase agreements		(726	)		75
Repayment of series A preferred stock		—			(22,857	)
Common dividends paid		(1,170	)		(1,079	)
Preferred dividends paid		(1,186	)		(1,467	)

Net cash provided by financing activities		4,090			1,305


Increase (decrease) in cash and due from financial institutions		3,761			(10,058	)
Cash and due from financial institutions at beginning of period		29,858			34,186

Cash and due from financial institutions at end of period	$	33,619		$	24,128


Cash paid during the period for:
Interest	$	2,468		$	3,254
Income taxes	$	2,250		$	950

Supplemental cash flow information:
Transfer of loans from portfolio to other real estate owned	$	174		$	261

See notes to interim unaudited consolidated financial statements

Page 7

CIVISTA BANCSHARES, INC

Condensed Consolidated Statement of Cash Flows (Unaudited) (Continued)

(In thousands)



	Nine months ended September 30, 2015

Acquisition of TCNB Financial Corp.

Noncash assets acquired:
Loans receivable	$	76,444
Other securities		716
Accrued interest receivable		194
Premises and equipment, net		1,738
Core deposit intangible		1,009
Other assets		472

Total non cash assets acquired		80,573

Liabilities assumed:
Deposits		86,869
Other liabilities		5

Total liabilities assumed		86,874

Net noncash liabilities acquired	$	6,301

See notes to interim unaudited consolidated financial statements

Page 8

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)

(1) Consolidated Financial Statements

Nature of Operations and Principles of Consolidation: As of May 1, 2015, our holding company changed its name from First Citizens Banc Corp to Civista Bancshares, Inc. (CBI). The Consolidated Financial Statements include the accounts of CBI and its wholly-owned subsidiaries: Civista Bank (Civista), First Citizens Insurance Agency, Inc., Water Street Properties, Inc. (Water St.) and FC Refund Solutions, Inc (FCRS). FCRS was formed to facilitate payment of individual state and federal income tax refunds. First Citizens Capital LLC (FCC) is wholly-owned by Civista and holds inter-company debt. The operations of FCC are located in Wilmington, Delaware. First Citizens Investments, Inc. (FCI) is wholly-owned by Civista and holds and manages its securities portfolio. The operations of FCI are located in Wilmington, Delaware. The above companies together are referred to as the “Company.” Intercompany balances and transactions are eliminated in consolidation.

The Consolidated Financial Statements have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the Company’s financial position as of September 30, 2015 and its results of operations and changes in cash flows for the periods ended September 30, 2015 and 2014 have been made. The accompanying Consolidated Financial Statements have been prepared in accordance with instructions of Form 10-Q, and therefore certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America have been omitted. The results of operations for the period ended September 30, 2015 are not necessarily indicative of the operating results for the full year. Reference is made to the accounting policies of the Company described in the notes to the financial statements contained in the Company’s 2014 annual report. The Company has consistently followed these policies in preparing this Form 10-Q.

The Company provides financial services through its offices in the Ohio counties of Erie, Crawford, Champaign, Franklin, Logan, Madison, Summit, Huron, Ottawa, Richland, Montgomery and Cuyahoga. Its primary deposit products are checking, savings, and term certificate accounts, and its primary lending products are residential mortgage, commercial, and installment loans. Substantially all loans are secured by specific items of collateral including business assets, consumer assets and commercial and Residential Real Estate. Commercial loans are expected to be repaid from cash flow from operations of businesses. The bank has two concentrations, one to Lessors of Non-Residential Buildings and Dwellings totaling $215,807, or 21.7 percent of total loans, as of September 30, 2015 and the other to Lessors of Residential Buildings and Dwellings totaling $134,752, or 13.6 percent of total loans, as of September 30, 2015. 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.

Other financial instruments that potentially represent concentrations of credit risk include deposit accounts in other financial institutions and Federal Funds sold that are in excess of federally insured limits. First Citizens Insurance Agency, Inc. was formed to allow the Company to participate in commission revenue generated through its third party insurance agreement. Insurance commission revenue was less than 1.0% of total revenue through September 30, 2015. Revenue from Water St. was less than 1.0% of total revenue through September 30, 2015. Management considers the Company to operate primarily in one reportable segment, banking.

Page 9

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)

(2) Significant Accounting Policies

Use of Estimates: To prepare financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in financial statements and the disclosures provided, and future results could differ. The allowance for loan losses, impairment of goodwill, fair values of financial instruments, deferred taxes and pension obligations are particularly subject to change.

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

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

Reclassifications: Some items in the prior year financial statements were reclassified to conform to the current presentation.

Derivative Instruments and Hedging Activities: The Company enters into interest rate swap agreements to facilitate the risk management strategies of a small number of commercial banking customers. All derivatives are accounted for in accordance with ASC-815, Derivatives and Hedging. The Company mitigates the risk of entering into these agreements by entering into equal and offsetting swap agreements with highly rated third party financial institutions. The swap agreements are free-standing derivatives and are recorded at fair value in the Company’s consolidated balance sheets. The Company is party to master netting arrangements with its financial institution counterparties; however, the Company does not offset assets and liabilities under these arrangements for financial statement presentation purposes because the Company does not currently intend to execute a setoff with its’ counterparties. The master netting arrangements provide for a single net settlement of all swap agreements, as well as collateral, in the event of default on, or termination of, any one contract. Collateral, usually in the form of marketable securities, is posted by the counterparty with net liability positions in accordance with contract thresholds.

Page 10

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)

Effect of Newly Issued but Not Yet Effective Accounting Standards:

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (a new revenue recognition standard). The Update’s core principle is that a company will recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, this Update specifies the accounting for certain costs to obtain or fulfill a contract with a customer and expands disclosure requirements for revenue recognition. This Update is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. The Company is evaluating the effect of adopting this new accounting Update on the Company’s financial statements.

In June 2014, the FASB issued ASU 2014-12, Compensation-Stock Compensation (Topic 718): Accounting for Share-Based Payments when the Terms of an Award Provide that a Performance Target Could Be Achieved After the Requisite Service Period. The amendments require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. The amendments in this Update are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Earlier adoption is permitted. Entities may apply the amendments in this Update either (a) prospectively to all awards granted or modified after the effective date or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. If retrospective transition is adopted, the cumulative effect of applying this Update as of the beginning of the earliest annual period presented in the financial statements should be recognized as an adjustment to the opening retained earnings balance at that date. Additionally, if retrospective transition is adopted, an entity may use hindsight in measuring and recognizing the compensation cost. The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial position or results of operations.

In November 2014, the FASB issued ASU 2014-16, Derivatives and Hedging (Topic 815): Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity (a consensus of the FASB Emerging Issues Task Force). This Update clarifies how current U.S. GAAP should be interpreted in subjectively evaluating the economic characteristics and risks of a host contract in a hybrid financial instrument that is issued in the form of a share. Public business entities are required to implement the new requirements in fiscal years and interim periods within those fiscal years beginning after December 15, 2015. This Update is not expected to have a significant impact on the Company’s financial statements.

In November 2014, the FASB issued ASU 2014-17, Business Combinations (Topic 805): Pushdown Accounting. The amendments in this Update apply to the separate financial statements of an acquired entity and its subsidiaries that are a business or nonprofit activity (either public or nonpublic) upon the occurrence of an event in which an acquirer (an individual or an entity) obtains control of the acquired entity. An acquired entity may elect the option to apply pushdown accounting in the reporting period in which the change-in-control event occurs. If pushdown accounting is not applied in the reporting period in which the change-in-control event occurs, an acquired entity will have the option to elect to apply pushdown accounting in a subsequent reporting period to the acquired entity’s most recent

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Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)

change-in-control event. The amendments in this Update are effective on November 18, 2014. After the effective date, an acquired entity can make an election to apply the guidance to future change-in-control events or to its most recent change-in-control event. This Update is not expected to have a significant impact on the Company’s financial statements.

In February 2015, the FASB issued ASU 2015-02, Consolidation (Topic 810). The amendments in this Update affect reporting entities that are required to evaluate whether they should consolidate certain legal entities. All legal entities are subject to reevaluation under the revised consolidation model. Specifically, the amendments (1) modify the evaluation of whether limited partnerships and similar legal entities are variable interest entities (VIEs) or voting interest entities; (2) eliminate the presumption that a general partner should consolidate a limited partnership; (3) affect the consolidation analysis of reporting entities that are involved with VIEs, particularly those that have fee arrangements and related party relationships; and (4) provide a scope exception from consolidation guidance for reporting entities with interests in legal entities that are required to comply with or operate in accordance with requirements that are similar to those in Rule 2a-7 of the Investment Company Act of 1940 for registered money market funds. The amendments in this Update are effective for public business entities for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. For all other entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2016, and for interim periods within fiscal years beginning after December 15, 2017. This Update is not expected to have a significant impact on the Company’s financial statements.

In April 2015, the FASB issued ASU 2015-03, Interest-Imputation of Interest (Subtopic 835-30), as part of its initiative to reduce complexity in accounting standards. To simplify presentation of debt issuance costs, the amendments in this Update require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this Update. For public business entities, the amendments in this Update are effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. For all other entities, the amendments in this Update are effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within fiscal years beginning after December 15, 2016. An entity should apply the new guidance on a retrospective basis, wherein the balance sheet of each individual period presented should be adjusted to reflect the period-specific effects of applying the new guidance. This Update is not expected to have a significant impact on the Company’s financial statements.

In April 2015, the FASB issued ASU 2015-04, Compensation-Retirement Benefits (Topic 715), as part of its initiative to reduce complexity in accounting standards. For an entity with a fiscal year-end that does not coincide with a month-end, the amendments in this Update provide a practical expedient that permits the entity to measure defined benefit plan assets and obligations using the month-end that is closest to the entity’s fiscal year-end and apply that practical expedient consistently from year to year. The practical expedient should be applied consistently to all plans if an entity has more than one plan. The amendments in this Update are effective for public business entities for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. For all other entities, the amendments in this Update are effective for financial statements issued for fiscal years beginning after December 15, 2016, and interim periods within fiscal years beginning after December 15, 2017. Earlier application is permitted. This Update is not expected to have a significant impact on the Company’s financial statements.

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Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)

In May 2015, the FASB issued ASU 2015-07, Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent). The Update applies to reporting entities that elect to measure the fair value of an investment using the net asset value per share (or its equivalent) practical expedient. Under the amendments in this Update, investments for which fair value is measured at net asset value per share (or its equivalent) using the practical expedient should not be categorized in the fair value hierarchy. Removing those investments from the fair value hierarchy not only eliminates the diversity in practice resulting from the way in which investments measured at net asset value per share (or its equivalent) with future redemption dates are classified, but also ensures that all investments categorized in the fair value hierarchy are classified using a consistent approach. Investments that calculate net asset value per share (or its equivalent), but for which the practical expedient is not applied will continue to be included in the fair value hierarchy. A reporting entity should continue to disclose information on investments for which fair value is measured at net asset value (or its equivalent) as a practical expedient to help users understand the nature and risks of the investments and whether the investments, if sold, are probable of being sold at amounts different from net asset value. The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. For all other entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. A reporting entity should apply the amendments retrospectively to all periods presented. The retrospective approach requires that an investment for which fair value is measured using the net asset value per share practical expedient be removed from the fair value hierarchy in all periods presented in an entity’s financial statements. Earlier application is permitted. This Update is not expected to have a significant impact on the Company’s financial statements.

In May 2015, the FASB issued ASU 2015-08, Business Combinations – Pushdown Accounting – Amendment to SEC Paragraphs Pursuant to Staff Accounting Bulletin No. 115. This ASU was issued to amend various SEC paragraphs pursuant to the issuance of Staff Accounting Bulletin No. 115. This Update is not expected to have a significant impact on the Company’s financial statements.

In August 2015, the FASB issued ASU 2015-14, Revenue from Contract with Customers (Topic 606). The amendments in this Update defer the effective date of ASU 2014-09 for all entities by one year. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in ASU 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. All other entities should apply the guidance in ASU 2014-09 to annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. The Company is evaluating the effect of adopting this new accounting Update.

In August 2015, the FASB issued ASU 2015-15, Interest-Imputation of Interest (Subtopic 835-30) Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting. This ASU adds SEC

Page 13

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)

paragraphs pursuant to the SEC Staff Announcement at the June 18, 2015 Emerging Issues Task Force meeting about the presentation and subsequent measurement of debt issuance costs associated with line-of-credit arrangements. The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial position or results of operations.

In September 2015, the FASB issued ASU 2015-16, Business Combinations (Topic 805). The amendments in this Update require that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The amendments in this Update require that the acquirer record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. The amendments in this Update require an entity to present separately on the face of the income statement or disclose in the notes the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years. For all other entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2016, and interim periods within fiscal years beginning after December 15, 2017. The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial position or results of operations.

Page 14

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)

(3) Merger

On March 6, 2015, CBI completed the acquisition by merger of TCNB Financial Corp. (“TCNB”) in an all-cash transaction for aggregate consideration of $17,226, or $23.50 per share of TCNB stock. The Company and TCNB had first announced that they had entered into an agreement to merge in September of 2014. Immediately following the merger, TCNB’s banking subsidiary, The Citizens National Bank of Southwestern Ohio, was merged into CBI’s banking subsidiary, Civista Bank.

At the time of the merger, TCNB had total assets of $97,479, including $76,771 in loans, and $86,708 in deposits. The transaction was recorded as a purchase and, accordingly, the operating results of TCNB have been included in the Company’s Consolidated Financial Statements since the close of business on March 6, 2015. The aggregate of the purchase price over the fair value of the net assets acquired of approximately $5,375 was recorded as goodwill and will be evaluated for impairment on an annual basis.

The following table presents financial information for the former TCNB included in the Consolidated Statements of Income from the date of acquisition through September 30, 2015 and for the three-month period ended September 30, 2015.


	Actual From Acquisition Date Through September 30, 2015 (in thousands)		For the Three-Month Period Ended September 30, 2015 (in thousands)
Net interest income after provision for loan losses	$	2,291	$	987
Noninterest income		71		—
Net income		859		396

Page 15

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)

The following table presents pro forma information for the nine and three-month periods ended September 30, 2015 and 2014 as if the acquisition of TCNB had occurred on January 1, 2014. This table has been prepared for comparative purposes only and is not indicative of the actual results that would have been attained had the acquisition occurred as of the beginning of the periods presented, nor is it indicative of future results.


	Pro Formas				Pro Formas
	Nine months ended September 30,				Three months ended September 30,
	2015		2014		2015		2014
Net interest income after provision for loan losses	$	36,951	$	32,799	$	12,974	$	30,677
Noninterest income		11,624		11,376		3,076		3,093
Net income		9,645		7,820		3,599		2,418
Pro forma earnings per share:
Basic	$	1.13	$	0.88	$	0.41	$	0.26
Diluted	$	0.88	$	0.69	$	0.33	$	0.22

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


	At March 6, 2015
Total purchase price				$	17,226

Net assets acquired:
Cash and short-term investments		18,152
Loans, net		76,444
Other securities		716
Premises and equipment		1,738
Accrued interest receivable		194
Core deposit intangible		1,009
Other assets		472
Noninterest-bearing deposits		(18,263	)
Interest-bearing deposits		(68,606	)
Other liabilities		(5	)
					11,851

Goodwill				$	5,375

Page 16

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)

The acquired assets and liabilities were measured at estimated fair values. Management made certain estimates and exercised judgment in accounting for the acquisition. The following is a description of the methods used to determine fair value of significant assets and liabilities at the acquisition date:

Cash and short-term investments: The Company acquired $18.2 million in cash and short-term investments, which management deemed to reflect fair value based on the short term nature of the asset.

Loans: The Company acquired $76.4 million in loans receivable with and without evidence of credit quality deterioration. The loans consisted of commercial loans, commercial real estate loans, and residential mortgage loans which included home equity secured lines of credit, real estate construction and consumer and other loans. The fair value of the performing loan portfolio includes separate adjustments to reflect a credit risk and marketability component and a yield component reflecting the differential between portfolio and market yields. Additionally, certain loans were valued based on their observable sales price. Loans acquired with credit deterioration of $831 were individually evaluated to estimate credit losses and a net recovery amount for each loan. The net cash flows for each loan was then discounted to present value using a risk-adjusted market rate.

Deposits: The Company acquired $86.7 million in deposits. Savings and transaction accounts are variable, have no stated maturity and can be withdrawn on short notice with no penalty. Therefore, the fair value of such deposits is considered equal to the carrying value. The fair value of CD’s consists of comparing the contractual cost of the CD’s to the market rates with corresponding maturities. The valuation adjustment reflects the present value of the difference between the cash flows attributable to the CD’s based on contractual and market rates. The core deposit intangible is determined by the present value difference of the net cost of the core deposit versus the same amount for an alternative funding source.

This acquisition provided the Company with the strategic opportunity to expand into new markets that, while similar to existing markets, are projected to be more vibrant in population growth and business opportunity growth. Additionally, the acquisition will provide exposure to suburbs of larger urban areas without the commitment of operating inside large metropolitan areas dominated by regional and national financial organizations. The acquisition also creates synergies on the operational side of the Company by allowing noninterest expenses to be spread over a larger operating base.

Page 17

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)

(4) Securities

The amortized cost and fair market value of available for sale securities and the related gross unrealized gains and losses recognized in accumulated other comprehensive income (loss) were as follows:


September 30, 2015	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value

U.S. Treasury securities and obligations of U.S. government agencies	$	39,271	$	234	$	(13	)	$	39,492
Obligations of states and political subdivisions		87,971		4,551		(143	)		92,379
Mortgage-backed securities in government sponsored entities		65,192		1,079		(74	)		66,197

Total debt securities		192,434		5,864		(230	)		198,068

Equity securities in financial institutions		481		106		—			587

Total	$	192,915	$	5,970	$	(230	)	$	198,655


December 31, 2014	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Treasury securities and obligations of U.S. government agencies	$	42,910	$	115	$	(123	)	$	42,902
Obligations of states and political subdivisions		83,215		5,112		(306	)		88,021
Mortgage-backed securities in government sponsored entities		65,646		976		(180	)		66,442

Total debt securities		191,771		6,203		(609	)		197,365

Equity securities in financial institutions		481		59		—			540

Total	$	192,252	$	6,262	$	(609	)	$	197,905

Page 18

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)

The amortized cost and fair value of securities at September 30, 2015, by contractual maturity, is shown below. Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations. Securities not due at a single maturity date, primarily mortgage-backed securities and equity securities are shown separately.


Available for sale	Amortized Cost		Fair Value
Due in one year or less	$	4,716	$	4,731
Due after one year through five years		26,519		26,734
Due after five years through ten years		30,616		32,110
Due after ten years		65,391		68,296
Mortgage-backed securities		65,192		66,197
Equity securities		481		587

Total securities available for sale	$	192,915	$	198,655

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


	Three months ended					Nine months ended
	September 30,					September 30,
	2015			2014		2015			2014
Sale proceeds	$	—		$	—	$	—		$	18,088
Gross realized gains		—			—		—			113
Gross realized losses		—			—		—			—
Gains (losses) from securities called or settled by the issuer		(5	)		1		(5	)		1

Securities were pledged to secure public deposits, other deposits and liabilities as required by law. The carrying value of pledged securities was approximately $148,557 and $137,898 as of September 30, 2015 and December 31, 2014, respectively.

Page 19

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)

Securities with unrealized losses at September 30, 2015 and December 31, 2014 not recognized in income are as follows:


September 30, 2015	12 Months or less					More than 12 months					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
Description of Securities	Value		Loss			Value		Loss			Value		Loss

U.S. Treasury securities and obligations of U.S. government agencies	$	2,037	$	—		$	1,192	$	(13	)	$	3,229	$	(13	)
Obligations of states and political subdivisions		7,866		(93	)		1,466		(50	)		9,332		(143	)
Mortgage-backed securities in gov’t sponsored entities		6,156		(37	)		7,649		(37	)		13,805		(74	)


Total temporarily impaired	$	16,059	$	(130	)	$	10,307	$	(100	)	$	26,366	$	(230	)


December 31, 2014	12 Months or less					More than 12 months					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
Description of Securities	Value		Loss			Value		Loss			Value		Loss

U.S. Treasury securities and obligations of U.S. government agencies	$	7,664	$	(17	)	$	11,888	$	(106	)	$	19,552	$	(123	)
Obligations of states and political subdivisions		853		(11	)		5,647		(295	)		6,500		(306	)
Mortgage-backed securities in gov’t sponsored entities		12,289		(29	)		11,492		(151	)		23,781		(180	)


Total temporarily impaired	$	20,806	$	(57	)	$	29,027	$	(552	)	$	49,833	$	(609	)

At September 30, 2015, there were thirty securities in the portfolio with unrealized losses mainly due to higher market rates when compared to the time of purchase. Unrealized losses on securities have not been recognized into income because the issuers’ securities are of high credit quality, management has the intent and ability to hold these securities for the foreseeable future, and the decline in fair value is largely due to market yields increasing across the municipal sector. The fair value is expected to recover as the securities approach their maturity date or reset date. The Company does not intend to sell until recovery and does not believe selling will be required before recovery.

Page 20

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)

(5) Loans

Loan balances were as follows:


	September 30,			December 31,
	2015			2014
Commercial and agriculture	$	129,119		$	114,186
Commercial real estate- owner occupied		160,457			143,014
Commercial real estate- non-owner occupied		340,702			308,666
Residential real estate		284,899			268,510
Real estate construction		67,461			65,452
Consumer and other		17,637			15,029

Total loans		1,000,275			914,857
Allowance for loan losses		(14,760	)		(14,268	)

Net loans	$	985,515		$	900,589

Included in total loans above are deferred loan fees of $63 at September 30, 2015 and $237 at December 31, 2014.

Included in the totals above are loans acquired from TCNB at the acquisition date, net of fair value adjustments, of:


	March 6,
	2015
Commercial and agriculture	$	13,799
Commercial real estate- owner occupied		23,029
Commercial real estate- non-owner occupied		13,808
Residential real estate		17,541
Real estate construction		3,863
Consumer and other		4,404

Net loans	$	76,444

Page 21

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)

(6) Allowance for Loan Losses

Management has an established methodology to determine the adequacy of the allowance for loan losses that assesses the risks and losses inherent in the loan portfolio. For purposes of determining the allowance for loan and lease losses, the Company has segmented certain loans in the portfolio by product type. Loss migration rates for each risk category are and calculated and used as the basis for calculating loan loss allowance allocations. Loss migration rates are calculated over a three-year period for all portfolio segments, except for the segment consisting of purchased automobile loans which is calculated over a two-year period. The use of a three-year period for loss migration analysis is a change in methodology for this period. Previously, a two-year loss migration analysis had been used for the entire portfolio. With continued improvement and stability in economic conditions, regulatory guidance recommends a longer look-back period. In addition, Civista made significant changes to consumer and commercial lending policies in the first quarter of 2012. Combined, the stable economy and now seasoned policy changes indicate a three year period is more reflective of future expectations. Management also considers certain economic factors for trends that management uses to account for the qualitative and environmental changes in risk, which affects the level of the reserve. The following economic factors are analyzed:

•

Changes in lending policies and procedures

•

Changes in experience and depth of lending and management staff

•

Changes in quality of Civista’s credit review system

•

Changes in nature and volume of the loan portfolio

•

Changes in past due, classified and nonaccrual loans and TDRs

•

Changes in economic and business conditions

•

Changes in competition or legal and regulatory requirements

•

Changes in concentrations within the loan portfolio

•

Changes in the underlying collateral for collateral dependent loans

Page 22

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)

The total allowance reflects management’s estimate of loan losses inherent in the loan portfolio at the balance sheet date. The Company considers the allowance for loan losses of $14,760 adequate to cover loan losses inherent in the loan portfolio, at September 30, 2015. The following tables present, by portfolio segment, the changes in the allowance for loan losses for the three and nine months ended September 30, 2015 and 2014.


	Commercial & Agriculture			Commercial Real Estate - Owner Occupied			Commercial Real Estate - Non-Owner Occupied			Residential Real Estate			Real Estate Construction			Consumer and Other			Unallocated			Total
For the nine months ended September 30, 2015

Allowance for loan losses:

Beginning balance	$	1,822		$	2,580		$	4,798		$	3,747		$	428		$	196		$	697		$	14,268
Charge-offs		(187	)		(363	)		(81	)		(779	)		—			(114	)		—			(1,524	)
Recoveries		157			223			105			289			4			38			—			816
Provision		(405	)		506			512			964			(4	)		245			(618	)		1,200

Ending Balance	$	1,387		$	2,946		$	5,334		$	4,221		$	428		$	365		$	79		$	14,760

For the nine months ended September 30, 2015, the allowance for Commercial and Agriculture loans was reduced due to decreases in specific reserves for impaired loans of $625. The decrease in specific reserves for impaired loans was the result of the resolution of an impaired loan. The Company did not incur losses with this resolution. In addition, criticized commercial & agriculture loan balances have decreased. The result was represented as a decrease in the provision. The increase in the allowance for Commercial Real Estate—Owner Occupied loans was the result of an increase in loss migration rates, which is attributable to the change in the lookback period to a three-year period. The increase in the allowance for Commercial Real Estate – Non–Owner Occupied loans was the result of an increase in loss migration rates, which is attributable to the change in the lookback period to a three-year period. The ending reserve balance for Residential Real Estate loans increased from the end of the previous year due to an increase in loss migration rates, which is attributable to the change in the look-back period to a three-year period. The increase in the allowance for Consumer and other loans increased due to an increase in loss migration rates. Unallocated reserves declined due to a change in the Company’s look-back period. The Company changed from a two-year look-back period to a three-year look-back period when calculating all but one segment’s loss migration rates during the third quarter of 2015. The change in

Page 23

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)

methodology is reflected in a decline in the unallocated balance with corresponding increase in allocated balances within the reserve calculation. While loan balances are up, loss rates continue to trend downward, exclusive of the change in methodology, resulting in a lower allowance balance. While criticized loans in total have increased slightly, we have seen significant improvement in nonperforming loan balances resulting in a decline in specific reserves for impaired loans. Management feels that the unallocated amount is appropriate and within the relevant range for the allowance that is reflective of the risk in the portfolio.


	Commercial & Agriculture			Commercial Real Estate - Owner Occupied			Commercial Real Estate - Non-Owner Occupied			Residential Real Estate			Real Estate Construction		Consumer and Other			Unallocated		Total
For the nine months ended September 30, 2014

Allowance for loan losses:

Beginning balance	$	2,841		$	3,263		$	4,296		$	5,224		$	184	$	214		$	506	$	16,528
Charge-offs		(326	)		(1,615	)		(105	)		(1,329	)		—		(65	)		—		(3,440	)
Recoveries		238			316			34			216			5		48			—		857
Provision		(1,148	)		902			753			201			176		18			598		1,500

Ending Balance	$	1,605		$	2,866		$	4,978		$	4,312		$	365	$	215		$	1,104	$	15,445

For the nine months ended September 30, 2014, the allowance for Commercial & Agriculture loans was reduced not only by charge-offs, but also due to a decrease in both the loan balances outstanding and the specific reserve required for this type, which was driven by a decrease in the volume of impaired loans. The net result of these changes was represented as a decrease in the provision. The increase in the allowance for Commercial Real Estate loans was the result of large charge offs, which led to increased general reserves due to an increase in loss rate. The net result of these changes was represented as an increase in the provision. The allowance for Residential Real Estate loans decreased during the period due to charge-offs of loans that had a specific reserve previously applied and a significant decline in past-dues and nonaccrual loans. The net result of these changes was represented as a decrease in the allowance. The allowance for Consumer and Other loans increased slightly from the beginning of the year. While loan balances and past-dues are up, loss rates continue to decrease resulting in the allowance being relatively unchanged. Overall, we have seen continued improvement in asset quality and loss rates. However, since the process of

Page 24

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)

estimating probable credit losses requires considerable judgment, management decided to increase unallocated reserves. Unallocated reserves remain within policy guidelines as a percent of total reserves at 7.1 percent.


	Commercial & Agriculture			Commercial Real Estate - Owner Occupied			Commercial Real Estate - Non-Owner Occupied			Residential Real Estate			Real Estate Construction			Consumer and Other			Unallocated			Total
For the three months ended September 30, 2015

Allowance for loan losses:

Beginning balance	$	1,395		$	3,383		$	5,427		$	3,470		$	434		$	190		$	408		$	14,707
Charge-offs		(187	)		(164	)		(18	)		(237	)		—			(28	)		—			(634	)
Recoveries		127			13			14			124			1			8			—			287
Provision		52			(286	)		(89	)		864			(7	)		195			(329	)		400

Ending Balance	$	1,387		$	2,946		$	5,334		$	4,221		$	428		$	365		$	79		$	14,760

For the three months ended September 30, 2015, the decrease in the allowance for Commercial Real Estate – Owner Occupied was the result of a significant change in the Special Mention loss migration rate that had been adversely effected by a specific loss on one relationship that occurred in 2014. The effect of this loss as of this quarter end migrated to the Substandard pool and has less of an impact to the reserve. The ending reserve balance for Residential Real Estate loans increased due an increase in criticized loan balances and an increase in loss migration rates. The increase in the allowance for Consumer and other loans increased due to an increase in loss rates. Unallocated reserves declined due to a change in the Company’s lookback period. The Company changed from a two-year lookback period to a three-year lookback period when calculating all but one segment’s loss migration rates during the third quarter of 2015. The change in methodology is reflected in a decline in the unallocated balance with corresponding increase in allocated balances within the reserve calculation. While loan balances are up, loss rates continue to trend downward, exclusive of the change in methodology, resulting in a lower allowance balance. While criticized loans have increased slightly, we have seen significant improvement in nonperforming loan balances resulting in a decline in specific reserves for impaired loans. Management feels that the unallocated amount is appropriate and within the relevant range for the allowance that is reflective of the risk in the portfolio.

Page 25

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)


	Commercial & Agriculture			Commercial Real Estate - Owner Occupied			Commercial Real Estate - Non-Owner Occupied		Residential Real Estate			Real Estate Construction		Consumer and Other			Unallocated		Total
For the three months ended September 30, 2014

Allowance for loan losses:

Beginning balance	$	2,067		$	3,135		$	4,853	$	4,439		$	287	$	196		$	418	$	15,395
Charge-offs		(13	)		(146	)		—		(275	)		—		(22	)		—		(456	)
Recoveries		143			241			10		95			2		15			—		506
Provision		(592	)		(364	)		115		53			76		26			686		—

Ending Balance	$	1,605		$	2,866		$	4,978	$	4,312		$	365	$	215		$	1,104	$	15,445

For the three months ended September 30, 2014, the allowance for Commercial and Agriculture loans was reduced not only by charge-offs, but also due to a decrease in the loan balances outstanding, the balance of impaired loans in this segment and decreases in both the specific and general reserves required for this type. The allowance for Commercial Real Estate loans was reduced not only by charge-offs, but also due to a decrease in both the specific and general reserves required for this type. The result of these changes for each loan type was represented as a decrease in the provision. The allowance for Residential Real Estate loans was reduced as a result of charge offs, a reduction in total loans past due and a reduction in nonaccrual loans, partially offset by changes related to increased volume. The net result of these changes was represented as a decrease in the allowance. We have seen continued improvement in asset quality and loss rates. However, since the process of estimating probable credit losses requires considerable judgment, management decided to increase unallocated reserves. Unallocated reserves remain within policy guidelines as a percent of total reserves at 7.1 percent.

Page 26

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)

The following tables present, by portfolio segment, the allocation of the allowance for loan losses and related loan balances as of September 30, 2015 and December 31, 2014.


	Commercial & Agriculture		Commercial Real Estate - Owner Occupied		Commercial Real Estate - Non-Owner Occupied		Residential Real Estate		Real Estate Construction		Consumer and Other		Unallocated		Total

September 30, 2015

Allowance for loan losses:
Loans acquired with credit deterioration	$	—	$	—	$	—	$	131	$	—	$	—	$	—	$	131

Ending balance:
Individually evaluated for impairment	$	16	$	4	$	—	$	164	$	—	$	—	$	—	$	184

Ending balance:
Collectively evaluated for impairment	$	1,371	$	2,942	$	5,334	$	3,926	$	428	$	365	$	79	$	14,445


Ending balance	$	1,387	$	2,946	$	5,334	$	4,221	$	428	$	365	$	79	$	14,760

Loan balances outstanding:
Loans acquired with credit deterioration	$	16	$	30	$	—	$	381	$	—	$	—			$	427

Ending balance:
Individually evaluated for impairment	$	894	$	2,626	$	1,828	$	1,746	$	—	$	4			$	7,098

Ending balance:
Collectively evaluated for impairment	$	128,209	$	157,801	$	338,874	$	282,772	$	67,461	$	17,633			$	992,750


Ending balance	$	129,119	$	160,457	$	340,702	$	284,899	$	67,461	$	17,637			$	1,000,275

Page 27

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)


	Commercial & Agriculture		Commercial Real Estate - Owner Occupied		Commercial Real Estate - Non-Owner Occupied		Residential Real Estate		Real Estate Construction		Consumer and Other		Unallocated		Total

December 31, 2014

Allowance for loan losses:

Ending balance:
Individually evaluated for impairment	$	641	$	57	$	20	$	305	$	—	$	—	$	—	$	1,023

Ending balance:
Collectively evaluated for impairment	$	1,181	$	2,523	$	4,778	$	3,442	$	428	$	196	$	697	$	13,245


Ending balance	$	1,822	$	2,580	$	4,798	$	3,747	$	428	$	196	$	697	$	14,268

Loan balances outstanding:

Ending balance:
Individually evaluated for impairment	$	2,304	$	3,557	$	2,175	$	3,108	$	—	$	5			$	11,149

Ending balance:
Collectively evaluated for impairment	$	111,882	$	139,457	$	306,491	$	265,402	$	65,452	$	15,024			$	903,708


Ending balance	$	114,186	$	143,014	$	308,666	$	268,510	$	65,452	$	15,029			$	914,857

Page 28

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)

The following tables present credit exposures by internally assigned grades for the periods ended September 30, 2015 and December 31, 2014. The risk rating analysis estimates the capability of the borrower to repay the contractual obligations of the loan agreements as scheduled or at all. The Company’s internal credit risk grading system is based on experiences with similarly graded loans.

The Company’s internally assigned grades are as follows:

•

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

•

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

•

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

•

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

•

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

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

Page 29

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)


	Commercial & Agriculture		Commercial Real Estate - Owner Occupied		Commercial Real Estate - Non-Owner Occupied		Residential Real Estate		Real Estate Construction		Consumer and Other		Total

September 30, 2015
Pass	$	124,065	$	147,049	$	326,014	$	111,857	$	58,947	$	8,201	$	776,133
Special Mention		862		5,180		10,998		1,783		18		—		18,841
Substandard		4,192		8,228		3,690		8,208		30		32		24,380
Doubtful		—		—		—		—		—		—		—

Ending Balance	$	129,119	$	160,457	$	340,702	$	121,848	$	58,995	$	8,233	$	819,354


	Commercial & Agriculture		Commercial Real Estate - Owner Occupied		Commercial Real Estate - Non-Owner Occupied		Residential Real Estate		Real Estate Construction		Consumer and Other		Total

December 31, 2014
Pass	$	107,903	$	128,222	$	298,237	$	100,810	$	59,584	$	5,651	$	700,407
Special Mention		3,446		5,492		6,305		697		19		—		15,959
Substandard		2,837		9,300		4,124		8,834		41		46		25,182
Doubtful		—		—		—		—		—		—		—

Ending Balance	$	114,186	$	143,014	$	308,666	$	110,341	$	59,644	$	5,697	$	741,548

Page 30

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)

The following tables present performing and nonperforming loans based solely on payment activity for the periods ended September 30, 2015 and December 31, 2014 that have not been assigned an internal risk grade. The types of loans presented here are not assigned a risk grade unless there is evidence of a problem. Payment activity is reviewed by management on a monthly basis to evaluate performance. Loans are considered to be nonperforming when they become 90 days past due or if management thinks that we may not collect all of our principal and interest. Nonperforming loans also include certain loans that have been modified in Troubled Debt Restructurings (TDRs) where economic concessions have been granted to borrowers who have experienced or are expected to experience financial difficulties. These concessions typically result from the Company’s loss mitigation activities and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance or other actions due to economic status. Certain TDRs are classified as nonperforming at the time of restructure and may only be returned to performing status after considering the borrower’s sustained repayment performance for a reasonable period, generally six months.


	Residential Real Estate		Real Estate Construction		Consumer and Other		Total

September 30, 2015
Performing	$	163,051	$	8,466	$	9,404	$	180,921
Nonperforming		—		—		—		—

Total	$	163,051	$	8,466	$	9,404	$	180,921


	Residential Real Estate		Real Estate Construction		Consumer and Other		Total

December 31, 2014
Performing	$	158,169	$	5,808	$	9,332	$	173,309
Nonperforming		—		—		—		—

Total	$	158,169	$	5,808	$	9,332	$	173,309

Page 31

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)

The following tables include an aging analysis of the recorded investment of past due loans outstanding as of September 30, 2015 and December 31, 2014.


September 30, 2015	30-59 Days Past Due		60-89 Days Past Due		90 Days or Greater		Total Past Due		Current		Total Loans		Past Due 90 Days and Accruing

Commercial & Agriculture	$	34	$	941	$	286	$	1,261	$	127,858	$	129,119	$	—
Commercial Real Estate—Owner Occupied		161		37		393		591		159,866		160,457		—
Commercial Real Estate—Non-Owner Occupied		4		—		1,496		1,500		339,202		340,702		—
Residential Real Estate		912		1,788		1,971		4,671		280,228		284,899		—
Real Estate Construction		199		—		—		199		67,262		67,461		—
Consumer and Other		490		18		24		532		17,105		17,637		24

Total	$	1,800	$	2,784	$	4,170	$	8,754	$	991,521	$	1,000,275	$	24


December 31, 2014	30-59 Days Past Due		60-89 Days Past Due		90 Days or Greater		Total Past Due		Current		Total Loans		Past Due 90 Days and Accruing

Commercial & Agriculture	$	58	$	—	$	187	$	245	$	113,941	$	114,186	$	—
Commercial Real Estate—Owner Occupied		622		251		657		1,530		141,484		143,014		—
Commercial Real Estate—Non-Owner Occupied		521		5		2,103		2,629		306,037		308,666		—
Residential Real Estate		1,923		721		2,347		4,991		263,519		268,510		—
Real Estate Construction		33		—		8		41		65,411		65,452		—
Consumer and Other		131		8		19		158		14,871		15,029		—

Total	$	3,288	$	985	$	5,321	$	9,594	$	905,263	$	914,857	$	—

Page 32

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)

The following table presents loans on nonaccrual status as of September 30, 2015 and December 31, 2014.


	2015		2014
Commercial & Agriculture	$	2,146	$	1,264
Commercial Real Estate—Owner Occupied		1,219		3,403
Commercial Real Estate—Non-Owner Occupied		1,519		2,134
Residential Real Estate		5,602		6,674
Real Estate Construction		30		41
Consumer and Other		29		42

Total	$	10,545	$	13,558

Nonaccrual Loans: Loans are considered for nonaccrual status upon reaching 90 days delinquency, unless the loan is well secured and in the process of collection, although the Company may be receiving partial payments of interest and partial repayments of principal on such loans. When a loan is placed on nonaccrual status, previously accrued but unpaid interest is deducted from interest income. A loan may be returned to accruing status only if one of three conditions are met: the loan is well-secured and none of the principal and interest has been past due for a minimum of 90 days; the loan is a TDR and has made a minimum of six months payments; or the principal and interest payments are reasonably assured and a sustained period of performance has occurred, generally six months.

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

Loans modified in a TDR are typically already on non-accrual status and partial charge-offs have in some cases already been taken against the outstanding loan balance. As a result, loans modified in a TDR may have the financial effect of increasing the specific allowance associated with the loan. An allowance for impaired loans that have been modified in a TDR are measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate or the estimated fair value of the collateral, less any selling costs, if the loan is collateral

Page 33

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)

dependent. Management exercises significant judgment in developing these estimates. As of September 30, 2015, TDRs accounted for $184 of the allowance for loan losses. As of December 31, 2014, TDRs accounted for $895 of the allowance for loan losses. The decrease is mainly the result of pay-offs.

Loan modifications that are considered TDRs completed during the nine-month periods ended September 30, 2015 and September 30, 2014 were as follows:


	For the Nine-Month Period Ended September 30, 2015						For the Nine-Month Period Ended September 30, 2014
	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Commercial & Agriculture		—	$	—	$	—		—	$	—	$	—
Commercial Real Estate—Owner Occupied		—		—		—		—		—		—
Commercial Real Estate—Non-Owner Occupied		—		—		—		—		—		—
Residential Real Estate		—		—		—		5		245		245
Real Estate Construction		1		41		41		—		—		—
Consumer and Other		—		—		—		—		—		—

Total Loan Modifications		1	$	41	$	41		5	$	245	$	245

Page 34

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)

Loan modifications that are considered TDRs completed during the quarter ended September 30, 2015 and September 30, 2014 were as follows:


	For the Three-Month Period Ended September 30, 2015						For the Three-Month Period Ended September 30, 2014
	Number of Contracts		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Commercial & Agriculture		—	$	—	$	—		—	$	—	$	—
Commercial Real Estate		—		—		—		—		—		—
Residential Real Estate		—		—		—		3		97		97
Real Estate Construction		—		—		—		—		—		—
Consumer and Other		—		—		—		—		—		—

Total Loan Modifications		—	$	—	$	—		3	$	97	$	97

Recidivism, or the borrower defaulting on its obligation pursuant to a modified loan, results in the loan once again becoming a non-accrual loan. Recidivism occurs at a notably higher rate than do defaults on new origination loans, so modified loans present a higher risk of loss than do new origination loans. During both the three and nine-month periods ended September 30, 2015 and September 30, 2014, there were no defaults on loans that were modified and considered TDRs during the respective twelve previous months.

Impaired Loans: Larger (greater than $500) Commercial & Agricultural loans and Commercial Real Estate loans, all TDRs and Residential Real Estate and Consumer loans that are part of a larger relationship are tested for impairment on a quarterly basis. These loans are analyzed to determine if it is probable that all amounts will not be collected according to the contractual terms of the loan agreement. If management determines that the value of the impaired loan is less than the recorded investment in the loan (net of previous charge-offs, deferred loan fees or costs and unamortized premium or discount), impairment is recognized through an allowance estimate or a charge-off to the allowance.

Page 35

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)

The following tables include the recorded investment and unpaid principal balances for impaired financing receivables with the associated allowance amount, if applicable, as of September 30, 2015 and December 31, 2014.


	September 30, 2015						December 31, 2014
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance recorded:
Commercial & Agriculture	$	871	$	1,036			$	1,377	$	1,504
Commercial Real Estate - Owner Occupied		2,368		2,583				2,961		3,327
Commercial Real Estate - Non-Owner Occupied		1,828		2,094				92		140
Residential Real Estate		960		1,505				1,893		3,487
Consumer and Other		4		4				5		5

Total		6,031		7,222				6,328		8,463
With an allowance recorded:
Commercial & Agriculture		23		23	$	16		927		1,056	$	641
Commercial Real Estate - Owner Occupied		258		258		4		596		643		57
Commercial Real Estate - Non-Owner Occupied		—		—		—		2,083		2,287		20
Residential Real Estate		1,145		1,162		295		1,215		1,223		305
Real Estate Construction		—		—		—		—		—		—

Total		1,426		1,443		315		4,821		5,209		1,023
Total:
Commercial & Agriculture		894		1,059		16		2,304		2,560		641
Commercial Real Estate - Owner Occupied		2,626		2,841		4		3,557		3,970		57
Commercial Real Estate - Non-Owner Occupied		1,828		2,094		—		2,175		2,427		20
Residential Real Estate		2,105		2,667		295		3,108		4,710		305
Real Estate Construction		—		—		—		—		—		—
Consumer and Other		4		4		—		5		5		—

Total	$	7,457	$	8,665	$	315	$	11,149	$	13,672	$	1,023

Page 36

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)

The following tables include the average recorded investment and interest income recognized for impaired financing receivables for the three and nine-month periods ended September 30, 2015 and 2014.


For the nine months ended:	September 30, 2015				September 30, 2014
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Commercial & Agriculture	$	1,680	$	54	$	3,570	$	104
Commercial Real Estate - Owner Occupied		3,507		168		6,313		208
Commercial Real Estate - Non-Owner Occupied		1,997		31		2,913		31
Residential Real Estate		2,640		128		3,559		220
Real Estate Construction		20		—		—		—
Consumer and Other		5		—		7		—

Total	$	9,849	$	381	$	16,362	$	563


For the three months ended:	September 30, 2015				September 30, 2014
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Commercial & Agriculture	$	1,058	$	9	$	2,829	$	25
Commercial Real Estate - Owner Occupied		3,263		39		5,115		21
Commercial Real Estate - Non-Owner Occupied		1,870		12		2,770		(4	)
Residential Real Estate		2,450		49		3,336		74
Real Estate Construction		20		—		—		—
Consumer and Other		4		—		6		—

Total	$	8,665	$	109	$	14,056	$	116

Page 37

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)

Foreclosed Assets Held For Sale

Foreclosed assets acquired in settlement of loans are carried at fair value less estimated costs to sell and are included in other assets on the Consolidated Balance Sheet. As of September 30, 2015 and December 31, 2014, a total of $494 and $560, respectively of foreclosed assets were included with other assets. As of September 30, 2015, included within the foreclosed assets is $494 of consumer residential mortgages that were foreclosed on or received via a deed in lieu transaction prior to the period end. As of September 30, 2015, the Company had initiated formal foreclosure procedures on $669 of consumer residential mortgages.

Page 38

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)

(7) Other Comprehensive Income

The following table presents the changes in each component of accumulated other comprehensive income (loss), net of tax, for the nine-month periods ended September 30, 2015 and 2014:


	For the Nine-Month Period Ended								For the Nine-Month Period Ended
	September 30, 2015								September 30, 2014
	Unrealized Gains and Losses on Available-for- Sale Securities		Defined Benefit Pension Items			Total			Unrealized Gains and Losses on Available-for- Sale Securities			Defined Benefit Pension Items			Total

Beginning balance	$	3,730	$	(3,777	)	$	(47	)	$	341		$	(4,588	)	$	(4,247	)

Other comprehensive income before reclassifications		57		—			57			2,916			2,666			5,582

Amounts reclassified from accumulated other comprehensive income (loss)		—		138			138			(75	)		146			71


Net current-period other comprehensive income		57		138			195			2,841			2,812			5,653

Ending balance	$	3,787	$	(3,639	)	$	148		$	3,182		$	(1,776	)	$	1,406

Amounts in parentheses indicate debits on the consolidated balance sheets.

Page 39

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)

The following table presents the amounts reclassified out of each component of accumulated other comprehensive income (loss) for the nine-month periods ended September 30, 2015 and 2014:


	Amount Reclassified from Accumulated Other Comprehensive Income (Loss)^(a)
Details about Accumulated Other Comprehensive (Loss) Components	For the nine months ended September 30, 2015			For the nine months ended September 30, 2014			Affected Line Item in the Statement Where Net Income is Presented
Unrealized gains and losses on available-for-sale securities	$	—		$	114		Net gain on sale of securities
Tax effect		—			(39	)	Income tax expense

		—			75		Net of tax

Amortization of defined benefit pension items
Actuarial gains/(losses)		(210	)^(b)		(222	)^(b)	Salaries, wages and benefits
Tax effect		72			76		Income tax expense

		(138	)		(146	)	Net of tax

Total reclassifications for the period	$	(138	)	$	(71	)	Net of tax

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

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

Page 40

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)

The following table presents the changes in each component of accumulated other comprehensive income (loss), net of tax, for the three-month periods ended September 30, 2015 and 2014:


	For the Three-Month Period Ended September 30, 2015								For the Three-Month Period Ended September 30, 2014
	Unrealized Gains and Losses on Available-for- Sale Securities		Defined Benefit Pension Items			Total			Unrealized Gains and Losses on Available-for- Sale Securities			Defined Benefit Pension Items			Total
Beginning balance	$	3,007	$	(3,685	)	$	(678	)	$	2,777		$	(1,834	)	$	943

Other comprehensive income (loss) before reclassifications		780		—			780			406			—			406
Amounts reclassified from accumulated other comprehensive income (loss)		—		46			46			(1	)		58			57

Net current-period other comprehensive income (loss)		780		46			826			405			58			463

Ending balance	$	3,787	$	(3,639	)	$	148		$	3,182		$	(1,776	)	$	1,406

Amounts in parentheses indicate debits on the consolidated balance sheets.

Page 41

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)

The following table presents the amounts reclassified out of each component of accumulated other comprehensive income (loss) for the three-month periods ended September 30, 2015 and 2014:


	Amount Reclassified from Accumulated Other Comprehensive Income (Loss) ^(a)
Details about Accumulated Other Comprehensive (Loss) Components	For the three months ended September 30, 2015			For the three months ended September 30, 2014			Affected Line Item in the Statement Where Net Income is Presented
Unrealized gains and losses on available-for-sale securities	$	—		$	1		Net gain on sale of securities
Tax effect		—			—		Income tax expense

		—			1		Net of tax

Amortization of defined benefit pension items
Actuarial gains/(losses)		(70	)^(b)		(89	)^(b)	Salaries, wages and benefits
Tax effect		24			31		Income tax expense

		(46	)		(58	)	Net of tax

Total reclassifications for the period	$	(46	)	$	(57	)	Net of tax

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

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

Page 42

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)

(8) Goodwill and Intangible Assets

The carrying amount of goodwill has increased $5,375 since December 31, 2014 as a result of the TCNB acquisition. The balance of goodwill was $27,095 at September 30, 2015 and $21,720 at December 31, 2014.

Management performs an annual evaluation of goodwill for impairment, or more frequently if events or changes in circumstances indicate that the asset might be impaired. Management last performed an evaluation of the Company’s goodwill during the fourth quarter of 2014 and concluded that the Company’s goodwill was not impaired at December 31, 2014.


	Acquired intangible assets were as follows as of September 30,
	2015				2014
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Core deposit and other intangibles	$	7,274	$	5,264	$	9,378	$	7,689

Aggregate amortization expense was $522 and $604 for September 30, 2015 and 2014, respectively.

Estimated amortization expense for each of the next three years and thereafter is as follows.


2015	$	188
2016		699
2017		587
Thereafter		536

	$	2,010

Page 43

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)

(9) Short-Term Borrowings

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


	At September 30, 2015						At December 31, 2014
	Federal Funds Purchased			Short-term Borrowings			Federal Funds Purchased			Short-term Borrowings

Outstanding balance	$	—		$	54,700		$	—		$	42,700
Maximum indebtedness		25,000			64,700			—			42,700
Average balance		93			21,938			41			1,951
Average rate paid		0.54	%		0.18	%		0.54	%		0.19	%
Interest rate on balance		0.00	%		0.19	%		—			0.14	%

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

These borrowing transactions can range from overnight to six months in maturity. The average maturity was one day at September 30, 2015 and December 31, 2014.

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

The following table presents detail regarding the securities pledged as collateral under repurchase agreements as of September 30, 2015 and December 31, 2014. All of the repurchase agreements are overnight agreements.


	September 30, 2015		December 31, 2014
Securities pledged for repurchase agreements:
U.S. Treasury securities	$	813	$	876
Obligations of U.S. government agencies		20,074		20,737

Total securities pledged	$	20,887	$	21,613

Gross amount of recognized liabilities for repurchase agreements	$	20,887	$	21,613

Amounts related to agreements not included in offsetting disclosures above	$	—	$	—

Page 44

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)

(10) Earnings per Common Share

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


	Three months ended September 30,				Nine months ended September 30,
	2015		2014		2015		2014
Basic
Net income	$	3,253	$	2,306	$	9,546	$	7,257
Preferred stock dividends		391		406		1,186		1,467

Net income available to common shareholders - basic	$	2,862	$	1,900	$	8,360	$	5,790

Weighted average common shares outstanding - basic		7,843,578		7,707,917		7,815,222		7,707,917

Basic earnings per common share	$	0.36	$	0.25	$	1.07	$	0.75

Diluted
Net income available to common shareholders - basic	$	2,862	$	1,900	$	8,360	$	5,790
Preferred stock dividends on convertible preferred stock		391		406		1,186		1,201

Net income available to common shareholders - diluted	$	3,253	$	2,306	$	9,546	$	6,991

Weighted average common shares outstanding for basic earnings per common share basic		7,843,578		7,707,917		7,815,222		7,707,917
Add: Dilutive effects of convertible preferred shares		3,078,245		3,196,931		3,101,937		3,196,931

Average shares and dilutive potential common shares outstanding - diluted		10,921,823		10,904,848		10,917,159		10,904,848

Diluted earnings per common share	$	0.30	$	0.21	$	0.87	$	0.64

Page 45

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)

For the three and nine-month periods ended September 30, 2015 there were 3,078,245 and 3,101,937, respectively, dilutive shares related to the Company’s convertible preferred stock. For the three- and nine-month periods ended September 30, 2014 there were 3,196,931 dilutive shares related to the Company’s convertible preferred stock. Under the “if converted” method, all convertible preferred shares are assumed to be converted into common shares at the corresponding conversion rate. These additional shares are then added to the common shares outstanding to calculate diluted earnings per share.

For the three- and nine-month periods ended September 30, 2015, there were 16,983 shares of unvested restricted stock outstanding at a price of $10.82 per share that were not included in the computation of diluted earnings per share because they were anti-dilutive. At September 30, 2014, there was no unvested restricted stock outstanding. There were no stock options outstanding during the three- and nine-month periods ended September 30, 2015 and 2014.

(11) Commitments, Contingencies and Off-Balance Sheet Risk

Some financial instruments, such as loan commitments, credit lines, letters of credit and overdraft protection, are issued to meet customers’ financing needs. These are agreements to provide credit or to support the credit of others, as long as the conditions established in the contract are met, and usually have expiration dates. Commitments may expire without being used. Off-balance-sheet risk of credit loss exists up to the face amount of these instruments, although material losses are not anticipated. The same credit policies are used to make such commitments as are used for loans, including obtaining collateral at exercise of commitment. The contractual amounts of financial instruments with off-balance-sheet risk were as follows for September 30, 2015 and December 31, 2014:


	Contract Amount
	September 30, 2015				December 31, 2014
	Fixed Rate		Variable Rate		Fixed Rate		Variable Rate
Commitment to extend credit:
Lines of credit and construction loans	$	5,835	$	196,931	$	9,405	$	160,718
Overdraft protection		4		25,208		4		22,122
Letters of credit		200		727		200		1,007

	$	6,039	$	222,866	$	9,609	$	183,847

Commitments to make loans are generally made for a period of one year or less. Fixed rate loan commitments included in the table above had interest rates ranging from 3.05% to 8.75% at September 30, 2015 and December 31, 2014, respectively. Maturities extend up to 30 years.

Civista is required to maintain certain reserve balances on hand in accordance with the Federal Reserve Board requirements. The average reserve balance maintained in accordance with such requirements was $2,980 on September 30, 2015 and $3,259 on December 31, 2014.

Page 46

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)

(12) Pension Information

The Company also sponsors a pension plan which is a noncontributory defined benefit retirement plan. Annual payments, subject to the maximum amount deductible for federal income tax purposes, are made to a pension trust fund. In 2006, the Company amended the pension plan to provide that no employee could be added as a participant to the pension plan after December 31, 2006. In 2014, the Company amended the pension plan again to provide that no additional benefits would accrue beyond April 30, 2014.

Net periodic pension expense was as follows:


	Three months ended September 30,						Nine months ended September 30,
	2015			2014			2015			2014
Service cost	$	—		$	94		$	—		$	264
Interest cost		156			201			468			581
Expected return on plan assets		(283	)		(312	)		(848	)		(903	)
Other components		70			89			210			222

Net periodic pension cost (benefit)	$	(57	)	$	72		$	(170	)	$	164

The total amount of pension contributions expected to be paid by the Company in 2015 is $700, compared to $1,515 in 2014.

(13) Equity Incentive Plan

At the Company’s 2014 annual meeting, the shareholders adopted the Company’s 2014 Incentive Plan (“2014 Incentive Plan”). The 2014 Incentive Plan authorizes the Company to grant options, stock awards, stock units and other awards for up to 375,000 common shares of the Company. There were 358,017 shares available for grants under this plan at September 30, 2015.

Certain officers were granted an aggregate of 16,983 restricted shares on March 17, 2015. The 2015 restricted shares vest over a 3-year service period, with one third each vesting on January 2 of 2016, 2017 and 2018. The product of the number of restricted shares granted and the grant date market price of the Company’s common shares determines the fair value of restricted shares under the Company’s 2014 Incentive Plan. Management recognizes compensation expense for the fair value of restricted shares on a straight-line basis over the requisite service period for the entire award.

The Company classifies share-based compensation for employees with “Salaries, wages and benefits” in the consolidated statements of income. Additionally, generally accepted accounting principles require the Company to report: (1) the expense associated with the grants as an adjustment to operating cash flows, and (2) any benefits of realized tax deductions in excess of previously recognized tax benefits on compensation expense as a financing cash flow.

Page 47

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)

No options had been granted under the 2014 Incentive Plan as of September 30, 2015 and 2014.

During the three and nine months ended September 30, 2015, the Company recorded $18 and $43, respectively, of share-based compensation expense for restricted shares granted under the 2014 Incentive Plan. Expected future compensation expense relating to the 16,983 restricted shares at September 30, 2015, is $141 over the remaining vesting period of 2.25 years.

The following is a summary of the status of the Company’s restricted shares as of September 30, 2015, and changes therein during the three and nine months ended:


	Three months ended September 30, 2015				Nine months ended September 30, 2015
	Number of Restricted Shares		Weighted Average Grant Date Fair Value		Number of Restricted Shares		Weighted Average Grant Date Fair Value
Nonvested at beginning of period		16,983	$	10.82		—	$	—
Granted		—		—		16,983		10.82
Vested		—		—		—		—
Forfeited		—		—		—		—

Nonvested at September 30, 2015		16,983		10.82		16,983		10.82

(14) Fair Value Measurement

The Company uses a fair value hierarchy to measure fair value. This hierarchy describes three levels of inputs that may be used to measure fair value. Level 1: Quoted prices for identical assets in active markets that are identifiable on the measurement date; Level 2: Significant other observable inputs, such as quoted prices for similar assets, quoted prices in markets that are not active and other inputs that are observable or can be corroborated by observable market data; Level 3: Significant unobservable inputs that reflect the Company’s own view about the assumptions that market participants would use in pricing an asset.

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

Equity securities: The Company’s equity securities are not actively traded in an open market. The fair values of these equity securities available for sale is determined by using market data inputs for similar securities that are observable (Level 2 inputs).

Page 48

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)

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

Impaired loans: The fair values of impaired loans are determined using the fair values of collateral for collateral dependent loans, or discounted cash flows. The Company uses independent appraisals, discounted cash flow models and other available data to estimate the fair value of collateral (Level 3 inputs).

Other real estate owned: The fair value of other real estate owned is determined using the fair value of collateral. The Company uses appraisals and other available data to estimate the fair value of collateral (Level 3 inputs). The appraised values are discounted to represent an estimated value in a distressed sale. Additionally, estimated costs to sell the property are used to further adjust the value.

Assets measured at fair value are summarized below.


	Fair Value Measurements at September 30, 2015 Using:
	(Level 1)		(Level 2)		(Level 3)
Assets:

Assets measured at fair value on a recurring basis:

U.S. Treasury securities and obligations of U.S. Government agencies	$	—	$	39,492	$	—
Obligations of states and political subdivisions		—		92,379		—
Mortgage-backed securities in government sponsored entities		—		66,197		—
Equity securities in financial institutions		—		587		—
Fair value of swap asset		—		2,379		—

Liabilities:
Fair value of swap liability		—		2,379		—

Assets measured at fair value on a nonrecurring basis:

Impaired loans	$	—	$	—	$	7,142
Other real estate owned		—		—		494

Page 49

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)


	Fair Value Measurements at December 31, 2014 Using:
	(Level 1)		(Level 2)		(Level 3)

Assets:

Assets measured at fair value on a recurring basis:
U.S. Treasury securities and obligations of U.S. Government agencies	$	—	$	42,902	$	—
Obligations of states and political subdivisions		—		88,021		—
Mortgage-backed securities in government sponsored entities		—		66,442		—
Equity securities in financial institutions		—		540		—
Fair value of swap asset		—		1,721		—

Liabilities:
Fair value of swap liability		—		1,721		—

Assets measured at fair value on a nonrecurring basis:

Impaired loans	$	—	$	—	$	10,126
Other real estate owned		—		—		560

The following table presents quantitative information about the Level 3 significant unobservable inputs for assets and liabilities measured at fair value on a nonrecurring basis at September 30, 2015.


	Quantitative Information about Level 3 Fair Value Measurements
September 30, 2015	Fair Value Estimate		Valuation Technique	Unobservable Input	Range

Impaired loans	$	7,142	Appraisal of collateral	Appraisal adjustments	10% - 30%

				Liquidation expense	0% - 10%

				Holding period	0 -30 months

			Discounted cash flows	Discount rates	3.8% - 8.0%

Other real estate owned	$	494	Appraisal of collateral	Appraisal adjustments	10% - 30%

				Liquidation expense	0% - 10%

Page 50

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)

The following table presents quantitative information about the Level 3 significant unobservable inputs for assets and liabilities measured at fair value on a nonrecurring basis at December 31, 2014.


	Quantitative Information about Level 3 Fair Value Measurements
December 31, 2014	Fair Value Estimate		Valuation Technique	Unobservable Input	Range

Impaired loans	$	10,126	Appraisal of collateral	Appraisal adjustments	10% - 30%

				Liquidation expense	0% - 10%

				Holding period	0 -30 months

			Discounted cash flows	Discount rates	3.8% - 8.0%

Other real estate owned	$	560	Appraisal of collateral	Appraisal adjustments	10% - 30%

				Liquidation expense	0% - 10%

Page 51

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)

The carrying amount and fair values of financial instruments are as follows.


September 30, 2015	Carrying Amount		Total Fair Value		Level 1		Level 2		Level 3
Financial Assets:
Cash and due from financial institutions	$	33,619	$	33,619	$	33,619	$	—	$	—
Securities available for sale		198,655		198,655		—		198,655		—
Other securities		13,324		13,324		13,324		—		—
Loans, held for sale		1,223		1,223		1,223		—		—
Loans, net of allowance for loan losses		985,515		991,870		—		—		991,870
Bank owned life insurance		19,987		19,987		19,987		—		—
Accrued interest receivable		4,880		4,880		4,880		—		—
Fair value swap asset		2,379		2,379		—		2,379		—

Financial Liabilities:
Nonmaturing deposits		839,822		839,822		839,822		—		—
Time deposits		216,137		216,839		—		—		216,839
Short-term FHLB advances		54,700		54,700		54,700		—		—
Long-term FHLB advances		17,500		17,644		—		—		17,644
Securities sold under agreement to repurchase		20,887		20,887		20,887		—		—
Subordinated debentures		29,427		24,949		—		—		24,949
Accrued interest payable		152		152		152		—		—
Fair value swap liability		2,379		2,379		—		2,379		—

Page 52

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)


December 31, 2014	Carrying Amount		Total Fair Value		Level 1		Level 2		Level 3
Financial Assets:
Cash and due from financial institutions	$	29,858	$	29,858	$	29,858	$	—	$	—
Securities available for sale		197,905		197,905		—		197,905		—
Other securities		12,586		12,586		12,586		—		—
Loans, held for sale		2,410		2,410		2,410		—		—
Loans, net of allowance for loan losses		900,589		908,118		—		—		908,118
Bank owned life insurance		19,637		19,637		19,637		—		—
Accrued interest receivable		3,852		3,852		3,852		—		—
Fair value swap asset		1,721		1,721		—		1,721		—

Financial Liabilities:
Nonmaturing deposits		748,948		748,948		748,948		—		—
Time deposits		219,970		221,263		—		—		221,263
Short-term FHLB advances		42,700		42,700		42,700		—		—
Long-term FHLB advances		22,500		22,699		—		—		22,699
Securities sold under agreement to repurchase		21,613		21,613		21,613		—		—
Subordinated debentures		29,427		24,688		—		—		24,688
Accrued interest payable		126		126		126		—		—
Fair value swap liability		1,721		1,721		—		1,721		—

Cash and due from financial institutions: The carrying amounts for cash and due from financial institutions approximate fair value because they have original maturities of less than 90 days and do not present unanticipated credit concerns.

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

Other securities: The carrying value of regulatory stock approximates fair value based on applicable redemption provisions.

Page 53

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)

Loans, held-for-sale: Loans held for sale are priced individually at market rates on the day that the loan is locked for commitment to an investor. Because the holding period of such loans is typically short, the carrying value generally approximates the fair value at the time the commitment is received. All loans in the held-for-sale account conform to Fannie Mae underwriting guidelines, with specific intent of the loan being purchased by an investor at the predetermined rate structure.

Loans, net of allowance for loan losses: Fair values for loans, other than impaired, are estimated for portfolios of loans with similar financial characteristics. The fair value of performing loans has been estimated by discounting expected future cash flows of the underlying portfolios. The discount rates used in these calculations are generally derived from the treasury yield curve and are calculated by discounting scheduled cash flows through the estimated maturity using estimated market discount rates that reflect the credit and interest rate inherent in the loan. The estimated maturity is based on the Company’s historical experience with repayments for each loan classification. Changes in these significant unobservable inputs used in discounted cash flow analysis, such as the discount rate or prepayment speeds, could lead to changes in the underlying fair value.

Bank owned life insurance: The carrying value of bank owned life insurance approximates the fair value based on applicable redemption provisions.

Accrued interest receivable and payable and securities sold under agreements to repurchase: The carrying amounts for accrued interest receivable, accrued interest payable and securities sold under agreements to repurchase approximate fair value because they are generally received or paid in 90 days or less and do not present unanticipated credit concerns.

Deposits: The fair value of deposits with no stated maturity, such as noninterest-bearing demand deposits, savings and NOW accounts, and money market accounts, is equal to the amount payable on demand.

The fair value of certificates of deposit is based on the discounted value of contractual cash flows. The discount rate is estimated using the current market rates currently offered for deposits of similar remaining maturities.

The deposits’ fair value estimates do not include the benefit that results from the low-cost funding provided by the deposit liabilities compared to the cost of borrowing funds in the market, commonly referred to as the core deposit intangible.

Federal Home Loan Bank (“FHLB”) advances: Rates available to the Company for borrowed funds with similar terms and remaining maturities are used to estimate the fair value of borrowed funds.

Subordinated debentures: The fair value of subordinated debentures is based on the discounted value of contractual cash flows of the underlying debt agreements. The discount rate is estimated using the current rate for the borrowing from the FHLB with the most similar terms.

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

Page 54

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)

(15) Preferred Shares

On December 19, 2013, the Company completed the sale of 1,000,000 depositary shares, each representing a 1/40th ownership interest in a 6.50% Noncumulative Redeemable Convertible Perpetual Preferred Share, Series B, of the Company, with a liquidation preference of $1,000 per share (equivalent to $25.00 per depositary share). The Company sold the maximum of 1,000,000 depositary shares in the offering, resulting in gross proceeds to the Company of $25,000.

Using proceeds from the sale of the depositary shares, the Company redeemed all of its outstanding Series A Preferred Shares for an aggregate purchase price of $22,857, which redemption was completed as of February 15, 2014.

(16) Derivative Hedging Instruments

To accommodate customer need and to support the Company’s asset/liability positioning, on occasion we enter into interest rate swaps with a customer and a bank counterparty. The Company enters into a floating rate loan and a fixed rate swap with our customer. Simultaneously, the Company enters into an offsetting fixed rate swap with a bank counterparty. In connection with each swap transaction, the Company agrees to pay interest to the customer on a notional amount at a variable interest rate and receive interest from the customer on the same notional amount at a fixed interest rate. At the same time, the Company agrees to pay a bank counterparty the same fixed interest rate on the same notional amount and receive the same variable interest rate on the same notional amount. These transactions allow the Company’s customer to effectively convert variable rate loans to fixed rate loans. Since the Company acts as an intermediary for its customer, changes in the fair value of the underlying derivative contracts offset each other and do not significantly impact the Company’s results of operations.

Page 55

Civista Bancshares, Inc.

Notes to Interim Consolidated Financial Statements (Unaudited)

Form 10-Q

(Amounts in thousands, except share data)

The following table summarizes the Company’s interest rate swap positions and the impact of a 1 basis point change in interest rates as of September 30, 2015.


	Notional Amount			Weighted Average Rate Received/(Paid)			Impact of a 1 basis point change in interest rates			Repricing Frequency
Derivative Assets	$	30,802			5.41	%	$	18		Monthly
Derivative Liabilities		(30,802	)		-5.41	%		(18	)	Monthly

Net Exposure	$	—					$	—

The following table summarizes the Company’s interest rate swap positions and the impact of a 1 basis point change in interest rates as of December 31, 2014


	Notional Amount			Weighted Average Rate Received/(Paid)			Impact of a 1 basis point change in interest rates			Repricing Frequency
Derivative Assets	$	29,060			5.47	%	$	19		Monthly
Derivative Liabilities		(29,060	)		-5.47	%		(19	)	Monthly

Net Exposure	$	—					$	—

The Company monitors and controls all derivative products with a comprehensive Board of Director approved commercial loan swap policy. All hedge transactions must be approved in advance by the Lenders Loan Committee or the Directors Loan Committee of the Board of Directors.

Page 56

Civista Bancshares, Inc.

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

Form 10-Q

(Amounts in thousands, except share data)

ITEM 2.

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

Introduction

The following discussion focuses on the consolidated financial condition of the Company at September 30, 2015 compared to December 31, 2014, and the consolidated results of operations for the three- and nine-month periods ended September 30, 2015, compared to the same periods in 2014. This discussion should be read in conjunction with the consolidated financial statements and footnotes included in this Form 10-Q.

Forward-Looking Statements

This Quarterly Report on Form 10-Q may contain “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), relating to such matters as the Company’s financial condition, anticipated operating results, cash flows, business line results, credit quality expectations, prospects for new lines of business, economic trends (including interest rates) and similar matters. Forward-looking statements reflect our expectations, estimates or projections concerning future results or events. These statements are generally identified by the use of forward-looking words or phrases such as “believe,” “belief,” “expect,” “anticipate,” “may,” “could,” “intend,” “intent,” “estimate,” “plan,” “foresee,” “likely,” “will,” “should” or other similar words or phrases. Forward-looking statements are not guarantees of performance and are inherently subject to known and unknown risks, uncertainties and assumptions that are difficult to predict and could cause our actual results, performance or achievements to differ materially from those expressed in or implied by the forward-looking statements. Factors that could cause actual results, performance or achievements to differ from results discussed in the forward-looking statements include, but are not limited to, changes in financial markets or national or local economic conditions; sustained weakness or deterioration in the real estate market; volatility and direction of market interest rates; credit risks of lending activities; changes in the allowance for loan losses; legislation or regulatory changes or actions; increases in Federal Deposit Insurance Corporation (“FDIC”) insurance premiums and assessments; changes in tax laws; failure of or breach in our information and data processing systems; unforeseen litigation; and other risks identified from time-to-time in the Company’s other public documents on file with the SEC, including those risks identified in “Item 1A. Risk Factors” of Part I of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014. The Company does not undertake, and specifically disclaims, any obligation to publicly release the result of any revisions that may be made to any forward-looking statements to reflect occurrence of anticipated or unanticipated events or circumstances after the date of such statements, except as required by law.

Page 57

Civista Bancshares, Inc.

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

Form 10-Q

(Amounts in thousands, except share data)

Financial Condition

Total assets of the Company at September 30, 2015 were $1,313,331 compared to $1,213,191 at December 31, 2014, an increase of $100,140, or 8.3 percent. The increase in total assets was mainly attributable to an increase in cash and due from financial institutions, loans, other assets and the merger of TCNB Financial Corp. (“TCNB”) with the Company on March 31, 2015. Total liabilities at September 30, 2015 were $1,189,994 compared to $1,097,282 at December 31, 2014, an increase of $92,712, or 8.4 percent. The increase in total liabilities was mainly attributable to an increase in total deposits and FHLB overnight advances.

Loans outstanding as of September 30, 2015 and December 31, 2014 are as follows.


	September 30, 2015			December 31, 2014

Commercial & Agriculture	$	129,119		$	114,186
Commercial Real Estate - Owner Occupied		160,457			143,014
Commercial Real Estate - Non-Owner Occupied		340,702			308,666
Residential Real Estate		284,899			268,510
Real Estate Construction		67,461			65,452
Consumer and Other		17,637			15,029

Total loans		1,000,275			914,857
Allowance for loan losses		(14,760	)		(14,268	)

Net loans	$	985,515		$	900,589

Net loans have increased $84,926 or 9.4 percent since December 31, 2014. The increase in net loans was spread across all segments and resulted primarily from the acquisition of net loans totaling $76,444 from TCNB. Commercial & Agriculture loans increased $14,933, with a total of $13,799 of these being acquired as part of the TCNB acquisition. Commercial Real Estate – Owner Occupied loans increased $17,443, with a total of $23,029 being acquired as part of the TCNB acquisition. Commercial Real Estate – Non-Owner Occupied loans increased $32,036, with a total of $13,808 of these loans being acquired as part of the TCNB acquisition. Residential Real Estate loans increased $16,389, with a total of $17,541 being acquired as part of the TCNB acquisition. Real estate construction loans increased $2,009, with a total of $3,863 being acquired as part of the TCNB acquisition. Consumer and other loans increased $2,608, with a total of $4,404 being acquired as part of the TCNB acquisition.

Loans held for sale have decreased $1,187 or 49.3 percent since December 31, 2014, due to a decrease in the amount of time originations remained on the Company’s books before they were sold during the first nine months of 2015. In the third quarter of 2015, the Company sold loans it had acquired in the acquisition by merger of TCNB. The loans were collateralized by manufactured housing and totaled $3,566. The Company realized a loss on the sale of $75. At September 30, 2015, the net loan to deposit ratio was 93.3 percent compared to 93.0 percent at December 31, 2014.

Page 58

Civista Bancshares, Inc.

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

Form 10-Q

(Amounts in thousands, except share data)

For the nine months of operations in 2015, $1,200 was placed into the allowance for loan losses from earnings, compared to $1,500 in the same period of 2014. The decrease in provision for loan losses in the first nine months of 2015 is related to the decrease in the specific reserve required for loans and a decrease in net charge-offs compared to a year ago. Net charge-offs have decreased to $708, compared to $2,583 in 2014. For the first nine months of 2015, the Company charged off a total of fifty-nine loans. Twenty-eight real estate mortgage loans totaling $490 net of recoveries, nine commercial real estate – owner occupied loans totaling $140 net of recoveries, four commercial real estate – non-owner occupied loans totaling $(24) net of recoveries, two commercial and agriculture loans totaling $30 net of recoveries and zero real estate construction loans totaling ($4) net of recoveries were charged off in the first nine months of the year. In addition, sixteen Consumer and Other loans totaling $76, net of recoveries, were charged off. For each loan category, as well as in total, the percentage of net charge-offs to loans was less than one percent. Nonperforming loans have decreased by $2,989 since December 31, 2014, which was due to a decrease in loans on nonaccrual status of $3,013, offset by an increase of $24 in loans past due 90 days but still accruing. Each of these factors was considered by management as part of the examination of both the level and mix of the allowance by loan type as well as the overall level of the allowance. Management specifically evaluates loans that are impaired for estimates of loss. To evaluate the adequacy of the allowance for loan losses to cover probable losses in the portfolio, management considers specific reserve allocations for identified portfolio loans, reserves for delinquencies and historical reserve allocations. Loss migration rates are calculated over a three-year period for all portfolio segments, except for the segment consisting of purchased automobile loans which is calculated over a two-year period. The use of a three-year period for loss migration analysis is a change in methodology for this period. Previously, a two-year loss migration analysis had been used for the entire portfolio. With continued improvement and stability in economic conditions, regulatory guidance recommends a longer look-back period. In addition, Civista made significant changes to consumer and commercial lending policies in the first quarter of 2012. Combined, the stable economy and now seasoned policy changes indicate a three year period is more reflective of future expectations. Management also considers certain economic factors for trends that management uses to account for the qualitative and environmental changes in risk, which affects the level of the reserve.

Management analyzes each Commercial and Commercial Real Estate loan, with a balance of $350 or larger, on an individual basis and designates a loan as impaired when it is in nonaccrual status or when an analysis of the borrower’s operating results and financial condition indicate that underlying cash flows are not adequate to meet its debt service requirements. In addition, loans held for sale are excluded from consideration as impaired. Loans are generally moved to nonaccrual status when 90 days or more past due. Impaired loans, or portions thereof, are charged-off when deemed uncollectible. The allowance for loan losses as a percent of total loans was 1.48 percent at September 30, 2015 and 1.56 percent at December 31, 2014.

The available for sale security portfolio increased by $750, from $197,905 at December 31, 2014 to $198,655 at September 30, 2015. Management continually evaluates our securities portfolio in response to established asset/liability management objectives, changing market conditions that could affect profitability and the level of interest rate risk to which the Company is exposed. These evaluations may cause the Company to change the level of funds it deploys into investment securities and change the composition of its investment securities portfolio. As of September 30, 2015, the Company was in compliance with all pledging requirements.

Page 59

Civista Bancshares, Inc.

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

Form 10-Q

(Amounts in thousands, except share data)

Premises and equipment, net, have increased $1,800 from December 31, 2014 to September 30, 2015. The increase is attributed to the acquisition of TCNB assets of $1,738, consisting of branch offices and equipment within those branches. The remaining difference resulted from new purchases of $933, offset by depreciation of $871.

Goodwill increased by $5,375, from $21,720 at December 31, 2014 to $27,095 at September 30, 2015. The increase is due to the goodwill created from the merger with TCNB. Other intangible assets increased $563 from year-end 2014. The increase includes $1,009 of core deposit intangibles from the merger with TCNB, offset by amortization of $446.

Other assets increased $2,036 from December 31, 2014 to September 30, 2015. The increase is mainly due to increases in low income housing investment, bank owned life insurance, swap assets and deferred tax assets.

Total deposits as of September 30, 2015 and December 31, 2014 are as follows.


	September 30, 2015		December 31, 2014

Noninterest-bearing demand	$	296,863	$	250,701
Interest-bearing demand		184,622		179,388
Savings and money market		358,337		318,859
Time deposits		216,137		219,970

Total Deposits	$	1,055,959	$	968,918

Total deposits at September 30, 2015 increased $87,041 from year-end 2014. Noninterest-bearing deposits increased $46,162 from year-end 2014, while interest-bearing deposits, including savings and time deposits, increased $40,879 from December 31, 2014. The increase in noninterest-bearing deposits was primarily due to the acquisition of TCNB, which added noninterest-bearing deposits of $18,263, as well as an increase in commercial accounts related to the Company’s participation in a tax refund processing program. The interest-bearing deposit increase was mainly due to the acquisition of TCNB, which contributed interest-bearing deposits totaling $68,606. The year-to-date average balance of total deposits increased $84,684 compared to the average balance of the same period in 2014. The increase in average balance is due to increases of $43,657 in demand deposit accounts, $13,514 in brokered deposits, $23,126 in money market savings, $8,588 in interest-bearing demand, $3,111 in public fund money market savings and $5,754 in statement saving accounts, offset by decreases of $15,144 in time certificates and $978 in IRA’s.

Page 60

Civista Bancshares, Inc.

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

Form 10-Q

(Amounts in thousands, except share data)

FHLB advances increased $7,000 from December 31, 2014 to September 30, 2015. The increase is mainly due to an increase in overnight funds of $12,000. In addition, the Company had one FHLB advance mature during the nine months ended September 30, 2015. The advance matured on March 11, 2015, in the amount of $5,000. This advance had a term of eighty-four months with a fixed rate of 2.84%. The advance was not replaced. Securities sold under agreements to repurchase, which tend to fluctuate, have decreased $726 from December 31, 2014 to September 30, 2015.

Shareholders’ equity at September 30, 2015 was $123,337, or 9.4 percent of total assets, compared to $115,909, or 9.6 percent of total assets, at December 31, 2014. The decrease in the ratio of equity to total assets was the result of an increase in total assets. The increase in shareholders’ equity was primarily due to net income of $9,546, a decrease in the Company’s pension liability, net of tax, of $138, an increase in the fair value of securities available for sale, net of tax, of $57 and offset by dividends on preferred stock and common stock of $1,186 and $1,170, respectively. Additionally, $43 was recognized as stock-based compensation in connection with the grant of restricted shares. Total outstanding common shares at September 30, 2015 were 7,843,578. Total outstanding common shares at December 31, 2014 were 7,707,917. The increase in common shares outstanding is the result of the conversion of 928 of the company’s previously issued preferred shares into 118,678 common shares and the grant of 16,983 restricted common shares to certain officers under the Company’s 2014 Incentive Plan.

Results of Operations

Nine Months Ended September 30, 2015 and 2014

The Company had net income of $9,546 for the nine months ended September 30, 2015, an increase of $2,289 from net income of $7,257 for the same nine months of 2014. Basic earnings per common share were $1.07 for the nine months ended September 30, 2015, compared to $0.75 for the same period in 2014. Diluted earnings per common share were $0.87 for the nine months ended September 30, 2015, compared to $0.64 for the same period in 2014. The primary reasons for the changes in net income are explained below.

Net interest income for the nine months ended September 30, 2015 was $35,231, an increase of $4,116 from $31,115 in the same nine months of 2014. Total interest income for the nine months ended September 30, 2015 was $37,725, an increase of $3,378 from $34,347 in the same nine months of 2014. Average earning assets increased 8.1 percent during the period ended September 30, 2015 as compared to the same period in 2014. Average loans and non-taxable securities for the first nine months of 2015 increased 12.7 percent and 13.2 percent, respectively, compared to the first nine months of last year. The increases were offset by decreases in taxable securities and interest-bearing deposits in banks. Interest-bearing deposits in other banks decreased mainly due to the timing of cash inflows and outflows related to our tax refund processing program. The yield on earning assets increased 7 basis points for the first nine months of 2015 compared to the first nine months of last year. Total interest expense for the nine months ended September 30, 2015 was $2,494, a decrease of $738 from $3,232 in the same nine months of 2014. Interest expense on time deposits and FHLB borrowings decreased $185 and $561, respectively in the first nine months of 2015 compared to the same period in 2014. Average time deposits for the first nine months of 2015 decreased 1.3 percent compared to the first nine months of 2014, while average

Page 61

Civista Bancshares, Inc.

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

Form 10-Q

(Amounts in thousands, except share data)

FHLB borrowings for the first nine months of 2015 increased 14.7 percent compared to the first nine months of 2014. The increase in FHLB borrowings is due to an increase in overnight borrowings, which are paying a low interest rate. The interest rate paid on time deposits during the first nine months of 2015 decreased by 10 basis points as compared to the same period in 2014. The interest rate paid on FHLB borrowings during the first nine months of 2015 decreased 225 basis points as compared to the same period in 2014. The Company’s net interest margin for the nine months ended September 30, 2015 and 2014 was 3.91% and 3.73%, respectively.

Page 62

Civista Bancshares, Inc.

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

Form 10-Q

(Amounts in thousands, except share data)

The following table presents the condensed average balance sheets for the nine months ended September 30, 2015 and 2014. The daily average loan amounts outstanding are net of unearned income and include loans held for sale and nonaccrual loans. The average balance of securities is computed using the carrying value of securities. Rates are annualized and taxable equivalent yields are computed using a 34% tax rate for tax-exempt interest income. The average yield has been computed using the historical amortized cost average balance for available-for-sale securities.


	Nine Months Ended September 30,
	2015								2014
	Average balance			Interest		Yield/ rate *			Average balance			Interest		Yield/ rate *
Assets:
Interest-earning assets:
Loans	$	976,290		$	33,271		4.56	%	$	866,424		$	29,850		4.61	%
Taxable securities		140,311			2,439		2.36	%		152,311			2,610		2.31	%
Non-taxable securities		70,779			1,917		5.73	%		62,544			1,750		5.83	%
Interest-bearing deposits in other banks		56,499			98		0.23	%		69,728			137		0.26	%

Total interest-earning assets		1,243,879			37,725		4.18	%		1,151,007			34,347		4.11	%

Noninterest-earning assets:
Cash and due from financial institutions		38,735								40,540
Premises and equipment, net		15,807								16,186
Accrued interest receivable		4,261								4,070
Intangible assets		28,214								24,218
Other assets		10,282								8,513
Bank owned life insurance		19,795								19,318
Less allowance for loan losses		(14,676	)							(16,224	)

Total assets	$	1,346,297							$	1,247,628

Liabilities and Shareholders Equity:
Interest-bearing liabilities:
Demand and savings	$	544,569		$	315		0.08	%	$	500,560		$	282		0.08	%
Time		226,109			1,273		0.75	%		229,091			1,458		0.85	%
FHLB		40,922			326		1.07	%		35,671			887		3.32	%
Federal funds purchased		92			—		0.00	%		55			—		0.00	%
Subordinated debentures		29,427			565		2.57	%		29,427			590		2.68	%
Repurchase agreements		19,183			15		0.10	%		19,167			15		0.10	%

Total interest-bearing liabilities		860,302			2,494		0.39	%		813,971			3,232		0.53	%

Noninterest-bearing deposits		353,002								309,345
Other liabilities		13,881								10,865
Shareholders’ equity		119,112								113,447

Total liabilities and shareholders’ equity	$	1,346,297							$	1,247,628

Net interest income and interest rate spread				$	35,231		3.79	%				$	31,115		3.58	%
Net interest margin							3.91	%							3.73	%

* - All yields and costs are presented on an annualized and tax equivalent basis

Page 63

Civista Bancshares, Inc.

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

Form 10-Q

(Amounts in thousands, except share data)

Net interest income may also be analyzed by comparing the volume and rate components of interest income and interest expense. The following table provides an analysis of the changes in interest income and expense between the nine months ended September 30, 2015 and 2014. The table is presented on a fully tax-equivalent basis.


	Increase (decrease) due to:
	Volume⁽¹⁾			Rate⁽¹⁾			Net
	(Dollars in thousands)
Interest income:
Loans	$	3,747		$	(326	)	$	3,421
Taxable securities		(212	)		41			(171	)
Nontaxable securities		233			(66	)		167
Interest-bearing deposits in other banks		(24	)		(15	)		(39	)

Total interest income	$	3,744		$	(366	)	$	3,378


Interest expense:
Demand and savings	$	25		$	8		$	33
Time		(19	)		(166	)		(185	)
FHLB		115			(676	)		(561	)
Subordinated debentures		—			(25	)		(25	)
Repurchase agreements		—			—			—

Total interest expense	$	121		$	(859	)	$	(738	)


Net interest income	$	3,623		$	493		$	4,116

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

The Company provides for loan losses through regular provisions to the allowance for loan losses. The provision is affected by net charge-offs on loans and changes in specific and general allocations required on the allowance for loan losses. Provisions for loan losses totaled $1,200 for the nine months ended September 30, 2015, compared to $1,500 for the same period in 2014. The decrease in provision for loan losses in the first nine months of 2015 is related to the decrease in the specific reserve required for loans and a decrease in net charge-offs compared to a year ago.

Page 64

Civista Bancshares, Inc.

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

Form 10-Q

(Amounts in thousands, except share data)

Noninterest income for the nine-month periods ended September 30, 2015 and 2014 are as follows.


	Nine months ended September 30,
	2015			2014

Service charges	$	3,487		$	3,184
Net gain on sale of securities		(5	)		114
Net gain on sale of loans		888			470
ATM fees		1,484			1,388
Trust fees		2,159			2,396
Bank owned life insurance		350			373
Tax refund processing fees		2,000			2,321
Other		769			770

Total noninterest income	$	11,132		$	11,016

Noninterest income for the nine months ended September 30, 2015 was $11,132, an increase of $116 or 1.1 percent from $11,016 for the same period of 2014. The primary reasons for the increase follow.

Service charge fee income for the period ended September 30, 2015 was $3,487, up $303 or 9.5 percent over the same period of 2014. The increase is primarily due to increases in business service charges and overdraft fees.

Gain on the sale of securities decreased $119 during the period ended September 30, 2015 compared to the same period of 2014. Management, from time to time, will reposition the investment portfolio to match liquidity needs of the Company.

Gain on sale of loans increased $418 or 88.9 percent during the period ended September 30, 2015 compared to the same period of 2014. The increase is due to an increase in volume of loans sold during the first nine months of 2015 as compared to the same period in 2014, as well as an increase in the premium earned.

ATM fee income increased $96 or 6.9 percent during the period ended September 30, 2015 compared to the same period of 2014. The increase is due to increased interchange fees.

Trust fee income is comprised of fees earned from the management and administration of trusts and other customer assets. These fees are largely based upon the market value of the assets that we manage and the fee rate charged to customers. Trust fee income decreased $237 or 9.9 percent during the period ended September 30, 2015 compared to the same period in 2014. The decrease is related to a general decrease in brokerage transactions compared to the same period in 2014.

The Company processes state and federal income tax refund payments for customers of third-party income tax preparation vendors. The third-party vendors pay us a fee for processing the payments. In 2015, a new fee structure was agreed upon between the Company and its’ vendors. The new fee calls

Page 65

Civista Bancshares, Inc.

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

Form 10-Q

(Amounts in thousands, except share data)

for a flat processing fee, whereas in 2014, the Company received a per transaction fee. As a result of this change, tax refund processing fees decreased $321 or 13.8 percent during the period ended September 30, 2015 compared to the same period in 2014. This fee income is seasonal in nature, the majority of which is received in the first quarter of the year.

Noninterest expense for the nine-month periods ended September 30, 2015 and 2014 are as follows.


	Nine months ended September 30,
	2015		2014

Salaries, Wages and benefits	$	17,732	$	16,661
Net occupancy expense		1,833		1,771
Equipment expense		1,030		1,023
Contracted data processing		1,392		1,080
FDIC assessment		654		700
State franchise tax		661		680
Professional services		1,716		1,332
Amortization of intangible assets		522		604
ATM expense		563		606
Marketing		842		1,227
Other		5,258		5,384

Total noninterest expense	$	32,203	$	31,068

Noninterest expense for the nine months ended September 30, 2015 was $32,203, an increase of $1,135, from $31,068 reported for the same period of 2014. The primary reasons for the increase follow.

Salary and other employee costs were $17,732, up $1,071 or 6.4 percent as compared to the same period of 2014. The increase was mainly due to an increase in salaries and 401(k) expenses. Salaries and related payroll taxes increased mainly due to annual pay increases and overtime related to the acquisition of TCNB, as well as the addition of TCNB employees. In 2015, the Company adopted a Safe Harbor 401(k) plan which increased the match paid to participants.

Contracted data processing costs were $1,392, up $312 or 28.9 percent compared to the same period in 2014 due to increases in the cost of technology services and core processing costs related to the acquisition of TCNB.

Professional service costs were $1,716, up $384 or 28.8 percent compared to the same period in 2014. The increase is due to increased legal and audit fees relating to the acquisition of TCNB, increased recruiting expenses and increased legal expenses related to the Company’s filing of a Form S-3 shelf registration statement with the SEC and matters related to the Special Meeting of Shareholders called to be held on November 4, 2015 for the purpose of voting to eliminate preemptive rights and cumulative voting in the election of directors, as well as the previously disclosed litigation related to a proposed sale of real estate that the Company owns near one of its branches.

Page 66

Civista Bancshares, Inc.

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

Form 10-Q

(Amounts in thousands, except share data)

Amortization expense decreased $82, or 13.6 percent from the same period of 2014, as a result of scheduled amortization of intangible assets associated with mergers.

ATM costs were $563, down $43 or 7.1 percent compared to the same period in 2014. The decrease is due to vendor credits that began in the second quarter of 2015.

Marketing costs were $842, down $385 or 31.4 percent compared to the same period in 2014. In 2014, the Company increased marketing expenses as part of its rebranding effort.

Other operating expenses were $5,258, down $126 or 2.3 percent compared to the same period in 2014. The decrease is mainly due to a decreased in donation expenses. In 2014, the Company donated property it was no longer using to a municipality.

Income tax expense for the nine months ended September 30, 2015 totaled $3,414, up $1,108 compared to the same period in 2014. The effective tax rates for the nine-month periods ended September 30, 2015 and September 30, 2014 were 26.3% and 24.1%, respectively. The difference between the statutory federal income tax rate and the Company’s effective tax rate is the permanent tax differences, primarily consisting of tax-exempt interest income from municipal investments and loans, low income housing tax credits and bank owned life insurance income. The increase in the effective tax rate as of September 30, 2015 is the result of an increase in taxable income as compared to the same period in 2014.

Three Months Ended September 30, 2015 and 2014

The Company had net income of $3,253 for the three months ended September 30, 2015, an increase of $947 from net income of $2,306 for the same three months of 2014. Basic earnings per common share were $0.36 for the quarter ended September 30, 2015, compared to $0.25 for the same period in 2014. Diluted earnings per common share were $0.30 for the quarter ended September 30, 2015, compared to $0.21 for the same period in 2014. The primary reasons for the changes in net income are explained below.

Net interest income for the three months ended September 30, 2015 was $12,402, an increase of $1,718 from $10,684 in the same three months of 2014. The Company’s net interest margin for the three months ended September 30, 2015 and 2014 was 4.13% and 3.94%, respectively. Total interest income for the three months ended September 30, 2015 was $13,223, an increase of $1,556 from $11,667 in the same three months of 2014. Average earning assets increased 10.8 percent during the quarter ended September 30, 2015 as compared to the same period in 2014. Average loans and non-taxable securities for the third quarter of 2015 increased 14.3 percent and 11.6 percent, respectively, compared to the third quarter of last year, offset by a decrease in average taxable securities of 5.4 percent. The yield on earning assets increased 9 basis points for the third quarter of 2015 compared to the third quarter of last year. Total interest expense for the three months ended September 30, 2015 was $821, a decrease of $162 from $983 in the same three months of 2014. Interest expense on time deposits and FHLB borrowings

Page 67

Civista Bancshares, Inc.

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

Form 10-Q

(Amounts in thousands, except share data)

decreased $53 and $125, respectively in the third quarter of 2015 compared to the same period in 2014. Average FHLB borrowings for the third quarter of 2015 increased 95.7 percent compared to the third quarter of 2014. The increase in FHLB borrowings is due to an increase in overnight borrowing, which are paying a low interest rate. The interest rate paid on time deposits and FHLB borrowings during the third quarter of 2015 also decreased by 7 and 224 basis points, respectively, as compared to the same period in 2014.

Page 68

Civista Bancshares, Inc.

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

Form 10-Q

(Amounts in thousands, except share data)

The following table presents the condensed average balance sheets for the three months ended September 30, 2015 and 2014. The daily average loan amounts outstanding are net of unearned income and include loans held for sale and nonaccrual loans. The average balance of securities is computed using the carrying value of securities. Rates are annualized and taxable equivalent yields are computed using a 34% tax rate for tax-exempt interest income. The average yield has been computed using the historical amortized cost average balance for available-for-sale securities.


	Three Months Ended September 30,
	2015								2014
	Average balance			Interest		Yield/ rate *			Average balance			Interest		Yield/ rate *
Assets:
Interest-earning assets:
Loans	$	1,009,372		$	11,755		4.62	%	$	883,459		$	10,218		4.59	%
Taxable securities		138,129			810		2.36	%		146,060			845		2.32	%
Non-taxable securities		72,080			653		5.65	%		64,575			595		5.75	%
Interest-bearing deposits in other banks		10,668			5		0.19	%		16,628			9		0.21	%

Total interest-earning assets	$	1,230,249			13,223		4.39	%	$	1,110,722			11,667		4.30	%

Noninterest-earning assets:
Cash and due from financial institutions		23,793								21,698
Premises and equipment, net		16,338								15,297
Accrued interest receivable		4,330								3,987
Intangible assets		29,589								24,026
Other assets		10,574								7,123
Bank owned life insurance		19,910								19,442
Less allowance for loan losses		(14,983	)							(15,721	)

Total Assets	$	1,319,800							$	1,186,574

Liabilities and Shareholders Equity:
Interest-bearing liabilities:
Demand and savings	$	552,899		$	108		0.08	%	$	501,765		$	94		0.08	%
Time		220,726			405		0.73	%		226,483			458		0.80	%
FHLB		62,057			111		0.71	%		31,705			236		2.95	%
Federal funds purchased		272			—		0.00	%		162			—		0.00	%
Subordinated debentures		29,427			192		2.59	%		29,427			190		2.56	%
Repurchase Agreements		20,044			5		0.10	%		17,045			5		0.12	%

Total interest-bearing liabilities	$	885,425			821		0.37	%	$	806,587			983		0.48	%

Noninterest-bearing deposits		300,305								257,903
Other liabilities		13,013								7,722
Shareholders’ Equity		121,057								114,362

Total Liabilities and Shareholders’ Equity	$	1,319,800							$	1,186,574

Net interest income and interest rate spread				$	12,402		4.02	%				$	10,684		3.82	%
Net interest margin							4.13	%							3.94	%

* - All yields and costs are presented on an annualized basis

Page 69

Civista Bancshares, Inc.

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

Form 10-Q

(Amounts in thousands, except share data)

Net interest income may also be analyzed by comparing the volume and rate components of interest income and interest expense. The following table provides an analysis of the changes in interest income and expense between the three months ended September 30, 2015 and 2014. The table is presented on a fully tax-equivalent basis.


	Increase (decrease) due to:
	Volume⁽¹⁾			Rate⁽¹⁾			Net
	(Dollars in thousands)
Interest income:
Loans	$	1,466		$	71		$	1,537
Taxable securities		(47	)		12			(35	)
Nontaxable securities		71			(13	)		58
Interest-bearing deposits in other banks		(3	)		(1	)		(4	)

Total interest income	$	1,487		$	69		$	1,556


Interest expense:
Demand and savings	$	10		$	4		$	14
Time		(11	)		(42	)		(53	)
FHLB		130			(255	)		(125	)
Subordinated debentures		—			2			2
Repurchase agreements		1			(1	)		—

Total interest expense	$	130		$	(292	)	$	(162	)


Net interest income	$	1,357		$	361		$	1,718

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

Provision for loan losses totaled $400 for the three months ended September 30, 2015, compared to $0 for the same period in 2014.

Page 70

Civista Bancshares, Inc.

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

Form 10-Q

(Amounts in thousands, except share data)

Noninterest income for the three-month periods ended September 30, 2015 and 2014 are as follows.


	Three months ended September 30,
	2015			2014

Service charges	$	1,262		$	1,110
Net gain on sale of securities		(5	)		1
Net gain on sale of loans		269			239
ATM fees		520			481
Trust fees		659			822
Bank owned life insurance		116			118
Tax refund processing fees		—			6
Other		255			235

Total noninterest income	$	3,076		$	3,012

Noninterest income for the three months ended September 30, 2015 was $3,076, an increase of $64 or 2.1 percent from $3,012 for the same period of 2014. The primary reasons for the increase follow.

Service charge fee income for the period ended September 30, 2015 was $1,262, up $152 or 13.7 percent over the same period of 2014. The increase is primarily due to increases in business service charges and overdraft fees.

Gain on the sale of loans increased $30 or 12.6 percent during the third quarter of 2015 compared to the same period of 2014. The increase is due to an increase in volume of loans sold during the third quarter of 2015 compared to the same period of 2014, as well as an increase in the premiums earned.

ATM fee income increased $39 or 8.1 percent during the third quarter of 2015 compared to the same period of 2014. The increase is due to increased interchange fees.

Trust fee income is comprised of fees earned from the management and administration of trusts and other customer assets. These fees are largely based upon the market value of the assets that we manage and the fee rate charged to customers. Trust fee income decreased $163 or 19.8 percent during the third quarter of 2015 compared to the same period in 2014. The decrease is related to a general decrease in brokerage transactions compared to the same period in 2014.

Page 71

Civista Bancshares, Inc.

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

Form 10-Q

(Amounts in thousands, except share data)

Noninterest expense for the three-month periods ended September 30, 2015 and 2014 are as follows.


	Three months ended September 30,
	2015		2014

Salaries, Wages and benefits	$	6,025	$	5,654
Net occupancy expense		595		510
Equipment expense		303		320
Contracted data processing		399		369
FDIC assessment		192		212
State franchise tax		205		240
Professional services		597		538
Amortization of intangible assets		189		201
ATM expense		119		203
Marketing		298		434
Other		1,744		1,980

Total noninterest expense	$	10,666	$	10,661

Noninterest expense for the three months ended September 30, 2015 was $10,666, an increase of $5, from $10,661 reported for the same period of 2014. The primary reasons for the increase follow.

Salaries, wages and benefits were $6,025, up $371 or 6.6 percent as compared to the same period of 2014. The increase was mainly due to an increase in salaries and related taxes. Salaries and related payroll taxes increased mainly due to annual pay increases and to additional employees on staff, largely related to the merger.

Net occupancy and equipment costs were $898, up $68 or 8.2 percent compared to the same period in 2014. The increase is mainly due to increases in building and equipment depreciation and rent expense as a result of the Company’s merger with TCNB.

Contracted data processing costs were $399, up $30 or 8.1 percent compared to the same period in 2014 due to increases in cost of technology services and in core processing costs during the third quarter of 2015 as compared to the same period in 2014.

Professional service costs were $597, up $59 or 11.0 percent compared to the same period in 2014. The increase is due to increased legal and audit fees relating to the Company’s filing of a Form S-3 shelf registration statement with the SEC and matters related to the Special Meeting of Shareholders called to be held on November 4, 2015 for the purpose of voting to eliminate preemptive rights and cumulative voting in the election of directors.

ATM costs were $119, down $84 or 41.4 percent compared to the same period in 2014. The decrease is due to credits received from a vendor for billing errors.

Page 72

Civista Bancshares, Inc.

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

Form 10-Q

(Amounts in thousands, except share data)

Marketing costs were $298, down $136 or 31.3 percent compared to the same period in 2014. In 2014, the Company increased marketing expenses as part of our rebranding efforts.

Other operating expenses were $1,744, down $236 or 11.9 percent compared to the same period in 2014. The decrease is mainly due to a decreased in donation expenses. In 2014, the Company donated property it was no longer using to a municipality.

Income tax expense for the three months ended September 30, 2015 totaled $1,159, up $430 compared to the same period in 2014. The effective tax rates for the three-month periods ended September 30, 2015 and September 30, 2014 were 26.3% and 24.0%, respectively. The difference between the statutory federal income tax rate and the Company’s effective tax rate is the permanent tax differences, primarily consisting of tax-exempt interest income from municipal investments and loans, low income housing tax credits and bank owned life insurance income.

Capital Resources

Shareholders’ equity totaled $123,337 at September 30, 2015 compared to $115,909 at December 31, 2014. The increase in shareholders’ equity resulted primarily from net income of $9,546, which was offset by dividends on preferred stock and common stock of $1,186 and $1,170, respectively.

During the first quarter of 2015, the Company adopted the new BASEL III regulatory capital framework as approved by the federal banking agencies. The final BASEL III rules also require the Company to now maintain minimum amounts and ratios of Common Equity Tier 1 (“CET1”) Capital to risk-weighted assets (as these terms are defined in the BASEL III rules). Under the BASEL III rules, the Company elected to opt-out of including accumulated other comprehensive income in regulatory capital. For December 31, 2014, The Company’s regulatory capital ratios were calculated under BASEL I rules because the BASEL III rules were not yet effective and, thus, the Common Equity Tier 1 Capital ratio was not required. All of the Company’s capital ratios exceeded the regulatory minimum guidelines as of September 30, 2015 and December 31, 2014 as identified in the following table:


	Total Risk Based Capital			Tier I Risk Based Capital			CET1 Risk Based Capital			Leverage Ratio
Company Ratios - September 30, 2015		13.7	%		12.5	%		7.3	%		9.7	%
Company Ratios - December 31, 2014		14.7	%		13.4	%		N/A			10.7	%
For Capital Adequacy Purposes		8.0	%		6.0	%		4.5	%		4.0	%
To Be Well Capitalized Under Prompt
Corrective Action Provisions		10.0	%		8.0	%		6.5	%		5.0	%

The Company paid a cash dividend of $0.05 per common share each on February 1, May 1 and August 1, 2015. In 2014, the Company paid a cash dividend of $0.04 per common share on February 1 and a

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Civista Bancshares, Inc.

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

Form 10-Q

(Amounts in thousands, except share data)

cash dividend of $0.05 per common share each on May 1 and August 1, 2014. The Company also paid a 6.50% cash dividend on its Series B preferred shares in the amount of approximately $404 on March 15, 2015 and approximately $391 each on June 16, 2015 and September 15, 2015. In 2014, the Company paid the final 5.00% cash dividend on its Series A preferred shares in the amount of approximately $267 at the time of redemption, which was completed on February 15, 2014. The Company also paid an annualized 6.50% cash dividend on its Series B preferred shares in the amount of approximately $388 on March 17, 2014 and approximately $406 each on June 16, 2014 and September 15, 2014.

Liquidity

The Company maintains a conservative liquidity position. All securities are classified as available for sale. Securities, with maturities of one year or less, totaled $4,731, or 2.4 percent of the total security portfolio at September 30, 2015. The available for sale portfolio helps to provide the Company with the ability to meet its funding needs. The Consolidated Statements of Cash Flows (Unaudited) contained in the consolidated financial statements detail the Company’s cash flows from operating activities resulting from net earnings.

Cash from operations for the period ended September 30, 2015 was $14,375. This includes net income of $9,546 plus net adjustments of $4,829 to reconcile net earnings to net cash provided by operations. Cash provided by operations is primarily from proceeds from sale of loans and net change in other assets and accrued expenses of $43,410 and $2,166, respectively. Cash used by operations is primarily from loans originated for sale of $37,769. Cash used by investing activities was $14,704 for the period ended September 30, 2015. Cash received from investing activities is primarily from maturing, called securities of $20,538. This increase in cash was offset by security purchases, net loan originations and loan purchases of $22,250, $9,426 and $3,826, respectively. Cash provided from financing activities for the first nine months of 2015 totaled $4,090. The increase of cash from financing activities is due to an increase in overnight borrowings of $12,000. Cash of $5,000 was used to repay a matured FHLB advance. In addition, securities sold under agreements to repurchase decreased $726, cash of $1,186 was used to pay preferred dividends and cash of $1,170 was used to pay common dividends. Cash and cash equivalents increased from $29,858 at December 31, 2014 to $33,619 at September 30, 2015.

Future loan demand of Civista may be funded by increases in deposit accounts, proceeds from payments on existing loans, the maturity of securities, and the sale of securities classified as available for sale. Additional sources of funds may also come from borrowing in the Federal Funds market and/or borrowing from the FHLB. Through its correspondent banks, Civista maintains federal funds borrowing lines totaling $35,000. As of September 30, 2015, Civista had total credit availability with the FHLB of $132,217, with standby letters of credit totaling $11,000 and a remaining borrowing capacity of approximately $49,017.

Page 74

Civista Bancshares, Inc.

Quantitative and Qualitative Disclosures About Market Risk

Form 10-Q

(Amounts in thousands, except share data)

ITEM 3.

Quantitative and Qualitative Disclosures about Market Risk

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

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

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

The Federal Reserve Board, together with the Office of the Comptroller of the Currency and the Federal Deposit Insurance Company, adopted a Joint Agency Policy Statement on interest-rate risk, effective June 26, 1996. The policy statement provides guidance to examiners and bankers on sound practices for managing interest-rate risk, which will form the basis for ongoing evaluation of the adequacy of interest-rate risk management at supervised institutions. The policy statement also outlines fundamental elements of sound management that have been identified in prior Federal Reserve guidance and discusses the importance of these elements in the context of managing interest-rate risk. Specifically, the guidance emphasizes the need for active board of director and senior management oversight and a comprehensive risk-management process that effectively identifies, measures, and controls interest-rate risk.

Financial institutions derive their income primarily from the excess of interest collected over interest paid. The rates of interest an institution earns on its assets and owes on its liabilities generally are established contractually for a period of time. Since market interest rates change over time, an institution is exposed to lower profit margins (or losses) if it cannot adapt to interest-rate changes. For example, assume that an institution’s assets carry intermediate- or long-term fixed rates and that those assets were funded with short-term liabilities. If market interest rates rise by the time the short-term liabilities must be refinanced, the increase in the institution’s interest expense on its liabilities may not be sufficiently offset if assets continue to earn at the long-term fixed rates. Accordingly, an institution’s profits could decrease on existing assets because the institution will have either lower net interest income or, possibly, net interest expense. Similar risks exist when assets are subject to contractual interest-rate ceilings, or rate sensitive assets are funded by longer-term, fixed-rate liabilities in a decreasing-rate environment.

Page 75

Civista Bancshares, Inc.

Quantitative and Qualitative Disclosures About Market Risk

Form 10-Q

(Amounts in thousands, except share data)

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

Several ways an institution can manage interest-rate risk include selling existing assets or repaying certain liabilities; matching repricing periods for new assets and liabilities, for example, by shortening terms of new loans or securities; and hedging existing assets, liabilities, or anticipated transactions. An institution might also invest in more complex financial instruments intended to hedge or otherwise change interest-rate risk. Interest rate swaps, futures contracts, options on futures, and other such derivative financial instruments often are used for this purpose. Because these instruments are sensitive to interest rate changes, they require management expertise to be effective. The Company has not purchased derivative financial instruments in the past and does not currently intend to purchase such instruments in the near future. Financial institutions are also subject to prepayment risk in falling rate environments. For example, mortgage loans and other financial assets may be prepaid by a debtor so that the debtor may refinance its obligations at new, lower rates. Prepayments of assets carrying higher rates reduce the Company’s interest income and overall asset yields. A large portion of an institution’s liabilities may be short-term or due on demand, while most of its assets may be invested in long-term loans or securities. Accordingly, the Company seeks to have in place sources of cash to meet short-term demands. These funds can be obtained by increasing deposits, borrowing, or selling assets. FHLB advances and wholesale borrowings may also be used as important sources of liquidity for the Company.

The following table provides information about the Company’s financial instruments that were sensitive to changes in interest rates as of December 31, 2014 and September 30, 2015, based on certain prepayment and account decay assumptions that management believes are reasonable. The table shows the changes in the Company’s net portfolio value (in amount and percent) that would result from hypothetical interest rate increases of 200 basis points and 100 basis points and an interest rate decrease of 100 basis points at September 30, 2015 and December 31, 2014.

Page 76

Civista Bancshares, Inc.

Quantitative and Qualitative Disclosures About Market Risk

Form 10-Q

(Amounts in thousands, except share data)

The Company had derivative financial instruments as of December 31, 2014 and September 30, 2015. The changes in fair value of the assets and liabilities of the underlying contracts offset each other. Expected maturity date values for interest-bearing core deposits were calculated based on estimates of the period over which the deposits would be outstanding. The Company’s borrowings were tabulated by contractual maturity dates and without regard to any conversion or repricing dates.


Net Portfolio Value
	September 30, 2015							December 31, 2014
Change in Rates	Dollar Amount		Dollar Change		Percent Change			Dollar Amount		Dollar Change		Percent Change
+200bp		185,045		23,118		14	%		160,744		14,829		10	%
+100bp		176,976		15,049		9	%		155,452		9,537		7	%
Base		161,927		—		—			145,915		—		—
-100bp		166,021		4,094		3	%		151,829		5,914		4	%

The change in net portfolio value from December 31, 2014 to September 30, 2015, can be attributed to two factors. The yield curve has remained nearly unchanged, dipping only slightly toward the shorter end of the curve. Additionally, both the volume and mix of assets and funding sources has changed. The additional volumes, related to the TCNB merger, contributed to the mix of assets being relatively heavier in loans compared to the end of the year. This change in mix tends to increase volatility. The funding volume and mix has shifted from borrowed money to deposits and CDs, which also tends to increase volatility. The volume from the merger and the shifts in mixes led to the increase in the base. Beyond the change in the base level of net portfolio value, projected movements in rates, up or down, would also lead to changes in market values. The change in the rates up scenarios for both the 100 and 200 basis point movements would lead to a faster decrease in the fair value of liabilities, compared to assets. Accordingly we would see an increase in the net portfolio value. However, a downward change in rates would lead to a small increase in the net portfolio value as the fair value of assets would increase slightly more quickly than the fair value of liabilities.

Page 77

Civista Bancshares, Inc.

Controls and Procedures

Form 10-Q

(Amounts in thousands, except share data)

ITEM 4.

Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive and our principal financial officers, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, our principal executive and our principal financial officers concluded that our disclosure controls and procedures as of September 30, 2015, were effective.

Changes in Internal Control over Financial Reporting

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

Civista Bancshares, Inc.

Other Information

Form 10-Q

Part II - Other Information


Item 1.	Legal Proceedings

	The Company’s bank subsidiary, Civista Bank (“Civista”) has been named as the defendant in a legal action filed by United Bank, Division of the Park National Bank (“United”). The action alleges that Civista received payments on loans that were proceeds from the sale of collateral in which United held a security interest. United’s allegations include a claim that the payments to Civista constituted fraudulent transfers. While the amounts claimed by United are overlapping and unclear, United appears to be seeking up to $424,113.83, plus punitive damages and attorneys’ fees. Civista believes it has a number of defenses to United’s claims, including the fact that the most significant claims appear to have been previously rejected by a different Ohio court. Civista has requested that the action be transferred to the court that heard the earlier case and intends to vigorously defend the action. There were no other new material legal proceedings or material changes to existing legal proceedings during the current period.

Item 1A.	Risk Factors

	There were no material changes during the current period to the risk factors disclosed in “Item 1A. Risk Factors” of Part I of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014.

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds

	None

Item 3.	Defaults Upon Senior Securities

	None

Item 4.	Mine Safety Disclosures

	Not applicable

Item 5.	Other Information

	None

Item 6.	Exhibits

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

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

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

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

	101	The following materials from Civista Bancshares Inc.’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2015, formatted in XBRL (eXtensible Business Reporting Language) pursuant to Rule 405 of Regulation S-T: (i) Consolidated Balance Sheets as of September 30, 2015 (Unaudited) and

Civista Bancshares, Inc.

Other Information

Form 10-Q



				December 31, 2014; (ii) Consolidated Statements of Income (Unaudited) for the three and nine months ended September 30, 2015 and 2014; (iii) Consolidated Statements of Comprehensive Income (Unaudited) for the three and nine months ended September 30, 2015 and 2014; (iv) Condensed Consolidated Statement of Shareholders’ Equity (Unaudited) for the nine months ended September 30, 2015; (v) Condensed Consolidated Statement of Cash Flows (Unaudited) for the three and nine months ended September 30, 2015 and 2014; and (vi) Notes to Interim Consolidated Financial Statements (Unaudited)

Civista Bancshares, Inc.

Signatures

Form 10-Q

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


Civista Bancshares, Inc.

/s/ James O. Miller				November 6, 2015
James O. Miller				Date
President, Chief Executive Officer

/s/ Todd A. Michel				November 6, 2015
Todd A. Michel				Date
Senior Vice President, Controller

Civista Bancshares, Inc.

Index to Exhibits

Form 10-Q

Exhibits


Exhibit	Description	Location

2.1	Agreement and Plan of Merger, dated September 10, 2014, by and among the Company, FC Merger Corp. and TCNB Financial Corp.	Filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K dated and filed September 11, 2014, and incorporated herein by reference. (File No. 1-36192)

3.1(a)	Articles of Incorporation, as amended, of the Company.	Filed as Exhibit 3.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2005, filed on March 16, 2006 and incorporated herein by reference. (File No. 0-25980)

3.1(b)	Certificate of Amendment by Shareholders or Members as filed with the Ohio Secretary of State on January 12, 2009, evidencing the adoption by the shareholders of the Company on January 5, 2009 of an amendment to Article FOURTH to authorize the issuance of up to 200,000 preferred shares, without par value.	Filed as Exhibit 3.1(b) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2008, filed on March 16, 2009 and incorporated herein by reference. (File No. 0-25980)

3.1(c)	Certificate of Amendment by Directors or Incorporators to Articles, filed with the Ohio Secretary of State on January 21, 2009, evidencing adoption of an amendment by the Board of Directors of the Company to Article FOURTH to establish the express terms of the Fixed Rate Cumulative Perpetual Preferred Shares, Series A, of First Citizens.	Filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K dated and filed January 26, 2009, and incorporated herein by reference. (File No. 0-25980)

3.1(d)	Certificate of Amendment by Directors or Incorporators to Articles, filed with the Ohio Secretary of State on November 1, 2013, evidencing adoption of an amendment by the Board of Directors of the Company to Article FOURTH to establish the express terms of the 6.50% Noncumulative Redeemable Convertible Perpetual Preferred Shares, Series B, of the Company.	Filed as Exhibit 3.4 to the Company’s Pre-Effective Amendment No.1 to Form S-1 Registration Statement dated and filed November 1, 2013, and incorporated herein by reference. (File No. 333-191169)

3.1(e)	Certificate of Amendment to Articles, filed with the Ohio Secretary of State on May 1, 2015, evidencing adoption of an amendment by the Board of Directors of the Company to Article FIRST to change the corporation’s name to Civista Bancshares, Inc.	Filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K dated and filed on May 1, 2015 and incorporated herein by reference. (File No. 1-36192)

Page 82

Civista Bancshares, Inc.

Index to Exhibits

Form 10-Q



3.2	Amended and Restated Code of Regulations of the Company (adopted April 17, 2007)	Filed as Exhibit 3.2 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2008, filed on March 16, 2015 and incorporated herein by reference. (File No. 0-25980)

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

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

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

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

101	The following materials from the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2015, formatted in XBRL (eXtensible Business Reporting Language) pursuant to Rule 405 of Regulation S-T: (i) Consolidated Balance Sheets (Unaudited) as of September 30, 2015 and December 31, 2014; (ii) Consolidated Statements of Income (Unaudited) for the three and nine months ended September 30, 2015 and 2014; (iii) Consolidated Statements of Comprehensive Income (Unaudited) for the three and nine months ended September 30, 2015 and 2014; (iv) Condensed Consolidated Statement of Shareholders’ Equity (Unaudited) for the nine months ended September 30, 2015; (v) Condensed Consolidated Statement of Cash Flows (Unaudited) for the three and nine months ended September 30, 2015 and 2014; and (vi) Notes to Interim Consolidated Financial Statements (Unaudited).	Included herewith

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