Management has an established methodology for determining the adequacy of the allowance for loan losses that assesses the risks and losses inherent in the loan portfolio. For purposes of determining the allowance for loan losses, the Company has segmented certain loans in the portfolio by product type. Loss migration rates for each risk category are calculated and used as the basis for calculating loan loss allowance allocations. Loss migration rates are calculated over a three-year period for all portfolio segments. Management also considers certain economic factors for trends that management uses to account for the qualitative and environmental changes in risk, which affects the level of the reserve.

The 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 $22,637 adequate to cover loan losses inherent in the loan portfolio, at September 30, 2020. The following tables present, by portfolio segment, the changes in the allowance for loan losses for the three and nine months ended September 30, 2020 and 2019.

For the three months ended September 30, 2020	Beginning balance		Charge-offs			Recoveries		Provision			Ending Balance
Commercial & Agriculture	$	2,799	$	—		$	1	$	(139	)	$	2,661
Commercial Real Estate:
Owner Occupied		3,411		(147	)		6		685			3,955
Non-Owner Occupied		9,169		—			3		1,406			10,578
Residential Real Estate		2,434		(11	)		117		(83	)		2,457
Real Estate Construction		1,844		—			1		500			2,345
Farm Real Estate		361		—			3		(4	)		360
Consumer and Other		247		(27	)		21		(21	)		220
Unallocated		155		—			—		(94	)		61
Total	$	20,420	$	(185	)	$	152	$	2,250		$	22,637

For the three months ended September 30, 2020, the Company provided $2,250 to the allowance for loan losses. The provision was primarily the result of an increase in Civista’s qualitative factors, primarily changes in international, national, regional and local conditions, related to the economic shutdown driven by the ongoing COVID-19 pandemic, as well as the significant increase in classified assets during the quarter, particularly in the special mention category. Economic impacts from the COVID-19 pandemic include the loss of revenue being experienced by our business clients, disruption of supply chains, additional employee costs for businesses due to the pandemic, higher unemployment rates throughout our footprint and a large number of customers requesting payment relief. The allowance for Commercial & Agriculture loans decreased due to a decrease in general reserves required for this type as a result of a decrease in loan balances. The result was represented as a decrease in the provision. The allowance for Commercial Real Estate – Owner Occupied loans increased due to an increase in general reserves required for this type as a result of factors related to the COVID-19 pandemic, increased loan balances and loss rates and by increased classified and non-accrual loans. The result was represented as an increase in the provision. The allowance for Commercial Real Estate – Non-Owner Occupied loans increased due to an increase in general reserves required as a result of an increase in loan balances and by an increase in classified loans. This was represented as an increase in the provision. The allowance for Residential Real Estate loans increased due to an increase in recoveries for this type of loan. The result was represented by a decrease in the provision. The allowance for Real Estate Construction loans increased due to an increase in loss rates on classified loans, represented by an increase in the provision. Management feels that the unallocated amount is appropriate and within the relevant range for the allowance that is reflective of the risk in the portfolio at September 30, 2020.

For the three months ended September 30, 2019	Beginning balance		Charge-offs			Recoveries		Provision			Ending Balance
Commercial & Agriculture	$	1,828	$	—		$	61	$	43		$	1,932
Commercial Real Estate:
Owner Occupied		2,009		—			43		85			2,137
Non-Owner Occupied		5,867		—			55		226			6,148
Residential Real Estate		1,698		(20	)		67		(136	)		1,609
Real Estate Construction		1,135		—			1		47			1,183
Farm Real Estate		365		—			1		1			367
Consumer and Other		201		(16	)		16		52			253
Unallocated		683		—			—		(168	)		515
Total	$	13,786	$	(36	)	$	244	$	150		$	14,144

For the three months ended September 30, 2019, the Company provided $150 to the allowance for loan losses. The allowance for Commercial & Agriculture loans increased due to an increase in general reserves required for this type as a result of higher loan balances. The result was represented as an increase in the provision. The allowance for Commercial Real Estate – Owner Occupied loans increased due to an increase in general reserves required for this type as a result of higher loan balances. The result was represented as an increase in the provision. The allowance for Commercial Real Estate – Non-Owner Occupied loans increased due to an increase in general reserves required as a result of an increase in loan balances. This was represented as an increase in the provision. The allowance for Residential Real Estate loans decreased due to a decrease in general reserves required for this type as a result of a decrease in loss rates, represented by a decrease in the provision. The allowance for Real Estate Construction loans increased due to an increase in general reserves required as a result of an increase in loan balances. The allowance for Consumer and Other loans increased due to an increase in loss rates. The result was represented as an increase in the provision. Management determined that the unallocated amount was appropriate and within the relevant range for the allowance that was reflective of the risk in the portfolio at September 30, 2019.

For the nine months ended September 30, 2020	Beginning balance		Charge-offs			Recoveries		Provision			Ending Balance
Commercial & Agriculture	$	2,219	$	(15	)	$	5	$	452		$	2,661
Commercial Real Estate:
Owner Occupied		2,541		(148	)		20		1,542			3,955
Non-Owner Occupied		6,584		—			44		3,950			10,578
Residential Real Estate		1,582		(108	)		196		787			2,457
Real Estate Construction		1,250		—			3		1,092			2,345
Farm Real Estate		344		—			10		6			360
Consumer and Other		247		(54	)		55		(28	)		220
Unallocated		—		—			—		61			61
Total	$	14,767	$	(325	)	$	333	$	7,862		$	22,637

For the nine months ended September 30, 2020, the Company provided $7,862 to the allowance for loan losses. The provision was primarily the result of an increase in Civista’s qualitative factors, primarily changes in international, national, regional and local conditions, related to the economic shutdown driven by the ongoing COVID-19 pandemic. Economic impacts related to the COVID-19 pandemic include the loss of revenue being experienced by our business clients, disruption of supply chains, additional employee costs for businesses due to the pandemic, higher unemployment rates throughout our footprint and a large number of customers requesting payment relief. The allowance for Commercial & Agriculture loans increased due to an increase in general reserves required for this type as a result of an increase in loan balances mainly from Civista’s participation in the PPP loan program, offset by a decrease in loss rates, resulting in an increase in the provision. PPP loans are eligible for a 100% guaranty by the SBA. However, in the event of a loss resulting from a default on a PPP loan, and a determination by the SBA that there was a deficiency in the manner on which the PPP loan was originated or funded, the SBA may deny its liability under the guaranty. The reserve percentage for PPP loans is substantially less than the other loans in this segment resulting in an overall decrease in the reserve percentage. The allowance for Commercial Real Estate – Owner Occupied loans increased due to an increase in general reserves required for this type as a result of higher loan balances, an increase in classified and non-accrual loans and an increase in loss rates. The result was represented as an increase in the provision. The allowance for Commercial Real Estate – Non-Owner Occupied loans increased due to an increase in general reserves required as a result of an increase in loan balances, an increase in classified loans, offset by a decrease in loss rates. This was represented as an increase in the provision. The allowance for Residential Real Estate loans increased due to an increase in general reserves required for this type as a result of factors related to the COVID-19 pandemic, offset by a decrease in loan balances and loss rates, represented by an increase in the provision. The allowance for Real Estate Construction loans increased due to an increase in general reserves required as a result of an increase in loan balances and an increase in loss rates on classified loans, represented by an increase in the provision. The allowance for Farm Real Estate loans increased due to an increase in general reserves required as a result of an increase in loan balances. The result was represented as an increase in the provision. Management feels that the unallocated amount is appropriate and within the relevant range for the allowance that is reflective of the risk in the portfolio at September 30, 2020.

For the nine months ended September 30, 2019	Beginning balance		Charge-offs			Recoveries		Provision			Ending Balance
Commercial & Agriculture	$	1,747	$	(27	)	$	65	$	147		$	1,932
Commercial Real Estate:
Owner Occupied		1,962		(60	)		282		(47	)		2,137
Non-Owner Occupied		5,803		—			99		246			6,148
Residential Real Estate		1,531		(223	)		229		72			1,609
Real Estate Construction		1,046		(24	)		1		160			1,183
Farm Real Estate		397		—			3		(33	)		367
Consumer and Other		284		(97	)		67		(1	)		253
Unallocated		909		—			—		(394	)		515
Total	$	13,679	$	(431	)	$	746	$	150		$	14,144

For the nine months ended September 30, 2019, the Company provided $150 to the allowance for loan losses. The allowance for Commercial & Agriculture loans increased due to an increase in general reserves required for this type as a result of higher loan balances, offset by a decrease in the loss rates. The result was represented as an increase in the provision. The allowance for Commercial Real Estate –Owner Occupied loans increased due to an increase in general reserves required as a result of higher loan balances and higher loss rates, offset by net recoveries on previously charged off amounts, resulting in a decrease in the provision. The allowance for Commercial Real Estate – Non-Owner Occupied loans increased due to an increase in general reserves required as a result of higher loan balances, offset by a decrease in the loss rates. This was represented as an increase in the provision. The allowance for Residential Real Estate loans increased due to an increase in general reserves required for this type as a result of an increase in loan balances and loss rates, represented by an increase in the provision. The allowance for Real Estate Construction loans increased due to an increase in general reserves required as a result of higher loan balances. The allowance for Farm Real Estate loans was reduced by a decrease in classified loan balances and the reserve required for this type of loan. The result was represented as a decrease in the provision. The allowance for Consumer and Other loans decreased due to a decrease in the general reserves required for the type as a result of a decrease in loan balances and loss rates. The result was represented as a decrease in the provision. Management determined that the unallocated amount was appropriate and within the relevant range for the allowance that was reflective of the risk in the portfolio at September 30, 2019.

The following tables present, by portfolio segment, the allocation of the allowance for loan losses and related loan balances as of September 30, 2020 and December 31, 2019.

September 30, 2020	Loans acquired with credit deterioration		Loans individually evaluated for impairment		Loans collectively evaluated for impairment		Total
Allowance for loan losses:
Commercial & Agriculture	$	—	$	—	$	2,661	$	2,661
Commercial Real Estate:
Owner Occupied		—		8		3,947		3,955
Non-Owner Occupied		—		—		10,578		10,578
Residential Real Estate		—		85		2,372		2,457
Real Estate Construction		—		—		2,345		2,345
Farm Real Estate		—		—		360		360
Consumer and Other		—		—		220		220
Unallocated		—		—		61		61
Total	$	—	$	93	$	22,544	$	22,637
Outstanding loan balances:
Commercial & Agriculture	$	—	$	—	$	435,285	$	435,285
Commercial Real Estate:
Owner Occupied		—		379		260,856		261,235
Non-Owner Occupied		—		55		683,524		683,579
Residential Real Estate		377		1,168		442,415		443,960
Real Estate Construction		—		—		167,560		167,560
Farm Real Estate		—		634		34,598		35,232
Consumer and Other		—		—		14,089		14,089
Total	$	377	$	2,236	$	2,038,327	$	2,040,940

December 31, 2019	Loans acquired with credit deterioration		Loans individually evaluated for impairment		Loans collectively evaluated for impairment		Total
Allowance for loan losses:
Commercial & Agriculture	$	—	$	—	$	2,219	$	2,219
Commercial Real Estate:
Owner Occupied		—		9		2,532		2,541
Non-Owner Occupied		—		—		6,584		6,584
Residential Real Estate		—		82		1,500		1,582
Real Estate Construction		—		—		1,250		1,250
Farm Real Estate		—		—		344		344
Consumer and Other		—		—		247		247
Unallocated		—		—		—		—
Total	$	—	$	91	$	14,676	$	14,767
Outstanding loan balances:
Commercial & Agriculture	$	—	$	367	$	202,743	$	203,110
Commercial Real Estate:
Owner Occupied		—		426		245,180		245,606
Non-Owner Occupied		—		374		591,848		592,222
Residential Real Estate		467		1,764		460,801		463,032
Real Estate Construction		—		—		155,825		155,825
Farm Real Estate		—		666		33,448		34,114
Consumer and Other		—		—		15,061		15,061
Total	$	467	$	3,597	$	1,704,906	$	1,708,970

The following tables present credit exposures by internally assigned risk grades as of September 30, 2020 and December 31, 2019. 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.

Generally, Residential Real Estate, Real Estate Construction and Consumer and Other loans are not risk-graded, except when collateral is used for a business purpose. Only those loans that have been risk rated are included below.

September 30, 2020	Pass		Special Mention		Substandard		Doubtful		Ending Balance
Commercial & Agriculture	$	427,539	$	6,009	$	1,737	$	—	$	435,285
Commercial Real Estate:
Owner Occupied		227,536		27,108		6,591		—		261,235
Non-Owner Occupied		597,582		83,622		2,375		—		683,579
Residential Real Estate		75,648		647		5,686		—		81,981
Real Estate Construction		153,132		—		493		—		153,625
Farm Real Estate		32,297		490		2,445		—		35,232
Consumer and Other		1,616		—		18		—		1,634
Total	$	1,515,350	$	117,876	$	19,345	$	—	$	1,652,571

December 31, 2019	Pass		Special Mention		Substandard		Doubtful		Ending Balance
Commercial & Agriculture	$	199,649	$	2,236	$	1,225	$	—	$	203,110
Commercial Real Estate:
Owner Occupied		237,171		5,617		2,818		—		245,606
Non-Owner Occupied		588,633		2,155		1,434		—		592,222
Residential Real Estate		73,289		528		6,495		—		80,312
Real Estate Construction		145,251		—		9		—		145,260
Farm Real Estate		30,808		567		2,739		—		34,114
Consumer and Other		1,289		—		6		—		1,295
Total	$	1,276,090	$	11,103	$	14,726	$	—	$	1,301,919

The following tables present performing and nonperforming loans based solely on payment activity for the periods ended September 30, 2020 and December 31, 2019 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 and if management determines 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.

The following tables include an aging analysis of the recorded investment of past due loans outstanding as of September 30, 2020 and December 31, 2019.

September 30, 2020	30-59 Days Past Due		60-89 Days Past Due		90 Days or Greater		Total Past Due		Current		Purchased Credit- Impaired Loans		Total Loans		Past Due 90 Days and Accruing
Commercial & Agriculture	$	176	$	300	$	55	$	531	$	434,754	$	—	$	435,285	$	—
Commercial Real Estate:
Owner Occupied		168		369		359		896		260,339		—		261,235		—
Non-Owner Occupied		—		—		7		7		683,572		—		683,579		—
Residential Real Estate		84		441		1,269		1,794		441,789		377		443,960		—
Real Estate Construction		—		—		—		—		167,560		—		167,560		—
Farm Real Estate		—		—		4		4		35,228		—		35,232		—
Consumer and Other		54		6		7		67		14,022		—		14,089		—
Total	$	482	$	1,116	$	1,701	$	3,299	$	2,037,264	$	377	$	2,040,940	$	—

December 31, 2019	30-59 Days Past Due		60-89 Days Past Due		90 Days or Greater		Total Past Due		Current		Purchased Credit- Impaired Loans		Total Loans		Past Due 90 Days and Accruing
Commercial & Agriculture	$	27	$	35	$	106	$	168	$	202,942	$	—	$	203,110	$	—
Commercial Real Estate:
Owner Occupied		453		63		663		1,179		244,427		—		245,606		—
Non-Owner Occupied		—		—		8		8		592,214		—		592,222		—
Residential Real Estate		2,399		198		1,775		4,372		458,193		467		463,032		—
Real Estate Construction		—		—		—		—		155,825		—		155,825		—
Farm Real Estate		—		—		7		7		34,107		—		34,114		—
Consumer and Other		129		46		—		175		14,886		—		15,061		—
Total	$	3,008	$	342	$	2,559	$	5,909	$	1,702,594	$	467	$	1,708,970	$	—

The following table presents loans on nonaccrual status, excluding purchased credit-impaired (PCI) loans, as of September 30, 2020 and December 31, 2019.

Nonaccrual Loans: Loans are considered for nonaccrual status upon reaching 90 days delinquency, unless the loan is well secured and in the process of collection, although the Company may be receiving partial payments of interest and partial repayments of principal on such loans. When a loan is placed on nonaccrual status, previously accrued but unpaid interest is deducted from interest income. Payments received on nonaccrual loans are applied to the unpaid principal balance. A loan may be returned to accruing status only if one of 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 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. Exceptions to this policy exist for loan modifications granted as part of the Company’s COVID-19 deferral program, which allows the Company to not classify a modification so long as certain criteria as established in the CARES Act are met at the time of the modification. 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. Residential Real Estate loans modified in a TDR primarily involve interest rate reductions where monthly payments are 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 fair value of the collateral, less any selling costs, if the loan is collateral dependent. Management exercises significant judgment in developing these estimates. As of September 30, 2020, TDRs accounted for $93 of the allowance for loan losses. As of December 31, 2019, TDRs accounted for $91 of the allowance for loan losses.

There were no loans modified as TDRs during the three-month periods ended September 30, 2020 or 2019 or during the nine-month period ended September 30, 2020. Loan modifications that are considered TDRs completed during the nine-month period ended September 30, 2019 were as follows:

	For the Nine-Month Period Ended
	September 30, 2019
	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		1		382		382
Residential Real Estate		—		—		—
Real Estate Construction		—		—		—
Farm Real Estate		—		—		—
Consumer and Other		—		—		—
Total Loan Modifications		1	$	382	$	382

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, 2020 and September 30, 2019, there were no defaults on loans that were modified and considered TDRs during the respective previous twelve months.

Impaired Loans: Larger (greater than $350) Commercial & Agricultural and Commercial Real Estate loan relationships, 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.

The following table includes the recorded investment and unpaid principal balances for impaired loans, excluding PCI loans, with the associated allowance amount, if applicable, as of September 30, 2020 and December 31, 2019.

	September 30, 2020						December 31, 2019
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance recorded:
Commercial & Agriculture	$	—	$	—			$	367	$	367
Commercial Real Estate:
Owner Occupied		149		149				168		168
Non-Owner Occupied		55		55				374		374
Residential Real Estate		993		1,017				1,571		1,643
Farm Real Estate		634		634				666		666
Total		1,831		1,855				3,146		3,218
With an allowance recorded:
Commercial Real Estate:
Owner Occupied		230		230	$	8		258		258	$	9
Residential Real Estate		175		179		85		193		197		82
Total		405		409		93		451		455		91
Total:
Commercial & Agriculture		—		—		—		367		367		—
Commercial Real Estate:
Owner Occupied		379		379		8		426		426		9
Non-Owner Occupied		55		55		—		374		374		—
Residential Real Estate		1,168		1,196		85		1,764		1,840		82
Farm Real Estate		634		634		—		666		666		—
Total	$	2,236	$	2,264	$	93	$	3,597	$	3,673	$	91

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, 2020 and 2019.

	September 30, 2020				September 30, 2019
For the three months ended	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Commercial & Agriculture	$	—	$	—	$	367	$	12
Commercial Real Estate—Owner Occupied		391		7		448		8
Commercial Real Estate—Non-Owner Occupied		212		5		378		6
Residential Real Estate		1,175		10		1,083		14
Farm Real Estate		644		7		681		7
Total	$	2,422	$	29	$	2,957	$	47

	September 30, 2020				September 30, 2019
For the nine months ended	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Commercial & Agriculture	$	92	$	4	$	367	$	24
Commercial Real Estate—Owner Occupied		406		21		463		25
Commercial Real Estate—Non-Owner Occupied		292		15		292		15
Residential Real Estate		1,464		34		1,148		45
Farm Real Estate		655		20		687		22
Total	$	2,909	$	94	$	2,957	$	131

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

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

There was no allowance for loan losses recorded for acquired loans with or without specific evidence of deterioration in credit quality as of September 30, 2020 or December 31, 2019, respectively.

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, 2020 and December 31, 2019, respectively, there were no foreclosed assets included in other assets. As of September 30, 2020 and December 31, 2019, the Company had initiated formal foreclosure procedures on $1,056 and $1,022, respectively, of consumer residential mortgages.