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 $27,033 adequate to cover loan losses inherent in the loan portfolio, at March 31, 2022. The following tables present, by portfolio segment, the changes in the allowance for loan losses for the three months ended March 31, 2022 and March 31, 2021.

For the three months ended March 31, 2022	Beginning balance		Charge-offs			Recoveries		Provision			Ending Balance
Commercial & Agriculture	$	2,600	$	—		$	1	$	(17	)	$	2,584
Commercial Real Estate:
Owner Occupied		4,464		—			—		130			4,594
Non-Owner Occupied		13,860		—			48		669			14,577
Residential Real Estate		2,597		(1	)		61		(45	)		2,612
Real Estate Construction		1,810		—			—		53			1,863
Farm Real Estate		287		—			2		(40	)		249
Consumer and Other		176		(29	)		10		(21	)		136
Unallocated		847		—			—		(429	)		418
Total	$	26,641	$	(30	)	$	122	$	300		$	27,033

For the three months ended March 31, 2022, the Company provided $300 to the allowance for loan losses, as compared to a provision of $830 for the three months ended March 31, 2021. The decrease in the provision in the first quarter of 2022, as compared to the first quarter of 2021, was due to the stability of our credit quality metrics coupled with the continued stabilization and, in some cases, improvement of international, national, regional and local economic conditions that were adversely impacted by the prior economic shutdown and restrictions in response to the ongoing COVID-19 pandemic. While vaccinations and improved treatments have created a level of optimism in the business community, there remains caution due to the lingering concerns over potential infection spikes. We remain cautious given the level of classified loans in the portfolio, particularly loans to borrowers in the hotel industry as well as the challenges businesses face in today’s environment. Economic impacts related to the COVID-19 pandemic have improved somewhat, but continued concerns linger due to the disruption of supply chains, additional employee costs, higher challenges throughout our footprint and rising inflationary pressures. While some of these pressures have eased, ongoing supply chain and staffing challenges, as well as the impact of higher inflation remain.

During the three months ended March 31, 2022, 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 PPP loan balances. Commercial and Agriculture loan balances decreased during the quarter mainly due to the forgiveness or payoff of PPP loans during the quarter. The result was represented as a decrease in the provision. The allowance for Commercial Real Estate – Owner Occupied loans increased due to an increase in general reserves required for this type as a result of increased loan balances, accompanied by an increase in classified loans balances. The result was represented as an increase in the provision. The allowance for Commercial Real Estate – Non-Owner Occupied loans increased due to an increase in general reserves required as a result of an increase in loan balances. This was represented as an increase in the provision. The allowance for Residential Real Estate loans increased due to net recoveries for this type of loan. The result was represented by a decrease in the provision. The allowance for Real Estate Construction loans decreased due to a decrease in loan balances. This was represented as a decrease in the provision. The allowance for Consumer and Other loans decreased due to a decrease in loan balances. This was represented as a decrease in the provision. Management feels that the unallocated amount is appropriate and within the relevant range for the allowance that is reflective of the risk in the portfolio at March 31, 2022.

For the three months ended March 31, 2021	Beginning balance		Charge-offs			Recoveries		Provision			Ending Balance
Commercial & Agriculture	$	2,810	$	—		$	145	$	(595	)	$	2,360
Commercial Real Estate:
Owner Occupied		4,057		—			6		(14	)		4,049
Non-Owner Occupied		12,451		—			7		751			13,209
Residential Real Estate		2,484		(37	)		142		(80	)		2,509
Real Estate Construction		2,439		—			1		462			2,902
Farm Real Estate		338		—			3		(58	)		283
Consumer and Other		209		(9	)		17		(47	)		170
Unallocated		240		—			—		411			651
Total	$	25,028	$	(46	)	$	321	$	830		$	26,133

For the three months ended March 31, 2021, the Company provided $830 to the allowance for loan losses. The provision was primarily the result of changes 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 from the COVID-19 pandemic during the three months ended March 31, 2021 included the loss of revenue 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.

For the three months ended March 31, 2021, the allowance for Commercial & Agriculture loans decreased due to a decrease in general reserves required for this type as a result of a decrease in loss rates. While loan balances increased, they increased in balances mainly from Civista’s participated in the PPP loan program. The result was represented as a decrease in the provision. The allowance for Commercial Real Estate – Owner Occupied loans decreased due to a decrease in general reserves required for this type as a result of decreased loan balances and loss rates. The result was represented as 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 an increase in loan balances and by an increase 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 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 balances of substandard classified loan balances, represented by 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 March 31, 2021.

The following tables present, by portfolio segment, the allocation of the allowance for loan losses and related loan balances as of March 31, 2022 and December 31, 2021.

March 31, 2022	Loans acquired with credit deterioration		Loans individually evaluated for impairment		Loans collectively evaluated for impairment		Total
Allowance for loan losses:
Commercial & Agriculture	$	—	$	—	$	2,584	$	2,584
Commercial Real Estate:
Owner Occupied		—		6		4,588		4,594
Non-Owner Occupied		—		—		14,577		14,577
Residential Real Estate		—		12		2,600		2,612
Real Estate Construction		—		—		1,863		1,863
Farm Real Estate		—		—		249		249
Consumer and Other		—		—		136		136
Unallocated		—		—		418		418
Total	$	—	$	18	$	27,015	$	27,033
Outstanding loan balances:
Commercial & Agriculture	$	—	$	—	$	218,443	$	218,443
Commercial Real Estate:
Owner Occupied		—		181		301,171		301,352
Non-Owner Occupied		—		—		869,663		869,663
Residential Real Estate		290		514		431,966		432,770
Real Estate Construction		—		—		161,651		161,651
Farm Real Estate		—		507		24,141		24,648
Consumer and Other		—		—		9,661		9,661
Total	$	290	$	1,202	$	2,016,696	$	2,018,188

December 31, 2021	Loans acquired with credit deterioration		Loans individually evaluated for impairment		Loans collectively evaluated for impairment		Total
Allowance for loan losses:
Commercial & Agriculture	$	—	$	—	$	2,600	$	2,600
Commercial Real Estate:
Owner Occupied		—		7		4,457		4,464
Non-Owner Occupied		—		—		13,860		13,860
Residential Real Estate		—		11		2,586		2,597
Real Estate Construction		—		—		1,810		1,810
Farm Real Estate		—		—		287		287
Consumer and Other		—		—		176		176
Unallocated		—		—		847		847
Total	$	—	$	18	$	26,623	$	26,641
Outstanding loan balances:
Commercial & Agriculture	$	—	$	—	$	246,502	$	246,502
Commercial Real Estate:
Owner Occupied		—		187		295,265		295,452
Non-Owner Occupied		—		0		829,310		829,310
Residential Real Estate		290		526		429,244		430,060
Real Estate Construction		—		—		157,127		157,127
Farm Real Estate		—		509		27,910		28,419
Consumer and Other		—		—		11,009		11,009
Total	$	290	$	1,222	$	1,996,367	$	1,997,879

The following tables present credit exposures by internally assigned risk grades as of March 31, 2022 and December 31, 2021. 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.

March 31, 2022	Pass		Special Mention		Substandard		Doubtful		Ending Balance
Commercial & Agriculture	$	208,752	$	8,351	$	1,340	$	—	$	218,443
Commercial Real Estate:
Owner Occupied		292,064		7,844		1,444		—		301,352
Non-Owner Occupied		804,373		28,588		36,702		—		869,663
Residential Real Estate		78,620		170		4,405		—		83,195
Real Estate Construction		140,467		—		4		—		140,471
Farm Real Estate		23,353		200		1,095		—		24,648
Consumer and Other		575		—		22		—		597
Total	$	1,548,204	$	45,153	$	45,012	$	—	$	1,638,369

December 31, 2021	Pass		Special Mention		Substandard		Doubtful		Ending Balance
Commercial & Agriculture	$	244,787	$	526	$	1,189	$	—	$	246,502
Commercial Real Estate:
Owner Occupied		290,617		3,119		1,716		—		295,452
Non-Owner Occupied		764,181		28,042		37,087		—		829,310
Residential Real Estate		77,594		164		4,455		—		82,213
Real Estate Construction		136,149		260		5		—		136,414
Farm Real Estate		27,023		205		1,191		—		28,419
Consumer and Other		764		—		20		—		784
Total	$	1,541,115	$	32,316	$	45,663	$	—	$	1,619,094

The following tables present performing and nonperforming loans based solely on payment activity for the periods ended March 31, 2022 and December 31, 2021 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 March 31, 2022 and December 31, 2021.

March 31, 2022	30-59 Days Past Due		60-89 Days Past Due		90 Days or Greater Past Due		Total Past Due		Current		Purchased Credit- Impaired Loans		Total Loans		Past Due 90 Days and Accruing
Commercial & Agriculture	$	22	$	—	$	78	$	100	$	218,343	$	—	$	218,443	$	—
Commercial Real Estate:
Owner Occupied		62		—		93		155		301,197		—		301,352		—
Non-Owner Occupied		—		—		3		3		869,660		—		869,663		—
Residential Real Estate		1,598		34		1,223		2,855		429,625		290		432,770		—
Real Estate Construction		—		—		—		—		161,651		—		161,651		—
Farm Real Estate		—		—		—		—		24,648		—		24,648		—
Consumer and Other		135		—		12		147		9,514		—		9,661		—
Total	$	1,817	$	34	$	1,409	$	3,260	$	2,014,638	$	290	$	2,018,188	$	—

December 31, 2021	30-59 Days Past Due		60-89 Days Past Due		90 Days or Greater Past Due		Total Past Due		Current		Purchased Credit- Impaired Loans		Total Loans		Past Due 90 Days and Accruing
Commercial & Agriculture	$	249	$	13	$	78	$	340	$	246,162	$	—	$	246,502	$	—
Commercial Real Estate:
Owner Occupied		—		—		106		106		295,346		—		295,452		—
Non-Owner Occupied		—		—		4		4		829,306		—		829,310		—
Residential Real Estate		1,848		879		842		3,569		426,201		290		430,060		—
Real Estate Construction		—		—		—		—		157,127		—		157,127		—
Farm Real Estate		—		—		—		—		28,419		—		28,419		—
Consumer and Other		42		—		9		51		10,958		—		11,009		—
Total	$	2,139	$	892	$	1,039	$	4,070	$	1,993,519	$	290	$	1,997,879	$	—

The following table presents loans on nonaccrual status, excluding purchased credit-impaired (PCI) loans, as of March 31, 2022 and December 31, 2021.

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 Coronavirus Aid, Relief, and Economic Security Act of 2020, as amended (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 March 31, 2022, TDRs accounted for $18 of the allowance for loan losses. As of December 31, 2021, TDRs accounted for $18 of the allowance for loan losses.

There were no loans modified as TDRs during the three-month periods ended March 31, 2022 or 2021.

Recidivism, or the borrower defaulting on its obligation pursuant to a modified loan, results in the loan once again becoming a non-accrual loan. Recidivism occurs at a notably higher rate than do defaults on new origination loans, so modified loans present a higher risk of loss than do new origination loans.

During the three-month periods ended March 31, 2022 and March 31, 2021, 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 Company’s policy for recognizing interest income on impaired loans does not differ from its overall policy for interest recognition.

In the second quarter of 2020, in the initial days of the pandemic, Civista booked 90-day payment modifications on 813 loans with an aggregate principal balance outstanding of $431.3 million. Additional 90-day modifications were extended on 100 loans with an aggregate principal balance outstanding of $124.4 million. Both deferral programs primarily consisted of the deferral of principal and/or interest payments. All such modified loans were performing at December 31, 2019 and complied with the provisions of the CARES Act to not be considered a TDR.

As of March 31, 2022, Civista had five loans with an aggregate principal balance outstanding of $2,764 that remained on CARES Act modifications. Details with respect to loan modifications that remain on deferred status are as follows:

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 March 31, 2022 and December 31, 2021.

	March 31, 2022						December 31, 2021
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance recorded:
Residential Real Estate	$	491	$	516			$	503	$	528
Farm Real Estate		507		507				509		509
Total		998		1,023				1,012		1,037
With an allowance recorded:
Commercial Real Estate:
Owner Occupied		181		181	$	6		187		187	$	7
Residential Real Estate		23		27		12		23		27		11
Total		204		208		18		210		214		18
Total:
Commercial & Agriculture		—		—		—		—		—		—
Commercial Real Estate:
Owner Occupied		181		181		6		187		187		7
Non-Owner Occupied		—		—		—		—		—		—
Residential Real Estate		514		543		12		526		555		11
Farm Real Estate		507		507		—		509		509		—
Total	$	1,202	$	1,231	$	18	$	1,222	$	1,251	$	18

The following table includes the average recorded investment and interest income recognized for impaired financing receivables for the three-month periods ended March 31, 2022 and 2021.

	March 31, 2022				March 31, 2021
For the three months ended	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Commercial & Agriculture	$	—	$	—	$	37	$	—
Commercial Real Estate—Owner Occupied		193		3		644		6
Commercial Real Estate—Non-Owner Occupied		—		—		43		1
Residential Real Estate		530		7		758		8
Farm Real Estate		514		6		611		6
Total	$	1,237	$	16	$	2,093	$	21

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 March 31, 2022 or December 31, 2021.

Foreclosed assets acquired in settlement of loans are carried at fair value less estimated costs to sell and are included in Other assets on the Consolidated Balance Sheet. As of March 31, 2022 and December 31, 2021, there were no foreclosed assets included in Other assets. As of March 31, 2022 and December 31, 2021, the Company had initiated formal foreclosure procedures on $437 and $293, respectively, of consumer residential mortgages.