(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 ☒ No ☐

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

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

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

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. Common Shares, no par value, outstanding at August ~~5, 2019—15,650,082~~6, 2020—16,052,979 shares

	June 30, 2019			December 31, 2018			June 30, 2020			December 31, 2019
ASSETS
Cash and due from financial institutions	$	49,839		$	42,779		$	196,520		$	48,535
Securities available for sale		359,473			346,294			368,383			358,499
Equity securities		1,039			1,070			798			1,191
Loans held for sale		2,563			1,391			18,523			2,285
Loans, net of allowance of $13,786 and $13,679		1,584,984			1,548,262
Loans, net of allowance of $20,420 and $14,767								2,002,545			1,694,203
Other securities		20,280			21,021			20,537			20,280
Premises and equipment, net		21,720			22,021			23,137			22,871
Accrued interest receivable		7,350			6,723			11,047			7,093
Goodwill		76,851			76,851			76,851			76,851
Other intangible assets		8,855			9,352			8,001			8,305
Bank owned life insurance		44,491			43,037			45,489			44,999
Swap assets								25,719			8,918
Other assets		25,550			20,153			14,603			15,527
Total assets	$	2,202,995		$	2,138,954		$	2,812,153		$	2,309,557
LIABILITIES
Deposits
Noninterest-bearing	$	496,541		$	468,083		$	693,848		$	512,553
Interest-bearing		1,136,179			1,111,810			1,375,413			1,166,211
Total deposits		1,632,720			1,579,893			2,069,261			1,678,764
Short-term Federal Home Loan Bank advances		121,300			188,600			—			101,500
Long-term Federal Home Loan Bank advances								125,000			125,000
Securities sold under agreements to repurchase		15,554			22,199			23,608			18,674
Other borrowings		55,000			5,000			183,695			—
Subordinated debentures		29,427			29,427			29,427			29,427
Swap liabilities								25,719			8,918
Accrued expenses and other liabilities		24,782			14,937			18,830			17,148
Total liabilities		1,878,783			1,840,056			2,475,540			1,979,431
SHAREHOLDERS’ EQUITY
Preferred shares, no par value, 200,000 shares authorized, Series B Preferred shares, $1,000 liquidation preference, 10,120 shares issued, net of issuance costs		9,364			9,364
Common shares, no par value, 20,000,000 shares authorized, 16,381,023 shares issued at June 30, 2019 and 16,351,463 shares issued at December 31, 2018		267,275			266,901
Common shares, no par value, 20,000,000 shares authorized, 17,664,951 shares issued at June 30, 2020 and 17,623,706 shares issued at December 31, 2019								276,841			276,422
Retained earnings		56,199			41,320			78,712			67,974
Treasury shares, 747,964 common shares at cost		(17,235	)		(17,235	)
Accumulated other comprehensive income (loss)		8,609			(1,452	)
Treasury shares, 1,611,972 common shares at June 30, 2020 and 936,164 common shares at December 31, 2019, at cost								(32,594	)		(21,144	)
Accumulated other comprehensive income								13,654			6,874
Total shareholders’ equity		324,212			298,898			336,613			330,126
Total liabilities and shareholders’ equity	$	2,202,995		$	2,138,954		$	2,812,153		$	2,309,557

	Three months ended					Six Months Ended					Three months ended						Six Months Ended
	June 30,					June 30,					June 30,						June 30,
	2019			2018		2019			2018		2020			2019			2020			2019
Interest and dividend income
Loans, including fees	$	21,657		$	14,144	$	42,619		$	27,783	$	21,613		$	21,657		$	43,286		$	42,619
Taxable securities		1,694			1,040		3,442			2,026		1,359			1,694			2,775			3,442
Tax-exempt securities		1,408			886		2,760			1,764		1,541			1,408			3,053			2,760
Federal funds sold and other		167			90		689			511		71			167			472			689
Total interest and dividend income		24,926			16,160		49,510			32,084		24,584			24,926			49,586			49,510
Interest expense
Deposits		1,976			570		3,867			1,277		1,802			1,976			3,787			3,867
Federal Home Loan Bank advances		831			482		1,429			634		447			831			1,028			1,429
Subordinated debentures		372			338		744			626		250			372			563			744
Securities sold under agreements to repurchase and other		5			4		10			9		10			5			18			10
Total interest expense		3,184			1,394		6,050			2,546		2,509			3,184			5,396			6,050
Net interest income		21,742			14,766		43,460			29,538		22,075			21,742			44,190			43,460
Provision for loan losses		—			—		—			—		3,486			—			5,612			—
Net interest income after provision for loan losses		21,742			14,766		43,460			29,538		18,589			21,742			38,578			43,460
Noninterest income
Service charges		1,552			1,359		3,008			2,493		930			1,552			2,398			3,008
Net gain on sale of securities		10			6		14			6		—			10			—			14
Net gain (loss) on equity securities		(33	)		35		(31	)		75
Net loss on equity securities												(5	)		(33	)		(146	)		(31	)
Net gain on sale of loans		555			474		886			807		2,261			555			3,088			886
ATM/Interchange fees		951			588		1,857			1,142		1,149			951			2,043			1,857
Wealth management fees		911			836		1,758			1,688		904			911			1,910			1,758
Bank owned life insurance		252			144		499			286		240			252			490			499
Tax refund processing fees		550			550		2,750			2,750		475			550			2,375			2,750
Swap fees												764			15			1,102			88
Other		356			398		647			759		136			341			470			559
Total noninterest income		5,104			4,390		11,388			10,006		6,854			5,104			13,730			11,388
Noninterest expense
Compensation expense		9,548			7,385		19,353			14,759		10,597			9,548			21,468			19,353
Net occupancy expense		964			862		2,004			1,623		1,064			964			2,040			2,004
Equipment expense		480			324		943			698		507			480			1,013			943
Contracted data processing		447			2,739		866			3,087		475			447			925			866
FDIC assessment		106			116		298			267		156			106			243			298
State franchise tax		499			363		899			681		475			499			967			899
Professional services		700			1,483		1,395			2,035		883			700			1,620			1,395
Amortization of intangible assets		235			26		475			59		228			235			459			475
ATM expense		546			208		924			426
ATM/Interchange expense												331			546			778			924
Marketing		367			320		707			638		339			367			695			707
Software maintenance expense												407			356			844			705
Other operating expenses		2,747			2,102		5,224			3,860		2,652			2,391			4,918			4,519
Total noninterest expense		16,639			15,928		33,088			28,133		18,114			16,639			35,970			33,088
Income before taxes		10,207			3,228		21,760			11,411		7,329			10,207			16,338			21,760
Income tax expense		1,546			214		3,430			1,408		825			1,546			2,001			3,430
Net Income		8,661			3,014		18,330			10,003		6,504			8,661			14,337			18,330
Preferred stock dividends		164			299		328			602		—			164			—			328
Net income available to common shareholders	$	8,497		$	2,715	$	18,002		$	9,401	$	6,504		$	8,497		$	14,337		$	18,002
Earnings per common share, basic	$	0.54		$	0.26	$	1.15		$	0.91	$	0.41		$	0.54		$	0.88		$	1.15
Earnings per common share, diluted	$	0.51		$	0.24	$	1.08		$	0.79	$	0.41		$	0.51		$	0.88		$	1.08

	Three Months Ended						Six Months Ended						Three Months Ended						Six Months Ended
	June 30,						June 30,						June 30,						June 30,
	2019			2018			2019			2018			2020			2019			2020			2019
Net income	$	8,661		$	3,014		$	18,330		$	10,003		$	6,504		$	8,661		$	14,337		$	18,330
Other comprehensive income (loss), net of reclassification adjustment:
Unrealized holding gains (losses) on available for sale securities		6,299			(684	)		12,441			(3,898	)
Other comprehensive income, net of reclassification adjustment:
Unrealized holding gains on available for sale securities														4,695			6,299			8,438			12,441
Tax effect		(1,323	)		143			(2,612	)		818			(986	)		(1,323	)		(1,772	)		(2,612	)
Pension liability adjustment		147			143			294			286			72			147			145			294
Tax effect		(31	)		(30	)		(62	)		(60	)		(15	)		(31	)		(31	)		(62	)
Total other comprehensive income (loss)		5,092			(428	)		10,061			(2,854	)
Total other comprehensive income														3,766			5,092			6,780			10,061
Comprehensive income	$	13,753		$	2,586		$	28,391		$	7,149		$	10,270		$	13,753		$	21,117		$	28,391

~~Condensed~~ Consolidated Statement of Changes in Shareholders’ Equity (Unaudited)

																											Common Shares											Accumulated Other		Total
																											Outstanding Shares			Amount		Retained Earnings			Treasury Shares			Comprehensive Income		Shareholders’ Equity
Balance, March 31, 2020																												16,064,010		$	276,546	$	73,972		$	(32,239	)	$	9,888	$	328,167
Net Income																												—			—		6,504			—			—		6,504
Other comprehensive income																												—			—		—			—			3,766		3,766
Stock-based compensation																												14,266			295		—			—			—		295
Common stock dividends ($0.11 per share)																												—			—		(1,764	)		—			—		(1,764	)
Purchase of treasury stock																												(25,297	)		—		—			(355	)		—		(355	)
Balance, June 30, 2020																												16,052,979		$	276,841	$	78,712		$	(32,594	)	$	13,654	$	336,613

	Preferred Shares						Common Shares										Accumulated Other			Total			Preferred Shares				Common Shares											Accumulated Other		Total
	Outstanding Shares			Amount			Outstanding Shares		Amount		Retained Earnings			Treasury Shares			Comprehensive Income			Shareholders’ Equity			Outstanding Shares		Amount		Outstanding Shares			Amount		Retained Earnings			Treasury Shares			Comprehensive Income		Shareholders’ Equity
Balance, March 31, 2019		10,120		$	9,364			15,624,113	$	266,990	$	49,421		$	(17,235	)	$	3,517		$	312,057			10,120	$	9,364		15,624,113		$	266,990	$	49,421		$	(17,235	)	$	3,517	$	312,057
Net Income		—			—			—		—		8,661			—			—			8,661			—		—		—			—		8,661			—			—		8,661
Other comprehensive income		—			—			—		—		—			—			5,092			5,092			—		—		—			—		—			—			5,092		5,092
Stock-based compensation		—			—			8,946		285		—			—			—			285			—		—		8,946			285		—			—			—		285
Common stock dividends ($0.11 per share)		—			—			—		—		(1,719	)		—			—			(1,719	)		—		—		—			—		(1,719	)		—			—		(1,719	)
Preferred stock dividends ($16.25 per share)		—			—			—		—		(164	)		—			—			(164	)		—		—		—			—		(164	)		—			—		(164	)
Balance, June 30, 2019		10,120		$	9,364			15,633,059	$	267,275	$	56,199		$	(17,235	)	$	8,609		$	324,212			10,120	$	9,364		15,633,059		$	267,275	$	56,199		$	(17,235	)	$	8,609	$	324,212

	Preferred Shares						Common Shares										Accumulated Other			Total
	Outstanding Shares			Amount			Outstanding Shares		Amount		Retained Earnings			Treasury Shares			Comprehensive Loss			Shareholders’ Equity
Balance, March 30, 2018		18,409		$	17,034			10,243,274	$	154,170	$	37,902		$	(17,235	)	$	(3,828	)	$	188,043
Net Income		—			—			—		—		3,014			—			—			3,014
Other comprehensive loss		—			—			—		—		—			—			(428	)		(428	)
Conversion of Series B preferred shares to common shares		(4,089	)		(3,784	)		522,904		3,784		—			—			—			—
Stock-based compensation		—			—			22,714		237		—			—			—			237
Common stock dividends ($0.07 per share)		—			—			—		—		(719	)		—			—			(719	)
Preferred stock dividends ($16.25 per share)		—			—			—		—		(299	)		—			—			(299	)
Balance, June 30, 2018		14,320		$	13,250			10,788,892	$	158,191	$	39,898		$	(17,235	)	$	(4,256	)	$	189,848

~~Condensed~~ Consolidated Statement of Changes in Shareholders’ Equity (Unaudited)

																											Common Shares											Accumulated Other			Total
																											Outstanding Shares			Amount		Retained Earnings			Treasury Shares			Comprehensive Income			Shareholders’ Equity
Balance, December 31, 2019																												16,687,542		$	276,422	$	67,974		$	(21,144	)	$	6,874		$	330,126
Net Income																												—			—		14,337			—			—			14,337
Other comprehensive income																												—			—		—			—			6,780			6,780
Stock-based compensation																												41,245			419		—			—			—			419
Common stock dividends ($0.22 per share)																												—			—		(3,599	)		—			—			(3,599	)
Purchase of treasury stock																												(675,808	)		—		—			(11,450	)		—			(11,450	)
Balance, June 30, 2020																												16,052,979		$	276,841	$	78,712		$	(32,594	)	$	13,654		$	336,613

	Preferred Shares						Common Shares										Accumulated Other			Total			Preferred Shares				Common Shares											Accumulated Other			Total
	Outstanding Shares			Amount			Outstanding Shares		Amount		Retained Earnings			Treasury Shares			Comprehensive Income (loss)			Shareholders’ Equity			Outstanding Shares		Amount		Outstanding Shares			Amount		Retained Earnings			Treasury Shares			Comprehensive Income (loss)			Shareholders’ Equity
Balance, December 31, 2018		10,120		$	9,364			15,603,499	$	266,901	$	41,320		$	(17,235	)	$	(1,452	)	$	298,898			10,120	$	9,364		15,603,499		$	266,901	$	41,320		$	(17,235	)	$	(1,452	)	$	298,898
Net Income		—			—			—		—		18,330			—			—			18,330			—		—		—			—		18,330			—			—			18,330
Other comprehensive income		—			—			—		—		—			—			10,061			10,061			—		—		—			—		—			—			10,061			10,061
Stock-based compensation		—			—			29,560		374		—			—			—			374			—		—		29,560			374		—			—			—			374
Common stock dividends ($0.20 per share)		—			—			—		—		(3,123	)		—			—			(3,123	)		—		—		—			—		(3,123	)		—			—			(3,123	)
Preferred stock dividends ($32.50 per share)		—			—			—		—		(328	)		—			—			(328	)		—		—		—			—		(328	)		—			—			(328	)
Balance, June 30, 2019		10,120		$	9,364			15,633,059	$	267,275	$	56,199		$	(17,235	)	$	8,609		$	324,212			10,120	$	9,364		15,633,059		$	267,275	$	56,199		$	(17,235	)	$	8,609		$	324,212

	Preferred Shares						Common Shares										Accumulated Other			Total
	Outstanding Shares			Amount			Outstanding Shares		Amount		Retained Earnings			Treasury Shares			Comprehensive Loss			Shareholders’ Equity
Balance, December 31, 2017		18,760		$	17,358			10,198,475	$	153,810	$	31,652		$	(17,235	)	$	(1,124	)	$	184,461
Change in accounting principle for adoption of ASU 2016-01		—			—			—		—		278			—			(278	)		—
Net Income		—			—			—		—		10,003			—			—			10,003
Other comprehensive loss		—			—			—		—		—			—			(2,854	)		(2,854	)
Conversion of Series B preferred shares to common shares		(4,440	)		(4,108	)		567,703		4,108		—			—			—			—
Stock-based compensation		—			—			22,714		273		—			—			—			273
Common stock dividends ($0.14 per share)		—			—			—		—		(1,433	)		—			—			(1,433	)
Preferred stock dividends ($32.50 per share)		—			—			—		—		(602	)		—			—			(602	)
Balance, June 30, 2018		14,320		$	13,250			10,788,892	$	158,191	$	39,898		$	(17,235	)	$	(4,256	)	$	189,848

	Six Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2020			2019
Net cash from operating activities	$	20,369		$	5,324		$	11,590		$	20,369
Cash flows used for investing activities:
Maturities and calls of securities, available-for-sale		25,887			9,332			27,439			25,887
Purchases of securities, available-for-sale		(43,998	)		(14,606	)		(29,446	)		(43,998	)
Sale of securities available for sale		16,829			—			—			16,829
Purchase of other securities								(257	)		—
Redemption of other securities		741			—			—			741
Sale of equity securities								247			—
Purchase of bank owned life insurance		(955	)		—			—			(955	)
Net loan originations		(36,593	)		(15,382	)		(322,770	)		(36,593	)
Proceeds from sale of other real estate owned properties		—			34
Proceeds from sale of premises and equipment		—			238
Premises and equipment purchases		(651	)		(292	)		(1,395	)		(651	)
Net cash used for investing activities		(38,740	)		(20,676	)		(326,182	)		(38,740	)
Cash flows from financing activities:
Repayment of long-term FHLB advances		—			(10,000	)
Proceeds from long-term FHLB advances		50,000			—			—			50,000
Net change in short-term FHLB advances		(67,300	)		94,300			(101,500	)		(67,300	)
Increase (decrease) in deposits		52,827			(58,751	)
Decrease in securities sold under repurchase agreements		(6,645	)		(7,525	)
Proceeds from other borrowings								183,695			—
Increase in deposits								390,497			52,827
Increase (decrease) in securities sold under repurchase agreements								4,934			(6,645	)
Purchase of treasury shares								(11,450	)		—
Common dividends paid		(3,123	)		(1,433	)		(3,599	)		(3,123	)
Preferred dividends paid		(328	)		(602	)		—			(328	)
Net cash provided by financing activities		25,431			15,989			462,577			25,431
Increase in cash and due from financial institutions		7,060			637			147,985			7,060
Cash and due from financial institutions at beginning of period		42,779			40,519			48,535			42,779
Cash and due from financial institutions at end of period	$	49,839		$	41,156		$	196,520		$	49,839
Cash paid during the period for:
Interest	$	6,018		$	2,854		$	5,434		$	6,018
Income taxes		2,350			1,500			—			2,350
Supplemental cash flow information:
Transfer of loans held for sale to portfolio		—			85
Conversion of preferred shares to common shares		—			4,108
Change in fair value of swap asset								(16,801	)		—
Change in fair value of swap asset liability								16,801			—
Securities purchased not settled		2,102			855			—			2,102
Increase in right-of-use asset on leases		(2,452	)		—			—			(251	)
Increase in lease liability		2,452			—			—			251

Nature of Operations and Principles of Consolidation: Civista Bancshares, Inc. (CBI) is an Ohio corporation and a registered financial holding company. The Consolidated Financial Statements include the accounts of CBI and its wholly-owned subsidiaries: Civista Bank (Civista), First Citizens Insurance Agency, Inc. (FCIA), Water Street Properties, Inc. (Water St.)~~, FC Refund Solutions, Inc. (FCRS)~~ and CIVB Risk Management, Inc. (CRMI). ~~FCRS was formed to facilitate payment of individual state and federal income tax refunds.~~ CRMI is a wholly-owned captive insurance company which allows the Company to insure against certain risks unique to the operations of CBI and its subsidiaries. The operations of CRMI are located in Wilmington, Delaware. 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. FCIA 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 June 30, ~~2019.~~2020. Water Street Properties was formed to hold properties repossessed by CBI subsidiaries. Revenue from Water St. was less than 1.0% of total revenue through June 30, ~~2019.~~2020. The above companies together are referred to as the “Company.” Intercompany balances and transactions are eliminated in consolidation.Management considers the Company to operate primarily in one reportable segment, banking.

The 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 June 30, ~~2019~~2020 and its results of operations and changes in cash flows for the periods ended June 30, ~~2019~~2020 and ~~2018~~2019 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~~periods ended June 30, ~~2019~~2020 are not necessarily indicative of the operating results for the full year. Reference is made to the accounting policies of the Company described in the notes to the audited financial statements contained in the Company’s ~~2018~~2019 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, in the Indiana counties of Dearborn and Ripley and in the Kentucky county of Kenton. Its primary deposit products are checking, savings, and term certificate accounts, and its primary lending products are residential mortgage, commercial, and installment loans. Substantially all loans are secured by specific items of collateral including business assets, consumer assets and commercial and residential real estate. Commercial loans are expected to be repaid from cash flow from operations of businesses. Civista has ~~two~~2 loan concentrations, ~~one~~1 is to Lessors of Non-Residential Buildings and Dwellings totaling ~~$411,239,~~$491,544, or ~~25.7%~~24.1% of total loans, as of June 30, ~~2019,~~2020, and the other is to Lessors of Residential Buildings and Dwellings totaling ~~$160,518,~~$222,089, or ~~10.0%~~10.9% of total loans, as of June 30, ~~2019.~~2020. These segments of the loan 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 ~~Federal Funds sold and~~ deposit accounts in other financial institutions that are in excess of federally insured limits.

Allowance for Loan Losses:The allowance for loan losses is regularly reviewed by management to determine that the amount is considered adequate to absorb probable losses in the loan portfolio. If not, an additional provision is made to increase the allowance. This evaluation includes specific loss estimates on certain individually reviewed impaired loans, the pooling of commercial credits risk graded as special mention and substandard that are not individually analyzed, and general loss estimates that are based upon the size, quality, and concentration characteristics of the various loan portfolios, adverse situations that may affect a borrower’s ability to repay, and current economic and industry conditions, among other items.

Those judgments and assumptions that are most critical to the application of this accounting policy are assessing the initial and on-going credit-worthiness of the borrower, the amount and timing of future cash flows of the borrower that are available for repayment of the loan, the sufficiency of underlying collateral, the enforceability of third-party guarantees, the frequency and subjectivity of loan reviews and risk ratings, emerging or changing trends that might not be fully captured in the historical loss experience, and charges against the allowance for actual losses that are greater than previously estimated. These judgments and assumptions are dependent upon or can be influenced by a variety of factors, including the breadth and depth of experience of lending officers, credit administration and the corporate loan review staff that periodically review the status of the loan, changing economic and industry conditions, changes in the financial condition of the borrower and changes in the value and availability of the underlying collateral and guarantees.

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 acquired companies on the Consolidated Balance Sheet at their fair value. The results of operations for acquired companies are included in the Company’s Consolidated Statements of Operations beginning at the acquisition date. Expenses arising from acquisition activities are recorded in the Consolidated Statements of Operations during the period incurred.

Reclassifications: Some items in the prior year financial statements were reclassified to conform to the current presentation. Such reclassifications had no effect on net income or shareholders’ equity.

~~Derivative Instruments and Hedging Activities: The Company enters into interest rate swap agreements to facilitate the risk management strategies~~

Adoption 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.

In ~~March 2017,~~August 2018, the Financial Accounting Standards Board ~~('FASB'~~(“FASB”) issued Accounting Standards Update ~~('ASU'~~(“ASU”) ~~2017-08,~~ ~~Receivables~~2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – ~~Nonrefundable Fees~~Changes to the Disclosure Requirements for Fair Value Measurement. The amendments in this Update remove the requirement to disclose the amount of and ~~Other Costs (Subtopic 310-20).~~ ~~These~~reasons for transfers between Level I and Level II of the fair value hierarchy; the policy for timing of transfers between levels; and the valuation processes for Level III fair value measurements. The amendments ~~shorten~~in this Update require disclosure of changes in unrealized gains and losses for the ~~amortization~~ period included in other comprehensive income (loss) for ~~certain callable debt securities~~recurring Level III fair value measurements held at ~~a premium. Specifically,~~ the ~~amendments require~~end of the ~~premium~~reporting period and the range and weighted average of significant unobservable inputs used to ~~be amortized to the earliest call date. The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity.~~develop Level III fair value measurements. We adopted ASU ~~2017-08,~~2018-13 effective January 1, ~~2019,~~2020, which did not have a material impact on the Company’s Consolidated Financial Statements.

~~Effective January 1, 2019, the Company adopted FASB ASU 2016-02,~~ ~~Leases~~, which requires the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous guidance. The original guidance required application on a modified retrospective basis with the earliest period presented. In August 2018, the FASB issued ASU ~~2018-11,~~ ~~Targeted Improvements~~2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40). The amendment in this ASU addressed customers’ accounting for implementation costs incurred in a cloud computing arrangement that is a service contract and also added certain disclosure requirements related to ~~ASC 842~~implementation costs incurred for internal-use software and cloud computing arrangements. The amendment in this ASU aligned the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). We adopted ASU 2018-15 effective January 1, 2020, which did not have a material impact on the Company’s Consolidated Financial Statements.

In October, 2018, the FASB issued ASU 2018-17, Consolidation (Topic 810), which ~~included an option~~made improvements in (1) applying the variable interest entity (VIE) guidance to private companies under common control and (2) considering indirect interests held through related parties under common control for determining whether fees paid to decision makers and service providers are variable interests. Under the amendments in this Update, a private company may elect not ~~restate comparative periods~~to apply VIE guidance to legal entities under common control (including common control leasing arrangements) if both the parent and the legal entity being evaluated for consolidation are not public business entities. In addition, indirect interests held through related parties in ~~transition~~common control arrangements should be considered on a proportional basis for determining whether fees paid to decision makers and ~~elect to use~~service providers are variable interests. We adopted ASU 2018-17 effective January 1, 2020, which did not have a material impact on the ~~effective date of ASC 842,~~ ~~Leases, as the date of initial application of transition, which we elected. As a result of the adoption of~~Company’s Consolidated Financial Statements.

~~ASC 842 on~~In November, 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808), which made the following targeted improvements to generally accepted accounting principles (GAAP) for collaborative arrangements: (1) clarified that certain transactions between collaborative arrangement participants should be accounted for as revenue under Topic 606 when the collaborative arrangement participant is a customer in the context of a unit of account, (2) added unit-of-account guidance in Topic 808 to align with the guidance in Topic 606 (that is, a distinct good or service) when an entity is assessing whether the collaborative arrangement or a part of the arrangement is within the scope of Topic 606, and (3) required that in a transaction with a collaborative arrangement participant that is not directly related to sales to third parties, presenting the transaction together with revenue recognized under Topic 606 is precluded if the collaborative arrangement participant is not a customer. We adopted ASU 2018-18 effective January 1, ~~2019, we recorded both operating lease right-of-use ('ROU') assets of $2,210 and lease liabilities of $2,210. The adoption of ASC 842 had an immaterial~~2020, which did not have a material impact on ~~our Condensed~~the Company’s Consolidated Statement of Earnings and Condensed Consolidated Statement of Cash Flows for the three-month period ended March 31, 2019. In addition, we elected the package of practical expedients permitted under the transition guidance within the new standard which allowed us to carry forward the historical lease classification. There was no cumulative effect adjustment to the opening balance of retained earnings required.Financial Statements.

~~Additional information and disclosures required by this new standard are contained in Note 17,~~ ~~'Leases'~~.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which changes the impairment model for most financial assets. This ASU is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. The underlying premise of ASU 2016-13 is that financial assets measured at amortized cost should be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The allowance for credit losses should reflect management’s current estimate of credit losses that are expected to occur over the remaining life of a financial asset. The income statement will be effected for the measurement of credit losses for newly recognized financial assets, as well as the expected increases or decreases of expected credit losses that have taken place during the period. With certain exceptions, transition to the new requirements will be through a cumulative effect adjustment to opening retained earnings as of the beginning of the first reporting period in which the guidance is adopted. ASU 2016-13 iswas to be effective for annual and interim periods beginning after December 15, 2019, ~~and~~with early adoption is permitted for annual and interim periods beginning after December 15, 2018. In November 2019, however, the FASB issued ASU 2019-10, Financial Instruments ‒ Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842). This Update deferred the effective date of ASU 2016-13 for U.S. Securities and Exchange Commission (“SEC”) filers that are eligible to be smaller reporting companies, such as the Company, to fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. Management is in the process of evaluating the impact adoption of ~~this update~~ASU 2016-13 will have on the Company’s Consolidated Financial Statements. This process has engaged multiple areas of the Company in evaluating loss estimation methods and application of these methods to specific segments of the loan portfolio. Management has been actively monitoring FASB developments and evaluating the use of different methods allowed. Due to continuing development of our methodology, additional time is required to quantify the ~~affect~~effect this ASU will have on the Company’s Consolidated Financial Statements. Management plans on running parallel calculations ~~during the year~~ and finalizing a method or methods of adoption in time for the effective date.

In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment. To simplify the subsequent measurement of goodwill, the FASB eliminated Step 2 from the goodwill impairment test. In computing the implied fair value of goodwill under Step 2, an entity had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Instead, under the amendments in this Update, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. A public business entity that is ~~a U.S. Securities and Exchange Commission (“SEC”)~~an SEC filer, such as the Company, ~~should~~was to adopt the amendments in this Update for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. In November 2019, however, the FASB issued ASU 2019-10, Financial Instruments ‒ Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842), which deferred the effective date for ASC 350, Intangibles – Goodwill and Other, for smaller reporting companies, such as the Company, to fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. 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 August 2018, the FASB issued ASU 2018-13,~~ ~~Fair Value Measurement (Topic 820): Disclosure Framework – Changes the Disclosure Requirements for Fair Value Measurements~~. The Update removes the requirement to disclose the amount of and reasons for transfers between Level I and Level II of the fair value hierarchy; the policy for timing of transfers between levels; and the valuation processes for Level III fair value measurements. The Update requires disclosure of changes in unrealized gains and losses for the period included in other comprehensive income (loss) for recurring Level III fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level III fair value measurements. This Update is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. This Update is not expected to have a significant impact on the Company’s financial statements.

~~In October, 2018, the FASB issued ASU 2018-17,~~ ~~Consolidation (Topic 810)~~, which made improvements in 1) applying the variable interest entity (VIE) guidance to private companies under common control and 2) considering indirect interests held through related parties under common control for determining whether fees paid to decision makers and service providers are variable interests. Under the amendments in this Update, a private company may elect not to apply VIE guidance to legal entities under common control (including common control leasing arrangements) if both the parent and the legal entity being evaluated for consolidation are not public business entities. In addition, indirect interests held through related parties in common control arrangements should be considered on a proportional basis for determining whether fees paid to decision makers and service providers are variable interests. For entities other than private companies, the amendments in this Update are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. This Update is not expected to have a significant impact on the Company’s financial statements.

~~In November, 2018, the FASB issued ASU 2018-18,~~ ~~Collaborative Arrangements (Topic 808)~~, which made the following targeted improvements to generally accepted accounting principles (GAAP) for collaborative arrangements: (1) clarified that certain transactions between collaborative arrangement participants should be accounted for as revenue under Topic 606 when the collaborative arrangement participant is a customer in the context of a unit of account, (2) add unit-of-account guidance in Topic 808 to align with the guidance in Topic 606 (that is, a distinct good or service) when an entity is assessing whether the collaborative arrangement or a part of the arrangement is within the scope of Topic 606, and (3) require that in a transaction with a collaborative arrangement participant that is not directly related to sales to third parties, presenting the transaction together with revenue recognized under Topic 606 is precluded if the collaborative arrangement participant is not a customer. ~~For public business entities, such as the Company, the amendments in this Update are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years.~~ ~~This Update is not expected to have a significant impact on the Company’s financial statements.~~

In April 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, and Topic 825, Financial Instruments, which affects a variety of topics in the Codification and applies to all reporting entities within the scope of the affected accounting guidance. Topic 326, Financial Instruments – Credit Losses amendments are effective for SEC registrants for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. ~~Topic 825, Financial Instruments~~ ~~amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years.~~ The Company is currently evaluating the potential impact of the Topic 326 amendments on the Company’s Consolidated Financial Statements. The amendments to Topic 825 ~~are~~were to be effective for interim and annual reporting periods beginning after December 15, 2019. In November 2019, however, the FASB issued ASU 2019-10, Financial Instruments ‒ Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842). This Update defers the effective date of ASU 2016-13 for SEC filers that are eligible to be smaller reporting companies, such as the Company, to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. This Update is not expected to have a material impact on the Company’s financial statements.

In May 2019, the FASB issued ASU 2019-05, Financial Instruments – Credit Losses, Topic 326, which allows entities to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost upon adoption of the new credit losses standard. To be eligible for the transition election, the existing financial asset must otherwise be both within the scope of the new credit losses standard and eligible for ~~the~~ applying the fair value option in ASC 825-10.3. The election must be applied on an instrument-by-instrument basis and is not available for either available-for-sale or held-to-maturity debt securities. For entities that elect the fair value option, the difference between the carrying amount and the fair value of the financial asset would be recognized through a cumulative-effect adjustment to opening retained earnings as of the date an entity adopted ASU 2016-13. Changes in fair value of that financial asset would subsequently be reported in current earnings. For entities that have not yet adopted ASU 2016-13, the effective dates and transition requirements are the same as those in ASU 2016-13. For entities that have adopted ASU 2016-13, ASU 2019-05 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted once ASU 2016-13 has been adopted. In November 2019, the FASB issued ASU 2019-10, Financial Instruments ‒ Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842). The Update defers the effective date of ASU 2016-13 for SEC filers that are eligible to be smaller reporting companies, such as the Company, to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial ~~position~~statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The Update is designed to provide relief from the accounting analysis and impacts that may otherwise be required for modifications to agreements necessitated by reference rate reform. The Update also provides optional expedients to enable companies to continue to apply hedge accounting to certain hedging relationships impacted by reference rate reform. The amendments in this Update are effective for all entities as of March 12, 2020 through December 31, 2022. Management is currently evaluating reference rate options and is reviewing loan agreements, debt securities, derivatives and borrowings impacted by reference rate reform.

~~Notes~~are not believed by management to ~~Interim~~have a material effect on the Company’s present or future Consolidated Financial ~~Statements (Unaudited)~~

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

June 30, 2019	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
June 30, 2020										Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Treasury securities and obligations of U.S. government agencies	$	21,779	$	221	$	(22	)	$	21,978	$	19,124	$	377	$	(1	)	$	19,500
Obligations of states and political subdivisions		180,496		11,245		(6	)		191,735		206,192		18,139		(12	)		224,319
Mortgage-backed securities in government sponsored entities		141,788		4,153		(181	)		145,760		118,322		6,247		(5	)		124,564
Total debt securities	$	344,063	$	15,619	$	(209	)	$	359,473	$	343,638	$	24,763	$	(18	)	$	368,383

December 31, 2018	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
December 31, 2019										Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Treasury securities and obligations of U.S. government agencies	$	30,623	$	202	$	(140	)	$	30,685	$	19,401	$	204	$	(4	)	$	19,601
Obligations of states and political subdivisions		168,993		3,680		(602	)		172,071		193,646		12,409		(21	)		206,034
Mortgage-backed securities in government sponsored entities		143,707		1,024		(1,193	)		143,538		129,145		3,863		(144	)		132,864
Total debt securities	$	343,323	$	4,906	$	(1,935	)	$	346,294	$	342,192	$	16,476	$	(169	)	$	358,499

The amortized cost and fair value of securities at June 30, ~~2019,~~2020, by contractual maturity, is shown below. Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations. Securities not due at a single maturity date, primarily mortgage-backed securities are shown separately.

Available for sale	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	10,871	$	10,851	$	8,185	$	8,252
Due after one year through five years		16,215		16,516		17,501		17,966
Due after five years through ten years		21,705		23,070		26,404		28,233
Due after ten years		153,484		163,276		173,226		189,368
Mortgage-backed securities		141,788		145,760		118,322		124,564
Total securities available for sale	$	344,063	$	359,473	$	343,638	$	368,383

Proceeds from sales of securities available for sale, gross realized gains and gross realized losses were as follows:

	Three Months Ended				Six Months Ended				Three Months Ended				Six Months Ended
	June 30,				June 30,				June 30,				June 30,
	2019		2018		2019		2018		2020		2019		2020		2019
Sale proceeds	$	—	$	—	$	16,829	$	—	$	—	$	—	$	—	$	16,829
Gross realized gains		—		—		47		—		—		—		—		47
Gross realized losses		—		—		43		—		—		—		—		43
Gains from securities called or settled by the issuer		10		6		10		6		—		10		—		10

Securities were pledged to secure public deposits, other deposits and liabilities as required by law. The carrying value of pledged securities was approximately ~~$136,488~~$158,871 and ~~$114,145~~$139,004 as of June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively.

Securities with unrealized losses at June 30, 2020 and December 31, 2019 not recognized in income are as follows:

~~Securities with unrealized losses at June 30, 2019 and December 31, 2018 not recognized in income are as follows:~~

December 31, 2018	12 Months or less					More than 12 months					Total
December 31, 2019																12 Months or less					More than 12 months					Total
Description of Securities	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
U.S. Treasury securities and obligations of U.S. government agencies	$	—	$	—		$	16,469	$	(140	)	$	16,469	$	(140	)	$	—	$	—		$	3,408	$	(4	)	$	3,408	$	(4	)
Obligations of states and political subdivisions		8,008		(71	)		25,890		(531	)		33,898		(602	)		1,947		(21	)		—		—			1,947		(21	)
Mortgage-backed securities in gov’t sponsored entities		6,630		(90	)		40,333		(1,103	)		46,963		(1,193	)		10,653		(91	)		7,732		(53	)		18,385		(144	)
Total temporarily impaired	$	14,638	$	(161	)	$	82,692	$	(1,774	)	$	97,330	$	(1,935	)	$	12,600	$	(112	)	$	11,140	$	(57	)	$	23,740	$	(169	)

At June 30, ~~2019,~~2020, there were ~~thirty-eight~~a total of 6 securities in the portfolio with unrealized losses mainly due to higher current market rates when compared to the time of purchase. Unrealized losses on securities have not been recognized into income because the issuers’ securities are of high credit quality, management has the intent and ability to hold these securities for the foreseeable future, and the decline in fair value is largely due to market yields increasing. The fair value is expected to recover as the securities approach their maturity date or reset date. The Company does not intend to sell until recovery and does not believe selling will be required before recovery.

The following table presents the net gains and losses on equity investments recognized in earnings for the three and ~~six-months~~six months ended June 30, ~~2019~~2020 and ~~2018,~~2019, and the portion of unrealized gains and losses for the period that relates to equity investments held at June 30, ~~2019~~2020 and ~~2018:~~2019:

Included in Commercial & Agriculture is $257,568 of Paycheck Protection Program (“PPP”) loans.

Included in total loans above are net deferred loan fees of $9,303 and $488 at June 30, 2020 and December 31, 2019, respectively. Included in net deferred loan fees is $8,678 of net deferred loans fees from PPP loans.

During the first six months of 2020, Civista modified 813 loans totaling $431,283, primarily consisting of the deferral of principal and/or interest payments in accordance with customer deferral requests related to the COVID-19 pandemic. All of the loans

~~Loan balances~~ were performing at the time of the modification and comply with the provisions of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) to not be considered a troubled debt restructuring. Details with respect to actual loan modifications are as follows:

							Number of				Weighted Average
Type of Loan							Loans		Balance		Interest Rate
	June 30, 2019			December 31, 2018					(In thousands)
Commercial & Agriculture	$	186,423		$	177,101			229	$	47,686		4.56	%
Commercial Real Estate- Owner Occupied		218,183			210,121
Commercial Real Estate- Non-Owner Occupied		530,570			523,598
Commercial Real Estate:
Owner Occupied								193		91,831		4.82	%
Non-Owner Occupied								179		234,543		4.47	%
Residential Real Estate		466,581			457,850			170		29,012		4.67	%
Real Estate Construction		144,448			135,195			18		26,296		4.39	%
Farm Real Estate		36,116			38,513			9		1,783		4.94	%
Consumer and Other		16,449			19,563			15		132		8.01	%
Total loans		1,598,770			1,561,941
Allowance for loan losses		(13,786	)		(13,679	)
Net loans	$	1,584,984		$	1,548,262
Total								813	$	431,283		4.57	%

~~Included in total~~For additional information regarding loans ~~above~~modified under the CARES Act, please see the subsequent events note.

Certain loans within our commercial and commercial real estate portfolios are ~~net deferred loan fees~~expected to be disproportionately adversely affected by the COVID-19 pandemic. Due to mandatory lockdowns and travel restrictions, certain industries, such as hospitality, travel, food service and restaurants and bars, may suffer greater losses as a result of ~~$259~~the COVID-19 pandemic. The following table provides information regarding our potential COVID-19 risk concentrations for commercial and ~~$389~~commercial real estate loans by industry type at June 30, ~~2019 and December 31, 2018, respectively.~~2020.

	Commercial & Agriculture		Commercial Real Estate- Owner Occupied		Commercial Real Estate- Non-Owner Occupied		Total
Administration and support	$	365	$	952	$	—	$	1,317
Agriculture		153		811		—		964
Construction		3,895		298		1,370		5,563
Education		74		2,363		—		2,437
Entertainment and recreation		3,102		26,638		5,151		34,891
Health care		3,226		11,523		—		14,749
Hotels		1,802		979		52,309		55,090
Information, finance and insurance		175		—		—		175
Manufacturing		6,192		2,068		—		8,260
Other services		4,490		9,319		3,421		17,230
Professional and management		250		394		—		644
Real estate		590		15,631		168,606		184,827
Restaurants		17,818		12,998		3,042		33,858
Retail		3,838		4,637		644		9,119
Transportation and warehousing		216		542		—		758
Wholesalers		1,500		2,678		—		4,178
Total	$	47,686	$	91,831	$	234,543	$	374,060

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 ~~and lease~~ 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 ~~$13,786~~$20,420 adequate to cover loan losses inherent in the loan portfolio, at June 30, ~~2019.~~2020. The following tables present, by portfolio segment, the changes in the allowance for loan losses for the three and six months ended June 30, ~~2019~~2020 and ~~2018.~~2019.

For the three months ended June 30, 2020, the Company provided $3,486 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 from the COVID-19 pandemic include the loss of revenue being experience 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. In addition, 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 participated in the PPP loan program. In the event of a loss resulting from a default on a PPP loan, and a determination by the U.S. Small Business Administration (“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 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 factors related to the COVID-19 pandemic, offset by a decrease in loan balances and 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. 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. The result was 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, 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 June 30, 2020.

For the three months ended June 30, 2019, the allowance for Commercial Real Estate – Non-Owner Occupied loans decreased due to a decrease in general reserves required as a result of a decrease in loan balances and loss rates. This was represented as a decrease 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 an increase in loan balances. The allowance for Consumer and Other loans was reduced by a decrease in loss rates and recoveries on previously charged off amounts. The result was represented as a decrease in the provision. Management ~~feels~~determined that the unallocated amount iswas appropriate and within the relevant range for the allowance that iswas reflective of the risk in the portfolio at June 30, 2019.

For the three months ended June 30, 2018	Beginning balance		Charge-offs			Recoveries		Provision			Ending Balance
For the six months ended June 30, 2020													Beginning balance		Charge-offs			Recoveries		Provision			Ending Balance
Commercial & Agriculture	$	1,359	$	(123	)	$	85	$	309		$	1,630	$	2,219	$	(15	)	$	4	$	591		$	2,799
Commercial Real Estate:
Owner Occupied		2,030		—			121		10			2,161		2,541		(1	)		14		857			3,411
Non-Owner Occupied		5,670		(1	)		7		(541	)		5,135		6,584		—			41		2,544			9,169
Residential Real Estate		1,750		(40	)		35		(54	)		1,691		1,582		(97	)		79		870			2,434
Real Estate Construction		820		—			—		41			861		1,250		—			2		592			1,844
Farm Real Estate		411		—			2		(3	)		410		344		—			7		10			361
Consumer and Other		247		(62	)		29		86			300		247		(27	)		34		(7	)		247
Unallocated		527		—			—		152			679		—		—			—		155			155
Total	$	12,814	$	(226	)	$	279	$	—		$	12,867	$	14,767	$	(140	)	$	181	$	5,612		$	20,420

For the ~~three~~six months ended June 30, ~~2018,~~2020, the Company provided $5,612 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 experience 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. In addition, the allowance for Commercial & Agriculture loans increased due to an increase in general reserves required for this type as a result of ~~higher~~an increase in loan ~~balances.~~balances mainly from Civista’s participated in the PPP loan program, offset by a decrease in loss rates. . 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. 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.~~balances and a decrease in loss rates. The result was represented as an increase in the provision. The allowance for Commercial Real Estate – Non-Owner Occupied loans ~~was reduced by~~increased due to an increase in general reserves required as a result of an increase in loan balances and 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 ~~lower loss rates. The allowance for Residential Real Estate loans was reduced~~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 ~~for this type~~ as a result of ~~a decrease~~an increase in ~~loss rates,~~loan balances, represented by ~~a decrease~~an increase in the provision. The allowance for Farm Real Estate loans ~~was reduced by a decrease~~increased due to an increase in general reserves required ~~for this type~~ as a result of ~~lower outstanding~~an increase in loan balances. The result was represented as ~~a decrease~~an increase in the provision.

~~(Amounts~~ Management feels that the unallocated amount is appropriate and within the relevant range for the allowance that is reflective of the risk in ~~thousands, except share data)~~the portfolio at June 30, 2020.

For the six months ended June 30, 2019, 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, 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 general reserves required for this type as a result of lower outstanding loan balances. 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 ~~feels~~determined that the unallocated amount iswas appropriate and within the relevant range for the allowance that iswas reflective of the risk in the portfolio at June 30, 2019.

For the six months ended June 30, 2018, 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 allowance for Commercial Real Estate – Non-Owner Occupied loans was reduced by a decrease in general reserves required for this type as a result of lower loss rates. The allowance for Residential Real Estate loans was reduced by 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 Farm Real Estate loans was reduced by a decrease in general reserves required for this type as a result of lower outstanding loan balances. The result was represented as a decrease in the provision.

The following tables present, by portfolio segment, the allocation of the allowance for loan losses and related loan balances as of June 30, ~~2019~~2020 and December 31, ~~2018.~~2019.

June 30, 2019	Loans acquired with credit deterioration		Loans individually evaluated for impairment		Loans collectively evaluated for impairment		Total
June 30, 2020									Loans acquired with credit deterioration		Loans individually evaluated for impairment		Loans collectively evaluated for impairment		Total
Allowance for loan losses:
Commercial & Agriculture	$	—	$	—	$	1,828	$	1,828	$	—	$	—	$	2,799	$	2,799
Commercial Real Estate:
Owner Occupied		—		10		1,999		2,009		—		8		3,403		3,411
Non-Owner Occupied		—		—		5,867		5,867		—		—		9,169		9,169
Residential Real Estate		—		97		1,601		1,698		—		84		2,350		2,434
Real Estate Construction		—		—		1,135		1,135		—		—		1,844		1,844
Farm Real Estate		—		—		365		365		—		—		361		361
Consumer and Other		—		—		201		201		—		—		247		247
Unallocated		—		—		683		683		—		—		155		155
Total	$	—	$	107	$	13,679	$	13,786	$	—	$	92	$	20,328	$	20,420
Outstanding loan balances:
Commercial & Agriculture	$	29	$	367	$	186,027	$	186,423	$	—	$	—	$	442,444	$	442,444
Commercial Real Estate:
Owner Occupied		—		459		217,724		218,183		—		403		252,511		252,914
Non-Owner Occupied		—		379		530,191		530,570		—		368		646,424		646,792
Residential Real Estate		559		1,126		464,896		466,581		463		1,183		451,421		453,067
Real Estate Construction		—		—		144,448		144,448		—		—		178,318		178,318
Farm Real Estate		—		682		35,434		36,116		—		653		34,788		35,441
Consumer and Other		—		—		16,449		16,449		—		—		13,989		13,989
Total	$	588	$	3,013	$	1,595,169	$	1,598,770	$	463	$	2,607	$	2,019,895	$	2,022,965

December 31, 2018	Loans acquired with credit deterioration		Loans individually evaluated for impairment		Loans collectively evaluated for impairment		Total
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	$	—	$	—	$	1,747	$	1,747	$	—	$	—	$	2,219	$	2,219
Commercial Real Estate:
Owner Occupied		—		12		1,950		1,962		—		9		2,532		2,541
Non-Owner Occupied		—		—		5,803		5,803		—		—		6,584		6,584
Residential Real Estate		8		122		1,401		1,531		—		82		1,500		1,582
Real Estate Construction		—		—		1,046		1,046		—		—		1,250		1,250
Farm Real Estate		—		7		390		397		—		—		344		344
Consumer and Other		—		—		284		284		—		—		247		247
Unallocated		—		—		909		909		—		—		0		0
Total	$	8	$	141	$	13,530	$	13,679	$	—	$	91	$	14,676	$	14,767
Outstanding loan balances:
Commercial & Agriculture	$	41	$	367	$	176,693	$	177,101	$	—	$	367	$	202,743	$	203,110
Commercial Real Estate:
Owner Occupied		—		484		209,637		210,121		—		426		245,180		245,606
Non-Owner Occupied		—		31		523,567		523,598		—		374		591,848		592,222
Residential Real Estate		883		1,279		455,688		457,850		467		1,764		460,801		463,032
Real Estate Construction		—		—		135,195		135,195		—		—		155,825		155,825
Farm Real Estate		—		696		37,817		38,513		—		666		33,448		34,114
Consumer and Other		—		—		19,563		19,563		—		—		15,061		15,061
Total	$	924	$	2,857	$	1,558,160	$	1,561,941	$	467	$	3,597	$	1,704,906	$	1,708,970

The following tables present credit exposures by internally assigned risk grades as of June 30, ~~2019~~2020 and December 31, ~~2018.~~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.

June 30, 2019	Pass		Special Mention		Substandard		Doubtful		Ending Balance
June 30, 2020											Pass		Special Mention		Substandard		Doubtful		Ending Balance
Commercial & Agriculture	$	181,688	$	2,049	$	2,686	$	—	$	186,423	$	437,923	$	2,526	$	1,995	$	—	$	442,444
Commercial Real Estate:
Owner Occupied		208,914		3,916		5,353		—		218,183		241,144		8,867		2,903		—		252,914
Non-Owner Occupied		527,609		2,297		664		—		530,570		643,612		1,773		1,407		—		646,792
Residential Real Estate		71,137		387		6,087		—		77,611		78,028		486		5,731		—		84,245
Real Estate Construction		135,222		—		10		—		135,232		165,678		485		8		—		166,171
Farm Real Estate		32,092		872		3,152		—		36,116		32,302		550		2,589		—		35,441
Consumer and Other		1,037		—		8		—		1,045		1,024		—		21		—		1,045
Total	$	1,157,699	$	9,521	$	17,960	$	—	$	1,185,180	$	1,599,711	$	14,687	$	14,654	$	—	$	1,629,052

December 31, 2018	Pass		Special Mention		Substandard		Doubtful		Ending Balance
December 31, 2019											Pass		Special Mention		Substandard		Doubtful		Ending Balance
Commercial & Agriculture	$	173,783	$	1,509	$	1,809	$	—	$	177,101	$	199,649	$	2,236	$	1,225	$	—	$	203,110
Commercial Real Estate:
Owner Occupied		201,228		3,512		5,381		—		210,121		237,171		5,617		2,818		—		245,606
Non-Owner Occupied		520,487		2,023		1,088		—		523,598		588,633		2,155		1,434		—		592,222
Residential Real Estate		70,908		580		7,363		—		78,851		73,289		528		6,495		—		80,312
Real Estate Construction		124,769		13		41		—		124,823		145,251		—		9		—		145,260
Farm Real Estate		32,908		3,096		2,509		—		38,513		30,808		567		2,739		—		34,114
Consumer and Other		1,713		—		20		—		1,733		1,289		—		6		—		1,295
Total	$	1,125,796	$	10,733	$	18,211	$	—	$	1,154,740	$	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 June 30, ~~2019~~2020 and December 31, ~~2018~~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 orand 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.

June 30, 2019	Residential Real Estate		Real Estate Construction		Consumer and Other		Total
June 30, 2020									Residential Real Estate		Real Estate Construction		Consumer and Other		Total
Performing	$	388,970	$	9,216	$	15,404	$	413,590	$	368,822	$	12,147	$	12,942	$	393,911
Nonperforming		—		—		—		—		—		—		2		2
Total	$	388,970	$	9,216	$	15,404	$	413,590	$	368,822	$	12,147	$	12,944	$	393,913

December 31, 2018	Residential Real Estate		Real Estate Construction		Consumer and Other		Total
December 31, 2019									Residential Real Estate		Real Estate Construction		Consumer and Other		Total
Performing	$	378,999	$	10,372	$	17,830	$	407,201	$	382,720	$	10,565	$	13,766	$	407,051
Nonperforming		—		—		—		—		—		—		—		—
Total	$	378,999	$	10,372	$	17,830	$	407,201	$	382,720	$	10,565	$	13,766	$	407,051

The following tables include an aging analysis of the recorded investment of past due loans outstanding as of June 30, ~~2019~~2020 and December 31, ~~2018.~~2019.

June 30, 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
June 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	$	298	$	244	$	93	$	635	$	185,759	$	29	$	186,423	$	—	$	—	$	—	$	55	$	55	$	442,389	$	—	$	442,444	$	—
Commercial Real Estate:
Owner Occupied		402		249		529		1,180		217,003		—		218,183		—		323		—		585		908		252,006		—		252,914		—
Non-Owner Occupied		250		—		9		259		530,311		—		530,570		—		—		—		7		7		646,785		—		646,792		—
Residential Real Estate		551		733		1,191		2,475		463,547		559		466,581		—		177		418		1,049		1,644		450,960		463		453,067		—
Real Estate Construction		—		—		—		—		144,448		—		144,448		—		—		—		—		—		178,318		—		178,318		—
Farm Real Estate		—		145		11		156		35,960		—		36,116		—		—		—		4		4		35,437		—		35,441		—
Consumer and Other		57		20		2		79		16,370		—		16,449		—		70		23		12		105		13,884		—		13,989		2
Total	$	1,558	$	1,391	$	1,835	$	4,784	$	1,593,398	$	588	$	1,598,770	$	—	$	570	$	441	$	1,712	$	2,723	$	2,019,779	$	463	$	2,022,965	$	2

December 31, 2018	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
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	$	225	$	—	$	92	$	317	$	176,743	$	41	$	177,101	$	—	$	27	$	35	$	106	$	168	$	202,942	$	—	$	203,110	$	—
Commercial Real Estate:
Owner Occupied		547		413		564		1,524		208,597		—		210,121		—		453		63		663		1,179		244,427		—		245,606		—
Non-Owner Occupied		288		290		372		950		522,648		—		523,598		—		—		—		8		8		592,214		—		592,222		—
Residential Real Estate		7,118		677		806		8,601		448,366		883		457,850		—		2,399		198		1,775		4,372		458,193		467		463,032		—
Real Estate Construction		—		12		27		39		135,156		—		135,195		—		—		—		—		—		155,825		—		155,825		—
Farm Real Estate		33		—		158		191		38,322		—		38,513		—		—		—		7		7		34,107		—		34,114		—
Consumer and Other		117		57		9		183		19,380		—		19,563		—		129		46		—		175		14,886		—		15,061		—
Total	$	8,328	$	1,449	$	2,028	$	11,805	$	1,549,212	$	924	$	1,561,941	$	—	$	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 June 30, ~~2019~~2020 and December 31, ~~2018.~~2019.

	June 30, 2019		December 31, 2018		June 30, 2020		December 31, 2019
Commercial & Agriculture	$	205	$	270	$	83	$	173
Commercial Real Estate:
Owner Occupied		1,112		942		832		938
Non-Owner Occupied		9		374		7		8
Residential Real Estate		3,482		3,886		3,753		4,183
Real Estate Construction		10		41		8		9
Farm Real Estate		308		338		259		284
Consumer and Other		5		18		19		4
Total	$	5,131	$	5,869	$	4,961	$	5,599

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 done 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 June 30, ~~2019,~~2020, TDRs accounted for ~~$107~~$92 of the allowance for loan losses. As of December 31, ~~2018,~~2019, TDRs accounted for ~~$143~~$91 of the allowance for loan losses.

Loan modifications that are considered TDRs completed during the six-months ended June 30, 2019 and June 30, 2018 were as follows. There were no loans modified in a TDR during the three-months ended June 30, 2019 and June 30, 2018:

There were 0 loans modified as TDRs during the three-month periods ended June 30, 2020 and 2019 and for the six-month period ended June 30, 2020.Loan modifications that are considered TDRs completed during the six-month period ended June 30, 2019 were as follows:

	For the Six-Month Period Ended						For the Six-Month Period Ended
	June 30, 2018						June 30, 2019
	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		3	$	591	$	591		—	$	—	$	—
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		3	$	591	$	591		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 six-month periods ended June 30, ~~2019~~2020 and June 30, ~~2018,~~2019, there were no0 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 June 30, ~~2019~~2020 and December 31, ~~2018.~~2019.

	June 30, 2019						December 31, 2018						June 30, 2020						December 31, 2019
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance recorded:
Commercial & Agriculture	$	367	$	367			$	367	$	367			$	—	$	—			$	367	$	367
Commercial Real Estate:
Owner Occupied		179		179				193		193				156		156				168		168
Non-Owner Occupied		379		379				31		34				368		368				374		374
Residential Real Estate		876		948				1,017		1,089				1,002		1,074				1,571		1,643
Farm Real Estate		682		682				256		256				653		653				666		666
Total		2,483		2,555				1,864		1,939				2,179		2,251				3,146		3,218
With an allowance recorded:
Commercial Real Estate:
Owner Occupied		280		280	$	10		291		291	$	12		247		247	$	8		258		258	$	9
Residential Real Estate		250		254		97		262		265		122		181		186		84		193		197		82
Farm Real Estate		—		—		—		440		440		7
Total		530		534		107		993		996		141		428		433		92		451		455		91
Total:
Commercial & Agriculture		367		367		—		367		367		—		—		—		—		367		367		—
Commercial Real Estate:
Owner Occupied		459		459		10		484		484		12		403		403		8		426		426		9
Non-Owner Occupied		379		379		—		31		34		—		368		368		—		374		374		—
Residential Real Estate		1,126		1,202		97		1,279		1,354		122		1,183		1,260		84		1,764		1,840		82
Farm Real Estate		682		682		—		696		696		7		653		653		—		666		666		—
Total	$	3,013	$	3,089	$	107	$	2,857	$	2,935	$	141	$	2,607	$	2,684	$	92	$	3,597	$	3,673	$	91

The following table includes the average recorded investment and interest income recognized for impaired financing receivables for the ~~three-and six-month~~three-month periods ended June 30, ~~2019~~2020 and ~~2018.~~2019.

	June 30, 2019				June 30, 2018				June 30, 2020				June 30, 2019
For the three months ended	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Commercial & Agriculture	$	367	$	6	$	993	$	6	$	—	$	—	$	367	$	6
Commercial Real Estate—Owner Occupied		465		9		524		8		409		7		465		9
Commercial Real Estate—Non-Owner Occupied		381		5		41		2		369		5		381		5
Residential Real Estate		1,137		15		1,321		17		1,462		11		1,137		15
Farm Real Estate		687		8		785		8		659		6		687		8
Total	$	3,037	$	43	$	3,664	$	41	$	2,899	$	29	$	3,037	$	43

	June 30, 2019				June 30, 2018				June 30, 2020				June 30, 2019
For the six months ended	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Commercial & Agriculture	$	367	$	12	$	808	$	13	$	122	$	4	$	367	$	12
Commercial Real Estate—Owner Occupied		472		17		686		17		415		14		472		17
Commercial Real Estate—Non-Owner Occupied		264		9		42		3		371		10		264		9
Residential Real Estate		1,184		31		1,334		34		1,563		24		1,184		31
Farm Real Estate		690		15		726		15		662		13		690		15
Total	$	2,977	$	84	$	3,596	$	82	$	3,133	$	65	$	2,977	$	84

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

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

	For the Three-Month Period Ended June 30, 2019			For the Three-Month Period Ended June 30, 2018			For the Three-Month Period Ended June 30, 2020			For the Three-Month Period Ended June 30, 2019
	(In Thousands)			(In Thousands)			(In Thousands)			(In Thousands)
Balance at beginning of period	$	326		$	8		$	206		$	326
Acquisition of PCI loans		—			—			—			—
Accretion		(67	)		(2	)		(7	)		(67	)
Transfer from non-accretable to accretable								6			—
Balance at end of period	$	259		$	6		$	205		$	259

	For the Six-Month Period Ended June 30, 2019			For the Six-Month Period Ended June 30, 2018			For the Six-Month Period Ended June 30, 2020			For the Six-Month Period Ended June 30, 2019
	(In Thousands)			(In Thousands)			(In Thousands)			(In Thousands)
Balance at beginning of period	$	336		$	15		$	255		$	336
Acquisition of PCI loans		—			—			—			—
Accretion		(77	)		(9	)		(169	)		(77	)
Transfer fron non-accretable to accretable								119			—
Balance at end of period	$	259		$	6		$	205		$	259

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

	At June 30, 2019		At December 31, 2018		At June 30, 2020		At December 31, 2019
	Acquired Loans with Specific Evidence of Deterioration of Credit Quality (ASC 310-30)		Acquired Loans with Specific Evidence of Deterioration of Credit Quality (ASC 310-30)		Acquired Loans with Specific Evidence of Deterioration of Credit Quality (ASC 310-30)		Acquired Loans with Specific Evidence of Deterioration of Credit Quality (ASC 310-30)
	(In Thousands)				(In Thousands)
Outstanding balance	$	1,357	$	1,805	$	976	$	1,149
Carrying amount		588		924		463		467

There ~~has been $0 and $8 in~~was 0 allowance for loan losses recorded for acquired loans with or without specific evidence of deterioration in credit quality as of June 30, ~~2019 and~~2020 or December 31, ~~2018,~~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 June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively, there were 0 foreclosed assets included in other ~~assets totaled $0.~~assets. As of June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, the Company had initiated formal foreclosure procedures on ~~$531~~$867 and ~~$311,~~$1,022, respectively, of consumer residential mortgages.

The following table presents the changes in each component of accumulated other comprehensive income (loss), net of tax.

For the Three-Month Period Ended

For the Three-Month Period Ended

June 30, 2019(a)

June 30, 2018(a)

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

$
7,200

$
(3,683
)

$
3,517

$
368

$
(4,196
)

$
(3,828
)
Other comprehensive income (loss) before
   reclassifications

4,984

—

4,984

(536
)

—

(536
)
Amounts reclassified from accumulated other
   comprehensive loss

(8
)

116

108

(5
)

113

108

Net current-period other comprehensive income
   (loss)

4,976

116

5,092

(541
)

113

(428
)
Ending balance

$
12,176

$
(3,567
)

$
8,609

$
(173
)

$
(4,083
)

$
(4,256
)

	For the Three-Month Period Ended							For the Three-Month Period Ended
	June 30, 2020(a)							June 30, 2019(a)
	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	$	15,840	$	(5,952	)	$	9,888	$	7,200		$	(3,683	)	$	3,517
Other comprehensive income before reclassifications		3,709		—			3,709		4,984			—			4,984
Amounts reclassified from accumulated other comprehensive income (loss)		—		57			57		(8	)		116			108
Net current-period other comprehensive income		3,709		57			3,766		4,976			116			5,092
Ending balance	$	19,549	$	(5,895	)	$	13,654	$	12,176		$	(3,567	)	$	8,609

The following table presents the amounts reclassified out of each component of accumulated other comprehensive income (loss).

	Amount Reclassified from Accumulated Other Comprehensive Income (Loss) (a)							Amount Reclassified from Accumulated Other Comprehensive Income (Loss) (a)
Details about Accumulated Other Comprehensive Loss Components	For the Three months ended June 30, 2019			For the Three months ended June 30, 2018			Affected Line Item in the Statement Where Net Income is Presented
Details about Accumulated Other Comprehensive Income (Loss) Components								For the Three months ended June 30, 2020			For the Three months ended June 30, 2019			Affected Line Item in the Statement Where Net Income is Presented
Unrealized gains on available-for-sale securities	$	10		$	6		Net gain on securities available for sale	$	—		$	10		Net gain (loss) on sale of securities
Tax effect		(2	)		(1	)	Income tax expense		—			(2	)	Income tax expense
		8			5		Net of tax		—			8
Amortization of defined benefit pension items
Actuarial gains/(losses) (b)		(147	)		(143	)	Other operating expenses		(72	)		(147	)	Other operating expenses
Tax effect		31			30		Income tax expense		15			31		Income tax expense
		(116	)		(113	)	Net of tax		(57	)		(116	)
Total reclassifications for the period	$	(108	)	$	(108	)	Net of tax	$	(57	)	$	(108	)

The following table presents the changes in each component of accumulated other comprehensive income (loss), net of tax.

For the Six-Month Period Ended

For the Six-Month Period Ended

June 30, 2019(a)

June 30, 2018(a)

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

$
2,347

$
(3,799
)

$
(1,452
)

$
3,185

$
(4,309
)

$
(1,124
)
Other comprehensive income (loss) before
   reclassifications

9,840

—

9,840

(3,075
)

—

(3,075
)
Amounts reclassified from accumulated other
   comprehensive loss

(11
)

232

221

(5
)

226

221

Net current-period other comprehensive income
   (loss)

9,829

232

10,061

(3,080
)

226

(2,854
)
Reclassification of equity securities from
   accumulated other comprehensive loss

—

—

—

(278
)

—

(278
)
Ending balance

$
12,176

$
(3,567
)

$
8,609

$
(173
)

$
(4,083
)

$
(4,256
)

	For the Six-Month Period Ended							For the Six-Month Period Ended
	June 30, 2020(a)							June 30, 2019(a)
	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	$	12,883	$	(6,009	)	$	6,874	$	2,347		$	(3,799	)	$	(1,452	)
Other comprehensive income before reclassifications		6,666		—			6,666		9,840			—			9,840
Amounts reclassified from accumulated other comprehensive income (loss)		—		114			114		(11	)		232			221
Net current-period other comprehensive income		6,666		114			6,780		9,829			232			10,061
Ending balance	$	19,549	$	(5,895	)	$	13,654	$	12,176		$	(3,567	)	$	8,609

The following table presents the amounts reclassified out of each component of accumulated other comprehensive income (loss).

	Amount Reclassified from Accumulated Other Comprehensive Income (Loss) (a)							Amount Reclassified from Accumulated Other Comprehensive Income (Loss) (a)
Details about Accumulated Other Comprehensive Loss Components	For the Six months ended June 30, 2019			For the Six months ended June 30, 2018			Affected Line Item in the Statement Where Net Income is Presented
Details about Accumulated Other Comprehensive Income (Loss) Components								For the Six months ended June 30, 2020			For the Six months ended June 30, 2019			Affected Line Item in the Statement Where Net Income is Presented
Unrealized gains on available-for-sale securities	$	14		$	6		Net gain on securities available for sale	$	—		$	14		Net gain (loss) on sale of securities
Tax effect		(3	)		(1	)	Income tax expense		—			(3	)	Income tax expense
		11			5		Net of tax		—			11
Amortization of defined benefit pension items
Actuarial gains/(losses) (b)		(294	)		(286	)	Other operating expenses		(145	)		(294	)	Other operating expenses
Tax effect		62			60		Income tax expense		31			62		Income tax expense
		(232	)		(226	)	Net of tax		(114	)		(232	)
Total reclassifications for the period	$	(221	)	$	(221	)	Net of tax	$	(114	)	$	(221	)

There has been no change in the carrying amount of goodwill of $76,851 for the periods ended June 30, 2019 and December 31, 2018. Goodwill is not amortized and, instead, management performs an evaluation of goodwill for impairment annually, 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 2018 and concluded that the Company’s goodwill was not impaired at December 31, 2018.

There was no change in the carrying amount of goodwill of $76,851 for the periods ended June 30, 2020 and December 31, 2019.

Acquired intangible assets, other than goodwill, as of June 30, ~~2019~~2020 and December 31, ~~2018~~2019 were as follows:

	2019						2018						2020						2019
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Amortized intangible assets(1):
MSRs	$	2,183	$	541	$	1,642	$	2,110	$	446	$	1,664
Core deposit intangibles		14,792		7,579		7,213		14,792		7,104		7,688	$	14,792	$	8,508	$	6,284	$	14,792	$	8,049	$	6,743
Total amortized intangible assets	$	16,975	$	8,120	$	8,855	$	16,902	$	7,550	$	9,352	$	14,792	$	8,508	$	6,284	$	14,792	$	8,049	$	6,743

Aggregate core deposit intangible amortization expense was $228, $235, ~~$26,~~$459 and $475 ~~and $59~~ for the three and ~~six-months~~six months ended June 30, ~~2019~~2020 and ~~2018,~~2019, respectively.

~~Aggregate~~Activity for mortgage servicing rights ~~amortization was $56, $27, $95~~(MSRs) and ~~$43 for~~ the ~~three and six-months ended~~related valuation allowance as of June 30, 2020 and December 31, 2019 ~~and 2018, respectively.~~were as follows:

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

	MSRs		Core deposit intangibles		Total		MSRs		Core deposit intangibles		Total
2019	$	44	$	470	$	514
2020		88		913		1,001	$	52	$	455	$	507
2021		87		891		978		104		891		995
2022		88		868		956		104		868		972
2023		86		841		927		103		841		944
2024								102		804		906
Thereafter		1,249		3,230		4,479		1,252		2,425		3,677
	$	1,642	$	7,213	$	8,855	$	1,717	$	6,284	$	8,001

Short-term borrowings, which consist of federal funds purchased and other short-term borrowings, are included in Short-term Federal Home Loan Bank advances on the Consolidated Balance Sheets and are summarized as follows:

	At June 30, 2019					At December 31, 2018						At June 30, 2020						At June 30, 2019
	Federal Funds Purchased		Short-term Borrowings			Federal Funds Purchased			Short-term Borrowings			Federal Funds Purchased			Short-term Borrowings			Federal Funds Purchased		Short-term Borrowings
Outstanding balance	$	—	$	121,300		$	—		$	188,600		$	—		$	—		$	—	$	121,300
Interest rate on balance													—			—			—		2.46	%
Maximum indebtedness		—		192,700			20,000			225,300			37,000			102,700			—		192,700
Average balance		—		102,108			116			113,520			305			16,391			—		102,108
Average rate paid		—		2.51	%		2.58	%		2.07	%		1.98	%		1.64	%		—		2.51	%
Interest rate on balance		—		2.46	%		—			2.45	%

Average balance during the period represents daily averages. Average rate paid represents 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 ~~June 30, 2019 and~~ December 31, ~~2018.~~2019.

Other borrowings consist of the Paycheck Protection Program Lending Facility (“PPPLF”). The PPPLF is intended to facilitate lending, by eligible borrowers, to small businesses under the PPP of the CARES Act. Under the PPPLF, the Federal Reserve Banks will lend to eligible borrowers on a non-recourse basis, taking PPP loans as collateral. During the second quarter of 2020, the Company borrowed $183,695 under the PPPLF. The maturity date of the PPPLF borrowing will equal the maturity date of the PPP loans pledged to secure the borrowing. The rate paid on the borrowing is at 0.35%.

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 June 30, 2020 and December 31, 2019. All of the repurchase agreements are overnight agreements.

The following table presents detail regarding the securities pledged as collateral under repurchase agreements as of June 30, 2019 and December 31, 2018. All of the repurchase agreements are overnight agreements.

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

	Three Months Ended				Six Months Ended				Three Months Ended				Six Months Ended
	June 30,				June 30,				June 30,				June 30,
	2019		2018		2019		2018		2020		2019		2020		2019
Basic
Net income	$	8,661	$	3,014	$	18,330	$	10,003	$	6,504	$	8,661	$	14,337	$	18,330
Preferred stock dividends		164		299		328		602		—		164		—		328
Net income available to common shareholders—basic	$	8,497	$	2,715	$	18,002	$	9,401	$	6,504	$	8,497	$	14,337	$	18,002
Weighted average common shares outstanding—basic		15,628,537		10,470,839		15,618,154		10,342,763		16,044,125		15,628,537		16,280,935		15,618,154
Basic earnings per common share	$	0.54	$	0.26	$	1.15	$	0.91	$	0.41	$	0.54	$	0.88	$	1.15
Diluted
Net income available to common shareholders—basic	$	8,497	$	2,715	$	18,002	$	9,401	$	6,504	$	8,497	$	14,337	$	18,002
Preferred stock dividends		164		299		328		602		—		164		0		328
Net income available to common shareholders—diluted	$	8,661	$	3,014	$	18,330	$	10,003	$	6,504	$	8,661	$	14,337	$	18,330
Weighted average common shares outstanding for basic earnings per common share		15,628,537		10,470,839		15,618,154		10,342,763		16,044,125		15,628,537		16,280,935		15,618,154
Add: Dilutive effects of convertible preferred shares		1,294,175		2,144,497		1,294,175		2,263,652		—		1,294,175		—		1,294,175
Average shares and dilutive potential common shares outstanding—diluted		16,922,712		12,615,336		16,912,329		12,606,415		16,044,125		16,922,712		16,280,935		16,912,329
Diluted earnings per common share	$	0.51	$	0.24	$	1.08	$	0.79	$	0.41	$	0.51	$	0.88	$	1.08

For the ~~three-month periods ended June 30, 2019~~three- and ~~June 30, 2018, there were 1,294,175 and 2,144,497, respectively, of average dilutive shares related to the Company’s convertible preferred shares. For the~~ six-month periods ended June 30, 2019, ~~and June 30, 2018,~~ there were 1,294,175 ~~and 2,263,652, respectively,~~ of average dilutive shares related to the Company’s convertible preferred shares. 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. Effective December 20, 2019, the Company redeemed all convertible preferred shares and corresponding depositary shares that remained outstanding.

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 June 30, ~~2019~~2020 and December 31, ~~2018:~~2019:

	Contract Amount								Contract Amount
	June 30, 2019				December 31, 2018				June 30, 2020				December 31, 2019
	Fixed Rate		Variable Rate		Fixed Rate		Variable Rate		Fixed Rate		Variable Rate		Fixed Rate		Variable Rate
Commitment to extend credit:
Lines of credit and construction loans	$	13,010	$	380,344	$	14,984	$	359,220	$	10,291	$	431,564	$	15,155	$	396,516
Overdraft protection		4		46,993		3		37,201		6		41,231		5		37,286
Letters of credit		624		926		624		850		600		886		624		776
	$	13,638	$	428,263	$	15,611	$	397,271	$	10,897	$	473,681	$	15,784	$	434,578

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 ~~4.83%~~3.50% to ~~8.50%~~8.00% at June 30, ~~2019~~2020 and from ~~2.88%~~4.50% to 8.50% at December 31, ~~2018, respectively.~~2019. 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 reserve balance maintained in accordance with such requirements was ~~$11,261~~$0 on June 30, ~~2019~~2020 and ~~$8,891~~$7,127 on December 31, ~~2018.~~2019. Such amounts are included within cash and due from financial institutions on the Consolidated Balance Sheet.

The Company sponsors a pension plan which is a noncontributory defined benefit retirement plan. Annual payments, subject to the maximum amount deductible for federal income tax purposes, are made to a pension trust fund. In 2006, the Company amended the pension plan to provide that no employee could be added as a participant to the pension plan after December 31, 2006. In 2014, the Company amended the pension plan again to provide that no0 additional benefits would accrue beyond April 30, 2014.

	Three months ended						Six Months Ended						Three months ended						Six Months Ended
	June 30,						June 30,						June 30,						June 30,
	2019			2018			2019			2018			2020			2019			2020			2019
Service cost	$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—
Interest cost		128			125			256			250			121			128			242			256
Expected return on plan assets		(256	)		(273	)		(512	)		(546	)		(187	)		(256	)		(374	)		(512	)
Other components		147			143			294			286			72			147			145			294
Net periodic pension benefit (cost)	$	19		$	(5	)	$	38		$	(10	)
Net periodic pension cost													$	6		$	19		$	13		$	38

The Company does ~~not~~0t expect to make any contribution to its pension plan in ~~2019.~~2020. The Company made no0 contribution to its pension plan in ~~2018.~~2019.

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 ~~240,001~~198,756 shares available for future grants under this plan at June 30, ~~2019.~~2020.

NoNaN options ~~had been~~were granted under the 2014 Incentive Plan ~~as of~~during the periods ended June 30, ~~2019~~2020 and ~~2018.~~

Each year, the Board of Directors has awarded restricted common shares to senior officers of the Company. The restricted shares vest ratably over a three-year period following the grant date. The product of the number of restricted shares granted and the grant date market price of the Company’s common shares determines the fair value of restricted shares awarded under the Company’s 2014 Incentive Plan. Management recognizes compensation expense for the fair value of restricted shares on a straight-line basis over the requisite service period for the entire award.

On May 17, 2018, directors of the Company’s banking subsidiary, Civista, were paid a retainer in the form of non-restricted common shares of the Company. The aggregate of 6,204 common shares were issued to Civista directors as payment of their retainer for their service on the Civista Board of Directors covering the period up to the 2019 Annual Meeting. This issuance was expensed in its entirety when the shares were issued in the amount of $144.

On September 25, 2018, newly appointed directors of the Company’s banking subsidiary, Civista, were paid a retainer in the form of non-restricted common shares of the Company. The aggregate of 867 common shares were issued for their service on the Civista Board of Directors covering the period up to the 2019 Annual Meeting. This issuance was expensed in its entirety when the shares were issued in the amount of $21.

~~Finally, on~~ May 21, 2019, directors of the Company’s banking subsidiary, Civista, were paid a retainer in the form of non-restricted common shares of the Company. The aggregate of 8,946 common shares were issued to Civista directors as payment of their retainer for their service on the Civista Board of Directors covering the period up to the 2020 Annual Meeting. This issuance was expensed in its entirety when the shares were issued in the amount of $196.

On May 21, 2020, directors of the Company’s banking subsidiary, Civista, were paid a retainer in the form of non-restricted common shares of the Company. The aggregate of 14,266 common shares were issued to Civista directors as payment of their retainer for their service on the Civista Board of Directors covering the period up to the 2021 Annual Meeting. This issuance was expensed in its entirety when the shares were issued in the amount of $196.

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

The following is a summary of the Company’s outstanding restricted shares and changes therein for the ~~three~~three- and six-month periods ended June 30, ~~2019:~~2020:

	Three months ended				Six Months Ended					Three months ended				Six Months Ended
	June 30, 2019				June 30, 2019					June 30, 2020				June 30, 2020
	Number of Restricted Shares		Weighted Average Grant Date Fair Value		Number of Restricted Shares			Weighted Average Grant Date Fair Value		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		44,027	$	20.48		39,970		$	19.10		54,274	$	20.90		44,027		$	20.48
Granted		—		—		21,106			20.65		—		—		26,979			21.26
Vested		—		—		(16,557	)		17.31		—		—		(16,732	)		20.36
Forfeited		—		—		(492	)		22.41		—		—		—			—
Nonvested at end of period		44,027	$	20.48		44,027		$	20.48		54,274	$	20.90		54,274		$	20.90

The following is a summary of the status of the Company’s outstanding restricted shares as of June 30, ~~2019:~~2020:

At June 30, 2019
At June 30, 2020							At June 30, 2020
Date of Award	Shares		Remaining Expense		Remaining Vesting Period (Years)			Shares		Remaining Expense		Remaining Vesting Period (Years)
January 15, 2016		4,108	$	31		1.50			2,056	$	10		0.50
March 20, 2017		3,725		25		0.50
March 20, 2017		3,581		61		2.50			2,388		37		1.50
April 10, 2018		5,282		73		1.50			2,643		23		0.50
April 10, 2018		6,225		108		3.50			4,670		77		2.50
March 14, 2019		10,188		175		2.50			6,796		95		1.50
March 14, 2019		10,918		182		4.50			8,742		139		3.50
March 13, 2020									12,982		242		2.50
March 13, 2020									13,997		226		4.50
		44,027	$	655		2.75			54,274	$	849		2.80

During the six months ended June 30, ~~2019,~~2020, the Company recorded ~~$178~~$223 of share-based compensation expense and $196 of director retainer fees for shares granted under the 2014 Incentive Plan. At June 30, ~~2019,~~2020, the total compensation cost related to ~~unvested awards not yet recognized is $655, which is expected to be recognized over the weighted average remaining life of the grants of 2.75 years.~~

unvested awards not yet recognized is $849, which is expected to be recognized over the weighted average remaining life of the grants of 2.80 years.

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 has two types of~~Company’s equity securities ~~one is~~are not actively traded in an open ~~market, while the other is listed on an exchange and is less frequently traded.~~market. The fair value of ~~the~~these equity security available for sale not actively traded in an open market is determined by using market data inputs for similar securities that are observable (Level 2 inputs). ~~The fair value of the other equity security is determined from third-party pricing services or a computerized pricing model and classified Level 2.~~

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

Impaired loans: The Company has measured impairment on impaired loans ~~generally~~ based on the discounted cash flows of the loan or the fair value of the loan’s collateral. Fair value is generally determined based upon independent third-party appraisals of the properties. In some cases, management may adjust the appraised value due to the ageof the appraisal, changes in market conditions, or observable deterioration of the property since the appraisal was completed. Additionally, management makes estimates about expected costs to sell the property which are also included in the net realizable value. If the fair value of the collateral dependent loan is less than the carrying amount of the loan, a specific reserve for the loan is made in the allowance for loan losses or a charge-off is taken to reduce the loan to the fair value of the collateral (less estimated selling costs) and the loan is included as a Level 3 measurement. If the fair value of the collateral exceeds the carrying amount of the loan, then the loan is not included in the table below as it is not currently being carried at its fair value. ~~The fair values in the table below exclude estimated selling costs of $13 as of June 30, 2019.~~

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

	Fair Value Measurements at June 30, 2019 Using:						Fair Value Measurements at June 30, 2020 Using:
Assets:	(Level 1)		(Level 2)		(Level 3)		(Level 1)		(Level 2)		(Level 3)
Assets measured at fair value on a recurring basis:
Securities available for sale
U.S. Treasury securities and obligations of U.S. Government agencies	$	—	$	21,978	$	—	$	—	$	19,500	$	—
Obligations of states and political subdivisions		—		191,735		—		—		224,319		—
Mortgage-backed securities in government sponsored entities		—		145,760		—		—		124,564		—
Total securities available for sale		—		359,473		—		—		368,383		—
Equity securities		—		1,039		—		—		798		—
Swap asset		—		8,598		—		—		25,719		—
Liabilities measured at fair value on a recurring basis:
Swap liability		—		8,598		—	$	—	$	25,719	$	—
Assets measured at fair value on a nonrecurring basis:
Impaired loans	$	—	$	—	$	29

~~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 June 30, 2019.~~

	Quantitative Information about Level 3 Fair Value Measurements						Fair Value Measurements at December 31, 2019 Using:
June 30, 2019	Fair Value		Valuation Technique	Unobservable Input	Range	Weighted Average
Assets:							(Level 1)		(Level 2)		(Level 3)
Assets measured at fair value on a recurring basis:
Securities available for sale
U.S. Treasury securities and obligations of U.S. Government agencies							$	—	$	19,601	$	—
Obligations of states and political subdivisions								—		206,034		—
Mortgage-backed securities in government sponsored entities								—		132,864		—
Total securities available for sale								—		358,499		—
Equity securities								—		1,191		—
Swap asset								—		8,918		—
Liabilities measured at fair value on a recurring basis:
Swap liability								—		8,918		—
Assets measured at fair value on a nonrecurring basis:
Impaired loans	$	29	Appraisal of collateral	Appraisal adjustments	10% - 30%	26%	$	—	$	—	$	1

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, ~~2018.~~2019.

Quantitative Information about Level 3 Fair Value Measurements

December 31, 2018

Fair Value

Valuation Technique

Unobservable Input

Range

Weighted Average

December 31, 2019

Fair Value

Valuation Technique

Unobservable Input

Range

Weighted Average

Impaired loans

1,803

Appraisal of collateral

Appraisal adjustments

0% - 30%

26%

Appraisal of collateral

Appraisal adjustments

30%

Liquidation expense

0% - 10%

Holding period

22 months

Holding period

0 - 30 months

21 months

The carrying amount and fair values of financial instruments not measured at fair value on a recurring or nonrecurring basis at June 30, ~~2019~~2020 are as follows:

June 30, 2019

Carrying
Amount

Total
Fair Value

Level 1

Level 2

Level 3

Financial Assets:

Cash and due from financial institutions

$
49,839

$
49,839

$
49,839

$
—

$
—

Other securities

20,280

20,280

20,280

—

—

Loans, held for sale

2,563

2,563

2,563

—

—

Loans, net of allowance

1,584,984

1,585,020

—

—

1,585,020

Bank owned life insurance

44,491

44,491

44,491

—

—

Accrued interest receivable

7,350

7,350

7,350

—

—

Financial Liabilities:

Nonmaturing deposits

1,364,451

1,364,451

1,364,451

—

—

Time deposits

268,269

269,293

—

—

269,293

Short-term FHLB advances

121,300

121,300

121,300

—

—

Long-term FHLB advances

55,000

57,345

—

—

57,345

Securities sold under agreement to repurchase

15,554

15,554

15,554

—

—

Subordinated debentures

29,427

35,798

—

—

35,798

Accrued interest payable

262

262

262

—

—

~~The carrying amount and fair values of financial instruments not measured at fair value on a recurring or nonrecurring basis at December 31, 2018 are as follows:~~

December 31, 2018	Carrying Amount		Total Fair Value		Level 1		Level 2		Level 3
June 30, 2020											Carrying Amount		Total Fair Value		Level 1		Level 2		Level 3
Financial Assets:
Cash and due from financial institutions	$	42,779	$	42,779	$	42,779	$	—	$	—	$	196,520	$	196,520	$	196,520	$	—	$	—
Other securities		21,021		21,021		21,021		—		—		20,537		20,537		20,537		—		—
Loans, held for sale		1,391		1,391		1,391		—		—		18,523		18,894		18,894		—		—
Loans, net of allowance		1,548,262		1,517,278		—		—		1,517,278		2,002,545		2,031,416		—		—		2,031,416
Bank owned life insurance		43,037		43,037		43,037		—		—		45,489		45,489		45,489		—		—
Accrued interest receivable		6,723		6,723		6,723		—		—		11,047		11,047		11,047		—		—
Financial Liabilities:
Nonmaturing deposits		1,312,207		1,312,207		1,312,207		—		—		1,776,351		1,776,351		1,776,351		—		—
Time deposits		267,686		267,943		—		—		267,943		292,910		294,736		—		—		294,736
Short-term FHLB advances		188,600		188,600		188,600		—		—
Long-term FHLB advances		5,000		4,983		—		—		4,983		125,000		129,753		—		—		129,753
Other borrowings												183,695		183,682		—		—		183,682
Securities sold under agreement to repurchase		22,199		22,199		22,199		—		—		23,608		23,608		23,608		—		—
Subordinated debentures		29,427		34,620		—		—		34,620		29,427		32,048		—		—		32,048
Accrued interest payable		230		230		230		—		—		240		240		240		—		—

The carrying amount and fair values of financial instruments not measured at fair value on a recurring or nonrecurring basis at December 31, 2019 are as follows:

December 31, 2019	Carrying Amount		Total Fair Value		Level 1		Level 2		Level 3
Financial Assets:
Cash and due from financial institutions	$	48,535	$	48,535	$	48,535	$	—	$	—
Other securities		20,280		20,280		20,280		—		—
Loans, held for sale		2,285		2,331		2,331		—		—
Loans, net of allowance		1,694,203		1,713,863		—		—		1,713,863
Bank owned life insurance		44,999		44,999		44,999		—		—
Accrued interest receivable		7,093		7,093		7,093		—		—
Financial Liabilities:
Nonmaturing deposits		1,402,924		1,402,924		1,402,924		—		—
Time deposits		275,840		276,616		—		—		276,616
Short-term FHLB advances		101,500		101,500		101,500		—		—
Long-term FHLB advances		125,000		123,893		—		—		123,893
Securities sold under agreement to repurchase		18,674		18,674		18,674		—		—
Subordinated debentures		29,427		34,452		—		—		34,452
Accrued interest payable		277		277		277		—		—

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

The following table summarizes the Company’s interest rate swap positions ~~and the impact of a 1 basis point change in interest rates~~ as of June 30, ~~2019.~~2020.

	Notional Amount			Weighted Average Rate Received/(Paid)			Impact of a 1 basis point change in interest rates			Repricing Frequency	Classification on the Consolidated Balance Sheet	Notional Amount			Fair Value			Weighted Average Rate Received/(Paid)
Derivative Assets	$	130,429			5.18	%	$	80		Monthly	Other Assets	$	219,075		$	25,719			4.61	%
Derivative Liabilities		(130,429	)		-5.18	%		(80	)	Monthly	Accrued expenses and other liabilities		(219,075	)		(25,719	)		-4.61	%
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, ~~2018.~~2019.

	Notional Amount			Weighted Average Rate Received/(Paid)			Impact of a 1 basis point change in interest rates			Repricing Frequency	Classification on the Consolidated Balance Sheet	Notional Amount			Fair Value			Weighted Average Rate Received/(Paid)
Derivative Assets	$	120,131			5.19	%	$	72		Monthly	Other Assets	$	151,648		$	8,918			5.04	%
Derivative Liabilities		(120,131	)		-5.19	%		(72	)	Monthly	Accrued expenses and other liabilities		(151,648	)		(8,918	)		-5.04	%
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. The Company classifies changes in fair value of derivatives with “Other” in the Consolidated Statements of Operation.

At June 30, 2020, the Company had cash and securities at fair value pledged for collateral on its interest rate swaps with third party financial institutions of $11,110 and $16,862, respectively. At December 31, 2019, securities with a fair value of $14,032 were pledged as collateral.

The Company invests in certain qualified affordable housing projects. At June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, the balance of the investment for qualified affordable housing projects was ~~$4,802~~$5,353 and ~~$4,276,~~$5,154, respectively. These balances are reflected in the other assets line on the Consolidated Balance Sheet. The unfunded commitments related to the investments in qualified affordable housing projects totaled ~~$4,173~~$4,885 and ~~$4,922~~$5,417 at June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively.

During the ~~six-months~~three months ended June 30, ~~2019~~2020 and ~~2018,~~2019, the Company recognized amortization expense with respect to its investments in qualified affordable housing projects of ~~$266~~$164 and ~~$258,~~$133, respectively, offset by tax credits and other benefits from its investment in affordable housing tax credits of ~~$552~~$301 and ~~$426,~~$276, respectively. During the ~~three-months~~six months ended June 30, ~~2019~~2020 and ~~2018,~~2019, the Company recognized amortization expense with respect to its investments in qualified affordable housing projects of ~~$133~~$333 and ~~$129,~~$266, respectively, offset by tax credits and other benefits from its investment in affordable housing tax credits of ~~$276~~$584 and ~~$207,~~$552, respectively. During the ~~three-~~three and ~~six-months~~six months ended June 30, ~~2019~~2020 and ~~2018,~~2019, the Company did ~~not~~0t incur impairment losses related to its investment in qualified affordable housing projects.

The Company accounts for revenues from contracts with customers under ASC 606, Revenue from Contracts with Customers. Revenue associated with financial instruments, including revenue from loans and securities are outside the scope of the new standard and accounted for under other existing GAAP. In addition, certain noninterest income streams such as fees associated with mortgage servicing rights, financial guarantees, derivatives, and certain credit card fees are also not in scope of the new guidance. Noninterest revenue streams in-scope of ASC 606 are discussed below.

Service charges consist of account analysis fees (i.e., net fees earned on analyzed business and public checking accounts), monthly service fees, and other deposit account related fees. The Company’s performance obligation for account analysis fees and monthly service fees is generally satisfied, and the related revenue recognized, over the period in which the service is provided. Other deposit account related fees are largely transactional based, and therefore, the Company’s performance obligation is satisfied, and related revenue recognized, at a point in time. Payment for service charges on deposit accounts is primarily received immediately or in the following month through a direct charge to customers’ accounts.

Fees, exchange, and other service charges are primarily comprised of debit and credit card income, ATM fees and other service charges. Debit and credit card income is primarily comprised of interchange fees earned whenever the Company’s debit and credit cards are processed through card payment networks such as Mastercard. ATM fees are primarily generated when a Company cardholder uses a non-Company ATM or a non-Company cardholder uses a Company ATM. The Company’s performance obligation for fees, exchange, and other service charges are largely satisfied, and related revenue recognized, when the services are rendered or upon completion. Payment is typically received immediately or in the following month.

Wealth management fees are primarily comprised of fees earned from the management and administration of trusts and other customer assets. The Company’s performance obligation is generally satisfied over time and the resulting fees are recognized monthly, based upon the month-end market value of the assets under management and the applicable fee rate. Payment is generally received in the following month through a direct charge to customers’ accounts. The Company does not earn performance-based incentives. The Company’s performance obligation for these transactional-based services is generally satisfied, and related revenue recognized, at a point in time (i.e., as incurred). Payment is received shortly after services are rendered.

The Company facilitates the payment of federal and state income tax refunds in partnership with a third-party vendor. Refund Transfers (“RTs”) are fee-based products whereby a tax refund is issued to the taxpayer after the Company has received the

refund from the federal or state government. As part of this agreement the Company earns fee income, the majority of which is received in the first quarter of the year. The Company’s fee income revenue is recognized based on the estimated percent of business completed by each date.

Other noninterest income consists of other recurring revenue streams such as check order fees, wire transfer fees, safety deposit box rental fees, item processing fees and other miscellaneous revenue streams. Check order income mainly represents fees charged to customers for checks. Wire transfer fees represent revenue from processing wire transfers. Safe deposit box rental fees are charged to the customer on an annual basis and recognized upon receipt of payment. The Company determined that since rentals and renewals occur fairly consistently over time, revenue is recognized on a basis consistent with the duration of the performance obligation. Item processing fee income represents fees charged to other financial institutions for processing their transactions. Payment is typically received in the following month.

The following presents noninterest income, segregated by revenue streams in-scope and out-of-scope of Topic 606, for the three and six months ended June 30, 2020 and 2019.

~~The following presents noninterest income, segregated by revenue streams in-scope and out-of-scope of Topic 606, for the three and six-months ended June 30, 2019 and 2018.~~

A contract asset balance occurs when an entity performs a service for a customer before the customer pays consideration (resulting in a contract receivable) or before payment is due (resulting in a contract asset). A contract liability balance is an entity’s obligation to transfer a service to a customer for which the entity has already received payment (or payment is due) from the customer. The Company’s noninterest revenue streams are largely based on transactional activity, or standard month-end revenue accruals such as asset management fees based on month-end market values. Consideration is often received immediately or shortly after the Company satisfies its performance obligation and revenue is recognized. The Company does not typically enter into long-term revenue contracts with customers, and therefore, does not experience significant contract balances. As of June 30, 2019 and December 31, 2018, the Company did not have any significant contract balances.

~~In connection~~Civista has received second customer deferral requests related to the COVID-19 pandemic for loans that had been previously modified. Through August 5, 2020, Civista granted a second modification on 75 loans totaling $95,153. Most of the second modifications consisted of the deferral of principal and/or interest payments as was granted under the first modification. Included in the second modifications were 17 loans totaling $33,160 that migrated from principal and interest deferrals to interest only payments. NaN loans have returned to making principal and interest payments and 651 loans are still within the original 90-day modification period. Details with respect to the ~~adoption of Topic 606, an entity is required to capitalize, and subsequently amortize into expense, certain incremental costs of obtaining a contract with a customer if these costs~~second loan modifications are expected to be recovered. The incremental costs of obtaining a contract are those costs that an entity incurs to obtain a contract with a customer that it would not have incurred if the contract had not been obtained (for example, sales commission). The Company utilizes the practical expedient which allows entities to immediately expense contract acquisition costs when the asset that would have resulted from capitalizing these costs would have been amortized in one year or less. Upon adoption of Topic 606, the Company did not capitalize any contract acquisition cost.as follows:

We have operating leases for several branch locations and office space. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. We also lease certain office equipment under operating leases. Many of our leases include both lease (e.g., minimum rent payments) and non-lease components (e.g., common-area or other maintenance costs). The Company accounts for each component separately based on the standalone price of each component. In addition, we have several operating leases with lease term of less than one year and therefore, we have elected the practical expedient to exclude these short-term leases from our ROU assets and lease liabilities.

Most leases include one or more options to renew. The exercise of lease renewal options is typically at our sole discretion. The majority of renewals to extend the lease terms are included in our ROU assets and lease liabilities as they are reasonably certain of exercise.

As most of our leases do not provide an implicit rate, we use the fully collateralized FHLB borrowing rate, commensurate with the lease terms based on the information available at the lease commencement date in determining the present value of the lease payments.

~~The balance sheet information related to our operating leases were as follows as of June 30, 2019:~~

~~The cost components of our operating leases were as follows for the period ended June 30, 2019:~~

~~Maturities of our lease liabilities for all operating leases for each of the next five years and thereafter is as follows:~~

~~The weighted average remaining lease terms and discount rates for all of our operating leases were as follows as of June 30, 2019:~~

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

The following discussion focuses on the consolidated financial condition of the Company at June 30, ~~2019~~2020 compared to December 31, ~~2018,~~2019, and the consolidated results of operations for the three- and six-month periods ended June 30, ~~2019,~~2020, compared to the same periods in ~~2018.~~2019. This discussion should be read in conjunction with the consolidated financial statements and footnotes included in this Form 10-Q.

This Quarterly Report on Form 10-Q may contain “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), relating to such matters as the Company’s financial condition, anticipated operating results, cash flows, business line results, credit quality expectations, prospects for new lines of business, economic trends (including interest rates) and similar matters. Forward-looking statements reflect our expectations, estimates or projections concerning future results or events. These statements are generally identified by the use of forward-looking words or phrases such as “believe,” “belief,” “expect,” “anticipate,” “may,” “could,” “intend,” “intent,” “estimate,” “plan,” “foresee,” “likely,” “will,” “should” or other similar words or phrases. Forward-looking statements are not guarantees of performance and are inherently subject to known and unknown risks, uncertainties and assumptions that are difficult to predict and could cause our actual results, performance or achievements to differ materially from those expressed in or implied by the forward-looking statements. Factors that could cause actual results, performance or achievements to differ from those discussed in the forward-looking statements include, but are not limited to, changes in financial markets or national or local economic conditions, including impacts from the COVID-19 pandemic on local, national and global economic conditions; higher default rates on loans made to our customers related to the impact of COVID-19 on our customers’ operations and financial conditions; the effects of various governmental responses to the COVID-19 pandemic, including stimulus packages and programs; potential litigation or other risks related to participating in the U.S. Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”), 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, ~~2018.~~2019, as supplemented by “Item 1A. Risk Factors” of the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2020 and by “Item 1A. Risk Factors” of Part II of this Quarterly Report on From 10-Q. 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.

Total assets of the Company at June 30, ~~2019~~2020 were ~~$2,202,995~~$2,812,153 compared to ~~$2,138,954~~$2,309,557 at December 31, ~~2018,~~2019, an increase of ~~$64,041,~~$502,596, or ~~3.0%~~21.8%. The increase in total assets was due to increases in cash and due from financial institutions ~~securities available for sale and loans~~ of ~~$7,060, $13,179 and $36,722,~~$147,985, accompanied by other increases in securities available for sale, loans held for sale, ~~bank owned life insurance~~loans, accrued interest receivable and other ~~assets.~~assets of $9,884, $16,238, $308,342, $3,954 and $15,877, respectively. Total liabilities at June 30, ~~2019~~2020 were ~~$1,878,783~~$2,475,540 compared to ~~$1,840,056~~$1,979,431 at December 31, ~~2018,~~2019, an increase of ~~$38,727,~~$496,109, or ~~2.1%~~25.1%. The increase in total liabilities was primarily attributable to ~~an increase~~increases in ~~total deposits, mainly due to our participation in the tax refund processing program~~noninterest-bearing demand accounts, interest-bearing demand accounts, other borrowings and accrued expenses and other liabilities of $181,295, $209,202, $183,695 and $18,483, respectively, partially offset by ~~decreases~~a decrease in short-term FHLB advances ~~and securities sold under agreements to repurchase.~~

~~Loans outstanding as~~ of ~~June 30, 2019 and December 31, 2018 were as follows:~~

Net loans have increased $36,722 or 2.4% since December 31, 2018. The Commercial & Agriculture, Commercial Real Estate – Owner Occupied, Commercial Real Estate – Non-Owner Occupied, Residential Real Estate and Real Estate Construction loan portfolios increased $9,322, $8,062, $6,972, $8,731 and $9,253, respectively since December 31, 2018, while the Farm Real Estate and Consumer and Other loan portfolios decreased $2,397 and $3,114, respectively since December 31, 2018. At June 30, 2019, the net loan to deposit ratio was 97.1% compared to 98.0% at December 31, 2018.$101,500.

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

Loans held for sale increased $16,238 or 710.6% since December 31, 2019. The increase is due to an increase in volume due to refinances as rates have declined. At June 30, 2020, 82 loans totaling $18,523 were held for sale as compared to 15 loans totaling $2,285 at December 31, 2019.

Net loans have increased $308,342 or 18.2% since December 31, 2019. The Commercial & Agriculture, Commercial Real Estate – Owner Occupied, Commercial Real Estate – Non-Owner Occupied, Real Estate Construction and Farm Real Estate loan portfolios increased $239,334, $7,308, $54,570, $22,493 and $1,327, respectively, since December 31, 2019, while the Residential Real Estate and Consumer and Other loan portfolios decreased $9,965 and $1,072, respectively, since December 31, 2019. The increase in Commercial & Agriculture loans is the result of PPP loans totaling $257,568 at June 30, 2020. At June 30, 2020, the net loan to deposit ratio was 96.8% compared to 100.9% at December 31, 2019.The decrease in the net loan to deposit ratio is the result of an increase in deposits.

During the first six months of ~~2019 and 2018, there were no~~2020, provisions made to the allowance for loan losses from ~~earnings.~~earnings totaled $5,612, compared to a provision of $0 during the same period in 2019. The increase in provision was due to an increase in the bank’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. Net recoveries for the first six months of ~~2019~~2020 totaled ~~$107,~~$41, compared to net ~~charge offs~~recoveries of ~~$267~~$107 in the first six months of ~~2018.~~2019. For the first six months of ~~2019,~~2020, the Company charged off a total of 2215 loans. ~~Two~~One Commercial &and Agriculture ~~loans~~loan totaling ~~$27, eight Real Estate Mortgage loans totaling $203,~~$15, one Commercial Real Estate – Owner Occupied ~~loan~~ totaling ~~$60, one~~$1, seven Residential Real Estate ~~Construction loan~~loans totaling ~~$24~~$97 and ~~ten~~six Consumer and Other loans totaling ~~$81~~$27 were charged off in the first six months of the year. In addition, during the first six months of ~~2019,~~2020, the Company had recoveries on previously charged-off Commercial and Agriculture loans of $4, Commercial Real Estate – Owner Occupied loans of ~~$239,~~$14, Commercial Real Estate – Non-Owner Occupied loans of ~~$44,~~$41, Residential Real Estate ~~Mortgage~~ loans of ~~$162,~~$79, Real Estate Construction loans of $2, Farm Real Estate loans of $2$7 and Consumer and Other loans of ~~$51.~~$34. For each loan category, as well as in total, the percentage of net charge-offs to loans was less than one percent. Nonperforming loans decreased by ~~$738~~$636 since December 31, ~~2018,~~2019, which was due to a decrease in loans on nonaccrual status of ~~$738.~~$638 and an increase in loans past due 90 days and accruing of $2. 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. 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’s Discussion and Analysis of Financial Condition and Results of Operations

Management analyzes each impaired Commercial and Commercial Real Estate loan relationship 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 indicates that underlying cash flows are not adequate to meet its debt service requirements. Loans held for sale are excluded from consideration as impaired. Loans are generally moved to nonaccrual status when 90 days or more past due. Impaired loans, or portions thereof, are charged-off when deemed uncollectible. The allowance for loan losses as a percent of total loans was ~~0.86%~~1.01% at June 30, ~~2019~~2020 and ~~0.88%~~0.86% December 31, ~~2018.~~2019.

The available for sale security portfolio increased by ~~$13,179,~~$9,884, from ~~$346,294~~$358,499 at December 31, ~~2018~~2019 to ~~$359,473~~$368,383 at June 30, ~~2019.~~2020. 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 June 30, ~~2019,~~2020, the Company was in compliance with all pledging requirements.

Accrued interest receivable increased $3,954, from $7,093 at December 31, 2019 to $11,047 at June 30, 2020. The increase is the result of loan modifications consisting of the deferral of principal and/or interest payments, which are the result of the COVID-19 pandemic.

Premises and equipment, net, ~~decreased $301~~increased $266 from December 31, ~~2018~~2019 to June 30, ~~2019.~~2020. The ~~decrease~~increase is the result of new purchases of ~~$651,~~$1,395, offset by depreciation of ~~$952.~~$1,119 and proceeds from the sale of premises and equipment of $10.

Bank owned life insurance (BOLI) increased ~~$1,454~~$490 from December 31, ~~2018~~2019 to June 30, ~~2019.~~2020. The ~~Company purchased additional policies totaling $955 during the first quarter of 2019. The remaining difference~~increase is the result of increases in the cash surrender value of the underlying insurance policies.

Swap assets increased ~~$5,397~~$16,801 from December 31, ~~2018~~2019 to June 30, ~~2019.~~2020. The increase of $16,801 is primarily the result of ~~increases~~an increase in ~~the market value~~volume of swap assets and right-of-use (ROU) assets, offset by a decrease in net deferred tax assets. We adopted ASU 2016-02, effective January 1, 2019, which requires the recognition of lease assets for those leases classified as operating leases. At June 30, 2019, the ROU assets totaled $2,452.activity related to our Commercial Real Estate loan growth.

Total deposits as of June 30, ~~2019~~2020 and December 31, ~~2018~~2019 were as follows:

	June 30, 2019		December 31, 2018		$ Change			% Change			June 30, 2020		December 31, 2019		$ Change		% Change
Noninterest-bearing demand	$	496,541	$	468,083	$	28,458			6.1	%	$	693,848	$	512,553	$	181,295		35.4	%
Interest-bearing demand		305,086		261,996		43,090			16.4	%		408,980		301,674		107,306		35.6	%
Savings and money market		562,823		582,128		(19,305	)		-3.3	%		673,524		588,697		84,827		14.4	%
Time deposits		268,270		267,686		584			0.2	%		292,909		275,840		17,069		6.2	%
Total Deposits	$	1,632,720	$	1,579,893	$	52,827			3.3	%	$	2,069,261	$	1,678,764	$	390,497		23.3	%

Total deposits at June 30, 2020 increased $390,497 from year-end 2019. Noninterest-bearing deposits increased $181,295 from year-end 2019, while interest-bearing deposits, including savings and time deposits, increased $209,202 from December 31, 2019. The increase in noninterest-bearing deposits was partially due to increases in cash balances related to the Company’s participation in a tax refund processing program, which added noninterest-bearing deposits of $30,799. This increase is temporary as transactions are processed and is expected to return to levels more consistent with December 31, 2019 over the next two quarters. In addition, personal demand and business demand deposit accounts increased $21,364 and $134,055, respectively. Much of the increase in business demand deposit accounts is due to the PPP loan proceeds. The increase in interest-bearing deposits was primarily due to an increase in non-public interest-bearing demand, savings and money markets and brokered money market accounts of $37,731, $61,399 and $29,745, respectively. Public fund interest-bearing demand and public fund time deposit accounts increased $69,575 and $17,411, respectively. The year-to-date average balance of total deposits increased $303,335 compared to the average balance for the same period in 2019 mainly due to increases in noninterest-bearing business demand and tax refund processing program accounts of $96,754 and $133,376, respectively, accompanied by increases in non-public interest-bearing demand, savings and money markets and public funds interest-bearing demand of $21,564, $33,665 and $27,893, respectively. In addition, the average balance of time deposits increased $14,332 as compared to the same period in 2019.

Short-term FHLB advances decreased $101,500 from December 31, 2019 to June 30, 2020. The decrease is due to a decrease in overnight borrowings. Securities sold under agreements to repurchase, which tend to fluctuate, have increased $4,934 from December 31, 2019 to June 30, 2020.

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

~~Total deposits at June 30, 2019~~Other borrowings increased ~~$52,827 from year-end 2018. Noninterest-bearing deposits increased $28,458 from year-end 2018, while interest-bearing deposits, including savings and time deposits, increased $24,369~~$183,695 from December 31, ~~2018.~~2019 to June 30, 2020. The increase ~~in noninterest-bearing deposits was primarily due~~is the result of borrowings by Civista under the Paycheck Protection Program Lending Facility (“PPPLF”) to increases in cash balances related to the Company’s participation in a tax refund processing program, which added noninterest-bearing deposits of $29,498. This increase is temporary as transactions are processed and is expected to return to levels more consistent with December 31, 2018 over the next two quarters. ~~The year-to-date average balance of total deposits~~provide funding for PPP loans.

Swap liabilities increased ~~$452,424 compared to the average balance for the same period in 2018 mainly due to the United Community Bancorp (“UCB”) acquisition in the third quarter of 2018.~~

~~FHLB advances decreased $17,300~~$16,801 from December 31, ~~2018~~2019 to June 30, ~~2019.~~2020. The ~~decrease~~increase of $16,801 is ~~due to a decrease in overnight funds~~primarily the result of ~~$67,300, offset by~~ an increase in ~~long term advances~~volume of $50,000. On May 23, 2019, the Company advanced $50,000 from the FHLB. The advance has terms of one hundred twenty months, puttable after sixty-months with a fixed rate of 2.05%. Securities sold under agreementsswap activity related to ~~repurchase, which tend to fluctuate, have decreased $6,645 from December 31, 2018 to June 30, 2019.~~our Commercial Real Estate loan growth.

Accrued expenses and other liabilities increased ~~$9,845~~$1,682 from December 31, ~~2018~~2019 to June 30, ~~2019.~~2020. The increase is ~~primarily~~ the result of ~~increases~~an increase in ~~lease liabilities~~a clearing account related to the tax refund processing program of ~~$2,452, swap liabilities of $5,761 and a recorded liability of $2,102 for security purchases to be settled.~~$1,072.

Shareholders’ equity at June 30, ~~2019~~2020 was ~~$324,212,~~$336,613, or ~~14.7%~~12.0% of total assets, compared to ~~$298,898,~~$330,126, or ~~14.0%~~14.3% of total assets, at December 31, ~~2018.~~2019. The increase was the result of net income of ~~$18,330,~~$14,337, a decrease in the Company’s pension liability, net of tax, of ~~$232,~~$114, and an increase in the fair value of securities available for sale, net of tax, of ~~$9,829, partially~~$6,666, offset by dividends on ~~preferred shares and~~ common shares of ~~$328~~$3,599 and ~~$3,123, respectively.~~ the purchase of treasury shares of $11,450.

Total outstanding common shares at June 30, ~~2019~~2020 were ~~15,633,059,~~16,052,979, which ~~increased~~decreased from ~~15,603,499~~16,687,542 common shares outstanding at December 31, ~~2018.~~2019. Common shares outstanding ~~increased~~decreased as a result of 675,808 common shares being repurchased by the Company at an average repurchase price of $16.94. The Company repurchased 672,000 common shares pursuant to a stock repurchase program announced on December 17, 2019 and 3,808 common shares surrendered to pay taxes upon vesting of restricted shares. The publicly-announced repurchase plan authorized the Company to repurchase up to 672,000 shares of the Company’s common shares until December 17, 2020. The decrease in common shares outstanding was offset by the grant of ~~21,106~~26,979 restricted common shares to certain officers under the Company’s 2014 Incentive Plan. In addition, ~~8,946~~14,266 common shares were issued to Civista directors as a retainer payment for service on the Civista Board of Directors.

The Company had net income of ~~$8,661~~$6,504 for the three months ended June 30, ~~2019, an increase~~2020, a decrease of ~~$5,647~~$2,157 from net income of ~~$3,014~~$8,661 for the same three months of ~~2018.~~2019. Basic earnings per common share were ~~$0.54~~$0.41 for the quarter ended June 30, ~~2019,~~2020, compared to ~~$0.26~~$0.54 for the same period in ~~2018.~~2019. Diluted earnings per common share were ~~$0.51~~$0.41 for the quarter ended June 30, ~~2019,~~2020, compared to ~~$0.24~~$0.51 for the same period in ~~2018.~~2019. The primary reasons for the changes in net income are explained below.

Net interest income for the three months ended June 30, ~~2019~~2020 was ~~$21,742,~~$22,075, an increase of ~~$6,976~~$333 from ~~$14,766~~$21,742 in the same three months of ~~2018.~~2019. This increase is the result of ~~an increase~~a decrease of ~~$8,766~~$342 in total interest income with ~~only an increase~~a decrease of ~~$1,790~~$675 in interest expense. Interest-earning assets averaged ~~$1,986,841~~$2,528,006 during the three months ended June 30, ~~2019,~~2020, an increase of ~~$558,888~~$541,165 from ~~$1,427,953~~$1,986,841 for the same period of ~~2018.~~2019. The Company’s average interest-bearing liabilities increased from ~~$905,722 during the three months ended June 30, 2018 to~~ $1,316,104 during the three months ended June 30, 2019 ~~largely due~~ to $1,619,603 during the ~~UCB acquisition in the third quarter of 2018.~~three months ended June 30, 2020. The Company’s fully tax equivalent net interest margin for the three months ended June 30, 2020 and 2019 was 3.61% and ~~2018 was~~ 4.49% ~~and 4.21%~~, respectively.

Total interest income was ~~$24,926~~$24,584 for the three months ended June 30, ~~2019, an increase~~2020, a decrease of ~~$8,766~~$342 from ~~$16,160~~$24,926 of total interest income for the same period in ~~2018.~~2019. The ~~increase~~decrease in interest income is attributable to ~~an increase~~a decrease of ~~$7,513~~$44 in interest and fees on loans, which resulted from a lower yield on the portfolio, partially offset by an increase in the average balance of ~~loans, accompanied by a higher yield on the portfolio.~~loans. The average balance of loans increased by ~~$424,577~~$389,436 or ~~36.6%~~24.6% to ~~$1,583,533~~$1,972,969 for the three months ended June 30, ~~2019~~2020 as compared to ~~$1,158,956~~$1,583,533 for the same period in ~~2018.~~2019. The loan yield ~~increased~~decreased to 4.41% for 2020, from 5.49% ~~for~~in 2019 ~~from 4.90% in 2018. The net increase in interest and fees earned on loans attributable~~mainly due to the ~~UCB acquisition was $3,681 for~~impact of lower interest rates during the first three months ~~ended June 30, 2019.~~

~~Interest on taxable securities increased $654 to $1,694 for the three months ended June 30, 2019,~~of 2020 as compared to ~~$1,040 for~~ the same period ~~in 2018. The~~of 2019. During the quarter, the average balance of ~~taxable securities increased $57,560 to $202,995 for~~PPP loans was $189,405. These loans had an average yield of 3.46% including the three months ended June 30, 2019 as compared to $145,435 for the same period in 2018. The yield on taxable securities increased 54 basis points to 3.39% for 2019, compared to 2.85% for 2018. Interest on tax-exempt securities increased $522 to $1,408 for the three months ended June 30, 2019, compared to $886 for the same period in 2018. The average balanceamortization of tax-exempt securities increased $69,138 to $171,004 for the three months ended June 30, 2019 as compared to $101,866 for the same period in 2018. The yield on tax-exempt securities decreased 7 basis points to 4.39% for 2019, compared to 4.46% for 2018.PPP fees.

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

Interest ~~expense increased $1,790 or 128.4%~~on taxable securities decreased $335 to ~~$3,184~~$1,359 for the three months ended June 30, ~~2019,~~2020, compared ~~with $1,394~~to $1,694 for the same period in ~~2018.~~2019. The average balance of taxable securities decreased $17,039 to $185,956 for the three months ended June 30, 2020 as compared to $202,995 for the same period in 2019. The yield on taxable securities decreased 33 basis points to 3.06% for 2020, compared to 3.39% for 2019. Interest on tax-exempt securities increased $133 to $1,541 for the three months ended June 30, 2020, compared to $1,408 for the same period in 2019. The average balance of tax-exempt securities increased $29,878 to $200,882 for the three months ended June 30, 2020 as compared to $171,004 for the same period in 2019. The yield on tax-exempt securities decreased 20 basis points to 4.19% for 2020, compared to 4.39% for 2019 due to the impact of lower interest rates during the first three months of 2020 as compared to the same period of 2019.

Interest expense decreased $675 or 21.2% to $2,509 for the three months ended June 30, 2020, compared with $3,184 for the same period in 2019. The change in interest expense can be attributed to an increase in the average balance of interest-bearing liabilities, offset by a decrease in rates on demand and ~~rate.~~savings accounts, FHLB borrowings and subordinated debentures. For the three months ended June 30, ~~2019,~~2020, the average balance of interest-bearing liabilities increased ~~$410,382~~$303,499 to ~~$1,316,104,~~$1,619,603, as compared to ~~$905,722~~$1,316,104 for the same period in ~~2018.~~2019. Interest incurred on deposits ~~increased~~decreased by ~~$1,406~~$174 to ~~$1,976~~$1,802 for the three months ended June 30, ~~2019,~~2020, compared to ~~$570~~$1,976 for the same period in ~~2018. The change in deposit expense was due to an increase in~~2019. Although the average balance of interest-bearing deposits ~~of $373,675~~increased to $187,372 for the three months ended June 30, ~~2019~~2020 as compared to the same period in ~~2018. In addition,~~2019, deposit expense decreased due to a decrease in the rate paid on demand and savings accounts ~~increased~~ from ~~0.16% in 2018 to~~ 0.34% in 2019 ~~and the~~to 0.17% in 2020. The rate paid on time deposits increased from ~~0.91%~~1.86% to ~~1.86%~~1.89% in ~~2019.~~2020 mainly due to special rates offered on time deposits during 2019 and through 2020. Interest expense incurred on FHLB advances and subordinated debentures ~~increased 46.7%~~decreased 42.1% from ~~2018.~~2019. The ~~increase was due to a $34,811 increase in~~ average balance ~~from 2018 and a 40 basis point increase in rate from 2018. The UCB acquisition resulted in a net increase of interest expense of $840~~on FHLB balances decreased $13,237 for the three months ended June 30, 2020 as compared to the same period in 2019, while the rate paid decreased 97 basis points. In addition, the rate paid on subordinated debentures decreased 165 basis points for the three months ended June 30, 2020 as compared to the same period in 2019. The average balance of other borrowings increased $124,819 for the three months ended June 30, 2020 as compared to the same period in 2019 as a result of the Company’s borrowings under the Paycheck Protection Program Liquidity Facility to fund PPP loans.

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

The following table presents the condensed average balance sheets for the three months ended June 30, ~~2019~~2020 and ~~2018.~~2019. The daily average loan amounts outstanding are net of unearned income and include loans held for sale and nonaccrual loans. The average balance of securities is computed using the carrying value of securities. Rates are annualized and taxable equivalent yields are computed using a 21% tax rate for tax-exempt interest income. The average yield has been computed using the historical amortized cost average balance for available-for-sale securities.

	Three Months Ended June 30,																Three Months Ended June 30,
	2019								2018								2020								2019
Assets:	Average balance			Interest		Yield/ rate*			Average balance			Interest		Yield/ rate*			Average balance			Interest		Yield/ rate*			Average balance			Interest		Yield/ rate*
Interest-earning assets:
Loans, including fees	$	1,583,533		$	21,657		5.49	%	$	1,158,956		$	14,144		4.90	%	$	1,972,969		$	21,613		4.41	%	$	1,583,533		$	21,657		5.49	%
Taxable securities		202,995			1,694		3.39	%		145,435			1,040		2.85	%		185,956			1,359		3.06	%		202,995			1,694		3.39	%
Tax-exempt securities		171,004			1,408		4.39	%		101,866			886		4.46	%		200,882			1,541		4.19	%		171,004			1,408		4.39	%
Interest-bearing deposits in other banks		29,309			167		2.29	%		21,696			90		1.66	%		168,199			71		0.17	%		29,309			167		2.29	%
Total interest-earning assets	$	1,986,841		$	24,926		5.14	%	$	1,427,953		$	16,160		4.60	%	$	2,528,006		$	24,584		4.01	%	$	1,986,841		$	24,926		5.14	%
Noninterest-earning assets:
Cash and due from financial institutions		38,558								36,501								84,961								38,558
Premises and equipment, net		21,819								17,549								22,535								21,819
Accrued interest receivable		7,324								5,270								9,312								7,324
Intangible assets		85,865								28,351								84,906								85,865
Other assets		22,193								12,781								43,297								22,193
Bank owned life insurance		44,328								25,317								45,334								44,328
Less allowance for loan losses		(13,884	)							(12,935	)							(17,098	)							(13,884	)
Total Assets	$	2,193,044							$	1,540,787							$	2,801,253							$	2,193,044
Liabilities and Shareholders Equity:
Interest-bearing liabilities:
Demand and savings	$	858,781		$	721		0.34	%	$	615,667		$	250		0.16	%	$	1,027,678		$	439		0.17	%	$	858,781		$	721		0.34	%
Time		271,183			1,255		1.86	%		140,622			320		0.91	%		289,658			1,363		1.89	%		271,183			1,255		1.86	%
FHLB		138,271			831		2.41	%		103,460			482		1.87	%
Short-term FHLB advances																		34			—		0.00	%		111,842			698		2.50	%
Long-term FHLB advances																		125,000			447		1.44	%		26,429			133		2.02	%
Other borrowings																		124,819			4		0.01	%		—			—		0.00	%
Subordinated debentures		29,427			372		5.07	%		29,427			338		4.61	%		29,427			250		3.42	%		29,427			372		5.07	%
Repurchase Agreements		18,442			5		0.11	%		16,546			4		0.10	%		22,987			6		0.10	%		18,442			5		0.11	%
Total interest-bearing liabilities	$	1,316,104		$	3,184		0.97	%	$	905,722		$	1,394		0.62	%	$	1,619,603		$	2,509		0.62	%	$	1,316,104		$	3,184		0.97	%
Noninterest-bearing deposits		540,283								434,126								790,891								540,283
Other liabilities		21,219								12,609								60,235								21,219
Shareholders’ Equity		315,438								188,330								330,524								315,438
Total Liabilities and Shareholders’ Equity	$	2,193,044							$	1,540,787							$	2,801,253							$	2,193,044
Net interest income and interest rate spread				$	21,742		4.17	%				$	14,766		3.98	%				$	22,075		3.39	%				$	21,742		4.17	%
Net interest margin							4.49	%							4.21	%							3.61	%							4.49	%

*—~~All~~Average yields ~~and costs~~ are presented on ~~an annualized basis~~a tax equivalent basis. The tax equivalent effect associated with loans and investments, included in the yields above, was $413 and $378 for the periods ended June 30, 202 and 2019, respectively.

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

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 June 30, ~~2019~~2020 and ~~2018. The table is presented on a fully tax-equivalent basis.~~2019.

	Increase (decrease) due to:							Increase (decrease) due to:
	Volume (1)		Rate (1)			Net		Volume (1)			Rate (1)			Net
	(Dollars in thousands)							(Dollars in thousands)
Interest income:
Loans, including fees	$	5,652	$	1,861		$	7,513	$	4,740		$	(4,784	)	$	(44	)
Taxable securities		429		225			654		(172	)		(163	)		(335	)
Tax-exempt securities		536		(14	)		522		201			(68	)		133
Interest-bearing deposits in other banks		37		40			77		178			(274	)		(96	)
Total interest income	$	6,654	$	2,112		$	8,766	$	4,947		$	(5,289	)	$	(342	)
Interest expense:
Demand and savings	$	127	$	344		$	471	$	122		$	(404	)	$	(282	)
Time		442		493			935		87			21			108
FHLB		187		162			349
Short-term FHLB advances									(698	)		—			(698	)
Long-term FHLB advances									363			(49	)		314
Other borrowings									4			—			4
Subordinated debentures		—		34			34		—			(122	)		(122	)
Repurchase agreements		—		1			1		1			—			1
Total interest expense	$	756	$	1,034		$	1,790	$	(121	)	$	(554	)	$	(675	)
Net interest income	$	5,898	$	1,078		$	6,976	$	5,068		$	(4,735	)	$	333

The Company provides for loan losses through regular provisions to the allowance for loan losses. ~~During~~Provisions for loan losses totaled $3,486 and $0 during the quarters ended June 30, ~~2019~~2020 and ~~June 30, 2018, no provision for loan losses was provided. Management’s analysis of~~2019. The increase in the provision was due to an increase in the bank’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 relating to the COVID-19 pandemic include the loss of revenue being experience by our business clients, disruption of supply chains, additional employee costs for businesses due to the ~~quarters ended June 30, 2019~~pandemic, higher unemployment rates throughout our footprint and ~~June 30, 2018, indicated that no provision was required.~~a large number of customers requesting payment relief. Our Commercial, Commercial Real Estate and Consumer portfolios have been, and are expected to continue to be impacted the most.

Noninterest income for the three-month periods ended June 30, ~~2019~~2020 and ~~2018~~2019 are as follows:

	Three months ended June 30,											Three months ended June 30,
	2019			2018		$ Change			% Change			2020			2019			$ Change			% Change
Service charges	$	1,552		$	1,359	$	193			14.2	%	$	930		$	1,552		$	(622	)		-40.1	%
Net gain on sale of securities		10			6		4			66.7	%		—			10			(10	)		-100.0	%
Net gain (loss) on equity securities		(33	)		35		(68	)		-194.3	%
Net loss on equity securities													(5	)		(33	)		28			-84.8	%
Net gain on sale of loans		555			474		81			17.1	%		2,261			555			1,706			307.4	%
ATM/Interchange fees		951			588		363			61.7	%		1,149			951			198			20.8	%
Wealth management fees		911			836		75			9.0	%		904			911			(7	)		-0.8	%
Bank owned life insurance		252			144		108			75.0	%		240			252			(12	)		-4.8	%
Tax refund processing fees		550			550		—			0.0	%		475			550			(75	)		-13.6	%
Swap fees													764			15			749			4993.3	%
Other		356			398		(42	)		-10.6	%		136			341			(205	)		-60.1	%
Total noninterest income	$	5,104		$	4,390	$	714			16.3	%	$	6,854		$	5,104		$	1,750			34.3	%

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

Noninterest income for the three months ended June 30, ~~2019~~2020 was ~~$5,104,~~$6,854, an increase of ~~$714~~$1,750 or ~~16.3%~~34.3% from ~~$4,390~~$5,104 for the same period of ~~2018.~~2019. The increase was ~~primary~~primarily due to increases in ~~service charge fees of $193,~~ net gain on sale of loans, ~~of $81, ATM/Interchange fees of $363 and bank owned life insurance of $108.~~

~~The increases in service charge fee income,~~ ATM/Interchange fees and ~~bank owned life insurance income is primarily attributable to the Company’s acquisition~~swap fees, offset by decreases in service charges, tax refund processing fees and other. Net loss on equity securities decreased as a result of ~~UCB during the third quarter of 2018.~~market value decreases. Net gain on sale of loans increased primarily as a result of an increase in ~~the average loan balance~~volume of loans sold. During the three-months ended June 30, 2020, 444 loans were sold, totaling $91,460. During the three-months ended June 30, 2019, 149 loans were sold, totaling $27,941. ATM/Interchange fees increased as a result of increased transaction fees and the receipt of member support fees. Swap fees increased due to the volume of swaps performed during the quarter ended June 30, 2020 as compared to the same period of 2019. Service charges decreased as a result of Civista waiving $93 of service fees on deposits accounts related to the COVID-19 pandemic. In addition, overdraft fees have decreased by $477. Other income decreased due to the amortization of mortgage servicing rights as a result of higher loan payoffs.

Additionally, the Company processes state and federal income tax refund payments for customers of third-party income tax preparation vendors for which we receive a fee for processing the refund payments. Tax refund processing fees were $475 for the three months ended June 30, 2019, a decrease of $75 from $550 for the same period of 2019. The decrease is the result of a decrease in volume of transactions processed during the period. This fee income is seasonal in nature, the majority of which is earned in the first quarter of the year.

Noninterest expense for the three-month periods ended June 30, 2020 and 2019 are as follows:

Noninterest expense for the three months ended June 30, 2020 was $18,114, an increase of $1,475, or 8.9%, from $16,639 reported for the same period of 2019. The primary reasons for the increase were increases in compensation expense, net occupancy expense, FDIC assessment, professional services, software maintenance expense and other, offset by a decrease in ATM/Interchange expense. The increase in compensation expense was due to increased payroll, payroll taxes and commission and incentive based costs. The quarter-to-date average full time equivalent (FTE) employees were 456.0 at June 30, 2020, an increase of 19.9 FTEs over 2019, which increased payroll and payroll related expenses. Payroll and payroll related expenses also increased due to annual pay increases and increases in commission based costs as the result of increased loan activity. The increase in net occupancy is the result of increased COVID-19 pandemic related expenses to janitorial services and supplies of $123. The quarter-over-quarter increase in FDIC assessments was attributable to an increase in the assessment base. The increase in professional services costs is the result of increased consulting services to implement cost savings and customer services. The decrease in ATM/Interchange expense is primarily due to a settlement received in the second quarter of 2020 and savings realized by a vendor change. The increase in software maintenance expense is due to a general increase in software maintenance contracts. The increase in other operating expense is primarily due to increases in communications expense, education and training, amortization on low income housing investment, other loan expense and MSR valuation expense.

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

~~during the three months ended June 30, 2019 and 2018. This fee income is seasonal in nature, the majority of which is earned in the first quarter of the year.~~

~~Noninterest expense for the three-month periods ended June 30, 2019 and 2018 are as follows:~~

Noninterest expense for the three months ended June 30, 2019 was $16,639, an increase of $711, or 4.5%, from $15,928 reported for the same period of 2018. The primary reasons for the increase were increases in compensation expenses of $2,163, net occupancy expense of $102, equipment expense of $156, state franchise taxes of $136, amortization expense of $209, ATM expense of $338 and other operating expenses of $645, offset by decreases in contracted data processing expenses of $2,292 and professional services costs of $783.

The increase in compensation expense is mainly due to being a larger company as a result of the acquisition of UCB. The quarter-to-date average full time equivalent (FTE) employees were 436.1 at June 30, 2019, an increase of 88.8 FTEs over 2018. In addition, the increase can be attributed to payroll and payroll related expenses due to annual pay increases and increases in commission based costs and employee insurance costs. The increases in net occupancy expense, equipment expense, amortization expense, ATM expense and other operating expenses are primarily due to being a larger company as a result of the acquisition of UCB. The quarter-over-quarter increase in state franchise taxes was attributable to an increase in equity capital, which is the basis of the Ohio Financial Institutions tax. The decrease in contracted data processing expenses and professional services costs is due to expenses paid during the second quarter of 2018 related to the acquisition of UCB.

Income tax expense for the three months ended June 30, ~~2019~~2020 totaled ~~$1,546, up $1,332~~$825, down $721 compared to the same period in ~~2018.~~2019. The effective tax rates for the three-month periods ended June 30, 2020 and 2019 were 11.3% and ~~2018 were~~ 15.2% ~~and 6.6%~~, 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~~decrease in the effective tax rate is due to higher non-taxable income and lower taxable income for the ~~three-months~~three months ended June 30, ~~2019,~~2020, as compared to the same period in ~~2018.~~2019.

The Company had net income of ~~$18,330~~$14,337 for the six months ended June 30, ~~2019, an increase~~2020, a decrease of ~~$8,327~~$3,993 from net income of ~~$10,003~~$18,330 for the same six months of ~~2018.~~2019. Basic earnings per common share were ~~$1.15~~$0.88 for the period ended June 30, ~~2019,~~2020, compared to ~~$0.91~~$1.15 for the same period in ~~2018.~~2019. Diluted earnings per common share were ~~$1.08~~$0.88 for the period ended June 30, ~~2019,~~2020, compared to ~~$0.79~~$1.08 for the same period in ~~2018.~~2019. The primary reasons for the changes in net income are explained below.

Net interest income for the six months ended June 30, ~~2019~~2020 was ~~$43,460,~~$44,190, an increase of ~~$13,922~~$730 from ~~$29,538~~$43,460 in the same six months of ~~2018.~~2019. This increase is the result of an increase of ~~$17,426~~$76 in total interest income with ~~only an increase~~a decrease of ~~$3,504~~$654 in interest expense. Interest-earning assets averaged ~~$2,002,099~~$2,380,088 during the six months ended June 30, ~~2019,~~2020, an increase of ~~$536,859~~$377,989 from ~~$1,465,240~~$2,002,099 for the same period of ~~2018.~~2019. The Company’s average interest-bearing liabilities increased from ~~$898,439 in 2018 to~~ $1,295,697 in 2019 ~~largely due~~ to ~~the UCB acquisition~~$1,502,552 in ~~the third quarter of 2018.~~2020. The Company’s fully tax equivalent net interest margin for the six months ended June 30, 2020 and 2019 was 3.84% and ~~2018 was~~ 4.47% ~~and 4.13%~~, respectively.

Total interest income increased $76 to $49,586 for the period ended June 30, 2020, which is attributable to an increase of $667 in interest and fees on loans. This change was the result of an increase in the average balance of loans, accompanied by a lower yield on the portfolio. The average balance of loans increased by $275,403 or 17.5% to $1,849,327 for the period ended June 30, 2020, as compared to $1,573,924 for the period ended June 30, 2019. The loan yield decreased to 4.71% for 2020, from 5.46% in 2019.

Interest on taxable securities decreased $667 to $2,775 for the period ended June 30, 2020, compared to $3,442 for the same period in 2019. The average balance of taxable securities decreased $18,505 to $186,780 for the period ended June 30, 2020 as compared to $205,285 for the period ended June 30, 2019. The yield on taxable securities decreased 31 basis points to 3.10% for 2020, compared to 3.41% for 2019. Interest on tax-exempt securities increased $293 to $3,053 for the period ended June 30, 2020, compared to $2,760 for the same period in 2019. The average balance of tax-exempt securities increased $34,884 to $199,233 for the period ended June 30, 2020 as compared to $164,349 for the period ended June 30, 2019. The yield on tax-exempt securities decreased 23 basis points to 4.21% for 2020, compared to 4.44% for 2019.

Interest on interest-bearing deposits in other banks decreased $217 to $472 for the period ended June 30, 2020, compared to $689 for the same period in 2019. The average balance of interest-bearing deposits in other banks increased $86,207 to $144,748 for the period ended June 30, 2020 as compared to $58,541 for the period ended June 30, 2019. The yield on interest-bearing deposits in other banks decreased 171 basis points to 0.66% for 2020, compared to 2.37% for 2019.

Interest expense decreased $654 or 10.8% to $5,396 for the period ended June 30, 2020, compared with $6,050 for the same period in 2019. The change in interest expense can be attributed to an increase in the average balance of interest-bearing liabilities accompanied by a decrease in rate. For the period ended June 30, 2020, the average balance of interest-bearing liabilities increased $206,855 to $1,502,552, as compared to $1,295,697 for the period ended June 30, 2019. Interest incurred on deposits decreased by $80 to $3,787 for the period ended June 30, 2020, compared to $3,867 for the same period in 2019. Although the average balance of interest-bearing deposits increased by $118,385 for the period ended June 30, 2020 as compared to the same period in 2019, deposit expense decreased due to a decrease in the rate paid on demand and savings accounts from 0.34% in 2019 to 0.22% in 2020. The rate paid on time deposits increased from 1.82% to 1.93% in 2020. Interest expense incurred on FHLB advances and subordinated debentures decreased 26.8% from 2019. The average balance on FHLB balances increased $23,509 for the period ended June 30, 2020 as compared to the same period in 2019, while the rate paid decreased 98 basis points. In addition, the rate paid on subordinated debentures decreased 125 basis points for the period ended June 30, 2020 as compared to the same period in 2019. The average balance of other borrowings increased $62,410 for the period ended June 30, 2020 as compared to the same period in 2019 as a result of the Company’s borrowings under the Paycheck Protection Program Liquidity Facility to fund loans.

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

Total interest income increased $17,426 to $49,510 for the period ended June 30, 2019, which is attributable to an increase of $14,836 in interest and fees on loans. This change was the result of an increase in the average balance of loans, accompanied by a higher yield on the portfolio. The average balance of loans increased by $420,694 or 36.5% to $1,573,924 for the period ended June 30, 2019, as compared to $1,153,230 for the period ended June 30, 2018. The loan yield increased to 5.46% for 2019, from 4.86% in 2018. The net increase in interest and fees earned on loans attributable to the UCB acquisition was $7,185 for the period ended June 30, 2019.

Interest on taxable securities increased $1,416 to $3,442 for the period ended June 30, 2019, compared to $2,026 for the same period in 2018. The average balance of taxable securities increased $62,056 to $205,285 for the period ended June 30, 2019 as compared to $143,229 for the period ended June 30, 2018. The yield on taxable securities increased 57 basis points to 3.41% for 2019, compared to 2.84% for 2018. Interest on tax-exempt securities increased $996 to $2,760 for the period ended June 30, 2019, compared to $1,764 for the same period in 2018. The average balance of tax-exempt securities increased $62,676 to $164,349 for the period ended June 30, 2019 as compared to $101,673 for the period ended June 30, 2018. The yield on tax-exempt securities decreased 5 basis points to 4.44% for 2019, compared to 4.49% for 2018.

Interest expense increased $3,504 or 137.6% to $6,050 for the period ended June 30, 2019, compared with $2,546 for the same period in 2018. The change in interest expense can be attributed to an increase in the average balance of interest-bearing liabilities and rate. For the period ended June 30, 2019, the average balance of interest-bearing liabilities increased $397,258 to $1,295,697, as compared to $898,439 for the period ended June 30, 2018. Interest incurred on deposits increased by $2,590 to $3,867 for the period ended June 30, 2019, compared to $1,277 for the same period in 2018. The change in deposit expense was due to an increase in the average balance of interest-bearing deposits of $348,261 for the period ended June 30, 2019 as compared to the same period in 2018. In addition, the rate paid on demand and savings accounts increased from 0.16% in 2018 to 0.34% in 2019 and the rate paid on time deposits increased from 0.95% to 1.82% in 2019. Interest expense incurred on FHLB advances and subordinated debentures increased 72.5% from 2018. The increase was due to a $46,155 increase in average balance from 2018 and a 46 basis point increase in rate from 2018. The UCB acquisition resulted in a net increase of interest expense of $1,632 for the period ended June 30, 2019.

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

The following table presents the condensed average balance sheets for the six months ended June 30, ~~2019~~2020 and ~~2018.~~2019. The daily average loan amounts outstanding are net of unearned income and include loans held for sale and nonaccrual loans. The average balance of securities is computed using the carrying value of securities. Rates are annualized and taxable equivalent yields are computed using a 21% tax rate for tax-exempt interest income. The average yield has been computed using the historical amortized cost average balance for available-for-sale securities.

	Six Months Ended June 30,																Six Months Ended June 30,
	2019								2018								2020								2019
Assets:	Average balance			Interest		Yield/ rate*			Average balance			Interest		Yield/ rate*			Average balance			Interest		Yield/ rate*			Average balance			Interest		Yield/ rate*
Interest-earning assets:
Loans, including fees	$	1,573,924		$	42,619		5.46	%	$	1,153,230		$	27,783		4.86	%	$	1,849,327		$	43,286		4.71	%	$	1,573,924		$	42,619		5.46	%
Taxable securities		205,285			3,442		3.41	%		143,229			2,026		2.84	%		186,780			2,775		3.10	%		205,285			3,442		3.41	%
Tax-exempt securities		164,349			2,760		4.44	%		101,673			1,764		4.49	%		199,233			3,053		4.21	%		164,349			2,760		4.44	%
Interest-bearing deposits in other banks		58,541			689		2.37	%		67,108			511		1.54	%		144,748			472		0.66	%		58,541			689		2.37	%
Total interest-earning assets	$	2,002,099		$	49,510		5.08	%	$	1,465,240		$	32,084		4.48	%	$	2,380,088		$	49,586		4.30	%	$	2,002,099		$	49,510		5.08	%
Noninterest-earning assets:
Cash and due from financial institutions		65,567								64,211								126,655								65,567
Premises and equipment, net		21,872								17,641								22,636								21,872
Accrued interest receivable		6,931								4,860								8,031								6,931
Intangible assets		85,990								28,359								84,994								85,990
Other assets		22,394								12,968								36,229								22,394
Bank owned life insurance		43,987								25,247								45,210								43,987
Less allowance for loan losses		(13,885	)							(13,037	)							(16,013	)							(13,885	)
Total Assets	$	2,234,955							$	1,605,489							$	2,687,830							$	2,234,955
Liabilities and Shareholders Equity:
Interest-bearing liabilities:
Demand and savings	$	857,232		$	1,429		0.34	%	$	615,940		$	502		0.16	%	$	961,285		$	1,044		0.22	%	$	857,232		$	1,429		0.34	%
Time		270,847			2,438		1.82	%		163,878			775		0.95	%		285,179			2,743		1.93	%		270,847			2,438		1.82	%
FHLB advance		117,882			1,429		2.44	%		71,727			634		1.78	%
Short-term FHLB advance																		16,391			134		1.64	%		102,108			1,270		2.51	%
Long-term FHLB advance																		125,000			894		1.44	%		15,774			159		2.03	%
Other borrowings																		62,410			4		0.01	%		—			—		—
Federal funds purchased																		305			3		1.98	%		—			—		—
Subordinated debentures		29,427			744		5.10	%		29,427			626		4.29	%		29,427			563		3.85	%		29,427			744		5.10	%
Repurchase Agreements		20,309			10		0.10	%		17,467			9		0.10	%		22,555			11		0.10	%		20,309			10		0.10	%
Total interest-bearing liabilities	$	1,295,697		$	6,050		0.94	%	$	898,439		$	2,546		0.57	%	$	1,502,552		$	5,396		0.72	%	$	1,295,697		$	6,050		0.94	%
Noninterest-bearing deposits		610,265								506,002								795,215								610,265
Other liabilities		20,408								14,656								58,500								20,408
Shareholders’ Equity		308,585								186,392								331,563								308,585
Total Liabilities and Shareholders’ Equity	$	2,234,955							$	1,605,489							$	2,687,830							$	2,234,955
Net interest income and interest rate spread				$	43,460		4.14	%				$	29,538		3.91	%				$	44,190		3.58	%				$	43,460		4.14	%
Net interest margin							4.47	%							4.13	%							3.84	%							4.47	%

*—~~All~~Average yields ~~and costs~~ are presented on ~~an annualized basis~~a tax equivalent basis. The tax equivalent effect associated with loans and investments, included in the yields above, was $819 and $741 for the periods ended June 30, 202 and 2019, respectively.

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

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 six months ended June 30, ~~2019~~2020 and ~~2018.~~2019. The table is presented on a fully tax-equivalent basis.

	Increase (decrease) due to:								Increase (decrease) due to:
	Volume (1)			Rate (1)			Net		Volume (1)			Rate (1)			Net
	(Dollars in thousands)								(Dollars in thousands)
Interest income:
Loans, including fees	$	11,073		$	3,763		$	14,836	$	6,888		$	(6,221	)	$	667
Taxable securities		953			463			1,416		(373	)		(294	)		(667	)
Tax-exempt securities		1,017			(21	)		996		436			(143	)		293
Interest-bearing deposits in other banks		(72	)		250			178		523			(740	)		(217	)
Total interest income	$	12,971		$	4,455		$	17,426	$	7,474		$	(7,398	)	$	76
Interest expense:
Demand and savings	$	253		$	674		$	927	$	158		$	(543	)	$	(385	)
Time		698			965			1,663		133			172			305
FHLB advance		504			291			795
Short-term FHLB advance										(807	)		(329	)		(1,136	)
Long-term FHLB advance										794			(59	)		735
Other borrowings										4			—			4
Federal funds purchased										3			—			3
Subordinated debentures		—			118			118		—			(181	)		(181	)
Repurchase agreements		1			—			1		1			—			1
Total interest expense	$	1,456		$	2,048		$	3,504	$	286		$	(940	)	$	(654	)
Net interest income	$	11,515		$	2,407		$	13,922	$	7,188		$	(6,458	)	$	730

The Company provides for loan losses through regular provisions to the allowance for loan losses. ~~During~~Provisions for loan losses totaled $5,612 and $0 during the periods ended June 30, ~~2019~~2020 and ~~June 30, 2018, no provision for loan losses was provided.~~2019. The ~~Company has experienced low net charge offs, improved asset quality and strengthened problem loan coverage ratios, which led to management’s decision that no~~increase in the provision was ~~required~~due to an increase in the bank’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 experience by our business clients, disruption of supply chains, additional employee costs for businesses due to the ~~periods ended June 30, 2019~~pandemic, higher unemployment rates throughout our footprint and ~~June 30, 2018.~~a large number of customers requesting payment relief. Our Commercial, Commercial Real Estate and Consumer portfolios have been, and are expected to continue to be impacted the most.

Noninterest income for the six-month periods ended June 30, ~~2019~~2020 and ~~2018~~2019 are as follows:

	Six months ended June 30,											Six months ended June 30,
	2019			2018		$ Change			% Change			2020			2019			$ Change			% Change
Service charges	$	3,008		$	2,493	$	515			20.7	%	$	2,398		$	3,008		$	(610	)		-20.3	%
Net gain on sale of securities		14			6		8			133.3	%
Net gain (loss) on equity securities		(31	)		75		(106	)		-141.3	%
Net gain (loss) on sale of securities													—			14			(14	)		-100.0	%
Net gain on equity securities													(146	)		(31	)		(115	)		371.0	%
Net gain on sale of loans		886			807		79			9.8	%		3,088			886			2,202			248.5	%
ATM/Interchange fees		1,857			1,142		715			62.6	%		2,043			1,857			186			10.0	%
Wealth management fees		1,758			1,688		70			4.1	%		1,910			1,758			152			8.6	%
Bank owned life insurance		499			286		213			74.5	%		490			499			(9	)		-1.8	%
Tax refund processing fees		2,750			2,750		—			0.0	%		2,375			2,750			(375	)		-13.6	%
Swap fees													1,102			88			1,014			1152.3	%
Other		647			759		(112	)		-14.8	%		470			559			(89	)		-15.9	%
Total noninterest income	$	11,388		$	10,006	$	1,382			13.8	%	$	13,730		$	11,388		$	2,342			20.6	%

Noninterest income for the six months ended June 30, 2019 was $11,388, an increase of $1,382 or 13.8% from $10,006 for the same period of 2018. The increase was primary due to increases in service charge fees of $515, net gain on sale of loans of $79, ATM/Interchange fees of $715 and bank owned life insurance of $213 which was offset by a decrease in other income of $112.

The increases in service charge fee income, ATM/Interchange fees and bank owned life insurance income is primarily attributable to the Company’s acquisition of UCB during the third quarter of 2018. Net gain on sale of loans increased primarily as a result of an increase in the average loan balance of loans sold. Other income decreased primarily as a result of lower swap fee income.

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

Noninterest income for the six months ended June 30, 2020 was $13,730, an increase of $2,342 or 20.6% from $11,388 for the same period of 2019. The increase was primary due to increases in net gain on sale of loans of $2,202, ATM/Interchange fees of $186 and swap fees of $1,014 which was offset by a decrease in service charges of $610, tax refund processing fees of $375, other income of $89 and an increase in net loss on equity securities of $115. Net gain (loss) on equity securities decreased as a result of market value decreases. Net gain on sale of loans increased primarily as a result of an increase in volume of loans sold. During the six-months ended June 30, 2020, 658 loans were sold, totaling $126,828. During the six-months ended June 30, 2019, 251 loans were sold, totaling $44,441. ATM/Interchange fees increased as a result of increased transaction fees and MasterCard fees. Swap fees increased due to the volume of swaps performed during the six-months ended June 30, 2020 as compared to the same period of 2019. Service charges decreased due to Civista waiving $93 of service fees on deposits accounts related to the COVID-19 pandemic. In addition, overdraft fees have decreased during the period. Other income decreased due to the amortization of mortgage servicing rights as a result of higher loan payoffs.

Additionally, the Company processes state and federal income tax refund payments for customers of third-party income tax preparation vendors for which we receive a fee for processing the refund payments. Tax refund processing fees were ~~$2,750 during~~$2,375 for the period ended June 30, 2019, ~~and 2018.~~a decrease of $375 from $2,750 for the same period of 2019. The decrease is the result of a decrease in volume of transactions processed during the period. This fee income is seasonal in nature, the majority of which is earned in the first quarter of the year.

Noninterest expense for the six-month periods ended June 30, ~~2019~~2020 and ~~2018~~2019 are as follows:

	Six months ended June 30,										Six months ended June 30,
	2019		2018		$ Change			% Change			2020		2019		$ Change			% Change
Compensation expense	$	19,353	$	14,759	$	4,594			31.1	%	$	21,468	$	19,353	$	2,115			10.9	%
Net occupancy expense		2,004		1,623		381			23.5	%		2,040		2,004		36			1.8	%
Equipment expense		943		698		245			35.1	%		1,013		943		70			7.4	%
Contracted data processing		866		3,087		(2,221	)		-71.9	%		925		866		59			6.8	%
FDIC assessment		298		267		31			11.6	%		243		298		(55	)		-18.5	%
State franchise tax		899		681		218			32.0	%		967		899		68			7.6	%
Professional services		1,395		2,035		(640	)		-31.4	%		1,620		1,395		225			16.1	%
Amortization of intangible assets		475		59		416			705.1	%		459		475		(16	)		-3.4	%
ATM expense		924		426		498			116.9	%
ATM/Interchange expense												778		924		(146	)		-15.8	%
Marketing		707		638		69			10.8	%		695		707		(12	)		-1.7	%
Software maintenance expense												844		705		139			19.7	%
Other operating expenses		5,224		3,860		1,364			35.3	%		4,918		4,519		399			8.8	%
Total noninterest expense	$	33,088	$	28,133	$	4,955			17.6	%	$	35,970	$	33,088	$	2,882			8.7	%

Noninterest expense for the six months ended June 30, ~~2019~~2020 was ~~$33,088,~~$35,970, an increase of ~~$4,955,~~$2,882, or ~~17.6%~~8.7%, from ~~$28,133~~$33,088 reported for the same period of ~~2018.~~2019. The primary reasons for the increase were increases in compensation expenses of ~~$4,594, net occupancy~~$2,115, professional services costs of $225, software maintenance expense of ~~$381, equipment expense of $245, state franchise taxes of $218, amortization expense of $416, ATM expense of $498~~$139 and other operating expenses of ~~$1,364,~~$399, offset by decreases in ~~contracted data processing expenses~~FDIC assessments of ~~$2,221~~$55 and ~~professional services costs~~ATM/Interchange expense of ~~$640.~~

$146. The increase in compensation expense ~~is mainly~~was due to ~~being a larger company as a result of the acquisition of UCB. Year-to-date~~increased payroll, overtime pay, 401k expenses, payroll taxes, employee insurance and commission and incentive based costs. The year-to-date average ~~FTE~~full time equivalent (FTE) employees were ~~433.3~~454.2 at June 30, ~~2019,~~2020, an increase of ~~88.3 FTE’s~~20.9 FTEs over ~~2018. In addition, the increase can be attributed to~~2019, which increased payroll and payroll related expenses. Payroll and payroll related expenses also increased due to annual pay increases and increases in commission based costs ~~stock-based compensation and employee insurance costs. The increases in net occupancy expense, equipment expense, amortization expense, ATM expense and other operating expenses~~ are ~~primarily due to being a larger company as a~~the result of ~~the acquisition of UCB.~~increased loan activity. The year-over-year ~~increase~~decrease in ~~state franchise taxes~~FDIC assessments was attributable to anthe remaining small bank assessment credits the bank carried over into 2020 and applied to its first quarter assessment. The increase in ~~equity capital, which is the basis of the Ohio Financial Institutions tax. The decrease in contracted data processing expenses and~~ professional services costs is the result of increased consulting services to implement cost savings and customer services and increased recruitment costs. The decrease in ATM/Interchange expense is primarily due to ~~expenses paid during~~a settlement received in the second quarter of ~~2018 related~~2020 and savings realized by a vendor change. The increase in software maintenance expense is due to ~~the acquisition~~a general increase in software maintenance contracts. The increase in other operating expense is primarily due to increases in software depreciation, amortization of ~~UCB.~~low income housing investments, other loan expense and MSR valuation expense, employee education and training, ATM/debit card losses and communication expense, offset by decreases in travel and lodging and meals.

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

Income tax expense for the six months ended June 30, ~~2019~~2020 totaled ~~$3,430, up $2,022~~$2,001, down $1,429 compared to the same period in ~~2018.~~2019. The effective tax rates for the six-month periods ended June 30, 2020 and 2019 were 12.2% and ~~2018 were~~ 15.8% ~~and 12.3%~~, 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~~decrease in the effective tax rate is due to ~~higher~~lower taxable income for the six-months ended June 30, ~~2019,~~2020, as compared to the same period in ~~2018.~~2019.

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

Shareholders’ equity totaled ~~$324,212~~$336,613 at June 30, ~~2019~~2020 compared to ~~$298,898~~$330,126 at December 31, ~~2018.~~2019. The Company repurchased common shares during the period, which totaled $11,450. The increase in shareholders’ equity ~~included~~was also impacted by net income of ~~$18,330,~~$14,337, a ~~$232~~$114 net decrease in the Company’s pension liability and an increase in the fair value of securities available for sale, net of tax, of ~~$9,829,~~$6,666, which was partially offset by dividends on ~~preferred stock and~~ common stock of ~~$328 and $3,123, respectively.~~$3,599.

All of the Company’s capital ratios exceeded the regulatory minimum guidelines as of June 30, ~~2019~~2020 and December 31, ~~2018~~2019 as identified in the following table:

	Total Risk Based Capital			Tier I Risk Based Capital			CET1 Risk Based Capital			Leverage Ratio			Total Risk Based Capital			Tier I Risk Based Capital			CET1 Risk Based Capital			Leverage Ratio
Company Ratios—June 30, 2019		16.8	%		15.9	%		13.6	%		12.4	%
Company Ratios—December 31, 2018		16.1	%		15.3	%		12.9	%		12.2	%
Company Ratios—June 30, 2020														14.0	%		13.0	%		11.6	%		10.4	%
Company Ratios—December 31, 2019														16.1	%		15.3	%		13.6	%		12.3	%
For Capital Adequacy Purposes		8.0	%		6.0	%		4.5	%		4.0	%		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	%		10.0	%		8.0	%		6.5	%		5.0	%

The Company maintains a conservative liquidity position. All securities are classified as available for sale. Securities, with maturities of one year or less, totaled ~~$10,851,~~$8,252, or ~~3.0%~~2.2% of the total security portfolio at June 30, ~~2019.~~2020. The available for sale portfolio helps to provide the Company with the ability to meet its funding needs. The Condensed Consolidated Statements of Cash Flows (Unaudited) contained in the consolidated financial statements detail the Company’s cash flows from operating activities resulting from net earnings.

As reported in the Condensed Consolidated Statements of Cash Flows (Unaudited), our cash flows are classified for financial reporting purposes as operating, investing or financing cash flows. Net cash provided by operating activities was ~~$20,369~~$11,590 and ~~$5,324~~$20,369 for the six months ended June 30, 2020 and 2019, respectively. The primary additions to cash from operating activities are from proceeds from the sale of loans. In addition, in 2020, additions from the change in the provision of loan losses and ~~2018, respectively. These amounts differ~~net deferred loan fees of $5,612 and $8,816, respectively added to cash from ~~net income~~operating activities. The primary use of cash from operating activities is from loans originated for sale. The increase in originations and sales of loans held for sale is due to ~~a variety of cash receipts and disbursements that did not affect net income for the respective periods.~~an increase in volume due to refinances as rates have declined. Net cash used for investing activities was ~~$38,740~~$326,182 and ~~$20,676~~$38,740 for the six months ended June 30, ~~2019~~2020 and ~~2018,~~2019, respectively, principally reflecting our loan and investment security activities. Cash provided by and used for deposits, borrowings and ~~borrowings~~purchase of treasury shares comprised most of our financing activities, which resulted in net cash provided by of ~~$25,431~~$462,577 and ~~$15,989~~$25,431 for the six months ended June 30, ~~2019~~2020 and ~~2018,~~2019, respectively.

Future loan demand of Civista may be funded by increases in deposit accounts, proceeds from payments on existing loans, the maturity of securities, and the sale of securities classified as available for sale. Additional sources of funds may also come from borrowing in the Federal Funds market and/or borrowing from the FHLB. Through its correspondent banks, Civista maintains federal funds borrowing lines totaling ~~$42,500.~~$50,000. As of June 30, ~~2019,~~2020, Civista had total credit availability with the FHLB of ~~$551,650~~$603,042 with standby letters of credit totaling $20,000 and a remaining borrowing capacity of approximately ~~$355,350.~~$458,042. In addition, ~~Civista Bancshares, Inc.~~CBI maintains a credit line totaling $10,000.

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

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

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

The Federal Reserve Board, together with the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation, 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.

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 to hedge interest rate risk in the past and does not currently intend to purchase such instruments in the near future. Financial institutions are also subject to prepayment risk in falling rate environments. For example, mortgage loans and other financial assets may be prepaid by a debtor

so that the debtor may refinance its obligations at new, lower rates. Prepayments of assets carrying higher rates reduce the Company’s interest income and overall asset yields. A large portion of an institution’s liabilities may be short-term or due on demand, while most of its assets may be invested in long-term loans or securities. Accordingly, the Company seeks to have in place sources of cash to meet short-term demands. These funds can be obtained by increasing deposits, borrowing, or selling assets. FHLB advances and wholesale borrowings may also be used as important sources of liquidity for the Company.

The following table provides information about the Company’s financial instruments that were sensitive to changes in interest rates as of December 31, ~~2018~~2019 and June 30, ~~2019,~~2020, 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~~decreases of 100 basis points and 200 basis points at June 30, ~~2019~~2020 and December 31, ~~2018.~~2019.

The Company had derivative financial instruments as of December 31, ~~2018~~2019 and June 30, ~~2019.~~2020. 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	Net Portfolio Value																	Net Portfolio Value
		June 30, 2019								December 31, 2018									June 30, 2020							December 31, 2019
Change in Rates		Dollar Amount		Dollar Change			Percent Change			Dollar Amount		Dollar Change			Percent Change				Dollar Amount		Dollar Change		Percent Change			Dollar Amount		Dollar Change			Percent Change
+200bp			442,718		46,599			12	%		417,572		29,451			8	%			483,152		71,705		17	%		449,843		31,596			8	%
+100bp			426,037		29,918			8	%		409,514		21,393			6	%			455,738		44,291		11	%		437,195		18,948			5	%
Base			396,119		—			—			388,121		—			—				411,447		—		—			418,247		—			—
-100bp			385,046		(11,073	)		-3	%		366,486		(21,393	)		-6	%			438,284		26,837		7	%		394,943		(23,304	)		-6	%
-200bp																				472,406		60,959		15	%		416,878		(1,369	)		0	%

The change in net portfolio value from December 31, ~~2018~~2019 to June 30, ~~2019,~~2020, can be attributed to a couple of factors. ~~While~~There was a nearly parallel drop in the yield curve ~~has fallen~~ from the end of the year, and both the volume and mix of assets and funding sources has changed. The volume of loans has increased, but the mix has shifted toward cash. Both the increase in loans and cash are primarily a result of PPP loans and the proceeds of those loans on deposit, respectively. Similarly, the volume and mix of ~~deposits has increased, while the mix~~liabilities has shifted ~~away~~toward deposits and other borrowings. Deposits increased as a result of PPP loan proceeds on deposit and other borrowings increased as a result of PPP funding acquired from ~~borrowed money toward deposits.~~the PPPLF. The ~~balance change~~mix shifts from the end of the year led to ~~an increase~~a slight decrease in the base net portfolio value. ~~Assets~~Generally, assets have shifted toward less volatile components while liabilities have shifted toward more volatile components. Combined, this led to ~~a small~~an increase in volatility. 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 larger decrease in the market value of ~~liabilities.~~liabilities than assets. Accordingly, we see ~~a small~~an increase in the net portfolio value. ~~However, a~~For 100 and 200 basis point downward ~~change~~changes in rates, ~~would lead to a decrease in the net portfolio value as~~ the market value of liabilities would increase more quickly than the market value of ~~assets.~~assets, leading to an increase in the net portfolio value.

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 June 30, ~~2019,~~2020, were effective.

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.

~~There were no material changes during the current period to~~The following information updates our risk factors and should be read in conjunction with 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, ~~2018.~~2019, and in “Item 1A. Risk Factors” of the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2020.

As a participating lender in the SBA Paycheck Protection Program (“PPP”), Civista is subject to additional risks of litigation from its customers or other parties regarding Civista’s processing of loans for the PPP and risks that the SBA may not fund some or all PPP loan guaranties.

On March 27, 2020, President Trump signed the CARES Act, which included a loan program administered through the SBA referred to as the PPP. Under the PPP, small businesses and other entities and individuals can apply for loans from existing SBA lenders and other approved regulated lenders that enroll in the program, subject to numerous limitations and eligibility criteria. Civista has participated as a lender in the PPP. The PPP opened on April 3, 2020; however, because of the short timeframe between the passing of the CARES Act and the opening of the PPP, there was some ambiguity in the laws, rules and guidance regarding the operation of the PPP, which exposes Civista to risks relating to noncompliance with the PPP.

Since the opening of the PPP, several other larger banks have been subject to litigation regarding the process and procedures that such banks used in processing applications for the PPP and claims related to agent fees. Civista may be exposed to the risk of similar litigation, from both customers and non-customers that approached Civista regarding PPP loans, regarding its process and procedures used in processing applications for the PPP, or litigation from agents with respect to agent fees. If any such litigation is filed against Civista and is not resolved in a favorable manner, it may result in significant financial liability or adversely affect the Company’s reputation. In addition, litigation can be costly, regardless of outcome. Any financial liability, litigation costs or reputational damage caused by PPP-related litigation could have a material adverse impact on our business, financial condition and results of operations.

Civista also has credit risk on PPP loans if a determination is made by the SBA that there is a deficiency in the manner in which a PPP loan was originated, funded, or serviced by Civista, such as an issue with the eligibility of a borrower to receive a PPP loan, which may or may not be related to the ambiguity in the laws, rules and guidance regarding the operation of the PPP. In the event of a loss resulting from a default on a PPP loan and a determination by the SBA that there was a deficiency in the manner in which the PPP loan was originated, funded, or serviced by Civista, the SBA may deny its liability under the guaranty, reduce the amount of the guaranty, or, if it has already paid under the guaranty, seek recovery of any loss related to the deficiency from Civista.

THE OUTBREAK OF THE RECENT COVID-19, OR AN OUTBREAK OF ANOTHER HIGHLY INFECTIOUS OR CONTAGIOUS DISEASE, COULD ADVERSELY AFFECT OUR BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Our business is dependent upon the willingness and ability of our customers to conduct banking and other financial transactions. The spread of a highly infectious or contagious disease, such as COVID-19. Could cause severe and prolonged disruptions to the economies in the U.S. and our market areas, which could in turn disrupt the business activities, and operations of our customers, as well as our business and operations. Since January 2020, the COVID-19 outbreak has caused significant disruption in the financial markets both globally and in the United States. The spread of COVID-19, or an outbreak of another highly infectious or contagious disease, including the time such outbreak takes to wane and the time it takes our markets to return to normal, may result in a significant decrease in business and/or cause our customers to be unable to meet existing payment or other obligations to us, particularly in the event of a significant spread of COVID-19 or an outbreak of an infectious disease in our market area. Although we maintain contingency plans for pandemic outbreaks, a spread of COVID-19, or an outbreak of another contagious disease could also negatively impact the availability of key personnel necessary to conduct our business activities. Such a spread or outbreak also negatively impacts the business and operations of third-party service providers who perform critical services for us. The spread of COVID-19, or another highly infectious or contagious disease, or the failure to contain such spread could have a material adverse effect to our business, financial condition, and results of operations.

On March 11. 2020, the World Health Organization announced that infections of COVID-19 had become pandemic, and on March 13, the U.S. President announced a national emergency relating to the disease. National, state and local authorities have recommended social distancing and imposed quarantine and isolation measures on large portions of the population, including mandatory stay-at-home orders and business closures. More recently, authorities have issued recommendations and mandates, including a state-wide mask mandate in Ohio, in connection with the reopening of businesses. These measures, while intended to protect human life, are expected to continue to have serious adverse impacts on the U.S. and our local economies of uncertain severity and duration. The effectiveness of economic stabilization efforts, including government payments to affected citizens and industries, is uncertain. Some economists are predicting the United States will soon enter a recession. Any of the foregoing factors, or other cascading effects of the pandemic that are not currently foreseeable, could materially affect our business, including our customers’ willingness to conduct banking transactions, their ability to pay on existing obligations and the availability of liquidity, which would negatively affect our financial condition and results of operations. The duration of any such impacts cannot be predicted.

OPERATIONAL IMPACTS FROM THE COVID-19 PANDEMIC COULD ADVERSELY AFFECT OUR BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

In response to COVID-19, the Company has modified its business practices with a portion of employees working remotely from their homes to limit interruptions to operations as much as possible and to help reduce the risk of COVID-19 infecting entire departments. Reduced workforces which may be caused by, but not limited to, illness, quarantine, stay at home or other government mandates, or difficulties transitioning back to an in office environment, could result in an adverse impact to the Company’s operations and financial performance. Employees with health conditions putting them at higher risk of adverse effects from COVID-19 are working remotely. The Company is encouraging virtual meetings and conference calls in place of in-person meetings, including the annual shareholders meeting which was held via teleconference this year. Additionally, travel has been restricted. The Company is promoting social distancing, frequent hand washing and thorough disinfection of all surfaces. Civista’s financial service location lobbies have been closed except for advance appointments only. Branch drive-ups, call center, ATMs and online/mobile banking services continue to operate and are the preferred option of service. Even with the precautions undertaken, the continued spread or prolonged impact of COVID-19 could negatively impact the availability of key personnel or significant numbers of the Company's staff, who are necessary to conduct the Company' business.

Further, technology in employees’ homes may not be as robust as in the Company’s offices and could cause the networks, information systems, applications, and other tools available to employees to be more limited or less reliable than in our offices. The continuation of these work-from-home measures also introduces additional operational risk, including increased cybersecurity risk. These cybersecurity risks include greater phishing, malware, and other cybersecurity attacks, vulnerability to disruptions of the Company’s information technology infrastructure and telecommunications systems for remote operations, increased risk of unauthorized dissemination of confidential information, limited ability to restore the systems in the event of a systems failure or interruption, greater risk of a security breach resulting in destruction or misuse of valuable information, and potential impairment of the Company’s ability to perform critical functions, including wiring funds, all of which could expose the Company to risks of data or financial loss, litigation and liability and could seriously disrupt operations and the operations of any impacted customers.

The Company also relies on many third parties in business operations, including appraisers of real property collateral, vendors that supply essential services such as loan servicers, providers of financial information, systems and analytical tools and providers of electronic payment and settlement systems, and local and federal government agencies, offices, and courthouses. In light of the developing measures responding to the pandemic, many of these entities may limit the availability and access of their services. For example, loan originations could be delayed due to the limited availability of real estate appraisers for the underlying collateral. Loan closings could be delayed due to reductions in available staff in recording offices or the closing of courthouses in certain counties, which slows the process for title work, and mortgage and UCC filings in those counties. If the third-party service providers continue to have limited capacities for a prolonged period or if additional limitations or potential disruptions in these services materialize, it may negatively affect the Company’s operations.

THE COMPANY MAY BE EXPOSED TO INCREASED INTEREST RATE RISK AS A RESULT OF THE COVID-19 PANDEMIC.

The Company’s net interest income, lending activities, deposits and profitability could be negatively affected by volatility in interest rates caused by uncertainties stemming from COVID-19. In March 2020, the Federal Reserve lowered the target range for the federal funds rate to a range from 0% to 0.25%, citing concerns about the impact of COVID-19 on markets and stress in the energy sector. A prolonged period of extremely volatile and unstable market conditions would likely increase the Company’s funding costs and negatively affect market risk mitigation strategies. Higher revenue volatility from changes in interest rates and spreads to benchmark indices could cause a loss of future net interest income and a decrease in the fair market values of the Company’s assets. Fluctuations in interest rates will impact both the level of income and expense recorded on most of the Company’s assets and liabilities and the market value of all interest-earning assets and interest-bearing liabilities, which in turn could have a material adverse effect on the Company’s net income, results of operations and financial condition. Low rates increase the risk in the U.S. of a negative interest rate environment in which interest rates drop below zero, either broadly or for some types of instruments. Such an occurrence would likely further reduce the interest the Company earns on loans and other earning assets, while also likely requiring the Company to pay to maintain its deposits with the Federal Reserve. The Company’s systems may not be able to adequately handle a negative interest rate environment and not all variable rate instruments are designed for such a circumstance. The Company cannot predict the nature or timing of future changes in monetary policies in response to the outbreak or the precise effects that they may have on the Company’s activities and financial results.

~~None~~During the second quarter of 2020, the Company purchased common shares as follows:

On December 17, 2019, the Company announced the implementation of a common share repurchase program which authorized the Company to buy up to 672,000 shares of its outstanding common shares. The expiration date of the common share repurchase program is December 17, 2020. As of June 30, 2020, the Company had purchased the full amount of 672,000 shares authorized under the repurchase program.

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.

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

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

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

PART I.	Financial Information
Item 1.	Financial Statements:
	Consolidated Balance Sheets (Unaudited) June 30, ~~2019~~2020 and December 31, ~~2018~~2019	2
	Consolidated Statements of Operations (Unaudited) Three- and six-months ended June 30, ~~2019~~2020 and ~~2018~~2019	3
	Consolidated Statements of Comprehensive Income (Unaudited) Three- and six-months ended June 30, ~~2019~~2020 and ~~2018~~2019	4
	~~Condensed~~ Consolidated Statement of Changes in Shareholders’ Equity (Unaudited) Three- and six-months ended June 30, ~~2019~~2020 and ~~2018~~2019	5
	Condensed Consolidated Statements of Cash Flows (Unaudited) Six months ended June 30, ~~2019~~2020 and ~~2018~~2019	7
	Notes to Interim Consolidated Financial Statements (Unaudited)	8-36
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	~~37-47~~38-50
Item 3.	Quantitative and Qualitative Disclosures ~~about~~About Market Risk	~~48-49~~51-52
Item 4.	Controls and Procedures	5053

PART II.	Other Information
Item 1.	Legal Proceedings	5154
Item 1A.	Risk Factors	5154
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5156
Item 3.	Defaults ~~upon~~Upon Senior Securities	5156
Item 4.	Mine Safety Disclosures	5156
Item 5.	Other Information	5156
Item 6.	Exhibits	5257
Signatures		5358

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

For the six months ended June 30, 2019	Beginning balance		Charge-offs			Recoveries		Provision			Ending Balance
Commercial & Agriculture	$	1,747	$	(27	)	$	4	$	104		$	1,828
Commercial Real Estate:
Owner Occupied		1,962		(60	)		239		(132	)		2,009
Non-Owner Occupied		5,803		—			44		20			5,867
Residential Real Estate		1,531		(203	)		162		208			1,698
Real Estate Construction		1,046		(24	)		—		113			1,135
Farm Real Estate		397		—			2		(34	)		365
Consumer and Other		284		(81	)		51		(53	)		201
Unallocated		909		—			—		(226	)		683
Total	$	13,679	$	(395	)	$	502	$	—		$	13,786

For the six months ended June 30, 2018	Beginning balance		Charge-offs			Recoveries		Provision			Ending Balance
Commercial & Agriculture	$	1,562	$	(248	)	$	104	$	212		$	1,630
Commercial Real Estate:
Owner Occupied		2,043		(193	)		130		181			2,161
Non-Owner Occupied		5,307		(45	)		21		(148	)		5,135
Residential Real Estate		1,910		(62	)		93		(250	)		1,691
Real Estate Construction		834		—			—		27			861
Farm Real Estate		430		—			3		(23	)		410
Consumer and Other		290		(103	)		33		80			300
Unallocated		758		—			—		(79	)		679
Total	$	13,134	$	(651	)	$	384	$	—		$	12,867

	2020			2019
Loan Servicing Rights:
Beginning of year	$	1,562		$	1,664
Additions		543			247
Disposals		—			—
Amortized to expense		(226	)		(247	)
Other charges		—			—
Change in valuation allowance		(162	)		(102	)
End of year	$	1,717		$	1,562


Valuation allowance:
Beginning of year	$	102		$	—
Additions expensed		162			102
Reductions credited to operations		—			—
Direct write-offs		—			—
End of year	$	264		$	102

	June 30, 2020		December 31, 2019
Securities pledged for repurchase agreements:
U.S. Treasury securities	$	917	$	810
Obligations of U.S. government agencies		22,691		17,864
Total securities pledged	$	23,608	$	18,674
Gross amount of recognized liabilities for repurchase agreements	$	23,608	$	18,674
Amounts related to agreements not included in offsetting disclosures above	$	—	$	—

	Classification on the Consolidated Balance Sheet	June 30, 2019
Assets:
Operating lease	Other assets	$	2,452
Total lease assets		$	2,452
Liabilities:
Operating lease	Accrued expenses and other liabilities	$	2,452
Total lease liabilities		$	2,452


~~Weighted-average remaining lease term-operating leases (years)~~	~~6.80~~
~~Weighted-average discount rate-operating leases~~	~~3.11~~	%

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number (or Approximate Dollar Value) of Shares (Units) that May Yet Be Purchased Under the Plans or Programs
April 1, 2020 - April 30, 2020		25,297	$	14.04		25,297		—
May 1, 2020 - May 31, 2020		—	$	—		—		—
June 1, 2020 - June 30, 2020		—	$	—		—		—
Total		25,297	$	14.04		25,297		—

Exhibit	Description	Location

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

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

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

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

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

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

101	The following materials from the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, ~~2019,~~2020, formatted in ~~XBRL (eXtensible~~Inline Extensible Business Reporting ~~Language) pursuant to Rule 405 of Regulation S-T:~~Language: (i) Consolidated Balance Sheets (Unaudited) as of June 30, ~~2019~~2020 and December 31, ~~2018;~~2019; (ii) Consolidated Statements of Income (Unaudited) for the three- and ~~six-months~~six- months ended June 30, ~~2019~~2020 and ~~2018;~~2019; (iii) Consolidated Statements of Comprehensive Income (Unaudited) for the three- and ~~six-months~~six- months ended June 30, ~~2019~~2020 and ~~2018;~~2019; (iv) ~~Condensed~~ Consolidated Statement of Shareholders’ Equity (Unaudited) for the ~~six~~three- and six- months ended June 30, ~~2019~~2020 and ~~2018;~~2019; (v) Condensed Consolidated Statement of Cash Flows (Unaudited) for the six months ended June 30, ~~2019~~2020 and ~~2018;~~2019; and (vi) Notes to Interim Consolidated Financial Statements (Unaudited).	Included herewith

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


/s/ Dennis G. Shaffer		August ~~9, 2019~~10, 2020
Dennis G. Shaffer		Date
~~President,~~ Chief Executive Officer and President


/s/ Todd A. Michel		August ~~9, 2019~~10, 2020
Todd A. Michel		Date
Senior Vice President, Controller