Loans

Peoples' loan portfolio consists of various types of loans originated primarily as a result of lending opportunities within Peoples' primary market areas of northeastern, central, southwestern and southeastern Ohio, west central West Virginia, and northeastern Kentucky. Acquired loans consist of loans purchased in 2012 or thereafter in a business combination. Loans that were acquired and subsequently re-underwritten, are reported as originated upon execution of such credit actions (for example, renewals and increases in lines of credit). The major classifications of loan balances (in each case, net of deferred fees and costs) excluding loans held for sale, were as follows:



(Dollars in thousands)	September 30, 2017		December 31, 2016
Originated loans:
Commercial real estate, construction	$	111,187	$	84,626
Commercial real estate, other	573,256		531,557
Commercial real estate	684,443		616,183
Commercial and industrial	407,468		378,131
Residential real estate	304,094		307,490
Home equity lines of credit	88,421		85,617
Consumer, indirect	335,436		252,024
Consumer, other	68,286		67,579
Consumer	403,722		319,603
Deposit account overdrafts	507		1,080
Total originated loans	$	1,888,655	$	1,708,104
Acquired loans:
Commercial real estate, construction	$	8,565	$	10,100
Commercial real estate, other	174,157		204,466
Commercial real estate	182,722		214,566
Commercial and industrial	36,462		44,208
Residential real estate	194,950		228,435
Home equity lines of credit	22,366		25,875
Consumer, indirect	408		808
Consumer, other	1,472		2,940
Consumer	1,880		3,748
Total acquired loans	$	438,380	$	516,832
Loans, net of deferred fees and costs	$	2,327,035	$	2,224,936

Peoples has acquired various loans through business combinations for which there was, at acquisition, evidence of deterioration of credit quality since origination, and for which it was probable that all contractually required payments would not be collected. The carrying amounts of these purchased credit impaired loans included in the loan balances above are summarized as follows:



(Dollars in thousands)	September 30, 2017		December 31, 2016
Commercial real estate, other	$	8,235	$	11,476
Commercial and industrial	818		1,573
Residential real estate	20,497		23,306
Consumer	41		76
Total outstanding balance	$	29,591	$	36,431
Net carrying amount	$	20,581	$	26,524

Changes in the accretable yield for purchased credit impaired loans for the nine months ended September 30, 2017 were as follows:



(Dollars in thousands)	Accretable Yield
Balance, December 31, 2016	$	7,132
Reclassification from nonaccretable to accretable	1,285
Accretion	(1,279		)
Balance, September 30, 2017	$	7,138

Peoples completes annual re-estimations of cash flows on acquired purchased credit impaired loans in August of each year. The above reclassification from nonaccretable to accretable related to the re-estimation of cash flows on the purchased credit impaired loan portfolio, coupled with the loans performing better than expected. The majority of the reclassification related to prepayment speeds decreasing in the residential portfolio, resulting in higher total expected cash flows.

Cash flows expected to be collected on purchased credit impaired loans are estimated by incorporating several key assumptions, similar to the initial estimate of fair value. These key assumptions include probability of default, and the amount of actual prepayments after the acquisition date. Prepayments affect the estimated life of the loans and could change the amount of interest income, and possibly the principal expected to be collected. In re-forecasting future estimated cash flows, credit loss expectations are adjusted as necessary.

Peoples pledges certain loans secured by 1-4 family and multifamily residential mortgages under a blanket collateral agreement to secure borrowings from the FHLB. The amount of such pledged loans totaled $490.1 million and $542.5 million at September 30, 2017 and December 31, 2016, respectively. Peoples also pledges commercial loans to secure borrowings with the FRB. The outstanding balances of these loans totaled $84.0 million and $152.0 million at September 30, 2017 and December 31, 2016, respectively.

Nonaccrual and Past Due Loans

A loan is considered past due if any required principal and interest payments have not been received as of the date such payments were required to be made under the terms of the loan agreement. A loan may be placed on nonaccrual status regardless of whether or not such loan is considered past due.

The recorded investments in loans on nonaccrual status and loans delinquent for 90 days or more and accruing were as follows:



	Nonaccrual Loans				Loans 90+ Days Past Due and Accruing
(Dollars in thousands)	September 30, 2017		December 31, 2016		September 30, 2017		December 31, 2016
Originated loans:
Commercial real estate, construction	$	776	$	826	$	—	$	—
Commercial real estate, other	6,675		9,934		374		—
Commercial real estate	7,451		10,760		374		—
Commercial and industrial	780		1,712		739		—
Residential real estate	3,437		3,778		231		183
Home equity lines of credit	344		383		15		—
Consumer, indirect	154		130		—		10
Consumer, other	16		11		—		—
Consumer	170		141		—		10
Total originated loans	$	12,182	$	16,774	$	1,359	$	193
Acquired loans:
Commercial real estate, other	$	982	$	1,609	$	898	$	1,506
Commercial and industrial	498		390		93		387
Residential real estate	2,210		2,317		1,184		1,672
Home equity lines of credit	330		231		—		—
Consumer, indirect	—		—		—		13
Consumer, other	17		4		8		—
Consumer	17		4		8		13
Total acquired loans	$	4,037	$	4,551	$	2,183	$	3,578
Total loans	$	16,219	$	21,325	$	3,542	$	3,771

During the first nine months of 2017, Peoples' nonaccrual loans declined largely due to several payoffs on larger relationships.

The following table presents the aging of the recorded investment in past due loans:



	Loans Past Due								Current Loans		Total Loans
(Dollars in thousands)	30 - 59 days		60 - 89 days		90 + Days		Total
September 30, 2017
Originated loans:
Commercial real estate, construction	$	—	$	—	$	—	$	—	$	111,187	$	111,187
Commercial real estate, other	1,693		229		6,573		8,495		564,761		573,256
Commercial real estate	1,693		229		6,573		8,495		675,948		684,443
Commercial and industrial	1,292		155		1,396		2,843		404,625		407,468
Residential real estate	2,076		1,368		1,777		5,221		298,873		304,094
Home equity lines of credit	346		184		145		675		87,746		88,421
Consumer, indirect	1,731		358		33		2,122		333,314		335,436
Consumer, other	158		89		14		261		68,025		68,286
Consumer	1,889		447		47		2,383		401,339		403,722
Deposit account overdrafts	—		—		—		—		507		507
Total originated loans	$	7,296	$	2,383	$	9,938	$	19,617	$	1,869,038	$	1,888,655
Acquired loans:
Commercial real estate, construction	$	—	$	—	$	—	$	—	$	8,565	$	8,565
Commercial real estate, other	544		176		1,089		1,809		172,348		174,157
Commercial real estate	544		176		1,089		1,809		180,913		182,722
Commercial and industrial	17		24		463		504		35,958		36,462
Residential real estate	1,498		1,141		2,436		5,075		189,875		194,950
Home equity lines of credit	112		—		280		392		21,974		22,366
Consumer, indirect	2		—		—		2		406		408
Consumer, other	13		18		24		55		1,417		1,472
Consumer	15		18		24		57		1,823		1,880
Total acquired loans	$	2,186	$	1,359	$	4,292	$	7,837	$	430,543	$	438,380
Total loans	$	9,482	$	3,742	$	14,230	$	27,454	$	2,299,581	$	2,327,035



	Loans Past Due								Current Loans		Total Loans
(Dollars in thousands)	30 - 59 days		60 - 89 days		90 + Days		Total
December 31, 2016
Originated loans:
Commercial real estate, construction	$	—	$	—	$	826	$	826	$	83,800	$	84,626
Commercial real estate, other	1,420		225		9,305		10,950		520,607		531,557
Commercial real estate	1,420		225		10,131		11,776		604,407		616,183
Commercial and industrial	1,305		700		1,465		3,470		374,661		378,131
Residential real estate	7,288		1,019		1,895		10,202		297,288		307,490
Home equity lines of credit	316		45		248		609		85,008		85,617
Consumer, indirect	2,080		273		77		2,430		249,594		252,024
Consumer, other	346		38		—		384		67,195		67,579
Consumer	2,426		311		77		2,814		316,789		319,603
Deposit account overdrafts	—		—		—		—		1,080		1,080
Total originated loans	$	12,755	$	2,300	$	13,816	$	28,871	$	1,679,233	$	1,708,104
Acquired loans:
Commercial real estate, construction	$	—	$	—	$	40	$	40	$	10,060	$	10,100
Commercial real estate, other	1,220		208		2,271		3,699		200,767		204,466
Commercial real estate	1,220		208		2,311		3,739		210,827		214,566
Commercial and industrial	148		3		777		928		43,280		44,208
Residential real estate	5,918		2,496		2,974		11,388		217,047		228,435
Home equity lines of credit	208		65		178		451		25,424		25,875
Consumer, indirect	4		—		—		4		804		808
Consumer, other	51		—		13		64		2,876		2,940
Consumer	55		—		13		68		3,680		3,748
Total acquired loans	$	7,549	$	2,772	$	6,253	$	16,574	$	500,258	$	516,832
Total loans	$	20,304	$	5,072	$	20,069	$	45,445	$	2,179,491	$	2,224,936

During the first nine months of 2017, Peoples' delinquency trends improved compared to the balances at December 31, 2016, as total loans past due declined in both the originated and acquired loan portfolios.

Credit Quality Indicators

As discussed in Note 1 of the Notes to the Consolidated Financial Statements included in Peoples' 2016 Form 10-K, Peoples categorizes the majority of its loans into risk categories based upon an established risk grading matrix using a scale of 1 to 8. A description of the general characteristics of the risk grades used by Peoples is as follows:

“Pass” (grades 1 through 4): Loans in this risk category involve borrowers of acceptable-to-strong credit quality and risk who have the apparent ability to satisfy their loan obligations. Loans in this risk grade would possess sufficient mitigating factors, such as adequate collateral or strong guarantors possessing the capacity to repay the loan if required, for any weakness that may exist.

“Special Mention” (grade 5): Loans in this risk grade are the equivalent of the regulatory definition of “Other Assets Especially Mentioned.” Loans in this risk category possess some credit deficiency or potential weakness, which requires a high level of management attention. Potential weaknesses include declining trends in operating earnings and cash flows and/or reliance on a secondary source of repayment. If left uncorrected, these potential weaknesses may result in noticeable deterioration of the repayment prospects for the loan or in Peoples' credit position.

“Substandard” (grade 6): Loans in this risk grade are inadequately protected by the borrower's current financial condition and payment capability or the collateral pledged, if any. Loans so classified have one or more well-defined weaknesses that jeopardize the orderly repayment of the loan. They are characterized by the distinct possibility that Peoples will sustain some loss if the deficiencies are not corrected.

“Doubtful” (grade 7): Loans in this risk grade have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or orderly repayment in full, on the basis of current existing facts, conditions and values, highly questionable and improbable. Possibility of loss is extremely high, but because of certain important and reasonably specific factors that may work to the advantage and strengthening of the exposure, classification of the loan as an estimated loss is deferred until its more exact status may be determined.

“Loss” (grade 8): Loans in this risk grade are considered to be non-collectible and of such little value that their continuance as bankable assets is not warranted. This does not mean a loan has absolutely no recovery value, but rather it is neither practical nor desirable to defer writing off the loan, even though partial recovery may be obtained in the future. Charge-offs against the allowance for loan losses are taken in the period in which the loan becomes uncollectible. Consequently, Peoples typically does not maintain a recorded investment in loans within this category.

Consumer loans and other smaller-balance loans are evaluated and categorized as “substandard,” “doubtful,” or “loss” based upon the regulatory definition of these classes and consistent with regulatory requirements. All other loans not evaluated individually, nor meeting the regulatory conditions to be categorized as described above, would be considered as being “not rated.”

The following table summarizes the risk category of loans within Peoples' loan portfolio based upon the most recent analysis performed:



	Pass Rated (Grades 1 - 4)		Special Mention (Grade 5)		Substandard (Grade 6)		Doubtful (Grade 7)		Not Rated		Total Loans
(Dollars in thousands)
September 30, 2017
Originated loans:
Commercial real estate, construction	$	104,446	$	5,510	$	776	$	—	$	455	$	111,187
Commercial real estate, other	541,073		21,062		11,121		—		—		573,256
Commercial real estate	645,519		26,572		11,897		—		455		684,443
Commercial and industrial	382,332		18,943		6,157		—		36		407,468
Residential real estate	18,717		1,033		11,499		182		272,663		304,094
Home equity lines of credit	596		—		—		—		87,825		88,421
Consumer, indirect	59		9		—		—		335,368		335,436
Consumer, other	38		—		—		—		68,248		68,286
Consumer	97		9		—		—		403,616		403,722
Deposit account overdrafts	—		—		—		—		507		507
Total originated loans	$	1,047,261	$	46,557	$	29,553	$	182	$	765,102	$	1,888,655
Acquired loans:
Commercial real estate, construction	$	8,513	$	—	$	52	$	—	$	—	$	8,565
Commercial real estate, other	157,610		8,057		8,490		—		—		174,157
Commercial real estate	166,123		8,057		8,542		—		—		182,722
Commercial and industrial	34,651		220		1,591		—		—		36,462
Residential real estate	13,082		604		1,365		—		179,899		194,950
Home equity lines of credit	143		—		—		—		22,223		22,366
Consumer, indirect	19		—		—		—		389		408
Consumer, other	42		—		—		—		1,430		1,472
Consumer	61		—		—		—		1,819		1,880
Total acquired loans	$	214,060	$	8,881	$	11,498	$	—	$	203,941	$	438,380
Total loans	$	1,261,321	$	55,438	$	41,051	$	182	$	969,043	$	2,327,035



	Pass Rated (Grades 1 - 4)		Special Mention (Grade 5)		Substandard (Grade 6)		Doubtful (Grade 7)		Not Rated		Total Loans
(Dollars in thousands)
December 31, 2016
Originated loans:
Commercial real estate, construction	$	73,423	$	—	$	826	$	—	$	10,377	$	84,626
Commercial real estate, other	505,029		11,855		14,673		—		—		531,557
Commercial real estate	578,452		11,855		15,499		—		10,377		616,183
Commercial and industrial	346,791		15,210		16,130		—		—		378,131
Residential real estate	47,336		957		12,828		304		246,065		307,490
Home equity lines of credit	465		—		135		—		85,017		85,617
Consumer, indirect	15		13		—		—		251,996		252,024
Consumer, other	50		—		—		—		67,529		67,579
Consumer	65		13		—		—		319,525		319,603
Deposit account overdrafts	—		—		—		—		1,080		1,080
Total originated loans	$	973,109	$	28,035	$	44,592	$	304	$	662,064	$	1,708,104
Acquired loans:
Commercial real estate, construction	$	10,046	$	—	$	54	$	—	$	—	$	10,100
Commercial real estate, other	181,781		12,475		10,210		—		—		204,466
Commercial real estate	191,827		12,475		10,264		—		—		214,566
Commercial and industrial	42,809		227		978		194		—		44,208
Residential real estate	17,170		709		1,404		—		209,152		228,435
Home equity lines of credit	202		—		—		—		25,673		25,875
Consumer, indirect	51		—		—		—		757		808
Consumer, other	53		—		—		—		2,887		2,940
Consumer	104		—		—		—		3,644		3,748
Total acquired loans	$	252,112	$	13,411	$	12,646	$	194	$	238,469	$	516,832
Total loans	$	1,225,221	$	41,446	$	57,238	$	498	$	900,533	$	2,224,936

In the first nine months of 2017, Peoples' classified loans, which are loans categorized as substandard or doubtful, declined compared to the balances at December 31, 2016 mostly due to loan payoffs.

Impaired Loans

The following table summarizes loans classified as impaired:



	Unpaid Principal Balance		Recorded Investment				Total Recorded Investment				Average Recorded Investment		Interest Income Recognized
			With Allowance		Without Allowance				Related Allowance
(Dollars in thousands)
September 30, 2017
Commercial real estate, construction	$	821	$	—	$	776	$	776	$	—	$	805	$	—
Commercial real estate, other	15,109		5,045		9,180		14,225		136		14,763		727
Commercial real estate	15,930		5,045		9,956		15,001		136		15,568		727
Commercial and industrial	2,794		2,016		603		2,619		424		2,651		384
Residential real estate	25,974		654		23,724		24,378		151		24,273		1,675
Home equity lines of credit	1,718		65		1,649		1,714		13		1,435		122
Consumer, indirect	171		18		154		172		2		155		11
Consumer, other	92		28		61		89		21		101		7
Consumer	263		46		215		261		23		256		18
Total	$	46,679	$	7,826	$	36,147	$	43,973	$	747	$	44,183	$	2,926
December 31, 2016
Commercial real estate, construction	$	894	$	—	$	866	$	866	$	—	$	913	$	3
Commercial real estate, other	20,029		7,474		12,227		19,701		803		18,710		700
Commercial real estate	20,923		7,474		13,093		20,567		803		19,623		703
Commercial and industrial	7,289		2,732		1,003		3,735		585		3,386		125
Residential real estate	27,703		138		27,393		27,531		24		27,455		1,419
Home equity lines of credit	908		—		908		908		—		717		44
Consumer, indirect	220		—		224		224		—		136		16
Consumer, other	130		—		130		130		—		138		13
Consumer	350		—		354		354		—		274		29
Total	$	57,173	$	10,344	$	42,751	$	53,095	$	1,412	$	51,455	$	2,320

Peoples' impaired loans shown in the table above included loans that were classified as troubled debt restructurings ("TDRs").

In assessing whether or not a borrower is experiencing financial difficulties, Peoples considers information currently available regarding the financial condition of the borrower. This information includes, but is not limited to, whether (i) the borrower is currently in payment default on any of the borrower's debt; (ii) a payment default is probable in the foreseeable future without the modification; (iii) the borrower has declared or is in the process of declaring bankruptcy; and (iv) the borrower's projected cash flow is insufficient to satisfy contractual payments due under the original terms of the loan without a modification.

Peoples considers all aspects of the modification to loan terms to determine whether or not a concession has been granted to the borrower. Key factors considered by Peoples include the borrower's ability to access funds at a market rate for debt with similar risk characteristics, the significance of the modification relative to the unpaid principal balance or collateral value of the debt, and the significance of a delay in the timing of payments relative to the original contractual terms of the loan. The most common concessions granted by Peoples generally include one or more modifications to the terms of the loan, such as (i) a reduction in the interest rate for the remaining life of the loan, (ii) an extension of the maturity date at an interest rate lower than the current market rate for new loans with similar risk, (iii) a temporary period of interest-only payments, and (iv) a reduction in the contractual payment amount for either a short period or the remaining term of the loan.

The following table summarizes the loans that were modified as a TDR during the three months ended September 30:



		Three Months Ended
		Recorded Investment (1)
(Dollars in thousands)	Number of Contracts	Pre-Modification		Post-Modification		Remaining Recorded Investment
September 30, 2017
Originated loans:
Commercial and industrial	1	$	36	$	36	$	36
Residential real estate	1	90		90		90
Home equity lines of credit	2	22		22		19
Consumer, indirect	5	34		34		34
Consumer, other	2	9		9		9
Consumer	7	43		43		43
Total originated loans	11	$	191	$	191	$	188
Acquired loans:
Residential real estate	2	$	61	$	61	$	61
Home equity lines of credit	1	34		34		34
Total acquired loans	3	$	95	$	95	$	95
September 30, 2016
Originated loans:
Residential real estate	2	$	75	$	75	$	75
Home equity lines of credit	3	23		23		23
Consumer, indirect	7	78		78		78
Consumer, other	3	34		34		34
Consumer	10	112		112		112
Total originated loans	15	$	210	$	210	$	210
Acquired loans:
Commercial real estate, other	1	$	224	$	224	$	224
Residential real estate	2	141		141		141
Total acquired loans	3	$	365	$	365	$	365
(1) The amounts shown are inclusive of all partial paydowns and charge-offs. Loans modified in a TDR that were fully paid down, charged-off or foreclosed upon by period end are not reported.

The following table summarizes the loans that were modified as a TDR during the nine months ended September 30:



		Nine Months Ended
		Recorded Investment (1)
(Dollars in thousands)	Number of Contracts	Pre-Modification		Post-Modification		Remaining Recorded Investment
September 30, 2017
Originated loans:
Commercial real estate, other	1	$	14	$	14	$	14
Commercial and industrial	3	174		174		123
Residential real estate	7	483		483		478
Home equity lines of credit	6	291		291		286
Consumer, indirect	11	127		127		86
Consumer, other	3	10		10		10
Consumer	14	137		137		96
Total originated loans	31	$	1,099	$	1,099	$	997
Acquired loans:
Commercial real estate, other	2	$	271	$	271	$	265
Residential real estate	8	264		264		263
Home equity lines of credit	5	328		328		323
Consumer, other	2	10		10		9
Total acquired loans	17	$	873	$	873	$	860
September 30, 2016
Originated loans:
Commercial real estate, other	1	$	57	$	57	$	56
Commercial and industrial	6	716		724		685
Residential real estate	5	173		173		173
Home equity lines of credit	3	23		23		23
Consumer, indirect	9	107		107		107
Consumer, other	5	46		46		46
Consumer	14	153		153		153
Total originated loans	29	$	1,122	$	1,130	$	1,090
Acquired loans:
Commercial real estate, other	1	$	223	$	223	$	223
Residential real estate	11	927		929		923
Home equity lines of credit	3	179		179		173
Consumer, indirect	2	8		8		8
Consumer, other	3	17		17		17
Consumer	5	25		25		25
Total acquired loans	20	$	1,354	$	1,356	$	1,344
(1) The amounts shown are inclusive of all partial paydowns and charge-offs. Loans modified in a TDR that were fully paid down, charged-off or foreclosed upon by period end are not reported.

The following table presents those acquired loans modified in a TDR during the year that subsequently defaulted (i.e., 90 days or more past due following a modification) during the nine month periods ended September 30, 2017 and 2016:



	September 30, 2017					September 30, 2016
(Dollars in thousands)	Number of Contracts	Recorded Investment (1)		Impact on the Allowance for Loan Losses		Number of Contracts	Recorded Investment (1)		Impact on the Allowance for Loan Losses
Acquired loans:
Residential real estate	1	$	44	$	—	—	$	—	$	—
Consumer, other	1	8		—		—	—		—
Total	2	$	52	$	—	—	$	—	$	—
(1) The amounts shown are inclusive of all partial paydowns and charge-offs. Loans modified in a TDR that were fully paid down, charged-off or foreclosed upon by period end are not reported.

Peoples did not have any originated loans that were modified as a TDR during the last twelve months that subsequently defaulted. Peoples had no commitments to lend additional funds to the related debtors whose terms have been modified in a TDR.

Allowance for Originated Loan Losses

Changes in the allowance for originated loan losses for the nine months ended September 30 were as follows:



(Dollars in thousands)	Commercial Real Estate			Commercial and Industrial			Residential Real Estate			Home Equity Lines of Credit			Consumer Indirect			Consumer Other			Deposit Account Overdrafts			Total
Balance, January 1, 2017	$	7,172		$	6,353		$	982		$	688		$	2,312		$	518		$	171		$	18,196
Charge-offs	(25		)	(165		)	(451		)	(100		)	(1,493		)	(275		)	(767		)	(3,276		)
Recoveries	135			1			128			9			598			152			159			1,182
Net recoveries (charge-offs)	110			(164		)	(323		)	(91		)	(895		)	(123		)	(608		)	(2,094		)
Provision for loan losses	252			226			265			82			1,397			46			507			2,775
Balance, September 30, 2017	$	7,534		$	6,415		$	924		$	679		$	2,814		$	441		$	70		$	18,877

Period-end amount allocated to:
Loans individually evaluated for impairment	$	136		$	424		$	151		$	13		$	2		$	21		$	—		$	747
Loans collectively evaluated for impairment	7,398			5,991			773			666			2,812			420			70			18,130
Ending balance	$	7,534		$	6,415		$	924		$	679		$	2,814		$	441		$	70		$	18,877

Balance, January 1, 2016	$	7,076		$	5,382		$	1,257		$	732		$	1,934		$	37		$	121		$	16,539
Charge-offs	(12		)	(1,017		)	(524		)	(58		)	(1,502		)	(397		)	(544		)	(4,054		)
Recoveries	1,199			250			193			33			727			183			148			2,733
Net recoveries (charge-offs)	1,187			(767		)	(331		)	(25		)	(775		)	(214		)	(396		)	(1,321		)
(Recovery of) provision for loan losses	(773		)	1,075			194			(21		)	1,081			769			418			2,743
Balance, September 30, 2016	$	7,490		$	5,690		$	1,120		$	686		$	2,240		$	592		$	143		$	17,961

Period-end amount allocated to:
Loans individually evaluated for impairment	$	1,164		$	506		$	122		$	—		$	—		$	—		$	—		$	1,792
Loans collectively evaluated for impairment	6,326			5,184			998			686			2,240			592			143			16,169
Ending balance	$	7,490		$	5,690		$	1,120		$	686		$	2,240		$	592		$	143		$	17,961

Allowance for Loan Losses for Acquired Loans

Acquired loans are recorded at their fair value as of the acquisition date with no valuation allowance, and monitored for changes in credit quality and subsequent increases or decreases in expected cash flows. Decreases in expected cash flows of acquired purchased credit impaired loans are recognized as an impairment, with the amount of the expected loss included in management's evaluation of the appropriateness of the allowance for loan losses. The methods utilized to estimate the required allowance for loan losses for nonimpaired acquired loans are similar to those utilized for originated loans; however, Peoples records a provision for loan losses only when the computed allowance exceeds the remaining fair value adjustment. During the third quarter of 2017, Peoples completed its reforecast of the estimated cash flows expected to be collected on purchased credit impaired loans. As a result, Peoples recorded an additional provision for loan losses for acquired loans during the third quarter of 2017. During the first nine months of 2017, Peoples also recognized a recovery of loan losses that was related to an acquired purchased credit impaired loan that was paid off.

The following table presents activity in the allowance for loan losses for acquired loans for the three and nine months ended September 30:



	Three Months Ended					Nine Months Ended
(Dollars in thousands)	September 30, 2017		September 30, 2016			September 30, 2017			September 30, 2016
Purchased credit impaired loans:
Balance, beginning of period	$	90	$	197		$	233		$	240
Charge-offs	—		(16		)	—			(67		)
Recoveries	—		—			—			—
Net charge-offs	—		(16		)	—			(67		)
Provision for (recovery of) loan losses	25		77			(118		)	85
Balance, September 30	$	115	$	258		$	115		$	258