6. LOANS AND RELATED ALLOWANCE FOR CREDIT LOSSES

Loans that the Company originated and has the intent and ability to hold for the foreseeable future or until maturity or payoff are stated at the outstanding unpaid principal balances, net of any deferred fees or costs and the allowance for loan losses. Loans acquired through a business combination are discussed under the heading “Acquired Loans”. Interest income on all loans, other than nonaccrual loans, is accrued over the term of the loans based on the amount of principal outstanding. Unearned income is amortized to income over the life of the loans, using the interest method.

The loan portfolio includes the following classes: (1) commercial, financial and agricultural, (2) real estate - commercial, (3) real estate - construction, (4) real estate – mortgage, (5) obligations of states and political subdivisions, and (6) personal loans.

Interest income on consumer, mortgage and commercial loans is discontinued and loans are placed on non-accrual status at the time the loan is 90 days delinquent unless the loan is well-secured and in process of collection. Loans are charged off to the extent principal or interest is deemed uncollectible. Past due status is based on the contractual terms of the loan. In all cases, loans are placed on non-accrual or charged off at an earlier date if collection of principal or interest is considered doubtful. Non-accrual loans and loans past due 90 days still on accrual include both homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans.

Interest received on such loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Under the cost-recovery method, interest income is not recognized until the loan principal balance is reduced to zero. Under the cash-basis method, interest income is recorded when the payment is received in cash. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current, the loan has performed in accordance with the contractual terms for a reasonable period of time and future payments are reasonably assured.

The Company originates loans in the portfolio with the intent to hold them until maturity. At the time the Company no longer intends to hold loans to maturity based on asset/liability management practices, the Company transfers loans from its portfolio to held for sale at fair value. Any write-down recorded upon transfer is charged against the allowance for loan losses. Any write-downs recorded after the initial transfers are recorded as a charge to other non-interest expense. Gains or losses recognized upon sale are included in gains on sales of loans, which is a component of non-interest income.

Loans Held for Sale

The Company has originated residential mortgage loans with the intent to sell. These individual loans are normally funded by the buyer immediately. The Company maintains servicing rights on these loans. Mortgage servicing rights are recognized as an asset upon the sale of a mortgage loan. A portion of the cost of the loan is allocated to the servicing right based upon fair value. Servicing rights are intangible assets and are carried at estimated fair value. Adjustments to fair value are recorded as non-interest income and included in mortgage banking income in the consolidated statements of income.

Commercial, Financial and Agricultural Lending

The Company originates commercial, financial and agricultural loans primarily to businesses located in its primary market area and surrounding areas. These loans are used for various business purposes, which include short-term loans and lines of credit to finance machinery and equipment purchases, inventory and accounts receivable. Generally, the maximum term for loans extended on machinery and equipment is shorter and does not exceed the projected useful life of such machinery and equipment. Most business lines of credit are written with a five year maturity, subject to an annual credit review.

Commercial loans are generally secured with short-term assets; however, in many cases, additional collateral, such as real estate, is provided as additional security for the loan. Loan-to-value maximum values have been established by the Company and are specific to the type of collateral. Collateral values may be determined using invoices, inventory reports, accounts receivable aging reports, collateral appraisals, and other methods.

In underwriting commercial loans, an analysis of the borrower’s character, capacity to repay the loan, the adequacy of the borrower’s capital and collateral, as well as an evaluation of conditions affecting the borrower, is performed. Evaluation of the borrower’s past, present and future cash flows is also an important aspect of the Company’s analysis.

Concentration analysis assists in identifying industry specific risk inherent in commercial, financial and agricultural lending. Mitigants include the identification of secondary and tertiary sources of repayment and appropriate increases in oversight.

Commercial, financial and agricultural loans generally present a higher level of risk than certain other types of loans, particularly during slow economic conditions.

Real Estate - Commercial Lending

The Company engages in real estate - commercial lending in its primary market area and surrounding areas. The Company’s real estate - commercial portfolio is secured primarily by residential housing, commercial buildings, raw land and hotels. Generally, real estate - commercial loans have terms that do not exceed 20 years, have loan-to-value ratios of up to 80% of the appraised value of the property and are typically secured by personal guarantees of the borrowers.

As economic conditions deteriorate, the Company reduces its exposure in real estate loans with higher risk characteristics. In underwriting these loans, the Company performs a thorough analysis of the financial condition of the borrower, the borrower’s credit history, and the reliability and predictability of the cash flow generated by the property securing the loan. Appraisals on properties securing commercial real estate loans originated by the Company are performed by independent appraisers.

Real estate - commercial loans generally present a higher level of risk than certain other types of loans, particularly during slow economic conditions.

Real Estate - Construction Lending

The Company engages in real estate - construction lending in its primary market area and surrounding areas. The Company’s real estate - construction lending consists of commercial and residential site development loans, as well as commercial building construction and residential housing construction loans.

The Company’s commercial real estate - construction loans are generally secured with the subject property, and advances are made in conformity with a pre-determined draw schedule supported by independent inspections. Terms of construction loans depend on the specifics of the project, such as estimated absorption rates, estimated time to complete, etc.

In underwriting commercial real estate - construction loans, the Company performs a thorough analysis of the financial condition of the borrower, the borrower’s credit history and the reliability and predictability of the cash flow generated by the project using feasibility studies, market data, and other resources. Appraisals on properties securing real estate - commercial loans originated by the Company are performed by independent appraisers.

Real estate - construction loans generally present a higher level of risk than certain other types of loans, particularly during slow economic conditions. The difficulty of estimating total construction costs adds to the risk as well.

Real Estate - Mortgage Lending

The Company’s real estate - mortgage portfolio is comprised of one-to-four family residential mortgages and business loans secured by one-to-four family properties. One-to-four family residential mortgage loan originations, including home equity installment and home equity lines of credit loans, are generated by the Company’s marketing efforts, its present customers, walk-in customers and referrals. These loans originate primarily within the Company’s market area or with customers primarily from the market area.

The Company offers fixed-rate and adjustable rate real estate - mortgage loans with a term up to a maximum of 25‑years for both permanent structures and those under construction. The Company’s one-to-four family residential mortgage originations are secured primarily by properties located in its primary market area and surrounding areas. The majority of the Company’s residential real estate - mortgage loans originate with a loan-to-value of 80% or less. Home equity installment loans are secured by the borrower’s primary residence with a maximum loan-to-value of 80% and a maximum term of 15 years. Home equity lines of credit are secured by the borrower’s primary residence with a maximum loan-to-value of 90% and a maximum term of 20 years.

In underwriting one-to-four family residential real estate loans, the Company evaluates the borrower’s ability to make monthly payments, the borrower’s repayment history and the value of the property securing the loan. The ability to repay is determined by the borrower’s employment history, current financial conditions, and credit background. The analysis is based primarily on the customer’s ability to repay and secondarily on the collateral or security. Most properties securing real estate loans made by the Company are appraised by independent fee appraisers. The Company generally requires mortgage loan borrowers to obtain an attorney’s title opinion or title insurance, and fire and property insurance (including flood insurance, if necessary) in an amount not less than the amount of the loan. The Company does not engage in sub-prime residential mortgage originations.

Residential mortgage loans and home equity loans generally present a lower level of risk than certain other types of consumer loans because they are secured by the borrower’s primary residence. Risk is increased when the Company is in a subordinate position for the loan collateral.

Obligations of States and Political Subdivisions

The Company lends to local municipalities and other tax-exempt organizations. These loans are primarily tax-anticipation notes and, as such, carry little risk. Historically, the Company has never had a loss on any loan of this type.

Personal Lending

The Company offers a variety of secured and unsecured personal loans, including vehicle loans, mobile home loans and loans secured by savings deposits as well as other types of personal loans.

Personal loan terms vary according to the type and value of collateral and creditworthiness of the borrower. In underwriting personal loans, a thorough analysis of the borrower’s willingness and financial ability to repay the loan as agreed is performed. The ability to repay is determined by the borrower’s employment history, current financial conditions and credit background.

Personal loans may entail greater credit risk than do residential mortgage loans, particularly in the case of personal loans which are unsecured or are secured by rapidly depreciable assets, such as automobiles or recreational equipment. In such cases, any repossessed collateral for a defaulted personal loan may not provide an adequate source of repayment of the outstanding loan balance as a result of the greater likelihood of damage, loss or depreciation. In addition, personal loan collections are dependent on the borrower’s continuing financial stability, and thus are more likely to be affected by adverse personal circumstances. Furthermore, the application of various federal and state laws, including bankruptcy and insolvency laws, may limit the amount which can be recovered on such loans.

Allowance for Credit Losses

The allowance for credit losses consists of the allowance for loan losses and the reserve for unfunded lending commitments. The allowance for loan losses (“allowance”) represents management’s estimate of probable incurred losses in the loan portfolio as of the consolidated statement of financial condition date and is recorded as a reduction to loans. The reserve for unfunded lending commitments represents management’s estimate of probable incurred losses in its unfunded lending commitments and is recorded in other liabilities on the consolidated statement of financial condition, when necessary. The amount of the reserve for unfunded lending commitments is not material to the consolidated financial statements. The allowance for loan losses is increased by the provision for loan losses, and decreased by charge-offs, net of recoveries. Loans deemed to be uncollectible are charged against the allowance for loan losses, and subsequent recoveries, if any, are credited to the allowance.

For financial reporting purposes, the provision for loan losses charged to current operating income is based on management’s estimates, and actual losses may vary from estimates. These estimates are reviewed and adjusted at least quarterly and are reported in earnings in the periods in which they become known.

Loans included in any class are considered for charge-off when:

principal or interest has been in default for 120 days or more and for which no payment has been received during the previous four months;

all collateral securing the loan has been liquidated and a deficiency balance remains;

a bankruptcy notice is received for an unsecured loan;

a confirming loss event has occurred; or

the loan is deemed to be uncollectible for any other reason.

The allowance consists of specific and general components. The specific component relates to loans that are individually classified as impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. Loans for which the terms have been modified resulting in a concession, and for which the borrower is experiencing financial difficulties, are considered troubled debt restructurings (“TDRs”) and classified as impaired.

Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loans and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan by loan basis by the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price or the fair value of the collateral if the loan is collateral dependent. If a loan is impaired, a portion of the allowance is allocated so that the loan is reported, net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the collateral.

Impairment for substantially all of the Company’s impaired loans is measured based on the estimated fair value of the loan’s collateral. For real estate - commercial loans, estimated fair values are determined primarily through third-party appraisals. When a real estate secured loan becomes impaired, a decision is made regarding whether an updated certified appraisal of the real estate is necessary. This decision is based on various considerations, including the age of the most recent appraisal, the loan-to-value ratio based on the current appraisal and the condition of the property. Appraised values may be discounted to arrive at the estimated selling price of the collateral, which is considered to be the estimated fair value. The discounts also include the estimated costs to sell the property. For commercial, financial and agricultural, and obligations of states and political subdivision loans, estimated fair values are determined based on the borrower’s financial statements, inventory reports, aging accounts receivable, equipment appraisals or invoices. Indications of value from these sources are generally discounted based on the age of the financial information or the quality of the assets. For such loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The Company generally does not separately identify individual consumer segment loans for impairment analysis, unless such loans are subject to a restructuring agreement.

Troubled debt restructurings are individually evaluated for impairment and included in the separately identified impairment disclosures. Loans whose terms are modified are classified as troubled debt restructurings if the Company grants borrowers concessions and it is deemed that those borrowers are experiencing financial difficulty. Concessions granted under a troubled debt restructuring generally involve a below-market interest rate based on the loan’s risk characteristics, an extension of a loan’s stated maturity date or a significant delay in payment. Non-accrual troubled debt restructurings are restored to accrual status if principal and interest payments, under the modified terms, are current for a sustained period after modification. For TDRs that subsequently default, the Company determines the amount of the allowance on that loan in accordance with the accounting policy for the allowance for loan losses on loans individually identified as impaired. The Company incorporates recent historical experience related to TDRs, including the performance of TDRs that subsequently default, into the calculation of the allowance by loan portfolio class.

Acquired Loans

Loans that Juniata acquires through business combinations are recorded at fair value with no carryover of the related allowance for loan losses. Some of these loans have shown evidence of credit deterioration since origination. These purchased credit impaired (“PCI”) loans are recorded at the amount paid, such that there is no carryover of the seller’s allowance for loan losses. After acquisition, losses are recognized by an increase in the allowance for loan losses.

Such purchased credit impaired loans are accounted for individually or aggregated into pools of loans based on common risk characteristics, such as credit score, loan type, and date of origination. Juniata estimates the amount and timing of expected cash flows for each loan or pool, and the expected cash flows in excess of amount paid is recorded as interest income over the remaining life of the loan or pool (accretable yield). The excess of the loan’s or pool’s contractual principal and interest over expected cash flows is not recorded (nonaccretable difference).

Over the life of the loan or pool, expected cash flows continue to be estimated. If the present value of expected cash flows is less than the carrying amount, a loss is recorded as a provision for loan losses. If the present value of expected cash flows is greater than the carrying amount, it is recognized as part of future interest income.

PCI loans that met the criteria for impairment or non-accrual of interest prior to the acquisition may be considered performing upon acquisition, regardless of whether the customer is contractually delinquent, if Juniata expects to fully collect the new carrying value (i.e. fair value) of the loans. As such, Juniata may no longer consider the loan to be non-accrual or nonperforming and may accrue interest on these loans, including the impact of any accretable discount. In addition, charge-offs on such loans would be first applied to the nonaccretable difference portion of the fair value adjustment.

Loans acquired through business combinations that do not meet the specific criteria of ASC 310‑30, but for which a discount is attributable at least in part to credit quality, are also accounted for in accordance with this guidance. As a result, related discounts are recognized subsequently through accretion based on the contractual cash flows of the acquired loans.

Loan Portfolio Classification

The following table presents the loan portfolio by class at March 31, 2020 and December 31, 2019.


(Dollars in thousands)
	March 31, 2020		December 31, 2019
Commercial, financial and agricultural	$	48,833	$	51,785
Real estate - commercial		118,265		126,613
Real estate - construction		51,108		46,459
Real estate - mortgage		147,226		150,538
Obligations of states and political subdivisions		16,621		16,377
Personal		7,961		8,818
Total	$	390,014	$	400,590

The following table summarizes the activity in the allowance for loan losses by loan class, for the three months ended March 31, 2020 and 2019.


(Dollars in thousands)							Obligations
	Commercial,						of states
	financial and		Real estate-		Real estate-		and political		Real estate-
	agricultural		commercial		construction		subdivisions		mortgage		Personal		Total
Three Months Ended
March 31, 2020
Balance, beginning of period	$	321	$	754	$	718	$	17	$	1,081	$	70	$	2,961
Provision for loan losses		112		4		154		6		65		15		356
Charge-offs		—		—		—		—		—		(21)		(21)
Recoveries		—		—		32		—		1		4		37
Balance, end of period	$	433	$	758	$	904	$	23	$	1,147	$	68	$	3,333
March 31, 2019
Balance, beginning of period	$	275	$	1,074	$	558	$	20	$	1,035	$	72	$	3,034
Provision for loan losses		6		(23)		14		1		12		5		15
Charge-offs		—		(15)		—		—		(47)		(11)		(73)
Recoveries		2		7		—		—		5		4		18
Balance, end of period	$	283	$	1,043	$	572	$	21	$	1,005	$	70	$	2,994

The following table summarizes loans by loan class, segregated into the amount required for loans individually evaluated for impairment and the amount required for loans collectively evaluated for impairment as of March 31, 2020 and December 31, 2019.


(Dollars in thousands)							Obligations
	Commercial,						of states
	financial and		Real estate-		Real estate-		and political		Real estate-
	agricultural		commercial		construction		subdivisions		mortgage		Personal		Total
March 31, 2020
Loans allocated by:
individually evaluated for impairment	$	562	$	3,836	$	—	$	—	$	1,250	$	—	$	5,648
acquired with credit deterioration		—		356		—		—		681		—		1,037
collectively evaluated for impairment		48,271		114,073		51,108		16,621		145,295		7,961		383,329
	$	48,833	$	118,265	$	51,108	$	16,621	$	147,226	$	7,961	$	390,014
Allowance for loan losses allocated by:
individually evaluated for impairment	$	118	$	—	$	—	$	—	$	7	$	—	$	125
acquired with credit deterioration		—		—		—		—		—		—		—
collectively evaluated for impairment		315		758		904		23		1,140		68		3,208
	$	433	$	758	$	904	$	23	$	1,147	$	68	$	3,333
December 31, 2019
Loans allocated by:
individually evaluated for impairment	$	—	$	1,206	$	—	$	—	$	1,296	$	14	$	2,516
acquired with credit deterioration		—		366		—		—		704		—		1,070
collectively evaluated for impairment		51,785		125,041		46,459		16,377		148,538		8,804		397,004
	$	51,785	$	126,613	$	46,459	$	16,377	$	150,538	$	8,818	$	400,590
Allowance for loan losses allocated by:
individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—	$	—
acquired with credit deterioration		—		—		—		—		—		—		—
collectively evaluated for impairment		321		754		718		17		1,081		70		2,961
	$	275	$	1,074	$	558	$	20	$	1,035	$	72	$	2,961

The Company has certain loans in its portfolio that are considered to be impaired. It is the policy of the Company to recognize income on impaired loans that have been transferred to nonaccrual status on a cash basis, only to the extent that it exceeds anticipated principal balance recovery. Until an impaired loan is placed on nonaccrual status, income is recognized on the accrual basis. Collateral analysis is performed on each impaired loan at least quarterly, and results are used to determine if a specific reserve is necessary to adjust the carrying value of each individual loan down to the estimated fair value. Generally, specific reserves are carried against impaired loans based upon estimated collateral value until a confirming loss event occurs or until termination of the credit is scheduled through liquidation of the collateral or foreclosure. Consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in process at March 31, 2020 and December 31, 2019 totaled $320,000 and $248,000, respectively. Charge-offs will occur when a confirmed loss is identified. Professional appraisals of collateral, discounted for expected selling costs, appraisal age, economic conditions and other known factors, are used to determine the charge-off amount.

The following table summarizes information regarding impaired loans by portfolio class as of March 31, 2020 and December 31, 2019.


(Dollars in thousands)	As of March 31, 2020						As of December 31, 2019
	Recorded		Unpaid Principal		Related		Recorded		Unpaid Principal		Related
	Investment		Balance		Allowance		Investment		Balance		Allowance
Impaired loans
With no related allowance recorded:
Real estate - commercial	$	3,836	$	3,934	$	—	$	1,206	$	1,304	$	—
Acquired with credit deterioration		356		390		—		366		395		—
Real estate – construction		—		1,045		—		—		1,054		—
Real estate - mortgage		1,125		1,852		—		1,296		2,006		—
Acquired with credit deterioration		681		832		—		704		840		—
Personal		—		—		—		14		14		—
With an allowance recorded:
Commercial, financial and agricultural	$	562	$	562	$	118	$	—	$	—	$	—
Real estate - mortgage		125		124		7		—		—		—
Total:
Commercial, financial and agricultural	$	562	$	562	$	118	$	—	$	—	$	—
Real estate - commercial		3,836		3,934		—		1,206		1,304		—
Acquired with credit deterioration		356		390		—		366		395		—
Real estate - construction		—		1,045		—		—		1,054		—
Real estate – mortgage		1,250		1,976		7		1,296		2,006		—
Acquired with credit deterioration		681		832		—		704		840		—
Personal		—		—		—		14		14		—
	$	6,685	$	8,739	$	125	$	3,586	$	5,613	$	—

Average recorded investment of impaired loans and related interest income recognized for the three months ended March 31, 2020 and 2019 are summarized in the tables below.


(Dollars in thousands)	Three Months Ended March 31, 2020						Three Months Ended March 31, 2019
	Average		Interest		Cash Basis		Average		Interest		Cash Basis
	Recorded		Income		Interest		Recorded		Income		Interest
	Investment		Recognized		Income		Investment		Recognized		Income
Impaired Loans
With no related allowance recorded:
Commercial, financial and agricultural	$	—	$	—	$	—	$	—	$	—	$	—
Real estate - commercial		2,080		5		12		1,062		3		—
Acquired with credit deterioration		361		—		—		538		—		—
Real estate - construction		—		—		—		14		—		—
Real estate - mortgage		1,139		4		11		1,245		5		12
Acquired with credit deterioration		693		—		—		958		—		—
Personal		9		—		—		16		—		—
With an allowance recorded:
Commercial, financial and agricultural	$	187	$	—	$	—	$	—	$	—	$	—
Real estate - mortgage		126		—		—		—		—		—
Total:
Commercial, financial and agricultural	$	187	$	—	$	—	$	—	$	—	$	—
Real estate - commercial		2,080		5		12		1,062		3		—
Acquired with credit deterioration		361		—		—		538		—		—
Real estate - construction		—		—		—		14		—		—
Real estate - mortgage		1,265		4		11		1,245		5		12
Acquired with credit deterioration		693		—		—		958		—		—
Personal		9		—		—		16		—		—
	$	4,595	$	9	$	23	$	3,833	$	8	$	12

The recorded investment in loans excludes accrued interest receivable and loan origination fees, net due to immateriality. For purposes of this disclosure, the unpaid principal balance is not reduced for partial charge-offs.

Loans on which the accrual of interest has been discontinued are designated as non-accrual loans. Accrual of interest on loans is generally discontinued when the contractual payment of principal or interest has become 90 days past due or reasonable doubt exists as to the full, timely collection of principal or interest. However, it is the Company’s policy to continue to accrue interest on loans over 90 days past due as long as (1) they are guaranteed or well secured and (2) there is an effective means of timely collection in process. When a loan is placed on non-accrual status, all unpaid interest credited to income in the current year is reversed against current period income, and unpaid interest accrued in prior years is charged against the allowance for loan losses. Interest received on nonaccrual loans generally is either applied against principal or reported as interest income, according to management’s judgment as to the collectability of principal. Generally, accruals are resumed on loans only when the obligation is brought fully current with respect to interest and principal, has performed in accordance with the contractual terms for a reasonable period of time and the ultimate collectability of the total contractual principal and interest is no longer in doubt. The Company’s nonaccrual and charge-off policies are the same, regardless of the loan type.

The following table presents nonaccrual loans by classes of the loan portfolio as of March 31, 2020 and December 31, 2019.


(Dollars in thousands)
	March 31, 2020		December 31, 2019
Non-accrual loans:
Commercial, financial and agricultural	$	562	$	—
Real estate - commercial		3,537		903
Real estate - mortgage		865		902
Personal		—		14
Total	$	4,964	$	1,819

The performance and credit quality of the loan portfolio is also monitored by analyzing the age of the loans receivable as determined by the length of time a recorded payment is past due. Past due status is determined by the contractual terms of the loan. The following tables present the classes of the loan portfolio summarized by the past due status as of March 31, 2020 and December 31, 2019.


													Loans
													Past Due
													Greater
(Dollars in thousands)							Greater						than 89
			30‑59 Days		60‑89 Days		than 89		Total Past				Days and
	Current		Past Due(2)		Past Due		Days		Due		Total Loans		Accruing(1)
As of March 31, 2020
Commercial, financial and agricultural	$	48,807	$	26	$	—	$	—	$	26	$	48,833	$	—
Real estate - commercial		117,727		136		—		46		182		117,909		—
Real estate - construction		48,550		2,558		—		—		2,558		51,108		—
Real estate - mortgage		145,341		414		38		752		1,204		146,545		134
Obligations of states and political subdivisions		16,621		—		—		—		—		16,621		—
Personal		7,904		57		—		—		57		7,961		—
Subtotal		384,950		3,191		38		798		4,027		388,977		134
Loans acquired with credit deterioration
Real estate - commercial		356		—		—		—		—		356		—
Real estate - mortgage		578		101		—		2		103		681		2
Subtotal		934		101		—		2		103		1,037		2
	$	385,884	$	3,292	$	38	$	800	$	4,130	$	390,014	$	136


													Loans
													Past Due
													Greater
(Dollars in thousands)							Greater						than 89
			30‑59 Days		60‑89 Days		than 89		Total Past				Days and
	Current		Past Due(2)		Past Due		Days		Due		Total Loans		Accruing(1)
As of December 31, 2019
Commercial, financial and agricultural	$	51,725	$	60	$	—	$	—	$	60	$	51,785	$	—
Real estate - commercial		126,180		19		—		48		67		126,247		—
Real estate - construction		46,172		287		—		—		287		46,459		—
Real estate - mortgage		148,366		348		149		971		1,468		149,834		359
Obligations of states and political subdivisions		16,377		—		—		—		—		16,377		—
Personal		8,725		55		—		38		93		8,818		24
Subtotal		397,545		769		149		1,057		1,975		399,520		383
Loans acquired with credit deterioration
Real estate - commercial		366		—		—		—		—		366		—
Real estate - mortgage		330		371		—		3		374		704		3
Subtotal		696		371		—		3		374		1,070		3
	$	398,241	$	1,140	$	149	$	1,060	$	2,349	$	400,590	$	386

(1)

These loans are guaranteed, or well-secured, and there is an effective means of collection in process.

(2)

Loans are considered past due when the borrower is in arrears on two or more monthly payments.

Troubled Debt Restructurings

The following tables summarize information regarding troubled debt restructurings by loan portfolio class at March 31, 2020 and December 31, 2019.


(Dollars in thousands)		Pre-Modification		Post-Modification
	Number of	Outstanding		Outstanding
	Contracts	Recorded Investment		Recorded Investment		Recorded Investment
As of March 31, 2020
Accruing troubled debt restructurings:
Real estate - commercial	1	$	306	$	326	$	302
Real estate - mortgage	7		488		516		387
	8	$	794	$	842	$	689


(Dollars in thousands)		Pre-Modification		Post-Modification
	Number of	Outstanding		Outstanding
	Contracts	Recorded Investment		Recorded Investment		Recorded Investment
As of December 31, 2019
Accruing troubled debt restructurings:
Real estate - commercial	1	$	306	$	326	$	306
Real estate - mortgage	7		488		516		397
	8	$	794	$	842	$	703

The Company’s troubled debt restructurings are also impaired loans, which may result in a specific allocation and subsequent charge-off if appropriate. As of March 31, 2020, there were no specific reserves carried for troubled debt restructured loans. There were no troubled debt restructured loans in default within 12 months of restructure during the three months ended March 31, 2020 or 2019. On December 31, 2019, there were no specific reserves carried for the troubled debt restructurings, nor any charge-offs related to the troubled debt restructured loans. The amended terms of the restructured loans vary, and may include interest rates that have been reduced, principal payments that have been reduced or deferred for a period of time and/or maturity dates that have been extended.

There were no loan terms modified resulting in troubled debt restructuring during the three months ended March 31, 2020. The following table lists the loan whose terms were modified resulting in a troubled debt restructuring during the three months ended March 31, 2019.


(Dollars in thousands)		Pre-Modification		Post-Modification
	Number of	Outstanding		Outstanding
	Contracts	Recorded Investment		Recorded Investment		Recorded Investment
Three months ended March 31, 2019
Accruing troubled debt restructurings:
Real estate - commercial	1	$	306	$	326	$	324
Real estate - mortgage	1		9		9		8
	2	$	315	$	335	$	332

The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), signed into law on March 27, 2020, permits financial institutions to suspend requirements under GAAP for loan modifications to borrowers affected by the COVID-19 pandemic if (1) the borrower was not more than 30 days past due as of December 31, 2019, and (2) the loan modification is made between March 1, 2020 and the earlier of December 31, 2020 or 60 days after the end of the coronavirus emergency declaration. A loan modification accounted for in accordance with the CARES Act is not treated as a TDR for accounting or disclosure purposes.

Additionally, the interagency statement offers some practical expedients for evaluating whether loan modifications that occur in response to the COVID-19 pandemic are TDRs. A lender can conclude that a borrower is not experiencing financial difficulty if either (1) short-term (e.g., six months) modifications are made in response to COVID-19, such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant related to loans in which the borrower is less than 30 days past due on its contractual payments at the time a modification program is implemented, or (2) the modification or deferral program is mandated by the federal government or a state government (e.g., a state program that requires all institutions within that state to suspend mortgage payments for a specified period). Accordingly, any loan modification made in response to the COVID-19 pandemic that meets either of these practical expedients would not be considered a TDR because the borrower is not experiencing financial difficulty.

As of March 31, 2020, Juniata approved interest and/or principal payment deferrals on eight loans totaling $566,000 for individuals and businesses affected by the economic impacts of COVID-19. None of the borrowers approved for these designated deferrals were delinquent as of March 20, 2020, the date on which the Company’s COVID-19 Modification Program went into effect, and the modification terms are short-term, thus the loan modifications are not considered to be troubled-debt restructures under the interagency statement guidance.

Credit Quality Indicators

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis includes loans to commercial customers with an aggregate loan exposure greater than $500,000 and for lines of credit in excess of $50,000. This analysis is performed on a continuing basis with all such loans reviewed annually. The Company uses the following definitions for risk ratings:

Special Mention. Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date. Loans in this category are reviewed no less than quarterly.

Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. Loans in this category are reviewed no less than monthly.

Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. Loans in this category are reviewed no less than monthly.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass-rated loans.

The following tables present the classes of the loan portfolio summarized by the aggregate pass rating and the classified ratings of special mention, substandard and doubtful within the Company’s internal risk rating system as of March 31, 2020 and December 31, 2019.


(Dollars in thousands)			Special
As of March 31, 2020	Pass		Mention		Substandard		Doubtful		Total
Commercial, financial and agricultural	$	43,679	$	4,173	$	419	$	562	$	48,833
Real estate - commercial		105,682		5,903		3,992		2,688		118,265
Real estate - construction		49,133		177		1,798		—		51,108
Real estate - mortgage		144,973		320		1,856		77		147,226
Obligations of states and political subdivisions		16,621		—		—		—		16,621
Personal		7,961		—		—		—		7,961
Total	$	368,049	$	10,573	$	8,065	$	3,327	$	390,014


(Dollars in thousands)			Special
As of December 31, 2019	Pass		Mention		Substandard		Doubtful		Total
Commercial, financial and agricultural	$	46,725	$	4,080	$	980	$	—	$	51,785
Real estate - commercial		113,851		5,668		7,046		48		126,613
Real estate - construction		44,954		287		1,218		—		46,459
Real estate - mortgage		148,164		327		1,951		96		150,538
Obligations of states and political subdivisions		16,377		—		—		—		16,377
Personal		8,804		—		14		—		8,818
Total	$	378,875	$	10,362	$	11,209	$	144	$	400,590