Loans

The Corporation grants commercial, residential, and consumer loans to customers. A substantial portion of the loan portfolio is represented by mortgage loans throughout southcentral Pennsylvania and northern Maryland. The ability of the Corporation’s debtors to honor their contracts is dependent upon the real estate values and general economic conditions in this area.

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off generally are reported at their outstanding unpaid principal balances adjusted for charge-offs, the allowance for loan losses, and any deferred fees or costs on originated loans. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the related loan yield using the interest method.

The loans receivable portfolio is segmented into commercial, residential mortgage, home equity lines of credit, and consumer loans. Commercial loans consist of the following classes: commercial and industrial, commercial real estate, and commercial real estate construction.

The accrual of interest on residential mortgage and commercial loans is discontinued at the time the loan is 90 days past due unless the credit is well-secured and in process of collection. Consumer loans (consisting of home equity lines of credit and consumer loan classes) are typically charged off no later than 120 days past due. Past due status is based on the contractual terms of the loan. In all cases, loans are placed on nonaccrual or charged off at an earlier date if collection of principal or interest is considered doubtful.

All interest accrued, but not collected, for loans that are placed on nonaccrual or charged off is reversed against interest income. The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual status. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

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 (the “allowance”) is established as losses are estimated to occur through a provision for loan losses charged to earnings. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. The reserve for unfunded lending commitments represents management’s estimate of losses inherent in its unfunded loan commitments and is recorded in other liabilities on the consolidated statement of condition. The amount of the reserve for unfunded lending commitments is not material to the consolidated financial statements.

The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectibility of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

The allowance consists of specific, general and unallocated components. The specific component relates to loans that are classified as either doubtful, substandard, or special mention. For such loans that are also 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 general component covers pools of loans by loan class including commercial loans not considered impaired, as well as smaller balance homogeneous loans, such as residential real estate, home equity, and other consumer loans. These pools of loans are evaluated for loss exposure based upon historical loss rates for the previous twelve quarters for each of these categories of loans, adjusted for qualitative risk factors. These qualitative risk factors include:


•	lending policies and procedures, including underwriting standards and collection, charge-off and recovery practices;


•	national, regional and local economic and business conditions, as well as the condition of various market segments, including the impact on the value of underlying collateral for collateral dependent loans;


•	the nature and volume of the portfolio and terms of loans;


•	the experience, ability and depth of lending management and staff;


•	the volume and severity of past due, classified and nonaccrual loans, as well as other loan modifications; and,


•	the existence and effect of any concentrations of credit and changes in the level of such concentrations.

Each factor is assigned a value to reflect improving, stable or declining conditions based on management’s best judgment using relevant information available at the time of the evaluation. Adjustments to the factors are supported through documentation of changes in conditions in a narrative accompanying the allowance for loan loss calculation.

The unallocated component of the allowance is maintained to cover uncertainties that could affect management’s estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio. It covers risks that are inherently difficult to quantify including, but not limited to, collateral risk, information risk, and historical charge-off risk.

A loan is considered impaired when, based on current information and events, it is probable that the Corporation will be unable to collect the scheduled payments of principal and/or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and/or 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 loan 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 for commercial and commercial construction loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent.

A specific allocation within the allowance for loan losses is established for an impaired loan if its carrying value exceeds its estimated fair value. The estimated fair values of the Corporation’s impaired loans are measured based on the estimated fair value of the loan’s collateral or the discounted cash flows method.

It is the policy of the Corporation to order an updated valuation on all real estate secured loans when the loan becomes 90 days past due and there has not been an updated valuation completed within the previous 12 months. In addition, the Corporation orders third-party valuations on all impaired real estate collateralized loans within 30 days of the loan being classified as impaired. Until the valuations are completed, the Corporation utilizes the most recent independent third-party real estate valuation to estimate the need for a specific allocation to be assigned to the loan. These existing valuations are discounted downward to account for such things as the age of the existing collateral valuation, change in the condition of the real estate, change in local market and economic conditions, and other specific factors involving the collateral. Once the updated valuation is completed, the collateral value is updated accordingly.

For commercial and industrial loans secured by non-real estate collateral, such as accounts receivable, inventory and equipment, estimated fair values are determined based on the borrower’s financial statements, inventory reports, accounts receivable aging reports, 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.

The Corporation actively monitors the values of collateral as well as the age of the valuation of impaired loans. Management believes that the Corporation’s market area is not as volatile as other areas throughout the United States, therefore valuations are ordered at least every 18 months, or more frequently if management believes that there is an indication that the fair value has declined.

For impaired loans secured by collateral other than real estate, the Corporation considers the net book value of the collateral, as recorded in the most recent financial statements of the borrower, and determines fair value based on estimates made by management.

Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, the Corporation does not separately identify individual consumer and residential loans for impairment disclosures, unless such loans are the subject of a troubled debt restructure.

Loans whose terms are modified are classified as troubled debt restructured loans if the Corporation grants such borrowers concessions that it would not otherwise consider and it is deemed that those borrowers are experiencing financial difficulty. Concessions granted under a troubled debt restructuring generally involve a temporary reduction in interest rate, a below market interest rate given the risk associated with the loan, or an extension of a loan’s stated maturity date. Nonaccrual troubled debt restructurings may be restored to accrual status if principal and interest payments, under the modified terms, are current for a sustained period of time and, based on a well-documented credit evaluation of the borrower’s financial condition, there is reasonable assurance of repayment. Loans classified as troubled debt restructurings are generally designated as impaired.

The allowance calculation methodology includes further segregation of loan classes into credit quality rating categories. The borrower’s overall financial condition, repayment sources, guarantors, and value of collateral, if appropriate, are generally evaluated annually for commercial loans or when credit deficiencies arise, such as delinquent loan payments.

Credit quality risk ratings include regulatory classifications of special mention, substandard, doubtful, and loss. Loans classified special mention have potential weaknesses that deserve management’s close attention. If uncorrected, the potential weaknesses may result in deterioration of the repayment prospects. Loans classified substandard have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They include loans that are inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified doubtful have all the weaknesses inherent in loans classified substandard with the added characteristic that collection or liquidation in full, on the basis of current conditions and facts, is highly improbable. Loans classified as a loss are considered uncollectible and are charged to the allowance for loan losses. Loans not classified are rated pass.

In addition, federal and state regulatory agencies, as an integral part of their examination process, periodically review the Corporation’s allowance for loan losses and may require the Corporation to recognize additions to the allowance based on their judgments about information available to them at the time of their examination, which may not be currently available to management. Based on management’s comprehensive analysis of the loan portfolio and economic conditions, management believes the current level of the allowance for loan losses is adequate.

Commercial and Industrial Lending — The Corporation originates commercial and industrial 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 based on the projected useful life of such machinery and equipment. Most business lines of credit are written on demand and may be renewed annually.

Commercial and industrial 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 Corporation and are specific to the type of collateral. Collateral values may be determined using invoices, inventory reports, accounts receivable aging reports, collateral appraisals, etc.

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

Commercial loans generally present a higher level of risk than other types of loans due primarily to the effect of general economic conditions.

Commercial Real Estate Lending — The Corporation engages in commercial real estate lending in its primary market area and surrounding areas. The Corporation’s commercial loan portfolio is secured primarily by commercial retail space, office buildings, and hotels. Generally, commercial real estate 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.

In underwriting these loans, the Corporation 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 Corporation are performed by independent appraisers.

Commercial real estate loans generally present a higher level of risk than other types of loans due primarily to the effect of general economic conditions and the complexities involved in valuing the underlying collateral.

Commercial Real Estate Construction Lending — The Corporation engages in commercial real estate construction lending in its primary market area and surrounding areas. The Corporation’s commercial real estate construction lending consists of commercial and residential site development loans, as well as commercial building construction and residential housing construction loans.

The Corporation’s commercial real estate construction loans are generally secured with the subject property. 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 Corporation 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, etc. Appraisals on properties securing commercial real estate construction loans originated by the Corporation are performed by independent appraisers.

Commercial real estate construction loans generally present a higher level of risk than other types of loans due primarily to the effect of general economic conditions and the uncertainties surrounding total construction costs.

Residential Mortgage Lending — One-to-four family residential mortgage loan originations, including home equity closed-end loans, are generated by the Corporation’s marketing efforts, its present customers, walk-in customers, and referrals. These loans originate primarily within the Corporation’s market area or with customers primarily from the market area.

The Corporation offers fixed-rate and adjustable-rate mortgage loans with terms up to a maximum of 30 years for both permanent structures and those under construction. The Corporation’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 Corporation’s residential mortgage loans originate with a loan-to-value of 80% or less. Loans in excess of 80% are required to have private mortgage insurance.

In underwriting one-to-four family residential real estate loans, the Corporation evaluates both the borrower’s financial ability to repay the loan as agreed and the value of the property securing the loan. Properties securing real estate loans made by the Corporation are appraised by independent appraisers. The Corporation generally requires borrowers to obtain an attorney’s title opinion or title insurance, as well as fire and property insurance (including flood insurance, if necessary) in an amount not less than the amount of the loan. The Corporation has not engaged in subprime residential mortgage originations.

Residential mortgage loans present a moderate level of risk due primarily to general economic conditions, as well as a continued weak housing market.

Home Equity Lines of Credit Lending — The Corporation originates home equity lines of credit primarily within the Corporation’s market area or with customers primarily from the market area. Home equity lines of credit are generated by the Corporation’s marketing efforts, its present customers, walk-in customers, and referrals.

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 home equity lines of credit, the Corporation evaluates both the value of the property securing the loan and the borrower’s financial ability to repay the loan as agreed. The ability to repay is determined by the borrower’s employment history, current financial condition, and credit background.

Home equity lines of credit generally present a moderate level of risk due primarily to general economic conditions, as well as a continued weak housing market.

Junior liens inherently have more credit risk by virtue of the fact that another financial institution may have a higher security position in the case of foreclosure liquidation of collateral to extinguish the debt. Generally, foreclosure actions could become more prevalent if the real estate market continues to be weak and property values deteriorate.

Consumer Lending — The Corporation offers a variety of secured and unsecured consumer loans, including those for vehicles and mobile homes and loans secured by savings deposits. These loans originate primarily within the Corporation’s market area or with customers primarily from the market area.

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

Consumer loans may entail greater credit risk than residential mortgage loans or home equity lines of credit, particularly in the case of consumer 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 consumer 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, consumer 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.

Acquired Loans

Acquired loans (impaired and non-impaired) are initially recorded at their acquisition-date fair values using Level 3 inputs. Fair values are based on a discounted cash flow methodology that involves assumptions and judgments as to credit risk, expected lifetime losses, environmental factors, collateral values, discount rates, expected payments and expected prepayments. Specifically, the Corporation has prepared three separate loan fair value adjustments that it believed a market participant might employ in estimating the entire fair value adjustment necessary under ASC 820-10 for the acquired loan portfolio. The three-separate fair valuation methodology employed are: 1) an interest rate loan fair value adjustment, 2) a general credit fair value adjustment, and 3) a specific credit fair value adjustment for purchased credit impaired loans subject to ASC 310-30 procedures.

The carryover of allowance for loan losses related to acquired loans is prohibited as any credit losses in the loans are included in the determination of the fair value of the loans at the acquisition date. The allowance for loan losses on acquired loans reflects only those losses incurred after acquisition and represents the present value of cash flows expected at acquisition that is no longer expected to be collected. Acquired loans are marked to fair value on the date of acquisition. In conjunction with the quarterly evaluation of the adequacy of the allowance for loan losses, the Corporation performs an analysis on acquired loans to determine whether or not there has been subsequent deterioration in relation to those loans. If deterioration has occurred, the Corporation will include these loans in the calculation of the allowance for loan losses after the initial valuation, and provide accordingly.

Upon acquisition, in accordance with US GAAP, the Corporation has individually determined whether each acquired loan is within the scope of ASC 310-30. The Corporation’s senior lending management reviewed the accounting seller’s loan portfolio on a loan by loan basis to determine if any loans met the two-part definition of an impaired loan as defined by ASC 310-30: 1) Credit deterioration on the loan from its inception until the acquisition date, and 2) It is probable that not all of the contractual cash flows will be collected on the loan.

Acquired ASC 310-20 loans, which are loans that did not meet the criteria above, were pooled into groups of similar loans based on various factors including borrower type, loan purpose, and collateral type. For these pools, the Corporation used certain loan information, including outstanding principal balance, estimated expected losses, weighted average maturity, weighted average margin, and weighted average interest rate along with estimated prepayment rates, expected lifetime losses, environment factors to estimate the expected cash flow for each loan pool. With regards to ASC 310-30 loans, for external disclosure purposes, the aggregate contractual cash flows less the aggregate expected cash flows resulted in a credit related non-accretable yield amount. The aggregate expected cash flows less the acquisition date fair value resulted in an accretable yield amount. The accretable yield reflects the contractual cash flows management expects to collect above the loan’s acquisition date fair value and will be recognized over the life of the loan on a level-yield basis as a component of interest income.

Over the life of the acquired ASC 310-30 loan, the Corporation continue to estimate cash flows expected to be collected. Decreases in expected cash flows, other than from prepayments or rate adjustments, are recognized as impairments through a charge to the provision for credit losses resulting in an increase in the allowance for credit losses. Subsequent improvements in cash flows result in first, reversal of existing valuation allowances recognized subsequent to acquisition, if any, and next, an increase in the amount of accretable yield to be subsequently recognized on a prospective basis over the loan’s remaining life.

Acquired ASC 310-30 loans that met the criteria for non-accrual of interest prior to acquisition are considered performing upon acquisition, regardless of whether the customer is contractually delinquent, if we can reasonably estimate the timing and amount of expected cash flows on such loans. Accordingly, we do not consider acquired contractually delinquent loans to be non-accruing and continue to recognize interest income on these loans using the accretion model.

The following table presents the classes of the loan portfolio summarized by the aggregate pass rating and the classified ratings of special mention, substandard, and doubtful within the Corporation’s internal risk rating system as of March 31, 2018, and December 31, 2017:



In thousands	Pass		Special Mention		Substandard		Doubtful		Total
MARCH 31, 2018
Originated Loans
Commercial and industrial	$	152,154	$	3,249	$	1,259	$	—	$	156,662
Commercial real estate	342,702		20,020		8,202		—		370,924
Commercial real estate construction	14,449		785		250		—		15,484
Residential mortgage	367,120		3,245		101		—		370,466
Home equity lines of credit	81,845		449		—		—		82,294
Consumer	14,267		—		—		—		14,267
Total Originated Loans	972,537		27,748		9,812		—		1,010,097
Acquired Loans
Commercial and industrial	5,599		199		3		—		5,801
Commercial real estate	122,270		12,459		4,094		—		138,823
Commercial real estate construction	5,207		382		—		—		5,589
Residential mortgage	47,856		2,421		3,201		—		53,478
Home equity lines of credit	21,525		288		385		—		22,198
Consumer	1,412		356		—		—		1,768
Total Acquired Loans	203,869		16,105		7,683		—		227,657
Total Loans
Commercial and industrial	157,753		3,448		1,262		—		162,463
Commercial real estate	464,972		32,479		12,296		—		509,747
Commercial real estate construction	19,656		1,167		250		—		21,073
Residential mortgage	414,976		5,666		3,302		—		423,944
Home equity lines of credit	103,370		737		385		—		104,492
Consumer	15,679		356		—		—		16,035
Total Loans	$	1,176,406	$	43,853	$	17,495	$	—	$	1,237,754



In thousands	Pass		Special Mention		Substandard		Doubtful		Total
DECEMBER 31, 2017
Originated Loans
Commercial and industrial	$	154,177	$	3,466	$	1,812	$	—	$	159,455
Commercial real estate	325,002		17,666		9,277		—		351,945
Commercial real estate construction	27,413		767		250		—		28,430
Residential mortgage	363,195		3,251		478		—		366,924
Home equity lines of credit	81,976		360		—		—		82,336
Consumer	14,454		—		—		—		14,454
Total Originated Loans	966,217		25,510		11,817		—		1,003,544
Acquired Loans
Commercial and industrial	6,120		244		10		—		6,374
Commercial real estate	124,852		12,734		3,228		—		140,814
Commercial real estate construction	6,742		388		—		—		7,130
Residential mortgage	52,959		2,762		3,248		—		58,969
Home equity lines of credit	24,990		88		378		—		25,456
Consumer	1,525		358		—		—		1,883
Total Acquired Loans	217,188		16,574		6,864		—		240,626
Total Loans
Commercial and industrial	160,297		3,710		1,822		—		165,829
Commercial real estate	449,854		30,400		12,505		—		492,759
Commercial real estate construction	34,155		1,155		250		—		35,560
Residential mortgage	416,154		6,013		3,726		—		425,893
Home equity lines of credit	106,966		448		378		—		107,792
Consumer	15,979		358		—		—		16,337
Total Loans	$	1,183,405	$	42,084	$	18,681	$	—	$	1,244,170

The following table provides changes in accretable yield for all acquired loans accounted for under ASC 310-30. Loans accounted for under ASC 310-20 are not included in this table.



In thousands	Three Months Ended March 31, 2018
Balance at beginning of period	$	1,234
Acquisitions of impaired loans	—
Reclassification from non-accretable differences	114
Accretion to loan interest income	(203		)
Balance at end of period	$	1,145

Cash flows expected to be collected on acquired loans are estimated quarterly 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 principal expected to be collected. In reforecasting future estimated cash flows, credit loss expectations are adjusted as necessary. Improved cash flow expectations for loans or pools are recorded first as a reversal of previously recorded impairment, if any, and then as an increase in prospective yield when all previously recorded impairment has been recaptured. Decreases in expected cash flows are recognized as impairment through a charge to the provision for loan losses and credit to the allowance for loan losses.

The following table summarizes information relative to impaired loans by loan portfolio class as of March 31, 2018, and December 31, 2017:



	Impaired Loans with Allowance						Impaired Loans with No Allowance
In thousands	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance
MARCH 31, 2018
Commercial and industrial	$	867	$	867	$	517	$	179	$	179
Commercial real estate	—		—		—		7,309		7,309
Commercial real estate construction	—		—		—		—		—
Residential mortgage	—		—		—		101		101
	$	867	$	867	$	517	$	7,589	$	7,589

DECEMBER 31, 2017
Commercial and industrial	$	1,311	$	1,311	$	792	$	188	$	188
Commercial real estate	832		832		60		7,528		7,528
Commercial real estate construction	—		—		—		—		—
Residential mortgage	377		377		377		101		101
	$	2,520	$	2,520	$	1,229	$	7,817	$	7,817

The following table summarizes information in regards to the average of impaired loans and related interest income by loan portfolio class for the three months ended March 31, 2018 and 2017:



	Impaired Loans with Allowance				Impaired Loans with No Allowance
In thousands	Average Recorded Investment		Interest Income		Average Recorded Investment		Interest Income
MARCH 31, 2018
Commercial and industrial	$	1,089	$	—	$	183	$	—
Commercial real estate	—		—		7,835		47
Commercial real estate construction	—		—		—		—
Residential mortgage	188		—		101		—
	$	1,277	$	—	$	8,119	$	47

MARCH 31, 2017
Commercial and industrial	$	945	$	—	$	1,134	$	—
Commercial real estate	—		—		8,683		90
Commercial real estate construction	—		—		150		25
Residential mortgage	376		—		374		14
	$	1,321	$	—	$	10,341	$	129

No additional funds are committed to be advanced in connection with impaired loans.

The following table presents nonaccrual loans by loan portfolio class as of March 31, 2018, and December 31, 2017, the table below excludes $6.9 million in purchase credit impaired loans, net of unamortized fair value adjustments:



In thousands	March 31, 2018		December 31, 2017
Commercial and industrial	$	1,046	$	1,499
Commercial real estate	3,352		4,378
Commercial real estate construction	—		—
Residential mortgage	101		478
	$	4,499	$	6,355

The following table summarizes information relative to troubled debt restructurings by loan portfolio class as of March 31, 2018, and December 31, 2017:



In thousands	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Recorded Investment at Period End
MARCH 31, 2018
Nonaccruing troubled debt restructurings:
Commercial real estate	$	3,189	$	3,241	$	2,552
Total nonaccruing troubled debt restructurings	3,189		3,241		2,552
Accruing troubled debt restructurings:
Commercial real estate	4,577		4,577		3,957
Total accruing troubled debt restructurings	4,577		4,577		3,957
Total Troubled Debt Restructurings	$	7,766	$	7,818	$	6,509

DECEMBER 31, 2017
Nonaccruing troubled debt restructurings:
Commercial real estate	$	4,015	$	4,073	$	3,405
Total nonaccruing troubled debt restructurings	4,015		4,073		3,405
Accruing troubled debt restructurings:
Commercial real estate	4,577		4,577		3,982
Total accruing troubled debt restructurings	4,577		4,577		3,982
Total Troubled Debt Restructurings	$	8,592	$	8,650	$	7,387

All of the Corporation’s troubled debt restructured loans are also impaired loans, of which some have resulted in a specific allocation and, subsequently, a charge-off as appropriate. As of March 31, 2018 and 2017, there were no defaulted troubled debt restructured loans. There were no charge-offs or specific allocation on any of the troubled debt restructured loans for the three months ended March 31, 2018 and 2017. One troubled debt restructured loan paid off during 2018 in the amount of $832,000 and one paid off during 2017 in the amount of $283,000. All other troubled debt restructured loans were current as of March 31, 2018, with respect to their associated forbearance agreement, except for one loan which has had periodic late payments. As of March 31, 2018, no loans classified as a troubled debt restructured loan have active forbearance agreements. The forbearance agreements have expired or the loans have paid off.

There were no loans whose terms have been modified resulting in troubled debt restructurings during the three months ended March 31, 2018 and 2017.

Consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process at March 31, 2018 and December 31, 2017, totaled $1,475,000 and $848,000, respectively.

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.

The following table presents the classes of the loan portfolio summarized by the past due status as of March 31, 2018, and December 31, 2017:



In thousands	30-59 Days Past Due		60-89 Days Past Due		>90 Days Past Due		Total Past Due		Current		Total Loans Receivable		Loans Receivable >90 Days and Accruing
MARCH 31, 2018
Originated Loans
Commercial and industrial	$	110	$	2	$	1,126	$	1,238	$	155,424	$	156,662	$	80
Commercial real estate	—		—		2,585		2,585		368,339		370,924		—
Commercial real estate construction	—		—		—		—		15,484		15,484		—
Residential mortgage	1,626		263		1,300		3,189		367,277		370,466		1,200
Home equity lines of credit	—		—		181		181		82,113		82,294		181
Consumer	8		9		—		17		14,250		14,267		—
Total originated loans	1,744		274		5,192		7,210		1,002,887		1,010,097		1,461
Acquired Loans
Commercial and industrial	—		—		—		—		5,801		5,801		—
Commercial real estate	50		865		—		915		137,908		138,823		—
Commercial real estate construction	—		—		420		420		5,169		5,589		420
Residential mortgage	321		415		—		736		52,742		53,478		—
Home equity lines of credit	272		—		70		342		21,856		22,198		70
Consumer	483		—		—		483		1,285		1,768		—
Total acquired loans	1,126		1,280		490		2,896		224,761		227,657		490
Total Loans
Commercial and industrial	110		2		1,126		1,238		161,225		162,463		80
Commercial real estate	50		865		2,585		3,500		506,247		509,747		—
Commercial real estate construction	—		—		420		420		20,653		21,073		420
Residential mortgage	1,947		678		1,300		3,925		420,019		423,944		1,200
Home equity lines of credit	272		—		251		523		103,969		104,492		251
Consumer	491		9		—		500		15,535		16,035		—
Total Loans	$	2,870	$	1,554	$	5,682	$	10,106	$	1,227,648	$	1,237,754	$	1,951



In thousands	30-59 Days Past Due		60-89 Days Past Due		>90 Days Past Due		Total Past Due		Current		Total Loans Receivable		Loans Receivable >90 Days and Accruing
DECEMBER 31, 2017
Originated Loans
Commercial and industrial	$	55	$	76	$	1,503	$	1,634	$	157,821	$	159,455	$	4
Commercial real estate	436		317		1,400		2,153		349,792		351,945		88
Commercial real estate construction	252		—		—		252		28,178		28,430		—
Residential mortgage	3,006		646		1,500		5,152		361,772		366,924		1,022
Home equity lines of credit	254		29		183		466		81,870		82,336		183
Consumer	72		26		3		101		14,353		14,454		3
Total originated loans	4,075		1,094		4,589		9,758		993,786		1,003,544		1,300
Acquired Loans
Commercial and industrial	83		—		—		83		6,291		6,374		—
Commercial real estate	916		—		—		916		139,898		140,814		—
Commercial real estate construction	—		—		—		—		7,130		7,130		—
Residential mortgage	930		304		137		1,371		57,598		58,969		137
Home equity lines of credit	83		—		70		153		25,303		25,456		70
Consumer	—		—		—		—		1,883		1,883		—
Total acquired loans	2,012		304		207		2,523		238,103		240,626		207
Total Loans
Commercial and industrial	138		76		1,503		1,717		164,112		165,829		4
Commercial real estate	1,352		317		1,400		3,069		489,690		492,759		88
Commercial real estate construction	252		—		—		252		35,308		35,560		—
Residential mortgage	3,936		950		1,637		6,523		419,370		425,893		1,159
Home equity lines of credit	337		29		253		619		107,173		107,792		253
Consumer	72		26		3		101		16,236		16,337		3
Total Loans	$	6,087	$	1,398	$	4,796	$	12,281	$	1,231,889	$	1,244,170	$	1,507

The following tables summarize the allowance for loan losses and recorded investment in loans receivable:



In thousands	Commercial and Industrial			Commercial Real Estate			Commercial Real Estate Construction		Residential Mortgage			Home Equity Lines of Credit			Consumer			Unallocated			Total
AS OF AND FOR THE PERIOD ENDED MARCH 31, 2018
Allowance for Loan Losses
Beginning balance - January 1, 2018	$	3,219		$	5,228		$	126	$	3,226		$	612		$	749		$	816		$	13,976
Charge-offs	(389		)	(33		)	—		(383		)	—			(21		)	—			(826		)
Recoveries	7			—			—		10			—			—			—			17
Provisions	137			260			9		83			(19		)	(3		)	(217		)	250
Ending balance - March 31, 2018	$	2,974		$	5,455		$	135	$	2,936		$	593		$	725		$	599		$	13,417
Ending balance: individually evaluated for impairment	$	517		$	—		$	—	$	—		$	—		$	—		$	—		$	517
Ending balance: collectively evaluated for impairment	$	2,457		$	5,455		$	135	$	2,936		$	593		$	725		$	599		$	12,900

Loans Receivable
Ending balance	$	162,463		$	509,747		$	21,073	$	423,944		$	104,492		$	16,035		$	—		$	1,237,754
Ending balance: individually evaluated for impairment	$	1,046		$	7,309		$	—	$	101		$	—		$	—		$	—		$	8,456
Ending balance: collectively evaluated for impairment	$	161,417		$	502,438		$	21,073	$	423,843		$	104,492		$	16,035		$	—		$	1,229,298

AS OF AND FOR THE PERIOD ENDED MARCH 31, 2017
Allowance for Loan Losses
Beginning Balance - January 1, 2017	$	3,055		$	4,968		$	147	$	3,478		$	648		$	923		$	975		$	14,194
Charge-offs	(40		)	—			—		(17		)	—			(72		)	—			(129		)
Recoveries	6			61			—		10			—			3			—			80
Provisions	231			(68		)	2		(167		)	(43		)	(15		)	60			—
Ending balance - March 31, 2017	$	3,252		$	4,961		$	149	$	3,304		$	605		$	839		$	1,035		$	14,145
Ending balance: individually evaluated for impairment	$	595		$	—		$	—	$	333		$	—		$	—		$	—		$	928
Ending balance: collectively evaluated for impairment	$	2,657		$	4,961		$	149	$	2,971		$	605		$	839		$	1,035		$	13,217

Loans Receivable
Ending balance	$	162,997		$	335,640		$	18,311	$	349,716		$	71,336		$	14,476		$	—		$	952,476
Ending balance: individually evaluated for impairment	$	2,068		$	8,617		$	—	$	746		$	—		$	—		$	—		$	11,431
Ending balance: collectively evaluated for impairment	$	160,929		$	327,023		$	18,311	$	348,970		$	71,336		$	14,476		$	—		$	941,045



In thousands	Commercial and Industrial		Commercial Real Estate		Commercial Real Estate Construction		Residential Mortgage		Home Equity Lines of Credit		Consumer		Unallocated		Total
AS OF DECEMBER 31, 2017
Allowance for Loan Losses
Ending balance	$	3,219	$	5,228	$	126	$	3,226	$	612	$	749	$	816	$	13,976
Ending balance: individually evaluated for impairment	$	792	$	60	$	—	$	377	$	—	$	—	$	—	$	1,229
Ending balance: collectively evaluated for impairment	$	2,427	$	5,168	$	126	$	2,849	$	612	$	749	$	816	$	12,747

Loans Receivable
Ending balance	$	165,829	$	492,759	$	35,560	$	425,893	$	107,792	$	16,337	$	—	$	1,244,170
Ending balance: individually evaluated for impairment	$	1,499	$	8,360	$	—	$	478	$	—	$	—	$	—	$	10,337
Ending balance: collectively evaluated for impairment	$	164,330	$	484,399	$	35,560	$	425,415	$	107,792	$	16,337	$	—	$	1,233,833