Total net loans at September 30, 2019 and December 31, 2018 are summarized as follows:



	September 30, 2019			December 31, 2018
Commercial, industrial, and agricultural	$	1,033,631		$	916,297
Commercial mortgages	788,974			697,776
Residential real estate	802,331			771,309
Consumer	121,598			86,035
Credit cards	7,393			7,623
Overdrafts	642			308
Less: unearned discount	(5,067		)	(4,791		)
allowance for loan losses	(20,207		)	(19,704		)
Loans, net	$	2,729,295		$	2,454,853

The Corporation’s outstanding loans and related unfunded commitments are primarily concentrated within central and northwest Pennsylvania, central and northeast Ohio, and western New York. The Bank attempts to limit concentrations within specific industries by utilizing dollar limitations to single industries or customers, and by entering into participation agreements with third parties. Collateral requirements are established based on management’s assessment of the customer. The Corporation maintains lending policies to control the quality of the loan portfolio. These policies delegate the authority to extend loans under specific guidelines and underwriting standards. These policies are prepared by the Corporation’s management and reviewed and ratified annually by the Corporation’s Board of Directors.

Pursuant to the Corporation’s lending policies, management considers a variety of factors when determining whether to extend credit to a customer, including loan-to-value ratios, FICO scores, quality of the borrower’s financial statements, and the ability to obtain personal guarantees.

Commercial, industrial, and agricultural loans comprised 38% and 37% of the Corporation’s total loan portfolio at September 30, 2019 and December 31, 2018, respectively. Commercial mortgage loans comprised 29% and 28% of the Corporation’s total loan portfolio at September 30, 2019 and December 31, 2018, respectively. Management assigns a risk rating to all commercial loans at loan origination. The loan-to-value policy guidelines for commercial, industrial, and agricultural loans are generally a maximum of 80% of the value of business equipment, a maximum of 70% of the value of accounts receivable, and a maximum of 60% of the value of business inventory at loan origination. The loan-to-value policy guideline for commercial mortgage loans is generally a maximum of 85% of the appraised value of the real estate.

Residential real estate loans comprised 29% and 31% of the Corporation’s total loan portfolio at September 30, 2019 and December 31, 2018, respectively. The loan-to-value policy guidelines for residential real estate loans vary depending on the collateral position and the specific type of loan. Higher loan-to-value terms may be approved with the appropriate private mortgage insurance coverage. The Corporation also originates and prices loans for sale into the secondary market. Loans so originated are classified as loans held for sale and are excluded from residential real estate loans reported above. The rationale for these sales is to mitigate interest rate risk associated with holding lower rate, long-term residential mortgages in the loan portfolio and to generate fee revenue from sales and servicing the loan. The Corporation also offers a variety of unsecured and secured consumer loan and credit card products which represented less than 5% of the total loan portfolio at both September 30, 2019 and December 31, 2018. Terms and collateral requirements vary depending on the size and nature of the loan.



	Commercial,Industrial, and Agricultural			Commercial Mortgages			Residential Real Estate			Consumer			Credit Cards			Overdrafts			Total
Allowance for loan losses, July 1, 2019	$	8,108		$	9,538		$	1,403		$	2,141		$	87		$	160		$	21,437
Charge-offs	(160		)	(2,650		)	(38		)	(547		)	(3		)	(113		)	(3,511		)
Recoveries	5			65			5			58			6			24			163
Provision (benefit) for loan losses	997			30			116			693			15			267			2,118
Allowance for loan losses, September 30, 2019	$	8,950		$	6,983		$	1,486		$	2,345		$	105		$	338		$	20,207



	Commercial,Industrial, and Agricultural			Commercial Mortgages			Residential Real Estate			Consumer			Credit Cards			Overdrafts			Total
Allowance for loan losses, January 1, 2019	$	7,341		$	7,490		$	2,156		$	2,377		$	103		$	237		$	19,704
Charge-offs	(160		)	(2,652		)	(282		)	(1,609		)	(55		)	(329		)	(5,087		)
Recoveries	13			66			72			132			12			83			378
Provision (benefit) for loan losses	1,756			2,079			(460		)	1,445			45			347			5,212
Allowance for loan losses, September 30, 2019	$	8,950		$	6,983		$	1,486		$	2,345		$	105		$	338		$	20,207



	Commercial, Industrial, and Agricultural			Commercial Mortgages		Residential Real Estate			Consumer			Credit Cards			Overdrafts			Total
Allowance for loan losses, July 1, 2018	$	7,143		$	10,615	$	1,900		$	2,156		$	101		$	207		$	22,122
Charge-offs	(30		)	0		(212		)	(469		)	(8		)	(94		)	(813		)
Recoveries	3			0		55			28			3			17			106
Provision (benefit) for loan losses	(536		)	682		235			608			11			95			1,095
Allowance for loan losses, September 30, 2018	$	6,580		$	11,297	$	1,978		$	2,323		$	107		$	225		$	22,510



	Commercial, Industrial, and Agricultural			Commercial Mortgages		Residential Real Estate			Consumer			Credit Cards			Overdrafts			Total
Allowance for loan losses, January 1, 2018	$	6,160		$	9,007	$	2,033		$	2,179		$	120		$	194		$	19,693
Charge-offs	(61		)	0		(289		)	(1,610		)	(53		)	(236		)	(2,249		)
Recoveries	165			0		67			112			27			64			435
Provision (benefit) for loan losses	316			2,290		167			1,642			13			203			4,631
Allowance for loan losses, September 30, 2018	$	6,580		$	11,297	$	1,978		$	2,323		$	107		$	225		$	22,510

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and is based on the Corporation’s impairment method as of September 30, 2019 and December 31, 2018. The recorded investment in loans excludes accrued interest and unearned discounts due to their insignificance.

September 30, 2019



	Commercial, Industrial, and Agricultural		Commercial Mortgages		Residential Real Estate		Consumer		Credit Cards		Overdrafts		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	766	$	2,054	$	29	$	0	$	0	$	0	$	2,849
Collectively evaluated for impairment	8,148		4,405		1,457		2,345		105		338		16,798
Acquired with deteriorated credit quality	0		0		0		0		0		0		0
Modified in a troubled debt restructuring	36		524		0		0		0		0		560
Total ending allowance balance	$	8,950	$	6,983	$	1,486	$	2,345	$	105	$	338	$	20,207
Loans:
Individually evaluated for impairment	$	2,898	$	3,110	$	489	$	0	$	0	$	0	$	6,497
Collectively evaluated for impairment	1,027,732		780,484		801,842		121,598		7,393		642		2,739,691
Acquired with deteriorated credit quality	0		534		0		0		0		0		534
Modified in a troubled debt restructuring	3,001		4,846		0		0		0		0		7,847
Total ending loans balance	$	1,033,631	$	788,974	$	802,331	$	121,598	$	7,393	$	642	$	2,754,569

December 31, 2018



	Commercial, Industrial, and Agricultural		Commercial Mortgages		Residential Real Estate		Consumer		Credit Cards		Overdrafts		Total
Allowance for loan losses:
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	54	$	4	$	100	$	0	$	0	$	10	$	168
Collectively evaluated for impairment	7,183		3,036		2,056		2,377		103		227		14,982
Acquired with deteriorated credit quality	0		0		0		0		0		0		0
Modified in a troubled debt restructuring	104		4,450		0		0		0		0		4,554
Total ending allowance balance	$	7,341	$	7,490	$	2,156	$	2,377	$	103	$	237	$	19,704
Loans:
Individually evaluated for impairment	$	1,334	$	1,446	$	502	$	0	$	0	$	10	$	3,292
Collectively evaluated for impairment	910,386		685,714		770,807		86,035		7,623		298		2,460,863
Acquired with deteriorated credit quality	0		567		0		0		0		0		567
Modified in a troubled debt restructuring	4,577		10,049		0		0		0		0		14,626
Total ending loans balance	$	916,297	$	697,776	$	771,309	$	86,035	$	7,623	$	308	$	2,479,348

The following tables present information related to loans individually evaluated for impairment, including loans modified in troubled debt restructurings, by portfolio segment as of September 30, 2019 and December 31, 2018 and for the three and nine months ended September 30, 2019 and 2018:



	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
With an allowance recorded:
Commercial, industrial, and agricultural	$	3,021	$	1,691	$	802
Commercial mortgage	8,055		6,258		2,578
Residential real estate	489		489		29
With no related allowance recorded:
Commercial, industrial, and agricultural	5,258		4,208		0
Commercial mortgage	1,423		1,698		0
Residential real estate	0		0		0
Total	$	18,246	$	14,344	$	3,409

December 31, 2018



	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
With an allowance recorded:
Commercial, industrial, and agricultural	$	3,053	$	3,037	$	158
Commercial mortgage	10,799		6,709		4,454
Residential real estate	502		502		100
Overdrafts	10		10		10
With no related allowance recorded:
Commercial, industrial, and agricultural	3,684		2,874		0
Commercial mortgage	5,659		4,786		0
Residential real estate	0		0		0
Overdrafts	0		0		0
Total	$	23,707	$	17,918	$	4,722

The unpaid principal balance of impaired loans includes the Corporation’s recorded investment in the loan and amounts that have been charged off.



	Three months ended September 30, 2019						Three months ended September 30, 2018
	Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized		Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized
With an allowance recorded:
Commercial, industrial, and agricultural	$	1,480	$	32	$	32	$	3,460	$	11	$	11
Commercial mortgage	7,024		12		12		9,042		37		37
Residential real estate	245		8		8		0		0		0
With no related allowance recorded:
Commercial, industrial, and agricultural	3,977		42		42		5,569		69		69
Commercial mortgage	2,435		29		29		5,153		20		20
Residential real estate	236		0		0		0		0		0
Total	$	15,397	$	123	$	123	$	23,224	$	137	$	137



	Nine months ended September 30, 2019						Nine months ended September 30, 2018
	Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized		Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Recognized
With an allowance recorded:
Commercial, industrial, and agricultural	$	1,819	$	74	$	74	$	2,672	$	54	$	54
Commercial mortgage	7,145		100		100		9,147		111		111
Residential real estate	122		8		8		0		0		0
With no related allowance recorded:
Commercial, industrial, and agricultural	3,676		128		128		5,084		160		160
Commercial mortgage	3,250		62		62		4,511		66		66
Residential real estate	368		11		11		0		0		0
Total	$	16,380	$	383	$	383	$	21,414	$	391	$	391



	September 30, 2019				December 31, 2018
	Nonaccrual		Past Due Over 90 Days Still on Accrual		Nonaccrual		Past Due Over 90 Days Still on Accrual
Commercial, industrial, and agricultural	$	3,994	$	443	$	2,076	$	487
Commercial mortgages	5,299		0		6,329		53
Residential real estate	4,779		62		5,187		299
Consumer	737		0		670		43
Credit cards	0		45		0		5
Total	$	14,809	$	550	$	14,262	$	887



	30-59 Days Past Due		60-89 Days Past Due		Greater Than 89 Days Past Due		Total Past Due		Loans Not Past Due		Total
Commercial, industrial, and agricultural	$	1,508	$	2,041	$	4,080	$	7,629	$	1,026,002	$	1,033,631
Commercial mortgages	230		0		1,868		2,098		786,876		788,974
Residential real estate	2,759		759		2,415		5,933		796,398		802,331
Consumer	472		230		317		1,019		120,579		121,598
Credit cards	53		48		45		146		7,247		7,393
Overdrafts	0		0		0		0		642		642
Total	$	5,022	$	3,078	$	8,725	$	16,825	$	2,737,744	$	2,754,569



	30-59 Days Past Due		60-89 Days Past Due		Greater Than 89 Days Past Due		Total Past Due		Loans Not Past Due		Total
Commercial, industrial, and agricultural	$	2,339	$	9	$	2,264	$	4,612	$	911,685	$	916,297
Commercial mortgages	758		3,055		283		4,096		693,680		697,776
Residential real estate	3,982		1,257		3,988		9,227		762,082		771,309
Consumer	470		282		363		1,115		84,920		86,035
Credit cards	59		15		5		79		7,544		7,623
Overdrafts	0		0		0		0		308		308
Total	$	7,608	$	4,618	$	6,903	$	19,129	$	2,460,219	$	2,479,348

The terms of certain loans have been modified as troubled debt restructurings. The modification of the terms of such loans included either or both of the following: a reduction of the stated interest rate of the loan or an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk.



	September 30, 2019					December 31, 2018
	Number of Loans	Loan Balance		Specific Reserve		Number of Loans	Loan Balance		Specific Reserve
Commercial, industrial, and agricultural	10	$	3,197	$	38	10	$	4,577	$	104
Commercial mortgages	13	7,002		536		15	10,049		4,450
Residential real estate	0	0		0		0	0		0
Consumer	0	0		0		0	0		0
Credit cards	0	0		0		0	0		0
Total	23	$	10,199	$	574	25	$	14,626	$	4,554

There was one loan modified as troubled debt restructurings during the three and nine months ended September 30, 2019 and four loans modified as troubled debt restructurings during the nine months ended September 30, 2018. There were no loans modified as troubled debt restructurings during the three months ended September 30, 2018.



	Three and nine months ended September 30, 2019					Nine months ended September 30, 2018
	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial, industrial, and agricultural	0	$	0	$	0	0	$	0	$	0
Commercial mortgages	1	383		383		4	1,091		1,091
Residential real estate	0	0		0		0	0		0
Consumer	0	0		0		0	0		0
Credit cards	0	0		0		0	0		0
Total	1	$	383	$	383	4	$	1,091	$	1,091

A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms. There were no loans modified as troubled debt restructurings for which there was a payment default within a twelve-month cycle following the modification during the period ended September 30, 2019 and September 30, 2018. There were no principal balances forgiven in connection with the loan restructurings.

In order to determine whether a borrower is experiencing financial difficulty, the Corporation evaluates the probability that the borrower will default on any of its debt payments in the foreseeable future without a loan modification. This evaluation is performed using the Corporation’s internal underwriting policies. The Corporation has no further loan commitments to customers whose loans are classified as a troubled debt restructuring.

Generally, nonperforming troubled debt restructurings are restored to accrual status when the obligation is brought current, has performed in accordance with the contractual terms for a reasonable period of time (generally six months) and the ultimate collectability of the total contractual principal and interest is no longer in doubt.

The Corporation classifies commercial, industrial, and agricultural loans and commercial mortgage 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.

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 Corporation’s credit position at some future date.

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 Corporation will sustain some loss if the deficiencies are not corrected.

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.



	Pass		Special Mention		Substandard		Doubtful		Total
Commercial, industrial, and agricultural	$	997,103	$	19,197	$	17,331	$	0	$	1,033,631
Commercial mortgages	770,873		9,753		8,348		0		788,974
Total	$	1,767,976	$	28,950	$	25,679	$	0	$	1,822,605



	Pass		Special Mention		Substandard		Doubtful		Total
Commercial, industrial, and agricultural	$	890,360	$	10,484	$	15,453	$	0	$	916,297
Commercial mortgages	684,806		3,236		9,734		0		697,776
Total	$	1,575,166	$	13,720	$	25,187	$	0	$	1,614,073

The Corporation considers the performance of the loan portfolio and its impact on the allowance for loan losses. For residential real estate, consumer, and credit card loan classes, the Corporation also evaluates credit quality based on the aging status of the loan, which was previously presented, and by payment activity. The following table presents the recorded investment in residential, consumer, and credit card loans based on payment activity as of September 30, 2019 and December 31, 2018:



	September 30, 2019						December 31, 2018
	Residential Real Estate		Consumer		Credit Cards		Residential Real Estate		Consumer		Credit Cards
Performing	$	797,490	$	120,861	$	7,348	$	765,823	$	85,322	$	7,618
Nonperforming	4,841		737		45		5,486		713		5
Total	$	802,331	$	121,598	$	7,393	$	771,309	$	86,035	$	7,623

The Corporation’s portfolio of residential real estate and consumer loans maintained within Holiday Financial Services Corporation (“Holiday”) are considered to be subprime loans. Holiday is a subsidiary that offers small balance unsecured and secured loans, primarily collateralized by automobiles and equipment, to borrowers with higher risk characteristics than are typical in the Bank’s consumer loan portfolio.