Total net loans at March 31, 2020 and December 31, 2019 are summarized as follows:



	March 31, 2020			December 31, 2019
Commercial, industrial and agricultural	$	1,090,915		$	1,046,665
Commercial mortgages	846,215			814,002
Residential real estate	814,657			814,030
Consumer	94,425			124,785
Credit cards	8,683			7,569
Overdrafts	311			2,146
Less: unearned discount	(4,546		)	(5,162		)
allowance for loan losses	(21,915		)	(19,473		)
Loans, net	$	2,828,745		$	2,784,562

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 March 31, 2020 and December 31, 2019, respectively. Commercial mortgage loans comprised 30% and 29% of the Corporation’s total loan portfolio at March 31, 2020 and December 31, 2019, 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 29% of the Corporation’s total loan portfolio at March 31, 2020 and December 31, 2019, 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 4% of the total loan portfolio at both March 31, 2020 and December 31, 2019. 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, January 1, 2020	$	8,287		$	6,952	$	1,499		$	2,411		$	84		$	240		$	19,473
Charge-offs	(25		)	0		(143		)	(592		)	(31		)	(119		)	(910		)
Recoveries	18			172		3			43			1			36			273
Provision (benefit) for loan losses	2,252			368		99			276			58			26			3,079
Allowance for loan losses, March 31, 2020	$	10,532		$	7,492	$	1,458		$	2,138		$	112		$	183		$	21,915



	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	0		(17		)	(98		)	(549		)	(26		)	(128		)	(818		)
Recoveries	4		0			65			46			5			34			154
Provision (benefit) for loan losses	442		1,373			(740		)	166			23			42			1,306
Allowance for loan losses, March 31, 2019	$	7,787	$	8,846		$	1,383		$	2,040		$	105		$	185		$	20,346

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 March 31, 2020 and December 31, 2019. The recorded investment in loans excludes accrued interest and unearned discounts due to their insignificance.

March 31, 2020



	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	$	3,489	$	1,264	$	51	$	0	$	0	$	0	$	4,804
Collectively evaluated for impairment	7,009		5,912		1,407		2,138		112		183		16,761
Acquired with deteriorated credit quality	0		0		0		0		0		0		0
Modified in a troubled debt restructuring	34		316		0		0		0		0		350
Total ending allowance balance	$	10,532	$	7,492	$	1,458	$	2,138	$	112	$	183	$	21,915
Loans:
Individually evaluated for impairment	$	8,663	$	12,172	$	460	$	0	$	0	$	0	$	21,295
Collectively evaluated for impairment	1,079,220		826,966		814,197		94,425		8,683		311		2,823,802
Acquired with deteriorated credit quality	0		512		0		0		0		0		512
Modified in a troubled debt restructuring	3,032		6,565		0		0		0		0		9,597
Total ending loans balance	$	1,090,915	$	846,215	$	814,657	$	94,425	$	8,683	$	311	$	2,855,206

December 31, 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	$	645	$	1,264	$	34	$	0	$	0	$	0	$	1,943
Collectively evaluated for impairment	7,614		5,358		1,465		2,411		84		240		17,172
Acquired with deteriorated credit quality	0		0		0		0		0		0		0
Modified in a troubled debt restructuring	28		330		0		0		0		0		358
Total ending allowance balance	$	8,287	$	6,952	$	1,499	$	2,411	$	84	$	240	$	19,473
Loans:
Individually evaluated for impairment	$	8,078	$	2,410	$	465	$	0	$	0	$	0	$	10,953
Collectively evaluated for impairment	1,035,494		804,360		813,565		124,785		7,569		2,146		2,787,919
Acquired with deteriorated credit quality	0		523		0		0		0		0		523
Modified in a troubled debt restructuring	3,093		6,709		0		0		0		0		9,802
Total ending loans balance	$	1,046,665	$	814,002	$	814,030	$	124,785	$	7,569	$	2,146	$	2,809,197

The following tables present information related to loans individually evaluated for impairment, including loans modified in troubled debt restructurings, by portfolio segment as of March 31, 2020 and December 31, 2019 and for the three months ended March 31, 2020 and 2019:



	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
With an allowance recorded:
Commercial, industrial and agricultural	$	7,111	$	7,068	$	3,523
Commercial mortgage	6,542		4,312		1,580
Residential real estate	480		460		51
With no related allowance recorded:
Commercial, industrial and agricultural	4,780		4,627		0
Commercial mortgage	14,666		14,425		0
Residential real estate	0		0		0
Total	$	33,579	$	30,892	$	5,154

December 31, 2019



	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
With an allowance recorded:
Commercial, industrial and agricultural	$	2,657	$	1,476	$	673
Commercial mortgage	6,541		4,349		1,594
Residential real estate	485		465		34
With no related allowance recorded:
Commercial, industrial and agricultural	9,845		9,695		0
Commercial mortgage	4,903		4,770		0
Residential real estate	0		0		0
Total	$	24,431	$	20,755	$	2,301



	Three months ended March 31, 2020						Three months ended March 31, 2019
	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	$	4,272	$	17	$	17	$	2,158	$	38	$	38
Commercial mortgage	4,331		37		37		7,267		40		40
Residential real estate	463		5		5		0		0		0
With no related allowance recorded:
Commercial, industrial and agricultural	7,161		42		42		3,376		54		54
Commercial mortgage	9,598		158		158		4,065		18		18
Residential real estate	0		0		0		500		7		7
Total	$	25,825	$	259	$	259	$	17,366	$	157	$	157



	March 31, 2020				December 31, 2019
	Nonaccrual		Past Due Over 90 Days Still on Accrual		Nonaccrual		Past Due Over 90 Days Still on Accrual
Commercial, industrial and agricultural	$	12,144	$	16	$	11,644	$	0
Commercial mortgages	14,237		0		4,533		0
Residential real estate	4,663		0		4,724		59
Consumer	810		0		835		0
Credit cards	0		17		0		2
Total	$	31,854	$	33	$	21,736	$	61



	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	$	2,604	$	6,251	$	4,809	$	13,664	$	1,077,251	$	1,090,915
Commercial mortgages	11,773		179		2,599		14,551		831,664		846,215
Residential real estate	3,285		623		2,601		6,509		808,148		814,657
Consumer	450		238		433		1,121		93,304		94,425
Credit cards	33		33		17		83		8,600		8,683
Overdrafts	0		0		0		0		311		311
Total	$	18,145	$	7,324	$	10,459	$	35,928	$	2,819,278	$	2,855,206



	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	$	1,273	$	548	$	3,784	$	5,605	$	1,041,060	$	1,046,665
Commercial mortgages	162		183		2,594		2,939		811,063		814,002
Residential real estate	3,383		1,270		2,714		7,367		806,663		814,030
Consumer	412		311		415		1,138		123,647		124,785
Credit cards	48		54		2		104		7,465		7,569
Overdrafts	0		0		0		0		2,146		2,146
Total	$	5,278	$	2,366	$	9,509	$	17,153	$	2,792,044	$	2,809,197

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.



	March 31, 2020					December 31, 2019
	Number of Loans	Loan Balance		Specific Reserve		Number of Loans	Loan Balance		Specific Reserve
Commercial, industrial and agricultural	10	$	3,032	$	34	10	$	3,093	$	28
Commercial mortgages	13	6,565		316		13	6,709		330
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	$	9,597	$	350	23	$	9,802	$	358

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 March 31, 2020 and March 31, 2019. 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	$	1,049,414	$	13,444	$	28,057	$	0	$	1,090,915
Commercial mortgages	799,848		22,388		23,979		0		846,215
Total	$	1,849,262	$	35,832	$	52,036	$	0	$	1,937,130



	Pass		Special Mention		Substandard		Doubtful		Total
Commercial, industrial and agricultural	$	1,004,445	$	16,696	$	25,524	$	0	$	1,046,665
Commercial mortgages	780,798		18,837		14,367		0		814,002
Total	$	1,785,243	$	35,533	$	39,891	$	0	$	1,860,667

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 March 31, 2020 and December 31, 2019:



	March 31, 2020						December 31, 2019
	Residential Real Estate		Consumer		Credit Cards		Residential Real Estate		Consumer		Credit Cards
Performing	$	809,994	$	93,615	$	8,666	$	809,247	$	123,950	$	7,567
Nonperforming	4,663		810		17		4,783		835		2
Total	$	814,657	$	94,425	$	8,683	$	814,030	$	124,785	$	7,569

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.