
	June 30, 2020		December 31, 2019
Commercial, industrial and agricultural	$	1,263,521	$	1,046,665
Commercial mortgages	865,401		814,002
Residential real estate	805,413		814,030
Consumer	93,409		124,785
Credit cards	6,760		7,569
Overdrafts	284		2,146
Less: unearned discount	(4,617)		(5,162)
allowance for loan losses	(24,529)		(19,473)
Loans, net	$	3,005,642	$	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 42% and 37% of the Corporation’s total loan portfolio at June 30, 2020 and December 31, 2019, respectively. Commercial mortgage loans comprised 29% and 29% of the Corporation’s total loan portfolio at June 30, 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 27% and 29% of the Corporation’s total loan portfolio at June 30, 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 3% of the total loan portfolio at both June 30, 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, April 1, 2020	$	10,532	$	7,492	$	1,458	$	2,138	$	112	$	183	$	21,915
Charge-offs	(2,623)		0		(19)		(413)		(41)		(95)		(3,191)
Recoveries	7		2		0		38		10		68		125
Provision for loan losses	1,886		2,134		1,237		377		33		13		5,680
Allowance for loan losses, June 30, 2020	$	9,802	$	9,628	$	2,676	$	2,140	$	114	$	169	$	24,529


	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	(2,648)		0		(162)		(1,005)		(72)		(214)		(4,101)
Recoveries	25		174		3		81		11		104		398
Provision for loan losses	4,138		2,502		1,336		653		91		39		8,759
Allowance for loan losses, June 30, 2020	$	9,802	$	9,628	$	2,676	$	2,140	$	114	$	169	$	24,529


	Commercial, Industrial and Agricultural		Commercial Mortgages		Residential Real Estate		Consumer		Credit Cards		Overdrafts		Total
Allowance for loan losses, April 1, 2019	$	7,787	$	8,846	$	1,383	$	2,040	$	105	$	185	$	20,346
Charge-offs	0		0		(146)		(513)		(26)		(88)		(773)
Recoveries	4		16		2		28		1		25		76
Provision (benefit) for loan losses	317		676		164		586		7		38		1,788
Allowance for loan losses, June 30, 2019	$	8,108	$	9,538	$	1,403	$	2,141	$	87	$	160	$	21,437


	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		(2)		(244)		(1,062)		(52)		(216)		(1,576)
Recoveries	8		1		67		74		6		59		215
Provision (benefit) for loan losses	759		2,049		(576)		752		30		80		3,094
Allowance for loan losses, June 30, 2019	$	8,108	$	9,538	$	1,403	$	2,141	$	87	$	160	$	21,437

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 June 30, 2020 and December 31, 2019. The recorded investment in loans excludes accrued interest and unearned discounts due to their insignificance.


	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	$	642	$	1,539	$	53	$	0	$	0	$	0	$	2,234
Collectively evaluated for impairment	8,653		7,780		2,623		2,140		114		169		21,479
Acquired with deteriorated credit quality	0		0		0		0		0		0		0
Modified in a troubled debt restructuring	507		309		0		0		0		0		816
Total ending allowance balance	$	9,802	$	9,628	$	2,676	$	2,140	$	114	$	169	$	24,529
Loans:
Individually evaluated for impairment	$	4,813	$	12,520	$	461	$	0	$	0	$	0	$	17,794
Collectively evaluated for impairment	1,254,203		845,886		804,838		93,409		6,760		284		3,005,380
Acquired with deteriorated credit quality	0		501		0		0		0		0		501
Modified in a troubled debt restructuring	4,505		6,494		114		0		0		0		11,113
Total ending loans balance	$	1,263,521	$	865,401	$	805,413	$	93,409	$	6,760	$	284	$	3,034,788


	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 June 30, 2020 and December 31, 2019 and for the three and six months ended June 30, 2020 and 2019:


	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
With an allowance recorded:
Commercial, industrial and agricultural	$	2,111	$	2,051	$	1,149
Commercial mortgage	6,563		4,330		1,848
Residential real estate	480		461		53
With no related allowance recorded:
Commercial, industrial and agricultural	10,037		7,267		0
Commercial mortgage	15,310		14,684		0
Residential real estate	115		114		0
Total	$	34,616	$	28,907	$	3,050


	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 June 30, 2020										Three months ended June 30, 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	$	2,052	$	28	$	28	$	1,273	$	27	$	27
Commercial mortgage	$	4,330	$	4	$	4	7,807		46		46
Residential real estate	$	461	$	0	$	0	0		0		0
With no related allowance recorded:
Commercial, industrial and agricultural	$	7,367	$	49	$	49	3,811		32		32
Commercial mortgage	$	14,684	$	66	$	66	3,257		20		20
Residential real estate	$	114	$	2	$	2	485		4		4
Total	$	29,008	$	149	$	149	$	16,633	$	129	$	129


	Six months ended June 30, 2020										Six months ended June 30, 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	$	3,532	$	45	$	45	$	1,861	$	65	$	65
Commercial mortgage	4,330		41		41		7,441		86		86
Residential real estate	462		5		5		0		0		0
With no related allowance recorded:
Commercial, industrial and agricultural	7,196		91		91		3,499		86		86
Commercial mortgage	11,293		224		224		3,767		38		38
Residential real estate	38		2		2		490		11		11
Total	$	26,851	$	408	$	408	$	17,058	$	286	$	286


	June 30, 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	$	9,762	$	116	$	11,644	$	0
Commercial mortgages	14,715		0		4,533		0
Residential real estate	4,307		0		4,724		59
Consumer	485		0		835		0
Credit cards	0		12		0		2
Total	$	29,269	$	128	$	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	$	445	$	451	$	6,551	$	7,447	$	1,256,074	$	1,263,521
Commercial mortgages	0		0		2,754		2,754		862,647		865,401
Residential real estate	809		1,496		2,162		4,467		800,946		805,413
Consumer	249		190		204		643		92,766		93,409
Credit cards	30		11		12		53		6,707		6,760
Overdrafts	0		0		0		0		284		284
Total	$	1,533	$	2,148	$	11,683	$	15,364	$	3,019,424	$	3,034,788


	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.


	June 30, 2020								December 31, 2019
	Number of Loans	Loan Balance		Specific Reserve		Number of Loans	Loan Balance		Specific Reserve
Commercial, industrial and agricultural	18	$	4,505	$	507	10	$	3,093	$	28
Commercial mortgages	13	6,494		309		13	6,709		330
Residential real estate	1	114		0		0	0		0
Consumer	0	0		0		0	0		0
Credit cards	0	0		0		0	0		0
Total	32	$	11,113	$	816	23	$	9,802	$	358


	Three and six months ended June 30, 2020
	Number of Loans	Pre-Modification Outstanding Recorded Investment Balance		Post-Modification Outstanding Recorded Investment Reserve
Commercial, industrial and agricultural	8	$	1,593	$	1,593
Commercial mortgages	0	0		0
Residential real estate	1	116		116
Consumer	0	0		0
Credit cards	0	0		0
Total	9	$	1,709	$	1,709

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 three and six months ended June 30, 2020 and June 30, 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	$	1,226,388	$	10,889	$	26,244	$	0	$	1,263,521
Commercial mortgages	818,811		13,465		33,125		0		865,401
Total	$	2,045,199	$	24,354	$	59,369	$	0	$	2,128,922


	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 June 30, 2020 and December 31, 2019:


	June 30, 2020										December 31, 2019
	Residential Real Estate		Consumer		Credit Cards		Residential Real Estate		Consumer		Credit Cards
Performing	$	801,106	$	92,924	$	6,748	$	809,247	$	123,950	$	7,567
Nonperforming	4,307		485		12		4,783		835		2
Total	$	805,413	$	93,409	$	6,760	$	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.