LOANS

The loans receivable portfolio is segmented into

residential mortgage, commercial and consumer loans. Loans outstanding at

September 30, 2017

and

December 31, 2016

are summarized by segment, and by classes within each segment, as follows:

Summary of Loans by Type
(In Thousands)	Sept. 30,			Dec. 31,
	2017			2016
Residential mortgage:
Residential mortgage loans - first liens	$	355,285		$	334,102
Residential mortgage loans - junior liens		24,694			23,706
Home equity lines of credit		36,534			38,057
1-4 Family residential construction		25,286			24,908
Total residential mortgage		441,799			420,773
Commercial:
Commercial loans secured by real estate		158,520			150,468
Commercial and industrial		83,243			83,854
Political subdivisions		54,730			38,068
Commercial construction and land		13,937			14,287
Loans secured by farmland		7,744			7,294
Multi-family (5 or more) residential		7,566			7,896
Agricultural loans		6,137			3,998
Other commercial loans		12,383			11,475
Total commercial		344,260			317,340
Consumer		14,953			13,722
Total		801,012			751,835
Less: allowance for loan losses		(8,900	)		(8,473	)
Loans, net	$	792,112		$	743,362

The Corporation grants loans to individuals as well as commercial and tax-exempt entities. Commercial, residential and personal loans are made to customers geographically concentrated in the Pennsylvania and New York counties that comprise the market serviced by Citizens & Northern Bank. Although the Corporation has a diversified loan portfolio, a significant portion of its debtors

’ ability to honor their contracts is dependent on the local economic conditions within the region. There is

concentration of loans to borrowers engaged in similar businesses or activities that exceed

10%

of total loans at either

September 30, 2017

December 31, 2016.

The Corporation maintains an allowance for loan losses that represents management

’s estimate of the losses inherent in the loan portfolio as of the balance sheet date and recorded as a reduction of the investment in loans. The allowance for loan losses is maintained at a level considered adequate to provide for losses that can be reasonably anticipated. Management performs a quarterly evaluation of the adequacy of the allowance. The allowance is based on the Corporation’s past loan loss experience, known and inherent risks in the portfolio, adverse situations that

may

affect the borrower’s ability to repay, the estimated value of any underlying collateral, composition of the loan portfolio, current economic conditions and other relevant factors. This evaluation is inherently subjective as it requires material estimates that

may

be susceptible to significant revision as more information becomes available. In the process of evaluating the loan portfolio, management also considers the Corporation’s exposure to losses from unfunded loan commitments. As of

September 30, 2017

and

December 31, 2016,

management determined that

allowance for credit losses related to unfunded loan commitments was required.

Transactions within the allowance for loan losses, summarized by segm

ent and class, for the

three

-month and

nine

-month periods ended

September 30, 2017

and

2016

were as follows:

Three Months Ended September 30, 2017	June 30,										Sept. 30,
(In Thousands)	2017 Balance		Charge-offs			Recoveries		Provision (Credit)			2017 Balance
Allowance for Loan Losses:
Residential mortgage:
Residential mortgage loans - first liens	$	3,052	$	0		$	1	$	112		$	3,165
Residential mortgage loans - junior liens		261		0			1		3			265
Home equity lines of credit		332		0			0		(6	)		326
1-4 Family residential construction		251		0			0		(8	)		243
Total residential mortgage		3,896		0			2		101			3,999
Commercial:
Commercial loans secured by real estate		2,610		0			0		27			2,637
Commercial and industrial		910		0			1		93			1,004
Commercial construction and land		162		0			0		(13	)		149
Loans secured by farmland		107		0			0		3			110
Multi-family (5 or more) residential		169		0			0		2			171
Agricultural loans		42		0			0		16			58
Other commercial loans		105		0			0		12			117
Total commercial		4,105		0			1		140			4,246
Consumer		134		(67	)		7		81			155
Unallocated		500		0			0		0			500
Total Allowance for Loan Losses	$	8,635	$	(67	)	$	10	$	322		$	8,900

Three Months Ended September 30, 2016	June 30,										Sept. 30,
(In Thousands)	2016 Balance		Charge-offs			Recoveries		Provision (Credit)			2016 Balance
Allowance for Loan Losses:
Residential mortgage:
Residential mortgage loans - first liens	$	2,830	$	(31	)	$	2	$	155		$	2,956
Residential mortgage loans - junior liens		239		0			0		9			248
Home equity lines of credit		359		0			0		0			359
1-4 Family residential construction		222		0			0		14			236
Total residential mortgage		3,650		(31	)		2		178			3,799
Commercial:
Commercial loans secured by real estate		2,083		0			0		304			2,387
Commercial and industrial		1,038		(2	)		1		1			1,038
Commercial construction and land		105		0			0		41			146
Loans secured by farmland		103		0			0		3			106
Multi-family (5 or more) residential		248		0			0		(5	)		243
Agricultural loans		47		0			0		(4	)		43
Other commercial loans		119		0			0		(3	)		116
Total commercial		3,743		(2	)		1		337			4,079
Consumer		138		(28	)		12		23			145
Unallocated		398		0			0		0			398
Total Allowance for Loan Losses	$	7,929	$	(61	)	$	15	$	538		$	8,421

Nine Months Ended September 30, 2017	Dec. 31,										Sept. 30,
(In Thousands)	2016 Balance		Charge-offs			Recoveries		Provision (Credit)			2017 Balance
Allowance for Loan Losses:
Residential mortgage:
Residential mortgage loans - first liens	$	3,033	$	(162	)	$	15	$	279		$	3,165
Residential mortgage loans - junior liens		258		(16	)		3		20			265
Home equity lines of credit		350		0			0		(24	)		326
1-4 Family residential construction		249		0			0		(6	)		243
Total residential mortgage		3,890		(178	)		18		269			3,999
Commercial:
Commercial loans secured by real estate		2,380		(96	)		0		353			2,637
Commercial and industrial		999		(1	)		3		3			1,004
Commercial construction and land		162		0			0		(13	)		149
Loans secured by farmland		110		0			0		0			110
Multi-family (5 or more) residential		241		0			0		(70	)		171
Agricultural loans		40		0			0		18			58
Other commercial loans		115		0			0		2			117
Total commercial		4,047		(97	)		3		293			4,246
Consumer		138		(127	)		30		114			155
Unallocated		398		0			0		102			500
Total Allowance for Loan Losses	$	8,473	$	(402	)	$	51	$	778		$	8,900

Nine Months Ended September 30, 2016	Dec. 31,										Sept. 30,
(In Thousands)	2015 Balance		Charge-offs			Recoveries		Provision (Credit)			2016 Balance
Allowance for Loan Losses:
Residential mortgage:
Residential mortgage loans - first liens	$	2,645	$	(73	)	$	2	$	382		$	2,956
Residential mortgage loans - junior liens		219		0			0		29			248
Home equity lines of credit		347		0			0		12			359
1-4 Family residential construction		207		0			0		29			236
Total residential mortgage		3,418		(73	)		2		452			3,799
Commercial:
Commercial loans secured by real estate		1,939		0			2		446			2,387
Commercial and industrial		981		(2	)		2		57			1,038
Commercial construction and land		58		0			0		88			146
Loans secured by farmland		106		0			0		0			106
Multi-family (5 or more) residential		675		(595	)		0		163			243
Agricultural loans		45		0			0		(2	)		43
Other commercial loans		118		0			0		(2	)		116
Total commercial		3,922		(597	)		4		750			4,079
Consumer		122		(67	)		39		51			145
Unallocated		427		0			0		(29	)		398
Total Allowance for Loan Losses	$	7,889	$	(737	)	$	45	$	1,224		$	8,421

In the evaluation of the loan portfolio, management determines

two

major components fo

r the allowance for loan losses – (

) a specific component based on an assessment of certain larger relationships, mainly commercial purpose loans, on a loan-by-loan basis; and (

) a general component for the remainder of the portfolio based on a collective evaluation of pools of loans with similar risk characteristics. The general component is assigned to each pool of loans based on both historical net charge-off experience, and an evaluation of certain qualitative factors. An unallocated component 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 above methodologies for estimating specific and general losses in the portfolio.

In determining the larger loan relationships for detailed assessment under the specific allowance component, the Corporation uses an internal risk rating system. Under the risk rating system, the Corporation classifies problem or potential problem loans as “Special Mention,” “Substandard,” or “Doubtful” on the basis of currently existing facts, conditions and values. Substandard loans include those characterized by the distinct possibility that the Corporation will sustain some loss if the deficiencies are

not

corrected. Loans classified as Doubtful have all the weaknesses inherent in those classified as Substandard with the added characteristic that the weaknesses present make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. Loans that do

not

currently expose the Corporation to sufficient risk to warrant classification as Substandard or Doubtful, but possess weaknesses that deserve management

’s close attention, are deemed to be Special Mention. Risk ratings are updated any time that conditions or the situation warrants. Loans

not

classified are included in the “Pass” column in the table below.

The following tables summarize the aggregate credit quality classification of outstan

ding loans by risk rating as of

September 30, 2017

and

December 31, 2016:

September 30, 2017
(In Thousands)			Special
	Pass		Mention		Substandard		Doubtful		Total
Residential Mortgage:
Residential mortgage loans - first liens	$	346,545	$	314	$	8,372	$	54	$	355,285
Residential mortgage loans - junior liens		24,463		107		124		0		24,694
Home equity lines of credit		35,933		62		539		0		36,534
1-4 Family residential construction		25,286		0		0		0		25,286
Total residential mortgage		432,227		483		9,035		54		441,799
Commercial:
Commercial loans secured by real estate		149,607		1,394		7,519		0		158,520
Commercial and Industrial		77,045		3,658		2,529		11		83,243
Political subdivisions		54,730		0		0		0		54,730
Commercial construction and land		13,848		10		79		0		13,937
Loans secured by farmland		5,759		587		1,385		13		7,744
Multi-family (5 or more) residential		6,974		0		592		0		7,566
Agricultural loans		5,133		278		726		0		6,137
Other commercial loans		12,310		0		73		0		12,383
Total commercial		325,406		5,927		12,903		24		344,260
Consumer		14,840		0		113		0		14,953
Totals	$	772,473	$	6,410	$	22,051	$	78	$	801,012

December 31, 2016
(In Thousands)			Special
	Pass		Mention		Substandard		Doubtful		Total
Residential Mortgage:
Residential mortgage loans - first liens	$	324,377	$	408	$	9,258	$	59	$	334,102
Residential mortgage loans - junior liens		23,274		132		300		0		23,706
Home equity lines of credit		37,360		123		574		0		38,057
1-4 Family residential construction		24,820		0		88		0		24,908
Total residential mortgage		409,831		663		10,220		59		420,773
Commercial:
Commercial loans secured by real estate		139,358		3,092		8,018		0		150,468
Commercial and Industrial		79,202		4,180		461		11		83,854
Political subdivisions		38,068		0		0		0		38,068
Commercial construction and land		14,136		70		81		0		14,287
Loans secured by farmland		5,745		129		1,404		16		7,294
Multi-family (5 or more) residential		7,277		0		619		0		7,896
Agricultural loans		3,208		0		790		0		3,998
Other commercial loans		11,401		0		74		0		11,475
Total commercial		298,395		7,471		11,447		27		317,340
Consumer		13,546		0		176		0		13,722
Totals	$	721,772	$	8,134	$	21,843	$	86	$	751,835

The general component of the allowance for loan losses covers pools of loans including commercial loans

not

considered individually impaired, as well as smaller balance homogeneous classes of loans, such as residential real estate, home equity lines of credit and other consumer loans. Accordingly, the Corporation generally does

not

separately identify individual consumer and residential loans for impairment disclosures, unless such loans are subject to a restructuring agreement. The pools of loans are evaluated for loss exposure based upon average historical net charge-off rates for each loan class, adjusted for qualitative factors

(described in the following paragraphs). The time period used in determining the average historical net charge-off rate for each loan class is based on management’s evaluation of an appropriate time period that captures an historical loss experience relevant to the current portfolio. Throughout

2016

and at

March 31, 2017,

three

-year average net charge-off rate was used for all loan classes. At

June 30, 2017

and

September 30, 2017,

five

-year average net charge-off rate was used for commercial loans secured by real estate and for multi-family residential loans, while a

three

-year average net charge-off rate was used for all other loan classes.

Qualitative

risk factors are evaluated for the impact on each of the

three

segments (residential mortgage, commercial and consumer) within the loan portfolio. Each qualitative factor is assigned a value to reflect improving, stable or declining conditions based on management’s judgment using relevant information available at the time of the evaluation. The adjustment for qualitative factors is applied as an increase or decrease to the average net charge-off rate for each loan class within each segment.

The q

ualitative factors used in the general component calculations are designed to address credit risk characteristics associated with each segment. The Corporation’s credit risk associated with all of the segments is significantly impacted by these factors, which include economic conditions within its market area, the Corporation’s lending policies, changes or trends in the portfolio, risk profile, competition, regulatory requirements and other factors. Further, the residential mortgage segment is significantly affected by the values of residential real estate that provide collateral for the loans. The majority of the Corporation’s commercial segment loans (approximately

55%

September 30, 2017)

is secured by real estate, and accordingly, the Corporation’s risk for the commercial segment is significantly affected by commercial real estate values. The consumer segment includes a wide mix of loans for different purposes, primarily secured loans, including loans secured by motor vehicles, manufactured housing and other types of collateral.

Loans are classified as impaired, when, based on current information and events, it is probable that the Corporation will be unable to collect the scheduled payments of principal 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 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 shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis for commercial loans, by the fair value of the collateral (if the loan is collateral dependent), by future cash flows discounted at the loan’s effective rate or by the loan’s observable market price.

The scope of loans reviewed individually each quarter to determine if they are impaired include all loan relationships greater than

$200,000

for which there is at least

one

extension of credit graded Special Mention, Substandard or Doubtful. Loans that are individually reviewed, but which are determined to

not

be impaired, are combined with all remaining loans that are

not

reviewed on a specific basis, and such loans are included within larger pools of loans based on similar risk and loss characteristics for purposes of determining the general component of the allowance. The loans that have been individually reviewed, but which have been determined to

not

be impaired, are included in the “Collectively Evaluated” column in the table summarizing the allowance and associa

ted loan balances as of

September 30, 2017

and

December 31, 2016.

All loans classified as troubled debt restructurings (discussed in more detail below) and all loan relationships less than

$200,000

in the aggregate, but with an estimated loss of

$100,000

or more, are individually evaluated for impairment.

The following tables present a summary of loan balances and the related allowance for loan losses summarized by portfolio segment and class for each

impairment method used as of

September 30, 2017

and

December 31, 2016:

September 30, 2017	Loans:						Allowance for Loan Losses:
(In Thousands)
	Individually		Collectively				Individually		Collectively
	Evaluated		Evaluated		Totals		Evaluated		Evaluated		Totals
Residential mortgage:
Residential mortgage loans - first liens	$	723	$	354,562	$	355,285	$	0	$	3,165	$	3,165
Residential mortgage loans - junior liens		62		24,632		24,694		0		265		265
Home equity lines of credit		0		36,534		36,534		0		326		326
1-4 Family residential construction		0		25,286		25,286		0		243		243

Total residential mortgage		785		441,014		441,799		0		3,999		3,999
Commercial:
Commercial loans secured by real estate		5,917		152,603		158,520		952		1,685		2,637
Commercial and industrial		476		82,767		83,243		165		839		1,004
Political subdivisions		0		54,730		54,730		0		0		0
Commercial construction and land		0		13,937		13,937		0		149		149
Loans secured by farmland		1,371		6,373		7,744		50		60		110
Multi-family (5 or more) residential		392		7,174		7,566		0		171		171
Agricultural loans		8		6,129		6,137		0		58		58
Other commercial loans		0		12,383		12,383		0		117		117

Total commercial		8,164		336,096		344,260		1,167		3,079		4,246

Consumer		20		14,933		14,953		0		155		155
Unallocated												500

Total	$	8,969	$	792,043	$	801,012	$	1,167	$	7,233	$	8,900

December 31, 2016	Loans:						Allowance for Loan Losses:
(In Thousands)
	Individually		Collectively				Individually		Collectively
	Evaluated		Evaluated		Totals		Evaluated		Evaluated		Totals
Residential mortgage:
Residential mortgage loans - first liens	$	753	$	333,349	$	334,102	$	0	$	3,033	$	3,033
Residential mortgage loans - junior liens		68		23,638		23,706		0		258		258
Home equity lines of credit		0		38,057		38,057		0		350		350
1-4 Family residential construction		0		24,908		24,908		0		249		249

Total residential mortgage		821		419,952		420,773		0		3,890		3,890
Commercial:
Commercial loans secured by real estate		8,005		142,463		150,468		528		1,852		2,380
Commercial and industrial		212		83,642		83,854		95		904		999
Political subdivisions		0		38,068		38,068		0		0		0
Commercial construction and land		0		14,287		14,287		0		162		162
Loans secured by farmland		1,394		5,900		7,294		51		59		110
Multi-family (5 or more) residential		392		7,504		7,896		0		241		241
Agricultural loans		13		3,985		3,998		0		40		40
Other commercial loans		0		11,475		11,475		0		115		115

Total commercial		10,016		307,324		317,340		674		3,373		4,047

Consumer		23		13,699		13,722		0		138		138
Unallocated												398

Total	$	10,860	$	740,975	$	751,835	$	674	$	7,401	$	8,473

Summary information r

elated to impaired loans at

September 30, 2017

and

December 31, 2016

is as follows:

(In Thousands)	September 30, 2017						December 31, 2016
	Unpaid						Unpaid
	Principal		Recorded		Related		Principal		Recorded		Related
	Balance		Investment		Allowance		Balance		Investment		Allowance
With no related allowance recorded:
Residential mortgage loans - first liens	$	752	$	723	$	0	$	783	$	753	$	0
Residential mortgage loans - junior liens		62		62		0		68		68		0
Commercial loans secured by real estate		3,231		3,231		0		6,975		5,232		0
Commercial and industrial		78		78		0		117		117		0
Loans secured by farmland		874		874		0		890		890		0
Multi-family (5 or more) residential		987		392		0		987		392		0
Agricultural loans		8		8		0		13		13		0
Consumer		20		20		0		23		23		0
Total with no related allowance recorded		6,012		5,388		0		9,856		7,488		0

With a related allowance recorded:
Commercial loans secured by real estate		2,686		2,686		952		2,773		2,773		528
Commercial and industrial		398		398		165		95		95		95
Loans secured by farmland		497		497		50		504		504		51
Total with a related allowance recorded		3,581		3,581		1,167		3,372		3,372		674
Total	$	9,593	$	8,969	$	1,167	$	13,228	$	10,860	$	674

The average balance of impaired loans and interest income recognized on impaired loans is as follows:

									Interest Income Recognized on
	Average Investment in Impaired Loans								Impaired Loans on a Cash Basis
(In Thousands)	3 Months Ended				9 Months Ended				3 Months Ended				9 Months Ended
	Sept. 30,				Sept. 30,				Sept. 30,				Sept. 30,
	2017		2016		2017		2016		2017		2016		2017		2016
Residential mortgage:
Residential mortgage loans - first lien	$	733	$	789	$	738	$	818	$	8	$	11	$	25	$	33
Residential mortgage loans - junior lien		64		72		65		72		1		0		3		2
Total residential mortgage		797		861		803		890		9		11		28		35
Commercial:
Commercial loans secured by real estate		6,200		7,022		6,377		6,524		36		83		127		274
Commercial and industrial		393		577		317		619		13		7		20		17
Loans secured by farmland		1,378		1,408		1,382		1,413		10		13		32		51
Multi-family (5 or more) residential		392		492		392		541		0		0		0		0
Agricultural loans		10		13		11		14		0		0		1		1
Total commercial		8,373		9,512		8,479		9,111		59		103		180		343
Consumer		25		17		27		16		0		0		0		0
Total	$	9,195	$	10,390	$	9,309	$	10,017	$	68	$	114	$	208	$	378

Loans are placed on nonaccrual status for all classes of loans when, in the opinion of management, collection of interest is doubtful. Any unpaid interest previously accrued on those loans is reversed from income. Interest income is

not

recognized on specific impaired loans unless the likelihood of further loss is remote. Interest payments received on loans for which the risk of further loss is greater than remote are applied as a reduction of the loan principal balance. Interest income on other nonaccrual loans

, including impaired loans, is recognized only to the extent of interest payments received. Generally, loans 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

longer in doubt. The past due status of all classes of loans receivable is determined based on contractual due dates for loan payments. Also, the amortization of deferred loan fees is discontinued when a loan is placed on nonaccrual status.

The breakdown by portfolio segment and class of nonaccrual loans and loans past due

ninety

days or more and still

accruing is as follows:

(In Thousands)	September 30, 2017				December 31, 2016
	Past Due				Past Due
	90+ Days and				90+ Days and
	Accruing		Nonaccrual		Accruing		Nonaccrual
Residential mortgage:
Residential mortgage loans - first liens	$	1,739	$	4,352	$	3,022	$	3,770
Residential mortgage loans - junior liens		4		0		114		0
Home equity lines of credit		208		59		320		11
Total residential mortgage		1,951		4,411		3,456		3,781
Commercial:
Commercial loans secured by real estate		126		5,732		2,774		3,080
Commercial and industrial		632		476		286		119
Commercial construction and land		53		0		0		0
Loans secured by farmland		215		1,313		219		1,331
Multi-family (5 or more) residential		0		392		0		392
Agricultural loans		0		8		0		13
Total commercial		1,026		7,921		3,279		4,935
Consumer		2		68		103		20

Totals	$	2,979	$	12,400	$	6,838	$	8,736

The

amounts shown in the table immediately above include loans classified as troubled debt restructurings (described in more detail below), if such loans are past due

ninety

days or more or nonaccrual.

The table below presents a summary of the c

ontractual aging of loans as of

September 30, 2017

and

December 31, 2016:

	As of September 30, 2017								As of December 31, 2016
	Current &								Current &
(In Thousands)	Past Due		Past Due		Past Due				Past Due		Past Due		Past Due
	Less than		30-89		90+				Less than		30-89		90+
	30 Days		Days		Days		Total		30 Days		Days		Days		Total
Residential mortgage:
Residential mortgage loans - first liens	$	347,083	$	4,410	$	3,792	$	355,285	$	321,670	$	6,695	$	5,737	$	334,102
Residential mortgage loans - junior liens		24,409		281		4		24,694		23,268		324		114		23,706
Home equity lines of credit		35,908		369		257		36,534		37,603		134		320		38,057
1-4 Family residential construction		24,597		689		0		25,286		24,567		341		0		24,908
Total residential mortgage		431,997		5,749		4,053		441,799		407,108		7,494		6,171		420,773

Commercial:
Commercial loans secured by real estate		155,276		215		3,029		158,520		147,464		82		2,922		150,468
Commercial and industrial		82,407		151		685		83,243		83,364		185		305		83,854
Political subdivisions		54,730		0		0		54,730		38,068		0		0		38,068
Commercial construction and land		13,858		26		53		13,937		14,199		88		0		14,287
Loans secured by farmland		6,726		57		961		7,744		6,181		83		1,030		7,294
Multi-family (5 or more) residential		7,135		39		392		7,566		7,439		65		392		7,896
Agricultural loans		6,052		77		8		6,137		3,981		4		13		3,998
Other commercial loans		12,383		0		0		12,383		11,475		0		0		11,475
Total commercial		338,567		565		5,128		344,260		312,171		507		4,662		317,340
Consumer		14,720		163		70		14,953		13,446		153		123		13,722

Totals	$	785,284	$	6,477	$	9,251	$	801,012	$	732,725	$	8,154	$	10,956	$	751,835

Nonaccrual loans are included in the contractual aging

in the immediately preceding table. A summary of the contractual aging of nonaccrual loans at

September 30, 2017

and

December 31, 2016

is as follows:

	Current &
(In Thousands)	Past Due		Past Due		Past Due
	Less than		30-89		90+
	30 Days		Days		Days		Total
September 30, 2017 Nonaccrual Totals	$	5,629	$	499	$	6,272	$	12,400
December 31, 2016 Nonaccrual Totals	$	4,199	$	419	$	4,118	$	8,736

Loans whose terms are modified are classified as

Troubled Debt Restructurings (TDRs) if the Corporation grants such borrowers concessions, and it is deemed that those borrowers are experiencing financial difficulty. Loans classified as TDRs are designated as impaired. The outstanding balance of loans subject to TDRs, as well as contractual aging information at

September 30, 2017

and

December 31, 2016

is as follows:

	Current &
(In Thousands)	Past Due		Past Due		Past Due
	Less than		30-89		90+
	30 Days		Days		Days		Nonaccrual		Total
September 30, 2017 Totals	$	658	$	0	$	0	$	3,075	$	3,733
December 31, 2016 Totals	$	5,453	$	350	$	0	$	2,874	$	8,677

September

30,

2017

and

December 31, 2016,

there were

commitments to loan additional funds to borrowers whose loans have been classified as TDRs.

TDR

s that occurred during the

three

-month and

nine

-month periods ended

September 30, 2017

and

2016

are as follows:

(Balances in Thousands)

Three Months Ended

September 30, 2017

September 30, 2016

Post-

Number

Modification

Number

Modification

Recorded

Loans

Investment

Loans

Investment

Consumer,

Accepted short fall from sale of residential real estate on a mortgage loan and made unsecured loan to same borrower

	Nine Months Ended				Nine Months Ended
	September 30, 2017				September 30, 2016
			Post-				Post-
	Number		Modification		Number		Modification
	of		Recorded		of		Recorded
	Loans		Investment		Loans		Investment
Residential mortgage,
Extended maturity with interest rate reduction		0	$	0		1	$	102
Commercial and industrial,
Extended maturity with interest rate increase		0		0		1		5
Consumer,
Accepted short fall from sale of residential real estate on a mortgage loan and made unsecured loan to same borrower		0		0		1		25
Total		0	$	0		3	$	132

There were

defaul

ts on loans for which modifications considered to be TDRs were entered into within the previous

months in the

three

-month periods ended

September 30, 2017

and

2016.

In the

nine

-month periods ended

September 30 2017

and

2016,

defaults on loans for which modifications considered to be TDRs were entered into within the previous

months are summarized as follows:

(Balances in Thousands)	Nine Months Ended				Nine Months Ended
	September 30, 2017				September 30, 2016
	Number				Number
	of		Recorded		of		Recorded
	Loans		Investment		Loans		Investment
Residential mortgage - first liens		0	$	0		1	$	242
Residential mortgage - junior liens		0		0		1		30
Commercial and industrial		0		0		1		5
Consumer		0		0		1		28
Total		0	$	0		4	$	305

The carrying amount of foreclosed residential real estate properties held as a result of obtaining physical possession (included in Foreclosed assets held for sale in the unaudited Consolidated Balance Sheet) is as follows:

(In Thousands)	Sept. 30,		Dec. 31,
	2017		2016
Foreclosed residential real estate	$	640	$	1,102

The recorded investment of consumer mortgage loans secured by residential real properties for which formal foreclosure proceedings were in process is as follows:

(In Thousands)	Sept. 30,		Dec. 31,
	2017		2016
Residential real estate in process of foreclosure	$	1,871	$	2,738