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Allowance for Loan and Lease Losses and Credit Quality Information
12 Months Ended
Dec. 31, 2019
Receivables [Abstract]  
ALLOWANCE FOR LOAN AND LEASE LOSSES AND CREDIT QUALITY INFORMATION
8. ALLOWANCE FOR LOAN AND LEASE LOSSES AND CREDIT QUALITY INFORMATION
The following tables provide the activity of our allowance for loan and lease losses and loan and lease balances for the years ended December 31, 2019, 2018 and 2017:
 
(Dollars in thousands)
Commercial and Industrial(1)
Owner-
occupied
Commercial
Commercial
Mortgages
Construction
Residential(2)
ConsumerTotal
Year Ended December 31, 2019
Allowance for loan and lease losses
Beginning balance$14,211  $5,057  $6,806  $3,712  $1,428  $8,325  $39,539  
Charge-offs(17,258) (354) (159) (42) (322) (4,138) (22,273) 
Recoveries1,621  200  1,546   (84) 1,463  4,750  
Provision (credit)23,977  (472) (830) 207  126  1,465  24,473  
Provision (credit) for acquired loans298  185  89  10  233  272  1,087  
Ending balance$22,849  $4,616  $7,452  $3,891  $1,381  $7,387  $47,576  
Period-end allowance allocated to:
Individually evaluated for impairment$1,179  $23  $—  $—  $463  $176  $1,841  
Collectively evaluated for impairment21,664  4,383  7,387  3,867  824  7,210  45,335  
Acquired loans evaluated for impairment 210  65  24  94   400  
Ending balance$22,849  $4,616  $7,452  $3,891  $1,381  $7,387  $47,576  
Period-end loan balances:
Individually evaluated for impairment(3)
$11,158  $4,060  $1,753  $—  $12,151  $7,467  $36,589  
Collectively evaluated for impairment1,619,549  971,694  1,105,174  437,999  145,582  899,724  5,179,722  
Acquired nonimpaired loans603,157  313,955  1,107,379  142,592  834,820  219,413  3,221,316  
Acquired impaired loans1,564  6,757  8,670  491  7,326  2,127  26,935  
Ending balance(4)
$2,235,428  $1,296,466  $2,222,976  $581,082  $999,879  $1,128,731  $8,464,562  

(Dollars in thousands)Commercial and Industrial
Owner-
occupied
Commercial
Commercial
Mortgages
Construction
Residential(2)
ConsumerTotal
Year Ended December 31, 2018
Allowance for loan and lease losses
Beginning balance$16,732  $5,422  $5,891  $2,861  $1,798  $7,895  $40,599  
Charge-offs(12,130) (417) (255) (1,475) (91) (2,615) (16,983) 
Recoveries1,381  34  255   154  926  2,753  
Provision (credit)8,328  (38) 924  2,341  (404) 2,126  13,277  
Provision (credit) for acquired loans(100) 56  (9) (18) (29) (7) (107) 
Ending balance$14,211  $5,057  $6,806  $3,712  $1,428  $8,325  $39,539  
Period-end allowance allocated to:
Individually evaluated for impairment$876  $—  $—  $444  $543  $168  $2,031  
Collectively evaluated for impairment13,334  4,965  6,727  3,254  847  8,155  37,282  
Acquired loans evaluated for impairment 92  79  14  38   226  
Ending balance$14,211  $5,057  $6,806  $3,712  $1,428  $8,325  $39,539  
Period-end loan balances:
Individually evaluated for impairment(3)
$14,837  $4,406  $4,083  $2,781  $11,017  $7,883  $45,007  
Collectively evaluated for impairment1,366,151  938,934  1,005,504  310,511  132,064  651,160  4,404,324  
Acquired nonimpaired loans89,970  112,386  145,648  2,525  57,708  21,745  429,982  
Acquired impaired loans1,531  4,248  7,504  749  761  151  14,944  
Ending balance(4)
$1,472,489  $1,059,974  $1,162,739  $316,566  $201,550  $680,939  $4,894,257  
 
(Dollars in thousands)Commercial and Industrial
Owner-
occupied
Commercial
Commercial
Mortgages
Construction
Residential(2)
ConsumerTotal
Year Ended December 31, 2017
Allowance for loan and lease losses
Beginning balance$13,339  $6,588  $8,915  $2,838  $2,059  $6,012  $39,751  
Charge-offs(5,008) (296) (4,612) (574) (168) (3,184) (13,842) 
Recoveries1,355  127  255  306  178  1,505  3,726  
Provision (credit)6,972  (1,098) 1,160  222  (300) 3,572  10,528  
Provision for acquired loans74  101  173  69  29  (10) 436  
Ending balance$16,732  $5,422  $5,891  $2,861  $1,798  $7,895  $40,599  
Period-end allowance allocated to:
Individually evaluated for impairment$3,687  $—  $18  $—  $760  $193  $4,658  
Collectively evaluated for impairment12,871  5,410  5,779  2,828  1,002  7,693  35,583  
Acquired loans evaluated for impairment174  12  94  33  36   358  
Ending balance$16,732  $5,422  $5,891  $2,861  $1,798  $7,895  $40,599  
Period-end loan balances:
Individually evaluated for impairment(3)
$19,196  $3,655  $6,076  $6,022  $13,778  $7,588  $56,315  
Collectively evaluated for impairment1,324,636  933,352  983,400  258,887  146,621  514,713  4,161,609  
Acquired nonimpaired loans116,566  136,437  188,505  15,759  72,304  35,945  565,516  
Acquired impaired loans4,156  5,803  9,724  940  784  247  21,654  
Ending balance(4)
$1,464,554  $1,079,247  $1,187,705  $281,608  $233,487  $558,493  $4,805,094  
(1)Includes commercial small business leases.
(2)Period-end loan balance excludes reverse mortgages at fair value of $16.6 million as of December 31, 2019, $16.5 million as of December 31, 2018, and $19.8 million as of December 31, 2017.
(3)The difference between this amount and nonaccruing loans represents accruing troubled debt restructured loans which are considered to be impaired loans of $14.3 million as of December 31, 2019, $15.0 million as of December 31, 2018, and $20.1 million as of December 31, 2017.
(4)Ending loan balances do not include net deferred fees.
Nonaccrual and Past Due Loans
The following tables show our nonaccrual and past due loans at the dates indicated:
 
December 31, 2019
(Dollars in thousands)30–89 Days
Past Due and
Still Accruing
Greater Than
90 Days
Past Due and
Still Accruing
Total Past
Due
And Still
Accruing
Accruing
Current
Balances
Acquired
Impaired
Loans
Nonaccrual
Loans
Total
Loans
Commercial and industrial(1)
$6,289  $2,038  $8,327  $2,214,506  $1,564  $11,031  $2,235,428  
Owner-occupied commercial1,498  831  2,329  1,283,320  6,757  4,060  1,296,466  
Commercial mortgages4,999  99  5,098  2,207,582  8,670  1,626  2,222,976  
Construction—  —  —  580,591  491  —  581,082  
Residential(2)
6,733  437  7,170  980,893  7,326  4,490  999,879  
Consumer(3)
13,164  12,745  25,909  1,098,980  2,127  1,715  1,128,731  
Total(4)
$32,683  $16,150  $48,833  $8,365,872  $26,935  $22,922  $8,464,562  
% of Total Loans0.39 %0.19 %0.58 %98.83 %0.32 %0.27 %100.00 %
(1)Includes commercial small business leases.
(2)Residential accruing current balances excludes reverse mortgages at fair value of $16.6 million.
(3)Includes $22.3 million of delinquent, but still accruing, U.S. government-guaranteed student loans that carry little risk of credit loss.
(4)Balances in table above includes $3.2 billion in acquired non-impaired loans.
December 31, 2018
(Dollars in thousands)30–89 Days
Past Due and
Still Accruing
Greater Than
90 Days
Past Due and
Still Accruing
Total Past
Due
And Still
Accruing
Accruing
Current
Balances
Acquired
Impaired
Loans
Nonaccrual
Loans
Total Loans
Commercial and industrial$4,646  $71  $4,717  $1,452,185  $1,531  $14,056  $1,472,489  
Owner-occupied commercial1,598  —  1,598  1,049,722  4,248  4,406  1,059,974  
Commercial mortgages2,296  —  2,296  1,148,988  7,504  3,951  1,162,739  
Construction157  —  157  312,879  749  2,781  316,566  
Residential(1)
2,315  660  2,975  194,960  761  2,854  201,550  
Consumer1,496  104  1,600  677,182  151  2,006  680,939  
Total(2)
$12,508  $835  $13,343  $4,835,916  $14,944  $30,054  $4,894,257  
% of Total Loans0.25 %0.02 %0.27 %98.81 %0.31 %0.61 %100.00 %
(1)Residential accruing current balances excludes reverse mortgages at fair value of $16.5 million.
(2)Balances in table above includes $430.0 million in acquired non-impaired loans.
Impaired Loans
The following tables provide an analysis of our impaired loans at December 31, 2019 and December 31, 2018: 

December 31, 2019
(Dollars in thousands)
Ending
Loan
Balances
Loans with
No Related
Reserve (1)
Loans with
Related
Reserve (2)
Related
Reserve
Contractual
Principal
Balances (2)
Average
Loan
Balances
Commercial and industrial$11,900  $9,979  $1,921  $1,185  $14,653  $17,033  
Owner-occupied commercial5,596  3,919  1,677  233  6,083  7,869  
Commercial mortgages4,888  1,753  3,135  65  5,215  4,607  
Construction435  —  435  24  488  1,686  
Residential14,119  8,858  5,261  557  16,721  12,031  
Consumer7,584  5,876  1,708  178  8,444  7,729  
Total$44,522  $30,385  $14,137  $2,242  $51,604  $50,955  
(1)Reflects loan balances at or written down to their remaining book balance.
(2)The above includes acquired impaired loans totaling $7.9 million in the ending loan balance and $9.0 million in the contractual principal balance.
December 31, 2018
(Dollars in thousands)
Ending
Loan
Balances
Loans
with No
Related
Reserve (1)
Loans with
Related
Reserve (2)
Related
Reserve
Contractual
Principal
Balances (2)
Average
Loan
Balances
Commercial and industrial$14,841  $8,625  $6,216  $878  $22,365  $18,484  
Owner-occupied commercial6,065  4,406  1,659  92  6,337  5,378  
Commercial mortgages5,679  4,083  1,596  79  15,372  7,438  
Construction3,530  —  3,530  458  5,082  5,091  
Residential11,321  6,442  4,879  581  13,771  12,589  
Consumer7,916  6,899  1,017  170  8,573  7,956  
Total$49,352  $30,455  $18,897  $2,258  $71,500  $56,936  
(1)Reflects loan balances at or written down to their remaining book balance.
(2)The above includes acquired impaired loans totaling $4.3 million in the ending loan balance and $4.8 million in the contractual principal balance.
Interest income of $0.8 million was recognized on impaired loans during both 2019 and 2018.
As of December 31, 2019, there were 33 residential loans and 29 commercial loans in the process of foreclosure. The total outstanding balance on the loans was $3.2 million and $9.5 million, respectively. As of December 31, 2018, there were 26 residential loans and 11 commercial loans in the process of foreclosure. The total outstanding balance on the loans was $1.9 million and $5.3 million, respectively.
Reserves on Acquired Nonimpaired Loans
In accordance with ASC 310, loans acquired by the Bank through its mergers with First National Bank of Wyoming (FNBW), Alliance Bancorp, Inc. (Alliance), Penn Liberty Bank (Penn Liberty), and Beneficial are reflected on the balance sheet at their fair values on the date of acquisition as opposed to their contractual values. Therefore, on the date of acquisition establishing an allowance for acquired loans is prohibited. After the acquisition date, the Bank performs a separate allowance analysis on a quarterly basis to determine if an allowance for loan loss is necessary. Should the credit risk calculated exceed the purchased loan portfolio’s total loan mark, additional reserves will be added to the Bank’s allowance. When a purchased loan becomes impaired after its acquisition, it is evaluated as part of the Bank’s reserve analysis and a specific reserve is established to be included in the Bank’s allowance.
Credit Quality Indicators
Below is a description of each of our risk ratings for all commercial loans:
Pass. These borrowers currently show no indication of deterioration or potential problems and their loans are considered fully collectible
Special Mention. Borrowers have potential weaknesses that deserve management’s close attention. Borrowers in this category may be experiencing adverse operating trends, for example, declining revenues or margins, high leverage, tight liquidity, or increasing inventory without increasing sales. These adverse trends can have a potential negative effect on the borrower’s repayment capacity. These assets are not adversely classified and do not expose the Bank to significant risk that would warrant a more severe rating. Borrowers in this category may also be experiencing significant management problems, pending litigation, or other structural credit weaknesses.
Substandard. Borrowers have well-defined weaknesses that require extensive oversight by management. Borrowers in this category may exhibit one or more of the following: inadequate debt service coverage, unprofitable operations, insufficient liquidity, high leverage, and weak or inadequate capitalization. Relationships in this category are not adequately protected by the sound financial worth and paying capacity of the obligor or the collateral pledged on the loan, if any. A distinct possibility exists that the Bank will sustain some loss if the deficiencies are not corrected.
Doubtful. Borrowers have well-defined weaknesses inherent in the Substandard category with the added characteristic that the possibility of loss is extremely high. Current circumstances in the credit relationship make collection or liquidation in full highly questionable. A doubtful asset has some pending event that may strengthen the asset that defers the loss classification. Such impending events include: perfecting liens on additional collateral, obtaining collateral valuations, an acquisition or liquidation preceding, proposed merger, or refinancing plan.
Loss. Loans are uncollectible or of such negligible value that continuance as a bankable asset is not supportable. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather it is not practical to defer writing off this asset even though partial recovery may be recognized sometime in the future.
Residential and Consumer Loans
The residential and consumer loan portfolios are monitored on an ongoing basis using delinquency information and loan type as credit quality indicators. These credit quality indicators are assessed in the aggregate in these relatively homogeneous portfolios. Loans that are greater than 90 days past due are generally considered nonperforming and placed on nonaccrual status.
The following tables provide an analysis of loans by portfolio segment based on the credit quality indicators used to determine the allowance for loan and lease loss.
Commercial Credit Exposure
 
December 31, 2019
(Dollars in thousands)
Commercial and Industrial(1)
Owner-occupied
Commercial
Commercial
Mortgages
Construction
Total Commercial (2)
Amount%
Risk Rating:
Special mention$12,287  $—  $40,478  $—  $52,765  
Substandard:
Accrual78,809  32,679  23,017  —  134,505  
Nonaccrual9,852  4,037  1,626  —  15,515  
Doubtful1,179  23  —  —  1,202  
Total Special Mention and Substandard102,127  36,739  65,121  —  203,987  %
Acquired impaired 1,564  6,757  8,670  491  17,482  — %
Pass2,131,737  1,252,970  2,149,185  580,591  6,114,483  97 %
Total$2,235,428  $1,296,466  $2,222,976  $581,082  $6,335,952  100 %
(1)Includes commercial small business leases.
(2)Table includes $2.2 billion of acquired non-impaired loans at December 31, 2019.

December 31, 2018
 Commercial and IndustrialOwner-occupied
Commercial
Commercial
Mortgages
Construction
Total Commercial (1)
(Dollars in thousands)Amount%
Risk Rating:
Special mention$8,710  $21,230  $—  $—  $29,940  
Substandard:
Accrual37,424  21,081  9,767  168  68,440  
Nonaccrual13,180  4,406  3,951  2,337  23,874  
Doubtful876  —  —  444  1,320  
Total Special Mention and Substandard60,190  46,717  13,718  2,949  123,574  %
Acquired impaired1,531  4,248  7,504  749  14,032  — %
Pass1,410,768  1,009,009  1,141,517  312,868  3,874,162  97 %
Total$1,472,489  $1,059,974  $1,162,739  $316,566  $4,011,768  100 %
(1)Table includes $350.5 million of acquired non-impaired loans at December 31, 2018.
Residential and Consumer Credit Exposure
 
     
Total Residential and Consumer(3)
 
Residential (2)
Consumer20192018
(Dollars in thousands)2019201820192018AmountPercentAmountPercent
Nonperforming (1)
$12,858  $11,017  $7,374  $7,883  $20,232  %$18,900  %
Acquired impaired loans7,326  761  2,127  151  9,453  — %912  — %
Performing979,695  189,772  1,119,230  672,905  2,098,925  99 %862,677  98 %
Total$999,879  $201,550  $1,128,731  $680,939  $2,128,610  100 %$882,489  100 %
(1)Includes $14.0 million as of December 31, 2019 and December 31, 2018 of troubled debt restructured mortgages and home equity installment loans that are performing in accordance with the loans modified terms and are accruing interest.
(2)Residential performing loans excludes $16.6 million and $16.5 million of reverse mortgages at fair value as of December 31, 2019 and December 31, 2018, respectively.
(3)Total includes acquired non-impaired loans of $1.1 billion at December 31, 2019 and $79.5 million at December 31, 2018.

Troubled Debt Restructurings (TDR)
A modification is classified as a TDR if both of the following exist: (1) the borrower is experiencing financial difficulty and (2) the Bank has granted a concession to the borrower. Many aspects of the borrower’s financial situation are assessed when determining whether they are experiencing financial difficulty. Concessions may include the reduction of the interest rate to a rate lower than current market rate for a new loan with similar risk, extension of the maturity date, reduction of accrued interest, or principal forgiveness. The assessments of whether a borrower is experiencing (or is likely to experience) financial difficulty and whether a concession has been granted is subjective in nature and management’s judgment is required when determining whether a modification is a TDR.
The following table presents the balance of TDRs as of the indicated dates:
 
(Dollars in thousands)December 31, 2019December 31, 2018
Performing TDRs$14,281  $14,953  
Nonperforming TDRs5,896  10,211  
Total TDRs$20,177  $25,164  
Approximately $0.6 million and $1.2 million in related reserves have been established for these loans at December 31, 2019 and December 31, 2018, respectively.

The following tables present information regarding the types of loan modifications made and the balances of loans modified as TDRs during the years ended December 31, 2019 and 2018:
December 31, 2019December 31, 2018
Contractual
payment
reduction
Maturity
date
extension
Discharged
in
bankruptcy
Other (1)
TotalContractual
payment
reduction
Maturity
date
extension
Discharged
in
bankruptcy
Other (1)
Total
Commercial—   —     —  —  —   
Owner-occupied commercial—  —  —    —  —  —  —  —  
Commercial mortgages —  —      —  —   
Construction—  —  —  —  —  —   —  —   
Residential —    10   —   —   
Consumer    21      20  
12   11  13  40  20     35  
(1)Other includes interest rate reduction, forbearance, and interest only payments.
 Year Ended December 31,
(Dollars in thousands)20192018
Pre
Modification
Post
Modification
Pre
Modification
Post
Modification
Commercial$1,134  $1,134  $5,102  $5,102  
Owner-occupied commercial1,367  1,367  —  —  
Commercial mortgages1,136  1,136  2,190  2,190  
Construction—  —  920  920  
Residential1,231  1,231  557  557  
Consumer2,046  2,046  1,481  1,481  
$6,914  $6,914  $10,250  $10,250  
Principal balances are generally not forgiven when a loans is modified as a TDR. Nonaccruing restructured loans remain in nonaccrual status until there has been a period of sustained repayment performance, which is typically six months, and payment is reasonably assured.
The TDRs set forth in the table above resulted in a $0.2 million decrease in our allowance for loan and lease losses, and resulted in no additional charge-offs during the year ended December 31, 2019. For the year ended December 31, 2018, the TDRs set forth in the table above resulted in a $2.0 million decrease in our allowance for loan and lease losses and $5.0 million of additional charge-offs.
For the year ended December 31, 2019, four TDRs defaulted that had received troubled debt modification during the past twelve months with a total loan amount of $0.3 million, compared with five loans with a total loan amount of $0.2 million during the year ended December 31, 2018.