Loans

3 Months Ended

Mar. 31, 2020

Loans And Leases Receivable Net Reported Amount [Abstract]

Loans

8. Loans

Loan segments have been identified by evaluating the portfolio based on collateral and credit risk characteristics.  Loans receivable consist of the following:

	March 31, 2020			December 31, 2019
	(In Thousands)
Real Estate:
Residential	$	1,265,901		$	324,773
Commercial		2,200,266			1,506,026
Construction		521,442			305,305
		3,987,609			2,136,104
Other Loans:
Commercial		897,865			578,071
Home equity and improvement		301,146			122,864
Consumer finance		137,679			37,649
		1,336,690			738,584
Loans before deferred loan origination fees and costs		5,324,299			2,874,688
Deduct:
Undisbursed construction loan funds		(206,236	)		(126,108	)
Net deferred loan origination fees and costs		(4,146	)		(2,259	)
Allowance for credit losses		(85,859	)		(31,243	)
Total loans	$	5,028,058		$	2,715,078

The following table discloses allowance for credit loss activity for the quarters ended March 31, 2020 and 2019 by portfolio segment (In Thousands):  

Quarter Ended March 31, 2020	Residential Real Estate			Commercial Real Estate			Construction			Commercial			Home Equity and Improvement			Consumer Finance			Total
Beginning Allowance	$	2,867		$	16,302		$	996		$	9,003		$	1,700		$	375		$	31,243
Impact of ASC 326 Adoption		1,765			3,682			(223	)		(2,263	)		(521	)		(86	)		2,354
Acquisition related allowance for credit loss (PCD)		1,077			4,053			—			2,272			248			48			7,698
Charge-Offs		(184	)		(16	)		—			(96	)		(30	)		(108	)		(434	)
Recoveries		101			340			—			669			42			60			1,212
Provisions(1)(2)		17,698			18,154			111			2,316			2,515			2,992			43,786
Ending Allowance	$	23,324		$	42,515		$	884		$	11,901		$	3,954		$	3,281		$	85,859

(1) Allowance/provision are not comparable to prior periods due to the adoption of CECL.

(2) Provision for the quarter ended March, 31, 2020 includes $25.9 million as a result of the Merger with UCFC in the first quarter

Quarter Ended March 31, 2019	Residential Real Estate			Commercial Real Estate			Construction		Commercial			Home Equity and Improvement			Consumer Finance			Total
Beginning Allowance	$	2,881		$	15,142		$	682	$	7,281		$	2,026		$	319		$	28,331
Charge-Offs		(172	)		—			—		(187	)		(33	)		(142	)		(534	)
Recoveries		13			96			—		12			24			10			155
Provisions		89			(169	)		49		170			(89	)		162			212
Ending Allowance	$	2,811		$	15,069		$	731	$	7,276		$	1,928		$	349		$	28,164

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of December 31, 2019 (in thousands):

As of December 31, 2019	Residential Real Estate		Commercial Real Estate		Construction		Commercial		Home Equity and Improvement		Consumer Finance		Total
Allowance for credit loss attributable to:
Individually evaluated for impairment	$	115	$	85	$	—	$	174	$	48	$	—	$	422
Collectively evaluated for impairment		2,752		16,217		996		8,829		1,652		375		30,821
Acquired with deteriorated credit quality		—		—		—		—		—		—		—
Total Allowance	$	2,867	$	16,302	$	996	$	9,003	$	1,700	$	375	$	31,243
Loans:
Individually evaluated for impairment	$	7,049	$	21,132	$	—	$	6,655	$	759	$	28	$	35,623
Collectively evaluated for impairment		318,106		1,490,306		206,721		573,244		122,963		37,808		2,749,148
Acquired with deteriorated credit quality		989		921		—		12		—		—		1,922
Total loans	$	326,144	$	1,512,359	$	206,721	$	579,911	$	123,722	$	37,836	$	2,786,693

The following table presents the average balance, interest income recognized and cash basis income recognized on impaired loans by class of loans for the three months ended March 31, 2019 (in thousands):

	Three Months Ended March 31, 2019
	Average Balance		Interest Income Recognized		Cash Basis Income Recognized
Residential Owner Occupied	$	4,552	$	64	$	60
Residential Non Owner Occupied		2,080		30		32
Total Residential Real Estate		6,632		94		92
CRE Owner Occupied		7,365		166		132
CRE Non Owner Occupied		1,989		33		26
Multi-Family Real Estate		1,332		20		20
Agriculture Land		12,903		206		197
Other CRE		1,154		34		33
Total Commercial Real Estate		24,743		459		408
Construction		—		—		—
Commercial Working Capital		8,089		143		91
Agriculture Production		—		—		—
Commercial Other		1,870		27		24
Total Commercial		9,959		170		115
Home Equity and Improvement		921		14		13
Consumer Finance		36		1		1
Total Impaired Loans	$	42,291	$	738	$	629

The following table presents the amortized cost basis of collateral-dependent loans by class of loans and collateral type as of March 31, 2020 (in thousands):

	March 31, 2020
	Real Estate		Equipment and Machinery		Inventory and Receivables		Vehicles		Total
Real Estate:
Residential	$	1,505	$	—	$	—	$	—	$	1,505
Commercial		18,688		—		—		—		18,688
Construction		—		—		—		—		—
Other Loans:
Commercial		440		4,010		1,285		332		6,067
Home equity and improvement		1		—		—		—		1
Consumer finance		—		—		—		72		72
Total	$	20,634	$	4,010	$	1,285	$	404	$	26,333

The following table presents loans individually evaluated for impairment by class of loans (in thousands):

	December 31, 2019
	Unpaid Principal Balance*		Recorded Investment		Allowance for Credit Loss Allocated
With no allowance recorded:
Residential Owner Occupied	$	86	$	86	$	—
Residential Non Owner Occupied		962		967		—
Total Residential Real Estate		1,048		1,053		—
CRE Owner Occupied		5,098		4,814		—
CRE Non Owner Occupied		1,815		1,006		—
Multi-Family Real Estate		128		130		—
Agriculture Land		12,734		12,792		—
Other CRE		—		—		—
Total Commercial Real Estate		19,775		18,742		—
Construction		—		—		—
Commercial Working Capital		5,417		5,435		—
Agriculture Production		—		—		—
Commercial Other		469		471		—
Total Commercial		5,886		5,906		—
Home Equity and Improvement		151		151		—
Consumer Finance		—		—		—
Total loans with no allowance recorded	$	26,860	$	25,852	$	—
With an allowance recorded:
Residential Owner Occupied	$	5,137	$	4,977	$	104
Residential Non Owner Occupied		1,014		1,019		11
Total Residential Real Estate		6,151		5,996		115
CRE Owner Occupied		2,085		1,623		60
CRE Non Owner Occupied		317		319		13
Multi-Family Real Estate		—		—		—
Agriculture Land		262		268		3
Other CRE		401		180		9
Total Commercial Real Estate		3,065		2,390		85
Construction		—		—		—
Commercial Working Capital		682		450		150
Agriculture Production		—		—		—
Commercial Other		318		299		24
Total Commercial		1,000		749		174
Home Equity and Improvement		654		608		48
Consumer Finance		28		28		—
Total loans with an allowance recorded	$	10,898	$	9,771	$	422

Non-performing loans include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans.  All loans greater than 90 days past due are placed on non-accrual status.  Effective January 1, 2020 with the adoption of ASC Topic 326, the Company began including non-accrual purchase credit deteriorated (PCD) loans in its non-performing loans.  As such, the non-performing loans as of March 31, 2020 include PCD loans accounted for pursuant to ASC Topic 326 as these loans are individually evaluated.  The non-performing loans do not include PCD (formerly purchase credit impaired (PCI)) loans as of December 31, 2019, as the PCD loans prior to adopting ASC Topic 326 were evaluated on a pool basis.  The following table presents the current balance of the aggregate amounts of non-performing assets, comprised of non-performing loans and real estate owned as of the dates indicated:

	March 31, 2020		December 31, 2019
	(In Thousands)
Non-accrual loans	$	32,593	$	13,437
Loans over 90 days past due and still accruing		99		—
Total non-performing loans		32,692		13,437
Real estate and other assets held for sale		548		100
Total non-performing assets	$	33,240	$	13,537
Troubled debt restructuring, still accruing	$	7,473	$	8,486

The following table presents the aging of the amortized cost in past due and non- accrual loans as of March 31, 2020, by class of loans (In Thousands):

	Current		30 - 59 days		60 - 89 days		90 + days		Total Past Due		Total Non- Accrual
Real Estate:
Residential		1,242,282		2,649		1,303		—		3,952		2,985
Commercial		2,160,018		57		5		—		62		5,196
Construction		310,783		8		—		—		8		—
Other Loans:
Commercial		867,758		124		125		—		249		3,961
Home equity and improvement		292,442		2,490		218		—		2,708		—
Consumer finance		131,117		343		29		99		471		728
PCD		66,286		2,393		795		—		3,188		19,723
Total Loans	$	5,070,686	$	8,064	$	2,475	$	99	$	10,638	$	32,593

The following table presents the aging of the recorded investment in past due and non-accrual loans as of December 31, 2019, by class of loans (In Thousands):

	Current		30 - 59 days		60 - 89 days		90 + days		Total Past Due		Total Non Accrual
Real Estate:
Residential		323,600		1,328		570		646		2,544		2,411
Commercial		1,509,132		339		172		2,716		3,227		7,609
Construction		206,721		—		—		—		—		—
Other Loans:
Commercial		576,988		273		206		2,444		2,923		2,961
Home equity and improvement		122,487		956		240		39		1,235		449
Consumer finance		37,622		143		64		7		214		7
Total Loans	$	2,776,550	$	3,039	$	1,252	$	5,852	$	10,143	$	13,437

Troubled Debt Restructurings

As of March 31, 2020, and December 31, 2019, the Company had a recorded investment in troubled debt restructurings (“TDRs”) of $13.8 million and $15.1 million, respectively.  The Company allocated $301,000 and $388,000 of specific reserves to those loans at March 31, 2020, and December 31, 2019, respectively, and had committed to lend additional amounts totaling up to $250,000 and $226,000 at March 31, 2020, and December 31, 2019, respectively.

The Company offers various types of concessions when modifying a loan, however, forgiveness of principal is rarely granted.  Each TDR is uniquely designed to meet the specific needs of the borrower.  Commercial and industrial loans modified in a TDR often involve temporary interest-only payments, term extensions and converting revolving credit lines to term loans.  Additional collateral or an additional guarantor is often requested when granting a concession.  Commercial mortgage loans modified in a TDR often involve temporary interest-only payments, re-amortization of remaining debt in order to lower payments and sometimes reducing the interest rate lower than the current market rate.  Residential mortgage loans modified in a TDR are comprised of loans where monthly payments are lowered, either through interest rate reductions or principal only payments for a period of time, to accommodate the borrowers’ financial needs, interest is capitalized into principal, or the term and amortization are extended.  Home equity modifications are made infrequently and usually involve providing an interest rate that is lower than the borrower would be able to obtain due to credit issues.  All retail loans where the borrower is in bankruptcy are classified as TDRs regardless of whether or not a concession is made.

Of the loans modified in a TDR as of March 31, 2020, $6.3 million were on non-accrual status and partial charge-offs have in some cases been taken against the outstanding balance.  Loans modified as a TDR may have the financial effect of increasing the allowance associated with the loan.  If the loan is determined to be collateral dependent, the estimated fair value of the collateral, less any selling costs is used to determine if there is a need for a specific allowance or charge-off.  If the loan is determined to be cash flow dependent, the allowance is measured based on the present value of expected future cash flows discounted at the loan’s pre-modification effective interest rate.

The following tables present loans by class modified as TDRs that occurred during the three month periods ending March 31, 2020, and March 31, 2019:

	Loans Modified as a TDR for the Three Months Ended March 31, 2020 ($ in thousands)
Troubled Debt Restructurings	Number of Loans		Recorded Investment (as of period end)
Real Estate:
Residential		2	$	378
Commercial		1		93
Construction		—		—
Other Loans:
Commercial		5		156
Home equity and improvement		1		26
Consumer finance		—		—
Total		9	$	653

The loans described above increased the allowance for credit losses (“ACL”) by $29,000 in the three month period ending March 31, 2020.     

	Loans Modified as a TDR for the Three Months Ended March 31, 2019 ($ in thousands)
Troubled Debt Restructurings	Number of Loans		Recorded Investment (as of period end)
Real Estate:
Residential		3	$	473
Commercial		—		—
Construction		—		—
Other Loans:
Commercial		1		14
Home equity and improvement		1		20
Consumer finance		1		7
Total		6	$	514

The loans described above decreased the ALLL by $6,000 in the three month period ending March 31, 2019.     

The following tables present loans by class modified as TDRs for which there was a payment default within twelve months following the modification during the three month periods ended March 31, 2020, and March 31, 2019:

	Three Months Ended March 31, 2020
	($ in thousands)
Troubled Debt Restructurings That Subsequently Defaulted	Number of Loans		Recorded Investment (as of period end)
Real Estate:
Residential		3	$	268
Commercial		1		172
Construction		—		—
Other Loans:
Commercial		1		132
Home equity and improvement		1		146
Consumer finance		—		—
Total		6	$	718

The TDRs that subsequently defaulted described above had no effect on the ACL for the three month period ended March 31, 2020 and increased the ACL by $15,000 for the three month period ended March 31, 2020.

In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed on the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification.

	Three Months Ended March 31, 2019
	($ in thousands)
Troubled Debt Restructurings That Subsequently Defaulted	Number of Loans		Recorded Investment (as of period end)
Real Estate:
Residential		1	$	76
Commercial		—		—
Construction		—		—
		—		—
Other Loans:		—		—
Commercial		3		2,544
Home equity and improvement		1		61
Consumer finance		—		—
Total		5	$	2,681

The TDRs that subsequently defaulted described above decreased the ALLL by $1,000 for the three month period ended March 31, 2019.

In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed on the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification.

Credit Quality Indicators

Loans are categorized 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.  Loans are analyzed individually by classifying the loans as to credit risk.  This analysis includes all non-homogeneous loans, such as commercial and commercial real estate loans and certain homogenous mortgage, home equity and consumer loans. This analysis is performed on a quarterly basis.  First Defiance uses the following definitions for risk ratings:

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 institution'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 institution 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.

Not Graded.  Loans classified as not graded are generally smaller balance residential real estate, home equity and consumer installment loans which are originated primarily by using an automated underwriting system.  These loans are monitored based on their delinquency status and are evaluated individually only if they are seriously delinquent.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans.  As of March 31, 2020, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows (In Thousands):

Class	Pass		Special Mention		Substandard		Doubtful		Not Graded		Total
Real Estate:
Residential		1,046,718		390		3,685		—		198,426		1,249,219
Commercial		2,108,684		28,045		27,272		—		1,275		2,165,276
Construction		290,253		—		—		—		20,538		310,791
Other Loans:
Commercial		839,917		20,477		11,574		—		—		871,968
Home equity and improvement		194,262		—		322		—		100,566		295,150
Consumer finance		100,059		—		31		13		32,213		132,316
PCD		27,851		21,151		40,195		—		—		89,197
Total Loans	$	4,607,744	$	70,063	$	83,079	$	13	$	353,018	$	5,113,917

As of December 31, 2019, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows (In Thousands):

Class	Pass		Special Mention		Substandard		Doubtful		Not Graded		Total
Real Estate:
Residential		159,539		415		3,479		—		162,711		326,144
Commercial		1,460,989		27,197		23,097		—		1,076		1,512,359
Construction		182,858		1,645		—		—		22,218		206,721
Other Loans:
Commercial		548,012		24,162		7,737		—		—		579,911
Home equity and improvement		—		—		315		—		123,407		123,722
Consumer finance		—		—		20		—		37,816		37,836
Total Loans	$	2,351,398	$	53,419	$	34,648	$	—	$	347,228	$	2,786,693

The table below presents the amortized cost basis of loans by credit quality indicator and class of loans based on the most recent analysis performed ($ in thousands):

	Term of loans by origination
	2020		2019		2018		2017		2016		Prior		Revolving Loans		Total
As of March 31, 2020
Real Estate
Residential:
Risk Rating
Pass	$	58,175	$	162,634	$	206,799	$	190,256	$	186,702	$	437,887	$	2,691	$	1,245,144
Special Mention		—		97		58		—		123		98		14		390
Substandard		—		—		236		63		219		3,167		—		3,685
Doubtful		—		—		—		—		—		—		—		—
Total	$	58,175	$	162,731	$	207,093	$	190,319	$	187,044	$	441,152	$	2,705	$	1,249,219
Commercial:
Risk Rating
Pass	$	105,546	$	450,533	$	370,078	$	391,162	$	243,768	$	530,218	$	18,654	$	2,109,959
Special Mention		—		1,664		999		3,096		2,628		18,935		723		28,045
Substandard		—		291		1,607		2,497		1,340		18,839		2,698		27,272
Doubtful		—		—		—		—		—		—		—		—
Total	$	105,546	$	452,488	$	372,684	$	396,755	$	247,736	$	567,992	$	22,075	$	2,165,276
Construction:
Risk Rating
Pass	$	4,502	$	148,694	$	94,356	$	49,665	$	13,137	$	437	$	-	$	310,791
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—
Total	$	4,502	$	148,694	$	94,356	$	49,665	$	13,137	$	437	$	-	$	310,791
Other Loans
Commercial:
Risk Rating
Pass	$	55,857	$	191,337	$	108,146	$	61,628	$	34,192	$	43,359	$	345,398	$	839,917
Special Mention		25		881		129		2,970		60		592		15,820		20,477
Substandard		22		136		228		231		340		273		10,344		11,574
Doubtful		—		—		—		—		—		—		—		—
Total	$	55,904	$	192,354	$	108,503	$	64,829	$	34,592	$	44,224	$	371,562	$	871,968
Home equity and Improvement:
Risk Rating
Pass	$	2,741	$	10,976	$	5,857	$	9,960	$	9,489	$	36,520	$	219,285	$	294,828
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		80		242		322
Doubtful		—		—		—		—		—		—		—		—
Total	$	2,741	$	10,976	$	5,857	$	9,960	$	9,489	$	36,600	$	219,527	$	295,150
Consumer Finance:
Risk Rating
Pass	$	11,543	$	52,569	$	30,898	$	17,149	$	8,692	$	4,922	$	6,499	$	132,272
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		31		—		—		—		31
Doubtful		—		—		6		—		7		—		—		13
Total	$	11,543	$	52,569	$	30,904	$	17,180	$	8,699	$	4,922	$	6,499	$	132,316
PCD:
Risk Rating
Pass	$	-	$	292	$	546	$	1,015	$	783	$	16,847	$	8,368	$	27,851
Special Mention		—		24		2,783		9,697		1,496		4,441		2,710		21,151
Substandard		—		102		110		17,378		1,776		11,970		8,859		40,195
Doubtful		—		—		—		—		—		—		—		—
Total	$	-	$	418	$	3,439	$	28,090	$	4,055	$	33,258	$	19,937	$	89,197

Allowance for Credit Losses (ACL)

The Company has adopted ASU 2016-13 (Topic 326 – Credit Losses) to calculate the ACL which requires a projection of credit loss over the contract lifetime of the credit adjusted for prepayment tendencies. This valuation account is deducted from the loans amortized cost basis to present the net amount expected to be collected on the loan.  The ACL is adjusted through the provision for credit losses and reduced by net charge offs of loans.  

The credit loss estimation process involves procedures that consider the unique characteristics of the Company’s portfolio segments.  These segments are further disaggregated into the loan pools for monitoring.  When computing allowance levels, a model of risk characteristics, such as loss history and delinquency status, along with current conditions and a supportable forecast is used to determine credit loss assumptions.  

The Company is generally utilizing two methodologies to analyze loan pools, discounted cash flows (“DCF”) and probability of default/loss given default (“PD/LGD”).  

A default can be trigger by one of several different asset quality factors including past due status, non-accrual status or if the loan has had a charge-off.  The PD/LGD utilizes charge off data from the Federal Financial Institutions Examination Council to construct a default rate.  The Company estimates losses over an approximate one-year forecast period using Moody’s baseline economic forecasts, and then reverts to longer term historical loss experience over a three-year period.  This default rate is further segmented based on the risk of the credit assigning a higher default rate to riskier credits.  

The DCF methodology was selected as the most appropriate for loan segments with longer average lives and regular payment structures.  The DCF model has two key components, the loss driver analysis combined with a cash flow analysis.  The contractual cash flow is adjusted for PD/LGD and prepayment speed to establish a reserve level.  The prepayment studies are updated quarterly by a third-party for each applicable pool.  

The remaining life method was selected for the consumer loan segment since the pool contains loans with many different structures and payment streams and collateral.  The weighted average remaining life uses an average annual charge-off rate applied to the contractual term, further adjusted for estimated prepayments to determine the unadjusted historical charge-off rate for the remaining balance of assets.  

Portfolio Segments	Loan Pool	Methodology	Loss Drivers
Residential real estate	1-4 Family nonowner occupied	DCF	National unemployment
	1-4 Family owner occupied	DCF	National unemployment
Commercial real estate	Commercial real estate nonowner occupied	DCF	National unemployment
	Commercial real estate owner occupied	DCF	National unemployment
	Multi Family	DCF	National unemployment
	Agriculture Land	DCF	National unemployment
	Other commercial real estate	DCF	National unemployment
Construction secured by real estate	Construction	PD/LGD	Call report loss history
Commercial	Commercial working capital	PD/LGD	Call report loss history
	Agriculture production	PD/LGD	Call report loss history
	Other commercial	PD/LGD	Call report loss history
Home equity and improvement	Home equity and improvement	PD/LGD	Call report loss history
Consumer finance	Consumer finance	Remaining life	Call report loss history

According to the accounting standard an entity may make an accounting policy election not to measure an allowance for credit losses for accrued interest receivable if the entity writes off the applicable accrued interest receivable balance in a timely manner.   The Company has made the accounting policy election not to measure an allowance for credit losses for accrued interest receivables for all loan segments.   Current policy dictates that a loan will be placed on nonaccrual status, with the current accrued interest receivable balance being written off, upon the loan being 90 days delinquent or when the loan is deemed to be collateral dependent and the collateral analysis shows less than 1.2 times discounted collateral coverage based on a current assessment of the value of the collateral.

In addition to the ASC Topic 326 requires the Company to establish a liability for anticipated credit losses for unfunded commitments. To accomplish this, the company must first establishes a loss expectation for extended (funded) commitments.  This loss expectation, expressed as a ratio to the amortized cost basis, is then applied to the portion of unfunded commitments not considered unilaterally cancelable, and considered by the company’s management as likely to fund over the life of the instrument.  At March 31, 2020, the Company had $1.3 billion in unfunded commitments and set aside $5.7 million in anticipated credit losses.  This reserve is recorded in other liabilities as opposed to the ACL.  

The determination of ACL is complex and the Company makes decisions on the effects of matters that are inherently uncertain.  Evaluations of the loan portfolio and individual credits require certain estimates, assumptions and judgements as to the facts and circumstances related to particular situations or credits.  There may be significant changes in the ACL in future periods determined by prevailing factors at that point in time along with future forecasts.  

Purchased Loans

As a result of the Merger, the Company acquired $2.3 billion in loans.  Par value of purchased loans follows (in thousands):

	2020
Par value of acquired loans at acquisition	$	2,314,588
Credit discount		34,610
Non-credit discount/(premium) at acquisition		(8,497	)
Purchase price of loans at acquisition	$	2,340,701

Under ASU Topic 326, when loans are purchased with evidence of more than insignificant deterioration of credit they are accounted for as purchase credit deteriorated (“PCD”). PCD loans acquired in a transaction are marked to fair value and a mark on yield is recorded. In addition, an adjustment is made to the ACL for the expected loss on the acquisition date. These loans are assessed on a regular basis and subsequent adjustments to the ACL are recorded on the income statement. On January 31, 2020, the Company acquired PCD loans with a fair value of $79.1 million, credit discount $7.7 million and a noncredit discount of $4.1 million. The outstanding balance at March 31, 2020 and related allowance on these loans is as follows (in thousands):

	Loan Balance		ACL Balance
	(In Thousands)
Real Estate:
Residential	$	17,651	$	1,345
Commercial		37,070		3,935
Construction		1,034		52
		55,755		5,332
Other Loans:
Commercial		25,921		2,255
Home equity and improvement		6,268		258
Consumer finance		1,253		64
		33,442		2,577
Total	$	89,197	$	7,909

At March 30, 2020 the Company had $2.0 million in loans that had previously been accounted for as purchase credit impaired.    

Foreclosure Proceedings

Consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure totaled $6.3 million as of March 31, 2020, and $981,000 as of December 31, 2019. The increase is a result of the merger with UCFC.