Loans | Loans Peoples' loan portfolio consists of various types of loans originated primarily as a result of lending opportunities within Peoples' primary market areas of northeastern, central, southwestern and southeastern Ohio, west central West Virginia, and northeastern Kentucky. Acquired loans consist of loans purchased in 2012 or thereafter in a business combination. Loans that were acquired and subsequently re-underwritten, are reported as originated upon execution of such credit actions (for example, renewals and increases in lines of credit). The major classifications of loan balances (in each case, net of deferred fees and costs) excluding loans held for sale, were as follows at December 31: (Dollars in thousands) 2017 2016 Originated loans: Commercial real estate, construction $ 107,118 $ 84,626 Commercial real estate, other 595,447 531,557 Commercial real estate 702,565 616,183 Commercial and industrial 438,051 378,131 Residential real estate 304,523 307,490 Home equity lines of credit 88,902 85,617 Consumer, indirect 340,390 252,024 Consumer, other 67,010 67,579 Consumer 407,400 319,603 Deposit account overdrafts 849 1,080 Total originated loans $ 1,942,290 $ 1,708,104 Acquired loans: Commercial real estate, construction $ 8,319 $ 10,100 Commercial real estate, other 165,120 204,466 Commercial real estate 173,439 214,566 Commercial and industrial 34,493 44,208 Residential real estate 184,864 228,435 Home equity lines of credit 20,575 25,875 Consumer, indirect 329 808 Consumer, other 1,147 2,940 Consumer 1,476 3,748 Total acquired loans $ 414,847 $ 516,832 Total loans $ 2,357,137 $ 2,224,936 Peoples has acquired various loans through business combinations for which there was, at acquisition, evidence of deterioration of credit quality since origination, and for which it was probable that all contractually required payments would not be collected. The carrying amounts of these purchased credit impaired loans included in the loan balances above are summarized as follows at December 31: (Dollars in thousands) 2017 2016 Commercial real estate $ 8,117 $ 11,476 Commercial and industrial 767 1,573 Residential real estate 19,532 23,306 Consumer 33 76 Total outstanding balance $ 28,449 $ 36,431 Net carrying amount $ 19,564 $ 26,524 Changes in the accretable yield for purchased credit impaired loans during the year ended December 31, 2017 were as follows: (Dollars in thousands) Accretable Yield Balance, December 31, 2016 $ 7,132 Additions: Reclassification from nonaccretable to accretable 1,285 Accretion (1,713 ) Balance, December 31, 2017 $ 6,704 Peoples completes annual re-estimations of cash flows on acquired purchased credit impaired loans in August of each year. The above reclassification from nonaccretable to accretable related to the re-estimation of cash flows on the purchased credit impaired loan portfolio, coupled with the loans performing better than expected. The majority of the reclassification related to prepayment speeds decreasing in the residential portfolio, resulting in higher total expected cash flows. Cash flows expected to be collected on purchased credit impaired loans are estimated by incorporating several key assumptions similar to those used in the initial estimate of fair value. These key assumptions include probability of default, and the amount of actual prepayments after the acquisition date. Prepayments affect the estimated life of the loans and could change the amount of interest income, and possibly the amount of principal expected to be collected. In reforecasting future estimated cash flows, credit loss expectations are adjusted as necessary. Peoples has pledged certain loans secured by 1-4 family and multifamily residential mortgages under a blanket collateral agreement to secure borrowings from the FHLB. The amount of such pledged loans totaled $ 487.2 million and $ 542.5 million at December 31, 2017 and 2016 , respectively. Peoples also had pledged commercial loans to secure borrowings with the FRB. The outstanding balances of these loans totaled $ 74.0 million and $ 152.0 million at December 31, 2017 and 2016 , respectively. Related Party Loans In the normal course of its business, Peoples Bank has granted loans to certain directors and officers of Peoples Bancorp Inc., including their affiliates, families and entities in which they are principal owners. At December 31, 2017 , no related party loan was past due 90 or more days, renegotiated or on nonaccrual status. Activity in related party loans is presented in the table below. Other changes primarily consist of changes in related party status and new directors elected during the year, as applicable. (Dollars in thousands) Balance, December 31, 2016 $ 17,187 New loans and disbursements 8,855 Repayments (9,202 ) Other changes (1,738 ) Balance, December 31, 2017 $ 15,102 Nonaccrual and Past Due Loans A loan is considered past due if any required principal and interest payments have not been received as of the date such payments were required to be made under the terms of the loan agreement. A loan may be placed on nonaccrual status regardless of whether or not such loan is considered past due. The recorded investments in loans on nonaccrual status and loans delinquent for 90 days or more and accruing were as follows at December 31: Accruing Loans 90+ Days Past Due Nonaccrual Loans (Dollars in thousands) 2017 2016 2017 2016 Originated loans: Commercial real estate, construction $ 754 $ 826 $ — $ — Commercial real estate, other 6,877 9,934 — — Commercial real estate 7,631 10,760 — — Commercial and industrial 739 1,712 — — Residential real estate 3,546 3,778 548 183 Home equity lines of credit 550 383 50 — Consumer, indirect 256 130 — 10 Consumer, other 39 11 16 — Consumer 295 141 16 10 Total originated loans $ 12,761 $ 16,774 $ 614 $ 193 Acquired loans: Commercial real estate, other $ 192 $ 1,609 $ 215 $ 1,506 Commercial and industrial 259 390 45 387 Residential real estate 2,168 2,317 730 1,672 Home equity lines of credit 312 231 22 — Consumer, indirect — — — 13 Consumer, other — 4 — — Consumer — 4 — 13 Total acquired loans $ 2,931 $ 4,551 $ 1,012 $ 3,578 Total loans $ 15,692 $ 21,325 $ 1,626 $ 3,771 The following tables present the aging of the recorded investment in past due loans at December 31: Loans Past Due Current Loans Total Loans (Dollars in thousands) 30 - 59 days 60 - 89 days 90 + Days Total 2017 Originated loans: Commercial real estate, construction $ — $ — $ — $ — $ 107,118 $ 107,118 Commercial real estate, other 990 — 6,492 7,482 587,965 595,447 Commercial real estate 990 — 6,492 7,482 695,083 702,565 Commercial and industrial 1,423 92 706 2,221 435,830 438,051 Residential real estate 4,562 1,234 2,408 8,204 296,319 304,523 Home equity lines of credit 502 80 395 977 87,925 88,902 Consumer, indirect 2,153 648 105 2,906 337,484 340,390 Consumer, other 417 46 48 511 66,499 67,010 Consumer 2,570 694 153 3,417 403,983 407,400 Deposit account overdrafts — — — — 849 849 Total originated loans $ 10,047 $ 2,100 $ 10,154 $ 22,301 $ 1,919,989 $ 1,942,290 Loans Past Due Current Loans Total Loans (Dollars in thousands) 30 - 59 days 60 - 89 days 90 + Days Total 2017 Acquired loans: Commercial real estate, construction $ — $ — $ — $ — $ 8,319 $ 8,319 Commercial real estate, other 775 948 312 2,035 163,085 165,120 Commercial real estate 775 948 312 2,035 171,404 173,439 Commercial and industrial — 1 171 172 34,321 34,493 Residential real estate 4,656 1,391 1,910 7,957 176,907 184,864 Home equity lines of credit 126 — 301 427 20,148 20,575 Consumer, indirect 3 — — 3 326 329 Consumer, other 10 11 — 21 1,126 1,147 Consumer 13 11 — 24 1,452 1,476 Deposit account overdrafts — — — — — — Total acquired loans $ 5,570 $ 2,351 $ 2,694 $ 10,615 $ 404,232 $ 414,847 Total loans $ 15,617 $ 4,451 $ 12,848 $ 32,916 $ 2,324,221 $ 2,357,137 2016 Originated loans: Commercial real estate, construction $ — $ — $ 826 $ 826 $ 83,800 $ 84,626 Commercial real estate, other 1,420 225 9,305 10,950 520,607 531,557 Commercial real estate 1,420 225 10,131 11,776 604,407 616,183 Commercial and industrial 1,305 700 1,465 3,470 374,661 378,131 Residential real estate 7,288 1,019 1,895 10,202 297,288 307,490 Home equity lines of credit 316 45 248 609 85,008 85,617 Consumer, indirect 2,080 273 77 2,430 249,594 252,024 Consumer, other 346 38 — 384 67,195 67,579 Consumer 2,426 311 77 2,814 316,789 319,603 Deposit account overdrafts — — — — 1,080 1,080 Total originated loans $ 12,755 $ 2,300 $ 13,816 $ 28,871 $ 1,679,233 $ 1,708,104 Acquired loans: Commercial real estate, construction $ — $ — $ 40 $ 40 $ 10,060 $ 10,100 Commercial real estate, other 1,220 208 2,271 3,699 200,767 204,466 Commercial real estate 1,220 208 2,311 3,739 210,827 214,566 Commercial and industrial 148 3 777 928 43,280 44,208 Residential real estate 5,918 2,496 2,974 11,388 217,047 228,435 Home equity lines of credit 208 65 178 451 25,424 25,875 Consumer, indirect 4 — — 4 804 808 Consumer, other 51 — 13 64 2,876 2,940 Consumer 55 — 13 68 3,680 3,748 Total acquired loans $ 7,549 $ 2,772 $ 6,253 $ 16,574 $ 500,258 $ 516,832 Total loans $ 20,304 $ 5,072 $ 20,069 $ 45,445 $ 2,179,491 $ 2,224,936 Credit Quality Indicators As discussed in Note 1, Peoples categorizes the majority of its loans into risk categories based upon an established risk grading matrix using a scale of 1 to 8. A description of the general characteristics of the risk grades used by Peoples is as follows: “Pass” (grades 1 through 4): Loans in this risk category involve borrowers of acceptable-to-strong credit quality and risk who have the apparent ability to satisfy their loan obligations. Loans in this risk category would possess sufficient mitigating factors, such as adequate collateral or strong guarantors possessing the capacity to repay the loans if required, for any weakness that may exist. “Special Mention” (grade 5): Loans in this risk category are the equivalent of the regulatory “Other Assets Especially Mentioned” classification. Loans in this risk category possess some credit deficiency or potential weakness, which requires a high level of management attention. Potential weaknesses include declining trends in operating earnings and cash flows and/or reliance on the secondary source of repayment. If left uncorrected, these potential weaknesses may result in noticeable deterioration of the repayment prospects for the loans or in Peoples' credit position. “Substandard” (grade 6): Loans in this risk category are inadequately protected by the borrower's current financial condition and payment capability, or by the collateral pledged, if any. Loans so classified have one or more well-defined weaknesses that jeopardize the orderly repayment of the loans. They are characterized by the distinct possibility that Peoples will sustain some loss if the deficiencies are not corrected. “Doubtful” (grade 7): Loans in this risk category have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or orderly repayment in full, on the basis of current existing facts, conditions and values, highly questionable and improbable. Possibility of loss is extremely high, but because of certain important and reasonably specific factors that may work to the advantage and strengthening of the exposure, classification of these loans as an estimate loss is deferred until their more exact status may be determined. “Loss” (grade 8): Loans in this risk category are considered to be non-collectible and of such little value that their continuance as bankable assets is not warranted. This does not mean each such loan has absolutely no recovery value, but rather it is neither practical nor desirable to defer writing off the loan, even though partial recovery may be obtained in the future. Charge-offs against the allowance for loan losses are taken in the period in which the loan becomes uncollectible. Consequently, Peoples typically does not maintain a recorded investment in loans within this risk category. Consumer loans and other smaller-balance loans are evaluated and categorized as “substandard,” “doubtful” or “loss” based upon the regulatory definition of these classes and consistent with regulatory requirements. All other loans not evaluated individually, nor meeting the regulatory conditions to be categorized as described above, would be considered as being “not rated.” The following tables summarize the risk category of Peoples' loan portfolio based upon the most recent analysis performed at December 31: Pass Rated Special Mention Substandard Doubtful Not Rated Total Loans (Dollars in thousands) (Grades 1 - 4) (Grade 5) (Grade 6) (Grade 7) 2017 Originated loans: Commercial real estate, construction $ 100,409 $ 5,502 $ 754 $ — $ 453 $ 107,118 Commercial real estate, other 561,320 17,189 16,938 — — 595,447 Commercial real estate 661,729 22,691 17,692 — 453 702,565 Commercial and industrial 420,477 13,062 4,512 — — 438,051 Residential real estate 17,896 1,000 11,371 216 274,040 304,523 Home equity lines of credit 454 — — — 88,448 88,902 Consumer, indirect 55 8 — — 340,327 340,390 Consumer, other 33 — — — 66,977 67,010 Consumer 88 8 — — 407,304 407,400 Deposit account overdrafts — — — — 849 849 Total originated loans $ 1,100,644 $ 36,761 $ 33,575 $ 216 $ 771,094 $ 1,942,290 Pass Rated Special Mention Substandard Doubtful Not Rated Total Loans (Dollars in thousands) (Grades 1 - 4) (Grade 5) (Grade 6) (Grade 7) 2017 Acquired loans: Commercial real estate, construction $ 8,267 $ — $ 52 $ — $ — $ 8,319 Commercial real estate, other 149,486 6,527 9,107 — — 165,120 Commercial real estate 157,753 6,527 9,159 — — 173,439 Commercial and industrial 32,011 157 2,325 — — 34,493 Residential real estate 12,543 593 1,105 — 170,623 184,864 Home equity lines of credit 124 — — — 20,451 20,575 Consumer, indirect 12 — — — 317 329 Consumer, other 35 — — — 1,112 1,147 Consumer 47 — — — 1,429 1,476 Deposit account overdrafts — — — — — — Total acquired loans $ 202,478 $ 7,277 $ 12,589 $ — $ 192,503 $ 414,847 Total loans $ 1,303,122 $ 44,038 $ 46,164 $ 216 $ 963,597 $ 2,357,137 2016 Originated loans: Commercial real estate, construction $ 73,423 $ — $ 826 $ — $ 10,377 $ 84,626 Commercial real estate, other 505,029 11,855 14,673 — — 531,557 Commercial real estate 578,452 11,855 15,499 — 10,377 616,183 Commercial and industrial 346,791 15,210 16,130 — — 378,131 Residential real estate 47,336 957 12,828 304 246,065 307,490 Home equity lines of credit 465 — 135 — 85,017 85,617 Consumer, indirect 15 13 — — 251,996 252,024 Consumer, other 50 — — — 67,529 67,579 Consumer 65 13 — — 319,525 319,603 Deposit account overdrafts — — — — 1,080 1,080 Total originated loans $ 973,109 $ 28,035 $ 44,592 $ 304 $ 662,064 $ 1,708,104 Acquired loans: Commercial real estate, construction $ 10,046 $ — $ 54 $ — $ — $ 10,100 Commercial real estate, other 181,781 12,475 10,210 — — 204,466 Commercial real estate 191,827 12,475 10,264 — — 214,566 Commercial and industrial 42,809 227 978 194 — 44,208 Residential real estate 17,170 709 1,404 — 209,152 228,435 Home equity lines of credit 202 — — — 25,673 25,875 Consumer, indirect 51 — — — 757 808 Consumer, other 53 — — — 2,887 2,940 Consumer 104 — — — 3,644 3,748 Total acquired loans $ 252,112 $ 13,411 $ 12,646 $ 194 $ 238,469 $ 516,832 Total loans $ 1,225,221 $ 41,446 $ 57,238 $ 498 $ 900,533 $ 2,224,936 Impaired Loans The following table summarizes loans classified as impaired at December 31: Unpaid Principal Balance Recorded Investment Total Recorded Investment Average Recorded Investment Interest Income Recognized With Without Related Allowance (Dollars in thousands) Allowance Allowance 2017 Commercial real estate, construction $ 821 $ — $ 754 $ 754 $ — $ 788 $ — Commercial real estate, other 14,909 14 13,606 13,620 1 14,392 503 Commercial real estate 15,730 14 14,360 14,374 1 15,180 503 Commercial and industrial 1,690 951 572 1,523 199 1,668 65 Residential real estate 24,743 477 22,626 23,103 58 23,195 1,246 Home equity lines of credit 1,707 81 1,624 1,705 18 1,505 85 Consumer, indirect 273 70 206 276 26 184 20 Consumer, other 87 56 28 84 37 79 7 Consumer 360 126 234 360 63 263 27 Total $ 44,230 $ 1,649 $ 39,416 $ 41,065 $ 339 $ 41,811 $ 1,926 2016 Commercial real estate, construction $ 894 $ — $ 866 866 $ — $ 913 $ 3 Commercial real estate, other 20,029 7,474 12,227 19,701 803 18,710 700 Commercial real estate 20,923 7,474 13,093 20,567 803 19,623 703 Commercial and industrial 7,289 2,732 1,003 3,735 585 3,386 125 Residential real estate 27,703 138 27,393 27,531 24 27,455 1,419 Home equity lines of credit 908 — 908 908 — 717 44 Consumer, indirect 220 — 224 224 — 136 16 Consumer, other 130 — 130 130 — 138 13 Consumer 350 — 354 354 — 274 29 Total $ 57,173 $ 10,344 $ 42,751 $ 53,095 $ 1,412 $ 51,455 $ 2,320 Peoples' loans classified as impaired shown in the table above, included loans that were classified as troubled debt restructurings ("TDRs"). In assessing whether or not a borrower is experiencing financial difficulties, Peoples considers information currently available regarding the financial condition of the borrower. This information includes, but is not limited to, whether (i) the borrower is currently in payment default on any of the borrower's debt; (ii) a payment default is probable in the foreseeable future without the modification; (iii) the borrower has declared or is in the process of declaring bankruptcy; and (iv) the borrower's projected cash flow is insufficient to satisfy contractual payments due under the original terms of the loan without a modification. Peoples considers all aspects of the modification to loan terms to determine whether or not a concession has been granted to the borrower. Key factors considered by Peoples include the borrower's ability to access funds at a market rate for a loan with similar risk characteristics, the significance of the modification relative to the unpaid principal loan balance or collateral value of the loan and the significance of a delay in the timing of payments relative to the original contractual terms of the loan. The most common concessions granted by Peoples generally include one or more modifications to the terms of the loan, such as (i) a reduction in the interest rate for the remaining life of the loan, (ii) an extension of the maturity date at an interest rate lower than the current market rate for a new loan with similar risk, (iii) a temporary period of interest-only payments, and (iv) a reduction in the contractual payment amount for either a short period or the remaining term of the loan. The following table summarizes the loans that were modified as TDRs during the years ended December 31, 2017 and 2016 . Recorded Investment (1) (Dollars in thousands) Number of Contracts Pre-Modification Post-Modification Remaining Recorded Investment 2017 Originated loans: Commercial real estate, other 1 $ 14 $ 14 $ 14 Commercial and industrial 4 210 210 149 Residential real estate 7 483 483 473 Home equity lines of credit 6 296 296 289 Consumer, indirect 15 218 218 201 Consumer, other 2 10 10 8 Consumer 17 228 228 209 Total 35 $ 1,231 $ 1,231 $ 1,134 Acquired loans: Commercial real estate, construction 3 $ 288 $ 288 $ 280 Residential real estate 9 442 442 412 Home equity lines of credit 5 328 328 320 Consumer, other 1 2 2 — Total 18 $ 1,060 $ 1,060 $ 1,012 2016 Originated loans: Commercial real estate, other 3 $ 109 $ 109 $ 107 Commercial and industrial 7 836 836 750 Residential real estate 8 266 266 266 Home equity lines of credit 5 81 81 81 Consumer, indirect 14 164 164 164 Consumer, other 3 24 24 23 Consumer 17 188 188 187 Total 40 $ 1,480 $ 1,480 $ 1,391 Acquired loans: Commercial real estate, construction 2 $ 237 $ 237 $ 237 Residential real estate 14 1,080 1,082 1,076 Home equity lines of credit 4 260 260 250 Consumer, indirect 2 7 7 7 Consumer, other 3 15 15 15 Consumer 5 22 22 22 Total 25 $ 1,599 $ 1,601 $ 1,585 (1) The amounts shown are inclusive of all partial paydowns and charge-offs. Loans modified in a TDR that were fully paid down, charged-off or foreclosed upon by period end are not reported. The following table presents those loans modified into a TDR during the year that subsequently defaulted (i.e., 90 days or more past due following a modification) during the years ended December 31, 2017 : 2017 (Dollars in thousands) Number of Contracts Recorded Investment (1) Impact on the Allowance for Loan Losses Acquired loans: Residential real estate 2 $ 64 $ — Total 2 $ 64 $ — (1) The amounts shown are inclusive of all partial paydowns and charge-offs. Loans modified in a TDR that were fully paid down, charged-off or foreclosed upon by period end are not reported. Peoples did not have any modified TDRs that subsequently defaulted in 2016. Peoples did not have any originated loans that were modified as a TDR during the last twelve months that subsequently defaulted. Peoples had no commitments to lend additional funds to the related borrowers whose loan terms have been modified in a TDR. Allowance for Loan Losses Changes in the allowance for loan losses in the periods ended December 31 were as follows: (Dollars in thousands) Commercial Real Estate Commercial and Industrial Residential Real Estate Home Equity Lines of Credit Consumer, indirect Consumer, other Deposit Account Overdrafts Total Balance, January 1, 2017 $ 7,172 $ 6,353 $ 982 $ 688 $ 2,312 $ 518 $ 171 $ 18,196 Charge-offs (408 ) (175 ) (637 ) (131 ) (2,110 ) (372 ) (1,038 ) (4,871 ) Recoveries 146 1 152 13 764 179 215 1,470 Net (charge-offs) recoveries (262 ) (174 ) (485 ) (118 ) (1,346 ) (193 ) (823 ) (3,401 ) Provision for (recovery of) loan losses 887 (366 ) 407 123 1,978 139 722 3,890 Balance, December 31, 2017 $ 7,797 $ 5,813 $ 904 $ 693 $ 2,944 $ 464 $ 70 $ 18,685 Period-end amount allocated to: Loans individually evaluated for impairment $ 1 $ 199 $ 58 $ 18 $ 26 $ 37 $ — $ 339 Loans collectively evaluated for impairment 7,796 5,614 846 675 2,918 427 70 18,346 Balance, December 31, 2017 $ 7,797 $ 5,813 $ 904 $ 693 $ 2,944 $ 464 $ 70 $ 18,685 Balance, January 1, 2016 $ 7,076 $ 5,382 $ 1,257 $ 732 $ 1,427 $ 544 $ 121 $ 16,539 Charge-offs (24 ) (1,017 ) (588 ) (73 ) (2,072 ) (583 ) (774 ) (5,131 ) Recoveries 1,209 306 278 56 1,059 226 175 3,309 Net recoveries (charge-offs) 1,185 (711 ) (310 ) (17 ) (1,013 ) (357 ) (599 ) (1,822 ) (Recovery of) provision for loan losses (1,089 ) 1,682 35 (27 ) 1,898 331 649 3,479 Balance, December 31, 2016 $ 7,172 $ 6,353 $ 982 $ 688 $ 2,312 $ 518 $ 171 $ 18,196 Period-end amount allocated to: Loans individually evaluated for impairment $ 803 $ 585 $ 24 $ — $ — $ — $ — $ 1,412 Loans collectively evaluated for impairment 6,369 5,768 958 688 2,312 518 171 16,784 Balance, December 31, 2016 $ 7,172 $ 6,353 $ 982 $ 688 $ 2,312 $ 518 $ 171 $ 18,196 The increase in total allowance for loan losses in 2017, was primarily due to total loan growth of 6% , or $132.2 million . The increase was primarily the result of commercial loan growth of $95.5 million , or 8% , which includes commercial real estate and commercial and industrial loan balances. Additionally, indirect consumer lending had growth of $87.9 million , or 35% , compared to December 31, 2016, and was partially offset by reductions in residential real estate loans. The increase in the total allowance for loan losses in 2016, was primarily due to total loan growth of 7% , or $152.5 million , with growth of 8% in commercial loan balances and 7% in consumer loan balances. Indirect lending experienced the largest growth across all loan categories for the year, increasing by $85.7 million , or 51% . Commercial and industrial loan growth was $70.6 million , or 20% , for 2016. Historical loss rates are calculated using charge-offs and recoveries within each portfolio over the past five years. The large provision for commercial and industrial loans during 2015 was primarily related to a specific allowance for one relationship which was charged off in 2015. The reduction in the allowance for originated residential real estate was driven by net recoveries in recent years reducing the historical loss rates. The changes in the home equity lines of credit and consumer categories of the allowance for originated loan losses and the related provision for originated loan losses recorded during 2015 were driven by net charge-off activity and increases in the size of the respective loan portfolios. Allowance for Acquired Loan Losses Acquired loans are recorded at their fair value as of the acquisition date with no valuation allowance, and monitored for changes in credit quality and subsequent increases or decreases in expected cash flows. Decreases in expected cash flows of purchased credit impaired loans are recognized as an impairment, with the amount of the expected loss included in management's evaluation of the appropriateness of the allowance for loan losses. Management reforecasts the estimated cash flows expected to be collected on purchased credit impaired loans annually. The methods utilized to estimate the required allowance for loan losses for nonimpaired acquired loans are similar to those utilized for originated loans; however, Peoples records a provision for loan losses only when the computed allowance for loan losses exceeds the remaining fair value adjustment. The following table presents activity in the allowance for loan losses for acquired loans as of December 31: (Dollars in thousands) 2017 2016 Purchased credit impaired loans: Balance, January 1 $ 233 $ 240 Charge-offs (7 ) (67 ) Recoveries — — Net charge-offs 226 173 (Recovery of) provision for loan losses (118 ) 60 Balance, December 31 $ 108 $ 233 During 2017, Peoples recognized a recovery of loan losses that was related to an acquired purchased credit impaired loan that was paid off. |