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 central and eastern Kentucky. Acquired loans consist of loans purchased in 2012 or thereafter. 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: (Dollars in thousands) September 30, December 31, 2018 Originated loans: Commercial real estate, construction $ 100,338 $ 124,013 Commercial real estate, other 659,103 632,200 Commercial real estate 759,441 756,213 Commercial and industrial 564,279 530,207 Residential real estate 308,964 296,860 Home equity lines of credit 92,910 93,326 Consumer, indirect 423,217 407,167 Consumer, direct 72,699 71,674 Consumer 495,916 478,841 Deposit account overdrafts 1,081 583 Total originated loans $ 2,222,591 $ 2,156,030 Acquired loans: Commercial real estate, construction $ 4,435 $ 12,404 Commercial real estate, other 171,096 184,711 Commercial real estate 175,531 197,115 Commercial and industrial 43,961 35,537 Residential real estate 358,053 296,937 Home equity lines of credit 41,942 40,653 Consumer, indirect 67 136 Consumer, direct 8,171 2,370 Consumer 8,238 2,506 Total acquired loans $ 627,725 $ 572,748 Total loans $ 2,850,316 $ 2,728,778 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: (Dollars in thousands) September 30, December 31, Commercial real estate $ 9,063 $ 11,955 Commercial and industrial 3,791 1,287 Residential real estate 24,361 20,062 Consumer 663 58 Total outstanding balance $ 37,878 $ 33,362 Net carrying amount $ 23,796 $ 22,475 Changes in the accretable yield for purchased credit impaired loans for the nine months ended September 30 were as follows: (Dollars in thousands) September 30, September 30, Balance, beginning of period $ 8,955 $ 6,704 Reclassification from nonaccretable to accretable 199 2,019 Additions: ASB Financial Corp. — 2,047 First Prestonsburg Bancshares Inc. 3,860 — Accretion (1,763 ) (1,392 ) Balance, September 30 $ 11,251 $ 9,378 The fair value of newly acquired loans is determined at the time of acquisition and Peoples completes annual re-estimations of cash flows on acquired purchased credit impaired loans in August of each year. At the end of each quarter, Peoples evaluates factors to determine if a material change has occurred in acquired purchased credit impaired loans, and if a re-estimation is needed. Factors evaluated to determine if a re-estimation is needed include changes in: risk ratings, maturity dates, charge-offs, payoffs, nonaccrual status, loans that have become past due and actual cash flows compared to the projected cash flows from the last re-estimation. Peoples evaluates these changes quarterly and compares the current status or activity to those at the previous cash flow re-estimation date, and the related materiality of the changes. As of September 30, 2019 , these changes, when compared to the total loan portfolio and the factors at the last re-estimation date, would not have a material impact on amounts recorded since the last re-estimation. Peoples completed a re-estimation of cash flows on purchased credit impaired loans in August 2019, resulting in a reclassification from nonaccretable to accretable yield as shown in the table above. Cash flows expected to be collected on purchased credit impaired loans are estimated by incorporating several key assumptions, similar to 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 principal expected to be collected. In re-forecasting future estimated cash flows, credit loss expectations are adjusted as necessary. Pledged Loans Peoples pledges certain loans secured by 1-4 family and multifamily residential mortgages under a blanket collateral agreement to secure borrowings from the FHLB of Cincinnati. The amount of loans pledged under this blanket collateral agreement totaled $485.8 million and $505.7 million at September 30, 2019 and December 31, 2018 , respectively. Peoples also pledges commercial loans to secure borrowings with the FRB of Cleveland. The outstanding balances of these loans totaled $171.7 million and $180.9 million at September 30, 2019 and December 31, 2018 , respectively. 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: Nonaccrual Loans Loans 90+ Days Past Due and Accruing (Dollars in thousands) September 30, December 31, September 30, December 31, Originated loans: Commercial real estate, construction $ — $ 710 $ — $ — Commercial real estate, other 6,680 6,565 — 786 Commercial real estate 6,680 7,275 — 786 Commercial and industrial 1,120 1,673 298 — Residential real estate 4,145 4,105 431 398 Home equity lines of credit 387 596 134 7 Consumer, indirect 771 480 — — Consumer, direct 53 56 — — Consumer 824 536 — — Total originated loans $ 13,156 $ 14,185 $ 863 $ 1,191 Acquired loans: Commercial real estate, construction $ 230 $ — $ — $ — Commercial real estate, other 155 319 582 15 Commercial real estate 385 319 582 15 Commercial and industrial 95 36 274 18 Residential real estate 1,862 1,921 2,664 1,032 Home equity lines of credit 700 637 49 — Consumer, direct 2 — 83 — Total acquired loans $ 3,044 $ 2,913 $ 3,652 $ 1,065 Total loans $ 16,200 $ 17,098 $ 4,515 $ 2,256 The following table presents the aging of the recorded investment in past due loans: Loans Past Due Current Loans Total Loans (Dollars in thousands) 30 - 59 days 60 - 89 days 90 + Days Total September 30, 2019 Originated loans: Commercial real estate, construction $ — $ — $ — $ — $ 100,338 $ 100,338 Commercial real estate, other 8 171 6,482 6,661 652,442 659,103 Commercial real estate 8 171 6,482 6,661 752,780 759,441 Commercial and industrial 429 175 1,279 1,883 562,396 564,279 Residential real estate 1,288 845 2,489 4,622 304,342 308,964 Home equity lines of credit 95 129 476 700 92,210 92,910 Consumer, indirect 2,719 484 215 3,418 419,799 423,217 Consumer, direct 292 42 6 340 72,359 72,699 Consumer 3,011 526 221 3,758 492,158 495,916 Deposit account overdrafts — — — — 1,081 1,081 Total originated loans $ 4,831 $ 1,846 $ 10,947 $ 17,624 $ 2,204,967 $ 2,222,591 Acquired loans: Commercial real estate, construction $ 100 $ 317 $ 230 $ 647 $ 3,788 $ 4,435 Commercial real estate, other 473 290 724 1,487 169,609 171,096 Commercial real estate 573 607 954 2,134 173,397 175,531 Commercial and industrial 159 123 368 650 43,311 43,961 Residential real estate 1,270 1,020 3,252 5,542 352,511 358,053 Home equity lines of credit 681 42 706 1,429 40,513 41,942 Consumer, indirect — — — — 67 67 Consumer, direct 47 19 85 151 8,020 8,171 Consumer 47 19 85 151 8,087 8,238 Total acquired loans $ 2,730 $ 1,811 $ 5,365 $ 9,906 $ 617,819 $ 627,725 Total loans $ 7,561 $ 3,657 $ 16,312 $ 27,530 $ 2,822,786 $ 2,850,316 Loans Past Due Current Loans Total Loans (Dollars in thousands) 30 - 59 days 60 - 89 days 90 + Days Total December 31, 2018 Originated loans: Commercial real estate, construction $ — $ — $ 710 $ 710 $ 123,303 $ 124,013 Commercial real estate, other 12 736 7,151 7,899 624,301 632,200 Commercial real estate 12 736 7,861 8,609 747,604 756,213 Commercial and industrial 1,678 3,520 1,297 6,495 523,712 530,207 Residential real estate 4,457 1,319 2,595 8,371 288,489 296,860 Home equity lines of credit 531 30 431 992 92,334 93,326 Consumer, indirect 3,266 488 165 3,919 403,248 407,167 Consumer, direct 308 50 42 400 71,274 71,674 Consumer 3,574 538 207 4,319 474,522 478,841 Deposit account overdrafts — — — — 583 583 Total originated loans $ 10,252 $ 6,143 $ 12,391 $ 28,786 $ 2,127,244 $ 2,156,030 Acquired loans: Commercial real estate, construction $ 511 $ — $ — $ 511 $ 11,893 $ 12,404 Commercial real estate, other 523 457 233 1,213 183,498 184,711 Commercial real estate 1,034 457 233 1,724 195,391 197,115 Commercial and industrial 111 13 18 142 35,395 35,537 Residential real estate 6,124 1,823 1,885 9,832 287,105 296,937 Home equity lines of credit 238 233 534 1,005 39,648 40,653 Consumer, indirect — — — — 136 136 Consumer, direct 23 6 — 29 2,341 2,370 Consumer 23 6 — 29 2,477 2,506 Total acquired loans $ 7,530 $ 2,532 $ 2,670 $ 12,732 $ 560,016 $ 572,748 Total loans $ 17,782 $ 8,675 $ 15,061 $ 41,518 $ 2,687,260 $ 2,728,778 Delinquency trends remained stable, as 99.0% of Peoples' portfolio was considered “current” at September 30, 2019 , compared to 98.5% at December 31, 2018 . Credit Quality Indicators As discussed in "Note 1 Summary of Significant Accounting Policies" of the Notes to the Consolidated Financial Statements included in Peoples' 2018 Form 10-K, 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 grade would possess sufficient mitigating factors, such as adequate collateral or strong guarantors possessing the capacity to repay the loan if required, for any weakness that may exist. “Special Mention” (grade 5): Loans in this risk grade are the equivalent of the regulatory definition of “Other Assets Especially Mentioned.” 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 a secondary source of repayment. If left uncorrected, these potential weaknesses may result in noticeable deterioration of the repayment prospects for the loan or in Peoples' credit position. “Substandard” (grade 6): Loans in this risk grade are inadequately protected by the borrower's current financial condition and payment capability or the collateral pledged, if any. Loans so classified have one or more well-defined weaknesses that jeopardize the orderly repayment of the loan. 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 grade 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 the loan as an estimated loss is deferred until its more exact status may be determined. “Loss” (grade 8): Loans in this risk grade are considered to be non-collectible and of such little value that their continuance as bankable assets is not warranted. This does not mean a 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 during the period in which the loan becomes uncollectible. Consequently, Peoples typically does not maintain a recorded investment in loans within this 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 table summarizes the risk category of loans within Peoples' loan portfolio based upon the most recent analysis performed: Pass Rated (Grades 1 - 4) Special Mention (Grade 5) Substandard (Grade 6) Doubtful (Grade 7) Not Rated Total Loans (Dollars in thousands) September 30, 2019 Originated loans: Commercial real estate, construction $ 99,569 $ — $ — $ — $ 769 $ 100,338 Commercial real estate, other 626,042 22,003 11,058 — — 659,103 Commercial real estate 725,611 22,003 11,058 — 769 759,441 Commercial and industrial 544,048 6,341 13,890 — — 564,279 Residential real estate 19,489 177 16,214 226 272,858 308,964 Home equity lines of credit 1,429 — — — 91,481 92,910 Consumer, indirect — — — — 423,217 423,217 Consumer, direct 27 — — — 72,672 72,699 Consumer 27 — — — 495,889 495,916 Deposit account overdrafts — — — — 1,081 1,081 Total originated loans $ 1,290,604 $ 28,521 $ 41,162 $ 226 $ 862,078 $ 2,222,591 Acquired loans: Commercial real estate, construction $ 2,766 $ 920 $ 749 $ — $ — $ 4,435 Commercial real estate, other 155,011 7,860 8,139 86 — 171,096 Commercial real estate 157,777 8,780 8,888 86 — 175,531 Commercial and industrial 39,127 1,049 3,785 — — 43,961 Residential real estate 33,453 3,053 4,663 128 316,756 358,053 Home equity lines of credit 2,017 93 — — 39,832 41,942 Consumer, indirect — — — — 67 67 Consumer, direct 13 — — — 8,158 8,171 Consumer 13 — — — 8,225 8,238 Total acquired loans $ 232,387 $ 12,975 $ 17,336 $ 214 $ 364,813 $ 627,725 Total loans $ 1,522,991 $ 41,496 $ 58,498 $ 440 $ 1,226,891 $ 2,850,316 Pass Rated (Grades 1 - 4) Special Mention (Grade 5) Substandard (Grade 6) Doubtful (Grade 7) Not Rated Total Loans (Dollars in thousands) December 31, 2018 Originated loans: Commercial real estate, construction $ 121,457 $ — $ 1,472 $ — $ 1,084 $ 124,013 Commercial real estate, other 612,099 10,898 9,203 — — 632,200 Commercial real estate 733,556 10,898 10,675 — 1,084 756,213 Commercial and industrial 476,290 45,990 7,692 — 235 530,207 Residential real estate 14,229 500 11,971 409 269,751 296,860 Home equity lines of credit 453 — — — 92,873 93,326 Consumer, indirect 8 — — — 407,159 407,167 Consumer, direct 30 — — — 71,644 71,674 Consumer 38 — — — 478,803 478,841 Deposit account overdrafts — — — — 583 583 Total originated loans $ 1,224,566 $ 57,388 $ 30,338 $ 409 $ 843,329 $ 2,156,030 Acquired loans: Commercial real estate, construction $ 8,976 $ 1,795 $ 1,633 $ — $ — $ 12,404 Commercial real estate, other 169,260 7,241 8,114 96 — 184,711 Commercial real estate 178,236 9,036 9,747 96 — 197,115 Commercial and industrial 32,471 2,008 1,058 — — 35,537 Residential real estate 17,370 1,938 2,033 137 275,459 296,937 Home equity lines of credit 33 — — — 40,620 40,653 Consumer, indirect 4 — — — 132 136 Consumer, direct 31 — — — 2,339 2,370 Consumer 35 — — — 2,471 2,506 Total acquired loans $ 228,145 $ 12,982 $ 12,838 $ 233 $ 318,550 $ 572,748 Total loans $ 1,452,711 $ 70,370 $ 43,176 $ 642 $ 1,161,879 $ 2,728,778 In the first nine months of 2019, Peoples' classified loans, which are loans categorized as substandard or doubtful, increased compared to the balances at December 31, 2018 mostly due to downgrades during the period combined with loans acquired in the First Prestonsburg merger, which were partially offset by paydowns on classified loans. At September 30, 2019 , criticized loans, which are those categorized as special mention, substandard or doubtful, declined compared to the balance at December 31, 2018, largely due to the upgrade of two commercial relationships, partially offset by loans acquired in the First Prestonsburg merger. At September 30, 2019 , Peoples had a total of $ 1.9 million of loans secured by residential real estate mortgages that were in the process of foreclosure. Impaired Loans The following table summarizes loans classified as impaired: Unpaid Principal Balance Recorded Investment Total Recorded Investment Average Recorded Investment Interest Income Recognized With Allowance Without Allowance Related Allowance (Dollars in thousands) September 30, 2019 Commercial real estate, construction $ 780 $ — $ 693 $ 693 $ — $ 702 $ 1 Commercial real estate, other 15,093 4,754 9,755 14,509 475 13,764 369 Commercial real estate 15,873 4,754 10,448 15,202 475 14,466 370 Commercial and industrial 4,113 999 3,087 4,086 206 2,481 99 Residential real estate 25,447 381 26,582 26,963 47 23,312 1,065 Home equity lines of credit 1,433 416 1,019 1,435 43 1,329 61 Consumer, indirect 597 195 410 605 30 456 31 Consumer, direct 628 43 586 629 10 261 22 Consumer 1,225 238 996 1,234 40 717 53 Total $ 48,091 $ 6,788 $ 42,132 $ 48,920 $ 811 $ 42,305 $ 1,648 December 31, 2018 Commercial real estate, construction $ 2,376 $ — $ 2,376 $ 2,376 $ — $ 1,732 $ 74 Commercial real estate, other 15,464 274 14,946 15,220 119 14,043 455 Commercial real estate 17,840 274 17,322 17,596 119 15,775 529 Commercial and industrial 3,305 790 2,436 3,226 157 2,423 72 Residential real estate 25,990 644 24,034 24,678 154 22,769 1,134 Home equity lines of credit 2,291 424 1,869 2,293 73 1,832 109 Consumer, indirect 496 — 503 503 — 278 15 Consumer, direct 79 22 57 79 6 63 20 Consumer 575 22 560 582 6 341 35 Total $ 50,001 $ 2,154 $ 46,221 $ 48,375 $ 509 $ 43,140 $ 1,879 Peoples' impaired loans 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 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 debt with similar risk characteristics, the significance of the modification relative to the unpaid principal balance or collateral value of the debt, 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 new loans 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 a TDR during the three months ended September 30 : Three Months Ended Recorded Investment (a) (Dollars in thousands) Number of Contracts Pre-Modification Post-Modification Remaining Recorded Investment September 30, 2019 Originated loans: Consumer, indirect 15 $ 205 $ 205 $ 205 Total originated loans 15 $ 205 $ 205 $ 205 Acquired loans: Residential real estate 1 $ 70 $ 70 $ 70 Total acquired loans 1 $ 70 $ 70 $ 70 September 30, 2018 Originated loans: Residential real estate 3 $ 87 $ 87 $ 87 Home equity lines of credit 4 533 533 531 Consumer, indirect 7 150 150 150 Total originated loans 14 $ 770 $ 770 $ 768 Acquired loans: Residential real estate 3 $ 272 $ 272 $ 272 Home equity lines of credit 1 54 54 54 Total acquired loans 4 $ 326 $ 326 $ 326 (a) 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. Nine Months Ended Recorded Investment (a) (Dollars in thousands) Number of Contracts Pre-Modification Post-Modification Remaining Recorded Investment September 30, 2019 Originated loans: Commercial and industrial 2 $ 38 $ 38 $ 34 Residential real estate 3 437 440 434 Home equity lines of credit 4 139 139 137 Consumer, indirect 23 328 328 312 Consumer, direct 3 52 52 48 Consumer 26 380 380 360 Total originated loans 35 $ 994 $ 997 $ 965 Acquired loans: Commercial real estate, other 3 $ 101 $ 76 $ 75 Commercial and industrial 5 1,557 1,557 1,510 Residential real estate 35 2,088 2,088 2,037 Home equity lines of credit 8 172 172 168 Consumer, direct 16 340 340 330 Total acquired loans 67 $ 4,258 $ 4,233 $ 4,120 September 30, 2018 Originated loans: Residential real estate 9 $ 871 $ 871 $ 871 Home equity lines of credit 6 565 565 562 Consumer, indirect 26 454 454 420 Consumer, direct 5 27 27 18 Consumer 31 481 481 438 Total originated loans 46 $ 1,917 $ 1,917 $ 1,871 Acquired loans: Commercial real estate, other 1 $ 50 $ 50 $ 47 Residential real estate 15 1,258 1,258 1,244 Home equity lines of credit 5 140 140 139 Total acquired loans 21 $ 1,448 $ 1,448 $ 1,430 (a) 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 acquired loans modified in a TDR during the year that subsequently defaulted (i.e., were 90 days or more past due following a modification) during the nine-month periods ended September 30: September 30, 2019 September 30, 2018 (Dollars in thousands) Number of Contracts Recorded Investment (a) Impact on the Allowance for Loan Losses Number of Contracts Recorded Investment (a) Impact on the Allowance for Loan Losses Acquired loans: Home equity lines of credit — $ — $ — 1 $ 10 $ — Consumer, direct 2 35 — — — — Total 2 $ 35 $ — 1 $ 10 $ — (a) The amount shown is 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 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 debtors whose terms have been modified in a TDR. Allowance for Originated Loan Losses Changes in the allowance for originated loan losses for the nine months ended September 30 were as follows: (Dollars in thousands) Commercial Real Estate Commercial and Industrial Residential Real Estate Home Equity Lines of Credit Consumer Indirect Consumer Direct Deposit Account Overdrafts Total Balance, January 1, 2019 $ 8,003 $ 6,178 $ 1,214 $ 618 $ 3,214 $ 351 $ 81 $ 19,659 Charge-offs (153 ) (324 ) (257 ) (45 ) (1,266 ) (150 ) (632 ) (2,827 ) Recoveries 98 2,093 220 10 229 45 157 2,852 Net (charge-offs) recoveries (55 ) 1,769 (37 ) (35 ) (1,037 ) (105 ) (475 ) 25 Provision for (recovery of) loan losses 518 (785 ) (15 ) (16 ) 1,070 93 522 1,387 Balance, September 30, 2019 $ 8,466 $ 7,162 $ 1,162 $ 567 $ 3,247 $ 339 $ 128 $ 21,071 Balance, January 1, 2018 $ 7,797 $ 5,813 $ 904 $ 693 $ 2,944 $ 464 $ 70 $ 18,685 Charge-offs (849 ) (38 ) (293 ) (67 ) (1,967 ) (297 ) (731 ) (4,242 ) Recoveries 58 10 98 12 403 114 160 855 Net charge-offs (791 ) (28 ) (195 ) (55 ) (1,564 ) (183 ) (571 ) (3,387 ) Provision for loan losses 960 353 290 70 2,043 114 596 4,426 Balance, September 30, 2018 $ 7,966 $ 6,138 $ 999 $ 708 $ 3,423 $ 395 $ 95 $ 19,724 The increase in the allowance for loan losses allocated to commercial real estate recorded during the first nine months of 2019 was driven by an increase in the allowance needed for loans individually evaluated for impairment combined with loan growth. The decline in the allowance for loan losses allocated to residential real estate recorded during the first nine months of 2019 was driven by a decrease in the allowance needed for loans individually evaluated for impairment which was offset partially by loan growth. The changes in the commercial and industrial, consumer indirect and consumer direct categories of the allowance for originated loan losses and the related provision for originated loan losses recorded during the nine months of 2019 were driven by net charge-off activity and increases in the size of the respective loan portfolios. The following table details the recorded investment and allowance for originated loan losses disaggregated based on impairment method: (Dollars in thousands) Commercial Real Estate Commercial and Industrial Residential Real Estate Home Equity Lines of Credit Consumer Indirect Consumer Direct Deposit Account Overdrafts Total September 30, 2019 Allowance for loan losses allocated to: Loans individually evaluated for impairment $ 475 $ 206 $ 47 $ 43 $ 30 $ 10 $ — $ 811 Loans collectively evaluated for impairment 7,991 6,956 1,115 524 3,217 329 128 20,260 Ending balance $ 8,466 $ 7,162 $ 1,162 $ 567 $ 3,247 $ 339 $ 128 $ 21,071 Recorded investment in: Loans individually evaluated for impairment $ 15,202 $ 4,086 $ 26,963 $ 1,435 $ 605 $ 629 $ — $ 48,920 Loans collectively evaluated for impairment 744,239 560,193 282,001 91,475 422,612 72,070 1,081 2,173,671 Ending balance $ 759,441 $ 564,279 $ 308,964 $ 92,910 $ 423,217 $ 72,699 $ 1,081 $ 2,222,591 December 31, 2018 Allowance for loan losses allocated to: Loans individually evaluated for impairment $ 119 $ 157 $ 154 $ 73 $ — $ 6 $ — $ 509 Loans collectively evaluated for impairment 7,884 6,021 1,060 545 3,214 345 81 19,150 Ending balance $ 8,003 $ 6,178 $ 1,214 $ 618 $ 3,214 $ 351 $ 81 $ 19,659 Recorded investment in: Loans individually evaluated for impairment $ 17,596 $ 3,226 $ 24,678 $ 2,293 $ 503 $ 79 $ — $ 48,375 Loans collectively evaluated for impairment 738,617 526,981 272,182 91,033 406,664 71,595 583 2,107,655 Ending balance $ 756,213 $ 530,207 $ 296,860 $ 93,326 $ 407,167 $ 71,674 $ 583 $ 2,156,030 September 30, 2018 Allowance for loan losses allocated to: Loans individually evaluated for impairment $ 91 $ 191 $ 40 $ 83 $ 140 $ 32 $ — $ 577 Loans collectively evaluated for impairment 7,875 5,947 959 625 3,283 363 95 19,147 Ending balance $ 7,966 $ 6,138 $ 999 $ 708 $ 3,423 $ 395 $ 95 $ 19,724 Recorded investment in: Loans individually evaluated for impairment $ 18,375 $ 2,185 $ 25,147 $ 2,270 $ 527 $ 77 $ — $ 48,581 Loans collectively evaluated for impairment 715,907 508,406 274,621 90,622 396,174 72,524 649 2,058,903 Ending balance $ 734,282 $ 510,591 $ 299,768 $ 92,892 $ 396,701 $ 72,601 $ 649 $ 2,107,484 Allowance for Loan Losses for Acquired Loans 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 acquired 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. The methods utilized to estimate the required allowance for loan losses for non-impaired acquired loans are similar to those utilized for originated loans; however, Peoples records a provision for loan losses only when the computed allowance exceeds the remaining fair value adjustment. The following table presents activity in the allowance for loan losses for acquired loans: Three Months Ended Nine Months Ended September 30, September 30, (Dollars in thousands) 2019 2018 2019 2018 Non-impaired loans: Balance, beginning of period $ 380 $ — $ 383 $ — Charge-offs — — (3 ) — Balance, end of period $ 380 $ — $ 380 $ — Purchased credit impaired loans: Balance, beginning of period $ 153 $ 108 $ 153 $ 108 (Recovery of) provision for loan losses (19 ) 47 (19 ) 47 Balance, end of period $ 134 $ 155 $ 134 $ 155 |