Loans and Allowance | LOANS AND ALLOWANCE The Corporation's primary lending focus is small business and middle market commercial, commercial real estate and residential real estate, which results in portfolio diversification. The following tables show the composition of the loan portfolio, the allowance for loan losses and credit quality characteristics by collateral classification, excluding loans held for sale. Loans held for sale at December 31, 2018 and 2017 , were $4,778,000 and $7,216,000 , respectively. The following table illustrates the composition of the Corporation’s loan portfolio by loan class for the years indicated: December 31, 2018 December 31, 2017 Commercial and industrial loans $ 1,726,664 $ 1,493,493 Agricultural production financing and other loans to farmers 92,404 121,757 Real estate loans: Construction 545,729 612,219 Commercial and farmland 2,832,102 2,562,691 Residential 966,421 962,765 Home equity 528,157 514,021 Individuals' loans for household and other personal expenditures 99,788 86,935 Lease financing receivables, net of unearned income 1,600 2,527 Other commercial loans 431,602 394,791 Loans 7,224,467 6,751,199 Allowance for loan losses (80,552 ) (75,032 ) Net Loans $ 7,143,915 $ 6,676,167 Allowance, Credit Quality and Loan Portfolio The Corporation maintains an allowance for loan losses to cover probable credit losses identified during its loan review process. Management believes that the allowance for loan losses is adequate to cover probable losses inherent in the loan portfolio at December 31, 2018 . The process for determining the adequacy of the allowance for loan losses is critical to the Corporation’s financial results. It requires management to make difficult, subjective and complex judgments to estimate the effect of uncertain matters. The allowance for loan losses considers current factors, including economic conditions and ongoing internal and external examinations, and will increase or decrease as deemed necessary to ensure it remains adequate. In addition, the allowance as a percentage of charge-offs and nonperforming loans will change at different points in time based on credit performance, portfolio mix and collateral values. The allowance for loan losses is maintained through the provision for loan losses, which is a charge against earnings. The allowance is increased by provision expense and decreased by charge-offs less recoveries. All charge-offs are approved by the Bank's senior credit officers and in accordance with established policies. The Bank charges off a loan when a determination is made that all or a portion of the loan is uncollectible. The amount provided for loan losses in a given period may be greater than or less than net loan losses experienced during the period, and is based on management’s judgment as to the appropriate level of the allowance for loan losses. The determination of the provision amount is based on management’s ongoing review and evaluation of the loan portfolio, including an internally administered loan "watch" list and independent loan reviews. The evaluation takes into consideration identified credit problems, the possibility of losses inherent in the loan portfolio that are not specifically identified and management’s judgment as to the impact of the current environment and economic conditions on the portfolio. The allowance consists of specific impairment reserves as required by ASC 310-10-35, a component for historical losses in accordance with ASC 450 and the consideration of current environmental factors in accordance with ASC 450. A loan is deemed impaired when, based on current information or events, it is probable that all amounts due of principal and interest according to the contractual terms of the loan agreement will not be collected. The historical loss allocation for loans not deemed impaired according to ASC 450 is the product of the volume of loans within the non-impaired criticized and non-criticized risk grade classifications, each segmented by call code, and the historical loss factor for each respective classification and call code segment. The historical loss factors are based upon actual loss experience within each risk and call code classification. The historical look back period for non-criticized loans looks to the most recent rolling-four-quarter average and aligns with the look back period for non-impaired criticized loans. Each of the rolling four quarter periods used to obtain the average, include all charge-offs for the previous twelve-month period, therefore the historical look back period includes seven quarters. Criticized loans are grouped based on the risk grade assigned to the loan. Loans with a special mention grade are assigned a loss factor, and loans with a classified grade but not impaired are assigned a separate loss factor. The loss factor computation for this allocation includes a segmented historical loss migration analysis of risk grades to charge-off. In addition to the specific reserves and historical loss components of the allowance, consideration is given to various environmental factors to ensure that losses inherent in the portfolio are reflected in the allowance for loan losses. The environmental component adjusts the historical loss allocations for non-impaired loans to reflect relevant current conditions that, in management's opinion, have an impact on loss recognition. Environmental factors that management reviews in the analysis include: national and local economic trends and conditions; trends in growth in the loan portfolio and growth in higher risk areas; levels of, and trends in, delinquencies and non-accruals; experience and depth of lending management and staff; adequacy of, and adherence to, lending policies and procedures including those for underwriting; industry concentrations of credit; and adequacy of risk identification systems and controls through the internal loan review and internal audit processes. In conformance with ASC 805 and ASC 820, loans purchased after December 31, 2008 are recorded at the acquisition date fair value. Such loans are included in the allowance to the extent a specific impairment is identified that exceeds the fair value adjustment on an impaired loan or the historical loss and environmental factor analysis indicates losses inherent in a purchased portfolio exceeds the fair value adjustment on the portion of the purchased portfolio not deemed impaired. At December 31, 2018, the allowance for loan losses was $80,552,000 , an increase of $5,520,000 from the December 31, 2017 balance of $75,032,000 . Net charge-offs for the twelve months ended December 31, 2018, were $1,707,000 , an increase of $1,559,000 from the same period in 2017. The provision for loan losses for the twelve months ended December 31, 2018 was $7,227,000 , a decrease of $1,916,000 from the same period in 2017. The determination of the provision for loan losses in any period is based on management’s continuing review and evaluation of the loan portfolio, and its judgment as to the impact of current economic conditions on the portfolio. The following tables summarize changes in the allowance for loan losses by loan segment for the twelve months ended December 31, 2018, 2017, and 2016: Twelve Months Ended December 31, 2018 Commercial Commercial Real Estate Consumer Residential Finance Total Allowance for loan losses: Balances, December 31, 2017 $ 30,418 $ 27,343 $ 3,732 $ 13,537 $ 2 $ 75,032 Provision for losses 2,097 2,482 679 1,969 7,227 Recoveries on loans 2,456 2,525 302 993 6,276 Loans charged off (2,316 ) (2,741 ) (749 ) (2,177 ) (7,983 ) Balances, December 31, 2018 $ 32,655 $ 29,609 $ 3,964 $ 14,322 $ 2 $ 80,552 Twelve Months Ended December 31, 2017 Commercial Commercial Real Estate Consumer Residential Finance Total Allowance for loan losses: Balances, December 31, 2016 $ 27,696 $ 23,661 $ 2,923 $ 11,755 $ 2 $ 66,037 Provision for losses 2,515 3,159 1,078 2,391 9,143 Recoveries on loans 1,590 2,260 324 706 4,880 Loans charged off (1,383 ) (1,737 ) (593 ) (1,315 ) (5,028 ) Balances, December 31, 2017 $ 30,418 $ 27,343 $ 3,732 $ 13,537 $ 2 $ 75,032 Twelve Months Ended December 31, 2016 Commercial Commercial Real Estate Consumer Residential Finance Total Allowance for loan losses: Balances, December 31, 2015 $ 26,478 $ 22,145 $ 2,689 $ 11,139 $ 2 $ 62,453 Provision for losses 1,876 1,834 432 1,515 5,657 Recoveries on loans 1,806 2,090 369 1,091 5,356 Loans charged off (2,464 ) (2,408 ) (567 ) (1,990 ) (7,429 ) Balances, December 31, 2016 $ 27,696 $ 23,661 $ 2,923 $ 11,755 $ 2 $ 66,037 The tables below show the Corporation’s allowance for loan losses and loan portfolio by loan segment for the years indicated. At December 31, 2018 and 2017, there was no related allowance for loan losses for loans acquired with deteriorated credit quality. December 31, 2018 Commercial Commercial Consumer Residential Finance Total Allowance balances: Individually evaluated for impairment $ 1,435 $ 1 $ 436 $ 1,872 Collectively evaluated for impairment $ 32,655 28,174 3,963 13,886 $ 2 78,680 Total allowance for loan losses $ 32,655 $ 29,609 $ 3,964 $ 14,322 $ 2 $ 80,552 Loan balances: Individually evaluated for impairment $ 1,838 $ 17,756 $ 18 $ 2,413 $ 22,025 Collectively evaluated for impairment 2,246,730 3,347,686 99,770 1,490,872 $ 1,600 7,186,658 Loans acquired with deteriorated credit quality 2,102 12,389 1,293 15,784 Loans $ 2,250,670 $ 3,377,831 $ 99,788 $ 1,494,578 $ 1,600 $ 7,224,467 December 31, 2017 Commercial Commercial Consumer Residential Finance Total Allowance balances: Individually evaluated for impairment $ 666 $ 567 $ 404 $ 1,637 Collectively evaluated for impairment 29,752 26,776 $ 3,732 13,133 $ 2 73,395 Total allowance for loan losses $ 30,418 $ 27,343 $ 3,732 $ 13,537 $ 2 $ 75,032 Loan balances: Individually evaluated for impairment $ 3,345 $ 17,432 $ 5 $ 2,429 $ 23,211 Collectively evaluated for impairment 2,005,275 3,135,481 86,930 1,472,821 $ 2,527 6,703,034 Loans acquired with deteriorated credit quality 1,421 21,997 1,536 24,954 Loans $ 2,010,041 $ 3,174,910 $ 86,935 $ 1,476,786 $ 2,527 $ 6,751,199 Loans individually evaluated for impairment are comprised of commercial and consumer loans deemed impaired in accordance with ASC 310-10 and include loans acquired with deteriorated credit quality totaling $1,541,000 and $315,000 at December 31, 2018 and 2017, respectively. The risk characteristics of the Corporation’s material portfolio segments are as follows: Commercial Commercial lending is primarily based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of borrowers, however, may not be as expected and the collateral securing these loans may fluctuate in value. Most commercial loans are secured by the tangible assets being financed such as equipment or real estate or other business assets such as accounts receivable or inventory and may incorporate a personal guarantee. Other loans may be unsecured, secured but under-collateralized or otherwise made on the basis of the enterprise value of an organization. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers. Commercial real estate These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Commercial real estate lending typically involves higher loan principal amounts and the repayment of these loans is generally dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan. Commercial real estate loans may be more adversely affected by conditions in the real estate markets or in the general economy. Management monitors and evaluates commercial real estate loans based on collateral and risk grade criteria. In addition, management tracks the level of owner-occupied commercial real estate loans versus non-owner occupied loans. Consumer and Residential With respect to residential loans that are secured by 1-4 family residences, which are typically owner occupied, the Corporation generally establishes a maximum loan-to-value ratio and requires private mortgage insurance if that ratio is exceeded. Home equity loans are secured by a subordinate interest in 1-4 family residences, and consumer loans are secured by consumer assets such as automobiles or recreational vehicles. Some consumer loans, such as small installment loans and certain lines of credit, are unsecured . Repayment of these loans is primarily dependent on the personal income and credit rating of the borrowers, which can be impacted by economic conditions in their market areas such as unemployment levels. Repayment on loans secured by 1-4 family residences can be impacted by changes in property values. Risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a large number of borrowers. Loans are reclassified to a non-accruing status when, in management’s judgment, the collateral value and financial condition of the borrower do not justify accruing interest. When the interest accrual is discontinued, all unpaid accrued interest is reversed against earnings when considered uncollectible. Payments subsequently received on non-accrual loans are applied to principal. A loan is returned to accrual status when principal and interest are no longer past due and collectability is probable, typically after a minimum of six consecutive months of performance. Payments received on impaired accruing or delinquent loans are applied to interest income as accrued. The following table summarizes the Corporation’s non-accrual loans by loan class for the years indicated: December 31, 2018 December 31, 2017 Commercial and industrial loans $ 1,803 $ 3,275 Agriculture production financing and other loans to farmers 679 1,027 Real estate loans: Construction 8,667 65 Commercial and farmland 8,156 12,951 Residential 4,966 9,444 Home equity 1,481 1,928 Individuals' loans for household and other personal expenditures 42 34 Other commercial loans 354 Total $ 26,148 $ 28,724 Impaired loans include loans deemed impaired according to the guidance set forth in ASC 310-10. Commercial loans under $500,000 and consumer loans, with the exception of troubled debt restructures, are not individually evaluated for impairment. Allowable methods for determining the amount of impairment include estimating fair value using the fair value of the collateral for collateral dependent loans. If the impaired loan is identified as collateral dependent, then the fair value method for measuring the amount of impairment is utilized. This method requires obtaining a current independent appraisal of the collateral and applying a discount factor, which includes selling costs if applicable, to the value. The fair value of real estate is generally based on appraisals by qualified licensed appraisers. The appraisers typically determine the value of the real estate by utilizing an income or market valuation approach. If an appraisal is not available, the fair value may be determined by using a cash flow analysis. Fair value on other collateral such as business assets is typically ascertained by assessing, either singularly or some combination of, asset appraisals, accounts receivable aging reports, inventory listings and or customer financial statements. Both appraised values and values based on borrower’s financial information are discounted as considered appropriate based on age and quality of the information and current market conditions. The following tables show the composition of the Corporation’s impaired loans, related allowance and interest income recognized while impaired by loan class for the years indicated: December 31, 2018 Unpaid Principal Recorded Related Average Recorded Investment Interest Income Recognized Impaired loans with no related allowance: Commercial and industrial loans $ 828 $ 806 $ 833 Agriculture production financing and other loans to farmers 679 679 679 Real estate loans: Construction 1,352 614 835 Commercial and farmland 11,176 8,994 12,975 $ 165 Residential 118 100 101 3 Home equity 49 48 48 Other commercial loans 353 353 353 Total $ 14,555 $ 11,594 $ 15,824 $ 168 Impaired loans with related allowance: Real estate loans: Construction $ 7,978 $ 7,977 $ 1,429 $ 7,977 Commercial and farmland 171 171 6 171 Residential 1,958 1,907 362 1,915 57 Home equity 376 358 74 365 10 Individuals' loans for household and other personal expenditures 18 18 1 20 $ 1 Total $ 10,501 $ 10,431 $ 1,872 $ 10,448 $ 68 Total Impaired Loans $ 25,056 $ 22,025 $ 1,872 $ 26,272 $ 236 December 31, 2017 Unpaid Principal Recorded Related Average Recorded Investment Interest Income Recognized Impaired loans with no related allowance: Commercial and industrial loans $ 7,611 $ 1,536 $ 3,839 Agriculture production financing and other loans to farmers 732 700 762 Real estate loans: Commercial and farmland 16,758 15,163 17,495 $ 360 Residential 833 519 635 Home equity 40 8 14 Individuals' loans for household and other personal expenditures 5 5 7 Total $ 25,979 $ 17,931 $ 22,752 $ 360 Impaired loans with related allowance: Commercial and industrial loans $ 812 $ 782 $ 552 $ 1,517 Agriculture production financing and other loans to farmers 357 327 114 327 Real estate loans: Commercial and farmland 2,988 2,269 567 2,379 Residential 1,616 1,572 327 1,580 $ 28 Home equity 350 330 77 332 11 Total $ 6,123 $ 5,280 $ 1,637 $ 6,135 $ 39 Total Impaired Loans $ 32,102 $ 23,211 $ 1,637 $ 28,887 $ 399 December 31, 2016 Unpaid Principal Recorded Related Average Recorded Investment Interest Income Recognized Impaired loans with no related allowance: Commercial and industrial loans $ 4,028 $ 1,696 $ 1,770 $ 37 Agriculture production financing and other loans to farmers 367 338 357 Real estate loans: Commercial and farmland 22,828 17,752 18,944 288 Residential 2,073 1,402 1,665 2 Home equity 60 30 30 Individuals' loans for household and other personal expenditures 9 9 9 Total $ 29,365 $ 21,227 $ 22,775 $ 327 Impaired loans with related allowance: Agriculture production financing and other loans to farmers $ 660 $ 660 $ 36 $ 690 Real estate loans: Commercial and farmland 4,237 2,985 553 2,990 Residential 968 877 233 872 $ 14 Home equity 290 266 66 266 6 Total $ 6,155 $ 4,788 $ 888 $ 4,818 $ 20 Total Impaired Loans $ 35,520 $ 26,015 $ 888 $ 27,593 $ 347 Impaired loans in the above tables do not include loans accounted for under ASC 310-30, or any other loan, unless deemed impaired in accordance with ASC 310-10. As part of the ongoing monitoring of the credit quality of the Corporation's loan portfolio, management tracks certain credit quality indicators including trends related to: (i) the level of criticized commercial loans, (ii) net charge-offs, (iii) non-performing loans, (iv) covenant failures and (v) the general national and local economic conditions. The Corporation utilizes a risk grading of pass, special mention, substandard, doubtful and loss to assess the overall credit quality of large commercial loans. All large commercial credit grades are reviewed at a minimum of once a year for pass grade loans. Loans with grades below pass are reviewed more frequently depending on the grade. A description of the general characteristics of these grades is as follows: • Pass - Loans that are considered to be of acceptable credit quality. • Special Mention - Loans which possess some credit deficiency or potential weakness, which deserves close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Corporation's credit position at some future date. Special mention assets are not adversely classified and do not expose the Corporation to sufficient risk to warrant adverse classification. The key distinctions of this category's classification are that it is indicative of an unwarranted level of risk; and weaknesses are considered “potential”, not “defined”, impairments to the primary source of repayment. Examples include businesses that may be suffering from inadequate management, loss of key personnel or significant customer or litigation. • Substandard - A substandard loan is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified have a well-defined weakness that jeopardizes the liquidation of the debt. They are characterized by the distinct possibility that the Corporation will sustain some loss if the deficiencies are not corrected. Other characteristics may include: o the likelihood that a loan will be paid from the primary source of repayment is uncertain or financial deterioration is underway and very close attention is warranted to ensure that the loan is collected without loss, o the primary source of repayment is gone, and the Corporation is forced to rely on a secondary source of repayment, such as collateral liquidation or guarantees, o loans have a distinct possibility that the Corporation will sustain some loss if deficiencies are not corrected, o unusual courses of action are needed to maintain a high probability of repayment, o the borrower is not generating enough cash flow to repay loan principal; however, it continues to make interest payments, o the Corporation is forced into a subordinated or unsecured position due to flaws in documentation, o loans have been restructured so that payment schedules, terms and collateral represent concessions to the borrower when compared to the normal loan terms, o the Corporation is seriously contemplating foreclosure or legal action due to the apparent deterioration of the loan, and o there is significant deterioration in market conditions to which the borrower is highly vulnerable. • Doubtful - Loans that have all of the weaknesses of those classified as Substandard. However, based on currently existing facts, conditions and values, these weaknesses make full collection of principal highly questionable and improbable. Other credit characteristics may include the primary source of repayment is gone or there is considerable doubt as to the quality of the secondary sources of repayment. The possibility of loss is high, but because of certain important pending factors that may strengthen the loan, loss classification is deferred until the exact status of repayment is known. • Loss – Loans that are considered uncollectible and of such little value that continuing to carry them as an asset is not warranted. Loans will be classified as Loss when it is neither practical or desirable to defer writing off or reserving all or a portion of a basically worthless asset, even though partial recovery may be possible at some time in the future. The following tables summarize the credit quality of the Corporation’s loan portfolio, by loan class for the years indicated. Consumer non-performing loans include accruing consumer loans 90-days or more delinquent and consumer non-accrual loans. The entire balance of a loan is considered delinquent if the minimum payment contractually required to be made is not received by the specified date. Loans that evidenced deterioration of credit quality since origination and the probability, at acquisition, that all contractually required payments would not be collected are included in the applicable categories below. December 31, 2018 Commercial Pass Commercial Special Mention Commercial Substandard Commercial Doubtful Commercial Loss Consumer Performing Consumer Total Commercial and industrial loans $ 1,660,879 $ 23,246 $ 42,539 $ 1,726,664 Agriculture production financing and other loans to farmers 78,446 5,966 7,992 92,404 Real estate loans: Construction 492,358 2,185 24,224 $ 25,419 $ 1,543 545,729 Commercial and farmland 2,669,491 76,037 84,288 2,285 1 2,832,102 Residential 170,075 7,373 2,076 782,080 4,817 966,421 Home equity 24,653 535 457 500,996 1,516 528,157 Individuals' loans for household and other personal expenditures 99,741 47 99,788 Lease financing receivables, net of unearned income 1,600 1,600 Other commercial loans 431,249 353 431,602 Loans $ 5,528,751 $ 115,342 $ 161,929 $ 1,410,521 $ 7,924 $ 7,224,467 December 31, 2017 Commercial Pass Commercial Special Mention Commercial Substandard Commercial Doubtful Commercial Loss Consumer Performing Consumer Total Commercial and industrial loans $ 1,418,401 $ 51,336 $ 23,386 $ 370 $ 1,493,493 Agriculture production financing and other loans to farmers 73,800 27,502 20,018 387 $ 50 121,757 Real estate loans: Construction 587,906 828 981 $ 22,374 $ 130 612,219 Commercial and farmland 2,408,329 70,074 79,769 1,536 2,980 3 2,562,691 Residential 185,725 4,376 4,209 114 759,900 8,441 962,765 Home equity 28,554 457 286 482,661 2,063 514,021 Individuals' loans for household and other personal expenditures 86,875 60 86,935 Lease financing receivables, net of unearned income 2,527 2,527 Other commercial loans 394,222 569 394,791 Loans $ 5,099,464 $ 154,573 $ 129,218 $ 2,407 $ 50 $ 1,354,790 $ 10,697 $ 6,751,199 The tables below show a past due aging of the Corporation’s loan portfolio, by loan class, for the years indicated: December 31, 2018 Current 30-59 Days 60-89 Days Loans 90 Days or More Past Due Non-Accrual Total Past Due Total Commercial and industrial loans $ 1,723,337 $ 1,093 $ 182 $ 249 $ 1,803 $ 3,327 $ 1,726,664 Agriculture production financing and other loans to farmers 89,440 2,285 679 2,964 92,404 Real estate loans: Construction 535,520 64 1,478 8,667 10,209 545,729 Commercial and farmland 2,822,515 1,253 178 8,156 9,587 2,832,102 Residential 959,252 1,756 430 17 4,966 7,169 966,421 Home equity 524,198 2,164 207 107 1,481 3,959 528,157 Individuals' loans for household and other personal expenditures 99,499 179 64 4 42 289 99,788 Lease financing receivables, net of unearned income 1,600 1,600 Other commercial loans 431,248 354 354 431,602 Loans $ 7,186,609 $ 8,794 $ 1,061 $ 1,855 $ 26,148 $ 37,858 $ 7,224,467 December 31, 2017 Current 30-59 Days 60-89 Days Loans 90 Days or More Past Due Non-Accrual Total Past Due Total Commercial and industrial loans $ 1,487,221 $ 2,967 $ 30 $ 3,275 $ 6,272 $ 1,493,493 Agriculture production financing and other loans to farmers 120,720 10 1,027 1,037 121,757 Real estate loans: Construction 610,896 1,193 $ 65 65 1,323 612,219 Commercial and farmland 2,542,048 6,923 166 603 12,951 20,643 2,562,691 Residential 948,947 4,010 308 56 9,444 13,818 962,765 Home equity 510,362 1,372 184 175 1,928 3,659 514,021 Individuals' loans for household and other personal expenditures 85,744 298 834 25 34 1,191 86,935 Lease financing receivables, net of unearned income 2,527 2,527 Other commercial loans 394,791 394,791 Loans $ 6,703,256 $ 16,773 $ 1,522 $ 924 $ 28,724 $ 47,943 $ 6,751,199 On occasion, borrowers experience declines in income and cash flow. As a result, these borrowers seek to reduce contractual cash outlays including debt payments. Concurrently, in an effort to preserve and protect its earning assets, specifically troubled loans, the Corporation works to maintain its relationship with certain customers who are experiencing financial difficulty by contractually modifying the borrower's debt agreement with the Corporation. In certain loan restructuring situations, the Corporation may grant a concession to a debtor experiencing financial difficulty, resulting in a trouble debt restructuring. A concession is deemed to be granted when, as a result of the restructuring, the Corporation does not expect to collect all original amounts due, including interest accrued at the original contract rate. If the payment of principal at original maturity is primarily dependent on the value of collateral, the current value of the collateral is considered in determining whether the principal will be paid. The following tables summarize troubled debt restructures in the Corporation's loan portfolio that occurred during the periods ended December 31, 2018 and 2017 : December 31, 2018 Pre-Modification Post-Modification Number Real estate loans: Commercial and farmland $ 85 $ 85 1 Residential 490 487 11 Home equity 81 81 3 Individuals' loans for household and other personal expenditures 65 66 3 Total $ 721 $ 719 18 December 31, 2017 Pre-Modification Post-Modification Number Commercial and industrial loans $ 599 $ 376 3 Agriculture production financing and other loans to farmers 387 387 3 Real estate loans: Commercial and farmland 1,022 1,156 8 Residential 788 862 15 Home equity 195 107 4 Individuals' loans for household and other personal expenditures 13 14 1 Total $ 3,004 $ 2,902 34 The following tables summarize the recorded investment of troubled debt restructures as of December 31, 2018 and 2017 , by modification type, that occurred during the years indicated: December 31, 2018 Term Rate Combination Total Real estate loans: Commercial and farmland $ 85 $ 85 Residential $ 209 $ 239 448 Home equity 106 74 180 Individuals' loans for household and other personal expenditures 58 6 64 Total $ 249 $ 289 $ 239 $ 777 December 31, 2017 Term Rate Combination Total Commercial and industrial loans $ 203 $ 166 $ 369 Agriculture production financing and other loans to farmers 387 387 Real estate loans: Commercial and farmland 705 $ 59 232 996 Residential 761 85 846 Home equity 105 105 Individuals' loans for household and other personal expenditures 14 14 Total $ 1,295 $ 939 $ 483 $ 2,717 Loans secured by 1- 4 family residential real estate made up 79 percent of the post-modification balances of the troubled debt restructured loans that occurred during the twelve months ending December 31, 2018 . The following tables summarize troubled debt restructures that occurred during the twelve months ended December 31, 2018 and 2017 , that subsequently defaulted during the period indicated and remained in default at period end. For purposes of this schedule, a loan is considered in default if it is 30-days or more past due. Twelve Months Ended December 31, 2018 Number of Loans Recorded Balance Real estate loans: Residential 2 $ 75 Total 2 $ 75 Twelve Months Ended December 31, 2017 Number of Loans Recorded Balance Real estate loans: Commercial and farmland 1 $ 14 Residential 4 323 Total 5 $ 337 For potential consumer loan restructures, impairment evaluation occurs prior to modification. Any subsequent impairment is addressed through the charge-off process or through a specific reserve. Consumer troubled debt restructures are generally included in the general historical allowance for loan loss at the post modification balance. Consumer non-accrual and delinquent troubled debt restructures are also considered in the calculation of the non-accrual and delinquency trend environmental allowance allocation. Consumer loans secured by residential real estate properties for which formal foreclosure proceedings are in process totaled $800,000 and $2,302,000 at December 31, 2018 and 2017, respectively. Commercial troubled debt restructured loans risk graded special mention, substandard, doubtful and loss are individually evaluated for impairment under ASC 310. Any resulting specific reserves are included in the allowance for loan losses. Commercial 30 - 89 day delinquent troubled debt restructures are included in the calculation of the delinquency trend environmental allowance allocation. With the exception of the acquired loans excluded from the allowance for loan losses, all commercial non-impaired loans, including non-accrual and 90-days or more delinquents, are included in the ASC 450 loss estimate. |