Loans | Loans Total net loans at December 31, 2019 and 2018 are summarized as follows: 2019 2018 Commercial, industrial, and agricultural $ 1,046,665 $ 916,297 Commercial mortgages 814,002 697,776 Residential real estate 814,030 771,309 Consumer 124,785 86,035 Credit cards 7,569 7,623 Overdrafts 2,146 308 Less: unearned discount (5,162 ) (4,791 ) allowance for loan losses (19,473 ) (19,704 ) Loans, net $ 2,784,562 $ 2,454,853 At December 31, 2019 and 2018 net unamortized fees of $3,092 and $3,175 , respectively, have been included in the carrying value of loans. The Corporation’s outstanding loans and related unfunded commitments are primarily concentrated within central and northwest Pennsylvania, central and northeast Ohio, and western New York. The Bank attempts to limit concentrations within specific industries by utilizing dollar limitations to single industries or customers, and by entering into participation agreements with third parties. Collateral requirements are established based on management’s assessment of the customer. The Corporation maintains lending policies to control the quality of the loan portfolio. These policies delegate the authority to extend loans under specific guidelines and underwriting standards. These policies are prepared by the Corporation’s management and reviewed and ratified annually by the Corporation’s Board of Directors. Pursuant to the Corporation’s lending policies, management considers a variety of factors when determining whether to extend credit to a customer, including loan-to-value ratios, FICO scores, quality of the borrower’s financial statements, and the ability to obtain personal guarantees. Commercial, industrial, and agricultural loans comprised 37% and 37% of the Corporation’s total loan portfolio at December 31, 2019 and 2018 , respectively. Commercial mortgage loans comprised 29% and 28% of the Corporation’s total loan portfolio at December 31, 2019 and 2018 , respectively. Management assigns a risk rating to all commercial loans at loan origination. The loan-to-value policy guidelines for commercial, industrial, and agricultural loans are generally a maximum of 80% of the value of business equipment, a maximum of 75% of the value of accounts receivable, and a maximum of 60% of the value of business inventory at loan origination. The loan-to-value policy guideline for commercial mortgage loans is generally a maximum of 85% of the appraised value of the real estate. Residential real estate loans comprised 29% and 31% of the Corporation’s total loan portfolio at December 31, 2019 and 2018 , respectively. The loan-to-value policy guidelines for residential real estate loans vary depending on the collateral position and the specific type of loan. Higher loan-to-value terms may be approved with the appropriate private mortgage insurance coverage. The Corporation also originates and prices loans for sale into the secondary market. Loans so originated are classified as loans held for sale and are excluded from residential real estate loans reported above. The rationale for these sales is to mitigate interest rate risk associated with holding lower rate, long-term residential mortgages in the loan portfolio and to generate fee revenue from sales and servicing the loan. The Corporation also offers a variety of unsecured and secured consumer loan and credit card products which represent less than 5% of the total loan portfolio at both December 31, 2019 and 2018 . Terms and collateral requirements vary depending on the size and nature of the loan. Transactions in the allowance for loan losses for the year ended December 31, 2019 were as follows: Commercial, Industrial, and Agricultural Commercial Mortgages Residential Real Estate Consumer Credit Cards Overdrafts Total Allowance for loan losses, January 1, 2019 $ 7,341 $ 7,490 $ 2,156 $ 2,377 $ 103 $ 237 $ 19,704 Charge-offs (205 ) (3,391 ) (386 ) (2,200 ) (116 ) (453 ) (6,751 ) Recoveries 17 124 73 154 15 113 496 Provision for loan losses 1,134 2,729 (344 ) 2,080 82 343 6,024 Allowance for loan losses, December 31, 2019 $ 8,287 $ 6,952 $ 1,499 $ 2,411 $ 84 $ 240 $ 19,473 Transactions in the allowance for loan losses for the year ended December 31, 2018 were as follows: Commercial, Industrial, and Agricultural Commercial Mortgages Residential Real Estate Consumer Credit Cards Overdrafts Total Allowance for loan losses, January 1, 2018 $ 6,160 $ 9,007 $ 2,033 $ 2,179 $ 120 $ 194 $ 19,693 Charge-offs (253 ) (3,337 ) (315 ) (2,279 ) (90 ) (319 ) (6,593 ) Recoveries 171 30 67 141 33 90 532 Provision for loan losses 1,263 1,790 371 2,336 40 272 6,072 Allowance for loan losses, December 31, 2018 $ 7,341 $ 7,490 $ 2,156 $ 2,377 $ 103 $ 237 $ 19,704 Transactions in the allowance for loan losses for the year ended December 31, 2017 were as follows: Commercial, Industrial, and Agricultural Commercial Mortgages Residential Real Estate Consumer Credit Cards Overdrafts Total Allowance for loan losses, January 1, 2017 $ 5,428 $ 6,753 $ 1,653 $ 2,215 $ 93 $ 188 $ 16,330 Charge-offs (544 ) (116 ) (466 ) (2,555 ) (144 ) (252 ) (4,077 ) Recoveries 235 197 78 161 27 87 785 Provision for loan losses 1,041 2,173 768 2,358 144 171 6,655 Allowance for loan losses, December 31, 2017 $ 6,160 $ 9,007 $ 2,033 $ 2,179 $ 120 $ 194 $ 19,693 The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and is based on the Corporation’s impairment method as of December 31, 2019 and 2018 . The recorded investment in loans excludes accrued interest and unearned discounts due to their insignificance. December 31, 2019 Commercial, Industrial, and Agricultural Commercial Mortgages Residential Real Estate Consumer Credit Cards Overdrafts Total Allowance for loan losses: Ending allowance balance attributable to loans: Individually evaluated for impairment $ 645 $ 1,264 $ 34 $ 0 $ 0 $ 0 $ 1,943 Collectively evaluated for impairment 7,614 5,358 1,465 2,411 84 240 17,172 Acquired with deteriorated credit quality 0 0 0 0 0 0 0 Modified in a troubled debt restructuring 28 330 0 0 0 0 358 Total ending allowance balance $ 8,287 $ 6,952 $ 1,499 $ 2,411 $ 84 $ 240 $ 19,473 Loans: Individually evaluated for impairment $ 8,078 $ 2,410 $ 465 $ 0 $ 0 $ 0 $ 10,953 Collectively evaluated for impairment 1,035,494 804,360 813,565 124,785 7,569 2,146 2,787,919 Acquired with deteriorated credit quality 0 523 0 0 0 0 523 Modified in a troubled debt restructuring 3,093 6,709 0 0 0 0 9,802 Total ending loans balance $ 1,046,665 $ 814,002 $ 814,030 $ 124,785 $ 7,569 $ 2,146 $ 2,809,197 December 31, 2018 Commercial, Industrial, and Agricultural Commercial Mortgages Residential Real Estate Consumer Credit Cards Overdrafts Total Allowance for loan losses: Ending allowance balance attributable to loans: Individually evaluated for impairment $ 54 $ 4 $ 100 $ 0 $ 0 $ 10 $ 168 Collectively evaluated for impairment 7,183 3,036 2,056 2,377 103 227 14,982 Acquired with deteriorated credit quality 0 0 0 0 0 0 0 Modified in a troubled debt restructuring 104 4,450 0 0 0 0 4,554 Total ending allowance balance $ 7,341 $ 7,490 $ 2,156 $ 2,377 $ 103 $ 237 $ 19,704 Loans: Individually evaluated for impairment $ 1,334 $ 1,446 $ 502 $ 0 $ 0 $ 10 $ 3,292 Collectively evaluated for impairment 910,386 685,714 770,807 86,035 7,623 298 2,460,863 Acquired with deteriorated credit quality 0 567 0 0 0 0 567 Modified in a troubled debt restructuring 4,577 10,049 0 0 0 0 14,626 Total ending loans balance $ 916,297 $ 697,776 $ 771,309 $ 86,035 $ 7,623 $ 308 $ 2,479,348 The following tables present information related to loans individually evaluated for impairment, including loans modified in troubled debt restructurings, by portfolio segment as of December 31, 2019 and 2018 and for the years ended December 31, 2019 , 2018 , and 2017 , respectively. December 31, 2019 Unpaid Principal Balance Recorded Investment Allowance for Loan Losses Allocated With an allowance recorded: Commercial, industrial, and agricultural $ 2,657 $ 1,476 $ 673 Commercial mortgage 6,541 4,349 1,594 Residential real estate 485 465 34 With no related allowance recorded: Commercial, industrial, and agricultural 9,845 9,695 0 Commercial mortgage 4,903 4,770 0 Residential real estate 0 0 0 Total $ 24,431 $ 20,755 $ 2,301 December 31, 2018 Unpaid Principal Balance Recorded Investment Allowance for Loan Losses Allocated With an allowance recorded: Commercial, industrial, and agricultural $ 3,053 $ 3,037 $ 158 Commercial mortgage 10,799 6,709 4,454 Residential real estate 502 502 100 Overdrafts 10 10 10 With no related allowance recorded: Commercial, industrial, and agricultural 3,684 2,874 0 Commercial mortgage 5,659 4,786 0 Residential real estate 0 0 0 Total $ 23,707 $ 17,918 $ 4,722 The unpaid principal balance of impaired loans includes the Corporation's recorded investment in the loan and the amount that have been charged off. Year Ended December 31, 2019 Average Recorded Investment Interest Income Recognized Cash Basis Interest Recognized With an allowance recorded: Commercial, industrial, and agricultural $ 1,750 $ 90 $ 90 Commercial mortgage 6,586 119 119 Residential real estate 191 13 13 Overdrafts 0 0 0 With no related allowance recorded: Commercial, industrial, and agricultural 4,919 208 208 Commercial mortgage 3,985 158 158 Residential real estate 294 11 11 Overdrafts 0 0 0 Total $ 17,725 $ 599 $ 599 Year Ended December 31, 2018 Average Recorded Investment Interest Income Recognized Cash Basis Interest Recognized With an allowance recorded: Commercial, industrial, and agricultural $ 2,745 $ 254 $ 249 Commercial mortgage 8,456 338 326 Residential real estate 304 20 19 Overdrafts 2 0 0 With no related allowance recorded: Commercial, industrial, and agricultural 4,642 157 148 Commercial mortgage 4,566 146 144 Residential real estate 0 0 0 Total $ 20,715 $ 915 $ 886 Year Ended December 31, 2017 Average Recorded Investment Interest Income Recognized Cash Basis Interest Recognized With an allowance recorded: Commercial, industrial, and agricultural $ 1,513 $ 97 $ 97 Commercial mortgage 11,944 327 327 Residential real estate 0 0 0 With no related allowance recorded: Commercial, industrial, and agricultural 2,438 114 114 Commercial mortgage 2,474 122 122 Residential real estate 0 0 0 Total $ 18,369 $ 660 $ 660 The following table presents the recorded investment in nonaccrual loans and loans past due over 90 days still on accrual by class of loans as of December 31, 2019 and 2018 : December 31, 2019 December 31, 2018 Nonaccrual Past Due Over 90 Days Still on Accrual Nonaccrual Past Due Over 90 Days Still on Accrual Commercial, industrial, and agricultural $ 11,644 $ 0 $ 2,076 487 Commercial mortgages 4,533 0 6,329 53 Residential real estate 4,724 59 5,187 299 Consumer 835 0 670 43 Credit cards 0 2 0 5 Total $ 21,736 $ 61 $ 14,262 $ 887 Nonaccrual loans and loans past due over 90 days still on accrual include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans. The following table presents the aging of the recorded investment in past due loans as of December 31, 2019 and 2018 by class of loans. December 31, 2019 30-59 Days Past Due 60-89 Days Past Due Greater Than 89 Days Past Due Total Past Due Loans Not Past Due Total Commercial, industrial, and agricultural $ 1,273 $ 548 $ 3,784 $ 5,605 $ 1,041,060 $ 1,046,665 Commercial mortgages 162 183 2,594 2,939 811,063 814,002 Residential real estate 3,383 1,270 2,714 7,367 806,663 814,030 Consumer 412 311 415 1,138 123,647 124,785 Credit cards 48 54 2 104 7,465 7,569 Overdrafts 0 0 0 0 2,146 2,146 Total $ 5,278 $ 2,366 $ 9,509 $ 17,153 $ 2,792,044 $ 2,809,197 December 31, 2018 30-59 Days Past Due 60-89 Days Past Due Greater Than 89 Days Past Due Total Past Due Loans Not Past Due Total Commercial, industrial, and agricultural $ 2,339 $ 9 $ 2,264 $ 4,612 $ 911,685 $ 916,297 Commercial mortgages 758 3,055 283 4,096 693,680 697,776 Residential real estate 3,982 1,257 3,988 9,227 762,082 771,309 Consumer 470 282 363 1,115 84,920 86,035 Credit cards 59 15 5 79 7,544 7,623 Overdrafts 0 0 0 0 308 308 Total $ 7,608 $ 4,618 $ 6,903 $ 19,129 $ 2,460,219 $ 2,479,348 Troubled Debt Restructurings During the years ended December 31, 2019 and 2018 , the terms of certain loans were modified as troubled debt restructurings. The modification of the terms of such loans included either or both of the following: a reduction of the stated interest rate of the loan; or an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk. The following table presents the number of loans, loan balances, and specific reserves for loans that have been restructured in a troubled debt restructuring as of December 31, 2019 and December 31, 2018 . December 31, 2019 December 31, 2018 Number of Loans Loan Balance Specific Reserve Number of Loans Loan Balance Specific Reserve Commercial, industrial, and agricultural 10 $ 3,093 $ 28 10 $ 4,577 $ 104 Commercial mortgages 13 6,709 330 15 10,049 4,450 Residential real estate 0 0 0 0 0 0 Consumer 0 0 0 0 0 0 Credit cards 0 0 0 0 0 0 Total 23 $ 9,802 $ 358 25 $ 14,626 $ 4,554 The following table presents loans by class modified as troubled debt restructurings that occurred during the years ended December 31, 2019 , 2018 , and 2017 : Year Ended December 31, 2019 Number of Loans Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment Commercial, industrial, and agricultural 0 $ 0 $ 0 Commercial mortgages 1 383 383 Residential real estate 0 0 0 Consumer 0 0 0 Credit cards 0 0 0 Total 1 $ 383 $ 383 Year Ended December 31, 2018 Number of Loans Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment Commercial, industrial, and agricultural 0 $ 0 $ 0 Commercial mortgages 5 1,570 1,570 Residential real estate 0 0 0 Consumer 0 0 0 Credit cards 0 0 0 Total 5 $ 1,570 $ 1,570 Year Ended December 31, 2017 Number of Loans Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment Commercial, industrial, and agricultural 4 $ 2,750 $ 2,750 Commercial mortgages 2 6,421 6,421 Residential real estate 0 0 0 Consumer 0 0 0 Credit cards 0 0 0 Total 6 $ 9,171 $ 9,171 The troubled debt restructurings described above increased the allowance for loan losses by $0 , $351 and $4,024 during the years ended December 31, 2019 , 2018 , and 2017 , respectively. Modifications involving a reduction of the stated interest rate of the loan were for periods ranging from 4 - 18 years . Modifications involving an extension of the maturity date were for periods ranging from 4 - 18 years . A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms. Except as discussed below, all loans modified in troubled debt restructurings are performing in accordance with their modified terms as of December 31, 2019 and 2018 and no principal balances were forgiven in connection with the loan restructurings. During the year ended December 31, 2019 one impaired commercial real estate loan with a balance of $381 as of December 31, 2019 was modified in troubled debt restructurings. The Corporation recorded no additional provision for loan losses and there was no chargeoff for this loan during the year ended December 31, 2019 . During the year ended December 31, 2018 five impaired commercial real estate loans totaling $1,677 were modified in troubled debt restructurings. The Corporation recorded an additional provision for loan losses of $351 and there were no chargeoffs for these loans during the year ended December 31, 2018. During the year ended December 31, 2018, one impaired commercial real estate loan that was modified in a troubled debt restructuring in 2017 began not to perform in accordance with its modified terms. As a result, an additional provision for loan losses of $1,847 was recorded, and the Corporation recorded a partial chargeoff of the loan of $3,336 during the year ended December 31, 2018. During the year ended December 31, 2017 four impaired commercial industrial loans totaling $2,750 were modified in troubled debt restructurings. The Corporation did no t record any additional provision for loan losses and there were no chargeoffs or defaults for these loans during the year ended December 31, 2017. During the year ended December 31, 2017 two impaired commercial real estate loans totaling $6,421 were modified in troubled debt restructurings. The Corporation recorded an additional provision for loan losses of $3,895 and there were no chargeoffs or defaults for these loans during the year ended December 31, 2017. In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without a loan modification. This evaluation is performed using the Corporation’s internal underwriting policies. The Corporation has no further loan commitments to customers whose loans are classified as a troubled debt restructuring. Generally, nonperforming troubled debt restructurings are restored to accrual status when the obligation is brought current, has performed in accordance with the contractual terms for a reasonable period of time (generally six months) and the ultimate collectability of the total contractual principal and interest is no longer in doubt. Credit Quality Indicators The Corporation classifies commercial, industrial, and agricultural loans and commercial mortgage loans 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. The Corporation 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 Corporation’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 Corporation 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. Loans not rated as special mention, substandard, or doubtful are considered to be pass rated loans. All loans included in the following tables have been assigned a risk rating within 12 months of the balance sheet date. December 31, 2019 Pass Special Mention Substandard Doubtful Total Commercial, industrial, and agricultural $ 1,004,445 $ 16,696 $ 25,524 $ 0 $ 1,046,665 Commercial mortgages 780,798 18,837 14,367 0 814,002 Total $ 1,785,243 $ 35,533 $ 39,891 $ 0 $ 1,860,667 December 31, 2018 Pass Special Mention Substandard Doubtful Total Commercial, industrial, and agricultural $ 890,360 $ 10,484 $ 15,453 $ 0 $ 916,297 Commercial mortgages 684,806 3,236 9,734 0 697,776 Total $ 1,575,166 $ 13,720 $ 25,187 $ 0 $ 1,614,073 The Corporation considers the performance of the loan portfolio and its impact on the allowance for loan losses. For residential real estate, consumer, and credit card loan classes, the Corporation also evaluates credit quality based on the performance status of the loan, which was previously presented, and by payment activity. Nonperforming loans include loans on nonaccrual status and loans past due over 90 days and still accruing interest. The following table presents the recorded investment in residential, consumer, and credit card loans based on performance status as of December 31, 2019 and December 31, 2018 : December 31, 2019 December 31, 2018 Residential Real Estate Consumer Credit Cards Residential Real Estate Consumer Credit Cards Performing $ 809,247 $ 123,950 $ 7,567 $ 765,823 $ 85,322 $ 7,618 Nonperforming 4,783 835 2 5,486 713 5 Total $ 814,030 $ 124,785 $ 7,569 $ 771,309 $ 86,035 $ 7,623 The Corporation’s portfolio of residential real estate and consumer loans maintained within Holiday Financial Services Corporation (“Holiday”), a subsidiary that offers small balance unsecured and secured loans, primarily collateralized by automobiles and equipment, to borrowers with higher risk characteristics than are typical in the Bank’s consumer loan portfolio, are considered to be subprime loans. Holiday’s loan portfolio, included in consumer and residential loans above, is summarized as follows at December 31, 2019 and 2018 : 2019 2018 Consumer $ 28,122 $ 26,568 Less: unearned discount (5,162 ) (4,791 ) Total $ 22,960 $ 21,777 |