Loans and Leases | Loans and Leases The loan and lease portfolio consists of loans and leases originated by the Corporation, as well as loans acquired in prior acquisitions. Certain tables in this footnote are presented with a breakdown between originated and acquired loans and leases. A. The following table details the amortized cost of loans and leases as of the dates indicated: Loans and Leases March 31, 2020 December 31, 2019 (dollars in thousands) Originated Acquired Total Loans and Leases Originated Acquired Total Loans and Leases Loans held for sale $ 2,785 $ — $ 2,785 $ 4,249 $ — $ 4,249 Real estate loans: Commercial real estate (CRE) - nonowner-occupied 1,190,314 164,102 1,354,416 1,161,815 175,352 1,337,167 Commercial real estate (CRE) - owner-occupied 485,962 44,705 530,667 479,466 48,141 527,607 Home equity lines of credit 195,054 14,224 209,278 209,239 15,023 224,262 Residential mortgage - 1st liens 616,103 94,392 710,495 604,884 101,806 706,690 Residential mortgage - junior liens 33,960 1,623 35,583 34,903 1,940 36,843 Construction 212,394 8,722 221,116 193,307 8,891 202,198 Total real estate loans 2,733,787 327,768 3,061,555 2,683,614 351,153 3,034,767 Commercial & Industrial 484,595 6,703 491,298 425,322 6,905 432,227 Consumer 43,786 2,165 45,951 54,913 2,328 57,241 Leases 162,433 5,929 168,362 156,967 8,111 165,078 Total portfolio loans and leases 3,424,601 342,565 3,767,166 3,320,816 368,497 3,689,313 Total loans and leases $ 3,427,386 $ 342,565 $ 3,769,951 $ 3,325,065 $ 368,497 $ 3,693,562 Loans with fixed rates $ 1,290,920 $ 193,453 $ 1,484,373 $ 1,251,762 $ 216,269 $ 1,468,031 Loans with adjustable or floating rates 2,136,466 149,112 2,285,578 2,073,303 152,228 2,225,531 Total loans and leases $ 3,427,386 $ 342,565 $ 3,769,951 $ 3,325,065 $ 368,497 $ 3,693,562 Net deferred loan origination fees (costs) included in the above loan table $ 64 $ — $ 64 $ (193) $ — $ (193) B. The following table details the components of net investment in leases: Components of Net Investment in Leases March 31, 2020 December 31, 2019 (dollars in thousands) Originated Acquired Total Leases Originated Acquired Total Leases Minimum lease payments receivable $ 180,071 $ 6,339 $ 186,410 $ 174,385 $ 8,753 $ 183,138 Unearned lease income (23,970) (528) (24,498) (23,641) (813) (24,454) Initial direct costs and deferred fees 6,332 118 6,450 6,223 171 6,394 Total Leases $ 162,433 $ 5,929 $ 168,362 $ 156,967 $ 8,111 $ 165,078 C. The following table details the amortized cost of nonperforming loans and leases as of the dates indicated: Nonperforming Loans and Leases March 31, 2020 December 31, 2019 (dollars in thousands) Originated Acquired Total Loans and Leases Originated Acquired Total Loans and Leases CRE - nonowner-occupied $ 181 $ — $ 181 $ 199 $ — $ 199 CRE - owner-occupied 1,423 1,120 2,543 1,523 2,636 4,159 Home equity lines of credit 758 — 758 636 — 636 Residential mortgage - 1st liens 215 865 1,080 630 1,817 2,447 Residential mortgage - junior liens 79 — 79 83 — 83 Construction — — — — — — Commercial & Industrial 2,341 351 2,692 1,799 381 2,180 Consumer 11 41 52 19 42 61 Leases 165 7 172 747 136 883 Total non-performing loans and leases $ 5,173 $ 2,384 $ 7,557 $ 5,636 $ 5,012 $ 10,648 D. Age Analysis of Past Due Loans and Leases The following tables present an aging of all portfolio loans and leases as of the dates indicated: Payment Status of All Portfolio Loans and Leases Accruing Loans and Leases As of March 31, 2020 30 – 59 60 – 89 Over 89 Total Past Current Total Accruing Nonaccrual Total (dollars in thousands) CRE - nonowner-occupied $ 54 $ 427 $ — $ 481 $ 1,353,754 $ 1,354,235 $ 181 $ 1,354,416 CRE - owner-occupied 1,759 338 — 2,097 526,027 528,124 2,543 530,667 Home equity lines of credit 1,122 — — 1,122 207,398 208,520 758 209,278 Residential mortgage - 1st liens 2,764 — 2,764 706,651 709,415 1,080 710,495 Residential mortgage - junior liens 11 — 11 35,493 35,504 79 35,583 Construction 3,417 — — 3,417 217,699 221,116 — 221,116 Commercial & Industrial 8,041 — — 8,041 480,565 488,606 2,692 491,298 Consumer 324 57 — 381 45,518 45,899 52 45,951 Leases 1,615 — — 1,615 166,575 168,190 172 168,362 Total portfolio loans and leases $ 19,107 $ 822 $ — $ 19,929 $ 3,739,680 $ 3,759,609 $ 7,557 $ 3,767,166 Payment Status of All Portfolio Loans and Leases Accruing Loans and Leases As of December 31, 2019 30 – 59 60 – 89 Over 89 Total Past Current Total Accruing Nonaccrual Total (dollars in thousands) CRE - nonowner-occupied $ 184 $ — $ — $ 184 $ 1,336,784 $ 1,336,968 $ 199 $ 1,337,167 CRE - owner-occupied 2,462 — — 2,462 520,986 523,448 4,159 527,607 Home equity lines of credit 354 365 — 719 222,907 223,626 636 224,262 Residential mortgage - 1st liens 1,639 388 — 2,027 702,216 704,243 2,447 706,690 Residential mortgage - junior liens 116 — — 116 36,644 36,760 83 36,843 Construction — — — — 202,198 202,198 — 202,198 Commercial & Industrial — — — — 430,047 430,047 2,180 432,227 Consumer 98 140 — 238 56,942 57,180 61 57,241 Leases 857 594 — 1,451 162,744 164,195 883 165,078 Total portfolio loans and leases $ 5,710 $ 1,487 $ — $ 7,197 $ 3,671,468 $ 3,678,665 $ 10,648 $ 3,689,313 The following tables present an aging of originated portfolio loans and leases as of the dates indicated: Payment Status of Originated Portfolio Loans and Leases Accruing Loans and Leases As of March 31, 2020 30 – 59 60 – 89 Over 89 Total Past Current Total Accruing Nonaccrual Total (dollars in thousands) CRE - nonowner-occupied $ 54 $ 427 $ — $ 481 $ 1,189,652 $ 1,190,133 $ 181 $ 1,190,314 CRE - owner-occupied 745 338 — 1,083 483,456 484,539 1,423 485,962 Home equity lines of credit 1,023 — — 1,023 193,273 194,296 758 195,054 Residential mortgage - 1st liens 2,115 — 2,115 613,773 615,888 215 616,103 Residential mortgage - junior liens 11 — 11 33,870 33,881 79 33,960 Construction 3,417 — — 3,417 208,977 212,394 — 212,394 Commercial & Industrial 8,041 — — 8,041 474,213 482,254 2,341 484,595 Consumer 19 37 — 56 43,719 43,775 11 43,786 Leases 1,399 — — 1,399 160,869 162,268 165 162,433 Total portfolio loans and leases $ 16,824 $ 802 $ — $ 17,626 $ 3,401,802 $ 3,419,428 $ 5,173 $ 3,424,601 Payment Status of Originated Portfolio Loans and Leases Accruing Loans and Leases As of December 31, 2019 30 – 59 60 – 89 Over 89 Total Past Current Total Accruing Nonaccrual Total (dollars in thousands) CRE - nonowner-occupied $ 184 $ — $ — $ 184 $ 1,161,432 $ 1,161,616 $ 199 $ 1,161,815 CRE - owner-occupied 2,462 — — 2,462 475,481 477,943 1,523 479,466 Home equity lines of credit 254 365 — 619 207,984 208,603 636 209,239 Residential mortgage - 1st liens 890 102 — 992 603,262 604,254 630 604,884 Residential mortgage - junior liens 116 — — 116 34,704 34,820 83 34,903 Construction — — — — 193,307 193,307 — 193,307 Commercial & Industrial — — — — 423,523 423,523 1,799 425,322 Consumer 18 88 — 106 54,788 54,894 19 54,913 Leases 781 566 — 1,347 154,873 156,220 747 156,967 Total portfolio loans and leases $ 4,705 $ 1,121 $ — $ 5,826 $ 3,309,354 $ 3,315,180 $ 5,636 $ 3,320,816 The following tables present an aging of acquired portfolio loans and leases as of the dates indicated: Payment Status of Acquired Portfolio Loans and Leases Accruing Loans and Leases As of March 31, 2020 30 – 59 60 – 89 Over 89 Total Past Current Total Accruing Nonaccrual Total (dollars in thousands) CRE - nonowner-occupied $ — $ — $ — $ — $ 164,102 $ 164,102 $ — $ 164,102 CRE - owner-occupied 1,014 — — 1,014 42,571 43,585 1,120 44,705 Home equity lines of credit 99 — — 99 14,125 14,224 — 14,224 Residential mortgage - 1st liens 649 — — 649 92,878 93,527 865 94,392 Residential mortgage - junior liens — — — — 1,623 1,623 — 1,623 Construction — — — — 8,722 8,722 — 8,722 Commercial & Industrial — — — — 6,352 6,352 351 6,703 Consumer 305 20 — 325 1,799 2,124 41 2,165 Leases 216 — — 216 5,706 5,922 7 5,929 Total portfolio loans and leases $ 2,283 $ 20 $ — $ 2,303 $ 337,878 $ 340,181 $ 2,384 $ 342,565 Payment Status of Acquired Portfolio Loans and Leases Accruing Loans and Leases As of December 31, 2019 30 – 59 60 – 89 Over 89 Total Past Current Total Accruing Nonaccrual Total (dollars in thousands) CRE - nonowner-occupied $ — $ — $ — $ — $ 175,352 $ 175,352 $ — $ 175,352 CRE - owner-occupied — — — — 45,505 45,505 2,636 48,141 Home equity lines of credit 100 — — 100 14,923 15,023 — 15,023 Residential mortgage - 1st liens 749 286 — 1,035 98,954 99,989 1,817 101,806 Residential mortgage - junior liens — — — — 1,940 1,940 — 1,940 Construction — — — — 8,891 8,891 — 8,891 Commercial & Industrial — — — — 6,524 6,524 381 6,905 Consumer 80 52 — 132 2,154 2,286 42 2,328 Leases 76 28 — 104 7,871 7,975 136 8,111 Total portfolio loans and leases $ 1,005 $ 366 $ — $ 1,371 $ 362,114 $ 363,485 $ 5,012 $ 368,497 E. Allowance for Credit Losses (“ACL”) on Loan and Leases The ACL on loans and leases represents management’s estimate of all expected credit losses over the expected contractual life of our existing portfolio loans and leases. Determining the appropriateness of the ACL on loans and leases is complex and requires judgment by management about the effect of matters that are inherently uncertain. Subsequent evaluations of the then-existing loan portfolio, in light of the factors then prevailing, may result in significant changes in the ACL on loans and leases in those future periods. The expense for credit loss recorded through earnings is the amount necessary to maintain the ACL on loans and leases at the amount of expected credit losses inherent within the loans and leases portfolio. The amount of expense and the corresponding level of ACL on loans and leases are based on management’s evaluation of the collectability of the loan and lease portfolio based on historical loss experience, reasonable and supportable forecasts, and other significant qualitative and quantitative factors. The ACL on loans and leases, as reported in our Consolidated Statements of Financial Condition, is adjusted by an expense for credit losses, which is recognized in earnings, and reduced by the charge-off of loan and lease amounts, net of recoveries. Management employs a disciplined process and methodology to establish the ACL on loans and leases that has two basic components: first, an asset-specific component involving individual loans and leases that do not share risk characteristics with other loans and leases and the measurement of expected credit losses for such individual loans; and second, a collective (pooled) component for estimated expected credit losses for pools of loans and leases that share similar risk characteristics. Based upon this methodology, management establishes an asset-specific ACL on loans and leases that do not share risk characteristics with other loans and leases based on the amount of expected credit losses calculated on those loans and leases and charges off amounts determined to be uncollectible. Factors we consider in measuring the extent of expected credit loss include payment status, collateral value, borrower financial condition, guarantor support and the probability of collecting scheduled principal and interest payments when due. When a loan or lease does not share risk characteristics with other loans or leases, management measures expected credit loss as the difference between the amortized cost basis in the loan and the present value of expected future cash flows discounted at the loan’s effective interest rate except that, for collateral dependent loans, credit loss is measured as the difference between the amortized cost basis in the loan and the fair value of the underlying collateral. The fair value of the collateral is adjusted for the estimated cost to sell if repayment or satisfaction of a loan is dependent on the sale (rather than only on the operation) of the collateral. If the calculated expected credit loss is determined to be permanent, fixed or nonrecoverable, the credit loss portion of the loan will be charged off against the ACL on loans and leases. Loans and leases designated as having significantly increased credit risk are generally placed on nonaccrual and remain in that status until all principal and interest payments are current and the prospects for future payments in accordance with the loan agreement are reasonably assured, at which point the loan is returned to accrual status. In estimating the component of the ACL on loans and leases that share common risk characteristics, loans and leases are segregated into portfolio segments based on Federal call report codes which classify loans and leases based on the primary collateral supporting the loan and lease. Methods utilized by management to estimate expected credit losses include a discounted cash flow (“DCF”) methodology that discounts instrument-level contractual cash flows, adjusted for prepayments and curtailments, incorporating loss expectations, and a weighted average remaining maturity (“WARM”) methodology which contemplates expected losses at a pool-level, utilizing historic loss information. Under both methodologies, management estimates the ACL on loans and leases using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. After the end of the reasonable and supportable forecast period, the loss rates revert to the long-term mean loss rate, or in the case of an input-driven predictive method, the long-term mean of the input, using a reversion period where applicable. Historical credit loss experience, including examination of loss experience at representative peer institutions when the Corporation’s first-party loss history does not result in estimations that are meaningful to users of the Corporation’s Consolidated Financial Statements, provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are considered for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level, or term as well as for changes in environmental conditions, such as changes in unemployment rates, property values, or other relevant factors. The DCF methodology uses inputs of current and forecasted macroeconomic indicators to predict future loss rates. The current macroeconomic indicator utilized by the bank is the Pennsylvania unemployment rate. In building the CECL model, a correlation between this indicator and historic loss levels was developed, enabling a prediction of future loss rates related to future Pennsylvania unemployment rates. The portfolio segments utilizing the DCF methodology as of March 31, 2020 included: CRE - owner-occupied and nonowner-occupied loans, home equity lines of credit, residential mortgages (first and junior liens), construction loans and consumer loans. The WARM methodology uses combined historic loss rates for the Bank and peer institutions, if necessary, gathered from Call Report filings. The selected period for which historic loss rates are used is dependent on management's evaluation of current conditions and expectations of future loss conditions. The portfolio segments utilizing the WARM methodology as of March 31, 2020 included commercial and industrial loans and leases. For the three months ended March 31, 2020, there was a significant change in the economic outlook impacting the ACL on loans and leases. Our CECL model included a sharp deterioration in the Pennsylvania unemployment rate, to levels observed during the last recessionary period in the second quarter of 2020, with a reversion to a long-term 15-year average. In addition to these assumptions, management applied additional qualitative factors related to the loss mitigation expected to be provided by the various governmental aid programs, such as increased unemployment benefits, stimulus payments, and the SBA's Paycheck Protection Program, as well as the Bank's loan payment deferral programs being offered to borrowers which provide a three six The following tables present the activity in the ACL on loans and leases, by portfolio segment, for the three months ended March 31, 2020 and 2019: Roll-Forward of ACL on Loans and Leases (dollars in thousands) CRE - nonowner-occupied CRE - Home equity lines of credit Residential mortgage - 1st liens Residential mortgage - junior liens Construction Commercial & Industrial Consumer Leases Total Balance, December 31, 2019 Prior to Adoption of ASC 326 $ 7,960 $ 2,825 $ 1,114 $ 2,501 $ 338 $ 1,230 $ 3,835 $ 438 $ 2,361 $ 22,602 Impact of Adopting ASC 326 (467) 16 (46) 2,408 79 (359) (159) 140 1,594 3,206 Loans and leases charged-off — — (114) (728) — — (627) (294) (2,626) (4,389) Recoveries collected 2 — — 1 — 1 15 33 264 316 PCL on loans and leases 5,834 1,351 1,794 4,134 100 6,112 5,670 24 7,316 32,335 Balance, March 31, 2020 $ 13,329 $ 4,192 $ 2,748 $ 8,316 $ 517 $ 6,984 $ 8,734 $ 341 $ 8,909 $ 54,070 Roll-Forward of ACL on Loans and Leases (dollars in thousands) CRE - nonowner-occupied CRE - Home equity lines of credit Residential mortgage - 1st liens Residential mortgage - junior liens Construction Commercial & Industrial Consumer Leases Total Balance, December 31, 2018 $ 5,856 $ 2,454 $ 1,140 $ 2,561 $ 364 $ 1,715 $ 3,166 $ 303 $ 1,867 $ 19,426 Loans and leases charged-off (1,515) — (103) (341) — — (197) (120) (568) (2,844) Recoveries collected 3 — 1 13 — 1 8 18 254 298 PCL on loans and leases 1,964 286 184 401 (14) (344) 530 238 491 3,736 Balance, March 31, 2019 $ 6,308 $ 2,740 $ 1,222 $ 2,634 $ 350 $ 1,372 $ 3,507 $ 439 $ 2,044 $ 20,616 As part of the process of determining the ACL for the different segments of the loan and lease portfolio, management considers certain credit quality indicators. Periodic reviews of loans are conducted by both in-house staff as well as external loan reviewers. The result of these reviews is reflected in the risk grade assigned to each loan. These internally assigned grades are as follows: • Pass – Loans considered satisfactory with no indications of deterioration. • Pass-Watch – Loans that are performing, but which may have a potential deficiency which the borrower appears to be managing or a possible deficiency in the future. • Special mention – Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date. • Substandard – Loans classified as substandard are inadequately protected by the current net worth and payment capacity of the obligor or of the collateral pledged, if any. Substandard loans have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. • Doubtful – Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. The following table details the amortized cost of portfolio loans and leases, by year of origination (for term loans) and by risk grade within each portfolio segment as of March 31, 2020: Term Loans Revolving Loans Amortized Cost Basis by Origination Year (1) Amortized Cost Basis (dollars in thousands) Risk Rating 2020 2019 2018 2017 2016 2015 and Prior Revolving Loans Revolving Loans Converted to Term Loans Total CRE - nonowner-occupied Pass $ 89,165 $ 496,294 $ 200,673 $ 145,828 $ 153,398 $ 179,666 $ 32,521 $ — $ 1,297,545 Pass-Watch 339 2,019 10,150 — 1,690 2,476 — — 16,674 Special Mention 6,562 — — — — 2,063 — — 8,625 Substandard — 2,802 — 834 27,030 906 — — 31,572 Total $ 96,066 $ 501,115 $ 210,823 $ 146,662 $ 182,118 $ 185,111 $ 32,521 $ — $ 1,354,416 CRE - owner-occupied Pass $ 25,072 $ 123,115 $ 124,604 $ 88,604 $ 57,551 $ 76,903 $ 16,012 $ — $ 511,861 Pass-Watch 2,770 — — 1,894 2,438 642 461 — 8,205 Special Mention — 582 — — 65 1,398 — — 2,045 Substandard 1,346 353 1,348 174 4,706 559 70 — 8,556 Total $ 29,188 $ 124,050 $ 125,952 $ 90,672 $ 64,760 $ 79,502 $ 16,543 $ — $ 530,667 Home equity lines of credit Pass $ 10,634 $ 881 $ 194 $ 66 $ 326 $ 2,953 $ 192,495 $ — $ 207,549 Special Mention — 829 — — — — — — 829 Substandard — 394 — — — 506 — — 900 Total $ 10,634 $ 2,104 $ 194 $ 66 $ 326 $ 3,459 $ 192,495 $ — $ 209,278 Residential mortgage - 1st liens Pass $ 47,225 $ 140,395 $ 98,491 $ 93,036 $ 75,832 $ 251,048 $ 1,127 $ — $ 707,154 Pass-Watch — — — — — 267 — — 267 Special Mention — 147 — — 883 — — — 1,030 Substandard — — 964 27 390 663 — — 2,044 Total $ 47,225 $ 140,542 $ 99,455 $ 93,063 $ 77,105 $ 251,978 $ 1,127 $ — $ 710,495 Residential mortgage - junior liens Pass $ 1,666 $ 5,217 $ 9,561 $ 4,676 $ 4,064 $ 10,143 $ 177 $ — $ 35,504 Substandard — — — — 37 42 — — 79 Total $ 1,666 $ 5,217 $ 9,561 $ 4,676 $ 4,101 $ 10,185 $ 177 $ — $ 35,583 Construction Pass $ 43,982 $ 68,406 $ 69,021 $ 14,170 $ — $ 5,194 $ 13,677 $ — $ 214,450 Pass-Watch — 42 — — — — — — 42 Substandard — 5,741 883 — — — — — 6,624 Total $ 43,982 $ 74,189 $ 69,904 $ 14,170 $ — $ 5,194 $ 13,677 $ — $ 221,116 Commercial & Industrial Pass $ 83,702 $ 81,809 $ 79,623 $ 20,150 $ 31,534 $ 25,168 $ 135,285 $ — $ 457,271 Pass-Watch 13,755 — — 918 — 908 5,765 — 21,346 Special Mention — — — 213 — 1,189 902 — 2,304 Substandard 3,904 465 695 582 1,351 2,368 1,012 — 10,377 Total $ 101,361 $ 82,274 $ 80,318 $ 21,863 $ 32,885 $ 29,633 $ 142,964 $ — $ 491,298 Consumer Pass $ 1,199 $ 5,379 $ 4,057 $ 516 $ 862 $ 1,504 $ 31,784 $ — $ 45,301 Substandard 597 12 — — — 41 — — 650 Total $ 1,796 $ 5,391 $ 4,057 $ 516 $ 862 $ 1,545 $ 31,784 $ — $ 45,951 Leases Pass $ 22,377 $ 74,962 $ 50,910 $ 14,572 $ 4,450 $ 919 $ — $ — $ 168,190 Substandard 22 18 70 51 10 1 — — 172 Total $ 22,399 $ 74,980 $ 50,980 $ 14,623 $ 4,460 $ 920 $ — $ — $ 168,362 Total portfolio loans and leases $ 354,317 $ 1,009,862 $ 651,244 $ 386,311 $ 366,617 $ 567,527 $ 431,288 $ — $ 3,767,166 (1) Year originated or renewed, whichever is more recent. The following tables present the amortized cost basis of loans and leases on nonaccrual status and loans and leases past due over 89 days still accruing as of the dates indicated: As of March 31, 2020 (dollars in thousands) Nonaccrual with No ACL Nonaccrual with ACL Loans Past Due Over 89 Days Still Accruing CRE - nonowner-occupied $ 181 $ — $ — CRE - owner-occupied 2,543 — — Home equity lines of credit 758 — — Residential mortgage - 1st liens 934 146 — Residential mortgage - junior liens 79 — — Construction — — — Commercial & Industrial 2,692 — — Consumer 40 12 — Leases — 172 — Total non-performing loans and leases $ 7,227 $ 330 $ — As of December 31, 2019 (dollars in thousands) Nonaccrual with No ACL Nonaccrual with ACL Loans Past Due Over 89 Days Still Accruing CRE - nonowner-occupied $ 199 $ — $ — CRE - owner-occupied 4,159 — — Home equity lines of credit 636 — — Residential mortgage - 1st liens 2,447 — — Residential mortgage - junior liens 83 — — Construction — — — Commercial & Industrial 2,180 — — Consumer 42 19 — Leases — 883 — Total non-performing loans and leases $ 9,746 $ 902 $ — For the three months ended March 31, 2020, $12 thousand of interest income was recognized on nonaccrual loans and leases. Collateral-dependent loans and leases where the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the sale of the collateral are, in general, individually evaluated for credit losses. Identified shortfalls between the amortized cost of the individually evaluated loan or lease and the value, less selling costs, of the underlying collateral are charged against the ACL. In certain cases, when the loan or lease is serviced by a third-party, and management is unable to process a timely charge-down of the loan or lease, it will assess a specific ACL to the individual loan or lease. This ACL represents the shortfall between the amortized cost and realizable value of the collateral. The following tables present the amortized cost basis of collateral-dependent loans and leases, indicating the type of collateral and the ACL determined through individual evaluation for credit loss, as of the dates indicated: As of March 31, 2020 (dollars in thousands) Real Estate Collateral Non-Real Estate Collateral Individually Evaluated ACL CRE - nonowner-occupied $ 181 $ — $ — CRE - owner-occupied 2,543 — — Home equity lines of credit 758 — — Residential mortgage - 1st liens 1,080 — 147 Residential mortgage - junior liens 79 — — Construction — — — Commercial & Industrial — 2,692 — Consumer — 52 12 Leases — 172 152 Total collateral-dependent loans and leases $ 4,641 $ 2,916 $ 311 As of December 31, 2019 (dollars in thousands) Real Estate Collateral Non-Real Estate Collateral Individually Evaluated ACL CRE - nonowner-occupied $ 199 $ — $ — CRE - owner-occupied 4,159 — — Home equity lines of credit 636 — — Residential mortgage - 1st liens 2,447 — — Residential mortgage - junior liens 83 — — Construction — — — Commercial & Industrial — 2,180 — Consumer — 61 19 Leases — 883 60 Total collateral-dependent loans and leases $ 7,524 $ 3,124 $ 79 F. Troubled Debt Restructurings (“TDRs”) The restructuring of a loan is considered a “troubled debt restructuring” if both of the following conditions are met: (i) the borrower is experiencing financial difficulties, and (ii) the creditor has granted a concession. The most common concessions granted include one or more modifications to the terms of the debt, such as (a) a reduction in the interest rate for the remaining life of the debt, (b) an extension of the maturity date at an interest rate lower than the current market rate for new debt with similar risk, (c) a temporary period of interest-only payments, (d) a reduction in the contractual payment amount for either a short period or remaining term of the loan, and (e) for leases, a reduced lease payment. A less common concession granted is the forgiveness of a portion of the principal. The determination of whether a borrower is experiencing financial difficulties takes into account not only the current financial condition of the borrower, but also the potential financial condition of the borrower, were a concession not granted. Similarly, the determination of whether a concession has been granted is very subjective in nature. For example, simply extending the term of a loan at its original interest rate or even at a higher interest rate could be interpreted as a concession unless the borrower could readily obtain similar credit terms from a different lender. The following table presents the balance of TDRs as of the indicated dates: Troubled Debt Restructurings (1) (dollars in thousands) March 31, December 31, TDRs included in nonperforming loans and leases $ 3,248 $ 3,018 TDRs in compliance with modified terms 4,852 5,071 Total TDRs $ 8,100 $ 8,089 (1) The Corporation began entering into loan modifications with borrowers in response to the COVID-19 pandemic, which have not been classified as TDRs, and therefore are not included in the above table. For more information on the criteria for classifying loans as TDRs, see Note 1 – Basis of Presentation, Principles of Consolidation, and Significant Accounting Policies to the Unaudited Consolidated Financial Statements. The following tables present information regarding loan and lease modifications categorized as TDRs for the three months ended March 31, 2020: Troubled Debt Restructurings (1) For the Three Months Ended March 31, 2020 (dollars in thousands) Number of Contracts Pre-Modification Outstanding Post-Modification Outstanding Commercial & Industrial 1 $ 287 $ 287 Leases 3 242 242 Total 4 $ 529 $ 529 (1) The Corporation began entering into loan modifications with borrowers in response to the COVID-19 pandemic, which have not been classified as TDRs, and therefore are not included in the above table. For more information on the criteria for classifying loans as TDRs, see Note 1 – Basis of Presentation, Principles of Consolidation, and Significant Accounting Policies to the Unaudited Consolidated Financial Statements. The following table presents information regarding the types of loan and lease modifications made for the three months ended March 31, 2020: Troubled Debt Restructurings (1) Number of Contracts for the Three Months Ended March 31, 2020 Loan Term Extension Interest Rate Change and Term Extension Interest Rate Change and/or Interest-Only Period Contractual Temporary Payment Deferral Commercial & Industrial 1 — — — — Leases — — — 3 — Total 1 — — 3 — (1) The Corporation began entering into loan modifications with borrowers in response to the COVID-19 pandemic, which have not been classified as TDRs, and therefore are not included in the above table. For more information on the criteria for classifying loans as TDRs, see Note 1 – Basis of Presentation, Principles of Consolidation, and Significant Accounting Policies to the Unaudited Consolidated Financial Statements. For the three months ended March 31, 2020, one residential mortgage loan, in the amount of $81 thousand, that was modified as a troubled debt restructuring during the past 12 months defaulted and was charged off. |