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. As further described in Note 2, “Recent Accounting Pronouncements,” in the accompanying Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K, the Corporation adopted ASC 326 using the modified retrospective approach method for all financial assets measured at amortized cost and OBS credit exposures. Results for reporting periods beginning after January 1, 2020 are presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP. In conjunction with the adoption of CECL, the Corporation has revised its segmentation to align with the methodology applied in determining the ACL for loans and leases under CECL, which is based on federal call report codes which classify loans based on the primary collateral supporting the loan. Segmentation prior to the adoption of CECL was based on product type or purpose. As such, certain reclassifications were made to conform prior-period amounts to current period presentation. A. The following table details the amortized cost of loans and leases as of the dates indicated: December 31, 2020 December 31, 2019 (dollars in thousands) Originated Acquired Total Loans and Leases Originated Acquired Total Loans and Leases Loans held for sale $ 6,000 $ — $ 6,000 $ 4,249 $ — $ 4,249 Real estate loans: Commercial real estate (CRE) - nonowner-occupied 1,330,947 104,628 1,435,575 1,161,815 175,352 1,337,167 Commercial real estate (CRE) - owner-occupied 544,782 33,727 578,509 479,466 48,141 527,607 Home equity lines of credit 157,385 11,952 169,337 209,239 15,023 224,262 Residential mortgage - 1st liens 540,307 81,062 621,369 604,884 101,806 706,690 Residential mortgage - junior liens 22,375 1,420 23,795 34,903 1,940 36,843 Construction 153,131 8,177 161,308 193,307 8,891 202,198 Total real estate loans 2,748,927 240,966 2,989,893 2,683,614 351,153 3,034,767 Commercial & Industrial 442,283 4,155 446,438 425,322 6,905 432,227 Consumer 39,603 80 39,683 54,913 2,328 57,241 Leases 149,914 2,483 152,397 156,967 8,111 165,078 Total portfolio loans and leases 3,380,727 247,684 3,628,411 3,320,816 368,497 3,689,313 Total loans and leases $ 3,386,727 $ 247,684 $ 3,634,411 $ 3,325,065 $ 368,497 $ 3,693,562 Loans with fixed rates $ 1,198,908 $ 134,084 $ 1,332,992 $ 1,251,762 $ 216,269 $ 1,468,031 Loans with adjustable or floating rates 2,187,819 113,600 2,301,419 2,073,303 152,228 2,225,531 Total loans and leases $ 3,386,727 $ 247,684 $ 3,634,411 $ 3,325,065 $ 368,497 $ 3,693,562 Net deferred loan origination fees (costs) included in the above loan table $ 673 $ — $ 673 $ (193) $ — $ (193) B. The following table details the components of net investment in leases: December 31, 2020 December 31, 2019 (dollars in thousands) Originated Acquired Total Leases Originated Acquired Total Leases Minimum lease payments receivable $ 164,556 $ 2,583 $ 167,139 $ 174,385 $ 8,753 $ 183,138 Unearned lease income (20,746) (138) (20,884) (23,641) (813) (24,454) Initial direct costs and deferred fees 6,104 38 6,142 6,223 171 6,394 Total Leases $ 149,914 $ 2,483 $ 152,397 $ 156,967 $ 8,111 $ 165,078 C. The following table details the amortized cost of nonperforming loans and leases as of the dates indicated: December 31, 2020 December 31, 2019 (dollars in thousands) Originated Acquired Total Loans and Leases Originated Acquired Total Loans and Leases CRE - nonowner-occupied $ 57 $ — $ 57 $ 199 $ — $ 199 CRE - owner-occupied 823 836 1,659 1,523 2,636 4,159 Home equity lines of credit 515 214 729 636 — 636 Residential mortgage - 1st liens 26 73 99 630 1,817 2,447 Residential mortgage - junior liens 50 35 85 83 — 83 Construction — — — — — — Commercial & Industrial 1,657 118 1,775 1,799 381 2,180 Consumer 30 — 30 19 42 61 Leases 791 81 872 747 136 883 Total non-performing loans and leases $ 3,949 $ 1,357 $ 5,306 $ 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: Accruing Loans and Leases As of December 31, 2020 30 – 59 60 – 89 Over 89 Total Past Current Total Accruing Nonaccrual Total (dollars in thousands) CRE - nonowner-occupied $ — $ — $ — $ — $ 1,435,518 $ 1,435,518 $ 57 $ 1,435,575 CRE - owner-occupied 1,907 416 — 2,323 574,527 576,850 1,659 578,509 Home equity lines of credit 87 — — 87 168,521 168,608 729 169,337 Residential mortgage - 1st liens 6,020 217 — 6,237 615,033 621,270 99 621,369 Residential mortgage - junior liens 88 58 — 146 23,564 23,710 85 23,795 Construction — — — — 161,308 161,308 — 161,308 Commercial & Industrial — — — — 444,663 444,663 1,775 446,438 Consumer 32 16 — 48 39,605 39,653 30 39,683 Leases 1,196 810 — 2,006 149,519 151,525 872 152,397 Total portfolio loans and leases $ 9,330 $ 1,517 $ — $ 10,847 $ 3,612,258 $ 3,623,105 $ 5,306 $ 3,628,411 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: Accruing Loans and Leases As of December 31, 2020 30 – 59 60 – 89 Over 89 Total Past Current Total Accruing Nonaccrual Total (dollars in thousands) CRE - nonowner-occupied $ — $ — $ — $ — $ 1,330,890 $ 1,330,890 $ 57 $ 1,330,947 CRE - owner-occupied 1,907 416 — 2,323 541,636 543,959 823 544,782 Home equity lines of credit 87 — — 87 156,783 156,870 515 157,385 Residential mortgage - 1st liens 4,109 217 — 4,326 535,955 540,281 26 540,307 Residential mortgage - junior liens 84 56 — 140 22,185 22,325 50 22,375 Construction — — — — 153,131 153,131 — 153,131 Commercial & Industrial — — — — 440,626 440,626 1,657 442,283 Consumer 32 16 — 48 39,525 39,573 30 39,603 Leases 1,196 735 — 1,931 147,192 149,123 791 149,914 Total portfolio loans and leases $ 7,415 $ 1,440 $ — $ 8,855 $ 3,367,923 $ 3,376,778 $ 3,949 $ 3,380,727 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: Accruing Loans and Leases As of December 31, 2020 30 – 59 60 – 89 Over 89 Total Past Current Total Accruing Nonaccrual Total (dollars in thousands) CRE - nonowner-occupied $ — $ — $ — $ — $ 104,628 $ 104,628 $ — $ 104,628 CRE - owner-occupied — — — — 32,891 32,891 836 33,727 Home equity lines of credit — — — — 11,738 11,738 214 11,952 Residential mortgage - 1st liens 1,911 — — 1,911 79,078 80,989 73 81,062 Residential mortgage - junior liens 4 2 — 6 1,379 1,385 35 1,420 Construction — — — — 8,177 8,177 — 8,177 Commercial & Industrial — — — — 4,037 4,037 118 4,155 Consumer — — — — 80 80 — 80 Leases — 75 — 75 2,327 2,402 81 2,483 Total portfolio loans and leases $ 1,915 $ 77 $ — $ 1,992 $ 244,335 $ 246,327 $ 1,357 $ 247,684 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 Loans and Leases As further described in Note 2, “Recent Accounting Pronouncements,” in the accompanying Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K, the Corporation adopted ASU 2016-13 (Topic 326 - Credit Losses) on January 1, 2020, which changed the way we estimate credit losses for loans and leases beginning after January 1, 2020. 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 provision 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 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, a collective (pooled) component for estimated expected credit losses for pools of loans and leases that share similar risk characteristics; and second, 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. 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, which generally include nonaccrual loans and leases, TDRs, and PCD loans. The asset-specific ACL is based on the amount of expected credit losses calculated on those loans and leases and amounts determined to be uncollectible are charged off. 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, they are individually evaluated for expected credit loss. For loans and leases that are not collateral-dependent, 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. For collateral-dependent loans, expected 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 1) a DCF methodology that discounts instrument-level contractual cash flows, adjusted for prepayments and curtailments, incorporating loss expectations, and 2) a 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 own 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 utilized in the DCF methodology, a correlation between this indicator and historic loss levels was developed, enabling a prediction of future loss rates related to projections of future Pennsylvania unemployment rates. The portfolio segments utilizing the DCF methodology as of December 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 December 31, 2020 included Commercial & Industrial loans and leases. As of December 31, 2020, management's current and forecasted economic outlook, which is central to the calculation of the ACL, improved since the first quarter of 2020, when the impact of COVID-19 was initially incorporated into management's current and forecasted economic outlook. Pennsylvania unemployment, which is used as the primary driver for forecasting future loss rates, has continued to improve during 2020 and is projected to continue on that path for the next four quarters. Following this 4-quarter forecast, the Pennsylvania unemployment rate will revert, immediately, to its long-term average. In addition to these assumptions, management applied additional qualitative factors related to the negative impact of the pandemic on certain segments of the portfolio. These segments included the retail and hospitality sub-segments of the non-owner-occupied CRE segment. The hospitality sub-segment was particularly hard-hit by the sharp drop in travel for both business and leisure, while the retail sub-segment suffered a significant loss of revenue due to lockdowns as well as shoppers' behavioral changes which favored online shopping as opposed to traditional brick-and-mortar purchases. These factors suggested a heightened probability of default for this type of borrower and was incorporated into the CECL model. The following table presents the activity in, as well as the loan and lease balances that were evaluated for, ACL on loans and leases under the CECL methodology, as of or for the year ended December 31, 2020, by portfolio segment: (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 ACL on loans and leases: 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 (1) (467) 16 (46) 2,408 79 (359) (159) 140 1,594 3,206 Loans and leases charged-off (244) (2,476) (114) (1,298) — — (3,773) (1,180) (5,536) (14,621) Recoveries collected 12 365 4 165 — 4 244 138 1,691 2,623 PCL on loans and leases 12,121 6,252 448 4,006 (35) 1,832 7,940 789 6,546 39,899 Balance, December 31, 2020 $ 19,382 $ 6,982 $ 1,406 $ 7,782 $ 382 $ 2,707 $ 8,087 $ 325 $ 6,656 $ 53,709 Period-end ACL on loans and leases allocated to: Individually evaluated for credit losses — — — 54 167 — — 33 955 1,209 Collectively evaluated for credit losses 19,382 6,982 1,406 7,728 215 2,707 8,087 292 5,701 52,500 Portfolio loan and lease balances: Individually evaluated for credit losses 1,866 1,994 729 1,466 1,945 1,291 1,925 52 1,083 12,351 Collectively evaluated for credit losses 1,433,336 576,515 168,608 619,758 21,850 160,017 444,513 39,631 151,314 3,615,542 PCD loans 373 — — 145 — — — — — 518 Portfolio loans and leases $ 1,435,575 $ 578,509 $ 169,337 $ 621,369 $ 23,795 $ 161,308 $ 446,438 $ 39,683 $ 152,397 $ 3,628,411 (1) The Corporation adopted ASU 2016-13 (Topic 326), “Measurement of Credit Losses on Financial Instruments,” on January 1, 2020. See Note 2, "Recent Accounting Pronouncements" in the accompanying Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K. The following table presents the activity in, as well as the loan and lease balances that were evaluated for, ACL on loans and leases under the incurred loss methodology, as of or for the year ended December 31, 2019, by portfolio segment: (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) (872) (347) (1,064) (56) — (351) (744) (2,565) (7,514) Recoveries collected 1,081 2 106 26 4 4 138 110 714 2,185 PCL on loans and leases 2,538 1,241 215 978 26 (489) 882 769 2,345 8,505 Balance, December 31, 2019 $ 7,960 $ 2,825 $ 1,114 $ 2,501 $ 338 $ 1,230 $ 3,835 $ 438 $ 2,361 $ 22,602 Period-end ACL on loans and leases allocated to: Individually evaluated for impairment — — — 190 206 — 22 64 482 Collectively evaluated for impairment 7,961 2,825 1,114 2,310 132 1,230 3,835 416 2,297 22,120 Portfolio loan and lease balances: Individually evaluated for impairment 383 4,160 636 4,711 2,319 — 2,335 85 1,090 15,719 Collectively evaluated for impairment 1,329,700 523,447 223,104 701,688 34,524 202,198 429,892 57,156 163,988 3,665,697 PCI loans 7,084 — 522 291 — — — — — 7,897 Portfolio loans and leases $ 1,337,167 $ 527,607 $ 224,262 $ 706,690 $ 36,843 $ 202,198 $ 432,227 $ 57,241 $ 165,078 $ 3,689,313 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 in order to assess the need for qualitative adjustments to the loss estimates forecast by the econometric modeling . 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 December 31, 2020, in accordance with ASC 326: 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 Lines of Credit Revolving Lines of Credit Converted to Term Loans Total CRE - nonowner-occupied Pass $ 300,611 $ 419,504 $ 148,685 $ 107,202 $ 97,429 $ 90,083 $ 49,290 $ — $ 1,212,804 Pass-Watch 2,554 31,536 22,880 3,840 269 15,924 — — 77,003 Special Mention 13,287 — 17,243 3,752 5,734 1,157 — — 41,173 Substandard 13,048 29,365 12,817 1,425 42,826 5,114 — — 104,595 Total $ 329,500 $ 480,405 $ 201,625 $ 116,219 $ 146,258 $ 112,278 $ 49,290 $ — $ 1,435,575 CRE - owner-occupied Pass $ 139,161 $ 118,159 $ 109,509 $ 64,885 $ 41,164 $ 42,943 $ 11,328 $ — $ 527,149 Pass-Watch 177 2,348 4,972 7,171 3,437 1,203 — — 19,308 Special Mention 4,708 269 3,431 — — 848 50 — 9,306 Substandard 3,429 6,303 6,628 668 3,681 1,944 93 — 22,746 Total $ 147,475 $ 127,079 $ 124,540 $ 72,724 $ 48,282 $ 46,938 $ 11,471 $ — $ 578,509 Home equity lines of credit Pass $ 3,432 $ 1,350 $ — $ 710 $ 276 $ 1,792 $ 160,226 $ 685 $ 168,471 Special Mention 38 — — — — — 99 — 137 Substandard — 263 25 100 — 304 37 — 729 Total $ 3,470 $ 1,613 $ 25 $ 810 $ 276 $ 2,096 $ 160,362 $ 685 $ 169,337 Residential mortgage - 1st liens Pass $ 114,996 $ 116,842 $ 69,266 $ 62,757 $ 79,045 $ 166,519 $ 1,041 $ — $ 610,466 Pass-Watch — 469 — — 374 260 — — 1,103 Special Mention — — 340 — — 7,388 — — 7,728 Substandard 878 78 — 115 927 74 — — 2,072 Total $ 115,874 $ 117,389 $ 69,606 $ 62,872 $ 80,346 $ 174,241 $ 1,041 $ — $ 621,369 Residential mortgage - junior liens Pass $ 2,998 $ 4,218 $ 3,746 $ 3,243 $ 2,189 $ 7,101 $ 177 $ — $ 23,672 Special Mention — — 38 — — — — — 38 Substandard — — — — — 85 — — 85 Total $ 2,998 $ 4,218 $ 3,784 $ 3,243 $ 2,189 $ 7,186 $ 177 $ — $ 23,795 Construction Pass $ 68,261 $ 53,857 $ 4,860 $ 1,983 $ — $ 4,844 $ 10,089 $ — $ 143,894 Pass-Watch 11,772 — 2,123 — — — — — 13,895 Substandard 3,519 — — — — — — — 3,519 Total $ 83,552 $ 53,857 $ 6,983 $ 1,983 $ — $ 4,844 $ 10,089 $ — $ 161,308 Commercial & Industrial Pass $ 121,768 $ 49,742 $ 61,056 $ 9,826 $ 27,362 $ 8,663 $ 87,166 $ — $ 365,583 Pass-Watch 27,047 1,009 1,531 9,786 305 — 12,796 — 52,474 Special Mention 507 7,956 — 208 — — 1,976 — 10,647 Substandard 2,759 1,011 8,400 1,417 932 749 2,466 — 17,734 Total $ 152,081 $ 59,718 $ 70,987 $ 21,237 $ 28,599 $ 9,412 $ 104,404 $ — $ 446,438 Consumer Pass $ 1,307 $ 3,599 $ 1,715 $ 202 $ 12 $ 197 $ 31,990 $ — $ 39,022 Substandard 631 18 12 — — — — — 661 Total $ 1,938 $ 3,617 $ 1,727 $ 202 $ 12 $ 197 $ 31,990 $ — $ 39,683 Leases Pass $ 51,470 $ 56,707 $ 34,159 $ 7,923 $ 1,255 $ 11 $ — $ — $ 151,525 Substandard — 293 459 110 10 — — — 872 Total $ 51,470 $ 57,000 $ 34,618 $ 8,033 $ 1,265 $ 11 $ — $ — $ 152,397 Total portfolio loans and leases $ 888,358 $ 904,896 $ 513,895 $ 287,323 $ 307,227 $ 357,203 $ 368,824 $ 685 $ 3,628,411 (1) Year originated or renewed, whichever is more recent. As discussed in Section I, "ACL on Loans and Leases," of Note 1, "Summary of Significant Accounting Policies," management currently utilizes the Pennsylvania unemployment rate as a macroeconomic indicator to predict future loss rates based on historic correlations between movements in this rate and observed loss experience. Historically, the Corporation has had relatively nominal levels of adversely-rated loans. As such, a meaningful correlation between these adversely-rated loans and Pennsylvania unemployment rates is not available. As of December 31, 2020, management considered the recent downgrades in the risk ratings of certain subsegments of the CRE - nonowner-occupied loans, in particular, retail and hospitality, and applied a qualitative adjustment to estimate a larger ACL for these loan types. The following tables detail the carrying value of all portfolio loans and leases by portfolio segment based on the credit quality indicators used to determine the ACL on loans as leases under the incurred loss methodology as of December 31, 2019: Credit Risk Profile by Internally Assigned Grade As of December 31, 2019 (dollars in thousands) Pass Special Mention Substandard Doubtful Total CRE - nonowner-occupied $ 1,293,230 $ 12,463 $ 31,474 $ — $ 1,337,167 CRE - owner-occupied 515,921 2,056 9,630 — 527,607 Home equity lines of credit 222,405 829 1,028 — 224,262 Residential mortgage - 1st liens 702,843 1,039 2,808 — 706,690 Residential mortgage - junior liens 36,760 — 83 — 36,843 Construction 196,231 — 5,967 — 202,198 Commercial & Industrial 418,636 3,535 10,056 — 432,227 Consumer 52,270 — 4,971 — 57,241 Leases 164,195 — 883 — 165,078 Total $ 3,602,491 $ 19,922 $ 66,900 $ — $ 3,689,313 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 December 31, 2020, in accordance with ASC 326: As of December 31, 2020 (dollars in thousands) Nonaccrual with No ACL Nonaccrual with ACL Loans Past Due Over 89 Days Still Accruing CRE - nonowner-occupied $ 57 $ — $ — CRE - owner-occupied 1,659 — — Home equity lines of credit 729 — — Residential mortgage - 1st liens 99 — — Residential mortgage - junior liens 85 — — Construction — — — Commercial & Industrial 1,775 — — Consumer — 30 — Leases — 872 — Total non-performing loans and leases $ 4,404 $ 902 $ — For the year ended December 31, 2020, $122 thousand of interest income was recognized on nonaccrual loans and leases. Collateral-dependent loans and leases for which 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 under the CECL methodology, as of December 31, 2020: As of December 31, 2020 (dollars in thousands) Real Estate Collateral Non-Real Estate Collateral Individually Evaluated ACL CRE - nonowner-occupied $ 57 $ — $ — CRE - owner-occupied 1,659 — — Home equity lines of credit 729 — — Residential mortgage - 1st liens 99 — — Residential mortgage - junior liens 85 — — Construction — — — Commercial & Industrial — 1,775 — Consumer — 30 30 Leases — 872 814 Total collateral-dependent loans and leases $ 2,629 $ 2,677 $ 844 The following table provides an analysis of the Corporation’s impaired loans as of December 31, 2019 under the incurred loss methodology: As of December 31, 2019 Recorded Investment (2) Principal Related Average (dollars in thousands) Impaired loans with related ACL: Residential mortgage - 1st liens $ 1,387 $ 1,387 $ 190 $ 1,402 Residential mortgage - junior liens 1,765 1,765 206 1,772 Consumer 43 43 22 44 Total $ 3,195 $ 3,195 $ 418 $ 3,218 Impaired loans without related ACL (1) : CRE - nonowner-occupied $ 383 $ 383 $ — $ 393 CRE - owner-occupied 4,159 5,127 — 5,218 Home equity lines of credit 636 636 — 645 Residential mortgage - 1st liens 3,325 3,610 — 3,647 Residential mortgage - junior liens 554 555 — 553 Commercial & Industrial 2,335 2,493 — 2,457 Consumer 42 57 — 45 Total $ 11,434 $ 12,861 $ — $ 12,958 Grand total $ 14,629 $ 16,056 $ 418 $ 16,176 (1) The table above does not include the recorded investment of $1.1 million of impaired leases with a $64 thousand related ACL on loans and leases. (2) Recorded investment equals principal balance, net of deferred origination costs/fees and loan marks, less partial charge-offs and interest payments on non-performing loans that have been applied to principal. For the year ended December 31, 2019, $440 thousand of interest income was recognized on impaired loans and leases. 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 bo |