Loans

Loans receivable that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at their unpaid principal balances, adjusted for any charge-offs, the ALL, and any deferred fees or costs on originated loans and unamortized premiums or discounts on purchased loans.

Loan interest income is accrued daily on outstanding balances. The following accounting policies, related to accrual and nonaccrual loans, apply to all portfolio segments and loan classes, which the Company considers to be the same. The accrual of interest is normally discontinued when a loan is specifically determined to be impaired and/or management believes, after considering collection efforts and other factors, that the borrower's financial condition is such that collection of interest is doubtful. Generally, any unpaid interest previously accrued on those loans is reversed against current period interest income. A loan may be restored to accrual status when its financial status has significantly improved and there is no principal or interest past due. A loan may also be restored to accrual status if the borrower makes six consecutive monthly payments or the lump sum equivalent. Income on nonaccrual loans is generally not recognized unless a loan is returned to accrual status or after all principal has been collected. Interest income generally is not recognized on impaired loans unless the likelihood of further loss is remote. Interest payments received on such loans are generally applied as a reduction of the loan principal balance. Delinquency status is determined based on contractual terms for all portfolio segments and loan classes. Loans past due 30 days or more are considered delinquent. Loans are considered in process of foreclosure when a judgment of foreclosure has been issued by the court.

Loan origination fees and direct loan origination costs are deferred and amortized as an adjustment of the related loan's yield using methods that approximate the interest method. The Company generally amortizes these amounts over the estimated average life of the related loans.

The composition of Net loans as of the balance sheet dates were as follows:



	September 30, 2019			December 31, 2018
	(Dollars in thousands)
Residential real estate	$	192,617		$	187,320
Construction real estate	63,245			55,322
Commercial real estate	284,271			276,500
Commercial	44,536			47,228
Consumer	3,566			3,241
Municipal	69,681			72,850
Gross loans	657,916			642,461
Allowance for loan losses	(5,808		)	(5,739		)
Net deferred loan costs	988			938
Net loans	$	653,096		$	637,660

Qualifying residential first mortgage loans and certain commercial real estate loans with a carrying value of $207.8 million and $167.7 million were pledged as collateral for borrowings from the FHLB under a blanket lien at September 30, 2019 and December 31, 2018, respectively.

A summary of current, past due and nonaccrual loans as of the balance sheet dates follows:



September 30, 2019	Current		30-59 Days		60-89 Days		90 Days and Over and Accruing		Nonaccrual		Total
	(Dollars in thousands)
Residential real estate	$	190,021	$	168	$	1,075	$	955	$	398	$	192,617
Construction real estate	62,764		98		122		228		33		63,245
Commercial real estate	282,238		1,549		192		24		268		284,271
Commercial	44,481		—		6		25		24		44,536
Consumer	3,545		19		2		—		—		3,566
Municipal	69,681		—		—		—		—		69,681
Total	$	652,730	$	1,834	$	1,397	$	1,232	$	723	$	657,916



December 31, 2018	Current		30-59 Days		60-89 Days		90 Days and Over and Accruing		Nonaccrual		Total
	(Dollars in thousands)
Residential real estate	$	183,624	$	1,984	$	696	$	422	$	594	$	187,320
Construction real estate	52,807		1,451		1,023		—		41		55,322
Commercial real estate	273,778		1,703		153		718		148		276,500
Commercial	47,163		24		8		—		33		47,228
Consumer	3,215		21		5		—		—		3,241
Municipal	72,789		61		—		—		—		72,850
Total	$	633,376	$	5,244	$	1,885	$	1,140	$	816	$	642,461

There were three residential real estate loans totaling $207 thousand and three commercial real estate loans totaling $137 thousand in process of foreclosure at September 30, 2019 and three residential real estate loans totaling $255 thousand and one commercial real estate loan totaling $146 thousand in process of foreclosure at December 31, 2018. Aggregate interest on nonaccrual loans not recognized was $1.2 million as of September 30, 2019 and $1.3 million as of December 31, 2018 and September 30, 2018.