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Loans and Leases

12 Months Ended

Dec. 31, 2020

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 Days Past Due		60 – 89 Days Past Due		Over 89 Days Past Due		Total Past Due		Current		Total Accruing Loans and Leases		Nonaccrual Loans and Leases		Total Loans and Leases
(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 Days Past Due		60 – 89 Days Past Due		Over 89 Days Past Due		Total Past Due		Current		Total Accruing Loans and Leases		Nonaccrual Loans and Leases		Total Loans and Leases
(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 Days Past Due		60 – 89 Days Past Due		Over 89 Days Past Due		Total Past Due		Current		Total Accruing Loans and Leases		Nonaccrual Loans and Leases		Total Loans and Leases
(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 Days Past Due		60 – 89 Days Past Due		Over 89 Days Past Due		Total Past Due		Current		Total Accruing Loans and Leases		Nonaccrual Loans and Leases		Total Loans and Leases
(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 Days Past Due		60 – 89 Days Past Due		Over 89 Days Past Due		Total Past Due		Current		Total Accruing Loans and Leases		Nonaccrual Loans and Leases		Total Loans and Leases
(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 Days Past Due		60 – 89 Days Past Due		Over 89 Days Past Due		Total Past Due		Current		Total Accruing Loans and Leases		Nonaccrual Loans and Leases		Total Loans and Leases
(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 - owner-occupied		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 - owner-occupied		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 Balance		Related ACL on loans and leases		Average Principal Balance
(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 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)	December 31, 2020		December 31, 2019
TDRs included in nonperforming loans and leases	$	1,737	$	3,018
TDRs in compliance with modified terms	7,046		5,071
Total TDRs	$	8,783	$	8,089

(1) The Corporation has entered 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 – Summary of and Significant Accounting Policies to the Consolidated Financial Statements.

The following table presents information regarding loans and leases categorized as TDRs for modifications made during the year ended December 31, 2020:


	For the Year Ended December 31, 2020
(dollars in thousands)	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
CRE - nonowner-occupied	2	$	1,809	$	1,809
CRE - owner-occupied	2	986		986
Construction	1	1,291		1,291
Commercial & Industrial	1	118		118
Leases	4	183		183
Total	10	$	4,387	$	4,387

The following table presents information regarding the types of loan and lease modifications made for the year ended December 31, 2020:


	Number of Contracts
	Loan Term Extension	Interest Rate Change and Term Extension	Term Extension and Interest-Only Period	Interest Rate Change and/or Interest-Only Period	Contractual Payment Reduction (Leases only)	Temporary Payment Deferral
CRE - nonowner-occupied	—	—	—	—	—	2
CRE - owner-occupied	2	—	—	—	—	—
Construction	—	—	1	—	—	—
Commercial & Industrial	1	—	—	—	—	—
Leases	—	—	—	—	4	—
Total	3	—	1	—	4	2

The following table presents information regarding loans and leases categorized as TDRs for modifications made during the year ended December 31, 2019:


	For the Year Ended December 31, 2019
(dollars in thousands)	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
CRE - nonowner-occupied	1	$	184	$	184
CRE - owner-occupied	1	1,287		1,287
Residential mortgage - junior lien	3	226		226
Commercial & Industrial	3	1,362		1,362
Leases	4	199		199
Total	12	3,259		3,259

The following table presents information regarding the types of loan and lease modifications made for the year ended December 31, 2019:


	Number of Contracts
	Loan Term Extension	Interest Rate Change and Term Extension	Term Extension and Interest-Only Period	Interest Rate Change and/or Interest-Only Period	Contractual Payment Reduction (Leases only)	Temporary Payment Deferral
CRE - nonowner-occupied	1	—	—	—	—	—
CRE - owner-occupied	1	—	—	—	—	—
Residential mortgage - junior lien	—	3	—	—	—	—
Commercial & Industrial	1	—	—	2	—	—
Leases	—	—	—	—	4	—
Total	3	3	—	2	4	—

During the year ended December 31, 2020, one CRE - owner-occupied loan with a principal balance of $992 thousand, which had been previously modified to troubled debt restructuring, defaulted and was charged off.