8. ALLOWANCE FOR LOAN LOSSES AND CREDIT QUALITY INFORMATION

Allowance for Loan Losses

We maintain an allowance for loan losses which represents our best estimate of probable losses in our loan portfolio. As losses are realized, they are charged to this allowance. We established our allowance in accordance with guidance provided in ASC 450, Contingencies (ASC 450), ASC 310, Receivables (ASC 310), and the SEC’s Staff Accounting Bulletin 102, Selected Loan Loss Allowance Methodology and Documentation Issues (SAB 102). When we have reason to believe it is probable that we will not be able to collect all contractually due amounts of principal and interest, loans are evaluated for impairment on an individual basis and a specific allocation of the allowance is assigned in accordance with ASC 310-10. We also maintain an allowance for loan losses on acquired loans when: (i) for loans accounted for under ASC 310-30, there is deterioration in credit quality subsequent to acquisition and (ii) for loans accounted for under ASC 310-20, the inherent losses in the loans exceed the remaining credit discount recorded at the time of acquisition. The determination of the allowance for loan losses requires significant judgment reflecting our best estimate of impairment related to specifically identified impaired loans as well as probable loan losses in the remaining loan portfolio. Our evaluation is based on a continuing review of these portfolios. The following are included in our allowance for loan losses:


•	Specific reserves for impaired loans


•	An allowance for each pool of homogeneous loans based on historical loss experience


•	Adjustments for qualitative and environmental factors allocated to pools of homogeneous loans

When it is probable that the Bank will be unable to collect all amounts due (interest and principal) in accordance with the contractual terms of the loan agreement, it assigns a specific reserve to that loan, as necessary. Unless loans are well-secured and collection is imminent, loans greater than 90 days past due are deemed impaired and their respective reserves are generally charged off once the loss has been confirmed. Estimated specific reserves are based on collateral values, estimates of future cash flows or market valuations. We charge loans off when they are deemed to be uncollectible. During the years ended December 31, 2018 and 2017, net charge-offs totaled $14.2 million, or 0.29% of average loans, and $10.1 million or 0.30% of average loans, respectively.

Allowances for pooled homogeneous loans, that are not deemed impaired, are based on historical net loss experience. Estimated losses for pooled portfolios are determined differently for commercial loan pools and retail loan pools. Commercial loans are pooled as follows: commercial, owner-occupied commercial, commercial mortgages and construction. Each pool is further segmented by internally assessed risk ratings. Loan losses for commercial loans are estimated by determining the probability of default and expected loss severity upon default. The probability of default is calculated based on the historical rate of migration to impaired status during the last 32 quarters. During the year ended December 31, 2018, we increased the look-back period to 32 quarters from 28 quarters used at December 31, 2017. This increase in the look-back period allows us to continue to anchor to the fourth quarter of 2010 to ensure that the quantitative reserves calculated by the allowance for loan loss model are adequately considering the losses within a full credit cycle.

Loss severity upon default is calculated as the actual loan losses (net of recoveries) on impaired loans in their respective pool during the same time frame. Retail loans are pooled into the following segments: residential mortgage, consumer secured and consumer unsecured loans. Pooled reserves for retail loans are calculated based solely on average net loss rates over the same 32 quarter look-back period.

Qualitative adjustment factors consider various current internal and external conditions which are allocated among loan types and take into consideration:


•	Current underwriting policies, staff, and portfolio mix,


•	Internal trends of delinquency, nonaccrual and criticized loans by segment,


•	Risk rating accuracy, control and regulatory assessments/environment,


•	General economic conditions - locally and nationally,


•	Market trends impacting collateral values, and


•	The competitive environment, as it could impact loan structure and underwriting.

The above factors are based on their relative standing compared to the period in which historic losses are used in quantitative reserve estimates and current directional trends. Qualitative factors in our model can add to or subtract from quantitative reserves.

The allowance methodology uses a loss emergence period (LEP), which is the period of time between an event that triggers the probability of a loss and the confirmation of the loss. We estimate the commercial LEP to be approximately nine quarters as of December 31, 2018. Our residential mortgage and consumer LEP remained at four quarters as of December 31, 2018. We evaluate LEP quarterly for reasonableness and complete a detailed historical analysis of our LEP annually for our commercial portfolio and review of the current four quarter LEP for the retail portfolio to determine the continued reasonableness of this assumption.

In prior periods, our allowance methodology included a component related to model estimation and complexity risk. During the second quarter of 2016, as a result of continued refinement of the model and normal review of the factors, we removed the model estimation and complexity risk component from our calculation of the allowance for loan losses.

Our loan officers and risk managers meet at least quarterly to discuss and review the conditions and risks associated with individual problem loans. In addition, various regulatory agencies periodically review our loan ratings and allowance for loan losses and the Bank’s internal loan review department performs loan reviews.

The following tables provide the activity of our allowance for loan losses and loan balances for the years ended December 31, 2018, 2017 and 2016:



(Dollars in thousands)	Commercial			Owner- occupied Commercial			Commercial Mortgages			Construction			Residential			Consumer			Total
Year Ended December 31, 2018
Allowance for loan losses
Beginning balance	$	16,732		$	5,422		$	5,891		$	2,861		$	1,798		$	7,895		$	40,599
Charge-offs	(12,130		)	(417		)	(255		)	(1,475		)	(91		)	(2,615		)	(16,983		)
Recoveries	1,381			34			255			3			154			926			2,753
Provision (credit)	8,328			(38		)	924			2,341			(404		)	2,126			13,277
Provision (credit) for acquired loans	(100		)	56			(9		)	(18		)	(29		)	(7		)	(107		)
Ending balance	$	14,211		$	5,057		$	6,806		$	3,712		$	1,428		$	8,325		$	39,539
Period-end allowance allocated to:
Loans individually evaluated for impairment	$	876		$	—		$	—		$	444		$	543		$	168		$	2,031
Loans collectively evaluated for impairment	13,334			4,965			6,727			3,254			847			8,155			37,282
Acquired loans evaluated for impairment	1			92			79			14			38			2			226
Ending balance	$	14,211		$	5,057		$	6,806		$	3,712		$	1,428		$	8,325		$	39,539
Period-end loan balances:
Loans individually evaluated for impairment⁽²⁾	$	14,837		$	4,406		$	4,083		$	2,781		$	11,017		$	7,883		$	45,007
Loans collectively evaluated for impairment	1,366,151			938,934			1,005,504			310,511			132,064			651,160			4,404,324
Acquired nonimpaired loans	89,970			112,386			145,648			2,525			57,708			21,745			429,982
Acquired impaired loans	1,531			4,248			7,504			749			761			151			14,944
Ending balance⁽³⁾	$	1,472,489		$	1,059,974		$	1,162,739		$	316,566		$	201,550		$	680,939		$	4,894,257



(Dollars in thousands)	Commercial			Owner- occupied Commercial			Commercial Mortgages			Construction			Residential			Consumer			Total
Year Ended December 31, 2017
Allowance for loan losses
Beginning balance	$	13,339		$	6,588		$	8,915		$	2,838		$	2,059		$	6,012		$	39,751
Charge-offs	(5,008		)	(296		)	(4,612		)	(574		)	(168		)	(3,184		)	(13,842		)
Recoveries	1,355			127			255			306			178			1,505			3,726
Provision (credit)	6,972			(1,098		)	1,160			222			(300		)	3,572			10,528
Provision (credit) for acquired loans	74			101			173			69			29			(10		)	436
Ending balance	$	16,732		$	5,422		$	5,891		$	2,861		$	1,798		$	7,895		$	40,599
Period-end allowance allocated to:
Loans individually evaluated for impairment	$	3,687		$	—		$	18		$	—		$	760		$	193		$	4,658
Loans collectively evaluated for impairment	12,871			5,410			5,779			2,828			1,002			7,693			35,583
Acquired loans evaluated for impairment	174			12			94			33			36			9			358
Ending balance	$	16,732		$	5,422		$	5,891		$	2,861		$	1,798		$	7,895		$	40,599
Period-end loan balances:
Loans individually evaluated for impairment⁽²⁾	$	19,196		$	3,655		$	6,076		$	6,022		$	13,778		$	7,588		$	56,315
Loans collectively evaluated for impairment	1,324,636			933,352			983,400			258,887			146,621			514,713			4,161,609
Acquired nonimpaired loans	116,566			136,437			188,505			15,759			72,304			35,945			565,516
Acquired impaired loans	4,156			5,803			9,724			940			784			247			21,654
Ending balance⁽³⁾	$	1,464,554		$	1,079,247		$	1,187,705		$	281,608		$	233,487		$	558,493		$	4,805,094



(Dollars in thousands)	Commercial			Owner- occupied Commercial			Commercial Mortgages			Construction			Residential			Consumer			Complexity Risk ⁽¹⁾			Total
Year Ended December 31, 2016
Allowance for loan losses
Beginning balance	$	11,156		$	6,670		$	6,487		$	3,521		$	2,281		$	5,964		$	1,010		$	37,089
Charge-offs	(5,052		)	(1,556		)	(422		)	(57		)	(88		)	(6,152		)	—			(13,327		)
Recoveries	594			117			322			484			254			1,232			—			3,003
Provision (credit)	6,260			1,163			2,466			(1,117		)	(422		)	4,989			(1,010		)	12,329
Provision for acquired loans	381			194			62			7			34			(21		)	—			657
Ending balance	$	13,339		$	6,588		$	8,915		$	2,838		$	2,059		$	6,012		$	—		$	39,751
Period-end allowance allocated to:
Loans individually evaluated for impairment	$	322		$	—		$	1,247		$	217		$	911		$	198		$	—		$	2,895
Loans collectively evaluated for impairment	12,834			6,573			7,482			2,535			1,125			5,797			—			36,346
Acquired loans evaluated for impairment	183			15			186			86			23			17			—			510
Ending balance	$	13,339		$	6,588		$	8,915		$	2,838		$	2,059		$	6,012		$	—		$	39,751
Period-end loan balances evaluated for:
Loans individually evaluated for impairment⁽²⁾	$	2,266		$	2,078		$	9,898		$	1,419		$	13,547		$	7,863		$	—		$	37,071
Loans collectively evaluated for impairment	1,120,193			899,590			921,333			189,468			157,738			386,146			—			3,674,468
Acquired nonimpaired loans	159,089			164,372			221,937			28,131			94,883			55,651			—			724,063
Acquired impaired loans	6,183			12,122			10,386			3,694			860			369			—			33,614
Ending balance⁽³⁾	$	1,287,731		$	1,078,162		$	1,163,554		$	222,712		$	267,028		$	450,029		$	—		$	4,469,216


(1)	Represents the portion of the allowance for loan losses established to account for the inherent complexity and uncertainty of estimates.


(2)	The difference between this amount and nonaccruing loans represents accruing troubled debt restructured loans which are considered to be impaired loans of $15.0 million at December 31, 2018, $20.1 million as of December 31, 2017, and $14.3 million at December 31, 2016.


(3)	Ending loan balances do not include net deferred fees.

Nonaccrual and Past Due Loans

Nonaccruing loans are those on which the accrual of interest has ceased. Typically, we discontinue accrual of interest on originated loans after payments become more than 90 days past due or earlier if we do not expect the full collection of principal or interest in accordance with the terms of the loan agreement. Interest accrued but not collected at the date a loan is placed on nonaccrual status is reversed and charged against interest income. In addition, the accretion of net deferred loan fees and amortization of net deferred loan costs is suspended when a loan is placed on nonaccrual status. Subsequent cash receipts are applied either to the outstanding principal balance or recorded as interest income, depending on our assessment of the ultimate collectability of principal and interest. Loans greater than 90 days past due and still accruing are defined as loans contractually past due 90 days or more as to principal or interest payments, but which remain in accrual status because they are considered well secured and are in the process of collection.

The following tables show our nonaccrual and past due loans at the dates indicated:



	December 31, 2018
(Dollars in thousands)	30–59 Days Past Due and Still Accruing			60–89 Days Past Due and Still Accruing			Greater Than 90 Days Past Due and Still Accruing			Total Past Due And Still Accruing			Accruing Current Balances			Acquired Impaired Loans			Nonaccrual Loans			Total Loans
Commercial	$	3,653		$	993		$	71		$	4,717		$	1,452,185		$	1,531		$	14,056		$	1,472,489
Owner-occupied commercial	733			865			—			1,598			1,049,722			4,248			4,406			1,059,974
Commercial mortgages	1,388			908			—			2,296			1,148,988			7,504			3,951			1,162,739
Construction	157			—			—			157			312,879			749			2,781			316,566
Residential	1,970			345			660			2,975			194,960			761			2,854			201,550
Consumer	525			971			104			1,600			677,182			151			2,006			680,939
Total ⁽¹⁾ ⁽²⁾	$	8,426		$	4,082		$	835		$	13,343		$	4,835,916		$	14,944		$	30,054		$	4,894,257
% of Total Loans	0.17		%	0.08		%	0.02		%	0.27		%	98.81		%	0.31		%	0.61		%	100.00		%


(1)	Balances in table above includes $430.0 million in acquired non-impaired loans.


(2)	Residential accruing current balances excludes reverse mortgages at fair value of $16.5 million.



	December 31, 2017
(Dollars in thousands)	30–59 Days Past Due and Still Accruing			60–89 Days Past Due and Still Accruing			Greater Than 90 Days Past Due and Still Accruing			Total Past Due And Still Accruing			Accruing Current Balances			Acquired Impaired Loans			Nonaccrual Loans			Total Loans
Commercial	$	1,050		$	—		$	—		$	1,050		$	1,440,291		$	4,156		$	19,057		$	1,464,554
Owner-occupied commercial	2,069			233			—			2,302			1,067,488			5,803			3,654			1,079,247
Commercial mortgages	320			90			—			410			1,171,701			9,724			5,870			1,187,705
Construction	—			—			—			—			278,864			940			1,804			281,608
Residential	2,058			731			356			3,145			225,434			784			4,124			233,487
Consumer	1,117			463			105			1,685			554,634			247			1,927			558,493
Total ⁽¹⁾ ⁽²⁾	$	6,614		$	1,517		$	461		$	8,592		$	4,738,412		$	21,654		$	36,436		$	4,805,094
% of Total Loans	0.14		%	0.03		%	0.01		%	0.18		%	98.61		%	0.45		%	0.76		%	100.00		%


(1)	Balances in table above includes $565.5 million in acquired non-impaired loans.


(2)	Residential accruing current balances excludes reverse mortgages at fair value of $19.8 million.

Impaired Loans

Loans for which it is probable we will not collect all principal and interest due according to their contractual terms, which is assessed based on the credit characteristics of the loan and/or payment status, are measured for impairment in accordance with the provisions of ASC 310 and SAB 102. The amount of impairment is required to be measured using one of three methods: (1) the present value of expected future cash flows discounted at the loan’s effective interest rate; (2) the fair value of collateral, if the loan is collateral dependent or (3) the loan’s observable market price. If the measure of the impaired loan is less than the recorded investment in the loan, a related allowance is allocated for the impairment.

The following tables provide an analysis of our impaired loans at December 31, 2018 and December 31, 2017:



	December 31, 2018
(Dollars in thousands)	Ending Loan Balances		Loans with No Related Reserve ⁽¹⁾		Loans with Related Reserve ⁽²⁾		Related Reserve		Contractual Principal Balances ⁽²⁾		Average Loan Balances
Commercial	$	14,841	$	8,625	$	6,216	$	878	$	22,365	$	18,484
Owner-occupied commercial	6,065		4,406		1,659		92		6,337		5,378
Commercial mortgages	5,679		4,083		1,596		79		15,372		7,438
Construction	3,530		—		3,530		458		5,082		5,091
Residential	11,321		6,442		4,879		581		13,771		12,589
Consumer	7,916		6,899		1,017		170		8,573		7,956
Total	$	49,352	$	30,455	$	18,897	$	2,258	$	71,500	$	56,936


(1)	Reflects loan balances at or written down to their remaining book balance.


(2)	The above includes acquired impaired loans totaling $4.3 million in the ending loan balance and $4.8 million in the contractual principal balance.



	December 31, 2017
(Dollars in thousands)	Ending Loan Balances		Loans with No Related Reserve ⁽¹⁾		Loans with Related Reserve ⁽²⁾		Related Reserve		Contractual Principal Balances ⁽²⁾		Average Loan Balances
Commercial	$	20,842	$	3,422	$	17,420	$	3,861	$	23,815	$	15,072
Owner-occupied commercial	5,374		3,654		1,720		12		5,717		5,827
Commercial mortgages	7,598		4,487		3,111		112		16,658		12,630
Construction	6,292		6,023		269		33		6,800		4,523
Residential	14,181		8,282		5,899		796		17,015		14,533
Consumer	7,819		6,304		1,515		203		8,977		8,158
Total	$	62,106	$	32,172	$	29,934	$	5,017	$	78,982	$	60,743


(1)	Reflects loan balances at or written down to their remaining book balance.


(2)	The above includes acquired impaired loans totaling $5.8 million in the ending loan balance and $6.8 million in the contractual principal balance.

Interest income of $0.8 million and $1.0 million was recognized on impaired loans during 2018 and 2017 respectively.

As of December 31, 2018, there were 26 residential loans and 11 commercial loans in the process of foreclosure. The total outstanding balance on the loans was $1.9 million and $5.3 million, respectively. As of December 31, 2017, there were 33 residential loans and 8 commercial loans in the process of foreclosure. The total outstanding balance on the loans was $2.9 million and $6.0 million, respectively.

Reserves on Acquired Nonimpaired Loans

In accordance with ASC 310, loans acquired by the Bank through its mergers with First National Bank of Wyoming (FNBW), Alliance Bancorp, Inc. (Alliance), and Penn Liberty Bank (Penn Liberty) are reflected on the balance sheet at their fair values on the date of acquisition as opposed to their contractual values. Therefore, on the date of acquisition establishing an allowance for acquired loans is prohibited. After the acquisition date, the Bank performs a separate allowance analysis on a quarterly basis to determine if an allowance for loan loss is necessary. Should the credit risk calculated exceed the purchased loan portfolio’s remaining credit mark, additional reserves will be added to the Bank’s allowance. When a purchased loan becomes impaired after its acquisition, it is evaluated as part of the Bank’s reserve analysis and a specific reserve is established to be included in the Bank’s allowance.

Credit Quality Indicators

Below is a description of each of our risk ratings for all commercial loans:


•	Pass. These borrowers currently show no indication of deterioration or potential problems and their loans are considered fully collectible

•

Special Mention. Borrowers have potential weaknesses that deserve management’s close attention. Borrowers in this category may be experiencing adverse operating trends, for example, declining revenues or margins, high leverage, tight liquidity, or increasing inventory without increasing sales. These adverse trends can have a potential negative effect on the borrower’s repayment capacity. These assets are not adversely classified and do not expose the Bank to significant risk that would warrant a more severe rating. Borrowers in this category may also be experiencing significant management problems, pending litigation, or other structural credit weaknesses.

•

Substandard. Borrowers have well-defined weaknesses that require extensive oversight by management. Borrowers in this category may exhibit one or more of the following: inadequate debt service coverage, unprofitable operations, insufficient liquidity, high leverage, and weak or inadequate capitalization. Relationships in this category are not adequately protected by the sound financial worth and paying capacity of the obligor or the collateral pledged on the loan, if any. A distinct possibility exists that the Bank will sustain some loss if the deficiencies are not corrected.

•

Doubtful. Borrowers have well-defined weaknesses inherent in the Substandard category with the added characteristic that the possibility of loss is extremely high. Current circumstances in the credit relationship make collection or liquidation in full highly questionable. A doubtful asset has some pending event that may strengthen the asset that defers the loss classification. Such impending events include: perfecting liens on additional collateral, obtaining collateral valuations, an acquisition or liquidation preceding, proposed merger, or refinancing plan.


•	Loss. Loans are uncollectible or of such negligible value that continuance as a bankable asset is not supportable. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather it is not practical to defer writing off this asset even though partial recovery may be recognized sometime in the future.

Residential and Consumer Loans

The residential and consumer loan portfolios are monitored on an ongoing basis using delinquency information and loan type as credit quality indicators. These credit quality indicators are assessed in the aggregate in these relatively homogeneous portfolios. Loans that are greater than 90 days past due are generally considered nonperforming and placed on nonaccrual status.

The following tables provide an analysis of loans by portfolio segment based on the credit quality indicators used to determine the Allowance for Loan Loss.

Commercial Credit Exposure



	December 31, 2018
(Dollars in thousands)	Commercial and Industrial		Owner-occupied Commercial		Commercial Mortgages		Construction		Total Commercial⁽¹⁾
									Amount		%
Risk Rating:
Special mention	$	8,710	$	21,230	$	—	$	—	$	29,940
Substandard:
Accrual	37,424		21,081		9,767		168		68,440
Nonaccrual	13,180		4,406		3,951		2,337		23,874
Doubtful	876		—		—		444		1,320
Total Special Mention and Substandard	60,190		46,717		13,718		2,949		123,574		3	%
Acquired impaired	1,531		4,248		7,504		749		14,032		—	%
Pass	1,410,768		1,009,009		1,141,517		312,868		3,874,162		97	%
Total	$	1,472,489	$	1,059,974	$	1,162,739	$	316,566	$	4,011,768	100	%


(1)	Table includes $350.5 million of acquired non-impaired loans at December 31, 2018.



	December 31, 2017
	Commercial and Industrial		Owner-occupied Commercial		Commercial Mortgages		Construction		Total Commercial⁽¹⁾
(Dollars in thousands)									Amount		%
Risk Rating:
Special mention	$	22,789	$	16,783	$	—	$	—	$	39,572
Substandard:
Accrual	34,332		19,386		1,967		4,965		60,650
Nonaccrual	15,370		3,654		5,852		1,804		26,680
Doubtful	3,687		—		18		—		3,705
Total Special Mention and Substandard	76,178		39,823		7,837		6,769		130,607		3	%
Acquired impaired	4,156		5,803		9,724		940		20,623		1	%
Pass	1,384,220		1,033,621		1,170,144		273,899		3,861,884		96	%
Total	$	1,464,554	$	1,079,247	$	1,187,705	$	281,608	$	4,013,114	100	%


(1)	Table includes $457.3 million of acquired non-impaired loans at December 31, 2017.

Residential and Consumer Credit Exposure



									Total Residential and Consumer⁽¹⁾
	Residential				Consumer				2018				2017
(Dollars in thousands)	2018		2017		2018		2017		Amount		Percent		Amount		Percent
Nonperforming ⁽²⁾	$	11,017	$	13,778	$	7,883	$	7,588	$	18,900	2	%	$	21,366	3	%
Acquired impaired loans	761		784		151		247		912		—	%	1,031		—	%
Performing	189,772		218,925		672,905		550,658		862,677		98	%	769,583		97	%
Total	$	201,550	$	233,487	$	680,939	$	558,493	$	882,489	100	%	$	791,980	100	%


(1)	Total includes acquired non-impaired loans of $79.5 million at December 31, 2018 and $108.2 million at December 31, 2017.


(2)	Includes $14.0 million as of December 31, 2018 and $15.3 million as of December 31, 2017 of troubled debt restructured mortgages and home equity installment loans that are performing in accordance with the loans modified terms and are accruing interest.

Troubled Debt Restructurings (TDR)

A modification is classified as a TDR if both of the following exist: (1) the borrower is experiencing financial difficulty and (2) the Bank has granted a concession to the borrower. Many aspects of the borrower’s financial situation are assessed when determining whether they are experiencing financial difficulty. Concessions may include the reduction of the interest rate to a rate lower than current market rate for a new loan with similar risk, extension of the maturity date, reduction of accrued interest, or principal forgiveness. The assessments of whether a borrower is experiencing (or is likely to experience) financial difficulty and whether a concession has been granted is subjective in nature and management’s judgment is required when determining whether a modification is a TDR.

The following table presents the balance of TDRs as of the indicated dates:



(Dollars in thousands)	December 31, 2018		December 31, 2017
Performing TDRs	$	14,953	$	20,061
Nonperforming TDRs	10,211		9,627
Total TDRs	$	25,164	$	29,688

Approximately $1.2 million and $1.0 million in related reserves have been established for these loans at December 31, 2018 and December 31, 2017, respectively.

The following tables present information regarding the types of loan modifications made and the balances of loans modified as TDRs during the years ended December 31, 2018 and 2017:



	December 31, 2018					December 31, 2017
	Contractual payment reduction	Maturity date extension	Discharged in bankruptcy	Other ⁽¹⁾	Total	Contractual payment reduction	Maturity date extension	Discharged in bankruptcy	Other ⁽¹⁾	Total
Commercial	6	—	—	—	6	1	4	—	—	5
Owner-occupied commercial	—	—	—	—	—	—	1	—	—	1
Commercial mortgages	2	1	—	—	3	—	1	—	—	1
Construction	—	1	—	—	1	—	5	—	1	6
Residential	4	—	1	—	5	2	1	5	1	9
Consumer	8	2	7	3	20	1	4	12	8	25
	20	4	8	3	35	4	16	17	10	47


(1)	Other includes interest rate reduction, forbearance, and interest only payments.



	Year Ended December 31,
(Dollars in thousands)	2018				2017
(Dollars in thousands)	Pre Modification		Post Modification		Pre Modification		Post Modification
Commercial	$	5,102	$	5,102	$	954	$	954
Owner-occupied commercial	—		—		3,071		3,071
Commercial mortgages	2,190		2,190		183		183
Construction	920		920		6,054		6,054
Residential	557		557		1,652		1,652
Consumer	1,481		1,481		2,498		2,498
	$	10,250	$	10,250	$	14,412	$	14,412

Principal balances are generally not forgiven when a loans is modified as a TDR. Nonaccruing restructured loans remain in nonaccrual status until there has been a period of sustained repayment performance, which is typically six months, and payment is reasonably assured.

The TDRs shown in the table above resulted in a decreased our allowance for loan losses by $2.0 million through allocation of a related reserve, and resulted in $5.0 million of incremental charge-offs during the year ended December 31, 2018. For the year ended December 31, 2017, the TDRs set forth in the table above increased our allowance for loan losses by $0.1 million through allocation of a related reserve, and resulted in no incremental charge-offs.