The Company’s loan portfolio consisted of the following at December 31 (in thousands):

	Principal Amount Outstanding		Net Deferred Loan (Fees) Costs			Loans, Net
2019
Commercial business	$	571,222	$	818		$	572,040
Commercial mortgage		1,108,315		(2,032	)		1,106,283
Residential real estate loans		560,717		11,633			572,350
Residential real estate lines		101,048		3,070			104,118
Consumer indirect		822,179		27,873			850,052
Other consumer		15,984		160			16,144
Total	$	3,179,465	$	41,522			3,220,987
Allowance for loan losses							(30,482	)
Total loans, net						$	3,190,505

2018
Commercial business	$	557,040	$	821		$	557,861
Commercial mortgage		960,265		(2,071	)		958,194
Residential real estate loans		514,981		9,174			524,155
Residential real estate lines		106,712		3,006			109,718
Consumer indirect		888,732		31,185			919,917
Other consumer		16,590		163			16,753
Total	$	3,044,320	$	42,278			3,086,598
Allowance for loan losses							(33,914	)
Total loans, net						$	3,052,684

The Company’s significant concentrations of credit risk in the loan portfolio relate to a geographic concentration in the communities that the Company serves.

Certain executive officers, directors and their business interests are customers of the Company. Transactions with these parties are based on the same terms as similar transactions with unrelated third parties and do not carry more than normal credit risk. Borrowings by these related parties amounted to $18.6 million and $10.3 million at December 31, 2019 and 2018, respectively. During 2019, new borrowings amounted to $9.8 million (including borrowings of executive officers and directors that were outstanding at the time of their appointment), and repayments and other reductions were $1.6 million.

The Company’s recorded investment, by loan class, in current and nonaccrual loans, as well as an analysis of accruing delinquent loans is set forth as of December 31 (in thousands):

	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Nonaccrual		Current		Total Loans
2019
Commercial business	$	361	$	-	$	-	$	361	$	1,177	$	569,684	$	571,222
Commercial mortgage		531		-		-		531		3,146		1,104,638		1,108,315
Residential real estate loans		929		114		-		1,043		2,484		557,190		560,717
Residential real estate lines		231		37		-		268		102		100,678		101,048
Consumer indirect		3,729		1,019		-		4,748		1,725		815,706		822,179
Other consumer		116		8		6		130		-		15,854		15,984
Total loans, gross	$	5,897	$	1,178	$	6	$	7,081	$	8,634	$	3,163,750	$	3,179,465

2018
Commercial business	$	227	$	1	$	-	$	228	$	912	$	555,900	$	557,040
Commercial mortgage		574		-		-		574		1,586		958,105		960,265
Residential real estate loans		1,295		242		-		1,537		2,391		511,053		514,981
Residential real estate lines		102		-		-		102		255		106,355		106,712
Consumer indirect		2,424		698		-		3,122		1,989		883,621		888,732
Other consumer		139		3		8		150		-		16,440		16,590
Total loans, gross	$	4,761	$	944	$	8	$	5,713	$	7,133	$	3,031,474	$	3,044,320

There were no loans past due greater than 90 days and still accruing interest as of December 31, 2019 and 2018. There were $6 thousand and $8 thousand in consumer overdrafts which were past due greater than 90 days as of December 31, 2019 and 2018, respectively. Consumer overdrafts are overdrawn deposit accounts which have been reclassified as loans but by their terms do not accrue interest.

Interest income on nonaccrual loans, if recognized, is recorded using the cash basis method of accounting. There was no interest income recognized on nonaccrual loans during the years ended December 31, 2019, 2018 and 2017. For the years ended December 31, 2019, 2018 and 2017, estimated interest income of $508 thousand, $294 thousand, and $481 thousand, respectively, would have been recorded if all such loans had been accruing interest according to their original contractual terms.

A modification of a loan constitutes a troubled debt restructuring (“TDR”) when a borrower is experiencing financial difficulty and the modification constitutes a concession. Commercial loans modified in a TDR may involve temporary interest-only payments, term extensions, reducing the interest rate for the remaining term of the loan, extending the maturity date at an interest rate lower than the current market rate for new debt with similar risk, collateral concessions, forgiveness of principal, forbearance agreements, or substituting or adding a new borrower or guarantor.

There were no loans modified as a TDR during the years ended December 31, 2019 and 2018.

There were no loans modified as a TDR during the years ended December 31, 2019 and 2018 that defaulted during the year ended December 31, 2019. For purposes of this disclosure, a loan modified as a TDR is considered to have defaulted when the borrower becomes 90 days past due.

Management has determined that specific commercial loans on nonaccrual status and all loans that have had their terms restructured in a troubled debt restructuring are impaired loans. The following table presents the recorded investment, unpaid principal balance and related allowance of impaired loans as well as average recorded investment and interest income recognized on impaired loans at December 31 (in thousands):

	Recorded Investment ⁽¹⁾		Unpaid Principal Balance ⁽¹⁾		Related Allowance		Average Recorded Investment		Interest Income Recognized
2019
With no related allowance recorded:
Commercial business	$	563	$	775	$	-	$	411	$	-
Commercial mortgage		973		1,749		-		1,701		-
		1,536		2,524		-		2,112		-
With an allowance recorded:
Commercial business		614		614		214		1,207		-
Commercial mortgage		2,173		2,173		479		1,825		-
		2,787		2,787		693		3,032		-
	$	4,323	$	5,311	$	693	$	5,144	$	-

2018
With no related allowance recorded:
Commercial business	$	319	$	487	$	-	$	1,156	$	-
Commercial mortgage		2,013		2,789		-		692		-
		2,332		3,276		-		1,848		-
With an allowance recorded:
Commercial business		725		725		205		2,458		-
Commercial mortgage		21		21		1		1,936		-
		746		746		206		4,394		-
	$	3,078	$	4,022	$	206	$	6,242	$	-

⁽¹⁾	Difference between recorded investment and unpaid principal balance represents partial charge-offs.

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors such as the fair value of collateral. The Company analyzes commercial business and commercial mortgage loans individually by classifying the loans as to credit risk. Risk ratings are updated any time the situation warrants. The Company uses the following definitions for risk ratings:

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 Company’s credit position at some future date.

Substandard: Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Company 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.

Loans not meeting the criteria above that are analyzed individually as part of the process described above are considered “uncriticized” or pass-rated loans and are included in groups of homogeneous loans with similar risk and loss characteristics.

Loans that do not meet the criteria above that are analyzed individually as part of the process described above are considered “uncriticized” or pass-rated loans and are included in groups of homogeneous loans with similar risk and loss characteristics.

The following table sets forth the Company’s commercial loan portfolio, categorized by internally assigned asset classification, as of December 31 (in thousands):

The Company utilizes payment status as a means of identifying and reporting problem and potential problem retail loans. The Company considers nonaccrual loans and loans past due greater than 90 days and still accruing interest to be non-performing. The following table sets forth the Company’s retail loan portfolio, categorized by payment status, as of December 31 (in thousands):

The following tables set forth the changes in the allowance for loan losses for the years ended December 31 (in thousands):

	Commercial Business			Commercial Mortgage			Residential Real Estate Loans			Residential Real Estate Lines			Consumer Indirect			Other Consumer			Total
2019
Allowance for loan losses:
Beginning balance	$	14,312		$	5,219		$	1,112		$	210		$	12,572		$	489		$	33,914
Charge-offs		(2,481	)		(2,997	)		(340	)		(13	)		(10,810	)		(1,170	)		(17,811	)
Recoveries		492			17			43			6			5,390			387			6,335
Provision (credit)		(965	)		3,442			244			(85	)		4,700			708			8,044
Ending balance	$	11,358		$	5,681		$	1,059		$	118		$	11,852		$	414		$	30,482
Evaluated for impairment:
Individually	$	214		$	479		$	-		$	-		$	-		$	-		$	693
Collectively	$	11,144		$	5,202		$	1,059		$	118		$	11,852		$	414		$	29,789

Loans:
Ending balance	$	571,222		$	1,108,315		$	560,717		$	101,048		$	822,179		$	15,984		$	3,179,465
Evaluated for impairment:
Individually	$	1,177		$	3,146		$	-		$	-		$	-		$	-		$	4,323
Collectively	$	570,045		$	1,105,169		$	560,717		$	101,048		$	822,179		$	15,984		$	3,175,142

2018
Allowance for loan losses:
Beginning balance	$	15,668		$	3,696		$	1,322		$	180		$	13,415		$	391		$	34,672
Charge-offs		(2,319	)		(1,020	)		(95	)		(142	)		(10,850	)		(1,308	)		(15,734	)
Recoveries		509			13			159			20			5,024			317			6,042
Provision (credit)		454			2,530			(274	)		152			4,983			1,089			8,934
Ending balance	$	14,312		$	5,219		$	1,112		$	210		$	12,572		$	489		$	33,914
Evaluated for impairment:
Individually	$	205		$	1		$	-		$	-		$	-		$	-		$	206
Collectively	$	14,107		$	5,218		$	1,112		$	210		$	12,572		$	489		$	33,708

Loans:
Ending balance	$	557,040		$	960,265		$	514,981		$	106,712		$	888,732		$	16,590		$	3,044,320
Evaluated for impairment:
Individually	$	1,044		$	2,034		$	-		$	-		$	-		$	-		$	3,078
Collectively	$	555,996		$	958,231		$	514,981		$	106,712		$	888,732		$	16,590		$	3,041,242

	Commercial Business			Commercial Mortgage			Residential Mortgage			Home Equity			Consumer Indirect			Other Consumer			Total
2017
Allowance for loan losses:
Beginning balance	$	7,225		$	10,315		$	1,478		$	303		$	11,311		$	302		$	30,934
Charge-offs		(3,614	)		(10	)		(431	)		(106	)		(10,164	)		(926	)		(15,251	)
Recoveries		416			262			130			60			4,444			316			5,628
Provision		11,641			(6,871	)		145			(77	)		7,824			699			13,361
Ending balance	$	15,668		$	3,696		$	1,322		$	180		$	13,415		$	391		$	34,672
Evaluated for impairment:
Individually	$	2,001		$	107		$	-		$	-		$	-		$	-		$	2,108
Collectively	$	13,667		$	3,589		$	1,322		$	180		$	13,415		$	391		$	32,564

Loans:
Ending balance	$	449,763		$	810,851		$	457,761		$	113,422		$	845,682		$	17,443		$	2,694,922
Evaluated for impairment:
Individually	$	5,322		$	2,852		$	-		$	-		$	-		$	-		$	8,174
Collectively	$	444,441		$	807,999		$	457,761		$	113,422		$	845,682		$	17,443		$	2,686,748

Commercial business loans primarily consist of loans to small to mid-sized businesses in our market area in a diverse range of industries. These loans are of higher risk and typically are made on the basis of the borrower’s ability to make repayment from the cash flow of the borrower’s business. Further, the collateral securing the loans may depreciate over time, may be difficult to appraise and may fluctuate in value. The credit risk related to commercial loans is largely influenced by general economic conditions and the resulting impact on a borrower’s operations or on the value of underlying collateral, if any.

Commercial mortgage loans generally have larger balances and involve a greater degree of risk than residential mortgage loans, potentially resulting in higher potential losses on an individual customer basis. Loan repayment is often dependent on the successful operation and management of the properties, as well as on the collateral securing the loan. Economic events or conditions in the real estate market could have an adverse impact on the cash flows generated by properties securing the Company’s commercial real estate loans and on the value of such properties.

Residential real estate loans (comprised of conventional mortgages and home equity loans) and residential real estate lines (comprised of home equity lines) are generally made based on the borrower’s ability to make repayment from his or her employment and other income but are secured by real property whose value tends to be more easily ascertainable. Credit risk for these types of loans is generally influenced by general economic conditions, the characteristics of individual borrowers, and the nature of the loan collateral.

Consumer indirect and other consumer loans may entail greater credit risk than residential mortgage loans and home equities, particularly in the case of other consumer loans which are unsecured or, in the case of indirect consumer loans, secured by depreciable assets, such as automobiles. In such cases, any repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment of the outstanding loan balance. In addition, consumer loan collections are dependent on the borrower’s continuing financial stability, and thus are more likely to be affected by adverse personal circumstances such as job loss, illness or personal bankruptcy. Furthermore, the application of various federal and state laws, including bankruptcy and insolvency laws, may limit the amount which can be recovered on such loans.