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Loans, net and allowance for loan losses | 12 Months Ended
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Dec. 31, 2017
Loans, net and allowance for loan losses |
Loans, net and allowance for loan losses | 4. Loans, net and allowance for loan losses: The major classifications of loans outstanding, net of deferred loan origination fees and costs at December 31, 2017 and 2016 are summarized as follows. Net deferred loan costs included in loan balances were $575 and $579 in 2017 and 2016, respectively.
|  |  | December 31, 2017 |  |  | December 31, 2016 |
Commercial |  | $ | 476,199 |  | $ | 408,814 |
Real estate: |  |  |  |  |  |  |
Commercial |  |  | 786,210 |  |  | 700,144 |
Residential |  |  | 287,935 |  |  | 289,781 |
Consumer |  |  | 142,721 |  |  | 134,226 |
Total |  | $ | 1,693,065 |  | $ | 1,532,965 |
Loans outstanding to directors, executive officers, principal stockholders or to their affiliates totaled $15,169 and $15,614 at December 31, 2017 and 2016, respectively. Advances and repayments during 2017 totaled $1,133 and $1,578 respectively. There were no related party loans that were classified as nonaccrual, past due, or restructured at December 31, 2017 and 2016. During 2017, the Company made donations of $1.1 million to a community foundation of which one of the Company’s directors is Chairman and CEO. The community foundation is a charitable organization approved by the Pennsylvania Department of Community and Economic Development under the Educational Improvement Tax Credit (EITC) program, which permits the Company to receive tax credits toward Pennsylvania state taxes while its donations are used to improve local education. During 2016, the Company made donations of $0.9 million to the community foundation. Deposits from related parties held by Peoples Bank amounted to $10.0 million at December 31, 2017 and $9.3 million at December 31, 2016. At December 31, 2017, the majority of the Company’s loans were at least partially secured by real estate in the eastern Pennsylvania and southern tier New York counties that make up the market serviced by Peoples Security Bank & Trust Company. Therefore, a primary concentration of credit risk is directly related to the real estate market in these regions. Changes in the general economy, local economy or in the real estate market could affect the ultimate collectability of this portion of the loan portfolio. Management does not believe there are any other significant concentrations of credit risk that could affect the loan portfolio. The changes in the allowance for loan losses account by major classification of loan for the year ended December 31, 2017, 2016, and 2015 were as follows:
|  |  |  |  | Real estate |  |  |  |  |  |  |  |  |  |
December 31, 2017 |  | Commercial |  | Commercial |  | Residential |  | Consumer |  | Unallocated |  | Total |
Allowance for loan losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | $ | 3,799 |  | $ | 5,847 |  | $ | 4,707 |  | $ | 1,608 |  | $ | — |  | $ | 15,961 |
Charge-offs |  |  | (173) |  |  | (706) |  |  | (533) |  |  | (737) |  |  |  |  |  | (2,149) |
Recoveries |  |  | 20 |  |  | 124 |  |  | 44 |  |  | 160 |  |  |  |  |  | 348 |
Provisions |  |  | 1,406 |  |  | 2,283 |  |  | 762 |  |  | 349 |  |  | — |  |  | 4,800 |
Ending balance |  | $ | 5,052 |  | $ | 7,548 |  | $ | 4,980 |  | $ | 1,380 |  | $ |  |  | $ | 18,960 |
Ending balance: individually evaluated for impairment |  |  | 159 |  |  | 263 |  |  | 336 |  |  | 8 |  |  |  |  |  | 766 |
Ending balance: collectively evaluated for impairment |  |  | 4,893 |  |  | 7,285 |  |  | 4,644 |  |  | 1,372 |  |  |  |  |  | 18,194 |
Ending balance: loans acquired with deteriorated credit quality |  | $ |  |  | $ |  |  | $ |  |  |  |  |  | $ |  |  | $ | — |
Loans receivable: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ending balance |  | $ | 476,199 |  | $ | 786,210 |  | $ | 287,935 |  | $ | 142,721 |  | $ |  |  | $ | 1,693,065 |
Ending balance: individually evaluated for impairment |  |  | 2,121 |  |  | 3,644 |  |  | 3,763 |  |  | 177 |  |  |  |  |  | 9,705 |
Ending balance: collectively evaluated for impairment |  |  | 473,736 |  |  | 781,921 |  |  | 284,142 |  |  | 142,544 |  |  |  |  |  | 1,682,343 |
Ending balance: loans acquired with deteriorated credit quality |  | $ | 342 |  | $ | 645 |  | $ | 30 |  | $ |  |  | $ |  |  | $ | 1,017 |
|  |  |  |  | Real estate |  |  |  |  |  |  |  |  |
December 31, 2016 |  | Commercial |  | Commercial |  | Residential |  | Consumer |  | Unallocated |  | Total
Allowance for loan losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | $ | 3,042 |  | $ | 4,245 |  | $ | 4,082 |  | $ | 1,583 |  | $ | 23 |  | $ | 12,975
Charge-offs |  |  | (776) |  |  | (858) |  |  | (339) |  |  | (495) |  |  |  |  |  | (2,468)
Recoveries |  |  | 86 |  |  | 122 |  |  | 69 |  |  | 177 |  |  |  |  |  | 454
Provisions |  |  | 1,447 |  |  | 2,338 |  |  | 895 |  |  | 343 |  |  | (23) |  |  | 5,000
Ending balance |  | $ | 3,799 |  | $ | 5,847 |  | $ | 4,707 |  | $ | 1,608 |  | $ |  |  | $ | 15,961
Ending balance: individually evaluated for impairment |  |  | 225 |  |  | 1,197 |  |  | 520 |  |  |  |  |  |  |  |  | 1,942
Ending balance: collectively evaluated for impairment |  |  | 3,574 |  |  | 4,650 |  |  | 4,187 |  |  | 1,608 |  |  |  |  |  | 14,019
Ending balance: loans acquired with deteriorated credit quality |  | $ |  |  | $ |  |  | $ |  |  |  |  |  | $ |  |  | $ | —
Loans receivable: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ending balance |  | $ | 408,814 |  | $ | 700,144 |  | $ | 289,781 |  | $ | 134,226 |  | $ |  |  | $ | 1,532,965
Ending balance: individually evaluated for impairment |  |  | 1,724 |  |  | 5,820 |  |  | 3,543 |  |  | 155 |  |  |  |  |  | 11,242
Ending balance: collectively evaluated for impairment |  |  | 406,127 |  |  | 692,987 |  |  | 286,201 |  |  | 134,071 |  |  |  |  |  | 1,519,386
Ending balance: loans acquired with deteriorated credit quality |  | $ | 963 |  | $ | 1,337 |  | $ | 37 |  |  |  |  | $ |  |  | $ | 2,337
|  |  |  |  | Real estate |  |  |  |  |  |  |  |  |  |
December 31, 2015 |  | Commercial |  | Commercial |  | Residential |  | Consumer |  | Unallocated |  | Total |
Allowance for loan losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | $ | 2,321 |  | $ | 3,037 |  | $ | 3,690 |  | $ | 1,290 |  | $ |  |  | $ | 10,338 |
Charge-offs |  |  | (246) |  |  | (325) |  |  | (523) |  |  | (333) |  |  |  |  |  | (1,427) |
Recoveries |  |  | 77 |  |  | 144 |  |  | 26 |  |  | 117 |  |  |  |  |  | 364 |
Provisions |  |  | 890 |  |  | 1,389 |  |  | 889 |  |  | 509 |  |  | 23 |  |  | 3,700 |
Ending balance |  | $ | 3,042 |  | $ | 4,245 |  | $ | 4,082 |  | $ | 1,583 |  | $ | 23 |  | $ | 12,975 |
Ending balance: individually evaluated for impairment |  |  | 759 |  |  | 126 |  |  | 1,138 |  |  | 117 |  |  |  |  |  | 2,140 |
Ending balance: collectively evaluated for impairment |  |  | 2,283 |  |  | 4,012 |  |  | 2,944 |  |  | 1,466 |  |  | 23 |  |  | 10,728 |
Ending balance: loans acquired with deteriorated credit quality |  | $ |  |  | $ | 107 |  | $ |  |  | $ |  |  | $ |  |  | $ | 107 |
Loans receivable: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Ending balance |  | $ | 365,767 |  | $ | 567,277 |  | $ | 306,218 |  | $ | 101,603 |  | $ |  |  | $ | 1,340,865 |
Ending balance: individually evaluated for impairment |  |  | 1,196 |  |  | 4,006 |  |  | 4,917 |  |  | 148 |  |  |  |  |  | 10,267 |
Ending balance: collectively evaluated for impairment |  |  | 363,620 |  |  | 561,903 |  |  | 301,252 |  |  | 101,455 |  |  |  |  |  | 1,328,230 |
Ending balance: loans acquired with deteriorated credit quality |  | $ | 951 |  | $ | 1,368 |  | $ | 49 |  | $ |  |  | $ |  |  | $ | 2,368 |
The following tables present the major classification of loans summarized by the aggregate pass rating and the classified ratings of special mention, substandard and doubtful within the Company’s internal risk rating system at December 31, 2017 and 2016:
|  |  |  |  | Special |  |  |  |  |  |  |  |  |  |
December 31, 2017 |  | Pass |  | Mention |  | Substandard |  | Doubtful |  | Total |
Commercial |  | $ | 472,185 |  | $ | 1,958 |  | $ | 2,056 |  | $ |  |  | $ | 476,199 |
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  |  | 764,320 |  |  | 13,015 |  |  | 8,875 |  |  |  |  |  | 786,210 |
Residential |  |  | 282,484 |  |  | 18 |  |  | 5,433 |  |  |  |  |  | 287,935 |
Consumer |  |  | 142,507 |  |  |  |  |  | 214 |  |  |  |  |  | 142,721 |
Total |  | $ | 1,661,496 |  | $ | 14,991 |  | $ | 16,578 |  | $ |  |  | $ | 1,693,065 |
|  |  |  |  | Special |  |  |  |  |  |  |  |  |  |
December 31, 2016 |  | Pass |  | Mention |  | Substandard |  | Doubtful |  | Total |
Commercial |  | $ | 398,867 |  | $ | 6,222 |  | $ | 3,725 |  | $ |  |  | $ | 408,814 |
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  |  | 674,914 |  |  | 10,392 |  |  | 14,838 |  |  |  |  |  | 700,144 |
Residential |  |  | 282,737 |  |  | 233 |  |  | 6,811 |  |  |  |  |  | 289,781 |
Consumer |  |  | 133,983 |  |  |  |  |  | 243 |  |  |  |  |  | 134,226 |
Total |  | $ | 1,490,501 |  | $ | 16,847 |  | $ | 25,617 |  | $ |  |  | $ | 1,532,965 |
Information concerning nonaccrual loans by major loan classification at December 31, 2017 and 2016 is summarized as follows:
|  |  | December 31, 2017 |  |  | December 31, 2016 |
Commercial |  | $ | 860 |  | $ | 934 |
Real estate: |  |  |  |  |  |  |
Commercial |  |  | 3,821 |  |  | 7,016 |
Residential |  |  | 2,994 |  |  | 3,003 |
Consumer |  |  | 177 |  |  | 155 |
Total |  | $ | 7,852 |  | $ | 11,108 |
The major classification of loans by past due status at December 31, 2017 and 2016 are summarized as follows:
|  |  |  |  |  |  |  | Greater |  |  |  |  |  |  |  |  |  |  | Loans > 90 |
|  | 30-59 Days |  | 60-89 Days |  | than 90 |  | Total Past |  |  |  |  |  |  |  | Days and |
December 31, 2017 |  | Past Due |  | Past Due |  | Days |  | Due |  | Current |  | Total Loans |  | Accruing |
Commercial |  | $ | 124 |  | $ | 216 |  | $ | 860 |  | $ | 1,200 |  | $ | 474,999 |  | $ | 476,199 |  |  |  |
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  |  | 1,722 |  |  | 194 |  |  | 3,821 |  |  | 5,737 |  |  | 780,473 |  |  | 786,210 |  |  |  |
Residential |  |  | 1,134 |  |  | 1,551 |  |  | 3,543 |  |  | 6,228 |  |  | 281,707 |  |  | 287,935 |  | $ | 549 |
Consumer |  |  | 1,101 |  |  | 364 |  |  | 363 |  |  | 1,828 |  |  | 140,893 |  |  | 142,721 |  |  | 186 |
Total |  | $ | 4,081 |  | $ | 2,325 |  | $ | 8,587 |  | $ | 14,993 |  | $ | 1,678,072 |  | $ | 1,693,065 |  | $ | 735 |
|  |  |  |  |  |  |  | Greater |  |  |  |  |  |  |  |  |  |  | Loans > 90 |
|  | 30-59 Days |  | 60-89 Days |  | than 90 |  | Total Past |  |  |  |  |  |  |  | Days and |
December 31, 2016 |  | Past Due |  | Past Due |  | Days |  | Due |  | Current |  | Total Loans |  | Accruing |
Commercial |  | $ | 249 |  | $ | 75 |  | $ | 934 |  | $ | 1,258 |  | $ | 407,556 |  | $ | 408,814 |  |  |  |
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  |  | 4,782 |  |  | 527 |  |  | 7,016 |  |  | 12,325 |  |  | 687,819 |  |  | 700,144 |  |  |  |
Residential |  |  | 2,100 |  |  | 354 |  |  | 3,561 |  |  | 6,015 |  |  | 283,766 |  |  | 289,781 |  | $ | 558 |
Consumer |  |  | 962 |  |  | 259 |  |  | 441 |  |  | 1,662 |  |  | 132,564 |  |  | 134,226 |  |  | 286 |
Total |  | $ | 8,093 |  | $ | 1,215 |  | $ | 11,952 |  | $ | 21,260 |  | $ | 1,511,705 |  | $ | 1,532,965 |  | $ | 844 |
The following tables summarize information concerning impaired loans as of and for the years ended December 31, 2017, 2016 and 2015 by major loan classification:
|  |  |  |  |  |  |  |  |  |  | For the Year Ended |
|  |  |  |  | Unpaid |  |  |  |  | Average |  | Interest |
|  | Recorded |  | Principal |  | Related |  | Recorded |  | Income |
December 31, 2017 |  | Investment |  | Balance |  | Allowance |  | Investment |  | Recognized |
With no related allowance: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  | $ | 1,279 |  | $ | 1,439 |  |  |  |  | $ | 1,668 |  | $ | 43 |
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  |  | 2,888 |  |  | 3,190 |  |  |  |  |  | 2,985 |  |  | 24 |
Residential |  |  | 2,196 |  |  | 2,672 |  |  |  |  |  | 2,227 |  |  | 21 |
Consumer |  |  | 169 |  |  | 181 |  |  |  |  |  | 173 |  |  |  |
Total |  |  | 6,532 |  |  | 7,482 |  |  |  |  |  | 7,053 |  |  | 88 |
With an allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  |  | 1,184 |  |  | 1,218 |  |  | 159 |  |  | 991 |  |  | 50 |
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  |  | 1,401 |  |  | 1,496 |  |  | 263 |  |  | 2,202 |  |  | 18 |
Residential |  |  | 1,597 |  |  | 1,759 |  |  | 336 |  |  | 1,335 |  |  | 23 |
Consumer |  |  | 8 |  |  | 8 |  |  | 8 |  |  | 20 |  |  |  |
Total |  |  | 4,190 |  |  | 4,481 |  |  | 766 |  |  | 4,548 |  |  | 91 |
Commercial |  |  | 2,463 |  |  | 2,657 |  |  | 159 |  |  | 2,659 |  |  | 93 |
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  |  | 4,289 |  |  | 4,686 |  |  | 263 |  |  | 5,187 |  |  | 42 |
Residential |  |  | 3,793 |  |  | 4,431 |  |  | 336 |  |  | 3,562 |  |  | 44 |
Consumer |  |  | 177 |  |  | 189 |  |  | 8 |  |  | 193 |  |  |  |
Total |  | $ | 10,722 |  | $ | 11,963 |  | $ | 766 |  | $ | 11,601 |  | $ | 179 |
|  |  |  |  |  |  |  |  |  |  | For the Year Ended |
|  |  |  |  | Unpaid |  |  |  |  | Average |  | Interest |
|  | Recorded |  | Principal |  | Related |  | Recorded |  | Income |
December 31, 2016 |  | Investment |  | Balance |  | Allowance |  | Investment |  | Recognized |
With no related allowance: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  | $ | 2,404 |  | $ | 3,213 |  |  |  |  | $ | 1,461 |  | $ | 48 |
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  |  | 2,364 |  |  | 3,018 |  |  |  |  |  | 4,300 |  |  | 71 |
Residential |  |  | 2,205 |  |  | 2,388 |  |  |  |  |  | 2,133 |  |  | 35 |
Consumer |  |  | 155 |  |  | 155 |  |  |  |  |  | 147 |  |  |  |
Total |  |  | 7,128 |  |  | 8,774 |  |  |  |  |  | 8,041 |  |  | 154 |
With an allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  |  | 283 |  |  | 283 |  |  | 225 |  |  | 859 |  |  |  |
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  |  | 4,793 |  |  | 4,793 |  |  | 1,197 |  |  | 2,366 |  |  | 2 |
Residential |  |  | 1,375 |  |  | 1,376 |  |  | 520 |  |  | 1,185 |  |  | 7 |
Consumer |  |  |  |  |  |  |  |  |  |  |  | 50 |  |  |  |
Total |  |  | 6,451 |  |  | 6,452 |  |  | 1,942 |  |  | 4,460 |  |  | 9 |
Commercial |  |  | 2,687 |  |  | 3,496 |  |  | 225 |  |  | 2,320 |  |  | 48 |
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  |  | 7,157 |  |  | 7,811 |  |  | 1,197 |  |  | 6,666 |  |  | 73 |
Residential |  |  | 3,580 |  |  | 3,764 |  |  | 520 |  |  | 3,318 |  |  | 42 |
Consumer |  |  | 155 |  |  | 155 |  |  |  |  |  | 197 |  |  |  |
Total |  | $ | 13,579 |  | $ | 15,226 |  | $ | 1,942 |  | $ | 12,501 |  | $ | 163 |
|  |  |  |  |  |  |  |  |  |  | For the Year Ended |
|  |  |  |  | Unpaid |  |  |  |  | Average |  | Interest |
|  | Recorded |  | Principal |  | Related |  | Recorded |  | Income |
December 31, 2015 |  | Investment |  | Balance |  | Allowance |  | Investment |  | Recognized |
With no related allowance: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  | $ | 1,352 |  | $ | 2,720 |  |  |  |  | $ | 1,848 |  | $ | 87 |
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  |  | 2,731 |  |  | 3,408 |  |  |  |  |  | 2,394 |  |  | 95 |
Residential |  |  | 3,048 |  |  | 3,231 |  |  |  |  |  | 2,664 |  |  | 4 |
Consumer |  |  | 31 |  |  | 31 |  |  |  |  |  | 17 |  |  |  |
Total |  |  | 7,162 |  |  | 9,390 |  |  |  |  |  | 6,923 |  |  | 186 |
With an allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  |  | 795 |  |  | 795 |  | $ | 759 |  |  | 1,680 |  |  | 40 |
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  |  | 2,643 |  |  | 2,643 |  |  | 233 |  |  | 4,155 |  |  | 86 |
Residential |  |  | 1,918 |  |  | 1,918 |  |  | 1,138 |  |  | 1,776 |  |  | 30 |
Consumer |  |  | 117 |  |  | 117 |  |  | 117 |  |  | 126 |  |  |  |
Total |  |  | 5,473 |  |  | 5,473 |  |  | 2,247 |  |  | 7,737 |  |  | 156 |
Commercial |  |  | 2,147 |  |  | 3,515 |  |  | 759 |  |  | 3,528 |  |  | 127 |
Real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  |  | 5,374 |  |  | 6,051 |  |  | 233 |  |  | 6,549 |  |  | 181 |
Residential |  |  | 4,966 |  |  | 5,149 |  |  | 1,138 |  |  | 4,440 |  |  | 34 |
Consumer |  |  | 148 |  |  | 148 |  |  | 117 |  |  | 143 |  |  |  |
Total |  | $ | 12,635 |  | $ | 14,863 |  | $ | 2,247 |  | $ | 14,660 |  | $ | 342 |
There were no amounts of interest income recognized using the cash-basis method on impaired loans for the years ended December 31, 2017, 2016 and 2015. As a part of the Merger, an adjustment was made to reflect the elimination of the allowance for loan losses related to the Peoples Neighborhood Bank loan portfolio, as required by purchase accounting standards. As a result, the acquired loan portfolio was evaluated based on risk characteristics and other credit and market criteria to determine a credit quality adjustment to the fair value of the loans acquired. The acquired loan balance was reduced by the aggregate amount of the credit quality adjustment in determining the fair value of the loans. The credit quality adjustment does not account for acquired loans deemed to be impaired in accordance with Accounting Standard Codification 310-30-30, previously known as Statement of Position (SOP) 03-3, “Accounting for Certain Loans Acquired in a Transfer.” These impaired loans are accounted for in the credit adjustment on distressed loans, which represents the portion of the loan balance that has been deemed uncollectible based on the management’s expectations of future cash flows for each respective loan. Based on management’s evaluation of the acquired loan portfolio, 29 loans were deemed impaired resulting in a credit adjustment on distressed loans of $6,892. As of December 31, 2017, there were a total of nine loans remaining with a credit adjustment of $1,430. Management performed an evaluation of expected future cash flows, including the anticipated cash flow from the sale of collateral, and compared that to the carrying amount of the impaired loans. Based on these evaluations, the Company has determined that no additional reserve was required against the acquired impaired loans at December 31, 2017. The changes in the accretable yield of acquired loans accounted for under ASC310-30 for the years ended December 31, 2017, 2016 and 2015, were as follows:
Year ended December 31 |  | 2017 |  | 2016 |  | 2015
Beginning Balance, January 1 |  | $ | 185 |  |  | $ |  |  |  | $ | 60 |
Reclassification from Nonaccretable |  |  |  |  |  |  | 554 |  |  |  |  |
Accretion |  |  | (185) |  |  |  | (369) |  |  |  | (60) |
Charge-offs |  |  |  |  |  |  |  |  |  |  |  |
Payments |  |  |  |  |  |  |  |  |  |  |  |
Ending Balance, December 31 |  | $ | — |  |  | $ | 185 |  |  | $ | — |
Included in the commercial loan, commercial real estate and residential real estate categories are troubled debt restructurings that were classified as impaired. Trouble debt restructurings totaled $3,074, $1,909 and $2,861 at December 31, 2017, 2016 and 2015, respectively. There were six loans modified in 2017, three loans modified in 2016 and nine loans modified in 2015 that resulted in troubled debt restructurings. The following tables summarize the loans whose terms have been modified resulting in troubled debt restructurings during the year ended December 31, 2017 and 2016.
|  |  |  | Pre-Modification |  | Post-Modification |  |  |  |
|  | Number |  | Outstanding Recorded |  | Outstanding |  | Recorded |
December 31, 2017 |  | of Contracts |  | Investment |  | Recorded Investment |  | Investment |
Commercial |  | 2 |  | $ | 885 |  | $ | 885 |  | $ | 864 |
Commercial real estate |  | 3 |  |  | 721 |  |  | 721 |  |  | 700 |
Residential mortgage |  | 1 |  |  | 64 |  |  | 64 |  |  | 64 |
Total |  | 6 |  | $ | 1,670 |  | $ | 1,670 |  | $ | 1,628 |
|  |  |  | Pre-Modification |  | Post-Modification |  |  |  |
|  | Number |  | Outstanding Recorded |  | Outstanding |  | Recorded |
December 31, 2016 |  | of Contracts |  | Investment |  | Recorded Investment |  | Investment |
Commercial |  | 1 |  | $ | 1,500 |  | $ | 1,150 |  | $ | 1,150 |
Commercial real estate |  |  |  |  |  |  |  |  |  |  |  |
Residential mortgage |  | 2 |  |  | 216 |  |  | 216 |  |  | 207 |
Total |  | 3 |  | $ | 1,716 |  | $ | 1,366 |  | $ | 1,357 |
There were no payment defaults within 12 months of its modification on loans considered troubled debt restructurings for the year ended December 31, 2017, one payment default for the year ended December 31, 2016 totaling $43 and two payment defaults for the year ended December 31, 2015 totaling $166. The amount of residential loans in the formal process of foreclosure totaled $1,684 at December 31, 2017 and $1,529 at December 31, 2016.

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