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LOANS AND ALLOWANCE FOR LOAN LOSSES
 12 Months Ended
Dec. 31, 2020
Accounts, Notes, Loans and Financing Receivable, Gross, Allowance, and Net [Abstract]  
LOANS AND ALLOWANCE FOR LOAN LOSSES LOANS AND ALLOWANCE FOR LOAN LOSSESThe Corporation grants commercial, residential, and consumer loans to customers primarily within southcentral Pennsylvania and northern Maryland and the surrounding area. A large portion of the loan portfolio is secured by real estate. Although the Bank has a diversified loan portfolio, its debtors’ ability to honor their contracts is influenced by the region’s economy.
The following tables present the classes of the loan portfolio summarized by the aggregate pass rating and the classified ratings of special mention, substandard and doubtful within the Corporation’s internal risk rating system as of December 31, 2020 and 2019:
In thousandsPassSpecial
Mention		SubstandardDoubtfulTotal
December 31, 2020     
Originated Loans
Commercial and industrial$270,047 $5,168 $2,688 $— $277,903 
Commercial real estate414,538 54,122 10,463 — 479,123 
Commercial real estate construction39,462 1,746 — — 41,208 
Residential mortgage332,632 4,327 178 — 337,137 
Home equity lines of credit80,560 346 — — 80,906 
Consumer11,819 — — — 11,819 
Total Originated Loans1,149,058 65,709 13,329 — 1,228,096 
Acquired Loans
Commercial and industrial38,882 1,893 1,476 — 42,251 
Commercial real estate245,597 16,706 3,201 — 265,504 
Commercial real estate construction10,300 2,394 — — 12,694 
Residential mortgage58,787 3,535 1,881 — 64,203 
Home equity lines of credit23,165 97 442 — 23,704 
Consumer1,330 — 2 — 1,332 
Total Acquired Loans378,061 24,625 7,002 — 409,688 
Total Loans
Commercial and industrial308,929 7,061 4,164 — 320,154 
Commercial real estate660,135 70,828 13,664 — 744,627 
Commercial real estate construction49,762 4,140 — — 53,902 
Residential mortgage391,419 7,862 2,059 — 401,340 
Home equity lines of credit103,725 443 442 — 104,610 
Consumer13,149 — 2 — 13,151 
Total Loans$1,527,119 $90,334 $20,331 $— $1,637,784 
In thousandsPassSpecial
Mention		SubstandardDoubtfulTotal
December 31, 2019     
Originated Loans
Commercial and industrial$132,791 $12,249 $716 $— $145,756 
Commercial real estate414,077 28,264 9,595 — 451,936 
Commercial real estate construction22,905 1,272 — — 24,177 
Residential mortgage364,814 6,279 251 — 371,344 
Home equity lines of credit92,372 627 83 — 93,082 
Consumer13,331 — — — 13,331 
Total Originated Loans1,040,290 48,691 10,645 — 1,099,626 
Acquired Loans
Commercial and industrial3,007 374 178 — 3,559 
Commercial real estate100,199 11,537 3,376 — 115,112 
Commercial real estate construction1,542 697 — — 2,239 
Residential mortgage33,349 2,089 1,555 — 36,993 
Home equity lines of credit14,603 45 317 — 14,965 
Consumer107 — — — 107 
Total Acquired Loans152,807 14,742 5,426 — 172,975 
Total Loans
Commercial and industrial135,798 12,623 894 — 149,315 
Commercial real estate514,276 39,801 12,971 — 567,048 
Commercial real estate construction24,447 1,969 — — 26,416 
Residential mortgage398,163 8,368 1,806 — 408,337 
Home equity lines of credit106,975 672 400 — 108,047 
Consumer13,438 — — — 13,438 
Total Loans$1,193,097 $63,433 $16,071 $— $1,272,601 
The following table provides changes in accretable yield for all acquired loans accounted for under ASC 310-30. Loans accounted for under ASC 310-20 are not included in this table.
In thousandsYear Ended December 31, 2020Year Ended December 31, 2019
Balance at beginning of period$642 $891 
Acquisitions of impaired loans354 — 
Reclassification from non-accretable differences311 492 
Accretion to loan interest income(711)(741)
Balance at end of period$596 $642 
Cash flows expected to be collected on acquired loans are estimated quarterly by incorporating several key assumptions similar to the initial estimate of fair value. These key assumptions include probability of default and the amount of actual prepayments after the acquisition date. Prepayments affect the estimated life of the loans and could change the amount of interest income, and possibly principal expected to be collected. In reforecasting future estimated cash flows, credit loss expectations are adjusted as necessary. Improved cash flow expectations for loans or pools are recorded first as a reversal of previously recorded impairment, if any, and then as an increase in prospective yield when all previously recorded impairment has been recaptured. Decreases in expected cash flows are recognized as impairment through a charge to the provision for loan losses and credit to the allowance for loan losses.
The following table summarizes information relative to impaired loans by loan portfolio class as of December 31, 2020 and 2019:
 Impaired Loans with AllowanceImpaired Loans with
No Allowance
In thousandsRecorded
Investment		Unpaid
Principal
Balance		Related
Allowance		Recorded
Investment		Unpaid
Principal
Balance
December 31, 2020     
Commercial and industrial$2,031 $2,031 $1,224 $— $— 
Commercial real estate2,728 2,728 158 5,861 5,861 
Commercial real estate construction— — — — — 
Residential mortgage— — — 101 101 
Home equity lines of credit— — — — — 
Total$4,759 $4,759 $1,382 $5,962 $5,962 
December 31, 2019     
Commercial and industrial$65 $65 $42 $— $— 
Commercial real estate— — — 7,383 7,383 
Commercial real estate construction— — — — — 
Residential mortgage— — — 171 171 
Home equity lines of credit— — — 83 83 
Total$65 $65 $42 $7,637 $7,637 
The following table summarizes information in regards to average of impaired loans and related interest income by loan portfolio class:
 Impaired Loans with
Allowance		Impaired Loans with
No Allowance
In thousandsAverage
Recorded
Investment		Interest
Income		Average
Recorded
Investment		Interest
Income
December 31, 2020    
Commercial and industrial$441 $— $9 $— 
Commercial real estate1,642 — 6,513 184 
Commercial real estate construction— — 495 109 
Residential mortgage— — 114 7 
Home equity lines of credit— — 39 3 
Total$2,083 $— $7,170 $303 
December 31, 2019    
Commercial and industrial$27 $— $— $— 
Commercial real estate— — 6,625 612 
Commercial real estate construction— — — — 
Residential mortgage— — 422 8 
Home equity lines of credit— — 35 — 
Total$27 $— $7,082 $620 
No additional funds are committed to be advanced in connection with impaired loans.
If interest on all nonaccrual loans had been accrued at original contract rates, interest income would have increased by $379,000 in 2020 and $249,000 in 2019.
The following table presents nonaccrual loans by loan portfolio class as of December 31, 2020 and 2019, the table below excludes $6.0 million in purchase credit impaired loans, net of unamortized fair value adjustments:
In thousands20202019
Commercial and industrial$2,031 $65 
Commercial real estate4,909 3,600 
Commercial real estate construction— — 
Residential mortgage101 171 
Home equity lines of credit— 83 
Total$7,041 $3,919 
There were no loans whose terms have been modified resulting in a troubled debt restructuring during the years ended December 31, 2020 and 2019. The Corporation classifies certain loans as troubled debt restructurings when credit terms to a borrower in financial difficulty are modified. The modifications may include a reduction in rate, an extension in term and/or the restructuring of scheduled principal payments. The Corporation had pre-existing nonaccruing and accruing troubled debt restructurings of $3,807,000 and $3,974,000 at December 31, 2020 and 2019, respectively. All of the Corporation’s troubled debt restructured loans are also impaired loans, of which some have resulted in a specific allocation and, subsequently, a charge-off as appropriate. Included in the non-accrual loan total at December 31, 2020 and 2019, were $127,000 and $191,000, respectively, of troubled debt restructurings. In addition to the troubled debt restructurings included in non-accrual loans, the Corporation also has loans classified as accruing troubled debt restructurings at December 31, 2020 and 2019, which total $3,680,000 and $3,783,000, respectively. There were no defaulted troubled debt restructured loans as of December 31, 2020 and 2019. There were no charge-offs on any of the troubled debt restructured loans for the years ended December 31, 2020 and 2019. There were no specific allocations on any troubled debt restructured loans for the years ended December 31, 2020 and 2019. One troubled debt restructured loan paid off during 2019 in the amount of $2,198,000. All other troubled debt restructured loans were current as of December 31, 2020, with respect to their associated forbearance agreement, except for one loan which has had periodic late payments. As of December 31, 2020, there are no active forbearance agreements. All forbearance agreements have expired or the loans have paid off.
Consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process at December 31, 2020 and 2019, totaled $391,000 and $822,000, respectively.
The performance and credit quality of the loan portfolio is also monitored by analyzing the age of the loans receivable as determined by the length of time a recorded payment is past due.
The following table presents the classes of the loan portfolio summarized by the past due status as of December 31, 2020 and 2019:
In thousands30-59 Days
Past Due		60-89 Days
Past Due		>90 Days Past DueTotal Past DueCurrentTotal Loans
Receivable		Loans
Receivable
>90 Days and
Accruing
December 31, 2020       
Originated Loans
Commercial and industrial$1,432 $— $— $1,432 $276,471 $277,903 $— 
Commercial real estate133 2,463 1,631 4,227 474,896 479,123 — 
Commercial real estate construction— 76 — 76 41,132 41,208 — 
Residential mortgage1,382 335 623 2,340 334,797 337,137 522 
Home equity lines of credit54 60 58 172 80,734 80,906 58 
Consumer98 51 — 149 11,670 11,819 — 
Total originated loans3,099 2,985 2,312 8,396 1,219,700 1,228,096 580 
Acquired Loans
Commercial and industrial122 231 — 353 41,898 42,251 — 
Commercial real estate319 220 — 539 264,965 265,504 — 
Commercial real estate construction42 — 97 139 12,555 12,694 97 
Residential mortgage834 349 146 1,329 62,874 64,203 146 
Home equity lines of credit196 — 32 228 23,476 23,704 32 
Consumer— 16 — 16 1,316 1,332 — 
Total acquired loans1,513 816 275 2,604 407,084 409,688 275 
Total Loans
Commercial and industrial1,554 231 — 1,785 318,369 320,154 — 
Commercial real estate452 2,683 1,631 4,766 739,861 744,627 — 
Commercial real estate construction42 76 97 215 53,687 53,902 97 
Residential mortgage2,216 684 769 3,669 397,671 401,340 668 
Home equity lines of credit250 60 90 400 104,210 104,610 90 
Consumer98 67 — 165 12,986 13,151 — 
Total Loans$4,612 $3,801 $2,587 $11,000 $1,626,784 $1,637,784 $855 
In thousands30-59 Days
Past Due		60-89 Days
Past Due		>90 Days Past DueTotal Past DueCurrentTotal Loans
Receivable		Loans
Receivable
>90 Days and
Accruing
December 31, 2019       
Originated Loans
Commercial and industrial$16 $— $4 $20 $145,736 $145,756 $4 
Commercial real estate325 2,247 1,286 3,858 448,078 451,936 — 
Commercial real estate construction78 — — 78 24,099 24,177 — 
Residential mortgage1,625 949 1,232 3,806 367,538 371,344 1,061 
Home equity lines of credit141 77 — 218 92,864 93,082 — 
Consumer38 8 19 65 13,266 13,331 19 
Total originated loans2,223 3,281 2,541 8,045 1,091,581 1,099,626 1,084 
Acquired Loans
Commercial and industrial— 23 — 23 3,536 3,559 — 
Commercial real estate1,063 — — 1,063 114,049 115,112 — 
Commercial real estate construction— — — — 2,239 2,239 — 
Residential mortgage293 257 120 670 36,323 36,993 120 
Home equity lines of credit236 93 15 344 14,621 14,965 15 
Consumer— — — — 107 107 — 
Total acquired loans1,592 373 135 2,100 170,875 172,975 135 
Total Loans
Commercial and industrial16 23 4 43 149,272 149,315 4 
Commercial real estate1,388 2,247 1,286 4,921 562,127 567,048 — 
Commercial real estate construction78 — — 78 26,338 26,416 — 
Residential mortgage1,918 1,206 1,352 4,476 403,861 408,337 1,181 
Home equity lines of credit377 170 15 562 107,485 108,047 15 
Consumer38 8 19 65 13,373 13,438 19 
Total Loans$3,815 $3,654 $2,676 $10,145 $1,262,456 $1,272,601 $1,219 
 
The following table summarizes the allowance for loan losses and recorded investment in loans:
In thousandsCommercial
and Industrial		Commercial
Real Estate		Commercial
Real Estate
Construction		Residential
Mortgage		Home Equity
Lines of Credit		ConsumerUnallocatedTotal
December 31, 2020        
Allowance for loan losses        
Beginning balance- January 1, 2020$2,400 $6,693 $298 $2,555 $619 $650 $620 $13,835 
Charge-offs(2,107)(675)— — — (205)— (2,987)
Recoveries83 96 — 1 29 29 — 238 
Provisions3,661 3,455 205 839 45 174 761 9,140 
Ending balance- December 31, 2020$4,037 $9,569 $503 $3,395 $693 $648 $1,381 $20,226 
Ending balance: individually evaluated for impairment$1,224 $158 $— $— $— $— $— $1,382 
Ending balance: collectively evaluated for impairment$2,813 $9,411 $503 $3,395 $693 $648 $1,381 $18,844 
Loans receivables        
Ending balance$320,154 $744,627 $53,902 $401,340 $104,610 $13,151 $— $1,637,784 
Ending balance: individually evaluated for impairment$2,031 $8,589 $— $101 $— $— $— $10,721 
Ending balance: collectively evaluated for impairment$318,123 $736,038 $53,902 $401,239 $104,610 $13,151 $— $1,627,063 
December 31, 2019        
Allowance for loan losses        
Beginning balance- January 1, 2019$2,597 $6,208 $203 $2,814 $611 $692 $839 $13,964 
Charge-offs(163)(78)— (173)(301)(202)— (917)
Recoveries66 10 — 37 12 63 — 188 
Provisions(100)553 95 (123)297 97 (219)600 
Ending balance- December 31, 2019$2,400 $6,693 $298 $2,555 $619 $650 $620 $13,835 
Ending balance: individually evaluated for impairment$42 $— $— $— $— $— $— $42 
Ending balance: collectively evaluated for impairment$2,358 $6,693 $298 $2,555 $619 $650 $620 $13,793 
Loans receivables        
Ending balance$149,315 $567,048 $26,416 $408,337 $108,047 $13,438 $— $1,272,601 
Ending balance: individually evaluated for impairment$65 $7,383 $— $171 $83 $— $— $7,702 
Ending balance: collectively evaluated for impairment$149,250 $559,665 $26,416 $408,166 $107,964 $13,438 $— $1,264,899 
The Bank has granted loans to certain of its executive officers, directors and their related interests. These loans were made on substantially the same basis, including interest rates and collateral as those prevailing for comparable transactions with other borrowers at the same time. The aggregate amount of these loans was $5,215,000 and $5,016,000 at December 31, 2020 and 2019, respectively. During 2020, $710,000 new loans or advances were extended and repayments totaled $511,000. None of these loans were past due, in nonaccrual status, or restructured at December 31, 2020.
Loan Modifications/Troubled Debt Restructurings/COVID-19
The Corporation has received a significant number of requests to modify loan terms and/or defer principal and/or interest payments, and has agreed to many such deferrals or are in the process of doing so. Under Section 4013 of the Coronavirus Aid,
Relief, and Economic Security (CARES) Act, loans less than 30 days past due as of December 31, 2019, will be considered current for COVID-19 modifications. A financial institution can then use FASB agreed upon temporary changes to GAAP for loan modifications related to COVID-19 that would otherwise be categorized as a troubled debt restructuring (TDR), and suspend any determination of a loan modified as a result of COVID-19 being a TDR, including the requirement to determine impairment for accounting purposes. Similarly, FASB has confirmed that short-term modifications made on a good-faith basis in response to COVID-19 to loan customers who were current prior to any relief are not TDRs.
Beginning the week of March 16, 2020, the Corporation began receiving requests for temporary modifications to the repayment structure for borrower loans. The modifications are grouped into deferred payments of no more than six months, interest only, lines of credit only and other. As of December 31, 2020, the Corporation had 48 temporary modifications with principal balances totaling $36,123,155.

Details with respect to actual loan modifications are as follows:    
Type of LoansNumber of LoansDeferral PeriodBalancePercentage of Capital
Commercial Purpose38 
Up to 6 months
$35,464,419 13.75 %
Consumer Purpose10 
Up to 6 months
658,736 0.26 
48 $36,123,155 

The global pandemic referred to as COVID-19 has created many barriers to loan production relative to the measures taken to slow the spread. These measures have put a large strain on a wide variety of industries within the global economy generally, and ACNB’s market specifically. The overall economic impact and effect of the measures is yet to be fully understood as its effects will most likely lag timewise behind while businesses and governments inject resources to help lessen the impact. Despite efforts to lessen the impact, it is the Corporation’s current belief that the pandemic will temporarily, or in some cases permanently, damage our borrower’s ability to repay loans and comply with terms.
The following table provides information with respect to the Corporation’s Commercial loans by industry at December 31, 2020 that may have suffered, or are expected to suffer, greater losses as a result of COVID-19.
            
Type of LoansNumber of LoansBalancePercentage of Total Loan PortfolioPercentage of Capital
Lessors of Commercial Real Estate7 $7,165,485 0.44 %2.78 %
Lessors of Residential Real Estate1 18,066 0.00 0.01 
Hospitality Industry (Hotels/Bed & Breakfast)7 18,394,377 1.12 7.13 
Food Services Industry3 4,535,983 0.28 1.76 
Other20 5,350,508 0.33 2.07 
38 $35,464,419 2.17 %13.75 %
Paycheck Protection Program
The Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, was signed into law on March 27, 2020, and provided over $2.0 trillion in emergency economic relief to individuals and businesses impacted by the COVID-19 pandemic. The CARES Act authorized the Small Business Administration (SBA) to temporarily guarantee loans under a new 7(a) loan program called the Paycheck Protection Program (PPP). As a qualified SBA lender, the Corporation was automatically authorized to originate PPP loans.
An eligible business can apply for a PPP loan up to the greater of: (1) 2.5 times its average monthly payroll costs, or (2) $10.0 million. PPP loans will have: (a) an interest rate of 1.0%, (b) a two-year loan term to maturity; and (c) principal and interest payments deferred for six months from the date of disbursement. The SBA will guarantee 100% of the PPP loans made to eligible borrowers. The entire principal amount of the borrowers’ PPP loan, including any accrued interest, is eligible to be reduced by the loan forgiveness amount under the PPP, so long as employee and compensation levels of the business are maintained and 60% of the loan proceeds are used for payroll expenses, with the remaining 40% of the loan proceeds used for other qualifying expenses.
As of December 31, 2020, the Corporation had originated approximately 1,440 applications for $160,857,603 of loans under the PPP. Fee income was approximately $6 million, before costs. The Corporation recognized $2,875,000 of PPP fee income through December 31, 2020 and the remaining amount will be recognized in future quarters.