(5) Allowance for Loan Losses

Management has an established methodology for determining the adequacy of the allowance for loan losses that assesses the risks and losses inherent in the loan portfolio. For purposes of determining the allowance for loan and lease losses, the Company has segmented certain loans in the portfolio by product type. Loss migration rates for each risk category are calculated and used as the basis for calculating loan loss allowance allocations. Loss migration rates are calculated over a three-year period for all portfolio segments. Management also considers certain economic factors for trends that management uses to account for the qualitative and environmental changes in risk, which affects the level of the reserve. The following economic factors are analyzed:

•

Changes in lending policies and procedures

•

Changes in experience and depth of lending and management staff

•

Changes in quality of credit review system

•

Changes in nature and volume of the loan portfolio

•

Changes in past due, classified and nonaccrual loans and TDRs

•

Changes in economic and business conditions

•

Changes in competition or legal and regulatory requirements

•

Changes in concentrations within the loan portfolio

•

Changes in the underlying collateral for collateral dependent loans

The total allowance reflects management’s estimate of loan losses inherent in the loan portfolio at the balance sheet date. The Company considers the allowance for loan losses of $13,331 adequate to cover loan losses inherent in the loan portfolio, at September 30, 2018. The following tables present, by portfolio segment, the changes in the allowance for loan losses for the three and nine months ended September 30, 2018 and 2017.

Allowance for loan losses:

For the nine months ended September 30, 2018	Beginning balance		Charge-offs			Recoveries		Provision			Ending Balance
Commercial & Agriculture	$	1,562	$	(248	)	$	168	$	149		$	1,631
Commercial Real Estate:
Owner Occupied		2,043		(193	)		148		45			2,043
Non-Owner Occupied		5,307		(121	)		23		236			5,445
Residential Real Estate		1,910		(74	)		181		(218	)		1,799
Real Estate Construction		834		—			—		147			981
Farm Real Estate		430		—			4		(41	)		393
Consumer and Other		290		(148	)		67		106			315
Unallocated		758		—			—		(34	)		724
Total	$	13,134	$	(784	)	$	591	$	390		$	13,331

For the nine months ended September 30, 2018, the allowance for Commercial & Agriculture loans increased due to an increase in general reserves required for this type as a result of higher loan balances and higher loss rates. The result was represented as an increase in the provision. The allowance for Commercial Real Estate – Non-Owner Occupied loans increased due to an increase in general reserves required as a result of higher loan balances. This was represented as an increase in the provision. The allowance for Residential Real Estate loans was reduced by a decrease in general reserves required for this type as a result of a decrease in loss rates, represented by a decrease in the provision. The allowance for Real Estate Construction loans increased due to an increase in general reserves required as a result of higher loan balances. The allowance for Farm Real Estate loans was reduced by a decrease in general reserves required for this type as a result of lower outstanding loan balances. The result was represented as a decrease in the provision. Management feels that the unallocated amount is appropriate and within the relevant range for the allowance that is reflective of the risk in the portfolio.

Allowance for loan losses:

For the nine months ended September 30, 2017	Beginning balance		Charge-offs			Recoveries		Provision			Ending Balance
Commercial & Agriculture	$	2,018	$	(11	)	$	134	$	(530	)	$	1,611
Commercial Real Estate:
Owner Occupied		2,171		(301	)		26		177			2,073
Non-Owner Occupied		4,606		(38	)		42		663			5,273
Residential Real Estate		3,089		(312	)		164		(462	)		2,479
Real Estate Construction		420		—			32		215			667
Farm Real Estate		442		—			2		(20	)		424
Consumer and Other		314		(135	)		38		108			325
Unallocated		245		—			—		(151	)		94
Total	$	13,305	$	(797	)	$	438	$	—		$	12,946

For the nine months ended September 30, 2017, the allowance for Commercial & Agriculture loans was reduced by a decrease in general reserves as a result of lower loss rates. The result was represented as a decrease in the provision. The allowance for Commercial Real Estate – Owner Occupied loans was reduced by a decrease in general reserves and charge-offs. The allowance for Commercial Real Estate – Non-Owner Occupied loans increased due to an increase in general reserves required for this type as a result of higher loan balances. The allowance for Residential Real Estate loans was reduced by a decrease in general reserves required for this type as a result of a decrease in loss rates, represented by a decrease in the provision. The allowance for Real Estate Construction loans increased due to higher outstanding loan balances for this type of loan. The allowance for Farm Real Estate loans was reduced by a decrease in general reserves required for this type as a result of lower outstanding loan balances. The result was represented as a decrease in the provision. The allowance for Consumer and Other loans increased due to an increase in general reserves required for this type as a result of higher loss rates. Management feels that the unallocated amount is appropriate and within the relevant range for the allowance that is reflective of the risk in the portfolio.

Allowance for loan losses:

For the three months ended September 30, 2018	Beginning balance		Charge-offs			Recoveries		Provision			Ending Balance
Commercial & Agriculture	$	1,630	$	—		$	64	$	(63	)	$	1,631
Commercial Real Estate:
Owner Occupied		2,161		—			18		(136	)		2,043
Non-Owner Occupied		5,135		(76	)		2		384			5,445
Residential Real Estate		1,691		(12	)		88		32			1,799
Real Estate Construction		861		—			—		120			981
Farm Real Estate		410		—			1		(18	)		393
Consumer and Other		300		(45	)		34		26			315
Unallocated		679		—			—		45			724
Total	$	12,867	$	(133	)	$	207	$	390		$	13,331

For the three months ended September 30, 2018, the allowance for Commercial & Agriculture loans increased due to amounts recovered on previously charged off loans offset by a decrease in general reserves required for this type as a result of lower loss rates. The result was represented as a decrease in the provision. The allowance for Commercial Real Estate – Owner Occupied loans decreased due to a decrease in general reserves required for this type as a result of lower loan balances and lower loss rates. The result was represented as a decrease in the provision. The allowance for Commercial Real Estate – Non-Owner Occupied loans increased due to an increase in general reserves required for this type as a result of higher loan balances and higher loss rates. The allowance for Residential Real Estate loans increased due to the net recoveries recorded during the quarter for this loan type. The allowance for Real Estate Construction loans increased due to an increase in general reserves required as a result of higher loan balances. The allowance for Farm Real Estate loans was reduced by a decrease in general reserves required for this type as a result of lower outstanding loan balances. The result was represented as a decrease in the provision. Management feels that the unallocated amount is appropriate and within the relevant range for the allowance that is reflective of the risk in the portfolio.

Allowance for loan losses:

For the three months ended September 30, 2017	Beginning balance		Charge-offs			Recoveries		Provision			Ending Balance
Commercial & Agriculture	$	1,608	$	(10	)	$	51	$	(38	)	$	1,611
Commercial Real Estate:
Owner Occupied		2,010		(91	)		8		146			2,073
Non-Owner Occupied		4,739		(38	)		33		539			5,273
Residential Real Estate		2,676		(116	)		77		(158	)		2,479
Real Estate Construction		482		—			13		172			667
Farm Real Estate		425		—			2		(3	)		424
Consumer and Other		324		(54	)		24		31			325
Unallocated		783		—			—		(689	)		94
Total	$	13,047	$	(309	)	$	208	$	—		$	12,946

For the three months ended September 30, 2017, the allowance for Commercial & Agriculture loans increased due to an increase in general reserves as a result of higher loan balances, offset by net recoveries. The result was represented as a decrease in the provision. The allowance for Commercial Real Estate – Owner Occupied loans increased due to an increase in general reserves as a result of higher outstanding loan balances and loss rates. The result was represented as an increase in the provision. The allowance for Commercial Real Estate – Non-Owner Occupied loans increased due to an increase in general reserves required for this type as a result of higher loan balances and by higher loss rates. The allowance for Residential Real Estate loans was reduced by a decrease in general reserves required for this type as a result of a decrease in loss rates, represented by a decrease in the provision. The allowance for Real Estate Construction loans increased due to higher outstanding loan balances for this type of loan and recoveries. Management feels that the unallocated amount is appropriate and within the relevant range for the allowance that is reflective of the risk in the portfolio.

The following tables present, by portfolio segment, the allocation of the allowance for loan losses and related loan balances as of September 30, 2018 and December 31, 2017.

September 30, 2018	Loans acquired with credit deterioration		Loans individually evaluated for impairment		Loans collectively evaluated for impairment		Total
Allowance for loan losses:
Commercial & Agriculture	$	—	$	—	$	1,631	$	1,631
Commercial Real Estate:
Owner Occupied		—		10		2,033		2,043
Non-Owner Occupied		—		—		5,445		5,445
Residential Real Estate		30		350		1,419		1,799
Real Estate Construction		—		—		981		981
Farm Real Estate		—		6		387		393
Consumer and Other		—		—		315		315
Unallocated		—		—		724		724
Total	$	30	$	366	$	12,935	$	13,331
Outstanding loan balances:
Commercial & Agriculture	$	47	$	390	$	169,249	$	169,686
Commercial Real Estate:
Owner Occupied		—		505		202,582		203,087
Non-Owner Occupied		—		36		499,204		499,240
Residential Real Estate		968		2,315		455,738		459,021
Real Estate Construction		—		—		126,288		126,288
Farm Real Estate		—		707		37,331		38,038
Consumer and Other		—		—		20,284		20,284
Total	$	1,015	$	3,953	$	1,510,676	$	1,515,644

December 31, 2017	Loans acquired with credit deterioration		Loans individually evaluated for impairment		Loans collectively evaluated for impairment		Total
Allowance for loan losses:
Commercial & Agriculture	$	82	$	4	$	1,476	$	1,562
Commercial Real Estate:
Owner Occupied		—		6		2,037		2,043
Non-Owner Occupied		—		—		5,307		5,307
Residential Real Estate		44		109		1,757		1,910
Real Estate Construction		—		—		834		834
Farm Real Estate		—		6		424		430
Consumer and Other		—		—		290		290
Unallocated		—		—		758		758
Total	$	126	$	125	$	12,883	$	13,134
Outstanding loan balances:
Commercial & Agriculture	$	87	$	438	$	151,948	$	152,473
Commercial Real Estate:
Owner Occupied		—		1,010		163,089		164,099
Non-Owner Occupied		—		44		425,579		425,623
Residential Real Estate		128		1,360		267,247		268,735
Real Estate Construction		—		—		97,531		97,531
Farm Real Estate		—		608		38,853		39,461
Consumer and Other		—		—		16,739		16,739
Total	$	215	$	3,460	$	1,160,986	$	1,164,661

The following tables present credit exposures by internally assigned grades as of September 30, 2018 and December 31, 2017. The risk rating analysis estimates the capability of the borrower to repay the contractual obligations of the loan agreements as scheduled or at all. The Company’s internal credit risk grading system is based on experiences with similarly graded loans.

The Company’s internally assigned grades are as follows:

•

Pass – loans which are protected by the current net worth and paying capacity of the obligor or by the value of the underlying collateral.

•

Special Mention – loans where a potential weakness or risk exists, which could cause a more serious problem if not corrected.

•

Substandard – loans that have a well-defined weakness based on objective evidence and are characterized by the distinct possibility that Civista will sustain some loss if the deficiencies are not corrected.

•

Doubtful – loans classified as doubtful have all the weaknesses inherent in a substandard asset. In addition, these weaknesses make collection or liquidation in full highly questionable and improbable, based on existing circumstances.

•

Loss – loans classified as a loss are considered uncollectible, or of such value that continuance as an asset is not warranted.

Generally, Residential Real Estate, Real Estate Construction and Consumer and Other loans are not risk-graded, except when collateral is used for a business purpose.

September 30, 2018	Pass		Special Mention		Substandard		Doubtful		Ending Balance
Commercial & Agriculture	$	165,691	$	1,999	$	1,996	$	—	$	169,686
Commercial Real Estate:
Owner Occupied		194,192		3,458		5,437		—		203,087
Non-Owner Occupied		496,495		1,860		885		—		499,240
Residential Real Estate		67,053		598		8,110		—		75,761
Real Estate Construction		115,419		13		43		—		115,475
Farm Real Estate		31,758		3,731		2,549		—		38,038
Consumer and Other		1,254		—		29		—		1,283
Total	$	1,071,862	$	11,659	$	19,049	$	—	$	1,102,570

December 31, 2017	Pass		Special Mention		Substandard		Doubtful		Ending Balance
Commercial & Agriculture	$	140,842	$	8,412	$	3,219	$	—	$	152,473
Commercial Real Estate:
Owner Occupied		155,756		1,166		7,177		—		164,099
Non-Owner Occupied		422,363		2,321		939		—		425,623
Residential Real Estate		62,628		1,997		5,873		—		70,498
Real Estate Construction		91,545		15		27		—		91,587
Farm Real Estate		25,228		11,236		2,997		—		39,461
Consumer and Other		1,312		—		70		—		1,382
Total	$	899,674	$	25,147	$	20,302	$	—	$	945,123

The following tables present performing and nonperforming loans based solely on payment activity for the periods ended September 30, 2018 and December 31, 2017 that have not been assigned an internal risk grade. The types of loans presented here are not assigned a risk grade unless there is evidence of a problem. Payment activity is reviewed by management on a monthly basis to evaluate performance. Loans are considered to be nonperforming when they become 90 days past due or if management thinks that we may not collect all of our principal and interest. Nonperforming loans also include certain loans that have been modified in Troubled Debt Restructurings (TDRs) where economic concessions have been granted to borrowers who have experienced or are expected to experience financial difficulties. These concessions typically result from the Company’s loss mitigation activities and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance or other actions due to economic status. Certain TDRs are classified as nonperforming at the time of restructure and may only be returned to performing status after considering the borrower’s sustained repayment performance for a reasonable period, generally six months.

September 30, 2018	Residential Real Estate		Real Estate Construction		Consumer and Other		Total
Performing	$	383,260	$	10,813	$	18,986	$	413,059
Nonperforming		—		—		15		15
Total	$	383,260	$	10,813	$	19,001	$	413,074

December 31, 2017	Residential Real Estate		Real Estate Construction		Consumer and Other		Total
Performing	$	198,237	$	5,944	$	15,341	$	219,522
Nonperforming		—		—		16		16
Total	$	198,237	$	5,944	$	15,357	$	219,538

The following tables include an aging analysis of the recorded investment of past due loans outstanding as of September 30, 2018 and December 31, 2017.

September 30, 2018	30-59 Days Past Due		60-89 Days Past Due		90 Days or Greater		Total Past Due		Current		Purchased Credit- Impaired Loans		Total Loans		Past Due 90 Days and Accruing
Commercial & Agriculture	$	152	$	—	$	285	$	437	$	169,202	$	47	$	169,686	$	—
Commercial Real Estate:
Owner Occupied		327		159		506		992		202,095		—		203,087		—
Non-Owner Occupied		293		—		68		361		498,879		—		499,240		—
Residential Real Estate		681		728		902		2,311		455,742		968		459,021		—
Real Estate Construction		—		—		39		39		126,249		—		126,288		—
Farm Real Estate		17		75		149		241		37,797		—		38,038		—
Consumer and Other		101		30		15		146		20,138		—		20,284		15
Total	$	1,571	$	992	$	1,964	$	4,527	$	1,510,102	$	1,015	$	1,515,644	$	15

December 31, 2017	30-59 Days Past Due		60-89 Days Past Due		90 Days or Greater		Total Past Due		Current		Purchased Credit- Impaired Loans		Total Loans		Past Due 90 Days and Accruing
Commercial & Agriculture	$	575	$	2	$	685	$	1,262	$	151,124	$	87	$	152,473	$	—
Commercial Real Estate:
Owner Occupied		897		104		484		1,485		162,614		—		164,099		—
Non-Owner Occupied		133		—		470		603		425,020		—		425,623		—
Residential Real Estate		1,613		229		785		2,627		265,980		128		268,735		—
Real Estate Construction		—		—		27		27		97,504		—		97,531		—
Farm Real Estate		27		—		186		213		39,248		—		39,461		—
Consumer and Other		92		96		16		204		16,535		—		16,739		16
Total	$	3,337	$	431	$	2,653	$	6,421	$	1,158,025	$	215	$	1,164,661	$	16

The following table presents loans on nonaccrual status, excluding purchased credit-impaired (PCI) loans, as of September 30, 2018 and December 31, 2017.

	September 30, 2018		December 31, 2017
Commercial & Agriculture	$	285	$	887
Commercial Real Estate:
Owner Occupied		891		1,476
Non-Owner Occupied		159		711
Residential Real Estate		3,945		2,778
Real Estate Construction		43		27
Farm Real Estate		334		186
Consumer and Other		27		67
Total	$	5,684	$	6,132

Nonaccrual Loans: Loans are considered for nonaccrual status upon reaching 90 days delinquency, unless the loan is well secured and in the process of collection, although the Company may be receiving partial payments of interest and partial repayments of principal on such loans. When a loan is placed on nonaccrual status, previously accrued but unpaid interest is deducted from interest income. Payments received on nonaccrual loans are applied to the unpaid principal balance. A loan may be returned to accruing status only if one of three conditions are met: the loan is well-secured and none of the principal and interest has been past due for a minimum of 90 days; the loan is a TDR and has made a minimum of six months payments; or the principal and interest payments are reasonably assured and a sustained period of performance has occurred, generally six months.

Modifications: A modification of a loan constitutes a TDR when the Company for economic or legal reasons related to a borrower’s financial difficulties grants a concession to the borrower that it would not otherwise consider. The Company offers various types of concessions when modifying a loan, however, forgiveness of principal is rarely granted. Commercial Real Estate loans modified in a TDR often involve reducing the interest rate lower than the current market rate for new debt with similar risk. Residential Real Estate loans modified in a TDR primarily involve interest rate reductions where monthly payments are lowered to accommodate the borrowers’ financial needs.

Loans modified in a TDR are typically already on non-accrual status and partial charge-offs have in some cases already been taken against the outstanding loan balance. As a result, loans modified in a TDR may have the financial effect of increasing the specific allowance associated with the loan. An allowance for impaired loans that have been modified in a TDR are measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate or the fair value of the collateral, less any selling costs, if the loan is collateral dependent. Management exercises significant judgment in developing these estimates. As of September 30, 2018, TDRs accounted for $171 of the allowance for loan losses. As of December 31, 2017, TDRs accounted for $169 of the allowance for loan losses.

Loan modifications that are considered TDRs completed during the periods ended September 30, 2018 and September 30, 2017 were as follows:

	For the Nine-Month Period Ended
	September 30, 2018
	Number of Contracts		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Commercial & Agriculture		—	$	—	$	—
Commercial Real Estate—Owner Occupied		—		—		—
Commercial Real Estate—Non-Owner Occupied		—		—		—
Residential Real Estate		1		23		23
Real Estate Construction		—		—		—
Farm Real Estate		1		110		110
Consumer and Other		—		—		—
Total Loan Modifications		2	$	133	$	133

	For the Nine-Month Period Ended
	September 30, 2017
	Number of Contracts		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Commercial & Agriculture		—	$	—	$	—
Commercial Real Estate—Owner Occupied		—		—		—
Commercial Real Estate—Non-Owner Occupied		—		—		—
Residential Real Estate		1		13		13
Real Estate Construction		—		—		—
Farm Real Estate		—		—		—
Consumer and Other		—		—		—
Total Loan Modifications		1	$	13	$	13

	For the three months ended
	September 30, 2018
	Number of Contracts		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Commercial & Agriculture		—	$	—	$	—
Commercial Real Estate—Owner Occupied		—		—		—
Commercial Real Estate—Non-Owner Occupied		—		—		—
Residential Real Estate		1		23		23
Real Estate Construction		—		—		—
Farm Real Estate		1		110		110
Consumer and Other		—		—		—
Total Loan Modifications		2	$	133	$	133

For the three months ended

September 30, 2017

Number of

Contracts

Pre-

Modification

Outstanding

Recorded

Investment

Post-

Modification

Outstanding

Recorded

Investment

Commercial & Agriculture

—

Commercial Real Estate—Owner Occupied

—

Commercial Real Estate—Non-Owner Occupied

—

Residential Real Estate

—

Real Estate Construction

—

Farm Real Estate

—

Consumer and Other

—

Total Loan Modifications

—

Recidivism, or the borrower defaulting on its obligation pursuant to a modified loan, results in the loan once again becoming a non-accrual loan. Recidivism occurs at a notably higher rate than do defaults on new origination loans, so modified loans present a higher risk of loss than do new origination loans.

During both the three- and nine-month periods ended September 30, 2018 and September 30, 2017, there were no defaults on loans that were modified and considered TDRs during the respective twelve previous months.

Impaired Loans: Larger (greater than $350) Commercial & Agricultural and Commercial Real Estate loan relationships, all TDRs and Residential Real Estate and Consumer loans that are part of a larger relationship are tested for impairment on a quarterly basis. These loans are analyzed to determine if it is probable that all amounts will not be collected according to the contractual terms of the loan agreement. If management determines that the value of the impaired loan is less than the recorded investment in the loan (net of previous charge-offs, deferred loan fees or costs and unamortized premium or discount), impairment is recognized through an allowance estimate or a charge-off to the allowance.

The following table includes the recorded investment and unpaid principal balances for impaired financing receivables, excluding PCI loans, with the associated allowance amount, if applicable, as of September 30, 2018 and December 31, 2017.

	September 30, 2018						December 31, 2017
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance recorded:
Commercial & Agriculture	$	390	$	390			$	—	$	—
Commercial Real Estate:
Owner Occupied		198		198				693		913
Non-Owner Occupied		36		39				44		48
Residential Real Estate		1,220		1,292				977		1,049
Farm Real Estate		257		257				148		148
Total		2,101		2,176				1,862		2,158
With an allowance recorded:
Commercial & Agriculture		—		—	$	—		438		438	$	4
Commercial Real Estate:
Owner Occupied		307		307		10		317		317		6
Residential Real Estate		1,095		1,099		350		383		387		109
Farm Real Estate		450		450		6		460		460		6
Total		1,852		1,856		366		1,598		1,602		125
Total:
Commercial & Agriculture		390		390		—		438		438		4
Commercial Real Estate:
Owner Occupied		505		505		10		1,010		1,230		6
Non-Owner Occupied		36		39		—		44		48		—
Residential Real Estate		2,315		2,391		350		1,360		1,436		109
Farm Real Estate		707		707		6		608		608		6
Total	$	3,953	$	4,032	$	366	$	3,460	$	3,760	$	125

The following table includes the average recorded investment and interest income recognized for impaired financing receivables for the three- and nine-month periods ended September 30, 2018 and 2017.

	September 30, 2018				September 30, 2017
For the nine months ended	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Commercial & Agriculture	$	704	$	19	$	1,609	$	27
Commercial Real Estate—Owner Occupied		641		26		1,632		66
Commercial Real Estate—Non-Owner Occupied		41		4		280		5
Residential Real Estate		1,580		51		1,554		56
Farm Real Estate		721		22		614		21
Total	$	3,687	$	122	$	5,689	$	175

	September 30, 2018				September 30, 2017
For the three months ended:	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Commercial & Agriculture	$	675	$	6	$	1,366	$	7
Commercial Real Estate—Owner Occupied		511		9		1,377		18
Commercial Real Estate—Non-Owner Occupied		38		1		202		2
Residential Real Estate		1,811		17		1,437		17
Farm Real Estate		742		7		614		8
Total	$	3,777	$	40	$	4,996	$	52

Changes in the amortizable yield for PCI loans were as follows, since acquisition:

	For the Nine-Month Period Ended September 30, 2018			For the Nine-Month Period Ended September 30, 2017
	(In Thousands)			(In Thousands)
Balance at beginning of period	$	15		$	49
Acquisition of PCI loans		334			—
Accretion		(11	)		(27	)
Balance at end of period	$	338		$	22

	For the Three-Month Period Ended September 30, 2018			For the Three-Month Period Ended September 30, 2017
	(In Thousands)			(In Thousands)
Balance at beginning of period	$	6		$	31
Acquisition of PCI loans		334			—
Accretion		(2	)		(9	)
Balance at end of period	$	338		$	22

Loans acquired with credit deterioration of $878 and accounted for in accordance with ASC 310-30 were individually evaluated to estimate credit losses and a net recovery amount for each loan. The net cash flows for each loan were then discounted to present value using a risk-adjusted market rate. The table below presents the components of the purchase accounting adjustments.

	September 14, 2018
	(In Thousands)
Contractually required payments	$	2,353
Non-accretable discount		(1,141	)
Expected cash flows		1,212
Accretable discount		(334	)
Estimated fair value	$	878

The following table presents additional information regarding loans acquired and accounted for in accordance with ASC 310-30:

	At September 30, 2018		At December 31, 2017
	Acquired Loans with Specific Evidence of Deterioration of Credit Quality (ASC 310-30)		Acquired Loans with Specific Evidence of Deterioration of Credit Quality (ASC 310-30)
	(In Thousands)
Outstanding balance	$	1,898	$	775
Carrying amount		1,015		215

There has been $30 and $126 in allowance for loan losses recorded for acquired loans with or without specific evidence of deterioration in credit quality as of September 30, 2018 and December 31, 2017, respectively.

Foreclosed Assets Held For Sale

Foreclosed assets acquired in settlement of loans are carried at fair value less estimated costs to sell and are included in other assets on the Consolidated Balance Sheet. As of September 30, 2018 and December 31, 2017, a total of $0 and $16, respectively of foreclosed assets were included in other assets. As of September 30, 2018 and December 31, 2017, the Company had initiated formal foreclosure procedures on $286 and $239, respectively, of consumer residential mortgages.