LOANS AND ALLOWANCE FOR LOAN LOSSES

The composition of the loan portfolio, net of deferred origination fees and costs, is summarized as follows (in thousands):



	September 30, 2017		December 31, 2016
Commercial and agricultural:
Commercial and industrial	$	188,341	$	176,201
Agricultural	448		360
Commercial mortgages:
Construction	57,704		46,387
Commercial mortgages, other	580,061		522,269
Residential mortgages	197,210		198,493
Consumer loans:
Credit cards	1,444		1,476
Home equity lines and loans	98,492		98,590
Indirect consumer loans	147,426		139,572
Direct consumer loans	17,687		16,942
Total loans, net of deferred origination fees and costs	$	1,288,813	$	1,200,290
Interest receivable on loans	3,448		3,192
Total recorded investment in loans	$	1,292,261	$	1,203,482

The Corporation's concentrations of credit risk by loan type are reflected in the preceding table. The concentrations of credit risk with standby letters of credit, committed lines of credit and commitments to originate new loans generally follow the loan classifications in the table above.

The following tables present the activity in the allowance for loan losses by portfolio segment for the three and nine-month periods ended September 30, 2017 and 2016 (in thousands):



	Three Months Ended September 30, 2017
Allowance for loan losses	Commercial and Agricultural			Commercial Mortgages			Residential Mortgages			Consumer Loans			Total
Beginning balance	$	1,883		$	7,778		$	1,517		$	3,926		$	15,104
Charge-offs	(89		)	(154		)	(133		)	(440		)	(816		)
Recoveries	34			1			—			82			117
Net recoveries (charge-offs)	(55		)	(153		)	(133		)	(358		)	(699		)
Provision	99			758			12			420			1,289
Ending balance	$	1,927		$	8,383		$	1,396		$	3,988		$	15,694



	Three Months Ended September 30, 2016
Allowance for loan losses	Commercial and Agricultural			Commercial Mortgages			Residential Mortgages			Consumer Loans			Total
Beginning balance	$	1,771		$	7,754		$	1,504		$	3,639		$	14,668
Charge-offs	(104		)	(52		)	(7		)	(280		)	(443		)
Recoveries	15			1			—			34			50
Net recoveries (charge-offs)	(89		)	(51		)	(7		)	(246		)	(393		)
Provision	101			520			50			379			1,050
Ending balance	$	1,783		$	8,223		$	1,547		$	3,772		$	15,325



	Nine Months Ended September 30, 2017
Allowance for loan losses	Commercial and Agricultural			Commercial Mortgages			Residential Mortgages			Consumer Loans			Total
Beginning balance:	$	1,589		$	7,270		$	1,523		$	3,871		$	14,253
Charge-offs:	(96		)	(154		)	(193		)	(1,265		)	(1,708		)
Recoveries:	95			4			30			270			399
Net recoveries (charge-offs)	(1		)	(150		)	(163		)	(995		)	(1,309		)
Provision	339			1,263			36			1,112			2,750
Ending balance	$	1,927		$	8,383		$	1,396		$	3,988		$	15,694



	Nine Months Ended September 30, 2016
Allowance for loan losses	Commercial and Agricultural			Commercial Mortgages			Residential Mortgages			Consumer Loans			Total
Beginning balance:	$	1,831		$	7,112		$	1,464		$	3,853		$	14,260
Charge-offs:	(121		)	(52		)	(65		)	(995		)	(1,233		)
Recoveries:	65			10			—			190			265
Net recoveries (charge-offs)	(56		)	(42		)	(65		)	(805		)	(968		)
Provision	8			1,153			148			724			2,033
Ending balance	$	1,783		$	8,223		$	1,547		$	3,772		$	15,325

The following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of September 30, 2017 and December 31, 2016 (in thousands):



	September 30, 2017
Allowance for loan losses:	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	159	$	1,009	$	—	$	—	$	1,168
Collectively evaluated for impairment	1,768		7,345		1,396		3,988		14,497
Loans acquired with deteriorated credit quality	—		29		—		—		29
Total ending allowance balance	$	1,927	$	8,383	$	1,396	$	3,988	$	15,694



	December 31, 2016
Allowance for loan losses:	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	—	$	735	$	—	$	141	$	876
Collectively evaluated for impairment	1,589		6,476		1,498		3,730		13,293
Loans acquired with deteriorated credit quality	—		59		25		—		84
Total ending allowance balance	$	1,589	$	7,270	$	1,523	$	3,871	$	14,253



	September 30, 2017
Loans:	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Loans individually evaluated for impairment	$	1,133	$	9,458	$	434	$	67	$	11,092
Loans collectively evaluated for impairment	188,170		629,211		197,267		265,689		1,280,337
Loans acquired with deteriorated credit quality	—		832		—		—		832
Total ending loans balance	$	189,303	$	639,501	$	197,701	$	265,756	$	1,292,261



	December 31, 2016
Loans:	Commercial and Agricultural		Commercial Mortgages		Residential Mortgages		Consumer Loans		Total
Loans individually evaluated for impairment	$	693	$	10,382	$	396	$	455	$	11,926
Loans collectively evaluated for impairment	176,334		558,451		198,474		256,879		1,190,138
Loans acquired with deteriorated credit quality	—		1,323		95		—		1,418
Total ending loans balance	$	177,027	$	570,156	$	198,965	$	257,334	$	1,203,482

The following table presents loans individually evaluated for impairment recognized by class of loans as of September 30, 2017 and December 31, 2016 (in thousands):



	September 30, 2017						December 31, 2016
With no related allowance recorded:	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
Commercial and agricultural:
Commercial and industrial	$	714	$	719	$	—	$	690	$	693	$	—
Commercial mortgages:
Construction	395		396		—		277		278		—
Commercial mortgages, other	4,274		4,277		—		8,792		7,857		—
Residential mortgages	457		434		—		395		396		—
Consumer loans:
Home equity lines and loans	66		67		—		93		95		—
With an allowance recorded:
Commercial and agricultural:
Commercial and industrial	413		414		159		—		—		—
Commercial mortgages:
Commercial mortgages, other	5,875		4,785		1,009		2,245		2,247		735
Consumer loans:
Home equity lines and loans	—		—		—		360		360		141
Total	$	12,194	$	11,092	$	1,168	$	12,852	$	11,926	$	876

The following table presents the average recorded investment and interest income of loans individually evaluated for impairment recognized by class of loans as of the three and nine-month periods ended September 30, 2017 and 2016 (in thousands):



	Three Months Ended September 30, 2017				Three Months Ended September 30, 2016				Nine Months Ended September 30, 2017				Nine Months Ended September 30, 2016
With no related allowance recorded:	Average Recorded Investment		Interest Income Recognized (1)		Average Recorded Investment		Interest Income Recognized (1)		Average Recorded Investment		Interest Income Recognized (1)		Average Recorded Investment		Interest Income Recognized (1)
Commercial and agricultural:
Commercial and industrial	$	661	$	8	$	900	$	10	$	666	$	24	$	1,083	$	33
Commercial mortgages:
Construction	974		3		310		4		946		9		329		11
Commercial mortgages, other	4,946		5		6,124		60		5,973		73		6,760		181
Residential mortgages	439		2		443		2		416		6		358		3
Consumer loans:
Home equity lines & loans	68		1		101		1		76		2		104		4
With an allowance recorded:
Commercial and agricultural:
Commercial and industrial	291		3		45		1		145		4		29		4
Commercial mortgages:
Commercial mortgages, other	4,721		4		5,151		1		3,989		10		4,998		4
Consumer loans:
Home equity lines and loans	—		—		360		—		180		—		362		—
Total	$	12,100	$	26	$	13,434	$	79	$	12,391	$	128	$	14,023	$	240

(1)Cash basis interest income approximates interest income recognized.

The following tables present the recorded investment in non-accrual and loans past due 90 days or more and still accruing by class of loans as of September 30, 2017 and December 31, 2016 (in thousands):



	Non-accrual				Loans Past Due 90 Days or More and Still Accruing
	September 30, 2017		December 31, 2016		September 30, 2017		December 31, 2016
Commercial and agricultural:
Commercial and industrial	$	150	$	—	$	2	$	2
Commercial mortgages:
Construction	159		19		—		—
Commercial mortgages, other	8,473		5,454		—		—
Residential mortgages	3,210		4,201		—		—
Consumer loans:
Credit cards	—		—		19		11
Home equity lines and loans	1,178		1,670		—		—
Indirect consumer loans	837		654		—		—
Direct consumer loans	21		45		—		—
Total	$	14,028	$	12,043	$	21	$	13

The following tables present the aging of the recorded investment in loans as of September 30, 2017 and December 31, 2016 (in thousands):



	September 30, 2017
	30 - 59 Days Past Due		60 - 89 Days Past Due		90 Days or More Past Due		Total Past Due		Loans Acquired with Deteriorated Credit Quality		Loans Not Past Due		Total
Commercial and agricultural:
Commercial and industrial	$	217	$	17	$	2	$	236	$	—	$	188,617	$	188,853
Agricultural	—		—		—		—		—		450		450
Commercial mortgages:
Construction	—		—		—		—		—		57,861		57,861
Commercial mortgages, other	4,218		—		2,572		6,790		832		574,018		581,640
Residential mortgages	1,122		695		1,714		3,531		—		194,170		197,701
Consumer loans:
Credit cards	6		2		19		27		—		1,417		1,444
Home equity lines and loans	220		99		846		1,165		—		97,598		98,763
Indirect consumer loans	2,084		325		501		2,910		—		144,880		147,790
Direct consumer loans	112		21		8		141		—		17,618		17,759
Total	$	7,979	$	1,159	$	5,662	$	14,800	$	832	$	1,276,629	$	1,292,261



	December 31, 2016
	30 - 59 Days Past Due		60 - 89 Days Past Due		90 Days or More Past Due		Total Past Due		Loans Acquired with Deteriorated Credit Quality		Loans Not Past Due		Total
Commercial and agricultural:
Commercial and industrial	$	160	$	7	$	2	$	169	$	—	$	176,497	$	176,666
Agricultural	—		—		—		—		—		361		361
Commercial mortgages:
Construction	—		1,177		—		1,177		—		45,333		46,510
Commercial mortgages, other	652		4,460		2,412		7,524		1,323		514,799		523,646
Residential mortgages	2,100		436		2,383		4,919		95		193,951		198,965
Consumer loans:
Credit cards	3		9		11		23		—		1,453		1,476
Home equity lines and loans	227		—		1,149		1,376		—		97,477		98,853
Indirect consumer loans	1,773		287		542		2,602		—		137,391		139,993
Direct consumer loans	54		7		22		83		—		16,929		17,012
Total	$	4,969	$	6,383	$	6,521	$	17,873	$	1,418	$	1,184,191	$	1,203,482

Troubled Debt Restructurings:

A modification of a loan may result in classification as a TDR when a borrower is experiencing financial difficulty and the modification constitutes a concession. The Corporation offers various types of modifications which may involve a change in the schedule of payments, a reduction in the interest rate, an extension of the maturity date, extending the maturity date at an interest rate lower than the current market rate for new debt with similar risk, requesting additional collateral, releasing collateral for consideration, substituting or adding a new borrower or guarantor, a permanent reduction of the recorded investment in the loan or a permanent reduction of the interest on the loan.

As of September 30, 2017 and December 31, 2016, the Corporation has a recorded investment in TDRs of $9.2 million and $10.2 million, respectively. There were specific reserves of $1.0 million and $0.9 million allocated for TDRs at September 30, 2017 and December 31, 2016, respectively. As of September 30, 2017, TDRs totaling $2.0 million were accruing interest under the modified terms and $7.2 million were on non-accrual status. As of December 31, 2016, TDRs totaling $5.8 million were accruing interest under the modified terms and $4.4 million were on non-accrual status. The Corporation had committed no additional amounts as of both September 30, 2017 and December 31, 2016, to customers with outstanding loans that are classified as TDRs.

During the three-month periods ended September 30, 2017 and 2016, the terms of certain loans were modified as TDRs. The modification of the terms of two commercial & industrial term loans during the three months ended September 30, 2017 included a reduction of the scheduled amortized payments for greater than a three month period, the release of collateral related to one of the loans and the extension of a maturity date. During the three months ended September 30, 2016, no loans were modified as TDRs.

During the nine months ended September 30, 2017 and 2016, the terms of certain loans were modified as TDRs. In addition to the modifications noted above, the modification of the terms of two commercial & industrial term loans and one line of credit during the nine months ended September 30, 2017 included consolidating the loans into one commercial & industrial loan, extending the maturity date by approximately two years and lowering the monthly payment. An additional piece of equipment was taken as collateral but was not considered to be of greater value than the concessions given. The modification of the terms of a commercial mortgage loan during the nine months ended September 30, 2017 included a reduction of the scheduled amortized payments of the loan for greater than a three month period. The modification of the terms of a residential mortgage loan during the nine months ended September 30, 2017 included an extension of the maturity date by approximately five years and a postponement of the scheduled amortized past due payments to the end of the loan.

The modification of the terms of a residential mortgage loan during the nine months ended September 30, 2016 included an extension of the maturity date by thirteen years at a stated interest rate lower than the current market rate for new debt with similar risk and a corresponding reduction of the scheduled amortization payments of the loan due to the longer term. The modification of the terms of five commercial real estate loans and one residential home equity loan during the nine months ended September 30, 2016 included consolidating the loans into one commercial real estate loan and extending the maturity date at a stated interest rate lower than the current market rate for new debt with similar risk. The modification of the terms of a residential mortgage loan performed during the nine months ended September 30, 2016 included a reduction in the stated interest rate for three years and a corresponding reduction of the scheduled amortized payments of the loan due to the lower interest rate. Additionally, $4 thousand of interest and past due escrow payments were capitalized on the restructured loan.

The following table presents loans by class modified as TDRs that occurred during the three months ended September 30, 2017 (dollars in thousands):



September 30, 2017	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled debt restructurings:
Commercial and agricultural:
Commercial and industrial	2	$	506	$	506
Total	2	$	506	$	506

The TDRs described above increased the allowance for loan losses by $0.1 million and resulted in no charge-offs during the three month period ended September 30, 2017.

There were no loans modified as TDRs during the three months ended September 30, 2016.

The following tables presents loans by class modified as TDRs that occurred during the nine months ended September 30, 2017 and 2016 (dollars in thousands):



September 30, 2017	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled debt restructurings:
Commercial and agricultural:
Commercial and industrial	3	$	677	$	677
Commercial mortgages:
Commercial mortgages	1	166		166
Residential mortgages	1	105		105
Total	5	$	948	$	948



September 30, 2016	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled debt restructurings:
Commercial mortgages:
Commercial mortgages	5	$	312	$	310
Residential mortgages	2	295		307
Consumer loans:
Home equity lines and loans	1	74		74
Total	8	$	681	$	691

The TDRs described above increased the allowance for loan losses by $0.2 million and resulted in no charge-offs during the nine months ended September 30, 2017. The TDRs described above did not increase the allowance for loan losses and resulted in no charge-offs during the nine months ended September 30, 2016.

A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms. There were no payment defaults on any loans previously modified as TDRs within twelve months following the modification during the three and nine month periods ended September 30, 2017.

There were no payment defaults on any loans previously modified as TDRs within twelve months following the modification during the three months ended September 30, 2016. The following table presents loans by class modified as TDRs for which there was a payment default within twelve months following the modification during the nine months ended September 30, 2016:

The TDRs that subsequently defaulted described above did not increase the allowance for loan losses and resulted in no charge offs during the nine months ended September 30, 2016.

Credit Quality Indicators

The Corporation establishes a risk rating at origination for all commercial loans. The main factors considered in assigning risk ratings include, but are not limited to: historic and future debt service coverage, collateral position, operating performance, liquidity, leverage, payment history, management ability, and the customer’s industry. Commercial relationship managers monitor all loans in their respective portfolios for any changes in the borrower’s ability to service its debt and affirm the risk ratings for the loans at least annually.

For the retail loans, which include residential mortgages, indirect and direct consumer loans, home equity lines and loans, and credit cards, once a loan is properly approved and closed, the Corporation evaluates credit quality based upon loan repayment.

The Corporation uses the risk rating system to identify criticized and classified loans. Commercial relationships within the criticized and classified risk ratings are analyzed quarterly. The Corporation uses the following definitions for criticized and classified loans (which are consistent with regulatory guidelines):

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 the institution’s credit position at some future date.

Substandard – Loans classified as substandard are inadequately protected by the current net worth and paying capability 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 institution 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.

Commercial loans not meeting the criteria above to be considered criticized or classified are considered to be pass rated loans. Loans listed as not rated are included in groups of homogeneous loans performing under terms of the loan notes. Based on the analyses performed as of September 30, 2017 and December 31, 2016, the risk category of the recorded investment of loans by class of loans is as follows (in thousands):



	September 30, 2017
	Not Rated		Pass		Special Mention		Substandard		Doubtful		Loans acquired with deteriorated credit quality		Total
Commercial and agricultural:
Commercial and industrial	$	—	$	181,457	$	5,390	$	2,006	$	—	$	—	$	188,853
Agricultural	—		450		—				—		—		450
Commercial mortgages:
Construction	—		57,702		—		159		—		—		57,861
Commercial mortgages	—		557,371		7,048		14,990		1,399		832		581,640
Residential mortgages	194,491		—		—		3,210		—		—		197,701
Consumer loans:
Credit cards	1,444		—		—		—		—		—		1,444
Home equity lines and loans	97,585		—		—		1,178		—		—		98,763
Indirect consumer loans	146,953		—		—		837		—		—		147,790
Direct consumer loans	17,738		—		—		21		—		—		17,759
Total	$	458,211	$	796,980	$	12,438	$	22,401	$	1,399	$	832	$	1,292,261



	December 31, 2016
	Not Rated		Pass		Special Mention		Substandard		Doubtful		Loans acquired with deteriorated credit quality		Total
Commercial and agricultural:
Commercial and industrial	$	—	$	172,873	$	2,277	$	1,516	$	—	$	—	$	176,666
Agricultural	—		361		—		—		—		—		361
Commercial mortgages:
Construction	—		45,055		259		1,196		—		—		46,510
Commercial mortgages	—		496,723		8,574		15,566		1,460		1,323		523,646
Residential mortgages	194,669		—		—		4,201		—		95		198,965
Consumer loans:
Credit cards	1,476		—		—		—		—		—		1,476
Home equity lines and loans	97,183		—		—		1,670		—		—		98,853
Indirect consumer loans	139,339		—		—		654		—		—		139,993
Direct consumer loans	16,967		—		—		45		—		—		17,012
Total	$	449,634	$	715,012	$	11,110	$	24,848	$	1,460	$	1,418	$	1,203,482

The Corporation considers the performance of the loan portfolio and its impact on the allowance for loan losses. For residential and consumer loan classes, the Corporation also evaluates credit quality based on the aging status of the loan, which was previously presented, and by payment activity. The following table presents the recorded investment in residential and consumer loans based on payment activity as of September 30, 2017 and December 31, 2016 (in thousands):



	September 30, 2017
			Consumer Loans
	Residential Mortgages		Credit Card		Home Equity Lines and Loans		Indirect Consumer Loans		Other Direct Consumer Loans
Performing	$	194,491	$	1,444	$	97,585	$	146,953	$	17,738
Non-Performing	3,210		—		1,178		837		21
	$	197,701	$	1,444	$	98,763	$	147,790	$	17,759



	December 31, 2016
			Consumer Loans
	Residential Mortgages		Credit Card		Home Equity Lines and Loans		Indirect Consumer Loans		Other Direct Consumer Loans
Performing	$	194,764	$	1,476	$	97,183	$	139,339	$	16,967
Non-Performing	4,201		—		1,670		654		45
	$	198,965	$	1,476	$	98,853	$	139,993	$	17,012

At the time of the merger with Fort Orange Financial Corp., the Corporation identified certain loans with evidence of deteriorated credit quality, and the probability that the Corporation would be unable to collect all contractually required payments from the borrower. These loans are classified as PCI loans. The Corporation adjusted its estimates of future expected losses, cash flows, and renewal assumptions on the PCI loans during the current year. These adjustments were made for changes in expected cash flows due to loans refinanced beyond original maturity dates, impairments recognized subsequent to the acquisition, advances made for taxes or insurance to protect collateral held and payments received in excess of amounts originally expected.

The table below summarizes the changes in total contractually required principal and interest cash payments, management’s estimate of expected total cash payments and carrying value of the PCI loans from July 1, 2017 to September 30, 2017 and July 1, 2016 to September 30, 2016 (in thousands):



Three Months Ended September 30, 2017	Balance at June 30, 2017			Income Accretion		All Other Adjustments			Balance at September 30, 2017
Contractually required principal and interest	$	1,167		$	—	$	(165	)	$	1,002
Contractual cash flows not expected to be collected (nonaccretable discount)	(33		)	—		(33		)	(66		)
Cash flows expected to be collected	1,134			—		(198		)	936
Interest component of expected cash flows (accretable yield)	(128		)	11		13			(104		)
Carrying amount of loans acquired with deteriorating credit quality	$	1,006		$	11	$	(185	)	$	832



Three Months Ended September 30, 2016	Balance at June 30, 2016			Income Accretion		All Other Adjustments			Balance at September 30, 2016
Contractually required principal and interest	$	2,492		$	—	$	(60	)	$	2,432
Contractual cash flows not expected to be collected (nonaccretable discount)	(374		)	—		(33		)	(407		)
Cash flows expected to be collected	2,118			—		(93		)	2,025
Interest component of expected cash flows (accretable yield)	(243		)	26		30			(187		)
Carrying amount of loans acquired with deteriorating credit quality	$	1,875		$	26	$	(63	)	$	1,838

For those purchased credit impaired loans disclosed above, the Corporation decreased the allowance for loan losses by $1 thousand during the three months ended September 30, 2017 and did not increase or decrease the allowance for loan losses during the three months ended September 30, 2016. The Corporation reversed $1 thousand of the allowance for loan losses during the three months ended September 30, 2017. The Corporation did not reverse any allowance for loan losses during the three months ended September 30, 2016.

The tables below summarizes the changes in total contractually required principal and interest cash payments, management’s estimate of expected total cash payments and carrying value of the PCI loans from January 1, 2017 to September 30, 2017 and January 1, 2016 to September 30, 2016 (in thousands):



Nine Months Ended September 30, 2017	Balance at December 31, 2016			Income Accretion		All Other Adjustments			Balance at September 30, 2017
Contractually required principal and interest	$	1,940		$	—	$	(938	)	$	1,002
Contractual cash flows not expected to be collected (nonaccretable discount)	(352		)	—		286			(66		)
Cash flows expected to be collected	1,588			—		(652		)	936
Interest component of expected cash flows (accretable yield)	(170		)	51		15			(104		)
Carrying amount of loans acquired with deteriorating credit quality	$	1,418		$	51	$	(637	)	$	832



Nine Months Ended September 30, 2016	Balance at December 31, 2015			Income Accretion		All Other Adjustments			Balance at September 30, 2016
Contractually required principal and interest	$	2,912		$	—	$	(480	)	$	2,432
Contractual cash flows not expected to be collected (nonaccretable discount)	(506		)	—		99			(407		)
Cash flows expected to be collected	2,406			—		(381		)	2,025
Interest component of expected cash flows (accretable yield)	(311		)	96		28			(187		)
Carrying amount of loans acquired with deteriorating credit quality	$	2,095		$	96	$	(353	)	$	1,838

For those purchased credit impaired loans disclosed above, the Corporation decreased the allowance for loan losses by $55 thousand and $15 thousand during the nine months ended September 30, 2017 and 2016, respectively. The Corporation reversed $30 thousand of the allowance for losses during the nine months ended September 30, 2017. The Corporation did not reverse any allowance for loan losses during the nine months ended September 30, 2016.

Number of Loans

Recorded Investment

Commercial mortgages:

Commercial mortgages