| Loan and Lease Receivables, Impaired Loans and Leases and Allowance for Loan and Lease Losses | Loan and Lease Receivables, Impaired Loans and Leases and Allowance for Loan and Lease Losses Loan and lease receivables consist of the following: June 30, December 31, (In Thousands) Commercial real estate Commercial real estate — owner occupied $ 169,768 $ 163,884 Commercial real estate — non-owner occupied 400,018 417,962 Construction and land development 140,318 121,160 Multi-family 86,912 72,578 1-4 family (1) 47,091 36,182 Total commercial real estate 844,107 811,766 Commercial and industrial (2) 454,868 416,654 Direct financing leases, net 28,723 34,165 Consumer and other Home equity and second mortgages (3) 9,466 7,866 Other 14,547 11,341 Total consumer and other 24,013 19,207 Total gross loans and leases receivable 1,351,711 1,281,792 Less: Allowance for loan and lease losses 15,199 14,329 Deferred loan fees 1,147 1,025 Loans and leases receivable, net $ 1,335,365 $ 1,266,438 (1) Includes residential real estate loans held for sale totaling $331,000 as of June 30, 2015 and $1.3 million as of December 31, 2014. (2) Includes guaranteed portion of SBA loans held for sale totaling $638,000 as of June 30, 2015. (3) Includes guaranteed portion of SBA loans held for sale totaling $305,000 as of June 30, 2015. Loans transferred to third parties consist of the guaranteed portion of SBA loans as well as participation interests in other originated loans. The total principal amount of loans transferred during the three months ended June 30, 2015 and 2014 was $32.0 million and $6.6 million , respectively. For the six months ended June 30, 2015 and 2014 , $46.6 million and $11.7 million of loans were transferred to third parties, respectively. Each of the transfers of these financial assets met the qualifications for sale accounting, including the requirements specific to loan participations, and therefore all of the loans transferred during the three and six months ended June 30, 2015 and June 30, 2014 have been derecognized in the unaudited Consolidated Financial Statements. The Corporation has a continuing involvement in each of the agreements by way of relationship management and servicing the loans; however, there are no further obligations to the third-party participant required of the Corporation in the event of a borrower’s default, other than standard representations and warranties related to sold amounts. The guaranteed portion of SBA loans were transferred at their fair value and the related gain was recognized upon the transfer as non-interest income in the unaudited Consolidated Financial Statements. No gain or loss was recognized on participation interests in other originated loans as they were transferred at or near the date of loan origination and the payments received for servicing the portion of the loans participated represents adequate compensation. The total amount of loan participations purchased on the Corporation’s Consolidated Balance Sheets as of June 30, 2015 and December 31, 2014 was $475,000 and $482,000 , respectively. The total amount of outstanding loans transferred to third parties as loan participations sold at June 30, 2015 and December 31, 2014 was $140.0 million and $116.6 million , respectively, all of which was treated as a sale and derecognized under the applicable accounting guidance in effect at the time of the transfers of the financial assets. The Corporation’s continuing involvement with these loans is by way of partial ownership, relationship management and all servicing responsibilities. As of June 30, 2015 and December 31, 2014 , the total amount of the Corporation’s partial ownership of loans on the Corporation’s Consolidated Balance Sheets was $98.4 million and $96.4 million , respectively. As of June 30, 2015 , $1.0 million loans in this participation sold portfolio were considered impaired as compared to $1.2 million as of December 31, 2014 . The Corporation does not share in the participant’s portion of the charge-offs. The Corporation sells residential real estate loans, servicing released, in the secondary market. The total principal amount of residential real estate loans sold during the three and six months ended June 30, 2015 was $10.3 million and $19.5 million , respectively. No residential real estate loans were originated or sold during the three months ended June 30, 2014 . Each of the transfers of these financial assets met the qualifications for sale accounting, and therefore all of the loans transferred during the three and six months ended June 30, 2015 have been derecognized in the unaudited Consolidated Financial Statements. The Corporation has a continuing involvement in each of the transactions by way of relationship management; however, there are no further obligations of the Corporation in the event of a borrower’s default, other than standard representations and warranties related to the sold amount. The loans were transferred at their fair value and the related gain was recognized as non-interest income upon the transfer in the unaudited Consolidated Financial Statements. ASC 310-30, Accounting for Certain Loans or Debt Securities Acquired in a Transfer, applies to purchased loans with evidence of deterioration in credit quality since origination for which it is probable at acquisition that the Corporation will be unable to collect all contractually required payments are considered to be credit impaired. Purchased credit-impaired loans are initially recorded at fair value, which is estimated by discounting the cash flows expected to be collected at the acquisition date. Because the estimate of expected cash flows reflects an estimate of future credit losses expected to be incurred over the life of the loans, an allowance for credit losses is not recorded at the acquisition date. The excess of cash flows expected at acquisition over the estimated fair value, referred to as the accretable yield, is recognized in interest income over the remaining life of the loan on a level-yield basis, contingent on the subsequent evaluation of future expected cash flows. The difference between the contractually required payments at acquisition and the cash flows expected to be collected at acquisition is referred to as the nonaccretable difference. A subsequent decrease in the estimate of cash flows expected to be received on purchased credit-impaired loans generally results in the recognition of an allowance for credit losses. Subsequent increases in cash flows result in reversal of any nonaccretable difference (or allowance for loan and lease losses to the extent any has been recorded) with a positive impact on interest income subsequently recognized. The measurement of cash flows involves assumptions and judgments for interest rates, prepayments, default rates, loss severity, and collateral values. All of these factors are inherently subjective and significant changes in the cash flow estimates over the life of the loan can result. The following table reflects the contractually required payments receivable and fair value of the Corporation’s purchased credit impaired loans as of June 30, 2015 and December 31, 2014 : June 30, December 31, (In Thousands) Contractually required payments $ 6,382 $ 6,874 Fair value of purchased credit impaired loans $ 3,701 $ 4,025 The following table presents a rollforward of the Corporation’s accretable yield as of June 30, 2015 and December 31, 2014 : As of and for the Six Months Ended June 30, 2015 As of and for the Year Ended December 31, 2014 (In Thousands) Accretable yield, beginning of period $ 676 $ 683 Accretion recognized in earnings (22 ) (7 ) Reclassification to nonaccretable difference for loans with changing cash flows (1) (21 ) — Changes in accretable yield for non-credit related changes in expected cash flows (2) (155 ) — Accretable yield, end of period $ 478 $ 676 (1) Represents changes in accretable yield for those loans that are driven primarily by credit performance. (2) Represents changes in accretable yield for those loans that are driven primarily by changes in actual and estimated payments. The following information illustrates ending balances of the Corporation’s loan and lease portfolio, including impaired loans by class of receivable, and considering certain credit quality indicators as of June 30, 2015 and December 31, 2014 : Category As of June 30, 2015 I II III IV Total (Dollars in Thousands) Commercial real estate: Commercial real estate — owner occupied $ 137,582 $ 18,053 $ 13,480 $ 653 $ 169,768 Commercial real estate — non-owner occupied 372,874 24,903 1,334 907 400,018 Construction and land development 121,404 8,370 5,927 4,617 140,318 Multi-family 85,641 367 894 10 86,912 1-4 family 37,919 4,755 2,057 2,360 47,091 Total commercial real estate 755,420 56,448 23,692 8,547 844,107 Commercial and industrial (1) 407,737 10,501 29,224 7,406 454,868 Direct financing leases, net 26,633 1,382 708 — 28,723 Consumer and other: Home equity and second mortgages 8,359 447 162 498 9,466 Other 13,856 — — 691 14,547 Total consumer and other 22,215 447 162 1,189 24,013 Total gross loans and leases receivable $ 1,212,005 $ 68,778 $ 53,786 $ 17,142 $ 1,351,711 Category as a % of total portfolio 89.66 % 5.09 % 3.98 % 1.27 % 100.00 % (1) Category IV includes $6.2 million considered performing impaired loans with interest income recognized on a cash basis as of June 30, 2015. Subsequent to June 30, 2015, the Corporation granted a concession to the client and considered the loans to be troubled debt restructurings. Category As of December 31, 2014 I II III IV Total (Dollars in Thousands) Commercial real estate: Commercial real estate — owner occupied $ 131,094 $ 15,592 $ 16,621 $ 577 $ 163,884 Commercial real estate — non-owner occupied 378,671 20,823 17,498 970 417,962 Construction and land development 100,934 8,193 6,876 5,157 121,160 Multi-family 70,897 751 913 17 72,578 1-4 family 25,997 5,278 3,336 1,571 36,182 Total commercial real estate 707,593 50,637 45,244 8,292 811,766 Commercial and industrial 383,755 18,524 12,026 2,349 416,654 Direct financing leases, net 32,756 1,120 289 — 34,165 Consumer and other: Home equity and second mortgages 7,039 205 189 433 7,866 Other 10,570 50 — 721 11,341 Total consumer and other 17,609 255 189 1,154 19,207 Total gross loans and leases receivable $ 1,141,713 $ 70,536 $ 57,748 $ 11,795 $ 1,281,792 Category as a % of total portfolio 89.07 % 5.50 % 4.51 % 0.92 % 100.00 % Credit underwriting through a committee process is a key component of the Corporation’s operating philosophy. Business development officers have relatively low individual lending authority limits, and thus a significant portion of the Corporation’s new credit extensions require approval from a loan approval committee regardless of the type of loan or lease, asset quality grade of the credit, amount of the credit, or the related complexities of each proposal. In addition, the Corporation makes every effort to ensure that there is appropriate collateral at the time of origination to protect the Corporation’s interest in the related loan or lease. Each credit is evaluated for proper risk rating upon origination, at the time of each subsequent renewal, upon receipt and evaluation of updated financial information from the Corporation’s borrowers, or as other circumstances dictate. The Corporation uses a nine grade risk rating system to monitor the ongoing credit quality of its loans and leases. The risk rating grades follow a consistent definition, and are then applied to specific loan types based on the nature of the loan. Each risk rating is subjective and, depending on the size and nature of the credit, subject to various levels of review and concurrence on the stated risk rating. In addition to its nine grade risk rating system, the Corporation groups loans into four loan and related risk categories which determine the level and nature of review by management. Category I — Loans and leases in this category are performing in accordance with the terms of the contract and generally exhibit no immediate concerns regarding the security and viability of the underlying collateral, financial stability of the borrower, integrity or strength of the borrower’s management team or the industry in which the borrower operates. Loans and leases in this category are not subject to additional monitoring procedures above and beyond what is required at the origination or renewal of the loan or lease. The Corporation monitors Category I loans and leases through payment performance, continued maintenance of its personal relationships with such borrowers and continued review of such borrowers’ compliance with the terms of their respective agreements. Category II — Loans and leases in this category are beginning to show signs of deterioration in one or more of the Corporation’s core underwriting criteria such as financial stability, management strength, industry trends and collateral values. Management will place credits in this category to allow for proactive monitoring and resolution with the borrower to possibly mitigate the area of concern and prevent further deterioration or risk of loss to the Corporation. Category II loans are considered performing but are monitored frequently by the assigned business development officer and by subcommittees of the Banks’ loan committees. Category III — Loans and leases in this category are identified by management as warranting special attention. However, the balance in this category is not intended to represent the amount of adversely classified assets held by the Banks. Category III loans and leases generally exhibit undesirable characteristics such as evidence of adverse financial trends and conditions, managerial problems, deteriorating economic conditions within the related industry, or evidence of adverse public filings and may exhibit collateral shortfall positions. Management continues to believe that it will collect all required principal and interest in accordance with the original terms of the contracts relating to the loans and leases in this category, and therefore Category III loans are considered performing with no specific reserves established for this category. Category III loans are monitored by management and loan committees of the Banks on a monthly basis and the Banks’ Boards of Directors at each of their regularly scheduled meetings. Category IV — Loans and leases in this category are considered to be impaired. Impaired loans and leases have been placed on non-accrual as management has determined that it is unlikely that the Banks will receive the required principal and interest in accordance with the contractual terms of the agreement. Impaired loans are individually evaluated to assess the need for the establishment of specific reserves or charge-offs. When analyzing the adequacy of collateral, the Corporation obtains external appraisals at least annually for impaired loans and leases. External appraisals are obtained from the Corporation’s approved appraiser listing and are independently reviewed to monitor the quality of such appraisals. To the extent a collateral shortfall position is present, a specific reserve or charge-off will be recorded to reflect the magnitude of the impairment. Loans and leases in this category are monitored by management and loan committees of the Banks on a monthly basis and the Banks’ Boards of Directors at each of their regularly scheduled meetings. Utilizing regulatory classification terminology, the Corporation identified $10.6 million and $27.1 million of loans and leases as Substandard as of June 30, 2015 and December 31, 2014 , respectively. No loans were considered Special Mention, Doubtful or Loss as of either June 30, 2015 or December 31, 2014 . The population of Substandard loans are a subset of Category III and Category IV loans. The delinquency aging of the loan and lease portfolio by class of receivable as of June 30, 2015 and December 31, 2014 is as follows: As of June 30, 2015 30-59 60-89 Greater Total past due Current Total loans (Dollars in Thousands) Accruing loans and leases Commercial real estate: Owner occupied $ — $ — $ — $ — $ 169,189 $ 169,189 Non-owner occupied — — — — 399,736 399,736 Construction and land development — — — — 135,779 135,779 Multi-family — — — — 86,902 86,902 1-4 family — — — — 45,775 45,775 Commercial and industrial 399 — — 399 447,091 447,490 Direct financing leases, net — — — — 28,723 28,723 Consumer and other: Home equity and second mortgages — — — — 9,063 9,063 Other — — — — 13,856 13,856 Total 399 — — 399 1,336,114 1,336,513 Non-accruing loans and leases Commercial real estate: Owner occupied $ — $ 490 $ — $ 490 $ 89 $ 579 Non-owner occupied — — 235 235 47 282 Construction and land development — — — — 4,539 4,539 Multi-family — — — — 10 10 1-4 family 658 96 175 929 387 1,316 Commercial and industrial (1) 219 194 582 995 6,383 7,378 Direct financing leases, net — — — — — — Consumer and other: Home equity and second mortgages — — 50 50 353 403 Other — — 691 691 — 691 Total 877 780 1,733 3,390 11,808 15,198 Total loans and leases Commercial real estate: Owner occupied $ — $ 490 $ — $ 490 $ 169,278 $ 169,768 Non-owner occupied — — 235 235 399,783 400,018 Construction and land development — — — — 140,318 140,318 Multi-family — — — — 86,912 86,912 1-4 family 658 96 175 929 46,162 47,091 Commercial and industrial 618 194 582 1,394 453,474 454,868 Direct financing leases, net — — — — 28,723 28,723 Consumer and other: Home equity and second mortgages — — 50 50 9,416 9,466 Other — — 691 691 13,856 14,547 Total $ 1,276 $ 780 $ 1,733 $ 3,789 $ 1,347,922 $ 1,351,711 Percent of portfolio 0.09 % 0.06 % 0.13 % 0.28 % 99.72 % 100.00 % (1) Current balance includes $6.2 million considered performing impaired loans with interest income recognized on a cash basis as of June 30, 2015. Subsequent to June 30, 2015, the Corporation granted a concession to the client and considered the loans to be troubled debt restructurings. As of December 31, 2014 30-59 60-89 Greater Total past due Current Total loans (Dollars in Thousands) Accruing loans and leases Commercial real estate: Owner occupied $ — $ — $ — $ — $ 163,384 $ 163,384 Non-owner occupied — — — — 417,676 417,676 Construction and land development — — — — 116,228 116,228 Multi-family — — — — 72,561 72,561 1-4 family — — — — 35,492 35,492 Commercial and industrial — — — — 414,336 414,336 Direct financing leases, net — — — — 34,165 34,165 Consumer and other: Home equity and second mortgages — — — — 7,537 7,537 Other — — — — 10,621 10,621 Total — — — — 1,272,000 1,272,000 Non-accruing loans and leases Commercial real estate: Owner occupied $ — $ — $ — $ — $ 500 $ 500 Non-owner occupied — 215 — 215 71 286 Construction and land development — 193 — 193 4,739 4,932 Multi-family — — — — 17 17 1-4 family — 106 306 412 278 690 Commercial and industrial 364 146 736 1,246 1,072 2,318 Direct financing leases, net — — — — — — Consumer and other: Home equity and second mortgages — — — — 329 329 Other — — 720 720 — 720 Total 364 660 1,762 2,786 7,006 9,792 Total loans and leases Commercial real estate: Owner occupied $ — $ — $ — $ — $ 163,884 $ 163,884 Non-owner occupied — 215 — 215 417,747 417,962 Construction and land development — 193 — 193 120,967 121,160 Multi-family — — — — 72,578 72,578 1-4 family — 106 306 412 35,770 36,182 Commercial and industrial 364 146 736 1,246 415,408 416,654 Direct financing leases, net — — — — 34,165 34,165 Consumer and other: Home equity and second mortgages — — — — 7,866 7,866 Other — — 720 720 10,621 11,341 Total $ 364 $ 660 $ 1,762 $ 2,786 $ 1,279,006 $ 1,281,792 Percent of portfolio 0.03 % 0.05 % 0.14 % 0.22 % 99.78 % 100.00 % The Corporation’s total impaired assets consisted of the following at June 30, 2015 and December 31, 2014 , respectively. June 30, December 31, (Dollars in Thousands) Non-accrual loans and leases Commercial real estate: Commercial real estate — owner occupied $ 579 $ 500 Commercial real estate — non-owner occupied 282 286 Construction and land development 4,539 4,932 Multi-family 10 17 1-4 family 1,316 690 Total non-accrual commercial real estate 6,726 6,425 Commercial and industrial (1) 7,378 2,318 Direct financing leases, net — — Consumer and other: Home equity and second mortgages 403 329 Other 691 720 Total non-accrual consumer and other loans 1,094 1,049 Total non-accrual loans and leases 15,198 9,792 Performing troubled debt restructurings 1,944 2,003 Total impaired loans and leases 17,142 11,795 Foreclosed properties, net 1,854 1,693 Total impaired assets $ 18,996 $ 13,488 June 30, December 31, Total non-accrual loans and leases to gross loans and leases 1.12 % 0.76 % Total non-performing assets to total gross loans and leases plus foreclosed properties, net 1.26 0.89 Total non-performing assets to total assets 1.01 0.70 Allowance for loan and lease losses to gross loans and leases 1.12 1.12 Allowance for loan and lease losses to non-accrual loans and leases 100.01 146.33 (1) Balance includes $6.2 million considered performing impaired loans with interest income recognized on a cash basis as of June 30, 2015. Subsequent to June 30, 2015, the Corporation granted a concession to the client and considered the loans to be troubled debt restructurings. As of June 30, 2015 and December 31, 2014 , $6.9 million and $7.4 million of the non-accrual loans were considered troubled debt restructurings, respectively. As of June 30, 2015 , there were no unfunded commitments associated with troubled debt restructured loans and leases. As of June 30, 2015 As of December 31, 2014 Number of Loans Pre-Modification Recorded Investment Post-Modification Recorded Investment Number of Loans Pre-Modification Recorded Investment Post-Modification Recorded Investment (Dollars in Thousands) Troubled debt restructurings: Commercial real estate Commercial real estate — owner occupied 2 $ 625 $ 564 2 $ 624 $ 577 Commercial real estate — non-owner occupied 5 1,151 907 5 1,095 970 Construction and land development 3 6,034 4,678 4 6,260 5,157 Multi-family 1 184 10 1 184 17 1-4 family 16 2,119 1,435 16 2,119 1,368 Commercial and industrial 3 201 144 4 361 155 Direct financing leases, net — — — — — — Consumer and other: Home equity and second mortgages 6 681 375 6 772 431 Other 1 2,076 690 2 2,080 721 Total 37 $ 13,071 $ 8,803 40 $ 13,495 $ 9,396 All loans and leases modified as a troubled debt restructuring are evaluated for impairment. The nature and extent of the impairment of restructured loans, including those which have experienced a default, is considered in the determination of an appropriate level of the allowance for loan and lease losses. As of June 30, 2015 and December 31, 2014 , the Corporation’s troubled debt restructurings grouped by type of concession were as follows: As of June 30, 2015 As of December 31, 2014 Number of Loans Recorded Investment Number of Loans Recorded Investment (Dollars in Thousands) Commercial real estate Extension of term 1 $ 31 1 $ 39 Interest rate concession 1 56 1 65 Combination of extension and interest rate concession 25 7,506 26 7,984 Commercial and industrial Combination of extension and interest rate concession 3 144 4 155 Consumer and other Extension of term 2 723 3 753 Combination of extension and interest rate concession 5 343 5 400 Total 37 $ 8,803 40 $ 9,396 There were no loans and leases modified in a troubled debt restructuring during the previous 12 months which subsequently defaulted during the six months ended June 30, 2015 . The following represents additional information regarding the Corporation’s impaired loans and leases by class: Impaired Loans and Leases As of and for the Six Months Ended June 30, 2015 Recorded investment Unpaid principal balance Impairment reserve Average recorded investment (1) Foregone interest income Interest income recognized Net foregone interest income (In Thousands) With no impairment reserve recorded: Commercial real estate: Owner occupied $ 564 $ 564 $ — $ 575 $ 13 $ — $ 13 Non-owner occupied 860 860 — 918 6 — 6 Construction and land development 4,617 7,287 — 5,039 71 — 71 Multi-family 10 377 — 13 24 — 24 1-4 family 1,442 1,514 — 1,578 33 — 33 Commercial and industrial (2) 6,375 6,384 — 231 63 1 62 Direct financing leases, net — — — — — — — Consumer and other: Home equity and second mortgages 317 317 — 292 8 — 8 Other 691 1,357 — 704 41 — 41 Total 14,876 18,660 — 9,350 259 1 258 With impairment reserve recorded: Commercial real estate: Owner occupied $ 89 $ 89 $ 4 $ 17 $ — $ — $ — Non-owner occupied 47 87 47 48 2 — 2 Construction and land development — — — — — — — Multi-family — — — — — — — 1-4 family 918 924 177 375 11 — 11 Commercial and industrial 1,031 1,031 253 1,241 38 — 38 Direct financing leases, net — — — — — — — Consumer and other: Home equity and second mortgages 181 181 94 127 7 — 7 Other — — — — — — — Total 2,266 2,312 575 1,808 58 — 58 Total: Commercial real estate: Owner occupied $ 653 $ 653 $ 4 $ 592 $ 13 $ — $ 13 Non-owner occupied 907 947 47 966 8 — 8 Construction and land development 4,617 7,287 — 5,039 71 — 71 Multi-family 10 377 — 13 24 — 24 1-4 family 2,360 2,438 177 1,953 44 — 44 Commercial and industrial 7,406 7,415 253 1,472 101 1 100 Direct financing leases, net — — — — — — — Consumer and other: Home equity and second mortgages 498 498 94 419 15 — 15 Other 691 1,357 — 704 41 — 41 Grand total $ 17,142 $ 20,972 $ 575 $ 11,158 $ 317 $ 1 $ 316 (1) Average recorded investment is calculated primarily using daily average balances. (2) Recorded investment and unpaid principal balances include $6.2 million considered performing impaired loans with interest income recognized on a cash basis as of June 30, 2015. Subsequent to June 30, 2015, the Corporation granted a concession to the client and considered the loans to be troubled debt restructurings. Impaired Loans and Leases As of and for the Year Ended December 31, 2014 Recorded Unpaid Impairment Average (1) Foregone Interest Net (In Thousands) With no impairment reserve recorded: Commercial real estate: Owner occupied $ 577 $ 577 $ — $ 484 $ 30 $ 79 $ (49 ) Non-owner occupied 921 921 — 349 22 — 22 Construction and land development 5,157 7,828 — 5,285 155 — 155 Multi-family 17 384 — 24 53 — 53 1-4 family 1,181 1,218 — 380 15 12 3 Commercial and industrial 2,316 2,926 — 6,141 463 649 (186 ) Direct financing leases, net — — — — — — — Consumer and other: Home equity and second mortgages 380 380 — 495 18 — 18 Other 721 1,389 — 768 87 — 87 Total 11,270 15,623 — 13,926 843 740 103 With impairment reserve recorded: Commercial real estate: Owner occupied $ — $ — $ — $ — $ — $ — $ — Non-owner occupied 49 89 49 52 4 — 4 Construction and land development — — — — — — — Multi-family — — — — — — — 1-4 family 390 390 155 405 18 — 18 Commercial and industrial 33 33 33 34 — — — Direct financing leases, net — — — — — — — Consumer and other: Home equity and second mortgages 53 53 53 57 5 — 5 Other — — — — — — — Total 525 565 290 548 27 — 27 Total: Commercial real estate: Owner occupied $ 577 $ 577 $ — $ 484 $ 30 $ 79 $ (49 ) Non-owner occupied 970 1,010 49 401 26 — 26 Construction and land development 5,157 7,828 — 5,285 155 — 155 Multi-family 17 384 — 24 53 — 53 1-4 family 1,571 1,608 155 785 33 12 21 Commercial and industrial 2,349 2,959 33 6,175 463 649 (186 ) Direct financing leases, net — — — — — — — Consumer and other: Home equity and second mortgages 433 433 53 552 23 — 23 Other 721 1,389 — 768 87 — 87 Grand total $ 11,795 $ 16,188 $ 290 $ 14,474 $ 870 $ 740 $ 130 (1) Average recorded investment is calculated primarily using daily average balances. The difference between the loans and leases recorded investment and the unpaid principal balance of $3.8 million and $4.4 million as of June 30, 2015 and December 31, 2014 represents partial charge-offs resulting from confirmed losses due to the value of the collateral securing the loans and leases being below the carrying values of the loans and leases. Impaired loans and leases also included $1.9 million and $2.0 million of loans as of June 30, 2015 and December 31, 2014 that were performing troubled debt restructurings, and thus, while not on non-accrual, were reported as impaired, due to the concession in terms. When a loan is placed on non-accrual, interest accrual is discontinued and previously accrued but uncollected interest is deducted from interest income. Cash payments collected on non-accrual loans are first applied to principal. Foregone interest represents the interest that was contractually due on the note but not received or recorded. To the extent the amount of principal on a non-accrual note is fully collected and additional cash is received, the Corporation will recognize interest income. To determine the level and composition of the allowance for loan and lease losses, the Corporation breaks out the portfolio by segments and risk ratings. First, the Corporation evaluates loans and leases for potential impairment classification. The Corporation analyzes each loan and lease determined to be impaired on an individual basis to determine a specific reserve based upon the estimated value of the underlying collateral for collateral-dependent loans, or alternatively, the present value of expected cash flows. The Corporation applies historical trends from established risk factors to each category of loans and leases that has not been individually evaluated for the purpose of establishing the general portion of the allowance. A summary of the activity in the allowance for loan and lease losses by portfolio segment is as follows: As of and for the Six Months Ended June 30, 2015 Commercial real estate Commercial and industrial loans and leases Consumer and other Total (Dollars in Thousands) Allowance for credit losses: Beginning balance $ 8,619 $ 5,492 $ 218 $ 14,329 Charge-offs (91 ) (313 ) (4 ) (408 ) Recoveries 66 5 3 74 Provision 123 1,024 57 1,204 Ending balance $ 8,717 $ 6,208 $ 274 $ 15,199 Ending balance: individually evaluated for impairment $ 228 $ 124 $ 94 $ 446 Ending balance: collectively evaluated for impairment $ 8,489 $ 5,955 $ 180 $ 14,624 Ending balance: loans acquired with deteriorated credit quality $ — $ 129 $ — $ 129 Loans and lease receivables: Ending balance, gross $ 844,107 $ 483,591 $ 24,013 $ 1,351,711 Ending balance: individually evaluated for impairment (1) $ 5,589 $ 6,751 $ 959 $ 13,299 Ending balance: collectively evaluated for impairment $ 835,559 $ 476,186 $ 22,824 $ 1,334,569 Ending balance: loans acquired with deteriorated credit quality $ 2,959 $ 654 $ 230 $ 3,843 Allowance as % of gross loans 1.03 % 1.28 % 1.14 % 1.12 % (1) Commercial and industrial loans and leases balance includes $6.2 million considered performing impaired loans with interest income recognized on a cash basis as of June 30, 2015. Subsequent to June 30, 2015, the Corporation granted a concession to the client and considered the loans to be troubled debt restructurings. As of and for the Six Months Ended June 30, 2014 Commercial real estate Commercial and industrial loans and leases Consumer and other Total (Dollars in Thousands) Allowance for credit losses: Beginning balance $ 9,055 $ 4,573 $ 273 $ 13,901 Charge-offs — — — — Recoveries 17 1 7 25 Provision (304 ) 432 (39 ) 89 Ending balance $ 8,768 $ 5,006 $ 241 $ 14,015 Ending balance: individually evaluated for impairment $ 342 $ 208 $ 56 $ 606 Ending balance: collectively evaluated for impairment $ 8,426 $ 4,798 $ 185 $ 13,409 Ending balance: loans acquired with deteriorated credit quality $ — $ — $ — $ — Loans and lease receivables: Ending balance, gross $ 637,403 $ 355,549 $ 15,663 $ 1,008,615 Ending balance: individually evaluated for impairment $ 5,416 $ 6,664 $ 1,331 $ 13,411 Ending balance: collectively evaluated for impairment $ 630,616 $ 348,885 $ 14,332 $ 993,833 Ending balance: loans acquired with deteriorated credit quality $ 1,371 $ — $ — $ 1,371 Allowance as % of gross loans 1.38 % 1.41 % 1.54 % 1.39 % |
