| 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 $ 167,936 $ 176,322 Commercial real estate — non-owner occupied 502,378 436,901 Land development 60,599 59,779 Construction 88,339 100,625 Multi-family 73,239 80,254 1-4 family 47,289 50,304 Total commercial real estate 939,780 904,185 Commercial and industrial 456,297 472,193 Direct financing leases, net 30,698 31,093 Consumer and other Home equity and second mortgages 7,372 8,237 Other 18,743 16,319 Total consumer and other 26,115 24,556 Total gross loans and leases receivable 1,452,890 1,432,027 Less: Allowance for loan and lease losses 18,154 16,316 Deferred loan fees 1,075 1,062 Loans and leases receivable, net $ 1,433,661 $ 1,414,649 Loans transferred to third parties consist of the guaranteed portion of Small Business Administration (“SBA”) loans as well as participation interests in other originated loans. The total principal amount of the guaranteed portion of SBA loans sold during the three months ended June 30, 2016 and 2015 was $18.6 million and $7.2 million , respectively. For the six months ended June 30, 2016 and 2015 , $31.0 million and $10.1 million of the guaranteed portion of SBA loans were sold to third parties, respectively. Each of the transfers of these financial assets met the qualifications for sale accounting, and therefore all of the loans transferred during the six months ended June 30, 2016 and 2015 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, servicing the loans, as well as being subject to normal and customary requirements of the SBA loan program; however, there are no further obligations to the third-party participant required of the Corporation, other than standard representations and warranties related to sold amounts, that would preclude the application of sale accounting treatment. 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. The total outstanding balance of sold SBA loans at June 30, 2016 and December 31, 2015 was $97.3 million and $73.4 million , respectively. As of June 30, 2016 and December 31, 2015 , the total amount of the Corporation’s partial ownership of sold SBA loans on the Corporation’s Consolidated Balance Sheets was $30.6 million and $24.6 million , respectively. As of June 30, 2016 , $2.4 million of loans in this portfolio were considered impaired as compared to $1.8 million as of December 31, 2015 . The total principal amount of transferred participation interests in other originated loans during the three months ended June 30, 2016 and 2015 was $9.7 million and $24.8 million , respectively. For the six months ended June 30, 2016 and 2015 , $15.4 million and $36.5 million of these participation interests were transferred to third parties, respectively, all of which was treated as a sale and derecognized under the applicable accounting guidance at the time of transfer. The Corporation’s continuing involvement with these loans is by way of partial ownership, relationship management and all servicing responsibilities; however, there are no further obligations of the Corporation, other than standard representations and warranties to the sold amount, that would preclude the application of sale accounting treatment. 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 outstanding balance of transferred loans at June 30, 2016 and December 31, 2015 was $103.3 million and $95.8 million , respectively. As of June 30, 2016 and December 31, 2015 , the total amount of the Corporation’s partial ownership of these transferred loans on the Corporation’s Consolidated Balance Sheets was $106.8 million and $112.2 million , respectively. No loans in this participation portfolio were considered impaired as of June 30, 2016 and December 31, 2015 . The Corporation does not share in the participant’s portion of any potential charge-offs. The total amount of loan participations purchased on the Corporation’s Consolidated Balance Sheets as of June 30, 2016 and December 31, 2015 was $459,000 and $467,000 , respectively. 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 months ended June 30, 2016 and 2015 was $8.0 million and $10.3 million , respectively. For the six months ended June 30, 2016 and 2015 the total principal amount of residential real estate loans sold was $15.2 million and $19.5 million , respectively. Each of the transfers of these financial assets met the qualifications for sale accounting, and therefore all of the loans transferred during the six months ended June 30, 2016 and 2015 have been derecognized in the unaudited Consolidated Financial Statements. The Corporation has a continuing involvement in each of the transactions, including by way of relationship management and standard representations and warranties related to the sold amount; however, there are no further obligations of the Corporation that would would preclude the application of sale accounting treatment. 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. According to ASC 310-30, Accounting for Certain Loans or Debt Securities Acquired in a Transfer , purchased credit-impaired loans exhibit 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. 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 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, 2016 and December 31, 2015 : June 30, December 31, (In Thousands) Contractually required payments $ 4,123 $ 5,291 Fair value of purchased credit impaired loans $ 2,263 $ 3,250 The following table presents a rollforward of the Corporation’s accretable yield as of June 30, 2016 and December 31, 2015 : As of and for the Six Months Ended June 30, 2016 As of and for Year Ended December 31, 2015 (In Thousands) Accretable yield, beginning of period $ 414 $ 676 Accretion recognized in earnings (87 ) (50 ) Reclassification to nonaccretable difference for loans with changing cash flows (1) (204 ) (60 ) Changes in accretable yield for non-credit related changes in expected cash flows (2) 69 (152 ) Accretable yield, end of period $ 192 $ 414 (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, 2016 and December 31, 2015 : Category As of June 30, 2016 I II III IV Total (Dollars in Thousands) Commercial real estate: Commercial real estate — owner occupied $ 136,996 $ 14,018 $ 13,061 $ 3,861 $ 167,936 Commercial real estate — non-owner occupied 473,644 24,218 2,546 1,970 502,378 Land development 55,275 839 656 3,829 60,599 Construction 78,088 5,745 4,227 279 88,339 Multi-family 72,726 513 — — 73,239 1-4 family 40,279 2,517 1,624 2,869 47,289 Total commercial real estate 857,008 47,850 22,114 12,808 939,780 Commercial and industrial 376,286 35,026 35,118 9,867 456,297 Direct financing leases, net 29,529 783 386 — 30,698 Consumer and other: Home equity and second mortgages 6,407 570 137 258 7,372 Other 18,145 63 — 535 18,743 Total consumer and other 24,552 633 137 793 26,115 Total gross loans and leases receivable $ 1,287,375 $ 84,292 $ 57,755 $ 23,468 $ 1,452,890 Category as a % of total portfolio 88.60 % 5.80 % 3.98 % 1.62 % 100.00 % Category As of December 31, 2015 I II III IV Total (Dollars in Thousands) Commercial real estate: Commercial real estate — owner occupied $ 156,379 $ 7,654 $ 9,311 $ 2,978 $ 176,322 Commercial real estate — non-owner occupied 410,517 20,662 3,408 2,314 436,901 Land development 52,817 2,241 309 4,412 59,779 Construction 98,693 851 564 517 100,625 Multi-family 79,368 884 — 2 80,254 1-4 family 41,086 3,985 1,865 3,368 50,304 Total commercial real estate 838,860 36,277 15,457 13,591 904,185 Commercial and industrial 430,199 7,139 25,706 9,149 472,193 Direct financing leases, net 29,514 1,013 528 38 31,093 Consumer and other: Home equity and second mortgages 7,497 — 141 599 8,237 Other 15,616 48 — 655 16,319 Total consumer and other 23,113 48 141 1,254 24,556 Total gross loans and leases receivable $ 1,321,686 $ 44,477 $ 41,832 $ 24,032 $ 1,432,027 Category as a % of total portfolio 92.29 % 3.11 % 2.92 % 1.68 % 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. 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 contractual 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 contractual 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 $25.7 million and $26.8 million of loans and leases as Substandard as of June 30, 2016 and December 31, 2015 , respectively. No loans were considered Special Mention, Doubtful or Loss as of either June 30, 2016 or December 31, 2015 . 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, 2016 and December 31, 2015 is as follows: As of June 30, 2016 30-59 60-89 Greater Total past due Current Total loans (Dollars in Thousands) Accruing loans and leases Commercial real estate: Owner occupied $ 997 $ — $ — $ 997 $ 163,145 $ 164,142 Non-owner occupied 319 2,000 — 2,319 498,089 500,408 Land development — — — — 56,785 56,785 Construction — — — — 88,033 88,033 Multi-family — — — — 73,239 73,239 1-4 family 77 — — 77 45,027 45,104 Commercial and industrial — — — — 446,430 446,430 Direct financing leases, net — — — — 30,698 30,698 Consumer and other: Home equity and second mortgages — — — — 7,163 7,163 Other — — — — 18,208 18,208 Total 1,393 2,000 — 3,393 1,426,817 1,430,210 Non-accruing loans and leases Commercial real estate: Owner occupied $ 1,537 $ — $ — $ 1,537 $ 2,257 $ 3,794 Non-owner occupied — — 1,714 1,714 256 1,970 Land development — — — — 3,814 3,814 Construction — — 191 191 115 306 Multi-family — — — — — — 1-4 family — — 1,331 1,331 854 2,185 Commercial and industrial 374 514 263 1,151 8,716 9,867 Direct financing leases, net — — — — — — Consumer and other: Home equity and second mortgages — — — — 209 209 Other — — 535 535 — 535 Total 1,911 514 4,034 6,459 16,221 22,680 Total loans and leases Commercial real estate: Owner occupied $ 2,534 $ — $ — $ 2,534 $ 165,402 $ 167,936 Non-owner occupied 319 2,000 1,714 4,033 498,345 502,378 Land development — — — — 60,599 60,599 Construction — — 191 191 88,148 88,339 Multi-family — — — — 73,239 73,239 1-4 family 77 — 1,331 1,408 45,881 47,289 Commercial and industrial 374 514 263 1,151 455,146 456,297 Direct financing leases, net — — — — 30,698 30,698 Consumer and other: Home equity and second mortgages — — — — 7,372 7,372 Other — — 535 535 18,208 18,743 Total $ 3,304 $ 2,514 $ 4,034 $ 9,852 $ 1,443,038 $ 1,452,890 Percent of portfolio 0.23 % 0.17 % 0.27 % 0.67 % 99.33 % 100.00 % As of December 31, 2015 30-59 60-89 Greater Total past due Current Total loans (Dollars in Thousands) Accruing loans and leases Commercial real estate: Owner occupied $ — $ — $ — $ — $ 173,416 $ 173,416 Non-owner occupied — — — — 435,222 435,222 Land development — — — — 55,386 55,386 Construction — — — — 100,228 100,228 Multi-family — — — — 80,252 80,252 1-4 family 78 — — 78 47,676 47,754 Commercial and industrial — — — — 463,057 463,057 Direct financing leases, net — — — — 31,055 31,055 Consumer and other: Home equity and second mortgages — — — — 7,695 7,695 Other — — — — 15,664 15,664 Total 78 — — 78 1,409,651 1,409,729 Non-accruing loans and leases Commercial real estate: Owner occupied $ — $ 473 $ — $ 473 $ 2,433 $ 2,906 Non-owner occupied — — — — 1,679 1,679 Land development — — — — 4,393 4,393 Construction 397 — — 397 — 397 Multi-family — — — — 2 2 1-4 family 430 34 895 1,359 1,191 2,550 Commercial and industrial 2,077 — 564 2,641 6,495 9,136 Direct financing leases, net — — — — 38 38 Consumer and other: Home equity and second mortgages — — 250 250 292 542 Other — — 655 655 — 655 Total 2,904 507 2,364 5,775 16,523 22,298 Total loans and leases Commercial real estate: Owner occupied $ — $ 473 $ — $ 473 $ 175,849 $ 176,322 Non-owner occupied — — — — 436,901 436,901 Land development — — — — 59,779 59,779 Construction 397 — — 397 100,228 100,625 Multi-family — — — — 80,254 80,254 1-4 family 508 34 895 1,437 48,867 50,304 Commercial and industrial 2,077 — 564 2,641 469,552 472,193 Direct financing leases, net — — — — 31,093 31,093 Consumer and other: Home equity and second mortgages — — 250 250 7,987 8,237 Other — — 655 655 15,664 16,319 Total $ 2,982 $ 507 $ 2,364 $ 5,853 $ 1,426,174 $ 1,432,027 Percent of portfolio 0.21 % 0.04 % 0.16 % 0.41 % 99.59 % 100.00 % The Corporation’s total impaired assets consisted of the following at June 30, 2016 and December 31, 2015 , respectively. June 30, December 31, (Dollars in Thousands) Non-accrual loans and leases Commercial real estate: Commercial real estate — owner occupied $ 3,794 $ 2,907 Commercial real estate — non-owner occupied 1,970 1,678 Land development 3,814 4,393 Construction 306 397 Multi-family — 2 1-4 family 2,185 2,550 Total non-accrual commercial real estate 12,069 11,927 Commercial and industrial 9,867 9,136 Direct financing leases, net — 38 Consumer and other: Home equity and second mortgages 209 542 Other 535 655 Total non-accrual consumer and other loans 744 1,197 Total non-accrual loans and leases 22,680 22,298 Foreclosed properties, net 1,548 1,677 Total non-performing assets 24,228 23,975 Performing troubled debt restructurings 788 1,735 Total impaired assets $ 25,016 $ 25,710 June 30, December 31, Total non-accrual loans and leases to gross loans and leases 1.56 % 1.56 % Total non-performing assets to total gross loans and leases plus foreclosed properties, net 1.67 1.67 Total non-performing assets to total assets 1.33 1.35 Allowance for loan and lease losses to gross loans and leases 1.25 1.14 Allowance for loan and lease losses to non-accrual loans and leases 80.04 73.17 As of June 30, 2016 and December 31, 2015 , $13.2 million and $16.2 million of the non-accrual loans were considered troubled debt restructurings, respectively. As of June 30, 2016 , there were no unfunded commitments associated with troubled debt restructured loans and leases. As of June 30, 2016 As of December 31, 2015 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 3 $ 1,208 $ 1,143 3 $ 1,209 $ 1,188 Commercial real estate — non-owner occupied 4 445 256 5 1,150 904 Land development 2 5,834 3,828 2 5,853 4,393 Construction 1 201 184 1 181 200 Multi-family — — — 1 184 2 1-4 family 14 1,795 1,607 15 2,035 1,869 Commercial and industrial 9 7,782 6,195 10 7,572 8,330 Consumer and other: Home equity and second mortgages 4 461 257 4 461 349 Other 1 2,076 535 1 2,076 655 Total 38 $ 19,802 $ 14,005 42 $ 20,721 $ 17,890 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, 2016 and December 31, 2015 , the Corporation’s troubled debt restructurings grouped by type of concession were as follows: As of June 30, 2016 As of December 31, 2015 Number of Loans Recorded Investment Number of Loans Recorded Investment (Dollars in Thousands) Commercial real estate Extension of term 1 $ 16 1 $ 24 Interest rate concession 1 53 1 55 Combination of extension of term and interest rate concession 22 6,949 25 8,477 Commercial and industrial Combination of extension of term and interest rate concession 9 6,195 10 8,330 Consumer and other Extension of term 1 535 1 655 Combination of extension of term and interest rate concession 4 257 4 349 Total 38 $ 14,005 42 $ 17,890 During the six months ended June 30, 2016 , two commercial and industrial loans defaulted, both of which had been modified in a troubled debt restructuring during the previous twelve months. The total recorded investment of the loans was $5.7 million . 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, 2016 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 $ 3,240 $ 3,240 $ — $ 2,274 $ 87 $ — $ 87 Non-owner occupied 1,970 2,010 — 728 36 — 36 Land development 3,829 6,499 — 4,146 57 — 57 Construction 122 122 — 293 4 — 4 Multi-family — — — — 1 134 (133 ) 1-4 family 2,025 2,025 — 2,483 55 94 (39 ) Commercial and industrial 3,103 3,103 — 239 45 18 27 Direct financing leases, net — — — 12 — — — Consumer and other: Home equity and second mortgages 258 258 — 447 8 — 8 Other 535 1,201 — 626 39 — 39 Total 15,082 18,458 — 11,248 332 246 86 With impairment reserve recorded: Commercial real estate: Owner occupied $ 621 $ 621 $ 9 $ 629 $ 18 $ — $ 18 Non-owner occupied — — — — — — — Land development — — — — — — — — — — Construction 157 157 — 41 192 — 3 — — 3 Multi-family — — — — — — — 1-4 family 844 849 114 695 14 — 14 Commercial and industrial 6,764 6,764 2,884 6,731 302 — 302 Direct financing leases, net — — — — — — — Consumer and other: Home equity and second mortgages — — — — — — — Other — — — — — — — Total 8,386 8,391 3,048 8,247 337 — 337 Total: Commercial real estate: Owner occupied $ 3,861 $ 3,861 $ 9 $ 2,903 $ 105 $ — $ 105 Non-owner occupied 1,970 2,010 — 728 36 — 36 Land development 3,829 6,499 — 4,146 57 — 57 Construction 279 279 41 485 7 — 7 Multi-family — — — — 1 134 (133 ) 1-4 family 2,869 2,874 114 3,178 69 94 (25 ) Commercial and industrial 9,867 9,867 2,884 6,970 347 18 329 Direct financing leases, net — — — 12 — — — Consumer and other: Home equity and second mortgages 258 258 — 447 8 — 8 Other 535 1,201 — 626 39 — 39 Grand total $ 23,468 $ 26,849 $ 3,048 $ 19,495 $ 669 $ 246 $ 423 (1) Average recorded investment is calculated primarily using daily average balances. Impaired Loans and Leases As of and for Year Ended December 31, 2015 Recorded Unpaid Impairment Average (1) Foregone Interest Net (In Thousands) With no impairment reserve recorded: Commercial real estate: Owner occupied $ 2,164 $ 2,164 $ — $ 712 $ 53 $ 12 $ 41 Non-owner occupied 2,314 2,355 — 962 25 — 25 Land development 4,413 7,083 — 4,333 133 — 133 Construction 120 120 — — — 474 — — — — — Multi-family 2 369 — 10 27 — 27 1-4 family 2,423 2,486 — 1,604 82 4 78 Commercial and industrial 2,546 2,590 — 544 172 6 166 Direct financing leases, net 38 38 — 4 — — — Consumer and other: Home equity and second mortgages 500 500 — 390 23 63 (40 ) Other 655 1,321 — 688 82 — 82 Total 15,175 19,026 — 9,721 597 85 512 With impairment reserve recorded: Commercial real estate: Owner occupied $ 814 $ 814 $ 20 $ 215 $ 7 $ 2 $ 5 Non-owner occupied — — — — — — — Land development — — — — — — — — — — — Construction 397 397 — 48 — 34 — — — — — Multi-family — — — — — — — 1-4 family 945 950 173 605 34 — 34 Commercial and industrial 6,603 6,603 847 810 102 — 102 Direct financing leases, net — — — — — — — Consumer and other: Home equity and second mortgages 99 99 25 58 10 — 10 Other — — — — — — — Total 8,858 8,863 1,113 1,722 153 2 151 Total: Commercial real estate: Owner occupied $ 2,978 $ 2,978 $ 20 $ 927 $ 60 $ 14 $ 46 Non-owner occupied 2,314 2,355 — 962 25 — 25 Land development 4,413 7,083 — 4,333 133 — 133 Construction 517 517 48 508 — — — Multi-family 2 369 — 10 27 — 27 1-4 family 3,368 3,436 173 2,209 116 4 112 Commercial and industrial 9,149 9,193 847 1,354 274 6 268 Direct financing leases, net 38 38 — 4 — — — Consumer and other: Home equity and second mortgages 599 599 25 448 33 63 (30 ) Other 655 1,321 — 688 82 — 82 Grand total $ 24,033 $ 27,889 $ 1,113 $ 11,443 $ 750 $ 87 $ 663 (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 $3.4 million and $3.9 million as of June 30, 2016 and December 31, 2015 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 $788,000 and $1.7 million of loans as of June 30, 2016 and December 31, 2015 that were performing troubled debt restructurings, and thus, although 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 such loan’s principal. Foregone interest represents the interest that was contractually due on the loan but not received or recorded. To the extent the amount of principal on a non-accrual loan 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, 2016 Commercial real estate Commercial and industrial loans and leases Consumer and other Total (Dollars in Thousands) Allowance for credit losses: Beginning balance $ 11,220 $ 4,387 $ 709 $ 16,316 Charge-offs (935 ) (652 ) (7 ) (1,594 ) Recoveries 139 2 4 145 Provision 1,012 2,280 (5 ) 3,287 Ending balance $ 11,436 $ 6,017 $ 701 $ 18,154 Ending balance: individually evaluated for impairment $ 123 $ 2,884 $ — $ 3,007 Ending balance: collectively evaluated for impairment $ 11,272 $ 3,133 $ 701 $ 15,106 Ending balance: loans acquired with deteriorated credit quality $ 41 $ — $ — $ 41 Loans and lease receivables: Ending balance, gross $ 939,780 $ 486,995 $ 26,115 $ 1,452,890 Ending balance: individually evaluated for impairment $ 11,083 $ 9,698 $ 604 $ 21,385 Ending balance: collectively evaluated for impairment $ 926,972 $ 477,128 $ 25,322 $ 1,429,422 Ending balance: loans acquired with deteriorated credit quality $ 1,725 $ 169 $ 189 $ 2,083 Allowance as % of gross loans 1.22 % 1.24 % 2.68 % 1.25 % As of and for Year Ended December 31, 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 (793 ) (711 ) (9 ) (1,513 ) Recoveries 104 6 4 114 Provision 3,290 (400 ) 496 3,386 Ending balance $ 11,220 $ 4,387 $ 709 $ 16,316 Ending balance: individually evaluated for impairment $ 240 $ 847 $ 26 $ 1,113 Ending balance: collectively evaluated for impairment $ 10,980 $ 3,540 $ 683 $ 15,203 Ending balance: loans acquired with deteriorated credit quality $ — $ — $ — $ — Loans and lease receivables: Ending balance, gross $ 904,185 $ 503,286 $ 24,556 $ 1,432,027 Ending balance: individually evaluated for impairment $ 10,849 $ 8,942 $ 1,061 $ 20,852 Ending balance: collectively evaluated for impairment $ 890,594 $ 494,098 $ 23,495 $ 1,408,187 Ending balance: loans acquired with deteriorated credit quality $ 2,742 $ 246 $ 193 $ 3,181 Allowance as % of gross loans 1.24 % 0.87 % 2.89 % 1.14 % |
