| 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: September 30, December 31, (In Thousands) Commercial real estate Commercial real estate — owner occupied $ 169,170 $ 176,322 Commercial real estate — non-owner occupied 483,540 436,901 Land development 60,348 59,779 Construction 110,426 100,625 Multi-family 73,081 80,254 1-4 family 46,341 50,304 Total commercial real estate 942,906 904,185 Commercial and industrial 464,920 472,193 Direct financing leases, net 29,638 31,093 Consumer and other Home equity and second mortgages 5,390 8,237 Other 16,610 16,319 Total consumer and other 22,000 24,556 Total gross loans and leases receivable 1,459,464 1,432,027 Less: Allowance for loan and lease losses 20,067 16,316 Deferred loan fees 1,167 1,062 Loans and leases receivable, net $ 1,438,230 $ 1,414,649 Loans transferred to third parties consist of the guaranteed portion of Small Business Administration (“SBA”) loans which the Corporation sold in the secondary market, 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 September 30, 2016 and 2015 was $3.3 million and $9.1 million , respectively. For the nine months ended September 30, 2016 and 2015 , $34.3 million and $19.2 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 nine months ended September 30, 2016 and 2015 have been derecognized in the unaudited Consolidated Financial Statements. The Corporation has a continuing involvement in each of the transferred lending arrangements 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 September 30, 2016 and December 31, 2015 was $96.9 million and $73.4 million , respectively. In the event of a loss resulting from default and the SBA determines there is a deficiency in the manner in which the loan was originated, funded or serviced by the Corporation, the SBA may require the Corporation to repurchase the loan, deny its liability under the guaranty, reduce the amount of the guaranty, or, if it has already paid under the guaranty, seek recovery of the principal loss related to the deficiency from the Corporation. The Corporation must comply with applicable SBA regulations in order to maintain the guaranty. In addition, the Corporation retains the option to repurchase the sold guaranteed portion of an SBA loan if the loan defaults. Management has assessed estimated losses inherent in the outstanding guaranteed portion of SBA loans sold in accordance with ASC 450, Contingencies , and determined a reserve based on the probability of future losses for these loans to be $375,000 at September 30, 2016, which is reported in other liabilities on the Corporation’s Consolidated Balance Sheets. No recourse reserve was recorded as of December 31, 2015. To date, the Corporation has not experienced significant historical losses related to the guaranteed portion of SBA loans. As of September 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 $30.0 million and $24.6 million , respectively. As of September 30, 2016 , $2.3 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 September 30, 2016 and 2015 was $16.7 million and $18.3 million , respectively. For the nine months ended September 30, 2016 and 2015 , $32.1 million and $54.8 million of these participation interests were transferred to third parties, respectively, all of which were treated as sales and derecognized under the applicable accounting guidance at the time of transfer. 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 September 30, 2016 and December 31, 2015 was $109.1 million and $95.8 million , respectively. As of September 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 $109.3 million and $112.2 million , respectively. No loans in this participation portfolio were considered impaired as of September 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 September 30, 2016 and December 31, 2015 was $454,000 and $467,000 , respectively. 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 loan and lease 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 September 30, 2016 and December 31, 2015 : September 30, December 31, (In Thousands) Contractually required payments $ 3,806 $ 5,291 Fair value of purchased credit-impaired loans 1,937 3,250 The following table presents a rollforward of the Corporation’s accretable yield as of September 30, 2016 and December 31, 2015 : As of and for the Nine Months Ended September 30, 2016 As of and for Year Ended December 31, 2015 (In Thousands) Accretable yield, beginning of period $ 414 $ 676 Accretion recognized in earnings (100 ) (50 ) Reclassification to nonaccretable difference for loans with changing cash flows (1) (216 ) (60 ) Changes in accretable yield for non-credit related changes in expected cash flows (2) 73 (152 ) Accretable yield, end of period $ 171 $ 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 September 30, 2016 and December 31, 2015 : Category As of September 30, 2016 I II III IV Total (Dollars in Thousands) Commercial real estate: Commercial real estate — owner occupied $ 139,894 $ 13,205 $ 11,468 $ 4,603 $ 169,170 Commercial real estate — non-owner occupied 460,093 19,035 2,505 1,907 483,540 Land development 54,194 833 1,647 3,674 60,348 Construction 99,947 5,470 2,056 2,953 110,426 Multi-family 72,856 225 — — 73,081 1-4 family 39,605 2,632 1,339 2,765 46,341 Total commercial real estate 866,589 41,400 19,015 15,902 942,906 Commercial and industrial 370,580 40,619 43,752 9,969 464,920 Direct financing leases, net 28,733 591 314 — 29,638 Consumer and other: Home equity and second mortgages 4,637 557 14 182 5,390 Other 16,132 82 5 391 16,610 Total consumer and other 20,769 639 19 573 22,000 Total gross loans and leases receivable $ 1,286,671 $ 83,249 $ 63,100 $ 26,444 $ 1,459,464 Category as a % of total portfolio 88.17 % 5.70 % 4.32 % 1.81 % 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. Commercial lenders 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 $32.1 million and $26.8 million of loans and leases as Substandard as of September 30, 2016 and December 31, 2015 , respectively. No loans were considered Special Mention, Doubtful or Loss as of either September 30, 2016 or December 31, 2015 . The population of Substandard loans is a subset of Category III and Category IV loans. The delinquency aging of the loan and lease portfolio by class of receivable as of September 30, 2016 and December 31, 2015 is as follows: As of September 30, 2016 30-59 60-89 Greater Total Past Due Current Total Loans and Leases (Dollars in Thousands) Accruing loans and leases Commercial real estate: Owner occupied $ — $ — $ — $ — $ 164,632 $ 164,632 Non-owner occupied — 296 — 296 481,337 481,633 Land development — — — — 56,686 56,686 Construction 286 431 — 717 106,756 107,473 Multi-family — — — — 73,081 73,081 1-4 family 193 — — 193 44,029 44,222 Commercial and industrial 200 27 — 227 454,724 454,951 Direct financing leases, net — — — — 29,638 29,638 Consumer and other: Home equity and second mortgages — — — — 5,217 5,217 Other — — — — 16,219 16,219 Total $ 679 $ 754 $ — $ 1,433 $ 1,432,319 $ 1,433,752 Non-accruing loans and leases Commercial real estate: Owner occupied $ — $ 61 $ 3,280 $ 3,341 $ 1,197 $ 4,538 Non-owner occupied — — — — 1,907 1,907 Land development — — — — 3,662 3,662 Construction — 122 312 434 2,519 2,953 Multi-family — — — — — — 1-4 family — 205 693 898 1,221 2,119 Commercial and industrial 27 331 6,111 6,469 3,500 9,969 Direct financing leases, net — — — — — — Consumer and other: Home equity and second mortgages — — 173 173 — 173 Other — — 391 391 — 391 Total $ 27 $ 719 $ 10,960 $ 11,706 $ 14,006 $ 25,712 Total loans and leases Commercial real estate: Owner occupied $ — $ 61 $ 3,280 $ 3,341 $ 165,829 $ 169,170 Non-owner occupied — 296 — 296 483,244 483,540 Land development — — — — 60,348 60,348 Construction 286 553 312 1,151 109,275 110,426 Multi-family — — — — 73,081 73,081 1-4 family 193 205 693 1,091 45,250 46,341 Commercial and industrial 227 358 6,111 6,696 458,224 464,920 Direct financing leases, net — — — — 29,638 29,638 Consumer and other: Home equity and second mortgages — — 173 173 5,217 5,390 Other — — 391 391 16,219 16,610 Total $ 706 $ 1,473 $ 10,960 $ 13,139 $ 1,446,325 $ 1,459,464 Percent of portfolio 0.05 % 0.10 % 0.75 % 0.90 % 99.10 % 100.00 % As of December 31, 2015 30-59 60-89 Greater Total Past Due Current Total Loans and Leases (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 September 30, 2016 and December 31, 2015 , respectively. September 30, December 31, (Dollars in Thousands) Non-accrual loans and leases Commercial real estate: Commercial real estate — owner occupied $ 4,538 $ 2,907 Commercial real estate — non-owner occupied 1,907 1,678 Land development 3,662 4,393 Construction 2,953 397 Multi-family — 2 1-4 family 2,119 2,550 Total non-accrual commercial real estate 15,179 11,927 Commercial and industrial 9,969 9,136 Direct financing leases, net — 38 Consumer and other: Home equity and second mortgages 173 542 Other 391 655 Total non-accrual consumer and other loans 564 1,197 Total non-accrual loans and leases 25,712 22,298 Foreclosed properties, net 1,527 1,677 Total non-performing assets 27,239 23,975 Performing troubled debt restructurings 732 1,735 Total impaired assets $ 27,971 $ 25,710 September 30, December 31, Total non-accrual loans and leases to gross loans and leases 1.76 % 1.56 % Total non-performing assets to total gross loans and leases plus foreclosed properties, net 1.86 1.67 Total non-performing assets to total assets 1.54 1.35 Allowance for loan and lease losses to gross loans and leases 1.37 1.14 Allowance for loan and lease losses to non-accrual loans and leases 78.05 73.17 As of September 30, 2016 and December 31, 2015 , $13.2 million and $16.2 million of the non-accrual loans and leases were considered troubled debt restructurings, respectively. There were no unfunded commitments associated with troubled debt restructured loans and leases as of September 30, 2016 . The following table provides the number of loans modified in a troubled debt restructuring and the pre- and post-modification recorded investment by class of receivable as of September 30, 2016 and December 31, 2015 . As of September 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 4 $ 1,338 $ 1,262 3 $ 1,209 $ 1,188 Commercial real estate — non-owner occupied 4 445 250 5 1,150 904 Land development 2 5,834 3,675 2 5,853 4,393 Construction 2 331 312 1 181 200 Multi-family — — — 1 184 2 1-4 family 13 1,747 1,581 15 2,035 1,869 Commercial and industrial 8 7,782 6,224 10 7,572 8,330 Consumer and other: Home equity and second mortgages 2 308 195 4 461 349 Other 1 2,076 391 1 2,076 655 Total 36 $ 19,861 $ 13,890 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 September 30, 2016 and December 31, 2015 , the Corporation’s troubled debt restructurings grouped by type of concession were as follows: As of September 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 $ 12 1 $ 24 Interest rate concession 1 53 1 55 Combination of extension of term and interest rate concession 23 7,015 25 8,477 Commercial and industrial Combination of extension of term and interest rate concession 8 6,224 10 8,330 Consumer and other Extension of term 1 9 1 655 Combination of extension of term and interest rate concession 2 577 4 349 Total 36 $ 13,890 42 $ 17,890 During the nine months ended September 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 Nine Months Ended September 30, 2016 Recorded Unpaid Impairment Average (1) Foregone Interest Net (In Thousands) With no impairment reserve recorded: Commercial real estate: Owner occupied $ 4,542 $ 4,542 $ — $ 2,857 $ 178 $ — $ 178 Non-owner occupied 1,907 1,947 — 1,137 61 — 61 Land development 3,674 6,345 — 4,003 82 — 82 Construction 434 434 — 109 24 — 24 Multi-family — — — — 1 134 (133 ) 1-4 family 1,933 1,933 — 2,227 82 94 (12 ) Commercial and industrial 2,766 2,766 — 522 96 18 78 Direct financing leases, net — — — 8 — — — Consumer and other: Home equity and second mortgages 182 182 — 375 16 127 (111 ) Other 391 1,057 — 578 56 — 56 Total $ 15,829 $ 19,206 $ — $ 11,816 $ 596 $ 373 $ 223 With impairment reserve recorded: Commercial real estate: Owner occupied $ 61 $ 61 $ 23 $ 424 $ 4 $ — $ 4 Non-owner occupied — — — — — — — Land development — — — — — — — — — — Construction 2,519 2,519 — 1,263 404 — 8 — — 8 Multi-family — — — — — — — 1-4 family 832 836 99 848 21 — 21 Commercial and industrial 7,203 7,203 3,251 7,611 430 — 430 Direct financing leases, net — — — — — — — Consumer and other: Home equity and second mortgages — — — — — — — Other — — — — — — — Total $ 10,615 $ 10,619 $ 4,636 $ 9,287 $ 463 $ — $ 463 Total: Commercial real estate: Owner occupied $ 4,603 $ 4,603 $ 23 $ 3,281 $ 182 $ — $ 182 Non-owner occupied 1,907 1,947 — 1,137 61 — 61 Land development 3,674 6,345 — 4,003 82 — 82 Construction 2,953 2,953 1,263 513 32 — 32 Multi-family — — — — 1 134 (133 ) 1-4 family 2,765 2,769 99 3,075 103 94 9 Commercial and industrial 9,969 9,969 3,251 8,133 526 18 508 Direct financing leases, net — — — 8 — — — Consumer and other: Home equity and second mortgages 182 182 — 375 16 127 (111 ) Other 391 1,057 — 578 56 — 56 Grand total $ 26,444 $ 29,825 $ 4,636 $ 21,103 $ 1,059 $ 373 $ 686 (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 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 $ 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 September 30, 2016 and December 31, 2015 , respectively, represents partial charge-offs resulting from losses due to the appraised 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 $732,000 and $1.7 million of loans as of September 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 categorizes 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 Nine Months Ended September 30, 2016 Commercial Real Estate Commercial and Industrial Consumer and Other Total (Dollars in Thousands) Allowance for loan and lease losses: Beginning balance $ 11,220 $ 4,387 $ 709 $ 16,316 Charge-offs (1,194 ) (2,048 ) (8 ) (3,250 ) Recoveries 170 2 5 177 Provision 2,619 4,331 (126 ) 6,824 Ending balance $ 12,815 $ 6,672 $ 580 $ 20,067 Ending balance: individually evaluated for impairment $ 1,385 $ 3,251 $ — $ 4,636 Ending balance: collectively evaluated for impairment $ 11,430 $ 3,421 $ 580 $ 15,431 Ending balance: loans acquired with deteriorated credit quality $ — $ — $ — $ — Loans and lease receivables: Ending balance, gross $ 942,906 $ 494,558 $ 22,000 $ 1,459,464 Ending balance: individually evaluated for impairment $ 13,953 $ 9,946 $ 413 $ 24,312 Ending balance: collectively evaluated for impairment $ 927,017 $ 484,589 $ 21,414 $ 1,433,020 Ending balance: loans acquired with deteriorated credit quality $ 1,936 $ 23 $ 173 $ 2,132 Allowance as % of gross loans and leases 1.36 % 1.35 % 2.64 % 1.37 % As of and for Year Ended December 31, 2015 Commercial Real Estate Commercial and Industrial Consumer and Other Total (Dollars in Thousands) Allowance for loan and lease 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 and leases 1.24 % 0.87 % 2.89 % 1.14 % |
