| 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: December 31, December 31, (In Thousands) Commercial real estate: Commercial real estate — owner occupied $ 200,387 $ 176,459 Commercial real estate — non-owner occupied 470,236 473,158 Land development 40,154 56,638 Construction 125,157 101,206 Multi-family 136,978 92,762 1-4 family 44,976 45,651 Total commercial real estate 1,017,888 945,874 Commercial and industrial 429,002 450,298 Direct financing leases, net 30,787 30,951 Consumer and other: Home equity and second mortgages 7,262 8,412 Other 18,099 16,329 Total consumer and other 25,361 24,741 Total gross loans and leases receivable 1,503,038 1,451,864 Less: Allowance for loan and lease losses 18,763 20,912 Deferred loan fees 1,443 1,189 Loans and leases receivable, net $ 1,482,832 $ 1,429,763 As of December 31, 2017 and 2016 , the total amount of the Corporation’s ownership of SBA loans on the Consolidated Balance Sheets comprised of the following: December 31, December 31, (In Thousands) Retained, unguaranteed portions of sold SBA loans $ 30,071 $ 30,418 Other SBA loans (1) 22,254 30,617 Total SBA loans $ 52,325 $ 61,035 (1) Primarily consisted of SBA Express loans and impaired SBA loans that were repurchased from the secondary market, all of which were not saleable as of December 31, 2017 and December 31, 2016, respectively. As of December 31, 2017 and 2016 , $11.1 million and $5.5 million of SBA loans were considered impaired, respectively. Loans transferred to third parties consist of the guaranteed portions of SBA loans which the Corporation sold in the secondary market, participation interests in other originated loans and residential real estate loans. The total principal amount of the guaranteed portions of SBA loans sold during the year ended December 31, 2017 and 2016 was $16.5 million and $41.2 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 year ended December 31, 2017 and 2016 have been derecognized in the Consolidated Financial Statements. The guaranteed portions of SBA loans were transferred at their fair value and the related gain was recognized upon the transfer as non-interest income in the Consolidated Financial Statements. The total outstanding balance of sold SBA loans at December 31, 2017 and 2016 was $100.3 million and $105.1 million , respectively. The total principal amount of transferred participation interests in other originated commercial loans during the year ended December 31, 2017 and 2016 was $63.6 million and $17.6 million , 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 these transferred loans at December 31, 2017 and 2016 was $106.4 million and $102.7 million , respectively. As of December 31, 2017 and 2016 , the total amount of the Corporation’s partial ownership of these transferred loans on the Consolidated Balance Sheets was $181.7 million and $106.1 million , respectively. No loans in this participation portfolio were considered impaired as of December 31, 2017 and 2016 . The Corporation does not share in the participant’s portion of any potential charge-offs. The total amount of loan participations purchased on the Consolidated Balance Sheets as of December 31, 2017 and 2016 was $650,000 and $1.2 million , respectively. The Corporation also previously sold residential real estate loans, servicing released, in the secondary market. The total principal amount of residential real estate loans sold during the year ended December 31, 2017 and 2016 was $1.6 million and $26.3 million , respectively. Each of the transfers of these financial assets met the qualifications for sale accounting, and therefore all of the loans transferred have been derecognized in the Consolidated Financial Statements. The loans were transferred at their fair value and the related gain was recognized as non-interest income upon the transfer in the Consolidated Financial Statements. Certain of the Corporation’s executive officers, directors and their related interests are loan clients of the Bank. As of December 31, 2017 and 2016 , loans aggregating approximately $10.5 million and $6.3 million , respectively, were outstanding to such parties. New loans granted to such parties during the years ended December 31, 2017 and 2016 were approximately $8.3 million and $673,000 and repayments on such loans were approximately $4.1 million and $1.3 million , respectively. These loans were made in the ordinary course of business and on substantially the same terms as those prevailing at the time for comparable loans not related to the lender. None of these loans were considered impaired as of December 31, 2017 or 2016 . The following tables illustrate 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 December 31, 2017 and 2016 : December 31, 2017 Category I II III IV Total (Dollars in Thousands) Commercial real estate: Commercial real estate — owner occupied $ 166,018 $ 18,442 $ 8,850 $ 7,077 $ 200,387 Commercial real estate — non-owner occupied 441,246 27,854 1,102 34 470,236 Land development 36,470 1,057 — 2,627 40,154 Construction 121,528 757 — 2,872 125,157 Multi-family 136,978 — — — 136,978 1-4 family 34,598 7,735 1,220 1,423 44,976 Total commercial real estate 936,838 55,845 11,172 14,033 1,017,888 Commercial and industrial 341,875 25,344 49,453 12,330 429,002 Direct financing leases, net 28,866 342 1,579 — 30,787 Consumer and other: Home equity and second mortgages 7,250 8 — 4 7,262 Other 17,745 — — 354 18,099 Total consumer and other 24,995 8 — 358 25,361 Total gross loans and leases receivable $ 1,332,574 $ 81,539 $ 62,204 $ 26,721 $ 1,503,038 Category as a % of total portfolio 88.66 % 5.42 % 4.14 % 1.78 % 100.00 % December 31, 2016 Category I II III IV Total (Dollars in Thousands) Commercial real estate: Commercial real estate — owner occupied $ 142,704 $ 20,294 $ 11,174 $ 2,287 $ 176,459 Commercial real estate — non-owner occupied 447,895 20,933 2,721 1,609 473,158 Land development 52,082 823 293 3,440 56,638 Construction 93,510 3,154 1,624 2,918 101,206 Multi-family 87,418 1,937 3,407 — 92,762 1-4 family 38,504 3,144 1,431 2,572 45,651 Total commercial real estate 862,113 50,285 20,650 12,826 945,874 Commercial and industrial 348,201 42,949 46,675 12,473 450,298 Direct financing leases, net 29,351 1,600 — — 30,951 Consumer and other: Home equity and second mortgages 8,271 121 12 8 8,412 Other 15,714 — 11 604 16,329 Total consumer and other 23,985 121 23 612 24,741 Total gross loans and leases receivable $ 1,263,650 $ 94,955 $ 67,348 $ 25,911 $ 1,451,864 Category as a % of total portfolio 87.04 % 6.54 % 4.64 % 1.78 % 100.00 % Credit underwriting primarily 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 borrowers’ management team or the industry in which the borrower operates. 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 or 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 Bank’s Loan Committee. 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 Bank. 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 subcommittees of the Bank’s Loan Committee on a monthly basis and the Bank’s 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 Bank will receive the contractual principal and interest in accordance with the original 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 subcommittees of the Bank’s Loan Committee on a monthly basis and the Bank’s Boards of Directors at each of their regularly scheduled meetings. Utilizing regulatory classification terminology, the Corporation identified $32.7 million and $34.3 million of loans and leases as Substandard as of December 31, 2017 and 2016 , respectively. The Corporation identified $4.7 million of loans and leases as Doubtful as of December 31, 2017 . No loans and leases were considered Doubtful as of December 31, 2016 . Additionally, no loans were considered Special Mention or Loss as of either December 31, 2017 or 2016 . 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 December 31, 2017 and 2016 was as follows: December 31, 2017 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 $ — $ — $ — $ — $ 193,366 $ 193,366 Non-owner occupied — — — — 470,202 470,202 Land development — — — — 37,528 37,528 Construction — 196 — 196 122,089 122,285 Multi-family — — — — 136,978 136,978 1-4 family 496 — — 496 43,319 43,815 Commercial and industrial 1,169 197 — 1,366 415,315 416,681 Direct financing leases, net — — — — 30,787 30,787 Consumer and other: Home equity and second mortgages 106 — — 106 7,156 7,262 Other — — — — 17,745 17,745 Total 1,771 393 — 2,164 1,474,485 1,476,649 Non-accruing loans and leases Commercial real estate: Owner occupied 405 — 4,836 5,241 1,780 7,021 Non-owner occupied — — — — 34 34 Land development — — — — 2,626 2,626 Construction — — 2,872 2,872 — 2,872 Multi-family — — — — — — 1-4 family — — 948 948 213 1,161 Commercial and industrial 782 — 7,349 8,131 4,190 12,321 Direct financing leases, net — — — — — — Consumer and other: Home equity and second mortgages — — — — — — Other — — 345 345 9 354 Total 1,187 — 16,350 17,537 8,852 26,389 Total loans and leases Commercial real estate: Owner occupied 405 — 4,836 5,241 195,146 200,387 Non-owner occupied — — — — 470,236 470,236 Land development — — — — 40,154 40,154 Construction — 196 2,872 3,068 122,089 125,157 Multi-family — — — — 136,978 136,978 1-4 family 496 — 948 1,444 43,532 44,976 Commercial and industrial 1,951 197 7,349 9,497 419,505 429,002 Direct financing leases, net — — — — 30,787 30,787 Consumer and other: Home equity and second mortgages 106 — — 106 7,156 7,262 Other — — 345 345 17,754 18,099 Total $ 2,958 $ 393 $ 16,350 $ 19,701 $ 1,483,337 $ 1,503,038 Percent of portfolio 0.20 % 0.03 % 1.09 % 1.32 % 98.68 % 100.00 % December 31, 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 $ — $ — $ — $ — $ 174,236 $ 174,236 Non-owner occupied — — — — 471,549 471,549 Land development — — — — 53,198 53,198 Construction — — — — 98,288 98,288 Multi-family — — — — 92,762 92,762 1-4 family 75 — — 75 43,639 43,714 Commercial and industrial 55 468 — 523 437,312 437,835 Direct financing leases, net — — — — 30,951 30,951 Consumer and other: Home equity and second mortgages — — — — 8,412 8,412 Other — — — — 15,725 15,725 Total 130 468 — 598 1,426,072 1,426,670 Non-accruing loans and leases Commercial real estate: Owner occupied — — 1,183 1,183 1,040 2,223 Non-owner occupied — — — — 1,609 1,609 Land development — — — — 3,440 3,440 Construction 2,482 — 436 2,918 — 2,918 Multi-family — — — — — — 1-4 family — — 1,240 1,240 697 1,937 Commercial and industrial 3,345 168 6,740 10,253 2,210 12,463 Direct financing leases, net — — — — — — Consumer and other: Home equity and second mortgages — — — — — — Other 186 — 378 564 40 604 Total 6,013 168 9,977 16,158 9,036 25,194 Total loans and leases Commercial real estate: Owner occupied — — 1,183 1,183 175,276 176,459 Non-owner occupied — — — — 473,158 473,158 Land development — — — — 56,638 56,638 Construction 2,482 — 436 2,918 98,288 101,206 Multi-family — — — — 92,762 92,762 1-4 family 75 — 1,240 1,315 44,336 45,651 Commercial and industrial 3,400 636 6,740 10,776 439,522 450,298 Direct financing leases, net — — — — 30,951 30,951 Consumer and other: Home equity and second mortgages — — — — 8,412 8,412 Other 186 — 378 564 15,765 16,329 Total $ 6,143 $ 636 $ 9,977 $ 16,756 $ 1,435,108 $ 1,451,864 Percent of portfolio 0.42 % 0.04 % 0.69 % 1.15 % 98.85 % 100.00 % The Corporation’s total impaired assets consisted of the following at December 31, 2017 and 2016 , respectively. December 31, December 31, (In Thousands) Non-accrual loans and leases Commercial real estate: Commercial real estate — owner occupied $ 7,021 $ 2,223 Commercial real estate — non-owner occupied 34 1,609 Land development 2,626 3,440 Construction 2,872 2,918 Multi-family — — 1-4 family 1,161 1,937 Total non-accrual commercial real estate 13,714 12,127 Commercial and industrial 12,321 12,463 Direct financing leases, net — — Consumer and other: Home equity and second mortgages — — Other 354 604 Total non-accrual consumer and other loans 354 604 Total non-accrual loans and leases 26,389 25,194 Foreclosed properties, net 1,069 1,472 Total non-performing assets 27,458 26,666 Performing troubled debt restructurings 332 717 Total impaired assets $ 27,790 $ 27,383 December 31, December 31, Total non-accrual loans and leases to gross loans and leases 1.76 % 1.74 % Total non-performing assets to total gross loans and leases plus foreclosed properties, net 1.83 1.83 Total non-performing assets to total assets 1.53 1.50 Allowance for loan and lease losses to gross loans and leases 1.25 1.44 Allowance for loan and lease losses to non-accrual loans and leases 71.10 83.00 As of December 31, 2017 and 2016 , $8.8 million and $12.8 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 December 31, 2017 . 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 December 31, 2017 and 2016 : As of December 31, 2017 As of December 31, 2016 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) Commercial real estate: Commercial real estate — owner occupied 3 $ 1,065 $ 880 3 $ 1,065 $ 930 Commercial real estate — non-owner occupied 1 158 34 1 158 39 Land development 1 5,745 2,626 1 5,745 3,440 Construction — — — 2 331 314 Multi-family — — — — — — 1-4 family 8 627 307 11 1,391 1,393 Commercial and industrial 10 8,759 4,951 10 8,094 7,058 Consumer and other: Home equity and second mortgage 2 37 4 1 37 8 Other 2 2,094 345 1 2,076 378 Total 27 $ 18,485 $ 9,147 30 $ 18,897 $ 13,560 All loans and leases modified as a troubled debt restructuring are measured 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 December 31, 2017 and 2016 , the Corporation’s troubled debt restructurings grouped by type of concession were as follows: As of December 31, 2017 As of December 31, 2016 Number of Loans Recorded Investment Number of Loans Recorded Investment (Dollars in Thousands) Commercial real estate: Extension of term — $ — 1 $ 8 Interest rate concession 12 3,793 1 52 Combination of extension of term and interest rate concession 1 54 16 6,056 Commercial and industrial: Combination of extension of term and interest rate concession 10 4,951 10 7,058 Consumer and other: Extension of term 1 328 1 378 Combination of extension of term and interest rate concession 3 21 1 8 Total 27 $ 9,147 30 $ 13,560 During the year ended December 31, 2017 , four commercial and industrial loans and one consumer loan totaling $4.4 million and $17,000 , respectively, were modified to a troubled debt restructuring. During the year ended December 31, 2016 , three commercial and industrial loans and one commercial real estate loan totaling $675,000 and $441,000 , respectively, were modified to a troubled debt restructuring. There were no loans and leases modified in a troubled debt restructuring during the previous 12 months which subsequently defaulted during the year ended December 31, 2017 . The following represents additional information regarding the Corporation’s impaired loans and leases, including performing troubled debt restructurings, by class: As of and for the Year Ended December 31, 2017 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 $ 7,077 $ 7,077 $ — $ 5,549 $ 613 $ — $ 613 Non-owner occupied 34 75 — 1,830 97 226 (129 ) Land development 2,627 5,297 — 3,092 84 — 84 Construction — — — 2,000 134 214 (80 ) Multi-family — — — 1 — — — 1-4 family 1,423 1,706 — 2,146 53 7 46 Commercial and industrial 5,465 6,502 — 3,634 858 7 851 Direct financing leases, net — — — — — — — Consumer and other: Home equity and second mortgages 4 3 — 7 — — — Other 345 1,011 — 365 59 — 59 Total 16,975 21,671 — 18,624 1,898 454 1,444 With impairment reserve recorded: Commercial real estate: Owner occupied — — — — — — — Non-owner occupied — — — — — — — Land development — — — — — — — Construction 2,872 2,872 415 2,252 158 — 158 Multi-family — — — — — — — 1-4 family — — — — — — — Commercial and industrial 6,865 8,813 4,067 12,288 639 — 639 Direct financing leases, net — — — — — — — Consumer and other: Home equity and second mortgages — — — — — — — Other 9 9 9 — — — — Total 9,746 11,694 4,491 14,540 797 — 797 Total: Commercial real estate: Owner occupied 7,077 7,077 — 5,549 613 — 613 Non-owner occupied 34 75 — 1,830 97 226 (129 ) Land development 2,627 5,297 — 3,092 84 — 84 Construction 2,872 2,872 415 4,252 292 214 78 Multi-family — — — 1 — — — 1-4 family 1,423 1,706 — 2,146 53 7 46 Commercial and industrial 12,330 15,315 4,067 15,922 1,497 7 1,490 Direct financing leases, net — — — — — — — Consumer and other: Home equity and second mortgages 4 3 — 7 — — — Other 354 1,020 9 365 59 — 59 Grand total $ 26,721 $ 33,365 $ 4,491 $ 33,164 $ 2,695 $ 454 $ 2,241 (1) Average recorded investment is calculated primarily using daily average balances. As of and for the Year Ended December 31, 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 $ 1,788 $ 1,788 $ — $ 3,577 $ 328 $ 118 $ 210 Non-owner occupied 1,609 1,647 — 1,318 91 79 12 Land development 3,440 6,111 — 3,898 107 — 107 Construction 436 438 — — — 291 — 20 — — 20 Multi-family — — — — 1 134 (133 ) 1-4 family 2,379 2,379 — 2,755 125 94 31 Commercial and industrial 1,307 1,307 — 709 79 62 17 Direct financing leases, net — — — 6 — — — Consumer and other: Home equity and second mortgages 8 8 — 307 16 127 (111 ) Other 378 1,044 — 510 71 — 71 Total 11,345 14,722 — 13,371 838 614 224 With impairment reserve recorded: Commercial real estate: Owner occupied 499 499 70 111 28 — 28 Non-owner occupied — — — — — — — Land development — — — — — — — — — — — Construction 2,482 2,482 — 1,790 — 834 — 45 — — 45 Multi-family — — — — — — — 1-4 family 193 199 39 203 5 — 5 Commercial and industrial 11,166 11,166 3,700 8,448 701 — 701 Direct financing leases, net — — — — — — — Consumer and other: Home equity and second mortgages — — — — — — — Other 226 226 — 19 — — — Total 14,566 14,572 5,599 9,615 779 — 779 Total: Commercial real estate: Owner occupied 2,287 2,287 70 3,688 356 118 238 Non-owner occupied 1,609 1,647 — 1,318 91 79 12 Land development 3,440 6,111 — 3,898 107 — 107 Construction 2,918 2,920 1,790 1,125 65 — 65 Multi-family — — — — 1 134 (133 ) 1-4 family 2,572 2,578 39 2,958 130 94 36 Commercial and industrial 12,473 12,473 3,700 9,157 780 62 718 Direct financing leases, net — — — 6 — — — Consumer and other: Home equity and second mortgages 8 8 — 307 16 127 (111 ) Other 604 1,270 — 529 71 — 71 Grand total $ 25,911 $ 29,294 $ 5,599 $ 22,986 $ 1,617 $ 614 $ 1,003 (1) Average recorded investment is calculated primarily using daily average balances. As of and for the 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 recorded investment of loans and leases and the unpaid principal balance of $6.6 million , $3.4 million and $3.9 million as of December 31, 2017 , 2016 and 2015 , respectively, represents partial charge-offs of loans and leases 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 $332,000 , $717,000 and $1.7 million of loans as of December 31, 2017 , 2016 and 2015 , respectively, that were performing troubled debt restructurings, and 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 into segments with similar risk characteristics. 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 Year Ended December 31, 2017 Commercial Real Estate Commercial and Industrial Consumer and Other Total (Dollars in Thousands) Beginning balance $ 12,384 $ 7,970 $ 558 $ 20,912 Charge-offs (127 ) (8,621 ) (92 ) (8,840 ) Recoveries 153 323 43 519 Net recoveries (charge-offs) 26 (8,298 ) (49 ) (8,321 ) Provision for credit losses (2,279 ) 8,553 (102 ) 6,172 Ending balance $ 10,131 $ 8,225 $ 407 $ 18,763 As of and for the Year Ended December 31, 2016 Commercial Real Estate Commercial and Industrial Consumer and Other Total (Dollars in Thousands) Beginning balance $ 11,220 $ 4,387 $ 709 $ 16,316 Charge-offs (1,194 ) (2,273 ) (127 ) (3,594 ) Recoveries 274 91 7 372 Net charge-offs (920 ) (2,182 ) (120 ) (3,222 ) Provision for credit losses 2,084 5,765 (31 ) 7,818 Ending balance $ 12,384 $ 7,970 $ 558 $ 20,912 As of and for the Year Ended December 31, 2015 Commercial Real Estate Commercial and Industrial Consumer and Other Total (Dollars in Thousands) Beginning balance $ 8,619 $ 5,492 $ 218 $ 14,329 Charge-offs (793 ) (711 ) (9 ) (1,513 ) Recoveries 104 6 4 114 Net charge-offs (689 ) (705 ) (5 ) (1,399 ) Provision for credit losses 3,290 (400 ) 496 3,386 Ending balance $ 11,220 $ 4,387 $ 709 $ 16,316 The following tables provide information regarding the allowance for loan and lease losses and balances by type of allowance methodology. As of December 31, 2017 Commercial Real Estate Commercial and Industrial Consumer and Other Total (Dollars in Thousands) Allowance for loan and lease losses: Collectively evaluated for impairment $ 9,716 $ 4,158 $ 398 $ 14,272 Individually evaluated for impairment 415 4,067 9 4,491 Loans acquired with deteriorated credit quality — — — — Total $ 10,131 $ 8,225 $ 407 $ 18,763 Loans and lease receivables: Collectively evaluated for impairment $ 1,003,855 $ 447,459 $ 25,003 1,476,317 Individually evaluated for impairment 13,506 12,324 358 26,188 Loans acquired with deteriorated credit quality 527 6 — 533 Total $ 1,017,888 $ 459,789 $ 25,361 $ 1,503,038 As of December 31, 2016 Commercial Real Estate Commercial and Industrial Consumer and Other Total (Dollars in Thousands) Allowance for loan and lease losses: Collectively evaluated for impairment $ 10,485 $ 4,270 $ 558 $ 15,313 Individually evaluated for impairment 1,899 3,700 — 5,599 Loans acquired with deteriorated credit quality — — — — Total $ 12,384 $ 7,970 $ 558 $ 20,912 Loans and lease receivables: Collectively evaluated for impairment $ 933,048 $ 468,776 $ 24,129 $ 1,425,953 Individually evaluated for impairment 11,222 12,452 612 24,286 Loans acquired with deteriorated credit quality 1,604 21 — 1,625 Total $ 945,874 $ 481,249 $ 24,741 $ 1,451,864 The Corporation’s net investment in direct financing leases consists of the following: As of December 31, 2017 2016 (In Thousands) Minimum lease payments receivable $ 24,898 $ 26,096 Estimated unguaranteed residual values in leased property 8,312 7,625 Initial direct costs 76 106 Unearned lease and residual income (2,499 ) (2,876 ) Investment in commercial direct financing leases $ 30,787 $ 30,951 There were no impairments of residual value of leased property during the years ended December 31, 2017 , 2016 and 2015 . The Corporation leases equipment under direct financing leases expiring in future years. Some of these leases provide for additional rents based on use in excess of a stipulated minimum number of hours and generally allow the lessees to purchase the equipment for fair value at the end of the lease term. Future aggregate maturities of minimum lease payments to be received are as follows: (In Thousands) Maturities during year ended December 31, 2018 $ 8,866 2019 6,635 2020 4,632 2021 2,301 2022 1,393 Thereafter 1,071 $ 24,898 |
