Loans and Leases | LOANS AND LEASES Following is a summary of loans and leases, net of unearned income: (in thousands) Originated Loans and Leases Acquired Loans Total Loans and Leases December 31, 2017 Commercial real estate $ 5,174,783 $ 3,567,081 $ 8,741,864 Commercial and industrial 3,495,247 675,420 4,170,667 Commercial leases 266,720 — 266,720 Other 17,063 — 17,063 Total commercial loans and leases 8,953,813 4,242,501 13,196,314 Direct installment 1,755,713 149,822 1,905,535 Residential mortgages 2,036,226 666,465 2,702,691 Indirect installment 1,448,268 165 1,448,433 Consumer lines of credit 1,151,470 594,323 1,745,793 Total consumer loans 6,391,677 1,410,775 7,802,452 Total loans and leases, net of unearned income $ 15,345,490 $ 5,653,276 $ 20,998,766 December 31, 2016 Commercial real estate $ 4,095,817 $ 1,339,345 $ 5,435,162 Commercial and industrial 2,711,886 330,895 3,042,781 Commercial leases 196,636 — 196,636 Other 35,878 — 35,878 Total commercial loans and leases 7,040,217 1,670,240 8,710,457 Direct installment 1,765,257 79,142 1,844,399 Residential mortgages 1,446,776 397,798 1,844,574 Indirect installment 1,196,110 203 1,196,313 Consumer lines of credit 1,099,627 201,573 1,301,200 Total consumer loans 5,507,770 678,716 6,186,486 Total loans and leases, net of unearned income $ 12,547,987 $ 2,348,956 $ 14,896,943 The loans and leases portfolio categories are comprised of the following: • Commercial real estate includes both owner-occupied and non-owner-occupied loans secured by commercial properties; • Commercial and industrial includes loans to businesses that are not secured by real estate; • Commercial leases consist of leases for new or used equipment; • Other is comprised primarily of credit cards and mezzanine loans; • Direct installment is comprised of fixed-rate, closed-end consumer loans for personal, family or household use, such as home equity loans and automobile loans; • Residential mortgages consist of conventional and jumbo mortgage loans for 1-4 family properties; • Indirect installment is comprised of loans originated by approved third parties and underwritten by us, primarily automobile loans; and • Consumer lines of credit include home equity lines of credit (HELOC) and consumer lines of credit that are either unsecured or secured by collateral other than home equity. The loans and leases portfolio consists principally of loans to individuals and small- and medium-sized businesses within our primary market areas of Pennsylvania, eastern Ohio, Maryland, North Carolina, South Carolina and northern West Virginia. The loans and leases portfolio also contains Regency consumer finance loans to individuals in Pennsylvania, Ohio, Tennessee and Kentucky. Due to the relative size of the Regency consumer finance loan portfolio, these loans are not segregated from other consumer loans. The following table shows certain information relating to the Regency consumer finance loans: December 31 2017 2016 (dollars in thousands) Regency consumer finance loans $ 174,916 $ 184,687 Percent of total loans and leases 0.8 % 1.2 % The following table shows certain information relating to commercial real estate loans: December 31 2017 2016 (dollars in thousands) Commercial construction, acquisition and development loans $ 1,170,175 $ 597,617 Percent of total loans and leases 5.6 % 4.0 % Commercial real estate: Percent owner-occupied 35.3 % 36.2 % Percent non-owner-occupied 64.7 % 63.8 % We have extended credit to certain directors and executive officers and their related interests. These related-party loans were made in the ordinary course of business under normal credit terms and do not involve more than a normal risk of collection. Following is a summary of the activity for these loans to related parties during 2017 : (in thousands) Balance at beginning of period $ 21,569 New loans 1,171 Repayments (3,447 ) Other 518 Balance at end of period $ 19,811 Other represents the net change in loan balances resulting from changes in related parties during 2017 . Acquired Loans All acquired loans were initially recorded at fair value at the acquisition date. Refer to the Acquired Loans section in Note 1, “Summary of Significant Accounting Policies,” for a discussion of ASC 310-20 and ASC 310-30 loans. The outstanding balance and the carrying amount of acquired loans included in the consolidated balance sheets are as follows: December 31 2017 2016 (in thousands) Accounted for under ASC 310-30: Outstanding balance $ 5,176,015 $ 2,346,687 Carrying amount 4,834,256 2,015,904 Accounted for under ASC 310-20: Outstanding balance 835,130 342,015 Carrying amount 812,322 325,784 Total acquired loans: Outstanding balance 6,011,145 2,688,702 Carrying amount 5,646,578 2,341,688 The outstanding balance is the undiscounted sum of all amounts owed under the loan, including amounts deemed principal, interest, fees, penalties and other, whether or not currently due and whether or not any such amounts have been written or charged-off. The carrying amount of purchased credit impaired loans included in the table above totaled $1.9 million at December 31, 2017 and $2.8 million at December 31, 2016 , representing 0.03% and 0.12% of the carrying amount of total acquired loans as of each date. The following table provides changes in accretable yield for all acquired loans accounted for under ASC 310-30. Loans accounted for under ASC 310-20 are not included in this table. Year Ended December 31 2017 2016 (in thousands) Balance at beginning of period $ 467,070 $ 256,120 Acquisitions 444,715 308,312 Reduction due to unexpected early payoffs (127,949 ) (86,046 ) Reclass from non-accretable difference 155,840 92,823 Disposals/transfers (3,559 ) (409 ) Other (658 ) — Accretion (226,978 ) (103,730 ) Balance at end of period $ 708,481 $ 467,070 Cash flows expected to be collected on acquired loans are estimated quarterly by incorporating several key assumptions similar to the initial estimate of fair value. These key assumptions include probability of default and the amount of actual prepayments after the acquisition date. Prepayments affect the estimated life of the loans and could change the amount of interest income, and possibly principal expected to be collected. In reforecasting future estimated cash flows, credit loss expectations are adjusted as necessary. Improved cash flow expectations for loans or pools are recorded first as a reversal of previously recorded impairment, if any, and then as an increase in prospective yield when all previously recorded impairment has been recaptured. Decreases in expected cash flows are recognized as impairment through a charge to the provision for credit losses and credit to the allowance for credit losses. During 2017 , there was an overall improvement in cash flow expectations which resulted in a net reclassification of $155.8 million from the non-accretable difference to accretable yield. This reclassification was $92.8 million for 2016 . The reclassification from the non-accretable difference to the accretable yield results in prospective yield adjustments on the loan pools. The following table reflects amounts at acquisition for all purchased loans subject to ASC 310-30 (impaired and non-impaired loans with deteriorated credit quality) acquired from YDKN in 2017 based on the fair value as described in Note 3. (in thousands) Acquired Impaired Loans Acquired Performing Loans Total Contractually required cash flows at acquisition $ 46,053 $ 5,085,712 $ 5,131,765 Non-accretable difference (expected losses and foregone interest) (23,924 ) (406,173 ) (430,097 ) Cash flows expected to be collected at acquisition 22,129 4,679,539 4,701,668 Accretable yield (3,266 ) (441,449 ) (444,715 ) Fair value of acquired loans at acquisition $ 18,863 $ 4,238,090 $ 4,256,953 In addition, loans purchased in the YDKN acquisition that were not subject to ASC 310-30 had the following balances at the date of acquisition: fair value of $778.4 million ; unpaid principal balance of $791.3 million ; and contractual cash flows not expected to be collected of $122.9 million . Credit Quality Management monitors the credit quality of our loan portfolio using several performance measures to do so based on payment activity and borrower performance. Non-performing loans include non-accrual loans and non-performing troubled debt restructurings (TDRs). Past due loans are reviewed on a monthly basis to identify loans for non-accrual status. We place originated loans on non-accrual status and discontinue interest accruals on originated loans generally when principal or interest is due and has remained unpaid for a certain number of days, or when the full amount of principal and interest is due and has remained unpaid for a certain number of days, unless the loan is both well secured and in the process of collection. Commercial loans are placed on non-accrual at 90 days, installment loans are placed on non-accrual at 120 days and residential mortgages and consumer lines of credit are generally placed on non-accrual at 180 days, though we may place a loan on non-accrual prior to these past due thresholds as warranted. When a loan is placed on non-accrual status, all unpaid accrued interest is reversed. Non-accrual loans may not be restored to accrual status until all delinquent principal and interest have been paid and the ultimate ability to collect the remaining principal and interest is reasonably assured. TDRs are loans in which we have granted a concession on the interest rate or the original repayment terms due to the borrower’s financial distress. Following is a summary of non-performing assets: December 31 2017 2016 (dollars in thousands) Non-accrual loans $ 74,635 $ 65,479 Troubled debt restructurings 23,481 20,428 Total non-performing loans 98,116 85,907 Other real estate owned (OREO) 40,606 32,490 Total non-performing assets $ 138,722 $ 118,397 Asset quality ratios: Non-performing loans / total loans and leases 0.47 % 0.58 % Non-performing loans + OREO / total loans and leases + OREO 0.66 % 0.79 % Non-performing assets / total assets 0.44 % 0.54 % The carrying value of residential other real estate owned (OREO) held as a result of obtaining physical possession upon completion of a foreclosure or through completion of a deed in lieu of foreclosure amounted to $3.6 million at December 31, 2017 . The recorded investment of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process at December 31, 2017 and December 31, 2016 totaled $15.2 million and $12.0 million , respectively. The following tables provide an analysis of the aging of loans by class segregated by loans and leases originated and loans acquired: (in thousands) 30-89 Days Past Due ≥ 90 Days Past Due and Still Accruing Non- Accrual Total Past Due Current Total Loans and Leases Originated Loans and Leases December 31, 2017 Commercial real estate $ 8,273 $ 1 $ 24,773 $ 33,047 $ 5,141,736 $ 5,174,783 Commercial and industrial 8,948 3 17,077 26,028 3,469,219 3,495,247 Commercial leases 1,382 41 1,574 2,997 263,723 266,720 Other 83 153 1,000 1,236 15,827 17,063 Total commercial loans and leases 18,686 198 44,424 63,308 8,890,505 8,953,813 Direct installment 13,192 4,466 8,896 26,554 1,729,159 1,755,713 Residential mortgages 14,096 2,832 5,771 22,699 2,013,527 2,036,226 Indirect installment 10,313 611 2,240 13,164 1,435,104 1,448,268 Consumer lines of credit 5,859 1,014 2,313 9,186 1,142,284 1,151,470 Total consumer loans 43,460 8,923 19,220 71,603 6,320,074 6,391,677 Total originated loans and leases $ 62,146 $ 9,121 $ 63,644 $ 134,911 $ 15,210,579 $ 15,345,490 December 31, 2016 Commercial real estate $ 8,452 $ 1 $ 20,114 $ 28,567 $ 4,067,250 $ 4,095,817 Commercial and industrial 16,019 3 24,141 40,163 2,671,723 2,711,886 Commercial leases 973 1 3,429 4,403 192,233 196,636 Other 398 83 1,000 1,481 34,397 35,878 Total commercial loans and leases 25,842 88 48,684 74,614 6,965,603 7,040,217 Direct installment 10,573 4,386 6,484 21,443 1,743,814 1,765,257 Residential mortgages 10,594 3,014 3,316 16,924 1,429,852 1,446,776 Indirect installment 9,312 513 1,983 11,808 1,184,302 1,196,110 Consumer lines of credit 3,529 1,112 1,616 6,257 1,093,370 1,099,627 Total consumer loans 34,008 9,025 13,399 56,432 5,451,338 5,507,770 Total originated loans and leases $ 59,850 $ 9,113 $ 62,083 $ 131,046 $ 12,416,941 $ 12,547,987 (in thousands) 30-89 Days Past Due ≥ 90 Days Past Due and Still Accruing Non- Accrual Total Past Due (1)(2) Current (Discount)/ Premium Total Loans Acquired Loans December 31, 2017 Commercial real estate $ 34,928 $ 63,092 $ 3,975 $ 101,995 $ 3,657,152 $ (192,066 ) $ 3,567,081 Commercial and industrial 3,187 6,452 5,663 15,302 698,265 (38,147 ) 675,420 Total commercial loans 38,115 69,544 9,638 117,297 4,355,417 (230,213 ) 4,242,501 Direct installment 5,267 2,013 — 7,280 141,386 1,156 149,822 Residential mortgages 17,191 15,139 — 32,330 675,499 (41,364 ) 666,465 Indirect installment — 1 — 1 10 154 165 Consumer lines of credit 6,353 3,253 1,353 10,959 596,298 (12,934 ) 594,323 Total consumer loans 28,811 20,406 1,353 50,570 1,413,193 (52,988 ) 1,410,775 Total acquired loans $ 66,926 $ 89,950 $ 10,991 $ 167,867 $ 5,768,610 $ (283,201 ) $ 5,653,276 December 31, 2016 Commercial real estate $ 9,501 $ 23,890 $ 949 $ 34,340 $ 1,384,752 $ (79,747 ) $ 1,339,345 Commercial and industrial 1,789 2,942 2,111 6,842 353,494 (29,441 ) 330,895 Total commercial loans 11,290 26,832 3,060 41,182 1,738,246 (109,188 ) 1,670,240 Direct installment 2,317 1,344 — 3,661 73,479 2,002 79,142 Residential mortgages 8,428 10,816 — 19,244 416,561 (38,007 ) 397,798 Indirect installment 19 4 — 23 96 84 203 Consumer lines of credit 2,156 1,528 336 4,020 201,958 (4,405 ) 201,573 Total consumer loans 12,920 13,692 336 26,948 692,094 (40,326 ) 678,716 Total acquired loans $ 24,210 $ 40,524 $ 3,396 $ 68,130 $ 2,430,340 $ (149,514 ) $ 2,348,956 (1) Past due information for acquired loans is based on the contractual balance outstanding at December 31, 2017 and 2016 . (2) Acquired loans are considered performing upon acquisition, regardless of whether the customer is contractually delinquent, if we can reasonably estimate the timing and amount of expected cash flows on such loans. In these instances, we do not consider acquired contractually delinquent loans to be non-accrual or non-performing and continue to recognize interest income on these loans using the accretion method. Acquired loans are considered non-accrual or non-performing when, due to credit deterioration or other factors, we determine we are no longer able to reasonably estimate the timing and amount of expected cash flows on such loans. We do not recognize interest income on acquired loans considered non-accrual or non-performing. We utilize the following categories to monitor credit quality within our commercial loan and lease portfolio: Rating Category Definition Pass in general, the condition of the borrower and the performance of the loan is satisfactory or better Special Mention in general, the condition of the borrower has deteriorated, requiring an increased level of monitoring Substandard in general, the condition of the borrower has significantly deteriorated and the performance of the loan could further deteriorate if deficiencies are not corrected Doubtful in general, the condition of the borrower has significantly deteriorated and the collection in full of both principal and interest is highly questionable or improbable The use of these internally assigned credit quality categories within the commercial loan and lease portfolio permits management’s use of transition matrices to estimate a quantitative portion of credit risk. Our internal credit risk grading system is based on past experiences with similarly graded loans and leases and conforms with regulatory categories. In general, loan and lease risk ratings within each category are reviewed on an ongoing basis according to our policy for each class of loans and leases. Each quarter, management analyzes the resulting ratings, as well as other external statistics and factors such as delinquency, to track the migration performance of the commercial loan and lease portfolio. Loans and leases within the Pass credit category or that migrate toward the Pass credit category generally have a lower risk of loss compared to loans and leases that migrate toward the Substandard or Doubtful credit categories. Accordingly, management applies higher risk factors to Substandard and Doubtful credit categories. The following tables present a summary of our commercial loans and leases by credit quality category segregated by loans and leases originated and loans acquired: Commercial Loan and Lease Credit Quality Categories (in thousands) Pass Special Mention Substandard Doubtful Total Originated Loans and Leases December 31, 2017 Commercial real estate $ 4,922,872 $ 152,744 $ 98,728 $ 439 $ 5,174,783 Commercial and industrial 3,266,966 132,975 92,091 3,215 3,495,247 Commercial leases 260,235 4,425 2,060 — 266,720 Other 15,866 43 1,154 — 17,063 Total originated commercial loans and leases $ 8,465,939 $ 290,187 $ 194,033 $ 3,654 $ 8,953,813 December 31, 2016 Commercial real estate $ 3,895,764 $ 130,452 $ 69,588 $ 13 $ 4,095,817 Commercial and industrial 2,475,955 104,652 128,089 3,190 2,711,886 Commercial leases 188,662 3,789 4,185 — 196,636 Other 34,531 264 1,083 — 35,878 Total originated commercial loans and leases $ 6,594,912 $ 239,157 $ 202,945 $ 3,203 $ 7,040,217 Acquired Loans December 31, 2017 Commercial real estate $ 3,102,788 $ 250,987 $ 213,089 $ 217 $ 3,567,081 Commercial and industrial 603,611 26,059 45,661 89 675,420 Total acquired commercial loans $ 3,706,399 $ 277,046 $ 258,750 $ 306 $ 4,242,501 December 31, 2016 Commercial real estate $ 1,144,676 $ 85,894 $ 108,128 $ 647 $ 1,339,345 Commercial and industrial 274,819 20,593 34,967 516 330,895 Total acquired commercial loans $ 1,419,495 $ 106,487 $ 143,095 $ 1,163 $ 1,670,240 Credit quality information for acquired loans is based on the contractual balance outstanding at December 31, 2017 and 2016 . We use delinquency transition matrices within the consumer and other loan classes to enable management to estimate a quantitative portion of credit risk. Each month, management analyzes payment and volume activity, FICO scores and other external factors such as unemployment, to determine how consumer loans are performing. Following is a table showing consumer loans by payment status: Consumer Loan Credit Quality by Payment Status (in thousands) Performing Non-Performing Total Originated loans December 31, 2017 Direct installment $ 1,739,060 $ 16,653 $ 1,755,713 Residential mortgages 2,019,816 16,410 2,036,226 Indirect installment 1,445,833 2,435 1,448,268 Consumer lines of credit 1,147,576 3,894 1,151,470 Total originated consumer loans $ 6,352,285 $ 39,392 $ 6,391,677 December 31, 2016 Direct installment $ 1,750,305 $ 14,952 $ 1,765,257 Residential mortgages 1,433,409 13,367 1,446,776 Indirect installment 1,193,930 2,180 1,196,110 Consumer lines of credit 1,096,642 2,985 1,099,627 Total originated consumer loans $ 5,474,286 $ 33,484 $ 5,507,770 Acquired loans December 31, 2017 Direct installment $ 149,751 $ 71 $ 149,822 Residential mortgages 666,465 — 666,465 Indirect installment 165 — 165 Consumer lines of credit 592,384 1,939 594,323 Total acquired consumer loans $ 1,408,765 $ 2,010 $ 1,410,775 December 31, 2016 Direct installment $ 79,142 $ — $ 79,142 Residential mortgages 397,798 — 397,798 Indirect installment 203 — 203 Consumer lines of credit 201,061 512 201,573 Total acquired consumer loans $ 678,204 $ 512 $ 678,716 Loans and leases are designated as impaired when, in the opinion of management, based on current information and events, the collection of principal and interest in accordance with the loan and lease contract is doubtful. Typically, we do not consider loans and leases for impairment unless a sustained period of delinquency (i.e., 90 -plus days) is noted or there are subsequent events that impact repayment probability (i.e., negative financial trends, bankruptcy filings, imminent foreclosure proceedings, etc.). Impairment is evaluated in the aggregate for consumer installment loans, residential mortgages, consumer lines of credit and commercial loan and lease relationships less than $500,000 based on loan and lease segment loss given default. For commercial loan and lease relationships greater than or equal to $500,000 , a specific valuation allowance is allocated, if necessary, so that the loan is reported net, at the present value of estimated future cash flows using a market interest rate or at the fair value of collateral if repayment is expected solely from the collateral. Consistent with our existing method of income recognition for loans and leases, interest income on impaired loans, except those classified as non-accrual, is recognized using the accrual method. Impaired loans, or portions thereof, are charged off when deemed uncollectible. Following is a summary of information pertaining to originated loans and leases considered to be impaired, by class of loan and lease: (in thousands) Unpaid Contractual Principal Balance Recorded Investment With No Specific Reserve Recorded Investment With Specific Reserve Total Recorded Investment Specific Reserve Average Recorded Investment At or for the Year Ended Commercial real estate $ 27,718 $ 21,748 $ 2,906 $ 24,654 $ 439 $ 24,413 Commercial and industrial 29,307 11,595 4,457 16,052 3,215 23,907 Commercial leases 1,574 1,574 — 1,574 — 1,386 Other — — — — — — Total commercial loans and leases 58,599 34,917 7,363 42,280 3,654 49,706 Direct installment 19,375 16,653 — 16,653 — 16,852 Residential mortgages 17,754 16,410 — 16,410 — 15,984 Indirect installment 5,709 2,435 — 2,435 — 2,279 Consumer lines of credit 5,039 3,894 — 3,894 — 3,815 Total consumer loans 47,877 39,392 — 39,392 — 38,930 Total $ 106,476 $ 74,309 $ 7,363 $ 81,672 $ 3,654 $ 88,636 At or for the Year Ended Commercial real estate $ 23,771 $ 19,699 $ 464 $ 20,163 $ 13 $ 19,217 Commercial and industrial 25,719 14,781 8,996 23,777 3,190 29,730 Commercial leases 3,429 3,429 — 3,429 — 3,394 Other 1,000 1,000 — 1,000 — 1,000 Total commercial loans and leases 53,919 38,909 9,460 48,369 3,203 53,341 Direct installment 16,440 14,952 — 14,952 — 14,997 Residential mortgages 14,090 13,367 — 13,367 — 13,200 Indirect installment 5,172 2,180 — 2,180 — 2,037 Consumer lines of credit 3,858 2,985 — 2,985 — 2,813 Total consumer loans 39,560 33,484 — 33,484 — 33,047 Total $ 93,479 $ 72,393 $ 9,460 $ 81,853 $ 3,203 $ 86,388 Interest income continued to accrue on certain impaired loans and totaled approximately $6.1 million , $4.6 million and $4.1 million during 2017 , 2016 and 2015 , respectively. The above tables do not reflect the additional allowance for credit losses relating to acquired loans. Following is a summary of the allowance for credit losses required for acquired loans due to changes in credit quality subsequent to the acquisition date: December 31 2017 2016 (in thousands) Commercial real estate $ 4,976 $ 4,538 Commercial and industrial (415 ) 500 Total commercial loans 4,561 5,038 Direct installment 1,553 1,005 Residential mortgages 484 632 Indirect installment 177 221 Consumer lines of credit (77 ) 372 Total consumer loans 2,137 2,230 Total allowance on acquired loans $ 6,698 $ 7,268 Troubled Debt Restructurings TDRs are loans whose contractual terms have been modified in a manner that grants a concession to a borrower experiencing financial difficulties. TDRs typically result from loss mitigation activities and could include the extension of a maturity date, interest rate reduction, principal forgiveness, deferral or decrease in payments for a period of time and other actions intended to minimize the economic loss and to avoid foreclosure or repossession of collateral. Following is a summary of the composition of total TDRs: (in thousands) Originated Acquired Total December 31, 2017 Accruing: Performing $ 19,538 $ 266 $ 19,804 Non-performing 20,173 3,308 23,481 Non-accrual 10,472 234 10,706 Total TDRs $ 50,183 $ 3,808 $ 53,991 December 31, 2016 Accruing: Performing $ 17,105 $ 365 $ 17,470 Non-performing 20,252 176 20,428 Non-accrual 9,035 — 9,035 Total TDRs $ 46,392 $ 541 $ 46,933 TDRs that are accruing and performing include loans that met the criteria for non-accrual of interest prior to restructuring for which we can reasonably estimate the timing and amount of the expected cash flows on such loans and for which we expect to fully collect the new carrying value of the loans. During 2017 , we returned to performing status $3.9 million in restructured residential mortgage loans that have consistently met their modified obligations for more than six months. TDRs that are accruing and non-performing are comprised of consumer loans that have not demonstrated a consistent repayment pattern on the modified terms for more than nine months, however it is expected that we will collect all future principal and interest payments. TDRs that are on non-accrual are not placed on accruing status until all delinquent principal and interest have been paid and the ultimate collectability of the remaining principal and interest is reasonably assured. Some loan modifications classified as TDRs may not ultimately result in the full collection of principal and interest, as modified, and may result in potential incremental losses which are factored into the allowance for credit losses. Excluding purchased impaired loans, commercial loans over $500,000 whose terms have been modified in a TDR are generally placed on non-accrual, individually analyzed and measured for estimated impairment based on the fair value of the underlying collateral. Our allowance for credit losses included specific reserves for commercial TDRs and pooled reserves for individual loans under $500,000 based on loan segment loss given default. Upon default, the amount of the recorded investment in the TDR in excess of the fair value of the collateral, less estimated selling costs, is generally considered a confirmed loss and is charged-off against the allowance for credit losses. The reserve for commercial TDRs included in the allowance for credit losses is presented in the following table: December 31 2017 2016 (in thousands) Specific reserves for commercial TDRs $ 95 $ 291 Pooled reserves for individual commercial loans under $500 469 276 All other classes of loans, which are primarily secured by residential properties whose terms have been modified in a TDR are pooled and measured for estimated impairment based on the expected net present value of the estimated future cash flows of the pool. Our allowance for credit losses included pooled reserves for these classes of loans of $4.0 million and $3.7 million at December 31, 2017 and 2016 , respectively. Upon default of an individual loan, our charge-off policy is followed accordingly for that class of loan. The majority of TDRs are the result of interest rate concessions for a limited period of time. Following is a summary of loans, by class, that have been restructured: Year Ended December 31 2017 2016 (dollars in thousands) Number of Contracts Pre-Modification Outstanding Recorded Investment Post- Modification Outstanding Recorded Investment Number of Contracts Pre-Modification Outstanding Recorded Investment Post- Modification Outstanding Recorded Investment Commercial real estate 3 $ 1,608 $ 1,683 4 $ 778 $ 737 Commercial and industrial 3 3,568 3,091 3 1,727 1,504 Total commercial loans 6 5,176 4,774 7 2,505 2,241 Direct installment 641 5,107 4,500 527 6,090 5,566 Residential mortgages 43 2,251 2,095 45 2,155 2,081 Indirect installment 18 48 43 19 51 51 Consumer lines of credit 64 1,372 1,158 81 1,419 1,283 Total consumer loans 766 8,778 7,796 672 9,715 8,981 Total 772 $ 13,954 $ 12,570 679 $ 12,220 $ 11,222 Following is a summary of originated TDRs, by class, for which there was a payment default, excluding loans that were either charged-off or cured by period end. Default occurs when a loan is 90 days or more past due and is within 12 months of restructuring. Year Ended December 31 2017 2016 (dollars in thousands) Number of Contracts Recorded Investment Number of Contracts Recorded Investment Commercial real estate 1 $ 463 — $ — Commercial and industrial — — — — Total commercial loans 1 463 — — Direct installment 131 358 90 313 Residential mortgages 6 314 7 285 Indirect installment 17 28 18 35 Consumer lines of credit 5 170 3 394 Total consumer loans 159 870 118 1,027 Total 160 $ 1,333 118 $ 1,027 |