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Allowance for Loan and Lease Losses
 6 Months Ended
Jun. 30, 2017
Receivables [Abstract]  
Allowance for Loan and Lease Losses
Allowance for Loan and Lease Losses
 
Originated Loans and Leases
 
Management reviews the appropriateness of the allowance for loan and lease losses (“allowance”) on a regular basis. Management considers the accounting policy relating to the allowance to be a critical accounting policy, given the inherent uncertainty in evaluating the levels of the allowance required to cover credit losses in the portfolio and the material effect that assumptions could have on the Company’s results of operations. The Company has developed a methodology to measure the amount of estimated loan loss exposure inherent in the loan portfolio to assure that an appropriate allowance is maintained. The Company’s methodology is based upon guidance provided in SEC Staff Accounting Bulletin No. 102, Selected Loan Loss Allowance Methodology and Documentation Issues and ASC Topic 310, Receivables and ASC Topic 450, Contingencies.
 
The model is comprised of four major components that management has deemed appropriate in evaluating the appropriateness of the allowance for loan and lease losses. While none of these components, when used independently, is effective in arriving at a reserve level that appropriately measures the risk inherent in the portfolio, management believes that using them collectively, provides reasonable measurement of the loss exposure in the portfolio. The four components include: impaired loans; individually reviewed and graded loans; historical loss experience; and qualitative or subjective analysis.
 
Since the methodology is based upon historical experience and trends as well as management’s judgment, factors may arise that result in different estimates. Significant factors that could give rise to changes in these estimates may include, but are not limited to, changes in economic conditions in the local area, concentration of risk, changes in interest rates, and declines in local property values. While management’s evaluation of the allowance as of June 30, 2017, considers the allowance to be appropriate, under adversely different conditions or assumptions, the Company would need to increase or decrease the allowance.
 
Acquired Loans and Leases
 
Acquired loans accounted for under ASC 310-30
 
For our acquired loans, our allowance for loan losses is estimated based upon our expected cash flows for these loans. To the extent that we experience a deterioration in borrower credit quality resulting in a decrease in our expected cash flows subsequent to the acquisition of the loans, an allowance for loan losses would be established based on our estimate of future credit losses over the remaining life of the loans.
 
Acquired loans accounted for under ASC 310-20
 
We establish our allowance for loan losses through a provision for credit losses based upon an evaluation process that is similar to our evaluation process used for originated loans. This evaluation, which includes a review of loans on which full collectability may not be reasonably assured, considers, among other matters, the estimated fair value of the underlying collateral, economic conditions, historical net loan loss experience, carrying value of the loans, which includes the remaining net purchase discount or premium, and other factors that warrant recognition in determining our allowance for loan losses.
 
The following tables detail activity in the allowance for loan and lease losses segregated by originated and acquired loan and lease portfolios and by portfolio segment for the three and six months ended June 30, 2017 and 2016. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.
 
Three months ended June 30, 2017
 
 

 
 

 
 

 
 

(in thousands)
Commercial
and Industrial

 
Commercial
Real Estate

 
Residential
Real Estate

 
Consumer
and Other

 
Finance
Leases

 
Total

Allowance for originated loans and leases
Beginning balance
$
10,273

 
$
19,114

 
$
5,386

 
$
1,142

 
$
0

 
$
35,915

 
 
 
 
 
 
 
 
 
 
 
 
Charge-offs
(2
)
 
0

 
(68
)
 
(249
)
 
0

 
(319
)
Recoveries
54

 
218

 
109

 
137

 
0

 
518

Provision (credit)
517

 
(211
)
 
334

 
206

 
0

 
846

Ending Balance
$
10,842

 
$
19,121

 
$
5,761

 
$
1,236

 
$
0

 
$
36,960

 
Three months ended June 30, 2017
 
 

 
 

 
 

 
 

(in thousands)
Commercial
and Industrial

 
Commercial
Real Estate

 
Residential
Real Estate

 
Consumer
and Other

 
Finance
Leases

 
Total

Allowance for acquired loans
 
 

 
 

 
 

 
 

 
 

Beginning balance
$
0

 
$
76

 
$
169

 
$
6

 
$
0

 
$
251

 
 
 
 
 
 
 
 
 
 
 
 
Charge-offs
(65
)
 
0

 
(152
)
 
(1
)
 
0

 
(218
)
Recoveries
0

 
16

 
12

 
6

 
0

 
34

Provision (credit)
115

 
(5
)
 
25

 
(5
)
 
0

 
130

Ending Balance
$
50

 
$
87

 
$
54

 
$
6

 
$
0

 
$
197

 
Three months ended June 30, 2016
 
 

 
 

 
 

 
 

(in thousands)
Commercial
and Industrial

 
Commercial
Real Estate

 
Residential
Real Estate

 
Consumer
and Other

 
Finance
Leases

 
Total

Allowance for originated loans and leases
 
 

 
 

 
 

 
 

 
 

Beginning balance
$
9,291

 
$
17,108

 
$
4,275

 
$
1,307

 
$
0

 
$
31,981

 
 
 
 
 
 
 
 
 
 
 
 
Charge-offs
(337
)
 
(12
)
 
0

 
(115
)
 
0

 
(464
)
Recoveries
89

 
210

 
15

 
159

 
0

 
473

Provision (credit)
(106
)
 
923

 
196

 
(35
)
 
0

 
978

Ending Balance
$
8,937

 
$
18,229

 
$
4,486

 
$
1,316

 
$
0

 
$
32,968

 
Three months ended June 30, 2016
 
 

 
 

 
 

 
 

(in thousands)
Commercial
and Industrial

 
Commercial
Real Estate

 
Residential
Real Estate

 
Consumer
and Other

 
Covered
Loans

 
Total

Allowance for acquired loans
 
 

 
 

 
 

 
 

 
 

Beginning balance
$
433

 
$
33

 
$
59

 
$
24

 
$
0

 
$
549

 
 
 
 
 
 
 
 
 
 
 
 
Charge-offs
(324
)
 
(182
)
 
0

 
0

 
0

 
(506
)
Recoveries
0

 
114

 
0

 
0

 
0

 
114

Provision (credit)
(62
)
 
100

 
(36
)
 
(2
)
 
0

 
0

Ending Balance
$
47

 
$
65

 
$
23

 
$
22

 
$
0

 
$
157

 
Six months ended June 30, 2017
 
 

 
 

 
 

 
 

(in thousands)
Commercial
and Industrial

 
Commercial
Real Estate

 
Residential
Real Estate

 
Consumer
and Other

 
Finance
Leases

 
Total

Allowance for originated loans and leases
 
 

 
 

 
 

 
 

 
 

Beginning balance
$
9,389

 
$
19,836

 
$
5,149

 
$
1,224

 
$
0

 
$
35,598

 
 
 
 
 
 
 
 
 
 
 
 
Charge-offs
(77
)
 
(21
)
 
(441
)
 
(530
)
 
0

 
(1,069
)
Recoveries
130

 
452

 
136

 
265

 
0

 
983

Provision (credit)
1,400

 
(1,146
)
 
917

 
277

 
0

 
1,448

Ending Balance
$
10,842

 
$
19,121

 
$
5,761

 
$
1,236

 
$
0

 
$
36,960




Six months ended June 30, 2017
 
 

 
 

 
 

 
 

(in thousands)
Commercial
and Industrial

 
Commercial
Real Estate

 
Residential
Real Estate

 
Consumer
and Other

 
Covered
Loans

 
Total

Allowance for acquired loans
Beginning balance
$
0

 
$
97

 
$
54

 
$
6

 
$
0

 
$
157

 
 
 
 
 
 
 
 
 
 
 
 
Charge-offs
(74
)
 
(73
)
 
(152
)
 
(1
)
 
0

 
(300
)
Recoveries
0

 
25

 
12

 
6

 
0

 
43

Provision (credit)
124

 
38

 
140

 
(5
)
 
0

 
297

Ending Balance
$
50

 
$
87

 
$
54

 
$
6

 
$
0

 
$
197


Six months ended June 30, 2016
 
 

 
 

 
 

 
 

(in thousands)
Commercial
and Industrial

 
Commercial
Real Estate

 
Residential
Real Estate

 
Consumer
and Other

 
Finance
Leases

 
Total

Allowance for originated loans and leases
 
 

 
 

 
 

 
 

 
 

Beginning balance
$
10,495

 
$
15,479

 
$
4,070

 
$
1,268

 
$
0

 
$
31,312

 
 
 
 
 
 
 
 
 
 
 
 
Charge-offs
(451
)
 
(12
)
 
(201
)
 
(361
)
 
0

 
(1,025
)
Recoveries
107

 
420

 
32

 
272

 
0

 
831

Provision (credit)
(1,214
)
 
2,342

 
585

 
137

 
0

 
1,850

Ending Balance
$
8,937

 
$
18,229

 
$
4,486

 
$
1,316

 
$
0

 
$
32,968


Six months ended June 30, 2016
 
 

 
 

 
 

 
 

(in thousands)
Commercial
and Industrial

 
Commercial
Real Estate

 
Residential
Real Estate

 
Consumer
and Other

 
Covered
Loans

 
Total

Allowance for acquired loans
 
 

 
 

 
 

 
 

 
 

Beginning balance
$
433

 
$
61

 
$
198

 
$
0

 
$
0

 
$
692

 
 
 
 
 
 
 
 
 
 
 
 
Charge-offs
(387
)
 
(182
)
 
(16
)
 
(93
)
 
0

 
(678
)
Recoveries
0

 
160

 
0

 
0

 
0

 
160

Provision (credit)
1

 
26

 
(159
)
 
115

 
0

 
(17
)
Ending Balance
$
47

 
$
65

 
$
23

 
$
22

 
$
0

 
$
157



At June 30, 2017 and December 31, 2016, the allocation of the allowance for loan and lease losses summarized on the basis of the Company’s impairment methodology was as follows:
 
(in thousands)
Commercial
and Industrial

 
Commercial
Real Estate

 
Residential
Real Estate

 
Consumer
and Other

 
Finance
Leases

 
Total

Allowance for originated loans and leases
 
 

 
 

June 30, 2017
 
 

 
 

 
 

 
 

 
 

Individually evaluated for impairment
$
293

 
$
0

 
$
0

 
$
0

 
$
0

 
$
293

Collectively evaluated for impairment
10,549

 
19,121

 
5,761

 
1,236

 
0

 
36,667

Ending balance
$
10,842

 
$
19,121

 
$
5,761

 
$
1,236

 
$
0

 
$
36,960

 
(in thousands)
Commercial
and Industrial

 
Commercial Real Estate

 
Residential Real Estate

 
Consumer
and Other

 
Covered Loans

 
Total

Allowance for acquired loans
 

 
 

 
 

 
 

 
 

 
 

June 30, 2017
 

 
 

 
 

 
 

 
 

 
 

Individually evaluated for impairment
$
50

 
$
75

 
$
0

 
$
0

 
$
0

 
$
125

Collectively evaluated for impairment
0

 
12

 
54

 
6

 
0

 
72

Ending balance
$
50

 
$
87

 
$
54

 
$
6

 
$
0

 
$
197

(in thousands)
Commercial and Industrial

 
Commercial Real Estate

 
Residential Real Estate

 
Consumer
and Other

 
Finance Leases

 
Total

Allowance for originated loans and leases
 
 

 
 

 
 

 
 

 
 

December 31, 2016
 

 
 

 
 

 
 

 
 

 
 

Individually evaluated for impairment
$
95

 
$
322

 
$
0

 
$
0

 
$
0

 
$
417

Collectively evaluated for impairment
9,294

 
19,514

 
5,149

 
1,224

 
0

 
35,181

Ending balance
$
9,389

 
$
19,836

 
$
5,149

 
$
1,224

 
$
0

 
$
35,598

(in thousands)
Commercial and Industrial

 
Commercial Real Estate

 
Residential Real Estate

 
Consumer
and Other

 
Covered Loans

 
Total

Allowance for acquired loans
 

 
 

 
 

 
 

 
 

 
 

December 31, 2016
 

 
 

 
 

 
 

 
 

 
 

Individually evaluated for impairment
$
0

 
$
76

 
$
0

 
$
0

 
$
0

 
$
76

Collectively evaluated for impairment
0

 
21

 
54

 
6

 
0

 
81

Ending balance
$
0

 
$
97

 
$
54

 
$
6

 
$
0

 
$
157


 
The recorded investment in loans and leases summarized on the basis of the Company’s impairment methodology as of June 30, 2017 and December 31, 2016 was as follows:
(in thousands)
Commercial and Industrial

 
Commercial Real Estate

 
Residential Real Estate

 
Consumer
and Other

 
Finance Leases

 
Total

Originated loans and leases
 

 
 

 
 

 
 

 
 

 
 

June 30, 2017
 

 
 

 
 

 
 

 
 

 
 

Individually evaluated for impairment
$
1,583

 
$
6,523

 
$
3,700

 
$
0

 
$
0

 
$
11,806

Collectively evaluated for impairment
1,065,325

 
1,713,139

 
1,209,109

 
59,362

 
15,931

 
4,062,866

Total
$
1,066,908

 
$
1,719,662

 
$
1,212,809

 
$
59,362

 
$
15,931

 
$
4,074,672


(in thousands)
Commercial and Industrial

 
Commercial Real Estate

 
Residential Real Estate

 
Consumer 
and Other

 
Covered Loans

 
Total

Acquired loans
 

 
 

 
 

 
 

 
 

 
 

June 30, 2017
 

 
 

 
 

 
 

 
 

 
 

Individually evaluated for impairment
$
102

 
$
1,454

 
$
1,514

 
$
0

 
$
0

 
$
3,070

Loans acquired with deteriorated credit quality
228

 
9,450

 
6,919

 
0

 
0

 
16,597

Collectively evaluated for impairment
60,804

 
217,651

 
48,823

 
896

 
0

 
328,174

Total
$
61,134

 
$
228,555

 
$
57,256

 
$
896

 
$
0

 
$
347,841

 
(in thousands)
Commercial and Industrial

 
Commercial Real Estate

 
Residential Real Estate

 
Consumer 
and Other

 
Finance Leases

 
Total

Originated loans and leases
 

 
 

 
 

 
 

 
 

 
 

December 31, 2016
 

 
 

 
 

 
 

 
 

 
 

Individually evaluated for impairment
$
635

 
$
8,812

 
$
3,507

 
$
0

 
$
0

 
$
12,954

Collectively evaluated for impairment
964,667

 
1,661,221

 
1,153,148

 
59,228

 
16,650

 
3,854,914

Total
$
965,302

 
$
1,670,033

 
$
1,156,655

 
$
59,228

 
$
16,650

 
$
3,867,868

 
(in thousands)
Commercial and Industrial

 
Commercial Real Estate

 
Residential Real Estate

 
Consumer 
and Other

 
Covered Loans

 
Total

Acquired loans
 

 
 

 
 

 
 

 
 

 
 

December 31, 2016
 

 
 

 
 

 
 

 
 

 
 

Individually evaluated for impairment
$
172

 
$
4,081

 
$
1,372

 
$
0

 
$
0

 
$
5,625

Loans acquired with deteriorated credit quality
448

 
14,368

 
7,701

 
0

 
0

 
22,517

Collectively evaluated for impairment
78,697

 
232,359

 
54,087

 
826

 
0

 
365,969

Total
$
79,317

 
$
250,808

 
$
63,160

 
$
826

 
$
0

 
$
394,111


 
A loan is impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement. Impaired loans consist of our non-homogenous nonaccrual loans, and all loans restructured in a troubled debt restructuring (TDR). Specific reserves on individually identified impaired loans that are not collateral dependent are measured based on the present value of expected future cash flows discounted at the original effective interest rate of each loan. For loans that are collateral dependent, impairment is measured based on the fair value of the collateral less estimated selling costs, and such impaired amounts are generally charged off. The majority of impaired loans are collateral dependent impaired loans that have limited exposure or require limited specific reserves because of the amount of collateral support with respect to these loans, and previous charge-offs. Interest payments on impaired loans are typically applied to principal unless collectability of the principal amount is reasonably assured. In these cases, interest is recognized on a cash basis. Impaired loans are as follows:
 
 
6/30/2017
 
12/31/2016
(in thousands)
Recorded Investment
 
Unpaid Principal Balance
 
Related Allowance
 
Recorded Investment
 
Unpaid Principal Balance
 
Related Allowance
Originated loans and leases with no related allowance
 
 

 
 

 
 

 
 

 
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
 

 
 

 
 

 
 

 
 

 
 

Commercial and industrial other
$
375

 
$
399

 
$
0

 
$
276

 
$
370

 
$
0

Commercial real estate
 

 
 

 
 

 
 

 
 

 
 

Commercial real estate other
6,523

 
7,048

 
0

 
6,979

 
7,263

 
0

Residential real estate
 

 
 

 
 

 
 

 
 

 
 

Home equity
3,700

 
3,847

 
0

 
3,507

 
3,535

 
0

Subtotal
$
10,598

 
$
11,294

 
$
0

 
$
10,762

 
$
11,168

 
$
0

 
 
 
 
 
 
 
 
 
 
 
 
Originated loans and leases with related allowance
 
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
 

 
 

 
 

 
 

 
 

 
 

Commercial and industrial other
1,208

 
1,208

 
293

 
359

 
276

 
95

Commercial real estate
 

 
 

 
 

 
 

 
 

 
 

Commercial real estate other
0

 
0

 
0

 
1,833

 
2,042

 
322

Subtotal
$
1,208

 
$
1,208

 
$
293

 
$
2,192

 
$
2,318

 
$
417

Total
$
11,806

 
$
12,502

 
$
293

 
$
12,954

 
$
13,486

 
$
417

 
 
6/30/2017
 
12/31/2016
(in thousands)
Recorded Investment
 
Unpaid Principal Balance
 
Related Allowance
 
Recorded Investment
 
Unpaid Principal Balance
 
Related Allowance
Acquired loans and leases with no related allowance
 
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
 

 
 

 
 

 
 

 
 

 
 

Commercial and industrial other
$
2

 
$
2

 
$
0

 
$
172

 
$
472

 
$
0

Commercial real estate
 

 
 

 
 

 
 

 
 

 
 

Commercial real estate other
1,187

 
1,369

 
0

 
4,003

 
4,386

 
0

Residential real estate
 

 
 

 
 

 
 

 
 

 
 

Home equity
1,514

 
1,453

 
0

 
1,372

 
1,372

 
0

Subtotal
$
2,703

 
$
2,824

 
$
0

 
$
5,547

 
$
6,230

 
$
0

 
 
 
 
 
 
 
 
 
 
 
 
Acquired loans and leases with related allowance
 
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
 

 
 

 
 

 
 

 
 

 
 

Commercial and industrial other
100

 
100

 
50

 
0

 
0

 
0

Commercial real estate
 

 
 

 
 

 
 

 
 

 
 

Commercial real estate other
267

 
267

 
75

 
78

 
78

 
76

Subtotal
$
367

 
$
367

 
$
125

 
$
78

 
$
78

 
$
76

Total
$
3,070

 
$
3,191

 
$
125

 
$
5,625

 
$
6,308

 
$
76


The average recorded investment and interest income recognized on impaired loans for the three months ended June 30, 2017 and 2016 was as follows:
 
 
Three Months Ended 06/30/2017
 
Three Months Ended 06/30/16
(in thousands)
Average Recorded Investment
 
Interest Income Recognized
 
Average Recorded Investment
 
Interest Income Recognized
Originated loans and leases with no related allowance
 

 
 

 
 

 
 

Commercial and industrial
 

 
 

 
 

 
 

Commercial and industrial other
301

 
0

 
382

 
0

Commercial real estate
 

 
 

 
 

 
 

Commercial real estate other
7,614

 
0

 
6,445

 
0

Residential real estate
 

 
 

 
 

 
 

Home equity
3,628

 
0

 
2,544

 
0

Subtotal
$
11,543

 
$
0

 
$
9,371

 
$
0

 
 
 
 
 
 
 
 
Originated loans and leases with related allowance
 

 
 

 
 

 
 

 
 
 
 
 
 
 
 
Commercial and industrial
 

 
 

 
 

 
 

Commercial and industrial other
612

 
0

 
34

 
0

Commercial real estate
 

 
 

 
 

 
 

Commercial real estate other
0

 
0

 
767

 
0

Subtotal
$
612

 
$
0

 
$
801

 
$
0

Total
$
12,155

 
$
0

 
$
10,172

 
$
0

 
 
Three Months Ended 06/30/2017
 
Three Months Ended 06/30/2016
(in thousands)
Average Recorded Investment
 
Interest Income Recognized
 
Average Recorded Investment
 
Interest Income Recognized
Acquired loans and leases with no related allowance
 

 
 

 
 

 
 

Commercial and industrial
 

 
 

 
 

 
 

Commercial and industrial other
83

 
0

 
289

 
0

Commercial real estate
 

 
 

 
 

 
 

Construction
0

 
0

 
304

 
0

Commercial real estate other
1,299

 
0

 
4,292

 
0

Residential real estate
 

 
 

 
 

 
 

Home equity
1,443

 
0

 
997

 
0

Subtotal
$
2,825

 
$
0

 
$
5,882

 
$
0

 
 
 
 
 
 
 
 
Acquired loans and leases with related allowance
 

 
 

 
 

 
 

 
 
 
 
 
 
 
 
Commercial and industrial
 

 
 

 
 

 
 

Commercial and industrial other
50

 
0

 
23

 
0

Commercial real estate
 

 
 

 
 

 
 

Commercial real estate other
267

 
0

 
31

 
0

Subtotal
$
317

 
$
0

 
$
54

 
$
0

Total
$
3,142

 
$
0

 
$
5,936

 
$
0





The average recorded investment and interest income recognized on impaired loans for the six months ended June 30, 2017 and 2016 was as follows:

 
Six Months Ended 06/30/17
 
Six Months Ended 06/30/16
(in thousands)
Average Recorded Investment
 
Interest Income Recognized
 
Average Recorded Investment
 
Interest Income Recognized
Originated loans and leases with no related allowance
 

 
 

 
 

 
 

 
 
 
 
 
 
 
 
Commercial and industrial
 

 
 

 
 

 
 

Commercial and industrial other
334

 
0

 
572

 
0

Commercial real estate
 

 
 

 
 

 
 

Commercial real estate other
8,031

 
0

 
6,022

 
0

Residential real estate
 

 
 

 
 

 
 

Home equity
3,485

 
0

 
2,452

 
0

Subtotal
$
11,850

 
$
0

 
$
9,046

 
$
0

 
 
 
 
 
 
 
 
Originated loans and leases with related allowance
 

 
 

 
 

 
 

 
 
 
 
 
 
 
 
Commercial and industrial
 

 
 

 
 

 
 

Commercial and industrial other
340

 
0

 
46

 
0

Commercial real estate
 

 
 

 
 

 
 

Commercial real estate other
0

 
0

 
607

 
0

Subtotal
$
340

 
$
0

 
$
653

 
$
0

Total
$
12,190

 
$
0

 
$
9,699

 
$
0


 
Six Months Ended 06/30/17
 
Six Months Ended 06/30/16
(in thousands)
Average Recorded Investment
 
Interest Income Recognized
 
Average Recorded Investment
 
Interest Income Recognized
Acquired loans and leases with no related allowance
 

 
 

 
 

 
 

 
 
 
 
 
 
 
 
Commercial and industrial
 

 
 

 
 

 
 

Commercial and industrial other
66

 
0

 
408

 
0

Commercial real estate
 

 
 

 
 

 
 

Construction
51

 
0

 
322

 
0

Commercial real estate other
2,774

 
0

 
4,447

 
0

Residential real estate
 

 
 

 
 

 
 

Home equity
1,694

 
0

 
1,260

 
0

Subtotal
$
4,585

 
$
0

 
$
6,437

 
$
0

 
 
 
 
 
 
 
 
Acquired loans and leases with related allowance
 

 
 

 
 

 
 

 
 
 
 
 
 
 
 
Commercial and industrial
 

 
 

 
 

 
 

Commercial and industrial other
20

 
0

 
16

 
0

Commercial real estate
 

 
 

 
 

 
 

Commercial real estate other
267

 
0

 
31

 
0

Subtotal
$
287

 
$
0

 
$
47

 
$
0

Total
$
4,872

 
$
0

 
$
6,484

 
$
0



 
Loans are considered modified in a TDR when, due to a borrower’s financial difficulties, the Company makes concessions to the borrower that it would not otherwise consider. These modifications may include, among others, an extension for the term of the loan, and granting a period when interest-only payments can be made with the principal payments made over the remaining term of the loan or at maturity.
 
The following tables present information on loans modified in troubled debt restructuring during the periods indicated.
June 30, 2017
Three Months Ended
 
 
 
 
 
 
 
Defaulted TDRs2 
 (in thousands)
Number of Loans
 
Pre-Modification Outstanding Recorded Investment
 
Post-Modification Outstanding Recorded Investment
 
Number of Loans
 
Post-Modification Outstanding Recorded Investment
Residential real estate
 

 
 

 
 

 
 

 
 

Home equity1 
1

 
89

 
89

 
0

 
0

 Total
1

 
$
89

 
$
89

 
0

 
$
0

1 Represents the following concessions:  extension of term and reduction of rate.
2 TDRs that defaulted during the three months ended June 30, 2017 that were restructured in the prior twelve months.
 
June 30, 2016
Three Months Ended
 
 
 
 
 
 
 
Defaulted TDRs2 
 (in thousands)
Number of Loans
 
Pre-Modification Outstanding Recorded Investment
 
Post-Modification Outstanding Recorded Investment
 
Number of Loans
 
Post-Modification Outstanding Recorded Investment
Residential real estate
 

 
 

 
 

 
 

 
 

Home equity1 
2

 
613

 
613

 
0

 
0

Total
2

 
$
613

 
$
613

 
0

 
$
0


1 Represents the following concessions:  extension of term and reduction of rate.
2 TDRs that defaulted during the three months ended June 30, 2016 that had been restructured in the prior twelve months.
June 30, 2017
Six Months Ended
   
 

 
 

 
 

 
Defaulted TDRs2 
(in thousands)
Number of
Loans
 
Pre-
Modification
Outstanding
Recorded
Investment
 
Post-
Modification
Outstanding
Recorded
Investment
 
Number of
Loans
 
Post-
Modification
Outstanding
Recorded
Investment
Residential real estate
 

 
 

 
 

 
 

 
 

Home equity1 
2

 
162

 
162

 
1

 
55

Total
2

 
$
162

 
$
162

 
1

 
$
55


1 Represents the following concessions:  extension of term and reduction of rate.
2 TDRs that defaulted during the six months ended June 30, 2017 that had been restructured in the prior twelve months.
June 30, 2016
Six Months Ended
 
 

 
 

 
 

 
Defaulted TDRs3 
(in thousands)
Number of
Loans
 
Pre-
Modification
Outstanding
Recorded
Investment
 
Post-
Modification
Outstanding
Recorded
Investment
 
Number of
Loans
 
Post-
Modification
Outstanding
Recorded
Investment
Commercial and industrial  
 

 
 

 
 

 
 

 
 

Commercial and industrial other1 
2

 
$
1,115

 
$
1,115

 
0

 
$
0

Residential real estate
 

 
 

 
 

 
 

 
 

Home equity2 
5

 
782

 
782

 
0

 
0

Total
7

 
$
1,897

 
$
1,897

 
0

 
$
0


1 Represents the following concessions:  extension of term and reduction of rate.
2 Represents the following concessions:  extension of term and reduction of rate.
3 TDRs that defaulted during the six months ended June 30, 2016 that had been restructured in the prior twelve months.

The following tables present credit quality indicators (internal risk grade) by class of commercial and industrial loans and commercial real estate loans as of June 30, 2017 and December 31, 2016.
 
June 30, 2017
 
 
 
 
 
 
 
 
 
 
 
 
Commercial and Industrial
 
Commercial and Industrial
 
CommercialReal Estate
 
CommercialReal Estate
 
CommercialReal Estate
 
 
(in thousands)
Other
 
Agriculture
 
Other
 
Agriculture
 
Construction
 
Total

Originated Loans and Leases
 

 
 

 
 

 
 

 
 

 
 

Internal risk grade:
 

 
 

 
 

 
 

 
 

 
 

Pass
$
965,156

 
$
78,390

 
$
1,477,335

 
$
112,035

 
$
95,634

 
$
2,728,550

Special Mention
7,545

 
10,570

 
11,765

 
8,608

 
0

 
38,488

Substandard
5,190

 
57

 
14,285

 
0

 
0

 
19,532

Total
$
977,891

 
$
89,017

 
$
1,503,385

 
$
120,643

 
$
95,634

 
$
2,786,570

 
June 30, 2017
 
 
 
 
 
 
 
 
 
 
 
 
Commercial and Industrial
 
Commercial and Industrial
 
Commercial Real Estate
 
Commercial Real Estate
 
Commercial Real Estate
 
 
(in thousands)
Other
 
Agriculture
 
Other
 
Agriculture
 
Construction
 
Total

Acquired Loans and Leases
 

 
 

 
 

 
 

 
 

 
 

Internal risk grade:
 

 
 

 
 

 
 

 
 

 
 

Pass
$
60,019

 
$
0

 
$
218,544

 
$
257

 
$
1,526

 
$
280,346

Special Mention
0

 
0

 
547

 
0

 
0

 
547

Substandard
1,115

 
0

 
7,681

 
0

 
0

 
8,796

Total
$
61,134

 
$
0

 
$
226,772

 
$
257

 
$
1,526

 
$
289,689

 
December 31, 2016
 
 
 
 
 
 
 
 
 
 
 
 
Commercial and Industrial
 
Commercial and Industrial
 
Commercial Real Estate
 
Commercial Real Estate
 
Commercial Real Estate
 
 
(in thousands)
Other
 
Agriculture
 
Other
 
Agriculture
 
Construction
 
Total

Originated Loans and Leases
Internal risk grade:
 

 
 

 
 

 
 

 
 

 
 

Pass
$
836,788

 
$
117,135

 
$
1,403,370

 
$
101,407

 
$
135,834

 
$
2,594,534

Special Mention
7,218

 
755

 
11,939

 
573

 
0

 
20,485

Substandard
3,049

 
357

 
16,381

 
529

 
0

 
20,316

Total
$
847,055

 
$
118,247

 
$
1,431,690

 
$
102,509

 
$
135,834

 
$
2,635,335

 
December 31, 2016
 
 
 
 
 
 
 
 
 
 
 
 
Commercial and Industrial
 
Commercial and Industrial
 
Commercial Real Estate
 
Commercial Real Estate
 
Commercial Real Estate
 
 
(in thousands)
Other
 
Agriculture
 
Other
 
Agriculture
 
Construction
 
Total

Acquired Loans and Leases
Internal risk grade:
 

 
 

 
 

 
 

 
 

 
 

Pass
$
77,921

 
$
0

 
$
229,334

 
$
267

 
$
8,936

 
$
316,458

Special Mention
0

 
0

 
526

 
0

 
0

 
526

Substandard
1,396

 
0

 
11,745

 
0

 
0

 
13,141

Total
$
79,317

 
$
0

 
$
241,605

 
$
267

 
$
8,936

 
$
330,125


 
The following tables present credit quality indicators by class of residential real estate loans and by class of consumer loans. Nonperforming loans include nonaccrual, impaired, and loans 90 days past due and accruing interest. All other loans are considered performing as of June 30, 2017 and December 31, 2016. For purposes of this footnote, acquired loans that were recorded at fair value at the acquisition date and are 90 days or greater past due are considered performing.
 
June 30, 2017
 
 
 
 
 
 
 
 
 
(in thousands)
Residential
Home Equity
 
Residential
Mortgages
 
Consumer
Indirect
 
Consumer
Other
 
Total
Originated Loans and Leases
 

 
 

 
 

 
 

 
 

Performing
$
209,916

 
$
995,465

 
$
12,828

 
$
46,274

 
$
1,264,483

Nonperforming
1,263

 
6,165

 
260

 
0

 
7,688

Total
$
211,179

 
$
1,001,630

 
$
13,088

 
$
46,274

 
$
1,272,171

 
June 30, 2017
 
 
 
 
 
 
 
 
 
(in thousands)
Residential
Home Equity
 
Residential
Mortgages
 
Consumer
Indirect
 
Consumer
Other
 
Total
Acquired Loans and Leases
 

 
 

 
 

 
 

 
 

Performing
$
32,799

 
$
22,526

 
$
0

 
$
896

 
$
56,221

Nonperforming
731

 
1,200

 
0

 
0

 
1,931

Total
$
33,530

 
$
23,726

 
$
0

 
$
896

 
$
58,152

 
December 31, 2016
(in thousands)
Residential
Home Equity
 
Residential
Mortgages
 
Consumer
Indirect
 
Consumer
Other
 
Total
Originated Loans and Leases
 

 
 

 
 

 
 

 
 

Performing
$
207,261

 
$
941,936

 
$
14,669

 
$
44,393

 
$
1,208,259

Nonperforming
2,016

 
5,442

 
166

 
0

 
7,624

Total
$
209,277

 
$
947,378

 
$
14,835

 
$
44,393

 
$
1,215,883

 
December 31, 2016
(in thousands)
Residential
Home Equity
 
Residential
Mortgages
 
Consumer
Indirect
 
Consumer
Other
 
Total
Acquired Loans and Leases
 

 
 

 
 

 
 

 
 

Performing
$
37,074

 
$
24,483

 
$
0

 
$
826

 
$
62,383

Nonperforming
663

 
940

 
0

 
0

 
1,603

Total
$
37,737

 
$
25,423

 
$
0

 
$
826

 
$
63,986