LOANS AND LEASES

Following is a summary of loans and leases, net of unearned income:

TABLE 5.1



(in thousands)	Originated Loans and Leases		Acquired Loans		Total Loans and Leases
September 30, 2018
Commercial real estate	$	5,978,629	$	2,867,111	$	8,845,740
Commercial and industrial	3,892,822		470,635		4,363,457
Commercial leases	346,579		—		346,579
Other	34,732		—		34,732
Total commercial loans and leases	10,252,762		3,337,746		13,590,508
Direct installment	1,670,964		107,159		1,778,123
Residential mortgages	2,457,380		527,282		2,984,662
Indirect installment	1,880,487		162		1,880,649
Consumer lines of credit	1,116,376		489,085		1,605,461
Total consumer loans	7,125,207		1,123,688		8,248,895
Total loans and leases, net of unearned income	$	17,377,969	$	4,461,434	$	21,839,403
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

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 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 following table shows certain information relating to commercial real estate loans:

TABLE 5.2



(dollars in thousands)	September 30, 2018			December 31, 2017
Commercial construction, acquisition and development loans	$	1,146,612		$	1,170,175
Percent of total loans and leases	5.3		%	5.6		%
Commercial real estate:
Percent owner-occupied	34.7		%	35.3		%
Percent non-owner-occupied	65.3		%	64.7		%

Acquired Loans

All acquired loans were initially recorded at fair value at the acquisition date. Refer to the Acquired Loans section in Note 1 of our 2017 Annual Report on Form 10-K 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:

TABLE 5.3



(in thousands)	September 30, 2018		December 31, 2017
Accounted for under ASC 310-30:
Outstanding balance	$	4,110,019	$	5,176,015
Carrying amount	3,830,823		4,834,256
Accounted for under ASC 310-20:
Outstanding balance	644,077		835,130
Carrying amount	626,041		812,322
Total acquired loans:
Outstanding balance	4,754,096		6,011,145
Carrying amount	4,456,864		5,646,578

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 $1.7 million at September 30, 2018 and $1.9 million at December 31, 2017, representing 0.04% and 0.03%, respectively, 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.

TABLE 5.4



	Nine Months Ended September 30,
(in thousands)	2018			2017
Balance at beginning of period	$	708,481		$	467,070
Acquisitions	—			444,715
Reduction due to unexpected early payoffs	(117,469		)	(90,097		)
Reclass from non-accretable difference	184,545			163,714
Disposals/transfers	(444		)	(341		)
Other	(412		)	1,129
Accretion	(169,605		)	(164,219		)
Balance at end of period	$	605,096		$	821,971

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.

The excess of cash flows expected to be collected at acquisition over recorded fair value is referred to as the accretable yield.

The accretable yield is recognized into income over the remaining life of the loan, or pool of loans, using an effective yield

method, if the timing and/or amount of cash flows expected to be collected can be reasonably estimated (the accretion model).

If the timing and/or amount of cash flows expected to be collected cannot be reasonably estimated, the cost recovery method of

income recognition must be used. The difference between the loan’s total scheduled principal and interest payments over all

cash flows expected at acquisition is referred to as the non-accretable difference. The non-accretable difference represents

contractually required principal and interest payments which we do not expect to collect.

During the nine months ended September 30, 2018, there was an overall improvement in cash flow expectations which resulted in a net reclassification of $184.5 million from the non-accretable difference to accretable yield. This reclassification was $163.7 million for the nine months ended September 30, 2017. The reclassification from the non-accretable difference to the accretable yield results in prospective yield adjustments on the loan pools and was also positively impacted by the sale of $56.5 million of acquired residential mortgage loans in the second quarter of 2018.

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 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 and leases 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. The majority of 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:

TABLE 5.5



(dollars in thousands)	September 30, 2018			December 31, 2017
Non-accrual loans	$	79,899		$	74,635
Troubled debt restructurings	22,322			23,481
Total non-performing loans	102,221			98,116
Other real estate owned	35,685			40,606
Total non-performing assets	$	137,906		$	138,722
Asset quality ratios:
Non-performing loans / total loans and leases	0.47		%	0.47		%
Non-performing loans + OREO / total loans and leases + OREO	0.63		%	0.66		%
Non-performing assets / total assets	0.42		%	0.44		%

The carrying value of residential other real estate owned 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 $5.4 million at September 30, 2018 and $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 September 30, 2018 and December 31, 2017 totaled $9.0 million and $15.2 million, respectively.

The following tables provide an analysis of the aging of loans by class segregated by loans and leases originated and loans acquired:

TABLE 5.6



(in thousands)	30-89 Days Past Due		> 90 Days Past Due and Still Accruing		Non- Accrual		Total Past Due (4)		Current		Total Loans and Leases
Originated Loans and Leases
September 30, 2018
Commercial real estate	$	12,978	$	2	$	18,243	$	31,223	$	5,947,406	$	5,978,629
Commercial and industrial	7,069		3		27,323		34,395		3,858,427		3,892,822
Commercial leases	712		—		5,526		6,238		340,341		346,579
Other	80		141		1,000		1,221		33,511		34,732
Total commercial loans and leases	20,839		146		52,092		73,077		10,179,685		10,252,762
Direct installment	7,779		663		7,888		16,330		1,654,634		1,670,964
Residential mortgages	19,274		1,754		6,110		27,138		2,430,242		2,457,380
Indirect installment	8,889		505		2,263		11,657		1,868,830		1,880,487
Consumer lines of credit	5,039		904		3,583		9,526		1,106,850		1,116,376
Total consumer loans	40,981		3,826		19,844		64,651		7,060,556		7,125,207
Total originated loans and leases	$	61,820	$	3,972	$	71,936	$	137,728	$	17,240,241	$	17,377,969
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



(in thousands)	30-89 Days Past Due		> 90 Days Past Due and Still Accruing		Non- Accrual		Total Past Due (1) (2) (3)		Current		(Discount) Premium			Total Loans
Acquired Loans
September 30, 2018
Commercial real estate	$	33,024	$	48,044	$	3,030	$	84,098	$	2,956,931	$	(173,918	)	$	2,867,111
Commercial and industrial	1,704		2,801		4,252		8,757		492,430		(30,552		)	470,635
Total commercial loans	34,728		50,845		7,282		92,855		3,449,361		(204,470		)	3,337,746
Direct installment	4,168		1,798		—		5,966		101,669		(476		)	107,159
Residential mortgages	15,237		6,428		—		21,665		522,844		(17,227		)	527,282
Indirect installment	—		1		—		1		—		161			162
Consumer lines of credit	6,699		2,244		681		9,624		490,358		(10,897		)	489,085
Total consumer loans	26,104		10,471		681		37,256		1,114,871		(28,439		)	1,123,688
Total acquired loans	$	60,832	$	61,316	$	7,963	$	130,111	$	4,564,232	$	(232,909	)	$	4,461,434
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


(1)	Past due information for acquired loans is based on the contractual balance outstanding at September 30, 2018 and December 31, 2017.

(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.


(3)	Approximately $28.5 million of acquired past-due or non-accrual loans were sold during the second quarter of 2018.


(4)	Approximately $14.7 million of originated past-due or non-accrual loans were sold during the second quarter of 2018.

We utilize the following categories to monitor credit quality within our commercial loan and lease portfolio:

TABLE 5.7



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:

TABLE 5.8



	Commercial Loan and Lease Credit Quality Categories
(in thousands)	Pass		Special Mention		Substandard		Doubtful		Total
Originated Loans and Leases
September 30, 2018
Commercial real estate	$	5,716,992	$	144,800	$	116,793	$	44	$	5,978,629
Commercial and industrial	3,626,199		187,032		74,879		4,712		3,892,822
Commercial leases	335,439		1,623		9,517		—		346,579
Other	33,481		110		1,141		—		34,732
Total originated commercial loans and leases	$	9,712,111	$	333,565	$	202,330	$	4,756	$	10,252,762
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
Acquired Loans
September 30, 2018
Commercial real estate	$	2,481,679	$	181,813	$	203,448	$	171	$	2,867,111
Commercial and industrial	408,326		20,605		41,704		—		470,635
Total acquired commercial loans	$	2,890,005	$	202,418	$	245,152	$	171	$	3,337,746
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

Credit quality information for acquired loans is based on the contractual balance outstanding at September 30, 2018 and December 31, 2017.

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, Fair Isaac Corporation (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:

TABLE 5.9



	Consumer Loan Credit Quality by Payment Status
(in thousands)	Performing		Non- Performing		Total
Originated loans
September 30, 2018
Direct installment	$	1,656,375	$	14,589	$	1,670,964
Residential mortgages	2,441,374		16,006		2,457,380
Indirect installment	1,878,224		2,263		1,880,487
Consumer lines of credit	1,111,004		5,372		1,116,376
Total originated consumer loans	$	7,086,977	$	38,230	$	7,125,207
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
Acquired loans
September 30, 2018
Direct installment	$	107,091	$	68	$	107,159
Residential mortgages	527,282		—		527,282
Indirect installment	162		—		162
Consumer lines of credit	487,823		1,262		489,085
Total acquired consumer loans	$	1,122,358	$	1,330	$	1,123,688
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

Loans 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 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.). Effective July 1, 2018, we changed our threshold for measuring impairment on a collective basis. Impairment is evaluated in the aggregate for newly impaired commercial loan relationships less than $1.0 million based on loan segment loss given default. Impairment is evaluated in the aggregate for consumer installment loans, residential mortgages, consumer lines of credit and commercial loan relationships less than $1.0 million based on loan segment loss given default. For commercial loan relationships greater than or equal to $1.0 million, 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, 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:

TABLE 5.10



(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 Nine Months Ended September 30, 2018
Commercial real estate	$	20,051	$	17,576	$	635	$	18,211	$	44	$	16,360
Commercial and industrial	31,219		19,533		8,272		27,805		4,712		27,096
Commercial leases	5,526		5,526		—		5,526		—		3,372
Total commercial loans and leases	56,796		42,635		8,907		51,542		4,756		46,828
Direct installment	17,554		14,589		—		14,589		—		15,191
Residential mortgages	17,316		16,006		—		16,006		—		16,887
Indirect installment	4,576		2,263		—		2,263		—		2,208
Consumer lines of credit	7,330		5,372		—		5,372		—		5,172
Total consumer loans	46,776		38,230		—		38,230		—		39,458
Total	$	103,572	$	80,865	$	8,907	$	89,772	$	4,756	$	86,286
At or for the Year Ended December 31, 2017
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
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

Interest income continued to accrue on certain impaired loans and totaled approximately $4.3 million and $3.3 million for the nine months ended September 30, 2018 and 2017, 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:

TABLE 5.11



(in thousands)	September 30, 2018			December 31, 2017
Commercial real estate	$	2,440		$	4,976
Commercial and industrial	639			(415		)
Total commercial loans	3,079			4,561
Direct installment	967			1,553
Residential mortgages	520			484
Indirect installment	226			177
Consumer lines of credit	(222		)	(77		)
Total consumer loans	1,491			2,137
Total allowance on acquired loans	$	4,570		$	6,698

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:

TABLE 5.12



(in thousands)	Originated		Acquired		Total
September 30, 2018
Accruing:
Performing	$	16,963	$	67	$	17,030
Non-performing	19,060		3,262		22,322
Non-accrual	8,621		91		8,712
Total TDRs	$	44,644	$	3,420	$	48,064
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

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 the nine months ended September 30, 2018, we returned to performing status $3.0 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 six 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 $1.0 million 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 individually impaired loans under $1.0 million 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:

TABLE 5.13



(in thousands)	September 30, 2018		December 31, 2017
Specific reserves for commercial TDRs	$	—	$	95
Pooled reserves for individual commercial loans	551		469

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 for September 30, 2018 and $4.0 million for December 31, 2017. Upon default of an individual loan, our charge-off policy is followed accordingly for that class of loan.

Following is a summary of TDR loans, by class:

TABLE 5.14



	Three Months Ended September 30, 2018					Nine Months Ended September 30, 2018
(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	$	507	$	494	4	$	656	$	614
Commercial and industrial	1	15		—		12	662		633
Total commercial loans	4	522		494		16	1,318		1,247
Direct installment	15	650		638		65	3,215		2,941
Residential mortgages	4	283		279		13	898		854
Indirect installment	—	—		—		—	—		—
Consumer lines of credit	11	540		549		25	1,199		1,004
Total consumer loans	30	1,473		1,466		103	5,312		4,799
Total	34	$	1,995	$	1,960	119	$	6,630	$	6,046



	Three Months Ended September 30, 2017					Nine Months Ended September 30, 2017
(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	—	$	—	$	—	2	$	595	$	560
Commercial and industrial	1	15		10		3	3,568		4,169
Total commercial loans	1	15		10		5	4,163		4,729
Direct installment	141	1,037		919		474	4,014		3,580
Residential mortgages	14	946		952		30	1,539		1,446
Indirect installment	3	5		4		12	36		32
Consumer lines of credit	9	77		50		51	1,080		901
Total consumer loans	167	2,065		1,925		567	6,669		5,959
Total	168	$	2,080	$	1,935	572	$	10,832	$	10,688

The year-to-date items in the above tables have been adjusted for loans that have been paid off and/or sold.

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.

TABLE 5.15



	Three Months Ended September 30, 2018			Nine Months Ended September 30, 2018
(dollars in thousands)	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment
Commercial real estate	3	$	1,078	3	$	1,078
Commercial and industrial	2	16		1	9
Total commercial loans	5	1,094		4	1,087
Direct installment	3	$	274	5	$	332
Residential mortgages	2	108		4	224
Indirect installment	—	—		—	—
Consumer lines of credit	—	—		3	252
Total consumer loans	5	382		12	808
Total	10	$	1,476	16	$	1,895



	Three Months Ended September 30, 2017			Nine Months Ended September 30, 2017
(dollars in thousands)	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment
Commercial real estate	1	$	463	1	$	463
Commercial and industrial	—	—		3	326
Total commercial loans	1	463		4	789
Direct installment	39	265		91	278
Residential mortgages	1	80		4	264
Indirect installment	4	22		12	22
Consumer lines of credit	3	26		4	89
Total consumer loans	47	393		111	653
Total	48	$	856	115	$	1,442

The year-to-date items in the above tables have been adjusted for loans that have been paid off and/or sold.