LOANS AND LOANS HELD FOR SALE

Loans are presented net of unearned income of $3.2 million and $2.1 million at December 31, 2015 and 2014 and net of a discount related to purchase accounting fair value adjustments of $10.9 million and $2.0 million at December 31, 2015 and December 31, 2014. The following table indicates the composition of the acquired and originated loans as of the dates presented:



	December 31,
(dollars in thousands)	2015		2014
Commercial
Commercial real estate	$	2,166,603	$	1,682,236
Commercial and industrial	1,256,830		994,138
Commercial construction	413,444		216,148
Total Commercial Loans	3,836,877		2,892,522
Consumer
Residential mortgage	639,372		489,586
Home equity	470,845		418,563
Installment and other consumer	73,939		65,567
Consumer construction	6,579		2,508
Total Consumer Loans	1,190,735		976,224
Total Portfolio Loans	5,027,612		3,868,746
Loans held for sale	35,321		2,970
Total Loans	$	5,062,933	$	3,871,716

As of December 31, 2015, our acquired loans from the Merger were $673.3 million including $293.2 million of CRE, $167.7 million of C&I, $69.2 million of commercial construction, $115.6 million of residential mortgage, $27.5 million of home equity, installment and other consumer construction. These acquired loans decreased from the original fair value on March, 2015 of $788.7 million, including $331.6 million of CRE, $184.2 million of C&I, $92.4 million of commercial construction, $116.9 million of residential mortgage, $25.6 million of home equity, $36.1 million of installment and other consumer and $1.9 million of consumer construction.

As of December 31, 2015, we had $35.3 million of loans held for sale, which included $23.3 million related to the decision to sell our credit card portfolio and the remaining balance related to mortgages held for sale.

We attempt to limit our exposure to credit risk by diversifying our loan portfolio by segment, geography, collateral and industry and actively managing concentrations. When concentrations exist in certain segments, we mitigate this risk by monitoring the relevant economic indicators and internal risk rating trends and through stress testing of the loans in these segments. Total commercial loans represented 76 percent of total portfolio loans at December 31, 2015 and 75 percent of total portfolio loans at December 31, 2014. Within our commercial portfolio, the CRE and Commercial Construction portfolios combined comprised $2.6 billion or 67 percent of total commercial loans and 51 percent of total portfolio loans at December 31, 2015 and 66 percent of total commercial loans and 49 percent of total portfolio loans at December 31, 2014. Of the $2.6 billion of CRE and Commercial Construction loans, $424.0 million were added as a result of the Merger. Further segmentation of the CRE and Commercial Construction portfolios by industry and collateral type reveal no concentration in excess of seven percent of total loans at either December 31, 2015 or December 31, 2014.

Our market area includes Pennsylvania and the contiguous states of Ohio, West Virginia, New York and Maryland. The majority of our commercial and consumer loans are made to businesses and individuals in this market area resulting in a geographic concentration. We believe our knowledge and familiarity with customers and conditions locally outweighs this geographic concentration risk. The conditions of the local and regional economies are monitored closely through publicly available data as well as information supplied by our customers. Management believes underwriting guidelines, active monitoring of economic conditions and ongoing review by credit administration mitigates the concentration risk present in the loan portfolio. Our CRE and Commercial Construction portfolios have out-of-market exposure of 5.8 percent of the combined portfolio and 3.0 percent of total loans at December 31, 2015 and 8.0 percent of the combined portfolio and 3.9 percent of total loans at December 31, 2014.

TDRs are loans where we, for economic or legal reasons related to a borrower's financial difficulties, grant a concession to the borrower that we would not otherwise grant. We strive to identify borrowers in financial difficulty early and work with them to modify the terms before their loan reaches nonaccrual status. These modified terms generally include extensions of maturity dates at a stated interest rate lower than the current market rate for a new loan with similar risk characteristics, reductions in contractual interest rates or principal deferment. While unusual, there may be instances of principal forgiveness. These modifications are generally for longer term periods that would not be considered insignificant. Additionally, we classify loans where the debt obligation has been discharged through a Chapter 7 Bankruptcy and not reaffirmed as TDRs.

We individually evaluate all substandard commercial loans that have experienced a forbearance or change in terms agreement, as well as all substandard consumer and residential mortgage loans that entered into an agreement to modify their existing loan to determine if they should be designated as TDRs. All TDRs are considered to be impaired loans and will be reported as impaired loans for the remaining life of the loan, unless the restructuring agreement specifies an interest rate equal to or greater than the rate that would be accepted at the time of the restructuring for a new loan with comparable risk and it is fully expected that the remaining principal and interest will be collected according to the restructured agreement. Further, all impaired loans are reported as nonaccrual loans unless the loan is a TDR that has met the requirements to be returned to accruing status. TDRs can be returned to accruing status if the ultimate collectability of all contractual amounts due, according to the restructured agreement, is not in doubt and there is a period of a minimum of six months of satisfactory payment performance by the borrower either immediately before or after the restructuring.

The following table summarizes the restructured loans as of the dates presented:



	December 31, 2015						December 31, 2014
(dollars in thousands)	Performing TDRs		Nonperforming TDRs		Total TDRs		Performing TDRs		Nonperforming TDRs		Total TDRs
Commercial real estate	$	6,822	$	3,548	$	10,370	$	16,939	$	2,180	$	19,119
Commercial and industrial	6,321		1,570		7,891		8,074		356		8,430
Commercial construction	5,013		1,265		6,278		5,736		1,869		7,605
Residential mortgage	2,590		665		3,255		2,839		459		3,298
Home equity	3,184		523		3,707		3,342		562		3,904
Installment and other consumer	25		88		113		53		10		63
Total	$	23,955	$	7,659	$	31,614	$	36,983	$	5,436	$	42,419

The following tables present the restructured loans for the 12 months ended December 31:



	2015
(dollars in thousands)	Number of Loans	Pre-Modification Outstanding Recorded Investment⁽¹⁾		Post-Modification Outstanding Recorded Investment⁽¹⁾		Total Difference in Recorded Investment
Commercial real estate
Principal deferral	2	$	2,851	$	1,841	$	(1,010	)
Maturity date extension	3	438		427		(11		)
Commercial and industrial
Principal deferral	6	661		363		(298		)
Maturity date extension	2	824		728		(96		)
Commercial construction
Maturity date extension	3	1,434		1,432		(2		)
Residential mortgage
Maturity date extension	8	545		265		(280		)
Maturity date extension and interest rate reduction	1	207		205		(2		)
Chapter 7 bankruptcy⁽²⁾	7	428		226		(202		)
Home equity
Maturity date extension	1	71		70		(1		)
Maturity date extension and interest rate reduction	3	203		201		(2		)
Chapter 7 bankruptcy⁽²⁾	23	619		576		(43		)
Installment and other consumer
Chapter 7 bankruptcy⁽²⁾	1	9		4		(5		)
Total by Concession Type
Principal deferral	8	3,512		2,204		(1,308		)
Maturity date extension and interest rate reduction	4	410		406		(4		)
Maturity date extension	17	3,312		2,922		(390		)
Chapter 7 bankruptcy⁽²⁾	31	1,056		806		(250		)
Total	60	$	8,290	$	6,338	$	(1,952	)


(1)	Excludes loans that were fully paid off or fully charged-off by period end. The pre-modification balance represents the balance outstanding prior to modification. The post-modification balance represents the outstanding balance at period end.


(2)	Chapter 7 bankruptcy loans where the debt has been legally discharged through the bankruptcy court and not reaffirmed.



	2014
(dollars in thousands)	Number of Loans	Pre-Modification Outstanding Recorded Investment⁽¹⁾		Post-Modification Outstanding Recorded Investment⁽¹⁾		Total Difference in Recorded Investment
Commercial real estate
Principal deferral	4	$	1,991	$	1,965	$	(26	)
Commercial and industrial
Principal deferral	2	381		356		(25		)
Commercial construction
Maturity date extension	1	1,019		974		(45		)
Residential mortgage
Chapter 7 bankruptcy⁽²⁾	9	651		634		(17		)
Home Equity
Maturity date extension and interest rate reduction	2	96		95		(1		)
Maturity date extension	6	349		348		(1		)
Chapter 7 bankruptcy⁽²⁾	15	432		382		(50		)
Installment and other consumer
Chapter 7 bankruptcy⁽²⁾	5	30		23		(7		)
Total by Concession Type
Principal deferral	6	2,372		2,321		(51		)
Maturity date extension and interest rate reduction	2	96		95		(1		)
Maturity date extension	7	1,368		1,322		(46		)
Chapter 7 bankruptcy⁽²⁾	29	1,113		1,039		(74		)
Total	44	$	4,949	$	4,777	$	(172	)


(1)	Excludes loans that were fully paid off or fully charged-off by period end. The pre-modification balance represents the balance outstanding prior to modification. The post-modification balance represents the outstanding balance at period end.


(2)	Chapter 7 bankruptcy loans where the debt has been legally discharged through the bankruptcy court and not reaffirmed.

During 2015, we modified 39 loans that were not considered to be TDRs, including 11 C&I loans for $7.8 million, 14 Commercial Construction loans for $8.5 million, eight CRE loans for $6.1 million, four Home Equity loans for $0.4 million and two Residential Real Estate loans for $0.1 million. The modifications primarily represented instances where we were adequately compensated through additional collateral or a higher interest rate or there was an insignificant delay in payment. As of December 31, 2015, we have no commitments to lend additional funds on any TDRs.

We returned eight TDRs to accruing status during the twelve months ended December 31, 2015 totaling $0.4 million. We returned nine TDRs to accruing status during 2014 totaling $1.9 million.

Defaulted TDRs are defined as loans having a payment default of 90 days or more after the restructuring takes place. The following tables present a summary of TDRs which defaulted during the years ended December 31, 2015 and 2014 that had been restructured within the last 12 months prior to defaulting:



	Defaulted TDRs
	For the Year Ended December 31, 2015			For the Year Ended December 31, 2014
(dollars in thousands)	Number of Defaults	Recorded Investment		Number of Defaults	Recorded Investment
Commercial real estate	—	$	—	—	$	—
Commercial and industrial	—	—		—	—
Residential real estate	—	—		1	20
Home equity	—	—		2	44
Total	—	$	—	3	$	64

The following table is a summary of nonperforming assets as of the dates presented:



	December 31,
(dollars in thousands)	2015		2014
Nonperforming Assets
Nonaccrual loans	$	27,723	$	7,021
Nonaccrual TDRs	7,659		5,436
Total nonaccrual loans	35,382		12,457
OREO	354		166
Total Nonperforming Assets	$	35,736	$	12,623

The increase in NPAs during 2015 was primarily due to subsequent deterioration on acquired loans since the acquisition date and a $4.7 million C&I loan. Included in the total NPAs of $35.7 million is approximately $16.3 million of loans from the Merger.

We have granted loans to certain officers and directors of S&T as well as to certain affiliates of the officers and directors in the ordinary course of business. These loans were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with unrelated persons and did not involve more than normal risk of collectability.

The following table presents a summary of the aggregate amount of loans to any such persons as of December 31:



(dollars in thousands)	2015			2014
Balance at beginning of year	$	27,368		$	23,848
New loans	24,743			27,799
Repayments	(27,594		)	(24,279		)
Balance at End of Year	$	24,517		$	27,368