Loans and Leases

12 Months Ended

Dec. 31, 2018

The loan and lease portfolio consists of loans and leases originated by the Corporation, as well as loans acquired in mergers and acquisitions. These mergers and acquisitions include the December 2017 RBPI Merger, the January 2015 CBH Merger, the November 2012 transaction with First Bank of Delaware and the July 2010 acquisition of First Keystone Financial, Inc. Certain tables in this Note 5 are presented with a breakdown between originated and acquired loans and leases.

A. The table below details portfolio loans and leases as of the dates indicated:



	December 31, 2018						December 31, 2017
(dollars in thousands)	Originated		Acquired		Total Loans and Leases		Originated		Acquired		Total Loans and Leases
Loans held for sale	$	1,749	$	—	$	1,749	$	3,794	$	—	$	3,794
Real estate loans:
Commercial mortgage	$	1,327,822	$	329,614	$	1,657,436	$	1,122,327	$	401,050	$	1,523,377
Home equity lines and loans	181,506		25,845		207,351		183,283		34,992		218,275
Residential mortgage	411,022		83,333		494,355		360,935		97,951		458,886
Construction	174,592		6,486		181,078		128,266		84,188		212,454
Total real estate loans	2,094,942		445,278		2,540,220		1,794,811		618,181		2,412,992
Commercial and industrial	624,643		70,941		695,584		589,304		130,008		719,312
Consumer	44,099		2,715		46,814		35,146		3,007		38,153
Leases	121,567		22,969		144,536		68,035		47,366		115,401
Total portfolio loans and leases	2,885,251		541,903		3,427,154		2,487,296		798,562		3,285,858
Total loans and leases	$	2,887,000	$	541,903	$	3,428,903	$	2,491,090	$	798,562	$	3,289,652
Loans with fixed rates	$	1,204,070	$	323,604	$	1,527,674	$	1,034,542	$	538,510	$	1,573,052
Loans with adjustable or floating rates	1,682,930		218,299		1,901,229		1,456,548		260,052		1,716,600
Total loans and leases	$	2,887,000	$	541,903	$	3,428,903	$	2,491,090	$	798,562	$	3,289,652
Net deferred loan origination fees included in the above loan table	$	2,226	$	—	$	2,226	$	887	$	—	$	887

B. Components of the net investment in leases are detailed as follows:



	December 31, 2018									December 31, 2017
(dollars in thousands)	Originated			Acquired			Total Leases			Originated			Acquired			Total Leases
Minimum lease payments receivable	$	135,313		$	25,372		$	160,685		$	75,592		$	55,219		$	130,811
Unearned lease income	(19,388		)	(3,005		)	(22,393		)	(10,338		)	(9,523		)	(19,861		)
Initial direct costs and deferred fees	5,642			602			6,244			2,781			1,670			4,451
Total Leases	$	121,567		$	22,969		$	144,536		$	68,035		$	47,366		$	115,401

C. Non-Performing Loans and Leases⁽¹⁾



	December 31, 2018						December 31, 2017
(dollars in thousands)	Originated		Acquired		Total Loans and Leases		Originated		Acquired		Total Loans and Leases
Commercial mortgage	$	435	$	2,133	$	2,568	$	90	$	782	$	872
Home equity lines and loans	3,590		26		3,616		1,221		260		1,481
Residential mortgage	2,813		639		3,452		1,505		2,912		4,417
Commercial and industrial	1,786		315		2,101		826		880		1,706
Consumer	45		63		108		—		—		—
Leases	392		583		975		103		—		103
Total non-performing loans and leases	$	9,061	$	3,759	$	12,820	$	3,745	$	4,834	$	8,579

(1) Purchased credit-impaired loans, which have been recorded at their fair values at acquisition, and which are performing, are excluded from this table, with the exception of $0 and $167 thousand of purchased credit-impaired loans as of December 31, 2018 and December 31, 2017, respectively, which became non-performing subsequent to acquisition.

D. Purchased Credit-Impaired Loans

The outstanding principal balance and related carrying amount of purchased credit-impaired loans, for which the Corporation applies ASC 310-30, Accounting for Purchased Loans with Deteriorated Credit Quality, to account for the interest earned, as of the dates indicated, are as follows:



(dollars in thousands)	December 31, 2018		December 31, 2017
Outstanding principal balance	$	17,904	$	46,543
Carrying amount⁽¹⁾	$	12,304	$	30,849

⁽¹⁾ Includes $0 and $1.9 million of purchased credit-impaired loans as of December 31, 2018 and December 31, 2017, respectively, for which the Corporation could not estimate the timing or amount of expected cash flows to be collected at acquisition, and for which no accretable yield is recognized. Additionally, the table above includes $0 and $167 thousand of purchased credit-impaired loans as of December 31, 2018 and December 31, 2017, respectively, which became non-performing subsequent to acquisition, which are disclosed in Section C, “Non-Performing Loans and Leases,” of Note 5, “Loans and Leases,” in the accompanying Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K, and which also have no accretable yield.

The following table presents changes in the accretable discount on purchased credit-impaired loans, for which the Corporation applies ASC 310-30, for the year ended December 31, 2018:



(dollars in thousands)	Accretable Discount
Balance, December 31, 2017	$	4,083
Accretion	(2,271		)
Reclassifications from nonaccretable difference	701
Additions/adjustments	329
Disposals	(145		)
Balance, December 31, 2018	$	2,697

E. Age Analysis of Past Due Loans and Leases

The following tables present an aging of all portfolio loans and leases as of the dates indicated:



	Accruing Loans and Leases
As of December 31, 2018	30 – 59 Days Past Due		60 – 89 Days Past Due		Over 89 Days Past Due		Total Past Due		Current*		Total Accruing Loans and Leases		Nonaccrual Loans and Leases		Total Loans and Leases
(dollars in thousands)	30 – 59 Days Past Due		60 – 89 Days Past Due		Over 89 Days Past Due		Total Past Due		Current*		Total Accruing Loans and Leases		Nonaccrual Loans and Leases		Total Loans and Leases
Commercial mortgage	$	821	$	251	$	—	$	1,072	$	1,653,796	$	1,654,868	$	2,568	$	1,657,436
Home equity lines and loans	92		—		—		92		203,643		203,735		3,616		207,351
Residential mortgage	2,330		218		—		2,548		488,355		490,903		3,452		494,355
Construction	—		—		—		—		181,078		181,078		—		181,078
Commercial and industrial	280		332		—		612		692,871		693,483		2,101		695,584
Consumer	35		5		—		40		46,666		46,706		108		46,814
Leases	641		460		—		1,101		142,460		143,561		975		144,536
Total portfolio loans and leases	$	4,199	$	1,266	$	—	$	5,465	$	3,408,869	$	3,414,334	$	12,820	$	3,427,154



	Accruing Loans and Leases
As of December 31, 2017	30 – 59 Days Past Due		60 – 89 Days Past Due		Over 89 Days Past Due		Total Past Due		Current*		Total Accruing Loans and Leases		Nonaccrual Loans and Leases		Total Loans and Leases
(dollars in thousands)	30 – 59 Days Past Due		60 – 89 Days Past Due		Over 89 Days Past Due		Total Past Due		Current*		Total Accruing Loans and Leases		Nonaccrual Loans and Leases		Total Loans and Leases
Commercial mortgage	$	1,366	$	2,428	$	—	$	3,794	$	1,518,711	$	1,522,505	$	872	$	1,523,377
Home equity lines and loans	338		10		—		348		216,446		216,794		1,481		218,275
Residential mortgage	1,386		79		—		1,465		453,004		454,469		4,417		458,886
Construction	—		—		—		—		212,454		212,454		—		212,454
Commercial and industrial	658		286		—		944		716,662		717,606		1,706		719,312
Consumer	1,106		—		—		1,106		37,047		38,153		—		38,153
Leases	125		177		—		302		114,996		115,298		103		115,401
Total portfolio loans and leases	$	4,979	$	2,980	$	—	$	7,959	$	3,269,320	$	3,277,279	$	8,579	$	3,285,858

*Included as “current” are $3.2 million and $4.1 million of loans and leases as of December 31, 2018 and 2017, respectively, which are classified as Administratively Delinquent. An Administratively Delinquent loan is one which has been approved for a renewal or extension but has not had all the required documents fully executed as of the reporting date. The Corporation does not consider these loans to be delinquent.

The following tables present an aging of originated portfolio loans and leases as of the dates indicated:



	Accruing Loans and Leases
As of December 31, 2018	30 – 59 Days Past Due		60 – 89 Days Past Due		Over 89 Days Past Due		Total Past Due		Current*		Total Accruing Loans and Leases		Nonaccrual Loans and Leases		Total Loans and Leases
(dollars in thousands)	30 – 59 Days Past Due		60 – 89 Days Past Due		Over 89 Days Past Due		Total Past Due		Current*		Total Accruing Loans and Leases		Nonaccrual Loans and Leases		Total Loans and Leases
Commercial mortgage	$	816	$	251	$	—	$	1,067	$	1,326,320	$	1,327,387	$	435	$	1,327,822
Home equity lines and loans	25		—		—		25		177,891		177,916		3,590		181,506
Residential mortgage	1,545		—		—		1,545		406,664		408,209		2,813		411,022
Construction	—		—		—		—		174,592		174,592		—		174,592
Commercial and industrial	280		332		—		612		622,245		622,857		1,786		624,643
Consumer	35		5		—		40		44,014		44,054		45		44,099
Leases	350		233		—		583		120,592		121,175		392		121,567
Total originated portfolio loans and leases	$	3,051	$	821	$	—	$	3,872	$	2,872,318	$	2,876,190	$	9,061	$	2,885,251



	Accruing Loans and Leases
As of December 31, 2017	30 – 59 Days Past Due		60 – 89 Days Past Due		Over 89 Days Past Due		Total Past Due		Current*		Total Accruing Loans and Leases		Nonaccrual Loans and Leases		Total Loans and Leases
(dollars in thousands)	30 – 59 Days Past Due		60 – 89 Days Past Due		Over 89 Days Past Due		Total Past Due		Current*		Total Accruing Loans and Leases		Nonaccrual Loans and Leases		Total Loans and Leases
Commercial mortgage	$	1,255	$	81	$	—	$	1,336	$	1,120,901	$	1,122,237	$	90	$	1,122,327
Home equity lines and loans	26		—		—		26		182,036		182,062		1,221		183,283
Residential mortgage	721		—		—		721		358,709		359,430		1,505		360,935
Construction	—		—		—		—		128,266		128,266		—		128,266
Commercial and industrial	439		236		—		675		587,803		588,478		826		589,304
Consumer	21		—		—		21		35,125		35,146		—		35,146
Leases	125		177		—		302		67,630		67,932		103		68,035
Total originated portfolio loans and leases	$	2,587	$	494	$	—	$	3,081	$	2,480,470	$	2,483,551	$	3,745	$	2,487,296

*Included as “current” are $2.0 million and $4.0 million of loans and leases as of December 31, 2018 and 2017, respectively, which are classified as Administratively Delinquent. An Administratively Delinquent loan is one which has been approved for a renewal or extension but has not had all the required documents fully executed as of the reporting date. The Corporation does not consider these loans to be delinquent.

The following tables present an aging of acquired portfolio loans and leases as of the dates indicated:



	Accruing Loans and Leases
As of December 31, 2018	30 – 59 Days Past Due		60 – 89 Days Past Due		Over 89 Days Past Due		Total Past Due		Current*		Total Accruing Loans and Leases		Nonaccrual Loans and Leases		Total Loans and Leases
(dollars in thousands)	30 – 59 Days Past Due		60 – 89 Days Past Due		Over 89 Days Past Due		Total Past Due		Current*		Total Accruing Loans and Leases		Nonaccrual Loans and Leases		Total Loans and Leases
Commercial mortgage	$	5	$	—	$	—	$	5	$	327,476	$	327,481	$	2,133	$	329,614
Home equity lines and loans	67		—		—		67		25,752		25,819		26		25,845
Residential mortgage	785		218		—		1,003		81,691		82,694		639		83,333
Construction	—		—		—		—		6,486		6,486		—		6,486
Commercial and industrial	—		—		—		—		70,626		70,626		315		70,941
Consumer	—		—		—		—		2,652		2,652		63		2,715
Leases	291		227		—		518		21,868		22,386		583		22,969
Total acquired portfolio loans and leases	$	1,148	$	445	$	—	$	1,593	$	536,551	$	538,144	$	3,759	$	541,903



	Accruing Loans and Leases
As of December 31, 2017	30 – 59 Days Past Due		60 – 89 Days Past Due		Over 89 Days Past Due		Total Past Due		Current*		Total Accruing Loans and Leases		Nonaccrual Loans and Leases		Total Loans and Leases
(dollars in thousands)	30 – 59 Days Past Due		60 – 89 Days Past Due		Over 89 Days Past Due		Total Past Due		Current*		Total Accruing Loans and Leases		Nonaccrual Loans and Leases		Total Loans and Leases
Commercial mortgage	$	111	$	2,347	$	—	$	2,458	$	397,810	$	400,268	$	782	$	401,050
Home equity lines and loans	312		10		—		322		34,410		34,732		260		34,992
Residential mortgage	665		79		—		744		94,295		95,039		2,912		97,951
Construction	—		—		—		—		84,188		84,188		—		84,188
Commercial and industrial	219		50		—		269		128,859		129,128		880		130,008
Consumer	1,085		—		—		1,085		1,922		3,007		—		3,007
Leases	—		—		—		—		47,366		47,366		—		47,366
Total acquired portfolio loans and leases	$	2,392	$	2,486	$	—	$	4,878	$	788,850	$	793,728	$	4,834	$	798,562

*Included as “current” are $1.2 million and $102 thousand of loans and leases as of December 31, 2018 and 2017, respectively, which are classified as Administratively Delinquent. An Administratively Delinquent loan is one which has been approved for a renewal or extension but has not had all the required documents fully executed as of the reporting date. The Corporation does not consider these loans to be delinquent.

F. Allowance for Loan and Lease Losses (the “Allowance”)

The following tables detail the roll-forward of the Allowance for the year ended December 31, 2018 and December 31, 2017:



(dollars in thousands)	Commercial Mortgage			Home Equity Lines and Loans			Residential Mortgage			Construction		Commercial and Industrial			Consumer			Leases			Total
Balance, December 31, 2017	$	7,550		$	1,086		$	1,926		$	937	$	5,038		$	246		$	742		$	17,525
Charge-offs	(331		)	(333		)	(354		)	—		(1,374		)	(311		)	(3,132		)	(5,835		)
Recoveries	16			2			56			2		24			10			433			543
Provision for loan and lease losses	332			248			185			546		1,773			284			3,825			7,193
Balance, December 31, 2018	$	7,567		$	1,003		$	1,813		$	1,485	$	5,461		$	229		$	1,868		$	19,426



(dollars in thousands)	Commercial Mortgage			Home Equity Lines and Loans			Residential Mortgage			Construction			Commercial and Industrial			Consumer			Leases			Total
Balance, December 31, 2016	$	6,227		$	1,255		$	1,917		$	2,233		$	5,142		$	153		$	559		$	17,486
Charge-offs	(55		)	(675		)	(326		)	—			(692		)	(154		)	(1,224		)	(3,126		)
Recoveries	12			5			165			4			25			8			328			547
Provision for loan and lease losses	1,366			501			170			(1,300		)	563			239			1,079			2,618
Balance, December 31, 2017	$	7,550		$	1,086		$	1,926		$	937		$	5,038		$	246		$	742		$	17,525

The following tables detail the allocation of the Allowance for all portfolio loans and leases by portfolio segment based on the methodology used to evaluate the loans and leases for impairment as of December 31, 2018 and December 31, 2017:



As of December 31, 2018	Commercial Mortgage		Home Equity Lines and Loans		Residential Mortgage		Construction		Commercial and Industrial		Consumer		Leases		Total
(dollars in thousands)	Commercial Mortgage		Home Equity Lines and Loans		Residential Mortgage		Construction		Commercial and Industrial		Consumer		Leases		Total
Allowance on loans and leases:
Individually evaluated for impairment	$	—	$	162	$	272	$	—	$	—	$	28	$	—	$	462
Collectively evaluated for impairment	7,567		841		1,541		1,485		5,461		201		1,868		18,964
Purchased credit-impaired⁽¹⁾	—		—		—		—		—		—		—		—
Total	$	7,567	$	1,003	$	1,813	$	1,485	$	5,461	$	229	$	1,868	$	19,426



As of December 31, 2017	Commercial Mortgage		Home Equity Lines and Loans		Residential Mortgage		Construction		Commercial and Industrial		Consumer		Leases		Total
(dollars in thousands)	Commercial Mortgage		Home Equity Lines and Loans		Residential Mortgage		Construction		Commercial and Industrial		Consumer		Leases		Total
Allowance on loans and leases:
Individually evaluated for impairment	$	—	$	19	$	230	$	—	$	5	$	4	$	—	$	258
Collectively evaluated for impairment	7,550		1,067		1,696		937		5,033		242		742		17,267
Purchased credit-impaired⁽¹⁾	—		—		—		—		—		—		—		—
Total	$	7,550	$	1,086	$	1,926	$	937	$	5,038	$	246	$	742	$	17,525

⁽¹⁾Purchased credit-impaired loans are evaluated for impairment on an individual basis.

The following tables detail the carrying value for all portfolio loans and leases by portfolio segment based on the methodology used to evaluate the loans and leases for impairment as of December 31, 2018 and December 31, 2017:



As of December 31, 2018	Commercial Mortgage		Home Equity Lines and Loans		Residential Mortgage		Construction		Commercial and Industrial		Consumer		Leases		Total
(dollars in thousands)	Commercial Mortgage		Home Equity Lines and Loans		Residential Mortgage		Construction		Commercial and Industrial		Consumer		Leases		Total
Carrying value of loans and leases:
Individually evaluated for impairment	$	7,008	$	4,998	$	6,608	$	—	$	2,629	$	134	$	—	$	21,377
Collectively evaluated for impairment	1,642,117		201,841		487,747		178,673		691,879		46,680		144,536		3,393,473
Purchased credit-impaired⁽¹⁾	8,311		512		—		2,405		1,076		—		—		12,304
Total	$	1,657,436	$	207,351	$	494,355	$	181,078	$	695,584	$	46,814	$	144,536	$	3,427,154

⁽¹⁾Purchased credit-impaired loans are evaluated for impairment on an individual basis.



As of December 31, 2017	Commercial Mortgage		Home Equity Lines and Loans		Residential Mortgage		Construction		Commercial and Industrial		Consumer		Leases		Total
(dollars in thousands)	Commercial Mortgage		Home Equity Lines and Loans		Residential Mortgage		Construction		Commercial and Industrial		Consumer		Leases		Total
Carrying value of loans and leases:
Individually evaluated for impairment	$	2,128	$	2,162	$	7,726	$	—	$	1,897	$	27	$	—	$	13,940
Collectively evaluated for impairment	1,503,825		215,604		451,160		204,088		712,865		38,126		115,401		3,241,069
Purchased credit-impaired⁽¹⁾	17,424		509		—		8,366		4,550		—		—		30,849
Total	$	1,523,377	$	218,275	$	458,886	$	212,454	$	719,312	$	38,153	$	115,401	$	3,285,858

⁽¹⁾Purchased credit-impaired loans are evaluated for impairment on an individual basis.

The following tables detail the allocation of the Allowance for originated portfolio loans and leases by portfolio segment based on the methodology used to evaluate the loans and leases for impairment as of December 31, 2018 and December 31, 2017:



As of December 31, 2018	Commercial Mortgage		Home Equity Lines and Loans		Residential Mortgage		Construction		Commercial and Industrial		Consumer		Leases		Total
(dollars in thousands)	Commercial Mortgage		Home Equity Lines and Loans		Residential Mortgage		Construction		Commercial and Industrial		Consumer		Leases		Total
Allowance on loans and leases:
Individually evaluated for impairment	$	—	$	162	$	175	$	—	$	—	$	28	$	—	$	365
Collectively evaluated for impairment	7,567		841		1,541		1,485		5,461		201		1,868		18,964
Total	$	7,567	$	1,003	$	1,716	$	1,485	$	5,461	$	229	$	1,868	$	19,329



As of December 31, 2017	Commercial Mortgage		Home Equity Lines and Loans		Residential Mortgage		Construction		Commercial and Industrial		Consumer		Leases		Total
(dollars in thousands)	Commercial Mortgage		Home Equity Lines and Loans		Residential Mortgage		Construction		Commercial and Industrial		Consumer		Leases		Total
Allowance on loans and leases:
Individually evaluated for impairment	$	—	$	19	$	180	$	—	$	5	$	4	$	—	$	208
Collectively evaluated for impairment	7,550		1,067		1,696		937		5,033		242		742		17,267
Total	$	7,550	$	1,086	$	1,876	$	937	$	5,038	$	246	$	742	$	17,475

The following tables detail the carrying value for originated portfolio loans and leases by portfolio segment based on the methodology used to evaluate the loans and leases for impairment as of December 31, 2018 and December 31, 2017:



As of December 31, 2018	Commercial Mortgage		Home Equity Lines and Loans		Residential Mortgage		Construction		Commercial and Industrial		Consumer		Leases		Total
(dollars in thousands)	Commercial Mortgage		Home Equity Lines and Loans		Residential Mortgage		Construction		Commercial and Industrial		Consumer		Leases		Total
Carrying value of loans and leases:
Individually evaluated for impairment	$	4,874	$	4,972	$	5,106	$	—	$	2,314	$	71	$	—	$	17,337
Collectively evaluated for impairment	1,322,948		176,534		405,916		174,592		622,329		44,028		121,567		2,867,914
Total	$	1,327,822	$	181,506	$	411,022	$	174,592	$	624,643	$	44,099	$	121,567	$	2,885,251



As of December 31, 2017	Commercial Mortgage		Home Equity Lines and Loans		Residential Mortgage		Construction		Commercial and Industrial		Consumer		Leases		Total
(dollars in thousands)	Commercial Mortgage		Home Equity Lines and Loans		Residential Mortgage		Construction		Commercial and Industrial		Consumer		Leases		Total
Carrying value of loans and leases:
Individually evaluated for impairment	$	1,345	$	1,902	$	4,418	$	—	$	1,186	$	27	$	—	$	8,878
Collectively evaluated for impairment	1,120,982		181,381		356,517		128,266		588,118		35,119		68,035		2,478,418
Total	$	1,122,327	$	183,283	$	360,935	$	128,266	$	589,304	$	35,146	$	68,035	$	2,487,296

The following tables detail the allocation of the Allowance for acquired portfolio loans and leases by portfolio segment based on the methodology used to evaluate the loans and leases for impairment as of December 31, 2018 and December 31, 2017:



As of December 31, 2018	Commercial Mortgage		Home Equity Lines and Loans		Residential Mortgage		Construction		Commercial and Industrial		Consumer		Leases		Total
(dollars in thousands)	Commercial Mortgage		Home Equity Lines and Loans		Residential Mortgage		Construction		Commercial and Industrial		Consumer		Leases		Total
Allowance on loans and leases:
Individually evaluated for impairment	$	—	$	—	$	97	$	—	$	—	$	—	$	—	$	97
Collectively evaluated for impairment	—		—		—		—		—		—		—		—
Purchased credit-impaired⁽¹⁾	—		—		—		—		—		—		—		—
Total	$	—	$	—	$	97	$	—	$	—	$	—	$	—	$	97

⁽¹⁾Purchased credit-impaired loans are evaluated for impairment on an individual basis.



As of December 31, 2017	Commercial Mortgage		Home Equity Lines and Loans		Residential Mortgage		Construction		Commercial and Industrial		Consumer		Leases		Total
(dollars in thousands)	Commercial Mortgage		Home Equity Lines and Loans		Residential Mortgage		Construction		Commercial and Industrial		Consumer		Leases		Total
Allowance on loans and leases:
Individually evaluated for impairment	$	—	$	—	$	50	$	—	$	—	$	—	$	—	$	50
Collectively evaluated for impairment	—		—		—		—		—		—		—		—
Purchased credit-impaired⁽¹⁾	—		—		—		—		—		—		—		—
Total	$	—	$	—	$	50	$	—	$	—	$	—	$	—	$	50

⁽¹⁾Purchased credit-impaired loans are evaluated for impairment on an individual basis.

The following tables detail the carrying value for acquired portfolio loans and leases by portfolio segment based on the methodology used to evaluate the loans and leases for impairment as of December 31, 2018 and December 31, 2017:



As of December 31, 2018	Commercial Mortgage		Home Equity Lines and Loans		Residential Mortgage		Construction		Commercial and Industrial		Consumer		Leases		Total
(dollars in thousands)	Commercial Mortgage		Home Equity Lines and Loans		Residential Mortgage		Construction		Commercial and Industrial		Consumer		Leases		Total
Carrying value of loans and leases:
Individually evaluated for impairment	$	2,134	$	26	$	1,502	$	—	$	315	$	63	$	—	$	4,040
Collectively evaluated for impairment	319,169		25,307		81,831		4,081		69,550		2,652		22,969		525,559
Purchased credit-impaired⁽¹⁾	8,311		512		—		2,405		1,076		—		—		12,304
Total	$	329,614	$	25,845	$	83,333	$	6,486	$	70,941	$	2,715	$	22,969	$	541,903

⁽¹⁾Purchased credit-impaired loans are evaluated for impairment on an individual basis.



As of December 31, 2017	Commercial Mortgage		Home Equity Lines and Loans		Residential Mortgage		Construction		Commercial and Industrial		Consumer		Leases		Total
(dollars in thousands)	Commercial Mortgage		Home Equity Lines and Loans		Residential Mortgage		Construction		Commercial and Industrial		Consumer		Leases		Total
Carrying value of loans and leases:
Individually evaluated for impairment	$	783	$	260	$	3,308	$	—	$	711	$	—	$	—	$	5,062
Collectively evaluated for impairment	382,843		34,223		94,643		75,822		124,747		3,007		47,366		762,651
Purchased credit-impaired⁽¹⁾	17,424		509		—		8,366		4,550		—		—		30,849
Total	$	401,050	$	34,992	$	97,951	$	84,188	$	130,008	$	3,007	$	47,366	$	798,562

⁽¹⁾Purchased credit-impaired loans are evaluated for impairment on an individual basis.

s part of the process of determining the Allowance for the different segments of the loan and lease portfolio, Management considers certain credit quality indicators. Periodic reviews of the individual loans are performed by both in-house staff as well as external loan reviewers. The result of these reviews is reflected in the risk grade assigned to each loan. These internally assigned grades are as follows:


•	Pass – Loans considered satisfactory with no indications of deterioration.


•	Special mention - Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

•

Substandard - Loans classified as substandard are inadequately protected by the current net worth and payment capacity of the obligor or of the collateral pledged, if any. Substandard loans have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.


•	Doubtful - Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

The following tables detail the carrying value of all portfolio loans and leases by portfolio segment based on the credit quality indicators used to determine the Allowance as of December 31, 2018 and December 31, 2017:



	Credit Risk Profile by Internally Assigned Grade
As of December 31, 2018
(dollars in thousands)	Pass		Special Mention		Substandard		Doubtful		Total
Commercial mortgage	$	1,635,068	$	631	$	20,639	$	1,098	$	1,657,436
Home equity loans and lines	203,037		—		4,314		—		207,351
Residential	490,789		—		3,566		—		494,355
Construction	171,353		938		8,787		—		181,078
Commercial & Industrial	684,444		2,737		8,402		1		695,584
Consumer	46,588		—		226		—		46,814
Leases	143,561		—		975		—		144,536
Total	$	3,374,840	$	4,306	$	46,909	$	1,099	$	3,427,154



	Credit Risk Profile by Internally Assigned Grade
As of December 31, 2017
(dollars in thousands)	Pass		Special Mention		Substandard		Doubtful		Total
Commercial mortgage	$	1,490,862	$	13,448	$	18,194	$	873	$	1,523,377
Home equity loans and lines	216,794		—		1,481		—		218,275
Residential	454,469		—		4,417		—		458,886
Construction	193,227		3,902		15,325		—		212,454
Commercial & Industrial	711,145		889		6,013		1,265		719,312
Consumer	38,153		—		—		—		38,153
Leases	115,298		—		103		—		115,401
Total	$	3,219,948	$	18,239	$	45,533	$	2,138	$	3,285,858

The following tables detail the carrying value of originated portfolio loans and leases by portfolio segment based on the credit quality indicators used to determine the Allowance as of December 31, 2018 and December 31, 2017:



	Credit Risk Profile by Internally Assigned Grade
As of December 31, 2018
(dollars in thousands)	Pass		Special Mention		Substandard		Doubtful		Total
Commercial mortgage	$	1,321,973	$	631	$	5,218	$	—	$	1,327,822
Home equity loans and lines	177,916		—		3,590		—		181,506
Residential	408,095		—		2,927		—		411,022
Construction	167,272		938		6,382		—		174,592
Commercial & Industrial	615,817		2,511		6,314		1		624,643
Consumer	43,936		—		163		—		44,099
Leases	121,175		—		392		—		121,567
Total	$	2,856,184	$	4,080	$	24,986	$	1	$	2,885,251



	Credit Risk Profile by Internally Assigned Grade
As of December 31, 2017
(dollars in thousands)	Pass		Special Mention		Substandard		Doubtful		Total
Commercial mortgage	$	1,114,171	$	—	$	8,156	$	—	$	1,122,327
Home equity loans and lines	182,062		—		1,221		—		183,283
Residential	359,430		—		1,505		—		360,935
Construction	126,260		—		2,006		—		128,266
Commercial & Industrial	586,896		664		1,389		355		589,304
Consumer	35,146		—		—		—		35,146
Leases	67,932		—		103		—		68,035
Total	$	2,471,897	$	664	$	14,380	$	355	$	2,487,296

The following tables detail the carrying value of acquired portfolio loans and leases by portfolio segment based on the credit quality indicators used to determine the Allowance as of December 31, 2018 and December 31, 2017:



	Credit Risk Profile by Internally Assigned Grade
As of December 31, 2018
(dollars in thousands)	Pass		Special Mention		Substandard		Doubtful		Total
Commercial mortgage	$	313,095	$	—	$	15,421	$	1,098	$	329,614
Home equity loans and lines	25,121		—		724		—		25,845
Residential	82,694		—		639		—		83,333
Construction	4,081		—		2,405		—		6,486
Commercial & Industrial	68,627		226		2,088		—		70,941
Consumer	2,652		—		63		—		2,715
Leases	22,386		—		583		—		22,969
Total	$	518,656	$	226	$	21,923	$	1,098	$	541,903



	Credit Risk Profile by Internally Assigned Grade
As of December 31, 2017
(dollars in thousands)	Pass		Special Mention		Substandard		Doubtful		Total
Commercial mortgage	$	376,691	$	13,448	$	10,038	$	873	$	401,050
Home equity loans and lines	34,732		—		260		—		34,992
Residential	95,039		—		2,912		—		97,951
Construction	66,967		3,902		13,319		—		84,188
Commercial & Industrial	124,249		225		4,624		910		130,008
Consumer	3,007		—		—		—		3,007
Leases	47,366		—		—		—		47,366
Total	$	748,051	$	17,575	$	31,153	$	1,783	$	798,562

G. Troubled Debt Restructurings (“TDRs”)

The restructuring of a loan is considered a “troubled debt restructuring” if both of the following conditions are met: (i) the borrower is experiencing financial difficulties, and (ii) the creditor has granted a concession. The most common concessions granted include one or more modifications to the terms of the debt, such as (a) a reduction in the interest rate for the remaining life of the debt, (b) an extension of the maturity date at an interest rate lower than the current market rate for new debt with similar risk, (c) a temporary period of interest-only payments, (d) a reduction in the contractual payment amount for either a short period or remaining term of the loan, and (e) for leases, a reduced lease payment. A less common concession granted is the forgiveness of a portion of the principal.

The determination of whether a borrower is experiencing financial difficulties takes into account not only the current financial condition of the borrower, but also the potential financial condition of the borrower, were a concession not granted. Similarly, the determination of whether a concession has been granted is very subjective in nature. For example, simply extending the term of a loan at its original interest rate or even at a higher interest rate could be interpreted as a concession unless the borrower could readily obtain similar credit terms from a different lender.

The following table presents the balance of TDRs as of the indicated dates:



(dollars in thousands)	December 31, 2018		December 31, 2017
TDRs included in nonperforming loans and leases	$	1,217	$	3,289
TDRs in compliance with modified terms	9,745		5,800
Total TDRs	$	10,962	$	9,089

The following table presents information regarding loans and leases categorized as TDRs for modifications made during the year ended December 31, 2018:



	For the Year Ended December 31, 2018
(dollars in thousands)	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial mortgage	1	$	4,439	$	4,439
Home equity lines and loans	3	961		961
Residential	6	620		640
Commercial and industrial	2	156		156
Consumer	1	20		20
Leases	4	173		173
Total	17	$	6,369	$	6,389

The following table presents information regarding the types of loan and lease modifications made for the year ended December 31, 2018:



	Number of Contracts
	Loan Term Extension	Interest Rate Change and Term Extension	Interest Rate Change and/or Interest-Only Period	Contractual Payment Reduction (Leases only)	Temporary Payment Deferral
Commercial mortgage	1	—	—	—	—
Home equity lines and loans	—	3	—	—	—
Residential	2	1	—	—	3
Commercial and industrial	1	1	—	—	—
Consumer	—	—	—	—	1
Leases	—	—	—	4	—
Total	4	5	—	4	4

The following table presents information regarding loans and leases categorized as TDRs for modifications made during the year ended December 31, 2017:



	For the Year Ended December 31, 2017
(dollars in thousands)	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Residential	3	$	432	$	432
Home equity lines and loans	3	582		582
Leases	4	100		100
Total	10	$	1,114	$	1,114

The following table presents information regarding the types of loan and lease modifications made for the year ended December 31, 2017:



	Number of Contracts
	Loan Term Extension	Interest Rate Change and Term Extension	Interest Rate Change and/or Interest-Only Period	Contractual Payment Reduction (Leases only)	Temporary Payment Deferral
Residential	1	1	1	—	—
Home equity lines and loans	—	—	3	—	—
Leases	—	—	—	4	—
Total	1	1	4	4	—

During the year ended December 31, 2018, one home equity loan and one lease with principal balances of $25 thousand and $49 thousand, respectively, which had been previously modified to troubled debt restructuring, defaulted and were charged off.

H. Impaired Loans

The following tables detail the recorded investment and principal balance of impaired loans by portfolio segment, their related allowance for loan and lease losses and interest income recognized for the year ended December 31, 2018, 2017 and 2016 (purchased credit-impaired loans are not included in the tables):



As of or for the Year Ended December 31, 2018	Recorded Investment⁽²⁾		Principal Balance		Related Allowance		Average Principal Balance		Interest Income Recognized		Cash-Basis Interest Income Recognized
(dollars in thousands)	Recorded Investment⁽²⁾		Principal Balance		Related Allowance		Average Principal Balance		Interest Income Recognized		Cash-Basis Interest Income Recognized
Impaired loans with related allowance:
Home equity lines and loans	$	1,280	$	1,280	$	162	$	640	$	27	$	—
Residential mortgage	1,966		1,966		272		1,983		94		—
Consumer	50		50		28		56		4		—
Total	$	3,296	$	3,296	$	462	$	2,679	$	125	$	—
Impaired loans⁽¹⁾ without related allowance:
Commercial mortgage	$	7,007	$	7,264	$	—	$	7,010	$	320	$	—
Home equity lines and loans	3,718		3,724		—		3,537		67		—
Residential mortgage	4,641		4,728		—		4,750		133		—
Commercial and industrial	2,629		3,803		—		3,349		126		—
Consumer	83		86		—		100		3		—
Total	$	18,078	$	19,605	$	—	$	18,746	$	649	$	—
Grand total	$	21,374	$	22,901	$	462	$	21,425	$	774	$	—

(1) The table above does not include the recorded investment of $1.2 million of impaired leases without a related allowance for loan and lease losses.

(2) Recorded investment equals principal balance, net of deferred origination costs/fees and loan marks, less partial charge-offs and interest payments on non-performing loans that have been applied to principal.



As of or for the Year Ended December 31, 2017	Recorded Investment⁽²⁾		Principal Balance		Related Allowance		Average Principal Balance		Interest Income Recognized		Cash-Basis Interest Income Recognized
(dollars in thousands)	Recorded Investment⁽²⁾		Principal Balance		Related Allowance		Average Principal Balance		Interest Income Recognized		Cash-Basis Interest Income Recognized
Impaired loans with related allowance:
Home equity lines and loans	$	577	$	577	$	19	$	232	$	7	$	—
Residential mortgage	2,436		2,436		230		2,467		127		—
Commercial and industrial	18		18		5		19		1		—
Consumer	27		27		4		28		1		—
Total	$	3,058	$	3,058	$	258	$	2,746	$	136	$	—
Impaired loans⁽¹⁾ without related allowance:
Commercial mortgage	$	2,128	$	2,218	$	—	$	2,205	$	85	$	—
Home equity lines and loans	1,585		1,645		—		1,636		38		—
Residential mortgage	5,290		5,529		—		4,994		191		—
Commercial and industrial	1,879		3,613		—		2,079		35		—
Total	$	10,882	$	13,005	$	—	$	10,914	$	349	$	—
Grand total	$	13,940	$	16,063	$	258	$	13,660	$	485	$	—

(1) The table above does not include the recorded investment of $272 thousand of impaired leases without a related allowance for loan and lease losses.



As of or for the Year Ended December 31, 2016	Recorded Investment⁽²⁾		Principal Balance		Related Allowance		Average Principal Balance		Interest Income Recognized		Cash-Basis Interest Income Recognized
(dollars in thousands)	Recorded Investment⁽²⁾		Principal Balance		Related Allowance		Average Principal Balance		Interest Income Recognized		Cash-Basis Interest Income Recognized
Impaired loans with related allowance:
Residential mortgage	$	622	$	622	$	73	$	639	$	27	$	—
Commercial and industrial	84		84		5		103		5		—
Consumer	31		31		8		33		2		—
Total	$	737	$	737	$	86	$	775	$	34	$	—
Impaired loans⁽¹⁾ without related allowance:
Commercial mortgage	$	1,577	$	1,577	$	—	$	1,583	$	70	$	—
Home equity lines and loans	2,354		2,778		—		2,833		25		—
Residential mortgage	6,644		6,970		—		7,544		276		—
Commercial and industrial	2,862		3,692				8,362		146		—
Total	$	13,437	$	15,017	$	—	$	20,322	$	517	$	—
Grand total	$	14,174	$	15,754	$	86	$	21,097	$	551	$	—

(1) The table above does not include the recorded investment of $240 thousand of impaired leases without a related allowance for loan and lease losses

I. Loan Mark

Loans acquired in mergers and acquisitions are recorded at fair value as of the date of the transaction. This adjustment to the acquired principal amount is referred to as the “Loan Mark”. With the exception of purchased credit impaired loans, for which the Loan Mark is accounted under ASC 310-30, the Loan Mark is amortized or accreted as an adjustment to yield over the lives of the loans.

The following tables detail, for acquired loans, the outstanding principal, remaining loan mark, and recorded investment, by portfolio segment, as of the dates indicated:



	As of December 31, 2018
(dollars in thousands)	Outstanding Principal		Remaining Loan Mark			Recorded Investment
Commercial mortgage	$	339,241	$	(9,627	)	$	329,614
Home equity lines and loans	28,212		(2,367		)	25,845
Residential mortgage	86,111		(2,778		)	83,333
Construction	6,780		(294		)	6,486
Commercial and industrial	72,948		(2,007		)	70,941
Consumer	2,828		(113		)	2,715
Leases	23,695		(726		)	22,969
Total	$	559,815	$	(17,912	)	$	541,903



	As of December 31, 2017
(dollars in thousands)	Outstanding Principal		Remaining Loan Mark			Recorded Investment
Commercial mortgage	$	412,263	$	(11,213	)	$	401,050
Home equity lines and loans	37,944		(2,952		)	34,992
Residential mortgage	101,523		(3,572		)	97,951
Construction	86,081		(1,893		)	84,188
Commercial and industrial	141,960		(11,952		)	130,008
Consumer	3,051		(44		)	3,007
Leases	50,530		(3,164		)	47,366
Total	$	833,352	$	(34,790	)	$	798,562

- Definition

The entire disclosure for claims held for amounts due a entity, excluding financing receivables. Examples include, but are not limited to, trade accounts receivables, notes receivables, loans receivables. Includes disclosure for allowance for credit losses.

+ References + Details