Loans and Leases

Summary of Major Loan and Lease Categories



	At March 31, 2016
(Dollars in thousands)	Originated			Acquired		Total
Commercial, financial and agricultural	$	486,112		$	21,207	$	507,319
Real estate-commercial	760,492			120,928		881,420
Real estate-construction	90,567			2,004		92,571
Real estate-residential secured for business purpose	103,591			114,673		218,264
Real estate-residential secured for personal purpose	185,482			3,227		188,709
Real estate-home equity secured for personal purpose	129,907			10,831		140,738
Loans to individuals	28,140			281		28,421
Lease financings	125,814			—		125,814
Total loans and leases held for investment, net of deferred income	$	1,910,105		$	273,151	$	2,183,256
Unearned lease income, included in the above table	$	(13,793	)	$	—	$	(13,793	)
Net deferred costs, included in the above table	4,568			—		4,568
Overdraft deposits included in the above table	58			—		58



	At December 31, 2015
(Dollars in thousands)	Originated			Acquired		Total
Commercial, financial and agricultural	$	479,980		$	24,535	$	504,515
Real estate-commercial	759,342			126,550		885,892
Real estate-construction	91,904			4,637		96,541
Real estate-residential secured for business purpose	94,280			124,503		218,783
Real estate-residential secured for personal purpose	177,850			3,305		181,155
Real estate-home equity secured for personal purpose	125,361			11,594		136,955
Loans to individuals	29,406			326		29,732
Lease financings	125,440			—		125,440
Total loans and leases held for investment, net of deferred income	$	1,883,563		$	295,450	$	2,179,013
Unearned lease income, included in the above table	$	(13,829	)	$	—	$	(13,829	)
Net deferred costs, included in the above table	4,244			—		4,244
Overdraft deposits included in the above table	35			—		35

Overdraft deposits are re-classified as loans and are included in the total loans and leases on the balance sheet.

The carrying amount of acquired loans at March 31, 2016 totaled $273.2 million, including $1.3 million of loans acquired with deteriorated credit quality, or acquired credit impaired loans from the Valley Green Bank acquisition. Acquired credit impaired loans are accounted for in accordance with Accounting Standards Codification (ASC) Topic 310-30.

The outstanding principal balance and carrying amount for acquired credit impaired loans at March 31, 2016 and December 31, 2015 were as follows:



(Dollars in thousands)	At March 31, 2016		At December 31, 2015
Outstanding principal balance	$	3,186	$	3,551
Carrying amount	1,267		1,253
Allowance for loan losses	8		8

The following table presents the changes in accretable yield on acquired credit impaired loans:



(Dollars in thousands)	Three Months Ended March 31, 2016
Beginning of period	$	144
Reclassification from nonaccretable difference	46
Accretable yield amortized to interest income	(74		)
End of period	$	116

Age Analysis of Past Due Loans and Leases

The following presents, by class of loans and leases, an aging of past due loans and leases, loans and leases which are current and the recorded investment in loans and leases 90 days or more past due which are accruing interest at March 31, 2016 and December 31, 2015:



(Dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		90 Days or more Past Due		Total Past Due		Current		Acquired Credit Impaired		Total Loans and Leases Held for Investment		Recorded Investment 90 Days or more Past Due and Accruing Interest
At March 31, 2016
Commercial, financial and agricultural	$	130	$	—	$	2,128	$	2,258	$	505,061	$	—	$	507,319	$	—
Real estate—commercial real estate and construction:
Commercial real estate	225		—		912		1,137		879,766		517		881,420		—
Construction	—		—		—		—		92,571		—		92,571		—
Real estate—residential and home equity:
Residential secured for business purpose	3,562		62		887		4,511		213,003		750		218,264		—
Residential secured for personal purpose	673		52		469		1,194		187,515		—		188,709		125
Home equity secured for personal purpose	210		159		483		852		139,886		—		140,738		353
Loans to individuals	289		137		205		631		27,790		—		28,421		205
Lease financings	1,376		413		431		2,220		123,594		—		125,814		10
Total	$	6,465	$	823	$	5,515	$	12,803	$	2,169,186	$	1,267	$	2,183,256	$	693
At December 31, 2015
Commercial, financial and agricultural	$	864	$	298	$	4,279	$	5,441	$	498,757	$	317	$	504,515	$	—
Real estate—commercial real estate and construction:
Commercial real estate	12,103		—		1,102		13,205		872,174		513		885,892		—
Construction	—		—		—		—		96,541		—		96,541		—
Real estate—residential and home equity:
Residential secured for business purpose	1,406		2,356		727		4,489		213,871		423		218,783		—
Residential secured for personal purpose	990		69		309		1,368		179,787		—		181,155		—
Home equity secured for personal purpose	777		52		174		1,003		135,952		—		136,955		—
Loans to individuals	198		97		173		468		29,264		—		29,732		173
Lease financings	1,294		652		646		2,592		122,848		—		125,440		206
Total	$	17,632	$	3,524	$	7,410	$	28,566	$	2,149,194	$	1,253	$	2,179,013	$	379

Non-Performing Loans and Leases

The following presents, by class of loans and leases, non-performing loans and leases at March 31, 2016 and December 31, 2015:



	At March 31, 2016								At December 31, 2015
(Dollars in thousands)	Nonaccrual Loans and Leases*		Accruing Troubled Debt Restructured Loans and Lease Modifications		Loans and Leases 90 Days or more Past Due and Accruing Interest		Total Non- Performing Loans and Leases		Nonaccrual Loans and Leases*		Accruing Troubled Debt Restructured Loans and Lease Modifications		Loans and Leases 90 Days or more Past Due and Accruing Interest		Total Non- Performing Loans and Leases
Commercial, financial and agricultural	$	6,080	$	1,443	$	—	$	7,523	$	6,915	$	1,602	$	—	$	8,517
Real estate—commercial real estate and construction:
Commercial real estate	3,981		2,417		—		6,398		4,314		2,449		—		6,763
Real estate—residential and home equity:
Residential secured for business purpose	2,496		413		—		2,909		1,863		763		—		2,626
Residential secured for personal purpose	375		—		125		500		376		421		—		797
Home equity secured for personal purpose	129		—		353		482		275		—		—		275
Loans to individuals	—		—		205		205		—		—		173		173
Lease financings	421		6		10		437		440		10		206		656
Total	$	13,482	$	4,279	$	693	$	18,454	$	14,183	$	5,245	$	379	$	19,807

* Includes nonaccrual troubled debt restructured loans and lease modifications of $1.5 million and $93 thousand at March 31, 2016 and December 31, 2015, respectively.

Credit Quality Indicators

The following tables present by class, the recorded investment in loans and leases held for investment by credit quality indicator at March 31, 2016 and December 31, 2015.

The Corporation employs a ten (10) grade risk rating system related to the credit quality of commercial loans and residential real estate loans secured for a business purpose of which the first six categories are pass categories (credits not adversely rated). The following is a description of the internal risk ratings and the likelihood of loss related to each risk rating. Loans with risk ratings of one through five are reviewed based on the relationship dollar amount with the borrower: loans with a relationship total of $2.5 million or greater are reviewed quarterly; loans with a relationship balance of less than $2.5 million but greater than $500 thousand are reviewed annually based on the borrower’s fiscal year; loans with a relationship balance of less than $500 thousand are reviewed only if the loan becomes 60 days or more past due. Loans with a risk rating of six are also reviewed based on the relationship dollar amount with the borrower: loans with a relationship balance of $2.0 million or greater are reviewed quarterly; loans with a relationship balance of less than $2.0 million but greater than $500 thousand are reviewed annually; loans with a relationship balance of less than $500 thousand are reviewed only if the loan becomes 60 days or more past due. Loans with a risk rating of seven are reviewed at least quarterly, and as often as monthly, at management’s discretion. Loans with risk ratings of eight through ten are reviewed monthly.


1.	Cash Secured—No credit risk


2.	Fully Secured—Negligible credit risk


3.	Strong—Minimal credit risk


4.	Satisfactory—Nominal credit risk


5.	Acceptable—Moderate credit risk


6.	Pre-Watch—Marginal, but stable credit risk


7.	Special Mention—Potential weakness


8.	Substandard—Well-defined weakness


9.	Doubtful—Collection in-full improbable


10.	Loss—Considered uncollectible

Commercial Credit Exposure Credit Risk by Internally Assigned Grades

The following table presents classifications for originated loans:



(Dollars in thousands)	Commercial, Financial and Agricultural		Real Estate— Commercial		Real Estate— Construction		Real Estate— Residential Secured for Business Purpose		Total
At March 31, 2016
Grade:
1. Cash secured/ 2. Fully secured	$	527	$	—	$	4,902	$	—	$	5,429
3. Strong	17,817		2,998		—		—		20,815
4. Satisfactory	27,198		36,971		450		8		64,627
5. Acceptable	340,778		525,195		76,592		87,621		1,030,186
6. Pre-watch	63,932		125,085		8,245		10,921		208,183
7. Special Mention	8,395		29,977		—		115		38,487
8. Substandard	27,465		40,266		378		4,926		73,035
9. Doubtful	—		—		—		—		—
10.Loss	—		—		—		—		—
Total	$	486,112	$	760,492	$	90,567	$	103,591	$	1,440,762
At December 31, 2015
Grade:
1. Cash secured/ 2. Fully secured	$	968	$	—	$	5,417	$	—	$	6,385
3. Strong	17,328		10,877		—		—		28,205
4. Satisfactory	36,697		36,023		450		9		73,179
5. Acceptable	328,140		530,766		72,630		78,659		1,010,195
6. Pre-watch	61,098		119,117		13,262		7,161		200,638
7. Special Mention	6,074		20,286		—		2,347		28,707
8. Substandard	29,675		42,273		145		6,104		78,197
9. Doubtful	—		—		—		—		—
10.Loss	—		—		—		—		—
Total	$	479,980	$	759,342	$	91,904	$	94,280	$	1,425,506

The following table presents classifications for acquired loans:



(Dollars in thousands)	Commercial, Financial and Agricultural		Real Estate— Commercial		Real Estate— Construction		Real Estate— Residential Secured for Business Purpose		Total
At March 31, 2016
Grade:
1. Cash secured/ 2. Fully secured	$	1,405	$	—	$	—	$	—	$	1,405
3. Strong	—		—		—		—		—
4. Satisfactory	1,163		3,000		—		604		4,767
5. Acceptable	15,557		98,120		2,004		103,018		218,699
6. Pre-watch	2,190		10,757		—		7,794		20,741
7. Special Mention	—		7,407		—		623		8,030
8. Substandard	892		1,644		—		2,634		5,170
9. Doubtful	—		—		—		—		—
10.Loss	—		—		—		—		—
Total	$	21,207	$	120,928	$	2,004	$	114,673	$	258,812
December 31, 2015
Grade:
1. Cash secured/ 2. Fully secured	$	1,411	$	—	$	—	$	—	$	1,411
3. Strong	—		—		—		—		—
4. Satisfactory	1,181		3,561		—		608		5,350
5. Acceptable	18,446		102,122		4,637		113,002		238,207
6. Pre-watch	2,273		10,365		—		8,153		20,791
7. Special Mention	417		8,853		—		367		9,637
8. Substandard	807		1,649		—		2,373		4,829
9. Doubtful	—		—		—		—		—
10.Loss	—		—		—		—		—
Total	$	24,535	$	126,550	$	4,637	$	124,503	$	280,225

Credit Exposure—Real Estate—Residential Secured for Personal Purpose, Real Estate—Home Equity Secured for Personal Purpose, Loans to individuals, Lease Financing Credit Risk Profile by Payment Activity

The Corporation monitors the credit risk profile by payment activity for the following classifications of loans and leases: residential real estate loans secured for a personal purpose, home equity loans secured for a personal purpose, loans to individuals and lease financings. Nonperforming loans and leases are loans past due 90 days or more, loans and leases on nonaccrual of interest and troubled debt restructured loans and lease modifications. Performing loans and leases are reviewed only if the loan becomes 60 days or more past due. Nonperforming loans and leases are reviewed monthly. Performing loans and leases have a nominal to moderate risk of loss. Nonperforming loans and leases are loans or leases with a well-defined weakness and where collection in-full is unlikely.

The following table presents classifications for originated loans:



(Dollars in thousands)	Real Estate— Residential Secured for Personal Purpose		Real Estate— Home Equity Secured for Personal Purpose		Loans to Individuals		Lease Financing		Total
At March 31, 2016
Performing	$	184,982	$	129,425	$	27,935	$	125,377	$	467,719
Nonperforming	500		482		205		437		1,624
Total	$	185,482	$	129,907	$	28,140	$	125,814	$	469,343
At December 31, 2015
Performing	$	177,053	$	125,086	$	29,233	$	124,784	$	456,156
Nonperforming	797		275		173		656		1,901
Total	$	177,850	$	125,361	$	29,406	$	125,440	$	458,057

The following table presents classifications for acquired loans:



(Dollars in thousands)	Real Estate— Residential Secured for Personal Purpose		Real Estate— Home Equity Secured for Personal Purpose		Loans to Individuals		Lease Financing		Total
At March 31, 2016
Performing	$	3,227	$	10,831	$	281	$	—	$	14,339
Nonperforming	—		—		—		—		—
Total	$	3,227	$	10,831	$	281	$	—	$	14,339
At December 31, 2015
Performing	$	3,305	$	11,594	$	326	$	—	$	15,225
Nonperforming	—		—		—		—		—
Total	$	3,305	$	11,594	$	326	$	—	$	15,225

Risks associated with lending activities include, among other things, the impact of changes in interest rates and economic conditions, which may adversely impact the ability of borrowers to repay outstanding loans, and impact the value of the associated collateral.

Commercial, financial and agricultural loans, commercial real estate loans, construction loans and residential real estate loans with a business purpose are generally perceived as having more risk of default than residential real estate loans with a personal purpose and consumer loans. These types of loans involve larger loan balances to a single borrower or groups of related borrowers. Commercial real estate loans may be affected to a greater extent than residential loans by adverse conditions in real estate markets or the economy because commercial real estate borrowers’ ability to repay their loans depends on successful development of their properties and factors affecting residential real estate borrowers.

Commercial, financial and agricultural business loans are typically based on the borrowers’ ability to repay the loans from the cash flow of their businesses. These loans may involve greater risk because the availability of funds to repay each loan depends substantially on the success of the business. In addition, the collateral securing the loans often depreciates over time, is difficult to appraise and liquidate and fluctuates in value based on the success of the business.

Risk of loss on a construction loan depends largely upon whether our initial estimate of the property’s value at completion of construction equals or exceeds the cost of the property construction (including interest). During the construction phase, a number of factors can result in delays and cost overruns. If estimates of value are inaccurate or if actual construction costs exceed estimates, the value of the property securing the loan may be insufficient to ensure full repayment when completed through a permanent loan or by seizure of collateral. Included in real estate-construction is track development financing. Risk factors related to track development financing include the demand for residential housing and the real estate valuation market. When projects move slower than anticipated, the properties may have significantly lower values than when the original underwriting was completed, resulting in lower collateral values to support the loan. Extended time frames also cause the interest carrying cost for a project to be higher than the builder projected, negatively impacting the builder’s profit and cash flow and, therefore, their ability to make principal and interest payments.

Commercial real estate loans and residential real estate loans with a business purpose secured by owner-occupied properties are dependent upon the successful operation of the borrower’s business. If the operating company suffers difficulties in terms of sales volume and/or profitability, the borrower’s ability to repay the loan may be impaired. Loans secured by properties where repayment is dependent upon payment of rent by third party tenants or the sale of the property may be impacted by loss of tenants, lower lease rates needed to attract new tenants or the inability to sell a completed project in a timely fashion and at a profit.

Commercial, financial and agricultural loans, commercial real estate loans, construction loans and residential real estate loans secured for a business purpose are more susceptible to a risk of loss during a downturn in the business cycle. While the Corporation has strict underwriting, review, and monitoring procedures in place, these procedures cannot eliminate all of the risks related to these loans.

The Corporation focuses on both assessing the borrower’s capacity and willingness to repay and on obtaining sufficient collateral. Commercial, financial and agricultural loans are generally secured by the borrower’s assets and by personal guarantees. Commercial real estate and residential real estate loans secured for a business purpose are originated primarily within the Southeastern Pennsylvania market area at conservative loan-to-value ratios and often with a guarantee of the borrowers. Management closely monitors the composition and quality of the total commercial loan portfolio to ensure that any credit concentrations by borrower or industry are closely monitored.

The Corporation originates fixed-rate and adjustable-rate real estate-residential mortgage loans that are secured by the underlying 1-to-4 family residential properties for personal purposes. Credit risk exposure in this area of lending is minimized by the evaluation of the credit worthiness of the borrower, including debt-to-equity ratios, credit scores and adherence to underwriting policies that emphasize conservative loan-to-value ratios of generally no more than 80%. Residential mortgage loans granted in excess of the 80% loan-to-value ratio criterion are generally insured by private mortgage insurance.

In the real estate-home equity loan portfolio secured for a personal purpose, credit exposure is minimized by the evaluation of the creditworthiness of the borrower, including debt-to-equity ratios, credit scores and adherence to the Corporation’s underwriting policies. Combined loan-to-value ratios are generally limited to 80%, but increased to 85% for the Corporation’s strongest profile borrower. Other credit considerations and compensating factors may support higher combined loan-to-value ratios.

Credit risk for consumer loans is controlled by strict adherence to underwriting standards that consider debt-to-income levels and the creditworthiness of the borrower and, if secured, collateral values. These loans are included within the portfolio of loans to individuals.

The primary risks that are involved with lease financing receivables are credit underwriting and borrower industry concentrations. The Corporation has strict underwriting, review, and monitoring procedures in place to mitigate this risk. Risk also lies in the residual value of the underlying equipment. Residual values are subject to judgments as to the value of the underlying equipment that can be affected by changes in economic and market conditions and the financial viability of the residual guarantors and insurers. To the extent not guaranteed or assumed by a third party, or otherwise insured against, the Corporation bears the risk of ownership of the leased assets. This includes the risk that the actual value of the leased assets at the end of the lease term will be less than the residual value. The Corporation greatly reduces this risk primarily by using $1.00 buyout leases, in which the entire cost of the leased equipment is included in the contractual payments, leaving no residual payment at the end of the lease term.

Reserve for Loan and Lease Losses and Recorded Investment in Loans and Leases

The following presents, by portfolio segment, a summary of the activity in the reserve for loan and lease losses, the balance in the reserve for loan and lease losses disaggregated on the basis of impairment method and the recorded investment in loans and leases disaggregated on the basis of impairment method for the three months ended March 31, 2016 and 2015:



(Dollars in thousands)	Commercial, Financial and Agricultural			Real Estate— Commercial and Construction			Real Estate— Residential Secured for Business Purpose			Real Estate— Residential and Home Equity Secured for Personal Purpose			Loans to Individuals			Lease Financings			Unallocated			Total
Three Months Ended March 31, 2016
Reserve for loan and lease losses:
Beginning balance	$	6,418		$	6,572		$	763		$	1,575		$	346		$	1,042		$	912		$	17,628
Charge-offs	(1,481		)	(26		)	(238		)	(46		)	(76		)	(205		)	N/A			(2,072		)
Recoveries	450			7			19			17			33			44			N/A			570
Provision (recovery of provision)	243			(82		)	203			(233		)	53			41			102			327
Recovery of provision for acquired credit impaired loans	—			—			—			(1		)	—			—			—			(1		)
Ending balance	$	5,630		$	6,471		$	747		$	1,312		$	356		$	922		$	1,014		$	16,452
Three Months Ended March 31, 2015
Reserve for loan and lease losses:
Beginning balance	$	6,920		$	8,943		$	763		$	1,124		$	360		$	985		$	1,567		$	20,662
Charge-offs	(300		)	(348		)	—			(31		)	(184		)	(230		)	N/A			(1,093		)
Recoveries	110			65			6			1			48			61			N/A			291
(Recovery of provision) provision	(18		)	988			(101		)	34			141			197			(167		)	1,074
Ending balance	$	6,712		$	9,648		$	668		$	1,128		$	365		$	1,013		$	1,400		$	20,934

N/A – Not applicable



(Dollars in thousands)	Commercial, Financial and Agricultural		Real Estate— Commercial and Construction		Real Estate— Residential Secured for Business Purpose		Real Estate— Residential and Home Equity Secured for Personal Purpose		Loans to Individuals		Lease Financings		Unallocated		Total
At March 31, 2016
Reserve for loan and lease losses:
Ending balance: individually evaluated for impairment	$	151	$	140	$	20	$	30	$	—	$	—	N/A		$	341
Ending balance: collectively evaluated for impairment	5,479		6,323		727		1,282		356		922		1,014		16,103
Ending balance: acquired credit impaired loans evaluated for impairment	—		8		—		—		—		—		—		8
Total ending balance	$	5,630	$	6,471	$	747	$	1,312	$	356	$	922	$	1,014	$	16,452
Loans and leases held for investment:
Ending balance: individually evaluated for impairment	$	12,977	$	29,375	$	3,618	$	504	$	—	$	—			$	46,474
Ending balance: collectively evaluated for impairment	473,135		821,684		99,973		314,885		28,140		125,814				1,863,631
Acquired non-credit impaired loans	21,207		122,415		113,923		14,058		281		—				271,884
Acquired credit impaired loans	—		517		750		—		—		—				1,267
Total ending balance	$	507,319	$	973,991	$	218,264	$	329,447	$	28,421	$	125,814			$	2,183,256
At March 31, 2015
Reserve for loan and lease losses:
Ending balance: individually evaluated for impairment	$	1,004	$	—	$	—	$	—	$	—	$	—	N/A		$	1,004
Ending balance: collectively evaluated for impairment	5,708		9,648		668		1,128		365		1,013		1,400		19,930
Total ending balance	$	6,712	$	9,648	$	668	$	1,128	$	365	$	1,013	$	1,400	$	20,934
Loans and leases held for investment:
Ending balance: individually evaluated for impairment	$	15,124	$	34,380	$	3,239	$	909	$	—	$	—			$	53,652
Ending balance: collectively evaluated for impairment	446,366		700,581		38,658		281,120		29,620		115,958				1,612,303
Acquired non-credit impaired loans	29,418		189,225		140,779		16,461		371		—				376,254
Acquired credit impaired loans	371		578		619		63		—		—				1,631
Total ending balance	$	491,279	$	924,764	$	183,295	$	298,553	$	29,991	$	115,958			$	2,043,840

N/A – Not applicable

Subsequent to the acquisition date, the methods utilized to estimate the required allowance for loan losses for acquired non-impaired loans is similar to originated loans, however, the Corporation records a provision for loan loss only when the required allowance exceeds the remaining unamortized credit mark. The present value of any decreases in expected cash flows after the acquisition date of purchased impaired loans will generally result in an impairment charge recorded as a provision for loan loss, resulting in an increase to the allowance.

Impaired Loans

The following presents, by class of loans, the recorded investment and unpaid principal balance of impaired loans , the amounts of the impaired loans for which there is not an allowance for credit losses and the amounts for which there is an allowance for credit losses at March 31, 2016 and December 31, 2015. The impaired loans exclude loans acquired with deteriorated credit quality.



	At March 31, 2016						At December 31, 2015
(Dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
Impaired loans with no related allowance recorded:
Commercial, financial and agricultural	$	12,677	$	13,921			$	10,337	$	13,318
Real estate—commercial real estate	29,009		29,885				30,088		30,996
Real estate—residential secured for business purpose	3,454		3,710				4,597		4,717
Real estate—residential secured for personal purpose	123		132				545		554
Real estate—home equity secured for personal purpose	129		129				170		170
Total impaired loans with no allowance recorded	$	45,392	$	47,777			$	45,737	$	49,755
Impaired loans with an allowance recorded:
Commercial, financial and agricultural	$	300	$	300	$	151	$	2,544	$	2,544	$	208
Real estate—commercial real estate	366		368		140		—		—		—
Real estate—residential secured for business purpose	164		167		20		295		295		45
Real estate—residential secured for personal purpose	252		252		30		252		252		16
Real estate—home equity secured for personal purpose	—		—		—		105		105		53
Total impaired loans with an allowance recorded	$	1,082	$	1,087	$	341	$	3,196	$	3,196	$	322



	At March 31, 2016						At December 31, 2015
(Dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
Total impaired loans:
Commercial, financial and agricultural	$	12,977	$	14,221	$	151	$	12,881	$	15,862	$	208
Real estate—commercial real estate	29,375		30,253		140		30,088		30,996		—
Real estate—residential secured for business purpose	3,618		3,877		20		4,892		5,012		45
Real estate—residential secured for personal purpose	375		384		30		797		806		16
Real estate—home equity secured for personal purpose	129		129		—		275		275		53
Total impaired loans	$	46,474	$	48,864	$	341	$	48,933	$	52,951	$	322

Impaired loans include nonaccrual loans accruing troubled debt restructured loans and other accruing impaired loans for which it is probable that not all principal and interest payments due will be collectible in accordance with the contractual terms. These loans are individually measured to determine the amount of potential impairment. The loans are reviewed for impairment based on the fair value of the collateral for collateral dependent loans and for certain loans based on discounted cash flows using the loans’ initial effective interest rates. Impaired loans include other accruing impaired loans of $29.1 million and $30.0 million at March 31, 2016 and December 31, 2015, respectively. Specific reserves on other accruing impaired loans were $151 thousand and $186 thousand at March 31, 2016 and December 31, 2015, respectively.

The following presents by class of loans, the average recorded investment in impaired loans and an analysis of interest on impaired loans. A loan may remain on accrual status if it is in the process of collection and is either guaranteed or well secured. Therefore, interest income on accruing impaired loans is recognized using the accrual method.



	Three Months Ended March 31, 2016						Three Months Ended March 31, 2015
(Dollars in thousands)	Average Recorded Investment		Interest Income Recognized*		Additional Interest Income That Would Have Been Recognized Under Original Terms		Average Recorded Investment		Interest Income Recognized*		Additional Interest Income That Would Have Been Recognized Under Original Terms
Commercial, financial and agricultural	$	13,569	$	68	$	95	$	16,094	$	142	$	87
Real estate—commercial real estate	29,212		305		70		29,124		320		83
Real estate—construction	—		—		—		5,748		—		77
Real estate—residential secured for business purpose	4,273		27		47		3,183		29		16
Real estate—residential secured for personal purpose	568		2		4		584		—		13
Real estate—home equity secured for personal purpose	177		—		2		165		—		3
Total	$	47,799	$	402	$	218	$	54,898	$	491	$	279


*	Includes interest income recognized on a cash basis for nonaccrual loans of $7 thousand and $4 thousand for the three months ended March 31, 2016 and 2015, respectively and interest income recognized on the accrual method for accruing impaired loans of $395 thousand and $487 thousand for the three months ended March 31, 2016 and 2015, respectively.

Troubled Debt Restructured Loans

The following presents, by class of loans, information regarding accruing and nonaccrual loans that were restructured:



	Three Months Ended March 31, 2016							Three Months Ended March 31, 2015
(Dollars in thousands)	Number of Loans	Pre- Restructuring Outstanding Recorded Investment		Post- Restructuring Outstanding Recorded Investment		Related Allowance		Number of Loans	Pre- Restructuring Outstanding Recorded Investment		Post- Restructuring Outstanding Recorded Investment		Related Allowance
Accruing Troubled Debt Restructured Loans:
Commercial, financial and agricultural	1	$	1,545	$	1,545	$	—	1	$	143	$	143	$	—
Real estate—residential secured for business purpose	—	—		—		—		1	353		353		—
Total	1	$	1,545	$	1,545	$	—	2	$	496	$	496	$	—
Nonaccrual Troubled Debt Restructured Loans:
Commercial, financial and agricultural	—	$	—	$	—	$	—	1	$	122	$	122	$	—
Total	—	$	—	$	—	$	—	1	$	122	$	122	$	—

The Corporation grants concessions primarily related to extensions of interest-only payment periods and an occasional payment modification. These modifications typically are for a short-term basis up to one year. The goal when restructuring a credit is to establish a reasonable period of time to provide cash flow relief to customers experiencing cash flow difficulties. Accruing troubled debt restructured loans are primarily comprised of loans on which interest is being accrued under the restructured terms, and the loans are current or less than ninety days past due.

The following presents, by class of loans, information regarding the types of concessions granted on accruing and nonaccrual loans that were restructured during the three months ended March 31, 2016 and 2015.



	Temporary Payment Reduction			Amortization Period Extension			Total Concessions Granted
(Dollars in thousands)	No. of Loans	Amount		No. of Loans	Amount		No. of Loans	Amount
Three Months Ended March 31, 2016
Accruing Troubled Debt Restructured Loans:
Commercial, financial and agricultural	—	$	—	1	$	1,545	1	$	1,545
Total	—	$	—	1	$	1,545	1	$	1,545
Nonaccrual Troubled Debt Restructured Loans:
Total	—	$	—	—	$	—	—	$	—
Three Months Ended March 31, 2015
Accruing Troubled Debt Restructured Loans:
Commercial, financial and agricultural	1	$	143	—	$	—	1	$	143
Real estate—residential secured for business purpose	1	353		—	—		1	353
Total	2	$	496	—	$	—	2	$	496
Nonaccrual Troubled Debt Restructured Loans:
Commercial, financial and agricultural	1	$	122	—	$	—	1	$	122
Total	1	$	122	—	$	—	1	$	122

The following presents, by class of loans, information regarding accruing and nonaccrual troubled debt restructured loans, for which there were payment defaults within twelve months of the restructuring date:



	Three Months Ended March 31,
	2016			2015
(Dollars in thousands)	Number of Loans	Recorded Investment		Number of Loans	Recorded Investment
Accruing Troubled Debt Restructured Loans:
Commercial, financial and agricultural	1	$	50	—	$	—
Total	1	$	50	—	$	—
Nonaccrual Troubled Debt Restructured Loans:
Commercial, financial and agricultural	—	$	—	2	$	200
Total	—	$	—	2	$	200

As a result of payment default during the first quarter of 2016, a commercial accruing troubled debt restructured loan totaling $50 thousand was placed on nonaccrual of interest status.

The following presents, by class of loans, information regarding consumer mortgages collateralized by residential real estate property that are in the process of foreclosure at March 31, 2016 and December 31, 2015:



(Dollars in thousands)	At March 31, 2016		At December 31, 2015
Real estate-residential secured for personal purpose	$	313	$	313
Real estate-home equity secured for personal purpose	60		60
Total	$	373	$	373

The Corporation held no foreclosed consumer residential real estate property at March 31, 2016 and December 31, 2015.