Loans and Leases

Summary of Major Loan and Lease Categories



	At December 31, 2017
(Dollars in thousands)	Originated			Acquired		Total
Commercial, financial and agricultural	$	833,100		$	63,111	$	896,211
Real estate-commercial	1,235,681			306,460		1,542,141
Real estate-construction	171,244			4,592		175,836
Real estate-residential secured for business purpose	250,800			91,167		341,967
Real estate-residential secured for personal purpose	260,654			60,920		321,574
Real estate-home equity secured for personal purpose	171,884			12,386		184,270
Loans to individuals	28,156			144		28,300
Lease financings	129,768			—		129,768
Total loans and leases held for investment, net of deferred income	$	3,081,287		$	538,780	$	3,620,067

Unearned lease income, included in the above table	$	(14,243	)	$	—	$	(14,243	)
Net deferred costs, included in the above table	4,669			—		4,669
Overdraft deposits included in the above table	222			—		222



	At December 31, 2016
(Dollars in thousands)	Originated			Acquired		Total
Commercial, financial and agricultural	$	663,221		$	160,045	$	823,266
Real estate-commercial	909,581			465,368		1,374,949
Real estate-construction	142,891			31,953		174,844
Real estate-residential secured for business purpose	151,931			142,137		294,068
Real estate-residential secured for personal purpose	210,377			80,431		290,808
Real estate-home equity secured for personal purpose	147,982			14,857		162,839
Loans to individuals	30,110			263		30,373
Lease financings	134,739			—		134,739
Total loans and leases held for investment, net of deferred income	$	2,390,832		$	895,054	$	3,285,886

Unearned lease income, included in the above table	$	(15,970	)	$	—	$	(15,970	)
Net deferred costs, included in the above table	4,503			—		4,503
Overdraft deposits included in the above table	84			—		84

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 December 31, 2017 totaled $538.8 million, including $424.1 million of loans from the Fox Chase acquisition and $114.7 million from the Valley Green Bank acquisition. At December 31, 2017, loans acquired with deteriorated credit quality, or acquired credit impaired loans, totaled $1.6 million representing $792 thousand from the Fox Chase acquisition and $791 thousand 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 December 31, 2017 and 2016 were as follows:



(Dollars in thousands)	At December 31, 2017		At December 31, 2016
Outstanding principal balance	$	2,325	$	8,993
Carrying amount	1,583		7,352
Allowance for loan losses	—		—

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



	For the Years Ended December 31,
(Dollars in thousands)	2017			2016
Beginning of period	$	50		$	144
Acquisition of credit impaired loans	—			283
Reclassification from nonaccretable discount	891			1,329
Accretable yield amortized to interest income	(926		)	(1,672		)
Disposals	(4		)	(34		)
End of period	$	11		$	50

The Corporation is a lessor of equipment under agreements expiring at various dates through the year 2029. At December 31, 2017 and 2016, the schedule of minimum lease payments receivable is as follows:



	At December 31,
(Dollars in thousands)	2017			2016
Within 1 year	$	53,625		$	56,872
After 1 year through 2 years	41,351			41,931
After 2 years through 3 years	27,411			28,340
After 3 years through 4 years	15,557			16,369
After 4 years through 5 years	5,375			6,753
Thereafter	692			444
Total future minimum lease payments receivable	144,011			150,709
Less: Unearned income	(14,243		)	(15,970		)
Total lease financing receivables, net of unearned income	$	129,768		$	134,739

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 December 31, 2017 and 2016:



(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 December 31, 2017
Commercial, financial and agricultural	$	2,182	$	1,440	$	1,509	$	5,131	$	890,658	$	422	$	896,211	$	—
Real estate—commercial real estate and construction:
Commercial real estate	733		548		1,410		2,691		1,539,094		356		1,542,141		—
Construction	1,970		—		365		2,335		173,501		—		175,836		—
Real estate—residential and home equity:
Residential secured for business purpose	1,651		315		1,355		3,321		338,061		585		341,967		162
Residential secured for personal purpose	4,368		1,118		23		5,509		315,845		220		321,574		—
Home equity secured for personal purpose	1,414		333		464		2,211		182,059		—		184,270		148
Loans to individuals	221		139		195		555		27,745		—		28,300		195
Lease financings	1,143		392		1,855		3,390		126,378		—		129,768		256
Total	$	13,682	$	4,285	$	7,176	$	25,143	$	3,593,341	$	1,583	$	3,620,067	$	761

At December 31, 2016
Commercial, financial and agricultural	$	1,536	$	256	$	1,335	$	3,127	$	819,550	$	589	$	823,266	$	—
Real estate—commercial real estate and construction:
Commercial real estate	1,482		1,560		2,591		5,633		1,363,606		5,710		1,374,949		—
Construction	202		—		—		202		174,642		—		174,844		—
Real estate—residential and home equity:
Residential secured for business purpose	1,390		428		1,539		3,357		289,927		784		294,068		—
Residential secured for personal purpose	3,243		905		879		5,027		285,512		269		290,808		481
Home equity secured for personal purpose	717		142		521		1,380		161,459		—		162,839		171
Loans to individuals	324		95		142		561		29,812		—		30,373		142
Lease financings	1,731		1,418		729		3,878		130,861		—		134,739		193
Total	$	10,625	$	4,804	$	7,736	$	23,165	$	3,255,369	$	7,352	$	3,285,886	$	987

Nonperforming Loans and Leases

The following presents, by class of loans and leases, nonperforming loans and leases at December 31, 2017 and 2016. Nonperforming loans exclude acquired credit impaired loans from Fox Chase and Valley Green.



	At December 31,
	2017								2016
(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 Nonperforming 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 Nonperforming Loans and Leases
Commercial, financial and agricultural	$	4,448	$	921	$	—	$	5,369	$	5,746	$	967	$	—	$	6,713
Real estate—commercial real estate and construction:
Commercial real estate	4,285		10,266		—		14,551		5,651		1,519		—		7,170
Construction	365		—		—		365		—		—		—		—
Real estate—residential and home equity:
Residential secured for business purpose	2,843		206		162		3,211		4,898		766		—		5,664
Residential secured for personal purpose	466		42		—		508		560		—		481		1,041
Home equity secured for personal purpose	511		—		148		659		525		—		171		696
Loans to individuals	—		—		195		195		—		—		142		142
Lease financings	1,599		—		256		1,855		536		—		193		729
Total	$	14,517	$	11,435	$	761	$	26,713	$	17,916	$	3,252	$	987	$	22,155

* Includes nonaccrual troubled debt restructured loans and lease modifications of $2.5 million and $1.8 million at December 31, 2017 and December 31, 2016, respectively.

Accruing troubled debt restructuring loans of $11.4 million includes incremental balances $9.2 million related to one borrower which was classified as troubled debt restructurings as the related loans were granted amortization period extensions during the second quarter of 2017.

Credit Quality Indicators

The following tables present by class, the recorded investment in loans and leases held for investment by credit quality indicator at December 31, 2017 and 2016.

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 a relationship balance of less than $1 million are reviewed on a performance basis, with the primary monitored metrics being delinquency (60 days or more past due) and revolving stagnancy. Loans with relationships greater than $1 million are reviewed at least annually. Loan relationships exceeding $15 million or classified as special mention or substandard are reviewed at least quarterly, or more frequently based on management’s discretion.


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 December 31, 2017
Grade:
1. Cash secured/ 2. Fully secured	$	2,521	$	—	$	20,420	$	—	$	22,941
3. Strong	9,206		1,821		—		—		11,027
4. Satisfactory	30,283		26,950		—		274		57,507
5. Acceptable	593,205		960,258		76,899		215,750		1,846,112
6. Pre-watch	179,990		209,844		72,168		29,738		491,740
7. Special Mention	4,027		12,974		1,392		296		18,689
8. Substandard	13,868		23,834		365		4,742		42,809
9. Doubtful	—		—		—		—		—
10. Loss	—		—		—		—		—
Total	$	833,100	$	1,235,681	$	171,244	$	250,800	$	2,490,825

At December 31, 2016
Grade:
1. Cash secured/ 2. Fully secured	$	272	$	—	$	13,714	$	162	$	14,148
3. Strong	14,980		2,045		—		—		17,025
4. Satisfactory	35,529		38,861		—		367		74,757
5. Acceptable	465,675		676,212		110,650		133,716		1,386,253
6. Pre-watch	113,499		128,646		18,213		12,025		272,383
7. Special Mention	8,820		22,439		314		1,199		32,772
8. Substandard	24,446		41,378		—		4,462		70,286
9. Doubtful	—		—		—		—		—
10. Loss	—		—		—		—		—
Total	$	663,221	$	909,581	$	142,891	$	151,931	$	1,867,624

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 December 31, 2017
Grade:
1. Cash secured/ 2. Fully secured	$	1,120	$	—	$	—	$	—	$	1,120
3. Strong	—		—		—		—		—
4. Satisfactory	125		482		—		—		607
5. Acceptable	49,949		183,490		—		73,402		306,841
6. Pre-watch	6,183		98,977		4,592		15,861		125,613
7. Special Mention	1,007		17,028		—		—		18,035
8. Substandard	4,727		6,483		—		1,904		13,114
9. Doubtful	—		—		—		—		—
10. Loss	—		—		—		—		—
Total	$	63,111	$	306,460	$	4,592	$	91,167	$	465,330
At December 31, 2016
Grade:
1. Cash secured/ 2. Fully secured	$	583	$	—	$	—	$	—	$	583
3. Strong	—		—		—		—		—
4. Satisfactory	4,399		1,018		—		—		5,417
5. Acceptable	113,512		282,199		20,565		117,322		533,598
6. Pre-watch	31,697		163,623		11,388		14,405		221,113
7. Special Mention	73		7,705		—		6,245		14,023
8. Substandard	9,781		10,823		—		4,165		24,769
9. Doubtful	—		—		—		—		—
10. Loss	—		—		—		—		—
Total	$	160,045	$	465,368	$	31,953	$	142,137	$	799,503

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.

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 Financings		Total
At December 31, 2017
Performing	$	260,589	$	171,527	$	27,961	$	127,913	$	587,990
Nonperforming	65		357		195		1,855		2,472
Total	$	260,654	$	171,884	$	28,156	$	129,768	$	590,462

At December 31, 2016
Performing	$	210,208	$	147,286	$	29,968	$	134,010	$	521,472
Nonperforming	169		696		142		729		1,736
Total	$	210,377	$	147,982	$	30,110	$	134,739	$	523,208

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 Financings		Total
At December 31, 2017
Performing	$	60,477	$	12,084	$	144	$	—	$	72,705
Nonperforming	443		302		—		—		745
Total	$	60,920	$	12,386	$	144	$	—	$	73,450

At December 31, 2016
Performing	$	79,559	$	14,857	$	263	$	—	$	94,679
Nonperforming	872		—		—		—		872
Total	$	80,431	$	14,857	$	263	$	—	$	95,551

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 itself. 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.

The Corporation originates fixed-rate and adjustable-rate real estate-residential mortgage loans and home equity 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.

Credit risk for direct 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 for the years ended December 31, 2017, 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
For the Year Ended December 31, 2017
Reserve for loan and lease losses:
Beginning balance	$	7,037		$	7,505		$	774		$	993		$	364		$	788		$	38		$	17,499
Charge-offs	(1,030		)	(232		)	(1,370		)	(196		)	(317		)	(3,992		)	N/A			(7,137		)
Recoveries	801			5			54			99			136			206			N/A			1,301
(Recovery of provision) provision	(66		)	2,561			2,204			857			190			4,130			16			9,892
(Recovery of provision) provision for acquired credit impaired loans	—			—			(1		)	1			—			—			—			—
Ending balance	$	6,742		$	9,839		$	1,661		$	1,754		$	373		$	1,132		$	54		$	21,555

For the Year Ended December 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	(4,827		)	(307		)	(522		)	(178		)	(395		)	(759		)	N/A			(6,988		)
Recoveries	1,454			101			71			88			133			191			N/A			2,038
Provision (recovery of provision)	3,992			961			462			(489		)	280			314			(874		)	4,646
Provision (recovery of provision) for acquired credit impaired loans	—			178			—			(3		)	—			—			—			175
Ending balance	$	7,037		$	7,505		$	774		$	993		$	364		$	788		$	38		$	17,499


For the Year Ended December 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	(4,793		)	(1,895		)	(179		)	(279		)	(549		)	(801		)	N/A			(8,496		)
Recoveries	1,032			200			28			10			176			214			N/A			1,660
Provision (recovery of provision)	3,259			(684		)	43			657			359			644			(655		)	3,623
Provision for acquired credit impaired loans	—			8			108			63			—			—			—			179
Ending balance	$	6,418		$	6,572		$	763		$	1,575		$	346		$	1,042		$	912		$	17,628

N/A – Not applicable

During 2017, the Corporation recorded charge-offs of $2.8 million related to $5.0 million of software leases under a vendor referral program. These leases are personally guaranteed by 29 high net worth individuals. During 2017, the lessees stopped making payments due to disputes with the vendor, and Univest Capital, Inc., a subsidiary of the Corporation, filed legal complaints to pursue collection of all amounts owed. A complaint was subsequently filed against Univest Capital Inc. and certain other defendants by one of the lessees in federal court in Texas seeking, among other things, class action certification and a declaration that the contracts and related guarantees are null and void. On September 25, 2017, Univest Capital, Inc. entered into a Release and Settlement Agreement whereby Univest Capital, Inc. received $1.0 million based upon court approval of the Agreement and is eligible to receive up to an additional $1.3 million. Payment of the $1.3 million is subject to the individual guarantor's election of whether or not they will be subject to the Release and Settlement Agreement. It is expected this election process will be completed by March 31, 2018 and related funds are expected to be received by June 30, 2018. If a guarantor elects to be subject to the Release and Settlement Agreement, Univest Capital, Inc. shall receive a payment of $43 thousand per guarantor. If a guarantor elects not to be subject to the Release and Settlement Agreement, Univest Capital, Inc. has the right to pursue collection of the full amount owed, which ranges from $108 thousand to $228 thousand per guarantor, via the normal collection process. As of December 31, 2017, Univest Capital, Inc. has a receivable totaling $1.3 million related to this matter, which is recorded as a non-accruing lease receivable.

The following presents, by portfolio segment, 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 at December 31, 2017 and 2016:



(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 December 31, 2017

Reserve for loan and lease losses:
Ending balance: individually evaluated for impairment	$	31	$	99	$	1	$	—	$	—	$	—	N/A		$	131
Ending balance: collectively evaluated for impairment	6,711		9,740		1,660		1,754		373		1,132		54		21,424
Total ending balance	$	6,742	$	9,839	$	1,661	$	1,754	$	373	$	1,132	$	54	$	21,555

Loans and leases held for investment:
Ending balance: individually evaluated for impairment	$	7,079	$	16,919	$	3,465	$	1,019	$	—	$	1,250			$	29,732
Ending balance: collectively evaluated for impairment	826,021		1,388,048		247,335		431,519		28,156		128,518				3,049,597
Loans measured at fair value	—		1,958		—		—		—		—				1,958
Acquired non-credit impaired loans	62,689		310,696		90,582		73,086		144		—				537,197
Acquired credit impaired loans	422		356		585		220		—		—				1,583
Total ending balance	$	896,211	$	1,717,977	$	341,967	$	505,844	$	28,300	$	129,768			$	3,620,067

At December 31, 2016


Reserve for loan and lease losses:
Ending balance: individually evaluated for impairment	$	19	$	25	$	191	$	—	$	—	$	—	N/A		$	235
Ending balance: collectively evaluated for impairment	7,018		7,480		583		993		364		788		38		17,264
Total ending balance	$	7,037	$	7,505	$	774	$	993	$	364	$	788	$	38	$	17,499


Loans and leases held for investment:
Ending balance: individually evaluated for impairment	$	11,077	$	25,066	$	6,687	$	1,085	$	—	$	—			$	43,915
Ending balance: collectively evaluated for impairment	652,144		1,027,406		145,244		357,274		30,110		134,739				2,346,917
Loans measured at fair value	—		2,138		—		—		—		—				2,138
Acquired non-credit impaired loans	159,456		489,473		141,353		95,019		263		—				885,564
Acquired credit impaired loans	589		5,710		784		269		—		—				7,352
Total ending balance	$	823,266	$	1,549,793	$	294,068	$	453,647	$	30,373	$	134,739			$	3,285,886

N/A – Not applicable

The Corporation records a provision for loan loss for the acquired non-impaired loans only when additional deterioration of the portfolio is identified over the projections utilized in the initial fair value analysis. After the acquisition measurement period, the present value of any decreases in expected cash flows of acquired credit 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 (excludes Lease Financings)

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 a reserve for credit losses and the amounts for which there is a reserve for credit losses at December 31, 2017 and 2016. The impaired loans exclude acquired credit impaired loans.



	At December 31,
	2017						2016
(Dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Reserve		Recorded Investment		Unpaid Principal Balance		Related Reserve
Impaired loans with no related reserve recorded:
Commercial, financial and agricultural	$	7,019	$	8,301			$	10,911	$	12,561
Real estate—commercial real estate	15,621		16,507				24,469		25,342
Real estate—construction	365		365				—		—
Real estate—residential secured for business purpose	3,430		4,620				5,704		6,253
Real estate—residential secured for personal purpose	508		566				560		594
Real estate—home equity secured for personal purpose	511		523				525		528
Total impaired loans with no related reserve recorded	$	27,454	$	30,882			$	42,169	$	45,278

Impaired loans with a reserve recorded:
Commercial, financial and agricultural	$	60	$	60	$	31	$	166	$	166	$	19
Real estate—commercial real estate	933		933		99		597		597		25
Real estate—residential secured for business purpose	35		37		1		983		1,105		191
Total impaired loans with a reserve recorded	$	1,028	$	1,030	$	131	$	1,746	$	1,868	$	235

Total impaired loans:
Commercial, financial and agricultural	$	7,079	$	8,361	$	31	$	11,077	$	12,727	$	19
Real estate—commercial real estate	16,554		17,440		99		25,066		25,939		25
Real estate—construction	365		365		—		—		—		—
Real estate—residential secured for business purpose	3,465		4,657		1		6,687		7,358		191
Real estate—residential secured for personal purpose	508		566		—		560		594		—
Real estate—home equity secured for personal purpose	511		523		—		525		528		—
Total impaired loans	$	28,482	$	31,912	$	131	$	43,915	$	47,146	$	235

Impaired loans includes 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 included other accruing impaired loans of $4.1 million and $23.3 million at December 31, 2017 and 2016, respectively. Specific reserves on other accruing impaired loans were $99 thousand and $84 thousand at December 31, 2017 and 2016, 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.



	For the Years Ended December 31,
	2017						2016						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		Average Recorded Investment		Interest Income Recognized*		Additional Interest Income That Would Have Been Recognized Under Original Terms
Loans held for sale	$	—	$	—	$	—	$	—	$	—	$	—	$	1,832	$	—	$	110
Loans held for investment:
Commercial, financial and agricultural	10,456		200		347		13,126		258		381		15,383		423		481
Real estate—commercial real estate	20,054		792		289		26,698		1,106		272		23,692		996		330
Real estate—construction	253		—		19		—		—		—		3,164		—		162
Real estate—residential secured for business purpose	3,801		65		169		4,084		67		207		3,805		144		161
Real estate—residential secured for personal purpose	614		3		39		498		2		24		729		2		43
Real estate—home equity secured for personal purpose	406		—		26		440		—		25		184		—		11
Total	$	35,584	$	1,060	$	889	$	44,846	$	1,433	$	909	$	48,789	$	1,565	$	1,298


*	Includes interest income recognized on a cash basis for nonaccrual loans of $4 thousand, $8 thousand and $37 thousand for the years ended December 31, 2017, 2016 and 2015, respectively and interest income recognized on the accrual method for accruing impaired loans of $1.1 million, $1.4 million and $1.5 million for the years ended December 31, 2017, 2016 and 2015, respectively.

Any income accrued on 1-to-4 family residential properties after the loan becomes 90 days past due, which is not placed on non-accrual, is held in a reserve for uncollected interest. The reserve for uncollected interest was $3 thousand and $10 thousand at December 31, 2017 and 2016, respectively.

The Bank maintains a reserve in other liabilities for off-balance sheet credit exposures that currently are unfunded. The reserve for these off-balance sheet credits was $390 thousand and $385 thousand at December 31, 2017 and 2016, respectively.

Impaired Leases

The Corporation had impaired leases of $1.3 million with $0 thousand related reserve at December 31, 2017. The Corporation had no impaired leases at December 31, 2016. See discussion in Reserve for Loan and Lease Losses and Recorded Investment in Loans and Leases.

Troubled Debt Restructured Loans

The following presents, by class of loans, information regarding accruing and nonaccrual loans that were restructured during the years ended December 31, 2017 and 2016:



	For the Years Ended December 31,
	2017							2016
(Dollars in thousands)	Number of Loans	Pre- Restructuring Outstanding Recorded Investment		Post- Restructuring Outstanding Recorded Investment		Related Reserve		Number of Loans	Pre- Restructuring Outstanding Recorded Investment		Post- Restructuring Outstanding Recorded Investment		Related Reserve
Accruing Troubled Debt Restructured Loans:
Commercial, financial and agricultural	—	$	—	$	—	$	—	1	$	1,545	$	1,545	$	—
Real estate—commercial real estate	3	9,206		9,206		—		—	—		—		—
Real estate—residential secured for business purpose	—	—		—		—		1	415		415		—
Total	3	$	9,206	$	9,206	$	—	2	$	1,960	$	1,960	$	—

Nonaccrual Troubled Debt Restructured Loans:
Commercial, financial and agricultural	2	$	1,127	$	1,127	$	—	—	$	—	$	—	$	—
Real estate—commercial real estate	1	328		328		—		—	—		—		—
Real estate—residential secured for business purpose	—	—		—		—		1	313		312		—
Real estate—residential secured for personal purpose	—	—		—		—		1	34		34		—
Real estate—home equity secured for personal purpose	—	—		—		—		1	152		152		—
Total	3	$	1,455	$	1,455	$	—	3	$	499	$	498	$	—

The Corporation grants concessions to existing borrowers primarily related to extensions of interest-only payment periods and an occasional payment modification. These modifications typically are for 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 years ended December 31, 2017 and 2016:



	Interest Only Term Extension			Maturity Date Extension			Amortization Period Extension			Total Concessions Granted
(Dollars in thousands)	No. of Loans	Amount		No. of Loans	Amount		No. of Loans	Amount		No. of Loans	Amount
For the Year Ended December 31, 2017
Accruing Troubled Debt Restructured Loans:
Real estate—commercial real estate	—	$	—	—	$	—	3	$	9,206	3	$	9,206
Total	—	$	—	—	$	—	3	$	9,206	3	$	9,206

Nonaccrual Troubled Debt Restructured Loans:
Commercial, financial and agricultural	—	$	—	—	$	—	2	$	1,127	2	$	1,127
Real estate—commercial real estate	—	—		1	328		—	—		1	328
Total	—	$	—	1	$	328	2	$	1,127	3	$	1,455


For the Year Ended December 31, 2016
Accruing Troubled Debt Restructured Loans:
Commercial, financial and agricultural	—	$	—	—	$	—	1	$	1,545	1	$	1,545
Real estate—residential secured for business purpose	1	415		—	—		—	—		1	415
Total	1	$	415	—	$	—	1	$	1,545	2	$	1,960


Nonaccrual Troubled Debt Restructured Loans:
Real estate—residential secured for business purpose	—	$	—	1	$	312	—	$	—	1	$	312
Real estate—residential secured for personal purpose	—	—		1	34		—	—		1	34
Real estate—home equity secured for personal purpose	—	—		1	152		—	—		1	152
Total	—	$	—	3	$	498	—	$	—	3	$	498

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:



	For the Years Ended December 31,
	2017			2016
(Dollars in thousands)	Number of Loans	Recorded Investment		Number of Loans	Recorded Investment
Accruing Troubled Debt Restructured Loans:
Total	—	$	—	—	$	—
Nonaccrual Troubled Debt Restructured Loans:
Real estate—residential secured for personal purpose	—	$	—	1	$	34
Total	—	$	—	1	$	34

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 December 31, 2017 and 2016:



(Dollars in thousands)	At December 31, 2017		At December 31, 2016
Real estate-residential secured for personal purpose	$	31	$	—
Real estate-home equity secured for personal purpose	—		180
Total	$	31	$	180

The following presents foreclosed residential real estate property included in other real estate owned at December 31, 2017 and 2016.



(Dollars in thousands)	At December 31, 2017		At December 31, 2016
Foreclosed residential real estate	$	80	$	—