LOANS AND LEASES

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



(in thousands)	Originated Loans and Leases		Acquired Loans		Total Loans and Leases
December 31, 2017
Commercial real estate	$	5,174,783	$	3,567,081	$	8,741,864
Commercial and industrial	3,495,247		675,420		4,170,667
Commercial leases	266,720		—		266,720
Other	17,063		—		17,063
Total commercial loans and leases	8,953,813		4,242,501		13,196,314
Direct installment	1,755,713		149,822		1,905,535
Residential mortgages	2,036,226		666,465		2,702,691
Indirect installment	1,448,268		165		1,448,433
Consumer lines of credit	1,151,470		594,323		1,745,793
Total consumer loans	6,391,677		1,410,775		7,802,452
Total loans and leases, net of unearned income	$	15,345,490	$	5,653,276	$	20,998,766
December 31, 2016
Commercial real estate	$	4,095,817	$	1,339,345	$	5,435,162
Commercial and industrial	2,711,886		330,895		3,042,781
Commercial leases	196,636		—		196,636
Other	35,878		—		35,878
Total commercial loans and leases	7,040,217		1,670,240		8,710,457
Direct installment	1,765,257		79,142		1,844,399
Residential mortgages	1,446,776		397,798		1,844,574
Indirect installment	1,196,110		203		1,196,313
Consumer lines of credit	1,099,627		201,573		1,301,200
Total consumer loans	5,507,770		678,716		6,186,486
Total loans and leases, net of unearned income	$	12,547,987	$	2,348,956	$	14,896,943

The loans and leases portfolio categories are comprised of the following:


•	Commercial real estate includes both owner-occupied and non-owner-occupied loans secured by commercial properties;


•	Commercial and industrial includes loans to businesses that are not secured by real estate;


•	Commercial leases consist of leases for new or used equipment;


•	Other is comprised primarily of credit cards and mezzanine loans;


•	Direct installment is comprised of fixed-rate, closed-end consumer loans for personal, family or household use, such as home equity loans and automobile loans;


•	Residential mortgages consist of conventional and jumbo mortgage loans for 1-4 family properties;


•	Indirect installment is comprised of loans originated by approved third parties and underwritten by us, primarily automobile loans; and


•	Consumer lines of credit include home equity lines of credit (HELOC) and consumer lines of credit that are either unsecured or secured by collateral other than home equity.

The loans and leases portfolio consists principally of loans to individuals and small- and medium-sized businesses within our primary market areas of Pennsylvania, eastern Ohio, Maryland, North Carolina, South Carolina and northern West Virginia.

The loans and leases portfolio also contains Regency consumer finance loans to individuals in Pennsylvania, Ohio, Tennessee and Kentucky. Due to the relative size of the Regency consumer finance loan portfolio, these loans are not segregated from other consumer loans. The following table shows certain information relating to the Regency consumer finance loans:



December 31	2017			2016
(dollars in thousands)
Regency consumer finance loans	$	174,916		$	184,687
Percent of total loans and leases	0.8		%	1.2		%

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



December 31	2017			2016
(dollars in thousands)
Commercial construction, acquisition and development loans	$	1,170,175		$	597,617
Percent of total loans and leases	5.6		%	4.0		%
Commercial real estate:
Percent owner-occupied	35.3		%	36.2		%
Percent non-owner-occupied	64.7		%	63.8		%

We have extended credit to certain directors and executive officers and their related interests. These related-party loans were made in the ordinary course of business under normal credit terms and do not involve more than a normal risk of collection. Following is a summary of the activity for these loans to related parties during 2017:



(in thousands)
Balance at beginning of period	$	21,569
New loans	1,171
Repayments	(3,447		)
Other	518
Balance at end of period	$	19,811

Other represents the net change in loan balances resulting from changes in related parties during 2017.

Acquired Loans

All acquired loans were initially recorded at fair value at the acquisition date. Refer to the Acquired Loans section in Note 1, “Summary of Significant Accounting Policies,” for a discussion of ASC 310-20 and ASC 310-30 loans. The outstanding balance and the carrying amount of acquired loans included in the consolidated balance sheets are as follows:



December 31	2017		2016
(in thousands)
Accounted for under ASC 310-30:
Outstanding balance	$	5,176,015	$	2,346,687
Carrying amount	4,834,256		2,015,904
Accounted for under ASC 310-20:
Outstanding balance	835,130		342,015
Carrying amount	812,322		325,784
Total acquired loans:
Outstanding balance	6,011,145		2,688,702
Carrying amount	5,646,578		2,341,688

The outstanding balance is the undiscounted sum of all amounts owed under the loan, including amounts deemed principal, interest, fees, penalties and other, whether or not currently due and whether or not any such amounts have been written or charged-off.

The carrying amount of purchased credit impaired loans included in the table above totaled $1.9 million at December 31, 2017 and $2.8 million at December 31, 2016, representing 0.03% and 0.12% of the carrying amount of total acquired loans as of each date.

The following table provides changes in accretable yield for all acquired loans accounted for under ASC 310-30. Loans accounted for under ASC 310-20 are not included in this table.



Year Ended December 31	2017			2016
(in thousands)
Balance at beginning of period	$	467,070		$	256,120
Acquisitions	444,715			308,312
Reduction due to unexpected early payoffs	(127,949		)	(86,046		)
Reclass from non-accretable difference	155,840			92,823
Disposals/transfers	(3,559		)	(409		)
Other	(658		)	—
Accretion	(226,978		)	(103,730		)
Balance at end of period	$	708,481		$	467,070

Cash flows expected to be collected on acquired loans are estimated quarterly by incorporating several key assumptions similar to the initial estimate of fair value. These key assumptions include probability of default and the amount of actual prepayments after the acquisition date. Prepayments affect the estimated life of the loans and could change the amount of interest income, and possibly principal expected to be collected. In reforecasting future estimated cash flows, credit loss expectations are adjusted as necessary. Improved cash flow expectations for loans or pools are recorded first as a reversal of previously recorded impairment, if any, and then as an increase in prospective yield when all previously recorded impairment has been recaptured. Decreases in expected cash flows are recognized as impairment through a charge to the provision for credit losses and credit to the allowance for credit losses.

During 2017, there was an overall improvement in cash flow expectations which resulted in a net reclassification of $155.8 million from the non-accretable difference to accretable yield. This reclassification was $92.8 million for 2016. The reclassification from the non-accretable difference to the accretable yield results in prospective yield adjustments on the loan pools.

The following table reflects amounts at acquisition for all purchased loans subject to ASC 310-30 (impaired and non-impaired loans with deteriorated credit quality) acquired from YDKN in 2017 based on the fair value as described in Note 3.



(in thousands)	Acquired Impaired Loans			Acquired Performing Loans			Total
Contractually required cash flows at acquisition	$	46,053		$	5,085,712		$	5,131,765
Non-accretable difference (expected losses and foregone interest)	(23,924		)	(406,173		)	(430,097		)
Cash flows expected to be collected at acquisition	22,129			4,679,539			4,701,668
Accretable yield	(3,266		)	(441,449		)	(444,715		)
Fair value of acquired loans at acquisition	$	18,863		$	4,238,090		$	4,256,953

In addition, loans purchased in the YDKN acquisition that were not subject to ASC 310-30 had the following balances at the date of acquisition: fair value of $778.4 million; unpaid principal balance of $791.3 million; and contractual cash flows not expected to be collected of $122.9 million.

Credit Quality

Management monitors the credit quality of our loan portfolio using several performance measures to do so based on payment activity and borrower performance.

Non-performing loans include non-accrual loans and non-performing troubled debt restructurings (TDRs). Past due loans are reviewed on a monthly basis to identify loans for non-accrual status. We place originated loans on non-accrual status and discontinue interest accruals on originated loans generally when principal or interest is due and has remained unpaid for a certain number of days, or when the full amount of principal and interest is due and has remained unpaid for a certain number of days, unless the loan is both well secured and in the process of collection. Commercial loans are placed on non-accrual at 90 days, installment loans are placed on non-accrual at 120 days and residential mortgages and consumer lines of credit are generally placed on non-accrual at 180 days, though we may place a loan on non-accrual prior to these past due thresholds as warranted. When a loan is placed on non-accrual status, all unpaid accrued interest is reversed. Non-accrual loans may not be restored to accrual status until all delinquent principal and interest have been paid and the ultimate ability to collect the remaining principal and interest is reasonably assured. TDRs are loans in which we have granted a concession on the interest rate or the original repayment terms due to the borrower’s financial distress.

Following is a summary of non-performing assets:



December 31	2017			2016
(dollars in thousands)
Non-accrual loans	$	74,635		$	65,479
Troubled debt restructurings	23,481			20,428
Total non-performing loans	98,116			85,907
Other real estate owned (OREO)	40,606			32,490
Total non-performing assets	$	138,722		$	118,397
Asset quality ratios:
Non-performing loans / total loans and leases	0.47		%	0.58		%
Non-performing loans + OREO / total loans and leases + OREO	0.66		%	0.79		%
Non-performing assets / total assets	0.44		%	0.54		%

The carrying value of residential other real estate owned (OREO) held as a result of obtaining physical possession upon completion of a foreclosure or through completion of a deed in lieu of foreclosure amounted to $3.6 million at December 31, 2017. The recorded investment of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process at December 31, 2017 and December 31, 2016 totaled $15.2 million and $12.0 million, respectively.

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



(in thousands)	30-89 Days Past Due		≥ 90 Days Past Due and Still Accruing		Non- Accrual		Total Past Due		Current		Total Loans and Leases
Originated Loans and Leases
December 31, 2017
Commercial real estate	$	8,273	$	1	$	24,773	$	33,047	$	5,141,736	$	5,174,783
Commercial and industrial	8,948		3		17,077		26,028		3,469,219		3,495,247
Commercial leases	1,382		41		1,574		2,997		263,723		266,720
Other	83		153		1,000		1,236		15,827		17,063
Total commercial loans and leases	18,686		198		44,424		63,308		8,890,505		8,953,813
Direct installment	13,192		4,466		8,896		26,554		1,729,159		1,755,713
Residential mortgages	14,096		2,832		5,771		22,699		2,013,527		2,036,226
Indirect installment	10,313		611		2,240		13,164		1,435,104		1,448,268
Consumer lines of credit	5,859		1,014		2,313		9,186		1,142,284		1,151,470
Total consumer loans	43,460		8,923		19,220		71,603		6,320,074		6,391,677
Total originated loans and leases	$	62,146	$	9,121	$	63,644	$	134,911	$	15,210,579	$	15,345,490
December 31, 2016
Commercial real estate	$	8,452	$	1	$	20,114	$	28,567	$	4,067,250	$	4,095,817
Commercial and industrial	16,019		3		24,141		40,163		2,671,723		2,711,886
Commercial leases	973		1		3,429		4,403		192,233		196,636
Other	398		83		1,000		1,481		34,397		35,878
Total commercial loans and leases	25,842		88		48,684		74,614		6,965,603		7,040,217
Direct installment	10,573		4,386		6,484		21,443		1,743,814		1,765,257
Residential mortgages	10,594		3,014		3,316		16,924		1,429,852		1,446,776
Indirect installment	9,312		513		1,983		11,808		1,184,302		1,196,110
Consumer lines of credit	3,529		1,112		1,616		6,257		1,093,370		1,099,627
Total consumer loans	34,008		9,025		13,399		56,432		5,451,338		5,507,770
Total originated loans and leases	$	59,850	$	9,113	$	62,083	$	131,046	$	12,416,941	$	12,547,987



(in thousands)	30-89 Days Past Due		≥ 90 Days Past Due and Still Accruing		Non- Accrual		Total Past Due (1)(2)		Current		(Discount)/ Premium			Total Loans
Acquired Loans
December 31, 2017
Commercial real estate	$	34,928	$	63,092	$	3,975	$	101,995	$	3,657,152	$	(192,066	)	$	3,567,081
Commercial and industrial	3,187		6,452		5,663		15,302		698,265		(38,147		)	675,420
Total commercial loans	38,115		69,544		9,638		117,297		4,355,417		(230,213		)	4,242,501
Direct installment	5,267		2,013		—		7,280		141,386		1,156			149,822
Residential mortgages	17,191		15,139		—		32,330		675,499		(41,364		)	666,465
Indirect installment	—		1		—		1		10		154			165
Consumer lines of credit	6,353		3,253		1,353		10,959		596,298		(12,934		)	594,323
Total consumer loans	28,811		20,406		1,353		50,570		1,413,193		(52,988		)	1,410,775
Total acquired loans	$	66,926	$	89,950	$	10,991	$	167,867	$	5,768,610	$	(283,201	)	$	5,653,276
December 31, 2016
Commercial real estate	$	9,501	$	23,890	$	949	$	34,340	$	1,384,752	$	(79,747	)	$	1,339,345
Commercial and industrial	1,789		2,942		2,111		6,842		353,494		(29,441		)	330,895
Total commercial loans	11,290		26,832		3,060		41,182		1,738,246		(109,188		)	1,670,240
Direct installment	2,317		1,344		—		3,661		73,479		2,002			79,142
Residential mortgages	8,428		10,816		—		19,244		416,561		(38,007		)	397,798
Indirect installment	19		4		—		23		96		84			203
Consumer lines of credit	2,156		1,528		336		4,020		201,958		(4,405		)	201,573
Total consumer loans	12,920		13,692		336		26,948		692,094		(40,326		)	678,716
Total acquired loans	$	24,210	$	40,524	$	3,396	$	68,130	$	2,430,340	$	(149,514	)	$	2,348,956


(1)	Past due information for acquired loans is based on the contractual balance outstanding at December 31, 2017 and 2016.

(2)

Acquired loans are considered performing upon acquisition, regardless of whether the customer is contractually delinquent, if we can reasonably estimate the timing and amount of expected cash flows on such loans. In these instances, we do not consider acquired contractually delinquent loans to be non-accrual or non-performing and continue to recognize interest income on these loans using the accretion method. Acquired loans are considered non-accrual or non-performing when, due to credit deterioration or other factors, we determine we are no longer able to reasonably estimate the timing and amount of expected cash flows on such loans. We do not recognize interest income on acquired loans considered non-accrual or non-performing.

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



Rating Category		Definition
Pass		in general, the condition of the borrower and the performance of the loan is satisfactory or better
Special Mention		in general, the condition of the borrower has deteriorated, requiring an increased level of monitoring
Substandard		in general, the condition of the borrower has significantly deteriorated and the performance of the loan could further deteriorate if deficiencies are not corrected
Doubtful		in general, the condition of the borrower has significantly deteriorated and the collection in full of both principal and interest is highly questionable or improbable

The use of these internally assigned credit quality categories within the commercial loan and lease portfolio permits management’s use of transition matrices to estimate a quantitative portion of credit risk. Our internal credit risk grading system is based on past experiences with similarly graded loans and leases and conforms with regulatory categories. In general, loan and lease risk ratings within each category are reviewed on an ongoing basis according to our policy for each class of loans and leases. Each quarter, management analyzes the resulting ratings, as well as other external statistics and factors such as delinquency, to track the migration performance of the commercial loan and lease portfolio. Loans and leases within the Pass credit category or that migrate toward the Pass credit category generally have a lower risk of loss compared to loans and leases that migrate toward the Substandard or Doubtful credit categories. Accordingly, management applies higher risk factors to Substandard and Doubtful credit categories.

The following tables present a summary of our commercial loans and leases by credit quality category segregated by loans and leases originated and loans acquired:



	Commercial Loan and Lease Credit Quality Categories
(in thousands)	Pass		Special Mention		Substandard		Doubtful		Total
Originated Loans and Leases
December 31, 2017
Commercial real estate	$	4,922,872	$	152,744	$	98,728	$	439	$	5,174,783
Commercial and industrial	3,266,966		132,975		92,091		3,215		3,495,247
Commercial leases	260,235		4,425		2,060		—		266,720
Other	15,866		43		1,154		—		17,063
Total originated commercial loans and leases	$	8,465,939	$	290,187	$	194,033	$	3,654	$	8,953,813
December 31, 2016
Commercial real estate	$	3,895,764	$	130,452	$	69,588	$	13	$	4,095,817
Commercial and industrial	2,475,955		104,652		128,089		3,190		2,711,886
Commercial leases	188,662		3,789		4,185		—		196,636
Other	34,531		264		1,083		—		35,878
Total originated commercial loans and leases	$	6,594,912	$	239,157	$	202,945	$	3,203	$	7,040,217
Acquired Loans
December 31, 2017
Commercial real estate	$	3,102,788	$	250,987	$	213,089	$	217	$	3,567,081
Commercial and industrial	603,611		26,059		45,661		89		675,420
Total acquired commercial loans	$	3,706,399	$	277,046	$	258,750	$	306	$	4,242,501
December 31, 2016
Commercial real estate	$	1,144,676	$	85,894	$	108,128	$	647	$	1,339,345
Commercial and industrial	274,819		20,593		34,967		516		330,895
Total acquired commercial loans	$	1,419,495	$	106,487	$	143,095	$	1,163	$	1,670,240

Credit quality information for acquired loans is based on the contractual balance outstanding at December 31, 2017 and 2016.

We use delinquency transition matrices within the consumer and other loan classes to enable management to estimate a quantitative portion of credit risk. Each month, management analyzes payment and volume activity, FICO scores and other external factors such as unemployment, to determine how consumer loans are performing.

Following is a table showing consumer loans by payment status:



	Consumer Loan Credit Quality by Payment Status
(in thousands)	Performing		Non-Performing		Total
Originated loans
December 31, 2017
Direct installment	$	1,739,060	$	16,653	$	1,755,713
Residential mortgages	2,019,816		16,410		2,036,226
Indirect installment	1,445,833		2,435		1,448,268
Consumer lines of credit	1,147,576		3,894		1,151,470
Total originated consumer loans	$	6,352,285	$	39,392	$	6,391,677
December 31, 2016
Direct installment	$	1,750,305	$	14,952	$	1,765,257
Residential mortgages	1,433,409		13,367		1,446,776
Indirect installment	1,193,930		2,180		1,196,110
Consumer lines of credit	1,096,642		2,985		1,099,627
Total originated consumer loans	$	5,474,286	$	33,484	$	5,507,770
Acquired loans
December 31, 2017
Direct installment	$	149,751	$	71	$	149,822
Residential mortgages	666,465		—		666,465
Indirect installment	165		—		165
Consumer lines of credit	592,384		1,939		594,323
Total acquired consumer loans	$	1,408,765	$	2,010	$	1,410,775
December 31, 2016
Direct installment	$	79,142	$	—	$	79,142
Residential mortgages	397,798		—		397,798
Indirect installment	203		—		203
Consumer lines of credit	201,061		512		201,573
Total acquired consumer loans	$	678,204	$	512	$	678,716

Loans and leases are designated as impaired when, in the opinion of management, based on current information and events, the collection of principal and interest in accordance with the loan and lease contract is doubtful. Typically, we do not consider loans and leases for impairment unless a sustained period of delinquency (i.e., 90-plus days) is noted or there are subsequent events that impact repayment probability (i.e., negative financial trends, bankruptcy filings, imminent foreclosure proceedings, etc.). Impairment is evaluated in the aggregate for consumer installment loans, residential mortgages, consumer lines of credit and commercial loan and lease relationships less than $500,000 based on loan and lease segment loss given default. For commercial loan and lease relationships greater than or equal to $500,000, a specific valuation allowance is allocated, if necessary, so that the loan is reported net, at the present value of estimated future cash flows using a market interest rate or at the fair value of collateral if repayment is expected solely from the collateral. Consistent with our existing method of income recognition for loans and leases, interest income on impaired loans, except those classified as non-accrual, is recognized using the accrual method. Impaired loans, or portions thereof, are charged off when deemed uncollectible.

Following is a summary of information pertaining to originated loans and leases considered to be impaired, by class of loan and lease:



(in thousands)	Unpaid Contractual Principal Balance		Recorded Investment With No Specific Reserve		Recorded Investment With Specific Reserve		Total Recorded Investment		Specific Reserve		Average Recorded Investment
At or for the Year Ended December 31, 2017
Commercial real estate	$	27,718	$	21,748	$	2,906	$	24,654	$	439	$	24,413
Commercial and industrial	29,307		11,595		4,457		16,052		3,215		23,907
Commercial leases	1,574		1,574		—		1,574		—		1,386
Other	—		—		—		—		—		—
Total commercial loans and leases	58,599		34,917		7,363		42,280		3,654		49,706
Direct installment	19,375		16,653		—		16,653		—		16,852
Residential mortgages	17,754		16,410		—		16,410		—		15,984
Indirect installment	5,709		2,435		—		2,435		—		2,279
Consumer lines of credit	5,039		3,894		—		3,894		—		3,815
Total consumer loans	47,877		39,392		—		39,392		—		38,930
Total	$	106,476	$	74,309	$	7,363	$	81,672	$	3,654	$	88,636
At or for the Year Ended December 31, 2016
Commercial real estate	$	23,771	$	19,699	$	464	$	20,163	$	13	$	19,217
Commercial and industrial	25,719		14,781		8,996		23,777		3,190		29,730
Commercial leases	3,429		3,429		—		3,429		—		3,394
Other	1,000		1,000		—		1,000		—		1,000
Total commercial loans and leases	53,919		38,909		9,460		48,369		3,203		53,341
Direct installment	16,440		14,952		—		14,952		—		14,997
Residential mortgages	14,090		13,367		—		13,367		—		13,200
Indirect installment	5,172		2,180		—		2,180		—		2,037
Consumer lines of credit	3,858		2,985		—		2,985		—		2,813
Total consumer loans	39,560		33,484		—		33,484		—		33,047
Total	$	93,479	$	72,393	$	9,460	$	81,853	$	3,203	$	86,388

Interest income continued to accrue on certain impaired loans and totaled approximately $6.1 million, $4.6 million and $4.1 million during 2017, 2016 and 2015, respectively. The above tables do not reflect the additional allowance for credit losses relating to acquired loans. Following is a summary of the allowance for credit losses required for acquired loans due to changes in credit quality subsequent to the acquisition date:



December 31	2017			2016
(in thousands)
Commercial real estate	$	4,976		$	4,538
Commercial and industrial	(415		)	500
Total commercial loans	4,561			5,038
Direct installment	1,553			1,005
Residential mortgages	484			632
Indirect installment	177			221
Consumer lines of credit	(77		)	372
Total consumer loans	2,137			2,230
Total allowance on acquired loans	$	6,698		$	7,268

Troubled Debt Restructurings

TDRs are loans whose contractual terms have been modified in a manner that grants a concession to a borrower experiencing financial difficulties. TDRs typically result from loss mitigation activities and could include the extension of a maturity date, interest rate reduction, principal forgiveness, deferral or decrease in payments for a period of time and other actions intended to minimize the economic loss and to avoid foreclosure or repossession of collateral.

Following is a summary of the composition of total TDRs:



(in thousands)	Originated		Acquired		Total
December 31, 2017
Accruing:
Performing	$	19,538	$	266	$	19,804
Non-performing	20,173		3,308		23,481
Non-accrual	10,472		234		10,706
Total TDRs	$	50,183	$	3,808	$	53,991
December 31, 2016
Accruing:
Performing	$	17,105	$	365	$	17,470
Non-performing	20,252		176		20,428
Non-accrual	9,035		—		9,035
Total TDRs	$	46,392	$	541	$	46,933

TDRs that are accruing and performing include loans that met the criteria for non-accrual of interest prior to restructuring for which we can reasonably estimate the timing and amount of the expected cash flows on such loans and for which we expect to fully collect the new carrying value of the loans. During 2017, we returned to performing status $3.9 million in restructured residential mortgage loans that have consistently met their modified obligations for more than six months. TDRs that are accruing and non-performing are comprised of consumer loans that have not demonstrated a consistent repayment pattern on the modified terms for more than nine months, however it is expected that we will collect all future principal and interest payments. TDRs that are on non-accrual are not placed on accruing status until all delinquent principal and interest have been paid and the ultimate collectability of the remaining principal and interest is reasonably assured. Some loan modifications classified as TDRs may not ultimately result in the full collection of principal and interest, as modified, and may result in potential incremental losses which are factored into the allowance for credit losses.

Excluding purchased impaired loans, commercial loans over $500,000 whose terms have been modified in a TDR are generally placed on non-accrual, individually analyzed and measured for estimated impairment based on the fair value of the underlying collateral. Our allowance for credit losses included specific reserves for commercial TDRs and pooled reserves for individual loans under $500,000 based on loan segment loss given default. Upon default, the amount of the recorded investment in the TDR in excess of the fair value of the collateral, less estimated selling costs, is generally considered a confirmed loss and is charged-off against the allowance for credit losses. The reserve for commercial TDRs included in the allowance for credit losses is presented in the following table:



December 31	2017		2016
(in thousands)
Specific reserves for commercial TDRs	$	95	$	291
Pooled reserves for individual commercial loans under $500	469		276

All other classes of loans, which are primarily secured by residential properties whose terms have been modified in a TDR are pooled and measured for estimated impairment based on the expected net present value of the estimated future cash flows of the pool. Our allowance for credit losses included pooled reserves for these classes of loans of $4.0 million and $3.7 million at December 31, 2017 and 2016, respectively. Upon default of an individual loan, our charge-off policy is followed accordingly for that class of loan.

The majority of TDRs are the result of interest rate concessions for a limited period of time. Following is a summary of loans, by class, that have been restructured:



Year Ended December 31	2017					2016
(dollars in thousands)	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Commercial real estate	3	$	1,608	$	1,683	4	$	778	$	737
Commercial and industrial	3	3,568		3,091		3	1,727		1,504
Total commercial loans	6	5,176		4,774		7	2,505		2,241
Direct installment	641	5,107		4,500		527	6,090		5,566
Residential mortgages	43	2,251		2,095		45	2,155		2,081
Indirect installment	18	48		43		19	51		51
Consumer lines of credit	64	1,372		1,158		81	1,419		1,283
Total consumer loans	766	8,778		7,796		672	9,715		8,981
Total	772	$	13,954	$	12,570	679	$	12,220	$	11,222

Following is a summary of originated TDRs, by class, for which there was a payment default, excluding loans that were either charged-off or cured by period end. Default occurs when a loan is 90 days or more past due and is within 12 months of restructuring.



Year Ended December 31	2017			2016
(dollars in thousands)	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment
Commercial real estate	1	$	463	—	$	—
Commercial and industrial	—	—		—	—
Total commercial loans	1	463		—	—
Direct installment	131	358		90	313
Residential mortgages	6	314		7	285
Indirect installment	17	28		18	35
Consumer lines of credit	5	170		3	394
Total consumer loans	159	870		118	1,027
Total	160	$	1,333	118	$	1,027