6. ALLOWANCE FOR LOAN LOSSES AND CREDIT QUALITY INFORMATION

We maintained an allowance for loan losses which represents our best estimate of probable losses within our loan portfolio. As losses are realized, they are charged to this allowance. We established our allowance in accordance with guidance provided in the SEC’s Staff Accounting Bulletin 102 (SAB 102), Selected Loan Loss Allowance Methodology and Documentation Issues Accounting Standard Codification (“ASC”) 450, Contingencies (ASC 450) and ASC 310, Receivables (“ASC 310”). The general allowance is calculated on a pooled loan basis using both quantitative and qualitative factors in accordance with ASC 450.

The specific allowance is calculated on an individual loan basis when collectability of all contractually due principal and interest is no longer believed to be probable. This calculation is in accordance with ASC 310-10. Lastly, the allowance related to acquired loans is calculated when (i) there was deterioration in credit quality subsequent to acquisition for loans accounted for under ASC 310-30, and (ii) the inherent losses in the loans exceed the remaining credit discount recorded at the time of acquisition for loans accounted for under ASC 310-20. Impairment of troubled debt restructurings are measured at the present value of estimated future cash flows using the loan’s effective rate at inception or the fair value of the underlying collateral if the loan is collateral dependent. Troubled debt restructurings consist of concessions granted to borrowers facing financial difficulty. Our evaluation is based upon a continuing review of these portfolios. The following are included in our allowance for loan losses:

•

Specific reserves for impaired loans

•

An allowance for each pool of homogenous loans based on historical loss experience

•

Adjustments for qualitative and environmental factors allocated to pools of homogenous loans

When it is probable that the Bank will be unable to collect all amounts due (interest and principal) in accordance with the contractual terms of the loan agreement, it assigns a specific reserve to that loan, if necessary. Unless loans are well-secured and collection is imminent, loans greater than 90 days past due are deemed impaired and their respective reserves are generally charged-off once the loss has been confirmed. Estimated specific reserves are based on collateral values, estimates of future cash flows or market valuations. We charge loans off when they are deemed to be uncollectible. During the twelve months ended December 31, 2016, net charge-offs totaled $10.3 million or 0.25% of average loans annualized, compared to $10.1 million, or 0.29% of average loans annualized, during the twelve months ended December 31, 2015. A significant portion of the net charge-offs in 2016 were the result of two relationships. A $15.4 million substandard C&I loan relationship was exited during the third quarter of 2016 and resulted in a $4.2 million charge-off and $3.0 million in incremental loan loss provision in the quarter. This was our largest, longstanding problem loan and had been reported as delinquent multiple times over the past several years. During the fourth quarter of 2016, $4.0 million from one private banking credit exposure granted under a business development initiative was downgraded to non-performing status. $3.5 million of this exposure was unsecured, resulting in a $3.5 million charge-off and incremental loan loss provision.

Allowances for pooled homogeneous loans, that are not deemed impaired, are based on historical net loss experience. Estimated losses for pooled portfolios are determined differently for commercial loan pools and retail loan pools. Commercial loans are pooled as follows: commercial, owner-occupied, commercial real estate and construction. Each pool is further segmented by internally assessed risk ratings. Loan losses for commercial loans are estimated by determining the probability of default and expected loss severity upon default. Probability of default is calculated based on the historical rate of migration to impaired status during the last 24 quarters. During the twelve months ended December 31, 2016, we increased the look-back period to 24 quarters from 20 quarters used at December 31, 2015. This increase in the look-back period allows us to continue to anchor to the fourth quarter of 2010 to ensure that the core reserves calculated by the ALLL model are adequately considering the losses within a full credit cycle.

Loss severity upon default is calculated as the actual loan losses (net of recoveries) on impaired loans in their respective pool during the same time frame. Retail loans are pooled into the following segments: residential mortgage, consumer secured and consumer unsecured loans. Pooled reserves for retail loans are calculated based solely on average net loss rates over the same 24 quarter look-back period.

Qualitative adjustment factors consider various current internal and external conditions which are allocated among loan types and take into consideration:

•

Current underwriting policies, staff, and portfolio mix,

•

Internal trends of delinquency, nonaccrual and criticized loans by segment,

•

Risk rating accuracy, control and regulatory assessments/environment,

•

General economic conditions — locally and nationally,

•

Market trends impacting collateral values,

•

The competitive environment, as it could impact loan structure and underwriting, and

•

Valuation complexity by segment.

The above factors are based on their relative standing compared to the period in which historic losses are used in core reserve estimates and current directional trends. Qualitative factors in our model can add to or subtract from core reserves.

The allowance methodology uses a loss emergence period (LEP), which is the period of time between an event that triggers the probability of a loss and the confirmation of the loss. We estimate the commercial LEP to be approximately 8 quarters as of December 31, 2016. Our residential mortgage and consumer LEP remained at approximately 4 quarters as of December 31, 2016. We evaluate LEP quarterly for reasonableness and complete a detailed historical analysis of our LEP annually for our commercial portfolio and review of the current 4 quarter LEP for the retail portfolio to determine the continued reasonableness of this assumption.

The final component of the allowance in prior periods was the reserve for model estimation and complexity risk. The calculation of this reserve was generally quantitative; however estimates of valuations and risk assessment, and methodology judgements were necessary in order to capture factors quarterly. During the second quarter of 2016, as a result of continued improvement in the model and normal review of the factors, we removed the model estimation and complexity risk reserve from our calculations of the allowance of loan losses.

Our loan officers and risk managers meet at least quarterly to discuss and review the conditions and risks associated with individual problem loans. In addition, various regulatory agencies periodically review our loan ratings and allowance for loan losses and the Bank’s internal loan review department performs loan reviews.

The following tables provide an analysis of the allowance for loan losses and loan balances as of and for the year ended December 31, 2016, December 31, 2015 and December 31, 2014:


(Dollars in thousands)	Commercial			Owner- occupied Commercial			Commercial Mortgages			Construction			Residential			Consumer			Complexity Risk ⁽¹⁾			Total
Twelve months ended December 31, 2016
Allowance for loan losses
Beginning balance	$	11,156		$	6,670		$	6,487		$	3,521		$	2,281		$	5,964		$	1,010		$	37,089
Charge-offs		(5,052	)		(1,556	)		(422	)		(57	)		(88	)		(6,152	)		—			(13,327	)
Recoveries		594			117			322			484			254			1,232			—			3,003
Provision (credit) for loan losses		6,260			1,163			2,466			(1,117	)		(422	)		4,989			(1,010	)		12,329
Provision for acquired loans		381			194			62			7			34			(21	)		—			657

Ending balance	$	13,339		$	6,588		$	8,915		$	2,838		$	2,059		$	6,012		$	—		$	39,751

Period-end allowance allocated to:
Loans individually evaluated for impairment	$	322		$	—		$	1,247		$	217		$	911		$	198		$	—		$	2,895
Loans collectively evaluated for impairment		12,834			6,573			7,482			2,535			1,125			5,797			—			36,346
Acquired loans evaluated for impairment		183			15			186			86			23			17			—			510

Ending balance	$	13,339		$	6,588		$	8,915		$	2,838		$	2,059		$	6,012		$	—		$	39,751

Period-end loan balances evaluated for:
Loans individually evaluated for impairment	$	2,266		$	2,078		$	9,898		$	1,419		$	13,547		$	7,863		$	—		$	37,071	⁽²⁾
Loans collectively evaluated for impairment		1,120,193			899,590			921,333			189,468			157,738			386,146			—			3,674,468
Acquired nonimpaired loans		159,089			164,372			221,937			28,131			94,883			55,651			—			724,063
Acquired impaired loans		6,183			12,122			10,386			3,694			860			369			—			33,614

Ending balance	$	1,287,731		$	1,078,162		$	1,163,554		$	222,712		$	267,028		$	450,029		$	—		$	4,469,216	⁽³⁾


(Dollars in thousands)	Commercial			Owner- occupied Commercial			Commercial Mortgages			Construction			Residential			Consumer			Complexity Risk ⁽¹⁾			Total
Twelve months ended December 31, 2015
Allowance for loan losses
Beginning balance	$	12,837		$	6,643		$	7,266		$	2,596		$	2,523		$	6,041		$	1,520		$	39,426
Charge-offs		(6,303	)		(738	)		(1,135	)		(146	)		(548	)		(3,225	)		—			(12,095	)
Recoveries		301			77			222			185			226			957			—			1,968
Provision (credit) for loan losses		4,241			665			(67	)		852			76			2,183			(510	)		7,440
Provision for acquired loans		80			23			201			34			4			8			—			350

Ending balance	$	11,156		$	6,670		$	6,487		$	3,521		$	2,281		$	5,964		$	1,010		$	37,089

Period-end allowance allocated to:
Loans individually evaluated for impairment	$	1,164		$	—		$	—		$	211		$	918		$	199		$	—		$	2,492
Loans collectively evaluated for impairment		9,988			6,648			6,384			3,310			1,360			5,765			1,010			34,465
Acquired loans evaluated for impairment		4			22			103			—			3			—			—			132

Ending balance	$	11,156		$	6,670		$	6,487		$	3,521		$	2,281		$	5,964		$	1,010		$	37,089

Period-end loan balances evaluated for:
Loans individually evaluated for impairment	$	5,680		$	1,090		$	3,411		$	1,419		$	15,548		$	7,664		$	—		$	34,812	⁽²⁾
Loans collectively evaluated for impairment		930,346			820,911			869,359			213,801			166,252			335,323			—			3,335,992
Acquired nonimpaired loans		112,586			53,954			83,415			27,009			76,929			17,255			—			371,148
Acquired impaired loans		12,985			4,688			10,513			3,544			950			7			—			32,687

Ending balance	$	1,061,597		$	880,643		$	966,698		$	245,773		$	259,679		$	360,249		$	—		$	3,774,639	⁽³⁾


(Dollars in thousands)	Commercial			Owner- occupied Commercial			Commercial Mortgages			Construction			Residential			Consumer			Complexity Risk ⁽¹⁾		Total
Twelve months ended December 31, 2014
Allowance for loan losses
Beginning balance	$	12,751		$	7,638		$	6,932		$	3,326		$	3,078		$	6,494		$	1,025	$	41,244
Charge-offs		(3,587	)		(1,085	)		(425	)		(88	)		(811	)		(2,855	)		—		(8,851	)
Recoveries		1,611			249			202			242			168			981			—		3,453
Provision (credit) for loan losses		2,062			(159	)		507			(884	)		88			1,339			495		3,448
Provision for acquired loans		—			—			50			—			—			82			—		132

Ending balance	$	12,837		$	6,643		$	7,266		$	2,596		$	2,523		$	6,041		$	1,520	$	39,426

Period-end allowance allocated to:
Loans individually evaluated for impairment	$	3,034		$	609		$	319		$	334		$	790		$	231		$	—	$	5,317
Loans collectively evaluated for impairment		9,803			6,034			6,947			2,262			1,733			5,810			1,520		34,109
Acquired loans evaluated for impairment		—			—			—			—			—			—			—		—

Ending balance	$	12,837		$	6,643		$	7,266		$	2,596		$	2,523		$	6,041		$	1,520	$	39,426

Period-end loan balances evaluated for:
Loans individually evaluated for impairment	$	12,381		$	2,474		$	8,335		$	1,419		$	15,666		$	6,376		$	—	$	46,651	⁽²⁾
Loans collectively evaluated for impairment		872,398			743,680			753,451			127,324			184,788			312,539			—		2,994,180
Acquired nonimpaired loans		32,024			40,180			37,697			9,891			17,363			8,619			—		145,774
Acquired impaired loans		3,269			2,264			5,976			3,863			512			9			—		15,893

Ending balance	$	920,072		$	788,598		$	805,459		$	142,497		$	218,329		$	327,543		$	—	$	3,202,498	⁽³⁾

(1)	Represents the portion of the allowance for loan losses established to account for the inherent complexity and uncertainty of estimates.

(2)	The difference between this amount and nonaccruing loans represents accruing troubled debt restructured loans which are considered to be impaired loans of $14.3 million at December 31, 2016, $13.6 million as of December 31, 2015 and $22.6 million at December 31, 2014.

(3)	Ending loan balances do not include deferred costs.

Nonaccrual and Past Due Loans

Nonaccruing loans are those loans on which the accrual of interest has ceased. We discontinue accrual of interest on originated loans after payments become more than 90 days past due or earlier if we do not expect the full collection of principal and interest in accordance with the terms of the loan agreement. Interest accrued but not collected at the date a loan is placed on nonaccrual status is reversed and charged against interest income. In addition, the accretion of net deferred loan fees is suspended when a loan is placed on nonaccrual status. Subsequent cash receipts are applied either to the outstanding principal balance or recorded as interest income, depending on our assessment of the ultimate collectability of principal and interest. Loans greater than 90 days past due and still accruing are defined as loans contractually past due 90 days or more as to principal or interest payments, but remain in accrual status because they are considered well secured and in process of collection.

The following tables show our nonaccrual and past due loans at the dates indicated:

At December 31, 2016

30–59 Days
Past Due and
Still Accruing

60–89 Days
Past Due and
Still Accruing

Greater Than
90 Days
Past Due and
Still Accruing

Total Past
Due
And Still
Accruing

Accruing
Current
Balances

Acquired
Impaired
Loans

Nonaccrual
Loans

Total
Loans

(Dollars in thousands)

Commercial

1,507

278

—

1,785

1,277,748

6,183

2,015

1,287,731

Owner-occupied commercial

116

540

—

656

1,063,306

12,122

2,078

1,078,162

Commercial mortgages

167

—

167

1,143,180

10,386

9,821

1,163,554

Construction

132

—

132

218,886

3,694

—

222,712

Residential

3,176

638

153

3,967

257,234

860

4,967

267,028

Consumer

392

346

285

1,023

444,642

369

3,995

450,029

Total ⁽¹⁾

5,490

1,802

438

7,730

4,404,996

33,614

22,876

4,469,216

% of Total Loans

0.12

0.04

0.01

0.17

98.57

0.75

0.51

100.00

(1)	Balances in table above includes $724.1 million in acquired non-impaired loans.


At December 31, 2015	30–59 Days Past Due and Still Accruing			60–89 Days Past Due and Still Accruing			Greater Than 90 Days Past Due and Still Accruing			Total Past Due And Still Accruing			Accruing Current Balances			Acquired Impaired Loans			Nonaccrual Loans			Total Loans
(Dollars in thousands)
Commercial	$	1,686		$	270		$	12,355		$	14,311		$	1,028,973		$	12,985		$	5,328		$	1,061,597
Owner-occupied commercial		713			217			4,886			5,816			869,048			4,688			1,091			880,643
Commercial mortgages		141			4			288			433			952,426			10,513			3,326			966,698
Construction		—			—			—			—			242,229			3,544			—			245,773
Residential		5,263			621			251			6,135			245,307			950			7,287			259,679
Consumer		1,222			36			252			1,510			354,599			7			4,133			360,249

Total ⁽¹⁾	$	9,025		$	1,148		$	18,032		$	28,205		$	3,692,582		$	32,687		$	21,165		$	3,774,639

% of Total Loans		0.24	%		0.03	%		0.48	%		0.75	%		97.83	%		0.86	%		0.56	%		100.00	%

(1)	Balances in table above includes $371.1 million in acquired non-impaired loans.

Impaired Loans

Loans for which it is probable we will not collect all principal and interest due according to contractual terms, which is assessed based on the credit characteristics of the loan and/or payment status, are measured for impairment in accordance with the provisions of SAB 102, Selected Loan Loss Allowance Methodology and Documentation Issues and ASC 310, Receivables (ASC 310). The amount of impairment is measured using one of three methods: (1) the present value of expected future cash flows discounted at the loan’s effective interest rate; (2) the fair value of collateral, if the loan is collateral dependent or (3) the loan’s observable market price. If the measure of the impaired loan is less than the recorded investment in the loan, a related allowance is allocated for the impairment.

The following tables provide an analysis of our impaired loans at December 31, 2016 and December 31, 2015:

2016

(Dollars in thousands)

Ending
Loan
Balances

Loans with
No Related
Reserve ⁽¹⁾

Loan with
Related
Reserve

Related
Reserve

Contractual
Principal
Balance

Average
Loan
Balances

Commercial

4,250

1,395

2,855

505

5,572

5,053

Owner-occupied commercial

4,650

2,078

2,572

5,129

3,339

Commercial mortgages

15,065

4,348

10,717

1,433

20,716

7,323

Construction

3,662

—

3,662

303

3,972

2,376

Residential

14,256

7,122

7,134

934

17,298

15,083

Consumer

8,021

6,561

1,460

215

11,978

7,910

Total ⁽²⁾

49,904

21,504

28,400

3,405

64,665

41,084


2015 (Dollars in thousands)	Ending Loan Balances		Loans with No Related Reserve ⁽¹⁾		Loan with Related Reserve		Related Reserve		Contractual Principal Balance		Average Loan Balances
Commercial	$	6,137	$	951	$	5,186	$	1,168	$	20,206	$	9,391
Owner-occupied commercial		2,127		1,090		1,037		22		2,947		2,111
Commercial mortgages		4,652		3,410		1,242		103		11,826		7,540
Construction		1,419		—		1,419		211		1,419		1,448
Residential		15,710		9,034		6,676		920		18,655		15,264
Consumer		7,665		6,498		1,167		200		9,353		6,801

Total	$	37,710	$	20,983	$	16,727	$	2,624	$	64,406	$	42,555

(1)	Reflects loan balances at or written down to their remaining book balance.

(2)	The above includes acquired impaired loans totaling $12.8 million in the ending loan balance and $15.0 million in the contractual principal balance.

Interest income of $1.2 million and $1.6 million was recognized on impaired loans during 2016 and 2015 respectively.

At December 31, 2016, there were 18 acquired loans accounted for under FASB ASC 310-20, Nonrefundable Fees and Other Costs (ASC 310-20) classified as nonaccrual loans with a carrying value of $3.8 million.

As of December 31, 2016, there were 29 residential loans and 7 commercial loans in the process of foreclosure. The total outstanding balance on the loans was $3.7 million and $3.6 million, respectively. As of December 31, 2015, there were 32 residential loans and 3 commercial loans in the process of foreclosure. The total outstanding balance on the loans was $5.0 million and $0.7 million, respectively.

Reserves On Acquired Nonimpaired Loans

In accordance with ASC 310, Receivables, loans acquired by the Bank through its merger with FNBW, Alliance and Penn Liberty are required to be reflected on the balance sheet at their fair values as opposed to their book values on the date of acquisition. Therefore, on the date of acquisition establishing an allowance for acquired loans is prohibited. After the acquisition date, the bank performs a separate allowance analysis on a quarterly basis to determine if an allowance for loan loss is necessary. Should the credit risk calculated exceed the purchased loan portfolio’s remaining credit mark, additional reserves will be added to the Bank’s allowance. When a purchased loan becomes impaired after its acquisition, it is evaluated as part of the Bank’s reserve analysis and a specific reserve is established to be included in the Bank’s allowance.

Credit Quality Indicators

Below is a description of each of our risk ratings for all commercial loans:

Pass. These borrowers presently show no current or potential problems and their loans are considered fully collectible.

Special Mention. Borrowers have potential weaknesses that deserve management’s close attention. Borrowers in this category may be experiencing adverse operating trends, for example, declining revenues or margins, high leverage, tight liquidity, or increasing inventory without increasing sales. These adverse trends can have a potential negative effect on the borrower’s repayment capacity. These assets are not adversely classified and do not expose the Bank to significant risk that would warrant a more severe rating. Borrowers in this category may also be experiencing significant management problems, pending litigation, or other structural credit weaknesses.

Substandard. Borrowers have well-defined weaknesses that require extensive oversight by management. Borrowers in this category may exhibit one or more of the following: inadequate debt service coverage, unprofitable operations, insufficient liquidity, high leverage, and weak or inadequate capitalization. Relationships in this category are not adequately protected by the sound financial worth and paying capacity of the obligor or the collateral pledged on the loan, if any. The distinct possibility exists that the Bank will sustain some loss if the deficiencies are not corrected.

Doubtful. Borrowers have well-defined weaknesses inherent in the Substandard category with the added characteristic that the possibility of loss is extremely high. Current circumstances in the credit relationship make collection or liquidation in full highly questionable. A doubtful asset has some pending event that may strengthen the asset that defers the loss classification. Such impending events include: perfecting liens on additional collateral, obtaining collateral valuations, an acquisition or liquidation preceding, proposed merger, or refinancing plan.

Loss. Borrowers are uncollectible or of such negligible value that continuance as a bankable asset is not supportable. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather that it is not practical to defer writing off this asset even though partial recovery may be recognized sometime in the future.

Residential and Consumer Loans

The residential and consumer loan portfolios are monitored on an ongoing basis using delinquency information and loan type as credit quality indicators. These credit quality indicators are assessed in the aggregate in these relatively homogeneous portfolios. Loans greater than 90 days past due are generally considered nonperforming and placed on nonaccrual status.

The following tables provide an analysis of loans by portfolio segment based on the credit quality indicators used to determine the Allowance at December 31:

Commercial Credit Exposure


																	Total Commercial⁽¹⁾
	Commercial				Owner-occupied Commercial				Commercial Mortgages				Construction				2016					2015
(Dollars in thousands)	2016		2015		2016		2015		2016		2015		2016		2015		Amount		%			Amount		%
Risk Rating:
Special mention	$	17,630	$	5,620	$	11,419	$	9,535	$	34,198	$	12,323	$	—	$	—	$	63,247				$	27,478
Substandard:
Accrual		45,067		33,883		19,871		22,901		239		2,547		2,193		8,296		67,370					67,627
Nonaccrual		1,693		4,164		2,078		1,090		8,574		3,326		—		—		12,345					8,580
Doubtful/nonaccrual		322		1,164		—		—		1,247		—		—		—		1,569					1,164

Total special mention and substandard		64,712		44,831		33,368		33,526		44,258		18,196		2,193		8,296		144,531		4	%		104,849		3	%
Acquired impaired loans		6,183		12,985		12,122		4,688		10,386		10,513		3,694		3,544		32,385		1	%		31,730		1	%
Pass		1,216,836		1,003,781		1,032,672		842,429		1,108,910		937,989		216,825		233,933		3,575,243		95	%		3,018,132		96	%

Total	$	1,287,731	$	1,061,597	$	1,078,162	$	880,643	$	1,163,554	$	966,698	$	222,712	$	245,773	$	3,752,159		100	%	$	3,154,711		100	%

(1)	Table includes $573.5 million in acquired non-impaired loans at December 31, 2016 and $277.0 million at December 31, 2015.

Consumer Credit Exposure


									Total Residential and Consumer ⁽²⁾
	Residential				Consumer				2016					2015
(Dollars in thousands)	2016		2015		2016		2015		Amount		Percent			Amount		Percent
Nonperforming ⁽¹⁾	$	13,547	$	15,548	$	7,863	$	7,664	$	21,410		3	%	$	23,212		4	%
Acquired impaired loans		860		950		369		7		1,229		—	%		957		—	%
Performing		252,621		243,181		441,797		352,578		694,418		97	%		595,759		96	%

Total	$	267,028	$	259,679	$	450,029	$	360,249	$	717,057		100	%	$	619,928		100	%

(1)	Includes $12.4 million as of December 31, 2016 and $11.8 million as of December 31, 2015 of troubled debt restructured mortgages and home equity installment loans that are performing in accordance with the loans modified terms and are accruing interest.

(2)	Total includes acquired non-impaired loans of $150.5 million at December 31, 2016 and $94.2 million at December 31, 2015.

Troubled Debt Restructurings (TDR)

A modification is classified as a TDR if both of the following exist: (1) the borrower is experiencing financial difficulty and (2) the Bank has granted a concession to the borrower. Many aspects of the borrower’s financial situation are assessed when determining whether they are experiencing financial difficulty. Concessions may include the reduction of the interest rate to a rate lower than current market rate for a new loan with similar risk, extension of the maturity date, reduction of accrued interest, or principal forgiveness. The assessments of whether a borrower is experiencing (or is likely to experience) financial difficulty and whether a concession has been granted is subjective in nature and management’s judgment is required when determining whether a modification is a TDR.

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


(Dollars in thousands)	December 31, 2016		December 31, 2015
Performing TDRs	$	14,336	$	13,647
Nonperforming TDRs		8,451		10,983

	$	22,787	$	24,630

Approximately $1.3 million and $2.1 million in related reserves have been established for these loans at December 31, 2016 and December 31, 2015, respectively.

The following table presents information regarding the types of loan modifications made for the twelve months ended December 31, 2016:


	Contractual payment reduction		Maturity date extension		Discharged in bankruptcy		Other ⁽¹⁾		Total
Commercial		—		2		—		1		3
Commercial mortgages		—		2		—		—		2
Residential		—		—		1		7		8
Consumer		12		—		2		—		14

		12		4		3		8		27

(1)	Other includes interest rate reduction and maturity date extension, forbearance, and interest only payments.

Principal balances are generally not forgiven by us when a loan is modified as a TDR. Nonaccruing restructured loans remain in nonaccrual status until there has been a period of sustained repayment performance, typically six months, and repayment is reasonably assured.

The following table presents loans identified as TDRs during the twelve months ended December 31, 2016 and December 31, 2015:


	Twelve Months Ended December 31,
(Dollars in thousands)	2016				2015
(Dollars in thousands)	Pre Modification		Post Modification		Pre Modification		Post Modification
Commercial	$	1,407	$	1,407	$	—	$	—
Owner-occupied commercial		—		—		577		577
Commercial mortgages		1,111		1,111		—		—
Residential		2,754		2,754		895		895
Consumer		873		873		1,615		1,615

	$	6,145	$	6,145	$	3,087	$	3,087

The TDRs set forth in the table above increased our allowance for loan losses by $0.1 million through allocation of a related reserve, and resulted in charge-offs of $0.4 million during the twelve months ended December 31, 2016. For the twelve months ended December 31, 2015, the TDRs set forth in the table above increased our allowance for loan losses by less than $0.1 million through allocation of a related reserve, and resulted in charge-offs of $0.2 million.