Allowance for Loan Losses, Allowance for Losses on Lending-Related Commitments and Impaired Loans

The tables below show the aging of the Company’s loan portfolio at June 30, 2016, December 31, 2015 and June 30, 2015:



As of June 30, 2016			90+ days and still accruing		60-89 days past due		30-59 days past due
(Dollars in thousands)	Nonaccrual		90+ days and still accruing		60-89 days past due		30-59 days past due		Current		Total Loans
Loan Balances:
Commercial
Commercial, industrial and other	$	16,414	$	—	$	1,412	$	22,317	$	3,416,432	$	3,456,575
Franchise	—		—		560		87		289,258		289,905
Mortgage warehouse lines of credit	—		—		—		—		270,586		270,586
Asset-based lending	—		235		1,899		6,421		834,112		842,667
Leases	387		—		48		—		267,639		268,074
PCI - commercial ⁽¹⁾	—		1,956		630		1,426		12,714		16,726
Total commercial	16,801		2,191		4,549		30,251		5,090,741		5,144,533
Commercial real estate:
Construction	673		—		46		7,922		396,264		404,905
Land	1,725		—		—		340		103,816		105,881
Office	6,274		—		5,452		4,936		892,791		909,453
Industrial	10,295		—		1,108		719		754,647		766,769
Retail	916		—		535		6,450		889,945		897,846
Multi-family	90		—		2,077		1,275		775,075		778,517
Mixed use and other	4,442		—		4,285		8,007		1,795,931		1,812,665
PCI - commercial real estate ⁽¹⁾	—		27,228		1,663		2,608		140,799		172,298
Total commercial real estate	24,415		27,228		15,166		32,257		5,749,268		5,848,334
Home equity	8,562		—		380		4,709		747,253		760,904
Residential real estate, including PCI	12,413		1,479		1,367		299		638,106		653,664
Premium finance receivables
Commercial insurance loans	14,497		10,558		6,966		9,456		2,436,803		2,478,280
Life insurance loans	—		—		46,651		11,953		2,811,356		2,869,960
PCI - life insurance loans ⁽¹⁾	—		—		—		—		291,602		291,602
Consumer and other, including PCI	475		226		610		1,451		124,616		127,378
Total loans, net of unearned income, excluding covered loans	$	77,163	$	41,682	$	75,689	$	90,376	$	17,889,745	$	18,174,655
Covered loans	2,651		6,810		697		1,610		93,480		105,248
Total loans, net of unearned income	$	79,814	$	48,492	$	76,386	$	91,986	$	17,983,225	$	18,279,903



As of December 31, 2015			90+ days and still accruing		60-89 days past due		30-59 days past due
(Dollars in thousands)	Nonaccrual		90+ days and still accruing		60-89 days past due		30-59 days past due		Current		Total Loans
Loan Balances:
Commercial
Commercial, industrial and other	$	12,704	$	6	$	6,749	$	12,930	$	3,226,139	$	3,258,528
Franchise	—		—		—		—		245,228		245,228
Mortgage warehouse lines of credit	—		—		—		—		222,806		222,806
Asset-based lending	8		—		3,864		1,844		736,968		742,684
Leases	—		535		748		4,192		220,599		226,074
PCI - commercial ⁽¹⁾	—		892		—		2,510		15,187		18,589
Total commercial	12,712		1,433		11,361		21,476		4,666,927		4,713,909
Commercial real estate
Construction	306		—		1,371		1,645		355,338		358,660
Land	1,751		—		—		120		76,546		78,417
Office	4,619		—		764		3,817		853,801		863,001
Industrial	9,564		—		1,868		1,009		715,207		727,648
Retail	1,760		—		442		2,310		863,887		868,399
Multi-family	1,954		—		597		6,568		733,230		742,349
Mixed use and other	6,691		—		6,723		7,215		1,712,187		1,732,816
PCI - commercial real estate ⁽¹⁾	—		22,111		4,662		16,559		114,667		157,999
Total commercial real estate	26,645		22,111		16,427		39,243		5,424,863		5,529,289
Home equity	6,848		—		1,889		5,517		770,421		784,675
Residential real estate, including PCI	12,043		488		2,166		3,903		588,851		607,451
Premium finance receivables
Commercial insurance loans	14,561		10,294		6,624		21,656		2,321,786		2,374,921
Life insurance loans	—		—		3,432		11,140		2,578,632		2,593,204
PCI - life insurance loans ⁽¹⁾	—		—		—		—		368,292		368,292
Consumer and other, including PCI	263		211		204		1,187		144,511		146,376
Total loans, net of unearned income, excluding covered loans	$	73,072	$	34,537	$	42,103	$	104,122	$	16,864,283	$	17,118,117
Covered loans	5,878		7,335		703		5,774		128,983		148,673
Total loans, net of unearned income	$	78,950	$	41,872	$	42,806	$	109,896	$	16,993,266	$	17,266,790


(1)	PCI loans represent loans acquired with evidence of credit quality deterioration since origination, in accordance with ASC 310-30. Loan agings are based upon contractually required payments.



As of June 30, 2015			90+ days and still accruing		60-89 days past due		30-59 days past due
(Dollars in thousands)	Nonaccrual		90+ days and still accruing		60-89 days past due		30-59 days past due		Current		Total Loans
Loan Balances:
Commercial
Commercial, industrial and other	$	4,424	$	—	$	1,846	$	6,027	$	2,845,833	$	2,858,130
Franchise	905		—		113		396		227,185		228,599
Mortgage warehouse lines of credit	—		—		—		—		213,797		213,797
Asset-based lending	—		—		1,767		7,423		823,265		832,455
Leases	65		—		—		—		187,565		187,630
PCI - commercial ⁽¹⁾	—		474		—		233		9,026		9,733
Total commercial	5,394		474		3,726		14,079		4,306,671		4,330,344
Commercial real estate:
Construction	19		—		—		4		307,122		307,145
Land	2,035		—		1,123		2,399		82,280		87,837
Office	6,360		701		163		2,601		744,992		754,817
Industrial	2,568		—		18		484		624,337		627,407
Retail	2,352		—		896		2,458		744,285		749,991
Multi-family	1,730		—		933		223		665,562		668,448
Mixed use and other	8,119		—		2,405		3,752		1,577,846		1,592,122
PCI - commercial real estate ⁽¹⁾	—		15,646		3,490		2,798		40,889		62,823
Total commercial real estate	23,183		16,347		9,028		14,719		4,787,313		4,850,590
Home equity	5,695		—		511		3,365		702,779		712,350
Residential real estate, including PCI	16,631		264		2,494		1,205		482,421		503,015
Premium finance receivables
Commercial insurance loans	15,156		9,053		5,048		11,071		2,420,080		2,460,408
Life insurance loans	—		351		—		6,823		2,145,981		2,153,155
PCI - life insurance loans ⁽¹⁾	—		—		—		—		384,320		384,320
Consumer and other, including PCI	280		110		196		919		117,963		119,468
Total loans, net of unearned income, excluding covered loans	$	66,339	$	26,599	$	21,003	$	52,181	$	15,347,528	$	15,513,650
Covered loans	6,353		10,030		1,333		1,720		173,974		193,410
Total loans, net of unearned income	$	72,692	$	36,629	$	22,336	$	53,901	$	15,521,502	$	15,707,060


(1)	PCI loans represent loans acquired with evidence of credit quality deterioration since origination, in accordance with ASC 310-30. Loan agings are based upon contractually required payments.

The Company's ability to manage credit risk depends in large part on our ability to properly identify and manage problem loans. To do so, the Company operates a credit risk rating system under which our credit management personnel assign a credit risk rating (1 to 10 rating) to each loan at the time of origination and review loans on a regular basis.

Each loan officer is responsible for monitoring his or her loan portfolio, recommending a credit risk rating for each loan in his or her portfolio and ensuring the credit risk ratings are appropriate. These credit risk ratings are then ratified by the bank’s chief credit officer and/or concurrence credit officer. Credit risk ratings are determined by evaluating a number of factors including: a borrower’s financial strength, cash flow coverage, collateral protection and guarantees.

The Company’s Problem Loan Reporting system automatically includes all loans with credit risk ratings of 6 through 9. This system is designed to provide an on-going detailed tracking mechanism for each problem loan. Once management determines that a loan has deteriorated to a point where it has a credit risk rating of 6 or worse, the Company’s Managed Asset Division performs an overall credit and collateral review. As part of this review, all underlying collateral is identified and the valuation methodology is analyzed and tracked. As a result of this initial review by the Company’s Managed Asset Division, the credit risk rating is reviewed and a portion of the outstanding loan balance may be deemed uncollectible or an impairment reserve may be established. The Company’s impairment analysis utilizes an independent re-appraisal of the collateral (unless such a third-party evaluation is not possible due to the unique nature of the collateral, such as a closely-held business or thinly traded securities). In the case of commercial real estate collateral, an independent third party appraisal is ordered by the Company’s Real Estate Services Group to determine if there has been any change in the underlying collateral value. These independent appraisals are reviewed by the Real Estate Services Group and sometimes by independent third party valuation experts and may be adjusted depending upon market conditions.

Through the credit risk rating process, loans are reviewed to determine if they are performing in accordance with the original contractual terms. If the borrower has failed to comply with the original contractual terms, further action may be required by the Company, including a downgrade in the credit risk rating, movement to non-accrual status, a charge-off or the establishment of a specific impairment reserve. If we determine that a loan amount, or portion thereof, is uncollectible, the loan’s credit risk rating is immediately downgraded to an 8 or 9 and the uncollectible amount is charged-off. Any loan that has a partial charge-off continues to be assigned a credit risk rating of an 8 or 9 for the duration of time that a balance remains outstanding. The Company undertakes a thorough and ongoing analysis to determine if additional impairment and/or charge-offs are appropriate and to begin a workout plan for the credit to minimize actual losses.

If, based on current information and events, it is probable that the Company will be unable to collect all amounts due to it according to the contractual terms of the loan agreement, a specific impairment reserve is established. In determining the appropriate charge-off for collateral-dependent loans, the Company considers the results of appraisals for the associated collateral.

Non-performing loans include all non-accrual loans (8 and 9 risk ratings) as well as loans 90 days past due and still accruing interest, excluding PCI and covered loans. The remainder of the portfolio is considered performing under the contractual terms of the loan agreement. The following table presents the recorded investment based on performance of loans by class, excluding covered loans, per the most recent analysis at June 30, 2016, December 31, 2015 and June 30, 2015:



	Performing						Non-performing						Total
(Dollars in thousands)	June 30, 2016		December 31, 2015		June 30, 2015		June 30, 2016		December 31, 2015		June 30, 2015		June 30, 2016		December 31, 2015		June 30, 2015
Loan Balances:
Commercial
Commercial, industrial and other	$	3,440,161	$	3,245,818	$	2,853,706	$	16,414	$	12,710	$	4,424	$	3,456,575	$	3,258,528	$	2,858,130
Franchise	289,905		245,228		227,694		—		—		905		289,905		245,228		228,599
Mortgage warehouse lines of credit	270,586		222,806		213,797		—		—		—		270,586		222,806		213,797
Asset-based lending	842,432		742,676		832,455		235		8		—		842,667		742,684		832,455
Leases	267,687		225,539		187,565		387		535		65		268,074		226,074		187,630
PCI - commercial ⁽¹⁾	16,726		18,589		9,733		—		—		—		16,726		18,589		9,733
Total commercial	5,127,497		4,700,656		4,324,950		17,036		13,253		5,394		5,144,533		4,713,909		4,330,344
Commercial real estate
Construction	404,232		358,354		307,126		673		306		19		404,905		358,660		307,145
Land	104,156		76,666		85,802		1,725		1,751		2,035		105,881		78,417		87,837
Office	903,179		858,382		747,756		6,274		4,619		7,061		909,453		863,001		754,817
Industrial	756,474		718,084		624,839		10,295		9,564		2,568		766,769		727,648		627,407
Retail	896,930		866,639		747,639		916		1,760		2,352		897,846		868,399		749,991
Multi-family	778,427		740,395		666,718		90		1,954		1,730		778,517		742,349		668,448
Mixed use and other	1,808,223		1,726,125		1,584,003		4,442		6,691		8,119		1,812,665		1,732,816		1,592,122
PCI - commercial real estate⁽¹⁾	172,298		157,999		62,823		—		—		—		172,298		157,999		62,823
Total commercial real estate	5,823,919		5,502,644		4,826,706		24,415		26,645		23,884		5,848,334		5,529,289		4,850,590
Home equity	752,342		777,827		706,655		8,562		6,848		5,695		760,904		784,675		712,350
Residential real estate, including PCI	641,251		595,408		486,384		12,413		12,043		16,631		653,664		607,451		503,015
Premium finance receivables
Commercial insurance loans	2,453,225		2,350,066		2,436,199		25,055		24,855		24,209		2,478,280		2,374,921		2,460,408
Life insurance loans	2,869,960		2,593,204		2,152,804		—		—		351		2,869,960		2,593,204		2,153,155
PCI - life insurance loans ⁽¹⁾	291,602		368,292		384,320		—		—		—		291,602		368,292		384,320
Consumer and other, including PCI	126,740		145,963		119,078		638		413		390		127,378		146,376		119,468
Total loans, net of unearned income, excluding covered loans	$	18,086,536	$	17,034,060	$	15,437,096	$	88,119	$	84,057	$	76,554	$	18,174,655	$	17,118,117	$	15,513,650


(1)	PCI loans represent loans acquired with evidence of credit quality deterioration since origination, in accordance with ASC 310-30. See Note 6 - Loans for further discussion of these purchased loans.

A summary of activity in the allowance for credit losses by loan portfolio (excluding covered loans) for the three and six months ended June 30, 2016 and 2015 is as follows:



Three months ended June 30, 2016				Commercial Real Estate			Home Equity			Residential Real Estate			Premium Finance Receivable			Consumer and Other			Total, Excluding Covered Loans
(Dollars in thousands)	Commercial			Commercial Real Estate			Home Equity			Residential Real Estate			Premium Finance Receivable			Consumer and Other			Total, Excluding Covered Loans
Allowance for credit losses
Allowance for loan losses at beginning of period	$	38,435		$	45,263		$	12,915		$	5,164		$	7,205		$	1,189		$	110,171
Other adjustments	(59		)	(70		)	—			(9		)	4			—			(134		)
Reclassification from allowance for unfunded lending-related commitments	—			(40		)	—			—			—			—			(40		)
Charge-offs	(721		)	(502		)	(2,046		)	(693		)	(1,911		)	(224		)	(6,097		)
Recoveries	121			296			71			31			633			35			1,187
Provision for credit losses	3,878			1,877			443			912			1,883			276			9,269
Allowance for loan losses at period end	$	41,654		$	46,824		$	11,383		$	5,405		$	7,814		$	1,276		$	114,356
Allowance for unfunded lending-related commitments at period end	$	—		$	1,070		$	—		$	—		$	—		$	—		$	1,070
Allowance for credit losses at period end	$	41,654		$	47,894		$	11,383		$	5,405		$	7,814		$	1,276		$	115,426
Individually evaluated for impairment	$	3,417		$	2,121		$	477		$	625		$	—		$	5		$	6,645
Collectively evaluated for impairment	37,571			45,736			10,906			4,720			7,814			1,271			108,018
Loans acquired with deteriorated credit quality	666			37			—			60			—			—			763
Loans at period end
Individually evaluated for impairment	$	21,173		$	49,284		$	8,562		$	17,281		$	—		$	536		$	96,836
Collectively evaluated for impairment	5,106,634			5,626,752			752,342			632,125			5,348,240			126,842			17,592,935
Loans acquired with deteriorated credit quality	16,726			172,298			—			4,258			291,602			—			484,884



Three months ended June 30, 2015	Commercial			Commercial Real Estate			Home Equity			Residential Real Estate			Premium Finance Receivable			Consumer and Other			Total, Excluding Covered Loans
(Dollars in thousands)	Commercial			Commercial Real Estate			Home Equity			Residential Real Estate			Premium Finance Receivable			Consumer and Other			Total, Excluding Covered Loans
Allowance for credit losses
Allowance for loan losses at beginning of period	$	33,726		$	37,002		$	12,664		$	4,096		$	5,992		$	966		$	94,446
Other adjustments	(13		)	(81		)	—			(5		)	6			—			(93		)
Reclassification from allowance for unfunded lending-related commitments	—			4			—			—			—			—			4
Charge-offs	(1,243		)	(856		)	(1,847		)	(923		)	(1,526		)	(115		)	(6,510		)
Recoveries	285			1,824			39			16			458			34			2,656
Provision for credit losses	145			4,305			1,432			1,835			1,991			(7		)	9,701
Allowance for loan losses at period end	$	32,900		$	42,198		$	12,288		$	5,019		$	6,921		$	878		$	100,204
Allowance for unfunded lending-related commitments at period end	$	—		$	884		$	—		$	—		$	—		$	—		$	884
Allowance for credit losses at period end	$	32,900		$	43,082		$	12,288		$	5,019		$	6,921		$	878		$	101,088
Individually evaluated for impairment	$	2,282		$	5,602		$	808		$	1,387		$	—		$	44		$	10,123
Collectively evaluated for impairment	30,600			37,145			11,480			3,589			6,921			834			90,569
Loans acquired with deteriorated credit quality	18			335			—			43			—			—			396
Loans at period end
Individually evaluated for impairment	$	11,921		$	65,870		$	5,909		$	20,459		$	—		$	418		$	104,577
Collectively evaluated for impairment	4,308,690			4,721,897			706,441			480,214			4,613,563			119,050			14,949,855
Loans acquired with deteriorated credit quality	9,733			62,823			—			2,342			384,320			—			459,218



Six months ended June 30, 2016				Commercial Real Estate			Home Equity			Residential Real Estate			Premium Finance Receivable			Consumer and Other			Total, Excluding Covered Loans
(Dollars in thousands)	Commercial			Commercial Real Estate			Home Equity			Residential Real Estate			Premium Finance Receivable			Consumer and Other			Total, Excluding Covered Loans
Allowance for credit losses
Allowance for loan losses at beginning of period	$	36,135		$	43,758		$	12,012		$	4,734		$	7,233		$	1,528		$	105,400
Other adjustments	(68		)	(146		)	—			(39		)	41			—			(212		)
Reclassification from allowance for unfunded lending-related commitments	—			(121		)	—			—			—			—			(121		)
Charge-offs	(1,392		)	(1,173		)	(3,098		)	(1,186		)	(4,391		)	(331		)	(11,571		)
Recoveries	750			665			119			143			1,420			71			3,168
Provision for credit losses	6,229			3,841			2,350			1,753			3,511			8			17,692
Allowance for loan losses at period end	$	41,654		$	46,824		$	11,383		$	5,405		$	7,814		$	1,276		$	114,356
Allowance for unfunded lending-related commitments at period end	$	—		$	1,070		$	—		$	—		$	—		$	—		$	1,070
Allowance for credit losses at period end	$	41,654		$	47,894		$	11,383		$	5,405		$	7,814		$	1,276		$	115,426



Six months ended June 30, 2015				Commercial Real Estate			Home Equity			Residential Real Estate			Premium Finance Receivable			Consumer and Other			Total, Excluding Covered Loans
(Dollars in thousands)	Commercial			Commercial Real Estate			Home Equity			Residential Real Estate			Premium Finance Receivable			Consumer and Other			Total, Excluding Covered Loans
Allowance for credit losses
Allowance for loan losses at beginning of period	$	31,699		$	35,533		$	12,500		$	4,218		$	6,513		$	1,242		$	91,705
Other adjustments	(30		)	(261		)	—			(8		)	(42		)	—			(341		)
Reclassification from allowance for unfunded lending-related commitments	—			(109		)	—			—			—			—			(109		)
Charge-offs	(1,920		)	(1,861		)	(2,431		)	(1,554		)	(2,789		)	(226		)	(10,781		)
Recoveries	655			2,136			87			92			787			87			3,844
Provision for credit losses	2,496			6,760			2,132			2,271			2,452			(225		)	15,886
Allowance for loan losses at period end	$	32,900		$	42,198		$	12,288		$	5,019		$	6,921		$	878		$	100,204
Allowance for unfunded lending-related commitments at period end	$	—		$	884		$	—		$	—		$	—		$	—		$	884
Allowance for credit losses at period end	$	32,900		$	43,082		$	12,288		$	5,019		$	6,921		$	878		$	101,088

A summary of activity in the allowance for covered loan losses for the three and six months ended June 30, 2016 and 2015 is as follows:



	Three Months Ended						Six Months Ended
	June 30,			June 30,			June 30,			June 30,
(Dollars in thousands)	2016			2015			2016			2015
Balance at beginning of period	$	2,507		$	1,878		$	3,026		$	2,131
Provision for covered loan losses before benefit attributable to FDIC loss share agreements	(702		)	(1,094		)	(2,648		)	(1,623		)
Benefit attributable to FDIC loss share agreements	562			875			2,119			1,298
Net provision for covered loan losses	(140		)	(219		)	(529		)	(325		)
Increase/decrease in FDIC indemnification liability/asset	(562		)	(875		)	(2,119		)	(1,298		)
Loans charged-off	(143		)	(140		)	(373		)	(377		)
Recoveries of loans charged-off	750			1,571			2,407			2,084
Net recoveries	607			1,431			2,034			1,707
Balance at end of period	$	2,412		$	2,215		$	2,412		$	2,215

In conjunction with FDIC-assisted transactions, the Company entered into loss share agreements with the FDIC. Additional expected losses, to the extent such expected losses result in the recognition of an allowance for loan losses, will increase the FDIC loss share asset or reduce any FDIC loss share liability. The allowance for loan losses for loans acquired in FDIC-assisted transactions is determined without giving consideration to the amounts recoverable through loss share agreements (since the loss share agreements are separately accounted for and thus presented “gross” on the balance sheet). On the Consolidated Statements of Income, the provision for credit losses is reported net of changes in the amount recoverable under the loss share agreements. Reductions to expected losses, to the extent such reductions to expected losses are the result of an improvement to the actual or expected cash flows from the covered assets, will reduce the FDIC loss share asset or increase any FDIC loss share liability. Additions to expected losses will require an increase to the allowance for loan losses, and a corresponding increase to the FDIC loss share asset or reduction to any FDIC loss share liability. See “FDIC-Assisted Transactions” within Note 3 – Business Combinations for more detail.

Impaired Loans

A summary of impaired loans, including troubled debt restructurings ("TDRs"), is as follows:



	June 30,		December 31,		June 30,
(Dollars in thousands)	2016		2015		2015
Impaired loans (included in non-performing and TDRs):
Impaired loans with an allowance for loan loss required ⁽¹⁾	$	42,968	$	49,961	$	50,748
Impaired loans with no allowance for loan loss required	53,008		51,294		52,609
Total impaired loans ⁽²⁾	$	95,976	$	101,255	$	103,357
Allowance for loan losses related to impaired loans	$	6,611	$	6,380	$	10,075
TDRs	$	49,635	$	51,853	$	62,776


(1)	These impaired loans require an allowance for loan losses because the estimated fair value of the loans or related collateral is less than the recorded investment in the loans.


(2)	Impaired loans are considered by the Company to be non-accrual loans, TDRs or loans with principal and/or interest at risk, even if the loan is current with all payments of principal and interest.

The following tables present impaired loans by loan class, excluding covered loans, for the periods ended as follows:



							For the Six Months Ended
	As of June 30, 2016						June 30, 2016
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
(Dollars in thousands)
Impaired loans with a related ASC 310 allowance recorded
Commercial
Commercial, industrial and other	$	10,253	$	12,866	$	3,280	$	10,172	$	375
Asset-based lending	—		—		—		—		—
Leases	387		387		128		390		10
Commercial real estate
Construction	—		—		—		—		—
Land	4,538		4,538		18		4,592		83
Office	2,401		3,059		176		2,427		70
Industrial	7,369		7,773		1,514		7,552		195
Retail	7,007		7,024		264		7,064		95
Multi-family	1,274		1,274		15		1,066		18
Mixed use and other	3,040		3,162		109		3,063		73
Home equity	1,349		1,511		477		1,443		30
Residential real estate	5,230		5,840		625		5,289		123
Consumer and other	120		148		5		123		4
Impaired loans with no related ASC 310 allowance recorded
Commercial
Commercial, industrial and other	$	10,092	$	10,950	$	—	$	10,045	$	328
Asset-based lending	—		—		—		—		—
Leases	—		—		—		—		—
Commercial real estate
Construction	2,677		2,677		—		2,693		77
Land	2,979		7,492		—		3,001		254
Office	6,967		8,715		—		7,107		227
Industrial	3,966		5,093		—		4,326		168
Retail	1,122		1,122		—		1,129		27
Multi-family	90		174		—		119		3
Mixed use and other	5,435		5,960		—		5,498		159
Home equity	7,213		9,674		—		8,356		219
Residential real estate	12,051		14,180		—		11,997		308
Consumer and other	416		494		—		427		14
Total impaired loans, net of unearned income	$	95,976	$	114,113	$	6,611	$	97,879	$	2,860



							For the Twelve Months Ended
	As of December 31, 2015						December 31, 2015
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
(Dollars in thousands)
Impaired loans with a related ASC 310 allowance recorded
Commercial
Commercial, industrial and other	$	9,754	$	12,498	$	2,012	$	10,123	$	792
Asset-based lending	—		—		—		—		—
Leases	—		—		—		—		—
Commercial real estate
Construction	—		—		—		—		—
Land	4,929		8,711		41		5,127		547
Office	5,050		6,051		632		5,394		314
Industrial	8,413		9,105		1,943		10,590		565
Retail	8,527		9,230		343		8,596		386
Multi-family	370		370		202		372		25
Mixed use and other	7,590		7,708		570		7,681		328
Home equity	423		435		333		351		16
Residential real estate	4,710		4,799		294		4,618		182
Consumer and other	195		220		10		216		12
Impaired loans with no related ASC 310 allowance recorded
Commercial
Commercial, industrial and other	$	8,562	$	9,915	$	—	$	9,885	$	521
Asset-based lending	8		1,570		—		5		88
Leases	—		—		—		—		—
Commercial real estate
Construction	2,328		2,329		—		2,316		113
Land	888		2,373		—		929		90
Office	3,500		4,484		—		3,613		237
Industrial	2,217		2,426		—		2,286		188
Retail	2,757		2,925		—		2,897		129
Multi-family	2,344		2,807		—		2,390		117
Mixed use and other	10,510		14,060		—		11,939		624
Home equity	6,424		7,987		—		5,738		288
Residential real estate	11,559		13,979		—		11,903		624
Consumer and other	197		267		—		201		12
Total impaired loans, net of unearned income	$	101,255	$	124,249	$	6,380	$	107,170	$	6,198



							For the Six Months Ended
	As of June 30, 2015						June 30, 2015
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
(Dollars in thousands)
Impaired loans with a related ASC 310 allowance recorded
Commercial
Commercial, industrial and other	$	7,607	$	8,046	$	2,200	$	7,788	$	181
Asset-based lending	—		—		—		—		—
Leases	65		65		65		66		2
Commercial real estate
Construction	—		—		—		—		—
Land	6,924		10,539		50		6,931		294
Office	7,005		7,010		2,414		7,060		154
Industrial	1,218		1,218		558		1,218		34
Retail	8,336		9,222		404		8,482		194
Multi-family	2,149		2,258		322		2,168		51
Mixed use and other	10,507		12,694		1,847		10,557		290
Home equity	1,673		1,728		808		1,680		34
Residential real estate	6,945		7,138		1,363		6,963		137
Consumer and other	180		245		44		190		6
Impaired loans with no related ASC 310 allowance recorded
Commercial
Commercial, industrial and other	$	3,760	$	6,731	$	—	$	4,052	$	219
Asset-based lending	—		—		—		—		—
Leases	—		—		—		—		—
Commercial real estate
Construction	2,665		2,665		—		2,650		61
Land	1,906		2,643		—		1,924		50
Office	6,289		8,780		—		6,834		221
Industrial	2,022		2,200		—		2,059		88
Retail	4,099		5,248		—		4,113		112
Multi-family	592		1,015		—		598		22
Mixed use and other	11,683		12,008		—		12,427		266
Home equity	4,236		5,697		—		4,320		118
Residential real estate	13,258		14,961		—		13,553		294
Consumer and other	238		267		—		241		7
Total impaired loans, net of unearned income	$	103,357	$	122,378	$	10,075	$	105,874	$	2,835

TDRs

At June 30, 2016, the Company had $49.6 million in loans modified in TDRs. The $49.6 million in TDRs represents 97 credits in which economic concessions were granted to certain borrowers to better align the terms of their loans with their current ability to pay.

The Company’s approach to restructuring loans, excluding PCI loans, is built on its credit risk rating system which requires credit management personnel to assign a credit risk rating to each loan. In each case, the loan officer is responsible for recommending a credit risk rating for each loan and ensuring the credit risk ratings are appropriate. These credit risk ratings are then reviewed and approved by the bank’s chief credit officer and/or concurrence credit officer. Credit risk ratings are determined by evaluating a number of factors including a borrower’s financial strength, cash flow coverage, collateral protection and guarantees. The Company’s credit risk rating scale is one through ten with higher scores indicating higher risk. In the case of loans rated six or worse following modification, the Company’s Managed Assets Division evaluates the loan and the credit risk rating and determines that the loan has been restructured to be reasonably assured of repayment and of performance according to the modified terms and is supported by a current, well-documented credit assessment of the borrower’s financial condition and prospects for repayment under the revised terms.

A modification of a loan, excluding PCI loans, with an existing credit risk rating of 6 or worse or a modification of any other credit, which will result in a restructured credit risk rating of six or worse, must be reviewed for possible TDR classification. In that event, our Managed Assets Division conducts an overall credit and collateral review. A modification of these loans is considered to be a TDR if both (1) the borrower is experiencing financial difficulty and (2) for economic or legal reasons, the bank grants a concession to a borrower that it would not otherwise consider. The modification of a loan, excluding PCI loans, where the credit risk rating is 5 or better both before and after such modification is not considered to be a TDR. Based on the Company’s credit risk rating system, it considers that borrowers whose credit risk rating is 5 or better are not experiencing financial difficulties and therefore, are not considered TDRs.

All credits determined to be a TDR will continue to be classified as a TDR in all subsequent periods, unless the borrower has been in compliance with the loan’s modified terms for a period of six months (including over a calendar year-end) and the current interest rate represents a market rate at the time of restructuring. The Managed Assets Division, in consultation with the respective loan officer, determines whether the modified interest rate represented a current market rate at the time of restructuring. Using knowledge of current market conditions and rates, competitive pricing on recent loan originations, and an assessment of various characteristics of the modified loan (including collateral position and payment history), an appropriate market rate for a new borrower with similar risk is determined. If the modified interest rate meets or exceeds this market rate for a new borrower with similar risk, the modified interest rate represents a market rate at the time of restructuring. Additionally, before removing a loan from TDR classification, a review of the current or previously measured impairment on the loan and any concerns related to future performance by the borrower is conducted. If concerns exist about the future ability of the borrower to meet its obligations under the loans based on a credit review by the Managed Assets Division, the TDR classification is not removed from the loan.

TDRs are reviewed at the time of the modification and on a quarterly basis to determine if a specific reserve is necessary. The carrying amount of the loan is compared to the expected payments to be received, discounted at the loan's original rate, or for collateral dependent loans, to the fair value of the collateral. Any shortfall is recorded as a specific reserve. The Company, in accordance with ASC 310-10, continues to individually measure impairment of these loans after the TDR classification is removed.

Each TDR was reviewed for impairment at June 30, 2016 and approximately $3.2 million of impairment was present and appropriately reserved for through the Company’s normal reserving methodology in the Company’s allowance for loan losses. For TDRs in which impairment is calculated by the present value of future cash flows, the Company records interest income representing the decrease in impairment resulting from the passage of time during the respective period, which differs from interest income from contractually required interest on these specific loans. During the three months ended June 30, 2016 and 2015, the Company recorded $135,000 and $94,000, respectively, in interest income representing this decrease in impairment. For the six months ended June 30, 2016 and 2015, the Company recorded $225,000 and $287,000, respectively, in interest income.

TDRs may arise in which, due to financial difficulties experienced by the borrower, the Company obtains through physical possession one or more collateral assets in satisfaction of all or part of an existing credit. Once possession is obtained, the Company reclassifies the appropriate portion of the remaining balance of the credit from loans to OREO, which is included within other assets in the Consolidated Statements of Condition. For any residential real estate property collateralizing a consumer mortgage loan, the Company is considered to possess the related collateral only if legal title is obtained upon completion of foreclosure, or the borrower conveys all interest in the residential real estate property to the Company through completion of a deed in lieu of foreclosure or similar legal agreement. Excluding covered OREO, at June 30, 2016, the Company had $11.3 million of foreclosed residential real estate properties included within OREO.

The tables below present a summary of the post-modification balance of loans restructured during the three and six months ended June 30, 2016 and 2015, respectively, which represent TDRs:



Three months ended June 30, 2016 (Dollars in thousands)	Total ⁽¹⁾⁽²⁾			Extension at Below Market Terms ⁽²⁾			Reduction of Interest Rate ⁽²⁾			Modification to Interest-only Payments ⁽²⁾			Forgiveness of Debt⁽²⁾
Three months ended June 30, 2016 (Dollars in thousands)	Count	Balance		Count	Balance		Count	Balance		Count	Balance		Count	Balance
Commercial
Commercial, industrial and other	1	$	275	1	$	275	—	$	—	—	$	—	1	$	275
Commercial real estate
Office	—	—		—	—		—	—		—	—		—	—
Industrial	—	—		—	—		—	—		—	—		—	—
Mixed use and other	—	—		—	—		—	—		—	—		—	—
Residential real estate and other	1	380		1	380		1	380		1	380		—	—
Total loans	2	$	655	2	$	655	1	$	380	1	$	380	1	$	275



Three months ended June 30, 2015 (Dollars in thousands)	Total ⁽¹⁾⁽²⁾			Extension at Below Market Terms ⁽²⁾			Reduction of Interest Rate ⁽²⁾			Modification to Interest-only Payments ⁽²⁾			Forgiveness of Debt⁽²⁾
Three months ended June 30, 2015 (Dollars in thousands)	Count	Balance		Count	Balance		Count	Balance		Count	Balance		Count	Balance
Commercial
Commercial, industrial and other	—	$	—	—	$	—	—	$	—	—	$	—	—	$	—
Commercial real estate
Office	—	—		—	—		—	—		—	—		—	—
Industrial	1	169		1	169		—	—		1	169		—	—
Mixed use and other	—	—		—	—		—	—		—	—		—	—
Residential real estate and other	5	1,148		5	1,148		2	372					—	—
Total loans	6	$	1,317	6	$	1,317	2	$	372	1	$	169	—	$	—


(1)	TDRs may have more than one modification representing a concession. As such, TDRs during the period may be represented in more than one of the categories noted above.


(2)	Balances represent the recorded investment in the loan at the time of the restructuring.

During the three months ended June 30, 2016, two loans totaling $655,000 were determined to be TDRs, compared to six loans totaling $1.3 million in the same period of 2015. Of these loans extended at below market terms, the weighted average extension had a term of approximately 36 months during the quarter ended June 30, 2016 compared to 29 months for the quarter ended June 30, 2015. Further, the weighted average decrease in the stated interest rate for loans with a reduction of interest rate during the period was approximately 275 basis points and 408 basis points during the three months ending June 30, 2016 and 2015, respectively. Interest-only payment terms were approximately six months during the three months ending June 30, 2016 compared to approximately 29 months for the three months ending June 30, 2015. Additionally, $300,000 of principal was forgiven in the second quarter of 2016 compared to no principal balances forgiven in the second quarter of 2015.



Six months ended June 30, 2016 (Dollars in thousands)	Total ⁽¹⁾⁽²⁾			Extension at Below Market Terms ⁽²⁾			Reduction of Interest Rate ⁽²⁾			Modification to Interest-only Payments ⁽²⁾			Forgiveness of Debt⁽²⁾
Six months ended June 30, 2016 (Dollars in thousands)	Count	Balance		Count	Balance		Count	Balance		Count	Balance		Count	Balance
Commercial
Commercial, industrial and other	2	$	317	2	$	317	—	$	—	—	$	—	1	$	275
Commercial real estate
Office	1	450		1	450		—	—		—	—		—	—
Industrial	6	7,921		6	7,921		3	7,196		—	—		—	—
Mixed use and other	2	150		2	150		—	—		—	—		—	—
Residential real estate and other	2	540		1	380		2	540		1	380		—	—
Total loans	13	$	9,378	12	$	9,218	5	$	7,736	1	$	380	1	$	275



Six months ended June 30, 2015 (Dollars in thousands)	Total⁽¹⁾⁽²⁾			Extension at Below Market Terms ⁽²⁾			Reduction of Interest Rate ⁽²⁾			Modification to Interest-only Payments ⁽²⁾			Forgiveness of Debt⁽²⁾
Six months ended June 30, 2015 (Dollars in thousands)	Count	Balance		Count	Balance		Count	Balance		Count	Balance		Count	Balance
Commercial
Commercial, industrial and other	—	$	—	—	$	—	—	$	—	—	$	—	—	$	—
Commercial real estate
Office	1	169		1	169		—	—		1	169		—	—
Industrial	—	—		—	—		—	—		—	—		—	—
Mixed use and other	—	—		—	—		—	—		—	—		—	—
Residential real estate and other	8	1,442		8	1,442		4	452		1	50		—	—
Total loans	9	$	1,611	9	$	1,611	4	$	452	2	$	219	—	$	—


(1)	TDRs may have more than one modification representing a concession. As such, TDRs during the period may be represented in more than one of the categories noted above.


(2)	Balances represent the recorded investment in the loan at the time of the restructuring.

During the six months ended June 30, 2016, 13 loans totaling $9.4 million were determined to be TDRs, compared to nine loans totaling $1.6 million in the same period of 2015. Of these loans extended at below market terms, the weighted average extension had a term of approximately six months during the six months ended June 30, 2016 compared to 27 months for the six months ended June 30, 2015. Further, the weighted average decrease in the stated interest rate for loans with a reduction of interest rate during the period was approximately 30 basis points and 367 basis points for the year-to-date periods June 30, 2016 and 2015, respectively. Interest-only payment terms were approximately six months during the six months ending June 30, 2016 compared to 28 months during the same period of 2015. Additionally, $300,000 of principal balances were forgiven in the first six months of 2016 compared to no balances forgiven during the same period of 2015.

The following table presents a summary of all loans restructured in TDRs during the twelve months ended June 30, 2016 and 2015, and such loans which were in payment default under the restructured terms during the respective periods below:



(Dollars in thousands)	As of June 30, 2016			Three Months Ended June 30, 2016			Six Months Ended June 30, 2016
	Total ⁽¹⁾⁽³⁾			Payments in Default⁽²⁾⁽³⁾			Payments in Default⁽²⁾⁽³⁾
	Count	Balance		Count	Balance		Count	Balance
Commercial
Commercial, industrial and other	2	$	317	—	$	—	—	$	—
Commercial real estate
Office	1	450		1	450		1	450
Industrial	6	7,921		3	725		3	725
Mixed use and other	4	351		1	16		3	217
Residential real estate and other	3	762		1	222		1	222
Total loans	16	$	9,801	6	$	1,413	8	$	1,614



(Dollars in thousands)	As of June 30, 2015			Three Months Ended June 30, 2015			Six Months Ended June 30, 2015
	Total ⁽¹⁾⁽³⁾			Payments in Default ⁽²⁾⁽³⁾			Payments in Default ⁽²⁾⁽³⁾
	Count	Balance		Count	Balance		Count	Balance
Commercial
Commercial, industrial and other	1	$	1,461	—	$	—	—	$	—
Commercial real estate
Office	1	720		—	—		—	—
Industrial	2	854		—	—		—	—
Mixed use and other	—	—		—	—		—	—
Residential real estate and other	13	3,058		4	833		4	833
Total loans	17	$	6,093	4	$	833	4	$	833


(1)	Total TDRs represent all loans restructured in TDRs during the previous twelve months from the date indicated.


(2)	TDRs considered to be in payment default are over 30 days past-due subsequent to the restructuring.


(3)	Balances represent the recorded investment in the loan at the time of the restructuring.