We maintain an allowance for loan losses, or ALL, at a level determined to be adequate to absorb estimated probable credit losses inherent in the loan portfolio as of the balance sheet date. We develop and document a systematic ALL methodology based on the following portfolio segments: 1) CRE, 2) C&I, 3) Commercial Construction, 4) Consumer Real Estate and 5) Other Consumer.

The following are key risks within each portfolio segment:

CRE—Loans secured by commercial purpose real estate, including both owner occupied properties and investment properties, for various purposes such as hotels, strip malls and apartments. Operations of the individual projects as well as global cash flows of the debtors are the primary sources of repayment for these loans. The condition of the local economy is an important indicator of risk, but there are also more specific risks depending on the collateral type as well as the business prospects of the lessee, if the project is not owner occupied.

C&I—Loans made to operating companies or manufacturers for the purpose of production, operating capacity, accounts receivable, inventory or equipment financing. Cash flow from the operations of the company is the primary source of repayment for these loans. The condition of the local economy is an important indicator of risk, but there are also more specific risks depending on the industry of the company. Collateral for these types of loans often do not have sufficient value in a distressed or liquidation scenario to satisfy the outstanding debt.

Commercial Construction—Loans made to finance construction of buildings or other structures, as well as to finance the acquisition and development of raw land for various purposes. While the risk of these loans is generally confined to the construction period, if there are problems, the project may not be complete, and as such, may not provide sufficient cash flow on its own to service the debt or have sufficient value in a liquidation to cover the outstanding principal. The condition of the local economy is an important indicator of risk, but there are also more specific risks depending on the type of project and the experience and resources of the developer.

Consumer Real Estate—Loans secured by first and second liens such as home equity loans, home equity lines of credit and 1-4 family residences, including purchase money mortgages. The primary source of repayment for these loans is the income and assets of the borrower. The condition of the local economy, in particular the unemployment rate, is an important indicator of risk for this segment. The state of the local housing market can also have a significant impact on this segment because low demand and/or declining home values can limit the ability of borrowers to sell a property and satisfy the debt.

Other Consumer—Loans made to individuals that may be secured by assets other than 1-4 family residences, as well as unsecured loans. This segment includes auto loans, unsecured loans and lines and credit cards. The primary source of repayment for these loans is the income and assets of the borrower. The condition of the local economy, in particular the unemployment rate, is an important indicator of risk for this segment. The value of the collateral, if there is any, is less likely to be a source of repayment due to less certain collateral values.

We further assess risk within each portfolio segment by pooling loans with similar risk characteristics. For the commercial loan classes, the most important indicator of risk is the internally assigned risk rating, including pass, special mention and substandard. Consumer loans are pooled by type of collateral, lien position and loan to value, or LTV, ratio for Consumer Real Estate loans. Historical loss rates are applied to these loan pools to determine the reserve for loans collectively evaluated for impairment.

The ALL methodology for groups of loans collectively evaluated for impairment is comprised of both a quantitative and qualitative analysis. A key assumption in the quantitative component of the reserve is the loss emergence period, or LEP. The LEP is an estimate of the average amount of time from the point at which a loss is incurred on a loan to the point at which the loss is confirmed. In general, the LEP will be shorter in an economic slowdown or recession and longer during times of economic stability or growth, as customers are better able to delay loss confirmation after a potential loss event has occurred.

Another key assumption is the look-back period, or LBP, which represents the historical data period utilized to calculate loss rates.

Management monitors various credit quality indicators for both the commercial and consumer loan portfolios, including delinquency, nonperforming status and changes in risk ratings on a monthly basis.

The following tables present the age analysis of past due loans segregated by class of loans as of June 30, 2015 and December 31, 2014:



	June 30, 2015
(dollars in thousands)	Current		30-59 Days Past Due		60-89 Days Past Due		90 Days Past Due⁽¹⁾		Nonaccrual		Total Past Due		Total Loans
Commercial real estate	$	2,032,731	$	9,656	$	3,518	$	1,721	$	7,309	$	22,204	$	2,054,935
Commercial and industrial	1,231,221		2,875		2,143		—		3,143		8,161		1,239,382
Commercial construction	333,897		4,474		—		2,140		4,472		11,086		344,983
Residential mortgage	593,043		1,732		1,770		947		2,010		6,459		599,502
Home equity	453,279		1,971		430		107		2,026		4,534		457,813
Installment and other consumer	93,223		261		774		—		179		1,214		94,437
Consumer construction	7,446		—		—		—		—		—		7,446
Loans held for sale	13,634		—		—		—		—		—		13,634
Totals	$	4,758,474	$	20,969	$	8,635	$	4,915	$	19,139	$	53,658	$	4,812,132
⁽¹⁾Represents acquired loans that were recorded at fair value at the acquisition date.



	December 31, 2014
(dollars in thousands)	Current		30-59 Days Past Due		60-89 Days Past Due		90 Days Past Due		Nonaccrual		Total Past Due		Total Loans
Commercial real estate	$	1,674,930	$	2,548	$	323	$	—	$	4,435	$	7,306	$	1,682,236
Commercial and industrial	991,136		1,227		153		—		1,622		3,002		994,138
Commercial construction	214,174		—		—		—		1,974		1,974		216,148
Residential mortgage	485,465		565		1,220		—		2,336		4,121		489,586
Home equity	414,303		1,756		445		—		2,059		4,260		418,563
Installment and other consumer	65,111		352		73		—		31		456		65,567
Consumer construction	2,508		—		—		—		—		—		2,508
Loans held for sale	2,970		—		—		—		—		—		2,970
Totals	$	3,850,597	$	6,448	$	2,214	$	—	$	12,457	$	21,119	$	3,871,716

We continually monitor the commercial loan portfolio through an internal risk rating system. Loan risk ratings are assigned based upon the creditworthiness of the borrower and are reviewed on an ongoing basis according to our internal policies. Loans within the pass rating generally have a lower risk of loss than loans risk rated as special mention or substandard.

Our risk ratings are consistent with regulatory guidance and are as follows:

Pass—The loan is currently performing and is of high quality.

Special Mention—A special mention loan has potential weaknesses that warrant management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects or in the strength of our credit position at some future date. Economic and market conditions, beyond the borrower’s control, may in the future necessitate this classification.

Substandard—A substandard loan is not adequately protected by the net worth and/or paying capacity of the borrower or by the collateral pledged, if any. Substandard loans have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. These loans are characterized by the distinct possibility that we will sustain some loss if the deficiencies are not corrected.

The following tables present the recorded investment in commercial loan classes by internally assigned risk ratings as of the dates presented:



	June 30, 2015
(dollars in thousands)	Commercial Real Estate		% of Total		Commercial and Industrial		% of Total		Commercial Construction		% of Total		Total		% of Total
Pass	$	1,976,311	96.2	%	$	1,158,898	93.5	%	$	300,968	87.3	%	$	3,436,177	94.4	%
Special mention	33,328		1.6	%	60,251		4.9	%	26,276		7.6	%	119,855		3.3	%
Substandard	45,296		2.2	%	20,233		1.6	%	17,739		5.1	%	83,268		2.3	%
Total	$	2,054,935	100	%	$	1,239,382	100.0	%	$	344,983	100.0	%	$	3,639,300	100.0	%

	December 31, 2014
(dollars in thousands)	Commercial Real Estate		% of Total		Commercial and Industrial		% of Total		Commercial Construction		% of Total		Total		% of Total
Pass	$	1,635,132	97.2	%	$	948,663	95.4	%	$	196,520	90.9	%	$	2,780,315	96.1	%
Special mention	23,597		1.4	%	30,357		3.1	%	12,014		5.6	%	65,968		2.3	%
Substandard	23,507		1.4	%	15,118		1.5	%	7,614		3.5	%	46,239		1.6	%
Total	$	1,682,236	100.0	%	$	994,138	100.0	%	$	216,148	100.0	%	$	2,892,522	100.0	%

We monitor the delinquent status of the consumer portfolio on a monthly basis. Loans are considered nonperforming when interest and principal are 90 days or more past due or management has determined that a material deterioration in the borrower’s financial condition exists. The risk of loss is generally highest for nonperforming loans.

The following tables present the recorded investment in consumer loan classes by performing and nonperforming status as of the dates presented:



	June 30, 2015
(dollars in thousands)	Residential Mortgage		% of Total		Home Equity		% of Total		Installment and other consumer		% of Total		Consumer Construction		% of Total		Total		% of Total
Performing	$	597,492	99.7	%	$	455,787	99.6	%	$	94,258	99.8	%	$	7,446	100.0	%	$	1,154,983	99.6	%
Nonperforming	2,010		0.3	%	2,026		0.4	%	179		0.2	%	—		—	%	4,215		0.4	%
Total	$	599,502	100.0	%	$	457,813	100.0	%	$	94,437	100.0	%	$	7,446	100.0	%	$	1,159,198	100.0	%

	December 31, 2014
(dollars in thousands)	Residential Mortgage		% of Total		Home Equity		% of Total		Installment and other consumer		% of Total		Consumer Construction		% of Total		Total		% of Total
Performing	$	487,250	99.5	%	$	416,504	99.5	%	$	65,536	99.9	%	$	2,508	100.0	%	$	971,798	99.5	%
Nonperforming	2,336		0.5	%	2,059		0.5	%	31		0.1	%	—		—	%	4,426		0.5	%
Total	$	489,586	100.0	%	$	418,563	100.0	%	$	65,567	100.0	%	$	2,508	100.0	%	$	976,224	100.0	%

We individually evaluate all substandard and nonaccrual commercial loans greater than $0.5 million for impairment. Loans are considered to be impaired when based upon current information and events it is probable that we will be unable to collect all principal and interest payments due according to the original contractual terms of the loan agreement. All TDRs will be reported as an impaired loan for the remaining life of the loan, unless the restructuring agreement specifies an interest rate equal to or greater than the rate that would be accepted at the time of the restructuring for a new loan with comparable risk and it is expected that the remaining principal and interest will be fully collected according to the restructured agreement. For all TDRs, regardless of size, as well as all other impaired loans, we conduct further analysis to determine the probable loss and assign a specific reserve to the loan if deemed appropriate.

The following tables summarize investments in loans considered to be impaired and the related information on those impaired loans as of the dates presented:



	June 30, 2015						December 31, 2014
(dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
Without a related allowance recorded:
Commercial real estate	$	18,548	$	25,698	$	—	$	19,890	$	25,262	$	—
Commercial and industrial	10,125		11,877		—		9,218		9,449		—
Commercial construction	9,293		12,983		—		7,605		11,293		—
Consumer real estate	6,824		7,527		—		7,159		7,733		—
Other consumer	192		197		—		42		48		—
Total without a Related Allowance Recorded	44,982		58,282		—		43,914		53,785		—
With a related allowance recorded:
Commercial real estate	749		749		567		—		—		—
Commercial and industrial	—		—		—		—		—		—
Commercial construction	—		—		—		—		—		—
Consumer real estate	120		120		37		43		43		43
Other consumer	4		4		4		20		20		11
Total with a Related Allowance Recorded	873		873		608		63		63		54
Total:
Commercial real estate	19,297		26,447		567		19,890		25,262		—
Commercial and industrial	10,125		11,877		—		9,218		9,449		—
Commercial construction	9,293		12,983		—		7,605		11,293		—
Consumer real estate	6,944		7,647		37		7,202		7,776		43
Other consumer	196		201		4		62		68		11
Total	$	45,855	$	59,155	$	608	$	43,977	$	53,848	$	54

The following tables summarize investments in loans considered to be impaired and related information on those impaired loans for the periods presented:



	Three Months Ended
	June 30, 2015				June 30, 2014
(dollars in thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Without a related allowance recorded:
Commercial real estate	$	19,733	$	158	$	21,382	$	159
Commercial and industrial	10,782		84		9,317		57
Commercial construction	8,119		81		8,279		57
Consumer real estate	6,891		91		7,166		100
Other consumer	126		4		109		1
Total without a Related Allowance Recorded	45,651		418		46,253		374
With a related allowance recorded:
Commercial real estate	420		—		—		—
Commercial and industrial	—		—		—		—
Commercial construction	—		—		—		—
Consumer real estate	121		2		48		1
Other consumer	4		—		22		—
Total with a Related Allowance Recorded	545		2		70		1
Total:
Commercial real estate	20,153		158		21,382		159
Commercial and industrial	10,782		84		9,317		57
Commercial construction	8,119		81		8,279		57
Consumer real estate	7,012		93		7,214		101
Other consumer	130		4		131		1
Total	$	46,196	$	420	$	46,323	$	375



	Six Months Ended
	June 30, 2015				June 30, 2014
(dollars in thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Without a related allowance recorded:
Commercial real estate	$	20,455	$	322	$	21,980	$	329
Commercial and industrial	11,162		146		9,066		114
Commercial construction	6,628		134		8,301		114
Consumer real estate	6,943		186		7,260		203
Other consumer	86		4		112		2
Total without a Related Allowance Recorded	45,274		792		46,719		762
With a related allowance recorded:
Commercial real estate	$	211	$	—	$	—	$	—
Commercial and industrial	—		—		—		—
Commercial construction	—		—		—		—
Consumer real estate	122		3		50		2
Other consumer	4		—		23		1
Total with a Related Allowance Recorded	337		3		73		3
Total:
Commercial real estate	20,666		322		21,980		329
Commercial and industrial	11,162		146		9,066		114
Commercial construction	6,628		134		8,301		114
Consumer real estate	7,065		189		7,310		205
Other consumer	90		4		135		3
Total	$	45,611	$	795	$	46,792	$	765

The following tables detail activity in the ALL for the periods presented:



	Three Months Ended June 30, 2015
(dollars in thousands)	Commercial Real Estate			Commercial and Industrial			Commercial Construction			Consumer Real Estate			Other Consumer			Total Loans
Balance at beginning of period	$	19,071		$	13,711		$	6,869		$	6,723		$	1,732		$	48,106
Charge-offs	(310		)	(992		)	—			(177		)	(276		)	(1,755		)
Recoveries	73			89			1			112			129			404
Net (Charge-offs)/ Recoveries	(237		)	(903		)	1			(65		)	(147		)	(1,351		)
Provision for loan losses	184			500			801			369			205			2,059
Balance at End of Period	$	19,018		$	13,308		$	7,671		$	7,027		$	1,790		$	48,814


	Three Months Ended June 30, 2014
(dollars in thousands)	Commercial Real Estate			Commercial and Industrial			Commercial Construction			Consumer Real Estate			Other Consumer			Total Loans
Balance at beginning of period	$	19,880		$	13,979		$	5,183		$	6,408		$	1,166		$	46,616
Charge-offs	(1,737		)	(743		)	(664		)	(425		)	(177		)	(3,746		)
Recoveries	1,294			2,936			324			164			126			4,844
Net (Charge-offs)/ Recoveries	(443		)	2,193			(340		)	(261		)	(51		)	1,098
Provision for loan losses	1,296			(3,168		)	(84		)	558			264			(1,134		)
Balance at End of Period	$	20,733		$	13,004		$	4,759		$	6,705		$	1,379		$	46,580


	Six Months Ended June 30, 2015
(dollars in thousands)	Commercial Real Estate			Commercial and Industrial			Commercial Construction			Consumer Real Estate			Other Consumer			Total Loans
Balance at beginning of period	$	20,164		$	13,668		$	6,093		$	6,333		$	1,653		$	47,911
Charge-offs	(376		)	(1,698		)	—			(552		)	(579		)	(3,205		)
Recoveries	176			203			2			248			213			842
Net (Charge-offs)/Recoveries	(200		)	(1,495		)	2			(304		)	(366		)	(2,363		)
Provision for loan losses	(946		)	1,135			1,576			998			503			3,266
Balance at End of Period	$	19,018		$	13,308		$	7,671		$	7,027		$	1,790		$	48,814


	Six Months Ended June 30, 2014
(dollars in thousands)	Commercial Real Estate			Commercial and Industrial			Commercial Construction			Consumer Real Estate			Other Consumer			Total Loans
Balance at beginning of period	$	18,921		$	14,433		$	5,374		$	6,362		$	1,165		$	46,255
Charge-offs	(2,004		)	(1,033		)	(692		)	(547		)	(445		)	(4,721		)
Recoveries	1,834			3,249			375			223			210			5,891
Net (Charge-offs)/Recoveries	(170		)	2,216			(317		)	(324		)	(235		)	1,170
Provision for loan losses	1,982			(3,645		)	(298		)	667			449			(845		)
Balance at End of Period	$	20,733		$	13,004		$	4,759		$	6,705		$	1,379		$	46,580

The following tables present the ALL and recorded investments in loans by category as of the periods presented:



	June 30, 2015
	Allowance for Loan Losses						Portfolio Loans
(dollars in thousands)	Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Total		Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Total⁽¹⁾
Commercial real estate	$	567	$	18,451	$	19,018	$	19,297	$	2,035,638	$	2,054,935
Commercial and industrial	—		13,308		13,308		10,125		1,229,257		1,239,382
Commercial construction	—		7,671		7,671		9,293		335,690		344,983
Consumer real estate	37		6,990		7,027		6,944		1,057,817		1,064,761
Other consumer	4		1,786		1,790		196		94,241		94,437
Total	$	608	$	48,206	$	48,814	$	45,855	$	4,752,643	$	4,798,498
⁽¹⁾Includes acquired loans.
	December 31, 2014
	Allowance for Loan Losses						Portfolio Loans
(dollars in thousands)	Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Total		Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Total⁽¹⁾
Commercial real estate	$	—	$	20,164	$	20,164	$	19,890	$	1,662,346	$	1,682,236
Commercial and industrial	—		13,668		13,668		9,218		984,920		994,138
Commercial construction	—		6,093		6,093		7,605		208,543		216,148
Consumer real estate	43		6,290		6,333		7,202		903,455		910,657
Other consumer	11		1,642		1,653		62		65,505		65,567
Total	$	54	$	47,857	$	47,911	$	43,977	$	3,824,769	$	3,868,746
⁽¹⁾Includes acquired loans.

Acquired loans are recorded at fair value with no carryover of the ALL. Credit deterioration on acquired loans incurred subsequent to the acquisition date will be recognized in the ALL through the provision.