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 does 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 completed, 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 residential mortgages, 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, 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. 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 the dates presented:



	June 30, 2017
(dollars in thousands)	Current		30-59 Days Past Due		60-89 Days Past Due		Nonaccrual		Total Past Due		Total Loans
Commercial real estate	$	2,653,680	$	2,846	$	917	$	7,199	$	10,962	$	2,664,642
Commercial and industrial	1,381,657		1,454		754		17,418		19,626		1,401,283
Commercial construction	424,254		187		—		2,313		2,500		426,754
Residential mortgage	694,800		3,506		781		7,056		11,343		706,143
Home equity	479,190		2,620		508		2,642		5,770		484,960
Installment and other consumer	69,756		211		60		41		312		70,068
Consumer construction	3,969		—		—		—		—		3,969
Loans held for sale	23,120		—		—		—		—		23,120
Total	$	5,730,426	$	10,824	$	3,020	$	36,669	$	50,513	$	5,780,939



	December 31, 2016
(dollars in thousands)	Current		30-59 Days Past Due		60-89 Days Past Due		Nonaccrual		Total Past Due		Total Loans
Commercial real estate	$	2,479,513	$	2,032	$	759	$	16,172	$	18,963	$	2,498,476
Commercial and industrial	1,391,475		1,061		428		8,071		9,560		1,401,035
Commercial construction	450,410		547		—		4,927		5,474		455,884
Residential mortgage	689,635		1,312		1,117		9,918		12,347		701,982
Home equity	476,866		1,470		509		3,439		5,418		482,284
Installment and other consumer	65,525		176		43		108		327		65,852
Consumer construction	5,906		—		—		—		—		5,906
Loans held for sale	3,793		—		—		—		—		3,793
Total	$	5,563,123	$	6,598	$	2,856	$	42,635	$	52,089	$	5,615,212

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, 2017
(dollars in thousands)	Commercial Real Estate		% of Total		Commercial and Industrial		% of Total		Commercial Construction		% of Total		Total		% of Total
Pass	$	2,574,835	96.6	%	$	1,290,204	92.1	%	$	402,199	94.2	%	$	4,267,238	95.0	%
Special mention	57,197		2.2	%	62,033		4.4	%	16,468		3.9	%	135,698		3.0	%
Substandard	32,610		1.2	%	49,046		3.5	%	8,087		1.9	%	89,743		2.0	%
Total	$	2,664,642	100.0	%	$	1,401,283	100.0	%	$	426,754	100.0	%	$	4,492,679	100.0	%

	December 31, 2016
(dollars in thousands)	Commercial Real Estate		% of Total		Commercial and Industrial		% of Total		Commercial Construction		% of Total		Total		% of Total
Pass	$	2,423,742	97.0	%	$	1,315,507	93.9	%	$	430,472	94.4	%	$	4,169,721	95.7	%
Special mention	33,098		1.3	%	40,409		2.9	%	14,691		3.2	%	88,198		2.0	%
Substandard	41,636		1.7	%	45,119		3.2	%	10,721		2.4	%	97,476		2.3	%
Total	$	2,498,476	100.0	%	$	1,401,035	100.0	%	$	455,884	100.0	%	$	4,355,395	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, 2017
(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	$	699,087	99.0	%	$	482,318	99.5	%	$	70,027	99.9	%	$	3,969	100.0	%	$	1,255,401	99.2	%
Nonperforming	7,056		1.0	%	2,642		0.5	%	41		0.1	%	—		—	%	9,739		0.8	%
Total	$	706,143	100.0	%	$	484,960	100.0	%	$	70,068	100.0	%	$	3,969	100.0	%	$	1,265,140	100.0	%

	December 31, 2016
(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	$	692,064	98.6	%	$	478,845	99.3	%	$	65,744	99.8	%	$	5,906	100.0	%	$	1,242,559	98.9	%
Nonperforming	9,918		1.4	%	3,439		0.7	%	108		0.2	%	—		—	%	13,465		1.1	%
Total	$	701,982	100.0	%	$	482,284	100.0	%	$	65,852	100.0	%	$	5,906	100.0	%	$	1,256,024	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 table summarizes investments in loans considered to be impaired and related information on those impaired loans as of the dates presented:



	June 30, 2017						December 31, 2016
(dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
With a related allowance recorded:
Commercial real estate	$	—	$	—	$	—	$	—	$	—	$	—
Commercial and industrial	2,443		2,443		340		964		2,433		771
Commercial construction	—		—		—		—		—		—
Consumer real estate	24		24		24		26		26		26
Other consumer	25		25		25		1		1		1
Total with a Related Allowance Recorded	2,492		2,492		389		991		2,460		798
Without a related allowance recorded:
Commercial real estate	6,472		7,472		—		16,352		17,654		—
Commercial and industrial	16,125		18,097		—		5,902		7,699		—
Commercial construction	4,257		6,295		—		6,613		10,306		—
Consumer real estate	11,106		12,024		—		12,053		12,849		—
Other consumer	10		13		—		24		31		—
Total without a Related Allowance Recorded	37,970		43,901		—		40,944		48,539		—
Total:
Commercial real estate	6,472		7,472		—		16,352		17,654		—
Commercial and industrial	18,568		20,540		340		6,866		10,132		771
Commercial construction	4,257		6,295		—		6,613		10,306		—
Consumer real estate	11,130		12,048		24		12,079		12,875		26
Other consumer	35		38		25		25		32		1
Total	$	40,462	$	46,393	$	389	$	41,935	$	50,999	$	798

As of June 30, 2017, we had $40.5 million of impaired loans, which included $4.3 million of acquired loans from the Merger that experienced credit deterioration since the acquisition date. This compares to $41.9 million of impaired loans at December 31, 2016, which included $18.4 million of acquired loans from the Merger.

The following table summarizes average recorded investment in and interest income recognized on loans considered to be impaired for the periods presented:



	Three Months Ended
	June 30, 2017				June 30, 2016
(dollars in thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With a related allowance recorded:
Commercial real estate	$	—	$	—	$	—	$	—
Commercial and industrial	813		6		4,617		31
Commercial construction	—		—		1,232		6
Consumer real estate	24		1		29		1
Other consumer	26		—		1		—
Total with a Related Allowance Recorded	863		7		5,879		38
Without a related allowance recorded:
Commercial real estate	6,934		35		14,619		64
Commercial and industrial	17,625		95		10,959		98
Commercial construction	4,262		42		10,625		48
Consumer real estate	11,280		125		11,028		107
Other consumer	11		1		38		—
Total without a Related Allowance Recorded	40,112		298		47,269		317
Total:
Commercial real estate	6,934		35		14,619		64
Commercial and industrial	18,438		101		15,576		129
Commercial construction	4,262		42		11,857		54
Consumer real estate	11,304		126		11,057		108
Other consumer	37		1		39		—
Total	$	40,975	$	305	$	53,148	$	355



	Six Months Ended
	June 30, 2017				June 30, 2016
(dollars in thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With a related allowance recorded:
Commercial real estate	$	—	$	—	$	—	$	—
Commercial and industrial	628		11		4,999		63
Commercial construction	—		—		1,244		12
Consumer real estate	25		1		30		1
Other consumer	27		1		2		—
Total with a Related Allowance Recorded	680		13		6,275		76
Without a related allowance recorded:
Commercial real estate	7,028		70		14,798		132
Commercial and industrial	16,382		124		11,253		189
Commercial construction	4,267		79		10,669		108
Consumer real estate	11,514		255		11,089		243
Other consumer	12		—		40		1
Total without a Related Allowance Recorded	39,203		528		47,849		673
Total:
Commercial real estate	7,028		70		14,798		132
Commercial and industrial	17,010		135		16,252		252
Commercial construction	4,267		79		11,913		120
Consumer real estate	11,539		256		11,119		244
Other consumer	39		1		42		1
Total	$	39,883	$	541	$	54,124	$	749

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



	Three Months Ended June 30, 2017
(dollars in thousands)	Commercial Real Estate			Commercial and Industrial			Commercial Construction			Consumer Real Estate			Other Consumer			Total Loans
Balance at beginning of period	$	20,570		$	13,244		$	14,102		$	5,956		$	1,944		$	55,816
Charge-offs	(1,673		)	(2,682		)	—			(1,097		)	(370		)	(5,822		)
Recoveries	155			69			113			76			75			488
Net (Charge-offs)/ Recoveries	(1,518		)	(2,613		)	113			(1,021		)	(295		)	(5,334		)
Provision for loan losses	5,306			(1,375		)	(271		)	868			341			4,869
Balance at End of Period	$	24,358		$	9,256		$	13,944		$	5,803		$	1,990		$	55,351


	Three Months Ended June 30, 2016
(dollars in thousands)	Commercial Real Estate			Commercial and Industrial			Commercial Construction			Consumer Real Estate			Other Consumer			Total Loans
Balance at beginning of period	$	15,266		$	14,740		$	10,825		$	8,261		$	1,255		$	50,347
Charge-offs	(1,662		)	(136		)	(945		)	(290		)	(463		)	(3,496		)
Recoveries	38			217			2			134			123			514
Net (Charge-offs)/ Recoveries	(1,624		)	81			(943		)	(156		)	(340		)	(2,982		)
Provision for loan losses	2,336			(50		)	1,819			313			430			4,848
Balance at End of Period	$	15,978		$	14,771		$	11,701		$	8,418		$	1,345		$	52,213


	Six Months Ended June 30, 2017
(dollars in thousands)	Commercial Real Estate			Commercial and Industrial			Commercial Construction			Consumer Real Estate			Other Consumer			Total Loans
Balance at beginning of period	$	19,976		$	10,810		$	13,999		$	6,095		$	1,895		$	52,775
Charge-offs	(2,063		)	(3,396		)	(644		)	(1,856		)	(804		)	(8,763		)
Recoveries	233			255			369			179			251			1,287
Net (Charge-offs)/Recoveries	(1,830		)	(3,141		)	(275		)	(1,677		)	(553		)	(7,476		)
Provision for loan losses	6,212			1,587			220			1,385			648			10,052
Balance at End of Period	$	24,358		$	9,256		$	13,944		$	5,803		$	1,990		$	55,351


	Six Months Ended June 30, 2016
(dollars in thousands)	Commercial Real Estate			Commercial and Industrial			Commercial Construction			Consumer Real Estate			Other Consumer			Total Loans
Balance at beginning of period	$	15,043		$	10,853		$	12,625		$	8,400		$	1,226		$	48,147
Charge-offs	(1,715		)	(2,830		)	(945		)	(522		)	(1,111		)	(7,123		)
Recoveries	398			420			3			298			207			1,326
Net (Charge-offs)/Recoveries	(1,317		)	(2,410		)	(942		)	(224		)	(904		)	(5,797		)
Provision for loan losses	2,252			6,328			18			242			1,023			9,863
Balance at End of Period	$	15,978		$	14,771		$	11,701		$	8,418		$	1,345		$	52,213

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



	June 30, 2017
	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
Commercial real estate	$	—	$	24,358	$	24,358	$	6,472	$	2,658,170	$	2,664,642
Commercial and industrial	340		8,916		9,256		18,568		1,382,715		1,401,283
Commercial construction	—		13,944		13,944		4,257		422,497		426,754
Consumer real estate	24		5,779		5,803		11,130		1,183,942		1,195,072
Other consumer	25		1,965		1,990		35		70,033		70,068
Total	$	389	$	54,962	$	55,351	$	40,462	$	5,717,357	$	5,757,819

	December 31, 2016
	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
Commercial real estate	$	—	$	19,976	$	19,976	$	16,352	$	2,482,124	$	2,498,476
Commercial and industrial	771		10,039		10,810		6,866		1,394,169		1,401,035
Commercial construction	—		13,999		13,999		6,613		449,271		455,884
Consumer real estate	26		6,069		6,095		12,079		1,178,093		1,190,172
Other consumer	1		1,894		1,895		25		65,827		65,852
Total	$	798	$	51,977	$	52,775	$	41,935	$	5,569,484	$	5,611,419