We maintain an ALL at a level determined to be appropriate to absorb estimated probable credit losses inherent within 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.

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 and 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 and 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, 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 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 LBP which represents the historical data period utilized to calculate loss rates.



	December 31, 2019
(dollars in thousands)	Current		30-59 Days Past Due		60-89 Days Past Due		90 Days + Past Due⁽¹⁾		Non- performing		Total Past Due Loans		Total Loans
Commercial real estate	$	3,376,156	$	9,595	$	716	$	911	$	29,140	$	40,362	$	3,416,518
Commercial and industrial	1,700,522		2,940		1,946		1,443		13,982		20,311		1,720,833
Commercial construction	372,589		956		1,163		—		737		2,856		375,445
Residential mortgage	986,148		2,016		1,727		1,175		7,519		12,437		998,585
Home equity	533,367		2,059		141		142		2,639		4,981		538,348
Installment and other consumer	78,189		426		292		86		40		844		79,033
Consumer construction	8,390		—		—		—		—		—		8,390
Loans held for sale	5,256		—		—		—		—		—		5,256
Total	$	7,060,617	$	17,992	$	5,985	$	3,757	$	54,057	$	81,791	$	7,142,408



	December 31, 2018
(dollars in thousands)	Current		30-59 Days Past Due		60-89 Days Past Due		90 Days + Past Due		Non- performing		Total Past Due Loans		Total Loans
Commercial real estate	$	2,903,997	$	3,638	$	2,145	$	—	$	12,052	$	17,835	$	2,921,832
Commercial and industrial	1,482,473		1,000		983		—		8,960		10,943		1,493,416
Commercial construction	243,004		—		—		—		14,193		14,193		257,197
Residential mortgage	717,447		1,584		520		—		7,128		9,232		726,679
Home equity	465,152		2,103		609		—		3,698		6,410		471,562
Installment and other consumer	67,281		148		75		—		42		265		67,546
Consumer construction	8,416		—		—		—		—		—		8,416
Loans held for sale	2,371		—		—		—		—		—		2,371
Total	$	5,890,141	$	8,473	$	4,332	$	—	$	46,073	$	58,878	$	5,949,019

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 and substandard.

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.

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.

Doubtful—Loans classified doubtful have all the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently known facts, conditions, and values, highly questionable and improbable.



	December 31, 2019
(dollars in thousands)	Commercial Real Estate		% of Total		Commercial and Industrial		% of Total		Commercial Construction		% of Total		Total		% of Total
Pass	$	3,270,437	95.7	%	$	1,636,314	95.1	%	$	347,324	92.5	%	$	5,254,076	95.3	%
Special mention	57,285		1.7	%	36,484		2.1	%	10,109		2.7	%	103,878		1.9	%
Substandard	86,772		2.5	%	47,980		2.8	%	17,899		4.8	%	152,651		2.8	%
Doubtful	2,023		—	%	55		—	%	113		—	%	2,191		—	%
Total	$	3,416,518	100.0	%	$	1,720,833	100.0	%	$	375,445	100.0	%	$	5,512,796	100.0	%



	December 31, 2018
(dollars in thousands)	Commercial Real Estate		% of Total		Commercial and Industrial		% of Total		Commercial Construction		% of Total		Total		% of Total
Pass	$	2,774,997	95.0	%	$	1,394,067	93.4	%	$	233,103	90.7	%	$	4,402,167	94.3	%
Special mention	54,627		1.9	%	25,368		1.7	%	7,349		2.8	%	87,344		1.8	%
Substandard	90,913		3.1	%	73,621		4.9	%	16,658		6.5	%	181,192		3.9	%
Doubtful	1,295		—	%	360		—	%	87		—	%	1,742		—	%
Total	$	2,921,832	100.0	%	$	1,493,416	100.0	%	$	257,197	100.0	%	$	4,672,445	100.0	%

Commercial substandard loans decreased $28.5 million from December 31, 2018 mainly due to loan pay-offs and upgrades of risk ratings. Special mention loans increased $16.5 million to $103.9 million at December 31, 2019 due to downgrades as a result of updated financial information.

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. Loans 90 days past due and still performing represent acquired loans that were recorded at fair value at the acquisition date.



	December 31, 2019
(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	$	991,066	99.2	%	$	535,709	99.5	%	$	78,993	99.9	%	$	8,390	100.0	%	$	1,614,158	99.4	%
Nonperforming	7,519		0.8	%	2,639		0.5	%	40		0.1	%	—		—	%	10,198		0.6	%
Total	$	998,585	100.0	%	$	538,348	100.0	%	$	79,033	100.0	%	$	8,390	100.0	%	$	1,624,356	100.0	%



	December 31, 2018
(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	$	719,551	99.0	%	$	467,864	99.2	%	$	67,504	99.9	%	$	8,416	100.0	%	$	1,263,335	99.1	%
Nonperforming	7,128		1.0	%	3,698		0.8	%	42		0.1	%	—		—	%	10,868		0.9	%
Total	$	726,679	100.0	%	$	471,562	100.0	%	$	67,546	100.0	%	$	8,416	100.0	%	$	1,274,203	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. A TDR 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 each TDR or other impaired loan, we conduct further analysis to determine the probable loss and assign a specific reserve to the loan if deemed appropriate.



	December 31, 2019						December 31, 2018
(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	$	13,011	$	14,322	$	2,023	$	7,733	$	7,733	$	1,295
Commercial and industrial	10,001		10,001		55		884		893		360
Commercial construction	489		489		113		489		489		87
Consumer real estate	—		—		—		15		14		10
Other consumer	9		9		9		11		12		11
Total with a Related Allowance Recorded	23,510		24,821		2,200		9,132		9,141		1,763
Without a related allowance recorded:
Commercial real estate	34,909		40,201		—		3,636		4,046		—
Commercial and industrial	7,605		10,358		—		12,788		14,452		—
Commercial construction	1,425		2,935		—		15,286		19,198		—
Consumer real estate	7,884		8,445		—		8,659		9,635		—
Other consumer	4		11		—		5		18		—
Total without a Related Allowance Recorded	51,827		61,950		—		40,374		47,349		—
Total:
Commercial real estate	47,920		54,523		2,023		11,369		11,779		1,295
Commercial and industrial	17,606		20,359		55		13,672		15,345		360
Commercial construction	1,914		3,424		113		15,775		19,687		87
Consumer real estate	7,884		8,445		—		8,674		9,649		10
Other consumer	13		20		9		16		30		11
Total	$	75,337	$	86,771	$	2,200	$	49,506	$	56,490	$	1,763

Impaired loans increased $25.8 million to $75.3 million compared to $49.5 million at December 31, 2018. During 2019, we modified a $20.2 million commercial relationship. The modification granted a concession to the borrower that reduced their monthly payments resulting in a TDR. The loan remains in performing status based on the strong historical repayment performance of the borrower prior to the restructure as well as recent changes occurring in the business which demonstrate the borrower’s ability to pay under the revised contractual terms. Guarantor support and sufficient collateral value further support the performing status of the loan.



	For the Year Ended
	December 31, 2019				December 31, 2018
(dollars in thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With a related allowance recorded:
Commercial real estate	$	14,018	$	—	$	7,780	$	238
Commercial and industrial	10,135		576		591		38
Commercial construction	489		—		561		—
Consumer real estate	—		—		16		1
Other consumer	13		1		19		1
Total with a Related Allowance Recorded	24,655		577		8,967		278
Without a related allowance recorded:
Commercial real estate	35,739		943		3,911		172
Commercial and industrial	5,565		368		4,722		257
Commercial construction	1,831		131		17,643		217
Consumer real estate	8,190		397		9,701		483
Other consumer	7		—		24		—
Total without a Related Allowance Recorded	51,332		1,839		36,001		1,129
Total:
Commercial real estate	49,757		943		11,691		410
Commercial and industrial	15,700		944		5,313		295
Commercial construction	2,320		131		18,204		217
Consumer real estate	8,190		397		9,717		484
Other consumer	20		1		43		1
Total	$	75,987	$	2,416	$	44,968	$	1,407



	2019
(dollars in thousands)	Commercial Real Estate			Commercial and Industrial			Commercial Construction			Consumer Real Estate			Other Consumer			Total
Balance at beginning of year	$	33,707		$	11,596		$	7,983		$	6,187		$	1,523		$	60,996
Charge-offs	(3,664		)	(8,928		)	(406		)	(1,353		)	(1,838		)	(16,189		)
Recoveries	137			1,388			5			637			377			2,544
Net (Charge-offs)	(3,527		)	(7,540		)	(401		)	(716		)	(1,461		)	(13,645		)
Provision for loan losses	397			11,625			318			866			1,667			14,873
Balance at End of Year	$	30,577		$	15,681		$	7,900		$	6,337		$	1,729		$	62,224



	2018
(dollars in thousands)	Commercial Real Estate			Commercial and Industrial			Commercial Construction			Consumer Real Estate			Other Consumer			Total
Balance at beginning of year	$	27,235		$	8,966		$	13,167		$	5,479		$	1,543		$	56,390
Charge-offs	(372		)	(8,574		)	(2,630		)	(1,319		)	(1,694		)	(14,589		)
Recoveries	309			1,723			1,135			541			492			4,200
Net (Charge-offs)	(63		)	(6,851		)	(1,495		)	(778		)	(1,202		)	(10,389		)
Provision for loan losses	6,535			9,481			(3,689		)	1,486			1,182			14,995
Balance at End of Year	$	33,707		$	11,596		$	7,983		$	6,187		$	1,523		$	60,996



	2019
	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	$	2,023	$	28,554	$	30,577	$	47,920	$	3,368,598	$	3,416,518
Commercial and industrial	55		15,626		15,681		17,606		1,703,227		1,720,833
Commercial construction	113		7,787		7,900		1,914		373,531		375,445
Consumer real estate	—		6,337		6,337		7,884		1,537,439		1,545,323
Other consumer	9		1,720		1,729		13		79,020		79,033
Total	$	2,200	$	60,024	$	62,224	$	75,337	$	7,061,815	$	7,137,152



	2018
	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	$	1,295	$	32,412	$	33,707	$	11,369	$	2,910,463	$	2,921,832
Commercial and industrial	360		11,236		11,596		13,672		1,479,744		1,493,416
Commercial construction	87		7,896		7,983		15,775		241,422		257,197
Consumer real estate	10		6,177		6,187		8,674		1,197,983		1,206,657
Other consumer	11		1,512		1,523		16		67,530		67,546
Total	$	1,763	$	59,233	$	60,996	$	49,506	$	5,897,142	$	5,946,648