LOANS

The following summarizes the Company’s major classifications for loans (in thousands):



	December 31, 2016			December 31, 2015

Residential real estate	$	1,451,462		$	1,383,133
Home equity	141,965			147,036
Commercial and industrial	185,667			165,340
Commercial real estate	1,229,516			1,127,581
Consumer	32,545			36,083
DDA overdrafts	5,071			3,361
Gross loans	3,046,226			2,862,534
Allowance for loan losses	(19,730		)	(19,251		)
Net loans	$	3,026,496		$	2,843,283

Construction loans of $14.2 million and $13.1 million are included within residential real estate loans at December 31, 2016 and December 31, 2015, respectively. Construction loans of $12.8 million and $12.6 million are included within commercial real estate loans at December 31, 2016 and December 31, 2015, respectively. The Company’s commercial and residential real estate construction loans are primarily secured by real estate within the Company’s principal markets. These loans were originated under the Company’s loan policy, which is focused on the risk characteristics of the loan portfolio, including construction loans. Adequate consideration has been given to these loans in establishing the Company’s allowance for loan losses.

The following table details the loans acquired in conjunction with the Virginia Savings, Community and AFB acquisitions (in thousands). These loans were originally underwritten by the acquiree in accordance with the acquiree's underwriting guidelines. As loans come up for renewal, extension, etc., the loans are underwritten in accordance withe the Company's underwriting guidelines and are thus not reflected in the table below.



	Virginia Savings		Community		AFB		Total
December 31, 2016
Outstanding loan balance	$	23,714	$	149,488	$	85,120	$	258,322

Credit-impaired loans:
Carrying value	1,700		8,857		—		10,557
Contractual principal and interest	1,895		11,157		—		13,052

December 31, 2015
Outstanding loan balance	$	28,914	$	181,545	$	112,862	$	323,321

Credit-impaired loans:
Carrying value	1,707		12,899		—		14,606
Contractual principal and interest	1,965		16,362		—		18,327

Changes in the accretable yield and the carrying amount of the purchased credit-impaired loans is as follows (in thousands):



	December 31, 2016						December 31, 2015
	Accretable Yield			Carrying Amount of Loans			Accretable Yield			Carrying Amount of Loans
Balance at the beginning of the period	$	6,640		$	14,606		$	10,334		$	17,329
Accretion	(1,061		)	1,061			(2,665		)	2,665
Reclassifications to/from accretable from/to non-accretable difference, net	(145		)	—			1,103			—
Payments received, net	—			(4,376		)	—			(3,369		)
Disposals	(425		)	(734		)	(2,132		)	(2,019		)
Balance at the end of period	$	5,009		$	10,557		$	6,640		$	14,606

Increases in expected cash flow subsequent to the acquisition are recognized first as a reduction of any previous impairment, then prospectively through adjustment of the yield on the loans or pools over its remaining life, while decreases in expected cash flows are recognized as impairment through a provision for loan loss and an increase in the allowance for purchased credit-impaired loans.