Loans, Allowance for Loan Losses and Credit Quality

9 Months Ended

Sep. 30, 2015

Loans, Allowance for Loan Losses and Credit Quality [Abstract]

LOANS, ALLOWANCE FOR LOAN LOSSES AND CREDIT QUALITY

LOANS, ALLOWANCE FOR LOAN LOSSES, AND CREDIT QUALITY

The following tables bifurcate the amount of loans and the allowance allocated to each loan category based on the type of impairment analysis as of the periods indicated:

	September 30, 2015
	(Dollars in thousands)
	Commercial and Industrial		Commercial Real Estate		Commercial Construction		Small Business		Residential Real Estate		Home Equity		Other Consumer		Total
Financing receivables ending balance:
Collectively evaluated for impairment	$	856,916	$	2,618,612	$	307,908	$	91,307	$	627,031	$	901,863	$	15,330	$	5,418,967
Individually evaluated for impairment	$	5,596	$	29,506	$	306	$	971	$	15,247	$	5,777	$	611	$	58,014
Purchased credit impaired loans	$	—	$	11,224	$	—	$	—	$	9,659	$	254	$	3	$	21,140
Total loans by group	$	862,512	$	2,659,342	$	308,214	$	92,278	$	651,937	$	907,894	$	15,944	$	5,498,121	(1	)

	December 31, 2014
	(Dollars in thousands)
	Commercial and Industrial		Commercial Real Estate		Commercial Construction		Small Business		Residential Real Estate		Home Equity		Other Consumer		Total
Financing receivables ending balance:
Collectively evaluated for impairment	$	856,185	$	2,304,099	$	265,501	$	84,159	$	505,799	$	858,305	$	16,335	$	4,890,383
Individually evaluated for impairment	$	4,654	$	30,729	$	311	$	1,088	$	15,055	$	5,330	$	868	$	58,035
Purchased credit impaired loans	$	—	$	12,495	$	182	$	—	$	9,405	$	228	$	5	$	22,315
Total loans by group	$	860,839	$	2,347,323	$	265,994	$	85,247	$	530,259	$	863,863	$	17,208	$	4,970,733	(1	)

(1) The amount of net deferred costs included in the ending balance was $4.0 million and $2.8 million at September 30, 2015 and December 31, 2014, respectively.

The following tables summarize changes in allowance for loan losses by loan category for the periods indicated:

	Three Months Ended September 30, 2015
	(Dollars in thousands)
	Commercial and Industrial			Commercial Real Estate			Commercial Construction		Small Business			Residential Real Estate			Home Equity			Other Consumer			Total
Allowance for loan losses
Beginning balance	$	15,279		$	26,359		$	4,071	$	1,248		$	2,551		$	4,871		$	616		$	54,995
Charge-offs	(497		)	(28		)	—		(2		)	(40		)	(249		)	(349		)	(1,165		)
Recoveries	22			152			—		57			6			130			208			575
Provision (benefit)	(518		)	582			422		(20		)	75			128			131			800
Ending balance	$	14,286		$	27,065		$	4,493	$	1,283		$	2,592		$	4,880		$	606		$	55,205

	Three Months Ended September 30, 2014
	(Dollars in thousands)
	Commercial and Industrial			Commercial Real Estate			Commercial Construction		Small Business			Residential Real Estate			Home Equity			Other Consumer			Total
Allowance for loan losses
Beginning balance	$	15,929		$	25,095		$	3,757	$	1,154		$	2,879		$	4,969		$	755		$	54,538
Charge-offs	(504		)	(691		)	—		(73		)	(199		)	(160		)	(279		)	(1,906		)
Recoveries	6			57			—		29			178			67			135			472
Provision (benefit)	91			1,248			356		45			(36		)	71			126			1,901
Ending balance	$	15,522		$	25,709		$	4,113	$	1,155		$	2,822		$	4,947		$	737		$	55,005

	Nine Months Ended September 30, 2015
	(Dollars in thousands)
	Commercial and Industrial			Commercial Real Estate			Commercial Construction		Small Business			Residential Real Estate			Home Equity			Other Consumer			Total
Allowance for loan losses
Beginning balance	$	15,573		$	25,873		$	3,945	$	1,171		$	2,834		$	4,956		$	748		$	55,100
Charge-offs	(1,531		)	(236		)	—		(198		)	(242		)	(659		)	(922		)	(3,788		)
Recoveries	903			1,006			—		189			52			234			509			2,893
Provision (benefit)	(659		)	422			548		121			(52		)	349			271			1,000
Ending balance	$	14,286		$	27,065		$	4,493	$	1,283		$	2,592		$	4,880		$	606		$	55,205
Ending balance: individually evaluated for impairment	$	252		$	225		$	—	$	28		$	1,313		$	245		$	27		$	2,090
Ending balance: collectively evaluated for impairment	$	14,034		$	26,840		$	4,493	$	1,255		$	1,279		$	4,635		$	579		$	53,115
	Nine Months Ended September 30, 2014
	(Dollars in thousands)
	Commercial and Industrial			Commercial Real Estate			Commercial Construction		Small Business			Residential Real Estate			Home Equity			Other Consumer			Total
Allowance for loan losses
Beginning balance	$	15,622		$	24,541		$	3,371	$	1,215		$	2,760		$	5,036		$	694		$	53,239
Charge-offs	(1,757		)	(4,273		)	—		(469		)	(653		)	(562		)	(908		)	(8,622		)
Recoveries	213			322			—		168			368			215			449			1,735
Provision (benefit)	1,444			5,119			742		241			347			258			502			8,653
Ending balance	$	15,522		$	25,709		$	4,113	$	1,155		$	2,822		$	4,947		$	737		$	55,005
Ending balance: individually evaluated for impairment	$	541		$	315		$	—	$	10		$	1,521		$	269		$	43		$	2,699
Ending balance: collectively evaluated for impairment	$	14,981		$	25,394		$	4,113	$	1,145		$	1,301		$	4,678		$	694		$	52,306

For the purpose of estimating the allowance for loan losses, management segregates the loan portfolio into the portfolio segments detailed in the above tables.  Each of these loan categories possesses unique risk characteristics that are considered when determining the appropriate level of allowance for each segment.  Some of the risk characteristics unique to each loan category include:

Commercial Portfolio

• Commercial and Industrial: Loans in this category consist of revolving and term loan obligations extended to business and corporate enterprises for the purpose of financing working capital and/or capital investment.  Collateral generally consists of pledges of business assets including, but not limited to: accounts receivable, inventory, plant & equipment, or real estate, if applicable. Repayment sources consist of primarily, operating cash flow, and secondarily, liquidation of assets.

• Commercial Real Estate: Loans in this category consist of mortgage loans to finance investment in real property such as multi-family residential, commercial/retail, office, industrial, hotels, educational and healthcare facilities and other specific use properties.  Loans are typically written with amortizing payment structures.  Collateral values are determined based upon third party appraisals and evaluations.  Loan to value ratios at origination are governed by established policy and regulatory guidelines. Repayment sources consist of primarily, cash flow from operating leases and rents, and secondarily, liquidation of assets.

• Commercial Construction: Loans in this category consist of short-term construction loans, revolving and nonrevolving credit lines and construction/permanent loans to finance the acquisition, development and construction or rehabilitation of real property.  Project types include residential 1-4 family, condominium and multi-family homes, commercial/retail, office, industrial, hotels, educational and healthcare facilities and other specific use properties.  Loans may be written with nonamortizing or hybrid payment structures depending upon the type of project.  Collateral values are determined based upon third party appraisals and evaluations.  Loan to value ratios at origination are governed by established policy and regulatory guidelines.  Repayment sources vary depending upon the type of project and may consist of sale or lease of units, operating cash flows or liquidation of other assets.

• Small Business: Loans in this category consist of revolving, term loan and mortgage obligations extended to sole proprietors and small businesses for purposes of financing working capital and/or capital investment.  Collateral generally consists of pledges of business assets including, but not limited to, accounts receivable, inventory, plant & equipment, or real estate if applicable.  Repayment sources consist primarily of operating cash flows, and secondarily, liquidation of assets.

For the commercial portfolio it is the Company’s policy to obtain personal guarantees for payment from individuals holding material ownership interests of the borrowing entities.

Consumer Portfolio

• Residential Real Estate: Residential mortgage loans held in the Company’s portfolio are made to borrowers who demonstrate the ability to make scheduled payments with full consideration to underwriting factors such as current and expected income, employment status, current assets, other financial resources, credit history and the value of the collateral.  Collateral consists of mortgage liens on 1-4 family residential properties.  The Company does not originate or purchase sub-prime loans.

• Home Equity: Home equity loans and lines are made to qualified individuals and are secured by senior or junior mortgage liens on owner-occupied 1-4 family homes, condominiums or vacation homes or on nonowner occupied 1-4 family homes with more restrictive loan to value requirements. The home equity loan has a fixed rate and is billed in equal payments comprised of principal and interest. The home equity line of credit has a variable rate and is billed in interest-only payments during the draw period. At the end of the draw period, the home equity line of credit is billed as a percentage of the principal balance plus all accrued interest. Additionally, the Company has the option of renewing the line of credit for additional draw periods.  Borrower qualifications include favorable credit history combined with supportive income requirements and combined loan to value ratios within established policy guidelines.

• Other Consumer: Other consumer loan products include personal lines of credit and amortizing loans made to qualified individuals for various purposes such as education, auto loans, debt consolidation, personal expenses or overdraft protection.  Borrower qualifications include favorable credit history combined with supportive income and collateral requirements within established policy guidelines.  These loans may be secured or unsecured.

Credit Quality

The Company continually monitors the asset quality of the loan portfolio using all available information. Based on this information, loans demonstrating certain payment issues or other weaknesses may be categorized as delinquent, impaired, nonperforming and/or put on nonaccrual status. Additionally, in the course of resolving such loans, the Company may choose to restructure the contractual terms of certain loans to match the borrower’s ability to repay the loan based on their current financial condition. If a restructured loan meets certain criteria, it may be categorized as a troubled debt restructuring (“TDR”).

The Company reviews numerous credit quality indicators when assessing the risk in its loan portfolio. For the commercial portfolio, the Company utilizes a 10-point commercial risk-rating system, which assigns a risk-grade to each borrower based on a number of quantitative and qualitative factors associated with a commercial loan transaction. Factors considered include industry and market conditions, position within the industry, earnings trends, operating cash flow, asset/liability values, debt capacity, guarantor strength, management and controls, financial reporting, collateral, and other considerations. The risk-ratings categories are defined as follows:

• 1- 6 Rating — Pass: Risk-rating grades “1” through “6” comprise those loans ranging from ‘Substantially Risk Free’ which indicates borrowers are of unquestioned credit standing and the pinnacle of credit quality, well established companies with a very strong financial condition, and loans fully secured by cash collateral, through ‘Acceptable Risk’, which indicates borrowers may exhibit declining earnings, strained cash flow, increasing leverage and/or weakening market fundamentals that indicate above average or below average asset quality, margins and market share. Collateral coverage is protective.

• 7 Rating — Potential Weakness: Borrowers exhibit potential credit weaknesses or downward trends deserving management’s close attention. If not checked or corrected, these trends will weaken the Company’s asset and position. While potentially weak, currently these borrowers are marginally acceptable; no loss of principal or interest is envisioned.

• 8 Rating — Definite Weakness Loss Unlikely: Borrowers exhibit well defined weaknesses that jeopardize the orderly liquidation of debt. Loan may be inadequately protected by the current net worth and paying capacity of the obligor or by the collateral pledged, if any. Normal repayment from the borrower is in jeopardy, although no loss of principal is envisioned. However, there is a distinct possibility that a partial loss of interest and/or principal will occur if the deficiencies are not corrected. Collateral coverage may be inadequate to cover the principal obligation.

• 9 Rating — Partial Loss Probable: Borrowers exhibit well defined weaknesses that jeopardize the orderly liquidation of debt with the added provision that the weaknesses make collection of the debt in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. Serious problems exist to the point where partial loss of principal is likely.

• 10 Rating — Definite Loss: Borrowers deemed incapable of repayment. Loans to such borrowers are considered uncollectible and of such little value that continuation as active assets of the Company is not warranted.

The credit quality of the commercial loan portfolio is actively monitored and any changes in credit quality are reflected in risk-rating changes. Risk-ratings are assigned or reviewed for all new loans, when advancing significant additions to existing relationships (over $50,000), at least quarterly for all actively managed loans, and any time a significant event occurs, including at renewal of the loan.

The Company utilizes a comprehensive strategy for monitoring commercial credit quality. Borrowers are required to provide updated financial information at least annually which is carefully evaluated for any changes in credit quality. Larger loan relationships are subject to a full annual credit review by an experienced credit analysis group. Additionally, the Company retains an independent loan review firm to evaluate the credit quality of the commercial loan portfolio. The independent loan review process achieves significant penetration into the commercial loan portfolio and reports the results of these reviews to the Audit Committee of the Board of Directors on a quarterly basis.

The following table details the amount of outstanding principal balances relative to each of the risk-rating categories for the Company’s commercial portfolio:

		September 30, 2015
Category	Risk Rating	Commercial  and Industrial		Commercial Real Estate		Commercial Construction		Small Business		Total
		(Dollars in thousands)
Pass	1 - 6	$	796,556	$	2,504,079	$	297,405	$	88,793	$	3,686,833
Potential weakness	7	45,609		93,609		10,280		2,666		152,164
Definite weakness-loss unlikely	8	20,272		60,421		529		735		81,957
Partial loss probable	9	75		1,233		—		84		1,392
Definite loss	10	—		—		—		—		—
Total		$	862,512	$	2,659,342	$	308,214	$	92,278	$	3,922,346

		December 31, 2014
Category	Risk Rating	Commercial  and Industrial		Commercial Real Estate		Commercial Construction		Small Business		Total
		(Dollars in thousands)
Pass	1 - 6	$	801,578	$	2,196,109	$	248,696	$	81,255	$	3,327,638
Potential weakness	7	37,802		82,372		15,464		2,932		138,570
Definite weakness-loss unlikely	8	20,241		67,571		1,834		949		90,595
Partial loss probable	9	1,218		1,271		—		111		2,600
Definite loss	10	—		—		—		—		—
Total		$	860,839	$	2,347,323	$	265,994	$	85,247	$	3,559,403

For the Company’s consumer portfolio, the quality of the loan is best indicated by the repayment performance of an individual borrower. However, the Company does supplement performance data with current Fair Isaac Corporation (“FICO”) scores and Loan to Value (“LTV”) estimates. Current FICO data is purchased and appended to all consumer loans on a quarterly basis. In addition, automated valuation services and broker opinions of value are used to supplement original value data for the residential and home equity portfolios, periodically. The following table shows the weighted average FICO scores and the weighted average combined LTV ratios as of the periods indicated below:

	September 30, 2015		December 31, 2014
Residential portfolio
FICO score (re-scored)(1)	741		739
LTV (re-valued)(2)	60.8	%	67.1	%
Home equity portfolio
FICO score (re-scored)(1)	765		764
LTV (re-valued)(2)	50.9	%	53.6	%

(1) The average FICO scores for September 30, 2015 are based upon rescores available from August 31, 2015 and origination score data for loans booked between September 1, 2015 and September 30, 2015. The average FICO scores for December 31, 2014 are based upon rescores available from November 30, 2014 and origination score data for loans booked between December 1, 2014 and December 31, 2014.

(2) The combined LTV ratios for September 30, 2015 are based upon updated automated valuations as of March 31, 2015 and origination value data for loans booked between April 1, 2015 and September 30, 2015. The combined LTV ratios for December 31, 2014 are based upon updated automated valuations as of February 28, 2013 and actual score data for loans booked from March 1, 2013 through December 31, 2014. For home equity loans and lines in a subordinate lien position, the LTV data represents a combined LTV, taking into account the senior lien data for loans and lines.

The Company’s philosophy toward managing its loan portfolios is predicated upon careful monitoring, which stresses early detection and response to delinquent and default situations. Delinquent loans are managed by a team of seasoned collection specialists and the Company seeks to make arrangements to resolve any delinquent or default situation over the shortest possible time frame. As a general rule, loans more than 90 days past due with respect to principal or interest are classified as nonaccrual loans. As permitted by banking regulations, certain consumer loans 90 days or more past due may continue to accrue interest. The Company also may use discretion regarding other loans over 90 days delinquent if the loan is well secured and in process of collection. Set forth below is information regarding the Company’s nonaccrual, delinquent, TDRs, and impaired loans at the period shown.

The following table shows nonaccrual loans at the dates indicated:

	September 30, 2015		December 31, 2014
	(Dollars in thousands)
Commercial and industrial	$	4,114	$	2,822
Commercial real estate	8,699		7,279
Commercial construction	307		311
Small business	159		246
Residential real estate	9,106		8,697
Home equity	7,142		8,038
Other consumer	40		—
Total nonaccrual loans(1)	$	29,567	$	27,393

(1) Included in these amounts were $5.2 million of nonaccruing TDRs at both September 30, 2015 and December 31, 2014, respectively.

The following table shows information regarding foreclosed residential real estate property at the date indicated:

	September 30, 2015
	(Dollars in thousands)
Foreclosed residential real estate property held by the creditor	$	1,700
Recorded investment in mortgage loans collateralized by residential real estate property that are in the process of foreclosure	$	1,465

The following table shows the age analysis of past due financing receivables as of the dates indicated:

	September 30, 2015
	30-59 days			60-89 days			90 days or more			Total Past Due					Total Financing Receivables		Recorded Investment >90 Days and Accruing
	Number of Loans	Principal Balance		Number of Loans	Principal Balance		Number of Loans	Principal Balance		Number of Loans	Principal Balance		Current
	(Dollars in thousands)
Loan Portfolio
Commercial and industrial	6	$	383	3	$	920	10	$	3,334	19	$	4,637	$	857,875	$	862,512	$	—
Commercial real estate	6	1,222		4	746		16	4,769		26	6,737		2,652,605		2,659,342		—
Commercial construction	—	—		—	—		1	306		1	306		307,908		308,214		—
Small business	8	27		4	44		10	105		22	176		92,102		92,278		—
Residential real estate	12	1,620		9	1,760		23	4,096		44	7,476		644,461		651,937		—
Home equity	27	1,770		13	769		14	1,295		54	3,834		904,060		907,894		—
Other consumer (1)	308	262		9	16		13	33		330	311		15,633		15,944		—
Total	367	$	5,284	42	$	4,255	87	$	13,938	496	$	23,477	$	5,474,644	$	5,498,121	$	—

	December 31, 2014
	30-59 days			60-89 days			90 days or more			Total Past Due					Total Financing Receivables		Recorded Investment >90 Days and Accruing
	Number of Loans	Principal Balance		Number of Loans	Principal Balance		Number of Loans	Principal Balance		Number of Loans	Principal Balance		Current
	(Dollars in thousands)
Loan Portfolio
Commercial and industrial	18	$	3,192	10	$	1,007	19	$	2,320	47	$	6,519	$	854,320	$	860,839	$	—
Commercial real estate	19	13,428		6	1,480		16	4,225		41	19,133		2,328,190		2,347,323		—
Commercial construction	1	506		—	—		1	311		2	817		265,177		265,994		—
Small business	7	21		8	113		7	173		22	307		84,940		85,247		—
Residential real estate	13	1,670		10	1,798		36	4,826		59	8,294		521,965		530,259		106
Home equity	20	1,559		7	307		23	2,402		50	4,268		859,595		863,863		—
Other consumer (1)	318	382		16	23		15	15		349	420		16,788		17,208		13
Total	396	$	20,758	57	$	4,728	117	$	14,272	570	$	39,758	$	4,930,975	$	4,970,733	$	119

(1) Other consumer portfolio is inclusive of deposit account overdrafts recorded as loan balances.

In the course of resolving nonperforming loans, the Company may choose to restructure the contractual terms of certain loans. The Company attempts to work out an alternative payment schedule with the borrower in order to avoid foreclosure actions. Any loans that are modified are reviewed by the Company to identify if a TDR has occurred, which is when, for economic or legal reasons related to a borrower’s financial difficulties, the Company grants a concession to the borrower that it would not otherwise consider. Terms may be modified to fit the ability of the borrower to repay in line with its current financial status and the restructuring of the loan may include the transfer of assets from the borrower to satisfy the debt, a modification of loan terms, or a combination of the two.

The following table shows the Company’s total TDRs and other pertinent information as of the dates indicated:

	September 30, 2015		December 31, 2014
	(Dollars in thousands)
TDRs on accrual status	$	37,477	$	38,382
TDRs on nonaccrual	5,201		5,248
Total TDRs	$	42,678	$	43,630
Amount of specific reserves included in the allowance for loan losses associated with TDRs	$	1,681	$	2,004
Additional commitments to lend to a borrower who has been a party to a TDR	$	1,366	$	1,400

The Company’s policy is to have any restructured loan which is on nonaccrual status prior to being modified remain on nonaccrual status for six months, subsequent to being modified, before management considers its return to accrual status. If the restructured loan is on accrual status prior to being modified, it is reviewed to determine if the modified loan should remain on accrual status. Additionally, loans classified as TDRs are adjusted to reflect the changes in value of the recorded investment in the loan, if any, resulting from the granting of a concession. For all residential loan modifications, the borrower must perform during a 90 day trial period before the modification is finalized.

The following table shows the modifications which occurred during the periods indicated and the change in the recorded investment subsequent to the modifications occurring:

	Three Months Ended					Nine Months Ended
	September 30, 2015					September 30, 2015
	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment (1)		Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment (1)
	(Dollars in thousands)
Troubled debt restructurings
Commercial and industrial	1	$	100	$	100	10	$	1,153	$	1,153
Commercial real estate	1	653		653		6	2,963		2,963
Small business	2	103		103		7	269		269
Residential real estate	2	218		245		5	376		403
Home equity	1	36		36		4	251		251
Total	7	$	1,110	$	1,137	32	$	5,012	$	5,039

	Three Months Ended					Nine Months Ended
	September 30, 2014					September 30, 2014
	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment (1)		Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment (1)
	(Dollars in thousands)
Troubled debt restructurings
Commercial and industrial	3	$	193	$	193	12	$	744	$	744
Commercial real estate	5	2,095		2,095		13	4,225		4,225
Small business	—	—		—		1	58		58
Residential real estate	1	156		158		8	1,388		1,419
Home equity	2	55		55		9	781		781
Other consumer	—	—		—		1	8		8
Total	11	$	2,499	$	2,501	44	$	7,204	$	7,235

(1) The post-modification balances represent the legal principal balance of the loan on the date of modification. These amounts may show an increase when modifications include a capitalization of interest.

The following table shows the Company’s post-modification balance of TDRs listed by type of modification during the period indicated:

	Three Months Ended September 30				Nine Months Ended September 30
	2015		2014		2015		2014
	(Dollars in thousands)				(Dollars in thousands)
Extended maturity	$	855	$	1,902	$	2,204	$	3,403
Adjusted interest rate	—		—		—		726
Combination rate and maturity	246		599		2,769		2,269
Court ordered concession	36		—		66		837
Total	$	1,137	$	2,501	$	5,039	$	7,235

The Company considers a loan to have defaulted when it reaches 90 days past due. The following table shows loans that have been modified during the past twelve months which have subsequently defaulted during the periods indicated:

	Three Months Ended September 30
	2015			2014
	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment
	(Dollars in thousands)
Troubled debt restructurings that subsequently defaulted
Commercial and industrial	—	—		1	46
Residential real estate	—	—		1	87
	—	$	—	2	$	133
	Nine Months Ended September 30
	2015			2014
	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment
	(Dollars in thousands)
Troubled debt restructurings that subsequently defaulted
Commercial real estate	2	$	880	—	$	—
Commercial and industrial	3	339		1	46
Residential real estate	—	—		3	214
	5	$	1,219	4	$	260

All TDR loans are considered impaired and therefore are subject to a specific review for impairment. The impairment analysis appropriately discounts the present value of the anticipated cash flows by the loan’s contractual rate of interest in effect prior to the loan’s modification. The amount of impairment, if any, is recorded as a specific loss allocation to each individual loan in the allowance for loan losses. Commercial loans (commercial and industrial, commercial construction, commercial real estate and small business loans), residential loans, and home equity loans that have been classified as TDRs and which subsequently default are reviewed to determine if the loan should be deemed collateral dependent. In such an instance, any shortfall between the value of the collateral and the carrying value of the loan is determined by measuring the recorded investment in the loan against the fair value of the collateral less estimated costs to sell. The Company charges off the amount of any confirmed loan loss in the period when the loans, or portion of loans, are deemed uncollectible. Smaller balance consumer TDR loans are reviewed for performance to determine when a charge-off is appropriate.

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed.

The tables below set forth information regarding the Company’s impaired loans by loan portfolio at the dates indicated:

	September 30, 2015
	Recorded Investment		Unpaid Principal Balance		Related Allowance
	(Dollars in thousands)
With no related allowance recorded
Commercial and industrial	$	2,041	$	2,193	$	—
Commercial real estate	13,740		14,835		—
Commercial construction	306		308		—
Small business	458		494		—
Residential real estate	3,555		3,658		—
Home equity	4,564		4,631		—
Other consumer	195		196		—
Subtotal	24,859		26,315		—
With an allowance recorded
Commercial and industrial	$	3,555	$	3,641	$	252
Commercial real estate	15,766		15,938		225
Small business	513		543		28
Residential real estate	11,692		12,806		1,313
Home equity	1,213		1,359		245
Other consumer	416		430		27
Subtotal	33,155		34,717		2,090
Total	$	58,014	$	61,032	$	2,090

	December 31, 2014
	Recorded Investment		Unpaid Principal Balance		Related Allowance
	(Dollars in thousands)
With no related allowance recorded
Commercial and industrial	$	3,005	$	3,278	$	—
Commercial real estate	15,982		17,164		—
Commercial construction	311		311		—
Small business	692		718		—
Residential real estate	2,439		2,502		—
Home equity	4,169		4,221		—
Other consumer	338		341		—
Subtotal	26,936		28,535		—
With an allowance recorded
Commercial and industrial	$	1,649	$	1,859	$	412
Commercial real estate	14,747		15,514		197
Small business	396		458		7
Residential real estate	12,616		13,727		1,500
Home equity	1,161		1,264		262
Other consumer	530		530		38
Subtotal	31,099		33,352		2,416
Total	$	58,035	$	61,887	$	2,416

The following tables set forth information regarding interest income recognized on impaired loans, by portfolio, for the periods indicated:

	Three Months Ended				Nine Months Ended
	September 30, 2015				September 30, 2015
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
	(Dollars in thousands)
With no related allowance recorded
Commercial and industrial	$	2,080	$	11	$	2,204	$	41
Commercial real estate	13,876		89		14,433		337
Commercial construction	307		—		309		—
Small business	465		4		484		14
Residential real estate	3,566		42		3,601		123
Home equity	4,585		44		4,670		134
Other consumer	198		4		207		12
Subtotal	25,077		194		25,908		661
With an allowance recorded
Commercial and industrial	$	3,687	$	10	$	3,894	$	57
Commercial real estate	15,830		204		15,993		609
Small business	540		7		564		22
Residential real estate	11,698		106		11,764		358
Home equity	1,221		4		1,238		13
Other consumer	421		4		443		11
Subtotal	33,397		335		33,896		1,070
Total	$	58,474	$	529	$	59,804	$	1,731

	Three Months Ended				Nine Months Ended
	September 30, 2014				September 30, 2014
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
	(Dollars in thousands)
With no related allowance recorded
Commercial and industrial	$	4,411	$	47	$	4,743	$	155
Commercial real estate	16,517		154		17,098		492
Small business	840		8		889		25
Residential real estate	2,806		34		2,836		71
Home equity	4,405		45		4,456		136
Other consumer	365		5		382		19
Subtotal	29,655		293		30,715		904
With an allowance recorded
Commercial and industrial	$	3,889	$	24	$	4,285	$	98
Commercial real estate	17,509		233		17,674		700
Small business	427		7		452		22
Residential real estate	12,841		106		12,959		324
Home equity	1,111		4		1,124		15
Other consumer	625		5		656		17
Subtotal	36,402		379		37,150		1,176
Total	$	66,057	$	672	$	67,865	$	2,080

Certain loans acquired by the Company may have shown evidence of deterioration of credit quality since origination and it was therefore deemed unlikely that the Company would be able to collect all contractually required payments. As such, these loans were deemed to be PCI loans and the carrying value and prospective income recognition are predicated upon future cash flows expected to be collected. The following table displays certain information pertaining to PCI loans at the dates indicated:

	September 30, 2015		December 31, 2014
	(Dollars in thousands)
Outstanding balance	$	23,877	$	25,279
Carrying amount	$	21,140	$	22,315

The following table summarizes activity in the accretable yield for the PCI loan portfolio:

	Three Months Ended September 30						Nine Months Ended September 30
	2015			2014			2015			2014
	(Dollars in thousands)
Beginning balance	$	2,527		$	3,845		$	2,974		$	2,514
Acquisition	—			—			319			—
Accretion	(592		)	(667		)	(2,138		)	(1,722		)
Other change in expected cash flows (1)	278			380			978			2,572
Reclassification from nonaccretable difference for loans which have paid off (2)	218			—			298			194
Ending balance	$	2,431		$	3,558		$	2,431		$	3,558

(1) Represents changes in cash flows expected to be collected and resulting in increased interest income as a prospective yield adjustment over the remaining life of the loan(s).

(2) Results in increased interest income during the period in which the loan paid off at amount greater than originally expected.