Loans, Allowance for Loan Losses and Credit Quality

6 Months Ended

Jun. 30, 2016

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:

	June 30, 2016
	(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	$	870,533	$	2,697,559	$	367,559	$	109,958	$	604,724	$	942,604	$	15,942	$	5,608,879
Individually evaluated for impairment	$	4,631	$	18,775	$	—	$	1,077	$	14,642	$	5,764	$	484	$	45,373
Purchased credit impaired loans	$	—	$	10,809	$	—	$	—	$	8,982	$	208	$	2	$	20,001
Total loans by group	$	875,164	$	2,727,143	$	367,559	$	111,035	$	628,348	$	948,576	$	16,428	$	5,674,253	(1	)

	December 31, 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	$	838,129	$	2,619,294	$	373,064	$	95,225	$	614,014	$	921,563	$	14,427	$	5,475,716
Individually evaluated for impairment	$	5,147	$	22,986	$	304	$	1,021	$	15,405	$	5,989	$	558	$	51,410
Purchased credit impaired loans	$	—	$	11,154	$	—	$	—	$	9,187	$	251	$	3	$	20,595
Total loans by group	$	843,276	$	2,653,434	$	373,368	$	96,246	$	638,606	$	927,803	$	14,988	$	5,547,721	(1	)

(1) The amount of net deferred fees on loans and net unamortized discounts on acquired loans not deemed to be purchased credit impaired ("PCI") included in the ending balance was $10.6 million and $10.9 million at June 30, 2016 and December 31, 2015 respectively.

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

	Three Months Ended June 30, 2016
	(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	$	13,485		$	28,595		$	5,100	$	1,341		$	2,567		$	4,915		$	429		$	56,432
Charge-offs	(2		)	(25		)	—		(30		)	(8		)	(190		)	(322		)	(577		)
Recoveries	649			223			—		73			51			26			250			1,272
Provision (benefit)	(105		)	218			116		57			(32		)	235			111			600
Ending balance	$	14,027		$	29,011		$	5,216	$	1,441		$	2,578		$	4,986		$	468		$	57,727

	Three Months Ended June 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	$	14,557		$	26,285		$	4,142		$	1,222		$	2,726		$	4,906		$	677		$	54,515
Charge-offs	(473		)	(67		)	—			(47		)	(17		)	(248		)	(247		)	(1,099		)
Recoveries	502			169			—			66			1			31			110			879
Provision (benefit)	693			(28		)	(71		)	7			(159		)	182			76			700
Ending balance	$	15,279		$	26,359		$	4,071		$	1,248		$	2,551		$	4,871		$	616		$	54,995

	Six Months Ended June 30, 2016
	(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	$	13,802		$	27,327		$	5,366		$	1,264		$	2,590		$	4,889		$	587		$	55,825
Charge-offs	(4		)	(25		)	—			(93		)	(27		)	(337		)	(628		)	(1,114		)
Recoveries	787			412			—			94			51			53			494			1,891
Provision (benefit)	(558		)	1,297			(150		)	176			(36		)	381			15			1,125
Ending balance	$	14,027		$	29,011		$	5,216		$	1,441		$	2,578		$	4,986		$	468		$	57,727
Ending balance: individually evaluated for impairment	$	255		$	791		$	—		$	3		$	1,188		$	228		$	27		$	2,492
Ending balance: collectively evaluated for impairment	$	13,772		$	28,220		$	5,216		$	1,438		$	1,390		$	4,758		$	441		$	55,235
	Six Months Ended June 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	(1,034		)	(208		)	—			(196		)	(202		)	(411		)	(573		)	(2,624		)
Recoveries	881			854			—			132			46			105			301			2,319
Provision (benefit)	(141		)	(160		)	126			141			(127		)	221			140			200
Ending balance	$	15,279		$	26,359		$	4,071		$	1,248		$	2,551		$	4,871		$	616		$	54,995
Ending balance: individually evaluated for impairment	$	310		$	201		$	—		$	4		$	1,337		$	250		$	30		$	2,132
Ending balance: collectively evaluated for impairment	$	14,969		$	26,158		$	4,071		$	1,244		$	1,214		$	4,621		$	586		$	52,863

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 and 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 and 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 primarily secured by senior or junior mortgage liens on owner-occupied 1-4 family homes, condominiums or vacation homes. 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, 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 or above average leverage and/or weakening market fundamentals that indicate 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:

		June 30, 2016
Category	Risk Rating	Commercial  and Industrial		Commercial Real Estate		Commercial Construction		Small Business		Total
		(Dollars in thousands)
Pass	1 - 6	$	811,834	$	2,581,659	$	361,211	$	107,949	$	3,862,653
Potential weakness	7	44,942		90,371		4,964		2,310		142,587
Definite weakness-loss unlikely	8	18,363		54,076		1,384		694		74,517
Partial loss probable	9	25		1,037		—		82		1,144
Definite loss	10	—		—		—		—		—
Total		$	875,164	$	2,727,143	$	367,559	$	111,035	$	4,080,901

		December 31, 2015
Category	Risk Rating	Commercial  and Industrial		Commercial Real Estate		Commercial Construction		Small Business		Total
		(Dollars in thousands)
Pass	1 - 6	$	765,753	$	2,484,025	$	363,781	$	93,008	$	3,706,567
Potential weakness	7	54,375		112,022		7,678		2,444		176,519
Definite weakness-loss unlikely	8	23,073		56,276		1,909		732		81,990
Partial loss probable	9	75		1,111		—		62		1,248
Definite loss	10	—		—		—		—		—
Total		$	843,276	$	2,653,434	$	373,368	$	96,246	$	3,966,324

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:

	June 30, 2016		December 31, 2015
Residential portfolio
FICO score (re-scored)(1)	742		742
LTV (re-valued)(2)	61.9	%	61.4	%
Home equity portfolio
FICO score (re-scored)(1)	766		765
LTV (re-valued)(2)	55.9	%	55.8	%

(1) The average FICO scores for June 30, 2016 are based upon rescores available from May 31, 2016 and origination score data for loans booked between June 1, 2016 and June 30, 2016. The average FICO scores for December 31, 2015 are based upon rescores available from November 30, 2015 and origination score data for loans booked between December 1, 2015 and December 31, 2015.

(2) The combined LTV ratios for June 30, 2016 are based upon updated automated valuations as of March 31, 2015 and origination value data for loans booked between April 1, 2015 and June 30, 2016. The combined LTV ratios for December 31, 2015 are based upon updated automated valuations as of March 31, 2015 and actual score data for loans booked from April 1, 2015 through December 31, 2015. 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.

Asset Quality

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. The Company also may use discretion regarding other loans over 90 days delinquent if the loan is well secured and/or in process of collection. Set forth is information regarding the Company’s nonperforming loans at the period shown:

The following table shows information regarding nonaccrual loans at the dates indicated:

	June 30, 2016		December 31, 2015
	(Dollars in thousands)
Commercial and industrial	$	3,177	$	3,699
Commercial real estate	8,220		7,856
Commercial construction	—		304
Small business	349		239
Residential real estate	7,116		8,795
Home equity	6,684		6,742
Other consumer	81		55
Total nonaccrual loans(1)	$	25,627	$	27,690

(1) Included in these amounts were $5.1 million and $5.2 million of nonaccruing TDRs at June 30, 2016 and December 31, 2015, respectively.

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

	June 30, 2016		December 31, 2015
	(Dollars in thousands)
Foreclosed residential real estate property held by the creditor	$	1,467	$	1,430
Recorded investment in mortgage loans collateralized by residential real estate property that are in the process of foreclosure	$	1,137	$	1,059

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

	June 30, 2016
	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	3	$	243	—	$	—	10	$	2,645	13	$	2,888	$	872,276	$	875,164	$	—
Commercial real estate	14	6,360		3	1,576		9	4,120		26	12,056		2,715,087		2,727,143		—
Commercial construction	—	—		—	—		—	—		—	—		367,559		367,559		—
Small business	10	26		3	68		17	186		30	280		110,755		111,035		—
Residential real estate	19	2,763		8	1,172		23	3,639		50	7,574		620,774		628,348		—
Home equity	20	1,371		12	478		26	2,012		58	3,861		944,715		948,576		—
Other consumer (1)	243	209		16	27		16	49		275	285		16,143		16,428		1
Total	309	$	10,972	42	$	3,321	101	$	12,651	452	$	26,944	$	5,647,309	$	5,674,253	$	1

	December 31, 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	9	$	399	4	$	1,021	8	$	3,039	21	$	4,459	$	838,817	$	843,276	$	—
Commercial real estate	19	7,349		6	1,627		13	4,458		38	13,434		2,640,000		2,653,434		—
Commercial construction	—	—		—	—		1	304		1	304		373,064		373,368		—
Small business	11	93		4	9		13	69		28	171		96,075		96,246		—
Residential real estate	20	3,119		11	2,049		19	3,433		50	8,601		630,005		638,606		—
Home equity	21	1,526		11	903		20	1,338		52	3,767		924,036		927,803		—
Other consumer (1)	297	231		12	65		13	25		322	321		14,667		14,988		—
Total	377	$	12,717	48	$	5,674	87	$	12,666	512	$	31,057	$	5,516,664	$	5,547,721	$	—

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

Troubled Debt Restructurings

In the course of resolving nonperforming loans, the Bank may choose to restructure the contractual terms of certain loans. The Bank 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 Bank to identify if a TDR has occurred, which is when, for economic or legal reasons related to a borrower’s financial difficulties, the Bank 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:

	June 30, 2016		December 31, 2015
	(Dollars in thousands)
TDRs on accrual status	$	28,319	$	32,849
TDRs on nonaccrual	5,121		5,225
Total TDRs	$	33,440	$	38,074
Amount of specific reserves included in the allowance for loan losses associated with TDRs	$	1,592	$	1,628
Additional commitments to lend to a borrower who has been a party to a TDR	$	1,104	$	972

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					Six Months Ended
	June 30, 2016					June 30, 2016
	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	4	$	253	$	253	7	$	528	$	528
Commercial real estate	4	918		918		6	1,343		1,343
Small business	2	109		109		2	109		109
Residential real estate	3	744		744		5	1,167		1,209
Home equity	3	123		123		4	304		304
Other consumer	1	22		22		5	107		107
Total	17	$	2,169	$	2,169	29	$	3,558	$	3,600

	Three Months Ended					Six Months Ended
	June 30, 2015					June 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	7	$	1,197	$	1,197	10	$	1,353	$	1,353
Commercial real estate	4	2,071		2,071		5	2,310		2,310
Small business	3	116		116		5	166		166
Residential real estate	—	—		—		3	157		157
Home equity	1	31		31		3	215		215
Total	15	$	3,415	$	3,415	26	$	4,201	$	4,201

(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 as of the periods indicated:

	Three Months Ended June 30				Six Months Ended June 30
	2016		2015		2016		2015
	(Dollars in thousands)				(Dollars in thousands)
Extended maturity	$	1,189	$	1,005	$	2,382	$	1,648
Adjusted interest rate	92		—		92		—
Combination rate and maturity	22		2,410		260		2,523
Court ordered concession	866		—		866		30
Total	$	2,169	$	3,415	$	3,600	$	4,201

The Company considers a loan to have defaulted when it reaches 90 days past due. There were no loans that have been modified during the past twelve months which have subsequently defaulted during the three months ended June 30, 2016 and 2015. The following table shows loans that have been modified during the past twelve months which have subsequently defaulted during the periods indicated:

	Six Months Ended June 30
	2016			2015
	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
	—	$	—	5	$	1,219

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 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.

Impaired Loans

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:

	June 30, 2016
	Recorded Investment		Unpaid Principal Balance		Related Allowance
	(Dollars in thousands)
With no related allowance recorded
Commercial and industrial	$	2,201	$	2,572	$	—
Commercial real estate	12,093		13,272		—
Small business	684		777		—
Residential real estate	4,283		4,601		—
Home equity	4,504		4,626		—
Other consumer	135		135		—
Subtotal	23,900		25,983		—
With an allowance recorded
Commercial and industrial	$	2,430	$	2,579	$	255
Commercial real estate	6,682		6,766		791
Small business	393		415		3
Residential real estate	10,359		11,338		1,188
Home equity	1,260		1,468		228
Other consumer	349		368		27
Subtotal	21,473		22,934		2,492
Total	$	45,373	$	48,917	$	2,492

	December 31, 2015
	Recorded Investment		Unpaid Principal Balance		Related Allowance
	(Dollars in thousands)
With no related allowance recorded
Commercial and industrial	$	2,613	$	3,002	$	—
Commercial real estate	12,008		13,128		—
Commercial construction	304		305		—
Small business	527		618		—
Residential real estate	3,874		4,033		—
Home equity	4,893		5,005		—
Other consumer	184		185		—
Subtotal	24,403		26,276		—
With an allowance recorded
Commercial and industrial	$	2,534	$	2,648	$	183
Commercial real estate	10,978		11,047		204
Small business	494		523		4
Residential real estate	11,531		12,652		1,278
Home equity	1,096		1,287		238
Other consumer	374		389		23
Subtotal	27,007		28,546		1,930
Total	$	51,410	$	54,822	$	1,930

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

	Three Months Ended				Six Months Ended
	June 30, 2016				June 30, 2016
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
	(Dollars in thousands)
With no related allowance recorded
Commercial and industrial	$	2,349	$	15	$	2,415	$	30
Commercial real estate	12,205		103		12,327		207
Small business	677		5		691		11
Residential real estate	4,315		51		4,331		101
Home equity	4,537		46		4,567		93
Other consumer	138		3		142		5
Subtotal	24,221		223		24,473		447
With an allowance recorded
Commercial and industrial	$	2,458	$	6	$	2,487	$	12
Commercial real estate	6,716		51		6,744		102
Small business	401		6		410		13
Residential real estate	10,394		91		10,424		184
Home equity	1,311		13		1,316		23
Other consumer	357		2		362		4
Subtotal	21,637		169		21,743		338
Total	$	45,858	$	392	$	46,216	$	785

	Three Months Ended				Six Months Ended
	June 30, 2015				June 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	$	2,842	$	40	$	2,927	$	81
Commercial real estate	14,467		227		15,044		471
Commercial construction	310		3		311		7
Small business	459		6		471		13
Residential real estate	3,385		40		3,403		79
Home equity	4,585		51		4,613		102
Other consumer	1,204		6		1,074		11
Subtotal	27,252		373		27,843		764
With an allowance recorded
Commercial and industrial	$	2,712	$	31	$	2,749	$	62
Commercial real estate	15,231		204		15,292		406
Small business	442		7		453		15
Residential real estate	11,608		128		11,662		295
Home equity	1,336		16		1,345		31
Other consumer	472		5		490		9
Subtotal	31,801		391		31,991		818
Total	$	59,053	$	764	$	59,834	$	1,582

Purchased Credit Impaired Loans

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:

	June 30, 2016		December 31, 2015
	(Dollars in thousands)
Outstanding balance	$	22,293	$	23,199
Carrying amount	$	20,001	$	20,595

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

	Three Months Ended June 30						Six Months Ended June 30
	2016			2015			2016			2015
	(Dollars in thousands)
Beginning balance	$	2,779		$	2,628		$	2,827		$	2,974
Acquisition	—			—			—			319
Accretion	(420		)	(583		)	(829		)	(1,546		)
Other change in expected cash flows (1)	234			481			531			700
Reclassification from nonaccretable difference for loans which have paid off (2)	32			1			96			80
Ending balance	$	2,625		$	2,527		$	2,625		$	2,527

(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.