Loans

Peoples' loan portfolio has consisted of various types of loans originated primarily as a result of lending opportunities within Peoples' primary market areas of northeastern, central, southwestern and southeastern Ohio, west central West Virginia, and northeastern Kentucky. Acquired loans consist of loans purchased in 2012 or thereafter in a business combination. The major classifications of loan balances, excluding loans held for sale, were as follows at December 31:



(Dollars in thousands)	2016		2015
Originated loans:
Commercial real estate, construction	$	84,626	$	63,785
Commercial real estate, other	531,557		471,184
Commercial real estate	616,183		534,969
Commercial and industrial	378,131		288,130
Residential real estate	307,490		288,783
Home equity lines of credit	85,617		74,176
Consumer, indirect	252,024		165,320
Consumer, other	67,579		61,813
Consumer	319,603		227,133
Deposit account overdrafts	1,080		1,448
Total originated loans	$	1,708,104	$	1,414,639
Acquired loans:
Commercial real estate, construction	$	10,100	$	12,114
Commercial real estate, other	204,466		265,092
Commercial real estate	214,566		277,206
Commercial and industrial	44,208		63,589
Residential real estate	228,435		276,772
Home equity lines of credit	25,875		32,253
Consumer, indirect	808		1,776
Consumer, other	2,940		6,205
Consumer	3,748		7,981
Total acquired loans	$	516,832	$	657,801
Total loans	$	2,224,936	$	2,072,440

Peoples has acquired various loans through business combinations for which there was, at acquisition, evidence of deterioration of credit quality since origination and for which it was probable that all contractually required payments would not be collected, commonly referred to as "purchased credit impaired" loans. The carrying amounts of these loans included in the loan balances above are summarized as follows at December 31:



(Dollars in thousands)	2016		2015
Commercial real estate	$	11,476	$	16,893
Commercial and industrial	1,573		3,040
Residential real estate	23,306		27,155
Consumer	76		193
Total outstanding balance	$	36,431	$	47,281
Net carrying amount	$	26,524	$	35,064

Changes in the accretable yield for acquired purchased credit impaired loans during the year ended December 31, 2016 were as follows:



(Dollars in thousands)	Accretable Yield
Balance, December 31, 2015	$	7,042
Additions:
Reclassification from nonaccretable to accretable	2,014
Accretion	(1,924		)
Balance, December 31, 2016	$	7,132

Peoples completed semi-annual re-estimations of cash flows on purchase credit impaired loans in February and August of 2016. The above reclassification from nonaccretable to accretable was related to the re-estimation of cash flows on the purchase credit impaired loan portfolios, coupled with the loans performing better than expected. The majority of the reclassification related to prepayment speeds decreasing in the residential loan portfolio, resulting in higher total expected cash flows. In 2017, Peoples will complete the re-estimation of cash flows on purchase credit impaired loans on an as needed basis and, in any event, at least annually in August.

Cash flows expected to be collected on purchase credit impaired loans are estimated by incorporating several key assumptions similar to those used in the initial estimate of fair value. These key assumptions include probability of default, and the amount of actual prepayments after the acquisition date. Prepayments affect the estimated life of the loans and could change the amount of interest income, and possibly the amount of principal expected to be collected. In reforecasting future estimated cash flows, credit loss expectations are adjusted as necessary.

Peoples has pledged certain loans secured by 1-4 family and multifamily residential mortgages under a blanket collateral agreement to secure borrowings from the FHLB. The amount of such pledged loans totaled $542.5 million and $554.8 million at December 31, 2016 and 2015, respectively. Peoples also had pledged commercial loans to secure borrowings with the FRB. The outstanding balances of these loans totaled $152.0 million and $195.5 million at December 31, 2016 and 2015, respectively.

Related Party Loans

In the normal course of its business, Peoples Bank has granted loans to certain directors and officers of Peoples Bancorp Inc., including their affiliates, families and entities in which they are principal owners. At December 31, 2016, no related party loan was past due 90 or more days, renegotiated or on nonaccrual status. Activity in related party loans is presented in the table below. Other changes primarily consist of changes in related party status and new directors elected during the year.



(Dollars in thousands)
Balance, December 31, 2015	$	19,221
New loans and disbursements	5,702
Repayments	(7,330		)
Other changes	—
Balance, December 31, 2016	$	17,593

Nonaccrual and Past Due Loans

A loan is considered past due if any required principal and interest payments have not been received as of the date such payments were required to be made under the terms of the loan agreement. A loan may be placed on nonaccrual status regardless of whether or not such loan is considered past due.

The recorded investments in loans on nonaccrual status and accruing loans delinquent for 90 days or more were as follows at December 31:



					Accruing Loans 90+ Days Past Due
	Nonaccrual Loans				Accruing Loans 90+ Days Past Due
(Dollars in thousands)	2016		2015		2016		2015
Originated loans:
Commercial real estate, construction	$	826	$	921	$	—	$	—
Commercial real estate, other	9,934		7,041		—		—
Commercial real estate	10,760		7,962		—		—
Commercial and industrial	1,712		480		—		680
Residential real estate	3,778		3,057		183		169
Home equity lines of credit	383		321		—		—
Consumer, indirect	130		34		10		—
Consumer, other	11		58		—		1
Consumer	141		92		10		1
Total originated loans	$	16,774	$	11,912	$	193	$	850
Acquired loans:
Commercial real estate, other	$	1,609	$	469	$	1,506	$	2,425
Commercial and industrial	390		247		387		1,306
Residential real estate	2,317		798		1,672		1,353
Home equity lines of credit	231		98		—		35
Consumer, indirect	—		—		13		—
Consumer, other	4		7		—		—
Consumer	4		7		13		—
Total acquired loans	$	4,551	$	1,619	$	3,578	$	5,119
Total loans	$	21,325	$	13,531	$	3,771	$	5,969

The following table presents the aging of the recorded investment in past due loans at December 31:



	Loans Past Due								Current Loans		Total Loans
(Dollars in thousands)	30 - 59 days		60 - 89 days		90 + Days		Total
2016
Originated loans:
Commercial real estate, construction	$	—	$	—	$	826	$	826	$	83,800	$	84,626
Commercial real estate, other	1,420		225		9,305		10,950		520,607		531,557
Commercial real estate	1,420		225		10,131		11,776		604,407		616,183
Commercial and industrial	1,305		700		1,465		3,470		374,661		378,131
Residential real estate	7,288		1,019		1,895		10,202		297,288		307,490
Home equity lines of credit	316		45		248		609		85,008		85,617
Consumer, indirect	2,080		273		77		2,430		249,594		252,024
Consumer, other	346		38		—		384		67,195		67,579
Consumer	2,426		311		77		2,814		316,789		319,603
Deposit account overdrafts	—		—		—		—		1,080		1,080
Total originated loans	$	12,755	$	2,300	$	13,816	$	28,871	$	1,679,233	$	1,708,104
Acquired loans:
Commercial real estate, construction	$	—	$	—	$	40	$	40	$	10,060	$	10,100
Commercial real estate, other	1,220		208		2,271		3,699		200,767		204,466
Commercial real estate	1,220		208		2,311		3,739		210,827		214,566
Commercial and industrial	148		3		777		928		43,280		44,208
Residential real estate	5,918		2,496		2,974		11,388		217,047		228,435
Home equity lines of credit	208		65		178		451		25,424		25,875
Consumer, indirect	4		—		—		4		804		808
Consumer, other	51		—		13		64		2,876		2,940
Consumer	55		—		13		68		3,680		3,748
Total acquired loans	$	7,549	$	2,772	$	6,253	$	16,574	$	500,258	$	516,832
Total loans	$	20,304	$	5,072	$	20,069	$	45,445	$	2,179,491	$	2,224,936



	Loans Past Due								Current Loans		Total Loans
(Dollars in thousands)	30 - 59 days		60 - 89 days		90 + Days		Total
2015
Originated loans:
Commercial real estate, construction	$	913	$	—	$	8	$	921	$	62,864	$	63,785
Commercial real estate, other	7,260		1,258		379		8,897		462,287		471,184
Commercial real estate	8,173		1,258		387		9,818		525,151		534,969
Commercial and industrial	1,437		215		767		2,419		285,711		288,130
Residential real estate	3,124		1,105		1,263		5,492		283,291		288,783
Home equity lines of credit	161		7		104		272		73,904		74,176
Consumer, indirect	790		168		—		958		164,362		165,320
Consumer, other	597		82		32		711		61,102		61,813
Consumer	1,387		250		32		1,669		225,464		227,133
Deposit account overdrafts	—		—		—		—		1,448		1,448
Total originated loans	$	14,282	$	2,835	$	2,553	$	19,670	$	1,394,969	$	1,414,639
Acquired loans:
Commercial real estate, construction	$	—	$	—	$	40	$	40	$	12,074	$	12,114
Commercial real estate, other	1,592		352		2,730		4,674		260,418		265,092
Commercial real estate	1,592		352		2,770		4,714		272,492		277,206
Commercial and industrial	177		232		1,553		1,962		61,627		63,589
Residential real estate	4,910		2,480		1,745		9,135		267,637		276,772
Home equity lines of credit	318		20		95		433		31,820		32,253
Consumer, indirect	23		—		—		23		1,753		1,776
Consumer, other	67		31		—		98		6,107		6,205
Consumer	90		31		—		121		7,860		7,981
Total acquired loans	$	7,087	$	3,115	$	6,163	$	16,365	$	641,436	$	657,801
Total loans	$	21,369	$	5,950	$	8,716	$	36,035	$	2,036,405	$	2,072,440

Credit Quality Indicators

As discussed in Note 1, Peoples categorizes the majority of its loans into risk categories based upon an established risk grading matrix using a scale of 1 to 8. A description of the general characteristics of the risk grades used by Peoples is as follows:

“Pass” (grades 1 through 4): Loans in this risk category involve borrowers of acceptable-to-strong credit quality and risk who have the apparent ability to satisfy their loan obligations. Loans in this risk category would possess sufficient mitigating factors, such as adequate collateral or strong guarantors possessing the capacity to repay the loan if required, for any weakness that may exist.

“Watch” (grade 5): Loans in this risk category are the equivalent of the regulatory “Other Assets Especially Mentioned” classification. Loans in this risk category possess some credit deficiency or potential weakness, which requires a high level of management attention. Potential weaknesses include declining trends in operating earnings and cash flows and/or reliance on the secondary source of repayment. If left uncorrected, these potential weaknesses may result in noticeable deterioration of the repayment prospects for the loan or in Peoples' credit position.

“Substandard” (grade 6): Loans in this risk category are inadequately protected by the borrower's current financial condition and payment capability, or by the collateral pledged, if any. Loans so classified have one or more well-defined weaknesses that jeopardize the orderly repayment of the loan. They are characterized by the distinct possibility that Peoples will sustain some loss if the deficiencies are not corrected.

“Doubtful” (grade 7): Loans in this risk category have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or orderly repayment in full, on the basis of current existing facts, conditions and values, highly questionable and improbable. Possibility of loss is extremely high, but because of certain important and reasonably specific factors that may work to the advantage and strengthening of the exposure, classification of these loans as an estimate loss is deferred until their more exact status may be determined.

“Loss” (grade 8): Loans in this risk category are considered to be non-collectible and of such little value that their continuance as bankable assets is not warranted. This does not mean each such loan has absolutely no recovery value, but rather it is neither practical nor desirable to defer writing off the loan, even though partial recovery may be obtained in the future. Charge-offs against the allowance for loan losses are taken in the period in which the loan becomes uncollectible. Consequently, Peoples typically does not maintain a recorded investment in loans within this risk category.

Consumer loans and other smaller-balance loans are evaluated and categorized as “substandard”, “doubtful” or “loss” based upon the regulatory definition of these classes and consistent with regulatory requirements. All other loans not evaluated individually, nor meeting the regulatory conditions to be categorized as described above, would be considered as being “not rated”.

The following table summarizes the risk category of Peoples' loan portfolio based upon the most recent analysis performed at December 31:



	Pass Rated		Watch		Substandard		Doubtful		Not Rated		Total Loans
(Dollars in thousands)	(Grades 1 - 4)		(Grade 5)		(Grade 6)		(Grade 7)
2016
Originated loans:
Commercial real estate, construction	$	73,423	$	—	$	826	$	—	$	10,377	$	84,626
Commercial real estate, other	505,029		11,855		14,673		—		—		531,557
Commercial real estate	578,452		11,855		15,499		—		10,377		616,183
Commercial and industrial	346,791		15,210		16,130		—		—		378,131
Residential real estate	47,336		957		12,828		304		246,065		307,490
Home equity lines of credit	465		—		135		—		85,017		85,617
Consumer, indirect	15		13		—		—		251,996		252,024
Consumer, other	50		—		—		—		67,529		67,579
Consumer	65		13		—		—		319,525		319,603
Deposit account overdrafts	—		—		—		—		1,080		1,080
Total originated loans	$	973,109	$	28,035	$	44,592	$	304	$	662,064	$	1,708,104
Acquired loans:
Commercial real estate, construction	$	10,046	$	—	$	54	$	—	$	—	$	10,100
Commercial real estate, other	181,781		12,475		10,210		—		—		204,466
Commercial real estate	191,827		12,475		10,264		—		—		214,566
Commercial and industrial	42,809		227		978		194		—		44,208
Residential real estate	17,170		709		1,404		—		209,152		228,435
Home equity lines of credit	202		—		—		—		25,673		25,875
Consumer, indirect	51		—		—		—		757		808
Consumer, other	53		—		—		—		2,887		2,940
Consumer	104		—		—		—		3,644		3,748
Total acquired loans	$	252,112	$	13,411	$	12,646	$	194	$	238,469	$	516,832
Total loans	$	1,225,221	$	41,446	$	57,238	$	498	$	900,533	$	2,224,936



	Pass Rated		Watch		Substandard		Doubtful		Not Rated		Total Loans
(Dollars in thousands)	(Grades 1 - 4)		(Grade 5)		(Grade 6)		(Grade 7)
2015
Originated loans:
Commercial real estate, construction	$	62,225	$	—	$	913	$	—	$	647	$	63,785
Commercial real estate, other	434,868		18,710		17,595		—		11		471,184
Commercial real estate	497,093		18,710		18,508		—		658		534,969
Commercial and industrial	259,183		23,601		5,344		—		2		288,130
Residential real estate	21,903		1,168		12,282		187		253,243		288,783
Home equity lines of credit	785		—		175		—		73,216		74,176
Consumer, indirect	114		—		—		—		165,206		165,320
Consumer, other	94		—		3		—		61,716		61,813
Consumer	208		—		3		—		226,922		227,133
Deposit account overdrafts	—		—		—		—		1,448		1,448
Total originated loans	$	779,172	$	43,479	$	36,312	$	187	$	555,489	$	1,414,639
Acquired loans:
Commercial real estate, construction	$	12,114	$	—	$	—	$	—	$	—	$	12,114
Commercial real estate, other	233,630		13,866		17,521		75		—		265,092
Commercial real estate	245,744		13,866		17,521		75		—		277,206
Commercial and industrial	56,077		3,078		4,238		196		—		63,589
Residential real estate	18,027		1,409		1,786		—		255,550		276,772
Home equity lines of credit	316		—		—		—		31,937		32,253
Consumer, indirect	126		—		—		—		1,650		1,776
Consumer, other	130		—		—		—		6,075		6,205
Consumer	256		—		—		—		7,725		7,981
Total acquired loans	$	320,420	$	18,353	$	23,545	$	271	$	295,212	$	657,801
Total loans	$	1,099,592	$	61,832	$	59,857	$	458	$	850,701	$	2,072,440

Impaired Loans

The following tables summarize loans classified as impaired at December 31:



	Unpaid Principal Balance		Recorded Investment				Total Recorded Investment				Average Recorded Investment		Interest Income Recognized
			With		Without				Related Allowance
(Dollars in thousands)			Allowance		Allowance
2016
Commercial real estate, construction	$	894	$	—	$	866	$	866	$	—	$	913	$	3
Commercial real estate, other	20,029		7,474		12,227		19,701		803		18,710		700
Commercial real estate	20,923		7,474		13,093		20,567		803		19,623		703
Commercial and industrial	7,289		2,732		1,003		3,735		585		3,386		125
Residential real estate	27,703		138		27,393		27,531		24		27,455		1,419
Home equity lines of credit	908		—		908		908		—		717		44
Consumer, indirect	220		—		224		224		—		136		16
Consumer, other	130		—		130		130		—		138		13
Consumer	350		—		354		354		—		274		29
Total	$	57,173	$	10,344	$	42,751	$	53,095	$	1,412	$	51,455	$	2,320
2015
Commercial real estate, construction	$	957	$	—	$	957	957		$	—	$	227	$	3
Commercial real estate, other	23,430		6,396		12,772		19,168		1,363		13,070		815
Commercial real estate	24,387		6,396		13,729		20,125		1,363		13,297		818
Commercial and industrial	5,670		1,224		4,130		5,354		351		4,049		246
Residential real estate	31,304		370		28,834		29,204		106		26,785		1,354
Home equity lines of credit	425		—		419		419		—		325		18
Consumer, indirect	118		—		103		103		—		84		—
Consumer, other	265		—		195		195		—		210		28
Consumer	383		—		298		298		—		294		28
Total	$	62,169	$	7,990	$	47,410	$	55,400	$	1,820	$	44,750	$	2,464

At December 31, 2016, Peoples' impaired loans shown in the table above included loans that were classified as troubled debt restructurings ("TDRs").

In assessing whether or not a borrower is experiencing financial difficulties, Peoples considers information currently available regarding the financial condition of the borrower. This information includes, but is not limited to, whether (i) the borrower is currently in payment default on any of the borrower's debt; (ii) a payment default is probable in the foreseeable future without the modification; (iii) the borrower has declared or is in the process of declaring bankruptcy; and (iv) the borrower's projected cash flow is insufficient to satisfy contractual payments due under the original terms of the loan without a modification.

Peoples considers all aspects of the modification to loan terms to determine whether or not a concession has been granted to the borrower. Key factors considered by Peoples include the borrower's ability to access funds at a market rate for loans with similar risk characteristics, the significance of the modification relative to the unpaid principal loan balance or collateral value underlying the loan, and the significance of a delay in the timing of payments relative to the original contractual terms of the loan. The most common concessions granted by Peoples generally include one or more modifications to the terms of the loan, such as (i) a reduction in the interest rate for the remaining life of the loan, (ii) an extension of the maturity date at an interest rate lower than the current market rate for new debt with similar risk, (iii) a temporary period of interest-only payments, and (iv) a reduction in the contractual payment amount for either a short period or the remaining term of the loan.

The following table summarizes the loans that were modified as TDRs during the years ended December 31, 2016 and 2015.



		Recorded Investment (1)
(Dollars in thousands)	Number of Contracts	Pre-Modification		Post-Modification		Remaining Recorded Investment
2016
Originated loans:
Commercial real estate, other	3	$	109	$	109	$	107
Commercial and industrial	7	828		836		750
Residential real estate	8	266		266		266
Home equity lines of credit	5	81		81		81
Consumer, indirect	14	164		164		164
Consumer, other	3	24		24		23
Consumer	17	188		188		187
Total	40	$	1,472	$	1,480	$	1,391
Acquired loans:
Commercial real estate, construction	2	$	237	$	237	$	237
Residential real estate	14	1,080		1,082		1,076
Home equity lines of credit	4	260		260		250
Consumer, indirect	2	7		7		7
Consumer, other	3	15		15		15
Consumer	5	22		22		22
Total	25	$	1,599	$	1,601	$	1,585
2015
Originated loans:
Commercial real estate, other	5	$	900	$	900	$	881
Commercial and industrial	4	834		834		834
Residential real estate	4	207		207		115
Home equity lines of credit	11	402		402		389
Consumer, indirect	5	51		51		50
Consumer, other	7	44		44		44
Consumer	12	95		95		94
Total	36	$	2,438	$	2,438	$	2,313
Acquired loans:
Residential real estate	4	$	246	$	246	$	246
Home equity lines of credit	1	8		8		7
Total	5	$	254	$	254	$	253
(1) The amounts shown are inclusive of all partial paydowns and charge-offs. Loans modified in a TDR that were fully paid down, charged-off or foreclosed upon by period end are not reported.

The following table presents those loans modified in a TDR during the year that subsequently defaulted (i.e., 90 days or more past due following a modification) during the years ended December 31, 2016 and 2015:



	2016					2015
(Dollars in thousands)	Number of Contracts	Recorded Investment (1)		Impact on the Allowance for Loan Losses		Number of Contracts	Recorded Investment (1)		Impact on the Allowance for Loan Losses
Acquired loans:
Residential real estate	—	$	—	$	—	1	$	151	$	—
Total	—	$	—	$	—	1	$	151	$	—
(1) The amounts shown are inclusive of all partial paydowns and charge-offs. Loans modified in a TDR that were fully paid down, charged-off or foreclosed upon by period end are not reported.

Peoples had no commitments to lend additional funds to the related borrowers whose loan terms have been modified in a TDR.

Allowance for Loan Losses

Changes in the allowance for loan losses in the periods ended December 31, were as follows:



(Dollars in thousands)	Commercial Real Estate			Commercial and Industrial			Residential Real Estate			Home Equity Lines of Credit			Consumer			Deposit Account Overdrafts			Total
Balance, January 1, 2016	$	7,076		$	5,382		$	1,257		$	732		$	1,971		$	121		$	16,539
Charge-offs	(24		)	(1,017		)	(588		)	(73		)	(2,655		)	(774		)	(5,131		)
Recoveries	1,209			306			278			56			1,285			175			3,309
Net recoveries (charge-offs)	1,185			(711		)	(310		)	(17		)	(1,370		)	(599		)	(1,822		)
(Recovery of) provision for loan losses	(1,089		)	1,682			35			(27		)	2,229			649			3,479
Balance, December 31, 2016	$	7,172		$	6,353		$	982		$	688		$	2,830		$	171		$	18,196

Period-end amount allocated to:
Loans individually evaluated for impairment	$	803		$	585		$	24		$	—		$	—		$	—		$	1,412
Loans collectively evaluated for impairment	6,369			5,768			958			688			2,830			171			16,784
Balance, December 31, 2016	$	7,172		$	6,353		$	982		$	688		$	2,830		$	171		$	18,196

Balance, January 1, 2015	$	9,825		$	4,036		$	1,627		$	694		$	1,587		$	112		$	17,881
Charge-offs	(242		)	(13,576		)	(628		)	(125		)	(1,353		)	(774		)	(16,698		)
Recoveries	104			98			315			119			755			171			1,562
Net charge-offs	(138		)	(13,478		)	(313		)	(6		)	(598		)	(603		)	(15,136		)
(Recovery of) provision for loan losses	(2,611		)	14,824			(57		)	44			982			612			13,794
Balance, December 31, 2015	$	7,076		$	5,382		$	1,257		$	732		$	1,971		$	121		$	16,539

Period-end amount allocated to:
Loans individually evaluated for impairment	$	1,363		$	351		$	106		$	—		$	—		$	—		$	1,820
Loans collectively evaluated for impairment	5,713			5,031			1,151			732			1,971			121			14,719
Balance, December 31, 2015	$	7,076		$	5,382		$	1,257		$	732		$	1,971		$	121		$	16,539

The increase in the total allowance for loan losses in 2016, was primarily due to total loan growth of 7%, or $152.5 million, with growth of 8% in commercial loan balances and 7% in consumer loan balances. Indirect lending experienced the largest growth across all loan categories for the year, increasing by $85.7 million, or 51%. Commercial and industrial loan growth was $70.6 million, or 20%, for 2016.

Historical loss rates are calculated using charge-offs and recoveries within each portfolio over the past five years. The large provision for commercial and industrial loans during 2015 was primarily related to a specific allowance for one relationship which was charged off in 2015. The reduction in the allowance for originated residential real estate was driven by net recoveries in recent years reducing the historical loss rates. The changes in the home equity lines of credit and consumer categories of the allowance for originated loan losses and the related provision for originated loan losses recorded during 2015 were driven by net charge-off activity and increases in the size of the respective loan portfolios.

Allowance for Acquired Loan Losses

Acquired loans are recorded at their fair value as of the acquisition date with no valuation allowance, and monitored for changes in credit quality and subsequent increases or decreases in expected cash flows. Decreases in expected cash flows of purchase credit impaired loans are recognized as an impairment, with the amount of the expected loss included in management's evaluation of the appropriateness of the allowance for loan losses. Management reforecasts the estimated cash flows expected to be collected on purchase credit impaired loans semi-annually. The methods utilized to estimate the required allowance for loan losses for nonimpaired acquired loans are similar to those utilized for originated loans; however, Peoples records a provision for loan losses only when the computed allowance exceeds the remaining fair value adjustment.

The following table presents activity in the allowance for loan losses for acquired loans as of December 31:



(Dollars in thousands)	2016			2015
Purchase credit impaired loans:
Balance, January 1	$	240		$	—
Charge-offs	(67		)	(63		)
Recoveries	—			—
Net (charge-offs) recoveries	(67		)	(63		)
Provision for loan losses	60			303
Balance, December 31	$	233		$	240

As of December 31, 2016 and 2015, the expected cash flows for purchase credit impaired loans had decreased from those estimated as of the respective acquisition dates, resulting in Peoples recording a provision for loan losses with respect to those acquired loans.