LOANS

Loan portfolio segments are defined as the level at which an entity develops and documents a systematic methodology to determine its allowance. The Corporation has two loan portfolio segments (commercial loans and consumer loans) that it uses in determining the allowance. Both quantitative and qualitative factors are used by management at the loan portfolio segment level in determining the adequacy of the allowance for the Corporation. Classes of loans are a disaggregation of an entity's loan portfolio segments. Classes of loans are defined as a group of loans which share similar initial measurement attributes, risk characteristics, and methods for monitoring and assessing credit risk. The Corporation has seven classes of loans, which are set forth below.

Commercial — Loans and lines of credit to varying types of businesses, including municipalities, school districts and nonprofit organizations, for the purpose of supporting working capital, operational needs and term financing of equipment. Repayment of such loans is generally provided through operating cash flows of the business. Commercial loans are predominately secured by equipment, inventory, accounts receivable, personal guarantees of the owner and other sources of repayment, although the Corporation may also secure commercial loans with real estate.

Commercial real estate — Loans secured by real estate occupied by the borrower for ongoing operations, non-owner occupied real estate leased to one or more tenants and vacant land that has been acquired for investment or future land development.

Real estate construction — Secured loans for the construction of business properties. Real estate construction loans often convert to a commercial real estate loan at the completion of the construction period.

Land development — Secured development loans made to borrowers for the purpose of infrastructure improvements to vacant land to create finished marketable residential and commercial lots/land. Most land development loans are originated with the intention that the loans will be paid through the sale of developed lots/land by the developers within twelve months of the completion date. Land development loans at December 31, 2014 and 2013 were primarily comprised of loans to develop residential properties.

Residential mortgage — Loans secured by one- to four-family residential properties, generally with fixed interest rates for periods of fifteen years or less. The loan-to-value ratio at the time of origination is generally 80% or less. Residential mortgage loans with a loan-to-value ratio of more than 80% generally require private mortgage insurance.

Consumer installment — Loans to consumers primarily for the purpose of acquiring automobiles, recreational vehicles and personal watercraft. These loans consist of relatively small amounts that are spread across many individual borrowers.

Home equity — Loans and lines of credit whereby consumers utilize equity in their personal residence, generally through a second mortgage, as collateral to secure the loan.

Commercial, commercial real estate, real estate construction and land development loans are referred to as the Corporation's commercial loan portfolio, while residential mortgage, consumer installment and home equity loans are referred to as the Corporation's consumer loan portfolio. A summary of loans follows:



	December 31,
	2014		2013
	(In thousands)
Commercial loan portfolio:
Commercial	$	1,354,881	$	1,176,307
Commercial real estate	1,557,648		1,232,658
Real estate construction	152,745		89,795
Land development	18,750		20,066
Subtotal	3,084,024		2,518,826
Consumer loan portfolio:
Residential mortgage	1,110,390		960,423
Consumer installment	829,570		644,769
Home equity	664,246		523,603
Subtotal	2,604,206		2,128,795
Total loans	$	5,688,230	$	4,647,621

Chemical Bank has extended loans to its directors, executive officers and their affiliates. These loans were made in the ordinary course of business upon normal terms, including collateralization and interest rates prevailing at the time, and did not involve more than the normal risk of repayment by the borrower. The aggregate loans outstanding to the directors, executive officers and their affiliates totaled $31.2 million at December 31, 2014 and $26.8 million at December 31, 2013. During 2014 and 2013, there were $39.3 million and $54.2 million, respectively, of new loans and other additions, while repayments and other reductions totaled $34.9 million and $43.4 million, respectively.

Loans held-for-sale, comprised of fixed-rate residential mortgage loans, were $9.1 million at December 31, 2014 and $5.2 million at December 31, 2013. The Corporation sold residential mortgage loans totaling $149 million in 2014 and $211 million in 2013.

Credit Quality Monitoring

The Corporation maintains loan policies and credit underwriting standards as part of the process of managing credit risk. These standards include making loans generally only within the Corporation's market areas. The Corporation's lending markets generally consist of communities across the lower peninsula of Michigan, except for the southeastern portion of Michigan. The Corporation has no foreign loans.

The Corporation has a commercial loan portfolio approval process involving underwriting and individual and group loan approval authorities to consider credit quality and loss exposure at loan origination. The loans in the Corporation's commercial loan portfolio are risk rated at origination based on the grading system set forth below. The approval authority of relationship managers is established based on experience levels, with credit decisions greater than $1.0 million requiring group loan authority approval, except for four executive and senior officers who have varying limits exceeding $1.5 million and up to $3.5 million. With respect to the group loan authorities, the Corporation has a loan committee, consisting of certain executive and senior officers, that meets weekly to consider loans ranging in amounts from $1.0 million to $5.0 million, depending on risk rating and credit action required. A directors' loan committee, consisting of eight independent members of the board of directors, the chief executive officer and senior credit officer, meets bi-weekly to consider loans in amounts over $5.0 million, and certain loans under $5.0 million depending on a loan's risk rating and credit action required. Loans over $10.0 million require the approval of the board of directors.

The majority of the Corporation's consumer loan portfolio is comprised of secured loans that are relatively small. The Corporation's consumer loan portfolio has a centralized approval process which utilizes standardized underwriting criteria. The ongoing measurement of credit quality of the consumer loan portfolio is largely done on an exception basis. If payments are made on schedule, as agreed, then no further monitoring is performed. However, if delinquency occurs, the delinquent loans are turned over to the Corporation's collection department for resolution, resulting in repossession or foreclosure if payments are not brought current. Credit quality for the entire consumer loan portfolio is measured by the periodic delinquency rate, nonaccrual amounts and actual losses incurred.

Loans in the commercial loan portfolio tend to be larger and more complex than those in the consumer loan portfolio, and therefore, are subject to more intensive monitoring. All loans in the commercial loan portfolio have an assigned relationship manager, and most borrowers provide periodic financial and operating information that allows the relationship managers to stay abreast of credit quality during the life of the loans. The risk ratings of loans in the commercial loan portfolio are reassessed at least annually, with loans below an acceptable risk rating reassessed more frequently and reviewed by various loan committees within the Corporation at least quarterly.

The Corporation maintains a centralized independent loan review function that monitors the approval process and ongoing asset quality of the loan portfolio, including the accuracy of loan grades. The Corporation also maintains an independent appraisal review function that participates in the review of all appraisals obtained by the Corporation for loans in the commercial loan portfolio.

Credit Quality Indicators

Commercial Loan Portfolio

The Corporation uses a nine grade risk rating system to monitor the ongoing credit quality of its commercial loan portfolio. These loan grades rank the credit quality of a borrower by measuring liquidity, debt capacity, coverage and payment behavior as shown in the borrower's financial statements. The loan grades also measure the quality of the borrower's management and the repayment support offered by any guarantors. A summary of the Corporation's loan grades (or, characteristics of the loans within each grade) follows:

Risk Grades 1-5 (Acceptable Credit Quality) — All loans in risk grades 1 through 5 are considered to be acceptable credit risks by the Corporation and are grouped for purposes of allowance for loan loss considerations and financial reporting. The five grades essentially represent a ranking of loans that are all viewed to be of acceptable credit quality, taking into consideration the various factors mentioned above, but with varying degrees of financial strength, debt coverage, management and factors that could impact credit quality. Business credits within risk grades 1 through 5 range from Risk Grade 1: Prime Quality (factors include: excellent business credit; excellent debt capacity and coverage; outstanding management; strong guarantors; superior liquidity and net worth; favorable loan-to-value ratios; debt secured by cash or equivalents, or backed by the full faith and credit of the U.S. Government) to Risk Grade 5: Acceptable Quality With Care (factors include: acceptable business credit, but with added risk due to specific industry or internal situations).

Risk Grade 6 (Watch) — A business credit that is not acceptable within the Corporation's loan origination criteria; cash flow may not be adequate or is continually inconsistent to service current debt; financial condition has deteriorated as company trends/management have become inconsistent; the company is slow in furnishing quality financial information; working capital needs of the company are reliant on short-term borrowings; personal guarantees are weak and/or with little or no liquidity; the net worth of the company has deteriorated after recent or continued losses; the loan requires constant monitoring and attention from the Corporation; payment delinquencies becoming more serious; if left uncorrected, these potential weaknesses may, at some future date, result in deterioration of repayment prospects.

Risk Grade 7 (Substandard — Accrual) — A business credit that is inadequately protected by the current financial net worth and paying capacity of the obligor or of the collateral pledged, if any; management has deteriorated or has become non-existent; quality financial information is not available; a high level of maintenance is required by the Corporation; cash flow can no longer support debt requirements; loan payments are continually and/or severely delinquent; negative net worth; personal guaranty has become insignificant; a credit that has a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. The Corporation still expects a full recovery of all contractual principal and interest payments; however, a possibility exists that the Corporation will sustain some loss if deficiencies are not corrected.

Risk Grade 8 (Substandard — Nonaccrual) — A business credit accounted for on a nonaccrual basis that has all the weaknesses inherent in a loan classified as risk grade 7 with the added characteristic that the weaknesses are so pronounced that, on the basis of current financial information, conditions and values, collection in full is highly questionable; a partial loss is possible and interest is no longer being accrued. This loan meets the definition of an impaired loan. The risk of loss requires analysis to determine whether a valuation allowance needs to be established.

Risk Grade 9 (Substandard — Doubtful) — A business credit that has all the weaknesses inherent in a loan classified as risk grade 8 and interest is no longer being accrued, but additional deficiencies make it highly probable that liquidation will not satisfy the majority of the obligation; the primary source of repayment is nonexistent and there is doubt as to the value of the secondary source of repayment; the possibility of loss is likely, but current pending factors could strengthen the credit. This loan meets the definition of an impaired loan. A loan charge-off is recorded when management deems an amount uncollectible; however, the Corporation will establish a valuation allowance for probable losses, if required.

The Corporation considers all loans graded 1 through 5 as acceptable credit risks and structures and manages such relationships accordingly. Periodic financial and operating data combined with regular loan officer interactions are deemed adequate to monitor borrower performance. Loans graded 6 and 7 are considered higher-risk credits than loans graded 1 through 5 and the frequency of loan officer contact and receipt of financial data is increased to stay abreast of borrower performance. Loans graded 8 and 9 are considered problematic and require special care. Further, loans graded 6 through 9 are managed and monitored regularly through a number of processes, procedures and committees, including oversight by a loan administration committee comprised of executive and senior management of the Corporation, and include highly structured reporting of financial and operating data, intensive loan officer intervention and strategies to exit, as well as potential management by the Corporation's special assets group.

The following schedule presents the recorded investment of loans in the commercial loan portfolio by risk rating categories at December 31, 2014 and 2013:



	Commercial		Commercial Real Estate		Real Estate Construction		Land Development		Total
	(In thousands)
December 31, 2014
Originated Portfolio:
Risk Grades 1-5	$	1,171,817	$	1,114,529	$	134,668	$	2,952	$	2,423,966
Risk Grade 6	37,800		34,996		1,408		738		74,942
Risk Grade 7	29,863		29,935		2,502		613		62,913
Risk Grade 8	16,417		24,958		162		225		41,762
Risk Grade 9	1		8		—		—		9
Subtotal	1,255,898		1,204,426		138,740		4,528		2,603,592
Acquired Portfolio:
Risk Grades 1-5	76,780		321,018		14,005		11,789		423,592
Risk Grade 6	12,687		8,698		—		583		21,968
Risk Grade 7	4,089		12,478		—		197		16,764
Risk Grade 8	5,427		11,028		—		1,653		18,108
Risk Grade 9	—		—		—		—		—
Subtotal	98,983		353,222		14,005		14,222		480,432
Total	$	1,354,881	$	1,557,648	$	152,745	$	18,750	$	3,084,024
December 31, 2013
Originated Portfolio:
Risk Grades 1-5	$	1,024,461	$	991,964	$	75,696	$	6,874	$	2,098,995
Risk Grade 6	20,082		34,248		654		969		55,953
Risk Grade 7	29,776		30,377		738		3,128		64,019
Risk Grade 8	17,414		28,580		371		2,309		48,674
Risk Grade 9	960		18		—		—		978
Subtotal	1,092,693		1,085,187		77,459		13,280		2,268,619
Acquired Portfolio:
Risk Grades 1-5	73,763		133,653		12,336		4,667		224,419
Risk Grade 6	5,472		5,022		—		—		10,494
Risk Grade 7	852		7,792		—		—		8,644
Risk Grade 8	3,527		1,004		—		2,119		6,650
Risk Grade 9	—		—		—		—		—
Subtotal	83,614		147,471		12,336		6,786		250,207
Total	$	1,176,307	$	1,232,658	$	89,795	$	20,066	$	2,518,826

Consumer Loan Portfolio

The Corporation evaluates the credit quality of loans in the consumer loan portfolio based on the performing or nonperforming status of the loan. Loans in the consumer loan portfolio that are performing in accordance with original contractual terms and are less than 90 days past due and accruing interest are considered to be in a performing status, while those that are in nonaccrual status, contractually past due 90 days or more as to interest or principal payments or classified as a nonperforming TDR are considered to be in a nonperforming status. Nonaccrual TDRs in the consumer loan portfolio are included with nonaccrual loans, while other TDRs in the consumer loan portfolio are considered to be in a nonperforming status until they meet the Corporation's definition of a performing TDR, at which time they are considered to be in a performing status.

The following schedule presents the recorded investment of loans in the consumer loan portfolio based on loans in a performing status and loans in a nonperforming status at December 31, 2014 and 2013:



	Residential Mortgage		Consumer Installment		Home Equity		Total
	(In thousands)
December 31, 2014
Originated Loans:
Performing	$	987,542	$	818,878	$	566,083	$	2,372,503
Nonperforming	10,459		500		3,013		13,972
Subtotal	998,001		819,378		569,096		2,386,475
Acquired Loans:
Performing	111,101		10,174		94,696		215,971
Nonperforming	1,288		18		454		1,760
Subtotal	112,389		10,192		95,150		217,731
Total	$	1,110,390	$	829,570	$	664,246	$	2,604,206
December 31, 2013
Originated Loans:
Performing	$	934,747	$	642,370	$	488,996	$	2,066,113
Nonperforming	14,134		676		3,382		18,192
Subtotal	948,881		643,046		492,378		2,084,305
Acquired Loans:
Performing	11,481		1,723		31,182		44,386
Nonperforming	61		—		43		104
Subtotal	11,542		1,723		31,225		44,490
Total	$	960,423	$	644,769	$	523,603	$	2,128,795

Nonperforming Loans

A summary of nonperforming loans follows:



	December 31,
	2014		2013
	(In thousands)
Nonaccrual loans:
Commercial	$	16,418	$	18,374
Commercial real estate	24,966		28,598
Real estate construction	162		371
Land development	225		2,309
Residential mortgage	6,706		8,921
Consumer installment	500		676
Home equity	1,667		2,648
Total nonaccrual loans	50,644		61,897
Accruing loans contractually past due 90 days or more as to interest or principal payments:
Commercial	170		536
Commercial real estate	—		190
Residential mortgage	557		537
Home equity	1,346		734
Total accruing loans contractually past due 90 days or more as to interest or principal payments	2,073		1,997
Nonperforming TDRs:
Commercial loan portfolio	15,271		13,414
Consumer loan portfolio	3,196		4,676
Total nonperforming TDRs	18,467		18,090
Total nonperforming loans	$	71,184	$	81,984

The Corporation's nonaccrual loans at December 31, 2014 and 2013 included $37.2 million and $37.3 million, respectively, of nonaccrual TDRs.

There was no interest income recognized on nonaccrual loans during 2014, 2013 and 2012 while the loans were in nonaccrual status. During 2014, 2013 and 2012, the Corporation recognized $0.5 million, $0.9 million and $1.1 million, respectively, of interest income on these loans while they were in an accruing status. Additional interest income that would have been recorded on nonaccrual loans had they been current in accordance with their original terms was $3.3 million in 2014, $3.5 million in 2013 and $4.5 million in 2012. During 2014, 2013 and 2012, the Corporation recognized interest income of $3.6 million, $3.2 million and $2.9 million, respectively, on performing and nonperforming TDRs.

Impaired Loans

The following schedule presents impaired loans by classes of loans at December 31, 2014:



	Recorded Investment		Unpaid Principal Balance		Related Valuation Allowance		Average Annual Recorded Investment		Interest Income Recognized While on Impaired Status
	(In thousands)
Impaired loans with a valuation allowance:
Commercial	$	966	$	1,040	$	293	$	2,117	$	—
Commercial real estate	2,587		2,927		710		3,699		—
Real estate construction	—		—		—		—		—
Land development	—		—		—		—		—
Residential mortgage	19,681		19,681		335		19,740		1,252
Subtotal	23,234		23,648		1,338		25,556		1,252
Impaired loans with no related valuation allowance:
Commercial	38,094		44,557		—		39,020		1,375
Commercial real estate	60,616		82,693		—		49,676		1,567
Real estate construction	162		255		—		164		—
Land development	1,928		3,484		—		3,551		131
Residential mortgage	7,994		7,994		—		7,005		15
Consumer installment	518		518		—		602		1
Home equity	2,121		2,121		—		2,302		12
Subtotal	111,433		141,622		—		102,320		3,101
Total impaired loans:
Commercial	39,060		45,597		293		41,137		1,375
Commercial real estate	63,203		85,620		710		53,375		1,567
Real estate construction	162		255		—		164		—
Land development	1,928		3,484		—		3,551		131
Residential mortgage	27,675		27,675		335		26,745		1,267
Consumer installment	518		518		—		602		1
Home equity	2,121		2,121		—		2,302		12
Total	$	134,667	$	165,270	$	1,338	$	127,876	$	4,353

The following schedule presents impaired loans by classes of loans at December 31, 2013:



	Recorded Investment		Unpaid Principal Balance		Related Valuation Allowance		Average Annual Recorded Investment		Interest Income Recognized While on Impaired Status
	(In thousands)
Impaired loans with a valuation allowance:
Commercial	$	2,517	$	2,656	$	728	$	5,398	$	—
Commercial real estate	2,576		2,965		353		9,725		—
Real estate construction	—		—		—		56		—
Land development	—		—		—		719		—
Residential mortgage	17,408		17,408		510		17,689		1,123
Subtotal	22,501		23,029		1,591		33,587		1,123
Impaired loans with no related valuation allowance:
Commercial	38,838		44,377		—		24,231		990
Commercial real estate	48,220		61,444		—		41,100		1,348
Real estate construction	371		478		—		314		—
Land development	7,170		11,817		—		9,075		303
Residential mortgage	8,921		8,921		—		9,147		—
Consumer installment	676		676		—		653		—
Home equity	2,648		2,648		—		2,914		—
Subtotal	106,844		130,361		—		87,434		2,641
Total impaired loans:
Commercial	41,355		47,033		728		29,629		990
Commercial real estate	50,796		64,409		353		50,825		1,348
Real estate construction	371		478		—		370		—
Land development	7,170		11,817		—		9,794		303
Residential mortgage	26,329		26,329		510		26,836		1,123
Consumer installment	676		676		—		653		—
Home equity	2,648		2,648		—		2,914		—
Total	$	129,345	$	153,390	$	1,591	$	121,021	$	3,764

The average annual recorded investment of impaired loans during 2012 was $133.0 million and was comprised of the following classes of loans: commercial - $27.7 million; commercial real estate - $58.1 million; real estate construction - $0.7 million; land development - $9.1 million; residential mortgage - $33.4 million; consumer installment - $1.1 million; and home equity - $2.9 million. Interest income recognized during 2012 while these loans were in impaired status was $3.7 million, including $1.0 million on commercial loans, $1.0 million on commercial real estate loans, $0.4 million on land development loans and $1.4 million on residential mortgage loans.

The difference between an impaired loan's recorded investment and the unpaid principal balance for originated loans represents a partial charge-off resulting from a confirmed loss due to the value of the collateral securing the loan being below the loan balance and management's assessment that full collection of the loan balance is not likely, and for acquired loans that meet the definition of an impaired loan represents fair value adjustments recognized at the acquisition date attributable to expected credit losses and the discounting of expected cash flows at market interest rates. The difference between the recorded investment and the unpaid principal balance of $30.6 million and $24.0 million at December 31, 2014 and December 31, 2013, respectively, includes confirmed losses (partial charge-offs) of $15.4 million and $20.2 million, respectively, and fair value discount adjustments of $15.2 million and $3.8 million, respectively.

Impaired loans included $19.9 million and $9.8 million at December 31, 2014 and December 31, 2013, respectively, of acquired loans that were not performing in accordance with original contractual terms. Acquired loans that are not performing in accordance with contractual terms are not reported as nonperforming loans because these loans are recorded in pools at their net realizable value based on the principal and interest the Corporation expects to collect on these loans. Impaired loans also included $45.7 million and $39.6 million at December 31, 2014 and December 31, 2013, respectively, of performing TDRs.

The following schedule presents the aging status of the recorded investment in loans by classes of loans at December 31, 2014 and 2013.



	31-60 Days Past Due		61-89 Days Past Due		Accruing Loans Past Due 90 Days or More		Non-accrual Loans		Total Past Due		Current		Total Loans
	(In thousands)
December 31, 2014
Originated Portfolio:
Commercial	$	4,033	$	743	$	170	$	16,418	$	21,364	$	1,234,534	$	1,255,898
Commercial real estate	7,515		1,383		—		24,966		33,864		1,170,562		1,204,426
Real estate construction	262		—		—		162		424		138,316		138,740
Land development	—		—		—		225		225		4,303		4,528
Residential mortgage	2,126		54		557		6,706		9,443		988,558		998,001
Consumer installment	3,620		512		—		500		4,632		814,746		819,378
Home equity	3,039		660		1,346		1,667		6,712		562,384		569,096
Total	$	20,595	$	3,352	$	2,073	$	50,644	$	76,664	$	4,913,403	$	4,990,067
Acquired Portfolio:
Commercial	$	133	$	—	$	5,427	$	—	$	5,560	$	93,423	$	98,983
Commercial real estate	2,014		352		11,052		—		13,418		339,804		353,222
Real estate construction	—		—		—		—		—		14,005		14,005
Land development	—		—		1,653		—		1,653		12,569		14,222
Residential mortgage	156		—		18		—		174		112,215		112,389
Consumer installment	55		3		454		—		512		9,680		10,192
Home equity	636		106		1,288		—		2,030		93,120		95,150
Total	$	2,994	$	461	$	19,892	$	—	$	23,347	$	674,816	$	698,163
December 31, 2013
Originated Portfolio:
Commercial	$	4,748	$	865	$	536	$	18,374	$	24,523	$	1,068,170	$	1,092,693
Commercial real estate	8,560		1,604		190		28,598		38,952		1,046,235		1,085,187
Real estate construction	—		4,107		—		371		4,478		72,981		77,459
Land development	—		—		—		2,309		2,309		10,971		13,280
Residential mortgage	2,191		103		537		8,921		11,752		937,129		948,881
Consumer installment	2,630		359		—		676		3,665		639,381		643,046
Home equity	1,452		278		734		2,648		5,112		487,266		492,378
Total	$	19,581	$	7,316	$	1,997	$	61,897	$	90,791	$	4,262,133	$	4,352,924
Acquired Portfolio:
Commercial	$	—	$	—	$	5,656	$	—	$	5,656	$	77,958	$	83,614
Commercial real estate	—		133		1,695		—		1,828		145,643		147,471
Real estate construction	—		—		—		—		—		12,336		12,336
Land development	—		—		2,332		—		2,332		4,454		6,786
Residential mortgage	—		—		61		—		61		11,481		11,542
Consumer installment	3		51		—		—		54		1,669		1,723
Home equity	394		—		43		—		437		30,788		31,225
Total	$	397	$	184	$	9,787	$	—	$	10,368	$	284,329	$	294,697

Loans Modified Under Troubled Debt Restructurings (TDRs)

The following schedule presents the Corporation's TDRs at December 31, 2014 and 2013:



	Performing TDRs		Non-Performing TDRs		Nonaccrual TDRs		Total
	(In thousands)
December 31, 2014
Commercial loan portfolio	$	29,179	$	15,271	$	32,597	$	77,047
Consumer loan portfolio	16,485		3,196		4,594		24,275
Total	$	45,664	$	18,467	$	37,191	$	101,322
December 31, 2013
Commercial loan portfolio	$	26,839	$	13,414	$	31,961	$	72,214
Consumer loan portfolio	12,732		4,676		5,321		22,729
Total	$	39,571	$	18,090	$	37,282	$	94,943

The following schedule provides information on the Corporation's TDRs that were modified during the years ended December 31, 2014, 2013 and 2012:



	Number of Loans	Pre- Modification Recorded Investment		Post- Modification Recorded Investment
	(Dollars in thousands)
Year ended December 31, 2014
Commercial loan portfolio:
Commercial	53	$	13,781	$	13,781
Commercial real estate	46	12,075		12,075
Land development	1	72		72
Subtotal — commercial loan portfolio	100	25,928		25,928
Consumer loan portfolio (residential mortgage)	119	4,184		4,158
Total	219	$	30,112	$	30,086
Year ended December 31, 2013
Commercial loan portfolio:
Commercial	57	$	12,123	$	12,123
Commercial real estate	49	16,222		16,222
Real estate construction	4	575		575
Land development	4	1,958		1,958
Subtotal — commercial loan portfolio	114	30,878		30,878
Consumer loan portfolio (residential mortgage)	85	4,943		4,840
Total	199	$	35,821	$	35,718
Year ended December 31, 2012
Commercial loan portfolio:
Commercial	91	$	13,720	$	13,720
Commercial real estate	77	17,328		17,328
Land development	11	5,494		5,494
Subtotal — commercial loan portfolio	179	36,542		36,542
Consumer loan portfolio (residential mortgage)	121	9,944		9,684
Total	300	$	46,486	$	46,226

The pre-modification and post-modification recorded investment represents amounts as of the date of loan modification. The difference between the pre-modification and post-modification recorded investment of residential mortgage TDRs represents impairment recognized by the Corporation through the provision for loan losses computed based on a loan's post-modification present value of expected future cash flows discounted at the loan's original effective interest rate.

The following schedule includes TDRs for which there was a payment default during the years ended December 31, 2014, 2013 and 2012, whereby the borrower was past due with respect to principal and/or interest for 90 days or more, and the loan became a TDR during the twelve-month period prior to the default:



	Years Ended December 31,
	2014			2013			2012
	Number of Loans	Principal Balance at Year End		Number of Loans	Principal Balance at Year End		Number of Loans	Principal Balance at Year End
	Number of Loans	Principal Balance at Year End		Number of Loans	Principal Balance at Year End		Number of Loans	Principal Balance at Year End
	(Dollars in thousands)
Commercial loan portfolio:
Commercial	7	$	885	23	$	2,745	10	$	1,692
Commercial real estate	6	2,352		8	4,278		15	4,993
Real estate construction	—	—		3	371		—	—
Land development	—	—		2	1,526		4	1,157
Subtotal — commercial loan portfolio	13	3,237		36	8,920		29	7,842
Consumer loan portfolio (residential mortgage)	12	259		22	1,826		13	1,673
Total	25	$	3,496	58	$	10,746	42	$	9,515

Allowance for Loan Losses

The following schedule presents, by loan portfolio segment, the changes in the allowance for the year ended December 31, 2014 and details regarding the balance in the allowance and the recorded investment in loans at December 31, 2014 by impairment evaluation method.



	Commercial Loan Portfolio			Consumer Loan Portfolio			Unallocated			Total
	(In thousands)
Changes in allowance for loan losses for the year ended December 31, 2014:
Beginning balance	$	44,482		$	30,145		$	4,445		$	79,072
Provision for loan losses	3,464			4,357			(1,721		)	6,100
Charge-offs	(6,399		)	(7,830		)	—			(14,229		)
Recoveries	2,609			2,131			—			4,740
Ending balance	$	44,156		$	28,803		$	2,724		$	75,683
Allowance for loan losses balance at December 31, 2014 attributable to:
Loans individually evaluated for impairment	$	1,003		$	335		$	—		$	1,338
Loans collectively evaluated for impairment	43,153			27,968			2,724			73,845
Loans acquired with deteriorated credit quality	—			500			—			500
Total	$	44,156		$	28,803		$	2,724		$	75,683
Recorded investment (loan balance) at December 31, 2014:
Loans individually evaluated for impairment	$	86,221		$	19,681		$	—		$	105,902
Loans collectively evaluated for impairment	2,517,371			2,366,794			—			4,884,165
Loans acquired with deteriorated credit quality	480,432			217,731			—			698,163
Total	$	3,084,024		$	2,604,206		$	—		$	5,688,230

The following presents, by loan portfolio segment, the changes in the allowance for the year ended December 31, 2013 and details regarding the balance in the allowance and the recorded investment in loans at December 31, 2013 by impairment evaluation method.



	Commercial Loan Portfolio			Consumer Loan Portfolio			Unallocated			Total
	(In thousands)
Changes in allowance for loan losses for the year ended December 31, 2013:
Beginning balance	$	49,975		$	29,333		$	5,183		$	84,491
Provision for loan losses	3,895			7,843			(738		)	11,000
Charge-offs	(12,280		)	(8,866		)	—			(21,146		)
Recoveries	2,892			1,835			—			4,727
Ending balance	$	44,482		$	30,145		$	4,445		$	79,072
Allowance for loan losses balance at December 31, 2013 attributable to:
Loans individually evaluated for impairment	$	1,081		$	510		$	—		$	1,591
Loans collectively evaluated for impairment	43,401			29,135			4,445			76,981
Loans acquired with deteriorated credit quality	—			500			—			500
Total	$	44,482		$	30,145		$	4,445		$	79,072
Recorded investment (loan balance) at December 31, 2013:
Loans individually evaluated for impairment	$	89,905		$	17,408		$	—		$	107,313
Loans collectively evaluated for impairment	2,178,714			2,066,897			—			4,245,611
Loans acquired with deteriorated credit quality	250,207			44,490			—			294,697
Total	$	2,518,826		$	2,128,795		$	—		$	4,647,621

The allowance attributable to acquired loans of $0.5 million at both December 31, 2014 and December 31, 2013 was primarily attributable to two consumer loan pools in the acquired loan portfolio experiencing a decline in expected cash flows. There were no material changes in expected cash flows for the remaining acquired loan pools at December 31, 2014. As part of its ongoing assessment of the acquired loan portfolio, management determined that the overall credit quality of the OAK acquired loan portfolio had improved, which resulted in an improvement in expected cash flows of loan pools in the OAK acquired commercial loan portfolio. Accordingly, management reclassified $10.0 million during 2014 from the nonaccretable difference to the accretable yield for these OAK acquired commercial loan pools, which will increase amounts recognized into interest income over the estimated remaining lives of these loan pools.