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 six 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 and land development — Real estate construction loans represent 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 loans represent 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 are 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 and comprised primarily of indirect loans purchased from dealers. 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, and 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:



(Dollars in thousands)	September 30, 2016		December 31, 2015
Commercial loan portfolio:
Commercial	$	3,159,936	$	1,905,879
Commercial real estate	3,773,017		2,112,162
Real estate construction and land development	500,494		232,076
Subtotal	7,433,447		4,250,117
Consumer loan portfolio:
Residential mortgage	3,046,959		1,429,636
Consumer installment	1,335,707		877,457
Home equity	899,676		713,937
Subtotal	5,282,342		3,021,030
Total loans	$	12,715,789	$	7,271,147

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 throughout Michigan and additional communities located within northeast Ohio and northern Indiana. The Corporation has no foreign loans.

The Corporation, through Chemical Bank and Talmer Bank and Trust, 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 six executive and senior officers who have varying loan limits exceeding $1.5 million and up to $3.5 million. With respect to the group loan authorities, Chemical Bank 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 $10.0 million, depending on risk rating and credit action required. A directors’ loan committee of Chemical Bank, consisting of eight independent members of the board of directors of Chemical Bank, the chief executive officer of Chemical Bank and the senior credit officer of Chemical Bank, meets bi-weekly to consider loans in amounts over $10.0 million, and certain loans under $10.0 million depending on a loan’s risk rating and credit action required. Loans over $15.0 million require the approval of the board of directors of Chemical Bank.

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 September 30, 2016 and December 31, 2015:



(Dollars in thousands)	Commercial		Commercial Real Estate		Real Estate Construction and Land Development		Total
September 30, 2016
Originated Portfolio:
Risk Grades 1-5	$	1,624,836	$	1,528,013	$	291,841	$	3,444,690
Risk Grade 6	49,934		40,710		288		90,932
Risk Grade 7	35,719		15,132		515		51,366
Risk Grade 8	12,612		19,913		80		32,605
Risk Grade 9	1,130		1		—		1,131
Subtotal	1,724,231		1,603,769		292,724		3,620,724
Acquired Portfolio:
Risk Grades 1-5	1,331,689		1,988,676		203,159		3,523,524
Risk Grade 6	49,679		94,829		742		145,250
Risk Grade 7	37,813		52,317		886		91,016
Risk Grade 8	16,524		33,426		2,983		52,933
Subtotal	1,435,705		2,169,248		207,770		3,812,723
Total	$	3,159,936	$	3,773,017	$	500,494	$	7,433,447
December 31, 2015
Originated Portfolio:
Risk Grades 1-5	$	1,418,301	$	1,341,202	$	183,323	$	2,942,826
Risk Grade 6	34,727		31,036		180		65,943
Risk Grade 7	39,933		26,658		1,123		67,714
Risk Grade 8	26,459		25,163		521		52,143
Risk Grade 9	2,095		—		—		2,095
Subtotal	1,521,515		1,424,059		185,147		3,130,721
Acquired Portfolio:
Risk Grades 1-5	340,782		629,430		41,683		1,011,895
Risk Grade 6	28,321		23,926		2,556		54,803
Risk Grade 7	11,607		29,975		1,537		43,119
Risk Grade 8	3,654		4,772		1,153		9,579
Subtotal	384,364		688,103		46,929		1,119,396
Total	$	1,905,879	$	2,112,162	$	232,076	$	4,250,117

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. Acquired loans that are not performing in accordance with contractual terms are not reported 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.

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 September 30, 2016 and December 31, 2015:



(Dollars in thousands)	Residential Mortgage		Consumer Installment		Home Equity		Total Consumer
September 30, 2016
Originated Loans:
Performing	$	1,363,819	$	1,171,759	$	589,374	$	3,124,952
Nonperforming	7,185		378		2,692		10,255
Subtotal	1,371,004		1,172,137		592,066		3,135,207
Acquired Loans	1,675,955		163,570		307,610		2,147,135
Total	$	3,046,959	$	1,335,707	$	899,676	$	5,282,342
December 31, 2015
Originated Loans:
Performing	$	1,207,945	$	868,975	$	587,566	$	2,664,486
Nonperforming	9,030		451		3,246		12,727
Subtotal	1,216,975		869,426		590,812		2,677,213
Acquired Loans	212,661		8,031		123,125		343,817
Total	$	1,429,636	$	877,457	$	713,937	$	3,021,030

Nonperforming Loans

A summary of nonperforming loans follows:



(Dollars in thousands)	September 30, 2016		December 31, 2015
Nonaccrual loans:
Commercial	$	13,742	$	28,554
Commercial real estate	19,914		25,163
Real estate construction and land development	80		521
Residential mortgage	5,119		5,557
Consumer installment	378		451
Home equity	2,064		1,979
Total nonaccrual loans	41,297		62,225
Accruing loans contractually past due 90 days or more as to interest or principal payments:
Commercial	221		364
Commercial real estate	739		254
Real estate construction and land development	1,439		—
Residential mortgage	375		402
Home equity	628		1,267
Total accruing loans contractually past due 90 days or more as to interest or principal payments	3,402		2,287
Nonperforming TDRs:
Commercial loan portfolio	15,261		16,297
Consumer loan portfolio	1,691		3,071
Total nonperforming TDRs	16,952		19,368
Total nonperforming loans (1)	$	61,651	$	83,880

(1) 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.

The Corporation’s nonaccrual loans at September 30, 2016 and December 31, 2015 included $29.5 million and $35.9 million, respectively, of nonaccrual TDRs.

The Corporation had $8.1 million of residential mortgage loans that were in the process of foreclosure at September 30, 2016, compared to $2.9 million at December 31, 2015.

Impaired Loans

The following schedule presents impaired loans by classes of loans at September 30, 2016 and December 31, 2015:



(Dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Valuation Allowance
September 30, 2016
Impaired loans with a valuation allowance:
Commercial	$	4,906	$	4,911	$	2,729
Commercial real estate	2,741		2,741		516
Residential mortgage	19,864		19,864		154
Subtotal	27,511		27,516		3,399
Impaired loans with no related valuation allowance:
Commercial	53,542		78,494		—
Commercial real estate	69,713		118,751		—
Real estate construction and land development	3,362		8,894		—
Residential mortgage	34,310		54,414		—
Consumer installment	1,004		1,538		—
Home equity	7,573		10,245		—
Subtotal	169,504		272,336		—
Total impaired loans:
Commercial	58,448		83,405		2,729
Commercial real estate	72,454		121,492		516
Real estate construction and land development	3,362		8,894		—
Residential mortgage	54,174		74,278		154
Consumer installment	1,004		1,538		—
Home equity	7,573		10,245		—
Total	$	197,015	$	299,852	$	3,399
December 31, 2015
Impaired loans with a valuation allowance:
Commercial	$	18,898	$	19,426	$	5,700
Commercial real estate	4,448		4,688		497
Residential mortgage	21,037		21,037		192
Subtotal	44,383		45,151		6,389
Impaired loans with no related valuation allowance:
Commercial	31,039		37,703		—
Commercial real estate	53,518		69,130		—
Real estate construction and land development	2,136		3,108		—
Residential mortgage	7,638		8,644		—
Consumer installment	498		512		—
Home equity	2,986		3,270		—
Subtotal	97,815		122,367		—
Total impaired loans:
Commercial	49,937		57,129		5,700
Commercial real estate	57,966		73,818		497
Real estate construction and land development	2,136		3,108		—
Residential mortgage	28,675		29,681		192
Consumer installment	498		512		—
Home equity	2,986		3,270		—
Total	$	142,198	$	167,518	$	6,389

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 $102.8 million and $25.3 million at September 30, 2016 and December 31, 2015, respectively, includes confirmed losses (partial charge-offs) of $17.4 million and $17.1 million, respectively, and fair value discount adjustments of $85.4 million and $8.2 million, respectively.

Impaired loans included $89.9 million and $12.8 million at September 30, 2016 and December 31, 2015, 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 $48.8 million and $47.8 million at September 30, 2016 and December 31, 2015, respectively, of performing TDRs.

The following schedule presents information related to impaired loans for the three and nine months ended September 30, 2016 and 2015, respectively:



	Three Months Ended September 30, 2016				Nine Months Ended September 30, 2016
(Dollars in thousands)	Average Recorded Investment		Interest Income Recognized While on Impaired Status		Average Recorded Investment		Interest Income Recognized While on Impaired Status
Commercial	$	43,812	$	1,073	$	42,478	$	1,750
Commercial real estate	58,658		1,219		56,779		2,068
Real estate construction and land development	2,400		64		2,243		115
Residential mortgage	35,986		818		30,499		1,540
Consumer installment	601		17		439		19
Home equity	4,466		95		3,504		123
Total	$	145,923	$	3,286	$	135,942	$	5,615



	Three Months Ended September 30, 2015				Nine months ended September 30, 2015
(Dollars in thousands)	Average Recorded Investment		Interest Income Recognized While on Impaired Status		Average Recorded Investment		Interest Income Recognized While on Impaired Status
Commercial	$	42,847	$	310	$	39,387	$	862
Commercial real estate	59,150		470		59,927		1,453
Real estate construction and land development	2,210		26		2,338		89
Residential mortgage	30,467		387		29,084		1,098
Consumer installment	497		—		474		1
Home equity	3,026		20		2,635		42
Total	$	138,197	$	1,213	$	133,845	$	3,545

The following schedule presents the aging status of the recorded investment in loans by classes of loans at September 30, 2016 and December 31, 2015:



(Dollars in thousands)	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
September 30, 2016
Originated Portfolio:
Commercial	$	6,313	$	2,675	$	221	$	13,742	$	22,951	$	1,701,280	$	1,724,231
Commercial real estate	11,913		726		739		19,914		33,292		1,570,477		1,603,769
Real estate construction and land development	3,003		—		1,439		80		4,522		288,202		292,724
Residential mortgage	2,627		—		375		5,119		8,121		1,362,883		1,371,004
Consumer installment	2,425		448		—		378		3,251		1,168,886		1,172,137
Home equity	3,097		940		628		2,064		6,729		585,337		592,066
Total	$	29,378	$	4,789	$	3,402	$	41,297	$	78,866	$	6,677,065	$	6,755,931
Acquired Portfolio:
Commercial	$	3,116	$	1,146	$	11,984	$	—	$	16,246	$	1,419,459	$	1,435,705
Commercial real estate	4,315		2,844		25,444		—		32,603		2,136,645		2,169,248
Real estate construction and land development	208		153		2,902		—		3,263		204,507		207,770
Residential mortgage	1,452		2,895		10,719		—		15,066		1,660,889		1,675,955
Consumer installment	1,367		200		203		—		1,770		161,800		163,570
Home equity	1,082		1,143		1,461		—		3,686		303,924		307,610
Total	$	11,540	$	8,381	$	52,713	$	—	$	72,634	$	5,887,224	$	5,959,858
December 31, 2015
Originated Portfolio:
Commercial	$	3,685	$	1,230	$	364	$	28,554	$	33,833	$	1,487,682	$	1,521,515
Commercial real estate	4,168		1,603		254		25,163		31,188		1,392,871		1,424,059
Real estate construction and land development	—		—		—		521		521		184,626		185,147
Residential mortgage	1,737		—		402		5,557		7,696		1,209,279		1,216,975
Consumer installment	3,145		644		—		451		4,240		865,186		869,426
Home equity	1,767		788		1,267		1,979		5,801		585,011		590,812
Total	$	14,502	$	4,265	$	2,287	$	62,225	$	83,279	$	5,724,655	$	5,807,934
Acquired Portfolio:
Commercial	$	490	$	532	$	3,735	$	—	$	4,757	$	379,607	$	384,364
Commercial real estate	3,557		691		4,771		—		9,019		679,084		688,103
Real estate construction and land development	—		—		1,154		—		1,154		45,775		46,929
Residential mortgage	1,370		—		2,081		—		3,451		209,210		212,661
Consumer installment	55		—		47		—		102		7,929		8,031
Home equity	847		78		1,007		—		1,932		121,193		123,125
Total	$	6,319	$	1,301	$	12,795	$	—	$	20,415	$	1,442,798	$	1,463,213

Loans Modified Under Troubled Debt Restructurings (TDRs)

The following schedule presents the Corporation’s TDRs at September 30, 2016 and December 31, 2015:



(Dollars in thousands)	Performing TDRs		Non-Performing TDRs		Nonaccrual TDRs		Total
September 30, 2016
Commercial loan portfolio	$	30,662	$	15,261	$	26,340	$	72,263
Consumer loan portfolio	18,173		1,691		3,165		23,029
Total	$	48,835	$	16,952	$	29,505	$	95,292
December 31, 2015
Commercial loan portfolio	$	29,844	$	16,297	$	32,682	$	78,823
Consumer loan portfolio	17,966		3,071		3,251		24,288
Total	$	47,810	$	19,368	$	35,933	$	103,111

The following schedule provides information on the Corporation's TDRs that were modified during the three and nine months ended September 30, 2016 and 2015:



	Three Months Ended September 30, 2016					Nine Months Ended September 30, 2016
(Dollars in thousands)	Number of Loans	Pre- Modification Recorded Investment		Post- Modification Recorded Investment		Number of Loans	Pre- Modification Recorded Investment		Post- Modification Recorded Investment
Commercial loan portfolio:
Commercial	4	$	4,160	$	4,160	32	$	12,141	$	12,141
Commercial real estate	—	—		—		6	2,441		2,441
Subtotal – commercial loan portfolio	4	4,160		4,160		38	14,582		14,582
Consumer loan portfolio	2	89		89		23	783		783
Total	6	$	4,249	$	4,249	61	$	15,365	$	15,365



	Three Months Ended September 30, 2015					Nine months ended September 30, 2015
(Dollars in thousands)	Number of Loans	Pre- Modification Recorded Investment		Post- Modification Recorded Investment		Number of Loans	Pre- Modification Recorded Investment		Post- Modification Recorded Investment
Commercial loan portfolio:
Commercial	3	$	882	$	882	21	$	5,146	$	5,146
Commercial real estate	3	2,044		2,044		12	5,105		5,105
Real estate construction and land development	—	—		—		1	305		305
Subtotal – commercial loan portfolio	6	2,926		2,926		34	10,556		10,556
Consumer loan portfolio	15	481		481		54	2,450		2,448
Total	21	$	3,407	$	3,407	88	$	13,006	$	13,004

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 three and nine months ended September 30, 2016 and 2015, 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:



	Three Months Ended September 30, 2016			Nine Months Ended September 30, 2016
(Dollars in thousands)	Number of Loans	Principal Balance at End of Period		Number of Loans	Principal Balance at End of Period
Commercial loan portfolio:
Commercial real estate	—	$	—	2	$	1,721
Subtotal – commercial loan portfolio	—	—		2	1,721
Consumer loan portfolio	1	—		3	—
Total	1	$	—	5	$	1,721



	Three Months Ended September 30, 2015			Nine months ended September 30, 2015
(Dollars in thousands)	Number of Loans	Principal Balance at End of Period		Number of Loans	Principal Balance at End of Period
Commercial loan portfolio:
Commercial real estate	1	$	74	5	$	1,016
Subtotal – commercial loan portfolio	1	74		5	1,016
Consumer loan portfolio	1	13		2	46
Total	2	$	87	7	$	1,062

Allowance for Loan Losses

The following schedule presents, by loan portfolio segment, the changes in the allowance for the three and nine months ended September 30, 2016 and 2015, respectively, and details regarding the balance in the allowance and the recorded investment in loans at September 30, 2016 by impairment evaluation method.



(Dollars in thousands)	Commercial Loan Portfolio			Consumer Loan Portfolio			Unallocated			Total
Changes in allowance for loan losses for the three months ended September 30, 2016:
Beginning balance	$	44,228		$	27,278		$	—		$	71,506
Provision for loan losses	3,537			566			—			4,103
Charge-offs	(824		)	(2,037		)	—			(2,861		)
Recoveries	489			538			—			1,027
Ending balance	$	47,430		$	26,345		$	—		$	73,775
Changes in allowance for loan losses for the nine months ended September 30, 2016:
Beginning balance	$	47,234		$	26,094		$	—		$	73,328
Provision for loan losses	5,437			3,166			—			8,603
Charge-offs	(7,262		)	(4,677		)	—			(11,939		)
Recoveries	2,021			1,762			—			3,783
Ending balance	$	47,430		$	26,345		$	—		$	73,775
Changes in allowance for loan losses for the three months ended September 30, 2015:
Beginning balance	$	45,527		$	23,321		$	6,093		$	74,941
Provision for loan losses	2,637			(351		)	(786		)	1,500
Charge-offs	(539		)	(1,656		)	—			(2,195		)
Recoveries	769			611			—			1,380
Ending balance	$	48,394		$	21,925		$	5,307		$	75,626
Changes in allowance for loan losses for the nine months ended September 30, 2015:
Beginning balance	$	44,156		$	28,803		$	2,724		$	75,683
Provision for loan losses	5,604			(3,687		)	2,583			4,500
Charge-offs	(2,958		)	(5,104		)	—			(8,062		)
Recoveries	1,592			1,913			—			3,505
Ending balance	$	48,394		$	21,925		$	5,307		$	75,626
Allowance for loan losses balance at September 30, 2016 attributable to:
Loans individually evaluated for impairment	$	3,245		$	154		$	—		$	3,399
Loans collectively evaluated for impairment	44,185			26,191			—			70,376
Loans acquired with deteriorated credit quality	—			—			—			—
Total	$	47,430		$	26,345		$	—		$	73,775
Recorded investment (loan balance) at September 30, 2016:
Loans individually evaluated for impairment	$	79,659		$	19,864		$	—		$	99,523
Loans collectively evaluated for impairment	3,541,065			3,115,343			—			6,656,408
Loans acquired with deteriorated credit quality	3,812,723			2,147,135			—			5,959,858
Total	$	7,433,447		$	5,282,342		$	—		$	12,715,789

The following schedule presents, by loan portfolio segment, details regarding the balance in the allowance and the recorded investment in loans at December 31, 2015 by impairment evaluation method.



(Dollars in thousands)	Commercial Loan Portfolio		Consumer Loan Portfolio		Total
Allowance for loan losses balance at December 31, 2015 attributable to:
Loans individually evaluated for impairment	$	6,197	$	192	$	6,389
Loans collectively evaluated for impairment	41,037		25,902		66,939
Loans acquired with deteriorated credit quality	—		—		—
Total	$	47,234	$	26,094	$	73,328
Recorded investment (loan balance) at December 31, 2015:
Loans individually evaluated for impairment	$	100,379	$	21,037	$	121,416
Loans collectively evaluated for impairment	3,030,342		2,656,176		5,686,518
Loans acquired with deteriorated credit quality	1,119,396		343,817		1,463,213
Total	$	4,250,117	$	3,021,030	$	7,271,147