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Loans
 3 Months Ended
Mar. 31, 2018
Receivables [Abstract]  
Loans
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 (owner-occupied), non-owner occupied real estate leased to one or more tenants (non-owner occupied) and vacant land that has been acquired for investment or future land development (vacant land).
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 at March 31, 2018 and December 31, 2017 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 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.
Loans held-for-sale, comprised of fixed-rate residential mortgage loans, were $31.6 million at March 31, 2018 and $52.1 million at December 31, 2017. The Corporation sold loans totaling $190.4 million and $191.5 million during the three months ended March 31, 2018 and 2017, respectively.

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 the Corporation's loans follows:
(Dollars in thousands)
 
Originated
 
Acquired(1)
 
Total Loans
March 31, 2018
 
 
 
 
 
 
Commercial loan portfolio:
 
 
 
 
 
 
Commercial
 
$
2,486,533

 
$
940,752

 
$
3,427,285

Commercial real estate:
 
 
 
 
 
 
Owner-occupied
 
1,185,797

 
647,027

 
1,832,824

Non-owner occupied
 
1,689,022

 
991,779

 
2,680,801

Vacant land
 
43,984

 
30,767

 
74,751

Total commercial real estate
 
2,918,803

 
1,669,573

 
4,588,376

Real estate construction and land development
 
485,474

 
74,306

 
559,780

Subtotal
 
5,890,810

 
2,684,631

 
8,575,441

Consumer loan portfolio:
 
 
 
 
 
 
Residential mortgage
 
2,039,349

 
1,225,271

 
3,264,620

Consumer installment
 
1,478,673

 
93,567

 
1,572,240

Home equity
 
603,684

 
202,762

 
806,446

Subtotal
 
4,121,706

 
1,521,600

 
5,643,306

Total loans(2)
 
$
10,012,516

 
$
4,206,231

 
$
14,218,747

December 31, 2017
 
 
 
 
 
 
Commercial loan portfolio:
 
 
 
 
 
 
Commercial
 
$
2,407,606

 
$
978,036

 
$
3,385,642

Commercial real estate:
 
 
 
 
 
 
Owner-occupied
 
1,185,614

 
627,948

 
1,813,562

Non-owner occupied
 
1,518,787

 
1,087,974

 
2,606,761

Vacant land
 
47,024

 
33,323

 
80,347

Total commercial real estate
 
2,751,425

 
1,749,245

 
4,500,670

Real estate construction and land development
 
498,155

 
76,060

 
574,215

Subtotal
 
5,657,186

 
2,803,341

 
8,460,527

Consumer loan portfolio:
 
 
 
 
 
 
Residential mortgage
 
1,967,857

 
1,284,630

 
3,252,487

Consumer installment
 
1,510,540

 
102,468

 
1,613,008

Home equity
 
611,846

 
217,399

 
829,245

Subtotal
 
4,090,243

 
1,604,497

 
5,694,740

Total loans(2)
 
$
9,747,429

 
$
4,407,838

 
$
14,155,267


(1) 
Acquired loans are accounted for under ASC Topic 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality (ASC 310-30)
(2) 
Reported net of deferred costs totaling $23.9 million and $26.1 million at March 31, 2018 and December 31, 2017, respectively.
    
The Corporation acquired loans at fair value as of the acquisition date, which includes loans acquired in the acquisitions of Talmer Bancorp, Inc. ("Talmer"), Lake Michigan Financial Corporation ("Lake Michigan"), Monarch Community Bancorp, Inc. ("Monarch"), Northwestern Bancorp, Inc. ("Northwestern") and O.A.K. Financial Corporation ("OAK"). Acquired loans are accounted for under ASC 310-30 which recognizes the expected shortfall of expected future cash flows, as compared to the contractual amount due, as nonaccretable discount. Any excess of the net present value of expected future cash flows over the acquisition date fair value is recognized as the accretable discount, or accretable yield. The accretable discount is recognized over the expected remaining life of the acquired loans on a pool basis. In the event an acquired loan is renewed or extended, the loan continues to be accounted for as an acquired loan on a pool basis in accordance with ASC 310-30.

Activity for the accretable yield, which includes contractually due interest for acquired loans that have been renewed or extended since the date of acquisition and continue to be accounted for in loan pools in accordance with ASC 310-30, follows:
(Dollars in thousands)
 
Talmer
 
Lake Michigan
 
Monarch
 
North-western
 
OAK
 
Total
Three Months Ended March 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
Balance at beginning of period
 
$
731,353

 
$
95,124

 
$
22,496

 
$
60,814

 
$
17,110

 
$
926,897

Accretion recognized in interest income
 
(42,640
)
 
(6,758
)
 
(1,156
)
 
(4,904
)
 
(3,103
)
 
(58,561
)
Net reclassification (to) from nonaccretable difference(1)
 
(2,883
)
 
1,790

 
(186
)
 
(510
)
 
2,151

 
362

Balance at end of period
 
$
685,830

 
$
90,156

 
$
21,154

 
$
55,400

 
$
16,158

 
$
868,698

 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31, 2017
 
 
 
 
 
 
 
 
 
 
 
 
Balance at beginning of period
 
$
798,210

 
$
121,416

 
$
27,182

 
$
69,847

 
$
23,316

 
$
1,039,971

Accretion recognized in interest income
 
(44,571
)
 
(7,266
)
 
(1,181
)
 
(3,892
)
 
(3,277
)
 
(60,187
)
Net reclassification (to) from nonaccretable difference(1)
 
21,139

 
(939
)
 
54

 
(1,058
)
 
1,428

 
20,624

Balance at end of period
 
$
774,778

 
$
113,211

 
$
26,055

 
$
64,897

 
$
21,467

 
$
1,000,408


(1) 
The net reclassification results from changes in expected cash flows of the acquired loans which may include increases in the amount of contractual principal and interest expected to be collected due to improvement in credit quality, increases in balances outstanding from advances, renewals, extensions and interest rates; as well as reductions in contractual principal and interest expected to be collected due to credit deterioration, payoffs, and decreases in interest rates.
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, through Chemical Bank, 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 $1.25 million requiring credit officer approval and credit decisions greater than $3.0 million requiring group loan authority approval, except for six executive and senior officers who have varying loan limits up to $8.0 million. With respect to the group loan authorities, Chemical Bank has various regional loan committees that meet weekly to consider loans ranging in amounts of $3.0 million to $7.0 million, and a senior loan committee, consisting of certain executive and senior officers, that meets weekly to consider loans ranging in amounts from $7.0 million up to Chemical Bank's internal lending limit, depending on risk rating and credit action required. Credit actions exceeding Chemical Bank's internal lending limit 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
Risk categories for the Corporation's commercial loan portfolio establish the credit quality of a borrower by measuring liquidity, debt capacity, coverage and payment behavior as shown in the borrower's financial statements. The risk categories also measure the quality of the borrower's management and the repayment support offered by any guarantors. Risk categories for the Corporation's commercial loan portfolio are described as follows:
Pass: Includes all loans without weaknesses or potential weaknesses identified in the categories of special mention, substandard or doubtful.
Special Mention: Loans with potential credit weakness or credit deficiency, which, if not corrected, pose an unwarranted financial risk that could weaken the loan by adversely impacting the future repayment ability of the borrower.
Substandard: Loans with a well-defined weakness, or weaknesses, such as loans to borrowers who may be experiencing losses from operations or inadequate liquidity of a degree and duration that jeopardizes the orderly repayment of the loan. Substandard loans also are distinguished by the distinct possibility of loss in the future if these weaknesses are not corrected.

Doubtful: Loans with all the characteristics of a loan classified as Substandard, with the added characteristic that credit weaknesses make collection in full highly questionable and improbable. The primary source of repayment is nonexistent and there is doubt as to the value of the secondary source of repayments. A doubtful asset has a high probability of total or substantial loss, but because of pending events that may strengthen the asset, its classification as loss is deferred.

Loss: An asset classified as loss is considered uncollectible and of such little value that the continuance as a bankable asset is not warranted. This classification does not mean that an asset has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off this basically worthless asset even through partial recovery may occur in the future.
    
The following schedule presents the recorded investment of loans in the commercial loan portfolio by credit risk categories at March 31, 2018 and December 31, 2017:
(Dollars in thousands)
 
Pass
 
Special Mention
 
Substandard
 
Doubtful
 
Total
March 31, 2018
 
 
 
 
 
 
 
 
 
 
Originated Portfolio:
 
 
 
 
 
 
 
 
 
 
Commercial
 
$
2,401,859

 
$
37,084

 
$
47,590

 
$
—

 
$
2,486,533

Commercial real estate:
 
 
 
 
 
 
 
 
 
 
Owner-occupied
 
1,123,847

 
16,850

 
44,789

 
311

 
1,185,797

Non-owner occupied
 
1,652,313

 
33,895

 
2,813

 
1

 
1,689,022

Vacant land
 
37,179

 
53

 
6,752

 
—

 
43,984

Total commercial real estate
 
2,813,339

 
50,798

 
54,354

 
312

 
2,918,803

Real estate construction and land development
 
472,340

 
9,724

 
3,410

 
—

 
485,474

Subtotal
 
5,687,538

 
97,606

 
105,354

 
312

 
5,890,810

Acquired Portfolio:
 
 
 
 
 
 
 
 
 
 
Commercial
 
830,615

 
66,480

 
43,471

 
186

 
940,752

Commercial real estate:
 
 
 
 
 
 
 
 
 
 
Owner-occupied
 
583,937

 
26,683

 
36,022

 
385

 
647,027

Non-owner occupied
 
913,327

 
45,146

 
33,306

 
—

 
991,779

Vacant land
 
25,632

 
312

 
4,823

 
—

 
30,767

Total commercial real estate
 
1,522,896

 
72,141

 
74,151

 
385

 
1,669,573

Real estate construction and land development
 
71,736

 
1,611

 
959

 
—

 
74,306

Subtotal
 
2,425,247

 
140,232

 
118,581

 
571

 
2,684,631

Total
 
$
8,112,785

 
$
237,838

 
$
223,935

 
$
883

 
$
8,575,441

December 31, 2017
 
 
 
 
 
 
 
 
 
 
Originated Portfolio:
 
 
 
 
 
 
 
 
 
 
Commercial
 
$
2,316,464

 
$
41,059

 
$
50,083

 
$
—

 
$
2,407,606

Commercial real estate:
 
 
 
 
 
 
 
 
 
 
Owner-occupied
 
1,133,609

 
19,438

 
32,567

 
—

 
1,185,614

Non-owner occupied
 
1,504,195

 
4,728

 
9,864

 
—

 
1,518,787

Vacant land
 
39,775

 
38

 
7,211

 
—

 
47,024

Total commercial real estate
 
2,677,579

 
24,204

 
49,642

 
—

 
2,751,425

Real estate construction and land development
 
494,528

 
837

 
2,790

 
—

 
498,155

Subtotal
 
5,488,571

 
66,100

 
102,515

 
—

 
5,657,186

Acquired Portfolio:
 
 
 
 
 
 
 
 
 
 
Commercial
 
873,861

 
68,418

 
35,539

 
218

 
978,036

Commercial real estate:
 
 
 
 
 
 
 
 
 
 
Owner-occupied
 
580,127

 
23,998

 
23,036

 
787

 
627,948

Non-owner occupied
 
995,709

 
43,645

 
48,620

 
—

 
1,087,974

Vacant land
 
27,849

 
327

 
5,147

 
—

 
33,323

Total commercial real estate
 
1,603,685

 
67,970

 
76,803

 
787

 
1,749,245

Real estate construction and land development
 
72,346

 
2,218

 
1,496

 
—

 
76,060

Subtotal
 
2,549,892

 
138,606

 
113,838

 
1,005

 
2,803,341

Total
 
$
8,038,463

 
$
204,706

 
$
216,353

 
$
1,005

 
$
8,460,527


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, are considered to be in a nonperforming status. Loans accounted for under ASC 310-30, "Acquired loans", that are not performing in accordance with contractual terms are not reported as nonperforming 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 March 31, 2018 and December 31, 2017:
(Dollars in thousands)
 
Residential Mortgage
 
Consumer
Installment
 
Home Equity
 
Total
Consumer
March 31, 2018
 
 
 
 
 
 
 
 
Originated Loans:
 
 
 
 
 
 
 
 
Performing
 
$
2,031,728

 
$
1,477,751

 
$
600,645

 
$
4,110,124

Nonperforming
 
7,621

 
922

 
3,039

 
11,582

Subtotal
 
2,039,349

 
1,478,673

 
603,684

 
4,121,706

Acquired Loans
 
1,225,271

 
93,567

 
202,762

 
1,521,600

Total
 
$
3,264,620

 
$
1,572,240

 
$
806,446

 
$
5,643,306

December 31, 2017
 
 
 
 
 
 
 
 
Originated Loans:
 
 
 
 
 
 
 
 
Performing
 
$
1,959,222

 
$
1,509,698

 
$
607,541

 
$
4,076,461

Nonperforming
 
8,635

 
842

 
4,305

 
13,782

Subtotal
 
1,967,857

 
1,510,540

 
611,846

 
4,090,243

Acquired Loans
 
1,284,630

 
102,468

 
217,399

 
1,604,497

Total
 
$
3,252,487

 
$
1,613,008

 
$
829,245

 
$
5,694,740



Nonperforming Assets and Past Due Loans

Nonperforming assets consist of loans for which the accrual of interest has been discounted, other real estate owned acquired through acquisitions, other real estate owned obtained through foreclosure and other repossessed assets.
Loans are considered past due or delinquent when the contractual principal or interest due in accordance with the terms of the loan agreement or any portion thereof remains unpaid after the due date of the scheduled payments. Loans outside of those accounted for under ASC 310-30 are classified as nonaccrual when, in the opinion of management, collection of principal or interest is doubtful. The accrual of interest is discontinued when a loan is placed in nonaccrual status and any payments received reduce the carrying value of the loan. A loan may be placed back on accrual status if all contractual payments have been received and collection of future principal and interest payments are no longer doubtful. Acquired loans that are not performing in accordance with contractual terms are not reported as nonperforming 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.
A summary of nonperforming loans follows:
(Dollars in thousands)
 
March 31,
2018
 
December 31,
2017
Nonperforming assets
 
 
 
 
Nonaccrual loans:
 
 
 
 
Commercial
 
$
20,000

 
$
19,691

Commercial real estate:
 
 
 
 
Owner-occupied
 
19,855

 
19,070

Non-owner occupied
 
5,489

 
5,270

Vacant land
 
4,829

 
5,205

Total commercial real estate
 
30,173

 
29,545

Real estate construction and land development
 
77

 
77

Residential mortgage
 
7,621

 
8,635

Consumer installment
 
922

 
842

Home equity
 
3,039

 
4,305

Total nonaccrual loans
 
61,832

 
63,095

Other real estate owned and repossessed assets
 
7,719

 
8,807

Total nonperforming assets
 
$
69,551

 
$
71,902

Accruing loans contractually past due 90 days or more as to interest or principal payments, excluding acquired loans accounted for under ASC 310-30
 
 
 
 
Commercial
 
$
322

 
$
—

Commercial real estate:
 
 
 
 
Non-owner occupied
 
—

 
13

Total commercial real estate
 
—

 
13

Home equity
 
913

 
1,364

Total accruing loans contractually past due 90 days or more as to interest or principal payments, excluding acquired loans accounted for under ASC 310-30
 
$
1,235

 
$
1,377



The Corporation’s nonaccrual loans at March 31, 2018 and December 31, 2017 included $26.2 million and $29.1 million, respectively, of nonaccrual TDRs.
The Corporation had $3.2 million of residential mortgage loans that were in the process of foreclosure at March 31, 2018, compared to $4.2 million at December 31, 2017.
Loan delinquency, excluding acquired loans accounted for under ASC 310-30, was as follows:
(Dollars in thousands)
 
30-59
days
past due
 
60-89
days
past due
 
90 days or more past due
 
Total past due
 
Current
 
Total loans
 
90 days or more past due and still accruing
March 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Originated Portfolio:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
 
$
8,689

 
$
6,079

 
$
12,122

 
$
26,890

 
$
2,459,643

 
$
2,486,533

 
$
322

Commercial real estate:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Owner-occupied
 
10,829

 
3,368

 
8,394

 
22,591

 
1,163,206

 
1,185,797

 
—

Non-owner occupied
 
3,749

 
897

 
928

 
5,574

 
1,683,448

 
1,689,022

 
—

Vacant land
 
675

 
—

 
180

 
855

 
43,129

 
43,984

 
—

Total commercial real estate
 
15,253

 
4,265

 
9,502

 
29,020

 
2,889,783

 
2,918,803

 
—

Real estate construction and land development
 
100

 
—

 
—

 
100

 
485,374

 
485,474

 
—

Residential mortgage
 
3,020

 
246

 
2,276

 
5,542

 
2,033,807

 
2,039,349

 
—

Consumer installment
 
2,817

 
570

 
257

 
3,644

 
1,475,029

 
1,478,673

 
—

Home equity
 
3,631

 
1,360

 
2,049

 
7,040

 
596,644

 
603,684

 
913

Total
 
$
33,510

 
$
12,520

 
$
26,206

 
$
72,236

 
$
9,940,280

 
$
10,012,516

 
$
1,235

December 31, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Originated Portfolio:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
 
$
13,906

 
$
3,766

 
$
9,494

 
$
27,166

 
$
2,380,440

 
$
2,407,606

 
$
—

Commercial real estate:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Owner-occupied
 
7,644

 
1,306

 
5,027

 
13,977

 
1,171,637

 
1,185,614

 
—

Non-owner occupied
 
1,653

 
228

 
693

 
2,574

 
1,516,213

 
1,518,787

 
13

Vacant land
 
83

 
28

 
153

 
264

 
46,760

 
47,024

 
—

Total commercial real estate
 
9,380

 
1,562

 
5,873

 
16,815

 
2,734,610

 
2,751,425

 
13

Real estate construction and land development
 
—

 
—

 
—

 
—

 
498,155

 
498,155

 
—

Residential mortgage
 
2,795

 
1,415

 
858

 
5,068

 
1,962,789

 
1,967,857

 
—

Consumer installment
 
3,324

 
442

 
226

 
3,992

 
1,506,548

 
1,510,540

 
—

Home equity
 
2,319

 
1,301

 
2,196

 
5,816

 
606,030

 
611,846

 
1,364

Total
 
$
31,724

 
$
8,486

 
$
18,647

 
$
58,857

 
$
9,688,572

 
$
9,747,429

 
$
1,377




Impaired Loans

A loan is impaired when, based on current information and events, it is probable that the Corporation will be unable to collect all amounts due according to the contractual terms of the loan agreement. Impaired loans include nonperforming loans and all TDRs. Impaired loans are accounted for at the lower of the present value of expected cash flows or the estimated fair value of the collateral. When the present value of expected cash flows or the fair value of the collateral of an impaired loan not accounted for under ASC 310-30 is less than the amount of unpaid principal outstanding on the loan, the recorded principal balance of the loan is reduced to its carrying value through either a specific allowance for loan loss or a partial charge-off of the loan balance.
The following schedules present impaired loans by classes of loans at March 31, 2018 and December 31, 2017:
(Dollars in thousands)
 
Recorded
Investment
 
Unpaid
Principal
Balance
 
Related
Valuation
Allowance
March 31, 2018
 
 
 
 
 
 
Impaired loans with a valuation allowance:
 
 
 
 
 
 
Commercial
 
$
23,500

 
$
25,998

 
$
1,987

Commercial real estate:
 
 
 
 
 
 
Owner-occupied
 
15,177

 
19,266

 
2,510

Non-owner occupied
 
2,952

 
5,545

 
201

Vacant land
 
1,317

 
1,520

 
356

Total commercial real estate
 
19,446

 
26,331

 
3,067

Real estate construction and land development
 
164

 
164

 
26

Residential mortgage
 
13,434

 
13,434

 
1,422

Consumer installment
 
1,101

 
1,101

 
206

Home equity
 
3,409

 
3,409

 
286

Subtotal
 
61,054

 
70,437

 
6,994

Impaired loans with no related valuation allowance:
 
 
 
 
 
 
Commercial
 
14,771

 
15,637

 
—

Commercial real estate:
 
 
 
 
 
 
Owner-occupied
 
15,435

 
16,291

 
—

Non-owner occupied
 
8,122

 
9,135

 
—

Vacant land
 
3,854

 
4,652

 
—

Total commercial real estate
 
27,411

 
30,078

 
—

Real estate construction and land development
 
174

 
241

 
—

Residential mortgage
 
5,928

 
5,928

 
—

Consumer installment
 
—

 
—

 
—

Home equity
 
1,780

 
1,780

 
—

Subtotal
 
50,064

 
53,664

 
—

Total impaired loans:
 
 
 
 
 
 
Commercial
 
38,271

 
41,635

 
1,987

Commercial real estate:
 
 
 
 
 
 
Owner-occupied
 
30,612

 
35,557

 
2,510

Non-owner occupied
 
11,074

 
14,680

 
201

Vacant land
 
5,171

 
6,172

 
356

Total commercial real estate
 
46,857

 
56,409

 
3,067

Real estate construction and land development
 
338

 
405

 
26

Residential mortgage
 
19,362

 
19,362

 
1,422

Consumer installment
 
1,101

 
1,101

 
206

Home equity
 
5,189

 
5,189

 
286

Total
 
$
111,118

 
$
124,101

 
$
6,994

(Dollars in thousands)
 
Recorded
Investment
 
Unpaid
Principal
Balance
 
Related
Valuation
Allowance
December 31, 2017
 
 
 
 
 
 
Impaired loans with a valuation allowance:
 
 
 
 
 
 
Commercial
 
$
28,897

 
$
31,655

 
$
2,296

Commercial real estate:
 
 
 
 
 
 
Owner-occupied
 
17,774

 
21,588

 
2,317

Non-owner occupied
 
5,307

 
7,870

 
316

Vacant land
 
4,922

 
5,122

 
594

Total commercial real estate
 
28,003

 
34,580

 
3,227

Real estate construction and land development
 
313

 
313

 
14

Residential mortgage
 
15,872

 
15,872

 
1,487

Consumer installment
 
966

 
966

 
120

Home equity
 
4,570

 
4,570

 
858

Subtotal
 
78,621

 
87,956

 
8,002

Impaired loans with no related valuation allowance:
 
 
 
 
 
 
Commercial
 
8,504

 
9,291

 
—

Commercial real estate:
 
 
 
 
 
 
Owner-occupied
 
11,351

 
12,631

 
—

Non-owner occupied
 
5,977

 
6,438

 
—

Vacant land
 
752

 
792

 
—

Total commercial real estate
 
18,080

 
19,861

 
—

Residential mortgage
 
4,902

 
4,902

 
—

Home equity
 
1,770

 
1,770

 
—

Subtotal
 
33,256

 
35,824

 
—

Total impaired loans:
 
 
 
 
 
 
Commercial
 
37,401

 
40,946

 
2,296

Commercial real estate:
 
 
 
 
 
 
Owner-occupied
 
29,125

 
34,219

 
2,317

Non-owner occupied
 
11,284

 
14,308

 
316

Vacant land
 
5,674

 
5,914

 
594

Total commercial real estate
 
46,083

 
54,441

 
3,227

Real estate construction and land development
 
313

 
313

 
14

Residential mortgage
 
20,774

 
20,774

 
1,487

Consumer installment
 
966

 
966

 
120

Home equity
 
6,340

 
6,340

 
858

Total
 
$
111,877

 
$
123,780

 
$
8,002



The following schedule presents additional information regarding impaired loans by classes of loans segregated by those requiring a valuation allowance and those not requiring a valuation allowance for the three months ended March 31, 2018 and 2017, and the respective interest income amounts recognized:
 
 
Three Months Ended March 31, 2018
 
Three Months Ended March 31, 2017
(Dollars in thousands)
 
Average
recorded
investment
 
Interest income
recognized
while on
impaired status
 
Average
recorded
investment
 
Interest income
recognized
while on
impaired status
Impaired loans with a valuation allowance:
 
 
 
 
 
 
 
 
Commercial
 
$
20,402

 
$
165

 
$
25,712

 
$
224

Commercial real estate:
 
 
 
 
 
 
 
 
Owner-occupied
 
14,072

 
82

 
14,659

 
154

Non-owner occupied
 
3,870

 
11

 
3,388

 
24

Vacant land
 
3,695

 
15

 
1,988

 
25

Total commercial real estate
 
21,637

 
108

 
20,035

 
203

Real estate construction and land development
 
225

 
2

 
161

 
2

Residential mortgage
 
13,604

 
117

 
17,398

 
155

Consumer installment
 
906

 
1

 
780

 
1

Home equity
 
3,694

 
17

 
4,071

 
21

Subtotal
 
$
60,468

 
$
410

 
$
68,157

 
$
606

Impaired loans with no related valuation allowance:
 
 
 
 
 
 
 
 
Commercial
 
$
18,126

 
$
95

 
$
9,297

 
$
30

Commercial real estate:
 
 
 
 
 
 
 
 
Owner-occupied
 
15,369

 
56

 
9,866

 
6

Non-owner occupied
 
7,158

 
65

 
9,131

 
85

Vacant land
 
1,769

 
—

 
4,476

 
12

Total commercial real estate
 
24,296

 
121

 
23,473

 
103

Real estate construction and land development
 
107

 
1

 
81

 
—

Residential mortgage
 
6,138

 
23

 
3,808

 
8

Consumer installment
 
140

 
—

 
215

 
—

Home equity
 
2,046

 
7

 
880

 
1

Subtotal
 
$
50,853


$
247


$
37,754


$
142

Total impaired loans:
 
 
 
 
 
 
 
 
Commercial
 
$
38,528

 
$
260

 
$
35,009

 
$
254

Commercial real estate:
 
 
 
 
 
 
 
 
Owner-occupied
 
29,441

 
138

 
24,525

 
160

Non-owner occupied
 
11,028

 
76

 
12,519

 
109

Vacant land
 
5,464

 
15

 
6,464

 
37

Total commercial real estate
 
45,933

 
229

 
43,508

 
306

Real estate construction and land development
 
332

 
3

 
242

 
2

Residential mortgage
 
19,742

 
140

 
21,206

 
163

Consumer installment
 
1,046

 
1

 
995

 
1

Home equity
 
5,740

 
24

 
4,951

 
22

Total
 
$
111,321

 
$
657

 
$
105,911


$
748



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.

Impaired loans included $49.3 million and $48.8 million at March 31, 2018 and December 31, 2017, respectively, of accruing TDRs.

Loans Modified Under Troubled Debt Restructurings (TDRs)

The following tables present the recorded investment of loans modified into TDRs during the three months ended March 31, 2018 and 2017 by type of concession granted. In cases where more than one type of concession was granted, the loans were categorized based on the most significant concession.
 
Concession type
 
 
 
 
 
 
(Dollars in thousands)
Principal
deferral
 
Principal
reduction
 
Interest
rate
 
Forbearance
agreement
 
Total
number
of loans
 
Pre-modification recorded investment
 
Post-modification recorded investment
For the three months ended March 31, 2018
 
 
 
 
 
 
 
 
 
 
Commercial loan portfolio:
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
$
903

 
$
—

 
$
1,065

 
$
261

 
18

 
$
2,235

 
$
2,229

Commercial real estate:
 
 
 
 
 
 
 
 
 
 
 
 
 
Owner-occupied
—

 
—

 
726

 
482

 
2

 
1,208

 
1,208

Non-owner occupied
68

 
—

 
—

 
—

 
1

 
74

 
68

Total commercial real estate
68

 
—

 
726

 
482

 
3

 
1,282

 
1,276

Total Commercial
971

 
—

 
1,791

 
743

 
21

 
3,517

 
3,505

Consumer loan portfolio:
 
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage
138

 
—

 
—

 
—

 
4

 
142

 
138

Consumer installment
71

 
23

 
28

 
—

 
16

 
128

 
122

Home equity
185

 
—

 
28

 
—

 
5

 
253

 
213

Total Consumer
394

 
23

 
56

 
—

 
25

 
523

 
473

Total loans
$
1,365

 
$
23

 
$
1,847

 
$
743

 
46

 
$
4,040

 
$
3,978

 
Concession type
 
 
 
 
 
 
(Dollars in thousands)
Principal
deferral
 
Interest
rate
 
Forbearance
agreement
 
Total
number
of loans
 
Pre-modification recorded investment
 
Post-modification recorded investment
For the three months ended March 31, 2017
 
 
 
 
 
 
 
 
 
 
Commercial loan portfolio:
 
 
 
 
 
 
 
 
 
 
Commercial
$
50

 
$
1,101

 
$
579

 
5

 
$
1,739

 
$
1,730

Commercial real estate:
 
 
 
 
 
 
 
 
 
 
 
Owner-occupied
447

 
75

 
—

 
3

 
522

 
522

Total commercial real estate
447

 
75

 
—

 
3

 
522

 
522

Total Commercial
497

 
1,176

 
579

 
8

 
2,261

 
2,252

Consumer loan portfolio:
 
 
 
 
 
 
 
 
 
 
Residential mortgage
98

 
—

 
—

 
1

 
98

 
98

Consumer installment
10

 
—

 
—

 
2

 
11

 
10

Home equity
111

 
—

 
—

 
1

 
165

 
111

Total Consumer
219

 
—

 
—

 
4

 
274

 
219

Total loans
$
716

 
$
1,176

 
$
579

 
12

 
$
2,535

 
$
2,471


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 presents the Corporation's TDRs at March 31, 2018 and December 31, 2017:
(Dollars in thousands)
 
Accruing TDRs
 
Nonaccrual TDRs
 
Total
March 31, 2018
 
 
 
 
 
 
Commercial loan portfolio
 
$
35,216

 
$
21,914

 
$
57,130

Consumer loan portfolio
 
14,070

 
4,265

 
18,335

Total
 
$
49,286

 
$
26,179

 
$
75,465

December 31, 2017
 
 
 
 
 
 
Commercial loan portfolio
 
$
34,484

 
$
24,358

 
$
58,842

Consumer loan portfolio
 
14,298

 
4,748

 
19,046

Total
 
$
48,782

 
$
29,106

 
$
77,888



The following schedule includes TDRs for which there was a payment default during the three months ended March 31, 2018 and 2017, 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:
 
 
For The Three Months Ended March 31, 2018
(Dollars in thousands)
 
Number of loans
 
Principal balance
Commercial loan portfolio (commercial)
 
1

 
$
82

Consumer loan portfolio (residential mortgage)
 
1

 
3

Total
 
2

 
$
85

 
 
 
 
 
 
 
For The Three Months Ended March 31, 2017
(Dollars in thousands)
 
Number of loans
 
Principal balance
Commercial loan portfolio (commercial)
 
3

 
$
620

Consumer loan portfolio (residential mortgage)
 
2

 
105

Total
 
5

 
$
725



Commitments to lend additional funds to borrowers whose terms have been modified in TDRs totaled $1.6 million and $2 thousand at March 31, 2018 and December 31, 2017, respectively.

Allowance for Loan Losses

The following schedule presents, by loan portfolio segment, the changes in the allowance for the originated loan portfolio for the three months ended March 31, 2018 and 2017.
(Dollars in thousands)
 
Commercial
Loan
Portfolio
 
Consumer
Loan
Portfolio
 
Total
Originated Loan Portfolio
 
 
 
 
 
 
Changes in allowance for loan losses for the three months ended March 31, 2018:
Beginning balance
 
$
66,133

 
$
25,754

 
$
91,887

Provision for loan losses
 
3,400

 
2,856

 
6,256

Charge-offs
 
(2,594
)
 
(2,230
)
 
(4,824
)
Recoveries
 
805

 
638

 
1,443

Ending balance
 
$
67,744

 
$
27,018

 
$
94,762

Changes in allowance for loan losses for the three months ended March 31, 2017:
Beginning balance
 
$
51,201

 
$
27,067

 
$
78,268

Provision for loan losses
 
4,392

 
(342
)
 
4,050

Charge-offs
 
(2,691
)
 
(2,883
)
 
(5,574
)
Recoveries
 
1,413

 
617

 
2,030

Ending balance
 
$
54,315

 
$
24,459

 
$
78,774

    
The following schedule presents by loan portfolio segment, details regarding the balance in the allowance and the recorded investment in loans at March 31, 2018 and December 31, 2017 by impairment evaluation method.
(Dollars in thousands)
 
Commercial
Loan
Portfolio
 
Consumer
Loan
Portfolio
 
Total
Allowance for loan losses balance at March 31, 2018 attributable to:
Loans individually evaluated for impairment
 
$
5,080

 
$
1,914

 
$
6,994

Loans collectively evaluated for impairment
 
62,664

 
25,104

 
87,768

Loans acquired with deteriorated credit quality
 
—

 
—

 
—

Total
 
$
67,744

 
$
27,018

 
$
94,762

Recorded investment (loan balance) at March 31, 2018:
Loans individually evaluated for impairment
 
$
85,466

 
$
25,652

 
$
111,118

Loans collectively evaluated for impairment
 
5,805,344

 
4,096,054

 
9,901,398

Loans acquired with deteriorated credit quality
 
2,684,631

 
1,521,600

 
4,206,231

Total
 
$
8,575,441

 
$
5,643,306

 
$
14,218,747

(Dollars in thousands)
 
Commercial
Loan
Portfolio
 
Consumer
Loan
Portfolio
 
Total
Allowance for loan losses balance at December 31, 2017 attributable to:
 
 
Loans individually evaluated for impairment
 
$
5,537

 
$
2,465

 
$
8,002

Loans collectively evaluated for impairment
 
60,596

 
23,289

 
83,885

Loans acquired with deteriorated credit quality
 
—

 
—

 
—

Total
 
$
66,133

 
$
25,754

 
$
91,887

Recorded investment (loan balance) at December 31, 2017:
 
 
Loans individually evaluated for impairment
 
$
83,797

 
$
28,080

 
$
111,877

Loans collectively evaluated for impairment
 
5,573,389

 
4,062,163

 
9,635,552

Loans acquired with deteriorated credit quality
 
2,803,341

 
1,604,497

 
4,407,838

Total
 
$
8,460,527

 
$
5,694,740

 
$
14,155,267