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Loans
 6 Months Ended
Jun. 30, 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 June 30, 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 watercraft and comprised primarily of indirect loans purchased from dealers. These loans generally 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 $46.8 million at June 30, 2018 and $52.1 million at December 31, 2017. The Corporation sold loans totaling $202.1 million and $392.6 million during the three and six months ended June 30, 2018, respectively and $199.9 million and $391.5 million during the three and six months ended June 30, 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
June 30, 2018
 
 
 
 
 
 
Commercial loan portfolio:
 
 
 
 
 
 
Commercial
 
$
2,753,604

 
$
822,834

 
$
3,576,438

Commercial real estate:
 
 
 
 
 
 
Owner-occupied
 
1,252,383

 
611,180

 
1,863,563

Non-owner occupied
 
1,819,535

 
908,568

 
2,728,103

Vacant land
 
46,411

 
33,195

 
79,606

Total commercial real estate
 
3,118,329

 
1,552,943

 
4,671,272

Real estate construction and land development
 
550,447

 
68,538

 
618,985

Subtotal
 
6,422,380

 
2,444,315

 
8,866,695

Consumer loan portfolio:
 
 
 
 
 
 
Residential mortgage
 
2,162,225

 
1,163,052

 
3,325,277

Consumer installment
 
1,501,900

 
85,427

 
1,587,327

Home equity
 
610,028

 
190,366

 
800,394

Subtotal
 
4,274,153

 
1,438,845

 
5,712,998

Total loans(2)
 
$
10,696,533

 
$
3,883,160

 
$
14,579,693

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 $22.6 million and $26.1 million at June 30, 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 June 30, 2018
 
 
 
 
 
 
 
 
 
 
 
 
Balance at beginning of period
 
$
685,830

 
$
90,156

 
$
21,154

 
$
55,400

 
$
16,158

 
$
868,698

Accretion recognized in interest income
 
(42,136
)
 
(6,302
)
 
(962
)
 
(4,618
)
 
(2,882
)
 
(56,900
)
Net reclassification (to) from nonaccretable difference(1)
 
(27,526
)
 
(3,412
)
 
(61
)
 
(1,051
)
 
1,016

 
(31,034
)
Balance at end of period
 
$
616,168

 
$
80,442

 
$
20,131

 
$
49,731

 
$
14,292

 
$
780,764

 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended June 30, 2017
 
 
 
 
 
 
 
 
 
 
 
 
Balance at beginning of period
 
$
774,778

 
$
113,211

 
$
26,055

 
$
64,897

 
$
21,467

 
$
1,000,408

Accretion recognized in interest income
 
(45,091
)
 
(7,583
)
 
(1,159
)
 
(5,467
)
 
(3,314
)
 
(62,614
)
Net reclassification (to) from nonaccretable difference(1)
 
71,682

 
15,944

 
(626
)
 
11,782

 
1,643

 
100,425

Balance at end of period
 
$
801,369

 
$
121,572

 
$
24,270

 
$
71,212

 
$
19,796

 
$
1,038,219

 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended June 30, 2018
 
 
 
 
Balance at beginning of period
 
$
731,353

 
$
95,124

 
$
22,496

 
$
60,814

 
$
17,110

 
$
926,897

Accretion recognized in interest income
 
(84,776
)
 
(13,060
)
 
(2,118
)
 
(9,522
)
 
(5,985
)
 
(115,461
)
Net reclassification (to) from nonaccretable difference(1)
 
(30,409
)
 
(1,622
)
 
(247
)
 
(1,561
)
 
3,167

 
(30,672
)
Balance at end of period
 
$
616,168

 
$
80,442

 
$
20,131

 
$
49,731

 
$
14,292

 
$
780,764

 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended June 30, 2017
 
 
 
 
 
 
 
 
 
 
 
 
Balance at beginning of period
 
$
798,210

 
$
121,416

 
$
27,182

 
$
69,847

 
$
23,316

 
$
1,039,971

Accretion recognized in interest income
 
(89,662
)
 
(14,849
)
 
(2,340
)
 
(9,359
)
 
(6,591
)
 
(122,801
)
Net reclassification (to) from nonaccretable difference(1)
 
92,821

 
15,005

 
(572
)
 
10,724

 
3,071

 
121,049

Balance at end of period
 
$
801,369

 
$
121,572

 
$
24,270

 
$
71,212

 
$
19,796

 
$
1,038,219


(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 June 30, 2018 and December 31, 2017:
(Dollars in thousands)
 
Pass
 
Special Mention
 
Substandard
 
Doubtful
 
Total
June 30, 2018
 
 
 
 
 
 
 
 
 
 
Originated Portfolio:
 
 
 
 
 
 
 
 
 
 
Commercial
 
$
2,654,995

 
$
40,619

 
$
57,300

 
$
690

 
$
2,753,604

Commercial real estate:
 
 
 
 
 
 
 
 
 
 
Owner-occupied
 
1,186,100

 
25,247

 
40,990

 
46

 
1,252,383

Non-owner occupied
 
1,800,859

 
12,891

 
5,785

 
—

 
1,819,535

Vacant land
 
40,488

 
176

 
5,746

 
1

 
46,411

Total commercial real estate
 
3,027,447

 
38,314

 
52,521

 
47

 
3,118,329

Real estate construction and land development
 
516,568

 
4,173

 
29,706

 
—

 
550,447

Subtotal
 
6,199,010

 
83,106

 
139,527

 
737

 
6,422,380

Acquired Portfolio:
 
 
 
 
 
 
 
 
 
 
Commercial
 
748,719

 
43,301

 
30,814

 
—

 
822,834

Commercial real estate:
 
 
 
 
 
 
 
 
 
 
Owner-occupied
 
548,079

 
31,767

 
31,323

 
11

 
611,180

Non-owner occupied
 
836,864

 
32,391

 
39,313

 
—

 
908,568

Vacant land
 
28,046

 
310

 
4,839

 
—

 
33,195

Total commercial real estate
 
1,412,989

 
64,468

 
75,475

 
11

 
1,552,943

Real estate construction and land development
 
67,211

 
370

 
957

 
—

 
68,538

Subtotal
 
2,228,919

 
108,139

 
107,246

 
11

 
2,444,315

Total
 
$
8,427,929

 
$
191,245

 
$
246,773

 
$
748

 
$
8,866,695

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 June 30, 2018 and December 31, 2017:
(Dollars in thousands)
 
Residential Mortgage
 
Consumer
Installment
 
Home Equity
 
Total
Consumer
June 30, 2018
 
 
 
 
 
 
 
 
Originated Loans:
 
 
 
 
 
 
 
 
Performing
 
$
2,154,251

 
$
1,500,955

 
$
607,056

 
$
4,262,262

Nonperforming
 
7,974

 
945

 
2,972

 
11,891

Subtotal
 
2,162,225

 
1,501,900

 
610,028

 
4,274,153

Acquired Loans
 
1,163,052

 
85,427

 
190,366

 
1,438,845

Total
 
$
3,325,277

 
$
1,587,327

 
$
800,394

 
$
5,712,998

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)
 
June 30,
2018
 
December 31,
2017
Nonperforming assets
 
 
 
 
Nonaccrual loans:
 
 
 
 
Commercial
 
$
20,741

 
$
19,691

Commercial real estate:
 
 
 
 
Owner-occupied
 
16,103

 
19,070

Non-owner occupied
 
9,168

 
5,270

Vacant land
 
3,135

 
5,205

Total commercial real estate
 
28,406

 
29,545

Real estate construction and land development
 
5,704

 
77

Residential mortgage
 
7,974

 
8,635

Consumer installment
 
945

 
842

Home equity
 
2,972

 
4,305

Total nonaccrual loans
 
66,742

 
63,095

Other real estate owned and repossessed assets
 
5,828

 
8,807

Total nonperforming assets
 
$
72,570

 
$
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
 
$
472

 
$
—

Commercial real estate:
 
 
 
 
Owner-occupied
 
461

 
—

Non-owner occupied
 
—

 
13

Vacant land
 
16

 
—

Total commercial real estate
 
477

 
13

Home equity
 
713

 
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
 
$
1,662

 
$
1,377


The Corporation’s nonaccrual loans at June 30, 2018 and December 31, 2017 included $25.3 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 June 30, 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
June 30, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Originated Portfolio:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
 
$
12,421

 
$
4,294

 
$
11,629

 
$
28,344

 
$
2,725,260

 
$
2,753,604

 
$
472

Commercial real estate:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Owner-occupied
 
15,233

 
2,771

 
9,033

 
27,037

 
1,225,346

 
1,252,383

 
461

Non-owner occupied
 
1,551

 
359

 
1,160

 
3,070

 
1,816,465

 
1,819,535

 
—

Vacant land
 
58

 
—

 
225

 
283

 
46,128

 
46,411

 
16

Total commercial real estate
 
16,842

 
3,130

 
10,418

 
30,390

 
3,087,939

 
3,118,329

 
477

Real estate construction and land development
 
—

 
—

 
5,565

 
5,565

 
544,882

 
550,447

 
—

Residential mortgage
 
440

 
2,814

 
2,899

 
6,153

 
2,156,072

 
2,162,225

 
—

Consumer installment
 
2,777

 
385

 
217

 
3,379

 
1,498,521

 
1,501,900

 
—

Home equity
 
3,930

 
1,028

 
2,019

 
6,977

 
603,051

 
610,028

 
713

Total
 
$
36,410

 
$
11,651

 
$
32,747

 
$
80,808

 
$
10,615,725

 
$
10,696,533

 
$
1,662

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 June 30, 2018 and December 31, 2017:
(Dollars in thousands)
 
Recorded
Investment
 
Unpaid
Principal
Balance
 
Related
Valuation
Allowance
June 30, 2018
 
 
 
 
 
 
Impaired loans with a valuation allowance:
 
 
 
 
 
 
Commercial
 
$
20,683

 
$
23,249

 
$
1,421

Commercial real estate:
 
 
 
 
 
 
Owner-occupied
 
13,483

 
16,970

 
1,352

Non-owner occupied
 
2,367

 
3,619

 
116

Vacant land
 
1,313

 
1,513

 
320

Total commercial real estate
 
17,163

 
22,102

 
1,788

Real estate construction and land development
 
207

 
207

 
12

Residential mortgage
 
13,026

 
13,026

 
1,364

Consumer installment
 
1,014

 
1,014

 
99

Home equity
 
3,146

 
3,146

 
161

Subtotal
 
55,239

 
62,744

 
4,845

Impaired loans with no related valuation allowance:
 
 
 
 
 
 
Commercial
 
17,831

 
19,143

 
—

Commercial real estate:
 
 
 
 
 
 
Owner-occupied
 
12,786

 
14,436

 
—

Non-owner occupied
 
10,884

 
11,896

 
—

Vacant land
 
2,921

 
4,007

 
—

Total commercial real estate
 
26,591

 
30,339

 
—

Real estate construction and land development
 
5,740

 
5,807

 
—

Residential mortgage
 
6,659

 
6,659

 
—

Consumer installment
 
—

 
—

 
—

Home equity
 
2,066

 
2,066

 
—

Subtotal
 
58,887

 
64,014

 
—

Total impaired loans:
 
 
 
 
 
 
Commercial
 
38,514

 
42,392

 
1,421

Commercial real estate:
 
 
 
 
 
 
Owner-occupied
 
26,269

 
31,406

 
1,352

Non-owner occupied
 
13,251

 
15,515

 
116

Vacant land
 
4,234

 
5,520

 
320

Total commercial real estate
 
43,754

 
52,441

 
1,788

Real estate construction and land development
 
5,947

 
6,014

 
12

Residential mortgage
 
19,685

 
19,685

 
1,364

Consumer installment
 
1,014

 
1,014

 
99

Home equity
 
5,212

 
5,212

 
161

Total
 
$
114,126

 
$
126,758

 
$
4,845

(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 and six months ended June 30, 2018 and 2017, and the respective interest income amounts recognized:
 
 
Three Months Ended June 30, 2018
 
Three Months Ended June 30, 2017
 
Six Months Ended June 30, 2018
 
Six Months Ended June 30, 2017
(Dollars in thousands)
 
Average
recorded
investment
 
Interest income
recognized
while on
impaired status
 
Average
recorded
investment
 
Interest income
recognized
while on
impaired status
 
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
 
$
18,139

 
$
111

 
$
24,493

 
$
201

 
$
19,271

 
$
276

 
$
25,103

 
$
425

Commercial real estate:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Owner-occupied
 
12,949

 
81

 
14,188

 
150

 
13,510

 
163

 
14,423

 
304

Non-owner occupied
 
2,246

 
10

 
2,973

 
27

 
3,058

 
21

 
3,180

 
51

Vacant land
 
1,308

 
17

 
1,865

 
25

 
2,502

 
32

 
1,927

 
50

Total commercial real estate
 
16,503

 
108

 
19,026

 
202

 
19,070

 
216

 
19,530

 
405

Real estate construction and land development
 
243

 
2

 
141

 
3

 
234

 
4

 
151

 
5

Residential mortgage
 
12,762

 
115

 
16,243

 
68

 
13,183

 
232

 
16,821

 
302

Consumer installment
 
1,067

 
2

 
682

 
1

 
986

 
3

 
731

 
2

Home equity
 
2,812

 
21

 
4,024

 
16

 
3,253

 
38

 
4,047

 
37

Subtotal
 
$
51,526

 
$
359

 
$
64,609

 
$
491

 
$
55,997

 
$
769

 
$
66,383

 
$
1,176

Impaired loans with no related valuation allowance:
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
 
$
20,078

 
$
147

 
$
11,010

 
$
48

 
$
19,102

 
$
242

 
$
10,153

 
$
78

Commercial real estate:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Owner-occupied
 
14,565

 
81

 
9,712

 
12

 
14,967

 
137

 
9,789

 
12

Non-owner occupied
 
9,539

 
38

 
10,387

 
81

 
8,349

 
103

 
9,760

 
167

Vacant land
 
3,440

 
—

 
5,084

 
6

 
2,604

 
—

 
4,780

 
24

Total commercial real estate
 
27,544

 
119

 
25,183

 
99

 
25,920

 
240

 
24,329

 
203

Real estate construction and land development
 
1,994

 
2

 
106

 
—

 
1,051

 
3

 
93

 
—

Residential mortgage
 
7,075

 
25

 
4,581

 
10

 
6,606

 
48

 
4,194

 
17

Consumer installment
 
41

 
—

 
142

 
—

 
91

 
—

 
179

 
—

Home equity
 
2,487

 
2

 
1,162

 
5

 
2,266

 
9

 
1,021

 
6

Subtotal
 
$
59,219


$
295


$
42,184


$
162


$
55,036

 
$
542

 
$
39,969

 
$
304

Total impaired loans:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
 
$
38,217

 
$
258

 
$
35,503

 
$
249

 
$
38,373

 
$
518

 
$
35,256

 
$
503

Commercial real estate:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Owner-occupied
 
27,514

 
162

 
23,900

 
162

 
28,477

 
300

 
24,212

 
316

Non-owner occupied
 
11,785

 
48

 
13,360

 
108

 
11,407

 
124

 
12,940

 
218

Vacant land
 
4,748

 
17

 
6,949

 
31

 
5,106

 
32

 
6,707

 
74

Total commercial real estate
 
44,047

 
227

 
44,209

 
301

 
44,990

 
456

 
43,859

 
608

Real estate construction and land development
 
2,237

 
4

 
247

 
3

 
1,285

 
7

 
244

 
5

Residential mortgage
 
19,837

 
140

 
20,824

 
78

 
19,789

 
280

 
21,015

 
319

Consumer installment
 
1,108

 
2

 
824

 
1

 
1,077

 
3

 
910

 
2

Home equity
 
5,299

 
23

 
5,186

 
21

 
5,519

 
47

 
5,068

 
43

Total
 
$
110,745

 
$
654

 
$
106,793


$
653


$
111,033

 
$
1,311

 
$
106,352

 
$
1,480



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 $48.3 million and $48.8 million at June 30, 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 and six months ended June 30, 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 June 30, 2018
 
 
 
 
 
 
 
 
 
 
Commercial loan portfolio:
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
$
740

 
$
—

 
$
218

 
$
—

 
13

 
$
969

 
$
958

Commercial real estate:
 
 
 
 
 
 
 
 
 
 
 
 
 
Owner-occupied
370

 
—

 
162

 
31

 
6

 
575

 
563

Total commercial real estate
370

 
—

 
162

 
31

 
6

 
575

 
563

Real estate construction and land development
—

 
—

 
—

 
—

 
—

 
—

 
—

Total Commercial
1,110

 
—

 
380

 
31

 
19

 
1,544

 
1,521

Consumer loan portfolio:
 
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage
131

 
40

 
39

 
—

 
3

 
215

 
210

Consumer installment
15

 
44

 
10

 
—

 
9

 
72

 
69

Home equity
81

 
—

 
87

 
—

 
4

 
171

 
168

Total Consumer
227

 
84

 
136

 
—

 
16

 
458

 
447

Total loans
$
1,337

 
$
84

 
$
516

 
$
31

 
35

 
$
2,002

 
$
1,968

For the six months ended June 30, 2018
 
 
 
 
 
 
 
 
 
 
Commercial loan portfolio:
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
$
1,643

 
$
—

 
$
1,283

 
$
261

 
31

 
$
3,204

 
$
3,187

Commercial real estate:
 
 
 
 
 
 
 
 
 
 
 
 
 
Owner-occupied
370

 
—

 
888

 
513

 
8

 
1,783

 
1,771

Non-owner occupied
68

 
—

 
—

 
—

 
1

 
74

 
68

Total commercial real estate
438

 
—

 
888

 
513

 
9

 
1,857

 
1,839

Real estate construction and land development
—

 
—

 
—

 
—

 
—

 
—

 
—

 Total Commercial
2,081

 
—

 
2,171

 
774

 
40

 
5,061

 
5,026

Consumer loan portfolio:
 
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage
269

 
40

 
39

 
—

 
7

 
357

 
348

Consumer installment
86

 
67

 
38

 
—

 
25

 
200

 
191

Home equity
266

 
—

 
115

 
—

 
9

 
424

 
381

Total Consumer
621

 
107

 
192

 
—

 
41

 
981

 
920

Total loans
$
2,702

 
$
107

 
$
2,363

 
$
774

 
81

 
$
6,042

 
$
5,946

 
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 June 30, 2017
 
 
 
 
 
 
 
 
 
Commercial loan portfolio:
 
 
 
 
 
 
 
 
 
 
Commercial
$
285

 
$
266

 
$
—

 
7

 
$
564

 
$
551

Commercial real estate:
 
 
 
 
 
 
 
 
 
 
 
Owner-occupied
—

 
65

 
122

 
3

 
194

 
187

Total commercial real estate
—

 
65

 
122

 
3

 
194

 
187

Total Commercial
285

 
331

 
122

 
10

 
758

 
738

Consumer loan portfolio:
 
 
 
 
 
 
 
 
 
 
Residential mortgage
37

 
261

 
—

 
5

 
316

 
298

Consumer installment
22

 
—

 
—

 
4

 
24

 
22

Home equity
153

 
—

 
—

 
4

 
160

 
153

Total Consumer
212

 
261

 
—

 
13

 
500

 
473

Total loans
$
497

 
$
592

 
$
122

 
23

 
$
1,258

 
$
1,211

For the six months ended June 30, 2017
 
 
 
 
 
 
 
 
 
 
Commercial loan portfolio:
 
 
 
 
 
 
 
 
 
 
Commercial
$
335

 
$
1,367

 
$
579

 
12

 
$
2,303

 
$
2,281

Commercial real estate:
 
 
 
 
 
 
 
 
 
 
 
Owner-occupied
447

 
140

 
122

 
6

 
716

 
709

Total commercial real estate
447

 
140

 
122

 
6

 
716

 
709

Total Commercial
782

 
1,507

 
701

 
18

 
3,019

 
2,990

Consumer loan portfolio:
 
 
 
 
 
 
 
 
 
 
Residential mortgage
135

 
261

 
—

 
6

 
414

 
396

Consumer installment
32

 
—

 
—

 
6

 
35

 
32

Home equity
264

 
—

 
—

 
5

 
325

 
264

Total Consumer
431

 
261

 
—

 
17

 
774

 
692

Total loans
$
1,213

 
$
1,768

 
$
701

 
35

 
$
3,793

 
$
3,682

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 June 30, 2018 and December 31, 2017:
(Dollars in thousands)
 
Accruing TDRs
 
Nonaccrual TDRs
 
Total
June 30, 2018
 
 
 
 
 
 
Commercial loan portfolio
 
$
34,161

 
$
21,539

 
$
55,700

Consumer loan portfolio
 
14,105

 
3,791

 
17,896

Total
 
$
48,266

 
$
25,330

 
$
73,596

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 and six months ended June 30, 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 June 30, 2018
 
For The Six Months Ended June 30, 2018
(Dollars in thousands)
 
Number of loans
 
Principal balance
 
Number of loans
 
Principal balance
Commercial loan portfolio (commercial)
 
2

 
$
67

 
3

 
$
149

Consumer loan portfolio (residential mortgage)
 
7

 
42

 
8

 
45

Total
 
9

 
$
109

 
11

 
$
194

 
 
 
 
 
 
 
 
 
 
 
For The Three Months Ended June 30, 2017
 
For The Six Months Ended June 30, 2017
(Dollars in thousands)
 
Number of loans
 
Principal balance
 
Number of loans
 
Principal balance
Commercial loan portfolio (commercial)
 
2

 
$
997

 
5

 
$
1,617

Consumer loan portfolio (residential mortgage)
 
3

 
58

 
5

 
163

Total
 
5

 
$
1,055

 
10

 
$
1,780



Commitments to lend additional funds to borrowers whose terms have been modified in TDRs totaled $2.5 million and $2.0 million at June 30, 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 and six months ended June 30, 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 June 30, 2018:
Beginning balance
 
$
67,744

 
$
27,018

 
$
94,762

Provision for loan losses
 
7,923

 
1,649

 
9,572

Charge-offs
 
(3,890
)
 
(1,836
)
 
(5,726
)
Recoveries
 
888

 
519

 
1,407

Ending balance
 
$
72,665

 
$
27,350

 
$
100,015

Changes in allowance for loan losses for the six months ended June 30, 2018:
Beginning balance
 
$
66,133

 
$
25,754

 
$
91,887

Provision for loan losses
 
11,323

 
4,505

 
15,828

Charge-offs
 
(6,484
)
 
(4,066
)
 
(10,550
)
Recoveries
 
1,693

 
1,157

 
2,850

Ending balance
 
$
72,665

 
$
27,350

 
$
100,015

Changes in allowance for loan losses for the three months ended June 30, 2017:
Beginning balance
 
$
54,315

 
$
24,459

 
$
78,774

Provision for loan losses
 
4,084

 
2,145

 
6,229

Charge-offs
 
(726
)
 
(1,578
)
 
(2,304
)
Recoveries
 
282

 
816

 
1,098

Ending balance
 
$
57,955

 
$
25,842

 
$
83,797

Changes in allowance for loan losses for the six months ended June 30, 2017:
Beginning balance
 
$
51,201

 
$
27,067

 
$
78,268

Provision for loan losses
 
8,476

 
1,803

 
10,279

Charge-offs
 
(3,417
)
 
(4,461
)
 
(7,878
)
Recoveries
 
1,695

 
1,433

 
3,128

Ending balance
 
$
57,955

 
$
25,842

 
$
83,797

    
The following schedule presents by loan portfolio segment, details regarding the balance in the allowance and the recorded investment in loans at June 30, 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 June 30, 2018 attributable to:
Loans individually evaluated for impairment
 
$
3,221

 
$
1,624

 
$
4,845

Loans collectively evaluated for impairment
 
69,444

 
25,726

 
95,170

Loans acquired with deteriorated credit quality
 
—

 
—

 
—

Total
 
$
72,665

 
$
27,350

 
$
100,015

Recorded investment (loan balance) at June 30, 2018:
Loans individually evaluated for impairment
 
$
88,215

 
$
25,911

 
$
114,126

Loans collectively evaluated for impairment
 
6,334,165

 
4,248,242

 
10,582,407

Loans acquired with deteriorated credit quality
 
2,444,315

 
1,438,845

 
3,883,160

Total
 
$
8,866,695

 
$
5,712,998

 
$
14,579,693

(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