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 December 31, 2018 and 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 and construction loans, were $85.0 million at December 31, 2018 and $52.1 million at December 31, 2017. The Corporation sold loans totaling $741.9 million, $838.5 million and $723.5 million during the years ended December 31, 2018, 2017 and 2016, respectively.

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



(Dollars in thousands)	Originated		Acquired⁽¹⁾		Total loans
December 31, 2018
Commercial loan portfolio:
Commercial	$	3,287,087	$	715,481	$	4,002,568
Commercial real estate:
Owner-occupied	1,513,532		546,025		2,059,557
Non-owner occupied	1,966,330		818,690		2,785,020
Vacant land	40,295		27,215		67,510
Total commercial real estate	3,520,157		1,391,930		4,912,087
Real estate construction and land development	566,726		30,486		597,212
Subtotal	7,373,970		2,137,897		9,511,867
Consumer loan portfolio:
Residential mortgage	2,407,305		1,051,361		3,458,666
Consumer installment	1,451,352		69,722		1,521,074
Home equity	612,129		166,043		778,172
Subtotal	4,470,786		1,287,126		5,757,912
Total loans⁽²⁾	$	11,844,756	$	3,425,023	$	15,269,779
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)	Loans acquired in the Talmer, Lake Michigan, Monarch, Northwestern and OAK acquisitions were elected to be accounted for under ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality (ASC 310-30), by analogy. See Note 1, Summary of Significant Accounting Policies for further information.


(2)	Reported net of deferred costs totaling $19.7 million and $26.1 million at December 31, 2018 and 2017, respectively.

The Corporation acquired loans at fair value as of the acquisition date, which includes loans acquired in the acquisitions of Talmer, Lake Michigan, Monarch, Northwestern and OAK. Loans acquired in each of these transactions ("Acquired Loans) were elected to be accounted for under ASC 310-30, by analogy, which recognizes the expected shortfall of expected future cash flows, as compared to the contractual amount due, as nonaccretable difference. 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 expected cash flows 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
Year Ended December 31, 2018
Balance at beginning of period	$	731,353		$	95,124		$	22,496		$	60,814		$	17,110		$	926,897
Accretion recognized in interest income	(164,614		)	(24,722		)	(3,881		)	(17,988		)	(10,214		)	(221,419		)
Net reclassification (to) from nonaccretable difference⁽¹⁾⁽²⁾	(61,407		)	2,730			(783		)	(1,371		)	2,678			(58,153		)
Balance at end of period	$	505,332		$	73,132		$	17,832		$	41,455		$	9,574		$	647,325
Year Ended December 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	(175,678		)	(29,077		)	(4,533		)	(20,318		)	(12,563		)	(242,169		)
Net reclassification (to) from nonaccretable difference⁽¹⁾	108,821			2,785			(153		)	11,285			6,357			129,095
Balance at end of period	$	731,353		$	95,124		$	22,496		$	60,814		$	17,110		$	926,897
Year Ended December 31, 2016
Balance at beginning of period	$	—		$	152,999		$	34,558		$	82,623		$	28,077		$	298,257
Addition attributable to acquisitions	862,127			—			—			—			—			862,127
Accretion recognized in interest income	(63,917		)	(33,031		)	(5,468		)	(15,791		)	(13,352		)	(131,559		)
Net reclassification (to) from nonaccretable difference⁽¹⁾	—			1,448			(1,908		)	3,015			8,591			11,146
Balance at end of period	$	798,210		$	121,416		$	27,182		$	69,847		$	23,316		$	1,039,971

(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.


(2)	The 2018 net reclassification from accretable to nonaccretable difference in the Talmer portfolio was primarily the result of unexpected prepayments and payoffs.

Chemical Bank has extended loans to its directors, executive officers and their affiliates. These loans were made in the ordinary course of business upon normal terms, including collateralization and interest rates prevailing at the time, and did not involve more than the normal risk of repayment by the borrower. The aggregate loans outstanding to the directors, executive officers and their affiliates totaled $3.6 million at December 31, 2018 and $3.8 million at December 31, 2017. During 2018 and 2017, there were $3.8 million and $44.1 million, respectively, of new loans and other additions, while repayments and other reductions totaled $4.0 million and $64.2 million, respectively.

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, 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 loan ranging in amounts from $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 December 31, 2018 and 2017:



(Dollars in thousands)	Pass		Special Mention		Substandard		Doubtful		Total
December 31, 2018
Originated Portfolio:
Commercial	$	3,118,894	$	87,222	$	77,036	$	3,935	$	3,287,087
Commercial real estate:
Owner-occupied	1,430,948		32,056		50,286		242		1,513,532
Non-owner occupied	1,901,822		39,416		25,092		—		1,966,330
Vacant land	36,499		—		3,741		55		40,295
Total commercial real estate	3,369,269		71,472		79,119		297		3,520,157
Real estate construction and land development	557,040		6,108		3,578		—		566,726
Subtotal	7,045,203		164,802		159,733		4,232		7,373,970
Acquired Portfolio:
Commercial	655,883		36,809		22,773		16		715,481
Commercial real estate:
Owner-occupied	500,072		28,909		17,033		11		546,025
Non-owner occupied	740,900		52,546		25,244		—		818,690
Vacant land	26,978		237		—		—		27,215
Total commercial real estate	1,267,950		81,692		42,277		11		1,391,930
Real estate construction and land development	29,248		97		1,141		—		30,486
Subtotal	1,953,081		118,598		66,191		27		2,137,897
Total	$	8,998,284	$	283,400	$	225,924	$	4,259	$	9,511,867
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 December 31, 2018 and 2017:



(Dollars in thousands)	Residential mortgage		Consumer installment		Home equity		Total consumer
December 31, 2018
Originated Portfolio:
Performing	$	2,399,317	$	1,450,076	$	608,525	$	4,457,918
Nonperforming	7,988		1,276		3,604		12,868
Subtotal	2,407,305		1,451,352		612,129		4,470,786
Acquired Loans	1,051,361		69,722		166,043		1,287,126
Total	$	3,458,666	$	1,521,074	$	778,172	$	5,757,912
December 31, 2017
Originated Portfolio:
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 discontinued, 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 assets follows:



	December 31,
(Dollars in thousands)	2018		2017
Nonperforming assets
Nonaccrual loans:
Commercial	$	30,139	$	19,691
Commercial real estate:
Owner-occupied	16,056		19,070
Non-owner occupied	23,021		5,270
Vacant land	3,337		5,205
Total commercial real estate	42,414		29,545
Real estate construction and land development	12		77
Residential mortgage	7,988		8,635
Consumer installment	1,276		842
Home equity	3,604		4,305
Total nonaccrual loans	85,433		63,095
Other real estate owned and repossessed assets	6,256		8,807
Total nonperforming assets	$	91,689	$	71,902

The Corporation's nonaccrual loans at December 31, 2018 and 2017 included $28.1 million and $29.1 million, respectively, of nonaccrual TDRs.

There was no interest income recognized on nonaccrual loans during 2018, 2017 and 2016 while the loans were in nonaccrual status. During 2018, 2017 and 2016, the Corporation recognized $2.1 million, $1.3 million and $0.4 million, respectively, of interest income on these loans while they were in an accruing status. Additional interest income that would have been recorded on nonaccrual loans had they been current in accordance with their original terms was $4.8 million in 2018, $3.1 million in 2017 and $2.9 million in 2016. During 2018, 2017 and 2016, the Corporation recognized interest income of $2.7 million, $2.6 million and $3.9 million, respectively, on performing TDRs.

The Corporation had $4.5 million of residential mortgage loans that were in the process of foreclosure at December 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:



	Loans Past Due and Still Accruing
(Dollars in thousands)	30-89 days past due		90 days or more past due		Total past due		Nonaccrual Loans		Current		Total loans
December 31, 2018
Originated Portfolio:
Commercial	$	16,835	$	—	$	16,835	$	30,139	$	3,240,113	$	3,287,087
Commercial real estate:
Owner-occupied	4,657		52		4,709		16,056		1,492,767		1,513,532
Non-owner occupied	1,793		887		2,680		23,021		1,940,629		1,966,330
Vacant land	160		—		160		3,337		36,798		40,295
Total commercial real estate	6,610		939		7,549		42,414		3,470,194		3,520,157
Real estate construction and land development	247		—		247		12		566,467		566,726
Residential mortgage	1,688		—		1,688		7,988		2,397,629		2,407,305
Consumer installment	4,731		—		4,731		1,276		1,445,345		1,451,352
Home equity	3,843		488		4,331		3,604		604,194		612,129
Total	$	33,954	$	1,427	$	35,381	$	85,433	$	11,723,942	$	11,844,756
December 31, 2017
Originated Portfolio:
Commercial	$	16,269	$	—	$	16,269	$	19,691	$	2,371,646	$	2,407,606
Commercial real estate:			—
Owner-occupied	4,078		—		4,078		19,070		1,162,466		1,185,614
Non-owner occupied	1,595		13		1,608		5,270		1,511,909		1,518,787
Vacant land	83		—		83		5,205		41,736		47,024
Total commercial real estate	5,756		13		5,769		29,545		2,716,111		2,751,425
Real estate construction and land development	—		—		—		77		498,078		498,155
Residential mortgage	2,325		—		2,325		8,635		1,956,897		1,967,857
Consumer installment	3,663		—		3,663		842		1,506,035		1,510,540
Home equity	2,891		1,364		4,255		4,305		603,286		611,846
Total	$	30,904	$	1,377	$	32,281	$	63,095	$	9,652,053	$	9,747,429

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 December 31, 2018 and December 31, 2017:



(Dollars in thousands)	Recorded investment		Unpaid principal balance		Related valuation allowance
December 31, 2018
Impaired loans with a valuation allowance:
Commercial	$	20,957	$	23,781	$	3,546
Commercial real estate:
Owner-occupied	14,702		16,519		1,359
Non-owner occupied	16,833		17,452		462
Vacant land	1,008		1,208		96
Total commercial real estate	32,543		35,179		1,917
Real estate construction and land development	126		126		11
Residential mortgage	10,867		10,867		816
Consumer installment	1,126		1,126		186
Home equity	4,432		4,432		328
Subtotal	70,051		75,511		6,804
Impaired loans with no related valuation allowance:
Commercial	25,093		25,934		—
Commercial real estate:
Owner-occupied	10,971		11,601		—
Non-owner occupied	12,412		13,411		—
Vacant land	2,825		3,911		—
Total commercial real estate	26,208		28,923		—
Real estate construction and land development	111		111		—
Residential mortgage	7,537		7,537		—
Consumer installment	377		377		—
Home equity	1,496		1,496		—
Subtotal	60,822		64,378		—
Total impaired loans:
Commercial	46,050		49,715		3,546
Commercial real estate:
Owner-occupied	25,673		28,120		1,359
Non-owner occupied	29,245		30,863		462
Vacant land	3,833		5,119		96
Total commercial real estate	58,751		64,102		1,917
Real estate construction and land development	237		237		11
Residential mortgage	18,404		18,404		816
Consumer installment	1,503		1,503		186
Home equity	5,928		5,928		328
Total	$	130,873	$	139,889	$	6,804



(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 at December 31, 2018, 2017 and 2016 and the respective interest income amounts recognized:



	For the years ended December 31,
	2018				2017				2016
(Dollars in thousands)	Average annual recorded investment		Interest income recognized while on impaired status		Average annual recorded investment		Interest income recognized while on impaired status		Average annual recorded investment		Interest income recognized while on impaired status
Impaired loans with a valuation allowance:
Commercial	$	17,683	$	457	$	25,099	$	939	$	7,829	$	—
Commercial real estate:
Owner-occupied	13,103		352		14,143		531		3,694		583
Non-owner occupied	6,440		48		3,274		89		1,711		139
Vacant land	1,881		47		2,566		57		253		113
Total commercial real estate	21,424		447		19,983		677		5,658		835
Real estate construction and land development	4,619		8		175		10		19		—
Residential mortgage	12,179		457		16,390		538		23,958		1,285
Consumer installment	989		8		744		4		359		—
Home equity	3,262		80		4,201		82		1,759		—
Subtotal	60,156		1,457		66,592		2,250		39,582		2,120
Impaired loans with no related valuation allowance:
Commercial	21,954		577		10,196		28		29,559		1,343
Commercial real estate:
Owner-occupied	13,807		296		11,999		—		20,306		17
Non-owner occupied	10,681		263		9,143		241		14,306		339
Vacant land	2,730		—		3,516		4		7,034		45
Total commercial real estate	27,218		559		24,658		245		41,646		401
Real estate construction and land development	1,520		7		78		—		585		22
Residential mortgage	7,594		110		4,622		38		1,519		—
Consumer installment	304		—		205		—		—		—
Home equity	2,217		25		1,392		14		555		—
Subtotal	60,807		1,278		41,151		325		73,864		1,766
Total impaired loans:
Commercial	39,637		1,034		35,295		967		37,388		1,343
Commercial real estate:
Owner-occupied	26,910		648		26,142		531		24,000		600
Non-owner occupied	17,121		311		12,417		330		16,017		478
Vacant land	4,611		47		6,082		61		7,287		158
Total commercial real estate	48,642		1,006		44,641		922		47,304		1,236
Real estate construction and land development	6,139		15		253		10		604		22
Residential mortgage	19,773		567		21,012		576		25,477		1,285
Consumer installment	1,293		8		949		4		359		—
Home equity	5,479		105		5,593		96		2,314		—
Total	$	120,963	$	2,735	$	107,743	$	2,575	$	113,446	$	3,886

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 $45.6 million and $48.8 million at December 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 years ended December 31, 2018, 2017 and 2016 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 year ended December 31, 2018
Commercial loan portfolio:
Commercial	$	4,967	$	—	$	4,129	$	1,438	67	$	10,566	$	10,534
Commercial real estate:
Owner-occupied	981		—		2,945		953		19	5,018		4,879
Non-owner occupied	68		66		—		—		2	143		134
Total commercial real estate	1,049		66		2,945		953		21	5,161		5,013
Subtotal	6,016		66		7,074		2,391		88	15,727		15,547
Consumer loan portfolio:
Residential mortgage	269		151		147		—		9	577		567
Consumer installment	192		168		113		—		47	492		473
Home equity	469		73		453		—		25	1,076		995
Subtotal	930		392		713		—		81	2,145		2,035
Total loans	$	6,946	$	458	$	7,787	$	2,391	169	$	17,872	$	17,582



	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 year ended December 31, 2017
Commercial loan portfolio:
Commercial	$	2,308	$	—	$	1,827	$	2,176	36	$	6,416	$	6,311
Commercial real estate:
Owner-occupied	512		—		311		582		13	1,468		1,405
Non-owner occupied	194		—		27		371		3	629		592
Total commercial real estate	706		—		338		953		16	2,097		1,997
Real estate construction and land development	35		—		—		—		1	36		35
Subtotal	3,049		—		2,165		3,129		53	8,549		8,343
Consumer loan portfolio:
Residential mortgage	297		—		383		—		11	763		680
Consumer installment	118		37		37		—		34	208		192
Home equity	389		—		52		—		14	537		441
Subtotal	804		37		472		—		59	1,508		1,313
Total loans	$	3,853	$	37	$	2,637	$	3,129	112	$	10,057	$	9,656



	Concession type
(Dollars in thousands)	Principal deferral		Principal reduction		A/B Note Restructure⁽¹⁾		Interest rate		Forbearance agreement		Total number of loans	Pre- modification recorded investment		Post- modification recorded investment
For the year ended December 31, 2016
Commercial loan portfolio:
Commercial	$	11,533	$	1,527	$	43	$	—	$	1,750	54	$	14,853	$	14,853
Commercial real estate:
Owner-occupied	2,508		1,866		—		—		—		13	4,374		4,374
Non-owner occupied	485		—		—		—		—		3	485		485
Total commercial real estate	2,993		1,866		—		—		—		16	4,859		4,859
Subtotal	14,526		3,393		43		—		1,750		70	19,712		19,712
Consumer loan portfolio:
Residential mortgage	477		—		—		—		—		4	477		477
Consumer installment	87		—		—		—		—		14	87		87
Home equity	179		—		—		364		—		10	543		543
Subtotal	743		—		—		364		—		28	1,107		1,107
Total loans	$	15,269	$	3,393	$	43	$	364	$	1,750	98	$	20,819	$	20,819


⁽¹⁾	Loan restructurings whereby the original loan is restructured into two notes: an "A" note, which generally reflects the portion of the modified loans which is expected to be collected: and a "B" note, which is fully charged off.

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 December 31, 2018 and 2017:



(Dollars in thousands)	Accruing TDRs		Nonaccrual TDRs		Total
December 31, 2018
Commercial loan portfolio	$	32,508	$	24,343	$	56,851
Consumer loan portfolio	13,072		3,732		16,804
Total	$	45,580	$	28,075	$	73,655
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 years ended December 31, 2018, 2017 and 2016, 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 years ended December 31,
	2018			2017			2016
	Number of loans	Principal balance at year end		Number of loans	Principal balance at year end		Number of loans	Principal balance at year end
(Dollars in thousands)	Number of loans	Principal balance at year end		Number of loans	Principal balance at year end		Number of loans	Principal balance at year end
Commercial loan portfolio:
Commercial	6	$	700	5	$	1,617	—	$	—
Commercial real estate	3	508		—	—		2	1,721
Commercial loan portfolio	9	$	1,208	5	$	1,617	2	$	1,721
Consumer loan portfolio (residential mortgage)	18	413		17	434		14	259
Total	27	$	1,621	22	$	2,051	16	$	1,980

Commitments to lend additional funds to borrowers whose terms have been modified in TDRs totaled $3.2 million and $2.0 million at December 31, 2018 and 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 years ended December 31, 2018, 2017 and 2016.



(Dollars in thousands)	Commercial loan portfolio			Consumer loan portfolio			Total
Originated Loan Portfolio
Changes in allowance for loan losses for the year ended December 31, 2018:
Beginning balance	$	66,133		$	25,754		$	91,887
Provision for loan losses	22,656			7,674			30,330
Charge-offs	(9,563		)	(8,901		)	(18,464		)
Recoveries	3,533			2,278			5,811
Ending balance	$	82,759		$	26,805		$	109,564
Changes in allowance for loan losses for the year ended December 31, 2017:
Beginning balance	$	51,201		$	27,067		$	78,268
Provision for loan losses	19,007			4,293			23,300
Charge-offs	(8,570		)	(8,297		)	(16,867		)
Recoveries	4,495			2,691			7,186
Ending balance	$	66,133		$	25,754		$	91,887
Changes in allowance for loan losses for the year ended December 31, 2016:
Beginning balance	$	47,234		$	26,094		$	73,328
Provision for loan losses	9,788			5,087			14,875
Charge-offs	(8,906		)	(6,396		)	(15,302		)
Recoveries	3,085			2,282			5,367
Ending balance	$	51,201		$	27,067		$	78,268

The following schedule presents, by loan portfolio segment, the changes in the allowance for the acquired loan portfolio for the year ended December 31, 2018. There was no allowance established for the acquired loan portfolio for the years ended December 31, 2017 and 2016.



(Dollars in thousands)	Commercial loan portfolio		Consumer loan portfolio		Total
Acquired Loan Portfolio
Changes in allowance for loan losses for the year ended December 31, 2018:
Beginning balance	$	—	$	—	$	—
Provision for loan losses	420		—		420
Charge-offs	—		—		—
Recoveries	—		—		—
Ending balance	$	420	$	—	$	420

The following schedule presents by loan portfolio segment, details regarding the balance in the allowance and the recorded investment in loans at December 31, 2018 and 2017 by impairment evaluation method.



(Dollars in thousands)	Commercial Loan Portfolio		Consumer Loan Portfolio		Total
Allowance for loan losses balance at December 31, 2018 attributable to:
Loans individually evaluated for impairment	$	5,474	$	1,330	$	6,804
Loans collectively evaluated for impairment	77,285		25,475		102,760
Loans accounted for under ASC 310-30	420		—		420
Total	$	83,179	$	26,805	$	109,984
Recorded investment (loan balance) at December 31, 2018:
Loans individually evaluated for impairment	$	105,038	$	25,835	$	130,873
Loans collectively evaluated for impairment	7,268,932		4,444,951		11,713,883
Loans accounted for under ASC 310-30	2,137,897		1,287,126		3,425,023
Total	$	9,511,867	$	5,757,912	$	15,269,779



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 accounted for under ASC 310-30	—		—		—
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 accounted for under ASC 310-30	2,803,341		1,604,497		4,407,838
Total	$	8,460,527	$	5,694,740	$	14,155,267