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Loans
 6 Months Ended
Jun. 30, 2019
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, 2019 and December 31, 2018 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 $33.0 million at June 30, 2019 and $85.0 million at December 31, 2018. The Corporation sold loans totaling $196.9 million and $392.7 million during the three and six months ended June 30, 2019, respectively, and $202.1 million and $392.6 million during the three and six months ended June 30, 2018, 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, 2019
 
 
 
 
 
 
Commercial loan portfolio:
 
 
 
 
 
 
Commercial
 
$
3,752,528

 
$
595,357

 
$
4,347,885

Commercial real estate:
 
 
 
 
 
 
Owner-occupied
 
1,528,802

 
495,759

 
2,024,561

Non-owner occupied
 
2,056,531

 
716,146

 
2,772,677

Vacant land
 
37,155

 
12,807

 
49,962

Total commercial real estate
 
3,622,488

 
1,224,712

 
4,847,200

Real estate construction and land development
 
671,773

 
28,997

 
700,770

Subtotal
 
8,046,789

 
1,849,066

 
9,895,855

Consumer loan portfolio:
 
 
 
 
 
 
Residential mortgage
 
2,722,019

 
944,594

 
3,666,613

Consumer installment
 
1,497,467

 
55,368

 
1,552,835

Home equity
 
604,835

 
141,765

 
746,600

Subtotal
 
4,824,321

 
1,141,727

 
5,966,048

Total loans(2)
 
$
12,871,110

 
$
2,990,793

 
$
15,861,903

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


(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.
(2) 
Reported net of deferred costs totaling $27.2 million and $19.7 million at June 30, 2019 and December 31, 2018, 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"). 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 yield 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
Three Months Ended June 30, 2019
 
 
 
 
 
 
 
 
 
 
 
 
Balance at beginning of period
 
$
469,713

 
$
68,995

 
$
16,967

 
$
38,644

 
$
8,345

 
$
602,664

Accretion recognized in interest income
 
(36,730
)
 
(5,291
)
 
(852
)
 
(3,214
)
 
(1,334
)
 
(47,421
)
Net reclassification (to) from nonaccretable difference(1)
 
730

 
409

 
750

 
745

 
913

 
3,547

Balance at end of period
 
$
433,713

 
$
64,113

 
$
16,865

 
$
36,175

 
$
7,924

 
$
558,790

 
 
 
 
 
 
 
 
 
 
 
 
 
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

 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended June 30, 2019
 
 
 
 
Balance at beginning of period
 
$
505,332

 
$
73,132

 
$
17,832

 
$
41,455

 
$
9,574

 
$
647,325

Accretion recognized in interest income
 
(74,761
)
 
(10,842
)
 
(1,626
)
 
(6,634
)
 
(2,703
)
 
(96,566
)
Net reclassification (to) from nonaccretable difference(1)
 
3,142

 
1,823

 
659

 
1,354

 
1,053

 
8,031

Balance at end of period
 
$
433,713

 
$
64,113

 
$
16,865

 
$
36,175

 
$
7,924

 
$
558,790

 
 
 
 
 
 
 
 
 
 
 
 
 
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


(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, 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 of $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, 2019 and December 31, 2018:
(Dollars in thousands)
 
Pass
 
Special Mention
 
Substandard
 
Doubtful
 
Total
June 30, 2019
 
 
 
 
 
 
 
 
 
 
Originated Portfolio:
 
 
 
 
 
 
 
 
 
 
Commercial
 
$
3,513,993

 
$
123,194

 
$
108,373

 
$
6,968

 
$
3,752,528

Commercial real estate:
 
 
 
 
 
 
 
 
 
 
Owner-occupied
 
1,452,031

 
25,913

 
50,697

 
161

 
1,528,802

Non-owner occupied
 
2,023,577

 
5,516

 
27,433

 
5

 
2,056,531

Vacant land
 
35,546

 
96

 
1,513

 
—

 
37,155

Total commercial real estate
 
3,511,154

 
31,525

 
79,643

 
166

 
3,622,488

Real estate construction and land development
 
664,122

 
3,612

 
4,039

 
—

 
671,773

Subtotal
 
7,689,269

 
158,331

 
192,055

 
7,134

 
8,046,789

Acquired Portfolio:
 
 
 
 
 
 
 
 
 
 
Commercial
 
505,823

 
62,253

 
25,512

 
1,769

 
595,357

Commercial real estate:
 
 
 
 
 
 
 
 
 
 
Owner-occupied
 
462,266

 
18,226

 
14,835

 
432

 
495,759

Non-owner occupied
 
655,602

 
43,147

 
17,382

 
15

 
716,146

Vacant land
 
12,614

 
193

 
—

 
—

 
12,807

Total commercial real estate
 
1,130,482

 
61,566

 
32,217

 
447

 
1,224,712

Real estate construction and land development
 
28,715

 
42

 
240

 
—

 
28,997

Subtotal
 
1,665,020

 
123,861

 
57,969

 
2,216

 
1,849,066

Total
 
$
9,354,289

 
$
282,192

 
$
250,024

 
$
9,350

 
$
9,895,855

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


    
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, 2019 and December 31, 2018:
(Dollars in thousands)
 
Residential Mortgage
 
Consumer
Installment
 
Home Equity
 
Total
Consumer
June 30, 2019
 
 
 
 
 
 
 
 
Originated Loans:
 
 
 
 
 
 
 
 
Performing
 
$
2,714,383

 
$
1,496,056

 
$
601,348

 
$
4,811,787

Nonperforming
 
7,636

 
1,411

 
3,487

 
12,534

Subtotal
 
2,722,019

 
1,497,467

 
604,835

 
4,824,321

Acquired Loans
 
944,594

 
55,368

 
141,765

 
1,141,727

Total
 
$
3,666,613

 
$
1,552,835

 
$
746,600

 
$
5,966,048

December 31, 2018
 
 
 
 
 
 
 
 
Originated Loans:
 
 
 
 
 
 
 
 
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



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:
(Dollars in thousands)
 
June 30,
2019
 
December 31,
2018
Nonperforming assets
 
 
 
 
Nonaccrual loans:
 
 
 
 
Commercial
 
$
37,762

 
$
30,139

Commercial real estate:
 
 
 
 
Owner-occupied
 
20,814

 
16,056

Non-owner occupied
 
21,639

 
23,021

Vacant land
 
1,446

 
3,337

Total commercial real estate
 
43,899

 
42,414

Real estate construction and land development
 
3,501

 
12

Residential mortgage
 
7,636

 
7,988

Consumer installment
 
1,411

 
1,276

Home equity
 
3,487

 
3,604

Total nonaccrual loans
 
97,696

 
85,433

Other real estate owned and repossessed assets
 
8,267

 
6,256

Total nonperforming assets
 
$
105,963

 
$
91,689


The Corporation's nonaccrual loans at June 30, 2019 and December 31, 2018 included $29.9 million and $28.1 million, respectively, of nonaccrual TDRs.

The Corporation had $3.6 million of residential mortgage loans that were in the process of foreclosure at June 30, 2019, compared to $4.5 million at December 31, 2018.

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
June 30, 2019
 
 
 
 
 
 
 
 
 
 
 
 
Originated Portfolio:
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
 
$
19,158

 
$
146

 
$
19,304

 
$
37,762

 
$
3,695,462

 
$
3,752,528

Commercial real estate:
 
 
 
 
 
 
 
 
 
 
 
 
Owner-occupied
 
3,368

 
—

 
3,368

 
20,814

 
1,504,620

 
1,528,802

Non-owner occupied
 
1,714

 
—

 
1,714

 
21,639

 
2,033,178

 
2,056,531

Vacant land
 
501

 
—

 
501

 
1,446

 
35,208

 
37,155

Total commercial real estate
 
5,583

 
—

 
5,583

 
43,899

 
3,573,006

 
3,622,488

Real estate construction and land development
 
538

 
—

 
538

 
3,501

 
667,734

 
671,773

Residential mortgage
 
6,183

 
—

 
6,183

 
7,636

 
2,708,200

 
2,722,019

Consumer installment
 
3,076

 
—

 
3,076

 
1,411

 
1,492,980

 
1,497,467

Home equity
 
2,557

 
—

 
2,557

 
3,487

 
598,791

 
604,835

Total
 
$
37,095

 
$
146

 
$
37,241

 
$
97,696

 
$
12,736,173

 
$
12,871,110

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



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, 2019 and December 31, 2018:
(Dollars in thousands)
 
Recorded
investment
 
Unpaid
principal
balance
 
Related
valuation
allowance
June 30, 2019
 
 
 
 
 
 
Impaired loans with a valuation allowance:
 
 
 
 
 
 
Commercial
 
$
28,732

 
$
31,556

 
$
5,805

Commercial real estate:
 
 
 
 
 
 
Owner-occupied
 
20,050

 
22,193

 
2,168

Non-owner occupied
 
18,080

 
19,966

 
1,366

Vacant land
 
786

 
1,003

 
59

Total commercial real estate
 
38,916

 
43,162

 
3,593

Real estate construction and land development
 
3,612

 
3,612

 
365

Residential mortgage
 
10,060

 
10,060

 
790

Consumer installment
 
1,594

 
1,594

 
109

Home equity
 
4,290

 
4,290

 
356

Subtotal
 
87,204

 
94,274

 
11,018

Impaired loans with no related valuation allowance:
 
 
 
 
 
 
Commercial
 
28,775

 
29,586

 
—

Commercial real estate:
 
 
 
 
 
 
Owner-occupied
 
12,057

 
12,895

 
—

Non-owner occupied
 
7,827

 
8,339

 
—

Vacant land
 
776

 
1,704

 
—

Total commercial real estate
 
20,660

 
22,938

 
—

Real estate construction and land development
 
164

 
164

 
—

Residential mortgage
 
7,235

 
7,235

 
—

Consumer installment
 
7

 
7

 
—

Home equity
 
1,656

 
1,656

 
—

Subtotal
 
58,497

 
61,586

 
—

Total impaired loans:
 
 
 
 
 
 
Commercial
 
57,507

 
61,142

 
5,805

Commercial real estate:
 
 
 
 
 
 
Owner-occupied
 
32,107

 
35,088

 
2,168

Non-owner occupied
 
25,907

 
28,305

 
1,366

Vacant land
 
1,562

 
2,707

 
59

Total commercial real estate
 
59,576

 
66,100

 
3,593

Real estate construction and land development
 
3,776

 
3,776

 
365

Residential mortgage
 
17,295

 
17,295

 
790

Consumer installment
 
1,601

 
1,601

 
109

Home equity
 
5,946

 
5,946

 
356

Total
 
$
145,701

 
$
155,860

 
$
11,018


(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


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, 2019 and 2018, and the respective interest income amounts recognized:
 
 
Three Months Ended June 30, 2019
 
Three Months Ended June 30, 2018
 
Six Months Ended June 30, 2019
 
Six Months Ended June 30, 2018
(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
 
$
26,587

 
$
93

 
$
18,139

 
$
111

 
$
24,109

 
$
179

 
$
19,271

 
$
276

Commercial real estate:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Owner-occupied
 
17,515

 
130

 
12,949

 
81

 
17,522

 
255

 
13,510

 
163

Non-owner occupied
 
9,050

 
9

 
2,246

 
10

 
11,055

 
54

 
3,058

 
21

Vacant land
 
788

 
2

 
1,308

 
17

 
896

 
10

 
2,502

 
32

Total commercial real estate
 
27,353

 
141

 
16,503

 
108

 
29,473

 
319

 
19,070

 
216

Real estate construction and land development
 
3,730

 
2

 
243

 
2

 
3,174

 
4

 
234

 
4

Residential mortgage
 
10,011

 
97

 
12,762

 
115

 
10,005

 
198

 
13,183

 
232

Consumer installment
 
1,250

 
2

 
1,067

 
2

 
1,213

 
4

 
986

 
3

Home equity
 
3,830

 
24

 
2,812

 
21

 
3,739

 
46

 
3,253

 
38

Subtotal
 
72,761

 
359

 
51,526

 
359

 
$
71,713

 
$
750

 
$
55,997

 
$
769

Impaired loans with no related valuation allowance:
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
 
27,865

 
201

 
20,078

 
147

 
$
27,510

 
$
384

 
$
19,102

 
$
242

Commercial real estate:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Owner-occupied
 
14,110

 
73

 
14,565

 
81

 
12,841

 
126

 
14,967

 
137

Non-owner occupied
 
16,677

 
58

 
9,539

 
38

 
16,073

 
105

 
8,349

 
103

Vacant land
 
1,140

 
—

 
3,440

 
—

 
1,787

 
—

 
2,604

 
—

Total commercial real estate
 
31,927

 
131

 
27,544

 
119

 
30,701

 
231

 
25,920

 
240

Real estate construction and land development
 
102

 
2

 
1,994

 
2

 
76

 
4

 
1,051

 
3

Residential mortgage
 
7,241

 
29

 
7,075

 
25

 
7,488

 
57

 
6,606

 
48

Consumer installment
 
36

 
—

 
41

 
—

 
226

 
—

 
91

 
—

Home equity
 
1,987

 
5

 
2,487

 
2

 
2,096

 
12

 
2,266

 
9

Subtotal
 
69,158


368


59,219


295


$
68,097

 
$
688

 
$
55,036

 
$
542

Total impaired loans:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
 
54,452

 
294

 
38,217

 
258

 
$
51,619

 
$
563

 
$
38,373

 
$
518

Commercial real estate:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Owner-occupied
 
31,625

 
203

 
27,514

 
162

 
30,363

 
381

 
28,477

 
300

Non-owner occupied
 
25,727

 
67

 
11,785

 
48

 
27,128

 
159

 
11,407

 
124

Vacant land
 
1,928

 
2

 
4,748

 
17

 
2,683

 
10

 
5,106

 
32

Total commercial real estate
 
59,280

 
272

 
44,047

 
227

 
60,174

 
550

 
44,990

 
456

Real estate construction and land development
 
3,832

 
4

 
2,237

 
4

 
3,250

 
8

 
1,285

 
7

Residential mortgage
 
17,252

 
126

 
19,837

 
140

 
17,493

 
255

 
19,789

 
280

Consumer installment
 
1,286

 
2

 
1,108

 
2

 
1,439

 
4

 
1,077

 
3

Home equity
 
5,817

 
29

 
5,299

 
23

 
5,835

 
58

 
5,519

 
47

Total
 
$
141,919

 
$
727

 
$
110,745


$
654


$
139,810

 
$
1,438

 
$
111,033

 
$
1,311



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 $47.9 million and $45.6 million at June 30, 2019 and December 31, 2018, 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, 2019 and 2018 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, 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial loan portfolio:
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
$
14

 
$
12

 
$
426

 
$
3,351

 
13

 
$
3,818

 
$
3,803

Commercial real estate:
 
 
 
 
 
 
 
 
 
 
 
 
 
Owner-occupied
156

 
—

 
268

 
—

 
4

 
436

 
424

Non-owner occupied
—

 
—

 
140

 
—

 
1

 
154

 
140

Vacant land
—

 
—

 
—

 
244

 
1

 
269

 
244

Total commercial real estate
156

 
—

 
408

 
244

 
6

 
859

 
808

Total commercial
170

 
12

 
834

 
3,595

 
19

 
4,677

 
4,611

Consumer loan portfolio:
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage
81

 
—

 
330

 
—

 
4

 
422

 
411

Consumer installment
15

 
39

 
13

 
—

 
6

 
70

 
67

Home equity
167

 
19

 
168

 
—

 
8

 
371

 
354

Total consumer
263

 
58

 
511

 
—

 
18

 
863

 
832

Total loans
$
433

 
$
70

 
$
1,345

 
$
3,595

 
37

 
$
5,540

 
$
5,443

For the six months ended June 30, 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial loan portfolio:
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
$
388

 
$
12

 
$
867

 
$
6,892

 
24

 
$
8,386

 
$
8,159

Commercial real estate:
 
 
 
 
 
 
 
 
 
 
 
 
 
Owner-occupied
2,863

 
103

 
297

 
1,360

 
9

 
4,649

 
4,623

Non-owner occupied
—

 
—

 
140

 
—

 
1

 
154

 
140

Vacant land
22

 
—

 
—

 
244

 
2

 
293

 
266

Total commercial real estate
2,885

 
103

 
437

 
1,604

 
12

 
5,096

 
5,029

 Total Commercial
3,273

 
115

 
1,304

 
8,496

 
36

 
13,482

 
13,188

Consumer loan portfolio:
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage
248

 
75

 
330

 
—

 
6

 
679

 
653

Consumer installment
61

 
65

 
13

 
—

 
17

 
149

 
139

Home equity
275

 
19

 
168

 
—

 
11

 
482

 
462

Total Consumer
584

 
159

 
511

 
—

 
34

 
1,310

 
1,254

Total loans
$
3,857

 
$
274

 
$
1,815

 
$
8,496

 
70

 
$
14,792

 
$
14,442

 
 
 
 
 
 
 
 
 
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

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

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

    
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, 2019 and December 31, 2018:

(Dollars in thousands)
 
Accruing TDRs
 
Nonaccrual TDRs
 
Total
June 30, 2019
 
 
 
 
 
 
Commercial loan portfolio
 
$
35,549

 
$
26,526

 
$
62,075

Consumer loan portfolio
 
12,304

 
3,397

 
15,701

Total
 
$
47,853

 
$
29,923

 
$
77,776

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



The following schedule includes TDRs for which there was a payment default during the three and six months ended June 30, 2019 and 2018, 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,
 
2019
 
2018
(Dollars in thousands)
 
Number of loans
 
Principal balance
 
Number of loans
 
Principal balance
Commercial loan portfolio
 
—

 
$
—

 
2

 
$
67

Consumer loan portfolio
 
2

 
29

 
7

 
42

Total
 
2

 
$
29

 
9

 
$
109


 
 
For The Six Months Ended June 30,
 
2019
 
2018
(Dollars in thousands)
 
Number of loans
 
Principal balance
 
Number of loans
 
Principal balance
Commercial loan portfolio
 
—

 
$
—

 
3

 
$
149

Consumer loan portfolio
 
2

 
29

 
8

 
45

Total
 
2

 
$
29

 
11

 
$
194



Commitments to lend additional funds to borrowers whose terms have been modified in TDRs totaled $4.3 million and $3.2 million at June 30, 2019 and December 31, 2018, 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, 2019 and 2018.
(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, 2019:
Beginning balance
 
$
84,010

 
$
26,274

 
$
110,284

Provision for loan losses
 
4,848

 
2,654

 
7,502

Charge-offs
 
(2,013
)
 
(1,611
)
 
(3,624
)
Recoveries
 
1,055

 
750

 
1,805

Ending balance
 
$
87,900

 
$
28,067

 
$
115,967

Changes in allowance for loan losses for the six months ended June 30, 2019:
Beginning balance
 
$
82,759

 
$
26,805

 
$
109,564

Provision for loan losses
 
6,712

 
3,269

 
9,981

Charge-offs
 
(3,447
)
 
(3,382
)
 
(6,829
)
Recoveries
 
1,876

 
1,375

 
3,251

Ending balance
 
$
87,900

 
$
28,067

 
$
115,967

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

        
The following schedule presents, by loan portfolio, the changes in the allowance for the acquired loan portfolio.
(Dollars in thousands)
 
Commercial
Loan
Portfolio
 
Consumer
Loan
Portfolio
 
Total
Acquired Loan Portfolio
 
 
 
 
 
 
Changes in allowance for loan losses for the three months ended June 30, 2019:
Beginning balance
 
$
—

 
$
—

 
$
—

Provision for loan losses
 
—

 
—

 
—

Charge-offs
 
—

 
—

 
—

Recoveries
 
—

 
—

 
—

Ending balance
 
$
—

 
$
—

 
$
—

Changes in allowance for loan losses for the six months ended June 30, 2019:
Beginning balance
 
$
420

 
$
—

 
$
420

Provision for loan losses
 
(420
)
 
—

 
(420
)
Charge-offs
 
—

 
—

 
—

Recoveries
 
—

 
—

 
—

Ending balance
 
$
—

 
$
—

 
$
—

    
The following schedule presents by loan portfolio segment, details regarding the balance in the allowance and the recorded investment in loans at June 30, 2019 and December 31, 2018 by impairment evaluation method.
(Dollars in thousands)
 
Commercial
Loan
Portfolio
 
Consumer
Loan
Portfolio
 
Total
Allowance for loan losses balance at June 30, 2019 attributable to:
Loans individually evaluated for impairment
 
$
9,763

 
$
1,255

 
$
11,018

Loans collectively evaluated for impairment
 
78,137

 
26,812

 
104,949

Loans accounted for under ASC 310-30
 
—

 
—

 
—

Total
 
$
87,900

 
$
28,067

 
$
115,967

Recorded investment (loan balance) at June 30, 2019:
Loans individually evaluated for impairment
 
$
120,859

 
$
24,842

 
$
145,701

Loans collectively evaluated for impairment
 
7,925,930

 
4,799,479

 
12,725,409

Loans accounted for under ASC 310-30
 
1,849,066

 
1,141,727

 
2,990,793

Total
 
$
9,895,855

 
$
5,966,048

 
$
15,861,903

(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 acquired with deteriorated credit quality
 
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 acquired with deteriorated credit quality
 
2,137,897

 
1,287,126

 
3,425,023

Total
 
$
9,511,867

 
$
5,757,912

 
$
15,269,779