Loans

Loan portfolio segments are defined as the level at which an entity develops and documents a systematic methodology to determine its allowance. The Corporation has two loan portfolio segments (commercial loans and consumer loans) that it uses in determining the allowance. Both quantitative and qualitative factors are used by management at the loan portfolio segment level in determining the adequacy of the allowance for the Corporation. Classes of loans are a disaggregation of an entity’s loan portfolio segments. Classes of loans are defined as a group of loans which share similar initial measurement attributes, risk characteristics, and methods for monitoring and assessing credit risk. The Corporation has six classes of loans, which are set forth below.

Commercial — Loans and lines of credit to varying types of businesses, including municipalities, school districts and nonprofit organizations, for the purpose of supporting working capital, operational needs and term financing of equipment. Repayment of such loans is generally provided through operating cash flows of the business. Commercial loans are predominately secured by equipment, inventory, accounts receivable, personal guarantees of the owner and other sources of repayment, although the Corporation may also secure commercial loans with real estate.

Commercial real estate — Loans secured by real estate occupied by the borrower for ongoing operations, non-owner occupied real estate leased to one or more tenants and vacant land that has been acquired for investment or future land development.

Real estate construction and land development — Real estate construction loans represent secured loans for the construction of business properties. Real estate construction loans often convert to a commercial real estate loan at the completion of the construction period. Land development loans represent secured development loans made to borrowers for the purpose of infrastructure improvements to vacant land to create finished marketable residential and commercial lots/land. Most land development loans are originated with the intention that the loans will be paid through the sale of developed lots/land by the developers within twelve months of the completion date. Land development loans at March 31, 2017 and December 31, 2016 were primarily comprised of loans to develop residential properties.

Residential mortgage — Loans secured by one- to four-family residential properties, generally with fixed interest rates for periods of fifteen years or less. The loan-to-value ratio at the time of origination is generally 80% or less. Residential mortgage loans with a loan-to-value ratio of more than 80% generally require private mortgage insurance.

Consumer installment — Loans to consumers primarily for the purpose of acquiring automobiles, recreational vehicles and personal watercraft and comprised primarily of indirect loans purchased from dealers. These loans consist of relatively small amounts that are spread across many individual borrowers.

Home equity — Loans and lines of credit whereby consumers utilize equity in their personal residence, generally through a second mortgage, as collateral to secure the loan.

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



(Dollars in thousands)	Originated		Acquired⁽¹⁾		Total Loans
March 31, 2017
Commercial loan portfolio:
Commercial	$	1,989,609	$	1,263,999	$	3,253,608
Commercial real estate	2,114,540		1,983,231		4,097,771
Real estate construction and land development	327,740		126,071		453,811
Subtotal	4,431,889		3,373,301		7,805,190
Consumer loan portfolio:
Residential mortgage	1,594,376		1,539,089		3,133,465
Consumer installment	1,342,063		138,994		1,481,057
Home equity	591,441		262,239		853,680
Subtotal	3,527,880		1,940,322		5,468,202
Total loans	$	7,959,769	$	5,313,623	$	13,273,392	⁽²	⁾
December 31, 2016
Commercial loan portfolio:
Commercial	$	1,901,526	$	1,315,774	$	3,217,300
Commercial real estate	1,921,799		2,051,341		3,973,140
Real estate construction and land development	281,724		122,048		403,772
Subtotal	4,105,049		3,489,163		7,594,212
Consumer loan portfolio:
Residential mortgage	1,475,342		1,611,132		3,086,474
Consumer installment	1,282,588		151,296		1,433,884
Home equity	595,422		280,787		876,209
Subtotal	3,353,352		2,043,215		5,396,567
Total loans	$	7,458,401	$	5,532,378	$	12,990,779	⁽²	⁾

(1) Acquired loans are accounted for under ASC 310-30.

(2) Reported net of deferred costs totaling $15.0 million and $14.8 million at March 31, 2017 and December 31, 2016, respectively.

The Corporation acquired loans at fair value as of the acquisition date, which includes loan acquired in the acquisitions of 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.

Activity for the accretable yield, which includes contractually due interest for acquired loans that have been renewed or extended since the date of acquisition and continue to be accounted for in loan pools in accordance with ASC 310-30, follows:



(Dollars in thousands)	Talmer			Lake Michigan			Monarch			North-western			OAK			Total
Three Months Ended March 31, 2017
Balance at beginning of period	$	798,210		$	121,416		$	27,182		$	69,847		$	23,316		$	1,039,971
Additions (reductions)⁽¹⁾	—			(939		)	54			(1,058		)	1,428			(515		)
Accretion recognized in interest income	(44,571		)	(7,266		)	(1,181		)	(3,892		)	(3,277		)	(60,187		)
Reclassification from nonaccretable difference	21,139			—			—			—			—			21,139
Balance at end of period	$	774,778		$	113,211		$	26,055		$	64,897		$	21,467		$	1,000,408

Three Months Ended March 31, 2016
Balance at beginning of period	$	—		$	152,999		$	34,558		$	82,623		$	28,077		$	298,257
Additions (reductions) ⁽¹⁾	—			(6,071		)	128			(2,254		)	1,516			(6,681		)
Accretion recognized in interest income	—			(8,953		)	(1,451		)	(4,001		)	(2,557		)	(16,962		)
Balance at end of period	$	—		$	137,975		$	33,235		$	76,368		$	27,036		$	274,614

(1) Represents additions of estimated contractual interest expected to be collected from acquired loans being renewed or extended, less reductions in contractual interest resulting from the early payoff of acquired loans.

As part of its ongoing assessment of the acquired loan portfolios, management has determined that the overall credit quality of the Talmer acquired loan portfolios has improved, which has resulted in an improvement in expected cash flows of certain loan pools in these acquired loan portfolios. Accordingly, management reclassified $21.1 million during the three months ended March 31, 2017 from the nonaccretable difference to the accretable yield for each of these acquired loan portfolios, which will increase amounts recognized into interest income over the estimated remaining lives of the loan pools within these portfolios.

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 $2.0 million requiring group loan authority approval, except for six executive and senior officers who have varying loan limits exceeding $2.0 million and up to $3.5 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 $2.0 million to $5.0 million, and a senior loan committee, consisting of certain executive and senior officers, that meets weekly to consider loans ranging in amounts from $5.0 million to $10.0 million, depending on risk rating and credit action required. A directors’ loan committee of Chemical Bank, consisting of eight independent members of the board of directors of Chemical Bank, the chief executive officer of Chemical Bank and the chief credit officer of Chemical Bank, meets bi-weekly to consider loans in amounts over $10.0 million, and certain loans under $10.0 million depending on a loan’s risk rating and credit action required. Loans over $25.0 million require the approval of the board of directors of Chemical Bank.

The majority of the Corporation’s consumer loan portfolio is comprised of secured loans that are relatively small. The Corporation’s consumer loan portfolio has a centralized approval process which utilizes standardized underwriting criteria. The ongoing measurement of credit quality of the consumer loan portfolio is largely done on an exception basis. If payments are made on schedule, as agreed, then no further monitoring is performed. However, if delinquency occurs, the delinquent loans are turned over to the Corporation’s collection department for resolution, resulting in repossession or foreclosure if payments are not brought current. Credit quality for the entire consumer loan portfolio is measured by the periodic delinquency rate, nonaccrual amounts and actual losses incurred.

Loans in the commercial loan portfolio tend to be larger and more complex than those in the consumer loan portfolio, and therefore, are subject to more intensive monitoring. All loans in the commercial loan portfolio have an assigned relationship manager, and most borrowers provide periodic financial and operating information that allows the relationship managers to stay abreast of credit quality during the life of the loans. The risk ratings of loans in the commercial loan portfolio are reassessed at least annually, with loans below an acceptable risk rating reassessed more frequently and reviewed by various loan committees within the Corporation at least quarterly.

The Corporation maintains a centralized independent loan review function that monitors the approval process and ongoing asset quality of the loan portfolio, including the accuracy of loan grades. The Corporation also maintains an independent appraisal review function that participates in the review of all appraisals obtained by the Corporation for loans in the commercial loan portfolio.

Credit Quality Indicators

Commercial Loan Portfolio

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 following schedule presents the recorded investment of loans in the commercial loan portfolio by credit risk categories at March 31, 2017 and December 31, 2016:



(Dollars in thousands)	Pass		Special Mention		Substandard		Doubtful		Total
March 31, 2017
Originated Portfolio:
Commercial	$	1,902,773	$	34,018	$	52,818	$	—	$	1,989,609
Commercial real estate	2,040,155		37,528		36,856		1		2,114,540
Real estate construction and land development	326,942		719		79		—		327,740
Subtotal	4,269,870		72,265		89,753		1		4,431,889
Acquired Portfolio:
Commercial	1,171,260		39,079		53,625		35		1,263,999
Commercial real estate	1,841,116		52,038		89,912		165		1,983,231
Real estate construction and land development	122,593		1,887		1,591		—		126,071
Subtotal	3,134,969		93,004		145,128		200		3,373,301
Total	$	7,404,839	$	165,269	$	234,881	$	201	$	7,805,190
December 31, 2016
Originated Portfolio:
Commercial	$	1,803,750	$	44,809	$	51,898	$	1,069	$	1,901,526
Commercial real estate	1,849,315		36,981		35,502		1		1,921,799
Real estate construction and land development	280,968		157		599		—		281,724
Subtotal	3,934,033		81,947		87,999		1,070		4,105,049
Acquired Portfolio:
Commercial	1,218,848		46,643		50,283		—		1,315,774
Commercial real estate	1,897,011		61,441		92,636		253		2,051,341
Real estate construction and land development	117,505		1,982		2,561		—		122,048
Subtotal	3,233,364		110,066		145,480		253		3,489,163
Total	$	7,167,397	$	192,013	$	233,479	$	1,323	$	7,594,212

Consumer Loan Portfolio

The Corporation evaluates the credit quality of loans in the consumer loan portfolio based on the performing or nonperforming status of the loan. Loans in the consumer loan portfolio that are performing in accordance with original contractual terms and are less than 90 days past due and accruing interest are considered to be in a performing status, while those that are in nonaccrual status, contractually past due 90 days or more as to interest or principal payments are considered to be in a nonperforming status. Loans accounted for under ASC 310-30, "acquired loans", that are not performing in accordance with contractual terms are not reported as nonperforming because these loans are recorded in pools at their net realizable value based on the principal and interest the Corporation expects to collect on these loans.

The following schedule presents the recorded investment of loans in the consumer loan portfolio based on loans in a performing status and loans in a nonperforming status at March 31, 2017 and December 31, 2016:



(Dollars in thousands)	Residential Mortgage		Consumer Installment		Home Equity		Total Consumer
March 31, 2017
Originated Loans:
Performing	$	1,587,627	$	1,341,308	$	588,728	$	3,517,663
Nonperforming	6,749		755		2,713		10,217
Subtotal	1,594,376		1,342,063		591,441		3,527,880
Acquired Loans	1,539,089		138,994		262,239		1,940,322
Total	$	3,133,465	$	1,481,057	$	853,680	$	5,468,202
December 31, 2016
Originated Loans:
Performing	$	1,468,373	$	1,281,709	$	592,071	$	3,342,153
Nonperforming	6,969		879		3,351		11,199
Subtotal	1,475,342		1,282,588		595,422		3,353,352
Acquired Loans	1,611,132		151,296		280,787		2,043,215
Total	$	3,086,474	$	1,433,884	$	876,209	$	5,396,567

Nonperforming Assets and Past Due Loans

Nonperforming assets consist of loans for which the accrual of interest has been discounted, other real estate owned acquired through acquisitions, other real estate owned obtained through foreclosure and other repossessed assets.

Loans are considered past due or delinquent when the contractual principal or interest due in accordance with the terms of the loan agreement or any portion thereof remains unpaid after the due date of the scheduled payments. Loans outside of those accounted for under ASC 310-30 are classified as nonaccrual when, in the opinion of management, collection of principal or interest is doubtful. The accrual of interest is discontinued when a loan is placed in nonaccrual status and any payments received reduce the carrying value of the loan. A loan may be placed back on accrual status if all contractual payments have been received and collection of future principal and interest payments are no longer doubtful. Acquired loans that are not performing in accordance with contractual terms are not reported as nonperforming because these loans are recorded in pools at their net realizable value based on the principal and interest the Corporation expects to collect on these loans.

A summary of nonperforming loans follows:



(Dollars in thousands)	March 31, 2017		December 31, 2016
Nonperforming assets
Nonaccrual loans:
Commercial	$	16,717	$	13,178
Commercial real estate	20,828		19,877
Real estate construction and land development	79		80
Residential mortgage	6,749		6,969
Consumer installment	755		879
Home equity	2,713		3,351
Total nonaccrual loans	47,841		44,334
Other real estate owned and repossessed assets	16,395		17,187
Total nonperforming assets	$	64,236	$	61,521
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	1,823		11
Commercial real estate	700		277
Home equity	1,169		995
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	$	3,692	$	1,283

The Corporation’s nonaccrual loans at March 31, 2017 and December 31, 2016 included $27.9 million and $30.5 million, respectively, of nonaccrual TDRs.

The Corporation had $5.1 million of residential mortgage loans that were in the process of foreclosure at March 31, 2017, compared to $7.3 million at December 31, 2016.

Loan delinquency, excluding acquired loans accounted for under ASC 310-30, was as follows:



(Dollars in thousands)	30-59 days past due		60-89 days past due		90 days or more past due		Total past due		Current		Total loans		90 days or more past due and still accruing
March 31, 2017
Originated Portfolio:
Commercial	$	10,603	$	9,411	$	8,661	$	28,675	$	1,960,934	$	1,989,609	$	1,823
Commercial real estate	9,712		2,625		6,016		18,353		2,096,187		2,114,540		700
Real estate construction and land development	3,495		1,770		—		5,265		322,475		327,740		—
Residential mortgage	12,918		731		941		14,590		1,579,786		1,594,376		—
Consumer installment	2,805		275		235		3,315		1,338,748		1,342,063		—
Home equity	3,976		552		1,536		6,064		585,377		591,441		1,169
Total	$	43,509	$	15,364	$	17,389	$	76,262	$	7,883,507	$	7,959,769	$	3,692
December 31, 2016
Originated Portfolio:
Commercial	$	10,421	$	4,842	$	3,641	$	18,904	$	1,882,622	$	1,901,526	$	11
Commercial real estate	6,551		1,589		5,165		13,305		1,908,494		1,921,799		277
Real estate construction and land development	2,721		499		—		3,220		278,504		281,724		—
Residential mortgage	3,147		62		1,752		4,961		1,470,381		1,475,342		—
Consumer installment	3,991		675		238		4,904		1,277,684		1,282,588		—
Home equity	3,097		893		2,349		6,339		589,083		595,422		995
Total	$	29,928	$	8,560	$	13,145	$	51,633	$	7,406,768	$	7,458,401	$	1,283

Impaired Loans

A loan is impaired when, based on current information and events, it is probable that the Corporation will be unable to collect all amounts due according to the contractual terms of the loan agreement. Impaired loans include nonperforming loans and all TDRs. Impaired loans are accounted for at the lower of the present value of expected cash flows or the estimated fair value of the collateral. When the present value of expected cash flows or the fair value of the collateral of an impaired loan not accounted for under ASC 310-30 is less than the amount of unpaid principal outstanding on the loan, the recorded principal balance of the loan is reduced to its carrying value through either a specific allowance for loan loss or a partial charge-off of the loan balance.

The following schedules present impaired loans by classes of loans at March 31, 2017 and December 31, 2016:



(Dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Valuation Allowance
March 31, 2017
Impaired loans with a valuation allowance:
Commercial	$	26,201	$	29,804	$	2,468
Commercial real estate	20,416		25,875		1,251
Real estate construction and land development	164		164		2
Residential mortgage	16,944		16,944		1,162
Consumer installment	799		799		102
Home equity	4,296		4,296		655
Subtotal	68,820		77,882		5,640
Impaired loans with no related valuation allowance:
Commercial	9,028		14,910		—
Commercial real estate	22,791		26,569		—
Real estate construction and land development	79		79		—
Residential mortgage	3,607		3,607		—
Consumer installment	62		62		—
Home equity	512		512		—
Subtotal	36,079		45,739		—
Total impaired loans:
Commercial	35,229		44,714		2,468
Commercial real estate	43,207		52,444		1,251
Real estate construction and land development	243		243		2
Residential mortgage	20,551		20,551		1,162
Consumer installment	861		861		102
Home equity	4,808		4,808		655
Total	$	104,899	$	123,621	$	5,640
December 31, 2016
Impaired loans with a valuation allowance:
Commercial	$	28,925	$	33,209	$	3,128
Commercial real estate	21,318		27,558		2,102
Real estate construction and land development	177		177		4
Residential mortgage	20,864		20,864		3,528
Consumer installment	879		879		240
Home equity	2,577		2,577		390
Subtotal	74,740		85,264		9,392
Impaired loans with no related valuation allowance:
Commercial	7,435		11,153		—
Commercial real estate	20,588		23,535		—
Real estate construction and land development	80		80		—
Residential mortgage	3,252		3,252		—
Home equity	774		774		—
Subtotal	32,129		38,794		—
Total impaired loans:
Commercial	36,360		44,362		3,128
Commercial real estate	41,906		51,093		2,102
Real estate construction and land development	257		257		4
Residential mortgage	24,116		24,116		3,528
Consumer installment	879		879		240
Home equity	3,351		3,351		390
Total	$	106,869	$	124,058	$	9,392

The following schedule presents additional information regarding impaired loans by classes of loans segregated by those requiring a valuation allowance and those not requiring a valuation allowance for the three months ended March 31, 2017 and 2016, and the respective interest income amounts recognized:



	Three Months Ended March 31, 2017				Three Months Ended March 31, 2016
(Dollars in thousands)	Average recorded investment		Interest income recognized while on impaired status		Average recorded investment		Interest income recognized while on impaired status
Impaired loans with a valuation allowance:
Commercial	$	25,712	$	—	$	10,551	$	—
Commercial real estate	20,035		—		7,592		—
Real estate construction and land development	161		—		—		—
Residential mortgage	17,398		264		20,988		333
Consumer installment	780		—		—		—
Home equity	4,071		—		—		—
Subtotal	$	68,157	$	264	$	39,131	$	333
Impaired loans with no related valuation allowance:
Commercial	$	9,297	$	255	$	31,404	$	277
Commercial real estate	23,473		306		45,737		380
Real estate construction and land development	81		2		918		6
Residential mortgage	3,808		—		5,149		—
Consumer installment	215		—		340		—
Home equity	880		—		2,388		—
Subtotal	$	37,754	$	563	$	85,936	$	663
Total impaired loans:
Commercial	$	35,009	$	255	$	41,955	$	277
Commercial real estate	43,508		306		53,329		380
Real estate construction and land development	242		2		918		6
Residential mortgage	21,206		264		26,137		333
Consumer installment	995		—		340		—
Home equity	4,951		—		2,388		—
Total	$	105,911	$	827	$	125,067	$	996

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 $57.1 million and $62.5 million at March 31, 2017 and December 31, 2016, respectively, of accruing TDRs.

Loans Modified Under Troubled Debt Restructurings (TDRs)

The following tables present the recorded investment of loans modified into TDRs during the three months ended March 31, 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		Interest rate		Forbearance agreement		Total number of loans	Pre-modification recorded investment		Post-modification recorded investment
For the three months ended March 31, 2017
Commercial loan portfolio:
Commercial	$	50	$	1,101	$	579	5	$	1,739	$	1,730
Commercial real estate	447		75		—		3	522		522
Subtotal	497		1,176		579		8	2,261		2,252
Consumer loan portfolio:
Residential mortgage	98		—		—		1	98		98
Consumer installment	10		—		—		2	11		10
Home equity	111		—		—		1	165		111
Subtotal	219		—		—		4	274		219
Total loans	$	716	$	1,176	$	579	12	$	2,535	$	2,471



For the three months ended March 31, 2016
Commercial loan portfolio:
Commercial	$	3,832	$	—	$	—	7	$	3,832	$	3,832
Commercial real estate	987		—		—		4	987		987
Subtotal	4,819		—		—		11	4,819		4,819
Consumer loan portfolio:
Residential mortgage	105		—		—		1	105		105
Consumer installment	33		—		—		4	33		33
Home equity	29		37		—		2	66		66
Subtotal	167		37		—		7	204		204
Total loans	$	4,986	$	37	$	—	18	$	5,023	$	5,023

The pre-modification and post-modification recorded investment represents amounts as of the date of loan modification. The difference between the pre-modification and post-modification recorded investment of residential mortgage TDRs represents impairment recognized by the Corporation through the provision for loan losses computed based on a loan's post-modification present value of expected future cash flows discounted at the loan's original effective interest rate.

The following schedule presents the Corporation's TDRs at March 31, 2017 and December 31, 2016:



(Dollars in thousands)	Accruing TDRs		Nonaccrual TDRs		Total
March 31, 2017
Commercial loan portfolio	$	41,055	$	23,842	$	64,897
Consumer loan portfolio	16,003		4,100		20,103
Total	$	57,058	$	27,942	$	85,000
December 31, 2016
Commercial loan portfolio	$	45,388	$	25,397	$	70,785
Consumer loan portfolio	17,147		5,134		22,281
Total	$	62,535	$	30,531	$	93,066

The following schedule includes TDRs for which there was a payment default during the three months ended March 31, 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:



	Three Months Ended March 31, 2017			Three Months Ended March 31, 2016
(Dollars in thousands)	Number of loans	Principal balance		Number of loans	Principal balance
Commercial loan portfolio:
Commercial	3	$	620	—	$	—
Commercial real estate	—	—		1	933
Subtotal - Commercial loan portfolio	3	620		1	933
Consumer loan portfolio (residential mortgage)	2	105		1	—
Total	5	$	725	2	$	933

At March 31, 2017, commitments to lend additional funds to borrowers whose terms have been modified in TDRs totaled $2.7 million.

Allowance for Loan Losses

The following schedule presents, by loan portfolio segment, the changes in the allowance for the three months ended March 31, 2017 and 2016, and details regarding the balance in the allowance and the recorded investment in loans at March 31, 2017 by impairment evaluation method.



(Dollars in thousands)	Commercial Loan Portfolio			Consumer Loan Portfolio			Total
Changes in allowance for loan losses for the three months ended March 31, 2017:
Beginning balance	$	51,201		$	27,067		$	78,268
Provision for loan losses	4,392			(342		)	4,050
Charge-offs	(2,691		)	(2,883		)	(5,574		)
Recoveries	1,413			617			2,030
Ending balance	$	54,315		$	24,459		$	78,774
Changes in allowance for loan losses for the three months ended March 31, 2016:
Beginning balance	$	47,234		$	26,094		$	73,328
Provision for loan losses	1,000			500			1,500
Charge-offs	(3,896		)	(1,562		)	(5,458		)
Recoveries	330			618			948
Ending balance	$	44,668		$	25,650		$	70,318
Allowance for loan losses balance at March 31, 2017 attributable to:
Loans individually evaluated for impairment	$	3,721		$	1,919		$	5,640
Loans collectively evaluated for impairment	50,594			22,540			73,134
Loans acquired with deteriorated credit quality	—			—			—
Total	$	54,315		$	24,459		$	78,774
Recorded investment (loan balance) at March 31, 2017:
Loans individually evaluated for impairment	$	78,679		$	26,220		$	104,899
Loans collectively evaluated for impairment	4,353,210			3,501,660			7,854,870
Loans acquired with deteriorated credit quality	3,373,301			1,940,322			5,313,623
Total	$	7,805,190		$	5,468,202		$	13,273,392

The following schedule presents, by loan portfolio segment, details regarding the balance in the allowance and the recorded investment in loans at December 31, 2016 by impairment evaluation method.



(Dollars in thousands)	Commercial Loan Portfolio		Consumer Loan Portfolio		Total
Allowance for loan losses balance at December 31, 2016 attributable to:
Loans individually evaluated for impairment	$	5,234	$	4,158	$	9,392
Loans collectively evaluated for impairment	45,967		22,909		68,876
Loans acquired with deteriorated credit quality	—		—		—
Total	$	51,201	$	27,067	$	78,268
Recorded investment (loan balance) at December 31, 2016:
Loans individually evaluated for impairment	$	78,523	$	28,346	$	106,869
Loans collectively evaluated for impairment	4,026,526		3,325,006		7,351,532
Loans acquired with deteriorated credit quality	3,489,163		2,043,215		5,532,378
Total	$	7,594,212	$	5,396,567	$	12,990,779