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Loans
 3 Months Ended
Mar. 31, 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 March 31, 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 $23.5 million at March 31, 2019 and $85.0 million at December 31, 2018. The Corporation sold loans totaling $195.8 million and $190.4 million during the three months ended March 31, 2019 and 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
March 31, 2019
 
 
 
 
 
 
Commercial loan portfolio:
 
 
 
 
 
 
Commercial
 
$
3,428,432

 
$
625,640

 
$
4,054,072

Commercial real estate:
 
 
 
 
 
 
Owner-occupied
 
1,536,956

 
513,474

 
2,050,430

Non-owner occupied
 
1,961,863

 
774,457

 
2,736,320

Vacant land
 
36,454

 
11,965

 
48,419

Total commercial real estate
 
3,535,273

 
1,299,896

 
4,835,169

Real estate construction and land development
 
592,289

 
30,301

 
622,590

Subtotal
 
7,555,994

 
1,955,837

 
9,511,831

Consumer loan portfolio:
 
 
 
 
 
 
Residential mortgage
 
2,542,943

 
1,006,674

 
3,549,617

Consumer installment
 
1,440,193

 
64,248

 
1,504,441

Home equity
 
603,144

 
155,015

 
758,159

Subtotal
 
4,586,280

 
1,225,937

 
5,812,217

Total loans(2)
 
$
12,142,274

 
$
3,181,774

 
$
15,324,048

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 $22.2 million and $19.7 million at March 31, 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 March 31, 2019
 
 
 
 
 
 
 
 
 
 
 
 
Balance at beginning of period
 
$
505,332

 
$
73,132

 
$
17,832

 
$
41,455

 
$
9,574

 
$
647,325

Accretion recognized in interest income
 
(38,031
)
 
(5,551
)
 
(774
)
 
(3,420
)
 
(1,369
)
 
(49,145
)
Net reclassification (to) from nonaccretable difference(1)
 
2,412

 
1,414

 
(91
)
 
609

 
140

 
4,484

Balance at end of period
 
$
469,713

 
$
68,995

 
$
16,967

 
$
38,644

 
$
8,345

 
$
602,664

 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
Balance at beginning of period
 
$
731,353

 
$
95,124

 
$
22,496

 
$
60,814

 
$
17,110

 
$
926,897

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

 
(186
)
 
(510
)
 
2,151

 
362

Balance at end of period
 
$
685,830

 
$
90,156

 
$
21,154

 
$
55,400

 
$
16,158

 
$
868,698


(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 March 31, 2019 and December 31, 2018:
(Dollars in thousands)
 
Pass
 
Special Mention
 
Substandard
 
Doubtful
 
Total
March 31, 2019
 
 
 
 
 
 
 
 
 
 
Originated Portfolio:
 
 
 
 
 
 
 
 
 
 
Commercial
 
$
3,242,753

 
$
87,939

 
$
89,169

 
$
8,571

 
$
3,428,432

Commercial real estate:
 
 
 
 
 
 
 
 
 
 
Owner-occupied
 
1,456,316

 
31,550

 
48,927

 
163

 
1,536,956

Non-owner occupied
 
1,897,810

 
41,195

 
22,807

 
51

 
1,961,863

Vacant land
 
33,756

 
98

 
2,597

 
3

 
36,454

Total commercial real estate
 
3,387,882

 
72,843

 
74,331

 
217

 
3,535,273

Real estate construction and land development
 
577,693

 
10,933

 
3,663

 
—

 
592,289

Subtotal
 
7,208,328

 
171,715

 
167,163

 
8,788

 
7,555,994

Acquired Portfolio:
 
 
 
 
 
 
 
 
 
 
Commercial
 
570,164

 
33,067

 
22,398

 
11

 
625,640

Commercial real estate:
 
 
 
 
 
 
 
 
 
 
Owner-occupied
 
477,378

 
20,522

 
15,563

 
11

 
513,474

Non-owner occupied
 
703,703

 
52,006

 
18,748

 
—

 
774,457

Vacant land
 
11,764

 
201

 
—

 
—

 
11,965

Total commercial real estate
 
1,192,845

 
72,729

 
34,311

 
11

 
1,299,896

Real estate construction and land development
 
29,174

 
59

 
1,068

 
—

 
30,301

Subtotal
 
1,792,183

 
105,855

 
57,777

 
22

 
1,955,837

Total
 
$
9,000,511

 
$
277,570

 
$
224,940

 
$
8,810

 
$
9,511,831

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 March 31, 2019 and December 31, 2018:
(Dollars in thousands)
 
Residential Mortgage
 
Consumer
Installment
 
Home Equity
 
Total
Consumer
March 31, 2019
 
 
 
 
 
 
 
 
Originated Loans:
 
 
 
 
 
 
 
 
Performing
 
$
2,535,278

 
$
1,439,002

 
$
599,871

 
$
4,574,151

Nonperforming
 
7,665

 
1,191

 
3,273

 
12,129

Subtotal
 
2,542,943

 
1,440,193

 
603,144

 
4,586,280

Acquired Loans
 
1,006,674

 
64,248

 
155,015

 
1,225,937

Total
 
$
3,549,617

 
$
1,504,441

 
$
758,159

 
$
5,812,217

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)
 
March 31,
2019
 
December 31,
2018
Nonperforming assets
 
 
 
 
Nonaccrual loans:
 
 
 
 
Commercial
 
$
33,715

 
$
30,139

Commercial real estate:
 
 
 
 
Owner-occupied
 
18,234

 
16,056

Non-owner occupied
 
19,430

 
23,021

Vacant land
 
2,153

 
3,337

Total commercial real estate
 
39,817

 
42,414

Real estate construction and land development
 
3,663

 
12

Residential mortgage
 
7,665

 
7,988

Consumer installment
 
1,191

 
1,276

Home equity
 
3,273

 
3,604

Total nonaccrual loans
 
89,324

 
85,433

Other real estate owned and repossessed assets
 
9,106

 
6,256

Total nonperforming assets
 
$
98,430

 
$
91,689


The Corporation's nonaccrual loans at March 31, 2019 and December 31, 2018 included $26.8 million and $28.1 million, respectively, of nonaccrual TDRs.

The Corporation had $4.0 million of residential mortgage loans that were in the process of foreclosure at March 31, 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
March 31, 2019
 
 
 
 
 
 
 
 
 
 
 
 
Originated Portfolio:
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
 
$
23,700

 
$
544

 
$
24,244

 
$
33,715

 
$
3,370,473

 
$
3,428,432

Commercial real estate:
 
 
 
 
 
 
 
 
 
 
 
 
Owner-occupied
 
4,642

 
—

 
4,642

 
18,234

 
1,514,080

 
1,536,956

Non-owner occupied
 
1,975

 
—

 
1,975

 
19,430

 
1,940,458

 
1,961,863

Vacant land
 
926

 
—

 
926

 
2,153

 
33,375

 
36,454

Total commercial real estate
 
7,543

 
—

 
7,543

 
39,817

 
3,487,913

 
3,535,273

Real estate construction and land development
 
1,528

 
—

 
1,528

 
3,663

 
587,098

 
592,289

Residential mortgage
 
2,247

 
—

 
2,247

 
7,665

 
2,533,031

 
2,542,943

Consumer installment
 
3,556

 
—

 
3,556

 
1,191

 
1,435,446

 
1,440,193

Home equity
 
2,495

 
—

 
2,495

 
3,273

 
597,376

 
603,144

Total
 
$
41,069

 
$
544

 
$
41,613

 
$
89,324

 
$
12,011,337

 
$
12,142,274

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 March 31, 2019 and December 31, 2018:
(Dollars in thousands)
 
Recorded
investment
 
Unpaid
principal
balance
 
Related
valuation
allowance
March 31, 2019
 
 
 
 
 
 
Impaired loans with a valuation allowance:
 
 
 
 
 
 
Commercial
 
$
27,102

 
$
29,617

 
$
4,971

Commercial real estate:
 
 
 
 
 
 
Owner-occupied
 
19,116

 
21,157

 
1,619

Non-owner occupied
 
4,739

 
5,816

 
392

Vacant land
 
1,000

 
1,205

 
110

Total commercial real estate
 
24,855

 
28,178

 
2,121

Real estate construction and land development
 
3,776

 
3,776

 
486

Residential mortgage
 
9,961

 
9,961

 
711

Consumer installment
 
1,051

 
1,051

 
103

Home equity
 
4,011

 
4,011

 
246

Subtotal
 
70,756

 
76,594

 
8,638

Impaired loans with no related valuation allowance:
 
 
 
 
 
 
Commercial
 
23,748

 
24,800

 
—

Commercial real estate:
 
 
 
 
 
 
Owner-occupied
 
11,964

 
12,825

 
—

Non-owner occupied
 
21,186

 
21,698

 
—

Vacant land
 
1,648

 
2,635

 
—

Total commercial real estate
 
34,798

 
37,158

 
—

Real estate construction and land development
 
147

 
147

 
—

Residential mortgage
 
7,581

 
7,581

 
—

Consumer installment
 
368

 
368

 
—

Home equity
 
1,806

 
1,806

 
—

Subtotal
 
68,448

 
71,860

 
—

Total impaired loans:
 
 
 
 
 
 
Commercial
 
50,850

 
54,417

 
4,971

Commercial real estate:
 
 
 
 
 
 
Owner-occupied
 
31,080

 
33,982

 
1,619

Non-owner occupied
 
25,925

 
27,514

 
392

Vacant land
 
2,648

 
3,840

 
110

Total commercial real estate
 
59,653

 
65,336

 
2,121

Real estate construction and land development
 
3,923

 
3,923

 
486

Residential mortgage
 
17,542

 
17,542

 
711

Consumer installment
 
1,419

 
1,419

 
103

Home equity
 
5,817

 
5,817

 
246

Total
 
$
139,204

 
$
148,454

 
$
8,638


(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 months ended March 31, 2019 and 2018, and the respective interest income amounts recognized:
 
 
Three Months Ended March 31, 2019
 
Three Months Ended March 31, 2018
(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
 
$
21,633

 
$
86

 
$
20,402

 
$
165

Commercial real estate:
 
 
 
 
 
 
 
 
Owner-occupied
 
17,528

 
125

 
14,072

 
82

Non-owner occupied
 
13,061

 
45

 
3,870

 
11

Vacant land
 
1,004

 
8

 
3,695

 
15

Total commercial real estate
 
31,593

 
178

 
21,637

 
108

Real estate construction and land development
 
2,618

 
2

 
225

 
2

Residential mortgage
 
9,999

 
101

 
13,604

 
117

Consumer installment
 
1,175

 
2

 
906

 
1

Home equity
 
3,647

 
22

 
3,694

 
17

Subtotal
 
70,665

 
391

 
60,468

 
410

Impaired loans with no related valuation allowance:
 
 
 
 
Commercial
 
27,154

 
183

 
18,126

 
95

Commercial real estate:
 
 
 
 
 
 
 
 
Owner-occupied
 
11,571

 
53

 
15,369

 
56

Non-owner occupied
 
15,469

 
47

 
7,158

 
65

Vacant land
 
2,434

 
—

 
1,769

 
—

Total commercial real estate
 
29,474

 
100

 
24,296

 
121

Real estate construction and land development
 
49

 
2

 
107

 
1

Residential mortgage
 
7,736

 
28

 
6,138

 
23

Consumer installment
 
417

 
—

 
140

 
—

Home equity
 
2,206

 
7

 
2,046

 
7

Subtotal
 
67,036


320


50,853


247

Total impaired loans:
 
 
 
 
 
 
 
 
Commercial
 
48,787

 
269

 
38,528

 
260

Commercial real estate:
 
 
 
 
 
 
 
 
Owner-occupied
 
29,099

 
178

 
29,441

 
138

Non-owner occupied
 
28,530

 
92

 
11,028

 
76

Vacant land
 
3,438

 
8

 
5,464

 
15

Total commercial real estate
 
61,067

 
278

 
45,933

 
229

Real estate construction and land development
 
2,667

 
4

 
332

 
3

Residential mortgage
 
17,735

 
129

 
19,742

 
140

Consumer installment
 
1,592

 
2

 
1,046

 
1

Home equity
 
5,853

 
29

 
5,740

 
24

Total
 
$
137,701

 
$
711

 
$
111,321


$
657



The difference between an impaired loan's recorded investment and the unpaid principal balance for originated loans represents a partial charge-off resulting from a confirmed loss due to the value of the collateral securing the loan being below the loan balance and management's assessment that full collection of the loan balance is not likely.
    
Impaired loans included $49.9 million and $45.6 million at March 31, 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 months ended March 31, 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 March 31, 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial loan portfolio:
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
$
374

 
$
—

 
$
441

 
$
3,541

 
11

 
$
4,568

 
$
4,356

Commercial real estate:
 
 
 
 
 
 
 
 
 
 
 
 
 
Owner-occupied
2,707

 
103

 
29

 
1,360

 
5

 
4,213

 
4,199

Vacant land
22

 
—

 
—

 
—

 
1

 
24

 
22

Total commercial real estate
2,729

 
103

 
29

 
1,360

 
6

 
4,237

 
4,221

Total commercial
3,103

 
103

 
470

 
4,901

 
17

 
8,805

 
8,577

Consumer loan portfolio:
 
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage
167

 
75

 
—

 
—

 
2

 
257

 
242

Consumer installment
46

 
26

 
—

 
—

 
11

 
79

 
72

Home equity
108

 
—

 
—

 
—

 
3

 
111

 
108

Total consumer
321

 
101

 
—

 
—

 
16

 
447

 
422

Total loans
$
3,424

 
$
204

 
$
470

 
$
4,901

 
33

 
$
9,252

 
$
8,999

 
 
 
 
 
 
 
 
 
Concession type
 
 
 
 
 
 
(Dollars in thousands)
Principal
deferral
 
Principal
reduction
 
Interest
rate
 
Forbearance
agreement
 
Total
number
of loans
 
Pre-modification recorded investment
 
Post-modification recorded investment
For the three months ended March 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial loan portfolio:
 
 
 
 
 
 
 
 
 
 
 
 
Commercial
$
903

 
$
—

 
$
1,065

 
$
261

 
18

 
$
2,235

 
$
2,229

Commercial real estate:
 
 
 
 
 
 
 
 
 
 
 
 
 
Owner-occupied
—

 
—

 
726

 
482

 
2

 
1,208

 
1,208

Non-owner occupied
68

 
—

 
—

 
—

 
1

 
74

 
68

Total commercial real estate
68

 
—

 
726

 
482

 
3

 
1,282

 
1,276

Total commercial
971

 
—

 
1,791

 
743

 
21

 
3,517

 
3,505

Consumer loan portfolio:
 
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage
138

 
—

 
—

 
—

 
4

 
142

 
138

Consumer installment
71

 
23

 
28

 
—

 
16

 
128

 
122

Home equity
185

 
—

 
28

 
—

 
5

 
253

 
213

Total consumer
394

 
23

 
56

 
—

 
25

 
523

 
473

Total loans
$
1,365

 
$
23

 
$
1,847

 
$
743

 
46

 
$
4,040

 
$
3,978

    
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, 2019 and December 31, 2018:

(Dollars in thousands)
 
Accruing TDRs
 
Nonaccrual TDRs
 
Total
March 31, 2019
 
 
 
 
 
 
Commercial loan portfolio
 
$
37,219

 
$
23,801

 
$
61,020

Consumer loan portfolio
 
12,716

 
2,999

 
15,715

Total
 
$
49,935

 
$
26,800

 
$
76,735

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 months ended March 31, 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 March 31,
 
2019
2018
(Dollars in thousands)
 
Number of loans
 
Principal balance
Number of loans
 
Principal balance
Commercial loan portfolio (commercial)
 
—

 
$
—

1

 
$
82

Consumer loan portfolio (residential mortgage)
 
—

 
—

1

 
3

Total
 
—

 
$
—

2


$
85



Commitments to lend additional funds to borrowers whose terms have been modified in TDRs totaled $4.7 million and $3.2 million at March 31, 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 months ended March 31, 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 March 31, 2019:
Beginning balance
 
$
82,759

 
$
26,805

 
$
109,564

Provision for loan losses
 
1,864

 
615

 
2,479

Charge-offs
 
(1,434
)
 
(1,771
)
 
(3,205
)
Recoveries
 
821

 
625

 
1,446

Ending balance
 
$
84,010

 
$
26,274

 
$
110,284

Changes in allowance for loan losses for the three months ended March 31, 2018:
Beginning balance
 
$
66,133

 
$
25,754

 
$
91,887

Provision for loan losses
 
3,400

 
2,856

 
6,256

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

 
638

 
1,443

Ending balance
 
$
67,744

 
$
27,018

 
$
94,762

        
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 March 31, 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 March 31, 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 March 31, 2019 attributable to:
Loans individually evaluated for impairment
 
$
7,578

 
$
1,060

 
$
8,638

Loans collectively evaluated for impairment
 
76,432

 
25,214

 
101,646

Loans accounted for under ASC 310-30
 
—

 
—

 
—

Total
 
$
84,010

 
$
26,274

 
$
110,284

Recorded investment (loan balance) at March 31, 2019:
Loans individually evaluated for impairment
 
$
114,426

 
$
24,778

 
$
139,204

Loans collectively evaluated for impairment
 
7,441,568

 
4,561,502

 
12,003,070

Loans accounted for under ASC 310-30
 
1,955,837

 
1,225,937

 
3,181,774

Total
 
$
9,511,831

 
$
5,812,217

 
$
15,324,048

(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