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 December 31, 2018 and 2017 were primarily comprised of loans to develop residential properties. Residential mortgage — Loans secured by one - to four -family residential properties, generally with fixed interest rates for periods of fifteen years or less. The loan-to-value ratio at the time of origination is generally 80% or less. Residential mortgage loans with a loan-to-value ratio of more than 80% generally require private mortgage insurance. Consumer installment — Loans to consumers primarily for the purpose of acquiring automobiles, recreational vehicles and watercraft and comprised primarily of indirect loans purchased from dealers. These loans generally consist of relatively small amounts that are spread across many individual borrowers. Home equity — Loans and lines of credit whereby consumers utilize equity in their personal residence, generally through a second mortgage, as collateral to secure the loan. Loans held-for-sale, comprised of fixed-rate residential mortgage and construction loans, were $85.0 million at December 31, 2018 and $52.1 million at December 31, 2017 . The Corporation sold loans totaling $741.9 million , $838.5 million and $723.5 million during the years ended December 31, 2018 , 2017 and 2016 , respectively. Commercial, commercial real estate, real estate construction and land development loans are referred to as the Corporation's commercial loan portfolio, while residential mortgage, consumer installment and home equity loans are referred to as the Corporation's consumer loan portfolio. A summary of the Corporation's loans follows: (Dollars in thousands) Originated Acquired (1) Total loans December 31, 2018 Commercial loan portfolio: Commercial $ 3,287,087 $ 715,481 $ 4,002,568 Commercial real estate: Owner-occupied 1,513,532 546,025 2,059,557 Non-owner occupied 1,966,330 818,690 2,785,020 Vacant land 40,295 27,215 67,510 Total commercial real estate 3,520,157 1,391,930 4,912,087 Real estate construction and land development 566,726 30,486 597,212 Subtotal 7,373,970 2,137,897 9,511,867 Consumer loan portfolio: Residential mortgage 2,407,305 1,051,361 3,458,666 Consumer installment 1,451,352 69,722 1,521,074 Home equity 612,129 166,043 778,172 Subtotal 4,470,786 1,287,126 5,757,912 Total loans (2) $ 11,844,756 $ 3,425,023 $ 15,269,779 December 31, 2017 Commercial loan portfolio: Commercial $ 2,407,606 $ 978,036 $ 3,385,642 Commercial real estate: Owner-occupied 1,185,614 627,948 1,813,562 Non-owner occupied 1,518,787 1,087,974 2,606,761 Vacant land 47,024 33,323 80,347 Total commercial real estate 2,751,425 1,749,245 4,500,670 Real estate construction and land development 498,155 76,060 574,215 Subtotal 5,657,186 2,803,341 8,460,527 Consumer loan portfolio: Residential mortgage 1,967,857 1,284,630 3,252,487 Consumer installment 1,510,540 102,468 1,613,008 Home equity 611,846 217,399 829,245 Subtotal 4,090,243 1,604,497 5,694,740 Total loans (2) $ 9,747,429 $ 4,407,838 $ 14,155,267 (1) Loans acquired in the Talmer, Lake Michigan, Monarch, Northwestern and OAK acquisitions were elected to be accounted for under ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality (ASC 310-30), by analogy. See Note 1, Summary of Significant Accounting Policies for further information. (2) Reported net of deferred costs totaling $19.7 million and $26.1 million at December 31, 2018 and 2017 , respectively. The Corporation acquired loans at fair value as of the acquisition date, which includes loans acquired in the acquisitions of Talmer, Lake Michigan, Monarch, Northwestern and OAK. Loans acquired in each of these transactions ("Acquired Loans) were elected to be accounted for under ASC 310-30, by analogy, which recognizes the expected shortfall of expected future cash flows, as compared to the contractual amount due, as nonaccretable difference. Any excess of the net present value of expected future cash flows over the acquisition date fair value is recognized as the accretable discount, or accretable yield. The accretable discount is recognized over the expected remaining life of the acquired loans on a pool basis. In the event an acquired loan is renewed or extended, the loan continues to be accounted for as an acquired loan on a pool basis in accordance with ASC 310-30. Activity for the accretable yield, which includes contractually due expected cash flows for acquired loans that have been renewed or extended since the date of acquisition and continue to be accounted for in loan pools in accordance with ASC 310-30, follows: (Dollars in thousands) Talmer Lake Michigan Monarch North-western OAK Total Year Ended December 31, 2018 Balance at beginning of period $ 731,353 $ 95,124 $ 22,496 $ 60,814 $ 17,110 $ 926,897 Accretion recognized in interest income (164,614 ) (24,722 ) (3,881 ) (17,988 ) (10,214 ) (221,419 ) Net reclassification (to) from nonaccretable difference (1)(2) (61,407 ) 2,730 (783 ) (1,371 ) 2,678 (58,153 ) Balance at end of period $ 505,332 $ 73,132 $ 17,832 $ 41,455 $ 9,574 $ 647,325 Year Ended December 31, 2017 Balance at beginning of period $ 798,210 $ 121,416 $ 27,182 $ 69,847 $ 23,316 $ 1,039,971 Accretion recognized in interest income (175,678 ) (29,077 ) (4,533 ) (20,318 ) (12,563 ) (242,169 ) Net reclassification (to) from nonaccretable difference (1) 108,821 2,785 (153 ) 11,285 6,357 129,095 Balance at end of period $ 731,353 $ 95,124 $ 22,496 $ 60,814 $ 17,110 $ 926,897 Year Ended December 31, 2016 Balance at beginning of period $ — $ 152,999 $ 34,558 $ 82,623 $ 28,077 $ 298,257 Addition attributable to acquisitions 862,127 — — — — 862,127 Accretion recognized in interest income (63,917 ) (33,031 ) (5,468 ) (15,791 ) (13,352 ) (131,559 ) Net reclassification (to) from nonaccretable difference (1) — 1,448 (1,908 ) 3,015 8,591 11,146 Balance at end of period $ 798,210 $ 121,416 $ 27,182 $ 69,847 $ 23,316 $ 1,039,971 (1) The net reclassification results from changes in expected cash flows of the acquired loans which may include increases in the amount of contractual principal and interest expected to be collected due to improvement in credit quality, increases in balances outstanding from advances, renewals, extensions and interest rates; as well as reductions in contractual principal and interest expected to be collected due to credit deterioration, payoffs, and decreases in interest rates. (2) The 2018 net reclassification from accretable to nonaccretable difference in the Talmer portfolio was primarily the result of unexpected prepayments and payoffs. Chemical Bank has extended loans to its directors, executive officers and their affiliates. These loans were made in the ordinary course of business upon normal terms, including collateralization and interest rates prevailing at the time, and did not involve more than the normal risk of repayment by the borrower. The aggregate loans outstanding to the directors, executive officers and their affiliates totaled $3.6 million at December 31, 2018 and $3.8 million at December 31, 2017 . During 2018 and 2017 , there were $3.8 million and $44.1 million , respectively, of new loans and other additions, while repayments and other reductions totaled $4.0 million and $64.2 million , respectively. Credit Quality Monitoring The Corporation maintains loan policies and credit underwriting standards as part of the process of managing credit risk. These standards include making loans generally only within the Corporation's market areas. The Corporation's lending markets generally consist of communities throughout Michigan, Ohio and Northern Indiana. The Corporation, through Chemical Bank, has a commercial loan portfolio approval process involving underwriting and individual and group loan approval authorities to consider credit quality and loss exposure at loan origination. The loans in the Corporation's commercial loan portfolio are risk rated at origination based on the grading system set forth below. The approval authority of relationship managers is established based on experience levels, with credit decisions greater than $1.25 million requiring credit officer approval and credit decisions greater than $3.0 million requiring group loan authority approval, except for six executive and senior officers who have varying loan limits up to $8.0 million . With respect to the group loan authorities, Chemical Bank has various regional loan committees that meet weekly to consider loan ranging in amounts from $3.0 million to $7.0 million , and a senior loan committee, consisting of certain executive and senior officers, that meets weekly to consider loans ranging in amounts from $7.0 million up to Chemical Bank's internal lending limit, depending on risk rating and credit action required. Credit actions exceeding Chemical Bank's internal lending limit require the approval of the board of directors of Chemical Bank. The majority of the Corporation's consumer loan portfolio is comprised of secured loans that are relatively small. The Corporation's consumer loan portfolio has a centralized approval process which utilizes standardized underwriting criteria. The ongoing measurement of credit quality of the consumer loan portfolio is largely done on an exception basis. If payments are made on schedule, as agreed, then no further monitoring is performed. However, if delinquency occurs, the delinquent loans are turned over to the Corporation's collection department for resolution, resulting in repossession or foreclosure if payments are not brought current. Credit quality for the entire consumer loan portfolio is measured by the periodic delinquency rate, nonaccrual amounts and actual losses incurred. Loans in the commercial loan portfolio tend to be larger and more complex than those in the consumer loan portfolio, and therefore, are subject to more intensive monitoring. All loans in the commercial loan portfolio have an assigned relationship manager, and most borrowers provide periodic financial and operating information that allows the relationship managers to stay abreast of credit quality during the life of the loans. The risk ratings of loans in the commercial loan portfolio are reassessed at least annually, with loans below an acceptable risk rating reassessed more frequently and reviewed by various loan committees within the Corporation at least quarterly. The Corporation maintains a centralized independent loan review function that monitors the approval process and ongoing asset quality of the loan portfolio, including the accuracy of loan grades. The Corporation also maintains an independent appraisal review function that participates in the review of all appraisals obtained by the Corporation for loans in the commercial loan portfolio. Credit Quality Indicators Commercial Loan Portfolio Risk categories for the Corporation's commercial loan portfolio establish the credit quality of a borrower by measuring liquidity, debt capacity, coverage and payment behavior as shown in the borrower's financial statements. The risk categories also measure the quality of the borrower's management and the repayment support offered by any guarantors. Risk categories for the Corporation's commercial loan portfolio are described as follows: Pass: Includes all loans without weaknesses or potential weaknesses identified in the categories of special mention, substandard or doubtful. Special Mention: Loans with potential credit weakness or credit deficiency, which, if not corrected, pose an unwarranted financial risk that could weaken the loan by adversely impacting the future repayment ability of the borrower. Substandard: Loans with a well-defined weakness, or weaknesses, such as loans to borrowers who may be experiencing losses from operations or inadequate liquidity of a degree and duration that jeopardizes the orderly repayment of the loan. Substandard loans also are distinguished by the distinct possibility of loss in the future if these weaknesses are not corrected. Doubtful: Loans with all the characteristics of a loan classified as Substandard, with the added characteristic that credit weaknesses make collection in full highly questionable and improbable. The primary source of repayment is nonexistent and there is doubt as to the value of the secondary source of repayments. A doubtful asset has a high probability of total or substantial loss, but because of pending events that may strengthen the asset, its classification as loss is deferred. Loss: An asset classified as loss is considered uncollectible and of such little value that the continuance as a bankable asset is not warranted. This classification does not mean that an asset has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off this basically worthless asset even through partial recovery may occur in the future. The following schedule presents the recorded investment of loans in the commercial loan portfolio by credit risk categories at December 31, 2018 and 2017 : (Dollars in thousands) Pass Special Mention Substandard Doubtful Total December 31, 2018 Originated Portfolio: Commercial $ 3,118,894 $ 87,222 $ 77,036 $ 3,935 $ 3,287,087 Commercial real estate: Owner-occupied 1,430,948 32,056 50,286 242 1,513,532 Non-owner occupied 1,901,822 39,416 25,092 — 1,966,330 Vacant land 36,499 — 3,741 55 40,295 Total commercial real estate 3,369,269 71,472 79,119 297 3,520,157 Real estate construction and land development 557,040 6,108 3,578 — 566,726 Subtotal 7,045,203 164,802 159,733 4,232 7,373,970 Acquired Portfolio: Commercial 655,883 36,809 22,773 16 715,481 Commercial real estate: Owner-occupied 500,072 28,909 17,033 11 546,025 Non-owner occupied 740,900 52,546 25,244 — 818,690 Vacant land 26,978 237 — — 27,215 Total commercial real estate 1,267,950 81,692 42,277 11 1,391,930 Real estate construction and land development 29,248 97 1,141 — 30,486 Subtotal 1,953,081 118,598 66,191 27 2,137,897 Total $ 8,998,284 $ 283,400 $ 225,924 $ 4,259 $ 9,511,867 December 31, 2017 Originated Portfolio: Commercial $ 2,316,464 $ 41,059 $ 50,083 $ — $ 2,407,606 Commercial real estate: Owner-occupied 1,133,609 19,438 32,567 — 1,185,614 Non-owner occupied 1,504,195 4,728 9,864 — 1,518,787 Vacant land 39,775 38 7,211 — 47,024 Total commercial real estate 2,677,579 24,204 49,642 — 2,751,425 Real estate construction and land development 494,528 837 2,790 — 498,155 Subtotal 5,488,571 66,100 102,515 — 5,657,186 Acquired Portfolio: Commercial 873,861 68,418 35,539 218 978,036 Commercial real estate: Owner-occupied 580,127 23,998 23,036 787 627,948 Non-owner occupied 995,709 43,645 48,620 — 1,087,974 Vacant land 27,849 327 5,147 — 33,323 Total commercial real estate 1,603,685 67,970 76,803 787 1,749,245 Real estate construction and land development 72,346 2,218 1,496 — 76,060 Subtotal 2,549,892 138,606 113,838 1,005 2,803,341 Total $ 8,038,463 $ 204,706 $ 216,353 $ 1,005 $ 8,460,527 Consumer Loan Portfolio The Corporation evaluates the credit quality of loans in the consumer loan portfolio based on the performing or nonperforming status of the loan. Loans in the consumer loan portfolio that are performing in accordance with original contractual terms and are less than 90 days past due and accruing interest are considered to be in a performing status, while those that are in nonaccrual status, contractually past due 90 days or more as to interest or principal payments are considered to be in a nonperforming status. Loans accounted for under ASC 310-30, "Acquired loans", that are not performing in accordance with contractual terms are not reported as nonperforming because these loans are recorded in pools at their net realizable value based on the principal and interest the Corporation expects to collect on these loans. The following schedule presents the recorded investment of loans in the consumer loan portfolio based on loans in a performing status and loans in a nonperforming status at December 31, 2018 and 2017 : (Dollars in thousands) Residential mortgage Consumer installment Home equity Total consumer December 31, 2018 Originated Portfolio: Performing $ 2,399,317 $ 1,450,076 $ 608,525 $ 4,457,918 Nonperforming 7,988 1,276 3,604 12,868 Subtotal 2,407,305 1,451,352 612,129 4,470,786 Acquired Loans 1,051,361 69,722 166,043 1,287,126 Total $ 3,458,666 $ 1,521,074 $ 778,172 $ 5,757,912 December 31, 2017 Originated Portfolio: Performing $ 1,959,222 $ 1,509,698 $ 607,541 $ 4,076,461 Nonperforming 8,635 842 4,305 13,782 Subtotal 1,967,857 1,510,540 611,846 4,090,243 Acquired Loans 1,284,630 102,468 217,399 1,604,497 Total $ 3,252,487 $ 1,613,008 $ 829,245 $ 5,694,740 Nonperforming Assets and Past Due Loans Nonperforming assets consist of loans for which the accrual of interest has been discontinued, other real estate owned acquired through acquisitions, other real estate owned obtained through foreclosure and other repossessed assets. Loans are considered past due or delinquent when the contractual principal or interest due in accordance with the terms of the loan agreement or any portion thereof remains unpaid after the due date of the scheduled payments. Loans outside of those accounted for under ASC 310-30 are classified as nonaccrual when, in the opinion of management, collection of principal or interest is doubtful. The accrual of interest is discontinued when a loan is placed in nonaccrual status and any payments received reduce the carrying value of the loan. A loan may be placed back on accrual status if all contractual payments have been received and collection of future principal and interest payments are no longer doubtful. Acquired loans that are not performing in accordance with contractual terms are not reported as nonperforming because these loans are recorded in pools at their net realizable value based on the principal and interest the Corporation expects to collect on these loans. A summary of nonperforming assets follows: December 31, (Dollars in thousands) 2018 2017 Nonperforming assets Nonaccrual loans: Commercial $ 30,139 $ 19,691 Commercial real estate: Owner-occupied 16,056 19,070 Non-owner occupied 23,021 5,270 Vacant land 3,337 5,205 Total commercial real estate 42,414 29,545 Real estate construction and land development 12 77 Residential mortgage 7,988 8,635 Consumer installment 1,276 842 Home equity 3,604 4,305 Total nonaccrual loans 85,433 63,095 Other real estate owned and repossessed assets 6,256 8,807 Total nonperforming assets $ 91,689 $ 71,902 The Corporation's nonaccrual loans at December 31, 2018 and 2017 included $28.1 million and $29.1 million , respectively, of nonaccrual TDRs. There was no interest income recognized on nonaccrual loans during 2018 , 2017 and 2016 while the loans were in nonaccrual status. During 2018 , 2017 and 2016 , the Corporation recognized $2.1 million , $1.3 million and $0.4 million , respectively, of interest income on these loans while they were in an accruing status. Additional interest income that would have been recorded on nonaccrual loans had they been current in accordance with their original terms was $4.8 million in 2018 , $3.1 million in 2017 and $2.9 million in 2016 . During 2018 , 2017 and 2016 , the Corporation recognized interest income of $2.7 million , $2.6 million and $3.9 million , respectively, on performing TDRs. The Corporation had $4.5 million of residential mortgage loans that were in the process of foreclosure at December 31, 2018 , compared to $4.2 million at December 31, 2017 . Loan delinquency, excluding acquired loans accounted for under ASC 310-30, was as follows: Loans Past Due and Still Accruing (Dollars in thousands) 30-89 days past due 90 days or more past due Total past due Nonaccrual Loans Current Total loans December 31, 2018 Originated Portfolio: Commercial $ 16,835 $ — $ 16,835 $ 30,139 $ 3,240,113 $ 3,287,087 Commercial real estate: Owner-occupied 4,657 52 4,709 16,056 1,492,767 1,513,532 Non-owner occupied 1,793 887 2,680 23,021 1,940,629 1,966,330 Vacant land 160 — 160 3,337 36,798 40,295 Total commercial real estate 6,610 939 7,549 42,414 3,470,194 3,520,157 Real estate construction and land development 247 — 247 12 566,467 566,726 Residential mortgage 1,688 — 1,688 7,988 2,397,629 2,407,305 Consumer installment 4,731 — 4,731 1,276 1,445,345 1,451,352 Home equity 3,843 488 4,331 3,604 604,194 612,129 Total $ 33,954 $ 1,427 $ 35,381 $ 85,433 $ 11,723,942 $ 11,844,756 December 31, 2017 Originated Portfolio: Commercial $ 16,269 $ — $ 16,269 $ 19,691 $ 2,371,646 $ 2,407,606 Commercial real estate: — Owner-occupied 4,078 — 4,078 19,070 1,162,466 1,185,614 Non-owner occupied 1,595 13 1,608 5,270 1,511,909 1,518,787 Vacant land 83 — 83 5,205 41,736 47,024 Total commercial real estate 5,756 13 5,769 29,545 2,716,111 2,751,425 Real estate construction and land development — — — 77 498,078 498,155 Residential mortgage 2,325 — 2,325 8,635 1,956,897 1,967,857 Consumer installment 3,663 — 3,663 842 1,506,035 1,510,540 Home equity 2,891 1,364 4,255 4,305 603,286 611,846 Total $ 30,904 $ 1,377 $ 32,281 $ 63,095 $ 9,652,053 $ 9,747,429 Impaired Loans A loan is impaired when, based on current information and events, it is probable that the Corporation will be unable to collect all amounts due according to the contractual terms of the loan agreement. Impaired loans include nonperforming loans and all TDRs. Impaired loans are accounted for at the lower of the present value of expected cash flows or the estimated fair value of the collateral. When the present value of expected cash flows or the fair value of the collateral of an impaired loan not accounted for under ASC 310-30 is less than the amount of unpaid principal outstanding on the loan, the recorded principal balance of the loan is reduced to its carrying value through either a specific allowance for loan loss or a partial charge-off of the loan balance. The following schedules present impaired loans by classes of loans at December 31, 2018 and December 31, 2017 : (Dollars in thousands) Recorded investment Unpaid principal balance Related valuation allowance December 31, 2018 Impaired loans with a valuation allowance: Commercial $ 20,957 $ 23,781 $ 3,546 Commercial real estate: Owner-occupied 14,702 16,519 1,359 Non-owner occupied 16,833 17,452 462 Vacant land 1,008 1,208 96 Total commercial real estate 32,543 35,179 1,917 Real estate construction and land development 126 126 11 Residential mortgage 10,867 10,867 816 Consumer installment 1,126 1,126 186 Home equity 4,432 4,432 328 Subtotal 70,051 75,511 6,804 Impaired loans with no related valuation allowance: Commercial 25,093 25,934 — Commercial real estate: Owner-occupied 10,971 11,601 — Non-owner occupied 12,412 13,411 — Vacant land 2,825 3,911 — Total commercial real estate 26,208 28,923 — Real estate construction and land development 111 111 — Residential mortgage 7,537 7,537 — Consumer installment 377 377 — Home equity 1,496 1,496 — Subtotal 60,822 64,378 — Total impaired loans: Commercial 46,050 49,715 3,546 Commercial real estate: Owner-occupied 25,673 28,120 1,359 Non-owner occupied 29,245 30,863 462 Vacant land 3,833 5,119 96 Total commercial real estate 58,751 64,102 1,917 Real estate construction and land development 237 237 11 Residential mortgage 18,404 18,404 816 Consumer installment 1,503 1,503 186 Home equity 5,928 5,928 328 Total $ 130,873 $ 139,889 $ 6,804 (Dollars in thousands) Recorded investment Unpaid principal balance Related valuation allowance December 31, 2017 Impaired loans with a valuation allowance: Commercial $ 28,897 $ 31,655 $ 2,296 Commercial real estate: Owner-occupied 17,774 21,588 2,317 Non-owner occupied 5,307 7,870 316 Vacant land 4,922 5,122 594 Total commercial real estate 28,003 34,580 3,227 Real estate construction and land development 313 313 14 Residential mortgage 15,872 15,872 1,487 Consumer installment 966 966 120 Home equity 4,570 4,570 858 Subtotal 78,621 87,956 8,002 Impaired loans with no related valuation allowance: Commercial 8,504 9,291 — Commercial real estate: Owner-occupied 11,351 12,631 — Non-owner occupied 5,977 6,438 — Vacant land 752 792 — Total commercial real estate 18,080 19,861 — Residential mortgage 4,902 4,902 — Home equity 1,770 1,770 — Subtotal 33,256 35,824 — Total impaired loans: Commercial 37,401 40,946 2,296 Commercial real estate: Owner-occupied 29,125 34,219 2,317 Non-owner occupied 11,284 14,308 316 Vacant land 5,674 5,914 594 Total commercial real estate 46,083 54,441 3,227 Real estate construction and land development 313 313 14 Residential mortgage 20,774 20,774 1,487 Consumer installment 966 966 120 Home equity 6,340 6,340 858 Total $ 111,877 $ 123,780 $ 8,002 The following schedule presents additional information regarding impaired loans by classes of loans segregated by those requiring a valuation allowance and those not requiring a valuation allowance at December 31, 2018 , 2017 and 2016 and the respective interest income amounts recognized: For the years ended December 31, 2018 2017 2016 (Dollars in thousands) Average annual recorded investment Interest income recognized while on impaired status Average annual recorded investment Interest income recognized while on impaired status Average annual recorded investment Interest income recognized while on impaired status Impaired loans with a valuation allowance: Commercial $ 17,683 $ 457 $ 25,099 $ 939 $ 7,829 $ — Commercial real estate: Owner-occupied 13,103 352 14,143 531 3,694 583 Non-owner occupied 6,440 48 3,274 89 1,711 139 Vacant land 1,881 47 2,566 57 253 113 Total commercial real estate 21,424 447 19,983 677 5,658 835 Real estate construction and land development 4,619 8 175 10 19 — Residential mortgage 12,179 457 16,390 538 23,958 1,285 Consumer installment 989 8 744 4 359 — Home equity 3,262 80 4,201 82 1,759 — Subtotal 60,156 1,457 66,592 2,250 39,582 2,120 Impaired loans with no related valuation allowance: Commercial 21,954 577 10,196 28 29,559 1,343 Commercial real estate: Owner-occupied 13,807 296 11,999 — 20,306 17 Non-owner occupied 10,681 263 9,143 241 14,306 339 Vacant land 2,730 — 3,516 4 7,034 45 Total commercial real estate 27,218 559 24,658 245 41,646 401 Real estate construction and land development 1,520 7 78 — 585 22 Residential mortgage 7,594 110 4,622 38 1,519 — Consumer installment 304 — 205 — — — Home equity 2,217 25 1,392 14 555 — Subtotal 60,807 1,278 41,151 325 73,864 1,766 Total impaired loans: Commercial 39,637 1,034 35,295 967 37,388 1,343 Commercial real estate: Owner-occupied 26,910 648 26,142 531 24,000 600 Non-owner occupied 17,121 311 12,417 330 16,017 478 Vacant land 4,611 47 6,082 61 7,287 158 Total commercial real estate 48,642 1,006 44,641 922 47,304 1,236 Real estate construction and land development 6,139 15 253 10 604 22 Residential mortgage 19,773 567 21,012 576 25,477 1,285 Consumer installment 1,293 8 949 4 359 — Home equity 5,479 105 5,593 96 2,314 — Total $ 120,963 $ 2,735 $ 107,743 $ 2,575 $ 113,446 $ 3,886 The difference between an impaired loan's recorded investment and the unpaid principal balance for originated loans represents a partial charge-off resulting from a confirmed loss due to the value of the collateral securing the loan being below the loan balance and management's assessment that full collection of the loan balance is not likely. Impaired loans included $45.6 million and $48.8 million at December 31, 2018 and December 31, 2017 , respectively, of accruing TDRs. Loans Modified Under Troubled Debt Restructurings (TDRs) The following tables present the recorded investment of loans modified into TDRs during the years ended December 31, 2018 , 2017 and 2016 by type of concession granted. In cases where more than one type of concession was granted, the loans were categorized based on the most significant concession. Concession type (Dollars in thousands) Principal Principal Interest Forbearance Total Pre- modification recorded investment Post- modification recorded investment For the year ended December 31, 2018 Commercial loan portfolio: Commercial $ 4,967 $ — $ 4,129 $ 1,438 67 $ 10,566 $ 10,534 Commercial real estate: Owner-occupied 981 — 2,945 953 19 5,018 4,879 Non-owner occupied 68 66 — — 2 143 134 Total commercial real estate 1,049 66 2,945 953 21 5,161 5,013 Subtotal 6,016 66 7,074 2,391 88 15,727 15,547 Consumer loan portfolio: Residential mortgage 269 151 147 — 9 577 567 Consumer installment 192 168 113 — 47 492 473 Home equity 469 73 453 — 25 1,076 995 Subtotal 930 392 713 — 81 2,145 2,035 Total loans $ 6,946 $ 458 $ 7,787 $ 2,391 169 $ 17,872 $ 17,582 Concession type (Dollars in thousands) Principal Principal Interest Forbearance Total Pre- modification recorded investment Post- modification recorded investment For the year ended December 31, 2017 Commercial loan portfolio: Commercial $ 2,308 $ — $ 1,827 $ 2,176 36 $ 6,416 $ 6,311 Commercial real estate: Owner-occupied 512 — 311 582 13 1,468 1,405 Non-owner occupied 194 — 27 371 3 629 592 Total commercial real estate 706 — 338 953 16 2,097 1,997 Real estate construction and land development 35 — — — 1 36 35 Subtotal 3,049 — 2,165 3,129 53 8,549 8,343 Consumer loan portfolio: Residential mortgage 297 — 383 — 11 763 680 Consumer installment 118 37 37 — 34 208 192 Home equity 389 — 52 — 14 537 441 Subtotal 804 37 472 — 59 1,508 1,313 Total loans $ 3,853 $ 37 $ 2,637 $ 3,129 112 $ 10,057 $ 9,656 Concession type (Dollars in thousands) Principal Principal A/B Note Restructure (1) Interest Forbearance Total Pre- modification recorded investment Post- modification recorded investment For the year ended December 31, 2016 Commercial loan portfolio: Commercial $ 11,533 $ 1,527 $ 43 $ — $ 1,750 54 $ 14,853 $ 14,853 Commercial real estate: Owner-occupied 2,508 1,866 — — — 13 4,374 4,374 Non-owner occupied 485 — — — — 3 485 485 Total commercial real estate 2,993 1,866 — — — 16 4,859 4,859 Subtotal 14,526 3,393 43 — 1,750 70 19,712 19,712 Consumer loan portfolio: Residential mortgage 477 — — — — 4 477 477 Consumer installment 87 — — — — 14 87 87 Home equity 179 — — 364 — 10 543 543 Subtotal 743 — — 364 — 28 1,107 1,107 Total loans $ 15,269 $ 3,393 $ 43 $ 364 $ 1,750 98 $ 20,819 $ 20,819 (1) Loan restructurings whereby the original loan is restructured into two notes: an "A" note, which generally reflects the portion of the modified loans which is expected to be collected: and a "B" note, which is fully charged off. The pre-modification and post-modification |