CHFC 2017 Annual Report

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, 2017 Commercial loan portfolio: Commercial $ 2,407,606 $ 978,036 $ 3,385,642 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 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 (2) $ 7,458,401 $ 5,532,378 $ 12,990,779 (1) Acquired loans are accounted for under ASC 310-30. (2) Reported net of deferred costs totaling $26.1 million and $14.8 million at December 31, 2017 and 2016, respectively. The Corporation acquired loans at fair value as of the acquisition date, which includes loans 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. 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. Chemical Financial Corporation Notes to Consolidated Financial Statements December 31, 2017 113