CHFC 2017 Annual Report

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, 2017 and December 31, 2016: (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 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 18,080 19,861 — Real estate construction and land development — — — Residential mortgage 4,902 4,902 — Consumer installment — — — Home equity 1,770 1,770 — Subtotal 33,256 35,824 — Total impaired loans: Commercial 37,401 40,946 2,296 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 Chemical Financial Corporation Notes to Consolidated Financial Statements December 31, 2017 120