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) which 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 seven 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.

Real estate commercial — 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 — Secured loans for the construction of business properties. Real estate construction loans often convert to a real estate commercial loan at the completion of the construction period.

Land development — 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 September 30, 2012 were primarily comprised of loans to develop residential properties.

Real estate residential — Loans secured by one- to four-family residential properties generally with fixed interest rates of fifteen years or less. The loan-to-value ratio at the time of origination is generally 80% or less. Real estate residential 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 boats. 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, real estate commercial, real estate construction and land development loans are referred to as the Corporation’s commercial loan portfolio, while real estate residential, consumer installment and home equity loans are referred to as the Corporation’s consumer loan portfolio. A summary of loans follows:



	September 30, 2012		December 31, 2011		September 30, 2011
	(In thousands)
Commercial loan portfolio:
Commercial	$	951,938	$	895,150	$	858,969
Real estate commercial	1,117,073		1,071,999		1,056,092
Real estate construction	56,071		73,355		72,851
Land development	34,811		44,821		46,978
Subtotal	2,159,893		2,085,325		2,034,890
Consumer loan portfolio:
Real estate residential	880,295		861,716		840,044
Consumer installment	538,412		484,058		526,573
Home equity	440,559		400,186		358,919
Subtotal	1,859,266		1,745,960		1,725,536
Total loans	$	4,019,159	$	3,831,285	$	3,760,426

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 across the middle to southern and western sections of the lower peninsula of Michigan. The Corporation’s lending market areas do not include the southeastern portion of Michigan. The Corporation has no foreign loans.

The Corporation 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 $1.0 million requiring group loan authority approval, except for four executive and senior officers who have varying limits exceeding $1.5 million and up to $3.5 million. With respect to the group loan authorities, the Corporation has a loan committee, consisting of certain executive and senior officers, that meets weekly to consider loans ranging in amounts from $1.0 million to $5.0 million, depending on risk rating and credit action required. A directors’ loan committee, consisting of ten members of the board of directors, including the chief executive officer, and the senior credit officer, meets bi-weekly to consider loans in amounts over $5.0 million, and certain loans under $5.0 million depending on a loan’s risk rating and credit action required. Loans over $10.0 million also require the approval of the board of directors.

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 that 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

The Corporation uses a nine grade risk rating system to monitor the ongoing credit quality of its commercial loan portfolio. These loan grades rank the credit quality of a borrower by measuring liquidity, debt capacity, coverage and payment behavior as shown in the borrower’s financial statements. The loan grades also measure the quality of the borrower’s management and the repayment support offered by any guarantors. A summary of the Corporation’s loan grades (or, characteristics of the loans within each grade) follows:

Risk Grades 1-5 (Acceptable Credit Quality) — All loans in risk grades 1 through 5 are considered to be acceptable credit risks by the Corporation and are grouped for purposes of allowance for loan loss considerations and financial reporting. The five grades essentially represent a ranking of loans that are all viewed to be of acceptable credit quality, taking into consideration the various factors mentioned above, but with varying degrees of financial strength, debt coverage, management and factors that could impact credit quality. Business credits within risk grades 1 through 5 range from Risk Grade 1: Prime Quality (factors include: excellent business credit; excellent debt capacity and coverage; outstanding management; strong guarantors; superior liquidity and net worth; favorable loan-to-value ratios; debt secured by cash or equivalents, or backed by the full faith and credit of the U.S. Government) to Risk Grade 5: Acceptable Quality With Care (factors include: acceptable business credit, but with added risk due to specific industry or internal situations).

Risk Grade 6 (Watch) — A business credit that is not acceptable within the Corporation’s loan origination criteria; cash flow may not be adequate or is continually inconsistent to service current debt; financial condition has deteriorated as company trends/management have become inconsistent; the company is slow in furnishing quality financial information; working capital needs of the company are reliant on short-term borrowings; personal guarantees are weak and/or with little or no liquidity; the net worth of the company has deteriorated after recent or continued losses; the loan requires constant monitoring and attention from the Corporation; payment delinquencies becoming more serious; if left uncorrected, these potential weaknesses may, at some future date, result in deterioration of repayment prospects.

Risk Grade 7 (Substandard — Accrual) — A business credit that is inadequately protected by the current financial net worth and paying capacity of the obligor or of the collateral pledged, if any; management has deteriorated or has become non-existent; quality financial information is not available; a high level of maintenance is required by the Corporation; cash flow can no longer support debt requirements; loan payments are continually and/or severely delinquent; negative net worth; personal guaranty has become insignificant; a credit that has a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. The Corporation still expects a full recovery of all contractual principal and interest payments; however, a possibility exists that the Corporation will sustain some loss if deficiencies are not corrected.

Risk Grade 8 (Substandard — Nonaccrual) — A business credit accounted for on a nonaccrual basis that has all the weaknesses inherent in a loan classified as risk grade 7 with the added characteristic that the weaknesses are so pronounced that, on the basis of current financial information, conditions, and values, collection in full is highly questionable; a partial loss is possible and interest is no longer being accrued. This loan meets the definition of an impaired loan. The risk of loss requires analysis to determine whether a valuation allowance needs to be established.

Risk Grade 9 (Substandard — Doubtful) — A business credit that has all the weaknesses inherent in a loan classified as risk grade 8 and interest is no longer being accrued, but additional deficiencies make it highly probable that liquidation will not satisfy the majority of the obligation; the primary source of repayment is nonexistent and there is doubt as to the value of the secondary source of repayment; the possibility of loss is likely, but current pending factors could strengthen the credit. This loan meets the definition of an impaired loan. A loan charge-off is recorded when management deems an amount uncollectible; however, the Corporation will establish a valuation allowance for probable losses, if required.

The Corporation considers all loans graded 1 through 5 as acceptable credit risks and structures and manages such relationships accordingly. Periodic financial and operating data combined with regular loan officer interactions are deemed adequate to monitor borrower performance. Loans with risk grades of 6 and 7 are considered higher-risk credits than loans graded 1 through 5 and the frequency of loan officer contact and receipt of financial data is increased to stay abreast of borrower performance. Loans with risk grades of 8 and 9 are considered problematic and require special care. Further, loans with risk grades of 6 through 9 are managed and monitored regularly through a number of processes, procedures and committees, including oversight by a loan administration committee comprised of executive and senior management of the Corporation, which includes highly structured reporting of financial and operating data, intensive loan officer intervention and strategies to exit, as well as potential management by the Corporation’s special assets group.

The following schedule presents the recorded investment of loans in the commercial loan portfolio by risk rating categories at September 30, 2012, December 31, 2011 and September 30, 2011:



	Commercial		Real Estate Commercial		Real Estate Construction		Land Development		Total
	(In thousands)
September 30, 2012
Originated Portfolio:
Risk Grades 1-5	$	772,555	$	793,237	$	37,346	$	12,348	$	1,615,486
Risk Grade 6	33,819		38,880		18		1,092		73,809
Risk Grade 7	17,091		30,971		—		5,313		53,375
Risk Grade 8	14,790		38,369		933		5,731		59,823
Risk Grade 9	427		2,942		—		—		3,369
Subtotal	838,682		904,399		38,297		24,484		1,805,862
Acquired Portfolio:
Risk Grades 1-5	97,308		192,903		17,774		7,556		315,541
Risk Grade 6	10,899		7,006		—		—		17,905
Risk Grade 7	2,107		11,672		—		—		13,779
Risk Grade 8	2,942		1,093		—		2,771		6,806
Risk Grade 9	—		—		—		—		—
Subtotal	113,256		212,674		17,774		10,327		354,031
Total	$	951,938	$	1,117,073	$	56,071	$	34,811	$	2,159,893
December 31, 2011
Originated Portfolio:
Risk Grades 1-5	$	706,040	$	692,193	$	54,029	$	14,791	$	1,467,053
Risk Grade 6	20,531		29,788		287		6,874		57,480
Risk Grade 7	26,238		48,648		—		2,400		77,286
Risk Grade 8	9,828		40,130		—		4,593		54,551
Risk Grade 9	898		4,308		—		1,597		6,803
Subtotal	763,535		815,067		54,316		30,255		1,663,173
Acquired Portfolio:
Risk Grades 1-5	111,846		231,669		18,883		8,358		370,756
Risk Grade 6	9,990		14,346		—		1,277		25,613
Risk Grade 7	3,101		8,556		—		596		12,253
Risk Grade 8	6,678		2,361		156		4,335		13,530
Risk Grade 9	—		—		—		—		—
Subtotal	131,615		256,932		19,039		14,566		422,152
Total	$	895,150	$	1,071,999	$	73,355	$	44,821	$	2,085,325
September 30, 2011
Originated Portfolio:
Risk Grades 1-5	$	661,237	$	673,659	$	53,044	$	15,762	$	1,403,702
Risk Grade 6	28,669		28,094		288		7,027		64,078
Risk Grade 7	26,096		50,709		52		851		77,708
Risk Grade 8	9,888		44,712		—		6,220		60,820
Risk Grade 9	916		4,142		—		1,657		6,715
Subtotal	726,806		801,316		53,384		31,517		1,613,023
Acquired Portfolio:
Risk Grades 1-5	111,354		231,467		19,324		8,979		371,124
Risk Grade 6	6,814		10,504		—		1,446		18,764
Risk Grade 7	4,762		10,180		—		688		15,630
Risk Grade 8	9,198		2,625		143		4,348		16,314
Risk Grade 9	35		—		—		—		35
Subtotal	132,163		254,776		19,467		15,461		421,867
Total	$	858,969	$	1,056,092	$	72,851	$	46,978	$	2,034,890

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 not performing in accordance with original contractual terms and are 90 days or more past due are considered to be in a nonperforming status. Loans in the consumer loan portfolio that are reported as TDRs are considered in a nonperforming status until they meet the Corporation’s definition of a performing TDR, at which time they are considered in a performing status. 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 September 30, 2012, December 31, 2011 and September 30, 2011:



	Real Estate Residential		Consumer Installment		Home Equity		Total Consumer
	(In thousands)
September 30, 2012
Originated Loans:
Performing	$	849,385	$	535,277	$	395,411	$	1,780,073
Nonperforming	15,640		962		4,010		20,612
Subtotal	865,025		536,239		399,421		1,800,685
Acquired Loans:
Performing	14,928		2,173		40,874		57,975
Nonperforming	342		—		264		606
Subtotal	15,270		2,173		41,138		58,581
Total	$	880,295	$	538,412	$	440,559	$	1,859,266
December 31, 2011
Originated Loans:
Performing	$	818,044	$	479,237	$	349,850	$	1,647,131
Nonperforming	22,708		1,707		3,783		28,198
Subtotal	840,752		480,944		353,633		1,675,329
Acquired Loans:
Performing	19,387		3,114		46,091		68,592
Nonperforming	1,577		—		462		2,039
Subtotal	20,964		3,114		46,553		70,631
Total	$	861,716	$	484,058	$	400,186	$	1,745,960
September 30, 2011
Originated Loans:
Performing	$	789,338	$	519,409	$	307,578	$	1,616,325
Nonperforming	28,329		2,931		4,446		35,706
Subtotal	817,667		522,340		312,024		1,652,031
Acquired Loans:
Performing	21,517		4,233		46,344		72,094
Nonperforming	860		—		551		1,411
Subtotal	22,377		4,233		46,895		73,505
Total	$	840,044	$	526,573	$	358,919	$	1,725,536

Nonperforming Loans

A summary of nonperforming loans follows:



	September 30, 2012		December 31, 2011		September 30, 2011
	(In thousands)
Nonaccrual loans:
Commercial	$	15,217	$	10,726	$	10,804
Real estate commercial	41,311		44,438		48,854
Real estate construction and land development	6,664		6,190		7,877
Real estate residential	11,307		12,573		17,544
Consumer installment and home equity	3,825		4,467		6,033
Total nonaccrual loans	78,324		78,394		91,112
Accruing loans contractually past due 90 days or more as to interest or principal payments:
Commercial	273		1,381		282
Real estate commercial	247		374		415
Real estate construction and land development	—		287		—
Real estate residential	431		752		974
Consumer installment and home equity	1,147		1,023		1,344
Total accruing loans contractually past due 90 days or more as to interest or principal payments	2,098		3,817		3,015
Nonperforming TDRs:
Commercial loan portfolio	6,553		14,675		16,457
Consumer loan portfolio	3,902		9,383		9,811
Total nonperforming TDRs	10,455		24,058		26,268
Total nonperforming loans	$	90,877	$	106,269	$	120,395

The Corporation’s nonaccrual loans at September 30, 2012, December 31, 2011 and September 30, 2011 included $37.0 million, $41.8 million and $44.4 million, respectively, of modified loans that were not reported as TDRs.

Impaired Loans

The following schedule presents impaired loans by classes of loans at September 30, 2012, December 31, 2011 and September 30, 2011:



	Recorded Investment		Unpaid Principal Balance		Related Valuation Allowance
	(In thousands)
September 30, 2012
Impaired loans with a valuation allowance:
Commercial	$	6,743	$	7,357	$	2,240
Real estate commercial	19,694		22,593		5,344
Real estate construction	127		127		43
Land development	2,800		2,800		383
Real estate residential	15,958		15,958		649
Subtotal	45,322		48,835		8,659
Impaired loans with no related valuation allowance:
Commercial	19,768		24,517		—
Real estate commercial	36,225		48,187		—
Real estate construction	806		806		—
Land development	7,723		10,903		—
Real estate residential	14,907		14,907		—
Consumer installment	876		876		—
Home equity	2,949		2,949		—
Subtotal	83,254		103,145		—
Total impaired loans:
Commercial	26,511		31,874		2,240
Real estate commercial	55,919		70,780		5,344
Real estate construction	933		933		43
Land development	10,523		13,703		383
Real estate residential	30,865		30,865		649
Consumer installment	876		876		—
Home equity	2,949		2,949		—
Total	$	128,576	$	151,980	$	8,659
December 31, 2011
Impaired loans with a valuation allowance:
Commercial	$	6,362	$	7,650	$	1,480
Real estate commercial	20,050		21,370		6,775
Land development	902		934		327
Real estate residential	25,012		25,012		704
Subtotal	52,326		54,966		9,286
Impaired loans with no related valuation allowance:
Commercial	19,559		29,349		—
Real estate commercial	40,953		54,249		—
Real estate construction	156		934		—
Land development	10,187		15,788		—
Real estate residential	12,573		12,573		—
Consumer installment	1,707		1,707		—
Home equity	2,760		2,760		—
Subtotal	87,895		117,360		—
Total impaired loans:
Commercial	25,921		36,999		1,480
Real estate commercial	61,003		75,619		6,775
Real estate construction	156		934		—
Land development	11,089		16,722		327
Real estate residential	37,585		37,585		704
Consumer installment	1,707		1,707		—
Home equity	2,760		2,760		—
Total	$	140,221	$	172,326	$	9,286



	Recorded Investment		Unpaid Principal Balance		Related Valuation Allowance
	(In thousands)
September 30, 2011
Impaired loans with a valuation allowance:
Commercial	$	5,342	$	6,965	$	1,562
Real estate commercial	20,084		21,245		6,759
Land development	1,748		1,757		387
Real estate residential	21,416		21,416		618
Subtotal	48,590		51,383		9,326
Impaired loans with no related valuation allowance:
Commercial	24,454		32,108		—
Real estate commercial	44,844		58,929		—
Real estate construction	143		1,115		—
Land development	11,047		17,069		—
Real estate residential	17,544		17,544		—
Consumer installment	2,931		2,931		—
Home equity	3,102		3,102		—
Subtotal	104,065		132,798		—
Total impaired loans:
Commercial	29,796		39,073		1,562
Real estate commercial	64,928		80,174		6,759
Real estate construction	143		1,115		—
Land development	12,795		18,826		387
Real estate residential	38,960		38,960		618
Consumer installment	2,931		2,931		—
Home equity	3,102		3,102		—
Total	$	152,655	$	184,181	$	9,326

The difference between an impaired loan’s recorded investment and the unpaid principal balance represents either (i) for originated loans, 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 or (ii) for acquired loans that meet the definition of an impaired loan, fair value adjustments recognized at the acquisition date attributable to expected credit losses and the discounting of expected cash flows at market interest rates. The difference between the recorded investment and the unpaid principal balance of $23.4 million, $32.1 million and $32.4 million at September 30, 2012, December 31, 2011 and September 30, 2011, respectively, includes confirmed losses (partial charge-offs) of $19.8 million, $21.7 million and $22.1 million, respectively, and fair value discount adjustments of $3.6 million, $10.4 million and $9.4 million, respectively.

The following schedule presents information related to impaired loans for the three and nine months ended September 30, 2012 and 2011:



	Three Months Ended September 30, 2012				Nine Months Ended September 30, 2012
	Average Recorded Investment		Interest Income Recognized While on Impaired Status		Average Recorded Investment		Interest Income Recognized While on Impaired Status
	(In thousands)
Commercial	$	28,683	$	149	$	27,684	$	602
Real estate commercial	54,524		212		59,063		642
Real estate construction	912		—		470		—
Land development	10,582		71		8,869		216
Real estate residential	33,652		288		37,861		1,031
Consumer installment	909		—		1,222		—
Home equity	2,940		—		2,910		—
Total	$	132,202	$	720	$	138,079	$	2,491



	Three Months Ended September 30, 2011				Nine Months Ended September 30, 2011
	Average Recorded Investment		Interest Income Recognized While on Impaired Status		Average Recorded Investment		Interest Income Recognized While on Impaired Status
	(In thousands)
Commercial	$	28,593	$	260	$	30,384	$	730
Real estate commercial	70,634		281		71,854		616
Real estate construction	145		2		192		10
Land development	13,414		86		13,940		270
Real estate residential	39,848		223		38,467		708
Consumer installment	2,916		—		2,844		—
Home equity	3,456		—		3,213		—
Total	$	159,006	$	852	$	160,894	$	2,334

Impaired loans included $9.4 million, $17.4 million and $19.7 million at September 30, 2012, December 31, 2011 and September 30, 2011, respectively, of acquired loans that were not performing in accordance with original contractual terms. These loans are not reported as nonperforming loans, as a market yield adjustment was recognized on these loans at acquisition that is being amortized into interest income. Impaired loans also included $30.4 million, $20.4 million and $15.5 million at September 30, 2012, December 31, 2011 and September 30, 2011, respectively, of performing TDRs.

The following schedule presents the aging status of the recorded investment in loans by classes of loans at September 30, 2012, December 31, 2011 and September 30, 2011:



	31-60 Days Past Due		61-89 Days Past Due		Accruing Loans Past Due 90 Days or More		Nonaccrual Loans		Total Past Due		Current		Total Loans
	(In thousands)
September 30, 2012
Originated Portfolio:
Commercial	$	9,707	$	1,374	$	273	$	15,217	$	26,571	$	812,111	$	838,682
Real estate commercial	4,929		1,660		247		41,311		48,147		856,252		904,399
Real estate construction	—		—		—		933		933		37,364		38,297
Land development	48		—		—		5,731		5,779		18,705		24,484
Real estate residential	3,208		97		431		11,307		15,043		849,982		865,025
Consumer installment	3,299		470		—		876		4,645		531,594		536,239
Home equity	1,543		730		1,147		2,949		6,369		393,052		399,421
Total	$	22,734	$	4,331	$	2,098	$	78,324	$	107,487	$	3,499,060	$	3,606,547
Acquired Portfolio:
Commercial	$	—	$	15	$	3,356	$	—	$	3,371	$	109,885	$	113,256
Real estate commercial	1,262		—		2,390		—		3,652		209,022		212,674
Real estate construction	—		—		—		—		—		17,774		17,774
Land development	—		—		3,038		—		3,038		7,289		10,327
Real estate residential	80		—		343		—		423		14,847		15,270
Consumer installment	18		—		—		—		18		2,155		2,173
Home equity	138		39		264		—		441		40,697		41,138
Total	$	1,498	$	54	$	9,391	$	—	$	10,943	$	401,669	$	412,612
December 31, 2011
Originated Portfolio:
Commercial	$	5,207	$	6,268	$	1,381	$	10,726	$	23,582	$	739,953	$	763,535
Real estate commercial	9,967		3,241		374		44,438		58,020		757,047		815,067
Real estate construction	—		—		287		—		287		54,029		54,316
Land development	—		—		—		6,190		6,190		24,065		30,255
Real estate residential	5,591		76		752		12,573		18,992		821,760		840,752
Consumer installment	3,449		1,174		—		1,707		6,330		474,614		480,944
Home equity	2,038		408		1,023		2,760		6,229		347,404		353,633
Total	$	26,252	$	11,167	$	3,817	$	78,394	$	119,630	$	3,218,872	$	3,338,502
Acquired Portfolio:
Commercial	$	394	$	—	$	7,808	$	—	$	8,202	$	123,413	$	131,615
Real estate commercial	1,820		—		2,592		—		4,412		252,520		256,932
Real estate construction	—		—		156		—		156		18,883		19,039
Land development	—		—		4,780		—		4,780		9,786		14,566
Real estate residential	288		—		1,577		—		1,865		19,099		20,964
Consumer installment	49		11		—		—		60		3,054		3,114
Home equity	641		262		462		—		1,365		45,188		46,553
Total	$	3,192	$	273	$	17,375	$	—	$	20,840	$	471,943	$	492,783



	31-60 Days Past Due		61-89 Days Past Due		Accruing Loans Past Due 90 Days or More		Nonaccrual Loans		Total Past Due		Current		Total Loans
September 30, 2011
Originated Portfolio:
Commercial	$	7,471	$	3,364	$	282	$	10,804	$	21,921	$	704,885	$	726,806
Real estate commercial	10,104		4,832		415		48,854		64,205		737,111		801,316
Real estate construction	214		288		—		—		502		52,882		53,384
Land development	—		349		—		7,877		8,226		23,291		31,517
Real estate residential	5,793		247		974		17,544		24,558		793,109		817,667
Consumer installment	4,578		775		—		2,931		8,284		514,056		522,340
Home equity	1,823		1,312		1,344		3,102		7,581		304,443		312,024
Total	$	29,983	$	11,167	$	3,015	$	91,112	$	135,277	$	3,129,777	$	3,265,054
Acquired Portfolio:
Commercial	$	540	$	—	$	10,515	$	—	$	11,055	$	121,108	$	132,163
Real estate commercial	—		—		2,864		—		2,864		251,912		254,776
Real estate construction	—		—		143		—		143		19,324		19,467
Land development	—		—		4,799		—		4,799		10,662		15,461
Real estate residential	—		766		860		—		1,626		20,751		22,377
Consumer installment	47		83		—		—		130		4,103		4,233
Home equity	236		256		551		—		1,043		45,852		46,895
Total	$	823	$	1,105	$	19,732	$	—	$	21,660	$	473,712	$	495,372

Loans Modified Under Troubled Debt Restructurings (TDRs)

The following schedule presents the Corporation’s TDRs at September 30, 2012, December 31, 2011 and September 30, 2011:



	Performing		Nonperforming		Total
	(In thousands)
September 30, 2012
Commercial loan portfolio	$	14,750	$	6,553	$	21,303
Consumer loan portfolio	15,656		3,902		19,558
Total	$	30,406	$	10,455	$	40,861
December 31, 2011
Commercial loan portfolio	$	4,765	$	14,675	$	19,440
Consumer loan portfolio	15,629		9,383		25,012
Total	$	20,394	$	24,058	$	44,452
September 30, 2011
Commercial loan portfolio	$	3,938	$	16,457	$	20,395
Consumer loan portfolio	11,605		9,811		21,416
Total	$	15,543	$	26,268	$	41,811

The following schedule provides information on loans reported as performing and nonperforming TDRs that were modified during the three and nine months ended September 30, 2012 and 2011:



	Three Months Ended September 30, 2012					Nine Months Ended September 30, 2012
	Number of Loans	Pre- Modification Recorded Investment		Post- Modification Recorded Investment		Number of Loans	Pre- Modification Recorded Investment		Post- Modification Recorded Investment
	(Dollars in thousands)
Commercial loan portfolio:
Commercial	9	$	665	$	665	19	$	3,891	$	3,891
Real estate commercial	8	1,426		1,426		19	5,264		5,264
Land development	—	—		—		1	1,638		1,638
Subtotal – commercial loan portfolio	17	2,091		2,091		39	10,793		10,793
Consumer loan portfolio (real estate residential)	15	1,352		1,301		65	7,083		6,872
Total	32	$	3,443	$	3,392	104	$	17,876	$	17,665



	Three Months Ended September 30, 2011					Nine Months Ended September 30, 2011
	Number of Loans	Pre- Modification Recorded Investment		Post- Modification Recorded Investment		Number of Loans	Pre- Modification Recorded Investment		Post- Modification Recorded Investment
	(Dollars in thousands)
Commercial loan portfolio:
Commercial	5	$	733	$	733	20	$	3,560	$	3,560
Real estate commercial	9	2,133		2,133		21	5,110		5,110
Subtotal – commercial loan portfolio	14	2,866		2,866		41	8,670		8,670
Consumer loan portfolio (real estate residential)	25	2,144		2,045		68	6,086		5,836
Total	39	$	5,010	$	4,911	109	$	14,756	$	14,506

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 real estate residential 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. No provision for loan losses was recognized related to TDRs in the commercial loan portfolio as the Corporation does not expect to incur a loss on these loans based on its assessment of the borrower's expected cash flows.

The following schedule includes performing and nonperforming TDRs at September 30, 2012, and TDRs that were transferred to nonaccrual status during the three and nine months ended September 30, 2012, for which there was a payment default during the three and nine months ended September 30, 2012, 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:



	With Payment Defaults During the Following Periods:
	Three Months Ended September 30, 2012			Nine Months Ended September 30, 2012
	Number of Loans	Principal Balance at		Number of Loans	Principal Balance at
	Number of Loans	September 30, 2012		Number of Loans	September 30, 2012
	(Dollars in thousands)
Commercial loan portfolio:
Commercial	2	$	1,240	3	$	1,300
Real estate commercial	3	2,457		5	3,293
Subtotal – commercial loan portfolio	5	3,697		8	4,593
Consumer loan portfolio (real estate residential)	1	742		5	1,126
Total	6	$	4,439	13	$	5,719

Allowance for Loan Losses

The following schedule presents, by loan portfolio segment, the changes in the allowance for the three and nine months ended September 30, 2012 and details regarding the balance in the allowance and the recorded investment in loans at September 30, 2012 by impairment evaluation method.



	Commercial Loan Portfolio			Consumer Loan Portfolio			Unallocated		Total
	(In thousands)
Changes in allowance for loan losses for the three months ended September 30, 2012:
Beginning balance	$	53,759		$	29,784		$	3,168	$	86,711
Provision for loan losses	2,365			1,765			370		4,500
Charge-offs	(4,754		)	(2,842		)	—		(7,596		)
Recoveries	460			619			—		1,079
Ending balance	$	51,830		$	29,326		$	3,538	$	84,694
Changes in allowance for loan losses for the nine months ended September 30, 2012:
Beginning balance	$	55,645		$	29,166		$	3,522	$	88,333
Provision for loan losses	6,003			7,481			16		13,500
Charge-offs	(11,330		)	(8,985		)	—		(20,315		)
Recoveries	1,512			1,664			—		3,176
Ending balance	$	51,830		$	29,326		$	3,538	$	84,694
Allowance for loan losses balance at September 30, 2012 attributable to:
Loans individually evaluated for impairment	$	8,010		$	649		$	—	$	8,659
Loans collectively evaluated for impairment	43,820			28,177			3,538		75,535
Loans acquired with deteriorated credit quality	—			500			—		500
Total	$	51,830		$	29,326		$	3,538	$	84,694
Recorded investment (loan balance) at September 30, 2012:
Loans individually evaluated for impairment	$	84,495		$	19,558		$	—	$	104,053
Loans collectively evaluated for impairment	1,721,367			1,781,127			—		3,502,494
Loans acquired with deteriorated credit quality	354,031			58,581			—		412,612
Total	$	2,159,893		$	1,859,266		$	—	$	4,019,159

The following schedule presents, by loan portfolio segment, details regarding the balance in the allowance and the recorded investment in loans at December 31, 2011 by impairment evaluation method.



	Commercial Loan Portfolio		Consumer Loan Portfolio		Unallocated		Total
	(In thousands)
Allowance for loan losses balance at December 31, 2011 attributable to:
Loans individually evaluated for impairment	$	8,582	$	704	$	—	$	9,286
Loans collectively evaluated for impairment	45,863		28,062		3,522		77,447
Loans acquired with deteriorated credit quality	1,200		400		—		1,600
Total	$	55,645	$	29,166	$	3,522	$	88,333
Recorded investment (loan balance) at December 31, 2011:
Loans individually evaluated for impairment	$	80,794	$	25,012	$	—	$	105,806
Loans collectively evaluated for impairment	1,582,379		1,650,317		—		3,232,696
Loans acquired with deteriorated credit quality	422,152		70,631		—		492,783
Total	$	2,085,325	$	1,745,960	$	—	$	3,831,285

The following schedule presents, by loan portfolio segment, the changes in the allowance for the three and nine months ended September 30, 2011 and details regarding the balance in the allowance and the recorded investment in loans at September 30, 2011 by impairment evaluation method.



	Commercial Loan Portfolio			Consumer Loan Portfolio			Unallocated		Total
	(In thousands)
Changes in allowance for loan losses for the three months ended September 30, 2011:
Beginning balance	$	58,572		$	29,283		$	1,878	$	89,733
Provision for loan losses	2,258			2,296			1,846		6,400
Charge-offs	(5,439		)	(3,400		)	—		(8,839		)
Recoveries	899			520			—		1,419
Ending balance	$	56,290		$	28,699		$	3,724	$	88,713
Changes in allowance for loan losses for the nine months ended September 30, 2011:
Beginning balance	$	59,443		$	27,338		$	2,749	$	89,530
Provision for loan losses	11,348			8,577			975		20,900
Charge-offs	(16,629		)	(9,158		)	—		(25,787		)
Recoveries	2,128			1,942			—		4,070
Ending balance	$	56,290		$	28,699		$	3,724	$	88,713
Allowance for loan losses balance at September 30, 2011 attributable to:
Loans individually evaluated for impairment	$	8,708		$	618		$	—	$	9,326
Loans collectively evaluated for impairment	46,282			28,081			3,724		78,087
Loans acquired with deteriorated credit quality	1,300			—			—		1,300
Total	$	56,290		$	28,699		$	3,724	$	88,713
Recorded investment (loan balance) at September 30, 2011:
Loans individually evaluated for impairment	$	87,930		$	21,416		$	—	$	109,346
Loans collectively evaluated for impairment	1,525,093			1,630,615			—		3,155,708
Loans acquired with deteriorated credit quality	421,867			73,505			—		495,372
Total	$	2,034,890		$	1,725,536		$	—	$	3,760,426

The allowance attributable to acquired loans of $0.5 million at September 30, 2012 was primarily attributable to two consumer loan pools in the acquired loan portfolio experiencing a decline in expected cash flows. The allowance attributable to acquired loans of $1.6 million and $1.3 million at December 31, 2011 and September 30, 2011, respectively, was primarily attributable to one of the commercial loan pools in the acquired loan portfolio experiencing a decline in expected cash flows. There were no material changes in expected cash flows for the remaining acquired loan pools at September 30, 2012, December 31, 2011 or September 30, 2011.