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 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.

Commercial real estate — 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 commercial real estate 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 March 31, 2013, December 31, 2012 and March 31, 2012 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 personal watercraft. 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, 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 loans follows:



	March 31, 2013		December 31, 2012		March 31, 2012
	(In thousands)
Commercial loan portfolio:
Commercial	$	1,038,115	$	1,002,722	$	903,935
Commercial real estate	1,162,383		1,161,861		1,095,793
Real estate construction	65,367		62,689		56,906
Land development	32,640		37,548		44,251
Subtotal	2,298,505		2,264,820		2,100,885
Consumer loan portfolio:
Residential mortgage	872,454		883,835		861,301
Consumer installment	540,216		546,036		480,622
Home equity	474,086		473,044		400,290
Subtotal	1,886,756		1,902,915		1,742,213
Total loans	$	4,185,261	$	4,167,735	$	3,843,098

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 lower peninsula of Michigan, except for 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 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 require majority approval of the full 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

Commercial Loan Portfolio

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 graded 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 graded 8 and 9 are considered problematic and require special care. Further, loans graded 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 include 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 March 31, 2013, December 31, 2012 and March 31, 2012:



	Commercial		Real Estate Commercial		Real Estate Construction		Land Development		Total
	(In thousands)
March 31, 2013
Originated Portfolio:
Risk Grades 1-5	$	868,683	$	858,484	$	50,601	$	11,720	$	1,789,488
Risk Grade 6	28,037		44,603		59		434		73,133
Risk Grade 7	26,040		29,359		1,020		5,754		62,173
Risk Grade 8	10,471		34,170		168		4,105		48,914
Risk Grade 9	1,715		1,679		—		—		3,394
Subtotal	934,946		968,295		51,848		22,013		1,977,102
Acquired Portfolio:
Risk Grades 1-5	93,560		176,523		13,519		7,783		291,385
Risk Grade 6	6,870		5,035		—		242		12,147
Risk Grade 7	874		11,146		—		—		12,020
Risk Grade 8	1,865		1,384		—		2,602		5,851
Risk Grade 9	—		—		—		—		—
Subtotal	103,169		194,088		13,519		10,627		321,403
Total	$	1,038,115	$	1,162,383	$	65,367	$	32,640	$	2,298,505
December 31, 2012
Originated Portfolio:
Risk Grades 1-5	$	827,112	$	846,901	$	47,847	$	15,010	$	1,736,870
Risk Grade 6	38,066		45,261		59		497		83,883
Risk Grade 7	16,831		26,343		—		6,367		49,541
Risk Grade 8	12,540		33,345		1,217		4,184		51,286
Risk Grade 9	2,061		4,315		—		—		6,376
Subtotal	896,610		956,165		49,123		26,058		1,927,956
Acquired Portfolio:
Risk Grades 1-5	93,281		188,499		13,566		8,419		303,765
Risk Grade 6	8,225		5,900		—		237		14,362
Risk Grade 7	2,169		9,677		—		—		11,846
Risk Grade 8	2,437		1,620		—		2,834		6,891
Risk Grade 9	—		—		—		—		—
Subtotal	106,112		205,696		13,566		11,490		336,864
Total	$	1,002,722	$	1,161,861	$	62,689	$	37,548	$	2,264,820
March 31, 2012
Originated Portfolio:
Risk Grades 1-5	$	715,244	$	729,709	$	38,133	$	16,782	$	1,499,868
Risk Grade 6	23,995		31,818		—		4,119		59,932
Risk Grade 7	23,119		41,963		539		6,799		72,420
Risk Grade 8	10,836		43,319		61		2,426		56,642
Risk Grade 9	607		3,551		—		1,322		5,480
Subtotal	773,801		850,360		38,733		31,448		1,694,342
Acquired Portfolio:
Risk Grades 1-5	109,109		219,944		18,173		9,304		356,530
Risk Grade 6	11,529		14,149		—		—		25,678
Risk Grade 7	2,559		10,284		—		412		13,255
Risk Grade 8	6,937		1,056		—		3,087		11,080
Risk Grade 9	—		—		—		—		—
Subtotal	130,134		245,433		18,173		12,803		406,543
Total	$	903,935	$	1,095,793	$	56,906	$	44,251	$	2,100,885

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 or classified as a nonperforming TDR 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 March 31, 2013, December 31, 2012 and March 31, 2012:



	Residential Mortgage		Consumer Installment		Home Equity		Total Consumer
	(In thousands)
March 31, 2013
Originated Loans:
Performing	$	844,240	$	537,817	$	432,489	$	1,814,546
Nonperforming	14,931		699		3,711		19,341
Subtotal	859,171		538,516		436,200		1,833,887
Acquired Loans:
Performing	13,283		1,700		37,724		52,707
Nonperforming	—		—		162		162
Subtotal	13,283		1,700		37,886		52,869
Total	$	872,454	$	540,216	$	474,086	$	1,886,756
December 31, 2012
Originated Loans:
Performing	$	854,882	$	543,339	$	429,734	$	1,827,955
Nonperforming	14,988		739		3,502		19,229
Subtotal	869,870		544,078		433,236		1,847,184
Acquired Loans:
Performing	13,843		1,958		39,637		55,438
Nonperforming	122		—		171		293
Subtotal	13,965		1,958		39,808		55,731
Total	$	883,835	$	546,036	$	473,044	$	1,902,915
March 31, 2012
Originated Loans:
Performing	$	824,323	$	476,610	$	350,916	$	1,651,849
Nonperforming	18,511		1,278		4,299		24,088
Subtotal	842,834		477,888		355,215		1,675,937
Acquired Loans:
Performing	17,459		2,734		44,571		64,764
Nonperforming	1,008		—		504		1,512
Subtotal	18,467		2,734		45,075		66,276
Total	$	861,301	$	480,622	$	400,290	$	1,742,213

Nonperforming Loans

A summary of nonperforming loans follows:



	March 31, 2013		December 31, 2012		March 31, 2012
	(In thousands)
Nonaccrual loans:
Commercial	$	12,186	$	14,601	$	11,443
Commercial real estate	35,849		37,660		46,870
Real estate construction	168		1,217		61
Land development	4,105		4,184		3,748
Residential mortgage	10,407		10,164		12,687
Consumer installment	699		739		1,278
Home equity	2,837		2,733		3,066
Total nonaccrual loans	66,251		71,298		79,153
Accruing loans contractually past due 90 days or more as to interest or principal payments:
Commercial	4		—		1,005
Commercial real estate	177		87		75
Real estate construction	—		—		—
Land development	—		—		—
Residential mortgage	196		1,503		333
Consumer installment	—		—		—
Home equity	874		769		1,233
Total accruing loans contractually past due 90 days or more as to interest or principal payments	1,251		2,359		2,646
Nonperforming TDRs:
Commercial loan portfolio	14,587		13,876		11,258
Consumer loan portfolio	4,328		3,321		5,491
Total nonperforming TDRs	18,915		17,197		16,749
Total nonperforming loans	$	86,417	$	90,854	$	98,548

The Corporation’s loans reported as TDRs do not include loans that are in a nonaccrual status that have been modified by the Corporation due to the borrower experiencing financial difficulty and for which a concession has been granted, as the Corporation does not expect to collect the full amount of principal and interest owed from the borrower on these modified loans. The Corporation’s nonaccrual loans at March 31, 2013, December 31, 2012 and March 31, 2012 included $47.0 million, $47.5 million and $38.6 million, respectively, of these modified loans.

Impaired Loans

The following schedule presents impaired loans by classes of loans at March 31, 2013, December 31, 2012 and March 31, 2012:



	Recorded Investment		Unpaid Principal Balance		Related Valuation Allowance
	(In thousands)
March 31, 2013
Impaired loans with a valuation allowance:
Commercial	$	4,347	$	4,931	$	1,629
Commercial real estate	12,876		13,045		3,893
Residential mortgage	17,296		17,296		662
Subtotal	34,519		35,272		6,184
Impaired loans with no related valuation allowance:
Commercial	21,565		26,737		—
Commercial real estate	42,852		56,259		—
Real estate construction	372		442		—
Land development	11,247		15,510		—
Residential mortgage	10,407		10,407		—
Consumer installment	699		699		—
Home equity	2,837		2,837		—
Subtotal	89,979		112,891		—
Total impaired loans:
Commercial	25,912		31,668		1,629
Commercial real estate	55,728		69,304		3,893
Real estate construction	372		442		—
Land development	11,247		15,510		—
Residential mortgage	27,703		27,703		662
Consumer installment	699		699		—
Home equity	2,837		2,837		—
Total	$	124,498	$	148,163	$	6,184
December 31, 2012
Impaired loans with a valuation allowance:
Commercial	$	6,368	$	6,818	$	1,966
Commercial real estate	17,267		17,607		5,359
Real estate construction	171		171		75
Land development	254		254		50
Residential mortgage	18,901		18,901		658
Subtotal	42,961		43,751		8,108
Impaired loans with no related valuation allowance:
Commercial	23,230		27,959		—
Commercial real estate	37,223		48,531		—
Real estate construction	1,046		1,116		—
Land development	10,867		15,112		—
Residential mortgage	10,164		10,164		—
Consumer installment	739		739		—
Home equity	2,733		2,733		—
Subtotal	86,002		106,354		—
Total impaired loans:
Commercial	29,598		34,777		1,966
Commercial real estate	54,490		66,138		5,359
Real estate construction	1,217		1,287		75
Land development	11,121		15,366		50
Residential mortgage	29,065		29,065		658
Consumer installment	739		739		—
Home equity	2,733		2,733		—
Total	$	128,963	$	150,105	$	8,108



	Recorded Investment		Unpaid Principal Balance		Related Valuation Allowance
	(In thousands)
March 31, 2012
Impaired loans with a valuation allowance:
Commercial	$	7,039	$	7,980	$	1,936
Commercial real estate	22,714		23,450		6,913
Land development	1,158		1,164		328
Residential mortgage	24,147		24,147		710
Subtotal	55,058		56,741		9,887
Impaired loans with no related valuation allowance:
Commercial	19,832		28,011		—
Commercial real estate	38,884		52,659		—
Real estate construction	61		61		—
Land development	7,708		12,739		—
Residential mortgage	12,687		12,687		—
Consumer installment	1,278		1,278		—
Home equity	3,066		3,066		—
Subtotal	83,516		110,501		—
Total impaired loans:
Commercial	26,871		35,991		1,936
Commercial real estate	61,598		76,109		6,913
Real estate construction	61		61		—
Land development	8,866		13,903		328
Residential mortgage	36,834		36,834		710
Consumer installment	1,278		1,278		—
Home equity	3,066		3,066		—
Total	$	138,574	$	167,242	$	9,887

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 $23.7 million, $21.1 million and $28.7 million at March 31, 2013, December 31, 2012 and March 31, 2012, respectively, includes confirmed losses (partial charge-offs) of $19.9 million, $17.3 million and $19.9 million, respectively, and fair value discount adjustments of $3.8 million, $3.8 million and $8.8 million, respectively.

Impaired loans included $8.6 million, $9.1 million and $15.5 million at March 31, 2013, December 31, 2012 and March 31, 2012, respectively, of acquired loans that were not performing in accordance with original contractual terms. Acquired loans that are not performing in accordance with contractual terms are not reported as nonperforming loans 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. Impaired loans also included $30.7 million, $31.4 million and $27.2 million at March 31, 2013, December 31, 2012 and March 31, 2012, respectively, of performing TDRs.

The following schedule presents information related to impaired loans for the three months ended March 31, 2013 and 2012:



	Average Recorded Investment		Interest Income Recognized While on Impaired Status
	(In thousands)
Three Months Ended March 31, 2013
Commercial	$	26,953	$	193
Commercial real estate	56,745		288
Real estate construction	363		2
Land development	10,914		91
Residential mortgage	28,920		295
Consumer installment	719		—
Home equity	2,962		—
Total	$	127,576	$	869



Three Months Ended March 31, 2012
Commercial	$	26,096	$	174
Commercial real estate	62,015		228
Real estate construction	64		—
Land development	7,727		72
Residential mortgage	37,629		393
Consumer installment	1,538		—
Home equity	2,824		—
Total	$	137,893	$	867

The following schedule presents the aging status of the recorded investment in loans by classes of loans at March 31, 2013, December 31, 2012 and March 31, 2012:



	31-60 Days Past Due		61-89 Days Past Due		Accruing Loans Past Due 90 Days or More		Non-accrual Loans		Total Past Due		Current		Total Loans
	(In thousands)
March 31, 2013
Originated Portfolio:
Commercial	$	7,948	$	1,664	$	4	$	12,186	$	21,802	$	913,144	$	934,946
Commercial real estate	9,195		2,541		177		35,849		47,762		920,533		968,295
Real estate construction	—		—		—		168		168		51,680		51,848
Land development	927		—		—		4,105		5,032		16,981		22,013
Residential mortgage	2,605		831		196		10,407		14,039		845,132		859,171
Consumer installment	2,038		524		—		699		3,261		535,255		538,516
Home equity	1,374		235		874		2,837		5,320		430,880		436,200
Total	$	24,087	$	5,795	$	1,251	$	66,251	$	97,384	$	3,713,605	$	3,810,989
Acquired Portfolio:
Commercial	$	191	$	—	$	2,504	$	—	$	2,695	$	100,474	$	103,169
Commercial real estate	479		157		3,341		—		3,977		190,111		194,088
Real estate construction	—		—		—		—		—		13,519		13,519
Land development	—		—		2,602		—		2,602		8,025		10,627
Residential mortgage	405		—		—		—		405		12,878		13,283
Consumer installment	34		33		—		—		67		1,633		1,700
Home equity	154		—		162		—		316		37,570		37,886
Total	$	1,263	$	190	$	8,609	$	—	$	10,062	$	364,210	$	374,272



	31-60 Days Past Due		61-89 Days Past Due		Accruing Loans Past Due 90 Days or More		Non-accrual Loans		Total Past Due		Current		Total Loans
	(In thousands)
December 31, 2012
Originated Portfolio:
Commercial	$	3,999	$	730	$	—	$	14,601	$	19,330	$	877,280	$	896,610
Commercial real estate	5,852		2,089		87		37,660		45,688		910,477		956,165
Real estate construction	—		—		—		1,217		1,217		47,906		49,123
Land development	—		—		—		4,184		4,184		21,874		26,058
Residential mortgage	3,161		55		1,503		10,164		14,883		854,987		869,870
Consumer installment	2,415		378		—		739		3,532		540,546		544,078
Home equity	1,618		427		769		2,733		5,547		427,689		433,236
Total	$	17,045	$	3,679	$	2,359	$	71,298	$	94,381	$	3,680,759	$	3,775,140
Acquired Portfolio:
Commercial	$	—	$	—	$	2,834	$	—	$	2,834	$	103,278	$	106,112
Commercial real estate	287		15		3,139		—		3,441		202,255		205,696
Real estate construction	—		—		—		—		—		13,566		13,566
Land development	—		—		2,834		—		2,834		8,656		11,490
Residential mortgage	123		—		122		—		245		13,720		13,965
Consumer installment	10		—		—		—		10		1,948		1,958
Home equity	205		—		170		—		375		39,433		39,808
Total	$	625	$	15	$	9,099	$	—	$	9,739	$	382,856	$	392,595
March 31, 2012
Originated Portfolio:
Commercial	$	3,655	$	1,793	$	1,005	$	11,443	$	17,896	$	755,905	$	773,801
Commercial real estate	4,632		4,436		75		46,870		56,013		794,347		850,360
Real estate construction	—		—		—		61		61		38,672		38,733
Land development	—		—		—		3,748		3,748		27,700		31,448
Residential mortgage	2,039		1,314		333		12,687		16,373		826,461		842,834
Consumer installment	2,519		410		—		1,278		4,207		473,681		477,888
Home equity	1,514		305		1,233		3,066		6,118		349,097		355,215
Total	$	14,359	$	8,258	$	2,646	$	79,153	$	104,416	$	3,265,863	$	3,370,279
Acquired Portfolio:
Commercial	$	—	$	150	$	7,147	$	—	$	7,297	$	122,837	$	130,134
Commercial real estate	—		—		3,474		—		3,474		241,959		245,433
Real estate construction	—		—		—		—		—		18,173		18,173
Land development	—		—		3,362		—		3,362		9,441		12,803
Residential mortgage	85		—		1,008		—		1,093		17,374		18,467
Consumer installment	17		3		—		—		20		2,714		2,734
Home equity	98		43		504		—		645		44,430		45,075
Total	$	200	$	196	$	15,495	$	—	$	15,891	$	456,928	$	472,819

Loans Modified Under Troubled Debt Restructurings (TDRs)

The following schedule presents the Corporation’s TDRs at March 31, 2013, December 31, 2012 and March 31, 2012:



	Performing		Nonperforming		Total
	(In thousands)
March 31, 2013
Commercial loan portfolio	$	17,755	$	14,587	$	32,342
Consumer loan portfolio	12,968		4,328		17,296
Total	$	30,723	$	18,915	$	49,638
December 31, 2012
Commercial loan portfolio	$	15,789	$	13,876	$	29,665
Consumer loan portfolio	15,580		3,321		18,901
Total	$	31,369	$	17,197	$	48,566
March 31, 2012
Commercial loan portfolio	$	8,521	$	11,258	$	19,779
Consumer loan portfolio	18,656		5,491		24,147
Total	$	27,177	$	16,749	$	43,926

The following schedule provides information on loans reported as performing and nonperforming TDRs that were modified during the three months ended March 31, 2013 and 2012:



	Number of Loans	Pre- Modification Recorded Investment		Post- Modification Recorded Investment
	(Dollars in thousands)
Three Months Ended March 31, 2013
Commercial loan portfolio:
Commercial	3	$	458	$	458
Commercial real estate	3	2,174		2,174
Land development	1	262		262
Subtotal – commercial loan portfolio	7	2,894		2,894
Consumer loan portfolio (residential mortgage)	16	1,249		1,214
Total	23	$	4,143	$	4,108



Three Months Ended March 31, 2012
Commercial loan portfolio:
Commercial	5	$	1,262	$	1,262
Commercial real estate	5	1,529		1,529
Land development	1	1,638		1,638
Subtotal – commercial loan portfolio	11	4,429		4,429
Consumer loan portfolio (residential mortgage)	20	3,154		3,061
Total	31	$	7,583	$	7,490

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. 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 loans reported as performing and nonperforming TDRs at March 31, 2013 and 2012, and TDRs that were transferred to nonaccrual status during the three months ended March 31, 2013 and 2012, for which there was a payment default during the three months ended March 31, 2013 and 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:



	Number of Loans	Principal Balance at End of Period
	(Dollars in thousands)
Three Months Ended March 31, 2013
Commercial loan portfolio (commercial)	1	$	434
Consumer loan portfolio (residential mortgage)	3	369
Total	4	$	803
Three Months Ended March 31, 2012
Commercial loan portfolio:
Commercial	1	$	60
Commercial real estate	1	768
Subtotal – commercial loan portfolio	2	828
Consumer loan portfolio (residential mortgage)	2	214
Total	4	$	1,042

Allowance for Loan Losses

The following schedule presents, by loan portfolio segment, the changes in the allowance for the three months ended March 31, 2013 and details regarding the balance in the allowance and the recorded investment in loans at March 31, 2013 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 March 31, 2013:
Beginning balance	$	49,975		$	29,333		$	5,183		$	84,491
Provision for loan losses	2,437			871			(308		)	3,000
Charge-offs	(3,516		)	(1,958		)	—			(5,474		)
Recoveries	211			606			—			817
Ending balance	$	49,107		$	28,852		$	4,875		$	82,834
Allowance for loan losses balance at March 31, 2013 attributable to:
Loans individually evaluated for impairment	$	5,522		$	662		$	—		$	6,184
Loans collectively evaluated for impairment	43,585			27,690			4,875			76,150
Loans acquired with deteriorated credit quality	—			500			—			500
Total	$	49,107		$	28,852		$	4,875		$	82,834
Recorded investment (loan balance) at March 31, 2013:
Loans individually evaluated for impairment	$	84,650		$	17,296		$	—		$	101,946
Loans collectively evaluated for impairment	1,892,452			1,816,591			—			3,709,043
Loans acquired with deteriorated credit quality	321,403			52,869			—			374,272
Total	$	2,298,505		$	1,886,756		$	—		$	4,185,261

The following schedule presents, by loan portfolio segment, details regarding the balance in the allowance and the recorded investment in loans at December 31, 2012 by impairment evaluation method.



	Commercial Loan Portfolio		Consumer Loan Portfolio		Unallocated		Total
	(In thousands)
Allowance for loan losses balance at December 31, 2012 attributable to:
Loans individually evaluated for impairment	$	7,450	$	658	$	—	$	8,108
Loans collectively evaluated for impairment	42,525		28,175		5,183		75,883
Loans acquired with deteriorated credit quality	—		500		—		500
Total	$	49,975	$	29,333	$	5,183	$	84,491
Recorded investment (loan balance) at December 31, 2012:
Loans individually evaluated for impairment	$	87,327	$	18,901	$	—	$	106,228
Loans collectively evaluated for impairment	1,840,629		1,828,283		—		3,668,912
Loans acquired with deteriorated credit quality	336,864		55,731		—		392,595
Total	$	2,264,820	$	1,902,915	$	—	$	4,167,735

The following schedule presents, by loan portfolio segment, the changes in the allowance for the three months ended March 31, 2012 and details regarding the balance in the allowance and the recorded investment in loans at March 31, 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 March 31, 2012:
Beginning balance	$	55,645		$	29,166		$	3,522	$	88,333
Provision for loan losses	2,037			1,343			1,620		5,000
Charge-offs	(3,379		)	(3,168		)	—		(6,547		)
Recoveries	614			385			—		999
Ending balance	$	54,917		$	27,726		$	5,142	$	87,785
Allowance for loan losses balance at March 31, 2012 attributable to:
Loans individually evaluated for impairment	$	9,177		$	710		$	—	$	9,887
Loans collectively evaluated for impairment	44,140			26,416			5,142		75,698
Loans acquired with deteriorated credit quality	1,600			600			—		2,200
Total	$	54,917		$	27,726		$	5,142	$	87,785
Recorded investment (loan balance) at March 31, 2012:
Loans individually evaluated for impairment	$	81,901		$	24,147		$	—	$	106,048
Loans collectively evaluated for impairment	1,612,441			1,651,790			—		3,264,231
Loans acquired with deteriorated credit quality	406,543			66,276			—		472,819
Total	$	2,100,885		$	1,742,213		$	—	$	3,843,098

The allowance attributable to acquired loans of $0.5 million at both March 31, 2013 and December 31, 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 $2.2 million at March 31, 2012 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 March 31, 2013, December 31, 2012 or March 31, 2012.