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 September 30, 2013, December 31, 2012 and September 30, 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:



	September 30, 2013		December 31, 2012		September 30, 2012
	(In thousands)
Commercial loan portfolio:
Commercial	$	1,128,122	$	1,002,722	$	951,938
Commercial real estate	1,215,631		1,161,861		1,117,073
Real estate construction	78,361		62,689		56,071
Land development	23,673		37,548		34,811
Subtotal	2,445,787		2,264,820		2,159,893
Consumer loan portfolio:
Residential mortgage	942,777		883,835		880,295
Consumer installment	622,040		546,036		538,412
Home equity	512,067		473,044		440,559
Subtotal	2,076,884		1,902,915		1,859,266
Total loans	$	4,522,671	$	4,167,735	$	4,019,159

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 nine 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 periodically utilizes independent third-party service providers to assist with its loan review function. 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 September 30, 2013, December 31, 2012 and September 30, 2012:



	Commercial		Real Estate Commercial		Real Estate Construction		Land Development		Total
	(In thousands)
September 30, 2013
Originated Portfolio:
Risk Grades 1-5	$	974,903	$	963,394	$	64,210	$	7,760	$	2,010,267
Risk Grade 6	16,439		37,572		58		1,063		55,132
Risk Grade 7	37,644		30,969		1,337		4,870		74,820
Risk Grade 8	9,753		28,186		183		2,954		41,076
Risk Grade 9	2,056		437		—		—		2,493
Subtotal	1,040,795		1,060,558		65,788		16,647		2,183,788
Acquired Portfolio:
Risk Grades 1-5	82,648		141,234		12,573		4,604		241,059
Risk Grade 6	2,620		4,837		—		—		7,457
Risk Grade 7	992		7,847		—		—		8,839
Risk Grade 8	1,067		1,155		—		2,422		4,644
Risk Grade 9	—		—		—		—		—
Subtotal	87,327		155,073		12,573		7,026		261,999
Total	$	1,128,122	$	1,215,631	$	78,361	$	23,673	$	2,445,787
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
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

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 September 30, 2013, December 31, 2012 and September 30, 2012:



	Residential Mortgage		Consumer Installment		Home Equity		Total Consumer
	(In thousands)
September 30, 2013
Originated Loans:
Performing	$	918,931	$	619,346	$	475,439	$	2,013,716
Nonperforming	11,850		665		3,709		16,224
Subtotal	930,781		620,011		479,148		2,029,940
Acquired Loans:
Performing	11,918		2,029		32,737		46,684
Nonperforming	78		—		182		260
Subtotal	11,996		2,029		32,919		46,944
Total	$	942,777	$	622,040	$	512,067	$	2,076,884
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
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

Nonperforming Loans

A summary of nonperforming loans follows:



	September 30, 2013		December 31, 2012		September 30, 2012
	(In thousands)
Nonaccrual loans:
Commercial	$	11,809	$	14,601	$	15,217
Commercial real estate	28,623		37,660		41,311
Real estate construction	183		1,217		933
Land development	2,954		4,184		5,731
Residential mortgage	8,029		10,164		11,307
Consumer installment	665		739		876
Home equity	3,023		2,733		2,949
Total nonaccrual loans	55,286		71,298		78,324
Accruing loans contractually past due 90 days or more as to interest or principal payments:
Commercial	281		—		273
Commercial real estate	—		87		247
Real estate construction	—		—		—
Land development	—		—		—
Residential mortgage	692		1,503		431
Consumer installment	—		—		—
Home equity	686		769		1,147
Total accruing loans contractually past due 90 days or more as to interest or principal payments	1,659		2,359		2,098
Nonperforming TDRs:
Commercial loan portfolio	15,744		13,876		6,553
Consumer loan portfolio	3,129		3,321		3,902
Total nonperforming TDRs	18,873		17,197		10,455
Total nonperforming loans	$	75,818	$	90,854	$	90,877

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 September 30, 2013, December 31, 2012 and September 30, 2012 included $39.1 million, $47.5 million and $37.0 million, respectively, of these modified loans.

Impaired Loans

The following schedule presents impaired loans by classes of loans at September 30, 2013, December 31, 2012 and September 30, 2012:



	Recorded Investment		Unpaid Principal Balance		Related Valuation Allowance
	(In thousands)
September 30, 2013
Impaired loans with a valuation allowance:
Commercial	$	5,059	$	5,803	$	1,857
Commercial real estate	6,684		7,901		1,651
Real estate construction	183		253		33
Land development	517		653		97
Residential mortgage	17,731		17,731		585
Subtotal	30,174		32,341		4,223
Impaired loans with no related valuation allowance:
Commercial	21,543		25,642		—
Commercial real estate	43,178		57,256		—
Real estate construction	133		133		—
Land development	9,095		13,347		—
Residential mortgage	8,029		8,029		—
Consumer installment	665		665		—
Home equity	3,023		3,023		—
Subtotal	85,666		108,095		—
Total impaired loans:
Commercial	26,602		31,445		1,857
Commercial real estate	49,862		65,157		1,651
Real estate construction	316		386		33
Land development	9,612		14,000		97
Residential mortgage	25,760		25,760		585
Consumer installment	665		665		—
Home equity	3,023		3,023		—
Total	$	115,840	$	140,436	$	4,223
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)
September 30, 2012
Impaired loans with a valuation allowance:
Commercial	$	6,743	$	7,357	$	2,240
Commercial real estate	19,694		22,593		5,344
Real estate construction	127		127		43
Land development	2,800		2,800		383
Residential mortgage	15,958		15,958		649
Subtotal	45,322		48,835		8,659
Impaired loans with no related valuation allowance:
Commercial	19,768		24,517		—
Commercial real estate	36,225		48,187		—
Real estate construction	806		806		—
Land development	7,723		10,903		—
Residential mortgage	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
Commercial real estate	55,919		70,780		5,344
Real estate construction	933		933		43
Land development	10,523		13,703		383
Residential mortgage	30,865		30,865		649
Consumer installment	876		876		—
Home equity	2,949		2,949		—
Total	$	128,576	$	151,980	$	8,659

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 and for acquired loans that meet the definition of an impaired loan represents 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 $24.6 million, $21.1 million and $23.4 million at September 30, 2013, December 31, 2012 and September 30, 2012, respectively, includes confirmed losses (partial charge-offs) of $21.2 million, $17.3 million and $19.8 million, respectively, and fair value discount adjustments of $3.4 million, $3.8 million and $3.6 million, respectively.

Impaired loans included $7.6 million, $9.1 million and $9.4 million at September 30, 2013, December 31, 2012 and September 30, 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 $34.1 million, $31.4 million and $30.4 million at September 30, 2013, December 31, 2012 and September 30, 2012, respectively, of performing TDRs.

The following schedule presents information related to impaired loans for the three and nine months ended September 30, 2013 and 2012:



	Three Months Ended September 30, 2013				Nine Months Ended September 30, 2013
	Average Recorded Investment		Interest Income Recognized While on Impaired Status		Average Recorded Investment		Interest Income Recognized While on Impaired Status
	(In thousands)
Commercial	$	27,025	$	215	$	26,894	$	633
Commercial real estate	50,266		284		53,482		984
Real estate construction	414		2		395		7
Land development	9,615		79		10,470		261
Residential mortgage	25,826		278		27,216		847
Consumer installment	632		—		666		—
Home equity	3,091		—		2,977		—
Total	$	116,869	$	858	$	122,100	$	2,732



	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
Commercial real estate	54,524		212		59,063		642
Real estate construction	912		—		470		—
Land development	10,582		71		8,869		216
Residential mortgage	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

The following schedule presents the aging status of the recorded investment in loans by classes of loans at September 30, 2013, December 31, 2012 and September 30, 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)
September 30, 2013
Originated Portfolio:
Commercial	$	7,833	$	1,542	$	281	$	11,809	$	21,465	$	1,019,330	$	1,040,795
Commercial real estate	6,533		2,274		—		28,623		37,430		1,023,128		1,060,558
Real estate construction	90		5,385		—		183		5,658		60,130		65,788
Land development	187		—		—		2,954		3,141		13,506		16,647
Residential mortgage	1,739		76		692		8,029		10,536		920,245		930,781
Consumer installment	2,980		350		—		665		3,995		616,016		620,011
Home equity	2,344		434		686		3,023		6,487		472,661		479,148
Total	$	21,706	$	10,061	$	1,659	$	55,286	$	88,712	$	4,125,016	$	4,213,728
Acquired Portfolio:
Commercial	$	67	$	—	$	1,574	$	—	$	1,641	$	85,686	$	87,327
Commercial real estate	439		—		3,355		—		3,794		151,279		155,073
Real estate construction	—		—		—		—		—		12,573		12,573
Land development	—		—		2,422		—		2,422		4,604		7,026
Residential mortgage	264		—		77		—		341		11,655		11,996
Consumer installment	3		1		—		—		4		2,025		2,029
Home equity	389		79		182		—		650		32,269		32,919
Total	$	1,162	$	80	$	7,610	$	—	$	8,852	$	300,091	$	308,943



	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
September 30, 2012
Originated Portfolio:
Commercial	$	9,707	$	1,374	$	273	$	15,217	$	26,571	$	812,111	$	838,682
Commercial real estate	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
Residential mortgage	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
Commercial real estate	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
Residential mortgage	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

Loans Modified Under Troubled Debt Restructurings (TDRs)

The following schedule presents the Corporation’s loans reported as TDRs at September 30, 2013, December 31, 2012 and September 30, 2012:



	Performing		Nonperforming		Total
	(In thousands)
September 30, 2013
Commercial loan portfolio	$	19,469	$	15,744	$	35,213
Consumer loan portfolio	14,602		3,129		17,731
Total	$	34,071	$	18,873	$	52,944
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
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

The following schedule provides information on loans reported as performing and nonperforming TDRs that were either modified during the three and nine months ended September 30, 2013 and 2012 or modified during a previous period and transfered from nonaccrual status during the three and nine months ended September 30, 2013 and 2012:



	Three Months Ended September 30, 2013					Nine Months Ended September 30, 2013
	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	2	$	352	$	352	11	$	3,370	$	3,370
Commercial real estate	3	2,100		2,100		16	8,701		8,701
Land development	—	—		—		3	637		637
Subtotal – commercial loan portfolio	5	2,452		2,452		30	12,708		12,708
Consumer loan portfolio (residential mortgage)	19	1,647		1,604		48	3,534		3,435
Total	24	$	4,099	$	4,056	78	$	16,242	$	16,143



	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
Commercial real estate	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 (residential mortgage)	15	1,352		1,301		65	7,083		6,872
Total	32	$	3,443	$	3,392	104	$	17,876	$	17,665

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 September 30, 2013 and 2012, and TDRs that were transferred to nonaccrual status during the three and nine months ended September 30, 2013 and 2012, for which there was a payment default during the three and nine months ended September 30, 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:



	Three Months Ended September 30, 2013			Nine Months Ended September 30, 2013
	Number of Loans	Principal Balance at End of Period		Number of Loans	Principal Balance at End of Period
	(Dollars in thousands)
Commercial loan portfolio:
Commercial	1	$	748	2	$	1,182
Commercial real estate	4	2,833		4	2,833
Subtotal – commercial loan portfolio	5	3,581		6	4,015
Consumer loan portfolio (residential mortgage)	4	109		7	478
Total	9	$	3,690	13	$	4,493

	Three Months Ended September 30, 2012			Nine Months Ended September 30, 2012
	Number of Loans	Principal Balance at End of Period		Number of Loans	Principal Balance at End of Period
	(Dollars in thousands)
Commercial loan portfolio:
Commercial	2	$	1,240	3	$	1,300
Commercial real estate	3	2,457		5	3,293
Subtotal – commercial loan portfolio	5	3,697		8	4,593
Consumer loan portfolio (residential mortgage)	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, 2013 and details regarding the balance in the allowance and the recorded investment in loans at September 30, 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 September 30, 2013:
Beginning balance	$	47,780		$	28,745		$	5,659		$	82,184
Provision for loan losses	2,810			2,165			(1,975		)	3,000
Charge-offs	(2,637		)	(1,793		)	—			(4,430		)
Recoveries	374			404			—			778
Ending balance	$	48,327		$	29,521		$	3,684		$	81,532
Changes in allowance for loan losses for the nine months ended September 30, 2013:
Beginning balance	$	49,975		$	29,333		$	5,183		$	84,491
Provision for loan losses	5,815			4,684			(1,499		)	9,000
Charge-offs	(9,374		)	(5,891		)	—			(15,265		)
Recoveries	1,911			1,395			—			3,306
Ending balance	$	48,327		$	29,521		$	3,684		$	81,532
Allowance for loan losses balance at September 30, 2013 attributable to:
Loans individually evaluated for impairment	$	3,638		$	585		$	—		$	4,223
Loans collectively evaluated for impairment	44,689			28,436			3,684			76,809
Loans acquired with deteriorated credit quality	—			500			—			500
Total	$	48,327		$	29,521		$	3,684		$	81,532
Recorded investment (loan balance) at September 30, 2013:
Loans individually evaluated for impairment	$	78,782		$	17,731		$	—		$	96,513
Loans collectively evaluated for impairment	2,105,006			2,012,209			—			4,117,215
Loans acquired with deteriorated credit quality	261,999			46,944			—			308,943
Total	$	2,445,787		$	2,076,884		$	—		$	4,522,671

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 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 allowance attributable to acquired loans of $0.5 million at September 30, 2013, December 31, 2012 and September 30, 2012 was primarily attributable to two consumer 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, 2013, December 31, 2012 or September 30, 2012.