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, 2014, December 31, 2013 and March 31, 2013 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, 2014		December 31, 2013		March 31, 2013
	(In thousands)
Commercial loan portfolio:
Commercial	$	1,208,641	$	1,176,307	$	1,038,115
Commercial real estate	1,279,167		1,232,658		1,162,383
Real estate construction	85,084		89,795		65,367
Land development	13,761		20,066		32,640
Subtotal	2,586,653		2,518,826		2,298,505
Consumer loan portfolio:
Residential mortgage	962,009		960,423		872,454
Consumer installment	675,412		644,769		540,216
Home equity	529,215		523,603		474,086
Subtotal	2,166,636		2,128,795		1,886,756
Total loans	$	4,753,289	$	4,647,621	$	4,185,261

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 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 which 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, 2014, December 31, 2013 and March 31, 2013:



	Commercial		Commercial Real Estate		Real Estate Construction		Land Development		Total
	(In thousands)
March 31, 2014
Originated Portfolio:
Risk Grades 1-5	$	1,060,743	$	1,034,517	$	70,750	$	3,831	$	2,169,841
Risk Grade 6	18,359		33,962		680		968		53,969
Risk Grade 7	33,768		32,671		815		700		67,954
Risk Grade 8	17,301		27,552		160		2,267		47,280
Risk Grade 9	950		16		—		—		966
Subtotal	1,131,121		1,128,718		72,405		7,766		2,340,010
Acquired Portfolio:
Risk Grades 1-5	67,326		139,130		12,679		3,906		223,041
Risk Grade 6	2,423		2,627		—		—		5,050
Risk Grade 7	3,635		7,753		—		—		11,388
Risk Grade 8	4,136		939		—		2,089		7,164
Risk Grade 9	—		—		—		—		—
Subtotal	77,520		150,449		12,679		5,995		246,643
Total	$	1,208,641	$	1,279,167	$	85,084	$	13,761	$	2,586,653
December 31, 2013
Originated Portfolio:
Risk Grades 1-5	$	1,024,461	$	991,964	$	75,696	$	6,874	$	2,098,995
Risk Grade 6	20,082		34,248		654		969		55,953
Risk Grade 7	29,776		30,377		738		3,128		64,019
Risk Grade 8	17,414		28,580		371		2,309		48,674
Risk Grade 9	960		18		—		—		978
Subtotal	1,092,693		1,085,187		77,459		13,280		2,268,619
Acquired Portfolio:
Risk Grades 1-5	73,763		133,653		12,336		4,667		224,419
Risk Grade 6	5,472		5,022		—		—		10,494
Risk Grade 7	852		7,792		—		—		8,644
Risk Grade 8	3,527		1,004		—		2,119		6,650
Risk Grade 9	—		—		—		—		—
Subtotal	83,614		147,471		12,336		6,786		250,207
Total	$	1,176,307	$	1,232,658	$	89,795	$	20,066	$	2,518,826
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

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. Nonaccrual TDRs in the consumer loan portfolio are included with nonaccrual loans, while other TDRs in the consumer loan portfolio 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, 2014, December 31, 2013 and March 31, 2013:



	Residential Mortgage		Consumer Installment		Home Equity		Total Consumer
	(In thousands)
March 31, 2014
Originated Loans:
Performing	$	937,968	$	672,984	$	497,196	$	2,108,148
Nonperforming	12,833		806		2,668		16,307
Subtotal	950,801		673,790		499,864		2,124,455
Acquired Loans:
Performing	11,150		1,622		29,020		41,792
Nonperforming	58		—		331		389
Subtotal	11,208		1,622		29,351		42,181
Total	$	962,009	$	675,412	$	529,215	$	2,166,636
December 31, 2013
Originated Loans:
Performing	$	934,747	$	642,370	$	488,996	$	2,066,113
Nonperforming	14,134		676		3,382		18,192
Subtotal	948,881		643,046		492,378		2,084,305
Acquired Loans:
Performing	11,481		1,723		31,182		44,386
Nonperforming	61		—		43		104
Subtotal	11,542		1,723		31,225		44,490
Total	$	960,423	$	644,769	$	523,603	$	2,128,795
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

Nonperforming Loans

A summary of nonperforming loans follows:



	March 31, 2014		December 31, 2013		March 31, 2013
	(In thousands)
Nonaccrual loans:
Commercial	$	18,251	$	18,374	$	12,186
Commercial real estate	27,568		28,598		35,849
Real estate construction	160		371		168
Land development	2,267		2,309		4,105
Residential mortgage	6,589		8,921		10,407
Consumer installment	806		676		699
Home equity	2,046		2,648		2,837
Total nonaccrual loans	57,687		61,897		66,251
Accruing loans contractually past due 90 days or more as to interest or principal payments:
Commercial	43		536		4
Commercial real estate	730		190		177
Real estate construction	—		—		—
Land development	—		—		—
Residential mortgage	—		537		196
Consumer installment	—		—		—
Home equity	622		734		874
Total accruing loans contractually past due 90 days or more as to interest or principal payments	1,395		1,997		1,251
Nonperforming TDRs:
Commercial loan portfolio	11,218		13,414		14,587
Consumer loan portfolio	6,244		4,676		4,328
Total nonperforming TDRs	17,462		18,090		18,915
Total nonperforming loans	$	76,544	$	81,984	$	86,417

The Corporation’s nonaccrual loans at March 31, 2014, December 31, 2013 and March 31, 2013 included $44.4 million, $37.3 million and $47.0 million, respectively, of nonaccrual TDRs.

Impaired Loans

The following schedule presents impaired loans by classes of loans at March 31, 2014, December 31, 2013 and March 31, 2013:



	Recorded Investment		Unpaid Principal Balance		Related Valuation Allowance
	(In thousands)
March 31, 2014
Impaired loans with a valuation allowance:
Commercial	$	3,534	$	3,704	$	1,250
Commercial real estate	3,720		3,878		371
Real estate construction	—		—		—
Land development	—		—		—
Residential mortgage	19,944		19,944		444
Subtotal	27,198		27,526		2,065
Impaired loans with no related valuation allowance:
Commercial	38,150		42,914		—
Commercial real estate	49,074		62,207		—
Real estate construction	160		366		—
Land development	4,472		7,773		—
Residential mortgage	6,589		6,589		—
Consumer installment	806		806		—
Home equity	2,046		2,046		—
Subtotal	101,297		122,701		—
Total impaired loans:
Commercial	41,684		46,618		1,250
Commercial real estate	52,794		66,085		371
Real estate construction	160		366		—
Land development	4,472		7,773		—
Residential mortgage	26,533		26,533		444
Consumer installment	806		806		—
Home equity	2,046		2,046		—
Total	$	128,495	$	150,227	$	2,065
December 31, 2013
Impaired loans with a valuation allowance:
Commercial	$	2,517	$	2,656	$	728
Commercial real estate	2,576		2,965		353
Real estate construction	—		—		—
Land development	—		—		—
Residential mortgage	17,408		17,408		510
Subtotal	22,501		23,029		1,591
Impaired loans with no related valuation allowance:
Commercial	38,838		44,377		—
Commercial real estate	48,220		61,444		—
Real estate construction	371		478		—
Land development	7,170		11,817		—
Residential mortgage	8,921		8,921		—
Consumer installment	676		676		—
Home equity	2,648		2,648		—
Subtotal	106,844		130,361		—
Total impaired loans:
Commercial	41,355		47,033		728
Commercial real estate	50,796		64,409		353
Real estate construction	371		478		—
Land development	7,170		11,817		—
Residential mortgage	26,329		26,329		510
Consumer installment	676		676		—
Home equity	2,648		2,648		—
Total	$	129,345	$	153,390	$	1,591



	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
Real estate construction	—		—		—
Land development	—		—		—
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

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 $21.7 million, $24.0 million and $23.7 million at March 31, 2014, December 31, 2013 and March 31, 2013, respectively, includes confirmed losses (partial charge-offs) of $17.8 million, $20.2 million and $19.9 million, respectively, and fair value discount adjustments of $3.9 million, $3.8 million and $3.8 million, respectively.

Impaired loans included $11.5 million, $9.8 million and $8.6 million at March 31, 2014, December 31, 2013 and March 31, 2013, 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 $41.8 million, $39.6 million and $30.7 million at March 31, 2014, December 31, 2013 and March 31, 2013, respectively, of performing TDRs.

The following schedule presents information related to impaired loans for the three months ended March 31, 2014 and 2013:



	Three Months Ended March 31, 2014
	Average Recorded Investment		Interest Income Recognized While on Impaired Status
	(In thousands)
Commercial	$	41,607	$	333
Commercial real estate	53,320		361
Real estate construction	167		—
Land development	4,643		37
Residential mortgage	26,781		303
Consumer installment	773		—
Home equity	2,168		—
Total	$	129,459	$	1,034



	Three Months Ended March 31, 2013
	Average Recorded Investment		Interest Income Recognized While on Impaired Status
	(In thousands)
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

The following schedule presents the aging status of the recorded investment in loans by classes of loans at March 31, 2014, December 31, 2013 and March 31, 2013:



	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, 2014
Originated Portfolio:
Commercial	$	6,003	$	1,832	$	43	$	18,251	$	26,129	$	1,104,992	$	1,131,121
Commercial real estate	4,094		1,098		730		27,568		33,490		1,095,228		1,128,718
Real estate construction	18		—		—		160		178		72,227		72,405
Land development	—		—		—		2,267		2,267		5,499		7,766
Residential mortgage	1,259		1,138		—		6,589		8,986		941,815		950,801
Consumer installment	1,950		313		—		806		3,069		670,721		673,790
Home equity	1,500		256		622		2,046		4,424		495,440		499,864
Total	$	14,824	$	4,637	$	1,395	$	57,687	$	78,543	$	4,385,922	$	4,464,465
Acquired Portfolio:
Commercial	$	—	$	—	$	6,496	$	—	$	6,496	$	71,024	$	77,520
Commercial real estate	—		—		2,549		—		2,549		147,900		150,449
Real estate construction	—		—		—		—		—		12,679		12,679
Land development	—		—		2,089		—		2,089		3,906		5,995
Residential mortgage	—		—		58		—		58		11,150		11,208
Consumer installment	49		—		—		—		49		1,573		1,622
Home equity	49		—		331		—		380		28,971		29,351
Total	$	98	$	—	$	11,523	$	—	$	11,621	$	277,203	$	288,824



	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, 2013
Originated Portfolio:
Commercial	$	4,748	$	865	$	536	$	18,374	$	24,523	$	1,068,170	$	1,092,693
Commercial real estate	8,560		1,604		190		28,598		38,952		1,046,235		1,085,187
Real estate construction	—		4,107		—		371		4,478		72,981		77,459
Land development	—		—		—		2,309		2,309		10,971		13,280
Residential mortgage	2,191		103		537		8,921		11,752		937,129		948,881
Consumer installment	2,630		359		—		676		3,665		639,381		643,046
Home equity	1,452		278		734		2,648		5,112		487,266		492,378
Total	$	19,581	$	7,316	$	1,997	$	61,897	$	90,791	$	4,262,133	$	4,352,924
Acquired Portfolio:
Commercial	$	—	$	—	$	5,656	$	—	$	5,656	$	77,958	$	83,614
Commercial real estate	—		133		1,695		—		1,828		145,643		147,471
Real estate construction	—		—		—		—		—		12,336		12,336
Land development	—		—		2,332		—		2,332		4,454		6,786
Residential mortgage	—		—		61		—		61		11,481		11,542
Consumer installment	3		51		—		—		54		1,669		1,723
Home equity	394		—		43		—		437		30,788		31,225
Total	$	397	$	184	$	9,787	$	—	$	10,368	$	284,329	$	294,697
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

Loans Modified Under Troubled Debt Restructurings (TDRs)

The following schedule presents the Corporation’s loans reported as TDRs at March 31, 2014, December 31, 2013 and March 31, 2013:



	Performing TDRs		Non-Performing TDRs		Nonaccrual TDRs		Total
	(In thousands)
March 31, 2014
Commercial loan portfolio	$	28,123	$	11,218	$	40,511	$	79,852
Consumer loan portfolio	13,700		6,244		3,875		23,819
Total	$	41,823	$	17,462	$	44,386	$	103,671
December 31, 2013
Commercial loan portfolio	$	26,839	$	13,414	$	31,961	$	72,214
Consumer loan portfolio	12,732		4,676		5,321		22,729
Total	$	39,571	$	18,090	$	37,282	$	94,943
March 31, 2013
Commercial loan portfolio	$	17,755	$	14,587	$	42,097	$	74,439
Consumer loan portfolio	12,968		4,328		4,916		22,212
Total	$	30,723	$	18,915	$	47,013	$	96,651

The following schedule provides information on the Corporation's TDRs that were modified during the three months ended March 31, 2014 and 2013:



	Number of Loans	Pre- Modification Recorded Investment		Post- Modification Recorded Investment
	(Dollars in thousands)
Three Months Ended March 31, 2014
Commercial loan portfolio:
Commercial	12	$	8,356	$	8,356
Commercial real estate	9	2,790		2,790
Land development	1	72		72
Subtotal – commercial loan portfolio	22	11,218		11,218
Consumer loan portfolio (residential mortgage)	30	987		978
Total	52	$	12,205	$	12,196



Three Months Ended March 31, 2013 (as revised)
Commercial loan portfolio:
Commercial	11	$	1,606	$	1,606
Commercial real estate	14	3,644		3,644
Real estate construction	2	364		364
Land development	2	432		432
Subtotal – commercial loan portfolio	29	6,046		6,046
Consumer loan portfolio (residential mortgage)	18	1,391		1,355
Total	47	$	7,437	$	7,401

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.

The following schedule includes TDRs for which there was a payment default during the three months ended March 31, 2014 and 2013, 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, 2014
Commercial loan portfolio:
Commercial	1	$	104
Commercial real estate	2	1,670
Subtotal – commercial loan portfolio	3	1,774
Consumer loan portfolio (residential mortgage)	—	—
Total	3	$	1,774
Three Months Ended March 31, 2013 (as revised)
Commercial loan portfolio:
Commercial	17	$	1,053
Commercial real estate	1	126
Real estate construction	1	160
Subtotal – commercial loan portfolio	19	1,339
Consumer loan portfolio (residential mortgage)	5	484
Total	24	$	1,823

During the three months ended March 31, 2013, the Corporation had excluded nonaccrual TDRs from the schedule of TDRs that were modified during the three months ended March 31, 2013 and the schedule of TDRs for which there was a payment default during the three months ended March 31, 2013. The Corporation has revised the amounts reported for the three months ended March 31, 2013 in these schedules to include activity related to all TDRs, including nonaccrual TDRs.

Allowance for Loan Losses

The following schedule presents, by loan portfolio segment, the changes in the allowance for the three months ended March 31, 2014 and details regarding the balance in the allowance and the recorded investment in loans at March 31, 2014 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, 2014:
Beginning balance	$	44,482		$	30,145		$	4,445		$	79,072
Provision for loan losses	960			855			(215		)	1,600
Charge-offs	(1,209		)	(2,263		)	—			(3,472		)
Recoveries	777			496			—			1,273
Ending balance	$	45,010		$	29,233		$	4,230		$	78,473
Allowance for loan losses balance at March 31, 2014 attributable to:
Loans individually evaluated for impairment	$	1,621		$	444		$	—		$	2,065
Loans collectively evaluated for impairment	43,389			28,289			4,230			75,908
Loans acquired with deteriorated credit quality	—			500			—			500
Total	$	45,010		$	29,233		$	4,230		$	78,473
Recorded investment (loan balance) at March 31, 2014:
Loans individually evaluated for impairment	$	87,587		$	19,944		$	—		$	107,531
Loans collectively evaluated for impairment	2,252,423			2,104,511			—			4,356,934
Loans acquired with deteriorated credit quality	246,643			42,181			—			288,824
Total	$	2,586,653		$	2,166,636		$	—		$	4,753,289

The following schedule presents, by loan portfolio segment, details regarding the balance in the allowance and the recorded investment in loans at December 31, 2013 by impairment evaluation method.



	Commercial Loan Portfolio		Consumer Loan Portfolio		Unallocated		Total
	(In thousands)
Allowance for loan losses balance at December 31, 2013 attributable to:
Loans individually evaluated for impairment	$	1,081	$	510	$	—	$	1,591
Loans collectively evaluated for impairment	43,401		29,135		4,445		76,981
Loans acquired with deteriorated credit quality	—		500		—		500
Total	$	44,482	$	30,145	$	4,445	$	79,072
Recorded investment (loan balance) at December 31, 2013:
Loans individually evaluated for impairment	$	89,905	$	17,408	$	—	$	107,313
Loans collectively evaluated for impairment	2,178,714		2,066,897		—		4,245,611
Loans acquired with deteriorated credit quality	250,207		44,490		—		294,697
Total	$	2,518,826	$	2,128,795	$	—	$	4,647,621

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 allowance attributable to acquired loans of $0.5 million at March 31, 2014, December 31, 2013 and March 31, 2013 was primarily attributable to two consumer loan pools in the acquired loan portfolio that had a decline in expected cash flows. Management determined that the overall credit quality of the acquired loan portfolio had improved at March 31, 2014, which has resulted in an improvement in expected cash flows of loan pools in the acquired commercial loan portfolio. Accordingly, management reclassified $10.0 million during the three months ended March 31, 2014 from the nonaccretable difference to the accretable yield for these acquired commercial loan pools, which will increase amounts recognized into interest income over the estimated remaining lives of these loan pools. There were no material changes in expected cash flows for the remaining acquired loan pools at December 31, 2013 or March 31, 2013.