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 June 30, 2014, December 31, 2013 and June 30, 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:



	June 30, 2014		December 31, 2013		June 30, 2013
	(In thousands)
Commercial loan portfolio:
Commercial	$	1,212,383	$	1,176,307	$	1,091,894
Commercial real estate	1,298,365		1,232,658		1,172,347
Real estate construction	101,168		89,795		73,448
Land development	10,956		20,066		27,181
Subtotal	2,622,872		2,518,826		2,364,870
Consumer loan portfolio:
Residential mortgage	970,397		960,423		898,816
Consumer installment	744,781		644,769		577,241
Home equity	560,754		523,603		494,944
Subtotal	2,275,932		2,128,795		1,971,001
Total loans	$	4,898,804	$	4,647,621	$	4,335,871

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 June 30, 2014, December 31, 2013 and June 30, 2013:



	Commercial		Commercial Real Estate		Real Estate Construction		Land Development		Total
	(In thousands)
June 30, 2014
Originated Portfolio:
Risk Grades 1-5	$	1,067,000	$	1,063,555	$	85,754	$	2,514	$	2,218,823
Risk Grade 6	15,459		30,053		666		965		47,143
Risk Grade 7	37,291		35,946		1,995		627		75,859
Risk Grade 8	18,560		25,347		160		2,184		46,251
Risk Grade 9	213		14		—		—		227
Subtotal	1,138,523		1,154,915		88,575		6,290		2,388,303
Acquired Portfolio:
Risk Grades 1-5	59,993		132,898		12,593		2,546		208,030
Risk Grade 6	6,769		3,822		—		—		10,591
Risk Grade 7	3,197		6,730		—		143		10,070
Risk Grade 8	3,901		—		—		1,977		5,878
Risk Grade 9	—		—		—		—		—
Subtotal	73,860		143,450		12,593		4,666		234,569
Total	$	1,212,383	$	1,298,365	$	101,168	$	10,956	$	2,622,872
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
June 30, 2013
Originated Portfolio:
Risk Grades 1-5	$	919,985	$	897,960	$	59,575	$	9,315	$	1,886,835
Risk Grade 6	26,848		43,650		58		434		70,990
Risk Grade 7	29,025		33,464		1,058		5,751		69,298
Risk Grade 8	9,693		28,048		183		3,434		41,358
Risk Grade 9	1,359		450		—		—		1,809
Subtotal	986,910		1,003,572		60,874		18,934		2,070,290
Acquired Portfolio:
Risk Grades 1-5	100,241		152,906		12,574		5,682		271,403
Risk Grade 6	2,315		5,696		—		—		8,011
Risk Grade 7	699		8,720		—		—		9,419
Risk Grade 8	1,729		1,453		—		2,565		5,747
Risk Grade 9	—		—		—		—		—
Subtotal	104,984		168,775		12,574		8,247		294,580
Total	$	1,091,894	$	1,172,347	$	73,448	$	27,181	$	2,364,870

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 June 30, 2014, December 31, 2013 and June 30, 2013:



	Residential Mortgage		Consumer Installment		Home Equity		Total Consumer
	(In thousands)
June 30, 2014
Originated Loans:
Performing	$	947,768	$	743,121	$	529,093	$	2,219,982
Nonperforming	12,217		536		3,371		16,124
Subtotal	959,985		743,657		532,464		2,236,106
Acquired Loans:
Performing	10,343		1,124		28,227		39,694
Nonperforming	69		—		63		132
Subtotal	10,412		1,124		28,290		39,826
Total	$	970,397	$	744,781	$	560,754	$	2,275,932
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
June 30, 2013
Originated Loans:
Performing	$	873,543	$	574,354	$	455,490	$	1,903,387
Nonperforming	12,651		552		3,753		16,956
Subtotal	886,194		574,906		459,243		1,920,343
Acquired Loans:
Performing	12,622		2,335		35,583		50,540
Nonperforming	—		—		118		118
Subtotal	12,622		2,335		35,701		50,658
Total	$	898,816	$	577,241	$	494,944	$	1,971,001

Nonperforming Loans

A summary of nonperforming loans follows:



	June 30, 2014		December 31, 2013		June 30, 2013
	(In thousands)
Nonaccrual loans:
Commercial	$	18,773	$	18,374	$	11,052
Commercial real estate	25,361		28,598		28,498
Real estate construction	160		371		183
Land development	2,184		2,309		3,434
Residential mortgage	6,325		8,921		9,241
Consumer installment	536		676		552
Home equity	2,296		2,648		3,064
Total nonaccrual loans	55,635		61,897		56,024
Accruing loans contractually past due 90 days or more as to interest or principal payments:
Commercial	15		536		1
Commercial real estate	69		190		78
Real estate construction	—		—		—
Land development	—		—		—
Residential mortgage	376		537		164
Consumer installment	—		—		—
Home equity	1,075		734		689
Total accruing loans contractually past due 90 days or more as to interest or principal payments	1,535		1,997		932
Nonperforming TDRs:
Commercial loan portfolio	11,049		13,414		19,140
Consumer loan portfolio	5,516		4,676		3,246
Total nonperforming TDRs	16,565		18,090		22,386
Total nonperforming loans	$	73,735	$	81,984	$	79,342

The Corporation’s nonaccrual loans at June 30, 2014, December 31, 2013 and June 30, 2013 included $43.7 million, $37.3 million and $40.1 million, respectively, of nonaccrual TDRs.

Impaired Loans

The following schedule presents impaired loans by classes of loans at June 30, 2014, December 31, 2013 and June 30, 2013:



	Recorded Investment		Unpaid Principal Balance		Related Valuation Allowance
	(In thousands)
June 30, 2014
Impaired loans with a valuation allowance:
Commercial	$	2,905	$	3,258	$	563
Commercial real estate	4,369		5,605		777
Real estate construction	—		—		—
Land development	—		—		—
Residential mortgage	20,353		20,353		379
Subtotal	27,627		29,216		1,719
Impaired loans with no related valuation allowance:
Commercial	39,420		43,463		—
Commercial real estate	46,205		58,997		—
Real estate construction	160		366		—
Land development	4,211		7,506		—
Residential mortgage	6,325		6,325		—
Consumer installment	536		536		—
Home equity	2,296		2,296		—
Subtotal	99,153		119,489		—
Total impaired loans:
Commercial	42,325		46,721		563
Commercial real estate	50,574		64,602		777
Real estate construction	160		366		—
Land development	4,211		7,506		—
Residential mortgage	26,678		26,678		379
Consumer installment	536		536		—
Home equity	2,296		2,296		—
Total	$	126,780	$	148,705	$	1,719
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)
June 30, 2013
Impaired loans with a valuation allowance:
Commercial	$	4,569	$	5,618	$	1,610
Commercial real estate	8,822		10,162		2,112
Real estate construction	—		—		—
Land development	2,039		2,872		130
Residential mortgage	17,406		17,406		582
Subtotal	32,836		36,058		4,434
Impaired loans with no related valuation allowance:
Commercial	21,969		25,934		—
Commercial real estate	42,913		56,117		—
Real estate construction	397		467		—
Land development	8,495		11,675		—
Residential mortgage	9,241		9,241		—
Consumer installment	552		552		—
Home equity	3,064		3,064		—
Subtotal	86,631		107,050		—
Total impaired loans:
Commercial	26,538		31,552		1,610
Commercial real estate	51,735		66,279		2,112
Real estate construction	397		467		—
Land development	10,534		14,547		130
Residential mortgage	26,647		26,647		582
Consumer installment	552		552		—
Home equity	3,064		3,064		—
Total	$	119,467	$	143,108	$	4,434

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 $21.9 million, $24.0 million and $23.6 million at June 30, 2014, December 31, 2013 and June 30, 2013, respectively, includes confirmed losses (partial charge-offs) of $18.2 million, $20.2 million and $20.1 million, respectively, and fair value discount adjustments of $3.7 million, $3.8 million and $3.5 million, respectively.

Impaired loans included $10.4 million, $9.8 million and $8.4 million at June 30, 2014, December 31, 2013 and June 30, 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 $44.1 million, $39.6 million and $32.7 million at June 30, 2014, December 31, 2013 and June 30, 2013, respectively, of performing TDRs.

The following schedule presents information related to impaired loans for the three and six months ended June 30, 2014 and 2013:



	Three Months Ended June 30, 2014				Six Months Ended June 30, 2014
	Average Recorded Investment		Interest Income Recognized While on Impaired Status		Average Recorded Investment		Interest Income Recognized While on Impaired Status
	(In thousands)
Commercial	$	42,629	$	347	$	42,118	$	680
Commercial real estate	51,260		366		52,290		727
Real estate construction	163		—		165		—
Land development	4,312		34		4,478		71
Residential mortgage	26,737		328		26,758		631
Consumer installment	634		—		704		—
Home equity	2,221		—		2,194		—
Total	$	127,956	$	1,075	$	128,707	$	2,109



	Three Months Ended June 30, 2013				Six Months Ended June 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	$	26,704	$	225	$	26,828	$	418
Commercial real estate	53,434		412		55,090		700
Real estate construction	410		3		386		5
Land development	10,879		91		10,897		182
Residential mortgage	26,903		274		27,911		569
Consumer installment	647		—		683		—
Home equity	2,878		—		2,920		—
Total	$	121,855	$	1,005	$	124,715	$	1,874

The following schedule presents the aging status of the recorded investment in loans by classes of loans at June 30, 2014, December 31, 2013 and June 30, 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)
June 30, 2014
Originated Portfolio:
Commercial	$	4,149	$	1,901	$	15	$	18,773	$	24,838	$	1,113,685	$	1,138,523
Commercial real estate	5,933		233		69		25,361		31,596		1,123,319		1,154,915
Real estate construction	—		—		—		160		160		88,415		88,575
Land development	—		—		—		2,184		2,184		4,106		6,290
Residential mortgage	2,515		—		376		6,325		9,216		950,769		959,985
Consumer installment	2,513		313		—		536		3,362		740,295		743,657
Home equity	2,002		985		1,075		2,296		6,358		526,106		532,464
Total	$	17,112	$	3,432	$	1,535	$	55,635	$	77,714	$	4,546,695	$	4,624,409
Acquired Portfolio:
Commercial	$	—	$	—	$	6,744	$	—	$	6,744	$	67,116	$	73,860
Commercial real estate	—		—		1,594		—		1,594		141,856		143,450
Real estate construction	—		—		—		—		—		12,593		12,593
Land development	—		—		1,977		—		1,977		2,689		4,666
Residential mortgage	—		—		69		—		69		10,343		10,412
Consumer installment	20		—		—		—		20		1,104		1,124
Home equity	325		49		63		—		437		27,853		28,290
Total	$	345	$	49	$	10,447	$	—	$	10,841	$	263,554	$	274,395



	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
June 30, 2013
Originated Portfolio:
Commercial	$	6,572	$	2,251	$	1	$	11,052	$	19,876	$	967,034	$	986,910
Commercial real estate	9,001		3,974		78		28,498		41,551		962,021		1,003,572
Real estate construction	—		—		—		183		183		60,691		60,874
Land development	—		—		—		3,434		3,434		15,500		18,934
Residential mortgage	2,871		67		164		9,241		12,343		873,851		886,194
Consumer installment	2,564		359		—		552		3,475		571,431		574,906
Home equity	1,520		349		689		3,064		5,622		453,621		459,243
Total	$	22,528	$	7,000	$	932	$	56,024	$	86,484	$	3,904,149	$	3,990,633
Acquired Portfolio:
Commercial	$	—	$	—	$	2,328	$	—	$	2,328	$	102,656	$	104,984
Commercial real estate	—		—		3,389		—		3,389		165,386		168,775
Real estate construction	—		—		—		—		—		12,574		12,574
Land development	2,080		—		2,564		—		4,644		3,603		8,247
Residential mortgage	198		78		—		—		276		12,346		12,622
Consumer installment	3		—		—		—		3		2,332		2,335
Home equity	297		—		119		—		416		35,285		35,701
Total	$	2,578	$	78	$	8,400	$	—	$	11,056	$	334,182	$	345,238

Loans Modified Under Troubled Debt Restructurings (TDRs)

The following schedule presents the Corporation’s loans reported as TDRs at June 30, 2014, December 31, 2013 and June 30, 2013:



	Performing TDRs		Non-Performing TDRs		Nonaccrual TDRs		Total
	(In thousands)
June 30, 2014
Commercial loan portfolio	$	29,296	$	11,049	$	40,351	$	80,696
Consumer loan portfolio	14,837		5,516		3,334		23,687
Total	$	44,133	$	16,565	$	43,685	$	104,383
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
June 30, 2013
Commercial loan portfolio	$	18,497	$	19,140	$	34,678	$	72,315
Consumer loan portfolio	14,160		3,246		5,378		22,784
Total	$	32,657	$	22,386	$	40,056	$	95,099

The following schedule provides information on the Corporation's TDRs that were modified during the three and six months ended June 30, 2014 and 2013:



	Three Months Ended June 30, 2014					Six Months Ended June 30, 2014
	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	15	$	3,575	$	3,575	27	$	11,931	$	11,931
Commercial real estate	12	3,134		3,134		21	5,924		5,924
Land development	—	—		—		1	72		72
Subtotal – commercial loan portfolio	27	6,709		6,709		49	17,927		17,927
Consumer loan portfolio	63	1,649		1,648		93	2,636		2,626
Total	90	$	8,358	$	8,357	142	$	20,563	$	20,553



	Three Months Ended June 30, 2013 (As Revised)					Six Months Ended June 30, 2013 (As Revised)
	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	8	$	2,753	$	2,753	19	$	4,359	$	4,359
Commercial real estate	10	4,019		4,019		24	7,663		7,663
Real estate construction	—	—		—		2	364		364
Land development	2	1,526		1,526		4	1,958		1,958
Subtotal – commercial loan portfolio	20	8,298		8,298		49	14,344		14,344
Consumer loan portfolio	19	765		745		37	2,156		2,100
Total	39	$	9,063	$	9,043	86	$	16,500	$	16,444

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 and six months ended June 30, 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:



	Three Months Ended June 30, 2014			Six Months Ended June 30, 2014
	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	5	$	771	6	$	875
Commercial real estate	3	603		5	2,273
Subtotal – commercial loan portfolio	8	1,374		11	3,148
Consumer loan portfolio	3	80		3	80
Total	11	$	1,454	14	$	3,228

	Three Months Ended June 30, 2013 (As Revised)			Six Months Ended June 30, 2013 (As Revised)
	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	—	$	—	17	$	1,053
Commercial real estate	—	—		1	126
Real estate construction	—	—		1	160
Land development	2	1,526		2	1,526
Subtotal – commercial loan portfolio	2	1,526		21	2,865
Consumer loan portfolio	4	19		9	503
Total	6	$	1,545	30	$	3,368

During the three and six months ended June 30, 2013, the Corporation had excluded nonaccrual TDRs from the schedule of TDRs that were modified during the three and six months ended June 30, 2013 and the schedule of TDRs for which there was a payment default during the three and six months ended June 30, 2013. The Corporation has revised the amounts reported for the three and six months ended June 30, 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 and six months ended June 30, 2014 and details regarding the balance in the allowance and the recorded investment in loans at June 30, 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 June 30, 2014:
Beginning balance	$	45,010		$	29,233		$	4,230		$	78,473
Provision for loan losses	439			1,287			(226		)	1,500
Charge-offs	(1,814		)	(1,561		)	—			(3,375		)
Recoveries	589			606			—			1,195
Ending balance	$	44,224		$	29,565		$	4,004		$	77,793
Changes in allowance for loan losses for the six months ended June 30, 2014:
Beginning balance	$	44,482		$	30,145		$	4,445		$	79,072
Provision for loan losses	1,399			2,142			(441		)	3,100
Charge-offs	(3,023		)	(3,824		)	—			(6,847		)
Recoveries	1,366			1,102			—			2,468
Ending balance	$	44,224		$	29,565		$	4,004		$	77,793
Allowance for loan losses balance at June 30, 2014 attributable to:
Loans individually evaluated for impairment	$	1,340		$	379		$	—		$	1,719
Loans collectively evaluated for impairment	42,884			28,686			4,004			75,574
Loans acquired with deteriorated credit quality	—			500			—			500
Total	$	44,224		$	29,565		$	4,004		$	77,793
Recorded investment (loan balance) at June 30, 2014:
Loans individually evaluated for impairment	$	86,823		$	20,353		$	—		$	107,176
Loans collectively evaluated for impairment	2,301,480			2,215,753			—			4,517,233
Loans acquired with deteriorated credit quality	234,569			39,826			—			274,395
Total	$	2,622,872		$	2,275,932		$	—		$	4,898,804

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 and six months ended June 30, 2013 and details regarding the balance in the allowance and the recorded investment in loans at June 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 June 30, 2013:
Beginning balance	$	49,107		$	28,852		$	4,875	$	82,834
Provision for loan losses	568			1,648			784		3,000
Charge-offs	(3,221		)	(2,140		)	—		(5,361		)
Recoveries	1,326			385			—		1,711
Ending balance	$	47,780		$	28,745		$	5,659	$	82,184
Changes in allowance for loan losses for the six months ended June 30, 2013:
Beginning balance	$	49,975		$	29,333		$	5,183	$	84,491
Provision for loan losses	3,005			2,519			476		6,000
Charge-offs	(6,737		)	(4,098		)	—		(10,835		)
Recoveries	1,537			991			—		2,528
Ending balance	$	47,780		$	28,745		$	5,659	$	82,184
Allowance for loan losses balance at June 30, 2013 attributable to:
Loans individually evaluated for impairment	$	3,852		$	582		$	—	$	4,434
Loans collectively evaluated for impairment	43,928			27,663			5,659		77,250
Loans acquired with deteriorated credit quality	—			500			—		500
Total	$	47,780		$	28,745		$	5,659	$	82,184
Recorded investment (loan balance) at June 30, 2013:
Loans individually evaluated for impairment	$	80,804		$	17,406		$	—	$	98,210
Loans collectively evaluated for impairment	1,989,486			1,902,937			—		3,892,423
Loans acquired with deteriorated credit quality	294,580			50,658			—		345,238
Total	$	2,364,870		$	1,971,001		$	—	$	4,335,871

The allowance attributable to acquired loans of $0.5 million at June 30, 2014, December 31, 2013 and June 30, 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 June 30, 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 six months ended June 30, 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 June 30, 2014, December 31, 2013 or June 30, 2013.