Loans

12 Months Ended

Dec. 31, 2011

Loans [Abstract]

LOANS

NOTE 4 — LOANS

Loan portfolio segments are defined as the level at which an entity develops and documents a systematic methodology to determine its allowance. The Corporation has two loan portfolio segments (commercial loans and consumer loans) which it uses in determining the allowance. Both quantitative and qualitative factors are used by management at the loan portfolio segment level in determining the adequacy of the allowance for the Corporation. Classes of loans are a disaggregation of an entity’s loan portfolio segments. Classes of loans are defined as a group of loans that share similar initial measurement attributes, risk characteristics, and methods for monitoring and assessing credit risk. The Corporation has seven classes of loans, which are set forth below.

Commercial — Loans and lines of credit to varying types of businesses, including municipalities, school districts and nonprofit organizations, for the purpose of supporting working capital, operational needs and term financing of equipment. Repayment of such loans is generally provided through operating cash flows of the business. Commercial loans are predominately secured by equipment, inventory, accounts receivable, personal guarantees of the owner and other sources of repayment, although the Corporation may also secure commercial loans with real estate.

Real estate commercial — Loans secured by real estate occupied by the borrower for ongoing operations, non-owner occupied real estate leased to one or more tenants and vacant land that has been acquired for investment or future land development.

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

Land development — Secured development loans made to borrowers for the purpose of infrastructure improvements to vacant land to create finished marketable residential and commercial lots/land. Most land development loans are originated with the intention that the loans will be paid through the sale of developed lots/land by the developers within twelve months of the completion date. Land development loans at December 31, 2011 and 2010 were primarily comprised of loans to develop residential properties.

Real estate residential — Loans secured by one- to four-family residential properties generally with fixed interest rates of fifteen years or less. The loan-to-value ratio at the time of origination is generally 80% or less. Real estate residential loans with a loan-to-value ratio of more than 80% generally require private mortgage insurance.

Consumer installment — Loans to consumers primarily for the purpose of acquiring automobiles, recreational vehicles and boats. These loans consist of relatively small amounts that are spread across many individual borrowers.

Home equity — Loans and lines of credit whereby consumers utilize equity in their personal residence, generally through a second mortgage, as collateral to secure the loan.

Commercial, real estate commercial, real estate construction and land development loans are referred to as the Corporation’s commercial loan portfolio, while real estate residential, consumer installment and home equity loans are referred to as the Corporation’s consumer loan portfolio.

A summary of loans follows:

	December 31,
	2011		2010
	(In thousands)
Commercial loan portfolio:
Commercial	$	895,150	$	818,997
Real estate commercial		1,071,999		1,076,971
Real estate construction		73,355		89,234
Land development		44,821		53,386
Subtotal		2,085,325		2,038,588
Consumer loan portfolio:
Real estate residential		861,716		798,046
Consumer installment		484,058		468,132
Home equity		400,186		376,896
Subtotal		1,745,960		1,643,074
Total loans	$	3,831,285	$	3,681,662

Chemical Bank has extended loans to its directors, executive officers and their affiliates. These loans were made in the ordinary course of business upon normal terms, including collateralization and interest rates prevailing at the time, and did not involve more than the normal risk of repayment by the borrower. The aggregate loans outstanding to the directors, executive officers and their affiliates totaled approximately $16.2 million at December 31, 2011 and $14.6 million at December 31, 2010. During 2011 and 2010, there were $35.1 million and $23.5 million, respectively, of new loans and other additions, while repayments and other reductions totaled $33.5 million and $27.3 million, respectively.

Loans held for sale, comprised of fixed-rate real estate residential loans, were $18.8 million at December 31, 2011 and $20.5 million at December 31, 2010. The Corporation sold real estate residential loans totaling $219 million in 2011 and $275 million in 2010. The only loans purchased by the Corporation during 2011 and 2010 were those acquired in the OAK acquisition in 2010, as discussed in Note 2.

Credit Quality Monitoring

The Corporation maintains loan policies and credit underwriting standards as part of the process of managing credit risk. These standards include making loans generally only within the Corporation’s market areas. The Corporation’s lending markets generally consist of communities across the middle to southern and western sections of the lower peninsula of Michigan. The Corporation’s lending market areas do not include the southeastern portion of Michigan. The Corporation has no foreign loans.

The Corporation has a commercial loan portfolio approval process involving underwriting and individual and group loan approval authorities to consider credit quality and loss exposure at loan origination. The loans in the Corporation’s commercial loan portfolio are risk rated at origination based on the grading system set forth below. The approval authority of relationship managers is established based on experience levels, with credit decisions greater than $1.0 million requiring group loan authority approval, except for four executive and senior officers who have varying limits exceeding $1.5 million and up to $3.5 million. With respect to the group loan authorities, the Corporation has a loan committee, consisting of certain executive and senior officers, that meets weekly to consider loans ranging in amounts from $1.0 million to $5.0 million, depending on risk rating and credit action required. A directors’ loan committee, consisting of ten members of the board of directors, including the chief executive officer, and the senior credit officer, meets bi-weekly to consider loans ranging in amounts from $5.0 million to $10.0 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 the approval of the board of directors.

The majority of the Corporation’s consumer loan portfolio is comprised of secured loans that are relatively small. The Corporation’s consumer loan portfolio has a centralized approval process 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

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 unattainable; 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 in risk grades 1 through 5 as acceptable credit risks and structures and manages such relationships accordingly. Periodic financial and operating data combined with regular loan officer interactions are deemed adequate to monitor borrower performance. Loans with risk grades of 6 and 7 are considered “watch credits” and the frequency of loan officer contact and receipt of financial data is increased to stay abreast of borrower performance. Loans with risk grades of 8 and 9 are considered problematic and require special care. Further, loans with risk grades of 6 through 9 are managed and monitored regularly through a number of processes, procedures and committees, including oversight by a loan administration committee comprised of executive and senior management of the Corporation, which 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 December 31, 2011 and 2010:

	Commercial		Real Estate Commercial		Real Estate Construction		Land Development		Total
	(In thousands)
December 31, 2011
Originated Portfolio:
Risk Grades 1-5	$	706,040	$	692,193	$	54,029	$	14,791	$	1,467,053
Risk Grade 6		20,531		29,788		287		6,874		57,480
Risk Grade 7		26,238		48,648		—		2,400		77,286
Risk Grade 8		9,828		40,130		—		4,593		54,551
Risk Grade 9		898		4,308		—		1,597		6,803
Subtotal		763,535		815,067		54,316		30,255		1,663,173
Acquired Portfolio:
Risk Grades 1-5		111,846		231,669		18,883		8,358		370,756
Risk Grade 6		9,990		14,346		—		1,277		25,613
Risk Grade 7		3,101		8,556		—		596		12,253
Risk Grade 8		6,678		2,361		156		4,335		13,530
Risk Grade 9		—		—		—		—		—
Subtotal		131,615		256,932		19,039		14,566		422,152
Total	$	895,150	$	1,071,999	$	73,355	$	44,821	$	2,085,325
December 31, 2010:
Originated Portfolio:
Risk Grades 1-5	$	619,150	$	656,471	$	67,907	$	15,797	$	1,359,325
Risk Grade 6		22,173		39,653		737		8,935		71,498
Risk Grade 7		16,480		35,471		551		983		53,485
Risk Grade 8		16,061		57,287		—		6,537		79,885
Risk Grade 9		607		3,271		—		2,430		6,308
Subtotal		674,471		792,153		69,195		34,682		1,570,501
Acquired Portfolio:
Risk Grades 1-5		119,943		249,495		19,796		12,667		401,901
Risk Grade 6		10,236		18,202		—		—		28,438
Risk Grade 7		6,050		14,896		—		457		21,403
Risk Grade 8		8,282		2,225		243		5,580		16,330
Risk Grade 9		15		—		—		—		15
Subtotal		144,526		284,818		20,039		18,704		468,087
Total	$	818,997	$	1,076,971	$	89,234	$	53,386	$	2,038,588

The Corporation evaluates the credit quality of loans in the consumer loan portfolio based on the performing or nonperforming status of the loan. Loans in the consumer loan portfolio that are performing in accordance with original contractual terms and are less than 90 days past due and accruing interest are considered to be in a performing status, while those that are not performing in accordance with original contractual terms and are more than 90 days past due are considered to be in a nonperforming status. Loans in the consumer loan portfolio that are reported as TDRs are considered in a nonperforming status until they meet the Corporation’s definition of a performing TDR, at which time they are considered in a performing status. The following schedule presents the recorded investment of loans in the consumer loan portfolio based on loans in a performing status and loans in a nonperforming status at December 31, 2011 and 2010:

	Real Estate Residential		Consumer Installment		Home Equity		Total Consumer
	(In thousands)
December 31, 2011
Originated Loans:
Performing	$	818,044	$	479,237	$	349,850	$	1,647,131
Nonperforming		22,708		1,707		3,783		28,198
Subtotal		840,752		480,944		353,633		1,675,329
Acquired Loans:
Performing		19,387		3,114		46,091		68,592
Nonperforming		1,577		—		462		2,039
Subtotal		20,964		3,114		46,553		70,631
Total	$	861,716	$	484,058	$	400,186	$	1,745,960
December 31, 2010:
Originated Loans:
Performing	$	733,461	$	460,203	$	321,854	$	1,515,518
Nonperforming		37,638		1,846		3,895		43,379
Subtotal		771,099		462,049		325,749		1,558,897
Acquired Loans:
Performing		25,406		6,083		50,873		82,362
Nonperforming		1,541		—		274		1,815
Subtotal		26,947		6,083		51,147		84,177
Total	$	798,046	$	468,132	$	376,896	$	1,643,074

Nonperforming Loans

A summary of nonperforming loans follows:

	December 31,
	2011		2010
	(In thousands)
Nonaccrual loans:
Commercial	$	10,726	$	16,668
Real estate commercial		44,438		60,558
Real estate construction and land development		6,190		8,967
Real estate residential		12,573		12,083
Consumer installment and home equity		4,467		4,686
Total nonaccrual loans		78,394		102,962
Accruing loans contractually past due 90 days or more as to interest or principal payments:
Commercial		1,381		530
Real estate commercial		374		1,350
Real estate construction and land development		287		1,220
Real estate residential		752		3,253
Consumer installment and home equity		1,023		1,055
Total accruing loans contractually past due 90 days or more as to interest or principal payments		3,817		7,408
Nonperforming TDRs:
Commercial loan portfolio		14,675		15,057
Consumer loan portfolio		9,383		22,302
Total nonperforming TDRs		24,058		37,359
Total nonperforming loans	$	106,269	$	147,729

There was no interest income recognized on nonaccrual loans during 2011, 2010 and 2009 while the loans were in nonaccrual status. During 2011 and 2010, the Corporation recognized $1.0 million and $1.1 million, respectively, of interest income on these loans while they were in an accruing status. Additional interest income that would have been recorded on these loans had they been current in accordance with their original terms was $6.0 million in 2011, $5.9 million in 2010 and $6.1 million in 2009. During 2011 and 2010, the Corporation recognized interest income of $2.3 million and $1.8 million, respectively, on TDRs.

Impaired Loans

The following schedule presents impaired loans by classes of loans at December 31, 2011:

	Recorded Investment		Unpaid Principal Balance		Related Valuation Allowance		Average Annual Recorded Investment		Interest  Income Recognized While on Impaired Status
	(In thousands)
Impaired loans with a valuation allowance:
Commercial	$	6,362	$	7,650	$	1,480	$	6,997	$	—
Real estate commercial		20,050		21,370		6,775		27,762		—
Land development		902		934		327		1,928		—
Real estate residential		25,012		25,012		704		22,525		1,433
Subtotal		52,326		54,966		9,286		59,212		1,433
Impaired loans with no related valuation allowance:
Commercial		19,559		29,349		—		22,900		1,000
Real estate commercial		40,953		54,249		—		41,663		767
Real estate construction		156		934		—		181		12
Land development		10,187		15,788		—		11,507		352
Real estate residential		12,573		12,573		—		16,054		—
Consumer installment		1,707		1,707		—		2,665		—
Home equity		2,760		2,760		—		3,126		—
Subtotal		87,895		117,360		—		98,096		2,131
Total impaired loans:
Commercial		25,921		36,999		1,480		29,897		1,000
Real estate commercial		61,003		75,619		6,775		69,425		767
Real estate construction		156		934		—		181		12
Land development		11,089		16,722		327		13,435		352
Real estate residential		37,585		37,585		704		38,579		1,433
Consumer installment		1,707		1,707		—		2,665		—
Home equity		2,760		2,760		—		3,126		—
Total	$	140,221	$	172,326	$	9,286	$	157,308	$	3,564

The following schedule presents impaired loans by classes of loans at December 31, 2010:

	Recorded Investment		Unpaid Principal Balance		Related Valuation Allowance		Average Annual Recorded Investment		Interest Income Recognized While on Impaired Status
	(In thousands)
Impaired loans with a valuation allowance:
Commercial	$	8,289	$	8,675	$	2,947	$	12,035	$	—
Real estate commercial		34,681		35,744		11,356		30,764		—
Land development		1,881		1,984		663		2,939		—
Real estate residential		22,302		22,302		806		18,890		878
Subtotal		67,153		68,705		15,772		64,628		878
Impaired loans with no related valuation allowance:
Commercial		28,597		39,927		—		18,030		1,114
Real estate commercial		38,689		51,722		—		36,629		371
Land development		10,498		15,039		—		9,888		84
Real estate residential		12,083		12,083		—		11,989		—
Consumer installment		1,751		1,751		—		1,691		—
Home equity		2,935		2,935		—		2,834		—
Subtotal		94,553		123,457		—		81,061		1,569
Total impaired loans:
Commercial		36,886		48,602		2,947		30,065		1,114
Real estate commercial		73,370		87,466		11,356		67,393		371
Land development		12,379		17,023		663		12,827		84
Real estate residential		34,385		34,385		806		30,879		878
Consumer installment		1,751		1,751		—		1,691		—
Home equity		2,935		2,935		—		2,834		—
Total	$	161,706	$	192,162	$	15,772	$	145,689	$	2,447

The difference between an impaired loan’s recorded investment and the unpaid principal balance represents either (i) for originated loans, a partial charge-off resulting from a confirmed loss due to the value of the collateral securing the loan being below the loan balance and management’s assessment that full collection of the loan balance is not likely or (ii) for acquired loans that meet the definition of an impaired loan, fair value adjustments recognized at the acquisition date attributable to expected credit losses and the discounting of expected cash flows at market interest rates. The difference between the recorded investment and the unpaid principal balance of $32.1 million and $30.5 million at December 31, 2011 and December 31, 2010, respectively, includes confirmed losses (partial charge-offs) of $21.7 million and $19.8 million, respectively, and fair value discount adjustments of $10.4 million and $10.7 million, respectively.

Impaired loans included $17.4 million and $21.4 million at December 31, 2011 and December 31, 2010, respectively, of acquired loans that were not performing in accordance with original contractual terms. These loans are not reported as nonperforming loans, as a market yield adjustment was recognized on these loans at acquisition that is being amortized into interest income. Impaired loans at December 31, 2011 also included $20.4 million of performing TDRs.

The following schedule presents the aging status of the recorded investment in loans by portfolio segment/class at December 31, 2011 and 2010.

	31-60 Days Past Due		61-89 Days Past Due		Accruing Loans Past Due 90 Days or More		Nonaccrual Loans		Total Past Due		Current		Total Loans
	(In thousands)
December 31, 2011
Originated Portfolio:
Commercial	$	5,207	$	6,268	$	1,381	$	10,726	$	23,582	$	739,953	$	763,535
Real estate commercial		9,967		3,241		374		44,438		58,020		757,047		815,067
Real estate construction		—		—		287		—		287		54,029		54,316
Land development		—		—		—		6,190		6,190		24,065		30,255
Real estate residential		5,591		76		752		12,573		18,992		821,760		840,752
Consumer installment		3,449		1,174		—		1,707		6,330		474,614		480,944
Home equity		2,038		408		1,023		2,760		6,229		347,404		353,633
Total	$	26,252	$	11,167	$	3,817	$	78,394	$	119,630	$	3,218,872	$	3,338,502
Acquired Portfolio:
Commercial	$	394	$	—	$	7,808	$	—	$	8,202	$	123,413	$	131,615
Real estate commercial		1,820		—		2,592		—		4,412		252,520		256,932
Real estate construction		—		—		156		—		156		18,883		19,039
Land development		—		—		4,780		—		4,780		9,786		14,566
Real estate residential		288		—		1,577		—		1,865		19,099		20,964
Consumer installment		49		11		—		—		60		3,054		3,114
Home equity		641		262		462		—		1,365		45,188		46,553
Total	$	3,192	$	273	$	17,375	$	—	$	20,840	$	471,943	$	492,783
December 31, 2010
Originated Portfolio:
Commercial	$	6,788	$	3,645	$	530	$	16,668	$	27,631	$	646,840	$	674,471
Real estate commercial		9,960		4,139		1,350		60,558		76,007		716,146		792,153
Real estate construction		689		—		—		—		689		68,506		69,195
Land development		—		119		1,220		8,967		10,306		24,376		34,682
Real estate residential		1,126		6,610		3,253		12,083		23,072		748,027		771,099
Consumer installment		6,179		1,741		95		1,751		9,766		452,283		462,049
Home equity		3,046		825		960		2,935		7,766		317,983		325,749
Total	$	27,788	$	17,079	$	7,408	$	102,962	$	155,237	$	2,974,161	$	3,129,398
Acquired Portfolio:
Commercial	$	131	$	64	$	10,445	$	—	$	10,640	$	133,886	$	144,526
Real estate commercial		993		—		3,302		—		4,295		280,523		284,818
Real estate construction		736		—		243		—		979		19,060		20,039
Land development		2,697		—		5,580		—		8,277		10,427		18,704
Real estate residential		685		—		1,541		—		2,226		24,721		26,947
Consumer installment		19		43		—		—		62		6,021		6,083
Home equity		85		34		274		—		393		50,754		51,147
Total	$	5,346	$	141	$	21,385	$	—	$	26,872	$	525,392	$	552,264

Loans Modified Under Troubled Debt Restructurings (TDRs)

The following schedule presents the Corporation’s TDRs at December 31, 2011 and 2010:

	December 31, 2011						December 31, 2010
	Performing		Nonperforming		Total		Performing		Nonperforming		Total
	(In thousands)
Commercial loan portfolio	$	4,765	$	14,675	$	19,440	$	—	$	15,057	$	15,057
Consumer loan portfolio		15,629		9,383		25,012		—		22,302		22,302
Total	$	20,394	$	24,058	$	44,452	$	—	$	37,359	$	37,359

The following schedule provides information on performing and nonperforming TDRs at December 31, 2011 that were modified during the twelve months ended December 31, 2011:

	Twelve Months Ended December 31, 2011
	Number of Loans		Pre- Modification Recorded Investment		Post- Modification Recorded Investment
	(Dollars in thousands)
Commercial loan portfolio:
Commercial		19	$	4,708	$	4,708
Real estate commercial		25		6,267		6,267
Subtotal		44		10,975		10,975
Consumer loan portfolio (real estate residential)		126		10,545		10,127
Total		170	$	21,520	$	21,102

The pre-modification and post-modification recorded investment represents amounts as of the date of loan modification. The difference between the pre-modification and post-modification recorded investment of real estate residential TDRs represents impairment recognized by the Corporation through the provision for loan losses computed based on a loan’s post-modification present value of expected future cash flows discounted at the loan’s original effective interest rate. No provision for loan losses was recognized related to TDRs in the commercial loan portfolio as the Corporation does not expect to incur a loss on these loans based on its assessment of the borrower’s expected cash flows.

The following schedule includes performing and nonperforming TDRs at December 31, 2011, and TDRs that were transferred to nonaccrual status during 2011, for which there was a payment default during the twelve months ended December 31, 2011, 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 December 31, 2011
	(Dollars in thousands)
Commercial loan portfolio:
Commercial		7	$	2,659
Real estate commercial		9		1,828
Subtotal		16		4,487
Consumer loan portfolio (real estate residential)		18		1,740
Total		34	$	6,227

Allowance for Loan Losses

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

	Commercial Loan Portfolio			Consumer Loan Portfolio			Unallocated		Total
	(In thousands)
Changes in allowance for loan losses for the year ended December 31, 2011:
Beginning balance	$	59,443		$	27,338		$	2,749	$	89,530
Provision for loan losses		14,196			11,031			773		26,000
Charge-offs		(20,571	)		(11,537	)		—		(32,108	)
Recoveries		2,577			2,334			—		4,911
Ending balance	$	55,645		$	29,166		$	3,522	$	88,333
Allowance for loan losses balance at December 31, 2011 attributable to:
Loans individually evaluated for impairment	$	8,582		$	704		$	—	$	9,286
Loans collectively evaluated for impairment		45,863			28,062			3,522		77,447
Loans acquired with deteriorated credit quality		1,200			400			—		1,600
Total	$	55,645		$	29,166		$	3,522	$	88,333
Recorded investment (loan balance) at December 31, 2011:
Loans individually evaluated for impairment	$	80,794		$	25,012		$	—	$	105,806
Loans collectively evaluated for impairment		1,582,379			1,650,317			—		3,232,696
Loans acquired with deteriorated credit quality		422,152			70,631			—		492,783
Total	$	2,085,325		$	1,745,960		$	—	$	3,831,285

The following presents, by loan portfolio segment, the changes in the allowance for the year ended December 31, 2010 and details regarding the balance in the allowance and the recorded investment in loans at December 31, 2010 by impairment evaluation method.

	Commercial Loan Portfolio			Consumer Loan Portfolio			Unallocated		Total
	(In thousands)
Changes in allowance for loan losses for the year ended December 31, 2010:
Beginning balance	$	48,239		$	30,907		$	1,695	$	80,841
Provision for loan losses		31,617			12,929			1,054		45,600
Charge-offs		(21,780	)		(18,706	)		—		(40,486	)
Recoveries		1,367			2,208			—		3,575
Ending balance	$	59,443		$	27,338		$	2,749	$	89,530
Allowance for loan losses balance at December 31, 2010 attributable to:
Loans individually evaluated for impairment	$	14,966		$	806		$	—	$	15,772
Loans collectively evaluated for impairment		44,477			26,532			2,749		73,758
Loans acquired with deteriorated credit quality		—			—			—		—
Total	$	59,443		$	27,338		$	2,749	$	89,530
Recorded investment (loan balance) at December 31, 2010:
Loans individually evaluated for impairment	$	101,250		$	22,302		$	—	$	123,552
Loans collectively evaluated for impairment		1,469,251			1,536,595			—		3,005,846
Loans acquired with deteriorated credit quality		468,087			84,177			—		552,264
Total	$	2,038,588		$	1,643,074		$	—	$	3,681,662

At December 31, 2011, the $1.6 million allowance attributable to acquired loans was primarily related to one of the acquired loan pools experiencing a decline in expected cash flows as of that date. There were no material changes in expected cash flows for the remaining acquired loan pools at December 31, 2011. An allowance related to acquired loans was not required at December 31, 2010.