Loans

6 Months Ended

Jun. 30, 2012

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 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.

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 June 30, 2012 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:

	June  30, 2012		December  31, 2011		June  30, 2011
	(In thousands)
Commercial loan portfolio:
Commercial	$	915,352	$	895,150	$	842,404
Real estate commercial		1,119,655		1,071,999		1,065,606
Real estate construction		54,538		73,355		91,152
Land development		39,689		44,821		51,199
Subtotal		2,129,234		2,085,325		2,050,361
Consumer loan portfolio:
Real estate residential		873,214		861,716		825,860
Consumer installment		535,283		484,058		517,405
Home equity		424,611		400,186		354,384
Subtotal		1,833,108		1,745,960		1,697,649
Total loans	$	3,962,342	$	3,831,285	$	3,748,010

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 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 with risk grades of 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 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 includes 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, 2012, December 31, 2011 and June 30, 2011:

	Commercial		Real Estate Commercial		Real Estate Construction		Land Development		Total
	(In thousands)
June 30, 2012
Originated Portfolio:
Risk Grades 1-5	$	727,713	$	773,312	$	35,496	$	15,950	$	1,552,471
Risk Grade 6		23,651		37,144		—		3,915		64,710
Risk Grade 7		23,213		38,577		701		5,526		68,017
Risk Grade 8		12,235		38,509		408		3,077		54,229
Risk Grade 9		438		3,182		—		—		3,620
Subtotal		787,250		890,724		36,605		28,468		1,743,047
Acquired Portfolio:
Risk Grades 1-5		107,624		205,091		17,933		7,887		338,535
Risk Grade 6		13,158		12,560		—		—		25,718
Risk Grade 7		1,611		9,398		—		—		11,009
Risk Grade 8		5,709		1,882		—		3,334		10,925
Risk Grade 9		—		—		—		—		—
Subtotal		128,102		228,931		17,933		11,221		386,187
Total	$	915,352	$	1,119,655	$	54,538	$	39,689	$	2,129,234
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
June 30, 2011
Originated Portfolio:
Risk Grades 1-5	$	637,709	$	673,117	$	69,609	$	15,684	$	1,396,119
Risk Grade 6		26,240		22,354		290		7,842		56,726
Risk Grade 7		20,766		49,993		182		651		71,592
Risk Grade 8		12,955		53,494		—		6,844		73,293
Risk Grade 9		1,431		3,830		—		2,089		7,350
Subtotal		699,101		802,788		70,081		33,110		1,605,080
Acquired Portfolio:
Risk Grades 1-5		121,952		236,604		20,918		11,405		390,879
Risk Grade 6		7,127		11,126		—		1,749		20,002
Risk Grade 7		7,904		10,881		—		653		19,438
Risk Grade 8		6,285		4,207		153		4,282		14,927
Risk Grade 9		35		—		—		—		35
Subtotal		143,303		262,818		21,071		18,089		445,281
Total	$	842,404	$	1,065,606	$	91,152	$	51,199	$	2,050,361

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 June 30, 2012, December 31, 2011 and June 30, 2011:

	Real  Estate Residential		Consumer Installment		Home Equity		Total Consumer
	(In thousands)
June 30, 2012
Originated Loans:
Performing	$	839,464	$	531,701	$	378,196	$	1,749,361
Nonperforming		17,551		1,182		3,969		22,702
Subtotal		857,015		532,883		382,165		1,772,063
Acquired Loans:
Performing		15,773		2,400		42,134		60,307
Nonperforming		426		—		312		738
Subtotal		16,199		2,400		42,446		61,045
Total	$	873,214	$	535,283	$	424,611	$	1,833,108
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
June 30, 2011
Originated Loans:
Performing	$	771,086	$	509,114	$	300,828	$	1,581,028
Nonperforming		30,930		3,215		4,926		39,071
Subtotal		802,016		512,329		305,754		1,620,099
Acquired Loans:
Performing		22,750		5,076		48,245		76,071
Nonperforming		1,094		—		385		1,479
Subtotal		23,844		5,076		48,630		77,550
Total	$	825,860	$	517,405	$	354,384	$	1,697,649

Nonperforming Loans

A summary of nonperforming loans follows:

	June  30, 2012		December  31, 2011		June  30, 2011
	(In thousands)
Nonaccrual loans:
Commercial	$	12,673	$	10,726	$	14,386
Real estate commercial		41,691		44,438		57,324
Real estate construction and land development		3,485		6,190		8,933
Real estate residential		12,613		12,573		17,809
Consumer installment and home equity		3,994		4,467		6,898
Total nonaccrual loans		74,456		78,394		105,350
Accruing loans contractually past due 90 days or more as to interest or principal payments:
Commercial		300		1,381		629
Real estate commercial		269		374		143
Real estate construction and land development		—		287		—
Real estate residential		840		752		1,729
Consumer installment and home equity		1,157		1,023		1,243
Total accruing loans contractually past due 90 days or more as to interest or principal payments		2,566		3,817		3,744
Nonperforming TDRs:
Commercial loan portfolio		11,691		14,675		15,443
Consumer loan portfolio		4,098		9,383		11,392
Total nonperforming TDRs		15,789		24,058		26,835
Total nonperforming loans	$	92,811	$	106,269	$	135,929

The Corporation’s nonaccrual loans at June 30, 2012, December 31, 2011 and June 30, 2011 included $33.4 million, $41.8 million and $52.0 million, respectively, of modified loans that were not reported as TDRs.

Impaired Loans

The following schedule presents impaired loans by classes of loans at June 30, 2012, December 31, 2011 and June 30, 2011:

	Recorded Investment		Unpaid Principal Balance		Related Valuation Allowance
	(In thousands)
June 30, 2012
Impaired loans with a valuation allowance:
Commercial	$	4,112	$	4,813	$	1,423
Real estate commercial		19,581		21,555		5,750
Real estate construction		181		181		134
Land development		972		1,008		154
Real estate residential		18,399		18,399		677
Subtotal	$	43,245	$	45,956	$	8,138
Impaired loans with no related valuation allowance:
Commercial		23,690		28,827		—
Real estate commercial		38,947		51,008		—
Real estate construction		227		1,394		—
Land development		7,467		9,516		—
Real estate residential		12,613		12,613		—
Consumer installment		1,182		1,182		—
Home equity		2,812		2,812		—
Subtotal		86,938		107,352		—
Total impaired loans:
Commercial		27,802		33,640		1,423
Real estate commercial		58,528		72,563		5,750
Real estate construction		408		1,575		134
Land development		8,439		10,524		154
Real estate residential		31,012		31,012		677
Consumer installment		1,182		1,182		0
Home equity		2,812		2,812		0
Total	$	130,183	$	153,308		8,138
December 31, 2011
Impaired loans with a valuation allowance:
Commercial	$	6,362	$	7,650	$	1,480
Real estate commercial		20,050		21,370		6,775
Land development		902		934		327
Real estate residential		25,012		25,012		704
Subtotal		52,326		54,966		9,286
Impaired loans with no related valuation allowance:
Commercial		19,559		29,349		—
Real estate commercial		40,953		54,249		—
Real estate construction		156		934		—
Land development		10,187		15,788		—
Real estate residential		12,573		12,573		—
Consumer installment		1,707		1,707		—
Home equity		2,760		2,760		—
Subtotal		87,895		117,360		—
Total impaired loans:
Commercial		25,921		36,999		1,480
Real estate commercial		61,003		75,619		6,775
Real estate construction		156		934		—
Land development		11,089		16,722		327
Real estate residential		37,585		37,585		704
Consumer installment		1,707		1,707		—
Home equity		2,760		2,760		—
Total	$	140,221	$	172,326	$	9,286

	Recorded Investment		Unpaid Principal Balance		Related Valuation Allowance
	(In thousands)
June 30, 2011
Impaired loans with a valuation allowance:
Commercial	$	7,278	$	9,096	$	2,127
Real estate commercial		29,681		31,417		8,227
Land development		2,225		2,234		522
Real estate residential		22,156		22,156		745
Subtotal		61,340		64,903		11,621
Impaired loans with no related valuation allowance:
Commercial		22,315		29,976		—
Real estate commercial		43,258		57,680		—
Real estate construction		152		1,124		—
Land development		11,872		17,625		—
Real estate residential		17,809		17,809		—
Consumer installment		3,205		3,205		—
Home equity		3,693		3,693		—
Subtotal		102,304		131,112		—
Total impaired loans:
Commercial		29,593		39,072		2,127
Real estate commercial		72,939		89,097		8,227
Real estate construction		152		1,124		—
Land development		14,097		19,859		522
Real estate residential		39,965		39,965		745
Consumer installment		3,205		3,205		—
Home equity		3,693		3,693		—
Total	$	163,644	$	196,015	$	11,621

The difference between an impaired loan’s recorded investment and the unpaid principal balance represents either (i) for originated loans, a partial charge-off resulting from a confirmed loss due to the value of the collateral securing the loan being below the loan balance and management’s assessment that full collection of the loan balance is not likely or (ii) for acquired loans that meet the definition of an impaired loan, fair value adjustments recognized at the acquisition date attributable to expected credit losses and the discounting of expected cash flows at market interest rates. The difference between the recorded investment and the unpaid principal balance of $23.1 million, $32.1 million and $32.4 million at June 30, 2012, December 31, 2011 and June 30, 2011, respectively, includes confirmed losses (partial charge-offs) of $19.1 million, $21.7 million and $22.6 million, respectively, and fair value discount adjustments of $4.0 million, $10.4 million and $9.8 million, respectively.

The following schedule presents information related to impaired loans for the three and six months ended June 30, 2012 and 2011:

	Three Months Ended June 30, 2012				Six Months Ended June 30, 2012
	Average Recorded Investment		Interest  Income Recognized While on Impaired Status		Average Recorded Investment		Interest  Income Recognized While on Impaired Status
	(In thousands)
Commercial	$	29,018	$	279	$	27,183	$	453
Real estate commercial		59,903		202		61,333		430
Real estate construction		435		—		249		—
Land development		8,301		73		8,014		145
Real estate residential		35,100		350		36,365		743
Consumer installment		1,219		—		1,379		—
Home equity		2,966		—		2,895		—
Total	$	136,942	$	904	$	137,418	$	1,771

	Three Months Ended June 30, 2011				Six Months Ended June 30, 2011
	Average Recorded Investment		Interest  Income Recognized While on Impaired Status		Average Recorded Investment		Interest  Income Recognized While on Impaired Status
	(In thousands)
Commercial	$	29,814	$	216	$	31,279	$	541
Real estate commercial		71,050		152		72,464		396
Real estate construction		196		15		216		30
Land development		13,750		107		14,203		196
Real estate residential		39,369		248		37,777		485
Consumer installment		3,032		—		2,808		—
Home equity		3,384		—		3,091		—
Total	$	160,595	$	738	$	161,838	$	1,648

Impaired loans included $13.6 million, $17.4 million and $18.6 million at June 30, 2012, December 31, 2011 and June 30, 2011, 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 also included $26.4 million, $20.4 million and $12.9 million at June 30, 2012, December 31, 2011 and June 30, 2011, respectively, of performing TDRs.

The following schedule presents the aging status of the recorded investment in loans by classes of loans at June 30, 2012, December 31, 2011 and June 30, 2011:

	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)
June 30, 2012
Originated Portfolio:
Commercial	$	5,089	$	1,838	$	300	$	12,673	$	19,900	$	767,350	$	787,250
Real estate commercial		8,595		556		269		41,691		51,111		839,613		890,724
Real estate construction		—		—		—		408		408		36,197		36,605
Land development		728		187		—		3,077		3,992		24,476		28,468
Real estate residential		2,568		94		840		12,613		16,115		840,900		857,015
Consumer installment		2,743		201		—		1,182		4,126		528,757		532,883
Home equity		1,013		660		1,157		2,812		5,642		376,523		382,165
Total	$	20,736	$	3,536	$	2,566	$	74,456	$	101,294	$	3,413,816	$	3,515,110
Acquired Portfolio:
Commercial	$	57	$	—	$	5,919	$	—	$	5,976	$	122,126	$	128,102
Real estate commercial		1,016		—		3,291		—		4,307		224,624		228,931
Real estate construction		—		—		—		—		—		17,933		17,933
Land development		—		—		3,607		—		3,607		7,614		11,221
Real estate residential		75		—		426		—		501		15,698		16,199
Consumer installment		12		—		—		—		12		2,388		2,400
Home equity		258		—		312		—		570		41,826		42,446
Total	$	1,418	$	—	$	13,555	$	—	$	14,973	$	432,259	$	447,232
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
June 30, 2011
Originated Portfolio:
Commercial	$	6,480	$	2,888	$	629	$	14,386	$	24,383	$	674,718	$	699,101
Real estate commercial		11,256		3,479		143		57,324		72,202		730,586		802,788
Real estate construction		—		290		—		—		290		69,791		70,081
Land development		209		—		—		8,933		9,142		23,968		33,110
Real estate residential		7,284		226		1,729		17,809		27,048		774,968		802,016
Consumer installment		4,302		1,056		—		3,205		8,563		503,766		512,329
Home equity		2,635		702		1,243		3,693		8,273		297,481		305,754
Total	$	32,166	$	8,641	$	3,744	$	105,350	$	149,901	$	3,075,278	$	3,225,179
Acquired Portfolio:
Commercial	$	18	$	—	$	7,659	$	—	$	7,677	$	135,626	$	143,303
Real estate commercial		368		—		4,235		—		4,603		258,215		262,818
Real estate construction		—		—		152		—		152		20,919		21,071
Land development		—		—		5,045		—		5,045		13,044		18,089
Real estate residential		128		—		1,094		—		1,222		22,622		23,844
Consumer installment		168		62		—		—		230		4,846		5,076
Home equity		370		107		385		—		862		47,768		48,630
Total	$	1,052	$	169	$	18,570	$	—	$	19,791	$	503,040	$	522,831

Loans Modified Under Troubled Debt Restructurings (TDRs)

The following schedule presents the Corporation’s TDRs at June 30, 2012, December 31, 2011 and June 30, 2011:

	Performing		Nonperforming		Total
	(In thousands)
June 30, 2012
Commercial loan portfolio	$	12,082	$	11,691	$	23,773
Consumer loan portfolio		14,301		4,098		18,399
Total	$	26,383	$	15,789	$	42,172
December 31, 2011
Commercial loan portfolio	$	4,765	$	14,675	$	19,440
Consumer loan portfolio		15,629		9,383		25,012
Total	$	20,394	$	24,058	$	44,452
June 30, 2011
Commercial loan portfolio	$	2,125	$	15,443	$	17,568
Consumer loan portfolio		10,764		11,392		22,156
Total	$	12,889	$	26,835	$	39,724

The following schedule provides information on loans reported as performing and nonperforming TDRs that were modified during the three and six months ended June 30, 2012 and 2011:

	Three Months Ended June 30, 2012						Six Months Ended June 30, 2012
	Number of  Loans		Pre- Modification Recorded Investment		Post- Modification Recorded Investment		Number of  Loans		Pre- Modification Recorded Investment		Post- Modification Recorded Investment
	(Dollars in thousands)
Commercial loan portfolio:
Commercial		5	$	1,964	$	1,964		10	$	3,225	$	3,225
Real estate commercial		6		2,309		2,309		11		3,839		3,839
Land development		—		—		—		1		1,638		1,638
Subtotal – commercial loan portfolio		11		4,273		4,273		22		8,702		8,702
Consumer loan portfolio (real estate residential)		22		1,776		1,711		42		4,931		4,772
Total		33	$	6,049	$	5,984		64	$	13,633	$	13,474

	Three Months Ended June 30, 2011						Six Months Ended June 30, 2011
	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		5	$	759	$	759		14	$	2,267	$	2,267
Real estate commercial		7		1,870		1,870		12		3,429		3,429
Subtotal – commercial loan portfolio		12		2,629		2,629		26		5,696		5,696
Consumer loan portfolio (real estate residential)		27		2,591		2,491		49		4,802		4,634
Total		39	$	5,220	$	5,120		75	$	10,498	$	10,330

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 June 30, 2012, and TDRs that were transferred to nonaccrual status during the three and six months ended June 30, 2012, for which there was a payment default during the three and six months ended June 30, 2012, whereby the borrower was past due with respect to principal and/or interest for 90 days or more, and the loan became a TDR during the twelve-month period prior to the default:

	With Payment Defaults During the Following Periods:
	Three Months Ended June 30, 2012				Six Months Ended June 30, 2012
	Number of		Principal Balance at		Number of		Principal Balance at
	Loans		June 30, 2012		Loans		June 30, 2012
	(Dollars in thousands)
Commercial loan portfolio:
Commercial		—	$	—		1	$	60
Real estate commercial		1		69		2		836
Subtotal – commercial loan portfolio		1		69		3		896
Consumer loan portfolio (real estate residential)		2		170		4		384
Total		3	$	239		7	$	1,280

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, 2012 and details regarding the balance in the allowance and the recorded investment in loans at June 30, 2012 by impairment evaluation method.

	Commercial Loan Portfolio			Consumer Loan Portfolio			Unallocated			Total
	(In thousands)
Changes in allowance for loan losses for the three months ended June 30, 2012:
Beginning balance	$	54,917		$	27,726		$	5,142		$	87,785
Provision for loan losses		1,601			4,373			(1,974	)		4,000
Charge-offs		(3,197	)		(2,975	)		—			(6,172	)
Recoveries		438			660			—			1,098
Ending balance	$	53,759		$	29,784		$	3,168		$	86,711
Changes in allowance for loan losses for the six months ended June 30, 2012:
Beginning balance	$	55,645		$	29,166		$	3,522		$	88,333
Provision for loan losses		3,638			5,716			(354	)		9,000
Charge-offs		(6,576	)		(6,143	)		—			(12,719	)
Recoveries		1,052			1,045			—			2,097
Ending balance	$	53,759		$	29,784		$	3,168		$	86,711
Allowance for loan losses balance at June 30, 2012 attributable to:
Loans individually evaluated for impairment	$	7,461		$	677		$	—		$	8,138
Loans collectively evaluated for impairment		44,698			28,507			3,168			76,373
Loans acquired with deteriorated credit quality		1,600			600			—			2,200
Total	$	53,759		$	29,784		$	3,168		$	86,711
Recorded investment (loan balance) at June 30, 2012:
Loans individually evaluated for impairment	$	81,622		$	18,399		$	—		$	100,021
Loans collectively evaluated for impairment		1,661,425			1,753,664			—			3,415,089
Loans acquired with deteriorated credit quality		386,187			61,045			—			447,232
Total	$	2,129,234		$	1,833,108		$	—		$	3,962,342

The following presents, by loan portfolio segment, 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)
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 schedule presents, by loan portfolio segment, the changes in the allowance for the three and six months ended June 30, 2011 and details regarding the balance in the allowance and the recorded investment in loans at June 30, 2011 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, 2011:
Beginning balance	$	57,526		$	27,417		$	4,731		$	89,674
Provision for loan losses		5,395			4,458			(2,853	)		7,000
Charge-offs		(5,276	)		(3,030	)		—			(8,306	)
Recoveries		927			438			—			1,365
Ending balance	$	58,572		$	29,283		$	1,878		$	89,733
Changes in allowance for loan losses for the six months ended June 30, 2011:
Beginning balance	$	59,443		$	27,338		$	2,749		$	89,530
Provision for loan losses		9,090			6,281			(871	)		14,500
Charge-offs		(11,190	)		(5,758	)		—			(16,948	)
Recoveries		1,229			1,422			—			2,651
Ending balance	$	58,572		$	29,283		$	1,878		$	89,733
Allowance for loan losses balance at June 30, 2011 attributable to:
Loans individually evaluated for impairment	$	10,876		$	745		$	—		$	11,621
Loans collectively evaluated for impairment		47,696			28,538			1,878			78,112
Loans acquired with deteriorated credit quality		—			—			—			—
Total	$	58,572		$	29,283		$	1,878		$	89,733
Recorded investment (loan balance) at June 30, 2011:
Loans individually evaluated for impairment	$	98,211		$	22,156		$	—		$	120,367
Loans collectively evaluated for impairment		1,506,869			1,597,943			—			3,104,812
Loans acquired with deteriorated credit quality		445,281			77,550			—			522,831
Total	$	2,050,361		$	1,697,649		$	—		$	3,748,010

At June 30, 2012 and December 31, 2011, the $2.2 million and $1.6 million, respectively, allowance attributable to acquired loans was primarily attributable to one of the acquired loan pools experiencing a decline in expected cash flows. There were no material changes in expected cash flows for the remaining acquired loan pools at June 30, 2012 or December 31, 2011. An allowance related to acquired loans was not required at June 30, 2011 due to no material changes in expected cash flows since the date of acquisition as of that date.