Loans and Allowance for Loan Losses

Total non-covered and covered loans outstanding are as follows:



		As of December 31,
		2011			2010
Commercial loans		$	5,107,747		$	4,527,497
Mortgage loans		413,664			403,843
Installment loans		1,263,665			1,308,860
Home equity loans		743,982			749,378
Credit card loans		146,356			149,506
Leases		73,530			63,004
	Total non-covered loans (a)	7,748,944			7,202,088
Allowance for noncovered loan losses		(107,699		)	(114,690		)
	Net non-covered loans	7,641,245			7,087,398
Covered loans (b)		1,497,140			1,976,754
Allowance for covered loan losses		(36,417		)	(13,733		)
	Net covered loans	1,460,723			1,963,021
	Net loans	$	9,101,968		$	9,050,419

(a) Includes acquired, non-covered loans of $113.2 million and $265.5 million as of December 31, 2011 and 2010, respectively.

(b) Includes loss share receivable of $205.7 million and $288.6 million as of December 31, 2011 and 2010, respectively.

Originated loans are presented net of deferred loan origination fees and costs which amounted to $6.0 million and $3.6 million at December 31, 2011 and 2010, respectively.

The Corporation makes loans to officers on the same terms and conditions as made available to all employees and to directors on substantially the same terms and conditions as transactions with other parties. An analysis of loan activity with related parties for the years ended December 31, 2011, 2010 and 2009 is summarized as follows:



	Years Ended December 31,
	2011			2010			2009
Aggregate amount at beginning of year	$	15,723		$	20,126		$	22,005
Additions (deductions)
New loans	2,458			6,115			3,504
Repayments	(2,552		)	(7,171		)	(4,808		)
Changes in directors and their affiliations	—			(3,347		)	(575		)
Aggregate amount at end of year	$	15,629		$	15,723		$	20,126

Acquired loans, including covered loans, are recorded at fair value as of the date of purchase with no allowance for loan loss. As discussed in Note 2 (Business Combinations), the Bank acquired loans of $275.6 million on February 19, 2010 in its acquisition of the First Bank branches, and $177.8 million on February 19, 2010 and $1.8 billion on May 14, 2010 in conjunction with the FDIC-assisted acquisitions of George Washington and Midwest, respectively. All loans acquired in the First Bank acquisition were performing as of the date of acquisition and, therefore, the difference between the fair value and the outstanding principal balance of these loans is being accreted to interest income over the remaining term of the loans. The loans that were acquired in these FDIC-assisted transactions are covered by Loss Share Agreements which afford the Bank significant loss protection. Loans covered under Loss Share Agreements, including the amounts of expected reimbursements from the FDIC under these agreements, are reported as covered loans in the accompanying consolidated balance sheets.

The Corporation elected to account for all loans acquired in the George Washington and Midwest acquisitions as impaired loans under ASC 310-30 (“Acquired Impaired Loans”) except for $162.6 million of acquired loans with revolving privileges, which are outside the scope of this guidance, and which are being accounted for in accordance with ASC 310 (“Acquired Non-Impaired Loans”). Interest income, through accretion of the difference between the carrying amount of the Acquired Impaired Loans and the expected cash flows, is recognized on all Acquired Impaired Loans. The difference between the fair value of the Acquired Non-Impaired Loans and their outstanding balances is being accreted to interest income over the remaining period the revolving lines are in effect. The outstanding balance, including contractual principal, interest, fees and penalties, of all Acquired Impaired Loans was $1.6 billion as of December 31, 2011.

The excess of an Acquired Impaired Loan’s cash flows expected to be collected over the initial investment in the loan is represented by the accretable yield. An Acquired Impaired Loan’s contractually required payments in excess of the amount of its cash flows expected to be collected is represented by its nonaccretable balance. The nonaccretable balance represents expected credit impairment on an Acquired Impaired Loan and is only recognized in income if payments exceed its recorded fair value. The majority of the nonaccretable balance on Acquired Impaired Loans is expected to be received through Loss Share Agreements and is recorded as part of covered loans in the accompanying consolidated balance sheet.

Over the life of the Acquired Impaired Loans, the Corporation continues to estimate cash flows expected to be collected, which includes the effects of estimated prepayments. The Corporation assesses impairment of Acquired Impaired Loans at each balance sheet date by comparing the net present value of updated cash flows (discounted by the effective yield calculated at the end of the previous accounting period) to the recorded book value. For any increases in cash flows expected to be collected, the Corporation adjusts the amount of accretable yield recognized on a prospective basis over the Acquired Impaired Loan’s or pool’s remaining life. To the extent impairment exists, an allowance for loan loss is established through a charge to provision for loan loss.

Changes in the carrying amount of accretable yield for Acquired Impaired Loans were as follows for the years ended December 31, 2011 and 2010:



	For the Year Ended
	December 31, 2011						December 31, 2010
	Accretable Yield			Carrying Amount of Loans			Accretable Yield			Carrying Amount of Loans
Balance at beginning of period	$	227,652		$	1,512,817		$	—		$	—
Loans acquired	—			—			260,751			1,794,593
Accretion	(130,424		)	130,424			(83,782		)	83,782
Net Reclassifications from non-accretable to accretable	82,835			—			52,253			—
Payments received, net	—			(514,263		)	—			(365,558		)
Disposals	(3,327		)	—			(1,570		)	—
Balance at end of period	$	176,736		$	1,128,978		$	227,652		$	1,512,817

The following tables present by portfolio type the aging of the recorded investment in past due loans as well as the recorded investment in nonaccrual and loans past due over 90 days still on accrual. A discussion of the Corporation's accounting policies for nonperforming loans is in Note 1 (Summary of Significant Accounting Policies).



As of December 31, 2011
Legacy Loans													≥ 90 Days
	Days Past Due						Total				Total		Past Due and		Nonaccrual
	30-59		60-89		≥ 90		Past Due		Current		Loans		Accruing		Loans
Commercial
C&I	1,521		940		5,490		7,951		2,740,751		2,748,702		465		9,266
CRE	6,187		4,819		29,976		40,982		1,951,211		1,992,193		984		36,025
Construction	39		—		7,837		7,876		269,459		277,335		609		7,575
Leases	—		—				—		73,530		73,530		—		—
Consumer
Installment	11,531		3,388		5,167		20,086		1,241,059		1,261,145		4,864		624
Home Equity Lines	2,627		778		1,241		4,646		720,045		724,691		796		1,102
Credit Cards	1,090		707		1,019		2,816		143,540		146,356		403		622
Residential Mortgages	11,778		2,059		9,719		23,556		388,268		411,824		3,252		6,468
Total	$	34,773	$	12,691	$	60,449	$	107,913	$	7,527,863	$	7,635,776	$	11,373	$	61,682
Acquired Loans (Noncovered)													≥ 90 Days
	Days Past Due						Total				Total		Past Due and		Nonaccrual
	30-59		60-89		≥ 90		Past Due		Current		Loans		Accruing		Loans
Commercial
C&I	—		—		66		66		26,708		26,774		—		69
CRE	—		452		1,675		2,127		60,616		62,743		—		2,880
Consumer
Installment	—		—		1		1		2,519		2,520		1		—
Home Equity Lines	67		—		1		68		19,223		19,291		2		—
Residential Mortgages	—		—		—		—		1,840		1,840		—		—
Total	$	67	$	452	$	1,743	$	2,262	$	110,906	$	113,168	$	3	$	2,949
Covered Loans (a)													≥ 90 Days
	Days Past Due						Total				Total		Past Due and		Nonaccrual
	30-59		60-89		≥ 90		Past Due		Current		Loans		Accruing(b)		Loans(b)
Commercial
C&I	7,451		2,137		25,801		35,389		162,150		197,539
CRE	20,379		12,895		170,795		204,069		573,779		777,848
Construction	4,206		1,674		57,978		63,858		26,051		89,909
Consumer
Installment	24		25		60		109		10,013		10,122
Home Equity Lines	2,656		1,094		1,088		4,838		136,710		141,548
Residential Mortgages	14,106		164		14,254		28,524		45,986		74,510
Total	$	48,822	$	17,989	$	269,976	$	336,787	$	954,689	$	1,291,476

(a) Excludes loss share receivable of $205.7 million as of December 31, 2011.

(b) Acquired impaired loans were not classified as nonperforming assets at December 31, 2011 as the loans are considered to be performing under ASC 310-30. As a result interest income, through the accretion of the difference between the carrying amount of the loans and the expected cash flows, is being recognized on all acquired impaired loans. These asset quality disclosures are, therefore, not applicable to acquired impaired loans.



As of December 31, 2010
Legacy Loans													≥ 90 Days
	Days Past Due						Total				Total		Past Due and		Nonaccrual
	30-59		60-89		≥ 90		Past Due		Current		Loans		Accruing		Loans
Commercial
C&I	$	5,280	$	7,592	$	12,553	$	25,425	$	1,960,404	$	1,985,829	$	4,692	$	8,368
CRE	10,801		3,832		58,977		73,610		1,953,710		2,027,320		1,908		65,096
Construction	1,490		1,777		18,639		21,906		255,253		277,159		2,795		16,364
Leases	—		—		—		—		63,004		63,004		—		—
Consumer
Installment	14,486		4,491		7,059		26,036		1,279,307		1,305,343		3,236		3,724
Home Equity Lines	2,500		755		744		3,999		722,351		726,350		744		72
Credit Cards	1,570		975		1,337		3,882		145,624		149,506		371		966
Residential Mortgages	10,574		1,665		14,815		27,054		375,022		402,076		8,768		10,004
Total	$	46,701	$	21,087	$	114,124	$	181,912	$	6,754,675	$	6,936,587	$	22,514	$	104,594

Acquired Loans (Noncovered)													≥ 90 Days
	Days Past Due						Total				Total		Past Due and		Nonaccrual
	30-59		60-89		≥ 90		Past Due		Current		Loans		Accruing		Loans
Commercial
C&I	$	1,939	$	511	$	703	$	3,153	$	92,995	$	96,148	$	703	$	—
CRE	493		16,650		38		17,181		123,860		141,041		38		—
Consumer
Installment	40		16		23		79		3,438		3,517		23		—
Home Equity Lines	105		24		46		175		22,853		23,028		46		—
Residential Mortgages	65		—		—		65		1,702		1,767		—		93
Total	$	2,642	$	17,201	$	810	$	20,653	$	244,848	$	265,501	$	810	$	93

Covered Loans (a)													≥ 90 Days
	Days Past Due						Total				Total		Past Due and		Nonaccrual
	30-59		60-89		≥ 90		Past Due		Current		Loans		Accruing(b)		Loans(b)
Commercial
C&I	$	5,509	$	2,911	$	70,588	$	79,008	$	180,186	$	259,194
CRE	29,241		16,761		208,820		254,822		763,393		1,018,215
Construction	2,179		2,458		83,969		88,606		28,564		117,170
Consumer
Installment	667		493		36		1,196		10,327		11,523
Home Equity Lines	1,476		738		443		2,657		183,277		185,934
Residential Mortgages	14,975		3,625		12,320		30,920		65,193		96,113
Total	$	54,047	$	26,986	$	376,176	$	457,209	$	1,230,940	$	1,688,149

(a) Excludes loss share receivable of $288.6 million as of December 31, 2010.

(b) Acquired impaired loans were not classified as nonperforming assets at December 31, 2010 as the loans are considered to be performing under ASC 310-30. As a result interest income, through the accretion of the difference between the carrying amount of the loans and the expected cash flows, is being recognized on all acquired impaired loans. These asset quality disclosures are, therefore, not applicable to acquired impaired loans.

Credit Quality

The credit quality of the Corporation’s loan portfolios is assessed as a function of net credit losses, levels of nonperforming assets and delinquencies, and credit quality ratings as defined by the Corporation. The Corporation's Credit Policy Division manages credit risk by establishing common credit policies for its subsidiary bank, participating in approval of its loans, conducting reviews of loan portfolios, providing centralized consumer underwriting, collections and loan operation services, and overseeing loan workouts. The Corporation's objective is to minimize losses from its commercial lending activities and to maintain consumer losses at acceptable levels that are stable and consistent with growth and profitability objectives. The Corporation's accounting policy for the allowance for loan losses is discussed in Note 1 (Summary of Significant Accounting Policies).

For consumer loans, Management evaluates credit quality based on the aging status of the loan as well as by payment activity, which is presented in the above tables. Individual commercial loans are assigned credit risk grades based on an internal assessment of conditions that affect a borrower’s ability to meet its contractual obligation under the loan agreement. The credit-risk grading process for commercial loans is summarized in Note 1 (Summary of Significant Accounting Policies). The following tables provide a summary of commercial loans by portfolio type by credit risk grade based on the most recent assessment performed.



As of December 31, 2011
Legacy Loans
	Commercial
	C&I		CRE		Construction		Leases
Grade 1	$	37,607	$	—	$	—	$	10,636
Grade 2	122,124		4,218		615		—
Grade 3	479,119		249,382		16,752		5,868
Grade 4	1,973,671		1,548,420		241,302		57,026
Grade 5	50,789		58,942		4,583		—
Grade 6	85,392		130,968		14,083		—
Grade 7	—		263		—		—
Grade 8	—		—		—		—
Total	$	2,748,702	$	1,992,193	$	277,335	$	73,530
Acquired Loans (Noncovered)
	Commercial
	C&I		CRE		Construction		Leases
Grade 1	$	—	$	—	$	—	$	—
Grade 2	—		—		—		—
Grade 3	—		1,871		—		—
Grade 4	26,036		55,129		—		—
Grade 5	—		—		—		—
Grade 6	738		5,743		—		—
Grade 7	—		—		—		—
Grade 8	—		—		—		—
Total	$	26,774	$	62,743	$	—	$	—
Covered Loans
	Commercial
	C&I		CRE		Construction		Leases
Grade 1	$	948	$	—	$	—	$	—
Grade 2	1,376		—		—		—
Grade 3	—		516		—		—
Grade 4	109,360		303,231		487		—
Grade 5	9,661		103,919		1,567		—
Grade 6	69,330		344,445		80,009		—
Grade 7	6,864		25,737		7,846		—
Grade 8	—		—		—		—
Total	$	197,539	$	777,848	$	89,909	$	—



As of December 31, 2010
Legacy Loans
	Commercial
	C&I		CRE		Construction		Leases
Grade 1	$	66,802	$	13,387	$	3,301	$	8,069
Grade 2	64,740		4,462		6,700		—
Grade 3	260,351		278,274		39,986		11,414
Grade 4	1,476,930		1,486,620		188,949		43,210
Grade 5	61,284		87,155		8,055		311
Grade 6	55,720		157,422		30,168		—
Grade 7	2		—		—		—
Grade 8	—		—		—		—
Total	$	1,985,829	$	2,027,320	$	277,159	$	63,004
Acquired Loans (Noncovered)
	Commercial
	C&I		CRE		Construction		Leases
Grade 1	$	—	$	—	$	—	$	—
Grade 2	—		—		—		—
Grade 3	451		5,934		—		—
Grade 4	95,392		133,613		—		—
Grade 5	5		—		—		—
Grade 6	300		1,494		—		—
Grade 7	—		—		—		—
Grade 8	—		—		—		—
Total	$	96,148	$	141,041	$	—	$	—
Covered Loans
	Commercial
	C&I		CRE		Construction		Leases
Grade 1	$	641	$	—	$	—	$	—
Grade 2	—		—		—		—
Grade 3	3,045		1,337		—		—
Grade 4	111,792		430,553		4,262		—
Grade 5	63,624		221,020		3,260		—
Grade 6	67,253		317,134		69,998		—
Grade 7	12,839		48,171		39,650		—
Grade 8	—		—		—		—
Total	$	259,194	$	1,018,215	$	117,170	$	—

The activity within the allowance for noncovered loan losses, by portfolio type, for the year ended December 31, 2011 is shown in the following table:



For the Year Ended December 31, 2011
	C&I			CRE			Construction			Leases			Installment			Home Equity Lines			Credit Cards			Residential Mortgages			Total
Allowance for loan losses, beginning balance	$	29,764		$	32,026		$	7,180		$	475		$	21,555		$	7,217		$	11,107		$	5,366		$	114,690
Charge-offs	(20,251		)	(10,571		)	(3,973		)	(778		)	(25,839		)	(8,691		)	(7,846		)	(4,819		)	(82,768		)
Recoveries	2,162			630			685			37			13,639			1,985			2,264			340			21,742
Provision for loan losses	20,688			9,772			1,281			607			8,626			6,255			1,844			4,962			54,035
Allowance for loan losses, ending balance	$	32,363		$	31,857		$	5,173		$	341		$	17,981		$	6,766		$	7,369		$	5,849		$	107,699

The following presents the allowance for noncovered loan losses and the recorded investment in legacy loans, by portfolio type, and based on impairment method as of December 31, 2011.



As of December 31, 2011
		C&I		CRE		Construction		Leases		Installment		Home Equity Lines		Credit Cards		Residential Mortgages		Total
Ending allowance for noncovered loan losses balance attributable to loans:
	Individually evaluated for impairment	$	2,497	$	1,599	$	99	$	—	$	1,382	$	31	$	108	$	1,364	$	7,080
	Collectively evaluated for impairment	29,866		30,258		5,074		341		16,599		6,735		7,261		4,485		100,619
Total ending allowance for noncovered loan losses balance		$	32,363	$	31,857	$	5,173	$	341	$	17,981	$	6,766	$	7,369	$	5,849	$	107,699
Legacy loans:
	Loans individually evaluated for impairment	$	8,269	$	36,087	$	9,320	$	—	$	33,571	$	4,763	$	2,202	$	17,398	$	111,610
	Loans collectively evaluated for impairment	2,740,433		1,956,106		268,015		73,530		1,227,574		719,928		144,154		394,426		7,524,166
Total ending legacy loan balance		$	2,748,702	$	1,992,193	$	277,335	$	73,530	$	1,261,145	$	724,691	$	146,356	$	411,824	$	7,635,776

The activity within the allowance for noncovered loan losses for the years ended December 31, 2010 and 2009 is shown in the following table:



	Years Ended December 31,
	2010		2009
Allowance for loan losses, beginning balance	$	115,092	$	103,757
Loans charged off:
C&I, CRE and construction	42,937		42,276
Leases	896		97
Installment	34,054		31,622
Home equity loans	7,912		7,200
Credit cards	13,577		13,558
Residential mortgages	5,156		4,960
Total charge-offs	104,532		99,713
Recoveries:
C&I, CRE and construction	2,816		1,584
Leases	267		57
Installment	13,203		8,500
Home equity loans	1,599		494
Credit cards	2,199		1,710
Residential mortgages	263		270
Total recoveries	20,347		12,615
Net charge-offs	84,185		87,098
Provision for loan losses	83,783		98,433
Allowance for loan losses, ending balance	$	114,690	$	115,092

To the extent there is a decrease in the present value of cash flows from Acquired Impaired Loans after the date of acquisition, the Corporation records an allowance for loan losses, net of expected reimbursement under any Loss Share Agreements. These expected reimbursements are recorded as part of covered loans in the accompanying consolidated balance sheets. During the year ended December 31, 2011, the Corporation increased its allowance for covered loan losses to $36.4 million to reserve for estimated additional losses on certain Acquired Impaired Loans. The increase in the allowance was recorded by a charge to the provision for covered loan losses of $62.9 million and an increase of $42.6 million in the loss share receivable for the portion of the losses recoverable under the Loss Share Agreements.

To the extent there is credit deterioration in Acquired Non-Impaired Loans after the date of acquisition, the Corporation records a provision for loan losses only when the required allowance, net of expected reimbursement under any Loss Share Agreements, exceeds any remaining credit discount.

The activity within the allowance for covered loan losses for the years ended December 31, 2011 and 2010 is shown in the following tables:



Allowance for Covered Loan Losses		Year ended
		December 31
		2011			2010
Balance at beginning of the period		$	13,733		$	—
	Provision for loan losses before benefit attributable to FDIC loss share agreements	62,905			27,184
	Benefit attributable to FDIC loss share agreements	(42,552		)	(22,752		)
Net provision for loan losses		20,353			4,432
Increase in indemnification asset		42,552			22,752
Loans charged-off		(40,221		)	(13,451		)
Balance at end of the period		$	36,417		$	13,733

A loan is considered to be impaired when, based on current events or information, it is probable the Corporation will be unable to collect all amounts due (principal and interest) per the contractual terms of the loan agreement. Loan impairment for all loans is measured based on either the present value of expected future cash flows discounted at the loan’s effective interest rate, at the observable market price of the loan, or the fair value of the collateral for certain collateral dependent loans. Impaired loans include all nonaccrual commercial, agricultural, construction, and commercial real estate loans, and loans modified as TDRs. The following tables present information related to impaired loans by portfolio type.



As of December 31, 2011
				Unpaid				Average
		Recorded		Principal		Related		Recorded
		Investment		Balance		Allowance		Investment
Impaired loans with no related allowance
Commercial
	C&I	$	6,999	$	9,121	$	—	$	8,442
	CRE	29,566		46,744		—		37,720
	Construction	7,522		13,675		—		9,908
Consumer
	Installment	—		—		—		—
	Home equity line	—		—		—		—
	Credit card	—		—		—		—
	Residential mortgages	4,244		4,262		—		4,450
Subtotal		48,331		73,802		—		60,520
Impaired loans with a related allowance
Commercial
	C&I	1,270		1,769		2,497		752
	CRE	6,521		6,789		1,599		3,247
	Construction	1,798		2,864		99		1,929
Consumer
	Installment	33,571		33,621		1,382		33,742
	Home equity line	4,763		4,763		31		4,996
	Credit card	2,202		2,202		108		2,497
	Residential mortgages	13,154		13,160		1,364		13,155
Subtotal		63,279		65,168		7,080		60,318
	Total impaired loans	$	111,610	$	138,970	$	7,080	$	120,838



As of December 31, 2010
				Unpaid				Average
		Recorded		Principal		Related		Recorded
		Investment		Balance		Allowance		Investment
Impaired loans with no related allowance
Commercial
	C&I	$	12,172	$	15,045	$	—	$	12,816
	CRE	34,003		40,619		—		35,238
	Construction	10,120		14,710		—		10,833
Consumer
	Installment	17,146		17,164		—		17,313
	Home equity line	1,747		1,747		—		1,764
	Credit card	3,081		3,081		—		2,926
	Residential mortgages	1,992		2,765		—		2,027
Subtotal		80,261		95,131		—		82,917
Impaired loans with a related allowance
Commercial
	C&I	—		—		—		—
	CRE	30,792		37,767		3,852		33,172
	Construction	7,585		11,423		1,588		8,928
Consumer
	Installment	—		—		—		—
	Home equity line	—		—		—		—
	Credit card	—		—		—		—
	Residential mortgages	9,705		9,776		741		9,713
Subtotal		48,082		58,966		6,181		51,813
	Total impaired loans	$	128,343	$	154,097	$	6,181	$	134,730

Aggregated consumer loans, mortgage loans, and leases that are collectively evaluated for impairment are not included in the above tables.

Interest income recognized on impaired loans during years ended December 31, 2011, 2010 and 2009 was not material.

In certain circumstances, the Corporation may modify the terms of a loan to maximize the collection of amounts due when a borrower is experiencing financial difficulties or is expected to experience difficulties in the near-term. In most cases the modification is either a concessionary reduction in interest rate, extension of the maturity date or modification of the adjustable rate provisions of the loan that would otherwise not be considered, however, forgiveness of principal is rarely granted. Concessionary modifications are classified as TDRs unless the modification is short-term, typically less than 90 days. TDRs accrue interest if the borrower complies with the revised terms and conditions and has demonstrated repayment performance at a level commensurate with the modified terms for a minimum of six consecutive payment cycles after the restructuring date.

The substantial majority of the Corporation’s residential mortgage TDRs involve reducing the client’s loan payment through an interest rate reduction for a set period of time based on the borrower’s ability to service the modified loan payment. Modifications of mortgages retained in portfolio are handled using proprietary modification guidelines, or the FDIC's Modification Program for residential first mortgages covered by Loss Share Agreements. The Corporation participates in the U.S. Treasury's Home Affordable Modification Program for originated mortgages sold to and serviced for Fannie Mae and Freddie Mac. Commercial and industrial loans modified in a TDR often involve temporary interest-only payments, term extensions, and converting revolving credit lines to term loans. Additional collateral, a co-borrower, or a guarantor is often requested. Commercial real estate and construction loans modified in a TDR often involve reducing the interest rate for the remaining term of the loan, extending the maturity date at an interest rate lower than the current market rate for new debt with similar risk, or substituting or adding a new borrower or guarantor. Construction loans modified in a TDR may also involve extending the interest-only payment period.

Included in the impaired loan balances above were TDRs of $72.9 million and $46.8 million as of December 31, 2011 and December 31, 2010, respectively. Specific allowances for loan losses are established for loans whose terms have been modified in a TDR. Specific reserve allocations are generally assessed prior to loans being modified in a TDR, as most of these loans migrate from the Corporation’s internal watch list and have been specifically allocated for as part of the Corporation’s normal loan loss provisioning methodology. Included in the impaired loan balances above were allowance for loan losses on TDRs of $3.5 million and $1.0 million as of December 31, 2011 and December 31, 2010, respectively.

As a result of adopting the amendments in ASU 2011-02 in the quarter ended September 30, 2011, the Corporation reassessed all restructurings that occurred on or after January 1, 2011 for identification as TDRs. The Corporation identified as TDRs certain receivables for which the allowance for credit losses had previously been measured under a general allowance for credit losses methodology. Upon identifying those receivables as TDRs, the Corporation identified them as impaired. The amendments in ASU 2011-02 require prospective application of the impairment measurement guidance for those receivables newly identified as impaired. The application of this new guidance to the commercial noncovered portfolio changed the evaluation of two loans with a recorded investment of $1.8 million to be classified as TDRs. The allowance for credit losses associated with these two loans, on the basis of a current evaluation of loss, was $0.3 million. In the consumer portfolio, $23.9 million of loans were reclassified as TDRs in the quarter ended September 30, 2011. The allowance for credit losses associated with these consumer loans, on the basis of a current evaluation of loss, was $1.3 million.

Acquired loans restructured after acquisition are not considered TDRs for purposes of the Corporation’s accounting and disclosure if the loans evidenced credit deterioration as of the acquisition date and are accounted for in pools. The Corporation has modified certain loans according to provisions in Loss Share Agreements. Losses associated with modifications on these loans, including the economic impact of interest rate reductions, are generally eligible for reimbursement under the Loss Share Agreements. As of December 31, 2011 and December 31, 2010, TDRs on Acquired Impaired Loans were $77.4 million and $37.2 million, respectively. At September 30, 2011, the end of the first interim period of adoption of ASU 2011-02, the recorded investment in covered loans, now considered a TDR was $1.9 million, and the allowance for credit losses associated with those covered loans, on the basis of a current evaluation of loss, was $0.2 million.

The following table provides a summary of TDRs by loan type as of December 31, 2011, including the delinquency status for TDRs that continue to accrue interest and TDRs included in nonperforming assets.



	Accruing TDRs						Nonaccruing TDRs						Total		Total
	Current		Delinquent		Total		Current		Delinquent		Total		TDRs		Allowance
Noncovered loans
Commercial
C&I	$	91	$	—	$	91	$	—	$	2,421	$	2,421	$	2,512	$	247
CRE	3,305		513		3,818		3,590		1,759		5,349		9,167		236
Construction	2,782		—		2,782		304		237		541		3,323		99
Total noncovered commercial	6,178		513		6,691		3,894		4,417		8,311		15,002		582
Consumer
Installment	31,635		1,802		33,437		—		134		134		33,571		1,382
Home equity lines	4,226		222		4,448		76		239		315		4,763		31
Credit card	2,073		110		2,183		—		19		19		2,202		108
Residential mortgages	13,694		707		14,401		1,635		1,362		2,997		17,398		1,364
Total noncovered consumer	51,628		2,841		54,469		1,711		1,754		3,465		57,934		2,885
Covered loans
C&I	—		—		—		1,022		8,141		9,163		9,163		1,578
CRE	15,203		2,362		17,565		25,885		20,658		46,543		64,108		7,069
Construction	—		—		—		—		4,148		4,148		4,148		—
Total covered commercial	15,203		2,362		17,565		26,907		32,947		59,854		77,419		8,647
Total TDRs	$	73,009	$	5,716	$	78,725	$	32,512	$	39,118	$	71,630	$	150,355	$	12,114

In the year ended December 31, 2011, ten commercial loans with a recorded investment of $4.3 million which had been modified in a TDR defaulted and were subsequently charged-off. The recorded investment of defaulted consumer loans which had been modified in a TDR in the year ended December 31, 2011 was $3.7 million. Loans modified in a TDR are closely monitored for delinquency as an early indicator of possible future default. If loans modified in a TDR subsequently default, the Corporation evaluates the loan for possible further impairment. The allowance for loan losses may be increased, adjustments may be made in the allocation of the allowance for loan losses, or partial charge-offs may be taken to further write-down the carrying value of the loan.

At December 31, 2011, the Corporation did not have any material commitments to lend additional funds to debtors owing receivables whose terms have been modified in a TDR.