Loans

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

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

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

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

Land development — Secured development loans made to borrowers for the purpose of infrastructure improvements to vacant land to create finished marketable residential and commercial lots/land. Most land development loans are originated with the intention that the loans will be paid through the sale of developed lots/land by the developers within twelve months of the completion date. Land development loans at September 30, 2014, December 31, 2013 and September 30, 2013 were primarily comprised of loans to develop residential properties.

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

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

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

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



	September 30, 2014		December 31, 2013		September 30, 2013
	(In thousands)
Commercial loan portfolio:
Commercial	$	1,239,946	$	1,176,307	$	1,128,122
Commercial real estate	1,322,646		1,232,658		1,215,631
Real estate construction	125,782		89,795		78,361
Land development	10,434		20,066		23,673
Subtotal	2,698,808		2,518,826		2,445,787
Consumer loan portfolio:
Residential mortgage	984,049		960,423		942,777
Consumer installment	783,443		644,769		622,040
Home equity	574,620		523,603		512,067
Subtotal	2,342,112		2,128,795		2,076,884
Total loans	$	5,040,920	$	4,647,621	$	4,522,671

Credit Quality Monitoring

The Corporation maintains loan policies and credit underwriting standards as part of the process of managing credit risk. These standards include making loans generally only within the Corporation’s market areas. The Corporation’s lending markets generally consist of communities across the lower peninsula of Michigan, except for the southeastern portion of Michigan. The Corporation has no foreign loans.

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

The majority of the Corporation’s consumer loan portfolio is comprised of secured loans that are relatively small. The Corporation’s consumer loan portfolio has a centralized approval process which utilizes standardized underwriting criteria. The ongoing measurement of credit quality of the consumer loan portfolio is largely done on an exception basis. If payments are made on schedule, as agreed, then no further monitoring is performed. However, if delinquency occurs, the delinquent loans are turned over to the Corporation’s collection department for resolution, resulting in repossession or foreclosure if payments are not brought current. Credit quality for the entire consumer loan portfolio is measured by the periodic delinquency rate, nonaccrual amounts and actual losses incurred.

Loans in the commercial loan portfolio tend to be larger and more complex than those in the consumer loan portfolio, and therefore, are subject to more intensive monitoring. All loans in the commercial loan portfolio have an assigned relationship manager, and most borrowers provide periodic financial and operating information that allows the relationship managers to stay abreast of credit quality during the life of the loans. The risk ratings of loans in the commercial loan portfolio are reassessed at least annually, with loans below an acceptable risk rating reassessed more frequently and reviewed by various loan committees within the Corporation at least quarterly.

The Corporation maintains a centralized independent loan review function that monitors the approval process and ongoing asset quality of the loan portfolio, including the accuracy of loan grades. The Corporation also maintains an independent appraisal review function that participates in the review of all appraisals obtained by the Corporation for loans in the commercial loan portfolio.

Credit Quality Indicators

Commercial Loan Portfolio

The Corporation uses a nine grade risk rating system to monitor the ongoing credit quality of its commercial loan portfolio. These loan grades rank the credit quality of a borrower by measuring liquidity, debt capacity, coverage and payment behavior as shown in the borrower’s financial statements. The loan grades also measure the quality of the borrower’s management and the repayment support offered by any guarantors. A summary of the Corporation’s loan grades (or characteristics of the loans within each grade) follows:

Risk Grades 1-5 (Acceptable Credit Quality) — All loans in risk grades 1 through 5 are considered to be acceptable credit risks by the Corporation and are grouped for purposes of allowance for loan loss considerations and financial reporting. The five grades essentially represent a ranking of loans that are all viewed to be of acceptable credit quality, taking into consideration the various factors mentioned above, but with varying degrees of financial strength, debt coverage, management and factors that could impact credit quality. Business credits within risk grades 1 through 5 range from Risk Grade 1: Prime Quality (factors include: excellent business credit; excellent debt capacity and coverage; outstanding management; strong guarantors; superior liquidity and net worth; favorable loan-to-value ratios; debt secured by cash or equivalents, or backed by the full faith and credit of the U.S. Government) to Risk Grade 5: Acceptable Quality With Care (factors include: acceptable business credit, but with added risk due to specific industry or internal situations).

Risk Grade 6 (Watch) — A business credit that is not acceptable within the Corporation’s loan origination criteria; cash flow may not be adequate or is continually inconsistent to service current debt; financial condition has deteriorated as company trends/management have become inconsistent; the company is slow in furnishing quality financial information; working capital needs of the company are reliant on short-term borrowings; personal guarantees are weak and/or with little or no liquidity; the net worth of the company has deteriorated after recent or continued losses; the loan requires constant monitoring and attention from the Corporation; payment delinquencies becoming more serious; if left uncorrected, these potential weaknesses may, at some future date, result in deterioration of repayment prospects.

Risk Grade 7 (Substandard — Accrual) — A business credit that is inadequately protected by the current financial net worth and paying capacity of the obligor or of the collateral pledged, if any; management has deteriorated or has become non-existent; quality financial information is not available; a high level of maintenance is required by the Corporation; cash flow can no longer support debt requirements; loan payments are continually and/or severely delinquent; negative net worth; personal guaranty has become insignificant; a credit that has a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. The Corporation still expects a full recovery of all contractual principal and interest payments; however, a possibility exists that the Corporation will sustain some loss if deficiencies are not corrected.

Risk Grade 8 (Substandard — Nonaccrual) — A business credit accounted for on a nonaccrual basis that has all the weaknesses inherent in a loan classified as risk grade 7 with the added characteristic that the weaknesses are so pronounced that, on the basis of current financial information, conditions, and values, collection in full is highly questionable; a partial loss is possible and interest is no longer being accrued. This loan meets the definition of an impaired loan. The risk of loss requires analysis to determine whether a valuation allowance needs to be established.

Risk Grade 9 (Substandard — Doubtful) — A business credit that has all the weaknesses inherent in a loan classified as risk grade 8 and interest is no longer being accrued, but additional deficiencies make it highly probable that liquidation will not satisfy the majority of the obligation; the primary source of repayment is nonexistent and there is doubt as to the value of the secondary source of repayment; the possibility of loss is likely, but current pending factors could strengthen the credit. This loan meets the definition of an impaired loan. A loan charge-off is recorded when management deems an amount uncollectible; however, the Corporation will establish a valuation allowance for probable losses, if required.

The Corporation considers all loans graded 1 through 5 as acceptable credit risks and structures and manages such relationships accordingly. Periodic financial and operating data combined with regular loan officer interactions are deemed adequate to monitor borrower performance. Loans graded 6 and 7 are considered higher-risk credits than loans graded 1 through 5 and the frequency of loan officer contact and receipt of financial data is increased to stay abreast of borrower performance. Loans graded 8 and 9 are considered problematic and require special care. Further, loans graded 6 through 9 are managed and monitored regularly through a number of processes, procedures and committees, including oversight by a loan administration committee comprised of executive and senior management of the Corporation, which include highly structured reporting of financial and operating data, intensive loan officer intervention and strategies to exit, as well as potential management by the Corporation’s special assets group.

The following schedule presents the recorded investment of loans in the commercial loan portfolio by risk rating categories at September 30, 2014, December 31, 2013 and September 30, 2013:



	Commercial		Commercial Real Estate		Real Estate Construction		Land Development		Total
	(In thousands)
September 30, 2014
Originated Portfolio:
Risk Grades 1-5	$	1,098,885	$	1,090,397	$	110,402	$	3,228	$	2,302,912
Risk Grade 6	16,469		27,087		666		943		45,165
Risk Grade 7	34,409		42,134		3,751		618		80,912
Risk Grade 8	18,006		23,847		162		1,467		43,482
Risk Grade 9	207		11		—		—		218
Subtotal	1,167,976		1,183,476		114,981		6,256		2,472,689
Acquired Portfolio:
Risk Grades 1-5	58,342		130,887		10,801		2,303		202,333
Risk Grade 6	3,909		2,086		—		—		5,995
Risk Grade 7	5,885		6,197		—		148		12,230
Risk Grade 8	3,834		—		—		1,727		5,561
Risk Grade 9	—		—		—		—		—
Subtotal	71,970		139,170		10,801		4,178		226,119
Total	$	1,239,946	$	1,322,646	$	125,782	$	10,434	$	2,698,808
December 31, 2013
Originated Portfolio:
Risk Grades 1-5	$	1,024,461	$	991,964	$	75,696	$	6,874	$	2,098,995
Risk Grade 6	20,082		34,248		654		969		55,953
Risk Grade 7	29,776		30,377		738		3,128		64,019
Risk Grade 8	17,414		28,580		371		2,309		48,674
Risk Grade 9	960		18		—		—		978
Subtotal	1,092,693		1,085,187		77,459		13,280		2,268,619
Acquired Portfolio:
Risk Grades 1-5	73,763		133,653		12,336		4,667		224,419
Risk Grade 6	5,472		5,022		—		—		10,494
Risk Grade 7	852		7,792		—		—		8,644
Risk Grade 8	3,527		1,004		—		2,119		6,650
Risk Grade 9	—		—		—		—		—
Subtotal	83,614		147,471		12,336		6,786		250,207
Total	$	1,176,307	$	1,232,658	$	89,795	$	20,066	$	2,518,826
September 30, 2013
Originated Portfolio:
Risk Grades 1-5	$	974,903	$	963,394	$	64,210	$	7,760	$	2,010,267
Risk Grade 6	16,439		37,572		58		1,063		55,132
Risk Grade 7	37,644		30,969		1,337		4,870		74,820
Risk Grade 8	9,753		28,186		183		2,954		41,076
Risk Grade 9	2,056		437		—		—		2,493
Subtotal	1,040,795		1,060,558		65,788		16,647		2,183,788
Acquired Portfolio:
Risk Grades 1-5	82,648		141,234		12,573		4,604		241,059
Risk Grade 6	2,620		4,837		—		—		7,457
Risk Grade 7	992		7,847		—		—		8,839
Risk Grade 8	1,067		1,155		—		2,422		4,644
Risk Grade 9	—		—		—		—		—
Subtotal	87,327		155,073		12,573		7,026		261,999
Total	$	1,128,122	$	1,215,631	$	78,361	$	23,673	$	2,445,787

Consumer Loan Portfolio

The Corporation evaluates the credit quality of loans in the consumer loan portfolio based on the performing or nonperforming status of the loan. Loans in the consumer loan portfolio that are performing in accordance with original contractual terms and are less than 90 days past due and accruing interest are considered to be in a performing status, while those that are in nonaccrual status, contractually past due 90 days or more as to interest or principal payments or classified as a nonperforming TDR are considered to be in a nonperforming status. Nonaccrual TDRs in the consumer loan portfolio are included with nonaccrual loans, while other TDRs in the consumer loan portfolio are considered in a nonperforming status until they meet the Corporation’s definition of a performing TDR, at which time they are considered in a performing status.

The following schedule presents the recorded investment of loans in the consumer loan portfolio based on loans in a performing status and loans in a nonperforming status at September 30, 2014, December 31, 2013 and September 30, 2013:



	Residential Mortgage		Consumer Installment		Home Equity		Total Consumer
	(In thousands)
September 30, 2014
Originated Loans:
Performing	$	963,469	$	782,087	$	544,227	$	2,289,783
Nonperforming	10,720		527		3,895		15,142
Subtotal	974,189		782,614		548,122		2,304,925
Acquired Loans:
Performing	9,658		728		26,327		36,713
Nonperforming	202		101		171		474
Subtotal	9,860		829		26,498		37,187
Total	$	984,049	$	783,443	$	574,620	$	2,342,112
December 31, 2013
Originated Loans:
Performing	$	934,747	$	642,370	$	488,996	$	2,066,113
Nonperforming	14,134		676		3,382		18,192
Subtotal	948,881		643,046		492,378		2,084,305
Acquired Loans:
Performing	11,481		1,723		31,182		44,386
Nonperforming	61		—		43		104
Subtotal	11,542		1,723		31,225		44,490
Total	$	960,423	$	644,769	$	523,603	$	2,128,795
September 30, 2013
Originated Loans:
Performing	$	918,931	$	619,346	$	475,439	$	2,013,716
Nonperforming	11,850		665		3,709		16,224
Subtotal	930,781		620,011		479,148		2,029,940
Acquired Loans:
Performing	11,918		2,029		32,737		46,684
Nonperforming	78		—		182		260
Subtotal	11,996		2,029		32,919		46,944
Total	$	942,777	$	622,040	$	512,067	$	2,076,884

Nonperforming Loans

A summary of nonperforming loans follows:



	September 30, 2014		December 31, 2013		September 30, 2013
	(In thousands)
Nonaccrual loans:
Commercial	$	18,213	$	18,374	$	11,809
Commercial real estate	23,858		28,598		28,623
Real estate construction	162		371		183
Land development	1,467		2,309		2,954
Residential mortgage	6,693		8,921		8,029
Consumer installment	527		676		665
Home equity	2,116		2,648		3,023
Total nonaccrual loans	53,036		61,897		55,286
Accruing loans contractually past due 90 days or more as to interest or principal payments:
Commercial	16		536		281
Commercial real estate	87		190		—
Real estate construction	—		—		—
Land development	—		—		—
Residential mortgage	380		537		692
Consumer installment	—		—		—
Home equity	1,779		734		686
Total accruing loans contractually past due 90 days or more as to interest or principal payments	2,262		1,997		1,659
Nonperforming TDRs:
Commercial loan portfolio	11,797		13,414		15,744
Consumer loan portfolio	3,647		4,676		3,129
Total nonperforming TDRs	15,444		18,090		18,873
Total nonperforming loans	$	70,742	$	81,984	$	75,818

The Corporation’s nonaccrual loans at September 30, 2014, December 31, 2013 and September 30, 2013 included $40.5 million, $37.3 million and $39.1 million, respectively, of nonaccrual TDRs.

Impaired Loans

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



	Recorded Investment		Unpaid Principal Balance		Related Valuation Allowance
	(In thousands)
September 30, 2014
Impaired loans with a valuation allowance:
Commercial	$	1,253	$	1,396	$	313
Commercial real estate	3,779		4,094		862
Real estate construction	—		—		—
Land development	—		—		—
Residential mortgage	19,629		19,629		328
Subtotal	24,661		25,119		1,503
Impaired loans with no related valuation allowance:
Commercial	40,344		45,259		—
Commercial real estate	45,550		59,037		—
Real estate construction	162		369		—
Land development	3,244		5,969		—
Residential mortgage	6,693		6,693		—
Consumer installment	527		527		—
Home equity	2,116		2,116		—
Subtotal	98,636		119,970		—
Total impaired loans:
Commercial	41,597		46,655		313
Commercial real estate	49,329		63,131		862
Real estate construction	162		369		—
Land development	3,244		5,969		—
Residential mortgage	26,322		26,322		328
Consumer installment	527		527		—
Home equity	2,116		2,116		—
Total	$	123,297	$	145,089	$	1,503
December 31, 2013
Impaired loans with a valuation allowance:
Commercial	$	2,517	$	2,656	$	728
Commercial real estate	2,576		2,965		353
Real estate construction	—		—		—
Land development	—		—		—
Residential mortgage	17,408		17,408		510
Subtotal	22,501		23,029		1,591
Impaired loans with no related valuation allowance:
Commercial	38,838		44,377		—
Commercial real estate	48,220		61,444		—
Real estate construction	371		478		—
Land development	7,170		11,817		—
Residential mortgage	8,921		8,921		—
Consumer installment	676		676		—
Home equity	2,648		2,648		—
Subtotal	106,844		130,361		—
Total impaired loans:
Commercial	41,355		47,033		728
Commercial real estate	50,796		64,409		353
Real estate construction	371		478		—
Land development	7,170		11,817		—
Residential mortgage	26,329		26,329		510
Consumer installment	676		676		—
Home equity	2,648		2,648		—
Total	$	129,345	$	153,390	$	1,591



	Recorded Investment		Unpaid Principal Balance		Related Valuation Allowance
	(In thousands)
September 30, 2013
Impaired loans with a valuation allowance:
Commercial	$	5,059	$	5,803	$	1,857
Commercial real estate	6,684		7,901		1,651
Real estate construction	183		253		33
Land development	517		653		97
Residential mortgage	17,731		17,731		585
Subtotal	30,174		32,341		4,223
Impaired loans with no related valuation allowance:
Commercial	21,543		25,642		—
Commercial real estate	43,178		57,256		—
Real estate construction	133		133		—
Land development	9,095		13,347		—
Residential mortgage	8,029		8,029		—
Consumer installment	665		665		—
Home equity	3,023		3,023		—
Subtotal	85,666		108,095		—
Total impaired loans:
Commercial	26,602		31,445		1,857
Commercial real estate	49,862		65,157		1,651
Real estate construction	316		386		33
Land development	9,612		14,000		97
Residential mortgage	25,760		25,760		585
Consumer installment	665		665		—
Home equity	3,023		3,023		—
Total	$	115,840	$	140,436	$	4,223

The difference between an impaired loan’s recorded investment and the unpaid principal balance for originated loans represents a partial charge-off resulting from a confirmed loss due to the value of the collateral securing the loan being below the loan balance and management’s assessment that full collection of the loan balance is not likely, and for acquired loans that meet the definition of an impaired loan represents fair value adjustments recognized at the acquisition date attributable to expected credit losses and the discounting of expected cash flows at market interest rates. The difference between the recorded investment and the unpaid principal balance of $21.8 million, $24.0 million and $24.6 million at September 30, 2014, December 31, 2013 and September 30, 2013, respectively, includes confirmed losses (partial charge-offs) of $18.2 million, $20.2 million and $21.2 million, respectively, and fair value discount adjustments of $3.6 million, $3.8 million and $3.4 million, respectively.

Impaired loans included $10.2 million, $9.8 million and $7.6 million at September 30, 2014, December 31, 2013 and September 30, 2013, respectively, of acquired loans that were not performing in accordance with original contractual terms. Acquired loans that are not performing in accordance with contractual terms are not reported as nonperforming loans because these loans are recorded in pools at their net realizable value based on the principal and interest the Corporation expects to collect on these loans. Impaired loans also included $44.6 million, $39.6 million and $34.1 million at September 30, 2014, December 31, 2013 and September 30, 2013, respectively, of performing TDRs.

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



	Three Months Ended September 30, 2014				Nine Months Ended September 30, 2014
	Average Recorded Investment		Interest Income Recognized While on Impaired Status		Average Recorded Investment		Interest Income Recognized While on Impaired Status
	(In thousands)
Commercial	$	41,903	$	346	$	42,046	$	1,026
Commercial real estate	50,133		263		51,571		990
Real estate construction	162		—		164		—
Land development	3,284		30		4,079		101
Residential mortgage	26,166		310		26,561		941
Consumer installment	481		—		630		—
Home equity	2,246		—		2,212		—
Total	$	124,375	$	949	$	127,263	$	3,058



	Three Months Ended September 30, 2013				Nine Months Ended September 30, 2013
	Average Recorded Investment		Interest Income Recognized While on Impaired Status		Average Recorded Investment		Interest Income Recognized While on Impaired Status
	(In thousands)
Commercial	$	27,025	$	215	$	26,894	$	633
Commercial real estate	50,266		284		53,482		984
Real estate construction	414		2		395		7
Land development	9,615		79		10,470		261
Residential mortgage	25,826		278		27,216		847
Consumer installment	632		—		666		—
Home equity	3,091		—		2,977		—
Total	$	116,869	$	858	$	122,100	$	2,732

The following schedule presents the aging status of the recorded investment in loans by classes of loans at September 30, 2014, December 31, 2013 and September 30, 2013:



	31-60 Days Past Due		61-89 Days Past Due		Accruing Loans Past Due 90 Days or More		Non-accrual Loans		Total Past Due		Current		Total Loans
	(In thousands)
September 30, 2014
Originated Portfolio:
Commercial	$	3,717	$	1,145	$	16	$	18,213	$	23,091	$	1,144,885	$	1,167,976
Commercial real estate	3,837		29		87		23,858		27,811		1,155,665		1,183,476
Real estate construction	1,075		—		—		162		1,237		113,744		114,981
Land development	—		—		—		1,467		1,467		4,789		6,256
Residential mortgage	1,669		—		380		6,693		8,742		965,447		974,189
Consumer installment	2,859		437		—		527		3,823		778,791		782,614
Home equity	2,592		361		1,779		2,116		6,848		541,274		548,122
Total	$	15,749	$	1,972	$	2,262	$	53,036	$	73,019	$	4,704,595	$	4,777,614
Acquired Portfolio:
Commercial	$	—	$	—	$	6,514	$	—	$	6,514	$	65,456	$	71,970
Commercial real estate	—		—		1,559		—		1,559		137,611		139,170
Real estate construction	—		—		—		—		—		10,801		10,801
Land development	—		—		1,727		—		1,727		2,451		4,178
Residential mortgage	—		—		202		—		202		9,658		9,860
Consumer installment	—		—		—		—		—		829		829
Home equity	335		—		227		—		562		25,936		26,498
Total	$	335	$	—	$	10,229	$	—	$	10,564	$	252,742	$	263,306



	31-60 Days Past Due		61-89 Days Past Due		Accruing Loans Past Due 90 Days or More		Non-accrual Loans		Total Past Due		Current		Total Loans
	(In thousands)
December 31, 2013
Originated Portfolio:
Commercial	$	4,748	$	865	$	536	$	18,374	$	24,523	$	1,068,170	$	1,092,693
Commercial real estate	8,560		1,604		190		28,598		38,952		1,046,235		1,085,187
Real estate construction	—		4,107		—		371		4,478		72,981		77,459
Land development	—		—		—		2,309		2,309		10,971		13,280
Residential mortgage	2,191		103		537		8,921		11,752		937,129		948,881
Consumer installment	2,630		359		—		676		3,665		639,381		643,046
Home equity	1,452		278		734		2,648		5,112		487,266		492,378
Total	$	19,581	$	7,316	$	1,997	$	61,897	$	90,791	$	4,262,133	$	4,352,924
Acquired Portfolio:
Commercial	$	—	$	—	$	5,656	$	—	$	5,656	$	77,958	$	83,614
Commercial real estate	—		133		1,695		—		1,828		145,643		147,471
Real estate construction	—		—		—		—		—		12,336		12,336
Land development	—		—		2,332		—		2,332		4,454		6,786
Residential mortgage	—		—		61		—		61		11,481		11,542
Consumer installment	3		51		—		—		54		1,669		1,723
Home equity	394		—		43		—		437		30,788		31,225
Total	$	397	$	184	$	9,787	$	—	$	10,368	$	284,329	$	294,697
September 30, 2013
Originated Portfolio:
Commercial	$	7,833	$	1,542	$	281	$	11,809	$	21,465	$	1,019,330	$	1,040,795
Commercial real estate	6,533		2,274		—		28,623		37,430		1,023,128		1,060,558
Real estate construction	90		5,385		—		183		5,658		60,130		65,788
Land development	187		—		—		2,954		3,141		13,506		16,647
Residential mortgage	1,739		76		692		8,029		10,536		920,245		930,781
Consumer installment	2,980		350		—		665		3,995		616,016		620,011
Home equity	2,344		434		686		3,023		6,487		472,661		479,148
Total	$	21,706	$	10,061	$	1,659	$	55,286	$	88,712	$	4,125,016	$	4,213,728
Acquired Portfolio:
Commercial	$	67	$	—	$	1,574	$	—	$	1,641	$	85,686	$	87,327
Commercial real estate	439		—		3,355		—		3,794		151,279		155,073
Real estate construction	—		—		—		—		—		12,573		12,573
Land development	—		—		2,422		—		2,422		4,604		7,026
Residential mortgage	264		—		77		—		341		11,655		11,996
Consumer installment	3		1		—		—		4		2,025		2,029
Home equity	389		79		182		—		650		32,269		32,919
Total	$	1,162	$	80	$	7,610	$	—	$	8,852	$	300,091	$	308,943

Loans Modified Under Troubled Debt Restructurings (TDRs)

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



	Performing TDRs		Non-Performing TDRs		Nonaccrual TDRs		Total
	(In thousands)
September 30, 2014
Commercial loan portfolio	$	28,606	$	11,797	$	36,549	$	76,952
Consumer loan portfolio	15,982		3,647		3,996		23,625
Total	$	44,588	$	15,444	$	40,545	$	100,577
December 31, 2013
Commercial loan portfolio	$	26,839	$	13,414	$	31,961	$	72,214
Consumer loan portfolio	12,732		4,676		5,321		22,729
Total	$	39,571	$	18,090	$	37,282	$	94,943
September 30, 2013
Commercial loan portfolio	$	19,469	$	15,744	$	34,124	$	69,337
Consumer loan portfolio	14,602		3,129		4,949		22,680
Total	$	34,071	$	18,873	$	39,073	$	92,017

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



	Three Months Ended September 30, 2014					Nine Months Ended September 30, 2014
	Number of Loans	Pre- Modification Recorded Investment		Post- Modification Recorded Investment		Number of Loans	Pre- Modification Recorded Investment		Post- Modification Recorded Investment
	(Dollars in thousands)
Commercial loan portfolio:
Commercial	7	$	448	$	448	34	$	12,379	$	12,379
Commercial real estate	7	1,138		1,138		28	7,062		7,062
Land development	—	—		—		1	72		72
Subtotal – commercial loan portfolio	14	1,586		1,586		63	19,513		19,513
Consumer loan portfolio	14	572		565		107	3,208		3,191
Total	28	$	2,158	$	2,151	170	$	22,721	$	22,704



	Three Months Ended September 30, 2013 (As Revised)					Nine Months Ended September 30, 2013 (As Revised)
	Number of Loans	Pre- Modification Recorded Investment		Post- Modification Recorded Investment		Number of Loans	Pre- Modification Recorded Investment		Post- Modification Recorded Investment
	(Dollars in thousands)
Commercial loan portfolio:
Commercial	6	$	716	$	716	25	$	5,075	$	5,075
Commercial real estate	8	3,924		3,924		32	11,587		11,587
Real estate construction	—	—		—		2	364		364
Land development	—	—		—		4	1,958		1,958
Subtotal – commercial loan portfolio	14	4,640		4,640		63	18,984		18,984
Consumer loan portfolio	23	1,773		1,730		60	3,929		3,830
Total	37	$	6,413	$	6,370	123	$	22,913	$	22,814

The pre-modification and post-modification recorded investment represents amounts as of the date of loan modification. The difference between the pre-modification and post-modification recorded investment of residential mortgage TDRs represents impairment recognized by the Corporation through the provision for loan losses computed based on a loan's post-modification present value of expected future cash flows discounted at the loan's original effective interest rate.

The following schedule includes TDRs for which there was a payment default during the three and nine months ended September 30, 2014 and 2013, whereby the borrower was past due with respect to principal and/or interest for 90 days or more, and the loan became a TDR during the twelve-month period prior to the default:



	Three Months Ended September 30, 2014			Nine Months Ended September 30, 2014
	Number of Loans	Principal Balance at End of Period		Number of Loans	Principal Balance at End of Period
	(Dollars in thousands)
Commercial loan portfolio:
Commercial	—	$	—	6	$	875
Commercial real estate	—	—		5	2,273
Subtotal – commercial loan portfolio	—	—		11	3,148
Consumer loan portfolio	4	162		7	242
Total	4	$	162	18	$	3,390

	Three Months Ended September 30, 2013 (As Revised)			Nine Months Ended September 30, 2013 (As Revised)
	Number of Loans	Principal Balance at End of Period		Number of Loans	Principal Balance at End of Period
	(Dollars in thousands)
Commercial loan portfolio:
Commercial	2	$	1,047	19	$	2,100
Commercial real estate	4	3,614		5	3,740
Real estate construction	—	—		1	160
Land development	—	—		2	1,526
Subtotal – commercial loan portfolio	6	4,661		27	7,526
Consumer loan portfolio	6	142		15	645
Total	12	$	4,803	42	$	8,171

During the three and nine months ended September 30, 2013, the Corporation had excluded nonaccrual TDRs from the schedule of TDRs that were modified during the three and nine months ended September 30, 2013 and the schedule of TDRs for which there was a payment default during the three and nine months ended September 30, 2013. The Corporation has revised the amounts reported for the three and nine months ended September 30, 2013 in these schedules to include activity related to all TDRs, including nonaccrual TDRs.

Allowance for Loan Losses

The following schedule presents, by loan portfolio segment, the changes in the allowance for the three and nine months ended September 30, 2014 and details regarding the balance in the allowance and the recorded investment in loans at September 30, 2014 by impairment evaluation method.



	Commercial Loan Portfolio			Consumer Loan Portfolio			Unallocated			Total
	(In thousands)
Changes in allowance for loan losses for the three months ended September 30, 2014:
Beginning balance	$	44,224		$	29,565		$	4,004		$	77,793
Provision for loan losses	715			834			(49		)	1,500
Charge-offs	(1,733		)	(1,889		)	—			(3,622		)
Recoveries	789			546			—			1,335
Ending balance	$	43,995		$	29,056		$	3,955		$	77,006
Changes in allowance for loan losses for the nine months ended September 30, 2014:
Beginning balance	$	44,482		$	30,145		$	4,445		$	79,072
Provision for loan losses	2,114			2,976			(490		)	4,600
Charge-offs	(4,756		)	(5,713		)	—			(10,469		)
Recoveries	2,155			1,648			—			3,803
Ending balance	$	43,995		$	29,056		$	3,955		$	77,006
Allowance for loan losses balance at September 30, 2014 attributable to:
Loans individually evaluated for impairment	$	1,175		$	328		$	—		$	1,503
Loans collectively evaluated for impairment	42,820			28,228			3,955			75,003
Loans acquired with deteriorated credit quality	—			500			—			500
Total	$	43,995		$	29,056		$	3,955		$	77,006
Recorded investment (loan balance) at September 30, 2014:
Loans individually evaluated for impairment	$	84,103		$	19,629		$	—		$	103,732
Loans collectively evaluated for impairment	2,388,586			2,285,296			—			4,673,882
Loans acquired with deteriorated credit quality	226,119			37,187			—			263,306
Total	$	2,698,808		$	2,342,112		$	—		$	5,040,920

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



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

The following schedule presents, by loan portfolio segment, the changes in the allowance for the three and nine months ended September 30, 2013 and details regarding the balance in the allowance and the recorded investment in loans at September 30, 2013 by impairment evaluation method.



	Commercial Loan Portfolio			Consumer Loan Portfolio			Unallocated			Total
	(In thousands)
Changes in allowance for loan losses for the three months ended September 30, 2013:
Beginning balance	$	47,780		$	28,745		$	5,659		$	82,184
Provision for loan losses	2,810			2,165			(1,975		)	3,000
Charge-offs	(2,637		)	(1,793		)	—			(4,430		)
Recoveries	374			404			—			778
Ending balance	$	48,327		$	29,521		$	3,684		$	81,532
Changes in allowance for loan losses for the nine months ended September 30, 2013:
Beginning balance	$	49,975		$	29,333		$	5,183		$	84,491
Provision for loan losses	5,815			4,684			(1,499		)	9,000
Charge-offs	(9,374		)	(5,891		)	—			(15,265		)
Recoveries	1,911			1,395			—			3,306
Ending balance	$	48,327		$	29,521		$	3,684		$	81,532
Allowance for loan losses balance at September 30, 2013 attributable to:
Loans individually evaluated for impairment	$	3,638		$	585		$	—		$	4,223
Loans collectively evaluated for impairment	44,689			28,436			3,684			76,809
Loans acquired with deteriorated credit quality	—			500			—			500
Total	$	48,327		$	29,521		$	3,684		$	81,532
Recorded investment (loan balance) at September 30, 2013:
Loans individually evaluated for impairment	$	78,782		$	17,731		$	—		$	96,513
Loans collectively evaluated for impairment	2,105,006			2,012,209			—			4,117,215
Loans acquired with deteriorated credit quality	261,999			46,944			—			308,943
Total	$	2,445,787		$	2,076,884		$	—		$	4,522,671

The allowance attributable to acquired loans of $0.5 million at September 30, 2014, December 31, 2013 and September 30, 2013 was primarily attributable to two consumer loan pools in the acquired loan portfolio that had a decline in expected cash flows. Management determined that the overall credit quality of the acquired loan portfolio had improved at September 30, 2014, which has resulted in an improvement in expected cash flows of loan pools in the acquired commercial loan portfolio. Accordingly, management reclassified $10.0 million during the nine months ended September 30, 2014 from the nonaccretable difference to the accretable yield for these acquired commercial loan pools, which will increase amounts recognized into interest income over the estimated remaining lives of these loan pools. There were no material changes in expected cash flows for the remaining acquired loan pools at September 30, 2014, December 31, 2013 or September 30, 2013.