LOANS AND ALLOWANCE FOR LOAN LOSSES

Following is a summary of loans, net of unearned income:


	Originated Loans		Acquired Loans		Total Loans
March 31, 2014
Commercial real estate	$	2,677,152	$	787,446	$	3,464,598
Commercial and industrial		1,848,332		116,733		1,965,065
Commercial leases		161,494		—		161,494

Total commercial loans and leases		4,686,978		904,179		5,591,157
Direct installment		1,386,940		80,618		1,467,558
Residential mortgages		688,038		447,752		1,135,790
Indirect installment		674,347		4,571		678,918
Consumer lines of credit		848,883		161,618		1,010,501
Other		59,212		—		59,212

	$	8,344,398		1,598,738	$	9,943,136

December 31, 2013
Commercial real estate	$	2,640,428	$	604,781	$	3,245,209
Commercial and industrial		1,761,668		119,806		1,881,474
Commercial leases		158,895		—		158,895

Total commercial loans and leases		4,560,991		724,587		5,285,578
Direct installment		1,387,995		79,241		1,467,236
Residential mortgages		678,227		408,512		1,086,739
Indirect installment		649,701		5,886		655,587
Consumer lines of credit		832,668		133,103		965,771
Other		45,183		—		45,183

	$	8,154,765	$	1,351,329	$	9,506,094

The carrying amount of acquired loans at March 31, 2014 totaled $1,593,642, including purchased credit-impaired (PCI) loans with a carrying amount of $14,513, while the carrying amount of acquired loans at December 31, 2013 totaled $1,345,429, including PCI loans with a carrying amount of $21,192. The outstanding contractual balance receivable of acquired loans at March 31, 2014 totaled $1,704,889, including PCI loans with an outstanding contractual balance receivable of $46,809, while the outstanding contractual balance receivable of acquired loans at December 31, 2013 totaled $1,449,227, including PCI loans with an outstanding contractual balance receivable of $56,500.

Commercial real estate includes both owner-occupied and non-owner-occupied loans secured by commercial properties. Commercial and industrial includes loans to businesses that are not secured by real estate. Commercial leases consist of loans for new or used equipment. Direct installment is comprised of fixed-rate, closed-end consumer loans for personal, family or household use, such as home equity loans and automobile loans. Residential mortgages consist of conventional and jumbo mortgage loans for non-commercial properties. Indirect installment is comprised of loans originated by third parties and underwritten by the Corporation, primarily automobile loans. Consumer lines of credit include home equity lines of credit (HELOC) and consumer lines of credit that are either unsecured or secured by collateral other than home equity. Other is comprised primarily of mezzanine loans and student loans.

The loan portfolio consists principally of loans to individuals and small- and medium-sized businesses within the Corporation’s primary market area of Pennsylvania, eastern Ohio, Maryland and northern West Virginia. The commercial real estate portfolio also includes run-off loans in Florida, which totaled $39,118 or 0.4% of total loans at March 31, 2014, compared to $39,379 or 0.4% of total loans at December 31, 2013. Additionally, the total loan portfolio contains consumer finance loans to individuals in Pennsylvania, Ohio, Tennessee and Kentucky, which totaled $171,228 or 1.7% of total loans at March 31, 2014, compared to $179,970 or 1.9% of total loans at December 31, 2013. Due to the relative size of the consumer finance loan portfolio, they are not segregated from other consumer loans.

As of March 31, 2014, 42.0% of the commercial real estate loans were owner-occupied, while the remaining 58.0% were non-owner-occupied, compared to 43.1% and 56.9%, respectively, as of December 31, 2013. As of March 31, 2014 and December 31, 2013, the Corporation had commercial construction loans of $270,913 and $252,842, respectively, representing 2.7% of total loans.

ASC 310-30 Loans

All loans acquired in the BCSB, PVF and ANNB acquisitions, except for revolving loans, are accounted for in accordance with ASC 310-30. Revolving loans are accounted for under ASC 310-20. The Corporation’s allowance for loan losses for acquired loans reflects only those losses incurred after acquisition.

The following table reflects amounts at acquisition for all purchased loans subject to ASC 310-30 (impaired and non-impaired) acquired from PVF and ANNB in 2013. ASC 310-30 (impaired and non-impaired) loans acquired from BCSB in 2014 are not presented because their values are expected to be immaterial, are preliminary in nature and are subject to refinement as additional information becomes available.


	Acquired Impaired Loans			Acquired Performing Loans			Total
Acquired from PVF and ANNB in 2013
Contractually required cash flows at acquisition	$	40,972		$	796,114		$	837,086
Non-accretable difference (expected losses and foregone interest)		(23,207	)		(52,992	)		(76,199	)

Cash flows expected to be collected at acquisition		17,765			743,122			760,887
Accretable yield		(2,505	)		(112,847	)		(115,352	)

Basis in acquired loans at acquisition	$	15,260		$	630,275		$	645,535

The following table provides a summary of change in accretable yield for all acquired loans, excluding loans from the BCSB acquisition.


	Acquired Impaired Loans			Acquired Performing Loans			Total
Three Months Ended March 31, 2014
Balance at beginning of period	$	7,456		$	298,190		$	305,646
Acquisitions		—			—			—
Reduction due to unexpected early payoffs		—			(12,694	)		(12,694	)
Reclass from non-accretable difference		332			436			768
Disposals/transfers		(759	)		(185	)		(944	)
Accretion		(1,264	)		(14,649	)		(15,913	)

Balance at end of period	$	5,765		$	271,098		$	276,863

Year Ended December 31, 2013
Balance at beginning of period	$	778		$	253,375		$	254,153
Acquisitions		2,505			112,847			115,352
Reduction due to unexpected early payoffs		—			(42,582	)		(42,582	)
Reclass from non-accretable difference		8,097			8,296			16,393
Disposals/transfers		(368	)		(224	)		(592	)
Accretion		(3,556	)		(33,522	)		(37,078	)

Balance at end of period	$	7,456		$	298,190		$	305,646

Purchased Credit-Impaired (PCI) Loans

The Corporation has acquired loans for which there was evidence of deterioration of credit quality since origination and for which it was probable, at acquisition, that all contractually required payments would not be collected.

Following is information about PCI loans. The table below does not include impaired loans from the BCSB acquisition because their values are expected to be immaterial, are preliminary in nature and are subject to refinement as additional information becomes available.


	Outstanding Balance			Non-Accretable Difference			Expected Cash Flows			Accretable Yield			Recorded Investment
For the Three Months Ended March 31, 2014
Balance at beginning of period	$	56,500		$	(26,852	)	$	29,648		$	(7,456	)	$	22,192
Acquisitions		—			—			—			—			—
Accretion		—			—			—			1,264			1,264
Payments received		(8,040	)		437			(7,603	)		—			(7,603	)
Reclass from non-accretable difference		—			332			332			(332	)		—
Disposals/transfers		(2,520	)		1,129			(1,391	)		759			(632	)
Contractual interest		869			(869	)		—			—			—

Balance at end of period	$	46,809		$	(25,823	)	$	20,896		$	(5,765	)	$	15,221

For the Year Ended December 31, 2013
Balance at beginning of period	$	41,134		$	(23,733	)	$	17,401		$	(778	)	$	16,623
Acquisitions		42,031			(24,266	)		17,765			(2,505	)		15,260
Accretion		—			—			—			3,556			3,556
Payments received		(10,670	)		1,345			(9,325	)		—			(9,325	)
Reclass from non-accretable difference		—			8,097			8,097			(8,097	)		—
Disposals/transfers		(18,695	)		14,405			(4,290	)		368			(3,922	)
Contractual interest		2,700			(2,700	)		—			—			—

Balance at end of period	$	56,500		$	(26,852	)	$	29,648		$	(7,456	)	$	22,192

The accretion in the table above includes $242 in 2014 and $440 in 2013 that primarily represents payoffs received on certain loans in excess of expected cash flows.

Credit Quality

Management monitors the credit quality of the Corporation’s loan portfolio on an ongoing basis. Measurement of delinquency and past due status are based on the contractual terms of each loan.

Non-performing loans include non-accrual loans and non-performing troubled debt restructurings (TDRs). Past due loans are reviewed on a monthly basis to identify loans for non-accrual status. The Corporation places a loan on non-accrual status and discontinues interest accruals on originated loans generally when principal or interest is due and has remained unpaid for a certain number of days unless the loan is both well secured and in the process of collection. Commercial loans are placed on non-accrual at 90 days, installment loans are placed on non-accrual at 120 days and residential mortgages and consumer lines of credit are generally placed on non-accrual at 180 days. When a loan is placed on non-accrual status, all unpaid interest is reversed. Non-accrual loans may not be restored to accrual status until all delinquent principal and interest have been paid and the ultimate ability to collect the remaining principal and interest is reasonably assured. TDRs are loans in which the borrower has been granted a concession on the interest rate or the original repayment terms due to financial distress. Non-performing assets also include debt securities on which OTTI has been taken in the current or prior periods that have not been returned to accrual status.

Following is a summary of non-performing assets:


	March 31, 2014			December 31, 2013
Non-accrual loans	$	60,039		$	58,755
Troubled debt restructurings		19,384			18,698

Total non-performing loans		79,423			77,453
Other real estate owned (OREO)		43,216			40,681

Total non-performing loans and OREO		122,639			118,134
Non-performing investments		—			797

Total non-performing assets	$	122,639		$	118,931

Asset quality ratios:
Non-performing loans as a percent of total loans		0.80	%		0.81	%
Non-performing loans + OREO as a percent of total loans + OREO		1.23	%		1.24	%
Non-performing assets as a percent of total assets		0.85	%		0.88	%

The following tables provide an analysis of the aging of the Corporation’s past due loans by class, segregated by loans originated and loans acquired:


	30-89 Days Past Due		>90 Days Past Due and Still Accruing		Non- Accrual		Total Past Due		Current		Total Loans
Originated loans:
March 31, 2014
Commercial real estate	$	6,297	$	243	$	43,385	$	49,925	$	2,627,227	$	2,677,152
Commercial and industrial		2,564		8		4,194		6,766		1,841,566		1,848,332
Commercial leases		1,150		—		744		1,894		159,600		161,494

Total commercial loans and leases		10,011		251		48,323		58,585		4,628,393		4,686,978
Direct installment		7,893		2,876		6,405		17,174		1,369,766		1,386,940
Residential mortgages		8,591		1,406		3,521		13,518		674,520		688,038
Indirect installment		3,762		240		1,259		5,261		669,086		674,347
Consumer lines of credit		2,207		685		531		3,423		845,460		848,883
Other		26		9		—		35		59,177		59,212

	$	32,490	$	5,467	$	60,039	$	97,996	$	8,246,402	$	8,344,398

December 31, 2013
Commercial real estate	$	5,428	$	252	$	40,960	$	46,640	$	2,593,788	$	2,640,428
Commercial and industrial		2,066		8		6,643		8,717		1,752,951		1,761,668
Commercial leases		714		—		734		1,448		157,447		158,895

Total commercial loans and leases		8,208		260		48,337		56,805		4,504,186		4,560,991
Direct installment		9,038		3,753		4,686		17,477		1,370,518		1,387,995
Residential mortgages		12,681		2,401		4,260		19,342		658,885		678,227
Indirect installment		5,653		471		1,060		7,184		642,517		649,701
Consumer lines of credit		1,737		1,076		412		3,225		829,443		832,668
Other		25		10		—		35		45,148		45,183

	$	37,342	$	7,971	$	58,755	$	104,068	$	8,050,697	$	8,154,765


	30-89 Days Past Due		> 90 Days Past Due and Still Accruing		Non- Accrual		Total Past Due (1)		Current		Discount			Total Loans
Acquired Loans:
March 31, 2014
Commercial real estate	$	23,180	$	31,063		—	$	54,243	$	790,425	$	(57,222	)	$	787,446
Commercial and industrial		726		5,296		—		6,022		119,541		(8,830	)		116,733
Commercial leases		—		—		—		—		—		—			—

Total commercial loans and leases		23,906		36,359		—		60,265		909,966		(66,052	)		904,179
Direct installment		1,112		957		—		2,069		76,628		1,921			80,618
Residential mortgages		8,514		20,886		—		29,400		452,306		(33,954	)		447,752
Indirect installment		101		31		—		132		5,032		(593	)		4,571
Consumer lines of credit		1,035		3,396		—		4,431		164,660		(7,473	)		161,618
Other		—		—		—		—		—		—			—

	$	34,668	$	61,629		—	$	96,297	$	1,608,592	$	(106,151	)	$	1,598,738

December 31, 2013
Commercial real estate	$	13,637	$	20,668		—	$	34,305	$	619,197	$	(48,721	)	$	604,781
Commercial and industrial		1,860		1,899		—		3,759		124,415		(8,368	)		119,806
Commercial leases		—		—		—		—		—		—			—

Total commercial loans and leases		15,497		22,567		—		38,064		743,612		(57,089	)		724,587
Direct installment		1,447		1,178		—		2,625		74,917		1,699			79,241
Residential mortgages		11,464		19,298		—		30,762		412,704		(34,954	)		408,512
Indirect installment		205		31		—		236		6,267		(617	)		5,886
Consumer lines of credit		1,592		2,749		—		4,341		135,699		(6,937	)		133,103
Other		—		—		—		—		—		—			—

	$	30,205	$	45,823		—	$	76,028	$	1,373,199	$	(97,898	)	$	1,351,329

(1)	Past due information for loans acquired is based on the contractual balance outstanding at March 31, 2014 and December 31, 2013.

The Corporation utilizes the following categories to monitor credit quality within its commercial loan portfolio:


Rating Category		Definition
Pass		in general, the condition of the borrower and the performance of the loan is satisfactory or better

Special Mention		in general, the condition of the borrower has deteriorated, requiring an increased level of monitoring

Substandard		in general, the condition of the borrower has significantly deteriorated and the performance of the loan could further deteriorate if deficiencies are not corrected

Doubtful		in general, the condition of the borrower has significantly deteriorated and the collection in full of both principal and interest is highly questionable or improbable

The use of these internally assigned credit quality categories within the commercial loan portfolio permits management’s use of migration and roll rate analysis to estimate a quantitative portion of credit risk. The Corporation’s internal credit risk grading system is based on past experiences with similarly graded loans and conforms with regulatory categories. In general, loan risk ratings within each category are reviewed on an ongoing basis according to the Corporation’s policy for each class of loans. Each quarter, management analyzes the resulting ratings, as well as other external statistics and factors such as delinquency, to track the migration performance of the commercial loan portfolio. Loans within the Pass credit category or that migrate toward the Pass credit category generally have a lower risk of loss compared to loans that migrate toward the Substandard or Doubtful credit categories. Accordingly, management applies higher risk factors to Substandard and Doubtful credit categories.

The following tables present a summary of the Corporation’s commercial loans by credit quality category, segregated by loans originated and loans acquired:


	Commercial Loan Credit Quality Categories
	Pass		Special Mention		Substandard		Doubtful		Total
Originated Loans:
March 31, 2014
Commercial real estate	$	2,501,710	$	70,417	$	103,838	$	1,187	$	2,677,152
Commercial and industrial		1,688,867		97,558		61,642		265		1,848,332
Commercial leases		158,289		2,182		1,023		—		161,494

	$	4,348,866	$	170,157	$	166,503	$	1,452	$	4,686,978

December 31, 2013
Commercial real estate	$	2,476,988	$	56,140	$	106,599	$	701	$	2,640,428
Commercial and industrial		1,611,530		97,675		52,322		141		1,761,668
Commercial leases		155,991		1,945		959		—		158,895

	$	4,244,509	$	155,760	$	159,880	$	842	$	4,560,991

Acquired Loans:
March 31, 2014
Commercial real estate	$	575,859	$	94,461	$	111,306	$	5,820	$	787,446
Commercial and industrial		98,716		4,265		13,702		50		116,733
Commercial leases		—		—		—		—		—

	$	674,575	$	98,726	$	125,008	$	5,870	$	904,179

December 31, 2013
Commercial real estate	$	442,604	$	74,315	$	85,086	$	2,776	$	604,781
Commercial and industrial		100,743		6,182		12,866		15		119,806
Commercial leases		—		—		—		—		—

	$	543,347	$	80,497	$	97,952	$	2,791	$	724,587

Credit quality information for acquired loans is based on the contractual balance outstanding at March 31, 2014 and December 31, 2013. The increase in acquired loans in 2014 primarily relates to the BCSB acquisition on February 15, 2014.

The Corporation uses payment status and delinquency migration analysis within the consumer and other loan classes to enable management to estimate a quantitative portion of credit risk. Each month, management analyzes payment and volume activity, as well as other external statistics and factors such as unemployment, to determine how consumer loans are performing.

Following is a table showing originated consumer loans by payment status:


	Consumer Loan Credit Quality by Payment Status
	Performing		Non-Performing		Total
March 31, 2014
Direct installment	$	1,374,893	$	12,047	$	1,386,940
Residential mortgages		674,077		13,961		688,038
Indirect installment		672,948		1,399		674,347
Consumer lines of credit		847,961		922		848,883
Other		59,212		—		59,212
December 31, 2013
Direct installment	$	1,377,418	$	10,577	$	1,387,995
Residential mortgages		664,214		14,013		678,227
Indirect installment		648,499		1,202		649,701
Consumer lines of credit		832,071		597		832,668
Other		45,183		—		45,183

Loans are designated as impaired when, in the opinion of management, based on current information and events, the collection of principal and interest in accordance with the loan contract is doubtful. Typically, the Corporation does not consider loans for impairment unless a sustained period of delinquency (i.e., 90-plus days) is noted or there are subsequent events that impact repayment probability (i.e., negative financial trends, bankruptcy filings, imminent foreclosure proceedings, etc.). Impairment is evaluated in the aggregate for consumer installment loans, residential mortgages, consumer lines of credit, commercial leases and commercial loan relationships less than $500. For commercial loan relationships greater than or equal to $500, a specific valuation allowance is allocated, if necessary, so that the loan is reported net, at the present value of estimated future cash flows using a market interest rate or at the fair value of collateral if repayment is expected solely from the collateral. Consistent with the Corporation’s existing method of income recognition for loans, interest on impaired loans, except those classified as non-accrual, is recognized as income using the accrual method. Impaired loans, or portions thereof, are charged off when deemed uncollectible.

Following is a summary of information pertaining to originated loans considered to be impaired, by class of loans:


	Recorded Investment		Unpaid Principal Balance		Specific Related Allowance		Average Recorded Investment
At or For the Three Months Ended March 31, 2014
With no specific allowance recorded:
Commercial real estate	$	36,987	$	50,287	$	—	$	38,730
Commercial and industrial		4,972		6,613		—		6,136
Commercial leases		744		744		—		739

Total commercial loans and leases		42,703		57,644		—		45,605
Direct installment		12,047		12,150		—		11,312
Residential mortgages		13,961		14,507		—		88,787
Indirect installment		1,399		2,861		—		1,301
Consumer lines of credit		922		1,000		—		760
Other		—		—		—		—
With a specific allowance recorded:
Commercial real estate		9,344		19,951		1,087		6,474
Commercial and industrial		181		190		181		152
Commercial leases		—		—		—		—

Total commercial loans and leases		9,525		20,141		1,268		6,626
Direct installment		—		—		—		—
Residential mortgages		—		—		—		—
Indirect installment		—		—		—		—
Consumer lines of credit		—		—		—		—
Other		—		—		—		—
Total:
Commercial real estate		46,331		70,238		1,087		45,204
Commercial and industrial		5,153		6,803		181		6,288
Commercial leases		744		744		—		739

Total commercial loans and leases		52,228		77,785		1,268		52,231
Direct installment		12,047		12,150		—		11,312
Residential mortgages		13,961		14,507		—		88,787
Indirect installment		1,399		2,861		—		1,301
Consumer lines of credit		922		1,000		—		760
Other		—		—		—		—


	Recorded Investment		Unpaid Principal Balance		Specific Related Allowance		Average Recorded Investment
At or For the Year Ended December 31, 2013
With no specific allowance recorded:
Commercial real estate	$	40,472	$	62,034	$	—	$	37,376
Commercial and industrial		7,301		8,669		—		8,304
Commercial leases		734		734		—		758

Total commercial loans and leases		48,507		71,437		—		46,438
Direct installment		10,577		10,830		—		10,557
Residential mortgages		14,012		14,560		—		13,565
Indirect installment		1,202		2,633		—		1,127
Consumer lines of credit		597		668		—		573
Other		—		—		—		—
With a specific allowance recorded:
Commercial real estate		3,603		3,818		701		14,379
Commercial and industrial		122		130		123		126
Commercial leases		—		—		—		—

Total commercial loans and leases		3,725		3,948		824		14,505
Direct installment		—		—		—		—
Residential mortgages		—		—		—		—
Indirect installment		—		—		—		—
Consumer lines of credit		—		—		—		—
Other		—		—		—		—
Total:
Commercial real estate		44,075		65,852		701		51,755
Commercial and industrial		7,423		8,799		123		8,430
Commercial leases		734		734		—		758

Total commercial loans and leases		52,232		75,385		824		60,943
Direct installment		10,577		10,830		—		10,557
Residential mortgages		14,012		14,560		—		13,565
Indirect installment		1,202		2,633		—		1,127
Consumer lines of credit		597		668		—		573
Other		—		—		—		—

Interest income is generally no longer recognized once a loan becomes impaired.

The above tables do not include PCI loans with a recorded investment of $15,221 at March 31, 2014 and $22,192 at December 31, 2013. These tables do not reflect the additional allowance for loan losses relating to acquired loans in the following pools and categories: commercial real estate of $2,612; commercial and industrial of $817; direct installment of $906; residential mortgages of $504; and indirect installment of $257, totaling $5,096 at March 31, 2014 and commercial real estate of $3,093; commercial and industrial of $786; direct installment of $727; residential mortgages of $970 and indirect installment of $324, totaling $5,900 at December 31, 2013.

Troubled Debt Restructurings

TDRs are loans whose contractual terms have been modified in a manner that grants a concession to a borrower experiencing financial difficulties. TDRs typically result from loss mitigation activities and could include the extension of a maturity date, interest rate reduction, principal forgiveness, deferral or decrease in payments for a period of time and other actions intended to minimize the economic loss and to avoid foreclosure or repossession of collateral.

Following is a summary of the composition of total TDRs:


	March 31, 2014		December 31, 2013
Accruing:
Performing	$	10,289	$	10,220
Non-performing		19,384		18,698
Non-accrual		12,389		12,705

	$	42,062	$	41,623

TDRs that are accruing and performing include loans that met the criteria for non-accrual of interest prior to restructuring for which the Corporation can reasonably estimate the timing and amount of the expected cash flows on such loans and for which the Corporation expects to fully collect the new carrying value of the loans. During the three months ended March 31, 2014, the Corporation returned to performing status $3,194 in restructured loans, all of which were secured by residential mortgages that have consistently met their modified obligations for more than six months. TDRs that are accruing and non-performing are comprised of consumer loans that have not demonstrated a consistent repayment pattern on the modified terms for more than six months, however it is expected that the Corporation will collect all future principal and interest payments. TDRs that are on non-accrual are not placed on accruing status until all delinquent principal and interest have been paid and the ultimate collectability of the remaining principal and interest is reasonably assured. Some loan modifications classified as TDRs may not ultimately result in the full collection of principal and interest, as modified, and result in potential incremental losses which are factored into the allowance for loan losses.

Excluding purchased impaired loans, commercial loans over $500 whose terms have been modified in a TDR are generally placed on non-accrual, individually analyzed and measured for estimated impairment based on the fair value of the underlying collateral. The Corporation’s allowance for loan losses included specific reserves for commercial TDRs of $523 and $561 at March 31, 2014 and December 31, 2013, respectively, and pooled reserves for individual loans under $500 of $188 and $193 for those same respective periods, based on historical loss experience. Upon default, the amount of the recorded investment in the TDR in excess of the fair value of the collateral less estimated selling costs is generally considered a confirmed loss and is charged-off against the allowance for loan losses.

All other classes of loans, which are primarily secured by residential properties, whose terms have been modified in a TDR are pooled and measured for estimated impairment based on the expected net present value of the estimated future cash flows of the pool. The Corporation’s allowance for loan losses included pooled reserves for these classes of loans of $1,026 and $1,005 at March 31, 2014 and December 31, 2013, respectively. Upon default of an individual loan, the Corporation’s charge-off policy is followed accordingly for that class of loan.

The majority of TDRs are the result of interest rate concessions for a limited period of time. Following is a summary of loans, by class, that have been restructured during the periods indicated:


	Three Months Ended March 31, 2014						Three Months Ended March 31, 2013
	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Commercial real estate		1	$	188	$	188		5	$	1,029	$	905
Commercial and industrial		1		52		50		—		—		—
Commercial leases		—		—		—		—		—		—

Total commercial loans and leases		2		240		238		5		1,029		905
Direct installment		126		1,678		1,647		110		1,176		1,150
Residential mortgages		9		281		280		14		597		709
Indirect installment		7		17		16		10		56		56
Consumer lines of credit		7		255		255		9		173		172
Other		—		—		—		—		—		—

		151	$	2,471	$	2,436		148	$	3,031	$	2,992

Following is a summary of TDRs, by class of loans, for which there was a payment default, excluding loans that were either charged-off or cured by period end. Default occurs when a loan is 90 days or more past due and is within 12 months of restructuring.


	Three Months Ended March 31, 2014 (1)				Three Months Ended March 31, 2013 (1)
	Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment
Commercial real estate		—	$	—		—	$	—
Commercial and industrial		—		—		1		33
Commercial leases		—		—		—		—

Total commercial loans and leases		—		—		1		33
Direct installment		18		171		21		170
Residential mortgages		—		—		2		93
Indirect installment		1		—		4		18
Consumer lines of credit		—		—		—		—
Other		—		—		—		—

		19	$	171		28	$	314

(1)	The recorded investment is as of period end.

Allowance for Loan Losses

The allowance for loan losses is established as losses are estimated to have occurred through a provision charged to earnings. Loan losses are charged against the allowance for loan losses when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance for loan losses. Allowances for impaired loans are generally determined based on collateral values or the present value of estimated cash flows. Changes in the allowance for loan losses related to impaired loans are charged or credited to the provision for loan losses.

The allowance for loan losses is maintained at a level that, in management’s judgment, is believed adequate to absorb probable losses associated with specifically identified loans, as well as estimated probable credit losses inherent in the remainder of the loan portfolio. Adequacy of the allowance for loan losses is based on management’s evaluation of potential loan losses in the loan portfolio, which includes an assessment of past experience, current economic conditions in specific industries and geographic areas, general economic conditions, known and inherent risks in the loan portfolio, the estimated value of underlying collateral and residuals and changes in the composition of the loan portfolio. Determination of the allowance for loan losses is inherently subjective as it requires significant estimates, including the amounts and timing of expected future cash flows on impaired loans, estimated losses on pools of homogeneous loans based on historical loss experience and consideration of current environmental factors and economic trends, all of which are susceptible to significant change.

Credit impaired loans obtained through acquisitions are accounted for under the provisions of ASC 310-30. The Corporation also accounts for certain acquired loans considered performing at the time of acquisition by analogy to ASC 310-30. ASC 310-30 requires the initial recognition of acquired loans at the present value of amounts expected to be received. Any deterioration in the credit quality of acquired loans subsequent to acquisition would be considered in the allowance for loan losses.

Following is a summary of changes in the allowance for loan losses, by loan class:


	Balance at Beginning of Period		Charge- Offs			Recoveries		Net Charge- Offs			Provision for Loan Losses			Balance at End of Period
Three Months Ended March 31, 2014
Commercial real estate	$	32,548	$	(2,223	)	$	299	$	(1,924	)	$	7,910		$	38,534
Commercial and industrial		32,603		(513	)		370		(143	)		(2,489	)		29,971
Commercial leases		1,903		(87	)		29		(58	)		99			1,944

Total commercial loans and leases		67,054		(2,823	)		698		(2,125	)		5,520			70,449
Direct installment		17,824		(2,521	)		267		(2,254	)		1,060			16,630
Residential mortgages		5,836		(132	)		4		(128	)		(401	)		5,307
Indirect installment		6,409		(802	)		217		(585	)		676			6,500
Consumer lines of credit		7,231		(323	)		55		(268	)		695			7,658
Other		530		(262	)		5		(257	)		306			579

Total allowance on originated loans		104,884		(6,863	)		1,246		(5,617	)		7,856			107,123

Purchased credit-impaired loans		1,000		(249	)		—		(249	)		(43	)		708
Other acquired loans		4,900		9			286		295			(807	)		4,388

Total allowance on acquired loans		5,900		(240	)		286		46			(850	)		5,096

Total allowance	$	110,784	$	(7,103	)	$	1,532	$	(5,571	)	$	7,006		$	112,219

Three Months Ended March 31, 2013
Commercial real estate	$	34,810	$	(2,287	)	$	1,427	$	(860	)	$	6,062		$	40,012
Commercial and industrial		31,849		(208	)		356		148			(3,159	)		28,838
Commercial leases		1,744		(57	)		62		5			(53	)		1,696

Total commercial loans and leases		68,403		(2,552	)		1,845		(707	)		2,850			70,546
Direct installment		15,130		(2,345	)		233		(2,112	)		2,082			15,100
Residential mortgages		5,155		(209	)		29		(180	)		3			4,978
Indirect installment		5,449		(810	)		193		(617	)		320			5,152
Consumer lines of credit		6,057		(342	)		87		(255	)		243			6,045
Other		—		(177	)		—		(177	)		860			683

Total allowance on originated loans		100,194		(6,435	)		2,387		(4,048	)		6,358			102,504

Purchased credit-impaired loans		759		(156	)		—		(156	)		(20	)		583
Other acquired loans		3,421		(213	)		204		(9	)		1,203			4,615

Total allowance on acquired loans		4,180		(369	)		204		(165	)		1,183			5,198

Total allowance	$	104,374	$	(6,804	)	$	2,591	$	(4,213	)	$	7,541		$	107,702

Following is a summary of the individual and collective originated allowance for loan losses and corresponding loan balances by class:


	Allowance				Loans Outstanding
	Individually Evaluated for Impairment		Collectively Evaluated for Impairment		Loans		Individually Evaluated for Impairment		Collectively Evaluated for Impairment
March 31, 2014
Commercial real estate	$	1,087	$	37,446	$	2,677,152	$	34,062	$	2,643,090
Commercial and industrial		181		29,791		1,848,332		1,704		1,846,628
Commercial leases		—		1,945		161,494		—		161,494

Total commercial loans and leases		1,268		69,182		4,686,978		35,766		4,651,212
Direct installment		—		16,629		1,386,940		—		1,386,940
Residential mortgages		—		5,307		688,038		—		688,038
Indirect installment		—		6,500		674,347		—		674,347
Consumer lines of credit		—		7,658		848,883		—		848,883
Other		—		579		59,212		—		59,212

	$	1,268	$	105,855	$	8,344,398	$	35,766	$	8,308,632

December 31, 2013
Commercial real estate	$	701	$	31,847	$	2,640,428	$	30,133	$	2,610,295
Commercial and industrial		123		32,480		1,761,668		4,243		1,757,425
Commercial leases		—		1,903		158,895		—		158,895

Total commercial loans and leases		824		66,230		4,560,991		34,376		4,526,615
Direct installment		—		17,824		1,387,995		—		1,387,995
Residential mortgages		—		5,836		678,227		—		678,227
Indirect installment		—		6,409		649,701		—		649,701
Consumer lines of credit		—		7,231		832,668		—		832,668
Other		—		530		45,183		—		45,183

	$	824	$	104,060	$	8,154,765	$	34,376	$	8,120,389