Management reviews the appropriateness of the ACL on a regular basis. Management considers the accounting policy relating to the allowance to be a critical accounting policy, given the inherent uncertainty in evaluating the levels of the allowance required to cover credit losses in the portfolio and the material effect that assumptions could have on the Company’s results of operations. The Company has developed a methodology to measure the amount of estimated credit loss exposure inherent in the loan portfolio to assure that an appropriate allowance is maintained. The Company’s methodology is based upon guidance provided in SEC Staff Accounting Bulletin No. 119, Measurement of Credit Losses on Financial Instruments ("CECL"), and Financial Instruments - Credit Losses and ASC Topic 326, Financial Instruments - Credit Losses.

The Company uses a DCF method to estimate expected credit losses for all loan segments excluding the leasing segment. For each of these loan segments, the Company generates cash flow projections at the instrument level wherein payment expectations are adjusted for estimated prepayment speed, curtailments, recovery lag, probability of default, and loss given default. The modeling of expected prepayment speeds, curtailment rates, and time to recovery are based on internal historical data.

The Company uses regression analysis of historical internal and peer data to determine suitable loss drivers to utilize when modeling lifetime probability of default and loss given default. This analysis also determines how expected probability of default and loss given default will react to forecasted levels of the loss drivers. For all loans utilizing the DCF method, management utilizes forecasts of national unemployment and a one year percentage change in national gross domestic product as loss drivers in the model.

For all DCF models, management has determined that four quarters represents a reasonable and supportable forecast period and reverts back to a historical loss rate over eight quarters on a straight-line basis. Management leverages economic projections from a reputable and independent third party to inform its loss driver forecasts over the four-quarter forecast period. Other internal and external indicators of economic forecasts, and scenario weightings, are also considered by management when developing the forecast metrics.

The combination of adjustments for credit expectations and timing expectations produces an expected cash flow stream at the instrument level. Instrument effective yield is calculated, net of the impacts of prepayment assumptions, and the instrument expected cash flows are then discounted at that effective yield to produce a net present value of expected cash flows ("NPV"). An ACL is established for the difference between the NPV and amortized cost basis.

The Company adopted ASU 2016-13 as of January 1, 2020 using the prospective transition approach for financial assets purchased with credit deterioration ("PCD") that were previously classified as purchased credit impaired ("PCI") and accounted for under ASC 310-30. In accordance with the standard, the Company did not reassess whether PCI assets met the criteria of PCD assets as of the date of adoption. The remaining discount on the PCD assets will be accreted into interest income on a level-yield method over the life of the loans.

Since the methodology is based upon historical experience and trends, current conditions, and reasonable and supportable forecasts, as well as management’s judgment, factors may arise that result in different estimates. While management’s evaluation of the allowance as of December 31, 2020, considers the allowance to be appropriate, under adversely different conditions or assumptions, the Company would need to increase or decrease the allowance. In addition, various federal and State regulatory agencies, as part of their examination process, review the Company's allowance and may require the Company to recognize additions to the allowance based on their judgements and information available to them at the time of their examinations.

Financial instruments include off-balance sheet credit instruments, such as commitments to make loans, and commercial letters of credit. The Company's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for off-balance sheet loan commitments is represented by the contractual amount of those instruments. Such financial instruments are recorded when they are funded. The Company records an allowance for credit losses on off-balance sheet credit exposures, unless the commitments to extend credit are unconditionally cancelable, through a charge to credit loss expense for off-balance sheet credit exposures included in other noninterest expense in the Company's Consolidated Statements of Income.

The following table details activity in the allowance for credit losses on loans for the years ended December 31, 2020 and 2019. As previously discussed, the Company adopted ASU 2016-13 on January 1, 2020 using the modified retrospective approach. Results for the periods beginning after January 1, 2020 are presented under ASC 326, while prior period amounts continue to be reported in accordance with previously applicable U.S. GAAP. As a result of the adoption of ASC 326, the Company recorded a net cumulative-effect adjustment reducing the allowance for credit losses by $2.5 million. The allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.


December 31, 2020
(In thousands)	Commercial & Industrial		Commercial Real Estate		Residential Real Estate		Consumer and Other		Finance Leases		Total
Allowance for credit losses:
Beginning balance, prior to adoption of ASU 2016-13	$	10,541	$	21,608	$	6,381	$	1,362	$	0	$	39,892
Impact of adopting ASU 2016-13	(2,008)		(5,917)		4,459		850		82		(2,534)
Charge-offs	(2)		(1,903)		(84)		(482)		0		(2,471)
Recoveries	131		58		194		248		0		631
Provision (credit) for credit loss expense	577		16,700		(693)		(416)		(17)		16,151
Ending Balance	$	9,239	$	30,546	$	10,257	$	1,562	$	65	$	51,669


December 31, 2019
(In thousands)	Commercial & Industrial		Commercial Real Estate		Residential Real Estate		Consumer and Other		Finance Leases		Total
Allowance for credit losses:
Beginning balance	$	11,272	$	23,483	$	7,345	$	1,310	$	0	$	43,410
Charge-offs	(696)		(4,015)		(256)		(823)		0		(5,790)
Recoveries	103		174		334		295		0		906
Provision (credit) for credit loss expense	(138)		1,966		(1,042)		580		0		1,366
Ending Balance	$	10,541	$	21,608	$	6,381	$	1,362	$	0	$	39,892


December 31, 2019
(In thousands)	Commercial & Industrial		Commercial Real Estate		Residential Real Estate		Consumer and Other		Finance Leases		Total
Allowance for originated loans and leases
Individually evaluated for impairment	$	245	$	662	$	0	$	0	$	0	$	907
Collectively evaluated for impairment	10,296		20,895		6,360		1,356		0		38,907
Ending balance	$	10,541	$	21,557	$	6,360	$	1,356	$	0	$	39,814
Allowance for acquired loans
Individually evaluated for impairment	$	0	$	0	$	0	$	0	$	0	$	0
Collectively evaluated for impairment	0		51		21		6		0		78
Ending balance	$	0	$	51	$	21	$	6	$	0	$	78


December 31, 2019
(In thousands)	Commercial & Industrial		Commercial Real Estate		Residential Real Estate		Consumer and Other		Finance Leases		Total
Acquired loans
Individually evaluated for impairment	$	2	$	714	$	2,114	$	0	$	0	$	2,830
Loans acquired with deteriorated credit quality	173		5,674		3,302		0		0		9,149
Collectively evaluated for impairment	38,901		140,529		27,955		785		0		208,170
Total	$	39,076	$	146,917	$	33,371	$	785	$	0	$	220,149

Prior to the adoption of ASC 326, a loan was considered impaired when, based on current information and events, it was probable that we would be unable to collect all amounts due according to the contractual terms of the loan agreement. Impaired loans consisted of non-homogenous nonaccrual loans, and all loans restructured in a troubled debt restructuring (TDR). Specific reserves on individually identified impaired loans that were not collateral dependent were measured based on the present value of expected future cash flows discounted at the original effective interest rate of each loan. For loans that were collateral dependent, impairment was measured based on the fair value of the collateral less estimated selling costs, and such impaired amounts were generally charged off. The majority of impaired loans were collateral dependent impaired loans that had limited exposure or require limited specific reserves because of the amount of collateral support with respect to these loans, and


	December 31, 2019
(In thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance
Originated loans and leases with no related allowance
Commercial & industrial
Commercial and industrial other	$	1,865	$	1,965	$	0
Commercial real estate
Commercial real estate other	10,205		11,017		0
Residential real estate
Home equity	3,779		3,992		0
Subtotal	$	15,849	$	16,974	$	0
Originated loans and leases with related allowance
Commercial & industrial
Commercial and industrial other	245		245		245
Commercial real estate
Commercial real estate other	3,291		3,291		662
Subtotal	$	3,536	$	3,536	$	907
Total	$	19,385	$	20,510	$	907


Year Ended December 31,
	2019				2018
(In thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Originated loans and leases with no related allowance
Commercial & industrial
Commercial and industrial other	$	1,830	$	0	$	1,979	$	0
Commercial real estate
Commercial real estate other	7,552		0		5,165		0
Residential real estate
Home equity	3,943		0		3,983		0
Subtotal	$	13,325	$	0	$	11,127	$	0
Originated loans and leases with related allowance
Commercial & industrial
Commercial and industrial other	$	132	$	0	$	1,374	$	0
Commercial real estate
Commercial real estate other	1,391		0		1,357		0
Subtotal	$	1,523	$	0	$	2,731	$	0
Total	$	14,848	$	0	$	13,858	$	0


Year Ended December 31,
	2019				2018
(In thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Acquired loans and leases with no related allowance
Commercial & industrial
Commercial and industrial other	$	21	$	0	$	50	$	0
Commercial real estate

Commercial real estate other	822		0		999		0
Residential real estate
Home equity	2,503		0		2,945		0
Subtotal	$	3,346	$	0	$	3,994	$	0
Acquired loans and leases with related allowance




Subtotal	$	0	$	0	$	0	$	0
Total	$	3,346	$	0	$	3,994	$	0

Loans are considered modified in a TDR when, due to a borrower’s financial difficulties, the Company makes a concession(s) to the borrower that it would not otherwise consider. When modifications are provided for reasons other than as a result of the financial distress of the borrower, these loans are not classified as TDRs or impaired. These modifications primarily include, among others, an extension of the term of the loan, and granting a period when interest-only payments can be made, with the principal payments and interest caught up over the remaining term of the loan or at maturity, among others.


December 31, 2020	Year Ended
						Defaulted TDRs2
(In thousands)	Number of Loans	Pre- Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Loans	Post- Modification Outstanding Recorded Investment
Commercial & industrial
Commercial and industrial other1	1	$	24	$	24	0	$	0


Residential real estate
Mortgages	2	274		274		1	37
Home equity1	1	43		43		1	87
Consumer and other
Consumer and other	1	4		4		0	0
Total	5	$	345	$	345	2	$	124


December 31, 2019	Year Ended
						Defaulted TDRs2
(In thousands)	Number of Loans	Pre- Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Loans	Post- Modification Outstanding Recorded Investment
Commercial & industrial
Commercial and industrial other	2	$	604	$	604	0	$	0
Commercial real estate
Commercial real estate other1	1	1,577		1,577		0	0
Residential real estate
Home equity1	2	181		181		1	93
Total	5	$	2,362	$	2,362	1	$	93

The Company's TDRs totaled $345,000 at December 31, 2020, compared to $2.4 million at December 31, 2019. At December 31, 2020, the Company was not committed to lend additional amounts to customers with outstanding loans that were classified as TDRs. The provisions of the CARES Act guidance issued by Federal banking regulators provided guidance and clarification related to modifications and deferral programs to assist borrowers who are negatively impacted by the COVID-19 national emergency. The guidance and clarifications detail certain provisions whereby banks are permitted to make deferrals and modifications to the terms of a loan which would not require the loan to be reported as a TDR. In accordance with the CARES Act and the interagency guidance, the Company elected to adopt the provisions to not report qualified loan modifications as TDRs.


(In thousands)	2020		2019		2018		2017		2016		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total Loans

Commercial & Industrial - Other:
Pass	$	91,597	$	72,639	$	56,191	$	60,714	$	33,402	$	301,027	$	149,969	$	16,301	$	781,840
Special Mention	1,064		367		344		912		2,045		228		1,331		0		6,291
Substandard	412		305		933		485		292		783		1,646		0		4,856
Total Commercial & Industrial - Other	$	93,073	$	73,311	$	57,468	$	62,111	$	35,739	$	302,038	$	152,946	$	16,301	$	792,987

Commercial and Industrial - PPP:
Pass	$	291,252	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	291,252
Special Mention	0		0		0		0		0		0		0		0		0
Substandard	0		0		0		0		0		0		0		0		0
Total Commercial and Industrial - PPP	$	291,252	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	291,252


Commercial and Industrial - Agriculture:
Pass	$	11,536	$	8,005	$	11,162	$	6,531	$	3,539	$	2,599	$	41,936	$	1,340	$	86,648
Special Mention	0		0		28		729		0		0		2,080		0		2,837
Substandard	99		83		0		202		0		2,308		2,312		0		5,004
Total Commercial and Industrial - Agriculture	$	11,635	$	8,088	$	11,190	$	7,462	$	3,539	$	4,907	$	46,328	$	1,340	$	94,489

Commercial Real Estate
Pass	$	278,747	$	246,331	$	232,651	$	237,487	$	290,106	$	664,027	$	33,117	$	64,903	$	2,047,369
Special Mention	35		13,016		5,612		4,654		34,310		46,074		203		0		103,904
Substandard	0		4,933		18,395		6,172		5,625		17,610		302		0		53,037
Total Commercial Real Estate	$	278,782	$	264,280	$	256,658	$	248,313	$	330,041	$	727,711	$	33,622	$	64,903	$	2,204,310

Commercial Real Estate - Agriculture:
Pass	$	22,440	$	35,081	$	44,519	$	22,356	$	17,081	$	44,559	$	919	$	5,602	$	192,557
Special Mention	1,960		0		575		1,366		1,053		6		49		0		5,009
Substandard	0		0		0		1,777		713		1,527		283		0		4,300
Total Commercial Real Estate - Agriculture	$	24,400	$	35,081	$	45,094	$	25,499	$	18,847	$	46,092	$	1,251	$	5,602	$	201,866

Commercial Real Estate - Construction
Pass	$	14,465	$	20,705	$	7,999	$	2,478	$	1,879	$	6,682	$	85,513	$	21,051	$	160,772
Special Mention	0		0		0		0		0		467		1,453		0		1,920
Substandard	0		0		0		0		0		324		0		0		324
Total Commercial Real Estate - Construction	$	14,465	$	20,705	$	7,999	$	2,478	$	1,879	$	7,473	$	86,966	$	21,051	$	163,016


(In thousands)	2020		2019		2018		2017		2016		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total Loans

Residential - Home Equity
Performing	$	1,440	$	2,764	$	1,052	$	2,120	$	722	$	1,106	$	188,614	$	44	$	197,862
Nonperforming	0		18		0		0		194		506		2,247		0		2,965
Total Residential - Home Equity	$	1,440	$	2,782	$	1,052	$	2,120	$	916	$	1,612	$	190,861	$	44	$	200,827

Residential - Mortgages
Performing	$	305,476	$	193,543	$	123,205	$	155,699	$	178,149	$	255,556	$	11,735	$	1,617	$	1,224,980
Nonperforming	0		258		455		706		1,404		7,305		52		0		10,180
Total Residential - Mortgages	$	305,476	$	193,801	$	123,660	$	156,405	$	179,553	$	262,861	$	11,787	$	1,617	$	1,235,160

Consumer - Direct
Performing	$	14,840	$	11,127	$	8,011	$	6,632	$	2,854	$	10,840	$	6,835	$	0	$	61,139
Nonperforming	5		74		167		12		0		2		0		$	0	260
Total Consumer - Direct	$	14,845	$	11,201	$	8,178	$	6,644	$	2,854	$	10,842	$	6,835	$	0	$	61,399

Consumer - Indirect
Performing	$	1,424	$	1,878	$	3,327	$	1,128	$	382	$	93	$	0	$	0	$	8,232
Nonperforming	0		67		44		7		36		15		0		0		169
Total Consumer Indirect	$	1,424	$	1,945	$	3,371	$	1,135	$	418	$	108	$	0	$	0	$	8,401


December 31, 2019
(In thousands)	Commercial & Industrial Other		Commercial & Industrial Agriculture		Commercial Real Estate Other		Commercial Real Estate Agriculture		Commercial Real Estate Construction		Total
Originated Loans and Leases
Internal risk grade:
Pass	$	851,517	$	89,892	$	1,857,142	$	166,888	$	212,302	$	3,177,741
Special Mention	8,306		1,698		16,623		3,173		0		29,800
Substandard	3,376		14,196		25,880		14,640		0		58,092
Total	$	863,199	$	105,786	$	1,899,645	$	184,701	$	212,302	$	3,265,633


December 31, 2019
(In thousands)	Commercial & Industrial Other		Commercial & Industrial Agriculture		Commercial Real Estate Other		Commercial Real Estate Agriculture		Commercial Real Estate Construction		Total
Acquired Loans and Leases
Internal risk grade:
Pass	$	38,879	$	0	$	143,175	$	197	$	1,335	$	183,586
Special Mention	0		0		0		0		0		0
Substandard	197		0		2,210		0		0		2,407
Total	$	39,076	$	0	$	145,385	$	197	$	1,335	$	185,993

The following tables present credit quality indicators by class of residential real estate loans and by class of consumer loans. Nonperforming loans include nonaccrual, impaired, and loans 90 days past due and accruing interest. All other loans were considered performing as of December 31, 2019. For purposes of this footnote, acquired loans that were recorded at fair value at the acquisition date and are 90 days or greater past due are considered performing.