LOANS AND ALLOWANCE FOR CREDIT LOSSES

9 Months Ended

Sep. 30, 2024

Receivables [Abstract]

LOANS AND ALLOWANCE FOR CREDIT LOSSES

LOANS AND ALLOWANCE FOR CREDIT LOSSES

Loan Portfolio and Credit Quality

The Corporation's primary lending focus is small business and middle market commercial, commercial real estate, public finance and residential real estate, which results in portfolio diversification. The following tables show the composition of the loan portfolio and credit quality characteristics by collateral classification, excluding loans held for sale.  Loans held for sale at September 30, 2024 and December 31, 2023, were $40.7 million and $18.9 million, respectively.

The following table illustrates the composition of the Corporation’s loan portfolio by loan class as of the dates indicated.

	September 30, 2024		December 31, 2023
Commercial and industrial loans	$	4,041,217	$	3,670,948
Agricultural land, production and other loans to farmers	238,743		263,414
Real estate loans:
Construction	814,704		957,545
Commercial real estate, non-owner occupied	2,251,351		2,400,839
Commercial real estate, owner occupied	1,152,751		1,162,083
Residential	2,366,943		2,288,921
Home equity	641,188		617,571
Individuals' loans for household and other personal expenditures	158,480		168,388
Public finance and other commercial loans	981,431		956,318
Loans	$	12,646,808	$	12,486,027

Credit Quality

As part of the ongoing monitoring of the credit quality of the Corporation's loan portfolio, management tracks certain credit quality indicators including trends related to: (i) the level of criticized commercial loans, (ii) net charge-offs, (iii) nonperforming loans, (iv) covenant failures and (v) the general national and local economic conditions.

The Corporation utilizes a risk grading of pass, special mention, substandard, doubtful and loss to assess the overall credit quality of large commercial loans. All large commercial credit grades are reviewed at a minimum of once a year for pass grade loans. Loans with grades below pass are reviewed more frequently depending on the grade. A description of the general characteristics of these grades is as follows:

•Pass - Loans that are considered to be of acceptable credit quality.

•Special Mention - Loans which possess some credit deficiency or potential weakness, which deserves close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Corporation's credit position at some future date. Special mention assets are not adversely classified and do not expose the Corporation to sufficient risk to warrant adverse classification.

•Substandard - Loans that are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified have a well-defined weakness that jeopardizes the liquidation of the debt. They are characterized by the distinct possibility that the Corporation will sustain some loss if the deficiencies are not corrected.

•Doubtful - Loans that have all of the weaknesses of those classified as Substandard. However, based on existing facts, conditions and values, these weaknesses make full collection of principal highly questionable and improbable.

•Loss – Loans that are considered uncollectible and of such little value that continuing to carry them as an asset is not warranted. Loans will be classified as Loss when it is neither practical or desirable to defer charging-off or reserving all or a portion of a basically worthless asset, even though partial recovery may be possible at some time in the future.

The following tables summarize the risk grading of the Corporation’s loan portfolio and gross charge-offs by loan class and by year of origination for the periods indicated. Consumer loans are not risk graded. For the purposes of this disclosure, consumer loans are classified in the following manner: loans that are less than 30 days past due are Pass, loans 30-89 days past due are Special Mention and loans greater than 89 days past due are Substandard.  The entire balance of a loan is considered delinquent if the minimum payment contractually required to be made is not received by the specified due date.

	September 30, 2024
	Term Loans (amortized cost basis by origination year)												Revolving loans amortized cost basis		Revolving loans converted to term
	2024		2023		2022		2021		2020		Prior						Total
Commercial and industrial loans
Pass	$	1,110,731	$	625,113	$	259,418	$	180,272	$	62,723	$	53,350	$	1,495,641	$	136	$	3,787,384
Special Mention	14,480		9,872		8,979		2,730		2,731		369		45,459		—		84,620
Substandard	28,078		32,296		24,365		7,007		1,655		1,670		72,482		555		168,108
Doubtful	—		1,105		—		—		—		—		—		—		1,105
Total Commercial and industrial loans	1,153,289		668,386		292,762		190,009		67,109		55,389		1,613,582		691		4,041,217
Current period gross charge-offs	1,178		37,655		242		8,577		498		236		—		—		48,386
Agricultural land, production and other loans to farmers
Pass	23,646		24,039		33,909		27,872		28,250		32,445		63,526		—		233,687
Special Mention	171		—		245		—		—		444		548		—		1,408
Substandard	491		50		936		696		516		86		873		—		3,648
Total Agricultural land, production and other loans to farmers	24,308		24,089		35,090		28,568		28,766		32,975		64,947		—		238,743
Real estate loans:
Construction
Pass	186,900		227,462		174,201		73,746		6,518		8,851		12,828		—		690,506
Special Mention	35,150		26,805		18,197		13,341		—		6		—		—		93,499
Substandard	22,000		—		8,699		—		—		—		—		—		30,699
Total Construction	244,050		254,267		201,097		87,087		6,518		8,857		12,828		—		814,704
Commercial real estate, non-owner occupied
Pass	278,958		280,167		346,311		413,970		351,260		299,771		21,681		—		1,992,118
Special Mention	81,543		19,499		19,347		23,624		1,768		28,452		—		—		174,233
Substandard	31,922		5,778		8,982		6,270		19,606		1,614		—		—		74,172
Doubtful	10,828		—		—		—		—		—		—		—		10,828
Total Commercial real estate, non-owner occupied	403,251		305,444		374,640		443,864		372,634		329,837		21,681		—		2,251,351
Current period gross charge-offs	—		339		3		—		—		—		—		—		342
Commercial real estate, owner occupied
Pass	118,117		167,922		173,512		230,821		214,975		144,123		33,613		—		1,083,083
Special Mention	2,220		2,385		8,616		6,545		4,935		1,402		460		—		26,563
Substandard	6,804		12,216		5,204		8,896		2,747		7,083		155		—		43,105
Total Commercial real estate, owner occupied	127,141		182,523		187,332		246,262		222,657		152,608		34,228		—		1,152,751
Current period gross charge-offs	—		—		—		—		9		—		—		—		9
Residential
Pass	166,807		421,280		680,588		408,017		339,835		308,575		6,117		13		2,331,232
Special Mention	1,095		1,975		5,436		3,425		1,745		3,585		—		—		17,261
Substandard	528		1,478		6,836		4,226		1,066		3,991		325		—		18,450
Total Residential	168,430		424,733		692,860		415,668		342,646		316,151		6,442		13		2,366,943
Current period gross charge-offs	—		124		653		123		21		288		—		—		1,209
Home equity
Pass	6,239		6,674		25,743		54,185		11,864		4,346		516,564		6,766		632,381
Special Mention	—		—		—		421		—		33		3,772		593		4,819
Substandard	62		—		572		561		—		206		1,955		632		3,988
Total Home Equity	6,301		6,674		26,315		55,167		11,864		4,585		522,291		7,991		641,188
Current period gross charge-offs	—		10		35		23		—		264		—		—		332
Individuals' loans for household and other personal expenditures
Pass	37,606		24,496		34,052		11,078		3,097		5,215		39,613		369		155,526
Special Mention	42		461		568		1,507		80		8		286		—		2,952
Substandard	—		—		—		—		—		2		—		—		2
Total Individuals' loans for household and other personal expenditures	37,648		24,957		34,620		12,585		3,177		5,225		39,899		369		158,480
Current period gross charge-offs	130		609		397		149		44		50		—		—		1,379
Public finance and other commercial loans
Pass	72,229		53,788		204,870		197,319		151,368		301,284		573		—		981,431
Total Public finance and other commercial loans	72,229		53,788		204,870		197,319		151,368		301,284		573		—		981,431
Loans	$	2,236,647	$	1,944,861	$	2,049,586	$	1,676,529	$	1,206,739	$	1,206,911	$	2,316,471	$	9,064	$	12,646,808
Total current period gross charge-offs	$	1,308	$	38,737	$	1,330	$	8,872	$	572	$	838	$	—	$	—	$	51,657

	December 31, 2023
	Term Loans (amortized cost basis by origination year)												Revolving loans amortized		Revolving loans converted
	2023		2022		2021		2020		2019		Prior		cost basis		to term		Total
Commercial and industrial loans
Pass	$	1,175,967	$	474,601	$	253,148	$	86,226	$	47,910	$	45,020	$	1,393,756	$	60	$	3,476,688
Special Mention	34,356		3,911		1,546		5,149		2,986		241		45,994		—		94,183
Substandard	12,311		20,245		17,733		2,479		1,507		1,512		40,449		144		96,380
Doubtful	857		—		—		—		—		—		2,840		—		3,697
Total Commercial and industrial loans	1,223,491		498,757		272,427		93,854		52,403		46,773		1,483,039		204		3,670,948
Current period gross charge-offs	13,973		2,711		576		5,665		78		261		—		—		23,264
Agricultural land, production and other loans to farmers
Pass	35,633		38,145		31,511		31,048		12,995		25,462		87,534		—		262,328
Special Mention	—		266		—		—		—		122		—		—		388
Substandard	58		150		—		454		—		36		—		—		698
Total Agricultural land, production and other loans to farmers	35,691		38,561		31,511		31,502		12,995		25,620		87,534		—		263,414
Current period gross charge-offs	—		—		—		—		—		—		—		—		—
Real estate loans:
Construction
Pass	403,578		267,587		198,350		8,372		7,723		2,357		11,735		—		899,702
Special Mention	25,894		—		—		20,846		—		—		—		—		46,740
Substandard	1,451		4,330		5,322		—		—		—		—		—		11,103
Total Construction	430,923		271,917		203,672		29,218		7,723		2,357		11,735		—		957,545
Current period gross charge-offs	—		—		—		—		—		—		—		—		—
Commercial real estate, non-owner occupied
Pass	373,378		504,280		535,327		418,553		141,320		200,821		16,744		—		2,190,423
Special Mention	76,382		21,145		7,005		4,531		19,479		27,941		37		—		156,520
Substandard	20,358		10,537		219		20,236		—		2,299		247		—		53,896
Total Commercial real estate, non-owner occupied	470,118		535,962		542,551		443,320		160,799		231,061		17,028		—		2,400,839
Current period gross charge-offs	—		66		—		—		—		—		—		—		66
Commercial real estate, owner occupied
Pass	176,750		199,821		256,346		263,522		99,180		77,485		27,369		—		1,100,473
Special Mention	6,712		5,034		9,319		2,460		919		2,902		514		—		27,860
Substandard	18,092		3,712		4,183		4,545		289		2,929		—		—		33,750
Total Commercial real estate, owner occupied	201,554		208,567		269,848		270,527		100,388		83,316		27,883		—		1,162,083
Current period gross charge-offs	48		—		—		—		2		—		—		—		50
Residential
Pass	395,363		695,056		442,495		365,297		98,654		254,718		4,988		83		2,256,654
Special Mention	2,167		5,591		3,202		1,924		1,065		4,837		200		81		19,067
Substandard	804		3,708		2,529		1,199		866		4,063		31		—		13,200
Total Residential	398,334		704,355		448,226		368,420		100,585		263,618		5,219		164		2,288,921
Current period gross charge-offs	101		252		208		3		3		94		—		—		661
Home equity
Pass	9,375		29,784		61,591		11,084		1,092		3,875		484,330		5,837		606,968
Special Mention	—		715		—		1,092		15		2		5,031		149		7,004
Substandard	63		—		727		—		—		123		2,589		97		3,599
Total Home Equity	9,438		30,499		62,318		12,176		1,107		4,000		491,950		6,083		617,571
Current period gross charge-offs	69		213		224		149		193		1,596		—		—		2,444
Individuals' loans for household and other personal expenditures
Pass	35,781		49,295		28,387		6,726		2,070		5,904		38,619		772		167,554
Special Mention	184		246		138		69		—		14		176		—		827
Substandard	—		6		—		—		1		—		—		—		7
Total Individuals' loans for household and other personal expenditures	35,965		49,547		28,525		6,795		2,071		5,918		38,795		772		168,388
Current period gross charge-offs	147		770		342		77		62		156		—		—		1,554
Public finance and other commercial loans
Pass	65,357		208,347		204,863		155,132		91,619		229,355		1,645		—		956,318
Total Public finance and other commercial loans	65,357		208,347		204,863		155,132		91,619		229,355		1,645		—		956,318
Loans	$	2,870,871	$	2,546,512	$	2,063,941	$	1,410,944	$	529,690	$	892,018	$	2,164,828	$	7,223	$	12,486,027
Total current period gross charge-offs	$	14,338	$	4,012	$	1,350	$	5,894	$	338	$	2,107	$	—	$	—	$	28,039

Total past due loans equaled $95.0 million as of September 30, 2024 representing a $15.8 million increase from $79.2 million at December 31, 2023. Loans 30-59 days past due decreased $3.8 million from December 31, 2023 as commercial real estate, non-owner occupied and commercial and industrial decreased $4.3 million and $3.1 million, respectively, which was partially offset by increases in construction and individuals' loans for household and other personal expenditures of $2.5 million and $1.9 million, respectively. Loans 60-89 days past due increased $7.6 million from December 31, 2023 as commercial and industrial increased $6.2 million. Loans 90 days or more past due increased $12.0 million from December 31, 2023 as commercial and industrial, commercial real estate, non-owner occupied and residential increased $1.6 million, $4.9 million and $4.1 million, respectively. The tables below show a past due aging of the Corporation’s loan portfolio, by loan class, as of the dates indicated:

	September 30, 2024
	Current		30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total		Loans > 90 Days or More Past Due And Accruing
Commercial and industrial loans	$	4,023,016	$	1,906	$	7,805	$	8,490	$	4,041,217	$	930
Agricultural land, production and other loans to farmers	238,221		522		—		—		238,743		—
Real estate loans:
Construction	810,536		2,522		1,646		—		814,704		—
Commercial real estate, non-owner occupied	2,225,782		8,680		485		16,404		2,251,351		12,989
Commercial real estate, owner occupied	1,150,327		501		891		1,032		1,152,751		—
Residential	2,334,312		10,377		6,029		16,225		2,366,943		166
Home equity	632,653		3,212		1,532		3,791		641,188		20
Individuals' loans for household and other personal expenditures	155,526		2,567		385		2		158,480		—
Public finance and other commercial loans	981,431		—		—		—		981,431		—
Loans	$	12,551,804	$	30,287	$	18,773	$	45,944	$	12,646,808	$	14,105

	December 31, 2023
	Current		30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total		Loans > 90 Days or More Past Due And Accruing
Commercial and industrial loans	$	3,657,447	$	5,021	$	1,622	$	6,858	$	3,670,948	$	86
Agricultural land, production and other loans to farmers	263,414		—		—		—		263,414		—
Real estate loans:
Construction	955,588		—		1,957		—		957,545		—
Commercial real estate, non-owner occupied	2,376,184		12,995		195		11,465		2,400,839		—
Commercial real estate, owner occupied	1,161,869		—		104		110		1,162,083		—
Residential	2,259,496		11,810		5,472		12,143		2,288,921		—
Home equity	608,948		3,614		1,647		3,362		617,571		52
Individuals' loans for household and other personal expenditures	167,553		635		192		8		168,388		—
Public finance and other commercial loans	956,284		—		—		34		956,318		34
Loans	$	12,406,783	$	34,075	$	11,189	$	33,980	$	12,486,027	$	172

Loans are reclassified to a nonaccruing status when, in management’s judgment, the collateral value and financial condition of the borrower do not justify accruing interest. At the time the accrual is discontinued, all unpaid accrued interest is reversed against earnings. Interest income accrued in prior years, if any, is charged to the allowance for credit losses. Payments subsequently received on nonaccrual loans are applied to principal. A loan is returned to accrual status when principal and interest are no longer past due and collectability is probable, typically after a minimum of six consecutive months of performance.

The following table summarizes the Corporation’s nonaccrual loans by loan class as of the dates indicated.

	September 30, 2024				December 31, 2023
	Nonaccrual Loans		Nonaccrual Loans with no Allowance for Credit Losses		Nonaccrual Loans		Nonaccrual Loans with no Allowance for Credit Losses
Commercial and industrial loans	$	8,612	$	2,459	$	9,050	$	1,015
Agricultural land, production and other loans to farmers	81		—		58		—
Real estate loans:
Construction	—		—		520		—
Commercial real estate, non-owner occupied	23,283		10,175		11,932		11,095
Commercial real estate, owner occupied	3,237		2,577		3,041		2,257
Residential	18,905		—		25,140		—
Home equity	4,925		—		3,820		—
Individuals' loans for household and other personal expenditures	45		—		19		—
Loans	$	59,088	$	15,211	$	53,580	$	14,367

Interest income on nonaccrual loans is recognized only to the extent that cash payments are received in excess of principal due. There was no interest income recognized on nonaccrual loans for the three and nine months ended September 30, 2024 or 2023.

Determining fair value for collateral dependent loans requires obtaining a current independent appraisal of the collateral and applying a discount factor, which includes selling costs if applicable, to the value. The fair value of real estate is generally based on appraisals by qualified licensed appraisers. The appraisers typically determine the value of the real estate by utilizing an income or market valuation approach. If an appraisal is not available, the fair value may be determined by using a cash flow analysis. Fair value on other collateral such as business assets is typically ascertained by assessing, either singularly or some combination of, asset appraisals, accounts receivable aging reports, inventory listings and or customer financial statements. Both appraised values and values based on borrower’s financial information are discounted as considered appropriate based on age and quality of the information and current market conditions.

The tables below present the amortized cost basis of collateral dependent loans by loan class and their respective collateral type, which are individually evaluated to determine expected credit losses. The total collateral dependent loan balance increased $6.0 million, primarily related to an increase of $21.4 million in commercial real estate, non-owner occupied, partially offset by a decrease of $16.3 million in commercial and industrial, for the nine months ended September 30, 2024. The total related allowance balance decreased $4.4 million, primarily related to a decrease of $9.2 million in commercial and industrial, offset by an increase of $4.8 million in commercial real estate, non-owner occupied, for the nine months ended September 30, 2024.

	September 30, 2024
	Commercial Real Estate		Residential Real Estate		Other		Total		Allowance on Collateral Dependent Loans
Commercial and industrial loans	$	—	$	—	$	15,685	$	15,685	$	2,312
Real estate loans:
Construction	—		4		—		4		—
Commercial real estate, non-owner occupied	38,959		—		—		38,959		4,864
Commercial real estate, owner occupied	10,575		—		—		10,575		—
Residential	—		1,241		—		1,241		198
Home equity	—		206		—		206		26
Loans	$	49,534	$	1,451	$	15,685	$	66,670	$	7,400

	December 31, 2023
	Commercial Real Estate		Residential Real Estate		Other		Total		Allowance on Collateral Dependent Loans
Commercial and industrial loans	$	—	$	—	$	32,029	$	32,029	$	11,474
Real estate loans:
Construction	—		7		—		7		—
Commercial real estate, non-owner occupied	17,516		—		—		17,516		35
Commercial real estate, owner occupied	9,452		—		—		9,452		—
Residential	—		1,439		—		1,439		230
Home equity	—		223		—		223		30
Loans	$	26,968	$	1,669	$	32,029	$	60,666	$	11,769

In certain situations, the Corporation may modify the terms of a loan to a debtor experiencing financial difficulty. The modifications may include principal forgiveness, interest rate reductions, payment delays, term extensions or combinations of these modifications. The following tables present the amortized cost basis of loans at September 30, 2024 and 2023 that were both experiencing financial difficulty and modified during the three and nine months ended September 30, 2024 and 2023, by class and by type of modification. The percentage of the amortized cost basis of loans that were modified to borrowers in financial distress as compared to the amortized cost basis of each class of financing receivable is also presented below.

	Three Months Ended September 30, 2024
	Loan Modifications Made to Borrowers Experiencing Financial Difficulty
	Payment Delay		Term Extension		Combination Payment Delay & Term Extension		Combination Interest Rate Reduction & Term Extension		Combination Interest Rate Reduction, Term Extension, & Payment Delay		% of Total Class of Financing Receivable
Commercial and industrial loans	$	9,600	$	10,333	$	—	$	31	$	—	0.49	%
Real estate loans:
Construction	—		915		22,000		—		—		2.81	%
Commercial real estate, non-owner occupied	—		10,254		—		10,828		—		0.94	%
Commercial real estate, owner occupied	—		5,841		—		—		—		0.51	%
Residential	493		56		—		—		304		0.04	%
Home equity	—		62		—		—		—		0.01	%
Total	$	10,093	$	27,461	$	22,000	$	10,859	$	304

	Three Months Ended September 30, 2023
	Loan Modifications Made to Borrowers Experiencing Financial Difficulty
	Payment Delay		Term Extension		Combination Interest Rate Reduction & Term Extension		Combination Payment Delay & Term Extension		% of Total Class of Financing Receivable
Commercial and industrial loans	$	908	$	7,734	$	134	$	—	0.25	%
Real estate loans:
Commercial real estate, non-owner occupied	—		11,823		—		—		0.50	%
Commercial real estate, owner occupied	—		6,950		—		—		0.60	%
Home equity	—		63		—		—		0.01	%
Individuals' loans for household and other personal expenditures	—		—		—		1		—	%
Total	$	908	$	26,570	$	134	$	1

	Nine Months Ended September 30, 2024
	Loan Modifications Made to Borrowers Experiencing Financial Difficulty
	Payment Delay		Term Extension		Interest Rate Reduction		Combination Payment Delay & Term Extension		Combination Interest Rate Reduction & Term Extension		Combination Interest Rate Reduction, Term Extension, & Payment Delay		% of Total Class of Financing Receivable
Commercial and industrial loans	$	11,080	$	12,880	$	247	$	17	$	31	$	—	0.60	%
Real estate loans:
Construction	—		915		—		22,000		—		—		2.81	%
Commercial real estate, non-owner occupied	—		18,933		—		—		10,828		—		1.32	%
Commercial real estate, owner occupied	—		6,208		—		—		—		—		0.54	%
Residential	1,931		341		—		283		—		529		0.13	%
Home Equity	—		62		—		162		—		—		0.03	%
Total	$	13,011	$	39,339	$	247	$	22,462	$	10,859	$	529

	Nine Months Ended September 30, 2023
	Loan Modifications Made to Borrowers Experiencing Financial Difficulty
	Payment Delay		Term Extension		Combination Interest Rate Reduction & Term Extension		Combination Payment Delay & Term Extension		% of Total Class of Financing Receivable
Commercial and industrial loans	$	908	$	14,822	$	239	$	—	0.46	%
Agricultural land, production and other loans to farmers	—		34		—		—		0.01	%
Real estate loans:
Construction	—		13		—		—		—	%
Commercial real estate, non-owner occupied	—		11,823		5,942		—		0.75	%
Commercial real estate, owner occupied	5,602		8,642		75		—		1.24	%
Residential	—		—		—		472		0.02	%
Home equity	—		63		—		—		0.01	%
Individuals' loans for household and other personal expenditures	—		—		—		1		—	%
Total	$	6,510	$	35,397	$	6,256	$	473

The following tables present the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty for the three and nine months ended September 30, 2024 and 2023.

	Three Months Ended September 30, 2024
	Financial Effect of Loan Modifications
	Payment Delay	Term Extension	Combination Payment Delay & Term Extension	Combination Interest Rate Reduction & Term Extension	Combination Interest Rate Reduction, Term Extension & Payment Delay
Commercial and industrial loans	Provided payment deferrals with weighted average delayed amounts of $200,000.	Extended loans by a weighted average of 6 months.		Reduced the weighted average contractual interest rate from 9.50% to 8.05% and extended loans by a weighted average of 48 months.
Real estate loans:
Construction		Extended loans by a weighted average of 6 months.	Provided payment deferrals with weighted average delayed amounts of $475,000 and extended loans by a weighted average of 4 months.
Commercial real estate, non-owner occupied		Extended loans by a weighted average of 8 months.		Reduced the weighted average contractual interest rate from 12.38% to 7.88% and extended loans by a weighted average of 8 months.
Commercial real estate, owner occupied		Extended loans by a weighted average of 8 months.
Residential	Provided payment deferrals with weighted average delayed amounts of $8,000.	Extended loans by a weighted average of 92 months.			Provided payment deferrals with weighted average delayed amounts of $14,000, extended loans by a weighted average of 149 months, and reduced the weighted average contractual interest rate from 5.73% to 3.31%.
Home equity		Extended loans by a weighted average of 6 months.

	Three Months Ended September 30, 2023
	Financial Effect of Loan Modifications
	Payment Delay	Term Extension	Combination Interest Rate Reduction & Term Extension	Combination Payment Delay & Term Extension
Commercial and industrial loans	Provided payment deferrals with weighted average delayed amounts of $24,000.	Extended loans by a weighted average of 8 months.	Reduced the weighted average contractual interest rate from 10.75% to 7.62%. Extended loans by a weighted average of 14 months.
Real estate loans:
Commercial real estate, non-owner occupied		Extended loans by a weighted average of 11 months.
Commercial real estate, owner occupied		Extended loans by a weighted average of 4 months.
Home Equity		Extended loans by a weighted average of 5 months.
Individuals' loans for household and other personal expenditures				Provided payment deferrals with weighted average delayed amounts of $300. Extended loans by a weighted average of 3 months.

	Nine Months Ended September 30, 2024
	Financial Effect of Loan Modifications
	Payment Delay	Term Extension	Interest Rate Reduction	Combination Payment Delay & Term Extension	Combination Interest Rate Reduction & Term Extension	Combination Interest Rate Reduction, Term Extension & Payment Delay
Commercial and industrial loans	Provided payment deferrals with weighted average delayed amounts of $180,000.	Extended loans by a weighted average of 9 months.	Reduced the weighted average contractual interest rate from 9.00% to 8.00%.	Provided payment deferrals with weighted average delayed amounts of $4,900 and extended loans by a weighted average of 3 months.	Reduced the weighted average contractual interest rate from 9.50% to 8.05%. Extended loans by a weighted average of 48 months.
Real estate loans:
Construction		Extended loans by a weighted average of 6 months.		Provided payment deferrals with weighted average delayed amounts of $475,000 and extended loans by a weighted average of 4 months.
Commercial real estate, non-owner occupied		Extended loans by a weighted average of 13 months.			Reduced the weighted average contractual interest rate from 12.38% to 7.88%. Extended loans by a weighted average of 8 months.
Commercial real estate, owner occupied		Extended loans by a weighted average of 13 months.
Residential	Provided payment deferrals with weighted average delayed amounts of $26,000.	Extended loans by a weighted average of 20 months.		Provided payment deferrals with weighted average delayed amounts of $8,000 and extended loans by a weighted average of 153 months.		Provided payment deferrals with weighted average delayed amounts of $14,000, extended loans by a weighted average of 91 months, and reduced the weighted average contractual interest rate from 5.74% to 4.03%.
Home Equity		Extended loans by a weighted average of 6 months.		Provided payment deferrals with weighted average delayed amounts of $7,800 and extended loans by a weighted average of 60 months.

	Nine Months Ended September 30, 2023
	Financial Effect of Loan Modifications
	Payment Delay	Term Extension	Combination Interest Rate Reduction & Term Extension	Combination Payment Delay & Term Extension
Commercial and industrial loans	Provided payment deferrals with weighted average delayed amounts of $24,000	Extended loans by a weighted average of 8 months.	Reduced the weighted average contractual interest rate from 9.66% to 7.39%. Extended loans by a weighted average of 13 months.
Agricultural land, production and other loans to farmers		Extended loans by a weighted average of 60 months.
Real estate loans:
Construction		Extended loans by a weighted average of 24 months.
Commercial real estate, non-owner occupied		Extended loans by a weighted average of 10 months.	Reduced the weighted average contractual interest rate from 7.81% to 7.40%. Extended loans by a weighted average of 41 months.
Commercial real estate, owner occupied	Provided payment deferrals with weighted average delayed amounts of $4,500,000.	Extended loans by a weighted average of 4 months.	Reduced the weighted average contractual interest rate from 10.25% to 6.61%. Extended loans by a weighted average of 114 months.
Residential				Provided payment deferrals with weighted average delayed amounts $3,400. Extended loans by a weighted average of 3 months.
Home Equity		Extended loans by a weighted average of 5 months.		Provided payment deferrals with weighted average delayed amounts $300. Extended loans by a weighted average of 3 months.

The Corporation closely monitors the performance of financial difficulty modifications to understand the effectiveness of its efforts. The following tables present the performance of financial difficulty modifications in the twelve months following modification.

	September 30, 2024
	Current		30-59 Days Past Due		60-89 Days Past Due		90+ Days Past Due		Total
Commercial and industrial loans	$	24,445	$	—	$	1,927	$	—	$	26,372
Agricultural land, production and other loans to farmers	22		—		—		—		22
Real estate loans:									—
Construction	22,915		—		—		—		22,915
Commercial real estate, non-owner occupied	21,082		8,680		—		1,730		31,492
Commercial real estate, owner occupied	7,523		—		—		—		7,523
Residential	1,940		—		250		1,189		3,379
Home equity	252		—		—		—		252
Total	$	78,179	$	8,680	$	2,177	$	2,919	$	91,955

	September 30, 2023
	Current		30-59 Days Past Due		60-89 Days Past Due		Total
Commercial and industrial loans	$	15,863	$	—	$	106	$	15,969
Agricultural land, production and other loans to farmers	34		—		—		34
Real estate loans:							—
Construction	13		—		—		13
Commercial real estate, non-owner occupied	17,765		—		—		17,765
Commercial real estate, owner occupied	13,157		—		1,162		14,319
Residential	472		—		—		472
Home equity	63		—		—		63
Individuals' loans for household and other personal expenditures	—		1		—		1
Total	$	47,367	$	1	$	1,268	$	48,636

During the three and nine months ended September 30, 2024, there were payment defaults of $1.7 million and $2.9 million, respectively, on loans to borrowers whose loans were modified due to financial difficulties within the previous twelve months. The payment defaults did not materially impact the allowance for credit losses on loans. There were no payment defaults during the three and nine months ended September 30, 2023 on loans that had been modified within the previous twelve months.

Upon the Corporation's determination that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or portion of the loan) is charged-off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the allowance for credit losses is adjusted by the same amount.

Allowance for Credit Losses on Loans

The Allowance for Credit Losses on Loans ("ACL - Loans") is a valuation account that is deducted from the amortized cost basis of loans to present the net amount expected to be collected on loans over the contractual term. The ACL - Loans is adjusted by the provision for credit losses, which is reported in earnings, and reduced by charge-offs for loans, net of recoveries. Provision for credit losses on loans reflects the totality of actions taken on all loans for a particular period including any necessary increases or decreases in the allowance related to changes in credit loss expectations associated with specific loans or pools of loans. Loans are charged-off against the allowance when the uncollectibility of the loan is confirmed. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off.

The allowance represents the Corporation’s best estimate of current expected credit losses on loans using relevant available information from internal and external sources, related to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. The CECL calculation is performed and evaluated quarterly and losses are estimated over the expected life of the loan. The level of the allowance for credit losses is believed to be adequate to absorb all expected future losses inherent in the loan portfolio at the measurement date.

In calculating the allowance for credit losses, the loan portfolio was pooled into ten loan segments with similar risk characteristics. Common characteristics include the type or purpose of the loan, underlying collateral and historical/expected credit loss patterns. In developing the loan segments, the Corporation analyzed the degree of correlation in how loans within each portfolio respond when subjected to varying economic conditions and scenarios as well as other portfolio stress factors.

The expected credit losses are measured over the life of each loan segment utilizing the Probability of Default / Loss Given Default methodology combined with economic forecast models to estimate the current expected credit loss inherent in the loan portfolio. This approach is also leveraged to estimate the expected credit losses associated with unfunded loan commitments incorporating expected utilization rates.

The Corporation sub-segmented certain commercial portfolios by risk level and certain consumer portfolios by delinquency status where appropriate. The Corporation utilized a four-quarter reasonable and supportable economic forecast period followed by a six-quarter, straight-line reversion period to the historical macroeconomic mean for the remaining life of the loans. Econometric modeling was performed using historical default rates and a selection of economic forecast scenarios published by Moody’s to develop a range of estimated credit losses for which to determine the best credit loss estimate within. Macroeconomic factors utilized in the modeling process include the national unemployment rate, BBB US corporate index, Commercial Real Estate ("CRE") price index and the home price index.

The Corporation qualitatively adjusts model results for risk factors that are not inherently considered in the quantitative modeling process, but are nonetheless relevant in assessing the expected credit losses within the loan portfolio. These adjustments may increase or decrease the estimate of expected credit losses based upon the assessed level of risk for each qualitative factor. The various risks that may be considered in making qualitative adjustments include, among other things, the impact of (i) changes in the nature and volume of the loan portfolio, (ii) changes in the existence, growth and effect of any concentrations in credit, (iii) changes in lending policies and procedures, including changes in underwriting standards and practices for collections, charge-offs, and recoveries, (iv) changes in the quality of the credit review function, (v) changes in the experience, ability and depth of lending, investment, collection and other relevant management staff, (vi) changes in the volume and severity of past due financial assets, the volume of the nonaccrual assets, and the volume and severity of adversely classified or graded assets, (vii) the value of underlying collateral for loans that are not collateral dependent, and (viii) other environmental factors such as regulatory, legal and technological considerations, as well as competition and changes in the economic and business conditions that affect the collectibility of financial assets. At CECL adoption, the Corporation established certain qualitative factors that were expected to correlate to losses within the loan portfolio. During a scheduled review of qualitative factors in 2023, the Corporation determined there had not been significant evidence of correlation to losses for the qualitative factors that included i) changes in experience, ability and depth of lending management and staff; ii) changes in lending policies and procedures; iii) changes in the quality of the credit review function; iv) portfolio mix and growth; and v) industry concentration. The Corporation decided to refine these qualitative factors in order to improve our ability to assess related risk and enhance our ability to correlate to losses. The Corporation’s evaluation of the qualitative approach resulted in an insignificant change to the ACL – Loans estimate.

In some cases, management may determine that an individual loan exhibits unique risk characteristics which differentiate the loan from other loans within the loan segments. In such cases, the loans are evaluated for expected credit losses on an individual basis and excluded from the collective evaluation. Specific reserve allocations of the allowance for credit losses are determined by analyzing the borrower’s ability to repay amounts owed, collateral deficiencies, the relative risk grade of the loan and economic conditions affecting the borrower’s industry, among other things. A loan is considered to be collateral dependent when, based upon management's assessment, the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. In such cases, expected credit losses are based on the fair value of the collateral at the measurement date, adjusted for estimated selling costs if satisfaction of the loan depends on the sale of the collateral. The fair value of collateral supporting collateral dependent loans is evaluated on a quarterly basis.

The risk characteristics of the Corporation’s portfolio segments are as follows:

Commercial

Commercial lending is primarily based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of borrowers, however, may not be as expected and the collateral securing these loans may fluctuate in value. Most commercial loans are secured by the tangible assets being financed such as equipment or real estate or other business assets such as accounts receivable or inventory and may incorporate a personal guarantee. Other loans may be unsecured, secured but under-collateralized or otherwise made on the basis of the enterprise value of an organization. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers.

Commercial real estate

Commercial real estate loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Commercial real estate lending typically involves higher loan principal amounts and the repayment of these loans is generally dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan. The Corporation monitors commercial real estate loans based on collateral and risk grade criteria, as well as the levels of owner-occupied versus non-owner occupied loans.

Construction

Construction loans are underwritten utilizing a combination of tools and techniques including feasibility and market studies, independent appraisals and appraisal reviews, absorption and interest rate sensitivity analysis as well as the financial analysis of the developer and all guarantors. Construction loans are monitored by either in house or third party inspectors limiting advances to a percentage of costs or stabilized project value. These loans frequently involve the disbursement of significant funds with the repayment dependent upon the successful completion and, where necessary, the future stabilization of the project. The predominant inherent risk of this portfolio is associated with the borrower's ability to successfully complete a project on time, within budget and stabilize the projected as originally projected.

Consumer and Residential

With respect to residential loans that are secured by 1-4 family residences, which are typically owner occupied, the Corporation generally establishes a maximum loan-to-value ratio and requires private mortgage insurance if that ratio is exceeded. Home equity loans are secured by a subordinate interest in 1-4 family residences, and consumer loans are secured by consumer assets such as automobiles or recreational vehicles. Some consumer loans, such as small installment loans and certain lines of credit, are unsecured. Repayment of these loans is primarily dependent on the personal income and credit rating of the borrowers and can also be impacted by changes in property values. Risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a large number of borrowers.

The ACL - Loans decreased $1.7 million and $17.1 million during the three and nine months ended September 30, 2024, respectively. Net charge-offs totaled $6.7 million and $48.6 million during the three and nine months ended September 30, 2024, respectively. Provision expense of $5.0 million and $31.5 million was recorded during the three and nine months ended September 30, 2024, respectively. The following tables summarize changes in the allowance for credit losses by loan segment for the three and nine months ended September 30, 2024 and 2023:

	Three Months Ended September 30, 2024
	Commercial		Commercial Real Estate		Construction		Consumer & Residential		Total
Allowance for credit losses - loans
Balances, June 30, 2024	$	91,217	$	45,514	$	14,360	$	38,446	$	189,537
Provision for credit losses - loans	8,456		1,873		(2,609)		(2,720)		5,000
Recoveries on loans	505		18		—		371		894
Loans charged off	(6,375)		—		—		(1,228)		(7,603)
Balances, September 30, 2024	$	93,803	$	47,405	$	11,751	$	34,869	$	187,828

	Three Months Ended September 30, 2023
	Commercial		Commercial Real Estate		Construction		Consumer & Residential		Total
Allowance for credit losses - loans
Balances, June 30, 2023	$	108,373	$	39,157	$	30,073	$	43,544	$	221,147
Provision for credit losses - loans	3,020		4,901		140		(3,061)		5,000
Recoveries on loans	179		—		—		367		546
Loans charged off	(19,833)		—		—		(1,078)		(20,911)
Balances, September 30, 2023	$	91,739	$	44,058	$	30,213	$	39,772	$	205,782

	Nine Months Ended September 30, 2024
	Commercial		Commercial Real Estate		Construction		Consumer & Residential		Total
Allowance for credit losses - loans
Balances, December 31, 2023	$	97,348	$	44,048	$	24,823	$	38,715	$	204,934
Provision for credit losses - loans	43,249		3,476		(13,072)		(2,153)		31,500
Recoveries on loans	1,592		232		—		1,227		3,051
Loans charged off	(48,386)		(351)		—		(2,920)		(51,657)
Balances, September 30, 2024	$	93,803	$	47,405	$	11,751	$	34,869	$	187,828

	Nine Months Ended September 30, 2023
	Commercial		Commercial Real Estate		Construction		Consumer & Residential		Total
Allowance for credit losses - loans
Balances, December 31, 2022	$	102,216	$	46,839	$	28,955	$	45,267	$	223,277
Provision for credit losses - loans	9,460		(2,833)		1,258		(2,885)		5,000
Recoveries on loans	775		56		—		1,004		1,835
Loans charged off	(20,712)		(4)		—		(3,614)		(24,330)
Balances, September 30, 2023	$	91,739	$	44,058	$	30,213	$	39,772	$	205,782

Off-Balance Sheet Arrangements, Commitments And Contingencies

In the normal course of business, the Corporation has entered into off-balance sheet financial instruments which include commitments to extend credit and standby letters of credit. Commitments to extend credit are usually the result of lines of credit granted to existing borrowers under agreements that the total outstanding indebtedness will not exceed a specific amount during the term of the indebtedness. Typical borrowers are commercial customers that use lines of credit to supplement their treasury management functions, and thus their total outstanding indebtedness may fluctuate during any time period based on the seasonality of their business and the resultant timing for their cash flows. Other typical lines of credit are related to home equity loans granted to customers. Commitments to extend credit generally have fixed expiration dates or other termination clauses that may require a fee.

Standby letters of credit are generally issued on behalf of an applicant (the Corporation’s customer) to a specifically named beneficiary and are the result of a particular business arrangement that exists between the applicant and the beneficiary. Standby letters of credit have fixed expiration dates and are usually for terms of two years or less unless terminated beforehand due to criteria specified in the standby letter of credit. The standby letter of credit would permit the beneficiary to obtain payment from the Corporation under certain prescribed circumstances. Subsequently, the Corporation would seek reimbursement from the applicant pursuant to the terms of the standby letter of credit.

The Corporation typically follows the same credit policies and underwriting practices when making these commitments as it does for on-balance sheet instruments. Each customer’s creditworthiness is typically evaluated on a case-by-case basis, and the amount of collateral obtained, if any, is based on management’s credit evaluation of the customer. Collateral held varies but may include cash, real estate, marketable securities, accounts receivable, inventory, equipment and personal property. The contractual amounts of these commitments are not reflected in the consolidated financial statements and only amounts drawn upon would be reflected in the future. Since many of the commitments are expected to expire without being drawn upon, the contractual amounts do not necessarily represent future cash requirements. However, should the commitments be drawn upon and should the Corporation’s customers default on their resulting obligation to the Corporation, the maximum exposure to credit loss, without consideration of collateral, is represented by the contractual amount of those commitments.

Financial instruments with off-balance sheet risk were as follows:

	September 30, 2024		December 31, 2023
Amounts of commitments:
Loan commitments to extend credit	$	5,493,144	$	5,025,790
Standby letters of credit	$	66,043	$	65,580

The Corporation maintains an accrual for credit losses on off-balance sheet commitments using the CECL methodology. Reserves for unfunded commitments declined by $3.0 million during the three and nine months ended September 30, 2023. There was no change in the reserve for unfunded commitments during the three and nine months ended September 30, 2024. This reserve level remains appropriate and is reported in Other Liabilities as of September 30, 2024 in the Consolidated Condensed Balance Sheets.

The table below reflects the total allowance for credit losses for the off-balance sheet commitment for the three and nine months ended September 30, 2024 and 2023:

	Three Months Ended				Nine Months Ended
	September 30, 2024		September 30, 2023		September 30, 2024		September 30, 2023
Balance at beginning of the period	$	19,500	$	23,300	$	19,500	$	23,300
Provision for credit losses - unfunded commitments	—		(3,000)		—		(3,000)
Ending balance	$	19,500	$	20,300	$	19,500	$	20,300