LOANS AND ALLOWANCE FOR CREDIT LOSSES

3 Months Ended

Mar. 31, 2025

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 March 31, 2025 and December 31, 2024, were $23.0 million and $18.7 million respectively.

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

	March 31, 2025		December 31, 2024
Commercial and industrial loans	$	4,306,597	$	4,114,292
Agricultural land, production and other loans to farmers	243,864		256,312
Real estate loans:
Construction	793,175		792,144
Commercial real estate, non-owner occupied	2,177,869		2,274,016
Commercial real estate, owner occupied	1,214,739		1,157,944
Residential	2,389,852		2,374,729
Home equity	650,499		659,811
Individuals' loans for household and other personal expenditures	140,954		166,028
Public finance and other commercial loans	1,087,356		1,059,083
Loans	$	13,004,905	$	12,854,359

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.

March 31, 2025
	Term Loans (amortized cost basis by origination year)
	2025		2024		2023		2022		2021		Prior		Revolving loans amortized cost basis		Revolving loans converted to term		Total
Commercial and industrial loans
Pass	$	431,109	$	1,184,550	$	441,048	$	165,738	$	142,290	$	91,465	$	1,614,342	$	—	$	4,070,542
Special Mention	138		6,225		6,271		21,724		823		2,286		44,753		—		82,220
Substandard	18,505		14,539		18,614		26,623		3,570		1,281		66,790		—		149,922
Doubtful	—		1,974		12		—		1,350		577		—		—		3,913
Total Commercial and industrial loans	449,752		1,207,288		465,945		214,085		148,033		95,609		1,725,885		—		4,306,597
Current period gross charge-offs	—		630		1,040		16		3,094		87		—		—		4,867
Agricultural land, production and other loans to farmers
Pass	18,823		24,089		22,240		29,683		25,580		53,261		60,772		—		234,448
Special Mention	—		159		29		476		—		863		1,227		—		2,754
Substandard	380		2,515		44		780		668		1,322		953		—		6,662
Total Agricultural land, production and other loans to farmers	19,203		26,763		22,313		30,939		26,248		55,446		62,952		—		243,864
Real estate loans:
Construction
Pass	25,407		243,728		200,293		60,604		13,178		10,994		10,327		—		564,531
Special Mention	12,176		97,317		23,145		44,557		—		35		—		—		177,230
Substandard	22,000		10,518		—		18,292		604		—		—		—		51,414
Total Construction	59,583		351,563		223,438		123,453		13,782		11,029		10,327		—		793,175
Commercial real estate, non-owner occupied
Pass	100,071		325,566		250,185		330,932		394,174		561,031		33,931		—		1,995,890
Special Mention	3,286		52,913		11,867		38,487		11,423		4,941		86		—		123,003
Substandard	12,892		11,430		2,436		6,364		6,641		19,211		2		—		58,976
Total Commercial real estate, non-owner occupied	116,249		389,909		264,488		375,783		412,238		585,183		34,019		—		2,177,869
Current period gross charge-offs	—		—		—		178		—		15		—		—		193
Commercial real estate, owner occupied
Pass	74,568		177,392		147,507		159,448		213,429		308,349		36,114		—		1,116,807
Special Mention	481		15,365		5,129		9,712		7,719		8,369		460		—		47,235
Substandard	16,822		14,027		7,033		1,820		3,508		3,914		—		—		47,124
Doubtful	—		3,573		—		—		—		—		—		—		3,573
Total Commercial real estate, owner occupied	91,871		210,357		159,669		170,980		224,656		320,632		36,574		—		1,214,739
Current period gross charge-offs	—		51		152		—		—		5		—		—		208
Residential
Pass	49,584		215,741		417,482		665,752		392,322		599,913		8,327		48		2,349,169
Special Mention	—		485		3,581		6,036		3,667		4,948		150		16		18,883
Substandard	—		1,480		2,162		8,917		4,078		4,816		347		—		21,800
Total Residential	49,584		217,706		423,225		680,705		400,067		609,677		8,824		64		2,389,852
Current period gross charge-offs	—		26		50		121		—		187		—		—		384
Home equity
Pass	2,289		11,023		4,193		23,629		49,320		14,843		532,713		2,105		640,115
Special Mention	—		38		—		—		467		36		4,069		114		4,724
Substandard	61		738		—		663		776		983		2,439		—		5,660
Total Home Equity	2,350		11,799		4,193		24,292		50,563		15,862		539,221		2,219		650,499
Current period gross charge-offs	—		6		—		11		2		44		—		—		63
Individuals' loans for household and other personal expenditures
Pass	14,306		24,848		19,061		28,870		8,844		5,912		38,013		—		139,854
Special Mention	—		257		369		272		141		16		45		—		1,100
Total Individuals' loans for household and other personal expenditures	14,306		25,105		19,430		29,142		8,985		5,928		38,058		—		140,954
Current period gross charge-offs	—		88		140		141		46		52		—		—		467
Public finance and other commercial loans
Pass	21,960		149,522		53,341		202,166		192,512		434,690		30,437		—		1,084,628
Special Mention	—		—		478		—		—		2,250		—		—		2,728
Total Public finance and other commercial loans	21,960		149,522		53,819		202,166		192,512		436,940		30,437		—		1,087,356
Loans	$	824,858	$	2,590,012	$	1,636,520	$	1,851,545	$	1,477,084	$	2,136,306	$	2,486,297	$	2,283	$	13,004,905
Total current period gross charge-offs	$	—	$	801	$	1,382	$	467	$	3,142	$	390	$	—	$	—	$	6,182

December 31, 2024
	Term Loans (amortized cost basis by origination year)
	2024		2023		2022		2021		2020		Prior		Revolving loans amortized cost basis		Revolving loans converted to term		Total
Commercial and industrial loans
Pass	$	1,314,174	$	493,138	$	196,877	$	158,215	$	55,639	$	49,554	$	1,576,409	$	130	$	3,844,136
Special Mention	14,982		13,282		20,837		1,097		2,222		348		41,187		—		93,955
Substandard	29,238		32,285		26,973		7,249		1,081		1,134		75,649		513		174,122
Doubtful	1,473		606		—		—		—		—		—		—		2,079
Total Commercial and industrial loans	1,359,867		539,311		244,687		166,561		58,942		51,036		1,693,245		643		4,114,292
Current period gross charge-offs	1,242		39,087		341		8,605		500		424		—		—		50,199
Agricultural land, production and other loans to farmers
Pass	28,600		23,070		30,518		26,442		27,105		29,930		84,502		—		250,167
Special Mention	169		—		245		—		446		422		528		—		1,810
Substandard	2,554		48		800		682		34		81		136		—		4,335
Total Agricultural land, production and other loans to farmers	31,323		23,118		31,563		27,124		27,585		30,433		85,166		—		256,312
Real estate loans:
Construction
Pass	241,622		203,829		114,794		31,864		6,398		8,549		12,836		—		619,892
Special Mention	74,879		21,853		19,019		15,214		—		40		—		—		131,005
Substandard	22,305		—		18,292		—		—		—		—		—		40,597
Doubtful	—		—		—		650		—		—		—		—		650
Total Construction	338,806		225,682		152,105		47,728		6,398		8,589		12,836		—		792,144
Commercial real estate, non-owner occupied
Pass	383,279		275,907		342,442		406,289		327,372		278,362		19,863		—		2,033,514
Special Mention	79,440		9,051		35,230		12,975		5,287		28,200		—		—		170,183
Substandard	34,215		2,506		6,737		6,656		18,607		1,598		—		—		70,319
Total Commercial real estate, non-owner occupied	496,934		287,464		384,409		425,920		351,266		308,160		19,863		—		2,274,016
Current period gross charge-offs	—		339		3		—		—		1		—		—		343
Commercial real estate, owner occupied
Pass	194,703		141,964		164,725		217,319		198,314		127,431		31,573		—		1,076,029
Special Mention	1,887		11,013		7,555		9,910		8,603		1,951		460		—		41,379
Substandard	13,310		7,669		3,189		11,294		1,522		3,552		—		—		40,536
Total Commercial real estate, owner occupied	209,900		160,646		175,469		238,523		208,439		132,934		32,033		—		1,157,944
Current period gross charge-offs	—		—		—		—		9		—		—		—		9
Residential
Pass	221,016		413,552		672,713		397,192		326,154		293,785		8,887		13		2,333,312
Special Mention	1,528		1,953		6,228		4,102		2,891		3,152		150		—		20,004
Substandard	1,306		1,912		8,849		3,989		1,216		3,794		347		—		21,413
Total Residential	223,850		417,417		687,790		405,283		330,261		300,731		9,384		13		2,374,729
Current period gross charge-offs	—		173		779		136		20		288		—		—		1,396
Home equity
Pass	6,788		4,354		24,810		51,313		10,486		3,976		535,132		12,124		648,983
Special Mention	38		—		375		285		297		69		4,568		442		6,074
Substandard	61		—		572		815		—		96		2,244		966		4,754
Total Home Equity	6,887		4,354		25,757		52,413		10,783		4,141		541,944		13,532		659,811
Current period gross charge-offs	—		10		35		22		—		267		—		—		334
Individuals' loans for household and other personal expenditures
Pass	40,819		21,867		31,356		10,520		2,276		4,693		53,180		180		164,891
Special Mention	153		234		347		175		59		40		128		—		1,136
Substandard	—		—		—		—		—		—		—		1		1
Total Individuals' loans for household and other personal expenditures	40,972		22,101		31,703		10,695		2,335		4,733		53,308		181		166,028
Current period gross charge-offs	208		920		523		184		47		80		—		—		1,962
Public finance and other commercial loans
Pass	161,072		53,750		203,884		195,066		146,377		298,802		132		—		1,059,083
Total Public finance and other commercial loans	161,072		53,750		203,884		195,066		146,377		298,802		132		—		1,059,083
Loans	$	2,869,611	$	1,733,843	$	1,937,367	$	1,569,313	$	1,142,386	$	1,139,559	$	2,447,911	$	14,369	$	12,854,359
Total current period gross charge-offs	$	1,450	$	40,529	$	1,681	$	8,947	$	576	$	1,060	$	—	$	—	$	54,243

Total past due loans equaled $140.0 million as of March 31, 2025 representing a $23.8 million increase from $116.2 million at December 31, 2024. At March 31, 2025, 30-59 days past due increased $1.8 million from December 31, 2024. At March 31, 2025, 60-89 days past due increased $20.6 million from December 31, 2024 as commercial and industrial, and commercial real estate, owner occupied loan classes increased $25.1 million and $4.5 million, respectively, which was partially offset by a decrease in the construction loan class of $6.8 million. At March 31, 2025, 90 days or more past due increased $1.4 million from December 31, 2024. The tables below show a past due aging of the Corporation’s loan portfolio, by loan class, as of the dates indicated:

	March 31, 2025
	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	$	4,260,713	$	13,082	$	25,602	$	7,200	$	4,306,597	$	3,905
Agricultural land, production and other loans to farmers	243,504		119		241		—		243,864		—
Real estate loans:
Construction	777,629		35		15,226		285		793,175		—
Commercial real estate, non-owner occupied	2,159,499		4,878		1,869		11,623		2,177,869		—
Commercial real estate, owner occupied	1,202,715		2,020		4,496		5,508		1,214,739		183
Residential	2,352,273		12,758		5,027		19,794		2,389,852		192
Home equity	641,332		3,840		561		4,766		650,499		—
Individuals' loans for household and other personal expenditures	139,854		908		192		—		140,954		—
Public finance and other commercial loans	1,087,356		—		—		—		1,087,356		—
Loans	$	12,864,875	$	37,640	$	53,214	$	49,176	$	13,004,905	$	4,280

	December 31, 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	$	4,096,605	$	7,428	$	473	$	9,786	$	4,114,292	$	2,010
Agricultural land, production and other loans to farmers	256,148		164		—		—		256,312		—
Real estate loans:
Construction	761,819		4,332		22,005		3,988		792,144		3,683
Commercial real estate, non-owner occupied	2,259,549		2,407		1,718		10,342		2,274,016		—
Commercial real estate, owner occupied	1,153,861		3,783		—		300		1,157,944		—
Residential	2,337,002		12,302		6,606		18,819		2,374,729		208
Home equity	649,238		4,431		1,569		4,573		659,811		—
Individuals' loans for household and other personal expenditures	164,891		926		210		1		166,028		1
Public finance and other commercial loans	1,059,083		—		—		—		1,059,083		—
Loans	$	12,738,196	$	35,773	$	32,581	$	47,809	$	12,854,359	$	5,902

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.

	March 31, 2025				December 31, 2024
	Nonaccrual Loans		Nonaccrual Loans with no Allowance for Credit Losses		Nonaccrual Loans		Nonaccrual Loans with no Allowance for Credit Losses
Commercial and industrial loans	$	6,136	$	736	$	8,090	$	4,937
Agricultural land, production and other loans to farmers	70		—		75		—
Real estate loans:
Construction	24,520		604		24,629		22,650
Commercial real estate, non-owner occupied	13,403		10,976		12,118		10,153
Commercial real estate, owner occupied	9,208		4,709		2,440		1,904
Residential	23,347		—		21,491		—
Home equity	5,238		—		4,924		—
Individuals' loans for household and other personal expenditures	—		—		6		—
Loans	$	81,922	$	17,025	$	73,773	$	39,644

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 months ended March 31, 2025 or 2024.

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 decreased $2.2 million, primarily related to a decrease of $5.3 million in the commercial and industrial loan class, partially offset by increases of $1.3 million and $1.9 million in commercial real estate, non-owner occupied, and commercial real estate, owner occupied loan classes, respectively, for the three months ended March 31, 2025. The total related allowance balance increased $5.6 million, primarily related to increases of $2.4 million, $1.6 million, and $1.4 million in construction, commercial real estate, owner occupied, and commercial and industrial loan classes, respectively, for the three months ended March 31, 2025.

	March 31, 2025
	Commercial Real Estate		Residential Real Estate		Other		Total		Allowance on Collateral Dependent Loans
Commercial and industrial loans	$	—	$	—	$	18,173	$	18,173	$	9,243
Real estate loans:
Construction	—		22,606		—		22,606		2,432
Commercial real estate, non-owner occupied	28,919		—		—		28,919		4,435
Commercial real estate, owner occupied	11,609		—		—		11,609		1,606
Residential	—		1,150		—		1,150		183
Home equity	—		195		—		195		24
Loans	$	40,528	$	23,951	$	18,173	$	82,652	$	17,923

	December 31, 2024
	Commercial Real Estate		Residential Real Estate		Other		Total		Allowance on Collateral Dependent Loans
Commercial and industrial loans	$	—	$	—	$	23,455	$	23,455	$	7,803
Real estate loans:
Construction	—		22,652		—		22,652		—
Commercial real estate, non-owner occupied	27,583		—		—		27,583		4,295
Commercial real estate, owner occupied	9,748		—		—		9,748		—
Residential	—		1,174		—		1,174		189
Home equity	—		201		—		201		25
Loans	$	37,331	$	24,027	$	23,455	$	84,813	$	12,312

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 March 31, 2025 and 2024 that were both experiencing financial difficulty and modified during the three months ended March 31, 2025 and 2024, by class and by type of modification. For the three months ended March 31, 2025, the table below excludes loan modifications considered insignificant. 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 March 31, 2025
	Loan Modifications Made to Borrowers Experiencing Financial Difficulty
	Payment Delay		Term Extension		% of Total Class of Financing Receivable
Commercial and industrial loans	$	—	$	7,365	0.17	%
Real estate loans:
Construction	—		22,000		2.77	%
Commercial real estate, owner occupied	—		10,254		0.84	%
Residential	269		—		0.01	%
Total	$	269	$	39,619

	Three Months Ended March 31, 2024
	Loan Modifications Made to Borrowers Experiencing Financial Difficulty
	Payment Delay		Term Extension		Interest Rate Reduction		Combination Payment Delay & Term Extension		% of Total Class of Financing Receivable
Commercial and industrial loans	$	1,542	$	2,798	$	250	$	14	0.12	%
Real estate loans:
Commercial real estate, owner occupied	—		190		—		—		0.02	%
Residential	1,617		—		—		—		0.07	%
Home equity	90		266		—		—		0.06	%
Total	$	3,249	$	3,254	$	250	$	14

The following tables present the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty for the three months ended March 31, 2025 and 2024.

	Three Months Ended March 31, 2025
	Financial Effect of Loan Modifications
	Payment Delay	Term Extension
Commercial and industrial loans		Extended loans by a weighted average of 3 months.
Real estate loans:
Construction		Extended loans by a weighted average of 5 months.
Commercial real estate, owner occupied		Extended loans by a weighted average of 3 months.
Residential	Provided payment deferrals with weighted average delayed amounts of $6.

	Three Months Ended March 31, 2024
	Financial Effect of Loan Modifications
	Payment Delay	Term Extension	Interest Rate Reduction	Combination Payment Delay & Term Extension
Commercial and industrial loans	Provided payment deferrals with weighted average delayed amounts of $50.	Extended loans by a weighted average of 15 months.	Reduced the weighted average contractual interest rate from 9.00% to 8.00%.	Provided payment deferrals with weighted average delayed amounts of $5. Extended loans by a weighted average of 3 months.
Real estate loans:
Commercial real estate, owner occupied		Extended loans by a weighted average of 5 months.
Residential	Provided payment deferrals with weighted average delayed amounts of $31.
Home equity	Provided payment deferrals with weighted average delayed amounts of $4.	Extended loans by a weighted average of 6 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.

	March 31, 2025
	Current		30-59 Days Past Due		60-89 Days Past Due		90+ Days Past Due		Total
Commercial and industrial loans	$	17,281	$	—	$	—	$	4,231	$	21,512
Agricultural land, production and other loans to farmers	2,212		—		—		—		2,212
Real estate loans:
Construction	22,000		—		—		—		22,000
Commercial real estate, owner occupied	12,730		—		—		3,573		16,303
Residential	4,846		298		25		1,740		6,909
Home equity	261		—		—		—		261
Total	$	59,330	$	298	$	25	$	9,544	$	69,197

	March 31, 2024
	Current		30-59 Days Past Due		60-89 Days Past Due		90+ Days Past Due		Total
Commercial and industrial loans	$	4,605	$	—	$	—	$	98	$	4,703
Real estate loans:
Commercial real estate, owner occupied	189		—		7		—		196
Residential	—		—		122		1,617		1,739
Home equity	356		—		—		—		356
Total	$	5,150	$	—	$	129	$	1,715	$	6,994

During the three months ended March 31, 2025, there were payment defaults of $9.5 million 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 $1.7 million payment defaults during the three months ended March 31, 2024 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 collectability of financial assets.

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 $0.7 million during the three months ended March 31, 2025. Net charge-offs totaled $4.9 million and provision expense of $4.2 million was recorded during the three months ended March 31, 2025. The following tables summarize changes in the allowance for credit losses by loan segment for the three months ended March 31, 2025 and 2024:

	Three Months Ended March 31, 2025
	Commercial		Commercial Real Estate		Construction		Consumer & Residential		Total
Allowance for credit losses - loans
Balances, December 31, 2024	$	94,757	$	51,099	$	9,784	$	37,117	$	192,757
Provision for credit losses - loans	9,154		(4,367)		1,757		(2,344)		4,200
Recoveries on loans	938		5		—		313		1,256
Loans charged off	(4,867)		(401)		—		(914)		(6,182)
Balances, March 31, 2025	$	99,982	$	46,336	$	11,541	$	34,172	$	192,031

	Three Months Ended March 31, 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	3,145		1,528		(4,454)		1,781		2,000
Recoveries on loans	551		53		—		296		900
Loans charged off	(1,831)		(351)		—		(971)		(3,153)
Balances, March 31, 2024	$	99,213	$	45,278	$	20,369	$	39,821	$	204,681

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:

	March 31, 2025		December 31, 2024
Amounts of commitments:
Loan commitments to extend credit	$	5,321,554	$	5,006,085
Standby letters of credit	$	65,210	$	71,271

The Corporation maintains an accrual for credit losses on off-balance sheet commitments using the CECL methodology. Reserves for unfunded commitments were $18.0 million at March 31, 2025 and December 31, 2024. There was no provision for credit losses on unfunded commitments during the three months ended March 31, 2025 and 2024. This reserve level remains appropriate and is reported in Other Liabilities as of March 31, 2025 and December 31, 2024 in the Consolidated Condensed Balance Sheets.