10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

OR

☐         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                     to                    

Commission file number 0-6233

1st Source Corporation

(Exact name of registrant as specified in its charter)

Indiana	35-1068133
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

100 North Michigan Street
South Bend,	IN	46601
(Address of principal executive offices)		(Zip Code)

(574) 235-2000

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock - without par value	SRCE	The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  x  Yes  o No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  x Yes  o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	x	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  ☐ Yes  x No

Number of shares of common stock outstanding as of April 15, 2022 — 24,732,545 shares

TABLE OF CONTENTS

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Consolidated Statements of Financial Condition — March 31, 2022 and December 31, 2021	3
	Consolidated Statements of Income — three months ended March 31, 2022 and 2021	4
	Consolidated Statements of Comprehensive Income (Loss) — three months ended March 31, 2022 and 2021	5
	Consolidated Statements of Shareholders’ Equity — three months ended March 31, 2022 and 2021	5
	Consolidated Statements of Cash Flows — three months ended March 31, 2022 and 2021	6
	Notes to the Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39
Item 4.	Controls and Procedures	39
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	39
Item 1A.	Risk Factors	39
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 3.	Defaults Upon Senior Securities	40
Item 4.	Mine Safety Disclosures	40
Item 5.	Other Information	40
Item 6.	Exhibits	40
SIGNATURES		41
EXHIBITS
	Exhibit 31.1
	Exhibit 31.2
	Exhibit 32.1
	Exhibit 32.2

2

1st SOURCE CORPORATION

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Unaudited - Dollars in thousands)

	March 31, 2022		December 31, 2021
ASSETS
Cash and due from banks	$	69,195	$	54,420
Federal funds sold and interest bearing deposits with other banks	347,697		470,767
Investment securities available-for-sale	1,857,431		1,863,041
Other investments	25,538		27,189
Mortgages held for sale	4,757		13,284
Loans and leases, net of unearned discount:
Commercial and agricultural	869,093		918,712
Solar	337,485		348,302
Auto and light truck	629,780		603,775
Medium and heavy duty truck	255,277		259,740
Aircraft	957,040		898,401
Construction equipment	775,972		754,273
Commercial real estate	920,807		929,341
Residential real estate and home equity	510,537		500,590
Consumer	138,012		133,080
Total loans and leases	5,394,003		5,346,214
Allowance for loan and lease losses	(129,959)		(127,492)
Net loans and leases	5,264,044		5,218,722
Equipment owned under operating leases, net	41,792		48,433
Net premises and equipment	45,960		47,038
Goodwill and intangible assets	83,921		83,926
Accrued income and other assets	272,128		269,469
Total assets	$	8,012,463	$	8,096,289
LIABILITIES
Deposits:
Noninterest-bearing demand	$	2,061,111	$	2,052,981
Interest-bearing deposits:
Interest-bearing demand	2,430,979		2,455,580
Savings	1,328,981		1,286,367
Time	852,021		884,137
Total interest-bearing deposits	4,611,981		4,626,084
Total deposits	6,673,092		6,679,065
Short-term borrowings:
Federal funds purchased and securities sold under agreements to repurchase	193,798		194,727
Other short-term borrowings	5,360		5,300
Total short-term borrowings	199,158		200,027
Long-term debt and mandatorily redeemable securities	69,563		71,251
Subordinated notes	58,764		58,764
Accrued expenses and other liabilities	92,416		117,718
Total liabilities	7,092,993		7,126,825
SHAREHOLDERS’ EQUITY
Preferred stock; no par value
Authorized 10,000,000 shares; none issued or outstanding	—		—
Common stock; no par value
Authorized 40,000,000 shares; issued 28,205,674 at March 31, 2022 and December 31, 2021	436,538		436,538
Retained earnings	624,503		603,787
Cost of common stock in treasury (3,473,139 shares at March 31, 2022 and 3,466,162 shares at December 31, 2021)	(115,654)		(114,209)
Accumulated other comprehensive loss	(80,537)		(9,861)
Total shareholders’ equity	864,850		916,255
Noncontrolling interests	54,620		$	53,209
Total equity	919,470		969,464
Total liabilities and equity	$	8,012,463	$	8,096,289

The accompanying notes are a part of the unaudited consolidated financial statements.

3

1st SOURCE CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited - Dollars in thousands, except per share amounts)

	Three Months Ended March 31,
	2022		2021
Interest income:
Loans and leases	$	55,208	$	57,864
Investment securities, taxable	6,344		3,988
Investment securities, tax-exempt	134		174
Other	363		266
Total interest income	62,049		62,292
Interest expense:
Deposits	2,376		3,526
Short-term borrowings	24		36
Subordinated notes	823		818
Long-term debt and mandatorily redeemable securities	(792)		500
Total interest expense	2,431		4,880
Net interest income	59,618		57,412
Provision for credit losses	2,233		2,398
Net interest income after provision for credit losses	57,385		55,014
Noninterest income:
Trust and wealth advisory	5,914		5,481
Service charges on deposit accounts	2,792		2,447
Debit card	4,194		4,182
Mortgage banking	1,377		3,901
Insurance commissions	1,905		2,152
Equipment rental	3,662		4,629
Gains on investment securities available-for-sale	—		—
Other	3,301		3,077
Total noninterest income	23,145		25,869
Noninterest expense:
Salaries and employee benefits	25,467		25,196
Net occupancy	2,811		2,719
Furniture and equipment	1,295		1,474
Data processing	5,208		4,984
Depreciation – leased equipment	3,015		3,773
Professional fees	1,608		1,613
FDIC and other insurance	850		665
Business development and marketing	1,268		997
Loan and lease collection and repossession	134		129
Other	3,680		2,590
Total noninterest expense	45,336		44,140
Income before income taxes	35,194		36,743
Income tax expense	7,793		8,637
Net income	27,401		28,106
Net (income) loss attributable to noncontrolling interests	(11)		(1)
Net income available to common shareholders	$	27,390	$	28,105
Per common share:
Basic net income per common share	$	1.10	$	1.10
Diluted net income per common share	$	1.10	$	1.10
Cash dividends	$	0.31	$	0.29
Basic weighted average common shares outstanding	24,743,790		25,320,930
Diluted weighted average common shares outstanding	24,743,790		25,320,930

The accompanying notes are a part of the unaudited consolidated financial statements.

4

1st SOURCE CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited - Dollars in thousands)

	Three Months Ended March 31,
	2022		2021
Net income	$	27,401	$	28,106
Other comprehensive income (loss):
Unrealized depreciation of available-for-sale securities	(93,094)		(14,658)
Reclassification adjustment for realized gains included in net income	—		—
Income tax effect	22,418		3,530
Other comprehensive loss, net of tax	(70,676)		(11,128)
Comprehensive (loss) income	$	(43,275)	$	16,978
Comprehensive (income) loss attributable to noncontrolling interests	(11)		(1)
Comprehensive (loss) income available to common shareholders	$	(43,286)	$	16,977

The accompanying notes are a part of the unaudited consolidated financial statements.

1st SOURCE CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited - Dollars in thousands, except per share amounts)

	Three Months Ended
	Preferred Stock		Common Stock		Retained Earnings		Cost of Common Stock in Treasury		Accumulated Other Comprehensive Income (Loss), Net		Total Shareholders’ Equity		Noncontrolling Interests		Total Equity
Balance at January 1, 2021	$	—	$	436,538	$	514,176	$	(82,240)	$	18,371	$	886,845	$	43,825	$	930,670
Net income	—		—		28,105		—		—		28,105		1		28,106
Other comprehensive loss	—		—		—		—		(11,128)		(11,128)		—		(11,128)
Issuance of 35,027 common shares under stock based compensation awards	—		—		844		638		—		1,482		—		1,482
Cost of 155,457 shares of common stock acquired for treasury	—		—		—		(6,621)		—		(6,621)		—		(6,621)
Common stock dividend ($0.29 per share)	—		—		(7,388)		—		—		(7,388)		—		(7,388)
Contributions from noncontrolling interests	—		—		—		—		—		—		887		887
Distributions to noncontrolling interests	—		—		—		—		—		—		(249)		(249)
Balance at March 31, 2021	$	—	$	436,538	$	535,737	$	(88,223)	$	7,243	$	891,295	$	44,464	935,759
Balance at January 1, 2022	$	—	$	436,538	$	603,787	$	(114,209)	$	(9,861)	$	916,255	$	53,209	$	969,464
Net income	—		—		27,390		—		—		27,390		11		27,401
Other comprehensive loss	—		—		—		—		(70,676)		(70,676)		—		(70,676)
Issuance of 38,442 common shares under stock based compensation awards	—		—		1,024		730		—		1,754		—		1,754
Cost of 45,419 shares of common stock acquired for treasury	—		—		—		(2,175)		—		(2,175)		—		(2,175)
Common stock dividend ($0.31 per share)	—		—		(7,698)		—		—		(7,698)		—		(7,698)
Contributions from noncontrolling interests	—		—		—		—		—		—		1,627		1,627
Distributions to noncontrolling interests	—		—		—		—		—		—		(227)		(227)
Balance at March 31, 2022	$	—	$	436,538	$	624,503	$	(115,654)	$	(80,537)	$	864,850	$	54,620	$	919,470

The accompanying notes are a part of the unaudited consolidated financial statements.

5

1st SOURCE CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited - Dollars in thousands)

	Three Months Ended March 31,
	2022		2021
Operating activities:
Net income	$	27,401	$	28,106
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses	2,233		2,398
Depreciation of premises and equipment	1,177		1,361
Depreciation of equipment owned and leased to others	3,015		3,773
Stock-based compensation	732		885
Amortization of investment securities premiums and accretion of discounts, net	967		1,734
Amortization of mortgage servicing rights	381		590
Mortgage servicing rights impairment recoveries	—		(42)
Amortization of right of use assets	785		1,133
Deferred income taxes	80		2,452
Gains on investment securities available-for-sale	—		—
Originations of loans held for sale, net of principal collected	(32,314)		(85,663)
Proceeds from the sales of loans held for sale	41,456		91,858
Net gain on sale of loans held for sale	(615)		(2,661)
Net gain on sale of other real estate and repossessions	(47)		(141)
Change in interest receivable	(530)		(142)
Change in interest payable	199		265
Change in other assets	9,099		(7,843)
Change in other liabilities	(10,882)		4,519
Other	(1,334)		(93)
Net change in operating activities	41,803		42,489
Investing activities:
Proceeds from sales of investment securities available-for-sale	—		—
Proceeds from maturities and paydowns of investment securities available-for-sale	57,392		119,692
Purchases of investment securities available-for-sale	(145,843)		(229,957)
Net change in partnership investments	(2,128)		(1,142)
Net change in other investments	1,651		—
Loans sold or participated to others	7,987		3,813
Proceeds from principal payments on direct finance leases	9,377		7,317
Net change in loans and leases	(66,069)		(49,255)
Net change in equipment owned under operating leases	3,626		(128)
Purchases of premises and equipment	(113)		(280)
Proceeds from disposal of premises and equipment	14		5
Proceeds from sales of other real estate and repossessions	1,983		697
Net change in investing activities	(132,123)		(149,238)
Financing activities:
Net change in demand deposits and savings accounts	26,143		271,650
Net change in time deposits	(32,116)		(86,337)
Net change in short-term borrowings	(869)		29,960
Payments on long-term debt	(2,440)		(2,035)
Acquisition of treasury stock	(2,175)		(6,621)
Net contributions from (distributions to) noncontrolling interests	1,400		639
Cash dividends paid on common stock	(7,918)		(7,600)
Net change in financing activities	(17,975)		199,656
Net change in cash and cash equivalents	(108,295)		92,907
Cash and cash equivalents, beginning of year	525,187		243,047
Cash and cash equivalents, end of period	$	416,892	$	335,954
Supplemental Information:
Non-cash transactions:
Loans transferred to other real estate and repossessed assets	$	1,150	$	839
Common stock matching contribution to Employee Stock Ownership and Profit Sharing Plan	683		715
Right of use assets obtained in exchange for lease obligations	116		46

The accompanying notes are a part of the unaudited consolidated financial statements.

6

1ST SOURCE CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 — Accounting Policies

1st Source Corporation is a bank holding company headquartered in South Bend, Indiana that provides, through its subsidiaries (collectively referred to as “1st Source” or “the Company”), a broad array of financial products and services.

Basis of Presentation – The accompanying unaudited consolidated financial statements reflect all adjustments (all of which are normal and recurring in nature) which are, in the opinion of management, necessary for a fair presentation of the consolidated financial position, the results of operations, changes in comprehensive income (loss), changes in shareholders’ equity, and cash flows for the periods presented. These unaudited consolidated financial statements have been prepared according to the rules and regulations of the Securities and Exchange Commission (SEC) and, therefore, certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP) have been omitted.

The Notes to the Consolidated Financial Statements appearing in 1st Source Corporation’s Annual Report on Form 10-K (2021 Annual Report), which include descriptions of significant accounting policies, should be read in conjunction with these interim financial statements. The Consolidated Statement of Financial Condition at December 31, 2021 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements. Certain amounts in the prior period consolidated financial statements have been reclassified to conform to the current period presentation.

Use of Estimates in the Preparation of Financial Statements – Financial statements prepared in accordance with GAAP require the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expense during the reporting period. Actual results could differ from those estimates.

Loans and Leases – Loans are stated at the principal amount outstanding, net of unamortized deferred loan origination fees and costs and net of unearned income. Interest income is accrued as earned based on unpaid principal balances. Origination fees and direct loan and lease origination costs are deferred, and the net amount amortized to interest income over the estimated life of the related loan or lease. Loan commitment fees are deferred and amortized into other income over the commitment period.

Direct financing leases are carried at the aggregate of lease payments plus estimated residual value of the leased property, net of unamortized deferred lease origination fees and costs and unearned income. Interest income on direct financing leases is recognized over the term of the lease to achieve a constant periodic rate of return on the outstanding investment. Costs incurred as a direct result of closing lease transactions are capitalized and amortized over the life of the lease while all other initial direct costs are expensed immediately.

Accrued interest is included in Accrued Income and Other Assets on the Consolidated Statements of Financial Condition and is excluded from the calculation of the allowance for credit losses. The accrual of interest on loans and leases is discontinued when a loan or lease becomes contractually delinquent for 90 days, or when an individual analysis of a borrower’s credit worthiness indicates a credit should be placed on nonperforming status, except for residential mortgage loans and consumer loans that are well secured and in the process of collection. Residential mortgage loans are placed on nonaccrual at the time the loan is placed in foreclosure. When interest accruals are discontinued, interest credited to income in the current year is reversed and interest accrued in the prior year is charged to the allowance for loan and lease losses. However, in some cases, the Company may elect to continue the accrual of interest when the net realizable value of collateral is sufficient to cover the principal and accrued interest. When a loan or lease is classified as nonaccrual and the future collectability of the recorded loan or lease balance is doubtful, collections on interest and principal are applied as a reduction to principal outstanding. Loans are returned to accrual status when all principal and interest amounts contractually due are brought current and future payments are reasonably assured, which is typically evidenced by a sustained repayment performance of at least six months.

Loans and leases that have been modified and economic concessions have been granted to borrowers who have experienced financial difficulties are considered a troubled debt restructuring (TDR). These concessions typically result from the Company’s loss mitigation activities and may include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance or other actions. Certain TDRs are classified as nonperforming at the time of restructuring and typically are returned to performing status after considering the borrower’s sustained repayment performance for a reasonable period of at least six months.

8

When the Company modifies loans and leases in a TDR, it evaluates any possible impairment based on the present value of expected future cash flows, discounted at the contractual interest rate of the original loan or lease agreement, or uses the current fair value of the collateral, less selling costs for collateral dependent loans. If the Company determines that the value of the modified loan is less than the recorded investment in the loan (net of previous charge-offs, deferred loan fees or costs and unamortized premium or discount), impairment is recognized through an allowance for loan and lease losses estimate or a charge-off to the allowance for loan and lease losses. In periods subsequent to modification, the Company evaluates all TDRs, including those that have payment defaults, for possible impairment and recognizes impairment through the allowance for loan and lease losses.

Note 2 — Recent Accounting Pronouncements

Financial Instruments–Credit Losses: In March 2022, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2022-02 “Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures.” These amendments eliminate the TDR recognition and measurement guidance and, instead, require that an entity evaluate (consistent with the accounting for other loan modifications) whether the modification represents a new loan or a continuation of an existing loan. The amendments also enhance existing disclosure requirements and introduce new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty. Additionally, these amendments require that an entity disclose current-period gross writeoffs by year of origination for financing receivables and net investment in leases within the scope of Subtopic 326-20. The guidance is effective for entities that have adopted ASU 2016-13 for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. These amendments should be applied prospectively. If an entity elects to early adopt ASU 2022-02 in an interim period, the guidance should be applied as of the beginning of the fiscal year that includes the interim period. An entity may elect to early adopt the amendments about TDRs and related disclosure enhancements separately from the amendments related to vintage disclosures. The Company is assessing ASU 2022-02 and its impact on its accounting and disclosures.

Reference Rate Reform: In March 2020, the FASB issued ASU No. 2020-04 “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” These amendments provide temporary optional guidance to ease the potential burden in accounting for reference rate reform. The ASU provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued. It is intended to help stakeholders during the global market-wide reference rate transition period. In January 2021, the FASB issued ASU 2021-01 which clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. The guidance is effective for all entities as of March 12, 2020 through December 31, 2022. The Company continues to implement its transition plan toward cessation of LIBOR and the modification of its loans and other financial instruments with attributes that are either directly or indirectly influenced by LIBOR. The Company expects to utilize the LIBOR transition relief allowed under ASU 2020-04 and ASU 2021-01, as applicable, and does not expect such adoption to have a material impact on its accounting and disclosures. The Company will continue to assess the impact as the reference rate transition approaches June 30, 2023.

9

Note 3 — Investment Securities Available-For-Sale

The following table shows investment securities available-for-sale.

(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
March 31, 2022
U.S. Treasury and Federal agencies securities	$	1,137,278	$	343	$	(56,676)	$	1,080,945
U.S. States and political subdivisions securities	102,459		145		(4,251)		98,353
Mortgage-backed securities — Federal agencies	700,666		394		(46,050)		655,010
Corporate debt securities	22,511		88		(74)		22,525
Foreign government and other securities	600		—		(2)		598
Total debt securities available-for-sale	$	1,963,514	$	970	$	(107,053)	$	1,857,431
December 31, 2021
U.S. Treasury and Federal agencies securities	$	1,093,780	$	3,244	$	(13,018)	$	1,084,006
U.S. States and political subdivisions securities	95,700		1,130		(1,129)		95,701
Mortgage-backed securities — Federal agencies	663,441		4,745		(8,459)		659,727
Corporate debt securities	22,510		499		—		23,009
Foreign government and other securities	600		—		(2)		598
Total debt securities available-for-sale	$	1,876,031	$	9,618	$	(22,608)	$	1,863,041

Amortized cost excludes accrued interest receivable which is included in Accrued Income and Other Assets on the Consolidated Statements of Financial Condition. At March 31, 2022 and December 31, 2021, accrued interest receivable on investment securities available-for-sale was $5.02 million and $4.80 million, respectively.

At March 31, 2022 and December 31, 2021, the residential mortgage-backed securities held by the Company consisted primarily of GNMA, FNMA and FHLMC pass-through certificates which are guaranteed by those respective agencies of the United States government (Government Sponsored Enterprise, GSEs).

The following table shows the contractual maturities of investments in debt securities available-for-sale at March 31, 2022. Expected maturities will differ from contractual maturities, because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

(Dollars in thousands)	Amortized Cost		Fair Value
Due in one year or less	$	99,452	$	99,754
Due after one year through five years	1,073,137		1,018,725
Due after five years through ten years	89,899		83,636
Due after ten years	360		306
Mortgage-backed securities	700,666		655,010
Total debt securities available-for-sale	$	1,963,514	$	1,857,431

10

The following table summarizes gross unrealized losses and fair value by investment category and age. At March 31, 2022, the Company’s available-for-sale securities portfolio consisted of 719 securities, 541 of which were in an unrealized loss position.

	Less than 12 Months				12 months or Longer				Total
(Dollars in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
March 31, 2022
U.S. Treasury and Federal agencies securities	$	796,571	$	(40,683)	$	207,232	$	(15,993)	$	1,003,803	$	(56,676)
U.S. States and political subdivisions securities	55,508		(2,367)		18,798		(1,884)		74,306		(4,251)
Mortgage-backed securities - Federal agencies	486,975		(32,284)		133,048		(13,766)		620,023		(46,050)
Corporate debt securities	8,109		(74)		—		—		8,109		(74)
Foreign government and other securities	98		(2)		—		—		98		(2)
Total debt securities available-for-sale	$	1,347,261	$	(75,410)	$	359,078	$	(31,643)	$	1,706,339	$	(107,053)
December 31, 2021
U.S. Treasury and Federal agencies securities	$	789,536	$	(10,728)	$	84,191	$	(2,290)	$	873,727	$	(13,018)
U.S. States and political subdivisions securities	39,585		(980)		4,875		(149)		44,460		(1,129)
Mortgage-backed securities - Federal agencies	454,413		(7,312)		35,232		(1,147)		489,645		(8,459)
Corporate debt securities	—		—		—		—		—		—
Foreign government and other securities	598		(2)		—		—		598		(2)
Total debt securities available-for-sale	$	1,284,132	$	(19,022)	$	124,298	$	(3,586)	$	1,408,430	$	(22,608)

The Company does not consider available-for-sale securities with unrealized losses at March 31, 2022 to be experiencing credit losses and recognized no resulting allowance for credit losses. The Company does not intend to sell these investments and it is more likely than not that the Company will not be required to sell these investments before recovery of the amortized cost basis, which may be the maturity dates of the securities. The unrealized losses occurred as a result of changes in interest rates, market spreads and market conditions subsequent to purchase.

The following table shows the gross realized gains and losses from the available-for-sale debt securities portfolio. Realized gains and losses of all securities are computed using the specific identification cost basis.

	Three Months Ended March 31,
(Dollars in thousands)	2022		2021
Gross realized gains	$	—	$	—
Gross realized losses	—		—
Net realized gains (losses)	$	—	$	—

At March 31, 2022 and December 31, 2021, investment securities available-for-sale with carrying values of $331.28 million and $351.13 million, respectively, were pledged as collateral for security repurchase agreements and for other purposes.

Note 4 — Loan and Lease Financings

The Company evaluates loans and leases for credit quality at least annually but more frequently if certain circumstances occur (such as material new information which becomes available and indicates a potential change in credit risk). The Company uses two methods to assess credit risk: loan or lease credit quality grades and credit risk classifications. The purpose of the loan or lease credit quality grade is to document the degree of risk associated with individual credits as well as inform management of the degree of risk in the portfolio taken as a whole. Credit risk classifications are used to categorize loans by degree of risk and to designate individual or committee approval authorities for higher risk credits at the time of origination. Credit risk classifications include categories for: Acceptable, Marginal, Special Attention, Special Risk, Restricted by Policy, Regulated and Prohibited by Law.

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All loans and leases, except residential real estate and home equity loans and consumer loans, are assigned credit quality grades on a scale from 1 to 12 with grade 1 representing superior credit quality. The criteria used to assign grades to extensions of credit that exhibit potential problems or well-defined weaknesses are primarily based upon the degree of risk and the likelihood of orderly repayment, and their effect on the Company’s safety and soundness. Loans or leases graded 7 or weaker are considered “special attention” credits and, as such, relationships in excess of $250,000 are reviewed quarterly as part of management’s evaluation of the appropriateness of the allowance for loan and lease losses. Grade 7 credits are defined as “watch” and contain greater than average credit risk and are monitored to limit the exposure to increased risk; grade 8 credits are “special mention” and, following regulatory guidelines, are defined as having potential weaknesses that deserve management’s close attention. Credits that exhibit well-defined weaknesses and a distinct possibility of loss are considered “classified” and are graded 9 through 12 corresponding to the regulatory definitions of “substandard” (grades 9 and 10) and the more severe “doubtful” (grade 11) and “loss” (grade 12). For residential real estate and home equity and consumer loans, credit quality is based on the aging status of the loan and by payment activity. Nonperforming loans are those loans which are on nonaccrual status or are 90 days or more past due.

Below is a summary of the Company’s loan and lease portfolio segments and a discussion of the risk characteristics relevant to each portfolio segment.

Commercial and agricultural – loans are to entities within the Company’s local market communities. Loans are for business or agri-business purposes and include working capital lines of credit secured by accounts receivable and inventory that are generally renewable annually and term loans secured by equipment with amortizations based on the expected life of the underlying collateral, generally three to seven years. These loans are typically further supported by personal guarantees. Commercial exposure is to a wide range of industries and services. Risks in this sector are also varied and are most impacted by general economic conditions. Risk mitigants include appropriate underwriting and monitoring and, when appropriate, government guarantees, including SBA and FSA. This portfolio sector also includes PPP loans, which are fully guaranteed by the SBA. As of March 31, 2022, PPP loan balances were $37.94 million which is net of unearned fees of $1.24 million.

Solar – loans are for the purpose of financing solar related projects and may include construction draw notes, operating loans, letters of credit and may entail a tax equity structure. Collateral in a multi-state area includes tangible assets of the borrower, assignment of intangible assets including power purchase agreements, and pledges of permits and licenses. Financing is provided to qualified borrowers throughout the continental United States with an emphasis on the region east of the Rocky Mountains.

Auto and light truck – loans are secured by vehicles and borrowers are nationwide. The portfolio consists of multiple industries: auto rental, auto leasing and specialty vehicle which includes bus, funeral car and step van. Borrowers in the auto rental segment are primarily independent auto rental entities with on-airport and off-airport locations, and some insurance replacement business. Loan amortizations are relatively short, generally eighteen months, but up to four years. Auto leasing customers lease to businesses and the Company takes assignment of the lease stream and places its lien on the vehicles. Terms are generally longer than the auto rental sector, three to seven years and match the underlying leases. Risks in both these segments include economic risks and collateral risks, principally used vehicle values. The bus segment is secured primarily by shuttle buses and motor coaches, the step van segment is secured by step vans and the funeral car segment is secured by hearses and limousines. Risks include lack of well-established mechanisms for disposition of collateral, such as auctions that are key to disposition of autos. Loans in the portfolio generally carry personal guarantees.

Medium and heavy duty truck – loans and full-service truck leases are secured by heavy-duty trucks, commonly Class 8 trucks, and are generally personally guaranteed. In addition to economic risks, collateral risk is significant. Financing is generally at full cost, plus additional expenditures to get the vehicle operational, such as taxes, insurance and fees. It takes three to four years of debt amortization to reach an equity position in the collateral.

Aircraft – loans are to domestic and foreign borrowers with the domestic segment further divided into two pools: 1) personal and business use, and 2) dealers and operators. The Company’s focus for the foreign sector is Latin America, principally Mexico and Brazil. Loans are primarily secured by new and used business jets and helicopters, with appropriate advances, amortizations of ten to fifteen years, and are generally guaranteed by individuals. The most significant risk in the Aircraft portfolio is collateral risk - volatility in underlying values and maintenance concerns. The portfolio is subject to national and global economic risks.

Construction equipment – loans are to borrowers throughout the country secured by specific equipment. The borrowers include highway and road builders, asphalt producers and pavers, suppliers of aggregate products, site developers, frac sand operations, general construction equipment dealers and operators, and crane rental entities. Generally, loans include personal guarantees. The construction equipment industry is heavily dependent on the U.S. economy and the global economy. Market growth is reliant on investments from public and private sectors into urbanization and infrastructure projects.

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Commercial real estate – loans are generally to entities within the local market communities served by the Company with advances generally within regulatory guidelines. Historically, the Company’s exposure to commercial real estate had been primarily to the less risky owner-occupied segment although growth in recent years has been in the non-owner-occupied segment which now accounts for slightly less than half of the portfolio. The non-owner-occupied segment includes hotels, apartment complexes and warehousing facilities. There is limited exposure to construction loans. Many commercial real estate loans carry personal guarantees. Additional risks in the commercial real estate portfolio stem from geographical concentration in northern Indiana and southwest Michigan and general economic conditions.

Residential real estate and home equity – loans predominantly include one-to-four family mortgages to borrowers in the Company’s local market communities and are appropriately underwritten and secured by residential real estate.

Consumer – loans are to individuals in the Company’s local markets and auto loans are generally secured by personal vehicles and appropriately underwritten.

The following table shows the amortized cost of loans and leases, segregated by portfolio segment, credit quality rating and year of origination as of March 31, 2022.

	Term Loans and Leases by Origination Year
(Dollars in thousands)	2022		2021		2020		2019		2018		Prior		Revolving Loans		Revolving Loans Converted to Term		Total
Commercial and agricultural
Grades 1-6	$	53,128	$	190,821	$	107,991	$	50,957	$	43,930	$	32,145	$	363,670	$	—	$	842,642
Grades 7-12	830		2,186		166		3,338		2,242		2,218		15,471		—		26,451
Total commercial and agricultural	53,958		193,007		108,157		54,295		46,172		34,363		379,141		—		869,093
Solar
Grades 1-6	22,411		128,379		40,552		81,076		18,901		38,480		—		—		329,799
Grades 7-12	—		—		1,131		5,837		718		—		—		—		7,686
Total solar	22,411		128,379		41,683		86,913		19,619		38,480		—		—		337,485
Auto and light truck
Grades 1-6	113,310		284,748		108,645		62,013		20,163		10,471		—		—		599,350
Grades 7-12	447		7,635		9,350		4,580		3,393		5,025		—		—		30,430
Total auto and light truck	113,757		292,383		117,995		66,593		23,556		15,496		—		—		629,780
Medium and heavy duty truck
Grades 1-6	26,377		85,103		61,748		50,070		19,724		12,068		—		—		255,090
Grades 7-12	—		—		—		—		—		187		—		—		187
Total medium and heavy duty truck	26,377		85,103		61,748		50,070		19,724		12,255		—		—		255,277
Aircraft
Grades 1-6	142,120		344,528		273,403		73,079		42,434		65,511		6,861		—		947,936
Grades 7-12	1,894		—		633		—		4,342		2,235		—		—		9,104
Total aircraft	144,014		344,528		274,036		73,079		46,776		67,746		6,861		—		957,040
Construction equipment
Grades 1-6	113,680		287,695		166,178		90,462		37,171		13,924		22,965		3,387		735,462
Grades 7-12	22,419		9,659		2,424		3,158		765		48		—		2,037		40,510
Total construction equipment	136,099		297,354		168,602		93,620		37,936		13,972		22,965		5,424		775,972
Commercial real estate
Grades 1-6	59,945		192,722		145,247		140,328		136,562		221,961		314		—		897,079
Grades 7-12	1,118		—		8,011		7,481		49		7,069		—		—		23,728
Total commercial real estate	61,063		192,722		153,258		147,809		136,611		229,030		314		—		920,807
Residential real estate and home equity
Performing	28,424		101,853		109,427		37,498		9,186		96,976		120,863		4,752		508,979
Nonperforming	—		—		—		—		14		1,097		243		204		1,558
Total residential real estate and home equity	28,424		101,853		109,427		37,498		9,200		98,073		121,106		4,956		510,537
Consumer
Performing	19,637		52,972		20,840		13,816		6,521		2,073		21,987		—		137,846
Nonperforming	—		11		55		37		28		35		—		—		166
Total consumer	$	19,637	$	52,983	$	20,895	$	13,853	$	6,549	$	2,108	$	21,987	$	—	$	138,012

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The following table shows the amortized cost of loans and leases, segregated by portfolio segment, credit quality rating and year of origination as of December 31, 2021.

	Term Loans and Leases by Origination Year
(Dollars in thousands)	2021		2020		2019		2018		2017		Prior		Revolving Loans		Revolving Loans Converted to Term		Total
Commercial and agricultural
Grades 1-6	$	233,512	$	123,947	$	60,744	$	55,231	$	32,545	$	20,184	$	364,460	$	—	$	890,623
Grades 7-12	4,682		194		3,667		2,373		2,004		484		14,685		—		28,089
Total commercial and agricultural	238,194		124,141		64,411		57,604		34,549		20,668		379,145		—		918,712
Solar
Grades 1-6	159,244		42,073		81,593		18,979		34,889		3,780		—		—		340,558
Grades 7-12	—		1,138		5,882		724		—		—		—		—		7,744
Total solar	159,244		43,211		87,475		19,703		34,889		3,780		—		—		348,302
Auto and light truck
Grades 1-6	331,105		122,709		72,580		24,965		11,814		901		—		—		564,074
Grades 7-12	10,828		11,752		7,467		3,859		4,876		919		—		—		39,701
Total auto and light truck	341,933		134,461		80,047		28,824		16,690		1,820		—		—		603,775
Medium and heavy duty truck
Grades 1-6	92,252		68,354		57,967		23,210		12,419		5,265		—		—		259,467
Grades 7-12	—		—		—		—		—		273		—		—		273
Total medium and heavy duty truck	92,252		68,354		57,967		23,210		12,419		5,538		—		—		259,740
Aircraft
Grades 1-6	384,895		290,897		85,916		45,848		47,025		29,435		4,844		—		888,860
Grades 7-12	1,141		649		—		4,670		454		2,627		—		—		9,541
Total aircraft	386,036		291,546		85,916		50,518		47,479		32,062		4,844		—		898,401
Construction equipment
Grades 1-6	314,044		201,032		109,029		47,693		13,501		5,031		18,937		4,594		713,861
Grades 7-12	26,650		8,709		1,983		797		80		—		—		2,193		40,412
Total construction equipment	340,694		209,741		111,012		48,490		13,581		5,031		18,937		6,787		754,273
Commercial real estate
Grades 1-6	230,701		150,144		146,374		141,838		126,642		112,243		391		—		908,333
Grades 7-12	218		5,921		7,159		491		6,208		1,011		—		—		21,008
Total commercial real estate	230,919		156,065		153,533		142,329		132,850		113,254		391		—		929,341
Residential real estate and home equity
Performing	105,345		114,682		41,185		9,706		11,720		89,646		122,281		4,555		499,120
Nonperforming	—		—		—		13		421		655		293		88		1,470
Total residential real estate and home equity	105,345		114,682		41,185		9,719		12,141		90,301		122,574		4,643		500,590
Consumer
Performing	58,866		24,307		17,031		8,284		2,263		697		21,378		—		132,826
Nonperforming	37		107		43		30		33		4		—		—		254
Total consumer	$	58,903	$	24,414	$	17,074	$	8,314	$	2,296	$	701	$	21,378	$	—	$	133,080

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The following table shows the amortized cost of loans and leases, segregated by portfolio segment, with delinquency aging and nonaccrual status.

(Dollars in thousands)	Current		30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due and Accruing		Total Accruing  Loans		Nonaccrual		Total Financing Receivables
March 31, 2022
Commercial and agricultural	$	867,023	$	503	$	201	$	—	$	867,727	$	1,366	$	869,093
Solar	337,485		—		—		—		337,485		—		337,485
Auto and light truck	607,991		214		—		—		608,205		21,575		629,780
Medium and heavy duty truck	254,896		194		—		—		255,090		187		255,277
Aircraft	950,763		3,409		2,235		—		956,407		633		957,040
Construction equipment	766,210		2,452		—		—		768,662		7,310		775,972
Commercial real estate	917,893		—		—		—		917,893		2,914		920,807
Residential real estate and home equity	508,270		556		153		274		509,253		1,284		510,537
Consumer	137,581		222		43		—		137,846		166		138,012
Total	$	5,348,112	$	7,550	$	2,632	$	274	$	5,358,568	$	35,435	$	5,394,003
December 31, 2021
Commercial and agricultural	$	916,659	$	—	$	—	$	—	$	916,659	$	2,053	$	918,712
Solar	348,302		—		—		—		348,302		—		348,302
Auto and light truck	579,605		—		—		—		579,605		24,170		603,775
Medium and heavy duty truck	259,467		—		—		—		259,467		273		259,740
Aircraft	894,092		1,130		2,530		—		897,752		649		898,401
Construction equipment	745,870		1,313		—		—		747,183		7,090		754,273
Commercial real estate	926,345		—		—		—		926,345		2,996		929,341
Residential real estate and home equity	498,854		212		54		245		499,365		1,225		500,590
Consumer	132,464		332		30		4		132,830		250		133,080
Total	$	5,301,658	$	2,987	$	2,614	$	249	$	5,307,508	$	38,706	$	5,346,214

Accrued interest receivable on loans and leases at March 31, 2022 and December 31, 2021 was $13.11 million and $12.94 million, respectively.

There were no loan and lease modifications classified as a troubled debt restructuring (TDR) during the three months ended March 31, 2022 and 2021. The classification between nonperforming and performing is determined at the time of modification. Modification programs focus on extending maturity dates or modifying payment patterns with most TDRs experiencing a combination of concessions. Modifications do not result in the contractual forgiveness of principal or interest. There were no modifications during the three months ended March 31, 2022 and 2021 that resulted in an interest rate below market rate.

There were no TDRs which had payment defaults within the twelve months following modification during the three months ended March 31, 2022 and 2021, respectively. Default occurs when a loan or lease is 90 days or more past due under the modified terms or transferred to nonaccrual.

The following table shows the recorded investment of loans and leases classified as troubled debt restructurings as of March 31, 2022 and December 31, 2021.

(Dollars in thousands)	March 31, 2022		December 31, 2021
Performing TDRs	$	—	$	319
Nonperforming TDRs	5,965		6,742
Total TDRs	$	5,965	$	7,061

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Note 5 — Allowance for Credit Losses

Allowance for Loan and Lease Losses

The allowance for credit losses is established for current expected credit losses on the Company’s loan and lease portfolios utilizing guidance in Accounting Standards Codification (ASC) Topic 326. The determination of the allowance requires significant judgment to estimate credit losses measured on a collective pool basis when similar risk characteristics exist, and for loans evaluated individually. In determining the allowance, the Company estimates expected future losses for the loan’s entire contractual term adjusted for expected payments when appropriate. The allowance estimate considers relevant available information, from internal and external sources relating to the historical loss experience, current conditions, and reasonable and supportable forecasts for the Company’s outstanding loan and lease balances. The allowance is an estimation that reflects management’s evaluation of expected losses related to the Company’s financial assets measured at amortized cost. To ensure that the allowance is maintained at an adequate level, a detailed analysis is performed on a quarterly basis and an appropriate provision is made to adjust the allowance.

The Company categorizes its loan portfolios into nine segments based on similar risk characteristics. Loans within each segment are collectively evaluated using either: 1) a cohort cumulative loss rate methodology (“cohort”) or, 2) the probability of default (“PD”)/loss given default (“LGD”) methodology (PD/LGD).

The following table shows the changes in the allowance for loan and lease losses, segregated by portfolio segment, for the three months ended March 31, 2022 and 2021.

(Dollars in thousands)	Commercial and agricultural		Solar		Auto and light truck		Medium and heavy duty truck		Aircraft		Construction equipment		Commercial real estate		Residential real estate and home equity		Consumer		Total
March 31, 2022
Balance, beginning of period	$	15,409	$	6,585	$	19,624	$	6,015	$	33,628	$	19,673	$	19,691	$	5,084	$	1,783	$	127,492
Charge-offs	—		—		—		—		—		48		—		4		165		217
Recoveries	4		—		65		—		316		—		—		1		65		451
Net charge-offs (recoveries)	(4)		—		(65)		—		(316)		48		—		3		100		(234)
Provision (recovery of provision)	185		(168)		(168)		34		2,024		416		(445)		137		218		2,233
Balance, end of period	$	15,598	$	6,417	$	19,521	$	6,049	$	35,968	$	20,041	$	19,246	$	5,218	$	1,901	$	129,959
March 31, 2021
Balance, beginning of period	$	16,680	$	5,549	$	28,926	$	6,400	$	34,053	$	19,166	$	22,758	$	5,374	$	1,748	$	140,654
Charge-offs	1		—		4,286		—		—		8		—		5		152		4,452
Recoveries	377		—		49		—		119		254		15		1		135		950
Net charge-offs (recoveries)	(376)		—		4,237		—		(119)		(246)		(15)		4		17		3,502
Provision (recovery of provision)	(1,605)		209		4,654		(129)		1,047		(3,103)		1,561		(207)		(29)		2,398
Balance, end of period	$	15,451	$	5,758	$	29,343	$	6,271	$	35,219	$	16,309	$	24,334	$	5,163	$	1,702	$	139,550

The allowance for credit losses increased during the first quarter in response to loan growth along with a forecast adjustment due to increased risk during the forecast period attributable to heightened geopolitical uncertainty, ongoing supply chain difficulties, and persistent inflation. Credit quality remains on an improving trend as evidenced by declining total special attention credit outstandings and net recoveries during the quarter. This quarter, increases in the allowance for various portfolios, particularly aircraft and construction equipment, were driven by loan growth and to a lesser extent, the forecast adjustment. Decreases in the auto and light truck portfolio was due to continued amortization of special attention credits in the highly reserved bus segment. Reduced reserves in the commercial real estate portfolio were due to a reduction in qualitative adjustments related to COVID-19 along with lower loan balances.

Commercial and agricultural – the decline in loan balances is attributable to PPP debt forgiveness coupled with a modest decline in loans in our core businesses. The small increase in the allowance was principally due to the impact of the forecast adjustment.

Solar – the allowance decreased due to lower loan outstandings. Credit quality is stable to improving.

Auto and light truck – the allowance decreased as a result of lower outstanding loan balances in the higher risk bus segment of the portfolio, which was significantly impacted by the pandemic. The decline in allowance attributable to the bus segment was substantially offset by loan growth in the auto rental and leasing segments, which carry lower loss ratios.

Medium and heavy duty truck – the allowance was minimally changed as a decrease in loan outstandings was offset by a slight increase in the forecast adjustment. Credit quality metrics continued to be relatively strong for this portfolio. Energy price volatility and driver availability remain a challenge.

16

Aircraft – the allowance increased due to loan growth in both domestic and foreign segments. The portfolio is currently bolstered by strengthening collateral values somewhat offset by continuing economic concerns related primarily to Latin American-based foreign loans. The Company has historically carried a higher allowance in this portfolio due to risk volatility.

Construction equipment – the allowance increased due to loan growth.

Commercial real estate – the allowance decrease was a result of declines in outstanding loan balances as well as a minor decrease in COVID-19-related qualitative adjustment factors.

Residential real estate and home equity – the increased allowance was due to an increase in loan balances.

Consumer – segment saw a slight increase in allowance due principally to loan growth.

Economic Outlook

As of March 31, 2022, the most significant economic factors impacting our loan portfolios are the war in Ukraine and resultant increased uncertainty for the U.S. economy, and additional inflationary pressures, further aggravated by supply chain disruptions. We remain concerned about COVID-19 surges and new variants. The forecast considers global and domestic economic impacts from these factors as well as other key economic factors such as change in Gross Domestic Product and unemployment which may impact our clients. The Company’s assumption was that economic growth will slow in 2022 and 2023 and inflation will remain well above the 2% Federal Reserve target rate resulting in an adverse impact on the loan and lease portfolio over the next two years.

As a result of geopolitical risks and economic uncertainty, the Company’s future loss estimates may vary considerably from the March 31, 2022 assumptions.

Liability for Credit Losses on Unfunded Loan Commitments

The liability for credit losses inherent in unfunded loan commitments is included in Accrued Expenses and Other Liabilities on the Consolidated Statements of Financial Condition. The following table shows the changes in the liability for credit losses on unfunded loan commitments.

	Three Months Ended March 31,
(Dollars in thousands)	2022		2021
Balance, beginning of period	$	4,196	$	4,499
Provision	728		94
Balance, end of period	$	4,924	$	4,593

Note 6 — Lease Investments

As a lessor, the Company’s loan and lease portfolio includes direct finance leases, which are included in Commercial and Agricultural, Solar, Auto and Light Truck, Medium and Heavy Duty Truck, Aircraft, and Construction Equipment on the Consolidated Statements of Financial Condition. The Company also finances various types of construction equipment, medium and heavy duty trucks, automobiles and other equipment under leases classified as operating leases, which are included in Equipment Owned Under Operating Leases, net, on the Consolidated Statements of Financial Condition.

The following table shows interest income recognized from direct finance lease payments and operating lease equipment rental income and related depreciation expense.

	Three Months Ended March 31,
(Dollars in thousands)	2022		2021
Direct finance leases:
Interest income on lease receivable	$	1,781	$	1,590
Operating leases:
Income related to lease payments	$	3,662	$	4,629
Depreciation expense	3,015		3,773

Income related to reimbursements from lessees for personal property tax on operating leased equipment for the three months ended March 31, 2022 and 2021 was $0.20 million and $0.24 million, respectively. Expense related to personal property tax payments on operating leased equipment for the three months ended March 31, 2022 and 2021 was $0.20 million and $0.24 million, respectively.

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Note 7 — Mortgage Servicing Rights

The Company recognizes the rights to service residential mortgage loans for others as separate assets, whether the servicing rights are acquired through a separate purchase or through the sale of originated loans with servicing rights retained. The Company allocates a portion of the total proceeds of a mortgage loan to servicing rights based on the relative fair value. The unpaid principal balance of residential mortgage loans serviced for third parties was $888.63 million and $883.90 million at March 31, 2022 and December 31, 2021, respectively.

Mortgage servicing rights (MSRs) are evaluated for impairment at each reporting date. For purposes of impairment measurement, MSRs are stratified based on the predominant risk characteristics of the underlying servicing, principally by loan type. If temporary impairment exists within a tranche, a valuation allowance is established through a charge to income equal to the amount by which the carrying value exceeds the fair value. If it is later determined all or a portion of the temporary impairment no longer exists for a particular tranche, the valuation allowance is reduced through a recovery of income.

The following table shows changes in the carrying value of MSRs and the associated valuation allowance.

	Three Months Ended March 31,
(Dollars in thousands)	2022		2021
Mortgage servicing rights:
Balance at beginning of period	$	4,671	$	4,616
Additions	335		761
Amortization	(381)		(590)
Carrying value before valuation allowance at end of period	4,625		4,787
Valuation allowance:
Balance at beginning of period	—		(812)
Impairment recoveries	—		42
Balance at end of period	$	—	$	(770)
Net carrying value of mortgage servicing rights at end of period	$	4,625	$	4,017
Fair value of mortgage servicing rights at end of period	$	6,363	$	4,365

At March 31, 2022 and 2021, the fair value of MSRs exceeded the carrying value reported in the Consolidated Statements of Financial Condition by $1.74 million and $0.35 million, respectively. This difference represents increases in the fair value of certain MSRs that could not be recorded above cost basis.

Mortgage loan contractual servicing fees, including late fees and ancillary income, were $0.72 million and $0.81 million for the three months ended March 31, 2022 and 2021, respectively. Mortgage loan contractual servicing fees are included in Mortgage Banking on the Consolidated Statements of Income.

Note 8 — Commitments and Financial Instruments with Off-Balance-Sheet Risk

Financial Instruments with Off-Balance-Sheet Risk — 1st Source and its subsidiaries are parties to financial instruments with off-balance-sheet risk in the normal course of business. These off-balance-sheet financial instruments include commitments to originate and sell loans and standby letters of credit. The instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the Consolidated Statements of Financial Condition.

The following table shows financial instruments whose contract amounts represent credit risk.

(Dollars in thousands)	March 31, 2022		December 31, 2021
Amounts of commitments:
Loan commitments to extend credit	$	1,204,428	$	1,148,984
Standby letters of credit	$	22,765	$	24,657
Commercial and similar letters of credit	$	746	$	8,531

The exposure to credit loss in the event of nonperformance by the other party to the financial instruments for loan commitments and standby letters of credit is represented by the dollar amount of those instruments. The Company uses the same credit policies and collateral requirements in making commitments and conditional obligations as it does for on-balance-sheet instruments.

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The Company grants mortgage loan commitments to borrowers, subject to normal loan underwriting standards. The interest rate risk associated with these loan commitments is managed by entering into contracts for future deliveries of loans. Loan commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.

Standby letters of credit are conditional commitments that guarantee the performance of a client to a third party. The credit risk involved in and collateral obtained when issuing standby letters of credit is essentially the same as that involved in extending loan commitments to clients. Standby letters of credit generally have terms ranging from two months to one year.

Commercial letters of credit are issued specifically to facilitate commerce and typically result in the commitment being drawn on when the underlying transaction is consummated between the customer and the third party. Commercial letters of credit generally have terms ranging from two months to six months.

Note 9 — Derivative Financial Instruments

Commitments to originate residential mortgage loans held for sale and forward commitments to sell residential mortgage loans are considered derivative instruments. See Note 8 for further information.

The Company has certain interest rate derivative positions that are not designated as hedging instruments. Derivative assets and liabilities are recorded at fair value on the Consolidated Statements of Financial Condition and do not take into account the effects of master netting agreements. Master netting agreements allow the Company to settle all derivative contracts held with a single counterparty on a net basis, and to offset net derivative positions with related collateral, where applicable. These derivative positions relate to transactions in which the Company enters into an interest rate swap with a client while at the same time entering into an offsetting interest rate swap with another financial institution. In connection with each transaction, the Company agrees to pay interest to the client on a notional amount at a variable interest rate and receive interest from the client on the same notional amount at a fixed interest rate. At the same time, the Company agrees to pay another financial institution the same fixed interest rate on the same notional amount and receive the same variable interest rate on the same notional amount. The transaction allows the client to effectively convert a variable rate loan to a fixed rate. Because the terms of the swaps with the customers and the other financial institutions offset each other, with the only difference being counterparty credit risk, changes in the fair value of the underlying derivative contracts are not materially different and do not significantly impact the Company’s results of operations.

The following table shows the amounts of non-hedging derivative financial instruments.

			Asset derivatives			Liability derivatives
(Dollars in thousands)	Notional or contractual amount		Statement of Financial Condition classification	Fair value		Statement of Financial Condition classification	Fair value
March 31, 2022
Interest rate swap contracts	$	1,017,365	Other assets	$	7,806	Other liabilities	$	8,006
Loan commitments	13,422		Mortgages held for sale	287		N/A	—
Forward contracts - mortgage loan	13,080		Mortgages held for sale	200		N/A	—
Total	$	1,043,867		$	8,293		$	8,006
December 31, 2021
Interest rate swap contracts	$	1,064,721	Other assets	$	20,735	Other liabilities	$	21,172
Loan commitments	15,086		Mortgages held for sale	452		N/A	—
Forward contracts - mortgage loan	22,000		N/A	—		Mortgages held for sale	11
Total	$	1,101,807		$	21,187		$	21,183

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The following table shows the amounts included in the Consolidated Statements of Income for non-hedging derivative financial instruments.

		Gain (loss)
		Three Months Ended March 31,
(Dollars in thousands)	Statement of Income classification	2022		2021
Interest rate swap contracts	Other expense	$	237	$	333
Interest rate swap contracts	Other income	—		86
Loan commitments	Mortgage banking	(165)		(698)
Forward contracts - mortgage loan	Mortgage banking	211		577
Total		$	283	$	298

The following table shows the offsetting of financial assets and derivative assets.

							Gross Amounts Not Offset in the Statement of Financial Condition
(Dollars in thousands)	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Statement of Financial Condition		Net Amounts of Assets Presented in the Statement of Financial Condition		Financial Instruments		Cash Collateral Received		Net Amount
March 31, 2022
Interest rate swaps	$	10,324	$	2,518	$	7,806	$	—	$	3,040	$	4,766
December 31, 2021
Interest rate swaps	$	24,436	$	3,701	$	20,735	$	—	$	—	$	20,735

The following table shows the offsetting of financial liabilities and derivative liabilities.

							Gross Amounts Not Offset in the Statement of Financial Condition
(Dollars in thousands)	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Statement of Financial Condition		Net Amounts of Liabilities Presented in the Statement of Financial Condition		Financial Instruments		Cash Collateral Pledged		Net Amount
March 31, 2022
Interest rate swaps	$	10,524	$	2,518	$	8,006	$	299	$	—	$	7,707
Repurchase agreements	193,798		—		193,798		193,798		—		—
Total	$	204,322	$	2,518	$	201,804	$	194,097	$	—	$	7,707
December 31, 2021
Interest rate swaps	$	24,873	$	3,701	$	21,172	$	20,498	$	—	$	674
Repurchase agreements	194,727		—		194,727		194,727		—		—
Total	$	219,600	$	3,701	$	215,899	$	215,225	$	—	$	674

If a default in performance of any obligation of a repurchase agreement occurs, each party will set-off property held in respect of transactions against obligations owing in respect of any other transactions. At March 31, 2022 and December 31, 2021, repurchase agreements had a remaining contractual maturity of $190.67 million and $191.47 million in overnight and $3.13 million and $3.26 million in up to 30 days, respectively and were collateralized by U.S. Treasury and Federal agencies securities.

Note 10 — Variable Interest Entities

A variable interest entity (VIE) is a partnership, limited liability company, trust or other legal entity that meets any one of the following criteria:

•The entity does not have sufficient equity to conduct its activities without additional subordinated financial support from another party.

•The entity’s investors lack the power to direct the activities that most significantly affect the entity’s economic performance.

•The entity’s at-risk holders do not have the obligation to absorb the losses or the right to receive residual returns.

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•The voting rights of some investors are not proportional to their economic interests in the entity, and substantially all of the entity’s activities involve, or are conducted on behalf of, investors with disproportionately few voting rights.

The Company is involved in various entities that are considered to be VIEs. The Company’s investments in VIEs are primarily related to investments promoting affordable housing, community development and renewable energy sources. Some of these tax-advantaged investments support the Company’s regulatory compliance with the Community Reinvestment Act. The Company’s investments in these entities generate a return primarily through the realization of federal and state income tax credits, and other tax benefits, such as tax deductions from operating losses of the investments, over specified time periods. Tax credits from affordable housing investments and community development investments are recognized as a reduction of tax expense. Investments in renewable energy sources qualify for investment tax credits which are recognized as a reduction to the related investment asset. The Company recognized federal income tax credits related to its affordable housing and community development tax-advantaged investments in tax expense of $0.50 million and $0.50 million for the three months ended March 31, 2022 and 2021, respectively. The Company also recognized $0.00 million and $1.92 million of investment tax credits for the three months ended March 31, 2022 and 2021, respectively.

The Company is not required to consolidate VIEs in which it has concluded it does not have a controlling financial interest, and thus is not the primary beneficiary. In such cases, the Company does not have both the power to direct the entities’ most significant activities and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIEs. As a limited partner in these operating partnerships, the Company is allocated credits and deductions associated with the underlying properties. The Company has determined that it is not the primary beneficiary of these investments because the general partners have the power to direct activities that most significantly influence the economic performance of their respective partnerships.

The Company’s investments in these unconsolidated VIEs are carried in Other Assets on the Consolidated Statements of Financial Condition. The Company’s unfunded capital and other commitments related to these unconsolidated VIEs are generally carried in Other Liabilities on the Consolidated Statements of Financial Condition. The Company’s maximum exposure to loss from these unconsolidated VIEs include the investment recorded on the Company’s Consolidated Statements of Financial Condition, net of unfunded capital commitments, and previously recorded tax credits which remain subject to recapture by taxing authorities based on compliance features required to be met at the project level. While the Company believes potential losses from these investments are remote, the maximum exposure was determined by assuming a scenario where the community-based business, housing projects and renewable energy projects completely fail and do not meet certain taxing authority compliance requirements resulting in recapture of the related tax credits.

The following table provides a summary of investments in affordable housing, community development and renewable energy VIEs that the Company has not consolidated.

(Dollars in thousands)	March 31, 2022		December 31, 2021
Investment carrying amount	$	26,391	$	35,968
Unfunded capital and other commitments	19,668		29,670
Maximum exposure to loss	48,044		50,319

The Company is required to consolidate VIEs in which it has concluded it has significant involvement in and the ability to direct the activities that impact the entity’s economic performance. The Company is the managing general partner of entities to which it shares interest in tax-advantaged investments with third parties. At March 31, 2022 and December 31, 2021, approximately $67.85 million and $59.08 million of the Company’s assets and $7.23 million and $0.00 million of its liabilities included on the Consolidated Statements of Financial Condition were related to tax-advantaged investment VIEs which the Company has consolidated, respectively. The assets of the consolidated VIEs are reported in Other Assets, the liabilities are reported in Other Liabilities and the non-controlling interest is reported in Equity on the Consolidated Statements of Financial Condition. The assets of a particular VIE are the primary source of funds to settle its obligations. The creditors of the VIE do not have recourse to the general credit of the Company. The Company’s exposure to the consolidated VIE is generally limited to the carrying value of its variable interest plus any related tax credits previously recognized.

Additionally, the Company sponsors one trust, 1st Source Master Trust (Capital Trust) of which 100% of the common equity is owned by the Company. The Capital Trust was formed in 2007 for the purpose of issuing corporation-obligated mandatorily redeemable capital securities (the capital securities) to third-party investors and investing the proceeds from the sale of the capital securities solely in junior subordinated debenture securities of the Company (the subordinated notes). The subordinated notes held by the Capital Trust are the sole assets of the Capital Trust. The Capital Trust qualifies as a variable interest entity for which the Company is not the primary beneficiary and therefore reported in the financial statements as an unconsolidated subsidiary. The junior subordinated debentures are reflected as subordinated notes in the Statements of Financial Condition with the corresponding interest distributions reflected as Interest Expense in the Statements of Income. The common shares issued by the Capital Trust are included in Other Assets in the Statements of Financial Condition.

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Distributions on the capital securities issued by the Capital Trust are payable quarterly at a rate per annum equal to the interest rate being earned by the Capital Trust on the subordinated notes held by the Capital Trust. The capital securities are subject to mandatory redemption, in whole or in part, upon repayment of the subordinated notes. The Company has entered into agreements which, taken collectively, fully and unconditionally guarantee the capital securities subject to the terms of each of the guarantees. The capital securities held by the Capital Trust qualify as Tier 1 capital under Federal Reserve Board guidelines.

The following table shows subordinated notes at March 31, 2022.

(Dollars in thousands)	Amount of Subordinated Notes		Interest Rate		Maturity Date
June 2007 issuance (1)	$	41,238	7.22	%	6/15/2037
August 2007 issuance (2)	17,526		2.31	%	9/15/2037
Total	$	58,764

(1) Fixed rate through life of debt.

(2) 3-Month LIBOR +1.48% through remaining life of debt.

Note 11 — Earnings Per Share

Earnings per common share is computed using the two-class method. Basic earnings per common share is computed by dividing net income available to common shareholders by the weighted-average number of common shares outstanding during the applicable period, excluding outstanding participating securities. Participating securities include non-vested restricted stock awards. Non-vested restricted stock awards are considered participating securities to the extent the holders of these securities receive non-forfeitable dividends at the same rate as holders of common stock. Diluted earnings per common share is computed using the weighted-average number of shares determined for the basic earnings per common share computation plus the dilutive effect of stock compensation using the treasury stock method.

Stock options, where the exercise price was greater than the average market price of the common shares, were excluded from the computation of diluted earnings per common share because the result would have been antidilutive. There were no stock options outstanding as of March 31, 2022 and 2021.

The following table presents a reconciliation of the number of shares used in the calculation of basic and diluted earnings per common share.

	Three Months Ended March 31,
(Dollars in thousands - except per share amounts)	2022		2021
Distributed earnings allocated to common stock	$	7,672	$	7,364
Undistributed earnings allocated to common stock	19,516		20,531
Net earnings allocated to common stock	27,188		27,895
Net earnings allocated to participating securities	202		210
Net income allocated to common stock and participating securities	$	27,390	$	28,105
Weighted average shares outstanding for basic earnings per common share	24,743,790		25,320,930
Dilutive effect of stock compensation	—		—
Weighted average shares outstanding for diluted earnings per common share	24,743,790		25,320,930
Basic earnings per common share	$	1.10	$	1.10
Diluted earnings per common share	$	1.10	$	1.10

Note 12 — Stock Based Compensation

As of March 31, 2022, the Company had four active stock-based employee compensation plans, which are more fully described in Note 16 of the Consolidated Financial Statements in 1st Source’s Annual Report on Form 10-K for the year ended December 31, 2021. These plans include three executive stock award plans, the Executive Incentive Plan (EIP), the Restricted Stock Award Plan (RSAP), the Strategic Deployment Incentive Plan (SDP); and the Employee Stock Purchase Plan. The 2011 Stock Option Plan was approved by the shareholders on April 21, 2011 but the Company had not made any grants through March 31, 2022.

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Stock-based compensation expense for all stock-based compensation awards granted is based on the grant-date fair value. For all awards except stock option awards, the grant date fair value is either the fair market value per share or book value per share (corresponding to the type of stock awarded) as of the grant date. For stock option awards, the grant date fair value is estimated using the Black-Scholes option pricing model. For all awards, the Company recognizes these compensation costs on a straight-line basis over the requisite service period of the award, for which the Company uses the related vesting term.

Total fair value of options vested and expensed was zero for the three months ended March 31, 2022 and 2021. As of March 31, 2022 and 2021 there were no outstanding stock options. There were no stock options exercised during the three months ended March 31, 2022 and 2021. All shares issued in connection with stock option exercises are issued from available treasury stock.

As of March 31, 2022, there was $9.48 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements. That cost is expected to be recognized over a weighted-average period of 3.56 years.

Note 13 — Accumulated Other Comprehensive Income (Loss)

The following table presents reclassifications out of accumulated other comprehensive income (loss) related to unrealized gains and losses on available-for-sale securities.

	Three Months Ended March 31,				Affected Line Item in the Statements of Income
(Dollars in thousands)	2022		2021
Realized gains included in net income	$	—	$	—	Gains on investment securities available-for-sale
	—		—		Income before income taxes
Tax effect	—		—		Income tax expense
Net of tax	$	—	$	—	Net income

Note 14 — Income Taxes

The total amount of unrecognized tax benefits that would affect the effective tax rate if recognized was zero at March 31, 2022 and December 31, 2021. Interest and penalties are recognized through the income tax provision. For the three months ended March 31, 2022 and 2021, the Company recognized no interest or penalties. There were no accrued interest and penalties at March 31, 2022 and December 31, 2021.

Tax years that remain open and subject to audit include the federal 2018-2021 years and the Indiana 2018-2021 years. The Company does not anticipate a significant change in the amount of uncertain tax positions within the next 12 months.

Note 15 — Fair Value Measurements

The Company records certain assets and liabilities at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are also utilized to determine the initial value of certain assets and liabilities, to perform impairment assessments, and for disclosure purposes. The Company uses quoted market prices and observable inputs to the maximum extent possible when measuring fair value. In the absence of quoted market prices, various valuation techniques are utilized to measure fair value. When possible, observable market data for identical or similar financial instruments is used in the valuation. When market data is not available, fair value is determined using valuation models that incorporate management’s estimates of the assumptions a market participant would use in pricing the asset or liability.

Fair value measurements are classified within one of three levels based on the observability of the inputs used to determine fair value, as follows:

•Level 1 — The valuation is based on quoted prices in active markets for identical instruments.

•Level 2 — The valuation is based on observable inputs such as quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

•Level 3 — The valuation is based on unobservable inputs that are supported by minimal or no market activity and that are significant to the fair value of the instrument. Level 3 valuations are typically performed using pricing models, discounted cash flow methodologies, or similar techniques that incorporate management’s own estimates of assumptions that market participants would use in pricing the instrument, or valuations that require significant management judgment or estimation.

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A financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

The Company elected fair value accounting for mortgages held for sale and for its best-efforts forward sales commitments. The Company economically hedges its mortgages held for sale at the time the interest rate locks are issued to the customers. The Company believes the election for mortgages held for sale will reduce certain timing differences and better match changes in the value of these assets with changes in the value of derivatives or best-best efforts forward sales commitments. At March 31, 2022 and December 31, 2021, all mortgages held for sale were carried at fair value.

The following table shows the differences between the fair value carrying amount of mortgages held for sale measured at fair value and the aggregate unpaid principal amount the Company is contractually entitled to receive at maturity.

(Dollars in thousands)	Fair value  carrying amount		Aggregate unpaid principal		Excess of fair value carrying amount over (under) unpaid principal
March 31, 2022
Mortgages held for sale reported at fair value	$	4,757	$	4,256	$	501	(1)
December 31, 2021
Mortgages held for sale reported at fair value	$	13,284	$	12,456	$	828	(1)

(1)The excess of fair value carrying amount over (under) unpaid principal is included in mortgage banking income and includes changes in fair value at and subsequent to funding and gains and losses on the related loan commitment prior to funding.

Financial Instruments on Recurring Basis:

The following is a description of the valuation methodologies used for financial instruments measured at fair value on a recurring basis:

Investment securities available-for-sale are valued primarily by a third party pricing agent. Prices supplied by the independent pricing agent, as well as their pricing methodologies and assumptions, are reviewed by the Company for reasonableness and to ensure such prices are aligned with market levels. In general, the Company’s investment securities do not possess a complex structure that could introduce greater valuation risk. The portfolio mainly consists of traditional investments including U.S. Treasury and Federal agencies securities, Federal agency mortgage pass-through securities, and general obligation and revenue municipal bonds. Pricing for such instruments is fairly generic and is easily obtained. On a quarterly basis, prices supplied by the pricing agent are validated by comparison to prices obtained from other third party sources for a material portion of the portfolio.

The valuation policy and procedures for Level 3 fair value measurements of available-for-sale debt securities are decided through collaboration between management of the Corporate Accounting and Funds Management departments. The changes in fair value measurement for Level 3 securities are analyzed on a periodic basis under a collaborative framework with the aforementioned departments. The methodology and variables used for input are derived from the combination of observable and unobservable inputs. The unobservable inputs are determined through internal assumptions that may vary from period to period due to external factors, such as market movement and credit rating adjustments.

Both the market and income valuation approaches are implemented using the following types of inputs:

•U.S. treasuries are priced using the market approach and utilizing live data feeds from active market exchanges for identical securities.

•Government-sponsored agency debt securities and corporate bonds are primarily priced using available market information through processes such as benchmark curves, market valuations of like securities, sector groupings and matrix pricing.

•Other government-sponsored agency securities, mortgage-backed securities and some of the actively traded REMICs and CMOs, are primarily priced using available market information including benchmark yields, prepayment speeds, spreads and volatility of similar securities.

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•State and political subdivisions are largely grouped by characteristics, i.e., geographical data and source of revenue in trade dissemination systems. Since some securities are not traded daily and due to other grouping limitations, active market quotes are often obtained using benchmarking for like securities. Local direct placement municipal securities, with very little market activity, are priced using an appropriate market yield curve, which includes a credit spread assumption.

Mortgages held for sale and the related loan commitments and forward contracts (hedges) are valued by a third party pricing agent. Prices supplied by the independent pricing agent, as well as their pricing methodologies, are reviewed by the Company for reasonableness and to ensure such prices are aligned with market values. On a quarterly basis, prices supplied by the pricing agent are validated by comparison to the prices obtained from other third party sources.

Interest rate swap positions, both assets and liabilities, are valued by a third-party pricing agent using an income approach and utilizing models that use as their basis readily observable market parameters. This valuation process considers various factors including interest rate yield curves, time value and volatility factors. Validation of third party agent valuations is accomplished by comparing those values to the Company’s swap counterparty valuations. Management believes an adjustment is required to “mid-market” valuations for derivatives tied to its performing loan portfolio to recognize the imprecision and related exposure inherent in the process of estimating expected credit losses as well as velocity of deterioration evident with systemic risks embedded in these portfolios. Any change in the mid-market derivative valuation adjustment will be recognized immediately through the Consolidated Statements of Income.

The following table shows the balance of assets and liabilities measured at fair value on a recurring basis.

(Dollars in thousands)	Level 1		Level 2		Level 3		Total
March 31, 2022
Assets:
Investment securities available-for-sale:
U.S. Treasury and Federal agencies securities	$	590,484	$	490,461	$	—	$	1,080,945
U.S. States and political subdivisions securities	—		93,824		4,529		98,353
Mortgage-backed securities — Federal agencies	—		655,010		—		655,010
Corporate debt securities	—		22,525		—		22,525
Foreign government and other securities	—		598		—		598
Total debt securities available-for-sale	590,484		1,262,418		4,529		1,857,431
Mortgages held for sale	—		4,757		—		4,757
Accrued income and other assets (interest rate swap agreements)	—		7,806		—		7,806
Total	$	590,484	$	1,274,981	$	4,529	$	1,869,994
Liabilities:
Accrued expenses and other liabilities (interest rate swap agreements)	$	—	$	8,006	$	—	$	8,006
Total	$	—	$	8,006	$	—	$	8,006
December 31, 2021
Assets:
Investment securities available-for-sale:
U.S. Treasury and Federal agencies securities	$	561,950	$	522,056	$	—	$	1,084,006
U.S. States and political subdivisions securities	—		93,852		1,849		95,701
Mortgage-backed securities — Federal agencies	—		659,727		—		659,727
Corporate debt securities	—		23,009		—		23,009
Foreign government and other securities	—		598		—		598
Total debt securities available-for-sale	561,950		1,299,242		1,849		1,863,041
Mortgages held for sale	—		13,284		—		13,284
Accrued income and other assets (interest rate swap agreements)	—		20,735		—		20,735
Total	$	561,950	$	1,333,261	$	1,849	$	1,897,060
Liabilities:
Accrued expenses and other liabilities (interest rate swap agreements)	$	—	$	21,172	$	—	$	21,172
Total	$	—	$	21,172	$	—	$	21,172

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The following table shows changes in Level 3 assets measured at fair value on a recurring basis for the quarter ended March 31, 2022 and 2021.

(Dollars in thousands)	U.S. States and political subdivisions securities
Beginning balance January 1, 2022	$	1,849
Total gains or losses (realized/unrealized):
Included in earnings	—
Included in other comprehensive income (loss)	(155)
Purchases	3,000
Issuances	—
Sales	—
Settlements	—
Maturities	(165)
Transfers into Level 3	—
Transfers out of Level 3	—
Ending balance March 31, 2022	$	4,529
Beginning January 1, 2021	$	2,152
Total gains or losses (realized/unrealized):
Included in earnings	—
Included in other comprehensive income (loss)	(80)
Purchases	—
Issuances	—
Sales	—
Settlements	—
Maturities	(165)
Transfers into Level 3	—
Transfers out of Level 3	—
Ending balance March 31, 2021	$	1,907

There were no gains or losses for the period included in earnings attributable to the change in unrealized gains or losses relating to assets still held at March 31, 2022 or 2021.

The following table shows the valuation methodology and unobservable inputs for Level 3 assets measured at fair value on a recurring basis.

(Dollars in thousands)	Fair Value		Valuation Methodology	Unobservable Inputs	Range of Inputs	Weighted Average
March 31, 2022
Debt securities available-for sale
Direct placement municipal securities	$	4,529	Discounted cash flows	Credit spread assumption	2.36% - 3.95%	2.88	%
December 31, 2021
Debt securities available-for sale
Direct placement municipal securities	$	1,849	Discounted cash flows	Credit spread assumption	0.04% - 2.31%	1.58	%

Financial Instruments on Non-recurring Basis:

The Company may be required, from time to time, to measure certain other financial assets at fair value on a non-recurring basis in accordance with GAAP. These adjustments to fair value usually result from application of lower of cost or market accounting or impairment charges of individual assets.

26

The Credit Policy Committee (CPC), a management committee, is responsible for overseeing the valuation processes and procedures for Level 3 measurements of impaired loans, other real estate and repossessions. The CPC reviews these assets on a quarterly basis to determine the accuracy of the observable inputs, generally third party appraisals, auction values, values derived from trade publications and data submitted by the borrower, and the appropriateness of the unobservable inputs, generally discounts due to current market conditions and collection issues. The CPC establishes discounts based on asset type and valuation source; deviations from the standard are documented. The discounts are reviewed periodically, annually at a minimum, to determine they remain appropriate. Consideration is given to current trends in market values for the asset categories and gains and losses on sales of similar assets. The Loan and Funds Management Committee of the Board of Directors is responsible for overseeing the CPC.

Discounts vary depending on the nature of the assets and the source of value. Aircraft are generally valued using quarterly trade publications adjusted for engine time, condition, maintenance programs, discounted by 10%. Likewise, autos are valued using current auction values, discounted by 10%; medium and heavy duty trucks are valued using trade publications and auction values, discounted by 15%. Construction equipment is generally valued using trade publications and auction values, discounted by 20%. Real estate is valued based on appraisals or evaluations, discounted by 20% with higher discounts for property in poor condition or property with characteristics which may make it more difficult to market. Commercial loans subject to borrowing base certificates are generally discounted by 20% for receivables and 40% - 75% for inventory with higher discounts when monthly borrowing base certificates are not required or received.

Collateral-dependent impaired loans and related write-downs are based on the fair value of the underlying collateral if repayment is expected solely from the collateral. Collateral values are reviewed quarterly and estimated using customized discounting criteria, appraisals and dealer and trade magazine quotes which are used in a market valuation approach. In accordance with fair value measurements, only impaired loans for which an allowance for loan loss has been established based on the fair value of collateral require classification in the fair value hierarchy. As a result, only a portion of the Company’s impaired loans are classified in the fair value hierarchy.

The Company has established MSRs valuation policies and procedures based on industry standards and to ensure valuation methodologies are consistent and verifiable. MSRs and related adjustments to fair value result from application of lower of cost or fair value accounting. For purposes of impairment, MSRs are stratified based on the predominant risk characteristics of the underlying servicing, principally by loan type. The fair value of each tranche of the servicing portfolio is estimated by calculating the present value of estimated future net servicing cash flows, taking into consideration actual and expected mortgage loan prepayment rates, discount rates, servicing costs, and other economic factors. Prepayment rates and discount rates are derived through a third party pricing agent. Changes in the most significant inputs, including prepayment rates and discount rates, are compared to the changes in the fair value measurements and appropriate resolution is made. A fair value analysis is also obtained from an independent third party agent and compared to the internal valuation for reasonableness. MSRs do not trade in an active, open market with readily observable prices and though sales of MSRs do occur, precise terms and conditions typically are not readily available and the characteristics of the Company’s servicing portfolio may differ from those of any servicing portfolios that do trade.

Other real estate is based on the fair value of the underlying collateral less expected selling costs. Collateral values are estimated primarily using appraisals and reflect a market value approach. Fair values are reviewed quarterly, and new appraisals are obtained annually. Repossessions are similarly valued.

For assets measured at fair value on a nonrecurring basis the following represents impairment charges (recoveries) recognized on these assets during the quarter ended March 31, 2022: collateral-dependent impaired loans - $0.00 million; mortgage servicing rights - $0.00 million; repossessions - $0.00 million; and other real estate - $0.00 million.

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The following table shows the carrying value of assets measured at fair value on a non-recurring basis.

(Dollars in thousands)	Level 1		Level 2		Level 3		Total
March 31, 2022
Collateral-dependent impaired loans	$	—	$	—	$	986	$	986
Accrued income and other assets (mortgage servicing rights)	—		—		4,625		4,625
Accrued income and other assets (repossessions)	—		—		73		73
Accrued income and other assets (other real estate)	—		—		—		—
Total	$	—	$	—	$	5,684	$	5,684
December 31, 2021
Collateral-dependent impaired loans	$	—	$	—	$	571	$	571
Accrued income and other assets (mortgage servicing rights)	—		—		4,671		4,671
Accrued income and other assets (repossessions)	—		—		861		861
Accrued income and other assets (other real estate)	—		—		—		—
Total	$	—	$	—	$	6,103	$	6,103

The following table below shows the valuation methodology and unobservable inputs for Level 3 assets and liabilities measured at fair value on a non-recurring basis.

(Dollars in thousands)	Carrying Value		Fair Value		Valuation Methodology	Unobservable Inputs	Range of Inputs	Weighted Average
March 31, 2022
Collateral-dependent impaired loans	$	986	$	986	Collateral based measurements including appraisals, trade publications, and auction values	Discount for lack of marketability and current conditions	20% - 90%	34.5	%
Mortgage servicing rights	4,625		6,363		Discounted cash flows	Constant prepayment rate (CPR)	10.2% - 17.4%	13.7	%
						Discount rate	9.8% - 12.6%	9.9	%
Repossessions	73		241		Appraisals, trade publications and auction values	Discount for lack of marketability	13% - 100%	70	%
Other real estate	—		—		Appraisals	Discount for lack of marketability	0% - 0%	0	%
December 31, 2021
Collateral-dependent impaired loans	$	571	$	571	Collateral based measurements including appraisals, trade publications, and auction values	Discount for lack of marketability and current conditions	20% - 90%	43.1	%
Mortgage servicing rights	4,671		5,640		Discounted cash flows	Constant prepayment rate (CPR)	11.8% - 18.5%	16.4	%
						Discount rate	8.6% - 11.5%	8.8	%
Repossessions	861		942		Appraisals, trade publications and auction values	Discount for lack of marketability	0% - 21%	2	%
Other real estate	—		—		Appraisals	Discount for lack of marketability	0% - 0%	0	%

GAAP requires disclosure of the fair value of financial assets and financial liabilities, including those financial assets and financial liabilities that are not measured and reported at fair value on a recurring or non-recurring basis.

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The following table shows the fair values of the Company’s financial instruments.

(Dollars in thousands)	Carrying or Contract Value		Fair Value		Level 1		Level 2		Level 3
March 31, 2022
Assets:
Cash and due from banks	$	69,195	$	69,195	$	69,195	$	—	$	—
Federal funds sold and interest bearing deposits with other banks	347,697		347,697		347,697		—		—
Investment securities, available-for-sale	1,857,431		1,857,431		590,484		1,262,418		4,529
Other investments	25,538		25,538		25,538		—		—
Mortgages held for sale	4,757		4,757		—		4,757		—
Loans and leases, net of allowance for loan and lease losses	5,264,044		5,280,472		—		—		5,280,472
Mortgage servicing rights	4,625		6,363		—		—		6,363
Accrued interest receivable	18,289		18,289		—		18,289		—
Interest rate swaps	7,806		7,806		—		7,806		—
Liabilities:
Deposits	$	6,673,092	$	6,666,398	$	5,821,071	$	845,327	$	—
Short-term borrowings	199,158		199,158		192,146		7,012		—
Long-term debt and mandatorily redeemable securities	69,563		68,258		—		68,258		—
Subordinated notes	58,764		58,350		—		58,350		—
Accrued interest payable	2,084		2,084		—		2,084		—
Interest rate swaps	8,006		8,006		—		8,006		—
Off-balance-sheet instruments *	—		82		—		82		—
December 31, 2021
Assets:
Cash and due from banks	$	54,420	$	54,420	$	54,420	$	—	$	—
Federal funds sold and interest bearing deposits with other banks	470,767		470,767		470,767		—		—
Investment securities, available-for-sale	1,863,041		1,863,041		561,950		1,299,242		1,849
Other investments	27,189		27,189		27,189		—		—
Mortgages held for sale	13,284		13,284		—		13,284		—
Loans and leases, net of allowance for loan and lease losses	5,218,722		5,269,551		—		—		5,269,551
Mortgage servicing rights	4,671		5,640		—		—		5,640
Accrued interest receivable	17,760		17,760		—		17,760		—
Interest rate swaps	20,735		20,735		—		20,735		—
Liabilities:
Deposits	$	6,679,065	$	6,680,163	$	5,794,928	$	885,235	$	—
Short-term borrowings	200,027		200,027		192,801		7,226		—
Long-term debt and mandatorily redeemable securities	71,251		71,305		—		71,305		—
Subordinated notes	58,764		58,553		—		58,553		—
Accrued interest payable	1,885		1,885		—		1,885		—
Interest rate swaps	21,172		21,172		—		21,172		—
Off-balance-sheet instruments *	—		364		—		364		—

* Represents estimated cash outflows required to currently settle the obligations at current market rates.

These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. These estimates are subjective in nature and require considerable judgment to interpret market data. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize in a current market exchange, nor are they intended to represent the fair value of the Company as a whole. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. The fair value estimates presented herein are based on pertinent information available to management as of the respective balance sheet date. Although the Company is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued since the presentation dates, and therefore, estimates of fair value after the balance sheet date may differ significantly from the amounts presented herein.

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Other significant assets, such as premises and equipment, other assets, and liabilities not defined as financial instruments, are not included in the above disclosures. Also, the fair value estimates for deposits do not include the benefit that results from the low-cost funding provided by the deposit liabilities compared to the cost of borrowing funds in the market.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following management’s discussion and analysis is presented to provide information concerning 1st Source Corporation and its subsidiaries’ (collectively referred to as “the Company”, “we”, and “our”) financial condition as of March 31, 2022, as compared to December 31, 2021, and the results of operations for the three months ended March 31, 2022 and 2021. This discussion and analysis should be read in conjunction with our consolidated financial statements and the financial and statistical data appearing elsewhere in this report and our 2021 Annual Report.

Except for historical information contained herein, the matters discussed in this document express “forward-looking statements.” Generally, the words “believe,” “contemplate,” “seek,” “plan,” “possible,” “assume,” “hope,” “expect,” “intend,” “targeted,” “continue,” “remain,” “estimate,” “anticipate,” “project,” “will,” “should,” “indicate,” “would,” “may” and other similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. Those statements, including statements, projections, estimates or assumptions concerning future events or performance, and other statements that are other than statements of historical fact, are subject to material risks and uncertainties. We caution readers not to place undue reliance on any forward-looking statements, which speak only as of the date made. We may make other written or oral forward-looking statements from time to time. Readers are advised that various important factors could cause our actual results or circumstances for future periods to differ materially from those anticipated or projected in such forward-looking statements. Such factors include, but are not limited to, changes in law, regulations or GAAP; our competitive position within the markets we serve; increasing consolidation within the banking industry; unforeseen changes in interest rates; unforeseen changes in loan prepayment assumptions; unforeseen downturns in or major events affecting the local, regional or national economies or the industries in which we have credit concentrations; potential impacts of the COVID-19 pandemic; and other matters discussed in our filings with the SEC, including our Annual Report on Form 10-K  for 2021, which filings are available from the SEC. We undertake no obligation to publicly update or revise any forward-looking statements.

FINANCIAL CONDITION

Our total assets at March 31, 2022 were $8.01 billion, a decrease of $83.83 million or 1.04% from December 31, 2021. Total investment securities available-for-sale were $1.86 billion, a decrease of $5.61 million or 0.30% from December 31, 2021. The largest contributor to the decrease in investment securities available-for-sale was negative market value adjustments due to temporary, non-credit-related, net unrealized losses as a result of changes in interest rates, market spreads and market conditions subsequent to purchase. Federal funds sold and interest bearing deposits with other banks were $347.70 million, a decrease of $123.07 million or 26.14% from December 31, 2021. The decrease in federal funds sold and interest bearing deposits with other banks was due to lower interest bearing deposits at the Federal Reserve Bank as a result of purchasing investment securities available for sale.

Total loans and leases were $5.39 billion, an increase of $47.79 million or 0.89% from December 31, 2021. The largest contributors to the increase in loans and leases was growth in the aircraft and auto and light truck portfolios offset by $36.61 million of Paycheck Protection Program loans forgiven by the SBA during the first quarter. As of March 31, 2022, total PPP loans were $37.94 million which is net of unearned fees of $1.24 million and located within the commercial and agricultural portfolio. Our foreign loan and lease balances, all denominated in U.S. dollars were $212.68 million and $193.31 million as of March 31, 2022 and December 31, 2021, respectively. Foreign loans and leases are in aircraft financing. Loan and lease balances to borrowers in Brazil and Mexico were $73.70 million and $127.73 million as of March 31, 2022, respectively, compared to $65.24 million and $117.90 million as of December 31, 2021, respectively. As of March 31, 2022 and December 31, 2021 there was not a significant concentration in any other country.

Equipment owned under operating leases was $41.79 million, a decrease of $6.64 million, or 13.71% compared to December 31, 2021. The largest contributor to the decrease in equipment owned under operating leases was reduced leasing volume primarily due to a change in customer preferences.

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Total deposits were $6.67 billion, a decrease of $5.97 million or 0.09% from the end of 2021. The largest contributors to the decrease in total deposits was a reduction in interest-bearing checking accounts, time deposits with maturities less than twelve months and brokered deposits offset by increased time deposits with maturities greater than twelve months. Short-term borrowings were $199.16 million, a decrease of $0.87 million or 0.43% from December 31, 2021. Long-term debt and mandatorily redeemable securities were $69.56 million, a decrease of $1.69 million or 2.37% from December 31, 2021. Accrued expenses and other liabilities were $92.42 million, a decrease of $25.30 million or 21.49% from December 31, 2021 primarily due to a decrease in the fair value of interest rate swap contracts with customers and annual incentive related payments to employees.

The following table shows accrued income and other assets.

(Dollars in thousands)	March 31, 2022		December 31, 2021
Accrued income and other assets:
Bank owned life insurance cash surrender value	$	71,728	$	71,466
Operating lease right of use assets	21,402		22,071
Accrued interest receivable	18,289		17,760
Mortgage servicing rights	4,625		4,671
Other real estate	—		—
Repossessions	73		861
Partnership investments carrying amount	94,243		95,045
All other assets	61,768		57,595
Total accrued income and other assets	$	272,128	$	269,469

The largest contributor to the increase in accrued income and other assets from December 31, 2021 was an increase in deferred tax assets related to available-for-sale debt securities included in all other assets above offset by a decrease in the fair value of interest rate swap contracts with customers included in all other assets above.

CAPITAL

As of March 31, 2022, total shareholders’ equity was $864.85 million, down $51.41 million, or 5.61% from the $916.26 million at December 31, 2021. In addition to net income of $27.39 million, other significant changes in shareholders’ equity during the first three months of 2022 included $7.70 million of dividends paid and $2.18 million in common stock acquired for treasury. The accumulated other comprehensive loss component of shareholders’ equity increased to $80.54 million at March 31, 2022, compared to $9.86 million at December 31, 2021 due to changes in interest rates, market spreads and market conditions. Our shareholders’ equity-to-assets ratio was 10.79% as of March 31, 2022, compared to 11.32% at December 31, 2021. Book value per common share declined to $34.97 at March 31, 2022, from $37.04 at December 31, 2021 primarily due to an increase in accumulated other comprehensive losses.

We declared and paid cash dividends per common share of $0.31 during the first quarter of 2022. The trailing four quarters dividend payout ratio, representing cash dividends per common share divided by diluted earnings per common share, was 26.23%. The dividend payout is continually reviewed by management and the Board of Directors subject to the Company’s capital and dividend policy.

The banking regulators have established guidelines for leverage capital requirements, expressed in terms of Tier 1 or core capital as a percentage of average assets, to measure the soundness of a financial institution. In addition, banking regulators have established risk-based capital guidelines for U.S. banking organizations.

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The actual capital amounts and ratios of 1st Source Corporation and 1st Source Bank as of March 31, 2022, are presented in the table below.

	Actual				Minimum Capital Adequacy				Minimum Capital Adequacy with Capital Buffer				To Be Well Capitalized Under Prompt Corrective Action Provisions
(Dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio
Total Capital (to Risk-Weighted Assets):
1st Source Corporation	$	1,056,141	16.93	%	$	499,129	8.00	%	$	655,107	10.50	%	$	623,911	10.00	%
1st Source Bank	986,199		15.82		498,720		8.00		654,570		10.50		623,400		10.00
Tier 1 Capital (to Risk-Weighted Assets):
1st Source Corporation	977,450		15.67		374,347		6.00		530,325		8.50		499,129		8.00
1st Source Bank	907,571		14.56		374,040		6.00		529,890		8.50		498,720		8.00
Common Equity Tier 1 Capital (to Risk-Weighted Assets):
1st Source Corporation	865,830		13.88		280,760		4.50		436,738		7.00		405,542		6.50
1st Source Bank	852,951		13.68		280,530		4.50		436,380		7.00		405,210		6.50
Tier 1 Capital (to Average Assets):
1st Source Corporation	977,450		12.25		319,190		4.00		N/A		N/A		398,988		5.00
1st Source Bank	907,571		11.38		319,053		4.00		N/A		N/A		398,816		5.00

PPP loan balances have been assigned a zero percent risk weight and therefore had no impact on our total risk-weighted assets at March 31, 2022.

LIQUIDITY AND INTEREST RATE SENSITIVITY

Effective liquidity management ensures that the cash flow requirements of depositors and borrowers, as well as our operating cash needs are met. Funds are available from a number of sources, including the securities portfolio, the core deposit base, access to the national brokered certificates of deposit market, national listing service certificates of deposit, Federal Home Loan Bank (FHLB) borrowings, Federal Reserve Bank (FRB) borrowings, and the capability to package loans for sale.

We have borrowing sources available to supplement deposits and meet our funding needs. 1st Source Bank has established relationships with several banks to provide short term borrowings in the form of federal funds purchased. At March 31, 2022, we had no borrowings in the federal funds market. We could borrow $245.00 million in additional funds for a short time from these banks on a collective basis. As of March 31, 2022, we had $43.98 million outstanding in FHLB advances and could borrow an additional $483.60 million contingent on the FHLB activity-based stock ownership requirement. We also had no outstandings with the FRB and could borrow $484.25 million as of March 31, 2022.

Our loan to asset ratio was 67.32% at March 31, 2022 compared to 66.03% at December 31, 2021 and 73.52% at March 31, 2021. Cash and cash equivalents totaled $416.89 million at March 31, 2022 compared to $525.19 million at December 31, 2021 and $335.95 million at March 31, 2021. The decrease in cash and cash equivalents was primarily due to a reduction in excess liquidity from fewer PPP loan forgiveness proceeds and marginal loan growth. At March 31, 2022, the Consolidated Statements of Financial Condition was rate sensitive by $152.84 million more assets than liabilities scheduled to reprice within one year, or approximately 1.05%. Management believes that the present funding sources provide adequate liquidity to meet our cash flow needs.

Under Indiana law governing the collateralization of public fund deposits, the Indiana Board of Depositories determines which financial institutions are required to pledge collateral based on the strength of their financial ratings. We have been informed that no collateral is required for our public fund deposits. However, the Board of Depositories could alter this requirement in the future and adversely impact our liquidity. Our potential liquidity exposure if we must pledge collateral is approximately $843 million.

RESULTS OF OPERATIONS

Net income available to common shareholders for the three month period ended March 31, 2022 was $27.39 million compared to $28.11 million for the same period in 2021. Diluted net income per common share was $1.10 for the three month period ended March 31, 2022, equal to the $1.10 earned for the same period in 2021. Return on average common shareholders’ equity was 12.20% for the three months ended March 31, 2022, compared to 12.74% in 2021. The return on total average assets was 1.39% for the three months ended March 31, 2022, compared to 1.55% in 2021.

Net income decreased for the three months ended March 31, 2022 compared to the first three months of 2021. Net interest income increased and the provision for credit losses decreased offset by a decrease to noninterest income and an increase to noninterest expense. Details of the changes in the various components of net income are discussed further below.

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NET INTEREST INCOME

The following tables provide an analysis of net interest income and illustrates the interest income earned and interest expense charged for each major component of interest earning assets and interest bearing liabilities. Yields/rates are computed on a tax-equivalent basis, using a 21% rate. Nonaccrual loans and leases are included in the average loan and lease balance outstanding.

DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS’ EQUITY

INTEREST RATES AND INTEREST DIFFERENTIAL

							Three Months Ended
	March 31, 2022						December 31, 2021						March 31, 2021
(Dollars in thousands)	Average Balance		Interest Income/Expense		Yield/ Rate		Average Balance		Interest Income/Expense		Yield/ Rate		Average Balance		Interest Income/Expense		Yield/ Rate
ASSETS
Investment securities available-for-sale:
Taxable	$	1,857,557	$	6,344	1.39	%	$	1,686,231	$	5,091	1.20	%	$	1,193,583	$	3,987	1.35	%
Tax exempt(1)	29,498		165		2.27	%	28,996		163		2.23	%	37,394		214		2.32	%
Mortgages held for sale	8,791		67		3.09	%	28,693		188		2.60	%	14,285		86		2.44	%
Loans and leases, net of unearned discount(1)	5,324,344		55,218		4.21	%	5,311,964		58,218		4.35	%	5,499,009		57,860		4.27	%
Other investments	400,058		363		0.37	%	659,954		430		0.26	%	216,280		266		0.50	%
Total earning assets(1)	7,620,248		62,157		3.31	%	7,715,838		64,090		3.30	%	6,960,551		62,413		3.64	%
Cash and due from banks	77,063						80,754						75,178
Allowance for loan and lease losses	(128,647)						(134,217)						(143,206)
Other assets	440,074						448,680						457,890
Total assets	$	8,008,738					$	8,111,055					$	7,350,413
LIABILITIES AND SHAREHOLDERS’ EQUITY
Interest-bearing deposits	$	4,587,242	$	2,376	0.21	%	$	4,628,802	$	2,624	0.22	%	$	4,261,207	$	3,526	0.34	%
Short-term borrowings:
Securities sold under agreements to repurchase	192,108		23		0.05	%	194,678		24		0.05	%	169,180		35		0.08	%
Other short-term borrowings	5,372		1		0.08	%	5,474		1		0.07	%	7,546		1		0.05	%
Subordinated notes	58,764		823		5.68	%	58,764		819		5.53	%	58,764		818		5.65	%
Long-term debt and mandatorily redeemable securities	69,967		(792)		(4.59)	%	71,604		446		2.47	%	80,967		500		2.50	%
Total interest-bearing liabilities	4,913,453		2,431		0.20	%	4,959,322		3,914		0.31	%	4,577,664		4,880		0.43	%
Noninterest-bearing deposits	2,029,627						2,071,773						1,719,264
Other liabilities	101,502						113,897						115,034
Shareholders’ equity	910,793						918,950						894,553
Noncontrolling interests	53,363						47,113						43,898
Total liabilities and equity	$	8,008,738					$	8,111,055					$	7,350,413
Less: Fully tax-equivalent adjustments			(108)						(109)						(121)
Net interest income/margin (GAAP-derived)(1)			$	59,618	3.17	%			$	60,067	3.09	%			$	57,412	3.35	%
Fully tax-equivalent adjustments			108						109						121
Net interest income/margin - FTE(1)			$	59,726	3.18	%			$	60,176	3.09	%			$	57,533	3.35	%
(1) See “Reconciliation of Non-GAAP Financial Measures” at the end of this section for additional information on this performance measure/ratio.

Quarter Ended March 31, 2022 compared to the Quarter Ended March 31, 2021

The taxable-equivalent net interest income for the three months ended March 31, 2022 was $59.73 million, an increase of 3.81% over the same period in 2021. The net interest margin on a fully taxable-equivalent basis was 3.18% for the three months ended March 31, 2022, compared to 3.35% for the three months ended March 31, 2021.

During the three month period ended March 31, 2022, average earning assets increased $659.70 million, up 9.48% over the comparable period in 2021. Average interest-bearing liabilities increased $335.79 million or 7.34%. The yield on average earning assets decreased 33 basis points to 3.31% from 3.64% primarily due to higher average balances in investment securities and other investments, which include federal funds sold, time deposits with other banks, Federal Reserve Bank excess balances, Federal Reserve Bank and Federal Home Loan Bank (FHLB) stock and commercial paper. Total cost of average interest-bearing liabilities decreased 23 basis points to 0.20% from 0.43% as a result of the lower interest rate environment and lower interest expense on mandatorily redeemable securities. The result to the net interest margin, or the ratio of net interest income to average earning assets, was a decrease of 17 basis points.

33

The average earning assets yield declined compared to the same quarter in the prior year as a strong economic recovery combined with pandemic related government policies that have kept interest rates low, generated a significant amount of excess liquidity and shifted the earning assets mix towards lower yielding instruments. Average investment securities increased $656.08 million or 53.30% with the largest increases in U.S. treasury and federal agency securities and mortgage-backed securities. Average other investments, primarily held at the Federal Reserve Bank, increased $183.78 million or 84.97%. The yield on net loans and leases decreased six basis points primarily due to the low interest rate environment. During the quarter, PPP loans had a positive eight basis point impact from the recognition of fees on PPP loans forgiven by the SBA compared to six basis point impact in first quarter 2021 and offset by PPP loan balances outstanding which earn interest at 1.00%. Average net loans and leases decreased $174.67 million or 3.18% primarily due to PPP loan forgiveness in the commercial and agricultural loan portfolio. Average loans and leases net PPP loans increased $185.66 million, up 3.65% compared to the first quarter of 2021.

Average interest-bearing deposits increased $326.04 million or 7.65% for the first quarter of 2022 over the same period in 2021 primarily due to the impact of government stimulus programs on consumer savings levels. The effective rate paid on average interest-bearing deposits decreased 13 basis points to 0.21% from 0.34%. The decrease in the average cost of interest-bearing deposits was primarily the result of lower rates and a shift in the deposit mix from the first quarter of 2021. Average noninterest-bearing deposits grew $310.36 million or 18.05% for the first quarter of 2022 over the same period in 2021 primarily due to business customers remaining cautious with their funds and spending.

Average short-term borrowings increased $20.75 million or 11.74% for the first quarter of 2022 compared to the same period in 2021. Interest paid on short-term borrowings decreased three basis points. Interest paid on subordinated notes increased three basis points during the first quarter of 2022 from the same period a year ago due to a variable rate increase on one tranche. Average long-term debt and mandatorily redeemable securities balances decreased $11.00 million or 13.59%. Interest paid on long-term debt and mandatorily redeemable securities decreased 709 basis points during the first quarter of 2022 from the same period in 2021 primarily due to lower rates on mandatorily redeemable securities from a reduction in book value per share during the quarter.

Reconciliation of Non-GAAP Financial Measures

The accounting and reporting policies of 1st Source conform to generally accepted accounting principles (“GAAP”) in the United States and prevailing practices in the banking industry. However, certain non-GAAP performance measures are used by management to evaluate and measure the Company’s performance. These include taxable-equivalent net interest income (including its individual components) and net interest margin (including its individual components). Management believes that these measures provide users of the Company’s financial information a more meaningful view of the performance of the interest-earning assets and interest-bearing liabilities.

Management reviews yields on certain asset categories and the net interest margin of the Company and its banking subsidiaries on a fully taxable-equivalent (“FTE”) basis. In this non-GAAP presentation, net interest income is adjusted to reflect tax-exempt interest income on an equivalent before-tax basis. This measure ensures comparability of net interest income arising from both taxable and tax-exempt sources.

		Three Months Ended
(Dollars in thousands)		March 31, 2022			December 31, 2021			March 31, 2021
Calculation of Net Interest Margin
(A)	Interest income (GAAP)	$	62,049		$	63,981		$	62,292
	Fully tax-equivalent adjustments:
(B)	- Loans and leases	77			79			81
(C)	- Tax-exempt investment securities	31			30			40
(D)	Interest income - FTE (A+B+C)	62,157			64,090			62,413
(E)	Interest expense (GAAP)	2,431			3,914			4,880
(F)	Net interest income (GAAP) (A–E)	59,618			60,067			57,412
(G)	Net interest income - FTE (D–E)	59,726			60,176			57,533
(H)	Annualization factor	4.056			3.967			4.056
(I)	Total earning assets	$	7,620,248		$	7,715,838		$	6,960,551
	Net interest margin (GAAP-derived) (F*H)/I	3.17		%	3.09		%	3.35		%
	Net interest margin - FTE (G*H)/I	3.18		%	3.09		%	3.35		%

34

PROVISION AND ALLOWANCE FOR CREDIT LOSSES

The provision for credit losses for the three months ended March 31, 2022 was $2.23 million compared to $2.40 million during the three months ended March 31, 2021. Net recoveries of $0.23 million or 0.02% of average loans and leases were recorded for the first quarter 2022, compared to net charge-offs of $3.50 million or 0.26% of average loans and leases for the same quarter a year ago. Net recoveries in 2022 were principally in the aircraft portfolio.

The provision for credit losses for the three months ended March 31, 2022 was principally driven by an upward revision to the forecast adjustment stemming from increased risk during the forecast period due to the war in Ukraine along with loan growth during the first quarter of 2022. We remain concerned about the long-term prospects for our bus segment and potential risks in our small business portfolio as financial relief provided by government programs afforded to our lending clients dissipates and the return to normal revenue and employment levels slows. The $47.79 million increase in outstanding loan balances this quarter was attributable to an $82.94 million increase in our core loan products offset by a $35.15 million decrease in PPP loans. At March 31, 2022, PPP loans totaled $37.94 million and necessitated minimal reserves as the program carries a 100% SBA guarantee and a debt forgiveness component. Impairment reserves for assets individually evaluated further decreased this quarter and continue to be a small component of our overall allowance.

We continue to evaluate risks which may impact our loan portfolios. Most notably, the current hostilities in Ukraine and resultant increased uncertainty characterized by persistent inflation and the potential for further disruptions of an already tenuous supply chain. Pandemic and related economic disruptions which previously dominated our risk analysis over the past eight quarters, have somewhat lessened in the U.S. but are again increasing abroad, particularly in China. Pandemic-related economic disruption remains a concern, particularly the availability of raw materials and extreme price volatility across the supply chain. We remain concerned that geopolitical events and disruption from future pandemic waves raise the potential for adverse impacts to the U.S. economy. Congressional spending initiatives face multiple challenges and an uncompromising partisanship. Additional current concerns include slower growth projections in the U.S. and abroad and the potential for raw material shortages and prolonged interruption in global trade as a result of trade restrictions related to the war in Ukraine and the pandemic-related responses of our trade partners. Political uncertainty continues in Latin America, with governments facing increased pressures from escalating social tensions, persistently high unemployment, and double-digit inflation. Corruption scandals persist, fueling U.S. border concerns. Globally, concerns continue to be heightened due to actual and potential terrorist attacks.

Another area of concern continues to be our aircraft portfolio where we have a collateral concentration and $213 million of foreign exposure, the majority of which is in Mexico and Brazil. We review political and economic data for these countries on a regular basis to assess the impact the environment may have on our customers. Historically, we have experienced volatile and unanticipated losses in both the foreign and domestic segments of our aircraft portfolios. Losses have been primarily attributable to unexpected declines in the value of specific aircraft collateral at a time when the borrower is experiencing financial difficulties. We review and assess aircraft values on an ongoing basis and use a tiered approach to establish advance rates and amortization schedules in an effort to limit collateral exposure. We continue to monitor individual customer performance and assess risks in the portfolio as a whole.

On March 31, 2022, 30 day and over loan and lease delinquency as a percentage of loan and lease balances was 0.19%, compared to 0.12% on March 31, 2021. The allowance for loan and lease losses as a percentage of loans and leases outstanding at the end of the period was 2.41% compared to 2.53% one year ago. The allowance as a percentage of loans and leases outstanding, net of PPP loans, was 2.43% compared to 2.42% at December 31, 2021 and 2.74% at March 31, 2021. A summary of loan and lease loss experience during the three months ended March 31, 2022 and 2021 is located in Note 5 of the Consolidated Financial Statements.

35

NONPERFORMING ASSETS

The following table shows nonperforming assets.

(Dollars in thousands)	March 31, 2022		December 31, 2021		March 31, 2021
Loans and leases past due 90 days or more	$	274	$	249	$	66
Nonaccrual loans and leases	35,435		38,706		58,513
Other real estate	—		—		369
Repossessions	73		861		2,214
Equipment owned under operating leases	343		1,518		1,647
Total nonperforming assets	$	36,125	$	41,334	$	62,809

Nonperforming assets as a percentage of loans and leases were 0.66% at March 31, 2022, 0.77% at December 31, 2021, and 1.12% at March 31, 2021. Excluding PPP loans, nonperforming assets as a percentage of loan and leases were 0.67% at March 31, 2022, 0.78% at December 31, 2021, and 1.22% at March 31, 2021. Nonperforming assets totaled $36.13 million at March 31, 2022, a decrease of 12.60% from the $41.33 million reported at December 31, 2021, and a 42.48% decrease from the $62.81 million reported at March 31, 2021. The decrease in nonperforming assets during the first three months of 2022 was related to continued recovery from the pandemic which has led to lower nonaccrual loans and leases and a decrease in equipment owned under operating leases. The decrease in nonperforming assets at March 31, 2022 from March 31, 2021 was related to a decrease in nonaccrual loans and leases, lower repossessions and decreased equipment owned under operating leases.

The decrease in nonaccrual loans and leases at March 31, 2022 from December 31, 2021 and March 31, 2021 occurred primarily in the auto and light truck and construction equipment portfolios. A summary of nonaccrual loans and leases and past due aging for the period ended March 31, 2022 and December 31, 2021 is located in Note 4 of the Consolidated Financial Statements.

Other real estate is the result of foreclosing on real estate in the local market for which we have a current appraisal and are well secured.

Repossessions consisted mainly of construction equipment as of March 31, 2022. At the time of repossession, the recorded amount of the loan or lease is written down to the fair value of the equipment or vehicle by a charge to the allowance for loan and lease losses or other income, if a positive adjustment, unless the equipment is in the process of immediate sale. Any subsequent fair value write-downs or write-ups, to the extent of previous write-downs, are included in noninterest expense. The decrease in repossession balances at March 31, 2022 compared to March 31, 2021 was primarily the result of the sale of repossessed buses in the auto and light truck portfolio.

The following table shows a summary of other real estate and repossessions.

(Dollars in thousands)	March 31, 2022		December 31, 2021		March 31, 2021
Commercial and agricultural	$	—	$	—	$	—
Solar	—		—		—
Auto and light truck	26		75		1,414
Medium and heavy duty truck	—		—		—
Aircraft	—		—		750
Construction equipment	47		757		—
Commercial real estate	—		—		369
Residential real estate and home equity	—		—		—
Consumer	—		29		50
Total	$	73	$	861	$	2,583

For financial statement purposes, nonaccrual loans and leases are included in loan and lease outstandings, whereas repossessions and other real estate are included in other assets.

36

NONINTEREST INCOME

The following table shows the details of noninterest income.

	Three Months Ended March 31,
(Dollars in thousands)	2022		2021		$ Change	% Change
Noninterest income:
Trust and wealth advisory	$	5,914	$	5,481	433	7.90	%
Service charges on deposit accounts	2,792		2,447		345	14.10	%
Debit card	4,194		4,182		12	0.29	%
Mortgage banking	1,377		3,901		(2,524)	(64.70)	%
Insurance commissions	1,905		2,152		(247)	(11.48)	%
Equipment rental	3,662		4,629		(967)	(20.89)	%
Gains on investment securities available-for-sale	—		—		—	NM
Other	3,301		3,077		224	7.28	%
Total noninterest income	$	23,145	$	25,869	(2,724)	(10.53)	%

NM = Not Meaningful

Trust and wealth advisory fees (which include investment management fees, estate administration fees, mutual fund fees, annuity fees, and fiduciary fees) increased during the three months ended March 31, 2022 compared with the same periods a year ago. Trust and wealth advisory fees are largely based on the number and size of client relationships and the market value of assets under management. The market value of trust assets under management at March 31, 2022, December 31, 2021, and March 31, 2021 was $5.09 billion, $5.33 billion, and $4.90 billion, respectively. Strong stock market performance and new business results in 2021 helped improve the value of trust assets under management, however, stock and bond market declines in the first quarter of 2022 resulted in lower asset values under management compared to December 31, 2021.

Service charges on deposit accounts increased for the three months ended March 31, 2022 over the comparable period in 2021. The increase in service charges on deposit accounts primarily reflects a higher volume of business and consumer nonsufficient fund transactions.

Debit card income improved in the three months ended March 31, 2022 over the same period a year ago. The majority of the improvement in debit card income was the result of an increased volume of debit card transactions.

Mortgage banking income decreased in the three months ended March 31, 2022 as compared to the same period in 2021. Demand for mortgages declined as refinancing slowed and inventory of homes for sale remained low which led to a lower volume of sales of loans originated for the secondary market as well as a lower margin on those sales.

Insurance commissions were lower during the three months ended March 31, 2022 compared to the same period a year ago. The reduction during the first three months of 2022 was mainly due to fewer seasonal contingent commissions received.

Equipment rental income decreased for the three months ended March 31, 2022 over the comparable period in 2021. The decline was the result of a reduction in leasing volume primarily in the construction equipment and auto and light truck portfolios resulting in the average equipment rental portfolio decreasing by 23.2% over the same period a year ago due to changing customer preferences.

There were no gains on the sale of investment securities available-for-sale during the three months ended March 31, 2022 or 2021.

Other income increased for the three months ended March 31, 2022 compared to the comparable period in 2021. The increase during the first quarter of 2022 compared to the same period one year ago was primarily a result of larger bank owned life insurance policy claims and higher brokerage fees and commissions offset by a decrease in customer interest rate swap fees.

37

NONINTEREST EXPENSE

The following table shows the details of noninterest expense.

	Three Months Ended March 31,
(Dollars in thousands)	2022		2021		$ Change	% Change
Noninterest expense:
Salaries and employee benefits	$	25,467	$	25,196	271	1.08	%
Net occupancy	2,811		2,719		92	3.38	%
Furniture and equipment	1,295		1,474		(179)	(12.14)	%
Data processing	5,208		4,984		224	4.49	%
Depreciation – leased equipment	3,015		3,773		(758)	(20.09)	%
Professional fees	1,608		1,613		(5)	(0.31)	%
FDIC and other insurance	850		665		185	27.82	%
Business development and marketing	1,268		997		271	27.18	%
Loan and lease collection and repossession	134		129		5	3.88	%
Other	3,680		2,590		1,090	42.08	%
Total noninterest expense	$	45,336	$	44,140	1,196	2.71	%

NM = Not Meaningful

Salaries and employee benefits increased during the three months ended March 31, 2022 compared to the same period in 2021. The increase was mainly due to a reduction in deferred salary expense on loan production, higher base salaries as a result of normal merit increases offset by reduced incentive compensation and a slight decline in staffing levels.

Net occupancy expense was higher during the three months ended March 31, 2022 compared to the same period a year ago due primarily to higher snow removal costs due to seasonal weather conditions.

Furniture and equipment expense, including depreciation, declined during the three months ended March 31, 2022 compared to the same period a year ago mainly due to depreciation.

Data processing expense increased during the first quarter of 2022 compared to the same period a year ago due primarily to higher computer processing charges.

Depreciation on leased equipment decreased for the three months ended March 31, 2022 compared to the same period in 2021. Depreciation on leased equipment correlates with the decrease in equipment rental income.

Professional fees were relatively flat during the first quarter of 2022 compared to the same period a year ago.

FDIC and other insurance was higher during the three months ended March 31, 2022 compared to the same period in 2021. The increase was mainly due to higher assessments for FDIC premiums.

Business development and marketing expense rose during the first quarter of 2022 compared to the same period a year ago. The increase was mainly due to increased business meals, entertainment and travel opportunities tied to fewer COVID-19 restrictions and higher marketing promotions.

Loan and lease collection and repossession expense increased slightly during the first quarter of 2022 compared to the same period in 2021. The increase was mainly due to fewer gains on the sale of repossessed assets.

Other expenses were higher during the first quarter of 2022 compared to the same period in 2021. The increase during the first quarter was primarily the result of a rise in the loan loss provision for unfunded loan commitments and a one-time state sales tax adjustment offset by lower postage and printing costs.

INCOME TAXES

The provision for income taxes for the three month period ended March 31, 2022 was $7.79 million compared to $8.64 million for the same period in 2021. The effective tax rate was 22.14% and 23.51% for the quarter ended March 31, 2022 and 2021, respectively. The decrease in the quarterly effective tax rate was due to a slight decrease in the tax provision for state income taxes during the first quarter of 2022 in comparison to the first quarter of 2021.

38

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in market risks faced by 1st Source since December 31, 2021. For information regarding our market risk, refer to 1st Source’s Annual Report on Form 10-K for the year ended December 31, 2021.

ITEM 4.

CONTROLS AND PROCEDURES

As of the end of the period covered by this report an evaluation was carried out, under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, at March 31, 2022, our disclosure controls and procedures were effective in ensuring that information required to be disclosed by 1st Source in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and are designed to ensure that information required to be disclosed in those reports is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosure.

In addition, there were no changes in our internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) during the first fiscal quarter of 2022 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II.  OTHER INFORMATION

ITEM 1.        Legal Proceedings.

1st Source and its subsidiaries are involved in various legal proceedings that are inherent risks of, or incidental to, the conduct of our businesses. Management does not expect the outcome of any such proceedings will have a material adverse effect on our consolidated financial position or results of operations. One such proceeding involves the consolidated bankruptcy cases of IOI Integrated Systems, Inc., its affiliates (collectively, “IOI”) and the owner of IOI, Najeeb Khan. The consolidated cases commenced in August 2019 and are pending in the United States Bankruptcy Court, Western District of Michigan, Southern Division. IOI and Mr. Khan were customers of 1st Source Bank. Mr. Khan was also a director of 1st Source and 1st Source Bank until his resignation on July 9, 2019. The liquidating trustee of the consolidated bankruptcy estates has alleged Mr. Khan misappropriated funds of IOI over many years for his own benefit and to the detriment of IOI creditors. The trustee is investigating whether various banks and other third parties, including 1st Source Bank, may have liability because of prior business relationships with IOI and/or Mr. Khan. The trustee’s focus regarding the Bank is on transaction activity in respective deposit accounts of Mr. Khan and entities controlled by Mr. Khan at the Bank. The Bank is fully cooperating with the trustee’s information requests. The trustee has variously asserted that the Bank received avoidable transfers under applicable federal bankruptcy and state law by virtue of transactions involving deposit accounts of Mr. Khan and IOI, and that the Bank had actual knowledge of and aided and abetted Mr. Khan's fraudulent activity. No claims have previously been formally served on the Bank. Management anticipates the trustee may formally commence litigation against various parties including the Bank sometime in 2022. The Bank will vigorously defend any claim that it was involved with and/or benefited from the alleged misconduct of Mr. Khan and/or IOI.

ITEM 1A.    Risk Factors.

There have been no material changes in risks faced by 1st Source since December 31, 2021. For information regarding our risk factors, refer to 1st Source’s Annual Report on Form 10-K for the year ended December 31, 2021.

39

ITEM 2.        Unregistered Sales of Equity Securities and Use of Proceeds.

ISSUER PURCHASES OF EQUITY SECURITIES

Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs*	Maximum Number (or Approximate Dollar Value) of Shares that may yet be Purchased Under the Plans or Programs
January 01 - 31, 2022	—	$	—	—	1,726,084
February 01 - 28, 2022	16,700	48.74		16,700	1,709,384
March 01 - 31, 2022	28,719	47.41		28,719	1,680,665

* 1st Source maintains a stock repurchase plan that was authorized by the Board of Directors on July 22, 2021. Under the terms of the plan, 1st Source may repurchase up to 2,000,000 shares of its common stock from time to time to mitigate the potential dilutive effects of stock-based incentive plans and other potential uses of common stock for corporate purposes. Since the inception of the plan, 1st Source has repurchased a total of 319,335 shares.

ITEM 3.        Defaults Upon Senior Securities.

None

ITEM 4.        Mine Safety Disclosures.

None

ITEM 5.        Other Information.

None

ITEM 6.        Exhibits.

The following exhibits are filed with this report:

31.1	Certification of Chief Executive Officer required by Rule 13a-14(a).
31.2	Certification of Chief Financial Officer required by Rule 13a-14(a).
32.1	Certification pursuant to 18 U.S.C. Section 1350 of Chief Executive Officer.
32.2	Certification pursuant to 18 U.S.C. Section 1350 of Chief Financial Officer.
101.INS	XBRL Instance Document — The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document.
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB	XBRL Taxonomy Extension Labels Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
104	Cover Page Interactive Data File (embedded within the Inline XBRL document and included in Exhibit 101)

40

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		1st Source Corporation
DATE	April 21, 2022	/s/ CHRISTOPHER J. MURPHY III
		Christopher J. Murphy III Chairman of the Board, President and CEO
DATE	April 21, 2022	/s/ BRETT A. BAUER
		Brett A. Bauer Treasurer and Chief Financial Officer Principal Accounting Officer

41

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Christopher J. Murphy III, Chief Executive Officer, certify that:

1.I have reviewed this quarterly report on Form 10-Q of 1st Source Corporation;

2.Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: April 21, 2022

/s/ CHRISTOPHER J. MURPHY III

Christopher J. Murphy III

Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Brett A. Bauer, Chief Financial Officer, certify that:

1.I have reviewed this quarterly report on Form 10-Q of 1st Source Corporation;

2.Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: April 21, 2022

/s/ BRETT A. BAUER

Brett A. Bauer

Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of 1st Source Corporation (1st Source) on Form 10-Q for the quarterly period ended March 31, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Christopher J. Murphy III, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1)The Report fully complies with the requirements of sections 13(a) or 15(d) of the Securities and Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of 1st Source.

Date: April 21, 2022

/s/ CHRISTOPHER J. MURPHY III

Christopher J. Murphy III

Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of 1st Source Corporation (1st Source) on Form 10-Q for the quarterly period ended March 31, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Brett A. Bauer, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1)The Report fully complies with the requirements of sections 13(a) or 15(d) of the Securities and Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of 1st Source.

Date: April 21, 2022

/s/ BRETT A. BAUER

Brett A. Bauer

Chief Financial Officer

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Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2022	Apr. 15, 2022
Document and Entity Information
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Mar. 31, 2022
Document Transition Report	false
Entity File Number	0-6233
Entity Incorporation, State or Country Code	IN
Entity Tax Identification Number	35-1068133
Entity Address, Address Line One	100 North Michigan Street
Entity Address, City or Town	South Bend,
Entity Address, State or Province	IN
Entity Address, Postal Zip Code	46601
City Area Code	574
Local Phone Number	235-2000
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Emerging Growth Company	false
Entity Small Business	false
Entity Shell Company	false
Title of 12(b) Security	Common Stock - without par value
Trading Symbol	SRCE
Security Exchange Name	NASDAQ
Entity Common Stock, Shares Outstanding		24,732,545
Entity Registrant Name	1st Source Corp
Entity Central Index Key	0000034782
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2022
Document Fiscal Period Focus	Q1
Amendment Flag	false

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CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
ASSETS
Cash and due from banks	$ 69,195	$ 54,420
Federal funds sold and interest bearing deposits with other banks	347,697	470,767
Investment securities available-for-sale	1,857,431	1,863,041
Other investments	25,538	27,189
Mortgages held for sale	4,757	13,284
Loans and leases - net of unearned discount
Loans and leases	5,394,003	5,346,214
Allowance for loan and lease losses	(129,959)	(127,492)
Net loans and leases	5,264,044	5,218,722
Equipment owned under operating leases, net	41,792	48,433
Net premises and equipment	45,960	47,038
Goodwill and intangible assets	83,921	83,926
Accrued income and other assets	272,128	269,469
Total assets	8,012,463	8,096,289
Deposits:
Noninterest-bearing demand	2,061,111	2,052,981
Interest-bearing deposits:
Interest-bearing demand	2,430,979	2,455,580
Savings	1,328,981	1,286,367
Time	852,021	884,137
Total interest-bearing deposits	4,611,981	4,626,084
Total deposits	6,673,092	6,679,065
Short-term borrowings:
Federal funds purchased and securities sold under agreements to repurchase	193,798	194,727
Other short-term borrowings	5,360	5,300
Total short-term borrowings	199,158	200,027
Long-term debt and mandatorily redeemable securities	69,563	71,251
Subordinated notes	58,764	58,764
Accrued expenses and other liabilities	92,416	117,718
Total liabilities	7,092,993	7,126,825
SHAREHOLDERS' EQUITY
Preferred stock; no par value Authorized 10,000,000 shares; none issued or outstanding	0	0
Common stock; no par value Authorized 40,000,000 shares; issued 28,205,674 at March 31, 2022 and December 31, 2021	436,538	436,538
Retained earnings	624,503	603,787
Cost of common stock in treasury (3,473,139 shares at March 31, 2022 and 3,466,162 shares at December 31, 2021)	(115,654)	(114,209)
Accumulated other comprehensive loss	(80,537)	(9,861)
Total shareholders’ equity	864,850	916,255
Noncontrolling interests	54,620	53,209
Total equity	919,470	969,464
Total liabilities and equity	$ 8,012,463	$ 8,096,289
Preferred stock; no par value (in dollars per share)	$ 0	$ 0
Preferred stock, Authorized shares	10,000,000	10,000,000
Preferred stock, issued shares	0	0
Preferred stock, outstanding shares	0	0
Common stock; no par value (in dollars per share)	$ 0	$ 0
Common stock, Authorized shares	40,000,000	40,000,000
Common stock, issued shares	28,205,674	28,205,674
Cost of common stock in treasury, shares	3,473,139	3,466,162
Commercial and agricultural
Loans and leases - net of unearned discount
Loans and leases	$ 869,093	$ 918,712
Allowance for loan and lease losses	(15,598)	(15,409)
Solar
Loans and leases - net of unearned discount
Loans and leases	337,485	348,302
Allowance for loan and lease losses	(6,417)	(6,585)
Auto and light truck
Loans and leases - net of unearned discount
Loans and leases	629,780	603,775
Allowance for loan and lease losses	(19,521)	(19,624)
Medium and heavy duty truck
Loans and leases - net of unearned discount
Loans and leases	255,277	259,740
Allowance for loan and lease losses	(6,049)	(6,015)
Aircraft
Loans and leases - net of unearned discount
Loans and leases	957,040	898,401
Allowance for loan and lease losses	(35,968)	(33,628)
Construction equipment
Loans and leases - net of unearned discount
Loans and leases	775,972	754,273
Allowance for loan and lease losses	(20,041)	(19,673)
Commercial real estate
Loans and leases - net of unearned discount
Loans and leases	920,807	929,341
Allowance for loan and lease losses	(19,246)	(19,691)
Residential real estate and home equity
Loans and leases - net of unearned discount
Loans and leases	510,537	500,590
Allowance for loan and lease losses	(5,218)	(5,084)
Consumer
Loans and leases - net of unearned discount
Loans and leases	138,012	133,080
Allowance for loan and lease losses	$ (1,901)	$ (1,783)

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CONSOLIDATED STATEMENTS OF INCOME - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Interest income:
Loans and leases	$ 55,208	$ 57,864
Investment securities, taxable	6,344	3,988
Investment securities, tax-exempt	134	174
Other	363	266
Total interest income	62,049	62,292
Interest expense:
Deposits	2,376	3,526
Short-term borrowings	24	36
Subordinated notes	823	818
Long-term debt and mandatorily redeemable securities	(792)	500
Total interest expense	2,431	4,880
Net interest income	59,618	57,412
Provision for credit losses	2,233	2,398
Net interest income after provision for loan and lease losses	57,385	55,014
Noninterest income:
Mortgage banking	1,377	3,901
Insurance commissions	1,905	2,152
Equipment rental	3,662	4,629
Gains on investment securities available-for-sale	0	0
Other	3,301	3,077
Total noninterest income	23,145	25,869
Noninterest expense:
Salaries and employee benefits	25,467	25,196
Net occupancy	2,811	2,719
Furniture and equipment	1,295	1,474
Information Technology and Data Processing	5,208	4,984
Depreciation - leased equipment	3,015	3,773
Professional fees	1,608	1,613
FDIC and other insurance	850	665
Business development and marketing	1,268	997
Loan and lease collection and repossession	134	129
Other	3,680	2,590
Total noninterest expense	45,336	44,140
Income before income taxes	35,194	36,743
Income tax expense	7,793	8,637
Net income	27,401	28,106
Net (income) loss attributable to noncontrolling interests	(11)	(1)
Net income available to common shareholders	$ 27,390	$ 28,105
Per common share:
Basic net income per common share (in dollars per share)	$ 1.10	$ 1.10
Diluted net income per common share (in dollars per share)	1.10	1.10
Cash dividends (in dollars per share)	$ 0.31	$ 0.29
Basic weighted average common shares outstanding (in shares)	24,743,790	25,320,930
Diluted weighted average common shares outstanding (in shares)	24,743,790	25,320,930
Trust and wealth advisory
Noninterest income:
Trust and wealth advisory, service charges on deposit accounts, and debit card income	$ 5,914	$ 5,481
Service charges on deposit accounts
Noninterest income:
Trust and wealth advisory, service charges on deposit accounts, and debit card income	2,792	2,447
Debit card
Noninterest income:
Trust and wealth advisory, service charges on deposit accounts, and debit card income	$ 4,194	$ 4,182

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Statement of Comprehensive Income [Abstract]
Net income	$ 27,401	$ 28,106
Other comprehensive income (loss):
Unrealized depreciation of available-for-sale securities	(93,094)	(14,658)
Reclassification adjustment for realized gains included in net income	0	0
Income tax effect	22,418	3,530
Other comprehensive loss, net of tax	(70,676)	(11,128)
Comprehensive (loss) income	(43,275)	16,978
Comprehensive (income) loss attributable to noncontrolling interests	(11)	(1)
Comprehensive (loss) income available to common shareholders	$ (43,286)	$ 16,977

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CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - USD ($) $ in Thousands	Total	Common Stock	Retained Earnings	Cost of Common Stock in Treasury	Accumulated Other Comprehensive Income (Loss), Net	Total Shareholders' Equity	Noncontrolling Interests
Balance at Dec. 31, 2020	$ 930,670	$ 436,538	$ 514,176	$ (82,240)	$ 18,371	$ 886,845	$ 43,825
Increase (Decrease) in Shareholders' Equity
Net income	28,106		28,105			28,105	1
Other comprehensive (loss) income	(11,128)				(11,128)	(11,128)
Issuance of 38,442 and 35,027 common shares under stock based compensation awards for the three months ended March 31, 2022 and 2021, respectively	1,482		844	638		1,482
Cost of 45,419 and 155,457 shares of common stock acquired for treasury for the three months ended March 31, 2022 and 2021, respectively	(6,621)			(6,621)		(6,621)
Common stock dividend ($0.31 and $0.29 per share for the three months ended March 31, 2022 and 2021, respectively)	(7,388)		(7,388)			(7,388)
Contributions from noncontrolling interests	887					0	887
Distributions to noncontrolling interests	$ (249)					0	(249)
Issuance of common shares under stock based compensation awards (in shares)	35,027
Common stock acquired for treasury (in shares)	155,457
Cash dividends (in dollars per share)	$ 0.29
Balance at Mar. 31, 2021	$ 935,759	436,538	535,737	(88,223)	7,243	891,295	44,464
Balance at Dec. 31, 2021	969,464	436,538	603,787	(114,209)	(9,861)	916,255	53,209
Increase (Decrease) in Shareholders' Equity
Net income	27,401		27,390			27,390	11
Other comprehensive (loss) income	(70,676)				(70,676)	(70,676)
Issuance of 38,442 and 35,027 common shares under stock based compensation awards for the three months ended March 31, 2022 and 2021, respectively	1,754		1,024	730		1,754
Cost of 45,419 and 155,457 shares of common stock acquired for treasury for the three months ended March 31, 2022 and 2021, respectively	(2,175)			(2,175)		(2,175)
Common stock dividend ($0.31 and $0.29 per share for the three months ended March 31, 2022 and 2021, respectively)	(7,698)		(7,698)			(7,698)
Contributions from noncontrolling interests	1,627					0	1,627
Distributions to noncontrolling interests	$ (227)					0	(227)
Issuance of common shares under stock based compensation awards (in shares)	38,442
Common stock acquired for treasury (in shares)	45,419
Cash dividends (in dollars per share)	$ 0.31
Balance at Mar. 31, 2022	$ 919,470	$ 436,538	$ 624,503	$ (115,654)	$ (80,537)	$ 864,850	$ 54,620

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CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Statement of Cash Flows [Abstract]
Net income	$ 27,401	$ 28,106
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses	2,233	2,398
Depreciation of premises and equipment	1,177	1,361
Depreciation of equipment owned and leased to others	3,015	3,773
Stock-based compensation	732	885
Amortization of investment securities premiums and accretion of discounts, net	967	1,734
Amortization of mortgage servicing rights	381	590
Mortgage servicing rights impairment recoveries	0	(42)
Amortization of right of use assets	785	1,133
Deferred income taxes	80	2,452
Gains on investment securities available-for-sale	0	0
Originations of loans held for sale, net of principal collected	(32,314)	(85,663)
Proceeds from the sales of loans held for sale	41,456	91,858
Net gain on sale of loans held for sale	(615)	(2,661)
Net gain on sale of other real estate and repossessions	(47)	(141)
Change in interest receivable	(530)	(142)
Change in interest payable	199	265
Change in other assets	9,099	(7,843)
Change in other liabilities	(10,882)	4,519
Other	(1,334)	(93)
Net Cash Provided by (Used in) Operating Activities	41,803	42,489
Investing activities:
Proceeds from sales of investment securities available-for-sale	0	0
Proceeds from maturities and paydowns of investment securities available-for-sale	57,392	119,692
Purchases of investment securities available-for-sale	(145,843)	(229,957)
Net change in partnership investments	(2,128)	(1,142)
Net change in other investments	1,651	0
Loans sold or participated to others	7,987	3,813
Proceeds from principal payments on direct finance leases	9,377	7,317
Net change in loans and leases	(66,069)	(49,255)
Net change in equipment owned under operating leases	3,626	(128)
Purchases of premises and equipment	(113)	(280)
Proceeds from disposal of premises and equipment	14	5
Proceeds from sales of other real estate and repossessions	1,983	697
Net Cash Provided by (Used in) Investing Activities	(132,123)	(149,238)
Financing activities:
Net change in demand deposits and savings accounts	26,143	271,650
Net change in time deposits	(32,116)	(86,337)
Net change in short-term borrowings	(869)	29,960
Payments on long-term debt	(2,440)	(2,035)
Acquisition of treasury stock	(2,175)	(6,621)
Net contributions from (distributions to) noncontrolling interests	1,400	639
Cash dividends paid on common stock	(7,918)	(7,600)
Net change in financing activities	(17,975)	199,656
Net change in cash and cash equivalents	(108,295)	92,907
Cash and cash equivalents, beginning of year	525,187	243,047
Cash and cash equivalents, end of period	416,892	335,954
Non-cash transactions:
Loans transferred to other real estate and repossessed assets	1,150	839
Common stock matching contribution to Employee Stock Ownership and Profit Sharing Plan	683	715
Right of use assets obtained in exchange for lease obligations	$ 116	$ 46

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Accounting Policies

3 Months Ended

Mar. 31, 2022

Accounting Policies [Abstract]

Accounting Policies

Accounting Policies

1st Source Corporation is a bank holding company headquartered in South Bend, Indiana that provides, through its subsidiaries (collectively referred to as “1st Source” or “the Company”), a broad array of financial products and services.

Basis of Presentation – The accompanying unaudited consolidated financial statements reflect all adjustments (all of which are normal and recurring in nature) which are, in the opinion of management, necessary for a fair presentation of the consolidated financial position, the results of operations, changes in comprehensive income (loss), changes in shareholders’ equity, and cash flows for the periods presented. These unaudited consolidated financial statements have been prepared according to the rules and regulations of the Securities and Exchange Commission (SEC) and, therefore, certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP) have been omitted.

The Notes to the Consolidated Financial Statements appearing in 1st Source Corporation’s Annual Report on Form 10-K (2021 Annual Report), which include descriptions of significant accounting policies, should be read in conjunction with these interim financial statements. The Consolidated Statement of Financial Condition at December 31, 2021 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements. Certain amounts in the prior period consolidated financial statements have been reclassified to conform to the current period presentation.

Use of Estimates in the Preparation of Financial Statements – Financial statements prepared in accordance with GAAP require the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expense during the reporting period. Actual results could differ from those estimates.

Loans and Leases – Loans are stated at the principal amount outstanding, net of unamortized deferred loan origination fees and costs and net of unearned income. Interest income is accrued as earned based on unpaid principal balances. Origination fees and direct loan and lease origination costs are deferred, and the net amount amortized to interest income over the estimated life of the related loan or lease. Loan commitment fees are deferred and amortized into other income over the commitment period.

Direct financing leases are carried at the aggregate of lease payments plus estimated residual value of the leased property, net of unamortized deferred lease origination fees and costs and unearned income. Interest income on direct financing leases is recognized over the term of the lease to achieve a constant periodic rate of return on the outstanding investment. Costs incurred as a direct result of closing lease transactions are capitalized and amortized over the life of the lease while all other initial direct costs are expensed immediately.

Accrued interest is included in Accrued Income and Other Assets on the Consolidated Statements of Financial Condition and is excluded from the calculation of the allowance for credit losses. The accrual of interest on loans and leases is discontinued when a loan or lease becomes contractually delinquent for 90 days, or when an individual analysis of a borrower’s credit worthiness indicates a credit should be placed on nonperforming status, except for residential mortgage loans and consumer loans that are well secured and in the process of collection. Residential mortgage loans are placed on nonaccrual at the time the loan is placed in foreclosure. When interest accruals are discontinued, interest credited to income in the current year is reversed and interest accrued in the prior year is charged to the allowance for loan and lease losses. However, in some cases, the Company may elect to continue the accrual of interest when the net realizable value of collateral is sufficient to cover the principal and accrued interest. When a loan or lease is classified as nonaccrual and the future collectability of the recorded loan or lease balance is doubtful, collections on interest and principal are applied as a reduction to principal outstanding. Loans are returned to accrual status when all principal and interest amounts contractually due are brought current and future payments are reasonably assured, which is typically evidenced by a sustained repayment performance of at least six months.

Loans and leases that have been modified and economic concessions have been granted to borrowers who have experienced financial difficulties are considered a troubled debt restructuring (TDR). These concessions typically result from the Company’s loss mitigation activities and may include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance or other actions. Certain TDRs are classified as nonperforming at the time of restructuring and typically are returned to performing status after considering the borrower’s sustained repayment performance for a reasonable period of at least six months.

When the Company modifies loans and leases in a TDR, it evaluates any possible impairment based on the present value of expected future cash flows, discounted at the contractual interest rate of the original loan or lease agreement, or uses the current fair value of the collateral, less selling costs for collateral dependent loans. If the Company determines that the value of the modified loan is less than the recorded investment in the loan (net of previous charge-offs, deferred loan fees or costs and unamortized premium or discount), impairment is recognized through an allowance for loan and lease losses estimate or a charge-off to the allowance for loan and lease losses. In periods subsequent to modification, the Company evaluates all TDRs, including those that have payment defaults, for possible impairment and recognizes impairment through the allowance for loan and lease losses.

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Recent Accounting Pronouncements

3 Months Ended

Mar. 31, 2022

Accounting Standards Update and Change in Accounting Principle [Abstract]

Recent Accounting Pronouncements

Recent Accounting Pronouncements

Financial Instruments–Credit Losses: In March 2022, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2022-02 “Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures.” These amendments eliminate the TDR recognition and measurement guidance and, instead, require that an entity evaluate (consistent with the accounting for other loan modifications) whether the modification represents a new loan or a continuation of an existing loan. The amendments also enhance existing disclosure requirements and introduce new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty. Additionally, these amendments require that an entity disclose current-period gross writeoffs by year of origination for financing receivables and net investment in leases within the scope of Subtopic 326-20. The guidance is effective for entities that have adopted ASU 2016-13 for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. These amendments should be applied prospectively. If an entity elects to early adopt ASU 2022-02 in an interim period, the guidance should be applied as of the beginning of the fiscal year that includes the interim period. An entity may elect to early adopt the amendments about TDRs and related disclosure enhancements separately from the amendments related to vintage disclosures. The Company is assessing ASU 2022-02 and its impact on its accounting and disclosures.

Reference Rate Reform: In March 2020, the FASB issued ASU No. 2020-04 “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” These amendments provide temporary optional guidance to ease the potential burden in accounting for reference rate reform. The ASU provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued. It is intended to help stakeholders during the global market-wide reference rate transition period. In January 2021, the FASB issued ASU 2021-01 which clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. The guidance is effective for all entities as of March 12, 2020 through December 31, 2022. The Company continues to implement its transition plan toward cessation of LIBOR and the modification of its loans and other financial instruments with attributes that are either directly or indirectly influenced by LIBOR. The Company expects to utilize the LIBOR transition relief allowed under ASU 2020-04 and ASU 2021-01, as applicable, and does not expect such adoption to have a material impact on its accounting and disclosures. The Company will continue to assess the impact as the reference rate transition approaches June 30, 2023.

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Investment Securities

3 Months Ended

Mar. 31, 2022

Investments, Debt and Equity Securities [Abstract]

Investment Securities

Investment Securities Available-For-Sale

The following table shows investment securities available-for-sale.

(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
March 31, 2022
U.S. Treasury and Federal agencies securities	$	1,137,278	$	343	$	(56,676)	$	1,080,945
U.S. States and political subdivisions securities	102,459		145		(4,251)		98,353
Mortgage-backed securities — Federal agencies	700,666		394		(46,050)		655,010
Corporate debt securities	22,511		88		(74)		22,525
Foreign government and other securities	600		—		(2)		598
Total debt securities available-for-sale	$	1,963,514	$	970	$	(107,053)	$	1,857,431
December 31, 2021
U.S. Treasury and Federal agencies securities	$	1,093,780	$	3,244	$	(13,018)	$	1,084,006
U.S. States and political subdivisions securities	95,700		1,130		(1,129)		95,701
Mortgage-backed securities — Federal agencies	663,441		4,745		(8,459)		659,727
Corporate debt securities	22,510		499		—		23,009
Foreign government and other securities	600		—		(2)		598
Total debt securities available-for-sale	$	1,876,031	$	9,618	$	(22,608)	$	1,863,041

Amortized cost excludes accrued interest receivable which is included in Accrued Income and Other Assets on the Consolidated Statements of Financial Condition. At March 31, 2022 and December 31, 2021, accrued interest receivable on investment securities available-for-sale was $5.02 million and $4.80 million, respectively.

At March 31, 2022 and December 31, 2021, the residential mortgage-backed securities held by the Company consisted primarily of GNMA, FNMA and FHLMC pass-through certificates which are guaranteed by those respective agencies of the United States government (Government Sponsored Enterprise, GSEs).

The following table shows the contractual maturities of investments in debt securities available-for-sale at March 31, 2022. Expected maturities will differ from contractual maturities, because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

(Dollars in thousands)	Amortized Cost		Fair Value
Due in one year or less	$	99,452	$	99,754
Due after one year through five years	1,073,137		1,018,725
Due after five years through ten years	89,899		83,636
Due after ten years	360		306
Mortgage-backed securities	700,666		655,010
Total debt securities available-for-sale	$	1,963,514	$	1,857,431

The following table summarizes gross unrealized losses and fair value by investment category and age. At March 31, 2022, the Company’s available-for-sale securities portfolio consisted of 719 securities, 541 of which were in an unrealized loss position.

	Less than 12 Months				12 months or Longer				Total
(Dollars in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
March 31, 2022
U.S. Treasury and Federal agencies securities	$	796,571	$	(40,683)	$	207,232	$	(15,993)	$	1,003,803	$	(56,676)
U.S. States and political subdivisions securities	55,508		(2,367)		18,798		(1,884)		74,306		(4,251)
Mortgage-backed securities - Federal agencies	486,975		(32,284)		133,048		(13,766)		620,023		(46,050)
Corporate debt securities	8,109		(74)		—		—		8,109		(74)
Foreign government and other securities	98		(2)		—		—		98		(2)
Total debt securities available-for-sale	$	1,347,261	$	(75,410)	$	359,078	$	(31,643)	$	1,706,339	$	(107,053)
December 31, 2021
U.S. Treasury and Federal agencies securities	$	789,536	$	(10,728)	$	84,191	$	(2,290)	$	873,727	$	(13,018)
U.S. States and political subdivisions securities	39,585		(980)		4,875		(149)		44,460		(1,129)
Mortgage-backed securities - Federal agencies	454,413		(7,312)		35,232		(1,147)		489,645		(8,459)
Corporate debt securities	—		—		—		—		—		—
Foreign government and other securities	598		(2)		—		—		598		(2)
Total debt securities available-for-sale	$	1,284,132	$	(19,022)	$	124,298	$	(3,586)	$	1,408,430	$	(22,608)

The Company does not consider available-for-sale securities with unrealized losses at March 31, 2022 to be experiencing credit losses and recognized no resulting allowance for credit losses. The Company does not intend to sell these investments and it is more likely than not that the Company will not be required to sell these investments before recovery of the amortized cost basis, which may be the maturity dates of the securities. The unrealized losses occurred as a result of changes in interest rates, market spreads and market conditions subsequent to purchase.

The following table shows the gross realized gains and losses from the available-for-sale debt securities portfolio. Realized gains and losses of all securities are computed using the specific identification cost basis.

	Three Months Ended March 31,
(Dollars in thousands)	2022		2021
Gross realized gains	$	—	$	—
Gross realized losses	—		—
Net realized gains (losses)	$	—	$	—

At March 31, 2022 and December 31, 2021, investment securities available-for-sale with carrying values of $331.28 million and $351.13 million, respectively, were pledged as collateral for security repurchase agreements and for other purposes.

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Loan and Lease Financings

3 Months Ended

Mar. 31, 2022

Receivables [Abstract]

Loan and Lease Financings

Loan and Lease FinancingsThe Company evaluates loans and leases for credit quality at least annually but more frequently if certain circumstances occur (such as material new information which becomes available and indicates a potential change in credit risk). The Company uses two methods to assess credit risk: loan or lease credit quality grades and credit risk classifications. The purpose of the loan or lease credit quality grade is to document the degree of risk associated with individual credits as well as inform management of the degree of risk in the portfolio taken as a whole. Credit risk classifications are used to categorize loans by degree of risk and to designate individual or committee approval authorities for higher risk credits at the time of origination. Credit risk classifications include categories for: Acceptable, Marginal, Special Attention, Special Risk, Restricted by Policy, Regulated and Prohibited by Law.

All loans and leases, except residential real estate and home equity loans and consumer loans, are assigned credit quality grades on a scale from 1 to 12 with grade 1 representing superior credit quality. The criteria used to assign grades to extensions of credit that exhibit potential problems or well-defined weaknesses are primarily based upon the degree of risk and the likelihood of orderly repayment, and their effect on the Company’s safety and soundness. Loans or leases graded 7 or weaker are considered “special attention” credits and, as such, relationships in excess of $250,000 are reviewed quarterly as part of management’s evaluation of the appropriateness of the allowance for loan and lease losses. Grade 7 credits are defined as “watch” and contain greater than average credit risk and are monitored to limit the exposure to increased risk; grade 8 credits are “special mention” and, following regulatory guidelines, are defined as having potential weaknesses that deserve management’s close attention. Credits that exhibit well-defined weaknesses and a distinct possibility of loss are considered “classified” and are graded 9 through 12 corresponding to the regulatory definitions of “substandard” (grades 9 and 10) and the more severe “doubtful” (grade 11) and “loss” (grade 12). For residential real estate and home equity and consumer loans, credit quality is based on the aging status of the loan and by payment activity. Nonperforming loans are those loans which are on nonaccrual status or are 90 days or more past due.

Below is a summary of the Company’s loan and lease portfolio segments and a discussion of the risk characteristics relevant to each portfolio segment.

Commercial and agricultural – loans are to entities within the Company’s local market communities. Loans are for business or agri-business purposes and include working capital lines of credit secured by accounts receivable and inventory that are generally renewable annually and term loans secured by equipment with amortizations based on the expected life of the underlying collateral, generally three to seven years. These loans are typically further supported by personal guarantees. Commercial exposure is to a wide range of industries and services. Risks in this sector are also varied and are most impacted by general economic conditions. Risk mitigants include appropriate underwriting and monitoring and, when appropriate, government guarantees, including SBA and FSA. This portfolio sector also includes PPP loans, which are fully guaranteed by the SBA. As of March 31, 2022, PPP loan balances were $37.94 million which is net of unearned fees of $1.24 million.

Solar – loans are for the purpose of financing solar related projects and may include construction draw notes, operating loans, letters of credit and may entail a tax equity structure. Collateral in a multi-state area includes tangible assets of the borrower, assignment of intangible assets including power purchase agreements, and pledges of permits and licenses. Financing is provided to qualified borrowers throughout the continental United States with an emphasis on the region east of the Rocky Mountains.

Auto and light truck – loans are secured by vehicles and borrowers are nationwide. The portfolio consists of multiple industries: auto rental, auto leasing and specialty vehicle which includes bus, funeral car and step van. Borrowers in the auto rental segment are primarily independent auto rental entities with on-airport and off-airport locations, and some insurance replacement business. Loan amortizations are relatively short, generally eighteen months, but up to four years. Auto leasing customers lease to businesses and the Company takes assignment of the lease stream and places its lien on the vehicles. Terms are generally longer than the auto rental sector, three to seven years and match the underlying leases. Risks in both these segments include economic risks and collateral risks, principally used vehicle values. The bus segment is secured primarily by shuttle buses and motor coaches, the step van segment is secured by step vans and the funeral car segment is secured by hearses and limousines. Risks include lack of well-established mechanisms for disposition of collateral, such as auctions that are key to disposition of autos. Loans in the portfolio generally carry personal guarantees.

Medium and heavy duty truck – loans and full-service truck leases are secured by heavy-duty trucks, commonly Class 8 trucks, and are generally personally guaranteed. In addition to economic risks, collateral risk is significant. Financing is generally at full cost, plus additional expenditures to get the vehicle operational, such as taxes, insurance and fees. It takes three to four years of debt amortization to reach an equity position in the collateral.

Aircraft – loans are to domestic and foreign borrowers with the domestic segment further divided into two pools: 1) personal and business use, and 2) dealers and operators. The Company’s focus for the foreign sector is Latin America, principally Mexico and Brazil. Loans are primarily secured by new and used business jets and helicopters, with appropriate advances, amortizations of ten to fifteen years, and are generally guaranteed by individuals. The most significant risk in the Aircraft portfolio is collateral risk - volatility in underlying values and maintenance concerns. The portfolio is subject to national and global economic risks.

Construction equipment – loans are to borrowers throughout the country secured by specific equipment. The borrowers include highway and road builders, asphalt producers and pavers, suppliers of aggregate products, site developers, frac sand operations, general construction equipment dealers and operators, and crane rental entities. Generally, loans include personal guarantees. The construction equipment industry is heavily dependent on the U.S. economy and the global economy. Market growth is reliant on investments from public and private sectors into urbanization and infrastructure projects.

Commercial real estate – loans are generally to entities within the local market communities served by the Company with advances generally within regulatory guidelines. Historically, the Company’s exposure to commercial real estate had been primarily to the less risky owner-occupied segment although growth in recent years has been in the non-owner-occupied segment which now accounts for slightly less than half of the portfolio. The non-owner-occupied segment includes hotels, apartment complexes and warehousing facilities. There is limited exposure to construction loans. Many commercial real estate loans carry personal guarantees. Additional risks in the commercial real estate portfolio stem from geographical concentration in northern Indiana and southwest Michigan and general economic conditions.

Residential real estate and home equity – loans predominantly include one-to-four family mortgages to borrowers in the Company’s local market communities and are appropriately underwritten and secured by residential real estate.

Consumer – loans are to individuals in the Company’s local markets and auto loans are generally secured by personal vehicles and appropriately underwritten.

The following table shows the amortized cost of loans and leases, segregated by portfolio segment, credit quality rating and year of origination as of March 31, 2022.

	Term Loans and Leases by Origination Year
(Dollars in thousands)	2022		2021		2020		2019		2018		Prior		Revolving Loans		Revolving Loans Converted to Term		Total
Commercial and agricultural
Grades 1-6	$	53,128	$	190,821	$	107,991	$	50,957	$	43,930	$	32,145	$	363,670	$	—	$	842,642
Grades 7-12	830		2,186		166		3,338		2,242		2,218		15,471		—		26,451
Total commercial and agricultural	53,958		193,007		108,157		54,295		46,172		34,363		379,141		—		869,093
Solar
Grades 1-6	22,411		128,379		40,552		81,076		18,901		38,480		—		—		329,799
Grades 7-12	—		—		1,131		5,837		718		—		—		—		7,686
Total solar	22,411		128,379		41,683		86,913		19,619		38,480		—		—		337,485
Auto and light truck
Grades 1-6	113,310		284,748		108,645		62,013		20,163		10,471		—		—		599,350
Grades 7-12	447		7,635		9,350		4,580		3,393		5,025		—		—		30,430
Total auto and light truck	113,757		292,383		117,995		66,593		23,556		15,496		—		—		629,780
Medium and heavy duty truck
Grades 1-6	26,377		85,103		61,748		50,070		19,724		12,068		—		—		255,090
Grades 7-12	—		—		—		—		—		187		—		—		187
Total medium and heavy duty truck	26,377		85,103		61,748		50,070		19,724		12,255		—		—		255,277
Aircraft
Grades 1-6	142,120		344,528		273,403		73,079		42,434		65,511		6,861		—		947,936
Grades 7-12	1,894		—		633		—		4,342		2,235		—		—		9,104
Total aircraft	144,014		344,528		274,036		73,079		46,776		67,746		6,861		—		957,040
Construction equipment
Grades 1-6	113,680		287,695		166,178		90,462		37,171		13,924		22,965		3,387		735,462
Grades 7-12	22,419		9,659		2,424		3,158		765		48		—		2,037		40,510
Total construction equipment	136,099		297,354		168,602		93,620		37,936		13,972		22,965		5,424		775,972
Commercial real estate
Grades 1-6	59,945		192,722		145,247		140,328		136,562		221,961		314		—		897,079
Grades 7-12	1,118		—		8,011		7,481		49		7,069		—		—		23,728
Total commercial real estate	61,063		192,722		153,258		147,809		136,611		229,030		314		—		920,807
Residential real estate and home equity
Performing	28,424		101,853		109,427		37,498		9,186		96,976		120,863		4,752		508,979
Nonperforming	—		—		—		—		14		1,097		243		204		1,558
Total residential real estate and home equity	28,424		101,853		109,427		37,498		9,200		98,073		121,106		4,956		510,537
Consumer
Performing	19,637		52,972		20,840		13,816		6,521		2,073		21,987		—		137,846
Nonperforming	—		11		55		37		28		35		—		—		166
Total consumer	$	19,637	$	52,983	$	20,895	$	13,853	$	6,549	$	2,108	$	21,987	$	—	$	138,012

The following table shows the amortized cost of loans and leases, segregated by portfolio segment, credit quality rating and year of origination as of December 31, 2021.

	Term Loans and Leases by Origination Year
(Dollars in thousands)	2021		2020		2019		2018		2017		Prior		Revolving Loans		Revolving Loans Converted to Term		Total
Commercial and agricultural
Grades 1-6	$	233,512	$	123,947	$	60,744	$	55,231	$	32,545	$	20,184	$	364,460	$	—	$	890,623
Grades 7-12	4,682		194		3,667		2,373		2,004		484		14,685		—		28,089
Total commercial and agricultural	238,194		124,141		64,411		57,604		34,549		20,668		379,145		—		918,712
Solar
Grades 1-6	159,244		42,073		81,593		18,979		34,889		3,780		—		—		340,558
Grades 7-12	—		1,138		5,882		724		—		—		—		—		7,744
Total solar	159,244		43,211		87,475		19,703		34,889		3,780		—		—		348,302
Auto and light truck
Grades 1-6	331,105		122,709		72,580		24,965		11,814		901		—		—		564,074
Grades 7-12	10,828		11,752		7,467		3,859		4,876		919		—		—		39,701
Total auto and light truck	341,933		134,461		80,047		28,824		16,690		1,820		—		—		603,775
Medium and heavy duty truck
Grades 1-6	92,252		68,354		57,967		23,210		12,419		5,265		—		—		259,467
Grades 7-12	—		—		—		—		—		273		—		—		273
Total medium and heavy duty truck	92,252		68,354		57,967		23,210		12,419		5,538		—		—		259,740
Aircraft
Grades 1-6	384,895		290,897		85,916		45,848		47,025		29,435		4,844		—		888,860
Grades 7-12	1,141		649		—		4,670		454		2,627		—		—		9,541
Total aircraft	386,036		291,546		85,916		50,518		47,479		32,062		4,844		—		898,401
Construction equipment
Grades 1-6	314,044		201,032		109,029		47,693		13,501		5,031		18,937		4,594		713,861
Grades 7-12	26,650		8,709		1,983		797		80		—		—		2,193		40,412
Total construction equipment	340,694		209,741		111,012		48,490		13,581		5,031		18,937		6,787		754,273
Commercial real estate
Grades 1-6	230,701		150,144		146,374		141,838		126,642		112,243		391		—		908,333
Grades 7-12	218		5,921		7,159		491		6,208		1,011		—		—		21,008
Total commercial real estate	230,919		156,065		153,533		142,329		132,850		113,254		391		—		929,341
Residential real estate and home equity
Performing	105,345		114,682		41,185		9,706		11,720		89,646		122,281		4,555		499,120
Nonperforming	—		—		—		13		421		655		293		88		1,470
Total residential real estate and home equity	105,345		114,682		41,185		9,719		12,141		90,301		122,574		4,643		500,590
Consumer
Performing	58,866		24,307		17,031		8,284		2,263		697		21,378		—		132,826
Nonperforming	37		107		43		30		33		4		—		—		254
Total consumer	$	58,903	$	24,414	$	17,074	$	8,314	$	2,296	$	701	$	21,378	$	—	$	133,080

The following table shows the amortized cost of loans and leases, segregated by portfolio segment, with delinquency aging and nonaccrual status.

(Dollars in thousands)	Current		30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due and Accruing		Total Accruing  Loans		Nonaccrual		Total Financing Receivables
March 31, 2022
Commercial and agricultural	$	867,023	$	503	$	201	$	—	$	867,727	$	1,366	$	869,093
Solar	337,485		—		—		—		337,485		—		337,485
Auto and light truck	607,991		214		—		—		608,205		21,575		629,780
Medium and heavy duty truck	254,896		194		—		—		255,090		187		255,277
Aircraft	950,763		3,409		2,235		—		956,407		633		957,040
Construction equipment	766,210		2,452		—		—		768,662		7,310		775,972
Commercial real estate	917,893		—		—		—		917,893		2,914		920,807
Residential real estate and home equity	508,270		556		153		274		509,253		1,284		510,537
Consumer	137,581		222		43		—		137,846		166		138,012
Total	$	5,348,112	$	7,550	$	2,632	$	274	$	5,358,568	$	35,435	$	5,394,003
December 31, 2021
Commercial and agricultural	$	916,659	$	—	$	—	$	—	$	916,659	$	2,053	$	918,712
Solar	348,302		—		—		—		348,302		—		348,302
Auto and light truck	579,605		—		—		—		579,605		24,170		603,775
Medium and heavy duty truck	259,467		—		—		—		259,467		273		259,740
Aircraft	894,092		1,130		2,530		—		897,752		649		898,401
Construction equipment	745,870		1,313		—		—		747,183		7,090		754,273
Commercial real estate	926,345		—		—		—		926,345		2,996		929,341
Residential real estate and home equity	498,854		212		54		245		499,365		1,225		500,590
Consumer	132,464		332		30		4		132,830		250		133,080
Total	$	5,301,658	$	2,987	$	2,614	$	249	$	5,307,508	$	38,706	$	5,346,214

Accrued interest receivable on loans and leases at March 31, 2022 and December 31, 2021 was $13.11 million and $12.94 million, respectively.

There were no loan and lease modifications classified as a troubled debt restructuring (TDR) during the three months ended March 31, 2022 and 2021. The classification between nonperforming and performing is determined at the time of modification. Modification programs focus on extending maturity dates or modifying payment patterns with most TDRs experiencing a combination of concessions. Modifications do not result in the contractual forgiveness of principal or interest. There were no modifications during the three months ended March 31, 2022 and 2021 that resulted in an interest rate below market rate.

There were no TDRs which had payment defaults within the twelve months following modification during the three months ended March 31, 2022 and 2021, respectively. Default occurs when a loan or lease is 90 days or more past due under the modified terms or transferred to nonaccrual.

The following table shows the recorded investment of loans and leases classified as troubled debt restructurings as of March 31, 2022 and December 31, 2021.

(Dollars in thousands)	March 31, 2022		December 31, 2021
Performing TDRs	$	—	$	319
Nonperforming TDRs	5,965		6,742
Total TDRs	$	5,965	$	7,061

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Allowance for Credit Losses

3 Months Ended

Mar. 31, 2022

Financing Receivable, Allowance for Credit Loss, Additional Information [Abstract]

Allowance for Credit Losses

Allowance for Credit Losses

Allowance for Loan and Lease Losses

The allowance for credit losses is established for current expected credit losses on the Company’s loan and lease portfolios utilizing guidance in Accounting Standards Codification (ASC) Topic 326. The determination of the allowance requires significant judgment to estimate credit losses measured on a collective pool basis when similar risk characteristics exist, and for loans evaluated individually. In determining the allowance, the Company estimates expected future losses for the loan’s entire contractual term adjusted for expected payments when appropriate. The allowance estimate considers relevant available information, from internal and external sources relating to the historical loss experience, current conditions, and reasonable and supportable forecasts for the Company’s outstanding loan and lease balances. The allowance is an estimation that reflects management’s evaluation of expected losses related to the Company’s financial assets measured at amortized cost. To ensure that the allowance is maintained at an adequate level, a detailed analysis is performed on a quarterly basis and an appropriate provision is made to adjust the allowance.

The Company categorizes its loan portfolios into nine segments based on similar risk characteristics. Loans within each segment are collectively evaluated using either: 1) a cohort cumulative loss rate methodology (“cohort”) or, 2) the probability of default (“PD”)/loss given default (“LGD”) methodology (PD/LGD).

The following table shows the changes in the allowance for loan and lease losses, segregated by portfolio segment, for the three months ended March 31, 2022 and 2021.

(Dollars in thousands)	Commercial and agricultural		Solar		Auto and light truck		Medium and heavy duty truck		Aircraft		Construction equipment		Commercial real estate		Residential real estate and home equity		Consumer		Total
March 31, 2022
Balance, beginning of period	$	15,409	$	6,585	$	19,624	$	6,015	$	33,628	$	19,673	$	19,691	$	5,084	$	1,783	$	127,492
Charge-offs	—		—		—		—		—		48		—		4		165		217
Recoveries	4		—		65		—		316		—		—		1		65		451
Net charge-offs (recoveries)	(4)		—		(65)		—		(316)		48		—		3		100		(234)
Provision (recovery of provision)	185		(168)		(168)		34		2,024		416		(445)		137		218		2,233
Balance, end of period	$	15,598	$	6,417	$	19,521	$	6,049	$	35,968	$	20,041	$	19,246	$	5,218	$	1,901	$	129,959
March 31, 2021
Balance, beginning of period	$	16,680	$	5,549	$	28,926	$	6,400	$	34,053	$	19,166	$	22,758	$	5,374	$	1,748	$	140,654
Charge-offs	1		—		4,286		—		—		8		—		5		152		4,452
Recoveries	377		—		49		—		119		254		15		1		135		950
Net charge-offs (recoveries)	(376)		—		4,237		—		(119)		(246)		(15)		4		17		3,502
Provision (recovery of provision)	(1,605)		209		4,654		(129)		1,047		(3,103)		1,561		(207)		(29)		2,398
Balance, end of period	$	15,451	$	5,758	$	29,343	$	6,271	$	35,219	$	16,309	$	24,334	$	5,163	$	1,702	$	139,550

The allowance for credit losses increased during the first quarter in response to loan growth along with a forecast adjustment due to increased risk during the forecast period attributable to heightened geopolitical uncertainty, ongoing supply chain difficulties, and persistent inflation. Credit quality remains on an improving trend as evidenced by declining total special attention credit outstandings and net recoveries during the quarter. This quarter, increases in the allowance for various portfolios, particularly aircraft and construction equipment, were driven by loan growth and to a lesser extent, the forecast adjustment. Decreases in the auto and light truck portfolio was due to continued amortization of special attention credits in the highly reserved bus segment. Reduced reserves in the commercial real estate portfolio were due to a reduction in qualitative adjustments related to COVID-19 along with lower loan balances.

Commercial and agricultural – the decline in loan balances is attributable to PPP debt forgiveness coupled with a modest decline in loans in our core businesses. The small increase in the allowance was principally due to the impact of the forecast adjustment.

Solar – the allowance decreased due to lower loan outstandings. Credit quality is stable to improving.

Auto and light truck – the allowance decreased as a result of lower outstanding loan balances in the higher risk bus segment of the portfolio, which was significantly impacted by the pandemic. The decline in allowance attributable to the bus segment was substantially offset by loan growth in the auto rental and leasing segments, which carry lower loss ratios.

Medium and heavy duty truck – the allowance was minimally changed as a decrease in loan outstandings was offset by a slight increase in the forecast adjustment. Credit quality metrics continued to be relatively strong for this portfolio. Energy price volatility and driver availability remain a challenge.

Aircraft – the allowance increased due to loan growth in both domestic and foreign segments. The portfolio is currently bolstered by strengthening collateral values somewhat offset by continuing economic concerns related primarily to Latin American-based foreign loans. The Company has historically carried a higher allowance in this portfolio due to risk volatility.

Construction equipment – the allowance increased due to loan growth.

Commercial real estate – the allowance decrease was a result of declines in outstanding loan balances as well as a minor decrease in COVID-19-related qualitative adjustment factors.

Residential real estate and home equity – the increased allowance was due to an increase in loan balances.

Consumer – segment saw a slight increase in allowance due principally to loan growth.

Economic Outlook

As of March 31, 2022, the most significant economic factors impacting our loan portfolios are the war in Ukraine and resultant increased uncertainty for the U.S. economy, and additional inflationary pressures, further aggravated by supply chain disruptions. We remain concerned about COVID-19 surges and new variants. The forecast considers global and domestic economic impacts from these factors as well as other key economic factors such as change in Gross Domestic Product and unemployment which may impact our clients. The Company’s assumption was that economic growth will slow in 2022 and 2023 and inflation will remain well above the 2% Federal Reserve target rate resulting in an adverse impact on the loan and lease portfolio over the next two years.

As a result of geopolitical risks and economic uncertainty, the Company’s future loss estimates may vary considerably from the March 31, 2022 assumptions.

Liability for Credit Losses on Unfunded Loan Commitments

The liability for credit losses inherent in unfunded loan commitments is included in Accrued Expenses and Other Liabilities on the Consolidated Statements of Financial Condition. The following table shows the changes in the liability for credit losses on unfunded loan commitments.

	Three Months Ended March 31,
(Dollars in thousands)	2022		2021
Balance, beginning of period	$	4,196	$	4,499
Provision	728		94
Balance, end of period	$	4,924	$	4,593

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Lease Investments

3 Months Ended

Mar. 31, 2022

Leases [Abstract]

Lease Investments

Lease Investments

As a lessor, the Company’s loan and lease portfolio includes direct finance leases, which are included in Commercial and Agricultural, Solar, Auto and Light Truck, Medium and Heavy Duty Truck, Aircraft, and Construction Equipment on the Consolidated Statements of Financial Condition. The Company also finances various types of construction equipment, medium and heavy duty trucks, automobiles and other equipment under leases classified as operating leases, which are included in Equipment Owned Under Operating Leases, net, on the Consolidated Statements of Financial Condition.

The following table shows interest income recognized from direct finance lease payments and operating lease equipment rental income and related depreciation expense.

	Three Months Ended March 31,
(Dollars in thousands)	2022		2021
Direct finance leases:
Interest income on lease receivable	$	1,781	$	1,590
Operating leases:
Income related to lease payments	$	3,662	$	4,629
Depreciation expense	3,015		3,773

Income related to reimbursements from lessees for personal property tax on operating leased equipment for the three months ended March 31, 2022 and 2021 was $0.20 million and $0.24 million, respectively. Expense related to personal property tax payments on operating leased equipment for the three months ended March 31, 2022 and 2021 was $0.20 million and $0.24 million, respectively.

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Mortgage Servicing Rights

3 Months Ended

Mar. 31, 2022

Transfers and Servicing of Financial Assets [Abstract]

Mortgage Servicing Rights

Mortgage Servicing Rights

The Company recognizes the rights to service residential mortgage loans for others as separate assets, whether the servicing rights are acquired through a separate purchase or through the sale of originated loans with servicing rights retained. The Company allocates a portion of the total proceeds of a mortgage loan to servicing rights based on the relative fair value. The unpaid principal balance of residential mortgage loans serviced for third parties was $888.63 million and $883.90 million at March 31, 2022 and December 31, 2021, respectively.

Mortgage servicing rights (MSRs) are evaluated for impairment at each reporting date. For purposes of impairment measurement, MSRs are stratified based on the predominant risk characteristics of the underlying servicing, principally by loan type. If temporary impairment exists within a tranche, a valuation allowance is established through a charge to income equal to the amount by which the carrying value exceeds the fair value. If it is later determined all or a portion of the temporary impairment no longer exists for a particular tranche, the valuation allowance is reduced through a recovery of income.

The following table shows changes in the carrying value of MSRs and the associated valuation allowance.

	Three Months Ended March 31,
(Dollars in thousands)	2022		2021
Mortgage servicing rights:
Balance at beginning of period	$	4,671	$	4,616
Additions	335		761
Amortization	(381)		(590)
Carrying value before valuation allowance at end of period	4,625		4,787
Valuation allowance:
Balance at beginning of period	—		(812)
Impairment recoveries	—		42
Balance at end of period	$	—	$	(770)
Net carrying value of mortgage servicing rights at end of period	$	4,625	$	4,017
Fair value of mortgage servicing rights at end of period	$	6,363	$	4,365

At March 31, 2022 and 2021, the fair value of MSRs exceeded the carrying value reported in the Consolidated Statements of Financial Condition by $1.74 million and $0.35 million, respectively. This difference represents increases in the fair value of certain MSRs that could not be recorded above cost basis.

Mortgage loan contractual servicing fees, including late fees and ancillary income, were $0.72 million and $0.81 million for the three months ended March 31, 2022 and 2021, respectively. Mortgage loan contractual servicing fees are included in Mortgage Banking on the Consolidated Statements of Income.

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Commitments and Financial Instruments with Off-Balance-Sheet Risk

3 Months Ended

Mar. 31, 2022

Commitments and Contingencies Disclosure [Abstract]

Commitments and Financial Instruments with Off-Balance-Sheet Risk

Commitments and Financial Instruments with Off-Balance-Sheet Risk

Financial Instruments with Off-Balance-Sheet Risk — 1st Source and its subsidiaries are parties to financial instruments with off-balance-sheet risk in the normal course of business. These off-balance-sheet financial instruments include commitments to originate and sell loans and standby letters of credit. The instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the Consolidated Statements of Financial Condition.

The following table shows financial instruments whose contract amounts represent credit risk.

(Dollars in thousands)	March 31, 2022		December 31, 2021
Amounts of commitments:
Loan commitments to extend credit	$	1,204,428	$	1,148,984
Standby letters of credit	$	22,765	$	24,657
Commercial and similar letters of credit	$	746	$	8,531

The exposure to credit loss in the event of nonperformance by the other party to the financial instruments for loan commitments and standby letters of credit is represented by the dollar amount of those instruments. The Company uses the same credit policies and collateral requirements in making commitments and conditional obligations as it does for on-balance-sheet instruments.

The Company grants mortgage loan commitments to borrowers, subject to normal loan underwriting standards. The interest rate risk associated with these loan commitments is managed by entering into contracts for future deliveries of loans. Loan commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.

Standby letters of credit are conditional commitments that guarantee the performance of a client to a third party. The credit risk involved in and collateral obtained when issuing standby letters of credit is essentially the same as that involved in extending loan commitments to clients. Standby letters of credit generally have terms ranging from two months to one year.

Commercial letters of credit are issued specifically to facilitate commerce and typically result in the commitment being drawn on when the underlying transaction is consummated between the customer and the third party. Commercial letters of credit generally have terms ranging from two months to six months.

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Derivative Financial Instruments

3 Months Ended

Mar. 31, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

Derivative Financial Instruments

Commitments to originate residential mortgage loans held for sale and forward commitments to sell residential mortgage loans are considered derivative instruments. See Note 8 for further information.

The Company has certain interest rate derivative positions that are not designated as hedging instruments. Derivative assets and liabilities are recorded at fair value on the Consolidated Statements of Financial Condition and do not take into account the effects of master netting agreements. Master netting agreements allow the Company to settle all derivative contracts held with a single counterparty on a net basis, and to offset net derivative positions with related collateral, where applicable. These derivative positions relate to transactions in which the Company enters into an interest rate swap with a client while at the same time entering into an offsetting interest rate swap with another financial institution. In connection with each transaction, the Company agrees to pay interest to the client on a notional amount at a variable interest rate and receive interest from the client on the same notional amount at a fixed interest rate. At the same time, the Company agrees to pay another financial institution the same fixed interest rate on the same notional amount and receive the same variable interest rate on the same notional amount. The transaction allows the client to effectively convert a variable rate loan to a fixed rate. Because the terms of the swaps with the customers and the other financial institutions offset each other, with the only difference being counterparty credit risk, changes in the fair value of the underlying derivative contracts are not materially different and do not significantly impact the Company’s results of operations.

The following table shows the amounts of non-hedging derivative financial instruments.

			Asset derivatives			Liability derivatives
(Dollars in thousands)	Notional or contractual amount		Statement of Financial Condition classification	Fair value		Statement of Financial Condition classification	Fair value
March 31, 2022
Interest rate swap contracts	$	1,017,365	Other assets	$	7,806	Other liabilities	$	8,006
Loan commitments	13,422		Mortgages held for sale	287		N/A	—
Forward contracts - mortgage loan	13,080		Mortgages held for sale	200		N/A	—
Total	$	1,043,867		$	8,293		$	8,006
December 31, 2021
Interest rate swap contracts	$	1,064,721	Other assets	$	20,735	Other liabilities	$	21,172
Loan commitments	15,086		Mortgages held for sale	452		N/A	—
Forward contracts - mortgage loan	22,000		N/A	—		Mortgages held for sale	11
Total	$	1,101,807		$	21,187		$	21,183

The following table shows the amounts included in the Consolidated Statements of Income for non-hedging derivative financial instruments.

		Gain (loss)
		Three Months Ended March 31,
(Dollars in thousands)	Statement of Income classification	2022		2021
Interest rate swap contracts	Other expense	$	237	$	333
Interest rate swap contracts	Other income	—		86
Loan commitments	Mortgage banking	(165)		(698)
Forward contracts - mortgage loan	Mortgage banking	211		577
Total		$	283	$	298

The following table shows the offsetting of financial assets and derivative assets.

							Gross Amounts Not Offset in the Statement of Financial Condition
(Dollars in thousands)	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Statement of Financial Condition		Net Amounts of Assets Presented in the Statement of Financial Condition		Financial Instruments		Cash Collateral Received		Net Amount
March 31, 2022
Interest rate swaps	$	10,324	$	2,518	$	7,806	$	—	$	3,040	$	4,766
December 31, 2021
Interest rate swaps	$	24,436	$	3,701	$	20,735	$	—	$	—	$	20,735

The following table shows the offsetting of financial liabilities and derivative liabilities.

							Gross Amounts Not Offset in the Statement of Financial Condition
(Dollars in thousands)	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Statement of Financial Condition		Net Amounts of Liabilities Presented in the Statement of Financial Condition		Financial Instruments		Cash Collateral Pledged		Net Amount
March 31, 2022
Interest rate swaps	$	10,524	$	2,518	$	8,006	$	299	$	—	$	7,707
Repurchase agreements	193,798		—		193,798		193,798		—		—
Total	$	204,322	$	2,518	$	201,804	$	194,097	$	—	$	7,707
December 31, 2021
Interest rate swaps	$	24,873	$	3,701	$	21,172	$	20,498	$	—	$	674
Repurchase agreements	194,727		—		194,727		194,727		—		—
Total	$	219,600	$	3,701	$	215,899	$	215,225	$	—	$	674

If a default in performance of any obligation of a repurchase agreement occurs, each party will set-off property held in respect of transactions against obligations owing in respect of any other transactions. At March 31, 2022 and December 31, 2021, repurchase agreements had a remaining contractual maturity of $190.67 million and $191.47 million in overnight and $3.13 million and $3.26 million in up to 30 days, respectively and were collateralized by U.S. Treasury and Federal agencies securities.

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Variable Interest Entities

3 Months Ended

Mar. 31, 2022

Variable Interest Entities [Abstract]

Variable Interest Entities Disclosure

Variable Interest Entities

A variable interest entity (VIE) is a partnership, limited liability company, trust or other legal entity that meets any one of the following criteria:

•The entity does not have sufficient equity to conduct its activities without additional subordinated financial support from another party.

•The entity’s investors lack the power to direct the activities that most significantly affect the entity’s economic performance.

•The entity’s at-risk holders do not have the obligation to absorb the losses or the right to receive residual returns.

•The voting rights of some investors are not proportional to their economic interests in the entity, and substantially all of the entity’s activities involve, or are conducted on behalf of, investors with disproportionately few voting rights.

The Company is involved in various entities that are considered to be VIEs. The Company’s investments in VIEs are primarily related to investments promoting affordable housing, community development and renewable energy sources. Some of these tax-advantaged investments support the Company’s regulatory compliance with the Community Reinvestment Act. The Company’s investments in these entities generate a return primarily through the realization of federal and state income tax credits, and other tax benefits, such as tax deductions from operating losses of the investments, over specified time periods. Tax credits from affordable housing investments and community development investments are recognized as a reduction of tax expense. Investments in renewable energy sources qualify for investment tax credits which are recognized as a reduction to the related investment asset. The Company recognized federal income tax credits related to its affordable housing and community development tax-advantaged investments in tax expense of $0.50 million and $0.50 million for the three months ended March 31, 2022 and 2021, respectively. The Company also recognized $0.00 million and $1.92 million of investment tax credits for the three months ended March 31, 2022 and 2021, respectively.

The Company is not required to consolidate VIEs in which it has concluded it does not have a controlling financial interest, and thus is not the primary beneficiary. In such cases, the Company does not have both the power to direct the entities’ most significant activities and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIEs. As a limited partner in these operating partnerships, the Company is allocated credits and deductions associated with the underlying properties. The Company has determined that it is not the primary beneficiary of these investments because the general partners have the power to direct activities that most significantly influence the economic performance of their respective partnerships.

The Company’s investments in these unconsolidated VIEs are carried in Other Assets on the Consolidated Statements of Financial Condition. The Company’s unfunded capital and other commitments related to these unconsolidated VIEs are generally carried in Other Liabilities on the Consolidated Statements of Financial Condition. The Company’s maximum exposure to loss from these unconsolidated VIEs include the investment recorded on the Company’s Consolidated Statements of Financial Condition, net of unfunded capital commitments, and previously recorded tax credits which remain subject to recapture by taxing authorities based on compliance features required to be met at the project level. While the Company believes potential losses from these investments are remote, the maximum exposure was determined by assuming a scenario where the community-based business, housing projects and renewable energy projects completely fail and do not meet certain taxing authority compliance requirements resulting in recapture of the related tax credits.

The following table provides a summary of investments in affordable housing, community development and renewable energy VIEs that the Company has not consolidated.

(Dollars in thousands)	March 31, 2022		December 31, 2021
Investment carrying amount	$	26,391	$	35,968
Unfunded capital and other commitments	19,668		29,670
Maximum exposure to loss	48,044		50,319

The Company is required to consolidate VIEs in which it has concluded it has significant involvement in and the ability to direct the activities that impact the entity’s economic performance. The Company is the managing general partner of entities to which it shares interest in tax-advantaged investments with third parties. At March 31, 2022 and December 31, 2021, approximately $67.85 million and $59.08 million of the Company’s assets and $7.23 million and $0.00 million of its liabilities included on the Consolidated Statements of Financial Condition were related to tax-advantaged investment VIEs which the Company has consolidated, respectively. The assets of the consolidated VIEs are reported in Other Assets, the liabilities are reported in Other Liabilities and the non-controlling interest is reported in Equity on the Consolidated Statements of Financial Condition. The assets of a particular VIE are the primary source of funds to settle its obligations. The creditors of the VIE do not have recourse to the general credit of the Company. The Company’s exposure to the consolidated VIE is generally limited to the carrying value of its variable interest plus any related tax credits previously recognized.

Additionally, the Company sponsors one trust, 1st Source Master Trust (Capital Trust) of which 100% of the common equity is owned by the Company. The Capital Trust was formed in 2007 for the purpose of issuing corporation-obligated mandatorily redeemable capital securities (the capital securities) to third-party investors and investing the proceeds from the sale of the capital securities solely in junior subordinated debenture securities of the Company (the subordinated notes). The subordinated notes held by the Capital Trust are the sole assets of the Capital Trust. The Capital Trust qualifies as a variable interest entity for which the Company is not the primary beneficiary and therefore reported in the financial statements as an unconsolidated subsidiary. The junior subordinated debentures are reflected as subordinated notes in the Statements of Financial Condition with the corresponding interest distributions reflected as Interest Expense in the Statements of Income. The common shares issued by the Capital Trust are included in Other Assets in the Statements of Financial Condition.

Distributions on the capital securities issued by the Capital Trust are payable quarterly at a rate per annum equal to the interest rate being earned by the Capital Trust on the subordinated notes held by the Capital Trust. The capital securities are subject to mandatory redemption, in whole or in part, upon repayment of the subordinated notes. The Company has entered into agreements which, taken collectively, fully and unconditionally guarantee the capital securities subject to the terms of each of the guarantees. The capital securities held by the Capital Trust qualify as Tier 1 capital under Federal Reserve Board guidelines.

The following table shows subordinated notes at March 31, 2022.

(Dollars in thousands)	Amount of Subordinated Notes		Interest Rate		Maturity Date
June 2007 issuance (1)	$	41,238	7.22	%	6/15/2037
August 2007 issuance (2)	17,526		2.31	%	9/15/2037
Total	$	58,764

(1) Fixed rate through life of debt.

(2) 3-Month LIBOR +1.48% through remaining life of debt.

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Earnings Per Share

3 Months Ended

Mar. 31, 2022

Earnings Per Share [Abstract]

Earnings Per Share

Earnings Per Share

Earnings per common share is computed using the two-class method. Basic earnings per common share is computed by dividing net income available to common shareholders by the weighted-average number of common shares outstanding during the applicable period, excluding outstanding participating securities. Participating securities include non-vested restricted stock awards. Non-vested restricted stock awards are considered participating securities to the extent the holders of these securities receive non-forfeitable dividends at the same rate as holders of common stock. Diluted earnings per common share is computed using the weighted-average number of shares determined for the basic earnings per common share computation plus the dilutive effect of stock compensation using the treasury stock method.

Stock options, where the exercise price was greater than the average market price of the common shares, were excluded from the computation of diluted earnings per common share because the result would have been antidilutive. There were no stock options outstanding as of March 31, 2022 and 2021.

The following table presents a reconciliation of the number of shares used in the calculation of basic and diluted earnings per common share.

	Three Months Ended March 31,
(Dollars in thousands - except per share amounts)	2022		2021
Distributed earnings allocated to common stock	$	7,672	$	7,364
Undistributed earnings allocated to common stock	19,516		20,531
Net earnings allocated to common stock	27,188		27,895
Net earnings allocated to participating securities	202		210
Net income allocated to common stock and participating securities	$	27,390	$	28,105
Weighted average shares outstanding for basic earnings per common share	24,743,790		25,320,930
Dilutive effect of stock compensation	—		—
Weighted average shares outstanding for diluted earnings per common share	24,743,790		25,320,930
Basic earnings per common share	$	1.10	$	1.10
Diluted earnings per common share	$	1.10	$	1.10

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Stock Based Compensation

3 Months Ended

Mar. 31, 2022

Share-based Payment Arrangement [Abstract]

Stock Based Compensation

Stock Based CompensationAs of March 31, 2022, the Company had four active stock-based employee compensation plans, which are more fully described in Note 16 of the Consolidated Financial Statements in 1st Source’s Annual Report on Form 10-K for the year ended December 31, 2021. These plans include three executive stock award plans, the Executive Incentive Plan (EIP), the Restricted Stock Award Plan (RSAP), the Strategic Deployment Incentive Plan (SDP); and the Employee Stock Purchase Plan. The 2011 Stock Option Plan was approved by the shareholders on April 21, 2011 but the Company had not made any grants through March 31, 2022.

Stock-based compensation expense for all stock-based compensation awards granted is based on the grant-date fair value. For all awards except stock option awards, the grant date fair value is either the fair market value per share or book value per share (corresponding to the type of stock awarded) as of the grant date. For stock option awards, the grant date fair value is estimated using the Black-Scholes option pricing model. For all awards, the Company recognizes these compensation costs on a straight-line basis over the requisite service period of the award, for which the Company uses the related vesting term.

Total fair value of options vested and expensed was zero for the three months ended March 31, 2022 and 2021. As of March 31, 2022 and 2021 there were no outstanding stock options. There were no stock options exercised during the three months ended March 31, 2022 and 2021. All shares issued in connection with stock option exercises are issued from available treasury stock.

As of March 31, 2022, there was $9.48 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements. That cost is expected to be recognized over a weighted-average period of 3.56 years.

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Accumulated Other Comprehensive Income

3 Months Ended

Mar. 31, 2022

Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]

Accumulated Other Comprehensive Income

Accumulated Other Comprehensive Income (Loss)

The following table presents reclassifications out of accumulated other comprehensive income (loss) related to unrealized gains and losses on available-for-sale securities.

	Three Months Ended March 31,				Affected Line Item in the Statements of Income
(Dollars in thousands)	2022		2021
Realized gains included in net income	$	—	$	—	Gains on investment securities available-for-sale
	—		—		Income before income taxes
Tax effect	—		—		Income tax expense
Net of tax	$	—	$	—	Net income

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Income Taxes

3 Months Ended

Mar. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The total amount of unrecognized tax benefits that would affect the effective tax rate if recognized was zero at March 31, 2022 and December 31, 2021. Interest and penalties are recognized through the income tax provision. For the three months ended March 31, 2022 and 2021, the Company recognized no interest or penalties. There were no accrued interest and penalties at March 31, 2022 and December 31, 2021.

Tax years that remain open and subject to audit include the federal 2018-2021 years and the Indiana 2018-2021 years. The Company does not anticipate a significant change in the amount of uncertain tax positions within the next 12 months.

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Fair Value Measurements

3 Months Ended

Mar. 31, 2022

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

The Company records certain assets and liabilities at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are also utilized to determine the initial value of certain assets and liabilities, to perform impairment assessments, and for disclosure purposes. The Company uses quoted market prices and observable inputs to the maximum extent possible when measuring fair value. In the absence of quoted market prices, various valuation techniques are utilized to measure fair value. When possible, observable market data for identical or similar financial instruments is used in the valuation. When market data is not available, fair value is determined using valuation models that incorporate management’s estimates of the assumptions a market participant would use in pricing the asset or liability.

Fair value measurements are classified within one of three levels based on the observability of the inputs used to determine fair value, as follows:

•Level 1 — The valuation is based on quoted prices in active markets for identical instruments.

•Level 2 — The valuation is based on observable inputs such as quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

•Level 3 — The valuation is based on unobservable inputs that are supported by minimal or no market activity and that are significant to the fair value of the instrument. Level 3 valuations are typically performed using pricing models, discounted cash flow methodologies, or similar techniques that incorporate management’s own estimates of assumptions that market participants would use in pricing the instrument, or valuations that require significant management judgment or estimation.

A financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

The Company elected fair value accounting for mortgages held for sale and for its best-efforts forward sales commitments. The Company economically hedges its mortgages held for sale at the time the interest rate locks are issued to the customers. The Company believes the election for mortgages held for sale will reduce certain timing differences and better match changes in the value of these assets with changes in the value of derivatives or best-best efforts forward sales commitments. At March 31, 2022 and December 31, 2021, all mortgages held for sale were carried at fair value.

The following table shows the differences between the fair value carrying amount of mortgages held for sale measured at fair value and the aggregate unpaid principal amount the Company is contractually entitled to receive at maturity.

(Dollars in thousands)	Fair value  carrying amount		Aggregate unpaid principal		Excess of fair value carrying amount over (under) unpaid principal
March 31, 2022
Mortgages held for sale reported at fair value	$	4,757	$	4,256	$	501	(1)
December 31, 2021
Mortgages held for sale reported at fair value	$	13,284	$	12,456	$	828	(1)

(1)The excess of fair value carrying amount over (under) unpaid principal is included in mortgage banking income and includes changes in fair value at and subsequent to funding and gains and losses on the related loan commitment prior to funding.

Financial Instruments on Recurring Basis:

The following is a description of the valuation methodologies used for financial instruments measured at fair value on a recurring basis:

Investment securities available-for-sale are valued primarily by a third party pricing agent. Prices supplied by the independent pricing agent, as well as their pricing methodologies and assumptions, are reviewed by the Company for reasonableness and to ensure such prices are aligned with market levels. In general, the Company’s investment securities do not possess a complex structure that could introduce greater valuation risk. The portfolio mainly consists of traditional investments including U.S. Treasury and Federal agencies securities, Federal agency mortgage pass-through securities, and general obligation and revenue municipal bonds. Pricing for such instruments is fairly generic and is easily obtained. On a quarterly basis, prices supplied by the pricing agent are validated by comparison to prices obtained from other third party sources for a material portion of the portfolio.

The valuation policy and procedures for Level 3 fair value measurements of available-for-sale debt securities are decided through collaboration between management of the Corporate Accounting and Funds Management departments. The changes in fair value measurement for Level 3 securities are analyzed on a periodic basis under a collaborative framework with the aforementioned departments. The methodology and variables used for input are derived from the combination of observable and unobservable inputs. The unobservable inputs are determined through internal assumptions that may vary from period to period due to external factors, such as market movement and credit rating adjustments.

Both the market and income valuation approaches are implemented using the following types of inputs:

•U.S. treasuries are priced using the market approach and utilizing live data feeds from active market exchanges for identical securities.

•Government-sponsored agency debt securities and corporate bonds are primarily priced using available market information through processes such as benchmark curves, market valuations of like securities, sector groupings and matrix pricing.

•Other government-sponsored agency securities, mortgage-backed securities and some of the actively traded REMICs and CMOs, are primarily priced using available market information including benchmark yields, prepayment speeds, spreads and volatility of similar securities.

•State and political subdivisions are largely grouped by characteristics, i.e., geographical data and source of revenue in trade dissemination systems. Since some securities are not traded daily and due to other grouping limitations, active market quotes are often obtained using benchmarking for like securities. Local direct placement municipal securities, with very little market activity, are priced using an appropriate market yield curve, which includes a credit spread assumption.

Mortgages held for sale and the related loan commitments and forward contracts (hedges) are valued by a third party pricing agent. Prices supplied by the independent pricing agent, as well as their pricing methodologies, are reviewed by the Company for reasonableness and to ensure such prices are aligned with market values. On a quarterly basis, prices supplied by the pricing agent are validated by comparison to the prices obtained from other third party sources.

Interest rate swap positions, both assets and liabilities, are valued by a third-party pricing agent using an income approach and utilizing models that use as their basis readily observable market parameters. This valuation process considers various factors including interest rate yield curves, time value and volatility factors. Validation of third party agent valuations is accomplished by comparing those values to the Company’s swap counterparty valuations. Management believes an adjustment is required to “mid-market” valuations for derivatives tied to its performing loan portfolio to recognize the imprecision and related exposure inherent in the process of estimating expected credit losses as well as velocity of deterioration evident with systemic risks embedded in these portfolios. Any change in the mid-market derivative valuation adjustment will be recognized immediately through the Consolidated Statements of Income.

The following table shows the balance of assets and liabilities measured at fair value on a recurring basis.

(Dollars in thousands)	Level 1		Level 2		Level 3		Total
March 31, 2022
Assets:
Investment securities available-for-sale:
U.S. Treasury and Federal agencies securities	$	590,484	$	490,461	$	—	$	1,080,945
U.S. States and political subdivisions securities	—		93,824		4,529		98,353
Mortgage-backed securities — Federal agencies	—		655,010		—		655,010
Corporate debt securities	—		22,525		—		22,525
Foreign government and other securities	—		598		—		598
Total debt securities available-for-sale	590,484		1,262,418		4,529		1,857,431
Mortgages held for sale	—		4,757		—		4,757
Accrued income and other assets (interest rate swap agreements)	—		7,806		—		7,806
Total	$	590,484	$	1,274,981	$	4,529	$	1,869,994
Liabilities:
Accrued expenses and other liabilities (interest rate swap agreements)	$	—	$	8,006	$	—	$	8,006
Total	$	—	$	8,006	$	—	$	8,006
December 31, 2021
Assets:
Investment securities available-for-sale:
U.S. Treasury and Federal agencies securities	$	561,950	$	522,056	$	—	$	1,084,006
U.S. States and political subdivisions securities	—		93,852		1,849		95,701
Mortgage-backed securities — Federal agencies	—		659,727		—		659,727
Corporate debt securities	—		23,009		—		23,009
Foreign government and other securities	—		598		—		598
Total debt securities available-for-sale	561,950		1,299,242		1,849		1,863,041
Mortgages held for sale	—		13,284		—		13,284
Accrued income and other assets (interest rate swap agreements)	—		20,735		—		20,735
Total	$	561,950	$	1,333,261	$	1,849	$	1,897,060
Liabilities:
Accrued expenses and other liabilities (interest rate swap agreements)	$	—	$	21,172	$	—	$	21,172
Total	$	—	$	21,172	$	—	$	21,172

The following table shows changes in Level 3 assets measured at fair value on a recurring basis for the quarter ended March 31, 2022 and 2021.

(Dollars in thousands)	U.S. States and political subdivisions securities
Beginning balance January 1, 2022	$	1,849
Total gains or losses (realized/unrealized):
Included in earnings	—
Included in other comprehensive income (loss)	(155)
Purchases	3,000
Issuances	—
Sales	—
Settlements	—
Maturities	(165)
Transfers into Level 3	—
Transfers out of Level 3	—
Ending balance March 31, 2022	$	4,529
Beginning January 1, 2021	$	2,152
Total gains or losses (realized/unrealized):
Included in earnings	—
Included in other comprehensive income (loss)	(80)
Purchases	—
Issuances	—
Sales	—
Settlements	—
Maturities	(165)
Transfers into Level 3	—
Transfers out of Level 3	—
Ending balance March 31, 2021	$	1,907

There were no gains or losses for the period included in earnings attributable to the change in unrealized gains or losses relating to assets still held at March 31, 2022 or 2021.

The following table shows the valuation methodology and unobservable inputs for Level 3 assets measured at fair value on a recurring basis.

(Dollars in thousands)	Fair Value		Valuation Methodology	Unobservable Inputs	Range of Inputs	Weighted Average
March 31, 2022
Debt securities available-for sale
Direct placement municipal securities	$	4,529	Discounted cash flows	Credit spread assumption	2.36% - 3.95%	2.88	%
December 31, 2021
Debt securities available-for sale
Direct placement municipal securities	$	1,849	Discounted cash flows	Credit spread assumption	0.04% - 2.31%	1.58	%

Financial Instruments on Non-recurring Basis:

The Company may be required, from time to time, to measure certain other financial assets at fair value on a non-recurring basis in accordance with GAAP. These adjustments to fair value usually result from application of lower of cost or market accounting or impairment charges of individual assets.

The Credit Policy Committee (CPC), a management committee, is responsible for overseeing the valuation processes and procedures for Level 3 measurements of impaired loans, other real estate and repossessions. The CPC reviews these assets on a quarterly basis to determine the accuracy of the observable inputs, generally third party appraisals, auction values, values derived from trade publications and data submitted by the borrower, and the appropriateness of the unobservable inputs, generally discounts due to current market conditions and collection issues. The CPC establishes discounts based on asset type and valuation source; deviations from the standard are documented. The discounts are reviewed periodically, annually at a minimum, to determine they remain appropriate. Consideration is given to current trends in market values for the asset categories and gains and losses on sales of similar assets. The Loan and Funds Management Committee of the Board of Directors is responsible for overseeing the CPC.

Discounts vary depending on the nature of the assets and the source of value. Aircraft are generally valued using quarterly trade publications adjusted for engine time, condition, maintenance programs, discounted by 10%. Likewise, autos are valued using current auction values, discounted by 10%; medium and heavy duty trucks are valued using trade publications and auction values, discounted by 15%. Construction equipment is generally valued using trade publications and auction values, discounted by 20%. Real estate is valued based on appraisals or evaluations, discounted by 20% with higher discounts for property in poor condition or property with characteristics which may make it more difficult to market. Commercial loans subject to borrowing base certificates are generally discounted by 20% for receivables and 40% - 75% for inventory with higher discounts when monthly borrowing base certificates are not required or received.

Collateral-dependent impaired loans and related write-downs are based on the fair value of the underlying collateral if repayment is expected solely from the collateral. Collateral values are reviewed quarterly and estimated using customized discounting criteria, appraisals and dealer and trade magazine quotes which are used in a market valuation approach. In accordance with fair value measurements, only impaired loans for which an allowance for loan loss has been established based on the fair value of collateral require classification in the fair value hierarchy. As a result, only a portion of the Company’s impaired loans are classified in the fair value hierarchy.

The Company has established MSRs valuation policies and procedures based on industry standards and to ensure valuation methodologies are consistent and verifiable. MSRs and related adjustments to fair value result from application of lower of cost or fair value accounting. For purposes of impairment, MSRs are stratified based on the predominant risk characteristics of the underlying servicing, principally by loan type. The fair value of each tranche of the servicing portfolio is estimated by calculating the present value of estimated future net servicing cash flows, taking into consideration actual and expected mortgage loan prepayment rates, discount rates, servicing costs, and other economic factors. Prepayment rates and discount rates are derived through a third party pricing agent. Changes in the most significant inputs, including prepayment rates and discount rates, are compared to the changes in the fair value measurements and appropriate resolution is made. A fair value analysis is also obtained from an independent third party agent and compared to the internal valuation for reasonableness. MSRs do not trade in an active, open market with readily observable prices and though sales of MSRs do occur, precise terms and conditions typically are not readily available and the characteristics of the Company’s servicing portfolio may differ from those of any servicing portfolios that do trade.

Other real estate is based on the fair value of the underlying collateral less expected selling costs. Collateral values are estimated primarily using appraisals and reflect a market value approach. Fair values are reviewed quarterly, and new appraisals are obtained annually. Repossessions are similarly valued.

For assets measured at fair value on a nonrecurring basis the following represents impairment charges (recoveries) recognized on these assets during the quarter ended March 31, 2022: collateral-dependent impaired loans - $0.00 million; mortgage servicing rights - $0.00 million; repossessions - $0.00 million; and other real estate - $0.00 million.

The following table shows the carrying value of assets measured at fair value on a non-recurring basis.

(Dollars in thousands)	Level 1		Level 2		Level 3		Total
March 31, 2022
Collateral-dependent impaired loans	$	—	$	—	$	986	$	986
Accrued income and other assets (mortgage servicing rights)	—		—		4,625		4,625
Accrued income and other assets (repossessions)	—		—		73		73
Accrued income and other assets (other real estate)	—		—		—		—
Total	$	—	$	—	$	5,684	$	5,684
December 31, 2021
Collateral-dependent impaired loans	$	—	$	—	$	571	$	571
Accrued income and other assets (mortgage servicing rights)	—		—		4,671		4,671
Accrued income and other assets (repossessions)	—		—		861		861
Accrued income and other assets (other real estate)	—		—		—		—
Total	$	—	$	—	$	6,103	$	6,103

The following table below shows the valuation methodology and unobservable inputs for Level 3 assets and liabilities measured at fair value on a non-recurring basis.

(Dollars in thousands)	Carrying Value		Fair Value		Valuation Methodology	Unobservable Inputs	Range of Inputs	Weighted Average
March 31, 2022
Collateral-dependent impaired loans	$	986	$	986	Collateral based measurements including appraisals, trade publications, and auction values	Discount for lack of marketability and current conditions	20% - 90%	34.5	%
Mortgage servicing rights	4,625		6,363		Discounted cash flows	Constant prepayment rate (CPR)	10.2% - 17.4%	13.7	%
						Discount rate	9.8% - 12.6%	9.9	%
Repossessions	73		241		Appraisals, trade publications and auction values	Discount for lack of marketability	13% - 100%	70	%
Other real estate	—		—		Appraisals	Discount for lack of marketability	0% - 0%	0	%
December 31, 2021
Collateral-dependent impaired loans	$	571	$	571	Collateral based measurements including appraisals, trade publications, and auction values	Discount for lack of marketability and current conditions	20% - 90%	43.1	%
Mortgage servicing rights	4,671		5,640		Discounted cash flows	Constant prepayment rate (CPR)	11.8% - 18.5%	16.4	%
						Discount rate	8.6% - 11.5%	8.8	%
Repossessions	861		942		Appraisals, trade publications and auction values	Discount for lack of marketability	0% - 21%	2	%
Other real estate	—		—		Appraisals	Discount for lack of marketability	0% - 0%	0	%

GAAP requires disclosure of the fair value of financial assets and financial liabilities, including those financial assets and financial liabilities that are not measured and reported at fair value on a recurring or non-recurring basis.

The following table shows the fair values of the Company’s financial instruments.

(Dollars in thousands)	Carrying or Contract Value		Fair Value		Level 1		Level 2		Level 3
March 31, 2022
Assets:
Cash and due from banks	$	69,195	$	69,195	$	69,195	$	—	$	—
Federal funds sold and interest bearing deposits with other banks	347,697		347,697		347,697		—		—
Investment securities, available-for-sale	1,857,431		1,857,431		590,484		1,262,418		4,529
Other investments	25,538		25,538		25,538		—		—
Mortgages held for sale	4,757		4,757		—		4,757		—
Loans and leases, net of allowance for loan and lease losses	5,264,044		5,280,472		—		—		5,280,472
Mortgage servicing rights	4,625		6,363		—		—		6,363
Accrued interest receivable	18,289		18,289		—		18,289		—
Interest rate swaps	7,806		7,806		—		7,806		—
Liabilities:
Deposits	$	6,673,092	$	6,666,398	$	5,821,071	$	845,327	$	—
Short-term borrowings	199,158		199,158		192,146		7,012		—
Long-term debt and mandatorily redeemable securities	69,563		68,258		—		68,258		—
Subordinated notes	58,764		58,350		—		58,350		—
Accrued interest payable	2,084		2,084		—		2,084		—
Interest rate swaps	8,006		8,006		—		8,006		—
Off-balance-sheet instruments *	—		82		—		82		—
December 31, 2021
Assets:
Cash and due from banks	$	54,420	$	54,420	$	54,420	$	—	$	—
Federal funds sold and interest bearing deposits with other banks	470,767		470,767		470,767		—		—
Investment securities, available-for-sale	1,863,041		1,863,041		561,950		1,299,242		1,849
Other investments	27,189		27,189		27,189		—		—
Mortgages held for sale	13,284		13,284		—		13,284		—
Loans and leases, net of allowance for loan and lease losses	5,218,722		5,269,551		—		—		5,269,551
Mortgage servicing rights	4,671		5,640		—		—		5,640
Accrued interest receivable	17,760		17,760		—		17,760		—
Interest rate swaps	20,735		20,735		—		20,735		—
Liabilities:
Deposits	$	6,679,065	$	6,680,163	$	5,794,928	$	885,235	$	—
Short-term borrowings	200,027		200,027		192,801		7,226		—
Long-term debt and mandatorily redeemable securities	71,251		71,305		—		71,305		—
Subordinated notes	58,764		58,553		—		58,553		—
Accrued interest payable	1,885		1,885		—		1,885		—
Interest rate swaps	21,172		21,172		—		21,172		—
Off-balance-sheet instruments *	—		364		—		364		—

* Represents estimated cash outflows required to currently settle the obligations at current market rates.

These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. These estimates are subjective in nature and require considerable judgment to interpret market data. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize in a current market exchange, nor are they intended to represent the fair value of the Company as a whole. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. The fair value estimates presented herein are based on pertinent information available to management as of the respective balance sheet date. Although the Company is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued since the presentation dates, and therefore, estimates of fair value after the balance sheet date may differ significantly from the amounts presented herein.

Other significant assets, such as premises and equipment, other assets, and liabilities not defined as financial instruments, are not included in the above disclosures. Also, the fair value estimates for deposits do not include the benefit that results from the low-cost funding provided by the deposit liabilities compared to the cost of borrowing funds in the market.

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Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2022

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation – The accompanying unaudited consolidated financial statements reflect all adjustments (all of which are normal and recurring in nature) which are, in the opinion of management, necessary for a fair presentation of the consolidated financial position, the results of operations, changes in comprehensive income (loss), changes in shareholders’ equity, and cash flows for the periods presented. These unaudited consolidated financial statements have been prepared according to the rules and regulations of the Securities and Exchange Commission (SEC) and, therefore, certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP) have been omitted.

The Notes to the Consolidated Financial Statements appearing in 1st Source Corporation’s Annual Report on Form 10-K (2021 Annual Report), which include descriptions of significant accounting policies, should be read in conjunction with these interim financial statements. The Consolidated Statement of Financial Condition at December 31, 2021 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements. Certain amounts in the prior period consolidated financial statements have been reclassified to conform to the current period presentation.

Use of Estimates in the Preparation of Financial Statements

Use of Estimates in the Preparation of Financial Statements – Financial statements prepared in accordance with GAAP require the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expense during the reporting period. Actual results could differ from those estimates.

Loans and Leases

Loans and Leases – Loans are stated at the principal amount outstanding, net of unamortized deferred loan origination fees and costs and net of unearned income. Interest income is accrued as earned based on unpaid principal balances. Origination fees and direct loan and lease origination costs are deferred, and the net amount amortized to interest income over the estimated life of the related loan or lease. Loan commitment fees are deferred and amortized into other income over the commitment period.

Direct financing leases are carried at the aggregate of lease payments plus estimated residual value of the leased property, net of unamortized deferred lease origination fees and costs and unearned income. Interest income on direct financing leases is recognized over the term of the lease to achieve a constant periodic rate of return on the outstanding investment. Costs incurred as a direct result of closing lease transactions are capitalized and amortized over the life of the lease while all other initial direct costs are expensed immediately.

Accrued interest is included in Accrued Income and Other Assets on the Consolidated Statements of Financial Condition and is excluded from the calculation of the allowance for credit losses. The accrual of interest on loans and leases is discontinued when a loan or lease becomes contractually delinquent for 90 days, or when an individual analysis of a borrower’s credit worthiness indicates a credit should be placed on nonperforming status, except for residential mortgage loans and consumer loans that are well secured and in the process of collection. Residential mortgage loans are placed on nonaccrual at the time the loan is placed in foreclosure. When interest accruals are discontinued, interest credited to income in the current year is reversed and interest accrued in the prior year is charged to the allowance for loan and lease losses. However, in some cases, the Company may elect to continue the accrual of interest when the net realizable value of collateral is sufficient to cover the principal and accrued interest. When a loan or lease is classified as nonaccrual and the future collectability of the recorded loan or lease balance is doubtful, collections on interest and principal are applied as a reduction to principal outstanding. Loans are returned to accrual status when all principal and interest amounts contractually due are brought current and future payments are reasonably assured, which is typically evidenced by a sustained repayment performance of at least six months.

Loans and leases that have been modified and economic concessions have been granted to borrowers who have experienced financial difficulties are considered a troubled debt restructuring (TDR). These concessions typically result from the Company’s loss mitigation activities and may include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance or other actions. Certain TDRs are classified as nonperforming at the time of restructuring and typically are returned to performing status after considering the borrower’s sustained repayment performance for a reasonable period of at least six months.

When the Company modifies loans and leases in a TDR, it evaluates any possible impairment based on the present value of expected future cash flows, discounted at the contractual interest rate of the original loan or lease agreement, or uses the current fair value of the collateral, less selling costs for collateral dependent loans. If the Company determines that the value of the modified loan is less than the recorded investment in the loan (net of previous charge-offs, deferred loan fees or costs and unamortized premium or discount), impairment is recognized through an allowance for loan and lease losses estimate or a charge-off to the allowance for loan and lease losses. In periods subsequent to modification, the Company evaluates all TDRs, including those that have payment defaults, for possible impairment and recognizes impairment through the allowance for loan and lease losses.

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Investment Securities (Tables)

3 Months Ended

Mar. 31, 2022

Investments, Debt and Equity Securities [Abstract]

Schedule of investment securities available-for-sale

The following table shows investment securities available-for-sale.

(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
March 31, 2022
U.S. Treasury and Federal agencies securities	$	1,137,278	$	343	$	(56,676)	$	1,080,945
U.S. States and political subdivisions securities	102,459		145		(4,251)		98,353
Mortgage-backed securities — Federal agencies	700,666		394		(46,050)		655,010
Corporate debt securities	22,511		88		(74)		22,525
Foreign government and other securities	600		—		(2)		598
Total debt securities available-for-sale	$	1,963,514	$	970	$	(107,053)	$	1,857,431
December 31, 2021
U.S. Treasury and Federal agencies securities	$	1,093,780	$	3,244	$	(13,018)	$	1,084,006
U.S. States and political subdivisions securities	95,700		1,130		(1,129)		95,701
Mortgage-backed securities — Federal agencies	663,441		4,745		(8,459)		659,727
Corporate debt securities	22,510		499		—		23,009
Foreign government and other securities	600		—		(2)		598
Total debt securities available-for-sale	$	1,876,031	$	9,618	$	(22,608)	$	1,863,041

Schedule of contractual maturities of investments in debt securities available-for-sale

The following table shows the contractual maturities of investments in debt securities available-for-sale at March 31, 2022. Expected maturities will differ from contractual maturities, because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

(Dollars in thousands)	Amortized Cost		Fair Value
Due in one year or less	$	99,452	$	99,754
Due after one year through five years	1,073,137		1,018,725
Due after five years through ten years	89,899		83,636
Due after ten years	360		306
Mortgage-backed securities	700,666		655,010
Total debt securities available-for-sale	$	1,963,514	$	1,857,431

Schedule of gross unrealized losses and fair value by investment category and age

The following table summarizes gross unrealized losses and fair value by investment category and age. At March 31, 2022, the Company’s available-for-sale securities portfolio consisted of 719 securities, 541 of which were in an unrealized loss position.

	Less than 12 Months				12 months or Longer				Total
(Dollars in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
March 31, 2022
U.S. Treasury and Federal agencies securities	$	796,571	$	(40,683)	$	207,232	$	(15,993)	$	1,003,803	$	(56,676)
U.S. States and political subdivisions securities	55,508		(2,367)		18,798		(1,884)		74,306		(4,251)
Mortgage-backed securities - Federal agencies	486,975		(32,284)		133,048		(13,766)		620,023		(46,050)
Corporate debt securities	8,109		(74)		—		—		8,109		(74)
Foreign government and other securities	98		(2)		—		—		98		(2)
Total debt securities available-for-sale	$	1,347,261	$	(75,410)	$	359,078	$	(31,643)	$	1,706,339	$	(107,053)
December 31, 2021
U.S. Treasury and Federal agencies securities	$	789,536	$	(10,728)	$	84,191	$	(2,290)	$	873,727	$	(13,018)
U.S. States and political subdivisions securities	39,585		(980)		4,875		(149)		44,460		(1,129)
Mortgage-backed securities - Federal agencies	454,413		(7,312)		35,232		(1,147)		489,645		(8,459)
Corporate debt securities	—		—		—		—		—		—
Foreign government and other securities	598		(2)		—		—		598		(2)
Total debt securities available-for-sale	$	1,284,132	$	(19,022)	$	124,298	$	(3,586)	$	1,408,430	$	(22,608)

Schedule of gross realized gains and losses from securities available-for-sale portfolio

The following table shows the gross realized gains and losses from the available-for-sale debt securities portfolio. Realized gains and losses of all securities are computed using the specific identification cost basis.

	Three Months Ended March 31,
(Dollars in thousands)	2022		2021
Gross realized gains	$	—	$	—
Gross realized losses	—		—
Net realized gains (losses)	$	—	$	—

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Loan and Lease Financings (Tables)

3 Months Ended

Mar. 31, 2022

Receivables [Abstract]

Schedule of amortized cost of loans and leases, segregated by portfolio segment, credit quality rating and year of origination

The following table shows the amortized cost of loans and leases, segregated by portfolio segment, credit quality rating and year of origination as of March 31, 2022.

	Term Loans and Leases by Origination Year
(Dollars in thousands)	2022		2021		2020		2019		2018		Prior		Revolving Loans		Revolving Loans Converted to Term		Total
Commercial and agricultural
Grades 1-6	$	53,128	$	190,821	$	107,991	$	50,957	$	43,930	$	32,145	$	363,670	$	—	$	842,642
Grades 7-12	830		2,186		166		3,338		2,242		2,218		15,471		—		26,451
Total commercial and agricultural	53,958		193,007		108,157		54,295		46,172		34,363		379,141		—		869,093
Solar
Grades 1-6	22,411		128,379		40,552		81,076		18,901		38,480		—		—		329,799
Grades 7-12	—		—		1,131		5,837		718		—		—		—		7,686
Total solar	22,411		128,379		41,683		86,913		19,619		38,480		—		—		337,485
Auto and light truck
Grades 1-6	113,310		284,748		108,645		62,013		20,163		10,471		—		—		599,350
Grades 7-12	447		7,635		9,350		4,580		3,393		5,025		—		—		30,430
Total auto and light truck	113,757		292,383		117,995		66,593		23,556		15,496		—		—		629,780
Medium and heavy duty truck
Grades 1-6	26,377		85,103		61,748		50,070		19,724		12,068		—		—		255,090
Grades 7-12	—		—		—		—		—		187		—		—		187
Total medium and heavy duty truck	26,377		85,103		61,748		50,070		19,724		12,255		—		—		255,277
Aircraft
Grades 1-6	142,120		344,528		273,403		73,079		42,434		65,511		6,861		—		947,936
Grades 7-12	1,894		—		633		—		4,342		2,235		—		—		9,104
Total aircraft	144,014		344,528		274,036		73,079		46,776		67,746		6,861		—		957,040
Construction equipment
Grades 1-6	113,680		287,695		166,178		90,462		37,171		13,924		22,965		3,387		735,462
Grades 7-12	22,419		9,659		2,424		3,158		765		48		—		2,037		40,510
Total construction equipment	136,099		297,354		168,602		93,620		37,936		13,972		22,965		5,424		775,972
Commercial real estate
Grades 1-6	59,945		192,722		145,247		140,328		136,562		221,961		314		—		897,079
Grades 7-12	1,118		—		8,011		7,481		49		7,069		—		—		23,728
Total commercial real estate	61,063		192,722		153,258		147,809		136,611		229,030		314		—		920,807
Residential real estate and home equity
Performing	28,424		101,853		109,427		37,498		9,186		96,976		120,863		4,752		508,979
Nonperforming	—		—		—		—		14		1,097		243		204		1,558
Total residential real estate and home equity	28,424		101,853		109,427		37,498		9,200		98,073		121,106		4,956		510,537
Consumer
Performing	19,637		52,972		20,840		13,816		6,521		2,073		21,987		—		137,846
Nonperforming	—		11		55		37		28		35		—		—		166
Total consumer	$	19,637	$	52,983	$	20,895	$	13,853	$	6,549	$	2,108	$	21,987	$	—	$	138,012

The following table shows the amortized cost of loans and leases, segregated by portfolio segment, credit quality rating and year of origination as of December 31, 2021.

	Term Loans and Leases by Origination Year
(Dollars in thousands)	2021		2020		2019		2018		2017		Prior		Revolving Loans		Revolving Loans Converted to Term		Total
Commercial and agricultural
Grades 1-6	$	233,512	$	123,947	$	60,744	$	55,231	$	32,545	$	20,184	$	364,460	$	—	$	890,623
Grades 7-12	4,682		194		3,667		2,373		2,004		484		14,685		—		28,089
Total commercial and agricultural	238,194		124,141		64,411		57,604		34,549		20,668		379,145		—		918,712
Solar
Grades 1-6	159,244		42,073		81,593		18,979		34,889		3,780		—		—		340,558
Grades 7-12	—		1,138		5,882		724		—		—		—		—		7,744
Total solar	159,244		43,211		87,475		19,703		34,889		3,780		—		—		348,302
Auto and light truck
Grades 1-6	331,105		122,709		72,580		24,965		11,814		901		—		—		564,074
Grades 7-12	10,828		11,752		7,467		3,859		4,876		919		—		—		39,701
Total auto and light truck	341,933		134,461		80,047		28,824		16,690		1,820		—		—		603,775
Medium and heavy duty truck
Grades 1-6	92,252		68,354		57,967		23,210		12,419		5,265		—		—		259,467
Grades 7-12	—		—		—		—		—		273		—		—		273
Total medium and heavy duty truck	92,252		68,354		57,967		23,210		12,419		5,538		—		—		259,740
Aircraft
Grades 1-6	384,895		290,897		85,916		45,848		47,025		29,435		4,844		—		888,860
Grades 7-12	1,141		649		—		4,670		454		2,627		—		—		9,541
Total aircraft	386,036		291,546		85,916		50,518		47,479		32,062		4,844		—		898,401
Construction equipment
Grades 1-6	314,044		201,032		109,029		47,693		13,501		5,031		18,937		4,594		713,861
Grades 7-12	26,650		8,709		1,983		797		80		—		—		2,193		40,412
Total construction equipment	340,694		209,741		111,012		48,490		13,581		5,031		18,937		6,787		754,273
Commercial real estate
Grades 1-6	230,701		150,144		146,374		141,838		126,642		112,243		391		—		908,333
Grades 7-12	218		5,921		7,159		491		6,208		1,011		—		—		21,008
Total commercial real estate	230,919		156,065		153,533		142,329		132,850		113,254		391		—		929,341
Residential real estate and home equity
Performing	105,345		114,682		41,185		9,706		11,720		89,646		122,281		4,555		499,120
Nonperforming	—		—		—		13		421		655		293		88		1,470
Total residential real estate and home equity	105,345		114,682		41,185		9,719		12,141		90,301		122,574		4,643		500,590
Consumer
Performing	58,866		24,307		17,031		8,284		2,263		697		21,378		—		132,826
Nonperforming	37		107		43		30		33		4		—		—		254
Total consumer	$	58,903	$	24,414	$	17,074	$	8,314	$	2,296	$	701	$	21,378	$	—	$	133,080

Schedule of amortized cost of loans and leases, segregated by portfolio segment, with delinquency aging and nonaccrual status

The following table shows the amortized cost of loans and leases, segregated by portfolio segment, with delinquency aging and nonaccrual status.

(Dollars in thousands)	Current		30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due and Accruing		Total Accruing  Loans		Nonaccrual		Total Financing Receivables
March 31, 2022
Commercial and agricultural	$	867,023	$	503	$	201	$	—	$	867,727	$	1,366	$	869,093
Solar	337,485		—		—		—		337,485		—		337,485
Auto and light truck	607,991		214		—		—		608,205		21,575		629,780
Medium and heavy duty truck	254,896		194		—		—		255,090		187		255,277
Aircraft	950,763		3,409		2,235		—		956,407		633		957,040
Construction equipment	766,210		2,452		—		—		768,662		7,310		775,972
Commercial real estate	917,893		—		—		—		917,893		2,914		920,807
Residential real estate and home equity	508,270		556		153		274		509,253		1,284		510,537
Consumer	137,581		222		43		—		137,846		166		138,012
Total	$	5,348,112	$	7,550	$	2,632	$	274	$	5,358,568	$	35,435	$	5,394,003
December 31, 2021
Commercial and agricultural	$	916,659	$	—	$	—	$	—	$	916,659	$	2,053	$	918,712
Solar	348,302		—		—		—		348,302		—		348,302
Auto and light truck	579,605		—		—		—		579,605		24,170		603,775
Medium and heavy duty truck	259,467		—		—		—		259,467		273		259,740
Aircraft	894,092		1,130		2,530		—		897,752		649		898,401
Construction equipment	745,870		1,313		—		—		747,183		7,090		754,273
Commercial real estate	926,345		—		—		—		926,345		2,996		929,341
Residential real estate and home equity	498,854		212		54		245		499,365		1,225		500,590
Consumer	132,464		332		30		4		132,830		250		133,080
Total	$	5,301,658	$	2,987	$	2,614	$	249	$	5,307,508	$	38,706	$	5,346,214

Schedule of recorded investment in loans and leases classified as troubled debt restructuring

The following table shows the recorded investment of loans and leases classified as troubled debt restructurings as of March 31, 2022 and December 31, 2021.

(Dollars in thousands)	March 31, 2022		December 31, 2021
Performing TDRs	$	—	$	319
Nonperforming TDRs	5,965		6,742
Total TDRs	$	5,965	$	7,061

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Allowance for Credit Losses (Tables)

3 Months Ended

Mar. 31, 2022

Financing Receivable, Allowance for Credit Loss, Additional Information [Abstract]

Schedule of changes in allowance for loan and lease losses, segregated by portfolio segment

The following table shows the changes in the allowance for loan and lease losses, segregated by portfolio segment, for the three months ended March 31, 2022 and 2021.

(Dollars in thousands)	Commercial and agricultural		Solar		Auto and light truck		Medium and heavy duty truck		Aircraft		Construction equipment		Commercial real estate		Residential real estate and home equity		Consumer		Total
March 31, 2022
Balance, beginning of period	$	15,409	$	6,585	$	19,624	$	6,015	$	33,628	$	19,673	$	19,691	$	5,084	$	1,783	$	127,492
Charge-offs	—		—		—		—		—		48		—		4		165		217
Recoveries	4		—		65		—		316		—		—		1		65		451
Net charge-offs (recoveries)	(4)		—		(65)		—		(316)		48		—		3		100		(234)
Provision (recovery of provision)	185		(168)		(168)		34		2,024		416		(445)		137		218		2,233
Balance, end of period	$	15,598	$	6,417	$	19,521	$	6,049	$	35,968	$	20,041	$	19,246	$	5,218	$	1,901	$	129,959
March 31, 2021
Balance, beginning of period	$	16,680	$	5,549	$	28,926	$	6,400	$	34,053	$	19,166	$	22,758	$	5,374	$	1,748	$	140,654
Charge-offs	1		—		4,286		—		—		8		—		5		152		4,452
Recoveries	377		—		49		—		119		254		15		1		135		950
Net charge-offs (recoveries)	(376)		—		4,237		—		(119)		(246)		(15)		4		17		3,502
Provision (recovery of provision)	(1,605)		209		4,654		(129)		1,047		(3,103)		1,561		(207)		(29)		2,398
Balance, end of period	$	15,451	$	5,758	$	29,343	$	6,271	$	35,219	$	16,309	$	24,334	$	5,163	$	1,702	$	139,550

Schedule of changes in allowance for credit losses on unfunded loan commitments

The following table shows the changes in the liability for credit losses on unfunded loan commitments.

	Three Months Ended March 31,
(Dollars in thousands)	2022		2021
Balance, beginning of period	$	4,196	$	4,499
Provision	728		94
Balance, end of period	$	4,924	$	4,593

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Lease Investments (Tables)

3 Months Ended

Mar. 31, 2022

Leases [Abstract]

Schedule of the components of income from direct finance and operating lease equipment

The following table shows interest income recognized from direct finance lease payments and operating lease equipment rental income and related depreciation expense.

	Three Months Ended March 31,
(Dollars in thousands)	2022		2021
Direct finance leases:
Interest income on lease receivable	$	1,781	$	1,590
Operating leases:
Income related to lease payments	$	3,662	$	4,629
Depreciation expense	3,015		3,773

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Mortgage Servicing Rights (Tables)

3 Months Ended

Mar. 31, 2022

Transfers and Servicing of Financial Assets [Abstract]

Schedule of changes in carrying value of mortgage servicing rights and associated valuation allowance

The following table shows changes in the carrying value of MSRs and the associated valuation allowance.

	Three Months Ended March 31,
(Dollars in thousands)	2022		2021
Mortgage servicing rights:
Balance at beginning of period	$	4,671	$	4,616
Additions	335		761
Amortization	(381)		(590)
Carrying value before valuation allowance at end of period	4,625		4,787
Valuation allowance:
Balance at beginning of period	—		(812)
Impairment recoveries	—		42
Balance at end of period	$	—	$	(770)
Net carrying value of mortgage servicing rights at end of period	$	4,625	$	4,017
Fair value of mortgage servicing rights at end of period	$	6,363	$	4,365

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Commitments and Financial Instruments with Off-Balance-Sheet Risk (Tables)

3 Months Ended

Mar. 31, 2022

Commitments and Contingencies Disclosure [Abstract]

Schedule of financial instruments whose contract amounts represent credit risk

The following table shows financial instruments whose contract amounts represent credit risk.

(Dollars in thousands)	March 31, 2022		December 31, 2021
Amounts of commitments:
Loan commitments to extend credit	$	1,204,428	$	1,148,984
Standby letters of credit	$	22,765	$	24,657
Commercial and similar letters of credit	$	746	$	8,531

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Derivative Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of amounts of non-hedging derivative financial instruments

The following table shows the amounts of non-hedging derivative financial instruments.

			Asset derivatives			Liability derivatives
(Dollars in thousands)	Notional or contractual amount		Statement of Financial Condition classification	Fair value		Statement of Financial Condition classification	Fair value
March 31, 2022
Interest rate swap contracts	$	1,017,365	Other assets	$	7,806	Other liabilities	$	8,006
Loan commitments	13,422		Mortgages held for sale	287		N/A	—
Forward contracts - mortgage loan	13,080		Mortgages held for sale	200		N/A	—
Total	$	1,043,867		$	8,293		$	8,006
December 31, 2021
Interest rate swap contracts	$	1,064,721	Other assets	$	20,735	Other liabilities	$	21,172
Loan commitments	15,086		Mortgages held for sale	452		N/A	—
Forward contracts - mortgage loan	22,000		N/A	—		Mortgages held for sale	11
Total	$	1,101,807		$	21,187		$	21,183

Schedule of amounts included in the consolidated statements of income for non-hedging derivative financial instruments

The following table shows the amounts included in the Consolidated Statements of Income for non-hedging derivative financial instruments.

		Gain (loss)
		Three Months Ended March 31,
(Dollars in thousands)	Statement of Income classification	2022		2021
Interest rate swap contracts	Other expense	$	237	$	333
Interest rate swap contracts	Other income	—		86
Loan commitments	Mortgage banking	(165)		(698)
Forward contracts - mortgage loan	Mortgage banking	211		577
Total		$	283	$	298

Schedule of offsetting of financial assets and derivative assets

The following table shows the offsetting of financial assets and derivative assets.

							Gross Amounts Not Offset in the Statement of Financial Condition
(Dollars in thousands)	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Statement of Financial Condition		Net Amounts of Assets Presented in the Statement of Financial Condition		Financial Instruments		Cash Collateral Received		Net Amount
March 31, 2022
Interest rate swaps	$	10,324	$	2,518	$	7,806	$	—	$	3,040	$	4,766
December 31, 2021
Interest rate swaps	$	24,436	$	3,701	$	20,735	$	—	$	—	$	20,735

Schedule of offsetting of financial liabilities and derivative liabilities

The following table shows the offsetting of financial liabilities and derivative liabilities.

							Gross Amounts Not Offset in the Statement of Financial Condition
(Dollars in thousands)	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Statement of Financial Condition		Net Amounts of Liabilities Presented in the Statement of Financial Condition		Financial Instruments		Cash Collateral Pledged		Net Amount
March 31, 2022
Interest rate swaps	$	10,524	$	2,518	$	8,006	$	299	$	—	$	7,707
Repurchase agreements	193,798		—		193,798		193,798		—		—
Total	$	204,322	$	2,518	$	201,804	$	194,097	$	—	$	7,707
December 31, 2021
Interest rate swaps	$	24,873	$	3,701	$	21,172	$	20,498	$	—	$	674
Repurchase agreements	194,727		—		194,727		194,727		—		—
Total	$	219,600	$	3,701	$	215,899	$	215,225	$	—	$	674

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Variable Interest Entities (Tables)

3 Months Ended

Mar. 31, 2022

Variable Interest Entities [Abstract]

Schedule of unconsolidated variable interest entities

The following table provides a summary of investments in affordable housing, community development and renewable energy VIEs that the Company has not consolidated.

(Dollars in thousands)	March 31, 2022		December 31, 2021
Investment carrying amount	$	26,391	$	35,968
Unfunded capital and other commitments	19,668		29,670
Maximum exposure to loss	48,044		50,319

Summary of subordinated notes

The following table shows subordinated notes at March 31, 2022.

(Dollars in thousands)	Amount of Subordinated Notes		Interest Rate		Maturity Date
June 2007 issuance (1)	$	41,238	7.22	%	6/15/2037
August 2007 issuance (2)	17,526		2.31	%	9/15/2037
Total	$	58,764

(1) Fixed rate through life of debt.

(2) 3-Month LIBOR +1.48% through remaining life of debt.

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Earnings Per Share (Tables)

3 Months Ended

Mar. 31, 2022

Earnings Per Share [Abstract]

Schedule of reconciliation of the number of shares used in the calculation of basic and diluted earnings per common share

The following table presents a reconciliation of the number of shares used in the calculation of basic and diluted earnings per common share.

	Three Months Ended March 31,
(Dollars in thousands - except per share amounts)	2022		2021
Distributed earnings allocated to common stock	$	7,672	$	7,364
Undistributed earnings allocated to common stock	19,516		20,531
Net earnings allocated to common stock	27,188		27,895
Net earnings allocated to participating securities	202		210
Net income allocated to common stock and participating securities	$	27,390	$	28,105
Weighted average shares outstanding for basic earnings per common share	24,743,790		25,320,930
Dilutive effect of stock compensation	—		—
Weighted average shares outstanding for diluted earnings per common share	24,743,790		25,320,930
Basic earnings per common share	$	1.10	$	1.10
Diluted earnings per common share	$	1.10	$	1.10

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Accumulated Other Comprehensive Income (Tables)

3 Months Ended

Mar. 31, 2022

Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]

Schedule of reclassifications out of accumulated other comprehensive income

The following table presents reclassifications out of accumulated other comprehensive income (loss) related to unrealized gains and losses on available-for-sale securities.

	Three Months Ended March 31,				Affected Line Item in the Statements of Income
(Dollars in thousands)	2022		2021
Realized gains included in net income	$	—	$	—	Gains on investment securities available-for-sale
	—		—		Income before income taxes
Tax effect	—		—		Income tax expense
Net of tax	$	—	$	—	Net income

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Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2022

Fair value measurements

Schedule of differences between the fair value carrying amount of mortgages held for sale measured at fair value and the aggregate unpaid principal amount

The following table shows the differences between the fair value carrying amount of mortgages held for sale measured at fair value and the aggregate unpaid principal amount the Company is contractually entitled to receive at maturity.

(Dollars in thousands)	Fair value  carrying amount		Aggregate unpaid principal		Excess of fair value carrying amount over (under) unpaid principal
March 31, 2022
Mortgages held for sale reported at fair value	$	4,757	$	4,256	$	501	(1)
December 31, 2021
Mortgages held for sale reported at fair value	$	13,284	$	12,456	$	828	(1)

(1)The excess of fair value carrying amount over (under) unpaid principal is included in mortgage banking income and includes changes in fair value at and subsequent to funding and gains and losses on the related loan commitment prior to funding.

Schedule of assets and liabilities measured at fair value on a recurring basis

The following table shows the balance of assets and liabilities measured at fair value on a recurring basis.

(Dollars in thousands)	Level 1		Level 2		Level 3		Total
March 31, 2022
Assets:
Investment securities available-for-sale:
U.S. Treasury and Federal agencies securities	$	590,484	$	490,461	$	—	$	1,080,945
U.S. States and political subdivisions securities	—		93,824		4,529		98,353
Mortgage-backed securities — Federal agencies	—		655,010		—		655,010
Corporate debt securities	—		22,525		—		22,525
Foreign government and other securities	—		598		—		598
Total debt securities available-for-sale	590,484		1,262,418		4,529		1,857,431
Mortgages held for sale	—		4,757		—		4,757
Accrued income and other assets (interest rate swap agreements)	—		7,806		—		7,806
Total	$	590,484	$	1,274,981	$	4,529	$	1,869,994
Liabilities:
Accrued expenses and other liabilities (interest rate swap agreements)	$	—	$	8,006	$	—	$	8,006
Total	$	—	$	8,006	$	—	$	8,006
December 31, 2021
Assets:
Investment securities available-for-sale:
U.S. Treasury and Federal agencies securities	$	561,950	$	522,056	$	—	$	1,084,006
U.S. States and political subdivisions securities	—		93,852		1,849		95,701
Mortgage-backed securities — Federal agencies	—		659,727		—		659,727
Corporate debt securities	—		23,009		—		23,009
Foreign government and other securities	—		598		—		598
Total debt securities available-for-sale	561,950		1,299,242		1,849		1,863,041
Mortgages held for sale	—		13,284		—		13,284
Accrued income and other assets (interest rate swap agreements)	—		20,735		—		20,735
Total	$	561,950	$	1,333,261	$	1,849	$	1,897,060
Liabilities:
Accrued expenses and other liabilities (interest rate swap agreements)	$	—	$	21,172	$	—	$	21,172
Total	$	—	$	21,172	$	—	$	21,172

Schedule of changes in investment securities available-for-sale Level 3 assets measured at fair value on a recurring basis

The following table shows changes in Level 3 assets measured at fair value on a recurring basis for the quarter ended March 31, 2022 and 2021.

(Dollars in thousands)	U.S. States and political subdivisions securities
Beginning balance January 1, 2022	$	1,849
Total gains or losses (realized/unrealized):
Included in earnings	—
Included in other comprehensive income (loss)	(155)
Purchases	3,000
Issuances	—
Sales	—
Settlements	—
Maturities	(165)
Transfers into Level 3	—
Transfers out of Level 3	—
Ending balance March 31, 2022	$	4,529
Beginning January 1, 2021	$	2,152
Total gains or losses (realized/unrealized):
Included in earnings	—
Included in other comprehensive income (loss)	(80)
Purchases	—
Issuances	—
Sales	—
Settlements	—
Maturities	(165)
Transfers into Level 3	—
Transfers out of Level 3	—
Ending balance March 31, 2021	$	1,907

Schedule of carrying value of assets measured at fair value on a non-recurring basis

The following table shows the carrying value of assets measured at fair value on a non-recurring basis.

(Dollars in thousands)	Level 1		Level 2		Level 3		Total
March 31, 2022
Collateral-dependent impaired loans	$	—	$	—	$	986	$	986
Accrued income and other assets (mortgage servicing rights)	—		—		4,625		4,625
Accrued income and other assets (repossessions)	—		—		73		73
Accrued income and other assets (other real estate)	—		—		—		—
Total	$	—	$	—	$	5,684	$	5,684
December 31, 2021
Collateral-dependent impaired loans	$	—	$	—	$	571	$	571
Accrued income and other assets (mortgage servicing rights)	—		—		4,671		4,671
Accrued income and other assets (repossessions)	—		—		861		861
Accrued income and other assets (other real estate)	—		—		—		—
Total	$	—	$	—	$	6,103	$	6,103

Schedule of fair values of financial instruments

The following table shows the fair values of the Company’s financial instruments.

(Dollars in thousands)	Carrying or Contract Value		Fair Value		Level 1		Level 2		Level 3
March 31, 2022
Assets:
Cash and due from banks	$	69,195	$	69,195	$	69,195	$	—	$	—
Federal funds sold and interest bearing deposits with other banks	347,697		347,697		347,697		—		—
Investment securities, available-for-sale	1,857,431		1,857,431		590,484		1,262,418		4,529
Other investments	25,538		25,538		25,538		—		—
Mortgages held for sale	4,757		4,757		—		4,757		—
Loans and leases, net of allowance for loan and lease losses	5,264,044		5,280,472		—		—		5,280,472
Mortgage servicing rights	4,625		6,363		—		—		6,363
Accrued interest receivable	18,289		18,289		—		18,289		—
Interest rate swaps	7,806		7,806		—		7,806		—
Liabilities:
Deposits	$	6,673,092	$	6,666,398	$	5,821,071	$	845,327	$	—
Short-term borrowings	199,158		199,158		192,146		7,012		—
Long-term debt and mandatorily redeemable securities	69,563		68,258		—		68,258		—
Subordinated notes	58,764		58,350		—		58,350		—
Accrued interest payable	2,084		2,084		—		2,084		—
Interest rate swaps	8,006		8,006		—		8,006		—
Off-balance-sheet instruments *	—		82		—		82		—
December 31, 2021
Assets:
Cash and due from banks	$	54,420	$	54,420	$	54,420	$	—	$	—
Federal funds sold and interest bearing deposits with other banks	470,767		470,767		470,767		—		—
Investment securities, available-for-sale	1,863,041		1,863,041		561,950		1,299,242		1,849
Other investments	27,189		27,189		27,189		—		—
Mortgages held for sale	13,284		13,284		—		13,284		—
Loans and leases, net of allowance for loan and lease losses	5,218,722		5,269,551		—		—		5,269,551
Mortgage servicing rights	4,671		5,640		—		—		5,640
Accrued interest receivable	17,760		17,760		—		17,760		—
Interest rate swaps	20,735		20,735		—		20,735		—
Liabilities:
Deposits	$	6,679,065	$	6,680,163	$	5,794,928	$	885,235	$	—
Short-term borrowings	200,027		200,027		192,801		7,226		—
Long-term debt and mandatorily redeemable securities	71,251		71,305		—		71,305		—
Subordinated notes	58,764		58,553		—		58,553		—
Accrued interest payable	1,885		1,885		—		1,885		—
Interest rate swaps	21,172		21,172		—		21,172		—
Off-balance-sheet instruments *	—		364		—		364		—

* Represents estimated cash outflows required to currently settle the obligations at current market rates.

Recurring

Fair value measurements

Schedule of valuation methodology and unobservable inputs for Level 3 assets and liabilities measured at fair value on a recurring and non-recurring basis

The following table shows the valuation methodology and unobservable inputs for Level 3 assets measured at fair value on a recurring basis.

(Dollars in thousands)	Fair Value		Valuation Methodology	Unobservable Inputs	Range of Inputs	Weighted Average
March 31, 2022
Debt securities available-for sale
Direct placement municipal securities	$	4,529	Discounted cash flows	Credit spread assumption	2.36% - 3.95%	2.88	%
December 31, 2021
Debt securities available-for sale
Direct placement municipal securities	$	1,849	Discounted cash flows	Credit spread assumption	0.04% - 2.31%	1.58	%

Non-recurring

Fair value measurements

Schedule of valuation methodology and unobservable inputs for Level 3 assets and liabilities measured at fair value on a recurring and non-recurring basis

The following table below shows the valuation methodology and unobservable inputs for Level 3 assets and liabilities measured at fair value on a non-recurring basis.

(Dollars in thousands)	Carrying Value		Fair Value		Valuation Methodology	Unobservable Inputs	Range of Inputs	Weighted Average
March 31, 2022
Collateral-dependent impaired loans	$	986	$	986	Collateral based measurements including appraisals, trade publications, and auction values	Discount for lack of marketability and current conditions	20% - 90%	34.5	%
Mortgage servicing rights	4,625		6,363		Discounted cash flows	Constant prepayment rate (CPR)	10.2% - 17.4%	13.7	%
						Discount rate	9.8% - 12.6%	9.9	%
Repossessions	73		241		Appraisals, trade publications and auction values	Discount for lack of marketability	13% - 100%	70	%
Other real estate	—		—		Appraisals	Discount for lack of marketability	0% - 0%	0	%
December 31, 2021
Collateral-dependent impaired loans	$	571	$	571	Collateral based measurements including appraisals, trade publications, and auction values	Discount for lack of marketability and current conditions	20% - 90%	43.1	%
Mortgage servicing rights	4,671		5,640		Discounted cash flows	Constant prepayment rate (CPR)	11.8% - 18.5%	16.4	%
						Discount rate	8.6% - 11.5%	8.8	%
Repossessions	861		942		Appraisals, trade publications and auction values	Discount for lack of marketability	0% - 21%	2	%
Other real estate	—		—		Appraisals	Discount for lack of marketability	0% - 0%	0	%

XML

Accounting Policies (Details)	3 Months Ended
	Mar. 31, 2022
Minimum
Summary of Significant Accounting Policies [Line Items]
Period of sustained performance required to change from non-performing to performing status	6 months

XML

Investment Securities (Details) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
Contractual maturities of investments in debt securities available-for-sale, Amortized Cost
Due in one year or less	$ 99,452
Due after one year through five years	1,073,137
Due after five years through ten years	89,899
Due after ten years	360
Mortgage-backed securities	700,666
Total debt securities available-for-sale	1,963,514	$ 1,876,031
Contractual maturities of investments in debt securities available-for-sale, Fair Value
Due in one year or less	99,754
Due after one year through five years	1,018,725
Due after five years through ten years	83,636
Due after ten years	306
Mortgage-backed securities	655,010
Total debt securities available-for-sale	1,857,431	1,863,041
Accrued interest receivable on investment securities available-for-sale	5,020	4,800
U.S. Treasury and Federal agencies securities
Contractual maturities of investments in debt securities available-for-sale, Amortized Cost
Total debt securities available-for-sale	1,137,278	1,093,780
Contractual maturities of investments in debt securities available-for-sale, Fair Value
Total debt securities available-for-sale	1,080,945	1,084,006
U.S. States and political subdivisions securities
Contractual maturities of investments in debt securities available-for-sale, Amortized Cost
Total debt securities available-for-sale	102,459	95,700
Contractual maturities of investments in debt securities available-for-sale, Fair Value
Total debt securities available-for-sale	98,353	95,701
Mortgage-backed securities - Federal agencies
Contractual maturities of investments in debt securities available-for-sale, Amortized Cost
Total debt securities available-for-sale	700,666	663,441
Contractual maturities of investments in debt securities available-for-sale, Fair Value
Total debt securities available-for-sale	655,010	659,727
Corporate debt securities
Contractual maturities of investments in debt securities available-for-sale, Amortized Cost
Total debt securities available-for-sale	22,511	22,510
Contractual maturities of investments in debt securities available-for-sale, Fair Value
Total debt securities available-for-sale	22,525	23,009
Foreign government and other securities
Contractual maturities of investments in debt securities available-for-sale, Amortized Cost
Total debt securities available-for-sale	600	600
Contractual maturities of investments in debt securities available-for-sale, Fair Value
Total debt securities available-for-sale	$ 598	$ 598

XML

Investment Securities (Details 2) $ in Thousands	3 Months Ended
	Mar. 31, 2022 USD ($)	Mar. 31, 2021 USD ($)	Dec. 31, 2021 USD ($)
Schedule Of Available For Sale Debt Securities [Line Items]
Total debt securities available-for-sale	$ 1,963,514		$ 1,876,031
Gross Unrealized Gains	970		9,618
Gross Unrealized Losses	(107,053)		(22,608)
Investment securities available-for-sale	1,857,431		1,863,041
Fair Value
Less than 12 Months	1,347,261		1,284,132
12 months or Longer	359,078		124,298
Total fair value	1,706,339		1,408,430
Unrealized Losses
Less than 12 Months	(75,410)		(19,022)
12 months or Longer	(31,643)		(3,586)
Total unrealized losses	(107,053)		(22,608)
Gross realized gains and losses
Gross realized gains	0	$ 0
Gross realized losses	0	0
Net realized (losses) gains	0	$ 0
Investment securities pledged as collateral	$ 331,280		351,130
Number of available-for-sale debt securities	719
Number of available-for-sale debt securities in an unrealized loss position	541
U.S. Treasury and Federal agencies securities
Schedule Of Available For Sale Debt Securities [Line Items]
Total debt securities available-for-sale	$ 1,137,278		1,093,780
Gross Unrealized Gains	343		3,244
Gross Unrealized Losses	(56,676)		(13,018)
Investment securities available-for-sale	1,080,945		1,084,006
Fair Value
Less than 12 Months	796,571		789,536
12 months or Longer	207,232		84,191
Total fair value	1,003,803		873,727
Unrealized Losses
Less than 12 Months	(40,683)		(10,728)
12 months or Longer	(15,993)		(2,290)
Total unrealized losses	(56,676)		(13,018)
U.S. States and political subdivisions securities
Schedule Of Available For Sale Debt Securities [Line Items]
Total debt securities available-for-sale	102,459		95,700
Gross Unrealized Gains	145		1,130
Gross Unrealized Losses	(4,251)		(1,129)
Investment securities available-for-sale	98,353		95,701
Fair Value
Less than 12 Months	55,508		39,585
12 months or Longer	18,798		4,875
Total fair value	74,306		44,460
Unrealized Losses
Less than 12 Months	(2,367)		(980)
12 months or Longer	(1,884)		(149)
Total unrealized losses	(4,251)		(1,129)
Mortgage-backed securities - Federal agencies
Schedule Of Available For Sale Debt Securities [Line Items]
Total debt securities available-for-sale	700,666		663,441
Gross Unrealized Gains	394		4,745
Gross Unrealized Losses	(46,050)		(8,459)
Investment securities available-for-sale	655,010		659,727
Fair Value
Less than 12 Months	486,975		454,413
12 months or Longer	133,048		35,232
Total fair value	620,023		489,645
Unrealized Losses
Less than 12 Months	(32,284)		(7,312)
12 months or Longer	(13,766)		(1,147)
Total unrealized losses	(46,050)		(8,459)
Corporate debt securities
Schedule Of Available For Sale Debt Securities [Line Items]
Total debt securities available-for-sale	22,511		22,510
Gross Unrealized Gains	88		499
Gross Unrealized Losses	(74)		0
Investment securities available-for-sale	22,525		23,009
Fair Value
Less than 12 Months	8,109		0
12 months or Longer	0		0
Total fair value	8,109		0
Unrealized Losses
Less than 12 Months	(74)		0
12 months or Longer	0		0
Total unrealized losses	(74)		0
Foreign government and other securities
Schedule Of Available For Sale Debt Securities [Line Items]
Total debt securities available-for-sale	600		600
Gross Unrealized Gains	0		0
Gross Unrealized Losses	(2)		(2)
Investment securities available-for-sale	598		598
Fair Value
Less than 12 Months	98		598
12 months or Longer	0		0
Total fair value	98		598
Unrealized Losses
Less than 12 Months	(2)		(2)
12 months or Longer	0		0
Total unrealized losses	$ (2)		$ (2)

XML

Loan and Lease Financings (Details)	3 Months Ended
	Mar. 31, 2022 USD ($) item class	Dec. 31, 2021 USD ($)
Receivables [Abstract]
Number of methods to assess credit risk | item	2
Loan and Lease Financings
Number of methods to assess credit risk | item	2
PPP loan balance	$ 37,940,000
PPP loans receivable deferred income	$ 1,240,000
Number of domestic aircraft loan pools | class	2
Amortized cost of loans and leases	$ 5,394,003,000	$ 5,346,214,000
Commercial and agricultural
Loan and Lease Financings
Financing receivable originated during current fiscal year	53,958,000	238,194,000
Financing receivable originated one year prior to current fiscal year	193,007,000	124,141,000
Financing receivable originated two years prior to current fiscal year	108,157,000	64,411,000
Financing receivable originated three years prior to current fiscal year	54,295,000	57,604,000
Financing receivable originated four years prior to current fiscal year	46,172,000	34,549,000
Financing receivable originated five years or more prior to current fiscal year	34,363,000	20,668,000
Revolving Loans	379,141,000	379,145,000
Revolving Loans Converted to Term	0	0
Amortized cost of loans and leases	$ 869,093,000	918,712,000
Commercial and agricultural | Minimum
Loan and Lease Financings
Expected life of underlying collateral	3 years
Commercial and agricultural | Maximum
Loan and Lease Financings
Expected life of underlying collateral	7 years
Solar
Loan and Lease Financings
Financing receivable originated during current fiscal year	$ 22,411,000	159,244,000
Financing receivable originated one year prior to current fiscal year	128,379,000	43,211,000
Financing receivable originated two years prior to current fiscal year	41,683,000	87,475,000
Financing receivable originated three years prior to current fiscal year	86,913,000	19,703,000
Financing receivable originated four years prior to current fiscal year	19,619,000	34,889,000
Financing receivable originated five years or more prior to current fiscal year	38,480,000	3,780,000
Revolving Loans	0	0
Revolving Loans Converted to Term	0	0
Amortized cost of loans and leases	337,485,000	348,302,000
Auto and light truck
Loan and Lease Financings
Financing receivable originated during current fiscal year	113,757,000	341,933,000
Financing receivable originated one year prior to current fiscal year	292,383,000	134,461,000
Financing receivable originated two years prior to current fiscal year	117,995,000	80,047,000
Financing receivable originated three years prior to current fiscal year	66,593,000	28,824,000
Financing receivable originated four years prior to current fiscal year	23,556,000	16,690,000
Financing receivable originated five years or more prior to current fiscal year	15,496,000	1,820,000
Revolving Loans	0	0
Revolving Loans Converted to Term	0	0
Amortized cost of loans and leases	$ 629,780,000	603,775,000
Auto and light truck | Minimum
Loan and Lease Financings
Loan amortization period	18 months
Direct finance lease term	3 years
Auto and light truck | Maximum
Loan and Lease Financings
Loan amortization period	4 years
Direct finance lease term	7 years
Medium and heavy duty truck
Loan and Lease Financings
Financing receivable originated during current fiscal year	$ 26,377,000	92,252,000
Financing receivable originated one year prior to current fiscal year	85,103,000	68,354,000
Financing receivable originated two years prior to current fiscal year	61,748,000	57,967,000
Financing receivable originated three years prior to current fiscal year	50,070,000	23,210,000
Financing receivable originated four years prior to current fiscal year	19,724,000	12,419,000
Financing receivable originated five years or more prior to current fiscal year	12,255,000	5,538,000
Revolving Loans	0	0
Revolving Loans Converted to Term	0	0
Amortized cost of loans and leases	$ 255,277,000	259,740,000
Medium and heavy duty truck | Minimum
Loan and Lease Financings
Period of amortization to reach equity position in collateral	3 years
Medium and heavy duty truck | Maximum
Loan and Lease Financings
Period of amortization to reach equity position in collateral	4 years
Aircraft
Loan and Lease Financings
Financing receivable originated during current fiscal year	$ 144,014,000	386,036,000
Financing receivable originated one year prior to current fiscal year	344,528,000	291,546,000
Financing receivable originated two years prior to current fiscal year	274,036,000	85,916,000
Financing receivable originated three years prior to current fiscal year	73,079,000	50,518,000
Financing receivable originated four years prior to current fiscal year	46,776,000	47,479,000
Financing receivable originated five years or more prior to current fiscal year	67,746,000	32,062,000
Revolving Loans	6,861,000	4,844,000
Revolving Loans Converted to Term	0	0
Amortized cost of loans and leases	$ 957,040,000	898,401,000
Aircraft | Minimum
Loan and Lease Financings
Loan amortization period	10 years
Aircraft | Maximum
Loan and Lease Financings
Loan amortization period	15 years
Construction equipment
Loan and Lease Financings
Financing receivable originated during current fiscal year	$ 136,099,000	340,694,000
Financing receivable originated one year prior to current fiscal year	297,354,000	209,741,000
Financing receivable originated two years prior to current fiscal year	168,602,000	111,012,000
Financing receivable originated three years prior to current fiscal year	93,620,000	48,490,000
Financing receivable originated four years prior to current fiscal year	37,936,000	13,581,000
Financing receivable originated five years or more prior to current fiscal year	13,972,000	5,031,000
Revolving Loans	22,965,000	18,937,000
Revolving Loans Converted to Term	5,424,000	6,787,000
Amortized cost of loans and leases	775,972,000	754,273,000
Commercial real estate
Loan and Lease Financings
Financing receivable originated during current fiscal year	61,063,000	230,919,000
Financing receivable originated one year prior to current fiscal year	192,722,000	156,065,000
Financing receivable originated two years prior to current fiscal year	153,258,000	153,533,000
Financing receivable originated three years prior to current fiscal year	147,809,000	142,329,000
Financing receivable originated four years prior to current fiscal year	136,611,000	132,850,000
Financing receivable originated five years or more prior to current fiscal year	229,030,000	113,254,000
Revolving Loans	314,000	391,000
Revolving Loans Converted to Term	0	0
Amortized cost of loans and leases	920,807,000	929,341,000
Residential real estate and home equity
Loan and Lease Financings
Financing receivable originated during current fiscal year	28,424,000	105,345,000
Financing receivable originated one year prior to current fiscal year	101,853,000	114,682,000
Financing receivable originated two years prior to current fiscal year	109,427,000	41,185,000
Financing receivable originated three years prior to current fiscal year	37,498,000	9,719,000
Financing receivable originated four years prior to current fiscal year	9,200,000	12,141,000
Financing receivable originated five years or more prior to current fiscal year	98,073,000	90,301,000
Revolving Loans	121,106,000	122,574,000
Revolving Loans Converted to Term	4,956,000	4,643,000
Amortized cost of loans and leases	510,537,000	500,590,000
Consumer
Loan and Lease Financings
Financing receivable originated during current fiscal year	19,637,000	58,903,000
Financing receivable originated one year prior to current fiscal year	52,983,000	24,414,000
Financing receivable originated two years prior to current fiscal year	20,895,000	17,074,000
Financing receivable originated three years prior to current fiscal year	13,853,000	8,314,000
Financing receivable originated four years prior to current fiscal year	6,549,000	2,296,000
Financing receivable originated five years or more prior to current fiscal year	2,108,000	701,000
Revolving Loans	21,987,000	21,378,000
Revolving Loans Converted to Term	0	0
Amortized cost of loans and leases	138,012,000	133,080,000
Credit Quality Grades 1-6 | Commercial and agricultural
Loan and Lease Financings
Financing receivable originated during current fiscal year	53,128,000	233,512,000
Financing receivable originated one year prior to current fiscal year	190,821,000	123,947,000
Financing receivable originated two years prior to current fiscal year	107,991,000	60,744,000
Financing receivable originated three years prior to current fiscal year	50,957,000	55,231,000
Financing receivable originated four years prior to current fiscal year	43,930,000	32,545,000
Financing receivable originated five years or more prior to current fiscal year	32,145,000	20,184,000
Revolving Loans	363,670,000	364,460,000
Revolving Loans Converted to Term	0	0
Amortized cost of loans and leases	842,642,000	890,623,000
Credit Quality Grades 1-6 | Solar
Loan and Lease Financings
Financing receivable originated during current fiscal year	22,411,000	159,244,000
Financing receivable originated one year prior to current fiscal year	128,379,000	42,073,000
Financing receivable originated two years prior to current fiscal year	40,552,000	81,593,000
Financing receivable originated three years prior to current fiscal year	81,076,000	18,979,000
Financing receivable originated four years prior to current fiscal year	18,901,000	34,889,000
Financing receivable originated five years or more prior to current fiscal year	38,480,000	3,780,000
Revolving Loans	0	0
Revolving Loans Converted to Term	0	0
Amortized cost of loans and leases	329,799,000	340,558,000
Credit Quality Grades 1-6 | Auto and light truck
Loan and Lease Financings
Financing receivable originated during current fiscal year	113,310,000	331,105,000
Financing receivable originated one year prior to current fiscal year	284,748,000	122,709,000
Financing receivable originated two years prior to current fiscal year	108,645,000	72,580,000
Financing receivable originated three years prior to current fiscal year	62,013,000	24,965,000
Financing receivable originated four years prior to current fiscal year	20,163,000	11,814,000
Financing receivable originated five years or more prior to current fiscal year	10,471,000	901,000
Revolving Loans	0	0
Revolving Loans Converted to Term	0	0
Amortized cost of loans and leases	599,350,000	564,074,000
Credit Quality Grades 1-6 | Medium and heavy duty truck
Loan and Lease Financings
Financing receivable originated during current fiscal year	26,377,000	92,252,000
Financing receivable originated one year prior to current fiscal year	85,103,000	68,354,000
Financing receivable originated two years prior to current fiscal year	61,748,000	57,967,000
Financing receivable originated three years prior to current fiscal year	50,070,000	23,210,000
Financing receivable originated four years prior to current fiscal year	19,724,000	12,419,000
Financing receivable originated five years or more prior to current fiscal year	12,068,000	5,265,000
Revolving Loans	0	0
Revolving Loans Converted to Term	0	0
Amortized cost of loans and leases	255,090,000	259,467,000
Credit Quality Grades 1-6 | Aircraft
Loan and Lease Financings
Financing receivable originated during current fiscal year	142,120,000	384,895,000
Financing receivable originated one year prior to current fiscal year	344,528,000	290,897,000
Financing receivable originated two years prior to current fiscal year	273,403,000	85,916,000
Financing receivable originated three years prior to current fiscal year	73,079,000	45,848,000
Financing receivable originated four years prior to current fiscal year	42,434,000	47,025,000
Financing receivable originated five years or more prior to current fiscal year	65,511,000	29,435,000
Revolving Loans	6,861,000	4,844,000
Revolving Loans Converted to Term	0	0
Amortized cost of loans and leases	947,936,000	888,860,000
Credit Quality Grades 1-6 | Construction equipment
Loan and Lease Financings
Financing receivable originated during current fiscal year	113,680,000	314,044,000
Financing receivable originated one year prior to current fiscal year	287,695,000	201,032,000
Financing receivable originated two years prior to current fiscal year	166,178,000	109,029,000
Financing receivable originated three years prior to current fiscal year	90,462,000	47,693,000
Financing receivable originated four years prior to current fiscal year	37,171,000	13,501,000
Financing receivable originated five years or more prior to current fiscal year	13,924,000	5,031,000
Revolving Loans	22,965,000	18,937,000
Revolving Loans Converted to Term	3,387,000	4,594,000
Amortized cost of loans and leases	735,462,000	713,861,000
Credit Quality Grades 1-6 | Commercial real estate
Loan and Lease Financings
Financing receivable originated during current fiscal year	59,945,000	230,701,000
Financing receivable originated one year prior to current fiscal year	192,722,000	150,144,000
Financing receivable originated two years prior to current fiscal year	145,247,000	146,374,000
Financing receivable originated three years prior to current fiscal year	140,328,000	141,838,000
Financing receivable originated four years prior to current fiscal year	136,562,000	126,642,000
Financing receivable originated five years or more prior to current fiscal year	221,961,000	112,243,000
Revolving Loans	314,000	391,000
Revolving Loans Converted to Term	0	0
Amortized cost of loans and leases	897,079,000	908,333,000
Credit Quality Grades 7-12
Loan and Lease Financings
Relationships reviewed quarterly as part of management's evaluation of the appropriateness of the allowance for loan and lease losses	250,000
Credit Quality Grades 7-12 | Commercial and agricultural
Loan and Lease Financings
Financing receivable originated during current fiscal year	830,000	4,682,000
Financing receivable originated one year prior to current fiscal year	2,186,000	194,000
Financing receivable originated two years prior to current fiscal year	166,000	3,667,000
Financing receivable originated three years prior to current fiscal year	3,338,000	2,373,000
Financing receivable originated four years prior to current fiscal year	2,242,000	2,004,000
Financing receivable originated five years or more prior to current fiscal year	2,218,000	484,000
Revolving Loans	15,471,000	14,685,000
Revolving Loans Converted to Term	0	0
Amortized cost of loans and leases	26,451,000	28,089,000
Credit Quality Grades 7-12 | Solar
Loan and Lease Financings
Financing receivable originated during current fiscal year	0	0
Financing receivable originated one year prior to current fiscal year	0	1,138,000
Financing receivable originated two years prior to current fiscal year	1,131,000	5,882,000
Financing receivable originated three years prior to current fiscal year	5,837,000	724,000
Financing receivable originated four years prior to current fiscal year	718,000	0
Financing receivable originated five years or more prior to current fiscal year	0	0
Revolving Loans	0	0
Revolving Loans Converted to Term	0	0
Amortized cost of loans and leases	7,686,000	7,744,000
Credit Quality Grades 7-12 | Auto and light truck
Loan and Lease Financings
Financing receivable originated during current fiscal year	447,000	10,828,000
Financing receivable originated one year prior to current fiscal year	7,635,000	11,752,000
Financing receivable originated two years prior to current fiscal year	9,350,000	7,467,000
Financing receivable originated three years prior to current fiscal year	4,580,000	3,859,000
Financing receivable originated four years prior to current fiscal year	3,393,000	4,876,000
Financing receivable originated five years or more prior to current fiscal year	5,025,000	919,000
Revolving Loans	0	0
Revolving Loans Converted to Term	0	0
Amortized cost of loans and leases	30,430,000	39,701,000
Credit Quality Grades 7-12 | Medium and heavy duty truck
Loan and Lease Financings
Financing receivable originated during current fiscal year	0	0
Financing receivable originated one year prior to current fiscal year	0	0
Financing receivable originated two years prior to current fiscal year	0	0
Financing receivable originated three years prior to current fiscal year	0	0
Financing receivable originated four years prior to current fiscal year	0	0
Financing receivable originated five years or more prior to current fiscal year	187,000	273,000
Revolving Loans	0	0
Revolving Loans Converted to Term	0	0
Amortized cost of loans and leases	187,000	273,000
Credit Quality Grades 7-12 | Aircraft
Loan and Lease Financings
Financing receivable originated during current fiscal year	1,894,000	1,141,000
Financing receivable originated one year prior to current fiscal year	0	649,000
Financing receivable originated two years prior to current fiscal year	633,000	0
Financing receivable originated three years prior to current fiscal year	0	4,670,000
Financing receivable originated four years prior to current fiscal year	4,342,000	454,000
Financing receivable originated five years or more prior to current fiscal year	2,235,000	2,627,000
Revolving Loans	0	0
Revolving Loans Converted to Term	0	0
Amortized cost of loans and leases	9,104,000	9,541,000
Credit Quality Grades 7-12 | Construction equipment
Loan and Lease Financings
Financing receivable originated during current fiscal year	22,419,000	26,650,000
Financing receivable originated one year prior to current fiscal year	9,659,000	8,709,000
Financing receivable originated two years prior to current fiscal year	2,424,000	1,983,000
Financing receivable originated three years prior to current fiscal year	3,158,000	797,000
Financing receivable originated four years prior to current fiscal year	765,000	80,000
Financing receivable originated five years or more prior to current fiscal year	48,000	0
Revolving Loans	0	0
Revolving Loans Converted to Term	2,037,000	2,193,000
Amortized cost of loans and leases	40,510,000	40,412,000
Credit Quality Grades 7-12 | Commercial real estate
Loan and Lease Financings
Financing receivable originated during current fiscal year	1,118,000	218,000
Financing receivable originated one year prior to current fiscal year	0	5,921,000
Financing receivable originated two years prior to current fiscal year	8,011,000	7,159,000
Financing receivable originated three years prior to current fiscal year	7,481,000	491,000
Financing receivable originated four years prior to current fiscal year	49,000	6,208,000
Financing receivable originated five years or more prior to current fiscal year	7,069,000	1,011,000
Revolving Loans	0	0
Revolving Loans Converted to Term	0	0
Amortized cost of loans and leases	23,728,000	21,008,000
Performing | Residential real estate and home equity
Loan and Lease Financings
Financing receivable originated during current fiscal year	28,424,000	105,345,000
Financing receivable originated one year prior to current fiscal year	101,853,000	114,682,000
Financing receivable originated two years prior to current fiscal year	109,427,000	41,185,000
Financing receivable originated three years prior to current fiscal year	37,498,000	9,706,000
Financing receivable originated four years prior to current fiscal year	9,186,000	11,720,000
Financing receivable originated five years or more prior to current fiscal year	96,976,000	89,646,000
Revolving Loans	120,863,000	122,281,000
Revolving Loans Converted to Term	4,752,000	4,555,000
Amortized cost of loans and leases	508,979,000	499,120,000
Performing | Consumer
Loan and Lease Financings
Financing receivable originated during current fiscal year	19,637,000	58,866,000
Financing receivable originated one year prior to current fiscal year	52,972,000	24,307,000
Financing receivable originated two years prior to current fiscal year	20,840,000	17,031,000
Financing receivable originated three years prior to current fiscal year	13,816,000	8,284,000
Financing receivable originated four years prior to current fiscal year	6,521,000	2,263,000
Financing receivable originated five years or more prior to current fiscal year	2,073,000	697,000
Revolving Loans	21,987,000	21,378,000
Revolving Loans Converted to Term	0	0
Amortized cost of loans and leases	$ 137,846,000	132,826,000
Nonperforming
Loan and Lease Financings
Classification of nonperforming loans, threshold period past due	90 days
Nonperforming | Residential real estate and home equity
Loan and Lease Financings
Financing receivable originated during current fiscal year	$ 0	0
Financing receivable originated one year prior to current fiscal year	0	0
Financing receivable originated two years prior to current fiscal year	0	0
Financing receivable originated three years prior to current fiscal year	0	13,000
Financing receivable originated four years prior to current fiscal year	14,000	421,000
Financing receivable originated five years or more prior to current fiscal year	1,097,000	655,000
Revolving Loans	243,000	293,000
Revolving Loans Converted to Term	204,000	88,000
Amortized cost of loans and leases	1,558,000	1,470,000
Nonperforming | Consumer
Loan and Lease Financings
Financing receivable originated during current fiscal year	0	37,000
Financing receivable originated one year prior to current fiscal year	11,000	107,000
Financing receivable originated two years prior to current fiscal year	55,000	43,000
Financing receivable originated three years prior to current fiscal year	37,000	30,000
Financing receivable originated four years prior to current fiscal year	28,000	33,000
Financing receivable originated five years or more prior to current fiscal year	35,000	4,000
Revolving Loans	0	0
Revolving Loans Converted to Term	0	0
Amortized cost of loans and leases	$ 166,000	$ 254,000

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Loan and Lease Financings (Details 2) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
Amortized cost of loans and leases, segregated by portfolio segment, with delinquency aging and nonaccrual status
90 Days or More Past Due and Accruing	$ 274	$ 249
Total Accruing Loans	5,358,568	5,307,508
Nonaccrual	35,435	38,706
Total loans and leases	5,394,003	5,346,214
Accrued interest receivable on loans and leases	13,110	12,940
Current
Amortized cost of loans and leases, segregated by portfolio segment, with delinquency aging and nonaccrual status
Total loans and leases	5,348,112	5,301,658
30 to 59 Days Past Due
Amortized cost of loans and leases, segregated by portfolio segment, with delinquency aging and nonaccrual status
Total loans and leases	7,550	2,987
60 to 89 Days Past Due
Amortized cost of loans and leases, segregated by portfolio segment, with delinquency aging and nonaccrual status
Total loans and leases	2,632	2,614
Commercial and agricultural
Amortized cost of loans and leases, segregated by portfolio segment, with delinquency aging and nonaccrual status
Total Accruing Loans	867,727	916,659
Nonaccrual	1,366	2,053
Total loans and leases	869,093	918,712
Commercial and agricultural | Current
Amortized cost of loans and leases, segregated by portfolio segment, with delinquency aging and nonaccrual status
Total loans and leases	867,023	916,659
Commercial and agricultural | 30 to 59 Days Past Due
Amortized cost of loans and leases, segregated by portfolio segment, with delinquency aging and nonaccrual status
Total loans and leases	503	0
Commercial and agricultural | 60 to 89 Days Past Due
Amortized cost of loans and leases, segregated by portfolio segment, with delinquency aging and nonaccrual status
Total loans and leases	201	0
Solar
Amortized cost of loans and leases, segregated by portfolio segment, with delinquency aging and nonaccrual status
Total Accruing Loans	337,485	348,302
Nonaccrual	0	0
Total loans and leases	337,485	348,302
Solar | Current
Amortized cost of loans and leases, segregated by portfolio segment, with delinquency aging and nonaccrual status
Total loans and leases	337,485	348,302
Solar | 30 to 59 Days Past Due
Amortized cost of loans and leases, segregated by portfolio segment, with delinquency aging and nonaccrual status
Total loans and leases	0	0
Solar | 60 to 89 Days Past Due
Amortized cost of loans and leases, segregated by portfolio segment, with delinquency aging and nonaccrual status
Total loans and leases	0	0
Auto and light truck
Amortized cost of loans and leases, segregated by portfolio segment, with delinquency aging and nonaccrual status
Total Accruing Loans	608,205	579,605
Nonaccrual	21,575	24,170
Total loans and leases	629,780	603,775
Auto and light truck | Current
Amortized cost of loans and leases, segregated by portfolio segment, with delinquency aging and nonaccrual status
Total loans and leases	607,991	579,605
Auto and light truck | 30 to 59 Days Past Due
Amortized cost of loans and leases, segregated by portfolio segment, with delinquency aging and nonaccrual status
Total loans and leases	214	0
Auto and light truck | 60 to 89 Days Past Due
Amortized cost of loans and leases, segregated by portfolio segment, with delinquency aging and nonaccrual status
Total loans and leases	0	0
Medium and heavy duty truck
Amortized cost of loans and leases, segregated by portfolio segment, with delinquency aging and nonaccrual status
Total Accruing Loans	255,090	259,467
Nonaccrual	187	273
Total loans and leases	255,277	259,740
Medium and heavy duty truck | Current
Amortized cost of loans and leases, segregated by portfolio segment, with delinquency aging and nonaccrual status
Total loans and leases	254,896	259,467
Medium and heavy duty truck | 30 to 59 Days Past Due
Amortized cost of loans and leases, segregated by portfolio segment, with delinquency aging and nonaccrual status
Total loans and leases	194	0
Medium and heavy duty truck | 60 to 89 Days Past Due
Amortized cost of loans and leases, segregated by portfolio segment, with delinquency aging and nonaccrual status
Total loans and leases	0	0
Aircraft
Amortized cost of loans and leases, segregated by portfolio segment, with delinquency aging and nonaccrual status
Total Accruing Loans	956,407	897,752
Nonaccrual	633	649
Total loans and leases	957,040	898,401
Aircraft | Current
Amortized cost of loans and leases, segregated by portfolio segment, with delinquency aging and nonaccrual status
Total loans and leases	950,763	894,092
Aircraft | 30 to 59 Days Past Due
Amortized cost of loans and leases, segregated by portfolio segment, with delinquency aging and nonaccrual status
Total loans and leases	3,409	1,130
Aircraft | 60 to 89 Days Past Due
Amortized cost of loans and leases, segregated by portfolio segment, with delinquency aging and nonaccrual status
Total loans and leases	2,235	2,530
Construction equipment
Amortized cost of loans and leases, segregated by portfolio segment, with delinquency aging and nonaccrual status
Total Accruing Loans	768,662	747,183
Nonaccrual	7,310	7,090
Total loans and leases	775,972	754,273
Construction equipment | Current
Amortized cost of loans and leases, segregated by portfolio segment, with delinquency aging and nonaccrual status
Total loans and leases	766,210	745,870
Construction equipment | 30 to 59 Days Past Due
Amortized cost of loans and leases, segregated by portfolio segment, with delinquency aging and nonaccrual status
Total loans and leases	2,452	1,313
Construction equipment | 60 to 89 Days Past Due
Amortized cost of loans and leases, segregated by portfolio segment, with delinquency aging and nonaccrual status
Total loans and leases	0	0
Commercial real estate
Amortized cost of loans and leases, segregated by portfolio segment, with delinquency aging and nonaccrual status
Total Accruing Loans	917,893	926,345
Nonaccrual	2,914	2,996
Total loans and leases	920,807	929,341
Commercial real estate | Current
Amortized cost of loans and leases, segregated by portfolio segment, with delinquency aging and nonaccrual status
Total loans and leases	917,893	926,345
Commercial real estate | 30 to 59 Days Past Due
Amortized cost of loans and leases, segregated by portfolio segment, with delinquency aging and nonaccrual status
Total loans and leases	0	0
Commercial real estate | 60 to 89 Days Past Due
Amortized cost of loans and leases, segregated by portfolio segment, with delinquency aging and nonaccrual status
Total loans and leases	0	0
Residential real estate and home equity
Amortized cost of loans and leases, segregated by portfolio segment, with delinquency aging and nonaccrual status
90 Days or More Past Due and Accruing	274	245
Total Accruing Loans	509,253	499,365
Nonaccrual	1,284	1,225
Total loans and leases	510,537	500,590
Residential real estate and home equity | Current
Amortized cost of loans and leases, segregated by portfolio segment, with delinquency aging and nonaccrual status
Total loans and leases	508,270	498,854
Residential real estate and home equity | 30 to 59 Days Past Due
Amortized cost of loans and leases, segregated by portfolio segment, with delinquency aging and nonaccrual status
Total loans and leases	556	212
Residential real estate and home equity | 60 to 89 Days Past Due
Amortized cost of loans and leases, segregated by portfolio segment, with delinquency aging and nonaccrual status
Total loans and leases	153	54
Consumer
Amortized cost of loans and leases, segregated by portfolio segment, with delinquency aging and nonaccrual status
90 Days or More Past Due and Accruing	0	4
Total Accruing Loans	137,846	132,830
Nonaccrual	166	250
Total loans and leases	138,012	133,080
Consumer | Current
Amortized cost of loans and leases, segregated by portfolio segment, with delinquency aging and nonaccrual status
Total loans and leases	137,581	132,464
Consumer | 30 to 59 Days Past Due
Amortized cost of loans and leases, segregated by portfolio segment, with delinquency aging and nonaccrual status
Total loans and leases	222	332
Consumer | 60 to 89 Days Past Due
Amortized cost of loans and leases, segregated by portfolio segment, with delinquency aging and nonaccrual status
Total loans and leases	$ 43	$ 30

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Loan and Lease Financings (Details 4) $ in Thousands	3 Months Ended
	Mar. 31, 2022 USD ($) item default	Mar. 31, 2021 item default	Dec. 31, 2021 USD ($)
Loans and leases classified as TDR
Number of Modifications | item	0	0
Number of Defaults | default	0	0
Loans and leases classified as troubled debt restructuring	$ 5,965		$ 7,061
Troubled debt restructured loans and leases which had payment defaults within twelve months following modification
Default threshold	90 days
Performing
Loans and leases classified as TDR
Loans and leases classified as troubled debt restructuring	$ 0		319
Nonperforming
Loans and leases classified as TDR
Loans and leases classified as troubled debt restructuring	$ 5,965		$ 6,742
Interest Rate Below Market Reduction [Member]
Loans and leases classified as TDR
Number of Modifications | item	0	0

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Allowance for Credit Losses (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2022 USD ($) item	Mar. 31, 2021 USD ($)
Allowance for credit losses
Number of classes existing in loan and lease portfolio | item	9
Changes in allowance for loan and lease losses
Balance at the beginning of the period	$ 127,492	$ 140,654
Charge-offs	217	4,452
Recoveries	451	950
Net charge-offs (recoveries)	(234)	3,502
Provision (recovery of provision)	2,233	2,398
Balance at the end of the period	129,959	139,550
Commercial and agricultural
Changes in allowance for loan and lease losses
Balance at the beginning of the period	15,409	16,680
Charge-offs	0	1
Recoveries	4	377
Net charge-offs (recoveries)	(4)	(376)
Provision (recovery of provision)	185	(1,605)
Balance at the end of the period	15,598	15,451
Solar
Changes in allowance for loan and lease losses
Balance at the beginning of the period	6,585	5,549
Charge-offs	0	0
Recoveries	0	0
Net charge-offs (recoveries)	0	0
Provision (recovery of provision)	(168)	209
Balance at the end of the period	6,417	5,758
Auto and light truck
Changes in allowance for loan and lease losses
Balance at the beginning of the period	19,624	28,926
Charge-offs	0	4,286
Recoveries	65	49
Net charge-offs (recoveries)	(65)	4,237
Provision (recovery of provision)	(168)	4,654
Balance at the end of the period	19,521	29,343
Medium and heavy duty truck
Changes in allowance for loan and lease losses
Balance at the beginning of the period	6,015	6,400
Charge-offs	0	0
Recoveries	0	0
Net charge-offs (recoveries)	0	0
Provision (recovery of provision)	34	(129)
Balance at the end of the period	6,049	6,271
Aircraft
Changes in allowance for loan and lease losses
Balance at the beginning of the period	33,628	34,053
Charge-offs	0	0
Recoveries	316	119
Net charge-offs (recoveries)	(316)	(119)
Provision (recovery of provision)	2,024	1,047
Balance at the end of the period	35,968	35,219
Construction equipment
Changes in allowance for loan and lease losses
Balance at the beginning of the period	19,673	19,166
Charge-offs	48	8
Recoveries	0	254
Net charge-offs (recoveries)	48	(246)
Provision (recovery of provision)	416	(3,103)
Balance at the end of the period	20,041	16,309
Commercial real estate
Changes in allowance for loan and lease losses
Balance at the beginning of the period	19,691	22,758
Charge-offs	0	0
Recoveries	0	15
Net charge-offs (recoveries)	0	(15)
Provision (recovery of provision)	(445)	1,561
Balance at the end of the period	19,246	24,334
Residential real estate and home equity
Changes in allowance for loan and lease losses
Balance at the beginning of the period	5,084	5,374
Charge-offs	4	5
Recoveries	1	1
Net charge-offs (recoveries)	3	4
Provision (recovery of provision)	137	(207)
Balance at the end of the period	5,218	5,163
Consumer
Changes in allowance for loan and lease losses
Balance at the beginning of the period	1,783	1,748
Charge-offs	165	152
Recoveries	65	135
Net charge-offs (recoveries)	100	17
Provision (recovery of provision)	218	(29)
Balance at the end of the period	$ 1,901	$ 1,702

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Allowance for Credit Losses (Details 2) - Unfunded Loan Commitment - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Allowance for credit losses
Balance, beginning of period	$ 4,196	$ 4,499
Provision	728	94
Balance, end of period	$ 4,924	$ 4,593

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Lease Investments (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Leases [Abstract]
Interest income on lease receivable	$ 1,781	$ 1,590
Income related to lease payments	3,662	4,629
Depreciation - leased equipment	3,015	3,773
Income from reimbursements for personal property tax payments on operating leased equipment	200	240
Expense for payments of personal property taxes on operating leased equipment	$ 200	$ 240

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Mortgage Servicing Rights (Details) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
Residential mortgage loans
Mortgage Servicing Rights
Unpaid principal balance	$ 888,630	$ 883,900

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Mortgage Servicing Rights (Details 2) - Residential mortgage loans - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Changes in mortgage servicing assets
Balance at the beginning of the period	$ 4,671	$ 4,616
Additions	335	761
Amortization	(381)	(590)
Carrying value before valuation allowance at end of period	4,625	4,787
Changes in valuation allowance
Balance at the beginning of the period	0	(812)
Impairment recoveries	0	42
Balance at the end of the period	0	(770)
Net carrying value of mortgage servicing rights at end of period	4,625	4,017
Fair value of mortgage servicing rights at end of period	6,363	4,365
Fair value of mortgage servicing rights exceeding the carrying value	1,740	350
Mortgage loan contractual servicing fees, including late fees and ancillary income	$ 720	$ 810

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Commitments and Financial Instruments with Off-Balance-Sheet Risk (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Dec. 31, 2021
Loan commitments to extend credit
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Off-balance-sheet instruments	$ 1,204,428	$ 1,148,984
Standby letters of credit
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Off-balance-sheet instruments	$ 22,765	24,657
Standby letters of credit | Minimum
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Letter of credit term	2 months
Standby letters of credit | Maximum
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Letter of credit term	1 year
Commercial and similar letters of credit
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Off-balance-sheet instruments	$ 746	$ 8,531
Commercial and similar letters of credit | Minimum
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Letter of credit term	2 months
Commercial and similar letters of credit | Maximum
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Letter of credit term	6 months

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Derivative Financial Instruments (Details) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
Non-hedging derivative financial instruments
Derivative Financial Instruments
Notional or contractual amount	$ 1,043,867	$ 1,101,807
Asset derivatives, Fair value	8,293	21,187
Liability derivatives, Fair value	8,006	21,183
Interest rate swap contracts
Derivative Financial Instruments
Asset derivatives, Fair value	10,324	24,436
Interest rate swap contracts | Non-hedging derivative financial instruments
Derivative Financial Instruments
Notional or contractual amount	1,017,365	1,064,721
Asset derivatives, Fair value	7,806	20,735
Liability derivatives, Fair value	8,006	21,172
Loan commitments | Non-hedging derivative financial instruments
Derivative Financial Instruments
Notional or contractual amount	13,422	15,086
Asset derivatives, Fair value	287	452
Liability derivatives, Fair value	0	0
Forward contracts - mortgage loan | Non-hedging derivative financial instruments
Derivative Financial Instruments
Notional or contractual amount	13,080	22,000
Asset derivatives, Fair value	200	0
Liability derivatives, Fair value	$ 0	$ 11

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Derivative Financial Instruments (Details 2) - Non-hedging derivative financial instruments - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Derivative Financial Instruments
Gain (loss)	$ 283	$ 298
Interest rate swap contracts | Other expense
Derivative Financial Instruments
Gain (loss)	237	333
Interest rate swap contracts | Other income
Derivative Financial Instruments
Gain (loss)	0	86
Loan commitments | Mortgage banking income
Derivative Financial Instruments
Gain (loss)	(165)	(698)
Forward contracts - mortgage loan | Mortgage banking income
Derivative Financial Instruments
Gain (loss)	$ 211	$ 577

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Derivative Financial Instruments (Details 3) - Interest rate swaps - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
Offsetting Assets
Asset derivatives, Fair value	$ 10,324	$ 24,436
Gross Amounts Offset in the Statement of Financial Position	2,518	3,701
Net Amounts of Assets Presented in the Statement of Financial Position	7,806	20,735
Derivative Asset, Fair Value, Amount Offset Against Collateral [Abstract]
Financial instruments	0	0
Cash collateral received	3,040	0
Net Amount	$ 4,766	$ 20,735

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Derivative Financial Instruments (Details 4) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
Offsetting of financial liabilities and derivative liabilities
Derivative Liability, Fair Value, Gross Liability Including Not Subject to Master Netting Arrangement	$ 204,322	$ 219,600
Gross Amounts Offset in the Statement of Financial Position	2,518	3,701
Net Amounts of Liabilities Presented in the Statement of Financial Position	201,804	215,899
Gross amounts Not Offset in the Statement of Financial Position
Financial Instruments	194,097	215,225
Cash Collateral Pledged	0	0
Net Amount	7,707	674
Interest rate swaps
Offsetting of financial liabilities and derivative liabilities
Derivative Liability, Fair Value, Gross Liability Including Not Subject to Master Netting Arrangement	10,524	24,873
Gross Amounts Offset in the Statement of Financial Position	2,518	3,701
Net Amounts of Liabilities Presented in the Statement of Financial Position	8,006	21,172
Derivative, Collateral, Right to Reclaim Securities	299	20,498
Gross amounts Not Offset in the Statement of Financial Position
Cash Collateral Pledged	0	0
Net Amount	7,707	674
Repurchase agreements
Offsetting of financial liabilities and derivative liabilities
Derivative Liability, Fair Value, Gross Liability Including Not Subject to Master Netting Arrangement	193,798	194,727
Net Amounts of Liabilities Presented in the Statement of Financial Position	193,798	194,727
Gross amounts Not Offset in the Statement of Financial Position
Financial Instruments	$ 193,798	$ 194,727

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Derivative Financial Instruments (Details 5) - U.S. Treasury and Federal agencies securities - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
Overnight and Continuous
Transfer of Certain Financial Assets Accounted for as Secured Borrowings
Repurchase agreements	$ 190,670	$ 191,470
Up to 30 Days
Transfer of Certain Financial Assets Accounted for as Secured Borrowings
Repurchase agreements	$ 3,130	$ 3,260

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Variable Interest Entities (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Dec. 31, 2021
Subordinated Borrowing [Line Items]
Federal tax credits recognized in tax expense	$ 500	$ 500
Investment tax credits	0	$ 1,920
Investment carrying amount	8,012,463		$ 8,096,289
Unfunded capital and other commitments	7,092,993		7,126,825
Maximum exposure to loss, unconsolidated VIEs	48,044		50,319
Variable interest entity, primary beneficiary
Subordinated Borrowing [Line Items]
Investment carrying amount	67,850		59,080
Unfunded capital and other commitments	7,230		0
Variable interest entity, not primary beneficiary
Subordinated Borrowing [Line Items]
Investment carrying amount	26,391		35,968
Unfunded capital and other commitments	$ 19,668		$ 29,670

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Variable Interest Entities (Details 2) $ in Thousands	3 Months Ended
	Mar. 31, 2022 USD ($) trust	Dec. 31, 2021 USD ($)
Variable Interest Entities [Abstract]
Number of trusts sponsored | trust	1
Percentage of ownership interest	100.00%
Subordinated Borrowing [Line Items]
Amount of subordinated notes	$ 58,764	$ 58,764
June 2007 issuance
Subordinated Borrowing [Line Items]
Amount of subordinated notes	$ 41,238
Interest rate (as a percent)	7.22%
Maturity date of subordinated notes	Jun. 15, 2037
August 2007 issuance
Subordinated Borrowing [Line Items]
Amount of subordinated notes	$ 17,526
Interest rate (as a percent)	2.31%
Maturity date of subordinated notes	Sep. 15, 2037
London Interbank Offered Rate (LIBOR) | August 2007 issuance
Subordinated Borrowing [Line Items]
Basis spread on variable rate (as a percent)	1.48%

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Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Earnings Per Share [Abstract]
Outstanding stock options (in shares)	0	0
Distributed earnings allocated to common stock	$ 7,672	$ 7,364
Undistributed earnings allocated to common stock	19,516	20,531
Net earnings allocated to common stock	27,188	27,895
Net earnings allocated to participating securities	202	210
Net income available to common shareholders	$ 27,390	$ 28,105
Weighted average shares outstanding for basic earnings per common share	24,743,790	25,320,930
Dilutive effect of stock compensation (in shares)	0	0
Weighted average shares outstanding for diluted earnings per common share	24,743,790	25,320,930
Basic earnings per common share (in dollars per share)	$ 1.10	$ 1.10
Diluted earnings per common share (in dollars per share)	$ 1.10	$ 1.10

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Stock Based Compensation (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2022 USD ($) item shares	Mar. 31, 2021 USD ($) shares
Stock-based compensation
Number of stock-based employee compensation plans | item	4
Number of executive stock award plans | item	3
Outstanding stock options (in shares)	0	0
Total unrecognized compensation cost related to non-vested share-based compensation arrangements | $	$ 9,480
Weighted-average period over which unrecognized compensation cost is expected to be recognized	3 years 6 months 21 days
Stock options
Stock-based compensation
Total fair value of options vested and expensed | $	$ 0	$ 0
Outstanding stock options (in shares)	0	0
Stock options exercised (in shares)	0	0

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Accumulated Other Comprehensive Income (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Reclassifications out of accumulated other comprehensive income
Gains on investment securities available-for-sale	$ 0	$ 0
Income tax expense	(7,793)	(8,637)
Unrealized gains and losses on available-for-sale securities | Amount Reclassified from Accumulated Other Comprehensive Income
Reclassifications out of accumulated other comprehensive income
Gains on investment securities available-for-sale	0	0
Income before income taxes	0	0
Income tax expense	0	0
Net income	$ 0	$ 0

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Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Dec. 31, 2021
Income Tax Disclosure [Abstract]
Unrecognized tax benefits that would affect the effective tax rate if recognized	$ 0		$ 0
Interest and penalties net of tax recognized	0	$ 0
Accrued interest and penalties	$ 0		$ 0

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Fair Value Measurements (Details) - USD ($) $ in Thousands		Mar. 31, 2022	Dec. 31, 2021
Fair value measurements
Fair value carrying amount		$ 4,757	$ 13,284
Mortgages held for sale reported at fair value
Fair value measurements
Fair value carrying amount		4,757	13,284
Aggregate unpaid principal		4,256	12,456
Excess of fair value carrying amount over (under) unpaid principal	[1]	$ 501	$ 828

[1] The excess of fair value carrying amount over (under) unpaid principal is included in mortgage banking income and includes changes in fair value at and subsequent to funding and gains and losses on the related loan commitment prior to funding.

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Fair Value Measurements (Details 2) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
Fair value measurements
Investment securities available-for-sale	$ 1,857,431	$ 1,863,041
Assets:
Mortgages held for sale	4,757	13,284
U.S. Treasury and Federal agencies securities
Fair value measurements
Investment securities available-for-sale	1,080,945	1,084,006
U.S. States and political subdivisions securities
Fair value measurements
Investment securities available-for-sale	98,353	95,701
Mortgage-backed securities - Federal agencies
Fair value measurements
Investment securities available-for-sale	655,010	659,727
Corporate debt securities
Fair value measurements
Investment securities available-for-sale	22,525	23,009
Foreign government and other securities
Fair value measurements
Investment securities available-for-sale	598	598
Total
Fair value measurements
Investment securities available-for-sale	1,857,431	1,863,041
Assets:
Mortgages held for sale	4,757	13,284
Level 1
Fair value measurements
Investment securities available-for-sale	590,484	561,950
Assets:
Mortgages held for sale	0	0
Level 2
Fair value measurements
Investment securities available-for-sale	1,262,418	1,299,242
Assets:
Mortgages held for sale	4,757	13,284
Level 3
Fair value measurements
Investment securities available-for-sale	4,529	1,849
Assets:
Mortgages held for sale	0	0
Recurring basis | Total
Fair value measurements
Investment securities available-for-sale	1,857,431	1,863,041
Assets:
Mortgages held for sale	4,757	13,284
Total	1,869,994	1,897,060
Liabilities:
Total	8,006	21,172
Recurring basis | Total | Interest rate swap contracts
Assets:
Accrued income and other assets	7,806	20,735
Liabilities:
Accrued expenses and other liabilities	8,006	21,172
Recurring basis | Total | U.S. Treasury and Federal agencies securities
Fair value measurements
Investment securities available-for-sale	1,080,945	1,084,006
Recurring basis | Total | U.S. States and political subdivisions securities
Fair value measurements
Investment securities available-for-sale	98,353	95,701
Recurring basis | Total | Mortgage-backed securities - Federal agencies
Fair value measurements
Investment securities available-for-sale	655,010	659,727
Recurring basis | Total | Corporate debt securities
Fair value measurements
Investment securities available-for-sale	22,525	23,009
Recurring basis | Total | Foreign government and other securities
Fair value measurements
Investment securities available-for-sale	598	598
Recurring basis | Level 1
Fair value measurements
Investment securities available-for-sale	590,484	561,950
Assets:
Mortgages held for sale	0	0
Total	590,484	561,950
Liabilities:
Total	0	0
Recurring basis | Level 1 | Interest rate swap contracts
Assets:
Accrued income and other assets	0	0
Liabilities:
Accrued expenses and other liabilities	0	0
Recurring basis | Level 1 | U.S. Treasury and Federal agencies securities
Fair value measurements
Investment securities available-for-sale	590,484	561,950
Recurring basis | Level 1 | U.S. States and political subdivisions securities
Fair value measurements
Investment securities available-for-sale	0	0
Recurring basis | Level 1 | Mortgage-backed securities - Federal agencies
Fair value measurements
Investment securities available-for-sale	0	0
Recurring basis | Level 1 | Corporate debt securities
Fair value measurements
Investment securities available-for-sale	0	0
Recurring basis | Level 1 | Foreign government and other securities
Fair value measurements
Investment securities available-for-sale	0	0
Recurring basis | Level 2
Fair value measurements
Investment securities available-for-sale	1,262,418	1,299,242
Assets:
Mortgages held for sale	4,757	13,284
Total	1,274,981	1,333,261
Liabilities:
Total	8,006	21,172
Recurring basis | Level 2 | Interest rate swap contracts
Assets:
Accrued income and other assets	7,806	20,735
Liabilities:
Accrued expenses and other liabilities	8,006	21,172
Recurring basis | Level 2 | U.S. Treasury and Federal agencies securities
Fair value measurements
Investment securities available-for-sale	490,461	522,056
Recurring basis | Level 2 | U.S. States and political subdivisions securities
Fair value measurements
Investment securities available-for-sale	93,824	93,852
Recurring basis | Level 2 | Mortgage-backed securities - Federal agencies
Fair value measurements
Investment securities available-for-sale	655,010	659,727
Recurring basis | Level 2 | Corporate debt securities
Fair value measurements
Investment securities available-for-sale	22,525	23,009
Recurring basis | Level 2 | Foreign government and other securities
Fair value measurements
Investment securities available-for-sale	598	598
Recurring basis | Level 3
Fair value measurements
Investment securities available-for-sale	4,529	1,849
Assets:
Mortgages held for sale	0	0
Total	4,529	1,849
Liabilities:
Total	0	0
Recurring basis | Level 3 | Interest rate swap contracts
Assets:
Accrued income and other assets	0	0
Liabilities:
Accrued expenses and other liabilities	0	0
Recurring basis | Level 3 | U.S. Treasury and Federal agencies securities
Fair value measurements
Investment securities available-for-sale	0	0
Recurring basis | Level 3 | U.S. States and political subdivisions securities
Fair value measurements
Investment securities available-for-sale	4,529	1,849
Recurring basis | Level 3 | Mortgage-backed securities - Federal agencies
Fair value measurements
Investment securities available-for-sale	0	0
Recurring basis | Level 3 | Corporate debt securities
Fair value measurements
Investment securities available-for-sale	0	0
Recurring basis | Level 3 | Foreign government and other securities
Fair value measurements
Investment securities available-for-sale	$ 0	$ 0

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Fair Value Measurements (Details 3) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Changes in the fair value of Level 3 assets measured on a recurring basis
Total gains or losses (unrealized): included in earnings	$ 0	$ 0
U.S. States and political subdivisions securities
Changes in the fair value of Level 3 assets measured on a recurring basis
Balance at the beginning of the period	1,849	2,152
Total gains or losses (realized/unrealized): included in earnings	0	0
Total gains or losses (realized/unrealized): included in other comprehensive income (loss)	(155)	(80)
Purchases	3,000	0
Issuances	0	0
Sales	0	0
Settlements	0	0
Maturities	(165)	(165)
Transfers into Level 3	0	0
Transfers out of Level 3	0	0
Balance at the end of the period	$ 4,529	$ 1,907

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Fair Value Measurements (Details 4) $ in Thousands	Mar. 31, 2022 USD ($)	Dec. 31, 2021 USD ($)
Valuation Methodology
Investment securities, available-for-sale	$ 1,857,431	$ 1,863,041
Level 3
Valuation Methodology
Investment securities, available-for-sale	4,529	1,849
Recurring | Level 3
Valuation Methodology
Investment securities, available-for-sale	4,529	1,849
Recurring | Level 3 | Discounted cash flows | Direct placement municipal securities
Valuation Methodology
Investment securities, available-for-sale	$ 4,529	$ 1,849
Discount for lack of marketability | Non-recurring | Level 3 | Trade publications | Aircraft
Unobservable Inputs
Discount rate (as a percent)	0.10
Discount for lack of marketability | Non-recurring | Level 3 | Auction values | Autos
Unobservable Inputs
Discount rate (as a percent)	0.10
Discount for lack of marketability | Non-recurring | Level 3 | Trade publications and auction values | Medium and heavy duty trucks
Unobservable Inputs
Discount rate (as a percent)	0.15
Discount for lack of marketability | Non-recurring | Level 3 | Trade publications and auction values | Construction equipment
Unobservable Inputs
Discount rate (as a percent)	0.20
Discount for lack of marketability | Non-recurring | Level 3 | Appraisals | Real estate
Unobservable Inputs
Discount rate (as a percent)	0.20
Credit spread assumption | Recurring | Level 3 | Discounted cash flows | Direct placement municipal securities | Minimum
Unobservable Inputs
Debt securities available-for-sale unobservable inputs (as a percent)	0.0236	0.0004
Credit spread assumption | Recurring | Level 3 | Discounted cash flows | Direct placement municipal securities | Maximum
Unobservable Inputs
Debt securities available-for-sale unobservable inputs (as a percent)	0.0395	0.0231
Credit spread assumption | Recurring | Level 3 | Discounted cash flows | Direct placement municipal securities | Weighted Average
Unobservable Inputs
Debt securities available-for-sale unobservable inputs (as a percent)	0.0288	0.0158
Receivables | Discount for lack of marketability | Non-recurring | Level 3 | Commercial loans
Unobservable Inputs
Discount rate (as a percent)	0.20
Inventory | Discount for lack of marketability | Non-recurring | Level 3 | Minimum | Commercial loans
Unobservable Inputs
Discount rate (as a percent)	0.40
Inventory | Discount for lack of marketability | Non-recurring | Level 3 | Maximum | Commercial loans
Unobservable Inputs
Discount rate (as a percent)	0.75

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Fair Value Measurements (Details 5) - Non-recurring - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Dec. 31, 2021
Impaired loans
Fair value measurements
Impairment charges	$ 0
Mortgage servicing rights
Fair value measurements
Impairment recoveries	0
Repossessions
Fair value measurements
Impairment charges	0
Other real estate
Fair value measurements
Impairment charges	0
Total
Fair value measurements
Impaired loans - collateral based	986	$ 571
Assets measured at fair value	5,684	6,103
Total | Mortgage servicing rights
Fair value measurements
Accrued income and other assets	4,625	4,671
Total | Repossessions
Fair value measurements
Accrued income and other assets	73	861
Total | Other real estate
Fair value measurements
Accrued income and other assets	0	0
Level 3
Fair value measurements
Impaired loans - collateral based	986	571
Assets measured at fair value	5,684	6,103
Level 3 | Mortgage servicing rights
Fair value measurements
Accrued income and other assets	4,625	4,671
Level 3 | Repossessions
Fair value measurements
Accrued income and other assets	73	861
Level 3 | Other real estate
Fair value measurements
Accrued income and other assets	$ 0	$ 0

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Fair Value Measurements (Details 6) - Non-recurring $ in Thousands	Mar. 31, 2022 USD ($)	Dec. 31, 2021 USD ($)
Level 3
Valuation Methodology
Assets measured at fair value	$ 5,684	$ 6,103
Carrying Value | Level 3 | Collateral based measurements | Impaired loans
Valuation Methodology
Assets measured at fair value	986	571
Carrying Value | Level 3 | Discounted cash flows | Mortgage servicing rights
Valuation Methodology
Assets measured at fair value	4,625	4,671
Carrying Value | Level 3 | Appraisals trade publications and auction values | Repossessions
Valuation Methodology
Assets measured at fair value	73	861
Carrying Value | Level 3 | Appraisals | Other real estate
Valuation Methodology
Assets measured at fair value	0	0
Fair Value
Valuation Methodology
Assets measured at fair value	5,684	6,103
Fair Value | Level 3 | Collateral based measurements | Impaired loans
Valuation Methodology
Assets measured at fair value	986	571
Fair Value | Level 3 | Discounted cash flows | Mortgage servicing rights
Valuation Methodology
Assets measured at fair value	6,363	5,640
Fair Value | Level 3 | Appraisals trade publications and auction values | Repossessions
Valuation Methodology
Assets measured at fair value	241	942
Fair Value | Level 3 | Appraisals | Other real estate
Valuation Methodology
Assets measured at fair value	$ 0	$ 0
Discount for lack of marketability and current conditions | Level 3 | Collateral based measurements | Impaired loans | Minimum
Unobservable Inputs
Impaired loans unobservable inputs (as a percent)	0.20	0.20
Discount for lack of marketability and current conditions | Level 3 | Collateral based measurements | Impaired loans | Maximum
Unobservable Inputs
Impaired loans unobservable inputs (as a percent)	0.90	0.90
Discount for lack of marketability and current conditions | Level 3 | Collateral based measurements | Impaired loans | Weighted Average
Unobservable Inputs
Impaired loans unobservable inputs (as a percent)	0.345	0.431
Constant prepayment rate (CPR) | Level 3 | Discounted cash flows | Mortgage servicing rights | Minimum
Unobservable Inputs
Mortgage servicing rights unobservable inputs (as a percent)	0.102	0.118
Constant prepayment rate (CPR) | Level 3 | Discounted cash flows | Mortgage servicing rights | Maximum
Unobservable Inputs
Mortgage servicing rights unobservable inputs (as a percent)	0.174	0.185
Constant prepayment rate (CPR) | Level 3 | Discounted cash flows | Mortgage servicing rights | Weighted Average
Unobservable Inputs
Mortgage servicing rights unobservable inputs (as a percent)	0.137	0.164
Discount rate | Level 3 | Discounted cash flows | Mortgage servicing rights | Minimum
Unobservable Inputs
Mortgage servicing rights unobservable inputs (as a percent)	0.098	0.086
Discount rate | Level 3 | Discounted cash flows | Mortgage servicing rights | Maximum
Unobservable Inputs
Mortgage servicing rights unobservable inputs (as a percent)	0.126	0.115
Discount rate | Level 3 | Discounted cash flows | Mortgage servicing rights | Weighted Average
Unobservable Inputs
Mortgage servicing rights unobservable inputs (as a percent)	0.099	0.088
Discount for lack of marketability | Level 3 | Appraisals trade publications and auction values | Repossessions | Minimum
Unobservable Inputs
Repossessions unobservable inputs (as a percent)	0.13	0
Discount for lack of marketability | Level 3 | Appraisals trade publications and auction values | Repossessions | Maximum
Unobservable Inputs
Repossessions unobservable inputs (as a percent)	1	0.21
Discount for lack of marketability | Level 3 | Appraisals trade publications and auction values | Repossessions | Weighted Average
Unobservable Inputs
Repossessions unobservable inputs (as a percent)	0.70	0.02
Discount for lack of marketability | Level 3 | Appraisals | Other real estate | Minimum
Unobservable Inputs
Other real estate unobservable inputs (as a percent)	0	0
Discount for lack of marketability | Level 3 | Appraisals | Other real estate | Maximum
Unobservable Inputs
Other real estate unobservable inputs (as a percent)	0	0
Discount for lack of marketability | Level 3 | Appraisals | Other real estate | Weighted Average
Unobservable Inputs
Other real estate unobservable inputs (as a percent)	0	0

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Fair Value Measurements (Details 7) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
Assets:
Cash and due from banks	$ 69,195	$ 54,420
Federal funds sold and interest bearing deposits with other banks	347,697	470,767
Investment securities available-for-sale	1,857,431	1,863,041
Other investments	25,538	27,189
Mortgages held for sale	4,757	13,284
Loans and leases, net of allowance for loan and lease losses	5,264,044	5,218,722
Liabilities:
Long-term debt and mandatorily redeemable securities	69,563	71,251
Subordinated notes	58,764	58,764
Carrying or Contract Value
Assets:
Cash and due from banks	69,195	54,420
Federal funds sold and interest bearing deposits with other banks	347,697	470,767
Investment securities available-for-sale	1,857,431	1,863,041
Other investments	25,538	27,189
Mortgages held for sale	4,757	13,284
Loans and leases, net of allowance for loan and lease losses	5,264,044	5,218,722
Mortgage servicing rights	4,625	4,671
Accrued interest receivable	18,289	17,760
Interest rate swaps	7,806	20,735
Liabilities:
Deposits	6,673,092	6,679,065
Short-term borrowings	199,158	200,027
Long-term debt and mandatorily redeemable securities	69,563	71,251
Subordinated notes	58,764	58,764
Accrued interest payable	2,084	1,885
Interest rate swaps	8,006	21,172
Off-balance-sheet instruments	0	0
Fair Value
Assets:
Cash and due from banks	69,195	54,420
Federal funds sold and interest bearing deposits with other banks	347,697	470,767
Investment securities available-for-sale	1,857,431	1,863,041
Other investments	25,538	27,189
Mortgages held for sale	4,757	13,284
Loans and leases, net of allowance for loan and lease losses	5,280,472	5,269,551
Mortgage servicing rights	6,363	5,640
Accrued interest receivable	18,289	17,760
Interest rate swaps	7,806	20,735
Liabilities:
Deposits	6,666,398	6,680,163
Short-term borrowings	199,158	200,027
Long-term debt and mandatorily redeemable securities	68,258	71,305
Subordinated notes	58,350	58,553
Accrued interest payable	2,084	1,885
Interest rate swaps	8,006	21,172
Off-balance-sheet instruments	82	364
Level 1
Assets:
Cash and due from banks	69,195	54,420
Federal funds sold and interest bearing deposits with other banks	347,697	470,767
Investment securities available-for-sale	590,484	561,950
Other investments	25,538	27,189
Mortgages held for sale	0	0
Loans and leases, net of allowance for loan and lease losses	0	0
Mortgage servicing rights	0	0
Accrued interest receivable	0	0
Interest rate swaps	0	0
Liabilities:
Deposits	5,821,071	5,794,928
Short-term borrowings	192,146	192,801
Long-term debt and mandatorily redeemable securities	0	0
Subordinated notes	0	0
Accrued interest payable	0	0
Interest rate swaps	0	0
Off-balance-sheet instruments	0	0
Level 2
Assets:
Cash and due from banks	0	0
Federal funds sold and interest bearing deposits with other banks	0	0
Investment securities available-for-sale	1,262,418	1,299,242
Other investments	0	0
Mortgages held for sale	4,757	13,284
Loans and leases, net of allowance for loan and lease losses	0	0
Mortgage servicing rights	0	0
Accrued interest receivable	18,289	17,760
Interest rate swaps	7,806	20,735
Liabilities:
Deposits	845,327	885,235
Short-term borrowings	7,012	7,226
Long-term debt and mandatorily redeemable securities	68,258	71,305
Subordinated notes	58,350	58,553
Accrued interest payable	2,084	1,885
Interest rate swaps	8,006	21,172
Off-balance-sheet instruments	82	364
Level 3
Assets:
Cash and due from banks	0	0
Federal funds sold and interest bearing deposits with other banks	0	0
Investment securities available-for-sale	4,529	1,849
Other investments	0	0
Mortgages held for sale	0	0
Loans and leases, net of allowance for loan and lease losses	5,280,472	5,269,551
Mortgage servicing rights	6,363	5,640
Accrued interest receivable	0	0
Interest rate swaps	0	0
Liabilities:
Deposits	0	0
Short-term borrowings	0	0
Long-term debt and mandatorily redeemable securities	0	0
Subordinated notes	0	0
Accrued interest payable	0	0
Interest rate swaps	0	0
Off-balance-sheet instruments	$ 0	$ 0