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Loans and Allowance
 3 Months Ended
Mar. 31, 2022
Receivables [Abstract]  
Loans and Allowance
LOANS AND ALLOWANCE

Loan Portfolio and Credit Quality

The Corporation's primary lending focus is small business and middle market commercial, commercial real estate, public finance and residential real estate, which results in portfolio diversification. The following tables show the composition of the loan portfolio and credit quality characteristics by collateral classification, excluding loans held for sale. Loans held for sale at March 31, 2022 and December 31, 2021, were $3.9 million and $11.2 million, respectively.

The following table illustrates the composition of the Corporation’s loan portfolio by loan class for the periods indicated:
March 31, 2022December 31, 2021
Commercial and industrial loans$2,826,660 $2,714,565 
Agricultural land, production and other loans to farmers209,077 246,442 
Real estate loans:
Construction552,975 523,066 
Commercial real estate, non-owner occupied2,073,197 2,135,459 
Commercial real estate, owner occupied974,521 986,720 
Residential1,226,695 1,159,127 
Home equity512,641 523,754 
Individuals' loans for household and other personal expenditures147,593 146,092 
Public finance and other commercial loans832,882 806,636 
Loans$9,356,241 $9,241,861 


As of March 31, 2022, the Corporation had $48.7 million of Paycheck Protection Program ("PPP") loans compared to the December 31, 2021 balance of $106.6 million. PPP loans are included in the commercial and industrial loan class. Additional details of the PPP are included in The CARES Act and the Paycheck Protection Program sections of the "COVID-19 UPDATE AND RELATED LEGISLATIVE AND REGULATORY ACTIONS" in the Management’s Discussion and Analysis of Financial Condition and Results of Operations included in this Form 10-Q.

Credit Quality
As part of the ongoing monitoring of the credit quality of the Corporation's loan portfolio, management tracks certain credit quality indicators including trends related to: (i) the level of criticized commercial loans, (ii) net charge-offs, (iii) non-performing loans, (iv) covenant failures and (v) the general national and local economic conditions.
The Corporation utilizes a risk grading of pass, special mention, substandard, doubtful and loss to assess the overall credit quality of large commercial loans. All large commercial credit grades are reviewed at a minimum of once a year for pass grade loans. Loans with grades below pass are reviewed more frequently depending on the grade. A description of the general characteristics of these grades is as follows:

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

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

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

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

•Loss – Loans that are considered uncollectible and of such little value that continuing to carry them as an asset is not warranted. Loans will be classified as Loss when it is neither practical or desirable to defer writing off or reserving all or a portion of a basically worthless asset, even though partial recovery may be possible at some time in the future.
The following tables summarize the risk grading of the Corporation’s loan portfolio by loan class and by year of origination for the years indicated. Consumer loans are not risk graded. For the purposes of this disclosure, the consumer loans are classified in the following manner: loans that are less than 30 days past due are Pass, loans 30-89 days past due are Special Mention and loans greater than 89 days past due are Substandard. The entire balance of a loan is considered delinquent if the minimum payment contractually required to be made is not received by the specified due date. Loans that evidenced deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected are included in the applicable categories below. Commercial and industrial loan balances as of March 31, 2022 include PPP loans with an origination year of 2021 and 2020 of $48.5 million and $155,000, respectively. Commercial and industrial loan balances as of December 31, 2021 include PPP loans with an origination year of 2021 and 2020 of $100.3 million and $6.3 million, respectively.

March 31, 2022
Term Loans (amortized cost basis by origination year)Revolving loans amortizedRevolving loans converted
20222021202020192018Priorcost basisto termTotal
Commercial and industrial loans
Pass$233,494 $860,644 $292,449 $127,655 $64,212 $48,840 $1,124,742 $— $2,752,036 
Special Mention83 13,199 8,914 196 911 1,967 21,206 — 46,476 
Substandard68 2,665 1,883 1,664 79 1,111 20,112 — 27,582 
Doubtful— 566 — — — — — — 566 
Total Commercial and industrial loans233,645 877,074 303,246 129,515 65,202 51,918 1,166,060 — 2,826,660 
Agricultural land, production and other loans to farmers
Pass13,604 45,415 44,372 20,250 7,270 37,478 38,054 — 206,443 
Special Mention— — 1,543 — — 248 89 — 1,880 
Substandard— — 502 44 181 27 — — 754 
Total Agricultural land, production and other loans to farmers13,604 45,415 46,417 20,294 7,451 37,753 38,143 — 209,077 
Real estate loans:
Construction
Pass93,208 234,844 169,386 25,825 958 4,681 18,879 — 547,781 
Special Mention4,398 — — — — — — — 4,398 
Substandard15 — 758 — — 23 — — 796 
Total Construction97,621 234,844 170,144 25,825 958 4,704 18,879 — 552,975 
Commercial real estate, non-owner occupied
Pass123,966 528,861 627,820 177,465 109,147 186,777 30,535 — 1,784,571 
Special Mention35,142 75,275 144,704 — — 1,696 — — 256,817 
Substandard— 23,502 6,819 112 1,106 270 — — 31,809 
Total Commercial real estate, non-owner occupied159,108 627,638 779,343 177,577 110,253 188,743 30,535 — 2,073,197 
Commercial real estate, owner occupied
Pass60,735 288,076 353,021 83,799 42,142 78,463 36,565 — 942,801 
Special Mention229 5,575 7,858 798 1,518 1,965 — — 17,943 
Substandard3,143 4,221 5,384 — — 1,029 — — 13,777 
Total Commercial real estate, owner occupied64,107 297,872 366,263 84,597 43,660 81,457 36,565 — 974,521 
Residential
Pass129,643 344,654 331,532 95,511 64,998 244,562 3,158 13 1,214,071 
Special Mention27 1,140 741 695 572 1,601 — 15 4,791 
Substandard— 1,276 1,541 316 1,324 3,371 5 — 7,833 
Total Residential129,670 347,070 333,814 96,522 66,894 249,534 3,163 28 1,226,695 
Home equity
Pass4,403 55,867 15,465 1,857 1,884 4,171 423,635 15 507,297 
Special Mention— — 42 47 27 2 2,863 — 2,981 
Substandard132 345 84 — 8 171 1,623 — 2,363 
Total Home Equity4,535 56,212 15,591 1,904 1,919 4,344 428,121 15 512,641 
Individuals' loans for household and other personal expenditures
Pass19,616 57,759 20,371 9,519 8,947 6,024 24,836 — 147,072 
Special Mention13 176 113 34 83 53 47 — 519 
Substandard— 1 1 — — — — — 2 
Total Individuals' loans for household and other personal expenditures19,629 57,936 20,485 9,553 9,030 6,077 24,883 — 147,593 
Public finance and other commercial loans
Pass54,959 222,676 176,446 99,935 38,565 213,118 27,183 — 832,882 
Total Public finance and other commercial loans54,959 222,676 176,446 99,935 38,565 213,118 27,183 — 832,882 
Loans$776,878 $2,766,737 $2,211,749 $645,722 $343,932 $837,648 $1,773,532 $43 $9,356,241 
December 31, 2021
Term Loans (amortized cost basis by origination year)Revolving loans amortizedRevolving loans converted
20212020201920182017Priorcost basisto termTotal
Commercial and industrial loans
Pass$1,019,757 $362,372 $144,520 $65,165 $21,575 $30,420 $990,335 $— $2,634,144 
Special Mention10,559 11,088 190 730 1,930 1,825 15,026 — 41,348 
Substandard2,811 2,127 7,432 2,932 431 747 22,593 — 39,073 
Total Commercial and industrial loans1,033,127 375,587 152,142 68,827 23,936 32,992 1,027,954 — 2,714,565 
Agricultural land, production and other loans to farmers
Pass50,251 45,164 22,195 7,689 6,153 36,074 74,871 — 242,397 
Special Mention— 1,543 — — — 252 264 — 2,059 
Substandard524 506 108 371 — 27 450 — 1,986 
Total Agricultural land, production and other loans to farmers50,775 47,213 22,303 8,060 6,153 36,353 75,585 — 246,442 
Real estate loans:
Construction
Pass215,167 200,169 63,589 979 1,762 2,453 17,201 — 501,320 
Special Mention20,737 270 — — — 46 — — 21,053 
Substandard— 693 — — — — — — 693 
Total Construction235,904 201,132 63,589 979 1,762 2,499 17,201 — 523,066 
Commercial real estate, non-owner occupied
Pass589,296 688,406 227,332 111,971 103,400 126,837 26,779 — 1,874,021 
Special Mention68,279 149,480 — — — 1,723 — — 219,482 
Substandard19,314 14,912 178 1,118 6,156 278 — — 41,956 
Total Commercial real estate, non-owner occupied676,889 852,798 227,510 113,089 109,556 128,838 26,779 — 2,135,459 
Commercial real estate, owner occupied
Pass299,186 392,383 92,338 43,252 46,044 48,571 33,998 — 955,772 
Special Mention5,665 5,953 738 1,532 902 1,301 149 — 16,240 
Substandard7,025 5,763 — 53 113 1,754 — — 14,708 
Total Commercial real estate, owner occupied311,876 404,099 93,076 44,837 47,059 51,626 34,147 — 986,720 
Residential
Pass349,726 353,691 103,028 69,745 55,240 210,669 2,955 73 1,145,127 
Special Mention1,034 1,394 1,456 306 172 2,106 — — 6,468 
Substandard1,004 1,575 335 1,248 108 3,257 — 5 7,532 
Total Residential351,764 356,660 104,819 71,299 55,520 216,032 2,955 78 1,159,127 
Home equity
Pass63,845 17,556 1,977 2,127 1,250 3,432 427,437 194 517,818 
Special Mention— 85 48 — — 24 3,451 — 3,608 
Substandard520 — — 8 91 70 1,639 — 2,328 
Total Home Equity64,365 17,641 2,025 2,135 1,341 3,526 432,527 194 523,754 
Individuals' loans for household and other personal expenditures
Pass67,749 23,452 11,893 11,197 2,008 4,928 24,406 — 145,633 
Special Mention79 85 50 33 20 58 134 — 459 
Total Individuals' loans for household and other personal expenditures67,828 23,537 11,943 11,230 2,028 4,986 24,540 — 146,092 
Public finance and other commercial loans
Pass231,319 178,316 100,679 39,098 105,964 128,942 22,318 — 806,636 
Total Public finance and other commercial loans231,319 178,316 100,679 39,098 105,964 128,942 22,318 — 806,636 
Loans$3,023,847 $2,456,983 $778,086 $359,554 $353,319 $605,794 $1,664,006 $272 $9,241,861 
Total past due loans equaled $51.6 million as of March 31, 2022, a $16.9 million increase from the total of $34.7 million for December 31, 2021. At March 31, 2022, 30-59 Days Past Due loans totaled $28.6 million, an increase of $13.6 million from December 31, 2021. The primary increases were related to two loans, totaling $20.1 million, in commercial and industrial and non-owner-occupied commercial real estate loans that were in the current category at December 31, 2021. One of the loans is within the nursing facility industry and the other in the game manufacturing industry. The tables below show a past due aging of the Corporation’s loan portfolio, by loan class, for the years indicated:
March 31, 2022
Current30-59 Days
Past Due		60-89 Days
Past Due		90 Days or More Past DueTotalLoans > 90 Days or More Past Due
And Accruing
Commercial and industrial loans$2,807,708 $9,181 $5,862 $3,909 $2,826,660 $1,424 
Agricultural land, production and other loans to farmers209,050 — — 27 209,077 — 
Real estate loans:
Construction552,866 — 109 — 552,975 — 
Commercial real estate, non-owner occupied2,057,043 11,851 — 4,303 2,073,197 — 
Commercial real estate, owner occupied973,075 1,182 27 237 974,521 — 
Residential1,217,155 3,697 713 5,130 1,226,695 132 
Home equity507,837 2,219 999 1,586 512,641 527 
Individuals' loans for household and other personal expenditures147,071 450 70 2 147,593 2 
Public finance and other commercial loans832,882 — — — 832,882 — 
Loans$9,304,687 $28,580 $7,780 $15,194 $9,356,241 $2,085 


December 31, 2021
Current30-59 Days
Past Due		60-89 Days
Past Due		90 Days or More Past DueTotalLoans > 90 Days or More Past Due
And Accruing
Commercial and industrial loans$2,708,539 $2,602 $2,437 $987 $2,714,565 $675 
Agricultural land, production and other loans to farmers246,380 36 — 26 246,442 — 
Real estate loans:
Construction522,349 717 — — 523,066 — 
Commercial real estate, non-owner occupied2,124,853 3,327 — 7,279 2,135,459 — 
Commercial real estate, owner occupied985,785 643 — 292 986,720 — 
Residential1,148,294 3,979 4,255 2,599 1,159,127 — 
Home equity518,643 3,327 281 1,503 523,754 288 
Individuals' loans for household and other personal expenditures145,634 375 83 — 146,092 — 
Public finance and other commercial loans806,636 — — — 806,636 — 
Loans$9,207,113 $15,006 $7,056 $12,686 $9,241,861 $963 
Loans are reclassified to a non-accruing status when, in management’s judgment, the collateral value and financial condition of the borrower do not justify accruing interest. At the time the accrual is discontinued, all unpaid accrued interest is reversed against earnings. Interest income accrued in prior years, if any, is charged to the allowance for credit losses. Payments subsequently received on non-accrual loans are applied to principal. A loan is returned to accrual status when principal and interest are no longer past due and collectability is probable, typically after a minimum of six consecutive months of performance.

The following table summarizes the Corporation’s non-accrual loans by loan class for the periods indicated:

March 31, 2022December 31, 2021
Non-Accrual LoansNon-Accrual Loans with no Allowance for Credit LossesNon-Accrual LoansNon-Accrual Loans with no Allowance for Credit Losses
Commercial and industrial loans$8,696 $— $7,598 $263 
Agricultural land, production and other loans to farmers103 — 631 524 
Real estate loans:
Construction740 — 685 — 
Commercial real estate, non-owner occupied21,427 4,201 23,029 6,133 
Commercial real estate, owner occupied1,689 1,320 411 — 
Residential8,553 2,920 9,153 2,160 
Home equity1,490 — 1,552 — 
Individuals' loans for household and other personal expenditures— — 3 — 
Loans$42,698 $8,441 $43,062 $9,080 


There was no interest income recognized on non-accrual loans for the three months ended March 31, 2022 or 2021.

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

The following table presents the amortized cost basis of collateral dependent loans, which are individually evaluated to determine expected credit losses:
March 31, 2022
Commercial Real EstateResidential Real EstateOtherTotal Allowance on Collateral Dependent Loans
Commercial and industrial loans$— $— $8,111 $8,111 $2,513 
Real estate loans:
Construction— 645 — 645 32 
Commercial real estate, non-owner occupied21,919 — — 21,919 3,190 
Commercial real estate, owner occupied2,351 — — 2,351 34 
Residential— 4,836 — 4,836 281 
Home equity— 388 — 388 63 
Loans$24,270 $5,869 $8,111 $38,250 $6,113 


December 31, 2021
Commercial Real EstateResidential Real EstateOtherTotal Allowance on Collateral Dependent Loans
Commercial and industrial loans$— $— $8,075 $8,075 $2,672 
Agricultural land, production and other loans to farmers524 — 251 775 — 
Real estate loans:
Construction— 685 — 685 82 
Commercial real estate, non-owner occupied23,652 — — 23,652 5,510 
Commercial real estate, owner occupied1,044 — — 1,044 — 
Residential— 4,906 — 4,906 305 
Home equity— 394 — 394 64 
Loans$25,220 $5,985 $8,326 $39,531 $8,633 
In certain loan restructuring situations, the Corporation may grant a concession to a debtor experiencing financial difficulty, resulting in a troubled debt restructuring. A concession is deemed to be granted when, as a result of the restructuring, the Corporation does not expect to collect all original amounts due, including interest accrued at the original contract rate. If the payment of principal at original maturity is primarily dependent on the value of collateral, the current value of the collateral is considered in determining whether the principal will be repaid.

The following tables summarize troubled debt restructures in the Corporation's loan portfolio that occurred during the three months ended March 31, 2022 and 2021.

Three Months Ended March 31, 2022
Pre- Modification Recorded BalanceTerm ModificationRate ModificationCombinationPost - Modification Recorded BalanceNumber of Loans
Real estate loans:
Residential$53 $— $56 $— $56 1
Total$53 $— $56 $— $56 1

Three Months Ended March 31, 2021
Pre- Modification Recorded BalanceTerm ModificationRate ModificationCombinationPost - Modification Recorded BalanceNumber of Loans
Commercial and industrial loans$348 $348 $— $— $348 2
Real estate loans:
Residential625 383 126 118627 7
Total$973 $731 $126 $118 $975 9 
Loans secured by residential real estate made up 100 percent of the post-modification balances of the troubled debt restructured loans that occurred during the three months ending March 31, 2022 and 64 percent for the three months ending March 31, 2021.

The following tables summarize troubled debt restructures that occurred during the twelve months ended March 31, 2022 and 2021, that subsequently defaulted during the period indicated and remained in default at period end. For purposes of this schedule, a loan is considered in default if it is 30-days or more past due.
Three Months Ended March 31, 2022
Number of LoansRecorded Balance
Real estate loans:  
Commercial real estate, owner occupied1 $27 
Total1 $27 


Three Months Ended March 31, 2021
Number of LoansRecorded Balance
Real estate loans:  
Residential5 $197 
Home equity1 91 
Individuals' loans for household and other personal expenditures1 2 
Total7 $290 


Commercial troubled debt restructured loans risk graded special mention, substandard, doubtful and loss are individually evaluated for apparent loss and may result in a specific reserve allocation in the allowance for credit loss. Commercial troubled debt restructures that aren't individually evaluated for a specific reserve are included in the calculation of allowance for credit losses through the loan segment loss analysis.

For all consumer loan modifications, an evaluation to identify if a troubled debt restructure has occurred is performed prior to making the modification. Any subsequent deterioration is addressed through the charge-off process or through a specific reserve allocation included in the allowance for credit loss. Consumer troubled debt restructures that are not individually evaluated for a specific reserve are included in the calculation of the allowance for credit losses through the loan segment loss analysis. Consumer loans secured by residential real estate properties for which formal foreclosure proceedings are in process totaled $3.9 million and $3.3 million at March 31, 2022 and 2021, respectively.
Allowance for Credit Losses on Loans

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

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

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

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

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

The Corporation qualitatively adjusts model results for risk factors that are not inherently considered in the quantitative modeling process, but are nonetheless relevant in assessing the expected credit losses within the loan portfolio. These adjustments may increase or decrease the estimate of expected credit losses based upon the assessed level of risk for each qualitative factor. The various risks that may be considered in making qualitative adjustments include, among other things, the impact of (i) changes in the nature and volume of the loan portfolio, (ii) changes in the existence, growth and effect of any concentrations in credit, (iii) changes in lending policies and procedures, including changes in underwriting standards and practices for collections, write-offs, and recoveries, (iv) changes in the quality of the credit review function, (v) changes in the experience, ability and depth of lending management and staff, and (vi) other environmental factors such as regulatory, legal and technological considerations, as well as competition.

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

No allowance for credit losses has been recognized for PPP loans as such loans are fully guaranteed by the Small Business Administration ("SBA").
The risk characteristics of the Corporation’s portfolio segments are as follows:

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

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

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

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

The following tables summarize changes in the allowance for credit losses by loan segment for the three months ended March 31, 2022 and 2021:

Three Months Ended March 31, 2022
CommercialCommercial Real EstateConstructionConsumer & ResidentialTotal
Allowance for credit losses
Balances, December 31, 2021$69,935 $60,665 $20,206 $44,591 $195,397 
Provision for credit losses7,571 (8,250)554 125 — 
Recoveries on loans139 707 — 206 1,052 
Loans charged off(8)(122)— (335)(465)
Balances, March 31, 2022$77,637 $53,000 $20,760 $44,587 $195,984 


Three Months Ended March 31, 2021
CommercialCommercial Real EstateConstructionConsumerResidentialConsumer & ResidentialTotal
Allowance for credit losses
Balances, December 31, 2020$47,115 $51,070 $— $9,648 $22,815 $— $130,648 
Credit risk reclassifications— (10,284)10,284 (9,648)(22,815)32,463 — 
Balances, December 31, 2020 after reclassifications47,115 40,786 10,284 — — 32,463 130,648 
Impact of adopting ASC 32620,024 34,925 8,805 — — 10,301 74,055 
Balances, January 1, 2021 Post-ASC 326 adoption67,139 75,711 19,089 — — 42,764 204,703 
Provision for credit losses(932)(1,701)1,095 — — 1,538 — 
Recoveries on loans188 164 — — — 342 694 
Loans charged off(673)(3,313)(2)— — (327)(4,315)
Balances, March 31, 2021$65,722 $70,861 $20,182 $— $— $44,317 $201,082 
Off-Balance Sheet Arrangements, Commitments And Contingencies

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

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

The Corporation typically follows the same credit policies and underwriting practices when making these commitments as it does for on-balance sheet instruments. Each customer’s creditworthiness is typically evaluated on a case-by-case basis, and the amount of collateral obtained, if any, is based on management’s credit evaluation of the customer. Collateral held varies but may include cash, real estate, marketable securities, accounts receivable, inventory, equipment and personal property.

The contractual amounts of these commitments are not reflected in the consolidated financial statements and only amounts drawn upon would be reflected in the future. Since many of the commitments are expected to expire without being drawn upon, the contractual amounts do not necessarily represent future cash requirements. However, should the commitments be drawn upon and should the Corporation’s customers default on their resulting obligation to the Corporation, the maximum exposure to credit loss, without consideration of collateral, is represented by the contractual amount of those commitments.

Financial instruments with off-balance sheet risk were as follows:
March 31, 2022December 31, 2021
Amounts of commitments:
Loan commitments to extend credit$3,958,844 $3,917,215 
Standby letters of credit$31,854 $34,613 


The adoption of the CECL methodology for measuring credit losses on January 1, 2021 resulted in an accrual for off-balance sheet commitments at adoption of $20.5 million. This reserve level remains appropriate and is reported in Other Liabilities as of March 31, 2022 in the Consolidated Condensed Balance Sheets.

The following table details activity in the allowance for credit losses on off-balance sheet commitments:
Three Months Ended
March 31, 2022
Balances, December 31, 2021$20,500 
Provision for credit losses— 
Balances, March 31, 2022$20,500