LOANS AND ALLOWANCE

6 Months Ended

Jun. 30, 2024

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 June 30, 2024 and December 31, 2023, were $32.3 million and $18.9 million, respectively.

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

	June 30, 2024		December 31, 2023
Commercial and industrial loans	$	3,949,817	$	3,670,948
Agricultural land, production and other loans to farmers	239,926		263,414
Real estate loans:
Construction	823,267		957,545
Commercial real estate, non-owner occupied	2,323,533		2,400,839
Commercial real estate, owner occupied	1,174,195		1,162,083
Residential	2,370,905		2,288,921
Home equity	631,104		617,571
Individuals' loans for household and other personal expenditures	162,089		168,388
Public finance and other commercial loans	964,814		956,318
Loans	$	12,639,650	$	12,486,027

Credit Quality

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

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

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

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

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

•Doubtful - Loans that have all of the weaknesses of those classified as Substandard. However, based on 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 charging-off or reserving all or a portion of a basically worthless asset, even though partial recovery may be possible at some time in the future.

The following tables summarize the risk grading of the Corporation’s loan portfolio and gross charge-offs by loan class and by year of origination for the periods indicated. Consumer loans are not risk graded. For the purposes of this disclosure, 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.

	June 30, 2024
	Term Loans (amortized cost basis by origination year)												Revolving loans amortized		Revolving loans converted
	2024		2023		2022		2021		2020		Prior		cost basis		to term		Total
Commercial and industrial loans
Pass	$	778,502	$	810,290	$	275,900	$	201,870	$	70,975	$	76,151	$	1,533,518	$	4	$	3,747,210
Special Mention	2,913		5,746		21,042		1,574		2,488		11		35,722		—		69,496
Substandard	13,274		38,566		21,712		5,592		1,625		1,827		42,791		—		125,387
Doubtful	—		7,643		—		—		—		—		81		—		7,724
Total Commercial and industrial loans	794,689		862,245		318,654		209,036		75,088		77,989		1,612,112		4		3,949,817
Current period gross charge-offs	1,100		31,803		205		8,425		345		133		—		—		42,011
Agricultural land, production and other loans to farmers
Pass	22,137		24,869		34,809		29,077		28,845		34,134		61,444		—		235,315
Special Mention	—		—		245		—		—		448		250		—		943
Substandard	601		53		968		709		516		33		788		—		3,668
Total Agricultural land, production and other loans to farmers	22,738		24,922		36,022		29,786		29,361		34,615		62,482		—		239,926
Real estate loans:
Construction
Pass	166,149		276,029		194,572		95,193		6,632		9,460		10,810		—		758,845
Special Mention	—		5,600		23,660		645		—		—		—		—		29,905
Substandard	21,202		2,858		5,135		5,322		—		—		—		—		34,517
Total Construction	187,351		284,487		223,367		101,160		6,632		9,460		10,810		—		823,267
Commercial real estate, non-owner occupied
Pass	245,845		303,828		399,269		451,607		373,231		298,925		13,660		—		2,086,365
Special Mention	77,354		22,906		21,755		10,937		2,428		45,158		—		—		180,538
Substandard	19,488		2,927		189		502		19,824		1,638		85		—		44,653
Doubtful	—		11,288		689		—		—		—		—		—		11,977
Total Commercial real estate, non-owner occupied	342,687		340,949		421,902		463,046		395,483		345,721		13,745		—		2,323,533
Current period gross charge-offs	—		339		3		—		—		—		—		—		342
Commercial real estate, owner occupied
Pass	75,597		191,056		175,737		245,405		231,751		159,142		30,206		—		1,108,894
Special Mention	138		3,230		15,076		6,717		5,301		1,750		260		—		32,472
Substandard	2,072		16,234		964		5,028		4,118		4,135		278		—		32,829
Total Commercial real estate, owner occupied	77,807		210,520		191,777		257,150		241,170		165,027		30,744		—		1,174,195
Current period gross charge-offs	—		—		—		—		9		—		—		—		9
Residential
Pass	111,630		427,692		698,308		421,439		350,587		322,922		5,052		14		2,337,644
Special Mention	668		2,480		5,301		3,917		1,197		5,147		350		—		19,060
Substandard	414		760		4,367		2,973		1,250		4,437		—		—		14,201
Total Residential	112,712		430,932		707,976		428,329		353,034		332,506		5,402		14		2,370,905
Current period gross charge-offs	—		39		403		57		21		54		—		—		574
Home equity
Pass	6,606		7,648		26,336		56,066		10,956		4,652		500,801		6,294		619,359
Special Mention	113		—		1,340		406		1,057		66		5,117		245		8,344
Substandard	62		—		52		597		—		325		2,125		240		3,401
Total Home Equity	6,781		7,648		27,728		57,069		12,013		5,043		508,043		6,779		631,104
Current period gross charge-offs	—		11		36		22		—		265		—		—		334
Individuals' loans for household and other personal expenditures
Pass	34,921		27,868		37,193		14,676		3,983		5,878		35,512		659		160,690
Special Mention	29		224		226		135		110		18		623		—		1,365
Substandard	—		22		10		—		—		—		2		—		34
Total Individuals' loans for household and other personal expenditures	34,950		28,114		37,429		14,811		4,093		5,896		36,137		659		162,089
Current period gross charge-offs	22		353		232		120		25		32		—		—		784
Public finance and other commercial loans
Pass	43,164		54,409		206,136		199,844		152,505		308,167		589		—		964,814
Total Public finance and other commercial loans	43,164		54,409		206,136		199,844		152,505		308,167		589		—		964,814
Loans	$	1,622,879	$	2,244,226	$	2,170,991	$	1,760,231	$	1,269,379	$	1,284,424	$	2,280,064	$	7,456	$	12,639,650
Total current period gross charge-offs	$	1,122	$	32,545	$	879	$	8,624	$	400	$	484	$	—	$	—	$	44,054

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

Total past due loans equaled $98.2 million as of June 30, 2024 representing an $18.9 million increase from $79.2 million at December 31, 2023. The 30-59 days past due loans decreased $5.0 million from December 31, 2023 as commercial real estate, non-owner occupied decreased $11.2 million, which was partially offset by increases in commercial and industrial and commercial real estate, owner occupied of $1.0 million and $3.2 million, respectively. The 60-89 days past due loans increased $19.0 million from December 31, 2023 as construction increased $19.2 million. The 90 days or more past due loans increased $5.0 million from December 31, 2023 as commercial and industrial and commercial real estate, non-owner occupied increased $3.5 million and $1.6 million, respectively. The tables below show a past due aging of the Corporation’s loan portfolio, by loan class, as of the dates indicated:

	June 30, 2024
	Current		30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Total		Loans > 90 Days or More Past Due And Accruing
Commercial and industrial loans	$	3,932,986	$	6,014	$	463	$	10,354	$	3,949,817	$	385
Agricultural land, production and other loans to farmers	239,676		250		—		—		239,926		—
Real estate loans:
Construction	802,064		—		21,203		—		823,267		—
Commercial real estate, non-owner occupied	2,306,861		1,789		1,799		13,084		2,323,533		—
Commercial real estate, owner occupied	1,170,516		3,237		—		442		1,174,195		—
Residential	2,342,411		12,483		4,213		11,798		2,370,905		1,187
Home equity	621,441		4,293		2,152		3,218		631,104		114
Individuals' loans for household and other personal expenditures	160,690		1,017		348		34		162,089		—
Public finance and other commercial loans	964,814		—		—		—		964,814		—
Loans	$	12,541,459	$	29,083	$	30,178	$	38,930	$	12,639,650	$	1,686

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

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

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

	June 30, 2024				December 31, 2023
	Nonaccrual Loans		Nonaccrual Loans with no Allowance for Credit Losses		Nonaccrual Loans		Nonaccrual Loans with no Allowance for Credit Losses
Commercial and industrial loans	$	13,373	$	5,884	$	9,050	$	1,015
Agricultural land, production and other loans to farmers	53		—		58		—
Real estate loans:
Construction	—		—		520		—
Commercial real estate, non-owner occupied	22,704		10,372		11,932		11,095
Commercial real estate, owner occupied	2,452		1,870		3,041		2,257
Residential	18,814		—		25,140		—
Home equity	4,476		—		3,820		—
Individuals' loans for household and other personal expenditures	34		—		19		—
Loans	$	61,906	$	18,126	$	53,580	$	14,367

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

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

The tables below present the amortized cost basis of collateral dependent loans by loan class and their respective collateral type, which are individually evaluated to determine expected credit losses. The total collateral dependent loan balance increased $5.0 million, primarily related to an increase of $8.1 million in commercial real estate, non-owner occupied, offset by a decrease of $3.4 million in commercial and industrial, for the six months ended June 30, 2024. The total related allowance balance decreased $612,000, primarily related to a decrease of $3.0 million in commercial and industrial, offset by an increase of $2.4 million in commercial real estate, non-owner occupied, for the six months ended June 30, 2024.

	June 30, 2024
	Commercial Real Estate		Residential Real Estate		Other		Total		Allowance on Collateral Dependent Loans
Commercial and industrial loans	$	—	$	—	$	28,665	$	28,665	$	8,442
Real estate loans:
Construction	—		5		—		5		—
Commercial real estate, non-owner occupied	25,606		—		—		25,606		2,483
Commercial real estate, owner occupied	9,951		—		—		9,951		—
Residential	—		1,263		—		1,263		204
Home equity	—		212		—		212		28
Loans	$	35,557	$	1,480	$	28,665	$	65,702	$	11,157

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

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

	Three Months Ended June 30, 2024
	Loan Modifications Made to Borrowers Experiencing Financial Difficulty
	Payment Delay		Term Extension		Combination Payment Delay & Term Extension		Combination Interest Rate Reduction, Term Extension, & Payment Delay		% of Total Class of Financing Receivable
Commercial and industrial loans	$	—	$	1,778	$	13	$	—	0.05	%
Real estate loans:
Commercial real estate, non-owner occupied	—		19,488		—		—		0.84	%
Commercial real estate, owner occupied	—		1,990		—		—		0.17	%
Residential	250		—		392		227		0.04	%
Home equity	—		—		162		—		0.03	%
Total	$	250	$	23,256	$	567	$	227

	Three Months Ended June 30, 2023
	Loan Modifications Made to Borrowers Experiencing Financial Difficulty
	Payment Delay		Term Extension		Combination Interest Rate Reduction & Term Extension		Combination Payment Delay & Term Extension		% of Total Class of Financing Receivable
Commercial and industrial loans	$	—	$	3,917	$	110	$	—	0.11	%
Real estate loans:
Commercial real estate, non-owner occupied	—		1,570		—		—		0.07	%
Commercial real estate, owner occupied	5,664		2,032		—		—		0.65	%
Residential	—		14		—		458		0.02	%
Total	$	5,664	$	7,533	$	110	$	458

	Six Months Ended June 30, 2024
	Loan Modifications Made to Borrowers Experiencing Financial Difficulty
	Payment Delay		Term Extension		Interest Rate Reduction		Combination Payment Delay & Term Extension		Combination Interest Rate Reduction, Term Extension, & Payment Delay		% of Total Class of Financing Receivable
Commercial and industrial loans	$	1,491	$	4,383	$	249	$	27	$	—	0.16	%
Real estate loans:
Commercial real estate, non-owner occupied	—		19,488		—		—		—		0.84	%
Commercial real estate, owner occupied	—		1,990		—		—		—		0.17	%
Residential	1,880		274		—		392		227		0.12	%
Home Equity	89		62		—		162		—		0.05	%
Total	$	3,460	$	26,197	$	249	$	581	$	227

	Six Months Ended June 30, 2023
	Loan Modifications Made to Borrowers Experiencing Financial Difficulty
	Payment Delay		Term Extension		Combination Interest Rate Reduction & Term Extension		Combination Payment Delay & Term Extension		% of Total Class of Financing Receivable
Commercial and industrial loans	$	—	$	12,897	$	110	$	—	0.37	%
Agricultural land, production and other loans to farmers	—		35		—		—		0.02	%
Real estate loans:
Construction	—		15		—		—		—	%
Commercial real estate, non-owner occupied	—		12,394		5,954		—		0.77	%
Commercial real estate, owner occupied	5,664		2,843		79		—		0.73	%
Residential	—		14		—		458		0.02	%
Total	$	5,664	$	28,198	$	6,143	$	458

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

	Three Months Ended June 30, 2024
	Financial Effect of Loan Modifications
	Payment Delay	Term Extension	Combination Payment Delay & Term Extension	Combination Payment Delay, Term Extension & Interest Rate Reduction
Commercial and industrial loans		Extended loans by a weighted average of 12 months.	Provided payment deferrals with weighted average delayed amounts of $5,000 and extended loans by a weighted average of 3 months.
Real estate loans:
Commercial real estate, non-owner occupied		Extended loans by a weighted average of 16 months.
Commercial real estate, owner occupied		Extended loans by a weighted average of 28 months.
Residential	Provided payment deferrals with weighted average delayed amounts of $9,000.		Provided payment deferrals with weighted average delayed amounts of $8,000 and extended loans by a weighted average of 120 months.	Provided payment deferrals with weighted average delayed amounts of $14,000, extended loans by a weighted average of 12 months, and reduced the weighted average contractual interest rate from 5.75% to 5.00%.
Home equity			Provided payment deferrals with weighted average delayed amounts of $8,000 and extended loans by a weighted average of 60 months.

	Three Months Ended June 30, 2023
	Financial Effect of Loan Modifications
	Payment Delay	Term Extension	Combination Interest Rate Reduction & Term Extension	Combination Payment Delay & Term Extension
Commercial and industrial loans		Extended loans by a weighted average of 6 months.	Reduced the weighted average contractual interest rate from 8.25% to 7.10%. Extended loans by a weighted average of 12 months.
Real estate loans:
Commercial real estate, non-owner occupied		Extended loans by a weighted average of 8 months.
Commercial real estate, owner occupied	Provided payment deferrals with weighted average delayed amounts of $4.5 million.	Extended loans by a weighted average of 6 months.
Residential		Extended loans by a weighted average of 11 months.		Provided payment deferrals with weighted average delayed amounts of $3,400. Extended loans by a weighted average of 3 months.

	Six Months Ended June 30, 2024
	Financial Effect of Loan Modifications
	Payment Delay	Term Extension	Interest Rate Reduction	Combination Payment Delay & Term Extension	Combination Payment Delay, Term Extension & Interest Rate Reduction
Commercial and industrial loans	Provided payment deferrals with weighted average delayed amounts of $50,000.	Extended loans by a weighted average of 14 months.	Reduced the weighted average contractual interest rate from 9.00% to 8.00%.	Provided payment deferrals with weighted average delayed amounts of $5,000 and extended loans by a weighted average of 3 months.
Real estate loans:
Commercial real estate, non-owner occupied		Extended loans by a weighted average of 16 months.
Commercial real estate, owner occupied		Extended loans by a weighted average of 28 months.
Residential	Provided payment deferrals with weighted average delayed amounts of $28,000.	Extended loans by a weighted average of 6 months.		Provided payment deferrals with weighted average delayed amounts of $8,000 and extended loans by a weighted average of 120 months.	Provided payment deferrals with weighted average delayed amounts of $14,000, extended loans by a weighted average of 12 months, and reduced the weighted average contractual interest rate from 5.75% to 5.00%.
Home Equity	Provided payment deferrals with weighted average delayed amounts of $4,000.	Extended loans by a weighted average of 5 months.		Provided payment deferrals with weighted average delayed amounts of $8,000 and extended loans by a weighted average of 60 months.

	Six Months Ended June 30, 2023
	Financial Effect of Loan Modifications
	Payment Delay	Term Extension	Combination Interest Rate Reduction & Term Extension	Combination Payment Delay & Term Extension
Commercial and industrial loans		Extended loans by a weighted average of 7 months.	Reduced the weighted average contractual interest rate from 8.25% to 7.10%. Extended loans by a weighted average of 12 months.	Reduced the weighted average contractual interest rate from 8.25% to 7.10%. Extended loans by a weighted average of 12 months.
Agricultural land, production and other loans to farmers		Extended loans by a weighted average of 60 months.
Real estate loans:
Construction		Extended loans by a weighted average of 24 months.
Commercial real estate, non-owner occupied		Extended loans by a weighted average of 9 months.	Reduced the weighted average contractual interest rate from 7.81% to 7.40%. Extended loans by a weighted average of 41 months.
Commercial real estate, owner occupied	Provided payment deferrals with weighted average delayed amounts of $4.5 million.	Extended loans by a weighted average of 6 months.	Reduced the weighted average contractual interest rate from 10.25% to 6.61%. Extended loans by a weighted average of 12 months.
Residential		Extended loans by a weighted average of 11 months.		Provided payment deferrals with weighted average delayed amounts $3,400. Extended loans by a weighted average of 3 months.

The following tables present the amortized cost basis and payment status of loans modified within the previous twelve months to borrowers experiencing financial difficulty, and that subsequently defaulted during the three and six months ended June 30, 2024 and 2023 and remained in default at period end.

	Three Months Ended June 30, 2024
	Payment Status
	Current		30-89 Days Past Due
Commercial and industrial loans	$	1,791	$	125
Real estate loans:
Commercial real estate, non-owner occupied	19,488		1,799
Commercial real estate, owner occupied	1,990		—
Residential	869		538
Home equity	162		89
Total	$	24,300	$	2,551

	Three Months Ended June 30, 2023
	Payment Status
	Current		30-89 Days Past Due		90+ Days Past Due
Commercial and industrial loans	$	4,027	$	—	$	—
Real estate loans:
Commercial real estate, non-owner occupied	1,570		—		—
Commercial real estate, owner occupied	7,696		—		—
Residential	159		108		205
Total	$	13,452	$	108	$	205

	Six Months Ended June 30, 2024
	Payment Status
	Current		30-89 Days Past Due		90+ Days Past Due
Commercial and industrial loans	$	6,150	$	125	$	—
Real estate loans:
Commercial real estate, non-owner occupied	19,488		1,799		—
Commercial real estate, owner occupied	1,990		—		—
Residential	1,219		538		1,188
Home equity	224		89		—
Total	$	29,071	$	2,551	$	1,188

	Six Months Ended June 30, 2023
	Payment Status
	Current		30-89 Days Past Due		90+ Days Past Due
Commercial and industrial loans	$	13,007	$	—	$	—
Agricultural land, production and other loans to farmers	35		—		—
Real estate loans:
Construction	15		—		—
Commercial real estate, non-owner occupied	18,348		—		—
Commercial real estate, owner occupied	8,586		—		—
Residential	159		108		205
Total	$	40,150	$	108	$	205

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

Allowance for Credit Losses on Loans

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

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

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

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

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

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

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

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

Commercial

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

Commercial real estate

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

Construction

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

Consumer and Residential

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

The allowance for credit losses decreased $15.1 million and $15.4 million during the three and six months ended June 30, 2024, respectively. Net charge-offs totaled $39.6 million and $41.9 million during the three and six months ended June 30, 2024, respectively. Provision expense of $24.5 million and $26.5 million was recorded during the three and six months ended June 30, 2024, respectively. The following tables summarize changes in the allowance for credit losses by loan segment for the three and six months ended June 30, 2024 and 2023:

	Three Months Ended June 30, 2024
	Commercial		Commercial Real Estate		Construction		Consumer & Residential		Total
Allowance for credit losses
Balances, March 31, 2024	$	99,213	$	45,278	$	20,369	$	39,821	$	204,681
Provision for credit losses	31,648		75		(6,009)		(1,214)		24,500
Recoveries on loans	536		161		—		560		1,257
Loans charged off	(40,180)		—		—		(721)		(40,901)
Balances, June 30, 2024	$	91,217	$	45,514	$	14,360	$	38,446	$	189,537

	Three Months Ended June 30, 2023
	Commercial		Commercial Real Estate		Construction		Consumer & Residential		Total
Allowance for credit losses
Balances, March 31, 2023	$	101,304	$	46,308	$	28,571	$	46,869	$	223,052
Provision for credit losses	7,639		(7,151)		1,502		(1,990)		—
Recoveries on loans	66		—		—		379		445
Loans charged off	(636)		—		—		(1,714)		(2,350)
Balances, June 30, 2023	$	108,373	$	39,157	$	30,073	$	43,544	$	221,147

	Six Months Ended June 30, 2024
	Commercial		Commercial Real Estate		Construction		Consumer & Residential		Total
Allowance for credit losses
Balances, December 31, 2023	$	97,348	$	44,048	$	24,823	$	38,715	$	204,934
Provision for credit losses	34,793		1,603		(10,463)		567		26,500
Recoveries on loans	1,087		214		—		856		2,157
Loans charged off	(42,011)		(351)		—		(1,692)		(44,054)
Balances, June 30, 2024	$	91,217	$	45,514	$	14,360	$	38,446	$	189,537

	Six Months Ended June 30, 2023
	Commercial		Commercial Real Estate		Construction		Consumer & Residential		Total
Allowance for credit losses
Balances, December 31, 2022	$	102,216	$	46,839	$	28,955	$	45,267	$	223,277
Provision for credit losses	6,440		(7,734)		1,118		176		—
Recoveries on loans	596		56		—		637		1,289
Loans charged off	(879)		(4)		—		(2,536)		(3,419)
Balances, June 30, 2023	$	108,373	$	39,157	$	30,073	$	43,544	$	221,147

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:

	June 30, 2024		December 31, 2023
Amounts of commitments:
Loan commitments to extend credit	$	5,271,982	$	5,025,790
Standby letters of credit	$	69,618	$	65,580

The Corporation maintains an accrual for credit losses on off-balance sheet commitments using the CECL methodology. Reserves for unfunded commitments declined by $3.8 million during the year ended December 31, 2023, which decreased the reserve to $19.5 million at December 31, 2023 and June 30, 2024. This reserve level remains appropriate and is reported in Other Liabilities as of June 30, 2024 in the Consolidated Condensed Balance Sheets.

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

	Three Months Ended				Six Months Ended
	June 30, 2024		June 30, 2023		June 30, 2024		June 30, 2023
Balance at beginning of the period	$	19,500	$	23,300	$	19,500	$	23,300
Provision for credit losses - unfunded commitments	—		—		—		—
Ending balance	$	19,500	$	23,300	$	19,500	$	23,300