| Loans and Allowance | 90 Days or More Past Due Commercial and industrial loans $ 2,870,436 $ 4,545 $ 19 $ 1,212 $ 2,876,212 $ — Agricultural land, production and other loans to farmers 244,403 114 — 1,114 245,631 — Real estate loans: Construction 540,648 560 — 16 541,224 — Commercial real estate, non-owner occupied 2,094,103 45,942 434 38,353 2,178,832 — Commercial real estate, owner occupied 946,423 792 1,096 1,727 950,038 1,032 Residential 1,234,473 1,582 377 3,493 1,239,925 — Home equity 477,927 1,906 1,010 1,386 482,229 60 Individuals' loans for household and other personal expenditures 126,075 181 42 89 126,387 1 Public finance and other commercial loans 677,750 — — — 677,750 — Loans $ 9,212,238 $ 55,622 $ 2,978 $ 47,390 $ 9,318,228 $ 1,093 December 31, 2020 Current 30-59 Days 60-89 Days 90 Days or More Past Due Total Loans > 90 Days or More Past Due Commercial and industrial loans $ 2,761,473 $ 5,866 $ 6,571 $ 2,789 $ 2,776,699 $ 594 Agricultural land, production and other loans to farmers 280,615 146 226 897 281,884 — Real estate loans: — Construction 484,706 — 17 — 484,723 — Commercial real estate, non-owner occupied 2,184,681 2,525 2,109 31,634 2,220,949 — Commercial real estate, owner occupied 951,561 4,854 180 1,906 958,501 — Residential 1,226,779 3,269 1,429 3,264 1,234,741 133 Home equity 503,596 2,644 559 1,460 508,259 19 Individuals' loans for household and other personal expenditures 129,049 334 96 — 129,479 — Public finance and other commercial loans 647,939 — — — 647,939 — Loans $ 9,170,399 $ 19,638 $ 11,187 $ 41,950 $ 9,243,174 $ 746 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. All unpaid accrued interest is reversed against earnings when considered uncollectible and at the time accrual is discontinued. 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, 2021 December 31, 2020 Non-Accrual Loans Non-Accrual Loans with no Allowance for Credit Losses Non-Accrual Loans Commercial and industrial loans $ 1,671 $ 786 $ 2,329 Agricultural land, production and other loans to farmers 1,220 561 1,012 Real estate loans: Construction 18 — 123 Commercial real estate, non-owner occupied 44,143 1,853 46,316 Commercial real estate, owner occupied 1,760 1,513 3,040 Residential 6,336 835 6,517 Home equity 2,650 — 2,095 Individuals' loans for household and other personal expenditures 125 — 39 Loans $ 57,923 $ 5,548 $ 61,471 There was no interest income recognized on non-accrual loans for the three months ended March 31, 2021 and 2020, respectively. 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, 2021 Commercial Real Estate Residential Real Estate Other Total Allowance on Collateral Dependent Loans Commercial and industrial loans $ — $ — $ 2,202 $ 2,202 $ — Agricultural land, production and other loans to farmers 780 — — 780 — Real estate loans: Commercial real estate, non-owner occupied 45,188 — — 45,188 5,561 Commercial real estate, owner occupied 3,539 — — 3,539 — Residential — 3,113 — 3,113 356 Home equity — 452 — 452 77 Individuals' loans for household and other personal expenditures — — 2 2 — Loans $ 49,507 $ 3,565 $ 2,204 $ 55,276 $ 5,994 As detailed in NOTE 1. GENERAL of these Notes to Consolidated Condensed Financial Statements, the Bank's banking regulators issued guidance in March 2020 encouraging financial institutions to work prudently with borrowers who are or may be unable to meet their contractual payment obligations due to the effects of COVID-19. Additionally, Section 4013 of the CARES Act had further provided that a qualified loan modification is exempt by law from classification as a troubled debt restructure as defined by GAAP, from the period beginning March 1, 2020 until the earlier of December 31, 2020 or the date that is 60 days after the date on which the national emergency concerning the COVID-19 outbreak under the National Emergencies Act (50 U.S.C. 1601 et seq.) terminates. In accordance with that guidance, the Bank has offered short-term modifications made in response to COVID-19 to borrowers who were current and otherwise not past due. These included short-term, 180 days or less, modifications in the form of payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant. The Consolidated Appropriations Act, 2021 extended the expiration date for COVID-related loan modifications exempt from troubled debt restructuring classification until the earlier of January 1, 2022, or 60 days after the termination of the national emergency. Details of the Corporation's modifications are included in the "LOAN QUALITY" section of Management’s Discussion and Analysis of Financial Condition and Results of Operations included on this Form 10-Q. 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, 2021. No troubled debt restructures in the Corporation's loan portfolio occurred in the three months ended March 31, 2020. Three Months Ended March 31, 2021 Pre- Modification Recorded Balance Term Modification Rate Modification Combination Post - Modification Recorded Balance Number of Loans Commercial and industrial $ 348 $ 348 $ — $ — $ 348 2 Real estate loans: Residential 625 383 126 118 627 7 Total $ 973 $ 731 $ 126 $ 118 $ 975 9 Loans secured by 1- 4 family residential real estate made up 64 percent of the post-modification balances of the troubled debt restructured loans that occurred during the three months ending March 31, 2021. The following tables summarize troubled debt restructures that occurred during the twelve months ended March 31, 2021 and 2020, 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, 2021 Number of Loans Recorded Balance Real estate loans: Residential 5 $ 197 Home equity 1 91 Individuals' loans for household and other personal expenditures 1 2 Total 7 $ 290 Three Months Ended March 31, 2020 Number of Loans Recorded Balance Real estate loans: Residential 1 $ 22 Total 1 $ 22 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 $3.3 million and $507,000 at March 31, 2021 and March 31, 2020, 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, 2021: Three Months Ended March 31, 2021 Commercial Commercial Real Estate Construction Consumer Residential Consumer & Residential Total 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 reclassifications 47,115 40,786 10,284 — — 32,463 130,648 Impact of adopting ASC 326 20,024 34,925 8,805 — — 10,301 74,055 Balances, January 1, 2021 Post-ASC 326 adoption 67,139 75,711 19,089 — — 42,764 204,703 Provision for credit losses (932) (1,701) 1,095 — — 1,538 — Recoveries on loans 188 164 — — — 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 Allowance for Loan Losses under prior GAAP ("Incurred Loss Model") Prior to the adoption of ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments on January 1, 2021, the Corporation maintained an allowance for loan losses in accordance with the incurred loss model as disclosed in the Corporation's 2020 Annual Report on Form 10-K. The following tables summarize changes in the allowance for loan losses by loan segment for the three months ended March 31, 2020: Three Months Ended March 31, 2020 Commercial Commercial Consumer Residential Total Allowance for loan losses: Balances, December 31, 2019 $ 32,902 $ 28,778 $ 4,035 $ 14,569 $ 80,284 Provision for losses 5,701 9,194 1,924 2,933 19,752 Recoveries on loans 443 118 42 70 673 Loans charged off (615) (183) (249) (208) (1,255) Balances, March 31, 2020 $ 38,431 $ 37,907 $ 5,752 $ 17,364 $ 99,454 The table below shows the Corporation’s allowance for loan losses under the incurred loss model and loan portfolio by loan segment as of the periods indicated. December 31, 2020 Commercial Commercial Consumer Residential Total Allowance Balances: Individually evaluated for impairment $ 223 $ 12,246 $ — $ 432 $ 12,901 Collectively evaluated for impairment 46,892 38,824 9,648 22,383 117,747 Total Allowance for Loan Losses $ 47,115 $ 51,070 $ 9,648 $ 22,815 $ 130,648 Loan Balances: Individually evaluated for impairment $ 1,258 $ 51,605 $ 2 $ 3,291 $ 56,156 Collectively evaluated for impairment 3,505,863 3,805,808 129,477 1,739,709 9,180,857 Loans acquired with deteriorated credit quality 577 5,584 — — 6,161 Loans $ 3,507,698 $ 3,862,997 $ 129,479 $ 1,743,000 $ 9,243,174 The following tables show the composition of the Corporation’s impaired loans, related allowance under the incurred loss model and interest income recognized while impaired by loan class as of the periods indicated: December 31, 2020 Unpaid Recorded Related Impaired loans with no related allowance: Commercial and industrial loans $ 1,059 $ 991 $ — Real estate Loans: Commercial real estate, non-owner occupied 4,958 4,694 — Commercial real estate, owner occupied 2,125 1,310 — Residential 957 816 — Individuals' loans for household and other personal expenditures 2 2 — Total $ 9,101 $ 7,813 $ — Impaired loans with related allowance: Commercial and industrial loans $ 268 $ 268 $ 223 Agricultural land, production and other loans to farmers 640 562 3 Real estate Loans: Commercial real estate, non-owner occupied 44,016 43,715 11,686 Commercial real estate, owner occupied 2,061 1,323 557 Residential 2,041 2,014 352 Home equity 487 461 80 Total $ 49,513 $ 48,343 $ 12,901 Total Impaired Loans $ 58,614 $ 56,156 $ 12,901 Three Months Ended March 31, 2020 Average Interest Impaired loans with no related allowance: Commercial and industrial loans $ 905 $ — Real estate Loans: Construction 1,015 — Commercial and farmland 6,852 37 Residential 59 1 Individuals' loans for household and other personal expenditures 3 — Total $ 8,834 $ 38 Impaired loans with related allowance: Real estate Loans: Commercial and farmland $ 2,400 $ — Residential 2,180 19 Home equity 393 3 Total $ 4,973 $ 22 Total Impaired Loans $ 13,807 $ 60 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 " id="sjs-B4" xml:space="preserve">LOANS AND ALLOWANCE Loan Portfolio and Credit Quality The Corporation's primary lending focus is small business and middle market commercial, commercial real estate 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, 2021 and December 31, 2020, were $4.4 million and $4.0 million, respectively. The following table illustrates the composition of the Corporation’s loan portfolio by loan class for the periods indicated: March 31, 2021 December 31, 2020 Commercial and industrial loans $ 2,876,212 $ 2,776,699 Agricultural land, production and other loans to farmers 245,631 281,884 Real estate loans: Construction 541,224 484,723 Commercial real estate, non-owner occupied 2,178,832 2,220,949 Commercial real estate, owner occupied 950,038 958,501 Residential 1,239,925 1,234,741 Home equity 482,229 508,259 Individuals' loans for household and other personal expenditures 126,387 129,479 Public finance and other commercial loans 677,750 647,939 Loans $ 9,318,228 $ 9,243,174 As of March 31, 2021, the Corporation had $741.7 million of Paycheck Protection Program ("PPP") loans compared to the December 31, 2020 balance of $667.1 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 section of the "COVID-19 UPDATE" section of Management’s Discussion and Analysis of Financial Condition and Results of Operations included on 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. Outstanding loan balances as of March 31, 2021 with an origination year of 2021 and 2020 include PPP loans of $293.1 million and $448.6 million, respectively. Term Loans (amortized cost basis by origination year) 2021 2020 2019 2018 2017 Prior Revolving loans amortized cost basis Total Commercial and industrial loans Pass $ 451,747 $ 1,101,622 $ 265,685 $ 121,416 $ 47,101 $ 64,093 $ 634,146 $ 2,685,810 Special Mention 7,735 50,704 1,421 7,435 2,306 2,326 29,255 101,182 Substandard 1,891 4,946 6,319 606 469 1,394 73,595 89,220 Total Commercial and industrial loans $ 461,373 $ 1,157,272 $ 273,425 $ 129,457 $ 49,876 $ 67,813 $ 736,996 $ 2,876,212 Agricultural land, production and other loans to farmers Pass 22,570 58,620 26,146 11,864 8,821 49,646 45,626 223,293 Special Mention 151 621 186 2,151 — 3,347 8,824 15,280 Substandard — 4,116 64 125 717 877 1,159 7,058 Total Agricultural land, production and other loans to farmers $ 22,721 $ 63,357 $ 26,396 $ 14,140 $ 9,538 $ 53,870 $ 55,609 $ 245,631 Real estate loans: Construction Pass 60,800 208,852 165,903 68,816 3,104 1,945 17,184 526,604 Special Mention — 10,118 — 63 — — 30 10,211 Substandard 4,391 — — — — 18 — 4,409 Total Construction $ 65,191 $ 218,970 $ 165,903 $ 68,879 $ 3,104 $ 1,963 $ 17,214 $ 541,224 Commercial real estate, non-owner occupied Pass 93,726 933,226 275,343 225,971 141,947 196,284 25,454 1,891,951 Special Mention 9,544 169,291 13,242 990 — 112 1,250 194,429 Substandard 238 38,545 24,741 11,585 7,840 9,503 — 92,452 Total Commercial real estate, non-owner occupied $ 103,508 $ 1,141,062 $ 313,326 $ 238,546 $ 149,787 $ 205,899 $ 26,704 $ 2,178,832 Commercial real estate, owner occupied Pass 51,710 481,355 122,017 57,531 60,587 89,802 39,729 902,731 Special Mention 45 10,174 2,606 1,646 2,242 1,178 149 18,040 Substandard 5,079 19,107 154 2,179 723 1,979 — 29,221 Loss 46 — — — — — — 46 Total Commercial real estate, owner occupied $ 56,880 $ 510,636 $ 124,777 $ 61,356 $ 63,552 $ 92,959 $ 39,878 $ 950,038 Residential Pass 171,109 398,112 148,457 101,627 88,700 314,130 3,873 1,226,008 Special Mention 349 982 — 588 82 1,313 93 3,407 Substandard 485 3,152 518 1,355 372 4,628 — 10,510 Total Residential $ 171,943 $ 402,246 $ 148,975 $ 103,570 $ 89,154 $ 320,071 $ 3,966 $ 1,239,925 Home equity Pass 2,673 20,032 2,577 2,930 1,786 5,085 442,166 477,249 Special Mention — 91 — — — 59 2,588 2,738 Substandard 403 151 — 13 129 195 1,351 2,242 Total Home Equity $ 3,076 $ 20,274 $ 2,577 $ 2,943 $ 1,915 $ 5,339 $ 446,105 $ 482,229 Individuals' loans for household and other personal expenditures Pass 16,786 38,678 24,201 18,482 4,383 7,550 15,996 126,076 Special Mention — 68 75 35 8 33 4 223 Substandard — 1 87 — — — — 88 Total Individuals' loans for household and other personal expenditures $ 16,786 $ 38,747 $ 24,363 $ 18,517 $ 4,391 $ 7,583 $ 16,000 $ 126,387 Public finance and other commercial loans Pass 21,613 191,808 128,844 39,837 130,856 151,403 13,389 677,750 Total Public finance and other commercial loans $ 21,613 $ 191,808 $ 128,844 $ 39,837 $ 130,856 $ 151,403 $ 13,389 $ 677,750 Loans $ 923,091 $ 3,744,372 $ 1,208,586 $ 677,245 $ 502,173 $ 906,900 $ 1,355,861 $ 9,318,228 December 31, 2020 Commercial Commercial Commercial Substandard Commercial Commercial Loss Consumer Performing Consumer Total Commercial and industrial loans $ 2,562,077 $ 117,503 $ 97,119 $ — $ — $ — $ — $ 2,776,699 Agricultural production financing and other loans to farmers 243,991 26,835 9,885 — — 1,173 — 281,884 Real estate Loans: Construction 446,846 10,445 5,549 — — 21,763 120 484,723 Commercial real estate, non-owner occupied 1,979,827 160,304 80,818 — — — — 2,220,949 Commercial real estate, owner occupied 907,566 17,641 33,294 — — 958,501 Residential 199,338 2,261 7,058 — — 1,020,687 5,397 1,234,741 Home equity 12,714 — 989 — — 492,999 1,557 508,259 Individuals' loans for household and other personal expenditures — — — — — 129,440 39 129,479 Public finance and other commercial loans 647,939 — — — — — — 647,939 Loans $ 7,000,298 $ 334,989 $ 234,712 $ — $ — $ 1,666,062 1666062 $ 7,113 $ 9,243,174 At March 31, 2021, 30-59 Days Past Due loans totaled $55.6 million, an increase of $36.0 million from December 31, 2020. The primary increase was in the commercial real estate, non-owner occupied segment and is related to four relationships. Three of the relationships are multi-family units totaling $24.1 million and the fourth relationship is a hotel totaling $21.0 million. At March 31, 2021, the 60-89 Days Past Due category totaled $3.0 million, a decrease of $8.2 million from December 31, 2020. The primary decrease was related to a $5.0 million commercial and industrial loan that was current as of March 31, 2021. The 90 Days or More Past Due bucket totaled $47.4 million at March 31, 2021, an increase of $5.4 million from December 31, 2020. The primary increase was related to a $13.0 million nursing home loan within the commercial real estate, non-owner occupied segment, that was current at December 31, 2020, but has moved into the 90+ Days Past Due bucket. This was offset by a $3.7 million loan within the same segment that was 90+ Days Past Due at December 31, 2020, but has since paid off. The tables below show a past due aging of the Corporation’s loan portfolio, by loan class, for the years indicated: March 31, 2021 Current 30-59 Days 60-89 Days 90 Days or More Past Due Total Loans > 90 Days or More Past Due Commercial and industrial loans $ 2,870,436 $ 4,545 $ 19 $ 1,212 $ 2,876,212 $ — Agricultural land, production and other loans to farmers 244,403 114 — 1,114 245,631 — Real estate loans: Construction 540,648 560 — 16 541,224 — Commercial real estate, non-owner occupied 2,094,103 45,942 434 38,353 2,178,832 — Commercial real estate, owner occupied 946,423 792 1,096 1,727 950,038 1,032 Residential 1,234,473 1,582 377 3,493 1,239,925 — Home equity 477,927 1,906 1,010 1,386 482,229 60 Individuals' loans for household and other personal expenditures 126,075 181 42 89 126,387 1 Public finance and other commercial loans 677,750 — — — 677,750 — Loans $ 9,212,238 $ 55,622 $ 2,978 $ 47,390 $ 9,318,228 $ 1,093 December 31, 2020 Current 30-59 Days 60-89 Days 90 Days or More Past Due Total Loans > 90 Days or More Past Due Commercial and industrial loans $ 2,761,473 $ 5,866 $ 6,571 $ 2,789 $ 2,776,699 $ 594 Agricultural land, production and other loans to farmers 280,615 146 226 897 281,884 — Real estate loans: — Construction 484,706 — 17 — 484,723 — Commercial real estate, non-owner occupied 2,184,681 2,525 2,109 31,634 2,220,949 — Commercial real estate, owner occupied 951,561 4,854 180 1,906 958,501 — Residential 1,226,779 3,269 1,429 3,264 1,234,741 133 Home equity 503,596 2,644 559 1,460 508,259 19 Individuals' loans for household and other personal expenditures 129,049 334 96 — 129,479 — Public finance and other commercial loans 647,939 — — — 647,939 — Loans $ 9,170,399 $ 19,638 $ 11,187 $ 41,950 $ 9,243,174 $ 746 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. All unpaid accrued interest is reversed against earnings when considered uncollectible and at the time accrual is discontinued. 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, 2021 December 31, 2020 Non-Accrual Loans Non-Accrual Loans with no Allowance for Credit Losses Non-Accrual Loans Commercial and industrial loans $ 1,671 $ 786 $ 2,329 Agricultural land, production and other loans to farmers 1,220 561 1,012 Real estate loans: Construction 18 — 123 Commercial real estate, non-owner occupied 44,143 1,853 46,316 Commercial real estate, owner occupied 1,760 1,513 3,040 Residential 6,336 835 6,517 Home equity 2,650 — 2,095 Individuals' loans for household and other personal expenditures 125 — 39 Loans $ 57,923 $ 5,548 $ 61,471 There was no interest income recognized on non-accrual loans for the three months ended March 31, 2021 and 2020, respectively. 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, 2021 Commercial Real Estate Residential Real Estate Other Total Allowance on Collateral Dependent Loans Commercial and industrial loans $ — $ — $ 2,202 $ 2,202 $ — Agricultural land, production and other loans to farmers 780 — — 780 — Real estate loans: Commercial real estate, non-owner occupied 45,188 — — 45,188 5,561 Commercial real estate, owner occupied 3,539 — — 3,539 — Residential — 3,113 — 3,113 356 Home equity — 452 — 452 77 Individuals' loans for household and other personal expenditures — — 2 2 — Loans $ 49,507 $ 3,565 $ 2,204 $ 55,276 $ 5,994 As detailed in NOTE 1. GENERAL of these Notes to Consolidated Condensed Financial Statements, the Bank's banking regulators issued guidance in March 2020 encouraging financial institutions to work prudently with borrowers who are or may be unable to meet their contractual payment obligations due to the effects of COVID-19. Additionally, Section 4013 of the CARES Act had further provided that a qualified loan modification is exempt by law from classification as a troubled debt restructure as defined by GAAP, from the period beginning March 1, 2020 until the earlier of December 31, 2020 or the date that is 60 days after the date on which the national emergency concerning the COVID-19 outbreak under the National Emergencies Act (50 U.S.C. 1601 et seq.) terminates. In accordance with that guidance, the Bank has offered short-term modifications made in response to COVID-19 to borrowers who were current and otherwise not past due. These included short-term, 180 days or less, modifications in the form of payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant. The Consolidated Appropriations Act, 2021 extended the expiration date for COVID-related loan modifications exempt from troubled debt restructuring classification until the earlier of January 1, 2022, or 60 days after the termination of the national emergency. Details of the Corporation's modifications are included in the "LOAN QUALITY" section of Management’s Discussion and Analysis of Financial Condition and Results of Operations included on this Form 10-Q. 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, 2021. No troubled debt restructures in the Corporation's loan portfolio occurred in the three months ended March 31, 2020. Three Months Ended March 31, 2021 Pre- Modification Recorded Balance Term Modification Rate Modification Combination Post - Modification Recorded Balance Number of Loans Commercial and industrial $ 348 $ 348 $ — $ — $ 348 2 Real estate loans: Residential 625 383 126 118 627 7 Total $ 973 $ 731 $ 126 $ 118 $ 975 9 Loans secured by 1- 4 family residential real estate made up 64 percent of the post-modification balances of the troubled debt restructured loans that occurred during the three months ending March 31, 2021. The following tables summarize troubled debt restructures that occurred during the twelve months ended March 31, 2021 and 2020, 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, 2021 Number of Loans Recorded Balance Real estate loans: Residential 5 $ 197 Home equity 1 91 Individuals' loans for household and other personal expenditures 1 2 Total 7 $ 290 Three Months Ended March 31, 2020 Number of Loans Recorded Balance Real estate loans: Residential 1 $ 22 Total 1 $ 22 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 $3.3 million and $507,000 at March 31, 2021 and March 31, 2020, 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, 2021: Three Months Ended March 31, 2021 Commercial Commercial Real Estate Construction Consumer Residential Consumer & Residential Total 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 reclassifications 47,115 40,786 10,284 — — 32,463 130,648 Impact of adopting ASC 326 20,024 34,925 8,805 — — 10,301 74,055 Balances, January 1, 2021 Post-ASC 326 adoption 67,139 75,711 19,089 — — 42,764 204,703 Provision for credit losses (932) (1,701) 1,095 — — 1,538 — Recoveries on loans 188 164 — — — 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 Allowance for Loan Losses under prior GAAP ("Incurred Loss Model") Prior to the adoption of ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments on January 1, 2021, the Corporation maintained an allowance for loan losses in accordance with the incurred loss model as disclosed in the Corporation's 2020 Annual Report on Form 10-K. The following tables summarize changes in the allowance for loan losses by loan segment for the three months ended March 31, 2020: Three Months Ended March 31, 2020 Commercial Commercial Consumer Residential Total Allowance for loan losses: Balances, December 31, 2019 $ 32,902 $ 28,778 $ 4,035 $ 14,569 $ 80,284 Provision for losses 5,701 9,194 1,924 2,933 19,752 Recoveries on loans 443 118 42 70 673 Loans charged off (615) (183) (249) (208) (1,255) Balances, March 31, 2020 $ 38,431 $ 37,907 $ 5,752 $ 17,364 $ 99,454 The table below shows the Corporation’s allowance for loan losses under the incurred loss model and loan portfolio by loan segment as of the periods indicated. December 31, 2020 Commercial Commercial Consumer Residential Total Allowance Balances: Individually evaluated for impairment $ 223 $ 12,246 $ — $ 432 $ 12,901 Collectively evaluated for impairment 46,892 38,824 9,648 22,383 117,747 Total Allowance for Loan Losses $ 47,115 $ 51,070 $ 9,648 $ 22,815 $ 130,648 Loan Balances: Individually evaluated for impairment $ 1,258 $ 51,605 $ 2 $ 3,291 $ 56,156 Collectively evaluated for impairment 3,505,863 3,805,808 129,477 1,739,709 9,180,857 Loans acquired with deteriorated credit quality 577 5,584 — — 6,161 Loans $ 3,507,698 $ 3,862,997 $ 129,479 $ 1,743,000 $ 9,243,174 The following tables show the composition of the Corporation’s impaired loans, related allowance under the incurred loss model and interest income recognized while impaired by loan class as of the periods indicated: December 31, 2020 Unpaid Recorded Related Impaired loans with no related allowance: Commercial and industrial loans $ 1,059 $ 991 $ — Real estate Loans: Commercial real estate, non-owner occupied 4,958 4,694 — Commercial real estate, owner occupied 2,125 1,310 — Residential 957 816 — Individuals' loans for household and other personal expenditures 2 2 — Total $ 9,101 $ 7,813 $ — Impaired loans with related allowance: Commercial and industrial loans $ 268 $ 268 $ 223 Agricultural land, production and other loans to farmers 640 562 3 Real estate Loans: Commercial real estate, non-owner occupied 44,016 43,715 11,686 Commercial real estate, owner occupied 2,061 1,323 557 Residential 2,041 2,014 352 Home equity 487 461 80 Total $ 49,513 $ 48,343 $ 12,901 Total Impaired Loans $ 58,614 $ 56,156 $ 12,901 Three Months Ended March 31, 2020 Average Interest Impaired loans with no related allowance: Commercial and industrial loans $ 905 $ — Real estate Loans: Construction 1,015 — Commercial and farmland 6,852 37 Residential 59 1 Individuals' loans for household and other personal expenditures 3 — Total $ 8,834 $ 38 Impaired loans with related allowance: Real estate Loans: Commercial and farmland $ 2,400 $ — Residential 2,180 19 Home equity 393 3 Total $ 4,973 $ 22 Total Impaired Loans $ 13,807 $ 60 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 |
