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Loans and Allowance for Credit Losses

9 Months Ended

Sep. 30, 2023

Loans and leases, net of unearned income

Loans and leases, net of unearned income, are summarized as follows:


	September 30, 2023		December 31, 2022
	(dollars in thousands)
Real estate - commercial mortgage	$	8,106,300	$	7,693,835
Commercial and industrial(1)	4,577,334		4,473,004
Real-estate - residential mortgage	5,279,681		4,737,279
Real-estate - home equity	1,045,438		1,102,838
Real-estate - construction	1,078,263		1,269,925
Consumer	743,976		699,179
Leases and other loans(2)	346,516		303,487
Net loans	$	21,177,508	$	20,279,547

(1) Includes unearned income of $1.1 million and $4.5 million at September 30, 2023 and December 31, 2022, respectively.

(2) Includes unearned income of $37.5 million and $24.8 million at September 30, 2023 and December 31, 2022, respectively.

The Corporation segments its loan portfolio by "portfolio segments," as presented in the table above. Certain portfolio segments are further disaggregated by "class segment" for the purpose of estimating credit losses.

Allowance for Credit Losses

The ACL consists of loans evaluated collectively and individually for expected credit losses. The ACL represents an estimate of expected credit losses over the expected life of the loans as of the balance sheet date and is recorded as a reduction to net loans. The ACL is increased by charges to expense, through the provision for credit losses, and decreased by charge-offs, net of recoveries. The reserve for OBS credit exposures includes estimated losses on unfunded loan commitments, letters of credit and other OBS credit exposures.

The following table summarizes the ACL - loans balance and the reserve for OBS credit exposures balance as of September 30, 2023 and December 31, 2022:



	September 30, 2023		December 31, 2022
	(dollars in thousands)
ACL - loans	$	292,739	$	269,366

Reserve for OBS credit exposures(1)	$	16,110	$	16,328

(1) Included in other liabilities on the consolidated balance sheets.

The following table presents the activity in the ACL - loans balances:


	Three months ended September 30				Nine months ended September 30
	2023		2022		2023		2022
	(dollars in thousands)
Balance at beginning of period	$	287,442	$	248,564	$	269,366	$	249,001
CECL Day 1 Provision expense	—		7,954		—		7,954
Initial purchased credit deteriorated loans	—		1,135		—		1,135
Loans charged off	(7,279)		(3,724)		(28,969)		(7,242)
Recoveries of loans previously charged off	2,181		3,272		7,896		11,593
Net loans (charged off) recovered	(5,098)		(452)		(21,073)		4,351
Provision for credit losses(1)	10,395		9,637		44,446		4,397
Balance at end of period	$	292,739	$	266,838	$	292,739	$	266,838
Provision for OBS credit exposures	$	(458)	$	1,367	$	(218)	$	1,157
Reserve for OBS credit exposures	$	16,110	$	16,074	$	16,110	$	16,074

(1) Provision included in the table only includes the portion related to net loans.

The following table presents the activity in the ACL by portfolio segment:


	Real Estate Commercial Mortgage		Commercial and Industrial		Real Estate Residential Mortgage		Consumer and Home Equity		Real Estate Construction		Leases and other loans		Total
	(dollars in thousands)
Three months ended September 30, 2023
Balance at June 30, 2023	$	72,302	$	75,189	$	88,849	$	28,982	$	11,144	$	10,976	$	287,442


Loans charged off	(860)		(3,220)		—		(1,803)		—		(1,396)		(7,279)
Recoveries of loans previously charged off	101		620		37		1,023		—		400		2,181
Net loans (charged off) recovered	(759)		(2,600)		37		(780)		—		(996)		(5,098)
Provision for loan losses(1)	2,403		9,766		(2,685)		1,873		(2,873)		1,911		10,395
Balance at September 30, 2023	$	73,946	$	82,355	$	86,201	$	30,075	$	8,271	$	11,891	$	292,739
Three months ended September 30, 2022
Balance at June 30, 2022	$	72,605	$	72,119	$	61,635	$	23,080	$	10,628	$	8,497	$	248,564
CECL Day 1 Provision expense	4,107		—		3,716		131		—		—		7,954
Initial purchased credit deteriorated loans	1,051		—		77		7		—		—		1,135
Loans charged off	(86)		(1,783)		—		(1,172)		—		(683)		(3,724)
Recoveries of loans previously charged off	29		2,213		101		682		—		247		3,272
Net loans (charged off) recovered	(57)		430		101		(490)		—		(436)		(452)
Provision for loan and lease losses(1)	11,144		(6,424)		1,880		1,812		1,045		180		9,637
Balance at September 30, 2022	$	88,850	$	66,125	$	67,409	$	24,540	$	11,673	$	8,241	$	266,838
Nine months ended September 30, 2023
Balance at December 31, 2022	$	69,456	$	70,116	$	83,250	$	26,429	$	10,743	$	9,372	$	269,366


Loans charged off	(14,452)		(5,849)		(62)		(5,322)		—		(3,284)		(28,969)
Recoveries of loans previously charged off	916		2,694		143		2,643		771		729		7,896
Net loans (charged off) recovered	(13,536)		(3,155)		81		(2,679)		771		(2,555)		(21,073)
Provision for loan losses(1)	18,026		15,394		2,870		6,325		(3,243)		5,074		44,446
Balance at September 30, 2023	$	73,946	$	82,355	$	86,201	$	30,075	$	8,271	$	11,891	$	292,739
Nine months ended September 30, 2022
Balance at December 31, 2021	$	87,970	$	67,056	$	54,236	$	19,749	$	12,941	$	7,049	$	249,001
CECL Day 1 Provision expense	4,107		—		3,716		131		—		—		7,954
Initial purchased credit deteriorated loans	1,051		—		77		7		—		—		1,135
Loans charged off	(238)		(2,211)		(66)		(3,101)		—		(1,626)		(7,242)
Recoveries of loans previously charged off	3,677		4,932		415		1,898		44		627		11,593
Net loans (charged off) recovered	3,439		2,721		349		(1,203)		44		(999)		4,351
Provision for loan losses(1)	(7,717)		(3,652)		9,031		5,856		(1,312)		2,191		4,397
Balance at September 30, 2022	$	88,850	$	66,125	$	67,409	$	24,540	$	11,673	$	8,241	$	266,838

(1) Provision included in the table only includes the portion related to net loans.

The ACL - loans includes qualitative adjustments, as appropriate, intended to capture the impact of uncertainties not reflected in the quantitative models. Qualitative adjustments include and consider changes in national, regional and local economic and business conditions, an assessment of the lending environment, including underwriting standards and other factors affecting credit quality.

The provision for credit losses for the three months ended September 30, 2023 was recorded primarily as a result of net-charge offs, loan growth and an increase for specifically impaired loans.

Non-accrual Loans

All loans individually evaluated for impairment are measured for losses on a quarterly basis. As of September 30, 2023 and December 31, 2022, substantially all of the Corporation's individually evaluated loans with total commitments greater than or equal to $1.0 million were measured based on the estimated fair value of each loan’s collateral, if any. Collateral could be in the form of real estate, in the case of commercial mortgages and construction loans, or business assets, such as accounts receivables

or inventory, in the case of commercial and industrial loans. Commercial and industrial loans may also be secured by real estate.

As of September 30, 2023 and December 31, 2022, approximately 73% and 91%, respectively, of loans evaluated individually for impairment with principal balances greater than or equal to $1.0 million, whose primary collateral consisted of real estate, were measured at estimated fair value using appraisals performed by state certified third-party appraisers that had been updated in the preceding 12 months.

The following table presents total non-accrual loans, by class segment:


	September 30, 2023						December 31, 2022
	With a Related Allowance		Without a Related Allowance		Total		With a Related Allowance		Without a Related Allowance		Total
	(dollars in thousands)
Real estate - commercial mortgage	$	22,550	$	20,199	$	42,749	$	39,722	$	30,439	$	70,161
Commercial and industrial	17,956		14,239		32,195		14,804		12,312		27,116
Real estate - residential mortgage	20,101		1,053		21,154		25,315		979		26,294
Real estate - home equity	5,422		110		5,532		5,975		130		6,105
Real estate - construction	340		337		677		866		502		1,368
Consumer	15		—		15		92		—		92
Leases and other loans	9,255		1,445		10,700		4,052		9,255		13,307
	$	75,639	$	37,383	$	113,022	$	90,826	$	53,617	$	144,443

As of September 30, 2023 and December 31, 2022, there were $37.4 million and $53.6 million, respectively, of non-accrual loans that did not have a specific valuation allowance for credit losses. The estimated fair values of the collateral securing these loans exceeded their carrying amount, or the loans were previously charged down to realizable collateral values. Accordingly, no specific valuation allowance was considered to be necessary.

Asset Quality

Maintaining an appropriate ACL is dependent on various factors, including the ability to identify potential problem loans in a timely manner. For commercial construction, commercial and industrial, and commercial real estate, an internal risk rating process is used. The Corporation believes that internal risk ratings are the most relevant credit quality indicator for these types of loans. The migration of loans through the various internal risk categories is a significant component of the ACL methodology for these loans, which bases the probability of default on this migration. Assigning risk ratings involves judgment. The Corporation's loan review officers provide a separate assessment of risk rating accuracy. Risk ratings may be changed based on the ongoing monitoring procedures performed by loan officers or credit administration staff, or if specific loan review assessments identify a deterioration or an improvement in a loan.

The following table summarizes designated internal risk rating categories by portfolio segment and loan class, by origination year, in the current period:


		September 30, 2023
		Term Loans Amortized Cost Basis by Origination Year												Revolving Loans		Revolving Loans converted to Term Loans
		(in thousands)												Amortized		Amortized
		2023		2022		2021		2020		2019		Prior		Cost Basis		Cost Basis		Total
Real estate - commercial mortgage
	Pass	$	599,679	$	1,018,639	$	1,307,915	$	964,569	$	763,273	$	2,950,509	$	57,549	$	34,133	$	7,696,266
	Special Mention	—		24,531		48,761		6,087		28,454		107,064		2,430		—		217,327
	Substandard or Lower	194		14,907		26,003		50,751		27,689		72,676		487		—		192,707
	Total real estate - commercial mortgage	599,873		1,058,077		1,382,679		1,021,407		819,416		3,130,249		60,466		34,133		8,106,300
Real estate - commercial mortgage
	Current period gross charge-offs	—		—		—		—		—		(30)		—		(14,422)		(14,452)
Commercial and industrial(1)
	Pass	568,053		617,462		365,847		353,550		282,877		670,312		1,435,287		14,873		4,308,261
	Special Mention	739		11,003		14,641		4,913		4,648		13,313		55,448		237		104,942
	Substandard or Lower	205		12,136		1,974		3,921		19,693		23,766		101,529		907		164,131
	Total commercial and industrial	568,997		640,601		382,462		362,384		307,218		707,391		1,592,264		16,017		4,577,334
Commercial and industrial(1)
	Current period gross charge-offs	—		—		—		—		—		—		(682)		(5,167)		(5,849)
Real estate - construction(2)
	Pass	194,777		224,814		261,417		63,984		10,264		35,247		15,083		—		805,586
	Special Mention	—		—		—		28,292		—		7,732		—		—		36,024
	Substandard or Lower	—		448		—		—		340		15,265		2,403		—		18,456
	Total real estate - construction	194,777		225,262		261,417		92,276		10,604		58,244		17,486		—		860,066
Real estate - construction(2)
	Current period gross charge-offs	—		—		—		—		—		—		—		—		—
Total
	Pass	$	1,362,509	$	1,860,915	$	1,935,179	$	1,382,103	$	1,056,414	$	3,656,068	$	1,507,919	$	49,006	$	12,810,113
	Special Mention	739		35,534		63,402		39,292		33,102		128,109		57,878		237		358,293
	Substandard or Lower	399		27,491		27,977		54,672		47,722		111,707		104,419		907		375,294
	Total	$	1,363,647	$	1,923,940	$	2,026,558	$	1,476,067	$	1,137,238	$	3,895,884	$	1,670,216	$	50,150	$	13,543,700

(1) Loans originated in 2021 and 2020 include $6.7 million of PPP loans that were assigned a rating of Pass based on the existence of a federal government

guaranty through the SBA.

(2) Excludes real estate - construction - other.

The following table summarizes designated internal risk rating categories by portfolio segment and loan class, by origination year, in the prior period:


		December 31, 2022
		Term Loans Amortized Cost Basis by Origination Year												Revolving Loans		Revolving Loans converted to Term Loans
		(dollars in thousands)												Amortized		Amortized
		2022		2021		2020		2019		2018		Prior		Cost Basis		Cost Basis		Total
Real estate - commercial mortgage
	Pass	$	1,014,575	$	1,095,725	$	969,118	$	810,850	$	621,689	$	2,610,511	$	80,665	$	307	$	7,203,440
	Special Mention	95		50,367		23,296		33,735		16,205		181,736		947		—		306,381
	Substandard or Lower	1,032		3,039		31,042		38,378		23,112		87,168		243		—		184,014
	Total real estate - commercial mortgage	1,015,702		1,149,131		1,023,456		882,963		661,006		2,879,415		81,855		307		7,693,835
Real estate - commercial mortgage
	Current period gross charge-offs	—		—		—		—		—		(53)		—		(12,420)		(12,473)
Commercial and industrial(1)
	Pass	907,390		449,145		397,881		315,605		185,096		604,352		1,387,961		618		4,248,048
	Special Mention	11,405		24,479		3,763		8,147		5,218		24,633		56,048		250		133,943
	Substandard or Lower	834		418		4,818		13,044		3,081		22,025		51,077		249		95,546
	Total commercial and industrial	919,629		474,042		406,462		336,796		193,395		651,010		1,495,086		1,117		4,477,537
Commercial and industrial(1)
	Current period gross charge-offs	—		—		(36)		—		(21)		(365)		(1,192)		(776)		(2,390)
Real estate - construction(2)
	Pass	159,195		390,993		243,406		28,539		24,421		93,511		47,271		—		987,336
	Special Mention	—		—		—		—		—		21,603		—		—		21,603
	Substandard or Lower	—		—		3,852		2,274		—		4,272		203		—		10,601
	Total real estate - construction	159,195		390,993		247,258		30,813		24,421		119,386		47,474		—		1,019,540
Real estate - construction(2)
	Current period gross charge-offs	—		—		—		—		—		—		—		—		—
Total
	Pass	$	2,081,160	$	1,935,863	$	1,610,405	$	1,154,994	$	831,206	$	3,308,374	$	1,515,897	$	925	$	12,438,824
	Special Mention	11,500		74,846		27,059		41,882		21,423		227,972		56,995		250		461,927
	Substandard or Lower	1,866		3,457		39,712		53,696		26,193		113,465		51,523		249		290,161
	Total	$	2,094,526	$	2,014,166	$	1,677,176	$	1,250,572	$	878,822	$	3,649,811	$	1,624,415	$	1,424	$	13,190,912

(1) Loans originated in 2021 and 2020 include $20.4 million of PPP loans that were assigned a rating of Pass based on the existence of a federal government

guaranty through the SBA.

(2) Excludes real estate - construction - other.

The Corporation considers the performance of the loan portfolio and its impact on the ACL. The Corporation does not assign internal risk ratings to smaller balance, homogeneous loans, such as home equity, residential mortgage, construction loans to individuals secured by residential real estate, consumer and leases and other loans. For these loans, the most relevant credit quality indicator is delinquency status and the Corporation evaluates credit quality based on the aging status of the loan. The following tables present the amortized cost of these loans based on payment activity, by origination year, for the periods shown:


		September 30, 2023
		Term Loans Amortized Cost Basis by Origination Year												Revolving Loans		Revolving Loans converted to Term Loans
		(dollars in thousands)												Amortized		Amortized
		2023		2022		2021		2020		2019		Prior		Cost Basis		Cost Basis		Total
Real estate - residential mortgage
	Performing	$	540,015	$	1,097,965	$	1,702,327	$	999,666	$	269,656	$	629,492	$	—	$	—	$	5,239,121
	Nonperforming	—		804		3,611		5,011		5,633		25,501		—		—		40,560
	Total real estate - residential mortgage	540,015		1,098,769		1,705,938		1,004,677		275,289		654,993		—		—		5,279,681
Real estate - residential mortgage
	Current period gross charge-offs	—		—		—		—		—		—		—		(62)		(62)
Consumer and real estate - home equity
	Performing	248,499		296,227		91,876		67,535		41,289		224,270		798,617		9,521		1,777,834
	Nonperforming	20		381		906		428		262		7,267		1,463		853		11,580
	Total consumer and real estate - home equity	248,519		296,608		92,782		67,963		41,551		231,537		800,080		10,374		1,789,414
Consumer and real estate - home equity
	Current period gross charge-offs	—		—		—		—		—		(523)		(22)		(4,777)		(5,322)
Leases and other loans
	Performing	158,933		89,264		30,908		25,186		19,150		12,331		—		—		335,772
	Nonperforming	—		43		—		—		—		10,701		—		—		10,744
	Leases and other loans	158,933		89,307		30,908		25,186		19,150		23,032		—		—		346,516
Leases and other loans
	Current period gross charge-offs	(471)		(521)		(246)		(128)		(82)		(656)		—		(1,180)		(3,284)
Construction - other
	Performing	81,142		121,659		14,666		730		—		—		—		—		218,197
	Nonperforming	—		—		—		—		—		—		—		—		—
	Total construction - other	81,142		121,659		14,666		730		—		—		—		—		218,197
Construction - other
	Current period gross charge-offs	—		—		—		—		—		—		—		—		—
Total
	Performing	$	1,028,589	$	1,605,115	$	1,839,777	$	1,093,117	$	330,095	$	866,093	$	798,617	$	9,521	$	7,570,924
	Nonperforming	20		1,228		4,517		5,439		5,895		43,469		1,463		853		62,884
	Total	$	1,028,609	$	1,606,343	$	1,844,294	$	1,098,556	$	335,990	$	909,562	$	800,080	$	10,374	$	7,633,808


		December 31, 2022
		Term Loans Amortized Cost Basis by Origination Year												Revolving Loans		Revolving Loans converted to Term Loans
		(dollars in thousands)												Amortized		Amortized
		2022		2021		2020		2019		2018		Prior		Cost Basis		Cost Basis		Total
Real estate - residential mortgage
	Performing	$	933,903	$	1,708,703	$	1,054,126	$	286,167	$	87,455	$	620,416	$	—	$	—	$	4,690,770
	Nonperforming	1,199		5,104		6,597		6,466		4,587		22,556		—		—		46,509
	Total real estate - residential mortgage	935,102		1,713,807		1,060,723		292,633		92,042		642,972		—		—		4,737,279
Real estate - residential mortgage
	Current period gross charge-offs	—		—		—		—		—		—		—		(66)		(66)
Consumer and Real estate - home equity
	Performing	416,631		109,724		80,422		52,384		45,642		211,127		842,226		34,061		1,792,217
	Nonperforming	292		298		174		36		98		6,512		1,722		668		9,800
	Total consumer and real estate - home equity	416,923		110,022		80,596		52,420		45,740		217,639		843,948		34,729		1,802,017
Consumer and Real estate - home equity
	Current period gross charge-offs	—		(587)		(70)		(108)		(16)		(442)		(178)		(3,011)		(4,412)
Leases and other loans
	Performing	146,198		39,427		40,024		29,309		15,019		15,670		—		—		285,647
	Nonperforming	—		—		—		—		—		13,307		—		—		13,307
	Leases and other loans	146,198		39,427		40,024		29,309		15,019		28,977		—		—		298,954
Leases and other loans
	Current period gross charge-offs	(506)		(167)		(140)		(80)		(47)		(1,191)		—		—		(2,131)
Construction - other
	Performing	164,924		73,492		10,892		—		1,077		—		—		—		250,385
	Nonperforming	—		—		—		—		—		—		—		—		—
	Total construction - other	164,924		73,492		10,892		—		1,077		—		—		—		250,385
Construction - other
	Current period gross charge-offs	—		—		—		—		—		—		—		—		—
Total
	Performing	$	1,661,656	$	1,931,346	$	1,185,464	$	367,860	$	149,193	$	847,213	$	842,226	$	34,061	$	7,019,019
	Nonperforming	1,491		5,402		6,771		6,502		4,685		42,375		1,722		668		69,616
	Total	$	1,663,147	$	1,936,748	$	1,192,235	$	374,362	$	153,878	$	889,588	$	843,948	$	34,729	$	7,088,635

The following table presents non-performing assets:


	September 30, 2023		December 31, 2022
	(dollars in thousands)
Non-accrual loans	$	113,022	$	144,443
Loans 90 days or more past due and still accruing(1)	27,962		27,463
Total non-performing loans	140,984		171,906
OREO(2)	2,549		5,790
Total non-performing assets	$	143,533	$	177,696

(1) Excludes PPP loans which are fully guaranteed by the federal government of $1.2 million and $7.7 million as of September 30, 2023 and December 31,

2022, respectively.

(2) Excludes $10.1 million and $6.0 million of residential mortgage properties for which formal foreclosure proceedings were in process as of September 30,

2023 and December 31, 2022, respectively.

The following tables present the aging of the amortized cost basis of loans, by class segment:


	30-59		60-89		≥ 90 Days
	Days Past		Days Past		Past Due		Non-
	Due		Due		and Accruing		Accrual		Current		Total
	(dollars in thousands)
September 30, 2023
Real estate – commercial mortgage	$	8,976	$	1,819	$	1,309	$	42,749	$	8,051,447	$	8,106,300
Commercial and industrial(1)(2)	4,097		2,921		1,170		32,195		4,536,951		4,577,334
Real estate – residential mortgage	44,563		10,146		19,406		21,154		5,184,412		5,279,681
Real estate – home equity	6,288		3,544		4,909		5,532		1,025,165		1,045,438
Real estate – construction	2,681		330		—		677		1,074,575		1,078,263
Consumer	8,511		1,458		1,124		15		732,868		743,976
Leases and other loans(2)	357		148		44		10,700		335,267		346,516
Total	$	75,473	$	20,366	$	27,962	$	113,022	$	20,940,685	$	21,177,508

(1) Excludes delinquent PPP loans 30-59 days past due, 60-89 days past due and 90 days or more past due of $0.1 million, $0.1 million and $1.2 million,

respectively, which are fully guaranteed by the federal government and are classified as current.

(2) Includes unearned income.


	30-59 Days Past Due		60-89 Days Past Due		≥ 90 Days Past Due and Accruing		Non- accrual		Current		Total
	(dollars in thousands)
December 31, 2022
Real estate – commercial mortgage	$	10,753	$	4,644	$	2,473	$	70,161	$	7,605,804	$	7,693,835
Commercial and industrial(1)(2)	6,067		2,289		1,172		27,116		4,436,360		4,473,004
Real estate – residential mortgage	57,061		8,209		20,215		26,294		4,625,500		4,737,279
Real estate – home equity	5,666		2,444		2,704		6,105		1,085,919		1,102,838
Real estate – construction	1,762		1,758		—		1,368		1,265,037		1,269,925
Consumer	6,692		1,339		899		92		690,157		699,179
Leases and other loans(2)	348		122		—		13,307		289,710		303,487
Total	$	88,349	$	20,805	$	27,463	$	144,443	$	19,998,487	$	20,279,547

(1) Excludes delinquent PPP loans 30-59 days past due, 60-89 days past due and 90 days or more past due of $0.1 million, $0.7 million and $7.7 million,

respectively, which are fully guaranteed by the federal government and are classified as current.

(2) Includes unearned income.

Collateral-Dependent Loans

A loan or a lease is considered to be collateral-dependent when the debtor is experiencing financial difficulty and repayment is expected to be provided substantially through the sale or operation of the collateral. For all classes of loans and leases deemed collateral-dependent, the Corporation elected the practical expedient to estimate expected credit losses based on the collateral’s fair value less cost to sell. In most cases, the Corporation records a partial charge-off to reduce the collateral-dependent loan's or lease's carrying value to the collateral’s fair value less cost to sell. Substantially all of the collateral supporting collateral-dependent loans or leases consists of various types of real estate, including residential properties, commercial properties, such as retail centers, office buildings, and lodging, agriculture land, and vacant land.

Loan Modifications

On January 1, 2023, the Corporation adopted ASU 2022-02. Loan modifications reported below do not include modifications with insignificant payment delays. ASU 2022-02 lists the following factors when considering if the loan modification has insignificant payment delays: (1) the amount of the restructured payments subject to the delay is insignificant relative to the unpaid principal or collateral value of the debt and will result in an insignificant shortfall in the contractual amount due, and (2) the delay in timing of the restructured payment period is insignificant relative to the frequency of payments due under the debt, the debt’s original contractual maturity or the debt’s original expected duration.

The ACL incorporates an estimate of lifetime expected credit losses and is recorded upon asset origination or acquisition. The starting point for the estimate of the ACL is historical loss information, which includes losses from modifications of receivables to borrowers experiencing financial difficulty. The Corporation uses a probability of default/loss given default model to determine the ACL. An assessment of whether a borrower is experiencing financial difficulty is made on the date of a modification.

The Corporation modifies loans by providing a concession when deemed appropriate. Depending on the circumstances, a term extension, interest rate reduction or principal forgiveness may be granted. In certain instances a combination of concessions may be provided to a customer.

When principal forgiveness is provided, the amortized cost basis of the forgiven portion of the asset is written off against the ACL. The amount of the principal forgiveness is deemed to be uncollectible; therefore, that portion of the loan is written off, resulting in a reduction of the amortized cost basis and a corresponding adjustment to the ACL.

The following table presents the amortized cost basis during the three months and nine months ended September 30, 2023 of the loans modified to borrowers experiencing financial difficulty, disaggregated by class of financing receivable and type of concession granted:


	Term Extension
	Three months ended September 30, 2023				Nine months ended September 30, 2023
	Amortization Cost Basis		% of Class of Financing Receivable			Amortization Cost Basis		% of Class of Financing Receivable
	(dollars in thousands)
Real estate - commercial mortgage	$	1,120	0.01	%		$	2,556	0.03	%
Commercial and industrial	7		—			66		—
Real estate - residential mortgage	1,933		0.04			5,343		0.10




Total	$	3,060				$	7,965

The following table presents the financial effect of the modifications made to borrowers experiencing financial difficulty for the three months and nine months ended September 30, 2023:


			Term Extension
			Financial Effect
Three months ended September 30, 2023
Real estate - commercial mortgage			Added a weighted-average 0.50 years to the life of loans, which reduced monthly payment amounts for the borrowers.
Commercial and industrial			Added a weighted-average 0.92 years to the life of loans, which reduced monthly payment amounts for the borrowers.
Real estate - residential mortgage			Added a weighted-average 4.49 years to the life of loans, which reduced monthly payment amounts for the borrowers.





Nine months ended September 30, 2023
Real estate - commercial mortgage			Added a weighted-average 2.43 years to the life of loans, which reduced monthly payment amounts for the borrowers.
Commercial and industrial			Added a weighted-average 3.76 years to the life of loans, which reduced monthly payment amounts for the borrowers.
Real estate - residential mortgage			Added a weighted-average 4.58 years to the life of loans, which reduced monthly payment amounts for the borrowers.

During the nine months ended September 30, 2023, there were no loans modified due to financial difficulty where there was an interest rate reduction or principal balance forgiveness.

During the nine months ended September 30, 2023, there were no loans modified due to financial difficulty that defaulted in the nine months subsequent to modification.

The following table presents the performance of loans that have been modified in the last nine months as of September 30, 2023.


			30-89		90+		Total
			Days Past		Past Due		Past
	Current		Due		and Accruing		Due
	(dollars in thousands)
Real estate - commercial mortgage	$	2,556	$	—	$	—	$	—
Commercial and industrial	66		—		—		—
Real estate - residential mortgage	5,343		—		—		—




Total	$	7,965	$	—	$	—	$	—

There were no commitments to lend additional funds to borrowers with loan modifications as a result of financial difficulty as of September 30, 2023.