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Loans and Allowance for Credit Losses

12 Months Ended

Dec. 31, 2023

NOTE 5 - LOANS AND ALLOWANCE FOR CREDIT LOSSES

Loans and leases, net of unearned income

Loans and leases, net of unearned income are summarized as follows as of December 31:


	2023		2022
	(dollars in thousands)
Real estate - commercial mortgage	$	8,127,728	$	7,693,835
Commercial and industrial(1)	4,545,552		4,473,004
Real-estate - residential mortgage	5,325,923		4,737,279
Real-estate - home equity	1,047,184		1,102,838
Real-estate - construction	1,239,075		1,269,925
Consumer	729,318		699,179
Leases and other loans(2)	336,314		303,487
Net loans	$	21,351,094	$	20,279,547

(1) Includes unearned income of $41.0 thousand and $4.5 million at December 31, 2023 and December 31, 2022, respectively.

(2) Includes unearned income of $38.0 million and $24.8 million at December 31, 2023 and December 31, 2022, respectively.

The Corporation has extended credit to officers and directors of the Corporation and to their associates. These related-party loans are made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with unrelated persons and do not involve more than the normal risk of collection or present other unfavorable features. The aggregate dollar amount of these loans, including unadvanced commitments, was $162.5 million and $126.3 million as of December 31, 2023 and 2022, respectively. During 2023, additions totaled $45.4 million and repayments totaled $9.2 million for related-party loans.

Allowance for Credit Losses

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



	2023		2022
	(dollars in thousands)
ACL - loans	$	293,404	$	269,366
Reserve for OBS credit exposures(1)	$	17,254	$	16,328

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

The following table presents the activity in the ACL - loans balances for the years ended December 31:


	2023		2022		2021
	(dollars in thousands)
Balance at beginning of period	$	269,366	$	249,001	$	277,567
CECL Day 1 Provision expense	—		7,954		—
Initial purchased credit deteriorated loans	—		1,135		—
Loans charged off	(39,201)		(21,472)		(30,952)
Recoveries of loans previously charged off	10,129		14,092		17,146
Net loans (charged off) recovered	(29,072)		(7,380)		(13,806)
Provision for credit losses	53,110		18,656		(14,760)
Balance at end of period	$	293,404	$	269,366	$	249,001

The following table presents the activity in the ACL - loans losses by portfolio segment for the years ended December 31, 2023 and 2022, by portfolio segment:


	Real Estate - Commercial Mortgage		Commercial and Industrial		Consumer and Real Estate - Home Equity		Real Estate - Residential Mortgage		Real Estate - Construction		Leases and other loans		Total
	(dollars in thousands)
Balance at December 31, 2021	$	87,970	$	67,056	$	19,749	$	54,236	$	12,941	$	7,049	$	249,001
CECL Day 1 Provision expense	4,107		—		131		3,716		—		—		7,954
Initial purchased credit deteriorated loans	1,051		—		7		77		—		—		1,135
Loans charged off	(12,473)		(2,390)		(4,412)		(66)		—		(2,131)		(21,472)
Recoveries of loans previously charged off	3,860		5,893		2,581		425		574		759		14,092
Net loans (charged off) recovered	(8,613)		3,503		(1,831)		359		574		(1,372)		(7,380)
Provision for loan losses(1)	(15,059)		(443)		8,373		24,862		(2,772)		3,695		18,656
Balance at December 31, 2022	69,456		70,116		26,429		83,250		10,743		9,372		269,366


Loans charged off	(17,999)		(9,246)		(7,514)		(62)		—		(4,380)		(39,201)
Recoveries of loans previously charged off	1,076		3,473		3,198		421		858		1,103		10,129
Net loans (charged off) recovered	(16,923)		(5,773)		(4,316)		359		858		(3,277)		(29,072)
Provision for loan losses(1)	60,032		9,923		(4,509)		(10,323)		694		(2,707)		53,110
Balance at December 31, 2023	$	112,565	$	74,266	$	17,604	$	73,286	$	12,295	$	3,388	$	293,404

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

The ACL may include qualitative adjustments intended to capture the impact of uncertainties not reflected in the quantitative models. In determining qualitative adjustments, management considers changes in national, regional, and local economic and business conditions and their impact on the lending environment, including underwriting standards and other factors affecting credit losses over the remaining life of each loan.

The increase in ACL - loans in 2023 was largely due to loan growth, changes to the macroeconomic outlook, net charge-offs and risk migration. The increase in ACL - loans in 2022 was primarily due to loan growth and changes to the macroeconomic outlook.

In 2023, the Corporation made updates to its PD and LGD models and methodology to enhance base quantitative ACL models. The Corporation updated the PD models to utilize a linear regression methodology and implemented a discreet 24 month reasonable and supportable forecast period with a 12 month straight-line reversion methodology. The ACL model enhancements did not have a material effect on the ACL as the model updates reduced reliance on supplementary models and qualitative factors and increased reliance on the output of the Corporation’s base quantitative models.

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 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, agricultural land, and vacant land.

All loans individually evaluated for impairment are measured for losses on a quarterly basis. As of December 31, 2023 and 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 December 31, 2023 and 2022, approximately 78% 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 certified third-party appraisers that had been updated in the preceding 12 months.

Non-accrual Loans

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


	2023						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	$	23,338	$	21,467	$	44,805	$	39,722	$	30,439	$	70,161
Commercial and industrial	12,410		27,542		39,952		14,804		12,312		27,116
Real estate - residential mortgage	18,806		2,018		20,824		25,315		979		26,294
Real estate - home equity	4,649		104		4,753		5,975		130		6,105
Real estate - construction	341		1,000		1,341		866		502		1,368
Consumer	52		—		52		92		—		92
Leases and other loans	9,255		638		9,893		4,052		9,255		13,307
Total	$	68,851	$	52,769	$	121,620	$	90,826	$	53,617	$	144,443

As of December 31, 2023 and December 31, 2022, there were $52.8 million and $53.6 million, respectively, of non-accrual loans that did not have a specific valuation allowance within the ACL. 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. The amount of interest income on non-accrual loans that was recognized was approximately $1.5 million in 2023 and $2.2 million in 2022.

Asset Quality

Maintaining an appropriate ACL is dependent on various factors, including the ability to identify potential problem loans in a timely manner. For 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:


	December 31, 2023
	(dollars in thousands)
	Term Loans Amortized Cost Basis by Origination Year												Revolving Loans		Revolving Loans converted to Term Loans
													Amortized		Amortized
	2023		2022		2021		2020		2019		Prior		Cost Basis		Cost Basis		Total
Real estate - commercial mortgage
Pass	$	783,673	$	993,017	$	1,203,852	$	984,958	$	721,857	$	2,822,155	$	59,253	$	31,636	$	7,600,401
Special Mention	2,767		43,904		105,185		7,862		35,289		105,786		1,760		—		302,553
Substandard or Lower	366		20,958		31,304		49,142		26,579		95,621		804		—		224,774
Total real estate - commercial mortgage	786,806		1,057,879		1,340,341		1,041,962		783,725		3,023,562		61,817		31,636		8,127,728
Real estate - commercial mortgage
Current period gross charge-offs	—		—		—		—		—		(424)		—		(17,575)		(17,999)
Commercial and industrial
Pass	626,386		590,132		330,576		341,218		272,126		598,838		1,443,203		10,736		4,213,215
Special Mention	7,936		9,548		16,499		3,577		6,817		18,487		72,775		198		135,837
Substandard or Lower	247		25,184		4,611		3,843		18,988		31,663		105,230		6,734		196,500
Total commercial and industrial	634,569		624,864		351,686		348,638		297,931		648,988		1,621,208		17,668		4,545,552
Commercial and industrial
Current period gross charge-offs	—		(299)		—		—		—		(249)		(682)		(8,016)		(9,246)
Real estate - construction(1)
Pass	322,922		258,080		261,583		37,426		9,510		34,097		13,677		—		937,295
Special Mention	—		12,622		25,898		—		—		—		—		—		38,520
Substandard or Lower	—		521		2,229		—		340		21,284		168		2,229		26,771
Total real estate - construction	322,922		271,223		289,710		37,426		9,850		55,381		13,845		2,229		1,002,586
Real estate - construction
Current period gross charge-offs	—		—		—		—		—		—		—		—		—
Total
Pass	$	1,732,981	$	1,841,229	$	1,796,011	$	1,363,602	$	1,003,493	$	3,455,090	$	1,516,133	$	42,372	$	12,750,911
Special Mention	10,703		66,074		147,582		11,439		42,106		124,273		74,535		198		476,910
Substandard or Lower	613		46,663		38,144		52,985		45,907		148,568		106,202		8,963		448,045
Total	$	1,744,297	$	1,953,966	$	1,981,737	$	1,428,026	$	1,091,506	$	3,727,931	$	1,696,870	$	51,533	$	13,675,866

(1) Excludes real estate - construction - other.

Total loans risk- rated substandard or lower increased by $157.9 million, or 54.4%, compared to December 31, 2022, primarily due to borrower performance in both commercial and industrial loans and commercial real estate loans.

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
	(dollars in thousands)
	Term Loans Amortized Cost Basis by Origination Year												Revolving Loans		Revolving Loans converted to Term Loans
													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
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
Current period gross charge-offs	—		—		(36)		—		(21)		(365)		(1,192)		(776)		(2,390)
Real estate - construction(1)
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(1)
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) 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 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:


	December 31, 2023
	(dollars in thousands)
	Term Loans Amortized Cost Basis by Origination Year												Revolving Loans		Revolving Loans converted to Term Loans
													Amortized		Amortized
	2023		2022		2021		2020		2019		Prior		Cost Basis		Cost Basis		Total
Real estate - residential mortgage
Performing	$	623,247	$	1,126,656	$	1,682,759	$	984,050	$	260,049	$	607,133	$	—	$	—	$	5,283,894
Nonperforming	—		1,720		4,888		4,701		6,233		24,487		—		—		42,029
Total real estate - residential mortgage	623,247		1,128,376		1,687,647		988,751		266,282		631,620		—		—		5,325,923
Real estate - residential mortgage
Current period gross charge-offs	—		—		—		—		—		—		—		(62)		(62)
Consumer and real estate - home equity
Performing	272,571		276,373		85,985		62,426		37,667		204,913		805,645		20,044		1,765,624
Nonperforming	295		455		866		282		354		5,526		1,439		1,661		10,878
Total consumer and real estate - home equity	272,866		276,828		86,851		62,708		38,021		210,439		807,084		21,705		1,776,502
Consumer and real estate - home equity
Current period gross charge-offs	(119)		—		—		—		—		(525)		(283)		(6,587)		(7,514)
Leases and other loans
Performing	166,490		83,641		27,755		22,304		16,246		9,867		—		—		326,303
Nonperforming	—		118		—		—		—		9,893		—		—		10,011
Total leases and other loans	166,490		83,759		27,755		22,304		16,246		19,760		—		—		336,314
Leases and other loans
Current period gross charge-offs	(471)		(521)		(246)		(128)		(82)		(656)		(765)		(1,511)		(4,380)
Construction - other
Performing	127,382		93,319		13,698		555		—		—		—		—		234,954
Nonperforming	—		1,535		—		—		—		—		—		—		1,535
Total construction - other	127,382		94,854		13,698		555		—		—		—		—		236,489
Construction - other
Current period gross charge-offs	—		—		—		—		—		—		—		—		—
Total
Performing	$	1,189,690	$	1,579,989	$	1,810,197	$	1,069,335	$	313,962	$	821,913	$	805,645	$	20,044	$	7,610,775
Nonperforming	295		3,828		5,754		4,983		6,587		39,906		1,439		1,661		64,453
Total	$	1,189,985	$	1,583,817	$	1,815,951	$	1,074,318	$	320,549	$	861,819	$	807,084	$	21,705	$	7,675,228


	December 31, 2022
	(dollars in thousands)
	Term Loans Amortized Cost Basis by Origination Year												Revolving Loans		Revolving Loans converted to Term Loans
													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 loans
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
Total leases and other	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:


	December 31, 2023		December 31, 2022
	(dollars in thousands)
Non-accrual loans	$	121,620	$	144,443
Loans 90 days or more past due and still accruing	31,721		27,463
Total non-performing loans	153,341		171,906
OREO(1)	896		5,790
Total non-performing assets	$	154,237	$	177,696

(1) Excludes $10.9 million and $6.0 million of residential mortgage properties for which formal foreclosure proceeding were in process as of December 31, 2023 and 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)
December 31, 2023
Real estate - commercial mortgage	$	4,408	$	1,341	$	1,722	$	44,805	$	8,075,452	$	8,127,728
Commercial and industrial(1)	5,620		1,656		1,068		39,952		4,497,256		4,545,552
Real estate - residential mortgage	49,145		10,838		21,205		20,824		5,223,911		5,325,923
Real estate - home equity	8,142		2,075		5,326		4,753		1,026,888		1,047,184
Real estate - construction	4,185		451		1,535		1,341		1,231,563		1,239,075
Consumer	8,361		1,767		747		52		718,391		729,318
Leases and other loans(1)	146		722		118		9,893		325,435		336,314
Total	$	80,007	$	18,850	$	31,721	$	121,620	$	21,098,896	$	21,351,094

(1) 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)	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(1)	348		122		—		13,307		289,710		303,487
Total	$	88,349	$	20,805	$	27,463	$	144,443	$	19,998,487	$	20,279,547

(1) Includes unearned income.

Loan Modifications to Borrowers Experiencing Financial Difficulty

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 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 amount of principal forgiven is deemed to be uncollectible and the amortized cost basis of the loan is reduced by the amount of the forgiven portion, with a corresponding reduction to the ACL.

The following table presents the amortized cost basis for the year ended December 31, 2023 of the loans modified to borrowers experiencing financial difficulty, disaggregated by class of financing receivable and type of concession granted:


	Term Extension
	Amortized Cost Basis		% of Class of Financing Receivable
	(dollars in thousands)
Real estate - commercial mortgage	$	2,944	0.04	%
Commercial and industrial	11,970		0.26
Real estate - residential mortgage	8,182		0.15




Total	$	23,096


	Interest Rate Reduction and Term Extension
	Amortized Cost Basis		% of Class of Financing Receivable
	(dollars in thousands)


Real estate - residential mortgage	$	910	0.02	%




Total	$	910

The following table presents the financial effect of the modifications made to borrowers experiencing financial difficulty for the year ended December 31, 2023.


			Term Extension
			Financial Effect
Real estate - commercial mortgage			Added a weighted-average 1.22 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 8.10 years to the life of loans, which reduced monthly payment amounts for the borrowers.

Interest Rate Reduction

Financial Effect

Real estate - residential mortgage

Reduced weighted-average interest rate from 3.76% to 2.30%

During the year ended December 31, 2023, there were no loans modified due to financial difficulty where there was a principal balance forgiveness.

During the year ended December 31, 2023, there were no loans modified due to financial difficulty during 2023 that defaulted subsequent to modification.

The following table presents the performance of loans that have been modified in the year ended December 31, 2023.


			30-89		90+		Total
			Days Past		Past Due		Past
	Current		Due		and Accruing		Due
	(dollars in thousands)
Real estate - commercial mortgage	$	2,944	$	—	$	—	$	—
Commercial and industrial	11,970		—		—		—
Real estate - residential mortgage	9,092		—		—		—




Total	$	24,006	$	—	$	—	$	—

There were no commitments to lend additional funds to borrowers with loan modifications as a result of financial difficulty as of December 31, 2023.