The following table presents the aging of the amortized cost basis of the Company’s past due loans by segment as of March 31, 2022:

The following table presents the aging of the amortized cost basis of the Company’s past due loans by segment as of December 31, 2021:

The delinquency status for loans on payment deferment due to COVID-19 financial hardship were reported at March 31, 2022 based on their delinquency status at the execution date of the payment deferment, unless subsequent to the execution date of the payment deferment, the borrower made all required past due payments to bring the loan to current status. Certain loans under extended pandemic-related forbearance were reclassified to nonaccrual status.

No interest income on nonaccrual loans was recognized during the three months ended March 31, 2022. An immaterial amount of accrued interest was written off on nonaccrual loans by reversing interest income.

The Company uses several credit quality indicators to assess credit risk in an ongoing manner. The Company’s primary credit quality indicator for its business lending portfolio is an internal credit risk rating system that categorizes loans as “pass”, “special mention”, “classified”, or “doubtful”. Credit risk ratings are applied individually to those classes of loans that have significant or unique credit characteristics that benefit from a case-by-case evaluation. Loans that were granted COVID-19 related financial hardship payment deferrals were reviewed on a case-by-case basis for downgrades into lower credit risk ratings. Loans on payment deferral will continue to be monitored for indications of deterioration that could result in future downgrades. In general, the following are the definitions of the Company’s credit quality indicators:

The following tables show the amount of business lending loans by credit quality category at March 31, 2022 and December 31, 2021:

All other loans are underwritten and structured using standardized criteria and characteristics, primarily payment performance, and are monitored collectively on a monthly basis. These are typically loans to individuals in the consumer categories and are delineated as either performing or nonperforming. Performing loans include loans classified as current as well as those classified as 30 - 89 days past due. Nonperforming loans include 90+ days past due and still accruing and nonaccrual loans.

The following table details the balances in all other loan categories at March 31, 2022:

(1)

FICO AB refers to higher tiered loans with FICO scores greater than or equal to 720 at origination.

(2)

FICO CDE refers to loans with FICO scores less than 720 at origination and potentially higher risk.

The following table details the balances in all other loan categories at December 31, 2021:


	Term Loans Amortized Cost Basis by Origination Year
													Revolving
													Loans
(000’s omitted)													Amortized
December 31, 2021	2021		2020		2019		2018		2017		Prior		Cost Basis		Total
Consumer mortgage:
FICO AB⁽¹⁾
Performing	$	514,680	$	229,039	$	183,469	$	113,618	$	116,417	$	566,129	$	0	$	1,723,352
Nonperforming		0		266		0		131		435		3,236		0		4,068
Total FICO AB		514,680		229,305		183,469		113,749		116,852		569,365		0		1,727,420
FICO CDE⁽²⁾
Performing		168,870		122,546		85,253		57,973		54,396		300,341		25,028		814,407
Nonperforming		0		522		972		1,465		939		10,389		0		14,287
Total FICO CDE		168,870		123,068		86,225		59,438		55,335		310,730		25,028		828,694
Total consumer mortgage	$	683,550	$	352,373	$	269,694	$	173,187	$	172,187	$	880,095	$	25,028	$	2,556,114

Consumer indirect:
Performing	$	590,857	$	204,529	$	182,458	$	107,683	$	39,385	$	64,750	$	0	$	1,189,662
Nonperforming		0		34		0		24		17		12		0		87
Total consumer indirect	$	590,857	$	204,563	$	182,458	$	107,707	$	39,402	$	64,762	$	0	$	1,189,749

Consumer direct:
Performing	$	72,584	$	28,905	$	24,770	$	12,340	$	4,396	$	4,575	$	6,218	$	153,788
Nonperforming		0		4		18		1		0		0		0		23
Total consumer direct	$	72,584	$	28,909	$	24,788	$	12,341	$	4,396	$	4,575	$	6,218	$	153,811

Home equity:
Performing	$	76,041	$	43,106	$	35,990	$	18,824	$	15,134	$	35,740	$	170,422	$	395,257
Nonperforming		0		64		47		102		131		679		1,781		2,804
Total home equity	$	76,041	$	43,170	$	36,037	$	18,926	$	15,265	$	36,419	$	172,203	$	398,061

(1)

FICO AB refers to higher tiered loans with FICO scores greater than or equal to 720 at origination.

(2)

FICO CDE refers to loans with FICO scores less than 720 at origination and potentially higher risk.

All loan classes are collectively assessed for impairment except business lending. A summary of individually assessed business loans as of March 31, 2022 and December 31, 2021 follows:


	March 31,		December 31,
(000’s omitted)	2022		2021
Loans with allowance allocation	$	5,374	$	7,102
Loans without allowance allocation		6,812		7,417
Carrying balance		12,186		14,519
Contractual balance		14,613		16,963
Specifically allocated allowance		504		566

The average carrying balance of individually assessed loans was $12.3 million and $34.9 million for the three months ended March 31, 2022 and 2021, respectively. No interest income was recognized on individually assessed loans for the three months ended March 31, 2022 and 2021.

In the course of working with borrowers, the Company may choose to restructure the contractual terms of certain loans. In this scenario, the Company attempts to work-out an alternative payment schedule with the borrower in order to optimize collectability of the loan. Any loans that are modified are reviewed by the Company to identify if a troubled debt restructuring (“TDR”) has occurred, which is when, for economic or legal reasons related to a borrower’s financial difficulties, the Company grants a concession to the borrower that it would not otherwise consider. Terms may be modified to fit the ability of the borrower to repay in line with its current financial standing and the restructuring of the loan may include the transfer of assets from the borrower to satisfy the debt, a modification of loan terms, or a combination of the two.

In accordance with the clarified guidance issued by the Office of the Comptroller of the Currency (“OCC”), loans that have been discharged in Chapter 7 bankruptcy but not reaffirmed by the borrower, are classified as TDRs, irrespective of payment history or delinquency status, even if the repayment terms for the loan have not been otherwise modified. The Company’s lien position against the underlying collateral remains unchanged. Pursuant to that guidance, the Company records a charge-off equal to any portion of the carrying value that exceeds the net realizable value of the collateral. The amount of loss incurred in the three months ended March 31, 2022 and 2021 was immaterial.

TDRs less than $0.5 million are collectively included in the allowance for credit loss estimate. Commercial loans greater than $0.5 million are individually assessed, and if necessary, a specific allocation of the allowance for credit losses is provided. With regard to determination of the amount of the allowance for credit losses, TDR loans are considered to be impaired. As a result, the determination of the amount of allowance for credit losses related to impaired loans for each portfolio segment within TDRs is the same as detailed previously.

Information regarding TDRs as of March 31, 2022 and December 31, 2021 is as follows:


	March 31, 2022									December 31, 2021
(000’s omitted)	Nonaccrual			Accruing			Total			Nonaccrual			Accruing			Total
	#	Amount		#	Amount		#	Amount		#	Amount		#	Amount		#	Amount
Business lending	10	$	1,002	4	$	807	14	$	1,809	10	$	1,011	4	$	811	14	$	1,822
Consumer mortgage	59		2,654	48		2,468	107		5,122	61		2,694	47		2,420	108		5,114
Consumer indirect	0		0	69		746	69		746	0		0	72		829	72		829
Consumer direct	0		0	16		5	16		5	0		0	16		7	16		7
Home equity	10		227	12		225	22		452	10		235	12		232	22		467
Total	79	$	3,883	149	$	4,251	228	$	8,134	81	$	3,940	151	$	4,299	232	$	8,239

The following table presents information related to loans modified in a TDR during the three months ended March 31, 2022 and 2021. Of the loans noted in the table below, all consumer mortgage loans for the three months ended March 31, 2022 and 2021 were modified due to a Chapter 7 bankruptcy as described previously. The financial effects of these restructurings were immaterial.


	Three Months Ended			Three Months Ended
	March 31, 2022			March 31, 2021
	Number of	Outstanding		Number of	Outstanding
(000’s omitted)	loans modified	Balance		loans modified	Balance
Business lending	0	$	0	0	$	0
Consumer mortgage	4		195	3		110
Consumer indirect	4		35	6		66
Consumer direct	0		0	1		7
Home equity	0		0	0		0
Total	8	$	230	10	$	183

Allowance for Credit Losses

The following presents by segment the activity in the allowance for credit losses during the three months ended March 31, 2022 and 2021:


	Three Months Ended March 31, 2022
	Beginning		Charge-						Ending
(000’s omitted)	balance		offs		Recoveries		Provision		balance
Business lending	$	21,021	$	(116)	$	70	$	(967)	$	20,008
Consumer mortgage		10,017		(40)		9		338		10,324
Consumer indirect		11,737		(1,688)		1,000		1,817		12,866
Consumer direct		2,306		(301)		176		544		2,725
Home equity		1,814		(11)		93		(428)		1,468
Unallocated		1,000		0		0		0		1,000
Purchased credit deteriorated		1,974		0		269		(487)		1,756
Allowance for credit losses – loans		49,869		(2,156)		1,617		817		50,147
Liabilities for off-balance-sheet credit exposures		803		0		0		89		892
Total allowance for credit losses	$	50,672	$	(2,156)	$	1,617	$	906	$	51,039


	Three Months Ended March 31, 2021
	Beginning		Charge-						Ending
(000’s omitted)	balance		offs		Recoveries		Provision		balance
Business lending	$	28,190	$	(51)	$	67	$	(1,164)	$	27,042
Consumer mortgage		10,672		(100)		10		(896)		9,686
Consumer indirect		13,696		(1,399)		1,246		(2,423)		11,120
Consumer direct		3,207		(318)		231		(438)		2,682
Home equity		2,222		(98)		4		(585)		1,543
Unallocated		1,000		0		0		0		1,000
Purchased credit deteriorated		1,882		0		27		87		1,996
Allowance for credit losses – loans		60,869		(1,966)		1,585		(5,419)		55,069
Liabilities for off-balance-sheet credit exposures		1,489		0		0		(300)		1,189
Total allowance for credit losses	$	62,358	$	(1,966)	$	1,585	$	(5,719)	$	56,258

A stable economic forecast as well as improvements in non-economic qualitative adjustments resulting from lower levels of delinquencies, deferrals, and charge-offs, have resulted in an allowance for credit losses to total loans ratio of 0.68% at March 31, 2022, seven basis points lower than the level at March 31, 2021 and consistent with the level at December 31, 2021.

Accrued interest receivable on loans, included in accrued interest and fees receivable on the consolidated statements of condition, totaled $18.1 million at March 31, 2022, and is excluded from the estimate of credit losses and amortized cost basis of loans.

Under ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326), also referred to as “CECL”, the Company utilizes the historical loss rate on its loan portfolio as the initial basis for the estimate of credit losses using the cumulative loss, vintage loss and line loss methods, which is derived from the Company’s historical loss experience from January 1, 2012 to December 31, 2020. Adjustments to historical loss experience were made for differences in current loan-specific risk characteristics and to address current period delinquencies, charge-off rates, risk ratings, lack of loan level data through an entire economic cycle, changes in loan sizes and underwriting standards, as well as the addition of acquired loans which were not underwritten by the Company. The Company considered historical losses immediately prior, through and following the Great Recession of 2008 compared to the historical period used for modeling to adjust the historical information to account for longer-term expectations for loan credit performance. Under CECL, the Company is required to consider future economic conditions to determine current expected credit losses. Management selected an eight-quarter reasonable and supportable forecast period using a two-quarter lag adjustment for economic factors that are not dependent on collateral values, and no lag for factors that do utilize collateral values, with a four-quarter reversion to the historical mean, to use as part of the economic forecast. Management determined that these qualitative adjustments were needed to adjust historical information for expected losses and to reflect changes as a result of current conditions.

For qualitative macroeconomic adjustments, the Company uses third party forecasted economic data scenarios utilizing a base scenario and two alternative scenarios that were weighted, with forecasts available as of March 31, 2022. These forecasts were factored into the qualitative portion of the calculation of the estimated credit losses and included the continued impact of COVID-19, such as supply chain pressures and their impact on collateral values and economic growth. The scenarios utilized forecast a generally positive outlook on the economy, with low unemployment figures and high collateral values for housing, commercial real estate, and vehicles. In addition to the economic forecast, the Company also considered additional qualitative adjustments as a result of COVID-19 and the impact on all industries, loan deferrals, delinquencies and downgrades.

Management developed expected loss estimates considering factors for segments as outlined below:

●

Business lending – non real estate: The Company selected projected unemployment and GDP as indicators of forecasted losses related to business lending, and utilize both factors in an even weight for the calculation. The Company also considered delinquencies, the level of loan deferrals, risk rating changes, recent charge-off history and acquired loans as part of the review of estimated losses.

●

Business lending – real estate: The Company selected projected unemployment and commercial real estate values as indicators of forecasted losses related to commercial real estate loans, and utilize both factors in an even weight for the calculation. The Company also considered the factors noted in business lending – non real estate.

●

Consumer mortgages and home equity: The Company selected projected unemployment and residential real estate values as indicators of forecasted losses related to mortgage lending, and utilize both factors in an even weight for the calculation. In addition, current delinquencies, the level of loan deferrals, charge-offs and acquired loans were considered.

●

Consumer indirect: The Company selected projected unemployment and vehicle valuation indices as indicators of forecasted losses related to indirect lending, and utilize both factors in an even weight for the calculation. In addition, current delinquencies, the level of loan deferrals, charge-offs and acquired loans were considered.

●

Consumer direct: The Company selected projected unemployment and inflation-adjusted household income as indicators of forecasted losses related to consumer direct lending, and utilize both factors in an even weight for the calculation. In addition, current delinquencies, the level of loan deferrals, charge-offs and acquired loans were considered.

The following table presents the carrying amounts of loans purchased and sold during the three months ended March 31, 2022 by portfolio segment:


	Business		Consumer		Consumer		Consumer		Home
(000’s omitted)	lending		mortgage		indirect		direct		equity		Total
Purchases	$	0	$	0	$	0	$	0	$	0	$	0
Sales		0		2,627		0		0		0		2,627

All the sales during the three months ended March 31, 2022 were sales of secondary market eligible residential mortgage loans.