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LOANS AND ALLOWANCE FOR CREDIT LOSSES

12 Months Ended

Dec. 31, 2023

LOANS AND ALLOWANCE FOR CREDIT LOSSES

NOTE D: LOANS AND ALLOWANCE FOR CREDIT LOSSES

The segments of the Company’s loan portfolio at December 31 are summarized as follows:


(000’s omitted)	2023		2022
CRE - multifamily	$	619,794	$	484,773
CRE – owner occupied		752,774		722,387
CRE – non-owner occupied		1,711,198		1,431,720
Commercial & industrial and other business loans		1,000,630		1,006,785
Consumer mortgage		3,285,018		3,012,475
Consumer indirect		1,703,440		1,539,653
Consumer direct		185,229		177,605
Home equity		446,515		433,996
Gross loans, including deferred origination costs		9,704,598		8,809,394
Allowance for credit losses		(66,669)		(61,059)
Loans, net of allowance for credit losses	$	9,637,929	$	8,748,335

The Company had approximately $81.6 million and $73.8 million of net deferred loan origination costs included in gross loans as of December 31, 2023 and 2022, respectively.

Certain directors and executive officers of the Company, as well as associates of such persons, are loan customers. Loans to these individuals were made in the ordinary course of business under normal credit terms and do not have more than a normal risk of collection. Following is a summary of the aggregate amount of such loans during 2023 and 2022.


(000’s omitted)	2023		2022
Balance at beginning of year	$	12,373	$	13,773
New loans		1,372		2,025
Payments		(2,053)		(3,425)
Balance at end of year	$	11,692	$	12,373

The following tables present the aging of the amortized cost basis of the Company’s past due loans by segment as of December 31, 2023 and 2022:


	Past Due		90+ Days Past
(000’s omitted)	30 – 89		Due and				Total
December 31, 2023	Days		Still Accruing		Nonaccrual		Past Due		Current		Total Loans
CRE – multifamily	$	0	$	0	$	0	$	0	$	619,794	$	619,794
CRE – owner occupied		1,477		0		1,953		3,430		749,344		752,774
CRE – non-owner occupied		2,311		0		17,964		20,275		1,690,923		1,711,198
Commercial & industrial and other business loans		880		0		336		1,216		999,414		1,000,630
Consumer mortgage		18,434		4,559		26,043		49,036		3,235,982		3,285,018
Consumer indirect		20,215		776		0		20,991		1,682,449		1,703,440
Consumer direct		1,579		135		23		1,737		183,492		185,229
Home equity		3,546		416		2,368		6,330		440,185		446,515
Total	$	48,442	$	5,886	$	48,687	$	103,015	$	9,601,583	$	9,704,598


	Past Due		90+ Days Past
(000’s omitted)	30 – 89		Due and				Total
December 31, 2022	Days		Still Accruing		Nonaccrual		Past Due		Current		Total Loans
CRE – multifamily	$	0	$	0	$	0	$	0	$	484,773	$	484,773
CRE – owner occupied		2,332		0		2,977		5,309		717,078		722,387
CRE – non-owner occupied		5,703		0		1,365		7,068		1,424,652		1,431,720
Commercial & industrial and other business loans		1,783		0		347		2,130		1,004,655		1,006,785
Consumer mortgage		13,757		3,510		22,583		39,850		2,972,625		3,012,475
Consumer indirect		16,767		178		0		16,945		1,522,708		1,539,653
Consumer direct		1,307		132		28		1,467		176,138		177,605
Home equity		3,595		299		1,945		5,839		428,157		433,996
Total	$	45,244	$	4,119	$	29,245	$	78,608	$	8,730,786	$	8,809,394

No interest income on nonaccrual loans was recognized during the years ended December 31, 2023 or 2022. For the years ended December 31, 2023 and 2022, an immaterial amount of accrued interest was written off on nonaccrual loans by reversing interest income. Approximately $0.4 million of interest income on loans that returned to accrual status in 2023 was recognized for the year ended December 31, 2023.

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 to loans individually based on a case-by-case evaluation. In general, the following are the definitions of the Company’s credit quality indicators:


Pass		The condition of the borrower and the performance of the loans are satisfactory or better.
Special Mention		The condition of the borrower has deteriorated and the loan has potential weaknesses, although the loan performs as agreed. Loss may be incurred at some future date if conditions deteriorate further.
Classified		The condition of the borrower has significantly deteriorated and the loan has a well-defined weakness or weaknesses. The performance of the loan could further deteriorate and incur loss if deficiencies are not corrected.
Doubtful		The condition of the borrower has deteriorated to the point that collection of the balance is improbable based on current facts and conditions and loss is likely.

The following tables show the amount of business lending loans by credit quality category at December 31, 2023 and 2022.


	Term Loans Amortized Cost Basis by Origination Year
													Revolving		Revolving
													Loans		Loans
(000’s omitted)													Amortized		Converted to
December 31, 2023	2023		2022		2021		2020		2019		Prior		Cost Basis		Term		Total
CRE – multifamily:
Risk rating
Pass	$	90,888	$	145,337	$	52,058	$	19,982	$	41,992	$	112,287	$	3,237	$	106,580	$	572,361
Special mention		13,175		7,317		0		65		0		3,522		0		8,289		32,368
Classified		0		959		0		0		551		1,293		150		12,112		15,065
Doubtful		0		0		0		0		0		0		0		0		0
Total CRE – multifamily	$	104,063	$	153,613	$	52,058	$	20,047	$	42,543	$	117,102	$	3,387	$	126,981	$	619,794
Current period gross charge-offs	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0

CRE – owner occupied:
Risk rating
Pass	$	58,544	$	89,616	$	58,798	$	46,465	$	80,361	$	192,345	$	28,023	$	158,652	$	712,804
Special mention		3,258		2,384		649		639		1,472		11,962		743		6,064		27,171
Classified		880		108		922		1,480		514		7,531		941		423		12,799
Doubtful		0		0		0		0		0		0		0		0		0
Total CRE – owner occupied	$	62,682	$	92,108	$	60,369	$	48,584	$	82,347	$	211,838	$	29,707	$	165,139	$	752,774
Current period gross charge-offs	$	0	$	0	$	0	$	0	$	0	$	0	$	19	$	0	$	19

CRE – non-owner occupied:
Risk rating
Pass	$	143,106	$	255,699	$	111,306	$	86,560	$	60,646	$	275,458	$	387,559	$	265,348	$	1,585,682
Special mention		42		827		16,109		1,311		109		29,648		18,806		3,506		70,358
Classified		947		136		1,123		2,996		1,248		20,578		100		27,542		54,670
Doubtful		0		0		0		488		0		0		0		0		488
Total CRE – non-owner occupied	$	144,095	$	256,662	$	128,538	$	91,355	$	62,003	$	325,684	$	406,465	$	296,396	$	1,711,198
Current period gross charge-offs	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0

Commercial & industrial and other business loans:
Risk rating
Pass	$	146,627	$	133,529	$	94,764	$	34,572	$	34,714	$	99,525	$	337,388	$	55,222	$	936,341
Special mention		15,306		2,071		1,491		1,557		2,553		1,854		16,341		8,045		49,218
Classified		38		800		558		477		323		1,305		10,800		770		15,071
Doubtful		0		0		0		0		0		0		0		0		0
Total commercial & industrial and other business loans	$	161,971	$	136,400	$	96,813	$	36,606	$	37,590	$	102,684	$	364,529	$	64,037	$	1,000,630
Current period gross charge-offs	$	0	$	160	$	0	$	0	$	0	$	36	$	569	$	0	$	765

Total business lending:
Risk rating
Pass	$	439,165	$	624,181	$	316,926	$	187,579	$	217,713	$	679,615	$	756,207	$	585,802	$	3,807,188
Special mention		31,781		12,599		18,249		3,572		4,134		46,986		35,890		25,904		179,115
Classified		1,865		2,003		2,603		4,953		2,636		30,707		11,991		40,847		97,605
Doubtful		0		0		0		488		0		0		0		0		488
Total business lending	$	472,811	$	638,783	$	337,778	$	196,592	$	224,483	$	757,308	$	804,088	$	652,553	$	4,084,396
Current period gross charge-offs	$	0	$	160	$	0	$	0	$	0	$	36	$	588	$	0	$	784


	Term Loans Amortized Cost Basis by Origination Year
													Revolving		Revolving
													Loans		Loans
(000’s omitted)													Amortized		Converted to
December 31, 2022	2022		2021		2020		2019		2018		Prior		Cost Basis		Term		Total
CRE - multifamily:
Risk rating
Pass	$	149,205	$	48,624	$	21,749	$	40,864	$	31,172	$	93,159	$	17,038	$	54,161	$	455,972
Special mention		0		1,180		69		234		1,288		252		0		19,998		23,021
Classified		0		0		0		578		702		4,500		0		0		5,780
Doubtful		0		0		0		0		0		0		0		0		0
Total CRE – multifamily	$	149,205	$	49,804	$	21,818	$	41,676	$	33,162	$	97,911	$	17,038	$	74,159	$	484,773

CRE – owner occupied:
Risk rating
Pass	$	92,920	$	64,019	$	54,765	$	85,791	$	46,175	$	174,928	$	47,866	$	109,315	$	675,779
Special mention		706		732		1,831		1,606		1,799		10,443		1,641		2,359		21,117
Classified		1,405		80		436		560		5,897		13,254		491		3,368		25,491
Doubtful		0		0		0		0		0		0		0		0		0
Total CRE – owner occupied	$	95,031	$	64,831	$	57,032	$	87,957	$	53,871	$	198,625	$	49,998	$	115,042	$	722,387

CRE – non-owner occupied:
Risk rating
Pass	$	266,704	$	139,965	$	103,026	$	66,272	$	56,406	$	234,593	$	323,477	$	140,418	$	1,330,861
Special mention		186		896		690		116		11,052		30,874		8,429		5,663		57,906
Classified		0		0		0		1,311		5,186		18,094		1,381		16,981		42,953
Doubtful		0		0		0		0		0		0		0		0		0
Total CRE –non-owner occupied	$	266,890	$	140,861	$	103,716	$	67,699	$	72,644	$	283,561	$	333,287	$	163,062	$	1,431,720

Commercial & industrial and other business loans:
Risk rating
Pass	$	238,794	$	121,253	$	53,051	$	53,890	$	34,669	$	102,071	$	323,248	$	32,824	$	959,800
Special mention		1,895		2,029		1,191		1,720		453		4,059		19,333		1,954		32,634
Classified		395		695		702		747		450		2,290		8,715		357		14,351
Doubtful		0		0		0		0		0		0		0		0		0
Total commercial & industrial and other business loans	$	241,084	$	123,977	$	54,944	$	56,357	$	35,572	$	108,420	$	351,296	$	35,135	$	1,006,785

Total business lending:
Risk rating
Pass	$	747,623	$	373,861	$	232,591	$	246,817	$	168,422	$	604,751	$	711,629	$	336,718	$	3,422,412
Special mention		2,787		4,837		3,781		3,676		14,592		45,628		29,403		29,974		134,678
Classified		1,800		775		1,138		3,196		12,235		38,138		10,587		20,706		88,575
Doubtful		0		0		0		0		0		0		0		0		0
Total business lending	$	752,210	$	379,473	$	237,510	$	253,689	$	195,249	$	688,517	$	751,619	$	387,398	$	3,645,665

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 tables detail the balances in all other loan categories at December 31, 2023 and 2022:


	Term Loans Amortized Cost Basis by Origination Year
													Revolving		Revolving
													Loans		Loans
(000’s omitted)													Amortized		Converted to
December 31, 2023	2023		2022		2021		2020		2019		Prior		Cost Basis		Term		Total
Consumer mortgage:
FICO AB⁽¹⁾
Performing	$	354,967	$	353,185	$	456,871	$	199,429	$	157,159	$	606,591	$	0	$	86,067	$	2,214,269
Nonperforming		0		371		764		605		279		5,187		0		195		7,401
Total FICO AB		354,967		353,556		457,635		200,034		157,438		611,778		0		86,262		2,221,670
FICO CDE⁽²⁾
Performing		148,443		150,585		164,839		103,003		71,710		331,839		39,630		30,098		1,040,147
Nonperforming		53		2,629		2,477		1,629		1,785		13,201		367		1,060		23,201
Total FICO CDE		148,496		153,214		167,316		104,632		73,495		345,040		39,997		31,158		1,063,348
Total consumer mortgage	$	503,463	$	506,770	$	624,951	$	304,666	$	230,933	$	956,818	$	39,997	$	117,420	$	3,285,018
Current period gross charge-offs	$	0	$	0	$	0	$	0	$	85	$	584	$	0	$	0	$	669

Consumer indirect:
Performing	$	681,824	$	572,799	$	273,035	$	71,428	$	45,203	$	58,375	$	0	$	0	$	1,702,664
Nonperforming		84		443		101		42		19		87		0		0		776
Total consumer indirect	$	681,908	$	573,242	$	273,136	$	71,470	$	45,222	$	58,462	$	0	$	0	$	1,703,440
Current period gross charge-offs	$	926	$	3,595	$	1,969	$	1,171	$	570	$	1,121	$	0	$	0	$	9,352

Consumer direct:
Performing	$	80,169	$	52,826	$	26,617	$	8,282	$	4,604	$	5,697	$	6,875	$	1	$	185,071
Nonperforming		33		41		47		0		2		23		12		0		158
Total consumer direct	$	80,202	$	52,867	$	26,664	$	8,282	$	4,606	$	5,720	$	6,887	$	1	$	185,229
Current period gross charge-offs	$	206	$	813	$	450	$	110	$	110	$	159	$	161	$	0	$	2,009

Home equity:
Performing	$	61,065	$	62,801	$	63,102	$	31,094	$	25,721	$	44,832	$	126,939	$	28,177	$	443,731
Nonperforming		0		162		10		253		260		533		1,053		513		2,784
Total home equity	$	61,065	$	62,963	$	63,112	$	31,347	$	25,981	$	45,365	$	127,992	$	28,690	$	446,515
Current period gross charge-offs	$	0	$	0	$	0	$	64	$	0	$	44	$	11	$	0	$	119

⁽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.


	Term Loans Amortized Cost Basis by Origination Year
													Revolving		Revolving
													Loans		Loans
(000’s omitted)													Amortized		Converted to
December 31, 2022	2022		2021		2020		2019		2018		Prior		Cost Basis		Term		Total
Consumer mortgage:
FICO AB⁽¹⁾
Performing	$	379,171	$	492,731	$	217,889	$	173,942	$	100,161	$	604,258	$	954	$	58,639	$	2,027,745
Nonperforming		0		75		573		184		399		4,347		0		449		6,027
Total FICO AB		379,171		492,806		218,462		174,126		100,560		608,605		954		59,088		2,033,772
FICO CDE⁽²⁾
Performing		160,388		178,262		112,640		79,357		54,861		323,189		27,884		22,056		958,637
Nonperforming		120		974		1,250		1,606		2,127		13,177		151		661		20,066
Total FICO CDE		160,508		179,236		113,890		80,963		56,988		336,366		28,035		22,717		978,703
Total consumer mortgage	$	539,679	$	672,042	$	332,352	$	255,089	$	157,548	$	944,971	$	28,989	$	81,805	$	3,012,475

Consumer indirect:
Performing	$	777,513	$	422,594	$	129,449	$	99,593	$	52,298	$	58,028	$	0	$	0	$	1,539,475
Nonperforming		18		1		53		67		15		24		0		0		178
Total consumer indirect	$	777,531	$	422,595	$	129,502	$	99,660	$	52,313	$	58,052	$	0	$	0	$	1,539,653

Consumer direct:
Performing	$	84,111	$	46,381	$	17,066	$	12,729	$	5,573	$	5,020	$	6,563	$	2	$	177,445
Nonperforming		6		51		1		1		29		50		22		0		160
Total consumer direct	$	84,117	$	46,432	$	17,067	$	12,730	$	5,602	$	5,070	$	6,585	$	2	$	177,605

Home equity:
Performing	$	69,575	$	72,270	$	37,964	$	31,506	$	16,068	$	41,097	$	132,703	$	30,569	$	431,752
Nonperforming		0		10		114		169		105		606		563		677		2,244
Total home equity	$	69,575	$	72,280	$	38,078	$	31,675	$	16,173	$	41,703	$	133,266	$	31,246	$	433,996

⁽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.

Business lending loans greater than $0.5 million that are on nonaccrual are individually assessed and, if necessary, a specific allocation of the allowance for credit losses is provided. A summary of individually assessed business lending loans as of December 31, 2023 and 2022 follows:


	December 31,		December 31,
(000’s omitted)	2023		2022
Loans with allowance allocation	$	3,484	$	0
Loans without allowance allocation		15,750		3,163
Carrying balance		19,234		3,163
Contractual balance		19,249		4,201
Specifically allocated allowance		470		0

The average carrying balance of individually assessed loans was $20.2 million and $12.2 million for the years ended December 31, 2023 and 2022, respectively. No interest income was recognized on individually assessed loans for the years ended December 31, 2023 and 2022.

Occasionally, the Company modifies loans to borrowers experiencing financial difficulty by providing principal forgiveness, term extension, payment delay or interest rate reduction. When principal forgiveness is provided, the amount of forgiveness is charged-off against the allowance for credit losses.

In some cases, the Company provides multiple types of modifications on one loan. Typically, one type of modification, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another modification, such as principal forgiveness, may be granted. Upon the Company’s determination that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of the loan) is charged off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the allowance for credit losses is adjusted by the same amount. The estimate of allowance for credit losses includes historical losses from loans that were modified due to borrower financial difficulty, therefore a charge to the allowance for credit losses is generally not recorded upon modification.

The following table presents the amortized cost basis of loans at December 31, 2023 that were both experiencing financial difficulty and modified during the year ended December 31, 2023, by class and by type of modification. The percentage of the amortized cost basis of loans that were modified to borrowers experiencing financial difficulty as compared to the amortized cost basis of each class of financing receivable is also presented below. The Company did not have any modifications to borrowers experiencing financial difficulty other than term extensions.


	Year Ended December 31, 2023
			Total Class of
	Term		Financing
(000s omitted except for percentages)	Extension		Receivable
CRE - owner occupied	$	1,367	0.18	%
CRE - non-owner occupied		700	0.04	%
Consumer mortgage		281	0.01	%
Home equity		31	0.01	%
Total	$	2,379	0.02	%

The Company closely monitors the performance of loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table presents the performance of such loans that have been modified at December 31, 2023.


					90+ Days Past
			Past Due 30 –		Due and Still
(000s omitted)	Current		89 Days		Accruing		Non-Accrual		Total
CRE - owner occupied	$	1,367	$	0	$	0	$	0	$	1,367
CRE - non-owner occupied		700		0		0		0		700
Consumer mortgage		0		0		0		281		281
Home equity		31		0		0		0		31
Total	$	2,098	$	0	$	0	$	281	$	2,379

The following table presents the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty for the year ended December 31, 2023:


		Year Ended
		December 31, 2023
		Weighted-Average
		Term Extension (Years)
CRE - owner occupied		10.0
CRE - non-owner occupied		5.0
Consumer mortgage		5.2
Home equity		9.9
Total		8.0

There were no loans modified to borrowers with financial difficulty that had a payment default subsequent to modification during the year ended December 31, 2023.

Prior to the adoption of ASU 2022-02 on January 1, 2023, modified loans were reviewed by the Company to identify if a TDR had 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. The amount of TDRs as of December 31, 2022 and 2021 are presented below.


	December 31, 2022
	Nonaccrual			Accruing			Total
(000’s omitted)	#	Amount		#	Amount		#	Amount
Multifamily	1	$	135	1	$	66	2	$	201
Commercial & industrial and other business loans	0		0	2		205	2		205
Consumer mortgage	52		2,218	46		2,114	98		4,332
Consumer indirect	0		0	56		600	56		600
Consumer direct	0		0	18		5	18		5
Home equity	9		108	9		178	18		286
Total	62	$	2,461	132	$	3,168	194	$	5,629


	December 31, 2021
	Nonaccrual			Accruing			Total
(000’s omitted)	#	Amount		#	Amount		#	Amount
Multifamily	1	$	135	1	$	76	2	$	211
CRE - owner occupied	6		711	1		685	7		1,396
Commercial & industrial and other business loans	3		165	2		50	5		215
Consumer mortgage	61		2,694	47		2,420	108		5,114
Consumer indirect	0		0	72		829	72		829
Consumer direct	0		0	16		7	16		7
Home equity	10		235	12		232	22		467
Total	81	$	3,940	151	$	4,299	232	$	8,239

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


	December 31, 2022			December 31, 2021
(000’s omitted)	#	Amount		#	Amount
CRE - owner occupied	0	$	0	5	$	1,371
Consumer mortgage	7		597	24		1,425
Consumer indirect	13		178	23		284
Consumer direct	3		5	2		7
Home equity	1		4	0		0
Total	24	$	784	54	$	3,087

Allowance for Credit Losses

The following presents by loan segment the activity in the allowance for credit losses during 2023, 2022 and 2021:


	Year Ended December 31, 2023
	Beginning		Charge-						Ending
(000’s omitted)	balance		offs		Recoveries		Provision		balance
Business lending	$	23,297	$	(784)	$	523	$	3,818	$	26,854
Consumer mortgage		14,343		(669)		48		1,611		15,333
Consumer indirect		17,852		(9,352)		5,719		4,366		18,585
Consumer direct		2,973		(2,009)		826		1,479		3,269
Home equity		1,594		(119)		14		139		1,628
Unallocated		1,000		0		0		0		1,000
Allowance for credit losses – loans		61,059		(12,933)		7,130		11,413		66,669
Liabilities for off-balance-sheet credit exposures		1,123		0		0		(210)		913
Total allowance for credit losses	$	62,182	$	(12,933)	$	7,130	$	11,203	$	67,582


	Year Ended December 31, 2022
							PCD
	Beginning		Charge-				Allowance at				Ending
(000’s omitted)	balance		offs		Recoveries		acquisition		Provision		balance
Business lending	$	22,995	$	(824)	$	1,374	$	71	$	(319)	$	23,297
Consumer mortgage		10,017		(313)		62		0		4,577		14,343
Consumer indirect		11,737		(7,986)		4,756		0		9,345		17,852
Consumer direct		2,306		(1,252)		772		0		1,147		2,973
Home equity		1,814		(86)		163		0		(297)		1,594
Unallocated		1,000		0		0		0		0		1,000
Allowance for credit losses – loans		49,869		(10,461)		7,127		71		14,453		61,059
Liabilities for off-balance-sheet credit exposures		803		0		0		0		320		1,123
Total allowance for credit losses	$	50,672	$	(10,461)	$	7,127	$	71	$	14,773	$	62,182


	Year Ended December 31, 2021
	Beginning								Ending
(000’s omitted)	balance		Charge-offs		Recoveries		Provision		balance
Business lending	$	30,072	$	(1,922)	$	796	$	(5,951)	$	22,995
Consumer mortgage		10,672		(426)		91		(320)		10,017
Consumer indirect		13,696		(5,160)		4,346		(1,145)		11,737
Consumer direct		3,207		(1,232)		793		(462)		2,306
Home equity		2,222		(225)		92		(275)		1,814
Unallocated		1,000		0		0		0		1,000
Allowance for credit losses – loans		60,869		(8,965)		6,118		(8,153)		49,869
Liabilities for off-balance-sheet credit exposures		1,489		0		0		(686)		803
Total allowance for credit losses	$	62,358	$	(8,965)	$	6,118	$	(8,839)	$	50,672

The allowance for credit losses increased to $66.7 million at December 31, 2023 compared to $61.1 million at December 31, 2022, driven by organic loan growth and stable economic forecasts.

Accrued interest receivable on loans, included in accrued interest and fees receivable on the consolidated statements of condition, totaled $31.2 million and $25.1 million at December 31, 2023 and 2022, respectively, 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. 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 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 with a four-quarter reversion to the historical mean to use as part of the economic forecast, and utilizes a two-quarter lag adjustment for economic factors that are not dependent on collateral values, and no lag for factors that utilize collateral values. 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 are weighted, with forecasts available as of December 31, 2023. These forecasts were factored into the qualitative portion of the calculation of the estimated credit losses and include the impact of a decline in residential real estate and vehicle prices as well as inflation. The scenarios utilized forecast stable unemployment levels, modest GDP and real household income growth, offset by some declines in auto, housing and commercial real estate prices.

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, 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, 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, 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, charge-offs and acquired loans were considered.

At December 31, 2023, loans with a carrying amount of approximately $4.39 billion were pledged for the availability to secure certain borrowings with the FHLB and FRB. There were $406.9 million of borrowings outstanding under these arrangements at December 31, 2023.

At December 31, 2023 and 2022, there were foreclosures in process of $5.8 million and $3.5 million, respectively.

During the year ended December 31, 2023, the Company did not purchase any loans, while the Company sold $6.1 million of secondary market eligible residential consumer mortgage loans during the period. During the year ended December 31, 2022, the Company purchased $436.9 million of loans in connection with the acquisition of Elmira, consisting of $125.3 million of business lending loans, $271.4 million of consumer mortgage loans, $9.4 million of consumer indirect loans, $12.5 million of consumer direct loans and $18.3 million of home equity loans. The Company sold $5.3 million of secondary market eligible residential consumer mortgage loans during the year ended December 31, 2022.