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LOANS AND ALLOWANCE FOR CREDIT LOSSES

6 Months Ended

Jun. 30, 2024

LOANS AND ALLOWANCE FOR CREDIT LOSSES

NOTE E: LOANS AND ALLOWANCE FOR CREDIT LOSSES

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


	June 30,		December 31,
(000’s omitted)	2024		2023
CRE – multifamily	$	663,681	$	619,794
CRE – owner occupied		816,630		752,774
CRE – non-owner occupied		1,720,539		1,711,198
Commercial & industrial and other business loans		1,093,323		1,000,630
Consumer mortgage		3,368,166		3,285,018
Consumer indirect		1,723,002		1,703,440
Consumer direct		186,503		185,229
Home equity		452,013		446,515
Gross loans, including deferred origination costs		10,023,857		9,704,598
Allowance for credit losses		(71,442)		(66,669)
Loans, net of allowance for credit losses	$	9,952,415	$	9,637,929

The following table presents the aging of the amortized cost basis of the Company’s past due loans by segment as of June 30, 2024 and December 31, 2023:


	Past Due		90+ Days Past
(000’s omitted)	30 – 89		Due and				Total
June 30, 2024	Days		Still Accruing		Nonaccrual		Past Due		Current		Total Loans
CRE – multifamily	$	141	$	0	$	0	$	141	$	663,540	$	663,681
CRE – owner occupied		477		0		3,089		3,566		813,064		816,630
CRE – non-owner occupied		93		0		13,364		13,457		1,707,082		1,720,539
Commercial & industrial and other business loans		329		0		550		879		1,092,444		1,093,323
Consumer mortgage		20,004		2,129		27,897		50,030		3,318,136		3,368,166
Consumer indirect		19,664		436		0		20,100		1,702,902		1,723,002
Consumer direct		1,681		86		20		1,787		184,716		186,503
Home equity		2,685		455		2,487		5,627		446,386		452,013
Total	$	45,074	$	3,106	$	47,407	$	95,587	$	9,928,270	$	10,023,857


	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

An immaterial amount of interest income on nonaccrual loans was recognized during the three and six months ended June 30, 2024 and 2023 and 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”, “substandard”, 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.
Substandard		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 June 30, 2024 and December 31, 2023:


													Revolving		Revolving
													Loans		Loans
(000’s omitted)	Term Loans Amortized Cost Basis by Origination Year												Amortized		Converted
June 30, 2024	2024		2023		2022		2021		2020		Prior		Cost Basis		to Term		Total
CRE – multifamily:
Risk rating
Pass	$	5,831	$	89,742	$	144,175	$	53,277	$	18,997	$	142,653	$	6,793	$	161,896	$	623,364
Special mention		0		13,175		7,280		0		63		5,253		0		0		25,771
Substandard		0		0		0		499		0		1,807		149		12,091		14,546
Doubtful		0		0		0		0		0		0		0		0		0
Total CRE – multifamily	$	5,831	$	102,917	$	151,455	$	53,776	$	19,060	$	149,713	$	6,942	$	173,987	$	663,681
Current period gross charge-offs⁽¹⁾	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0

CRE – owner occupied:
Risk rating
Pass	$	29,673	$	55,798	$	83,029	$	55,491	$	40,951	$	255,362	$	52,921	$	198,180	$	771,405
Special mention		0		2,964		4,258		1,850		616		12,766		440		2,745		25,639
Substandard		0		2,506		2,637		868		1,468		6,924		259		4,796		19,458
Doubtful		0		128		0		0		0		0		0		0		128
Total CRE – owner occupied	$	29,673	$	61,396	$	89,924	$	58,209	$	43,035	$	275,052	$	53,620	$	205,721	$	816,630
Current period gross charge-offs⁽¹⁾	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0

CRE – non-owner occupied:
Risk rating
Pass	$	52,538	$	151,758	$	249,033	$	107,620	$	87,999	$	313,167	$	357,791	$	270,544	$	1,590,450
Special mention		159		40		1,739		16,533		1,274		29,809		19,356		3,386		72,296
Substandard		0		729		134		157		303		24,167		3,869		26,666		56,025
Doubtful		0		218		0		966		0		0		0		584		1,768
Total CRE – non-owner occupied	$	52,697	$	152,745	$	250,906	$	125,276	$	89,576	$	367,143	$	381,016	$	301,180	$	1,720,539
Current period gross charge-offs⁽¹⁾	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0

Commercial & industrial and other business loans:
Risk rating
Pass	$	139,425	$	93,097	$	117,838	$	80,281	$	28,351	$	107,359	$	397,496	$	57,901	$	1,021,748
Special mention		667		14,314		2,285		1,818		1,149		3,705		19,267		2,363		45,568
Substandard		162		3,249		2,732		631		271		1,017		13,137		4,808		26,007
Doubtful		0		0		0		0		0		0		0		0		0
Total commercial & industrial and other business loans	$	140,254	$	110,660	$	122,855	$	82,730	$	29,771	$	112,081	$	429,900	$	65,072	$	1,093,323
Current period gross charge-offs⁽¹⁾	$	0	$	64	$	98	$	21	$	0	$	0	$	341	$	2	$	526

Total business lending:
Risk rating
Pass	$	227,467	$	390,395	$	594,075	$	296,669	$	176,298	$	818,541	$	815,001	$	688,521	$	4,006,967
Special mention		826		30,493		15,562		20,201		3,102		51,533		39,063		8,494		169,274
Substandard		162		6,484		5,503		2,155		2,042		33,915		17,414		48,361		116,036
Doubtful		0		346		0		966		0		0		0		584		1,896
Total business lending	$	228,455	$	427,718	$	615,140	$	319,991	$	181,442	$	903,989	$	871,478	$	745,960	$	4,294,173
Current period gross charge-offs⁽¹⁾	$	0	$	64	$	98	$	21	$	0	$	0	$	341	$	2	$	526

(1)For the six months ended June 30, 2024.


													Revolving		Revolving
													Loans		Loans
(000’s omitted)	Term Loans Amortized Cost Basis by Origination Year												Amortized		Converted
December 31, 2023	2023		2022		2021		2020		2019		Prior		Cost Basis		to 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
Substandard		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⁽¹⁾	$	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
Substandard		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⁽¹⁾	$	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
Substandard		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⁽¹⁾	$	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
Substandard		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⁽¹⁾	$	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
Substandard		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⁽¹⁾	$	0	$	160	$	0	$	0	$	0	$	36	$	588	$	0	$	784

(1)For the year ended December 31, 2023.

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 June 30, 2024 and December 31, 2023:


													Revolving		Revolving
													Loans		Loans
(000’s omitted)	Term Loans Amortized Cost Basis by Origination Year												Amortized		Converted
June 30, 2024	2024		2023		2022		2021		2020		Prior		Cost Basis		to Term		Total
Consumer mortgage:
FICO AB⁽¹⁾
Performing	$	145,501	$	343,947	$	341,795	$	441,530	$	191,633	$	715,309	$	0	$	100,846	$	2,280,561
Nonperforming		0		0		487		658		672		5,001		0		188		7,006
Total FICO AB		145,501		343,947		342,282		442,188		192,305		720,310		0		101,034		2,287,567
FICO CDE⁽²⁾
Performing		62,249		146,033		144,370		157,276		97,806		376,845		35,709		37,291		1,057,579
Nonperforming		0		948		2,689		1,751		1,881		14,364		347		1,040		23,020
Total FICO CDE		62,249		146,981		147,059		159,027		99,687		391,209		36,056		38,331		1,080,599
Total consumer mortgage	$	207,750	$	490,928	$	489,341	$	601,215	$	291,992	$	1,111,519	$	36,056	$	139,365	$	3,368,166
Current period gross charge-offs⁽³⁾	$	0	$	0	$	0	$	1	$	20	$	136	$	0	$	0	$	157

Consumer indirect:
Performing	$	325,720	$	591,520	$	475,306	$	208,967	$	49,730	$	71,323	$	0	$	0	$	1,722,566
Nonperforming		36		146		191		55		6		2		0		0		436
Total consumer indirect	$	325,756	$	591,666	$	475,497	$	209,022	$	49,736	$	71,325	$	0	$	0	$	1,723,002
Current period gross charge-offs⁽³⁾	$	102	$	1,489	$	2,243	$	766	$	329	$	740	$	0	$	0	$	5,669

Consumer direct:
Performing	$	44,351	$	62,712	$	40,782	$	19,036	$	5,376	$	7,312	$	6,828	$	0	$	186,397
Nonperforming		0		9		30		0		0		25		42		0		106
Total consumer direct	$	44,351	$	62,721	$	40,812	$	19,036	$	5,376	$	7,337	$	6,870	$	0	$	186,503
Current period gross charge-offs⁽³⁾	$	2	$	592	$	404	$	293	$	40	$	65	$	112	$	0	$	1,508

Home equity:
Performing	$	25,519	$	58,010	$	58,923	$	58,578	$	29,011	$	63,009	$	129,233	$	26,788	$	449,071
Nonperforming		0		242		174		131		273		762		937		423		2,942
Total home equity	$	25,519	$	58,252	$	59,097	$	58,709	$	29,284	$	63,771	$	130,170	$	27,211	$	452,013
Current period gross charge-offs⁽³⁾	$	0	$	0	$	23	$	0	$	0	$	0	$	34	$	0	$	57

(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.

(3)For the six months ended June 30, 2024.


													Revolving		Revolving
													Loans		Loans
(000’s omitted)	Term Loans Amortized Cost Basis by Origination Year												Amortized		Converted
December 31, 2023	2023		2022		2021		2020		2019		Prior		Cost Basis		to 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⁽³⁾	$	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⁽³⁾	$	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⁽³⁾	$	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⁽³⁾	$	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.

(3)For the year ended December 31, 2023.

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. If management determines that foreclosure is probable, expected credit losses for collateral dependent loans are based on the fair value of the collateral at the reporting date, adjusted for estimated selling costs as appropriate. A loan is considered collateral dependent when the borrower is experiencing financial difficulty and the loan is expected to be repaid substantially through the operation or sale of the collateral. The collateral for individually assessed CRE non-owner occupied loans consists mainly of office properties associated with two customers. A summary of individually assessed business loans as of June 30, 2024 and December 31, 2023 follows:


	June 30, 2024							December 31, 2023
					Specifically						Specifically
	Carrying		Contractual		Allocated		Carrying		Contractual		Allocated
(000’s omitted)	Balance		Balance		Allowance		Balance		Balance		Allowance
Loans with allowance allocation:
CRE – owner occupied	$	1,606	$	1,606	$	128	$	0	$	0	$	0
CRE – non-owner occupied		12,804		12,905		1,767		3,484		3,484		470
Total	$	14,410	$	14,511	$	1,895	$	3,484	$	3,484	$	470

Loans without allowance allocation:
CRE – owner occupied	$	1,289	$	1,326	$	0	$	1,551	$	1,551	$	0
CRE – non-owner occupied		0		0		0		13,999		14,014		0
Commercial & industrial and other business loans		0		0		0		200		200		0
Total	$	1,289	$	1,326	$	0	$	15,750	$	15,765	$	0

The average carrying balance of individually assessed loans was $15.9 million and $2.5 million for the three months ended June 30, 2024 and 2023, respectively. The average carrying balance of individually assessed loans was $16.1 million and $3.1 million for the six months ended June 30, 2024 and 2023, respectively. No interest income was recognized on individually assessed loans for the three or six months ended June 30, 2024 and 2023.

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 June 30, 2024 that were both experiencing financial difficulty and modified during the three and six months ended June 30, 2024, 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. During the three and six months ended June 30, 2023, the amount of loans that were modified to borrowers experiencing financial difficulty was immaterial.


	Three Months Ended				Six Months Ended
	June 30, 2024				June 30, 2024
			Total Class of				Total Class of
	Term		Financing		Term		Financing
(000s omitted except for percentages)	Extension		Receivable		Extension		Receivable
CRE – owner occupied	$	113	0.01	%	$	298	0.04	%
CRE – non-owner occupied		3,035	0.18	%		3,253	0.19	%
Commercial & industrial and other business loans		42	0.00	%		140	0.00	%
Consumer mortgage		236	0.01	%		236	0.01	%
Home equity		30	0.01	%		30	0.01	%
Total	$	3,456	0.03	%	$	3,957	0.04	%

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 in the last 12 months.


	June 30, 2024
					90+ Days Past
			Past Due 30 –		Due and Still		Non-
(000s omitted)	Current		89 Days		Accruing		Accrual		Total
CRE – owner occupied	$	1,596	$	0	$	0	$	0	$	1,596
CRE – non-owner occupied		3,877		0		0		0		3,877
Commercial & industrial and other business loans		140		0		0		0		140
Consumer mortgage		0		0		0		511		511
Home equity		31		0		0		30		61
Total	$	5,644	$	0	$	0	$	541	$	6,185

The following table presents the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty during the three and six months ended June 30, 2024:


	Three Months Ended	Six Months Ended
	June 30, 2024	June 30, 2024
	Weighted-Average	Weighted-Average
	Term Extension (Years)	Term Extension (Years)
CRE – owner occupied	9.5	4.7
CRE – non-owner occupied	0.5	1.0
Commercial & industrial and other business loans	5.0	4.2
Consumer mortgage	7.1	7.1
Home equity	1.8	1.8
Total	1.3	1.8

There were no loans modified to borrowers with financial difficulty that had a payment default subsequent to modification during the three months ended June 30, 2024 and 2023.

Allowance for Credit Losses

The following presents by segment the activity in the allowance for credit losses during the three months and six months ended June 30, 2024 and 2023:


	Three Months Ended June 30, 2024
	Beginning		Charge-						Ending
(000’s omitted)	balance		offs		Recoveries		Provision		balance
Business lending	$	29,371	$	(265)	$	92	$	1,930	$	31,128
Consumer mortgage		14,490		(64)		31		(154)		14,303
Consumer indirect		20,294		(2,609)		1,931		508		20,124
Consumer direct		3,355		(635)		267		381		3,368
Home equity		1,581		(34)		0		(28)		1,519
Unallocated		1,000		0		0		0		1,000
Allowance for credit losses – loans		70,091		(3,607)		2,321		2,637		71,442
Liabilities for off-balance-sheet credit exposures		798		0		0		71		869
Total allowance for credit losses	$	70,889	$	(3,607)	$	2,321	$	2,708	$	72,311


	Three Months Ended June 30, 2023
	Beginning		Charge-						Ending
(000’s omitted)	balance		offs		Recoveries		Provision		balance
Business lending	$	25,227	$	(304)	$	113	$	255	$	25,291
Consumer mortgage		14,278		(204)		25		454		14,553
Consumer indirect		18,047		(1,859)		1,676		(56)		17,808
Consumer direct		3,030		(307)		233		76		3,032
Home equity		1,588		(84)		5		91		1,600
Unallocated		1,000		0		0		0		1,000
Allowance for credit losses – loans		63,170		(2,758)		2,052		820		63,284
Liabilities for off-balance-sheet credit exposures		1,001		0		0		(68)		933
Total allowance for credit losses	$	64,171	$	(2,758)	$	2,052	$	752	$	64,217


	Six Months Ended June 30, 2024
	Beginning		Charge-						Ending
(000’s omitted)	balance		offs		Recoveries		Provision		balance
Business lending	$	26,854	$	(526)	$	131	$	4,669	$	31,128
Consumer mortgage		15,333		(157)		34		(907)		14,303
Consumer indirect		18,585		(5,669)		3,140		4,068		20,124
Consumer direct		3,269		(1,508)		482		1,125		3,368
Home equity		1,628		(57)		3		(55)		1,519
Unallocated		1,000		0		0		0		1,000
Allowance for credit losses – loans		66,669		(7,917)		3,790		8,900		71,442
Liabilities for off-balance-sheet credit exposures		913		0		0		(44)		869
Total allowance for credit losses	$	67,582	$	(7,917)	$	3,790	$	8,856	$	72,311


	Six Months Ended June 30, 2023
	Beginning		Charge-						Ending
(000’s omitted)	balance		offs		Recoveries		Provision		balance
Business lending	$	23,297	$	(479)	$	285	$	2,188	$	25,291
Consumer mortgage		14,343		(223)		32		401		14,553
Consumer indirect		17,852		(4,390)		3,023		1,323		17,808
Consumer direct		2,973		(812)		420		451		3,032
Home equity		1,594		(84)		11		79		1,600
Unallocated		1,000		0		0		0		1,000
Allowance for credit losses – loans		61,059		(5,988)		3,771		4,442		63,284
Liabilities for off-balance-sheet credit exposures		1,123		0		0		(190)		933
Total allowance for credit losses	$	62,182	$	(5,988)	$	3,771	$	4,252	$	64,217

The allowance for credit losses increased to $71.4 million at June 30, 2024 compared to $66.7 million at December 31, 2023 and $63.2 million at March 31, 2023, reflective of an increase in loans outstanding, a stable economic forecast and continued macroeconomic uncertainty primarily concerning the business lending and consumer indirect portfolios.

Accrued interest receivable on loans, included in accrued interest and fees receivable on the consolidated statements of condition, totaled $34.4 million at June 30, 2024 and is excluded from the estimate of credit losses and amortized cost basis of loans.

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 June 30, 2024. 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 for non – office specific properties and utilize both factors in an even weight for the calculation. For office specific properties, the Company selected projected office specific commercial real estate values and vacancy rates 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 June 30, 2024, loans with a carrying amount of approximately $4.49 billion were pledged for the availability to secure certain borrowings with the FHLB and FRB. There were $710.7 million of borrowings outstanding under these arrangements at June 30, 2024.

At June 30, 2024 and December 31, 2023, there were foreclosures in process of $6.2 million and $5.8 million, respectively.

During the six months ended June 30, 2024, the Company did not purchase any loans, while the Company sold $12.8 million of secondary market eligible residential consumer mortgage loans during the period. During the six months ended June 30, 2023, the Company did not purchase any loans and sold $1.8 million of secondary market eligible residential consumer mortgage loans.