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Allowance for Credit Losses
 3 Months Ended
Mar. 31, 2023
Financing Receivable, Allowance for Credit Loss, Additional Information [Abstract]  
Allowance for Credit Losses Allowance for Credit Losses
Allowance for Loan and Lease Losses
The allowance for credit losses is established for current expected credit losses on the Company’s loan and lease portfolios utilizing guidance in Accounting Standards Codification (ASC) Topic 326. The determination of the allowance requires significant judgment to estimate credit losses measured on a collective pool basis when similar risk characteristics exist, and for loans evaluated individually. In determining the allowance, the Company estimates expected future losses for the loan’s entire contractual term adjusted for expected payments when appropriate. The allowance estimate considers relevant available information, from internal and external sources relating to the historical loss experience, current conditions, and reasonable and supportable forecasts for the Company’s outstanding loan and lease balances. The allowance is an estimation that reflects management’s evaluation of expected losses related to the Company’s financial assets measured at amortized cost. To ensure that the allowance is maintained at an adequate level, a detailed analysis is performed on a quarterly basis and an appropriate provision is made to adjust the allowance.
The Company categorizes its loan portfolios into nine segments based on similar risk characteristics. Loans within each segment are collectively evaluated using either: 1) a cohort cumulative loss rate methodology (“cohort”) or, 2) the probability of default (“PD”)/loss given default (“LGD”) methodology (PD/LGD).
The following table shows the changes in the allowance for loan and lease losses, segregated by portfolio segment, for the three months ended March 31, 2023 and 2022.
(Dollars in thousands)Commercial and
agricultural		SolarAuto and
light truck		Medium
and
heavy duty
truck		AircraftConstruction
equipment		Commercial
real estate		Residential
real estate
and home
equity		ConsumerTotal
March 31, 2023         
Balance, beginning of period$14,635 $7,217 $18,634 $7,566 $41,093 $24,039 $17,431 $6,478 $2,175 $139,268 
Charge-offs564 — 112 — — 1 39 1 324 1,041 
Recoveries172 — 541 — 226 — 3 233 60 1,235 
Net charge-offs (recoveries)392 — (429)— (226)1 36 (232)264 (194)
Provision (recovery of provision)1,844 (929)(505)263 (1,186)1,541 1,905 (89)205 3,049 
Balance, end of period$16,087 $6,288 $18,558 $7,829 $40,133 $25,579 $19,300 $6,621 $2,116 $142,511 
March 31, 2022         
Balance, beginning of period$15,409 $6,585 $19,624 $6,015 $33,628 $19,673 $19,691 $5,084 $1,783 $127,492 
Charge-offs— — — — — 48 — 4 165 217 
Recoveries4 — 65 — 316 — — 1 65 451 
Net charge-offs (recoveries)(4)— (65)— (316)48 — 3 100 (234)
Provision (recovery of provision)185 (168)(168)34 2,024 416 (445)137 218 2,233 
Balance, end of period$15,598 $6,417 $19,521 $6,049 $35,968 $20,041 $19,246 $5,218 $1,901 $129,959 
The allowance for credit losses increased during the quarter in response to loan growth along with an increase to the forecast adjustment. Broader market liquidity concerns and tightening credit conditions have added additional uncertainty and increased downside risks in the forecast period. Ongoing risks include a weakened domestic GDP outlook, persistent inflation, higher interest rates, and continued geopolitical uncertainty. Credit quality metrics remain relatively stable as evidenced by a modest decline in total special attention credit outstandings during the quarter and continued low delinquency rates. Charge-off activity during the quarter was offset with an uptick in recoveries leading to a net recovery position for the period. Total special attention balances were down slightly, but downgrades within the special attention pool during the quarter indicate some additional credit risk within the problem loan pool.
Commercial and agricultural – the increase in the allowance during the quarter was principally due to a change in mix within the commercial special attention pool towards higher risk rated loans which carry higher loss ratios along with the impact of the forecast adjustment.
Solar – the allowance decreased due to a decline in outstanding loan balances during the quarter. Credit quality is stable.
Auto and light truck – the allowance reported minimal change as continued growth in the auto rental and leasing sectors was offset by a decline in loan outstandings in higher risk sectors of the portfolio.
Medium and heavy duty truck – the allowance increased due to higher loan outstandings during the quarter. Credit quality metrics continue to be strong for this portfolio. Energy price volatility and driver availability remain a challenge.
Aircraft – the allowance decreased due to lower loan outstandings in both the domestic and foreign sectors. The portfolio is currently bolstered by strong collateral values somewhat offset by continuing economic concerns related primarily to Latin American-based foreign loans. The Company has historically carried a higher allowance in this portfolio due to risk volatility.
Construction equipment – the allowance increased primarily due to strong loan growth in the portfolio.
Commercial real estate – the allowance increased during the quarter due to loan growth along with the impact of the forecast adjustment.
Residential real estate and home equity – the allowance increased primarily due to loan growth.
Consumer – the allowance decreased slightly due to lower loan outstandings during the period.
Economic Outlook
As of March 31, 2023, the most significant economic factors impacting the Company’s loan portfolios are a weakened domestic growth outlook, exacerbated by persistent inflation, higher interest rates and the protracted war in Ukraine and resultant increased geopolitical uncertainty. Recent market liquidity events have added uncertainty and the Company is concerned about the impact of tighter credit conditions on the economy and the effect that may have on future economic growth. The forecast considers global and domestic economic impacts from these factors as well as other key economic factors such as change in gross domestic product and unemployment which may impact the Company’s clients. The Company’s assumption was that economic growth will slow markedly in 2023 and 2024 and inflation will remain well above the 2% Federal Reserve target rate resulting in an adverse impact on the loan and lease portfolio over the next two years.
As a result of geopolitical risks and economic uncertainty, the Company’s future loss estimates may vary considerably from the March 31, 2023 assumptions.
Liability for Credit Losses on Unfunded Loan Commitments
The liability for credit losses inherent in unfunded loan commitments is included in Accrued Expenses and Other Liabilities on the Consolidated Statements of Financial Condition. The following table shows the changes in the liability for credit losses on unfunded loan commitments.
Three Months Ended
March 31,
(Dollars in thousands)20232022
Balance, beginning of period$5,616 $4,196 
Provision1,035 728 
Balance, end of period$6,651 $4,924