The Company measures expected credit losses for financial assets measured at amortized cost, including loans, investments and certain off-balance-sheet credit exposures in accordance with ASU 2016-13. See Note 1 - Summary of Significant Accounting Policies for a description of the Company's allowance methodology.

Under the standard, the Company's methodology for determining the allowance for credit losses on loans is based upon key assumptions, including the lookback periods, historic net charge-off factors, economic forecasts, reversion periods, prepayments and qualitative adjustments. The allowance is measured on a collective, or pool, basis when similar risk characteristics exist. Loans that do not share common risk characteristics are evaluated on an individual basis and are excluded from the collective evaluation. At December 31, 2022, loans totaling $7.77 billion were evaluated collectively and the allowance on these balances totaled $66.2 million and loans evaluated on an individual basis totaled $99.7 million with the specific allocations of the allowance for credit losses totaling $4.1 million.

Federal regulatory agencies, as an integral part of their examination process, review our loans and the corresponding allowance for credit losses. While we believe that our allowance for credit losses on loans in relation to our current loan portfolio is adequate to cover current and expected losses, we cannot assure you that we will not need to increase our allowance for credit losses on loans or that the regulators will not require us to increase this allowance. Future increases in our allowance for credit losses on loans could materially and adversely affect our earnings and profitability.


(in thousands)	2022		2021
Balance at beginning of the period	$	58,047	$	71,124

Initial allowance for credit losses on PCD loans	12,077		—
Charge-offs on PCD loans	(7,634)		—
Charge-offs	(733)		(4,589)
Recoveries	819		2,427
Net (charge-offs) recoveries	(7,548)		(2,162)
Provision for credit loss - loans	7,688		(10,915)
Balance at end of the period	$	70,264	$	58,047

Accrued interest receivable on loans, reported as a component of accrued interest receivable on the consolidated balance sheet, totaled $24.5 million and $13.9 million at December 31, 2022 and December 31, 2021, respectively. The Company made the election to exclude accrued interest receivable from the estimate of credit losses.

The allowance for credit losses increased to $70.3 million, 0.89% of total loans, at December 31, 2022, compared to $58.0 million, 0.97% of total loans, at December 31, 2021, was primarily due to the initial allowance for credit losses on PCD loans acquired from 1st Constitution. The decrease in the allowance as a percentage of total loans is principally due to improvement in macroeconomic conditions and a decrease in historical loss experience.

The 2022 provision was predominantly due to the provision for the 1st Constitution's acquired non-purchased credit deteriorated loans and the growth in the loan portfolio. Charge-offs in 2022 include $7.6 million in charge-offs on 1st Constitution's acquired PCD loans. The benefit of credit losses in 2021 was largely due to an improvement in macroeconomic factors. Non-performing loans totaling $21.7 million were sold during 2021 resulting in net charge-offs of $706,000.


(in thousands)	Balance at December 31, 2021		Initial allowance for credit losses on PCD loans		Charge-offs		Recoveries		Provision (Benefit) for Credit Loss - Loans		Balance at December 31, 2022
Non-owner occupied commercial	$	20,071	$	1,312	$	(4)	$	4	$	2,079	$	23,462
Owner occupied commercial	3,964		1,137		(38)		351		1,282		6,696
Multifamily	8,309		4		—		—		1,112		9,425
Non-owner occupied residential	2,380		175		—		14		74		2,643

Commercial, industrial and other	9,891		2,413		(1,128)		151		(2,491)		8,836
Construction	838		6,843		(6,807)		3		2,091		2,968
Equipment finance	3,663		—		(184)		114		(148)		3,445
Residential mortgage	3,914		179		—		48		3,900		8,041
Consumer	5,017		14		(206)		134		(211)		4,748
Total	$	58,047	$	12,077	$	(8,367)	$	819	$	7,688	$	70,264


(in thousands)	Balance at December 31, 2020		Charge-offs		Recoveries		(Benefit) Provision for Credit Loss - Loans		Balance at December 31, 2021
Non owner occupied commercial	$	25,910	$	(2,708)	$	462	$	(3,593)	$	20,071
Owner occupied commercial	3,955		(282)		302		(11)		3,964
Multifamily	7,253		(28)		—		1,084		8,309
Non owner occupied residential	3,321		(223)		165		(883)		2,380
Commercial, industrial and other	13,665		(401)		888		(4,261)		9,891
Construction	786		(54)		75		31		838
Equipment finance	6,552		(346)		61		(2,604)		3,663
Residential mortgage	3,623		(113)		177		227		3,914
Consumer	6,059		(434)		297		(905)		5,017
Total	$	71,124	$	(4,589)	$	2,427	$	(10,915)	$	58,047


December 31, 2022	Loans								Allowance for Credit Losses
(in thousands)	Individually evaluated		Collectively evaluated		Acquired with deteriorated credit quality		Total		Individually evaluated		Collectively evaluated		Total
Non-owner occupied commercial	$	—	$	2,871,950	$	34,064	$	2,906,014	$	753	$	22,709	$	23,462
Owner occupied commercial	12,041		1,202,919		31,229		1,246,189		983		5,713		6,696
Multifamily	—		1,254,412		6,402		1,260,814		5		9,420		9,425
Non-owner occupied residential	441		216,516		1,069		218,026		16		2,627		2,643
Commercial, industrial and other	2,806		594,568		9,337		606,711		2,150		6,686		8,836
Construction	980		379,120		—		380,100		—		2,968		2,968
Equipment finance	—		151,574		—		151,574		—		3,445		3,445
Residential mortgage	—		764,340		1,212		765,552		181		7,860		8,041
Consumer	—		330,920		150		331,070		3		4,745		4,748
Total loans	$	16,268	$	7,766,319	$	83,463	$	7,866,050	$	4,091	$	66,173	$	70,264


December 31, 2021	Loans								Allowance for Credit Losses
(in thousands)	Individually evaluated for impairment		Collectively evaluated for impairment		Acquired with deteriorated credit quality		Total		Individually evaluated for impairment		Collectively evaluated for impairment		Total
Non owner occupied commercial	$	3,063	$	2,313,047	$	174	$	2,316,284	$	—	$	20,071	$	20,071
Owner occupied commercial	6,678		901,638		133		908,449		69		3,895		3,964
Multifamily	—		972,233		—		972,233		—		8,309		8,309
Non owner occupied residential	2,567		174,463		67		177,097		—		2,380		2,380
Commercial, industrial and other	6,537		455,306		563		462,406		4,182		5,709		9,891
Construction	—		302,228		—		302,228		—		838		838
Equipment finance	—		123,212		—		123,212		—		3,663		3,663
Residential mortgage	1,416		437,294		—		438,710		—		3,914		3,914
Consumer	—		275,529		—		275,529		—		5,017		5,017
Total loans	$	20,261	$	5,954,950	$	937	$	5,976,148	$	4,251	$	53,796	$	58,047

At December 31, 2022, the balance of the allowance for credit loss on available for sale and held to maturity securities was $310,000 and $107,000, respectively. At December 31, 2021, the Company reported an allowance for credit losses of $83,000 on available for sale securities and of $181,000 on held to maturity securities. For the year ended December 31, 2022, the Company recorded a net provision for credit losses of $227,000 on securities available for sale and a net benefit of $74,000 on securities held to maturity in the provision for credit losses on the Consolidated Statement of Income. For the year ended December 31, 2021, the Company, recorded a provision of $84,000 on securities available for sale and $178,000 on securities held to maturity.

Accrued interest receivable on securities is reported as a component of accrued interest receivable on the consolidated balance sheet and totaled $8.7 million and $5.3 million at December 31, 2022 and December 31, 2020, respectively. The Company made the election to exclude accrued interest receivable from the estimate of credit losses on securities.

The allowance for credit losses on off-balance-sheet exposures is reported in other liabilities in the Consolidated Balance Sheets. The liability represents an estimate of expected credit losses arising from off balance sheet exposures such as letters of credit, guarantees and unfunded loan commitments. The process for measuring lifetime expected credit losses on these exposures is consistent with that for loans as discussed above, but is subject to an additional estimate reflecting the likelihood that funding will occur. No liability is recognized for off balance sheet credit exposures that are unconditionally cancellable by the Company. Adjustments to the liability are reported as a component of provision for credit losses.