XML 23 R14.htm IDEA: XBRL DOCUMENT v3.23.2
Allowance for Credit Losses
 6 Months Ended
Jun. 30, 2023
Receivables [Abstract]  
Allowance for Credit Losses Allowance for Credit Losses
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 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 for a description of the Company's 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 June 30, 2023, loans totaling $8.02 billion were evaluated collectively and the allowance on these balances totaled $70.8 million and loans totaling $84.1 million were evaluated on an individual basis with the specific allocations of the allowance for credit losses totaling $3.2 million. Loans evaluated on an individual basis include $74.6 million in PCD loans, which had a specific allowance for credit losses of $2.5 million. The Company made the election to exclude accrued interest receivable from the estimate of credit losses.
Allowance for Credit Losses - Loans
The allowance for credit losses on loans is summarized in the following table:
For the Three Months Ended June 30,For the Six Months Ended June 30,
(in thousands)2023202220232022
Balance at beginning of the period$71,403 $67,112 $70,264 $58,047 
Initial allowance for credit losses on PCD loans— — — 12,077 
Charge-offs on PCD loans— — — (7,634)
Charge-offs(148)(369)(287)(539)
Recoveries288 510 353 672 
  Net recoveries (charge-offs)140 141 66 (7,501)
Provision for credit loss - loans2,422 1,583 3,635 6,213 
Balance at end of the period$73,965 $68,836 $73,965 $68,836 
The provision for credit losses on loans for the second quarter of 2023 included a slight increase in qualitative factors due to uncertainty in the economy compared to the second quarter of 2022, which was partially offset by a decrease in the total of individually evaluated loans, while the provision for the six months ended June 30, 2022 was predominantly due to the provision for the 1st Constitution's acquired non-purchased credit deteriorated loans. Charge-offs in the six months ended June 30, 2022 include $7.6 million in charge-offs on 1st Constitution's acquired PCD loans.

The following tables detail activity in the allowance for credit losses on loans by portfolio segment for the three and six months ended 2023 and 2022:
(in thousands)
Balance at March 31, 2023
Charge-offsRecoveriesProvision (Benefit) for Credit Loss
Balance at June 30, 2023
Non-owner occupied commercial$24,281 $— $— $(738)$23,543 
Owner occupied commercial6,058 — 6 100 6,164 
Multifamily9,010 — — 27 9,037 
Non-owner occupied residential2,593 — — (189)2,404 
Commercial, industrial and other8,111 (13)176 605 8,879 
Construction3,105 (13)— (360)2,732 
Equipment finance4,448 (22)10 2,048 6,484 
Residential mortgage8,944 — — 661 9,605 
Consumer4,853 (100)96 268 5,117 
Total$71,403 $(148)$288 $2,422 $73,965 
(in thousands)
Balance at March 31, 2022
Initial allowance for credit losses on PCD loansCharge-offsRecoveriesProvision (Benefit) for Credit Loss
Balance at June 30, 2022
Non owner occupied commercial$23,649 $— $— $4 $273 $23,926 
Owner occupied commercial6,125 — (4)341 476 6,938 
Multifamily8,300 — — — 141 8,441 
Non owner occupied residential2,908 — — — (15)2,893 
Commercial, industrial and other11,674 — (305)33 (1,313)10,089 
Construction1,727 — — — 1,210 2,937 
Equipment finance2,459 — (24)64 (246)2,253 
Residential mortgage5,686 — — — 893 6,579 
Consumer4,584 — (36)68 164 4,780 
Total$67,112 $— $(369)$510 $1,583 $68,836 
(in thousands)
Balance at December 31, 2022
Charge-offsRecoveriesProvision (Benefit) for Credit Loss
Balance at June 30, 2023
Non-owner occupied commercial$23,462 $— $— $81 $23,543 
Owner occupied commercial6,696 — 6 (538)6,164 
Multifamily9,425 — — (388)9,037 
Non-owner occupied residential2,643 — — (239)2,404 
Commercial, industrial and other8,836 (13)211 (155)8,879 
Construction2,968 (13)— (223)2,732 
Equipment finance3,445 (83)25 3,097 6,484 
Residential mortgage8,041 — — 1,564 9,605 
Consumer4,748 (178)111 436 5,117 
Total$70,264 $(287)$353 $3,635 $73,965 
    
(in thousands)
Balance at December 31, 2021
Initial allowance for credit losses on PCD loansCharge-offsRecoveriesProvision (Benefit) for Credit Loss
Balance at June 30, 2022
Non owner occupied commercial$20,071 $1,312 $(4)$4 $2,543 $23,926 
Owner occupied commercial3,964 1,137 (38)351 1,524 6,938 
Multifamily8,309 4 — — 128 8,441 
Non owner occupied residential2,380 175 — 14 324 2,893 
Commercial, industrial and other9,891 2,413 (1,128)78 (1,165)10,089 
Construction838 6,843 (6,807)3 2,060 2,937 
Equipment finance3,663 — (121)79 (1,368)2,253 
Residential mortgage3,914 179 — 48 2,438 6,579 
Consumer5,017 14 (75)95 (271)4,780 
Total$58,047 $12,077 $(8,173)$672 $6,213 $68,836 


The following tables present the recorded investment in loans by portfolio segment and the related allowance for credit losses at June 30, 2023 and December 31, 2022:
June 30, 2023Loans Allowance for Credit Losses
(in thousands) Individually evaluated for impairment Collectively evaluated for impairmentAcquired with deteriorated credit qualityTotalIndividually evaluated for impairmentCollectively evaluated for impairment Total
Non-owner occupied commercial$— $2,962,009 $29,115 $2,991,124 $591 $22,952 $23,543 
Owner occupied commercial7,498 1,160,453 33,098 1,201,049 906 5,258 6,164 
Multifamily— 1,308,261 5,994 1,314,255 16 9,021 9,037 
Non-owner occupied residential523 204,260 1,035 205,818 15 2,389 2,404 
Commercial, industrial and other1,531 589,290 3,969 594,790 1,508 7,371 8,879 
Construction— 354,918 — 354,918 — 2,732 2,732 
Equipment finance— 173,469 — 173,469 — 6,484 6,484 
Residential mortgage— 920,903 1,206 922,109 154 9,451 9,605 
Consumer— 343,613 142 343,755 — 5,117 5,117 
Total loans$9,552 $8,017,176 $74,559 $8,101,287 $3,190 $70,775 $73,965 
December 31, 2022Loans Allowance for Credit Losses
(in thousands)Individually evaluated for impairmentCollectively evaluated for impairmentAcquired with deteriorated credit qualityTotalIndividually evaluated for impairmentCollectively evaluated for impairmentTotal
Non-owner occupied commercial$— $2,871,950 $34,064 2,906,014 $753 $22,709 $23,462 
Owner occupied commercial12,041 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 residential441 216,516 1,069 218,026 16 2,627 2,643 
Commercial, industrial and other2,806 594,568 9,337 606,711 2,150 6,686 8,836 
Construction980 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 
Allowance for Credit Losses - Securities
At June 30, 2023, the balance of the allowance for credit loss on available for sale and held to maturity securities was $0 and $146,000, respectively. At December 31, 2022, the Company reported an allowance for credit losses on available for sale securities of $310,000 and an allowance for credit losses on held to maturity securities of $107,000.
The allowance for credit losses on securities is summarized in the following tables:
Available for SaleFor the Three Months Ended June 30,For the Six Months Ended June 30,
(in thousands)2023202220232022
Balance at beginning of the period$160 $1,267 $310 $83 
Charge-offs$— $— (6,640)
Recoveries$— $— — 
  Net charge-offs $— $— (6,640)
(Benefit) provision for credit loss expense(160)1,535 6,330 2,719 
Balance at end of the period$— $2,802 $— $2,802 
Held to MaturityFor the Three Months Ended June 30,For the Six Months Ended June 30,
(in thousands)2023202220232022
Balance at beginning of the period$157 $199 $107 $181 
(Benefit) provision for credit loss expense(11)(9)39 9 
Balance at end of the period$146 $190 $146 $190 

The provision for credit loss expense for available for sale securities increased from $2.7 million in the first half of 2022 to $6.3 million in the first half of 2023 as a result of a $6.6 million provision and subsequent charge-off of subordinated debt securities of Signature Bank which failed in March 2023.
Accrued interest receivable on securities is reported as a component of accrued interest receivable on the consolidated balance sheets and totaled $9.0 million at June 30, 2023 and $8.7 million at December 31, 2022. The Company made the election to exclude accrued interest receivable from the estimate of credit losses on securities.
Allowance for Credit Losses - Off-Balance-Sheet Exposures
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 the provision for credit losses.
At June 30, 2023 and December 31, 2022, the balance of the allowance for credit losses for off-balance sheet exposures was $2.8 million and $3.0 million, respectively. For the three months ended June 30, 2023 and three months ended June 30, 2022, the Company recorded a benefit for credit losses on off-balance-sheet exposures of $304,000 and a provision for credit losses on off-balance sheet exposures of $535,000, respectively. For the six months ended June 30, 2023 and six months ended June 30, 2022, the Company recorded a benefit for credit losses on off-balance sheet exposures of $164,000 and a provision for credit losses on off-balance sheet exposures of $975,000, respectively