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LOANS AND ALLOWANCE FOR CREDIT LOSSES

3 Months Ended

Mar. 31, 2023

The following is a summary of total loans by regulatory call report code with sub-segmentation based on underlying collateral for certain loan types:


(In thousands)	March 31, 2023		December 31, 2022
Construction	$	373,953	$	319,452
Commercial multifamily	618,073		620,088
Commercial real estate owner occupied	695,890		640,489
Commercial real estate non-owner occupied	2,531,946		2,496,237
Commercial and industrial	1,517,556		1,445,236

Residential real estate	2,463,981		2,312,447
Home equity	222,393		227,450
Consumer other	258,175		273,910
Total loans	$	8,681,967	$	8,335,309

Allowance for credit losses	97,991		96,270
Net loans	$	8,583,976	$	8,239,039

During the three months ended March 31, 2023 and March 31, 2022, there were no loans reclassified to held for sale. Held for sale loans are not contained in the balances within this note and are accounted for at the lower of carrying value or fair market value within loans held for sale on the Consolidated Balance Sheet.

Risk characteristics relevant to each portfolio segment are as follows:

Construction - Loans in this segment primarily include real estate development loans for which payment is derived from sale of the property or long term financing at completion. Credit risk is affected by cost overruns, time to sell at an adequate price, and market conditions.

Commercial real estate multifamily, owner occupied and non-owner - Loans in these segments are primarily owner-occupied or income-producing properties throughout New England and Northeastern New York. The underlying cash flows generated by the properties are adversely impacted by a downturn in the economy, which in turn, will have an effect on the credit quality in this segment. Management monitors the cash flows of these loans.

Commercial and industrial loans - Loans in this segment are made to businesses and are generally secured by assets of the business such as accounts receivable, inventory, marketable securities, other liquid collateral, equipment and other business assets. Repayment is expected from the cash flows of the business. Loans in this segment include asset based loans which generally have no scheduled repayment and which are closely monitored against formula based collateral advance ratios. A weakened economy, and resultant decreased consumer spending, will have an effect on the credit quality in this segment.

Residential real estate - All loans in this segment are collateralized by residential real estate and repayment is dependent on the credit quality of the individual borrower. The overall health of the economy, including unemployment rates and housing prices, will have an effect on the credit quality in this segment.

Home equity and other consumer loans - Loans in this segment are primarily home equity lines of credit, automobile loans and other consumer loans. The overall health of the economy, including unemployment rates and housing prices, will have an effect on the credit quality in this segment.

Allowance for Credit Losses for Loans

The Allowance for Credit Losses for Loans (“ACLL”) is comprised of the allowance for loan losses, and the allowance for unfunded commitments is accounted for as a separate liability in other liabilities on the balance sheet. The level of the ACLL represents management’s estimate of expected credit losses over the expected life of the loans at the balance sheet date. The Company uses a static pool migration analysis method, applying expected historical loss trend and observed economic metrics. The level of the ACLL is based on management’s ongoing review of all relevant information, from internal and external sources, relating to past and current events, utilizing a 7 quarter reasonable and supportable forecast period with a 1 year reversion period. The ACLL reserve is overlaid with qualitative factors based upon:

•the existence and growth of concentrations of credit;

•the volume and severity of past due financial assets, including nonaccrual assets;

•the institutions lending and credit review as well as the experience and ability of relevant management and staff and;

•the effect of other external factors such as regulatory, competition, regional market conditions, legal and technological environment and other events such as natural disasters;

•the effect of other economic factors such as economic stimulus and customer forbearance programs.

The allowance for unfunded commitments is maintained at a level by the Company to be sufficient to absorb expected lifetime losses related to unfunded credit facilities (including unfunded loan commitments and letters of credit) and is included in other liabilities on the consolidated balance sheet.

The Company’s activity in the allowance for credit losses for loans for the three ended March 31, 2023 and March 31, 2022 was as follows:


(In thousands)	Balance at Beginning of Period		Adoption of ASU No. 2022-02		Charge-offs		Recoveries		Provision for Credit Losses		Balance at End of Period
Three months ended March 31, 2023
Construction	$	1,227	$	—	$	—	$	—	$	309	$	1,536
Commercial multifamily	1,810		—		—		6		(118)		1,698
Commercial real estate owner occupied	10,739		24		(70)		45		(460)		10,278
Commercial real estate non-owner occupied	30,724		—		—		95		2,589		33,408
Commercial and industrial	18,743		(23)		(6,033)		305		7,172		20,164

Residential real estate	18,666		2		(31)		387		(1,434)		17,590
Home equity	2,173		—		(10)		26		131		2,320
Consumer other	12,188		(404)		(1,793)		176		830		10,997
Total allowance for credit losses	$	96,270	$	(401)	$	(7,937)	$	1,040	$	9,019	$	97,991


(In thousands)	Balance at Beginning of Period		Charge-offs		Recoveries		Provision for Credit Losses		Balance at End of Period
Three months ended March 31, 2022
Construction	$	3,206	$	—	$	—	$	(701)	$	2,505
Commercial multifamily	6,120		—		—		(349)		5,771
Commercial real estate owner occupied	12,752		(130)		209		(1,333)		11,498
Commercial real estate non-owner occupied	32,106		(4,884)		1,266		(2,674)		25,814
Commercial and industrial	22,584		(653)		1,288		(270)		22,949

Residential real estate	22,406		(164)		388		(4,814)		17,816
Home equity	4,006		—		134		(837)		3,303
Consumer other	2,914		(216)		137		6,984		9,819
Total allowance for credit losses	$	106,094	$	(6,047)	$	3,422	$	(3,994)	$	99,475

The Company’s allowance for credit losses on unfunded commitments is recognized as a liability (other liabilities on the consolidated balance sheet), with adjustments to the reserve recognized in other noninterest expense in the consolidated statement of income. The Company’s activity in the allowance for credit losses on unfunded commitments for the three months ended March 31, 2023 and 2022 was as follows:


	Three Months Ended March 31,
(In thousands)	2023		2022
Balance at beginning of period	$	8,588	$	7,043


Expense for credit losses	99		—
Balance at end of period	$	8,687	$	7,043

Credit Quality Information

The Company monitors the credit quality of its portfolio by using internal risk ratings that are based on regulatory guidance. Loans that are given a Pass rating are not considered a problem credit. Loans that are classified as Special Mention loans are considered to have potential weaknesses and are evaluated closely by management. Substandard, including non-accruing loans, are loans for which a definitive weakness has been identified and which may make full collection of contractual cash flows questionable. Doubtful loans are those with identified weaknesses that make full collection of contractual cash flows, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

For commercial credits, the Company assigns an internal risk rating at origination and reviews the rating annual, semiannually, or quarterly depending on the risk rating. The rating is also reassessed at any point in time when management becomes aware of information that may affect the borrower’s ability to fulfill their obligations.

The Company risk rates its residential mortgages, including 1-4 family and residential construction loans, based on a three rating system: Pass, Special Mention, and Substandard. Loans that are current within 59 days are rated Pass. Residential mortgages that are 60-89 days delinquent are rated Special Mention. Loans delinquent for 90 days or greater are rated Substandard and generally placed on non-accrual status.

The following table presents the Company’s loans by risk category:


	Term Loans Amortized Cost Basis by Origination Year
(In thousands)	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total
As of March 31, 2023
Construction
Current period gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Risk rating
Pass	$	14,566	$	177,174	$	152,773	$	26,327	$	2,967	$	145	$	—	$	—	$	373,952
Special Mention	—		—		—		—		—		1		—		—		1
Substandard	—		—		—		—		—		—		—		—		—
Total	$	14,566	$	177,174	$	152,773	$	26,327	$	2,967	$	146	$	—	$	—	$	373,953
Commercial multifamily:
Current period gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Risk rating
Pass	$	3,938	$	204,570	$	57,851	$	27,427	$	99,583	$	215,608	$	990	$	—	$	609,967
Special Mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		2,609		—		5,497		—		—		8,106
Total	$	3,938	$	204,570	$	57,851	$	30,036	$	99,583	$	221,105	$	990	$	—	$	618,073
Commercial real estate owner occupied:
Current period gross write-offs	$	—	$	—	$	—	$	—	$	—	$	70	$	—	$	—	$	70

Risk rating
Pass	$	25,216	$	124,314	$	127,750	$	57,507	$	102,523	$	238,771	$	3,002	$	—	$	679,083
Special Mention	—		4,281		—		387		3,855		—		—		—		8,523
Substandard	—		972		122		493		241		6,456		—		—		8,284
Total	$	25,216	$	129,567	$	127,872	$	58,387	$	106,619	$	245,227	$	3,002	$	—	$	695,890
Commercial real estate non-owner occupied:
Current period gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Risk rating
Pass	$	114,007	$	630,920	$	409,821	$	173,271	$	290,200	$	818,573	$	17,253	$	—	$	2,454,045
Special Mention	—		—		—		—		7,669		23,821		—		—		31,490
Substandard	—		—		660		7,137		5,890		32,724		—		—		46,411
Total	$	114,007	$	630,920	$	410,481	$	180,408	$	303,759	$	875,118	$	17,253	$	—	$	2,531,946
Commercial and industrial:
Current period gross write-offs	$	—	$	—	$	191	$	669	$	580	$	4,593	$	—	$	—	$	6,033

Risk rating
Pass	$	56,776	$	279,856	$	142,925	$	49,172	$	60,597	$	169,281	$	699,241	$	—	$	1,457,848
Special Mention	175		—		1,210		1,290		2,597		1,805		6,342		—		13,419
Substandard	—		549		5,425		3,566		7,496		14,571		10,332		—		41,939
Doubtful	—		—		—		—		—		51		4,299		—		4,350
Total	$	56,951	$	280,405	$	149,560	$	54,028	$	70,690	$	185,708	$	720,214	$	—	$	1,517,556


	Term Loans Amortized Cost Basis by Origination Year
(In thousands)	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total
Residential real estate
Current period gross write-offs	$	—	$	25	$	—	$	—	$	—	$	6	$	—	$	—	$	31

Risk rating
Pass	$	136,527	$	1,008,711	$	276,189	$	94,488	$	71,237	$	862,274	$	161	$	—	$	2,449,587
Special Mention	—		43		371		—		—		694		—		—		1,108
Substandard	—		159		331		434		1,485		10,877		—		—		13,286
Total	$	136,527	$	1,008,913	$	276,891	$	94,922	$	72,722	$	873,845	$	161	$	—	$	2,463,981


	Term Loans Amortized Cost Basis by Origination Year
(In thousands)	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total
As of December 31, 2022
Construction
Risk rating
Pass	$	153,393	$	133,708	$	25,634	$	3,432	$	1,361	$	1,924	$	—	$	—	$	319,452
Special Mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—		—
Total	$	153,393	$	133,708	$	25,634	$	3,432	$	1,361	$	1,924	$	—	$	—	$	319,452

Commercial multifamily:
Risk rating
Pass	$	205,124	$	61,032	$	27,583	$	100,696	$	67,675	$	149,633	$	205	$	—	$	611,948
Special Mention	—		—		2,628		—		—		—		—		—		2,628
Substandard	—		—		—		—		5,512		—		—		—		5,512
Total	$	205,124	$	61,032	$	30,211	$	100,696	$	73,187	$	149,633	$	205	$	—	$	620,088

Commercial real estate owner occupied:
Risk rating
Pass	$	131,096	$	127,270	$	58,835	$	82,576	$	75,322	$	154,056	$	3,464	$	—	$	632,619
Special Mention	—		—		387		—		—		—		—		—		387
Substandard	1,003		122		31		282		1,056		4,989		—		—		7,483
Total	$	132,099	$	127,392	$	59,253	$	82,858	$	76,378	$	159,045	$	3,464	$	—	$	640,489

Commercial real estate non-owner occupied:
Risk rating
Pass	$	621,685	$	410,359	$	175,456	$	333,783	$	313,124	$	530,322	$	17,846	$	—	$	2,402,575
Special Mention	—		—		—		—		20,000		18,462		—		—		38,462
Substandard	—		—		7,237		13,623		15,610		18,730		—		—		55,200
Total	$	621,685	$	410,359	$	182,693	$	347,406	$	348,734	$	567,514	$	17,846	$	—	$	2,496,237

Commercial and industrial:
Risk rating
Pass	$	282,781	$	147,070	$	56,880	$	67,975	$	83,223	$	99,367	$	648,956	$	—	$	1,386,252
Special Mention	—		5,811		1,290		1,332		11,502		912		2,632		—		23,479
Substandard	204		496		3,640		8,139		1,981		2,799		10,581		—		27,840
Doubtful	—		—		—		—		—		56		7,609		—		7,665
Total	$	282,985	$	153,377	$	61,810	$	77,446	$	96,706	$	103,134	$	669,778	$	—	$	1,445,236









Residential real estate
Risk rating
Pass	$	997,981	$	280,308	$	96,548	$	70,845	$	138,894	$	713,744	$	165	$	—	$	2,298,485
Special Mention	—		364		—		861		202		707		—		—		2,134
Substandard	—		284		448		267		1,857		8,972		—		—		11,828
Total	$	997,981	$	280,956	$	96,996	$	71,973	$	140,953	$	723,423	$	165	$	—	$	2,312,447

For home equity and consumer other loan portfolio segments, Berkshire evaluates credit quality based on the aging status of the loan and by payment activity. The performing or nonperforming status is updated on an ongoing basis dependent upon improvement and deterioration in credit quality. The following table presents the amortized cost based on payment activity:


	Term Loans Amortized Cost Basis by Origination Year
(In thousands)	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total
As of March 31, 2023
Home equity:
Current period gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	10	$	—	$	10

Payment performance
Performing	$	—	$	—	$	111	$	450	$	—	$	2,423	$	217,685	$	—	$	220,669
Nonperforming	—		—		—		—		—		—		1,724		—		1,724
Total	$	—	$	—	$	111	$	450	$	—	$	2,423	$	219,409	$	—	$	222,393

Consumer other:
Current period gross write-offs	$	—	$	1,510	$	181	$	7	$	21	$	74	$	—	$	—	$	1,793

Payment performance
Performing	$	11,962	$	148,658	$	26,235	$	7,661	$	11,125	$	41,923	$	9,556	$	—	$	257,120
Nonperforming	—		52		84		34		190		673		22		—		1,055
Total	$	11,962	$	148,710	$	26,319	$	7,695	$	11,315	$	42,596	$	9,578	$	—	$	258,175


	Term Loans Amortized Cost Basis by Origination Year
(In thousands)	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total
As of December 31, 2022
Home equity:
Payment performance
Performing	$	—	$	114	$	454	$	—	$	—	$	17	$	224,746	$	—	$	225,331
Nonperforming	—		—		—		—		—		—		2,119		—		2,119
Total	$	—	$	114	$	454	$	—	$	—	$	17	$	226,865	$	—	$	227,450

Consumer other:
Payment performance
Performing	$	161,157	$	28,279	$	8,312	$	12,670	$	27,608	$	24,682	$	9,070	$	—	$	271,778
Nonperforming	588		137		44		280		477		567		39		—		2,132
Total	$	161,745	$	28,416	$	8,356	$	12,950	$	28,085	$	25,249	$	9,109	$	—	$	273,910

The following is a summary of loans by past due status at March 31, 2023 and December 31, 2022:


(In thousands)	30-59 Days Past Due		60-89 Days Past Due		90 Days or Greater Past Due		Total Past Due		Current		Total Loans
March 31, 2023
Construction	$	—	$	1	$	—	$	1	$	373,952	$	373,953
Commercial multifamily	—		208		—		208		617,865		618,073
Commercial real estate owner occupied	265		—		2,785		3,050		692,840		695,890
Commercial real estate non-owner occupied	127		660		176		963		2,530,983		2,531,946
Commercial and industrial	2,174		2,555		13,596		18,325		1,499,231		1,517,556

Residential real estate	3,278		1,108		13,185		17,571		2,446,410		2,463,981
Home equity	599		172		2,093		2,864		219,529		222,393
Consumer other	1,982		1,082		2,093		5,157		253,018		258,175
Total	$	8,425	$	5,786	$	33,928	$	48,139	$	8,633,828	$	8,681,967


(In thousands)	30-59 Days Past Due		60-89 Days Past Due		90 Days or Greater Past Due		Total Past Due		Current		Total Loans
December 31, 2022
Construction	$	—	$	—	$	—	$	—	$	319,452	$	319,452
Commercial multifamily	—		214		—		214		619,874		620,088
Commercial real estate owner occupied	122		—		3,302		3,424		637,065		640,489
Commercial real estate non-owner occupied	143		—		191		334		2,495,903		2,496,237
Commercial and industrial	1,173		1,438		18,658		21,269		1,423,967		1,445,236

Residential real estate	3,694		2,134		11,724		17,552		2,294,895		2,312,447
Home equity	168		57		2,119		2,344		225,106		227,450
Consumer other	1,990		1,028		2,158		5,176		268,734		273,910
Total	$	7,290	$	4,871	$	38,152	$	50,313	$	8,284,996	$	8,335,309

The following is a summary of loans on nonaccrual status and loans past due 90 days or more and still accruing as of March 31, 2023 and December 31, 2022:



(In thousands)	Nonaccrual Amortized Cost		Nonaccrual With No Related Allowance		Past Due 90 Days or Greater and Accruing		Interest Income Recognized on Nonaccrual
At or for the three months ended March 31, 2023
Construction	$	—	$	—	$	—	$	—
Commercial multifamily	—		—		—		—
Commercial real estate owner occupied	2,192		1,058		593		—
Commercial real estate non-owner occupied	176		66		—		—
Commercial and industrial	12,124		7,917		1,472		—

Residential real estate	9,720		6,120		3,465		—
Home equity	1,724		461		369		—
Consumer other	1,055		—		1,038		—
Total	$	26,991	$	15,622	$	6,937	$	—

The commercial and industrial loans nonaccrual amortized cost as of March 31, 2023 included medallion loans with a fair value of $0.5 million and a contractual balance of $10.2 million.



(In thousands)	Nonaccrual Amortized Cost		Nonaccrual With No Related Allowance		Past Due 90 Days or Greater and Accruing		Interest Income Recognized on Nonaccrual
At or for the three months ended December 31, 2022
Construction	$	—	$	—	$	—	$	—
Commercial multifamily	—		—		—		—
Commercial real estate owner occupied	2,202		1,411		1,100		—
Commercial real estate non-owner occupied	191		73		—		—
Commercial and industrial	16,992		14,223		1,666		—

Residential real estate	8,901		5,307		2,823		—
Home equity	1,568		388		551		—
Consumer other	1,260		2		898		—
Total	$	31,114	$	21,404	$	7,038	$	—

The commercial and industrial loans nonaccrual amortized cost as of December 31, 2022 included medallion loans with a fair value of $0.6 million and a contractual balance of $10.9 million.

The following table summarizes information about total loans rated Special Mention or lower at March 31, 2023 and December 31, 2022. The table below includes consumer loans that are Special Mention and Substandard accruing that are classified as performing based on payment activity.


(In thousands)	March 31, 2023		December 31, 2022
Non-Accrual	$	26,991	$	31,114
Substandard Accruing	99,551		88,665
Total Classified	126,542		119,779
Special Mention	55,751		68,127
Total Criticized	$	182,293	$	187,906

A financial asset is considered collateral-dependent when the debtor is experiencing financial difficulty and repayment is expected to be provided substantially through the sale or operation of the collateral. Expected credit losses for collateral-dependent loans are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate. Significant quarter over quarter changes are reflective of changes in nonaccrual status and not necessarily associated with credit quality indicators like appraisal value. The following table presents the amortized cost basis of individually analyzed collateral-dependent loans by loan portfolio segment:


	Type of Collateral
(In thousands)	Real Estate		Investment Securities/Cash		Other
March 31, 2023
Construction	$	—	$	—	$	—
Commercial multifamily			—		—
Commercial real estate owner occupied	1,066		—		—
Commercial real estate non-owner occupied	373		—		—
Commercial and industrial	185		—		8,946

Residential real estate	4,746		—		—
Home equity	462		—		—
Consumer other	—		—		—
Total loans	$	6,832	$	—	$	8,946

December 31, 2022
Construction	$	—	$	—	$	—
Commercial multifamily	—		—		—
Commercial real estate owner occupied	2,793		—		—
Commercial real estate non-owner occupied	384		—		—
Commercial and industrial	288		—		16,931

Residential real estate	3,910		—		—
Home equity	501		—		—
Consumer other	2		—		—
Total loans	$	7,878	$	—	$	16,931

Modified Loans

Occasionally, the Company modifies loans to borrowers in financial distress by providing principal forgiveness, term extension, an other-than-insignificant 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 concessions on one loan. Typically, one type of concession, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another concession, such as principal forgiveness, may be granted. For the loans included in the "combination" columns below, multiple types of modifications have been made on the same loan within the current reporting period. The combination is at least two of the following: a term extension and principal forgiveness, an other-than-insignificant payment delay and/or an interest rate reduction.

The following table presents the amortized cost basis of loans at March 31, 2023 that were both experiencing financial difficulty and modified during the three months ended March 31, 2023, by class and by type of modification. The percentage of the amortized cost basis of loans that were modified to borrowers in financial distress as compared to the amortized cost basis of each class of financing receivable is also presented below:


(In thousands)	Principal Forgiveness		Payment Delay		Term Extension		Interest Rate Reduction		Combination Term Extension and Principal Forgiveness		Combination Term Extension and Interest Rate Reduction		Total Class of Financing Receivable
Three months ended March 31, 2023
Construction	$	—	$	—	$	—	$	—	$	—	$	—	—	%
Commercial multifamily	—		—		—		—		—		—		—
Commercial real estate owner occupied	—		387		—		—		—		—		0.06
Commercial real estate non-owner occupied	—		—		—		—		—		—		—
Commercial and industrial	—		—		—		—		10		—		—

Residential real estate	—		—		—		—		—		—		—
Home equity	—		—		—		—		—		—		—
Consumer other	—		—		—		—		—		—		—
Total	$	—	$	387	$	—	$	—	$	10	$	—	—	%

The Company has not committed to lend additional amounts to the borrowers included in the previous table.

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 twelve months.

(In thousands)

30 - 59 Days Past Due

60 - 89 Days Past Due

Greater Than 89 Days Past Due

Total Past Due

March 31, 2023

Construction

—

Commercial multifamily

—

Commercial real estate owner occupied

—

Commercial real estate non-owner occupied

—

Commercial and industrial

—

Residential real estate

—

Home equity

—

Consumer other

—

Total

—

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


(In thousands)	Principal Forgiveness		Weighted Average Interest Rate Reduction		Weighted Average Term Extension (months)
March 31, 2023
Construction	$	—	—	%	0
Commercial multifamily	—		—		0
Commercial real estate owner occupied	—		—		120
Commercial real estate non-owner occupied	—		—		0
Commercial and industrial	—		1.25		87
Residential real estate	—		—		0
Home equity	—		—		0
Consumer other	—		—		0

There were no loans that had a payment default during the three months ended March 31, 2023 that were modified in the twelve months prior to that default to borrowers experiencing financial difficulty.

Upon the Company's determination that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or portion of the loan) is written 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.