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Allowance for Credit Losses
 12 Months Ended
Dec. 31, 2021
Financing Receivable, Allowance for Credit Loss, Additional Information [Abstract]  
Allowance for Credit Losses Allowance for Credit Losses
Allowance for Loan and Lease Losses
The methodology used to estimate the appropriate level of the allowance for loan and lease losses is described in Note 1, under the heading “Allowance for Credit Losses.” The allowance for loan and lease losses at December 31, 2021 and 2020, represents the Company’s current estimate of lifetime credit losses inherent in the loan and lease portfolio. The following table shows the changes in the allowance for loan and lease losses, segregated by portfolio segment, for each of the three years ended December 31.
(Dollars in thousands) Commercial and agriculturalSolarAuto and light truckMedium
and
heavy duty truck		AircraftConstruction equipmentCommercial real estateResidential real estate and home equityConsumerTotal
2021         
Balance, beginning of year$16,680 $5,549 $28,926 $6,400 $34,053 $19,166 $22,758 $5,374 $1,748 $140,654 
Charge-offs2,930 — 7,797 — — 856 — 228 712 12,523 
Recoveries812 — 1,316 — 687 473 19 16 341 3,664 
Net charge-offs (recoveries)2,118 — 6,481 — (687)383 (19)212 371 8,859 
Provision (recovery of provision)847 1,036 (2,821)(385)(1,112)890 (3,086)(78)406 (4,303)
Balance, end of year$15,409 $6,585 $19,624 $6,015 $33,628 $19,673 $19,691 $5,084 $1,783 $127,492 
2020         
Balance, beginning of year$20,926 $2,745 $14,400 $4,612 $31,058 $14,120 $18,350 $3,609 $1,434 $111,254 
Impact of ASC 326 adoption(939)284 (1,303)2,414 484 372 (649)1,688 233 2,584 
Adjusted balance, beginning of year19,987 3,029 13,097 7,026 31,542 14,492 17,701 5,297 1,667 113,838 
Charge-offs903 — 7,107 15 855 4,090 37 74 893 13,974 
Recoveries663 — 499 18 1,800 1,415 58 33 303 4,789 
Net charge-offs (recoveries)240 — 6,608 (3)(945)2,675 (21)41 590 9,185 
Provision (recovery of provision)(3,067)2,520 22,437 (629)1,566 7,349 5,036 118 671 36,001 
Balance, end of year$16,680 $5,549 $28,926 $6,400 $34,053 $19,166 $22,758 $5,374 $1,748 $140,654 
2019         
Balance, beginning of year$15,555 $1,508 $14,689 $4,303 $33,047 $10,922 $15,705 $3,425 $1,315 $100,469 
Charge-offs1,040 — 991 1,132 3,066 238 5 53 1,066 7,591 
Recoveries664 — 97 32 1,143 160 75 85 287 2,543 
Net charge-offs (recoveries)376 — 894 1,100 1,923 78 (70)(32)779 5,048 
Provision (recovery of provision)5,747 1,237 605 1,409 (66)3,276 2,575 152 898 15,833 
Balance, end of year$20,926 $2,745 $14,400 $4,612 $31,058 $14,120 $18,350 $3,609 $1,434 $111,254 
The allowance for loan and lease losses decreased year-over-year in 2021 for most portfolio segments due to improvements in credit quality, attributable in large part to government stimulus payments which provided much needed relief to our customers during the pandemic. The 2020 allowance includes the impact of adopting ASC 326 for each loan segment. Generally, a decrease in the allowance upon adoption was related to shorter duration assets in the loan class and likewise, an increase was generally due to longer duration assets.
Commercial and agricultural – loans declined year-over-year due to PPP debt forgiveness partially offset by modest loan growth in our core businesses. The decline in the allowance was principally due to improved credit quality as reflected by lower special attention loan balances.
Solar – allowance increased due to loan growth. Credit quality is stable to improving.
Auto and light truck – allowance decreased as a result of charge-offs and lower outstanding loan balances in the higher risk bus segment of the portfolio, which was significantly impacted by the pandemic. The decline in balances in the bus segment was more than offset by increases in the auto rental and leasing segments, which carry lower loss ratios.
Medium and heavy duty truck – allowance decrease was principally attributable to a decrease in portfolio outstanding balances. Credit quality metrics continued to be relatively strong for this portfolio.
Aircraft – the allowance was principally impacted by improved credit quality metrics and strengthening collateral values somewhat offset by loan growth and heightened economic concerns related to foreign loans. The Company has historically carried a higher allowance in this portfolio due to risk volatility.
Construction equipment – allowance increase was driven by loan growth.
Commercial real estate – allowance decrease was a result of declines in outstanding loan balances and also qualitative adjustments to the loss ratios for the hotel segment which was hard hit by the pandemic but is currently performing better than anticipated.
Residential real estate and home equity – decreased allowance due to decline in loan balances.
Consumer – segment saw an increase in allowance due to forecast adjustments and slight loan growth.
Economic Outlook
As of December 31, 2021, the most significant economic factors impacting our loan portfolios are the pandemic and the Omicron COVID variant surge, ongoing supply chain disruptions, and increasing inflation. The forecast considers global and domestic economic effects from the pandemic as well as other key economic factors such as unemployment and inflation which may impact our clients. The Company’s assumption was that economic growth will slow in 2022 and 2023 and inflation will remain 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 the unprecedented economic uncertainty caused by the COVID-19 pandemic, the Company’s future loss estimates may vary considerably from the December 31, 2021 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 for each of the three years ended December 31.
(Dollars in thousands)202120202019
Balance, beginning of year$4,499 $3,172 $3,075 
Impact of ASC 326 adoption— 777 — 
Adjusted balance, beginning of year4,499 3,949 3,075 
(Recovery of) provision(303)550 97 
Balance, end of year$4,196 $4,499 $3,172