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Allowance for Credit Losses on Loans | 3 Months Ended
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Mar. 31, 2023
Receivables [Abstract] |
Allowance for Credit Losses on Loans | Allowance for Credit Losses on Loans The Company's methodology for determining the ACL 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. For a description of the Company's ACL policy, see Note 1 - Description of Business, Basis of Presentation, Significant Accounting Policies and Recently Issued Accounting Pronouncements included in Item 8. Financial Statements And Supplementary Data in our 2022 Annual Form 10-K. GAAP requires the Company to develop reasonable and supportable forecasts of future conditions, and estimate how those forecasts are expected to impact a borrower’s ability to satisfy their obligation to the Company and the ultimate collectability of future cash flows over the life of a loan. The Company uses macroeconomic scenarios from an independent third party. These scenarios are based on past events, current conditions, and the likelihood of future events occurring. The Company’s ACL model at March 31, 2023 includes assumptions concerning the rising interest rate environment, ongoing inflationary pressures throughout the U.S. economy, higher energy prices, and general uncertainty concerning future economic conditions, and the potential for recessionary conditions. The Company recognizes that historical information used as the basis for determining future expected credit losses may not always, by itself, provide a sufficient basis for determining future expected credit losses. The Company, therefore, considers the need for qualitative adjustments to the ACL on a quarterly basis. Qualitative adjustments may be related to and include, but not be limited to, factors such as: (i) management’s assessment of economic forecasts used in the model and how those forecasts align with management’s overall evaluation of current and expected economic conditions, (ii) organization specific risks such as credit concentrations, collateral specific risks, regulatory risks, and external factors that may ultimately impact credit quality, (iii) potential model limitations such as limitations identified through back-testing, and other limitations associated with factors such as underwriting changes, acquisition of new portfolios and changes in portfolio segmentation, and (iv) management’s overall assessment of the adequacy of the ACL, including an assessment of model data inputs used to determine the ACL. As of March 31, 2023, qualitative adjustments primarily relate to certain segments of the loan portfolio deemed by management to be of a higher-risk profile where management believes the quantitative component of the Company’s ACL model may not have fully captured the associated impact to the ACL. In addition, qualitative adjustments also relate to heightened uncertainty as to future macroeconomic conditions and the related impact on certain loan segments. Management reviews the need for an appropriate level of qualitative adjustments on a quarterly basis, and as such, the amount and allocation of qualitative adjustments may change in future periods. During the three months ended March 31, 2023, the ACL on loans increased $1.5 million, or 3.4%, due primarily to a provision for credit losses on loans of $1.7 million driven by growth in loans receivable and changes in loan mix primarily due to the increase in commercial and multifamily construction loans. The following table presents a summary of the changes in the ACL for the periods indicated:
| Three Months Ended March 31, |  |  |  |
| 2023 |  | 2022 |  |  |  |
| (In thousands) |  |  |  |
Beginning balance | $ | 42,986 |  |  | $ | 42,361 |  |  |  |  |
Charge-offs | (314) |  |  | (355) |  |  |  |  |
Recoveries of loans previously charged-off | 84 |  |  | 849 |  |  |  |  |
Provision for (reversal of) credit losses | 1,713 |  |  | (2,522) |  |  |  |  |
Ending balance | $ | 44,469 |  |  | $ | 40,333 |  |  |  |  |
The following tables detail the activity in the ACL on loans by segment and class for the periods indicated:
| Three Months Ended March 31, 2023
| Beginning Balance |  | Charge-offs |  | Recoveries |  | Provision for (Reversal of) Credit Losses |  | Ending Balance
| (In thousands)
Commercial business: |  |  |  |  |  |  |  |  |
Commercial and industrial | $ | 13,962 |  |  | $ | (161) |  |  | $ | 51 |  |  | $ | (286) |  |  | $ | 13,566 |
Owner-occupied CRE | 7,480 |  |  | — |  |  | — |  |  | 45 |  |  | 7,525 |
Non-owner occupied CRE | 9,276 |  |  | — |  |  | — |  |  | (430) |  |  | 8,846 |
Total commercial business | 30,718 |  |  | (161) |  |  | 51 |  |  | (671) |  |  | 29,937 |
Residential real estate | 2,872 |  |  | — |  |  | — |  |  | 30 |  |  | 2,902 |
Real estate construction and land development:
Residential | 1,654 |  |  | — |  |  | — |  |  | (112) |  |  | 1,542 |
Commercial and multifamily | 5,409 |  |  | — |  |  | — |  |  | 2,034 |  |  | 7,443 |
Total real estate construction and land development | 7,063 |  |  | — |  |  | — |  |  | 1,922 |  |  | 8,985 |
Consumer | 2,333 |  |  | (153) |  |  | 33 |  |  | 432 |  |  | 2,645 |
Total | $ | 42,986 |  |  | $ | (314) |  |  | $ | 84 |  |  | $ | 1,713 |  |  | $ | 44,469 |
| Three Months Ended March 31, 2022
| Beginning Balance |  | Charge-offs |  | Recoveries |  | (Reversal of) Provision for Credit Losses |  | Ending Balance
| (In thousands)
Commercial business: |  |  |  |  |  |  |  |  |
Commercial and industrial | $ | 17,777 |  |  | $ | (163) |  |  | $ | 272 |  |  | $ | (2,621) |  |  | $ | 15,265 |
Owner-occupied CRE | 6,411 |  |  | (36) |  |  | — |  |  | 710 |  |  | 7,085 |
Non-owner occupied CRE | 8,861 |  |  | — |  |  | — |  |  | 721 |  |  | 9,582 |
Total commercial business | 33,049 |  |  | (199) |  |  | 272 |  |  | (1,190) |  |  | 31,932 |
Residential real estate | 1,409 |  |  | (30) |  |  | 3 |  |  | 421 |  |  | 1,803 |
Real estate construction and land development:
Residential | 1,304 |  |  | — |  |  | 8 |  |  | (188) |  |  | 1,124 |
Commercial and multifamily | 3,972 |  |  | — |  |  | — |  |  | (797) |  |  | 3,175 |
Total real estate construction and land development | 5,276 |  |  | — |  |  | 8 |  |  | (985) |  |  | 4,299 |
Consumer | 2,627 |  |  | (126) |  |  | 566 |  |  | (768) |  |  | 2,299 |
Total | $ | 42,361 |  |  | $ | (355) |  |  | $ | 849 |  |  | $ | (2,522) |  |  | $ | 40,333 |

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